{"report": "Part of the Mariana Islands Archipelago, the CNMI is a chain of 14 islands in the western Pacific Ocean, just north of Guam and about 3,200 miles west of Hawaii. The CNMI has a total population of 53,890, according to the CNMI’s 2016 Household, Income, and Expenditures Survey. Almost 90 percent of the population (48,200) resided on the island of Saipan, with an additional 6 percent (3,056) on the island of Tinian and 5 percent (2,635) on the island of Rota. The Consolidated Natural Resources Act of 2008 amended the U.S.– CNMI covenant to apply federal immigration law to the CNMI after a transition period. To provide for an orderly transition from the CNMI immigration system to the U.S. federal immigration system under the immigration laws of the United States, DHS established the CW program in 2011. Under the program, foreign workers are able to obtain, through their employers, nonimmigrant CW-1 status that allows them to work in the CNMI for up to a year. The Consolidated Natural Resources Act of 2008 requires DHS to annually reduce the number of CW-1 permits until the number reaches zero by the end of the transition period. The act was amended in December 2014 to extend the transition period through December 31, 2019. The act was further amended in August 2017 to, among other things, (1) add 350 CW-1 permits to the fiscal year 2017 cap; (2) restrict future permits for workers in construction and extraction occupations; and (3) increase the CNMI education funding fee that employers must pay for each permit from $150 to $200. DHS determines the annual cap on CW-1 permits and the terms and conditions of the CW program. In November 2017, DHS set the cap for CW-1 permits for fiscal year 2018 through the end of the program (see table 1). The proposed bill, the Northern Mariana Islands U.S. Workforce Act (S. 2325), includes the following provisions, among others, that would affect the CW program: (1) the number of permits to be allocated each year, (2) the distribution of the permits, and (3) a new CW-3 worker designation. Under the terms of S. 2325, the number of permits issued may not exceed 13,000 during fiscal year 2019. Starting in fiscal year 2020, the number of permits issued may not exceed a number that is 500 fewer than the number issued during the immediately preceding fiscal year. Figure 1 shows the past and future numerical limits on CNMI-Only Transitional Worker permits established by DHS and the proposed numerical limits for permits under S. 2325. The limits shown for S. 2325 in figure 1 assume that employers would petition for, and DHS would issue, the maximum number of available permits for fiscal year 2019 and for each subsequent year. Under S. 2325, as under the current law, a permit for construction and extraction occupations would be issued only to extend a permit that was first issued before October 1, 2015. Also, S. 2325 would require the Secretary of Homeland Security to consider, in good faith, any comments or advice submitted by the CNMI governor, including any recommendation to reserve a number of permits each year for occupational categories necessary to maintain public health or safety in the commonwealth. S. 2325 proposes a new CW-3 worker designation. Foreign workers who are otherwise admissible would be eligible for CW-3 permits if they were admitted to the CNMI as CW-1 workers during fiscal year 2014 and every subsequent fiscal year beginning before the date of the enactment of S. 2325. These workers would receive a permit to remain in the CNMI for a 3-year period beginning on the date of S. 2325’s enactment. CW-3 permits could be renewed in 3-year increments during the transition period for workers who remain outside the United States for a continuous period of not less than 30 days during the 180-day period immediately preceding each such renewal. CW-3 permits would count against the numerical caps specified in S. 2325. The CNMI’s inflation-adjusted gross domestic product (GDP) has grown each year since 2012. The U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) estimates that the CNMI’s GDP increased by almost 29 percent in 2016 after increasing by about 4 percent in 2015. BEA attributes this economic growth to a significant increase in visitor spending, particularly for casino gambling, and investment in the construction of a casino resort in Saipan and other hotel construction. Figure 2 shows the casino’s development site in Saipan before and during construction. The new casino opened for business on July 6, 2017. Since 1990, the CNMI’s tourism market has experienced considerable fluctuation, as evidenced by total annual visitor arrivals (see fig. 3). Visitor arrivals to the CNMI declined from a peak of 726,690 in fiscal year 1997 to a low of 338,106 in fiscal year 2011, or by 53 percent. However, since 2011, visitor arrivals have nearly doubled, reaching 653,150 in fiscal year 2017, and increased by 30 percent from 2016 to 2017. Data from the Marianas Visitors Authority show that the downward trend in Japanese arrivals from 2013 to 2017 was offset by the growth in arrivals from China and South Korea. While eligible Japanese and South Korean visitors enter the CNMI under the U.S. visa waiver program, Chinese visitors are not eligible for the program and are allowed to be temporarily present in the CNMI under DHS’s discretionary parole authority, according to DHS officials. DHS exercises parole authority to allow, on a case-by-case basis, eligible nationals of China to enter the CNMI temporarily as tourists when there is significant public benefit, according to DHS. Following consecutive annual decreases in the total number of employed workers from 2005 through 2013, employment has increased annually since 2014, according to CNMI tax data. Figure 4 shows the numbers of employed workers, both foreign and domestic, in the CNMI from 2001 through 2016. From 2013 to 2016, the number of employed workers increased by approximately 25 percent, from 23,344 to 29,215. As figure 4 shows, while the number and percentage of foreign workers fell between 2001 and 2016, foreign workers still constitute the majority of the CNMI workforce. Of the nearly 30,000 employed workers in the CNMI in 2016, more than half were foreign workers, according to CNMI tax data. The number of foreign workers fell from a peak of over 38,000 in 2002—roughly 75 percent of employed workers—to fewer than 16,000 in 2016. In contrast, since 2002, the number of domestic workers has fluctuated from year to year, ranging from about 10,500 to almost 13,700, but increased by 28 percent from 2013 to 2016. The CNMI economy continues to experience growing demand for workers. In fiscal years 2012 through 2016, the number of CW-1 permits almost doubled, and since fiscal year 2016, the number of permits has approached the numerical limits on permits for those years. Our preliminary analysis indicates that the number of approved CW-1 permits grew from 7,127 in fiscal year 2012 to more than 13,000 in fiscal year 2016. On October 14, 2016—2 weeks into fiscal year 2017—USCIS announced that it had received enough petitions to reach the CW-1 cap for fiscal year 2017 and would not accept requests for new permits for that year during the remaining 11 months. In May 2017, USCIS announced that it had received a sufficient number of petitions to reach the CW-1 cap for fiscal year 2018. Table 2 shows the CW-1 permit caps and numbers of permits approved for fiscal years 2012 through 2018. According to USCIS officials, as of January 26, 2018, fiscal year 2018 petitions were still being adjudicated. Our preliminary analysis of USCIS CW-1 permit data for fiscal years 2012 through 2018 identified trends in CW-1 workers’ country of birth, occupation, and duration of employment. USCIS data showed a decline in the numbers of CW-1 permits for fiscal years 2017 through 2018 for workers born in each of the five countries listed most frequently on the petitions—the Philippines, China, South Korea, Bangladesh, and Japan (see table 3). As of January 17, 2018, the number of permits approved for workers born in the Philippines, who received the most permits for all 7 years of the CW program, had declined by 13 percent from fiscal year 2017 to fiscal year 2018 and by 26 percent from fiscal year 2015 to fiscal year 2018. Concurrent with construction of the casino and other tourism infrastructure, the number of CW-1 permits for workers born in China increased by almost 3,800 from fiscal year 2015 to fiscal year 2016 and declined by about 3,500 from fiscal year 2017 to fiscal year 2018. Our preliminary analysis indicates that as of January 17, 2018, USCIS had approved 750 CW-1 permits for construction workers for fiscal year 2018. This number represents a 75 percent decline from the nearly 3,000 permits approved for fiscal year 2017 (see table 4). This decline reflects new restrictions on future permits for workers in construction occupations. Of the 8,228 foreign workers who had been granted fiscal year 2018 permits as of January 17, 2018, 2,352 had maintained continuous employment in the CNMI since fiscal year 2014 (see table 5). Of the 2,352 workers with continuous employment in fiscal years 2014 through 2018, 1,905 workers (81 percent) were born in the Philippines. Chairman Murkowski, Ranking Member Cantwell, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. For further information regarding this statement, please contact David Gootnick, Director, International Affairs and Trade at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony included Emil Friberg (Assistant Director), Julia Ann Roberts (Analyst-in-Charge), Sada Aksartova, Andrew Kurtzman, Reid Lowe, Moon Parks, and John Yee. Technical support was provided by Chris Keblitis, Mary Moutsos, and Alexander Welsh. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Pub. L. No. 110-229, enacted in 2008, amended the U.S.-CNMI covenant to apply federal immigration law to the CNMI after a transition period. The law required the Department of Homeland Security (DHS) to establish a temporary work permit program for foreign workers. DHS is required to decrease the number of permits issued annually, reducing them to zero by the end of the transition period, scheduled for December 31, 2019. To implement the law, DHS established a new work permit program in 2011. Under the program, foreign workers can obtain, through their employers, nonimmigrant CW-1 status that allows them to work in the CNMI. The law was amended in August 2017 to, among other things, restrict future permits for workers in construction and extraction occupations. Proposed legislation—Senate bill S. 2325—would, among other things, extend the transition period through December 31, 2029; increase the number of available permits from the 2018 level; and set required decreases in the annual numerical limit for the permits. (See figure for past numerical limits established by DHS and future limits proposed by S. 2325.) This testimony discusses (1) recent trends in the CNMI economy and (2) preliminary observations about the number of approved CW-1 permits and characteristics of permit holders, drawn from GAO's ongoing work. GAO updated information about the CNMI's economy that it reported in May 2017 (see GAO-17-437 ). GAO also analyzed data and documents from U.S. agencies and the CNMI government. The Commonwealth of the Northern Mariana Islands' (CNMI) inflation-adjusted gross domestic product (GDP) has grown each year since 2012, according to the Bureau of Economic Analysis. In 2016, the CNMI's GDP rose by 29 percent, partly as a result of construction investment. While tourism has fluctuated in recent years, visitor arrivals in the CNMI rose by nearly a third from 2016 to 2017. After nearly a decade of annual decline, the total number of workers employed in the CNMI increased from 2013 through 2016, according to the most recent available CNMI tax data. Foreign workers made up 53 percent of those employed in 2016, compared with roughly 75 percent in 2002. GAO's preliminary analysis indicates that the number of approved CNMI-Only Transitional Worker (CW-1) permits for foreign workers in the CNMI grew from over 7,100 for fiscal year 2012 to nearly 13,000 for fiscal year 2017. In addition, GAO identified trends in the country of birth, occupation, and employment duration of foreign workers with CW-1 permits approved for fiscal years 2012 through 2018. Workers born in the Philippines received the highest number of CW-1 permits each year. As of January 2018, 750 CW-1 permits had been granted to construction workers for fiscal year 2018—a 75 percent decline from the prior fiscal year. GAO estimated that approximately 2,350 foreign workers with approved CW-1 permits maintained continuous employment in the CNMI from fiscal year 2014 through January 2018. About 80 percent of these workers were born in the Philippines.", "document_type": "gao"}
{"report": "The U.S. pipeline network includes both interstate and intrastate pipelines, the vast majority of which fall into the latter category: Interstate pipelines: Interstate pipelines are primarily large-volume transmission pipelines that carry gas or hazardous liquid–sometimes over hundreds of miles—to communities and large-volume users (e.g., factories). At the start of 2017, there were about 340,000 miles of interstate transmission pipelines nationwide. Newly tapped domestic gas and oil deposits have resulted in an increase in the existing pipeline infrastructure to transport natural gas and oil. Intrastate pipelines: Intrastate pipelines are primarily composed of gas distribution and some transmission pipelines that transport natural gas pipelines to residential, commercial, and industrial customers. As of 2015, there were about 2.2 million miles of distribution pipelines nationwide. In addition, an estimated 18,000 miles of federally regulated gathering pipelines carry natural gas or hazardous liquids from production areas to processing facilities where the product is refined before continuing in transmission pipelines. At the federal level, PHMSA is responsible for developing regulations for domestic interstate and intrastate natural gas and hazardous liquid pipelines. Its regulatory programs are focused on ensuring safety in the design, construction, operation, and maintenance of pipelines. Inspectors from PHMSA’s five regional offices and states are responsible for inspecting nearly 3,000 companies that operate 2.7 million miles of pipelines. Each year, PHMSA uses its Risk Ranking Index Model (RRIM) as one input to determine its annual inspection priorities. RRIM categorizes each of the nation’s pipeline systems regulated by PHMSA into high, medium, and low-risk tiers. Pipeline risk are proposedbased on a combination of categories, such as the type of pipeline material and time since last inspection. PHMSA’s guidance specifies that high-risk pipelines should be inspected at least once every 3 years, medium-risk pipelines every 5 years, and low-risk pipelines every 7 years. PHMSA’s goal each year is to inspect, at a minimum, pipeline systems where the time since last inspection meets or exceeds the PHMSA guidance for the tier. Under federal pipeline safety laws, states may assume inspection and enforcement responsibilities for intrastate gas and hazardous liquid pipelines, which are primarily natural gas distribution pipelines. States assume that responsibility by annually certifying their state pipeline safety program to PHMSA, which PHMSA must validate. As part of a state’s certification, states must establish pipeline laws similar to federal pipeline safety regulations for intrastate pipelines, but may also impose more stringent pipeline safety regulations. PHMSA reimburses certified state agencies up to 80 percent of the total cost of operating their pipeline safety program through an annual grant. PHMSA may permit certified states to participate in interstate inspections through three types of agreements. (See fig.1): Interstate agent agreement: At PHMSA’s discretion, certified states may enter into an interstate agent agreement for either their natural gas program, hazardous liquid program, or both on an annual basis. As of April, 2018, nine state pipeline agencies hold these agreements. On PHMSA’s behalf, these agencies assume inspection responsibilities for the range of interstate inspection activities, as agreed upon by PHMSA and prioritized by PHMSA during the agency’s annual inspection planning process. States may also propose and conduct additional inspections as they believe necessary. While state inspectors can identify violations, PHMSA is ultimately responsible for enforcement of interstate pipeline regulations and uses a range of enforcement tools from Warning Letters to more stringent Notices of Probable Violation with either proposed compliance orders or proposed civil penalties. Temporary interstate agreement: These agreements allow PHMSA to request a state that has had its certification validated by PHMSA to perform interstate pipeline inspections on a temporary basis. According to PHMSA guidelines, these agreements are used typically for new construction inspections, but may include assistance such as inspection of specific operators, witness to repairs or testing, or investigation of incidents. Since 2010, PHMSA has entered into temporary interstate agreements with six states. Joint inspection: The Pipes Act of 2016 included a requirement for PHMSA to allow certified states to participate in the inspection of an interstate pipeline safety facility, if requested by the state pipeline safety agency. As of April, 2018, no states have requested to participate in joint inspections. According to PHMSA regional officials we met with, interstate agents conduct high-quality inspections of interstate pipelines and provide an important supplement to the federal inspection workforce. PHMSA regional officials generally agreed that interstate agents have well-trained staff and leverage their local knowledge to enhance interstate pipeline inspections within their state. Additionally, interstate agents, if authorized by PHMSA, may conduct inspections of interstate pipelines within their state more frequently than PHMSA. For instance, officials in one PHMSA region noted that an interstate agent in their jurisdiction ensured each interstate operator was inspected once every 2 years, regardless of PHMSA’s risk ranking. Similarly, in two of 5 regions that have interstate agents, PHMSA regional officials stated that they needed interstate agents to supplement their current allocation of federal inspectors. For instance, in one region, PHMSA officials said that if interstate agent agreements were discontinued, the region would need to hire 3 to 4 additional inspectors. In another region, officials said that interstate agents provided the equivalent of 5 to 10 additional inspectors. Officials in one PHMSA region said that, although the region could absorb the interstate agent workload if needed, doing so would lead to less extensive inspections because there would more pipelines to inspect with fewer federal inspectors. Interstate agents may also enhance pipeline safety oversight within their state by going above and beyond the annual interstate inspection activities required under their agreement with PHMSA. Specifically, as part of the annual inspection planning process, PHMSA’s regional offices work with interstate agents to develop an annual inspection plan. While interstate agents must prioritize PHMSA’s inspection priorities, such as participation in new construction inspections and PHMSA-led systems inspections, they can also propose additional inspections of interstate pipelines within their state. Officials in half of the nine states with interstate agent agreements stated that they proposed and obtained PHMSA’s approval for additional interstate pipeline inspections that would not otherwise have been included in PHMSA’s annual inspection plan. For instance, PHMSA’s Western Region reported that between January 1, 2015 and December 31, 2016 Washington State’s pipeline safety agency—which holds an interstate agent agreement—proposed and conducted 13 inspections beyond those identified in PHMSA’s inspection plans. During these additional inspections conducted by interstate agents, state officials have identified violations of pipeline safety regulations. Some violations, including the four illustrative examples below, were deemed serious enough that PHMSA imposed civil penalties. In 2015, the Connecticut Department of Energy and Environmental Protection inspected an interstate pipeline that traverses the state. During the inspection, Connecticut inspectors found the pipeline operator had failed to employ properly qualified welders in constructing a section of the pipeline. As a result, PHMSA issued a civil penalty of $26,200 to the pipeline operator. In response to the findings, the operator ensured its welders were properly qualified and replaced the 14 welds completed by improperly qualified welders. In 2014, the New York Department of Public Service’s Pipeline Division inspected an interstate pipeline that traverses the state. During that inspection, New York inspectors identified violations related to the operator’s corrosion-control practices. Inspectors also found that the operator failed to prepare, and follow, a manual for conducting operations and maintenance activities, as well as for emergency response. As a result, PHMSA issued a civil penalty of $61,900. In response to the findings, the operator took action to address the corrosion control-related violations and revised its operations and maintenance manual. In 2011, the New York Department of Public Service’s Pipeline Division inspected an interstate pipeline that traverses the state. During that inspection, a New York inspector identified violations related to corrosion-control practices. As a result, PHMSA issued a civil penalty of $78,900. PHMSA also issued a Compliance Order, requiring the operator to remediate the identified violations, or face an additional civil penalty. In 2014, Arizona’s Corporation Commission’s Pipeline Safety Section inspected two interstate gas transmission lines that traverse the state. During the inspection, PHMSA and Arizona inspectors found that the operator had committed probable violations by not properly odorizing its pipeline, and providing insufficient information to the public about its pipeline odorization methods. As a result, PHMSA issued a Notice of Probable Violation, proposed civil penalties totaling $162,700, and issued a Proposed Compliance Order. Although state involvement in interstate inspections can enhance oversight, officials from almost all of our selected states that do not currently have an interstate agent agreement expressed little interest in pursuing such an agreement. Specifically, some officials in we spoke with plan to focus their limited resources on intrastate pipeline safety oversight activities. For example, although Texas has over 50,000 miles of interstate pipeline, officials in that state have focused exclusively on intrastate inspection activity, citing the heavy workload of their inspection staff, as well as challenges in recruiting and retaining additional inspectors. In another instance, California’s state pipeline safety agency responsible for hazardous liquid oversight voluntarily withdrew from the interstate agent program in 2013, citing staffing shortages stemming from a difficult economic climate. Although PHMSA’s current policy stance does not prohibit the agency from entering into a formal interstate agent agreement if the circumstances warrant, the agency prefers that state agencies enter into temporary interstate agreements. PHMSA officials explained that, historically, PHMSA has used interstate agents to supplement federal inspection resources and that the current nine interstate agents supplement the federal workforce by approximately 10–15 inspectors. PHMSA officials stated that they do not intend to discontinue current interstate agent agreements, but due in part to a recent staff increase the agency has sufficient staff to meet its inspection needs without adding additional interstate agents. PHMSA officials also told us that intrastate pipelines pose the highest safety risk to states and, consequently, state pipeline safety agencies should focus their efforts on intrastate pipeline oversight rather than participating in interstate pipeline inspections. During the last 7 years, four states that applied for an agent agreement— New Hampshire, Virginia, Maryland, and Nevada—were not accepted by PHMSA for these reasons. (See app. I.) In 2013, PHMSA decided not to renew another state pipeline safety agency’s interstate agent agreement, citing the state agency’s inability to staff its program properly, among other things. While temporary interstate agreements provide an opportunity to participate in interstate pipeline oversight, officials from some state agencies told us that the agreement’s limited scope and ad hoc nature can create obstacles to state participation. For instance, in states without an interstate agent agreement, state inspectors’ day-to-day work focuses exclusively on intrastate pipeline oversight activities. In the event PHMSA requested assistance with certain interstate inspections, state inspectors may be unfamiliar with the interstate pipeline systems and operators. As a result, some state officials said that their inspectors may have a steep learning curve when conducting inspections under a temporary interstate agreement. However, PHMSA officials disagreed that most interstate agent states would have such steep learning curve because they currently inspect intrastate transmission pipelines; the regulations for interstate and intrastate pipelines are for the most part identical. Another obstacle some state officials identified relates to the fact that state pipeline safety agencies may not have sufficient inspection staff available, when needed, to participate in ad hoc interstate inspections. Due to the limited state role and competing priorities, state pipeline safety agencies rarely enter into temporary interstate agreements. According to officials in five of the 6 states that have that have entered into temporary interstate agreements, the agreements were used for limited, ad hoc inspections that were initiated by PHMSA. The sixth temporary interstate agreement was initiated by PHMSA in lieu of the Virginia pipeline safety agency’s 2017 application for an interstate agent agreement for natural gas. PHMSA offered to enter into a longer-term, temporary interstate agreement, which would permit the state agency to inspect the installation of two large interstate pipeline systems. The state agency accepted the temporary interstate agreement, which may be extended annually until the completion of the pipeline construction. To meet its new interstate inspection obligations, the state agency told us it hired two additional inspectors. According to state officials, those two inspectors will be dedicated to intrastate pipeline inspection, which will allow two of the state agency’s more experienced inspectors to conduct interstate pipeline inspections. Current interstate agents do not consider temporary interstate agreements to be an adequate substitute for an interstate agent agreement. According to officials we spoke with that are currently interstate agents, an interstate agent agreement allows state agencies and their inspectors to develop a strong understanding of operators and pipelines within their state. A few state officials stressed that the greatest benefit of interstate agent status was the ability to leverage their local knowledge—such as the proximity and familiarity with interstate pipelines within their states—to allow for quick responses to public concerns and pipeline incidents. PHMSA officials emphasized that temporary interstate agreements are not intended to replicate an interstate agent agreement; instead, these agreements are designed to provide PHMSA the flexibility to request targeted, short-term assistance from state pipeline safety agencies with interstate pipeline inspections. Joint inspections offer states the most limited role in interstate pipeline inspections and may be entered into only if the state meets certain conditions. In response to the requirement in the PIPES Act, PHMSA created joint inspections and established certain criteria for state participation. For instance, to ensure that participation in joint inspections does not compromise intrastate pipeline safety, PHMSA only allows state inspectors to participate if the state agency has accomplished the required minimum number of inspection days during the preceding calendar year. PHMSA also requires state agencies to bear the cost of participating in joint inspections—including travel and inspection time for the state inspectors—rather than allowing states to include this activity in their annual pipeline safety program grant reimbursement. According to PHMSA officials, this requirement is designed to focus limited federal funds intended to support states’ intrastate pipeline safety programs. While it is too early to know whether states will participate in joint inspections over the long term, no states have participated to date. Despite general agreement among some state pipeline safety officials that collaborating with PHMSA on interstate pipeline inspections could be beneficial, they noted that PHMSA’s criteria reduces the incentive to participate. For instance, a few of the state officials we spoke to generally expressed concern over the requirement that states bear the entire cost of their participation. Additionally, state officials perceive the current joint inspection policy as restricting state inspectors to an observer role. However, PHMSA officials we spoke with noted that the role of state inspectors can vary based on the levels of training and knowledge among state inspectors. PHMSA officials told us they intend to clarify this role for states. From fiscal year 2012 to 2017, PHMSA’s funding increased by nearly 40 percent, allowing the agency to hire additional pipeline inspectors. Specifically, PHMSA’s funding increased from $110 million in fiscal year 2012 to $154 million in fiscal year 2017. PHMSA’s inspection and enforcement division received the majority of the increased funding, allowing that division to hire additional staff. From fiscal year 2012 through 2017, the number of inspectors hired increased by over 25 percent, from 107 to 147 across the five PHMSA regions. (See fig. 2). In recent years, PHMSA has improved its analysis of the number of pipeline inspectors needed to address the inspection workload in each region. Before 2014, PHMSA allocated inspectors evenly across the agency’s five regions. Since 2014, PHMSA has used a regional workload analysis to allocate its interstate inspectors. Unlike the previous analysis, the regional workload analysis takes into account federal inspector workload, pipeline construction, and the amount of pipeline mileage in areas where the consequences of an accident are greater (such as populated and environmentally sensitive areas) to help ensure that PMHSA has appropriate resources in each region. For example, PHMSA’s central region received a greater percentage of inspectors than most other regions to help oversee a number of new pipeline construction projects. (See table 2). According to PHMSA officials, the regional workload analysis has resulted in a better match between workforce staffing and needs. While PHMSA has improved how it allocates its current inspection staff among the regions, the agency lacks a forward-looking workforce plan for interstate pipeline inspections. Workforce planning helps agencies take a strategic, forward-looking approach to put the right people with the right skills in the right places at the right time. We have previously identified leading practices for effective strategic workforce planning. These approaches may vary with each agency’s particular needs and mission, but share certain principles. These may include: identifying skills and competencies to fill critical workforce gaps and the strategies needed to recruit them; developing specific strategies that are tailored to address gaps in number, deployment, and alignment of human capital; and monitoring and evaluating the agency’s progress toward its human capital goals. However, PHMSA has not developed a plan that systematically identifies the anticipated interstate pipeline inspection workload or the number of inspection staff needed to meet that workload. In light of the diminishing role that interstate agents currently provide in bolstering PHMSA’s inspection workforce, a plan for conducting future interstate pipeline inspections should also account for the reduction in resources and expertise state inspectors can potentially provide. According to PHMSA officials, they have not developed a workforce plan for interstate pipeline inspections because the agency’s focus has been on allocating and training the recently hired inspectors and ensuring that pipeline inspections are completed. Further, the lack of an inspector workforce plan may be symptomatic of a wider-ranging workforce planning issue. A November, 2017 DOT Inspector General (IG) report found that PHMSA had not developed a comprehensive workforce plan since 2005 and recommended that PHMSA develop such a plan. PHMSA agreed with the recommendation and anticipates completing the plan by the end of December 2018. Of note, PHMSA’s 2005 workforce plan did not include an analysis of federal and state inspectors needed for interstate pipeline inspections. In the absence of a workforce plan for interstate inspections, PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective pipeline oversight. PHMSA has an important role in overseeing interstate pipelines and operators to ensure pipeline safety, and the agency’s partnership with interstate agents has proven beneficial in fulfilling that role. Recent increases in funding have allowed PHMSA to increase its own inspection workforce and reduce its reliance on state agents. However, the agency does not have an inspection workforce plan to ensure that it is making the correct decisions regarding its mix of federal inspectors versus state resources. Therefore, it does not have reasonable assurance that it will be able to provide adequate oversight of interstate pipelines going forward. PHMSA should develop a workforce plan for interstate pipeline inspections that is consistent with leading practices in workforce planning, which should include a consideration of the additional resources and safety oversight that state pipeline officials can provide. (Recommendation 1) We provided DOT with a draft of this report for review and comment. In its comments, reproduced in appendix II, the Department of Transportation concurred with our recommendation. The Department of Transportation also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to relevant congressional committees, the Secretary of Transportation, and other interested parties. In addition, this report will also be available at no charge on GAO’s website at http://www.gao.gov If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In the past 7 years, four additional state pipeline safety agencies have applied for interstate agent agreements: New Hampshire: In 2014, the state legislature passed a law requiring the state’s pipeline safety agency to apply for interstate agent status on an annual basis. State pipeline safety officials cited New Hampshire inspectors’ local knowledge of interstate pipelines, as well as concerns over the frequency of PHMSA’s interstate pipeline inspection activity, as reasons for seeking an agreement. To date, PHMSA has not accepted the state agency’s annual applications for interstate agent status citing an increase in the federal inspection workforce, a preference for states to focus on intrastate pipeline oversight, and the ability for state agencies to participate in interstate inspections through other means, such as temporary interstate agreements. Virginia: In 2016, the Virginia General Assembly passed legislation requiring the state pipeline safety agency to apply for interstate agent status for natural gas. The state agency applied the following year, citing the need to conduct construction inspections of the Virginia section of two large interstate natural gas transmission pipelines. PHMSA did not accept the state agency’s application, citing increasing federal inspection resources as well the agency’s lack of full authority over its intrastate gas operators. Instead, PHMSA provided the state agency a temporary interstate agreement, renewable on an annual basis, to conduct the desired inspections. Maryland: Maryland’s pipeline safety agency applied for interstate agent status in 2014 in response to public concern over proposed construction of a new interstate pipeline. PHMSA did not accept the agency’s application for interstate agent status, citing an increase in federal resources and PHMSA’s preference that the state agency focus its inspection efforts on intrastate pipelines. According to state agency officials, public interest has waned and the state has no plans to reapply. Nevada: Nevada’s pipeline safety agency applied for interstate agent status in 2011. According to state pipeline safety officials, they did so to help retain staff, rather than as a result of pipeline safety concerns. PHMSA did not accept the agency’s request, citing a preference only to enter into new interstate agreements when additional state support was needed, as well as the preference for states to focus on intrastate pipeline facilities. According to state officials, they do not plan to reapply. In addition to the contact named above, Sara Vermillion (Assistant Director), Nick Nadarski (Analyst-in-Charge), Mike Duane, David Hooper, Delwen Jones, Malika Rice, and Kelly Rubin made key contributions to this report.", "summary": "PHMSA oversees the safety of interstate and intrastate natural gas and hazardous liquid pipelines. PHMSA certifies states to oversee intrastate pipelines, and some states also act as PHMSA's “agents” to supplement the federal inspection workforce for interstate pipelines. In recent years PHMSA has signaled a move away from using interstate agent agreements. Recent funding increases have enabled PHMSA to hire additional federal inspectors. States may receive annual grants to reimburse up to 80 percent of the cost of their pipeline safety activities. Congress included a provision in statute for GAO to review the federal and state responsibilities and resources used to inspect interstate pipelines. This report addresses (1) how state participation has affected interstate pipeline oversight and (2) PHMSA's assessment of the resources needed to conduct interstate pipeline inspections. GAO reviewed relevant laws and PHMSA guidance on state participation in these inspections; analyzed the most recent 6 years of PHMSA funding and inspector staffing data; and interviewed pipeline safety officials from PHMSA and 22 states selected based on level of participation in interstate inspections. State involvement in interstate pipeline inspections can enhance oversight, although the three types of agreements that the Pipeline and Hazardous Materials Safety Administration (PHMSA) uses to allow state participation are not used extensively. Annual interstate agent agreements —held by 9 states—allow states to participate in all inspection activities and can bolster interstate pipeline oversight. For instance, an inspection conducted in 2014 by New York state officials led to $61,900 in federal civil penalties. Temporary interstate agreements —used in 6 states to date—allow PHMSA to request states to participate in specific interstate pipeline inspections. PHMSA officials said these agreements provide the agency greater flexibility. Some current interstate agents GAO interviewed said that temporary interstate agreements are useful, but are not substitutes for interstate agent status because states do not participate in the full range of inspections. Finally, PHMSA as authorized by federal law recently established joint inspections allowing states to request to participate in interstate inspections. However, state officials were concerned that their role is limited and that they must bear the full cost to participate. PHMSA officials said they intend to clarify the state inspector role in joint inspections and acknowledged that federal grants cannot be used by states to support joint inspection activities. PHMSA allocated recently hired inspectors based on regional workload, but has not assessed future resource needs. From fiscal years 2012 to 2017, PHMSA's appropriations increased over 40 percent, allowing the agency to expand its inspector workforce by about 25 percent. PHMSA allocated the additional inspectors across the agency's five regions based on workload. For example, PHMSA's central region received a greater percentage of inspectors than other regions to help oversee a number of new pipeline construction projects. However, PHMSA has not planned for future workforce needs for interstate pipeline inspections. In particular, it has not assessed the resources and benefits that states can provide through the three types of agreements. Leading practices for workforce planning indicate that such forward-looking analyses are essential for effective workforce planning. Without such analyses, PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective oversight of interstate pipelines. PHMSA should develop a workforce plan for interstate pipeline inspections, considering, among other things, the additional resources and safety oversight that state pipeline officials can provide. DOT concurred with our recommendation and provided technical comments, which we incorporated as appropriate.", "document_type": "gao"}
{"report": "VA’s mission is to promote the health, welfare, and dignity of all veterans in recognition of their service to the nation by ensuring that they receive medical care, benefits, social support, and lasting memorials. In carrying out this mission, the department operates one of the largest health care delivery systems in the United States, providing health care services to approximately 9 million veterans throughout the United States, Philippines, Virgin Islands, Puerto Rico, American Samoa, and Guam. In 2015, we designated VA health care as a high-risk area for the federal government, and we continue to be concerned about the department’s ability to ensure that its resources are being used cost-effectively and efficiently to improve veterans’ timely access to health care. In part, we identified limitations in the capacity of VA’s existing IT systems, including the outdated, inefficient nature of certain systems and a lack of system interoperability as contributors to the department’s challenges related to health care. Providing health care to veterans requires a complex set of clinical and administrative capabilities supported by IT. VA’s health information system—VistA—has been essential to the department’s ability to deliver health care to veterans. VistA contains an electronic health record for each patient that supports clinical settings throughout the department. For example, clinicians can use the system to enter and review patient information; order lab tests, medications, diets, radiology tests, and procedures; record a patient’s allergies or adverse reactions to medications; request and track consults; enter progress notes, diagnoses, and treatments for encounters; and enter discharge summaries. VistA was developed in house by clinicians and IT personnel in various VA medical facilities and has been in operation since the early 1980s. Over the last several decades, VistA has evolved into a technically complex system comprised of about 170 modules that support health care delivery at 152 VA Medical Centers and over 1,200 outpatient sites. In addition, customization of VistA, such as changes to the modules by the various medical facilities, has resulted in about 130 versions of the system—referred to as instances. According to VA, VistA modules are comprised of one or more software applications that support various health care functions, such as providing care coordination and mental health services. In addition to VistA, the department has other health information systems that must interface with VistA to send, exchange, or store related health (e.g., clinical and patient) data. Since 2001, VA has identified the need for enhancements and modifications to VistA and has pursued multiple efforts to modernize the system. Two major efforts have included the VistA Evolution program and, most recently, the planned acquisition of the same electronic health record system that the Department of Defense (DOD) is acquiring. In 2013, VA established VistA Evolution as a joint program between OI&T and VHA that was comprised of a collection of projects and efforts focused on improving the efficiency and quality of veterans’ health care. This program was to modernize the department’s health information systems, increase VA’s data exchange and interoperability capabilities with DOD and private sector health care partners, and reduce VA’s time to deploy new health information management capabilities. In June 2017, the former VA Secretary announced a significant shift in the department’s approach to modernizing VistA. Specifically, rather than continue to use VistA, the Secretary stated that the department planned to acquire the same Cerner electronic health record system that DOD has been acquiring. Accordingly, the department awarded a contract to Cerner in May 2018 for a maximum of $10 billion over 10 years. Cerner is to replace VistA with a commercial electronic health record system. This new system is to support a broad range of health care functions that include, for example, acute care, clinical decision support, dental care, and emergency medicine. When implemented, the new system will be expected to provide access to authoritative clinical data sources and become the authoritative source of clinical data to support improved health, patient safety, and quality of care provided by VA. As previously mentioned, this acquisition is being managed by VA’s EHRM program. According to program documentation, EHRM is also to deliver program management support and the infrastructure modernization required to install and operate the new system. According to EHRM program documentation, the department has estimated that an additional $5.8 billion in funding, above the contract amount, would be needed to fund project management support and infrastructure improvements over the 10-year period. This amount does not fully include government employee costs. Deployment of the new electronic health record system at the initial sites is planned for within 18 months of October 1, 2018, with a phased implementation of the remaining sites over the next decade. Each VA medical facility is expected to continue using VistA until the new system has been deployed at that location. According to VA, the department’s costs for VistA and related activities are approximated by funding obligations of about $1.1 billion, $899 million, and $946 million in fiscal years 2015, 2016 and 2017, respectively, for a total of about $3.0 billion over 3 years to support the system. Specifically, VHA and OI&T reported obligations to cover the costs for the VistA Evolution program, including costs for development, operation and maintenance, and payroll for government employees over the 3 fiscal years. Further, in their efforts to fully determine the costs associated with VistA, VA officials also reported obligations for activities that supported VistA, but were not included in the VistA Evolution program. These other obligations were for investments in interoperability initiatives, such as increasing data standardization and data sharing between VA, DOD, and other government and non-government entities, and the Virtual Lifetime Electronic Record Health. These obligations also include other VistA- related technology investments, such as networks and infrastructure sustainment, continuation of legacy systems, and overall patient safety, security, and system reliability. Table 1 provides a summary of the total VistA and related obligations that VA identified for fiscal years 2015 through 2017. Understanding the scope of VA’s current health information system is essential to effectively planning for the new system. However, according to VA officials, there is no single information source that fully defines the scope of VistA. Instead, existing definitions of the system, including the components that comprise it, are identified by multiple sources. These sources include the VA Systems Inventory, VistA Document Library, and VA Monograph. Each of these sources describes VistA from a different perspective. For example, the VA Monograph provides an overview of VistA and non-VistA applications used by VHA. The monograph also describes modules and their associated business functions, but does not document all customization at local facilities. The VA Systems Inventory is a database that identifies current IT systems at VA, including systems and interfaces that are related to VistA. The VA Document Library is an online resource for accessing documentation on VA’s nationally released software applications, including VistA. In the absence of a complete definition of VistA, EHRM program officials have taken a number of steps to define the system’s scope and identify the components that the Cerner system will replace. These steps have included conducting two analyses, performing preliminary site assessments, and planning for Cerner to perform a detailed assessment of each site where the new system will be deployed. Specifically, EHRM program subject-matter experts undertook an analysis that identified 143 VistA modules and 35 software applications as representing the scope of the system. They then compared the functionality provided by the VistA modules to the Cerner system’s capabilities to identify the VistA components that are expected to be replaced by the Cerner system. The analysis identified 131 (92 percent) of the 143 VistA modules and 32 (91 percent) of the 35 applications that are expected to be replaced by the Cerner system. For example, the analysis determined that the Care Management and Mental Health modules would be replaced by the new system. EHRM program officials also undertook a subsequent, broader analysis to identify, among other things, the scope of VistA, as well as the department’s other health IT systems that could also be replaced by the Cerner system. These other systems include, for example, dentistry and oncology applications. As part of this analysis, the department combined data from the VA Systems Inventory, the VistA Document Library, the VA Monograph, and other sources to identify the health information technology environment at a typical VA medical center. The resulting analysis of VA’s health IT environment identified a total of 330 applications that support health care delivery at a medical center, of which 119 applications (approximately 36 percent) have been identified as having similar functionality as a capability of the Cerner system. Further, 128 of the 330 applications are identified as VistA applications. Of the 128 applications designated as VistA, 58 (approximately 45 percent) have been identified as having similar functionality as a capability of the Cerner system, including pharmacy, laboratory, and scheduling capabilities. In addition to the analyses discussed above, VA has taken steps to understand differences in VistA at individual facilities. Specifically, according to EHRM officials, representatives from VA and Cerner have visited 17 VA medical facilities to conduct preliminary site assessments. The intent of these assessments is to obtain a broad perspective of the current state of the systems, applications, integration points, reporting, and workflows being utilized at individual facilities. These site visits identified VistA customization that may be site specific. The identification of such site specific customization is intended to help Cerner plan for implementation of its system at each location. According to EHRM program officials, full site assessments that are planned at each location in preparation for implementation of the Cerner system are expected to identify the full extent of VistA customization. Since the former VA Secretary announced in June 2017 that the department would acquire the same electronic health record system as DOD, VA has taken steps to position the department for the transition to the new system. These actions, which are ongoing, have included standardizing VistA, assessing the department’s approach to increasing interoperability, establishing governance for the new program and the framework for joint governance with DOD, and preparing initial program plans. VA’s goal is for all instances of VistA being used in its medical facilities to be standardized where practical. Such standardization is intended to better position the department to switch to the Cerner system. To increase standardization, the VistA Evolution program has been focused over the last 5 years on standardizing a core set of VistA modules related to interoperability which, according to the department, accounts for about 60 percent of VistA. In addition, the program has focused on identifying software that is common to each VistA instance. VA refers to this collection of standard software as the gold instance. As part of its effort to standardize VistA, VA has implemented a process to compare the system at each site with the gold instance. Sites that are identified as having variations from the gold instance must apply for a waiver to gain approval for continuing to operate a non-standard VistA instance. OI&T and VHA assess the waivers, which may be approved if a site needs non-standard functionality that is deemed critical to that site. Alternatively, waivers are not approved if the assessment determines that a site’s needs can be met by reverting to the gold instance of VistA. VA has identified increased interoperability as a key expected outcome of its decision to switch from VistA to the Cerner system. To ensure that the contract with Cerner will improve interoperability with community care providers (i.e., non-VA and third party providers), the former VA Secretary announced in December 2017 that the department had taken a “strategic pause” on the electronic health record acquisition process. During the pause, an independent study was undertaken to assess the approach to interoperability with the new acquisition. The assessment made recommendations to improve imported data, address data rights and patient safety risks, and improve data access for patients. VA agreed with all of the resulting recommendations and, according to EHRM program officials, included provisions in the contract with Cerner to address the recommendations. Our prior work has identified strong agency leadership support and governance as factors that can increase the likelihood of a program’s success. Such leadership and governance can come from the establishment of an effective program management organization and a related governance structure. VA has taken steps to establish a program management office and drafted a structure for technology, functional, and joint governance of the electronic health record implementation. Specifically, in January 2018, the former VA Secretary established the EHRM Program Executive Office (PEO) that reports directly to the VA Deputy Secretary. According to EHRM program officials, this office supported the contract negotiations with the Cerner Corporation and is expected to continue to manage the program going forward. Program officials stated that the office is beginning the process of hiring full-time employees. In addition, to support the program office, the department has awarded a contract for project management support and has also reassigned a number of VA staff to the PEO. Further, VA has drafted a memorandum that describes the role of governance bodies within VA, as well as governance intended to facilitate coordination between DOD and VA. For example, according to the draft memorandum, within VA, the EHRM Steering Committee is expected to provide strategic direction for the efforts while monitoring progresses toward goals and advising the Secretary on the progress and performance of the EHRM efforts. This committee is to include the Deputy Secretary, the Undersecretary for Health, and the Chief Information Officer, among others, and is to meet quarterly or as necessary to make its reports to the Secretary. Additionally, according to EHRM program documentation, VA is in the process of establishing a Functional Governance Board, a Technical Governance Board, and a Governance Integration Board comprised of program officials intended to provide guidance; coordinate with DOD, as appropriate; and inform the Steering Committee. Further, a joint governance structure between VA and DOD has been proposed that would be expected to leverage existing joint governance facilitated by the DOD/VA Interagency Program Office. Nevertheless, while the department’s plans for governance of the EHRM program provide a framework for high-level oversight for program decisions moving forward, EHRM officials have noted that the governance bodies will not be finalized until October 2018. Program planning is an activity for ensuring effective management of key aspects of an IT program. These key aspects include identification of the program’s scope, responsible organizations, costs, and schedules. VA has prepared initial program plans, including a preliminary timeline for deploying the new electronic health record system to its medical facilities. The department also has a proposed 90-day schedule that depicts key program activities currently underway now that the contract has been awarded. For example, the department’s preliminary plans include an 8- year deployment schedule beginning with planned implementation at initial sites within 18 months of October 1, 2018. According to the executive director for the EHRM program, the department also intends to complete a full suite of planning and acquisition management documents to guide the program. These documents include, for example, a life cycle cost estimate, a data migration plan, a change management plan, and an integrated master schedule to establish key milestones over the life of the project. EHRM PEO officials have stated that the department intends to complete the development of its initial plans for the program within 30 to 90 days of awarding the contract (between mid-June and mid-August 2018), and intends to update those plans as the program matures. The plans are to be reviewed during the milestone reviews identified in the department’s formal project management framework. Our prior work has determined that successfully overcoming major IT acquisition challenges can best be achieved when critical success factors are applied. Specifically, we reported in 2011 on common factors critical to the success of IT acquisitions, based on seven agencies having each identified the acquisition that best achieved the agency’s respective cost, schedule, scope, and performance goals. These factors remain relevant today and can serve as a model of best practices that VA could apply to enhance the likelihood that the acquisition of a new electronic health record system will be successfully achieved. Among the agencies’ seven IT investments, agency officials identified nine factors as having been critical to the success of three or more of the seven investments. These nine critical success factors are consistent with leading industry practices for IT acquisition. The factors are: Active engagement of senior officials with stakeholders. Qualified and experienced program staff. Support of senior department and agency executives. Involvement of end users and stakeholders in the development of requirements. Participation of end users in testing system functionality prior to formal end user acceptance testing. Consistency and stability of government and contractor staff. Prioritization of requirements by program staff. Regular communication maintained between program officials and the prime contractor. Sufficient funding. Officials for all seven selected investments cited active engagement with program stakeholders—individuals or groups (including, in some cases, end users) with an interest in the success of the acquisition—as a critical factor to the success of those investments. Agency officials stated that stakeholders, among other things, reviewed contractor proposals during the procurement process, regularly attended program management office sponsored meetings, were working members of integrated project teams, and were notified of problems and concerns as soon as possible. In addition, officials from two investments noted that actively engaging with stakeholders created transparency and trust, and increased the support from the stakeholders. Additionally, officials for six of the seven selected investments indicated that the knowledge and skills of the program staff were critical to the success of the program. This included knowledge of acquisitions and procurement processes, monitoring of contracts, large-scale organizational transformation, Agile software development concepts, and areas of program management such as earned value management and technical monitoring. Finally, officials for five of the seven selected investments identified having the end users test and validate the system components prior to formal end user acceptance testing for deployment as critical to the success of their program. Similar to this factor, leading guidance recommends testing selected products and product components throughout the program life cycle. Testing of functionality by end users prior to acceptance demonstrates, earlier rather than later in the program life cycle, that the functionality will fulfill its intended use. If problems are found during this testing, programs are typically positioned to make changes that would be less costly and disruptive than ones made later in the life cycle. Use of the critical success factors described above can serve as a model of best practices for VA. Application of these acquisition best practices presents opportunities for the department to increase the likelihood that its planned acquisition of a new electronic health record system will meet its cost, schedule, scope, and performance goals. In conclusion, VA continued to obligate billions of dollars for its VistA system. Recently, the department has undertaken important analyses to better understand the scope of the system and identify capabilities that can be provided by the Cerner electronic health record system it is acquiring. VA has additional key activities underway, such as establishing program governance and EHRM program planning. Based on these preliminary observations and as the department continues its activities to transition from VistA to the Cerner electronic health record system, critical success factors can serve as a model of best practices that VA could apply to enhance the likelihood that the acquisition of the new system will be successfully achieved. While it is early in VA’s acquisition of the Cerner system, it will be important for the department to leverage all available opportunities to ensure that its transition to a new system is carried out in the most effective manner possible. Our experience has shown that challenges can successfully be overcome through using a disciplined approach to IT acquisition management. Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have. If you or your staffs have any questions about this testimony, please contact David A. Powner at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony statement. GAO staff who made key contributions to this statement are Mark Bird (Assistant Director), Jennifer Stavros-Turner (Analyst in Charge), John Bailey, Rebecca Eyler, Jacqueline Mai, Scott Pettis, and Charles Youman. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "VA provides health care services to almost 9 million veterans and their families and relies on its health information system—VistA—to do so. However, the system is more than 30 years old, is costly to maintain, and does not support interoperability with DOD and private health care providers. Since 2001, VA has pursued multiple efforts to modernize the system. In June 2017, VA announced plans to acquire the same system—the Cerner system—that DOD is implementing. GAO was asked to summarize preliminary observations from its ongoing review of VistA and the department's efforts to acquire a new system to replace VistA. Specifically, the statement summarizes preliminary observations regarding (1) costs incurred for the system and related activities during the last 3 fiscal years; (2) key components that comprise VistA and are to be replaced; and (3) actions VA has taken to prepare for its transition to the Cerner system. The statement also discusses common factors critical to the success of IT acquisitions that GAO has previously identified. GAO reviewed its prior reports on the VistA modernization and on critical success factors of major IT acquisitions. GAO also reviewed records of obligations for VistA for fiscal years 2015, 2016, and 2017; analyzed VA documentation that describes the scope of VistA, and reviewed program documentation. According to the Department of Veterans Affairs (VA), the Veterans Health Information Systems and Technology Architecture (VistA) and related costs, as approximated by funding obligations, were approximately $1.1 billion, $899 million, and $946 million in fiscal years 2015, 2016 and 2017, respectively. These obligations total about $3.0 billion over 3 years to support the system. As identified by the department, the obligations were to cover the costs for three programs (VistA Evolution, Interoperability, and Virtual Lifetime Electronic Record Health) and other supporting investments for activities such as networks and infrastructure sustainment. The following table provides a summary of the total VistA and VistA-related obligations. GAO's preliminary results indicate that VA is working to define VistA and identify system components to be replaced by the new system. However, according to VA officials, there is no single information source that fully defines the scope of VistA. This situation is partly due to differences in VistA at various facilities. In the absence of a complete definition of VistA, program officials have taken a number of steps to define the system's scope and identify the components that the new system will replace. These steps have included conducting analyses, performing preliminary site (medical facility) assessments, and planning for a detailed assessment of each site where the new system will be deployed. Since VA announced in June 2017 that the department would acquire the same electronic health record system as the Department of Defense (DOD), GAO's preliminary results indicate that VA has begun taking actions to prepare for the transition from VistA. These actions have included standardizing VistA, clarifying the department's approach to interoperability, establishing governance for the new program and the framework for joint governance with DOD, and preparing initial program plans. VA is early in its effort to transition from VistA to the Cerner system and the department's actions are ongoing. In 2011, GAO reported on nine common factors critical to the success of major IT acquisitions. Such factors include ensuring active engagement of senior officials with stakeholders and having qualified, experienced program staff. These critical success factors can serve as a model of best practices that VA could apply to enhance the likelihood that the acquisition of a new electronic health record system will be successfully achieved.", "document_type": "gao"}
{"report": "JWST is envisioned to be a large deployable space telescope, optimized for infrared observations, and the scientific successor to the aging Hubble Space Telescope. JWST is being designed for a 5-year mission to find the first stars, study planets in other solar systems to search for the building blocks of life elsewhere in the universe, and trace the evolution of galaxies from their beginning to their current formation. JWST is intended to operate in an orbit approximately 1.5 million kilometers—or 1 million miles—from the Earth. With a 6.5-meter primary mirror, JWST is expected to operate at about 100 times the sensitivity of the Hubble Space Telescope. JWST’s science instruments are designed to observe very faint infrared sources and therefore are required to operate at extremely cold temperatures. To help keep these instruments cold, a multi-layered tennis court-sized sunshield is being developed to protect the mirrors and instruments from the sun’s heat. The JWST project is divided into three major segments: the observatory segment, the ground segment, and the launch segment. When complete, the observatory segment of JWST is to include several elements (Optical Telescope Element (OTE), Integrated Science Instrument Module (ISIM), and spacecraft) and major subsystems (sunshield and cryocooler). The hardware configuration created when the Optical Telescope Element and the Integrated Science Instrument Module were integrated, referred to as OTIS, is not considered an element by NASA, but we categorize it as such for ease of discussion. Additionally, JWST is dependent on software to deploy and control various components of the telescope, and to collect and transmit data back to Earth. The elements, major subsystems, and software are being developed through a mixture of NASA, contractor, and international partner efforts. See figure 1 for an interactive graphic that depicts the elements and major subsystems of JWST. For the majority of work remaining, the JWST project is relying on two contractors: Northrop Grumman Corporation and the Association of Universities for Research in Astronomy’s Space Telescope Science Institute (STScI). Northrop Grumman plays the largest role, developing the sunshield, the Optical Telescope Element, the spacecraft, and the Mid-Infrared Instrument’s cryocooler, in addition to integrating and testing the observatory. STScI’s role includes soliciting and evaluating research proposals from the scientific community, and receiving and storing the scientific data collected, both of which are services that it currently provides for the Hubble Space Telescope. Additionally, STScI is developing the ground system that manages and controls the telescope’s observations and will operate the observatory on behalf of NASA. JWST will be launched on an Ariane 5 rocket, provided by the European Space Agency. JWST depends on 22 deployment events—more than a typical science mission—to prepare the observatory for normal operations on orbit. For example, the sunshield and primary mirror are designed to fold and stow for launch and deploy once in space. Due to its large size, it is nearly impossible to perform deployment tests of the fully assembled observatory, so the verification of deployment elements is accomplished by a combination of lower level component tests in flight-simulated environments; ambient deployment tests for assembly, element, and observatory levels; and detailed analysis and simulations at various levels of assembly. We have previously reported that complex development efforts like JWST face numerous risks and unforeseen technical challenges, which oftentimes can become apparent during integration and testing. To accommodate unanticipated challenges and manage risk, projects reserve extra time in their schedules, which is referred to as schedule reserve, and extra money in their budgets, which is referred to as cost reserve. Schedule reserve is allocated to specific activities, elements, and major subsystems in the event of delays or to address unforeseen risks. Each JWST element and major subsystem has been allocated schedule reserve. When an element or major subsystem exhausts schedule reserve, it may begin to affect schedule reserve on other elements or major subsystems whose progress is dependent on prior work being finished for its activities to proceed. The element or major subsystem with the least amount of schedule reserve determines the critical path for the project. Any delay to an activity that is on the critical path will reduce schedule reserve for the whole project, and could ultimately impact the overall project schedule. Cost reserves are additional funds within the project manager’s budget that can be used to address unanticipated issues for any element or major subsystem, and are used to mitigate issues during the development of a project. For example, cost reserves can be used to buy additional materials to replace a component or, if a project needs to preserve schedule reserve, reserves can be used to accelerate work by adding shifts to expedite manufacturing. NASA’s Goddard Space Flight Center (Goddard)—the NASA center with responsibility for managing JWST— has issued procedural requirements that establish the levels of both cost and schedule reserves that projects must hold at various phases of development. In addition to cost reserves held by the project manager, management reserves are funds held by the contractors that allow them to address cost increases throughout development. We have found that management reserves should contain 10 percent or more of the cost to complete a project and are generally used to address various issues tied to the contract’s scope. JWST has experienced significant cost increases and schedule delays. Prior to being approved for development, cost estimates of the project ranged from $1 billion to $3.5 billion, with expected launch dates ranging from 2007 to 2011. Before 2011, early technical and management challenges, contractor performance issues, low level cost reserves, and poorly phased funding levels caused JWST to delay work after cost and schedule baselines were established, which contributed to significant cost and schedule overruns, including launch delays. The Chair of the Senate Subcommittee on Commerce, Justice, Science, and Related Agencies requested from NASA an independent review of JWST in June 2010. NASA commissioned the Independent Comprehensive Review Panel, which issued its report in October 2010, and concluded that the baseline funding did not allot adequate reserves, resulting in an unexecutable project. Following this review, the JWST program underwent a replan in September 2011, and in November of that same year, Congress placed an $8 billion cap on the formulation and development costs for the project. On the basis of the replan, NASA rebaselined JWST with a life- cycle cost estimate of $8.835 billion which included additional money for operations and a planned launch in October 2018. The revised life-cycle cost estimate included a total of 13 months of funded schedule reserve. We have previously found that since the project’s replan in 2011, the JWST project has met its cost and schedule commitments. In our most recent report in December 2016, we found that the project was still operating within its committed schedule while in its riskiest phase of development—integration and test—but had used about 3 months of schedule reserve since our previous December 2015 report. In addition, we found that the project was facing numerous risks and single points of failure before launch. Finally, we found that while the project was meeting its cost commitments despite technical and workforce challenges, the observatory contractor had continued to maintain a larger workforce for longer than planned in order to address technical issues. In these prior reports, we have made recommendations with regard to improving cost and schedule estimating, updating risk assessments, and strengthening management oversight. NASA has generally agreed and taken steps to implement a number of our recommendations. For example, in December 2015, we recommended that the JWST project require contractors to identify, explain, and document anomalies in contractor-delivered monthly earned value management reports. NASA concurred with this recommendation and, in February 2016, directed the contractors to implement the actions stated in the recommendation. However, NASA did not implement some recommendations, which if implemented, may have provided insight into the challenges it now faces. For example, in December 2012, we recommended the JWST project update its joint cost and schedule confidence level (JCL), a point-in-time estimate that, among other things, includes all cost and schedule elements and incorporates and quantifies known risks. NASA policy requires projects to establish commitment baselines at a 70 percent confidence level. Although NASA concurred with this recommendation, it did not take steps to implement it. An updated JCL may have portended the current schedule delays, which could have been proactively addressed by the project. While much progress on hardware integration and testing and several risk reduction efforts have occurred over the past several months, the JWST project also used all of its schedule reserves established at the replan in 2011 to address various technical issues, including a test anomaly on the telescope and sunshield hardware challenges. In September 2017, the JWST project requested a launch window at least 5 to 8 months later than the planned October 2018 launch readiness date, based on the results of a schedule risk assessment that showed that various components of the spacecraft element integration were taking longer to complete than expected. The new launch window included up to 4 months of additional schedule reserves. However, shortly after requesting the revised launch window from the European Space Agency (ESA), which will contribute the launch vehicle, the project learned from Northrop Grumman that up to another 3 months of schedule reserve use was expected, due to lessons learned from conducting deployment exercises of the spacecraft element and sunshield. After incorporating some schedule efficiencies, the project now has 1.5 months of schedule reserve remaining. Given the remaining integration and test work ahead—the phase in development where problems are most likely to be found and schedules tend to slip—and risks remaining to be reduced to acceptable levels, coupled with a low level of schedule reserves, we believe that additional delays to the project’s launch readiness date are likely. Since our last report, the JWST project has made considerable progress toward completing its third and fourth of five total integration and test phases for the combined optical telescope element and integrated science instrument module (OTIS) and the spacecraft elements, respectively. Previously, the project and Northrop Grumman completed the Integrated Science Instrument Module and the Optical Telescope Element integration phases in March 2016, as shown in Figure 2 below. OTIS progress: Hardware integration and two of three key environmental tests—acoustics and vibration—were completed in 2016 and early 2017, respectively. The third key test, cryovacuum— which was conducted in a large cryovacuum chamber to ensure the telescope can operate at the near-absolute zero cryogenic temperatures of space—began in July 2017 at Johnson Space Center and successfully concluded in October 2017. The project identified a technical issue with the stability of the optical mirror that affects image quality, and by conducting some additional testing, determined that it was caused by a test equipment setup issue and not related to the flight hardware itself. Project officials stated that they plan to delay shipping the completed OTIS element to the Northrop Grumman facility in California for final integration with the spacecraft element from late December 2017 to February 2018. According to project officials, the delay allows the project to shift some of the work to prepare OTIS for integration with the spacecraft—such as cleaning the mirrors—to Johnson Space Center where it will not have to share space in the crowded clean room at Northrop Grumman as sunshield fold and stow activities are ongoing. OTIS is expected to arrive at Northrop Grumman months ahead of its need date for integration into the observatory. Spacecraft element progress: All spacecraft element hardware has been delivered and mechanical integration of spacecraft hardware— including the five layers of the sunshield—is largely complete. Northrop Grumman has also completed a folding operation and the first full deployment of the integrated spacecraft element. Northrop Grumman plans to refold the sunshield and complete one more deployment cycle, after environmental testing, in this phase of integration and testing. The project and its contractors conducted risk reduction testing on OTIS and the spacecraft elements to reduce risk for challenging environmental tests on flight hardware. These tests allowed the project and its contractors to practice processes and procedures for testing on flight hardware to create a more efficient test flow and proactively address issues before flight hardware tests commenced. For example, the second risk reduction test on the OTIS pathfinder hardware showed that vibration levels inside the test chamber were too high, and adjustments to the ground support equipment were implemented to address this issue. Additionally, Northrop Grumman officials noted that risk reduction tests on the spacecraft element have helped demonstrate facility capability and logistics for the upcoming tests of flight hardware. The project has also progressed in preparing the software and ground systems that will operate the observatory and manage and control the telescope’s observations. According to NASA’s Independent Verification and Validation group, the overall status of JWST software development and integration efforts is very positive with minimal development remaining, and the group has significant confidence that the mission software will support the mission objectives. Additionally, the Space Telescope Science Institute has made considerable progress in preparing JWST’s ground systems, such as preparing the Mission Operations Center and conducting the Mission Operations Review in April 2017. The project has made notable progress in reducing and closing numerous tracked risks. In December 2016, we reported that the project maintained a risk list with 73 items. Currently, the list of tracked risks has 47 items to be closed or mitigated to acceptable levels. The completion of the OTIS cryovacuum test enabled the project to recently close several risks. For example, the project previously tracked a risk that the instrument module and telescope element might have to be de-integrated if OTIS testing revealed workmanship issues. With the successful completion of the testing, this risk was closed in fall 2017. The project also obtained a waiver from the Office of Safety and Mission Assurance to NASA’s risk policy for its over 300 single point failures throughout the observatory, the majority of which are related to the sunshield. Project officials reported that the elimination of all single point failures on the JWST Mission is not practical or even feasible, due mainly to the large number of deployments, and that all mitigations practical to address and minimize them have been implemented. In the summer of 2017, the JWST project conducted a schedule risk assessment that showed that the October 2018 launch readiness date was unachievable, primarily due to the various components of spacecraft element integration taking longer to complete than planned. The project performed the schedule risk assessment in order to provide ESA a desired launch window about one year prior to the expected launch date. The assessment took into account remaining work to be completed, lessons learned from environmental testing, and the current performance rates of integrating the spacecraft element. As a result of the assessment, in September 2017 NASA requested from ESA a launch window of March 2019 to June 2019. The requested launch window represents a 5- to 8- month delay from the previously planned October 2018 launch readiness date. The schedule risk assessment incorporated input from Northrop Grumman on expected durations for remaining spacecraft and observatory level integration activities. However, the project’s analysis determined that the expected durations provided by Northrop Grumman were overly optimistic. As a result, the project incorporated uncertainty factors into the analysis, which added 2 to 3 months to the schedule. The project also estimated an additional 5 to 8 weeks would be needed because of emerging technical issues not specifically accounted for by the schedule risk assessment. Additionally, the project updated the expected time required at the launch site for processing activities and added about 1.25 months. According to project officials, the confidence in the launch window identified is in line with that of a typical NASA JCL at 70 percent. NASA’s independent Standing Review Board reviewed the assessment and found that it was a thorough approach for reviewing the schedule, risks, and uncertainties and that the new proposed launch readiness range is technically feasible with reasonable risk. NASA’s request for a March to June 2019 launch window was driven by its own schedule and technical issues, but also avoids potential conflicts with other mission launches. Regardless of JWST’s launch readiness, and prior to undertaking the schedule risk assessment, the project learned in November 2016 of potential scheduling conflicts at the launch site in French Guiana. After numerous delays, BepiColombo, a joint ESA/Japan Aerospace Exploration Agency mission to Mercury, is currently forecasted to have an October 2018 launch readiness date. According to program officials, that mission could have taken precedence over JWST given that planetary missions generally have more limited launch windows. Additionally, Arianespace, a commercial company, currently has a commercial launch scheduled for the December 2018 timeframe. While much progress has been made since we last reported in December 2016, the project and Northrop Grumman consumed the remaining 6 months of schedule reserves established at the 2011 replan to address technical challenges that arose during the OTIS and the spacecraft element integration and test work, as well as additional challenges identified by the schedule risk assessment. Specifically: In February 2017, a vibration anomaly during OTIS vibration testing at Goddard Space Flight Center, occurring in parallel with spacecraft and sunshield issues, consumed 1.25 months and delayed the start of cryovacuum testing, the final event in the OTIS integration and test phase, by several weeks. In April 2017, spacecraft and sunshield issues consumed an additional 1.25 months. Specifically, a contractor technician applied too much voltage and irreparably damaged the spacecraft’s pressure transducers, components of the propulsion system, which help monitor spacecraft fuel levels. The transducers had to be replaced and reattached in a complicated welding process. At the same time, Northrop Grumman also addressed several challenges with integrating sunshield hardware such as the mid-boom assemblies and membrane tensioning system, which help deploy the sunshield and maintain its correct shape. Finally, in September 2017, the remaining 3.5 months of previously planned schedule reserves was consumed as a result of the contractor having underestimated the time required to complete integration and test work on the spacecraft and other risks identified in the schedule risk analysis. Specifically, execution of spacecraft integration and test tasks, due to the complexity of work and cautious handling given sensitivity of flight hardware, was slower than planned. For example, the installation of numerous membrane retention devices slowed the pace of the work. According to Northrop Grumman officials, the sunshield is elevated off the ground for installation work and the size and quantity of the work lifts necessary for the technicians to access the sunshield requires more maneuvering and prevents the technicians from working on the forward and aft sunshield assemblies simultaneously. Taking into account the consumption of planned reserves and the establishment of the revised launch window, the project expected to have up to 4 months of schedule reserve extending to the end of the launch window range, or June 2019. However, shortly after the project notified ESA of the launch delay in September 2017, the project received updated information from Northrop Grumman and determined that up to 3 months of schedule reserve would be needed based upon lessons learned from Northrop Grumman’s initial sunshield folding operation and implications for remaining deployment test activities. After incorporating some schedule efficiencies, the project now has 1.5 months of schedule reserve remaining. This level of schedule reserve is below the standards established by Goddard Space Flight Center for a project at this stage of development. The project is working with Northrop Grumman to determine if any further schedule reserve can be regained by incorporating schedule efficiencies and adjusting integration and test plans. As shown in the figure below, Northrop Grumman’s work on the spacecraft element remains on the project’s critical path—the schedule with the least amount of reserve, which determines the overall schedule reserve for the project—now with an estimated 1.5 months of schedule reserve to the end of the launch window in June 2019. Given several ongoing technical issues, and the work remaining to test the spacecraft element and complete integration of the telescope and spacecraft, combined with continuing slower than planned work at Northrop Grumman, we believe that the rescheduled launch window is likely unachievable. For example, in May 2017, Northrop Grumman found that 8 of 16 valves in the spacecraft propulsion system’s thruster modules were leaking beyond allowable levels. The project and Northrop Grumman were unable to definitively isolate the root cause of the leaks; however, Northrop Grumman determined that the most likely cause is a handling error at their facility. Specifically, the material around the valves deteriorated due to a solvent used for cleaning. All of the thruster modules were returned to the vendor for investigation and refurbishment. According to project officials, the refurbished thruster modules were returned to the contractor facility in late 2017 for reattachment. However, reattaching the repaired modules is a challenge because of the close proximity of electronics and other concerns. The project included about one month in the schedule risk assessment to account for the time spent investigating and determining the path forward for the thruster issue; however, the full schedule impact of reattaching the thruster modules to the spacecraft element had not yet been determined and was not incorporated into the analysis. In November 2017, the project and Northrop Grumman chose a reattachment method that project officials stated is expected to require less time to complete and pose fewer risks to the hardware than a traditional welding approach. In October 2017, when conducting folding and deployment exercises on the sunshield, Northrop Grumman discovered several tears in the sunshield membrane layers. According to program officials, a workmanship error contributed to the tears. The tears can be repaired; however, some schedule reserve may be required to repair them. Additionally, during the deployment exercise, one of the sunshield’s six membrane tensioning systems experienced a snag. Northrop Grumman is planning to implement a slight design modification to prevent the issue from occurring again. Northrop Grumman officials have not yet determined if the schedule will be affected as a result. Beyond mitigating the specific spacecraft thruster module valve leak and sunshield issues, the project faces significant work ahead, and numerous risks remain to be mitigated to acceptable levels. For example, the project and Northrop Grumman must: Resolve lingering technical issues from the OTIS cryovacuum test and prepare and ship OTIS to the Northrop Grumman facility in California for integration with the spacecraft. Complete integration of spacecraft hardware, and conduct spacecraft element environmental tests and remaining deployments of the spacecraft and sunshield—activities which, to date, have taken considerably longer than planned. Integrate the completed OTIS element with the spacecraft element and test the full observatory in the fifth and final integration phase, which includes another set of challenging environmental tests. Mitigate approximately 47 remaining tracked hardware and software risks to acceptable levels and continue to address the project’s 300+ potential single point failures to the extent possible. Prepare and ship the observatory to the launch site and complete final launch site processing, including installation of critical release mechanisms. Project officials have expressed concern with Northrop Grumman’s ability to prevent further schedule erosion as the project moves through remaining integration and test work. With the project’s current low level of schedule reserves, even a relatively minor disruption could cause the project to miss its revised launch window. According to program officials, the contractor has increased its daily work shifts from two to three and is now working 24 hours per day on spacecraft integration, which further limits schedule flexibility. In early 2018, the project’s independent Standing Review Board will review the latest schedule inputs based on updated knowledge about spacecraft integration and test activity durations. For example, according to project officials, by early 2018, the contractor is expected to have completed the second of four planned fold and stow sequences on the sunshield, which will provide more insight into whether the current planned schedule is realistic. The Standing Review Board will also examine the project’s plans for schedule efficiencies and potential integration and test adjustments to determine if the June 2019 launch window can be met. Project officials stated that following this review, NASA senior management will be briefed on the Standing Review Board’s findings and will then formally identify a new launch readiness window. Our prior work has shown that integration and testing is the phase in which problems are most likely to be found and schedules tend to slip. For a uniquely complex project such as JWST, this risk is magnified. Now that the project is well into its complex integration and test efforts, events are sequential in nature and there are fewer opportunities to mitigate issues in parallel. Since the replan, the project has used about 2.5 months of schedule reserve per year to address technical issues, but, as discussed above, it now has only approximately 1.5 months of schedule reserve to last until the end of the revised launch window in June 2019. Thus, past experience with technical issues in earlier integration phases suggests that this amount of reserve will not be adequate for the challenging work ahead, and further delays to launch readiness are likely. We will continue to monitor the project’s progress in meeting its revised schedule as more information is available during this critical integration and test phase. Northrop Grumman continued to maintain higher than planned workforce levels in the past year and, as a result, NASA will have limited cost reserves to address future challenges. Northrop Grumman’s ability to control costs and decrease its workforce is central to JWST’s capacity to meet its long-term cost commitments. For the past 44 months, Northrop Grumman’s actual workforce has exceeded its projections and the company is not expected to significantly reduce its workforce until the spring of 2019, when NASA plans to ship the completed observatory to the launch site. Northrop Grumman had planned to reduce its workforce in fiscal years 2016 and 2017 as work was planned to be completed, but has needed to maintain higher workforce levels due to technical challenges and the work taking longer than expected. Figure 6 illustrates the difference between the workforce levels that Northrop Grumman projected for fiscal years 2016 and 2017, and its actual workforce levels during that period. As shown in figure 6, Northrop Grumman has slightly reduced its workforce since the beginning of fiscal year 2016. However, staffing levels remain higher than projected as a result of previously noted technical challenges including spacecraft and sunshield integration and test challenges, to keep specialized engineers available when needed during final assembly, and to complete required testing activities. Projections made at the beginning of fiscal year 2017—when the expected launch readiness date was October 2018—expected workforce levels to begin at 472 full-time equivalent staff and drop to 109 at the end of the fiscal year. However, technical challenges and delays in completing scheduled work did not allow for the planned workforce reduction and Northrop Grumman reported 496 full-time equivalent staff in September 2017, or 387 more than planned. According to JWST project officials and similar to previous years, Northrop Grumman’s priority for fiscal year 2018 is to maintain schedule in order to ensure that the new launch window set from March to June 2019 can be met. As a result, Northrop Grumman’s contractor workforce levels are expected to continue to be elevated through JWST’s final integration and test phase in fiscal year 2019 where the spacecraft and OTIS will be integrated before shipment to the launch site. Northrop Grumman submitted a cost overrun proposal to NASA in July 2016, primarily to address costs associated with sustaining its workforce at higher levels than planned in fiscal year 2017. An overrun proposal seeks to increase the value of a cost-reimbursement contract when the total estimated cost is less than the contract’s estimated cost to complete the performance of the contract. In addition to higher workforce levels, the overrun proposal replenished contractor management reserves that had been used to address technical issues, and addressed projected growth in the contractor’s cost to complete work. NASA and the contractor completed negotiations in September 2017 and executed a contract modification that added $179.9 million to the value of the contract to cover Northrop Grumman’s cost overrun and additional negotiated items, such as particle dampers. This amount was intended to cover the cost of the remaining work through the expected launch date of October 2018. However, by September 2017 Northrop Grumman had no remaining schedule reserves and a limited amount of cost reserves with which to address future costs. Furthermore, the project determined—as discussed above—that the October 2018 launch window was not feasible and established a new launch window. According to JWST project officials, the project expects to issue a request for proposal in early 2018 to cover the costs for the remaining work through the new launch window. The project plans to use a significant portion of fiscal years 2018 and 2019 program cost reserves to address Northrop Grumman costs and unanticipated technical challenges. According to JWST program officials, if the contractor does not improve its schedule efficiency, the remaining reserves will be used to offset increased cost resulting from taking longer to complete the work. For the sixth consecutive year, the JWST project managed spending within its allocated budget in fiscal year 2017. However, JWST is still resolving technical challenges and planned work continues to take longer to complete. Prudent management of its resources allowed the project to carry into fiscal year 2018 about a third more carry over funding than it had projected at the beginning of the fiscal year. Program officials said that assuming the remaining integration and tests proceed as planned and no long delays are encountered, the existing program resources accommodate the new launch window of March to June 2019. The project continues to identify funding options in the event of a delay of beyond the end of the launch window. Under the 2011 replan, Congress placed an $8 billion cap on formulation and development costs, but any long delays beyond the new launch window—which, as noted above, are likely— place the project at risk of exceeding this cap. We requested comments from NASA, but agency officials determined that no formal comments were necessary. NASA provided technical comments, which were incorporated as appropriate. We are sending copies of the report to NASA’s Administrator and interested congressional committees. In addition, the report is available at no charge on GAO’s website and http://www.gao.gov. If you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Richard Cederholm, (Assistant Director); Karen Richey, (Assistant Director); Jay Tallon, (Assistant Director); Brian Bothwell, Laura Greifner, Daniel Kuhn, Katherine Lenane, Jose Ramos, Carrie Rogers, Sylvia Schatz, and Roxanna Sun made key contributions to this report.", "summary": "JWST, a large, deployable telescope intended to be the successor to the Hubble Space Telescope, is one of NASA's most complex and expensive projects, at an anticipated cost of $8.8 billion. Congress set an $8 billion JWST development cost cap in 2011, and the remaining $837 million is for its operations costs. JWST is intended to revolutionize our understanding of star and planet formation and advance the search for the origins of our universe. With significant integration and testing planned for the remaining period until launch, the JWST project will still need to address many challenges during the remainder of integration and testing. Conference Report No. 112-284, accompanying the Consolidated and Further Continuing Appropriations Act, 2012, included a provision for GAO to assess the project annually and report on its progress. This is the sixth such report. This report assesses the extent to which JWST is (1) meeting its schedule commitments, and (2) able to meet its cost commitments. GAO reviewed monthly JWST reports, reviewed relevant policies, conducted independent analysis of NASA and contractor data, and interviewed NASA and contractor officials. In 2017, the National Aeronautics and Space Administration's (NASA) James Webb Space Telescope (JWST) project delayed its launch readiness date by at least 5 months, and further delays are likely. The delay—from October 2018 to a launch window between March and June 2019—was primarily caused by components of JWST's spacecraft taking longer to integrate than planned. JWST made considerable progress toward the completion of integration and test activities in the past year. However, the project used all remaining schedule reserve—or extra time set aside in the schedule in the event of delays or unforeseen risks—to address technical issues, including an anomaly on the telescope found during vibration testing. Extending the launch window provided the project up to 4 months of schedule reserve. However, shortly after requesting the new launch window in September 2017, the project determined that several months of schedule reserve would be needed to address lessons learned from the initial folding and deployment of the observatory's sunshield (see image). Given remaining integration and test work ahead—the phase in development where problems are most likely to be found and schedules tend to slip—coupled with only 1.5 months of schedule reserves remaining to the end of the launch window, additional launch delays are likely. The project's Standing Review Board will conduct an independent review of JWST's schedule status in early 2018 to determine if the June 2019 launch window can be met. JWST will also have limited cost reserves to address future challenges, such as further launch delays, and is at risk of breaching its $8 billion cost cap for formulation and development set by Congress in 2011. For several years, the prime contractor has overestimated workforce reductions, and technical challenges have prevented these planned reductions, necessitating the use of cost reserves. Program officials said that existing program resources will accommodate the new launch window—provided remaining integration and testing proceeds as planned without any long delays. However, JWST is still resolving technical challenges and work continues to take longer than planned to complete. As a result, the project is at risk of exceeding its $8 billion formulation and development cost cap. GAO has made recommendations on the project in previous reports. NASA agreed with and took action on many of GAO's prior recommendations, but not on others—some of which may have provided insight to the current schedule delays. For example, in December 2012, GAO recommended that the JWST project perform an updated integrated cost/schedule risk analysis.", "document_type": "gao"}
{"report": "As we have previously reported, 911 services have evolved from basic 911—which provided Americans with a universally recognized emergency number—to Enhanced 911 which also routes calls to the appropriate call center and provides information about the caller’s location and a call back number. NG911 represents the next evolution in 911 services by using IP-based technology to deliver and process 911 traffic. Under NG911, call centers will continue to receive voice calls and location information, but will also be able to accommodate emergency communications from the range of technologies in use today. In addition, NG911 systems provide call centers with enhanced capabilities to route and transfer calls and data, which could improve call centers’ abilities to handle overflow calls and increase information sharing with first responders. Generally speaking, 911 communications begin when a caller dials 911 using a landline, wireless, or Voice over Internet Protocol (VoIP) system. Once a 911 caller places an emergency call, a communications provider receives and routes the call to the appropriate call center, along with the caller’s phone number and location (i.e., street address for a landline caller, approximate geographic location for a wireless caller, and the subscriber’s address for VoIP). Calls and data may be routed to 911 call centers using legacy methods (i.e., routing calls across traditional telephone networks) or NG911 methods (i.e., routing calls and other data through IP-networks). Once the call reaches a call center, trained call takers and dispatchers determine the nature of the emergency and dispatch first responders, typically using a variety of equipment and systems, including call handling systems, mapping programs, and computer aided dispatch. Figure 1 illustrates the 911 communications and dispatch process. As illustrated in figure 1, NG911 systems use IP-networks capable of carrying voice plus large amounts of data. These emergency-services networks are typically deployed at the state or regional level with multiple call centers connecting to the network. However, the existence of an IP- network alone does not constitute an NG911 system. As defined by standards developed by the emergency communications community, an NG911 system should have the capability to, among other things: provide a secure environment for emergency communications; acquire and integrate additional data for routing and answering calls; process all types of emergency calls, including multimedia messages; transfer calls with added data to other call centers or first responders. While NG911 systems must possess certain capabilities, it is important to note that states and localities may make decisions about which capabilities they intend to use to best meet their needs. In addition, states and localities have the authority to make decisions about what NG911 equipment, systems, and vendors to use; thus, the configurations of these systems vary. According to a panel of experts convened by the National 911 Program, the transition to NG911 may require a variety of technical and operational changes to current 911 systems and processes. For example, technical changes can include upgrades to networks or installing new hardware or software in 911 call centers. Operational changes can include the need for additional training or the development of new policies and procedures (e.g., new procedures for processing or storing multimedia). These technical and operational changes may also have effects on 911 funding and state and local governance structures, which we will discuss in more detail later in this report. According to an FCC advisory body that examined NG911 systems architecture in 2016, while NG911 systems are implemented in a variety of ways at the state or local level, NG911 implementation can occur gradually and in phases. According to this model, NG911 implementation occurs on a continuum that begins with legacy 911 systems and ends with a fully deployed NG911 national end-state where all individual 911 call centers nationwide would be connected. The NG911 implementation model identifies activities that take place as part of the NG911 transition, many of which occur concurrently, such as: planning (e.g., conducting feasibility studies, preparing databases, establishing governance models); acquiring, testing, and implementing NG911 system elements (e.g., establishing an emergency-services IP-network, location-based call routing, processing multimedia); connecting call centers within a jurisdiction (i.e., jurisdictional end- state in which all call centers are fully NG911 operational, supported by agreements, policies, and procedures); and connecting NG911 systems nationwide (i.e., national end-state in which all call centers in the nation are fully NG911 operational, supported by agreements, policies, and procedures). In addition, because 911 services provide an essential function, the implementation of NG911 generally involves using both the legacy system and the NG911 system simultaneously for a period of time, according to the FCC advisory body, to ensure 911 services are not disrupted as new system elements are tested and implemented. Deploying and operating 911 is the responsibility of 911 authorities at the state and local level. As we have previously reported, all 50 states and the District of Columbia collect—or have authorized local entities to collect—funding for 911 from telephone service subscribers, and methods within each state for collecting funds vary. FCC, as required by statute, reports to Congress annually on the states’ collection and distribution of 911 fees and charges. There are approximately 6,000 call centers nationwide that process 911 calls, often at the county or city level, and these centers can vary greatly in size and technical sophistication. The state and local governance structures that oversee 911 operations also vary by location. For example, we previously reported that some states collect fees or charges for 911 and administer a statewide 911 program. Other states authorize local entities to collect fees or charges for 911 and administer 911 programs at the local level. Still other states use a combination of these approaches. According to a panel of experts convened by the National 911 Program, historically, 911 authority has been coordinated and maintained locally with no requirement to coordinate with other jurisdictions. However, the transition to NG911 enables connection of 911 systems. Thus, as previously mentioned, the NG911 transition may require technological and operational changes, as well as changes to 911 policies and governance responsibilities for states and localities. While deploying and operating 911 is the responsibility of entities at the state and local level, federal agencies—including NHTSA, NTIA, FCC, and DHS—have responsibilities to support state and local implementation, including through facilitating coordination of activities among 911 stakeholders and administering federal grants, for example: NHTSA houses the National 911 Program as part of its Office of Emergency Medical Services (Office of EMS) to provide national leadership and coordination for the NG911 transition throughout the United States, as previously mentioned. According to NHTSA, the fiscal year 2017 budget for the National 911 Program was $2.74 million. Among other activities, which we will discuss later in this report, the National 911 Program surveys states on progress implementing NG911 and reports this survey data annually. FCC issues orders and regulations for 911 service providers on topics relevant to NG911, such as 911 reliability, location accuracy, and text- to-911. FCC also sponsors advisory bodies comprised of government and industry experts that study relevant topics and provide recommendations related to NG911, such as the Task Force on Optimal Public Safety Answering Point Architecture and the Communications, Security, Reliability, and Interoperability Council. While there are no federally mandated time frames for implementing NG911, the Next Generation 911 Advancement Act of 2012 requires specific actions of some federal agencies as outlined in table 1, below. In addition, according to the National 911 Program, as states and localities continue to implement NG911, and begin to explore interconnection with other states’ 911 systems, federal agencies may need to take steps to help ensure state NG911 networks are interoperable and connected. We will discuss actions taken by federal agencies to assist states and localities to implement NG911 later in this report. According to NHTSA’s most recent national survey, state and local progress implementing NG911 varies, and about half of all states reported being in some phase of transition to NG911 in 2015. While a few states are well into statewide implementation, NHTSA officials told us that no state had completely implemented all NG911 functions. Additionally, as of the fall of 2017, none of the selected states we spoke with were processing multimedia—such as images or audio/video recordings—through their 911 systems due to concerns related to privacy, liability, and the ability to store and manage these types of data, among other things. The national survey data, based on responses from 45 states, measured the extent to which NG911 planning and acquisition of NG911 equipment and services were occurring, and the extent to which basic NG911 functions were operational at the state and local levels in 2015. Planning: This measure includes state and local NG911 plans for governance, funding, system components, and operations. In this context, system components refer to an emergency services IP-based network, NG911 software, system and information security, and databases, among other things, according to NHTSA’s survey. In total, 25 of 45 states reported having a state or at least one local NG911 plan in place; conversely, 18 states reported having no NG911 plan in place at either the state or local level—which may indicate they are in the early stages of planning for the NG911 transition or have not yet begun the transition to NG911. Acquisition: These measures identify states or local entities that have defined their NG911 needs and awarded contracts, and then installed and tested acquired NG911 components and services. Twenty-four states reported awarding at least one contract at the state or local level for NG911 components and services. Twenty-three states reported having installed and tested NG911 components and services at either the state or local level. NG911 services: This is a measure of 911 authorities that have some basic, functioning NG911 infrastructure in place. In total, 21 states reported having some level of basic NG911 services in place at the state or local level. Of these 21 states, 10 reported that all 911 authorities within the state were using NG911 technology to process emergency calls. Another 7 of these states reported that 25 percent or less of their state’s 911 authorities were using NG911 technology to process emergency calls. Federal officials, industry stakeholders, and state and local 911 officials we interviewed from nine states identified a number of challenges to implementing NG911, including challenges related to funding, evolving technology and operations, and governance. Funding: State and local officials in four of nine selected states identified insufficient funding as one of the challenges they face in implementing NG911. Additionally, FCC, NHTSA, and industry reports noted that state and local financing strategies are generally insufficient to fully implement NG911. Specifically, these reports note that the need to provide new capital for NG911 implementation while simultaneously funding legacy operational costs during the transition can strain state and local funding. Limited funding: Officials in three states told us that their current funding may not be able to support the upfront costs of infrastructure and equipment acquisitions associated with the transition to NG911. Further, officials said they will need to simultaneously fund both the new NG911 and legacy 911 systems currently in operation until the NG911 systems are fully operational. To address these challenges, a Minnesota official told us about how the state leveraged economies of scale to reduce overall costs through cost sharing between multiple call centers and of call centers consolidating operations from 114 to 104 call centers. Additionally, a Virginia official told us that to cover the upfront costs of transitioning to NG911, the state plans to borrow from the state treasury and then repay the treasury with future-year fee collections. Fee diversion: Diversion of fees intended for 911 costs to non-911 activities may affect a state’s or locality’s ability to cover NG911 transition costs and necessitate identifying alternative funding sources. The FCC’s 2016 annual report on 911 fees indicates that for calendar year 2015, all but two of the states that responded to FCC’s 911 fee survey affirmed that their state or jurisdiction collects fees from phone users to support or implement 911 services. State and local authorities also determine how these 911 fees can be used. FCC’s report also indicated that eight states and Puerto Rico reported diverting a total of more than $220 million (or approximately 8.4 percent) of 911 fees collected to non-911 purposes. Some of these diverted funds were directed to other public safety programs, and others were diverted to either non-public safety or unspecified purposes. According to one state official, had it not been for 911 fees being diverted to non-911 purposes, funding would have been sufficient to cover the NG911 transition without having to go to the state legislature for additional funding. However, officials in the other eight selected states told us that either fee diversion was not an issue in their state or that the diversion of funds had not affected their state’s ability to implement NG911. Evolving technology and operations: Officials in eight states told us that the retirement of legacy infrastructure and the transition to IP-based systems introduces new technical and operational challenges for call centers and states, as well as for equipment and service providers. Interoperability: Officials in three selected states mentioned that connecting to neighboring networks—whether within or between states—could pose challenges. For example, officials mentioned that states and localities may have obtained different equipment, software applications, or service providers – all of which can make interconnections difficult. Officials in Maine and New Hampshire told us that differences in service providers can also be a challenge to seamlessly connecting to neighboring systems. In an instance where two states (Minnesota and North Dakota) have worked to connect their 911 systems, both states used the same service provider, which officials said allowed for fewer barriers to connection. Cyber risks: Officials in three states told us that the transition from a traditional system that only transmits voice traffic to an IP-based system that transmits voice and data traffic has significantly increased the risk of a cyber-attack. This can be a challenge because managing cyber risks is a new and evolving role for state and local 911 authorities. Approaching the transition to NG911 without managing these risks could result in disrupted or disabled call center operations and ultimately a delayed response to an emergency situation. Multimedia: Officials in three states mentioned potential implementation challenges related to accepting and processing multimedia such as audio recordings, images, and videos. More specifically, one official said they did not have procedures to manage or store these multimedia files once received. In addition, another official raised privacy and liability concerns. Call routing: One of the core services of an NG911 system is the ability to have calls routed to the appropriate call center based on a wireless caller’s physical location, instead of the location of the cellular tower that receives and transmits the call. An FCC-sponsored working group reported that there are several options for achieving this and each option has unique positive and negative aspects. One challenge officials in two states noted was that rather than a single, nationwide approach to routing these calls, state and local 911 authorities would need to work individually with the wireless carriers to determine how to best implement location-based call routing. Governance: FCC has noted that transitioning to NG911 will likely result in new roles and levels of coordination between state 911 authorities, local 911 authorities, 911 call centers, and 911 service providers. Further, relationships among authorities at the state and local level may change as states work to interconnect NG911 systems. State and local officials noted that these types of governance challenges can apply in a variety of situations, including within or between states. Evolving roles: As previously mentioned, 911 governance structures vary among states. These varying governance structures may pose different challenges. For example, some states have a centralized structure in which a single government agency is responsible for statewide 911 system’s administration and policy. Officials in two states told us that although they faced challenges transitioning to NG911, their states’ centralized 911 structure eased the transition in their states because there was uniformity in policy and technology, among other things, coming from a single statewide authority. In other states, 911 systems are primarily a local responsibility and organized with decentralized authorities and resources. In these instances, there may be specific challenges related to transitioning to an interconnected NG911 system. Such challenges may include the need for increased levels of coordination among numerous jurisdictions with potentially disparate organizational structures, levels of funding, and priorities. An official also noted that there are governance challenges related to connecting states and evolving relationships between 911 authorities and service providers. Informing decision makers: One of the challenges identified by officials in two states is differing levels of experience and understanding by state and local officials as to what NG911 priorities should be for timely implementation. To help with this understanding, the federal government is making efforts to educate state and local authorities on how to facilitate policymaker understanding as well as provide regular updates to stakeholders on recent NG911 developments. We discuss some of these efforts later in this report. While state and local entities have the primary responsibility for implementing NG911 technology and services, federal agencies are taking actions to assist state and local 911 entities to address NG911 implementation challenges. Actions taken include developing resources, offering technical assistance, and convening stakeholders. More specifically, we identified selected activities that were taken by NHTSA, NTIA, FCC, and DHS that address some of the funding, technology, and governance challenges raised by state and local 911 stakeholders, for example: Cost study: NHTSA’s National 911 Program and NTIA, in consultation with FCC and DHS, plan to issue a study of the range of costs for 911 call centers and service providers to implement NG911 systems. According to NHTSA officials, the cost study will present a nationwide view, rather than a state-by-state view, on the progress of NG911 implementation and its associated costs. Grant program: NHTSA and NTIA are preparing to jointly administer a $115 million grant program to improve 911 services, including the adoption and operation of NG911 services. In September 2017, NHTSA and NTIA issued a notice of proposed rulemaking outlining implementing regulations for the grant program. NHTSA and NTIA expect to award the grants in 2018. Technology standards: The National 911 Program issued an annual guide in 2017 that stressed the importance of using open technology standards for NG911 services. The guide provides a list of standards that have been recently updated and an analysis that identifies whether existing standards fully address NG911 processes and protocols. Cybersecurity guides: DHS issued a guide in 2016 that identified cybersecurity risks for NG911 and risk mitigation strategies. According to DHS officials, the National 911 Program provided input on this guide. In addition, an advisory body tasked by FCC to examine 911 call-centers’ architecture issued a report in 2016 that provided a cybersecurity self-assessment tool for call centers and guidance on cybersecurity strategies. Governance plans: To address challenges related to the evolving roles for state and local 911 authorities, the National 911 Program issued a guide in 2016 that provided practices for states to consider when interconnecting NG911 networks, and DHS issued a guide in 2015 for emergency communications officials for establishing, assessing, and updating their governance structures. In addition, an FCC advisory body issued a report in 2016 that identified NG911 governance approaches, issues, and recommendations for states, localities, and call centers to consider when planning for the deployment of NG911. In addition to federal agency efforts to assist the state and local 911 community, the National 911 Program is in the early stages of establishing an interagency initiative to create a National NG911 Roadmap. As part of this initiative, the National 911 Program plans to convene the 911 stakeholder community to identify tasks that need to be completed at the national level by the federal government and other public and private-sector organizations to support the creation of a national, interconnected NG911 system. Additional details regarding this planned activity are described in further detail later in this report. For additional information on federal actions to address state and local NG911 challenges, see appendix II. As the lead entity for coordinating federal NG911 activities, the National 911 Program has taken a variety of actions to assist the state and local 911 community, in collaboration with other federal agencies. However, the program lacks goals and performance measures to assess whether these activities are achieving desired results. National 911 Program officials stated that they initiate program activities based on feedback received from the 911 community. In addition, officials said the program’s activities fall within the tasks established in the Next Generation 911 Advancement Act of 2012. However, the National 911 Program does not have a means to assess its progress toward meeting its responsibilities established in the 2012 Act. National 911 Program officials said the Office of EMS—the office within NHTSA in which the program is housed—has a strategic plan, but it is outdated and does not contain specific goals or performance measures related to 911 or NG911 implementation. Officials said the Office of EMS has held preliminary discussions to begin updating its strategic plan by January 2019 and plans to include goals and performance measures related to 911 and NG911 services. Office of EMS officials told us the Office of EMS strategic plan will be jointly developed with the National 911 Program. However the Office of EMS had not yet developed a draft strategic plan during the time of our review. Federal internal control standards call for management to clearly define objectives in order to achieve desired results. According to these standards, an entity determines its mission, establishes specific measurable objectives, and formulates plans to achieve its objectives. These standards state that management sets objectives in order to meet the entity’s mission, strategic plan, and goals and requirements of applicable laws and regulations. In addition, our work on leading practices for managing for results indicated that an agency’s strategic goals should also explain what results are expected from the agency and when to expect those results. Further, these goals form a basis for an entity to identify strategies to fulfill its mission and improve its operations to support the achievement of that mission. As the lead entity for coordinating federal NG911 efforts, the National 911 Program faces a complex and challenging task of assisting the 911 community while the nation’s 911 systems undergo a major transformation. However, without specific goals and related performance measures, the National 911 Program is unable to assess how well its activities are achieving results in relation to its responsibilities identified in the 2012 Act. As the National 911 Program and the Office of EMS consider creating a strategic plan, ensuring that the plan includes specific goals and related measures for the National 911 Program would help officials better understand whether the program’s activities are effectively assisting states and localities in transitioning to a fully integrated national NG911 system, and help identify any programmatic changes that might be needed. As previously mentioned, the National 911 Program is in the early stages of establishing an interagency initiative to create a National NG911 Roadmap. This initiative will convene the 911 stakeholder community to identify national-level tasks that need to be completed by federal agencies and other organizations to realize a national, interconnected NG911 system. According to the National 911 Program, a list of the national-level tasks needed to advance NG911 implementation nationwide has not been created to date. In addition, state officials we spoke with said there are certain issues related to interoperability and cybersecurity that federal agencies need to address before states can connect their respective state NG911 systems. To address these issues, NHTSA’s National 911 Program issued a request for proposal (RFP) in August 2017 for managing the roadmap development process and awarded a contract in September 2017. While the National 911 Program is taking steps to develop a National NG911 Roadmap, the program does not have a plan to identify: (1) roles or responsibilities for federal entities to carry out national-level tasks or (2) how the program plans to achieve the roadmap’s objectives. NHTSA’s NG911 roadmap RFP specifies that by identifying a list of national-level tasks that are developed and adopted by the 911 stakeholder community, the roadmap could serve as a blueprint to carry out these tasks and thereby ensure the interoperability of the nation’s NG911 system. However, the National 911 Program does not have plans for the entities participating in the development of the roadmap to be assigned roles and responsibilities for executing the roadmap’s national- level tasks. National 911 Program officials told us the National 911 Program does not plan to assign roles and responsibilities because NHTSA does not have the authority to require or assign tasks for other entities. Additionally, program officials view the simultaneous identification of tasks and assignments of responsibility for those tasks as a risk to facilitating a candid and productive discussion with entities participating in the roadmap initiative. However, officials stated it may be appropriate for agencies participating in the roadmap initiative to perform specific tasks after the roadmap is finalized. We have previously examined interagency collaborative mechanisms and identified certain key issues for federal agencies to consider when using these mechanisms to achieve results. Our prior work has found that following leading collaboration practices, such as clarifying roles and responsibilities of agencies engaged in collaboration, can enhance and sustain collaboration among agencies and provide an understanding of who will do what in support of meeting the aims of the collaborative group. As stated above, the RFP specifies that a roadmap developed by and adopted by 911 stakeholders could serve as a blueprint to carry out the roadmap’s tasks. Securing the commitment of agencies to assigned roles could help organize the collaborative group’s joint and individual efforts and thereby better facilitate decision making. As we have previously found, a lack of clarity on the roles and responsibilities of agencies participating in an interagency effort—such as the execution of the roadmap’s tasks—may limit agencies’ abilities to effectively achieve shared objectives. Given the complexity of the task and the number of agencies that could be involved, following selected leading collaboration practices for the roadmap initiative—particularly with regard to collaborating with roadmap stakeholders to clarify their roles and responsibilities (whether during the creation of the task list or afterwards)—could reduce barriers to agencies effectively working together to achieve the national-level tasks. While clarifying the roles and responsibilities of roadmap stakeholders for the execution of the roadmap’s tasks is an important collaborative step, the National 911 Program has additional responsibilities as the lead entity for the initiative. However, National 911 Program officials are unable to clearly articulate how the program will proceed following the completion of the roadmap. National 911 Program officials said without knowing the contents of the roadmap, it would be premature to specify how the roadmap’s national-level tasks would be completed. Officials stated that once the roadmap is completed, possible next steps may include identification of timelines, deadlines, and a mechanism for tracking progress, among other things, but officials stated that these steps are not required in the roadmap RFP. As stated above, federal internal control standards call for management to clearly define objectives in specific terms. According to these standards, management defines what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. Without a clear plan for how the National 911 Program would take next steps to support the implementation of the roadmap’s objectives and tasks, the National 911 Program may not be prepared to take effective action once the roadmap is completed. We have previously found that having an implementation plan can assist agencies to better focus and prioritize goals and objectives, and align planned activities. Once the roadmap is completed, developing an implementation plan that details what is to be achieved and how it will be accomplished will place the National 911 Program in a better position moving forward to support the completion of the national-level tasks. The current 911 system is undergoing a historic transition. With no federal requirement that states transition to NG911 services, federal leadership is critical to addressing interoperability challenges and promoting the goal of an interconnected national system. As the lead federal entity for fostering coordination and collaboration among federal, state, and local 911 authorities, the National 911 Program plays a critical role in coordinating NG911 implementation efforts to improve the nation’s 911 services. However, this program—in collaboration with other federal agencies— faces a complex and challenging task to help move approximately 6,000 independent 911 call centers toward an interconnected national NG911 system. In addition, given that the NG911 transition is still in its early stages and is an ongoing effort, it is difficult to assess the effectiveness of various federal actions to assist states and localities in the transition. In light of these challenges, without specific goals and related measures to assess effectiveness, the National 911 Program may be hindered in determining whether it is making progress towards its stated mission. Through the roadmap initiative, the National 911 Program has taken important first steps in identifying the need for actions at the national level, in order to fully realize the desired end-state of a national, interconnected NG911 system. However, while identifying needed next steps is essential, equally important to the collaborative effort’s success is (1) defining and agreeing on the roles and responsibilities of the entities best suited to undertake these actions, and (2) developing plans for how the National 911 Program will support implementation to achieve the roadmap’s objectives. If taken, these actions could help further NG911 implementation nationwide and help the National 911 Program and federal agencies in assisting states and localities to improve these lifesaving services. We are making the following three recommendations to the Administrator of NHTSA regarding the National 911 Program: develop specific program goals and performance measures related to NG911 implementation. (Recommendation 1) in collaboration with the appropriate federal agencies, determine roles and responsibilities of federal agencies participating in the National NG911 Roadmap initiative in order to carry out the national-level tasks over which each agency has jurisdiction. (Recommendation 2) develop an implementation plan to support the completion of the National NG911 Roadmap’s national-level tasks. (Recommendation 3) We provided a draft of this report to the Departments of Transportation, Commerce, and Homeland Security and FCC for their review and comment. In its comments, reproduced in appendix III, the Department of Transportation agreed with the recommendations. The Departments of Transportation and Homeland Security also provided technical comments, which we incorporated as appropriate. The Department of Commerce and FCC had no comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of the Department of Transportation, the Secretary of the Department of Commerce, the Secretary of the Department of Homeland Security, the Managing Director of the FCC, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff who made key contributions to this report are listed in appendix IV. Our objectives were to examine (1) progress states and localities are making to implement Next Generation 911 (NG911) and the challenges they have faced and (2) how federal agencies have addressed state and local implementation challenges and planned next steps. To describe state and local progress in implementing NG911 and background information on fee collection and costs, we analyzed select survey data elements from the 2016 National 911 Progress Report and the Eighth Annual Report to Congress on State Collection and Distribution of 911 and Enhanced 911 Fees and Charges, maintained by the National Highway Traffic Safety Administration (NHTSA) and the Federal Communications Commission (FCC) respectively. More specifically, we analyzed the most recent state-provided data (from calendar year 2015) related to the planning and implementation of NG911 at the state and local levels, as well as NG911 cost and 911-related revenue data. We assessed the reliability of these data by reviewing relevant documents and discussing data elements with staff responsible for collecting and analyzing the data. We also conducted our own testing to check the consistency of the data. We found the data from both sources to be sufficiently reliable for our purposes to describe states’ progress in implementing NG911 and provide background on 911 fee collection and costs. While these data provide the best nationwide picture of NG911 implementation and fee collection, and are reliable for our purposes, there are some limitations on how the data can be used. Since we did not validate the state-reported responses, our findings based on these data are limited to what states reported. Additionally, regarding the 2016 National 911 Progress Report data, there are limitations to (1) making comparisons between states because states have different approaches to implementing NG911 and (2) ascertaining year-over-year progress because reporting is voluntary and states’ response rates can vary year to year. To describe implementation challenges that states and local authorities may be encountering, we selected a non-generalizable sample of 10 states as case studies, based upon a variety of factors, including reported progress in implementing NG911, statewide planning and coordination, reported number of annual 911 calls, whether states diverted 911 fees to other uses, and variation in geographic location. We selected these states, in part, based on their responses to the two aforementioned surveys. Based on the aforementioned criteria, we selected the following states to include as case studies: California, Maine, Maryland, Minnesota, Nevada, New Hampshire, North Dakota, South Dakota, Vermont, and Virginia. We reviewed documents and interviewed state officials from all of these states except Nevada about NG911 implementation progress, challenges, federal actions, and any additional assistance needed. We contacted 911 officials in Nevada but did not receive responses. We also interviewed local officials in four of the selected states. While not generalizable to all states, the information obtained from our case studies provides examples of broader issues faced by states and localities in managing the NG911 transition. To determine how federal agencies have addressed state and local implementation challenges and planned next steps, we reviewed relevant statutes, regulations, and documentation of federal agency actions and plans, and our prior reports. We also interviewed officials from federal agencies, including NHTSA, the National Telecommunications and Information Administration (NTIA), FCC, and the U.S. Department of Homeland Security (DHS), about federal actions taken and plans for next steps. To understand planning activities undertaken by NHTSA’s National 911 Program, and its planned project to develop a National NG911 Roadmap, we reviewed the National 911 Program’s internal planning documents, the program’s request for proposal to develop a national roadmap, the program’s written responses to our questions, and interviewed National 911 Program officials. In addition, we interviewed officials from national associations representing emergency-response- technology companies, wireless and wireline phone carriers, emergency- communications entities, and groups representing deaf and hard-of- hearing consumers to gain their perspectives on federal actions taken and next steps. We assessed the National 911 Program’s strategic- planning activities against leading practices for performance management found in our prior work on strategic planning and goal setting and federal internal control standards. We assessed the National 911 Program’s planned activities for the national roadmap project against federal internal control standards and selected key practices to enhance interagency collaboration identified in our prior work. We conducted our work from January 2017 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Description of challenge State and local funding may not be sufficient to support costs associated with transitioning to NG911 equipment and infrastructure. Transitioning from legacy infrastructure to Internet Protocol-based systems presents technical and operational challenges such as interoperability and cybersecurity risks. Federal actions Grant resources: The National Highway Traffic Safety Administration’s (NHTSA) National 911 Program issued on its website a list clarifying which of the fiscal year 2016 emergency-communications grants may be used for NG911 services. Program officials said they developed this list in collaboration with the Department of Homeland Security (DHS). Cost study: NHTSA’s National 911 Program and the National Telecommunications and Information Administration (NTIA), in consultation with the Federal Communications Commission (FCC) and DHS, plan to issue a study of the range of costs for 911 call centers and service providers to implement NG911 systems and on the nationwide progress of implementing NG911 services. Grant program: NHTSA and NTIA are preparing to jointly administer a $115 million grant program to improve 911 services, including the adoption and operation of NG911 services. NHTSA and NTIA expect to award the grants in 2018. Funding mechanisms: An advisory body tasked by FCC issued a report in 2016 that identified common costs and funding mechanisms for 911 officials to consider. The report also introduced a 911 funding sustainment model designed for use by 911 officials to calculate their financial needs to support a transition to NG911 implementation. Guides on technology standards and procurement practices: In 2017, NHTSA’s National 911 Program issued an annual guide on emergency- communications technology standards that stressed the importance of using open technology standards for NG911 services. The National 911 Program issued another guide in 2016 that provides information on procuring goods and services related to NG911 such as practices for call centers to consider when developing their request for proposals and contracts. Examining emerging technology issues: In 2017, FCC tasked a public- private advisory council to recommend how FCC can promote the NG911 transition, enhance the reliability of NG911, and mitigate the threat of 911 outages. Prior to that tasking, the FCC advisory council issued a report in 2016 that explored location-based routing issues and discussed transition considerations from legacy 911 to NG911. NG911 cybersecurity guide and technical assistance: DHS, with input from NHTSA’s National 911 Program according to DHS officials, issued a guide in 2016 that identifies cybersecurity risks for NG911 and risk mitigation strategies. In addition, DHS provides NG911 technical assistance for states seeking assistance with strategic planning and technology integration. In a separate effort, an advisory body tasked by FCC to examine 911 call center architecture issued a report in 2016 that provides a cybersecurity self- assessment tool for call centers and guidance on cybersecurity strategies. Description of challenge States may face a range of challenges related to evolving roles for state and local 911 authorities that could hinder NG911 implementation. Federal actions Guides on state and legislative planning: NHTSA’s National 911 Program issued guides on state 911 planning and legislative issues to consider for NG911 and awarded a contract in September 2017 to update those guides. In 2016, the National 911 Program issued a guidebased on the experiences of Iowa, Minnesota, North Dakota, and South Dakota that identifies practices to consider for states interconnecting NG911 networks across state lines. Exploring NG911 governance implementation issues: In 2016, an advisory body tasked by FCC issued a report that identifies NG911 governance approaches, issues, and recommendations for states, localities, and call centers to consider when planning for the deployment of NG911. In 2013, FCC also issued a report that details recommendations to Congress for transitioning from legacy 911 to NG911 networks. Guide on emergency communications governance structures: In 2015, DHS and the National Council of Statewide Interoperability Coordinators issued a guide that provides characteristics of effective governance approaches and best practices for officials to establish, assess, and update their governance structures. In addition to the contact named above, Andrew Huddleston (Assistant Director), Jean Cook (Analyst in Charge), Camilo Flores, Steven Rabinowitz, Malika Rice, Kelly L. Rubin, Michael Sweet, Hai Tran, Marika Van Laan, and Michelle Weathers made key contributions to this report.", "summary": "Each year, millions of Americans call 911 for help during emergencies. However, the nation's legacy 911 system relies on aging infrastructure that is not designed to accommodate modern communications technologies. As a result, states and localities are upgrading to NG911, which offers improved capabilities, such as the ability to process images, audio files, and video. While deploying NG911 is the responsibility of state and local entities, federal agencies also support implementation, led by NHTSA's National 911 Program, which facilitates collaboration among federal, state, and local 911 stakeholders. GAO was asked to review NG911 implementation nationwide. This report examines: (1) state and local progress and challenges in implementing NG911 and (2) federal actions to address challenges and planned next steps. GAO reviewed relevant statutes, regulations, and federal agency reports and plans. GAO also analyzed NHTSA's survey data on state 911 implementation for calendar year 2015, the most recent year for which data were available, and interviewed federal officials, state and local officials from nine states (selected to represent different regions and various phases of NG911 implementation), and officials from industry and advocacy groups. The National Highway Traffic Safety Administration's (NHTSA) National 911 Program's most recent national survey on Next Generation 911 (NG911) implementation indicated that about half of states were in some phase of transition to NG911 in 2015, but that state and local progress varied. Specifically, 10 states reported that all 911 authorities in their state processed calls using NG911 systems; however, 18 states reported having no state or local NG911 transition plans in place—which may indicate these states were in the early phases of planning for the transition to NG911 or had not yet begun. GAO spoke with state and local 911 officials in 9 states, which were in various phases of implementing NG911, and found that none of the 9 selected states were accepting images, audio files, or video. State and local 911 officials identified a number of challenges to implementing NG911. Such challenges are related to funding, evolving technology and operations, and governance. For example, officials in 3 states said that the current funding they collect from telephone service subscribers may not be sufficient to support NG911's transition costs while simultaneously funding the operation of existing 911 systems. Federal agencies—including NHTSA, the National Telecommunications and Information Administration, the Federal Communications Commission, and the U.S. Department of Homeland Security—have responsibilities to support NG911 implementation, such as through coordinating activities and administering grants, and are taking actions to assist state and local entities in addressing challenges to NG911's implementation. Such actions include developing resources, offering technical assistance, and convening stakeholders to explore emerging NG911 issues. For example, as the lead entity for coordinating federal NG911 efforts, NHTSA's National 911 Program is developing resources on NG911 topics, such as federal funding and governance structures. While the National 911 Program is taking steps to facilitate the state and local transition to NG911, the program lacks specific performance goals and measures to assess its progress. Without such goals and measures, it is not clear to what extent the program is effectively achieving its mission. In 2018, the National 911 Program plans to establish an interagency initiative tasked with creating a National NG911 Roadmap. This roadmap is intended to identify next steps for the federal government in supporting the creation of a national, interconnected NG911 system. While the National 911 Program is taking steps to develop a list of national-level tasks as part of its roadmap initiative, the program does not have a plan to identify: (1) roles or responsibilities for federal entities to carry out these tasks or (2) how the program plans to achieve the roadmap's objectives. Collaborating with the appropriate federal agencies to determine federal roles and responsibilities to carry out the roadmap's national-level tasks could reduce barriers to agencies effectively working together to achieve those tasks. Furthermore, developing an implementation plan that details how the roadmap's tasks will be achieved would place the National 911 Program in a better position to effectively lead interagency efforts to implement NG911 nationwide. GAO recommends that NHTSA's National 911 Program develop performance goals and measures and, for the National NG911 Roadmap, determine agencies' roles and responsibilities and develop an implementation plan. NHTSA agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Among health care programs, Medicaid is the largest as measured by enrollment (over 73 million in fiscal year 2017) and the second largest as measured by expenditures ($596 billion in fiscal year 2017), second only to Medicare. The CMS Office of the Actuary projected that Medicaid spending would grow at an average rate of 5.7 percent per year, from fiscal years 2016 to 2025, with projected Medicaid expenditures reaching $958 billion by fiscal year 2025. This projected growth in expenditures reflects both expected increases in expenditures per enrollee and in levels of Medicaid enrollment. Beneficiaries with disabilities and those who are elderly constitute the highest per enrollee expenditures, which are projected to increase by almost 50 percent from fiscal year 2016 to 2025. Medicaid enrollment is also expected to grow by as many as 13.2 million newly eligible adults by 2025—as additional states may expand their Medicaid programs to cover certain low-income adults under the Patient Protection and Affordable Care Act (PPACA). (See fig. 1.) The partnership between the federal government and states is a central tenet of the Medicaid program. CMS provides oversight and technical assistance for the program, and states are responsible for administering their respective Medicaid programs’ day-to-day operations—including determining eligibility, enrolling individuals and providers, and adjudicating claims—within broad federal requirements. Federal oversight includes ensuring that the design and operation of state programs meet federal requirements and that Medicaid payments are made appropriately. (See fig. 2 for a diagram of the federal-state Medicaid partnership framework.) Joint financing of Medicaid is also a fixture of the federal-state partnership, with the federal government matching most state Medicaid expenditures using a statutory formula based, in part, on each state’s per capita income in relation to the national average per capita income. States have flexibility in determining how their Medicaid benefits are delivered. For example, states may (1) contract with managed care organizations to provide a specific set of Medicaid-covered services to beneficiaries and pay the organizations a set amount, generally on a per beneficiary per month basis; (2) pay health care providers for each service they provide on a fee-for-service basis; or (3) rely on a combination of both delivery systems. Managed care continues to be a growing component of the Medicaid program. In fiscal year 2017, expenditures for managed care were $280 billion, representing almost half of total program expenditures, compared with 42 percent in fiscal year 2015. (See fig. 3.) States also have the flexibility to innovate outside of many of Medicaid’s otherwise applicable requirements through Medicaid demonstrations approved under section 1115 of the Social Security Act. These demonstrations allow states to test new approaches to coverage and to improve quality and access, or generate savings or efficiencies. For example, under demonstrations, states have extended coverage to certain populations, provided services not otherwise eligible for federal matching funds, made incentive payments to providers for delivery system improvements. As of November 2016, nearly three-quarters of states have CMS- approved demonstrations. In fiscal year 2015, total spending under demonstrations represented a third of all Medicaid spending nationwide. (See fig. 4.) In addition to other types of improper payments, Medicaid presents opportunities for fraud, because of the size, expenditures, and complexities of the program—including the variation in states’ design and implementation. Medicaid Fraud Control Units (MFCU)—state entities responsible for investigating and prosecuting Medicaid fraud—have reported on Medicaid fraud convictions and recovered monies, in their annual reports. For example, over the past 5 years, MFCUs have reported an average of 1,072 yearly Medicaid fraud convictions. They also reported about $680 million in recoveries related to fraud in fiscal year 2017—almost double the recoveries from fiscal year 2016. Our prior work has identified three broad areas of risk to the fiscal integrity of Medicaid: improper payment rates, state use of supplemental payments, and oversight of demonstration programs. CMS annually computes the national Medicaid improper payment estimate as a weighted average of states’ improper payment estimates for three component parts—fee-for-service, beneficiary eligibility determinations, and managed care. The improper payment estimate for each component is developed under its own methodology. The national rate in fiscal year 2017 was 10.1 percent, or $36.7 billion. Since 2016, Medicaid has exceeded the 10 percent criterion set in statute. As such, the program was not fully compliant with the Improper Payments Elimination and Recovery Act of 2010. In May 2018, we reported that the Medicaid managed care component of the improper payment estimate does not fully account for all program risks in managed care. We identified 10 federal and state audits and investigations (out of 27 focused on Medicaid managed care) that cited about $68 million in overpayments and unallowable managed care organization costs that were not accounted for by the managed care improper payment estimate. Another of these investigations resulted in a $137.5 million settlement to resolve allegations of false claims. We further noted that the full extent of overpayments and unallowable costs is unknown, because the 27 audits and investigations we reviewed were conducted over more than 5 years and involved a small fraction of the more than 270 managed care organizations operating nationwide as of September 2017. Some examples of the state audits that identified overpayments and unallowable costs include the following: The Washington State Auditor’s Office found that two managed care organizations made $17.5 million in overpayments to providers in 2010, which may have increased the state’s 2013 capitation rates. The Texas State Auditor’s Office found that one managed care organization reported $3.8 million in unallowable costs for advertising, company events, gifts, and stock options, along with $34 million in other questionable costs in 2015. The New York State Comptroller found that two managed care organizations paid over $6.6 million to excluded and deceased providers from 2011 through 2014. To the extent that such overpayments and unallowable costs are unidentified and not removed from the cost data used to set managed care payment rates, they may allow inflated future payments and minimize the appearance of program risks in Medicaid managed care. This potential understatement of the program risks in managed care also may curtail investigations into the appropriateness of managed care spending. The continued growth of Medicaid managed care makes ensuring the accuracy of managed care improper payment estimates increasingly important. In May 2018, we acknowledged that although CMS has increased its focus on and worked with states to improve oversight of Medicaid managed care; its efforts—for example, updated regulations and audits of managed care providers—did not ensure the identification and reporting of overpayments and unallowable costs. In May 2016, CMS updated its regulations for managed care programs, including that states arrange an independent audit of the data submitted by MCOs, at least once every 3 years. We found that although this requirement has the potential to enhance state oversight of managed care; CMS was reviewing the rule for possible revision of its requirements. We also noted that another effort to address program risks in managed care—the use of CMS program integrity contractors to audit providers that are paid by managed care organizations—has been limited. To address the program risks that are not measured as a part of CMS’s methodology to estimate improper payments, in May 2018 we recommended that CMS take steps to mitigate such risks, which could include revising its methodology or focusing additional audit resources on managed care. HHS concurred with this recommendation. Our prior work on Medicaid has also identified other program risks associated with provider enrollment and beneficiary eligibility that may contribute to improper payments. In table 1 below, we identify some examples of the previous recommendations we have made to address these types of program risks, and what, if any, steps CMS has taken in response to our recommendations. Supplemental payments are payments made to providers—such as local government hospitals and other providers—that are in addition to the regular, claims-based payments made to providers for services they provided. Like all Medicaid payments, supplemental payments are required to be economical and efficient. Supplemental payments have been growing and totaled more than $48 billion in 2016. Our prior work has identified several concerns related to supplemental payments, including the need for more complete and accurate reporting, criteria for economical and efficient payments, and written guidance on the distribution of payments. Complete and accurate reporting. Our prior work has identified increased use of provider taxes and transfers from local government providers to finance the states’ share of supplemental payments, which, although allowed under federal law, effectively shift Medicaid costs from the states to the federal government. In particular, we previously reported in July 2014 that states’ share of Medicaid supplemental payments financed with funds from providers and local governments increased the federal share from 57 percent in state fiscal year 2008 to 70 percent in state fiscal year 2012. The full extent of this shift in states’ financing structure was unknown, because CMS had not ensured that states report complete and accurate data on the sources of funds they use to finance their share of Medicaid payments, and CMS’s efforts had fallen short of obtaining complete data. (See table 2 below for our recommendation and actions CMS has taken.) For example, in July 2014, we reported that in one state, a $220 million payment increase for nursing facilities resulted in an estimated $110 million increase in federal matching funds to the state, and a net payment increase to the facilities of $105 million. (See fig. 5.) Criteria for economical and efficient payments. Our prior work has demonstrated that CMS lacks the criteria, data, and review processes to ensure that one type of supplemental payments—non-DSH supplemental payments—are economical and efficient. For example, in April 2015, we identified public hospitals in one state that received such supplemental and regular Medicaid payments that, when combined, were hundreds of millions in excess of the hospitals’ total Medicaid costs and tens of millions in excess of their total operating costs—unbeknownst to CMS. Accordingly, we concluded that CMS’s criteria and review processes did not ensure that it can identify excessive payments and determine if supplemental payments are economical and efficient. (See table 2 below for our recommendations and actions CMS has taken.) Written guidance on the distribution of payments. According to CMS policy, Medicaid payments, including supplemental payments, should be linked to the provision of Medicaid services and not contingent on the provision of local funds. However, in February 2016 we reported that CMS did not have written guidance that clarifies this policy. In February 2016, we found examples of hospitals with large uncompensated costs associated with serving the low-income and Medicaid population that received relatively little in supplemental payments, while other hospitals with relatively low uncompensated care costs—but that were able to contribute a large amount of funds for the state’s Medicaid share— received large supplemental payments relative to those costs, raising questions as to whether CMS policies are being followed. (See table 2 for our recommendation and actions CMS has taken.) Recognizing that Congress could help address some of the program risks associated with supplemental payments, in November 2012, we suggested that Congress consider requiring CMS to improve state reporting of supplemental payments, including requiring annual reporting of facility-specific payment amounts; clarify permissible methods for calculating these supplemental payments; and implement annual independent certified audits to verify state compliance with methods for calculating supplemental payments. Subsequent to our work highlighting the need for complete and accurate reporting, in January 2017 a bill was introduced in the House of Representatives that, if enacted, would require annual state reporting of non-DSH supplemental payments made to individual facilities, require CMS to issue guidance to states that identifies permissible methods for calculating non-DSH supplemental payments to providers, and establish requirements for such annual independent audits. Another bill was introduced in October 2017 that would require states to submit annual reports that identify the sources and amount of funds used to finance the state share of Medicaid payments. As of May 2018, no action had been taken on either proposed bill. Demonstration programs, comprising about one-third of total Medicaid expenditures in fiscal year 2015, can be a powerful tool for states and CMS to test new approaches to providing coverage and delivering services that could reduce costs and improve outcomes. However, our prior work has identified several concerns related to demonstrations, including the need for ensuring that (1) demonstrations meet the policy requirements of budget neutrality—that is, they must not increase federal costs—and (2) evaluations are used to determine whether demonstrations are having their intended effects. Budget neutrality of Medicaid demonstrations. Demonstration spending limits, by HHS policy, should not exceed spending that would have occurred in the absence of a demonstration. In multiple reports examining more than a dozen demonstrations between 2002 and 2017, we have identified a number of questionable methods and assumptions that HHS has permitted states to use when estimating costs. We found that federal spending on Medicaid demonstrations could be reduced by billions of dollars if HHS were required to improve the process for reviewing, approving, and making transparent the basis for spending limits approved for Medicaid demonstrations. The following are some examples of what we have previously found: In August 2014, we reported that HHS had approved a spending limit for Arkansas’s demonstration—to test whether providing premium assistance to purchase private coverage through the health insurance exchange would improve access for newly eligible Medicaid beneficiaries—that was based, in part, on hypothetical, not actual, costs. Specifically, the spending limit was based on significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program, and HHS did not request any data to support the state’s assumptions. We estimated that by allowing the state to use hypothetical costs, HHS approved a demonstration spending limit that was over $775 million more than what it would have been if the limit was based on the state’s actual payment rates for services under the traditional Medicaid program. We also reported in August 2014 that HHS officials told us it granted Arkansas and 11 other states additional flexibility in their demonstrations in order to increase spending limits if costs proved higher than expected. We concluded that granting this flexibility to the states to adjust the spending limit increased the fiscal risk to the federal government. More recently, in April 2017, we reported that two states used unspent federal funds from their previous demonstrations to expand the scope of subsequent demonstrations by $8 billion and $600 million, respectively. We concluded that inflating the spending limits in this way inappropriately increased the federal government’s fiscal liability for Medicaid. We have previously made recommendations to improve oversight of spending on demonstrations, and HHS recently took action that partially responds to one of these recommendations. (See table 3 for examples of the recommendations and actions HHS has taken.) Specifically, under a policy implemented in 2016, HHS restricted the amount of unspent funds states can accrue for each year of a demonstration, and has also reduced the amount of unspent funds that states can carry forward to new demonstrations. For 10 demonstrations it has recently approved, HHS estimated that the new policy has reduced total demonstration spending limits by $109 billion for 2016 through 2018, the federal share of which is $62.9 billion. These limits reduce the effect, but do not specifically address all, of the questionable methods and assumptions that we have identified regarding how HHS sets demonstration spending limits. Evaluation of Medicaid demonstrations. In a January 2018 report, we questioned the usefulness of both state-led and federal evaluations of section 1115 demonstrations, particularly with regard to how these evaluation results may inform policy decisions. State-led evaluations. We identified significant limitations among selected state-led demonstration evaluations, including gaps in reported evaluation results for important parts of the demonstrations. (See table 4.) These gaps resulted, in part, from CMS requiring final, comprehensive evaluation reports after the expiration of the demonstrations rather than at the end of each 3- to 5-year demonstration cycle. In October 2017, CMS officials stated that the agency planned to require final reports at the end of each demonstration cycle for all demonstrations, although it had not established written procedures for implementing this new policy. We concluded in January 2018 that without written procedures for implementing such requirements, gaps in oversight could continue. Federal evaluations. Evaluations of federal demonstrations led by CMS have also been limited due to data challenges and a lack of transparent reporting. For example, delays obtaining data directly from states, among other things, led CMS to considerably reduce the scope of a large, multi-state evaluation, which was initiated in 2014 to examine the impact of state demonstrations in four policy areas deemed to be federal priorities. In our January 2018 report, we found that although CMS had made progress in obtaining needed data, CMS had no policy for making the results public. By not making these results public in a timely manner, we concluded that CMS was missing an opportunity to inform important federal and state policy discussions. In light of our concerns about state-led and federal demonstration evaluations, in January 2018, we recommended that CMS (1) establish written procedures for requiring final evaluation reports at the end of each demonstration cycle, (2) issue criteria for when it will allow limited evaluations of demonstrations, and (3) establish a policy for publicly releasing findings from federal evaluations of demonstrations. HHS concurred with these recommendations. Across our body of work, we have made 83 recommendations to CMS and HHS and suggested 4 matters for congressional consideration to address a variety of concerns about the Medicaid program. The agencies generally agreed with our recommendations and have implemented 25 of these recommendations to date, and CMS still needs to take fundamental actions in three areas—having more timely, complete, and reliable data; conducting fraud risk assessments; and strengthening federal-state collaboration—to strengthen Medicaid oversight and better manage program risks. An overarching challenge for CMS oversight of the Medicaid program is the lack of accurate, complete, and timely data. Our work has demonstrated how insufficient data have affected CMS’s ability to ensure proper payments, assess beneficiaries’ access to services, and oversee states’ financing strategies. As part of its efforts to address longstanding data concerns, CMS has taken some steps toward developing a reliable national repository for Medicaid data, most notably the Transformed Medicaid Statistical Information System (T-MSIS). Through T-MSIS, CMS will collect detailed information on Medicaid beneficiaries—such as their citizenship, immigration, and disability status—as well as any expanded diagnosis and procedure codes associated with their treatments. States are to report data more frequently—and in a timelier manner—than they have previously, and T-MSIS includes approximately 2,800 automated quality checks. The T-MSIS initiative has the potential to improve CMS’s ability to identify improper payments, help ensure beneficiaries’ access to services, and improve program transparency, among other benefits. As we reported in December 2017, implementing the T-MSIS initiative has been—and will continue to be—a multi-year effort. CMS has worked closely with states and has reached a point where nearly all states are reporting T-MSIS data. While recognizing the progress made, we noted that more work needs to be done before CMS or states can use these data for program oversight: All states need to report complete T-MSIS data. For our December 2017 report, we reviewed a sample of six states and found that none were reporting complete data. T-MSIS data should be formatted in a manner that allows for state data to be compared nationally. In December 2017, we reported that state officials had expressed concerns that states did not convert their data to the T-MSIS format in the same ways, which could limit cross- state comparisons. In our December 2017 report, we recommended that CMS take steps to expedite the use of T-MSIS data, including efforts to (1) obtain complete information from all states; (2) identify and share information across states to improve data comparability; and (3) implement mechanisms by which states can collaborate on an ongoing basis to improve the completeness, comparability, and utility of T-MSIS data. We also recommended that CMS articulate a specific plan and associated time frames for using T-MSIS data for oversight. The agency concurred with our recommendations, but has not yet implemented them. Our prior work has also noted areas where other data improvements are critical to program oversight: In July 2014, we found that there was a need for data on supplemental payments that states make to individual hospitals and other providers. In particular, our findings and related recommendation from July 2014 indicate that CMS should develop a data collection strategy that ensures that states report accurate and complete data on all sources of funds used to finance the states’ share of Medicaid payments. In January 2017, we found limitations in the data CMS collects to monitor the provision of, and spending on, personal care services— services that are at a high risk for improper payments, including fraud. In particular, data on the provision of personal care services were often not timely, complete, or consistent. Data on states’ spending on these services were also not accurate or complete. In January 2017, we recommended that CMS improve personal care services data by (1) establishing standard reporting guidance for key data, (2) ensuring linkage between data on the provision of services and reported expenditures, (3) ensuring state compliance with reporting requirements, and (4) developing plans to use data for oversight. The agency concurred with two recommendations and neither agreed nor disagreed with the other two recommendations, and has not yet implemented any. In December 2017, we examined CMS’s efforts managing fraud risks in Medicaid and compared it with our Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. This framework describes leading practices in four components: commit, assess, design and implement, and evaluate and adapt. (See fig. 6.) The Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires the Office of Management and Budget (OMB) to establish guidelines incorporating the leading practices from our Fraud Risk Framework for federal agencies to create controls to identify and assess fraud risks, and design and implement antifraud control activities. In July 2016, OMB published guidance, and among other things, this guidance affirms that managers should adhere to the leading practices identified in our Fraud Risk Framework. In a December 2017 report, we found that CMS’s efforts partially aligned with our fraud risk framework. In particular, CMS had shown a commitment to combating fraud, in part, by establishing a dedicated entity—the Center for Program Integrity—to lead antifraud efforts, and offering and requiring antifraud training for stakeholder groups, such as providers, beneficiaries, and health-insurance plans; and taken steps to identify fraud risks, such as by designating specific provider types as high risk and developing associated control activities. However, CMS had not conducted a fraud risk assessment for Medicaid, and had not designed and implemented a risk-based antifraud strategy. A fraud risk assessment allows managers to fully consider fraud risks to their programs, analyze their likelihood and impact, and prioritize risks. Managers can then design and implement a strategy with specific control activities to mitigate these fraud risks, as well as design and implement an appropriate evaluation. We concluded that through these actions, CMS could better ensure that it is addressing the full portfolio of risks and strategically targeting the most-significant fraud risks facing Medicaid. As a result, in December 2017 we made three recommendations to CMS, two of which were to conduct fraud risk assessments, and create an antifraud strategy for Medicaid, including an approach for evaluation. HHS concurred with our recommendations, but has not yet implemented them. The federal government and the states play important roles in reducing improper payments and overseeing the Medicaid program, including overseeing spending on Medicaid supplemental payments and demonstrations. Our prior work shows that oversight of the Medicaid program could be further improved through leveraging and coordinating program integrity efforts with state agencies, state auditors, and other partners. Collaborative audits with state agencies. As we have previously reported, CMS has made changes to its Medicaid program integrity efforts, including a shift to collaborative audits—in which CMS’s contractors and states work in partnership to audit Medicaid providers. In March 2017, we reported that collaborative audits had identified substantial potential overpayments to providers, but barriers—such as staff burden or problems communicating with contractors—had limited their use and prevented states from seeking audits or hindered the success of audits. We recommended that CMS address the barriers that limit state participation in collaborative audits, including their use in managed care delivery systems. CMS concurred with this recommendation and has taken steps to address them for a number of states, but has not yet made such changes accessible to a majority of states. State auditors and federal partners. We have found that state auditors and the HHS-OIG offer additional oversight and information that can help identify program risks. To that end, we routinely coordinate our audit efforts with the state auditors and the HHS-OIG. For example, we have convened and facilitated meetings between CMS and state audit officials to discuss specific areas of concern in Medicaid and future opportunities for collaboration. The state auditors and CMS officials commented on the benefits of such coordination, with the state auditors noting that they can assist CMS’s state program integrity reviews by identifying program risks. State auditors also have conducted program integrity reviews to identify improper payments and deficiencies in the processes used to identify them. We believe that these reviews could provide insights into program weaknesses that CMS could learn from and potentially address nationally. Coordination also provides an opportunity for state auditors to learn methods for conducting program integrity reviews. The following are recent examples of reviews conducted: In 2017, the Oregon Secretary of State Audits Division found approximately 31,300 questionable payments to Coordinated Care Organizations (which receive capitated monthly payments for beneficiaries, similar to managed care organizations), based on a review of 15 months of data. In addition, the state auditor found that approximately 47,600 individuals enrolled in Oregon’s Medicaid program were ineligible, equating to $88 million in avoidable expenditures. Massachusetts’ Medicaid Audit Unit’s recent annual report (covering the time period from March 15, 2017, through March 14, 2018) reported that the state auditor identified more than $211 million in unallowable, questionable, duplicative, unauthorized, or potentially fraudulent billing in the program. A 2017 report released by the Louisiana Legislative Auditor’s Office stated that the office reviewed Medicaid eligibility files and claims data covering January 2011 through October 2016, and found $1.4 million in questionable duplicate payments. In fiscal year 2017, the Mississippi Division of Medicaid reported that they recovered more than $8.6 million through various audits of medical claims paid to health care providers. The division also referred seven cases to the state’s attorney general’s office, in which the division had identified $3.1 million in improper billing. At a May 2018 federal and state auditor coordination meeting that we participated in, the HHS-OIG provided examples of the financial impact of its work related to improper payments, including one review of managed care long term services and supports that identified $717 million potential federal savings, three reviews of managed care payments made after beneficiaries’ death that identified $18.2 million in federal funds to be recovered, and two reviews of managed care payments made for beneficiaries with multiple Medicaid IDs that identified $4.3 million in federal funds to be recovered. Healthcare Fraud Prevention Partnership. The Healthcare Fraud Prevention Partnership (HFPP) is an important tool to help combat Medicaid fraud. In 2012, CMS created the HFPP to share information with public and private stakeholders, and to conduct studies related to health care fraud, waste, and abuse. According to CMS, as of October 2017, the HFPP included 89 public and private partners—including Medicare—and Medicaid-related federal and state agencies, law enforcement agencies, private health insurance plans, and antifraud and other health care organizations. The HFPP has conducted studies that pool and analyze multiple payers’ claims data to identify providers with patterns of suspect billing across private health insurance plans. In August 2017, we reported that the partnership participants separately told us the HFPP’s studies helped them identify and take action against potentially fraudulent providers and payment vulnerabilities of which they might not otherwise have been aware, and fostered both formal and informal information sharing. Chairman Johnson, Ranking Member McCaskill, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions you may have. If you or your staff members have any questions concerning this testimony, please contact Carolyn L. Yocom, who may be reached at 202-512-7114 or yocomc@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Leslie V. Gordon (Assistant Director), Deirdre Gleeson Brown (Analyst-in-Charge), Muriel Brown, Helen Desaulniers, Melissa Duong, Julianne Flowers, Sandra George, Giselle C. Hicks, Drew Long, Perry Parsons, Russell Voth, and Jennifer Whitworth. Improper Payments: Actions and Guidance Could Help Address Issues and Inconsistencies in Estimation Processes. GAO-18-377. Washington, D.C.: May 31, 2018. Medicaid: CMS Should Take Steps to Mitigate Program Risks in Managed Care. GAO-18-291. Washington, D.C.: May 7, 2018. Medicaid: Opportunities for Improving Program Oversight. GAO-18-444T. Washington, D.C.: April 12, 2018. Medicaid Demonstrations: Evaluations Yielded Limited Results, Underscoring Need for Changes to Federal Policies and Procedures. GAO-18-220. Washington, D.C.: January 19, 2018. Medicaid: Further Action Needed to Expedite Use of National Data for Program Oversight. GAO-18-70. Washington, D.C.: December 8, 2017. Medicare and Medicaid: CMS Needs to Fully Align Its Antifraud Efforts with the Fraud Risk Framework. GAO-18-88. Washington, D.C.: December 5, 2017. Improper Payments: Additional Guidance Could Provide More Consistent Compliance Determinations and Reporting by Inspectors General. GAO-17-484. Washington, D.C.: May 31, 2017. Medicaid Demonstrations: Federal Action Needed to Improve Oversight of Spending. GAO-17-312. Washington, D.C.: April 3, 2017. Medicaid Program Integrity: CMS Should Build on Current Oversight Efforts by Further Enhancing Collaboration with States. GAO-17-277. Washington, D.C.: March 15, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Medicaid: CMS Needs Better Data to Monitor the Provision of and Spending on Personal Care Services. GAO-17-169. Washington, D.C.: January 12, 2017. Medicaid: Program Oversight Hampered by Data Challenges, Underscoring Need for Continued Improvement. GAO-17-173. Washington, D.C.: January 6, 2017. Improper Payments: Strategy and Additional Actions Needed to Help Ensure Agencies Use the Do Not Pay Working System as Intended. GAO-17-15. Washington, D.C.: October 14, 2016. Medicaid Program Integrity: Improved Guidance Needed to Better Support Efforts to Screen Managed Care Providers. GAO-16-402. Washington, D.C.: April 22, 2016. Medicaid: Federal Guidance Needed to Address Concerns About Distribution of Supplemental Payments. GAO-16-108. Washington, D.C.: February 5, 2016. Medicaid: Additional Efforts Needed to Ensure that State Spending is Appropriately Matched with Federal Funds. GAO-16-53. Washington, D.C.: October 16, 2015. Medicaid: Service Utilization Patterns for Beneficiaries in Managed Care. GAO-15-481. Washington, D.C.: May 29, 2015. Medicaid: Additional Actions Needed to Help Improve Provider and Beneficiary Fraud Controls. GAO-15-313. Washington, D.C.: May 14, 2015. Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited Data and Unclear Policy. GAO-15-322. Washington, D.C.: April 10, 2015. Medicaid Demonstrations: HHS’s Approval Process for Arkansas’s Medicaid Expansion Waiver Raises Cost Concerns. GAO-14-689R. Washington, D.C.: August 8, 2014. Medicaid Financing: States’ Increased Reliance on Funds from Health Care Providers and Local Governments Warrants Improved CMS Data Collection. GAO-14-627. Washington, D.C.: July 29, 2014. Medicaid Demonstration Waivers: Approval Process Raises Cost Concerns and Lacks Transparency. GAO-13-384. Washington, D.C.: June 25, 2013. Medicaid: More Transparency of and Accountability for Supplemental Payments Are Needed. GAO-13-48. Washington, D.C.: November 26, 2012. Medicaid Demonstration Waivers: Recent HHS Approvals Continue to Raise Cost and Oversight Concerns. GAO-08-87. Washington, D.C.: January 31, 2008. Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver Projects Raise Concerns. GAO-02-817. Washington, D.C.: July 12, 2002. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Medicaid, a joint federal-state health care program overseen by CMS, is a significant component of federal and state budgets, with total estimated expenditures of $596 billion in fiscal year 2017. Medicaid allows significant flexibility for states to design and implement program innovations based on their unique needs. The resulting diversity of the program and its size, make the program particularly challenging to oversee at the federal level and also vulnerable to improper payments. In fiscal year 2017, estimated improper payments were $36.7 billion in Medicaid, up from $29.1 billion in fiscal year 2015. Further, the Medicaid program accounted for about 26 percent of the fiscal year 2017 government-wide improper payment estimate. This testimony focuses on the (1) major risks to the integrity of the Medicaid program, and (2) actions needed to manage these risks. This testimony draws on GAO's reports issued between November 2012 and May 2018 on the Medicaid program. GAO's work has identified three broad areas of risk in Medicaid that also contribute to overall growth in program spending, projected to exceed $900 billion in fiscal year 2025. 1) Improper payments , including payments made for services not actually provided. Regarding managed care payments, which were nearly half (or $280 billion) of Medicaid spending in fiscal year 2017, GAO has found that the full extent of program risk due to overpayments and unallowable costs is unknown. 2) Supplemental payments , which are payments made to providers—such as local government hospitals—that are in addition to regular, claims-based payments made to providers for specific services. These payments totaled more than $48 billion in fiscal year 2016 and in some cases have shifted expenditures from the states to the federal government. 3) Demonstrations , which allow states to test new approaches to coverage. Comprising about one-third of total Medicaid expenditures in fiscal year 2015, GAO has found that demonstrations have increased federal costs without providing results that can be used to inform policy decisions. GAO's work has recommended numerous actions to strengthen oversight and manage program risks. Improve data. The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, needs to make sustained efforts to ensure Medicaid data are timely, complete, and comparable from all states, and useful for program oversight. Data are also needed for oversight of supplemental payments and ensuring that demonstrations are meeting their stated goals. Target fraud. CMS needs to conduct a fraud risk assessment for Medicaid, and design and implement a risk-based antifraud strategy for the program. Collaborate. There is a need for a collaborative approach to Medicaid oversight. State auditors have conducted evaluations that identified significant improper payments and outlined deficiencies in Medicaid processes that require resolution. As a part of this body of work, GAO has made 83 recommendations to address shortcomings in Medicaid oversight and suggested four matters for congressional consideration. The Department of Health and Human Services and CMS have generally agreed with these recommendations and have implemented 25 of them. GAO will continue to monitor implementation of the remaining recommendations.", "document_type": "gao"}
{"report": "Our simulations suggest that the sector will likely continue to face a difference between revenue and spending during the next 50 years. This long-term outlook is measured by the operating balance—a measure of the sector’s ability to cover its current expenditures out of current receipts. While both expenditures and revenues are projected to increase as a percentage of gross domestic product (GDP) during the simulation period, a difference between the two is projected to persist because expenditures are generally expected to grow at a faster rate than revenues. (see figure 1). Absent any policy changes by state and local governments, revenues are likely to be insufficient to maintain the sector’s capacity to provide services at levels consistent with current policies during the next 50 years. Our simulations suggest that state and local governments will need to make policy changes to avoid fiscal imbalances before then and assure that revenues are at least equal to expenditures. We simulated the state and local government sector’s operating balance (the difference between the sector’s operating revenues and operating expenditures) in order to understand the sector’s long-term fiscal outlook. The sector’s operating expenditures were 15.1 percent of GDP in 2017. As shown in figure 2, these state and local government sector operating expenditures are comprised of employee compensation, social benefit payments, interest payments, capital outlays, and other expenditures. The sector’s operating revenues were 13.8 percent of GDP in 2017. As shown in figure 3, these state and local government sector operating revenues are comprised of taxes, transfer receipts, and other types of revenues. One way of measuring the long-term fiscal challenges faced by the state and local government sector is through an indicator known as the “fiscal gap.” The fiscal gap is an estimate of actions—such as revenue increases or expenditure reductions—that must be taken today and maintained for each year going forward to achieve fiscal balance during the simulation period. While we measured the gap as the amount of reductions in expenditures needed to prevent negative operating balances, increases in revenues, reductions in expenditures, or a combination of the two of sufficient magnitude would allow the sector to close the fiscal gap. Our simulations suggest that the fiscal gap is about 14.7 percent of total expenditures or about 2.4 percent of GDP. That is, assuming no change in projected total revenues, eliminating the difference between the sector’s expenditures and revenues during the 50-year simulation period would likely require action to be taken today, and maintained for each year equivalent to a 14.7 percent reduction in the sector’s total expenditures (see figure 4). Alternatively, assuming no change in projected total expenditures, closing the fiscal gap by increasing revenue would also likely require actions of similar magnitude. More likely, eliminating the difference between expenditures and revenues would involve some combination of spending reductions and revenue increases. Our simulations suggest that growth in the sector’s overall spending is largely driven by health care expenditures. As shown in figure 5, these expenditures are projected to increase from about 4.1 percent of GDP in 2018 to 6.3 percent of GDP in 2067. Two types of health care expenditures—Medicaid spending and spending on health benefits for state and local government employees and retirees—will likely constitute a growing expenditure for state and local governments during the simulation period. Medicaid expenditures are expected to rise, on average, by 1 percentage point more than GDP each year. According to CBO, growth in Medicaid spending reflects growth in both the number of people receiving Medicaid benefits and the cost of Medicaid benefits each person receives. Specifically, CBO reported that between 2019 and 2028, Medicaid spending is projected to grow at an average rate of 5.5 percent per year—nearly 5 percentage points of this growth is due to an increase in per capita costs and about 1 percentage point of this growth is due to an increase in enrollment. Data from CBO and the Centers for Medicare & Medicaid Services (CMS) also suggest that growth in Medicaid spending per capita is generally expected to outpace GDP growth in the future—referred to as excess cost growth. Our estimates of Medicaid excess cost growth using CMS data suggest that Medicaid spending per capita will grow, on average, about 0.5 percent faster than GDP per capita for the period from 2018 through 2067. Our simulations also suggest that health benefits for state and local government employees and retirees—a type of employee compensation spending—are likely to rise, on average, by 0.9 percentage points more than GDP each year. Growth in these health benefits also reflects growth in the projected number of employees and retirees and growth in the projected amount of health benefits for each employee and retiree. Growth in spending by states and local governments on health care per capita, which includes spending on employee and retiree health benefits, is generally expected to outpace GDP per capita. Data from CMS suggest that national health expenditures per capita are likely to grow on average about 0.8 percent faster than GDP per capita each year during the simulation period from 2018 through 2067. If employee and retiree health benefits follow trends in overall national health spending, they will likely make up an increasingly large share of total employee compensation going forward (see figure 6). While state and local government contributions to employee pension plans—another type of employee compensation spending—will likely decline as a percentage of GDP, as shown in figure 6, our simulations nonetheless suggest that state and local governments may need to take steps to manage their pension obligations in the future. From 1998 through 2007, state and local governments’ pension contributions amounted to about 8 percent of wages and salaries on average. In addition, for the period from 2008 through 2017, pension contributions amounted to about 12.3 percent of wages and salaries on average. Our simulations suggest that those pension contributions will need to be about 12.9 percent of wages and salaries for state and local governments to meet their long-term pension obligations. This is the case even though pension asset values have increased in recent years, from about $2.4 trillion in 2008 to about $4.2 trillion in 2017 (adjusted for inflation and measured in 2012 dollars). This suggests that state and local governments may need to take additional steps to manage their pension obligations by reducing benefits or increasing employees’ contributions. Along with pension contributions, other types of state and local government expenditures are projected to grow more slowly than GDP. For example, in 2017, wages and salaries of state and local government employees constituted a large expenditure for the sector. However, these expenditures are projected to decline as a percentage of GDP during the simulation period. Our simulations also suggest that state and local governments’ capital outlays—which include spending on infrastructure, such as buildings, highways and streets, sewer systems, and water systems, as well as equipment and land— will grow more slowly than GDP if state and local governments continue to provide current levels of capital per resident. Our simulations suggest that federal grants overall will increase as a share of GDP, while Medicaid grants will likely grow more quickly than other types of federal grants (see figure 7). Thus, Medicaid grants will likely make up an increasing share of revenues in the future. Since Medicaid is a matching formula grant program, the projected increase in federal Medicaid grants, therefore, reflects expected increased Medicaid expenditures that will be shared by state governments. Our simulations also suggest that federal investment grants (i.e., grants intended to finance capital infrastructure investments) and other federal grants unrelated to Medicaid (i.e., grants intended to finance education, social services, housing, and community investment) are likely to decline as a share of GDP. Further, our simulations suggest that if historical relationships between state and local governments’ tax revenues and tax bases persist, total tax revenues for the state and local government sector will increase from 8.8 percent of GDP in 2018 to 9.4 percent of GDP by the end of the simulation period. This increase is driven largely by the growth in personal income taxes, as shown in figure 8. Specifically, our simulations suggest that personal income tax revenues will increase as a share of GDP by about 1 percentage point during the simulation period. Sales taxes and property taxes, on the other hand, are projected to remain relatively constant as a share of GDP during the simulation period through 2067. While our long-term simulations do not account for pending or future federal policy changes that will result in changes to expenditures and revenues, an understanding of several recent federal policy changes related to taxes and health care are important to note because they present sources of uncertainty for the state and local government sector’s long-term fiscal outlook. In addition, as is the case in any model that is reliant on historical data to simulate a long-term outlook, other considerations, such as economic growth and rates of return on pension assets, could shift future fiscal outcomes. These policy changes and uncertainties are discussed below and may help federal policy makers and state and local governments consider how these changes could affect the long-term outlook. Recently enacted legislation, such as Public Law 115-97, commonly referred to by the President and administrative documents as the Tax Cuts and Jobs Act (TCJA), could affect the sector’s revenues over the long-term. Enacted in December 2017, TCJA included significant changes to corporate and individual tax law, with implications for state and local government tax collections. In particular, for individual taxpayers, for tax years 2018 through 2025, tax rates were lowered for nearly all income levels, some deductions from taxable income were changed (personal exemptions were eliminated, while the standard deduction was increased), and certain credits, such as the child tax credit, were expanded. The effect of TCJA on the long-term state and local fiscal outlook is still evolving, and will likely depend on how states incorporate the law’s changes into their state income tax rules. That is, because some states link their state income taxes to federal income tax rules, states must decide whether to let the changes from TCJA flow through to their state income tax systems, or establish new state income tax rules. For example, some states have adopted the federal definition of taxable income as a starting point for state tax calculations, while other states use the federal definition of adjusted gross income as a starting point. The choices states make to continue to link to these definitions could have long-term implications for their state tax revenues. In addition, under TCJA, the amount of the federal itemized deductions allowed for all state and local income, sales, and property taxes (commonly referred to as the state and local tax (SALT) deduction) is now capped at $10,000 for tax years 2018 to 2025. The magnitude or net effect of these changes is uncertain in that states are still working to understand the impact of the tax laws on their revenues. It remains to be seen whether and how states will see changes in their revenues in the future. Moreover, a recent U.S. Supreme Court decision involving state sales taxes could have implications for states’ ability to collect revenue. Specifically, the court’s ruling in June 2018 in South Dakota v. Wayfair, Inc. held that states could require out-of-state sellers to collect and remit sales taxes on purchases made from those out-of-state sellers, even if the seller does not have a substantial physical presence in the taxing state. Prior to this ruling, a seller that did not have a substantial physical presence in a state could not be required to collect and remit a sales tax on goods sold into the state. Instead, a purchaser may have been required to pay a use tax (i.e., a tax levied on the consumer for the privilege of use, ownership, or possession of taxable goods and services) in the same amount to his or her state government. In 2017, we reported that states could realize between an estimated $8.5 billion and $13.4 billion in additional state sales tax revenue across all states if all sellers were required to collect taxes on all remote sales at current rates. The extent to which states realize changes in sales tax revenue will likely depend on how they revise their state laws and enforcement efforts in response to this June 2018 ruling. Enacted health care legislation could also affect the long-term fiscal position of state and local governments. As we have reported in prior work, the effect of the Patient Protection and Affordable Care Act (PPACA) on the long-term state and local fiscal outlook could depend on how states implement PPACA, and on future rates of health care cost growth. For example, consider the states that have opted, under PPACA, to expand Medicaid program coverage to millions of lower income adults. While the federal government is expected to cover a large share of the costs of the Medicaid expansion, these states are ultimately expected to bear some of the costs. Specifically, the federal government reimbursed 100 percent of the costs of the expanded population beginning in 2014. This reimbursement rate will decline from the 2018 reimbursement rate of 94 percent to 90 percent by 2020. As such, the reduced federal reimbursement rate may affect those states that expanded their Medicaid populations in recent years. As discussed earlier in this report, our simulations suggest that Medicaid spending will make up an increasing share of the state and local government sector’s operating expenditures in the future. A weakening of the economy could add to the fiscal pressures states face in funding these Medicaid obligations. As our prior work has shown, past recessions in 2001 and 2007 hampered states’ ability to fund increased Medicaid enrollment and maintain their existing services. Specifically, Medicaid enrollment increased during these recessions, in part due to increased unemployment, which led more individuals to become eligible for the program. We have also reported on the use of Medicaid demonstrations, which allow states to test new approaches to coverage to improve quality and access, or generate savings or efficiencies. Specifically, CMS may waive certain Medicaid requirements and approve new types of expenditures that would not otherwise be eligible for federal Medicaid matching funds. For example, under demonstrations, states have extended coverage to certain populations, provided services not otherwise eligible for Medicaid, and made payments to providers to incentivize delivery system improvements. We previously reported that, as of November 2016, nearly three-quarters of states have CMS- approved demonstrations. In fiscal year 2015, federal spending under demonstrations represented a third of all Medicaid spending nationwide. We also reported that in 10 states, federal spending on demonstrations represented 75 percent or more of all federal spending on Medicaid. Joint financing of Medicaid is a fixture of this federal-state partnership. Demonstration waivers hold the potential for changing state Medicaid spending. However, as we have reported, these demonstrations are required, under HHS policy, to achieve budget neutrality and not raise costs for the federal government. In addition to federal tax- and health-related policy changes, a number of other factors could affect the state and local government sector’s long- term fiscal outlook. Specifically, we developed simulations using alternative assumptions of the growth of key model variables—which include economic growth, health care excess cost growth, and the rate of return on pension assets. We determined that changes in the growth projections of these key variables could affect the operating balance of state and local governments, thereby shifting future fiscal outcomes for the sector. Future trends in GDP growth could affect the state and local government sector’s fiscal outlook. Data from CBO and the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (OASDI Trustees) project real GDP to grow by 1.9 percent per year on average from 2018 through 2028, and by 2.1 percent per year on average after 2028, respectively. Using these projections, our simulations suggest that maintaining current policies would cause the sector’s expenditures to exceed its revenues and that the difference between revenues and expenditures would become increasingly negative during the next several decades. However, simulations we developed using the OASDI Trustees’ alternative projections of real GDP growth suggest that the difference between revenues and expenditures would expand before narrowing toward the end of the simulation period if real GDP were to grow at a faster rate—2.8 percent per year on average—as shown in figure 9. Our simulations also show that if GDP were to grow at a slower rate—1.5 percent per year on average—the difference between revenues and expenditures would expand. This would result in an increasingly negative operating balance during the simulation period. As discussed earlier in this report, excess cost growth in health care is another key determinant of the sector’s fiscal balance. Data from CBO project Medicaid spending per capita to grow about 1.5 percent faster than GDP per capita on average for the period from 2019 through 2028. Data from CMS project Medicaid spending per capita to grow about 0.6 percent faster on average for the period from 2029 through 2067. Data from CMS also project national health expenditures per capita to grow about 0.8 percent faster than GDP per capita for the period from 2018 through 2067. Using these projections, our simulations suggest that maintaining current policies will cause the sector’s expenditures to exceed its revenues, and that the difference between revenues and expenditures will become increasingly negative during the next several decades. However, simulations developed using alternative projections of excess cost growth in Medicaid and national health expenditures suggest that the difference between revenues and expenditures may be reduced but not eliminated within the simulation period if excess cost growth in health care is zero. In the scenario where excess cost growth rises faster—0.7 percent on average for Medicaid for the period from 2029 through 2067 and 1 percent for national health expenditures for the period from 2018 through 2067—our simulations show that the difference between revenues and expenditures will persist for the remainder of the simulation period (see figure 10). The rate of return on pension assets could also affect the state and local government sector’s fiscal outlook. Based on an inflation-adjusted rate of return on pension assets of 5 percent, our simulations suggest that state and local governments will need to make pension contributions equivalent to about 12.9 percent of their wages and salaries to meet their long-term pension obligations. However, this estimate is sensitive to the rate of return on state and local governments’ pension assets. Simulations we developed using a higher rate of return—7.5 percent—suggest that pension contributions needed to meet pension obligations would be about 3 percent of state and local government employees’ wages and salaries. In addition, under this scenario, our simulations suggest that the difference between revenues and expenditures will be reduced, but not eliminated within the simulation period. Alternatively, we estimated that if the rate of return on pension assets is relatively low—at 2.5 percent— required pension contributions would need to be about 23 percent of state and local government employees’ wages and salaries during the simulation period. Under this scenario, our simulations show that the sector’s negative operating balance will continue to grow larger throughout the simulation period. It follows therefore, that high rates of return on pension assets are associated with an improved outlook for state and local governments, and vice versa (see figure 11). This report was prepared under the direction of Michelle A. Sager, Director, Strategic Issues, who can be reached at (202) 512-6806 or sagerm@gao.gov, and Oliver M. Richard, Director, Center for Economics, who can be reached at (202) 512-8424 or richardo@gao.gov if there are any questions. GAO staff who made key contributions to this report are listed in appendix IV. To simulate measures of fiscal balance for the state and local government sector for the long term, we used aggregate data on the state and local government sector and national data on other variables from the following sources: Agency for Healthcare Research and Quality; Board of Governors of the Federal Reserve System; Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (OASDI Trustees); Bureau of Economic Analysis (BEA); Bureau of Labor Statistics; Centers for Medicare & Medicaid Services (CMS); Congressional Budget Office (CBO); and Federal Reserve Bank of St. Louis. Our approach generally follows the approach used in GAO-08-317 and in subsequent updates of that report. Specifically, we developed a model that projects the levels of receipts and expenditures of the state and local government sector (henceforth, the sector) in future years based on current and historical spending and revenue patterns. We use table 3.3 of the National Income and Product Accounts (NIPA)—State and Local Government Current Receipts and Expenditures—prepared by BEA at the U.S. Department of Commerce as an organizing framework for developing our model of the sector’s revenues and expenditures (see table 1). In this table, current revenues are grouped in five main categories. Current tax receipts. These receipts are tax payments made by persons or businesses to state and local governments. They include income taxes, general sales taxes, property taxes, and excise taxes. Current taxes also include fees for motor vehicle licenses, drivers’ licenses, and business licenses. Social insurance contributions. These contributions finance the provision of certain social benefits to qualified persons, and include contributions from employers and employees for temporary disability insurance, worker’s compensation insurance, and other programs. Income receipts from government assets. These receipts include interest, dividends, and rental income, such as royalties paid on drilling on the outer continental shelf. Also, state and local governments earn interest and dividend income on financial assets. Current transfer receipts. Transfer receipts are receipts for which state and local governments provide nothing of value in return. Current transfer receipts include federal grants, fines, fees, donations, and tobacco settlements. Also included are net insurance settlements, certain penalty taxes, court fees, and other miscellaneous transfers. Current surplus of government enterprises. This surplus is a profit- type measure for state and local government enterprises, such as water, sewer, gas, and electricity providers; toll providers; liquor stores; air and water terminals; public transit; and state lotteries. Some types of enterprises, such as state lotteries, consistently earn surpluses which are used to fund general government activities. In contrast, many enterprises run deficits, which, in turn, reduce receipts. State and local governments also receive income from the sale of goods and services, such as school tuition. In the NIPAs, this income is treated as an offset against expenditures, not revenue. This income comes from voluntary purchases that might have been made from a private sector provider of such services. In addition to current receipts, state and local governments receive capital transfer receipts. These receipts include estate and gift taxes, and federal government investment grants for capital such as highways, transit, air transportation, and water treatment plants. State and local government current expenditures are grouped into four main categories. Consumption expenditures. Generally, spending for which some value is provided in return. State and local government consumption spending is the sum of inputs used to provide goods and services, including compensation of general government employees, consumption of general government fixed capital (depreciation), and intermediate goods and services purchased, less sales to other sectors and own-account investment. Current transfer payments. Payments for which nothing of value is provided in return. For state and local governments, current transfer payments consist primarily of social benefits, which are payments to persons to provide for needs that arise from circumstances such as sickness, unemployment, retirement, and poverty. There are two kinds of social benefits—benefits from social insurance funds, such as temporary disability insurance and workers’ compensation, and other social benefits, such as medical benefits from Medicaid and the state Children’s Health Insurance Program (CHIP), family assistance from Temporary Assistance to Needy Families, education assistance, and other public assistance programs. While NIPA table 3.3 also includes other current transfer payments to the rest of the world as part of current transfer payments, these amounts are generally equal to zero. Interest payments. These include actual and imputed interest and represent the cost of borrowing by state and local governments to finance their capital and operational costs. Subsidies. State and local government subsidies are largely payments to railroads. State and local government spending also includes gross investment, capital transfer payments, and net purchases of nonproduced assets. Gross investment is spending on capital goods like structures, equipment, and intellectual property—items that are called fixed assets or capital because of their repeated or continuous use in providing government services for more than 1 year. Structures include residential and commercial buildings, highways and streets, sewer systems, and water systems. State and local government capital transfer payments include disaster-related insurance benefits paid to the U.S. territories and the Commonwealths of Puerto Rico and Northern Mariana Islands. Net purchases of nonproduced assets are composed of net purchases of land less oil bonuses (payments to states for the long-term rights to extract oil). Our main indicator of the sector’s fiscal balance is its operating balance net of funds for capital expenditures (henceforth, operating balance), which is a measure of the sector’s ability to cover its current expenditures out of current revenues. The operating balance is defined as total receipts minus (1) capital outlays not financed by medium- and long-term debt issuance, (2) total current expenditures less depreciation, (3) current surplus of state and local government enterprises, and (4) net social insurance fund balance. Alternative indicators of fiscal balance include net saving and net lending or borrowing. Net saving is the difference between current receipts and current expenditures. Since current expenditures exclude capital investment but include a depreciation measure, net saving can be thought of as a measure of the extent to which governments are covering their current operations from current receipts. Net lending or borrowing is the difference between total receipts and total expenditures, and is analogous to the federal unified surplus or deficit. Total receipts differ from current receipts because they include capital transfer receipts. Total expenditures differ from current expenditures because they include capital investment, capital transfer payments, and net purchases of nonproduced assets. However, they exclude fixed capital consumption. The former three categories are cash expenditures, while the latter is a noncash charge. Net lending or net borrowing represents the governments’ cash surplus or borrowing requirement. This measure is normally negative because governments borrow to finance their capital investment (and sometimes to finance current operations as well). The following equations describe how we simulated state and local government receipts and expenditures, as well as the intermediate variables used in those simulations. For this update, we started with historical data for 2017, or the most recent year available, and then simulated each variable for each year from 2018 through 2092 (the simulation period). To simulate state and local government receipts and expenditures, we use simulations of various national-level demographic, macroeconomic, and health care variables derived from projections produced by CBO, CMS, and the OASDI Trustees, and otherwise derived using our own assumptions (see table 2). This approach is similar to the approach we have used in prior model updates. To simulate state and local government spending on defined benefit pensions, we first estimate the contribution rate (as a fraction of state and local government general government wages and salaries) that state and local governments would need to make each year going forward to ensure that their pension systems are fully funded on an ongoing basis. Our goal is to estimate the financial commitments to employees that have been and are likely to continue to be made by the state and local sector to better understand the full fiscal outlook for the sector. As such, our analysis projects the liabilities that the sector is likely to continue to incur in the future based on simulations of future numbers of retirees receiving pension benefits and their benefit amounts; future numbers of employees, their wages and salaries, and their pension contributions; and assets in state and local government defined benefit pension funds. Although we are only interested in applying contribution rates over the simulation time frame, we actually have to derive the contribution rate for a longer time frame in order to find the steady-state level of necessary contributions. This longer time frame is required because the estimated contribution rate increases as the projection horizon increases and eventually converges to a steady state. If the projection period is of insufficient length, the steady-state level of contribution is not attained, and the necessary contribution rate is understated. We simulated variables used to estimate the pension contribution rate using the approach summarized in table 3. This approach is similar to the approach we have used in prior model updates. Future growth in the number of state and local government retirees— many of whom will be entitled to pension and health care benefits—is largely driven by the size of the workforce in earlier years. We simulated the number of state and local government retirees by assuming that the growth rate in the number of retirees is a weighted average of the growth rates in lagged general government and government enterprise employment. We estimated the weights using a regression of the percent change in the number of retirees on the percent change in employment 1, 6, 11, 16, 21, 26, 31, 36, and 41 years in the past. The coefficients on the past percentage changes in employment were constrained to be non- negative and to sum to 1. For this regression, we removed cyclical swings in employment using the Hodrick-Prescott filter. Similarly, future changes in the real amount of pension benefits will be a function of past changes in real wages and salaries. As indicated in table 3, we used a weighted average of past values of the state and local government employment cost index to simulate the employment cost index for state and local government retirees. We chose the weights to reflect changes in the share and average real benefit level of three subsets of the retiree population over time: (1) new retirees entering the beneficiary pool, (2) deceased retirees leaving the pool, and (3) continuing retirees from the previous year. We simulated the weight for new retirees in a year as the number of retirees less the number of continuing retirees divided by the number of retirees. We simulated the weight for deceased retirees as the mortality rate multiplied by last year’s retirees divided by this year’s retirees. We simulated the weight for continuing retirees as last year’s retirees divided by this year’s retirees. Finally, we simulated the employment cost index for state and local government retirees as the sum of the weight on new retirees multiplied by the state and local government employment cost index and the weight on continuing retirees multiplied by the state and local government employment cost index 8 years prior, less the weight on deceased retirees multiplied by the state and local government employment cost index 21 years prior. As discussed above, we started with historical data for 2017, or the most recent year available, simulated all of the variables in table 3 over the long run, and then used the consumer price index (CPI) and the real return on pension assets to calculate the total present value of wages and salaries for state and local government general government and government enterprise employees, the total present value of real pension benefits paid to state and local government retirees, and the total present value of state and local government employees’ pension contributions. Then, we calculated the total present value of state and local governments’ pension liabilities as the total present value of real pension benefits paid to state and local government retirees less the total present value of state and local government employees’ pension contributions, and the value of assets in state and local government defined benefit pension funds in 2017. Finally, we estimated state and local governments’ pension contribution rate as the ratio of the total present value of their pension liabilities to the total present value of wages and salaries for state and local government employees. Table 4 summarizes the approach we used to simulate interest rates on state and local government financial assets and liabilities. This approach is similar to the approach we have used in prior model updates. Table 5 summarizes our approach to simulating state and local government receipts. This approach is similar to the approach we have used in prior model updates. These variables track state and local government receipts in table 1 above as follows: State and local government personal income tax revenue is the sum of state personal income tax revenue and local personal income tax revenue; State and local government personal tax revenue is the sum of personal income tax revenue and other personal tax revenue; State and local government revenue from taxes on production and imports is the sum of general sales tax revenue, excise tax revenue, property tax revenue, and revenue from other taxes on production and imports; State and local government current tax revenue is the sum of personal tax revenue, revenue from taxes on production and imports, and corporate income tax revenue; State and local government current transfer receipts are equal to federal Medicaid grants minus Medicare Part D payments to the federal government, plus other federal grants (excluding investment grants), transfer receipts from businesses, and transfer receipts from persons; State and local government current receipts are the sum of current tax revenue, current transfer receipts, income on assets, social insurance contributions, and government enterprise surplus; State and local government capital transfer receipts are the sum of federal investment grants and estate and gift tax revenue; and State and local government total receipts are the sum of current receipts and capital transfer receipts. Our general approach to simulating state and local government expenditures is to assume that state and local governments maintain the current level of public goods and services provision per capita (see table 6). Thus, we generally assume that expenditures keep up with U.S. population growth and some measure of inflation, where the relevant rate of inflation varies depending on the specific type of expenditure. However, we use alternative approaches—described below—to simulate depreciation, interest payments, and social benefits for health care. This approach is similar to the approach we have used in prior model updates. These variables correspond to state and local government expenditures in table 1 as follows: Employee compensation is the sum of wages and salaries, pension contributions, health benefits for current employees, health benefits for retirees, and other compensation, for state and local government general government employees. Consumption expenditures are the sum of employee compensation, general government fixed capital consumption, and other general government consumption expenditures. Social benefit payments are the sum of Medicaid benefits, non- Medicaid health benefits, and non-health social benefits. Current expenditures are the sum of consumption expenditures, social benefit payments, interest payments, and subsidy payments. Total expenditures are the sum of current expenditures, gross investment, capital transfer payments, and purchases of nonproduced assets, minus general government and government enterprise fixed capital consumption. Table 7 summarizes our approach for simulating state and local government financial assets and liabilities. This approach is similar to the approach we have used in prior model updates. Our method for simulating the sectors’ short-term debt outstanding leverages the fact that for any entity, there is a direct relationship between budget outcomes and changes in financial position. Specifically, if expenditures exceed receipts, the gap needs to be financed by some combination of changes in financial assets and changes in financial liabilities. If governments spend more than they take in, they must pay for it by issuing debt, cashing in assets, or some combination of the two. Conversely, if receipts exceed expenditures and the sector is a net lender, its net financial investment (the net change in financial assets minus the net change in financial liabilities) must equal the budget surplus. The relationship between budget outcomes and the sector’s financial position is shown in the following accounting identity: total receipts – total expenditures = change in financial assets – change in financial liabilities. The sector’s financial liabilities include short-, medium-, and long-term debt; trade payables; and loans from the federal government, so the accounting identity can be rewritten as follows: total receipts – total expenditures = change in financial assets – change in medium- and long-term debt – change in trade payables – change in federal government loans – change in short term debt. For a given difference between total receipts and total expenditures, various combinations of changes in financial assets and changes in financial liabilities can satisfy this identity. However, we assumed that financial assets grow at the same rate as U.S. GDP, that medium- and long-term debt outstanding is determined using the historical relationship described in table 7, that federal government loans to state and local governments are determined using the historical relationship described in table 7, and that trade payables grow at the same rate as other state and local government consumption spending. If the first four terms on the right hand side of the identity are already determined, then only the fifth term— the change in short-term debt—is free to satisfy this identity. As discussed above, our indicators of fiscal balance are operating balance, net saving, and net lending or borrowing. This approach is similar to the approach we have used in prior model updates. Recall that we defined operating balance as follows: operating balance = total receipts – (gross investment + capital transfer payments + net purchases of nonproduced assets – medium- and long-term debt issuance) – (current expenditures – consumption of general government fixed assets) – current surplus of state and local government enterprises – net social insurance fund balance. By substituting for total receipts and current expenditures using the relationships described above and rearranging terms, we can also calculate operating balance using a formula that more easily identifies its revenue components—the items in the first set of parentheses—and expenditure components—the items in the second set of parentheses: operating balance = (current tax revenues + estate and gift tax revenues + social insurance fund contributions + income receipts from assets + current transfers + federal investment grants + medium- and long-term debt issuance) – (compensation of general government employees + social benefit payments + interest payments + gross investment + capital transfer payments + net purchases of nonproduced assets + other general government consumption expenditures + subsidy payments + net social insurance fund balance). Some of our simulations are based on estimated historical relationships between pairs of variables: Elasticity of real personal consumption expenditures less food and services with respect to real wages and salaries; Elasticity of the real U.S. market value of real estate with respect to Relationship between effective interest rates on financial assets and Relationship between state and local government bond yields and 10- year Treasury rates; Relationship between effective interest rates on long-term state and local government debt and federal government loans and state and local government bond yields; Elasticity of real state personal income tax revenue with respect to Elasticity of real state and local government excise tax revenue with respect to real wages and salaries; Relationship between long-term debt issuance as a fraction of gross investment and nonproduced asset purchases in excess of federal investment grants and the change in state and local government bond yields; and Relationship between real federal government lending to state and local governments and real U.S. GDP. To estimate each of these historical relationships, we used the following approach: first, we assessed the order of integration of both variables using unit root tests of the levels and the first differences, where a variable is integrated of order 0 (I(0) or stationary) if we rejected the null hypothesis of a unit root in the levels at standard significance levels, and is integrated of order 1 (I(1) or first-order nonstationary) if we could not reject the null hypothesis of a unit root in the levels but we could do so for the first differences. For relationships between variables that were both stationary, we estimated an autoregressive distributed lag model, where y is the dependent variable, x is the independent variable, and ε is an independent, identically distributed error term. The long-run impact on y of a one unit change in x is given by ∑ . We initially chose the number of lags based on the Bayesian Information Criteria and then added additional lags of the dependent variable, if needed, until the residuals were consistent with a white noise process at standard significance levels. For relationships between variables that were both first-order nonstationary, we used the same approach but also used the Pesaran, Shin, and Smith bounds test for the existence of a cointegrating (long-run equilibrium) relationship. We concluded that the variables were cointegrated if we rejected the null hypothesis of no relationship at standard significance levels. Tables 8 and 9 summarize the estimated regression models as well as the results of the unit root, white noise, and cointegration tests. We simulated the model for the 75-year period from 2018 through 2092, and we used the results to calculate the operating balance for the state and local government sector as a percentage of U.S. GDP. Our results suggest that if the sector maintains current policy and continues to provide current per capita levels of public goods and services, then its operating balance will decline from about -1 percent of U.S. GDP to about -3 percent of U.S. GDP over the next 50 years. To shed light on how maintaining the operating balance at or above zero would affect the state and local government sector, we used the model to simulate the level of total expenditures that would keep the operating balance greater than or equal to zero. We then calculated the difference between the present value of total expenditures simulated assuming the sector maintains balance, and the present value of total expenditures simulated assuming the sector maintains current policies, both as a percentage of the present value of total expenditures assuming the sector maintains current policies, and as a percentage of the present value of U.S. GDP. We calculated all of the present values for the 50-year period from 2018 through 2067, and we used a discount rate equal to the average of the 3-month Treasury rate and the 10-year Treasury rate for each year. Our results suggest that the difference between the present value of total expenditures that maintain balance and the present value of total expenditures that maintain current policies is about -14.7 percent of the present value of total expenditures that maintain current policies, or about -2.4 percent of the present value of U.S. GDP. That is, our simulations suggest that maintaining balance would require the sector to spend about 14.7 percent less than it would spend each year to maintain current policies. We note that a similar exercise based on simulating total revenues required to maintain the operating balance at or above zero would generate a similar result. Our approach has a number of limitations and the results should be interpreted with caution: The state and local government fiscal model is not designed for certain types of analyses. The simulations are not intended to provide precise predictions. Even though we know that these governments regularly make changes to tax laws and expenditures, the model essentially holds current policy in place and analyzes the fiscal future for the sector as if those policies were maintained because it would be highly speculative to make any assumptions about future policy adjustments. Fiscal outcomes, as related to the state and local government sector’s financial position and solvency, may not reflect all aspects of the sector’s fiscal health. Other indicators include economic indicators that go beyond the sector’s financial position to include economic growth, income, or distributional equity, as well as indicators of the quality of services provided by the sector, including education, health care, infrastructure, and other public goods and services. Our unit of analysis is the state and local government sector as a whole, so our results provide an assessment of the sector’s fiscal outlook. However, individual state and local governments likely exhibit significant heterogeneity in their expenditure and revenue patterns, so their fiscal outlooks will likely differ from that for the sector. Nevertheless, it is informative to assess the overall fiscal outlook of the sector because doing so reveals the outlook for the average state or local government. In addition, aggregate data on the sector are available on a more timely basis than data for individual state and local governments. This allows for a better assessment of the sector’s current fiscal outlook. Our results for the sector also provide a baseline from which to view the experiences of individual state and local governments. Finally, assessing the fiscal outlook of the sector as a whole can help mitigate the tendency to extrapolate from the most visible, but potentially not representative, experiences of individual states or localities. Our baseline approach to simulating the fiscal outlook for the state and local government sector is described in appendix I. As part of our simulation approach, we used five variables with values for the simulation period—the period from 2018 through 2092—that are projected outside the model and that do not rely on maintaining historical relationships: U.S. population, real U.S. gross domestic product (GDP) growth, national health care excess cost growth, Medicaid excess cost growth, and the real rate of return on pension assets. U.S. population. For our baseline simulations, we used the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds’ (OASDI Trustees) intermediate population projections. Real U.S. GDP. For our baseline simulations, we projected real U.S. GDP to grow at the same rate as Congressional Budget Office (CBO) projections for the period from 2018 through 2028 and to grow at the same rate as the OASDI Trustees’ intermediate projections of real U.S. GDP growth for the period from 2029 through 2092. National health expenditures excess cost growth. For our baseline simulations, we used Centers for Medicare & Medicaid Services’ (CMS) baseline projection of national health expenditures excess cost growth. Medicaid excess cost growth. For our baseline simulations, for the period from 2029 through 2092, we used Medicaid excess cost growth derived from CMS’s baseline projections. Real rate of return on state and local government pension assets. For our baseline simulations, we assumed a 5 percent real rate of return on state and local government pension assets. To assess the sensitivity of our results to changes in these baseline projections, we selected two alternative projections of each of these variables, one associated with a faster growth rate or rate of return and one associated with a slower growth rate or rate of return. U.S. population. For our alternative simulations, we used the OASDI Trustees’ high cost and low cost population projections. Real U.S. GDP. For our alternative simulations, we used the OASDI Trustees’ high cost and low cost projections of real U.S. GDP growth. National health expenditures excess cost growth. For our alternative simulations, we used CMS’s alternative projection of national health expenditures excess cost growth. As another alternative, we simulated the model assuming excess cost growth for national health expenditures is zero. Medicaid excess cost growth. For our alternative simulations, for the period from 2029 through 2092, we used Medicaid excess cost growth derived from CMS’s alternative projections for the period from 2029 through 2092. As another alternative, we simulated the model assuming Medicaid excess cost growth is zero for the period from 2029 through 2092. Real rate of return on state and local government pension assets. For our sensitivity analysis, we used real rates of return of 2.5 percent and 7.5 percent. Table 10 shows the average annual growth rate or rate of return associated with the baseline and alternative projections of each variable for the simulation period. For our simulations based on alternative assumptions about U.S. population growth and real U.S. GDP growth, as well as simulations based on alternative assumptions about real pension asset returns, we simulated the model changing one variable at a time and leaving the others fixed at their baseline values. For example, for one simulation we used the slower assumption for real U.S. GDP growth and the baseline assumptions for all other variables. For our simulations based on alternative assumptions about excess cost growth for national health expenditures and for Medicaid, we changed both variables in the same direction and left the others fixed at their baseline values. For example, for one simulation we used zero excess cost growth for both national health expenditures and for Medicaid, and made the baseline assumption for the other variables. Thus, our sensitivity analysis is in the spirit of a partial equilibrium comparative statics analysis that sheds light on how each of the individual variables may affect the state and local government sector’s fiscal outlook. However, these variables are likely to be correlated so future changes in one would likely be associated with changes in others. State and Local Governments’ Fiscal Outlook: December 2016 Update, GAO-17-213SP. Washington, D.C.: Dec. 8, 2016. State and Local Governments’ Fiscal Outlook: December 2015 Update, GAO-16-260SP. Washington, D.C.: Dec. 16, 2015. State and Local Governments’ Fiscal Outlook: December 2014 Update, GAO-15-224SP. Washington, D.C.: Dec. 17, 2014. State and Local Governments’ Fiscal Outlook: April 2013 Update, GAO-13-546SP. Washington, D.C.: Apr. 29, 2013. State and Local Governments’ Fiscal Outlook: April 2012 Update, GAO-12-523SP. Washington, D.C.: Apr. 5, 2012. State and Local Government Pension Plans: Economic Downturn Spurs Efforts to Address Costs and Sustainability, GAO-12-322. Washington, D.C.: Mar. 2, 2012. State and Local Governments’ Fiscal Outlook: April 2011 Update, GAO-11-495SP. Washington, D.C.: Apr. 6, 2011. State and Local Governments: Knowledge of Past Recessions Can Inform Future Federal Fiscal Assistance, GAO-11-401. Washington, D.C.: Mar. 31, 2011. State and Local Governments: Fiscal Pressures Could Have Implications for Future Delivery of Intergovernmental Programs, GAO-10-899. Washington, D.C.: July 30, 2010. State and Local Governments’ Fiscal Outlook: March 2010 Update, GAO-10-358. Washington, D.C.: Mar. 2, 2010. Update of State and Local Government Fiscal Pressures, GAO-09-320R. Washington, D.C.: Jan. 26, 2009. State and Local Fiscal Challenges: Rising Health Care Costs Drive Long- term and Immediate Pressures, GAO-09-210T. Washington, D.C.: Nov. 19, 2008. State and Local Governments: Growing Fiscal Challenges Will Emerge during the Next 10 Years, GAO-08-317. Washington, D.C.: Jan. 22, 2008. Our Nation’s Long-Term Fiscal Challenge: State and Local Governments Will Likely Face Persistent Fiscal Challenges in the Next Decade, GAO-07-1113CG. Washington, D.C.: July 18, 2007. State and Local Governments: Persistent Fiscal Challenges Will Likely Emerge within the Next Decade, GAO-07-1080SP. Washington, D.C.: July 18, 2007. In addition to the contacts listed above, Brenda Rabinowitz and Courtney LaFountain (Assistant Directors), David Aja, Brett Caloia, Ann Czapiewski, Joe Silvestri, Stewart Small, Andrew J. Stephens, Frank Todisco, Walter Vance, and Chris Woika made significant contributions to this report.", "summary": "Fiscal sustainability presents a national challenge shared by all levels of government. Since 2007, GAO has published simulations of long-term fiscal trends in the state and local government sector, which have consistently shown that the sector faces long-term fiscal pressures. While most states have requirements related to balancing their budgets, deficits can arise because the planned annual revenues are not generated at the expected rate, demand for services exceeds planned expenditures, or both, resulting in a near-term operating deficit. This report updates GAO's state and local fiscal model to simulate the fiscal outlook for the state and local government sector. This includes identifying the components of state and local expenditures likely to contribute to the sector's fiscal pressures. In addition, this report identifies considerations related to federal policy and other factors that could contribute to uncertainties in the state and local government sector's long-term fiscal outlook. GAO's model uses the Bureau of Economic Analysis's National Income and Product Accounts as the primary data source and presents the results in the aggregate for the state and local sector as a whole. The model shows the level of receipts and expenditures for the sector until 2067, based on current and historical spending and revenue patterns. In addition, the model assumes that the current set of policies in place across state and local government remains constant to show a simulated long-term outlook. GAO's simulations suggest that the state and local government sector will likely face an increasing difference between revenues and expenditures during the next 50 years as reflected by the operating balance--a measure of the sector's ability to cover its current expenditures out of its current receipts. While both expenditures and revenues are projected to increase as a percentage of gross domestic product (GDP), a difference between the two is projected to persist because expenditures are expected to grow faster than revenues throughout the simulation period. GAO's simulations also suggest that growth in the sector's overall spending is largely driven by health care expenditures--in particular, Medicaid spending and spending on health benefits for state and local government employees and retirees. These expenditures are projected to grow as a share of GDP during the simulation period. GAO's simulations also suggest that revenues from personal income taxes and federal grants to states and localities will increase during the simulation period. However, revenues will grow more slowly than expenditures such that the sector faces a declining fiscal outlook. GAO also identified federal policy changes that could affect the state and local government sector's fiscal outlook. For example, the effects of the recently-enacted Tax Cuts and Jobs Act will likely depend on how states incorporate the Act into their state income tax rules. In addition, other factors, such as economic growth and rates of return on pension assets, could shift future fiscal outcomes for the sector.", "document_type": "gao"}
{"report": "DOD guidance states that the Air Force and other services are responsible for providing trained and ready forces to fulfill the current and future operational requirements of the combatant commands. The Air Force is specifically responsible for gaining and maintaining air superiority. The Air Force Strategic Master Plan states that the Air Force must focus clearly on the capabilities that will allow freedom of maneuver and decisive action in highly contested spaces, including high-end air capabilities. Fifth generation fighter capabilities and ready and trained Airmen who are properly equipped for their missions are central components of the Air Force’s ability to provide air superiority in contested environments. The F-22 is the Air Force’s fifth generation, air superiority fighter that incorporates a stealthy and highly maneuverable airframe, advanced integrated avionics, and engines capable of sustained supersonic flight. The F-22 is optimized for air-to-air combat, able to carry up to eight air-to- air missiles, and equipped with a 20-millimeter cannon. After development began, the Air Force also added air-to-ground capabilities to the F-22. Air Force officials emphasized the synergistic benefits of the F-22 to the joint force. Specifically, the F-22’s individual capabilities, like its stealth and sensors, help it to coordinate and improve the performance of other aircraft during operations, including fourth generation fighters. The Air Force views the F-22 and the F-35—its other fifth generation fighter—as complementary platforms with some overlapping capabilities. For example, the F-22 is focused on, and more capable in, air-to-air missions and the F-35 is focused on, and more capable in, air-to-ground missions. The Air Force announced in its fiscal year 2018 budget request that it now intends to retain the F-22 until 2060. It has also begun an effort to define and develop the next generation of air superiority capabilities that it plans to field in 2030 and beyond. Figure 1 shows a picture of an F-22. The F-22 and the F-15C are the two operational fighters in the Air Force’s Air Superiority Core Function. The Air Force assigns two primary (air-to- air focused) missions and one secondary (air-to-ground focused) mission to the F-22. These missions are described in table 1. The Air Force requires its pilots to be proficient in their primary missions and familiar with their secondary missions. The size of the current F-22 fleet is smaller than the Air Force originally planned. The Air Force F-22 acquisition program began in 1991 with an intended development period of 12 years and a planned quantity of 648 aircraft. The Air Force had intended to station 40 percent of the operational fleet outside of the United States. However, schedule delays, cost increases, and changes to threats, missions, and requirements led DOD to reduce the number of F-22s it eventually purchased. The Air Force identified a requirement for 381 F-22s in 2002, but ended aircraft production in 2012 with approximately half of that number. As of May 2018, the Air Force had a total of 186 F-22s, as shown in figure 2. The total aircraft inventory includes primary mission aircraft in each community—those authorized to perform combat—as well as aircraft that are designated for other purposes. The operational portion of the F-22 fleet is organized into 6 operational squadrons at four locations. According to Air Force officials, the small number of F-22s provides a less than ideal fifth generation fighter capacity until F-35 numbers grow. However, in a June 2017 report to Congress, the Air Force stated that it would not make economic or operational sense to reopen the F-22 production line, and reported that it would cost approximately $50 billion to procure an additional 194 F-22s. The Air Force is continuing to fund programs to modernize the F-22 and make reliability improvements. Figure 3 shows the basing locations of the F-22 fleet, and the numbers of aircraft at each base. The size and structure of F-22 units diminishes the Air Force’s ability to maximize the number of F-22s available for operations and have not been reviewed since 2010. The F-22 has sustainment issues due to the fleet’s maintenance and supply challenges. These challenges have affected aircraft availability rates, which have remained below Air Force standards. The small size of F-22 squadrons and wings has contributed to low aircraft availability rates. Further, the Air Force practice of deploying a small portion of a squadron makes it difficult for F-22 squadrons, as currently organized, to make aircraft available for their missions at home station. The Air Force would also face difficulties generating aircraft to support DOD’s concepts for using distributed operations in high threat environments with its current F-22 squadron organization. Although in 2016 it assessed its future air superiority capability needs, the Air Force has not comprehensively assessed whether the current F-22 organizational structure is optimized to support combatant commander needs. The F-22 has sustainment issues due to the fleet’s maintenance and supply challenges that have affected aircraft availability rates. In fiscal year 2016, this resulted in the fleet having an average of 80 F-22s available for operations, as shown in figure 4. According to the Air Force, from fiscal year 2012 through 2016, the F-22 fleet availability rate was below the Air Force’s annual F-22 availability standard by 4 to 19 percent. First, the F-22 has some unique maintenance challenges, which have affected aircraft availability rates. The maintenance demands of the F- 22’s Low Observable (LO) coating, a critical component of its stealth characteristic, reduces aircraft availability. Without the LO maintenance issues, availability would have been significantly closer to meeting the annual availability standard, according to the Air Force officials. Fourth generation fighters do not have to contend with this maintenance issue. The F-22’s LO coating is actually a series of coatings that require diligent and time-consuming application and curing, which results in extended periods of time when the aircraft are not available, according to Air Force officials. The F-22’s LO coating is also beginning to reach the end of its service live, requiring maintenance actions that further reduce aircraft availability. The Air Force has begun to address these maintenance issues by using a more durable coating and standing up additional repair facilities. Second, the F-22 faces a number of supply challenges that have contributed to reduced and unpredictable aircraft availability. Officials from all four operational locations expressed concerns over low supply levels and difficulties with obtaining needed parts. The F-22 fleet’s small size and resulting low demand for parts contributes to this problem. Obtaining missing parts can be a time-consuming and costly process because some original manufacturers no longer make the parts or are completely out of business, according to Air Force officials. When this is the case, the Air Force may need to find the original aircraft and parts design plans, and obtain a new contractor to produce a small number of parts. Officials at one operational location said a simple wiring harness required a 30-week lead time. Appendix I contains additional information on F-22 maintenance and supply issues. With 18 to 21 primary mission aircraft per F-22 squadron, and 1 or 2 F-22 squadrons per wing, the Air Force has been unable to gain the maintenance and supply efficiencies associated with its larger traditional squadrons and wings, and this has contributed to low aircraft availability rates. According to service officials, the Air Force has traditionally structured its fighter wings to have 3 squadrons with 24 primary mission aircraft per squadron to optimize maintenance efficiency and combat power. The Air Force is planning to organize its active duty F-35 fleet into traditional sized squadrons with 2 or 3 squadrons per wing. A RAND study also concluded that larger squadrons and multiple squadrons per wing create efficiencies. Larger squadrons and wings create efficiencies because people, equipment, and parts can be shared, according to Air Force officials. Having a multi-squadron wing is also beneficial when one squadron deploys a portion of its aircraft, pilots, and maintenance personnel and leaves another portion of the squadron at the squadron’s home station. In these cases, collocated squadron(s) can help backfill shortfalls for the portion of the squadron that remained at home station. The Air Force recognizes that smaller F-22 operational squadrons and wings face sustainment challenges due to their size. Facing cuts in the total number of aircraft purchased, the Air Force decided in 2006 to organize its F-22s into 7 operational squadrons, each with 18 primary mission aircraft. However, in 2010, the Air Force found that this plan was unsustainable because operational squadrons were not able to produce adequate sorties. The Air Force then decided to eliminate 1 squadron and used some of the aircraft from that squadron to increase the number of primary mission aircraft to 21 in its 5 remaining active duty squadrons. The Air Force left its one F-22 National Guard squadron with only 18 primary mission aircraft. The Air Force’s intent with this restructuring was to increase fleet sustainability while retaining enough squadrons for force projection needs. F-22 aircraft availability metrics have fluctuated, but have generally been better for operational locations with more aircraft per squadron and more squadrons per wing. For example, table 2 shows that the operational locations in Alaska and Virginia—locations with 2 operational squadrons—have higher aircraft availability rates than the locations with only 1 operational squadron. Although Air Force maintenance data shows that the Florida operational squadron had a lower availability rate than the locations with 2 operational squadrons in fiscal years 2014, 2015, and 2016, Air Force officials noted that this squadron should be able to leverage the maintenance benefits of having the F-22 training squadron on base. However, a major maintenance backlog for the training squadron currently limits that benefit, according to the officials. The F-22 units in Alaska and Virginia are also generally able to produce more sorties per month. Further, F-22 squadron officials in Hawaii stated that increasing their squadron—the smallest in the fleet—by 4 additional aircraft would allow the squadron to generate 32 percent more sorties. Air Force officials cautioned that there are many factors that influence maintenance metrics for the F-22, including the age of the aircraft, climate and leadership. However, they agreed that larger squadrons and wings increase maintenance performance. Further, the Air Force practice of deploying a small portion of a squadron forward makes it difficult for F-22 squadrons as currently organized to make aircraft available for their missions at home station, according to officials from all four operational locations. The Air Force organizes its F- 22 squadrons and other fighter squadrons based on a model where a squadron deploys to a single forward location, according to Air Force officials. In order to facilitate deployments, the Air Force has for approximately the last two decades organized squadrons into smaller deployable pieces called Unit Type Codes (UTCs). However, the UTCs are not the same size. For example, one of the F-22’s UTCs is designed to have only 6 of a squadron’s 21 aircraft but contains almost 50 percent of the squadron’s equipment, approximately 40 percent of the squadron’s maintenance personnel and 60 percent of its operational personnel. This organizational approach therefore creates a disproportionate split among UTCs in terms of equipment and personnel, making it more difficult for the underserved portions of the squadron to maintain readiness or generate sorties. Furthermore, different UTCs will not only have unequal amounts of equipment and personnel, but will also tend to unevenly apportion their best aircraft, more experienced personnel, and critical parts, according to Air Force officials. The officials noted that during “split operations,” the portion of the squadron remaining at home struggles to keep aircraft available for missions. According to Air Force officials, traditional fighter squadrons have larger UTCs, which provides a better balance in equipment and personnel that lessens the strain of split operations. With its current F-22 squadron organization, the Air Force would also face difficulties generating aircraft to support DOD’s concepts for using distributed operations in high threat environments. According to DOD, potential adversaries are increasingly capable of challenging U.S. access to operational areas by, for example, developing cruise and ballistic missiles that are able to reach U.S. forward air bases. In its Air Superiority 2030 Flight Plan, the Air Force states that the ability to deploy and operate forces in non-permissive environments is essential to air superiority. One approach for doing this is to use distributed bases. Instead of operating from well-developed and vulnerable forward air bases, squadrons would break up into smaller units and operate independently from multiple locations, moving around so as to complicate enemy targeting. The Air Force is drafting an adaptive basing concept and implementation plan to help guide its efforts in this area. Sustaining and maintaining multiple independent deployable units so that they have operational aircraft available for the combatant commander is not possible with the current F-22 squadron structure and would require significant investment, according to Air Force officials. F-22 squadrons have made a number of short exercise deployments, with small numbers of aircraft to provide forward presence and examine the units’ abilities to conduct distributed operations. These deployments showed that rapidly deploying small numbers of F-22s for short durations is possible. The deployments also identified a number of challenges the Air Force needs to address if it implements a distributed operations concept, including maintenance, logistics, spare parts, and tanker support challenges, according to after-action reports and service officials. Furthermore, according to the Commander of U.S. Pacific Command, distributed operations requires a dynamic logistics system that is more responsive, agile, and flexible than DOD is used to employing. Air Force officials told us that the Air Force is early in the process of examining the implications of distributed operations and has not determined the extent to which F-22 squadron organization should be adjusted to support distributed operations. While the Air Force reviews F-22 operations and sustainment needs as part of the annual programming and budgeting process within DOD, the Air Force has not comprehensively assessed whether the current F-22 organizational structure is the optimal structure to support combatant commander needs since 2010, according to Air Force officials. As previously discussed, the Air Force found in 2010 that operational squadrons were not able to produce adequate sorties and so eliminated 1 squadron and used some of the aircraft from that squadron to increase the number of primary mission aircraft in its 5 remaining active duty squadrons DOD’s Joint Publication 3-0, Joint Operations, states that risk management is the process to identify, assess, and control hazards arising from operational factors and make decisions that balance risk and cost with mission benefits. It assists organizations and individuals in making informed decisions to reduce or offset risk, thereby increasing operational effectiveness and the probability of mission success. Furthermore, Standards for Internal Control in the Federal Government states that management should periodically evaluate the organizational structure so that it meets the entity’s objectives and has adapted to any new objectives for the entity. Furthermore, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. However, the Air Force has not conducted a comprehensive assessment of the F-22 organizational structure since 2010, according to Air Force officials. As previously discussed, while the larger squadrons and wings created after the 2010 restructuring have generally had higher availability rates than smaller ones, fleet aircraft availability rates remain below the Air Force standard for what is needed. Further, the F-22’s role has also evolved since 2010. For example, F-22s have begun participating in combat operations in Iraq and Syria. Additionally, potential adversaries are increasingly able to challenge U.S. air superiority, according to the Air Force. In 2016, the Air Force examined its future air superiority capability needs in its Air Superiority 2030 Flight Plan, but that review did not include an assessment of organizational structure, according to officials involved with the review. Such an assessment could consider a number of alternatives, such as consolidating the F-22 fleet into larger squadrons and/or wings to improve aircraft availability or revising the design of the deployable units in squadrons to better support current deployment practices and future operational concepts, as well as any risks associated with those alternatives. Without conducting a comprehensive assessment of the F-22 organizational structure that identifies and assesses alternative approaches to organizing F-22 squadrons, the Air Force may be forgoing opportunities to improve the availability of its small yet critical F-22 fleet to support current and future combatant commander high-end air superiority needs. The Air Force’s utilization of its F-22 fleet has limited its pilots’ opportunities to train for their high-end air superiority missions, and contributed to F-22 pilots not meeting their training requirements. F-22 pilots need extensive training in order to be prepared to execute their high-end air superiority missions. However, Air Force utilization of F-22 units for exercises, the low supply of adversary air training capabilities, and the use of F-22s to meet combatant commander needs, including the alert mission, affects the ability of pilots to meet those requirements. F-22 pilots are not meeting their minimum yearly training requirements for the air superiority missions, according to Air Force training reports and service officials. F-22 pilots need extensive training for F-22 units to fulfill their air superiority role. Air Force guidance notes that a key to maintaining air superiority is trained and ready Airmen that must possess a well-honed combat edge so that they are ready to prevail even against the most advanced opponents. The Air Force strategy also notes that the training of Airmen must be relevant and responsive if they are to maintain superior agility in the future. Through its Ready Aircrew Program, the Air Force establishes annual continuation training requirements for F-22 pilots. These requirements focus on the training needed to accomplish the core missions of F-22 units. They define the minimum required mix of annual sorties, simulator missions, and training events aircrews must accomplish to sustain combat mission readiness. Air Force officials emphasized that the requirements outlined in the Ready Aircrew Program are minimums and noted that some pilots may need additional sorties to achieve proficiency. In 2016, GAO reported that combat fighter squadrons were unable to meet annual training requirements across the full range of core missions. Further, an Air Force analysis conducted in 2016 determined that, based on current aircraft availability rates, pilots in an F-22 squadron with 21 primary mission aircraft need 270 days of home station training each year to meet their minimum annual continuation training requirements. However, F-22 pilots are generally not meeting those minimums, according to the officials, and F-22 operational squadrons have reported numerous shortfalls. For example, one squadron identified training shortfalls in its primary missions for four consecutive years in its annual training reports. Another squadron identified training shortfalls in one of its primary missions, offensive counter-air, in three of the last four annual training reports. Although participation in exercises is an important component of F-22 pilot training, multiple exercises can interrupt pilot training cycles and restrictions in some exercises can detract from F-22 pilot training for the high threat environment. Exercises provide pilots an opportunity to train in a more realistic setting. At the same time, frequent participation in exercises can take time away from the home station training that is required to maintain combat mission readiness for high-end air superiority missions. Although high demand for exercise participation is causing stress across the Air Force, the problem is particularly acute for F-22 pilots, according to a 2016 Air Force analysis. While F-22 pilots require 270 days at home each year, they are getting only 191 days on average, according to the analysis. Pilots from other fighter aircraft, such as the F- 16 and F-15E, are also experiencing home station training shortfalls, but not as great as those faced by F-22 pilots, according to the analysis. Furthermore, F-22 units are often directed to participate in exercises as part of Air Force efforts to build relationships with partners. However, due to security concerns regarding exposing the F-22’s unique capabilities, F- 22 pilots may be restricted from flying the aircraft the way they would in combat, according to Air Force officials. As a result, the value of the training is reduced and these types of exercises can result in the F-22 pilots developing bad habits that must be corrected in future training, according to Air Force officials. The Air Force recognizes that exercise demands on F-22 units and other fighter units make it difficult for pilots to complete their required training. Based on its analysis, the Air Force is planning to increase the time pilots have available to conduct home station training, including by establishing a goal of no more than 1 day on travel for every 5 days at home station. As a result, the Air Force will be reducing total exercise participation and thereby increasing the number of days F-22 pilots are at home station in fiscal year 2018 by 8 days. However, the Air Force projects that F-22 pilots in fiscal year 2018 will still fall 71 days short of the 270 days they need to meet their yearly training requirement, based on current aircraft availability rates. Without exploring further reductions in exercise events that do not contribute to high-end air superiority training, at current aircraft availability rates F-22 pilots may not be fully prepared to effectively support combatant commander needs against the most advanced threats. F-22 pilot training requires flying against aircraft playing the role of adversaries, but high demand and low supply of adversary air resources have resulted in training shortfalls. Due to the F-22’s unique air superiority role and high-end capabilities, the Air Force expects F-22 pilots to face and defeat numerically superior adversaries. This results in an annual demand of between 145 and 171 adversary air sorties for every operational F-22 pilot. The adversary air demand for fourth generation fighters is much lower. For example, continuation training for the Air Force’s other air superiority fighter—the F-15C—results in an annual demand of between 45 and 73 adversary air sorties. To support F-22 training requirements, the Air Force has provided two of the four operational locations (Virginia and Florida) with a squadron of T-38s to provide dedicated adversary air support for use in training. In Alaska, an adversary air squadron is located at a nearby base that is able to provide some support for F-22 training, according to officials. The F-22s in Hawaii have no adversary air support on base or nearby. Figure 5 shows F-22 operational locations and their adversary air support. All F-22 operational locations report that insufficient adversary air caused pilots to have shortfalls in their training. For example, the operational F-22 squadron in Florida, which shares an adversary air squadron with a collocated F-22 training unit, reported that F-22 pilot training deficiencies in fiscal year 2016 were caused in part by limited adversary air support. Specifically, adversary air shortfalls negatively impacted the training of 83 percent of the squadron’s pilots for the offensive counter-air mission and 54 percent of the pilots for the defensive counter-air mission. Operational squadrons at other locations reported similar negative effects on training caused in part by the limited adversary air. Moreover, the limited supply of dedicated adversary aircraft means that often F-22 pilots must fly their aircraft in an adversary aircraft role to support the training of the squadron’s other F-22 pilots. For example, according to a 2017 Air Force memo, 55 percent of all sorties generated by F-22s based in Hawaii were dedicated to adversary air. The F-22 squadron in Hawaii reported that this practice negatively affected the combat readiness of all of the squadron’s pilots. The Air Force categorizes adversary air sorties as useful only for maintaining basic flying proficiency. Officials from the Virginia unit explained that F-22 pilots flying adversary air do not fly like they would during combat missions and so these sorties are wasteful, having no or negative training value. An official representing the Hawaii unit indicated that the high percentage of sorties dedicated to adversary air leads to wasteful training and declines in readiness against potential threats. Air Force officials expect competing demands for limited adversary air to grow as the Air Force stands up more F-35 squadrons. The Air Force recognizes and is attempting to mitigate adversary air shortfalls. For example, the Air Force has hired contractors to address Air Force adversary air shortfalls at exercises, as we previously reported. In addition, the Air Force has outlined a plan to provide additional adversary air support for its fighter units, including contract adversary air support for the F-22 training squadron in Florida and the operational squadrons at two of the four operational locations (Virginia and Hawaii) in the 2019 timeframe. However, the Air Force must first complete additional analysis and finalize funding before additional adversary support is provided to these locations, according to an August 2017 Air Force briefing on the plan. Until the Air Force explores additional alternatives for increasing external adversary air training support at all of the operational locations, F-22 pilots will likely continue to face training shortfalls and use limited sorties on flying adversary air themselves. Furthermore, this may result in the F-22 squadrons not being fully prepared to execute the high-end air superiority missions. The Air Force is providing F-22s in support of current combatant commander needs, including alert missions and operational deployments, but the alert mission and these operational deployments take time away from air superiority training. Although these missions are important, they take no or limited advantage of the unique capabilities provided by the F- 22, as figure 6 illustrates. Classified details regarding the current and projected operational requirements for the F-22 are included in the classified version of this report. DOD has an established risk-informed process to distribute the service’s operational forces to the combatant commanders. Air Force officials told us that combatant commanders can request a general fighter capability or a very specific capability that only an F-22 can provide. Air Force officials also said the Air Force does not set aside F-22 units for only the most advanced threat missions, and it does not set aside any other fighter units for unique missions. The Air Force provides F-22 units to the combatant commands when those units address the combatant commander’s capability requirement and are available, according to service officials. F-22 support for ongoing air sovereignty alert missions further reduces F- 22 pilots’ abilities to train for the high-end air superiority mission. The alert mission supports homeland defense, DOD’s top priority. This mission requires certain air bases have fully fueled, fully armed jets ready at all times to respond to threats from civil or military aviation. Two F-22 operational locations have full time alert mission responsibilities (Alaska and Hawaii) and one location (Virginia) performs alert missions on an as- needed basis. According to Air Force officials, the alert mission does not require the high-end capabilities provided by the F-22 and currently F- 15C and F-16 squadrons are filling alert mission requirements in other parts of the United States. F-35s could also conduct this mission if they were assigned it, according to Air Force officials. The Air Force plans to start fielding 2 F-35 squadrons in Alaska beginning in 2020. However, there are currently no plans to use F-35s for the alert mission, according to U.S. Northern Command. With no other operational Air Force fighter squadrons currently based in Hawaii and Alaska, the alert mission falls to the F-22 units. Dedicating F-22s to the alert mission reduces the ability of F-22 pilots to train for their primary missions. Operational squadrons in Alaska and Hawaii have F-22 pilots sitting alert in order to address the 24-hour per day alert commitment. During this time they are not able to train for their high-end air superiority missions. Further, the squadrons must dedicate a number of mission-capable aircraft to this mission, which is more challenging for squadrons with a smaller number of aircraft. Squadron officials from one location estimated that they could generate hundreds of additional training sorties on an annual basis if they could use the aircraft that are currently dedicated to the alert mission. The Air Force also deploys F-22s outside of the United States to address combatant commander requirements and these deployments also reduce the time available for F-22 pilots to conduct home station training for their high-end air superiority missions. Since 2007, the Air Force has deployed F-22s to a number of combatant commands to address a variety of needs, including providing assurance to friends and allies and deterring potential adversaries. F-22s deployed to U.S. Central Command have also been supporting ongoing operations against ISIS in Iraq and Syria. F-22 pilots can gain valuable experience from deployments but their ability to train for the high-end air superiority mission can suffer. For example, F-22 involvement in current combat operations against ISIS provides pilots with experience deploying for combat, integrating with coalition forces, and conducting air-to-ground attack operations, according to Air Force officials. Although its high-end capabilities provide some benefits in current operations against ISIS, F-22s have primarily been used for close air support (CAS) missions in operations against ISIS, according to Air Force officials. However, CAS is not a primary or secondary mission for the F-22. As such, F-22 pilot air superiority skills degrade while on deployment because they are conducting CAS missions and not able to train for their air superiority missions, according to Air Force officials. The F-22’s current availability and pilot training challenges will likely become more significant as fourth generation fighters become less survivable and the Air Force’s reliance on its small fleet of F-22s to execute the air superiority mission grows. Limitations on F-22 availability are due in part to maintenance challenges inherent to the F-22, including maintaining its LO coating. It is also due in part to Air Force decisions to organize the F-22 fleet into small wings and squadrons, resulting in lost efficiencies that come with larger organizations. Further, F-22 squadrons, designed to operate from one location, face challenges generating available aircraft when they are split, as current Air Force practices and future concepts require. The Air Force also requires well-trained pilots in order to take full advantage of the F-22’s high-end capabilities. However, F-22 pilots’ ability to train for its air superiority missions and meet associated training requirements is constrained by factors including adversary air limitations and participation in exercises with limited training value. Operational use of the F-22 for missions that have no or limited need for the F-22’s unique capabilities, such as the alert mission, further limit the ability of pilots to prepare for the high-end air superiority challenges the nation increasingly faces. One option for addressing these challenges would be to purchase more F-22s. However, the Air Force’s determination that it does not make economic or operational sense to restart F-22 production means that the Air Force has to find other ways to improve its F-22 fleet’s ability to address high-end air superiority challenges. Air Force efforts to improve F-22 capabilities and maintainability and wider efforts to address high exercise demand and adversary air shortfalls are examples of positive steps the service is taking. The Air Force has also shown a prior willingness to consolidate its F-22 fleet. Further, the Air Force outlined its commitment to addressing high-end air superiority challenges in its Air Superiority 2030 Flight Plan. This effort, along with the planned fielding of a large number of F-35s provides the Air Force with the opportunity to more comprehensively review and, if necessary, transform how it should best organize, posture, train, and utilize its fifth generation assets, including the F-22. However, unless the Air Force takes steps to assess and make necessary adjustments to the current organization and use of its F-22s, F-22 units are likely to continue to experience aircraft availability and pilot training rates that are below what they could be. As a result, the Air Force may be incurring increased risks in future operations in high threat areas. We are making the following two recommendations to the Air Force: The Secretary of the Air Force should conduct a comprehensive assessment of the F-22 organizational structure that identifies and assesses alternative approaches to organizing F-22 squadrons. The assessment could at a minimum assess the following two alternatives: consolidating the fleet into larger squadrons and/or wings in order to improve aircraft availability, and revising the design of the deployable units in squadrons to better support current deployment practices and future operational concepts. (Recommendation 1) The Secretary of the Air Force should identify and assess actions to increase F-22 pilot training opportunities for the high-end air superiority missions. This effort could consider alternatives such as: reducing exercise events that do not contribute to F-22 pilot high-end air superiority training, increasing external adversary air support so all F-22 pilots can use their available limited sorties to conduct high-end air superiority training rather than having a significant portion of the F-22 pilots providing training support, and finding alternatives to using F-22 units for alert missions, and other missions that do not require the jet’s unique capabilities or prepare F-22 pilots for their primary missions. (Recommendation 2) We provided a draft of the classified version of the report to DOD for review and comment. That draft contained the same recommendations as this unclassified version. In written comments (reproduced in appendix II), DOD concurred with our recommendations and noted planned actions to address each recommendation. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Senate Armed Services Committee and the House Armed Services Committee and the Secretary of Defense; the Chairman of the Joint Chiefs of Staff; and the Secretary of the Air Force, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Maintenance demands of the F-22’s unique Low Observable (LO) coating, along with supply challenges exacerbated by the fleet’s small size, limit the number of aircraft available for missions. In part because of these challenges, the Air Force had an average of 80 F-22s available for operations during fiscal year 2016. Maintenance demands of the F-22’s unique LO coating, a critical component that gives the F-22 its stealth characteristics, reduces aircraft availability. Without the LO maintenance issues, availability would have been significantly closer to meeting the annual availability standard, according to Air Force officials. Fourth generation fighters, lacking a full LO coating, do not have to contend with this maintenance issue. The LO coating is actually a series of coatings that require diligent and time- consuming application and curing, resulting in extended periods of time during which aircraft are not available, according to Air Force officials. Further, the LO coating for each F-22 requires regular and thorough inspection to ensure that any damaged or degraded areas are identified and repaired. If damage to the LO coating exceeds a threshold, the F-22 is considered not capable of conducting its mission. An Air Force report summarizing fiscal year 2016 maintenance issues reported that LO maintenance was the primary reason F-22s were not considered mission capable due to maintenance. Maintaining the integrity of the LO coating complicates other F-22 maintenance actions because the LO coating must be removed and then restored. According to Air Force officials, removing and replacing a part on an F-22 and a fourth generation fighter, like an F-15C, could take a similar amount of time. However, the F-22 would require additional time at the beginning and end of the maintenance action to gain access to the part through the LO coating and then restore the integrity of the coating, significantly increasing the time aircraft would be unavailable due to maintenance. The Air Force is taking steps to reduce the impact of LO maintenance by, for example, creating panels that can be removed without requiring a full recoating procedure and by developing a more durable coating. Additionally, Air Force officials told us that the LO coating for its other fifth generation fighter—the F-35—uses different materials and processes and should be easier to maintain than the F-22’s LO. The F-22’s LO coating is also beginning to reach the end of its service life, requiring maintenance actions that further reduce aircraft availability. According to Air Force officials, the LO coating has an 8-to-10 year life span, but environmental factors such as high temperatures, humidity, and salinity can reduce that span by 2 to 3 years. Further, the Air Force does not house its F-22s in climate-controlled hangars at 3 of the 4 operational locations (Florida, Hawaii, and Virginia), thus exposing them to these LO- degrading environmental factors. The Air Force has taken action to address maintenance challenges by using a more durable coating and standing up additional repair facilities. The Air Force also plans to use more durable materials to make long-term corrective repairs beginning in calendar year 2019, but this will constitute a costly long-term effort, according to the Air Force. As a result of the F-22 fleet’s small size and resulting low demand for parts, the F-22 faces a number of supply challenges that have contributed to reduced and unpredictable aircraft availability. Officials from all four operational locations identified low supply levels and difficulty obtaining needed parts as a concern. Obtaining parts can be a time-consuming and costly process because some original manufacturers no longer make the parts or are completely out of business, according to Air Force officials. When this is the case, the Air Force may need to find the original aircraft and parts design plans, and obtain a new contractor to produce a small number of parts. Officials at one operational location said a simple wiring harness required a 30-week lead time. Air Force maintenance statistics for fiscal year 2016 show that 14 percent of the F-22 fleet was not mission capable, and therefore not available, due to supply issues. According to Air Force officials, the F-22 fleet’s small size and resulting low demand for parts makes this problem more acute. F-22 squadrons face an unenviable choice when necessary parts are not available, according to Air Force officials: they can make the aircraft unavailable until the spare part arrives and can be installed or they can take the part from another aircraft that may be broken for a different reason. The second option, called cannibalization, is an inefficient way to conduct maintenance because it doubles the work. A good part needs to be removed from one aircraft and put into another. Once the replacement part arrives, it needs to be installed on the cannibalized aircraft. There is also a chance that the cannibalized part could get damaged in the process or just not work. Further, cannibalization could result in additional LO repairs on the donor aircraft. An Air Force report summarizing fiscal year 2016 maintenance issues reported that F-22 cannibalization rates have grown by 6 percent between fiscal years 2012 and 2016. The F-22’s small fleet size also exacerbates supply challenges it is facing with its engines, potentially falling below minimum spare part requirements for multiple calendar years. Further, an increase in flying hours in 2014 resulted in engines requiring overhauls sooner than previously anticipated. It is taking time for the engine maintenance contractor to build up enough capacity to deal with this increased demand. The officials said that the F-22’s small fleet size contributed to this problem because, as was the case with other parts issues, low early demand meant that many of the vendors that built parts for those engines no longer build the parts or are not in business. Additionally, it takes time to find vendors and skilled people to build those parts again. The Air Force is implementing a mitigation plan that includes increasing production, overflying the standard engine maintenance interval, and borrowing engines from aircraft in long-term maintenance. According to Air Force officials, this kind of engine issue is not unique to the F-22. They noted that there was a time when B-1s, another small fleet, had a major engine shortfall that resulted in aircraft parked without engines in them. An Air Force forecast shows that mitigation efforts will avoid that problem, barring unanticipated increases in demand or maintenance problems. In addition to the contact name above, Michael Ferren, Assistant Director; Vincent Buquicchio; Nicolaas Cornelisse, Analyst-in-Charge; Patricia Donahue; Amie Lesser; Tamiya Lunsford; Matthew Jacobs; Travis Masters; Richard Powelson; Walter Vance; and Nicole Volchko made key contributions to this report.", "summary": "The F-22 was designed and fielded as the Air Force's premier air-to-air fighter. The small fleet of 186 F-22s is central to the Air Force's ability to accomplish its air superiority mission in high threat areas. While the Air Force has focused on other missions over the last 15 years of conflict, it is now trying to refocus on overcoming advanced threats, even as it continues to support ongoing operations. Though the recent introduction of the F-35 gives the Air Force another advanced fighter, the F-35 is primarily designed for the air-to-ground missions and so is intended to complement but not replace the F-22. Senate Report 114-255 included a provision for GAO to review a variety of issues related to Air Force F-22 fighter squadrons. This report examines the extent to which the Air Force's (1) organization of its F-22 fleet maximizes availability of aircraft and (2) utilization of its F-22 fleet affects pilot air superiority training. GAO reviewed Department of Defense (DOD) guidance, analyzed maintenance data and training information for the F-22, evaluated the use of F-22s during deployments, and interviewed agency officials. This is a public version of a classified report issued in April 2018. Information DOD deemed classified or sensitive has been omitted. The Air Force's organization of its small F-22 fleet has not maximized the availability of these 186 aircraft. Availability is constrained by maintenance challenges and unit organization. For example, stealth is a central feature of the F-22 and, according to Air Force officials, maintaining the stealth coating on the outside of the aircraft is time consuming and significantly reduces the time F-22s are available for missions. Maintenance availability challenges are exacerbated by the Air Force's decision to organize the F-22 fleet into small units—18 or 21 primary mission aircraft per squadron and one or two squadrons per wing. Traditional fighter wings have three squadrons per wing with 24 aircraft in each squadron, which creates maintenance efficiencies because people, equipment, and parts can be shared, according to Air Force officials. Moreover, the Air Force organized F-22 squadrons to operate from a single location. However, it generally deploys only a part of a squadron, and the remaining part struggles to keep aircraft available for missions at home. Larger, traditional Air Force squadrons and deployable units provide a better balance of equipment and personnel, according to service officials. The Air Force has not reassessed the structure of its F-22 fleet since 2010. Without conducting a comprehensive assessment to identify and assess F-22 organization, the Air Force may be foregoing opportunities to improve the availability of its small yet critical F-22 fleet, and support combatant commander air superiority needs in high threat environments. The Air Force's utilization of its F-22 fleet has limited pilot opportunities to train for air superiority missions in high threat environments. To complete the annual training requirements for air superiority missions, F-22 pilots must train almost the entire year. However, F-22 pilots are not meeting their minimum yearly training requirements for the air superiority missions, according to Air Force training reports and service officials. Moreover, the utilization of F-22s for exercises and operational missions that do not require the F-22's unique capabilities interrupt pilot training and lead to reduced proficiency. For example, F-22 units are often directed to participate in partnership building exercises. However, during these exercises, F-22 pilots may be restricted from flying the F-22 the way they would fly it in combat—due to security concerns about exposing the F-22's unique capabilities. These restrictions limit the value of the exercises and can result in pilots developing bad habits, according to Air Force officials. The Air Force also uses F-22s to support alert missions—a mission that requires certain bases to have jets ready at all times to respond to threats from civil or military aviation. The alert mission does not require the advanced capabilities of the F-22, but there are no other operational Air Force fighter squadrons currently based at the F-22 locations in Alaska and Hawaii, so the alert mission falls to the F-22 units. Pilots and aircraft assigned to the alert mission cannot be used for any other purposes, including training. This limits opportunities for pilots to enhance air superiority skills. Without examining and implementing options to improve F-22 pilot training opportunities, the Air Force may be foregoing opportunities to improve its capability to address the high-end air superiority challenges it expects to face. GAO recommends that the Air Force reassess its F-22 organizational structure to determine alternative approaches to organizing F-22 squadrons, and identify ways to increase F-22 pilot training opportunities for high-end air superiority missions. DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The Arms Export Control Act of 1976 gives the President authority to sell defense articles and services to eligible foreign governments and international organizations. This Act is the basis of the FMS program, which the U.S. government considers to be an integral component of U.S. national security and foreign policy. Under the FMS program, foreign governments pay the U.S. government to administer the acquisition of defense articles and services on their behalf. Typically, defense equipment made available for transfer or sale to foreign governments falls under an acquisition program managed by one or more of the U.S. military departments. Generally, this equipment has gone through operational testing and has entered or is entering full-rate production. Multiple federal entities have a role in the FMS program, including DOD and the Department of State (State). Within DOD, DSCA and the military departments play an extensive role in administering the program and managing FMS acquisitions, respectively. DSCA carries out key administrative functions, such as coordinating the development and execution of sales through the FMS program and conducting negotiations with foreign governments. The military departments are involved early in the development of the potential sale when the foreign government identifies the defense equipment it needs to buy to achieve a desired capability. Congressional oversight of the FMS program has resulted in amendments to the Arms Export Control Act and other relevant legislation to improve the FMS program. The first phase of the FMS process generally involves a foreign government submitting a request, usually to State or DOD, to express interest in purchasing defense articles or services. Depending on the size and complexity of the items being purchased and the foreign government’s available budget, the process to finalize the terms of a sale can take from a few days to years. In response to concerns that the FMS process is slow and burdensome, Congress has increased oversight of the program and recently passed legislation intended to improve the timeliness of the FMS process. For example, in the National Defense Authorization Act for Fiscal Year 2017, Congress required DOD to revise its acquisition regulations to place new requirements on FMS contracting and to establish a pilot program to seek ways to accelerate contracting and pricing processes for FMS. According to DSCA officials, foreign governments interested in having nonrecurring costs waived must request a waiver before DOD develops and sends the sales agreement to the foreign government for acceptance and signature. The sales agreement—formally referred to as a letter of offer and acceptance—details the specific items, quantities, and total estimated costs, among other things. The sales agreement, once signed, is commonly referred to as a FMS case. For a given FMS case, DSCA’s decision regarding whether or not to waive nonrecurring costs would also be articulated in the agreement. Consistent with the Arms Export Control Act and DOD policy, foreign governments may request that nonrecurring costs be waived based on one of three justifications: To achieve equipment standardization with NATO and select allies (Australia, Israel, Japan, Jordan, New Zealand, and the Republic of Korea). In addition to NATO itself, there are currently 34 countries that qualify for the equipment standardization waiver justification, as shown in figure 1. To avoid a potential loss of sale that could likely result from imposing nonrecurring costs. To obtain cost savings through economies of scale on major defense equipment also procured for the U.S. military that substantially offsets the revenue that will be lost if the nonrecurring costs are waived. The Code of Federal Regulations states that all waiver requests should originate with the foreign government and must specify the reasons or justifications for the requests. A foreign government generally initiates the process by submitting a written request to waive the nonrecurring costs for the major defense equipment it plans to purchase. For example, a NATO member country planning to purchase P-8A patrol aircraft would submit a request to waive nonrecurring costs for that equipment to the Navy, stating that the purchase would promote equipment standardization. The letter of offer and acceptance the military department sends to the foreign government states the estimated costs and the quantity of major defense equipment for which nonrecurring costs will be waived. Once the letter of offer and acceptance has been signed by the foreign government, any increase in the quantity of items requires that the foreign government submit a request to waive nonrecurring costs for the additional equipment. If equipment quantities are reduced after the waiver is approved, the total amount of nonrecurring costs waived will be less than the value at the time the waiver was approved. For example, in 2013, DSCA approved a waiver for up to $799 million in nonrecurring costs for 768 Patriot missiles. However, the foreign government reduced its planned procurement to 248 missiles. As of December 2017, DSCA estimated that the amount of nonrecurring costs that will be waived decreased to $258 million—about two-thirds less than was originally approved. The laws, regulations, and policies regarding nonrecurring costs have been revised several times over the past 50 years. DOD has had a process in place to recover nonrecurring research and development and production costs on sales of major defense equipment to foreign governments and international organizations since 1967. The requirement to recover a proportionate amount of these costs was codified in the Arms Export Control Act of 1976, which authorizes arms sales in furtherance of U.S. security objectives. Significant legal, regulatory, and policy changes regarding the justifications that can be used to waive nonrecurring costs are summarized in figure 2. The Arms Export Control Act requires recovery of a proportionate amount of nonrecurring research, development, and production costs for foreign sales of major defense equipment. For example, in the F-35 Joint Strike Fighter program, costs for production testing and tooling equipment are considered nonrecurring costs. The military departments, as delegated under the Code of Federal Regulations, are responsible for determining the per-unit nonrecurring cost for each type of major defense equipment. In practice, DOD components submit requests to establish nonrecurring costs to DSCA, which—if approved by DSCA—are made publicly available on the agency’s website. In practice, determining what nonrecurring costs will be charged entails the following steps: 1. Charges are calculated by dividing total program nonrecurring costs by the total number of planned production units. For example, the Air Force determined that the nonrecurring costs for a sensor program were $660 million and estimated that a total of 250,000 units would be procured by DOD and from sales under the FMS program. Based on these estimates, the Air Force calculated a nonrecurring cost charge of $2,640 per unit. 2. For each individual FMS case that includes major defense equipment, the military department calculates the amount of nonrecurring costs for the sale by multiplying the quantity of items by the per-unit nonrecurring cost charge. For instance, in the example described above, if a foreign government wants to purchase 10 sensors, a nonrecurring cost charge of $26,400 would be added as part of the sale. DOD policy requires that waivers also be reviewed on a case-by-case basis and tied to a specific sale that defines the quantities of each item to be procured. This policy prohibits blanket waivers, those that would waive nonrecurring costs on all sales to a particular country or all sales pertaining to specific equipment. For example, DSCA cannot grant a blanket waiver for the Patriot missile that would automatically waive nonrecurring costs on all subsequent sales of that missile. Within DOD, the Director of DSCA has been delegated authority to waive nonrecurring costs for sales of major defense equipment to foreign governments and international organizations. While DSCA has primary responsibility for determining whether waiver requests meet all legal and regulatory criteria, we observed that multiple DOD offices are involved in the waiver review process, as illustrated in figure 3. In practice, the military departments receive waiver requests from a foreign government or international organization and ensure that all required information is submitted, including the equipment type and quantity, as well as the justification for the waiver. Based on this information, the military department determines whether or not to endorse the waiver request. The military department then compiles a package of relevant documentation, including calculation of the estimated total amount of nonrecurring costs to be waived, the original waiver request, and a memo documenting its decision regarding the waiver request. In the course of our work, we found that, within each military department, the offices involved in the waiver review process include: The U.S. Army Security Assistance Command, which initially reviews the waiver request, and the Office of the Deputy Assistant Secretary of the Army for Defense Exports and Cooperation, which provides the Army’s decision whether to endorse the waiver request; The Navy International Program Office, which reviews the waiver request and provides the Navy’s decision whether to endorse the waiver request; and The Air Force Security Assistance and Cooperation Directorate, which initially reviews the waiver request, and the Office of the Secretary of the Air Force, International Affairs, which provides the Air Force’s decision whether to endorse the waiver request. Apart from DSCA, all waiver requests are reviewed by the OUSD (AT&L) and OUSD (Comptroller), while the OUSD for Policy only reviews waivers that cite the loss of sale justification. From fiscal years 2012 through 2017, DOD approved nonrecurring cost waivers valued at nearly $16 billion that it might otherwise have collected from foreign governments as part of its major defense equipment sales. Over this period, DSCA approved 810 of the 813 waiver requests it received, resulting in an approval rate of more than 99 percent. However, the dollar value of the approved waivers does not, in all instances, reflect the total amount that will ultimately be waived once sales are finalized. Rather, it reflects a ceiling for the nonrecurring costs that DOD could waive. During this time frame, DSCA collected $106 million in nonrecurring costs; however, this amount may be associated with FMS cases prior to fiscal year 2012. We were not able to determine the exact amount actually waived once sales agreements were finalized due to data limitations. From fiscal years 2012 through 2017, DOD approved 99 percent of the 813 nonrecurring cost waiver requests for major defense equipment sold through the FMS program. In our analysis of DSCA’s data on waivers requested for the 6-year period, we found that: DOD approved all 471 waiver requests that cited equipment standardization submitted by 25 countries and NATO, totaling approximately $6.7 billion. DOD approved all but 2 of the 340 waiver requests that cited loss of sale submitted by 34 countries, totaling almost $9.2 billion. DOD also approved a waiver of $460,000 for one of the two cost savings waiver requests it received. In total, these approved nonrecurring cost waivers amounted to nearly $16 billion over the past 6 years. The value of approved waivers increased more in fiscal year 2017 than in prior years, as shown in figure 4. The increase is primarily due to 2 approved waivers totaling nearly $3.5 billion for sales of missiles and related support systems. From fiscal years 2012 through 2017, approximately 93 percent of nonrecurring cost waivers were approved for countries in Europe, the Middle East, and the Pacific region. Based on our review of data obtained from DSCA, we found that countries eligible for equipment standardization waivers always cited this justification in their waiver requests, with one exception. We found that only eligible countries received a waiver for equipment standardization. All other countries that did not qualify for equipment standardization submitted waiver requests for loss of sale, except for 2 waiver requests that cited cost savings to the U.S. government. As shown in figure 5, all countries that utilized the equipment standardization justification are located in Europe and the Pacific region, and nearly all the $9.2 billion approved loss of sale waivers were for countries in the Middle East. Currently, DSCA uses the Defense Security Assistance Management System (DSAMS) to maintain records on FMS case initiation and execution, but an official stated the system was not designed to track nonrecurring cost data, such as data on waivers requested or actual costs waived, for each individual FMS case. DSCA uses separate methods for tracking data on approved waivers and the equipment that was purchased as part of an individual FMS case. DSCA officials stated that to calculate the amount of nonrecurring costs actually waived for each approved waiver, they manually review DSAMS records for individual FMS cases to identify the planned quantity of items to be purchased. While DSCA provided data on actual costs waived, we were unable to independently verify these calculations and, as a result, are unable to report on the actual costs waived for waivers that were approved for fiscal years 2012 through 2017. Other complexities make it difficult to conclusively determine how much has been waived, including: Approved waivers do not have expiration dates but are tied to a specific sale. DSCA officials stated that waivers are generally used within 5 years, which coincides with the expiration date of the sales agreement. The lag time between when a waiver is approved and when the amount of equipment is finalized can take years. According to DSCA officials, nearly all nonrecurring costs are waived rather than collected. Officials also noted that DSCA has collected approximately $106 million in nonrecurring costs for fiscal years 2012 through 2017; however; this amount may include costs collected from FMS cases that were finalized prior to our time frame. DSCA officials could not confirm whether the 813 waiver requests that they received during fiscal years 2012 through 2017 represented the universe of all sales eligible for waivers under the FMS program, as DSAMS does not consistently track whether an individual FMS case includes major defense equipment and therefore would be eligible for a waiver or subject to the collection of nonrecurring costs. According to DSCA officials, foreign governments rarely forego submitting waiver requests and, invariably, submission of these requests is considered a standard practice. As a result, with few exceptions, DSCA officials said that DOD waives nearly all nonrecurring costs associated with eligible sales in the FMS program. We have previously reported that DSCA has efforts underway to develop a new system, the Security Cooperation Enterprise Solution, which is expected to address longstanding information management challenges. The new system is being developed with the goal of aggregating data from multiple information management systems in order to provide increased insight into the acquisition process, among other things. During our current review, DSCA officials noted that the new system will include requirements to incorporate nonrecurring cost data, but it is unclear whether the system will automate reporting of nonrecurring costs actually waived. We previously reported that the deployment schedule for the new system has been delayed and is being revised. DSCA officials were uncertain of a new deployment date as system requirements are currently being re-validated and expected to continue through 2020. Our review found that DOD considers a variety of factors when reviewing nonrecurring cost waiver requests, but, ultimately, the department wants to ensure that sales are not jeopardized. Individually and collectively, these sales complement various foreign policy, national security, and economic objectives. The ability to waive nonrecurring costs assists in keeping FMS competitive and ensuring sales are not jeopardized, according to DSCA and other DOD officials. While there is a decades-old requirement to recover the U.S. government’s investment in the nonrecurring costs of major defense equipment it develops and later sells to foreign governments, DOD is authorized to waive collection of these costs, which it implements through DSCA. Under the Arms Export Control Act and its implementing regulations, DSCA has considerable latitude to approve all waivers that meet the criteria for each justification. DSCA’s approval of nearly all waivers is in accordance with statutory requirements. When reviewing nonrecurring cost waiver requests, DSCA, consistent with DOD guidance, factors the legal requirements for the justification cited for a waiver request, in addition to broader benefits to achieve foreign policy, national security, and economic objectives, which are interrelated. DOD offices that play a role in reviewing and deciding on waiver requests may also consider these factors. Foreign policy and national security benefits: DSCA and other DOD officials weigh the effect of equipment sales under the FMS program on foreign policy and national security objectives. DSCA officials stated that avoiding a potential lost sale is paramount and outweighs the benefits of collecting nonrecurring costs, which may only be a small fraction of the overall sale. DSCA officials added that if a waiver request is not approved, U.S. relations with the foreign government could become strained or otherwise be negatively affected. DSCA officials indicated that one of the goals of the FMS program is to facilitate building and maintaining international relationships. Further, officials added that nonrecurring cost waivers help achieve that goal by making the FMS program competitive. The precedent for waiving nonrecurring costs has existed for decades, and foreign governments know to request waivers and expect they will be approved, according to DOD officials. In addition, Air Force officials stated that foreign governments seek to negotiate the price when purchasing U.S. defense equipment. DSCA officials stated that foreign governments view the nonrecurring cost waivers as a way to realize some form of cost savings when purchasing defense equipment under the FMS program. DSCA officials stated that, regardless of the amount, waiving nonrecurring costs can be viewed as significant because it gives the appearance of the foreign government achieving some cost savings. The U.S. National Military Strategy prioritizes increasing U.S. interoperability with coalition partners. Sales of defense equipment to U.S. allies are a means to achieve these interoperability goals. Equipment standardization with NATO member countries and other select allies is one of the available justifications for which a waiver can be requested and approved. Interoperability helps strengthen relationships with allies and advances U.S. and allied security interests in these regions. Navy officials stated that increasing the capabilities available to U.S. allies through FMS reduces the need to locate U.S. military forces and equipment in proximity to these allies. Economic benefits: Sales through the FMS program can result in cost savings for the U.S. government, which is also one of the permissible justifications in the Arms Export Control Act for foregoing collection of nonrecurring costs. Both the U.S. and foreign governments can benefit from economies of scale where increasing the volume of defense equipment purchased decreases the cost per unit. Navy officials also explained that they always consider the possibility of cost savings in sales through the FMS program, and added that they coordinate their own procurement plans with FMS purchases to achieve cost savings. However, DSCA officials stated that the efforts to obtain required data and conduct analysis to quantify the amount of cost savings are extensive. As a result, this analysis is generally only performed when required to justify cost savings waiver requests. In addition to the potential for lower unit prices, the FMS program helps to sustain the U.S. defense industrial base and allows it to remain globally competitive. This level of competition has increased as NATO allies also sell their military equipment. Navy officials stated there are always competing items, since foreign governments can purchase more equipment with less capability at a lower price from another country, which can expand the foreign government’s buying power relative to what it can afford when buying from the United States. In addition to competing offers, budget constraints may pose a challenge for some foreign governments seeking to purchase U.S. defense equipment and the added expense of paying nonrecurring costs could threaten a potential sale. DOD officials stated that risking a lost sale if a waiver is not approved could have potentially negative effects for the U.S. companies that manufacture defense equipment sold under the FMS program. Specifically, DOD officials indicated that if the sale is lost, U.S. jobs and economic viability could be affected, particularly because some FMS cases can be valued at billions of dollars in equipment purchases. DOD’s waiver review process is, at times, inefficient, includes repetitive steps, and does not account for the value of the waiver request. Waiver justifications are broadly defined in the Arms Export Control Act, which— as delegated—gives DSCA flexibility to determine how to review requests and grant waivers. DSCA has implemented a review process that involves up to 12 offices including the military departments, DSCA, and various OUSD offices. In some cases, these offices are reviewing waivers to verify similar information, at times leading to repetitive reviews. The same process is applied despite the amount of nonrecurring costs requested to be waived, complexity of the case, or ease (or difficulty) in assessing the validity of the justification cited in the waiver request. DOD has taken steps to reduce the time for a few offices to review waivers, but we found there are opportunities for additional efficiencies to be realized. For 23 of the 24 waiver requests we reviewed, on average, the military departments determined whether to endorse requested waivers around 270 days after they were submitted by the foreign government. DSCA then, on average, took less than 60 days to decide whether to approve the waiver, which is consistent with its policy to respond to waiver requests within 60 days of receipt. There is no policy regarding the time frame for military departments to review a waiver request, as military officials stated the review time can vary depending on whether additional information must be obtained from the foreign government. However, recognizing an opportunity to streamline the review process, DSCA has worked with the Air Force to identify one office that did not add value, reducing the Air Force review process from three offices to two. Officials stated this action decreased the amount of time required for review. DSCA officials also stated that they have improved their review times by using digital signatures when concurring on waiver decisions. Our prior work has indicated that concerns have been raised about the timeliness of the FMS program, and a DSCA official stated that these efforts were part of a DSCA initiative to increase efficiencies in the overall FMS process. Further, we found repetitive steps in the process for assessing potential U.S. foreign policy and national security benefits from a sale where equipment standardization is cited as the justification for the requested waiver. These benefits are already assessed for certain FMS cases by an in-country team that is comprised of officials from State and the relevant DOD combatant command that manages military operations in designated areas of responsibility. Once the waiver is requested by the foreign government, DSCA and OUSD (AT&L) officials review the waiver request to assess these benefits, even though military officials stated an assessment has already been conducted to determine how the proposed sale will advance U.S. national security objectives within the region. In addition, DSCA officials stated that since foreign governments are procuring equipment also used by the U.S. military, by default, purchasing the equipment would result in standardization. After a potential sale has received a favorable country team assessment, the only additional requirement is to determine whether the customer is NATO or among the 34 countries eligible for the standardization waiver. Yet while this requirement is easily confirmed, the waiver request may still be reviewed by as many as 11 offices within the military department and DSCA, as well as at the OUSD level. However, we found, for example, DSCA did not adjust its review process based on the value of the nonrecurring costs to be waived. In one case, for a cost savings waiver request with estimated nonrecurring costs just under $12,000, the Air Force took 112 days to coordinate its review and endorsement of the waiver before submitting it to DSCA. DSCA then took 47 days to coordinate input from various OUSD offices to reach a final decision on the requested waiver. Similarly, in another instance where the value of the requested loss of sale waiver was substantially higher—$337 million—it took the Army 160 days to coordinate its review before passing it on to DSCA, which took 29 days to finalize its decision. Other than OUSD Policy’s review of the loss of sale waiver, both of these waiver requests required the same review process despite the substantial difference in costs. For waiver requests that cite the loss of sale justification, DSCA and military department officials told us that it is difficult to prove or disprove a foreign government’s claim that not waiving nonrecurring costs will likely lead to a loss of sale. DOD guidance states these waiver requests should include information on competing items and their cost, if available; however, the guidance does not specify the type of information or level of detail that should be provided. DSCA officials stated that they interpret this guidance to mean this information is optional and therefore not required. According to DOD officials, a foreign government’s budget constraints could limit its ability to pay nonrecurring costs. Of the 18 loss of sale waiver requests that we reviewed, none included any additional information on competing offers or spending limits, beyond the basic loss of sale statement. Even if DOD received this type of information from the foreign government, DSCA officials told us that corroborating this information would be difficult. Therefore, DOD officials stated that they do not assess the likelihood of loss of sale beyond the minimum criteria. Although this assessment requires no additional analysis, loss of sale waiver requests are subject to the same review process, but with OUSD Policy as another required layer of review, bringing the possible total up to 12 offices. DSCA and OUSD Policy officials were unsure of the origin of the requirement for OUSD Policy to weigh in on waiver requests that cite loss of sale. Further, OUSD Policy officials stated that they review waiver requests for similar elements as other DOD entities, such as whether the sale will support security objectives in the region. DSCA officials have acknowledged that identifying further opportunities to streamline waiver reviews through a risk-based approach could enhance efficiencies in the FMS program. Federal standards for internal controls state that agencies should assign and delegate responsibilities in a manner that maximizes efficiency and effectiveness. In light of the significant growth in the FMS program in recent years, as well as the resulting workload for DSCA and other cognizant DOD components, continuing to streamline the waiver review process would better position DSCA and the military departments in maximizing efficiencies in the FMS process. The FMS program is a central component of U.S. foreign policy. Our work has shown it enhances the capabilities of our allies, fosters interoperability with foreign militaries, helps sustain our defense industrial base, and serves our national security interests. In 1976, Congress codified the requirement for DOD to recoup nonrecurring costs on sales of major defense equipment to help ensure that FMS customers pay their share of the full cost of this equipment. At the same time, Congress provided for waiving nonrecurring costs for specified reasons. Over the past 6 years, DOD has prioritized the benefits of the FMS program and has typically waived rather than collected nonrecurring costs under these specified reasons. Within DOD, there are opportunities to consider streamlining the waiver review process to eliminate efforts that are potentially repetitive or inefficient. The review process for waiver requests requires that multiple offices review all waiver requests, regardless of the amount of nonrecurring costs to be waived or the complexity of the specific circumstances. The FMS program has been criticized for being slow and burdensome. To create efficiencies in the overall FMS program, DOD could take additional steps to streamline the FMS waivers review process. We are making the following recommendation to DSCA: The DSCA Director should continue to identify opportunities to streamline the review process for nonrecurring cost waiver requests. (Recommendation 1) We provided a draft of this report to DOD for comment. In its comments, reproduced in appendix II, DOD concurred with our recommendation. DOD also provided technical comments, which we incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Defense. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or MakM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In this report, we addressed the (1) nonrecurring cost waivers approved by the Department of Defense (DOD) from fiscal years 2012 through 2017, (2) factors DOD considers when reviewing waivers, and (3) efficiency of the waiver review process. To address all objectives, we analyzed data from the Defense Security Cooperation Agency (DSCA) on requests made by foreign governments to waive nonrecurring costs on purchases of major defense equipment under the Foreign Military Sales (FMS) program. We reviewed data for fiscal years 2012 through 2017, as these years provided the most complete data available to facilitate our analysis and gain insights about the waivers requested based on the three allowable justifications within the scope of our review—equipment standardization, loss of sale avoidance, and cost savings to the U.S. government. DSCA uses the Defense Security Assistance Management System (DSAMS) to maintain records on FMS case data from the time the case is initiated; however, the system does not track nonrecurring cost data, such as data on waivers requested or costs waived, for each individual FMS case. Instead, DSCA provided a dataset on waivers requested that is maintained in a spreadsheet. To assess the reliability of DSCA’s data, we tested for missing data, inconsistent coding, and compared data on selected waiver requests to waiver documentation we obtained from DSCA. In reviewing the documentation relative to the dataset we obtained, we found a small amount of data that were incorrectly coded, but these miscodings had minimal potential to affect our analysis. DSCA corrected these miscodings when we brought the errors to their attention. Overall, we found that the documentation for the selected waiver requests generally matched the data DSCA provided. We interviewed DSCA officials responsible for the data to identify the quality controls in place to ensure the data are accurate and reliable. Based on these steps, we determined the data were sufficiently reliable to identify the extent to which DOD approved nonrecurring cost waivers and to select a sample of waiver requests to review. To identify the extent to which DOD approved nonrecurring cost waivers for fiscal years 2012 through 2017, we analyzed data on nonrecurring cost waiver requests, which included: the country requesting the waiver, the justification under which the waiver was requested, the requested amount of the waiver, whether or not the waiver was approved, the approved value of the waiver, and the military department responsible for managing the procurement of the major defense equipment associated with the requested waiver. We analyzed the data to determine the number and dollar value of waivers requested for each waiver justification in total and by fiscal year. We also analyzed the data to determine the value of nonrecurring cost waivers approved by geographic region. DSCA has various information management systems and methods to track data related to FMS cases. However, these systems are not integrated and data limitations precluded certain analysis: A DSCA official stated that DSCA does not track which FMS cases include major defense equipment, which impeded our ability to conclusively report on the total universe of all eligible FMS cases during fiscal years 2012 through 2017 for which a nonrecurring cost waiver could have been requested, and the percentage of cases represented by the 813 requested waivers. DSCA processes thousands of FMS cases each year; however, not all FMS cases meet the threshold for collecting or waiving nonrecurring costs as this requirement only applies to FMS cases where major defense equipment is being purchased. We interviewed DSCA officials to obtain information on how major defense equipment is recorded in DSAMS and the process they use to determine whether a FMS case includes major defense equipment. To identify the universe of eligible FMS cases would have required a manual review of thousands of cases to match the nonrecurring cost waiver data that DSCA maintains in a separate spreadsheet with the case data captured in DSAMS that itemizes the equipment purchased for each individual FMS case. Because a FMS case can have multiple waivers, there is an added challenge to accurately match the waiver with the corresponding case. While DSCA maintains internal records that track the extent to which waivers are used to their fullest value, we were unable to fully validate certain data elements on equipment quantities. This precluded our ability to report on the amount of total costs waived relative to the value of the approved waiver. DSCA officials stated that when DSCA grants a waiver there is a ceiling on the value of the waiver, which functions similar to a coupon in that it cannot be used to waive nonrecurring costs that exceed the value of the approved waiver. DSCA maintains information on the equipment quantities for each FMS case in DSAMS. However, in order to estimate the costs waived, DSCA officials stated that they manually review each FMS case associated with a waiver to identify the quantities purchased, which may change through amendments to the FMS case. DSCA provided a dataset that compares approved waivers to costs waived; however, we could not verify equipment quantities from DSAMS. We also interviewed DSCA officials to gain insight about their quality control process to ensure the data are reliable. Our ability to verify equipment quantities made it difficult to report on actual costs waived. To determine the factors DOD considers when reviewing waiver requests, we selected a non-generalizable sample of 24 waiver requests and the related documentation and files to identify the information the foreign government submitted as part of the request, including any information on competing items, and how these waivers are considered as part of the overall FMS program. We selected the sample from the dataset provided by DSCA on the total waiver requests from fiscal years 2012 through April 2017. The sample included waiver requests citing each of the three justifications and represented different geographical regions. To enhance our understanding of how anomaly waivers are processed, we selected 5 waiver requests to include in our sample because of their unique characteristics: The only 2 waiver requests that cited cost savings to the U.S. The only 2 loss of sale waiver requests that were denied. One waiver request from a foreign government that would have been eligible to use the equipment standardization justification but cited the loss of sale justification in its waiver request. To select the remaining 19 waivers, we set a threshold for waivers approved where the value of the nonrecurring cost was over $20 million to capture high-value waivers, as these waivers represented 80 percent of the total value of approved waivers within our time frame for our sample selection. Next, we selected at least 2 waiver requests from each fiscal year for the 6-year period included in our review and ensured a mix of waivers requested by various foreign governments, including those that had the highest value of waivers approved. We also ensured that the waivers reflected a mix of FMS cases to be managed by the Air Force, Army, and Navy, which also review and provide input to DSCA on the waiver requests. Our sample includes a higher number of loss of sale justifications to provide greater insight about how DOD considers these requests given the minimal requirements and that these requests represent the majority of costs requested to be waived. While our findings are based on a non-generalizable sample and cannot be used to make inferences about all FMS nonrecurring cost waivers requested, the sample provides insight on the specific circumstances of waiver requests and DSCA’s decision in these cases. We recorded the information obtained from our review of the waiver request files in a data collection instrument. One analyst entered information in the data collection instrument and another analyst independently reviewed the information to ensure accuracy. After reviewing the waiver requests, we interviewed officials from military departments associated with the waiver request files that we reviewed to obtain clarifying information about specific waiver requests. To determine the efficiency of the waiver review process, we reviewed documentation for the 24 selected waiver requests to identify the offices involved in the review process, and the length of time taken to review and decide on the waiver request from the time of submission. We used the same data collection instrument to record this information as part of the two analysts’ reviews. We compared these offices’ practices to review the waivers with the Standards for Internal Control in the Federal Government, which calls for agencies to assign and delegate responsibilities in a manner that maximizes efficiency and effectiveness. In addition, we reviewed relevant DOD policy and interviewed officials from the military departments, DSCA, the Office of the Undersecretary of Defense (OUSD) Comptroller, OUSD for Policy, and OUSD for Acquisition, Technology, and Logistics (AT&L) to discuss their roles in reviewing nonrecurring cost waiver requests and the steps they take during their review. We conducted this performance audit from March 2017 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Candice Wright (Assistant Director), Jessica Karnis (Analyst-in-Charge), Emily Bond, Lorraine Ettaro, Cale Jones, William Lamping, Miranda Riemer, and Roxanna Sun made key contributions to this report.", "summary": "Under the Arms Export Control Act and its implementing regulations, DOD is required to recover nonrecurring costs—unique one-time program-wide expenditures—for certain major defense equipment sold under the FMS program. These costs include research, development, and one-time production costs, such as expenses for testing equipment. The Act also permits those costs to be waived under certain circumstances, such as to standardize equipment with select allies or to avoid a loss of sale. GAO was asked to review DOD's use of nonrecurring cost waivers. This report addresses the (1) nonrecurring cost waivers approved by DOD from fiscal years 2012 through 2017, (2) factors DOD considers when reviewing waivers, and (3) efficiency of the waiver review process. To conduct this work, GAO analyzed DOD data of nonrecurring cost waivers for fiscal years 2012 through 2017, the most recent and complete data, to identify the value of waivers. GAO then reviewed a non-generalizable sample of 24 of these waivers that included a mix of justifications and geographic regions. GAO reviewed relevant DOD policy and interviewed DOD officials about the process to assess these waivers. In the past 6 years, the Department of Defense (DOD) approved waivers valued at nearly $16 billion that it might otherwise have collected from foreign governments as part of its sales of major defense equipment through the Foreign Military Sales (FMS) program. The Arms Export Control Act, as delegated, authorizes the Defense Security Cooperation Agency (DSCA) within DOD to waive nonrecurring costs under certain circumstances, such as to standardize equipment with allies. From fiscal years 2012 through 2017, DSCA reviewed 813 waivers and denied 3, resulting in an approval rate of 99 percent. As shown in the figure below, the value of approved waivers significantly increased to nearly $6 billion last year, which is due to 2 waivers totaling nearly $3.5 billion for sales of missiles and related support systems. Total Value of Approved Foreign Military Sales Nonrecurring Cost Waivers from Fiscal Years 2012 through 2017 When reviewing waivers, DSCA considers foreign policy and national security factors, such as interoperability with allies, and economic factors, such as support for the U.S. defense industrial base. Agency officials stated that approving waivers helps ensure sales go through and such broader benefits are realized. DSCA's practice to approve waivers is consistent with the authority it has been delegated under the Arms Export Control Act and is influenced by these benefits. The process DOD has established to consider waivers is, at times, inefficient and repetitive. DSCA has final approval authority; however, multiple DOD offices must review and provide input on each waiver, with some offices reviewing waivers for the same purpose. Federal standards for internal control call for agencies to allocate resources and assign responsibilities to achieve efficiency and effectiveness. DOD has already taken steps to improve the efficiency of the waiver review process; for example, by reducing the time a few offices take to review the waivers. Nonrecurring cost waivers are one part of the larger FMS process, and continuing to streamline the waiver review process would better position DSCA and the military departments to identify opportunities to maximize efficiencies. DSCA should continue to identify opportunities to streamline the waiver review process. DSCA concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "RRB administers retirement, survivor, disability, unemployment, and sickness benefits for railroad workers and their families under the provisions of the Railroad Retirement Act of 1974, as amended (RRA) and the Railroad Unemployment Insurance Act of 1938, as amended (RUIA). Individuals who work for railroads engaged in interstate commerce, for railroad associations, and for railroad labor organizations are among those covered by RRB’s benefits system instead of Social Security or the federal-state unemployment insurance system. During fiscal year 2016, RRB received approximately $12 billion in funding, about half of which came from payroll taxes levied on railroad workers and their employers. Almost all of the funding was used to pay benefits, including unemployment benefits. In addition, RRB administers Medicare coverage for railroad workers. The railroad retirement system and Social Security system are separate but linked with regard to benefit payments and taxes. Railroad workers and their employers pay the same payroll taxes as other workers covered by Social Security for comparable retirement, disability, unemployment insurance, and Medicare benefits. RRB also collects taxes to cover additional benefits. A financial interchange between the two systems allows funds to be transferred between RRB and Social Security accounts based on the amount of Social Security benefits that workers would have received if they were covered by Social Security, as well as the payroll taxes that would have been collected if the railroad workers were covered by Social Security instead of their own system. According to RRB data, the railroad retirement, survivor, and disability system is projected to remain solvent over at least the next 25 years. Under the RRA, RRB provides two distinct disability benefits for railroad workers—total and permanent (T&P) disability and occupational disability. For T&P disability, RRB makes determinations about railroad workers’ disability claims independent of but using the same general criteria that the Social Security Administration (SSA) uses to administer its Disability Insurance program. That is, a worker must have a medically determinable physical or mental impairment that (1) has lasted (or is expected to last) at least 1 year or is expected to result in death, and (2) prevents them from engaging in substantial gainful activity, defined as work activity that involves significant physical or mental activities performed for pay or profit. In other words, these workers are essentially deemed unable to engage in any regular employment. According to RRB’s 2017 Annual Report, at the end of fiscal year 2016, the agency was paying 10,300 T&P disability beneficiaries an average of $1,911 each per month for a total of about $236 million annually. In fiscal year 2016, data provided by RRB indicate that the agency approved about 78 percent of the 843 applications for T&P disability benefits it received. Occupational disability is a unique benefit for railroad workers. RRB provides these benefits to workers who have physical or mental impairments that prevent them from performing their specific railroad job, even though they may be able to perform other kinds of work. For example, a railroad engineer who cannot frequently climb, bend, or reach, as required by the job, may be found to be occupationally disabled. To be eligible for occupational disability benefits, workers must meet certain labor- and management-negotiated disability criteria as well as certain age and service requirements. Railroad workers age 60 and older with at least 10 years of service are eligible to apply, as well as workers of any age with at least 20 years of service. Workers determined to be eligible for occupational disability benefits may be able to return to the workforce, but generally not to their original occupation. According to RRB, at the end of fiscal year 2016, the agency was paying 21,000 occupational disability beneficiaries an average of $3,053 each per month for a total of about $769 million annually. In fiscal year 2016, data provided by RRB indicate that the agency approved about 98 percent of the 984 applications for occupational disability benefits it received. Federal law generally requires RRB to conduct CDRs to determine if beneficiaries continue to meet the disability requirements of the law. RRB conducts two overall types of CDRs: medical and earnings. In a medical CDR, disability examiners review a beneficiary’s medical records and may order additional examinations to determine whether the individual’s medical condition has improved to the point where it is no longer considered disabling. In an earnings CDR, disability examiners review earnings to determine whether beneficiaries are earning income that exceeds program limits, which could make them ineligible for benefits. If the agency, while conducting an earnings review, obtains information that indicates the beneficiary’s medical condition has improved, RRB can initiate a medical CDR as well. Similarly, if RRB discovers earnings above program limits while developing evidence for a medical review, the agency may initiate an earnings CDR. RRB generally conducts medical reviews with a frequency determined by the beneficiary’s likelihood of medical improvement, which may fall into one of three categories: medical improvement expected (MIE)—when a beneficiary’s impairment demonstrates medical improvement, when improvement is unpredictable, or when medical intervention may change the impairment’s severity, among other reasons; medical improvement possible (MIP)—when a beneficiary’s disability may improve, or the likelihood of medical improvement within 3 years is not probable; or medical improvement not expected (MINE)—when a beneficiary’s impairment meets certain listings such as blindness or hearing loss and generally when a beneficiary has attained 54 ½ years of age. If a beneficiary’s disability is classified as MIE, RRB generally reviews the beneficiary’s continuing eligibility for disability benefits at intervals from 6 months to 18 months. For MIP cases, RRB mails a questionnaire at least once every 3 years that asks a beneficiary to update medical and earnings information. If the self-reported information indicates medical improvement or a return to work, RRB may conduct a CDR. For MINE cases, RRB’s regulations state that it will not routinely review the beneficiary’s continuing eligibility. (See fig. 1.) According to RRB’s guidance, factors such as age and work experience may also affect how and when RRB classifies a beneficiary as MINE, or whether it should schedule (or “diary”) a CDR. RRB maintains a list of scheduled CDRs in its CDR Call-Up program. It uses this program to both identify CDRs that require completion and to schedule CDRs based on the likelihood of medical improvement. RRB also started conducting CDRs in 2015 that target cases at high risk of potential fraud and which officials said could result in the termination of benefits. In addition to medical reviews, RRB conducts earnings CDRs for beneficiaries detected with earnings that exceed disability program limits. Most earnings CDRs are triggered by unreported earnings detected through RRB’s policing operation. Policing for earnings involves an annual data match by SSA in which it uses RRB’s disability beneficiary database and Internal Revenue Service (IRS) earnings data to detect unreported earnings. (See fig. 2.) In this process, RRB provides SSA with a record of all disability beneficiaries, and SSA matches these beneficiaries against IRS earnings data. For those cases in which earnings are identified, RRB has an earnings reconciliation process to determine which beneficiaries may be excluded from an earnings CDR and which should receive one. For example, RRB considers whether a beneficiary has any disability-related work expenses, such as the cost of special transportation or medication, which are deducted from any earnings, or if the beneficiary has reached full retirement age. (See fig. 2.) In addition, a beneficiary who returns to work or has earnings from employment is required to report that information to RRB, and the agency may initiate a CDR depending on the circumstances. If a potential overpayment is identified as a result of a CDR, the Disability Benefits Division refers the case to another division within RRB to calculate the overpayment amount. Over the 3 years for which RRB was able to provide us with complete data, the agency completed 427 CDRs. This number represents CDRs for slightly more than 1 percent of the railroad workers who received disability benefits during that period, an average of about 35,000, including both occupational and T&P beneficiaries. Most of the reviews it completed from fiscal years 2014 through 2016 were medical CDRs, but earnings CDRs identified most of the ineligible beneficiaries and overpayments. Of the 427 CDRs completed, 209 were medical CDRs and 163 were earnings CDRs. In 55 cases, both a medical and an earnings CDR were completed. Forty-three of the scheduled medical CDRs completed were based on medical improvement criteria. Another 166 of the medical CDRs completed were based on “high-risk” selection criteria that were developed after fraudulent activities came to light among Long Island Rail Road (LIRR) beneficiaries in the late 1990s through 2008. RRB uses the high-risk selection criteria to target occupational disability beneficiaries who share certain characteristics that are common to the employees who participated in the LIRR fraud scheme. Overall, RRB determined that about 86 percent of beneficiaries remained eligible for benefits as a result of all of the CDRs completed in fiscal years 2014-2016. (See fig. 3.) During fiscal years 2014-2016, RRB completed a total of 43 medical CDRs for beneficiaries–about 0.1 percent of disability beneficiaries–that were scheduled based on beneficiaries’ medical improvement category. Our analysis of RRB’s data and policies suggests that RRB completes few medical CDRs relative to the total number of disability beneficiaries because it has a high percentage of older disability beneficiaries who may not be subject to a medical CDR. According to the data provided by RRB, about 90 percent of individuals who received a disability payment in fiscal year 2016 were age 55 or older (see fig. 4), and RRB’s Disability Claims Manual states that at age 54½, a combination of medical and vocational factors, such as medical condition, age, and work experience, may preclude a return to work. More specifically, the manual instructs disability examiners to classify beneficiaries over age 54½ as “medical improvement not expected” because of the remote likelihood that they will be able to engage in medium or heavy work. Scheduled medical CDRs resulted in few terminations and identified few overpayments. Data provided by RRB indicate that of the 43 medical CDRs completed during fiscal years 2014-2016, 3 ineligible beneficiaries were identified and 1 overpayment of $28,000 was identified and calculated. RRB determined that 40 of the 43 beneficiaries (93 percent) continued to meet the appropriate disability criteria for occupational or T&P disability, as applicable, and qualify for benefits (see sidebar). These results largely mirror RRB’s initial approval rates for disability benefits. In fiscal year 2016, 89 percent of all disability applicants were approved for benefits. In fiscal year 2015, RRB expanded the use of medical CDRs to include certain high-risk occupational disability cases that would previously only have been selected for a CDR if RRB received a report of medical recovery or identified earnings that could affect entitlement to benefits. As part of its Disability Program Improvement Plan, RRB developed selection criteria to target cases at high risk for potential fraud that could result in termination of benefits. According to RRB officials, the criteria for targeting these cases are based on characteristics common to the employees who participated in the LIRR fraud scheme. In order to fall within the high-risk group, a beneficiary must (1) have an occupational disability, (2) have an orthopedic or psychological impairment, (3) be under age 55, and (4) not have a disability freeze. Despite these targeted criteria, the 166 high-risk CDRs completed in fiscal years 2015 and 2016 identified no ineligible beneficiaries and no overpayments. According to a senior RRB official, the agency is not yet ready to abandon its high-risk CDR effort, and it continues to consider these reviews as potentially effective. However, high-risk CDR outcomes raise questions about the value and benefit of RRB dedicating resources to conduct these additional reviews. Earnings CDRs resulted in a higher percentage of terminations and identified more overpayments than scheduled and high-risk medical CDRs combined. During fiscal years 2014-2016, RRB completed 163 earnings CDRs. Most of these earnings CDRs (127) were initiated as a result of RRB’s annual earnings policing effort, in which RRB’s beneficiary database is matched against Internal Revenue Service earnings data. Other CDRs were initiated as a result of self-reported earnings information from beneficiaries. Over this 3-year period, earnings CDRs identified 47 ineligible beneficiaries and terminated their benefits. During this same time period, earnings CDRs identified at least $970,550 in overpayments that had been calculated for CDRs completed during fiscal years 2014-2016. However, earnings CDRs that were conducted may identify additional overpayments but RRB is slow to calculate overpayments. We determined that the overpayment data RRB provided for CDRs completed during 2014-2016 were incomplete. For example, a case file review of six randomly selected earnings CDRs completed in fiscal year 2016 found that in three of the cases, the Retirement and Survivor Benefits Division (RSBD), the office responsible for calculating overpayments, had not calculated the overpayments identified by those 2016 reviews as of July 2017. RRB officials acknowledged delays of a year or more in calculating overpayments for disability beneficiaries identified by CDRs, and that RRB lacks a standard time frame for doing so. The officials attributed the delays to competing priorities and staffing shortages within RSBD. RRB has no plans to establish a standard time frame for processing overpayments identified through CDRs. Identifying and calculating overpayments in a timely manner are important to RRB’s long-term performance goal related to payment accuracy, as outlined in its strategic plan. Further, federal internal control standards state that transactions should be recorded promptly to maintain their relevance and value to management in controlling operations. In addition, although RRB’s annual earnings policing effort has identified numerous beneficiaries with earnings over program limits as well as overpayments, the data RRB uses for its policing effort can be up to 2 years old. The data RRB uses to identify unreported earnings and determine whether it should initiate a CDR are based on outdated IRS earnings information. For example, income earned in calendar year 2014 that is filed with the IRS in 2015 would not become available for earnings policing until 2016. Further, the earnings discovered during the course of a CDR may be even older than 2 years. Our review of the six earnings CDRs completed in fiscal year 2016 found the earned income in question ranged from 2011 through 2013. RRB officials acknowledged that the data it currently uses for its policing effort cause delays in identifying earnings. When overpayments are not identified in a timely manner, RRB’s ability to detect when a beneficiary is not eligible for benefits is hindered, thereby increasing the potential for lost federal dollars. In addition, the delay may also cause larger overpayments since undetected overpayments can accrue over several years. We previously recommended that RRB explore options to obtain more timely earnings data for use in making disability benefit eligibility determinations, which includes CDRs. In response, RRB officials said one step they have recently taken is to use The Work Number, which includes payroll data from over 5,500 employers nationwide, on a case- by-case basis for CDRs to obtain more recent earnings information from employers for a specific beneficiary. In addition, RRB contacts employers directly to obtain earnings information needed for CDRs. However, according to a RRB official, IRS earnings data are currently the only source to which RRB has access for earnings policing that includes all of its disability beneficiaries. RRB has considered conducting earnings policing using the Department of Health and Human Services’ quarterly earnings data from the National Directory of New Hires, which includes the most recent eight quarters of wages reported from all states. In its budget submissions for fiscal years 2017-2019, RRB included a legislative proposal seeking access to these quarterly earnings data, since access is limited by statute. Several federal agencies, including the Departments of the Treasury, Education, Housing and Urban Development, and the Social Security Administration, are currently authorized by law to use data from the National Directory of New Hires to verify program eligibility and detect and prevent overpayments. Providing RRB with similar access to more recent earnings data would enable it to identify potential overpayments sooner than is currently possible. SSA has legal authority to access quarterly wage data from the National Directory of New Hires for the purpose of making disability benefit eligibility determinations, which includes CDRs. In March 2017, SSA implemented the Quarterly Earnings Project in which it matched certain Social Security Disability Insurance beneficiaries against these earnings data with the goal of reducing overpayments. According to SSA officials, the project identified beneficiaries with substantial earnings, on average, 1 year earlier when using quarterly wage data instead of earnings data from the IRS—the data RRB currently uses to conduct its annual earnings match. SSA officials project that the Quarterly Earnings Project will achieve an estimated $10.3 million in savings and benefit terminations in 22 percent of the roughly 10,000 cases selected for review in fiscal year 2017. RRB’s Program Evaluation and Management Services (PEMS), which is tasked with conducting reviews to ensure efficient program performance, has conducted two internal reviews of the high-risk medical CDRs since they were first implemented in 2015. PEMS concluded in its 2016 report that conducting high-risk CDRs based solely on the likelihood of medical improvement demonstrated no return on investment. PEMS officials recommended that the Disability Benefits Division focus its resources on investigating non-reported work and earnings rather than on developing medical evidence; however, RRB continues to dedicate resources to developing medical evidence for high-risk CDRs, and a senior RRB official said the agency is not ready to abandon its high-risk CDR effort. RRB officials said they plan to track certain annual measures for high-risk CDRs, such as the number of cases referred to the OIG for potential fraud, CDR outcomes (continuances, suspensions, and terminations), and any overpayments identified. Our findings and PEMS’s 2016 conclusions indicate that these high-risk medical CDRs have not been effective in identifying ineligible beneficiaries, or identifying potential fraud. High initial approval rates for occupational disability benefits—over 96 percent for fiscal years 2008- 2016—may be an indication that high-risk CDRs for occupational beneficiaries would result in most beneficiaries continuing to qualify for benefits, since the same disability criteria are used to evaluate medical condition for initial decisions and CDRs. By continuing to conduct high- risk CDRs, RRB may be expending resources that could be used for other purposes that are more effective in identifying ineligible beneficiaries. Aside from RRB’s efforts to oversee its high-risk medical reviews, it does not routinely analyze program data for its CDR operations as a whole. The lack of routine data collection and analysis limits its ability to identify potential gaps in oversight and monitor program performance. RRB officials said compiling comprehensive information for the CDR program can be challenging because CDR data are housed in multiple systems, some of which use outdated software and are not compatible with each other. For example, information related to CDR overpayments is housed in at least three separate systems. Further, according to RRB officials, some case information is only available in paper files. RRB has taken some steps to improve its ability to access information, such as converting its paper files to electronic images, but the information in the images cannot easily be analyzed. RRB was able to compile data for fiscal years 2014-2016 for our review that made it possible for us to analyze different aspects of the CDR program, such as the number of medical and earnings CDRs completed each year, the amount of overpayments identified as a result of CDRs, and CDR outcomes. However, RRB was unable to provide complete historical data for CDRs completed before fiscal year 2014. If RRB routinely compiled and analyzed these data for its own purposes, it could better monitor CDR program performance. This would be consistent with federal internal control standards, which state that management should use program data for effective program monitoring. Routinely compiling and analyzing CDR program data would also allow RRB to identify potential gaps in oversight. For example, our analysis of the data provided by RRB indicated that 10 percent of the 427 cases for which it completed a CDR during fiscal years 2014-2016 lacked a valid initial medical improvement category—medical improvement expected, possible, or not expected—which is assigned when beneficiaries are first awarded benefits. Since RRB schedules medical CDRs based on medical improvement category information, and we found that medical improvement category data are incomplete for 10 percent of the CDRs completed during fiscal years 2014-2016, this raises questions as to whether RRB is scheduling and conducting medical CDRs for everyone it should be. RRB officials said the only way to verify a beneficiary’s medical improvement category is to perform an individual query in the CDR Call-Up program or check the paper files, which could be very time- consuming and labor-intensive to do for all beneficiaries. RRB also lacks data on the total number of beneficiaries currently in each medical improvement category. Without these data, RRB cannot anticipate how many medical CDRs it should expect to conduct and when. Federal internal control standards state that management should use quality information to make informed decisions, and that quality information is current, complete, and accurate. RRB’s ability to monitor the performance of its CDR program is also limited because it does not track all costs or benefits of conducting CDRs. For example, RRB officials told us they do not analyze certain program data, such as administrative costs and recovered overpayments for CDRs. Analyzing these program data would enable RRB to compare any savings produced by CDRs against the cost of administering them. RRB’s strategic plan states that the agency measures the efficiency of its agency-wide program integrity efforts by comparing any savings they produce against the cost of administering the activities. According to the plan, program integrity efforts that can identify savings include computer matching to prevent payments to deceased beneficiaries and referring suspected fraud to the OIG. In its fiscal year 2017 Performance and Accountability Report, RRB reported a return on investment of $4.18 for each dollar spent on combined program integrity efforts in fiscal year 2016. However, we do not know how CDRs contributed to this return on investment or the savings resulting from CDRs specifically. As a steward of tax dollars, it is important that RRB take all necessary steps to operate and manage its disability program effectively and efficiently, while minimizing overpayments. RRB’s continued reliance on outdated earnings information to identify beneficiaries who, at the time a CDR is conducted, may no longer be eligible for benefits, increases the likelihood of making improper benefit payments and having to try to recover the money in the future. In addition, even for those overpayments that RRB identifies, it lacks a standard for processing them in a timely manner, which increases the potential loss of federal dollars. Furthermore, despite a RRB report that high-risk medical CDRs have not been effective, the agency expends resources on these reviews that could be used for other purposes that are more effective in identifying ineligible beneficiaries. RRB’s lack of routine data collection and analysis hampers its ability to monitor program performance and determine what changes, if any, should be made to improve the CDR program, including determining the number of beneficiaries in each medical improvement category and the costs and benefits of conducting the various types of reviews. While paper files and disparate data systems present challenges to collecting and analyzing program data and may hinder oversight efforts, RRB could be doing more with the data it has to identify potential gaps in oversight. To improve RRB’s ability to make accurate disability benefit eligibility determinations, including CDRs, and to decrease the potential for making improper payments, Congress should consider granting RRB access to the Department of Health and Human Services’ quarterly earnings information from the National Directory of New Hires database. (Matter for Consideration 1) To enhance RRB’s ability to manage and oversee its CDR program, we are making the following three recommendations to the Railroad Retirement Board: RRB should develop a standard for the timely processing of disability program overpayments identified through CDRs. (Recommendation 1) RRB should consider whether to reallocate resources used for high-risk CDRs to other CDR efforts that produce more effective outcomes. (Recommendation 2) RRB should routinely compile and analyze CDR program data, such as the number of cases selected for review, the number of beneficiaries in each medical improvement category, outcomes, and the costs and benefits of conducting CDRs, to improve program oversight. (Recommendation 3) We provided a draft of this report to RRB for review and comment. RRB provided written comments, which are reproduced in appendix II. The agency also provided additional technical comments, which have been incorporated as appropriate. RRB agreed with all three of the recommendations and noted that it has already taken initial steps to implement them. We are sending copies of this report to the appropriate congressional committees, the Railroad Retirement Board, and other interested parties. In addition, the report will be will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In fiscal years 2007 through 2016, RRB received, on average, approximately $11.6 billion annually from multiple sources to fund its programs. RRB’s budget in fiscal year 2016, the most recent year for which data are available, was $12.4 billion. (See table 1.) Railroad retirement, survivor, disability, unemployment, and sickness benefit payroll taxes are the primary funding source for RRB and totaled $5.9 billion in fiscal year 2016. In fiscal years 2007-2016, these taxes averaged $5.2 billion annually. Railroad employers and employees pay Tier I taxes, which are the same as taxes levied on Social Security- covered employers and workers. The taxes fund benefits similar to Social Security retirement and disability. Employers and employees also pay Tier II taxes to finance additional railroad retirement benefits. According to RRB data, Tier I and Tier II taxes for fiscal year 2016 amounted to $2.8 billion and $3.1 billion, respectively. Railroad employers also paid approximately $117.2 million in unemployment insurance taxes in fiscal year 2016. The second major source of RRB funding consists of transfers from the Social Security trust funds under a financial interchange between the two systems. The financial interchange is intended to place the Social Security Old-Age and Survivors Insurance Trust Fund and the federal Hospital Insurance Trust Fund in the same condition they would have been in had railroad employees been covered by the Social Security Act and Federal Insurance Contributions Act, and the Railroad Retirement Act had not been enacted. The financial interchange calculation involves computing the amount of Social Security taxes that would have been collected on railroad employment and computing the amount of benefits which Social Security would have paid to railroad retirement beneficiaries during the same fiscal year. When benefit reimbursements exceed payroll taxes, the difference, with an allowance for interest and administrative expenses, is transferred from the Social Security Trust Funds to RRB. If taxes exceed benefit reimbursements, which has not happened since 1951, a transfer would be made in favor of the Social Security Trust Funds. According to RRB data, the net financial transfer to the Social Security Equivalent Benefit Account during fiscal year 2016 amounted to about $4.1 billion; in fiscal years 2007-2016, these transfers averaged $4.0 billion annually. The third major source of RRB funding is transfers from the National Railroad Retirement Investment Trust, the trust fund that holds assets to help pay a portion of RRB benefits. The Trust was established pursuant to Section 105 of the Railroad Retirement and Survivors’ Improvement Act of 2001, and is the vehicle for investing RRB retirement benefit assets in non-government securities. Under the Trust’s investment guidelines, assets are invested in both government securities and private equities, unlike the Social Security Trust Funds, which are only invested in government securities. The Trust also provided for the transfer of excess RRB retirement, survivor, and disability benefit payroll taxes that are not needed to pay benefits to the Trust for investment, and for transfers from the Trust to the Treasury to assist the RRB in meeting its benefit obligations. The Trust has not received transfers from the RRB since the end of fiscal year 2004. During fiscal year 2016, however, the Trust transferred a total of $1.4 billion to the Treasury for payment of RRB benefit obligations; for fiscal years 2007-2016, these transfers averaged $1.6 billion annually. According to RRB data, the value of Trust-managed assets at the end of fiscal year 2016 was $25.1 billion. The fourth major source of RRB funding is appropriations. According to RRB officials, most of these appropriations are derived from the taxation of railroad retiree benefits and primarily fund benefit payments. These appropriations also fund specific efforts such as administrative costs. In fiscal year 2016, RRB received $790.6 million in federal appropriations; for fiscal years 2007-2016, RRB’s annual appropriation averaged $655.4 million. In fiscal years 2007-2016, RRB expended, on average, approximately $11.6 billion annually to fund its programs. (See table 2.) RRB’s expenditures in fiscal year 2016, the most recent year for which data are available, were $12.8 billion, which included approximately $12.5 billion for benefit payments, $156.0 million for salaries and expenses, and $98.0 million for interest expenses due to borrowing from Treasury for the financial interchange. By law, RRB is required to prepare an annual report to the President and Congress containing a 5-year projection on revenues to and payments from the Railroad Retirement Account (RRA). In its June 2017 report, RRB projected that cash flow problems would not occur during the 25- year projection period (calendar years 2017-2041). The report also recommended no change in employer and employee tax rates and no diversion of taxes from the RRA to the Railroad Unemployment Insurance Account (RUIA). In addition to the contact named above, Mark Glickman (Assistant Director), Arthur T. Merriam Jr. (Analyst-In-Charge), Meredith Moore, and Jill Yost made significant contributions to this report. Also contributing to this report were Daniel Concepcion, Erin Godtland, Joel Green, Nicole Jarvis, David Lehrer, Emei Li, Olivia Lopez, Sheila McCoy, Phillip McIntyre, Jean McSween, Mimi Nguyen, James Rebbe, Anjali Tekchandani, Frank Todisco, and Kathleen van Gelder. Social Security Disability: SSA Could Increase Savings by Refining Its Selection of Cases for Disability Review. GAO-16-250. Washington, D.C.: February 11, 2016. Railroad Retirement Board: Actions Needed to Reduce Continued Risk of Fraud and Improper Payments. GAO-15-535T. Washington, D.C.: May 1, 2015. Railroad Retirement Board: Total and Permanent Disability Program at Risk of Improper Payments. GAO-14-418. Washington, D.C.: June 26, 2014. Use of the Railroad Retirement Board Occupational Disability Program across the Rail Industry. GAO-10-351R. Washington, D.C.: February 4, 2010. Railroad Retirement Board: Review of Commuter Railroad Occupational Disability Claims Reveals Potential Program Vulnerabilities. GAO-09-821R. Washington, D.C.: September 9, 2009.", "summary": "RRB is an independent agency that administers disability benefits for railroad workers. In fiscal year 2016, about 31,000 railroad workers with disabilities received $1.1 billion in disability benefits. RRB is generally required to periodically assess beneficiaries' medical condition or earnings through continuing disability reviews (CDRs) to verify that they remain eligible for disability benefits. This report examines the extent to which RRB (1) conducts medical and earnings CDRs to ensure the continued eligibility of disability beneficiaries, and (2) oversees the CDR program. GAO analyzed data provided by RRB for CDRs completed in fiscal years 2014-2016, the only years for which complete data were available. GAO also reviewed RRB's policies and procedures, a nongeneralizable random sample of 14 CDR cases that were completed in fiscal year 2016, and relevant federal laws and regulations; and interviewed RRB officials. In fiscal years 2014-2016, the Railroad Retirement Board (RRB) completed continuing disability reviews (CDRs) of various types for 427 beneficiaries (see figure below), covering slightly more than 1 percent of the railroad workers who received disability benefits during that period. These reviews included: Scheduled Medical Reviews –These are scheduled at different intervals depending on the likelihood of medical improvement. RRB data suggest that most beneficiaries are not subject to these CDRs because they are older than 54½, which RRB defines as the age at which they are unlikely to return to work. Of 43 medical CDRs that were scheduled, RRB identified 3 ineligible beneficiaries and 1 overpayment of about $28,000. High-Risk Reviews – In fiscal year 2015, RRB began conducting medical CDRs on cases it considered to be at high risk for fraud. It completed 166 of these reviews in fiscal years 2015 and 2016, but none identified any ineligible beneficiaries or overpayments. Earnings Reviews – During fiscal years 2014-2016, 163 earnings CDRs identified 47 ineligible beneficiaries and at least $970,550 in overpayments. However, RRB uses earnings information that can be up to 2 years old, thereby delaying the detection of ineligible beneficiaries and increasing the potential for lost federal dollars. Other federal agencies have access to a national federal database with more recent earnings data. Providing RRB access to these data would enable it to identify overpayments sooner. Medical + Earnings Reviews – In some cases, RRB conducts both a medical and earnings CDR. RRB's data do not allow GAO to attribute the outcome to either type of CDR. RRB oversight has primarily been limited to conducting two internal reviews of high-risk medical CDRs, one of which concluded, consistent with the above results, that these CDRs demonstrated no return on investment. Nevertheless, RRB continues to do them. RRB does not routinely compile and analyze data for all of the CDRs it conducts, which limits its ability to identify potential gaps in oversight and to monitor program performance. For example, RRB lacks data that would help it determine how many medical CDRs it should expect to conduct. RRB officials said compiling data can be challenging because it uses multiple data systems. However, by more efficiently collecting and compiling key CDR data, RRB could enhance its capability to routinely assess program performance. Congress should consider giving RRB access to the National Directory of New Hires, a national database of wage and employment information that would enable it to identify potential overpayments sooner. GAO is also making three recommendations to RRB, including that it reconsider the purpose and value of high-risk CDRs, and routinely compile and analyze CDR data to improve oversight. RRB agreed with these recommendations.", "document_type": "gao"}
{"report": "With a staff of over 47,000 members, the Coast Guard operates a multimission fleet of 201 fixed and rotary-wing aircraft and over 1,400 boats and ships. Operational control of surface and air assets is divided into two geographic Areas (Pacific and Atlantic), within which are nine Districts consisting of 37 sectors and the stations within them. The Coast Guard’s program oversight, policy development, and personnel administration are carried out at the Coast Guard’s headquarters. As shown in table 1, the Coast Guard is responsible for 11 statutory missions identified in the Homeland Security Act of 2002, as amended. The Coast Guard manages these missions through six mission programs, also listed in table 1. As part of its marine safety mission, for example, the Coast Guard conducts, among other activities, safety inspections and vessel accident investigations, including those involving commercial fishing vessels, which are part of an industry with one of the highest death rates of any industry in the United States. For each of its 11 missions, the Coast Guard has developed goals and targets to assess and communicate agency performance. The Coast Guard’s performance assessment process also includes identifying performance gaps and implementing corrective actions to address unmet performance goals. As part of its process, the Coast Guard is to establish targets for the current and subsequent 2 fiscal years, according to Coast Guard officials. Each target is set by the Coast Guard, but according to the Coast Guard’s Annual Performance Report (APR), some are derived from external factors. For example, DHS requires that Coast Guard set a 100 percent target for the percent of people in imminent danger saved in the maritime environment. Further, several of the Coast Guard’s assets used to conduct these missions are approaching the end of their intended service lives. As part of its efforts to modernize its assets used to carry out various missions, the Coast Guard has begun acquiring new vessels, such as the National Security Cutter, the Fast Response Cutter as well as other assets. However, concerns surrounding the affordability of this effort remain as the Coast Guard continues to pursue multiple new acquisitions without long-term planning to guide the affordability of its acquisition portfolio. Figure 1 shows the Coast Guard’s Fast Response Cutter and National Security Cutter. We previously reported on actions the Coast Guard could take to ensure that, among other things, it addresses limitations posed by incomplete data, the use of unrealistic asset performance data, and limitations with its performance goal data, for more effective program management. Examples of data limitations that we have recommended that the Coast Guard take action on are below. Improve completeness of mission data. In December 2017, we found that several different federal agencies play a role in overseeing and promoting commercial fishing vessel safety, including the Coast Guard. As part of its marine safety activities, the Coast Guard conducts, among other activities, safety inspections and vessel accident investigations. Commercial fishing has one of the highest death rates of any industry in the United States and vessel disasters are the leading cause of fatalities among fishers, according to the National Institute for Occupational Safety and Health. However, our December 2017 review found that more information is needed to calculate vessel safety statistics that could enhance the Coast Guard’s knowledge about accident, injury, and fatality trends involving commercial fishing vessels. The Coast Guard collects some data on commercial fishing vessels that operate in federal waters—including a vessel’s length and construction date—but data on the population of the active U.S. commercial fishing vessel fleet are not complete. Between 2006 and 2015, the Coast Guard investigated 2,101 commercial fishing vessel accidents that were identified as occurring in federal waters. While the number of accidents generally increased over this time period, the number of injuries and fatalities declined over the same 10-year period. However, we could not assess the number of accidents, injuries, and fatalities by fishery— meaning the area in which a certain type of fish (e.g., shrimp, salmon, crab) is caught—because the Coast Guard’s data is not complete. Further, we were unable to calculate the rates of commercial fishing vessel accidents, injuries, and fatalities, because reliable data on certain information needed to do so—including the total number of vessels that are actively fishing and the fishery or region in which the vessel operates—are either not maintained or are not collected by the Coast Guard or other federal agencies. Having this information could be useful to carrying out the Coast Guard’s marine safety mission, which includes enforcing laws to prevent death, injury and property loss in the marine environment. We recommended in our December 2017 report that the Coast Guard ensure that data it collects during commercial fishing vessel incident investigations is accurately captured. We also recommended that the Coast Guard work with stakeholders to form a working group to determine an efficient means to establish a reliable estimate of the population of active commercial fishing vessels. The Coast Guard agreed with both recommendations, and in February 2018 informed us that it is in the process of developing additional data fields to capture more information, such as the fishery in which the commercial fishing is involved, and is engaging stakeholders to establish an appropriate working group. We will continue to monitor these actions. Use more realistic asset performance data. In our May 2016 report on Coast Guard strategic planning, we found that the Coast Guard did not provide field units with realistic goals for allocating assets, by mission. We reported that the Coast Guard’s strategic allocations of assets were based on unrealistic assumptions about the performance capacity of its assets and did not reflect asset condition and unscheduled maintenance. This was due, in part, to the Coast Guard not including information from its field units on the actual performance of its assets. For example, agency officials noted that one of its classes of cutters was 50 years old and these cutters were hampered by mechanical failures requiring emergency dry dock repairs, which resulted in reduced availability to carry out their missions during the year. In another example, a field unit stated that based on historical use, it planned for 575 hours per vessel for one type of cutter instead of the 825 hours performance capacity. Because actual asset use has consistently fallen below asset performance capacities, there is not a direct alignment between the Coast Guard’s strategic operational goals and its prospects for achieving those goals. As a result, the headquarters’ strategic intent, which is based on asset capacity rather than actual performance, did not provide the field with strategic, realistic goals for allocating assets by mission. Agencies should use quality information that is appropriate, current, complete, accurate, accessible, and timely to achieve objectives and address related risks. We recommended that the Coast Guard incorporate field unit input, such as information on assets’ actual performance, to inform more realistic asset allocation decisions. The Coast Guard concurred with this recommendation, and in February 2018 informed us that it plans to address this recommendation through changes to two process documents that are under revision, with an expected completion date in March 2018. Improve performance goal data. In our October 2017 review of Coast Guard performance goals, we reported that the Coast Guard and DHS identified limitations with two of the seven selected performance goals we reviewed, including the five year average number of recreational boating deaths and injuries. In particular, officials believe that many recreational boating injuries that do not require hospitalization are not reported to the Coast Guard. These officials believe that the amount of underreporting may vary over time due to changes in industry trends, making it difficult to accurately determine actual injury rates and program performance. We determined that the data for this performance goal was not sufficiently reliable for the purposes of our reporting objectives due to these likely limitations. We found that the Coast Guard did not report the possible extent of these limitations with this performance goal in its fiscal year 2016 APR. For the other performance goal, the Coast Guard and DHS identified limitations with the number of detected incursions of foreign fishing vessels violating U.S. waters, which is publicly reported in DHS’s APR. DHS’s review of this performance goal, reported in August 2015, raised questions about the validity of this goal—that is, whether it provides a useful measure of the Coast Guard’s performance. Specifically, the review noted that this performance goal is intended to measure a deterrence effect, but doing so is inherently difficult and may lead to contradictory interpretations of performance. In October 2017, we found that the data for this performance goal was sufficiently reliable for our reporting objective purposes, but questions remain about its validity. Reliable data is not a useful indication of performance unless it is also a valid representation of the goal being addressed. DHS officials reported that they did not include a discussion of the limitations for this performance goal in DHS’s fiscal year 2015 APR because the performance goal met the minimum threshold for data reliability despite the goal’s limitations. Coast Guard officials reported they were aware of these limitations and were working with DHS and OMB to improve the performance goal and implement corrective actions within 1 to 2 years. We recommended that the Coast Guard assess the extent to which documentation on performance data reliability contains appropriate information on known data reliability limitations and update these documents, as needed, based on the results of the assessment. The Coast Guard concurred and in February 2018, informed us that it had taken initial actions to address our recommendation. However, our preliminary review of these actions indicates that further action will be needed to fully address our recommendation, such as documenting and reporting the limitations of performance data. Our previous reports have identified areas in which the Coast Guard could improve the transparency of its data used for reporting on its mission performance and planning. Improve transparency of data on mission performance. In our October 2017 report on performance goals, we found that the Coast Guard’s APR has not been released publicly since 2011 due to a previous DHS leadership decision. Consequently, there has not been full visibility over performance across all of the Coast Guard’s missions. For example, one of the Coast Guard’s missions—defense readiness—has no goals that are publicly reported or shared with Congress, even though measures related to defense readiness are included in the Coast Guard’s APR. Coast Guard officials stated that they could see the benefit of publicly releasing their APR; however, DHS’s decision to limit the number of performance goals shared publicly has so far deterred the Coast Guard from pursuing the public release of its APR. DHS officials told us that the department is concerned about conflicting information that a component’s APR might present because it is vetted and produced separately from the DHS APR. However, the lack of transparency regarding performance data shared publicly and with Congress can result in an incomplete picture of mission performance and can limit effective oversight of Coast Guard operations. As a result, the public and Congress may be unable to determine the extent to which the Coast Guard is meeting its missions. We recommended that future Coast Guard APRs be available on the Coast Guard’s public website. The Coast Guard concurred with this recommendation and in February 2018, the Coast Guard informed us that it had completed its 2017 APR and are determining an appropriate approach for making it publicly available. Improve capital planning transparency. In our previously issued work on the Coast Guard’s annual 5-year capital investment plan (CIP), we found that the CIP does not consistently reflect current total cost estimates or the effects of tradeoffs that are made as part of the annual budget cycle. We made several recommendations in recent years intended to help the Coast Guard plan for future acquisitions and the difficult tradeoff decisions it will likely face. The Coast Guard generally concurred with these recommendations and is in various stages of implementation. For example, in 2017 we reported that we have made recommendations that DHS and the Coast Guard take several actions to gain an understanding of what the Coast Guard needs to meet its mission within its likely acquisition funding levels. These recommended actions included the Coast Guard: (1) conducting a comprehensive portfolio review across all its acquisitions to develop revised baselines that meet mission needs and reflect realistic funding scenarios and (2) developing a 20-year plan that identifies all necessary recapitalization efforts and any fiscal resources likely necessary to complete these efforts. For example, in 2014 we recommended the Coast Guard develop a 20-year fleet modernization plan that identifies all acquisitions needed to maintain the current level of service and the fiscal resources needed to acquire them. Without these efforts, the Coast Guard will continue, as it has in recent years, to plan its future acquisitions through the annual budgeting process, an approach that has led to delayed and reduced capabilities. In 2016, the Coast Guard revised its 2005 Mission Needs Statement, which provides a basic foundation for long-term investment planning that is to serve as the basis for evaluating the effectiveness of various fleet mixes, and inform the Coast Guard’s CIP. However, the 2016 Mission Needs Statement did not identify specific assets the Coast Guard needs to achieve its missions, nor did it update the annual hours it needs from each asset class to satisfactorily complete its missions. The Coast Guard has stated it is developing a 20-year Long-term Major Acquisition Plan, but it has not stated when the plan will be completed or what will be included in this plan, such as potential trade-offs that could be made across the Coast Guard’s portfolio of acquisitions to better meet mission needs within realistic funding levels. A long-term plan with a tradeoff analysis would facilitate a full understanding of the affordability challenges facing the Coast Guard while it builds the Offshore Patrol Cutter. DHS concurred with our 2014 recommendation, but it is unclear when the Coast Guard plans to complete the 20-year plan. Chairman Hunter, Ranking Member Garamendi, and members of the sub- committee, this completes my prepared statement. I would be happy to respond to any questions you may have at this time. If you or your staff members have any questions about this testimony, please contact Nathan Anderson at (202) 512-3841 or andersonn@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals making key contributions to this work, and the underlying reports on which it is based, include Dawn Hoff (Assistant Director); Andrew Curry (Analyst-in-Charge); Chuck Bausell; David Bieler; Richard Cederholm; John Crawford; Timothy J. DiNapoli; Michele Fejfar; Laurier R. Fish; Peter Haderlein; Eric Hauswirth; Laura Jezewski; Tracey King; Benjamin Licht; Marie A. Mak; Gary Malavenda; Diana Moldafsky; Heidi Nielson; Meg Ullengren; and Kayli Westling. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The Coast Guard, a component of DHS, serves as the principal federal agency responsible for maritime safety, security, and environmental stewardship in U.S. ports and waterways. To ensure that the Coast Guard is effectively fulfilling its missions, agency managers must have accurate information and base decisions on sound analyses for effective program management. This statement discusses Coast Guard actions needed to (1) improve the quality of data used for program management and (2) improve the transparency of its data for reporting on mission performance and planning. This statement is based on relevant products GAO issued from June 2014 through December 2017 on Coast Guard strategic planning and management issues, as well as related recommendation follow-up conducted through February 2018. GAO reviewed applicable laws, regulations, policies and guidance. GAO also interviewed Coast Guard officials responsible for administering these programs and obtained information on how they used data to inform decisionmaking. GAO interviewed a range of stakeholders, including federal and industry officials. GAO's prior work recommended multiple actions to improve the Coast Guard's program management by improving the quality of data it uses to manage and report on its mission performance. Specifically, GAO recommended actions such as collecting more complete data and clarifying the data limitations to facilitate more effective program management. For example, in December 2017, GAO found that more information is needed to calculate vessel safety statistics that could enhance the Coast Guard's knowledge about accident, injury, and fatality trends involving commercial fishing vessels. Having more complete information could be useful to carrying out its marine safety mission, and GAO recommended, among other things, that the Coast Guard ensure that data collected during commercial fishing vessel incident investigations is accurately captured. In 2018, the Coast Guard reported taking initial steps to capture more accurate data. GAO's prior work also identified areas where the Coast Guard could improve the transparency of the data it uses for reporting on its mission performance as well its capital planning purposes. For example, in an October 2017 report on performance goals, GAO found the Coast Guard's Annual Performance Report (APR) has not been released publicly since 2011. Consequently, there has not been full visibility over performance across all of the Coast Guard's missions. Coast Guard officials stated that a decision by Department of Homeland Security (DHS) leadership to limit the number of performance goals shared publicly had deterred the Coast Guard from public release of its APR. GAO recommended that APRs be available on the Coast Guard's website; the Coast Guard plans to publicly release future APRs. In addition, previous GAO reports found that the Coast Guard's annual 5-year capital investment plan, which projects acquisition funding needs for the upcoming 5 years, did not consistently reflect current total cost estimates or the effects of tradeoffs made as part of the annual budget cycle. GAO made recommendations to help the Coast Guard plan for future acquisitions and the difficult trade off decisions it will face given funding constraints. The Coast Guard agreed, but it is unclear when it will complete the 20-year plan. GAO is not making new recommendations in this statement but has made them to the Coast Guard and DHS in the past on improving its program management through, among other things, better quality and more transparent data. DHS and the Coast Guard agreed with these recommendations and reported actions or plans to address them.", "document_type": "gao"}
{"report": "NRC is an independent agency established by the Energy Reorganization Act of 1974 to license and regulate civilian uses of nuclear materials in the United States for commercial, industrial, medical, and academic purposes. Under the Atomic Energy Act of 1954, as amended, NRC is responsible for issuing licenses for civilian uses of radioactive material and conducting oversight activities under such licenses to protect the health and safety of the public, among other things. NRC regulates commercial nuclear power plants; research, test, and training reactors; nuclear fuel cycle facilities; the transport, storage, and disposal of radioactive materials and waste; and the use of radioactive materials in medical, academic, and industrial settings. NRC is authorized to conduct inspections and investigations; enforce regulatory requirements by, among other things, issuing orders and imposing civil (monetary) penalties; and revoke licenses. NRC is headed by a five-member Commission, with members appointed by the President and confirmed by the Senate; one commissioner is designated by the President to serve as the Chair and official spokesperson of the Commission. NRC staff from headquarters and the four regional offices implement the agency’s programs for developing regulations, licensing, inspection, enforcement, and emergency response, among other responsibilities. NRC’s Office of the Chief Financial Officer establishes, maintains, and oversees the implementation and interpretation of the agency’s regulatory user fee policies and regulations, among other responsibilities. The Office of the Chief Financial Officer is responsible for assessing service fees to licensees for each license they hold and sending licensees invoices quarterly. The quarterly invoices for service fees may include costs in the following three categories: NRC staff work. NRC staff record their time related to services, such as licensing, inspections, special projects, and license reviews, which is then billed to licensees to recover the full cost of these services. To calculate the cost of work performed by NRC staff, NRC applies an hourly rate—as established during the agency’s annual rulemaking process—to the number of staff hours spent on work that is directly attributable to a specific licensee. Overhead costs for project managers and resident inspectors. Some licensees work with an NRC project manager or resident inspector, and NRC allocates the overhead costs for these NRC staff to the licensees. Overhead costs cover the costs of these staff doing tasks that are not assigned to a specific licensee, but that benefit licensees, such as training, according to NRC staff. Project manager and resident inspector overhead costs are calculated for each relevant licensee as 6 percent of the licensee’s total NRC staff time charges for the quarter. Contractor charges. NRC sometimes hires a commercial contractor or other federal agency, such as the Department of Energy (referred to collectively as contractors), to perform services that are directly attributable to a licensee, such as reviewing license applications. In these cases, NRC pays the contractor for the work and then bills the licensee for reimbursement of the contractor’s charges. NRC’s billing process for service fees begins by identifying work that can be billed to a specific licensee and ends when the licensee pays the quarterly invoice. Once NRC determines that billable work needs to be done, the agency follows the steps in the billing process shown in figure 1. The steps in NRC’s billing process are described in more detail below. NRC assigns activity code: After billable work is identified, NRC assigns an activity code, which is a project code to which NRC employees charge time for billable work performed. NRC performs work: NRC staff perform work that is billable to a licensee and record their time biweekly in electronic time cards in NRC’s time and labor management system. If NRC staff discover that they have recorded time incorrectly in a previous pay period, such as by charging time to an incorrect activity code, they can correct the error by making a prior-period adjustment. Adjustments that are made within 6 weeks of the date of the error can be made directly in the time and labor management system; adjustments made 6 weeks or more after the date of the error require a memo with justification from the employee’s office director to NRC’s Controller. Supervisors review hours: At the end of each 2-week pay period, NRC supervisors review and approve the time cards for the staff they supervise, including the hours charged to activity codes. Contractor performs work: If work is done by a contractor, the contractor submits a status report and invoice to NRC each month. Each monthly status report includes a description of the work done, the planned completion date, the total charges for the current invoice, the cumulative charges to date, and an estimate of future charges. NRC reviews charges: NRC staff responsible for managing the agency’s contracts review the monthly status reports and invoices and must approve invoices before paying the contractor. After paying a contractor’s invoice, NRC bills the licensee for reimbursement of the amount NRC paid to the contractor. Contractor charges are included on a licensee’s quarterly invoice, and NRC may bill a licensee for contractor charges after the quarter in which the work was performed. NRC aggregates charges: NRC’s financial management system aggregates all NRC staff hours and charges from contractors biweekly for each licensee. The financial management system obtains data on staff hours from NRC’s time and labor management system. Contractor charges are entered manually into the financial management system. NRC validates charges: NRC regional and program offices review and certify all charges to licensees after the end of each quarter. To accomplish this, the Office of the Chief Financial Officer produces quarterly validation reports—one for staff charges and one for contractor charges—from NRC’s financial management system. NRC invoices licensees: NRC creates invoices each quarter and sends them to licensees via the U.S. Postal Service. Licensees’ payments are due to NRC within 30 days of the invoice date to avoid paying interest on the charges. Licensee reviews and pays invoice: Licensees review the invoice and may pay the invoice, request that NRC review the fees assessed, or dispute the fees. These billing disputes generally start informally with the licensee contacting NRC. According to NRC staff, most disputes are handled informally and generally entail explanations of the agency’s billing or licensing policies. If NRC staff are unable to resolve a licensee’s concern informally, the licensee can write a letter to the Chief Financial Officer, which begins a formal dispute process. According to NRC staff, to address a licensee’s concerns with the charges, the Office of the Chief Financial Officer reviews the charges on the invoice and may involve the relevant regional or program offices to determine whether the charges are valid for the work performed. Additionally, NRC’s Office of the General Counsel may be included in disputes regarding NRC’s fee policy. After the dispute is resolved, the licensee pays the invoice. NRC’s OIG and internal reviews conducted by NRC in the last 5 years identified problems with the agency’s billing process. In 2012 and 2015, for example, OIG audits identified problems with NRC’s management and review of billable charges and recommended changes to the agency’s internal processes and procedures—called internal controls—to improve the accuracy of invoices. In 2013, NRC launched the Business Process Improvement Project to determine the root causes of billing errors, many of which were discovered during the quarterly validation step of the billing process. The project was completed in 2014 and made recommendations focused on strengthening internal controls and improving efficiency and effectiveness of the billing process. Additionally, in 2016 NRC requested feedback from the public, including licensees and other stakeholders, on the general communications the agency provides about its fees, intending to use the feedback to improve the transparency of its fees development and invoicing practices. Following this effort, NRC launched its Fees Transformation initiative to improve transparency of its fee-setting and billing processes. NRC has recently implemented or plans to implement changes in four main areas of its billing process to address problems identified by NRC’s OIG and NRC internal reviews: controls over activity codes, guidance and training for NRC staff, quarterly validation of charges, and charging licensees for billable overhead costs. NRC’s OIG and internal reviews found problems with NRC’s internal controls over activity codes, which affected the quality of data used for billing and other agency processes. The management of activity codes was decentralized, meaning that staff in NRC’s offices generated the codes and each office followed its own policies and procedures regarding the setup and use of these codes. NRC also did not have a standardized set of activity codes to be used across the agency. Activity codes were instead linked to specific licensees, meaning that identical work activities for two licensees would require two different activity codes. These conditions resulted in an excessive number of activity codes in the agency’s time and labor management system. According to an internal NRC review, the decentralized management and absence of standardized activity codes weakened internal controls and put NRC at risk for incomplete or inaccurate billing. Further, there was no consistent naming convention, and activity code titles often lacked the specificity necessary for NRC staff to readily identify the correct code for the work activity performed, according to the OIG. NRC staff could also search and access the entire inventory of activity codes, including those unrelated to their work. According to the OIG, these conditions increased risk for staff to inadvertently select the wrong activity codes when recording their time; in such cases, the wrong licensee could be billed for the work. Starting in fiscal year 2016, the Office of the Chief Financial Officer began taking responsibility for overseeing and managing activity codes, including establishing, maintaining, and closing activity codes available in the agency’s time and labor management system. Further, NRC developed a set of standardized activity codes with titles related to the specific work activities completed. The transition to centralized activity code management and standardized activity codes was completed in October 2017, according to NRC staff. Also in October 2017, the agency implemented controls that prevent a staff member from charging time to an activity code unless a project manager has granted that staff member access to the code. NRC’s OIG and internal reviews found problems with staff’s understanding of their roles and responsibilities for accurate time and labor reporting and management of billable contracts, which, according to NRC documents, contributed to avoidable time card errors and billing errors. To address these problems, NRC provided training and updated guidance for staff covering the following two areas: Time and labor reporting. According to an internal NRC review, staff were making avoidable data entry errors in time cards that supervisors who approved the timecards were not identifying, meaning incorrect time cards were sent to the Office of the Chief Financial Officer for billing. In late fiscal year 2015, NRC provided training to all agency staff to emphasize the importance of accurate time reporting, the process for selecting correct activity codes, and the relationship of time card entry to billing. According to NRC officials, the agency also provided specialized training to staff in offices where errors were common. Additionally, the agency updated its time and labor reporting guidance and provided supplemental guidance to staff related to time and labor reporting. Furthermore, in preparation for changes to activity codes that were implemented in October 2017, NRC provided additional training to staff on the new activity code structure and making corrections to their time cards. Management of contracts. According to an internal NRC review, approximately one-third of the billing errors identified during the quarterly validation step of the billing process resulted from administrative errors in managing contracts. NRC’s OIG also found that agency guidance related to the invoice review process was outdated and did not provide staff with sufficient criteria for verifying information contained in contractor invoices. Without such criteria, NRC could not ensure that it was evaluating contractor charges consistently and appropriately before billing those charges to licensees. In 2015, NRC provided training to staff who manage contracts, which, according to NRC officials, resulted in an immediate decrease in associated billing errors. NRC also revised its guidance to clarify responsibilities, procedures, and instructions for reviewing and approving contractor invoices. NRC’s OIG and internal reviews identified conditions that made the quarterly validation step in the billing process challenging for staff to perform and that led to inconsistent validation procedures among program and regional offices. NRC has taken or plans to take the following two actions to address these problems: Improving validation reports. According to NRC documents, the quarterly validation reports contained billing data for all program and regional offices—sometimes amounting to more than 4,000 pages of data—and the reports did not have the sorting functionality or querying capability that would allow NRC staff to extract relevant information. Staff in program and regional offices instead relied on manually generated reports to compile information they needed. Additionally, according to the OIG, the quarterly validation reports did not include sufficient detail on contractor charges for NRC’s staff to properly review them. To address these problems, in 2014 NRC started providing the quarterly validation report in electronic spreadsheet format, which gave staff the sorting and filtering capabilities needed to extract data relevant to their respective reviews and eliminated the need for manually generated reports, according to NRC staff. Further, NRC began providing validation information for contractor charges in a separate report. The new validation report for contractor charges has more detailed information and specific instructions for NRC staff for verifying the accuracy of the charges. Standardizing the quarterly validation process. According to NRC, the current quarterly validation process is not standardized across the regional and program offices and there is no agency guidance to ensure that staff in different offices conduct the process consistently. Further, there is currently no way to ensure that an adequately trained person in each program or regional office is conducting the validation, according to NRC staff. To address these problems, NRC is planning to standardize the quarterly validation process and to establish clear roles and responsibilities for staff participating in the process. One key change NRC is planning is to have the individual leading the work validate the accuracy of the charges. According to NRC’s planning documents—dated August 2017—NRC expects to pilot the new validation process in June 2018 and to implement it agency-wide by October 2018. At the end of fiscal year 2012, an internal NRC audit identified approximately $24 million in unbilled overhead hours. NRC staff explained that the hours went unbilled because project managers and resident inspectors charged billable overhead time to nonbillable activity codes, rather than to the billable activity codes associated with licensees. According to an internal NRC review, these errors accounted for approximately two-thirds of the billing errors identified during the quarterly validation process. At the beginning of fiscal year 2016, NRC started billing this overhead time as a separate fee on invoices that is calculated as 6 percent of all NRC billable hours on an invoice, which eliminated the billing errors related to overhead. However, NRC analyzed this billing method again in fiscal year 2017 and determined that eliminating the percentage charge and having staff charge their billable overhead time to billable activity codes would be more equitable. NRC intends to implement a new process for charging billable overhead time at the start of fiscal year 2019. According to NRC staff, the agency has made administrative changes to address the factors that contributed to project managers and resident inspectors incorrectly charging overhead time in the past. Licensees we interviewed identified challenges with the amount of information available about NRC’s billable work, and NRC’s recent changes have made more information available, but some licensees are not aware of the information. Licensees also identified challenges with NRC’s method of delivering paper invoices by mail, and although NRC’s recent and planned changes may help address these challenges, NRC’s plans are incomplete. Licensees we interviewed identified challenges with the amount of information available about NRC’s billable work, including challenges related to planning and budgeting for NRC work and verifying charges on invoices. NRC has recently implemented changes that may address some of the challenges. Licensees we interviewed identified challenges with planning for future work and budgeting to pay future costs because NRC does not provide certain information about the agency’s billable work. Specifically, NRC does not formally provide information on timeframes for completing billable work, customized cost estimates for projects, or the status of ongoing work. Eleven of the 13 licensees we interviewed indicated that having timeframes, cost estimates, status reports, or a combination of these would be useful. One licensee explained that when it receives an invoice for work that NRC staff have performed, the licensee does not know how much work remains and cannot budget for future expenses. This challenge may be addressed, in part, by NRC’s Fees Transformation initiative. Under this initiative, NRC began reporting on its public website in September 2017 resource estimates for various licensing actions, such as site permitting, design certifications, inspections, license amendments, and license renewals, among others. These resource estimates include the low, high, and average number of NRC staff hours billed for each action, as well as some estimates for contractor charges for certain tasks. These resource estimates are based on historical expenses and were calculated using a sample of licensing and oversight actions, though they may still be useful to licensees to help plan and budget for future NRC costs. According to NRC’s website, the agency will update most of the resource estimates every 2 years. Licensees we interviewed said that they have challenges verifying charges on their invoices because NRC’s invoices do not provide enough information on work that NRC staff or contractors perform. For NRC staff work, invoices include the total hours charged by NRC staff for each activity code. However, activity codes often cover broad topics rather than specific work activities. Also, activity codes have a 120-character limit, according to NRC staff, and NRC uses some of those characters to list each licensee’s name and other identifying information, which means that there is limited remaining space to identify the specific work activity. Nine of the 13 licensees we interviewed explained that more descriptive activity codes on invoices would be helpful. One licensee said that it is difficult to know what project it is being billed for because the activity code descriptions are cryptic and sometimes nondescript. In addition, all 13 licensees we interviewed indicated that having NRC staff names or their positions would be helpful in verifying the accuracy of charges. For example, 2 of these licensees explained that they are familiar with the NRC staff who consistently work on their projects, so they could consider questioning charges if the invoice showed a new person working on a project. Additionally, licensees said that it is difficult to verify charges on their invoices because NRC’s invoices also do not contain detailed information on contractor charges. Invoices indicate that work was done by a contractor and provide the total cost of the work, but they do not include the contractor’s name or describe the work performed. Five of the licensees we interviewed said that invoices do not have enough information about the contractor and the work performed. Additionally, 4 of these licensees stated that they cannot determine whether the amounts charged were accurate or reasonable without more information. Challenges related to verifying charges may be addressed by some of NRC’s recent changes to its billing process, which include updating invoices. NRC is updating its invoices to include (1) standardized activity codes that have titles describing the specific work activity completed, (2) the names of the NRC staff charging time to the licensee, and (3) the name of the contractor that performed the work for which the licensee is being billed. NRC staff expected to issue the updated invoices to licensees in January 2018, after we completed our audit work. Therefore, we could not assess licensees’ satisfaction with the updated invoices. According to a planning document for some of NRC’s recent changes, the agency intends to solicit feedback from licensees in fiscal year 2018 on whether the updated invoices have addressed licensees’ challenges. However, NRC staff told us that they are not certain when the agency will solicit feedback. In addition to updating invoices, NRC can provide supplemental information to licensees to help them verify the accuracy of the following charges: NRC staff charges: NRC created biweekly reports on staff charges that it sends to licensees, when requested. These biweekly reports provide more frequent cost data and include a level of detail that is not provided on the quarterly invoices. For example, the biweekly reports include NRC staff names and the charges, by employee, for that 2- week period. Three of the 13 licensees we interviewed that receive the biweekly reports said that they use the reports to check the quarterly invoice for accuracy by adding up the costs from the biweekly reports and comparing them to the quarterly invoice. For example, a licensee told us that if the biweekly reports and quarterly invoice have similar totals, it does not raise any questions about the charges. Contractor charges: NRC has supplemental contractor information that it can provide to licensees. NRC receives monthly status reports from contractors on charges that are ultimately billed to licensees on their quarterly invoices. These monthly status reports include current work performed and associated charges, as well as remaining work to be performed and an estimate of future charges. In 2015, NRC developed a process to review and provide to licensees certain information from the monthly status reports when licensees request it. Although this supplemental information on staff charges and contractor charges is available, not all licensees know it is available. Specifically, 6 of the 13 licensees we interviewed told us that the biweekly reports would be useful, but did not know the reports are available and can be requested. Also, 10 of the 13 licensees we interviewed told us that detailed information on contract work would be useful, but 9 of them did not know this information is available and can be requested. Not all licensees know the supplemental information is available because, according to NRC staff in the Office of the Chief Financial Officer, the agency has not instituted a formal process to inform all licensees of its availability. These staff added that the agency has announced the availability of this supplemental information at industry conferences or has told individual licensees about it. NRC staff explained that the agency is meeting statutory requirements for issuing invoices and provides the supplemental information as a courtesy to licensees, but is not required to do so. According to NRC staff in the Office of the Chief Financial Officer, the agency has not formally notified all licensees about the availability of this supplemental information because it is time-consuming to provide it to licensees. These staff also said that they have found that not all licensees may need this information. This is consistent with information from the licensees we interviewed. For example, 2 licensees told us that they do not need biweekly reports; one said that it operates on a fixed annual budget, so additional information on biweekly costs would not be useful. In contrast, NRC staff noted that licensees with more complex invoices—such as multiple sites and multiple inspections and licensing actions—may find the supplemental information useful. Standards for Internal Control in the Federal Government explains that management should communicate quality information externally so that external parties can help the entity achieve its objectives and address related risks. Furthermore, being open and transparent in communications is part of NRC’s Organizational Values, which guide every action it takes, how it performs administrative tasks, and how it interacts with stakeholders. Communicating to licensees about what information is available could help improve the transparency of NRC’s invoices, in accordance with the agency’s values. Additionally, 2 licensees told us that they requested information on work being done by a contractor but NRC staff told them that the information could not be provided. NRC staff in the Office of the Chief Financial Officer acknowledged that some NRC project managers may not be aware that licensees can request contract information because there is no policy or guidance to instruct NRC staff on what information they can provide or how to do so. Standards for Internal Control in the Federal Government states that agency management should clearly document— in management directives, administrative policies, or operating manuals— the processes it uses to ensure that it is achieving its objectives. By developing a policy and guidance for NRC staff, the agency could help ensure that staff are aware of the agency’s processes and provide quality information consistently. Licensees we interviewed said that NRC’s method for delivering paper invoices by mail created challenges related to the format and timeliness of the invoice, though NRC’s recent and planned changes may help address these challenges. For example, one licensee told us that, without the sorting and filtering capabilities of an electronic spreadsheet, this licensee is not able to verify the accuracy of charges for specific components of the work that NRC is doing. Another licensee told us that it is difficult to track costs of projects to completion without an electronic spreadsheet of charges. NRC now provides biweekly reports in an electronic spreadsheet format, which may help address the challenges these licensees cited. However, as discussed above, NRC does not provide these biweekly reports unless they are requested, and some licensees do not know that they are available. Licensees also cited challenges with the timeliness of invoices they receive via mail. For example, 2 licensees stated that, with invoices taking up to 10 days to arrive in the mail, licensees sometimes do not have sufficient time to conduct a proper review of charges and remit payment to NRC within the 30-day deadline. According to one licensee we interviewed, delays in receiving the invoices have resulted in late fees. To address the challenge of timeliness, NRC will, upon request from a licensee, e-mail a copy of the invoice to the licensee after the hardcopy invoice has been mailed. This practice allows the licensee to begin reviewing its charges while waiting for the mailed copy to arrive. However, of the 11 licensees that told us an e-mailed copy of the invoice would be useful, 4 of them did not know this option was available. NRC staff said the agency intends to transition to electronic billing—that is, sending invoices in electronic format via e-mail or providing licensees with web access to review and pay invoices. According to NRC staff, the agency’s transition to electronic billing is being done to improve efficiency and internal controls in NRC’s billing process. However, doing so may also help address challenges that some licensees experience with the format and timeliness of invoices. For example, 11 of the 13 licensees we interviewed affirmed that receiving electronic invoices or periodic statements of charges electronically would be beneficial. In October 2016, NRC’s Commission directed NRC staff to examine opportunities to accelerate the transition to an electronic billing system. The agency has indicated its intent to complete the planning phase by October 2017 and fully implement a new system by October 2019. However, according to NRC staff, the planning phase was not completed because the agency needed to fully implement the recent changes to its billing process before planning for the transition to electronic billing. As a result, the agency has not yet developed any planning documents to help ensure that it meets its deadlines, achieves its goal of increasing efficiency, or addresses licensees’ challenges. NRC staff in the Office of the Chief Financial Officer said that they recognize there could be delays in planning, but still expect to implement electronic billing by October 2019. We have previously found that federal information technology projects too frequently incur cost overruns and schedule slippages, but that proper planning—including incorporating best practices for project planning and scheduling—may help mitigate these effects. The Project Management Institute’s A Guide to the Project Management Body of Knowledge identifies standards related to project management processes, including project planning. In particular, the guide explains that the project plan is a comprehensive document that defines the basis of all project work and describes how the project will be executed, monitored, and controlled. The project plan integrates and consolidates plans for project components, such as plans for managing the project’s scope, schedule, cost, quality, and risk, among others. Among other things, the project management plan may also include requirements and techniques for communication among stakeholders and key reviews by management. By developing a project management plan that is consistent with best practices, NRC would have more reasonable assurance that it is better managing its transition to electronic billing. Furthermore, Standards for Internal Control in the Federal Government also states that, in deciding what information is required to achieve objectives, management should consider the needs of both internal and external users. Additionally, we have previously identified common factors critical to successful information technology acquisitions. Among these factors are (1) involving end users and stakeholders in developing requirements and (2) including end users in testing of system functionality prior to formal end user acceptance testing. As NRC develops a project management plan, by involving licensees in developing system capabilities for electronic billing, which includes soliciting and considering licensees’ information needs, the agency would have better assurance of a successful transition to electronic billing. Additionally, Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives. Control activities may include establishing performance measures and indicators and management reviews that compare actual performance to planned or expected results and analyze significant differences. As NRC develops a project management plan, including steps to assess the results of implementing electronic billing, which includes comparing actual performance of the new electronic billing system to planned results, would provide the agency more reasonable assurance that the project meets desired outcomes. NRC has recently implemented or plans to implement a number of changes to its billing process that—if implemented as intended—could address challenges that licensees identified in our interviews. However, additional steps could enhance NRC’s efforts to improve its billing process. Licensees told us that they could use more detailed information, more timely information, and information in an electronic format. NRC has made more detailed information on staff charges available in biweekly reports and has developed a process to provide detailed information on contractor work, upon request from a licensee. NRC is also providing invoices in electronic format to some licensees, when requested. However, some licensees that would find the information on staff and contractor charges useful do not know that it is available, and some NRC staff are not aware that they can provide it or how to do so. Until NRC communicates to all licensees about what information is available and develops a policy and guidance for agency staff, the agency cannot ensure that it is providing quality information consistently. Further, NRC intends to take additional action toward improving its billing process and invoices by transitioning to electronic billing. As NRC moves forward with this project, developing a project management plan that is consistent with best practices, to include establishing plans for the project’s schedule and cost, as well as involving licensees in developing the plan and assessing the results of implementation, will give the agency more reasonable assurance that it is better managing its transition to electronic billing and could help ensure that the project meets desired outcomes. We are making the following five recommendations to NRC: The Chief Financial Officer of NRC should formally communicate to all licensees that supplemental billing information—including biweekly reports and monthly status reports on contractor charges—is available and how to request it. Formal communication that would reach all licensees could include adding information to their quarterly invoices. (Recommendation 1) The Chief Financial Officer of NRC should develop agency policy and guidance for staff on what billing information related to contractor charges NRC staff can provide to licensees and how it should be provided. (Recommendation 2) As NRC plans its transition to electronic billing, the Chief Financial Officer of NRC should develop a project plan that incorporates standards for project management, which includes establishing plans for schedule and cost. (Recommendation 3) In developing the project plan for electronic billing, the Chief Financial Officer of NRC should include steps to involve licensees in developing system capabilities, which includes soliciting and considering licensees’ information needs. (Recommendation 4) In developing the project plan for electronic billing, the Chief Financial Officer of NRC should include steps to assess the results of implementing electronic billing, which includes comparing the actual performance to intended outcomes. (Recommendation 5) We provided a draft of this report to NRC for review and comment. NRC provided written comments, which are reproduced in appendix I. In its written comments, NRC agreed with our findings and recommendations. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Chairman of the Nuclear Regulatory Commission, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Hilary Benedict (Assistant Director), Wyatt R. Hundrup (Analyst in Charge), and Breanna Trexler made key contributions to this report. Also contributing to this report were Ellen Fried, Cindy Gilbert, Heather Keister, Benjamin Licht, Laurel Plume, Dan C. Royer, and Barbara Timmerman.", "summary": "NRC is responsible for regulating the commercial nuclear industry, including nuclear power plants. NRC provides services, such as inspections, for regulated entities that hold licenses—that is, licensees. NRC recovers the costs for these services by assessing fees and billing licensees quarterly. In fiscal year 2016, NRC collected about $321 million in service fees. From 2006 to 2016, audits of NRC's fees identified problems with NRC's billing process. For example, a 2012 audit identified about $24 million in unbilled fees from fiscal years 2011 and 2012. GAO was asked to review NRC's billing process for service fees. This report examines (1) the actions NRC is taking to address problems with its billing process identified by internal reviews and (2) the challenges selected licensees identified with NRC's billing process and the extent to which NRC's actions are addressing them. GAO reviewed audits of NRC's billing process and other documents related to this process. GAO also interviewed NRC staff and a nongeneralizable sample of 13 licensees, selected based on the amount of service fees charged from October 2015 through July 2017, and compared NRC's actions against criteria on internal controls and project planning. The Office of the Inspector General for the Nuclear Regulatory Commission (NRC) and internal reviews conducted by NRC identified several problems with the agency's billing process, and NRC has implemented or plans to implement several changes to address the recommendations. For example, the codes that NRC staff use to record their work hours on time cards—referred to as activity codes—did not describe the work and did not have a consistent naming convention, which increased the risk of staff charging their time to the wrong activity codes. This could lead, in some cases, to billing errors. To address these problems, NRC created a standard naming convention for activity codes that provides more information about the activity. See the figure below for the steps in NRC's billing process for work that NRC or contractor staff performed. Some of the 13 licensees that GAO interviewed identified challenges with NRC's billing process, including its method for delivering paper invoices by mail. For example, two of these licensees stated that with invoices taking up to 10 days to arrive in the mail, they sometimes do not have sufficient time to properly review charges and remit payment to NRC within the 30-day deadline for paying the invoice. One licensee said that delays in receiving an invoice resulted in late fees. NRC is undertaking an initiative to transition to electronic billing, which may address the challenges the licensees identified and, according to NRC staff, improve the agency's billing process. However, NRC has not developed planning documents for this initiative and, according to staff, the planning phase is already past its original deadline of October 2017. The Project Management Institute has identified standards related to project management processes, including project planning. By developing a project management plan that is consistent with best practices and includes steps for involving licensees in system development and assessing results of the project, NRC would have reasonable assurance that it can better manage its electronic billing initiative. GAO is making five recommendations, including that NRC develop a project management plan for its electronic billing initiative that follows project management standards and includes steps for involving licensees and assessing results. NRC agreed with these recommendations.", "document_type": "gao"}
{"report": "The F-35 Lightning II program, also known as the Joint Strike Fighter program, is a joint, multinational acquisition intended to develop and field a family of next-generation strike fighter aircraft for the U.S. Air Force, Navy, and Marine Corps (hereinafter referred to as the services), eight international partners, and foreign military sales customers. There are three F-35 variants and each will be a multi-role, stealthy strike aircraft replacement for or complement to legacy fighter aircraft, as seen in figure 1. DOD initiated the F-35 program in October 2001, and it is nearing the end of system development and preparing for operational testing. DOD has also been concurrently fielding and operating a growing fleet of aircraft as part of low-rate initial production. As of August 2017, 253 aircraft have been fielded and are flying from nine locations in the United States and three international locations. The Marine Corps and Air Force declared initial operational capability in 2015 and 2016, respectively, and the Navy is scheduled to declare initial operational capability in 2018. In 2019, DOD plans to begin full-rate production of the aircraft. See figure 2 for a timeline of major events and anticipated fleet growth in the F-35 program. By full-rate production, DOD would generally be required to establish adequate sustainment and support systems for the F-35. Per DOD guidance for weapon system acquisitions, these sustainment and support systems should be defined in a support concept that is incorporated into a sustainment strategy. For the F-35, this concept should comprise the necessary plans to conduct operations, maintenance, and sustainment throughout the system’s life cycle, with the F-35 Life Cycle Sustainment Plan serving as the principal document governing F-35 sustainment. According to F-35 operational requirements, this concept must provide warfighting and peacetime capability with the lowest cost of ownership, and all variants must be able to deploy rapidly, sustain high mission reliability, and sustain a high sortie-generation rate. Sustainment for the F-35 aircraft is a large and complex undertaking with many stakeholders. The F-35 Joint Program Office is responsible for managing and overseeing the support functions required to field and maintain the readiness and operational capability of the F-35 aircraft across the enterprise. The F-35 program currently relies heavily on contractors to provide sustainment support and has two product support integrators. As the product support integrator for the aircraft system, Lockheed Martin is charged with integrating sustainment support for the system, including that for the F-35 supply chain, depot maintenance, and pilot and maintainer training, as well as providing engineering and technical support. Currently, DOD is contracting for sustainment support with Lockheed Martin largely through annual contracts, and according to F-35 program officials, plans to transition to 5-year, fixed-price, performance-based sustainment contracts in 2020. DOD has established a Hybrid Product Support Integrator organization— a collaboration of government and contractor organizations tasked with managing product support to meet the F-35 strategy and performance outcomes. This organization was initially established in 2016 as a part of the F-35 Joint Program Office, and is expected to be fully implemented by 2019. According to program officials, the establishment of the Hybrid Product Support Integrator is an acknowledgement that DOD needs to take a more significant role in providing sustainment support for the F-35. In addition, the U.S. Air Force, Navy, and Marine Corps have each established an F-35 integration office or cell focused on how the services will operate and afford the F-35, among other things. DOD is planning to meet the sustainment requirements of its F-35 customers by providing a common, global support solution. As part of this common solution, participants share critical aspects of sustainment support, some of which are discussed below, and which are in various stages of implementation to support the growing fleet. Depot maintenance: The F-35 sustainment strategy has a two-level maintenance concept, consisting of organizational-level maintenance performed by squadron-level personnel, and depot-level maintenance. Depot-level maintenance includes structural repair, software upgrades, engine system overhaul and repair, component repair, and other activities that require specialized skills, facilities, or tooling to conduct the repairs. DOD is establishing modification and repair capabilities at six military service depots in the United States and additional repair facilities overseas. Supply chain: All F-35 customers, including the U.S. military services and international partners, share a global pool of spare parts, which is managed by Lockheed Martin. According to program officials, these pooled assets are unique to the F-35 and include consumable and repairable spare parts for the airframe, support equipment, pilot flight equipment, and training devices. The services and international partners can also purchase packages of spare parts that are tailored to their individual deployment and shipboard operational requirements. Training: Currently, the F-35 program is conducting pilot and maintainer training at Eglin Air Force Base, Luke Air Force Base, Marine Corps Air Station Beaufort, and Naval Air Station Lemoore. The F-35 program’s training system includes pilot and maintenance training devices and courseware that are tailored to multiple variants and services. Infrastructure: F-35 customers are responsible for setting up their own F-35 facilities—hangars, training facilities, and depots, among other things—and the program office works with them in a supporting role. Sustainment infrastructure requirements to support the F-35 are defined in a series of facility requirement documents that are updated and provided to all customers annually. Many of the costs of F-35 sustainment—also known as operating and support costs—are allocated across the military services and international partners based upon a number of factors, including the number of aircraft that each customer owns and their operational requirements. Such operating and support costs consist of sustainment costs incurred from the initial system deployment through the end-of-system operations, and they include all costs of operating, maintaining, and supporting a fielded system. The Office of the Director for Cost Assessment and Program Evaluation develops independent cost estimates for F-35 operating and support costs, which are reported in DOD’s annual F-35 Selected Acquisition Report as the official operating and support cost estimates for the program. Additionally, the program office develops an annual estimate for the operating and support costs of maintaining and supporting the F- 35 over its 60-year life cycle, which can differ from the estimate conducted by the Office of the Director for Cost Assessment and Program Evaluation, due in part to differences in assumptions between the two estimates. Additionally, there are numerous factors that will affect life- cycle operating and support costs for the F-35, including aspects of the F- 35 program that are still maturing. These include the following: Reliability and maintainability: Reliability and maintainability data measure aircraft performance to determine how often the aircraft experiences failures and how much time it takes to repair those failures. These data are monitored through a series of metrics that measure the intended performance of the aircraft in meeting its requirements as it progresses toward maturity at a cumulative 200,000 flight hours, with at least 75,000 flight hours each for the F- 35A and F-35B, and 50,000 flight hours for the F-35C. Reliability and maintainability drive sortie-generation rates and the size of the logistics footprint for the F-35, as well as inform program operating and support costs, which are tied to the performance of the system at maturity. Technical data: Technical data for weapon systems include the details necessary to ensure the adequacy of performance, as well as instruction, maintenance, and other actions needed to support weapon systems. Technical data constitute an important part of a weapon system program, such as the F-35. Identifying technical data needs, costs, and ownership are essential for DOD to effectively consider and maximize competition for future product support of F-35 sustainment. DOD has currently fielded and is sustaining more than 250 F-35 aircraft, and the number is expected to triple by the end of 2021 and keep growing as the program moves into full-rate production. DOD has also supported significant F-35 milestones such as the initial operational capability declarations of the Marine Corps and Air Force in 2015 and 2016, respectively, and the transfer of an operational squadron to Japan in early 2017. As a fifth generation aircraft, the F-35 is intended to improve situational awareness through sensor fusion and will enhance the ability of legacy aircraft to conduct various missions while flying together with it. The F-35 was also designed with increased stealth capabilities, the capacity to carry weapons internally instead of externally to reduce drag and enable stealth, and advanced sensor systems. In particular, the aircraft is designed to execute missions in high-threat areas, requiring fewer support assets and possessing a greater survivability rate as compared with fourth generation aircraft such as the Air Force’s F-16s and the Navy’s and Marine Corps’ F/A-18s. Squadron officials at multiple F-35 locations that we visited expressed enthusiasm for the unique capabilities of the aircraft, such as the increased situational awareness that the F-35 provides pilots relative to legacy aircraft and the relative ease with which pilots are able to learn how to employ its tactical capabilities. They also noted improvement in the performance of the aircraft as it has been continuously developed. However, DOD is facing several key sustainment challenges that pose risks to its ability to meet current and future warfighter readiness requirements, and these could limit the ability of the military services to fully leverage the capabilities of the aircraft. Table 1 summarizes these challenges, which are largely attributable to insufficient planning, as discussed in more detail below. Repair capacity: DOD does not have enough capacity to repair F-35 aircraft parts because the establishment of repair capabilities at the military depots is 6 years behind schedule. There are many different components of the F-35 aircraft that DOD plans to repair at the six military depots within the United States, as documented in an F-35 Depot Implementation Plan. Repair capabilities at the military depots were originally planned to be completed by 2016, but program officials told us that some capabilities have now been delayed until 2022. Program officials in part attributed these delays to the military services not providing enough funding for depot requirements; however, service officials told us that the program office did not clearly identify some depot requirements in a timely manner necessary for the services to fund those requirements. In addition, DOD did not plan for and fund the stocks of material needed to repair parts at the depots—referred to as “lay-in material.” Program officials said that they had incorrectly assumed that lay-in material would be included as part of the contracts for establishing repair capabilities at the military depots. As a result, DOD has had to fund and negotiate additional contracts with the prime contractor for the lay-in material. Currently, moreover, due in part to the late identification of requirements and funding, the lay-in material to support repairs for more than a dozen different aircraft components is not expected to be delivered to the depots until months—or in some cases, years—after the technical capabilities to conduct the repairs have been established. As seen in figure 3, for certain F-35 parts, these delays have resulted in repair times that are significantly longer than those the program had projected, leading to repair backlogs. According to prime contractor officials, because of these capacity shortfalls, DOD is currently relying on the original equipment manufacturers to repair parts, but the capacity of these manufacturers is already strained by requirements to produce the parts needed to support aircraft production. Program officials said that establishing the depot repair capabilities is now the F-35 Joint Program Office Product Support Manager’s top priority. As such, the program is working to implement several different initiatives to accelerate the development of repair capabilities, including trying to better align lay-in material requirements with the activation of repair capabilities, prioritizing the establishment of certain repair capabilities to align with the readiness requirements of the fleet, and looking at options to decrease the amount of time that it takes to establish repair capabilities for each component line. However, program officials said that plans are still preliminary, and that they are unsure how much funding will be available to implement these initiatives. Spare parts: DOD is experiencing shortages of spare parts in the F-35 supply chain, resulting in lower than expected readiness. From January through August 7, 2017, the prime contractor reported that the average percentage of time that F-35 aircraft were unable to fly because they were awaiting parts was about 22 percent—more than double that of DOD’s objective of 10 percent, as seen in figure 4. According to program office and contractor officials, the shortages of spare parts are due in part to the delays in the establishment of depot repair capabilities, incomplete plans and funding that did not account for the long lead time for parts, insufficient amounts of service funding, and poor reliability of certain parts. For instance, 19 percent of F-35 parts have a lead time of more than 2 years. The 2 to 3 years that it takes to procure these parts includes both a lengthy period for contracting and a period for the production of the parts once contracts have been established. However, program office and military service officials told us that the timing of prior service funding authorizations and contract awards did not account for this long lead time to procure parts, resulting in parts that were late to meet the military services’ operational needs. According to DOD officials, the parts within the F-35 global pool of spare parts are unique to the F-35 system and generally cannot be obtained from other sources. The program office and prime contractor have identified steps needed to increase the availability of spare parts to prevent these challenges from worsening as the number of aircraft in the fleet grows, such as improving the production and repair capacity of suppliers and aligning the timing of the military services’ funding authorizations with the required lead time for parts. However, according to DOD documentation, planned funding and contract awards for fiscal years 2018 and 2019 are still forecasted to be later than needed to meet demand for new parts, and the program’s ability to accelerate this timeline is uncertain. Thus, parts shortages are expected to continue for several years and may worsen if DOD and the contractor are not able to fully implement these actions. DOD has not fully defined all of the technical data it needs from the prime contractor to maximize the potential for future competition of contracts among providers for sustainment requirements, nor does it know the associated costs of these data. In 2014, we recommended that the program office develop a long-term Intellectual Property Strategy to include the identification of all critical technical data needs and their associated costs. As of September 2017, the program has taken some steps to develop an Intellectual Property Strategy, but it has not identified all critical needs and their associated costs. Program officials said that they are currently working with the prime contractor to develop a list of technical data requirements. Program officials said that once this effort is complete, DOD will be in position to begin prioritizing and negotiating for specific data rights that the program needs to facilitate its sustainment plans. Officials acknowledged, however, that there is risk associated with efforts to obtain required technical data rights for F-35 sustainment to promote increased competition because the contractors may not be willing to provide these rights, or the costs may be too high. They also told us that the program office deals with such risks on a case-by-case basis, and that if a data right needed by the program office to implement the sustainment strategy cannot be obtained, then plans will have to be adjusted accordingly. Program officials said that, in some cases, they will likely have to make legal claims against the prime contractor’s technical data rights assertions, based on government funding of such products. Moreover, the technical data needed to repair F-35 aircraft, such as maintenance instructions, are still not fully developed. According to contractor officials, the contractor and DOD have developed and verified more than 84 percent of the unit-level technical data needed to address known maintenance requirements, such as instructions for how to replace specific parts on the aircraft. However, according to program and contractor officials, the technical data needed for maintainers to troubleshoot issues with the aircraft are lagging behind planned development. Such data are intended to help maintainers when the source of a maintenance issue is unclear, by providing guidance on the actions needed to isolate the most likely problems. In the absence of troubleshooting instructions, maintainers sometimes incorrectly identify what needs to be fixed on the aircraft. For instance, officials from one squadron said that the troubleshooting data are sometimes insufficient to pinpoint the issue with the aircraft, which can lead the maintainer to remove a component, order a new part from the contractor, and subsequently find that the new part does not fix the issue—a scenario that is both inefficient and costly. According to program and contractor officials, the immaturity of technical data for troubleshooting maintenance issues could be contributing to the high rate of parts that the F-35 squadrons are sending to the depots for repair that do not actually need to be repaired, resulting in inefficiencies at the depots. For example, officials at one depot we visited said that 68 percent of the parts they receive from F-35 squadrons do not need to be repaired and that the process for testing such parts usually takes nearly 10 hours to complete, which is both inefficient and can add to repair backlogs. The Navy and Marine Corps require intermediate-level maintenance capabilities for shipboard deployments because it is more difficult and time-consuming to obtain spare parts, or to send parts to the depots for repair, when onboard a ship. DOD has been conducting analyses to support the requirement and has recently identified the initial intermediate-level repair capabilities that it plans to implement, including select avionics, support equipment, and hydraulic repairs. These decisions will trigger other requirements and related costs that must be planned for—such as for personnel, technical data, support equipment, and updates to policies governing the maintenance of spare parts— before the capability can be implemented. For example, program officials told us that once determinations are made about intermediate-level maintenance, the program will have to develop a plan that specifies what technical data rights are needed, and when, to facilitate intermediate-level maintenance, and will then have to negotiate with the contractor to obtain those technical data rights. In August 2017, the program office identified new funding requirements for DOD to implement initial intermediate-level maintenance capabilities for fiscal years 2019 through 2023. However, these requirements are not currently funded in DOD’s budget, leaving a projected shortfall of $267 million over this time period. Because a funded plan for intermediate-level maintenance is not yet in place, the Marine Corps will not have the desired level of intermediate- level maintenance capabilities for its initial shipboard deployments planned for 2018. Accordingly, it will be highly reliant on the currently challenged F-35 supply chain and depot repair capabilities for support, and will likely experience degraded readiness. In addition, without such a plan, it is unclear whether such capabilities will be available to support the Navy’s first planned F-35 shipboard deployments in 2021. Central to F-35 sustainment is the Autonomic Logistics Information System (ALIS)—a complex system supporting operations, mission planning, supply-chain management, maintenance, and other processes. However, ALIS is in continuous development, with planned updates that support required sustainment capabilities for years to come. For example, future versions of ALIS are intended to improve data collection and reporting, and to provide capabilities to support intermediate-level maintenance. Historically, ALIS has experienced delays. For instance, an ALIS version that was initially planned to be completed for testing in 2010, is now being tested in 2017. In 2016 we found that DOD did not have a plan to ensure that ALIS was fully functional as key program milestones approached, and we recommended that DOD develop a plan to prioritize and address ALIS risks. Since that time, the program office has implemented this recommendation through the development of an ALIS Technical Roadmap to plan for these requirements. However, emerging requirements, such as to address cyber security vulnerabilities and system obsolescence, will likely lead to changes in the Roadmap that could further delay the date when these sustainment capabilities are provided. Furthermore, the requirements and associated timelines for ALIS development that are identified in this plan may not be realistic because the requirements are not fully funded in upcoming service budgets, resulting in additional risks to the program’s plan. As discussed above, DOD’s challenges are due in large part to sustainment plans that do not fully include key requirements, associated timelines, and aligned (that is, timely and sufficient) funding to support those requirements. F-35 program stakeholders have long recognized the program’s need for more comprehensive and detailed planning documents to identify the key activities and decision points necessary to establish sustainment capabilities and guide the F-35 sustainment strategy. For instance, in 2009 an Independent Logistics Assessment team recommended, among other things, that DOD develop a program- wide integrated master schedule that includes key governmental activities and tasks necessary to establish F-35 logistics capabilities required through full-rate production, but the program did not develop such a tool. In 2014 the program office identified the need to establish a road map with clear decision points to prepare the F-35 enterprise for long-term sustainment. Finally, in December 2016 the Under Secretary of Defense for Acquisition, Technology, and Logistics directed the program office to submit an integrated master schedule for the deployment of global F-35 sustainment capabilities by January 2017, which is not yet completed. Program officials said that they are now developing an integrated master schedule, and that this schedule will incorporate major sustainment milestones required to implement the program’s sustainment strategy. DOD is also updating sustainment strategy documents, including the F-35 Life Cycle Sustainment Plan and Acquisition Strategy, to include an Intellectual Property Strategy. However, the timeframes for completion of these documents are uncertain, in part due to ongoing DOD efforts to refine its follow-on modernization plans for the F-35, which will affect the sustainment plans. Thus, the scope and the degree to which these updates will address the challenges that DOD is facing are unclear. For instance, an Office of the Secretary of Defense official charged with reviewing these plans said that there is still significant work to be done by the military services and the program office to identify and align sustainment requirements with funding in order to support the fiscal year 2019 budget process, which will ultimately be necessary to inform these plans. Military service headquarters officials told us that, as customers of the program, they need to better understand from the program office when sustainment capabilities—such as military depots—will be established, and when associated funding is needed to support that schedule. In August 2017, the program office identified some specific funding requirements for the military services, beyond what they have already budgeted for F-35 sustainment, which are needed to address some of the sustainment challenges discussed above—including spare parts shortages, gaps in depot lay-in material, and ALIS development. While this is a positive step by the program office, it also demonstrates that DOD faces a funding shortage of approximately $1.5 billion between fiscal years 2018 and 2023 for F-35 sustainment, as well as significant readiness risks associated with this lack of alignment between requirements and funding. The different elements of F-35 sustainment support are highly integrated, and challenges or delays in one area can significantly affect outcomes in other areas. For example, the delays in established repair capacity at the depots constitute one of the reasons why the program has an insufficient supply of spare parts. Procurement decisions can also significantly affect sustainment outcomes. The Air Force and Marine Corps are considering an acceleration of their purchases of F-35 aircraft, thus creating more demand on the already strained sustainment enterprise, for which DOD has not always provided timely funding (for example, funding for spare parts). Our prior work on acquisition program management has identified a number of key program management practices that can improve program outcomes if implemented, such as clearly establishing well-defined requirements, developing realistic cost estimates and schedules, and securing stable funding that matches resources to requirements. As DOD prepares for the growth of the fleet and attempts to address existing sustainment challenges, its effort to develop an integrated master schedule is a positive step. Such a schedule, if comprehensive and realistic, could be a critical tool to guide the revision of DOD’s sustainment plans to better ensure that the plans that form the basis of its strategy are sufficient to meet warfighter requirements. Ultimately, however, without plans that include all key requirements and decision points with aligned funding, the F-35 program will likely face continual challenges in providing timely sustainment support to the warfighter, and may have difficulties in fully implementing its F-35 sustainment strategy in time to meet the needs of a growing fleet. Further, as the services consider accelerating their purchases of F-35 aircraft, DOD risks purchasing aircraft that the program and the services are not ready to sustain. DOD is conducting pilot—or trial—performance-based agreements with the prime contractor as a part of its annual cost-reimbursable sustainment contracts, in order to test metrics and performance-management processes. According to F-35 program officials, DOD plans to transition to multi-year, fixed-price, performance-based contracts in fiscal year 2020. Performance-based logistics is a support strategy that emphasizes performance in contracts, rather than delivery of goods and services, and payment is related to the degree to which performance meets contracted standards. In 2012, the Under Secretary of Defense for Acquisition, Technology, and Logistics directed an increased use of performance- based logistics agreements, stating that such agreements can yield significant cost and performance benefits if effectively implemented. DOD has developed a series of performance objectives to provide insight into the level of sustainment support that the prime contractor is providing to the military services. From these objectives, DOD has selected three system-level metrics, listed below, to incentivize the contractor under the pilot performance-based agreements: Air Vehicle Availability (AVA): measures the percentage of total time during which aircraft are safe to fly, available for use, and able to perform at least one tasked mission; Full Mission Capable (FMC): measures the percentage of time during which aircraft are fully capable of accomplishing all tasked missions; Mission Effectiveness (ME): measures the extent to which the F-35 components and mission systems affected the successful completion of each assigned mission. In these pilot agreements, DOD and the contractor together negotiated minimum and objective targets against which the performance of the aircraft—and the support provided by the contractor to enable that performance—is measured. For fiscal years 2016 and 2017, these agreements were 1-year, cost-reimbursable contracts with potential incentives for the contractor based on assessed performance of the aircraft across the three system-level metrics. According to F-35 program officials and documentation we reviewed, DOD plans to establish a 2-year contract for fiscal years 2018 through 2019, with select elements that are performance-based, in preparation to transition to a 5- year, fixed-price, performance-based contract for the 2020—2024 time period. Program officials said that this 5-year contract is planned to include 2 base years and 3 pre-negotiated option years. DOD did not achieve most of the performance targets that it set for the pilot performance-based agreements for the 2016 sustainment contract. Subsequently, DOD negotiated lower targets for some metrics in the 2017 sustainment contract. As of June 2017, DOD was meeting several of the minimum targets established in the 2017 sustainment contract, but none of the objective targets. According to program and contractor officials, the failure to meet these targets is largely due to the sustainment challenges that we discussed previously in this report. For example, the limited availability of spare parts within the F-35 supply chain is contributing to lower than expected AVA and FMC rates. Figure 5 below shows the actual fleet performance results for the 2016 and 2017 (through June 2017) pilot performance-based agreements. The 2016 pilot performance- based agreement began in March 2016 and spanned a 10-month period, through December 2016. The 2017 agreement began in March 2017, and program officials said that it is expected to continue through February 2018. Furthermore, the performance targets established in the sustainment contracts for the pilot performance-based agreements are lower than the desired aircraft performance targets that the services have identified for their aircraft. As part of the pilot performance-based agreements, each of the military services has established individual agreements with the program office that identify their respective required levels of minimum and objective aircraft performance for their units, across key metrics. Program officials said that while they try to meet the services’ performance requirements when negotiating the contracts, the agreements with the services are not binding. The performance targets that have been negotiated on the sustainment contracts are generally lower than those required by the services. For instance, the Marine Corps established a minimum performance target for non-deployed units of 60 percent FMC aircraft for 2017, but the minimum target established in the contract for that same metric was 14 percent. Similarly, the Air Force identified a minimum performance target for non-deployed units of 65 percent AVA, but the minimum target established in the contract for that same metric was 52 percent. Program officials said that the costs of meeting the services’ performance requirements would be too high given the current supply chain challenges across the fleet. Figure 6 shows the differences between the performance targets required by the Marine Corps and those that DOD was able to negotiate under the pilot performance-based agreement in 2017. DOD may not be using the appropriate metrics under the pilot performance-based agreements to achieve desired outcomes. DOD guidance states that optimal performance-based contracts use objective, measurable, and manageable metrics that accurately assess the support provider’s performance against the delivery of targeted warfighter outcomes. It also defines ideal metrics as those that are, among other things: (1) reflective of processes over which the contractor has control, and (2) able to motivate desired behavior. We found the following: The contractor does not have full control over the performance outcomes for which it is paid: The system-level metrics that the prime contractor is being assessed against are not fully reflective of processes over which the contractor has control, because actions that the F-35 squadrons take when maintaining or operating the aircraft affect the metric outcomes being measured. For example, a contractor official at one site that we visited cited an instance when a military service maintainer towed an aircraft into a hangar and broke a surface panel, resulting in the aircraft not being able to fly for 60 days because there was no surface panel replacement available in the supply chain. Thus, the contractor could be held accountable for a lack of performance that the customer created. Conversely, to keep aircraft flying, military service maintainers have taken actions that mask contractor failures to provide support—for example, cannibalizing parts from other aircraft at rates significantly higher than DOD intends, based on data provided by the prime contractor and shown in figure 7. Because the contractor does not fully control the outcomes for which it is being assessed, prime contractor and military service officials said that contentious negotiations have occurred at times about how to assign responsibility for performance. This ultimately makes it difficult for DOD to hold the contractor accountable. Further, one of the three system-level metrics—Mission Effectiveness—is assessed by pilots subjectively after each flight. Some pilots and service officials whom we spoke to said that different pilots may make differing determinations about the effectiveness of the mission, which could affect the measured performance outcomes. DOD has established performance review groups to review and reconcile data in instances where the contractor does not believe that it should be held responsible for certain metric outcomes, but this process requires both DOD and the contractor to make subjective determinations about the root causes of particular performance failures in order to determine whether the contractor or the military services are to blame. Figure 8 shows how this reconciliation process can result in adjustments to the measured performance data when assessing the level of support provided by the contractor. Under the pilot performance-based agreements, the reconciled data points serve as the basis for calculating contractor incentive fees. Additionally, DOD is working to implement agreements that define lower- level metrics for which the military services will be held responsible, such as defining how long it should take for maintainers to conduct maintenance, but these agreements have not yet been fully implemented. Ultimately, service officials told us that the complexity of these adjudication efforts indicates that DOD may not be holding the contractor accountable for the appropriate metrics. Current metrics may not motivate the desired behaviors from all stakeholders. The current metrics may not consistently motivate the necessary behaviors from all stakeholders to either achieve desired warfighter outcomes or meet the current metrics on contract. For example, DOD has established AVA as its primary metric, and it provides greater incentive fees to the contractor for meeting the AVA targets as compared with the other two metrics. However, Marine Corps and Navy officials told us that FMC aircraft are more important for operational deployments, as they represent aircraft that are ready for war. DOD’s performance-based logistics guidance states that it is important to exercise caution when selecting a combination of metrics, to ensure that they do not create undesirable conflicts. The achievement of the AVA and FMC metrics may at times be in conflict with one another. For instance, according to contractor and program officials, an aircraft is still considered to be available if its low observable—or stealth—systems are not working, but for it to be considered a fully-mission capable aircraft, a military service would have to ground the aircraft for several days to repair the low observable system. Contractor officials have also expressed concern that the metrics they are being paid for may not be as important to the services as other factors—such as achievement of flying hours or the ability to train pilots—and that this could affect whether the services will take all necessary actions to meet the targets for which the contractor is paid. Officials from a training unit we visited said that they were focused on training pilots, not on achieving the metric targets identified in the contract. This unit was able to exceed its required flight hours to support pilot training in April 2017, even though the performance of its aircraft fell well below desired Marine Corps performance levels for AVA and FMC. Program office and contractor officials noted that pilot performance-based agreements were put in place to gather lessons learned and ensure that DOD has the appropriate metrics before entering into 5-year, fixed-price contracts. However, contractor officials said that the performance review process does not include a step to review how the metrics are driving behaviors or to determine whether DOD has the appropriate metrics in place, and they suggested that a more robust effort to consider lessons learned from the pilot agreements is needed. Service officials have suggested that incentivizing simpler metrics that focus on individual aspects of F-35 sustainment for which the contractor has more control— such as supply chain responsiveness or depot-level repair—instead of system-level performance metrics may be more appropriate. Without reexamining the metrics to ensure that they are objectively measurable, reflective of processes that the contractor can control, and able to motivate desired behaviors, DOD may not be well positioned to accurately assess contractor performance or achieve optimal outcomes across future performance-based sustainment contracts that will likely cost tens of billions of dollars. DOD does not yet have full information on F-35 sustainment costs or technical characteristics such as reliability and maintainability, and this could pose risks to its ability to effectively negotiate 5-year, fixed-price performance-based contracts with the prime contractor by 2020. Although DOD has fielded more than 250 aircraft, the aircraft system remains immature. DOD has established a target for system maturity of 200,000 total flight hours, with minimum flight hours for each variant. DOD reached 100,000 total F-35 flight hours in July 2017, and it does not expect to reach its maturity targets for all variants until fiscal year 2024. Specifically, we found that DOD does not have full visibility into the actual costs for some key sustainment requirements that are considered cost- drivers within the program, such as the actual costs of parts and repairs. Given the immaturity of the system, DOD has relied on projected parts reliability and pricing to formulate cost estimates, but officials said that actual costs are needed to improve both their confidence in the estimates and their understanding of how cost is related to performance. There is potential for the actual costs of sustainment requirements to change significantly from initial projections. For instance, the costs of initial spare parts over the life cycle increased by $447 million in the program’s estimate from the 2014 estimate to the 2015 estimate, due largely to increases in unit prices from those initially projected. According to program officials, their understanding of actual costs is limited in part because of the immaturity of the system. Program officials said that they are taking steps to obtain more actual cost information as the aircraft matures, and to determine how much repairs should cost, in order to better position themselves for contract negotiations. However, in addition to system immaturity, program officials said that they are experiencing challenges in obtaining important details about existing cost data needed to inform their cost models from the contractor, such as the costs of the individual parts and repairs that the contractor purchases from its suppliers. Further, we found that there are a number of technical aspects of the aircraft that are immature or uncertain. While the F-35 is meeting expectations for some measurements of reliability and maintainability, other measurements are still lagging behind operational requirements. For example, aircraft are experiencing failures that result in the loss of a capability to perform a mission-essential function at more than twice the rate expected across all variants. Mean repair times for critical components that fail are also more than twice as long as the operational requirements dictate. Additionally, the significant software releases required to complete F-35 system development—referred to as Block 3F—are planned to be tested and released in 2017. However in April 2017 we reported that the program’s schedule for completion of Block 3F and associated testing would likely be delayed due in part to software issues and system instability. Additionally, as of June 2017, the DOD Office of the Director for Operational Test and Evaluation predicted that required initial operational test and evaluation for Block 3F would likely not begin until late 2018 or early 2019. According to operational testing officials, such software releases can lead to different reliability and maintainability issues than were previously known, as the aircraft becomes capable of flying at higher speeds and altitudes. According to these officials, there would be inherent risk in signing a fixed-price, performance-based contract before the reliability and maintainability data for Block 3F are more fully known, as those data will influence how much aircraft performance should cost at maturity. DOD guidance states that in order for performance-based arrangements to be effective, the government must clearly understand program requirements, costs, and technical characteristics; and that systems should achieve a level of maturity and design stability. Program officials said they believe that DOD can gain sufficient knowledge of the costs and technical characteristics of the aircraft prior to 2020, and that they will seek to write options into the multi-year, performance-based contract if there are still risks that need to be mitigated. However, program officials said that the program office has not established criteria addressing the extent of the cost and technical data that it will require prior to entering into the planned agreements. While the program still has a few years until that date, program officials said that the process to develop this contract is expected to begin in late 2017. In April 2017 we reported on the risks of moving forward with additional F-35 program development before DOD has a full understanding of the aircraft’s baseline Block 3F capabilities, specifically citing difficulties in presenting a sound business case for soliciting contractor proposals without such knowledge. The program office could face similar challenges preparing for a fixed-price, performance-based sustainment contract amid existing uncertainty. Without a full understanding of F-35 costs and technical characteristics at maturity, DOD may not be well positioned to accurately determine how much fleet performance should cost over a 5-year, fixed-price, performance-based contract, and thus may be at risk of overpaying the contractor while not receiving the expected level of sustainment support. DOD has taken some actions to try to reduce estimated sustainment costs for F-35 operating and support, which, according to the program office’s fiscal year 2016 cost estimate, are projected to cost $1.06 trillion in then-year dollars (see figure 9 below). For example, the program office has established a Cost War Room to identify and implement cost- reduction initiatives with the goal of reducing the program office’s 2012 operating and support cost estimate by 30 percent by 2022. These initiatives include updating assumptions about fuel usage, among others. According to program documentation, such efforts are projected to result in a cost avoidance of $60.7 billion. The program office also has an effort targeted at improving reliability and maintainability of F-35 components. As of May 2017, the program office had completed 38 improvement projects that are expected to result in $1.7 billion in operating and support cost avoidance. However, at the same time, the projected operating and support costs estimated by the program office have increased from fiscal year 2012 to fiscal year 2016, due to an increase in projected flying hours, an extension of the aircraft’s life cycle from 56 to 60 years, and refinements to the cost models, among other factors. Figure 9 shows the increase to the program office’s life cycle operating and support cost estimate since fiscal year 2012. In addition, DOD has not established affordability constraints for the F-35 program that are linked to the military services’ budgets, as we recommended in September 2014. In our prior work, we found that the program’s affordability targets may not be reflective of what the services can actually afford because it did not use the military services’ budgets to establish the targets. At that time, the annual F-35 operating and support costs were estimated to be considerably higher than the combined annual costs of several legacy aircraft, and according to DOD officials, the sustainment strategy was not affordable. We recommended that DOD establish affordability targets linked to the services’ budgets, because without such targets DOD cannot be sure whether the cost savings they are pursuing will lead to an affordable sustainment strategy. The department concurred with this recommendation but has not taken specific action on it at the program level. We made this a priority recommendation for DOD in July 2017. The Senate Armed Services Committee also directed DOD to provide it with a plan for improving the transparency and affordability of the F-35 sustainment strategy, to include identifying affordability constraints linked to, and informed by, the military services’ budgets. The Marine Corps has recently taken steps to develop budget-based affordability targets for their portion of F-35 sustainment costs. The Marine Corps identified the need to reduce steady-state sustainment costs per aircraft by at least 20 percent through cost modeling efforts and budget analysis, and Marine Corps officials said they believe that such a reduction would make the program affordable for the Marine Corps. Marine Corps officials stated that to achieve such reductions, they are exploring options to reduce costs—such as transitioning maintenance tasks from depots to operational units, and revising sustainment support personnel requirements—in coordination with the program office and prime contractor. The program office could use this service target to inform the establishment of program-level affordability constraints. As previously discussed, the program is experiencing sustainment challenges due in part to some requirements not being fully funded, and this could present a continued risk going forward if sustainment for the F- 35 is not affordable within the services’ budgets. Program officials also told us that if the services cannot fully fund sustainment requirements, DOD will have to prioritize funding and defer requirements to later years. However, given the F-35’s global sustainment strategy of providing support across the military services and the international partners through shared pools of funding, a single customer that cannot fully fund requirements may affect the ability of DOD and the contractor to provide adequate sustainment support across the global F-35 fleet. F-35 actual sustainment costs that are being charged by the program office to the military services, as well as the capabilities associated with those costs, are not fully transparent to the services. In addition to estimating projected costs for F-35 sustainment over the aircraft’s life cycle as described above, the program office also calculates the actual F- 35 sustainment costs that will be charged to the military services on an annual basis. To determine these actual sustainment costs, the military services first submit their F-35 sustainment capability requirements to the program office for approval. The program office approves requirements as a basis for its annual life-cycle operating and support cost estimate, which is used to provide each of the military services with an estimate for their respective portion of F-35 sustainment costs to support the services’ budget planning process. The program office then negotiates with the prime contractor the level of support the contractor will provide to meet service sustainment requirements. It is at this point that the program office informs the services of the actual costs that they will be charged for contracted sustainment. According to program officials, the contracted level of support may not include all the requirements initially submitted by the military services for a given contract period, and the associated costs of the contract services may not align with initial estimates given to the military services, because support is negotiated between the program office and the prime contractor. Air Force, Navy, and Marine Corps officials told us that they do not fully understand how the actual costs that they are charged by the program office for F-35 sustainment are clearly linked to the capabilities that they are receiving. They cited issues related to unexplained cost increases, difficulty in tracking their requirements to the contracts, and concerns about how to track their dollars to shared pools of sustainment assets, as discussed in detail below. Unexplained or unexpected growth in actual sustainment costs: Service headquarters officials cited concerns about unexplained or unexpected growth in sustainment costs, particularly between the cost estimate that they were quoted for budget planning purposes and what they are actually charged by the program office in the budget execution year. For example, according to program documentation, the Marine Corps was initially given a funding requirement for fiscal year 2017 sustainment support of $293 million, which then increased to $364 million in the execution year, largely due to increases in contractor personnel costs. Marine Corps officials said that the reasons behind this growth in personnel costs were not clearly substantiated for the Marine Corps by the program office. In order to afford these increased costs for sustainment support, Marine Corps officials said that the Marine Corps had to reduce its planned flying hours. In another instance, documents provided by the Navy show that the program office increased the cost of the Navy’s and Marine Corps’ combined spare parts requirements for fiscal year 2017 from an original estimate of $261 million to $402 million over the course of the execution year. In addition, service officials told us that they sometimes become aware of the growth in sustainment costs late in the services’ budgeting process, making it difficult for them to find additional funding for such changes. Tracking requirements to negotiated contract services and costs: Officials from two of the services told us that they have had difficulty in tracking their respective services’ requirements to the costs being charged by the program and the capabilities that are negotiated on the contract. For instance, Air Force officials stated that the Air Force specified a desired performance level for AVA of 65 percent to the program office as a minimum target for its squadrons, but ultimately the program office contracted for a target of 52 percent. Air Force officials said they were not aware of this change until after the contract was negotiated. Similarly, Navy officials also told us that the program office does not notify the Navy of changes from the estimated costs to the actual contract costs or the requirements that are included during negotiations for sustainment contracts, even when the requirements differ from what the Navy intended. As a result, officials said that the services often have limited visibility into the support that the contractor will provide along with the actual costs for which the services are responsible, until after the contract is signed. Shared pools of F-35 sustainment assets: These transparency concerns are complicated by the fact that the services are paying into shared pools for F-35 sustainment, and the costs they are being charged for some requirements—such as for spare parts—cannot be directly tracked to an item that the services own or support that is specifically provided to an individual service. Service officials said that the funds they have contributed to the shared sustainment support have not resulted in the expected sustainment support. Specifically, Air Force officials questioned why key performance points in the program—such as depot repair capabilities and supply availability— are lagging by several years in some instances, and said that they need better accounting from the program office on how the money the Air Force has contributed to the program has been spent, and why those funds have not resulted in improved performance. Furthermore, Air Force officials raised questions about whether all program participants are paying for their required shares of F-35 sustainment costs, and said that they have not been able to obtain such information from the program office. This lack of transparency is due in part to insufficient communication between the program office and the services, particularly as requirements and costs change. Program officials have acknowledged that the program office has not always provided the services with the level of detail and clarity around costs that the services would like, but said that recently the program has been more focused on communicating with the military services. Program officials also told us that the services are free to contact the program office should they have any concerns regarding F-35 sustainment costs and how they are shared. However, given the consistent concerns expressed to us across the services, it appears that this level of dialogue has not been adequate to facilitate the services’ understanding of sustainment costs. Two of the services have requested organizations external to the F-35 program to conduct reviews of the program to better understand their respective portions of F-35 sustainment costs and, in some cases, identify potential opportunities for cost savings. While these studies will likely provide valuable information to the services and the program office, they also add costs to an already expensive weapon system. For example, according to program officials, the contract for the study requested by the Marine Corps has cost the program office at least $2.7 million. Further, reliance on one-time studies by external organizations to help program participants understand their F- 35 sustainment costs and associated capabilities is not a practical substitute for the effective communication needed in a program of this magnitude. F-35 program guidance has emphasized the need to ensure that costs are transparent to stakeholders. Further, our prior work examining programs with multiple governmental customers found that when customers understand how costs and underlying assumptions are determined, they can better anticipate potential changes to those assumptions, identify their effects on costs, and incorporate that information into their budget plans. Without better communication on the relationship between the costs and the associated capabilities delivered for F-35 sustainment support, the military services may not be able to appropriately plan for sustainment costs over the life cycle of the F-35 or to make affordability trade-offs between requirements, as they try to prioritize funding within their budgets. DOD’s F-35 program is at a critical juncture. With aircraft development nearing completion within the next few years, DOD must now shift its attention and resources to sustaining the growing F-35 fleet. While production accelerates, DOD’s reactive approach to planning for and funding the capabilities needed to sustain the F-35 has resulted in significant readiness challenges—including multi-year delays in establishing repair capabilities and spare parts shortages. There is little doubt that the F-35 brings unique capabilities to the U.S. military, but without revising sustainment plans to include the key requirements and decision points needed to fully implement the F-35 sustainment strategy, and without aligned funding plans to meet those requirements, DOD is at risk of being unable to leverage the capabilities of the aircraft it has recently purchased. Furthermore, until it improves its plans, DOD faces a larger uncertainty as to whether it can successfully sustain a rapidly expanding fleet. DOD’s plan to enter into multi-year, performance-based contracts with the prime contractor has the potential to produce cost savings and other benefits. However, important lessons are emerging from its pilot agreements with the contractor that are intended to inform the upcoming multi-year contract negotiations. To date, DOD has not achieved the desired aircraft performance under the pilot agreements, but it continues to move quickly toward negotiating longer-term contracts—which are likely to cost tens of billions of dollars—by 2020. Without examining whether it has the appropriate metrics to incentivize the contractor or a sufficient understanding of the actual costs and technical characteristics of the aircraft before entering into multi-year, performance-based contracts, DOD could find itself overpaying for sustainment support that is not sufficient to meet warfighter requirements. Finally, on a broader level, DOD’s projected costs to sustain the F-35 fleet over its life cycle have risen since 2012 despite the department’s concerted efforts to reduce costs. Already the most expensive weapon system in DOD’s history, these rising costs are particularly concerning because the military services do not fully understand what they are paying for. This puts them in a precarious position as they consider critical trade-offs that might make F-35 sustainment more affordable. Without improving communication with the services to help them better understand how the sustainment costs they are being charged relate to the capabilities that they receive, the services may not be able to effectively budget for the F-35 over the long term. We are making the following four recommendations to DOD. The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should revise sustainment plans to ensure that they include the key requirements and decision points needed to fully implement the F-35 sustainment strategy and aligned funding plans to meet those requirements. (Recommendation 1) The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should re-examine the metrics that it will use to hold the contractor accountable under the fixed-price, performance-based contracts to ensure that such metrics are objectively measurable, are fully reflective of processes over which the contractor has control, and drive desired behaviors by all stakeholders. (Recommendation 2) The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should, prior to entering into multi-year, fixed-price, performance- based contracts, ensure that DOD has sufficient knowledge of the actual costs of sustainment and technical characteristics of the aircraft after baseline development is complete and the system reaches maturity. (Recommendation 3) The Under Secretary of Defense for Acquisition, Technology, and Logistics, in coordination with the F-35 Program Executive Officer, should take steps to improve communication with the services and provide more information about how the F-35 sustainment costs they are being charged relate to the capabilities received. (Recommendation 4) We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix II, DOD concurred with our recommendations and identified actions that it would take in response. We are sending copies of this report to appropriate congressional committees; the Secretary of Defense; the Under Secretary of Defense for Acquisition, Technology, and Logistics; the F-35 Program Executive Officer; the Secretaries of the Air Force and Navy; and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-5431 or russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff members making key contributions to this report are listed in appendix III. For each of our objectives, we reviewed relevant sustainment plans, guidance, and program documentation, and collected information by interviewing officials from the Office of the Assistant Secretary of Defense (Logistics and Materiel Readiness), the F-35 Joint Program Office, the U.S. Air Force, the U.S. Navy, the U.S. Marine Corps, and the prime contractor, Lockheed Martin. To interview officials and observe F-35 operations, maintenance, and training, we conducted visits to two F-35 operational locations—Hill Air Force Base, Utah, and Marine Corps Air Station Iwakuni, Japan; two F-35 training locations—Eglin Air Force Base, Florida, which also includes a Navy F-35 training squadron, and Marine Corps Air Station Beaufort, South Carolina; and two F-35 maintenance depots—Ogden Air Logistics Complex, Utah, and Fleet Readiness Center Southeast, Florida. A full listing of organizations with whom we met is provided later in this appendix. We also gathered various data related to F-35 sustainment, such as supply chain and repair data and aircraft performance data. To determine the reliability of these data, we collected information on how the data were collected, managed, and used through a questionnaire and interviews with cognizant Department of Defense (DOD) officials and the prime contractor. In our assessment, we identified some limitations in the way that certain data are collected and reported, such as data related to aircraft performance (Air Vehicle Availability, Full Mission Capable, and Mission Effectiveness metrics), data related to aircraft that are not mission capable due to supply issues, and parts cannibalization rates that could potentially result in inaccuracies. However, these data come from the program’s data systems of record, and are the same data used by the program office and prime contractor to monitor the health of the supply chain and assess aircraft performance against contract requirements and program objectives. As such, they are the best source of data available to provide information on the progress and challenges within the program. We determined that these data presented in our findings are sufficiently reliable for the way in which we report them. Specifically, the parts cannibalization rates are consistent with the trends observed across other key data elements within the program, and with the testimonial evidence provided to us by the units with whom we met during our review, and are sufficiently reliable to report as a data trend relative to program objectives. All other performance data presented in our report are sufficiently reliable to present as specific data points, in order to describe the status of sustainment requirements and measured aircraft performance across key metrics as reported by the prime contractor and DOD. To assess the status of DOD’s efforts to sustain the F-35 fleet and any challenges it has faced, we reviewed DOD and contractor plans, briefings, and schedules to determine the current status of key requirements and decision points necessary to establish F-35 sustainment capabilities, such as depot and other maintenance capabilities, the supply chain, technical data, and development of key software systems, among other things, and spoke with cognizant officials about these issues. We also compared actual data obtained about F-35 repair and supply chain capabilities with DOD’s objectives for these capabilities to identify areas of challenge for the program. Specifically, we obtained data on aircraft that were not mission capable due to supply issues from January 2017 through August 7, 2017 and average repair times as of May 2017, in order to provide the most recently available information about the health of the supply chain. As discussed above, we determined that these data are sufficiently reliable to present as specific data points. In addition, we identified key acquisition program management practices that can improve program outcomes if implemented—such as clearly establishing well-defined requirements, developing realistic cost estimates and schedules, and securing stable funding that matches resources to requirements—and assessed DOD’s sustainment planning efforts against these criteria. To assess the extent to which DOD is positioned to enter into multi-year performance-based F-35 sustainment contracts, we reviewed documentation related to DOD’s pilot—or trial— performance-based agreements for F-35 sustainment, such as sustainment contracts, readiness data provided by the military services, metric taxonomies, and agreements between the program office and the military services that identify the services’ desired performance targets. We also obtained aircraft performance data from the Sustainment Performance Management System for the 2016 pilot performance-based agreement (March 2016 – December 2016) and the 2017 pilot performance-based agreement (March 2017 – June 2017) to the extent available at the time we completed our audit work. As discussed above, we determined that these data are sufficiently reliable to present as specific data points. These time periods are the only time periods for which the program office has assessed contractor performance under these pilot arrangements. We also reviewed performance-management guidance and processes and interviewed officials to determine how performance data are being collected and assessed. In addition, we reviewed aircraft maturity, reliability, and maintainability data, and documentation related to cost- visibility issues, and we spoke with cognizant officials about these issues to determine DOD’s level of understanding of the costs and technical characteristics that will affect future sustainment support. In addition, we obtained cannibalization data from March 2016 to March 2017 in order to review and report recent trends in cannibalization rates over a time in which the program has introduced a significant amount of aircraft to the fleet. As discussed above, we determined that these data are sufficiently reliable to present as trend data relative to the program objective. Further, we reviewed DOD guidance and best practices related to performance- based agreements to identify attributes of ideal performance metrics and effective performance-based agreements. We then compared these attributes with the information described above to determine whether DOD has the appropriate metrics to achieve desired outcomes and the necessary information to effectively negotiate multi-year, fixed-price, performance-based contracts with the prime contractor by 2020, as planned. To assess the progress, if any, DOD has made toward reducing F-35 sustainment costs, and the extent to which costs are transparent to the military services, we reviewed F-35 Joint Program Office sustainment- cost estimates from fiscal year 2012 to fiscal year 2016 in order to identify changes to the estimate since the program’s sustainment cost baseline was established in 2012; documentation related to program office and service cost-reduction efforts; sustainment contracts; F-35 cost-sharing rules; and budget documentation from both the program office and the military services. The fiscal year 2016 sustainment-cost estimate is the most current cost estimate conducted by the program office. In addition, we interviewed cognizant officials from the F-35 Joint Program Office and military services to discuss how the program office informs the military services of F-35 sustainment costs, and the degree to which the services understand these costs and the sustainment capabilities provided for those costs. We compared this information with program guidance and with key operating principles for programs that involve multiple governmental customers identified in our prior work in order to assess the transparency of F-35 sustainment costs for the military services. We conducted this performance audit from October 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We met with officials from the following Department of Defense (DOD) and contractor organizations during our review. We selected these organizations based on their oversight, planning, and execution roles in support of F-35 sustainment and operations. In addition to the contact named above, Alissa Czyz (Assistant Director), Vincent Buquicchio, Kasea Hamar, Jeff Hubbard, Amie Lesser, Sean Manzano, Carol Petersen, Clarice Ransom, Michael Silver, Maria Staunton, Cheryl Weissman, and Delia Zee made key contributions to this report. F-35 Joint Strike Fighter: DOD’s Proposed Follow-on Modernization Acquisition Strategy Reflects an Incremental Approach Although Plans Are Not Yet Finalized. GAO-17-690R. Washington, D.C.: August 8, 2017. F-35 Joint Strike Fighter: DOD Needs to Complete Developmental Testing Before Making Significant New Investments. GAO-17-351. Washington, D.C.: April 24, 2017. F-35 Joint Strike Fighter: Continued Oversight Needed as Program Plans to Begin Development of New Capabilities. GAO-16-390. Washington, D.C.: April 14, 2016. F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its Central Logistics System. GAO-16-439. Washington, D.C.: April 14, 2016. F-35 Joint Strike Fighter: Preliminary Observations on Program Progress. GAO-16-489T. Washington, D.C.: March 23, 2016. F-35 Joint Strike Fighter: Assessment Needed to Address Affordability Challenges. GAO-15-364. Washington, D.C.: April 14, 2015. F-35 Sustainment: Need for Affordable Strategy, Greater Attention to Risks, and Improved Cost Estimates. GAO-14-778. Washington, D.C.: September 23, 2014. F-35 Joint Strike Fighter: Slower Than Expected Progress in Software Testing May Limit Initial Warfighting Capabilities. GAO-14-468T. Washington, D.C.: March 26, 2014. F-35 Joint Strike Fighter: Problems Completing Software Testing May Hinder Delivery of Expected Warfighting Capabilities. GAO-14-322. Washington, D.C.: March 24, 2014. F-35 Joint Strike Fighter: Restructuring Has Improved the Program, but Affordability Challenges and Other Risks Remain. GAO-13-690T. Washington, D.C.: June 19, 2013. F-35 Joint Strike Fighter: Program Has Improved in Some Areas, but Affordability Challenges and Other Risks Remain. GAO-13-500T. Washington, D.C.: April 17, 2013. F-35 Joint Strike Fighter: Current Outlook Is Improved, but Long-Term Affordability Is a Major Concern. GAO-13-309. Washington, D.C.: March 11, 2013. Joint Strike Fighter: DOD Actions Needed to Further Enhance Restructuring and Address Affordability Risks. GAO-12-437. Washington, D.C.: June 14, 2012. Joint Strike Fighter: Restructuring Added Resources and Reduced Risk, but Concurrency Is Still a Major Concern. GAO-12-525T. Washington, D.C.: March 20, 2012. Joint Strike Fighter: Implications of Program Restructuring and Other Recent Developments on Key Aspects of DOD’s Prior Alternate Engine Analyses. GAO-11-903R. Washington, D.C.: September 14, 2011. Joint Strike Fighter: Restructuring Places Program on Firmer Footing, but Progress Is Still Lagging. GAO-11-677T. Washington, D.C.: May 19, 2011. Joint Strike Fighter: Restructuring Places Program on Firmer Footing, but Progress Still Lags. GAO-11-325. Washington, D.C.: April 7, 2011. Joint Strike Fighter: Restructuring Should Improve Outcomes, but Progress Is Still Lagging Overall. GAO-11-450T. Washington, D.C.: March 15, 2011.", "summary": "The F-35 aircraft represents the future of tactical aviation for the U.S. military, and is DOD's most expensive weapon system, with sustainment costs alone estimated at more than $1 trillion over a 60-year life cycle. As the F-35 program approaches full-rate production, DOD is working to deliver an affordable sustainment strategy that is able to meet the needs of the military services. This strategy is being tested as DOD stands up military depots, trains personnel, and supports its first operational squadrons—with plans to establish multi-year, performance-based contracts by 2020. The National Defense Authorization Act for fiscal year 2017 includes a provision for GAO to review the F-35 program's sustainment support structure. This report assesses (1) the status of DOD's efforts to sustain the F-35 fleet and any challenges it has faced; (2) the extent to which DOD is positioned to enter into multi-year, performance-based F-35 sustainment contracts; and (3) the progress, if any, DOD has made toward reducing F-35 sustainment costs and the extent to which costs are transparent. GAO reviewed DOD and contractor documentation, analyzed data, and interviewed relevant officials. The Department of Defense (DOD) is sustaining over 250 F-35 aircraft (F-35) and plans to triple the fleet by the end of 2021, but is facing sustainment challenges that are affecting warfighter readiness (see table). These challenges are largely the result of sustainment plans that do not fully include key requirements or aligned (timely and sufficient) funding. DOD is taking steps to address some challenges, but without more comprehensive plans and aligned funding, DOD risks being unable to fully leverage the F-35's capabilities and sustain a rapidly expanding fleet. DOD's plan to enter into multi-year, performance-based F-35 sustainment contracts with the prime contractor has the potential to produce costs savings and other benefits, but DOD may not be well positioned to enter into such contracts by 2020. To date, DOD has not yet achieved its desired aircraft performance under pilot (i.e., trial) performance-based agreements with the prime contractor. In addition, the level of performance DOD has contracted for is generally below what the services desire (see figure 2 for Marine Corps example). Also, the three performance metrics DOD is using to incentivize the contractor under these pilot agreements may not be the appropriate metrics to achieve desired outcomes, in part because they are not fully reflective of processes for which the contractor has control. This can make it difficult for DOD to hold the contractor accountable. Further, due to system immaturity, DOD does not have full information on F-35 sustainment costs and technical characteristics such as reliability and maintainability, which could hinder its ability to effectively negotiate performance-based contracts with the contractor by 2020. Without examining whether it has the appropriate metrics to incentivize the contractor or a full understanding of the actual costs and technical characteristics of the aircraft before entering into multi-year, performance-based contracts, DOD risks overpaying the contractor for sustainment support that does not meet warfighter requirements. DOD has taken actions to reduce F-35 sustainment costs, but estimated life cycle costs have increased and are not fully transparent to the military services (see figure 3). Specifically, the services do not fully understand how the costs they are being charged by the program office are linked to the capabilities they are receiving, citing unexplained cost increases and difficulty in tracking their requirements to contracts. For example, the Marine Corps received an initial funding requirement for fiscal year 2017 sustainment of $293 million, which then increased to $364 million in the execution year. This lack of transparency is due in part to insufficient communication between the program office and the services, and it puts the services in a difficult position as they consider critical trade-offs that may make F-35 sustainment more affordable. Without improving communication with the services about the costs they are being charged, the services may not be able to effectively budget for long-term sustainment. GAO recommends that DOD revise sustainment plans, re-examine metrics and ensure that it has sufficient knowledge of costs and technical characteristics before entering into performance-based contracts, and improve communication with the services about sustainment costs. DOD concurred with these recommendations.", "document_type": "gao"}
{"report": "IHS was established within the Public Health Service in 1955 to provide certain health services to members of federally recognized AI/AN tribes, primarily in rural areas on or near reservations. IHS provides services directly through a network of hospitals, clinics, and health stations operated by IHS, and also funds services provided at tribally operated facilities. As of October 2017, IHS, tribes, and tribal organizations operated 168 service units, 48 hospitals, and 560 ambulatory care centers—including health centers, school health centers, health stations, and Alaska village clinics. See table 1. According to IHS officials, the agency provides services almost exclusively in locations designated as Health Professional Shortage Areas, with most locations identified as extreme shortage areas. In addition, IHS data indicate that about 35 percent of certain IHS facilities, including four hospitals, were identified as isolated hardship posts in 2016. IHS oversees its health care facilities through a decentralized system of 12 area offices, which are led by area directors; 10 of these 12 IHS areas have federally operated IHS facilities. IHS’s headquarters office is responsible for setting health care policy, helping to ensure the delivery of quality comprehensive health services, and advocating for the health needs and concerns of AI/AN people. The IHS area offices are responsible for distributing funds to the facilities in their areas, monitoring their operation, and providing guidance and technical assistance. IHS’s estimated budget authority for fiscal year 2018 is over $5.6 billion, an increase of almost $580 million from its enacted budget authority of just over $5 billion in fiscal year 2017. IHS has agreements with tribes and tribal organizations by which it transfers a substantial portion of its budget authority to tribes and tribal organizations. For example, in 2017, the agency transferred approximately 54 percent of its total budget authority to tribes and tribal organizations to operate part or all of their own health care programs through self-determination contracts and self- governance compacts. Self-determination contracts: IHS had 373 self-determination contracts in place with 220 tribes in 2017. Self-governance compacts: IHS had 98 self-governance compacts in place—including 124 funding agreements—with 360 tribes in 2017. See figure 1 for the percentage of IHS’s total budget authority transferred to tribes in fiscal year 2017. According to IHS officials, over the last few years an increasing number of tribes have sought to enter into contracts and compacts with IHS to assume responsibility for some or all of their health care programs, and thereby receive funding from IHS. Unless otherwise specified in law, funding included in annual appropriation acts is available for obligation during a single fiscal year, after which it expires. For this reason, the continuation of normal government operations depends upon the enactment each fiscal year of a new appropriations act. Any lapse in appropriations—a funding gap— causes most government functions to shut down. To avert a government shutdown, Congress may enact one or more CRs. CRs are spending bills that provide funds to allow agencies to operate during a specified period of time while Congress works to pass an annual appropriations act. Relevant aspects of the federal budget environment include the following. Frequency of CRs and shutdowns. In all but 4 of the last 40 fiscal years—including fiscal year 2018—Congress has enacted CRs. Since fiscal year 1999, CRs have varied greatly in their number and duration— the number of CRs enacted in each year ranged from 2 to 21, and the duration of CRs has ranged from 1 to 187 days. Regarding lapses in appropriations that resulted in government shutdowns, in January 2018 the government partially shut down for 3 calendar days after the CR in place expired. Other shutdowns have lasted longer—16 calendar days in October 2013 and 21 calendar days in December 1995 through January 1996. We have previously reported on the effects of CRs and shutdowns for federal agencies. Budget authority during a CR. CRs provide “such amounts as may be necessary” to maintain operations consistent with the prior fiscal year’s appropriations and authorities. To control spending in this manner, CRs generally prohibit agencies from initiating new activities and projects for which appropriations, funds, or other authorities were not available in the prior fiscal year. They also require agencies to take the most limited funding actions necessary to maintain operations at the prior fiscal year’s level. Budget authority during a funding gap. Certain federal health care programs have various budget authorities that can allow for continued operations during a funding gap. For example, VA’s advance appropriations authority for its health care programs allows operations to continue after one appropriation expires, using the previously enacted budget for the next year. Although IHS does not have this authority, Congress has enacted longer periods of availability for certain IHS appropriations that would allow the activities they support to continue during a funding gap, assuming the appropriation has not run out. For example, IHS’s appropriation for Indian health facilities remains available until expended, in contrast to its appropriation for Indian health services, which is generally available for a single fiscal year. In this regard, funds for Indian health services that IHS transfers to tribes and tribal organizations during the 1-year period of availability are deemed to be obligated at the time of the award and thereafter remain available to the tribes to operate their own health care programs without fiscal year limitation. Thus, to the extent sufficient funding remained available from federal or other sources during a lapse in appropriations, a tribe could continue to operate its own health care programs during a shutdown. To operate IHS’s health care system on an emergency basis during a funding gap, IHS would need to determine what programs and activities qualified for an emergency exception under the law. Contingency planning for government shutdowns. Federal agencies must determine what activities and programs they are permitted or required to continue prior to a potential shutdown. This includes designating certain employees as “excepted” employees who would be expected to continue to work during the shutdown and who would be paid upon the enactment of an appropriation. Employees who are not “excepted” would be subject to furlough. Citing funding uncertainty associated with continued use of CRs, AI/AN advocacy groups such as the National Indian Health Board have requested that Congress grant IHS advance appropriation authority; legislation to provide IHS this authority has been introduced more than once. The most recent such legislation, H.R. 235, introduced in January 2017 (not enacted), would have provided IHS with 2-year fiscal budget authority for its Indian health services and Indian health facilities accounts, similar to the authority that VA currently has for its health care appropriation accounts. HHS, on behalf of IHS, has not requested that IHS be granted advance appropriation authority during its annual budget submissions to Congress. VA, through the VHA, operates one of the nation’s largest health care systems, with 171 VA medical centers, more than 1,000 outpatient facilities, and total health care budget authority of about $69 billion in fiscal year 2017. VA provided health care services to about 6.8 million veterans in fiscal year 2017, and the agency forecasts that demand for its services is expected to grow in the coming years. VA was granted advance appropriation authority for specified medical care accounts in the Veterans Health Administration in 2009. Currently, VA’s annual appropriations for health care include advance appropriations that become available in the fiscal year after the fiscal year for which the appropriations act was enacted. Under this authority, VA receives advance appropriations for VHA’s Medical Services, Medical Support and Compliance, Medical Facilities, and Medical Community Care appropriations accounts and is required to provide Congress with detailed estimates of funds needed to provide its health care services for the fiscal year for which advance appropriations are to be provided. According to VA officials, veterans service organizations were the primary advocates who sought advance appropriation authority for VA’s health care program. In its health care budget proposal each year, VA submits a request for the upcoming fiscal year, as well as an advance appropriation request for the following year. In early 2018, for example, VA submitted a request for fiscal year 2019, as well as a fiscal year 2020 advance appropriation request. According to VA, more than 90 percent of its budget request is developed using an actuarial model that is based in part on VA’s actual health care utilization data from prior years; for example, the 2020 advance appropriation request used fiscal year 2016 data. VHA officials said that the agency calculates its advance appropriation request to fund needed care as estimated by its actuarial model, with less funding requested for other expenses (such as non-recurring maintenance) and officials told us this is consistent with direction provided by OMB. OMB officials told us that the amount provided in the advance appropriation is intended to provide VA with some assurances that it will be able to continue health care operations seamlessly across fiscal years. In the subsequent year (the year during which the advance appropriation can be used), VA may request an adjustment to the amount previously provided through advance appropriations—referred to by agency officials as a “second bite”—an arrangement that is intended by design to help respond to more recent policy changes or significant events. For example, VA requested a “second bite” increase of $2.65 billion for fiscal year 2018, to the $66.4 billion initially provided to its VHA accounts through its advance appropriation. Both OMB and VHA officials said this “second bite” provides an opportunity to make an adjustment to VA’s advance appropriation using updated utilization data. VHA officials told us that changes in policy (such as determining which veterans or what health benefits can be covered) sometimes drive changes from the initial budget request. For example, policy changes can include adding an additional presumptive condition—such as health conditions associated with Agent Orange exposure—resulting in a new health benefit, or a costly new drug treatment, as in the case of the addition to the drug formulary of a new Hepatitis C drug treatment. Despite having advance appropriation authority, VA has faced challenges in budget formulation, in addition to the general management and oversight challenges we cited in adding VA to our High-Risk List in 2015. Specifically, we reported in our 2017 update to the High-Risk List that VA faces challenges regarding the reliability, transparency, and consistency of its budget estimates for medical services, as well as weaknesses in tracking obligations for medical services and estimating budgetary needs for future years. These challenges were evident in June 2015, when VA requested authority from Congress to move funds from another appropriation account because agency officials projected a fiscal year 2015 funding gap of about $3 billion in its medical services appropriation account. IHS officials, tribal representatives, and other stakeholders we spoke with described how budget uncertainty resulting from CRs and government shutdowns can have a variety of effects on the provision of IHS-funded health care services for AI/ANs. The following summarizes these effects, along with the views of IHS officials, tribal representatives, and other stakeholders on how advance appropriation authority could mitigate them, and VA’s related experiences: Provision of health care services. IHS officials said that, in general, most health care services would be expected to continue at IHS-operated facilities during a shutdown, as health care providers would be deemed “excepted” personnel under the agency’s contingency plan. However, officials noted some health care procedures could be delayed, as determined on a case-by-case basis at the local level. IHS officials also acknowledged that tribal health care programs may not have access to furloughed IHS staff who do not work during a shutdown, such as support staff at local IHS area offices, who may carry out administrative duties on their behalf. For example, tribal representatives told us that during a previous government shutdown, finance employees from the local IHS area offices were furloughed (and thus not permitted to work), which created challenges for tribal health care operations that depended on these IHS employees to process payments and agreements. IHS officials stated they believe advance appropriations could help ensure continuity of health care services through certainty of funding. IHS officials also said that while lapses in appropriations do not halt patient care, they do create complications—such as the determination of excepted personnel as described above—that could be eliminated by funding provided through advance appropriations. Tribal representatives said the certainty of funding that would come with IHS having advance appropriations would create a sense of stability in tribal health care programs as well. VA VISN officials we spoke to said having advance appropriations has improved their ability to manage resources for continuity of services and allowed them to avoid the substantial additional planning that occurs before a potential government shutdown when agencies are determining which providers and staff would be deemed excepted. According to the VISN officials, knowing that funding is coming—as opposed to having less certainty—would allow an agency to plan and prioritize its services more efficiently. Health care program planning. Tribal representatives said operating health care programs with short-term funding provided through a series of CRs—and facing potential government shutdowns—rather than a full year’s apportionment hinders their ability to plan for new programs and for improvements that need to be carried out across budget years or that require large up-front investments, such as an electronic medical records system or other significant information technology purchases. Tribal representatives said there are often plans that they have to set aside because they don’t have enough funds to start a project during a CR, and—if there are multiple CRs—there is not enough time left in the budget year to start bigger projects once an annual appropriation is passed. Tribal representatives also told us that they believe that advance appropriations would help tribal health care programs plan for current and future needs. For example, one tribal official told us advance appropriations would allow tribes to plan for long-term health initiatives. The official’s specific tribe has a gestational diabetes program in conjunction with a local university that the tribe could plan to take full responsibility for if they had more funding stability. VA VISN officials we interviewed provided several examples of how they believe advance appropriations facilitate their planning. For example, VISN officials told us advance appropriations allow them to plan strategically for equipment purchases: if they need to buy a CT scanner, they would plan to do site preparation in one year—for example, reconfiguring the space for the new equipment by moving walls, electrical rewiring, etc.—and buy the scanner in the next year. With advance appropriations, they know they are going to have funds for an expensive equipment purchase available the next year; without an advance appropriation, they would not be sure, and could spend funds on preparation and then ultimately not have the funds to make the equipment purchase. These officials also said having advance appropriations gave them confidence in making current plans to provide the new shingles vaccine for their over-50 population in 2019, including the ability to secure an adequate supply of the vaccine from the manufacturer. Provider recruitment and retention. IHS officials and tribal representatives said existing challenges related to their recruitment and retention of health care providers—many of which are related to the rural and remote locations of many of IHS’s facilities—are exacerbated by funding uncertainty resulting from CRs or potential government shutdowns. IHS officials said CRs and government shutdowns can disrupt recruitment activities such as IHS marketing efforts, job advertisements, application review, interviews, and candidate site visits. Additionally, when recruiting health care providers, IHS officials said CRs and potential government shutdowns create doubt about the stability of employment at IHS amongst potential candidates, which may result in reduced numbers of candidates or withdrawals from candidates during the pre-employment process. IHS officials said that many providers in rural and remote locations are the sole source of income for their families, and the potential for delays in pay resulting from a government shutdown can serve as a disincentive for employees considering public service in critical shortage areas that do not offer adequate spousal employment opportunities. Tribal representatives said CRs create challenges for tribes in funding planned pay increases—such as cost-of-living adjustments— for health care staff at their facilities, and they may, as a result, defer increases. IHS officials and tribal representatives stated they believe advance appropriations could mitigate these challenges. For example, IHS officials said that with advance appropriations, recruitment and outreach activities could continue without disruption, and selected candidates could be brought on board as scheduled. One tribal representative stated that advance appropriations could help with recruitment by providing perceived job stability that is similar to VA or the private sector. According to VA VISN officials, the agency’s experience with advance appropriation authority suggests that advance appropriations can facilitate physician recruitment, including hiring. If, for example, they were far along in the hiring process at the end of a fiscal year, but could not finalize the hire before the end of the year, having advance appropriations for the next fiscal year provides the certainty that they will be able to make the hire in the new fiscal year. Commercial contracts and vendor negotiations. IHS officials and tribal representatives said budget uncertainty can lead to vendor reluctance to provide services to IHS and tribally operated facilities. IHS officials said they have heard from vendors—who are typically Indian- or veteran- owned small businesses in the communities being served by IHS—that they lose trust in IHS and federally-funded tribal health care programs when they are affected by budget uncertainty. One tribal organization told us delays in receiving full funding because of CRs has inhibited its ability to pay invoices for pharmaceuticals in a timely manner, which has harmed its relationship with its vendors. VISN officials told us that advance appropriations can provide an element of stability to agency funding that may serve to reassure potential vendors. According to VISN officials, vendors can be hard to find in remote and rural areas, and their perception of funding certainty can play a role in encouraging their participation as government contractors. As contracting with the federal government can be burdensome, particularly for smaller vendors, VISN officials said, any measures—such as advance appropriations—that could enhance the stability of agency contracting could make these vendors more likely to participate in government contracting. Administrative burden and costs. IHS officials and tribal representatives said the agency and tribes incur additional administrative burden and costs when the government is funded through multiple CRs, due to the high proportion of IHS funding that is transferred to tribes through contracts and compacts. Specifically, IHS officials said there is an additional administrative burden generated by each CR that results in the distribution of funds to tribes. For each CR period, IHS headquarters staff generate proportional funding allotments, which they provide to individual area offices, which then also conduct processing activities to generate payments from these allotments to the tribes in their areas. As part of this process, IHS officials said they modify hundreds of tribal contracts and make amendments to funding agreements associated with tribal compacts, and those efforts represent a significant administrative burden for IHS staff. Tribal representatives also described administrative burden associated with CRs. As one representative of a group representing several tribes told us, each CR requires the same processing and manpower for each partial payment as for a full apportionment, and moreover, CRs require tracking and reconciliation that is not necessary for a single, full apportionment. IHS officials and tribal representatives noted that time and money spent on these additional administrative activities detract from other priorities, including patient care. IHS officials said that advance appropriations would reduce this administrative burden, and added that having advance appropriations would allow for more efficiency in processing payments to tribes. IHS officials suggested that the agency would have to do less administrative work overall, because currently, under a single year appropriation (with recurrent CRs), they may modify or amend agreements 7 or 8 times within a fiscal year. Although acknowledging that advance appropriation authority would entail the additional burden of preparing budget requests for more than one fiscal year, they expect this administrative burden to be less than those under repeated CRs. Financial effects on tribes. According to tribal representatives we spoke with, funding uncertainty from recurring CRs and from government shutdowns has led to particular adverse financial effects on tribes that operate their own health care programs with funding from IHS. For example, according to tribal representatives, Funding uncertainty surrounding a CR results in more expensive commercial loans (with higher interest rates) to finance construction of new health care facilities. Specifically, a tribal representative said the uncertainty of the availability of funds due to a CR resulted in a downgrading of the tribe’s credit rating, and hence higher interest rates, as it was planning a clinic expansion. During a government shutdown, some tribes must redistribute funds from other budget categories to replace health care funding from IHS in order to continue providing health care services. Some tribes have economic development activities that provide additional funding and facilitate this redistribution, but others do not. For example, one tribal organization said that during the 2013 government shutdown, it had to take out loans and maintain a line of credit in order to pay for services and make payroll. Subsequently, that tribal organization had to pay interest on those loans, causing greater financial hardship. Tribes attempt to mitigate the challenge of not knowing their final annual payment from IHS under recurrent CRs by keeping extra funds in reserve for emergencies, which limits the remaining funds available for providing health care services. Short-term funding under CRs or delayed funding after a lapse in appropriations can limit the ability of tribes and tribal organizations to invest funds from IHS and generate interest that can be reinvested in tribal health care programs. CRs have affected the ability of tribes to reduce costs by planning for bulk purchases at favorable rates. For example, some tribes in Alaska prefer to make bulk purchases of heating oil during “barge season’’— when waterways are still navigable and not frozen. If they do not have enough money for a bulk purchase because of a CR’s limited funding, they must purchase fuel in smaller quantities, which is ultimately significantly more expensive. Tribal representatives told us one beneficial financial effect of advance appropriations for tribes could be providing opportunities for longer term contracts with vendors, which could result in cost savings that could be used for tribal health care programs. We identified three types of considerations for policymakers related to providing advanced appropriation authority to IHS—operational, congressional flexibility, and agency capacity and leadership considerations. We identified these considerations based on a review of our 2009 testimony that examined considerations for granting VA advance appropriation authority, in which we identified key questions that would be applicable to any agency being granted such authority, and our interviews with VA, IHS, and other officials. In our 2009 testimony, we noted that proposals to change the availability of the appropriations for VA deserved careful scrutiny, given the challenges the agency faces in formulating its health care budget and the changing nature of health care. Similar consideration would apply to IHS. Operational considerations. If Congress were to grant IHS advance appropriation authority, it would need to make operational decisions regarding what amount of IHS funding would be provided in advance appropriations, with input from OMB and IHS as appropriate. Specifically, Congress could consider the following questions: (1) What proportion of IHS’s estimated budget would be provided in the advance appropriation—the full amount, or less (as is the case for VA)? Which appropriations accounts would be included? Further, would funds intended for transfer to tribes be handled differently? (2) Under what conditions, if any, would there be changes to funding provided through advance appropriations during the next budget cycle? For example, would Congress expect to adjust the advance appropriation amount through a “second bite,” as is the case with VA? Congressional flexibility considerations. We reported in 2009 that consideration of any proposal to change the availability of the appropriations VA receives for health care should take into account the impact of any change on congressional flexibility and oversight. These same considerations hold merit regarding potential changes to the appropriation status of any federal agency, including IHS. Specifically, advance appropriation authority reduces flexibility for congressional appropriators, because it reduces what is left for the overall budget for the rest of the government—meaning the total available for appropriations for a budget year is reduced by the amount of advance appropriations for that year, when budgets have caps. Agency capacity and leadership considerations. IHS officials told us they believe the agency’s current budget planning processes would be adequate for estimating advance appropriation budget requests, because IHS begins planning for its budget request 3 years in advance. Officials added that IHS plans its budget so far in advance to have sufficient time to work with tribes in formulating recommendations for its budget request. IHS officials said that a downside to planning so far in advance is that they do not necessarily have the most current information while formulating the budget request. In addition, we noted prior to VA receiving advance appropriation authority that advance appropriation authority could potentially exacerbate existing challenges when developing or managing a budget, generally, due in part to the higher risk of uncertainty when developing estimates that are an additional 12 months out from the actual budget year (e.g., 30 months out instead of 18 months). We raised certain capacity and leadership concerns based on our previous work when we added IHS to our High-Risk List in 2017. Further, in June 2018, we found that while IHS had taken some actions to partially address these concerns, additional progress was needed to fully address these management weaknesses. For example, IHS still does not have permanent leadership—including a Director of IHS—which is necessary for the agency to demonstrate its commitment to improvement. Additionally, while the agency has made some progress in demonstrating it has the capacity and resources necessary to address the program risks we identified in our reports, there are still vacancies in several key positions, including in the Office of Finance and Accounting. While not directly related to consideration of advance appropriations, IHS’s high-risk designation and continuing challenges in mitigating the deficiencies in its program point to questions about the agency’s capacity to implement such a change to its budget formulation process. We provided a draft of this report to HHS and VA for review and comment. HHS did not have any comments. We received general comments from VA that are reprinted in appendix I. We also provided relevant draft portions of this report to NIHB, which represents tribal and AI/AN interests. NIHB provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretaries of the Department of Health and Human Services and the Department of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or farbj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Kathleen M. King (Director), Karen Doran (Assistant Director), Julie T. Stewart (Analyst-in-Charge), Kristen J. Anderson, and Leonard S. Brown made key contributions to this report. Also contributing were Sam Amrhein, George Bogart, Christine Davis, and Vikki Porter.", "summary": "IHS, an agency within the Department of Health and Human Services (HHS), receives an annual appropriation from Congress to provide health care services to over 2 million American Indians and Alaska Natives (AI/AN) who are members of 573 tribes. IHS generally provides services through direct care at facilities such as hospitals and health centers. Some tribes receive IHS funding to operate their own health care facilities. Tribal representatives have sought legislative approval to provide IHS advance appropriation authority stating that it would facilitate planning and more efficient spending. Experts have reported that agencies can use the authority to prevent funding gaps, and avoid uncertainties associated with receiving funds through CRs. House Report 114-632 included a provision for GAO to review the use of advance appropriations authority and applications to IHS. Among other things, this report (1) describes advance appropriation authority considerations identified by stakeholders for providing IHS-funded health care services, and (2) identifies other considerations for policymakers related to providing the authority to IHS. GAO reviewed its prior reports related to IHS, VA, government shutdowns, and CRs, and interviewed officials from IHS, several tribes and other organizations representing AI/AN interests, the Office of Management and Budget, VA and other experts. GAO provided a draft of this report to HHS, which had no comments; to VA, which provided general comments; and to tribal representatives, which provided technical comments that were incorporated as appropriate. The Indian Health Service (IHS), like most federal agencies, must use appropriations in the year for which they are enacted. However, there has been interest in providing IHS with advance appropriation authority, which would give the agency authority to spend a specific amount 1 or more fiscal years after the fiscal year for which the appropriation providing it is enacted. Currently, the Department of Veterans Affairs (VA) is the only federal provider of health care services to have such authority. Stakeholders interviewed by GAO, including IHS officials and tribal representatives, identified effects of budget uncertainty on the provision of IHS-funded health care as considerations for providing IHS with advance appropriation authority. Budget uncertainty arises during continuing resolutions (CR)—temporary funding periods during which the federal government has not passed a budget—and during government shutdowns. Officials said that advance appropriation authority could mitigate the effects of this uncertainty. IHS officials and tribal representatives specifically described several effects of budget uncertainty on their health care programs and operations, including the following: Provider recruitment and retention. Existing challenges related to the recruitment and retention of health care providers—such as difficulty recruiting providers in rural locations—are exacerbated by funding uncertainty. For example, CRs and government shutdowns can disrupt recruitment activities like application reviews and interviews. Administrative burden and costs. Both IHS and tribes incur additional administrative burden and costs as IHS staff calculate proportional allocations for each tribally operated health care program and modify hundreds of tribal contracts each time a new CR is enacted by Congress to conform to limits on available funding. Financial effects on tribes. Funding uncertainty resulting from recurring CRs and from government shutdowns has led to adverse financial effects on tribes and their health care programs. For instance, one tribe incurred higher interest on loans when the uncertainty of the availability of federal funds led to a downgraded credit rating, as it was financing construction of a health care facility. GAO identified various considerations for policymakers to take into account for any proposal to change the availability of the appropriations that IHS receives. These considerations include operational considerations, such as what proportion of the agency's budget would be provided in the advance appropriation and under what conditions changes to the funding provided through advance appropriations would be permitted in the following year. Additionally, congressional flexibility considerations arise because advance appropriation authority reduces what is left for the overall budget for the rest of the government. Another consideration is agency capacity and leadership, including whether IHS has the processes in place to develop and manage an advance appropriation. GAO has reported that proposals to change the availability of appropriations deserve careful scrutiny, an issue underscored by concerns raised when GAO added IHS to its High-Risk List in 2017.", "document_type": "gao"}
{"report": "According to the President’s budget, the federal government plans to invest more than $96 billion for IT in fiscal year 2018—the largest amount ever budgeted. Despite such large IT expenditures, we have previously reported that investments in federal IT too often result in failed projects that incur cost overruns and schedule slippages, while contributing little to the desired mission-related outcomes. For example: The tri-agency National Polar-orbiting Operational Environmental Satellite System was disbanded in February 2010 by the White House’s Office of Science and Technology Policy after the program spent 16 years and almost $5 billion. The Department of Homeland Security’s (DHS) Secure Border Initiative Network program was ended in January 2011, after the department obligated more than $1 billion for the program. The Department of Veterans Affairs’ Financial and Logistics Integrated Technology Enterprise program was intended to be delivered by 2014 at a total estimated cost of $609 million, but was terminated in October 2011. The Department of Defense’s Expeditionary Combat Support System was canceled in December 2012 after spending more than a billion dollars and failing to deploy within 5 years of initially obligating funds. The United States Coast Guard (Coast Guard) decided to terminate its Integrated Health Information System project in 2015. As reported by the agency in August 2017, the Coast Guard spent approximately $60 million over 7 years on this project, which resulted in no equipment or software that could be used for future efforts. Our past work has found that these and other failed IT projects often suffered from a lack of disciplined and effective management, such as project planning, requirements definition, and program oversight and governance. In many instances, agencies had not consistently applied best practices that are critical to successfully acquiring IT. Such projects have also failed due to a lack of oversight and governance. Executive-level governance and oversight across the government has often been ineffective, specifically from CIOs. For example, we have reported that some CIOs’ roles were limited because they did not have the authority to review and approve the entire agency IT portfolio. In addition to failures when acquiring IT, security deficiencies can threaten systems once they become operational. As we previously reported, in order to counter security threats, 23 civilian Chief Financial Officers Act agencies spent a combined total of approximately $4 billion on IT security-related activities in fiscal year 2016. Even so, our cybersecurity work at federal agencies continues to highlight information security deficiencies. The following examples describe the types of risks we have found at federal agencies. In November 2017, we reported that the Department of Education’s Office of Federal Student Aid did not consistently analyze privacy risks for its electronic information systems, and policies and procedures for protecting information systems were not always up to date. In August 2017, we reported that, since the 2015 data breaches, the Office of Personnel Management (OPM) had taken actions to prevent, mitigate, and respond to data breaches involving sensitive personal and background investigation information. However, we noted that the agency had not fully implemented recommendations made to OPM by DHS’s United States Computer Emergency Readiness Team to help the agency improve its overall security posture and improve its ability to protect its systems and information from security breaches. In July 2017, we reported that IT security at the Internal Revenue Service had weaknesses that limited its effectiveness in protecting the confidentiality, integrity, and availability of financial and sensitive taxpayer data. An underlying reason for these weaknesses was that the Internal Revenue Service had not effectively implemented elements of its information security program. In May 2016, we reported that the National Aeronautics and Space Administration, the Nuclear Regulatory Commission, OPM, and the Department of Veteran Affairs did not always control access to selected high-impact systems, patch known software vulnerabilities, and plan for contingencies. An underlying reason for these weaknesses was that the agencies had not fully implemented key elements of their information security programs. In August 2016, we reported that the IT security of the Food and Drug Administration had significant weaknesses that jeopardized the confidentiality, integrity, and availability of its information systems and industry and public health data. Congress and the President have enacted various key pieces of reform legislation to address IT management issues. These include the federal IT acquisition reform legislation commonly referred to as the Federal Information Technology Acquisition Reform Act (FITARA). This legislation was intended to improve covered agencies’ acquisitions of IT and enable Congress to monitor agencies’ progress and hold them accountable for reducing duplication and achieving cost savings. The law includes specific requirements related to seven areas: Agency CIO authority enhancements. CIOs at covered agencies have the authority to, among other things, (1) approve the IT budget requests of their respective agencies and (2) review and approve IT contracts. Federal data center consolidation initiative (FDCCI). Agencies covered by FITARA are required, among other things, to provide a strategy for consolidating and optimizing their data centers and issue quarterly updates on the progress made. Enhanced transparency and improved risk management. The Office of Management and Budget (OMB) and covered agencies are to make detailed information on federal IT investments publicly available, and agency CIOs are to categorize their investments by level of risk. Portfolio review. Covered agencies are to annually review IT investment portfolios in order to, among other things, increase efficiency and effectiveness and identify potential waste and duplication. Expansion of training and use of IT acquisition cadres. Covered agencies are to update their acquisition human capital plans to support timely and effective IT acquisitions. In doing so, the law calls for agencies to consider, among other things, establishing IT acquisition cadres (i.e., multi-functional groups of professionals to acquire and manage complex programs), or developing agreements with other agencies that have such cadres. Government-wide software purchasing program. The General Services Administration is to develop a strategic sourcing initiative to enhance government-wide acquisition and management of software. In doing so, the law requires that, to the maximum extent practicable, the General Services Administration should allow for the purchase of a software license agreement that is available for use by all executive branch agencies as a single user. Maximizing the benefit of the Federal Strategic Sourcing Initiative. Federal agencies are required to compare their purchases of services and supplies to what is offered under the Federal Strategic Sourcing Initiative. In June 2015, OMB released guidance describing how agencies are to implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls to meet the law’s requirements, while providing agencies with flexibility to adapt to unique agency processes and requirements; strengthen the relationship between agency CIOs and bureau CIOs; strengthen CIO accountability for IT costs, schedules, performance, and security. The guidance identifies a number of actions that agencies are to take to establish a basic set of roles and responsibilities (referred to as the common baseline) for CIOs and other senior agency officials; and thus, to implement the authorities described in the law. For example, agencies are to conduct a self-assessment and submit a plan describing the changes they intend to make to ensure that common baseline responsibilities are implemented. In addition, in August 2016, OMB released guidance intended to, among other things, define a framework for achieving the data center consolidation and optimization requirements of FITARA. The guidance directs agencies to develop a data center consolidation and optimization strategic plan that defines the agency’s data center strategy for fiscal years 2016, 2017, and 2018. This strategy is to include, among other things, a statement from the agency CIO indicating whether the agency has complied with all data center reporting requirements in FITARA. Further, the guidance indicates that OMB is to maintain a public dashboard to display consolidation-related costs savings and optimization performance information for the agencies. Congress has recognized the importance of agencies’ continued implementation of FITARA provisions, and has taken legislative action to extend selected provisions beyond their original dates of expiration. Specifically, Congress and the President enacted laws to: remove the expiration date for enhanced transparency and improved risk management provisions, which were set to expire in 2019; remove the expiration date for portfolio review, which was set to expire in 2019; and extend the expiration date for FDCCI from 2018 to 2020. In addition, Congress and the President enacted a law to authorize the availability of funding mechanisms to help further agencies’ efforts to modernize IT. The law, known as the Modernizing Government Technology (MGT) Act, authorizes agencies to establish working capital funds for use in transitioning from legacy IT systems, as well as for addressing evolving threats to information security. The law also creates the Technology Modernization Fund, within the Department of the Treasury, from which agencies can “borrow” money to retire and replace legacy systems, as well as acquire or develop systems. Further, in February 2018, OMB issued guidance for agencies to implement the MGT Act. The guidance was intended to provide agencies additional information regarding the Technology Modernization Fund, and the administration and funding of the related IT working capital funds. Specifically, the guidance allowed agencies to begin submitting initial project proposals for modernization on February 27, 2018. In addition, in accordance with the MGT Act, the guidance provides details regarding a Technology Modernization Board, which is to consist of (1) the Federal CIO; (2) a senior official from the General Services Administration; (3) a member of DHS’s National Protection and Program Directorate; and (4) four federal employees with technical expertise in IT development, financial management, cybersecurity and privacy, and acquisition, appointed by the Director of OMB. Congress and the President enacted the Federal Information Security Modernization Act of 2014 (FISMA) to improve federal cybersecurity and clarify government-wide responsibilities. The act addresses the increasing sophistication of cybersecurity attacks, promotes the use of automated security tools with the ability to continuously monitor and diagnose the security posture of federal agencies, and provides for improved oversight of federal agencies’ information security programs. Specifically, the act clarifies and assigns additional responsibilities to entities such as OMB, DHS, and the federal agencies. Table 1 describes a selection of OMB, DHS, and agency responsibilities. Beyond the implementation of FITARA, FISMA, and related actions, the current administration has also initiated other efforts intended to improve federal IT. Specifically, in March 2017, the administration established the Office of American Innovation, which has a mission to, among other things, make recommendations to the President on policies and plans aimed at improving federal government operations and services. In doing so, the office is to consult with both OMB and the Office of Science and Technology Policy on policies and plans intended to improve government operations and services, improve the quality of life for Americans, and spur job creation. In May 2017, the Administration also established the American Technology Council, which has a goal of helping to transform and modernize federal agency IT and how the federal government uses and delivers digital services. The President is the chairman of this council, and the Federal CIO and the United States Digital Service Administrator are among the members. In addition, on May 11, 2017, the President signed Executive Order 13800, Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure. This executive order outlined actions to enhance cybersecurity across federal agencies and critical infrastructure to improve the nation’s cyber posture and capabilities against cyber security threats. Among other things, the order tasked the Director of the American Technology Council to coordinate a report to the President from the Secretary of DHS, the Director of OMB, and the Administrator of the General Services Administration, in consultation with the Secretary of Commerce, regarding the modernization of federal IT. As a result, the Report to the President on Federal IT Modernization was issued on December 13, 2017, and outlined the current and envisioned state of federal IT. The report focused on modernization efforts to improve the security posture of federal IT and recognized that agencies have attempted to modernize systems but have been stymied by a variety of factors, including resource prioritization, ability to procure services quickly, and technical issues. The report provided multiple recommendations intended to address these issues through the modernization and consolidation of networks and the use of shared services to enable future network architectures. Further, in March 2018, the Administration issued the President’s Management Agenda, which lays out a long-term vision for modernizing the federal government. The agenda identifies three related drivers of transformation—IT modernization; data, accountability, and transparency; and the workforce of the future—that are intended to push change across the federal government. The Administration also established 14 related Cross-Agency Priority goals, many of which have elements that involve IT. In particular, the Cross-Agency Priority goal on IT modernization states that modern IT must function as the backbone of how government serves the public in the digital age and provides three priorities that are to guide the Administration’s efforts to modernize federal IT: (1) enhancing mission effectiveness by improving the quality and efficiency of critical services, including the increased utilization of cloud-based solutions; (2) reducing cybersecurity risks to the federal mission by leveraging current commercial capabilities and implementing cutting edge cybersecurity capabilities; and (3) building a modern IT workforce by recruiting, reskilling, and retaining professionals able to help drive modernization with up-to-date technology. Most recently, on May 15, 2018, the President signed Executive Order 13833, Enhancing the Effectiveness of Agency Chief Information Officers. Among other things, this executive order is intended to better position agencies to modernize their IT systems, execute IT programs more efficiently, and reduce cybersecurity risks. The order pertains to 22 of the 24 Chief Financial Officer Act agencies: the Department of Defense and the Nuclear Regulatory Commission are exempt. For the covered agencies, the executive order strengthens the role of agency CIOs by, among other things, requiring to report directly to their agency head; to serve as their agency head’s primary IT strategic advisor; and to have a significant role in all management, governance, and oversight processes related to IT. In addition, one of the cybersecurity requirements directs agencies to ensure that the CIO works closely with an integrated team of senior executives, including those with expertise in IT, security, and privacy, to implement appropriate risk management measures. In the February 2017 update to our high-risk series, we reported that agencies still needed to complete significant work related to the management of IT acquisitions and operations We stressed that OMB and federal agencies should continue to expeditiously implement FITARA and OMB’s related guidance, which include enhancing CIO authority, consolidating data centers, and acquiring and managing software licenses. Our update to this high-risk area also stressed that OMB and agencies needed to continue to implement our prior recommendations in order to improve their ability to effectively and efficiently invest in IT. Specifically, from fiscal years 2010 through 2015, we made 803 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations. In addition, in fiscal year 2016, we made 202 new recommendations, thus, further reinforcing the need for OMB and agencies to address the shortcomings in IT acquisitions and operations. As stated in the update, OMB and agencies should demonstrate government-wide progress in the management of IT investments by, among other things, implementing at least 80 percent of our recommendations related to managing IT acquisitions and operations within 4 years. As of May 2018, OMB and agencies had fully implemented 489 (or about 61 percent) of the 803 recommendations. Figure 1 summarizes the progress that OMB and agencies have made in addressing our recommendations as compared to the 80 percent target. Overall, federal agencies would be better positioned to realize billions in cost savings and additional management improvements if they address these recommendations, including those aimed at implementing CIO responsibilities, review of IT acquisitions; improving data center consolidation; and managing software licenses. In all, the various laws, such as FITARA, and related guidance assign 35 IT management responsibilities to CIOs in six key areas. These areas are: leadership and accountability, budgeting, information security, investment management, workforce, and strategic planning. In a draft report on CIO responsibilities that we have provided to the agencies for comment and plan to issue in June 2018, our preliminary results suggest that none of the 24 agencies we reviewed had policies that fully addressed the role of their CIO, as called for by federal laws and guidance. In this regard, a majority of the agencies fully or substantially addressed the role of their CIOs for the area of leadership and accountability. In addition, a majority of the agencies substantially or partially addressed the role of their CIOs for two areas: information security and IT budgeting. However, most agencies partially or minimally addressed the role of their CIOs for two areas: investment management and strategic planning. These preliminary results are shown in figure 2. Despite these shortfalls, most agency officials stated that their CIOs are implementing the responsibilities even if the agencies do not have policies requiring implementation. Nevertheless, the CIOs of the 24 selected agencies acknowledged in responses to a survey that we administered for our draft report that they were not always very effective in implementing the six IT management areas. Specifically, our preliminary results show that at least 10 of the CIOs indicated that they were less than very effective for each of the six areas of responsibility. We believe that until agencies fully address the role of CIOs in their policies, agencies will be limited in addressing longstanding IT management challenges. Figure 3 depicts that extent to which the CIOs reported their effectiveness in implementing the six areas of responsibility. Beyond the actions of the agencies, however, our preliminary results indicate that shortcomings in agencies’ policies also are partially attributable to two weaknesses in OMB’s FITARA implementation guidance. First, the guidance does not comprehensively address all CIO responsibilities, such as those related to assessing the extent to which personnel meet IT management knowledge and skill requirements, and ensuring that personnel are held accountable for complying with the information security program. Correspondingly, the majority of the agencies’ policies did not fully address nearly all of the responsibilities that were not included in OMB’s guidance. Second, OMB’s guidance does not ensure that CIOs have a significant role in (1) IT planning, programming, and budgeting decisions and (2) execution decisions and the management, governance, and oversight processes related to IT, as required by federal law and guidance. In the absence of comprehensive guidance, CIOs will not be positioned to effectively acquire, maintain, and secure their IT systems. Based on our preliminary results, 24 agency CIOs also identified a number of factors that enabled and challenged their ability to effectively manage IT. As shown in figure 4, five factors were identified by at least half of the 24 CIOs as major enablers and three factors were identified by at least half of the CIOs as major challenges. Specifically, most agency CIOs cited five factors as being enablers to effectively carry out their responsibilities: (1) NIST guidance, (2) the CIO’s position in the agency hierarchy, (3) OMB guidance, (4) coordination with the Chief Acquisition Officer (CAO), and (5) legal authority. Further, three factors were cited by CIOs as major factors that have challenged their ability to effectively carry out responsibilities: (1) processes for hiring, recruiting, and retaining IT personnel; (2) financial resources; and (3) the availability of personnel/staff resources. As our draft report states, although OMB has issued guidance aimed at addressing the three factors that were identified by at least half of the CIOs as major challenges, the guidance does not fully address those challenges. Further, regarding the financial resources challenge, OMB recently required agencies to provide data on CIO authority over IT spending; however, its guidance does not provide a complete definition of the authority. We believe that in the absence of such guidance, agencies have created varying definitions of CIO authority. Further, until OMB updates its guidance to include a complete definition of the authority that CIOs are to have over IT spending, it will be difficult for OMB to identify any deficiencies in this area and to help agencies make any needed improvements. In order to address challenges in implementing CIO responsibilities, we intend to include in our draft report recommendations to OMB and each of the selected 24 federal agencies to improve the effectiveness of CIOs’ implementation of their responsibilities for each of the six IT management areas. FITARA includes a provision to enhance covered agency CIOs’ authority through, among other things, requiring agency heads to ensure that CIOs review and approve IT contracts. OMB’s FITARA implementation guidance expanded upon this aspect of the legislation in a number of ways. Specifically, according to the guidance: CIOs may review and approve IT acquisition strategies and plans, rather than individual IT contracts; CIOs can designate other agency officials to act as their representatives, but the CIOs must retain accountability; CAOs are responsible for ensuring that all IT contract actions are consistent with CIO-approved acquisition strategies and plans; and CAOs are to indicate to the CIOs when planned acquisition strategies and acquisition plans include IT. In January 2018, we reported that most of the CIOs at 22 selected agencies were not adequately involved in reviewing billions of dollars of IT acquisitions. For instance, most of the 22 agencies did not identify all of their IT contracts. In this regard, the agencies identified 78,249 IT- related contracts, to which they obligated $14.7 billion in fiscal year 2016. However, we identified 31,493 additional contracts with $4.5 billion obligated, raising the total amount obligated by these agencies to IT contracts in fiscal year 2016 to at least $19.2 billion. Figure 5 reflects the obligations that the 22 selected agencies reported to us relative to the obligations we identified. The percentage of additional IT contract obligations we identified varied among the selected agencies. For example, the Department of State did not identify 1 percent of its IT contract obligations. Conversely, 8 agencies did not identify over 40 percent of their IT contract obligations. Many of the selected agencies that did not identify these IT contract obligations did not follow OMB guidance. Specifically, 14 of the 22 agencies did not involve the acquisition office in their process to identify IT acquisitions for CIO review, as required by OMB. In addition, 7 agencies did not establish guidance to aid officials in recognizing IT. We concluded that until these agencies involve the acquisitions office in their IT acquisition identification processes and establish supporting guidance, they cannot ensure that they will identify all IT acquisitions. Without proper identification of IT acquisitions, these agencies and CIOs cannot effectively provide oversight of these acquisitions. In addition to not identifying all IT contracts, 14 of the 22 selected agencies did not fully satisfy OMB’s requirement that the CIO review and approve IT acquisition plans or strategies. Further, only 11 of 96 randomly selected IT contracts at 10 agencies that we evaluated were CIO-reviewed and approved as required by OMB’s guidance. The 85 IT contracts not reviewed had a total possible value of approximately $23.8 billion. We believe that until agencies ensure that CIOs are able to review and approve all IT acquisitions, CIOs will continue to have limited visibility and input into their agencies’ planned IT expenditures and will not be able to use the increased authority that FITARA’s contract approval provision is intended to provide. Further, agencies will likely miss an opportunity to strengthen CIOs’ authority and the oversight of IT acquisitions. As a result, agencies may award IT contracts that are duplicative, wasteful, or poorly conceived. As a result of these findings, we made 39 recommendations in our January 2018 report. The recommendations included that agencies ensure that their acquisition offices are involved in identifying IT acquisitions and issuing related guidance, and that IT acquisitions are reviewed in accordance with OMB guidance. OMB and the majority of the agencies generally agreed with or did not comment on the recommendations. In our February 2017 high-risk update, we stated that OMB and agencies needed to demonstrate additional progress on achieving data center consolidation savings in order to improve the management of IT acquisitions and operations. Further, data center consolidation efforts are key to implementing FITARA. Specifically, OMB established the FDCCI in February 2010 to improve the efficiency, performance, and environmental footprint of federal data center activities. The enactment of FITARA in 2014 codified and expanded the initiative. In a series of reports that we issued from July 2011 through August 2017, we noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies’ data center consolidation plans, data center optimization, and OMB’s tracking and reporting on related cost savings. In these reports, we made a total of 160 recommendations to OMB and 24 agencies to improve the execution and oversight of the initiative. Most agencies and OMB agreed with our recommendations or had no comments. As of May 2018, 80 of these 160 recommendations remained unimplemented. Further, we recently reported in May 2018 that the 24 agencies participating in OMB’s Data Center Optimization Initiative (DCOI) had communicated mixed progress toward achieving OMB’s goals for closing data centers by September 2018. Over half of the agencies reported that they had either already met, or planned to meet, all of their OMB- assigned goals by the deadline. This would result in the closure of 7,221 of the 12,062 centers that agencies reported in August 2017. However, 4 agencies reported that they do not have plans to meet all of their assigned goals and 2 agencies are working with OMB to establish revised targets. With regard to agencies’ progress in achieving cost savings, 24 agencies reported $3.9 billion in cost savings through 2018. The 24 agencies also reported limited progress against OMB’s five data center optimization targets for server utilization and automated monitoring, energy metering, power usage effectiveness, facility utilization, and virtualization. As of August 2017, 1 agency reported that it had met four targets, 1 agency reported that it had met three targets, 6 agencies reported having met either one or two targets, and 14 agencies reported meeting none of the targets. Further, as of August 2017, most agencies were not planning to meet OMB’s fiscal year 2018 optimization targets. Specifically, 4 agencies reported plans to meet all of their applicable targets by the end of fiscal year 2018; 14 agencies reported plans to meet some of the targets; and 4 reported that they did not plan to meet any targets. Figure 6 summarizes agency-reported plans to meet or exceed the OMB’s data center optimization targets, as of August 2017. In 2016 and 2017, we made 81 recommendations to OMB and the 24 DCOI agencies to help improve the reporting of data center-related cost savings and to achieve optimization targets. As of May 2018, 71 of these 81 recommendations have not been fully addressed. In our 2015 high-risk report’s discussion of IT acquisitions and operations, we identified the management of software licenses as an area of concern, in part because of the potential for cost savings. Federal agencies engage in thousands of software licensing agreements annually. The objective of software license management is to manage, control, and protect an organization’s software assets. Effective management of these licenses can help avoid purchasing too many licenses, which can result in unused software, as well as too few licenses, which can result in noncompliance with license terms and cause the imposition of additional fees. As part of its PortfolioStat initiative, OMB has developed policy that addresses software licenses. This policy requires agencies to conduct an annual, agency-wide IT portfolio review to, among other things, reduce commodity IT spending. Such areas of spending could include software licenses. In May 2014, we reported on federal agencies’ management of software licenses and determined that better management was needed to achieve significant savings government-wide. Of the 24 selected agencies we reviewed, only 2 had comprehensive policies that included the establishment of clear roles and central oversight authority for managing enterprise software license agreements, among other things. Of the remaining 22 agencies, 18 had policies that were not comprehensive, and 4 had not developed any policies. Further, we found that only 2 of the 24 selected agencies had established comprehensive software license inventories, a leading practice that would help them to adequately manage their software licenses. The inadequate implementation of this and other leading practices in software license management was partially due to weaknesses in agencies’ policies. As a result, we concluded that agencies’ oversight of software license spending was limited or lacking, thus potentially leading to missed savings. However, the potential savings could be significant considering that, in fiscal year 2012, 1 major federal agency reported saving approximately $181 million by consolidating its enterprise license agreements, even when its oversight process was ad hoc. Accordingly, we recommended that OMB issue a directive to help guide agencies in managing software licenses. We also made 135 recommendations to the 24 agencies to improve their policies and practices for managing licenses. Among other things, we recommended that the agencies regularly track and maintain a comprehensive inventory of software licenses and analyze the inventory to identify opportunities to reduce costs and better inform investment decision making. Most agencies generally agreed with the recommendations or had no comments. As of May 2018, 78 of the 135 recommendations had not been implemented. Table 2 reflects the extent to which the 24 agencies implemented the recommendations in these two areas. Since information security was added to the high-risk list in 1997, we have consistently identified shortcomings in the federal government’s approach to cybersecurity. We have previously testified that, even though agencies have acted to improve the protections over federal and critical infrastructure information and information systems, the federal government needs to take the following actions to strengthen U.S. cybersecurity: Effectively implement risk-based entity-wide information security programs consistently over time. Among other things, agencies need to (1) implement sustainable processes for securely configuring operating systems, applications, workstations, servers, and network devices; (2) patch vulnerable systems and replace unsupported software; (3) develop comprehensive security test and evaluation procedures and conduct examinations on a regular and recurring basis; and (4) strengthen oversight of contractors providing IT services. Improve its cyber incident detection, response, and mitigation capabilities. DHS needs to expand the capabilities and support wider adoption of its government-wide intrusion detection and prevention system. In addition, the federal government needs to improve cyber incident response practices, update guidance on reporting data breaches, and develop consistent responses to breaches of personally identifiable information. Expand its cyber workforce planning and training efforts. The federal government needs to (1) enhance efforts for recruiting and retaining a qualified cybersecurity workforce and (2) improve cybersecurity workforce planning activities. Expand efforts to strengthen cybersecurity of the nation’s critical infrastructures. The federal government needs to develop metrics to (1) assess the effectiveness of efforts promoting the National Institute of Standards and Technology’s (NIST) Framework for Improving Critical Infrastructure Cybersecurity and (2) measure and report on the effectiveness of cyber risk mitigation activities and the cybersecurity posture of critical infrastructure sectors. Better oversee protection of personally identifiable information. The federal government needs to (1) protect the security and privacy of electronic health information, (2) ensure privacy when face recognition systems are used, and (3) protect the privacy of users’ data on state-based health insurance marketplaces. As we have previously noted, in order to take the preceding actions and strengthen the federal government’s cybersecurity posture, agencies should implement the information security programs required by FISMA. In this regard, FISMA provides a framework for ensuring the effectiveness of information security controls for federal information resources. The law requires each agency to develop, document, and implement an agency- wide information security program. Such a program includes risk assessments; the development and implementation of policies and procedures to cost-effectively reduce risks; plans for providing adequate information security for networks, facilities, and systems; security awareness and specialized training; the testing and evaluation of the effectiveness of controls; the planning, implementation, evaluation, and documentation of remedial actions to address information security deficiencies; procedures for detecting, reporting, and responding to security incidents; and plans and procedures to ensure continuity of operations. Since 2010, we have made 2,733 recommendations to agencies aimed at improving the security of federal systems and information. These recommendations have identified actions for agencies to take to strengthen technical security controls over their computer networks and systems. They also have included recommendations for agencies to fully implement aspects of their information security programs, as mandated by FISMA. Nevertheless, many agencies continue to be challenged in safeguarding their information systems and information, in part because many of these recommendations have not been implemented. As of May 2018, 793 of information security-related recommendations we have made have not been implemented. In order to determine the effectiveness of the agencies’ information security programs and practices, FISMA requires that federal agencies’ inspectors general conduct annual independent evaluations. The agencies are to report the results of these evaluations to OMB, and OMB is to summarize the results in annual reports to Congress. In these evaluations, the inspectors general frame the scope of their analysis, identify key findings, and detail recommendations to address the findings. The evaluations also are to capture maturity model ratings for their respective agencies. Toward this end, in fiscal year 2017, the inspector general community, in partnership with OMB and DHS, finalized a 3-year effort to create a maturity model for FISMA metrics that align to the five function areas in the NIST Framework for Improving Critical Infrastructure Cybersecurity (Cybersecurity Framework): identify, protect, detect, respond, and recover. This alignment is intended to help promote consistent and comparable metrics and criteria and provides agencies with a meaningful independent assessment of their information security programs. This maturity model is designed to summarize the status of agencies’ information security programs on a five-level capability maturity scale. The five maturity levels are defined as follows: Level 1 Ad-hoc: Policies, procedures, and strategy are not formalized; activities are performed in an ad-hoc, reactive manner. Level 2 Defined: Policies, procedures, and strategy are formalized and documented but not consistently implemented. Level 3 Consistently Implemented: Policies, procedures, and strategy are consistently implemented, but quantitative and qualitative effectiveness measures are lacking. Level 4 Managed and Measurable: Quantitative and qualitative measures on the effectiveness of policies, procedures, and strategy are collected across the organizations and used to assess them and make necessary changes. Level 5 Optimized: Policies, procedures, and strategy are fully institutionalized, repeatable, self-generating, consistently implemented and regularly updated based on a changing threat and technology landscape and business/mission needs. In March 2018, OMB issued its annual FISMA report to Congress, which showed the combined results of the inspectors general’s fiscal year 2017 evaluations. Based on data from 76 agency inspector general and independent auditor assessments, OMB determined that the government-wide median maturity model ratings across the five NIST Cybersecurity Framework areas did not exceed a level 3 (consistently implemented). Table 3 shows the inspectors general’s median ratings for each of the NIST Cybersecurity Framework areas. In its efforts toward strengthening the federal government’s cybersecurity, OMB also requires agencies to submit related cybersecurity metrics as part of its Cross-Agency Priority goals. In particular, OMB developed the IT modernization goal so that federal agencies will be able to build and maintain more modern, secure, and resilient IT. A key part of this goal is to reduce cybersecurity risks to the federal mission through three strategies: manage asset security, protect networks and data, and limit personnel access. The key targets supporting each of these strategies correspond to areas within the FISMA metrics. Table 4 outlines the strategies and their associated targets. In conclusion, FITARA and FISMA present opportunities for the federal government to address the high-risk areas on improving the management of IT acquisitions and operations, and ensuring the security of federal IT, thereby saving billions of dollars. Most agencies have taken steps to execute key IT management and cybersecurity initiatives, including implementing CIO responsibilities, requiring CIO review of IT acquisitions, realizing data center consolidation cost savings, managing software assets, and complying with FISMA requirements. The agencies have also continued to address the recommendations that we have made over the past several years. However, further efforts by OMB and federal agencies to implement our previous recommendations would better position them to improve the management and security of federal IT. To help ensure that these efforts succeed, we will continue to monitor agencies’ efforts toward implementing these recommendations. Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact David A. Powner, Director, Information Technology, at (202) 512- 9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Kevin Walsh (Assistant Director), Chris Businsky, Rebecca Eyler, Meredith Raymond, and Jessica Waselkow (Analyst in Charge). This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The federal government plans to invest almost $96 billion in IT in fiscal year 2018. Historically, IT investments have too often failed or contributed little to mission-related outcomes. Further, increasingly sophisticated threats and frequent cyber incidents underscore the need for effective information security. As a result, GAO added two areas to its high-risk list: IT security in 1997 and the management of IT acquisitions and operations in 2015. This statement summarizes agencies' progress in improving IT management and ensuring the security of federal IT. It is primarily based on GAO's prior reports issued between February 1997 and May 2018 (and an ongoing review) on (1) CIO responsibilities, (2) agency CIOs' involvement in approving IT contracts, (3) data center consolidation efforts, (4) the management of software licenses, and (5) compliance with cybersecurity requirements. The Office of Management and Budget (OMB) and federal agencies have taken steps to improve the management of information technology (IT) acquisitions and operations and ensure the security of federal IT through a series of initiatives. As of May 2018, agencies had fully implemented about 61 percent of the approximately 800 IT management-related recommendations that GAO made from fiscal years 2010 through 2015. Likewise, since 2010, agencies had implemented about 66 percent of the approximately 2,700 security-related recommendations as of May 2018. Even with this progress, significant actions remain to be completed. Chief Information Officer (CIO) responsibilities . Laws such as the Federal Information Technology Acquisition Reform Act (FITARA) and related guidance assigned 35 key IT management responsibilities to CIOs to help address longstanding challenges. However, in a draft report on CIO responsibilities, GAO's preliminary results suggest that none of the 24 selected agencies have policies that fully address the role of their CIO, as called for by federal laws and guidance. GAO intends to recommend that OMB and each of the selected 24 agencies take actions to improve the effectiveness of CIO's implementation of their responsibilities. IT contract approval . According to FITARA, covered agencies' CIOs are required to review and approve IT contracts. Nevertheless, in January 2018, GAO reported that most of the CIOs at 22 selected agencies were not adequately involved in reviewing billions of dollars of IT acquisitions. Consequently, GAO made 39 recommendations to improve CIO oversight over IT acquisitions. Consolidating data centers . OMB launched an initiative in 2010 to reduce data centers, which was codified and expanded in FITARA. According to agencies, data center consolidation and optimization efforts have resulted in approximately $3.9 billion of cost savings through 2018. Even so, additional work remains. GAO has made 160 recommendations to OMB and agencies to improve the reporting of related cost savings and to achieve optimization targets; however, as of May 2018, 80 of the recommendations have not been fully addressed. Managing software licenses . Effective management of software licenses can help avoid purchasing too many licenses that result in unused software. In May 2014, GAO reported that better management of licenses was needed to achieve savings, and made 135 recommendations to improve such management. Four years later, 78 of the recommendations remained open. Improving the security of federal IT systems . While the government has acted to protect federal information systems, agencies need to improve security programs, cyber capabilities, and the protection of personally identifiable information. Over the last several years, GAO has made about 2,700 recommendations to agencies aimed at improving the security of federal systems and information. These recommendations identified actions for agencies to take to strengthen their information security programs and technical controls over their computer networks and systems. As of May 2018, about 800 of the information security-related recommendations had not been implemented. From fiscal years 2010 through 2015, GAO made about 800 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations. Since 2010, GAO also made about 2,700 recommendations to federal agencies to improve the security of federal systems. These recommendations include those to improve the implementation of CIO responsibilities, the oversight of the data center consolidation initiative, software license management efforts, and the strength of security programs and technical controls. Most agencies agreed with these recommendations, and GAO will continue to monitor their implementation.", "document_type": "gao"}
{"report": "Uranium is a naturally occurring radioactive element that is enriched to fuel nuclear power plants and that can also be used to meet certain national security purposes. Natural uranium is comprised of approximately 99.3 percent of the uranium-238 isotope and 0.7 percent of the uranium-235 isotope—which undergoes fission to release energy. Uranium enrichment is the process of increasing the concentration of uranium-235 in a quantity of natural uranium to make LEU to fuel nuclear power plants, or to make HEU, which is used in nuclear weapons and as fuel by the U.S. Navy. Generally, to produce enriched uranium, uranium is extracted or mined from underground deposits, converted from a solid to a gas, enriched to increase its concentration of uranium-235, and then fabricated into fuel elements, such as rods for commercial nuclear reactors, appropriate for their ultimate use. These steps make up the nuclear fuel cycle (see fig. 1). After the fuel has been irradiated in a nuclear power reactor, it is considered “spent” nuclear fuel. Spent fuel can be chemically reprocessed, and the enriched uranium recycled for reuse. The United States used to reprocess spent nuclear fuel but has not done so since the mid-1970s, primarily to discourage other countries from pursuing reprocessing because of concerns over nuclear proliferation, as we have previously reported. Currently, in the United States, spent fuel is stored as waste. LEU can also be produced by downblending HEU to LEU. This involves mixing HEU with a “diluent” or other forms of uranium—such as natural uranium—to reduce the concentration of the uranium-235 isotope in the uranium and produce an overall lower level of enrichment. Until 2013, uranium was enriched in the United States both for national security and commercial purposes. Beginning in the 1940s, DOE and its predecessor agencies provided uranium enrichment services—first for national security purposes and later for the emerging commercial nuclear power industry—using government-owned gaseous diffusion plants. In 1992, the U.S. government established the United States Enrichment Corporation (USEC) as a government corporation to take over operations of DOE’s enrichment facilities and to provide uranium enrichment services for the U.S. government and utilities that operate nuclear power plants. In 1998, the corporation was privatized under the USEC Privatization Act. From 1998 until 2013, DOE relied exclusively on USEC to obtain enrichment services for the production of LEU needed to produce tritium. In May 2013, USEC ceased enrichment at its last commercially active enrichment plant in Paducah, Kentucky, which it had leased from DOE since the time of USEC’s establishment. USEC has been the only company to enrich uranium with U.S. technology. Gas centrifuge technology, rather than gaseous diffusion technology, is currently used around the world to enrich uranium. Gas centrifuges work by spinning uranium hexafluoride in a gas form inside a centrifuge rotor at an extremely high speed. The rotation creates a strong centrifugal force, which separates the lighter uranium-235 molecules from the heavier uranium-238 molecules. The enrichment achieved by a single gas centrifuge is not sufficient to achieve the desired assay, so a series of centrifuges are connected together in a configuration called a cascade. In the United States, URENCO—a European enrichment consortium— operates a gas centrifuge enrichment plant in New Mexico. The obligations governing the use of foreign uranium enrichment technology and nuclear material in the United States are established under international agreements between the United States and foreign partners. These agreements generally impose certain terms and conditions on transfers of nuclear material and equipment, including, among other things, requiring peaceful use of the material and equipment. The agreements’ peaceful-use provisions generally state that material, equipment, and components subject to the agreements will not be used for any nuclear explosive device, for research on or development of any nuclear explosive device, or for any military purposes. This section discusses national security and other uses for enriched uranium, such as tritium production, highly enriched uranium, and high- assay low enriched uranium. Tritium is a key isotope used in nuclear weapons. NNSA needs an assured source of tritium to maintain the capabilities of the nuclear stockpile and has called tritium a “pressing” defense need. However, tritium has a relatively short half-life of 12.3 years and decays at a rate of about 5.5 percent per year. It must be periodically replenished to maintain the designed capability of the weapons. Some tritium may be recycled from dismantled weapons, but the inventory must also be replenished through the production of new tritium. At present, NNSA produces tritium through the use of one of TVA’s electricity-producing nuclear reactors fueled with unobligated LEU. Small quantities of tritium are the normal by-products of electricity-producing nuclear power plants, such as those owned and operated by TVA. To produce more tritium than usual and later collect it, specially designed targets—called tritium-producing burnable absorber rods (TPBAR)—are loaded with the unobligated LEU and irradiated in TVA’s Watts Bar 1 reactor. Irradiated TPBARs are unloaded during normal fuel reloading and shipped to NNSA’s Tritium Extraction Facility at the Savannah River Site in South Carolina. There the tritium is extracted and prepared for use in nuclear warheads and bombs (see fig. 2 for NNSA’s tritium production process). Prior to the use of TVA’s reactor, the United States used other government-owned reactors to produce tritium (see sidebar). In 1999, TVA signed an interagency agreement with DOE to produce tritium at its Watts Bar and Sequoyah commercial nuclear reactors. Since 2003, TVA has been producing tritium for NNSA at its Watts Bar 1 reactor. TVA does not have plans to use the Sequoyah reactors for tritium production in the near term, according to a TVA document. History of U.S. Tritium Production From 1954 until 1988, the United States produced the majority of its tritium using nuclear reactors at the Savannah River Site in South Carolina. Smaller amounts of tritium were also produced using nuclear reactors at the Department of Energy’s (DOE) Hanford Site in Washington. When the site’s last operating reactor—known as K Reactor—was shut down due to safety concerns in 1988, the United States lost its capability to produce tritium for the nuclear weapons stockpile. The amount of tritium that NNSA needs changes based on national security requirements. In fiscal year 2015, NNSA conducted a review of the tritium inventory and anticipated future demand. At that time, NNSA determined that to meet future tritium demand a second TVA reactor would be required to irradiate TPBARs and produce additional tritium. Using a second TVA reactor would increase the amount of unobligated LEU needed for tritium production using this process, according to NNSA documents. NNSA also supplies HEU for national security and other missions. NNSA provides HEU to fuel reactors for the U.S. Navy’s aircraft carriers and submarines. NNSA recovers HEU from excess dismantled nuclear weapons. According to NNSA’s October 2015 plan, HEU from these sources will meet naval reactors’ demand through 2060. After this time, NNSA will need additional sources of HEU for naval nuclear reactors. To satisfy non-defense demands, NNSA also supplies HEU to, among other things, fuel research reactors for medical isotope production and other research applications. In 1998, the Secretary of Energy announced that DOE would turn to commercial light water reactors as the sole means of meeting the future demand for tritium. From 1988 to 1998, DOE was able to meet its tritium requirements by harvesting and recycling it from dismantled nuclear warheads, as the United States decreased the size of its nuclear arsenal. However, because of tritium’s short half-life, DOE could not meet its long-term tritium needs in this manner indefinitely. Since 2003, the Tennessee Valley Authority (TVA) has been producing tritium for National Nuclear Security Administration (NNSA) at its Watts Bar 1 commercial nuclear power reactor. NNSA’s nonproliferation mission requires “high assay” LEU—meaning LEU enriched in the uranium-235 isotope to below 20 percent but above the standard 3 to 5 percent used in most commercial reactors—for research and isotope production reactor fuel. Since there are no commercial uranium enrichment facilities licensed to produce high-assay LEU, it must be produced by downblending HEU. According to NNSA documents, the HEU inventory allocated for research and isotope production reactors using high-assay LEU is projected to be exhausted by around 2030. After this time, a new supply of high-assay LEU for research and isotope production reactors will need to be identified. NNSA has initiated a process to determine a long-term solution for obtaining enriched uranium and tritium. DOE’s Order 413.3B, Program and Project Management for the Acquisition of Capital Assets, governs how NNSA acquires capital assets with total project costs greater than $50 million, which could include a new uranium enrichment capability or other new capability to produce tritium. The stated goal of the order is to deliver fully capable projects within the planned cost, schedule, and performance baseline. Order 413.3B also establishes DOE’s critical decision (CD) process. This process divides the capital asset acquisition into five project phases that progress from a broad statement of mission need, to requirements that guide project execution, through design and construction, and concludes with an operational facility. Each phase ends with a major approval milestone—or “critical decision”—that marks the successful completion of that phase. A key activity during CD-0, the preconceptual design phase is the preparation of a mission need statement. A mission need statement identifies the capability gap between the current state of a program’s mission and the mission plan. DOE’s Order 413.3B provides direction for preparing a mission need statement, including that it be independent of a particular solution, and that it should not be defined by equipment, facility, technological solution, or physical end-item. This approach is to allow the agency the flexibility to explore a variety of approaches and not prematurely limit potential solutions. Under Order 413.3B, an analysis and selection of alternatives—which builds off the mission need—should be conducted during the CD-1 phase, the conceptual design phase. In addition to the requirements of Order 413.3B, DOE has guidance for identifying, analyzing, and selecting alternatives that is found throughout the seven guides associated with the order. Conducting the analysis of alternatives is a key first step to help ensure that the selected alternative best meets the agency’s mission need and that this alternative is chosen on the basis of selection criteria, such as safety, cost, or schedule. Figure 3 illustrates when DOE conducts the analysis of alternatives as part of its project management process for capital asset projects. In October 2016, NNSA approved a mission need statement for long-term capability to supply unobligated enriched uranium for tritium production and presented a preliminary set of options to meet that need. In December 2016, DOE approved CD-0 to begin the acquisition of such a capability. Consistent with direction in DOE Order 413.3B, NNSA has begun conducting an analysis of alternatives that is to identify the option that would best meet the mission need for a domestic uranium enrichment capability. In August 2017, DOE and NNSA officials stated that the analysis of alternatives will be completed by the end of 2019. Also, under DOE Order 413.3B, DOE’s technology readiness levels (TRL) are incorporated into the CD process. TRLs are used by federal agencies and industry to assess the maturity of evolving technologies. TRLs are measured along a scale of 1 to 9, beginning with TRL 1 (or basic principles observed and reported) and ending with TRL 9 (or actual system operated over the full range of expected mission conditions). DOE guidance states that a TRL of 4—system or component validation at laboratory scale—is recommended for CD-1 (conceptual design process). Projects are encouraged to achieve a TRL of 7—full scale demonstration of a prototypical system in a relevant environment—prior to CD-3 (final design phase). In March 2009, we issued our cost guide to provide assistance to federal agencies with preparing cost estimates, among other things. Drawing from federal cost estimating organizations and industry, the cost guide describes best practices for ensuring development of high-quality—that is, reliable—cost estimates. A reliable cost estimate helps ensure that management is given the information it needs to make informed decisions. The cost guide identifies four characteristics of a reliable cost estimate: (1) comprehensive, (2) well documented, (3) accurate, and (4) credible. DOE’s Order 413.3B states, among other things, that its cost estimates shall be developed, maintained, and documented in a manner consistent with methods and best practices identified in our cost guide, DOE guidance, and applicable acquisition regulations and Office of Management and Budget guidance. Our cost guide can be used to evaluate the reliability of rough-order-of- magnitude estimates. Rough-order-of-magnitude estimates are typically used to support “what-if” analyses and are helpful in examining initial differences in alternatives to identify which are most feasible. However, the nature of a rough-order-of-magnitude estimate means that it is not as robust as a detailed, budget-quality, life-cycle estimate and, according to the guide, its results should not be considered or used with the same level of confidence. Further, the cost guide states that because this estimate is developed from limited data and in a short time, it should never be considered a budget-quality cost estimate. NNSA is taking or plans to take four actions to extend its existing inventories of unobligated enriched uranium to address its near-term need for tritium and has generally identified the costs, schedules, and risks for these actions. These actions would together extend the supply of unobligated LEU from 2027 until approximately 2038 to 2041, according to NNSA documents. NNSA first identified the actions to extend its unobligated LEU supply based on an analysis completed by the DOE Uranium Inventory Working Group, which was convened by NNSA in September 2014 to analyze the department’s uranium inventory and identify material and options to provide unobligated LEU for tritium production reactors. These actions were later presented in NNSA’s October 2015 plan. Of the four actions NNSA is taking or plans to take, two actions involve nuclear material accounting practices that help preserve supplies of unobligated LEU, and two of the actions involve downblending HEU. NNSA has generally identified the costs and schedules for these actions. Specifically, NNSA estimated in its October 2015 plan that the total cost of the four actions would be approximately $1.1 billion from fiscal years 2016 through 2025 and would provide additional quantities of unobligated LEU for TVA to meet NNSA’s tritium needs through 2038 to 2041. Based on our review, the actual costs and schedules through October 2017 generally align with the estimates in NNSA’s October 2015 plan. NNSA and GAO have identified some risks associated with two of these actions. One of these risks has been resolved; NNSA is taking steps to mitigate another; while other risks, such as the uncertainty of future appropriations, are unresolved. The following are the four actions, and their costs, schedules, and risks. Book storage is an industry-wide nuclear material accounting practice, where a nuclear material supplier—such as a uranium enrichment plant or nuclear fuel fabricator—can record in its accounts, or books, the amount of enriched uranium in its inventory belonging to a customer, such as a nuclear power plant operator, and hold that material for future delivery to the customer. TVA has entered into contracts with two nuclear fuel suppliers to conduct book storage to preserve unobligated LEU for TVA on behalf of NNSA. This practice effectively parks the unobligated LEU into a separate account so that the material is not inadvertently loaded into a non-tritium producing reactor. Book storage helps TVA preserve limited quantities of unobligated LEU for the future; it will eventually be used for tritium production at the Watts Bar reactor. According to agency officials, a key benefit of using book storage for LEU is that TVA does not have to physically store the material. According to these officials, book storage is significantly less expensive than paying to set up a physical storage facility. The terms of TVA’s book storage contracts, including the parties involved, schedules, and values, are proprietary and business sensitive, according to TVA officials. Based on our analysis, the actual fees paid by TVA under its book storage contracts align with NNSA’s projected costs for book storage in its October 2015 plan. NNSA is reimbursing TVA for the book storage fees it is paying. According to NNSA, the obligations preserved from using book storage for unobligated LEU through these contracts extend the LEU fuel need date by 3 years. NNSA’s October 2015 plan did not identify any specific risks for these existing book storage contracts. Obligation exchanges are another industry-wide nuclear material accounting practice, which involves the transfer of obligations on nuclear material—such as LEU—between two entities without physically moving the material. Similar to book storage, TVA may conduct obligation exchanges on behalf of NNSA to increase the inventory of unobligated LEU available for tritium production. According to NNSA’s October 2015 plan, TVA may conduct additional obligation exchanges in the future on behalf of NNSA. According to NNSA and TVA officials, at least one future obligation exchange is anticipated but has not been scheduled. According to these officials, there are no specific costs associated with transferring the obligations on LEU between entities. In addition, if additional inventories of unobligated LEU are identified, NNSA officials told us they will encourage TVA to conduct additional obligation exchanges to preserve the material. NNSA’s October 2015 plan did not identify any specific risks for obligation exchanges. NNSA’s first downblending action involves downblending 10.4 metric tons of HEU that was previously declared excess to national security needs. NNSA initiated the 3-year REU program in 2015 and, according to NNSA officials, the last shipment of HEU for downblending is expected in December 2018. According to these officials, close-out and final operations of the contract will end in early 2019. The REU downblending is being performed through a contract between NNSA and WesDyne, which subcontracts with another company, Nuclear Fuel Services, according to DOE documents we reviewed and officials we interviewed. According to NNSA documents, NNSA is the sole customer for this downblending effort. The estimated costs for the REU downblending program are $373 million, according to NNSA’s October 2015 plan. According to NNSA and contractor officials, the fixed price of the contract is $333.8 million, and the invoiced costs for the REU downblending program through October 2017 are $141.4 million, which aligns with the terms of the contract. According to an NNSA official, NNSA is paying for the REU program through a combination of funds provided through annual appropriations and what the parties refer to as a “barter” arrangement, according to NNSA officials and documents. Under this arrangement, NNSA is compensating the downblending contractor by transferring title of the derived LEU to WesDyne, which will be retained as unobligated LEU and eventually sold to TVA for tritium production purposes. The REU downblending program will generate approximately five reactor reloads of unobligated fuel for TVA, and will likely be used in the early to mid-2030s, according to NNSA documents. Regarding the risks for the REU program, NNSA identified the uncertainty of whether NNSA would be able to continue to conduct barters of derived LEU to pay for downblending services. For example, the 2015 plan notes that, while such transactions had worked well for previous downblending campaigns, declining markets values for enriched uranium in recent years had reduced industry’s interest in being compensated for services with a portion of the derived LEU. In addition, NNSA officials identified a lawsuit challenging the legality of barters as a risk. This suit was dismissed in July 2016. As a result, this specific risk no longer affects the Department, and according to NNSA officials, the agency anticipates being able to continue compensating Nuclear Fuel Services with derived LEU for the duration of the REU program. NNSA’s second downblending action, which is planned to begin in 2019, will involve HEU mainly composed of undesirable scrap, primarily in the form of oxides, left over from uranium processing activities. NNSA estimates that the planned DBOT program will generate approximately 10 reloads of unobligated fuel for TVA, likely to be used in the mid-2030s. According to an NNSA document, the program is expected to run for a 6- year period from 2019 through 2025. However, the schedule for HEU downblending under the DBOT action has not yet been finalized. According to NNSA officials, as of January 2018 the agreement is still being negotiated, but NNSA officials told us they anticipate that TVA will manage Nuclear Fuel Services’ down-blending activities in support of the DBOT program as well as the resulting unobligated LEU and its associated flags. NNSA’s estimated costs for the DBOT downblending program are $770 million, according to NNSA’s October 2015 plan. NNSA plans to pay for the DBOT program solely with funds provided through annual appropriations. NNSA does not currently plan to transfer any LEU resulting from this downblending program as payment to the contractor and will instead keep all the LEU for future tritium production. The DBOT program has not been initiated, so we could not assess whether the program’s actual costs and schedule align with the estimates in NNSA’s October 2015 plan. However, NNSA officials said they have confidence in the projected costs for the DBOT program since the estimates are based on previous downblending programs that NNSA has conducted over the past decade. NNSA identified two risks, and we identified one additional risk, facing the DBOT program. First, NNSA’s October 2015 plan identified the uncertainty of annual appropriations in the amount of $770 million to support this program. In addition, NNSA’s October 2015 plan identified a second risk associated with the availability of material for the DBOT program. The DBOT material will consist largely of scrap oxide left over from weapons production processes, some to be generated in future years. Because the schedules for those processes may change, the amounts of material available for DBOT and the dates when it will be available are subject to some uncertainty. Furthermore, we identified an additional risk to the DBOT program that is not addressed in NNSA’s October 2015 plan. Specifically, NNSA did not indicate which nuclear fuel cycle company would be used for the book storage of the LEU resulting from the DBOT program, and there is no guarantee that a company would be willing to engage in book storage for NNSA. A senior NNSA official stated that this detail will be worked out once the DBOT contract is finalized. NNSA and TVA officials noted that other fuel cycle facilities have previously been uninterested in conducting book storage for NNSA, so options may be limited. According to NNSA officials, if book storage was unavailable in the future, NNSA could pay for the physical storage of the LEU for the DBOT program. Since the costs of physically storing LEU for the DBOT program are not included in NNSA’s cost estimates, this could increase the overall costs of the program. NNSA’s preliminary plan—as outlined in its domestic uranium enrichment mission need statement—to analyze options for supplying enriched uranium in the long term is inconsistent with DOE directives. This is because the scope of the mission need statement can be interpreted to fulfill multiple mission needs, which is inconsistent with DOE directives that such a statement should be a clear and concise description of the gap between current capabilities and the mission need. Under either interpretation of the mission need statement, NNSA is not complying with these directives because it is showing preference toward a particular solution—building a new uranium enrichment capability—and the agency has not included other options for analysis. In the mission need statement, NNSA has preliminarily identified two uranium enrichment technologies as the most feasible options for reestablishing a uranium enrichment capability, but both face deployment challenges. NNSA’s preliminary plan—as outlined in its domestic uranium enrichment mission need statement—for analyzing options to supply enriched uranium in the long term is unclear because the scope of the mission need statement can be interpreted to fulfill more than one mission need, and this is inconsistent with DOE directives. Specifically, NNSA’s October 2016 mission need statement—developed by NNSA’s Office of Domestic Uranium Enrichment—identified two mission needs: (1) a need for enriched uranium for a range of national security and other missions, including LEU for tritium production, HEU for the U.S. Navy, and high- assay LEU for research needs; and (2) a specific need for tritium. Because the mission need is not clearly stated, it is not clear whether NNSA intends to identify a future source of enriched uranium that could meet a range of mission needs, or only meet the specific mission need for tritium. According to DOE guidance for the mission need statement, the mission need statement should be a clear and concise description of the gap between current capabilities and the mission need. A senior NNSA official acknowledged that the mission need statement was ambiguously written because there are a range of mission needs for enriched uranium, and the ultimate mission need that the analysis of alternatives process will meet is unclear. Under either interpretation of the intent of the mission need statement, the document does not fully comply with DOE directives. According to DOE Order 413.3B, the mission need should be independent of a particular solution and should not be defined by the equipment, facility, technological solution, or physical end-item. This approach allows the Office of Domestic Uranium Enrichment the flexibility to explore a variety of solutions and not limit potential solutions. Under the first interpretation of NNSA’s mission need statement (which appears to be its preferred interpretation, according to NNSA documents), NNSA needs a future source of enriched uranium for a range of missions—initially LEU to produce tritium, but later also to produce high- assay LEU for research needs and HEU for the U.S. Navy. Specifically, the document states that if the United States decided to reestablish a domestic uranium enrichment capability, it “could meet several national security missions.” Further, it states that “future demand for additional enrichment assays and volumes should be considered in the selection of the enrichment capacity to meet national security needs.” This suggests that NNSA may be missing opportunities to consider options for providing additional enriched uranium that do not entail reestablishing a uranium enrichment plant. For example, while the mission need statement discusses some policy options that would provide NNSA with a new source of enriched uranium without building a new enrichment capability, it excludes at least one policy option that was originally identified in NNSA’s October 2015 plan— reprocessing DOE-owned spent nuclear fuel to recover HEU (which could also be downblended to produce LEU). Reprocessing spent nuclear fuel could provide a significant quantity of enriched uranium without the need for a new enrichment capability. It is not clear why NNSA excluded this option from the mission need statement at this early point in the development of alternatives. See appendix II for a discussion of other options NNSA includes in its mission need statement that could provide NNSA with a new source of enriched uranium without building a new enrichment capability. Under the second, narrower interpretation of the mission need statement, NNSA would need to obtain LEU solely to meet its mission need for tritium. However, contrary to DOE directives that a mission need statement be independent of a particular solution and not be defined by equipment, facility, technological solution, or physical end-item, NNSA is showing preference for a particular end-item—enriched uranium—to continue the tritium production mission. The mission need statement indicates a preference for using enriched uranium to continue the tritium production mission, as it only identifies options to obtain additional enriched uranium. This approach would exclude consideration of certain technology options, such as one that may have the potential to produce tritium without the need for enriched uranium. Specifically, during our review, we identified a technology capable of producing tritium that does not require enriched uranium and is being developed by Global Medical Isotope Systems (GMIS). This technology was not included in NNSA’s mission need statement as an option to help NNSA meet its tritium production requirements. An NNSA office separate from the Office of Domestic Uranium Enrichment—the Office of Nuclear Materials Integration—has funded the GMIS technology in a demonstration effort to determine whether it can produce tritium in sufficient quantities to support NNSA’s needs. The GMIS technology is currently at a low TRL, and the tritium production estimates have not been independently verified, but a senior NNSA official and GMIS representatives told us that it produced “appreciable amounts of tritium” during the demonstration. However, another senior NNSA official stated that it would be more appropriate to consider the GMIS technology in a process being conducted by another NNSA office— the Tritium Sustainment Office—which is currently examining potential options to meet tritium needs in 2055 and beyond, when TVA’s Watts Bar reactors may no longer be operating. This official, however, told us that the program office has no plans to update its last technology evaluation from 2014, which did not include consideration of the GMIS technology. If the purpose of NNSA’s mission need statement is to meet tritium requirements, then NNSA may be missing the opportunity to assess a technology that could meet the mission need without the need for enriched uranium. Without revising the scope of the mission need statement to clarify which mission need it seeks to achieve and adjusting, as appropriate, the range of preliminary options being considered in the analysis of alternatives, NNSA may not consider all options that could satisfy its ultimate mission need. The mission need statement identifies six potential enrichment technology options for reestablishing an unobligated uranium enrichment capability. The technology selected could be used first to produce LEU to support the tritium production mission, and potentially later used to produce high- assay LEU for research needs and HEU for the U.S. Navy, according to NNSA documents. According to NNSA’s mission need statement, these six technologies were identified by a team of federal, national laboratory, and contractor experts in uranium enrichment technologies in December 2014, later presented in the October 2015 plan, and then included in the mission need statement. Among the six technologies, four—restart of the Paducah Gaseous Diffusion Plant, electromagnetic isotope separation, atomic vapor laser isotope separation, and separation of isotopes by laser excitation—are unlikely to be feasible, according to NNSA documents (app. III provides additional information on these four enrichment technologies). Some of these technologies have produced enriched uranium in the past, but extraordinary technical or financial barriers, past research failures, or peaceful-use restrictions would likely preclude further consideration by NNSA, according to NNSA documents. According to NNSA documents, NNSA has preliminarily identified the two remaining uranium enrichment technologies as the most feasible options to supply unobligated LEU for tritium production: the AC100 (“large”) centrifuge and a “small” centrifuge design. However, both of these options face challenges to deployment. Of the identified options, the AC100, or large centrifuge, is the technology that is furthest along in development. Centrus Energy Corp.—the private company known as USEC Inc. prior to its bankruptcy in 2014—developed a large (about 40 feet tall) advanced centrifuge for uranium enrichment. From June 2012 through September 2015, DOE invested approximately $397 million to financially support a research, development, and demonstration program for the large centrifuge technology at Centrus’ demonstration facility—the American Centrifuge Plant—in Ohio (See fig. 4). However, in September 2015, DOE announced that it would not continue funding the demonstration plant in Ohio past the end of that month. According to a September 2015 DOE memorandum, the department had obtained the testing data it needed and determined that there was “minimal incremental value” in continuing demonstration operations. Centrus was unable to continue operation of the demonstration plant without further government support and, in February 2016, announced its intent to demobilize it. Appendix IV provides additional information on the development of Centrus’ AC100 large centrifuge technology. According to NNSA’s October 2015 report, at the conclusion of DOE’s support, Centrus had successfully demonstrated that the large centrifuge technology had achieved a TRL of 7 to 8—or the generally successful demonstration of a test facility. DOE has continued funding, at a lower level, Centrus’ further development of the large centrifuge technology at a test facility in Oak Ridge, Tennessee, through September 2018. The October 2016 mission need statement estimated that it would take 2 to 5 years to complete development of the technology. According to a senior DOE official, though DOE has discontinued the majority of its funding, the department has taken two actions to preserve the large centrifuge technology—preserving the intellectual property for this technology and hiring some former Centrus employees—to ensure that the technology can be deployed if it is selected in the analysis of alternatives. However, we identified several challenges that could complicate future efforts to deploy the large centrifuge technology—challenges related to the preservation of intellectual property, royalty costs for commercial deployment, and the weakening of Centrus’ U.S. supplier and knowledge base. Intellectual property. A senior DOE official stated that there were two issues with DOE’s Office of Nuclear Energy original preservation of the information. First, preservation of the schematics began before certain technical issues with the demonstration plant were discovered, and consequently, Centrus’ proposed resolution of those issues was not included in the documentation, according to DOE and NNSA officials. Second, a DOE official and Centrus representatives stated that DOE’s contract with Centrus did not specify how the schematics were to be preserved. Rather than preserving the schematics in an electronic engineering format, Centrus preserved them in a different format that will require them to be reconstructed in an engineering program, according to the DOE official. NNSA officials acknowledged there were issues with the 2014 preservation effort and stated that negotiations were under way to contract with Centrus for a second preservation effort that would include updated schematics in the correct format and the documentation on the proposed resolution of the technical issues. Royalty costs. Although DOE owns the intellectual property, by agreement, Centrus is owed royalties if the large centrifuge technology is deployed for commercial purposes. According to a June 2002 agreement between DOE and USEC, these royalties would be capped at $665 million. In a January 2017 request for information from industry, NNSA expressed interest in obtaining enriched uranium through a federal government-private industry partnership. In January 2017, NNSA officials said that they were not sure how royalties might affect such a partnership. It is possible that if a private industry partner was only interested in producing enriched uranium for the government alongside a commercial operation, the royalties could discourage such a partnership, or that some of the costs might be passed on to the government. However, the royalties may be less than the cost of developing a new enrichment capability, so such an arrangement may also attract partners interested in entering the market but not in developing new technology. Supplier base. Centrus representatives told us that Centrus assembled an extensive domestic supplier base during the demonstration program to show that enrichment services could be unobligated. According to Centrus representatives and a Centrus document, the company had sourced components for the demonstration plant from over 900 different suppliers and manufacturers in 28 states, and that following its closure, many of these companies would go out of business or lose the capability to produce the necessary parts. As a result, if the large centrifuge option is selected, a domestic supplier base will have to be rebuilt, according to Centrus representatives. NNSA officials acknowledged that—as NNSA conducts the analysis of alternatives process—Centrus’ supplier and manufacturing base will continue to diminish. Knowledge base. Centrus representatives have raised concerns that the closure of the American Centrifuge Plant and associated layoffs of qualified workers may make it difficult to re-hire experienced centrifuge workers in the future. According to a cost estimate review prepared by a contractor for NNSA, the American Centrifuge Plant employed 370 full- time equivalent workers during the demonstration program. However, as of January 2017, it employed approximately 117 staff, according to a Centrus document. NNSA officials acknowledged that the loss of skilled workers is a concern and stated that, as a mitigating measure, ORNL has hired knowledgeable former Centrus personnel for further centrifuge research projects at ORNL. The second most feasible option to supply unobligated LEU for tritium production is the design for a small centrifuge technology. NNSA is funding an experiment to develop a centrifuge design that it anticipates will be smaller (from 6 to 14 feet tall), simpler, and potentially less expensive to build and maintain than the large centrifuge, according to an NNSA document. The experiment began at ORNL in 2016 and is based on prior ORNL experience with centrifuges. According to NNSA and ORNL documents, the small centrifuge experiment will take 3.5 years to achieve a TRL of 3 to 4—successful validation at laboratory scale—and cost approximately $42 million for this validation effort. During our visit to ORNL in December 2016, laboratory representatives told us that prototypes had not yet been constructed and showed us their preliminary design work and initial construction of their facility. As of December 2017, the first prototype of three or four planned sizes had been built and tested, according to NNSA officials and ORNL representatives. Following completion of the experiment, the mission need statement estimates that it could take another 4 to 7 years to bring the technology to a TRL of 9 (ready to deploy). Like the large centrifuge technology, the small centrifuge technology faces challenges that could complicate its deployment. For example, according to NNSA officials and ORNL representatives, the small centrifuge experiment is on an aggressive testing schedule to demonstrate results and potential scalability to meet NNSA’s planned 2019 deadline to select a preferred alternative in the analysis of alternatives process. Further, according to NNSA officials and ORNL representatives, if the small centrifuge design is selected, ORNL would not build and operate the plant because it is focused on research and development. Instead, NNSA would have to identify and contract with another entity to license, transfer, and deploy the technology, according to NNSA officials and ORNL representatives. NNSA officials also stated that there will be challenges in establishing a U.S. manufacturing base of suppliers for the small centrifuge and associated equipment. Though the scope of the mission need statement is unclear, NNSA has prepared preliminary cost estimates for the two uranium technologies it considers most feasible: the large and small centrifuge. These estimates are limited in scope and the estimate for the large centrifuge was premised on assumptions that were no longer valid. In addition, even when assessed for a more limited scope—producing LEU for tritium—the cost estimates do not fully meet best practices for reliable estimates applicable to all cost estimates. Though the scope of the mission need statement is unclear, NNSA’s preliminary cost estimates for the two uranium technologies it considers most feasible—the large and small centrifuge—are limited in scope, and the estimate for the large centrifuge was premised on assumptions that were no longer valid. Specifically, the limited scope of the cost estimates mean that they do not reflect the full costs of building a uranium enrichment facility that could eventually provide the capacity to enrich enough uranium to meet multiple needs, not just tritium. As previously noted, NNSA identified two mission needs: (1) a need for enriched uranium for a range of national security and other missions, including LEU for tritium production, HEU for the U.S. Navy, and high-assay LEU for research needs; and (2) a specific need for tritium. According to DOE and NNSA documents and NNSA officials, NNSA appears to favor an incremental approach to reestablishing a domestic uranium enrichment capability. This incremental approach would start with the selection of an enrichment technology in an enrichment plant capable of meeting tritium production requirements but could be expanded to meet the other governmental enriched uranium needs over time, according to our review of NNSA documents. Best practices for cost estimating state that programs following such an approach should clearly define the characteristics of each increment of capability so that a rigorous life cycle cost estimate can be developed. In addition, we have recommended that agencies conducting incremental acquisitions consider establishing each increment of increased capability with its own cost and schedule baseline. However, the scope of NNSA’s cost estimates for the large and small centrifuges are limited only to an enrichment plant capable of meeting the tritium production requirements, according to DOE and NNSA documents. The cost estimates do not estimate the incremental costs of the additional enrichment capacity necessary to meet additional enriched uranium needs such as HEU. NNSA officials stated that the cost estimates were preliminary in nature and that they anticipate developing more in-depth cost estimates as NNSA progresses further in the analysis of alternatives process. By limiting the scope of the cost estimates to one mission need—LEU for tritium—and not addressing the additional costs to meet other enriched uranium mission needs, NNSA’s cost estimates may be underestimating the life cycle costs of the technology options under evaluation—which could lead the agency to select a less cost-effective technology option. We also found that NNSA relied on a Centrus-provided scenario for the large centrifuge cost estimate that was premised on assumptions that were no longer valid, rather than using a scenario that more accurately reflected conditions at the demonstration plant at the time of the analysis. We found that the large centrifuge cost estimate had not been substantially updated since fall 2014. According to DOE documents, NNSA officials, and Centrus representatives, the estimate was originally prepared by Centrus in the fall of 2014, and NNSA and its contractor made minimal updates to this estimate in January 2015 and again in fall 2016. However, this meant that NNSA officials used a scenario that assumed conditions that were no longer accurate as of October 2016, the date of the mission need statement. This scenario, for example, assumed that the demonstration plant would be left intact for 5 years—in a cold standby state—followed by a restart of operations. However, in February 2016, Centrus had already publicly announced that it would begin decontamination and decommissioning the demonstration plant in spring 2016. An alternate scenario—complete demobilization of the demonstration plant followed by a restart of operations after 10 years—may have more closely reflected conditions at the time. According to a December 2014 estimate provided by Centrus to DOE and NNSA, this scenario presented the most risk, as it meant that the site, staff, and supplier base would all have to be reconstituted after a significant break—which could be very difficult. According to this estimate, the cost of the alternate scenario would likely be $2.6 billion greater. NNSA officials stated that they had used the scenario that they thought best fit the conditions at the time, and Centrus officials agreed that cold standby was an appropriate scenario to use. However, by using the cold standby scenario rather than the demobilization scenario, NNSA appears to have underestimated the costs to build an enrichment facility by several billion dollars. A senior NNSA official noted that, for the large centrifuge, they intend to create a new estimate that does not rely on Centrus. Even when assessed for a more limited scope—producing LEU for tritium—NNSA’s preliminary cost estimates for the two uranium enrichment technology options that the agency considers to be the most feasible—the large and small centrifuge technologies—do not fully meet best practices for reliable cost estimates, including those for early stages of acquisition. Our cost guide—which presents best practices for cost estimates—states that high-quality, or reliable, cost estimates—including preliminary and rough-order-of-magnitude estimates—must meet four characteristics: they must be comprehensive, well-documented, accurate, and credible. DOE Order 413.3B states that cost estimates must be developed, maintained, and documented in a manner consistent with the methods and best practices identified in, among other things, our cost guide. Reliable cost estimates are crucial tools for decision makers, according to best practices. According to the cost guide best practices, cost estimates are considered reliable if each of the four characteristics is substantially or fully met. If any of the characteristics is not met, minimally met, or partially met, then the estimates cannot be considered to be reliable. Office of Management and Budget guidance notes the importance of reliable cost estimates at the early stages of project initiation, stating that early emphasis on cost estimating during the planning phase is critical to successful life cycle management—in short, determining whether benefits outweigh costs. NNSA’s mission need statement presented rough-order-of-magnitude cost estimates of $7.5 to $14 billion to build a national security enrichment plant using the large centrifuge technology, and an estimate of $3.8 to $8.3 billion to build such a plant using the small centrifuge technology. We found that the large centrifuge cost estimate only partially met the characteristics of being comprehensive and credible, and minimally met the characteristics of being well-documented and accurate. The small centrifuge cost estimate only partially met the characteristic of being comprehensive, and minimally met the characteristics of being well- documented, accurate, and credible. Because the large and small centrifuge cost estimates do not fully meet the best practices characteristics of reliable cost estimates, we concluded that they are not reliable. We shared our assessments with NNSA officials and a representative from an NNSA contractor and discussed the findings. We reviewed their comments and any additional information they provided and incorporated them to finalize our assessments. NNSA officials explained that the cost estimates are preliminary and are intended only to be rough-order-of-magnitude estimates since the process is only in the early stages and will be revised as the analysis of alternatives process moves forward. NNSA officials stated that they are aware of the limitations of the preliminary large and small centrifuge cost estimates. By developing reliable cost estimates consistent with best practices, NNSA will reasonably ensure that it has reliable information to make an informed decision about its options. The following is a summary of our assessments. Comprehensive. Best practices state that—to be considered comprehensive—a cost estimate should include both government and contractor costs of the project over its full life cycle, from “cradle to grave.” This includes costs from the inception of the project through design, development, deployment, and operation and maintenance, to retirement of the project. A life cycle cost estimate can support budgetary decisions, key decision points, milestone reviews, and investment decisions. DOE Order 413.3B does not specifically require a life cycle cost estimate at CD-0. Nonetheless, according to best practices, having a complete life cycle cost estimate helps ensure that all costs are fully accounted for and that resources are efficiently allocated to support the project. We found that the cost estimate to build a large centrifuge facility partially met the comprehensive characteristic because it included a high-level description of the work to be performed, and presented a brief summary description of the schedule, number of machines, and activities. However, the estimate was not a life cycle cost estimate because it excluded certain costs, such as retirement and close-out costs. In addition, other than noting a government oversight fee, the documentation does not specify whether the estimated costs are government or contractor costs. The estimate contains a 17 percent add-on, which an NNSA contractor told us accounts for DOE and contractor oversight costs, but the estimate does not specify how those costs are allocated. We found that the cost estimate to build a small centrifuge facility also partially met the comprehensive characteristic. We found that the estimate included costs for manufacturing, design, testing of the centrifuges, and 11 years of operations but, similar to the large centrifuge facility estimate, did not include retirement and close-out costs. Well-documented. Best practices state that data are the foundation of every cost estimate and that the quality of the data affects an estimate’s overall credibility. Thus, the supporting documentation for an estimate should capture in writing the source data used, an assessment of the reliability of the data, and how the data were normalized to make them consistent with and comparable to other data used in the estimate. The documentation should describe in sufficient detail the calculations performed and the estimating methodology used to derive each project element’s cost such that any cost analyst could understand what was done and replicate it. Without good documentation, management may not be convinced that the estimate is credible; supporting data will not be available for creating a historical database; questions about the approach or data used to create the estimate cannot be answered; lessons learned and a history for tracking why costs changed cannot be recorded; and the scope of the analysis cannot be thoroughly defined. We found that the cost estimate to build a large centrifuge facility minimally met this characteristic. NNSA’s contractor adjusted estimates previously provided by Centrus for inflation and added an estimate for DOE’s oversight and fees. The documentation does not provide any of the supporting cost data or include descriptions of adjustments or normalization made to the data. We found that the estimate’s supporting documentation does not provide a description of the specific calculations and presents methodologies in only broad terms. The documentation does not describe the steps taken to develop the estimates and does not provide enough information or supporting data to enable an analyst unfamiliar with the program to replicate the cost estimates. We were unable to trace the calculations to assess the accuracy and suitability of the methodology. Similarly, we found the cost estimate to build a small centrifuge facility minimally met this characteristic. We found that the supporting documentation does not include information about the supporting data underlying the cost estimate. The sources of the data are not documented, and no information is included about how the data were normalized to make them comparable to other data used in the estimate. We found that it would be difficult to recreate this estimate because no supporting data or electronic cost models were documented. Accurate. According to best practices, a cost estimate should provide results that are unbiased; that is, the estimate should not be overly conservative or optimistic. An estimate is accurate when, among other things, it is based on an assessment of most likely costs, adjusted properly for inflation, and contains few, if any, mathematical mistakes. Best practices state that unless an estimate is based on an assessment of the most likely costs and reflects the degree of uncertainty given all of the risks considered, management will not be able to make good decisions. Not adequately addressing risk, especially risk that is outside the estimator’s control or that were never conceived to be possible, can result in point estimates that give decision makers no information about their likelihood of success or give them meaningless confidence intervals. We found the cost estimate to build a large centrifuge facility minimally met this characteristic. We could not determine whether the estimate is unbiased because no risk and uncertainty analysis had been performed. Portions of the work breakdown structure’s elements are based on historical costs, but neither the historical data were provided, nor was there a thorough description of how those historical costs were adjusted or used. The contractor applied a 2 percent inflation factor but did not document the source of this factor; a representative of NNSA’s contractor stated that another DOE office recommended using that factor. We found no mathematical mistakes in the overall calculations, but the model was not available to evaluate the methodologies used. For the small centrifuge, we found the cost estimate minimally met this characteristic. We found that no risk or uncertainty analysis had been performed. The estimate uses a 2.4 percent inflation factor, but there is no documentation about the origin of this factor. An independent cost review performed by DOE’s Office of Project Management Oversight and Assessments stated that this inflation factor was overly optimistic and recommended the use of a 4 percent factor. We did not detect any mathematical errors in the overall calculations, but the model was not available to evaluate the methodologies. Credible. The credible characteristic reflects the extent to which a cost estimate can be trusted, according to our cost guide. For example, to be considered credible, the cost estimate should include a sensitivity analysis that examines how changes to key assumptions, parameters, and inputs affect the estimate. This analysis helps ensure that a range of possible costs are identified, as well as risks and their effects that may affect those costs. In addition, major cost elements should be cross-checked by the estimator to validate the results, and an independent cost estimate should be conducted by an outside group. The absence of a sensitivity analysis increases the chance that decisions will be made without a clear understanding of the impacts on costs, and the estimate will lose credibility. The cost estimate to build a large centrifuge facility partially meets this characteristic. NNSA presents several case studies rather than conducting a sensitivity analysis. These case studies only differ in one key assumption—schedule—but do not differ in any other major assumptions. The cost estimate documentation identified some major cost elements as cost drivers, but no cross-check information had been documented. DOE performed cross-checks in an independent cost review. The cost estimate to build a small centrifuge facility minimally meets this characteristic. There is no evidence in the supporting documentation that a sensitivity analysis was completed. Some programmatic risks were identified in the documentation. No cross- check information had been documented. DOE performed an independent cost review which adjusted the project management cost to make it consistent with the large centrifuge project management cost estimate. Regarding the large centrifuge, an NNSA official said that the agency had requested the supporting documentation that formed the basis of the estimate Centrus prepared in 2014, but that Centrus did not provide the information, stating that it was proprietary. However, according to Centrus representatives, Centrus offered to provide updated cost estimates and supporting data—provided that they were appropriately protected—but NNSA declined the offer. According to an NNSA official, the agency has not made a renewed effort to obtain this information because Centrus is still a publicly-traded company that would like to commercialize the large centrifuge technology. Regarding the small centrifuge, an NNSA official told us that the agency did not have sufficient data to create a reliable preliminary cost estimate because the small centrifuge experiment is still in the preliminary design and development stages. In the absence of such data, ORNL based its estimate on its decades-long expertise and experience with centrifuges, as well as on the cost structure of the large centrifuge, according to NNSA documents. NNSA and DOE officials stated that they expect to have data by mid-2019 that would support a reliable cost estimate for inclusion in the analysis of alternatives process, which is expected to conclude in 2019. The officials said that they are still developing the technology and intend to create a new cost estimate. Tritium is a key isotope used in U.S. nuclear weapons, and the United States requires an ongoing supply of tritium to sustain the nuclear stockpile. Since 2013, the United States has not had a supplier of unobligated LEU, which under the current approach is necessary to power the TVA reactor that produces tritium. NNSA recognizes that its unobligated LEU inventory is finite and declining and has taken actions to extend existing supplies of unobligated LEU in the near term. These actions have effectively bought the agency some time while it initiates an analysis of alternatives process to develop a long-term solution. However, the scope of the mission need statement underpinning the analysis of alternatives is unclear because it can be interpreted to fulfill more than one mission, which is inconsistent with DOE directives that such a statement should be a clear and concise description of the gap between current capabilities and the mission need. The mission need statement is also inconsistent with the directives’ requirement that the mission need should be independent of a particular solution and not be defined by a technological solution or physical end-item. In addition, the mission need statement indicates a preference for using enriched uranium to continue the tritium production mission and excludes consideration of certain technology options, such as one that may have the potential to produce tritium without the need for enriched uranium. Without revising the scope of the mission need statement to clarify which mission need it seeks to achieve and adjusting, as appropriate, the range of options being considered in the analysis of alternatives, NNSA may not consider all options that could satisfy its ultimate mission need. Further, the preliminary cost estimates developed by NNSA for the large centrifuge and small centrifuge technology options were limited in scope—sized for a capacity to enrich uranium only for tritium production—and do not reflect the full costs of building a uranium enrichment facility that could eventually meet a range of enriched uranium mission needs. By ensuring that the scope of the cost estimates address additional costs that align with other mission needs that the enrichment capability may be intended to fulfill, NNSA can select a more effective option. In addition, we found that the cost estimates produced for this more limited scope do not fully meet the best practice characteristics of reliable cost estimates. By developing reliable cost estimates consistent with best practices, NNSA will ensure that it has quality information to make an informed decision about which option to select. We are making the following two recommendations to NNSA: The NNSA Administrator should revise the scope of the mission need statement to clarify which mission need it seeks to achieve and, as appropriate, adjust the range of options considered in the analysis of alternatives process. (Recommendation 1) The NNSA Administrator should—following clarification of the scope of the mission need statement—ensure that the agency’s cost estimates for whichever options it considers going forward are aligned with the scope of the mission need that the enrichment capability is intended to fulfill and that they are developed consistent with best practices. (Recommendation 2) We provided drafts of this report to NNSA, State, DOD, and TVA for review and comment. In written comments, which are summarized below and reproduced in appendix V, NNSA neither agreed nor disagreed with our recommendations. However, NNSA stated that it will take future actions consistent with our recommendations. NNSA also provided technical comments, which we considered and incorporated as appropriate. The State Department provided technical comments, which we incorporated as appropriate. The Department of Defense stated that it did not have any written or technical comments and TVA did not provide written or technical comments. We also provided a technical statement of facts to the following entities: Centrus, ConverDyn, GMIS, and URENCO. We received technical comments and incorporated them, as appropriate. In its written comments, NNSA clarified that its mission need statement is written to support a range of requirements, the most urgent of which is LEU for tritium production. Further, NNSA stated that it will evaluate a broader range of options to meet its mission need during the analysis of alternatives process, which has begun and which NNSA has targeted for completion by December 2019. Because the analysis and selection of alternatives in the CD-1 phase builds off of the mission need statement, we believe NNSA’s clarification of its mission need statement is positive and will help result in an analysis of alternatives that does not limit potential solutions. NNSA also stated that it will produce higher fidelity cost estimates leading up to the CD-1 phase, which we agree is consistent with our recommendation. NNSA stated that the preliminary cost estimates it developed do not include the full life cycle cost of building an enrichment facility to meet the range of enriched uranium missions it has now clarified as its mission need, but it stated that such estimates are neither required nor cost beneficial at this early stage. As we noted, best practices—which can be used to evaluate preliminary cost estimates—recommend having complete life cycle cost estimates even at this early stage because they help ensure that all costs are considered to support decision-making and that resources are efficiently allocated to support the project. As NNSA develops its higher fidelity estimates, following cost estimating best practices—such as, by ensuring that the cost estimates for the alternatives being evaluated align with the broad range of uranium mission needs that those alternatives are intended to address, and that full life cycle cost estimates are developed for each option—would better position NNSA to select an option going forward. We are sending copies of this report to the appropriate congressional committees, Secretary of Energy, Secretary of State, Secretary of Defense, Vice President for Government Relations of TVA, and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or at bawdena@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. The objectives of our review were to assess (1) the actions the National Nuclear Security Administration (NNSA) is taking to extend its existing inventories of enriched uranium to address near-term tritium needs and the costs, schedules, and risks of those actions; (2) the extent to which NNSA’s plan to analyze options for supplying enriched uranium in the long term is consistent with Department of Energy (DOE) directives; and (3) NNSA’s preliminary cost estimates for long-term uranium enrichment technology options and the extent to which they meet best practices for reliable estimates. To inform all three objectives, we analyzed NNSA planning documents, such as NNSA’s October 2015 Tritium and Enriched Uranium Management Plan Through 2060 and other documents from NNSA and DOE pertaining to the management of enriched uranium and tritium. We also interviewed officials from NNSA, DOE, the Department of Defense (DOD), the Department of State (State), the Tennessee Valley Authority (TVA) and representatives of companies participating in different stages of the nuclear fuel cycle. We conducted site visits to the Oak Ridge National Laboratory (ORNL), the Y-12 National Security Complex in Oak Ridge, Tennessee, and the American Centrifuge Plant, in Piketon, Ohio, to understand the technology and nonproliferation policy issues that affect the current inventory and future supply of unobligated enriched uranium. To describe the actions NNSA is taking or plans to take to extend its existing inventories of enriched uranium to address near-term tritium needs and the costs, schedules, and risks of those actions, we reviewed and analyzed agency documents pertaining to NNSA’s estimates of the costs, schedules, and risks for the actions. Namely, we analyzed NNSA’s October 2015 Tritium and Enriched Uranium Management Plan Through 2060 and other NNSA strategies and implementation plans, including a 2014 Uranium Inventory Working Group assessment of near-term NNSA actions to extend the supply of unobligated LEU. We interviewed NNSA and TVA officials to validate the cost and schedule information for the action NNSA is taking to extend its LEU inventory. To compare the estimated costs to the actual costs for the actions NNSA is taking or plans to take to extend the unobligated LEU fuel supply for tritium production, we analyzed contracts between TVA and fuel cycle facilities for book storage and associated documentation. We then spoke with representatives from NNSA’s downblending contractor, and compared that information to the costs that had been invoiced through July 2017. To identify risks of the options that NNSA has identified, we reviewed NNSA documents and interviewed NNSA officials. To assess the extent to which NNSA’s plan to analyze options for supplying enriched uranium in the long term is consistent with DOE directives, we reviewed DOE and NNSA documents including: documents associated with DOE’s critical decision process, such as the uranium enrichment mission need statement, project requirements, and the CD-0 approval memo; DOE memos on the department’s uranium management strategy; and an intellectual property transfer contract between DOE and the United States Enrichment Corporation (USEC). We compared these documents to DOE directives, including DOE Order 413.3B Program and Project Management for the Acquisition of Capital Assets and 413. 3-4A Technology Readiness Assessment Guide, and associated guidance, such as DOE 413.3-17 Mission Need Statement Guide. ORNL and its subcontractor manage the contracts to develop and preserve the large centrifuge technology (AC100), and the contract to develop the small centrifuge technology; therefore, we also reviewed ORNL documents including a uranium enrichment production technology study, project management plans for the large and small centrifuge projects, and large centrifuge experiment test results. We interviewed DOE officials and ORNL representatives regarding efforts to assess the feasibility of other technology options identified in NNSA’s October 2015 plan—large centrifuge, small centrifuge, Atomic Vapor Laser Isotope Separation (AVLIS), Electromagnetic Isotope Separation (EMIS), Separation of Isotopes by Laser Excitation (SILEX), and the Paducah Gaseous Diffusion Plant. We also reviewed documents and interviewed representatives from Centrus and Global Laser Enrichment (GLE)—a joint venture that developed SILEX—regarding the development of the large centrifuge, AVLIS, and SILEX technologies. In addition, we reviewed industry responses to NNSA’s request for information regarding proposals for meeting NNSA’s future enriched uranium needs. We also interviewed NNSA and DOE officials, and industry representatives, to learn about any recent alternative tritium production technology developments. We conducted a site visit to an isotope production facility in Henderson, Nevada, to observe a NNSA- funded demonstration project with Global Medical Isotope Systems that is currently testing an alternative tritium production technology. To review the feasibility of policy and other options that NNSA is evaluating, we analyzed NNSA planning documents, and interviewed officials from NNSA and State to determine the extent to which the costs, schedules, and risks for these options were known. To examine NNSA’s preliminary cost estimates for long-term uranium enrichment technology options—the large and small centrifuges—and the extent to which they meet best practices for reliable estimates we compared these estimates to GAO’s Cost Estimating and Assessment Guide (cost guide), which is a compilation of best practices that federal cost estimating organizations and industry use to develop and maintain reliable cost estimates throughout the life of an acquisition program. According to the cost guide’s best practices, four characteristics make up reliable cost estimates—they are comprehensive, well-documented, accurate, and credible. To develop our assessments, we interviewed an NNSA official and a representative of an NNSA contractor who prepared the cost estimates about their methodologies and the findings that were used to support the cost estimates presented in NNSA’s mission need statement. We analyzed the cost estimating practices used by NNSA against the four characteristics of reliable cost estimates. We performed a summary analysis because NNSA’s cost estimates were at the rough- order-of-magnitude level. After conducting our initial analyses, we shared them with NNSA officials to provide them an opportunity to comment and identify reasons for observed shortfalls in cost estimating best practices. We took their comments and any additional information they provided and incorporated them to finalize our assessment. While rough-order-of- magnitude estimates should never be considered high-quality estimates, rough-order-of-magnitude estimates can be considered reliable by fully or substantially meeting industry best practices. For example, we have found that other rough-order-of-magnitude estimates substantially or fully met various characteristics of a reliable cost estimate, such as cost estimates prepared by the DOD and the U.S. Customs and Border Protection within the Department of Homeland Security. Moreover, DOE’s cost guidance states that, “regardless of purpose, classification, or technique,” the agency’s cost estimates should demonstrate quality sufficient for its intended use, be complete, and follow accepted standards such as our cost guide. DOE’s cost guidance also describes good cost estimates as including a full life-cycle cost estimate, among other things. These best practices should result in reliable and valid cost estimates that management can use for making informed decisions. We conducted this performance audit from August 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The National Nuclear Security Administration (NNSA) has identified other options for obtaining enriched uranium to evaluate in its analysis of alternatives process, but these options pose significant challenges and are likely to be eliminated during this process, according to NNSA and Department of State (State) officials. These options may require changes in policy and could have significant costs, risks, or technical challenges, according to NNSA and State officials. These options include revising domestic policy and international agreements to allow the use of foreign- obligated enriched uranium and technology for producing tritium; obtaining low enriched uranium (LEU) through the Mutual Defense Agreement between the United States and the United Kingdom; downblending highly enriched uranium (HEU) from the defense programs inventory; and reprocessing spent U.S. nuclear fuel. NNSA officials stated that they do not plan to pursue these options at this time. Over the years, questions have been raised as to whether using foreign- obligated material and technology to produce LEU, which produces tritium that can be harvested for weapons, when irradiated in a power reactor, constitutes a peaceful use. However, according to DOE, it has been the agency’s long-standing practice to use only unobligated material for tritium production. NNSA’s mission need statement includes the option to revise domestic policy and seek to renegotiate international agreements to allow foreign-obligated LEU—that is, LEU either sourced from foreign countries or produced using non-U.S. equipment or technology—for tritium production for nuclear weapons. Specifically, NNSA discussed three variations of the option of using foreign-obligated LEU for tritium production for use in nuclear weapons: Using obligated LEU from URENCO—a European enrichment consortium operating an enrichment plant in New Mexico. The LEU produced by URENCO is enriched using foreign technology and is subject to a peaceful use provision in an international agreement between the United States and Germany, the Netherlands, and the United Kingdom. Loading TVA reactor cores with a mix of unobligated and obligated LEU fuel proportional to the extent that the reactor core is used for tritium production for commercial electricity production. Renegotiating international agreements to allow the use of foreign technologies to produce LEU for tritium production. According to NNSA and State Department officials, longstanding U.S. policy will likely preclude the use of these options. A 1998 interagency review—led by DOE—considered the nonproliferation issues associated with establishing a new means for tritium production. The 1998 review concluded that DOE should exclusively use LEU that is unobligated by peaceful-use restrictions to preserve the “military/civilian dichotomy.” Since that time, NNSA has adhered to this policy and used only unobligated LEU for tritium production, as we reported in 2015. Various U.S. interagency policy committees—which provide national security policy analysis within the National Security Council—met several times between 2014 and 2016 to reexamine the policy and consider whether to allow obligated LEU to be used for tritium production for nuclear weapons. However, the committees concluded that this is not permissible either by the United States or partner countries under applicable international agreements. Revising the policy and agreements would have significant repercussions on U.S. nonproliferation policy as well as on international agreements, according to NNSA and State officials. In addition, according to the mission need statement, U.S. partners have repeatedly requested assurances that materials supplied to the United States not be used for tritium production. In addition, NNSA and State officials stated that using only unobligated LEU for national security purposes supports U.S. nonproliferation policy goals by, for example, avoiding setting a precedent for other countries that may seek to use U.S. obligated LEU for military purposes. State officials stated that even using a mix of unobligated and obligated LEU fuel would still essentially be asking a foreign partner for the use of its material for tritium production for nuclear weapons. Revising policy to allow for the use of obligated LEU in tritium production could “blur the line” between using LEU for peaceful energy purposes and national security purposes, according to these officials. NNSA also considered obtaining LEU from the United Kingdom under our mutual defense agreement with that country. The agreement provides for the transfer of special nuclear material between the two countries. In 2014, the Senate Armed Services Committee directed DOE to evaluate whether it would be possible to obtain LEU for the purposes of tritium production from the United Kingdom under the mutual defense agreement. According to State officials, the mutual defense agreement does not preclude the United States from obtaining LEU directly from the United Kingdom for the purposes of tritium production. However, this option is not likely to be pursued by the federal government, according to NNSA officials. Aside from the mutual defense agreement, State officials said that they are not aware of any other such agreements that would potentially allow the United States to obtain tritium from another country. NNSA’s October 2015 plan identifies a Strategic Reserve of HEU maintained by NNSA as a potential source of HEU for downblending to obtain unobligated LEU for use in tritium production. The Strategic Reserve consists of HEU metal and HEU in nuclear weapon components that are held as a backup for weapons in the U.S. nuclear stockpile. According to the October 2015 plan, this option could provide unobligated LEU for tritium production for many years. However, the October 2015 plan states that changing the quantity of HEU held in the Strategic Reserve inventory would require presidential approval. NNSA officials indicated that the agency is assessing the costs and risks of this option. According to these officials, pursuing this option would involve significant costs and risks associated with lowering the material in the Strategic Reserve, as well as accelerating the dismantlement of nuclear weapons and the disassembly of their components. While this option is currently being assessed for costs and risks, NNSA officials noted that there is currently “no plan” to access material from the Strategic Reserve. Finally, the United States’ inventory of HEU is finite; the United States has not had a domestic capability to produce HEU since 1992 and instead meets national security needs using an inventory of HEU that was enriched prior to 1992. Using this inventory for HEU downblending would consume HEU that could be used to meet other national security missions, such as providing HEU fuel for the U.S. Navy’s propulsion reactors. Consequently, this option could accelerate the date when a new enrichment capability for HEU production would be needed. In its October 2015 plan, NNSA identified an option of reprocessing spent U.S. nuclear fuel to obtain unobligated HEU that could be downblended to LEU and used for tritium production. However, this option was not ultimately included in NNSA’s October 2016 mission need statement. This material is spent reactor fuel from the U.S. Navy and other sources, and represents a potentially significant source of unobligated LEU that could be used for tritium production. DOE maintains a large inventory of such fuel, which includes both aluminum-clad and non-aluminum clad fuel, such as zirconium-clad fuel. Most of the aluminum-clad fuel is stored at the Savannah River Site, in South Carolina, while most of the zirconium-clad fuel is stored at the Idaho National Laboratory. Options for recovering HEU from either type of spent fuel are limited. The United States can only process and recover HEU from aluminum-clad spent nuclear fuel using the Savannah River Site’s H-Canyon facility, which is the only hardened nuclear chemical separations plant still in operation in the United States. There is a small amount of aluminum- clad fuel at the Idaho National Laboratory that would need to be shipped to the Savannah River Site. However, according to NNSA officials, it would be expensive to transport the material from the Idaho National Laboratory to the Savannah River Site, and the costs to operate H- Canyon to process the material would be high. Further, receipts of all nuclear material at H-Canyon have been halted by Savannah River Site’s management and operations contractor due to the facility’s degraded conditions and seismic risks. Even if H-Canyon were to resume operations, NNSA officials stated that processing aluminum-clad spent fuel would yield relatively small quantities of LEU usable for tritium production, as a considerable portion of the spent fuel is encumbered under a 1994 Presidential declaration. Therefore, NNSA officials reported that this is considered a long-term option due to the high costs and risks involved. DOE’s Office of Nuclear Energy is researching a process that could recover HEU from the zirconium-clad spent naval reactor fuel. In May 2017, Idaho National Laboratory completed a study examining the feasibility of processing a portion of its zirconium-clad spent fuel inventory through a new process called “ZIRCEX.” The report concluded that ZIRCEX showed promise; however, it also noted that pilot-scale testing was needed to prove that it can be used effectively at production scale. According to DOE officials, a pilot-scale demonstration is planned using ZIRCEX, with limited testing planned in fiscal year 2018. DOE officials told us the costs and schedules to implement a full-scale production plant using ZIRCEX to recover HEU from zirconium clad spent fuel are not known. Furthermore, additional processing and downblending would be needed to produce unobligated LEU. DOE considers recovering unobligated HEU for tritium production for use in nuclear weapons through the ZIRCEX process a long-term possibility that could be re- evaluated as the technology matures. In addition to the large and small centrifuges, four other enrichment options were presented in the National Nuclear Security Administration’s (NNSA) October 2015 plan and its October 2016 mission need statement. However, these options are unlikely to be pursued, according to NNSA documents. Some of these options have produced enriched uranium in the past, but extraordinary technical or financial barriers, past research failures, or peaceful use restrictions will likely preclude further consideration by NNSA, according to agency documents. These options include: Restart of the Paducah Gaseous Diffusion Plant (GDP). Gaseous diffusion was the first uranium enrichment technology used for both national security and commercial enriched uranium needs in the United States, and involves passing uranium hexafluoride in a gaseous form through a series of filters that is then cooled into a solid. The Paducah GDP produced low enriched uranium (LEU) from the mid-1950s until 2013. It was originally operated by the Department of Energy (DOE), but leased to the United States Enrichment Corporation (USEC) beginning in 1993. Gaseous diffusion facilities used very large amounts of electricity, making them costly to operate. According to DOE, by May 2012, it became clear that USEC was no longer in a financial position to continue enrichment activities at the Paducah GDP, and—through a series of transactions—DOE transferred enough material to keep it operating long enough to produce an additional 15-year supply of LEU for future tritium production. In May 2013, USEC ceased enrichment at the Paducah GDP citing the high costs of maintaining and operating an aging plant. In October 2014, the Paducah GDP was returned to DOE, and DOE is currently deactivating the plant in preparation for decontamination and decommissioning, while it continues to complete environmental cleanup that began in the late 1980s. In April 2015, when NNSA produced a technical evaluation of uranium enrichment technology options, restarting the Paducah GDP was still a hypothetical possibility. At that time, NNSA estimated that the technology readiness level (TRL) for this option rated 7-8 on the TRL scale. Restarting the Paducah GDP was advantageous, according to NNSA, because of the facility’s high production rate. For example, according to DOE officials, if it had been operated for a relatively brief period of time after May 2013, a significant stockpile of unobligated LEU could have been produced to support tritium production for a number of years. Since 2015, the plant and equipment have significantly deteriorated, and restart of the Paducah GDP is no longer a feasible option, according to NNSA documents and Oak Ridge National Laboratory (ORNL) representatives. Due to degradation of the equipment, the expected rate of equipment failure, a lack of replacement parts, the dispersion of trained and qualified personnel, and ongoing decontamination and demolition activities, a major effort would be required to reconstitute the plant, according to NNSA’s 2015 technical evaluation and the 2015 plan. NNSA’s 2015 evaluation estimated that it would cost $425 million to $797 million to restart the plant, and between $554 million to $1 billion annually to operate it. In addition, even if the Paducah GDP were successfully restarted without major failures, the plant could likely operate at full capacity for only 1 to 3 years before incurring additional significant costs for repairs, and obtaining replacement parts for critical process equipment would be difficult. According to NNSA’s April 2015 evaluation, operating the Paducah GDP beyond 1 to 3 years would require major investments in the plant’s facilities and infrastructure. Electromagnetic Isotope Separation (EMIS). Electromagnetic isotope separation was used in the United States to enrich uranium for the Manhattan Project, but was abandoned in favor of the then- less-costly gaseous diffusion technology. Electromagnetic separation used magnetic and electronic forces to manipulate and separate charged isotopes. An updated EMIS machine has been developed by ORNL that was successful at the laboratory scale, and which had a TRL of 7, according to NNSA documents and ORNL representatives. However, when scaled to production levels, NNSA estimated that an enrichment facility using EMIS would require over 60,000 machines and cost approximately $150 billion to construct. Due to the exorbitant estimated costs, this option is unlikely to be pursued by NNSA, according to agency documents. Atomic Vapor Laser Isotope Separation (AVLIS). Lawrence Livermore National Laboratory and later, USEC, developed the AVLIS technology from 1973 through 1999. This technology relies on the phenomenon that different isotopes of uranium absorb laser light at different wavelengths. Because lasers can be finely tuned, the ability to separate the uranium-235 isotope from the uranium-238 isotope is potentially much greater than with gaseous diffusion or the gas centrifuge process. However, despite the federal government spending $1.7 billion on the technology, and USEC investing an additional $100 million, it was not successful at the pilot scale stage and USEC ended research and funding in 1999. According to NNSA’s October 2015 plan, AVLIS’ TRL was estimated to be 5-6. If development were restarted, AVLIS could reach a TRL of 9— ready to deploy—in 5 to 15 years, according to NNSA’s October 2015 plan. However, this would likely be too late to meet NNSA’s 2038 to 2041 need date for additional unobligated LEU, and there is no estimate for the cost of such a plant, according to agency documents. According to NNSA’s 2015 plan, there is no current effort to develop the AVLIS technology. Separation of Isotopes by Laser Excitation (SILEX). Global Laser Enrichment (GLE)—a joint venture between General Electric, Hitachi, and Cameco—is developing this uranium enrichment technology that also uses lasers to separate isotopes. The technology is proprietary and was developed, in part, by an Australian company. In November 2016, DOE reached an agreement to sell its depleted uranium tails to GLE for re-enrichment to natural uranium. According to a senior SILEX official, GLE intends to build an enrichment plant by 2025 adjacent to the site of the former Paducah GDP to re-enrich these tails. However, we previously found that the SILEX agreement between the United States and Australia likely prohibits using LEU produced using GLE’s process for the subsequent production of tritium, and the executive branch has long interpreted it as such. The AC100 centrifuge (large centrifuge) design was developed by USEC Inc. (now Centrus), based off Department of Energy (DOE) centrifuge research that was terminated in the 1980s. Standing about 40 feet tall, its size means that it can produce more separative work units (SWU) per centrifuge than other centrifuge designs—making it the most advanced centrifuge design in the world, according to Centrus. In contrast to European and Japanese centrifuge designs, which are relatively small (2 to 4 meters long) and have separative work capacities in the range of 5 SWU per year to 100 SWU per year, the AC100 demonstrated a SWU production rate greater than 340 per year. When it leased a DOE site at Piketon, Ohio, for its American Centrifuge demonstration plant starting in 2004, USEC originally intended to build a 3.8 million SWU commercial uranium enrichment plant at that site with enough land nearby to expand the facility to meet total U.S. low enriched uranium (LEU) demand, including enough to meet national security needs. The planned facility would have included over 14,400 centrifuges in a facility covering over 2 million square feet. In 2010, and again in 2012, DOE and USEC signed cooperative agreements to share the cost of supporting a research, development, and demonstration program for the large centrifuge technology. DOE provided $280 million, or 80 percent of the investment in the program, with the remaining $70 million, or 20 percent, provided by USEC. With this support, USEC began operating a 120-machine commercial demonstration cascade in October 2013. In the wake of significant adverse uranium market impacts resulting from the Fukushima Daiichi accident in Japan in 2011, and in light of difficulties in securing DOE loan guarantees for deploying a commercial plant, USEC declared bankruptcy in March 2014 and later emerged as Centrus. In April 2014, following the conclusion of the cooperative agreement, the Secretary of Energy stated that DOE’s Oak Ridge National Laboratory would place Centrus under contract to operate the demonstration plant and technology with a focus on meeting national security needs. In May 2014, Centrus entered into a contract with UT-Battelle—DOE’s contractor for Oak Ridge National Laboratory—to run a program to preserve and further advance the technology readiness of the AC100 technology. Also, since 2002, Centrus has maintained a lease on a smaller test research facility, K-1600, at Oak Ridge, Tennessee, from DOE. According to a DOE document, centrifuges can be assembled and balanced at K-1600, and the test facility allows verification of centrifuge operations beyond what was possible at the demonstration plant. The K-1600 facility is located near Centrus’ manufacturing hub, the American Centrifuge Technology & Manufacturing Center, also in Oak Ridge, Tennessee. Because the May 2014 contract was set to expire in September 2015, Centrus and UT-Battelle began negotiating a new contract to support operations at the demonstration plant, the Technology and Manufacturing Center, and K-1600 in early 2015. UT-Battelle and Centrus agreed to an extension of research operations at K-1600 and the Technology and Manufacturing Center until September 2016 for $35 million annually. In addition, the Centrus lease of K-1600 was renewed until the end of calendar year 2017. However, the parties were unable to agree on further funding for the demonstration plant. On September 11, 2015, DOE announced that it would not fund the demonstration plant in Piketon, Ohio, after September 30 of that year. Centrus—unable to operate the demonstration plant without further government support—announced its intention to demobilize the plant in February 2016. Decontamination and decommissioning of the demonstration plant began in April 2016. As part of this work, Centrus is removing all of the equipment—including the centrifuges—from the demonstration plant, and will finish disposing of the machines at a secure government facility in October 2017, according to Centrus officials. However, according to DOE officials, DOE has preserved a number of the centrifuges and associated components at the Technology & Manufacturing Center. Centrus documents anticipate that the decontamination and decommissioning work will be substantially complete by the end of 2017. According to NNSA officials, Centrus has given verbal notice to DOE that it intends to terminate its American Centrifuge demonstration plant site lease in 2019. An August 2015 DOE memo states that technical issues with the existing centrifuges, peaceful-use restrictions on key components and DOE’s acquisition timeline meant that there was limited value in continuing to support the demonstration cascade after 2015. Specifically, during operation of the demonstration cascade, two technical issues were identified that made the existing centrifuges undesirable for future use. Rehabilitation of the centrifuges would have been cost prohibitive, according to NNSA officials. In addition, key components of the existing machines were constructed using foreign-sourced materials, which were subject to peaceful-use restrictions. According to an August 2015 DOE memo, the second cooperative agreement with Centrus did not require that Centrus use unobligated materials, and Centrus initially assumed it would use those machines in a larger commercial plant and not for national security. Centrus representatives and DOE officials told us that the company had since identified U.S. suppliers or workarounds for these components. However, to be used in a national security facility, these components would need to be remanufactured using those suppliers, since not all components in the demonstration cascade were unobligated. Further, under NNSA’s timeline for a domestic uranium enrichment capability, it could take until 2027 to begin construction of a uranium enrichment plant. Thus, according to an August 2015 memo, DOE concluded that it would not be economical to keep the demonstration cascade operational, and that, after the passage of so much time, parts of the centrifuges and the balance of the plant would also need to be replaced during construction. In addition to the individual named above, Shelby S. Oakley, Director; William Hoehn, Assistant Director; Eric Bachhuber, Analyst in Charge; Julia Coulter; and Katrina Pekar-Carpenter made key contributions to this report. Also contributing to this report were Antoinette C. Capaccio, Jeff Cherwonik, Jennifer Echard, Robert S. Fletcher, Ellen Fried, Cindy Gilbert, Amanda K. Kolling, Jason Lee, Jennifer Leotta, Dan C. Royer, Anne Stevens, and Kiki Theodoropoulos.", "summary": "NNSA has several mission needs for enriched uranium, including providing LEU to fuel a nuclear reactor that produces tritium—a key isotope used in nuclear weapons. NNSA has a pressing defense need for unobligated LEU to fuel this reactor, meaning the uranium, technology and equipment used to produce the LEU, must be U.S. in origin. Because the United States lost its only source of unobligated LEU production in 2013, the supply is finite. A House Armed Services Committee report included a provision for GAO to assess NNSA's plans to manage tritium and enriched uranium. This report examines (1) the actions NNSA is taking to extend its existing LEU inventories to address near-term tritium needs; (2) the extent to which NNSA's plan to analyze long-term options for supplying enriched uranium is consistent with DOE directives; and (3) NNSA's preliminary cost estimates for long-term uranium enrichment technology options and the extent to which they meet best practices for reliable estimates. GAO analyzed NNSA plans on costs, schedules, and risks; compared them with its guide on best practices in cost estimating; and interviewed NNSA and other officials. The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy (DOE), is taking or plans to take four actions to extend inventories of low-enriched uranium (LEU) that is unobligated, or carries no promises or peaceful use to foreign trade partners until about 2038 to 2041. Two of the actions involve preserving supplies of LEU, and the other two involve diluting highly enriched uranium (HEU) with lower enriched forms of uranium to produce LEU. GAO reviewed these actions and found the actual costs and schedules for those taken to date generally align with estimates. NNSA and GAO have identified risks associated with two of these actions. One of these risks has been resolved; NNSA is taking steps to mitigate another, while others, such as uncertainty of future appropriations, are unresolved. NNSA's preliminary plan for analyzing options to supply unobligated enriched uranium in the long term is inconsistent with DOE directives for the acquisition of capital assets, which state that the mission need statement should be a clear and concise description of the gap between current capabilities and the mission need. The scope of the mission need statement that NNSA has developed can be interpreted to meet two different mission needs: (1) a need for enriched uranium for multiple national security needs, including tritium, and (2) a specific need for enriched uranium to produce tritium. The DOE directives also state that mission need should be independent of and not defined by a particular solution. However, NNSA is showing preference toward a particular solution—building a new uranium enrichment capability—and the agency has not included other technology options for analysis. Without (1) revising the scope of the mission need statement to clarify the mission need it seeks to achieve and (2) adjusting the range of options it considers in the analysis of alternatives process, NNSA may not consider all options to satisfy its mission need. Although the scope of the mission need statement is unclear, NNSA has prepared preliminary cost estimates for the two uranium enrichment technology options—the large and small centrifuge—that the agency considers to be the most feasible. However, these estimates are limited in scope and do not fully meet best practices for reliable cost estimates. Based on GAO's review of NNSA documents, NNSA appears to favor an incremental approach to reestablishing an enrichment capability that could ultimately meet all national security needs for enriched uranium. The estimates' scope is limited, however, in that they reflect only the costs of the first increment—producing LEU for tritium—and do not reflect the full costs of building a uranium enrichment facility that could meet the range of enriched uranium needs. GAO's cost guide—which provides cost estimating best practices—states that the scope of preliminary cost estimates should reflect full life-cycle costs. Also, NNSA's estimates for the two options minimally or partially met best practice characteristics for reliable cost estimates even when assessed for the more limited mission scope. For example, the estimates excluded certain costs and did not describe the calculations used. NNSA officials said that the cost estimates are preliminary and will be revised. By developing reliable cost estimates that are aligned with the revised mission need statement and consistent with best practices, NNSA will reasonably ensure that it has reliable information to make a decision about which option to select. GAO is making two recommendations, including that NNSA revise the scope of its mission need statement and ensure that the scope of its cost estimates are aligned with the revised statement while developing estimates consistent with best practices. NNSA described actions planned and in process to address both recommendations.", "document_type": "gao"}
{"report": "How Sunscreen Works Most sunscreen products work by absorbing, reflecting, or scattering sunlight. Sunscreen contains chemicals that interact with the skin to protect it from ultraviolet (UV) rays. UV rays are an invisible form of radiation from the sun, tanning beds, and sunlamps that can penetrate the skin and change skin cells. The most common kinds of skin cancer, including the deadliest kind of skin cancer (melanoma), are associated with exposure to ultraviolet (UV) light. Sunscreen is one of the most common methods of protection against UV exposure used by Americans. To lower the risk of skin cancer, the Centers for Disease Control and Prevention and FDA recommend that consumers use broad spectrum sunscreens with a sun protection factor (SPF) of 15 or more as directed and in conjunction with other sun- protective measures, such as seeking shade and wearing protective clothing, hats, and sunglasses. Current recommendations also state that sunscreen should be reapplied every 2 hours and after swimming, sweating, and toweling off. When used incorrectly, sunscreen may provide a false sense of protection, which can ultimately lead to increased UV exposure. Because sunscreens are intended to help prevent sunburn and, in some cases, decrease the risks of skin cancer and early skin aging caused by the sun, these products are considered drugs under the Federal Food, Drug, and Cosmetic Act. Sunscreens are regulated as OTC (i.e., nonprescription) drugs, which are drugs considered to be safe for use by consumers without the intervention of a health care professional, such as a physician. Broad Spectrum Sunscreen and Sun Protection Factor (SPF) There are two types of ultraviolet (UV) radiation from which one needs protection— UVA and UVB. UVA radiation penetrates the skin more deeply and can cause skin cancer and other skin damage. UVB radiation can cause sunburn and result in skin damage. Broad spectrum sunscreens provide protection against both UVA and UVB rays. Products labeled as “broad spectrum” have been tested for both UVA and UVB protection. Sunscreens are made in a wide range of SPFs. The SPF value indicates the level of sunburn protection provided by the sunscreen product. Higher SPF values (up to 50) provide greater sunburn protection. Because SPF values are determined from a test that measures protection against sunburn, SPF values primarily indicate a sunscreen’s UVB protection. Most OTC drugs, including nearly all sunscreen products, are marketed in the United States by following the OTC monograph process. An OTC monograph is a regulation that specifies the active ingredients that may be used to treat certain diseases or conditions without a prescription, and the appropriate dose and labeling for use, among other things. OTC drugs that meet a monograph’s requirements may be marketed without FDA’s prior approval, assuming compliance with all other applicable regulations. FDA regulations designate categories of OTC drugs, including antacids, cough and cold products, and sunscreens, to be covered by OTC monographs. OTC drug products that do not fit under an existing monograph must be approved under an NDA to be marketed, which is an application also used for new prescription drugs. See table 1 for a summary of the differences between marketing an OTC drug product, such as a sunscreen product, under the OTC monograph process compared to under an NDA. According to FDA officials, more than 100,000 OTC drugs are marketed under the OTC monograph process, and about 400 are approved to be marketed under NDAs. The sunscreen monograph currently includes 16 active ingredients. The last active ingredients (avobenzone and zinc oxide) were added to the sunscreen monograph in the late 1990s. FDA issued a final sunscreen OTC monograph in 1999; before it could go into effect, however, FDA stayed its effective date indefinitely, because the agency had not yet established UVA/broad spectrum testing and labeling requirements for sunscreen products. To date, the sunscreen monograph is not in effect. While the sunscreen monograph’s effective date is stayed, FDA has indicated that it will not take enforcement action against the marketing of sunscreens using the 16 active ingredients included in the stayed final monograph or some combination thereof, provided the products are marketed in compliance with other applicable regulations and consistent with FDA’s 2011 draft guidance. In 2002, FDA created a two-part process, referred to as the TEA process, by which an active ingredient that was not included in OTC drugs marketed in the United States prior to the beginning of the monograph process in the 1970s can be considered for marketing under the OTC monograph process by receiving a GRASE determination. Part 1: Eligibility determination. To be eligible for review under the TEA process, the sponsor must submit an application showing that the active ingredient has been marketed in OTC drugs for a material time and to a material extent, as shown by, for example a minimum of 5 continuous years in the same country, or multiple countries outside the United States, or in an OTC product with an approved NDA in the United States; and a sufficient quantity as measured by the total number of dosage units or weight of active ingredient sold, and in a population reasonably extrapolated to the population of the United States. For ingredients found to meet the eligibility requirements, FDA publically posts this determination in the Federal Register and requests safety and effectiveness data to be submitted for the agency’s review. Part 2: GRASE determination. FDA reviews the safety and effectiveness data submitted by sponsors and other interested parties to determine whether the ingredient is generally recognized as safe and effective for OTC use. Standards for GRASE determinations are established in FDA regulations. General recognition is based upon published studies, which may be corroborated by unpublished studies and other data. Safety means a low incidence of adverse reactions or significant side effects under adequate directions for use and warnings against unsafe use, as well as low potential for harm, which may result from abuse that can occur when the drug is widely available. Effectiveness means a reasonable expectation that, in a significant proportion of the target population, the pharmacological effect of the drug, when used under adequate directions for use and warnings against unsafe use, will provide clinically significant relief of the type claimed. Based on its review, FDA may initially determine that the active ingredient is GRASE or not GRASE for OTC use; a not GRASE determination could result from FDA’s determination that the safety and effectiveness data submitted are insufficient. FDA issues its initial GRASE determination in the Federal Register and provides a period of time for public comments. The agency then reviews any comments received and issues its final GRASE determination in the Federal Register. SIA altered the process FDA is required to use for its review of sunscreen active ingredients and established time frames for the agency’s review. It also established a process for convening the agency’s Nonprescription Drugs Advisory Committee to review and provide recommendations regarding sunscreen applications at certain points in the process, and created a mechanism for sponsors to request FDA’s Office of the Commissioner to review sunscreen applications. At the time SIA was enacted in November 2014, FDA had received TEAs for eight sunscreen active ingredients. For all eight of these ingredients, FDA had deemed the applications eligible for review under the TEA process (that is, the sponsors demonstrated that the ingredients had been marketed for a material time and to a material extent), and the agency had requested data to demonstrate safety and effectiveness. FDA implemented requirements for reviewing applications for sunscreen active ingredients within the time frames required by SIA. For example, by November 2016, FDA issued final guidance for applications for sunscreen active ingredients, such as guidance on safety and effectiveness testing standards and on convening the Nonprescription Drugs Advisory Committee to discuss sunscreen active ingredients. In May 2016, FDA also issued its first required report to Congress on specific performance metrics, such as the number of sunscreen applications with pending GRASE determinations. In addition to requiring FDA to issue two additional reports to Congress in 2018 and 2020, SIA requires FDA to finalize the sunscreen monograph by November 26, 2019. See table 2 for the status of FDA’s implementation of SIA requirements and corresponding time frames. FDA also implemented changes to the process for reviewing sunscreen applications as required by SIA. Administrative orders. SIA changed the process for issuing initial and final GRASE determinations for sunscreen applications to administrative orders. FDA officials stated that this approach is more efficient than rulemaking. Agency officials noted that administrative orders are not subject to multiple-stage rulemaking procedures, and generally undergo fewer levels of review outside of FDA. Time frames. SIA established time frames for each step in the review process for sunscreen applications. For example, the agency is required to determine whether a new application for a sunscreen active ingredient is eligible for review and notify the sponsor within 60 days of receipt by the agency. These time frames only include FDA’s review, and do not include the time for the sponsor or other interested parties to prepare and submit safety and effectiveness data, or respond to additional FDA requests. Filing determination. SIA added a step, known as a filing determination, in which FDA reviews the safety and effectiveness data to determine whether it is sufficiently complete for the agency to begin its more substantive review to determine whether an active ingredient is GRASE. If FDA determines that the data are sufficiently complete to determine whether the active ingredient is GRASE, the agency will file the application and further analyze the data. If FDA determines that the data are not sufficiently complete, the agency can refuse-to-file the application, which involves notifying the sponsor and providing reasons for the refusal. Sponsors can protest FDA’s decision to refuse-to-file the application, known as “file over protest,” in which case FDA will proceed with its more substantial review to determine if the active ingredient is GRASE. Office of the Commissioner review. SIA established a mechanism for sponsors to request the Office of the Commissioner to issue GRASE determinations if FDA does not meet required time frames. The mechanism has not been employed to date, because, as of August 2017, FDA had met its required time frames for reviewing and initially responding to sunscreen applications. Figure 1 illustrates the post-SIA process for FDA’s review of pending and new applications for sunscreen active ingredients, including time frames. FDA completed its review of the safety and effectiveness data for each of the eight sunscreen active ingredient applications that it received prior to the enactment of SIA. The agency concluded that the ingredients were not GRASE because the data were insufficient and additional safety and effectiveness data are needed to determine otherwise. Sponsors questioned FDA’s request for additional data and no data have been provided. As of February 2015, FDA completed its review of the safety and effectiveness data—that is, the initial GRASE determination—for each of the eight sunscreen applications submitted between the creation of the TEA process in 2002 and SIA’s enactment in 2014. FDA’s review concluded that the eight sunscreen active ingredients were not GRASE, because the data were insufficient to make a determination, and that additional data are needed to determine otherwise. (See fig. 2.) For all eight pending sunscreen applications, FDA requested additional safety and effectiveness data to support a GRASE determination. The data FDA requested include Human clinical safety studies including skin irritation, sensitization, and photosafety studies, as well as human pharmacokinetic tests (which measure the amount of absorption of a drug into the body). Among other studies, FDA specifically recommends that sponsors conduct a Maximal Usage Trial (MUsT), a type of human pharmacokinetic study, to support an adequate assessment of safety. Human safety data from adverse event reports and other safety- related information from marketed products that contain the active ingredient. This includes a summary of all available reported adverse events potentially associated with the ingredient, all available documented case reports of serious side effects, any available safety information from studies of the safety and effectiveness of sunscreen products containing the ingredient in humans, and relevant medical literature describing adverse events. Nonclinical animal studies that characterize the potential long-term dermal and systemic effects of exposure to the active ingredient. These tests include dermal and systemic carcinogenicity studies, as well as toxicokinetic tests (to help determine the relationship between exposure in toxicology studies in animals and the corresponding exposure in humans). In most cases, FDA also recommended developmental and reproductive toxicity studies to evaluate the potential effects of the active ingredient on developing offspring. FDA’s guidance states that if the ingredient is not absorbed into the body past an identified threshold, some of these studies will not be needed. Effectiveness data from at least two SPF studies showing that the active ingredient prevents sunburn. FDA stated these studies should demonstrate protection at an SPF of 2 or higher. FDA’s 2016 guidance on safety and effectiveness data for sunscreen states that its approach for evaluating the safety of sunscreen active ingredients is based on the agency’s current scientific understanding of topical products for chronic use. According to FDA, the standard for determining GRASE has remained the same over time. However, FDA reports that the increase in the amount and frequency of sunscreen usage, coupled with advances in scientific understanding and safety evaluation methods, has changed the agency’s perspective on what it needs to determine if sunscreen active ingredients are GRASE. As a result, the agency stated that these additional tests, such as the MUsT, are necessary to determine whether a sunscreen active ingredient is safe for chronic use. FDA reported that the studies it is requesting are not novel and are consistent with the requirements for chronically used topical drug products approved through the NDA process. For the eight sunscreen applications FDA received since 2002, FDA took between approximately 6 and 13 years to issue initial GRASE determinations starting from the date that the application was submitted. For six of the eight sunscreen applications, it took FDA more than 8 years to issue an initial GRASE determination. (See table 3.) Sponsors or other parties may submit safety and effectiveness data after FDA determines the application is eligible for review. From the most recent date that safety and effectiveness data were submitted for each application, the range of time for FDA to issue an initial GRASE determination was between about 4 and 11 years. According to FDA officials, the delays in reviewing sunscreen applications can be attributed to inadequate resources to carry out the agency’s OTC drug responsibilities and a lengthy multi-step rulemaking process, which the applications were subject to prior to SIA. The officials added that the delays in FDA’s review of sunscreen applications are indicative of the larger issues affecting the OTC monograph process more generally. For example, though the OTC monograph process began over 40 years ago, FDA officials said that the agency has still not been able to complete many monographs, or make timely changes based on emerging safety issues and evolving science, because of the burdensome regulatory process and inadequate resources. FDA officials estimate that as of October 2017 approximately one third of the monographs are not yet final, and several hundred active ingredients, including those used in sunscreen products, do not have a final GRASE determination. Some stakeholders and sponsor representatives said that one effect associated with SIA was that FDA took action on the sunscreen applications that had been pending for many years. Without the act, some of them questioned whether FDA would have reviewed the sunscreen applications or provided feedback to the sponsors. Though the agency has made an initial GRASE determination, the timing of FDA’s final GRASE determination for each of the eight sunscreen active ingredients will be determined, in part, by when each ingredient’s sponsor provides FDA with the additional safety and effectiveness data the agency requested. Sponsor representatives and some stakeholders questioned the additional safety and effectiveness data requested by FDA citing the following reasons Requested test not previously conducted on sunscreen. Some of the sponsor representatives and stakeholders we interviewed stated that they were not aware of one of the tests FDA requested, the MUsT, ever being conducted on sunscreen active ingredients. Some of these sponsor representatives and stakeholders said there is a lack of knowledge by sponsors and testing laboratories on how to conduct this test, as well as a lack of testing protocols. Further, representatives from some of the sponsors said that the thresholds set by FDA for these test results, which affects whether FDA will recommend additional testing, were unreasonably low or unrealistic. FDA officials stated that a MUsT is a fairly recent term for a pharmacokinetic test under maximum use, which is a test that has been used for dermal products since the 1990s. They added that the threshold FDA established for this test is considered by the agency to minimize risk, and that at or above this threshold, the risk for cancer may increase. According to agency officials, FDA’s draft guidance on conducting a MUsT is expected to be issued in 2018. Equal to or more rigorous than NDA testing requirements. Some of the sponsor representatives and stakeholders said that the additional safety and effectiveness data FDA requested are equal to or more rigorous than what are submitted for an NDA. In particular, a stakeholder noted that FDA requested additional safety and effectiveness testing for an application to market the ingredient under the OTC monograph process from a company that already had an approved NDA for a product containing the same active ingredient (ecamsule). FDA officials indicated that active ingredients under consideration for inclusion in an OTC monograph may require some studies to demonstrate that the ingredient is GRASE for OTC use that would not be required for approval of an individual drug product through an NDA. Specifically, FDA officials said such studies may be needed because once an ingredient is found to be GRASE it can be formulated in many ways (in accordance with the monograph) and marketed in multiple sunscreen products without further agency review. Additionally, the combination of sunscreen active ingredients with other inactive ingredients in a sunscreen spray, for example, may affect the absorption of the sunscreen active ingredient, according to FDA officials. In contrast, NDAs are product-specific and once approved, further changes to the products require FDA approval. Raising the bar. Some of the sponsor representatives and stakeholders said that FDA’s requests for additional safety and effectiveness data equate to FDA raising the bar or otherwise changing what is required to demonstrate GRASE for additional active ingredients in sunscreen. Some stakeholders noted that sunscreen active ingredients that are currently marketed are not subject to this level of scrutiny. According to FDA officials, given the increased usage of sunscreen, coupled with increased knowledge of how drugs are absorbed into the skin, the agency has changed its perspective on what it needs to determine if sunscreen active ingredients are GRASE. FDA officials said that when the OTC monographs first started in the 1970s, it was thought that topical products would remain on the skin rather than be absorbed, but science has shown that some topical drugs, including some active ingredients used in sunscreens, are absorbed through the skin. Because of this knowledge, FDA officials said that the agency now considers potential dermal absorption for every topically applied drug. Lack of access to some requested data. In some cases, the sponsor or another interested party submitted a study’s summary results or summary information on adverse events associated with an active ingredient, but FDA requested more detailed data behind the study or detailed data on adverse events. However, some sponsor representatives and stakeholders said that the sponsor may not have access to this level of detail if it had not conducted the study itself or received the associated adverse event reports. For example, if the sponsor is the company that manufactures the active ingredient, it would not necessarily have access to adverse event reports for specific sunscreen products, because these reports would instead be submitted to the company that manufactures the actual sunscreen product used by consumers. One stakeholder also questioned why FDA has not attempted to obtain relevant adverse event data directly from regulatory agencies in other countries. FDA officials said that the agency does not generally have access to adverse event reports from foreign regulatory agencies, and that the agency relies on sponsors to provide adequate information to support a GRASE determination. Some stakeholders supported FDA’s request that sponsors provide additional safety and effectiveness data to determine if an active ingredient is GRASE for use in sunscreens. In particular, some of the stakeholders we interviewed stated that FDA is justified in requesting additional safety and effectiveness data from the sponsors given that science has evolved and the recommended use of sunscreen has changed over time. As of October 2017, FDA officials said that the agency has not received any of the additional safety and effectiveness data requested for the eight sunscreen active ingredients seeking a GRASE determination. According to sponsor representatives we spoke with, the sponsors are either still considering whether to conduct the additional tests FDA requested or they do not plan to do so. The reasons cited by the sponsor representatives and stakeholders included Return on investment. Sponsor representatives said the testing FDA requested is extensive, would cost millions of dollars, or take several years to conduct. Some of the stakeholders said the profit margins for these types of products can be low, and other stakeholders and sponsors said that once an active ingredient is determined to be GRASE and added to the OTC monograph, then anyone can market products using that active ingredient, as there is no period of market exclusivity granted to sponsors. Additionally, some stakeholders and sponsors added that the sponsors are reluctant to spend money on additional testing, because many of these sunscreen active ingredients have been on the market in other countries for many years. Instead, according to one sponsor representative, sponsors may choose to devote their resources into developing a newer generation of sunscreen active ingredients. Alternatives not accepted. Some sponsor representatives and stakeholders said that when alternative testing methods were proposed to FDA in place of the MUsT and other tests recommended by the agency, FDA rejected the alternatives. Further, when a sponsor asked the agency if the ingredient’s experience being marketed in other countries could be used to waive some of the carcinogenicity studies requested by FDA, the agency said that marketing experience can guide the design of studies, but it is not sufficient to appropriately assess carcinogenicity. The main purpose of carcinogenicity studies, according to FDA, is to detect the potential for cancer risks associated with lifelong exposure to the active ingredient, which are difficult to detect through the adverse event data associated with marketing experience. Animal testing. Some sponsor representatives and one stakeholder mentioned concerns about conducting tests on animals, because of the effect it may have on a company’s ability to market products worldwide. For example, European regulations prohibit cosmetics, including sunscreens, from being tested on animals, though they would not prohibit such testing as required by other countries. Additionally, one sponsor and one stakeholder expressed concern that sunscreen manufacturers may face backlash from animal rights groups and shareholders if animal testing is conducted. Uncertainty if more tests will be requested by FDA in the future. One sponsor representative said that there is uncertainty whether FDA may request additional studies in the future based on the outcomes of the FDA-recommended tests. According to one stakeholder, there is concern that sponsors may spend additional time and money on conducting the tests requested by FDA and the sunscreen active ingredient may still not be determined to be GRASE. Sponsor representatives for the pending sunscreen applications and most stakeholders said that the sponsors and FDA are essentially at a standstill about adding more sunscreen active ingredients to the U.S. market through the OTC monograph process. Sponsor representatives acknowledged that they could have submitted an NDA to market a new sunscreen product instead of seeking a GRASE determination for a sunscreen active ingredient. However, some sponsor representatives and a stakeholder said that NDAs are impractical for sunscreen products, because the formulations are continually changing; for example, sunscreen products may have a new fragrance based on the season. Additionally, many of the sponsors that submitted sunscreen applications manufacture the active ingredient, but not the finished sunscreen products; yet, it is the finished products that receive approval through the NDA process. Though FDA stated that it needs additional resources to complete its work related to the OTC monograph process—and most stakeholders agree—additional resources alone will not lead to additional sunscreen active ingredients on the U.S. market. Movement on sunscreen active ingredients will also depend on sponsors and other interested parties submitting data that FDA determines are sufficient for a GRASE determination. Some stakeholders said that they agree with FDA on the need for testing to ensure the safety and effectiveness of sunscreen ingredients, but some of them said the agency should also consider the potential benefit of preventing skin cancer if new ingredients—which could offer better protection against UVA rays—become available for the U.S. market. We provided a draft of this report to the Department of Health and Human Services for review and comment. The department provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretary of the Department of Health and Human Services, appropriate congressional committees, as well as other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If your staff have any questions about this report, please contact me at (202) 512-7114 or crossem@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. To examine the steps the Food and Drug Administration (FDA) has taken to review time and extent (TEA) applications for non-sunscreen active ingredients, we reviewed the Sunscreen Innovation Act (SIA), applicable FDA regulations and guidance, and other relevant documentation associated with the non-sunscreen TEAs. We also interviewed FDA officials and representatives of the sponsors associated with the six non- sunscreen TEAs submitted prior to the enactment of SIA in 2014. SIA included requirements related to FDA’s review of non-sunscreen TEAs. Specifically, SIA required FDA to provide sponsors of certain non-sunscreen TEAs submitted prior to the enactment of SIA, upon request, with the opportunity to select from among different options for FDA’s review (called a review framework), including corresponding time frames; issue regulations establishing time frames for reviewing non- sunscreen TEAs submitted after SIA was enacted, as well as metrics for tracking the extent to which the time frames are met; and submit a letter to Congress that includes a report on the status of FDA’s review of non-sunscreen TEAs that were pending before SIA’s enactment. FDA implemented these requirements associated with non-sunscreen TEAs by November 2016. For example, FDA provided each sponsor that requested review framework options with the ability to select the process and corresponding time frames to be applied to its pending TEA. The review framework options included FDA using an administrative order or rulemaking process, with or without a filing determination. The time frames FDA established to initially respond to the pending non-sunscreen TEAs ranged from 90 days (when an option with a filing determination is selected) to 3.5 years (when an option without a filing determination is selected) from the date the sponsor selected a review framework. For example, when a sponsor chooses to receive a filing determination with the administrative order process, FDA is to determine within 90 days whether the safety and effectiveness data provided by the sponsor or other interested party are sufficiently complete for the agency to begin its substantive review and issue a filing determination. If FDA determines that the application can be filed, the agency then has 2 years after the filing date to issue a proposed order determining whether the ingredient is generally recognized as safe and effective (GRASE). When a sponsor chooses to not receive a filing determination with the rulemaking process, FDA has 3.5 years to issue a proposed rule with the GRASE determination. Additionally, FDA issued a final rule in November 2016 outlining the process and time frames by which the agency will review and take action on new non-sunscreen TEAs submitted after the enactment of SIA, including time frames for each step in the review process. (See fig. 3.) In establishing these time frames, FDA noted that it considered the agency’s public health priorities and available resources, as required by SIA, and accounted for the anticipated variations in the content, complexity, and format of submissions, as permitted by SIA. The overall time frames for FDA’s review are estimated to be about 6 years from the date FDA receives a TEA to the date a final GRASE determination is issued. Specifically, the approximately 6 years consists of 180 days for an eligibility determination, 90 days for a filing determination, 1,095 days for an initial GRASE determination, and 912 days for a final GRASE determination. These time frames only include FDA’s review, and do not include time for the sponsor or other interested parties to submit safety and effectiveness data, respond to additional FDA requests, or request meetings with the agency before such filing. FDA also established metrics for tracking the extent to which the agency meets the time frames set forth in the regulations, and sent a letter to Congress reporting on the status of the non-sunscreen TEAs submitted prior to SIA. These metrics are included in FDA’s regulation for non- sunscreen TEAs. The metrics include the number of non-sunscreen TEAs that have been submitted post SIA, and the number and percent of these TEAs to which FDA has responded within its required time frames. Agency officials said that FDA has not received any additional non- sunscreen TEAs as of August 2017 beyond the six that were submitted prior to the enactment of SIA, and therefore has not publicly reported metrics for non-sunscreen TEAs. Lastly, FDA submitted a letter to Congress in May 2016 describing the status of the six non-sunscreen TEAs submitted prior to SIA, including the review framework selected by each sponsor, when applicable. As of August 2017, FDA had not issued a GRASE determination for any of the six TEAs for non-sunscreen active ingredients that were submitted before SIA was enacted. FDA has not made a GRASE determination because FDA refused to file the applications. Two non-sunscreen TEAs were determined by FDA to contain insufficient information to be filed for review in 2016. FDA requested that the sponsors for these applications provide a detailed chemical description of the active ingredients, assessments of carcinogenicity, and safety and efficacy data, among other things. Representatives of sponsors for both ingredients said they do not plan on conducting the additional tests that FDA requested, because of concerns about return on investment. According to FDA officials, the sponsors of these applications did not elect to “file over protest.” Sponsors withdrew their applications. Three non-sunscreen TEAs were withdrawn in 2016. Representatives of the sponsors of these three applications said the companies did so because of increased regulatory scrutiny of the active ingredient, and the additional safety and effectiveness data requested by FDA. TEA is still pending FDA’s initial GRASE determination. One non- sunscreen TEA that was submitted in 2004 to add an anti-dandruff ingredient to the over-the-counter monograph was pending FDA review as of August 2017. The sponsor for this application did not request to select a review framework from the agency and so the application is subject to the regulations that FDA issued in November 2016. In accordance with the time frames established in the regulations, FDA officials expect to issue a proposed rule with a GRASE determination for this TEA in 2019—within 1,095 days (3 years) of when the regulation was finalized. This date is nearly 15 years after the application was originally submitted. For those two non-sunscreen TEAs for which FDA refused to file the applications, FDA’s determination came about 8 and 13 years after the TEA was originally submitted. Sponsors that withdrew the three non- sunscreen TEAs did so 11 or more years after submitting the application. (See table 4.) In addition to the contact named above, Kim Yamane (Assistant Director), Rebecca Hendrickson (Analyst-in-Charge), Kristin Ekelund, and Toni Harrison made key contributions to this report. Also contributing were George Bogart, Karen Howard, Drew Long, and Vikki Porter.", "summary": "Using sunscreen as directed with other sun protective measures may help reduce the risk of skin cancer—the most common form of cancer in the United States. In the United States, sunscreen is considered an over-the-counter drug, which is a drug available to consumers without a prescription. Some sunscreen active ingredients not currently marketed in the United States have been available in products in other countries for more than a decade. Companies that manufacture some of these ingredients have sought to market them in the United States by applying to add the ingredients to the sunscreen monograph, which lists ingredients that can be used in sunscreens without FDA's premarket approval. FDA reviews the applications and corresponding safety and effectiveness data for the ingredients. The Sunscreen Innovation Act includes a provision for GAO to examine FDA's implementation of the act. This report examines (1) the extent to which FDA implemented requirements for reviewing applications for sunscreen active ingredients within mandated time frames, and (2) the status of the sunscreen applications. GAO reviewed FDA regulations and guidance documents, Federal Register notices, and FDA and sponsor documents for all eight sunscreen applications. GAO also interviewed FDA officials; sponsors of sunscreen applications; and stakeholders with interests in sunscreen, including health care providers, researchers, and industry groups. Stakeholders were selected based on knowledge of the monograph process and sunscreen active ingredients. The perspectives of these stakeholders are not generalizable. The Food and Drug Administration (FDA), within the Department of Health and Human Services, implemented requirements for reviewing applications for sunscreen active ingredients within time frames set by the Sunscreen Innovation Act, which was enacted in November 2014. For example, the agency issued a guidance document on safety and effectiveness testing in November 2016. As of August 2017, all applications for sunscreen active ingredients remain pending after the agency determined more safety and effectiveness data are needed. By February 2015, FDA completed its initial review of the safety and effectiveness data for each of the eight pending applications, as required by the act. FDA concluded that additional data are needed to determine that the ingredients are generally recognized as safe and effective (GRASE), which is needed so that products using the ingredients can subsequently be marketed in the United States without FDA's premarket approval. To make a GRASE determination, FDA requested that the application sponsors provide additional data, including human clinical studies, animal studies, and efficacy studies. Sponsors of some of the sunscreen applications and some stakeholders GAO interviewed questioned FDA's requests, stating, for example, that the agency's recommended absorption test has never been conducted on sunscreen ingredients and there is a lack of knowledge on how to conduct it. At the same time, other stakeholders support the additional testing FDA requested. FDA reports that the increase in the amount and frequency of sunscreen usage, coupled with advances in scientific understanding and safety evaluation methods, has informed the agency's perspective that it needs additional data to determine that sunscreen active ingredients are GRASE. However, none of the sponsors reported current plans to provide the requested information—that is, they are either still considering whether to conduct the additional tests or they do not plan to do so. They cited the following reasons: Return on investment. The testing FDA requested is extensive, would cost millions of dollars, or take several years to conduct, according to sponsor representatives. Some stakeholders and sponsor representatives said that sponsors are currently working to develop newer sunscreen ingredients and are therefore reluctant to invest in the testing FDA requested for the older ingredients covered by the pending applications. Alternatives not accepted. Some sponsor representatives and stakeholders said that when they proposed alternative testing methods for absorption, for example, the agency rejected the alternatives. Animal testing. One stakeholder and some sponsor representatives reported concerns about the effect that the animal testing requested by FDA may have on companies' marketing of sunscreen products worldwide. Additionally, one stakeholder and representatives from one sponsor expressed concern that sunscreen manufacturers may face backlash from animal rights groups and shareholders if animal testing is conducted. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "The National Housing Act authorized HUD’s Office of Housing to accept assignment of and sell defaulted single-family mortgage loans. Additionally, Office of Management and Budget (OMB) Circular No. A-11 (2016) states that under the Debt Collection Improvement Act of 1996, credit agencies with over $100 million in loan assets are expected to sell defaulted loan assets that are more than 1 year delinquent, with some exceptions. The OMB Circular further states that the agency may not be required to sell loan assets if a serious conflict exists between selling loans and policy goals. In 2017, FHA insured over $1 trillion in single- family mortgage loans, including more than 200,000 loans in default. Consistent with the National Housing Act and OMB Circular, FHA uses DASP to reduce its backlog of defaulted loans by selling loans that are severely delinquent. As of 2016, loans must be at least 8 months delinquent to be eligible for sale through DASP. In addition, servicers must evaluate borrowers for all FHA loss mitigation options in order for loans to be eligible for sale through DASP. FHA has called its single-family forward loan sales program by different names over the years, but it became known as DASP beginning with FHA’s third loan sale in 2012. We use DASP throughout this report to refer to FHA loan sales, regardless of the timing or the program name. Between 2010 and 2016, FHA held a total of 16 sales, with between one and four sales annually. As seen in figure 1, the number of loans sold varied significantly among the sales. Figure 2 shows the extent to which FHA has sold defaulted loans in each state in 2013-2016. The map also indicates states with longer expected foreclosure timelines. The foreclosure process is governed by state laws and differs across states. FHA establishes expected timelines for completing foreclosure and acquiring title to the property in each state. As discussed later, the foreclosure process involves a number of costs, which may be higher in states with longer expected foreclosure timelines. Additional information on the loans sold through DASP can be found in appendix II. A loan becomes delinquent after the borrower misses a single payment and goes into default after it is at least 31 days—two full payments—past due, including when a borrower may miss payments sporadically over time without repaying the missed amount. Loan servicers—which can be large mortgage finance companies or commercial banks—are responsible for accepting payments from borrowers and managing mortgages. FHA requires the servicers to provide monthly reports on each loan with one or more missed payments through its Single Family Default Monitoring System (default monitoring system). Before initiating foreclosure actions, FHA requires servicers to contact the borrower, collect information on the borrower’s finances, and evaluate the borrower using the following ordered steps, referred to as the waterfall of loss mitigation priorities: informal forbearance through an oral agreement allowing for reduced or suspended payments for a period of 3 months or less; formal forbearance with written repayment plans, which combine a suspension or reduction in monthly mortgage payments with a repayment period; special forbearance of up to 12 months for borrowers who are unemployed; FHA-Home Affordable Modification Program (HAMP), which works to get a borrower to return to making regular payments (reperforming); FHA-HAMP offers qualified borrowers a loan modification that results in an affordable monthly payment amount that does not exceed 40 percent of the borrower’s gross monthly income by reamortizing the debt for a new 30-year term at a fixed interest rate at or below the market rate and, under certain circumstances, deferring the payment of principal through the use of a partial claim; and non-retention disposition methods, including a preforeclosure sale (also known as a short sale) in which the borrower sells a property and the mortgage is satisfied for less than the amount that is owed, or deed-in-lieu of foreclosure in which the borrower voluntarily transfers a property to FHA to release all mortgage obligations; FHA may also provide move-out incentive payments to borrowers for short sales and deeds-in-lieu of foreclosure. To qualify for most of these actions, borrowers must be in default. A servicer must evaluate a borrower for the loss mitigation options monthly, but a borrower may not qualify for any option. However, a borrower’s circumstances are fluid and eligibility can change. For example, borrowers who previously did not qualify for any loss mitigation options could be eligible to be evaluated for loss mitigation options again after starting a new job. FHA provides servicers with incentive payments of varying size for taking certain loss mitigation actions. FHA generally requires servicers to either use a loss mitigation option for which a borrower qualifies or initiate foreclosure within 6 months of the default date, but a loan also may become eligible for disposition through a DASP sale when loss mitigation has been exhausted and it meets other eligibility criteria. FHA provides servicers with a list of loan eligibility criteria in the servicer agreement for each sale. Servicers use the criteria to identify which loans are eligible for a DASP sale. For example, eligibility criteria include that a loan must be FHA-insured, have no more than four dwelling units, and have an unpaid principal balance (amount owed) greater than $20,000. Other criteria relate to length of delinquency, loan-to-value (LTV) ratio, and the condition of the property. Loans that qualify for loss mitigation or have a foreclosure date scheduled or completed during the sale period are not eligible for DASP. Information on changes to loan eligibility criteria throughout the history of the program can be found later in this report. Each of the disposition methods FHA uses when loss mitigation on defaulted loans is exhausted has different costs to FHA’s MMI Fund (see table 1). For the nonretention disposition methods of short sale, deed-in- lieu of foreclosure, third-party sale, or foreclosure—which we refer to as “out of home” methods—FHA pays a claim to the servicer in the amount of the unpaid mortgage balance and other expenses. In addition, for a deed-in-lieu of foreclosure or foreclosure—in which the property enters HUD’s inventory of real estate owned (REO) property—FHA also incurs costs associated with maintaining, repairing, and selling the property. This generally results in a greater loss to the MMI Fund. In the case of a DASP sale, FHA avoids interest and servicing costs during the foreclosure period as well as REO-related expenses, but incurs the cost of the difference between the unpaid balance and expenses and the amount FHA receives for the loan it sells. The loan sale process has three distinct phases: presale, due diligence and bid, and postsale (see figs. 3, 4, and 5, respectively). FHA contractors (the transaction specialist, the compliance analytics contractor, and the program financial advisor) facilitate and perform various tasks throughout these phases. The summary below reflects the process according to 2016 sales documents (the most recent DASP sales documents available), other supplemental information, and interviews with FHA officials and contractors. Figure 3 shows the presale phase. During this phase, FHA or its contractor notifies interested servicers and communicates loan eligibility criteria to servicers through the servicer agreement. Servicers that plan to participate in the sale identify a list of eligible loans, certify the accuracy and eligibility of the loans, and provide the list to FHA for review through the Claim Submission Report. The servicer uploads information on the loans submitted to FHA. FHA creates the submitted loan database, which includes each accepted loan’s current unpaid balance, payment history, and an estimate of the underlying property value. According to FHA staff, FHA reviews the eligible loans submitted by servicers and, with the advice of its transaction specialist contractor, groups them into pools based on geography and other factors. FHA sells loans in national pools or Neighborhood Stabilization Outcome (NSO) pools, for which purchasers must meet specific neighborhood stabilization outcomes for 50 percent or more of the properties in the pool. Next, an FHA contractor notifies prospective purchasers about the upcoming sale via email, and notices are posted in the Federal Register, industry publications, and newspapers. Purchasers can include private equity firms, hedge funds, rental housing companies, and nonprofit organizations. Prospective purchasers must submit to FHA a Confidentiality Agreement and a Qualification Statement. FHA reviews the documentation to determine whether the purchaser qualifies to participate in the sale. Figure 4 depicts the due diligence and bid phase of a DASP sale. During this phase, prospective purchasers receive access to the data room—a shared data website—to review materials including the loan information provided by servicers (due diligence materials); bid instructions; and sale agreement that describes representations, warranties, and postsale requirements, among other things. The servicer, FHA staff, and FHA contractors continue to verify the eligibility of the loans. Prospective purchasers place bids on each loan in a pool and deposit a percentage of their total bid amount. FHA evaluates the bids and selects the highest bidder for each pool based on the total of the loan-level bids. FHA then notifies that bidder and provides an executed purchaser agreement that describes postsale servicing and reporting requirements. Purchasers must agree to follow the terms of the purchaser agreement including avoiding finalizing foreclosures for 6 or 12 months (depending on whether the sale occurred prior to July 2015), evaluating borrowers for loan modification, and reporting outcomes to FHA. Figure 5 depicts the postsale phase. During the postsale phase, FHA provides the list of sold loans to the servicer and winning purchaser, which together determine servicing transfer dates. After bid day, servicers verify that loans continue to meet eligibility criteria for the sale and begin submitting insurance claims to FHA. Purchasers pay FHA for the loans that are sold, and servicers transfer loan information and complete mortgage files to the purchasers. When servicers submit claims to FHA for sold loans, they must report the reason any loans are not transferred. For example, a loan might not be transferred due to ongoing loss mitigation activity or another reason, such as no longer meeting delinquency eligibility criteria, and would remain with the servicer and FHA insured. Following the final transfer of loan documentation, servicing is transferred from the servicer to the purchaser. The servicer notifies the borrowers of the transfer of servicing and termination of their FHA mortgage insurance. Following the transfer, the purchaser sends the borrowers a similar notice of transfer and any required disclosures. Following the final settlement date, the purchaser submits the first of 16 quarterly reports on the status of the sale portfolio using the format provided in FHA’s Post-Sale Reporting tool. If a purchaser demonstrates a pattern of failing to report, FHA may disqualify the purchaser from future sales. During the first 12 months of the reporting period, purchasers must evaluate borrowers for a HAMP modification or a substantially similar modification. Additionally, the purchaser must avoid foreclosure for 12 months unless the home is vacant or there are extenuating circumstances. The purchaser agreement allows the purchaser 10 months starting with the servicing transfer date to notify HUD of any alleged breach of FHA’s representations and warranties on purchased loans. For example, a breach could be that a loan does not meet eligibility requirements, is not covered by a valid hazard insurance policy, or has an outstanding mechanic’s lien. After notifying the original servicer and reviewing any response, FHA determines whether there is a breach and the appropriate remedy. The breach remedy can include a cure of the breach (such as by the servicer paying an outstanding lien), reduction in claim payment, or repurchase by the servicer. The servicer has 60 days to comply with the remedy. If a breach results in the repurchase of the loan by the original servicer, the purchaser will transfer servicing back to the original servicer. FHA made changes to DASP by adding borrower protections and made efforts to increase the participation of nonprofit organizations. FHA also changed loan eligibility criteria and bidding processes to increase recoveries to the MMI Fund. Other changes included automating and streamlining processes. FHA has added to DASP protections for borrowers and requirements to help stabilize neighborhoods in response to concerns raised by various stakeholders. For example, borrower protections included extending the moratorium on foreclosures from 6 months to 12 months and requiring the purchaser to offer a HAMP or substantially similar modification to qualified borrowers beginning with its July 2015 loan sale. In September 2016, FHA also added payment shock protection, which limited increases in a borrower’s interest rate to 1 percent per year following a 5-year reduced rate period. In an effort to stabilize neighborhoods, FHA added a requirement in 2016 prohibiting purchasers from walking away from vacant properties. In a hearing before the House Committee on Financial Services in July 2016, the HUD Secretary stated that the changes that FHA made to the program in 2015 and 2016 were designed with input from a broad range of stakeholders and were assessed for how well the changes would fulfill the agency’s goal of strengthening neighborhoods. In 2015, FHA made several outreach efforts to expand the participation of nonprofit organizations in DASP. These efforts included offering nonprofit organizations a “first look” at vacant REO properties, allowing purchasers to resell to nonprofit organizations, and conducting a webinar to educate and encourage the participation of nonprofit organizations. These efforts came about following a September 2014 report from the Center for American Progress and suggestions from other stakeholders that FHA make it easier for nonprofit organizations to participate in DASP. In 2016, FHA set a target that 10 percent of bids come from nonprofit organizations and local governments, including offering loans in targeted distressed areas. In 2015 and 2016, FHA offered nine pool sales directed at nonprofit organizations only. Some members of Congress expressed concern over FHA’s efforts to encourage participation of nonprofit organizations, stating that FHA would likely get lower bids than it would normally receive from private companies. According to FHA officials, FHA changed its loan eligibility criteria for inclusion in DASP sales in order to decrease losses to the MMI Fund and to give servicers more time to work with borrowers on loss mitigation. FHA lists the eligibility criteria to qualify loans for FHA’s loan sale program in each servicer agreement. Our analysis of the servicer agreements from 2010 through 2016 showed that some criteria remained the same during the period, such as the requirement that servicers must have evaluated borrowers for all loss mitigation actions in accordance with FHA regulations or that loans in certain types of bankruptcy were ineligible. Other criteria changed during that period, including the following examples: Delinquency requirements for eligible loans changed from six full payments past due to eight full payments past due beginning with the first DASP sale in 2016; and FHA changed its eligible LTV ratio. Between the 2010 sale and the second DASP sale in 2012, FHA set a minimum LTV ratio for loan sales at 85 percent or higher—meaning that to qualify for sale, the ratio of the amount owed on the loan to the estimated value of the property was required to be 85 percent or higher. Beginning with the first DASP sale in 2015, FHA set minimum eligible LTV ratios by state—70 percent in New York and New Jersey and 85 or 100 percent for other states, with about half the states in each percentage category. FHA officials said that they analyzed loan-level bid amounts and found that they had greater recoveries relative to REO disposition on loans with shorter delinquencies and higher LTV ratios. According to the officials, this was because these loans had a higher probability of modification by purchasers. Further, they said that the changes in eligibility criteria related to delinquency and LTV ratio were intended to decrease losses to the MMI Fund. In addition, FHA lowered limits on loan-level bid pricing to minimize the potential negative effects of ineligible loans being removed from sales after bidding. Purchasers could use loan-level bid pricing to strategically take advantage of the expected removal of ineligible loans after bidding. Because a purchaser pays only for the loans that are actually transferred and some loans are removed from sales due to ineligibility, such as due to changes in loss mitigation or foreclosure status, FHA receives less in actual returns on the sale than the winning—highest—bid. For selected loan pools in the second sale in 2013 and the first sale in 2014, FHA analyzed the bid amounts of loans that became ineligible after purchasers had bid. Before the 2015 sale, FHA lowered its maximum purchasers’ loan-level bid amount from 200 to 175 percent of the unpaid balance of a loan. FHA contractors deployed tools in 2015 and 2016 to automate previously manually intensive processes of collecting data and emails from about 30 different purchasers and tracking the status of sold loans. FHA, contractors, and purchasers we interviewed said that these processes improved data quality, efficiency, and communication among parties. A postsale reporting tool and data repository enables the contractor to send mass emails and target email reminders of upcoming due dates, including report deadlines, to purchasers that have not submitted required documents. In addition, the tool validates data by checking for logic and data type. A loan sale system conducts automated checks of data in the submitted loan database for completeness and accurate file layout. The system also checks whether all required documents are included on the shared data website that purchasers use to perform due diligence and determine bid amounts. The system automatically generates a report of errors that is sent to servicers. A web-based breach tracking tool that streamlines and centralizes tracking of loans that breach—that is, were transferred to purchasers but did not meet eligibility standards. The tool allows the purchasers to submit breach requests, notifies servicers automatically about pending breaches, and allows auction stakeholders to review breaches and update the status of the loan. Servicers identify eligible loans for inclusion in a DASP sale, certify eligibility, and update loan information and remove ineligible loans prior to bid day. FHA staff and contractors described the various checks they conduct to generally verify a loan’s continued eligibility by reviewing the loan’s default status in FHA’s default monitoring system and in some cases other servicer data before a sale. Specifically, both FHA staff and the compliance analytics contractor conduct eligibility tests by checking each submitted loan’s default status. The transaction specialist contractor told us it conducts automated checks of the loan submission and related data that servicers submit to check for data completeness and valid formatting. Additionally, this contractor also checks that the loans match eligibility criteria and that all required documents were submitted. Starting in 2015, FHA officials told us that FHA and its three primary contractors began to verify that all loans submitted for sale had an eligible default status as part of their quality-control process. FHA officials said that any updates or changes servicers make to the status of submitted loans require the program financial advisor contractor to repeat its quality- control procedures. In addition, servicers are expected to ensure that loans meet eligibility criteria until the loan is sold and servicing responsibilities are transferred to the purchaser. The servicer agreement states that an eligible mortgage loan meets all eligibility criteria as of the date it is submitted for sale and continues to meet all such requirements as of the claim date. FHA officials said that servicers check eligibility at the loan submission date, approximately 3 weeks prior to the bid day when they update loan information, and at the claim date. Servicers should remove ineligible loans from the sale. In 2014, FHA required servicers to self-certify the accuracy of the default status of loans. FHA officials told us that it also has absolute discretion to exclude one or more loans from the sale. According to FHA officials, FHA has two different provisions in place to correct when a loan should not have been sold. One provision, as described earlier, allows the purchaser to initiate the breach process and the servicer either corrects the reason for the breach or FHA repurchases the loan. Another provision is the “claw-back” provision. Under this provision, FHA or the former servicer can require the purchaser to return the loan to FHA in exchange for the amount the purchaser paid for the loan. However, we found examples of potentially ineligible loans that were submitted for sale and were sold in DASP auctions. Of the 12,210 loans sold in 2016, a small percentage of loans (about 2.65 percent) did not meet eligibility criteria based on their default status on the date loans were submitted. The error rate was similar at the bid date for the 12,210 loans sold in 2016. In particular, about 2.67 percent of these loans did not meet eligibility criteria based on their default status on the bid date. These loans were ineligible for varied reasons, including because they did not meet FHA’s length of delinquency requirement, were involved in certain types of bankruptcy, or were undergoing loss mitigation and therefore should have remained under FHA insurance protection. Ineligible loans may have been sold because the status of loans changed after the servicer and FHA completed their eligibility checks. FHA’s staff and contractors conduct multiple eligibility checks concurrently during the presale and due diligence and bid phases—about 12 to 14 weeks before bid day according to FHA officials. These early checks conducted by FHA’s staff and contractors do not necessarily occur in a specific order or according to specific timelines. FHA officials told us that FHA relies on the servicers to perform eligibility checks a few weeks before bid day and again after the sale when the servicer submits the claim. However, the status of delinquent loans can be very fluid. According to our analysis of FHA data, 23 percent of loans from 2010 to 2016 were removed between the bid date and the claim date. FHA officials told us that servicers remove loans after FHA’s reviews to maintain compliance with representations and warranties under the servicer agreement. FHA officials also explained that loan removal was due to changes in loans’ eligibility status, such as entering into loss mitigation or the scheduling of a foreclosure sale. We reviewed a nongeneralizable sample of 10 loans that appeared to be ineligible and interviewed FHA officials about these loans. We found that some changes in the eligibility of loans could be missed due to the length of time between eligibility checks and data updates. The status of loans can change multiple times during a sale process. FHA requires servicers to self-report the status of defaulted loans on a monthly basis to the default monitoring system, usually within the first 5 days of the month, but servicers may report changes throughout the month if a loan’s status changes. However, FHA officials told us that the system updates once a month. FHA’s eligibility checks may have occurred before the updates were posted to the default monitoring system. FHA officials told us that FHA relies on the controls in place and contractual agreements with the servicers that require them to ensure that loans are eligible when submitted to FHA for sale and when they file a claim with FHA. As a result, FHA may not be aware of a change in loan eligibility that was reported in the default monitoring system after its eligibility checks were completed. Federal internal control standards require that management design control activities to achieve objectives and respond to risks. Control activities can be either preventive or detective. A preventive control activity prevents an entity from failing to achieve an objective or address a risk. Although FHA has implemented a number of controls to prevent ineligible loans from being sold, these controls may miss loans that change status after the eligibility check because FHA staff and contractors do not have a designated time in the process to conduct the eligibility check. Without spacing the timing of the various checks throughout the process, including some checks that occur closer to the bid date, FHA staff and contractors do not have the most reliable and updated data from which to make decisions regarding loan eligibility, and FHA could be selling some ineligible loans. If FHA sells a loan that is ineligible to be sold because of ongoing loss mitigation, it pays a claim for a loan that may become reperforming and never require a claim. Likewise, borrowers could lose access to benefits such as reevaluation for the suite of FHA loss mitigation options. FHA has begun to centralize its existing written guidance, but policies for when program changes should be evaluated are not documented in this guidance. A July 2017 report from the HUD OIG found that HUD did not develop formal guidance or procedures for its single-family note sales program and recommended that the agency develop and implement formal procedures and guidance for DASP. FHA responded to the OIG that the operations of the DASP sales were documented in a series of procedures used internally by staff and externally by stakeholders. In May 2018, FHA officials told us that in response to the OIG’s recommendation, they were consolidating their current written procedures and guidance into one Asset Sales Handbook to centralize the information for internal and external stakeholders. (See app. III for a description of these documents.) FHA officials told us the key documents governing a DASP sale include the servicer agreement, purchaser agreement, detailed instructions for bid day, and specific requirements for qualified servicers. However, we found that if FHA were to compile these existing documents into an Asset Sales Handbook, it would still be missing some important program policies. As of February 2019, FHA officials confirmed that they had no written policies documenting when program changes should be evaluated. When FHA described its process for evaluating program changes, officials stated that the informal practice was to consider changes when planning for a new sale. However, as stated earlier, FHA made a number of changes in 2015 and 2016 but has not held a DASP sale since 2016. FHA officials said the date of the next DASP sale is unknown. FHA also experienced another period when no sales were conducted between 2005 and 2009. Federal internal control standards require that management implement control activities through policies. This includes documenting in policies the internal control responsibilities of the organization and periodically reviewing policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives. For example, the standards state that if there is a significant change in an entity’s process, management reviews the process in a timely manner after the change to determine that the control activities are designed and implemented appropriately. However, FHA officials told us that they had not evaluated whether the most recent program changes were effective or should be revised because they were not planning a new sale yet. With several years between sales, written policies for regular consideration and review of program changes can help to ensure that FHA is reviewing the effectiveness of previous changes and controls and considering potential new changes in a timely manner. FHA has a DASP program objective of maximizing recoveries to the MMI Fund and has some specific targets to assess whether it is meeting this objective. On a quarterly basis, FHA measures how recovery for asset sales compares to foreclosure with REO dispositions and other disposition types, such as short sales and claims without conveyance of title. FHA officials explained that they maximize recovery by holding open and competitive auctions for nonperforming single-family loans, with the highest bidder as the winner. In addition, the Office of Risk develops a reserve price—an estimate of the expected REO recovery value of each loan in a sale and a benchmark for comparison with the bids received—to minimize the risk that FHA will not get the best recovery for the loan. In the past, when FHA received a bid below the reserve price, it opted to not sell the pool. As a result, the reserve price serves as a critical target in the agency’s determination of whether to sell. In contrast, FHA has not developed specific targets for meeting what appear to be additional DASP objectives, based on a variety of program documents and recent program changes. In 2016, for example, the HUD Secretary testified before Congress that DASP has a dual goal— ”support recoveries to the Fund while preserving homeownership and help stabilize neighborhoods.” Similarly, in HUD’s 2016 Post-Sale Report to the FHA Commissioner, HUD explained that it designed DASP “to maximize recoveries to the , and when possible, help keep borrowers—otherwise headed to foreclosure— in the home.” HUD’s recent changes to DASP likewise appear to recognize program objectives in addition to maximizing recoveries to the MMI Fund. When HUD extended the prohibition against foreclosure from 6 months to 12 months in 2015, for instance, a HUD press release stated that such changes “not only strengthen the program but help to ensure it continues to serve its intended purposes of supporting the MMI Fund and offering borrowers a second chance at avoiding foreclosure.” And when HUD changed DASP in 2016 to prohibit purchasers from abandoning low- value properties in high-foreclosure neighborhoods, it declared that this was done to help stabilize neighborhoods. Despite these repeated department statements that DASP has a “two- fold” goal and multiple “intended purposes,” FHA officials told us that preserving homeownership and stabilizing neighborhoods are “ancillary benefits”—positive consequences that flow from DASP’s objective of maximizing recoveries for the MMI Fund—but not objectives themselves. Because FHA does not consider homeownership preservation and neighborhood stabilization to be program objectives, the agency has not developed targets to meet them. FHA officials explained that they measure and monitor the extent to which purchasers meet requirements for NSO pools, for instance, by collecting loan outcome data from purchasers for 4 years. These purchasers must have no less than 50 percent of the loans in each NSO pool achieve outcomes such as keeping borrowers in their homes and properties occupied through rentals. However, FHA does not have a similar target for national pools, which represent about 80 percent of the sold loans. FHA requires purchasers of national pools to report on borrower outcomes quarterly for 4 years, but does not measure the extent to which these outcomes meet a specific target and are achieving program objectives. Prior GAO work identified key attributes of successful performance measures and indicated that performance measures should be clear, have measurable numerical targets, and demonstrate results. In addition, according to federal internal control standards, management should define objectives clearly to enable the identification of risks and define risk tolerances. This includes, for example, defining objectives in specific and measurable terms to allow for the assessment of performance toward achieving objectives. Although FHA officials told us that DASP has one objective with resulting “ancillary benefits,” it also cited these same benefits as additional program goals and purposes in the recent past. Without clarifying the program’s objectives in light of relevant laws, regulations, and agency statements and setting measurable targets to achieve these objectives, particularly for national pools, FHA cannot ensure that DASP is achieving optimal results. FHA has not used performance data to establish criteria for the timing of DASP sales. FHA officials said they have not set criteria for when to hold sales, such as the size of the portfolio of defaulted loans or other considerations. In contrast, Fannie Mae estimates the number of defaulted loans needed to be sold to achieve its goals and assesses market conditions to produce a detailed schedule of sales for the year. Our analysis of FHA’s default monitoring system data shows that several years after the housing crisis, FHA continues to insure a backlog of defaulted loans with six or more missed payments (see fig. 6). FHA officials stated that, in July 2018, FHA had about 300,000 defaulted loans, which is similar to the number of loans as in years when the DASP program was active. Most servicers we talked to told us that they preferred selling defaulted loans through DASP rather than taking them through the REO disposition process due to the servicing responsibility and costs associated with foreclosure. However, FHA officials told us that they did not know when the next sale would be. The GPRA Modernization Act of 2010 established an expectation that agencies use evidence and performance data in decision making. Specifically, the act changed agency performance management roles, planning and review processes, and reporting to ensure that agencies use evidence and performance data in decision making. Our prior work has stated that although the act’s requirements apply at the agency-wide level, they can also serve as leading practices at other organizational levels, such as component agencies, offices, programs, and projects. Because specific criteria for when to hold sales are not in place, FHA’s timing of and decisions to hold DASP sales were inconsistent. FHA held 16 DASP sales between 2010 and 2016. These sales occurred at varying frequencies. For example, FHA held between one and four sales per year, and the number of months between sales ranged from 2 to 10 months. Officials stated that DASP should be used to address a large buildup of defaulted loans and because of its lower loss severity compared with REO dispositions. Officials also told us they have not developed criteria because FHA operates DASP as a pilot program and continues to make changes after each sale. However, without analyzing the performance data of the portfolio of defaulted loans to identify criteria for the timing of DASP sales—even as a pilot program—FHA cannot make fully informed decisions about when to hold sales and may not be optimizing its use of the program in achieving its objectives. FHA does not evaluate loan outcomes for loans sold through DASP and does not monitor the modifications offered by individual purchasers. Our analysis of FHA outcome data found that in aggregate, sold loans were less likely to avoid foreclosure than similar, unsold loans. However, our analysis also found that for some sales and some purchasers, sold loans were more likely to avoid foreclosure compared to unsold loans. A number of factors may contribute to differences in outcomes between sold and unsold loans by sale and purchaser, including increased postsale servicing and reporting requirements and the types of modifications offered by individual purchasers. FHA does not use the data it collects to evaluate outcomes for loans sold through DASP compared to outcomes for similar, unsold loans. We reviewed a contractor report and FHA’s periodic reports on DASP outcomes and found that they lacked critical outcome information. Specifically, in 2017, a contractor analyzed home equity preserved as a result of the foreclosures avoided through DASP, and then estimated the effect of avoided foreclosures on surrounding areas. However, the contractor did not estimate the effect of foreclosure avoidance relative to unsold loans. Borrowers with unsold loans may also avoid foreclosure, for example, if their circumstances change and they become eligible for foreclosure mitigation options again. FHA’s periodic reports on outcomes also do not compare outcomes between sold and unsold loans. FHA officials told us they had not conducted such a comparison because they expect all loans eligible for sale to be foreclosed. A foreclosed mortgage with an REO property disposition results in the greatest losses to the MMI Fund. However, our analysis of FHA data does not support these claims. When we compared loans sold through DASP to unsold loans with similar characteristics, we found that some unsold loans achieved an outcome other than foreclosure—21 to about 34 percent at various times within a 4-year period. FHA officials also told us that they evaluate loan outcomes by tracking the extent to which purchasers are meeting NSO requirements. However, because about 80 percent of loans were not sold through NSO pools, FHA’s evaluation covers only about 20 percent of DASP loans. In addition, FHA’s NSO requirements are targeted toward achieving specific outcomes for a property or community—such as donating the property to a land bank—rather than an individual loan or borrower. Our analysis indicates that sold loans had higher foreclosure rates than unsold loans regardless of whether they were sold through national or NSO pools. estimated current loan-to-value ratio, and The matched comparison attempted to minimize differences between sold and unsold loans across these factors in order to isolate the effect on outcomes of being sold out of FHA’s insurance program. We have previously found that evaluations often involve creating a comparison group. Furthermore, HUD policy states that its evaluations use methods that isolate to the greatest extent possible the effects of the program from other influences. FHA could use loans not sold through DASP to estimate what outcomes would have been observed in the absence of the program and the associated losses to the MMI Fund. A process to evaluate outcomes for sold loans relative to similar, unsold loans could help FHA determine whether DASP is meeting its financial objective of maximizing recoveries to the MMI Fund and understand the extent to which DASP is helping struggling homeowners. In its reports on DASP outcomes, FHA periodically reports at an aggregate level the change in monthly payments resulting from the modifications offered by purchasers. However, FHA does not track or report the change in payments by individual purchasers. A 2016 white paper prepared by the Department of the Treasury in conjunction with HUD and FHFA defined loss mitigation sustainability as offering solutions that work the first time. It further stated that modifications that provide meaningful payment reduction will decrease the chance of a homeowner redefaulting. Additionally, we reported in 2012 that the change in a borrower’s monthly mortgage payment is among the factors that can significantly influence the success of a modification. Since 2015, FHA has required purchasers to offer eligible borrowers HAMP-like modifications or substantially similar modifications designed to lower borrowers’ monthly payments to an affordable and sustainable amount. However, FHA does not monitor the extent to which individual purchasers complied with the requirement to offer payment-lowering modifications to eligible borrowers. We found that while the majority of the modifications offered to borrowers whose loans were sold in 2015 or later decreased monthly payments by more than 20 percent, about 8 percent of modifications increased or did not result in a change in payment. Not all borrowers are eligible for a payment-lowering modification, and, according to FHA officials, some modifications could increase monthly payments for borrowers with a large number of missed payments. As discussed later, our analysis found that outcomes can vary greatly by purchaser, and purchasers may not offer comparable modification options. See appendix IV for information on the types of modifications purchasers have used. Furthermore, FHA may not have the data it needs to evaluate whether payment-lowering modifications offered by purchasers remain sustainable. In the second 2016 sale, FHA began requiring that modified interest rates be fixed for at least 5 years and thereafter that they not increase by more than 1 percent per year. FHA also began requiring purchasers to report data related to interest rates for modified loans, including the modified interest rate and the number of years it would remain fixed. However, based on our review of reported modification information, none of the purchasers from this sale reported these data. Additionally, about 22 percent of the modifications offered to borrowers whose loans were sold in the 2015 sale or later included a deferment. Under deferment, borrowers are allowed to temporarily stop making payments toward some or all of their principal balance, interest, or other indebtedness, and deferment may result in a balloon payment at a later date. Other than type of deferment, FHA does not require purchasers to report details of the deferment or the effect on payments following the deferral period. As a result, we could not determine the long-term effect on monthly payments for many modifications offered by purchasers. Some advocacy group representatives we spoke with expressed concerns about purchasers offering unsustainable modifications. For example, one advocacy group representative told us that some purchasers may offer modifications that initially lower monthly payments but later adjust to levels that are higher than what they were prior to modification. FHA requires purchasers to report some information that would allow it to determine the types of modifications offered by individual purchasers as well as the sustainability of these modifications. As mentioned previously, FHA officials said they expect all loans eligible for sale to be foreclosed and consider any nonforeclosure outcome achieved by purchasers to be an improvement. This expectation may deter FHA from evaluating the modifications offered by individual purchasers or the sustainability of modifications. Federal internal control standards state that management should use quality information to achieve its objectives, which includes identifying information requirements needed to achieve the objectives, evaluating the data it receives from internal and external sources to ensure they are sufficiently reliable for use in making informed decisions, and using the data for effective monitoring. Without monitoring individual purchasers’ modifications or collecting key data elements, FHA cannot determine whether purchasers are meeting the postsale requirements or the extent to which eligible homeowners obtain sustainable modifications. Our analysis showed that sold loans were more likely to experience foreclosure than similar, unsold loans overall within a 48-month period after servicing transfer (see fig. 7). In the aggregate, the probability of experiencing foreclosure was greater overall for sold loans compared to unsold loans. For example, the probability of foreclosure 24 months after the servicing transfer date was 43 percent for sold loans and about 36 percent for unsold loans, a statistically significant difference. Additionally, we analyzed the probability that a borrower reperformed, received a temporary action such as forbearance or a trial modification, or received a short sale or deed-in-lieu of foreclosure—foreclosure avoidance outcomes. In the aggregate, the probability that sold loans avoided foreclosure ranged from about 15 to 24 percent at various times within a 3-year period beginning 12 months after the servicing transfer date. Foreclosure avoidance rates for unsold loans were higher, ranging from 21 to about 34 percent during this period. We found that sold loans were less likely to result in owners staying in their homes compared to unsold loans due to out-of-home actions (see fig. 8). The probability of reperforming was greater overall for unsold loans compared to sold loans. Additionally, unsold loans were more likely to receive an in-home temporary action. In contrast, sold loans were more likely to result in a short sale or a deed-in-lieu of foreclosure, through which borrowers avoid foreclosure but lose the title to their homes. See appendix VI for a comparison of reperforming, short sale or deed-in-lieu of foreclosure, and temporary action outcomes between sold loans and unsold loans. Although we found that sold loans were more likely to experience foreclosure in aggregate, for later sales, after about 12 months, rates of avoiding foreclosure were similar or greater for sold loans compared to unsold loans, and for some purchasers rates of foreclosure were similar or smaller for sold loans compared to unsold loans. For the second 2013 sale through the 2015 sale, we found that sold loans were less likely to avoid foreclosure compared to unsold loans (see fig. 9). In the 2016 sales, however, after about 12 months the sold loans were more likely to avoid foreclosure compared to similar unsold loans. Further, after an additional 12 months—24 months after the servicing transfer date—loans sold in the first sale in 2016 avoided foreclosure at a rate that was 5 percentage points greater than unsold loans. Loans sold in the second sale in 2016 were also consistently less likely to foreclose compared to unsold loans. We discuss potential explanations for these differences among sales in the section that follows. We also found differences in the rates of foreclosure and some outcomes that avoid foreclosure achieved by different purchasers (see fig. 10). For example, the probability of a loan reperforming 24 months after the servicing transfer date ranged from about 0.2 to about 25 percent for selected DASP purchasers. While most of these purchasers fell below the reperforming estimate of 18 percent for similar, unsold loans, one purchaser exceeded this rate. Foreclosure and short sale or deed-in-lieu of foreclosure probabilities 24 months after the servicing transfer date also differed among these purchasers, ranging from 31 to about 90 percent and from 8 to about 30 percent, respectively. These rates generally exceeded the foreclosure and short sale or deed-in-lieu of foreclosure estimates for similar, unsold loans (34 and about 9 percent, respectively). Purchasers told us that the outcome they pursue for a loan depends in part on the borrower’s preference. According to purchasers, for borrowers who want to keep their homes, the best option is to try to modify the loan and achieve reperformance status. Purchasers also said that for borrowers who do not want a modification or for whom a modification is not possible, they may pursue a short sale or deed-in-lieu of foreclosure, which have a less negative effect on borrowers’ credit than a foreclosure. Representatives of a consumer advocacy group and a research organization told us that foreclosure has the most negative effect on the borrower’s credit. A Fair Isaac Corporation (FICO) study found that, in some cases, foreclosure had a more negative effect on comparable borrowers’ credit profiles than a short sale or deed-in-lieu of foreclosure. FHA officials, purchasers, and servicers said that purchasers have more flexibility and are in a better position than FHA servicers to provide more generous mitigation options. A senior FHA official emphasized that purchasers have more financial flexibility because they generally buy the defaulted loans at a discount from FHA (that is, less than the unpaid principal balance). According to different DASP stakeholders, purchasers can forgive a portion of the principal, offer a deferment that is greater than 30 percent of unpaid principal extend the term of a loan beyond 30 years, reduce the interest rate below the current market rate, offer more than one modification in a 2-year period, and offer more generous terms for deeds-in-lieu of foreclosure and short sales. In contrast, FHA is restricted in the loss mitigation options it can offer. FHA officials told us that it does not offer debt forgiveness, but may defer a limited amount of principal through a partial claim. FHA officials also said they generally set loan term ranges to meet requirements for securitization in the secondary mortgage market, including a fixed interest rate and a 30-year term. In addition, FHA’s loss mitigation alternatives to foreclosure, such as short sales and deeds-in-lieu of foreclosure, are restricted or approved by FHA based on their chance of success and the associated financial effect on the MMI Fund. However, representatives of some advocacy groups told us that borrowers generally benefit from their loans remaining insured and unsold because FHA’s loss mitigation process is more transparent. They said that information on the loss mitigation process under FHA is publicly available, while it can be difficult to access information about some purchasers’ loss mitigation processes. Also, starting in 2012, FHA policies attempted to provide a more consistent loss mitigation process for borrowers across all FHA servicers. In contrast, purchasers can have varying processes for offering loss mitigation options. A number of factors may contribute to differences in outcomes between sold and unsold loans by DASP sale and purchaser, such as increased postsale servicing and reporting requirements, variations in purchaser participation across sales, and differences in the modifications offered by purchasers. Changes in postsale servicing requirements may account for higher reperforming rates for sold loans in the 2016 sales. As discussed previously, FHA introduced additional servicing requirements in 2015 aimed at offering additional protections to borrowers whose loans were sold through DASP. For example, FHA began requiring purchasers to evaluate borrowers for HAMP or substantially similar modifications aimed at lowering borrowers’ monthly payments and offer these modifications to eligible borrowers. Further, the share of loans sold through NSO pools relative to national pools has increased, which may also account for higher reperforming rates for sold loans in the 2016 sales. As noted previously, NSO and nonprofit pools have additional postsale outcome requirements. We compared outcomes for loans sold in NSO pools to outcomes for loans sold in national pools and found that loans sold in NSO pools were more likely to reperform, possibly due to higher occupancy rates in NSO pools compared with national pools. As shown in figure 11, the share of loans sold through NSO and nonprofit pools relative to loans sold through national pools increased between 2013 and 2016, from about 12 percent of the total loans in our scope for the 2013 sales to about 45 percent of loans in the 2016 sales. In addition, FHA introduced a reporting requirement in 2015 that purchasers continue reporting the outcome status of loans even after selling them to new buyers, as opposed to reporting the loans as resold with no further outcome updates. Purchasers may have returned these loans to performing status before selling them because performing loans are more profitable, but the performing status would not have been reported before 2015. The use of resales as a status was substantially lower in the second sale in 2016 compared to the first sale in 2013—0.04 percent of reported statuses compared to 29 percent of reported statuses. This change could be reflected in the higher reperforming outcomes we observed for sold loans in 2016. Our analysis indicated that individual purchasers did not consistently buy loans across sales and the share of loans bought by individual purchasers varied. For example, about 42 percent of the purchasers in our scope bought loans in one sale, while about 27 percent of purchasers bought loans in three or more sales. The share of loans bought by individual purchasers has also varied by sale (fig. 12). For example, one purchaser bought about 4 percent of the loans sold in the second sale in 2013 but about 82 percent of the loans sold in the first sale in 2016. This purchaser had higher reperforming and lower foreclosure outcomes compared to other purchasers. In addition, purchasers may not consistently offer modification options. Approximately 18 percent of the sold loans in our scope received one or more modifications. However, individual purchasers offered modifications at varying rates, from no modifications to 46 percent of the loans they purchased. Our analysis also indicates that the type of modifications offered may differ by purchaser. For example, we found that about 88 percent of the modifications that had decreased monthly payments by 30 percent or more were offered by two of the 25 purchasers that reported modifying loans. In addition, the share of modifications offered by individual purchasers that resulted in no payment change or an increase in payment varied. For example, eight purchasers reported either no change or an increase in payment in 51 to 75 percent of the modifications they offered. In contrast, three other purchasers reported either no change in payment or an increase in payment in less than 10 percent of their modifications. Purchasers’ investment goals and expertise could affect borrower outcomes. DASP purchasers include investment firms, rental housing companies, and nonprofit organizations with varying investment goals. In interviews, purchasers cited various goals for purchased loans. For example, an executive of a nonprofit organization said its primary goal was to help borrowers avoid foreclosure, while representatives of an investment firm told us that their goal was to maximize the return for each purchased loan. A representative of one advocacy group told us that purchasers’ different areas of expertise could make different foreclosure and foreclosure avoidance options more or less profitable for them. For example, purchasers with an extensive background in loan servicing may be able to offer modifications at a lower cost, while rental companies may consider DASP as a source for inventory for properties to rent if loss mitigation fails. Additionally, purchasers can have varying levels of success in contacting borrowers to discuss modifications or disposition options for the loans they purchased. Most purchasers noted that it was often difficult to make contact with borrowers because houses were vacant or borrowers avoided contact. For example, one purchaser said it was unable to reach about 25 percent of borrowers for the loans it purchased. Another purchaser said it was unable to reach about half of the borrowers. Furthermore, while several purchasers said they primarily contacted borrowers via the notice of servicing transfer and by phone, one purchaser also said that a more successful outreach method involved in- person visits to borrowers’ homes, but that such visits may not always be feasible due to resource constraints. FHA announces bid dates in the Federal Register and industry publications but does not communicate long-range notice of upcoming sales. FHA held multiple sales in 2011, 2012, 2013, 2014, and 2016, but the sales were not held at set intervals or at set dates throughout the years. FHA has not held any DASP sales since September 2016, and officials stated that they do not know when FHA will hold another sale. Our interviews indicate that communicating long-range notice of sales could help keep participation robust and increase bid amounts. One purchaser told us that it was eager for FHA to restart DASP sales. However, purchasers would like to receive additional notice of sales. One purchaser told us that additional notice of FHA sales would allow it the time to plan or raise additional capital needed to participate in a DASP sale. Another purchaser said that, without knowledge of when another sale will occur, it will invest elsewhere. Losing bidders to other entities’ sales could affect bid amounts in DASP sales. According to economic literature, increasing the number of bidders in an auction generally should increase bid amounts—a financial objective for the program. Federal internal control standards state that management should externally communicate the necessary quality information so that external parties can help the entity achieve its objectives and address related risks. For example, although Fannie Mae does not publish an annual schedule, market participants know when to expect Fannie Mae sales because it has held them multiple times a year. In contrast, FHA does not hold regular sales or signal to the market when it will hold its next sale through its outreach because DASP remains a pilot program. FHA officials said they change program parameters with each sale, so it is difficult to schedule sales in advance. We previously noted that, even implementing DASP as a pilot program, FHA could use performance data to establish criteria for the timing of sales and to help optimize the use of the program to achieve its objectives. Similarly, by communicating long- range notice of upcoming sales to market participants, FHA could encourage bidder participation and potentially help meet its objective of maximizing recoveries to the MMI Fund. As discussed in appendix VII, characteristics of successful auctions include attracting sufficient interest in the auction and in designing the auction to meet its objectives. Without communicating long-range notice, FHA may be recovering less than it could for the MMI Fund. FHA sets reserve prices—a minimum amount that it is willing to accept as the winning bid—to help ensure that the MMI Fund is minimally affected by the sale. FHA generates a reserve price for each loan and adds those prices together to generate a pool reserve price. If FHA does not receive a bid on a pool that is at or above its reserve price, FHA may choose not to sell the pool. Any amount of the bid above the reserve price represents additional potential proceeds to the MMI Fund. FHA officials stated that they expect that all DASP loans would be foreclosed and the properties placed in its REO inventory had they not been sold. FHA officials stated that they establish each loan’s reserve price considering the percentage of the unpaid balance FHA expects to recover through foreclosure and REO disposition. A recent HUD OIG report found that for loans sold in 2015 and 2016, FHA experienced a 3 percent lower loss rate compared with similar loans that were foreclosed and the associated property placed into FHA’s REO inventory. Loss estimates have varied over time and by location of the property associated with the loan, but generally an REO disposition results in the greatest loss to the MMI Fund. For example, FHA’s Office of Risk estimated that from fiscal year 2013 through the first quarter of 2017, FHA lost 61 percent (recovering about 39 percent) of the unpaid balance on REO dispositions compared to about 46 percent (recovering 54 percent) of the unpaid balance on other nonloan sale dispositions. FHA officials stated that unsold defaulted loans would likely result in foreclosure and being placed in the REO inventory. However, our analysis of outcomes showed that comparable unsold loans resulted in a range of outcomes, not just foreclosure and REO disposition. Specifically, our analysis of outcomes in sales between 2013 and 2016 showed that about 66 percent of unsold loans with characteristics similar to sold loans resulted in foreclosure or remained unresolved. The remaining 34 percent of these unsold loans resulted in a range of nonforeclosure outcomes (including returning the loan to performing status), all of which could produce smaller losses to the MMI Fund compared with REO disposition. Further, our analysis found that about 14 percent of the loans returned to performing status or were terminated as paid in full, thereby generating very little to no loss to the MMI Fund. FHA may be setting its reserve prices too low in some cases. FHA sets a loan’s reserve price considering the percentage of the unpaid balance it expects to recover through an REO disposition to guarantee the minimum recovery proceeds to the MMI Fund. However, when the expected losses to the MMI Fund for some loans are smaller—such as in the case of a different disposition method or a terminated loan—the reserve price would need to be higher to guarantee the minimum recovery proceeds to the MMI Fund. If FHA could recover more of the unpaid loan balance through a non-REO disposition method, setting the reserve price at the expected recovery of the unpaid balance from an REO disposition would be too low. See figure 13 for an illustrative example of how reserve prices could be affected based on different expectations of loan dispositions. The extent to which the MMI Fund could be negatively affected depends on how reserve prices compare to the actual winning bids. In figure 13, if FHA set the reserve price of pool A at $3,900,000, FHA would sell the pool to the highest bidder that bid at least $3,900,000. If the highest bid was less than $3,900,000, FHA may not sell the pool. If the highest bid for the pool was at least $3,900,000 but less than $5,054,000, the MMI Fund would be negatively affected because FHA could have recovered more by not selling the pool. If the highest bid was at least $5,054,000, the MMI Fund may not be negatively affected by the sale. Using a simplified method to calculate reserve prices that does not consider differences in local housing markets, we estimate that 31 percent of the loan pools FHA sold in its 2013–2016 sales had winning bids greater than FHA reserve prices but less than our calculated reserve prices. For about 14 percent of the pools, our calculated reserve price was 10 percent or more below the winning bid, and for 7 percent of the pools, our calculated reserve price was 25 percent or more below the winning bid. Federal internal control standards state that management should use quality information to achieve the entity’s objectives. This includes designing a process that uses the entity’s objectives and related risks to identify the information requirements needed to achieve the objectives and address the risks. However, FHA is not considering information on the range of potential outcomes for loans in setting its reserve pricing because it expects all sold loans to result in foreclosure and REO disposition. Without considering other disposition methods in its reserve pricing, FHA risks recovering less for the MMI Fund in loan sales than if the loans had not been sold and risks not meeting its objective. FHA’s eligibility criteria specify the characteristics of the loans that can be selected for a loan sale, but FHA does not analyze its portfolio to identify loan characteristics for which DASP would be the lowest-cost disposition method or consider market information before setting the criteria. FHA has analyzed bid amounts from previous sales and made changes to eligibility criteria related to length of delinquency and LTV ratio, in part, intended to increase MMI Fund recoveries. For example, using analysis of its 2014 sales, FHA determined the LTV ratios that produced the highest loan-level recoveries relative to REO dispositions and changed the loan eligibility criteria for the minimum LTV ratios by state for its 2015 sale. According to FHA, this change was intended to make more loans eligible for disposition through DASP sales in certain states that had long foreclosure processes. However, FHA does not analyze its portfolio of defaulted loans to identify characteristics of loans that, if sold, would minimize the loss to the MMI Fund relative to all other disposition methods to inform eligibility criteria for sales. FHA may have missed an opportunity to evaluate when loan sales would be the most effective disposition method to maximize recoveries to the MMI Fund—a financial objective of the program. FHA contracted with CoreLogic in 2016 to develop a tool to determine the lowest-cost disposition for defaulted loans in FHA’s portfolio but did not include loan sales as a potential disposition method. The tool is intended to generate estimates of property values and holding costs and determine the lowest cost disposition method for a given loan at a given time. Used broadly, this information could help FHA identify loan criteria for which DASP sales would be the most effective disposition method and set loan eligibility criteria for DASP loans. However, FHA excluded DASP because, according to the contractor, the data on DASP had been too inconsistent to be reliably included in the CoreLogic tool. Therefore, FHA cannot use the tool to identify loan characteristics for which DASP could be the lowest-cost disposition method or to inform its decisions in setting loan eligibility criteria. Further, FHA determines eligibility criteria before considering current market information. FHA’s transaction specialist gathers market information before the sale, but FHA does not consider it before setting eligibility criteria and soliciting eligible loans from servicers. The transaction specialist analyzes the market and develops a sales strategy report using the loans submitted by the servicers. The report contains information on available capital for key purchasers, the number and type of loans purchasers are interested in buying, other entities’ upcoming sales, and potential pooling strategies for the loans submitted. FHA uses the information to develop pools intended to maximize the sale proceeds, but not to identify characteristics of loans meeting purchasers’ preferences and inform decisions in setting eligibility criteria. FHA’s current approach risks setting criteria that may not maximize recovery to the MMI Fund because it may be selling loans that could result in a smaller loss to the MMI Fund than if they had remained under FHA insurance. FHA generally analyzes how to maximize sales proceeds after setting loan eligibility criteria and reviewing the servicers’ submitted loans because servicers select the loans, voluntarily participate, and may not submit all eligible loans. Further, setting loan eligibility criteria that increase servicers’ cost to identify loans may reduce servicer participation. In addition, FHA does not use current market information because, according to officials, they use data from past sales to determine market preferences and their primary concern is the effect on the MMI Fund. However, FHA has not held a sale since 2016, so market preferences may have changed. Additionally, purchaser participation may decline if loans do not match their preferences. Generally, fewer bidders indicate less interest in the pools and could result in decreased prices, which would reduce returns to the MMI Fund. By implementing DASP, HUD intended to maximize recoveries to the MMI Fund. Without analyzing its loan portfolio to identify when loan sales would be the most cost-effective disposition method and considering market information before setting loan eligibility criteria, FHA cannot appropriately calibrate its loan eligibility criteria to maximize recovery to the MMI Fund. Based on our analysis of comparable mortgage industry auctions, FHA’s auction structure mirrors the industry standards of pooled, highest bidder, sealed bid auctions. Other auction structures we examined, such as single loan sales and adding a winner-take-all option, would involve tradeoffs. For example, an analysis by DebtX, a loan sale advisor, showed that FHA would have earned higher proceeds in a prior DASP sale if it had awarded based on single-loan bids rather than the pool-level bids. However, our interviews with FHA officials and purchasers revealed uncertainty in how proceeds from single-loan bids would compare to bids for pooled loans. For example, FHA officials said they benefit from economies of scale when offering larger pools and that administrative costs associated with servicing transfers would be higher if FHA sold loans individually. Furthermore, purchasers may decline to bid on individual loans. Purchasers we interviewed expressed interest in sets of loans rather than individual loans, in part to manage risk. When asked about smaller pools, FHA officials stated that they have used small pools to attract nonprofit bidders, but we found that these pools had a low number of bidders and many were not traded. The effect on the MMI Fund of adding a winner-take-all option to FHA’s auction structure is uncertain. Such a structure could result in increased bid amounts. In a winner-take-all option, each bidder would choose to either participate at the sale level or pool level in the winner-take-all option. In either case, the bidder would place loan-level bids that would be rolled up to the pool or sale level. If a winner-take-all bid exceeds the aggregate of the highest pool-level bid for each pool, all pools are awarded to the winner-take-all bidder. By definition, if a winner-take-all bidder won the auction, the resulting bid would increase FHA’s overall sale proceeds. However, a winner-take-all structure could discourage bidder participation, which could lead to reduced bid amounts. Smaller entities and larger nonwinning bidders may be less likely to participate in future sales because of the costs associated with participating. According to auction theory, the higher the cost of performing due diligence and qualifying for and participating in the auction, the more bidder participation will be discouraged. Although the extent of purchasers’ due diligence checks differed, all the purchasers we interviewed told us that they expend funds to purchase property valuations on at least a sample of loans to check whether the valuations listed in the servicer data were reasonable. Some purchasers also expend funds to examine servicing records or perform legal searches related to the loans. Additionally, bidders are required to submit deposits with their bids that FHA will return if the bidder is not awarded the pool or pools. One purchaser told us it was reluctant to spend the money on due diligence if it did not have a reasonable chance at winning the pool or pools. According to economic literature, having fewer bidders in an auction generally results in decreased prices and an increased opportunity for bidders to form strategic partnerships that would decrease competition. See appendix VII for more information on auction structures. It is unclear whether changes to FHA’s pooling strategy—that is, its approach for selecting loans to include in its loan sale pools—would result in more bidders or higher bid amounts. We compared the pooling practices and pool-level data of FHA with those of Freddie Mac and Fannie Mae (the enterprises) to determine whether pooling strategy affected the number of bids. The enterprises started selling defaulted loans in 2015—much later than FHA—and have continued to do so, with Freddie Mac and Fannie Mae both holding sales in October 2018. FHA held three DASP sales in fiscal years 2015 and 2016 that overlapped with the time frame of the enterprises’ sales. FHA and enterprise pools had different financial characteristics—loans in FHA pools were less delinquent, the properties were more likely to be occupied, and the loans had lower underlying property values compared to loans in enterprise pools (see fig. 14). Nonetheless, FHA received similar numbers of bids and bid amounts relative to the estimated property values as the enterprises. Generally, the number of bidders for FHA and the enterprises was between three and six, and bid amounts were typically between 58 and 71 percent of the underlying estimated property value. Many of the purchasers of FHA’s DASP loan pools also purchased the enterprises’ pools of defaulted loans. It is unclear whether adjusting the pooling strategy to focus on specific loan characteristics would increase the number of bidders for FHA. Enterprise officials told us that they pool by geography, occupancy, and LTV ratio and also try to create loan pools such that all loans have the same servicer. Unlike the enterprises, FHA does not pool loans by similar characteristics, and pools frequently have loans from more than one servicer. FHA officials told us they primarily use geography and pool size to pool loans. However, FHA officials also told us they try to include loans to make the pools attractive to different types of purchasers. Loans may be valued differently by bidders with unique strengths—such as strong default servicing infrastructures or experience rehabilitating properties—that would make the loans more profitable to them compared to other bidders. FHA officials stated that they encourage higher, outlier bids by structuring pools to attract different types of bidders. We found differences in the extent to which loan-pool characteristics were associated with bidder participation for FHA’s and the enterprises’ defaulted loan sales. Our multiple variable regression analyses of how loan-pool characteristics predict the number of bidders showed the following: Pools with a higher percentage of occupied properties were associated with an increase in the number of bidders in FHA pools but a decrease in the number of bidders in enterprise pools. Average LTV ratio was not associated with the number of bidders for FHA or the enterprises. National pools were associated with more bidders for FHA. This result may be due to fewer FHA postsale requirements for national pools. For FHA pools, more servicers was associated with fewer bidders, possibly due to higher transaction costs. Although 86 percent of FHA pools had fewer than five servicers, the number of servicers for FHA pools ranged from one to 21. In contrast, all enterprise pools were single-servicer pools, except for four out of 101 pools (about 4 percent) that each had two servicers. See appendix I for a detailed description of these analyses. Setting aside pools for nonprofit organizations has not significantly expanded bidder participation in FHA loan sales. FHA performs market outreach to educate potential purchasers about the DASP process, but barriers to entry exist in terms of qualifications and the underlying capital required. In its 2015 sale, FHA began offering nonprofit-only pools. In 2016, FHA established a goal of selling 10 percent of assets to nonprofits and local governments. In 2015–2016, FHA offered nine pools exclusively to nonprofits, of which five (about 56 percent) received bids at or above FHA’s reserve price and were traded. Each pool received between one and three bids. Despite heavy marketing, all traded pools were awarded to two organizations, including one first-time purchaser. In comparison, from 2010–2016, FHA offered 191 national and NSO pools, and 185 (about 97 percent) received bids at or above FHA’s reserve price and were traded. Several stakeholders told us that most nonprofit organizations do not have the capacity to service delinquent loans, but they may be able to participate in the program in a different capacity. For example, two purchasers partnered with nonprofit organizations to perform outreach to borrowers. Since 2002, FHA has used loan sales intermittently to reduce its backlog of defaulted mortgages and preserve the financial health of the MMI Fund. In addition, some homeowners have received additional opportunities to modify their loans and retain their homes through the program. Yet, our review found several areas where FHA can improve its management of DASP through more formalized procedures and analyses, as follows. Improving controls. By evaluating eligibility at various points throughout the 3-month period prior to the sales, including after the servicer update, FHA could better prevent the sale of ineligible loans. Additionally, as FHA finalizes its comprehensive procedures, it can better ensure that it is considering the effects of previous changes on the program by including procedures for reviewing and documenting program changes in a timely manner. Using performance data. FHA has not developed key performance measures for DASP. Without measurable targets related to clear program objectives, FHA is not well-positioned to assess the effectiveness of DASP—which is still considered a pilot program—in achieving its objectives. Furthermore, by using performance data to determine the optimal timing of DASP sales, FHA could help the program achieve higher recoveries. Evaluating outcomes. FHA has not conducted an analysis that compares the extent to which sold loans help avoid foreclosure, as compared to similar, unsold loans. Such an analysis would help assess DASP’s effectiveness in meeting a program objective. Monitoring and evaluating purchasers’ modifications. FHA does not monitor purchasers of defaulted loans to ensure they are complying with FHA’s requirement to offer payment-lowering modifications to eligible borrowers. Additionally, FHA may not collect the data it needs to evaluate whether modifications offered by purchasers remain sustainable. With better monitoring, FHA could determine whether individual purchasers are meeting these requirements. Maximizing benefits of loan sales. FHA has opportunities to make changes in how loan sales are held and structured that could enhance bidder participation and better meet the DASP objective of maximizing recoveries to the MMI Fund—which are two characteristics of successful auctions. Providing better advance notice to prospective bidders, setting reserve prices based on realistic expectations, and setting loan eligibility requirements that encourage more bidding could improve the results of DASP sales and thereby reduce losses to the MMI Fund. We are making the following nine recommendations to FHA: The Commissioner of FHA should ensure that its eligibility checks are conducted throughout the DASP sale process, such as by establishing a schedule to check for eligibility at certain milestones. (Recommendation 1) In formalizing procedures for DASP, the Commissioner of FHA should document processes for timely consideration and review of program changes. (Recommendation 2) The Commissioner of FHA should clearly define DASP objectives and develop measurable targets for all program objectives. (Recommendation 3) The Commissioner of FHA should use performance data to develop criteria for when to hold DASP sales. (Recommendation 4) The Commissioner of FHA should evaluate loan outcomes under DASP compared to outcomes for similar, unsold loans. (Recommendation 5) The Commissioner of FHA should monitor individual purchasers’ compliance with FHA’s modification requirements and ensure the purchasers submit the data needed to evaluate the sustainability of modifications. (Recommendation 6) The Commissioner of FHA should communicate long-range notice to prospective bidders of upcoming DASP sales. (Recommendation 7) The Commissioner of FHA should develop a methodology to assess the range of possible outcomes for loans when setting DASP reserve prices. (Recommendation 8) The Commissioner of FHA should analyze FHA’s loan portfolio and market information before setting loan eligibility criteria. (Recommendation 9) We provided a draft of this report for review and comment to HUD and FHFA. HUD provided written comments, which have been reproduced in appendix VIII, that communicate FHA’s response to the report. Both HUD and FHFA provided technical comments, which we have incorporated, as appropriate. In its written response, FHA’s management generally agreed that opportunities exist for improvement to single-family loans through more formalized procedures and analyses, as the defaulted loan disposition option transitions to a permanent disposition alternative. FHA generally agreed with seven recommendations and did not explicitly agree or disagree with two recommendations. FHA neither agreed nor disagreed with our recommendation that FHA should ensure that its eligibility checks are conducted throughout the DASP sale process, such as by establishing a schedule to check for eligibility at certain milestones. FHA stated that it works with the servicers and relies on them to determine eligibility throughout the DASP sale process. FHA also stated that its management agrees to include a schedule of eligibility checks in its procedures. We acknowledge that servicers check loan eligibility throughout the process, as stated in the report. However, we maintain that FHA and its contractors should also space their own checks throughout the process, specifically scheduling some closer to the bid date, and not rely exclusively on the servicers for this function at the end of the sale process. FHA neither agreed nor disagreed with our recommendation that FHA should clearly define DASP objectives and develop measurable targets for all program objectives. FHA management stated that it believes it already has clear objectives and performance management in place for its DASP objective to maximize recoveries to the MMI Fund and that it measures whether it is meeting this objective. We acknowledge that FHA’s objective to maximize recoveries to the MMI Fund is clear and that it has a measureable target. However, as stated in the report, agency documents and program changes reflect additional program objectives related to preserving homeownership, helping to stabilize neighborhoods, and offering borrowers a second chance at avoiding foreclosure that do not have measurable targets. We maintain that FHA should clarify its program’s objectives in agency documents, whether that be one objective or several, and ensure that each objective has a measurable target. FHA also took issue with aspects of our comparison of sold and unsold loans in its written response and technical comments. In its written response, FHA noted that the unsold loans in our analysis are invalid for comparison to sold loans because these unsold loans had not been deemed by servicers as having completed all applicable loss mitigation activities prior to being included in the analysis the way sold loans had. We attempted to minimize differences between the sold and unsold loans by matching loans across several variables that could affect the likelihood of foreclosure or foreclosure avoidance. We found a high rate of similarity between the two groups and indirectly controlled for any differences in the extent of loss mitigation by including length of delinquency as one of the matching variables. According to the FHA servicing handbook, servicers are generally required to either use a loss mitigation option for which a borrower qualifies or initiate foreclosure within 6 months of the default date. In its technical comments, FHA also noted that our matching of comparison loans omitted important variables. In particular, FHA noted that the analysis did not hold constant several factors related to the risk of foreclosure, including default risk as measured by FICO scores, debt-to-income ratios, home price appreciation, and loan amount and term. However, we indirectly controlled for loan term and home prices by matching loans by origination years and indirectly controlled for loan amount and home prices by matching on categories of LTV ratios. We did not control for debt-to-income ratios or FICO scores, but FHA’s data systems did not contain them for unsold loans and FHA does not include them as criteria for DASP eligibility. Further, these variables may not be substantially different between the sold and unsold loans because the loans in both groups are severely delinquent. We revised the report to clarify that we estimated the LTV ratio at the time of the DASP sale. We calculated the LTV ratio using the outstanding loan amount and estimating current property values by adjusting the original sale values for regional changes in home prices over time. In addition, FHA stated in technical comments that our comparison group is invalid because 100 percent of loans in DASP sales would end in foreclosure if they were not included in a sale. FHA stated that the only loans eligible for sale are those for which the only alternative remaining to the borrower is foreclosure. However, we disagree that all sold loans would have ended in foreclosure had they not been sold. As discussed in the report, unsold loans with characteristics similar to sold loans experience a range of outcomes, including up to 34 percent experiencing outcomes other than foreclosure following sales. In addition, the status of delinquent loans can be very fluid throughout the sale process, even after purchasers place bids on them, and borrowers who previously did not qualify for a loss mitigation option could become eligible to be evaluated again (and their loan could become ineligible for sale) if their circumstances change. For example, our analysis of FHA data found that from 2010 through 2016 about 23 percent of loans were removed from sales between the bid and claims dates due to, among other things, loans entering into loss mitigation. Furthermore, we found that for five individual loan pools, more than half of the loans were removed from the sales between the bid and claims dates. These results argue against the validity of FHA’s presumption that all loans selected for sales would have ended in foreclosure. Although our matching process does not capture all potential foreclosure risk characteristics and our results should be interpreted accordingly, our analysis supports our assumption that the pools of sold and unsold loans are generally comparable and describes relationships between DASP participation and loan outcomes. We maintain that our approach is reasonable using the available data and forms a sound basis for the findings and recommendations in the report. As FHA considers actions in response to our recommendations about evaluating loan outcomes and assessing its methodology for setting reserve prices, we encourage it to further enhance the robustness of these analytical methods. . As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of HUD, the Director of FHFA, and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IX. The objectives of our report were to examine (1) the changes the Federal Housing Administration (FHA) has made to the Distressed Asset Stabilization Program (DASP) over time; (2) certain DASP procedures, including those associated with loan eligibility, and documentation; (3) FHA’s evaluation of the identified outcomes for loans that have been sold through DASP and how these compare with similar, unsold loans; and (4) the potential effects that changes to DASP might have on the Mutual Mortgage Insurance Fund (MMI Fund). To conduct the data analyses discussed in the sections below, we used the FHA data sets listed in table 2. (We discuss the use and reliability of these data sets in the sections that follow this table.) To address all the objectives, we reviewed relevant laws, agency documents, and agreements. We reviewed the National Housing Act, Department of Housing and Urban Development (HUD) program evaluation policy and sale notices in the Federal Register, and Office of Management and Budget (OMB) Circular A-11. We reviewed HUD’s contractual agreements with servicers and purchasers for each DASP sale from 2010 to 2016, which are called, respectively, Participating Servicer Agreements (servicer agreements) and Conveyance, Assignment, and Assumption Agreements (purchaser agreements). We also reviewed other agency documents, including HUD’s Fiscal Year 2017 Annual Performance Report, FHA’s DASP sale results, FHA’s Actuarial Reports, HUD’s Reports to the Commissioner on Post Sale Reporting, and the Federal Housing Finance Agency’s (FHFA) Enterprise Non-performing Loan Sales Reports. We also reviewed prior GAO work on related topics. We interviewed officials from multiple offices within HUD, including the Offices of Asset Sales, Single Family Asset Management, Risk Management and Assessment, Finance and Budget, and the National Servicing Center. We also interviewed HUD’s three primary contractors for DASP at the time of our review—transaction specialist: Verdi Consulting; compliance analytics: SP Group; and program financial adviser: NOVAD Management Consulting. We interviewed officials from FHFA and the government-sponsored enterprises (enterprises)—Freddie Mac and Fannie Mae—as they also auction defaulted loans. We interviewed and reviewed reports from selected consumer advocacy organizations and industry stakeholders that included five servicers, seven purchasers, and two loan-sale advisory firms. In interviews, we generally discussed with participants the following topics: changes to DASP over time; what works well and what could be improved in DASP; foreclosure avoidance options that purchasers offer; the effectiveness of FHA’s 2015 and 2016 DASP reforms; communication to borrowers whose loans are selected for a DASP sale; and the auction process and effect of alternative auction structures on the MMI Fund. To select servicers and purchasers to interview, we analyzed the bid day pool-level data and postsale data, respectively. We selected and interviewed five servicers from a universe of 56 servicers based on high and low participation in terms of number of sales, loans sold, and the unpaid balance of the loans and type of institution (bank and nonbank). We selected and interviewed seven purchasers from a universe of 29 purchasers based on participation, postsale foreclosure rate, and type of institution (for-profit and nonprofit). The views and practices of the servicers and purchasers we selected may not represent those of the servicers or purchasers not selected. To identify a complete list of the loans sold through DASP (sold loans), as described in the background section of the report and used in analyses throughout, we obtained and analyzed postsale reporting data. Per the purchaser agreements, purchasers are required to report the outcome status of sold loans on a quarterly basis for 4 years following the transfer of loan servicing responsibilities. The quarterly postsale reports did not always include data for every purchased loan. We therefore compared the number of loans included in each quarterly postsale report for each pool and used the quarterly reports with the highest loan count to develop a complete list of the loans sold through DASP. To develop the map showing the concentration of sold loans by state, we used data from the Single Family Default Monitoring System (default monitoring system) to calculate the ratio of loans sold through DASP to FHA-insured, defaulted loans with six or more missed payments in July of each year. We then categorized states into five ratio categories based on the distribution of ratios across states. We limited our review of participants and characteristics to the loans included in our comparison analysis of outcomes to provide descriptive context for this analysis. To assess the reliability of the data sources above, we interviewed FHA officials about how the data were collected, processed, and accessed. We also identified the sold loans that were not reported in the default monitoring system at the time servicers submitted the loans to FHA for sale. We found that less than 0.1 percent of the sold loans in our scope were not reported as delinquent by servicers and determined that, due to their small percentage, excluding these loans would not bias our results. Based on our interviews and review of unreported loans, we concluded that servicers generally reported sold loans in the default monitoring system, and we found the data to be sufficiently reliable for the purpose of identifying and describing sold loans. To describe the DASP process and changes to the program over time, we reviewed FHA documentation, legislation, and other reports. To describe how DASP currently works, we analyzed the 2016 servicer and purchaser agreements and interviewed FHA officials and servicers. To describe how the program changed over time and the type of changes that FHA made, we reviewed HUD’s authorizing legislation to accept assignment and sell loans, program requirements under OMB Circular No. A-11, and HUD press releases that announced the program’s initiation and changes. To identify changes in servicer agreements and purchaser agreements since 2010, we performed a content analysis identifying differences from sale- to-sale (one servicer agreement and one purchaser agreement for each sale between 2010 and 2016). One analyst performed the review, and a second analyst verified the selected content. To gather additional background information on the program and the changes over time, we reviewed reports issued by the HUD Office of Inspector General (OIG) and consumer advocacy and other research organizations such as the National Consumer Law Center, Center for American Progress, and Urban Institute. To corroborate our information on the program and changes, we asked FHA to provide us a list of changes to the program between 2010 and 2016, and we interviewed FHA officials in HUD headquarters and at the National Servicing Center. We further corroborated our understanding of DASP through interviews with the servicers and purchasers. To identify FHA’s procedures for monitoring loan eligibility, we examined procedures identified in the servicer agreements and contracts and statements of work for entities assisting in oversight of DASP sales. We assessed the extent to which these procedures existed and were working effectively by reviewing status codes from FHA’s default monitoring system and examining relevant findings from HUD OIG audit reports. We found limited information in agency documentation on steps conducted to verify loan eligibility and had to rely on discussions with FHA staff and contractors on monitoring processes. We also interviewed servicers on their process for selecting loans and certifying loan eligibility for DASP. We further corroborated this information by providing a combined list of steps to FHA officials to verify accuracy. To assess whether FHA’s procedures for assessing loan eligibility were working, we determined the extent to which FHA’s sold loans appeared to be ineligible in its 2016 sales. To identify the ineligible loans, we compared the eligibility criteria listed in the 2016 servicer agreements to the data in the default monitoring system. We obtained the default information for sold loans for the period 2 months prior to the bid date— the period when servicers generally submit loans for sale—and at the bid date. We limited our analysis to loans sold in 2016 because FHA’s loan eligibility criteria changed from sale to sale and 2016 was the most recent year a sale occurred. We selected a nongeneralizable sample of 10 loans with ineligible default codes in the default monitoring system as of the bid date. To determine why FHA sold loans that appeared to be ineligible, we provided list of sold loans with ineligible codes to FHA staff for them to research and provide their explanations. We followed up in interviews with officials from FHA’s Office of Asset Sales to further clarify their responses. We also interviewed FHA officials regarding data reliability and to ensure that our understanding of the default codes and their corresponding eligibility or ineligibility for sale was accurate. We also performed electronic checks for consistency and validity and found the data to be sufficiently reliable for the purpose of determining default status, length of delinquency, and the extent to which loans that FHA sold in 2016 appeared to be ineligible. To assess whether DASP purchasers offered borrowers payment- lowering modifications, we evaluated the loan modifications offered by individual purchasers by comparing borrowers’ monthly mortgage payments prior to being modified to their monthly payments after being modified. We obtained postmodification payment data from the postsale reports and premodification payment data from the submitted loan database. Using the most recent postsale record for each modified loan, we calculated the change in payment resulting from the modifications offered by DASP purchasers. To confirm that we used the appropriate data sources and variables for our analysis, we contacted FHA’s Program Financial Advisor, who collects postsale reporting data and reports some information on modifications. Our analysis included all loans sold in DASP sales that occurred between 2013 and 2016, with some exceptions, in line with the scope of our comparison analysis of outcomes. We selected this scope because it represented the period for which FHA was generally able to provide consistent postsale quarterly reports. In addition, to assess the sustainability of the modifications offered by DASP purchasers, we used data on modification type from the postsale reports to calculate the number of modifications that included a deferment. We identified loan modification characteristics from prior GAO work. We also reviewed the purchaser agreements and postsale reports to examine the information available on modified interest rates. Our analysis was limited to modifications that were reported using the more expansive list of characteristic codes introduced in 2016, which accounted for about 95 percent of the modifications in our scope. To assess the reliability of the modification data, we checked for missing or invalid data entries across different modification fields, including modification date, modification type, and monthly payment before and after a modification. We found that purchasers generally reported consistent information on modifications for loans sold in DASP sales that occurred between 2013 and 2016 and determined the data to be sufficiently reliable for the purpose of calculating payment change and assessing the sustainability of modifications. We used multiple FHA data sources to match sold loans to similar unsold loans and compare outcomes across the groups. We used data from FHA’s default monitoring system and integrated database to obtain information on loan-level characteristics for both sold and unsold loans, such as length of delinquency. However, FHA data did not contain loans’ current property value or current loan-to-value (LTV) ratio. To calculate the current property value, we generated property values for sold and unsold loans based on data in the integrated database, including property value at origination, date of origination, and location information. We then aged the property values to the matching month and year using FHFA’s House Price Index data, which considers geography. We calculated the LTV ratio for sold and unsold loans by dividing the current unpaid principal balance obtained from the default monitoring system by the calculated current property value. To identify the loans sold through DASP and to determine their outcomes, we used postsale reporting data reported by DASP purchasers. To determine monthly outcome statuses for unsold loans, we used FHA’s default monitoring system and integrated database. Our analysis generally included loans sold in DASP sales that occurred between 2013 and 2016, but we excluded some sales and pools for various reasons. We excluded loans sold in the DASP sales that occurred from 2010 through 2012 because FHA could not provide semiannual or quarterly postsale reports for these loans. We excluded loans sold in Neighborhood Stabilization Outcome (NSO) pools in the first sale in 2013 because FHA had not yet implemented reporting requirements for more detailed information on loan status for NSO pools. We excluded Direct Sales, through which FHA directly transfers loans to government entities, as well as Aged Delinquent Portfolio Loan Sales, because these sales do not follow normal DASP procedures. Lastly, we excluded loans in pools that were offered for sale but not traded and loans that dropped out before transfer and were never sold. FHA was generally able to provide quarterly reports for the remaining sales and pools within the required reporting time frame. We took a number of steps to prepare and ensure the reliability of the data used to match sold loans to similar, unsold loans and compare outcomes. We generated seven datasets corresponding to the seven DASP sales in our scope. Each dataset was made up of the records in the default monitoring system 2 months prior to the bid date for the corresponding DASP sale—the time servicers submit eligible loans for sale to FHA, according to FHA officials. We eliminated duplicate case numbers as well as erroneous submissions, and we added sale and pool variables to identify sold loans based on the master list of sold loans. We also excluded unsold loans that were ineligible for sale at the time of matching. Specifically, we reviewed FHA’s servicer agreements and developed criteria for excluding unsold loans from matching based on sale eligibility requirements outlined in these agreements. We interviewed FHA officials to ensure that our understanding of the default status codes and their corresponding ineligibility for sale was accurate. We then used this information to identify and exclude ineligible loans. We performed a variety of electronic checks to test the completeness, consistency, and logic of outcome statuses for sold and unsold loans as reported by servicers. We excluded or corrected, where possible, a small percentage of sold and unsold loans (2 percent excluded and about 11 percent corrected) that had invalid or illogical reported statuses. We also excluded loans with invalid case numbers, loans erroneously reported as sold by purchasers, and other problem records. These exclusions accounted for less than 1 percent of the sold loans in our scope. We found that three pools were missing more than half of the expected number of postsale reports. Because these pools accounted for less than 2 percent of the sold loans in our scope, we decided to keep these pools in our analysis as they provided additional data points for estimating outcome probabilities, and including them would not significantly bias our results. Finally, when assessing data reliability, we consulted relevant documentation on the default monitoring system, integrated database, and postsale reporting systems and the specific fields used from these systems. We also interviewed officials knowledgeable about how data from these systems were collected, maintained, and accessed. Based on these steps, we determined that the data were sufficiently reliable for the purpose of matching sold loans to similar, unsold loans and comparing outcomes. We used statistical matching methods to identify a comparison group of unsold loans that closely resembled sold loans on loan characteristics that could affect the likelihood of foreclosure. Unsold loans were matched to sold loans for each sale, resulting in seven groups of unsold loans corresponding to loans sold in the seven DASP sales that occurred in 2013–2016. We matched unsold to sold loans 2 months prior to the bid date across the following characteristics: Length of delinquency. Number of missed payments at matching. Occupancy status. Whether property was occupied or vacant at matching. Location. Location of the property, based on latitude and longitude. Servicer. FHA-approved, mortgage servicer. Loan-to-Value (LTV) ratio category. Value of the property relative to the outstanding unpaid balance on the loan at matching. Loan origination. Year of the loan’s origination. We excluded modification status from the matching criteria. While there is some indication that loans that have been modified once are more likely to redefault in the future, this is largely dependent on the quality of the modification. However, modification quality could not be determined based on the FHA data we received. Our analysis did not seek to conduct a definitive evaluation of the causal effects on outcomes of being sold through DASP. Instead we sought to improve on simple comparisons of outcomes between sold and unsold loans by constructing a comparison group of unsold loans that were similar to sold loans on loan-level characteristics known to affect the likelihood of foreclosure. For example, matching sold and unsold loans by location minimized variation in neighborhood characteristics and local housing markets that could be associated with a higher or lower likelihood of foreclosure. We selected these factors based on our previous work on foreclosure mitigation and on consultations with subject-matter experts within GAO. See appendix V for more information on our statistical matching analysis. To compare outcomes for sold and unsold loans, we identified outcomes using postsale reporting data dictionaries in FHA’s purchaser agreements as well as FHA’s status codes used in its default monitoring system and integrated database data dictionaries. We grouped the outcomes into six outcome categories. To assign sold loans to a category, we used FHA’s postsale reporting data, and to assign unsold loans to a category, we used FHA’s default monitoring system and integrated database data. The outcome categories were as follows: Foreclosure. Loans terminated with foreclosure. Reperforming. Loans restored to performing status either under the original mortgage terms or through a permanent modification. In this outcome, the borrower retains ownership of the home. Temporary Action. Loans with temporary action that allow the borrower to retain ownership of the home—for example, an agreement for paying the loan balance or restoring it to performing status has been reached but has not met FHA’s time requirement to meet FHA’s definition of performing. This category may also include other interventions that have the intent of keeping the borrower in the home, such as forbearance. Short sale/deed-in-lieu of foreclosure. Loans that avoid foreclosure through short sales and deeds-in-lieu of foreclosure. In this outcome the borrower loses ownership of the home. Unresolved. Loans remaining in default status and whose outcomes were unresolved. Other. Loans whose outcomes do not fit into these other categories. A number of sold loans were reported by purchasers as resold, with no further outcome updates, and we decided to categorize these separately. Purchasers had the option of reporting on loans as resold until 2015, when FHA introduced a reporting requirement that purchasers continue reporting the outcome status of loans even after selling them to new buyers. For the loans in our scope, the percentage of postsale reports that included a status of resold ranged from 7 to 35 percent for the 2013 and 2014 sales, before dropping to less than 1 percent beginning with the 2015 sale. Purchasers may have returned resold loans to performing status before selling them because performing loans are more profitable, and, by categorizing these loans separately, we may have undercounted performing loans for the earlier DASP sales. While we considered classifying loans reported as resold as performing, our review of status sequences for loans with at least one resold status showed that purchasers reported a range of nonperforming outcomes before and after the resold status, indicating that not all resold loans were performing. We therefore determined that categorizing resold loans separately would result in more reliable estimates for sold loans. Using data from the default monitoring system to classify outcomes for the matched, unsold loans in our analysis required us to make some assumptions that may have resulted in overcounting performing, unsold loans. Because the default monitoring system only contains data on delinquent loans and does not include status information on performing loans, our classification of performing, unsold loans was based on whether or not a servicer reported the loan in the default monitoring system in a given month. As a result, we assumed that unreported loans were performing. However, a missing report could also be the result of a reporting omission by the servicer, rather than an indication of a performing status. To mitigate the risk of overcounting performing, unsold loans, we used a variable indicating the length of a loan’s current default episode to help us distinguish between performing loans and servicer omissions. Specifically, we counted unsold loans as performing only if the default episode length in the most recent default monitoring system report was less than the reported episode length in the default monitoring system report preceding the period of no reporting. We assumed that a lower default episode length in the most recent default monitoring system report meant that the borrower was making payments during the period of no reporting. Otherwise, we classified periods of no reporting as missing. We compared monthly outcomes for sold loans and unsold loans after servicing transferred to the purchaser. We set the origin of the observation period to the latest servicing transfer date in each pool of sold loans and their associated matched unsold loans. Because the latest servicing transfer date varied across these groups, the number of observations and the associated dates varied across pools and sales. We measured outcomes for up to a maximum of 48 months, from January 2013 through December 2017, the most recent full quarter of postsale reporting data available at the time of our review. The follow-up periods ranged from the full, 4-year reporting period required by FHA for loans sold in the 2013 sales to 1 year for loans sold in the second sale in 2016. See appendix V for more information on our statistical analysis of outcomes for sold loans and unsold loans. To examine the extent to which loan-pool characteristics were associated with bidder participation for FHA loan sales and the enterprises’ nonperforming loan sales, we built regression models. We identified from interviews key characteristics (independent variables) that may make loan pools attractive to certain bidders, such as having a single servicer or low vacancy. We obtained bid-day data from FHA and the enterprises that included the number of bidders (dependent variable) and the winning bid amounts, as well as the timing of the sale. We generated FHA pool characteristics from the loan level data in FHA’s submitted loan database and supplemented it with FHA default status data (see table 2 above for further information about FHA’s data sets). For the enterprises, we obtained pool characteristics from a published FHFA report. This report provided a range of characteristics to compare to those of FHA’s pools. See table 3 for our regression estimates of the relationship between pool characteristics and the number of bidders in FHA’s DASP sales and the enterprises’ sales. The associated p-values are presented in parentheses, and *, **, and *** denote significance at 10 percent, 5 percent, and 1 percent or better, respectively. In the report body we use the 95 percent confidence level as indicating significance of the regression estimates. To assess the reliability of the FHA data, we performed reasonableness checks that resulted in the removal of FHA’s 2010 sale due to a large number of invalid case numbers and two additional pools from later sales, we also removed pools based on missing or invalid date—in total 4 percent of FHA’s pools. We did not independently verify the data in the FHFA reports, but we interviewed the FHFA staff that generated the report about the reliability of the data. Some limitations stem from the differences between FHA’s and the enterprises’ pools and the underlying loans as well as the data available on the pools. For example, we use data from FHA sales from 2011–2016 and from sales in 2015–2017 for the enterprises. We use the time variables to control for housing market differences as well as the defaulted loan sale market. Additionally, we included FHA’s nontraded pools but not the enterprises’ nontraded pools because the FHFA reports did not present data on these pools. We showed the differences and similarities across the entities in figure 14 in the report. We determined that data for the remaining pools were sufficiently reliable for examining the association of pool characteristics with bidder participation and for comparison between the enterprises’ and FHA’s sales. To calculate pool reserve prices, we obtained FHA data on quarterly loss severity by disposition method for 2013–2016. Using our results from the outcomes comparison analysis, we calculated pool-level reserve prices and compared them to winning pool-level bids. To assess the effect that changing FHA’s auction design could have on the MMI Fund and to identify elements of a successful auction structure, we reviewed economic literature on auction structures and auction descriptions in business and commercial literature. To compare the DASP auction structure with the enterprises as well as mortgage auctions in the private market, we analyzed agency and enterprise documents and interviewed market participants. We developed a detailed description of FHA’s and the enterprises’ current auction structures, including information about the nature of the loan pools being auctioned; about sellers, purchasers, and other auction stakeholders; and about the benefits and drawbacks of the auction design. In interviews, we received suggestions about aspects of FHA auctions that, if changed, may increase bidder participation. To examine these aspects, we interviewed purchasers on their potential interest in these changes and examined FHA sale data following an instance of a single purchaser winning all the pools in a sale. To assess the DASP auction structure, we compared it to selected characteristics of successful auctions and determined the extent to which the characteristics were used by FHA. We conducted this performance audit from January 2017 to July 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix includes descriptive information about the Federal Housing Administration’s (FHA) Distressed Asset Stabilization Program (DASP) servicers, purchasers, and sold loans. The information presented is generally based on loans sold in DASP sales that occurred between 2013 and 2016. Thirty-two servicers participated in DASP sales between fiscal years 2013 and 2016, with the largest participating servicer offering 48 percent (more than 44,000) of the loans sold. As seen in figure 15, the number of servicers increased from nine in the first sale in 2013 to 22 in the second sale in 2016. During this same period, 26 purchasers participated in the DASP sales, with the largest participating purchaser buying 27 percent (about 25,000) of the loans sold. The share of loans offered by individual servicers also varied over time and by sale. One or two servicers offered the majority of sold loans in earlier sales, but more servicers offered a greater share of the loans sold in later sales (see fig. 16). For example, one servicer offered 89 percent of the loans sold in the first sale in 2013, about 51 percent of the loans sold in the second sale in 2014, and about 8 percent of the loans sold in the second sale in 2016. During this time, new servicers began offering loans for sale, and servicers that had offered a smaller share of the loans sold in earlier sales began offering a larger share of loans for sale. Occupancy status. The majority of properties sold through DASP were occupied by the borrower, with a smaller portion having been vacated (see fig. 17). DASP purchasers told us that their ability to contact and engage borrowers is one determinant in whether they are able to offer loss mitigation options to avoid foreclosure. One purchaser noted that in cases where it is unable to contact the borrower, which may indicate that the property is vacant, it tries to foreclose as quickly as possible. Delinquency. The majority of loans sold through DASP had missed 12 or more payments (see fig. 18). As discussed earlier, a loan becomes delinquent after a borrower misses a single payment, and goes into default after it is two payments past due. Generally, servicers must utilize a loss-mitigation option or initiate foreclosure within 6 months of default. As we previously reported, serious delinquency is among the factors associated with an increased likelihood of foreclosure. Loan-to-Value (LTV) ratio. About 18 percent of sold loans had an LTV ratio of 110 or greater (see fig. 19). The LTV ratio represents the unpaid principal balance of a loan as a percentage of the current property value. As we previously reported, negative equity or a high LTV ratio is among the factors associated with an increased likelihood of foreclosure. Origination. As figure 20 shows, sold loans were more likely to have originated at the peak of the housing crisis in 2008 and 2009. FHA officials told us that they used DASP to reduce the significant backlog of defaulted loans they were faced with following the housing crisis. In this appendix, we describe the documents the Federal Housing Administration (FHA) uses to guide the Distressed Asset Stabilization Program. The documents listed in table 4 represent the current written procedures and guidance that FHA planned, as of May 2018, to incorporate into a single document—the Asset Sales Handbook—to centralize the information for internal and external stakeholders. We examined the different types of actions purchasers have used to modify loans they purchased through the Distressed Asset Stabilization Program (DASP) and the expected effect of each type of action on borrowers’ payments. Table 5 summarizes our findings on postsale modification actions. Our analysis was limited to modifications reported using reporting codes introduced in the purchaser agreement for the first sale in 2016, and included loans sold between fiscal years 2013 and 2016. We found that the Federal Housing Administration (FHA) may not have the data it needs to determine whether payment-lowering modifications offered by purchasers were sustainable—for example, a modification in which a low payment was later adjusted to higher than what it was prior to modification. Therefore, we could not determine the long-term effect on payment for many modifications offered by purchasers, as noted by “unclear” in the last column of table 5. This appendix provides additional methodological details on our analysis to compare outcomes between loans sold through the Distressed Asset Stabilization Program (DASP) and a comparison group of similar unsold loans. The analysis consisted of two parts: (1) applying statistical methods for constructing matched comparison groups and (2) estimating a statistical model of loan outcomes using the matched sample of loans. We matched one unsold loan to each sold loan, using exact and Mahalanobis distance matching methods. We matched exactly on occupancy status, state, and loan servicer, and we matched the distributions of loan delinquency period, loan-to-value ratio (divided into five categories), geographic coordinate, and origination year. Unsold loans could be matched multiple times in order to maximize the degree of similarity between the sold and unsold loans, given constrained sample sizes of potential comparison loans. (That is, we used one-to-one matching with replacement.) Matching occurred separately for each loan sale in order to measure the matching variables 2 months before each sale occurred. We assessed the quality of candidate matched samples by consulting univariate empirical-QQ plots, descriptive statistics, and multivariate Kolmogorov-Smirnov tests of equal distributions for each of the matching variables, as implemented in the “Matching” package for the statistical software, R, version 3.5.1. We attempted to match exactly within the smallest geographical area that sample sizes allowed. Location is important for the outcomes of Federal Housing Administration (FHA) loans and is potentially correlated with many unobserved variables, such as local housing market conditions. After experimenting with multiple geographic areas, such as the census tract and county, we chose a strategy of matching exactly on state and matching in distribution on latitude, longitude, and product. This ensured that the comparison loans were in the same states as the sold loans, which held constant differences in foreclosure processes and other political and legal differences. Although the matched loans were potentially in different counties or municipalities than the sold loans, generally they were still close to each other, as measured by the geographic coordinates. We obtained a similar matched sample of comparison loans for each loan sale, as summarized in table 6 and figures 21 and 22. Although we conducted the matching separately for each sale (exactly matched), we combined the sales and their matched comparison loans for the purpose of summarizing their similarity across the matching variables. We used statistical modeling methods designed for longitudinal time-to- event or “duration” data to compare outcomes for sold and matched unsold loans. Conventional duration methods, such as “competing risks” models, would estimate the probability that a loan experienced one or more terminal outcomes by a certain follow-up time. These methods assume that event times are observed exactly, and that no outcome can occur more than once. These assumptions were not realistic for our analysis. Loans could transition among several nonterminal outcomes over time, such as reperforming or temporary action, before experiencing a terminal outcome, such as foreclosure. Our data sources measured the status of unsold loans monthly and sold loans quarterly. However, events could occur on any date, in continuous time, so the status of each loan was unknown between pairs of reporting times (or interval-censored). We used Multi-State Markov models to account for these features of the data. Our models assumed a directed graphical structure for how loans could transition among events between observed follow-up times, as described in figure 23. We developed our model of possible transitions based on FHA’s typical process for managing unsold delinquent loans and DASP program rules for managing sold delinquent loans. To simplify the model, we did not allow paths for transitions that were infrequently observed, illogical, or inconsistent with prior knowledge about loan management. These unusual transitions in the data may reflect misclassified outcomes or transitions through unobserved outcomes between observation times. Table 7 gives the sample counts of the transitions in the matched sample of loan-month observations. The graphical version of our model implied a matrix of modeled transitions among outcomes, with transition probabilities set to 0 for paths between outcomes not shown in the graph. Specifically, we defined the loan outcomes at time t, Y, as a stochastic process, taking values according to an underlying model of transition probabilities from time 0 to t: where r and s denoted two outcomes from the set of outcomes above in table 7, such as unresolved and reperforming. Consistent with existing literature, we assumed that the outcome process was a time- homogenous Markov chain. This assumption made the model mathematically tractable, but required the transition probability at any follow-up time to be independent of prior outcomes and constant over the observation period. (We estimated versions of the model that relaxed this assumption, as described below.) Under this assumption, we modeled the transition hazard rate from outcome r to s as: where x and βrs were vectors of covariates and transition-specific parameters (excluding an intercept) and qrs was an unspecified proportional baseline hazard. All covariates were time-invariant characteristics of the loans measured at baseline, 2 months prior to the loan’s bid date, used to create the matched sample. We estimated βrs using maximum likelihood estimation methods, as implemented by the “msm” package in R 3.5.1. The body of this report provides estimated transition probabilities for various groups of loans, including loans that were sold or unsold. We estimated the probability of a loan’s transitioning from unresolved at t = 0 to some other outcome at t using the estimated parameters and the matrix exponential P(t) = exp(tQ), where P and Q are the matrices of transition probabilities and hazards, respectively, for all outcomes r and s. We used Monte Carlo simulation from the fitted multivariate normal distribution of the parameters to estimate 95 percent confidence intervals for the transition probabilities, using 1,000 draws. In appendix VI, we provide more detailed estimates of these transition probabilities and their confidence intervals for key findings discussed in the body of this report. Our models estimated the difference in transition probabilities between sold and unsold loans in the matched sample by including an indicator for sold status in x. We estimated transition probabilities for certain subpopulations of loans, like specific purchasers or loan sales, by estimating separate models for each subpopulation. This approach allowed the models to be fully stratified and reduced computational burdens associated with estimating many parameters using a sample of 1 million or more observed transitions, as a fully interactive specification between sold status and the subpopulation variables would have required. However, this approach prevented us from estimating the partial interactions between sold loan status and the subpopulation variables. We conducted several validation and robustness checks of the analyses reported in the body of this report. These included the following: Predictive fit. We did not design our models to predict future outcomes but rather to make inferences about the difference in transition probabilities between sold and matched unsold loans. However, to identify substantial problems with model fit, we compared the observed prevalence of each outcome to the estimated prevalence expected under our models. Figure 24 shows the predictive fit for models with a covariate in x for sold status and a piecewise-constant indicator for the period after month 12. The estimated and observed prevalence are generally close for most outcomes before month 40. After that month, the model underestimates the prevalence of foreclosure and overestimates the prevalence of unresolved. This lack of fit late in the observation period may reflect the substantial effect of sales cohort, which we modeled through separate models stratified by sale rather than as a covariate. In any case, the model fit was acceptable, given our nonpredictive use of the model and the limitations of using observed outcome prevalence rates to validate predictions of a process with interval censoring. Time-inhomogenous models. We relaxed our assumption that the transition intensities were constant throughout the observation period by including indicators in x for whether the observation fell before or after 12 months. FHA changed DASP rules before the 2015 sales to extend the moratorium on foreclosures from 6 months to 12 months. Outcome transition estimates from a model including these time indicators plus a sold indicator appear in table 8, along with our base estimates from a time-homogenous model with only the sold indicator. Although Akaike Information Criterion values showed that the piecewise model improved the fit, the estimated transition probabilities generally supported the same substantive conclusions. The piecewise model estimated that sold loans were somewhat more likely to transition to a short sale or deed-in-lieu outcome, and somewhat less likely to transition to reperforming, but the direction of the association was the same as in the time-homogenous model. We used the time- homogenous model to provide results in the body of this report and in appendix VI, due to the considerable computing time required to estimate models with piecewise-constant covariates. In this appendix, we provide data for selected borrower outcome figures presented in this report. We also provide additional outcome figures and data, as well as outcome data for sold loans and unsold loans by some loan-level characteristics. These figures and data are based on the statistical matching and modeling analysis of loans sold through the Distressed Asset Stabilization Program (DASP) and similar, unsold loans described in appendix I and appendix V of this report. Tables 9–12 present data for selected outcome figures shown in the report. Table 9 presents estimates of foreclosure and foreclosure avoidance outcome rates for sold loans and similar, unsold loans, based on statistical models (fig. 7). Table 10 presents these estimates for out-of- home and in-home outcomes (fig. 8). Figure 9 in the body of this report shows the foreclosure and foreclosure avoidance outcomes by DASP sale, and tables 11 and 12 present these estimates for all outcomes by DASP sale, 12 and 24 months following the servicing transfer date, respectively. As discussed in appendix I, to compare foreclosure and foreclosure avoidance outcomes for sold and unsold loans, we assigned loans to one of six outcome categories. Figure 25 and table 13 present the outcome figures and associated data for sold and unsold loans across all six categories. Figures 26–29 compare specific outcomes for sold and unsold loans across different loan characteristics. We selected characteristics and outcomes that showed clear patterns or differences between sold and unsold loans. Our analysis showed that the loan-to-value (LTV) ratio was less strongly associated with reperforming rates for sold loans compared to similar, unsold loans (see fig. 26). For example, while the probability of reperforming varied across different LTV ratio categories for unsold loans, the probability varied less for sold loans. Our analysis of outcomes by different delinquency categories showed that length of delinquency was less strongly associated with reperforming rates for sold loans compared to similar, unsold loans (see fig. 27). For example, while the probability of reperforming 12 months after the servicing transfer date ranged from 8 to 29 percent across different delinquency lengths for unsold loans, this range was smaller for sold loans—about 9 to about 16 percent. Our analysis of outcomes by year of loan origination showed that length of delinquency was less strongly associated with reperforming rates for sold loans compared to similar, unsold loans (see fig. 28). For example, the year of loan origination did not affect the probability of reperforming for sold loans. However, for unsold loans the probability of reperforming was lowest for loans originating in 2007–2008 at the beginning of the housing crisis. Our analysis of outcomes by occupancy showed that, for occupied properties, sold loans were more likely to experience foreclosure compared with similar, unsold loans (see fig. 29). However, for vacant properties, sold loans experience foreclosure at equal or smaller rates compared to similar, unsold loans. The Federal Housing Administration (FHA) uses a pooled, highest-bidder, sealed-bid auction structure to sell its single-family defaulted residential mortgages through the Distressed Asset Stabilization Program (DASP). This auction structure is consistent with industry standards and private market practices for selling these mortgages and includes many characteristics of a successful auction. We identified characteristics of successful auctions by reviewing economics literature on auction structures and auction descriptions in business and commercial literature, and we obtained information about the nature of the loans being auctioned, about sellers, purchasers and other auction stakeholders, and about the benefits and drawbacks to each of various details of the auction design. Table 14 shows some auction characteristics and an evaluation of FHA’s DASP design. In addition to the contact named above, Jill Naamane (Assistant Director), Rhonda Rose (Analyst in Charge), Abigail Brown, Stephen Brown, Karen Jarzynka-Hernandez, John Karikari, May Lee, Ned Malone, Paulina Maqueda-Escamilla, John McGrail, Samuel Portnow, Tovah Rom, Jena Sinkfield, Anne Stevens, Jeff Tessin, Jim Vitarello, Sarah Wilson, and Elisa Yoshiara made key contributions to this report. Also contributing to this report were DuEwa Kumara and Jason Rodriguez.", "summary": "HUD insures single-family mortgage loans and is authorized to sell defaulted loans under the National Housing Act. In fiscal years 2010–2016, FHA auctioned off approximately 111,000 loans to private purchasers under DASP. DASP helped reduce a backlog of federally insured defaulted loans stemming from the 2007–2011 financial crisis and was intended to protect the MMI Fund by paying insurance claims before the costly foreclosure process. GAO was asked to evaluate DASP. This report examines, among other things, certain DASP procedures, including verifying loan eligibility criteria, and documentation; FHA's evaluation of the identified outcomes of sold loans and how these compare with similar, unsold loans; and the potential effects that changes to DASP might have on the MMI Fund. GAO reviewed FHA policies, contracts, and reports, and interviewed FHA officials, selected servicers and purchasers based on sales participation, and other stakeholders. GAO also conducted a statistical analysis comparing outcome data for sold loans and similar loans that remained FHA-insured and analyzed the effect of loan pool characteristics on bidder participation. The Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) uses multiple entities to check loan eligibility for the Distressed Asset Stabilization Program (DASP)—in which FHA accepts assignment of eligible, defaulted single-family loans from servicers in exchange for claim payments and sells the loans in competitive auctions. After servicers submit loans for sale, FHA and its contractors concurrently check loan data for completeness, validity, and eligibility. FHA relies on servicers to check eligibility a few weeks before and again after the bid date. The status of delinquent loans can be fluid, and a change in eligibility status close to this date may not be detected. GAO's analysis of fiscal year 2016 default data indicates about 2.67 percent of loans that FHA sold were ineligible based on length of delinquency or loss mitigation status. Without checking loan eligibility closer to bidding, FHA risks selling ineligible loans, and borrowers could lose access to benefits. FHA does not evaluate outcomes for sold loans against similar unsold loans. GAO found that, in aggregate, sold defaulted loans were more likely to experience foreclosure than comparable unsold defaulted loans (see figure). However, GAO's analysis identified varying outcomes by purchasers and sales. For example, some purchasers' loans had higher probabilities of avoiding foreclosure, with borrowers making regular payments again by 24 months after the transfer of loans. Also, loans sold in 2016 sales were less likely to experience foreclosure compared to unsold loans. HUD policy states that the agency's evaluations isolate program effects from other influences. Evaluating outcomes for sold loans against similar unsold loans could help FHA determine whether DASP is meeting its objective of maximizing recoveries to the Mutual Mortgage Insurance Fund (MMI Fund) and understand the extent to which DASP helps borrowers. Changing some of FHA's auction processes may help the MMI Fund. FHA could increase participation and MMI Fund recoveries in its auctions by communicating upcoming sales earlier. One purchaser said that additional notice would allow it time to plan for the capital needed to bid. Also, FHA set reserve prices (minimum acceptable price) based on the amount it expected to recover after loans completed foreclosure—yet GAO estimates that some of these loans will avoid foreclosure (see figure). As a result, FHA risks recovering less for the MMI Fund in loan sales than if the loans had not been sold. GAO is making nine recommendations to FHA, including establishing specific time frames to check loan eligibility, evaluating loan outcome data, and changing auction processes to help protect the MMI Fund. FHA generally agreed with seven recommendations, and neither agreed nor disagreed with two. GAO maintains that all the recommendations are valid.", "document_type": "gao"}
{"report": "The federal government has recognized 573 Indian tribes as distinct, independent political communities with tribal sovereignty. There are different categories of tribal lands, with differing implications with respect to ownership and administration. Reservations are defined geographic areas with established boundaries recognized by the United States. Tribal lands vary in size, demographics, and location. For example, those lands smallest in size are less than one square mile, and the largest, the Navajo Nation, is more than 24,000 square miles (the size of West Virginia). Tribal land locations can range from extremely remote, rural locations to urban areas. Figure 1 shows tribal lands in the United States according to the 2010 Census. The term “broadband” commonly refers to Internet access that is high speed and provides an “always-on” connection, so users do not have to reestablish a connection each time they access the Internet. Broadband service may be “fixed”—that is, providing service to a single location, such as a customer’s home—or “mobile,” that is, providing service wherever a customer has access to a mobile wireless network, including while on the move, through a mobile device, such as a smartphone. Fixed and mobile broadband providers deploy and maintain infrastructure to connect consumers to the Internet. Providers offer fixed Internet service through a number of technologies, such as copper phone lines, fiber-optic lines, coaxial cables, wireless antennas, satellites, or a mix of technologies (see fig. 2). To install fixed or wireless infrastructure, providers must obtain permits from government entities with jurisdiction over the land or permission from public utilities to deploy infrastructure on existing utility poles. The federal government has emphasized the importance of ensuring Americans have access to broadband, and a number of agencies, including FCC, currently provide funding to subsidize broadband deployment in areas in which the return on investment has not attracted private investment. The Communications Act of 1934, as amended by the Telecommunications Act of 1996, specifies that consumers in “rural, insular, and high-cost areas” should have access to telecommunication services and rates that are “reasonably comparable” to consumers in urban areas. To achieve this goal, FCC administers the High-Cost program, which provides subsidies to providers of phone service in rural, insular, and other remote areas. In 2011, FCC launched a series of reforms to its High-Cost program, including adding support for broadband services, and created the Connect America Fund, which provides subsidies to fixed and mobile providers of telecommunications and broadband services in rural, insular, and other remote areas where the costs of providing service is high. To be eligible for Universal Service Fund support from FCC, a provider must be designated an Eligible Telecommunications Carrier by the appropriate state or by FCC and must meet certain service obligations. The Connect America Fund has distributed approximately $4.5 billion per year, and has separate funding mechanisms targeted to specific goals. For example, there are funds for fixed-phone and broadband service and funds for mobile service, including a Tribal Mobility Fund (Phase 1) that awarded nearly $50 million in 2014 for the provision of 3G and 4G service to unserved tribal areas. In addition to FCC, a number of other agencies provide funding for broadband deployment in unserved or underserved areas. For example, the United States Department of Agriculture’s Community Connect Program, which provides grants to rural communities to provide high- speed Internet service to unserved areas. The American Recovery and Reinvestment Act of 2009 (Recovery Act) mandated the development of a nationwide map of broadband availability. To implement the act, the National Telecommunications & Information Administration (NTIA)—an agency within the Department of Commerce—established a grant program to enable U.S. states and territories to collect state-level broadband mapping data. NTIA used these data to launch the National Broadband Map (www.broadbandmap.gov) in February 2011. As the funding for the NTIA’s program came to an end in 2014, NTIA stopped collecting data to update the map and, according to FCC officials, created a memorandum of understanding with FCC through which FCC agreed to maintain public access to the last version of the map. FCC issued rules in 2013 to begin collecting broadband deployment data, in addition to the broadband subscription data it had collected from providers since 2000. FCC sought, but did not receive, $3 million to update the National Broadband Map in its fiscal year 2015 and fiscal year 2016 budgets. In 2018, Congress directed FCC to develop a report by March 23, 2019, evaluating broadband coverage in certain tribal lands (to include an assessment of areas that have adequate broadband coverage, as well as an assessment of unserved areas), and to complete a proceeding to address unserved areas by September 23, 2020. Currently, FCC requires broadband providers to report on their broadband deployment by filing a form twice a year (Form 477). Fixed broadband providers submit a list of the census blocks in which their broadband service is available, and mobile providers submit “shapefiles”—a geospatial depiction of the coverage area, which FCC refers to as “polygons”—of their coverage areas. FCC uses providers’ 477 data to develop a statutorily mandated annual report on advanced telecommunications capability. In addition, in 2016, FCC began publishing its own maps of broadband deployment, using the information from providers’ Form 477 filings. In February 2018, FCC launched an updated map of fixed broadband deployment (https://broadbandmap.fcc.gov/#/). This map allows users to search for broadband deployment by address and provides summary-level statistics regarding broadband deployment in specific tribal lands (see fig. 3). According to FCC officials, this new map format will support more frequent data updates. FCC also provides national maps of mobile LTE coverage; these maps do not allow users to access data at the same level of granularity as the maps of fixed broadband (see fig. 4). FCC collects and uses data that capture broadband availability to measure broadband access on tribal lands, leading to overstatements of broadband access on tribal lands. Specifically, FCC’s method of collecting mobile and fixed broadband data from providers (the Form 477) does not accurately or completely capture broadband access on tribal lands because it (1) captures nationwide broadband availability data— areas where providers may have broadband infrastructure—but does so in a way that leads to overstatements of availability, and (2) does not capture information on factors that FCC and tribal stakeholders have stated can affect broadband access on tribal lands, such as affordability, service quality, and denials of service. Nonetheless, FCC uses its Form 477 broadband availability data in annual broadband deployment reports to measure the percentage of Americans living on tribal lands with or without access to broadband, and to measure progress toward FCC’s strategic goal of increasing all Americans’ access to affordable broadband. By using broadband availability data to measure broadband access on tribal lands, FCC overstates broadband access on tribal lands. FCC’s Form 477, its primary method of collecting nationwide broadband data, collects information on broadband availability, which identifies where providers have broadband infrastructure and could potentially provide broadband services but not where consumers can actually access those services. Moreover, the Form 477’s mobile broadband data- collection methods are not standardized, and its fixed broadband data- collection methods are not sufficiently granular to provide information about broadband availability on tribal lands. FCC’s Form 477 requires mobile broadband providers to report their coverage areas by submitting geospatial data depicting the areas in which consumers could expect to receive the minimum advertised speed. FCC has previously noted the importance of collecting nationally standardized, uniform broadband data from providers to assess broadband availability and allow for easy comparison across providers. However, the Form 477 does not require that providers use a standardized method with defined technical parameters (such as signal strength, or amount of interference) when determining their coverage area, resulting in data that cannot be meaningfully compared across providers, according to FCC. To map their coverage areas, providers may use predictive models based on different measurement methods and a variety of factors known to affect mobile broadband service such as topography, tree cover, and buildings, among other factors. Providers and tribal stakeholders have expressed concern with the accuracy of FCC’s mobile broadband data, and FCC has acknowledged concerns that the lack of a standardized method resulted in data that were unreliable for the purposes of determining mobile broadband coverage for specific geographic areas, such as tribal lands. About half of the tribal government representatives we interviewed told us that they believe FCC’s data overstate mobile LTE broadband availability on their lands. For example, a few representatives expressed concerns with the accuracy of the mobile data in areas with varied terrain, such as mountains and valleys. In comments to FCC, broadband providers have also raised concerns regarding the accuracy of the mobile coverage data generated by the Form 477 for the purposes of identifying areas eligible for funding through FCC’s Mobility Fund Phase II program, which provides federal funding to increase mobile broadband services in unserved areas. In 2017, in response to such concerns, FCC reversed its prior decision to use the Form 477 data to identify specific areas eligible for federal funding through the Mobility Fund Phase II program. Instead, FCC undertook a one-time special data collection, for which it required providers to measure their coverage based on a common set of standards, in order to better identify unserved areas that would be presumptively eligible for funding. FCC plans to allow parties, including tribal governments, to challenge the data where they believe the data overstate mobile broadband coverage through August, 2018. Additionally, in an August 2017 Notice of Proposed Rulemaking, FCC requested comment on potential changes to modernize its Form 477 data collection, including whether it should require all providers to use a standardized method when submitting mobile coverage data on the form. FCC officials told us that they do not have a timeline for the development of a final rule, and as of August 2018, FCC had not yet issued a final rule on modernizing the Form 477. The Form 477 collects fixed broadband data that are not sufficiently granular to accurately depict broadband availability on tribal lands. Specifically, FCC directs fixed broadband providers to submit a list of census blocks where service is available on the Form 477. FCC defines “available” as whether the provider does—or could, within a typical service interval or without an extraordinary commitment of resources— provide service to at least one end-user premises in a census block. Thus, in its annual reports and maps of fixed broadband service, FCC considers an entire block to be served if a provider reports that it does, or could offer, service to at least one household in the census block. FCC does not define a typical service interval or an extraordinary commitment of resources in its Form 477 instructions. However, FCC officials stated that providers should not report service in areas in which major construction would be required to provide service. A few providers told us that the lack of clear guidance from FCC regarding how to determine where broadband is available has led different providers to interpret the Form 477 directions in different ways, which can affect the accuracy and consistency of reporting from provider to provider. For example, in a filing with FCC, one provider stated that it had misapplied the definition of “available” and, as a result, overstated the availability of its services by almost 3,000 census blocks. As shown in figure 5, FCC’s definition of availability leads to overstatements of fixed broadband availability on tribal lands by: (1) counting an entire census block as served if only one location has broadband, and (2) allowing providers to report availability in blocks where they do not have any infrastructure connecting homes to their networks if the providers determine they could offer service to at least one household. Almost all the providers and private companies, and most of the representatives of tribal governments and organizations we spoke with told us that due to these issues, FCC’s definition of availability results in data that overstate broadband availability. According to FCC officials, FCC requires providers to report fixed broadband availability where they could provide service within a “typical service interval” and without “an extraordinary commitment of resources” in order to: (1) ensure that it captures instances in which a provider has a network nearby but has not installed the last connection to the homes, and (2) identify where service is connected to homes, but homes have not subscribed. FCC officials also told us that FCC measures availability at the census block level because sub-census block data may be costly to collect. In 2013, FCC considered collecting more granular nationwide data on broadband deployment but decided against collecting these data because it determined that the burden would outweigh the benefit. However, FCC, tribal stakeholders, and providers have noted that FCC’s approach leads to overstatements of availability. For example, in its 2017 Notice of Proposed Rulemaking on modernizing the Form 477 data collection, FCC acknowledged that by requiring a provider to report where it could provide service, it is impossible to tell whether the provider would be unable or unwilling to take on additional subscribers in a census block it lists as served. According to FCC, this limits the value of the data to inform FCC policies. In addition, several providers and tribal stakeholders we interviewed said that some “digital subscriber line” (DSL) and fixed wireless providers may overstate their service areas on the Form 477 because they may not take into account technological or terrain limitations that would affect their ability to actually provide service. FCC has also recognized that by measuring availability at the census block level, not every person will have access to broadband in a block that the data show as served, and FCC has noted that in rural areas, such as tribal lands, census blocks can be large and providers may only deploy service to a portion of the census block. A few representatives for tribal governments and organizations noted that the use of census blocks may uniquely overstate broadband availability on tribal lands when census blocks contain both tribal and non-tribal areas, because availability in the non-tribal portion of the block can result in the tribal area of the census block also being counted as served. FCC is considering requiring providers to report whether they are willing and able to serve additional customers in a census block and collecting sub-census block data in its 2017 proposed rulemaking on modernizing the Form 477. About one-third of the parties that commented on FCC’s proposals were not in favor of FCC collecting these more granular data on the Form 477, stating that the data would be less accurate and more burdensome for providers to collect and report, among other reasons, and questioned whether more detailed information on nationwide broadband availability is necessary. We heard similar concerns from a few of the providers and trade associations we interviewed. However, about one- third of the parties that commented on FCC’s proposals were in favor of collecting more granular data, stating that such data would be more useful for policymakers and more accurate. Additionally, a few tribally owned and non-tribal providers we interviewed told us that providers already maintain data for business purposes that would allow them to report more granular information on broadband availability. One stakeholder we spoke with pointed out that, as the federal government and states work to ensure the last remaining unserved areas—rural, low- population density areas including tribal lands—have service, sub- census-block-level data are needed to ensure that governments are making wise and accurate investments. FCC does not collect information on several factors that FCC and tribal stakeholders have stated can affect broadband access. FCC and tribal stakeholders have noted that broadband access can be affected by factors such as the affordability and quality of the broadband services being offered, and the extent to which providers deny service to those who request it. By collecting and using data on factors that can affect broadband access, FCC would have more complete information on the extent to which Americans living on tribal lands have access to broadband Internet services. Affordability: FCC has noted that affordability of broadband services can affect broadband access but does not collect information on the cost of broadband service on tribal lands on the Form 477. For example, in the National Broadband Plan, FCC cited affordable access to robust broadband service as a long-term goal, and in its Strategic Plan 2018–2022, FCC acknowledged that affordability is an important factor affecting broadband access and a key driver of the digital divide. Moreover, most of the representatives of tribal governments and organizations we spoke to told us that the affordability of broadband services is an important factor for understanding whether or not people on tribal lands could realistically access broadband services. Tribal government officials from one tribe we spoke with told us that residents on their lands cannot access broadband because it is too costly. For example, a provider that advertises services on the tribe’s land charges $130 per month for broadband services, approximately one-and-a-half times the average rate providers charge for comparable services in urban areas, according to FCC (see fig. 6). In the 2018 Broadband Deployment Report, FCC acknowledged that affordability can influence a consumer’s decision on whether to purchase broadband, but FCC did not consider cost in its assessment of broadband access on tribal lands, stating that pricing does not go to the congressional requirement to assess deployment and availability in conducting its inquiry as required by Congress under section 706 of the Telecommunications Act and also citing a lack of reliable comprehensive data on this issue. In addition, FCC officials we interviewed acknowledged that while broadband service may be technically available, it may be prohibitively expensive for some, which may make availability alone an incomplete indicator of broadband access. Quality of Service: In the Telecommunications Act of 1996 Congress recognized the importance of service quality by defining advanced telecommunications capability as any technology that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications. In keeping with this legislation, FCC has consistently set thresholds for speeds that qualify as broadband services and has stated that “latency” and consistency of service figure prominently into whether a broadband service is able to provide advanced capabilities and thus whether users can access high-quality telecommunications. Likewise, almost all of the representatives for tribal governments or organizations we interviewed told us that quality of service is a key component of access to broadband and that routine outages, slow speeds, and high latency keep people on tribal lands from consistently accessing the Internet. Most tribal stakeholders and a few providers we interviewed told us that factors such as terrain, weather, and type of technology can all affect the quality of service an end user receives and, ultimately, the subscribers’ ability to access the Internet (see fig. 7). For example, some representatives of tribal governments and organizations told us issues like oversubscription— when a provider signs up more customers than its equipment can handle—and outdated or limited infrastructure result in low-quality services that cannot support advanced and, in some cases, basic functions. Though FCC uses the Form 477 to collect some data on advertised speeds from providers, FCC does not collect data on actual speeds, service outages, and latency on the form. In its 2018 Broadband Deployment Report, FCC stated that it did not consider FCC data on actual speed, latency, or consistency of service when evaluating broadband access due to the lack of appropriate data. FCC noted that the lack of Form 477 data on actual speeds in particular constrained evaluation of mobile broadband access. Service Denials: FCC has recognized that information on denials of service is pertinent to understanding actual broadband access but does not collect data on service denials in the Form 477. Specifically, in the National Broadband Plan, FCC recommended that FCC collect data to determine whether broadband service is being denied to potential residential customers based on the income of the residents in a particular geographic area. Some representatives of the tribal governments or organizations told us that that they were aware of a provider denying service to residents of tribal lands, despite the provider reporting broadband availability on at least a portion of those lands, according to our analysis of the Form 477 data. These representatives told us that they believed service was denied because of disputes with the tribal government, low demand for service, or the high costs of extending services to the home on tribal lands. Some representatives of tribal governments or organizations we spoke with also told us that providers may have denied service because their equipment was at capacity and could not accommodate new users (see fig. 8). For example, on three of the tribal lands we visited, we observed fiber optic cable located close to government and residential structures that did not have broadband access via fiber. According to tribal government officials, despite the physical proximity of the fiber optic cable, the tribal government and residents could not access it because the provider was not offering service or was unwilling or unable to build to the structures. A few providers we interviewed stated that they may not provide services to individuals who request them because of high-costs, administrative barriers, or technical limitations. However, FCC does not collect data on service denials on the Form 477. In its Strategic Plan 2018–2022 and the National Broadband Plan, FCC identified increasing all Americans’ access to affordable broadband as a long-term, strategic goal. Congress has similarly directed FCC to develop policies and programs aimed at increasing access to affordable broadband in all regions of the United States, including tribal lands, and required FCC to report annually on its progress. According to the Government Performance and Results Act (GPRA), as enhanced by the GPRA Modernization Act of 2010 (GPRAMA), agencies should use accurate and reliable data to measure progress toward achieving their goals. Additionally, Standards for Internal Control in the Federal Government state that agencies should use quality information— information that is complete, appropriate, and reliable—to inform decision-making processes and evaluate the agency’s performance in achieving goals. According to these standards, agencies should also communicate quality information externally to achieve the agency’s goals. However, FCC has used its Form 477 data, which do not accurately or completely measure broadband access on tribal lands, as its primary source to evaluate progress toward FCC’s strategic goal of increasing broadband access and to develop maps and reports intended to depict broadband access on tribal lands. For example, in its 2018 Broadband Deployment Report, FCC found that 64.6 percent of Americans residing on tribal lands have access to fixed broadband services. By using these data, FCC has overstated the extent to which Americans living on tribal lands can actually access broadband Internet services and FCC’s progress toward increasing broadband access. As a result, the digital divide may appear less significant as a national challenge, and FCC and tribal stakeholders working to target broadband funding to unserved or underserved tribal lands will be limited in their ability to make informed decisions. This increases the risk that residents living on tribal lands will continue to lack broadband access. Some tribal officials stated that inaccurate data have affected their ability to plan their own broadband networks and obtain federal broadband funding, and most of the tribal stakeholders we interviewed identified a pressing need for accurate data on the gaps in broadband access on tribal lands in order to ensure that tribes can qualify for federal funding and to effectively target the areas that need it most. For example, representatives for one tribal government that is providing broadband services said the government will not be able to use a federal grant to build broadband infrastructure in areas of their reservation that lack access, because the Form 477 data overstate actual access on the tribe’s land. As more than three quarters of the tribal governments we spoke to are working to provide broadband services on their lands in some capacity, overstating broadband access on tribal lands could affect the ability of a number of tribes to access federal funding to increase broadband access on their lands. As previously discussed, FCC is considering proposals to modify its Form 477 data collection as part of a 2017 Notice of Proposed Rulemaking, but FCC officials told us that the Commission does not have a timeline for issuance of a final rule. While some of FCC’s proposals could help address some of the limitations identified above by, for example, collecting more granular nationwide broadband availability data, FCC has not addressed specifically the collection of more accurate and complete data on broadband access for tribal lands in this proceeding. FCC has identified the need to improve broadband data for tribal lands in particular, and as previously noted, in 2018 Congress directed FCC to develop a report evaluating broadband coverage in certain tribal lands and initiate a proceeding to address the unserved areas identified in the report. FCC officials told us that FCC has not determined how it will address this requirement, but it is currently considering its options, including potentially addressing the requirement as part of its ongoing proposed rulemaking on modernizing the Form 477 data collection. An evaluation of broadband coverage on tribal lands that relies on the current Form 477 data would be subject to the limitations described above, including the overstatement of broadband access on tribal lands. Additionally, FCC has demonstrated that it is possible in some circumstances to collect more granular data when such data collection is targeted to a specific need or area. For example, in 2017 FCC began requiring certain providers that receive funding through the Connect America Fund to report the latitude and longitude of locations where broadband is available, and FCC has noted that these more granular data are extremely useful to the Commission, especially for rural areas where census blocks can be quite large. A few large providers and trade associations similarly stated in public comments on FCC’s proposed rulemaking to modernize the Form 477 process that FCC should target its collection of more granular broadband data to areas where the data are most likely to be overstated—specifically, large, rural census blocks with low population densities, such as those on tribal lands. Additionally, as discussed above, FCC undertook a one-time special data collection for Mobility Fund II to ensure that the mobile broadband data it collected would be reliable for the intended use. By developing and implementing methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands, FCC would be able to better identify tribal areas without access to broadband and to target federal broadband funding to the tribal areas most in need. FCC uses data submitted by broadband providers via the Form 477 process to develop maps and datasets depicting broadband services nationwide, and in specific locations, such as tribal lands, but does not have a formal process to obtain input from tribes on the accuracy of the broadband data. FCC’s 2010 National Broadband Plan noted the need for the federal government to improve the quality of data regarding broadband on tribal lands and recommended that FCC work with tribes to ensure that any information collected is accurate and useful. It also noted that tribal representatives should have the opportunity to review mapping data about tribal lands and offer supplemental data or corrections. Similarly, federal internal control standards note the need for federal agencies to communicate with external entities, such as tribal governments, and to enable these entities to provide quality information to the agency that will help it achieve its objectives. FCC officials told us that they address questions and concerns regarding provider coverage claims submitted to the Office of Native Affairs and Policy, which will work with tribal governments to help them identify inaccurate broadband data for tribal lands, and share tribal questions and concerns with the appropriate FCC bureaus. However, FCC does not have a formal process for tribes (or other governmental entities) to provide input to ensure that the broadband data FCC collects through the 477 process, or the resulting maps that FCC creates to depict broadband on tribal lands, are accurate. Similarly, FCC does not use other methods to verify provider-submitted Form 477 data on tribal lands against other sources of information, such as on-site tests or data collected by other agencies. When discussing the lack of a formal process for tribal representatives or other governmental entities to provide feedback on the accuracy of the 477 broadband data, FCC officials noted that if consumers and local officials have information on individual locations that lack broadband service, such information does not indicate that the entire census block lacks broadband service. Additionally, FCC officials noted that providers attest to the accuracy of the data and that FCC staff validate the data by conducting internal checks to identify possible errors, such as unlikely changes in a providers’ coverage area, and may follow-up with a provider to discuss such changes. However, these checks do not include soliciting input from tribes. About half of the tribal stakeholders we spoke to raised concerns that FCC’s broadband deployment data rely solely on unverified information submitted by providers. Additionally, most tribal stakeholders we interviewed told us that consistent with the recommendations in the National Broadband Plan, FCC should work directly with tribes to obtain information from them to improve the accuracy of its broadband deployment data for tribal lands. These stakeholders identified several ways in which FCC could work with tribes on this issue, including: conducting on-site visits with tribal stakeholders to observe the extent to which broadband infrastructure and services are present; conducting outreach and technical assistance for tribal stakeholders to raise awareness and use of FCC’s broadband data; and providing opportunities for the tribes to collect their own data or submit feedback regarding the accuracy of FCC’s data. FCC’s National Broadband Plan notes the importance of supporting tribal efforts to build technical expertise with respect to broadband issues, and federal internal control standards state that federal agencies should obtain quality information from external entities. Officials we interviewed in FCC’s Office of Native Affairs and Policy told us that they provide some outreach and technical assistance to tribal officials at regional and national workshops, and FCC officials stated that they conducted specific outreach to tribal entities regarding the Mobility Fund Phase II challenge process, while, about half of the tribal representatives we spoke to stated that they were not aware of the Form 477 data or corresponding maps, or raised concerns about a lack of outreach from FCC to inform tribes about the data. Some tribal stakeholders stated that if FCC were to solicit tribal input as part of its verification of the broadband data and maps, technical training and assistance could help tribes use and provide feedback on the data, or improve the collection and submission of their own data. A few of the stakeholders we interviewed noted that tribes can face difficulties when they attempt to challenge FCC’s broadband availability data. For example, in 2013, prior to the auction that distributed Tribal Mobility Fund Phase 1 support, FCC allowed interested parties to challenge FCC’s preliminary determinations regarding which census blocks lacked 3G or better service and would be eligible for support in the auctions. However, all of the tribal entities that challenged the accuracy of FCC’s data were unsuccessful in increasing the number of eligible areas. According to FCC officials, the tribal entities did not provide sufficient or sufficiently verifiable information to support their challenges. A few tribal stakeholders provided varying reasons for this, one of which was the need for more technical expertise to help the tribe meet FCC’s requirements. Because FCC lacks a formal process to obtain tribal input on its broadband data, FCC is missing an important source of information regarding areas in which the data may overstate broadband service on tribal lands. Tribal stakeholders are able to provide a first-hand perspective on the extent to which service is available within their lands and the extent to which factors like affordability, service quality, and service denials affect residents’ ability to access broadband. FCC plans to award nearly $2 billion in support from the Connect America Fund to areas that it has identified as lacking broadband, including tribal lands. Any inaccuracies in its broadband data could affect FCC’s funding decisions and the ability of tribal lands to access broadband in the future. Additionally, in its 2017 report on tribal infrastructure, the National Congress of American Indians stressed the importance of including tribal governments in a leadership role with respect to collecting data on local infrastructure needs. Specifically, it stressed the need for the federal government to invest in tribal data systems and researchers to generate useful, locally specific data that can inform the development and implementation of infrastructure development projects and assess the effectiveness of those projects over time. By establishing a process to obtain input from tribal governments on the accuracy of provider- submitted broadband data that includes outreach and technical assistance, as recommended in the National Broadband Plan, FCC could help tribes develop and share locally specific information on broadband access, which would in turn improve the accuracy of FCC’s broadband data for tribal lands. The success of such an effort may rely on the tribes’ knowledge of, and technical ability to participate in, the process. When discussing the need to improve data regarding broadband on tribal lands, FCC’s 2010 National Broadband Plan recommended that FCC develop a process for tribes to receive information from providers about broadband services on tribal lands. In 2011, FCC required that Eligible Telecommunications Carriers (providers receiving Universal Service Funds from FCC) serving tribal lands meaningfully engage with tribes regarding communications services (including broadband). Specifically, the providers must file an annual report documenting that this engagement included a discussion of, among other things, a needs assessment and deployment planning for communications services, including broadband. FCC’s 2012 guidance on fulfilling the engagement obligations, which FCC officials confirmed is still in effect, noted that the stated goal of the engagement requirement was to benefit tribal government leaders, providers, and consumers by fostering a dialogue between tribal governments and providers that would lead to improved services on tribal lands. The guidance further noted that the tribal engagement process “cannot be viewed as simply another ‘check the box’ requirement by either party,” and states that a provider should “demonstrate repeated good faith efforts to meaningfully engage with the tribal government.” Finally, FCC noted in its 2012 guidance that the guidance would evolve over time based on the feedback of both tribal governments and broadband providers and that FCC would develop further guidance and best practices. This approach is consistent with federal internal control standards, which call for agencies to communicate with, and obtain quality information from, external parties. About half of the tribal stakeholders we interviewed raised concerns about difficulties accessing information from providers regarding broadband deployment on their tribe’s lands, a key part of the provider engagement process, according to FCC’s guidance. For example, a representative from one tribe stated that a provider declined his requests to meet more than once a year to discuss the provider’s deployment of broadband services on the tribe’s land. A representative from another tribal government stated that some providers are very focused and transparent about their broadband plans and work with the tribe, while other providers treat tribal engagement as a “box to check” and send the tribe broadband deployment information that is not useful because it is redacted. Similarly, some tribal stakeholders stated that providers heavily redacted deployment information (which providers may consider proprietary) or required the tribe sign non-disclosure agreements to access deployment data. According to one tribal stakeholder, these non-disclosure agreements could possibly require tribes to waive tribal sovereign immunity in order to view the data. Some of the industry stakeholders we interviewed stated that they attempt to engage with tribes but the level of responsiveness from tribes varies. For example, some stakeholders stated that they send letters and do not hear back from tribes. One stakeholder stated that they make repeated attempts to contact tribes when they do not hear back after their initial contact, while another stated that a provider meets regularly with some tribes. Although FCC stated in its 2012 guidance that it would update the tribal engagement guidance and develop best practices based on feedback from tribal governments and broadband providers, it has taken limited steps to obtain such feedback from providers and tribal governments to determine whether its guidance is enabling meaningful tribal engagement. Additionally, FCC has not updated the guidance or issued best practices. Thus, FCC has limited information regarding whether its tribal engagement requirement is fulfilling its intended purpose. FCC officials we interviewed said that the Office of Native Affairs and Policy (ONAP) provided information and, in some cases, held training sessions about the tribal engagement obligation during workshops with tribal representatives, and encouraged representatives to contact ONAP with any concerns. ONAP officials also noted that they handle complaints from tribes regarding a lack of provider engagement and reach out to providers to address tribal concerns. ONAP officials stated that they have had internal discussions about whether the guidance is clear or needs revision, but this has not gone beyond internal discussions. A few of the tribal stakeholders provided examples of the benefits of providers engaging with tribes to ensure tribal representatives have access to information regarding broadband availability on their lands. For example, one representative stated that this information could help the tribes plan deployments by focusing on areas that they know the provider does not plan to serve. Another representative stated that tribal engagement could help improve the accuracy of FCC’s broadband maps. By obtaining feedback from both tribal stakeholders and providers on the effectiveness of FCC’s tribal engagement guidance to determine whether changes are needed, FCC would be better positioned to ensure that tribal governments and providers are sharing information in a manner that will lead to improved services on tribal lands. FCC has collected data and developed maps and reports depicting broadband on tribal lands and has noted the lower levels of broadband access on tribal lands, in comparison to other areas. However, limitations in FCC’s existing process for collecting and reporting broadband data have led FCC to overstate broadband access on tribal lands. By taking steps to address these limitations and to collect data that more accurately and completely depict broadband access on tribal lands, FCC would have greater assurance that it is making progress on reducing the digital divide on tribal lands and targeting broadband funding to tribal lands most in need. Without taking these steps, FCC increases the risk that residents living on tribal lands will continue to lack broadband access. Compounding the limitations in FCC’s data collection process is FCC’s lack of a formal process to obtain tribal input on the accuracy of provider- submitted broadband data for tribal lands. By developing a process to solicit tribal input and ensuring that tribes know about the process and are equipped with the technical skills and abilities necessary to provide this information, FCC would be better able to ensure the accuracy of its broadband data for tribal lands. Moreover, FCC would be able to obtain firsthand, locally specific information on broadband access that could inform FCC’s policies and funding decisions and help FCC achieve its goal of increasing broadband access for all Americans, including those living on tribal lands. Finally, by obtaining feedback from providers and tribal stakeholders on the effectiveness of FCC’s tribal engagement guidance, FCC would be better positioned to assess whether its guidance is helping providers meet requirements and ultimately whether providers’ engagement is fulling its intended purpose of fostering a dialogue between tribal governments and providers that would lead to improved services on tribal lands. We are making the following three recommendations to the Chairman of the Federal Communications Commission. The Chairman of the Federal Communications Commission should develop and implement methods—such as a targeted data collection—for collecting and reporting accurate and complete data on broadband access specific to tribal lands. (Recommendation 1) The Chairman of the Federal Communications Commission should develop a formal process to obtain tribal input on the accuracy of provider-submitted broadband data that includes outreach and technical assistance to help tribes participate in the process. (Recommendation 2) The Chairman of the Federal Communications Commission should obtain feedback from tribal stakeholders and providers on the effectiveness of FCC’s 2012 statement to providers on how to fulfill their tribal engagement requirements to determine whether FCC needs to clarify the agency’s tribal engagement statement. (Recommendation 3) We provided a draft of this report to FCC for review and comment. In written comments provided by FCC (reproduced in appendix III), FCC agreed with our findings and recommendations. In its written comments, FCC described efforts, some of which are already under way, that it felt would address each recommendation and stated its intent to build upon those efforts. For example, FCC explained that it is exploring methods to collect more granular broadband deployment data and noted the need to balance the burden on Form 477 filers. FCC also noted that it is starting work to address a statutorily-required evaluation of broadband coverage on certain tribal lands. We agree that increasing the granularity of deployment data is helpful in addressing data accuracy issues, but we also note that it is important to collect data related to factors that affect broadband access on tribal lands. FCC also described informal efforts to collect tribal feedback on providers’ broadband data and stated it would explore options for a formal process to collect feedback. Regarding our recommendation related to providers’ engagement efforts, FCC outlined its existing methods by which tribal stakeholders can provide feedback on providers’ engagement efforts and agreed that seeking additional feedback from tribal stakeholders and providers would be desirable. We agree that improving feedback in these ways could help FCC determine whether it needs to clarify its tribal engagement statement. FCC also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Chairman of the Federal Communications Commission, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or GoldsteinM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: List of Interviewees Representatives from tribal governments or tribally owned broadband providers Choctaw Nation of Oklahoma (OK) Confederated Tribes of the Colville Reservation (WA) Fond du Lac Band of Lake Superior Chippewa (MN) Fort Belknap Indian Community (MT) Gila River Telecommunications, Inc. (AZ) Hopi Telecommunications, Inc. (AZ) Jamestown S’Klallam Tribe (WA) Karuk Tribe (CA) Leech Lake Band of Ojibwe (MN) Makah Tribe (WA) Navajo Tribal Utility Authority (AZ, NM, UT) Nez Perce Tribe (ID) Osage Nation (OK) Pueblo of Acoma (NM) Pueblo of Pojoaque (NM) Pueblo of San Ildefonso (NM) Taos Pueblo (NM) Red Spectrum Communications (Coeur d’Alene Tribe (ID)) Saint Regis Mohawk Tribe and Mohawk Networks, LLC (NY) San Carlos Apache Telecommunications Utility, Inc. (AZ) Southern California Tribal Chairmen’s Association - Tribal Digital Village Network (CA) Spokane Tribe of Indians and Spokane Tribe Telecom Exchange (WA) Standing Rock Telecommunications, Inc. (ND, SD) Warm Springs Telecommunications Co. (OR) Yurok Tribe and Yurok Connect (CA) Representatives from tribal associations/consortiums that include tribes Affiliated Tribes of Northwest Indians Middle Rio Grande Pueblo Consortium National Congress of American Indians Native American Finance Officers Association (NAFOA) REDINet Representatives from companies/academic groups that work with tribes AMERIND Risk Arizona State University, American Indian Policy Institute and School of Public Affairs Turtle Island Communications Representatives from providers/trade associations (non-tribally owned) AT&T Representatives from companies that collect broadband data Alexicon Connected Nation Government Agencies (non-tribal) Census Bureau U.S. Department of Agriculture’s Rural Utilities Service Department of Interior’s Bureau of Indian Affairs National Telecommunications and Information Administration Minnesota Office of Broadband Development One broadband provider we interviewed did not want to be included in this appendix. This report discusses the extent to which: (1) the Federal Communications Commission’s (FCC) approach to collecting broadband availability data accurately captures the ability of Americans living on tribal lands to access broadband Internet services and (2) FCC obtains tribal input on the accuracy of provider-submitted broadband data for tribal lands. To address both objectives, we analyzed FCC’s December 2016 fixed and mobile broadband availability data—the most recent data at the time of our review—to identify the speeds, technologies, and availability providers reported for federally recognized tribal lands. Providers currently report this information to FCC by filing a “Form 477,” twice a year. We also used 2010 U.S. Census data to identify census blocks completely or partially on tribal lands. To assess the reliability of FCC’s data and 2010 U.S. Census data, we reviewed a previous GAO reliability assessment, and for FCC’s data we conducted electronic testing and analysis of the data, reviewed FCC guidance and documentation, and interviewed FCC officials. Based on the results of our analysis, we determined the data to be reliable for our purposes, which were: (1) to inform our selection of tribal governments and providers for interviews and visits, as described below, and (2) to develop maps depicting fixed and mobile broadband availability for the nine tribal lands we selected for visits, in order to obtain tribal representatives’ feedback on the data. Specifically, we mapped; fixed broadband data according to speed and technology, and mobile data for long-term evolution (LTE) services by provider for each tribal land. We used those maps during our visits to discuss the accuracy of the data with representatives for each tribal government or tribally owned provider. Though we analyzed all up and download speeds that providers reported in the Form 477, for the purposes of this report we defined “broadband” as fixed Internet service reaching at least 25 megabits per second (Mbps) download and 3 Mbps upload speeds, in accordance with FCC’s advanced telecommunications capability benchmark in its 2018 Broadband Deployment Report. We also report on the availability of mobile broadband, which, for the purposes of this report, does not have a speed threshold and refers to long-term evolution (LTE) services. To address both objectives and obtain tribal government representatives’ feedback on the accuracy of FCC’s broadband data for their lands, we interviewed representatives from 25 tribal governments or tribally owned providers, including visits to 9 tribal lands. We considered a range of factors when we selected tribal governments and tribally owned providers for interviews, including our analysis of Form 477 data, recommendations from tribal, industry, or government stakeholders regarding tribal and non- tribal representatives familiar with broadband data issues, and demographic and geographic characteristics, among others. For example, we considered demographic characteristics such as unemployment rate from the 2011– 2015 American Community Survey data, and geographic characteristics such as rurality from the United States Department of Agriculture (USDA) Rural-Urban Commuting Area Codes data. The tribes included in our review vary with respect to location, level of broadband availability according to FCC, land mass, and population size and density. The results of our interviews are not generalizable to all tribal governments or tribally owned broadband providers. In addition to tribal governments and tribally owned providers, we interviewed six tribal organizations and four stakeholders who work with tribes on broadband issues. For reporting purposes, we developed the following series of indefinite quantifiers to describe the tribal responses from the 35 entities representing tribal stakeholders we interviewed: 3 to 7 is defined as “a few;” 8 to 15 is described as “some;” 16 to 20 is described as “about half;” 21 to 27 is described as “most;” and 28 to 34 is described as “almost all.” A full list of the tribal stakeholders we interviewed can be found in appendix I. Further, to obtain industry perspectives, we reviewed public comments submitted by providers and industry associations in FCC’s ongoing 2017 Notice of Proposed Rulemaking on Modernizing the Form 477 Data Program. We also interviewed 10 non-tribally owned fixed and mobile broadband providers and three industry associations to understand providers’ views on the Form 477 and how providers interact with tribal governments. When selecting providers for interviews, we included providers that reported serving the lands of tribal governments we interviewed and selected providers that varied in the percentage of tribal lands they reported serving. The providers we interviewed represent large, nationwide carriers as well as small, local carriers, and offer broadband via a variety of technologies, including fiber optics, digital subscriber line (DSL), fixed wireless, and mobile LTE. The results of our interviews with providers are not generalizable to all broadband providers. In addition, to address both objectives, we interviewed representatives from other government entities, as well as private companies that collect and report broadband data. A full list of the industry stakeholders we interviewed can be found in appendix I. To identify the extent to which FCC’s approach to collecting broadband availability data reflects the ability of Americans living on tribal lands to actually access broadband Internet services, we reviewed documentation of the Form 477 process, including submission guidance, and FCC’s proposals and public comments in its 2017 Notice of Proposed Rulemaking on Modernizing the Form 477 Data Program and Mobility Fund Phase II proceedings. We also interviewed FCC officials, industry stakeholders, and tribally owned broadband providers to understand FCC’s current process for collecting broadband data. To understand the purpose of the Form 477 data collection process and FCC’s strategic goals, we reviewed relevant statutes, and FCC documents, including FCC’s Strategic Plan 2018––2022, the National Broadband Plan, and FCC’s broadband deployment and progress reports. Given the importance placed on broadband access in these documents, we interviewed tribal stakeholders, as described above and reviewed FCC documents to identify factors affecting the ability of Americans living on tribal lands to access broadband Internet services. We also reviewed previous GAO work that identified barriers to broadband access on tribal lands. We compared the Form 477 process to FCC’s strategic goals and to factors affecting broadband access to determine the extent to which the Form 477 was designed to collect information on those factors and to meet FCC’s goals. We further evaluated this information against the Government Performance and Results Act, as enhanced by the GPRA Modernization Act of 2010 and Standards for Internal Control in the Federal Government. We also reviewed documentation for other FCC data collection programs, including the Measuring Broadband America program and the Urban Rate Survey, to determine the extent to which FCC collected data on factors affecting broadband access outside of the Form 477 process. To determine the extent to which FCC obtains tribal input on the accuracy of provider-submitted broadband data for tribal lands, we interviewed FCC officials and analyzed FCC documents regarding the collection procedures for the Form 477 data and FCC’s policies for working with tribal governments, as well as Connect America Fund documents regarding requirements for providers to share information with tribal governments. We also reviewed documents on past FCC Universal Service Fund processes to challenge broadband data and identified prior instances in which tribal governments or tribally owned providers challenged FCC’s broadband data and the outcomes of those challenges. Additionally, we interviewed tribal stakeholders, as described above, to understand the extent to which: (1) FCC involves tribal governments and other stakeholders in the validation of Form 477 broadband data, (2) tribal governments can access broadband data from FCC or providers, and (3) FCC’s Form 477 data accurately reflected broadband access on their lands. For the nine tribal lands we visited, we asked tribal governments or tribally owned providers to identify where the data do or do not accurately reflect broadband access on maps of FCC’s data. Further, to identify how providers complied with FCC’s tribal engagement requirement and obtain their perspectives, we interviewed providers and industry associations. We compared FCC’s data validation procedures and tribal stakeholders’ feedback on the process to FCC’s policies for working with tribal governments, FCC recommendations from the National Broadband Plan and Standards for Internal Control in the Federal Government. We also interviewed and received written comments from officials from other federal agencies that have broadband programs, including USDA Rural Utilities Service, the National Telecommunications and Information Administration (NTIA), and others, in addition to a state agency and three private companies that collect and report broadband data to understand how other entities collect and validate broadband data. We conducted this performance audit from June 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Mark L. Goldstein, (202) 512-2834 or GoldsteinM@gao.gov. In addition to the contact named above, Keith Cunningham (Assistant Director); Crystal Huggins (Analyst in Charge); Katherine Blair; Lilia Chaidez; Camilo Flores; Adam Gomez; Serena Lo; Jeffery Malcolm; John Mingus; Joshua Ormond; Jay Spaan; James Sweetman, Jr.; Elaine Vaurio; and Michelle Weathers made key contributions to this report.", "summary": "Broadband furthers economic development, educational attainment, and public health and safety; however, residents of tribal lands have lower levels of broadband access relative to the U.S. population. Congress has prioritized identifying and targeting funds to unserved areas. FCC uses data from broadband providers to develop maps and reports depicting broadband availability in the United States, with specific information on tribal lands. GAO was asked to review FCC's efforts to collect broadband data for tribal lands. This report examines the extent to which: (1) FCC's approach to collecting broadband data accurately captures broadband access on tribal lands and (2) FCC obtains tribal input on the data. GAO interviewed stakeholders from 25 tribal governments or tribally owned providers, and visited nine tribal lands. The selected tribes varied geographically and in levels of broadband availability, among other characteristics. GAO also reviewed FCC's rulemakings on broadband data and interviewed other tribal stakeholders, FCC officials, and 13 non-tribal broadband providers selected to include a diversity of technologies. Provider and tribal interviews were based on non-generalizable samples. The Federal Communications Commission (FCC) collects data on broadband availability from providers, but these data do not accurately or completely capture broadband access on tribal lands. Specifically, FCC collects data on broadband availability; these data capture where providers may have broadband infrastructure. However, FCC considers broadband to be “available” for an entire census block if the provider could serve at least one location in the census block. This leads to overstatements of service for specific locations like tribal lands (see figure). FCC, tribal stakeholders, and providers have noted that this approach leads to overstatements of broadband availability. Because FCC uses these data to measure broadband access, it also overstates broadband access—the ability to obtain service—on tribal lands. Additionally, FCC does not collect information on several factors—such as affordability, quality, and denials of service—that FCC and tribal stakeholders stated can affect the extent to which Americans living on tribal lands can access broadband services. FCC provides broadband funding for unserved areas based on its broadband data. Overstatements of access limit FCC's and tribal stakeholders' abilities to target broadband funding to such areas. For example, some tribal officials stated that inaccurate data have affected their ability to plan their own broadband networks and obtain funding to address broadband gaps on their lands. By developing and implementing methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands, FCC would be better able to target federal broadband funding to tribal areas that need it the most and to more accurately assess FCC's progress toward its goal of increasing all Americans' access to affordable broadband. FCC does not have a formal process to obtain tribal input on the accuracy of provider-submitted broadband data. In the National Broadband Plan , FCC highlighted the need for a targeted approach to improve broadband availability data for tribal lands. As outlined in the plan, such an approach would include working with tribes to ensure that information is accurate and useful. About half of the tribal stakeholders GAO interviewed raised concerns that FCC relies solely on data from providers, and most stated FCC should work with tribes to improve the accuracy of FCC's data. Establishing a formal process to obtain input from tribal governments on the accuracy of provider-submitted broadband data could help improve the accuracy of FCC's broadband data for tribal lands. GAO is making three recommendations to FCC, including that it collect and report data that accurately measure tribal broadband access as well as develop a process to obtain tribal input on the accuracy of the data. FCC agreed with the recommendations.", "document_type": "gao"}
{"report": "DOD’s contracting process—governed by laws and regulations—seeks to promote competition, be transparent in conducting business and ultimately satisfy DOD users in terms of cost, quality, and timeliness to protect taxpayers’ interests. DOD’s acquisition process begins at the point when agency needs are established; it includes requirements development and acquisition planning, a process for awarding contracts, and contract administration. While we recognize that requirements development and acquisition planning can affect the time it takes to award a contract, this review focuses on the time from solicitation issuance to contract award. An overview of competition in contracting, contract phases, and DOD initiatives follows. Federal statutes and the Federal Acquisition Regulation (FAR) generally require that federal agencies award contracts through full and open competition, but recognize that such competition is not always feasible or desirable, and authorize the use of other than full and open competition under certain conditions. The exceptions include: only one responsible source exists and no other supplies or services will satisfy agency requirements; unusual and compelling urgency exists; or when authorized or required by statute (for example, statutorily allowed sole-source awards to small businesses). Even when using other than full and open competition, agencies must solicit offers from as many potential sources as is practicable. Generally, contracts awarded using other than full and open competition must be supported by written justifications and approvals that contain sufficient facts and rationale to justify the use of the specific exception to full and open competition. The approval level for these types of contracts varies according to the dollar value of the procurement. The acquisition planning phase includes pre-solicitation activities such as market research and defining requirements, among others. We identified four contract phases subsequent to acquisition planning: solicitation, initial evaluation, discussion/negotiation, and contract award. See figure 1. Solicitation: Agencies solicit offers from prospective contractors by issuing a request for proposals. The request for proposals informs the prospective contractors of the government’s requirements, the anticipated terms and conditions that will apply to the contract, the information required in a proposal and, in a competitive acquisition, the factors used to evaluate proposals and their relative importance. Those who wish to respond must submit their proposal to the government office in the time and manner stated in the request for proposals. We consider the solicitation phase to begin with solicitation issuance and end at the deadline to submit the initial proposals. Initial Evaluation: Proposal evaluation is an assessment of the proposals and the offerors’ ability to perform the prospective contract successfully. For example, proposals undergo technical evaluation to determine offerors’ ability to meet the technical requirements and cost or price evaluation to determine whether the price is fair and reasonable. Agencies also evaluate proposals when using other than full and open competition as part of agency preparation for negotiation with the offerors. We consider the evaluation phase to begin when contractors submit initial proposals and to end once government contracting personnel receive approval to enter into negotiations or discussions. Discussion/Negotiation: Negotiations are exchanges, in either a competitive or sole-source environment, between the government and offerors that are undertaken with the intent of allowing the offerors to revise the proposals. Negotiations allow the offerors to address any concerns with the proposals or provide additional information on relevant past performance, among other things. We consider this phase to start when the contracting officer receives approval to enter into negotiations and end when contracting personnel receive approval to award the contract. Contract Award: We consider the contract award phase to start when the approval to award the contract is given and end when the contracting officer signs the contract. The following DOD initiatives identify certain tasks that contracting officials should address between solicitation issuance and contract award: Source Selection Procedures: DOD updated its source selection procedures in April 2016 to help standardize the process to deliver products at the best value. These procedures outline a common set of principles and procedures for conducting acquisitions in accordance with applicable statutes and regulations. Unless waived, the source selection procedures apply to all acquisitions conducted as part of a major system acquisition and all competitively negotiated acquisitions with an estimated value of more than $10 million. Peer Reviews: The Office of Defense Procurement and Acquisition Policy is responsible for all pricing, contracting, and procurement policy matters within DOD and has required peer reviews of certain DOD acquisitions since 2009. The office currently conducts peer reviews for all procurements with an estimated value of over $1 billion and for noncompetitive procurements for new contract actions valued at $500 million or more. The office generally conducts peer reviews prior to issuance of the solicitation, prior to request for final proposal revisions, and prior to contract award, as well as periodic post-award reviews. Peer review teams include contracting officials from the military departments and defense agencies as well as legal advisors. For acquisitions below $1 billion, the military components must establish their own policies for conducting reviews based on expected acquisition value and the extent of competition. DOD components in our review have efforts underway to track and reduce the time to award contracts, but these efforts are not coordinated across the department. The DOD components collect information on the time to award contracts, but differ on what information they collect and how they use it. DOD is taking a number of actions to understand the information the components collect such as determining what events are tracked, but DOD does not have a department-wide strategy for collecting and assessing the components’ information. DOD has proposed reducing how long it takes to award contracts. Each component we reviewed collected information on the length of time to award certain contracts, but the information varied. The differences include: (1) the types of contract actions tracked; (2) the start of the period measured; (3) whether components track interim dates between solicitation issuance and award; and (4) how goals to reduce the length of time are determined. For example, the Air Force limits its scope to discrete contract value ranges while the other components include broader dollar ranges. The components also use different starting points to measure the time frames. For example, the Army Contracting Command currently tracks time starting from the submission of an adequate requirements package to contracting officials, which occurs before solicitation issuance. The Air Force, however, tracks how long it takes to award a contract starting from solicitation issuance. The selected components in our review also differ in collecting data for interim phases of the contract award process—such as evaluation or negotiation. Both Navy commands capture multiple data points, such as when negotiations begin, among other events, but there is no common practice for including certain data across the commands that is provided to DOD. Table 1 shows the broad categories of information collected. Concerns within the Air Force about the length of time taken to award contracts led to a process, begun in 2014, for tracking award times for sole-source contracts, including identifying practices and procedures that contributed to the time, according to Air Force contracting officials. The officials stated that this effort helped to reduce the average time to award sole-source contracts between $50 million and $500 million from about 16 months in fiscal year 2014 to about 12 months in fiscal year 2017. Air Force officials attributed the reductions in time to various streamlining initiatives, such as asking for contractors’ feedback on draft solicitations and clarifying as needed. Beginning with new contracts awarded in fiscal year 2014, the Air Force collected information on sole-source contracts between $50 million and $500 million. In early fiscal year 2018, the Air Force expanded its data collection to include competitive contracts from $50 million to $1 billion. The Air Force tracks the time starting from solicitation issuance to contract award. It also tracks interim phases of contract awards such as the start of evaluation or negotiation. According to Air Force officials, they establish fiscal year goals to measure progress based on the average of schedule dates. The data for both the sole-source contracts and now the competitive contracts are collected through a manual data call and are entered into a spreadsheet. The data are reported to the Office of the Assistant Secretary of the Air Force for Acquisition. In November 2017, the Deputy Assistant Secretary of the Army (Procurement) called for the formation of an Army-wide team to examine approaches for improving procurement time frames similar to one already underway at the Army Contracting Command. The command began tracking the lengths of time to award contracts in 2015, and expanded the effort across the command in January 2017. The Army Contracting Command: Tracks all procurements based on dollar thresholds, dividing the contracts by competitive and non-competitive actions. Tracks the time from the receipt of the requirements package to contract award. The process does not capture interim phases of contract award such as the start of evaluation or negotiation. Establishes goals by averaging historical data. For instance, a competitively awarded contract between $50 million and $250 million is estimated to take 600 days. Army officials stated that they track actual performance against their goals on a quarterly basis. Collects data through its Virtual Contracting Enterprise system, which includes electronic contract files that can be used to obtain contract data such as solicitation issuance date. The command computes averages by aggregating the data by dollar threshold, contracting organization, and portfolios—such as weapon systems or services contracts. In November 2014, the Defense Logistics Agency examined awards from 2011 to 2013 to determine areas to focus on to make the contract award process more efficient. Defense Logistics Agency contracting officials stated that they have reduced the award time since they began their assessment by streamlining their procedures. The agency: Collects contract data for all of its procurements. Measures the time period from receipt of purchase requirement package to contract award, but not the phases in between solicitation and contract award—such as evaluation or negotiation. Establishes a goal based on historical averages for the various contract types, such as long-term contracts or delivery orders, in order to aggregate contracts with similar characteristics. The agency varies the goals according to the kind of contract, such as those using simplified acquisition procedures or larger value contracts. For example, the Aviation command’s goal is to award contracts that require certified cost or pricing data with a period of performance that exceeds 3 years within 315 days for fiscal year 2018. For those contracts that do not require certified cost or pricing data, the goal is 215 days. Collects contract data using its contract management systems, continues to assess whether it is meeting timeliness goals on a monthly basis, and revises goals each fiscal year to reflect changes in trends and volume of contract actions. Starting in May 2015, the Navy contracting commands presented data quarterly on execution of contracts and areas for improvement within the contract award process to the Office of the Assistant Secretary of the Navy, (Research, Development, and Acquisition) in response to concerns about the length of time for contract awards. The Navy commands we selected have made efforts to identify bottlenecks within the contract award process. For example, their analysis of the data highlighted the timeliness and quality of the procurement request as a common issue among the Navy contracting commands as well as the justification and approval cycle for sole-source awards. The analyses also included areas for improvement during the process, such as improving guidance and training for technical evaluation teams and exploring opportunities to streamline or waive some peer reviews. Naval Air Systems Command piloted the Procurement Management Tool in fiscal year 2013. The Procurement Management Tool is an electronic system to collect information on contracts, which allows contracting officials to forecast and manage procurement time frames. The system: Maintains data from all of the Naval Air Systems Command’s contracts, starting from acquisition planning (pre-solicitation efforts), in addition to various interim dates such as proposal receipt. The tool allows contracting officials to compare planned, revised, and actual dates. Tracks the overall length of time to award contracts. Navy contracting officials said they use the planned dates as the baseline to compare to the actual dates to determine the variance. Their goal is to reduce the variance between the dates. Uses data from the Command’s contract writing systems, but updates are done manually. Data are made available to Naval Air Systems Command officials and provide them a high-level view of the cost and cycle time drivers that may be selected for further investigation. Reports can be generated at any time, on an as- needed basis. Naval Sea Systems Command, starting in 2005, conducted analyses on the contract award phases that were used to identify problem areas that added time beyond what was anticipated. The analyses also capture data from entities outside of the contracting office, such as program offices. Naval Sea Systems Command has used the analyses to implement streamlining initiatives as well as establish performance measures to assess progress on a quarterly basis. A Naval Sea Systems Command official told us that the command has reduced the average length of time to award contracts above $750,000. Specifically, for competitive contracts, the average was reduced from 467 days to 387 days (about 18 percent), and for sole- source contracts the average was reduced from 336 to days to 278 days (about 18 percent) from fiscal year 2013 through fiscal year 2017. The Naval Sea Systems Command tracks its contracts valued at $750,000 or greater using an electronic data base—E-milestone— to collect contract information. The data base collects information starting from pre-solicitation efforts, which includes the purchase request to contract award. The system includes interim dates within the contract award process, such as the beginning of evaluation. Contracting officials are responsible for capturing both planned and actual dates in the system. Analysis of the variation between the planned and actual dates can be used to identify areas where difficulties occur. Command officials stated that their goal is to reduce the variance between the planned and actual dates. The system reports performance metrics monthly to program executive offices as well as to higher offices. The metrics the command collects reveal acquisition process bottlenecks and facilitate corrective action and acquisition streamlining. According to Defense Procurement and Acquisition Policy officials, DOD is taking steps to address its concerns about the time to issue sole-source contract awards for major weapon systems. DOD has proposed reducing this time by 50 percent over a 3-year period, as measured from the receipt of the requirements to contract award. DOD officials also plan to expand this effort to include competitively awarded contracts. While DOD has proposed reducing the length of time to award contracts by as much as 50 percent, according to DOD officials, it does not have a department-wide strategy for the information components are to collect and report because it has not defined what is to be measured. Internal control standards for the federal government state that management should use relevant information to make informed decisions and evaluate an agency’s performance in achieving key objectives and establish a baseline as a measure to assess progress in achieving its goals. As discussed above, DOD components have made some efforts to collect information to understand the length of time to award contracts for their own management purposes. Since the components differ on when they start measuring the time to award contracts and whether they collect data on interim dates between solicitation issuance and contract award, it is difficult for DOD to ensure that the data from the various components are comparable and comprehensive. This issue was highlighted in the National Defense Authorization Act for Fiscal Year 2018, which contained a provision for DOD to develop a definition of “procurement administrative lead time” to be used throughout the department and a plan for measuring and publicly reporting data on procurement administrative lead time. DOD proposed a definition for the procurement administrative lead time as the time between the date on which DOD issues the initial solicitation for a contract or task order and the date of the award in a February 2018 notice in the Federal Register. The proposed definition applies to DOD contracts and task orders above the Simplified Acquisition Threshold. In addition to issuing the Federal Register notice, Defense Procurement and Acquisition Policy officials have started working with the military components (Army, Navy, and Air Force) to understand the information they have on the time frames for awarding contracts. Further, DOD officials stated that they are starting to identify events common across the components, relative to contract award time frames. According to DOD officials, DOD plans to include pre-solicitation events and some interim events between solicitation issuance and contract award in its DOD-wide data collection efforts. Because DOD’s efforts are in the early stages, they have not established which specific events to measure and how they will use the information collected. Without a strategy for data collection and assessment, DOD will be limited in its ability to assess progress toward achieving its proposed goal and addressing challenges across components. Our review of a nongeneralizable selection of 129 weapon systems- related contracts had a wide range of time intervals from solicitation issuance to award. The time intervals from solicitation to award ranged from less than a month to more than 4 years, with a median of about 9 months. Based on our analysis, 88 of the 129 contracts were awarded less than a year from the solicitation issuance date, while 38 were awarded between 1 and 2 years. The remaining 3 selected contracts took more than 2 years to award. We analyzed the time taken to award contracts based on three characteristics identified by some DOD officials and contractor representatives that may affect the time taken to award contracts: contract value, extent competed, and contract type. We did not observe any patterns based on these characteristics. The results of our analysis are as follows. We found a wide range of time intervals for the 129 contract awards we reviewed, which ranged from about $5 million to over $12 billion. We observed that both shortest and the longest time intervals from solicitation to contract award were for contracts valued under $50 million. One of the two contracts that were awarded within 20 days had a contract value of about $7 million for commercial software services. Figure 2 summarizes information on the time interval based on contract value. DOD contracting officials and industry representatives we interviewed stated that contracts awarded using full and open competition could have a longer time interval than contracts awarded using other than full and open competition due to the need to evaluate proposals from multiple offerors. Twenty-seven of the 129 contracts in our review used full and open competition, and the remaining 102 contracts used other than full and open competition. Based on our analysis, roughly two-thirds of the selected contracts in either group took less than 1 year to award. Specifically: Eighteen of the 27 selected contracts awarded using full and open competition were awarded within a year of solicitation issuance, and the remaining 9 were awarded between 1 and 2 years. Seventy of the 102 selected contracts awarded using other than full and open competition were awarded within a year and 29 of the 102 were awarded between 1 and 2 years. DOD contracting officials and industry representatives we interviewed asserted that firm-fixed-priced contracts would generally take a shorter amount of time to award. For example, Navy contracting officials told us that other than firm-fixed-priced contracts—such as contracts with award or incentive fees—could take longer to award because the government would need to negotiate the fee structure with the contractor. We found a wide range of time intervals based on contract type. Roughly two-thirds of the 129 selected contracts were awarded in less than 1 year regardless of contract type. Specifically: Thirty-eight of the 53 firm-fixed-price contracts were awarded within a year of when the solicitation was issued and 50 of the 76 other contracts were awarded within a year of solicitation issuance. The results of our survey of contracting officials for 37 contracts showed that contracting officials cited a number of factors—such as the quality of the proposal—that helped reduce or increase the time to award the selected contracts. They did not identify any one factor that consistently affected the time to award. Officials for more than half of the contracts reported needing more time to award the contracts than they initially anticipated. DOD contracting officials we surveyed for 23 of 37 contracts reported needing more time to award their contract than anticipated at the time they issued their solicitation. Table 2 summarizes how respondents in our survey characterized differences between the anticipated contract award date and the actual date. DOD contracting officials cited the decision to make the award an office priority and contractor responsiveness as factors helping to decrease the overall time. In addition, contracting officials for four contracts awarded using full and open competition cited receiving waivers or deviations from relevant federal and service-level acquisition regulations as a factor that reduced the time. In case study interviews, contracting officials for two of these four contracts added that peer review waivers and delegation of the decision authority level to a lower level helped decrease the overall time. According to these contracting officials, they received these waivers because the procurements were considered low risk since the requirements that the offerors needed to meet were straightforward. DOD policy officials said peer review waivers are infrequently requested and granted on case-by-case bases. According to these officials, as of March 2018, 14 peer review waivers had been requested since fiscal year 2016 and all of them were granted. In contrast, contracting officials responding to our survey cited several factors that lengthened the time for contracts that were awarded later than anticipated. For example, in the solicitation phase, contracting officials for contracts awarded using full and open competition cited the lack of quality of the solicitation as a factor that lengthened the time needed, while contracting officials for contracts awarded using other than full and open competition cited the contractor’s inability to provide a timely proposal and government changes in requirements. In an Air Force cost-plus-award-fee contract awarded using other than full and open competition for a ballistic missile-related system valued over $400 million, a contracting official noted that the government changed some of the requirements after solicitation issuance. This resulted in amendments to the solicitation and revisions to the contractor’s proposal, which increased the time needed in the solicitation phase, and led to the contract being awarded later than anticipated. Based on survey responses, we also found variation in the factors that shortened or lengthened the time needed in the different phases— solicitation, initial evaluation, and negotiation. Contracting officials pointed out, however, that additional time needed in one phase could result in less time being needed in other phases. Contracting officials cited factors related to the quality of the solicitation and whether there were government changes in requirements as shortening or lengthening the time in this phase. Contracting officials for contracts awarded using other than full and open competition cited the contractor’s inability to provide a timely proposal as a factor that lengthened this phase. For an Army sole- source contract for aircraft maintenance and sustainment support, contracting officials told us that the solicitation phase took longer than anticipated. This phase took over 10 months from the solicitation issuance to when the contractor submitted a proposal. According to the contractor, after solicitation issuance, the government made some changes to the requirements, including the quantities of items. During that period, labor rates had changed, which increased the time needed to submit a proposal so that these changes could be incorporated. Some of the factors cited by contracting officials as shortening or lengthening the evaluation phase included those related to the quality of the proposal, the acquisition workforce, or the staff performing evaluations or approving the analyses. Technical and cost or price evaluations, among others, assess the offerors’ ability to perform successfully, ensure that offerors’ proposals meet the requirements listed in the solicitation, and establish that the price is fair and reasonable. Contracting officials we surveyed cited different factors based on the cost or price evaluation, technical evaluations, and the extent competed. Contracting officials with contracts awarded using full and open competition cited the number and quality of the proposals—whether they needed revisions or not—as shortening or lengthening the time needed to complete technical evaluations. For cost or price evaluations, they cited the number of proposals received and the completeness of the information provided by the contractor. Contracting officials with contracts awarded using other than full and open competition cited contractor responsiveness to requests for additional information as a factor regardless of the time needed to complete both types of evaluations. For cost or price evaluations, contracting officials cited factors related to the proposal, such as its quality and timeliness, as among the factors that helped shorten the time. In a case study involving a Navy sole-source research and development contract valued over $1 billion for the Next Generation Jammer, contracting and program officials said it took the contractor about 4 months after submitting the initial proposal to provide the contracting office a complete proposal due to delays in getting subcontractor information. According to these officials, despite the delay, they did not need more time in this phase since they were able to start evaluating the initial proposal consisting of the prime contractor’s technical and cost information, and incorporate analyses for the subcontractor information once they received it. Contracting officials that used other than full and open competition also cited requesting audit assistance from the Defense Contract Audit Agency as a factor that lengthened the time needed for cost or price evaluations. For example, in a Navy firm-fixed-price contract that was awarded using other than full and open competition for radar engineering services valued at $221 million, an audit took longer than anticipated— about 5 months—due in part to a complex pricing model and delays in receiving subcontractor pricing data. While the Defense Contract Audit Agency and the contractor communicated on the pricing data and cost structure, the agency was unable to complete its audit without the subcontractor data. In addition to agreeing on the price of a contract, the negotiation phase also includes any additional evaluations of revised proposals. Contracting officials cited the need for subsequent evaluations due to revised proposals as a factor that lengthened this phase. Among other factors, contracting officials cited the contract approval authority level and the approving authority’s availability or responsiveness as factors that shortened this phase. In contrast, contracting officials also cited bid protests or agreement on fees as factors that lengthened it. A contracting official for an Air Force contract awarded using full and open competition cited pre-award bid protests as a factor that lengthened the discussion phase. One of the offerors protested the evaluation of its proposal, which was found technically unacceptable. The offeror’s protest was denied because it was found that the evaluation of the proposal was reasonable and consistent with the terms of the solicitation. In addition, the offeror initially selected for award of the approximately $17 million contract was the lowest priced proposal that was found technically acceptable. However, the contracting officer subsequently found the offeror nonresponsive due to several challenges. These challenges and the pre-award bid protest resulted in a longer than anticipated discussion phase, and the award was made to the next lowest priced offeror. Contracting officials for 2 contracts awarded using other than full and open competition cited obtaining agreement on profit or fee as a factor that lengthened the negotiation phase. For example, in an Army contract for spares, maintenance, and overhaul of an airframe, the government and the contractor disagreed over the profit margin. Negotiations for the approximately $54 million contract stalled until the issue was elevated to higher levels at both the contractor and the government. This contract took about 22 months from solicitation issuance to contract award, with the negotiations phase taking about 8 months from approval to enter into negotiations to approval for contract award. For additional information on the survey results, see appendix II. DOD has proposed reducing the time to award contracts in order to address concerns that it is taking too long. To measure progress against its goal, DOD will need relevant information about the time frames involved. DOD components are collecting information on the length of time to award contracts, but their efforts differ. DOD does not have a comprehensive strategy to use the component information already available or to collect other information that may be needed to assess contract award time frames. Having a DOD-wide strategy could enable DOD to consistently and comprehensively track contract award time, assess the factors contributing to this time, leverage the various efforts that the components have taken, identify any best practices, and measure progress toward any goals for reducing the time to award contracts. Currently, DOD does not define the events that should be measured occurring prior to solicitation or those that occur between solicitation issuance and contract award. While the military components collect various information about the length of time to award contracts based on their specific needs and organizational structures, at a minimum, DOD should have relevant information for its own management purposes. As DOD implements provisions in the National Defense Authorization Act for Fiscal Year 2018, the department has an opportunity to identify what data, if any, beyond just the overall procurement administrative lead time should be collected and reported. Identifying the information that is to be collected is a necessary first step for DOD to assess its progress in reducing the time taken to award contracts. We recommend that the Secretary of Defense direct the Director, Defense Procurement and Acquisition Policy to develop a strategy regarding contract award time frames that identifies: the information the department needs to collect; and how the department will use the information to assess the time it takes to award contracts. The strategy should seek to communicate the department’s goals related to contract award time frames, seek to leverage ongoing data collection efforts by the various components, and specify the events prior to solicitation and between solicitation issuance and contract award that the department believes should be tracked. (Recommendation 1) We provided a draft of this report to DOD for comment. DOD concurred with the recommendation. DOD provided written comments which have been reproduced in appendix III. DOD also provided technical comments which we incorporated as appropriate. We are sending copies of this report to the Secretary of Defense; the Under Secretary of Defense for Acquisition, Technology and Logistics; the Secretaries of the Army, Navy, and Air Force; the Director, Defense Logistics Agency; appropriate congressional committees; and other interested parties. This report will also be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by e-mail at woodsw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. We were asked to evaluate the length of time taken to award weapon systems-related contracts. This report examines (1) the Department of Defense’s (DOD) efforts to determine the time it takes to award weapon systems contracts; (2) what available data show regarding the time between solicitation issuance and award for selected weapon systems- related contracts; and (3) factors identified as contributing to contract award time frames. To understand the procedures DOD follows to award contracts and DOD’s efforts to determine the time it takes to award contracts, we reviewed relevant sections of the Federal Acquisition Regulation (FAR), such as Part 6: Competition Requirements, and Part 15: Contracting by Negotiation, and relevant sections of the Defense Federal Acquisition Regulation Supplement. In addition, we analyzed DOD-level and component-level guidance, policies, memorandums, and training materials on the contract award process. We also reviewed Standards for Internal Control in the Federal Government and prior GAO reports. To determine the extent DOD components (Air Force, Army, Navy and the Defense Logistics Agency) collected and analyzed data and how they are managing the time from solicitation issuance to contract award, we analyzed relevant documentation, such as monthly or quarterly management reviews and briefings. We interviewed acquisition officials at DOD and the components regarding studies or analysis conducted related to the time to award contracts. We selected the components based on the highest total number of contracts and highest total contract value. We discussed contract award time frames included in studies or analysis to determine the selected components’ or commands’ reasons for conducting the analysis, any challenges identified, actions taken to address those challenges, and ongoing efforts to reduce the time needed to complete the contract award process. We also discussed their data collection and verification process, but we did not independently verify the data that were reported in the studies and analyses. We determined that the data reported by the military components were reliable for the purposes of describing data collection and analyses done by DOD components. We also met with industry associations for their perspective regarding the length of time to award weapon systems-related contracts. To understand the length of time taken to award DOD weapon systems- related contracts, and how contract value, extent competed, and contract type relate to that time, we analyzed contract data for a nongeneralizable sample of weapon systems-related contracts from the Federal Procurement Data System-Next Generation (FPDS-NG). We used FPDS- NG to identify DOD weapon systems-related contracts that were newly awarded from fiscal year 2014 through fiscal year 2016, with a contract value of $5 million or more. To include weapon systems-related contracts, we initially selected major defense weapon systems contracts as identified by DOD and identified the supplies or service codes (Product Service Code and North American Industry Classification Systems codes). We then compared the list of contracts with contract information in FPDS-NG to identify the contracts that contain the same codes to identify similar supplies and services. We narrowed the number of contracts using the DOD acquisition program field in FPDS-NG as a proxy to identify weapon systems-related contracts. For multiple award contracts, we selected the first contract awarded among those that were awarded under the same solicitation as indicated by the contract number. We excluded contracts that were awarded under specific circumstances that use different acquisition procedures, such as contracts awarded under simplified acquisition procedures. In addition, we excluded basic ordering agreements; blanket purchase agreements; orders of any type, including task and delivery orders; and extensions of existing contracts. We excluded undefinitized contract actions and contracts that included foreign funds or foreign military sales because of the peculiarities associated with these procurements. We also excluded contracts coded as Ballistic Missile Defense Organization in FPDS-NG because this field was used broadly to include contracts for both weapon systems and non- weapon systems. We further limited our selection of contracts to selected military components—Air Force, Army, Navy and the Defense Logistics Agency based on the highest number of contracts and highest total contract value. We then identified the largest commands within these components also based on the number of contracts and total contract value. Air Force- Air Force Materiel Command, Army- Army Contracting Command Defense Logistics Agency- Aviation Navy- Naval Air Systems Command Navy- Naval Sea Systems Command Defense Logistics Agency-Aviation, Air Force Materiel Command, and the Army Contracting Command awarded the higher number of contracts and the highest total value within their respective components. For Navy, the Naval Air Systems Command awarded the higher number of contracts, but the Naval Sea Systems Command awarded a higher total value, so we included both. For multiple award contracts, we selected the first contract awarded among those that were awarded under the same solicitation as indicated by the contract number. We excluded contracts that were awarded under specific circumstances that use different acquisition procedures, such as contracts awarded under simplified acquisition procedures. In addition, we excluded basic ordering agreements; blanket purchase agreements; orders of any time, including task and delivery orders; and extensions of existing contracts. We excluded undefinitized contract actions and contracts that included foreign funds or foreign military sales because of the peculiarities associated with these procurements. We also excluded contracts coded as Ballistic Missile Defense Organization in FPDS-NG because this field was used broadly to include contracts for both weapon systems and non-weapon systems. As a result, we initially identified a nongeneralizable sample of 145 contracts. In addition, we used the information contracting officials reported in our web-based survey to confirm whether the 60 contracts we surveyed met our selection criteria, and excluded those that did not. These exclusions resulted in a nongeneralizable selection of 129 weapon systems-related contracts. To assess FPDS-NG data reliability, we compared the FPDS-NG data to the contract documentation that we obtained for the solicitation issuance and contract award dates to verify the dates. We verified the contract value, extent competed, and contract type by comparing the data reported in FPDS-NG, such as the contract number and award value, to information in the contract documentation. We also verified the solicitation and contract award dates using contract documentation. We determined that the FPDS-NG data was reliable for the purposes of identifying a nongeneralizable sample of contracts and analyzing time between solicitation and contract award dates, contract value, extent competed, and contract type. To obtain information on the factors that helped or hindered the length of time to award contracts, we conducted a web-based survey of contracting officials—such as contracting officers or contract specialists—for 60 contracts. The survey collected information from contracting officials on the start and end dates of the solicitation, initial evaluation, discussion or negotiation, and contract award phases. We also collected information on factors that helped mitigate the time interval or hindered contracting officials from completing the solicitation, initial evaluation, and discussion or negotiation phases. For the survey, we additionally screened out contracts awarded using sealed bidding. We also did not include the Defense Logistics Agency-Aviation as part of the survey because it is a combat support agency providing weapon systems parts for the military services. From 145 of the 171 selected weapon systems-related contracts, we randomly selected 20 contracts from the Air Force Materiel Command, 20 from the Army Contracting Command, 10 from the Naval Air Systems Command, and 10 from the Naval Sea Systems Command for a nongeneralizable survey sample. For the survey, we identified the time to award contracts by phases, from solicitation issuance to contract award. These phases are based on discrete events found in the FAR or component-specific guidance as necessary steps in awarding a contract by negotiation. The 4 phases we identified are: Solicitation: from solicitation issuance to solicitation closing date or Initial Evaluation: from solicitation closing date or receipt of initial proposal to when contracting personnel receive approval to enter into discussion or negotiation Discussions/negotiations: from approval to enter into discussion or negotiation to approval to award the contract Contract award: from approval to award the contract to the date the contract was signed by the contracting officer. We conducted a total of eight telephone pre-tests on the contents and format of the survey with officials from the Air Force Materiel Command, Army Contracting Command, Naval Air Systems Command, and Naval Sea Systems Command to determine if the questions were understandable and answerable, in addition to verifying that the terminology used in the survey was accurate, and that the survey was unbiased. As a result of the pre-tests, we refined the survey as appropriate. We emailed a link to the web-based survey to contracting officials for the 60 selected weapon systems-related contracts on October 19, 2017. To encourage respondents to complete the survey, we sent reminder emails and made telephone calls to contracting officials after the initial email was sent. We closed the survey on January 10, 2018. Of the 60 contracts we surveyed, we excluded 18 contracts that did not meet our selection criteria based on the responses from the contracting officials. These included contracts that were not newly awarded, used sealed bid procedures, or contained foreign funding or foreign military sales. Of the 42 remaining contracts, we received responses from contracting officials for 37 contracts, for an overall response rate of 88 percent. The survey included event dates, which differentiate between the phases. We did not verify the start and end dates of the phases reported in the survey and relied on contracting officials’ responses. We did, however, verify the dates for solicitation issuance and contract award against the FPDS-NG reported data and contract documentation as part of the verification process for the 129 selected contracts. We emailed contracting officials in certain instances where we needed clarification on survey responses. For example, we followed-up on responses that differed from FPDS-NG reported data and responses that indicated that a contract was awarded using both full and open and other than full and open competition, among others. We made corrections to the data as needed. For more in-depth information on the factors and circumstances that affected the time from solicitation issuance to contract award, we selected 7 contracts from the survey for further analysis. To obtain a variety of contract characteristics, we selected the case studies based on certain criteria including: (1) representation of different DOD components; (2) a range of longer and shorter time intervals between solicitation and contract award date; (3) contracts with larger contract value; and (4) the extent the contracts were competed. We selected 4 contracts awarded using other than full and open competition and 3 awarded using full and open competition. For the purposes of our report, full and open competition after exclusion of sources is considered to be full and open competition. We did not select contracts from the Naval Sea Systems Command as part of our case study because the extent of competition was not confirmed at the time of selection. For these 7 contracts, we reviewed the survey results, analyzed contract file documentation, and conducted interviews with available contracting officials and program office officials, as well as contractor representatives to obtain their perspectives on the factors that helped or hindered the time from solicitation issuance to contract award. We conducted this performance audit from January 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We distributed a web-based survey to a random sample of contracting officials for 60 weapon systems-related contracts and reviewed responses for 37 contracts. The survey results presented in tables 4 through 13 are nongeneralizable. For more information on our methodology for designing and distributing the survey, see appendix I. In addition to the contact named above, Penny Berrier (Assistant Director), Peter Anderson, David Ballard, Sonja Bensen, Lorraine Ettaro, Kurt Gurka, Gina Hoover, Julia Kennon, Carol Mebane, Anh Nguyen, Bonita Oden, Jenny Shinn, Abby Volk, and Robin Wilson made major contributions to this report.", "summary": "DOD's contracting process is designed to protect taxpayers' interests, among other things, and can take time. DOD leadership and contractors have expressed concern about the length of time to award contracts and DOD has proposed reducing that time. GAO was asked to evaluate the length of time to award weapon systems contracts. This report examines (1) DOD's efforts to determine the time it takes to award contracts; (2) data on the time interval from solicitation to contract award for selected contracts; and (3) factors identified as contributing to contract award time frames. GAO used the Federal Procurement Data System-Next Generation to identify new weapon systems-related contracts awarded in fiscal years 2014 through 2016, valued over $5 million, among other factors. GAO selected a nongeneralizable sample of 129 contracts at four DOD components with the highest total dollar value and highest number of contracts from those fiscal years for further analysis. GAO analyzed contract documentation and surveyed contracting officials on a subset of contracts to determine the factors affecting the time between solicitation issuance and award. Although the Department of Defense (DOD) has proposed reducing the time it takes to award contracts related to weapon systems, the department has a limited understanding of how long it currently takes and therefore lacks a baseline to measure success. The DOD components GAO reviewed—Air Force, Army, Defense Logistics Agency, and Navy—collect data on their time frames for awarding contracts. However, they do so in different ways in the absence of a DOD-wide strategy for what information should be collected. For example, the Air Force measures the time to award beginning with solicitation issuance, while the other components use a different starting point. As a result, information the components collect is not comparable and is of limited use for understanding contract award time frames department-wide. Determining what information is needed to monitor time taken to award contracts consistently across components should help DOD assess its progress toward reducing the time. GAO analyzed the time from solicitation issuance to award for 129 weapon systems-related contracts and found it ranged from less than a month to over 4 years. Although some DOD and industry officials stated that contract value could affect contract award time frames, GAO observed a wide range of time intervals and did not observe any patterns based on this characteristic. (See figure below.) According to DOD contracting officials GAO surveyed, factors that can help reduce—or, alternatively lengthen—the time between when a solicitation is issued to when a contract is awarded include a decision to make the contract award an office priority and how quickly contractors respond to requests for additional information after initial proposals are received. GAO recommends that DOD develop a strategy that identifies the information it needs to collect and how it will use the information to assess contract award time frames. DOD concurred.", "document_type": "gao"}
{"report": "The exchanges (including the FFE and those operated by individual states) provide a seamless, single point of access for eligible individuals to enroll in qualified health plans. For the FFE, CMS established a website—Healthcare.gov—as the public portal through which individuals may apply for coverage and select and enroll in health plans, which are offered at different levels of coverage, or “metal tiers”—bronze, silver, gold, and platinum—that reflect the percentage of covered medical expenses estimated to be paid by the insurer. The data that individuals provide in their application is stored in the FFE’s centralized enrollment system, which is maintained by CMS. Although CMS oversees the centralized enrollment system, both CMS and issuers have shared responsibility for enrollment and coverage functions once individuals apply for coverage: CMS is responsible for determining an individual’s eligibility for coverage and income-based federal subsidies, enrolling the individual, and processing subsequent coverage changes or terminations. For example, individuals may change their existing coverage by signing up under an SEP due to the birth of a child or relocation, or they may voluntarily terminate their coverage, or CMS may terminate coverage if the agency is unable to verify key information such as citizenship status. CMS is also responsible for making payments for APTCs and determining whether an enrollee is eligible for any cost-sharing reductions that lower enrollees’ out-of- pocket costs for expenses, such as deductibles and copayments. Issuers are responsible for, among other things, collecting premiums from enrollees, arranging for coverage through provider networks, and paying claims. Issuers are also responsible for processing, and notifying CMS of, terminations related to nonpayment of premiums or fraud. As a result of this shared responsibility, CMS and issuers notify each other of coverage updates by transferring data back and forth through electronic files known as “transaction files.” It is critical that both issuers and CMS have consistent, accurate, and current information on enrollees, because monthly APTC payments are based on enrollment data in CMS’s centralized system. Federal regulations require CMS to reconcile enrollment information with issuers on at least a monthly basis. Accordingly, CMS and issuers reconcile certain key data elements on a monthly basis through an automated enrollment reconciliation process, in which issuer and CMS data are compared and discrepancies are resolved. Through this process, APTC amounts and their effective dates are compared and reconciled. CMS’s data system is considered to be correct when considering discrepancies on overall enrollment counts or with key data elements, such as coverage start and end dates between issuer and CMS data. Therefore, CMS will not change the APTC payments based on issuers’ data that may differ from CMS’s data unless there are significant discrepancies. There are several specific steps involved in transferring data between CMS and issuers for initial enrollment, subsequent updates, and reconciliation (see fig. 1 for a high-level overview of the data transfer process): Initial enrollment: CMS forwards an outbound electronic transaction file to the issuer with information on the applicant, the plan selection, the premium, and the APTC amount. Once the issuer receives the initial premium payment, the issuer sends an inbound electronic transaction file back to CMS to confirm the enrollment. Issuers may not refuse to issue coverage to an individual CMS has deemed eligible once that individual has made the initial premium payment. Transaction files are transmitted electronically on a daily basis. Subsequent changes/terminations: Subsequent changes to the individual’s coverage may be initiated by enrollees, CMS, or issuers. For example, enrollees may request changes to their coverage through the portal if they experience a change in circumstance (such as needing to enroll under an SEP due to the birth of a child, or to terminate their coverage if they move to a different state); CMS may terminate coverage if the agency cannot verify key eligibility information (such as citizenship status); or issuers may terminate coverage if enrollees fail to pay their premiums. If CMS initiates changes in coverage, it notifies issuers through subsequent outbound transaction files, and similarly, if issuers initiate changes they notify CMS through subsequent inbound transaction files. Monthly reconciliation: CMS sends issuers a snapshot of key elements of the enrollment data in its centralized enrollment system in an outbound reconciliation file. Issuers compare the data from the file to their enrollment systems and identify missing enrollments or other discrepancies. Issuers make updates as necessary and send CMS an inbound reconciliation file with information about current enrollees, cancellations, and terminations in their systems. CMS then performs an automated comparison of the data in the inbound reconciliation files with its centralized enrollment system and identifies any further discrepancies that may need to be resolved either by CMS or issuers. If necessary, CMS makes further updates to its data. In an April 2017 final rule, CMS implemented several actions that, in part, responded to issuer concerns about special enrollment periods and stability of enrollment. Specifically, CMS stated that the agency would require documentation from all individuals applying to enroll in coverage under an SEP to verify their eligibility for the SEP prior to enrollment. CMS also stated that, starting in June 2017, it would allow issuers, subject to state law, to apply a new premium payment to an individual’s past due payments before applying that premium towards a new enrollment. CMS stated that issuers would be allowed to refuse to provide coverage to an enrollee applying under an SEP due to loss of existing coverage if the issuer had previously terminated the enrollee’s coverage for nonpayment of premiums, unless the enrollee paid the past due premiums. CMS further stated that this provision was intended to encourage individuals to maintain continuous coverage rather than start and stop coverage (and thereby avoid incurring past due premiums). Approximately 4.9 million enrollees (53 percent of the 9.2 million FFE enrollees in 2015) maintained continuous coverage throughout the year— that is, their coverage began between January 1 and March 1, 2015, and lasted through December 31, 2015. These individuals therefore had 10 or more months of continuous coverage, with an average length of coverage of 11.6 months. Most of these enrollees (83 percent) re-enrolled in coverage by June 2016. The remaining 4.3 million enrollees (47 percent of the FFE enrollees in 2015) did not maintain continuous FFE coverage throughout the year, as defined above. The average length of coverage for these enrollees was about 5.0 months and, for most (72 percent), coverage ended prior to the end of the year. (See fig. 2 for information on enrollee length of coverage.) Of the 4.3 million enrollees, 38 percent re-enrolled in exchange coverage for 2016, although enrollees that held coverage through the end of the year—regardless of their length of coverage—were far more likely to have re-enrolled than enrollees whose coverage ended prior to the year’s end. In general, we did not find notable differences in attributes of enrollees’ coverage (for example, by benefit level of selected plan or monthly premium after APTC) or enrollee demographics when comparing the two groups of enrollees—those who maintained continuous coverage throughout 2015, and those who did not. (For data on coverage and demographics of FFE enrollees who did maintain continuous coverage throughout 2015 and those who did not, see app. I.) However, in examining the demographic and coverage characteristics of all FFE enrollees, we found that enrollees with certain characteristics tended to remain covered for a longer period of time in 2015 compared to other enrollees. For example: Enrollment period. Enrollees who enrolled during the open enrollment period had a higher average length of coverage than enrollees who enrolled through an SEP—9.1 months compared to 5.2 months (see fig. 3). However, more individuals who enrolled through an SEP remained enrolled through December 31, 2015, compared to individuals who enrolled during open enrollment—72 percent compared to 64 percent. Age. Enrollees aged 55 or older had the highest average length of coverage, while those aged 25 to 34 had the lowest—9.2 months compared to 7.8 months. Reported household income. APTC-eligible enrollees who reported having a household income between 301 and 400 percent of the federal poverty level had the highest average length of coverage, while those who reported having a household income less than, or equal to, 100 percent of the federal poverty level had the lowest—8.9 months compared to 8.0 months. Eligibility for APTC. Enrollees who were eligible for APTC had a higher average length of coverage than enrollees who were not eligible for APTC—8.6 months compared to 7.8 months Benefit level of selected plan. Enrollees who selected higher- benefit, gold plans had the highest average length of coverage, while enrollees who selected lower-benefit catastrophic, plans had the lowest—8.8 months compared to 6.7 months. Enrollees who selected silver plans—the most common plan selection—had an average length of coverage of 8.6 months. State of residence. Enrollees residing in Maine had the highest average length of coverage, while enrollees residing in Mississippi had the lowest—9.4 months compared to 8.0 months. See appendix II for additional data on the average length of coverage for enrollees by various characteristics. CMS’s data on terminations of enrollee coverage due to nonpayment of premiums are not complete and accurate. CMS officials told us that they collect some information from issuers on their terminations of enrollee coverage for nonpayment of premiums. When issuers terminate policies, the inbound transaction files they send to CMS must include, among other elements, a revised coverage end date taking the termination into account. CMS uploads these data into its centralized FFE enrollment system. However, while the issuers may also include codes that designate the reasons for the terminations, there is no requirement for them to consistently do so. Data on termination codes may therefore not be consistently reported by issuers. CMS officials told us that data on reasons for termination are not tracked because they are not critical to ensure the accuracy of APTC payments—which is the main function of the reconciliation process. Officials stated that key essential variables that CMS does track are whether coverage is effectuated (that is, whether the first premium payment has been made), whether the enrollee is eligible for APTC payments, and whether coverage was terminated. In addition, when issuers do report termination reason codes, these data are not always accurate. Specifically, CMS told us that, historically, issuers may have incorrectly used the nonpayment termination code for other types of terminations, and two issuers we interviewed acknowledged having done so. We compared data on terminations for nonpayment from CMS’s centralized enrollment system with data we obtained from three issuers for a small selection of enrollees. We found that for one large issuer operating in multiple states, the CMS data indicated that coverage for 18 of the 26 enrollees that we examined had been terminated for nonpayment of premiums, while the issuer data indicated that coverage had been terminated for other reasons, in most cases because it had expired at the end of the year. The issuer indicated that it likely reported these year-end terminations to CMS incorrectly as terminations for nonpayment of premiums. CMS has recently taken actions that may improve the reliability of data on terminations for nonpayment, but these actions do not ensure the data are consistently reported and recorded by CMS. Specifically, in July 2017, CMS indicated that it would add new codes to the transaction files for issuers to use to help prevent inaccurate reporting of the nonpayment termination code. CMS told us that it expects issuers to begin using the new codes in 2018. CMS’s data on terminations for nonpayment therefore may be more reliable beginning in 2018. However, CMS has not required issuers to report the termination reasons in the transaction files because, according to CMS officials, these data are not essential to tracking the accuracy of APTC payments. The agency also does not have plans in the near future to use the data in tracking trends in enrollment and termination of enrollee coverage in the FFE to assess the overall stability of the exchange. Further, CMS does not have a transparent, systematic process for issuers to ensure that data on terminations they initiate due to nonpayment are complete and accurate in the CMS system. Issuers we interviewed told us that they are unable to ascertain whether CMS is correctly updating the FFE enrollment system with the termination reason codes issuers provide when policies are terminated. While issuers can determine from the monthly reconciliation files whether CMS has updated certain issuer data for enrollees whose coverage was terminated (for example, the revised coverage end date), the files do not capture data on reasons for termination. Therefore, issuers are unable to determine if the CMS FFE data on termination reason codes matches theirs and make corrections where necessary. Some issuers told us they had requested that CMS add a variable to capture data on termination reasons in the monthly reconciliation files sent to issuers. CMS officials stated that the agency is in the initial stages of exploring whether this would be feasible for CMS and issuers, but that it will require significant resources and time to develop. Although CMS’s recent changes may improve its data, they do not ensure the agency will have complete and transparent data on terminations for nonpayment of premiums. According to federal internal control standards, federal agencies should obtain and use relevant, reliable data to achieve their objectives. Without complete and accurate data, CMS may be allowing enrollees who lost exchange coverage for nonpayment of premiums to re-enroll under SEPs although, under federal regulations, these individuals are ineligible to do so. Issuers reported that this had occurred. CMS officials told us that the agency is exploring options to have its system automatically prevent certain enrollees with prior terminations for nonpayment from enrolling in coverage under an SEP for loss of existing coverage, but noted that this functionality would depend on receiving reliable data on terminations for nonpayment from issuers. Further, without reliable data, CMS may not be able to assess the effects of its April 2017 policy allowing issuers to apply enrollees’ new premium payments toward unpaid premiums over the past 12 months. This is because the agency lacks the complete and accurate data that would be necessary to ensure that issuers are correctly identifying enrollees terminated for nonpayment. In its role as administrator of the FFE, it is important for CMS to assess the overall stability of the exchange by, among other things, tracking trends in enrollment and termination of enrollee coverage and addressing issuers’ concerns, where appropriate, to ensure their continued participation in the exchange. Issuers have raised concerns that the SEP regulations potentially allow individuals to enroll in coverage despite having their coverage terminated for nonpayment of premiums. However, CMS does not have the data needed to determine the extent of these problems. While CMS has made some efforts to improve the accuracy of the agency’s data on terminations for nonpayment, it has not indicated whether the agency will require issuers to consistently and accurately report these data. Moreover, CMS has no way to ensure the reliability and transparency of the data, because the existing process—the exchange of monthly reconciliation files between CMS and issuers—does not have a place to capture these data. CMS could capitalize on this existing process, already familiar to issuers, by adding a variable that captures data on termination reasons to the monthly reconciliation file and tracking its accuracy. By taking this step, in addition to requiring issuers to report these data, CMS could help ensure it has reliable and transparent data on terminations of enrollee coverage for nonpayment of premiums, and it could use these data to assess the effects of CMS policies and the overall stability of the exchange. We are making the following two recommendations to CMS: The Administrator of CMS should ensure that CMS has complete data on terminations of enrollee coverage for nonpayment of premiums by requiring issuers to report these data. (Recommendation 1) The Administrator of CMS should provide a transparent process for issuers and CMS to systematically reconcile discrepancies in their data on terminations of enrollee coverage for nonpayment of premiums. (Recommendation 2) We provided a draft of this report to HHS. HHS provided written comments, which are reprinted in appendix III. HHS concurred with our first recommendation to require issuers to report data on terminations of enrollee coverage for nonpayment of premiums. HHS noted that it currently collects information on termination reasons on enrollment transactions with issuers, and that it would review the requirements for collection of these data to identify possible improvements. HHS also concurred with our second recommendation to ensure a transparent process for issuers and CMS to systematically reconcile discrepancies in their data on terminations of enrollee coverage for nonpayment of premiums. HHS stated that it would consider how to incorporate reconciliation of these data into its existing monthly data reconciliation process with issuers, balancing issuer and agency burdens against the benefits of doing so. As agreed with your office, unless you publically announce the contents of the report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. Table 1 provides information on demographic characteristics for federally facilitated exchange (FFE) enrollees that maintained continuous coverage throughout 2015—defined as beginning coverage by March 1, 2015, and maintaining it without any gaps through December 31, 2015—and for all other 2015 FFE enrollees. Table 2 provides information on the characteristics of these enrollees’ coverage. Table 3 provides the extent to which enrollees maintained continuous coverage throughout 2015 by their state of residence. Table 4 provides information on average length of coverage for all 9.2 million federally facilitated exchange enrollees in 2015 by various demographic characteristics. Table 5 provides information on average length of coverage for these enrollees by characteristics of the enrollees’ coverage. Table 6 provides information on average length of coverage for enrollees by their state of residence. In addition to the contact named above, William Hadley (Assistant Director), Iola D’Souza (Analyst in Charge), Richard Lipinski, Peter Mann- King, and Priyanka Sethi Bansal made key contributions to this report. Also contributing were Muriel Brown, Laurie Pachter, and Emily Wilson.", "summary": "CMS has noted that it is important for enrollees to maintain continuous health insurance coverage to ensure the stability of the FFE. Certain rules allow for enrollment flexibilities—such as special enrollment periods and a 3-month grace period that is allowed before coverage is terminated for recipients of federal income-based subsidies who default on their premiums. However, some issuers have stated that these rules could be misused, resulting in non-continuous coverage. There are little data on the extent to which enrollees maintain continuous coverage during a year and, more specifically, on the extent to which coverage is terminated for nonpayment of premiums. GAO examined (1) the extent to which FFE enrollees maintained coverage in 2015 and (2) the extent to which CMS has reliable data on termination of enrollees' coverage for nonpayment of premiums. GAO analyzed CMS's 2015 FFE enrollment data (the most recent year of available data); interviewed CMS officials and selected issuers; and reviewed applicable laws and guidance from CMS. In 2015, 9.2 million individuals enrolled in the federal health insurance exchange in 37 states. Eligible individuals (e.g., U.S. citizens or those lawfully present in the United States) are able to enroll in health coverage during the annual open enrollment period. Outside of open enrollment, eligible individuals may enroll in coverage or change their coverage selection during special enrollment periods. Individuals may enroll under a special enrollment period if, for example, they lost their coverage from another source, such as Medicaid or an employer, or due to relocation. Under federal regulations, enrollees may not sign up for coverage under a special enrollment period citing loss of coverage if the coverage was lost due to nonpayment of premiums. About half (53 percent) of the 2015 federally facilitated exchange (FFE) enrollees maintained continuous health insurance coverage throughout the year—that is, they began coverage between January 1 and March 1, 2015, and maintained it through December 31, 2015. These individuals had an average of 11.6 months of coverage. The remaining 47 percent of FFE enrollees started their coverage later or ended it during the year; they averaged 5.0 months of coverage. Enrollees could have voluntarily ended coverage—due to gaining other coverage, for example—or have had it terminated by the Centers for Medicare & Medicaid Services (CMS) or the issuers of coverage for valid reasons, including losing eligibility for exchange coverage or for nonpayment of premiums. CMS does not have reliable data on issuer-generated terminations of coverage for enrollees' nonpayment of premiums. Although CMS and issuers share data on the terminations each generates and reconcile their data on a monthly basis to ensure data accuracy, the agency does not require issuers to consistently report data on the reasons for terminations. Officials told us they do not track these data because they are not critical to ensure the accuracy of the federal subsidy amounts—which is the main function of the monthly reconciliation process. Further, CMS lacks a transparent process to ensure the accuracy of these data, as the monthly reconciliation files transmitted between CMS and issuers do not include a place to capture data on termination reasons. Issuers said that they are therefore unable to ascertain whether data they provide on the reasons for termination match CMS's data, and thus they cannot make corrections where necessary. The agency's lack of reliable data on terminations for nonpayment limits its ability to effectively oversee certain federal regulations. For example, because CMS is not systematically tracking these data, it cannot tell whether enrollees applying for coverage under a special enrollment period had lost their coverage for nonpayment of premiums—in which case they would be ineligible for the special enrollment period per federal regulations. CMS could capitalize on its existing process, already familiar to issuers, by adding a variable that captures data on termination reasons to the monthly reconciliation file. By taking this step, in addition to requiring issuers to report these data, CMS could help ensure it has reliable and transparent data on terminations of enrollee coverage for nonpayment of premiums, and it could use these data to assess the effects of CMS policies and the overall stability of the exchange. GAO recommends that CMS ensures it has (1) complete data on terminations of coverage for nonpayment of premiums; and (2) a transparent process to reconcile discrepancies and ensure the accuracy of these data. The Department of Health and Human Services concurred with both recommendations.", "document_type": "gao"}
{"report": "In fiscal year 2016, USPS handled over 1 billion pieces of international mail, which included over 976 million pieces of letter mail. According to USPS statistics, about 371 million pieces of letter mail (38 percent) was sent to other countries or “outbound” mail, while the majority of international letter mail, 605 million pieces (62 percent), was sent to the United States from other countries or “inbound” mail. UPU member nations agree to provide a “single postal territory” for international mail, meaning designated postal operators must deliver inbound international mail to the recipient in their own country (i.e., provide universal service). The UPU created the terminal dues system in 1969 to establish a means for paying destination countries’ designated postal operators for the cost of delivering the mail that originated in another UPU member country. UPU member countries vote every 4 years on the annual payment rates. The current terminal dues system was designed as a single rate structure for the delivery of letter mail, regardless of shape (i.e., letters, flats or packets). The system takes into account that this rate varies based on UPU’s estimation of each nation’s postal cost structure and economic development. As such, the UPU divides its member countries into country groups based on the UPU’s “postal development indicator,” which is largely based on gross national income per capita and attempts to factor in the cost to deliver a letter based on statistics from the United Nations, the World Bank, and the UPU. Designated postal operators from transitional (formerly called “developing”) countries generally pay a lower terminal dues rate for their mail to be delivered by designated postal operators in target (formerly called “industrialized”) countries (see app. II for a list of the countries in each UPU country group). UPU limits the rates through caps and floors to minimize year-over-year variability. In addition to USPS, numerous domestic stakeholders are affected by the terminal dues system, for example: ECOs, such as FedEx and UPS, that collect, transport, and deliver documents and packages sent to the United States from other countries. As they are not designated postal operators under the UPU, ECOs are not part of the terminal dues system and do not have access to terminal dues rates. Some U.S. businesses that compete with foreign companies for U.S. customers, including large e-commerce businesses, such as Amazon, and much smaller e-commerce related businesses, as well as U.S. businesses that obtain goods from other countries via international mail. U.S. businesses that send mail to other countries—such as business correspondence, advertisements, or e-commerce packages—and that have an interest in paying the lowest postage rate. U.S. consumers—mainly individuals who send or receive correspondence, gifts, or commercial goods through international mail. Government also plays a role in the terminal dues system. The Department of State (State) represents the United States to the UPU, and State officials participate in the negotiations at the UPU congress, held every 4 years, that determine terminal dues rates. State also solicits input on terminal dues and other international postal issues through a Federal Advisory Committee on international mail that consists of USPS and PRC officials, other federal agencies with jurisdiction over related issues (e.g., the U.S. Department of Commerce), and representatives from affected businesses. PRC also has a role in international mail issues including terminal dues, USPS bilateral agreements, and USPS international mail products. First, State is required by statute to request PRC’s views on terminal dues proposals before they are adopted by the UPU every 4 years to ensure that the U.S. positions on the relevant UPU proposals are consistent with PRC’s standards and criteria for regulating USPS rates (or if not consistent, provide a foreign policy or national security interest justification). State then is required to ensure that the terminal dues proposals for market-dominant mail are consistent with PRC’s views unless there is a foreign policy or national security concern. Second, PRC is required by statute to review USPS proposals for international mail products to ensure compliance with legal requirements, such as requirements relating to cost coverage. Third, PRC has also sponsored studies on terminal dues issues in recent years. USPS officials stated that designated postal operators send mail to USPS for delivery to U.S. addresses under the UPU’s Universal Postal Convention. Designated postal operators pay for the collection and transportation of mail to the United States and hand off mail to USPS at a USPS International Service Center (ISC) for sorting and final delivery (see fig. 1). USPS presents the inbound mail to U.S. Customs and Border Protection (CBP) for inspection at the ISC. Once the mail clears CBP inspection, the mail enters USPS’s domestic mail stream for delivery. The process is reversed for outbound international mail collected by USPS for delivery to foreign addresses. According to USPS analysis, USPS has generated positive net revenue from all terminal dues mail, which has increased from fiscal year 2012 to fiscal year 2016. This occurred even though losses from inbound mail more than doubled from $66 million to $135 million from fiscal year 2012 to fiscal year 2016 (see fig.2). Net revenue for outbound terminal dues mail increased during the same time period. To understand this trend of declining net revenue for inbound terminal dues mail, it is important to understand the differences in inbound versus outbound mail. As USPS is the designated postal operator for the United States responsible for ensuring universal service under UPU agreements, it is required to accept and deliver all mail tendered to it from other designated postal operators (inbound mail), including mail sent under the terminal dues rates adopted by the UPU. USPS’s recent losses on inbound terminal dues mail are due in part to the shift in this mail from primarily letters and flats to more packets (which are more costly for USPS to handle and deliver)—which outpaced the corresponding terminal dues revenue earned by USPS (see fig. 3). These losses are exacerbated by the rising volume of inbound terminal dues mail. According to USPS, there has been an 86 percent increase in all inbound terminal dues mail between fiscal year 2012 and 2016— including a 19 percent increase between fiscal year 2015 and 2016 alone—with much of the increase attributable to international e- commerce. E-commerce mail consists mainly of packets that are heavier and irregular (see fig. 4 for examples). Most inbound letter mail to the United States in fiscal year 2016 was “packets,” defined by the UPU as small packages that weigh no more than 2 kilograms (about 4.4 pounds), often generated by e-commerce. USPS officials stated that packets generate higher costs as USPS’s delivery and processing costs for packets are higher than they are for letters. The current terminal dues system does not distinguish mail based on shape, and there is no separate rate for packets. A recent report commissioned by PRC found that the current terminal dues system, by reducing the price of international packet mail below what it would be without the system, is responsible for increasing the demand (and hence volume) of packets sent through USPS. According to the report, this increase in terminal dues packets reduces the demand for other types of international mail and ECOs. As mentioned above, losses occur because USPS’s costs to deliver inbound terminal dues mail are higher than the terminal dues revenues for that mail. Specifically, PRC has recognized that terminal dues have not covered USPS’s costs to deliver inbound letter mail since fiscal year 1998 and has reiterated this recently. USPS recently stated that the failure to cover USPS’s costs for inbound mail was caused by the terminal dues system. For example, currently, USPS is paid between $1.13 and $1.87 in terminal dues to deliver a 10-ounce packet from a developing country, an amount that does not include any additional surcharges for tracking and other features. Conversely, USPS officials told us that the published domestic rates for a 10-ounce piece of mail range from $1.61 to the highest commercial rate of $3.46. However, comparing these products is complicated, because they offer different features. According to USPS officials, packets sent under the terminal dues system do not include any tracking and have a delivery time of up to 3 weeks from some countries, while all USPS domestic mail products include tracking and have delivery times from as short as one day to an average of 2 to 3 days. In addition, 85 percent of USPS domestic mail receives discounted rates for mail that is entered in bulk and prepared in a way that reduces USPS’s costs, including barcoding, presorting, and being entered into USPS’s system closer to its final destination. USPS reports show that net revenue for outbound terminal dues mail increased from fiscal year 2012 to fiscal year 2016. The increased net revenue allowed USPS to more than offset its losses from inbound terminal dues mail. The increase in net revenue came despite a decrease in outbound terminal dues mail volume over the same period. According to stakeholders we interviewed as well as our economic analysis, businesses that send outbound international mail and U.S. consumers also benefit from the current terminal dues system similar to USPS (see table 1). These stakeholders benefit for the following reasons: U.S. businesses that send outbound terminal dues mail, for example, e-commerce shippers or magazine publishers, may pay lower postal rates than what would be set by the destination country’s designated postal operator to deliver that mail. This is the case for mail sent to many developed countries, such as in Europe, where most U.S. outbound international mail is sent. In this case, the postage charged by USPS to the business reflects the relatively low terminal dues rate paid by USPS to those designated postal operators, rather than a higher rate that better reflects the designated postal operator’s delivery costs. U.S. consumers also benefit from the current terminal dues system. As described above, U.S. consumers have spurred a significant increase in inbound international mail, especially from Asia where terminal dues rates are lower than USPS’s costs, which contributes to low shipping prices for U.S. consumers. For example, the USPS’s Office of Inspector General (OIG) conducted a case study in 2015 that found that five low-cost items shipped from China cost about $1.60 per item in shipping charges, while equivalent published domestic postage for the same items cost between $2.04 and $2.22 per item, depending on their exact weight. Studies by the USPS OIG and WIK-Consult GmbH (WIK Consultants) have found similar benefits for consumers from the current terminal dues system. U.S. consumers may also see the same kind of benefit from lower mailing prices as do U.S. businesses that send terminal dues mail to certain outbound countries, such as in Europe, that have higher delivery costs than the terminal dues paid to them by USPS. Despite creating some benefits for some U.S. stakeholders, the current terminal dues system also creates competitive disadvantages for other U.S. stakeholders (see table 2). The terminal dues system puts ECOs at a disadvantage because according to representatives from ECOs we spoke with, their volume for international items that are similar to those currently shipped at terminal dues rates is low, and they cannot compete on price with designated postal operators. Instead, they compete using other features such as tracking and delivery speed. Businesses overseas, like e-commerce companies such as Alibaba, can use the terminal dues system as a low- cost alternative to ECO service for items which have much slower delivery standards than offered by ECOs. This disadvantage is especially pronounced when ECOs compete with designated postal operators for business from countries with relatively low terminal dues rates, such as many countries in Asia. U.S. businesses that compete with foreign companies that use inbound terminal dues mail are also disadvantaged by the current terminal dues system. Foreign businesses that send products from countries with low terminal dues to U.S. consumers through USPS may have a competitive advantage over domestic businesses, which may have to pay a higher domestic postage. Representatives from two small U.S. businesses we spoke with stated that the disparity between postage charges available to foreign mailers under the terminal dues system versus the domestic postage available to them was a significant factor in reduced sales in recent years, although the disparity between postage charges is not the only disadvantage they faced from foreign competition. We found this outcome may be less of a competitive disadvantage for larger businesses, such as Amazon, which may be able to obtain discounts on the domestic mailing prices from USPS based on volume, presorting, and other worksharing arrangements while smaller domestic mailers may not be able to secure such discounts. Even with discounting, the domestic- mailing price may still be higher than the foreign-mailing price charged by a designated postal operator a price that is based on, in part, a lower terminal dues rate. However, USPS officials cautioned that such comparisons are complicated because: 1. Terminal dues rates do not include other costs, such as the cost of collection, international transportation, and other costs that may be included in the price charged to the foreign mailer by the designated postal operator. 2. Significant amounts of international mail are sent in large quantities from foreign designated postal operators to USPS, making this mail not analogous to USPS’s single-piece mail rates. 3. U.S. commercial customers may pay non-published rates established in negotiated service agreements that may be lower than USPS’s single-piece published rates. While we described above how different stakeholders are affected by the terminal dues system, it is not possible to quantify the system’s impacts. For example, according to USPS officials, while the current system has a single rate for three shapes of terminal dues mail, USPS has over 3,000 rates for domestic mail, making rate comparisons of terminal dues mail products to domestic mail products imprecise. In addition, the terminal dues rate is a payment between designated postal operators, not the price paid by the foreign mailer. This price information may not be publicly available as designated postal operators in other countries might also have non-published prices. Based on our analysis of the changes to the terminal dues system recently adopted by the UPU and of USPS’s estimates of the financial impact of those changes, increased terminal dues rates should help reduce USPS’s losses for inbound mail. All terminal dues rates will increase for inbound mail starting on January 1, 2018—especially for certain countries, which will increase by 13 percent per year specifically for packets. By 2021, all but the least developed countries will have the same terminal dues rates for packets. As the majority of terminal dues mail handled by USPS is inbound, the increase in revenue resulting from higher terminal dues may likely more than offset the increase in USPS’s costs that will result from increases in terminal dues rates to the countries where most USPS outbound terminal dues mail is sent. The UPU also created a new rate category for packets, in addition to a new tracked-packet surcharge, which will increase USPS’s revenue. As described previously, the current terminal dues rates do not distinguish between letters, flats, or packets—even though packets are more expensive to handle and deliver due to their irregular size and heavier weight. This change should lead to higher terminal dues revenue for USPS. In addition, the UPU adopted the Integrated Product Plan (IPP) at the 2016 UPU congress; that, among other things, will require commercial goods to be sent under the terminal dues system as packets. According to USPS officials, this change could also increase terminal dues revenues, as all commercial items will be sent via packets, which will have higher terminal dues rates starting in 2018. However, decisions on other aspects of the IPP are expected to be made at a special UPU congress in 2018. According to USPS projections, USPS will start earning positive net revenues for inbound terminal dues mail as a result of these changes. As terminal dues rates increase, USPS projections show that USPS will cover costs for inbound terminal dues mail from the 15 countries that sent most of the inbound terminal dues mail to the United States in fiscal year 2015. The State Department official who coordinated the U.S. delegation to the 2016 UPU congress stated that these changes will achieve the government’s goal of dramatically improving USPS’s cost coverage for the delivery of inbound terminal dues mail, such as packets, from China and other developing countries, when the changes take effect in 2018. However, other stakeholders we spoke with disagree on the extent of improvement. While PRC staff officials stated that the UPU has made some progress in closing the gap between terminal dues rates and domestic rates for equivalent domestic mail, they also stated that there is still a way to go to make the rates equivalent to each other. Similarly, PRC’s Chairman stated that while the changes will improve USPS’s cost coverage, they will not eliminate the negative impacts of the current terminal dues system and may in fact exacerbate them over the 2018– 2021 period. In addition, he stated that while USPS projected that terminal dues proposals in 2008 and 2012 would increase USPS’s cost coverage for inbound terminal dues mail, the improvement was negligible, casting doubt on the accuracy of USPS’s projections for the planned changes for the 2018–2021 period. A consultant who has experience in international mail issues stated that, given some assumptions about changes in international mail volume, the terminal dues increases will still not be equal to the delivery costs for domestic postage for inbound terminal dues mail to countries such as the United States. He estimated that the difference between the new terminal dues rates and equivalent domestic postage for packets will be reduced from about 57 to 73 percent (depending on the sending country) in 2016 to about 50 percent by 2021. According to stakeholders we interviewed as well as our analysis of UPU’s terminal dues rates, the projected increase in terminal dues rates caused by the planned changes to the terminal dues system may negatively affect U.S. businesses that send outbound terminal dues mail and U.S. consumers (see table 3). U.S. businesses and U.S. consumers that send mail to other countries will pay higher postage rates for terminal dues mail, to the extent that USPS increases its prices to reflect the higher terminal dues USPS must pay to designated postal operators. However, increased terminal dues rates may still be less than the cost to deliver that mail for designated postal operators in relatively high cost countries, such as Norway and Germany. U.S. businesses and consumers benefit from this disparity as the postage they pay USPS to send mail to those countries is based on the terminal dues rates to those countries, not the delivery costs, which may be higher. U.S. consumers may also see shipping prices increase for inbound terminal dues mail, for example e-commerce packets, to the extent that any increases in postage charged to foreign mailers resulting from increased terminal dues rates are passed along to U.S. consumers. ECOs and U.S. businesses affected by inbound terminal dues mail should become more cost-competitive due to the planned increased terminal dues rates, although the planned changes may not eliminate all of the existing competitive disadvantages (see table 4). A State Department official stated that these new rates may still not fully cover the cost of delivery in some countries with very high postal delivery costs, potentially impacting ECOs’ competitiveness in those countries. A representative from a small business that competes with overseas e- commerce businesses for U.S. consumers stated that any increase in terminal dues would make his business more price-competitive with foreign competitors. However, a representative from one small business affected by inbound terminal dues mail we spoke with stated that his business had already suffered due to the terminal dues system. He added that other factors also make it harder to compete and therefore it would be harder to recover even with higher terminal dues rates. While these changes may have different effects on U.S. stakeholders, it is difficult to quantify the future effects because of limited information and forecasting variability. As a result, it remains to be seen what the effects of these changes to this system will be on domestic stakeholders. USPS, USPS OIG, PRC, and others have developed or adapted models and analyses that try to show the economic impacts of the terminal dues system on different stakeholders and estimate the impact of any changes to that system. We analyzed six recent models and analyses—including the USPS’s, USPS OIG’s, and PRC’s models—that describe either different effects of the terminal dues system on USPS, all designated postal operators, or other stakeholders. Some of these studies also try to measure how terminal dues rate increases may affect these stakeholders. Our review determined that these models and analyses can help inform stakeholders about the different overall effects of terminal dues. However, we also found that the analyses are limited in how they can predict or describe the effect of the terminal dues system, in part due to a lack of complete information on the following issues: the volume of mail, including its type and weight, that flows between each UPU member country; equivalent domestic postage rates that would be charged to domestic mailers for service equivalent to inbound terminal dues mail; the presence of alternative international mail agreements, such as bilateral and multilateral agreements; the number of U.S. businesses and consumers that receive or send international mail covered by terminal dues rates; the number and market characteristics of U.S. businesses that currently compete with imported products that are sent under terminal dues; how terminal dues rates and changes in those rates would affect supply chains between businesses in the U.S. and other countries; and, the share of postage costs of U.S. businesses for outbound mail that is covered by the terminal dues system and the proportion of total business costs; how important postage and shipping costs are to total costs of doing business, domestically and globally. Our analysis also found that some of the models and analyses we reviewed did not make adjustments to factor in some or all of these potential mail-related changes, such as changes in: volume of international mail reimbursed by terminal dues changes in response to increases in terminal dues rates or changes in other international mail products offered by USPS or express consignment operators; monetary exchange rates, as all terminal dues are denominated in Special Drawing Rights, a combination of five major currencies, which all vary over time, introducing uncertainty to any projection of terminal dues rates; and, other international trade issues, such as customs duties, tariffs, labor costs, other shipping costs, and regulatory costs. In the absence of models or analyses that take these factors into account, it is difficult to quantify the impact of terminal dues rate increases on other domestic stakeholders. Not all international mail is sent through the terminal dues system. USPS officials and mail stakeholders told us and USPS data indicate that mailers send a significant portion of U.S. inbound and outbound international mail using the following alternatives: bilateral and multilateral agreements, parcels, express mail service, and direct entry. USPS data show that that while terminal dues as a percentage of inbound international mail volume increased from about 50 percent in fiscal year 2012 to about 60 percent in fiscal year 2016, a significant portion of international mail comes into the United States via these alternatives. Each of these alternatives is described in greater detail below. USPS negotiates bilateral and multilateral agreements for a number of countries, wherein USPS and other designated postal operators both pay higher rates for different mail products (inbound and outbound) with desirable features not available for terminal dues mail, such as tracking and faster delivery. For example, USPS is party to the multilateral PRIME agreement, which gives priority delivery and performance bonuses (paid in addition to terminal dues) to mail from 31 countries. According to USPS officials, bilateral and multilateral agreements have improved USPS’s financial position. In reviewing these agreements, PRC has found that they improve USPS’s financial position relative to what it would have been in the absence of these agreements. USPS offers products that provide UPU parcel service for both inbound and outbound mail, which includes tracking, liability insurance, and signature confirmation at delivery. Parcels are sent under UPU parcel rates, which are higher than what USPS would receive under the terminal dues system for comparable letter mail. USPS also offers “e-Commerce Parcel,” a new parcel service established by the UPU in 2016. The e-Commerce Parcel product is aimed at the e-commerce marketplace and provides tracking, but no liability or signature confirmation. Under e-Commerce Parcel, designated postal operators determine the inbound delivery rates, which are expected to be lower than parcel service due to the service limitations. USPS officials stated that they are implementing the e- Commerce parcel service and reviewing its pricing strategy. USPS also provides Express Mail Service (also referred to as EMS) for both inbound and outbound international mail. Express Mail Service products provide express delivery of documents and merchandise, which take priority over other postal services and include signature confirmation and liability insurance for damaged or lost mail. Express Mail Service rates for inbound products can be set by bilateral agreements or determined by the receiving designated postal operator. During fiscal year 2016, inbound Express Mail Service products included shipments from 149 countries, including China, Japan, Korea, Canada, and France. Express Mail Service products for outbound U.S. mail include Priority Mail Express International service, a high-speed USPS mail service available to certain countries and available at designated USPS facilities, and Global Express Guaranteed service, a USPS international expedited delivery service provided through an alliance with FedEx. Mailers use direct entry as a way of accessing USPS domestic mail services from foreign countries without sending the item through a foreign designated postal operator. Under USPS’s Global Direct Entry Wholesaler Program, third party companies, such as foreign e- commerce businesses selling products in the United States, send the items to the United States as cargo that bypasses designated postal operators, circumventing the terminal dues system entirely. Once the items clear customs, they are entered to USPS’s system at domestic postage rates. Some of these items are entered into USPS’s system outside of USPS’s Global Direct Entry Wholesaler Program. For example, we spoke with a representative of a U.S. company that provides direct entry services for foreign mailers, preparing items for easier entry through customs, for example by labeling items with barcodes that describe the product, and for USPS by applying U.S. domestic postage. The company representative stated that once the items clear customs, the company transports the items to one of 140 USPS distribution points (i.e. USPS’s domestic mail processing facilities) to facilitate timely and efficient delivery. As we discuss in more detail later, these alternatives may offer various benefits and disadvantages to customers that may choose them based on a combination of price, available features, and speed of delivery. USPS officials stated that alternatives to the terminal dues system earn increased net revenue for USPS, for example, Rates negotiated as part of bilateral and multilateral agreements, UPU parcel rates, and Express Mail Service product rates set by USPS are higher than terminal dues rates; this difference means negotiated rates provide better cost coverage and generate higher net revenues than terminal dues rates. Direct entry mail generates greater net revenue for USPS, because shippers enter the mail directly into USPS’s domestic mail stream at domestic postal rates. USPS also realizes operational efficiencies from these alternatives due to mail entry and preparation requirements, leading to lower USPS costs. Direct entry mail is subject to the same preparation requirements as domestic mail entered in bulk quantities, such as being presorted and entered close to its final destination. Although alternatives to the terminal dues system account for a significant portion of international mail handled by USPS, terminal dues mail continues to grow at a higher rate. From fiscal year 2012 to fiscal year 2016, the volumes of (1) USPS terminal dues mail, (2) mail covered by bilateral and multilateral agreements, and (3) parcels increased, while Express Mail Service volume decreased. U.S. consumers may also benefit from all four alternatives due to faster delivery than under the terminal dues system and from special features such as tracking, especially for higher-value items. However, U.S. consumers may pay more to use these alternatives given the special features they offer. The effects of the alternatives on ECOs are unclear. Representatives from ECOs told us that USPS bilateral and multilateral agreement mail products and Express Mail Service products enjoy certain advantages, such as easier customs clearance, that make USPS’s products more attractive to customers. However, the representatives added that the effects of USPS bilateral agreements on their business are unclear, because USPS considers the rates to be proprietary information that is not publicly available. The representatives also noted that they did not believe their products are able to compete directly with USPS bilateral and multilateral mail products because the rates for these products are based on comparatively low terminal dues rates. A 2015 USPS OIG study found that ECOs’ rates are generally much higher than rates for USPS bilateral agreement and direct entry products, therefore ECOs’ products are not price competitive with USPS’s products. Express Mail Service and parcel products are priced higher than terminal dues rates and offer special features similar to those offered by ECOs, such as priority shipping and tracking, making those products more attractive for higher value and time sensitive items, and thus may compete with ECOs’ products. The effects of the alternatives on other international mail stakeholders, such as U.S. businesses that are affected by inbound or outbound international mail, are also unclear. For example, USPS bilateral agreements may increase mailer options by providing faster service and more product features, all at a lower price that discourages competition from ECOs. However, the full effects of bilateral agreements are unclear, in part because these rates are not public. The extent that U.S. businesses related to outbound mail have access to and use direct entry options into other countries is also unclear. In addition, other non-postal related factors such as monetary exchange rates and product prices affect the competitiveness of U.S. businesses that are affected by inbound or outbound mail could be more important than mailing prices to their international competitiveness. It is also difficult to quantify the effects of alternatives to the terminal dues system because of limited information. The information needed to determine the effects on domestic stakeholders from Express Mail Service products and bilateral agreements are not publicly available, as USPS regards this information as business proprietary. Effects on stakeholders from direct entry mail are also unclear, in part because this type of inbound mail may be difficult to distinguish from other domestic USPS mail, and information on direct entry mail is not collected by USPS. Use of alternatives also depends on terminal dues rates and other factors, such as overall mail volume trends, and the models and analyses we reviewed do not take these alternatives into account when modeling international mail trends. For example, none of the models and analyses we reviewed took into account bilateral agreements due to the lack of publicly available information. We provided a draft of this product to USPS, PRC, and the Department of State for their review and comment. In USPS’s comments, reproduced in appendix IV, USPS generally agreed with our findings, described the impact of upcoming terminal dues changes, and emphasized that USPS has been taking efforts to improve its cost coverage and collect more revenue for international mail. In PRC’s comments, reproduced in appendix V, PRC generally agreed with our findings. State did not provide any formal comments. USPS also provided technical comments, which we incorporated as appropriate. PRC and State did not provide any technical comments. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report describes the financial effects on domestic stakeholders of the following: (1) the rates under the current UPU terminal dues system, (2) planned changes to those rates, and (3) alternatives to the terminal dues system. For all of our objectives, we interviewed officials at the U.S. Postal Service (USPS), the Department of State (State), U.S. Customs and Border Protection (CBP), and the Postal Regulatory Commission (PRC); industry consultants; and selected mail stakeholders affected by terminal dues. We selected stakeholders affected by terminal dues based on our reviews of comments submitted to PRC on proposals related to terminal dues for the 2016 UPU congress, as well as interviews with USPS, PRC, State officials, and industry consultants. To obtain background information and provide context for this report, we reviewed relevant federal statutes and U.S. policies; documentation from the UPU, State, USPS, USPS Office of Inspector General (USPS OIG); and knowledgeable consultants. Relevant legal sources that we reviewed include Title 39 of the U.S. Code and the 2006 Postal Accountability and Enhancement Act. In addition, we reviewed the UPU constitution, UPU general regulations, and UPU agreements reached at the 2016 UPU congress, which define the terminal dues system. We reviewed documents of State’s Advisory Committee on International Postal and Delivery Services under the Federal Advisory Committee Act, including minutes and proposals, and USPS and USPS OIG reports on terminal dues and international mail flows. We also reviewed related studies by third parties, including PRC-sponsored reports by Copenhagen Economics on the economic impacts of terminal dues and other terminal dues related reports. In addition, we reviewed GAO reports on related postal issues, as well as relevant academic literature, industry journals, books, and other publications, including news articles. We analyzed available USPS information for fiscal years 2015 and 2016 on international mail to and from the United States and to and from UPU- designated target and transitional countries to determine the most significant mail flows. USPS information for inbound and outbound international mail by country was only available beginning in fiscal year 2015. To determine the current rates under the UPU terminal dues system and the effects of these rates on selected stakeholders, we reviewed and analyzed UPU documentation on terminal dues rates, and we identified and interviewed affected domestic mail stakeholders to obtain their views on the potential impacts of the current terminal dues system. We judgmentally selected stakeholders through interviews with USPS, State, PRC, and industry group officials and consultants and our review of mail stakeholder comments submitted to PRC pursuant to PRC proceedings on terminal dues and international mail related proposals and agreements. In addition, to select business and consultant stakeholders, we also reviewed published reports documenting their knowledge of international mail and terminal dues issues. We interviewed USPS and CBP officials and observed international mail processing by USPS and CBP at two USPS International Service Centers (ISC). We applied standard economic principles to describe effects of the current terminal dues system on domestic stakeholders. To describe the effects of the current terminal dues system on USPS specifically, we reviewed USPS position papers, analyses, and reviewed and analyzed terminal dues models and analyses showing the effects of terminal dues, and reviewed UPU documents describing the terminal dues system, relevant USPS OIG reports, and PRC proceedings and Annual Compliance Determination Reports. We analyzed USPS information and reports on inbound and outbound international mail, including volume, costs, and revenue from fiscal years 2012 to 2016 and UPU information describing the terminal dues system and rates from 2014 to 2017. We assessed the reliability of USPS’s information on the volume, costs, and revenue for international mail by reviewing documentation related to how the data are collected and processed. We found this information to be sufficiently reliable for the limited purpose of presenting this descriptive information. We also visited the Chicago O’Hare International Airport and the New York John F. Kennedy International Airport International Service Centers to observe how USPS processes inbound and outbound international mail and how USPS interacts with CBP to clear international mail for delivery to U.S. addressees. We selected the Chicago O’Hare International Airport and the New York John F. Kennedy International Airport International Service Centers because they process most inbound international mail volume, as well as their location and interviews with USPS and CBP officials. To determine planned changes to UPU terminal dues rates, we reviewed UPU documents that described the changes to the terminal dues system resulting from the 2016 UPU congress, including the 2018 through 2021 terminal dues rate structure. We also reviewed USPS and State proposals to the 2016 UPU congress and stakeholder comments submitted to PRC on proposals to the 2016 UPU congress. We applied standard economic principles to describe effects of the planned changes on domestic stakeholders. We reviewed six economic models and analyses estimating different effects of the current and future terminal dues system on global postal flows and on various stakeholders. We selected the six models and analyses for analysis based on how current they were and whether they produced empirical findings related to the effects of terminal dues or changes in terminal dues. These models and analyses were taken from the published academic literature, economic papers, government reports, and government analyses. The studies used a range of methodologies from simulation modeling to experimental methods, in part due to the paucity of data on a number of variables such as trade flows or how terminal dues affect certain stakeholders, such as consumers and businesses. Our overall review of the studies was based on economic criteria and GAO guidance which included: the purpose of the model, the assumptions used, the data or lack of data, model validation methods, transparency of the model and data, sensitivity analysis, and peer review. Where appropriate, we also compared the results of the models or analyses to other similar modeling results. The analyses we assessed address different questions relating to various mail stakeholders. We determined that these analyses appropriately include, though with certain limitations, the key elements of an economic analysis. Our overall assessment is that while these models and analyses include limitations and caveats, they still inform decision-makers and stakeholders about the different economic effects of terminal dues. To determine the alternatives to the terminal dues system used by U.S. mail stakeholders and the implications of those alternatives for stakeholders, we interviewed USPS, PRC, and State officials, representatives from mailing industry companies, express consignment operators and other selected stakeholders affected by the terminal dues system, international mail consultants, and freight shipping and forwarding firms. We analyzed USPS information and reports on inbound and outbound international mail from fiscal year 2012 through fiscal year 2016, including volume, cost, and revenue data. We assessed the reliability of USPS’s information on the volume, costs, and revenue for international mail by reviewing documentation related to how the data are collected and processed. We found this information to be sufficiently reliable for the limited purpose of presenting this descriptive information. We selected the four alternatives offered by USPS to the terminal dues system, including USPS bilateral and multilateral agreements with other designated postal operators, Express Mail Service products, parcels, and direct entry mail. To describe these alternatives and determine their implications for mail stakeholders, we reviewed and analyzed USPS bilateral agreements with other designated postal operators, stakeholder comments on proposed bilateral agreements, PRC decisions on the proposed agreements, and USPS and USPS OIG documents and reports describing our selected alternatives. We reviewed USPS’s bilateral agreements with China Post, Canada Post, Hong Kong Post, Korea Post, and Royal PostNL in the Netherlands, which were in force during the course of our work. We applied standard economic principles to describe effects of these alternatives on domestic stakeholders. The performance audit on which this report is based was conducted from May 2016 to August 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate, evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with USPS from June to October 2017 to prepare this public version of the original sensitive report. This public version was also prepared in accordance with these standards. This is a public version of GAO-17-571SU that we issued in August 2017. This report excludes information that was deemed to be proprietary by USPS and that must be protected from public disclosure. Therefore, this report omits proprietary information and certain data related to USPS’s revenues, costs and volumes for international mail. Although the information provided in this report is more limited in scope, it addresses the same objectives as the sensitive report and the methodology used for both reports is the same. The UPU divides its member countries into country groups based on the UPU’s “postal development indicator,” which is largely based on gross national income per capita and attempts to factor in the cost to deliver a letter based on statistics from the United Nations, the World Bank, and the UPU. The UPU uses the country groups to, among other things, apply terminal dues rates to international letter mail sent between member countries. The UPU consolidated its five country groups for the 2014– 2017 period into four country groups for the 2018–2021 period: Group I includes the most developed countries, Groups II and III include developing countries, and Group IV includes the least developed countries. In addition to the contact named above, Derrick Collins (Assistant Director); Greg Hanna (Analyst-in-Charge); Barbara El Osta; Camilo Flores; Kenneth John; Mike Mgebroff; Malika Rice; and Amy Rosewarne made key contributions to this report.", "summary": "In 2016, USPS handled over 1 billion pieces of international mail—both inbound (received from other countries) and outbound (sent to other countries). International mail is governed by the UPU, which is comprised of over 190 member countries, including the United States. The UPU establishes remuneration rates, called terminal dues, for certain types of international mail exchanged between member countries. Questions have been raised about how current and future planned rates for terminal dues affect USPS and other stakeholders that are involved in international mail. GAO was asked to review the terminal dues system. Among other issues, this report examines the financial effects of: (1) the current UPU rates for terminal dues and (2) the planned changes to those rates on USPS and mail stakeholders. GAO analyzed USPS's mail data for fiscal years 2012–2016; USPS's, the Postal Regulatory Commission's (PRC), and UPU's policies and documents; and applicable U.S. statutes. GAO interviewed USPS, PRC, and Department of State officials, and mail stakeholders, including U.S. companies, such as FedEx and UPS, and consultants. These stakeholders were identified through public comments made to PRC on proposals related to terminal dues. While not generalizable, the views provide illustrative examples. This is a public version of a sensitive but unclassified report issued in August 2017. Information related to USPS's revenues, costs, and volumes for international mail that USPS has deemed proprietary has been omitted from this report. The Universal Postal Union (UPU), a specialized agency of the United Nations, created the terminal dues system so that designated postal operators in member countries could compensate designated postal operators in other countries for delivering mail in those countries. GAO found that it is not possible to quantify the financial effects of the terminal dues system on various U.S. mail stakeholders because the data needed to conduct such an analysis are not readily available. However, stakeholders GAO spoke with and literature GAO reviewed described differing impacts of the terminal dues system on U.S. stakeholders. For example, Analysis by the United States Postal Service (USPS)—the U.S. designated postal operator—found that the rates for inbound international terminal dues mail does not cover its costs for delivering that mail in the United States. As a result, USPS's net losses on this type of mail more than doubled between 2012 and 2016. In contrast, USPS analysis indicates that the rates for outbound international terminal dues mail has resulted in net positive revenues for USPS, which offset the losses from inbound terminal dues mail. U.S. businesses that send outbound terminal dues mail may benefit to the extent that their costs to mail items to certain countries through USPS may be lower than the actual mail delivery costs in those countries. U.S. consumers who receive imported products may pay lower mailing costs for products originating from low terminal dues rate countries. Express consignment operators such as FedEx and the United Parcel Service said the terminal dues system creates a competitive disadvantage for them. Representatives from these companies said that they have difficulty competing for some international mail business because they cannot offer pricing as low as the postage based on the terminal dues rates offered by designated postal operators. The UPU adopted increased terminal dues rates for member countries starting in 2018. GAO found that these planned changes could affect U.S. stakeholders differently, but the effects are also difficult to quantify because of limited information and forecasting variability. Nevertheless, stakeholders identified examples of the potential effects that the planned changes could have on them. For example: For USPS, an increase in inbound terminal dues rates should reduce related losses for delivering this mail; although USPS's costs may increase from paying higher terminal dues rates to countries where USPS sends most of its outbound terminal dues mail. U.S. businesses that send outbound terminal dues mail may have to pay higher postage to USPS to cover the increase in terminal dues rates to send mail to other countries, thus increasing costs to them. U.S. consumers who receive lower-priced imported products may experience a reduced benefit because of the higher terminal dues rates for inbound mail. The increased rates for inbound terminal dues mail may allow rates offered by express consignment operators to become more competitive as they may be able to offer their mail products at more comparable costs.", "document_type": "gao"}
{"report": "EPA regulates drinking water contaminants by issuing legally enforceable standards under the Safe Drinking Water Act that generally limit the levels of these contaminants in public water systems. EPA has issued such regulations for approximately 90 drinking water contaminants. Public water systems, including the DOD public water systems that provide drinking water to about 3 million people living and working on military installations, are required to comply with EPA and state drinking water regulations. While EPA has not issued legally enforceable standards for PFAS in drinking water, the agency has monitored water systems in the United States for six types of PFAS chemicals—including PFOS and PFOA—in order to understand the nationwide occurrence of these chemicals. This monitoring effort was part of a larger framework established by the Safe Drinking Water Act to assess unregulated contaminants. Under this framework, EPA is to select for consideration from a list (called the contaminant candidate list) those unregulated contaminants that present the greatest public health concern, establish a program to monitor drinking water for unregulated contaminants, and decide whether or not to regulate at least 5 such contaminants every 5 years (called a regulatory determination). EPA’s regulatory determinations are to be based on the following three broad statutory criteria, all of which must be met for EPA to decide that a drinking water regulation is needed: the contaminant may have an adverse effect on the health of persons; the contaminant is known to occur or there is a substantial likelihood that the contaminant will occur in public water systems with a frequency and at levels of public health concern; and in the sole judgment of the EPA Administrator, regulation of such contaminant presents a meaningful opportunity for health risk reduction for persons served by public water systems. To date, PFOS and PFOA are unregulated because EPA has not made a positive regulatory determination for these chemicals. Even when EPA has not issued a regulation, EPA may publish drinking water health advisories. In contrast to drinking water regulations, health advisories are nonenforceable. Health advisories recommend the amount of contaminants that can be present in drinking water—“health advisory levels”—at which adverse health effects are not anticipated to occur over specific exposure durations. Most recently, in May 2016 EPA issued lifetime health advisories for PFOS and PFOA. These advisories set the recommended health advisory level for each contaminant—or both contaminants combined—at 70 parts per trillion in drinking water. According to DOD, the department also considers information in these health advisories when determining the need for cleanup action at installations with PFOS and PFOA contamination. We reported in October 2017 that, following the release of EPA’s lifetime health advisory for PFOS and PFOA in May 2016, each of the military departments directed their installations to identify locations with any known or suspected prior release of PFOS and PFOA and to address any releases that pose a risk to human health—which can include people living outside DOD installations; and test for PFOS and PFOA in their drinking water and address any contamination above EPA’s lifetime health advisory level. We further reported that, as of December 2016, DOD had identified 393 active or closed military installations with any known or suspected releases of PFOS or PFOA. Since we issued our report, DOD has updated that number to 401 active or closed installations, according to August 2017 data provided in a March 2018 report to Congress on the department’s response to PFOS and PFOA contamination. We stated in our October 2017 report that the military departments had reported spending approximately $200 million at or near 263 installations for environmental investigations and response actions, such as installing treatment systems or supplying bottled water, as of December 2016. The Air Force had identified 203 installations with known or suspected releases of PFOS and PFOA and had spent about $153 million on environmental investigations and response actions (accounting for about 77 percent of what the military departments had spent on PFOS and PFOA activities as of December 2016). For example, the Air Force reported spending over $5 million at Peterson Air Force Base in Colorado. During our visit to that installation in November 2016, officials showed us the current and former fire training areas that they were investigating to determine the extent to which prior use of firefighting foam may have contributed to PFOS and PFOA found in the drinking water of three nearby communities. Additionally, the Air Force had awarded a contract for, among other things, installing treatment systems in those communities. The Navy had identified 127 installations with known or suspected releases of PFOS and PFOA and had spent about $44.5 million on environmental investigations and response actions (accounting for about 22 percent of what the military departments had spent on PFOS and PFOA activities as of December 2016). For example, the Navy reported spending about $15 million at the former Naval Air Station Joint Reserve Base Willow Grove in Pennsylvania. During our visit to that installation in August 2016, officials told us that the Navy was investigating the extent to which PFOS and PFOA on the installation may have contaminated a nearby town’s drinking water. At the time, the Navy had agreed to pay for installing treatment systems and connecting private well owners to the town’s drinking water system, among other things. The Army had identified 61 installations with known or suspected releases of PFOS and PFOA and had spent about $1.6 million on environmental investigations (accounting for less than 1 percent of what the military departments had spent on PFOS and PFOA activities as of December 2016), but had not yet begun any response actions. At the time of our October 2017 report, the Army had not yet completed testing its drinking water for PFOS and PFOA. DOD’s March 2018 report to Congress provided updated information on actions taken (such as providing alternative drinking water or installing treatment systems) to address PFOS and PFOA in drinking water at or near military installations in the United States, as shown in figure 1 below. Specifically, DOD reported taking action as of August 2017 to address PFOS and PFOA levels exceeding those recommended in EPA’s health advisories for drinking water for people (1) on 13 military installations and (2) outside 22 military installations. We reported in October 2017 that, in addition to actions initiated by DOD, the department also took action in response to state and federal regulators. DOD responded to four administrative orders requiring that DOD address PFOS and PFOA levels that exceeded EPA’s health advisory levels for drinking water. One order was issued by the Ohio Environmental Protection Agency at Wright-Patterson Air Force Base in Ohio, and three orders were issued by EPA at the former Pease Air Force Base in New Hampshire; Horsham Air Guard Station in Pennsylvania; and the former Naval Air Warfare Center Warminster in Pennsylvania. For example, at Wright-Patterson Air Force Base, levels of PFOS and PFOA that exceeded EPA’s lifetime health advisory levels were found at two wells on the installation in 2016. In response to the order from the Ohio Environmental Protection Agency, the Air Force closed drinking water wells, installed new monitoring wells, and provided bottled water to vulnerable populations on the installation. Additional details on each order and examples of actions by DOD to address the orders were reported on in our October 2017 report. According to DOD, it may take several years for the department to determine how much it will cost to clean up PFOS and PFOA contamination at or near its military installations. Additionally, DOD officials told us in September 2018 that they believe a legally enforceable EPA drinking water cleanup standard would ensure greater consistency and confidence in their cost estimates because such a standard would give them a consistent target to clean up to. In a January 2017 report on environmental cleanup at closed installations, we recommended that DOD include in future annual reports to Congress best estimates of the environmental cleanup costs for contaminants such as PFOS and PFOA as additional information becomes available. DOD implemented this recommendation by including in its fiscal year 2016 environmental report to Congress (issued in June 2018) an estimate of the costs to respond to PFOS and PFOA. In our October 2017 report, we found that DOD was taking steps to address health and environmental concerns with its use of firefighting foam that contains PFAS. These steps included restricting the use of existing foams that contain PFAS, testing DOD’s current foams to identify the amount of PFAS they contain, and funding research into the future development of PFAS-free foam that can meet DOD’s performance and compatibility requirements (see table 1). Some of these steps, such as limiting the use of firefighting foam containing PFAS, were in place. Others, such as researching potential PFAS-free firefighting foams, were in progress at the time of our review. DOD’s military specification for firefighting foam, which outlines performance and compatibility requirements, also requires that firefighting foam purchased by the department contain PFAS. We reported in October 2017 that, according to DOD, there was no PFAS-free firefighting foam that could meet DOD’s performance and compatibility requirements. As a result, the Navy—which is the author of the military specification— had no plans to remove the requirement for firefighting foam to contain PFAS. However, Navy officials told us during our review that if a PFAS- free foam were to be developed that could meet DOD performance and compatibility requirements the Navy would make any necessary revisions to the military specification at that time. Navy officials also said during our review that they were planning to revise the military specification to set limits for the amount of PFAS that are allowed in firefighting foam, following their testing on the amounts of PFOS, PFOA, and other PFAS found in foam used by DOD. In June 2018, DOD reported to Congress that its military specification for firefighting foam was amended to set a maximum level of PFOS and PFOA (800 parts per billion). DOD officials told us in September 2018 this maximum level applies to the amount of those chemicals in firefighting foam concentrate before it is mixed and diluted with water to create firefighting foam. The DOD officials also said that 800 parts per billion is the lowest level of PFOS and PFOA that can be detected in firefighting foam concentrate by current testing methods and technologies, but DOD is working with foam manufacturers and laboratories to achieve lower detection limits. According to the June 2018 report, DOD plans to establish lower limits for PFOS and PFOA in firefighting foam in late 2018. The June 2018 report reiterated that, according to DOD, no commercially available PFAS-free foam has met the performance requirements of the military specification, and the report also stated that DOD-funded research efforts to develop a PFAS-free foam that can meet performance requirements are still ongoing. Chairman Paul, Ranking Member Peters, and Members of the Subcommittee, this completes our prepared statement. We would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this report, please contact us at Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov or J. Alfredo Gómez, (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this statement include Maria Storts (Assistant Director), Diane B. Raynes (Assistant Director), Michele Fejfar, Karen Howard, Richard P. Johnson, Mae Jones, Amie Lesser, Summer Lingard-Smith, Felicia Lopez, and Geoffrey Peck. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "According to health experts, exposure to elevated levels of PFOS and PFOA could cause increased cancer risk and other health issues in humans. DOD has used firefighting foam containing PFOS, PFOA, and other PFAS since the 1970s to quickly extinguish fires and ensure they do not reignite. EPA has found elevated levels of PFOS and PFOA in drinking water across the United States, including in drinking water at or near DOD installations. This statement provides information on actions DOD has taken to address elevated levels of PFOS and PFOA in drinking water at or near military installations and to address concerns with firefighting foam. This statement is largely based on a GAO report issued in October 2017 ( GAO-18-78 ). To perform the review for that report, GAO reviewed DOD policies and guidance related to PFOS and PFOA and firefighting foam, analyzed DOD data on testing and response activities for PFOS and PFOA, reviewed the four administrative orders issued by EPA and state regulators to DOD on addressing PFOS and PFOA in drinking water, visited seven installations, and interviewed DOD and EPA officials. This statement also includes updated information based on two 2018 DOD reports to Congress—one on PFOS and PFOA response and one on firefighting foam—as well as discussions with DOD officials. GAO reported in October 2017 that the Department of Defense (DOD) had initiated actions to address elevated levels of perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA) in drinking water at or near military installations. PFOS and PFOA are part of a larger class of chemicals called per- and polyfluoroalkyl substances (PFAS), which can be found in firefighting foam used by DOD. In May 2016, the Environmental Protection Agency (EPA) issued nonenforceable drinking water health advisories for those two chemicals. Health advisories include recommended levels of contaminants that can be present in drinking water at which adverse health effects are not anticipated to occur over specific exposure durations. In response to those health advisories, DOD's military departments directed their military installations to (1) identify locations with a known or suspected release of PFOS and PFOA and address any releases that pose a risk to human health, which can include people living outside DOD installations, and (2) test for PFOS and PFOA in installation drinking water and address any contamination above the levels in EPA's health advisories. For example: As of August 2017, DOD had identified 401 active or closed military installations with known or suspected releases of PFOS or PFOA. The military departments had reported spending approximately $200 million at or near 263 installations for environmental investigations and responses related to PFOS and PFOA, as of December 2016. According to DOD, it may take several years for the department to determine how much it will cost to clean up PFOS and PFOA contamination at or near its military installations. DOD reported taking actions (such as providing alternative drinking water and installing treatment systems) as of August 2017 to address PFOS and PFOA levels exceeding those recommended in EPA's health advisories for drinking water for people (1) on 13 military installations in the United States and (2) outside 22 military installations in the United States. In addition to actions initiated by DOD, GAO reported in October 2017 that the department also had received and responded to four orders from EPA and state regulators that required DOD to address PFOS and PFOA levels that exceeded EPA's health advisory levels for drinking water at or near four installations. GAO also reported in October 2017 that DOD was taking steps to address health and environmental concerns with its use of firefighting foam that contains PFAS. These steps included restricting the use of existing foams that contain PFAS; testing foams to identify the amount of PFAS they contain; and funding research on developing PFAS-free foam that can meet DOD's performance requirements, which specify how long it should take for foam to extinguish a fire and keep it from reigniting. In a June 2018 report to Congress, DOD stated that no commercially available PFAS-free foam has met DOD's performance requirements and that research to develop such a PFAS-free foam is ongoing.", "document_type": "gao"}
{"report": "The purpose of federal banking supervision is to help ensure that banks throughout the financial system are operating in a safe and sound manner and are complying with banking laws and regulations in the provision of financial services. Banks in the United States are supervised by one of the following three federal regulators: FDIC supervises all FDIC-insured state-chartered banks that are not members of the Federal Reserve System and insured state savings associations and insured state chartered branches of foreign banks. The Federal Reserve supervises commercial banks that are state- chartered and members of the Federal Reserve System. OCC supervises federally chartered national banks and savings associations (also known as federal thrifts). FDIC, the Federal Reserve, and OCC are required to conduct a full- scope, on-site examination of each of their supervised banks at least once during each 12-month period. The regulators may extend the examination interval to 18 months, generally for banks and thrifts that have less than $1 billion in total assets and that meet certain conditions, such as satisfactory ratings, are well capitalized, and are not being subject to a formal enforcement action. As part of a full-scope examination, examiners review a bank’s risk exposure within a number of components using the Uniform Financial Institutions Rating System, which also is referred to as the CAMELS rating system (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk). Evaluations of CAMELS components consider a bank’s size and sophistication, the nature and complexity of its activities, and its risk profile. The end result of a full-scope, on-site examination is a report of examination, which includes the CAMELS ratings and other findings and is provided to the bank’s management and board of directors. A report of examination may include deficiencies or other issues that examiners found and that a bank is expected to address within specific time frames. Such issues generally are called supervisory recommendations by FDIC, supervisory findings by the Federal Reserve, and supervisory concerns by OCC. For purposes of this report, we collectively refer to such issues as supervisory concerns. Supervisory concerns may be designed to correct practices that deviate from sound risk management principles or noncompliance with laws and regulations. Supervisory concerns that involve more significant issues are brought to the attention of a bank’s board of directors and senior management in the report of examination as matters requiring immediate attention (MRIA) or matters requiring attention (MRA) under the Federal Reserve’s policies, matters requiring board attention (MRBA) under FDIC’s policies, and MRAs under OCC’s policies. If a bank were to fail to address a supervisory concern, its regulator could subject the bank to enhanced supervision, downgrade of a component or composite rating, or other supervisory actions, such as informal or formal enforcement actions. Under their 2006 guidance, regulators define CRE loans to include construction loans, loans to finance CRE that are not secured by CRE, loans secured by multifamily property, and loans secured by nonfarm, nonresidential property in which the primary source of repayment derives from the rental income associated with the property or the proceeds of the sale, refinancing, or permanent financing of the property. CRE loans in which the primary source of repayment is not the property itself are called owner-occupied loans and can include loans to businesses for working capital purposes that use real estate as collateral. For example, a line of credit for a business’s operating expenses might be secured in part by commercial property, such as an office. Construction and land development (CLD) loans generally are considered to be the riskiest class of CRE, due to their long development times and because they can include properties (such as housing developments or retail space in a shopping mall) that are built before having firm commitments from buyers or lessees. In addition, by the time the construction phase is completed, market demand may have fallen, putting downward pressure on sales prices or rents—making this type of loan more risky. Based on concerns about the increase in CRE concentrations at community banks and the risks associated with such concentrations, FDIC, the Federal Reserve, and OCC jointly issued guidance in December 2006 on CRE concentrations and sound risk management practices. The guidance described the regulators’ expectations for sound risk management practices for banks with concentrations in CRE loans. Specifically, the guidance identified seven key elements, or internal control areas, that a bank’s risk management practices should address to identify, monitor, and control its CRE concentration risk (see fig. 1). The 2006 CRE guidance also sets forth three criteria to identify banks with CRE loan concentrations that could be subject to greater supervisory scrutiny. According to the guidance, a bank that has experienced rapid growth in CRE lending, has notable exposure to a specific type of CRE, or is approaching or exceeds the following supervisory criteria may be identified for further supervisory analysis of the level and nature of its CRE concentration risk: CLD concentration threshold: CLD loans represent 100 percent or more of a bank’s total capital. Total CRE concentration threshold: Total nonowner-occupied CRE loans (including CLD loans) represent 300 percent or more of a bank’s total capital and total CRE lending increased by 50 percent or more during the previous 36 months. According to the guidance, the CLD and CRE thresholds do not constitute limits on a bank’s CRE lending activity but rather serve as high-level indicators to identify banks potentially exposed to CRE concentration risk. In 2011, we reported on how the federal banking regulators had responded to the potential risks of growing CRE concentrations at community banks, including by jointly issuing the 2006 CRE concentration guidance. We recommended that the regulators should enhance or supplement the 2006 CRE guidance and take steps to better ensure that such guidance is consistently applied. The regulators have taken steps to address our recommendation. Out of the approximately 5,900 banks that had a CRE loan portfolio as of the end of June 2017, a total of 504 banks exceeded either 100 percent in CLD loans as a percentage of total risk-based capital, or 300 percent in CRE loans as a percentage of total-risk based capital and had seen 50 percent CRE portfolio growth during the previous 36 months. Of these 504 banks, a total of 69 banks exceeded both the CLD criteria and the total CRE criteria (including the growth component). In December 2015, federal banking regulators issued a joint statement to remind banks of the 2006 regulatory guidance on prudent risk management practices for CRE lending activity through economic cycles. The regulators noted, among other trends, that many banks’ CRE concentration levels had been rising. According to the statement, regulators would continue to pay special attention to potential risks associated with CRE lending during 2016. Specifically, the regulators stated that when conducting examinations that include a review of CRE lending activities, they would focus on banks’ implementation of the prudent principles in the 2006 CRE guidance and other applicable guidance relative to identifying, measuring, monitoring, and managing concentration risk in CRE lending activities. According to officials from FDIC, the Federal Reserve, and OCC, their agencies use a variety of formal and informal processes to monitor the condition of banks and identify risks, including CRE concentration risk. For example, The Federal Reserve has a National Risk Council and FDIC and OCC have National Risk Committees that meet routinely to identify and evaluate risks facing banks and are supported by a number of other committees or other groups. FDIC officials told us that analysis done by FDIC’s Regional Risk Committees identified growth in CRE concentrations in 2015 and brought the issue to the National Risk Committee’s attention. OCC began actively monitoring CRE loan growth in the middle of 2014 and began focusing on CRE concentration risk management during bank examinations in 2015. OCC officials also stated that CRE concentration risk has been a key risk issue for the agency’s National Risk Committee since early 2016. Federal Reserve officials told us that the agency, including the Federal Reserve banks, began to monitor bank CRE concentrations more closely around mid-2013 after identifying an increase in CRE concentrations. According to FDIC, Federal Reserve, and OCC officials, they met together in early 2015 to discuss CRE lending growth and the rise in bank CRE loan concentrations and held subsequent meetings throughout the year, in part to discuss policy options for helping to ensure that banks were appropriately managing their CRE concentration risks. One of the outcomes of such interagency coordination was the December 2015 joint statement on CRE concentrations. Although the CRE sector has recovered since the 2007–2009 financial crisis, our trend and econometric analyses generally indicate that credit and other risks related to bank CRE lending have increased over the past several years. Based on indicators of CRE market conditions and loan performance, the CRE sector has recovered from the 2007–2009 financial crisis. For example, spending on CRE construction projects—a source of demand for bank financing—has rebounded. Vacancy rates for apartments, office buildings, and other CRE properties have declined. Similarly, as shown in figure 2, delinquency and charge-off rates on bank CRE loans have fallen from their post-crisis peaks and are at or below their lowest levels since 2002. Although these rates provide information on the current performance of bank CRE loans, they provide little or no information about potential future risks faced by banks. For example, high-risk loans made to less creditworthy borrowers could perform well when property markets and the economy are doing well but may perform poorly when property markets or the economy begin to slow. At the same time, our analyses of other market, underwriting, and lending data and forecasts from predictive econometric models we developed suggest that banks’ credit and concentration risks related to their CRE lending have increased. As shown in figure 3, according to a Federal Reserve survey, banks lowered their CRE loan underwriting standards— terms and conditions under which banks extend loans—after the financial crisis, but more banks began to tighten their underwriting standards since late 2015. In general, tightening underwriting standards may indicate that loan officers are reevaluating the degree of risk in CRE markets served by banks. According to Federal Reserve data, a larger share of banks has tightened underwriting standards on multifamily properties, such as apartments. CRE property prices, particularly for multifamily properties, have increased rapidly in recent years, and CRE property valuations have similarly increased. For example, as shown in figure 4, capitalization rates (the ratio of income generated by a property to the property’s price) on CRE properties have trended downward since around 2010—indicating that borrowers (i.e., property owners) may be earning less of a return on their CRE properties. Capitalization rates can be indicative of expected future price changes—for example, low capitalization rates may reflect expectations of future price increase, but can also be driven by investor sentiment not associated with fundamental aspects of properties. In addition, as shown in figure 5, the number of banks with concentrated portfolios in CLD or total CRE loans has been gradually increasing since around 2014. Greater concentrations in a particular lending sector (e.g., commercial real estate, residential real estate, or business lending) leave banks more vulnerable to a sectoral downturn, all else equal. To further assess risk in bank CRE lending, we developed and estimated several predictive models of aggregate losses on bank CRE loans. The models incorporate measures of CRE property prices, bank lending, and underwriting standards. The models generally found that, historically, higher future losses are predicted when CRE lending and prices are simultaneously high relative to gross domestic product, and when banks are tightening underwriting standards. Based largely on the simultaneous increase in bank CRE lending and CRE prices observed over the last several years, these models suggest that credit risk has increased, though it remains lower than the level of risk associated with the 2007– 2009 financial crisis. As we noted earlier, high property valuations and substantial increases in lending can simultaneously weaken collateral protections and indicate lower borrower quality, both of which can raise the risk of losses should the economy or CRE sector weaken. (See app. II for additional information on our models.) We found that regulators generally subjected banks with relatively high concentrations in CRE loans to greater supervisory scrutiny in comparison to banks with relatively lower concentrations in CRE loans in our review of 54 examinations for 40 banks conducted from 2013 through 2016. In all of these examinations, the regulators specifically assessed whether each bank had adequate risk management practices and capital for managing its CRE concentration risk and generally found that the banks had adequate risk management practices and capital. In a few examinations, regulators differed in how they addressed supervisory concerns about a bank’s CRE-related risk management practices. In our review of a nongeneralizable sample of 54 examinations conducted from 2013 through 2016, we found that FDIC, Federal Reserve, and OCC subjected banks with relatively high concentrations in CRE loans to greater supervisory scrutiny. In both their 2006 CRE guidance and 2015 CRE statement, the regulators indicated that banks with relatively high CLD or total CRE concentrations should maintain risk management practices commensurate with the level and nature of their concentration risk. The 2006 CRE guidance recognized that the sophistication of a bank’s CRE risk management practices depends on, among other things, the level and nature of its CRE concentrations and associated risk. As noted earlier, the guidance notes that a bank’s risk management practices should address seven internal control areas: (1) board and management oversight; (2) portfolio management; (3) management information systems; (4) market analysis; (5) credit underwriting standards; (6) portfolio stress testing and sensitivity analysis; and (7) credit risk review function. Based on our analyses, we found that the 2006 CRE guidance’s risk management framework is adequately designed to help ensure that banks effectively identify, measure, monitor, and control their CRE concentration risk. For example, the guidance is consistent with credit and concentration risk principles issued by international standard- setting bodies. Of the 54 reports of examination that we reviewed, 41 of them covered banks whose CLD or total CRE concentrations exceeded the CLD concentration threshold, total CRE concentration threshold, or both thresholds set forth in the 2006 guidance. In all of these examinations, we found that FDIC, Federal Reserve, and OCC examiners generally assessed whether each bank had implemented adequate risk management practices to manage their concentration risk. As shown in figure 6, in 26 of the 41 examinations, FDIC, Federal Reserve, and OCC examiners did not find any weaknesses in the banks’ CRE risk management practices across the seven internal control areas, but did find weaknesses in the remaining 15 examinations. In 15 of the 41 examinations we reviewed, FDIC, Federal Reserve, and OCC examiners found the banks had CRE-related risk management weaknesses in at least one of the seven internal control areas. Examiners most frequently found risk management weakness in three internal control areas: board and management oversight (11 instances), management information systems (8 instances), and stress testing (7 instances). To a slightly lesser extent, examiners found weaknesses in portfolio management, credit underwriting standards, and credit risk review function. Examiners communicated their supervisory concerns to these 15 banks in their reports of examinations. In 12 of the examinations, examiners included MRAs, MRBAs, or MRIAs in their reports of examination that directed the banks to correct their risk management weaknesses. In the other three examinations, examiners included recommendations or other notes in their reports of examination that generally directed the banks to correct their risk management weaknesses. Consistent with the 2006 CRE guidance, we found that examiners generally did not use the CLD or total CRE concentration thresholds as limits on bank CRE lending. With two exceptions, examiners did not direct banks that exceeded the CLD or CRE threshold to reduce their concentrations but rather focused on ensuring that the banks’ risk management practices were commensurate with the nature and level of their concentration risk. In the two exceptions, examiners found the banks’ practices and capital inadequate for managing their CLD or CRE concentration risk and directed the banks to reduce their concentrations and improve their risk management practices. We found that FDIC, Federal Reserve, and OCC examiners varied in the extent to which they documented—in the reports of examination and supporting workpapers—the scope of their review of banks’ CRE-related risk management practices and findings. For example, we were not always able to determine whether examiners found a bank’s practices adequate in one or more of the seven internal control areas based on our review of the report of examination and, if available, supporting workpapers. According to the regulators, reports of examinations are used primarily to document practices found to be inadequate and not practices found to be adequate. Moreover, the regulators told us that their examiners recently have been required to use a CRE examination module to document their assessment and findings of banks with concentrations exceeding the CLD or CRE threshold. In the 41 examinations we reviewed where banks exceed one of the concentration thresholds, FDIC, Federal Reserve, and OCC examiners assessed whether the banks generally had capital commensurate with their CRE concentration risk. In 34 of the examinations, examiners determined that the banks’ capital levels were adequate for managing their CLD or total CRE concentration risk. In 7 of the examinations, examiners determined that the banks’ capital levels were inadequate. For six of the seven banks, examiners directed the banks in the reports of examination to reduce or manage their CRE concentrations in light of inadequate capital. In the case of one bank, examiners required the bank to comply with a previous formal enforcement action that addressed the need for the bank to adhere to its board-approved capital plan. For banks with relatively high CLD or total CRE concentrations, we found that Federal Reserve and OCC examiners assessed the banks’ CRE- related risk management practices in subsequent examinations. In our review of 41 examinations of banks that exceeded the CLD or CRE threshold, 26 of them covered two examination cycles of 13 banks conducted from 2013 through 2016. We found that examiners assessed the banks’ practices for managing their concentration risk in both examinations. In 14 examinations (covering 7 banks), examiners found that the banks had adequate risk management practices in both examinations. In six examinations (covering three banks), examiners found aspects of the banks’ risk management practices to be inadequate in their 2013 or 2014 examination and noted their supervisory concerns in the reports of examination. In the subsequent examinations, the examiners found that the banks had adequately addressed the previously identified risk management weaknesses. In six examinations (covering three banks), examiners found the banks’ practices for managing their CRE concentration risk to be adequate in the 2013 or 2014 examinations but inadequate in the subsequent examinations. The examiners issued the banks MRAs or MRIAs or took an informal enforcement action. For banks with concentrations below the CLD or total CRE threshold, we found that regulators generally did not examine the banks’ CRE-related risk management practices. Thirteen of the 54 examinations we reviewed covered banks that did not exceed the CLD or CRE thresholds. Although the banks did not exceed either threshold, OCC examiners assessed the banks’ CRE-related risk management practices in 3 of the examinations. In 1 examination, examiners determined that the bank’s CRE-related risk management practices were adequate. The other 2 examinations covered subsequent cycle examinations of the same bank. In the first examination, examiners found that the bank had adequate practices for managing risk associated with its CRE loans but directed the bank through an MRA to incorporate stress testing of the loan portfolio into its monitoring. In the subsequent examination, the examiners found that the bank had addressed the MRA. In the other 10 examinations, FDIC, Federal Reserve, and OCC examiners did not mention in the report of examination the banks’ practices for managing the risk associated with their CRE loans. FDIC, Federal Reserve, and OCC officials told us that examiners use their professional judgment in determining whether to review a bank’s CRE-related risk management practices if the bank’s concentration is below the CLD and CRE threshold. This approach is consistent with the overall risk-based supervisory process used by the regulators, which focuses examiner resources on assessing bank management’s ability to identify and control risks. For example, FDIC’s examination guidelines note that examiners should focus their resources on a bank’s highest risk areas when assessing risk management programs, financial conditions, and internal controls. According to the guidance, the exercise of examiner judgment to determine the scope and depth of review in each functional area is crucial to the success of the risk-focused supervisory process. In a few examinations, we found differences across regulators in how they addressed supervisory concerns about banks’ CRE-related risk management practices because of differences in the regulators’ policies. In our nongeneralizable sample of 54 examinations, Federal Reserve, FDIC, and OCC examiners included CRE-related supervisory concerns, such as recommendations, MRAs, or MRBAs, in 22 of the reports of examinations. Although the regulators have policies for identifying and communicating supervisory concerns, their policies use different criteria. For example, OCC’s policies instruct examiners to use MRAs to describe practices that a bank must implement or correct to address a deficiency and not to use MRAs to require enhancements to bank practices that meet acceptable standards. However, the Federal Reserve’s and FDIC’s policies do not expressly include such criteria. Consistent with their policies, OCC examiners included MRAs in the reports of examination that we reviewed only when they found a bank’s CRE-related risk-management practices to be inadequate. In contrast, in 2 reports of examination, we found that FDIC examiners did not find the banks’ CRE- related risk management practices to be inadequate but included MRBAs to direct the banks to enhance or sustain certain CRE-related risk management practices. Similarly, in 1 report of examination, Federal Reserve examiners found that the bank’s risk management practices and capital were adequate for its CRE concentrations but included an MRA to require the bank to enhance its capital plan to include concentration risk considerations. In addition to their examinations, federal banking regulators have taken informal and formal enforcement actions against banks for not adequately managing their CRE concentration risk. In general, initial consideration and determination of whether informal or formal action is required usually results from examination findings. Unlike informal enforcement actions, formal enforcement actions are published or publicly available. From 2013 through 2016, FDIC, the Federal Reserve, and OCC took formal enforcement actions against banks for not adequately managing risks related to their CRE concentrations, including those outlined in the jointly issued 2006 CRE guidance. FDIC took 22 formal enforcement actions against banks for matters related to their CRE concentrations during this period. The Federal Reserve took 2 formal enforcement actions against banks for matters related to their risk management of CRE lending. OCC took 11 formal enforcement actions against banks for matters related to their CRE concentrations during this same period. The majority of these formal enforcement actions discussed the 2006 CRE guidance and directed the banks to improve their practices for managing their CRE concentration risk. For example, in a number of formal enforcement actions, the regulators ordered the banks to revise their written concentration risk management programs for identifying, monitoring, and controlling risks associated with concentrations of credit, consistent with the 2006 CRE guidance. We provided a draft of this report to FDIC, the Federal Reserve, and, OCC for review and comment. The agencies provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and FDIC, the Federal Reserve, and OCC. This report will also be available at no charge on our website at http://www.gao.gov. Should you or your staff have questions concerning this report, please contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VII. Our objectives in this report were to examine: (1) trends in the commercial real estate (CRE) lending markets, including changes in the level of credit and concentration risk in the markets, and (2) actions federal banking regulators took through their examinations to help ensure that banks with CRE concentrations are effectively managing the related risks. To examine trends in the CRE lending markets, we reviewed academic literature and prior GAO work and interviewed officials from the federal banking regulators and private data providers. Specifically, we interviewed officials at the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) to help identify potential indicators of risk in CRE markets. To further inform our assessment of risk, we reviewed prior GAO work on the lessons learned from prior banking crises and the use of early warning models for monitoring the financial system. We also reviewed academic research on early warning models of banking and real estate-related crises. To report trends and assess risk, we reviewed and analyzed a range of data that we considered to be reflective of various aspects of risk in CRE lending markets. Specifically, we reviewed and analyzed commercial property vacancy data from REIS (a private commercial real estate data provider); commercial property construction data from the U.S. Census Bureau; data on delinquencies and charge-offs on bank CRE loans from the Federal Reserve; data on commercial property prices and capitalization rates from Real Capital Analytics (a private commercial real estate data provider); FDIC data on bank CRE lending; and Federal Reserve data on underwriting standards. We evaluated trends in these data and used a subset of these data to estimate several predictive models of aggregate losses on bank CRE loans. (See app. II for more information on our predictive models.) To examine actions taken by federal regulators to help ensure that banks with high CRE concentrations are effectively managing the related risks, we reviewed and analyzed their relevant guidance and regulations on bank CRE lending, examination policies and procedures (e.g., examination manuals and modules), studies and other publications on risks in the banking industry, and formal enforcement actions taken from 2013 through 2016 for CRE-related matters. In addition, we analyzed Consolidated Reports of Condition and Income data from SNL Financial for the period from 2011 through 2016 to calculate banks’ construction and land development (CLD) and CRE concentrations during the period. Specifically, we used the concentration formulas in the 2006 CRE concentration guidance (jointly issued by the federal banking regulators) to calculate banks’ CLD and CRE concentrations and identify banks whose CRE concentrations exceeded, in full or in part, the guidance’s CRE concentration thresholds during part or all of the time frame. Based on whether the banks’ CRE concentrations exceeded the thresholds and other criteria discussed below, we selected a nongeneralizable sample of 40 banks overseen by FDIC, the Federal Reserve, or OCC. For the banks in our sample, we requested from the regulators copies of the reports of examination and, if available, related workpapers prepared by the regulators based on their full-scope examinations of the banks done from 2013 through 2014, and from 2015 through 2016. In addition to using banks’ CRE concentrations as a basis to select examinations, we judgmentally selected a nonprobability sample of banks based on the following criteria: Total asset size: We considered the size of the banks based on their total assets and selected banks from each of the following three ranges: (1) banks with $1 billion or more in total assets, (2) banks with $100 million or more but less than $1 billion in total assets, and (3) banks with less than $100 million in total assets. Primary regulator: We considered the primarily regulator of the banks and selected a sample of 40 banks that resulted in a total of 20 examinations to review from each regulator. Geographic distribution: We selected banks to ensure that at least one bank was from each of the four regions of the U.S. Census and each of the nine divisions within those regions. Based on the 40 banks we selected, we reviewed and analyzed 54 reports of examination and, if available, the related workpapers. We analyzed the examinations using criteria or other requirements specified in the 2006 CRE guidance jointly issued by the regulators and their examination policies and procedures. We did not review six examinations of banks supervised by the Federal Reserve. We also interviewed officials from FDIC, Federal Reserve, and OCC, and from a national banking association about bank CRE lending and applicable CRE guidance and requirements. For the data we analyzed under both of our objectives, we took a number of steps to assess the reliability of the data, including interviewing data providers; corroborating trends across multiple data sources; reviewing related documentation; inspecting data for missing values, outliers, or other errors; and reviewing relevant, prior GAO work. We determined that these data were sufficiently reliable for our reporting objectives. We conducted this performance audit from January 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We developed and estimated several models of aggregate losses on bank commercial real estate (CRE) loans. These models attempt to predict future aggregate charge-offs using contemporary indicators of potential risks. We incorporated indicators of risk based on the cross- country research literature on early warning models of banking risk and prior GAO work on identifying early warning models as tools that could assist financial regulators in assessing risk. One study summarized the overall intuition for models of this class in the following way: “imbalances manifest themselves in the coexistence of unusually rapid cumulative growth in private sector credit and asset prices.” Our results were consistent with this concept and extend the aggregate early warning model literature to a sectoral model. As such, our models incorporate measures of CRE property prices, bank lending volumes, and bank loan underwriting standards. The models predict charge-offs 2–3 years into the future (the dependent variable is the average charge-off rate for 8 through 11 quarters into the future), using commercial bank charge-off rates from the Board of Governors of the Federal Reserve System (Federal Reserve), first quarter 1991 to second quarter 2017. (See below for an illustrative regression equation for one of these models.) We began with two model variations, one based on the levels of key variables and the other based on their growth rates, using the following independent variables, respectively: “Level” model: Level of CRE prices to gross domestic product (GDP), level of bank CRE lending to GDP, the interaction of the level of CRE prices and lending, and the net percentage of banks tightening underwriting standards on CRE loans. “Growth” model: Growth rate of CRE prices over the last year, growth rate of bank CRE lending over the last year, interaction of price and lending growth, and the net percentage of banks tightening underwriting standards on CRE loans. By inspection, the model based on levels also captured key aspects of the evolution of aggregate losses on bank CRE loans in recent decades—for example, low charge-offs prior to the crisis, the rapid increase during crisis, and very low charge-offs in recent years. In this model higher losses are predicted by tightening underwriting standards, and the interaction of (i.e., simultaneous increase in) the level of CRE prices and the level of CRE lending. The bulk of the explanatory power of the model appears to come from the interaction of the level of CRE prices and the level of CRE lending—consistent with Borio and Drehmann’s view that the coexistence of rapidly increasing credit and prices is associated with greater risk. These results are also consistent with a more general theory, for example, that periods of economic stability induce greater risk-taking over time, bidding up asset prices and loosening underwriting standards until ultimately increased valuations become unsustainable, prices fall, and borrowers begin to default. We estimated a number of additional models for robustness, to determine if goodness-of-fit and forecasts could be improved markedly, and to assess the degree of forecast uncertainty. For example we estimated a model with a censored dependent variable and used information criteria to select models that combined elements from our initially separate models based on growth rates and levels as well as a model that includes current charge-offs. In figure 7, we report the general trend in expected future charge-offs as well as convey forecast uncertainty based on differences in the forecasts of three of these models. In figure 8, we convey forecast uncertainty based on the 75 percent confidence interval for a combined model that we selected based on information criteria. Implicit in this exercise is the assumption that the data-generating process is reasonably stable—as a result, structural change associated with new financial products, new risk management tools, and new legal and regulatory frameworks could reduce the stability of the data- generating process. We interpret our results and forecasts in light of these potential limitations. Specifically, we do not interpret model results as concrete, precise predictions of aggregate commercial real estate losses but rather as an additional, general indication of the degree of risk in bank CRE lending. We mitigate risks associated with estimating this type of model with appropriate diagnostics, out-of-sample testing, and by developing the model in the context of the well-established early warning literature. That said, some inevitable limitations remain, including the potential omission of important risk factors and other approximations associated with our specification (e.g., our choice of a linear functional form). In addition, diagnostics for detecting nonstationary time series are imperfect, especially with small sample sizes, which may inflate our measures of statistical significance and traditional goodness-of-fit measures like r- squared. These biases may be present, however, in models that still generate useful predictions. In this “small data” context there is also risk of fitting (or over-fitting) the model to predict a particular credit event— though, again, this risk is mitigated somewhat in the context of the broad cross-country early warning literature and the use of out-of-sample testing. In addition to the contact named above, Richard Tsuhara (Assistant Director), Tarek Mahmassani (Analyst in Charge), Abigail Brown, Tarik Carter, M’Baye Diagne, Michael Hoffman, Risto Laboski, Marc Molino, Jessica Sandler, Jennifer Schwartz, and Andrew Stavisky made significant contributions to this report.", "summary": "In 2006, federal banking regulators jointly issued guidance that described their expectations for sound risk management practices for banks with CRE concentrations. The guidance includes two CRE thresholds that regulators use to identify banks that are potentially exposed to significant CRE concentration risk and could be subject to greater supervisory scrutiny. Concentrations in CRE loans at U.S. banks have been steadily increasing—raising safety and soundness concerns. In December 2015, the regulators jointly issued a public statement to remind banks of the 2006 CRE guidance. In light of the joint 2015 statement and GAO's ongoing monitoring of regulatory efforts to identify and respond to emerging threats to the banking system, GAO examined (1) trends in the CRE lending market, including changes in risk, and (2) actions taken by regulators to help ensure that banks with CRE concentrations are effectively managing the related risks. To address these issues, GAO analyzed CRE-related data; reviewed agency policies and guidance; and reviewed a nongeneralizable sample of 54 bank examinations conducted from 2013 through 2016 based on the banks' CRE concentrations, total assets, primary regulator, and geographic location. GAO also interviewed officials from the federal banking regulators. While the commercial real estate (CRE) sector has recovered since the 2007–2009 financial crisis, GAO's trend and econometric analyses generally indicate that risk in CRE lending by banks has increased over the past several years. Since the early 2000s, community banks have tended toward providing CRE loans more than other kinds of loans. Indicators of CRE market conditions and loan performance have been improving since 2011. At the same time, GAO's analyses of changes in CRE underwriting standards, property prices, and other data suggest that credit and concentration risks have increased in bank CRE lending. For example, the number of banks with relatively high CRE concentrations—measured by the ratio of a bank's CRE loans to its total capital—has been increasing. In addition, commercial property prices have been increasing rapidly, and property valuations also have risen in recent years. Similarly, GAO's predictive econometric models of CRE loan performance suggest that risk has increased, based largely on the simultaneous increase in bank CRE lending and CRE prices observed over the last several years, but is lower than the level associated with the 2007–2009 financial crisis. GAO found that federal banking regulators subjected banks with relatively high CRE concentrations to greater supervisory scrutiny based on its review of a nongeneralizable sample of 54 bank examinations covering 40 banks done by the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, and Office of the Comptroller of the Currency from 2013 through 2016. Of the 54 examinations that GAO reviewed, 41 of them covered banks with relatively high CRE concentrations. In all of these examinations, regulators examined whether the banks had adequate risk management practices and capital to manage their CRE concentration risk. In 26 of the 41 examinations, regulators did not find any risk management weaknesses. However, in 15 of the 41 examinations, regulators found the banks had weaknesses in one or more risk management areas, such as board and management oversight, management information systems, or underwriting. The regulators generally communicated their findings to the banks in the reports of examination and directed the banks to correct their risk management weaknesses.", "document_type": "gao"}
{"report": "Federal agencies can respond to a disaster when effective response and recovery are beyond the capabilities of the affected state and local governments. In such cases, the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) permits the President to declare a major disaster in response to a request by the governor of a state or territory or by the chief executive of a tribal government. Such a declaration is the mechanism by which the federal government becomes involved in funding and coordinating response and recovery activities. At least 30 federal agencies administer disaster assistance programs and activities. Under the National Response Framework, which governs any type of federal disaster or emergency response, the Department of Homeland Security (DHS) is the federal department with primary responsibility for coordinating disaster response. Within DHS, FEMA has lead responsibility and provides three principal forms of funding for disaster recovery—Individual Assistance, Public Assistance, and Hazard Mitigation. The Individual Assistance Program provides financial assistance directly to survivors for expenses that cannot be met through insurance or low-interest loans, such as temporary housing, counseling, unemployment compensation, or medical expenses. The Public Assistance Program provides federal disaster grant assistance to state, local, tribal, and territorial governments and certain types of nonprofit organizations for debris removal, emergency protection, and the restoration of facilities. The Hazard Mitigation Program is designed to help communities prepare for and recover from future disasters. It funds a wide range of projects, such as purchasing properties in flood-prone areas, adding shutters to windows, and rebuilding culverts in drainage ditches. The Small Business Act also authorizes SBA to make direct loans to help businesses, nonprofit organizations, homeowners, and renters repair or replace property damaged or destroyed in a federally declared disaster. HUD uses data from FEMA and SBA to make decisions on the amount of CDBG-DR funding to allocate to affected communities. The Housing and Community Development Act of 1974 created the CDBG program to develop viable urban communities by providing decent housing and a suitable living environment and by expanding economic opportunities, principally for low- and moderate-income persons. Program funds can be used for housing, economic development, neighborhood revitalization, and other community development activities. Because the CDBG program already has a mechanism to provide federal funds to states and localities, the program is widely viewed as a flexible solution to disburse federal funds to address unmet needs in emergency situations. When disasters occur, Congress often appropriates additional CDBG funding (CDBG-DR) through supplemental appropriations. These appropriations often provide HUD the authority to waive or modify many of the statutory and regulatory provisions governing the CDBG program, thus providing states with greater flexibility and discretion to address recovery needs. Eligible activities that grantees have undertaken with CDBG-DR funds include relocation payments to displaced residents, acquisition of damaged properties, rehabilitation of damaged homes, rehabilitation of public facilities such as neighborhood centers and roads, and hazard mitigation. In numerous appropriations from fiscal year 1993 to 2018, Congress provided more than $86 billion in CDBG-DR funds to help states recover from federal disasters. For example, Congress directed CDBG-DR funds toward recovery and rebuilding efforts in the Gulf Coast after Hurricanes Katrina, Rita, and Wilma in 2005; New York after the September 11th terrorist attacks in 2001; North Dakota, South Dakota, and Minnesota after the floods in 1997; Oklahoma City after the 1995 bombing of the Alfred Murrah Building; Southern California after the 1994 Northridge earthquake; and Florida after Hurricane Andrew in 1992. As of January 2019, HUD was overseeing 106 CDBG-DR grants totaling more than $54 billion. Once Congress appropriates CDBG-DR funds, HUD publishes notices in the Federal Register to allocate the funding appropriated to affected communities based on unmet need, and to outline the grant process and requirements for the grantees’ use of the funds. In 2018, HUD allocated the vast majority of the 2017 funds to four agencies: Puerto Rico’s Department of Housing (Departamento de la Vivienda), the Texas General Land Office, the U.S. Virgin Islands Housing Finance Authority, and Florida’s Department of Economic Opportunity. Table 1 shows the CDBG-DR funding that HUD had allocated to the 2017 grantees as of February 2019 and the remaining funds to be allocated. The funding was allocated in two portions, one in February 2018 and one in August 2018. The nearly $33 billion in funding that Puerto Rico, Texas, the U.S. Virgin Islands, and Florida are to receive for recovery from Hurricanes Harvey, Irma, and Maria is almost 60 times more than the total amount of traditional CDBG funds they received in the last 5 years (see table 2). The 2017 CDBG-DR funding that Puerto Rico, Texas, and Florida received also greatly exceeded their most recent prior CDBG-DR grants. In 2008, Puerto Rico was allocated approximately $30 million in CDBG-DR funds in response to Hurricane Ike. Between 2016 and 2017, Texas was allocated approximately $313.5 million in CDBG-DR funds in response to floods that occurred in 2015 and 2016. In 2016, Florida was allocated approximately $117.9 million in CDBG-DR funds in response to Hurricanes Hermine and Matthew. The U.S. Virgin Islands had not previously received CDBG-DR funds. HUD’s Office of Community Planning and Development (CPD) administers the traditional CDBG program and CDBG-DR funds. Before 2004, existing CPD staff administered CDBG-DR. In 2004, HUD established the Disaster Recovery and Special Issues Division within CPD’s Office of Block Grant Assistance to manage large CDBG-DR grantees with allocations of $500 million or more. CPD field office staff generally manage all other grantees. Other HUD officials are also involved with CDBG-DR, including the Departmental Enforcement Center and Office of Policy Development and Research. The Departmental Enforcement Center works with several of HUD’s program areas, including CPD, to ensure that federally funded programs operate according to program guidelines and regulations. For example, center staff help CPD review grantees’ financial processes and procedures. The Office of Policy Development and Research maintains current information on housing needs, market conditions, and existing programs and conducts research on community development issues. Its staff use this information to help CPD award CDBG-DR funds. As of January 2019, all four grantees had entered into grant agreements with HUD for their initial 2017 CDBG-DR funds, but they needed to take additional steps before disbursing funds to individuals affected by the 2017 hurricanes. According to the February 2018 Federal Register notice allocating the initial $7.4 billion in CDBG-DR funds, grantees were required to take a number of steps before they could enter into a grant agreement with HUD and begin expending funds (see fig.1). These steps had associated deadlines, which the four grantees generally met. The steps grantees were required to take before they could enter into a grant agreement included the following: Financial processes and procedures. Grantees were required to document their financial controls, procurement processes, and grant management procedures (including those for preventing the duplication of benefits, ensuring timely expenditures, and preventing and detecting fraud, waste, and abuse). By the end of September 2018, HUD had certified that all four grantees had proficient financial controls, procurement processes, and grant management procedures. Implementation plan. Grantees were required to submit an implementation plan that describes their capacity to carry out the recovery and how they will address any capacity gaps. By the end of September 2018, HUD had approved the implementation plans and capacity assessments of all four grantees. Action plan. Finally, grantees were required to submit an action plan for disaster recovery that includes an assessment of unmet needs for housing, infrastructure, and economic revitalization and a description of activities intended to meet these needs. By the end of July 2018, all four grantees had approved action plans. Once these steps were completed, HUD and the grantees could sign grant agreements, and the grantees could begin drawing down funds. All four of the grantees had signed grant agreements with HUD by the end of September 2018. The February 2018 Federal Register notice required grantees to begin drawing down funds by August 13, 2018, but a HUD official told us that the grantees were unable to meet this requirement because HUD had not yet finalized an agreement with three grantees by that date and had just entered into a grant agreement with Florida. The grant agreements require grantees to expend their entire CDBG-DR allocations on eligible activities within 6 years of signing their grant agreements. According to HUD officials, this requirement has been included in grant agreements since 2015 to help speed up the expenditure of funds. (As discussed in the last section of this report, some CDBG-DR grantees have been slow to expend their funds.) As of January 2019, the grantees had generally not drawn down funds for individuals affected by the 2017 hurricanes because they were designing and setting up the activities to assist these individuals. Specifically, as of January 2019, Texas had drawn down approximately $18 million and Florida had drawn down approximately $1 million of their allocations generally for administrative and planning expenses. The other two grantees had not drawn down any of their February 2018 allocations (see table 3). As of the end of 2018, the grantees were taking steps to design and set up the activities approved in their action plans and planned to implement activities in stages. Florida. On September 24, 2018, Florida opened the registration period for a program that provides rehabilitation or replacement assistance to owner-occupied homes and rental properties impacted by Hurricane Irma. According to Florida officials, residents have until March 29, 2019, to register. The purpose of the registration process is for Florida to evaluate the potentially eligible population. According to Florida officials, Florida began taking applications from registrants on November 27, 2018, and staff were conducting eligibility reviews on completed applications as of late December 2018. Puerto Rico. Puerto Rico officials said they planned to stagger the implementation of their approved CDBG-DR activities. They would begin with activities they considered to be critical such as providing assistance for the rehabilitation, reconstruction, or relocation of owner-occupied units and gap financing for properties being developed with Low-Income Housing Tax Credits. Officials said they planned to begin taking applications by the end of calendar year 2018 or early 2019 but that the start dates depended on HUD’s approval of the activities’ policies and procedures. Texas. On July 23, 2018, Texas began taking applications for a program that provides assistance for the rehabilitation, reconstruction, and new construction of affordable multifamily rental housing. Texas officials said they expected to begin signing agreements with selected developers early in calendar year 2019. In addition, on November 27, 2018, Texas began taking applications for a program that provides assistance for the rehabilitation and reconstruction of owner-occupied single-family homes. In late December 2018, Texas officials told us they were reviewing the more than 1,500 completed applications for program eligibility. U.S. Virgin Islands. The U.S. Virgin Islands planned to first implement two housing programs that provide assistance for the rehabilitation or reconstruction of storm-damaged residential owner- occupied units and for the construction of new homes for first-time homebuyers. U.S. Virgin Islands officials stated that as of November 2018, they were working on policies and procedures for the subrecipients that will help administer these programs and that they planned to launch both programs early in calendar year 2019. The U.S. Virgin Islands also planned to provide assistance for the rehabilitation or construction of affordable rental housing units but did not provide information on when it planned to implement this activity. In addition, officials said they anticipate funding some infrastructure projects in early 2019. To meet the requirement for certification of financial controls, procurement processes, and grant management procedures (financial processes and procedures), all four 2017 grantees told us that they generally used processes and procedures that were already in place to administer prior CDBG-DR grants or other HUD funds. For example, Texas and Florida asked HUD to generally rely on the certification and supporting documentation of financial processes and procedures that they had submitted for previous CDBG-DR grants. U.S. Virgin Islands officials told us they generally relied on the financial processes and procedures they have in place for the administration of the traditional CDBG program. Similarly, Puerto Rico officials told us that they relied on existing financial processes and procedures they have in place for other federal funds, including other HUD and FEMA funds. We and the HUD OIG have ongoing or completed work on controls over CDBG-DR funds. We have ongoing work examining, among other things, HUD’s internal control plan for the 2017 appropriated disaster funds, including CDBG-DR funds. In response to a congressional request, the HUD OIG reviewed the ability of the grantees in Texas and Florida to follow applicable federal regulations and requirements. In its reports on Texas and Florida, the HUD OIG identified concerns with grantees’ financial processes and procedures. Texas. In a May 2018 report, the HUD OIG stated that Texas had prior audit findings related to procurement that the agency should avoid repeating. For example, for a prior CDBG-DR grant, the HUD OIG found that Texas did not show how its procurement process was equivalent to federal requirements. Among other things, the HUD OIG recommended that HUD require Texas to ensure that its procurement and expenditure policies and procedures are implemented and working as designed. Texas responded that it would clarify the procurement processes in its financial submission if needed. Florida. In September 2018, the HUD OIG found weaknesses in Florida’s controls over its drawdown of funds and classification of costs. For example, it found that for a prior CDBG-DR grant, Florida drew down more funds than it expended on administrative and planning costs, and that the grantee charged $30,000 to a prior CDBG-DR grant that should have been charged to its 2017 CDBG-DR grant. The report acknowledged that Florida had taken steps to address this concern, but the OIG recommended, among other things, that the grantee establish adequate financial controls to ensure that its disaster funds are properly classified and allocated to the correct grant. Florida agreed with the recommendation, noting that it had corrected the discrepancy the HUD OIG identified during the audit and stating that it would continue to improve its internal controls. In addition, Florida officials told us that they have worked with HUD staff to ensure that financial and programmatic staff are trained to correctly classify costs and verify that they are accurately allocated and recorded. According to HUD OIG officials, they plan to begin similar reviews of Puerto Rico and the U.S. Virgin Islands in early calendar year 2019. The February 2018 Federal Register notice required grantees to assess staff capacity and identify necessary personnel for the administration of CDBG-DR funds. To increase their capacity to manage the 2017 CDBG-DR funds, grantees made changes to their organizational structure. Florida. The Florida Department of Economic Opportunity created a disaster recovery office to administer the 2017 CDBG-DR grants because, according to Florida officials, the grants were significantly larger than its traditional CDBG grant and prior CDBG-DR grants. Puerto Rico. The Puerto Rico Department of Housing, which had not administered prior CDBG or CDBG-DR funding, created a disaster recovery division to manage its CDBG-DR allocation. Texas. The Texas General Land Office, the lead state agency for long-term disaster recovery, established a single point of contact for its subrecipients and created a planning team. Authority, which administers the territory’s traditional CDBG program, created a division to manage its CDBG-DR allocation. Grantees still need to fill many vacant positions to administer the 2017 CDBG-DR funds. All of the grantees planned to hire more in-house staff (see table 4). As of December 2018, about 48 percent of the needed full- time equivalent positions at the four grantees were vacant—with vacancies at individual grantees ranging from about 15 percent for Texas to about 78 percent for Puerto Rico. These positions will be funded with CDBG-DR funds. All four 2017 grantees also planned to use contractors to help fill gaps in expertise and operational capacity. Florida. According to Florida officials, Florida had hired three vendors to help administer its CDBG-DR funds as of December 2018. They stated that the first vendor employed two staff to conduct an organizational study for Florida to help improve staffing efficiencies, the second vendor had 250 staff working to implement Hurricane Irma programs and activities, and the third vendor supplied five project management staff to support CDBG-DR activities. The officials also stated Florida plans to procure third-party monitoring services, contract staff services, and additional support to meet audit and compliance requirements. Puerto Rico. Puerto Rico hired two contractors to help it set up the grant. Specifically, 20 contract staff assisted Puerto Rico with development of its action plan. Puerto Rico also planned to hire vendors to help administer the territory’s CDBG-DR activities, but they had not yet determined the number of contract staff needed. Texas. According to Texas officials, Texas hired eight vendors to, among other things, administer the state’s housing assistance activities and track the progress of its CDBG-DR activities. As of December 2018, these vendors had 192 staff. U.S. Virgin Islands. According to a U.S. Virgin Islands official, the U.S. Virgin Islands hired a contractor to help set up the grant, including assisting with the development of its action plan. The official also told us that the U.S. Virgin Islands planned to hire contractors to help support the implementation of its CDBG-DR activities but it had not yet determined the number of contract staff needed. The HUD OIG has raised concerns about the capacity of two of the 2017 CDBG-DR grantees. In a May 2018 report, the HUD OIG found that Texas did not have enough staff to adequately administer its 2017 CDBG- DR funds. At the time of its review, the HUD OIG found that 37 percent of the grantee’s full-time positions were vacant. Texas responded that it had been actively determining optimal staffing levels and hiring timeframes, but did not have a reserve budget to hire staff before receiving its 2017 allocation. Similarly, in a September 2018 report, the HUD OIG recommended that Florida continue to fill its vacancies and assess staffing resources as it prepared for additional disaster funds. Florida accepted the recommendation and stated that it was taking steps to assess and address staffing needs. As discussed in the last section of this report, building the capacity needed to manage large grants has historically been a challenge for CDBG-DR grantees. Grantees were also required to submit an action plan for disaster recovery that includes an assessment of unmet needs in housing, infrastructure, and economic revitalization. The purpose of these unmet needs assessments was to help grantees understand the type and location of community needs and to target their CDBG-DR funds to those areas with the greatest need. We focused on grantees’ estimates of unmet housing needs because the February 2018 Federal Register notice required grantees to primarily use their initial CDBG-DR allocation to address their unmet housing needs. Before grantees developed their unmet needs assessments, HUD estimated their unmet needs to allocate the appropriated CDBG-DR funds. HUD calculated unmet housing needs as the number of housing units with unmet needs times the average estimated cost to repair those units less repair funds already provided by FEMA and SBA. HUD relied on FEMA Individual Assistance data to estimate the number of affected owner-occupied and rental units and used SBA data on disaster loans to estimate repair costs. HUD developed five damage categories to determine the level of damage housing units sustained: minor-low, minor- high, major-low, major-high, and severe. Because both acts that appropriated the CDBG-DR funds require HUD to allocate funding to the “most impacted and distressed areas,” the agency only included owner- occupied and rental units that had major or severe damages in its estimate of unmet housing needs. To determine the average cost of repairs for owner-occupied and rental units in each damage category, HUD used SBA data rather than FEMA data. HUD said SBA damage assessments better reflect the full cost to repair a unit because the assessments are based on the total physical loss to the unit. In contrast, FEMA assesses damage based on the cost to make the unit habitable, and therefore its estimates are generally lower than SBA’s estimates. To estimate unmet needs, HUD then multiplied the number of units it identified as having major-low, major-high, and severe damage by corresponding SBA average cost-of-repair amounts (see table 5). To estimate the needs of owner-occupied and rental units for their unmet needs assessments, the four grantees generally used FEMA and SBA data but used different methodologies to analyze these data. Below is an overview of the methodology each of the 2017 CDBG-DR grantees used to estimate housing needs for owner-occupied and rental units. Florida. Florida included all SBA applicants and FEMA applicants with units that incurred minor damage as defined by HUD’s two lowest damage categories, neither of which was included in HUD’s estimate. Florida did not use HUD repair estimates; instead, it developed its own estimates using SBA data. Puerto Rico. Like Florida, Puerto Rico included all SBA applicants and FEMA applicants with minor damage. Puerto Rico also included an estimate of units with “potential unmet needs.” Puerto Rico calculated its own cost-of-repair estimates based on SBA data. Texas. Texas’ methodology was the same as HUD’s methodology. Specifically, Texas included FEMA applicants with major and severe damage and used the repair estimates HUD provided in the February 2018 Federal Register notice. U.S. Virgin Islands. The U.S. Virgin Islands included units that FEMA did not inspect and units with minor damage, neither of which HUD included in its estimate. The U.S. Virgin Islands used estimates HUD provided in an April 2018 memorandum to determine the repair costs. Because three of the grantees tailored their unmet needs estimates for their individual planning purposes, aggregating these estimates would not be appropriate because the estimates do not provide comparable measures of unmet housing needs. Although we did not conduct an extensive assessment of the estimates, we performed some limited analysis to illustrate the impact of some of the grantees’ methodological decisions. The three grantees’ decisions expanded the definition of unmet housing needs, which resulted in higher estimates compared to HUD’s methodology. Including FEMA applicants with minor damage. Florida, Puerto Rico, and the U.S. Virgin Islands included FEMA applicants with minor damages that fell into HUD’s two lowest categories of damage. Including these applicants increased the needs estimate for the U.S. Virgin Islands by approximately $431 million. Our analysis showed that including these applicants increased Puerto Rico’s needs estimate by at least $1.5 billion. Grantees said that including FEMA applicants with the two lowest levels of damages provided a more accurate representation of the needs for owner-occupied and rental units. For example, Puerto Rico’s action plan states that these applicants were unlikely to receive other federal or local assistance to repair their homes, and therefore would have needs. HUD officials told us that grantees have the discretion to use allocated funds to assist applicants with less severe damage as long as those individuals have unmet needs. Including SBA applicants that were denied assistance. Florida and Puerto Rico included SBA applicants whose units were not inspected because they were denied disaster loans, although the extent to which these units sustained damages was unknown. Florida estimated approximately $1.8 billion and Puerto Rico approximately $1.5 billion in housing needs for these SBA applicants. Florida and Puerto Rico officials told us that they included these applicants because being denied did not necessarily mean that these applicants did not experience losses. For example, SBA applicants can be denied loan assistance based on their inability to repay, despite potentially having unmet needs. Similarly, HUD officials explained that they consider applications that SBA has denied as a potential indicator of unmet needs. Including FEMA applicants without verified losses. Florida included FEMA applicants without verified losses and the U.S. Virgin Islands included units that FEMA did not inspect. Absent verified losses and inspections, they assumed the FEMA applicants had some level of unmet needs. Florida’s action plan states that it included FEMA applicants without verified losses, but the plan did not include the number of such applicants or their associated housing needs. The U.S. Virgin Islands’ action plan states that it included 3,774 such FEMA applicants in its estimate of damaged homes, but the plan did not include the associated repair costs. According to Florida and Virgin Islands officials, they included these applicants to account for what they determined was underrepresentation of impacted populations. According to HUD officials, grantees typically conduct their own inspections or rely on SBA inspections in an effort to capture more comprehensive damage estimates. Including owner-occupied and rental units with “potential unmet needs.” Puerto Rico included an estimate of “potential unmet housing needs” to account for owners and renters that did not apply to FEMA and FEMA applicants without verified losses. Absent applications or verified losses, Puerto Rico assumed that nonapplicants and applicants without verified losses had some level of unmet needs. Puerto Rico estimated these potential unmet needs to be approximately $5.8 billion. HUD officials told us that there were a significant number of FEMA applicants who were denied in Puerto Rico due to an inability to prove property ownership. In general, HUD officials stated that the methodologies HUD and grantees used to develop unmet needs estimates did not need to be the same. This is because HUD’s estimate of unmet needs was used to allocate funds to grantees and grantees’ estimates were used to target their funding. They also noted that there was more than one way to determine unmet needs and that it was acceptable for grantees to use different methodologies to reflect their local circumstances. Although grantees’ estimates of unmet needs do not affect the amount of CDBG- DR funds that they are allocated, the flexibility grantees have in defining unmet needs increases the importance of HUD’s review of these estimates. As discussed in the next section of this report, HUD’s review of these estimates was limited. HUD lacks adequate guidance for its staff to use when determining the adequacy of a grantee’s financial processes and procedures and assessments of its capacity and unmet needs. Financial processes and procedures. HUD staff use a checklist to assess a grantee’s financial controls, procurement processes, and procedures for prevention of duplication of payments to detect fraud, waste, and abuse of funds (financial certification checklist). The questions on this checklist focus on whether certain information required in the February 2018 Federal Register notice was included. For example, as figure 2 shows, the financial certification checklist asks HUD staff to determine whether a grantee has attached its procedures for preventing duplication of benefits and verifying all sources of disaster assistance received. However, it does not ask HUD staff to assess the adequacy of the grantee’s approach for verifying all sources of disaster assistance. In addition, the financial certification checklist, which is framed as a series of “yes” or “no” questions, does not include guidance that the HUD reviewer must consider. For example, the certification checklist asks whether the grantee has standards to maintain “adequate control” over all CDBG-DR funds but does not define what it means to maintain adequate control. HUD officials told us that HUD reviewers do assess the quality of grantees’ submissions during their reviews. They stated that they request additional information from grantees if they deem the information initially submitted to be incomplete or unclear. However, in the absence of additional guidance for HUD staff, it is unclear how they assess quality on a consistent basis. Capacity assessments. HUD’s checklist for reviewing management capacity (capacity checklist) assesses whether the grantee included certain information required in the February 2018 Federal Register notice. For example, the capacity checklist asks whether a grantee provided a timeline for addressing the gaps it identified in its capacity assessment. However, it does not require the reviewer to evaluate the adequacy of the assessment or the timeline (see fig. 3). Similarly, the capacity checklist asks whether the grantee planned to designate personnel for program management, procurement, monitoring, and other functions but does not require the reviewer to assess the adequacy of the number of personnel. One question asks whether the personnel will be “in proportion to applicant population” but does not cite the required proportion. As discussed above, HUD officials told us that HUD reviewers do assess the quality of grantees’ submissions during their reviews, but in the absence of additional guidance for staff, it was unclear how they determine that documents are adequate. Unmet needs assessments. HUD staff also use a checklist to assess the grantees’ action plans, including their assessments of unmet needs (see fig. 4). The questions ask the reviewer to determine whether the needs assessment covers housing, infrastructure, and economic revitalization and to estimate the portion of those three areas to be funded from other sources, as required in the February 2018 Federal Register notice. However, the reviewer is not required to evaluate the reliability of the grantees’ assessments or estimates, and HUD does not provide additional guidance for staff to help assess the reliability of the information provided. HUD officials said they have other documentation that supplements the checklists. However, we found that documentation lacked sufficient information for assessing the submissions. For example: February 2018 Federal Register notice. According to HUD officials, the notice is the primary source of guidance for HUD reviewers. They stated that the notice defines “proficient financial processes and procedures.” However, the February 2018 notice states that grantees must submit certain audits, financial reports, and their financial standards but does not describe how HUD reviewers should assess the quality of those financial standards. In addition, the vague language in the checklist often mirrors the February 2018 notice. For example, neither document tells staff how to determine whether “the overall effect of the standards provide for full and open competition.” Regulations for the traditional CDBG program. According to HUD officials, reviewers can consult existing federal regulations governing the development and review of plans required under the traditional CDBG program when reviewing grantees’ action plans, including unmet needs assessments. However, both the February 2018 and August 2018 Federal Register notices waive the requirement for an action plan under the CDBG regulation. The notices instead require CDBG-DR grantees to submit an action plan for disaster recovery specifically that includes an unmet needs assessment. Another reason HUD cited for not having additional guidance is the reviewers’ years of professional experience. A senior HUD official said the staff members who reviewed Florida and Texas’ submissions were senior CPD staff who had been CDBG-DR grant managers since at least 2014. The same senior official, a CPD specialist since 1998, told us that she reviewed the submissions from Puerto Rico and the U.S. Virgin Islands. However, experienced staff may leave their positions, while the guidance for reviewing grantees’ submissions would remain. The acts appropriating CDBG-DR funds for the 2017 disasters require HUD to certify that a grantee has proficient financial controls, processes, and procedures. In addition, both acts require grantees to submit action plans to the HUD Secretary. The February 2018 Federal Register notice requires that grantees demonstrate that they have capacity to effectively manage the CDBG-DR funds and that their action plans include an assessment of unmet needs. Further, federal internal control standards state that management should use quality information to achieve the entity’s objectives. For example, management is to obtain relevant data from reliable internal and external sources in a timely manner based on the identified information requirements. Federal internal control standards also state that management should (1) internally communicate the necessary quality information to achieve the entity’s objectives and (2) establish and operate monitoring activities to monitor the internal control system and evaluate the results. As discussed in the last section of this report, prior grantees’ lack of adequate financial processes and procedures and capacity led to challenges, such as improper payments and the need to acquire additional expertise. Further, all four grantees’ initial assessments showed that their CDBG-DR allocations will not meet their unmet needs. Having reliable estimates of unmet needs that will not be met with the appropriated $35.4 billion is important because Congress could use these estimates to determine if further appropriations are necessary. Further, grantees need accurate information to appropriately address unmet needs. Without additional guidance for HUD staff to use in assessing the quality of grantees’ submissions, HUD cannot provide reasonable assurance that its reviews of these submissions are thorough and consistent. In their reviews of the 2017 grantees’ financial processes and procedures and assessments of capacity and unmet needs, HUD’s reviewers did not document their conclusions. According to a HUD official, the final completed checklists are the official records of the agency’s certification of grantees’ financial processes and procedures and its review of capacity and unmet needs assessments. However, the checklists do not require a description of the basis for answering “yes” to a question. The checklists require HUD reviewers to describe the basis for their conclusion for “no” answers only. As a result, the final checklists that we reviewed, which showed a “yes” to each question, did not explain how the reviewer concluded that grantees’ submissions were sufficient. A HUD official told us that outside of the official administrative record, there is documentation on the agency’s communication with grantees. However, because this documentation was not readily available for all four grantees, HUD provided examples of written feedback given to one grantee. Our review of this documentation showed variation in the extent to which the reviewer requested information about the quality of the information provided. In written feedback that HUD provided to the grantee on its capacity assessment, the HUD reviewer asked for more comprehensive analysis of staffing needs and to include a rationale for the number of staff to be assigned to each function. Yet, other feedback HUD provided focused on whether certain information was included rather than on the quality of the information. For example, when reviewing the grantee’s financial processes and procedures, the reviewer pointed out that the grantee had not shown that it had addressed prior audit findings. In another instance, the reviewer asked the grantee to include additional information in the section of its action plan on unmet needs, but did not focus on the grantee’s methodology. According to a HUD official, this documentation was not readily available for each grantee because it is not part of the official administrative record. Even if readily available, such documentation likely would not substantiate HUD’s conclusions that grantees’ submissions and estimates were sufficient. CPD’s monitoring handbook states that staff must document the basis for their conclusions during a monitoring review because “monitoring conclusions must be clear to persons unfamiliar with the participant, program, or technical area.” In addition, federal internal control standards require management to design control activities to achieve objectives in response to risk. One example of a control activity is clearly documenting transactions and other significant events in a manner that allows the documentation to be readily available for examination. According to a HUD official, documentation is limited and not readily available because CPD staff have many responsibilities in addition to the review of grantees’ submissions, such as assisting in the monitoring of prior CDBG-DR grants. However, it is important that HUD prioritize the documentation of its reviews. Without documenting the basis for its conclusions when reviewing grantees’ submissions, stakeholders and decision makers lack information on why HUD concluded that grantees’ financial processes and procedures and capacity and unmet needs assessments were adequate. HUD also misses an opportunity to leverage this information later to mitigate risk and inform its monitoring of grantees. HUD determined that the 2017 CDBG-DR grants posed high risk due to the size of the grants, but did not have a comprehensive plan to monitor these grants. First, HUD had not identified any unique risk factors associated with the 2017 grants that required additional attention. For example, HUD had not analyzed the potential risk of awarding a large grant to an entity that had little or no experience administering CDBG-DR funds. The agency also had not used any potential risks identified during its reviews of grantees’ financial processes and capacity assessments to inform its monitoring. Second, although HUD had plans to conduct onsite monitoring, it had not defined the scope of this monitoring. HUD provided a monitoring schedule that showed that the agency intended to conduct two monitoring visits and two technical assistance visits each to Florida, Texas, and the U.S. Virgin Islands in fiscal year 2019. Although the schedule shows only one monitoring visit for Puerto Rico, HUD officials told us that they also plan to conduct two monitoring visits and two technical assistance visits to Puerto Rico. Regarding the scope of monitoring visits, HUD officials said that staff consider where the CDBG- DR grantee is in the recovery process when identifying areas to be reviewed during monitoring. For example, they said that they tend to focus on grantees’ efforts to hire staff and develop policies and procedures during the first year and on grantees’ implementation of specific activities in the second year. Although HUD had these tentative plans for the early years of the grants, the agency had not documented them. According to HUD officials, as of November 2018 HUD had not developed a comprehensive monitoring plan because it had not yet completed the annual risk analysis process that it uses to determine the extent of monitoring for programs such as CDBG and CDBG-DR. According to HUD officials, this process is undertaken during the first quarter of each fiscal year. HUD guidance states that the purpose of this analysis is to provide the information needed for HUD to effectively target its resources to grantees that pose the greatest risk to the integrity of CDBG-DR, including identification of the program areas to be covered and the depth of the review. In comments on the draft report, HUD stated that it had completed its risk analysis and updated its monitoring schedule to include all the grantees it planned to visit in fiscal year 2019. HUD also stated that it had begun identifying monitoring strategies for all monitoring reviews that would occur from March 2019 through May 2019 and would develop the remaining strategies after the initial monitoring reviews. However, the risk analysis is of limited usefulness for new CDBG-DR grants because, based on HUD guidance, the risk analysis assumes that the grant has been active for several years. For example, a reviewer is to select the high-risk category if, within the past 3 grant years, the grantee had received two or more findings that are open, overdue, and unresolved; sanctions have been imposed on the grantee; or the grantee had not been monitored—all considerations that currently are moot for the 2017 grantees. Further, the risk analysis does not formally incorporate information HUD gleaned from its reviews of grantees’ financial processes and capacity assessments. For example, the risk analysis worksheet does not include questions about the extent to which HUD’s review of a grantee’s procurement processes and procedures raised any concerns. According to the February 2018 Federal Register notice, HUD will undertake an annual risk analysis and conduct on-site monitoring. Further, federal internal control standards state that management should establish and operate monitoring activities and evaluate results. The standards suggest that as part of monitoring, management identify changes that have occurred or are needed because of changes in the entity or environment. However, HUD does not have a monitoring plan that identifies the specific risk factors for each grantee and outlines the scope of its monitoring. A comprehensive monitoring plan would help HUD ensure that its oversight of grantees’ compliance with grant requirements focused on grantees’ areas of greatest risk. HUD has not conducted workforce planning to determine the number of staff it needs to monitor the large 2017 CDBG-DR grants and other outstanding grants. The growth in the number and dollar amount of CDBG-DR grants has created workforce challenges for HUD. The more than $35 billion in CDBG-DR funds Congress appropriated for the 2017 hurricanes was almost as much as HUD’s entire budget for fiscal year 2018. In addition, Congress appropriated more CDBG-DR funds to help with recovery from the 2018 Hurricanes Florence and Michael, and will likely appropriate more. As of October 2018, CPD’s Disaster Recovery and Special Issues Division had 24 permanent full-time staff. However, division officials told us that staffing had not increased at a rate commensurate with the increase in CDBG-DR grants due to budget constraints. Although the 2017 grants would be their priority for monitoring, they said that they still had a responsibility to oversee other grants. HUD officials told us that they planned to hire additional staff for the Disaster Recovery and Special Issues Division but that they had not finalized their hiring plans. In October 2018, a CPD official told us that in fiscal year 2018 HUD approved the hiring of 17 limited-term hires to be paid with supplemental disaster funds appropriated for HUD salaries and expenses. Division officials also told us that HUD had approved two permanent hires in fiscal year 2018, a financial analyst and a team leader for oversight of the Puerto Rico grantee. For fiscal year 2019, the CPD official said HUD was considering hiring five additional permanent staff for the division but that if approved, the division had estimated that it would need five more staff. In November 2018, division officials said that the number of additional staff we were told had been approved for fiscal year 2018 seemed high and that as of November 2018, HUD had not finalized its hiring plans for the division. In comments on the draft report, HUD stated that the division had developed a staffing plan to address long- term oversight and management of the CDBG-DR portfolio and, as of March 1, 2019, expected to fill 14 positions over the next 3 months. In addition, it stated that the agency had identified an approach to secure 20 additional positions to support CDBG-DR, and expected the agency’s financial and human capital officials to approve it in the next few weeks. Federal internal control standards state that management should design control activities, including management of human capital, to achieve objectives and respond to risks. Management is to continually assess the knowledge, skills, and ability needs of the entity so that the entity is able to obtain a workforce that has the required knowledge, skills, and abilities to achieve organizational goals. In previous work on human capital, we identified key principles for effective strategic workforce planning, including determining the critical skills and competencies needed to achieve current and future programmatic results and developing strategies that are tailored to address gaps in number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies. However, as of March 1, 2019, HUD had not hired any additional staff; provided documentation showing that the number of staff it planned to hire would be sufficient to oversee current CDBG-DR funds and funds appropriated for Hurricanes Florence and Michael; or determined that staff have the needed knowledge, skills, or abilities. HUD did not have this information because it had not conducted strategic workforce planning. According to HUD officials, they were in the process of evaluating the division’s organizational structure. Without strategic workforce planning that determines if the number of staff HUD plans to hire is sufficient to oversee the growing number of CDBG-DR grants, identifies the critical skills and competencies needed, and includes strategies to address any gaps, HUD will not be able to identify the staffing resources necessary to oversee CDBG-DR grants. Due to the lack of permanent statutory authority for CDBG-DR, CDBG-DR appropriations require HUD to customize grantee requirements for each disaster. The ad hoc nature of CDBG-DR has created challenges for CDBG-DR grantees, such as lags in accessing funding and varying requirements. CDBG-DR grantees have also experienced administrative challenges not related to the lack of permanent statutory authority, such as challenges with grantee capacity, procurement, and improper payments. Although Congress has used CDBG to meet unmet disaster recovery needs since 1993, it has not established permanent statutory authority for CDBG-DR. Because of its flexibility, Congress has relied on CDBG and provided numerous supplemental appropriations for more than $86 billion in CDBG-DR funds to HUD. When Congress appropriates CDBG-DR funds, it also grants HUD broad authority to waive CDBG program requirements and establish alternative requirements for CDBG-DR funds via Federal Register notices. For example, in consecutive notices for disasters that occurred from 2001-2016, HUD waived the requirement that 70 percent of CDBG funds received by the state over a 1- to 3-year period be for activities that benefit persons of low and moderate income. For disasters from 2004-2017, it issued a waiver permitting states to directly administer CDBG-DR funds, rather than distributing all funds to local governments as is required under the traditional CDBG program. Also, since 2001 HUD has waived the requirement for CDBG action plans and instead required grantees to submit to HUD an action plan for disaster recovery. Because CDBG-DR is not a permanently authorized program, HUD officials stated that they have not established permanent regulations. Legislation was proposed in the 115th Congress that would have permanently authorized the CDBG-DR program, but was not enacted. According to HUD officials, they provided technical drafting assistance on this bill. As of February 2019, Congress had not permanently authorized CDBG-DR or any other program to meet unmet disaster needs. Unlike CDBG-DR, other federal disaster assistance programs, such as those administered by FEMA and SBA, are permanently authorized. In 1988, the Stafford Act created permanent statutory authority for much of the disaster assistance system in place today. Under this act, FEMA has multiple mechanisms for providing assistance. For example, FEMA’s Individual Assistance program provides various forms of help following a disaster, such as financial assistance for housing, unemployment, and crisis counseling assistance. In the late 1950s, the Small Business Act permanently authorized the SBA Disaster Loan Program, which provides low-interest direct loans to businesses, homeowners, and renters to repair or replace property. A recent report on climate change supports a growing need for a permanent program to address unmet disaster needs. According to a 2018 report from the U.S. Global Change Research Program, the frequency and intensity of extreme weather and climate-related events are expected to increase. The report noted that as hurricane damage can be attributed to warmer atmosphere and warmer, higher seas, there is a need to rebuild to more resilient infrastructure and develop new frameworks for disaster recovery. In part because Congress has not established permanent statutory authority for CDBG-DR or some other program to address unmet needs, GAO, the HUD OIG, and some of the 2017 grantees have cited a number of challenges. These include lags in accessing funding and varying requirements. Lags in accessing funding. For earlier hurricanes, it took at least a month for HUD to issue the Federal Register notices that outlined the CDBG-DR requirements for each disaster. For the 2017 disasters, it took longer. As noted previously, these notices lay out the steps that grantees must take before they can enter into grant agreements with HUD and begin expending funds. As shown in figure 5, it took 45 days for HUD to issue the requisite Federal Register notice after the first appropriation for the 2005 Gulf Coast hurricanes, 35 days after the first appropriation for Hurricane Sandy, and 154 days (or 5 months) after the first appropriation for the 2017 hurricanes. According to HUD officials, they delayed issuance of the first notice for the 2017 hurricanes because they expected a second appropriation and wanted to allocate those funds in the same notice. After HUD issued the Federal Register notices, it generally took the grantees months to complete all of the required steps to enter into grant agreements. For example, it took each of the 2017 grantees over 6 months to execute grant agreements with HUD. Two 2017 grantees that we interviewed suggested that the CDBG-DR process could be shortened if there were an established set of rules for states to follow instead of waiting months for a new Federal Register notice to be published for each allocation. One grantee told us that CDBG-DR should be codified as a formal program with basic rules in place so that grantees do not have to wait months for a notice to be published before they begin planning. In a May 2018 hearing on CDBG- DR, a 2017 grantee testified that disaster recovery could be greatly expedited if HUD had written regulations that governed CDBG-DR allocations. The official stated that states would not have to wait for the Federal Register notice to be published to begin designing activities and developing action plans. Similarly, for our January 2010 report on the Gulf Coast hurricanes, HUD officials told us that a permanently authorized CDBG-DR program would allow HUD to issue permanent regulations and require less need for Federal Register notices and the use of waivers after each disaster, thereby allowing funds to be available for providing assistance sooner. As part of our current review, HUD officials reiterated that a permanently authorized CDBG-DR program would allow HUD to issue permanent regulations. They stressed that for a permanently authorized CDBG-DR program to be effective, Congress would need to provide HUD the flexibility to waive traditional CDBG statutory requirements and adopt alternative requirements to help address recovery needs. Varying requirements. CDBG-DR grant requirements vary from notice to notice. In a July 2018 report, the HUD OIG found that as of September 2017, HUD used 61 notices to oversee 112 active disaster recovery grants totaling more than $47.4 billion, and would issue additional notices for funding provided in 2017 and 2018. The HUD OIG also noted that as of February 2017, Louisiana had seven open grants and had to follow 45 Federal Register notices, and that Texas had 6 open grants and had to follow 48 Federal Register notices. Officials from one of the 2017 grantees we interviewed said it was challenging to manage seven different CDBG-DR grants, each with different rules. As an example, they noted that 2015 grant funds cannot be used on levees, while funds from other years can be. To help manage these different requirements, they stated that they must tie each grant to the relevant public law in their grant management system. To further ensure compliance with the various notices, their legal department prepares a new template for the agreement that the states signs with subrecipients for each public law. Officials from another 2017 grantee stated that it was difficult to build an infrastructure for the management of current and future CDBG-DR funds, as the rules often could be different for each allocation. They also noted that variations across different allocations can make it more difficult for grantees to manage and comply with differing requirements. According to HUD officials, the requirements have varied due to differences in appropriations language and policies across administrations and changes made in response to input from the HUD OIG. In addition, the July 2018 HUD OIG report identified 59 duplicative or similar requirements in most of the notices that could benefit from a permanent framework. For example, the following rules or waivers were consistently repeated: allowing states to directly administer grants and carry out eligible activities, requiring grantees to submit an action plan, requiring grantees to review for duplication of benefits, allowing states to use subrecipients, and allowing flood buyouts. The HUD OIG recommended that the Office of Block Grant Assistance work with its Office of General Counsel to codify CDBG-DR in regulations. HUD disagreed with this recommendation, stating that it lacked statutory authority to create a permanent CDBG-DR program. In commenting on the report, HUD acknowledged that the current process of changing appropriations requirements, which results in waivers and alternative requirements, can be challenging. It further stated that congressional direction would be needed for a more standard, regulation-governed program. Further, we and others have cited four additional challenges that could be addressed in a statute permanently authorizing CDBG-DR or another disaster assistance program for unmet needs. Lag between a disaster and appropriation of CDBG-DR funds. In a July 2015 report on Hurricane Sandy, we found that the unpredictable timing of the appropriation for CDBG-DR challenged grantees’ recovery planning. As shown in figure 6, the first CDBG-DR supplemental appropriation for the Gulf Coast hurricanes was enacted 4 months after the first Gulf Coast hurricane occurred. Less time elapsed between Hurricane Sandy and Hurricane Harvey (the first of the 2017 hurricanes) and Congress’ appropriation of funds, 3 months and 2 weeks, respectively. In contrast, a presidential disaster declaration activates the provision of funds from FEMA’s Disaster Relief Fund. The SBA Disaster Loan Program is also activated by a presidential disaster declaration. Congress funds both programs through annual appropriations. Lag in spending funds once grant agreements have been signed. Once grantees have entered into grant agreements with HUD, it can take years for them to implement activities and expend all of their CDBG-DR funds. There is no consensus on the amount of time it should take grantees to expend their funds. Congress has established obligation and expenditure deadlines, such as through a provision in the Disaster Relief Appropriations Act, 2013. In that act, which applies to 47 grants, grantees are required to spend the funds within 24 months of obligation unless the Office of Management and Budget (OMB) provides a waiver. Similarly, the appropriations for the 2017 disasters also must be expended within 24 months of the date of obligation, and OMB is authorized to provide a waiver of this requirement. In addition, legislation has been proposed that would require funds to be expended within 6 years, with the possibility of an extension up to 3 years upon a waiver by OMB. Since 2015, HUD has imposed a requirement that grantees expend their funds within 6 years of signing a grant agreement. According to HUD officials, they chose 6 years because their research showed that most expenditure activity occurs within the first 6 years of the grant. However, of the 50 grants awarded in fiscal years 2012 and 2013 that are at or approaching the original 6-year mark, 9 grantees (18 percent) had expended less than half of the funds. Some of these grantees have received extensions that allow their grants to remain open until September 2022. According to HUD, a number of factors can delay recovery efforts, including subsequent disasters, litigation, and limited constructions seasons due to weather. See appendix III for more information on these grants. Housing programs that are not aligned with unmet needs. In past work, we found that CDBG-DR grantees are not required to align their housing activities with the needs of the affected communities. In a January 2010 report on the Gulf Coast hurricanes, we found that states used their broad discretion and additional flexibility to decide what proportion of their CDBG-DR funds went to homeowner units and rental units. In Louisiana and Mississippi, more homeowner units were damaged than rental units, but the proportional damage to rental stock was generally greater. However, 62 percent of damaged homeowner units were assisted and 18 percent of rental units were assisted. We recommended that Congress consider providing more specific direction regarding the distribution of disaster-related CDBG assistance that states are to provide for homeowners and renters. Since the Gulf Coast hurricanes, Congress has appropriated funding for subsequent disasters; however, as of February 2019, no appropriations had addressed this issue. Coordination with multiple federal agencies. In our July 2015 report on Hurricane Sandy, we found that different federal disaster response programs are initiated at different times, making it challenging for state and local officials to determine how to use federal funds in a comprehensive manner. In response to a survey that we conducted for that report, 12 of 13 states and cities reported that navigating the multiple funding streams and various regulations was a challenge that affected their ability to maximize disaster resilience opportunities. For example, state officials we interviewed for that report noted the redundancy of some federal requirements for receiving disaster assistance such as the duplication of environmental reviews, which are required by both HUD and FEMA. In our January 2010 report on the Gulf Coast hurricanes, we noted that a Department of Homeland Security study indicated that experts should discuss how challenges associated with the different federal efforts that provide disaster recovery assistance—such as CDBG- DR and those administered by FEMA—could be addressed. The study also suggested that experts explore new methods for delivering assistance. In our June 2009 report on CDBG-DR, we also found that guidance for the Gulf Coast disaster recovery was insufficient and that conflicting federal decisions hindered coordination of CDBG-DR and FEMA’s Hazard Mitigation Grant Program funds. We recommended that HUD coordinate with FEMA to ensure that new guidance clarified the potential options, and limitations, available to states when using CDBG disaster assistance funds alongside other disaster-related federal funding streams. HUD issued the guidance, and the recommendation was closed in November 2011. Without permanent statutory authority for a disaster assistance program that meets verified unmet needs, grantees will likely continue to encounter the challenges associated with needing customized grant requirements for each disaster, such as funding lags and varying requirements. Permanent statutory authority could also improve coordination among federal agencies that administer disaster funds. In addition to the challenges experienced because CDBG-DR is not permanently authorized, reports on prior disasters cited CDBG-DR administrative challenges such as building capacity, avoiding improper payments, and following procurement processes. Grantee capacity. Grantees have experienced difficulties establishing the necessary capacity to manage large CDBG-DR grants. An Urban Institute testimony described constraints on grantees’ comprehensive capacity building. Specifically, it noted levels of expertise and program management as a repeated source of challenges, citing limitations on the availability of skilled staff. In addition, a paper on large-scale disaster recovery reported that large-scale CDBG-DR programs are significantly larger than traditional CDBG programs, and that many grantees need to hire private contractors to fill gaps in expertise and operational capacity. We also found in our June 2009 report on Gulf Coast disaster recovery that Louisiana and Mississippi lacked sufficient capacity to administer and manage CDBG-DR programs of such unprecedented size. As discussed previously, the 2017 grantees plan to hire more staff to administer CDBG-DR funds. However, officials of one grantee and HUD officials said they are all competing for the same small pool of potential applicants with CDBG-DR expertise. HUD officials said grantees in Puerto Rico and the U.S. Virgin Islands face the additional challenge of relocating potential candidates, and in the case of Puerto Rico finding bilingual candidates. Improper payments. Our prior reports and those of the HUD OIG have identified improper payments as an ongoing challenge for HUD and CDBG-DR grantees. In February 2015, we found that HUD’s policies and procedures did not address all key requirements for estimating improper payments for Hurricane Sandy CDBG-DR funds. To help ensure that HUD produced reliable estimates of its improper payments, we recommended that HUD revise its policies and procedures by (1) requiring payments to federal employees to be included in populations for testing as required by the Improper Payments Information Act of 2002, as amended, and (2) including steps to assess the completeness of the population of transactions used for selecting the samples to be tested. HUD concurred with our recommendation and has since updated its policies and procedures to require that payments to federal employees be included in the improper payment testing for the program. However, because it has not yet taken steps to ensure that all grantee files are included in the population for testing improper payments, this recommendation remained open as of February 2019. The HUD OIG also has conducted numerous audits of the internal controls of prior CDBG-DR grantees, a number of which resulted in findings related to improper payments. For example, in an August 2017 report on the State of New Jersey, the OIG found that the state disbursed Sandy CDBG-DR funds to homebuyers who did not meet all of the program eligibility requirements. It also found in a December 2016 report that the City of New York disbursed more than $18.2 million in CDBG-DR funds for state sales tax on program repairs and maintenance services that the city was not legally required to pay under New York state law. In a July 2016 report on the administration of SBA and CDBG-DR disaster assistance, the Congressional Research Service noted that the availability and timing of disaster assistance from different sources can result in agencies providing duplicative assistance. In addition, according to SBA data we reviewed for our July 2010 report on the Gulf Coast hurricanes, SBA determined that 76 small businesses approved for loans under Louisiana’s Business Recovery Grant and Loan Program, funded by CDBG-DR, received duplicate benefits under SBA’s Disaster Loan Program. In the appropriations acts for the 2017 disasters, Congress required federal agencies, including HUD, to submit their plans for ensuring internal control over disaster relief funding to Congress, among others. HUD submitted its plan to Congress on November 2, 2018. As previously noted, we are conducting a separate review on, among other things, HUD’s internal control plan. Procurement. The HUD OIG has issued nearly 20 audits on disaster recovery grantees that contained findings related to procurement, including reviews of grantees that received funds to recover from the Gulf Coast hurricanes and Hurricane Sandy. In a September 2017 report, the HUD OIG found that HUD did not provide sufficient guidance and oversight to ensure that state disaster grantees followed proficient procurement processes. The OIG focused on whether HUD staff had ensured that the grantee had adopted federal procurement standards or had a procurement process that was equivalent to those standards. It made four recommendations to help ensure that products and services are purchased competitively at fair and reasonable prices in future disaster allocations. In a September 2016 report, the HUD OIG described the results of an initiative by the Council of the Inspectors General on Integrity and Efficiency to review funds provided by the Disaster Relief Appropriations Act, 2013. This review was conducted by the HUD OIG and the OIGs for seven other agencies that received funds for Hurricane Sandy and other disasters under the act. The HUD OIG pointed out a range of contracting issues that HUD grantees faced, including that they billed outside the scope of work, lacked competitive procedures or full and open competition, and had unsupported labor costs. It attributed these challenges to HUD and the grantees (1) not understanding federal contracting regulations and cost principles and (2) lacking internal controls over procurement processes. As a result, the HUD OIG stated that HUD and grantees did not know whether they received the best value and greatest overall benefit from their various disaster relief procurement contracts, amendments, and change orders. The OIG concluded that the Council of the Inspectors General on Integrity and Efficiency should work with HUD to ensure the agency, grantees, and contractors complied with federal contracting requirements. The HUD OIG also recommended in a May 2018 report that Texas adhere more closely to federal procurement regulations in applying for and expending CDBG-DR grants. It recommended that HUD require the grantee to (1) ensure that its procurement and expenditure policies and procedures are implemented and working as designed and (2) ensure that warnings about false statements and false claims are included in all of its contract-related forms. Texas responded that it would continue to strengthen its current program structure. Monitoring. In our June 2009 report on CDBG-DR guidance for the Gulf Coast disaster recovery, we found that in addition to HUD’s four to five on-site monitoring and technical assistance visits per year, a number of state officials needed clarification of federal regulations, environmental requirements, and waivers related to the use of CDBG-DR funds in disaster recovery. Although HUD had field offices in both Louisiana and Mississippi, the CDBG-DR grant management responsibilities were handled by HUD headquarters staff. Grantees in both states emphasized that an additional onsite presence from HUD would have been beneficial to their recovery efforts. In addition, in a May 2018 report on CPD’s monitoring of grantees’ compliance with requirements contained in the Disaster Relief Appropriations Act, 2013, the HUD OIG found a lack of monitoring of grantees’ drawdown transactions. The OIG recommended that CPD monitor these transactions to ensure that grantees appropriately record transactions. HUD agreed to open an investigation to review the transactions before responding to the recommendation. CDBG has been widely viewed as a convenient, expedient, and accessible tool for meeting needs in disaster-impacted communities that are not met by other federal and private sources, but CDBG-DR has proven to be slow for HUD and grantees to implement. Over a year after Congress first appropriated CDBG-DR funds for recovery from the 2017 hurricanes, grantees have generally not drawn down these funds to aid disaster hurricane victims because they continue to plan and design their activities. While it is important to provide disaster assistance promptly, HUD also needs to ensure that grantees are well positioned to administer the funds. Before expending funds, HUD required grantees to submit planning documentation, but its review of this documentation was limited. Specifically, HUD did not have adequate guidance for staff to use when assessing the adequacy of grantees’ financial controls, procurement processes, and grant management procedures and of their capacity and unmet needs assessments. HUD also did not maintain documentation to substantiate staff’s conclusions that the grantees’ submissions were sufficient. By developing additional guidance for staff to use in evaluating the quality of grantees’ financial processes and procedures and capacity and unmet needs assessments, HUD can provide better assurance that its reviews are thorough and consistent. Further, without documenting the basis for its conclusions when reviewing future grantees’ submissions, stakeholders and decision makers lack information on why HUD concluded that grantees’ financial processes and procedures and capacity and unmet needs assessments were adequate. HUD also misses an opportunity to leverage this information later to mitigate risk and inform its monitoring of grantees. HUD’s monitoring of the 2017 grantees will be critical given challenges that the HUD OIG has identified with grantees’ procedures and our concerns about HUD’s reviews of grantees’ initial submissions. But HUD did not have a monitoring plan that reflected the specific risk factors of each grantee and outlined the scope of its monitoring. A comprehensive monitoring plan would help HUD ensure that its oversight of grantees’ compliance with grant requirements focused on grantees’ areas of greatest risks. Further, HUD did not yet have the staff in place to effectively oversee CDBG-DR funds. Without strategic workforce planning that determines if the number of staff the agency will be able to hire is sufficient to oversee the growing number of CDBG-DR grants, identifies the critical skills and competencies needed, and includes strategies to address any gaps, HUD will not be able to identify the staffing resources necessary to oversee CDBG-DR grants. Finally, if the federal government continues to use the CDBG program for federal disaster assistance, grantees will likely encounter many of the same challenges they have in the past—including lags in accessing funding, requirements that may vary for each disaster, and difficulties coordinating with multiple federal agencies. Establishing permanent statutory authority for a disaster assistance program that meets verified unmet needs in a timely manner would provide a consistent framework for administering funds for unmet needs going forward. The program could be administered either by HUD or another agency that had authority to issue associated regulations. Such a statute and regulations could create consistent requirements for grantees and specify how the program would fit into the federal government’s disaster assistance framework. The importance of establishing permanent statutory authority for such a program is underscored by the expected increase in the frequency and intensity of extreme weather and climate-related events. Congress should consider legislation establishing permanent statutory authority for a disaster assistance program administered by HUD or another agency that responds to unmet needs in a timely manner and directing the applicable agency to issue implementing regulations. We are making the following five recommendations to HUD: The Assistant Secretary for Community Planning and Development should develop additional guidance for HUD staff to use when assessing the adequacy of the financial controls, procurement processes, and grant management procedures that grantees develop. (Recommendation 1) The Assistant Secretary for Community Planning and Development should develop additional guidance for HUD staff to use when assessing the adequacy of the capacity and unmet needs assessments that grantees develop. (Recommendation 2) The Assistant Secretary for Community Planning and Development should require staff to document the basis for their conclusions during reviews of grantees’ financial controls, procurement processes, and grant management procedures and capacity and unmet needs assessments. (Recommendation 3) The Assistant Secretary for Community Planning and Development should develop and implement a comprehensive monitoring plan for the 2017 grants. (Recommendation 4) The Assistant Secretary for Community Planning and Development should conduct workforce planning for the Disaster Recovery and Special Issues Division to help ensure that it has sufficient staff with appropriate skills and competencies to manage a growing portfolio of grants. (Recommendation 5) We provided a draft of this report to HUD for comment. In written comments, which are summarized below and reproduced in appendix IV, HUD partially agreed with two of our recommendations and generally agreed with the remaining three. HUD partially agreed with the draft report’s first recommendation to develop standards for HUD staff to use when assessing the adequacy of the financial controls, procurement processes, and grant management procedures that grantees develop. HUD disagreed that it needed to develop standards for financial processes and procedures, stating that such standards already exist. Specifically, HUD pointed to the February 2018 Federal Register notice, which states that a grantee has proficient financial policies and procedures if it submitted to HUD certain information for its review. In the draft report, we acknowledged that the notice required grantees to submit information such as certain audits, financial reports, and their financial standards. However, we concluded that the notice does not describe how HUD reviewers should assess the quality of those financial standards. HUD agreed that providing additional guidance to staff on defining the specific conditions that must exist within these documents would improve its proficiency determination. This was the intent of the recommendation included in the draft report. However, to avoid confusion, we revised the recommendation and related report language to further clarify our intent by substituting “additional guidance” for “standards.” HUD also partially agreed with our second recommendation to develop standards for HUD staff to use when assessing the adequacy of grantees’ capacity and unmet needs assessments. Similar to our first recommendation, HUD stated that the standards for HUD staff to use when assessing the adequacy of these assessments are included in the February 2018 Federal Register notice. Specifically, HUD noted that it states that HUD will determine the grantee’s implementation plan, which contains its capacity assessment, to be adequate if it addresses the items required in the notice. HUD also stated that the notice directed grantees to develop a needs assessment to understand the type and location of community needs and to target limited resources to those areas with the greatest need. In the draft report, we acknowledged that the notice required grantees to submit (1) an implementation plan that describes, among other things, their capacity to carry out the recovery and how they will address any capacity gaps for HUD and (2) an action plan for disaster recovery that includes an assessment of unmet needs to help grantees understand the type and location of community needs and to target their CDBG-DR funds to those areas with the greatest need. However, we concluded that the notice does not describe how HUD reviewers should assess the adequacy of these assessments. HUD agreed that providing additional guidance to HUD staff on defining the specific conditions that must exist within the documents grantees submit to HUD would improve the review of grantee capacity. HUD also agreed that there was an opportunity to improve the consistency of HUD’s review of grantees’ action plans, including their unmet needs assessments. Because providing additional guidance to HUD staff was the intent of the recommendation in the draft report, we revised the recommendation and related report language to clarify our intent by substituting “additional guidance” for “standards.” HUD generally agreed with our remaining three recommendations. HUD agreed with our third recommendation to document the basis for conclusions during reviews of grantees’ financial controls, procurement processes, and grant management procedures and capacity and unmet needs assessments, stating that it will require staff to better document their analysis. HUD also agreed with our fourth recommendation to develop and implement a comprehensive monitoring plan for the 2017 grants, stating that such a plan is necessary to effectively manage the growing portfolio of CDBG-DR grants. It provided a monitoring schedule for fiscal year 2019 that it characterized as a monitoring plan, and noted that it had begun identifying monitoring strategies for all monitoring reviews that would occur from March 2019 through May 2019. It also said it would develop the remaining strategies after the initial monitoring reviews. However, HUD still needs to develop a plan that identifies the specific risk factors of each grantee and outlines the scope of its monitoring. Similarly, HUD agreed with our fifth recommendation to conduct workforce planning for the Disaster Recovery and Special Issues Division. It stated that the division had developed a staffing plan to address long-term oversight and management of the CDBG-DR portfolio and, as of March 1, 2019, expected to fill 14 positions over the next 3 months. In addition, it stated that it had identified an approach to secure 20 additional positions to support CDBG-DR and expected to finalize this approach in the next few weeks once it was approved by HUD’s financial and human capital officials. We added this updated information to the report. While developing a staffing plan is a good first step, HUD still needs to conduct workforce planning to determine if the number of staff they will be able to hire is sufficient to oversee the growing number of CDBG-DR grants, identify the critical skills and competencies needed, and develop strategies for addressing any gaps. HUD also provided the following comments on our findings. Regarding the discussion of unmet needs assessments, HUD noted that the draft report does not acknowledge that the second appropriation for 2017 disasters directed HUD to provide a minimum of $11 billion for Puerto Rico and the U.S. Virgin Islands for unmet needs, which made HUD’s standard methodology for determining the allocation based on unmet needs data moot. HUD stated that this information is critical to understanding the allocation of funds toward unmet needs associated with 2017 disasters. Our review of the unmet needs assessments focused on the first CDBG-DR appropriation of $7.4 billion, for which HUD used its standard methodology to allocate the funds. We focused on this initial allocation because HUD had reviewed and approved the grantees’ unmet need estimates for these funds. In response to HUD’s comment, we added language to the report that $11 billion was to be allocated to Puerto Rico and the U.S. Virgin Islands where we make reference to the second CDBG-DR appropriation of $28 billion. Regarding the discussion of our prior work that found that CDBG-DR grantees are not required to align their housing activities with the needs of the affected communities, HUD stated the agency had implemented requirements that directed grantees to ensure that CDBG-DR funding allocations are reasonably proportionate to the total remaining unmet needs for housing, infrastructure, and economic revitalization. It also noted that the February 2018 Federal Register notice directs grantees to propose an allocation of CDBG-DR funds that primarily considers unmet housing needs. The focus of our discussion was the status of our recommendation that Congress consider providing more specific direction on the distribution of CDBG-DR funds. Although we acknowledged in the draft report that HUD instructed the 2017 grantees to primarily use their initial CDBG- DR allocation to meet unmet housing needs, we did not do so in the section of the draft report that discussed this prior work. In response to HUD’s comment, we added similar language in that section. Regarding our discussion of prior HUD OIG reports on grantee procurement practices, HUD said there has been a protracted disagreement between HUD and the HUD OIG regarding the procurement requirements that may be imposed on CDBG-DR recipients, specifically the definition of “equivalent.” HUD stated that the most recent resolution of this disagreement came in a January 10, 2017, decision memorandum from the former HUD Deputy Secretary, supported by a legal opinion from HUD’s Office of General Counsel. According to HUD, these documents supported CPD’s position that states have the authority to follow their own procurement standards. However, according to the HUD OIG’s December 2018 semiannual report, the HUD OIG disagreed with this assessment and referred this issue to the Deputy Secretary on March 31, 2017. The report noted that, as of the end of fiscal year 2018, the HUD OIG had not received a decision. We revised the report to state that HUD and the HUD OIG have an ongoing disagreement. Regarding a HUD OIG report on Florida that we cited, HUD said it was evident that the state’s financial policies and capacities were functioning effectively because the state independently corrected a bookkeeping error prior to the HUD OIG audit. However, the HUD OIG noted in the report that Florida corrected the error the OIG identified during the audit. Florida agreed with the finding and accepted the recommendation. Therefore, we made no change to the report. Further, HUD noted that the draft report cites recommendations from a number of prior HUD OIG audits that had been closed or where fundamental disagreement existed between HUD and the HUD OIG. In the few instances where we did not provide the status of HUD OIG recommendations to HUD, we added their status to the report. Regarding our analysis of the status of 2012 and 2013 CDBG-DR grants, HUD stated that the draft report included a simplified analysis of CDBG-DR grant performance that dismissed HUD’s determination that disbursements from a CDBG-DR grant are substantially completed 6 years after the effective date of the agreement. It noted that our analysis excluded grants that were closed out and included grants that should not have been included because they had a contract-effective date of mid-2015 or later. However, our analysis that HUD commented on draws from its own publicly available monthly report entitled “Monthly CDBG-DR Grant Financial Report.” Based on HUD’s comments, the report appears to be missing key information on the timing of the grants—namely, some grants identified as 2012 and 2013 grants had effective dates of 2015 or later. Further, many of the grants that HUD said were unfairly included in our analysis were designated as “slow spenders” in HUD’s own monthly report. We reviewed the additional documentation HUD provided and updated our analysis. HUD also provided technical comments, which we incorporated as appropriate. We considered three comments to be more than technical in nature. First, HUD stated that the draft report (1) was critical of grantee capacity challenges, implying that the varying requirements in the numerous Federal Register notices further tax a grantee’s capacity, and (2) suggested that permanent regulatory authority for CDBG-DR would begin to address these issues. However, the draft report identified grantee capacity as an administrative challenge that CDBG- DR grantees face that is not related to the lack of permanent statutory authority. Second, HUD stated that the primary cause of the “ad hoc nature” of the CDBG-DR program and grantee capacity challenges is the unpredictability of disasters and the uniqueness of each recovery effort, not the lack of permanent statutory authority. It said that each congressional appropriation includes unique statutory provisions aimed at making incremental program improvements that can only be implemented through a new Federal Register notice. We recognize that each disaster is unique, but as our past work and that of the HUD OIG has shown, there are certain challenges associated with meeting customized grant requirements for each disaster—such as funding lags, varying requirements, and coordination with multiple programs— that could be addressed if Congress considered permanently authorizing a disaster assistance program that meets unmet needs. Third, HUD stated that CDBG-DR funds are distinct from FEMA and SBA response and recovery resources because FEMA and SBA disaster programs have a narrower scope. HUD noted that CDBG-DR funds aid in a community’s long-term recovery from a catastrophic disaster, which requires substantial time for planning the community- wide recovery effort. We recognize that long-term recovery takes time, but we maintain that this does not prohibit Congress from considering legislation establishing permanent statutory authority for a disaster assistance program that responds to unmet needs. Because we believe the draft report adequately addressed the various issues HUD raised, we made no changes in response to these comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of Housing and Urban Development, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Our objectives were to examine (1) the status of the 2017 Community Development Block Grant Disaster Recovery (CDBG-DR) grants; (2) the steps the 2017 CDBG-DR grantees have taken to establish financial processes and procedures, build capacity, and estimate unmet needs; (3) the extent to which the Department of Housing and Urban Development (HUD) has reviewed the steps that grantees have taken and developed plans for future monitoring; and (4) the challenges that HUD and grantees have faced in administering grants. We focused our review on the states of Florida and Texas and the U.S. territories of Puerto Rico and the U.S. Virgin Islands—the states and territories most directly affected by Hurricanes Harvey, Irma, and Maria and that received over $1 billion in CDBG-DR funds to address unmet recovery needs. For all of our objectives, we visited Puerto Rico and Texas to interview officials at the Puerto Rico Department of Housing and Texas General Land Office, respectively, which are the 2017 CDBG-DR grantees in those jurisdictions. During our visit to Puerto Rico, we also met with Puerto Rico’s Central Office of Recovery, Reconstruction and Resilience, which was created to provide administrative oversight of all programs related to disaster recovery. We visited these two grantees because they were the 2017 grantees that received the largest amounts of CDBG-DR funds. We also conducted telephone interviews with officials from the U.S. Virgin Islands Housing Finance Authority and the Florida Department of Economic Opportunity, the 2017 CDBG-DR grantees in those jurisdictions. To determine the status of the 2017 CDBG-DR grants, we reviewed relevant laws and the Federal Register notices allocating the CDBG-DR funds and interviewed HUD officials to determine the steps grantees were required to take before signing a grant agreement and expending their 2017 CDBG-DR funds. We reviewed key documents—such as documentation on financial processes and procedures, implementation plans, and action plans—to determine when they were submitted and approved. To determine how much CDBG-DR funding the 2017 grantees had drawn down, we examined data from the Disaster Recovery Grant Reporting system as of January 2019 (the most recent month available during our review). To assess the reliability of these data, we reviewed relevant documentation on the system and interviewed officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purpose of reporting CDBG-DR draw down information. To determine the steps the 2017 CDBG-DR grantees have taken to establish financial processes and procedures, build capacity, and estimate unmet needs, we reviewed grantees’ documents, such as their organizational charts and capacity assessments, to determine how grantees plan to administer the CDBG-DR grants. In addition, we identified and reviewed relevant HUD Office of the Inspector General (OIG) reports to determine whether the office had previously identified concerns about these grantees’ financial processes and procedures and capacity. To determine how grantees calculated their unmet housing needs for homeowners and renters, we determined how HUD calculated grantees’ unmet needs by reviewing the methodology outlined in the Federal Register notices allocating the CDBG-DR funds and interviewing HUD officials. We focused on the calculation HUD used to determine unmet housing needs because the February 2018 Federal Register notice required grantees to primarily use their initial CDBG-DR allocation to address their unmet housing needs. We further focused on the housing needs of homeowners and renters because they constituted the largest portion (ranging from 47 percent in Texas to 99 percent in Florida) of grantees’ total estimates of housing needs. To determine how grantees calculated the housing needs estimates of homeowners and renters and the activities grantees planned to fund with the CDBG-DR grants, we reviewed grantees’ descriptions of their methodologies in the action plans they were required to develop for their initial CDBG-DR allocation. Although we did not conduct an extensive review of the grantees’ methodologies for estimating the unmet housing needs of homeowners and renters, we compared their methodologies to HUD’s methodology (described in Federal Register notices), identifying any differences. To examine the extent to which HUD has reviewed the steps that grantees have taken and developed plans for future monitoring, we reviewed HUD documents such as the completed checklists it used to review (1) documentation grantees submitted for certification of their financial controls, procurement processes, and grant management procedures, (2) grantees’ implementation plans, which contained a capacity assessment, and (3) grantees’ action plans for disaster recovery, including their unmet needs assessments. We compared these checklists against relevant statutory and regulatory requirements and internal control standards. In addition, we reviewed examples of unofficial working documents that HUD provided, such as a grantee’s response to HUD questions on the documentation that it had submitted. Further, to determine HUD’s monitoring of the 2017 CDBG-DR grantees, we reviewed HUD documents such as the Office of Community Planning and Development’s monitoring handbook and monitoring schedule for fiscal year 2019 and interviewed HUD officials. We compared HUD’s monitoring policies and procedures against relevant internal control standards. Finally, we interviewed HUD officials about their resource needs, hiring plans, and plans to monitor current and future CDBG-DR grants. We compared HUD’s hiring plans against relevant internal control standards and best practices for workforce planning we have previously identified. To determine the challenges that HUD and grantees have faced in administering grants, we conducted a literature search for reports on CDBG-DR funds used to recover from the 2005 Gulf Coast hurricanes (Katrina, Rita, and Wilma) and Hurricane Sandy. We focused on these hurricanes because Katrina, the costliest of the three Gulf Coast hurricanes, and Sandy were among the top five costliest hurricanes on record in the United States. We searched for GAO, HUD OIG, and Congressional Research Service reports and other literature such as government reports, peer-reviewed journals, hearings and transcripts, books, and association publications. To identify GAO reports, we used the search engine on GAO’s public website and searched for relevant terms such as “community development block grant,” “Sandy,” “Katrina,” and “Gulf Coast” from August 2005 (the month of the 2005 hurricanes) to April 2018 (the date of the search). To identify HUD OIG reports, we reviewed disaster-related reports the HUD OIG made available on its public webpages titled “Disaster Oversight Highlights,” “Superstorm Sandy,” and “Hurricane Katrina.” To identify Congressional Research Service reports, we used its public website’s search engine and searched for the terms “community development block grant” and “disaster.” To identify the other literature sources, we searched the following: ABI/INFORM®, Econ Lit, National Technical Information Service, and 20 other databases through GAO’s ProQuest subscription; Nexis; and Congressional Quarterly. We used terms such as “Community Development Block Grant,” “CDBG,” “disaster,” “Katrina,” “Sandy,” “challenge,” and “barrier” and limited the publication date range to between 2005 and 2018. Our searches initially yielded 157 sources. We screened out 23 based on their abstracts and an additional 103 sources after reviewing their full content. We excluded studies that related to the traditional CDBG program rather than CDBG-DR and those that provided general background on CDBG-DR. We determined that the remaining 31 sources were relevant for our purposes and reviewed them to determine if they identified any challenges that HUD and CDBG-DR grantees faced in administering prior CDBG-DR funds. Specifically, we considered any description of concerns with the administration and oversight of CDBG- DR to be a challenge. Using a standard form, one analyst reviewed each source, identified relevant challenges, and assigned the relevant challenges to a category. A second analyst reviewed the identification and categorization. Where there were differences in the review of the first and second analyst, the two conferred and entered a final decision. We also interviewed HUD officials and the 2017 CDBG-DR grantees to obtain their perspectives on the challenges in administering the 2017 grants. To determine the time it took grantees to receive CDBG-DR funds (one of the challenges we identified through our literature review), we reviewed information from the Disaster Recovery Grant Reporting system, HUD notices, and other sources to obtain the dates for the appropriations, allocations, and grant agreement for the Gulf Coast hurricanes, Hurricane Sandy, and the 2017 hurricanes. To determine the time it took grantees to expend their CDBG-DR funds (another challenge we identified through our literature review), we analyzed expenditure data in the Disaster Recovery Grant Reporting system for grants made in fiscal years 2012 and 2013, as of January 1, 2019. We selected these grants because HUD officials told us that grantees generally expend the majority of their CDBG-DR funds within 6 years of signing a grant agreement, and the 2012 and 2013 grantees are approaching this milestone. To assess the reliability of the Disaster Recovery Grant Reporting system data, we reviewed relevant documentation on the system and interviewed officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purpose of reporting grant agreement dates and CDBG-DR expenditures. We conducted this performance audit from January 2018 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The February 2018 Federal Register notice allocating the initial $7.4 billion in Community Development Block Grant Disaster Recovery (CDBG-DR) funds appropriated for the 2017 disasters requires grantees to use the funds primarily to address unmet housing needs. The initial action plans for the four largest 2017 CDBG-DR grantees—Florida, Texas, Puerto Rico, and the U.S. Virgin Islands—outline the various activities they plan to implement to address unmet needs. These include home buyout and rehabilitation programs to address unmet housing needs, workforce training and business recovery grants to address unmet economic revitalization needs, and the provision of matching funds for FEMA-assisted infrastructure projects to address unmet infrastructure needs. Florida focused its February 2018 CDBG-DR allocation on addressing unmet housing and economic revitalization needs (see table 6). Texas allocated approximately 45 percent of its February 2018 CDBG-DR allocation to the City of Houston and Harris County to directly administer their own CDBG-DR housing and infrastructure activities. Texas plans to use the majority of the remaining funds to address unmet housing needs in other areas affected by Hurricane Harvey (see table 7). Puerto Rico plans to use over 75 percent of its February 2018 CDBG-DR allocation to address unmet housing and economic revitalization needs (see table 8). The U.S. Virgin Islands’ plans to use about 42 percent of its February 2018 CDBG-DR allocation to address unmet housing and economic revitalization needs (see table 9). Congress appropriates Community Development Block Grant Disaster Recovery (CDBG-DR) funds to help states recover from federally declared disasters. Once Congress appropriates CDBG-DR funds, the Department of Housing and Urban Development (HUD) is responsible for allocating the funds to designated grantees in affected areas. According to HUD officials, most expenditure activity in CDBG-DR grants occurs within the first 6 years of the grant. As shown in table 10, of the 50 grants at or approaching the 6-year mark, 9 grantees had expended less than half of the funds. In addition to the contact named above, Paige Smith (Assistant Director), Josephine Perez (Analyst in Charge), Meredith Graves, Raheem Hanifa, Joe Maher, John McGrail, Marc Molino, Tovah Rom, and Michael Silver made key contributions to this report.", "summary": "The 2017 hurricanes (Harvey, Irma, and Maria) caused an estimated $265 billion in damage, primarily in Texas, Florida, Puerto Rico, and the U.S. Virgin Islands. As of February 2019, Congress had provided over $35 billion to HUD for CDBG-DR grants to help communities recover. Communities may use these funds to address unmet needs for housing, infrastructure, and economic revitalization. GAO was asked to evaluate the federal government's response to the 2017 hurricanes. In this initial review of CDBG-DR, GAO examined, among other things, (1) the status of the 2017 grants, (2) HUD's review of the initial steps grantees have taken and its plans for future monitoring, and (3) challenges HUD and grantees face in administering grants. GAO reviewed documentation from the four largest 2017 CDBG-DR grantees and HUD. GAO also reviewed prior work on CDBG-DR and interviewed officials from HUD and the four grantees. As of September 2018, the four states and territories that received the most 2017 Community Development Block Grant Disaster Recovery (CDBG-DR) funds had signed grant agreements with the Department of Housing and Urban Development (HUD). Before signing the agreements, HUD certified the grantees' financial processes and procedures. It also approved the grantees' assessments of their capacity to carry out the recovery and of unmet needs (losses not met with insurance or other forms of assistance). Before funding begins to reach disaster victims, the grantees need to take additional steps, such as finalizing plans for individual activities. As of January 2019, Texas had drawn down about $18 million (of $5 billion) for administration and planning only, and Florida had drawn down about $1 million (of $616 million) for administration, planning, and housing activities. Puerto Rico and the U.S. Virgin Islands had not drawn down any of the $1.5 billion and $243 million, respectively, they had been allocated. HUD lacks adequate guidance for staff reviewing the quality of grantees' financial processes and procedures and assessments of capacity and unmet needs, and has not completed monitoring or workforce plans. The checklists used to review grantees' financial processes and procedures and assessments ask the reviewer to determine if the grantee included certain information, such as its procurement processes, but not to evaluate the adequacy of that information. In addition, the checklists, which include a series of “yes” or “no” questions, do not include guidance that the HUD reviewer must consider. HUD also does not have a monitoring plan that identifies the risk factors for each grantee and outlines the scope of monitoring. Further, HUD has not developed a workforce plan that identifies the critical skills and competencies HUD needs and includes strategies to address any staffing gaps. Adequate review guidance, a monitoring plan, and strategic workforce planning would improve HUD's ability to oversee CDBG-DR grants. Without permanent statutory authority and regulations such as those that govern other disaster assistance programs, CDBG-DR appropriations require HUD to customize grant requirements for each disaster in Federal Register notices—a time-consuming process that has delayed the disbursement of funds. In a July 2018 report, the HUD Office of Inspector General found that as of September 2017, HUD used 61 notices to oversee 112 active CDBG-DR grants. Officials from one of the 2017 grantees told us that it was challenging to manage the multiple CDBG-DR grants it has received over the years because of the different rules. CDBG-DR grantees have faced additional challenges such as the need to coordinate the use of CDBG-DR funds with other disaster recovery programs that are initiated at different times and administered by other agencies. HUD officials said that permanently authorizing CDBG-DR would allow HUD to issue permanent regulations for disaster recovery. Permanent statutory authority could help address the challenges grantees face in meeting customized grant requirements for each disaster, such as funding lags, varying requirements, and coordination with multiple programs. The expected increase in the frequency and intensity of extreme weather events underscores the need for a permanent program to address unmet disaster needs. Congress should consider permanently authorizing a disaster assistance program that meets unmet needs in a timely manner. GAO also makes five recommendations to HUD, which include developing guidance for HUD staff to use in assessing grantees, developing a monitoring plan, and conducting workforce planning. HUD generally agreed with three recommendations and partially agreed with two, which GAO clarified to address HUD's comments.", "document_type": "gao"}
{"report": "In fiscal year 2017, about 13 billion pounds of cargo was transported on aircraft to the United States—over 5 billion pounds was transported on passenger aircraft (e.g., Delta and United Airlines), and about 8 billion pounds was transported on all-cargo aircraft (e.g., FedEx and United Parcel Service)—from over 300 foreign airports, according to our analysis of Bureau of Transportation Statistics data. U.S.-bound air cargo can vary widely in size and include such disparate items as electronic equipment, automobile parts, clothing, medical supplies, fresh produce, and cut flowers. The international air cargo shipping process involves a complex network of business entities that include individual shippers, manufacturers, transportation companies, freight forwarders, warehouses and air carriers. Entities within the supply chain may provide all services (warehousing, consolidation, and loading of air cargo, for example) or only certain services. The standards set by the International Civil Aviation Organization (ICAO) focus on four primary types of entities: known and unknown consignors (i.e., individual shippers, manufacturers, other shipping entities), regulated agents (i.e., freight forwarders, handling agents), and commercial air carriers. Various other air cargo supply chain entities also have responsibilities for applying specific types of security controls in accordance with the international standards. Figure 1 shows an illustrative example of the flow of U.S.-bound air cargo and where in the supply chain the cargo can be secured. The Aviation and Transportation Security Act (ATSA), enacted into law shortly after the September 11, 2001 terrorist attacks, established TSA and gave it responsibility for securing all modes of transportation, including the nation’s civil aviation system, which includes U.S. and foreign-flagged air carrier operations to, from, within, or overflying the United States, as well as the foreign point-to-point operations of U.S.- flagged carriers. Among other things, ATSA requires, in general, that TSA provide for the screening of all passengers and property, including cargo transported by air carriers. ATSA further requires that a system be in operation to screen, inspect, or otherwise ensure the security of the cargo transported by all-cargo aircraft to, from, and within the United States, but did not establish a firm deadline for the implementation of such a system. Further, to help enhance civil aviation security, the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Commission Act), mandated that DHS establish a system within 3 years of enactment (enacted August 3, 2007) to screen 100 percent of air cargo transported on all passenger aircraft operated by an air carrier traveling to, from, within, or overflying the United States. TSA reported that it met the mandate to screen 100 percent of domestic air cargo transported on passenger aircraft in August 2010 and U.S.-bound air cargo transported on passenger aircraft from foreign airports in August 2013. There is no comparable 100 percent screening requirement in statute for cargo transported to the United States on all-cargo air carriers. However, TSA requires that all cargo transported on U.S.-bound flights be screened or subjected to security controls that prevent the introduction of explosives, incendiaries, or other destructive devices. If the cargo comes from known consignors or regulated agents, TSA’s all-cargo security program does not require any additional screening unless the cargo piece exceeds a certain weight. On the other hand, all-cargo air carriers must screen all cargo that they accept from unknown consignors or nonregulated agents. Air carriers are responsible for implementing TSA security requirements predominantly through TSA-approved security programs that describe the security policies, procedures, and systems the air carriers are to implement and maintain in order to comply with TSA security requirements. These requirements include measures related to the acceptance, handling, and screening of cargo; training of employees in security and cargo screening procedures; testing employee proficiency in cargo screening; and access to cargo areas and aircraft. If threat information or events indicate that additional security measures are needed to better secure the aviation sector, TSA may issue revised or new security requirements in the form of security directives or emergency amendments when more immediate action on behalf of air carriers is necessary. Air carriers must implement the requirements set forth in applicable security directives or emergency amendments (unless otherwise approved by TSA to implement alternative security measures) in addition to requirements already imposed and enforced by TSA in order to remain compliant with their respective security programs. Under TSA regulations, air carriers are responsible for ensuring the security of the air cargo they transport, and TSA requirements specify methods and technologies that may be used to secure U.S-bound air cargo through screening procedures. Specific screening methods outlined in the 9/11 Commission Act, for example, include X-ray systems, explosives detection systems (EDS), explosives trace detection (ETD), explosives detection canine teams certified by TSA, and physical search together with manifest verification. The 9/11 Commission Act, however, requires that screening involve a physical examination or non- intrusive method of assessing whether cargo poses a threat to transportation security and not solely performing a review of information about cargo contents or verifying the identity of the cargo’s shipper, when not performed in conjunction with the screening methods outlined above. To assess whether air carriers properly implement security regulations, TSA conducts regulatory compliance inspections of U.S. and foreign- flagged air carriers at all foreign airports with U.S.-bound flights. During these inspections, a TSA inspection team is to examine air carriers’ implementation of applicable security requirements, including their TSA- approved security programs, any amendments or alternative procedures to these security programs, and applicable security directives or emergency amendments. In general, following a risk-informed approach, TSA attempts to inspect all air carriers with TSA-approved security programs at each foreign airport where they operate flights to the United States either annually or semiannually depending on the risk level of the airport. Compliance inspections can include reviews of documentation, such as screening logs; interviews of air carrier personnel; and direct observations of air cargo operations. Consistent with the ATSA, and in accordance with existing statutory requirements, TSA also assesses the effectiveness of security measures at foreign airports using select ICAO security standards and recommended practices. These standards and recommended practices include ensuring that passengers and cargo are properly screened and that unauthorized individuals do not have access to restricted areas of the airport. TSA uses a risk-informed approach to schedule foreign airport assessments, generally every 1 to 3 years, with high risk airports assessed more frequently than medium and low risk airports. Although TSA is authorized under U.S. law to conduct foreign airport assessments at intervals it considers necessary, it may not perform an assessment of security measures at a foreign airport without permission from the host government. TSA also does not have authority to impose or otherwise enforce security requirements at foreign airports. Instead TSA must work with host government civil aviation officials to schedule airport visits to conduct airport assessments (as well as air carrier inspections) and improve upon existing conditions when deficiencies are identified. Table 1 highlights the roles and responsibilities of certain TSA positions within Global Strategies that are responsible for implementing the air carrier inspection and foreign airport assessment programs. In addition to conducting air carrier inspections and foreign airport assessments, TSA has also developed the NCSP Recognition Program, for which TSA compares and assesses foreign air cargo security programs and standards to determine if those programs provide a level of security that is commensurate with TSA’s air cargo security standards. The NCSP recognition process involves comparing foreign countries’ air cargo security program requirements to TSA air cargo security requirements and conducting visits to the foreign countries to observe the security programs in operation and determine if they can be validated as commensurate with TSA’s. The recognition decision is based on whether the other country’s NCSP is commensurate in six pillars of cargo supply chain security that TSA has identified, which are: Facility Security. Procedures and mechanisms to prevent unauthorized entry to facilities where cargo is screened, prepared, and stored. Chain of Custody/Transit Procedures. Methods or procedures to prevent and deter unauthorized access to cargo while stored or in transit between facilities prior to loading onboard aircraft. Screening. Screening of cargo through the application of technical or other means that are intended to identify weapons or explosives. Personnel Security. Processes to vet individuals with unescorted access to air cargo at any point in the air cargo supply chain. Training. Training of personnel who screen, handle screened cargo, or perform other duties related to air cargo screening, preparation, or storage. Compliance and Oversight Activities. Clearly established requirements that regulated entities must satisfy in order to participate in the security program, and routine audits of such entities for compliance by appropriate authorities. TSA first approved the NCSP recognition process for passenger aircraft operations in fiscal year 2011 and made subsequent changes to the process in fiscal year 2013. According to TSA, the NCSP Recognition Program increases its visibility into recognized governments’ air cargo security requirements and air cargo supply chains, facilitates the identification of air cargo industry vulnerabilities, and is a key component of TSA’s efforts to achieve 100 percent screening of U.S.-bound air cargo and enhance global supply chain security. Within Global Strategies, the Mitigation Plans and Programs Directorate is responsible for the NCSP Recognition Program. Air Cargo Advance Screening (ACAS) The Department of Homeland Security’s (DHS) U.S. Customs and Border Protection (CBP) and the Transportation Security Administration (TSA) initiated the ACAS pilot in December 2010 to more readily identify high risk cargo for additional screening prior to all-cargo and passenger aircraft departing from foreign airports to the United States. Unlike TSA, which focuses on aviation security, to include the security of air cargo prior to loading on aircraft at last point of departure airports, CBP focuses on identifying persons and cargo that may violate U.S. law and are, therefore, prohibited from entry into the United States. The aim of the pilot was to determine whether it was feasible for air carriers to submit air cargo manifest data to CBP prior to departure from all foreign last point of departure airports. This would allow CBP to analyze, target, and, if needed, for DHS to issue instructions to air carriers to provide additional cargo information or take additional security measures before such cargo is loaded onto U.S.-bound aircraft. DHS determined that the pilot was successful. In 2012, we reported on the actions TSA took to enhance the security of U.S.-bound air cargo after the October 2010 discovery of explosive devices in packages on all-cargo aircraft bound for the United States from Yemen. We recommended, among other things, that DHS assess the costs and benefits of requiring all-cargo carriers to report U.S.-bound air cargo screening data. DHS agreed with our recommendation and TSA reported that, although all-cargo air carriers submit data to TSA as part of the Air Cargo Advance Screening (ACAS) pilot, the all-cargo air carriers do not need to report on the number of shipments screened for explosives. Nevertheless, TSA reported that it will be able to utilize ACAS data to determine the percentage of shipments transported to the United States on all-cargo aircraft that carriers must screen for explosives. To help ensure compliance with cargo security requirements and international standards, TSA inspects air carriers and assesses certain known consignors and regulated agents. TSA also inspects cargo security procedures during foreign airport assessments. Further, DHS has also implemented requirements to obtain advance information on air cargo shipments through ACAS that it uses to perform targeted risk assessments. TSA inspects air carriers and assesses certain known consignors and regulated agents to help ensure compliance with cargo security requirements. However, certain factors can limit TSA’s ability to conduct inspections or observe various security measures, including cargo screening. TSA uses a multistep process to plan, conduct, and record air carrier cargo inspections. To plan inspections, TSA develops an annual Master Work Plan that regional operations centers use to schedule air carrier inspections each fiscal year. Based on our review of TSA work plans for fiscal years 2012 through 2018 and discussions with TSA officials at all six regional operations centers, TSA separately plans for passenger inspections and cargo inspections of both all-cargo air carriers as well as passenger air carriers that transport cargo bound for the United States from foreign airports. To conduct air cargo inspections, TSA inspectors are to use standardized, cargo-specific job aids that assess air carriers against security program requirements in all six pillars of supply chain security. According to TSA officials, they update the cargo inspection job aids, as needed, to ensure they reflect changes to TSA requirements and the current threat environment. For example, the cargo inspection job aids prompt TSA inspectors to inquire about the transportation of cargo from certain high risk countries. TSA inspectors we spoke with at all six regional operations centers stated that they use the cargo inspection job aids, and inspectors we spoke with at five regional operations centers stated that they are helpful. We observed 17 air carrier cargo inspections at airports in two different countries and found that TSA inspectors consistently used the cargo inspection job aids to assess the air carriers against TSA requirements. These inspectors observed air carriers’ implementation of security measures (such as cargo screening), interviewed security officials, and reviewed air carrier records (including cargo screening and training logs). Officials at all six regional operations centers and the air carriers we met with confirmed these methods are routine practices. Further, officials representing 10 of the 11 air carriers we met with confirmed that TSA regularly inspects their cargo operations at foreign airports to ensure compliance with screening and other security requirements. After completing an air carrier inspection, TSA inspectors are to enter air carrier cargo inspection results into PARIS. TSA supervisors and managers are to review the inspection reports for quality and track their completion. TSA officials we interviewed at TSA headquarters and all six regional operations centers confirmed the quality review process is in place and that they use it. In addition, TSA headquarters cargo experts are to review a sample of air carrier cargo inspections. Based on our analysis of PARIS data, TSA conducted close to 5,000 air carrier cargo inspections (including both passenger air carriers and all- cargo air carriers) from fiscal year 2012 through fiscal year 2017 and found air carriers in full compliance with applicable security requirements in 84 percent of these inspections. TSA reported at least one instance of noncompliance, or violation, for the remaining 16 percent of cargo inspections. Based on the TSA data, the percentage of inspections with violations has generally trended downward during this time period. TSA officials attributed this downward trend to a number of factors including: (1) TSA’s emphasis on assisting air carriers (through its international industry representative) in implementing new air cargo security requirements after the 2010 printer ink cartridge plot; (2) increases in the number of TSA inspectors to ensure compliance; (3) TSA’s outreach to foreign governments for improved cargo security under the NCSP Recognition Program; and (4) TSA efforts to engage with air carriers, including regional industry summits that included a cargo security focus. According to TSA officials, if a TSA inspector finds that an air carrier is not in compliance with any applicable security requirements, additional steps are to be taken to correct and record those specific violations, which can include providing on-the-spot counseling for minor violations or opening an investigation if the violation is potentially more serious. Upon conclusion of the investigation, TSA is to make a determination whether to issue a warning notice, letter of correction, or notice of proposed civil penalty. For example, based on TSA data, we determined that TSA inspectors provided counseling (specific guidance) in certain instances when they found that an air carrier had failed to obtain multiple views of cargo screened using an X-ray machine. According to the TSA data, the air carrier took immediate corrective actions and implemented the correct procedures on-the-spot. From the data provided by TSA, we also identified potentially more serious violations. Examples of such violations included instances in which TSA inspectors initiated an investigation when they found that an air carrier was not screening 100 percent of the cargo as required under its approved security program. According to TSA officials, TSA relies on a system of progressive enforcement and carefully considers whether a civil penalty is warranted based, in part, on the history of an air carrier’s inspections. TSA officials added that they may consider options other than civil penalties, since their objective is to encourage compliance through capacity-building efforts with air carriers, not to generate revenue. For example, TSA will sometimes settle a civil penalty by allowing the air carrier responsible for the violation to invest the agreed upon penalty into improved security measures or screening processes. According to TSA data, TSA inspectors identified 1,128 air carrier cargo security violations during fiscal years 2012 through 2017 for the 16 percent (781) of air carrier inspections where they found at least one violation. For these violations, TSA took the following actions: TSA inspectors resolved 580 of the violations (approximately half) through counseling and referred the remaining 548 violations for investigation since they were each potentially serious enough to warrant an enforcement action. TSA conducted investigations covering the 548 potentially more serious violations, which resulted in about 220 administrative actions, nearly 50 civil penalties, and over 30 instances where no action was taken. According to TSA, TSA inspectors recommended total civil penalties of approximately $23.5 million, $22.2 million of which consisted of penalties proposed for one air carrier. During air carrier inspection visits, the TSA inspection team may also conduct assessments of known consignors and regulated agents in countries with recognized NCSPs. According to TSA data, TSA conducted assessments of 38 known consignors and regulated agents in fiscal year 2017. While conducting a site visit to a foreign airport in an NCSP country in March 2018, we observed TSA inspectors conduct assessments of two regulated agents and the inspectors covered all of the required questions. The assessments were primarily interviews along with some observations that included warehouse security and limited cargo screening. Record reviews were not part of the assessment because that is the purview of the foreign government’s civil aviation authority, according to the TSA inspectors. Foreign government civil aviation authority officials attended the assessments of the two regulated agents to observe and take notes of the visit and discussions. According to the TSA inspectors who conducted the assessments in the NCSP country we visited, meeting with regulated agents is invaluable because regulated agents, not air carriers or their authorized representatives, conduct almost all air cargo screening in that country. The inspectors added that having the opportunity to meet with regulated agents during foreign site visits provides them with insights regarding the extent to which screening of U.S.-bound cargo is being conducted at foreign last point of departure airports. In countries without a recognized NCSP, air carriers are required under their TSA-approved security programs to screen all cargo at the airport. TSA inspectors are not always able to observe certain security measures during air carrier cargo inspections or airport assessments because of foreign government sovereignty and air cargo logistics. For example, regional operations center officials told us that they are not always able to observe cargo screening because of restrictions placed on them by foreign governments, such as the number of days they are given to complete an inspection or assessment, the hours they are allowed to work, or the size of the TSA inspection team. TSA officials also stated that the transportation of air cargo occurs at all hours of the day and night, and TSA inspectors must sometimes choose which security measures to observe. For example, the TSA officials stated that screening may occur many hours prior to the loading of that cargo on an aircraft. At both foreign airports we visited, we observed TSA inspectors working late night or early morning hours to observe air carriers’ cargo operations. Out of the 17 air carrier cargo inspections we observed at the two foreign airports we visited, TSA inspectors were not able to observe cargo acceptance procedures for 11 air carriers and cargo screening for 9 air carriers because these carriers did not receive or screen cargo during the time of the inspections or the inspectors were busy conducting other inspections. Because regulated agents screen the vast majority of the cargo before transporting it to the airport in the NCSP country we visited, TSA did not observe cargo screening in eight of the nine air carrier cargo inspections they conducted at that airport. For inspections where TSA inspectors cannot observe security measures, we observed (and TSA inspectors confirmed) that they rely on interviews with officials responsible for cargo security and screening and document reviews (such a reviewing cargo screening logs) to determine whether air carriers are complying with TSA air cargo security requirements. At the request of TSA, air carriers must provide evidence of compliance with applicable security requirements and its security programs, including copies of records. TSA inspectors also do not inspect air carriers at all foreign airports from which air carriers transport U.S.-bound cargo. As we reported in May 2018, challenges prevent TSA from completing 100 percent of required air carrier inspections in Cuba at the frequency established in its standard operating procedures, including external factors, such as foreign government requests to reschedule TSA inspections, and limitations in the data TSA uses to schedule inspections. Further, TSA officials stated that most all-cargo carriers do not have scheduled flights. Instead, they wait until they have sufficient cargo to ship and then complete their routes, which can make it difficult for TSA to schedule inspections— planned 3 months in advance—during times that the carrier will be flying cargo to the United States. According to the vice president of security at one all-cargo carrier, TSA does not always inspect all last point of departure routes used by the airline. TSA is taking steps to better understand air carriers’ schedules. For example, in response to our 2018 review addressing TSA’s efforts to ensure the security of air carrier operations between the United States and Cuba, TSA reported that it began developing a tool in August 2017 that is designed to analyze aggregate flight data and validate or identify last point of departure service to the United States from international locations. In addition to conducting air carrier cargo inspections, TSA inspection teams conduct assessments of foreign airports that provide passenger and/or cargo service to the United States to determine if these airports are maintaining and carrying out effective security measures. TSA inspectors generally use the same process to plan, conduct, and record airport assessments as air carrier inspections, according to TSA headquarters and regional operations centers officials. Specifically, TSA inspection teams assess the foreign airports using 44 ICAO standards and recommended practices, including nine standards or practices that are specific to the transport of cargo and mail. These standards include measures for the acceptance, screening, and protection of air cargo. At the end of each foreign airport assessment, TSA inspectors are to prepare a report detailing findings on the airport’s overall security posture and security measures that may also contain recommendations for corrective actions. We observed TSA inspectors conducting the cargo portion of an airport assessment at one airport we visited and confirmed their use of this process. Inspectors used the results of the air carrier cargo inspections conducted earlier in the site visit to inform the cargo portion of the airport assessment and complete the associated job aid. The TSA inspectors obtained additional information specific to the assessment during an interview with airport officials and an international mail facility in the country we visited. The inspectors stated that they corroborated the information obtained during interviews with documentation provided by airport officials and the foreign government in advance of the visit. TSA conducted about 570 assessments of foreign airports with U.S- bound cargo shipments from fiscal year 2012 through fiscal year 2017, and TSA inspectors determined that the airports were fully compliant with the cargo-related ICAO standards and recommended practices in about 430 of these assessments (75 percent), according to our analysis of TSA data. However, TSA inspectors found at least one instance of cargo noncompliance in about 140 airport assessments (25 percent). Based on TSA data, the percentage of airport assessments in which TSA inspectors identified cargo noncompliance issues has generally trended upward during fiscal years 2012 through 2017. TSA officials attributed this upward trend to the introduction of a new ICAO standard in 2014 for ensuring that all cargo shipments designated as higher-risk undergo enhanced screening. TSA assigns a vulnerability score to each ICAO standard and recommended practice assessed using a rating system, ranging from a category “1,” which represents full compliance with ICAO standards and recommended practices, to a “5,” which involves the most serious or egregious issues. For example, in a fiscal year 2017 foreign airport assessment, TSA inspectors recorded an instance of noncompliance of ICAO standard 4.6.3 (that requires protection of cargo from the point of screening until departure of the aircraft) as a “3” when they identified holes in a facility perimeter barrier allowing direct access to secured cargo. Further, during a 2014 airport assessment, TSA inspectors assessed an instance of noncompliance of the same standard as a “5” when they observed two unescorted individuals in a security restricted area without airport identification. Based on the results of TSA’s foreign airport assessments conducted during fiscal years 2012 through 2017, TSA inspectors assessed most noncompliance issues identified as a “2” or “3.” As of December 2017, TSA officials reported that certain foreign airports took corrective actions to address noncompliance issues. As a result, TSA closed out approximately 40 percent of the fiscal year 2012 through 2017 deficiencies identified in its assessments. According to our analysis of TSA data, for the remaining 60 percent of noncompliance issues, the airports have not yet taken sufficient action to fully address TSA’s concerns, or TSA inspectors have not yet verified whether the actions foreign airports reported that they have taken are sufficient for addressing the noncompliance issues. The majority of unaddressed noncompliance issues pertain to issues identified in fiscal year 2016 or 2017 assessments. In our 2017 review of TSA’s foreign airport assessments, we reported that TSA assists foreign airports in addressing identified noncompliance issues (security deficiencies) in various ways, but noted that TSA could enhance data management. As part of assisting foreign airports, TSA inspectors educate foreign airport officials on how to mitigate identified airport security deficiencies. Specifically, TSA provides on-the-spot counseling, training, technical assistance, security consultations, and security equipment. In addition, TSA representatives—the primary liaisons between the U.S. government and foreign governments on transportation security issues—are responsible for monitoring the progress made by foreign officials in addressing security deficiencies identified during TSA airport assessments. Our 2017 review found, however, that TSA representatives did not always update key information in TSA’s database for tracking the resolution status of security deficiencies, including the security deficiencies’ root causes and corrective actions. To help strengthen TSA’s analysis and decision making, we recommended that TSA fully capture and specifically categorize data on the root causes of security deficiencies and the status of corrective actions to be taken. TSA concurred with our recommendations and is taking steps to address them, as discussed below. In addition to working with foreign airports to address deficiencies, TSA sometimes requires air carriers to adopt security procedures through security directives or emergency amendments to compensate for serious vulnerabilities that TSA identified during the foreign airport assessment. For example, at one airport in Africa, passenger air carriers must hold all cargo for 24 hours prior to transport. In response to our 2017 recommendations, TSA officials told us that they are in the process of developing a vulnerability resolution tool to capture the vulnerabilities associated with a specific location, such as a foreign country or airport. According to TSA officials, the tool will be used to identify and categorize root causes of vulnerabilities identified during air carrier inspections and foreign airport assessments, as well as incorporate other country specific information. TSA officials added that, once completed, TSA hopes to be able to use the tool to develop vulnerability mitigation options to, among other things, address security vulnerabilities identified during air carrier inspections and foreign airport assessments. For example, if TSA inspectors identify a cargo screening vulnerability during an air carrier inspection or airport assessment, they may determine that the root cause is a lack of national-level training courses. In an example such as this, although TSA does not have the authority to require a foreign government to take corrective actions, TSA officials may develop a training curriculum that foreign governments could deploy, if they choose, to address the identified vulnerability. According to TSA officials, TSA inspectors and TSA representatives would subsequently determine whether the training resolved the vulnerability and, if necessary, consider what additional measures may be appropriate. TSA expects to have the tool in place and staff trained to use it by the beginning of fiscal year 2019. DHS has taken steps to require advance information on air cargo shipments in order to conduct targeted risk assessments and help ensure the cargo is secure before air carriers transport it to the United States. As previously discussed, in December 2010, U.S. Customs and Border Protection (CBP) began collecting cargo data from certain air carriers before they loaded U.S.-bound cargo as part of the voluntary ACAS pilot program. In response to a terrorist plot in July 2017, TSA issued security directives and emergency amendments in September 2017 requiring air carriers transporting cargo to the United States from last point of departure airports in Turkey to submit advance cargo data to CBP. Further, in January 2018, TSA imposed similar requirements for foreign air carriers operating out of certain high risk countries in the Middle East. DHS subsequently published the ACAS interim final rule, which requires all air carriers to submit advance air cargo information as of June 12, 2018. TSA and CBP identify high risk cargo based on, among other things, the advance information air carriers submit and may require them to take additional actions before loading the cargo onto U.S.-bound flights. Before implementation of the ACAS interim final rule, air carriers not participating in the ACAS pilot were required to submit manifest data to CBP no later than 4 hours before the flight’s arrival in the United States, or no later than the time of departure from locations in North America, the Caribbean, Central America, and parts of South America north of the Equator. However, under ACAS, a subset of the manifest data must be provided prior to loading the cargo onto U.S.-bound aircraft. After reviewing the data, DHS can mandate that an air carrier (1) provide additional information on a particular cargo shipment, (2) perform enhanced screening before loading the cargo, or (3) not transport the cargo to the United States. TSA officials are beginning to track whether air carriers have conducted the required ACAS screening as a part of their international compliance activities. TSA officials stated that inspectors review air carrier screening and manifest logs during air carrier cargo inspections at foreign airports to verify compliance with ACAS. In addition, TSA plans to fully develop the process of assessing air carrier compliance with ACAS requirements, according to TSA officials. As of June 2018, TSA has recognized the passenger air cargo security programs of the European Union, which covers the 28 European Union member states, and 12 other countries. NCSP recognition is a voluntary agreement between TSA and a foreign government. TSA’s NCSP recognition process involves three phases: (1) a technical review and analysis of a foreign country’s air cargo security program’s requirements with TSA requirements to determine if the programs align on basic principles; (2) validation visits to the foreign country to determine if the air cargo security program aligns with TSA practices; and (3) a decision on whether to recognize the foreign government’s air cargo security program as commensurate with TSA’s air cargo security requirements. The recognition decision is based on whether the foreign government’s NCSP is commensurate with TSA requirements across TSA’s six pillars of cargo supply chain security, and the potential outcomes are as follows: Recognition with no caveats. TSA may determine that the foreign government’s NCSP is fully commensurate with all of TSA’s air cargo security requirements across all six supply chain security pillars or TSA may find there are slight variations in air cargo security requirements that nonetheless provide a commensurate level of security and give the country’s NCSP recognition with no caveats. As of June 2018, TSA had recognized the NCSPs of Canada, Israel, and Norway without any caveats. Recognition with caveats. TSA may decide to recognize a government’s NCSP, but with certain caveats based on specific variations within a country’s national requirements. According to TSA officials, in this instance, TSA requires air carriers in that country to continue to implement specific TSA requirements on U.S.-bound air cargo to account for the variation. As of June 2018, TSA had issued at least one caveat with nine NCSP recognized countries and the European Union. For example, in these nine recognized countries and the European Union, TSA requires air carriers to rescreen cargo originating from specific third party countries according to TSA standards before transporting it to the United States. No recognition, but provides recommendations. TSA may determine that a foreign government’s NCSP is not commensurate with TSA requirements in many areas and make recommendations to that government on how to improve its air cargo security program to better align with TSA and global air cargo security requirements. For example, after reviewing one country’s air cargo security program requirements, TSA determined that its NCSP was not commensurate and provided written recommendations on ways to improve its NCSP, as discussed below. According to TSA officials, under such circumstances they will continue to engage with the foreign government. If the foreign government implements the recommendations, TSA may reconsider the foreign government for NCSP recognition. Notably, TSA recognized another country’s air cargo security program only after its civil aviation authority implemented TSA’s recommendations to improve certain procedures, including screening of staff with access to air cargo. Where NCSP recognition is not applicable, air carriers transporting air cargo into the United States from last point of departure airports must continue to apply their TSA-approved security program requirements pertaining to cargo. TSA originally developed the NCSP Recognition Program for passenger air cargo security programs in fiscal year 2011, and TSA expanded the scope of the program in fiscal year 2013 to include all-cargo operations. As a result of this expansion, foreign governments may choose to engage with TSA on NCSP recognition for passenger operations, all-cargo operations, or both. According to TSA’s NCSP memo authorizing the change, by including all-cargo operations in its evaluation of other countries’ NCSPs, TSA can gain a greater understanding of the international air cargo supply chain. As of June 2018, TSA had recognized the all-cargo operations of the European Union and six other countries. Figure 2 provides information about the foreign government NCSPs that TSA had recognized as of June 2018. According to TSA data, air carrier participation in the NCSP Recognition Program has increased in recent years. Specifically, as of June 2018, 130 air carriers participate in the NCSP Recognition Program—an increase from about 50 in fiscal year 2015 when TSA last recognized a foreign government’s NCSP. After TSA has recognized a foreign government’s NCSP, air carriers can request amendments to their TSA-approved security programs to allow them to follow a recognized country’s air cargo security program instead of having to follow both the recognized country’s security program and separate requirements in their TSA-approved security programs. Representatives from all 11 air carriers we met with stated that they have submitted requests to TSA to amend their security programs in order to implement the foreign government’s NCSP instead of TSA requirements when operating in those countries that have NCSP recognition. According to representatives from all 11 air carriers and TSA officials we met with, air carriers benefit from NCSP recognition. Specifically, they and the stakeholders in their supply chains can learn and use the host country’s set of air cargo security requirements (and without a need to know and implement TSA requirements for cargo transported on U.S.-bound flights from that country). TSA officials stated that, as of June 2018, apart from the European Union and the 12 other countries that have NCSP programs, no additional foreign governments are close to achieving NCSP recognition. However, TSA NCSP Recognition Program officials continue to coordinate with foreign governments on air cargo security issues when requested and as TSA resources allow. According to information provided by TSA, as of June 2018, TSA had coordinated with 21 additional foreign governments interested in NCSP recognition that are not yet recognized. In non- recognized countries, air carriers transporting U.S.-bound air cargo must follow the measures required by the foreign governments in addition to their TSA-approved security programs. Once TSA determines a foreign government’s NCSP is commensurate with TSA requirements, it monitors NCSP implementation through air carrier cargo inspections, foreign airport assessments, ongoing engagements with foreign government officials, and revalidation of NCSP recognition (see fig. 3). Each of these monitoring mechanisms is discussed in greater detail below. According to TSA officials, results from air carrier inspections and foreign airport assessments provide TSA valuable information in determining whether to revalidate a foreign government’s NCSP recognition because TSA inspectors are able to verify a recognized government’s NCSP implementation in person. We analyzed TSA data from fiscal years 2015 through 2017 and confirmed that TSA conducted air carrier cargo inspections and assessments of foreign airports with U.S-bound cargo shipments that covered all recognized NCSPs. Representatives from 10 of the 11 air carriers we met with and the two foreign governments we met with confirmed that TSA conducts air carrier inspections in recognized countries. According to our analysis of TSA data for fiscal years 2015 through 2017, TSA inspectors identified more air carrier violations and lower rates of compliance with cargo-related standards and recommended practices at foreign airports located in non-NCSP countries than in NCSP countries. In addition to identifying lower rates of compliance in non-NCSP countries, TSA officials also determined that the noncompliance issues in non-NCSP countries were more serious than noncompliance issues in NCSP countries, according to our data analysis. According to TSA officials, TSA inspectors identified fewer violations during air carrier cargo inspections in NCSP countries because air carriers only need to implement one air cargo security program (the host government’s) and, therefore, were less likely to make errors. Additionally, TSA inspectors identified fewer noncompliance issues in NCSP countries because TSA officials meet with foreign officials in recognized countries on a regular basis, and this helps to improve compliance. Representatives from 10 air carriers we met with confirmed that they are less likely to violate air cargo security requirements in NCSP countries because (1) the foreign government conducts regular compliance inspections (a component of the oversight and compliance security pillar TSA requires foreign governments implement to obtain NCSP recognition), or (2) screeners are less likely to make errors screening cargo because they only need to implement the foreign government’s NCSP, which reduces confusion. For example, one air carrier representative told us that cargo screeners do not need to determine which security measures (TSA’s or the host government’s) to implement for a particular flight. TSA and foreign government officials also discuss changes in a foreign government’s NCSP on a regular basis, according to our review of TSA’s documents and interviews with TSA and foreign government officials. For example, TSA’s memos authorizing the NCSP Recognition Program and 11 of 12 letters of recognition provided to foreign governments express an intent for TSA to hold in-person, annual meetings with officials in countries with a recognized NCSP program to discuss issues related to NCSP recognition. TSA officials generally held or planned to hold such meetings in fiscal years 2017 and 2018, according to our review of TSA’s NCSP Recognition Program fiscal year 2018 work plan. In addition, TSA officials stationed at U.S. embassies are to meet with their foreign government counterparts on a regular basis, according to TSA officials and the two recognized governments with whom we met. For example, the TSA representative who coordinates with the European Commission in Brussels, Belgium, told us that he meets with European Commission officials multiple times each month. He stated that these conversations can cover regulatory and legislative changes pertaining to air cargo security with European Commission officials and he informs TSA headquarters and the Frankfurt Regional Operations Center of changes that could affect NCSP recognition in Europe. TSA headquarters and European Commission officials confirmed that these meetings occur. TSA revalidates recognized NCSPs using the results of its air carrier inspections, airport assessments, ongoing engagement with foreign government officials, and additional site visits to the foreign country, if needed. According to our analysis of TSA NCSP recognition letters and NCSP information compiled by TSA officials, TSA has revalidated all recognized NCSP countries at least once since fiscal year 2012. Further, this analysis shows that TSA has generally revalidated the NCSPs of recognized countries every 3 years, as required by the TSA memos that established and revised the NCSP recognition process. However, in 2016, TSA authorized a change to the revalidation process that allows for continuous NCSP recognition because, according to TSA officials and NCSP memos, the monitoring mechanisms TSA has in place (e.g., air carrier inspections, foreign airport assessments, and ongoing dialogue with foreign government officials) provide sufficient information to validate that foreign governments’ recognized NCSPs and continue to provide a commensurate level of security to TSA’s. TSA’s 2016 NCSP memo states that TSA can revoke continuous recognition at any time, and TSA may not grant continuous recognition to a country if TSA determines that additional oversight is warranted. For example, TSA officials stated that they may only recognize a country’s NCSP on a time-limited basis if they experience communication or access issues or have concerns about implementation of the NCSP. As of June 2018, TSA had granted continuous recognition to the European Union and 10 other countries and had not revoked any government’s continuous recognition, according to summary NCSP information provided by TSA officials. TSA has taken steps to broadly measure the effectiveness of its air carrier inspections and foreign airport assessments, but these efforts do not allow TSA to specifically determine the effectiveness of the cargo portions of such inspections or assessments. In addition, TSA has not developed measures for determining the effectiveness of its NCSP Recognition Program. TSA tracks data on the results of air carrier inspections and foreign airport assessments, and it broadly measures the effectiveness of its foreign airport assessment program and is developing a similar measure for its air carrier inspection program. However, TSA’s performance measures do not allow it to specifically determine the effectiveness of its air carrier cargo inspections or the cargo portions of foreign airport assessments. For example, in fiscal year 2017, TSA developed a new performance measure to track the extent to which foreign airports take actions to address noncompliance issues identified by TSA inspectors during foreign airport assessments. The target for this performance measure is for 70 percent of foreign airports to implement corrective actions or other mitigation strategies. However, that performance measure does not allow TSA to determine the effectiveness of the cargo portions of airport assessments because it does not separately account for cargo and noncargo noncompliance issues. Specifically, the current measure does not capture noncompliance issues by category, to allow TSA to determine which noncompliance issues specifically pertain to cargo. Such a broad measure of the effectiveness of foreign airport assessments could obscure progress made (or lack thereof) in resolving cargo-specific vulnerabilities. According to our analysis of TSA fiscal year 2017 foreign airport assessment data, TSA could meet its 70 percent target if foreign airports take actions to address noncompliance issues unrelated to cargo—including passenger and carry-on baggage screening and access controls—without taking any actions to address identified noncompliance issues for cargo. TSA officials stated that they are coordinating with the Office of Management and Budget to develop a performance measure to gauge the effectiveness of air carrier inspections. However, TSA officials also stated that they have no plans to differentiate the extent to which air carriers correct violations TSA inspectors identify related to cargo from those identified related to passengers as they develop this measure. Notably, TSA has regularly included a goal to secure air cargo and the supply chain in annual operational implementation plans, but TSA has no associated performance measures that show the effectiveness of efforts taken to meet this goal. TSA’s Office of Global Strategies Fiscal Year 2016 Strategy states that all strategic goals and objectives will have corresponding, relevant performance indicators that measure organization effectiveness in those areas. Further, DHS and TSA guidance state that it is important to measure the effectiveness of risk management priorities. For example, the DHS National Infrastructure Protection Plan and Transportation Systems Sector-Specific Plan state that setting goals and measuring the effectiveness of risk management efforts against these goals are key elements of a risk management framework. We have also previously reported on the importance of developing outcome-based performance measures—measures that address the results (effectiveness) of products and services. According to TSA officials, they have not developed outcome-based performance measures that are specific to cargo security because they believe that measuring the results of air carrier inspections and foreign airport assessments holistically is sufficient to provide them with information on air cargo vulnerabilities. However, as previously discussed, TSA inspectors are identifying some potentially serious cargo vulnerabilities during air carrier cargo inspections and the cargo portions of airport assessments, including cargo that was not properly screened. Given TSA’s assessment that the security threat in air cargo is significant, developing and monitoring an outcome-based performance measure specific to the cargo portions of foreign airport assessments—along with differentiating the extent to which air carriers correct violations related to cargo from those related to passengers as it develops and monitors outcome-based performance measures for its air carrier inspection program–could help TSA better determine the effectiveness of these efforts and whether they are improving the security of U.S.-bound air cargo. Such cargo-specific outcome-based performance measures could include differentiating the percentage of cargo-related violations that TSA has verified air carriers have addressed (as opposed to passenger- related violations) and measuring the progress that foreign airport authorities, foreign governments, or TSA have made to address vulnerabilities specific to ICAO’s cargo-related standards. TSA does not measure the effectiveness of its NCSP Recognition Program. Specifically, TSA budget documents and annual performance reports do not include measures for gauging the success of its NCSP Recognition Program. TSA operational implementation plans for fiscal years 2014 through 2017 addressed program recognition—including working toward recognition efforts with countries based on a list of priorities and holding annual in-person meetings with each recognized government—but TSA has not evaluated the impact of these actions. In addition, while TSA’s operational implementation plans include milestones to measure outputs of the NCSP Recognition Program, TSA has not measured outcomes of its NCSP recognition efforts. For example, TSA has not measured the extent to which non-recognized countries implement recommendations that TSA has made to them during the NCSP recognition process. TSA officials stated that such a measure would help them determine the effect of the NCSP Recognition Program on air cargo security. According to TSA officials, in the absence of formal performance measures, the primary metric used to measure the performance of the NCSP Recognition Program is the number of countries TSA has recognized. However, this metric does not address the effectiveness of the NCSP Recognition Program because it does not measure how the program improves air cargo security. We have previously reported on the importance of measuring program performance. Our prior reports and guidance have stated that performance measures should evaluate both processes (outputs) and outcomes related to program activities. Specifically, we have noted that output measures address the type or level of program activities conducted, such as the number of countries recognized, while outcome- based measures address the results of products and services, such as how recognition programs facilitate the identification of air cargo industry vulnerabilities or contribute to improved air cargo security. Further, as discussed earlier, TSA strategy documents and leading practices encourage the development of relevant performance indicators that measure program effectiveness. TSA officials stated that TSA has not developed performance measures associated with the NCSP Recognition Program because TSA has reorganized and different directorates within TSA have had responsibility for NCSP program recognition over time. TSA officials also stated that developing NCSP Recognition Program performance measures has been secondary to other tasks, such as developing the ACAS program. Developing and monitoring output and outcome-based performance measures for its NCSP Recognition Program will help TSA better assess the effectiveness of the program and whether the resources it has invested are yielding their intended results. Air carriers transport billions of pounds of cargo into the United States from foreign airports each year, and the threat posed by terrorists attempting to conceal explosive devices in air cargo shipments remains significant, according to TSA. TSA has taken steps to ensure that U.S- bound air cargo is secure by, for example, conducting air carrier cargo inspections overseas, performing assessments of foreign airports that transport cargo to the United States using ICAO cargo-related standards and recommended practices, and evaluating and recognizing the NCSPs of foreign countries. Although TSA tracks cargo compliance data collected during its air carrier inspections and foreign airport assessments and is developing a vulnerability resolution tool, TSA has not developed outcome-based performance measures for determining the effectiveness of its air cargo security compliance efforts. Developing and monitoring an outcome-based performance measure for the cargo portions of airport assessments and differentiating the extent to which air carriers correct violations related to cargo from those related to passengers as it develops and monitors outcome-based performance measures for its air carrier inspection program could help TSA better assess the effectiveness of these efforts and whether they are improving air cargo security. For example, TSA could measure the percentage of cargo-related violations that TSA has verified air carriers have addressed. Further, developing and monitoring output and outcome-based performance measures for its recognition programs will help TSA better determine the effectiveness of the NCSP Recognition Program and whether the resources TSA has invested are yielding their intended results. For example, TSA could measure the extent to which non-recognized countries implement recommendations that TSA has made to them during the NCSP recognition process. We are making the following three recommendations to TSA: The Administrator of TSA should instruct Global Strategies to develop and monitor outcome-based performance measures for determining the effectiveness of the cargo portion of its foreign airport assessments. (Recommendation 1) The Administrator of TSA should instruct Global Strategies to differentiate the extent to which air carriers correct violations related to cargo from those related to passengers as it develops outcome-based performance measures for its air carrier inspection program, and monitor any measure it develops. (Recommendation 2) The Administrator of TSA should instruct Global Strategies to develop and monitor output and outcome-based performance measures for determining the effectiveness of its NCSP Recognition Program. (Recommendation 3) In August 2018, we provided a draft of the sensitive version of this report to the Department of Homeland Security for its review and comment. In written comments, which are included in appendix IV, DHS stated that it concurred with the recommendations and plans to develop cargo-specific performance measures to help determine the effectiveness of its air carrier inspections, foreign airport assessments, and the NCSP Recognition Program. DHS also provided technical comments, which we have incorporated into the report, as appropriate. We are sending copies of this report to interested congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact Nathan Anderson at (202) 512-3841 or andersonn@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report: (1) describes steps the Transportation Security Administration (TSA) takes to help ensure that U.S-bound air cargo is secure, (2) describes the status of TSA’s efforts to recognize and monitor foreign governments’ air cargo security programs, and (3) analyzes the extent to which TSA measures the effectiveness of its efforts to secure U.S.-bound air cargo. This report is a public version of a sensitive report that we issued in October 2018.TSA deemed some of the information in our October report to be Sensitive Security Information, which must be protected from public disclosure. Therefore, this report omits sensitive information about TSA’s risk methodology, the standards that TSA uses to assess foreign airports, the specific results of TSA’s air carrier inspections and foreign airport assessments, and information on the types of NCSP recognition TSA has granted to other countries. Although the information provided in this report is more limited, the report addresses the same objectives as the sensitive report and uses the same methodology. To describe the steps TSA takes to help ensure that U.S-bound air cargo is secure, we reviewed relevant laws and regulations, TSA security policies and procedures, screening program requirements, and security directives and emergency amendments relevant to air cargo. For example, we reviewed relevant air carrier security programs and associated cargo inspection job aids that TSA transportation security specialists (inspectors) are to use during each air carrier cargo inspection to ensure that requirements for air carrier security programs are fully evaluated during each inspection. We also reviewed fiscal years 2012 through 2018 air carrier inspection and airport assessment Master Work Plans—which TSA uses to track its overseas air carrier inspection and foreign airport assessment schedule—to better understand how TSA schedules inspections and assessments and the types of inspections it conducts. We chose these fiscal years because they cover the time period since our previous air cargo security review. In addition, we conducted site visits to two foreign airports that operate flights that transport air cargo directly to the United States—one in South America and one in Asia—to observe a nongeneralizable sample of TSA inspectors conducting a total of 17 air carrier cargo inspections. At one airport, we also observed the cargo portion of an airport assessment. We selected these locations based on their designation by TSA as airports of relatively high risk level, as well as high volume of U.S.-bound air cargo; TSA’s air carrier inspection schedule; and geographic dispersion. We also chose these countries to allow us to observe an inspection in one country where TSA has recognized the NCSP and one country where TSA has not recognized the NCSP. In addition, we reviewed the final reports TSA inspectors completed for the air carrier cargo inspections and airport assessment we observed. Further, we obtained and analyzed the results of all air carrier cargo inspections (close to 5,000) and assessments at foreign airports that are last points of departure for cargo bound for the United States (about 570) conducted by TSA inspectors and then entered by them into TSA’s databases. The Performance and Results Information System (PARIS) database contains security compliance information on TSA-regulated entities, including air carriers, and the Global Risk Analysis and Decision Support (GRADS) system vulnerability tracking sheet contains the results of foreign airport assessments. We analyzed PARIS and GRADS data from fiscal years 2012 through 2017, to cover the period since our previous air cargo security review and to include the 5 most recent years for which data were available at the time of our review. Specifically, we analyzed the frequency with which air carriers and foreign airports complied with TSA air cargo security requirements and select cargo- related International Civil Aviation Organization (ICAO) aviation security standards and recommended practices, including the seriousness of ICAO noncompliance issues TSA inspectors identified. TSA also uses GRADS to populate the Open Standards and Recommended Practices Finding Tool (OSFT), which tracks efforts taken by TSA and host governments to address noncompliance issues identified during foreign airport assessments. We analyzed fiscal years 2012 through 2017 OSFT data to determine the status of noncompliance issues TSA inspectors identified. We also reviewed 2017 PARIS data on the number of known consignor and regulated agent assessments TSA inspectors conducted. To assess the reliability of TSA’s air carrier and airport assessment data captured in PARIS and GRADS tracking sheet and OSFT, we reviewed program documentation on system controls, interviewed knowledgeable TSA officials, and analyzed TSA’s data for any potential gaps and errors. During our assessment, we found some inconsistencies in the tool TSA uses to follow up on airport noncompliance issues. We rounded airport compliance information to the nearest 10 for reporting purposes. We also aggregated ICAO standards and recommended practices within the Measures Related to Cargo, Mail, and Other Goods category for reporting purposes because their numbering has changed over time. We concluded that TSA’s data on air carrier inspections and foreign airport assessments were sufficiently reliable to provide a general indication of the level of compliance for TSA’s air carrier inspections and foreign airport assessments over the period of our analysis. In addition, we conducted interviews with TSA officials, foreign government representatives, and air cargo industry stakeholders, as follows: We interviewed senior TSA officials, inspectors, TSA representatives stationed overseas, and international industry representatives located at TSA headquarters and in the field. For example, we met with the Director of Global Compliance as well as managers and inspectors from all six TSA regional operations centers who are responsible for planning and conducting air carrier inspections and assessments of foreign airports. During our interviews with TSA staff, we discussed TSA’s efforts to ensure the security of U.S.-bound air cargo prior to being transported to the United States and air carriers are in compliance with the applicable TSA cargo security requirements. We also interviewed officials at the European Commission (EC) and from the civil aviation authority in the country in Asia that we visited to discuss air cargo security standards and their experiences in coordinating with TSA. We judgmentally selected these foreign government entities because they (1) aligned with TSA’s inspection site visit in the country in Asia that we observed and (2) represent different models of recognition (i.e., TSA recognizes both the passenger and all-cargo portions of the European Union national cargo security program (NCSP) but only passenger operations in the NCSP for the country in Asia that we visited). Further, we met with representatives from 2 aviation associations and 11 air carriers that include U.S. and foreign-flagged air carriers, as well as passenger and all-cargo carriers. One of the international aviation associations includes air carriers that comprise over 80 percent of the world’s air traffic and the other aviation association includes the 5 air carriers that transported the largest individual amounts of U.S.-bound air cargo, by tonnage, in fiscal year 2017. We based our selection of the 11 air carriers on the relatively high volume of U.S.-bound cargo they transport; their operation of flights at the foreign airports we visited; and to obtain a range of coverage regarding their geographical regions of operation, passenger and all- cargo air carriers, and U.S. and foreign-flagged air carriers. Results from these meetings with foreign governments and aviation industry officials are not generalizable, but provided us with information on stakeholders’ experiences and perspectives regarding air cargo security issues. To describe the status of TSA’s efforts to recognize and monitor foreign governments’ air cargo security programs, we reviewed TSA’s policies and procedures for its NCSP Recognition Program. For example, we reviewed TSA memos from 2012, 2013, and 2016 that documented the recognition standards and any subsequent revisions to the NCSP Recognition Program; as well as TSA’s process for monitoring NCSP recognition requirements. Additionally, we analyzed letters that TSA provided since 2012 to the 13 governments it determined had commensurate air cargo security programs and NCSP information TSA officials compiled specifically for our review to better understand TSA’s terms of recognition with each government and the timeframes for revalidating NCSP recognition. We also reviewed letters TSA provided to governments it had determined did not have commensurate air cargo security programs, which provided us with insights into the recognition process and the criteria applied to TSA’s reviews. Further, we reviewed the NCSP Recognition Program’s fiscal years 2017 and 2018 work plans, as well as summaries of TSA’s annual meetings with foreign governments to better understand TSA’s efforts to engage with recognized governments. We also analyzed the air carrier cargo inspection and airport assessment data discussed above to determine the number of cargo inspections and assessments TSA completed in recognized countries from fiscal years 2015 through 2017. We chose this time period because it represents the 3 most recent complete fiscal years, and TSA last recognized a country’s NCSP in 2015. We also analyzed data from TSA’s Security Policy and Industry Engagement Policy Inventory on the number of air carriers participating in the NCSP Recognition Program from fiscal year 2012— when the NCSP Recognition Program began—through fiscal year 2017— the most recent complete fiscal year available at the time of our review— to determine how the level of participation has changed over time. In addition, we analyzed fiscal year 2017 Department of Transportation Bureau of Transportation Statistics T-100 data bank, which contains data on U.S.-bound departures from foreign airports, among other things, to determine the percentage of overall U.S.-bound air cargo shipped from NCSP countries. To assess the reliability of the T-100 data, we reviewed documentation on system controls, interviewed knowledgeable officials from the Bureau of Transportation Statistics, and analyzed the data for any potential gaps and errors. We determined that the T-100 data were sufficiently reliable for our intended purposes. Finally, we conducted interviews with TSA and foreign government officials from two countries, and with representatives of the 11 air carriers described previously to better understand TSA’s ongoing efforts to recognize and monitor foreign governments’ air cargo security programs. We also confirmed the status of countries’ NCSP recognition, as of June 2018, with TSA officials. To analyze the extent to which TSA measures the effectiveness of its various efforts to secure U.S.-bound air cargo, we reviewed documents that contain information on TSA’s air cargo security objectives, goals, and performance measures, including (1) information reported to the Office of Management and Budget in annual budget documents from fiscal years 2014 through 2019, and (2) TSA’s Global Strategies directorates Operational Implementation Plans from fiscal years 2014 through 2018— the most recent years available at the time of our review. These plans include annual objectives and milestones for U.S.-bound air cargo security programs. We also reviewed the measures in the annual budget documents and Operational Implementation Plans and compared them with requirements in TSA’s Global Strategies’ Fiscal Year 2016 Strategy and Fiscal Year 2018 Strategy Program and applicable laws governing performance reporting in the federal government, including the Government Performance and Results Act of 1993 (GPRA), as updated and expanded by the GPRA Modernization Act of 2010 (GPRAMA). For example, we assessed whether the performance measures provide information on the effectiveness of TSA’s various air cargo security efforts. Although GPRA and GPRAMA requirements apply to those goals reported by departments (e.g., DHS), we have previously reported that they can serve as leading practices at other organizational levels, such as component agencies (e.g., the TSA) for performance management. Further, we assessed TSA’s performance measures against risk management principles in the DHS National Infrastructure Protection Plan and the Transportation Systems Sector-Specific Plan. In addition, we obtained additional information on how TSA measures the performance of its air cargo security efforts during our interviews with TSA headquarters officials. The performance audit upon which this report is based was conducted from July 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with TSA from September 2018 to November 2018 to prepare this public version of the original sensitive report for public release. This public version was also prepared in accordance with these standards. Air carrier cargo inspections are conducted by a team of Transportation Security Administration (TSA) security specialists (inspectors) at foreign airports who review passenger and all-cargo air carriers’ implementation of requirements in their TSA-approved security programs, any amendments or alternative procedures to these security programs, and applicable security directives or emergency amendments. The frequency of air carrier cargo inspections at each airport depends on a risk-informed approach and is influenced, in part, by the airport’s vulnerability to security breaches, since the security posture of each airport varies, according to TSA. In general, TSA procedures require TSA to inspect air carriers with TSA-approved security programs at each airport annually or semiannually depending on the vulnerability level of the airport, with some exceptions. The inspection teams—based out of TSA regional operations centers—generally include one team leader and one team member and typically take 1 or 2 days, but can involve more inspectors and take longer to complete depending on the extent of service by the air carrier. TSA inspectors may spend several days at a foreign airport inspecting air carriers if there are multiple air carriers serving the United States from that location. During air carrier cargo inspections, TSA inspectors are to review applicable security manuals, procedures, and records; interview air carrier personnel; and are to observe security measures, such as cargo acceptance and screening, among other activities. Air carriers are subject to inspection in six key areas of cargo supply chain security, as described in table 2. After completion of an air carrier inspection, TSA inspectors are to record the results into TSA’s Performance and Results Information System (PARIS), a database containing security compliance information on TSA- regulated entities. If an inspector finds that an air carrier is in violation of any applicable security requirements, the inspector is to take additional steps to record the specific violation(s) and, in some cases, pursue them with further investigation. For example, TSA inspectors may choose to resolve violations that are minor or technical in nature, such as an employee not displaying their identification, through on-the-spot feedback and instruction, referred to as “counseling.” For more serious violations, such as inadequate screener training, TSA inspectors may pursue administrative actions, including issuing a warning notice, or initiating an investigation and requiring air carriers to inform TSA of the specific steps they will take to address the issue. For more egregious violations, such as failure to screen cargo, TSA inspectors may recommend a civil penalty. In extreme cases, TSA may withdraw its approval of an air carriers’ security program and suspend the air carriers’ operations. According to TSA officials, they rely on a system of progressive enforcement and carefully consider whether a civil penalty is warranted based on the compliance history of an air carrier, among other factors. Through its foreign airport assessment program, TSA determines whether foreign airports that provide passenger or all-cargo air carrier service to the United States are maintaining and carrying out effective security measures. To determine the frequency of foreign airport assessments, TSA uses a risk-informed approach to categorize airports into three risk tiers, with high risk airports assessed more frequently than medium and low risk airports. TSA’s assessments of foreign airports are generally scheduled during the same site visit as air carrier inspections for a certain location, and the same team of inspectors generally conducts both the airport assessment and air carrier inspections. According to TSA, it generally takes 3 to 7 days to complete a foreign airport assessment. However, the amount of time and number of team members required to conduct an assessment varies based on several factors, including the size of the airport and the threat level to civil aviation in the host country. TSA uses a multistep process to plan and conduct assessments of foreign airports. Specifically, TSA must obtain approval from the host government to conduct an airport assessment, and schedule the date for the on-site assessment. After conducting an entry briefing with host country and airport officials, the TSA team conducts an on-site visit to the airport. During the assessment, the team of inspectors uses several methods to determine a foreign airport’s level of compliance with 39 International Civil Aviation Organization (ICAO) standards and five ICAO recommended practices, to include conducting interviews with airport officials, examining documents pertaining to the airport’s security measures, and conducting a physical inspection of the airport. ICAO standards and recommended practices address operational issues at an airport, such as ensuring that passengers and cargo are properly screened and that unauthorized individuals do not have access to restricted areas of an airport. ICAO standards and recommended practices also address non-operational issues, such as whether a foreign government has implemented a national civil aviation security program for regulating security procedures at its airports and whether airport officials that are responsible for implementing security controls are subject to background investigations, are appropriately trained, and are certified according to the foreign government’s national civil aviation security program. At the close of an airport assessment, TSA inspectors are to brief foreign airport and government officials on the results. TSA inspectors also prepare a report in TSA’s Global Risk Analysis and Decision Support System (GRADS) detailing their findings on the airport’s overall security posture and security measures, which may contain recommendations for corrective actions and must be reviewed by TSA field and headquarters management. As part of the report, TSA assigns a vulnerability score to each ICAO standard and recommended practice assessed, as well as an overall vulnerability score for the airport, which corresponds to the level of compliance for each ICAO standard and recommended practice TSA assesses. Further, according to TSA officials, cargo experts in TSA headquarters review the cargo portion of each airport assessment before the assessment report is finalized. Afterward, TSA shares a summary of the results with the foreign airport and host government officials. In some cases, TSA requires air carriers to implement security procedures, such as requiring air carrier employees to guard the aircraft while on the tarmac, to address any deficiency that TSA identified during a foreign airport assessment through the issuance of security directives and emergency amendments. If the Secretary of Homeland Security determines that an airport does not maintain and carry out effective security measures, he or she shall, after advising the Secretary of State, take action, which generally includes notification to the appropriate authorities of the country of security deficiencies identified, notification to the general public that the airport does not maintain effective security measures, and modification of air carrier operations at that airport. Nathan Anderson, (206) 287-4804 or andersonn@gao.gov. In addition to the contact above, Christopher Conrad (Assistant Director), Paul Hobart (Analyst-in-Charge), Hiwotte Amare, Charles Bausell, Dominick Dale, Pamela Davidson, Wendy Dye, Mike Harmond, Eric Hauswirth, Ryan Lester, Benjamin Licht, and Tom Lombardi made key contributions.", "summary": "According to TSA, the federal agency responsible for securing the nation's civil aviation system, the introduction of explosive devices in air cargo shipments is a significant threat. To mitigate this threat, TSA is to review the security procedures carried out by all air carriers with U.S.-bound flights and at foreign airports servicing those air carriers. In addition, TSA assesses the commensurability of foreign countries' air cargo security programs. GAO was asked to evaluate TSA's progress in assessing and mitigating air cargo security risks. This report addresses (1) steps TSA takes to help ensure that U.S-bound air cargo is secure, (2) the status of TSA's efforts to recognize and monitor foreign governments' air cargo security programs, and (3) the extent to which TSA measures the effectiveness of its efforts to secure U.S.-bound air cargo. GAO reviewed TSA policies and procedures, analyzed TSA program data, observed a nongeneralizable sample of 17 air carrier inspections at two foreign airports (selected based on high air cargo volume and other factors), and interviewed TSA, foreign government, and air carrier representatives. The Transportation Security Administration (TSA) inspects air carriers and assesses foreign airports to help ensure the security of U.S.-bound air cargo. Air carrier inspections . GAO observed 17 air carrier inspections and found that TSA inspectors consistently followed TSA procedures. Further, GAO's analysis of TSA data found air carriers were in full compliance with cargo security requirements in 84 percent of the nearly 5,000 cargo inspections conducted during fiscal years 2012 through 2017. TSA officials were able to resolve a majority of the violations identified during the inspection process. Foreign airport assessments . GAO analysis of TSA data found that about 75 percent of the foreign airport assessments that TSA conducted during fiscal years 2012 through 2017 fully complied with international air cargo security standards. As of the end of 2017, foreign officials had addressed about 40 percent of the non-compliance issues. TSA continues to work with foreign officials to address the remaining non-compliance issues. As of June 2018, TSA had recognized the national cargo security programs (NCSP) of the European Union and 12 other countries as commensurate with TSA's, and TSA uses a variety of mechanisms to monitor NCSP implementation. TSA's process for NCSP recognition, which is voluntary, involves comparing air cargo security requirements to TSA's and conducting visits to the countries to validate their use. Once TSA determines a program is commensurate with TSA's, it monitors NCSP implementation through regular air carrier inspections, foreign airport assessments, and dialog with government officials. TSA may decide not to recognize a country's NCSP but, instead, make recommendations for improving air cargo security. In countries where TSA has not recognized their NCSP, all U.S.-bound cargo is subject to TSA security requirements. TSA's performance measures do not allow it to specifically determine the effectiveness of its efforts to secure U.S.-bound air cargo. For example, TSA measures whether foreign airports take actions to address all noncompliance issues identified during airport assessments, but such a broad measure could obscure progress made in resolving cargo-specific vulnerabilities. Similarly, TSA officials stated that they are developing a measure to gauge the effectiveness of air carrier inspections, but they do not plan to differentiate efforts to secure air cargo from those for securing passengers. Developing and monitoring outcome-based performance measures that separately account for cargo noncompliance issues and violations could help TSA better determine the extent to which its foreign airport assessments and air carrier inspections improve the security of U.S.-bound air cargo. In addition, TSA measures the number of countries it has recognized in the NCSP Recognition Program, but this metric does not address the effectiveness of the program. Developing and monitoring outcome-based performance measures for the NCSP Recognition Program would help TSA better determine whether the resources invested are yielding the intended results. This is a public version of a sensitive report issued in October 2018. Information that TSA deemed to be sensitive is omitted from this report. GAO is recommending that TSA develop and monitor outcome-based performance measures to assess the effectiveness of (1) the cargo portion of foreign airport assessments, (2) air carrier cargo inspections, and (3) the NCSP Recognition Program. TSA concurred with the recommendations.", "document_type": "gao"}
{"report": "The federal government has recognized 573 Indian tribes as distinct, independent political communities with inherent powers of a limited sovereignty, which has never been extinguished. These tribes can vary significantly in regard to tribal size, population, and ownership status of land. For instance, some tribal lands include reservations—land set aside by treaty, federal law, or executive order for the residence or use of an Indian tribe. Some tribal lands include parcels with different ownership; parcels may be held in trust by the federal government for the benefit of a tribe or an individual tribal citizen. Trust and restricted lands can affect a tribe’s ability to use their land as collateral to obtain a loan. In addition, the size of a tribe’s land base can range from less than one square mile to more than 24,000 square miles (the size of West Virginia). Some tribes are located in extremely remote, rural locations and others are located in urban areas. The term “broadband” commonly refers to Internet access that is high speed and provides an “always-on” connection, so users do not have to reestablish a connection each time they access the Internet. Broadband providers deploy and maintain infrastructure to connect consumers to the Internet and provide Internet service through a number of technologies. Broadband infrastructure may include burying fiber-optic or copper cables, stringing cable on existing poles, or erecting towers for wireless microwave links, which relay wireless Internet connections from tower to tower. Figure 1 illustrates some of the options for broadband deployment infrastructure. To install this infrastructure, providers must obtain permits from government entities with jurisdiction over the land or permission from public utilities to deploy infrastructure on existing utility poles. The federal government has emphasized the importance of ensuring Americans have access to broadband, and a number of agencies, including FCC and RUS, currently provide funding to subsidize broadband deployment in areas in which the return on investment has not attracted private investment. FCC funds a number of programs through the Universal Service Fund, which may increase broadband deployment on tribal lands. One program is the high-cost program (renamed the Connect America Fund (CAF) in 2011), which provides financial support to both wireline and wireless telecommunications carriers that provide telecommunications services (referred to as providers in this report) to supplement their operating costs to serve consumers in rural or remote areas, where the cost of providing service is high. From 2010 to 2017, a total of $34.5 billion in annual and standalone Universal Service Fund high-cost support was disbursed to providers, as follows: In total, the high-cost program and Connect America Fund provided $34.1 billion from 2010 to 2017 in financial support to providers, consisting of annual disbursements between $3.7 and $5 billion. The Mobility Fund Phase I provided $300 million in 2012 in one-time support to providers to expand broadband service in areas where service was not available, including tribal lands. The Tribal Mobility Fund Phase I provided $49.8 million in 2014 in one-time support to providers to deploy broadband service to unserved tribal lands. To be eligible to receive for Universal Service Fund program support, a provider must be designated an eligible telecommunications carrier (ETC) by the appropriate state or by FCC. Under FCC rules, which many state programs mirror, ETCs must meet certain service obligations as described below: provide a 5-year plan showing how program support will be used to improve its coverage, service quality, or capacity in each service area where it seeks designation; demonstrate its ability to remain functional in emergency situations; demonstrate that it will satisfy consumer protection and service quality offer local usage plans comparable to those offered by the incumbent carrier in the areas for which it seeks designation; and acknowledge that it may be required to provide equal access to other providers within the service area if all other ETCs in the designated service area relinquish their designations. In addition to FCC’s funding, RUS has a current program and had a prior program and NTIA had a prior program that provided funding to improve broadband service in unserved or underserved areas. The RUS and NTIA prior programs were authorized by the American Recovery and Reinvestment Act of 2009 (Recovery Act) to expand high-speed Internet service in unserved areas, and there is no current funding for these programs. RUS’s Community Connect program currently provides grants to rural communities to provide high-speed Internet service to unserved areas. The Community Connect program is significantly smaller than FCC’s programs, with $95.2 million awarded to 36 recipients from 2010 to 2017. The purpose of the RUS Community Connect program is to provide financial assistance to eligible applicants that will provide broadband service that fosters economic growth and delivers enhanced educational, healthcare, and public-safety benefits. In addition, RUS previously administered the Broadband Initiatives Program (BIP), authorized by the Recovery Act to expand high-speed Internet service in unserved areas. BIP funding included $2.2 billion dedicated to deploy broadband infrastructure. Through the program, RUS funded a total of 247 infrastructure projects with the requirement that all projects be fully completed by June 30, 2015. In addition to the infrastructure awards, 12 technical assistance grants went to tribal communities to develop regional plans to provide broadband service in rural areas that remain critically unserved. NTIA administered a prior program also authorized by the Recovery Act called the Broadband Technology Opportunities Program (BTOP). NTIA made available $3.1 billion in BTOP funding to deploy broadband infrastructure. Through the program, NTIA awarded a total of 116 infrastructure grants with the requirement that all projects be fully complete within 5 years of the award date. Although we identified some partnership arrangements between tribes and other entities to increase broadband deployment on tribal lands using prior authorized funding, based on our review, these arrangements are not being used under currently available programs. As previously noted, there are greater costs associated with deploying broadband on unserved tribal lands because the unserved areas are generally rural, with possibly rugged terrain, and have low population densities. Because of these greater costs, there may be little to no private sector incentive to deploy broadband or enter into a partnership arrangement to do so. During our review, we did not find any partnership arrangements that leveraged currently available federal funding from FCC’s CAF or RUS’s Community Connect Program. The seven partnership examples we identified were ones that obtained federal funding under past programs, namely BIP and BTOP that were funded by the Recovery Act. Among these examples, tribes partnered with several different types of entities that were eligible to receive federal grants, including (1) private providers; (2) a community access network provider; (3) an electric cooperative; (4) a regional consortium; and (5) tribally owned telecommunications companies (which we will refer to as tribally owned providers). These types of arrangements are explained below. Outcomes of these partnership arrangements varied, as reported by tribal officials and other stakeholders we interviewed, but these stakeholders did not always agree on the outcomes. Private providers can partner with a tribe to deploy broadband infrastructure on tribal lands. We found two instances in which a tribe partnered with private providers to improve broadband service. Pine Telephone Company and Choctaw Nation. With the land the tribe has jurisdiction over covering over 10 counties across 12,000 square miles in Oklahoma, the Choctaw Nation’s lands encompasses about 15 percent of the State of Oklahoma’s total area—an area larger than the entire state of Maryland. According to the Oklahoma Department of Transportation, the Choctaw Nation is the largest employer in the southeastern Oklahoma region and its businesses are key contributors to the state’s economy. However, a tribal official told us that the tribal government has struggled to meet the tribe’s broadband needs. According to the Choctaw Nation official, Pine Telephone Company (Pine), a privately owned company, has a history of partnering with the Choctaw Nation. In 2010, Pine received a BTOP grant of $9.5 million to deploy broadband infrastructure to underserved areas of Southeastern Oklahoma, including Choctaw Nation lands. According to tribal officials and representatives from Pine, the partnership enabled tribal government agencies and buildings— including public schools, public safety agencies, fire and police departments, and a health clinic—to get broadband service. The partnership also improved broadband service for the Choctaw Nation. Additionally, Pine had been proactive in partnering with the Choctaw Nation to secure federal grants and assist with land use and rights-of- way issues, according to a tribal official. Pine representatives told us that partnering with the Choctaw Nation had been beneficial based on their common interest to increase broadband service to the area. Inland Cellular, First Step, and Nez Perce. The Nez Perce Tribe’s reservation consists of 750,000 acres located in north central Idaho. Tribal officials told us that the terrain on the reservation makes broadband deployment challenging because it has very large hills and deep valleys; additionally the reservation is sparsely populated. Tribal officials told us that prior to 2010, there was no broadband service available on the Nez Perce reservation. In 2010, the tribe received a BTOP grant of $1.6 million for the Nez Perce Broadband Enhancement Project; the project was completed in 2013. The tribe used that federal grant to deploy 216 miles of broadband (wireless) infrastructure across its reservation to provide broadband service in four northern Idaho counties. As part of the project, the tribe partnered with two private providers, Inland Cellular and First Step, to expand broadband service on the reservation. The tribe used BTOP funding for infrastructure buildout in areas in need of connectivity, while Inland Cellular and First Step focused their efforts on infrastructure buildout in more populated areas. According to Nez Perce and Inland Cellular officials, the partnership resulted in broadband service being provided to previously underserved rural communities and 17 community institutions, including schools and public safety organizations. Because the partners each own towers on the reservation, the officials told us they could collocate equipment on each other’s towers, an approach that resulted in more reliable service. Further, Nez Perce officials and Inland Cellular representatives told us that their partnership was complementary, in that Inland Cellular offered voice services and the tribe’s enterprise offered data services. Community access network providers are typically owned and operated by public entities rather than by a private corporation. All profits are reinvested to operate, maintain, and expand the community network. Community access networks focus on building broadband infrastructure that allows multiple Internet service providers to offer their services to customers. For example, rather than having one choice for Internet service, community access network providers will allow several service providers to compete for customers. Northwest Open Access Network (NoaNet). NoaNet, a utility network that offers communities access to broadband infrastructure, has deployed infrastructure in rural areas of Washington State, including on tribal lands. NoaNet received two BTOP grants in 2010—one grant for $84 million and the other for $54 million—to enhance existing infrastructure and improve broadband service in unserved areas. NoaNet representatives told us that over the course of several years, NoaNet deployed 2,300 miles of fiber-optic cable across tribal lands in Washington State and partnered with several Indian tribes and nations, including the Kalispel Indian Community of the Kalispel Reservation, Lower Elwha Tribal Community, and Yakama Nation, to deploy broadband infrastructure. For example, NoaNet representatives told us they partnered with Yakama Nation and exchanged a NoaNet-owned asset for access to a power source and the right to install fiber-optic lines on Yakama tribal land. According to NoaNet representatives, NoaNet’s infrastructure buildout improved broadband services and created new economic development opportunities for several tribes in Washington State. For example, they said NoaNet collaborated with Yakama Nation Networks—a wireless network and tribal enterprise serving the tribe— to provide faster broadband service to the reservation. Further, the NoaNet representatives said the availability of broadband service created new technical jobs with professional growth opportunities on the reservation. NoaNet representatives added that NoaNet enabled high-speed Internet service to the Makah Tribe’s health clinic, government offices, school, and library, where they previously had no Internet service at all. Moreover, they told us that partnerships are beneficial in helping tribes gain telecommunications experience. Similarly, according to a tribal representative from Jamestown S’Klallam Tribe, NoaNet’s infrastructure buildout helped the tribe obtain broadband services for its library and also helped create economic opportunities for the tribe. Rural electric cooperative networks typically serve areas that have low population density where traditional providers do not want to serve because of limited opportunities for financial return on investment. Kit Carson Electric Cooperative and Taos Pueblo. Kit Carson Electric Cooperative (KCEC) is a member-owned, nonprofit electric distribution cooperative that operates a fiber-optic broadband network. In 2010, KCEC received $64 million in grant funding from RUS’s BIP to create a 2,400-mile broadband network in northern New Mexico and provide broadband service to businesses and homes, including those on the Taos Pueblo and Picuris Pueblo. In an August 2016 presentation to the New Mexico state legislature, KCEC stated that that the project connected tribal members and community institutions, created job opportunities, and improved public safety by improving emergency communications services. According to Taos Pueblo officials, the impetus to work with KCEC was to improve broadband service to meet immediate economic, education, health service, and public safety needs of the tribe. However, based on our meetings with both KCEC representatives and Taos Pueblo officials they have different perspectives about the success of this partnership at delivering broadband service to the tribe. For example, KCEC representatives told us that the cooperative constructed the fiber-optic network and connected the government buildings and homes of Taos Pueblo and Picuris Pueblo members as promised, and that KCEC has responded to service interruptions when they occurred on tribal lands. On the other hand Taos Pueblo officials told us, that KCEC did not deploy broadband infrastructure to enable service to all homes and buildings on tribal lands as the tribe had expected. Similarly, KCEC representatives told us that they worked regularly with the Taos and Picuris tribal governments and had good relationships with them; they noted that they meet with tribal leadership every quarter to maintain effective communications and address any issues. In contrast, according to Taos Pueblo officials, KCEC did not solicit tribal input when building out the fiber-optic network, and only met with Taos Pueblo officials about once a year and did not follow up on the issues the tribe raised. Further, according to KCEC representatives, in its federal funding application, KCEC made a commitment that the Taos and Picuris tribal lands would be the first areas targeted for building out the network, and the representatives said that KCEC completed 100 percent of the construction and connected the tribal governments as promised. Taos Pueblo officials, however, said that their tribe was the last to receive service and that KCEC did not complete the broadband construction, including service to the homes of some of its members, because KCEC exhausted its BIP funding. We have previously reported that regional consortium, which are typically formed by groups to undertake an enterprise beyond the resources of any one member, can sponsor regional networks that focus on building broadband networks and providing broadband services to schools, medical providers, public safety agencies, and other community institutions. North Central New Mexico Economic Development District. Located in northern New Mexico, the Pueblo of Pojoaque, Santa Clara Pueblo, Tesuque Pueblo, and Ohkay Owingeh partnered with local governments to establish the North Central New Mexico Economic Development District (the District), a regional consortium, to address the socio-economic needs of its members. In 2008, regional planners and government officials identified broadband as the region’s number- one infrastructure priority because rural north central New Mexico relied significantly on dial-up Internet service and lacked affordable service to small businesses, libraries, schools, and other community institutions. In 2010, the District received a BTOP grant of $10.6 million to build a community-owned broadband network, known as REDI Net. The District sought the BTOP grant to improve rural healthcare services, make public and higher education more accessible, and improve local government services, like public safety. REDI Net’s construction included upgrading existing infrastructure and deploying 136 miles of new fiber-optic cable across the region and on pueblo lands to replace low-performing dial-up service with faster, more affordable broadband service. According to the project’s progress report submitted to NTIA, the partnership enabled broadband infrastructure to be deployed across the four participating lands and connect 110 community institutions. The project’s description stated that REDI Net was being used to deliver telemedicine services, distance-learning applications, and critical communications for emergency first-responders. According to REDI Net representatives, in 2017, REDI Net became a standalone organization, separate from the District, and currently charges a monthly fee for the pueblos to use the broadband network. A REDI Net representative told us that the biggest outcome of the partnership has been the improved relationships and collaboration among the Pueblo of Pojoaque, Santa Clara Pueblo, Tesuque Pueblo, and Ohkay Owingeh and other local municipalities. Some tribes have created their own telecommunications companies to provide broadband access to their communities. Based on the examples we identified, a tribe may create its own telecommunications or broadband company or a tribe may partner with an existing tribal enterprise such as an electrical utility to provide broadband services. Navajo Nation and Navajo Tribal Utility Authority. The Navajo Nation—which spans across Arizona, New Mexico, and Utah— partners with a tribally owned entity, the Navajo Tribal Utility Authority (NTUA), to provide broadband service to residents and households. According to a NTUA representative, the Navajo Nation has diverse, challenging terrain—which includes canyons, valleys, timber forest, desert, and mountains—making it difficult to provide broadband service to tribal residents. In 2010, NTUA received a BTOP grant of $32 million to deploy broadband infrastructure covering 15,000 square miles across the three states. According to the project’s progress report submitted to NTIA, by 2013, NTUA leveraged BTOP funding to deploy 570 miles of fiber-optic cable and 775 miles of wireless infrastructure resulting in a total of 1,345 new network miles. According to NTUA representatives, the partnership between the Navajo Nation and NTUA increased broadband deployment on the nation and created new opportunities for NTUA to partner with other private providers to further expand broadband services. For example, NTUA representatives said NTUA partnered with a private broadband provider, Commnet, to deploy wireless broadband infrastructure that enabled tribal citizens to receive 4G LTE service. NTUA and Commnet representatives told us NTUA’s relationship with Navajo Nation represented an attractive business opportunity for Commnet because of NTUA’s established rights-of-ways on the Navajo Nation’s tribal lands. Saint Regis Mohawk Tribe and Mohawk Networks. The Saint Regis Mohawk Tribe, located in the northern region of New York, received a $10.5 million BIP grant in 2010 to complete a large broadband project expanding access to unserved areas. According to tribal officials and Mohawk Networks representatives, the tribe completed a $15 million broadband infrastructure project laying 68 miles of fiber and connecting 1,500 tribal households and community institutions. Upon completion of the BIP broadband project, the tribal officials said the tribe launched its tribally owned broadband provider, Mohawk Networks, LLC in 2015, to respond to tribal residents’ need for reliable, cost-effective broadband service. Tribal officials said Mohawk Networks currently provides high-speed Internet to tribal homes and businesses. According to tribal officials, in addition to providing broadband service to tribal residents for the first time, the partnership between Saint Regis Mohawk Tribe and its tribally owned broadband provider created new jobs and opportunities to expand broadband services. For example, the officials said the partnership resulted in the creation of a tribal subsidiary, North Country Broadband Services, Inc., to deploy wireless infrastructure to neighboring counties, thus generating new revenue for Mohawk Networks. FCC and RUS are the primary sources of federal funding to deploy broadband infrastructure in rural and remote areas where the cost of providing service is high, including tribal lands. Based on our review of the funding provided by four federal programs targeted to increase deployment in unserved areas, very little has gone directly to tribes or to tribally owned broadband providers. Specifically, from 2010 to 2017, we found that less than 1 percent of FCC funding and about 14 percent of RUS funding went directly to tribes and tribally owned providers. Combined, FCC and RUS funding totaled $34.6 billion during that time period and tribes and tribally owned providers received $235 million, or about 0.7 percent. While the majority of the funding from the four programs we reviewed from both agencies is provided to deploy broadband to rural, unserved, or underserved areas, only one source of funding, FCC’s Tribal Mobility Fund Phase I, is dedicated specifically to deploying broadband on tribal lands. The National Broadband Plan stated in 2010 that tribes needed substantially greater financial support than was available to them at the time and that accelerating tribal broadband deployment would require increased funding. Furthermore, the National Congress of American Indians expressed concerns that the needs for federally funded broadband projects are greater on tribal lands but tribes do not receive the appropriate share of federal funding aimed at increasing broadband deployment. Through our analysis we found that 14 tribal entities received federal funding from FCC and RUS to increase broadband deployment from 2010-2017 (see fig. 2). Of the four main programs we reviewed, tribes and tribally owned providers received the following funds: Connect America Fund: Nine tribally owned providers received high- cost support funding totaling $218.1 million. Mobility Fund Phase I: One tribally owned provider received support totaling $3.3 million. Tribal Mobility Fund Phase I: No tribal providers received funding. RUS Community Connect Grants: Four tribal entities received $13.5 million. The tribal officials, tribal associations, and tribally owned broadband providers we interviewed cited several barriers that tribes may face when seeking federal funding for broadband deployment. The two primary barriers these interviewees cited were (1) the statutory requirement for ETC designation and (2) grant application requirements. FCC’s Connect America Fund (CAF) is the largest source of federal funding for broadband deployment in unserved and underserved areas; however, very few tribes are currently eligible for this source of funding. At the time of our review, FCC officials told us there were 11 tribes that have providers that are designated as ETCs and therefore would be eligible to receive CAF funding. Although FCC adopted rules in 2011 to create CAF and modernize the program so that it could support broadband capable networks, FCC officials told us that most ETCs are the telephone companies that were in existence when Congress passed the Telecommunications Act of 1996. According to FCC officials, FCC has explored whether it has authority to allow non-ETC providers to receive CAF support payments but determined that the statute is clear that only ETCs can receive program support. Between 2012 and 2017, FCC officials said FCC received nine ETC applications, four of which were from tribally owned providers. Of those four, only one tribally owned provider was designated an ETC. Three tribes we contacted said they would like the opportunity to receive CAF support to deploy broadband on tribal lands, but they realize they are not eligible to receive funding unless they have the ETC designation. Moreover, officials from two tribes and a tribal association stated that while they want to provide broadband services in their communities, they did not seek the ETC designation because of the ETC service obligations described above. The Leech Lake Band of Ojibwe applied for ETC status in 2013. We met with tribal officials who told us that the tribe was providing broadband service in its community through its own, tribally chartered telecommunications company and at the time of our visit, they had been waiting several years for a decision from FCC on their ETC application. The tribal officials told us that if FCC did not make a decision soon, the tribal government would need to shut down the broadband network, as the tribe’s original decision to fund the network assumed there would be a CAF subsidy to help defray the costs. The Leech Lake reservation is rural with low population density and is surrounded by the Chippewa National Forest. Subsequent to our meeting with the tribe in November 2017, the tribe withdrew its application in March 2018, noting that it was ceasing its attempt to run its telecommunications company specifically “due to inaction” by FCC. According to representatives from a tribal association we contacted, FCC has provided ETCs with billions of dollars to deploy service to unserved areas through the Universal Service Fund programs, but FCC’s efforts have not always been successful in the hardest to reach areas, particularly tribal lands. The representatives noted that FCC’s competitive market approach does not work where competition cannot be supported and that there needs to be a different approach. Similarly, tribal officials from Idaho told us that rural service providers are able to operate due to CAF support, but the tribe is not eligible to receive those subsidies. Officials said although the provider in their area has received millions of dollars in CAF subsidies, it has not deployed broadband on the tribal lands. Other tribal officials from Washington State told us that although private providers received CAF subsidies to deploy broadband service to their reservation, the private providers told the tribe it would be years before they offer service on tribal lands. In 2014, FCC conducted its Rural Broadband Experiment to open up eligibility for CAF funding to non-ETC providers. FCC made $100 million available for the experiment and applicants included a diverse group of entities, including competitive providers, electric utilities, wireless Internet service providers, and others. However, while this experiment opened the application process to non-ETC providers, it did not remove the ETC requirement. CAF support awarded through this experiment was provisional pending the broadband providers’ obtaining ETC status. According to FCC documentation, there were 181 applicants for the experiment, but only 16 ended up meeting all the requirements to receive funding. None of those 16 entities was tribal. Stakeholders we interviewed said tribes may face barriers completing federal grant applications to obtain funding for broadband deployment. In particular, two community access providers, five tribally owned providers, and one regional consortium we contacted said that meeting the application requirements was difficult. Representatives from eight of the tribes we contacted told us that in general, the language included in the federal grant applications is difficult to understand or the administrative requirements of federal grants are burdensome. Another tribal representative told us he would only recommend applying for RUS’s Community Connect program if the tribe has an entire team of dedicated people to manage the grant process. Some of the tribal officials we contacted cited difficulties preparing required application materials between the time a grant announcement was made and the submission deadline. For example, tribal officials we contacted from New Mexico and Oklahoma stated that the constrained time frames prevented them from effectively preparing a comprehensive application package. In some cases, the narrow application windows prevented the tribes from applying at all. Furthermore, tribal officials, tribal associations, and tribally owned broadband providers told us that complying with the following regulatory requirements for RUS Community Connect grants could be challenging for tribes: Preparing existing and proposed network design: RUS’s Community Connect program requires applicants to submit information on the network’s design that contains all the technical information on the applicant’s existing (if applicable) and proposed network. The network design is typically completed by a licensed engineer. Tribal officials in Washington State told us that conducting analyses of existing infrastructure and what improvements are needed can be cost- prohibitive for some tribes because it requires financial resources that the tribe may not have before applying for the grant. Many of these costs are related to the expense of bringing in outside experts or consultants who are needed to perform the technical studies. Another tribal representative told us since the tribe has no way of knowing if the grant will be approved, spending money to complete the application is a large risk. According to RUS officials, the Community Connect program is not authorized to fund pre-planning activities. Demonstrating financial sustainability within 5 years: The RUS Community Connect grant application requires a “financial forecast” that includes the applicant’s existing operations and the proposed project and must be supported by a detailed narrative that explains the methodology and assumptions used to develop the projections, including the number of subscribers projected to take the applicant’s service. The financial forecast must cover at least 5 years, and it is used by RUS to determine whether the proposed project is financially sustainable. However, tribal officials from Idaho told us that it is not feasible for tribes to show financial sustainability (a return on investment) in 5 years in high cost areas. They noted that a period of 15 years may be needed to produce a return on investment in those areas, and this requirement prevents tribes from qualifying for Community Connect grants. Obtaining matching funds required to apply for federal grants: RUS’s Community Connect program requires grant applicants to provide matching funds of at least 15 percent from non-federal sources and does not accept in-kind contributions of goods or services. The matching fund requirement can be difficult for some tribes to obtain. For example, officials from RUS and the tribal entities we contacted told us that tribes often times do not have the upfront cash to meet the matching requirement. According to a tribal association we contacted, obtaining credit is a serious problem for some tribes. In general, tribes cannot collateralize tribal property, and therefore often times are unable to get bank loans for infrastructure projects. The National Broadband Plan recommended that federal agencies facilitate tribal access to broadband funding opportunities. Furthermore, recognizing the need to reduce barriers to expand broadband deployment, the Broadband Opportunity Council, established in March 2015, issued a report stating that federal agencies should use all available and appropriate authorities to identify and address regulatory barriers that may unduly impede either broadband deployment or the infrastructure to augment broadband deployment. RUS officials said they have held a number of external training and outreach events, such as workshops and seminars, with tribes over the past 5 years to provide information about RUS’s broadband programs. For example, in April 2018, before the 2018 Community Connect grant’s application deadline, RUS hosted a webinar on various requirements for grant applications. RUS officials told us that RUS’s outreach efforts generally focus on specific programs and instructing potential applicants on program requirements and how to complete application packages. However, beyond these outreach efforts, RUS officials said they have not undertaken a formal assessment to identify and address the regulatory barriers that tribes may face in obtaining RUS funding for broadband deployment. When we asked RUS officials about the feasibility of doing so, they said that they have limited resources and multiple competing priorities for those resources. RUS officials also noted that BIP authorized and provided funding for technical assistance for applicants, funding that enabled RUS to address some of the barriers tribes face. Nevertheless, lacking such an assessment, tribes may continue to face the regulatory barriers described above in obtaining RUS funding for broadband deployment on their lands. According to the National Broadband Plan, local entities (including tribal, state, regional, and local governments) decide to offer broadband services when no providers exist that meet local needs, and local entities do so after trying to work with established carriers to meet local needs. Several of the tribes we visited told us they were trying to deploy broadband infrastructure or offer service because the private providers were not building out on their lands. For example, one tribe stressed that unlike private providers, they would prioritize tribal areas needing broadband service, but they need federal funding to do so. An estimated 35 percent of Americans living on tribal lands lack broadband service, which could hinder tribal efforts to promote self- governance, economic opportunity, education, public safety, and cultural preservation. However, little federal funding aimed at increasing broadband service actually goes to tribal entities, even though the National Broadband Plan stressed that tribes needed substantially greater financial support and recommended that federal agencies facilitate tribal access to broadband funding opportunities. Tribes may face barriers in obtaining federal funds to deploy broadband, and the Broadband Opportunity Council recognized the need for federal agencies to reduce the barriers that are impeding broadband deployment. However, RUS has not taken steps to identify or address the barriers tribes face when applying for RUS grant funding. By identifying and addressing any regulatory barriers that impede tribal entities’ access to RUS funding, RUS could help tribes obtain funding to expand broadband deployment on tribal lands. The Secretary of Agriculture should direct the Administrator of RUS to undertake an assessment to identify any regulatory barriers that may unduly impede efforts by tribes to obtain RUS federal grant funds for broadband deployment on tribal lands and implement any steps necessary to address the identified barriers. (Recommendation 1) We provided a draft of this report to FCC, RUS, and NTIA for comment. FCC and RUS provided technical comments, which we incorporated as appropriate; NTIA did not have any comments. A Department of Agriculture official indicated in an e-mail message that RUS neither agreed nor disagreed with the recommendation. RUS’s technical comments noted that RUS has and will continue to work with tribes to facilitate broadband deployment, whether tribes have the desire and capacity to provide the service or whether another provider is able to bring that service to tribal areas. We are sending copies of this report to the appropriate congressional committees, the Chairman of FCC, the Secretary of Agriculture, the Secretary of Commerce, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. This report discusses (1) examples of partnership arrangements that tribal entities have used to increase broadband deployment on tribal lands and the outcomes of those partnerships, (2) the amount of funding provided to tribal entities for broadband deployment from key federal programs, and (3) stakeholder-identified barriers that tribal entities face in obtaining federal funding for broadband deployment and the extent to which federal agencies have taken action to address those barriers. To address these objectives, we reviewed relevant federal statutes, including the Communications Act of 1934, as amended, and Federal Communications Commission’s (FCC) regulations, orders, and policy statements including FCC’s Statement of Policy on Establishing a Government-to-Government Relationship with Indian Tribes. In addition, we reviewed documentation and interviewed officials from FCC, including officials from the Office of Native Affairs and Policy; U.S. Department of Agriculture’s Rural Utilities Service (RUS); U.S. Department of Commerce’s National Telecommunications and Information Administration (NTIA); and U.S. Department of Housing and Urban Development’s Office of Native American Programs. To gather information on partnership arrangements that tribes have entered to increase broadband deployment on tribal lands and their outcomes, we conducted a review of relevant published literature that included government reports, industry articles, and publications from associations, non-profits, and public policy research organizations. Although we were not able to identify an industry-accepted definition of partnerships, we used the term partnerships to refer to instances in which a tribal nation or tribal government works with another entity to design, build, or operate infrastructure assets, or other capital assets to improve or enhance broadband service. This also included partnerships between a tribe and its tribally owned broadband provider. To identify examples of tribal broadband partnerships for our review, we first interviewed agency officials, tribes, private providers, and other stakeholders such as tribal associations. We also identified broadband projects with a tribal partnership component by reviewing reports from 2010 to 2017 for the following federal programs: (1) FCC’s Universal Service Fund high-cost program and Connect America Fund (including the Mobility Fund Phase I (Auction 901) and Tribal Mobility Fund Phase I (Auction 902)); (2) RUS’s Community Connect Program; (3) RUS’s Broadband Initiatives Program; and (4) NTIA’s Broadband Technology Opportunities Program. While there may be other tribal partnership examples that exist, through these efforts we identified seven broadband projects with a tribal partnership component completed within the last 5 years (2013 to 2017). We interviewed tribal leaders and officials from the seven tribes that were involved in the selected partnerships, and visited six tribes in Idaho, New Mexico, and Washington State. When meeting with tribal leaders and officials, we used the same semi-structured interview questions for all tribes; however, tribal officials may not have answered all questions. Because we limited our review to these seven selected partnership examples, our findings are not generalizable. To determine the amount of funding from key federal programs provided to tribal entities for broadband deployment, we first identified the federal programs that provide broadband funding from NTIA’s Guide to Federal Funding of Broadband Projects. The guide lists 17 federal programs that fund broadband infrastructure. Of those federal programs, we focused our review on four programs, three in FCC and one grant program in RUS, selected because they provide the most directly relevant funding for broadband deployment in unserved areas, which includes tribal lands. We first identified federal agencies and programs that provide grants or loans to tribal and non-tribal entities to buildout broadband infrastructure on tribal lands including: FCC, RUS, U.S. Department of Commerce Economic Development Administration (EDA), and NTIA. We interviewed federal agency officials to identify any additional federal programs that provided funding in the last 7 years. We excluded federal loan programs because they may require letters of credit and or assets as collateral, which is often not a feasible option for tribes given land ownership issues. We also considered but excluded those federal programs that are not directly related to broadband expansion and deployment, such as the Department of Housing and Urban Development’s Choice Neighborhoods Program, whose primary purpose is housing related. We compiled total funding data for these four federal programs and the amount of funding provided to tribes and tribal entities for broadband deployment projects for 2010 to 2017. We took steps to assess the reliability of the data—such as cross-checking the data, following up with agency officials, and reviewing documentation—and found the data were sufficiently reliable for the purposes of summarizing total funding and the amount provided to tribes and tribal entities. Because we relied upon titles or names of grant recipients to identify those grants awarded to tribes and tribally owned providers, our analysis may not include some grants awarded to broadband providers that deploy infrastructure to larger service areas that may also include tribal lands. To determine stakeholder-identified barriers that tribal entities face in obtaining federal funding for broadband deployment and federal government efforts to address those barriers, we interviewed FCC and RUS officials and the tribal government officials, tribally owned broadband providers, and tribal associations listed in table 1. We interviewed representatives from 17 tribes in different locations with varying population sizes and levels of broadband deployment. Additionally, we interviewed officials from 9 tribally owned and 7 private broadband providers operating on tribal lands. We selected these broadband providers to interview because they received federal support to serve on tribal lands or because they were a designated eligible telecommunications carrier (ETC) serving tribal interests. Furthermore, we identified and interviewed industry stakeholders such as research groups and telecommunications associations on their views regarding barriers to obtaining federal program assistance for broadband deployment on tribal lands. These stakeholders were selected based on their exposure to broadband issues on tribal lands such as representing tribally owned broadband providers. The views obtained from these interviews are not generalizable to all tribes, all broadband providers, or all industry stakeholders. We also reviewed a report from the Broadband Opportunity Council directing agencies to identify and address regulatory barriers that may unduly impede broadband deployment and assessed RUS’s efforts to address the regulatory barriers tribes may face in attempting to obtain RUS funding for broadband deployment. For a complete list of entities we interviewed see table 1. We conducted this performance audit from September 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov. In addition to the contact named above, Sally Moino (Assistant Director); Tina Paek (Analyst in Charge); Rose Almoguera; Sharon Dyer; Hannah Laufe; Serena Lo; Cheryl Peterson; Malika Rice; Amy Rosewarne; Jay Spaan; James Sweetman, Jr.; Hai Tran; and Jade Winfree made key contributions to this report.", "summary": "In 2018, FCC estimated that 35 percent of Americans living on tribal lands lack broadband service compared to 8 percent of Americans overall. Various federal programs support increasing broadband deployment in unserved areas, including tribal lands. Tribes can form partnerships with private sector companies and others to deploy broadband infrastructure on tribal lands. GAO was asked to provide information on these partnerships. This report discusses (1) examples and outcomes of tribal partnership arrangements, (2) the amount of federal funding provided to tribal entities for broadband deployment, and (3) stakeholder-identified barriers that tribes face in obtaining federal funding and the extent to which federal agencies have addressed those barriers. GAO identified partnerships by reviewing federally funded broadband projects that included a partnership component; analyzed federal funding dedicated to broadband deployment; interviewed agency and tribal government officials, tribal associations, tribally owned broadband providers, and industry stakeholders; and assessed RUS's efforts to address the regulatory funding barriers tribes may face. The information presented is illustrative and is not generalizable to all tribes or all partnerships. GAO identified some partnership arrangements between tribes and other entities to increase broadband access on tribal lands. Among the seven examples GAO identified, tribes partnered with different types of entities including private broadband providers, a community access network provider, an electric cooperative, a regional consortium, and tribally owned broadband providers. According to the tribes participating in the partnerships, almost all of the partnerships improved broadband service on tribal lands. The Federal Communications Commission (FCC) and the Rural Utilities Service (RUS) are the primary sources of federal funding to deploy broadband infrastructure where the cost of providing service is high, including on tribal lands. GAO reviewed funding for four programs, three in FCC and one grant program in RUS, and found that in total, less than 1 percent has gone directly to tribes or to tribally owned broadband providers to expand broadband service. GAO found that 14 tribal entities received federal funding from FCC and RUS to increase broadband deployment for 2010–2017. The tribal officials, tribal associations, and tribally owned broadband providers GAO contacted cited several barriers tribes face in obtaining federal funding to deploy broadband service on tribal lands. For example, they said tribes face regulatory barriers in applying for RUS's grant funding, including (1) preparing existing and proposed network design, (2) demonstrating financial sustainability of the broadband project within 5 years, and (3) obtaining matching funds. An interagency council recently recommended that federal agencies identify and address regulatory barriers that may unduly impede broadband deployment. Although RUS conducts some outreach with tribes, it has not undertaken a formal assessment to identify and address the regulatory barriers that tribes may face in obtaining RUS's funding for broadband deployment. RUS officials told GAO that they do not have the resources to do so. Nevertheless, lacking such an assessment, tribes may continue to face regulatory barriers in obtaining RUS funding for broadband deployment on their lands. By identifying and addressing any regulatory barriers that impede tribal entities' access to RUS funding, RUS could help tribes obtain funding to expand broadband deployment on tribal lands. GAO recommends that RUS identify and address regulatory barriers that impede tribal entities from obtaining RUS funding for broadband deployment. RUS neither agreed nor disagreed with this recommendation.", "document_type": "gao"}
{"report": "To help ensure that veterans are prescribed and use opioid pain medications in a safe and effective manner, VHA launched its OSI nationally in 2013. VHA established nine OSI goals in a December 2014 memorandum. For each of the goals, VHA directed its VISNs and their associated VHA medical facilities to take specified actions to meet the goals. (See table 1.) VHA has also developed opioid risk mitigation strategies for its providers to follow when prescribing opioid pain medications to veterans. These key strategies include one whose increased use is an explicit goal for the OSI and two that are requirements in VHA policy. 1. Annual urine drug screening for veterans on long-term opioid therapy. Providers should generally ensure that a urine drug screening has been conducted for veterans who are on long-term opioid therapy at least once in the 365 days prior to initiating or renewing an opioid prescription. Urine drug screening allows providers to monitor the types of drugs that are in a veteran’s system, including controlled and illicit substances. Increasing the use of urine drug screening is OSI goal two. 2. Annual prescription drug monitoring program (PDMP) query. PDMPs are state-run electronic databases used to track the prescribing and dispensing of prescriptions for controlled substances, identify suspected misuse or diversion (i.e., channeling drugs into illegal use), and identify trends in drug utilization. In 2016, VHA began requiring in policy that providers query state PDMPs at least once annually when prescribing opioids to determine whether their patients have received prescriptions for opioid medications or other controlled substances from non-VA providers. 3. Informed consent for long-term opioid therapy. In 2014, VHA began requiring in policy that providers educate their patients on the risks associated with the use of prescription opioids and to obtain veterans’ formal acknowledgment of these risks in writing prior to initiating long- term opioid therapy. In 2010, in coordination with DOD, VA developed clinical practice guidelines for its providers to use when prescribing opioids for chronic pain. These guidelines were updated in 2017. While clinical practice guidelines contain evidence-based recommendations, they are not required to be followed in all clinical situations; therefore, variations in practice may occur based on individual patient needs subject to the discretion of the provider. The 2017 VA/DOD clinical practice guidelines related to opioid therapy for chronic pain generally complement VHA’s OSI goals. For example, the guidelines recommend a conservative use of opioids for chronic pain and emphasize strategies to mitigate the risk of using opioids. The evidence- based clinical practice guideline recommendations include the following: 1. Use of non-pharmacological treatments. The guidelines advise not initiating opioid therapy for chronic pain. They also recommend alternatives to opioid therapy, such as non-opioid medications and non-pharmacological treatments. Non-pharmacological treatments for chronic pain include, for example, cognitive behavioral therapy and yoga. 2. Naloxone prescribing. Naloxone is a highly effective, potentially life- saving intervention for reversing opioid overdoses, and it can be prescribed to veterans as a preventive measure. Veterans who are prescribed naloxone can use it when experiencing an overdose or a family member can administer it on their behalf. According to the clinical practice guidelines, naloxone should be offered as an antidote to all patients at risk for an opioid overdose, including those who are in the process of tapering from opioids. The guidelines describe several significant risk factors which can indicate the prescribing of naloxone, including the duration and dose of opioids, current or history of depression or substance use disorder, and suicidality. 3. Appropriate follow-up visits with a provider. According to the guidelines, follow-up pain management visits should be scheduled at least every 1-4 weeks after any change in medication regimen and at least once every 1-3 months for the duration of the therapy to help ensure that the treatment plan is optimized. VHA officials told us that the main focus of the OSI is changing the prescribing patterns of providers to better align with evidence-based practices. We found that this has been carried out by VHA through three key efforts: tracking opioid prescribing rates and other trends, identifying irregular prescribing patterns, and educating providers on best practices through academic detailing. Tracking Opioid Prescribing Patterns. Under the OSI, VHA uses quarterly data derived from VHA’s electronic medical record system to monitor prescription opioid use among veterans, the related prescribing patterns of VHA providers, and the rates of urine drug screening for veterans receiving long-term opioid therapy. Specifically, VHA tracks the following four clinical indicators, known as the OSI metrics, for each of its medical facilities: 1. the percentage of patients dispensed an opioid, 2. the percentage of patients dispensed an opioid and a benzodiazepine, 3. the percentage of patients on long-term opioid therapy who received a urine drug screen within the previous year of having their prescription filled, and 4. the percentage of patients dispensed greater than or equal to 100 morphine milligram equivalents per day. Our analysis of quarterly OSI metric data shows that since the beginning of the OSI in the fourth quarter of fiscal year 2013 to the first quarter of fiscal year 2018 (the most recent data available at the time of our review), the percentage of veterans dispensed an opioid has decreased by 7 percentage points, or roughly 267,000 veterans, while the rate of urine drug screening for veterans on long-term opioid therapy increased significantly—by over 47 percentage points. The increase in the percentage of patients receiving a urine drug screening was driven more by a reduction in the total number of patients on long-term opioid therapy (about 197,000 veterans) than an increase in the number of patients receiving the screening (about 27,000 veterans). (See table 2.) Identifying Irregular Prescribing Patterns. As part of its monitoring of the OSI metrics, VHA Central Office has periodically identified VHA medical facilities and VHA providers who deviate from average prescribing rates across VHA. For example: Facilities. In 2014, VHA Central Office identified 39 of 140 medical facilities across 12 VISNs with relatively higher rates of opioid dispensing as outliers based on the OSI metric percentage of veterans dispensed an opioid. VHA Central Office notified the VISNs of these facilities and required each facility to submit a corrective action plan to VHA Central Office outlining the actions they would take to reduce opioid prescribing. Based on our analysis of VHA documents, we found that the identified facilities in the five VISNs selected for our review submitted information in response to VHA Central Office’s request. Providers. In February 2017, VHA Central Office identified 320 outliers out of 8,351 providers at 94 VHA medical facilities based on the relatively high proportion of their patients who were prescribed opioids. VHA Central Office directed the VHA medical facilities associated with these outlier providers to review their prescribing rates in the context of their clinical practice, and to report back with any feedback given or actions taken. According to officials from the five facilities in our review, outlier providers tended to be surgeons, pain management specialists, or physical rehabilitation providers who might be expected to prescribe opioids at a higher-than-average rate due to the nature of their specialty and the types of patients they treat. According to a VHA Central Office progress report, the facilities provided feedback and follow-up actions for 319 out of 320 outlier providers. In May 2017, VHA identified a second round of 303 outliers out of 8,505 providers; 187 of these providers were previously identified as outliers in February 2017. According to one VHA Central Office official, as of September 2017, VHA was reviewing these outlier data and will evaluate whether VHA facilities will be asked to conduct further reviews of these prescribers. Educating Providers through Academic Detailing. To help change the prescribing patterns of providers, VHA has also implemented a system- wide academic detailing program to educate providers and improve the delivery of evidence-based health care at facilities. In 2015, VHA required each VISN to establish such a program to improve performance on all OSI metrics. According to VHA Central Office officials, academic detailers are responsible for reviewing facility-level data on the prescribing patterns of providers and identifying potential areas of improvement. Detailers can educate providers with higher-than-average prescribing rates—such as those outliers identified in February and May 2017 by VHA Central Office—to help ensure providers are delivering safe and effective care for pain. According to VHA, as of January 2018, academic detailers have conducted over 20,000 opioid-related visits to VHA providers. According to VHA officials, their data also show that academic detailing results in greater patient safety for veterans taking opioids. For example, compared with those who did not receive academic detailing visits, providers who did receive such visits experienced (1) greater reductions in the proportion of their patients on high-dose opioids, (2) reductions in their patients’ average morphine milligram equivalent daily dosage, and (3) increases in their naloxone prescribing rates. Based on our analysis of VHA information, we found evidence suggesting that the agency has accomplished six of the nine 2014 OSI goals. For example, the agency has seen increases in the use of urine drug screening for veterans on long-term opioid therapy, and it has developed provider tools to identify veterans at a higher risk for adverse events while using opioids. For several goals, although VHA did not implement the actions required in all those instances, the agency provided us with information or data demonstrating that the goals had effectively been met. However, for three OSI goals, it is unclear if the goal has been fully met because VHA lacks documentation showing that it has implemented the required action under the goal or the required action is still in progress. (See table 3.) (See appendix I for a more detailed description of VHA’s known efforts and data related to each goal). When asked about the lack of documentation for two of its OSI goals (goals four and seven), VHA officials told us that relevant documentation could not be produced. This lack of documentation is inconsistent with federal internal control standards. Specifically, according to federal internal control standards, management should evaluate and document the results of monitoring. By not documenting the actions it is taking under each of its OSI goals, VHA lacks assurance that these actions have been implemented by the VISNs or VHA medical facilities. As a result, VHA does not know whether it has fully met these OSI goals. Moreover, for the OSI goal related to establishing safe and effective VISN tapering programs for veterans using opioids and benzodiazepines (goal four), VHA officials told us that they addressed this goal by issuing national tapering guidance, including a provider reference guide in 2014, an opioid taper decision tool in 2016, and the VA/DOD clinical practice guidelines in 2017. However, these actions do not appear to be sufficient for meeting the goal as it is currently written, because issuing national guidance alone does not ensure that safe and effective tapering programs are established. Furthermore, VHA did not specify how safety and effectiveness within a tapering program would be measured, nor did the agency specify a deadline for the required action as described in December 2014. According to federal internal control standards relating to the establishment and review of performance measures and indicators, government agencies should use appropriate information to adequately assess performance, including establishing milestones or numerical targets, as appropriate. Without clearly defined and measurable outcomes, VHA cannot fully assess its progress towards meeting this OSI goal. We also found that VHA has not implemented two CARA requirements intended to improve opioid safety for veterans. First, CARA requires that VHA’s Opioid Therapy Risk Report (OTRR) have the ability to determine whether a provider has prescribed opioids to a veteran without checking that veteran’s information in the OTRR. Available to providers through VHA’s electronic medical record system, OTRR is a clinical tool that provides information on any opioid and concurrent benzodiazepine prescriptions a veteran is receiving, the veteran’s current and prior health conditions, recent and upcoming appointments, and whether any opioid risk mitigation strategies have been employed (such as urine drug screening or PDMP query). However, we found that VHA Central Office cannot track the extent to which VHA providers use OTRR because this tool does not have this tracking capability. VHA officials said that adding tracking capabilities to OTRR is not a high priority for the agency due to limited resources and competing priorities. Instead, according to a draft memorandum, VHA Central Office is planning to address this CARA provision by requiring VHA providers to document the use of OTRR in a standardized way that VHA can monitor. However, as of March 2018, VHA has not established this requirement or outlined the process for monitoring providers’ use of OTRR. Without the ability to track the use of OTRR, VHA cannot sufficiently monitor whether providers are using the tool to help reduce the likelihood of opioid-related adverse events occurring among veterans receiving care through VHA. CARA also requires that VHA modify its electronic medical record system so that any provider who accesses the record of a veteran will be notified whether that veteran is receiving opioid therapy and has a history of substance abuse disorder or prior instances of overdose; has a history of opioid abuse; or is at risk of developing an opioid use disorder. However, we found that VHA does not plan to modify its electronic medical record system to implement this capability. When asked about this provision in CARA, VHA officials said that VHA’s medical record currently has real- time alerts to inform providers about veterans’ existing opioid prescriptions and that any patient exposed to an opioid could be at risk of developing an opioid use disorder. Additionally, they said that an alert regarding current or past history of opioid use disorder could have an unintended consequence of discouraging veterans from reporting their medical history due to the stigma surrounding drug use disorders. Our review of selected VHA medical facilities shows that providers do not always follow three key opioid risk mitigation strategies, two of which are required under VHA policy. Specifically, increasing the use of urine drug screening is an explicit goal of the OSI, and providers should generally ensure that an annual urine drug screening has been conducted. VHA policy requires providers to 1) query state PDMPs at least annually when prescribing opioids to determine if the veteran has obtained opioid medications or other controlled substances from a non-VA provider and 2) obtain written informed consent from patients about the risks of initiating long-term opioid therapy. These strategies are intended to help ensure that patients at VHA medical facilities are safely prescribed opioid medications. Overall, based on our review of 103 veterans at five selected facilities, we found that 75 percent of the veterans in our sample had an annual urine screening, 26 percent had their names queried in a PDMP, and 70 percent provided informed consent. Provider Adherence to Three Veterans Health Administration (VHA) Opioid Risk Mitigation Strategies at Five Selected Medical Facilities, March 2016 through March 2017 Increasing the use of urine drug screening is an explicit goal of VHA’s Opioid Safety Initiative (OSI), and providers should generally ensure that an annual urine drug screening has been conducted. VHA policy requires providers to (1) query state prescription drug monitoring programs (PDMP) at least annually when prescribing opioids to determine if the veteran has obtained opioid medications or other controlled substances from a non-VA provider, and (2) obtain written informed consent from patients about the risks of initiating long-term opioid therapy. However, our review of medical records for a random nongeneralizable selection of 103 veterans subject to these risk mitigation strategies found that Of the 53 veterans who received long-term opioid therapy: 32 veterans received an annual urine drug screening, which allows providers to monitor the types of medications in a veteran’s system, including controlled and illicit substances; 13 veterans had their names queried annually in a state PDMP to see if they had received prescriptions for controlled substances, including opioids from non-VHA prescribers; and 41 veterans had provided informed consent indicating that they had been educated on the risks and benefits of opioid use. Of the 25 veterans prescribed an opioid and benzodiazepine concurrently: 17 veterans received an annual urine drug screening; 8 veterans had an annual PDMP query; and 22 veterans had provided informed consent. Of the 25 veterans with the highest risk of an adverse event, such as a suicide, overdose, fall, or accident, based on their Stratified Tool for Opioid Risk Mitigation (STORM) risk score: 24 veterans received an annual urine drug screening; 5 veterans had an annual PDMP query; and 11 veterans had provided informed consent. We identified a number of factors that may have contributed to the inconsistent adherence to the three key opioid risk mitigation strategies at our selected VHA medical facilities. These factors may impede providers’ ability to consistently follow these strategies for all applicable patients at these facilities. To the extent that these factors are present across other facilities, VHA’s ability to ensure that all veterans are prescribed opioids in a safe and effective manner may be limited. PDMP access issues. Officials at four of the five selected medical facilities faced PDMP access issues. Officials at two facilities told us that not all facility staff can access state PDMPs due to state laws and regulations that do not allow access to all types of providers, such as nurses and pharmacists. Officials at one of these selected facilities explained that nurse practitioners in that state cannot access the state’s PDMP, so they must rely on other providers to obtain information from the PDMP about their patients. In addition, in some states, only providers licensed in the state may access the state’s PDMP. Because providers at VHA facilities may not be licensed in the state where the VHA facility is located but licensed in another state, these providers may be unable to access the state’s PDMP. Officials at two selected facilities also described difficulties accessing PDMPs in neighboring states that are part of the catchment area for the facility and where the veteran may reside. The low rates of adherence we identified may also be attributed to the fact that VHA did not require providers to query the PDMP until October 2016, 7 months into our review of patients from March 2016 to March 2017. CARA directed VA to ensure access by VHA providers to information on controlled substances prescribing through state PDMPs, including by seeking to enter into memoranda of understanding with states to allow shared access of such information between states and the VA. According to VHA officials, VHA Central Office has not taken steps to develop memoranda of understanding with states, nor has it developed any related guidance. Officials said this issue is likely being addressed by individual VISNs and medical facilities. In addition, VHA officials told us they have communicated with Members of Congress and the National Governors Association to address issues related to VHA provider access to the state PDMPs. Lack of required staff to support providers. We also found that not all of the selected medical facilities and their respective VISNs had filled required staff positions that can help ensure provider adherence to opioid risk mitigation strategies—specifically, academic detailers and pain champions. At the time of our review, not all facilities had access to VISN academic detailing services, which, according to VHA, can help ensure that providers follow opioid risk mitigation strategies. While VHA officials said that most VISNs across VHA had implemented an academic detailing program as required by VHA policy, two of the five VISNs for the selected facilities in our review had not. Nationally, as of March 2018, four VISNs had not implemented an academic detailing program. Additionally, 11 facilities across VHA had not received a visit from a detailer. At the time of our review, four of five selected facilities did not have a Pain Champion as required by VHA policy beginning in March 2015. Pain champions are generally primary care providers knowledgeable about pain care who can serve as a resource for other primary care providers by promoting safe and effective pain care. According to VHA officials, pain champions play a critical role in opioid safety and can help providers remedy gaps in pain care management for individual patients, such as incomplete opioid risk mitigation strategies. Lack of clinical opioid safety alerts. Another factor that may limit adherence to the opioid risk mitigation strategies is the fact that none of the selected facilities employ electronic reminders to help remind primary care nurses of strategies that have not been completed. Primary care nurses are typically responsible for ensuring adherence to these strategies, and VHA facilities often employ electronic alerts to notify providers when certain tasks need to be completed, such as regular screenings for depression and traumatic brain injury. Although VHA facilities are not required to develop these alerts, according to some primary care nurses we interviewed, it would be helpful to receive a reminder when a veteran is due for a PDMP query, urine drug screening, or has not given long-term opioid use informed consent. According to the nurses, such an alert could be issued through the electronic medical record system. Limited facility monitoring. We found that facilities’ monitoring of provider adherence to the opioid risk mitigation strategies was limited across the five selected facilities in our review, which could hinder identification of non-adherence to these strategies. Specifically, while we found that all five medical facilities and VISNs in our review have an active pain management committee, facility officials told us that three of five facility committees do not conduct regular medical record reviews, which VHA encourages under its pain management directive to improve pain management. The directive states that facility pain management committees should monitor the pain management practices at their facility. For example, the pain management committee could monitor providers’ care plans for individual veterans, which are to be documented in the veterans’ medical records. These types of medical record reviews could help identify providers who are not adhering to VHA’s opioid safety requirements. We also found that some VHA providers at selected facilities do not consistently follow selected clinical practice guideline recommendations related to opioid safety. Our findings are based on our review of a random selection of medical records for 103 veterans prescribed opioids between March 2016 and March 2017. These guidelines recommend, for example, that providers consider using non-pharmacological treatments, such as acupuncture and yoga, for chronic pain and prescribe naloxone, a potentially lifesaving drug, as warranted. The guidelines provide evidence-based recommendations designed to assist in provider decision-making; however, they are not VHA requirements and variations in practice will occur based on provider discretion and the needs of individual patients. Overall, we found that, 20 percent of veterans in our sample were prescribed a non-pharmacological therapy, 23 percent of the veterans were prescribed naloxone, 54 percent had appropriate maintenance follow-up visits with a provider while prescribed opioids, and 17 percent had appropriate follow-up visits with a provider after a change in their opioid prescription. Provider Adherence to Selected Clinical Practice Guideline Recommendations for Management of Opioid Therapy for Chronic Pain at Five Selected Veterans Health Administration (VHA) Medical Facilities, March 2016 through March 2017 Clinical practice guidelines provide evidence-based recommendations designed to assist in provider decision-making; however, they are not VHA requirements and variations in practice will occur based on provider discretion and the needs of individual patients. Our review of medical records for a random, nongeneralizable selection of 103 veterans subject to the recommendations found that Of the 53 veterans who had been prescribed long-term opioids: 11 veterans were prescribed a non-pharmacological therapy, such as yoga, or cognitive behavioral therapy; 13 veterans were prescribed naloxone, which is a highly effective intervention for reversing an overdose; 29 veterans had a maintenance follow-up visit at least once every 30-180 days for the duration of the veteran’s opioid therapy; and 3 of 21 veterans who had a change in their opioid medication during the time of our review had a follow-up visit between 14 and 28 days following the change. Of the 25 veterans prescribed a concurrent opioid and benzodiazepine: 6 veterans were prescribed a non-pharmacological therapy; 4 veterans were prescribed naloxone; 11 veterans had a maintenance follow-up visit; and 0 of 9 veterans who had a change in their opioid medication during the time of our review had a follow-up visit between 14 and 28 days following the medication change. Of the 25 veterans with the highest risk of an adverse event, such as a suicide, overdose, fall, or opioid-induced respiratory depression, based on their Stratified Tool for Opioid Risk Mitigation (STORM) risk score: 4 veterans were prescribed a non-pharmacological therapy; 7 veterans were prescribed naloxone; 16 veterans had a maintenance follow-up visit; and 5 of 17 veterans who had a change in their opioid medication during the time of our review had a follow-up visit between 14 and 28 days following the medication change. There are a variety of reasons that VHA providers may not always follow clinical practice guideline recommendations. For example, the availability of these non-pharmacological therapies may be limited, according to officials at all five selected VHA medical facilities. Officials at some facilities noted that the availability of these therapies can be particularly challenging for facilities in rural areas. VHA officials explained that the biggest barrier to providing naloxone is educating providers, so that they consistently consider prescribing naloxone for their patients receiving opioid therapy. According to officials, an education course for providers on naloxone prescribing became available in December 2015, and naloxone education efforts are a key focus of academic detailing programs. According to VHA data, since fiscal year 2014, naloxone distribution has increased. Specifically, as of March 2018, the agency has dispensed almost 142,000 naloxone kits to veterans, an increase of about 58 percent since June 2017. VHA is taking important steps under the OSI to help ensure that veterans receive safe care. For example, VHA has begun tracking and publicly reporting data on four key metrics related to opioid prescriptions, and these data show that opioid prescription rates have decreased since 2013. In addition, our review also found that VHA has made progress on most of its 2014 OSI goals. However, for two goals, VHA lacks documentation showing whether VISNs and medical facilities have completed required relevant actions, and in one case, VHA has not specified measurable outcomes, which makes it challenging to determine whether these goals have been accomplished. Without sufficient documentation and measurable outcomes, VHA cannot determine whether these OSI goals to help ensure safe and effective care for veterans prescribed opioids have been fully successful. Our review also shows that VHA needs to do more to ensure that its providers are following three key opioid risk mitigation strategies when prescribing an opioid medication to a veteran: conducting an annual urine drug screening, querying a PDMP, and obtaining written informed consent from the veteran on the benefits and risks of using opioid medications. VHA has several means at its disposal for improving adherence to these strategies—at a minimum it should ensure that each VISN has a fully staffed academic detailing program and that each facility has a designated primary care pain champion, as VHA policy requires. In addition to enforcing these requirements, VHA should direct its facilities to strengthen monitoring efforts to help ensure providers’ adhere to the opioid risk mitigation strategies. These efforts include regular reviews of veterans’ medical records and creating electronic alerts reminding providers when these risk mitigation strategies have not been completed. Academic detailers and pain champions would also help educate providers further about evidence-based clinical practice guideline recommendations, such as non-pharmacological alternatives to opioid therapy and prescribing naloxone. Without these efforts to improve adherence to key opioid risk mitigation strategies, VHA’s ability to ensure that all veterans are prescribed opioids in a safe and effective manner may be limited. We are making the following five recommendations to VA: The Undersecretary for Health should ensure that Central Office, VISNs, and medical facilities document the actions they take towards achieving OSI goals. (Recommendation 1) The Undersecretary for Health should ensure that any OSI goals that have not been met have clearly defined, measurable outcomes, including milestones or numerical targets, as appropriate, and timeframes. (Recommendation 2) The Undersecretary for Health should track the use of the OTRR (or any subsequent tool) by providers prior to initiating opioid therapy. (Recommendation 3) The Undersecretary for Health should ensure that all VISNs have implemented an academic detailing program that supports all medical facilities in the VISN and that all VHA medical facilities have a designated primary care pain champion as required. (Recommendation 4) The Undersecretary for Health should require VHA medical facilities to take steps to ensure provider adherence to opioid risk mitigation strategies, including querying PDMPs, obtaining written informed consent, and conducting urine drug screening. For example, these steps could include creating alerts in the electronic medical record system to remind primary care teams when these actions should be completed or strengthening facility monitoring of providers. (Recommendation 5) We provided a draft of this report to VA for comment. While VA was reviewing a draft of this report, it requested further specificity in recommendation two; as a result, we revised the recommendation to be clearer. In its written comments, which are reproduced in appendix II, VA concurred with our recommendations and provided technical comments, which we have incorporated as appropriate. In its comments, VA agreed that clarifying ongoing priorities and plans and filling in gaps in implementation will help facilitate progress in its opioid safety efforts. VA stated that it will establish a workgroup to review all OSI goals and ensure that the goals have clearly defined measurable outcomes and timelines, and that documentation requirements are established. VA also informed us that in March 2018 it published a notice requiring VHA clinicians to conduct and document a data-based risk review using one of VHA’s clinical decision support tools for opioid management, such as STORM, prior to initiating opioid therapy. VA also stated that it will take actions to ensure that academic detailing programs are fully implemented and primary care pain champions are in place across the system. To improve its clinicians’ adherence to opioid risk mitigation strategies, VA stated that it will establish a workgroup to review and develop methods for increasing adherence. VA expects to complete all these actions by April 2019 or earlier. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, the Undersecretary for Health, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or clowersa@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Description of known related efforts and data According to VHA training system data, 13 of 21 VISNs developed at least one education course addressing the use of urine drug screening from January 1, 2015 through April 29, 2017. Ten of the 13 VISNs developed at least one course by the deadline (December 31, 2014) as required. Further, 6 of the 13 VISNs had at least one course with 30 or fewer providers completing it. Because we found the VISN course assignment data unreliable, we could not determine the completion rates for these courses. However, we found that, in response to a 2015 White House memorandum that required all federal employee opioid prescribers to complete training on the appropriate prescribing of opioids (which included discussion of urine drug screening) by April 15, 2017, of 20,231 prescribers who were identified and assigned the course, 19,242 completed it, for a completion rate of about 95 percent, according to VHA data from January 1, 2015 through April 29, 2017. Urine drug screening targets based on previous urine drug screening rates for all VHA facilities must be reached by 2nd quarter, fiscal year 2015 (March 31, 2015) According to VHA data, 151 of 157 facilities met or exceeded their urine drug screening target by the deadline (March 31, 2015) as required. In addition, VHA OSI metric data also show that there has been a 47 percentage point increase nationally in the percentage of patients on long-term opioid therapy who received a urine drug screen from the 4th quarter of fiscal year 2013 to the 1st quarter of fiscal year 2018. The increase in the percentage of patients receiving a urine drug screening was driven more by a reduction in the total number of patients on long-term opioid therapy rather than an increase in the number of patients receiving the screening. VHA Central Office lacks certifications from all VISNs that programs were established. Although officials at the five VISNs in our review told us they had supported training efforts on the use of PDMPs, only one VISN in our review provided documentation that it had established a program by the deadline (March 31, 2015) as required. However, in October 2016, VHA issued a directive requiring providers to query state PDMPs for patients prescribed opioids and also issued guidance on how PDMPs should be accessed and how these efforts should be documented in VA’s electronic health record system. In addition, according to VHA officials, querying the PDMP was added to the 2015 White House-required opioid safety training, as described earlier. According to VHA data, there has been a 22 percent increase in the querying of PDMPs by providers from 4th quarter, fiscal year 2016 to 3rd quarter, fiscal year 2017. Description of known related efforts and data VHA Central Office lacks documentation from all VISNs regarding VISN-specific protocols and implementation plans. Only one of the five VISNs in our review provided documentation regarding a VISN-specific protocol relating to patients on opioids and benzodiazepines, which was developed in 2013. Four of the five VISNs did not provide documentation of a VISN-specific protocol or implementation plans. However, VHA officials told us that they addressed this goal by issuing national tapering guidance including a provider reference guide in 2014, an opioid taper decision tool in 2016, and the VA/DOD clinical practice guideline in 2017. VHA officials said that the issuance of this guidance made the VISN-required action irrelevant. In addition, VHA OSI metric data show that there has been a 6.6 percentage point decrease nationally in the percentage of patients dispensed an opioid and benzodiazepine from the fourth quarter of fiscal year 2013 to the first quarter of fiscal year 2018. In 2016, VHA released its opioid risk stratification toolkit in the form of an opioid safety monitoring tool called the Stratification Tool for Opioid Risk Mitigation. In addition, VHA updated its pain management opioid safety education guide and quick reference guide for providers in July 2017. VHA Central Office lacks documentation from all VISNs regarding VISN-specific protocols and implementation plans. Only one of the five VISNs in our review provided documentation regarding a VISN-specific protocol relating to patients on opioids and benzodiazepines, which was developed in 2013. Four of the five VISNs did not provide documentation of a VISN-specific protocol or implementation plans. VHA-required action(s) Each VISN must certify that the treatment of all patients with a daily dose of greater than 200 morphine milligram equivalents has been reviewed by 2nd quarter, fiscal year 2015 (March 31, 2015) Description of known related efforts and data VHA Central Office lacks certifications from all VISNs that reviews were conducted. Although officials at the five VISNs in our review told us they had completed these reviews, only one VISN provided us with documentation to conclude that its facilities completed their review. However, VHA OSI metric data show that there has been a 2.1 percentage point decrease nationally in the percentage of patients dispensed greater than or equal to 100 morphine milligram equivalents per day from the fourth quarter of fiscal year 2013 to the first quarter of fiscal year 2018. Each facility must provide evidence that at least two evidence-based behavioral/psychological treatments or approved complementary or alternative modalities can be provided by 2nd quarter, fiscal year 2015 (March 31, 2015) According to VHA 2nd quarter, fiscal year 2015 data, all VHA medical facilities located in the United States provided at least one psychosocial service and at least one complementary and integrative health service. In February 2016, VHA began a pilot to implement a model of care known as the Collaborative Chronic Care Model into existing Behavioral Health Interdisciplinary Program teams at nine VHA medical facilities. According to a VHA document, the pilot will provide facilitation support to enhance existing Behavioral Health Interdisciplinary Program teams by incorporating evidence-based Collaborative Care Model elements, which can include a care manager to proactively monitor care and progress as well as other tools intended to improve communication between primary care and specialty care. In fiscal year 2017, efforts were expanded to 30 additional VHA medical facilities. According to one VHA official, the pilot is expected to be completed no earlier than August 2019. VISNs are regional networks that manage the VHA medical facilities located in their area. In October 2015, VHA began to implement a realignment of its VISN boundaries which resulted in the number of its VISNs decreasing from 21 to 18. One VISN provided evidence of one VHA medical facility’s tapering recommendations for patients on opioids and benzodiazepines. Based on information we obtained from VHA relative to this goal, “psychosocial” services refer to “behavioral/psychological” treatments, and “integrated health” is a term that may be used to refer to “complementary and alternative” modalities. According to a VHA official, the VHA facility in Manila, the Philippines did not offer at least one psychosocial service and at least one integrative health service for this time period. In addition to the contact named above, Marcia A. Mann, Assistant Director; Stella Chiang, Analyst-in-Charge; Emily Binek, Krister Friday, Diona Martyn, and Michael Rose made key contributions to this report. Also contributing were Zhi Boon and Emily Wilson.", "summary": "The Comprehensive Addiction and Recovery Act of 2016 and Senate Report 114-57 included provisions for GAO to report on VHA's OSI and the opioid prescribing practices of its health care providers. This report examines, among other issues, (1) the extent to which VHA has met OSI goals established in 2014 and (2) the extent to which VHA providers adhere to key opioid risk mitigation strategies. To do this work, GAO reviewed data and documents related to OSI efforts and goals and interviewed VHA officials. In addition, GAO reviewed a random, nongeneralizable selection of medical records for 103 veterans who were prescribed opioids at five selected VHA medical facilities from March 2016 through March 2017. GAO selected the facilities to obtain diversity in geography and rates of opioid prescribing. At the selected facilities, GAO reviewed facility data and documents related to opioid safety and interviewed officials. The Veterans Health Administration (VHA) has made progress improving opioid safety through its Opioid Safety Initiative (OSI). Launched in 2013, the OSI aims to help ensure that veterans are prescribed opioids in a safe and effective manner. Since the OSI began, VHA has seen reductions in opioid prescribing rates. For example, from the fourth quarter of fiscal year 2013 to the first quarter of fiscal year 2018, the percentage of patients dispensed an opioid decreased from about 17 percent to about 10 percent, or by about 267,000 veterans. Also, available evidence suggests VHA has accomplished six of nine OSI goals established in 2014; however, it is unclear whether the remaining three goals have been fully met. For example, in the case of OSI goal four (establishing safe and effective regional tapering programs for patients on opioids and benzodiazepines), GAO found that VHA lacked documentation that its regional networks established these programs. VHA also did not establish measures of safety or effectiveness under this goal. These limitations prevent VHA from fully evaluating progress and accurately determining the extent to which its efforts to help ensure safe and effective prescribing of opioids have been successful. In a review of a nongeneralizable sample of 103 veterans' medical records at five selected VHA medical facilities, GAO found that VHA providers did not always adhere to key opioid risk mitigation strategies, which are required by VHA policy or relevant to OSI goals. For example, among 53 veterans who were prescribed long-term opioid therapy (defined as a 90-day supply in the last 6 months), GAO found that 40 veterans did not have their names queried in a state-run prescription drug monitoring program database. The databases are used to identify patients who are receiving multiple prescriptions that may place them at greater risk for misusing opioids or overdosing; 21 veterans did not have a urine drug screening within the year prior to having their prescription filled. The screenings are used to determine whether veterans are taking their opioid medications as prescribed; and 12 veterans did not provide written informed consent. Informed consent is a formal acknowledgement that the veteran has been educated on the risks and benefits of opioid use prior to initiating long-term opioid therapy. GAO found several factors that may have contributed to inconsistent adherence to key opioid risk mitigation strategies at the selected VHA facilities. For example, four of the five selected facilities did not have a pain champion (a primary care position required by VHA that can help providers adhere to opioid risk mitigation strategies), and not all facilities had access to academic detailing, a program in which trained clinical pharmacists work one-on-one with providers to better inform them about evidence-based care related to the appropriate treatment of relevant medical conditions. In addition, three of the five facilities did not consistently review veterans' medical records to ensure provider adherence to these strategies. To the extent that these factors affect all VHA facilities, VHA will continue to face challenges ensuring that its providers prescribe opioids in a safe and effective manner. GAO is making five recommendations to VHA, including that it document actions and develop measurable outcomes related to its OSI goals, ensure that providers are adhering to opioid risk mitigation strategies, and ensure that all its regional networks have implemented academic detailing programs and that all VHA medical facilities have a designated primary care pain champion, as required. The Department of Veterans Affairs concurred with GAO's recommendations and described steps it will take to implement them.", "document_type": "gao"}
{"report": "For over a decade, each of VA’s 170 medical centers used VHA’s legacy MSPV program to order medical supplies, such as bandages and scalpels. Many of those items were purchased using the Federal Supply Schedules, which provided medical centers with a great deal of flexibility. However, as we reported in 2016, this legacy program prevented VHA from standardizing items used across its medical centers and affected its ability to leverage its buying power to achieve greater cost avoidance. Standardization is a process of narrowing the range of items purchased to meet a given need, such as buying 10 varieties of bandages instead of 100, in order to improve buying power, simplify supply chain management, and provide clinical consistency. In part because of the legacy MSPV program’s limited standardization, VHA decided to transition to a new iteration, called MSPV-NG. The transition to MSPV-NG has been a major effort, involving the MSPV- NG program office, stakeholders from the VHA’s Procurement and Logistics Office and VA’s Strategic Acquisition Center (SAC)—a VA-wide contracting organization—and logistics and clinical personnel at every medical center. The program also includes hundreds of new contracts with individual supply vendors and a new set of prime vendor contracts to distribute the supplies. VA’s goals for the MSPV-NG program include (1) standardizing requirements for supply items for greater clinical consistency; (2) demonstrating cost avoidance by leveraging VA’s substantial buying power when making competitive awards; (3) achieving greater efficiency in ordering and supply chain management, including a metric of ordering 40 percent of medical centers’ supplies from the MSPV-NG formulary; and (4) involving clinicians in requirements development to ensure uniform clinical review of medical supplies. VHA launched the MSPV-NG program in December 2016, but allowed a 4-month transition period. After April 2017, medical centers could no longer use the legacy program. MSPV-NG now restricts ordering to a narrow formulary. VHA policy requires medical centers to use MSPV- NG—as opposed to other means such as open market purchase card transactions—when purchasing items that are available in the formulary. Leading hospital networks we spoke with have similar goals to VA in managing their supply chains, including clinical standardization and reduced costs. These hospital networks reported they analyze their spending to identify items purchased most frequently, and which ones would be the best candidates to standardize first to yield cost savings. The hospitals’ supply chain managers reported establishing consensus with clinicians through early and frequent collaboration, understanding that clinician involvement is critical to the success of any effort to standardize their medical supply chain. By following these practices, these hospital networks have reported they have achieved significant cost savings in some cases, and the potential for improved patient care, while maintaining buy-in from their clinicians. VHA’s implementation of the MSPV-NG program—from its initial work to identify a list of supply requirements in early 2015, through its roll-out of the formulary to medical centers in December 2016—was not executed in line with leading practices. Specifically, VHA lacked a documented program strategy, leadership stability, and workforce capacity for the transition that, if in place, could have facilitated buy-in for the change throughout the organization. Further, the initial requirements development process and tight time frames contributed to ineffective contracting processes. As a result, VHA developed an initial formulary that did not meet the needs of the medical centers and has yet to achieve utilization and cost avoidance goals. VA made some changes in the second phase of requirements development to address deficiencies identified in the initial roll out. Key among these was to increase the level of clinical involvement, that is, to obtain input from the doctors and nurses at VA’s individual medical facilities. Despite changes aimed at improving implementation, the agency continues to face challenges that prevent the program from fully achieving its goals. VA did not document a clear overall strategy for the MSPV-NG program at the start and has not done so to date. About 6 months after our initial requests for a strategy or plan, a VHA official provided us with an October 2015 plan focusing on the mechanics of establishing the MSPV-NG formulary. However, this plan was used only within the VHA Procurement and Logistics Office and had not been approved by VHA or VA leadership. Leading practices for organizational transformation state that agencies must have well-documented plans and strategies for major initiatives (such as MSPV-NG) and communicate them clearly and consistently to all involved—which included VHA headquarters, the SAC, and all 170 medical centers. Without such a strategy, VA could not reasonably ensure that all stakeholders understood VHA’s approach for MSPV-NG and worked together in a coordinated manner to achieve program goals. In our November 2017 report, we recommended that the Director of the MSPV-NG program office should, with input from SAC, develop, document, and communicate to stakeholders an overarching strategy for the program, including how the program office will prioritize categories of supplies for future phases of requirement development and contracting. VA agreed with this recommendation and reported it would have a strategy in place by December 2017. Leadership instability and workforce challenges also made it difficult for VA to execute its transition to MSPV-NG. Our work has shown that leadership buy-in is necessary to ensure that major programs like MSPV- NG have the resources and support they need to execute their missions. Due to a combination of budget and hiring constraints, and lack of prioritization within VA, the MSPV-NG program office has never been fully staffed and has experienced instability in its leadership. As of January 2017, 24 of the office’s 40 positions were filled, and program office officials stated that this lack of staff affected their ability to implement certain aspects of the program within the planned time frames. In addition, since the inception of MSPV-NG, the program office has had four directors, two of whom were acting and two of whom were fulfilling the director position while performing other collateral duties. For instance, one of the acting MSPV-NG program office directors was on detail from a regional health network to fulfill the position, but had to abruptly leave and return to her prior position due to a federal hiring freeze. In our November 2017 report, we recommended that VHA prioritize the hiring of a MSPV- NG program director on a permanent basis. VA agreed with this recommendation and indicated a vacancy announcement will be posted by the end of 2017. The MSPV-NG program office initially developed requirements for items to be included in the formulary based almost exclusively on prior supply purchases, with limited clinician involvement. The program office concluded in its October 2015 formulary plan that relying on data from previous clinician purchases would be a good representation of medical centers’ needs and that clinician input would not be required for identifying which items to include in the initial formulary. Further, rather than standardizing purchases of specific categories of supplies—such as bandages or scalpels—program officials told us they identified medical and surgical items on which VA had spent $16,000 or more annually and ordered at least 12 times per year, and made those items the basis for the formulary. Officials said this analysis initially yielded a list of about 18,000 items, which the program office further refined to about 6,000 items by removing duplicate items or those that were not considered consumable commodities, such as medical equipment. This approach to requirements development stood in sharp contrast to those of the leading hospital networks we met with, which rely heavily on clinician input to help drive the standardization process and focus on individual categories of supplies that provide the best opportunities for cost savings. Based on the requirements developed by the program office, SAC began to issue competitive solicitations for the 6,000 items on the initial formulary in June 2015. Medical supply companies had responded to about 30 percent of the solicitations as of January 2016. As a result, according to SAC officials, they conducted outreach and some of these companies responded that VHA’s requirements did not appear to be based on clinical input and instead consisted of manufacturer-specific requirements that favored particular products instead of broader descriptions. Furthermore, SAC did not solicit large groups of related items, but rather issued separate solicitations for small groups of supply items—consisting of three or fewer items. This is contrary to industry practices of soliciting large groups of related supplies together. Therefore, according to SAC officials, some medical supply companies told them that submitting responses to SAC’s solicitations required more time and resources than they were willing to commit. By its April 2016 deadline for having 6,000 items on the formulary, SAC had been working on the effort for over a year and had established competitive agreements for about 200 items, representing about 3 percent of the planned items. Without contracts for the items on the formulary in place, VA delayed the launch of the MSPV-NG program until December 2016 and SAC began establishing non-competitive agreements in the last few months before the launch of MSPV-NG. As shown in figure 1, these non-competitive agreements accounted for approximately 79 percent of the items on the January 2017 version of the formulary. While this approach enabled the MSPV-NG program office to establish the formulary more quickly, it did so at the expense of one of the primary goals of the MSPV-NG program—leveraging VA’s buying power to obtain cost avoidance through competition. Once VA’s MSPV-NG initial formulary was established in December 2016, each medical center was charged with implementing it. According to logistics officials we spoke with at selected medical centers, they had varying levels of success due, in part, to incomplete guidance from the program office. Without clear guidance, many medical centers reported they were unable to find direct matches or substitutes on the MSPV-NG formulary for a substantial number of items they routinely used, which negatively impacted utilization rates for the initial formulary. In our November 2017 report, we recommended that the Director of the MSPV- NG program office provide complete guidance to medical centers for matching equivalent supply items. VA agreed with this recommendation and indicated it would provide this guidance to medical centers by December 2017. According to SAC, as of June 2017, only about a third of the items on the initial version of the formulary were being ordered in any significant quantity by medical centers, indicating that many items on the formulary were not those that are needed by medical centers. Senior VHA acquisition officials attributed this mismatch to shortcomings in their initial requirements development process as well as with VA’s purchase data. VA had set a target that medical centers would order 40 percent of their supplies from the MSPV-NG formulary, but utilization rates were below this target with a nationwide average utilization rate across medical centers of about 24 percent as of May 2017. Specifically, Chief Supply Chain Officers—who are responsible for managing the ordering and stocking of medical supplies at six selected medical centers—told us that many items they needed were not included in the MSPV-NG formulary. As such, we found that these six medical centers generally fell below VA’s stated utilization target. As shown in figure 2, among the six selected medical centers we reviewed, one met the target, while the remaining five were below 25 percent utilization. Instead of fully using MSPV-NG, the selected medical centers are purchasing many items through other means, such as purchase cards or new contracts awarded by their local contracting office, in part, because they said the formulary does not meet their needs. These approaches run counter to the goals of the MSPV-NG program and contribute to VA not making the best use of taxpayer dollars. Greater utilization of MSPV-NG is essential to VA achieving the cost avoidance goal of $150 million for its supply chain transformation effort. Under the legacy MSPV program, the National Acquisition Center tracked cost avoidance achieved by comparing prices for competitively-awarded MSPV supply contracts with prices available elsewhere. However, VHA officials stated that they are not currently tracking cost avoidance related specifically to MSPV-NG. In our November 2017 report, we recommended that the VHA Chief Procurement and Logistics Officer, in coordination with SAC, should calculate cost avoidance achieved by MSPV-NG on an ongoing basis. VA agreed with this recommendation and reported it would develop a new metric to measure cost avoidance by June 2018. In Phase 2 of MSPV-NG, the program office has taken some steps to incorporate greater clinical involvement in subsequent requirements development, but both its requirements development and SAC’s contracting efforts have been hampered by staffing and schedule constraints. In the fall of 2016, the program office began to establish panels of clinicians to serve on MSPV-NG integrated product teams (IPT) assigned to the task of developing updated requirements for the second phase of the formulary. Program officials said they had difficulty recruiting clinicians to participate. We found that slightly more than half (20 of the 38) of the IPTs had begun their work to review items and develop updated requirements by the time the MSPV-NG program launched in December 2016. Staff on the IPTs had to complete their responsibilities by the end of March 2017 while simultaneously managing their regular workload as physicians, surgeons, or nurses. By early March 2017, the IPTs still had about 4,200 items to review. Faced with meeting this unrealistic time frame, the MSPV-NG program office had 9 IPT members travel to one location—with an additional 10 members participating virtually—to meet for 5 days to review the remaining items. Members told us that this time pressure limited the extent to which they were able to pursue the goal of standardizing supplies, and that their review ended up being more of a data validation exercise than a standardization review. VHA ultimately met this compressed timeline, but in a rushed manner that limited the impact of clinician involvement. In our November 2017 report, we recommended that the VHA Chief Procurement and Logistics Officer use input from national clinical program offices to prioritize its requirements development and standardization efforts beyond Phase 2 to focus on supply categories that offer the best opportunity for standardization and cost avoidance. VA agreed with this recommendation and stated it is in the process of finalizing guidance that will detail the importance of involving the national clinical program offices in MSPV-NG requirements development and standardization efforts. The SAC plans to replace the existing Phase 1 non-competitive agreements with competitive awards based on the Phase 2 requirements generated by the IPTs, but it may not be able to keep up with expiring agreements due to an unrealistic schedule. Because they were made on a non-competitive basis, the Phase 1 agreements were established for a period of 1 year. In order to keep the full formulary available, the SAC director said the staff must award 200 to 250 contracts before the Phase 1 agreements expire later this year. SAC officials acknowledged that it is unlikely that they will be able to award the contracts by the time the existing agreements expire. According to SAC officials, they are in the process of hiring more staff to deal with the increased workload. Further, the SAC division director told us that they canceled all outstanding Phase 2 solicitations in September 2017 due to low response rates, protests from service-disabled veteran-owned small businesses, and changes in overall MSPV-NG strategy. In our November 2017 report, we recommended that the MSPV-NG program office and SAC should establish a plan for how to mitigate the potential risk of gaps in contract coverage while SAC is still working to make competitive Phase 2 awards, which could include prioritizing supply categories that are most likely to yield cost avoidance. VA agreed with this recommendation and indicated it has developed a plan to mitigate the risk of gaps in contract coverage with short- and mid-term procurement strategies to ensure continued provision of medical and surgical supplies to VHA facilities. The department also stated that it plans to replace the current MSPV-NG contract and formulary process with a new approach where the prime vendor would develop the formulary. However, VA will likely face challenges in this new approach until it fully addresses the existing shortcomings in the MSPV-NG program. Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this statement, please contact Shelby S. Oakley at 202-512-4841 or OakleyS@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to the report on which this testimony is based are Lisa Gardner, Assistant Director; Emily Bond; Matthew T. Crosby; Lorraine Ettaro; Michael Grogan; Jeff Hartnett; Katherine Lenane; Teague Lyons; Roxanna Sun; and Colleen Taylor. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "VA spends hundreds of millions of dollars annually on medical supplies to meet the health care needs of about 7 million veterans. To provide a more efficient, cost-effective way for its medical centers to order supplies, the VA established the MSPV-NG program. The program's goals include involving clinicians in requirements development, leveraging buying power when making competitive awards, and consolidating supplies used across medical centers. VA began developing requirements in early 2015 and launched the program in December 2016. This testimony summarizes key information contained in GAO's November 2017 report, GAO-18-34 . Specifically, it addresses the extent to which VA's implementation of MSPV-NG has been effective in meeting program goals. GAO analyzed VA's requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also met with contracting and clinical officials at six medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation. The Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation did not have an overarching strategy, stable leadership, and workforce capacity that could have facilitated medical center buy-in for the change. VA also developed requirements for a broad range of MSPV-NG items with limited clinical input. Further, starting in June 2015, VA planned to award competitive contracts, but instead, 79 percent of the items available for purchase under MSPV-NG were added through non-competitive agreements. (See figure). As a result, the program did not meet the needs of medical centers, and usage remained below VA's 40 percent target. (See figure.) VA has taken steps to address some deficiencies and is developing a new approach to the program. However, VA will likely continue to face challenges in meeting its goals until it fully addresses these existing shortcomings. GAO made 10 recommendations in its November 2017 report, including that VA develop an overarching strategy, expand clinician input in requirements development, and establish a plan for awarding future competitive contracts. VA agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "The federal government’s increasing demand for IT has led to an increase in the number of federal data centers and a corresponding increase in operational costs. According to OMB, the federal government had 432 data centers in 1998, 2,094 in July 2010, and 9,995 in August 2016. Operating such a large number of centers has been, and continues to be, a significant cost to the federal government. For example, in 2007, the Environmental Protection Agency (EPA) estimated that the electricity costs to operate federal servers and data centers across the government were about $450 million annually. According to the Department of Energy (Energy), a typical data center has 100 to 200 times the energy use intensity of a commercial building. In 2009, OMB reported that server utilization rates as low as 5 percent across the federal government’s estimated 150,000 servers were a factor driving the need to establish a coordinated, government-wide effort to improve the efficiency, performance, and environmental footprint of federal data center activities. Concerned about the size of the federal data center inventory and the potential to improve the efficiency, performance, and the environmental footprint of federal data center activities, OMB’s Federal CIO established FDCCI in February 2010. This initiative’s four high-level goals were to reduce the overall energy and real estate footprint of government data centers; reduce the cost of data center hardware, software, and operations; increase the overall IT security posture of the government; and shift IT investments to more efficient computing platforms and technologies. In February 2010, OMB required all of the agencies participating in the FDCCI to submit a data center inventory and a consolidation plan. In October 2010, OMB also clarified the definition of a data center and noted that, for the purposes of FDCCI, a data center was to be defined as any room used for the purpose of processing or storing data that is larger than 500 square feet and meets stringent availability requirements. Under this definition, OMB reported that agencies had identified 2,094 data centers as of July 2010. However, in 2011, the Federal CIO expanded the definition to include a facility of any size and OMB published its revised definition in March 2012. Based on the revised definition, OMB estimated that there were a total of 3,133 federal data centers in December 2011. In addition, its goal was to consolidate approximately 40 percent, or 1,253 of these data centers, for a savings of approximately $3 billion by the end of 2015. Figure 1 provides an example of data center server racks at the Social Security Administration’s (SSA) National Support Center. The number of federal data centers reported by agencies has continued to grow since 2011. In March 2016, we reported that agencies had collectively identified a total of 10,584 data centers as of November 2015—an increase of about 7,500 data centers compared to OMB’s October 2011 estimate. According to the Federal CIO, the increase in the number of data centers was primarily due to the expanded definition of a data center and improved inventory reporting by the agencies. Further, OMB placed greater emphasis on data center optimization when it issued memorandum M-13-09 in March 2013. Specifically, OMB stated that, to more effectively measure the efficiency of an agency’s data center assets, agencies would also be measured by the extent to which their primary data centers are optimized for total cost of ownership by incorporating metrics for data center energy, facility, labor, and storage, among other things. Subsequently, in May 2014, OMB issued memorandum M-14-08, which established a set of data center optimization metrics to measure agency progress, along with target values for each metric. All agencies were expected to achieve the target values by the end of fiscal year 2015. Recognizing the importance of reforming the government-wide management of IT, Congress enacted FITARA in December 2014. Among other things, the law required agencies to: Submit to OMB a comprehensive inventory of the data centers owned, operated, or maintained by or on behalf of the agency. Submit, by the end of fiscal year 2016, a multi-year strategy to achieve the consolidation and optimization of the agency’s data centers. The strategy was to include performance metrics that were consistent with the government-wide data center consolidation and optimization metrics. Report progress towards meeting government-wide data center consolidation and optimization metrics on a quarterly basis to OMB’s Administrator of the Office of Electronic Government. In addition, according to FITARA, the Office of Electronic Government at OMB was to: Establish metrics applicable to the consolidation and optimization of data centers (including server efficiency), ensure that agencies’ progress toward meeting government-wide data center consolidation and optimization metrics is made publicly available, review agencies’ inventories and strategies to determine whether they are comprehensive and complete, and monitor the implementation of each agency’s strategy. Develop and make publicly available not later than December 19, 2015, a goal broken down by year, for the amount of planned cost savings and optimization improvements to be achieved through FDCCI and, for each year thereafter until October 1, 2020, compare reported cost savings and optimization improvements against those goals. In August 2016, OMB issued memorandum M-16-19, which established DCOI and included guidance on how to implement the data center consolidation and optimization provisions of FITARA. Among other things, the guidance required agencies to consolidate inefficient infrastructure, optimize existing facilities, improve their security posture, and achieve cost savings. For example, each agency was required to maintain a complete inventory of all data center facilities owned, operated, or maintained by or on its behalf, and measure progress toward defined optimization performance metrics on a quarterly basis as part of its data center inventory submission. OMB’s memorandum also directed each agency to develop a DCOI strategic plan that defined its data center strategy for fiscal years 2016 through 2018. Among other things, this strategy was to include a timeline for agency consolidation and optimization activities with an emphasis on cost savings and optimization performance benchmarks that the agency could achieve between fiscal years 2016 and 2018. For example, each agency was required to develop cost savings targets due to consolidation and optimization actions and report any realized cost savings. OMB required each agency to publicly post its DCOI strategic plan to its agency-owned digital strategy website by September 30, 2016, and to post subsequent strategic plan updates by April 14, 2017 and April 13, 2018. Further, the memorandum stated that OMB was to maintain a public dashboard (referred to as the IT Dashboard) to display government-wide and agency-specific progress in areas such as planned and achieved data center closures, consolidation-related cost savings, and data center optimization performance information. In this regard, OMB began including data center consolidation and optimization progress information on the IT Dashboard in August 2016. OMB’s memorandum also provided new guidance for the classification of a physical data center, expanding the definition of a data center. According to the revised definition, a room with at least one server that provides services (whether in a production, test, staging, development, or any other environment) should be considered a data center, while a room containing only print servers, routing equipment, switches, security devices (such as firewalls), or other telecommunication components, was not to be considered a data center. In light of this new definition, OMB directed each agency to perform a comprehensive review of its data centers and maintain a complete and updated data center inventory. Further, OMB directed each agency to categorize each of its data centers as either a tiered data center or a non- tiered data center. OMB’s memorandum defined a tiered data center as one that uses each of the following: a separate physical space for IT infrastructure; an uninterruptible power supply; a dedicated cooling system or zone; and a backup power generator for a prolonged power outage. According to the memorandum, all other data centers are to be considered non-tiered. Moreover, OMB guidance included a series of performance metrics in the areas of data center closures, cost savings, and optimization progress. Data center closures: Agencies are expected to close at least 25 percent of tiered data centers government-wide, excluding those approved as inter-agency shared services providers, by the end of fiscal year 2018. Further, agencies are to close at least 60 percent of non-tiered data centers government-wide by the end of fiscal year 2018. OMB’s guidance further notes that, in the long term, all agencies should continually strive to close all non-tiered data centers, noting that server rooms and closets pose security risks and management challenges and are an inefficient use of resources. Cost savings: Agencies are expected to reduce government-wide annual costs attributable to physical data centers by at least 25 percent, resulting in savings of at least $2.7 billion for fiscal years 2016 through 2018. Data center optimization: Agencies are expected to measure progress against a series of new data center performance metrics in the areas of server utilization, energy metering, power usage, facility utilization, and virtualization. Further, OMB’s guidance established target values for each metric that agencies are to achieve by the end of fiscal year 2018. OMB’s guidance further noted that agency progress against these performance metrics is to be measured by OMB on a quarterly basis, using agencies’ data center inventory submissions and OMB-defined closures, cost savings, and optimization targets. Since the enactment of FITARA in December 2014, we have annually reviewed and verified the quality and completeness of each covered agency’s inventory and DCOI strategy. We have also published reports documenting the findings from each of these reviews. In addition, we have examined and reported on agencies’ efforts to optimize their data centers, as well as the challenges encountered and successes achieved. In a report that we issued in March 2016, we noted that agencies had reported significant data center closures—totaling more than 3,100 through fiscal year 2015—with the Departments of Agriculture (Agriculture), Defense (Defense), the Interior (Interior), and the Treasury (Treasury) accounting for 84 percent of the total. Although agencies fell short of OMB’s fiscal year 2015 consolidation goal, their plans identified about 2,100 additional centers planned for closure through fiscal year 2019. Agencies also reported significant consolidation cost savings and avoidances—totaling about $2.8 billion through fiscal year 2015, and expected to increase to over $8.0 billion in future years. The Departments of Commerce (Commerce), Defense, Homeland Security (DHS), Transportation (Transportation), and the Treasury accounted for 96 percent of the total planned savings. However, we pointed out that many agencies lacked complete cost savings goals for the next several years despite having closures planned. In addition, we reported that 22 agencies had made limited progress against OMB’s fiscal year 2015 data center optimization performance metrics, such as the utilization of data center facilities. Accordingly, we recommended that the agencies take actions to complete their cost savings targets and improve optimization progress. Of the 24 agencies to which we made recommendations, 14 agreed with our recommendations, 4 did not state whether they agreed or disagreed, and 6 stated that they had no comments. As of March 2018, 26 of the 32 recommendations from this report had yet to be fully addressed. In May 2017, we reported that the agencies continued to report significant data center closures—totaling more than 4,300 through August 2016— with Agriculture, Defense, Interior, and the Treasury accounting for 84 percent of the total. The agencies’ plans for 2016 had identified more than 1,200 additional centers planned for closure through fiscal year 2019. Agencies also reported significant consolidation and optimization cost savings and avoidances, which totaled about $2.3 billion through August 2016. However, reductions in the amount of achieved savings reported to OMB, particularly by the Treasury, resulted in a net decrease of more than $400 million in these savings, compared to amounts we previously reported in 2015. Further, our report noted that, as of December 2016, agencies’ total planned cost savings of about $656 million were more than $3.3 billion less, compared to the amounts that we reported in 2015, and more than $2 billion less than OMB’s fiscal year 2018 cost savings goal of $2.7 billion. This reduction in planned savings was the result of eight agencies reporting less in planned cost savings and avoidances in their DCOI strategic plans compared to the savings amounts previously reported to us in November 2015. The reduction also reflected the absence of cost savings information for one agency (Defense) that did not submit its strategic plan in time for our review. In addition, our May 2017 report identified weaknesses in agencies’ DCOI strategic plans. Of the 23 agencies that had submitted their strategic plans at the time of our review, 7 agencies—Agriculture, the Department of Education (Education), DHS, and the Department of Housing and Urban Development (HUD); the General Services Administration (GSA); the National Science Foundation (NSF); and the Office of Personnel Management (OPM)—had addressed all five required elements of a strategic plan, as identified by OMB (such as providing information related to data center closures and cost savings metrics). The remaining 16 agencies that submitted their plans either partially met or did not meet the requirements. We also pointed out that there were inconsistencies in the reporting of cost savings in the strategic plans of 11 agencies. Given these findings, we recommended that OMB improve its oversight of agencies’ DCOI strategic plans and their reporting of cost savings and avoidances. We also recommended that 16 agencies and Defense (which did not submit a plan in time for our review) complete the missing elements in their strategic plans, and that 11 agencies ensure the reporting of consistent cost savings and avoidance information to OMB. Of the 25 agencies (including OMB) to which we made recommendations, 12 agreed with our recommendations, 2 disagreed, and 11 did not state whether they agreed or disagreed. As of March 2018, 29 of the 30 recommendations had not been fully addressed. In a subsequent report that we issued in August 2017, we noted that 22 of the 24 agencies required to participate in the OMB DCOI collectively had reported limited progress against OMB’s fiscal year 2018 performance targets for the five optimization metrics. The 2 remaining agencies, Education and HUD, did not have agency-owned data centers and, therefore, did not have a basis to report on progress. Specifically, for each of the five targets, no more than 5 agencies reported that they had met or exceeded that specific target. This limited progress against OMB’s optimization targets was due, in part, to agencies not fully addressing our prior recommendations in this area. In addition, we noted in the report that most agencies had not yet implemented automated monitoring tools to measure server utilization, as required by the end of fiscal year 2018. Specifically, 4 agencies reported that they had fully implemented such tools, 18 reported that they had not yet done so, and 2 did not have a basis to report on progress because they did not have agency-owned data centers. We also noted that, although federal standards emphasize the need to establish plans to help ensure goals are met, none of the 18 agencies had fully documented plans for implementing automated monitoring tools. Accordingly, we recommended that OMB formally document a requirement for agencies to include plans, as part of existing OMB reporting mechanisms, to implement automated monitoring tools at their agency-owned data centers. We also recommended that the 18 agencies without fully documented plans take action, within existing OMB reporting mechanisms, to complete plans describing how they intend to achieve OMB’s requirement to implement automated monitoring tools at all agency-owned data centers by the end of fiscal year 2018. Of the 19 agencies (including OMB) to which we made recommendations, 10 agreed with our recommendations, 3 partially agreed, and 6 did not state whether they agreed or disagreed. As of March 2018, none of the 19 recommendations had been fully addressed. As previously mentioned, in August 2016, OMB established a goal to close at least 25 percent of each agency’s tiered data centers and at least 60 percent of each agency’s non-tiered data centers by the end of fiscal year 2018. Related to doing so, agencies’ August 2016 inventories reported a total of 9,995 data centers and, in August 2017, 14 agencies reported an additional 2,067 facilities, for a total of 12,062 data centers. Based on this revised inventory, agencies will need to close 6,306 data centers (665 tiered and 5,641 non-tiered) to meet OMB’s goals by the end of fiscal year 2018. Toward this end, the 24 agencies participating in DCOI collectively have made progress on their data center closure efforts. Specifically, as of August 2017, the agencies reported that they had closed 5,805 tiered and non-tiered centers (48 percent). Figure 2 provides a summary of the total number of federal data centers and closures reported from 1998 to August 2017. Figure 3 provides a further breakdown of agencies’ data center inventories, as of August 2017, in terms of the total number of data centers that were closed, planned for closure, or not planned for closure. Nevertheless, while the agencies collectively had made progress toward OMB’s closure goals, the 24 agencies’ individual reported progress and plans showed mixed results when compared with OMB’s goal for each agency to close at least 25 percent of tiered data centers and at least 60 percent of non-tiered centers. Specifically, as of August 2017, 13 agencies reported that they had already met the goal of closing 25 percent of their tiered data centers, another 4 agencies reported that they plan to meet the goal by the end of fiscal year 2018, and 5 agencies reported that they do not currently plan to meet the goal. Further, as of August 2017, 7 agencies reported having already met the goal for closing 60 percent of their non-tiered centers, 6 agencies reported that they planned to meet the goal by the end of fiscal year 2018, and 10 agencies reported that they did not plan to meet the goal. Table 1 displays a breakdown of the number of reported tiered and non- tiered data centers and completed and planned closures by agency, as of August 2017. As shown in the table, the reported closures of Agriculture (2,233 data centers), Defense (834), and Treasury (1,713) together accounted for 4,780 (or 82 percent) of the 5,805 data center closures. However, no other agency accounted for more than 187 (or 3 percent) of those closures. In addition, the remaining 1,416 planned closures are to be carried out across 20 agencies. Further, among the agencies, 7 reported that they do not plan to meet one of their tiered or non-tiered closure goals, and 4 reported that they do not plan to meet either of the goals by the end of fiscal year 2018. Officials from these 11 agencies that do not plan to meet one or both of their goals provided various reasons for why they currently do not plan to do so. For example, officials in USAID’s Office of the Chief Information Officer stated that their agency had reported a number of server closets in overseas locations as non-tiered data centers to comply with OMB’s data center definition provided in its August 2016 guidance. The officials said that, as long as USAID maintains those locations, the agency needs the services provided in those server closets and will not be able to close them to meet OMB’s goal. However, the officials also said that the agency is exploring ways to replace the server closets using cloud services. Several agencies that viewed their goals as unattainable indicated that they were seeking revised closure goals. Specifically, officials from Interior’s Office of the Chief Information Officer stated that a number of the department’s non-tiered data centers were either mission critical or not cost effective to close. Thus, the officials said Interior was working with OMB to establish a revised closure goal. Similarly, Transportation’s Director for IT Compliance stated that the department was working with OMB to establish a revised closure goal. The department reported having 186 tiered data centers in Federal Aviation Administration control towers that it believes should be excluded from its count of data centers when OMB sets the department’s goal for closures. Further, our analysis determined that it may not always be realistic for an agency to meet OMB’s targets. For example, NSF, which does not have any tiered data centers, reported that it plans to close one (50 percent) of its two non-tiered data centers. However, the only way to meet OMB’s 60 percent threshold would be for the agency to close both of its non-tiered centers, which may not be an option, depending on the services provided by that one remaining center. Although OMB’s stated time frame for closing data centers currently remains as the end of fiscal year 2018, the recent extension of FITARA’s data center consolidation and optimization provisions through fiscal year 2020 provides agencies additional time to work toward meeting OMB’s closure targets. However, in some cases, these efforts may require significant restructuring of an agency’s business operations, or, as reported by several agencies, a revision of OMB’s goals in consideration of the agencies’ specific needs. Given that agencies had been working toward OMB’s DCOI goals for approximately one year as of August 2017, and because the extension of FITARA’s data center provisions pushes the sunset for these efforts out through fiscal year 2020, we are not making any related recommendations to those agencies that have not met the closure goals at this time. We plan to continue to monitor the agencies’ progress toward meeting the goals in our future work. Since 2013, federal agencies have been required to report on data center cost savings. In this regard, OMB provided guidance regarding how agencies were to report cost savings and avoidances. Specifically, it required agencies to report both data center consolidation cost savings and avoidances, among other areas, as part of a quarterly data collection process known as the integrated data collection. FITARA also called for each agency to submit a multi-year strategy for achieving the consolidation and optimization of data centers that includes year-by-year calculations of investment and cost savings through fiscal year 2018, which has now been extended to 2020. In addition, in August 2016, OMB M-16-19 provided guidance on how agencies should implement the requirements of FITARA. Specifically, agencies were to develop a strategic plan that included information on historical cost savings and avoidances due to data center consolidation and optimization through fiscal year 2015. This guidance stated that agency strategic plans were also to include year-by-year calculations of target and actual agency-wide spending and cost savings on data centers from fiscal years 2016 through 2018. Further, the guidance established a DCOI government-wide cost savings goal of $2.7 billion for all federal agencies to achieve from fiscal years 2016 through 2018. This overall goal is then broken down into agency-specific targets on the IT Dashboard. As of August 2017, 20 agencies had reported through the integrated data collection that they had achieved $1.04 billion in cost savings for fiscal years 2016 and 2017, while 4 agencies reported that they had not achieved any savings. Further, the 20 agencies’ DCOI strategic plans identified an additional $0.58 billion, for a total of $1.62 billion in planned savings from fiscal years 2016 through 2018. Nevertheless, this total is about $1.12 billion below OMB’s goal of $2.7 billion for DCOI savings. Figure 4 provides a comparison of the 24 agencies’ total reported savings for fiscal years 2016 and 2017, and the planned savings through 2018, against OMB’s DCOI savings goal for fiscal years 2016 through 2018. Among the 24 participating DCOI agencies that reported achieving about $1.04 billion in savings, Commerce ($594.28 million), Defense ($141.36 million), and DHS ($106.51 million) were responsible for approximately $842 million (about 81 percent) of that total. No other agency reported saving more than $54.40 million. Table 2 provides specific data related to each agency’s planned and achieved savings for fiscal years 2016 and 2017, as of August 2017. In addition, the 24 agencies reported that they have planned an additional $0.58 billion in DCOI cost savings (for a total of $1.62 billion) through fiscal year 2018. However, as noted earlier, this total is approximately $1.12 billion below OMB’s $2.7 billion goal for the initiative. Table 3 provides a more detailed comparison between each agency’s planned savings, as reported in its DCOI strategic plan, and OMB’s agency- specific targets, as reported on the IT Dashboard. As shown in table 3, 6 agencies identified planned savings that are expected to meet or exceed their OMB targets, while 2 agencies that did not have an OMB target also identified planned savings. In contrast, 12 agencies reported that they are not currently planning to meet their targets, and 4 agencies did not have a savings target and are not planning any savings. These findings align with what we reported in March 2016, when we noted that 10 agencies had not established planned cost savings goals for fiscal years 2016 through 2018, even though they had closures planned during that time period. Accordingly, in that report, we recommended that these agencies complete their planned data center cost savings targets for fiscal years 2016 through 2018. Most of the agencies agreed with the recommendations or had no comments. Nonetheless, agencies continued to be challenged in identifying and reporting their cost savings. As of August 2017, 5 of the agencies had implemented our recommendations in this area. In the absence of consistent and full reporting of fiscal years 2016 through 2018 planned savings in agencies’ DCOI strategic plans, as required by FITARA and OMB, agencies’ total planned savings will likely continue to be understated. With less than a year for agencies to meet OMB’s current planned savings targets, we are re-emphasizing the need for agencies to implement our prior recommendations related to establishing and meeting their planned data center cost savings targets. FITARA required OMB to establish metrics to measure the optimization of data centers, including server efficiency, and ensure that agencies’ progress toward meeting the metrics is made public. Pursuant to FITARA, OMB’s August 2016 memorandum established a set of five data center optimization metrics intended to measure agencies’ progress in the areas of server utilization and automated monitoring, energy metering, power usage effectiveness, facility utilization, and virtualization. According to OMB, while the server utilization and automated monitoring metric applies to agency-owned tiered and non-tiered data centers, the four remaining metrics apply only to agency-owned tiered centers. OMB’s memorandum also established a target value for each of the five metrics, which agencies are expected to achieve by the end of fiscal year 2018. OMB measures agencies’ progress against the optimization targets using the agencies’ quarterly data center inventory submission and publicly reports this progress information on its IT Dashboard. Table 4 provides a description of the five data center optimization metrics and target values. As of August 2017, 22 of the 24 DCOI agencies continued to report limited progress in meeting OMB’s fiscal year 2018 data center optimization targets identified on the IT Dashboard. As noted earlier, the remaining 2 agencies—Education and HUD—reported that they did not have any agency-owned data centers in their inventory and, therefore, did not have a basis to measure and report optimization progress. With regard to the data center optimization targets, the most progress was reported for the power usage effectiveness and virtualization metrics, with 5 and 6 agencies, respectively, reporting that they had met OMB’s targets. However, only 3 agencies or fewer reported meeting the energy metering, facility utilization, and server utilization and automated monitoring metrics. Figure 5 summarizes the 24 agencies’ progress in meeting each optimization target, as of August 2017. As of August 2017, SSA and EPA reported the most progress among the 22 agencies with a basis to report against OMB’s metrics targets— meeting 4 and 3 targets, respectively. Six agencies met either one or two targets, and 14 agencies reported meeting none of the targets. Further, of the 22 agencies, 9 were not able to report any progress against either the server utilization metric or power usage effectiveness metric, or both, because their data centers lacked the required monitoring tools to measure progress in these areas. OMB began requiring the implementation of these monitoring tools in August 2016; however, as of August 2017, these 9 agencies had not reported that they had implemented the tools at any data centers. The remaining 13 agencies reported that they had implemented the tools in at least one data center. Table 5 depicts the agencies and whether they met or did not meet each OMB target. Agencies’ limited progress against OMB’s optimization targets is due, in part, to not fully addressing our prior recommendations in this area. As discussed earlier, in March 2016, we reported on weaknesses in agencies’ data center optimization efforts, including that 22 agencies did not meet OMB’s fiscal year 2015 optimization targets. We noted that this was partially due to the agencies facing challenges in optimizing their data centers, including their decentralized organizational structures that made consolidation and optimization difficult, and competing priorities for resources. In addition, consolidating certain data centers was problematic because the volume or type of information involved required the data center to be close in proximity to the users. Accordingly, we recommended that the agencies take action to improve optimization progress, to include addressing any identified challenges. Most agencies agreed with our recommendations or had no comments. In response to our recommendation, 19 of the 22 agencies submitted documentation to us that described steps they intended to take to improve their data center optimization efforts. The planned steps included completion dates ranging between April 2016 and September 2019. Among the steps described by the agencies was developing internal scorecards to track and report on optimization progress, including progress at their component agencies, and launching more aggressive efforts to optimize data centers using virtualization and cloud computing solutions. However, as of February 2018, only 1 of the 22 agencies (Education) had fully addressed our recommendation. In addition to reporting current optimization progress on the IT Dashboard, OMB requires agencies’ DCOI strategic plans to include, among other things, planned performance levels for fiscal years 2017 and 2018 for each optimization metric. However, according to the 24 agencies’ DCOI strategic plan information as of August 2017, most are not planning to meet OMB’s optimization targets by the end of fiscal year 2018. More specifically, of the 24 agencies, only 4—Commerce, EPA, NSF, and USAID—reported plans to fully meet their applicable targets by the end of fiscal year 2018. Of the remaining agencies, 14 reported plans to meet some, but not all, of the targets; 4 reported that they do not plan to meet any targets; and—as already discussed—Education and HUD do not have a basis to report planned optimization milestones because they do not report having any agency-owned data centers. Figure 6 summarizes agencies’ progress, as of August 2017, in meeting OMB’s optimization targets and planned progress to be achieved by September 2018. The limited progress made by agencies in optimizing their data centers, combined with the lack of established plans to improve progress, makes it unclear whether agencies will be able to achieve OMB’s optimization targets by the end of fiscal year 2018. Considering that OMB is expecting at least $2.7 billion in cost savings from agencies’ optimization efforts, the ability of agencies to meet the optimization targets will be critical to meeting this savings goal. However, only four agencies are planning to meet all of their applicable targets. If the remaining agencies take steps to implement the prior recommendations we have made in this area, it should increase the likelihood that DCOI can achieve the expected benefits of optimization and the resulting cost savings. We requested comments on a draft of this report from OMB and the 24 other agencies that we reviewed. Of these, 5 agencies indicated that they agreed with our report and 20 acknowledged receiving the draft, but did not state whether they agreed or disagreed with the report. Agencies also offered various comments in support of the DCOI effort and actions taken to improve performance. Additionally, multiple agencies provided technical comments, which we have incorporated, as appropriate. The following five agencies agreed with our report: In emails received from Agriculture, Energy, VA, and NRC, the agencies agreed with the findings in the draft report. In written comments, SSA agreed with the draft report’s characterization of the agency’s DCOI efforts. SSA’s comments are reprinted in appendix II. In addition, the following 20 agencies did not state whether they agreed or disagreed with the report and offered other comments: In written comments, HUD and Transportation did not agree or disagree with the draft report. The departments’ comments are reprinted in appendices III and IV, respectively. In emails received from Commerce, Defense, Education, HHS, DHS, Justice, Labor, State, Treasury, EPA, NASA, NSF, OPM, SBA, and USAID, the agencies did not agree or disagree with the draft report. In written comments, Interior did not agree or disagree with the draft report’s findings. In addition, Interior provided a technical comment related to our calculation of the department’s achieved optimization savings for fiscal years 2016 and 2017. Specifically, the department provided updated savings figures for those years, which were based on Interior’s February 2018 quarterly submission to OMB. However, the effective date of the updated data (February 2018) is outside the scope of our review, which relied solely on data reported in August 2017, as detailed in appendix I. While we recognize the department’s efforts to ensure that its past reporting is updated and as accurate as possible, our report only presents data as reported by agencies in August 2017. Consequently, we believe that the achieved cost savings for Interior accurately reflect what the department reported at the time of our review. The department’s comments are reprinted in appendix V. In an e-mail received on March 27, 2018, GSA did not agree or disagree with the draft report’s findings, and provided comments questioning the methodology we used to determine the number of data center closures. Specifically, GSA stated that, by including facilities that are now closed in our reporting of the federal government’s inventory of 12,062 data centers, our report gives the impression that the government is currently operating 12,062 open data centers. GSA also asserted that we should include in our counts facilities identified as using cloud computing providers. In our report, we consistently state that the 12,062 data centers reflect the overall count of federal facilities identified since the launch of FDCCI in 2010. Further, we clearly identify the portion of the overall count of data centers that have since closed, or that are planned to close. By doing so, we provide a perspective of consolidation progress against the overall inventory over the past 8 years. Further, in regard to facilities using cloud providers, OMB’s August 2016 guidance specifically states that such facilities are not to be considered data centers. As such, we did not include them in our totals. Accordingly, we maintain that our methodology is reasonable and continue to believe that our report accurately reports the status of federal data center consolidation efforts. GSA also suggested that we confirm with OMB our statement that the FITARA Enhancement Act of 2017’s extension of the sunset provides agencies with an additional 2 years to accomplish the goals of DCOI. It is true that OMB has not issued guidance that extends the existing August 2018 DCOI deadlines. However, it is appropriate to note that the 2017 law extends the DCOI sunset date for the data center requirements that govern agencies. Finally, GSA expressed concern that the data on optimization metrics that we drew from the IT Dashboard were not representative of the data provided by agencies in their August 2017 quarterly submissions to OMB. Further, GSA noted that such a selection of mixed data sources may present an incomplete and inaccurate picture and recommended that we note the date on which we accessed the IT Dashboard data, note that those data are frequently updated, and specify the date of other sources of data that we used for our analysis. In this report, we present an analysis of agencies’ progress against OMB’s data center optimization metrics, using data that were taken from the IT Dashboard. These data are posted to the Dashboard after being automatically calculated from agencies’ quarterly submissions to OMB. For the purposes of this report, we pulled the data from the Dashboard a week after agencies’ August 2017 submissions were due to OMB. We then confirmed with the agencies that the data we collected were consistent with their August 2017 submissions to OMB and we labeled the data as being effective as of August 2017. We also analyzed other data from the agencies’ August 2017 quarterly submissions, such as the status of data center closures and associated cost savings, and showed the effective date of our analysis as being August 2017. Based on these actions, which are also discussed in the description of the scope and methodology of our audit work found in app. I, we believe that our presentation of the data on optimization metrics is accurate, appropriately labeled, and correctly reflects the status of agency efforts at a specific moment in time. In an e-mail received on April 18, 2018, OMB did not agree or disagree with our report, but offered several comments on our findings. Specifically, OMB noted that some agencies may be reporting their planned savings incorrectly in their DCOI strategic plans in that agencies may be reporting annual savings figures instead of the required cumulative figures. OMB further described plans to update the IT Dashboard in the near future to more accurately reflect planned DCOI savings and added that, as a result, the data in our report likely will not match the data OMB intends to publish. In conducting our analysis, on two occasions, we requested and received agencies’ validation of the results of our analysis of their planned cost savings. This process resulted in minor technical changes to some agencies’ data. We believe that our continued efforts to validate these data provide reasonable assurance as to the accuracy of the agency reported information that we analyzed. The implementation of OMB’s proposed changes to the IT Dashboard should provide yet another tool that can be used to improve how agencies report their cost savings—an important measure of DCOI’s success. Additionally, the comments noted that GAO and OMB use a different basis to calculate agencies’ data center closure targets, with OMB using a baseline inventory from the beginning of DCOI in 2016, which does not recognize changes in agencies’ inventories since that point. OMB asserted that, because GAO’s calculations account for changes in agencies’ inventories since the beginning of DCOI, OMB’s targets differ from GAO’s calculations. We recognize the difference in approach for calculating data center closures that we used, as compared to that used by OMB. As detailed in our report, when DCOI was launched in August 2016, agencies reported an overall inventory of 9,995 data centers. One year later, in August 2017, agencies reported more than 2,000 additional facilities, for a total of 12,062 centers. Because OMB’s closure targets required agencies to close a certain percentage of their data centers, basing agency goals on an outdated inventory (that did not include the additional facilities) does not give a true picture of progress towards consolidation of data centers. Conversely, our methodology (detailed in app. I) takes into account inventory growth and uses the same percentage-based closure goals defined in OMB’s guidance. Our methodology presents a more accurate status of progress based on the growth of the inventory over time. Consequently, we believe that our methodology allows us to present a reasonable status of agencies’ progress against OMB’s goals. We are sending copies of this report to interested congressional committees, the Director of OMB, the secretaries and heads of the departments and agencies addressed in this report, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VI. Our objectives for this engagement were to: (1) review agencies’ data center closures to date and plans for further closures, (2) evaluate agencies’ progress in achieving data center consolidation savings and describe plans for future savings, and (3) assess agencies’ progress against the Office of Management and Budget’s (OMB) data center optimization targets. To address the first objective, we obtained and analyzed August 2017 data center inventory documentation from the 24 departments and agencies (agencies) that participate in OMB’s Data Center Optimization Initiative (DCOI). To determine data center closures to date, we totaled agency reported closures from fiscal year 2010 through August 2017 and, to identify future closures, we totaled agency reported planned closures through fiscal year 2019. We also compared agencies’ completed and planned closures to OMB’s fiscal year 2018 consolidation goals, as documented in its August 2016 memorandum (M-16-19). To verify the quality, completeness, and reliability of the agencies’ data center inventories, we compared information on completed and planned data center closures to similar information reported on OMB’s Information Technology (IT) Dashboard—a public website that provides information on federal agencies’ major IT investments. We also checked for missing data and other errors, such as missing closure status information. Further, we obtained written responses from agency officials regarding actions taken to ensure the reliability of their inventory data, and discussed any discrepancies or potential errors identified to determine the causes or to request additional information. We determined that the data were sufficiently complete and reliable to report on agencies’ consolidation progress and planned closures. For the second objective, we obtained and analyzed cost savings and avoidance documentation from the 24 DCOI agencies. This documentation is required by OMB’s March 2013 and August 2016 memorandums and included the agencies’ quarterly reports of cost savings and avoidances posted to their digital services websites and their DCOI strategic plans. To determine cost savings achieved, we totaled agencies’ reported savings and avoidances from the start of fiscal years 2012 through August 2017, as found in the August 2017 quarterly reports posted to the agencies’ digital services websites. To identify future planned savings, we totaled the agencies’ projected savings and avoidances from fiscal years 2016 through 2018, as reported in their DCOI strategic plans. To assess the quality, completeness, and reliability of each agency’s data center consolidation cost savings information, we used the latest version of each agency’s update of the August 2017 quarterly cost savings report and DCOI strategic plan. We also reviewed the quarterly reports and DCOI strategic plans for missing data and other errors, such as missing cost-savings information. In addition, we compared agencies cost savings and avoidances with data from our most recent data center consolidation report. Further, we obtained written responses from agency officials regarding the steps taken to ensure the accuracy and reliability of their cost savings data. As a result, we determined that the data were sufficiently complete and reliable to report on agencies data center consolidation cost-savings information. For our third objective, we analyzed the August 2017 data center optimization progress information of the 24 DCOI agencies. This progress information was obtained from the IT Dashboard—an OMB public website that provides information on federal agencies’ major IT investments. We then compared the agencies’ optimization progress information against OMB’s fiscal year 2018 optimization targets, as documented in its August 2016 memorandum. Although OMB’s memorandum establishes a single optimization target value for the server utilization and automated monitoring metric, the IT Dashboard displays agencies’ progress for tiered and non-tiered data centers separately. To report consistently with OMB’s implementation memorandum, we combined the progress information for tiered and non-tiered data centers into a single assessment in this report. To assess the reliability of agencies’ optimization progress information on OMB’s IT Dashboard, we reviewed the information for errors or missing data, such as progress information that was not available for certain metrics. We also compared agencies’ optimization progress information across multiple reporting quarters to identify any inconsistencies in agencies’ reported progress. We discussed with staff from OMB’s Office of the Federal Chief Information Officer any discrepancies or potential errors identified to determine the causes. In addition, we interviewed OMB officials to obtain additional information regarding the steps taken to ensure the reliability of and validate the optimization data on the Dashboard. Moreover, we obtained written responses from agency officials regarding the steps taken to ensure the accuracy and reliability of the reported optimization progress. We discussed with agency officials any discrepancies or potential errors identified during our reviews to determine the causes or request additional information. We determined that the data were sufficiently reliable to report on agencies’ optimization progress. To assess the reliability of the DCOI strategic plans, we reviewed agencies’ documentation to identify any missing data or errors. We also compared the planned data center optimization milestones in agencies’ documentation against current optimization progress information obtained from the IT Dashboard. In addition, we discussed with agency officials any discrepancies or potential errors identified during our reviews of the DCOI strategic plans to determine the causes or request additional information. As a result of these efforts, we determined that the agencies’ strategic plan information was sufficiently reliable for reporting on plans to meet or not meet OMB’s fiscal year 2018 optimization targets. We conducted this performance audit from July 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, individuals making contributions to this report included Dave Hinchman (Assistant Director), Justin Booth (Analyst-in-Charge), Chris Businsky, Nancy Glover, Linda Kochersberger, and Jonathan Wall.", "summary": "In December 2014, Congress enacted federal IT acquisition reform legislation that included provisions related to ongoing federal data center consolidation efforts. OMB's Federal Chief Information Officer launched DCOI to build on prior data center consolidation efforts; improve federal data centers' performance; and establish goals for inventory closures, cost savings and avoidances, and optimization performance. The 2014 legislation also included a provision for GAO to annually review agencies' data center inventories and strategies. Accordingly, GAO reviewed agencies' data center closures to date and plans for further closures; evaluated agencies' progress in achieving consolidation savings and described their plans for future savings; and assessed agencies' progress against OMB's data center optimization targets. To do so, GAO assessed the 24 DCOI agencies' data center inventories as of August 2017; reviewed their reported cost savings documentation; evaluated their data center optimization strategic plans; and assessed 22 agencies' progress against OMB's established optimization targets. Two agencies did not have a basis to report planned optimization milestones. OMB and the 24 DCOI agencies provided mixed responses to GAO's findings on the progress made towards initiative goals. GAO continues to believe that implementation of the recommendations made previously will help the agencies meet OMB's targets for cost savings and optimization of performance. The 24 agencies participating in the Office of Management and Budget's (OMB) Data Center Optimization Initiative (DCOI) reported mixed progress toward achieving OMB's goals for closing data centers by September 2018. Over half of the agencies reported that they had either already met, or planned to meet, all of their OMB-assigned goals by the deadline. This would result in the closure of 7,221 of the 12,062 centers that agencies reported in August 2017. However, 4 agencies reported that they do not have plans to meet all of their assigned goals and 2 agencies are working with OMB to establish revised targets. With regard to agencies' progress in achieving cost savings, 20 agencies reported, as of August 2017, that they had achieved $1.04 billion in cost savings for fiscal years 2016 and 2017. In addition, the agencies' DCOI strategic plans identify an additional $0.58 billion in planned savings—for a total of $1.62 billion for fiscal years 2016 through 2018. This total is approximately $1.12 billion less than OMB's DCOI savings goal of $2.7 billion (see figure). This shortfall is the result of 12 agencies reporting less in planned cost savings and avoidances in their DCOI strategic plans, as compared to the savings targets established for them by OMB. The 24 agencies reported limited progress against OMB's five data center optimization targets for server utilization and automated monitoring, energy metering, power usage effectiveness, facility utilization, and virtualization. As of August 2017, 1 agency had met four targets, 1 agency had met three targets, 6 agencies had met either one or two targets, and 14 agencies reported meeting none of the targets. Further, as of August 2017, most agencies were not planning to meet OMB's fiscal year 2018 optimization targets. Specifically, 4 agencies reported plans to meet all of their applicable targets by the end of fiscal year 2018; 14 reported plans to meet some of the targets; and 4 reported that they do not plan to meet any targets. In 2016 and 2017, GAO made a number of recommendations to OMB and the 24 DCOI agencies to help improve the reporting of data center-related cost savings and to achieve optimization targets. As of March 2018, 74 of these 81 recommendations had not been fully addressed.", "document_type": "gao"}
{"report": "According to the Director of HSWL, who was appointed to the position in August 2015, financial, technical, schedule, and personnel risks led the Coast Guard’s Executive Oversight Council to decide to terminate the IHiS project in October 2015: Financial risks. Internal investigations were initiated in January 2015 and May 2015 to determine whether the HSWL Directorate had violated the Antideficiency Act by using incorrect funding sources and incorrect fiscal year funds for the IHiS project. The Coast Guard ordered project management and contractor staff to cease work on IHiS until a determination was made regarding the antideficiency violation. Technical risks. IHiS lacked an independent security assessment and full interface testing to ensure security and data integrity. In addition, key functionality for the system, such as user verification, had not been completed. Schedule risks. The HSWL Director stated that she requested that the Department of Defense’s (DOD) Defense Health Agency Solution Delivery Information Technology (IT) team independently validate the IHiS timelines and the status of the project in 2015 because of the identified technical risks and concerns as to whether the system would be ready to be piloted in the fall of 2015. According to the Director, the Defense Health Agency team projected the timeline for the first clinic implementation to be approximately 1 year later than originally estimated due, in part, to incomplete interfaces and workflows. Personnel risks. Although HSWL staff had been managing the IHiS project since it was initiated in 2010, Command, Control, Communications, Computers, and Information Technology (C4&IT) was directed to assume the oversight responsibilities for IHiS implementation in May 2015. This action was due to concerns about the project’s adherence to established governance processes raised by the internal investigators looking into the potential Antideficiency Act violations. By August 2015, the key HSWL project management personnel that had overseen the project since 2010 had been removed. As a result of the changes in staff, one vendor noted that it was unclear as to who were the stakeholders, responsible parties, and decision makers. According to an analysis conducted by the Coast Guard, which included obligations and expenditures from September 2010 to August 2017, the agency had obligated approximately $67 million for the IHiS project and, of that amount, had spent approximately $59.9 million at the time of its cancelation. In addition, over 2 years after the project’s cancelation, the Coast Guard continued to pay vendors. In this regard, it paid approximately $6.6 million to vendors between November 2017 and February 2018 to satisfy existing contractual obligations for services such as leased equipment that was damaged or missing; software licensing and support; a data storage center; and removal and shipment of equipment. Further, according to staff in Coast Guard’s Office of Budget and Programs, no equipment or software from the IHiS project could be reused for future efforts. The Coast Guard could not demonstrate that it effectively managed and oversaw the IHiS project prior to its discontinuance, and did not document and share valuable lessons learned from the failed project. Specifically, although the Coast Guard was to follow its System Development Life Cycle (SDLC) Practice Manual to guide its management and oversight of the project, the agency could not provide complete evidence that it had addressed 15 of the 30 SDLC practices we selected for evaluation. For example, the Coast Guard could not demonstrate that it had conducted IHiS system testing, although the agency granted an authority to operate (ATO) and indicated in the ATO memorandum that the system had undergone some form of testing. The Coast Guard’s SDLC specifies that system testing is to take place prior to the issuance of an ATO. Project team members provided inconsistent explanations regarding whether or not documentation existed to demonstrate the actions taken to manage and oversee the project. The absence of the various documents and other artifacts that would support the required SDLC activities raises doubts that the Coast Guard took the necessary and appropriate steps to ensure effective management of the IHiS project. Further, although the Coast Guard developed charters for various governance boards to provide project oversight and direction, the boards were not active and the Chief Information Officer (CIO) was not included as a member of the boards. Taking steps to fully implement governance boards that include the CIO will be important to the Coast Guard’s oversight efforts in implementing a future EHR system and may decrease the risk of IT project failure. Lastly, although Coast Guard officials stated that lessons learned had been identified throughout the process of developing IHiS, as of 2 years after its cancelation, the agency had not documented and shared any lessons learned from the project and did not have established plans for doing so. Until the Coast Guard takes steps to document and share identified lessons learned with individuals charged with developing and acquiring its IT systems, opportunities to protect future systems against the recurrence of mistakes that contributed to the failure of IHiS will likely be missed. In the absence of an EHR system, the Coast Guard is relying on a predominately paper health record management process to document health care services for its nearly 50,000 military members. Currently, the Coast Guard’s clinical staff perform various manual steps to process each paper health record. For example, clinical staff schedule appointments for patients using Microsoft Outlook’s calendar feature and provide the patient with paper forms for completion upon his or her arrival. In addition, clinical staff must handwrite clinical notes in the paper health record during the appointment, as well as handwrite prescriptions, among other manual processes. In response to our survey, the 12 HSWL Regional Managers identified a number of challenges that clinics and sick bays in their regions had experienced in managing and maintaining paper health records. These challenges were grouped into 16 categories. Further, the 120 clinic and sick bay administrators that subsequently responded to a separate survey reported varying degrees to which they viewed each category as challenging. Figure 1 provides the clinic and sick bay respondents’ views of the top four challenges. With regard to these top four challenges to managing and maintaining paper health records, clinic and sick bay respondents offered the following examples: Incomplete records. Ninety-eight (82 percent) of the respondents reported incomplete records as challenging. In this regard, 34 of the survey respondents reported that not all records from the Coast Guard legacy EHR systems were printed out and included in patients’ paper health records as required before the systems were retired. Thus, they had no way to ensure the patients’ paper records were complete. Penmanship. Among the 91 (76 percent) survey respondents that reported penmanship as challenging, several respondents noted that it is difficult for staff to read illegible handwritten medical notes. This, in turn, results in difficulty determining the accurate diagnosis, the required prescription, or a referral. Tracking medications. According to 89 (76 percent) of the respondents, it is challenging to track medications without an EHR. For example, one administrator stated that staff members rely heavily on patients to remember what medications they are taking—potentially causing harm if patients cannot remember what medications they are taking and the medications have dangerous interactions. Amount of time to manage records. According to 86 (72 percent) of the respondents, managing paper health records is challenging and requires more time for staff to complete and file paperwork. Several respondents stated that the size of the paper health records has increased, resulting in additional time required to review and file records. The responding clinic and sickbay administrators described a range of alternative work-around processes that they have developed to help alleviate several of the challenges. Specifically, they reported having developed additional forms, tracking methods, and alternative processes, as well as having notified Coast Guard HSWL management of the challenges they face. However, these alternative processes may not provide sustained solutions to overcoming these challenges. Until Coast Guard implements a new EHR solution, the challenges inherent in a predominantly paper process will likely remain. The Coast Guard has begun taking steps to acquire a new EHR system referred to as the Electronic Health Record Acquisition (eHRa). The Coast Guard plans to manage and oversee the acquisition of eHRa through its non-major acquisition process (NMAP), as described in its Non-Major Acquisition Process (NMAP) Manual. NMAP requires formal approval reviews at three discrete knowledge points called acquisition decision events (ADE) and includes three phases to assess the readiness and maturity of the acquisition. The Coast Guard formally identified the need for a new EHR system on February 1, 2016, and obtained approval for the first of three ADE’s on February 13, 2016. It subsequently initiated market research activities by collecting cost, schedule, and capabilities information from commercial and government solution providers, including DOD and the Department of Veterans Affairs. The Coast Guard used the providers’ responses to develop an alternatives analysis report that was completed in October 2017. The report recommended a solution based on performance, risk, cost, and schedule advantages. The report indicated that the Coast Guard plans to use the results of the alternatives analysis to refine the acquisition strategy, and to support the development of artifacts which are required to successfully achieve the ADE-2 milestone. Staff within the Acquisitions Directorate stated that they were also in the process of finalizing a life cycle cost estimate and a project plan for eHRa—documents necessary for ensuring that appropriate business decisions will be made regarding eHRa’s logistics, affordability, and resources, among other things. As of December 2017, the Coast Guard had not yet made a final determination as to which option would be chosen as the solution for the eHRa acquisition. Our report that is being released today contains four recommendations to the Coast Guard. Specifically, we recommend that the Coast Guard: expeditiously and judiciously pursue the acquisition of a new EHR ensure established processes required for the future acquisition or development of an EHR are effectively implemented and adequately documented; direct the Chief Information Officer and the Chief Acquisition Officer to establish and fully implement project governance boards for the future EHR effort that include the Chief Information Officer; and document any lessons learned from the discontinued IHiS project, share them with the new project management team, and ensure lessons learned are utilized for the future EHR effort. The Department of Homeland Security concurred with our four recommendations and identified actions being taken or planned to implement them. If the Coast Guard fully and effectively implements our recommendations, many of the challenges faced by its clinics and sick bays and the thousands of Coast Guard members utilizing its health services could be diminished. In summary, given the numerous challenges inherent with managing and maintaining paper health records, it will be important for the Coast Guard to prioritize obtaining an EHR for its thousands of members. Until a solution for its EHR system is chosen and successfully implemented, the agency is likely to continue to face these challenges. In addition, ensuring established project management and governance processes are effective, as well as documenting and sharing lessons learned, will be essential in avoiding past mistakes and helping to ensure a successful implementation of a future EHR solution at the Coast Guard. Chairman Hunter, Ranking Member Garamendi, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have. If you or your staff have any questions about this testimony, please contact David A. Powner, Director, Information Technology Management Issues, at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony statement. GAO staff who made key contributions to this statement are Nicole Jarvis (Assistant Director), Ashfaq Huda (Analyst in Charge), Sharhonda Deloach, Rebecca Eyler, Monica Perez-Nelson, and Scott Pettis. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "In 2010, the Coast Guard initiated an effort—known as IHiS—to replace its aging EHR system with a new system that was to modernize various health care services for its nearly 50,000 military members. However, in October 2015, the Coast Guard announced that the modernization project would be canceled. GAO was asked to summarize its report that is being released today on the Coast Guard's actions related to its EHR modernization initiative. GAO's testimony specifically addresses Coast Guard's (1) reasons for deciding to terminate further IHiS development; (2) management and oversight actions for the discontinued project and whether lessons learned were identified; (3) current process for managing health records and the challenges it is encountering; and (4) plans for effectively implementing a new EHR system and the current status of its efforts. In preparing the report on which this testimony is based, GAO reviewed IHiS project expenditures; analyzed key project management documentation; surveyed Coast Guard's Regional Managers and clinical staff; and interviewed key staff. Financial, technical, schedule, and personnel risks led to the United States Coast Guard's (Coast Guard) decision to terminate the Integrated Health Information System (IHiS) project in 2015. According to the Coast Guard (a military service within the Department of Homeland Security), as of August 2017, $59.9 million was spent on the project over nearly 7 years and no equipment or software could be reused for future efforts. In addition, the Coast Guard could not fully demonstrate the project management actions taken for IHiS, lacked governance mechanisms, and did not document lessons learned for the failed project. In the absence of an electronic health record (EHR) system, the Coast Guard currently relies on a predominately paper health record management process to document health care services. Currently, the Coast Guard's clinical staff perform various manual steps to process each paper health record. Coast Guard Regional Managers and clinic and sick bay administrators informed GAO of the many challenges encountered in returning to a paper process. These challenges include the inability for some clinics to adequately track vital information such as medications—potentially causing harm to members if they take medications that have dangerous interactions. To help alleviate several of these challenges, the Coast Guard has developed alternative work-around processes. However, these alternative processes may not provide sustained solutions to overcoming these challenges. In February 2016, the Coast Guard initiated the process for acquiring a new EHR system. As of November 2017, agency officials had conducted research and recommended a solution based on performance, risk, cost, and schedule advantages. However, 2 years after canceling IHiS and moving toward a predominately manual process, the agency has not yet made a final determination on this. Successfully and quickly implementing an EHR system is vital to overcoming the challenges the Coast Guard currently faces in managing paper health records. The expeditious implementation of such a system can significantly improve the quality and efficiency of care to the thousands of Coast Guard active duty and reserve members that receive health care. In the report being released today, GAO is recommending that the Coast Guard (1) expeditiously and judiciously pursue a new EHR system, and in doing so (2) ensure key processes are implemented; (3) establish project governance boards; and (4) document lessons learned from the IHiS project. The Department of Homeland Security concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "WMATA operates the nation’s second largest heavy rail transit system (Metrorail) and fifth largest bus system (Metrobus), accounting for about 1.1 million passenger trips per weekday. Metrorail runs 6 train lines connecting the District of Columbia to various locations in Maryland and Virginia. A portion of the latest addition, the Silver Line, was opened in 2014. WMATA was created in 1967 through an interstate compact— matching legislation passed by the District of Columbia, the state of Maryland, and the Commonwealth of Virginia, and then ratified by Congress—to plan, develop, finance, and operate a regional transportation system in the National Capital area. A board of eight voting directors and eight alternate directors governs WMATA. The directors are appointed by the District of Columbia, Virginia, Maryland, and the federal government, with each appointing two voting and two alternate directors. WMATA’s operating revenues from rider fares, parking fees, and paid advertisements, do not cover its annual costs, so it relies on year-to-year funding commitments from Maryland, Virginia, and the District of Columbia, and various forms of federal funding to cover gaps in its capital and operating budgets. WMATA’s operating budget covers personnel costs and contracted services; in fiscal year 2017 about 75 percent of its $1.8 billion operating budget went to personnel costs. WMATA’s capital budget, which covers short-term maintenance and long-term capital projects, totaled $1.2 billion in fiscal year 2017. In 2018, Maryland, Virginia, and the District of Columbia each passed legislation to provide additional recurring annual funding to WMATA generally for capital purposes, totaling $500 million annually across the 3 jurisdictions. In recent years, WMATA added new rail service while also experiencing declines in ridership. From fiscal years 2006 through 2017, WMATA increased Metrorail service about 23 percent as measured in total railcar revenue service miles, or the miles traveled when the vehicle is in revenue service; WMATA increased Metrobus service slightly, by about 4 percent. Over this same time, ridership declined—by about 17 percent on Metrorail and 12 percent on Metrobus. (See fig. 1). WMATA attributes this ridership decline to multiple factors, including growth in telecommuting, the expansion of alternative transportation options, and a decline in service quality and reliability. In addition, between June 2016 and June 2017, WMATA completed SafeTrack, a large-scale accelerated maintenance program that suspended service on portions of Metrorail, resulting in delays and additional ridership declines. WMATA’s workforce is composed of bus and rail operations staff, as well as managers, administrators, law enforcement, and others. In September 2017, after reducing its workforce by eliminating 6 percent of its 13,000 positions, WMATA reported that it had 12,217 employee positions across 6 different employee groups, of which 11,341 were filled. Most WMATA employees—83 percent—are represented by one of WMATA’s five unions, depending on the employees’ positions. The Amalgamated Transit Union Local 689 is the largest union, representing 67 percent of WMATA employees (see table 1). Each union negotiates its own terms on wages, salaries, hours, working conditions, and pensions or retirement, and generally documents these terms in its collective bargaining agreement. WMATA provides a defined benefit pension for almost all of its represented employees and for non-represented employees hired before January 1, 1999. In these pension plans, the benefit a retiree receives is generally based on the retiree’s age and/or years of service and compensation, which may include overtime wages for represented employees. WMATA’s annual contributions to its pension plans are invested in portfolios that include stocks, bonds, and real estate to fund future pension benefits. The Local 689 pension plan is WMATA’s largest, and covered 80 percent of all WMATA pension plan members in fiscal year 2017. Each of the five pension plans is governed by a separate group of trustees responsible for administering the plan. The trustees are composed of a mix of members selected by WMATA and by the respective union or employee group. For example, the trustees for the Local 689 plan include three appointed by WMATA and three by Local 689. WMATA makes payments for four defined benefit retiree health plans. These plans generally cover Local 689 employees, Local 2 employees, Metro Transit Police, and Metro Special Police, in addition to non- represented employees. According to WMATA officials, WMATA’s four retiree health plans are “pay-as-you-go,” meaning WMATA pays for benefits as they become due each year, and funds necessary for future benefits are not accumulated. WMATA’s total workforce costs—composed of wages, salaries, and benefits for current and retired employees—increased modestly in inflation-adjusted dollars (on average by about 3 percent annually) from fiscal years 2006 through 2017. This modest increase reflected small increases in wage and salary costs and substantial increases in employee and retiree benefit costs. In particular, WMATA’s required annual contributions to its pension plans increased by an annual average of almost 19 percent and were WMATA’s fastest growing workforce cost component from fiscal years 2006 through 2017. The possibility of further increases in the costs of WMATA’s pension plans poses significant risk to the agency’s financial operations, yet WMATA has not fully assessed these risks. WMATA’s total workforce costs increased by about 3 percent annually on average between fiscal years 2006 and 2017 in inflation-adjusted fiscal year 2017 dollars, with wages and salaries increasing an average 1.1 percent per year, from $645 million in 2006 to $728 million in 2017. These costs grew at a slower rate than the costs of contracted services (7.3 percent annually on average) and employee and retiree benefits (5.6 percent annually on average), as discussed below (see table 2). The total number of employees WMATA budgeted for each year (authorized positions) grew slightly faster than wages and salaries—about 2 percent per year on average—increasing from 10,451 in 2006 to 13,032 in 2017, with similar growth in the number of occupied positions. Wages and salaries increased at a slower rate than WMATA’s workforce in part because, according to WMATA officials, non-union employees did not receive a salary increase for several of these years. In contrast, employees represented by one of WMATA’s five unions generally received annual wage and salary increases, as laid out in their collective bargaining agreements. WMATA officials also estimated that since 2008, between about 10 and 14 percent of its annual wage and salary costs were composed of operating overtime. WMATA officials stated that operating overtime is used to fill gaps in schedules or staffing in positions that have high vacancy rates, such as Metro Transit Police. While wage and salary costs increased modestly, the cost of WMATA’s contracted services more than doubled from fiscal years 2006 through 2017. During this time contracted services costs increased more than 7 percent per year on average, from $123 million in fiscal year 2006 to $267 million in fiscal year 2017. WMATA officials reported large increases during this period in repair and maintenance, custodial services, professional and technical services such as attorneys and management consultants, and WMATA’s MetroAccess contract that provides paratransit door-to-door service for riders unable to use bus or rail. WMATA officials attributed these increases to several factors. First, they stated that paratransit service ridership and the contractor cost per trip have increased. The officials estimated that providing paratransit service currently costs WMATA about $50 per passenger trip. Second, WMATA officials said adding five new Silver Line stations resulted in increases in contract costs because some of the services already provided by contractors, including custodial services and some track work, were extended to the new stations. Third, WMATA officials said they have been using more contractors in recent years to control costs and improve efficiency. For example, they stated they may use contracts to address problems such as a backlog of track inspections because they can procure contractors to complete the work more quickly than they could with current WMATA staff who would have to be pulled away from other duties or new WMATA staff who would have to be hired and trained. From fiscal years 2006 through 2017, WMATA’s annual costs for its employee and retiree benefits increased substantially in inflation-adjusted fiscal year 2017 dollars. Employee and retiree benefit costs—which include benefits for current employees, such as health care and vacation, and benefits for retired employees such as pensions and health care— increased at an average annual rate of 5.6 percent, from $327 million to $593 million (see table 2 above). These cost increases are reflective of substantial increases in the amount WMATA contributed to its pension plans. These costs increased by an average of 18.9 percent annually, from $25 million in fiscal year 2006 to $168 million in fiscal year 2017. WMATA payments for retiree health benefits increased less dramatically, on average 2.7 percent per year from fiscal years 2008 through 2017($39 million to $49 million). (See fig. 2). WMATA officials attributed increases in employee and retiree benefit contributions to multiple factors including market losses to pension assets incurred after the 2007–2009 financial crisis and an increase in the cost of providing healthcare benefits. Despite paying more for its retiree pension and health plans since 2006, in fiscal year 2017 WMATA had large unfunded retiree health and pension liabilities. Unfunded liabilities are the estimated value of the amount of additional assets, beyond any existing plan assets, that would be required to fully fund accrued liabilities of a plan. The assets of WMATA’s pensions largely consist of investments in stocks, bonds, and real estate. Unfunded liabilities are similar to other kinds of debt because they constitute a promise to make a future payment or provide a benefit. According to WMATA’s fiscal year 2017 Comprehensive Annual Financial Report, WMATA’s pension plans were underfunded by $1.1 billion for fiscal year 2017, of which $814 million was attributed to WMATA’s largest pension plan—Local 689. In contrast, WMATA’s four retiree health plans were pay-as-you-go during fiscal years 2006 through 2017, meaning WMATA’s annual plan contributions were benefit payments for retirees each year in that period. Since WMATA did not make contributions to prefund retiree health benefits, funds necessary for future benefits were not accumulated as assets. As a result, the entire accrued liability was an unfunded liability, and WMATA’s four retiree health plans were unfunded by over $1.8 billion in fiscal year 2017. WMATA officials said they have made several changes to reduce unfunded pension and retiree health liabilities through negotiations with WMATA’s unions. For example, in 2014, Local 689 employees began contributing a portion of their compensation (1 percent) to the Local 689 pension plan. This amount increased to 3 percent in 2015. Local 689 employee contributions reported for fiscal year 2017 were about $22 million, which was about 17 percent of the $127.5 million reported for WMATA’s contribution to their pension plan for that year. In addition, according to WMATA’s fiscal year 2017 Comprehensive Annual Financial Report, non-represented and Local 2 employees hired on or after January 1, 1999 are not eligible for the defined benefit pension plan. WMATA also reported that Local 689 and Local 2 employees hired on or after January 1, 2010, Metro Special Police hired after February 25, 2016, and non- represented employees hired after January 1, 2017 are not eligible for retiree health benefits. Most recently, WMATA created a trust to fund WMATA’s retiree health benefits and invested $3 million in the trust. WMATA’s pension plans, due to their relative size and maturity and investment decisions, pose a particular risk to WMATA’s financial operations: Relative size and maturity: The size of WMATA’s pension plans and the overall maturity of the plans’ participants pose a combined financial risk to WMATA. WMATA’s pension plans assets and liabilities are large relative to its business operations. For example, in fiscal year 2017, WMATA’s pension assets ($3.6 billion) were about 5 times more, and its pension liabilities ($4.7 billion) about 6.5 times more than its annual wages and salaries ($728 million). Because of their relative size, changes in the value of these assets or liabilities— for example, as a result of underperforming investments or revisions to actuarial assumptions—could significantly affect WMATA’s operations. In addition, WMATA’s pension plans are considered “mature” by actuarial measures, meaning, for example, that they have a high proportion of retirees compared to active members. A 2017 WMATA Board of Directors Pension Subcommittee report indicated that if WMATA’s assumed rate of return across all five plans decreased from 7.66 percent to 7 percent, WMATA’s required annual pension contribution would increase $42 million, a 26 percent increase, from 22 percent of wages and salaries ($160.7 million) to about 28 percent of wages and salaries ($203 million). Investment decisions: WMATA’s pension plans assume higher rates of return than state and local pension plans generally do, according to a recent National Association of State Retirement Administrators report. For the 2017 plan year, WMATA’s largest pension plan had an assumed rate of return of 7.85 percent per year, and the weighted average assumed rate of return for WMATA’s five plans combined was 7.66 percent. The average assumed rate of return among the largest state and local government plans was 7.52 percent in 2017, and dropped to a planned 7.36 percent for fiscal year 2018. If WMATA’s pension plan assets return significantly less than assumed, WMATA’s unfunded liabilities will be higher than anticipated, potentially resulting in a spike in required contributions, as occurred in the years following the 2007-2009 financial crisis (see fig. 2 above). WMATA’s pension plans are largely invested in the stock market, which also poses risk. For example, according to a November 2017 report to WMATA’s Board of Directors Pension Subcommittee, 69 percent of WMATA’s plan assets across all five pension plans were invested in the stock market, and only 18 percent in fixed income or cash. Investing in assets such as stocks may increase expected investment returns, but it also increases risk because stock returns are more volatile than investments in high quality bonds that provide a more stable rate of return. In addition, with its mature plans, WMATA faces a shorter time horizon before benefits for its retirees and older workers will become due, leaving less time to recover from investment shortfalls. According to literature on challenges facing U.S. pension plans, plans should take on less risk as they become more mature. This is because investment losses—and corresponding required increases in contributions—can potentially be a high percentage of wage and salary costs, with less time to make adjustments. As described above, WMATA’s pension plans are considered mature, yet they still have a high percentage allocated to risky assets. Although WMATA recently hired a consultant to complete a high-level review of its pensions, it has not fully assessed the risks of its five pension plans to the agency’s financial operations. In 2016 and 2017 WMATA hired a consultant to provide an overview of its five pension plans, including reviewing the plans’ funding strategies and performance. However, the stated purpose of these reports did not include an assessment of risk, and the reports included only limited analysis of the various risks facing WMATA from the plans, for example forecasting WMATA’s pension contributions over the next 10 years, but only under one scenario. In addition, WMATA provided us with analyses conducted by an actuary for each of its five pension plans, which included some limited risk analysis for three of the five pension plans, and no risk analysis for the other two plans, including the Local 689 plan—WMATA’s largest. Neither WMATA nor the trustees for the Local 689 plan have fully assessed the risks of that plan. WMATA’s Office of Internal Compliance has developed a process to periodically assess risks across the agency, known as an Enterprise Risk Management Program, and reported that pension risks could be assessed within this framework. However, WMATA has not yet assessed the fiscal risks from its pension plans within this program. WMATA officials said they are in the process of identifying risks to include in this program for 2019. The internal control standards WMATA follows state that organizations should identify, analyze, and respond to risks related to achieving their objectives. Further, a Society of Actuaries Blue Ribbon Panel reported that it is important for stakeholders—such as trustees, funding entities, plan members, union officials, and, in WMATA’s case, its Board of Directors—to have comprehensive information about the current and expected future financial position of pension plans and the extent of risks facing pension plans. According to the Blue Ribbon Panel, this information should include, among other things, “stress testing,” which projects a plan’s financial outcomes under adverse scenarios. WMATA officials told us that WMATA has not fully assessed pension risks because WMATA’s management does not have control over decisions related to the risks its pension plans take. For example, WMATA officials told us that given that both asset-allocation and investment-return assumptions are the purview of plan trustees who are required to act independently, WMATA has left the decision to determine if risk analysis is necessary to the individual plans’ trustees. WMATA officials stated that even if they were to identify risks, there are not many actions WMATA management could take to change them because trustees have ultimate control over the plans’ investment decisions. However, the investment risks taken by the pension plans’ trustees ultimately affect the amount that WMATA is required to contribute, and assessing those risks could help WMATA better anticipate its required future pension contributions. Without a comprehensive assessment of these risks, WMATA and its stakeholders—such as its Board of Directors—are limited in their ability to prepare for economic scenarios that could ultimately increase the amount WMATA is required to contribute to its pension plans. In addition, if disappointing market returns were the result of a broader economic downturn, WMATA’s revenues—such as those from local jurisdictions— could decline at the same time as higher pension contributions were required. For example, as noted earlier, if WMATA’s pension plans’ assets of $3.6 billion return significantly less than assumed, WMATA could experience a spike in required contributions, as it did in the years following the 2007–2009 financial crisis. Such a spike would further constrain WMATA’s operating budget, and potentially jeopardize its ability to pay for pension contributions or provide transit service. Moreover, without a comprehensive assessment of these risks under various scenarios, WMATA may lack useful information to develop risk mitigation efforts and to inform its collective bargaining negotiations about pay and benefits. Such information would also be useful to WMATA to inform its Board of Directors, and the jurisdictions that fund WMATA, about the impact that adverse economic scenarios could have on WMATA’s ability to provide future service at anticipated funding levels. WMATA identifies the staffing levels it needs each year through its annual budgeting process, but does not have a strategic process to identify and address its long-term workforce needs to meet the agency’s goals. For example, in preparing the annual budget request for the Board of Directors, WMATA officials identify the number of staff needed in individual departments the following fiscal year. However, WMATA does not have a process for identifying and addressing agency-wide workforce needs beyond one year or in relation to agency-wide goals, contrary to leading practices. In addition, WMATA has some workforce development programs, including some that are piloted or planned, but these programs are not based on an agency-wide assessment of the skills the agency needs to meet its strategic goals. Instead, WMATA’s workforce development programs are directed to short-term needs such as filling vacancies. WMATA officials identify staffing levels needed by individual departments annually, in preparation for WMATA’s annual budget. The annual budget, once approved by WMATA’s Board of Directors, sets a ceiling for the number of positions WMATA can employ in the next fiscal year. For example, in fiscal year 2016, WMATA was authorized to fill up to 13,032 positions in fiscal year 2017. WMATA officials told us that each department, such as Rail Services or Bus Services, estimates the number of positions they will need to meet their mission the following fiscal year. According to WMATA officials, this estimation is based in large part on the number of positions allotted to them in the previous fiscal year. WMATA officials said the budget office assembles this department-level data into WMATA’s agency-wide budget request for the board of directors. WMATA’s recent restructuring of its workforce was also guided by the annual budget process. Beginning in June 2016 in preparation for the fiscal year 2018 budget proposal, WMATA eliminated 800 positions, most of which were vacant. To identify these positions, WMATA’s General Manager directed department heads to help identify any positions that were redundant or obsolete. WMATA officials reported that 637 of the 800 positions eliminated were already vacant, and of the 163 occupied positions most were reassigned to other existing positions. Ultimately, WMATA terminated 62 employees during this time for an estimated savings of $7.3 million (about $116,000 per employee in salary and benefits). Although WMATA estimates departmental staffing needs annually, WMATA officials said the agency does not have a process for identifying the agency’s long-term workforce needs. Instead, officials said that each department typically completes a 3-year business plan through which it may identify the number of employees needed over that period. However, none of the 8 department business plans that we reviewed for calendar years 2017 through 2019 identified the number of employees needed. Further, WMATA’s Chief Operating Office business plan identified the lack of long-term workforce planning as a risk to the office’s ability to meet its core organizational goals. WMATA’s four organizational goals are creating a safety culture and system, delivering quality service, improving regional mobility, and ensuring financial stability and investing in people. According to leading human capital practices we have previously identified, agencies should have a strategic workforce planning process that identifies the workforce, including full-time, part-time, and contracts, needed to meet the agency’s strategic goals now and in the future. Strategic workforce planning helps an agency align its human capital program with its current and emerging mission and ensures that it will have the workforce it needs to accomplish its goals. According to these leading practices, the first step of strategic workforce planning is for top management to set a strategic direction for the agency’s workforce planning efforts, and to involve employees and other stakeholders in the development and communication of these efforts. WMATA does not have a strategic workforce planning process that would address its workforce needs beyond the next fiscal year because it has not prioritized that effort. WMATA officials told us they were interested in creating a strategic workforce plan, and had made previous plans to do so. Specifically, WMATA’s 2013–2025 Strategic Plan reported that the agency was creating a “Strategic Human Capital Plan” that would have developed long-term workforce planning strategies. However, WMATA officials told us that the Strategic Human Capital Plan was never completed due to other, competing priorities such as filling vacant positions and addressing other workforce issues in the upcoming budget. Without a strategic workforce planning process to establish a long-term direction for its workforce, WMATA does not have a clear plan for how it will acquire, develop, and retain the workforce needed to achieve its strategic goals of creating a safety culture, delivering quality service, improving regional mobility, and financial stability. Further, without such a process, WMATA lacks reasonable assurance that its short-term annual budget requests for staff, including the recent restructuring, will move the agency toward these strategic goals. WMATA officials told us they have some established workforce development programs, and others piloted or planned. For example, WMATA currently has three specialized recruitment programs to identify qualified veterans, Latinos, and persons with disabilities for WMATA positions. WMATA also provides targeted training for employees such as “principles of supervision” for all new supervisors. WMATA officials told us the agency is also developing a “People Strategy,” which will include multiple workforce development programs for certain entry-level workers and managers to improve their skills and help them to advance in the agency. One component of the People Strategy will be to establish a program to identify and train “high-potential” staff for leadership positions. Although WMATA has some limited workforce development programs, these programs are not based on an agency-wide assessment of skill and competency gaps. According to the COSO internal control standards and leading practices we have previously identified, once an organization’s leadership sets a strategic direction for workforce planning efforts, it needs to conduct a “workforce gap analysis”—a data-driven assessment of the critical skills and competencies the agency will need to achieve its current and future goals. Agencies can use different approaches for this analysis. One example is using information on retirements and attrition to identify future gaps in staffing or skills. Another is “scenario planning” in which an agency identifies how its activities might change in scope and volume in the next 5 years, and then identifies gaps in skills and competencies needed to fill the likely scenarios, rather than planning to meet the needs of a single view of the future. An agency can then develop strategies that are tailored to address any gaps between the skills and competencies they need and the ones they already have. WMATA officials reported that they identify workforce gaps by tracking vacancy rates (percentage of budgeted positions that are vacant) and consulting department leaders about employees departing or retiring. However, WMATA officials said they do not monitor trends in agency- wide retirements and had not projected the number of employees eligible to retire in the future—essential components of a data-driven workforce gap analysis. In comparison, officials from four of the five similar transit agencies we interviewed project the percentage of staff who are eligible to retire in the future, ranging from 3 to 10 years. WMATA officials said the agency has not conducted an agency-wide assessment of its skill and competency needs because it has been more reactive than proactive in response to attrition and retirements and relied on promoting staff to higher-level positions to fill vacancies. For example, until 2017, WMATA had a Superintendent Succession Planning Program, which was designed to prepare bus and rail employees for management roles. WMATA officials reported that this program was initiated in 2009 but is currently on hold as the agency develops its People Strategy. WMATA officials said they plan to implement a different succession planning program, which will offer financial incentives for some managers to transfer knowledge to staff before they retire, as part of the People Strategy. However, without conducting a data-driven assessment of the critical skills and competencies WMATA needs to fill any gaps and achieve its strategic goals, WMATA lacks complete information on where the gaps in its workforce lie, and if its workforce development programs are addressing those gaps or ultimately moving the agency closer to its strategic goals. WMATA has implemented two performance management systems to cover its various employee groups, but these systems lack some key elements of an effective performance management system. Specifically, WMATA has linked employee performance to pay for some employees; however, WMATA’s performance management systems do not (1) consistently align employee and agency goals or assign responsibilities, (2) make meaningful distinctions in performance, or (3) consistently use competencies to identify the behaviors individual employees need to contribute to strategic goals. In addition, WMATA does not have sufficient controls to ensure that performance reviews are complete, accurate, and submitted within established timeframes and does not use performance management information to track progress towards strategic goals. WMATA has implemented two performance management systems that cover all employees: PERFORMetro for non-represented staff and staff represented by Local 2, Fraternal Order of Police, or Local 639; and Performance Conversations for staff represented by Local 689 or Teamsters Local 922. The features of the PERFORMetro and Performance Conversations systems vary somewhat in terms of the frequency of performance reviews, the use of objectives to assess performance, and other characteristics (see table 3). WMATA links pay increases to positive performance for some employees under PERFORMetro, a key element of effective performance management. For example, Metro Special Police must earn a solid performer or better rating to be eligible for salary increases. We have previously noted that high-performing organizations seek to create pay systems that clearly link to employee contributions. WMATA does not link pay to performance for employees who fall under Performance Conversations. Pay increases for these employees—who are represented by two of the largest unions at WMATA—are determined by years of service as described in the collective bargaining agreements. WMATA officials said they had considered linking some pay to performance in the past, but had not pursued this since they believe any changes to how pay is awarded would have to be negotiated between WMATA and each respective bargaining unit. Although WMATA has linked individual performance to pay for some employees, the design of WMATA’s performance management systems lacks three additional key elements of an effective performance management system as identified in our prior work and internal control standards followed by WMATA. Those key elements are: aligning employee and agency goals and identifying responsibilities making meaningful distinctions in performance, and using tailored competencies to define needed skills and behaviors. Aligning employee and agency goals and identifying responsibilities: PERFORMetro is not designed to align individual employee performance with all of its strategic goals. While Performance Conversation forms guide supervisors to discuss the employees’ performance in relation to each of WMATA’s four strategic goals, supervisors under PERFORMetro are required to evaluate employees on individual performance objectives that are aligned with three of these goals. Supervisors under PERFORMetro are not required to evaluate employees on a performance objective aligned with WMATA’s fourth strategic goal—improving regional mobility. WMATA officials told us it is up to individual supervisors to determine whether to evaluate an employee on the fourth strategic goal. Of the 50 performance reviews we assessed, we observed one that aligned an employee’s performance objectives with the organizational goal of improving regional mobility. According to leading performance management practices we previously identified, aligning individual performance objectives with organizational goals helps individuals see the connection between their daily activities and the organization’s goals. Without a mechanism in place to do this for PERFORMetro staff, WMATA may not know how these employees are contributing to increasing regional mobility, and employees may not know how they are performing relative to this goal. In addition, WMATA has not consistently identified how its performance management systems support its overarching strategic goals or assigned responsibilities for implementing these systems. While WMATA issued a staff memo in April 2016 that identified a goal for Performance Conversations—to ensure that employees understand how their performance supports Metro’s strategic goals—WMATA has not done so for PERFORMetro. In addition, none of the performance management documents we reviewed clearly assigned authority or defined responsibilities for implementing either PERFORMetro or Performance Conversations. According to the COSO internal control standards, setting program goals is a key part of the management process, and program- level goals should cascade from agency-level goals. Additionally, these standards include establishing policies and procedures that effectively document a program’s design, delegation of authorities, and assignments of responsibilities. Making meaningful distinctions: WMATA’s performance management systems are not designed to make meaningful distinctions in performance. According to leading performance management practices, the organization’s leadership should make meaningful distinctions between acceptable and outstanding performance of individuals. However, both of WMATA’s performance management systems lack clear definitions for supervisors and employees to use in assessing performance. For example, WMATA leaves it up to employees and their supervisors to identify and define many of the objectives on which employees under PERFORMetro are evaluated. WMATA officials said this provides supervisors some flexibility to account for the responsibilities of employees in different positions. However, the result is that two employees performing the same functions may be evaluated on different objectives, making it difficult to distinguish their performance. Further, under PERFORMetro supervisors are required to rate employees on each objective as “met,” “did not meet,” and “exceeded,” but WMATA does not provide definitions for these categories for each objective. As a result, two employees rated under PERFORMetro could receive different ratings for comparable performance. In addition, for employees under the Performance Conversations system, WMATA does not require supervisors to rate employee performance. Rather, officials told us that WMATA implemented Performance Conversations as a way to encourage more positive, performance-based interactions between employees and management that expanded beyond discipline. WMATA has a discipline-based program for most employees under Performance Conversations (Local 689 bus and rail operations employees and Local 922 bus operators) that establishes standards of conduct these employees must adhere to, and identifies penalties if they do not. This discipline-based program lays out the penalties for violations of employee standards of conduct such as speeding or failing to stop at a red signal. The penalties for conduct violations range from written warnings, to suspensions, to termination. Using competencies tailored to each position: WMATA’s performance management systems do not consistently use competencies to identify the behaviors individual employees are expected to contribute to strategic goals. Although WMATA has established competencies as part of its PERFORMetro system, these competencies are defined in a uniform manner that does not reflect the varied job responsibilities of its employees. Inclusion of such competencies tailored to each position’s responsibilities is a leading practice for an effective performance management system. Competencies, which define the skills and supporting behaviors that individuals are expected to exhibit to carry out their work effectively can provide a fuller picture of an individual’s performance. WMATA defines four competencies for all employees under PERFORMetro—”focuses on safety,” “serves customers,” “accountability,” and “teamwork.” However, these competencies are defined in the same way for all employees under PERFORMetro and are not based on the job responsibilities of each position. For example, WMATA assesses the performance of individuals performing different job functions—such as administrative staff and police officers—by the same competencies and without consideration for how skills and behaviors vary by job function. As such, some portions of the competency descriptions are not applicable to all employees. For example, all PERFORMetro employees are evaluated on the extent that they wear required personal protective equipment and/or clothing, but this may not apply to someone in accounting or human resources. WMATA officials said they are aware of this, and that supervisors choose which portions of the competency descriptions to apply to their employees. Finally, WMATA officials said they do not include competencies for employees under Performance Conversations because Performance Conversations are intended to promote performance discussions, not to evaluate employee performance. However, without competencies tailored to employees’ positions, supervisors are limited in their ability to assess employee performance. WMATA’s performance management systems lack key elements of an effective performance management system in part because the agency has not established comprehensive policies and procedures, as called for by COSO, for its performance management systems. Instead, the agency relies on piecemeal documents—such as staff memos and training—and individual supervisors to define and carry out performance management. By establishing comprehensive policies and procedures that document key elements, such as defined objectives and rating categories, WMATA would be better positioned to assess staff performance and ensure performance management is consistently implemented across supervisors. Additionally, WMATA would be better positioned to use its performance management systems to move employees toward achieving its strategic goals. We found that, in implementing its most recent performance evaluation cycle, WMATA’s reviews of employee performance were often incomplete, inaccurate, or untimely. First, officials said that they do not routinely collect or retain the forms for its Performance Conversations and that accordingly, WMATA does not know the extent to which these reviews were completed. Second, in our review of a non-generalizable sample of 50 PERFORMetro performance evaluations for fiscal year 2016, we found that WMATA supervisors frequently submitted evaluations that were incomplete, inaccurate, or not submitted within established timeframes. Specifically: 25 of the 50 selected files we reviewed were missing either the employee’s or supervisor’s signature required on the initial expectations setting portion of the form; 3 of those 25 files were also missing a required signature on the final review portion of the evaluation form, which provides assurance that the performance evaluation was completed; 10 of the 50 selected files we reviewed were scored incorrectly and thus assigned a performance rating inconsistent with the supporting review. WMATA determines an employee’s final rating based on scores tabulated by supervisors for an employee meeting his or her objectives and demonstrating competencies. Specifically, employees receive separate ratings for objectives and competencies, which are then combined together to yield a final overall rating of “role model,” “solid performer,” or “improvement required”. We found tabulation errors in 10 of the files where, for example, a “solid performer” was given a “role model” rating. Without accurate information about employee performance, WMATA may not be able to recognize employees’ achievements or address potential performance challenges. 22 of the 50 selected files we reviewed were not submitted on time according to timeframes established in a 2016 WMATA staff notice and a 2017 agreement between WMATA and one of its unions. This includes 9 files of employees not represented by a union, 5 law enforcement staff files, and 8 Local 2 staff files. Local 2 officials told us they filed a grievance following delayed performance reviews for its members. Pursuant to the grievance, Local 2 officials signed an agreement with WMATA that if a supervisor does not submit a scheduled performance evaluation within 30 calendar days of a Local 2 employee’s anniversary date, that employee will receive an automatic solid performer rating and any associated pay or step increase. COSO internal control standards state that management should establish control activities, such as policies and procedures, to achieve its goals. Examples of control activities include management reviews and controls over information processing, among other things. A specific type of control activity is a “transaction control,” which helps management ensure that all transactions (in this case, performance reviews) are completely captured, accurate, and timely. Transaction controls may include authorizations or approvals by a higher level of management, or verifications to compare transactions to a policy and then follow-up if the transaction is not consistent with the policy. In the case of WMATA’s performance reviews, this could include comparing a list of employees who should have received a performance review per WMATA policy to a list of the reviews that were submitted to the human resources office. We found that WMATA does not have sufficient controls in place to ensure that supervisors accurately complete performance reviews and submit them to the human resources department within established timeframes. WMATA human resources officials said that for the 2016 review cycle, they emailed a report to supervisors listing year-end performance reviews that were due within 90 days, but did not subsequently ensure that they were completed correctly and on time. Officials said that once supervisors emailed these reviews to the human resources department, human resources staff manually recorded these reviews into WMATA’s personnel information system. WMATA officials told us that human resources staff examined the performance reviews for completion and accuracy. Despite this process, WMATA officials could not provide us reliable information on the number of 2016 performance reviews that were completed, and as previously mentioned, said they did not routinely collect or retain Performance Conversations forms. WMATA officials said they have plans to upgrade their current performance management information technology system, but descriptions of the upgrade that WMATA provided to us do not identify how the upgrade will address the issues we identified. Without controls to ensure that supervisors submit complete, accurate, and timely performance reviews, WMATA lacks information on the performance of its workforce, and employees lack information needed to improve performance. WMATA officials told us that they do not have a process to use information from their performance management systems to identify performance gaps, or pinpoint improvement opportunities. We have previously identified that routinely using performance information to track individual contributions to organizational priorities, and then requiring follow-up actions to address gaps, are key performance management practices. This approach allows an agency to use its employee performance information to monitor progress towards its strategic goals. Officials from two transit agencies we spoke to told us they use information from their performance management systems to track performance gaps related to strategic goals. For example, Chicago Transit Authority officials told us that they evaluate employees on competencies related to the organization’s strategic goals of safety, customer service, and teamwork, and then aggregate performance review information to assess the organization’s performance on these goals. WMATA does not make use of employee performance information in part because it has not developed a process to do so. Without a documented process to use employee performance management information to monitor progress on its strategic goals, WMATA may miss opportunities to identify and follow-up on performance gaps and to make full use of the information collected through its performance management systems. WMATA transports more than 1 million passengers each weekday, making it central to the mobility and productivity of the nation’s capital. Recent safety incidents and declines in ridership place additional pressure on WMATA to effectively manage its most expensive resource— its workforce. If increases in WMATA’s workforce pension costs continue to outpace increases in WMATA’s other workforce costs, WMATA will be under greater pressure to manage its costs and balance competing priorities. A comprehensive assessment of the fiscal risks these pension investments could pose to WMATA could help it prepare for various economic scenarios and ensure that it can continue to provide benefits to its employees without having to compromise future service to riders to pay for these benefits. Effective workforce planning could also help WMATA by ensuring that WMATA has the people and skills it needs to achieve its goals of safety, customer service, financial stability, and regional mobility now and in the future. Establishing a strategic workforce planning process that involves employees and other stakeholders, and that uses data on WMATA’s workforce to assess competency and skill gaps would provide WMATA with critical information that could help it address any identified gaps and ultimately move it closer to its strategic goals. With effective employee performance management, WMATA also would be better positioned to achieve its goals by explicitly aligning them with the daily tasks of its employees. By establishing comprehensive policies and procedures for its performance management systems that align employee performance objectives with WMATA’s strategic goals and define performance objectives, rating categories, and competencies, WMATA will be better able to steer employees towards behaviors that support the agency’s goals and away from behaviors that do not. Further, establishing controls for supervisors to submit complete, accurate, and timely performance reviews would help ensure that staff receive information needed to improve their performance. Finally, a documented process to make use of the performance information WMATA collects could help it track progress in meeting its organizational goals and identify and address performance gaps. In light of WMATA’s uncertain financial future, improvements in WMATA’s workforce planning and performance management could better position WMATA to navigate that future. We are making the following five recommendations to WMATA: 1. WMATA’s General Manager should conduct a comprehensive assessment of the financial risks to which WMATA is exposed from its pension plans and communicate the results to its pension plan trustees and other stakeholders, such as its Board of Directors. This assessment should include information about WMATA’s current and potential future required payments and unfunded liabilities, including under potentially adverse economic scenarios. (Recommendation 1) 2. WMATA’s General Manager should develop a strategic workforce planning process that (1) sets a strategic direction for WMATA’s workforce planning and involves employees and other stakeholders in developing and communicating the process, and (2) includes a data- driven assessment of the critical skill and competencies WMATA needs to fill any gaps. (Recommendation 2) 3. WMATA’s General Manager should establish comprehensive policies and procedures for both of its performance management systems that document the goals of the systems and individuals’ responsibilities for implementing these systems; align employee performance objectives with all of WMATA’s strategic goals; and define performance objectives, rating categories, and competencies tailored to individual positions’ responsibilities. (Recommendation 3) 4. WMATA’s General Manager should establish controls to ensure supervisors fully and accurately complete employee performance reviews and submit them to human resources within established timeframes. (Recommendation 4) 5. WMATA’s General Manager should develop a documented process to use employee performance management information to monitor progress toward WMATA’s strategic goals. (Recommendation 5) We provided a draft of this report to WMATA and DOT for review and comment. WMATA provided written comments, which we have reprinted in appendix II, and technical comments, which we incorporated as appropriate throughout our report. Regarding our first recommendation that WMATA conduct a comprehensive assessment of the financial risks to which it is exposed from its pension plans, WMATA concurred but stated that the agency has already completed such an assessment and does not believe that any additional assessment would add value. As stated in our report, WMATA hired a consultant in 2016 and 2017 to provide an overview of its five pension plans, including reviewing the plans’ funding strategies and performance. However, the stated purpose of these reports did not include an assessment of risk, and the reports included only limited analysis of the various risks WMATA is facing from the plans, and only considered a single scenario for estimating WMATA’s future pension obligations. As such we concluded that these reports did not constitute a comprehensive assessment of risks facing WMATA from its pension plans. Given the plans’ large size relative to WMATA’s business operations, high proportion of retirees compared to active members, high percentage allocation to risky assets, and high assumed rates of return, WMATA’s pension plans pose significant risk to its financial operations. Without a comprehensive risk assessment, WMATA and its Board of Directors are limited in their ability to prepare for economic scenarios that could compromise WMATA’s ability to provide future service. Thus, we continue to believe that our recommendation is valid and that WMATA should fully implement it. Regarding our second recommendation that WMATA develop a strategic workforce planning process, WMATA concurred and described actions it has underway to address the recommendation. Regarding our third recommendation that WMATA develop comprehensive policies and procedures for both of its performance management systems, WMATA concurred and stated that it is in the process of hiring a consultant to evaluate and redesign WMATA’s performance management systems for fiscal year 2020. WMATA also noted that the agency published a performance management handbook and guide in July 2018 that, among other things, provides definitions and indicators for behaviors assessed in performance evaluations. As part of our recommendation follow up process, we will obtain and review the handbook to determine whether it fully addresses our recommendation. Regarding our fourth recommendation that WMATA establish controls to ensure that supervisors complete and submit employee performance reviews to human resources within established timeframes, WMATA concurred and described actions it plans to take in response. Regarding our fifth recommendation that WMATA develop a documented process to use employee performance management information to monitor progress towards WMATA’s strategic goals, WMATA neither agreed nor disagreed. WMATA stated that it already ties individual employee performance to the agency’s strategic goals, but is open to considering improvements through the third-party consultant it plans to hire to review its performance management systems. In our report we note that WMATA’s PERFORMetro performance management system is not designed to align individual employee performance with all of its strategic goals. Specifically, supervisors under PERFORMetro are required to evaluate employees on individual performance objectives that are aligned with three of WMATA’s strategic goals, but not with WMATA’s fourth strategic goal—improving regional mobility. Further, WMATA officials told us that they do not have a process to use information from their performance management systems to identify performance gaps, or pinpoint improvement opportunities. Thus, we continue to believe that our recommendation is valid and WMATA should fully implement it. We are sending copies of this report to the General Manager of WMATA, the Secretary of Transportation, and the appropriate congressional committees. We provided a draft of this report to WMATA and DOT for review and comment. If you or your staff have any questions about this report, please contact Mark Goldstein at (202) 512-2834 or goldsteinm@gao.gov or Frank Todisco at (202) 512-2700 or todiscof@gao.gov. Mr. Todisco meets the qualification standards of the American Academy of Actuaries to address the actuarial issues contained in this report. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors are listed in Appendix III. This report assesses (1) how the Washington Metropolitan Area Transit Authority’s (WMATA) workforce costs have changed from fiscal years 2006 through 2017 and factors contributing to those changes; (2) how WMATA identifies and addresses its current and future workforce needs; and (3) how WMATA has designed, implemented, and monitored its employee performance management systems. To assess how WMATA’s workforce costs have changed since 2006, we used data from WMATA’s annual budgets and annual audited financial statements from fiscal years 2006 through 2017 on the amounts expensed by WMATA on wages and salaries, employee and retiree benefits, contracted services, and other information on WMATA’s pension and retiree medical plans. We selected 2006 to account for any potential effects of the 2007-2009 financial crisis on pension or other costs, and because WMATA began contributing to its largest pension plan again in 2006 after a 6-year period of not contributing to this plan. To adjust WMATA’s costs for inflation, we used quarterly data on the GDP price index, which we obtained from the Bureau of Economic Analysis. Inflation adjustment factors are calculated to align with the definition of WMATA’s fiscal year, which begins on July 1 and ends on June 30 of the following calendar year. Our calculations adjust nominal values for inflation to find real values are expressed in fiscal year 2017 dollars, where fiscal year refers to WMATA’s fiscal year. We also reviewed data WMATA provided on operating and capital overtime costs, and the most recent actuarial reports for each of WMATA’s five pension plans for more information on WMATA’s pension obligations. Additionally, we analyzed characteristics of WMATA’s five pension plans in consultation with GAO’s Chief Actuary and in relation to actuarial principles and recent literature. Further, we consulted with GAO’s Chief Actuary for assistance in interpreting information about WMATA’s pension and retiree medical plans. To assess WMATA’s pension costs, we reviewed pension expense— which reports WMATA’s expense for its pension plans during a year, as measured in accordance with pension accounting standards for financial reporting purposes—and pension contributions, which reports the amount WMATA paid into its pension plans during a year. Both pension expense and pension contributions increased substantially from fiscal years 2006 through 2017. While pension expense is the pension component of WMATA’s employee and retiree benefit cost data described above, changes in pension accounting reporting standards in 2014 resulted in pension expense being reported differently before and after 2014. As such, we relied on pension contributions as our primary measure of growth of WMATA’s annual pension costs. To assess the reliability of WMATA’s budget data, and other data WMATA provided, we interviewed WMATA officials on practices used to assemble these data. We found these data to be sufficiently reliable for our purposes. To identify factors contributing to changes in workforce costs, we interviewed WMATA officials and reviewed WMATA’s annual budgets, annual financial statements, and actuarial statements for information on the total number of authorized represented and non-represented staff, changes in operating overtime costs, changes in pension-related costs, and other factors that could influence workforce cost changes since fiscal year 2006. To evaluate how WMATA identifies and addresses its workforce needs, we compared WMATA’s workforce planning and workforce development efforts to leading practices we previously identified and the Committee of Sponsoring Organizations of the Treadway Commission (COSO) internal control standards, which WMATA follows. We previously developed these leading strategic workforce planning practices based on a review of documents from (1) organizations with government-wide responsibilities for or expertise in workforce planning models and tools, such as the Office of Personnel Management and the National Academy of Public Administration, and (2) federal agencies recommended as having promising workforce planning programs. Additionally, to identify these practices we reviewed our prior reports and testimonies on human capital issues and met with officials from the aforementioned organizations concerning existing workforce planning models and lessons learned from workforce planning experiences. In addition to comparing WMATA’s workforce planning efforts to leading practices and COSO standards, we reviewed WMATA’s 2017–2019 individual department business plans and 2013–2025 strategic plan to describe how WMATA identifies its short- and long-term workforce needs. Furthermore, we obtained and reviewed WMATA information on the positions WMATA eliminated in fiscal years 2017 and 2018, including the number of positions that were vacant or occupied. Lastly, we compared WMATA’s workforce planning approach to those at a non- generalizable sample of five similar U.S. transit and rail agencies, selected based on similarity in size, age, unions representing agency staff, and stakeholder recommendations. Agency size was measured according to unlinked passenger trips and passenger miles data in the American Public Transportation Association’s 2016 Public Transportation Fact Book, the most recent issue available at the time of selection. System age and union status were determined by a review of publicly available information about each transit system such as academic papers and transit agency websites. With input from industry, federal, WMATA, and union stakeholders, we selected the following peer agencies: (1) Chicago Transit Authority, (2) Los Angeles County Metropolitan Transportation Authority, (3) San Francisco Bay Area Rapid Transit District, (4) Southeastern Pennsylvania Transportation Authority, and (5) Metropolitan Transportation Authority, Metro-North Commuter Railroad. To evaluate how WMATA designed, implemented, and monitored its performance management systems, we reviewed documentation on WMATA’s two employee performance management systems— ”PERFORMetro” for non-represented, Office and Professional Employees International Union Local 2, Fraternal Order of Police, and International Brotherhood of Teamsters Local 639 employees; and “Performance Conversation” for Amalgamated Transit Union Local 689 and International Brotherhood of Teamsters Local 922 employees. We compared these systems to leading performance management practices we have previously identified and to the COSO internal control standards. We previously identified these key practices for modern, effective, and credible performance management systems by synthesizing information contained in its previous performance management work. These practices were also provided for comments to officials from the Office of Personnel Management, the Senior Executives Association and the Center for Human Resources Management at the National Academy of Public Administration. In addition to comparing WMATA’s performance management systems to key practices and COSO internal control standards, we also reviewed WMATA’s 2013–2025 strategic plan, which outlines WMATA’s four strategic goals: (1) build and maintain a premier safety culture and system, (2) meet or exceed expectations by consistently delivering quality service, (3) improve regional mobility and connect communities, and (4) ensure financial stability and invest in our people and assets. To assess how WMATA implemented its performance management systems, including what management controls it had in place to track the completion of required annual employee performance reviews, we interviewed WMATA human resources officials and assessed the data they collected on the number of 2016 PERFORMetro year-end reviews that were required and submitted by supervisors. WMATA officials could not tell us how many PERFORMetro reviews or Performance Conversation forms were required over the period we requested. WMATA officials said that they had data on the number of 2016 PERFORMetro reviews submitted to human resources, but did not collect any data on Performance Conversation forms. As such, we requested the list of submitted 2016 PERFORMetro reviews. WMATA human resources management sent an email to all supervisors asking them to send the reviews they had conducted in the 2016 performance period if they had not already done so. While this information met our purposes for performing a non-generalizable review of selected completed performance reviews, data on the number of employees who were required to have a performance review under PERFORMetro in the 2016 performance period and the number of those employees who received a review were not reliable for reporting purposes. WMATA officials agreed with our assessment that these data were not reliable for reporting purposes. From the list of PERFORMetro reviews we received, we selected an initial non-generalizable sample of 60 files to assess based on employee group (non-represented, Local 2, and Metro Transit Police) and job title. We selected 20 files from each of the three employee groups—10 files each from the two job titles within each employee group with the highest number of identified reviews. We selected the 60 files by assigning random numbers to each file within the six selected job titles and selecting the first 10 files in the sorted, randomized list. We adjusted our random selection as needed to ensure our selection included performance reviews completed by multiple supervisors. Our final selection included the following performance review files: Non-represented employees (20 files total) Rail Operations Supervisor (10 files) Transit Field Operations Supervisor (10 files) Local 2 employees (20 files total) Training and Safety Instructor (10 files) Central Control Supervisor (10 files) METRO Transit Police Department (20 files total) METRO Police S (10 files) Special Police Series (10 files) While conducting our file review, we found that the Special Police Series evaluation forms were significantly different than the other files and did not align with the data collection instrument we had designed. As a result, we did not include these 10 files, leaving us with 50 files included in our final analysis. Lastly, as discussed in our report, we did not review any Performance Conversation files as WMATA officials told us that they do not track the completion of these forms and therefore did not have any data on the number of Performance Conversation year-end reviews that were completed in fiscal year 2017, the first year Performance Conversations were implemented. Finally, we interviewed officials from the FTA and union leadership from four of the five unions representing WMATA employees. We conducted our work from July 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contacts named above, Matt Barranca (Assistant Director), Sarah Farkas (Analyst in Charge); Namita Bhatia Sabharwal; Lacey Coppage; Tom Gilbert; Josh Ormond; Steve Rabinowitz; Michelle Weathers; Hannah Weigle; and Elizabeth Wood made key contributions to this report.", "summary": "WMATA transports more than 1 million rail and bus passengers each weekday in the nation's capital and surrounding areas. However, recent safety incidents and declines in ridership and revenues have focused public attention on how WMATA manages its workforce and associated costs. GAO was asked to review WMATA's workforce management. This report examines, among other things, (1) how WMATA's workforce costs have changed from fiscal years 2006 through 2017 and factors contributing to those changes, and (2) how WMATA has designed and implemented its employee performance management systems. GAO reviewed WMATA's annual financial statements and budgets from fiscal years 2006 through 2017, and compared WMATA's workforce cost and performance management efforts to leading practices and internal control and actuarial principles. GAO also reviewed a non-generalizable sample of employee performance evaluations selected to include occupations with the highest number of evaluations. The Washington Metropolitan Area Transit Authority's (WMATA) workforce costs—including wages, salaries, and benefits for employees and retirees—increased on average by about 3 percent annually from fiscal years 2006 through 2017. This increase was largely driven by the cost of employee and retiree benefits. Specifically, the amount WMATA was required to contribute to its pension plans increased by an annual average of about 19 percent during this period. Due to their relative size, proportion of retirees compared to active members, and investment decisions, these pension plans pose significant risk to WMATA's financial operations, yet WMATA has not fully assessed the risks. Without comprehensive information on the risks facing its pension plans, WMATA may not be prepared for economic scenarios that could increase its required contributions to an extent that might jeopardize its ability to provide some transit service. WMATA has implemented two employee performance management systems that cover all employees, but these systems lack some key elements of an effectively designed and implemented performance management system. For example, WMATA's performance management systems are not designed to make meaningful distinctions in performance, a key element of an effective system. This design is due in part to WMATA's lack of comprehensive policies and procedures for its performance management systems. In addition, WMATA lacks sufficient controls to ensure that supervisors complete required performance evaluations accurately and on-time. For example, in 10 of 50 performance evaluations we reviewed, we found scoring errors where employees were assigned a performance rating inconsistent with the supporting review. Without comprehensive policies and procedures or sufficient controls over its performance management systems, WMATA lacks tools and information to move employees toward achieving WMATA's strategic goals. GAO is making five recommendations to WMATA, including that it develop a comprehensive assessment of risks posed by its pension plans, comprehensive policies and procedures for its employee performance management systems, and controls to ensure supervisors complete required performance evaluations, among other actions. WMATA agreed with four recommendations and neither agreed nor disagreed with the fifth.", "document_type": "gao"}
{"report": "DOD’s 19 defense agencies and 8 DOD field activities are defense organizations separate from the military departments. They are intended to provide a common supply or service across more than one DOD organization. The services and supplies provided by the DAFAs are broad; they range from intelligence to human resources services, to providing secure networks and buildings, to developing cutting edge research and technological advancements, to missile defense, to providing groceries for military families. DOD estimates that the DAFAs employ more than 380,000 military and civilian personnel across the department, not including contractors. Each head of a DAFA reports to a principal staff assistant within the Office of the Secretary of Defense, who in turn reports directly to the Deputy Secretary of Defense or the Secretary of Defense. The principal staff assistants who provide oversight to the DAFAs include the CMO, the Chief Information Officer, the heads of DOD’s Offices of General Counsel and Public Affairs, and all of the Under Secretaries within the department, depending on the mission of the DAFA. In addition to providing advice to the Secretary on assigned matters, each principal staff assistant plays an important role in the development and review of key aspects of the DAFA’s submissions as part of DOD’s annual budget process, called the Planning, Programming, Budgeting, and Execution process. A subset of the DAFAs consists of the combat support agencies, which have, in addition to their other functions, focused missions to support the combatant commands. These eight agencies are jointly overseen by their respective principal staff assistants and the Chairman of the Joint Chiefs of Staff. Figure 1 details the organizational structure and reporting relationships of the DAFAs, including the eight combat support agencies. Section 901 of the Fiscal Year 2017 National Defense Authorization Act established a CMO within DOD, effective on February 1, 2018, and the Secretary established the position, as directed, on that date. The Fiscal Year 2018 National Defense Authorization Act, Section 910, clarified the role and expanded the responsibilities of the DOD CMO. Further, it elevated the position to take precedence in the department after the Secretary of Defense and the Deputy Secretary of Defense. This section also gave the CMO authority to direct the secretaries of the military departments and the heads of other defense organizations with regard to business operations and department-wide shared services. The expanded authority of the CMO includes oversight, direction, and control over DAFAs providing shared business services for the department, to be determined by the Secretary of Defense or the Deputy Secretary of Defense. In January 2019 the CMO will assume some of the Chief Information Officer responsibilities, duties, and powers related to business systems or management, including the management of the enterprise business operations and shared services of the department, as required by law. Additionally, the CMO will serve as the DOD performance improvement officer. Since 2011, we have issued annual reports on opportunities to reduce or better manage fragmentation, overlap, and duplication, as well as to achieve cost savings and enhance revenue for the federal government. The federal government faces a long-term, unsustainable fiscal path based on an imbalance between federal revenues and spending. Figure 2 defines fragmentation, overlap, and duplication. Although DOD has taken some steps to assess the continuing need for the DAFAs, we found that these steps have been neither comprehensive nor routine, especially since 2012. At the time of our review, section 192(c) of title 10 of the United States Code required the Secretary of Defense to review the services and supplies each DAFA provides to ensure that (1) there is a continuing need for each DAFA; and (2) the provision of services and supplies by each DAFA, rather than by the military departments, is a more effective, economical, or efficient manner of providing those services and supplies or of meeting the requirements for combat readiness. From 1987 to 2012, DOD issued biennial reports to Congress to record its response to this statute, but the methodology and quality of those reports varied. Regarding the methodology of the past reports, for the first five biennial reports, from 1987 to 1995, DOD relied on a research team to identify findings and provide recommendations on the structure and composition of the DAFAs. The four reports issued from 1997 to 2004 relied on a survey of the DAFAs’ customers across DOD. From 2005 to 2010, DOD issued three reports that alternated between a senior management assessment of the DAFAs and the customer survey approach. In addition, the 2009-2010 report recorded activities relevant to the statutory review requirement, with a focus on a major DOD efficiency initiative that was ongoing at that time. Regarding quality, we found that the most recent report, dated 2012, generally did not reflect key elements of quality evaluations, which we identified in our prior work and compiled as part of this review. Table 1 below details these key elements. We found that some key elements were included in the most recent report, but other key elements were not reflected. We reviewed that report against all elements and found that the report’s purpose was aligned with the relevant statutory requirements, which is a key element. Further, the report relied on data obtained from appropriate sources for the evaluation, to include survey information from the DAFA directors and military department officials. However, we found that the report did not assess the reliability of the data used, define key terms, clearly state criteria used for analysis, or make recommendations. For example, OCMO officials familiar with the report told us that some DAFAs and military departments surveyed for the report provided more detail and information in their responses than others, but there was no assessment of the reliability of this information. Overall, OCMO officials acknowledged that the report was more of a collection of information, rather than an in-depth assessment. At the time of our review, section 192(c) of title 10, United States Code, did not explicitly require that DOD develop and issue a written report as part of the required periodic review. According to DOD officials, they discontinued issuing biennial reports in 2012 because the reports were not a leadership priority, given the resources required to produce them. In addition, OCMO officials acknowledged that the department does not currently record fulfillment of the statutory requirement through a centralized process, such as the development of a report that responds to the requirement. However, a DOD directive tasks the former Director of Administration and Management, whose functions have now been integrated into the CMO office, to oversee the biennial review of the DAFAs and to record the fulfillment of that review. Further, Standards for Internal Control in the Federal Government states that documentation is a necessary part of an effective internal control system and is required for effective operations. OCMO officials told us that they are considering renewing the issuance of biennial reports, but that there are no firm plans to do so at this time, nor are there any associated time frames. In the absence of biennial reports, OCMO officials stated that since 2012 they have relied on existing departmental processes to address the statutory requirement to review the DAFAs. Senior level OCMO officials expressed some disagreement about which of these existing processes ensure that they have fulfilled the statutory requirement. When we assessed the processes, we determined that DOD did not provide sufficient evidence that it has met the statutory requirement. These processes include the following: Annual budget process: Some OCMO officials stated that DOD’s annual budget process is a means of addressing the statutory requirement to review the DAFAs, but one senior official from the OCMO disagreed. Although DOD reviews the budget proposals for each DAFA, DOD could not provide evidence that the annual budget process includes a specific review of the continuing need for each DAFA, or that the use of the DAFAs ensures the most efficient provision of services across DOD. Day-to-day management of the DAFAs: One OCMO official stated that day-to-day management of the DAFAs provides a means of addressing the statutory requirement to review the DAFAs. However, we found that the documentation provided by OCMO officials does not demonstrate that a review and recording of DAFA services and supplies takes place through day-to-day management of the department. Moreover, some OCMO officials stated that the day-to- day management activities of a large organization can actually detract from leadership’s ability to focus on needed reviews and reform. Reform or efficiency initiatives: Some OCMO officials stated that prior reform efforts that were focused on the DAFAs exemplify the department’s response to the statute. However, although certain reform initiatives, such as the Business Process and Systems Reviews, affected the DAFAs, we found that the stated purposes of these reform initiatives, discussed in more detail later in this report, do not reference the continuing need for DAFAs or examine whether services should be performed instead by the military departments. Further, some OCMO officials acknowledged that prior reform efforts did not examine the continuing need for DAFAs. DAFA reorganizations: OCMO officials cited certain reorganizations of the department as evidence that they review the DAFAs. However, the examples they cited were congressionally mandated reorganizations, such as the replacement of the Under Secretary of Defense for Acquisition, Technology, and Logistics with two new Under Secretary positions. As these were congressionally mandated reorganizations and therefore required, we found that they do not demonstrate that changes resulted from an internal comprehensive assessment of the continuing need for the DAFAs or their provision of services and supplies. Management of services through executive agents: Finally, OCMO officials stated that the existence of executive agents throughout the department shows that DOD focuses on ensuring efficient delivery of services and supplies. Multiple heads of DAFAs serve as designated executive agents. However, OCMO officials did not provide documentation that these executive agents assess the continuing need for the DAFAs. Further, we have previously reported on weaknesses in the use of DOD executive agents in management arrangements. For example, we previously reported that DOD had not defined continued need, currency, effectiveness, or efficiency in satisfying requirements for executive agents. Under a separate statute, 10 U.S.C. § 193(a), DOD is required to periodically report on the responsiveness and readiness of the eight combat support agencies, a subset of the DAFAs. In contrast to DOD’s biennial reports on DAFAs for 10 U.S.C. § 192(c), we found that the DOD combat support agency reports for 10 U.S.C. § 193(a) we reviewed generally reflect key elements of quality evaluations that we identified. For example, the most recent combat support agency reports we reviewed generally have clear evaluation questions, use sufficient and appropriate data, and support conclusions with data and analysis. Last, all of the DOD combat support agency reports we reviewed contain actionable recommendations. Recommendations from the Joint Staff included in combat support agency reports resulted in reported efficiencies. For example, in response to the findings and recommendations of a combat support agency report, officials from the Defense Information Services Agency created a new office to serve as a single point of contact for its customers. These officials reported that the office has reduced paperwork and helped to build relationships with customers. Joint Staff officials reported a variety of other positive results from combat support agency report recommendations. These results include an increase in the speed of specific deliveries from the Defense Logistics Agency (DLA) to DOD customers outside the continental United States; improved navigational charts provided by the National Geospatial Intelligence Agency to the Combatant Commands to ensure safety; and the establishment of clear policy related to fuel additives, including the clarification of specific roles and responsibilities. OCMO officials stated that the statutory requirement for combat support agency reports is more specific and smaller in scope than the statutory requirement to review the DAFAs. As a result, the officials told us that they have not been able to conduct targeted and potentially more useful analysis for DAFAs, such as the evaluations they conduct of the combat support agencies. However, we found that while the statutes differed in some ways—for example, a report is specifically required for the combat support agencies, but was not for the DAFAs—both statutes prescribed broad requirements for the review processes. While each statute requires a periodic assessment, we found differences in the direction that DOD provides to guide the department’s response to these statutes. Specifically, a Joint Staff Instruction describes requirements for the combat support agency reports and provides direction for the associated process. In many cases, the Joint Staff Instruction requirements reflect the key elements for evaluations that we identified. For example, the instruction provides general guidance on the criteria that reports should use, as well as specific examples. To ensure data reliability, the instruction requires validation of findings, issues, recommendations, and observations. Further, the instruction describes key terms included in the statute, such as responsiveness, readiness, and operating forces. In contrast, DOD has not issued internal guidance that details requirements for the required review of DAFAs. The Joint Staff has also developed a strategy for scoping and timing its combat support agency reviews to make the work manageable and the outcome of the reviews useful to the combatant command. Specifically, the Joint Staff focuses each report on one combat support agency at a time, rotating the focus so that each agency is reviewed every several years. Joint Staff officials stated that the focus areas of the reports also vary depending on the needs of warfighter, senior leader direction, and actions taken as a result of the previous assessments. Additionally, when conducting its reviews, the Joint Staff primarily assesses the combat support missions within each combat support agency, rather than all functions implemented by the agency. Conversely, DOD has not developed any internal guidance for a similar process that would allow for a more manageable approach to the requirement to review the DAFAs. As a result, previous biennial reviews examined all services and supplies of all DAFAs in each report, an approach that CMO officials acknowledged prohibited more detailed analysis. Through the development of internal guidance that provides clear direction for conducting and recording DOD’s response to the required review of the DAFAs, the department could more clearly define or target the scope of those reviews and any resulting reports to make effective use of the resources devoted to that process. For example, DOD could choose to follow a risk-based approach, focus on the department’s key priorities for reform, or rotate the focus of each report as the Joint Staff does with the combat support agency reports. Without clear internal guidance that defines the requirements for a high- quality review of its DAFAs and the associated recording of the results of those reviews, DOD and congressional decision makers may not have reasonable assurance that there is a continuing need for the DAFAs and that the provision of services and supplies is effective, economical, and efficient. Such information could assist decision makers when considering any future reorganizations of the DAFAs, or the realignment of functions among the DAFAs or other defense organizations, or when seeking greater efficiencies. DOD currently has a service delivery model in which there are numerous human resources providers offering varying levels of quality and transparency of costs. Section 191 of title 10, United States Code, states that the Secretary of Defense may provide for the performance of a supply or service activity that is common to more than one military department by a single agency of DOD when it would be more effective, economical, or efficient. Nevertheless, at least six organizations within DOD, including three DAFAs and the three military departments, provide human resources services to other defense agencies or organizations. Specifically, DLA, the Defense Finance and Accounting Service (DFAS), and the Washington Headquarters Service (WHS) perform human resources services for other organizations, such as other DAFAs; offices within the Office of the Secretary of Defense; or parts of the military departments. All perform the same types of human resources services, such as those related to civilian workforce hiring across DOD. Additionally, the Departments of the Army, Navy, and Air Force each has a human resources command or personnel center. Below is a count of the number of customers served by the DOD agencies providing human resources services as of May 2018, as reported by agency officials. DLA provides human resources services for about 70,000 customers, including 25,000 of its own employees and 45,000 civilians from across DOD outside of DLA. DFAS provides human resources services for about 26,000 DOD civilians, including 12,000 DFAS employees and about 14,000 customers from across DOD. WHS performs nearly all types of human resources services for some DAFAs, such as the Defense POW/MIA Accounting Agency and the Defense Legal Services Agency, as well as all senior executives and presidential appointees across the department, totaling about 170,000 individuals. However, WHS performs only certain human resources services for its own employees, such as recruitment and training. WHS pays DLA to perform other types of human resources services, such as personnel action processing, pre-employment drug testing, and the processing of certain travel orders and allowances, among other functions, for more than 7,000 WHS employees. Through our assessment of documents detailing the human resources service customer bases of DFAS, DLA, and WHS, we found that there is overlap in the human resources services that they provide. For example, DOD officials reported that three DAFAs and the military departments provide human resources servicing to personnel employed by the Defense Security Cooperation Agency, depending on the location, rank, or other characteristics of the staff (see figure 3). Moreover, although each military department has its own human resources command or personnel center, we have identified some instances of DAFAs providing human resources services to military department civilian employees or servicemembers. For example, the Army pays DFAS to provide broad human resources support to the Army’s Financial Management Command, even though it could use its own human resources servicing organization. Additionally, WHS officials stated that the agency provides certain human resources services to all presidential appointee civilian positions across the military departments, rather than having the appointees’ military departments’ own human resources commands or personnel centers do so. Also, DLA provides human resources services to the military department civilians and servicemembers assigned to DLA. The fragmentation and overlap among the DAFAs that provide human resources services to other defense offices or organizations have resulted in negative effects, such as inconsistent performance information, inefficiencies resulting from fragmented information technology (IT) systems, and inefficiencies related to overhead costs. In the current service delivery model with multiple human resources service providers, DOD agencies choose a human resources provider. DFAS, DLA, and WHS differ in how they measure and report their performance data, which results in inconsistent information and limits customers’ ability to make informed choices about selecting a human resources service provider to meet their needs. DFAS, DLA, and WHS submit data in department-wide information systems, as required. This information is used to develop an overall DOD time-to-hire measure of the department’s performance against the government-wide goal of 80 days to fill a job opening. However, the ways in which each DAFA develops this measure, and other measures to assess its own performance, differ. For instance, one DAFA measures 12 different phases of the entire process to fill a job opening, with a different measure for each of the 12 phases. Other DAFAs choose to begin or end their measurement process at different points within the hiring process. As such, the measures used by human resources providers to determine the timeliness and quality of the services provided to customers are not consistent across the providers. The inconsistent performance data do not allow DOD customers to make fully informed comparisons in selecting a service provider. Table 2 shows the differences among the respective reported time-to-hire averages of the three DAFAs that provide human resources services for civilians who are hired by the three military departments. The averages range from 65 days to 120 days, which shows a considerable variance in performance. However, as described previously, these reported averages were not calculated in a consistent manner across the department’s human resources providers. In addition, these time-to-hire averages do not reflect the quality of the hiring or reflect that some types of positions are difficult to fill, which could affect results. For example, DOD reports that it takes an average of 118 days to fill a civilian intelligence and counterintelligence position department-wide. With more consistent information, DOD leadership could better assess what changes, if any, need to be made to improve hiring practices. As DOD officials told us, delays in hiring can result in failing to hire the best candidates and can negatively affect program success. Further, DOD organizations could better weigh decisions on obtaining human resources services. Each human resources provider within DOD uses a common IT system, called the Defense Civilian Personnel Data System, to store and process civilian human resources data. However, each uses a separate connection to the system, resulting in some inefficiency. For example, when an employee in a defense agency serviced by multiple human resources providers transfers to a different part of the same agency or another part of DOD, the employee is treated as if he or she has been newly hired. The employee’s personnel data must be re-entered through a different connection to the data system, and other administrative steps are re-performed, such as providing the employee a new Common Access Card, the department’s identification badge used for facility and computer system access. Additionally, DOD officials stated that there are more than 800 learning management systems employed across the department, which are used to deliver training to personnel and store and record training records. DAFA and OCMO officials stated that these fragmented learning management IT systems are duplicative in nature and are costly to the department to maintain, although officials were not able to provide an estimate of those costs. In January 2018, DOD officials stated that all human resources providers were expected to move to a common connection to the IT system by October 2018, which was expected to eliminate redundant data entry and other duplicative administrative inefficiencies. However, as of June 2018, DOD officials stated that this effort is on hold, as the department is currently reexamining the best strategy to provide IT solutions for human resources. According to officials, that strategy might be to use a cloud- based solution, as opposed to changes to the legacy system of the Defense Civilian Personnel Data System. We found that defense agencies or other organizations that use more than one human resources service provider are paying overhead costs charged by each provider, which results in unnecessary expenses and inefficiencies. DOD officials agreed that the fragmented system of service delivery with multiple providers allows for possibly redundant overhead charges, and that a more consolidated service delivery model could reduce expenses associated with overhead. The DAFAs that charge human resources customers by using a fee-for-service structure apply a certain percentage of the total cost as a “general and administrative cost” or “non-labor costs” to each customer. Agency officials stated that these overhead costs pay for management salaries, other personnel-related costs, and administrative costs, such as IT support and facilities costs. These overhead costs are separate from the “direct labor” costs that represent the personnel and other expenses required to perform the service requested. For example, DFAS officials stated that about 7 percent of the fees charged by DFAS to human resources service customers goes for “general and administrative costs” that are separate from the direct labor expense required to perform services. Similarly, about 20 percent of the costs charged to DLA’s human resources customers covers indirect costs. As such, organizations pay overhead and administrative expenses for several human resources providers, thereby using financial resources that could be diverted to higher priority needs. According to DOD officials, using one provider would likely reduce inefficient expenses for human resources services paid by defense organizations. However, according to those officials, more comprehensive information and analysis is needed to determine the extent of inefficient overhead costs that occur. Comprehensive information about the extent of these and other possibly redundant or otherwise inefficient expenses would help identify a human resources service delivery model that is effective, economical, and efficient. In January 2018, the Deputy Secretary of Defense established a Human Resources Management Reform Team to initiate key reform efforts within the department. This team is one of nine cross-functional teams established by the Deputy Secretary of Defense to drive reform throughout the department. The human resources management reform team is led by a senior DOD human resources official and comprised of representatives from DFAS; DLA; WHS, the Departments of the Army, Air Force, and Navy; and the OCMO, among others. According to the team’s charter, the team will work to modify human resources processes and move toward enterprise service delivery of human resources services, which is expected to reduce costs. Team members told us that their initial focus is to carry out projects focusing on high-priority challenges, such as pursuing the optimal IT systems for DOD human resources services department-wide and identifying legislative and regulatory changes needed to streamline processes and procedures. After progress is made in these areas, the team plans to review service delivery across the department and determine the most effective and efficient system. Senior leaders from the human resources directorates of DFAS, DLA, and WHS all stated that increased consolidation was possible, if properly reviewed and implemented, especially for tasks such as entering personnel data and other hiring-related tasks, which could be conducted through a shared service model. This work may lead to increased coordination among, or consolidation of one or more, organizations. DOD has not assessed or identified the most effective, economic, or efficient provision of this business function. DOD officials stated that assessing the provision of human resources in the department has not previously been a priority of senior leadership. A memorandum from the Deputy Secretary of Defense that established the human resources management reform team required that the team move the department toward a shared service delivery model. Specifically, this required a “time- phased way forward,” with outcomes and time frames for converting the mission to an enterprisewide service delivery model. The new reform team reflects a commitment from senior leaders within the department to address longstanding problems in the human resources area. However, we identified limitations in how the human resources management reform team is planning and managing its work. First, one goal of the reform team is to reduce the time-to-hire averages across the department and determine a method to measure the quality of hiring. DOD officials stated that performance measure improvements are an important focus of their efforts and that they will share best practices for time-to-hire and will require a standard measure of quality of hiring. However, team plans we reviewed do not include steps for ensuring that the DAFAs and military departments adopt standardized processes to develop a consistent time-to-hire measure. Standardized quality information would be valuable in determining which organizations may be best placed to provide department-wide human resources service delivery, and without this information DOD may not have assurance that its hiring practices are effective and efficient. Standards for Internal Control in the Federal Government emphasizes that managers should identify the information required and obtain it from relevant and reliable sources. Second, the team has not set clear time frames for some of its work. As we reported in July 2018, agency reform efforts should have implementation plans with key milestones and deliverables to track implementation progress, and clear outcome-oriented goals and performance measures for the proposed reforms. While one of the team’s projects is to determine the best strategy for providing IT solutions for human resources, the team has not identified time frames for completing the assessments needed to inform a new strategy, or deliverables for finalizing and implementing the IT strategy. DOD officials stated that they will develop project plans for completing assessments needed and identify time-frames with the reform team focused on broader department-wide IT. The human resources management reform team has also not set clear time frames or deliverables for developing and moving toward an optimal service delivery model for the department, which may be a long-term effort that goes beyond the expected 2 year duration of the reform team. Draft documents of the team we reviewed discussed obtaining relevant data in 2018, reviewing the effects of policy changes in 2019, and pursuing undefined pilot projects in 2020. However, DOD officials told us that the team plans to begin focusing on assessing optimal service delivery models possibly in 2019. No specific time frames for completion of this effort have been identified, and team members stated that completion of IT efforts and regulatory reforms takes precedence. Further, it is unclear how implementation of long-term efforts will be managed. Third, although one of the team’s charges is to determine the optimal model for department-wide delivery of human resources services, team members are not considering key pieces of information that would be useful in doing so. For example, team members we contacted were not aware that some DOD organizations were making potentially redundant and inefficient payments to the DAFAs for human resources services as overhead charges collected by multiple providers. As discussed previously, Standards for Internal Control in the Federal Government emphasizes the importance of quality performance information. When we raised the issue of overhead charges with team members, they noted that if such redundant payments are occurring, that would occur only within the department’s “Fourth Estate,” and that they are initially focusing on issues that affect the department as a whole. However, considering the size and scope of the Fourth Estate, which DOD reported includes more than $100 billion in funding annually, identifying comprehensive information regarding the extent of inefficient overhead costs would be important information for the reform team to consider in addressing inefficiencies and pursuing enterprise-wide solutions to determine the most effective, economical, and efficient model of service delivery. With consistent human resources performance information, clear time frames in place, and comprehensive information on overhead costs, the team would be better positioned to thoroughly assess the department’s system for human resources service delivery, and to develop and implement long-term solutions for better coordination or consolidation of this function. Further, DOD decision-makers would have assurance that any changes they make, such as consolidation of certain organizations or functions, would be based on sound and complete analysis. DOD has undertaken several efficiency initiatives since 2011 that are intended to improve the efficiency of headquarters organizations, including the DAFAs, and to identify related cost savings. These initiatives include the Secretary Gates Efficiencies, the More Disciplined Use of Resources, the Core Business Process Review, the Business Process and Systems Reviews, and a series of initiatives related to the savings required by the National Defense Authorization Act for Fiscal Year 2016. Table 3 describes each efficiency initiative we assessed as part of this review and includes an estimated cost savings that the department expected to achieve for each initiative. DOD has taken some steps to monitor and evaluate the results of its efficiency initiatives, but it has not consistently done so. For some of the efficiency initiatives, DOD ensured that there was ongoing monitoring and worked to evaluate results. For example, as part of the former Secretary Gates Efficiencies initiative, the military departments and the Special Operations Command were required to prepare briefings on the status of initiatives, and the offices of the then Deputy CMO and Comptroller directed them to enter information regarding their efficiency initiatives into a database designed to capture performance management data. Officials stated that this information was designed to allow them to track the progress of the initiatives, including milestones, risk assessments, and the roles and responsibilities of those implementing the initiatives. While implementing its More Disciplined Use of Resources initiative, DOD took some ad hoc steps to evaluate the effect of some of the efforts, such as establishing performance measures to assess their effect on achieving desired outcomes. An official in the office of the Under Secretary of Defense (Comptroller) later issued a memorandum that established a requirement to report on the initiatives, including performance goals, measures, and accomplishments. This memorandum was issued based on a recommendation we made in a prior report that the military departments and the Special Operations Command develop approaches for evaluating the effect of their efficiency initiatives, such as establishing performance measures or other indicators, collecting related performance information, and using this information to measure progress in achieving intended outcomes associated with their initiatives until implemented. However, for other efficiency initiatives, DOD did not consistently ensure that the agency established a baseline from which to measure progress, use ongoing monitoring, or evaluate results. For example, in the case of DOD’s Core Business Process Review initiative, DOD has not evaluated whether the effort achieved any of its intended savings or led to expected efficiencies. According to OCMO officials, DOD ultimately concluded that potential savings opportunities identified as part of this review could not entirely be achieved through these means. As a result, it is unclear what savings, if any, the department achieved. DOD’s Business Process and Systems Reviews ended with a briefing to the Deputy Secretary of Defense and Vice Chairman of the Joint Chiefs of Staff that included a summary of how the organizations would measure progress toward outcomes. While the office of the then Deputy CMO and the principal staff assistants were responsible for monitoring the effort up to the briefing, officials from the Deputy CMO’s office stated that following the briefing any monitoring that occurred would be the responsibility of the principal staff assistants. However, not all principal staff assistants continued monitoring. For example, although the CMO is the principal staff assistant for two of the agencies reviewed—WHS and the Pentagon Force Protection Agency—OCMO officials were unable to provide a list of initiatives related to each agency and the status of those initiatives. DOD also did not consistently ensure that the agency monitored and evaluated efforts associated with the National Defense Authorization Act for Fiscal Year 2016 requirement to save at least $10 billion from headquarters, administrative, and support activities for fiscal years 2015 through 2019. One of the efforts that DOD took pursuant to this requirement was for DAFAs to review their service contracts and present recommendations for cuts to a Senior Review Panel. Under this initiative, called the Service Requirement Review Boards, the panel either approved the proposed cuts or directed alternative reductions, and DCMO then monitored the organizations to ensure that the cuts were taken. However, other efforts DOD took pursuant to the requirement were not well monitored. For example, as part of the required savings, DOD identified approximately $5.3 billion that it later determined to be “not auditable” because the baseline for the reductions had not been established. Congress mandated DOD to report on its efforts with its budget submissions for fiscal years 2017 through 2019. DOD submitted its first report on May 22, 2018, and it included the $5.3 billion in savings that it had deemed “not auditable.” According to Standards for Internal Control in the Federal Government, agencies should monitor and evaluate the quality of performance over time. As part of this effort, agencies should establish a baseline from which to measure progress, use ongoing monitoring, and evaluate results. Further, the GPRA Modernization Act of 2010 requires agencies to regularly monitor their progress in achieving goals. Our previous work has noted that having a process with written guidance for monitoring achieved savings from efficiency initiatives can help organizations evaluate actual performance against planned results. We have also previously noted that without guidance that clearly outlines the information to be provided for evaluation, DOD cannot be assured that senior leaders are getting complete information needed to enhance their visibility over the status of efficiency initiatives. Although DOD has not consistently ensured that the agency established a baseline from which to measure progress, use ongoing monitoring, or evaluate results, OCMO officials stated that the department is working to do so. The officials stated that previous efforts to track reform had been more focused on assessing whether steps had been taken, rather than on measuring progress and evaluating the results. In its most recent budget request, DOD emphasized the importance of using goals and performance measures to assess the benefit and value of reforms, along with the importance of relevant, accurate, and timely data. In addition, the chartering documents for DOD’s reform teams highlight the importance of monitoring and evaluation, and senior DOD officials are echoing this point. We recently reported that outcome-oriented goals and performance measures and an implementation plan with key milestones and deliverables are important when considering agency reform. While the reform teams’ focus on monitoring and evaluation is a positive step, officials stated that the teams are expected to exist for approximately 2 years, and monitoring and evaluating results of some reform efforts may take a significant amount of time to appropriately assess the effects of the reform. In addition, OCMO officials have not provided evidence of plans to fully monitor efforts that began before the reform teams were created and should still be in process. These efforts include savings related to the requirement to save at least $10 billion from headquarters, administrative, and support activities for fiscal years 2015 through 2019. Without ensuring that efficiency initiatives are fully monitored and evaluated against established baselines over time, DOD lacks a systematic basis for evaluating whether its various initiatives have improved the efficiency or effectiveness of its programs or activities. While DOD has long been required to periodically review the DAFAs to ensure, among other things, that the provision of their services and supplies are economical, efficient, and effective, it has relied on existing processes to fulfill this requirement, rather than with comprehensive and routine assessment. Without internal guidance that results in quality evaluations of the DAFAs, DOD decision makers remain limited in the information they have about what efficiencies the DAFAs could pursue and how they could cut costs. With establishment of the new CMO position, the department has an opportunity to address long-standing weaknesses in its business operations, including those performed by the DAFAs. The department’s effort to establish reform teams that can drive change, as well as a senior-level reform management group to direct and oversee these efforts, is a positive step forward. Having comprehensive and quality information would help the CMO and other senior leaders make important decisions regarding the direction of reform efforts and to assess whether efforts are achieving desired results. However, the human resources management reform team has not collected comprehensive information, such as performance information on hiring time frames and overhead costs for providing human resources services and time frames for these efforts, which would enable the department to best address inefficiencies among the DAFAs that provide human resources services. Moreover, DOD has not consistently ensured that the agency established a baseline from which to measure progress, used ongoing monitoring, or evaluated results. While OCMO officials are focused on the reform teams, full monitoring is necessary for all efficiency initiatives. Without routinely and comprehensively monitoring and evaluating ongoing efficiency initiatives across all of its reform efforts, DOD cannot have assurance as to whether its efforts have achieved desired outcomes, are saving resources, and are improving effectiveness. We are making five recommendations to DOD. The Secretary of Defense should ensure that the CMO develops internal guidance that defines the requirements and provides clear direction for conducting and recording reviews of the DAFAs in response to10 U.S.C. § 192(c). This guidance, which could be similar to the guidance that exists for assessments of the combat support agencies, should reflect the key elements of quality evaluations. (Recommendation 1) The Secretary of Defense should ensure that the CMO, with input from the human resources management team, requires that all DOD human resources providers adopt consistent time-to-hire measures, as one process for assessing performance. (Recommendation 2) The Secretary of Defense should ensure that the CMO, through the human resources management reform team, identifies time frames and deliverables for identifying and adopting optimal IT solutions for human resources and fully assessing, identifying, and implementing the most effective and efficient means of human resources service delivery. (Recommendation 3) The Secretary of Defense should ensure that the CMO, through the human resources management reform team, collects information on the overhead costs charged by all DOD human resources service providers to assist in determining the most effective, economical, and efficient model of human resources service delivery within the department. (Recommendation 4) The Secretary of Defense should ensure that the CMO routinely and comprehensively monitors and evaluates ongoing efficiency initiatives within the department, including those related to the reform teams. This monitoring should include establishing baselines from which to measure progress, periodically reviewing progress made, and evaluating results. (Recommendation 5) We provided a draft of this report to DOD for review and comment. DOD concurred with our five recommendations and noted planned actions to address each recommendation. In its written comments, DOD stated that the National Defense Authorization Act for Fiscal Year 2019 gives the CMO additional specific authorities; substantially rewrites the requirements of section 192(c); and addresses the findings and recommendations in our report. Further, DOD stated the department is on track to achieve substantial savings through its reform team efforts and CMO emphasis on strong management practices, integrated processes, and best value business investments. DOD’s comments are reprinted in their entirety in appendix II. DOD also provided technical comments, which we incorporated into the report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and DOD’s Chief Management Officer. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report evaluates the extent to which (1) the Department of Defense (DOD) has assessed the continuing need for each defense agency and DOD field activity (DAFA); (2) any overlap or fragmentation among the DAFAs that provide human resources services has affected the delivery of those services; and (3) DOD has monitored and evaluated the results of its efficiency initiatives that affect the DAFAs. For our first objective, we reviewed DOD’s biennial reports on the DAFAs from 1987, the first year after enactment of the requirement, through 2012, the most recent year of DOD’s reporting. We also interviewed officials from the Chief Management Officer’s (CMO) office regarding DOD’s current processes for reviewing and recording its assessment of the DAFAs. Further, we reviewed the most recent DOD reports on combat support agencies, as there is a comparable statutory requirement for DOD to review this subset of the DAFAs, and the corresponding Joint Staff Instruction that guides those reports. We also spoke to relevant Joint Staff officials regarding the processes used to develop those reports. We compared DOD’s biennial reports and combat support agency reports against key elements of quality evaluations, which we identified in prior work and compiled as part of this review, as specified below. To analyze the quality of biennial reports and combat support agency reports, we identified and selected key elements of quality evaluations and compared reports against these key elements. We took four major steps to identify and select key elements. First, we identified criteria that assess the quality of agency evaluations and resulting reports based on a review of relevant GAO reports and discussions with a methodologist. Second, in collaboration with a methodologist, we assessed the appropriateness of identified criteria for this analysis, and we concluded that no single assessed criterion met the needs of this review. Third, we identified relevant areas of overlap across the criteria, and we excluded topics not relevant for our purposes, such as statistical modeling for technical evaluations. Fourth, we selected a set of elements encompassing relevant areas of overlap, and we discussed and revised these elements in collaboration with a methodologist. For the analysis of reports against key elements, we gathered and recorded evidence related to each question from a variety of DOD sources including DOD reports, statements from DOD officials representing the research team, and relevant DOD guidance related to the reports. One analyst assessed the extent to which the reports reflected the key elements, and a second analyst reviewed their assessment. Where there was disagreement in the assessment, analysts discussed their analysis and reached a consensus. Last, for the first objective, we assessed DOD’s response to the statutory requirement that it periodically review the continuing need for its DAFAs, and whether the provision of services and supplies by the DAFAs, rather than by the military departments, is more effective, economical, and efficient. We interviewed Office of the Chief Management Officer (OCMO) officials about the existing departmental processes that they stated addressed the statute, and we reviewed associated documentation provided by the OCMO officials, such as budget materials. For our second objective, we reviewed the business functions of selected DAFAs to identify possible inefficient duplication, overlap, or fragmentation in the services provided by those selected DAFAs to other organizations within the department. For our selection from the 27 DAFAs within DOD, we excluded DAFAs that have been previously identified as focus areas from our body of work on duplication, overlap, and fragmentation. We selected 7 DAFAs that are larger in size and budget than others and that focus on the traditional business areas of DOD, such as logistics or financial management. From those 7 DAFAs we reviewed the chartering directives for each of those agencies and DOD’s most recent biennial report on DAFAs to identify terms and phrases that appeared duplicative or repetitive in nature. Using that strategy, we selected human resources as the business line of effort for the focus of our review. We reviewed the provision of human resources services by DAFAs to identify any potential inefficient duplication, overlap, or fragmentation. For example, we reviewed the client bases serviced by each DAFA to identify inefficient duplication or overlap and reviewed the performance measures used by each DAFA to examine for fragmentation in approach to performance measurement. Pursuant to 10 U.S.C. § 191 , whenever the Secretary of Defense determines that it would be more effective, economical, or efficient to provide for the performance of a supply or service common to multiple military departments by a single agency, then the Secretary can create a DAFA to provide that supply or service. Further, at the time of our review, section 192(c) of title 10, United States Code, required, among other things, that the Secretary of Defense periodically ensure that the provision of services and supplies by the DAFAs, rather than by the military departments, is more effective, economical, and efficient. As such, we assessed DOD’s provision of human resources by DAFAs against GAO’s Duplication Evaluation Guide to assess DOD’s provision of human resources. We interviewed officials from DOD’s CMO office, the 3 DAFAs that provide human resources services for the department (DFAS, DLA, and WHS), and the lead and members of DOD’s human resources management reform team, and we reviewed documents such as DOD’s human capital operating plan and documents provided by the DAFAs that detailed their human resources business functions. For our third objective, we selected efficiency initiatives that affect DAFAs, and that we have previously reported on since 2011. We reviewed a selection of reform initiatives because DOD does not have a comprehensive listing of the reform initiatives it has undertaken. For the purposes of this review, we define “efficiency” as maintaining federal government services or outcomes using fewer resources (such as time and money) or improving or increasing the quality or quantity of services or outcomes while maintaining (or reducing) resources. We obtained documentation and spoke with officials from CMO and the DAFAs selected for the second objective of this report regarding DOD’s monitoring, assessing, and tracking of the selected reform initiatives. We obtained information and documentation from CMO officials regarding DOD’s ongoing reform efforts, including plans for monitoring and assessing these efforts. We compared this information and documentation against Standards for Internal Control in the Federal Government, which states that management should establish a baseline from which to measure progress, use ongoing monitoring, and evaluate results. We conducted this performance audit from August 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Margaret Best (Assistant Director), Miranda Cohen, Alexandra Gonzalez, Amanda Manning, Richard Powelson, Suzanne Perkins, Andrew Stavisky, Amie Lesser, Sarah Veale, and Cheryl Weissman made key contributions to this report.", "summary": "DOD spends billions of dollars annually to maintain business functions that support the warfighter. Many of these functions are performed by the DAFAs—DOD's 19 defense agencies and 8 field activities intended to provide department-wide consolidated support functions. GAO has previously identified instances of fragmentation, overlap, and duplication among the DAFAs. Senate Report 115-125, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018, included a provision that GAO review the DAFAs. This report evaluates the extent to which (1) DOD has assessed the continuing need for each DAFA; (2) any overlap or fragmentation among the DAFAs that provide human resources services has affected service delivery; and (3) DOD has monitored and evaluated the results of its efficiency initiatives that affect the DAFAs. GAO reviewed legal requirements, assessed prior DOD reports, and analyzed DOD's human resources activities and documentation tracking past efficiency initiatives. The Department of Defense (DOD) does not comprehensively or routinely assess the continuing need for its defense agencies and DOD field activities (DAFAs). DOD was statutorily required to review the services and supplies each DAFA provides to ensure there is a continuing need for each and that the provision of services and supplies by each DAFA, rather than by the military departments, is more effective, economical, or efficient. A DOD directive requires the recording of the review. DOD previously issued biennial reports to Congress to record its review. Since 2012, DOD has relied on existing processes to fulfill the requirement; such as the annual budget process and the day-to-day management of the DAFAs. However, DOD did not provide sufficient evidence that these processes satisfy the statute. For example, while DOD reviews the DAFAs during the budget process, it does not specifically review the provision of services by the DAFAs rather than the military departments. Further, DOD does not have internal guidance that provides clear direction for conducting and recording its response to the statutory requirement. Without such guidance, DOD is limited in its ability to clearly define or target the scope of its reviews and any resulting reports. As such, DOD and congressional decision makers may not have reasonable assurance of a continuing need for the DAFAs, or that the provision of services and supplies is effective, economical, and efficient. There is fragmentation and overlap within the DAFAs that provide human resources services to other defense agencies or organizations within DOD. At least six DOD organizations, including three DAFAs, perform human resources services for other parts of the department. One DAFA receives human resources services from all six organizations. This has resulted in negative effects, such as inconsistent performance information regarding hiring, fragmented information technology systems, and inefficiencies associated with overhead costs. For example, DOD officials stated that there are over 800 fragmented information technology systems used to store and record training records across the department, which are costly to maintain. DOD established a reform team to reduce inefficiencies within this business function. However, the team lacks comprehensive information on overhead costs that could guide reform and does not have time frames or deliverables for completing certain reform initiatives. With consistent human resource performance information, comprehensive information on overhead costs, and clear time frames in place, the team would be better positioned to thoroughly assess the department's system for human resources service delivery and develop and implement long-term solutions for better coordination or consolidation of this function. DOD has taken some steps to monitor and evaluate the results of key efficiency initiatives that affect the DAFAs. However, DOD has not always established baselines or performed ongoing monitoring of its initiatives. Further, DOD has focused on whether steps have been taken, rather than outcomes achieved. For example, DOD did not evaluate whether a prior efficiency initiative called the Core Business Process Review achieved any of its intended savings or led to expected efficiencies. Without ensuring that efficiency initiatives are fully monitored and evaluated against established baselines over time, DOD lacks a systematic basis for evaluating whether its various initiatives have improved the efficiency or effectiveness of its programs or activities. GAO is making five recommendations, including for DOD to develop internal guidance to conduct and record its reviews of DAFAs; collect consistent performance information and comprehensive overhead cost information; establish time frames and deliverables for key reform efforts; and ensure routine and comprehensive monitoring and evaluation of ongoing efficiency initiatives. DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "State is the lead agency involved in implementing American foreign policy and representing the United States abroad. According to State and USAID’s joint strategic plan for fiscal years 2018 through 2022, State’s goals are to (1) protect America’s security at home and abroad, (2) renew America’s competitive advantage for sustained economic growth and job creation, (3) promote American leadership through balanced engagement, and (4) ensure effectiveness and accountability to the American taxpayer. State’s Foreign Service employees serve in a variety of functions at overseas posts as either generalists or specialists. Foreign Service generalists help formulate and implement U.S. foreign policy and are assigned to work in one of five career tracks: consular, economic, management, political, or public diplomacy. Generalists at overseas posts collect information and engage with foreign governments and citizens of foreign countries and report the results of these interactions back to State headquarters in Washington, D.C., among other functions. Foreign Service specialists abroad support and maintain the functioning of overseas posts and serve in one of 25 different skill groups, in positions such as security officer or information management. Specialists at overseas posts play a critical role in ensuring the security and maintenance of the posts’ facilities, computer networks, and supplies as well as the protection of post staff, their family members, and local staff, among other functions. State may require Foreign Service employees to be available for service anywhere in the world, as needed, and State has the authority to direct Foreign Service employees to any of its posts overseas or to its headquarters in Washington, D.C. However, as noted in our 2012 report, State generally does not use this authority, preferring other means of filling high-priority positions, according to State officials. The process of assigning Foreign Service employees to their positions typically begins when they receive a list of upcoming vacancies for which they may compete. Foreign Service employees then submit a list of positions for which they would like to be considered, known as bids, to the Office of Career Development and Assignments and consult with their career development officer. The process varies depending on an officer’s grade and functional specialty, and State uses a variety of incentives to encourage Foreign Service employees to bid on difficult-to-fill posts. State groups countries of the world—and corresponding U.S. overseas posts in these countries—into areas of responsibility under six geographic regional bureaus: Bureau of African Affairs Bureau of East Asian and Pacific Affairs Bureau of European and Eurasian Affairs Bureau of Near Eastern Affairs Bureau of South and Central Asian Affairs Bureau of Western Hemisphere Affairs Overseas posts report to State headquarters through their respective regional bureaus. For example, because the Bureau of African Affairs has responsibility for developing and managing U.S. policy concerning parts of the African continent, U.S. overseas posts in Nigeria report through the bureau to State headquarters. According to State officials, State maintains personnel data on State employees in its GEMS database. GEMS includes information on Foreign Service and Civil Service positions; in particular, it shows the total number of authorized Foreign Service positions at State and whether each position is currently filled or vacant. As displayed in figure 1, the GEMS data show that the majority of Foreign Service employees (73 percent) work in positions at overseas posts. However, some Foreign Service staff (27 percent) are assigned to positions in the United States, where they may complete required language or other training, serve as desk officers for the regional bureaus, or work in other functions at State headquarters. According to State data, the number of both staffed and vacant overseas Foreign Service positions increased between 2008 and 2018. As shown in figure 2, the number of positions staffed grew from 6,979 in 2008 to 8,574 in 2018—a more than 20 percent increase. Despite the increase in the number of positions staffed, our analysis found that as of March 31, 2018, overall, 13 percent of State’s overseas Foreign Service positions were vacant. This vacancy percentage is similar to the percentages of vacancies in overseas Foreign Service positions that we reported in 2012 and 2008. In 2012, we reported that 14 percent of State’s overseas Foreign Service positions were vacant as of October 31, 2011, and we reported that the same percentage of overseas Foreign Service positions—14 percent—were vacant as of September 30, 2008. According to State officials, State’s ability to hire Foreign Service employees to fill persistent vacancies has been affected by factors such as reduced appropriations. For instance, according to State officials and State’s Five Year Workforce Plan, because of funding cuts enacted in fiscal year 2013, State could only hire one employee for every two leaving the Foreign Service. From fiscal years 2014 to 2016, funding for State’s annual appropriations supported hiring to replace Foreign Service employees projected to leave the agency, according to State officials. These officials indicated, however, that Foreign Service hiring was again impacted from January 2017 through May 2018 by a hiring freeze. As a result, State hired below levels required to replace full projected attrition of Foreign Service employees. While State’s data show persistent vacancies in both generalist and specialist positions at overseas posts, specialist positions remain vacant at a higher rate. State’s data show that 12 percent (680 of 5,660) of overseas Foreign Service generalist positions were vacant as of March 31, 2018, a slight decrease from the 14 percent of overseas Foreign Service generalist positions that we reported vacant in 2012. State’s data also show that 14.2 percent (594 of 4,188) of all overseas Foreign Service specialist positions were vacant, close to the 14.8 percent vacancy rate that we reported in 2012. State’s data show persistent vacancies in Foreign Service generalist positions responsible for analysis, engagement, and reporting at overseas posts. As shown in table 1, among Foreign Service generalist career tracks, the political, economic, and “other” tracks had the largest percentage of vacant positions, with, respectively, 20 percent, 16 percent, and 14 percent of positions vacant as of March 31, 2018. Our 2012 report noted vacancies in the same three career tracks. Political officers at overseas posts are responsible for collecting and analyzing information on political events, engaging with foreign governments, and reporting back to State headquarters. Economic officers at overseas posts work with foreign governments and other U.S. agencies on technology, science, economic, trade, and environmental issues. The “other” generalist career track includes positions designated as “Executive” or “International Relations,” which, according to State officials, may be filled by generalists from any of State’s five career tracks. State’s data show persistent vacancies in Foreign Service specialist positions that support and maintain the functioning of overseas posts. Among the 10 largest Foreign Service specialist skill groups, security officer, office management specialist, and information management had the largest percentages of vacant positions. As shown in figure 3, in these three groups, respectively, 16 percent, 16 percent, and 14 percent of positions were vacant. The vacancies in these three specialist skill groups are persistent; in 2012, we reported that the same three groups had the largest numbers of vacant positions. Security officers are typically responsible for responding to various threats to the physical security of overseas posts and for ensuring the protection of post staff, their family members, and local staff. Office management specialists provide professional management and administrative support. Information management staff are typically responsible for maintaining and ensuring the security of State’s computer networks and communications systems at overseas posts. State officials said that State has had difficulty in recruiting and hiring Foreign Service employees to fill specialist positions in some skill groups at overseas posts. According to State officials and staff at overseas posts, some vacant specialist positions are more difficult to fill than others because candidates for these positions must often possess skills in fields such as medicine or information technology that tend to be highly sought after in the private sector. According to staff at overseas posts, it is not uncommon for specialist candidates in these fields to choose higher- paying jobs in the private sector rather than specialist positions in the Foreign Service. Additionally, in some circumstances, State must compete with other federal agencies to recruit specialists from the same limited pool of talent. Consequently, according to State officials, State has been unable to attract and retain personnel with the skills necessary to fill some Foreign Service specialist positions, which has led to persistent vacancies in specialist positions. Vacancies in Foreign Service specialist positions at overseas posts present additional challenges because specialized skills and competencies are often required to perform the work of these positions. According to State officials, because Foreign Service generalists may be assigned to work outside of their career tracks, in some circumstances, State has more flexibility in filling a generalist vacancy than a specialist vacancy. For example, generalists outside the consular career track can serve as a consular officer for one or more tours of duty. However, specialist positions often require specialized skills or experience that generalists may not possess. In addition, according to staff at overseas posts, it is generally not possible for a Foreign Service specialist from one skill group to perform the work of a Foreign Service specialist from a different skill group. For instance, a Foreign Service specialist assigned to the medical section at a post will not be able to help address the workload of a vacant position in the information management section. Thus, according to staff at overseas posts, vacancies in specialist positions at the posts may create greater challenges than vacancies in generalist positions. According to State’s data, as of March 31, 2018, overseas posts with State’s highest foreign policy priorities had the highest percentages of vacant Foreign Service positions. Using its Overseas Staffing Model process, State assigns each embassy to one of seven categories based primarily on the level and type of work required to pursue the U.S. government’s diplomatic relations with the host country at post. As we previously reported, the rankings are closely associated with the department’s foreign policy priorities; the higher the category, the greater the resources needed to conduct the work of the overseas post and the higher the post’s foreign policy priority. For example, the highest-level category, level 5+, includes the largest, most comprehensive full-service posts, where the host country’s regional and global role requires extensive U.S. personnel resources. The lowest-level category includes small embassies with limited requirements for advocacy, liaison, and coordination in the host country’s government. As shown in table 2, according to State’s data, as of March 31, 2018, overseas posts in the “Embassy 5+” category had the highest percentage of vacant positions. The results of this analysis were similar to those we reported in 2012. While State has Foreign Service vacancies worldwide, as of March 31, 2018, the highest percentages of vacancies were in the South and Central Asian Affairs Bureau (SCA) and Near Eastern Affairs Bureau (NEA)—bureaus representing regions with heightened security risks that could threaten U.S. foreign policy interests, according to State. SCA, which includes countries such as Afghanistan, Pakistan, and India, faces a host of security and stability challenges that could threaten U.S. interests, according to a February 2018 report from State’s Office of Inspector General. NEA includes countries, such as Egypt, Iraq, and Saudi Arabia, which have faced numerous security threats in recent years that could also threaten U.S. interests overseas. As shown in figure 4, among State’s regional bureaus, as of March 31, 2018, SCA and NEA had the highest percentages of overseas Foreign Service vacancies at 21 percent (238 of 1,115 positions) and 18 percent (234 of 1,279 positions), respectively. In 2012, we reported that these two bureaus also had the highest percentages of overseas Foreign Service vacancies among regional bureaus. Vacancies in Foreign Service positions at overseas posts increase workloads and adversely affect the morale of Foreign Service employees. According to State officials in headquarters and staff at overseas posts, when a Foreign Service position at an overseas post is vacant, Foreign Service employees at that post are generally responsible for covering the workload of the vacant position. Further, Foreign Service employees at some posts—particularly posts with fewer Foreign Service staff—may be responsible for covering the workload of multiple vacant positions. For example, at two African posts we heard examples of Foreign Service employees covering the workload of multiple vacant Foreign Service positions. As a result of increased workloads, Foreign Service employees are also more likely to have less time available to perform some important functions, according to staff at overseas posts. According to staff at overseas posts, such functions include training and supervising entry- level Foreign Service employees, local staff, and eligible family members (EFM); reducing the risk of fraud, waste, and abuse; improving and innovating processes at post that could reduce inefficiencies; initiating and implementing projects that could enhance various diplomatic efforts; and conducting maintenance of systems. In addition, according to staff at overseas posts, vacancies adversely affect staff morale. Staff at multiple posts said that vacancies and the resulting increased workloads had created substantial stress and increased “burnout” of Foreign Service employees at the posts. They noted that these levels of stress and burnout had contributed to Foreign Service employees’ ending their overseas assignments early for medical or personal reasons. These curtailments, in turn, had increased the overall vacancies and their effects at overseas posts. According to staff at overseas posts, vacancies in Foreign Service generalist positions at overseas posts adversely affect State’s diplomatic readiness. Among Foreign Service generalist career tracks, the political and economic career tracks had the two largest percentages of vacant positions—20 percent and 16 percent, respectively—as of March 31, 2018. According to staff at overseas posts, vacancies in political and economic positions at overseas posts—particularly posts with fewer Foreign Service employees—limit the amount of reporting on political and economic developments that posts are able to submit back to State headquarters. For example, Foreign Service employees from three posts in Africa told us that persistent, long-term vacancies in those posts’ political and economic positions had constrained their abilities to provide full reporting on political and economic developments in their host countries. According to staff at overseas posts, reporting on political and economic developments in other countries—submitted by overseas posts back to State headquarters—is essential for State to make informed foreign policy decisions. Foreign Service employees from two posts in large countries in East and South Asia also told us that vacancies in these sections had limited their capacity to engage with host government officials on important, strategic issues for the United States, such as reducing nuclear proliferation or enhancing trade and investment relationships with the United States. Vacancies in the political and economic career tracks at overseas posts could adversely affect State’s ability to achieve two of the goals in State and USAID’s joint strategic plan for fiscal years 2018 through 2022—(1) renew America’s competitive advantage for sustained economic growth and job creation and (2) promote American leadership through balanced engagement. According to staff at overseas posts, vacancies in Foreign Service specialist positions at overseas posts may heighten the level of security risk at the posts and disrupt post operations. Among Foreign Service specialist skill groups with the highest number of vacant positions, security officer, office management specialist, and information management had the largest percentages of vacant positions—16 percent, 16 percent, and 14 percent, respectively—as of March 31, 2018. According to staff at overseas posts, vacancies in security officer positions at overseas posts reduce the amount of time that security staff can spend identifying, investigating, and responding to potential security threats to the post. Security officers are also responsible for identifying and analyzing host-country intelligence-gathering efforts at their respective overseas posts—and post staff told us that, because of vacancies in these positions, some security officers had been unable to complete this work for their posts, potentially increasing the risk of foreign government officials gaining access to sensitive information. Also, post staff told us that security officer vacancies limit the amount of time that security officers present at posts can devote to important security oversight activities, including regular training, drilling, and supervising of local guard forces and security contractors. Post staff noted, for example, that security officers at overseas posts should conduct regular training and drilling exercises to evaluate their local guard force’s effectiveness in searching a vehicle entering the post compound for explosive devices. According to post staff, when these important security oversight activities are not properly and regularly conducted, the level of security risk at these overseas posts may increase. According to State officials in headquarters and staff at overseas posts, as well as reporting by State’s OIG, vacancies in information management positions at overseas posts have increased the vulnerability of posts’ computer networks to potential cybersecurity attacks and other malicious threats. State officials told us that the Foreign Service had faced chronic shortages of information management staff available to fill these positions worldwide. According to State officials, because of ongoing information management vacancies, some required tasks—such as conducting planned network maintenance—were performed infrequently or not at all. In another example, staff at overseas posts said that because of vacancies, information management staff had been unable to regularly check their computer system logs to ensure that security breaches had not taken place. Post staff added that, if a breach did occur, vacancies could increase the amount of time needed to identify an attack and deploy countermeasures, further increasing the risks to posts’ computer networks. Inspections conducted by State’s OIG from fall 2014 to spring 2016 found that information management staff at 33 percent of overseas posts had not performed various required information management duties. According to State’s OIG, neglect of these duties may leave the department vulnerable to increased cybersecurity attacks. According to staff at overseas posts, the office management specialist position at overseas posts has evolved considerably over time; these specialists increasingly play a critical role in ensuring that the work of overseas posts is effectively completed. Post staff said that office management specialists provide administrative and other support services to other Foreign Service employees and are assigned to various sections of post. For example, staff at one post noted that office management specialists assigned to the Security Officer sections at overseas posts reduce the workload of security officers by completing more routine security tasks and allowing the security officers to focus on more challenging or involved tasks necessary to secure overseas posts. Post staff told us that vacancies in office management specialist positions reduce the amount of work that can be completed by other Foreign Service employees at overseas posts. For example, when office management specialist positions assigned to the Security Officer or Information Management sections of posts are vacant, these vacancies further exacerbate the higher number of vacancies that already exist in these sections. According to staff at overseas posts, higher numbers of office management specialist vacancies require other Foreign Service employees to spend a significant amount of time on administrative tasks, reducing the amount of time these staff can spend on mission-critical activities. Officials in headquarters and at overseas posts described various State efforts to help address overseas Foreign Service vacancies. According to State officials, Foreign Service vacancies at overseas posts are a complex problem that multiple offices within State address on an individual basis. State’s various efforts to address overseas Foreign Service vacancies are not guided by an integrated action plan to reduce persistent vacancies. Our 2017 High-Risk Series report calls for agencies to, among other things, design and implement action plan strategies for closing skills gaps. The action plan should (1) define the root cause of all skills gaps within an agency and (2) provide suggested corrective measures, including steps necessary to implement solutions. This report also emphasizes the high risk that mission-critical skills gaps in the federal workforce pose to the nation. While various State offices have implemented the efforts we identified, State lacks an action plan that is integrated—or consolidated—across its relevant offices to guide its efforts to address persistent overseas Foreign Service vacancies. Moreover, some staff at overseas posts acknowledged that the efforts State has taken to help address vacancies have not reduced persistent Foreign Service vacancies, notably in specialist positions. In response to our inquiry about an action plan, State officials said that the agency does not have a single document that addresses Foreign Service staffing gaps at overseas posts. Instead, State officials directed us to State’s Five Year Workforce Plan: Fiscal Years 2016-2020, stating that it was the most comprehensive document that outlines State’s efforts to address Foreign Service vacancies at overseas posts. The workforce plan notes that it provides a framework to address State’s human capital requirements and highlights State’s challenges and achievements in recruiting, hiring, staffing, and training Foreign Service staff. However, in reviewing the portions of the workforce plan that State indicated were most relevant, we found that the workforce plan does not include an integrated action plan that defines the root causes of the persistent overseas Foreign Service vacancies we identified or suggest corrective measures to reduce vacancies in these positions, including steps necessary to implement solutions. State officials also noted that they frequently meet to discuss and address workforce issues. For example, they said they convene a multi-bureau planning group that meets biweekly to discuss strategic workforce issues such as hiring needs based on attrition and other issues. However, according to State officials, this group has not developed an action plan to reduce persistent Foreign Service vacancies at overseas posts. State lacks an integrated action plan to guide its efforts to address persistent Foreign Service vacancies that includes corrective measures to address the root causes of the vacancies. Without defining the root causes of persistent Foreign Service vacancies at overseas posts and identifying appropriate corrective measures, overseas vacancies may persist and continue to adversely affect State’s ability to achieve U.S. foreign policy goals. Foreign Service generalists and specialists at overseas posts are critical to advancing U.S. foreign policy and economic interests abroad. However, for at least a decade, the Foreign Service has had persistent vacancies in both generalist and specialist positions at overseas posts. In particular, large numbers of vacant positions have persisted over time in certain overseas Foreign Service positions, such as information management and security officer positions. These vacancies in critical positions at overseas posts have adversely affected State’s ability to carry out its mission effectively and threaten State’s ability to ensure the security and safety of its employees, their families, and post facilities. While State has made some efforts to address Foreign Service vacancies, addressing chronic vacancies in critical positions at overseas posts requires a thoughtful, coherent, and integrated action plan that defines the root causes of persistent Foreign Service vacancies at overseas posts along with suggested corrective measures to reduce such vacancies, following what was called for in our 2017 High-Risk Series report. Developing such an action plan would help State address its persistent staffing gaps, improve its ability to achieve U.S. foreign policy goals, and help ensure secure and efficient operations. The Secretary of State should develop an integrated action plan that defines the root causes of persistent Foreign Service vacancies at overseas posts and provides suggested corrective measures to reduce such vacancies, including steps necessary to implement solutions. (Recommendation 1) We provided a draft of this report to State for review and comment. In its comments, reproduced in appendix III, State concurred with our recommendation. State also noted that it has taken actions and identified some causes of vacancies, but acknowledged that it lacks an integrated action plan and will take steps to develop such a plan. State also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6881 or bairj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) vacancies in the Department of State’s (State) Foreign Service staffing at overseas posts, (2) reported effects of Foreign Service vacancies on diplomatic readiness, and (3) State’s efforts to address Foreign Service vacancies. To address these three objectives, we interviewed State officials from the department’s Bureau of Human Resources and Bureau of Consular Affairs as well as State officials representing the Offices of the Executive Director for State’s six regional bureaus. We also interviewed staff at 10 overseas posts. We conducted in-person interviews with staff at 3 of these posts—the U.S. Embassy in Beijing and the U.S. Consulate in Shanghai, China, and the U.S. Embassy in New Delhi, India. We conducted telephone interviews with staff at the other 7 posts—the U.S. Embassies in Abuja, Nigeria; Bogota, Colombia; Kinshasa, Democratic Republic of the Congo; Kabul, Afghanistan; Mexico City, Mexico; and N’Djamena, Chad; and the U.S. Consulate in Frankfurt, Germany. We used the following criteria to select overseas posts for interviews: (1) posts with larger numbers of Foreign Service vacancies; (2) posts with diversity in the types of Foreign Service positions that were vacant; (3) posts with higher relative importance to U.S. economic, national security, and other foreign policy interests; and (4) posts in a range of geographic locations by State region. To examine vacancies in State’s Foreign Service staffing at overseas posts, we analyzed State’s personnel data on Foreign Service staffing at overseas posts from the department’s Global Employment Management System (GEMS), as of March 2018. Our analysis of the GEMS data includes Foreign Service positions filled by permanent Foreign Service employees as well as positions filled by nonpermanent Foreign Service employees, such as Consular Fellows. This analysis does not include the number of staffed and vacant positions at overseas posts in Libya, Syria, and Yemen, which, at the time of our review, were in suspended operations status, as well as U.S. Mission Somalia, which was operating under special circumstances at a different location. To calculate vacancy rates, we divided the total number of positions by the number of positions listed as vacant in GEMS. For example, a post with 10 positions and 2 vacancies would have a vacancy rate of 20 percent. We calculated vacancy rates for each of the following categories: type (i.e., generalist or specialist), function (e.g., consular or information management), regional bureau (i.e., Bureau of African Affairs or Bureau of Western Hemisphere Affairs), and embassy and nonembassy rankings from State’s Overseas Staffing Model (i.e., Embassy 3+ or 5). According to State officials, the data in GEMS have a number of limitations: The number of vacant positions at overseas posts listed in GEMS may be overstated, because State has not yet decided to remove some of these positions from its database. Some of the vacancies in GEMS are short-term or temporary. Foreign Service employees periodically rotate out of their positions at their overseas posts, sometimes creating temporary vacancies until the positions are filled by incoming Foreign Service employees. The GEMS data show larger numbers of vacant Foreign Service positions at posts in Afghanistan, Iraq, and Pakistan than actually were unstaffed at these posts. According to State officials, this discrepancy results from State’s relying heavily on shorter-term assignments to fill Foreign Service positions at these locations. These shorter-term assignments are not reflected in GEMS, and the positions therefore appear vacant. The GEMS data may not reflect Foreign Service employees who have been temporarily reassigned from one overseas post to another. The GEMS data may show positions as filled although the Foreign Service employee filling the position has not yet arrived at post. To assess the reliability of the GEMS database, we asked State officials whether State had made any major changes to the database since our 2012 report, when we assessed the GEMS data to be sufficiently reliable. State officials indicated that no major changes had been made. We also tested the data for completeness, confirmed the general accuracy of the data with officials at selected overseas posts, and interviewed knowledgeable officials from State’s Office of Resource Management and Organizational Analysis concerning the data’s reliability. We found the GEMS data to be reliable for the purpose of determining the numbers and percentages of vacant Foreign Service positions at overseas posts. We did not validate whether the total number of authorized overseas Foreign Service positions was appropriate or met State’s needs. We also reviewed State workforce planning documents and budget documents, such as State’s Five Year Workforce and Leadership Succession Plan: Fiscal Years 2016-2020 and Quadrennial Diplomacy and Development Review. In addition, we reviewed State Office of Inspector General reports as well as our previous reports on human capital challenges at State and effective strategic human capital management across the federal government. In particular, our report High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others notes that strategic human capital management is a high-risk issue across the federal government and lists five key elements as a road map for agency efforts to improve and ultimately address such issues. For our third objective, we assessed whether State’s efforts to address vacancies were guided by a corrective action plan that identifies the root causes of persistent Foreign Service vacancies at overseas posts and suggests corrective measures to reduce such vacancies, including steps necessary to implement solutions. We conducted this performance audit from August 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The “Economic” generalist career track includes positions from the “Science Officer” staffing skill group in the GEMS data. 170 Foreign Service employees were not staffed to one of the six regional bureaus. In addition to the contact named above, Godwin Agbara (Assistant Director), Ian Ferguson (Analyst-in-Charge), Anthony Costulas, Natalia Pena, Debbie Chung, Chris Keblitis, Reid Lowe, Justin Fisher, and Alexander Welsh made key contributions to this report.", "summary": "State staffs Foreign Service employees to more than 270 embassies and consulates worldwide to advance U.S. foreign policy and economic interests. In 2009 and 2012, GAO identified ongoing Foreign Service staffing gaps. GAO was asked to review State's Foreign Service staffing. This report examines (1) vacancies in State's Foreign Service staffing at overseas posts, (2) reported effects of Foreign Service vacancies on diplomatic readiness, and (3) State's efforts to address Foreign Service vacancies. To address these objectives, GAO analyzed State's Global Employment Management System data as of March 2018. The system includes information on Foreign Service and Civil Service positions, including the total number of authorized Foreign Service positions and whether each position is filled or vacant. GAO also reviewed its relevant prior reports and State workforce planning documents. In addition, GAO interviewed State staff at 10 overseas posts, selected on the basis of large numbers of Foreign Service vacancies and diversity in the types of Foreign Service positions that were vacant at these posts, among other factors. The Department of State's (State) data show persistent Foreign Service vacancies at overseas posts since 2008. According to the data, 13 percent of overseas Foreign Service positions were vacant as of March 2018. This percentage is similar to the percentages GAO reported for 2008 and 2012, when 14 percent of these positions were vacant. In addition, State's data show persistent vacancies at overseas posts in generalist positions that help formulate and implement U.S. foreign policy and in specialist positions that support and maintain the functioning of overseas posts. State's data also show persistent Foreign Service vacancies at overseas posts with State's highest foreign policy priorities and in regions with security risks that could threaten U.S. foreign policy interests. According to staff at overseas posts, Foreign Service vacancies adversely affect State's ability to carry out U.S. foreign policy. Staff at overseas posts told us that vacancies increase workloads, contributing to low morale and higher stress for Foreign Service staff and that vacancies in Political and Economic positions—20 percent and 16 percent, respectively—limit the reporting on political and economic issues that posts are able to provide to State headquarters. Notably, officials also stated that vacancies in specialist positions may heighten security risks at overseas posts and disrupt post operations. For instance, some overseas post staff said that vacancies in Information Management positions had increased the vulnerability of posts' computer networks to potential cybersecurity attacks and other malicious threats. State described various efforts—implemented by multiple offices in the department —to help address overseas Foreign Service vacancies, but these efforts are not guided by an integrated action plan to reduce persistent vacancies. An example of State's efforts is the “Hard-to-Fill” program, which allows Civil Service staff an opportunity to fill a Foreign Service vacancy on a single overseas tour. According to GAO's 2017 High-Risk Series report, an agency should design and implement an action plan—integrated across its relevant offices—that defines the root causes of all skills gaps and suggests corrective measures. However, State has not developed such an action plan for reducing persistent overseas Foreign Service vacancies. Without developing an integrated action plan, overseas Foreign Service vacancies may persist. As a result, State's ability to achieve U.S. foreign policy goals and help ensure secure and efficient operations could be adversely impacted. GAO recommends that State develop an integrated action plan that defines the root causes of persistent Foreign Service vacancies at overseas posts and suggests corrective measures to reduce such vacancies. State concurred with our recommendation and noted that it will take steps to develop an integrated action plan.", "document_type": "gao"}
{"report": "Various DOJ and federal judiciary stakeholders play key roles in the federal criminal justice process, and as such, they can also have key roles in considering whether to use incarceration alternatives for a given offender or inmate. For example, in the course of the federal criminal justice process, a U.S. attorney is involved in the process of investigating, charging and prosecuting an offender, among other responsibilities. Federal defenders are called upon to represent defendants who are unable to financially retain counsel in federal criminal proceedings. The U.S. Probation and Pretrial Services Office (PPSO), an office within the judiciary, also has responsibilities including supervising an offender pretrial or after conviction. Federal judges are responsible for determining an offender’s sentence, and, in the case of incarceration, BOP is responsible for caring for the inmate while in custody. Federal laws and guidelines determine what, if any, incarceration is appropriate for offenders. The Sentencing Reform Act of 1984 established the independent U.S. Sentencing Commission (USSC) within the judicial branch and charged it with, among other things, developing federal sentencing guidelines. The guidelines specify sentencing guideline ranges—a range of time (in months) that offenders should serve given the nature of their offense and other factors—but also permit sentences to depart upward or downward from guideline ranges because of aggravating or mitigating circumstances. In 2005, the Supreme Court found the sentencing guidelines, which had previously been binding for federal judges to follow in sentencing criminal defendants, to be advisory in nature. Regardless of the guidelines’ advisory nature, judges are still required to calculate sentences properly and to consider the guideline ranges as well as the nature and circumstances of the offense, the defendant’s history, and the need for deterrence, among other sentencing goals. As we reported in June 2016, alternatives to incarceration were available at various steps in the federal criminal justice process, from charging and prosecution through incarceration (see figure 1). For instance, at the front-end of the criminal justice process, there are pretrial diversion programs that can provide offenders an opportunity to avoid prosecution or incarceration if they satisfy program requirements. In addition, toward the end of inmates’ periods of incarceration, BOP may place inmates in residential reentry centers (RRC, also known as halfway houses), in which inmates are housed outside of a prison environment prior to their release in the community. During their time in RRCs, inmates are authorized to leave for approved activities, such as work; are monitored 24 hours a day, such as through sign-out procedures; are required to work or be actively seeking work; and are required to pay a percentage of their salaries as a subsistence fee to cover some of their expenses at the RRC. In addition, BOP may place inmates in home confinement toward the end of their sentences. While in home confinement, inmates are required to remain in their homes when not involved in approved activities, such as employment, and are supervised and monitored, such as through curfews, random staff visits, or electronic monitoring. RRC staff may provide the supervision of inmates in home confinement. Through an interagency agreement, BOP and the PPSO also established the Federal Location Monitoring Program, through which PPSO officers provide supervision for BOP inmates on home confinement under certain conditions. Among other things, to qualify inmates ordinarily must be classified as minimum security level; seek and maintain employment; and pay for all or part of the costs of the Federal Location Monitoring Program. BOP is responsible for the custody and care of federal inmates. As of December 2017, there were a total of about 184,000 federal inmates, according to BOP. According to BOP data, 83 percent of these inmates are in the 122 institutions managed by BOP. The remainder are confined in secure privately managed or community-based facilities, local jails, or in home confinement. BOP has a role to help ensure that offenders properly transition into society and avoid a return to prison or criminal behavior (recidivism) after they have completed their terms of incarceration. Among other activities, BOP provides reentry services to inmates within federal prisons that may include drug treatment programs, education and vocational training, and psychology services. BOP also is to facilitate the transfer of inmates into RRCs, which provide assistance as inmates transition into communities, to include home confinement. RRCs provide employment counseling and job placement assistance, financial management assistance, and substance abuse treatment or counseling as well as other services, which may vary by facility. According to BOP, approximately 180 RRCs provide housing for over 7,500 federal offenders prior to release into their communities. As we reported in September 2017, individuals convicted of a crime may have limitations placed upon them that can affect their reentry. Individuals convicted of a crime generally face a sentence, which can include fines, probation, and incarceration in jail or prison. In addition to the sentence, individuals may also face collateral consequences— penalties and disadvantages, other than those associated with a sentence, which can be imposed upon an individual as a result of a conviction. For example, collateral consequences may prohibit people who committed crimes involving a sex offense or offense involving a child victim from working in a child care facility. Collateral consequences can be contained in federal and state laws and regulations. Notably, federal collateral consequences can serve various functions, such as enhancing public safety or protecting government interests. In 2012, the American Bar Association began compiling the first nationwide inventory of collateral consequences, known as the National Inventory of the Collateral Consequences of Conviction (NICCC). As of December 31, 2016, the NICCC contained roughly 46,000 collateral consequences established through federal and state laws and regulations. We reported on collateral consequences contained in federal laws and regulations (i.e., federal collateral consequences) that can be imposed upon individuals with nonviolent drug convictions (NVDC). Our review of the NICCC found that, as of December 31, 2016, there were 641 collateral consequences in federal laws and regulations that can be triggered by NVDC. The NICCC data indicated that these 641 collateral consequences can limit many aspects of an individual’s life, such as employment, business licenses, education, and government benefits. For example, individuals may be ineligible for certain professional licenses, federal education loans, or federal food assistance. Moreover, we found that the NICCC identified that 78 percent of these 641 collateral consequences can potentially last a lifetime. We also reported on selected stakeholders’ views. We spoke to 14 individuals who were leaders of organizations representing judges, victims of crime, and states, among others—on actions the federal government could consider to mitigate these collateral consequences. Most of the stakeholders that we interviewed—13 of 14—said it was important for the federal government to take action to mitigate federal collateral consequences for NVDC. Thirteen stakeholders said that mitigating federal collateral consequences could potentially reduce the likelihood that individuals with NVDC reoffend. Similarly, 11 stakeholders said that mitigation could potentially increase the likelihood that individuals with NVDC successfully reenter the community after jail or prison. The text box below identifies some of the statements made by stakeholders during our interviews from our prior work regarding federal collateral consequences for NVDC. Stakeholder Perspectives on Federal Collateral Consequences for Nonviolent Drug Convictions, as Reported in GAO-17-691 “The breadth of federal collateral consequences for nonviolent drug convictions is so massive and affects so many aspects of a person’s life, such as family life, immigration, jury service, housing, employment, and voting, that they contribute to an underclass of people.” “Many instances wherein the federal collateral consequences for nonviolent drug convictions end up making it hard for people to live a law abiding life. For example, they may not be able to live in public housing or may be barred from getting an occupational license or doing a particular job. This may push them to turn back to committing crimes to make some money.” “…some federal collateral consequences for nonviolent drug convictions are sensible and appropriate. If we abolish exist you could imperil public safety…” “We can’t just say we’re going to err on the side of public safety and implement a wide range of collateral consequences strictly across the board. The problem is that public safety is undermined by making it impossible for individuals to move on from the criminal offense.” “It is important not to assume that nonviolent means that there is no victim.” Since 1980, the federal prison population increased from about 25,000 to about 184,000, as of December 2017. In June 2015 and June 2016, we reported that in part to help address challenges associated with overcrowding in certain institutions and related costs of incarceration, DOJ had taken steps to reduce the prison population by pursuing initiatives to: use alternatives to incarceration for low-level nonviolent crimes; prioritize prosecutions to focus on serious cases; and commute, or reduce, sentences of qualified federal inmates. In these reports, we highlighted potential areas for continued oversight of these initiatives and made six recommendations. DOJ concurred with five of these recommendations and partially concurred with the other. As of December 2017, DOJ has implemented two of the six recommendations and had not fully addressed the remaining four. DOJ could better measure effectiveness of pretrial diversion alternatives. In June 2016, we reported that DOJ had taken steps to pursue alternatives to incarceration for certain offenders, but could improve data collection and efforts to measure outcomes resulting from the use of pretrial diversion alternatives. Our review examined two pretrial diversion programs on the front-end of the criminal justice process that provided offenders an opportunity to avoid incarceration if they satisfy program requirements. Title 9 of the U.S. Attorneys’ Manual permits U.S. Attorneys’ Offices to divert, at the discretion of a U.S. Attorney, certain federal offenders from prosecution into a program of supervision and services administered by the PPSO. Under the Title 9 diversion program, if the offender fulfills the terms of the program, the offender will not be prosecuted, or, if the offender has already been charged, the charges will be dismissed. In addition to the Title 9 Pretrial Diversion Program, federal criminal justice stakeholders within some judicial districts have voluntarily established court-involved pretrial diversion practices. Court-involved pretrial diversion allows certain federal offenders the opportunity to participate in supervised programs or services, such as a drug court to address criminal behavior that may be linked to addiction to drugs or alcohol. Program participants are to meet regularly with court officials including a judge and pretrial services officer to discuss their progress in the program. If the offender satisfies program requirements, the offender may not be prosecuted, charges may be dismissed, or the participant may receive a reduced sentence. While DOJ had collected some data on the use of pretrial diversion, we found that the data were of limited usefulness and reliability because its case management system did not distinguish between the different types of diversion and DOJ had not provided guidance to U.S. Attorneys’ Offices as to when and how pretrial diversion cases are to be entered into the system. In addition, we found that DOJ had not measured the outcomes or identified the cost implications of its pretrial diversion programs. To address these deficiencies, we made four recommendations to DOJ. The first two relate to tracking and entering pretrial diversion data, while the second two relate to assessing outcomes based on the data. Specifically, we recommended that DOJ (1) separately identify and track the different types of pretrial diversion programs, (2) provide guidance to its attorneys on the appropriate way to enter data, (3) identify, obtain, and track data on the outcomes and costs of pretrial diversion programs, and (4) develop performance measures to assess diversion program outcomes. DOJ concurred with all four of our recommendations. In October 2016, DOJ took actions to fully implement the first two recommendations. Specifically, in September 2016, DOJ provided guidance to staff in its U.S. Attorneys’ Offices that outlines (1) the use of two new pretrial diversion codes—one for Title 9 pretrial diversion and another for court-involved diversion and (2) the appropriate entries to create and dispose of each type of pretrial diversion. Attorneys were instructed to use the codes starting on October 1, 2016. However, as of December 2017, DOJ has not implemented the third and fourth recommendations. We continue to believe that by obtaining data on the costs and outcomes of pretrial diversion programs and establishing performance measures, DOJ would gain multiple advantages in its ability to manage these programs and optimize their outcomes and cost implications. DOJ could better assess initiatives to address prison overcrowding and costs. In June 2015, we reported that DOJ could better measure the efficacy of two incarceration initiatives designed to address challenges related to overcrowding and rising costs. One of these was the Smart on Crime initiative, announced in August 2013 as a comprehensive effort to: prioritize prosecutions to focus on the most serious cases; reform sentencing to eliminate unfair disparities and reduce overburdened prisons; pursue alternatives to incarceration for low-level nonviolent crimes; improve reentry to curb repeat offenses and re-victimization; and surge resources to prevent violence and protecting most vulnerable populations. In our report, we found that DOJ had established indicators that were well-linked to these goals; however, the indicators lacked other key elements of successful performance measurement systems, such as clarity, a measurable target, or context. For example, none of the indicators had numerical targets by which to assess whether overall goals and objectives are achieved. To address this deficiency, we recommended that DOJ modify its Smart on Crime indicators to incorporate key elements of successful performance measurement systems. DOJ partially concurred with the recommendation, and agreed to continually refine and enhance the indicators to improve their clarity and context. However, DOJ did not agree that establishing measurable targets for its indicators was appropriate. We recognized that it might not be appropriate to create targets for every indicator. Nevertheless, we maintained that measurable performance targets that are properly developed, communicated, and managed, can aid Department leadership in the admittedly challenging task of assessing progress in the Smart on Crime Initiative. In March 2017, DOJ noted that, due to a change in administration, the status of the Smart on Crime Initiative was uncertain. In May 2017, the Attorney General issued a new charging and sentencing policy to all federal prosecutors that effectively rescinded any previous policy of DOJ that is inconsistent with the new charging and sentencing policy, including certain aspects of the Smart on Crime Initiative. In December 2017, DOJ stated it would start to collect data on and monitor the implementation of this new policy. However, DOJ did not provide information on how it plans to modify its indicators to incorporate key elements of successful performance measurement systems. To the extent that DOJ continues to implement other aspects of the Smart on Crime initiative, such as improving reentry and surging resources to prevent violence we continue to believe this recommendation is valid. The second initiative we addressed in our June 2015 report was the Clemency Initiative, which encourages nonviolent, low-level federal offenders to petition to have their sentences commuted, or reduced, by the President. Commutation of sentence, as we reported, has long been considered to be an extraordinary remedy that is rarely granted. According to DOJ, in 2013, then-President Obama expressed a desire to review more petitions, and DOJ pledged to expedite the review of such petitions in order to provide them to the President for consideration. However, we found that DOJ had not adequately assessed the extent to which the Clemency Initiative is expeditiously identifying meritorious petitions because it had not tracked how long it takes for petitions to clear each step in its review process or identified and addressed any processes that may contribute to unnecessary delays. We made a recommendation to DOJ to address this deficiency. DOJ concurred, but in March 2017 DOJ stated that it had no standard review process to evaluate. In December 2017, DOJ reported to us that it has taken steps to accelerate the review of commutation cases, such as assigning two attorneys to spend additional time on commutation cases. Although DOJ’s actions are consistent with our recommendation, DOJ has not tracked how long it takes for petitions to clear each step in its review process. This makes it unclear whether DOJ’s actions are addressing the processes that contribute to unnecessary delays. As part of its mission to protect public safety, BOP provides reentry programming that aims to facilitate offenders’ successful return to the community and reduce recidivism. These reentry efforts include programs offered in BOP facilities, as well as RRC and home confinement services that allow inmates to serve the final months of their sentences in the community. In our February 2012, June 2015, and June 2016 reports we highlighted potential areas for continued oversight and made four recommendations to BOP. As of December 2017, BOP has implemented two of the four recommendations and has taken action to address one other recommendation. BOP has developed a plan to evaluate its reentry programs. In June 2015, we reported that BOP had 18 reentry programs available to inmates in BOP institutions in the areas of inmate treatment and education. We found that while BOP had plans to evaluate the performance of some of its reentry programs, it did not have a plan in place to prioritize evaluations across all of these programs. As a result, we recommended that BOP include, as part of its current evaluation plan, all 18 of BOP’s national reentry programs, and prioritize its evaluations by considering factors such as resources required for conducting evaluations. In May 2016, BOP provided to us an evaluation plan that was consistent with our recommendation. BOP has continued to update the evaluation plan to reflect changes in priority. For example, the most recent plan, updated in July 2017, lists BOP’s Mental Health Step Down Unit program as its top priority, with a target evaluation date of fiscal year 2018. According to BOP, this reflects the need for analysis of services for seriously mentally ill inmates. BOP has taken steps to assess costs of home confinement services. In February 2012, we reported that BOP did not know the actual cost of home confinement services. To facilitate inmates’ reintegration into society, BOP may transfer eligible inmates to community corrections locations for up to the final 12 months of their sentences. Inmates may spend this time in a RRC and in confinement in their homes for up to 6 months. BOP contracts with private organizations to manage the RRCs and monitor inmates in home confinement. At the time of our review, BOP was paying a rate of 50 percent of the overall per diem rate negotiated with the RRC for each inmate in home confinement. For example, if BOP paid a contractor the average community corrections per diem rate of $70.79 for each inmate housed in a RRC, BOP would pay $35.39 per day for that contractor’s supervision of each inmate in home confinement. However, according to BOP, the agency did not require contractors to provide the actual costs for home confinement services as part of their contract and therefore did not know the cost of home confinement. To help BOP better manage its costs, we recommended that BOP establish a plan for requiring contractors to submit separate prices of RRC beds and home confinement services. BOP implemented this recommendation and determined that all new solicitations as of February 1, 2013, will have separate line items for RRC in-house beds and home confinement services. According to BOP, as of November 2017, 184 solicitations with separate RRC bed and home confinement service line items have been issued since February 2013. BOP could better measure the outcomes of RRCs and home confinement. In June 2016, we reported that BOP was not positioned to track the information it would need to help measure the outcomes of inmates placed in RRCs and home confinement and did not have performance measures in place. Specifically, we found that, as part of its strategic plan, BOP had two measures—one to track the number of inmates placed into RRCs, and another to track the number of inmates placed in home confinement. However, these measures did not help assess the outcomes of RRCs and home confinement, such as how these programs may or may not affect the recidivism rates of inmates. To address this deficiency, we made two recommendations to BOP to (1) identify, obtain, and track data on the outcomes of the RRC and home confinement programs; and (2) develop performance measures by which to help assess program outcomes. DOJ concurred with these recommendations. As of December 2017, BOP has taken steps to implement our recommendation to identify, obtain, and track data on the outcomes of RRCs and home confinement. In particular, BOP reported to us that it has developed a revised Statement of Work for use with its RRC contractors that requires the contractors to track and report quarterly to BOP on, among other things, the number of placements into and releases from RRCs and home confinement; revocations from RRCs or home confinement; and RRC and home confinement residents that have secured full, part-time, or temporary employment. BOP plans to compile these data to track contractor performance and program outcomes. Further, BOP reported to us that it has developed a voluntary survey that asks RRC residents about their RRC experiences, including the amount of help they received in finding and keeping a job, and finding a place to live. These actions are in line with our recommendation and we will continue to monitor their implementation. However, as of December 2017, BOP has not provided evidence to us that it has developed performance measures by which to help assess program outcomes. We continue to believe BOP should do so. Chairman Gowdy, Ranking Member Cummings, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have. For further information about this statement, please contact Diana Maurer at (202) 512-8777 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this statement include Brett Fallavollita (Assistant Director), David Alexander, Pedro Almoguera, Joy Booth, Billy Commons, III, Tonnye’ Connor-White, Jessica Du, Lorraine Ettaro, Michele Fejfar, Christopher Hatscher, Susan Hsu, Tom Jessor, Matt Lowney, Heather May, and Jill Verret. Key contributors for the previous work on which this testimony is based are listed in each product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "BOP's rising costs and offender recidivism present incarceration challenges to both DOJ and the nation. For example, BOP's operating costs have generally increased over time, and in fiscal year 2017 amounted to more than $6.9 billion, or 24 percent of DOJ's total discretionary budget. In addition, from 1980 through 2013, BOP's prison population increased by almost 800 percent, from 24,640 to 219,298. While the prison population began to decline in 2013, DOJ has continued to identify prison crowding as a critical issue. GAO has examined a number of DOJ efforts to slow the growth of the prison population and to reduce recidivism through the use of reentry programs to help offenders successfully return to the community. This statement summarizes findings and recommendations from recent GAO reports that address (1) DOJ's incarceration reduction initiatives, and (2) BOP reentry programs. This statement is based on prior GAO products issued from February 2012 through June 2016, along with updates on the status of recommendations obtained as of December 2017. For the updates on DOJ's progress in implementing recommendations, GAO analyzed information provided by DOJ officials on actions taken and planned. The Department of Justice (DOJ) has fully addressed two of six GAO recommendations related to its incarceration reduction initiatives . In June 2015 and June 2016, GAO reported that to help address challenges associated with incarceration, DOJ had, among other things, taken steps to reduce the prison population by pursuing initiatives to use alternatives to incarceration for low-level nonviolent crimes. GAO made six recommendations to DOJ related to these efforts. As of December 2017, DOJ has implemented two of the six recommendations and has not fully addressed the remaining four. Specifically, to enhance efforts to measure program outcomes, DOJ issued guidance on proper data entry and began tracking data on different types of pretrial diversion programs that allow certain offenders to avoid incarceration if they satisfy program requirements. In addition, as of December 2017, DOJ has taken steps to partially implement GAO's recommendation to address unnecessary delays in reviewing inmates' petitions to commute their sentences. DOJ has not taken action to address recommendations to better assess the results of pretrial diversion programs or another effort to prioritize prosecutions and reform sentencing to eliminate unfair disparities, among other goals. Further, in December 2017, DOJ noted there had been policy changes since GAO made a recommendation related to enhancing measures to monitor prioritizing prosecution and sentencing reform. Although DOJ reported taking some actions to implement GAO's recommendation, these actions did not include establishing measures that incorporate key elements of successful performance measurement systems. DOJ has addressed two of four GAO recommendations related to its reentry programs . As part of its mission to protect public safety, DOJ's Federal Bureau of Prisons (BOP) provides reentry programming that aims to facilitate offenders' successful return to the community and reduce recidivism (a return to prison or criminal behavior). These reentry efforts include programs offered in BOP facilities as well as contractor-managed residential reentry centers (RRC)—also known as halfway houses—and home confinement services that allow inmates to serve the final months of their sentences in the community. GAO issued three reports in February 2012, June 2015, and June 2016 and made four recommendations to BOP in this area. As of December 2017, DOJ has implemented two of the four recommendations and has begun to take action to address one of the remaining two. Specifically, to implement one of GAO's recommendations, DOJ established a plan to evaluate the effectiveness of all the 18 reentry programs it offers to inmates in BOP facilities. To implement another GAO recommendation to improve cost management, DOJ began requiring contractors to submit separate prices for RRC beds and home confinement services. As of December 2017, DOJ noted it has taken initial steps to address a recommendation to track outcome data for its RRC and home confinement programs; however, it has not taken action to develop measures to assess the performance of these programs. GAO has made 10 recommendations to DOJ in prior reports to help improve performance measurement and resource management. DOJ generally concurred and has addressed or taken steps to address several. GAO continues to believe all of these recommendations should be fully implemented.", "document_type": "gao"}
{"report": "Under SBA’s 7(a) loan program, SBA guarantees loans made by commercial lenders to small businesses for working capital and other general business purposes. These lenders are mostly banks, but some are non-bank lenders, including small business lending companies— lenders whose lending activities are not subject to regulation by any federal or state regulatory agency, but were previously licensed by SBA and authorized to provide 7(a) loans to qualified small businesses. The guarantee assures the lender that if a borrower defaults on a loan, the lender will receive an agreed-upon portion (generally between 50 percent and 85 percent) of the outstanding balance. For a majority of 7(a) loans, SBA relies on lenders with delegated authority to approve and service 7(a) loans and to ensure that borrowers meet the program’s eligibility requirements. To be eligible for the 7(a) program, a business must be an operating for-profit small firm (according to SBA’s size standards) located in the United States and must meet the credit elsewhere requirement. Because the 7(a) program is required to serve borrowers who cannot obtain conventional credit at reasonable terms, lenders making 7(a) loans must take steps to ensure that borrowers meet the program’s credit elsewhere requirement. Because SBA relies on lenders with delegated authority to make these determinations, SBA’s oversight of these lenders is particularly important. However, we found in a 2009 report that SBA’s lack of guidance to lenders on how to document compliance with the credit elsewhere requirement was impeding the agency’s ability to oversee compliance with the credit elsewhere requirement. To improve SBA’s oversight of lenders’ compliance with the credit elsewhere requirement, we recommended in 2009 that SBA issue more detailed guidance to lenders on how to document their compliance with the credit elsewhere requirement. As a result, SBA revised its standard operating procedure to state that each loan file must contain documentation that specifically identifies the factors in the present financing that meet the credit elsewhere test, which we believe met the spirit of our recommendation. SBA’s current credit elsewhere criteria for determining 7(a) loan eligibility include the following factors: 1. the business needs a longer maturity than the lender’s policy permits; 2. the requested loan exceeds the lender’s policy limit regarding the amount that it can lend to one customer; 3. the collateral does not meet the lender’s policy requirements; 4. the lender’s policy normally does not allow loans to new businesses or businesses in the applicant’s industry; or 5. any other factors relating to the credit which, in the lender’s opinion, cannot be overcome except for the guarantee. When the 7(a) program was first implemented, borrowers were generally required to show proof of credit denials from banks that documented, among other things, the reasons for not granting the desired credit. Similar requirements remained in effect until 1985, when SBA amended the rule to permit a lender’s certification made in its application for an SBA guarantee to be sufficient documentation. This certification requirement remained when the rule was rewritten in 1996. SBA stated that it believed requiring proof of loan denials was demoralizing to small businesses and unenforceable by SBA. SBA and lender roles vary among 7(a) program categories—including regular 7(a), the Preferred Lenders Program, and SBA Express. Under the regular (nondelegated) 7(a) program, SBA makes the loan approval decision, including the credit determination. Under the Preferred Lenders Program and SBA Express, SBA delegates to the lender the authority to make loan approval decisions, including credit determinations, without prior review by SBA. For each 7(a) program category, lenders are required to ensure that borrowers meet the credit elsewhere requirement for all 7(a) loans. The maximum loan amount under the SBA Express program is $350,000, as opposed to $5 million for other 7(a) loans. The program allows lenders to utilize, to the maximum extent possible, their own credit analyses and loan underwriting procedures. In return for the expanded authority and autonomy provided by the program, SBA Express lenders agree to accept a maximum SBA guarantee of 50 percent. Other 7(a) loans generally have a maximum guarantee of 75 percent or 85 percent, depending on the loan amount. In fiscal year 2016, 1,991 lenders approved 7(a) loans, of which 1,321 approved at least one loan with some form of delegated authority. SBA’s Office of Credit Risk Management is responsible for overseeing 7(a) lenders, including those with delegated authority. SBA created this office in fiscal year 1999 to help ensure consistent and appropriate supervision of SBA’s lending partners. The office is responsible for managing all activities regarding lender reviews; preparing written reports; evaluating new programs; and recommending changes to existing programs to assess risk potential. Generally, the office oversees SBA lenders to identify unacceptable risk profiles using its risk rating system and enforce loan program requirements. According to SBA’s standard operating procedures, one of the agency’s purposes of its monitoring and oversight activities is to promote responsible lending that supports SBA’s mission to increase access to capital for small businesses. In the federal budget, the 7(a) program is generally required to set fees that it charges to lenders and borrowers at a level to cover the estimated cost of the program associated with borrower defaults (in present value terms). To offset some of the costs of the program, such as default costs, SBA assesses lenders two fees on each 7(a) loan. First, depending on the term of the loan, the guarantee fee must be paid by the lender within either 90 days of loan approval or 10 business days of the SBA loan number being assigned. This fee is based on the amount of the loan and the level of the guarantee, and lenders can pass the fee on to the borrower. Second, the servicing fee must be paid annually by the lender and is based on the outstanding balance of the guaranteed portion of the loan. The 7(a) program accounts for a small portion of total small business lending. According to a May 2017 report by the Consumer Financial Protection Bureau, the total debt financing available to small businesses was estimated to be $1.4 trillion. Of that amount, the Consumer Financial Protection Bureau estimated that about 7 percent was SBA loans, including 7(a) loans. SBA and some other researchers have suggested that there may be disparities in credit access among small businesses, based on characteristics of the borrower and firm. SBA lists as a strategic objective to “ensure inclusive entrepreneurship by expanding access and opportunity to small businesses and entrepreneurs in communities where market gaps remain.” In 2007, we reported that some studies had noted disparities among some races and genders in the conventional lending market, but the studies did not offer conclusive evidence on the reasons for those differences. Much of the research we reviewed in 2007 relied on the Board of Governors of the Federal Reserve System’s Survey of Small Business Finance, which was last implemented in 2003. Although this survey is no longer available, recently the 12 Federal Reserve Banks conducted the Small Business Credit Survey. In a series of reports based on the more recent survey, researchers found disparities in credit availability based on gender, the age of the firm, and minority status. From fiscal years 2007 through 2016, a majority of loan dollars guaranteed under the 7(a) program went to small businesses that were new, partially or wholly owned by women, or located in a distressed area. As previously mentioned, recent studies we reviewed by the Federal Reserve Banks and other researchers suggest that certain small business borrowers—including businesses that are new or owned by women—have difficulty obtaining conventional small business loans, which may put them at a disadvantage. As shown in figure 1, almost two-thirds of loan dollars guaranteed under the 7(a) program for this period went to small businesses that were in these two categories or located in a distressed area. The remaining 37 percent of 7(a) loan dollars went to businesses that were established, solely male-owned, and not located in economically distressed areas. See appendixes II and III for additional data on 7(a) loans, such as the total volume, percentage of lending provided by year and by state, and other borrower characteristics, including SBA’s loan- and lender-level Small Business Risk Portfolio Solutions score (predictive score) information. In the following figures, we present more detailed data on 7(a) loans to small businesses based on their status as a new business; gender of ownership; location relative to economically distressed areas; and minority ownership for fiscal years 2007 through 2016. New businesses. As shown in figure 2, the percentage of 7(a) loans that went to new businesses decreased from 36 percent in fiscal year 2007 to 23 percent in fiscal year 2011 before increasing to 35 percent by 2016. Gender. From fiscal years 2007 through 2016, the share of the total value of approved 7(a) loans by gender of owner remained fairly consistent (see fig. 3). An average of 70 percent of the total loan value went to male- owned businesses, and the remaining 30 percent went to businesses that were majority (more than 50 percent) or partially (50 percent or less) owned by women. Economically distressed areas. SBA did not provide data on whether 7(a) loans go to businesses located in economically distressed neighborhoods. However, we used data from the American Community Survey for 2011 through 2015, the most recent version available at the time of our analysis, along with zip code information provided by SBA to determine the average poverty rate by zip code (see fig. 4). From fiscal years 2007 through 2016, the proportion of the total value of 7(a) loans approved that went to borrowers in economically distressed areas remained between 23 percent and 26 percent. We defined distressed areas as zip codes where at least 20 percent of the households had incomes below the national poverty line. Minority/Nonminority status of borrower. From fiscal years 2007 through 2016, the proportion of the total value of 7(a) loans approved that went to minority borrowers decreased overall—from 43 percent to 30 percent—with the lowest share at 24 percent in fiscal year 2010 (see fig. 5). The share of approved loan dollars that went to nonminority borrowers varied, increasing to 69 percent in fiscal year 2010 before decreasing to 56 percent in fiscal year 2016. Notably, the share of the total value of loans approved that went to borrowers whose race/ethnicity was categorized as undetermined increased from 5 percent in fiscal year 2007 to 13 percent in fiscal year 2016. This increase does not fully account for the declined share for minority borrowers. However, according to SBA officials, borrowers voluntarily provide self-reported information on race and ethnicity and therefore the associated trend data should be viewed with caution. SBA relies on on-site reviews as its primary mechanism for evaluating lenders’ compliance with the credit elsewhere requirement. The reviews are performed by third-party contractors with SBA staff participation and additional oversight from SBA. According to SBA’s standard operating procedures, these reviews are generally conducted every 12 to 24 months for all 7(a) lenders with outstanding balances on the SBA- guaranteed portions of their loan portfolios of $10 million or more, although SBA may conduct on-site reviews of any SBA lender at any time as it considers necessary. In fiscal year 2016, SBA conducted 40 on-site reviews of 7(a) lenders, representing approximately 35 percent of SBA’s total outstanding 7(a) loan portfolio. As part of SBA’s on-site reviews, reviewers judgmentally selected a sample of approximately 30 to 40 loan files using a risk-based approach. These loan files accounted for approximately 6 percent to 19 percent of each lender’s total gross SBA dollars in fiscal year 2016. For each lender, approximately 70 percent to 90 percent of the loan files in the sample were reviewed to evaluate compliance with the credit elsewhere requirement. According to SBA’s contractors, loans that were selected for other reasons, such as issues related to liquidation, were not required to be reviewed for credit elsewhere compliance. SBA requires lenders to provide a narrative to support the credit elsewhere determination in the credit memorandum included in each loan file. SBA’s standard operating procedures state that lenders must substantiate that credit is not available elsewhere by (1) discussing the criteria that demonstrate an identifiable weakness in a borrower’s credit and (2) including the specific reasons why the borrower does not meet the lender’s conventional loan policy requirements. In keeping with SBA’s documentation requirement, third-party contractors and SBA staff who conduct on-site reviews are supposed to assess whether lenders have adequately documented the credit elsewhere criteria and provided specific reasons supporting the criteria in the credit memorandum. According to SBA’s contractors, adequate documentation of the credit elsewhere determination in the credit memorandum would include not just which of the criteria a borrower met but also a discussion of the basis or justification for the decision. For example, if a lender determined that a borrower needed a longer maturity, the lender should explain in the credit memorandum the reasons why a longer maturity was necessary. SBA’s contractors also told us that they carefully review a lender’s loan policies in preparation for on-site reviews and refer to a lender’s policies throughout the reviews. Reviewers do not attempt to verify the evidence given in support of the credit elsewhere reason beyond the information provided in the credit memorandum. Based on our review of fiscal year 2016 reports, on-site reviews can result in three levels of noncompliance response: Finding: This is the most severe result and is associated with a corrective action for the lender to remedy the issue. Observation: This is a deficiency recorded in the review’s summary but may not warrant a corrective action for the lender. Deficiency Noted: This is the lowest level of response. It is a deficiency noted as part of the review that is not included in the review’s summary and also may not warrant a corrective action. According to SBA officials, SBA’s policy has been that any noncompliance with SBA loan program requirements results in a finding. However, according to SBA officials and our review of the fiscal year 2016 on-site review reports, if a single instance of noncompliance was identified in fiscal year 2016, SBA generally would not issue a finding. Instead, SBA’s contractors said they would attempt to determine whether that instance was an inadvertent error, such as by examining additional loan files. Lenders that are subject to corrective actions are generally required to submit a response to SBA within 30 days to document how they have addressed or plan to address the identified issues. SBA subsequently asks for documentation to show that the lender has remedied the issue, and in some cases will conduct another review that usually includes an assessment of 5 to 10 additional loan files to determine whether the credit elsewhere reason has been adequately documented. According to SBA officials, SBA may also review lenders’ compliance with corrective actions from recent on-site reviews during targeted reviews (discussed below) and delegated authority renewal reviews (for lenders with delegated authority). In addition to on-site reviews, SBA also monitors lenders’ compliance with the credit elsewhere requirement through targeted reviews (performed on- or off-site). Targeted reviews of a specific process or issue may be conducted for a variety of reasons at SBA’s discretion, including assessing a lender’s compliance with the credit elsewhere requirement. In fiscal year 2016, SBA conducted 24 targeted reviews that included an examination of lenders’ compliance with the credit elsewhere documentation requirement. For these reviews, SBA examined loan files for 5 judgmentally selected loans that were provided to SBA electronically, as well as copies of the credit elsewhere reasoning (among other underwriting documentation) for 10 additional recently-approved loans. SBA also conducts periodic off-site reviews that use loan- and lender- level portfolio metrics to evaluate the risk level of lenders’ 7(a) portfolios. According to agency officials, SBA also began using off-site reviews to evaluate lenders’ compliance with the credit elsewhere requirement in fiscal year 2016. In that year, SBA conducted off-site reviews of 250 lenders and required these lenders to report the credit elsewhere justification for a sample of 10 loans per lender that were identified by SBA’s selection process. Lenders were not required to provide supporting documentation, and SBA did not follow up with lenders or review loan files to ensure the validity of the self-reported reasons. According to SBA, off-site reviews followed the same procedures in fiscal year 2017 as in 2016 and that the agency planned to use the same procedures for these reviews in the future. According to the agency, it also routinely evaluates and revises its review processes and procedures. In addition, SBA’s Loan Guaranty Processing Center and National Guaranty Purchase Center conduct Improper Payments Elimination and Recovery Act and quality control reviews at the time of loan approval and at the time of guaranty purchase, respectively. These reviews examine the credit elsewhere requirement, among other issues. Lastly, since 2014 SBA’s Office of Inspector General has also examined whether high-dollar or early-defaulted 7(a) loans were made in accordance with rules; regulations; policies; and procedures, including the credit elsewhere requirement. Our review of the on-site reviews conducted in fiscal year 2016 found that 17 of the 40 reviews—more than 40 percent—identified compliance issues with the credit elsewhere documentation requirement. Of those 17 reviews, 10 reviews resulted in a Finding (all with associated corrective 3 reviews resulted in an Observation (none with associated corrective actions or requirements), and 4 reviews resulted in a Deficiency Noted (one with an associated requirement). For all of the 17 on-site reviews that identified an instance of noncompliance, the issue was related to the lender’s documentation of the credit elsewhere criteria or justification. For example, one review found that the lender’s “regulatory practices demonstrate material noncompliance with SBA Loan Program requirements regarding documentation of the Credit Elsewhere Test.” Another review found that the lender “failed to demonstrate with adequate documentation that credit was not available elsewhere on reasonable terms and conditions.” For 2 of the 17 reviews, the issue was partly related to a discrepancy between the credit elsewhere justification used for some of the sample loan files and the lender’s own loan policy limits. With regard to SBA’s targeted reviews, 7 of 24 reviews (29 percent) conducted in fiscal year 2016 found a compliance issue with the credit elsewhere requirement. Of those 7 reviews, 6 reviews resulted in a Finding (all with associated corrective actions), 1 review resulted in an Observation (without an associated corrective no reviews resulted in a Deficiency Noted. For all of the 7 targeted reviews that identified a compliance issue, the issue was wholly related to the lender’s documentation of the credit elsewhere reason or justification. For example, 4 reviews found that for at least one loan reviewed, “the Lender failed to document justification that credit was unavailable elsewhere.” Another review found that for “three SBA Express loans and one Small Loan Advantage loan reported “other factors relating to the credit that in the lender’s opinion cannot be overcome except for the guaranty’ without specific identification of the factors.” Based on our review of on-site review reports and an interview with one reviewer, the key factors underlying lenders’ high rate of noncompliance with the credit elsewhere documentation requirement were lenders’ lack of proper internal controls and procedures and lack of awareness of the credit elsewhere documentation requirement. In fiscal year 2016, SBA’s corrective actions related to the credit elsewhere requirement required the lenders to establish or strengthen their policies; procedures; underwriting processes; or internal controls. In addition, contractors conducting the on- site reviews with whom we spoke stated that some lenders appeared to be unfamiliar with SBA’s standard operating procedures or were unclear on how to interpret them. For the 11 on-site reviews conducted in 2016 that included corrective actions, SBA generally required lenders to improve controls or procedures. For example, one lender was required to “correct its policy, modify its procedure, and amend its internal controls to ensure that its consideration and documentation of credit unavailable elsewhere identifies the specific fact(s) which are applicable to the specific loan and the determination is rendered and accurate for each individual SBA loan that it originates.” Another lender was required to “improve underwriting processes and controls to ensure that the borrower meets the [credit elsewhere] requirement” and to “document the loan file with the reasons for the determination.” Similarly, for the six targeted reviews in 2016 that included corrective actions, SBA issued a general requirement for the lender to “identify the causes for the Findings and implement corrective actions.” Based on our review of these targeted reviews, lenders generally remedied or intended to remedy the issue by amending their internal controls or procedures. For example, one lender stated that the “Credit Elsewhere test will be incorporated into the Credit Department process.” Another lender stated that it would “centralize all SBA underwriting and has developed an SBA addendum that will be utilized for all SBA-guaranteed loans.” Although some of SBA’s on-site reviews for fiscal year 2016 identified factors leading to noncompliance, they generally did not document reviewers’ assessment of lenders’ policies and practices for complying with the credit elsewhere documentation requirement. SBA’s standard operating procedures state that the on-site reviewers should determine whether or not lenders’ policies and practices adhere to the requirement, but they do not require them to document their assessment of these policies and practices. Only 4 of the 40 fiscal year 2016 review reports that we examined included such an assessment. As a result, although SBA required corrective actions by the lender to address deficiencies, there usually was no record of the underlying factors that resulted in the lender’s noncompliance. Federal internal control standards state that management should design control activities to achieve objectives and respond to risks, including appropriate documentation of transactions and internal control. Because SBA does not require reviewers to document their assessment of lenders’ policies and practices for complying with the credit elsewhere documentation requirement, the agency does not have good information to help explain why so many lenders are not in compliance. This hinders SBA’s ability to take informed and effective actions to improve lender compliance with the requirement and ensure that the program is reaching its intended population. SBA does not routinely collect information on the criteria lenders use in their credit elsewhere justifications. As previously discussed, lenders are required to maintain documentation of borrower eligibility (including the credit elsewhere justification) in each loan file for loans approved through lenders’ delegated authority. However, SBA cannot readily aggregate information on lenders’ credit elsewhere justifications for both delegated and nondelegated loans: For delegated loans, lenders are required to certify the loan’s credit elsewhere eligibility on E-Tran, SBA’s online portal for origination of delegated and nondelegated loans. However, lenders are only required to check a box to certify that the loan file contains the required credit elsewhere justification and are not required to submit any additional information, including which of the criteria was used to make the determination. According to SBA officials, delegated loans account for loans approved by approximately 70 percent of lenders. For nondelegated loans, lenders are required to submit credit elsewhere documentation to be reviewed by SBA’s Loan Guaranty Processing Center. For these loans, which comprise loans approved by the remaining 30 percent of lenders, SBA might maintain paper records of data on borrowers’ eligibility but does not compile such data electronically and thus cannot readily aggregate the data for analysis. Instead, SBA relies on on-site reviews or lender-reported information to review lenders’ credit elsewhere justifications and collects limited data from these reviews. For its on-site reviews, SBA does not collect sample data on lenders’ use of the credit elsewhere criteria. For its off-site reviews, SBA collected sample data on lenders’ use of the credit elsewhere criteria based on 250 such reviews conducted in fiscal year 2016. For these reviews, SBA asked lenders to self-report a short description of the credit elsewhere justifications used for an SBA-selected sample of 10 loans. However, as discussed earlier, SBA did not request or examine loan files as part of these off-site reviews and did not follow up with lenders or review loan files to ensure the validity of the self- reported reasons. One reason why SBA does not routinely collect complete information on lenders’ use of the credit elsewhere criteria is that SBA’s loan origination system, E-Tran, is not equipped to record or tabulate this information. In addition, according to an SBA official, on-site reviews do not collect data on the credit elsewhere criteria because the loans reviewed are judgmentally selected and would not accurately represent the larger population. Federal internal control standards state that management should use quality information to achieve the entity’s objectives. To do so, management should identify the information needed to achieve the objectives and address the risks, obtain relevant data from reliable internal and external sources in a timely manner, and process the obtained data into quality information. More robust information on lenders’ credit elsewhere justifications, including the credit elsewhere criteria, would allow SBA to evaluate patterns in lender practices related to the credit elsewhere requirement and, in turn, help the agency ensure compliance with the requirement. In this context, generalizable data, which can be collected through random sampling, or complete data through required reporting for every loan would allow SBA to better understand patterns in lender practices across the 7(a) program. Further, nongeneralizable data, which are available through SBA’s current off- and on-site review processes, would allow SBA to examine specific groups of lenders and could help SBA determine if it is necessary to collect additional data. SBA does not analyze the limited data it collects to help it monitor lenders’ compliance with the credit elsewhere requirement. According to agency officials, SBA has not performed lender-level analyses of the criteria lenders use for their credit elsewhere justifications. Additionally, SBA has not analyzed 7(a) lenders’ use of the “other factors” criterion— that is, factors not specified in the other criteria that, in the lender’s opinion, cannot be overcome except for the guarantee—for example, by collecting data on the frequency of its use or examining why lenders rely on it. While some 7(a) lenders told us they avoided relying on the “other factors” criterion because it was vague and open to interpretation, some lenders have used it when a borrower’s profile did not meet any of the other criteria. For example, one lender stated that this criterion was used for a borrower who was no longer a start-up but had experienced fluctuations in cash flow due to relocation or change in ownership. Another lender stated that the criterion was used more frequently during the 2007-2009 financial recession to extend financing to borrowers whose owners had experienced a home foreclosure but were otherwise sound. Federal internal control standards state that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. Analyzing data on lenders’ use of the credit elsewhere criteria as part of its monitoring procedures could help SBA determine whether there are patterns in lender practices related to the criteria that could predict lender noncompliance. For example, SBA could analyze lenders’ use of the criteria along with lender review results and other data on loan characteristics and performance to determine whether certain patterns indicate that a lender might be applying the requirement inconsistently. Additionally, such analysis could inform SBA’s selection of which lenders to review by improving its ability to identify lenders at risk of noncompliance with the credit elsewhere requirement. Better selection criteria for its lender reviews could, in turn, improve identification and remediation of such noncompliance, helping ensure that the 7(a) program serves its target population. Representatives at 8 of the 11 lenders that we contacted said they believed that SBA’s current credit elsewhere criteria are adequate in targeting small business borrowers who cannot obtain credit at reasonable terms. Representatives of these lenders also agreed that the criteria generally serve the types of small businesses that would otherwise have trouble obtaining conventional credit, such as new businesses or those with a shortage of collateral. One lender representative told us its most commonly used criterion related to the overall time in business because of the higher risk of failure. Another lender representative cited the lack of collateral as the most common criterion used. Additionally, representatives at an industry association told us that one of the most commonly used criteria was the one related to loan maturity and many small businesses seek 7(a) loans because they offer repayment terms of up to 10 years, compared to 1 to 3 years for conventional loans. Representatives of two other lenders suggested that the credit elsewhere criteria should not be overly prescriptive, which could limit lenders’ ability to make 7(a) loans to some businesses. For example, one representative said the credit elsewhere criteria should remain flexible because banks have different lending policies. In addition, representatives at three lenders indicated that they were hesitant to use the “other factors” criterion. One lender believed the requirement was open to interpretation and could be used inappropriately with lenders determining their own individual conventional loan policies. Another lender commented that the criterion was vague and rarely used by his institution, noting that SBA should provide some additional guidance on its use. Lenders consider multiple factors in determining whether to offer small businesses a conventional loan or a 7(a) loan, according to stakeholders with whom we spoke. For example, representatives at an industry association stated that a bank goes through several analyses to determine what loan product to offer the borrower. These representatives stated that the credit elsewhere requirement is embedded in the analysis a bank performs, such as whether the borrower qualifies for a loan and has a financial need for an SBA loan and whether the 7(a) program is right for that borrower. Representatives at two other lenders also stated that many small businesses have already been turned down for conventional loans before they seek a 7(a) loan. One representative noted that the “reasonable rates and terms” component of the 7(a) program was important as it allows lenders to look more broadly at a borrower’s needs. For instance, the representative explained, lenders can assess whether repayment terms are reasonable given a particular borrower’s situation and the resources the borrower will have to repay the loan. Economic conditions also affect lending policies, including whether borrowers qualify for a conventional loan, according to representatives at seven lenders with whom we spoke. For example, during the recent economic downturn, banks tightened their underwriting standards for small businesses and were less willing to lend without a government guarantee, according to one lender representative. SBA has issued revised primary operational guidance for the 7(a) program, effective January 1, 2018. As discussed previously, lenders are required to make a determination that the desired credit is not available to the applicant from nonfederal sources. Under the previous guidance, the lender had to determine that some or the entire loan was not available from nonfederal sources or the resources of the applicant business. However under the revised guidance, the scope of nonfederal sources a lender must review was further defined to include sources both related and unrelated to the applicant. The updated guidance states that lenders must consider: Nonfederal sources related to the applicant, including the liquidity of owners of 20 percent or more of the equity of the applicant, their spouses and minor children, and the applicant itself; or Nonfederal sources unrelated to the applicant, including conventional lenders or other sources of credit. Representatives of five lenders told us they have been determining how to interpret the new procedures with a few stating they would like additional guidance, including what information to retain in the file. Representatives of two lenders stated that there is some ambiguity in how to determine nonfederal resources and how to assess whether small business owners have too many available liquid resources to qualify for a 7(a) loan. One representative said that lenders can have different interpretations of what constitutes “available resources,” which is not specified in the new SOP. As a result, he said, there may be some confusion about how to assess family members of the borrower who have high net worths and whether the borrower should decline a family member contribution to qualify for an SBA loan. A representative of one lender stated that lenders will not know what SBA expects until loans are approved under the new procedures, default, and are then reviewed. Another lender’s representative suggested additional guidance on documentation, such as whether the bank must obtain a personal financial statement for each owner of the business. A SBA staff told us SBA has provided multiple training presentations to SBA staff, lenders, and trade associations on the statutory changes to the credit elsewhere requirements and standard operating procedure updates. These have included a presentation at a trade association conference, four monthly conference calls for SBA staff, and two conference calls for SBA lenders. SBA staff said SBA also plans to hold monthly training sessions with SBA field offices, quarterly training sessions with the industry, and at least four training sessions in 2018 at lender trade conferences. Additionally, a representative from an industry association told us it is providing industry training on SBA’s revised procedures, including the credit elsewhere liquidity requirement. SBA’s 7(a) loan program is required to serve creditworthy small business borrowers who cannot obtain credit through a conventional lender at reasonable terms, and SBA largely relies on lenders with delegated authority to make credit elsewhere determinations. However, although there is a high rate of lender noncompliance with the credit elsewhere documentation requirement, SBA does not require its reviewers to document their assessment of the policies and procedures lenders use to meet the requirement. Without better information from lender reviews on how lenders are implementing the requirement to document their credit elsewhere decisions, SBA may be limited in its ability to promote compliance with requirements and, in turn, use such information to help ensure that 7(a) loans are reaching their target population. Furthermore, SBA does not routinely collect or analyze information on the criteria used for credit elsewhere justifications to evaluate patterns in lender practices. SBA recently began collecting some information on lenders’ use of the criteria, but this information is limited, and SBA does not analyze the information that it does collect to better understand lenders’ practices. Without more robust information and analysis, SBA may be limited in its ability to understand how lenders are using the credit elsewhere criteria and whether 7(a) loans are reaching borrowers who cannot obtain credit from other sources at reasonable terms. We are making the following three recommendations to SBA. The Administrator of SBA should require reviewers to consistently document their assessments of a lender’s policies and practices. (Recommendation 1) The Administrator of SBA should use its on-site and off-site reviews to routinely collect information on lenders’ use of credit elsewhere criteria as part of its monitoring of lender practices related to the credit elsewhere requirement. (Recommendation 2) The Administrator of SBA should analyze information on lenders’ use of credit elsewhere criteria obtained from its reviews to identify lenders that may be at greater risk of noncompliance and to inform its selection of lenders for further review for credit elsewhere compliance. (Recommendation 3) We provided a draft of this report for review and comment. SBA’s written comments are reprinted in appendix IV. SBA generally agreed with the recommendations. SBA also provided additional comments on certain statements in the draft report, which are summarized below with our responses. SBA noted that the draft Highlights did not discuss how credit elsewhere is determined for nondelegated loans. We have not revised the Highlights in response to this comment because our review focused on delegated lenders. In the body of the report we note that approximately 70 percent of 7(a) loans are approved under delegated authority. We also refer to SBA’s nondelegated loans in the report for additional context. According to SBA, the statement on our draft Highlights did not fully reflect its monitoring of lender compliance. SBA identified a variety of reviews it uses in addition to on-site reviews by third party contractors, which we discuss in the body of the report. We have modified the Highlights to reflect these other reviews. Also in reference to the draft Highlights, SBA stated that it provides oversight on every on-site lender review and that an SBA employee is present as a subject-matter expert on every review. We revised the Highlights by adding that SBA provides oversight to the on-site reviews conducted by third-party contractors. In response to a statement in our draft report that SBA guarantees loans to small businesses for working capital and other general business purposes, SBA commented that working capital generally is not the primary purpose for SBA-guaranteed loans. We did not revise the statement because SBA’s SOP 50 10 5 (version J) specifies that SBA’s 7(a) loan proceeds may be used for permanent working capital and revolving working capital, among other things. In relation to a footnote in our report that mentions two lender reviews for which we did not receive documentation, SBA stated that on February 15, 2018, it provided documentation to us related to the reviews and that we had confirmed its receipt. However, the text in the footnote in question refers to two targeted lender reviews from 2016 that included corrective actions. The information SBA provided to us on February 15, 2018, was related to on-site reviews conducted in 2016. As a result, we did not revise the footnote. SBA’s letter also contained technical comments that we incorporated as appropriate. We are sending copies of this report to congressional committees, agencies, and other interested parties. In addition, this report will be available at no charge on our website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report discusses (1) 7(a) lending to selected categories of small business borrowers from fiscal years 2007 through 2016; (2) how the Small Business Administration (SBA) monitors lenders’ compliance with the credit elsewhere requirement; (3) the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement; and (4) lenders’ views on the criteria used to determine eligibility for 7(a) loans and other issues related to the 7(a) program. For background on the 7(a) program and the credit elsewhere requirement, we reviewed the legislative history of the 7(a) program and our previous reports. We also interviewed officials from SBA’s Office of Credit Risk Management on guidance provided to 7(a) lenders. For background on constraints in the small business credit market, we reviewed recent academic literature on the characteristics of small businesses that historically have had more difficulty accessing credit. In addition, we reviewed recent studies published by the Federal Reserve Banks of Atlanta; Cleveland; Kansas City; and New York. To describe the population of borrowers served by the 7(a) program, we selected characteristics (such as gender, minority status, and percentage of new business) that we used in our 2007 report and that were the subject of the recent studies by Federal Reserve Banks. We obtained and analyzed SBA loan-level data to describe 7(a) loans and borrowers. Specifically, SBA provided us with 581,393 records from its administrative data systems, which contained information on all loans approved and disbursed in fiscal years 2007 through 2016. The SBA data included various types of information describing each loan, including the total gross approval amount; the amount guaranteed by SBA; the loan term; and the interest rate; delivery method; and status of the loan. The SBA data also included information on borrower characteristics: Age of business. Firms were classified as new (less than 2 years in operation) or existing. Gender. Firms were classified as 100 percent male-owned; 50 percent or greater women owned; 50 percent or less women-owned; or “unknown.” Information on gender was voluntarily provided by borrowers. Economically distressed area. We identified borrowers in economically distressed areas by matching borrower zip codes provided by SBA to those in the 2011 through 2015 American Community Survey. We defined distressed areas as zip codes where at least 20 percent of households had incomes below the national poverty line. In about 1 percent of the cases, we were unable to classify a lender because a zip code had changed or had insufficient population to report a poverty rate. We consider 1 percent of unmatched cases to be low by data reliability standards. Race/ethnicity. Borrowers were placed in one of nine categories of race/ethnicity, including an “unknown” category. We aggregated these to create minority, nonminority, and undetermined categories. The minority category included all borrowers who reported being a race/ethnicity other than white. The nonminority category included borrowers who reported being white. Information on race was voluntarily provided by borrowers. Industry. Firms were assigned a North American Industrial Classification code. These six-digit codes begin with a two-digit sector code that we used to draw more general conclusions about industries. Geographic information. The data provided the state where the borrower is located. In addition, we obtained information from SBA on loan- and lender-level Small Business Risk Portfolio Solution scores (predictive scores) provided by Dunn & Bradstreet and Fair Isaac Company, for loans approved in fiscal year 2016, the latest available. We were able to obtain predictive scores for approximately 81 percent of the loans for which SBA had provided other information. According to SBA, some loans may not have been disbursed at the time we obtained the predictive scores and, as a result, we do not have scores associated with these loans. We analyzed the information to determine the range of predictive scores and the range of average predictive scores by lender. To assess the reliability of loan-level data on borrower and loan characteristics and predictive scores we received from SBA, we interviewed agency officials knowledgeable about the data and reviewed related documentation. We also conducted electronic testing, including checks for outliers, missing data, and erroneous values. We determined that the data were sufficiently reliable for the purposes of describing the characteristics of borrowers who received 7(a) loans and the distribution of predictive scores. To assess how SBA monitors lenders’ compliance with the credit elsewhere requirement and criteria, we reviewed SBA’s standard operating procedures and other guidance on 7(a) program regulations and lender oversight. Specifically, we reviewed SOP 50 10 5 (versions I and J) on Lender and Development Company Loan Programs, SOP 50 53(A) on Lender Supervision and Enforcement, and SOP 51 00, On-Site Lender Reviews/Examinations, as well as information and policy notices related to the credit elsewhere requirement. Additionally, we interviewed representatives including those at SBA’s Office of Capital Access and Office of Credit Risk Management on lender oversight and lender review processes. We reviewed all the on-site lender review reports (40 reviews), including corrective actions or requirements related to the credit elsewhere requirement (documentation for 11 lenders), and targeted review reports that had credit elsewhere findings (7 reviews) that SBA conducted in fiscal year 2016. We also interviewed officials and reviewed recent reports from SBA’s Office of Inspector General. To assess the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement, we interviewed SBA officials and reviewed documentation for SBA’s online portal for loan origination. We also incorporated information from interviews with a nongeneralizable, nonrepresentative sample of 7(a) lenders, which we discuss below. To obtain lenders’ views on the criteria used to determine eligibility for 7(a) loans and other program-related issues, we interviewed SBA staff including from the Office of Capital Access, and representatives of the National Association of Government Guaranteed Lenders; American Bankers Association; Independent Community Bankers Association; and National Federation of Independent Businesses. We also interviewed 11 banks (one bank provided written responses) in order to obtain the lender perspective of credit elsewhere. Nine of the banks were selected by us using a random process that concentrated on larger lenders. These nine lenders selected by us represent about 13 percent of the loans approved and 16 percent of the dollars approved in 2016. In addition, we interviewed two additional banks that represented an industry group – one larger bank and one small bank. Although we partially selected at random, the lenders we interviewed should not be considered generalizable because of the small number. We conducted this performance audit from August 2017 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In this appendix, we provide information on the total amount and number of approved 7(a) loans and the top eight industry sectors receiving 7(a) loans. Data are also presented on fiscal year 2016 loan volume by state and per capita. As shown in figure 6 below, the total amount of approved 7(a) loans decreased during the period associated with the Great Recession (2007 through 2009). From fiscal year 2009 on, the total amount of approved 7(a) loans increased until a decline in fiscal year 2012. During this timeframe, the American Recovery and Reinvestment Act of 2009 and the Small Business Jobs Act of 2010 provided fee relief and higher guaranties. The Small Business Jobs Act of 2010 also provided a temporary increase in Small Business Administration (SBA) Express loan limits to $1 million (instead of $350,000). These programs have since expired. 7(a) Loans by North American Industry Classification System (NAICS) code. Table 1 shows the largest eight industrial sectors by proportion of the total amount of 7(a) loans approved, using the NAICS code. The combined share of the top eight sectors declined slightly from 85 percent to 80 percent of the total lending from fiscal years 2007 through 2016, with an average of 82 percent. During this period, the Accommodation and Food Services sector had the largest average share of total loan amount at 17 percent, followed by the Retail Trade sector at 15 percent. Approved loan amount and per capita dollars by state. As shown in figure 7, California; Texas; Florida; Georgia; and New York received the highest total of approved loan dollars in fiscal year 2016. The average approval amount across all loans was $380,619. Georgia and Arkansas had the largest average approval amount in 2016. Also, during this period, Utah; Colorado; Georgia; California; and Washington received the highest per capita approved loan dollars. In fiscal-year 2016, creditworthiness varied widely among 7(a) program borrowers. We analyzed creditworthiness using the Small Business Administration’s (SBA) Small Business Risk Portfolio Solution score (predictive score), which ranges from 70 to 300, with 300 indicating the least risky loan. According to SBA, loans with scores above 180 are considered “lower risk,” scores between 140 and 179 are considered “moderate risk,” and scores 139 and lower are considered “higher risk.” There did not appear be differences in score based on the gender of the borrower or the age of the business. While SBA relies on the Predictive Score data to identify lenders that may pose excessive risk to the SBA 7(a) portfolio, the data also provide potential insights related to lender implementation of the credit elsewhere requirement. Variation. We found that some 7(a) borrowers were much more creditworthy than others. In 2016, the only year for which we obtained data, the predictive score at origination varied widely among borrowers. In 2016, the scores of borrowers ranged from a low of 91 to a high of 246. However, most scores were between 171 and 203, and the median score was 188. Race/ethnicity. We found that there were slight differences in creditworthiness by race/ethnicity, with median scores ranging from 180 to 189 depending on the category. Specifically, loans to African Americans in 2016 had a median score of 180, and loans to Hispanics had a median score of 183. In contrast, loans to whites had a median score of 188, and loans to Asian and Pacific Islanders had a median score of 189. Lender size. We found that lenders with larger numbers of SBA loans tended to have slightly more creditworthy borrowers. The top 5 percent of lenders had a median average score of 187, whereas the bottom 75 percent of lenders had a median average score of 182.5. Among the top 5 percent of lenders (with 374 loans per lender on average, collectively representing about 70 percent of the loans approved), the average score ranged from 171 to 195. Among all lenders, the average score ranged from 116 to 233. However, because many lenders only approved one or two loans in 2016, the average may reflect very few borrowers for that lender, making it difficult to tell whether the scores reflect a real difference between lenders. In addition to the contact named above, Harry Medina (Assistant Director); Janet Fong (Analyst in Charge); Benjamin A. Bolitzer; Gita DeVaney; David S. Dornisch; Amanda D. Gallear (intern); Marc W. Molino; Jennifer W. Schwartz; and Tyler L. Spunaugle made key contributions to this report.", "summary": "SBA's 7(a) program is required to serve creditworthy small business borrowers who cannot obtain credit through a conventional lender at reasonable terms. The Joint Explanatory Statement of the Consolidated Appropriations Act, 2017 includes a provision for GAO to review the 7(a) program. This report discusses, among other things, (1) how SBA monitors lenders' compliance with the credit elsewhere requirement, (2) the extent to which SBA evaluates trends in lender credit elsewhere practices, and (3) lenders' views on the credit elsewhere criteria for 7(a) loans. GAO analyzed SBA data on 7(a) loans approved for fiscal years 2007–2016, the latest available, and reviewed literature on small business lending; reviewed standard operating procedures, other guidance, and findings from SBA reviews performed in fiscal year 2016; and interviewed lender associations and a nonrepresentative sample of 7(a) lenders selected that concentrated on larger lenders. For its 7(a) loan program, the Small Business Administration (SBA) has largely delegated authority to lenders to make 7(a) loan determinations for those borrowers who cannot obtain conventional credit at reasonable terms elsewhere. To monitor lender compliance with the “credit elsewhere” requirement SBA primarily uses on-site reviews conducted by third-party contractors with SBA participation and oversight, and other reviews. According to SBA guidance, lenders making 7(a) loans must take steps to ensure and document that borrowers meet the program's credit elsewhere requirement. However, GAO noted a number of concerns with SBA's monitoring efforts. Specifically, GAO found the following: Over 40 percent (17 of 40) of the on-site lender reviews performed in fiscal year 2016 identified lender noncompliance with the requirement. On-site reviewers identified several factors, such as weakness in lenders' internal control processes that were the cause for lender noncompliance. Most on-site reviewers did not document their assessment of lenders' policies or procedures, because SBA does not require them to do so. As a result SBA does not have information that could help explain the high noncompliance rate. Federal internal control standards state that management should design control activities, including appropriate documentation, and use quality information to achieve the entity's objectives. Without better information on lenders' procedures for complying with the documentation requirement, SBA may be limited in its ability to promote compliance with requirements designed to help ensure that the 7(a) program reaches its target population. SBA does not routinely collect or analyze information on the criteria used by lenders for credit elsewhere justifications. SBA recently began collecting some information on lenders' use of the criteria, but this information is limited, and SBA does not analyze the information that it does collect to better understand lenders' practices. Federal internal control standards state that management should use quality information to achieve the entity's objectives. Without more robust information and analysis, SBA may be limited in its ability to understand how lenders are using the credit elsewhere criteria and identify patterns of use by certain lenders that place them at a higher risk of not reaching borrowers who cannot obtain credit from other sources at reasonable terms. In general, representatives from 8 of 11 lenders that GAO interviewed stated that SBA's credit elsewhere criteria are adequate for determining small business eligibility for the 7(a) program. These criteria help them target their lending to small businesses that would otherwise have difficulty obtaining conventional credit because they are often new businesses or have a shortage of collateral. However, they also said that other factors—such as lender policies and economic conditions—can affect their decisions to offer 7(a) loans. In January 2018, SBA issued revised guidance for the 7(a) program and has provided training on this new guidance to lenders and trade associations. Lenders told GAO they are still in the process of understanding the new requirements. GAO recommends that SBA (1) require its on-site reviewers to document their assessment of lenders' policies and procedures related to the credit elsewhere documentation requirement, (2) collect information on lenders' use of credit elsewhere criteria, and (3) analyze that information to identify trends. SBA generally agreed with the recommendations.", "document_type": "gao"}
{"report": "SIV holders become lawful permanent residents upon admission to the United States under one of three special visa programs. The first, created in 2006, is for certain Afghans and Iraqis who have worked directly with U.S. Armed Forces, or under chief of mission authority, for at least one year as translators or interpreters. It is currently capped at 50 visas (excluding spouses and children) per year and is a permanent program. The other two SIV programs for certain Iraqis and Afghans who worked for or on behalf of the U.S. government, and as a consequence experienced or are experiencing an ongoing serious threat, have had larger numbers of visas allocated but are temporary in nature and require legislation to extend the programs. The SIV program for Iraqis who worked for or on behalf of the U.S. government stopped accepting new applications after fiscal year 2014. The SIV program for Afghans who worked for or on behalf of the U.S. government continued to accept new applications as of November 2017, and most recently, was allocated additional visas in December 2017. For all of these SIV programs, prospective special immigrants must go through multiple steps as required by the particular program to which they are applying, such as (1) providing a letter of recommendation from the direct U.S. citizen employment supervisor, (2) a statement describing the threats the applicant has received as a result of his or her U.S. government employment, and (3) forms and documents for all family members applying for visas. Additionally, applicants must have an in- person interview with a consular officer and have fingerprints taken at a U.S. embassy or consular office, among other steps in the process. The Iraqi and Afghan SIV application process has been subject to criticism due in part to the length of time it has taken some applications to be processed. Legislation was enacted to require State and the Department of Homeland Security to complete SIV applications within a specified period of time and to report on the efficiency of the application process. Afghan and Iraqi special immigrants are treated like refugees for purposes of federal public assistance, including receipt of resettlement assistance. Over time, SIV holders have accounted for an increasing percent of the total number of individuals receiving resettlement assistance in the United States. SIV holders accounted for about 1 percent of the total number of individuals who received resettlement assistance upon arrival in fiscal year 2008 (the first year they were eligible for this assistance), 13 percent in fiscal year 2016, and about 26 percent in fiscal year 2017, with a reduction that year in total refugee arrivals (see fig. 1). During the application process overseas, SIV holders may elect to receive resettlement assistance upon arrival in the United States. If they indicate on their visa application that they have a tie in the United States and would like to be placed nearby, in most cases PRM will do so. SIV holders are then served by the local resettlement agencies in that area. (This is also true for refugees who indicate they have U.S. ties.) Most SIV holders travel to the United States in the same way as refugees, with travel booked by the International Organization for Migration (an inter- governmental organization). In this case, resettlement agencies know in advance of SIV holders’ arrival. However, some SIV holders elect to book their own travel to the United States for various reasons, such as when they may be in immediate danger in their home countries. These SIV holders must contact a local resettlement agency as soon as possible after they arrive to receive initial resettlement assistance through the R&P program, generally within 30 days of arrival. SIV holders who arrange their own travel and elect to receive resettlement assistance after they arrive in the United States are often known by resettlement agencies as walk-in SIV holders. Various federal programs provide resettlement assistance for which SIV holders are eligible (see table 1). The R&P program provides initial resettlement assistance for the first 30 to 90 days and is administered through agreements PRM has with the nine national resettlement agencies and their network of local resettlement agencies. The R&P cooperative agreement outlines what resettlement agencies must do for a newly arrived individual or family, including picking up people at the airport; providing initial housing, furniture, food, and clothing; helping children enroll in school or adults enroll in language programs; and developing a resettlement plan, which focuses on early employment for employable adults. Under the R&P agreement, PRM provides a fixed per capita grant to national resettlement agencies for individuals served ($2,075 in fiscal year 2017), of which a specified amount must be given in cash or spent directly on each individual served through the R&P program ($925 in fiscal year 2017). These grant amounts and standards are the same nationally. ORR’s programs generally provide short-term assistance after the initial resettlement period. Several of ORR’s key refugee assistance programs, such as cash and medical assistance and social services, are administered through grants to refugee coordinators (or equivalent) in each state. These coordinators are, in many cases, staffed by state agencies (e.g., departments of social services), but in some cases are staffed by private organizations. At the local level, service providers may be county social services offices, local affiliates of the nine national resettlement agencies, or other community service providers. In contrast, ORR’s Matching Grant program is administered through the national resettlement agencies and not the state refugee coordinators. This program provides cash assistance, employment services, and case management for up to 6 months. In some cases a household also may receive Temporary Assistance for Needy Families (TANF) or Medicaid instead of refugee cash and medical assistance, depending on state eligibility rules and the characteristics of any given household. In addition, because SIV holders, like refugees, are eligible to receive public benefits, they may also be eligible for other types of assistance, such as food assistance from the Supplemental Nutrition Assistance Program. Limited data from PRM from fiscal year 2011 through part of fiscal year 2017 showed that most principal SIV holders were unemployed and relied on cash assistance for income 90 days after arrival to the United States. Available data from ORR for one of its programs, the Matching Grant program, provide slightly longer-term information, but only cover a portion of SIV holders and are not representative. ORR’s Matching Grant data for fiscal year 2016 (the only year available) showed that most SIV holders were employed 6 months after arrival and no longer reliant on cash assistance. Although ORR regularly surveys the general refugee population up to 5 years after resettlement in order to examine their longer-term outcomes, it has never surveyed SIV holders for such information. About 60 percent of all principal SIV holders participating in the R&P program who arrived to the United States in fiscal years 2011 through the first quarter of 2017 were unemployed 90 days after arriving, according to data that PRM collects from resettlement agencies on R&P recipients. Based on our analyses of these data, principal SIV holders from Iraq tended to be unemployed at somewhat higher rates than those from Afghanistan. With respect to English speaking skills, the majority who reported their level of spoken English as “good” were unemployed, though they had considerably higher employment rates at 90 days than those reporting English levels of “some” or “none.” In contrast, employment rates were relatively comparable among principal SIV holders with different levels of education, although those with post- secondary levels of education had somewhat lower employment than those at the secondary level (see fig. 2). Additionally, almost all SIV households relied on cash assistance at 90 days in order to cover expenses such as housing costs. Even among households that had earnings from employment, most also relied on some form of cash assistance, according to our analysis of the R&P data. Of those SIV households receiving earnings from employment, 89 percent were also receiving income through Refugee Cash Assistance, Matching Grant, or TANF programs, which is slightly higher than the rate of the overall refugee population who received one of these types of cash assistance (82 percent). These were the most common types of cash assistance that SIV households received, with slightly less than a third also relying on personal assets (see fig. 3). SIV holders also received non-cash assistance and services within 90 days of arrival, based on our analysis of the R&P data. For example, nearly all SIV households received food assistance, the most common type of non-cash assistance. Other common forms of assistance include employment services and case management, which were provided to both principal SIV holders and spouses (mostly wives) at comparable rates (see fig. 4). To a lesser degree, principal SIV holders and spouses also received health services and access to English as a Second Language (ESL) courses, among other types of assistance. The most recent data from the Matching Grant program, which is one cash assistance program in which selected SIV holders might participate during and after their initial 90 days in the United States, and the one such ORR program for which SIV outcomes could be identified, showed that the majority of SIV program participants were employed and no longer relying on cash assistance at end of the 180 day (or 6 month) benefit period. Specifically, about two-thirds of SIV holders in the Matching Grant program were employed at 180 days, a rate slightly lower than the rate for all Matching Grant participants, which include refugees, asylees, and other specified groups, according to data for fiscal year 2016 (see fig. 5). However, SIV holder participants had slightly higher rates of full-time employment and a slightly higher average wage of about $12 per hour compared with all Matching Grant participants. The relatively low wages may reflect, among other contributing factors, the general need for Matching Grant participants to accept the first available employment opportunity, including entry level jobs, as a requirement of the program and the length of the program, which ends at 180 days. About 80 percent of participating SIV households, as well as all participating households in the Matching Grant program in fiscal year 2016, were considered “self- sufficient,” defined by the program as having sufficient earnings to cover basic expenses without the need for cash assistance. About one-third of SIV households overall participate in the Matching Grant program. Findings on SIV holders participating in this program are not representative of all SIV holders, given program design elements. For instance, the Matching Grant program has limited enrollment slots, and resettlement agencies may have an incentive to select more “employable” candidates. In contrast, Refugee Cash Assistance and TANF, the other main cash assistance programs in which SIV holders may participate, generally serve all eligible clients based on income and other eligibility requirements. Additionally, unlike Refugee Cash Assistance or TANF, the benefit amount for the Matching Grant program is generally not reduced or terminated based on earnings, which may create additional incentives to find work and potentially increase the likelihood of employment at 90 days for Matching Grant participants. Our analysis of PRM’s data from the R&P program show that principal SIV holders participating in the Matching Grant program have a higher employment rate 90 days after arrival than those receiving cash assistance from ORR’s Refugee Cash Assistance program or state TANF programs. Additionally, although Matching Grant data provide some additional information beyond what is collected for the R&P program, the data still provide relatively limited insight on individuals’ employment and other outcomes. First, the Matching Grant data are collected at 6 months after arrival, which is a few months beyond the 90-day reporting period for the R&P program. The focus on 6-month outcomes aligns with the Matching Grant program’s goal of immediate self-sufficiency and employment before the end of cash assistance; however, the short timeframe precludes any understanding of participants’ progress in job security, wage growth, or career advancement over the longer-term. Second, while the Matching Grant data do include information on full-time or part- time employment status and average wage—information not captured in the R&P data—they do not provide information on type of employment, career or wage progression, or the amount earnings exceed expenses for those households considered self-sufficient. Moreover, ORR’s guidelines for the Matching Grant program encourage resettlement agencies to work with participants with specialized, advanced skills or vocations who have been placed in entry-level work to obtain job upgrades or recertification programs as appropriate. However, ORR does not collect any information on the extent that this occurs or results in positive employment outcomes, such as wage increases. While ORR’s program data focus on short-term self-sufficiency, ORR regularly gathers information on the longer-term outcomes of the general refugee population through its Annual Survey of Refugees. ORR conducts its Annual Survey of Refugees to comply with a statutory reporting requirement. It also uses its annual survey to provide Congress and the public information as to whether refugees are successfully resettling in the United States through its programs, in line with the agency’s overall mission to link the populations it serves to the right resources to help them become successfully assimilated members of American society over the longer term. The survey provides information on a sample of refugees each year after resettlement in the United States, up to 5 years. It reports on a range of outcomes, including wage progression, educational attainment, home ownership, and the receipt of public assistance (including non-cash assistance), among other things. Although ORR has typically surveyed the refugee population overall, it has in previous years used its annual survey to conduct supplements on special populations, including Iraqi refugees, Hmong refugees, and the Lost Boys of Sudan. These populations were selected based on ORR leadership’s policy priorities and their inclusion in the survey, through the use of oversampling techniques, was cost-neutral, according to ORR officials. ORR, however, has never used its Annual Survey of Refugees to examine long-term outcomes for SIV holders. HHS, in October 2017, awarded a research contract focused on redesigning its Annual Survey of Refugees, the first such redesign since 1993. The goal of this effort is to better understand medium- to long-term resettlement outcomes for refugees and related populations through improved data collection, but the contract does not mention examining the outcomes of any special populations, such as SIV holders. Agency officials stated that ORR plans to explore potential costs and benefits of including special populations (such as SIV holders) in its survey redesign efforts. However, at the time of our review, ORR officials did not yet know whether such an effort would be cost neutral, as with other prior efforts examining special populations; and if not, whether they could obtain long-term outcome information about SIV holders through future surveys or in other ways. Standards for Internal Control state that management needs quality information to make decisions and achieve its objectives. Accordingly, one of ORR’s policy objectives is to improve data collection in order to make data-driven decisions to better support the populations it serves. Similarly, a primary goal of HHS’ redesign of the Annual Survey of Refugees is to maximize the effectiveness of ORR’s policies and programs in promoting successful integration for its populations. Without longer-term data or other in-depth research, neither ORR nor policymakers have information as to whether SIV holders have progressed beyond the immediate goal of basic self-sufficiency toward improved economic security and cultural integration over the longer term. SIV holders faced a variety of challenges while resettling in the United States, according to representatives of 13 local resettlement agencies we interviewed and SIV holders who participated in 11 focus groups. Among local resettlement agencies, the two in Northern Virginia reported significant challenges with their capacity to assist the large numbers of SIV holders in the area, while agencies in other locations we visited reported fewer capacity challenges. SIV holders also experienced challenges finding skilled employment, which did not align with their expectations of resettlement in the United States. Additionally, securing affordable and suitable housing, and female spouses’ assimilation to U.S. culture were reported challenges. Officials we interviewed from some resettlement agencies reported taking steps to address some of these issues. Of the 13 local resettlement agencies in three states at which we interviewed officials, officials from the 2 agencies in Northern Virginia reported the greatest impact from high numbers of SIV holders, creating capacity challenges at both local resettlement agencies as well as in the community. The number of SIV holders in the Northern Virginia area increased more than tenfold since fiscal year 2013 and almost doubled from fiscal years 2015 through 2016, according to data provided by Virginia’s state refugee coordinator. Officials from one of the two local resettlement agencies in Northern Virginia reported that SIV holders also increased as a percentage of their total caseload in recent years, and now make up almost 90 percent. In addition to large numbers of SIV holders scheduled to arrive at local resettlement agencies, many also arrived as walk-ins, which meant the agencies could not predict how many individuals they would need to assist at a given time, according to Virginia’s state refugee coordinator. Both of the Northern Virginia local resettlement agencies reported challenges related to capacity. Staff from one agency said that a case manager would normally have three to four families a month to resettle but now might regularly be dealing with five families in a week and, in an extreme case, 70 families in a month. The large influx created great challenges in finding affordable housing for SIV holders, according to staff from the two agencies, especially because the area has one of the most expensive housing costs in the state (see fig. 6). Additionally, officials from the agencies and Virginia’s state refugee coordinator reported that the influx caused significant delays in getting SIV holders needed social services, such as health screenings for children, which then resulted in school enrollment delays. Due to the significant increase in SIV holder arrivals, two national resettlement agencies opened temporary offices in the area under PRM’s approval and encouragement. SIV holders may have originally been drawn to Northern Virginia by the hope of finding work at nearby federal government offices, according to officials from one national resettlement agency and one local resettlement agency. Local resettlement agency staff added that over time, SIV holders may have moved to the area to be near an established community of SIV holders. According to PRM data, 83 percent of SIV holder cases in Virginia reported having U.S. ties, although 66 percent of these were ties to friends (not relatives). In all three focus groups conducted in Northern Virginia, SIV holders reported that their U.S. ties were sometimes distant friends or acquaintances who were helpful in the resettlement process, including with providing transportation and navigating life in the United States. Officials from local resettlement agencies in other areas we visited expressed fewer capacity challenges. In Sacramento, officials from the three local resettlement agencies and a local service provider reported that they faced some capacity challenges, as their local area had among the highest number of SIV holder arrivals in the United States, according to our analysis of PRM data. However, so far officials we interviewed in Sacramento reported that have been able to find ways to manage service provision to address the high caseloads. For instance, to address rising housing costs and difficulties securing affordable housing, officials from one local resettlement agency reported that they started securing housing farther from the central SIV holder community, although this was not always preferred by SIV holders they resettled. Officials from Sacramento County’s health department said to address backlogs for health screenings caused by increased SIV holder arrivals, they increased the number of full-time staff. In addition, Sacramento, when compared with Northern Virginia, had more local resettlement agencies to manage arrivals (four versus two), which may have helped local agencies address capacity challenges. In the Dallas/Fort Worth area, officials we interviewed from all six local resettlement agencies reported no significant capacity challenges with respect to resettling SIV holders. These six agencies had fewer SIV holder arrivals, and SIV holders represented a smaller percentage of their total caseload than other sites we visited. Generally, securing affordable housing that meets requirements was not reported as a major challenge, although housing prices were rising in Dallas, according to local resettlement agency staff and the Dallas/Fort Worth regional designee. According to officials from national and local resettlement agencies, officials from advocacy groups, and SIV holder participants in all 8 focus groups conducted with principal SIV holders, principal SIV holders faced challenges obtaining employment in their previous fields or that matched their skill level. These challenges occurred even though they had worked for the U.S. government, tended to have completed secondary education or more, and reported good levels of spoken English. Several factors may account for these challenges, some of which may also be applicable to skilled refugees or immigrants who are not SIV holders. These include: Limited opportunities for federal employment in the United States: SIV holders had limited opportunities for federal employment because most positions required U.S. citizenship as well as background investigations or security clearances that are available only to citizens, as we reported in 2010. In 6 of the 8 focus groups we conducted with principal SIV holders, some participants said that they expected to be able to get jobs similar to the ones they had in Afghanistan or Iraq, such as with the federal government, because they had previously worked for U.S. organizations. Based on the surveys they completed at the end of our focus groups, principal SIV holders reported that they had a range of jobs in Afghanistan and Iraq, including interpreter, information technology worker, security guard, project manager, and engineer. In one of our focus groups conducted in Northern Virginia, some participants expressed frustration with being ineligible for security clearances for federal employment in the United States because they were able to obtain clearance to work in Afghanistan, and they now had to wait 5 years to apply for U.S. citizenship, which is required for a U.S. security clearance. SIV holders’ previous work may not help with U.S. employment: Some officials we interviewed from advocacy groups and local resettlement agencies said that while principal SIV holders’ ability to speak English with a high level of proficiency enabled them to work for the U.S. government overseas, they may not always have the writing skills needed for professional work in the United States. Officials from a career development organization that works directly with highly skilled immigrants, including SIV holders, to help them re-enter their fields in the United States said that SIV holders may sometimes be hindered in re-entering their original professional fields because during the time they worked as interpreters, translators, or other positions for the U.S. government, they may not have been actively employed in their original fields. Barriers to foreign degree and credential recognition: While SIV holders and others may be able to get their foreign degrees or other credentials assessed for U.S. equivalency, these processes can be costly or time consuming, according to officials we interviewed from one national and two local resettlement agencies. Staff from two national resettlement agencies said that degree recognition could be particularly challenging for Afghan SIV holders because the nature of conflict in Afghanistan made it harder for evaluators to connect with universities there. Other research we reviewed identified the complexities of the licensing process and of available career paths as challenges for highly skilled and educated immigrants in the United States in general. Officials we interviewed from about half of the local resettlement agencies said that because principal SIV holders were often unable to find employment in their prior profession, many took “survival” or low-skilled jobs in order to cover basic expenses. Officials from local resettlement agencies, as well as participants in our focus groups, reported that common jobs for principal SIV holders included drivers for ride-sharing services like Uber and Lyft, airport workers such as luggage handling and food service, security guards, low-level information technology workers such as cell phone assembly or temporary technician, or warehouse workers such as inventory or stocking. One principal SIV holder we spoke to in our focus groups said he worked as a civil engineer for 6 years in Afghanistan, but was assembling cell phones in the United States, which was disappointing for him given his years of experience and education. In almost all of our focus groups with principal SIV holders, participants expressed frustration about the barriers to re-entering their professional fields and the need to take low-skilled jobs. These employment-related challenges did not align with the expectations of principal SIV holders, who thought that their education and prior work experience with the U.S. government would enable them to find skilled work, according to many national and local resettlement agency officials we interviewed and SIV holders who participated in our focus groups. All 3 state refugee coordinators, representatives of 7 of 9 national resettlement agencies, and representatives of 10 of 13 local resettlement agencies we spoke to said that SIV holders tend to have high, unrealistic expectations about employment or about life in general after they arrive. As one principal SIV holder from one of our focus groups in California stated: “I thought I would not need to worry about anything in the U.S. for years and they will take care of me and my family because I worked for their government.” SIV holders in our focus groups also expected more assistance in obtaining high-skilled employment than they generally received. In all 8 of our focus groups conducted with principal SIV holders, some participants expected more assistance getting back into their fields of interest, but said that local resettlement agencies did not always have the technical skills or resources needed to assist them. Similarly, in 4 of the 8 focus groups with principal SIV holders, some participants reported that they expected to receive sufficient government assistance to cover expenses while they adapted to life in the United States, spent time getting retrained or recertified, or searched for employment. Because of these high expectations, the reality of starting over was frustrating or shocking, and made the initial resettlement process challenging, according to both staff from local resettlement agencies and SIV holders from our focus groups. Officials from a number of national and local resettlement agencies said that SIV holders’ expectations tended to be higher than other clients they served, such as refugees. Officials we interviewed from a number of national and local resettlement agencies agreed that they would have liked to do more for SIV holders, given their sacrifice in working for the U.S. government, but that they treat all of their clients in the resettlement program the same, in accordance with PRM’s cooperative agreements. Staff from one national resettlement agency and one local resettlement agency agreed that while they would like to assist SIV holders and other highly-skilled clients to obtain better or more skilled jobs, they did not have the resources or capacity to provide a significant amount of specialized help over a longer term. False expectations about resettlement may have come through word of mouth or other sources, according to resettlement agency staff and SIV holders we interviewed. Some local resettlement agency staff said SIV holders’ high expectations may be due in part to inaccurate information from the SIV holder community through social media or word of mouth. Staff from one local resettlement agency reported that managing SIV holders’ high expectations was time-consuming for staff because there was a “mountain of misinformation” within the community. Principal SIV holders may have also received false hope from their overseas U.S. military colleagues, who may not understand the challenges of resettlement. For example, one principal SIV holder we spoke to in our focus groups said that his American co-workers in Afghanistan told him it would be easy to find a good job in the United States because of his skills, but he said finding employment in his previous field was challenging and he is now working for a warehouse packing department. The Virginia Refugee Resettlement Program Manual states that the STEP program provides highly-skilled participants with specialized services that include professional assessments and assistance in accessing training, certifications, and courses related to prior careers. STEP participants are selected based on an employment assessment of all participants enrolled in Virginia’s refugee social service employment program, which is available to those who have had a refugee eligible status for less than 5 years and are over age 16. Many STEP beneficiaries in Northern Virginia are special immigrant visa (SIV) holders, according to the Virginia State Refugee Coordinator. The STEP program is funded through the Office of Refugee Resettlement’s Refugee Social Services and Targeted Assistance funds, and services are provided by local resettlement agencies. programs: Officials we interviewed at local resettlement agencies in Texas and Virginia said they used ORR funding to support career development programs for SIV holders and other clients. For example, officials from Catholic Charities Dallas said they used ORR’s Refugee Social Services funds to offer clients training and certifications in technical occupations, such as clinical nurse or forklift operator. Officials we interviewed from other organizations said they also relied on programming or funds provided under the Workforce Innovation and Opportunity Act (WIOA) for career development programs that could serve SIV holders. For example, officials from the International Rescue Committee’s national office said that some of their local offices used WIOA’s American Job Center system to help SIV holders and other skilled clients with good English skills access training opportunities or other job search resources. Officials from the Sacramento Employment Training Agency told us they recently utilized WIOA and other funding to launch an English Language Learner Workforce Navigator pilot that will emphasize assisting SIV holders and refugees because of large populations of these groups in Sacramento County. The program aims to provide participants with additional entry points to employment and training opportunities, as well as case management and supportive services. California Law on In-state Tuition for SIV Holders and Refugees In October 2017, California enacted Assembly Bill 343, which provides certain special immigrant visa (SIV) holders and refugees admitted to the United States and who settle in California with in-state tuition at California Community Colleges for the minimum time necessary to become a resident. (Students generally need to live in California for more than one year and meet other requirements to qualify for in-state tuition.) The legislature’s finding, as stated in the bill, was that access to institutions of higher education will ensure that SIV holders are “able to pursue their educational goals and rebuild and improve their lives and the lives of their families.” Upwardly Global officials describe their work as eliminating employment barriers for special immigrant visa (SIV) holders, immigrants and refugees who were professionals in their home countries. They work to help these newcomers re-enter their career fields after moving to the United States, according to staff we interviewed and other information. The organization offers career development programming including training on the U.S. job search, specialized training opportunities, and recertification services. It provides these services to job seekers in-person at physical locations (Chicago, New York, San Francisco, and Silver Spring, Maryland), as well as virtually through online services, training modules, or other job resources. Since 2009, the organization has placed 69 individuals with SIVs (of 236 served) into new employment with an average annual salary of about $54,000 at placement, according to data from Upwardly Global. SIV holders most commonly placed in jobs in technology, engineering, or finance and accounting, according to staff we interviewed. career development: Officials from Catholic Charities Fort Worth, for example, said they recruited retirees who were former professionals to voluntarily work one-on-one with clients on job readiness skills, such as interviews, resume writing, and general career planning. Officials we interviewed from several national and local resettlement agencies or county service providers also reported that they sometimes refer clients to outside organizations with career development programming for highly-skilled immigrants, such as Upwardly Global (see sidebar). While housing challenges were common among both SIV holders and refugees, SIV holders tended to have high expectations, according to staff from some local resettlement agencies. Officials from national and local resettlement agencies, as well as SIV holders from our focus groups, described several housing related challenges: Local resettlement agencies faced barriers to securing housing: SIV holders, like refugees, lack rental or credit histories and Social Security numbers when they arrive in the United States, which limits the housing options available to local resettlement agencies who must secure their housing. Local resettlement agency staff said that they had built relationships with landlords who were willing to forego these requirements; accordingly, some staff reported that SIV holders and refugees were often housed in certain apartment complexes. SIV holders in our focus groups expected better housing: In 10 of 11 focus groups we conducted, SIV holders reported that sometimes the apartments they lived in were not of high quality, they experienced problems with infestation, or had concerns about safety. The SIV holders in our focus groups who had problems with infestation or other issues said that they reported them to the landlord or local resettlement agency and the issues were generally addressed, but not always to their satisfaction. Additionally, according to staff from national and local resettlement agencies, as well as SIV holders in 5 of our 11 focus groups, SIV holders often expected better housing or to be placed in certain locations near the main SIV holder community; however, this was not always possible due to limited availability of affordable housing. SIV holders in some of our focus groups also reported that they could not afford to move to nicer apartments. Affordable housing was limited: Housing affordability was also cited as a major challenge, especially by local resettlement agency staff and SIV holder participants in 5 of our focus groups in Northern Virginia and Oakland, California. In Alameda County, where the city of Oakland is located, and in the city of Alexandria, where most SIV holders from our 3 focus groups in Northern Virginia lived, the median rental cost for a one-bedroom apartment in 2016 was about $1,400, according to U.S. Census Bureau data. In Sacramento and Dallas, rising housing costs were cited as growing challenges by staff from some local resettlement agencies and SIV holders in 3 of our 4 focus groups in those cities. While there are no national guidelines for affordability, officials from one national resettlement agency said that their general rule is to find housing that a family could afford on their expected income and have extra for other expenses. Some groups we spoke with used strategies to help address housing challenges. For example, Catholic Charities Dallas had a dedicated housing specialist whose primary job was to find and place clients into suitable housing and whose work included conducting outreach to new apartment complexes to ensure that they knew of the agency and the benefits of renting to SIV holders and refugee clients. Officials from Catholic Charities of the East Bay in Oakland described their church sponsorship program in which a local church is matched with a family to help subsidize rent and support the family in other areas, often for 6 months or more. Also, officials from one advocacy and service organization, No One Left Behind, said they assisted local resettlement agencies with finding housing for SIV holders, and had established agreements with local resettlement agencies in some cities, including Rochester, New York and Pittsburgh, Pennsylvania to secure housing and provide furnishings for all SIV holder families they resettled. Officials we interviewed from all 9 national resettlement agencies and 12 of 13 local resettlement agencies reported that female SIV spouses experienced specific barriers to assimilation. These include: Female SIV spouses experienced cultural adjustment challenges: Officials from national and local resettlement agencies reported that the gap between male principal SIV holders and their spouses in terms of English proficiency, education, work experience, or exposure to American culture, could be large and created challenges for women’s integration, especially for Afghan women, a few officials noted. Accordingly, male principal SIV holders may be able to more quickly integrate, while female SIV spouses may be less likely to participate in programs, struggle to integrate, or feel isolated, according to officials from national and local resettlement agencies. Officials noted that this gap tended to be larger than between refugee husbands and wives, who may be more evenly matched. Our analysis of PRM data confirmed that differences in education and spoken English levels were larger between principal SIV holders and spouses than with refugee principals and spouses. According to our analysis of PRM data on SIV spouses, 42 percent reported speaking no English, with those from Afghanistan much less likely to speak any English than those from Iraq. Afghan SIV spouses were also about one-third as likely to have reported completing postsecondary education as Iraqi SIV spouses, based on available data. In contrast, in our focus groups some female SIV spouses and some female principal SIV holders had prior work experience and high levels of education. For example, about one-third of the female SIV spouses in our focus groups (9 of 27) reported on their participant surveys that they had prior work experience in their home countries, including as teachers and journalists. Lack of childcare and limited transportation options: Officials we interviewed from local resettlement agencies and SIV spouses in two of our focus groups said that barriers around childcare and transportation made it challenging for female SIV spouses to leave the house for classes or employment. For example, in one of our Sacramento focus groups, several female SIV spouses reported that they wanted to take English classes and find work, but the cost of childcare and lack of public transportation, including school buses for their children, were prohibitive. National and local resettlement agency officials also reported that female SIV spouses may take longer to assimilate and feel isolated because of families’ expectations about female spouses staying home. Officials from one national resettlement agency said that prior to arrival, many SIV holders and their families lived comfortably on one income, and therefore female spouses were often not initially willing to work, which strained finances and made self-sufficiency difficult. In all three of our focus groups with female SIV spouses, participants said that they would like to work, but needed to wait until their children were older or needed to learn English first. Officials we interviewed from several resettlement agencies described their efforts to address some of the challenges related to the integration of female spouses. They include: Engaged SIV women independent from their spouses: Staff from two local resettlement agencies reported providing intake for men and women separately so that they ensure that women had a connection to resettlement agency staff independent of their husbands. Other agencies reported that they started making sure that an interpreter was provided for the female spouse rather than having her husband act as an interpreter, so that they could ensure everyone received the same information and that such information was not filtered through the husband. Staff we spoke to at one local resettlement agency acknowledged that their employment services had previously been primarily focused on the male clients in each household, but that they had since created a separate curriculum for women to ensure that all adult clients received job readiness training. Mitigated barriers faced by female SIV spouses to attend English classes and to work: To address childcare and transportation barriers, staff we spoke to at three local resettlement agencies said they offered English language classes at apartment complexes with many SIV holder families, with childcare provided. Several local resettlement agencies also used volunteers to provide in-home English classes and mentoring for SIV women. Officials from two local resettlement agencies said they provided women’s empowerment programming to overcome isolation and other issues. For example, officials from International Rescue Committee Dallas told us that they offered a women’s empowerment class that met two times per week to discuss varying topics, including public transit, job readiness, and sewing. Officials from Opening Doors Sacramento, an affiliate of Church World Service, told us that they assist women who are special immigrant visa (SIV) holders and refugees convert their homes into home-based childcare centers. Opening Doors utilizes funds from the Office of Refugee Resettlement’s grant on micro- finance and partners with a local social service agency to help the women start a business plan and get licensed. As of April 2017, over 50 women have received their license through this program, many of whom are from Afghanistan, according to officials from Opening Doors. State’s PRM has taken several steps to address the capacity challenges reported by resettlement agencies in Northern Virginia. First, in May 2017, PRM placed limitations on SIV holders’ resettlement in that area in response to concerns raised by local resettlement agencies and the state refugee coordinator, and in consultation with national resettlement agencies, advocacy groups, and ORR. The policy generally restricts SIV holders from being placed in Northern Virginia unless they have close family ties there. Second, in June 2017, PRM issued another new policy that gives SIV holders more resettlement options. Under this new policy, SIV holders can choose to be placed in one of 25 cities without having a U.S. tie (see table 2). This option did not exist previously, as SIV holders, like refugees, were typically placed near a specified U.S. tie or in a location primarily determined by resettlement agencies. According to PRM officials, by providing a choice to SIV holders, they aimed to increase the likelihood of successful resettlement in these alternative areas and mitigate secondary migration (when people leave their initial placement to move to desired locations). PRM officials said that they considered various factors in developing the list of 25 cities, including the presence of existing SIV communities, sufficient capacity to resettle new arrivals among local resettlement agencies, and housing availability and employment opportunities based on information from local resettlement agencies. In finalizing its list of cities, PRM also sought input from national resettlement agencies, advocacy organizations, and ORR. To inform SIV holders about resettlement prior to arrival and to better manage their expectations, PRM has developed informational materials specifically for SIV holders. All individuals served through the R&P program must receive cultural orientation training once they arrive in the United States, according to R&P guidelines, and many refugees also take this training overseas. In contrast, SIV holders generally do not take overseas cultural orientation training because they typically receive their visas in locations where there are no facilities to provide such training. PRM officials said providing special cultural orientation training sessions for SIV holders, such as at the U.S. embassy in Kabul, would be logistically difficult and potentially result in additional security risks for SIV holders. In lieu of overseas cultural orientation trainings, PRM provides a Dari-translated version of its manual on U.S. resettlement, Welcome to the United States: A Guidebook for Refugees, for distribution by the U.S. embassy in Kabul. It has also developed several other types of informational materials specifically for SIV holders, including documents such as “19 Things You Need to Know About Resettling in the United States” and “Frequently Asked Questions (FAQs) About Resettlement Benefits for Iraqi and Afghan Recipients of Special Immigrant Visas,” as well as short videos aimed specifically at SIV holders (see sidebar). SIV holders can access informational materials on State’s Refugee Processing Center’s website, and links to this website are included at the end of emails from PRM staff when communicating with SIV holders, according to PRM officials. Additionally, PRM officials noted that they have also worked with advocacy groups who may be communicating with SIV holders while overseas, to disseminate information, such as the challenges of resettling in high cost-of-living areas. Officials said that their efforts to inform SIV holders about resettlement before they come to the United States have been ongoing for several years. However, officials we interviewed from many national and local resettlement agencies, as well as those from some state refugee coordinator offices and advocacy groups, said that State could do more to inform SIV holders about resettlement while they were still overseas, given their often false expectations about resettlement. For instance, officials from a number of these entities said that PRM’s informational materials for SIV holders are general and lack specific details or more in- depth information on issues, such as housing affordability, employment, or the type of government assistance they will or are likely to receive. This type of information could provide them a better sense of what to expect when they resettle in the United States, according to officials. Based on our review, we found that while the materials discuss resettlement challenges generally, such as difficulties associated with relocating in certain high-cost areas or the likelihood that SIV holders will need to take an entry-level job instead of one in their professional field, they do not contain specific details, examples, or links to specific information. For example, the materials do not provide information on area housing costs in popular resettlement areas or common jobs or average wages among SIV holders (or refugees). They provide minimal information on the amounts people may receive in government assistance or the extent to which they can expect assistance with such things as longer-term training or education. PRM’s new list of 25 cities, for instance, includes a link to each city’s municipal government website, but such websites are unlikely to provide easy access to information, such as area housing costs, that could help inform people’s resettlement choices. PRM officials stated that they are wary of providing specific details because these may vary for SIV families, depending on the state where they reside, the assistance programs in which they participate, their particular household situation, or other factors. Such differences can be a source of misinformation among those in the SIV community, according to PRM officials, as well as some resettlement agencies we interviewed. Accordingly, officials noted that they would not want to be in a position to defend information that may be inaccurate or not applicable to SIV holders. Officials we interviewed from two resettlement agencies also noted that it could be challenging to provide specific details, such as on government benefit amounts, as these may vary greatly across households. Yet, officials we interviewed from other resettlement agencies and advocacy groups noted that illustrative details, examples, or more in- depth discussion on key issues would provide SIV holders more understanding of what they may experience and inform their decision- making. Providing web links to relevant information or additional information from official sources may also help SIV holders gather information from more credible sources and counter some of the misinformation they may receive through word of mouth, according to a state refugee coordinator and officials at two local resettlement agencies we interviewed. Similarly, participants in 5 of our 11 focus groups said that getting additional cultural orientation or more information about life in the United States, such as from State, would have been useful. Some said they did not always get an accurate picture of resettlement from their U.S. ties. One principal SIV holder we spoke to said getting additional information about resettlement while still overseas would have been useful for SIV holders since it can be difficult to learn all this information once they have arrived in the United States, as they are in “culture shock” and “overwhelmed” by all they have to do. In contrast, participants in three focus groups said that access to more resettlement information overseas would not have been useful: People’s primary focus at that time is on simply getting their visa and leaving the country. In addition to the lack of specificity in the information provided to prospective SIV holders, some of State’s efforts to disseminate existing information are also incomplete. For instance, we learned of some instances of miscommunication between PRM and Consular Affairs regarding information provided to SIV holders at embassies. While PRM officials told us they understood that the embassies in Kabul and Baghdad provided SIV holders with hard copies of Welcome to the United States, and played the informational videos for SIV holders on a loop, officials from Consular Affairs told us that the Bagdad embassy no longer provided hard copies of guides due to costs, and neither embassy played the videos due to space and other issues. Officials we interviewed from a few resettlement agencies and advocacy groups suggested that there may be additional opportunities for State to disseminate information, such as making the “19 Things to Know” document available at more touch points. The links to such SIV-specific informational documents are directly available on State’s Refugee Processing Center website and through the form SIV holders complete to elect to receive resettlement benefits. However, they are not directly accessible on State’s Consular Affairs’ websites that describe the steps to apply for a SIV. Further, these SIV- specific documents are also not offered at embassies or mailed to SIV holders in their visa packages, according to Consular Affairs officials. Moreover, in several of our focus groups, some participants stated that they did not remember receiving any or much information on resettlement in the United States while in their home country, including information aimed specifically at SIV holders. Federal internal controls state that management should externally communicate necessary quality information to achieve objectives, considering audience, nature of information, availability of information, and costs in doing so. Because State’s current information to SIV holders overseas is general and the agency may miss opportunities to disseminate or otherwise make individuals aware of the information, SIV holders may be hampered in their ability to make well-informed decisions on where to resettle in the United States, as well as in their ability to prepare and adapt to potential challenges as quickly as possible upon arrival. Although ORR does not provide specific support or assistance for SIV holders, ORR’s funding and technical assistance for refugees and other eligible clients can be used to support programming for highly skilled clients, including SIV holders. For example, states can use Refugee Social Services and Targeted Assistance Grant funds to develop specialized programs aimed at higher skilled immigrants, if they choose. Among our selected states, Virginia used these funds to support its career development program. ORR also uses a technical assistance provider, Higher, to provide support related to employment and self- sufficiency. Higher makes various employment resources available that resettlement agencies or other service providers can use, including those that can help serve highly skilled clients, such as webinars or postings on educational or career development opportunities. Higher has also developed online training modules, recertification guides, and other resources that refugees, SIV holders, or other clients can directly access through its website, in addition to posting links to other providers’ services, such as those from Upwardly Global, which are directly accessible by clients. In addition, in June 2017, ORR posted a new $3 million competitive grant announcement for the Refugee Career Pathways program that aims to address the challenges experienced by highly skilled refugees, SIV holders, or other eligible populations in moving beyond low-skilled work into professional fields with career advancement opportunities (see text box). The grant announcement states that this program will utilize a “career pathways” approach, as defined by WIOA, which is a combination of training, education, and services to help people obtain short-term and long-term career opportunities in specific fields that align with state or regional economic needs. Possible types of assistance that could be provided to participants include case management, training and technical assistance, mentoring, or financial assistance for educational or certification programs. This ORR grant aligns with the desire for more targeted assistance and information for skilled immigrants, such SIV holders, which was expressed by officials we interviewed at a number of national and local resettlement agencies and SIV holders in our focus groups. Goals of Office of Refugee Resettlement’s new Refugee Career Pathways Program “The Refugee Career Pathways (RCP) program is a new program established by the Office of Refugee Resettlement (ORR) to address the obstacles faced by resettled refugees in initiating professional careers in their new communities. While many refugees have previous professional experience in their country of origin, they often lack the degrees, certifications, and knowledge specific to the U.S. job environment needed to attain professional employment after resettlement. Even highly-skilled refugees are often required to take low-skilled jobs with little opportunity for advancement or skill development. This in turn limits refugees’ potential to achieve economic self-sufficiency and to benefit their communities by making full use of the skills and experience they bring to their new home. The goal of the RCP program is to support refugees in attaining the knowledge and resources needed to begin a professional career in their new community. Existing job training programs for refugees often focus on supporting initial job placement, which may not be adequate to secure long-term self-sufficiency. The RCP program will assist refugees to begin professional careers that provide not only a salary but also greater job security and the possibility of career advancement.” SIV holders resettle in the United States in most cases to escape endangerment—a result of their work for the U.S. government in Iraq or Afghanistan. After their resettlement, however, no outcome information exists beyond whether SIV holders are minimally self-sufficient within their first 6 months. SIV holders are a small group compared to the larger, general population of refugees. Yet ORR faced and overcame similar constraints in conducting studies on other special populations in the past, such as the Lost Boys of Sudan, responding to the focus and concern of policymakers about those populations at the time. Although ORR could leverage its existing methodologies to examine SIV holders’ longer-term outcomes in further research, similar to what it did for other groups, it has not yet fully explored the feasibility of doing so or other possibilities to obtain information about the SIV holder population. ORR’s new survey redesign efforts, aimed at improving its understanding of the long-term outcomes of refugees and related populations, provide the agency an opportunity to do this. Until then, policymakers have no information as to whether SIV holders—a population of special interest and one with an increasing presence in the federal refugee resettlement programs—are successfully resettling in the United States. While many of the resettlement challenges related to employment, housing, or cultural integration are outside of State’s control, they may be exacerbated by SIV holders’ own high expectations about resettlement. These expectations are often cultivated before they arrive from overseas. State’s efforts to inform SIV holders about resettlement have been ongoing for years and, to some extent, help overcome the logistical difficulties of not being able to provide SIV holders with cultural orientation training before they come. However, the persistent gap among SIV holders’ expectations and their experiences, as described by many of the SIV holders and officials we interviewed from national and local resettlement agencies and advocacy groups, and other stakeholders, suggests that these efforts are falling short. While State has made efforts to disseminate the information through various touchpoints, there are missed opportunities for distribution, such as at embassies. When coupled with the lack of examples or details in State’s informational materials for SIV holders, these missed opportunities may contribute to SIV holders’ ongoing false expectations of resettlement. Finding additional ways to deliver information to SIV holders about the realities of resettlement could help them make more informed decisions about where they choose to resettle—decisions which may be predicated on their ability to access additional information about important factors such as employment opportunities or area housing costs. Such information, while not a panacea for the real resettlement challenges SIV holders face, can at least help them make decisions that better align their personal situation with the economic realities of resettlement in the United States. Additional information could also mitigate SIV holders’ surprise and frustration once they arrive, better enable them to quickly orient to their new lives, as well as help refugee agencies facilitate that transition. We are making two recommendations, including one to ORR and one to PRM: 1. The Director of the Office of Refugee Resettlement (ORR) should consider including SIV holders in its Annual Survey of Refugees. (Recommendation 1) 2. The Assistant Secretary of the Bureau of Population, Refugees, and Migration (PRM) should identify and implement additional ways to deliver information to prospective SIV holders about resettlement to assist with adjustment and expectations after arrival in the United States, including providing more detailed or in-depth information on key issues. PRM, working with Consular Affairs as needed, should also identify and address potential gaps in disseminating relevant information to SIV holders, such as at embassies. (Recommendation 2) We provided a draft of our report to HHS and State for review and comment. Both agencies agreed with our recommendations. In its response, HHS stated that while it did not believe including SIV holders in the Annual Survey of Refugee was feasible under the current contract due to costs, it would continue to look for cost-effective ways to include SIV holders in its survey redesign efforts and in future contracts. HHS stated that it would also explore ways to capture more information on SIV holders through its administrative program data, including on employment outcomes. State, in its response, said that PRM has developed new guidance for the Refugee Processing Center’s SIV unit regarding the distribution of additional information to SIV holders and that staff from this unit plan to include additional links to cultural orientation information in all their correspondences with SIV applicants. Additionally, State noted that Embassy Baghdad will distribute copies of the Welcome Guide to Iraqi SIV holders and that PRM will work with Consular Affairs to identify other ways to provide information to SIV applicants. HHS and State also provided technical comments, which we incorporated into the report as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, Secretaries of Health and Human Services and State, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. This appendix provides additional information on our methodologies for our analysis of data from the Department of State (State) and on our focus groups with special immigrant visa (SIV) holders. We analyzed individual record-level data from State’s Bureau of Population, Refugees, and Migration (PRM) for fiscal years 2011 through the first quarter of 2017 (i.e., October 2010 through December 2016) that provide information on recipients of State’s resettlement program, the Reception and Placement (R&P) program. Fiscal year 2011 was the first year of the R&P program’s current reporting requirements, and December 2016 was the most current data available at the time of our review. Overall, this timeframe accounted for about 40,000 individual SIV holders (principal SIV holders and their family members) and 14,000 cases, or households, before we excluded instances of missing data. In our analysis and reported results, we excluded instances of missing data, such as when SIV holders migrated from their initial placements before resettlement agencies could collect 90-day outcome information, or, in the case of employment rates, when principal SIV holders were considered exempt from seeking employment for various reasons. This resulted in about 38,000 individuals and 13,000 cases. The R&P information we examined included data on recipients’ employment status and other household income sources at 90 days after arrival, such as from earnings or common cash assistance programs. Most of the R&P data are provided as “yes” or “no” responses, such as whether an individual is employed or whether the household has income that exceeds expenses. R&P data are collected by national and local resettlement agencies on all individuals served through the R&P program, and reported to PRM at one-point in time—90 days after individuals’ arrival in the United States. Per R&P reporting requirements, some data are collected at the case or household level, such as whether the household has sufficient income to meet expenses, while other data, such as employment status, are collected on each individual in a case. Additionally, we reviewed PRM data on recipients’ background characteristics, such as education level and spoken English ability, collected by PRM during the application and screening process prior to an individual’s resettlement in the United States. PRM tracks information on all individuals applying to the U.S. Refugee Admissions Program, including those with SIVs, using its data repository known as the Worldwide Refugee Admissions Processing System. Some of the background information on SIV holders, including education level and spoken English level, are self-reported and provided on SIV application forms. PRM collected both the background and the R&P data in a way that allowed SIV holders to be examined separately from resettled refugees. We also did analyses with the same variables for resettled refugees from the same general timeframe. We reviewed the data from PRM for missing data and internal inconsistencies, and interviewed PRM officials knowledgeable about the data to resolve identified issues. We determined that the data were sufficiently reliable for our purposes of reporting employment rates, income sources, and receipt of services at 90 days, as well as broad categories of education and spoken English levels, for SIV holders and, in some cases, refugees. In each of our selected states (California, Texas, and Virginia), we conducted three to four focus groups with principal SIV holders and SIV spouses to better understand resettlement factors or challenges from their perspectives. In total, we conducted 11 focus groups and spoke with 86 participants from both Afghanistan and Iraq. Specifically, we conducted eight focus groups with all or mostly principal SIV holders. (Participants in seven of these groups were all male principal SIV holders; participants in one group included four male principal SIV holders and two female spouses.) We also conducted three focus groups with primarily female spouses. (All participants in these three groups were females; however, in two groups, one participant was the principal SIV holder.) To supplement the information we gathered through our focus group discussions, we also distributed short anonymous surveys to participants at the end of each session. Among other basic questions, we asked participants whether they were currently employed and, if so, the type of work they did. We also asked principal SIV holders what type of work they did for the U.S. government, and SIV spouses whether they worked in their home country and the type of work. Almost all participants submitted a survey (84 of 86). However, some participants (particularly SIV spouses) appeared to have difficulty understanding the questions, although we had translation assistance during our focus groups. In our report, we discussed survey findings on principal SIV holders’ prior work for the U.S. government and the prevalence of prior work among SIV spouses. Overall, these responses had few blanks, and the responses themselves seemed to indicate general understanding of the questions. The information gathered from interviews and focus groups from our site visits is not generalizable and is meant to provide illustrative examples. In addition to the contact above, Janet Mascia (Assistant Director), Theresa Lo (Analyst-in-Charge), Cristina Norland, and Rachel Pittenger made key contributions to this report. Also contributing to this report were James Bennett, Kathryn Bernet, Pamela Davidson, Holly Dye, Sara Edmondson, Cynthia Grant, Marissa Jones, James Rebbe, and Rosemary Torres Lerma.", "summary": "Certain Afghan or Iraqi nationals who worked for the U.S. government and may have experienced serious threats due to this work may qualify for an SIV. An SIV allows them and eligible family members to resettle in the United States, and since 2008 over 60,000 SIV holders (principal holder and family members) have done so. Upon arrival, they are eligible for resettlement assistance from State and HHS. GAO was asked to review SIV holders' resettlement outcomes and challenges. This report examines (1) available data on SIV holders' employment and other outcomes, (2) challenges affecting their resettlement, and (3) federal efforts to help address challenges. GAO analyzed the most recent federal data (State: 2010-2016; and HHS: 2016) on SIV holders' outcomes; interviewed officials from nine national resettlement agencies; and visited three states (CA, TX, and VA) where over half of SIV holders resettled. In these states, GAO interviewed the states' refugee coordinators and, for two local areas with relatively high levels of SIV resettlement, interviewed local resettlement agency officials and conducted focus groups with SIV holders. GAO also reviewed relevant federal laws and policies and interviewed federal officials. Since fiscal year 2011, about 13,000 Afghan and Iraqi nationals (excluding family members) have resettled in the United States under special immigrant visas (SIV), but limited data on their outcomes are available from the Department of State (State) and the Department of Health and Human Services (HHS). State collects data on SIV holders' resettlement outcomes once—90 days after they arrive. GAO's analysis of State's data from October 2010 through December 2016 showed that the majority of principal SIV holders—those who worked for the U.S. government—were unemployed at 90 days, including those reporting high levels of education and spoken English. Separately, HHS collects data on about one-third of resettled SIV holders (those in one HHS grant program). According to HHS's fiscal year 2016 data (the only year available), most of these SIV holders were employed and not receiving cash assistance 6 months after arrival; however, these data are not representative of all SIV holders. GAO did not identify any outcome data for SIV holders beyond 6 months after arrival. HHS annually surveys refugees up to 5 years after arrival, but does not do so for SIV holders. However, it has occasionally used its survey of refugees to analyze selected groups at no additional reported cost. Such analysis could provide valuable information on whether SIV holders have achieved longer-term assimilation, consistent with HHS' mission and program goals. Stakeholders GAO interviewed reported several resettlement challenges, including capacity issues in handling large numbers of SIV holders, difficulties finding skilled employment, and SIV holders' high expectations. Officials from local resettlement agencies in Northern Virginia reported capacity challenges for their agencies and the community due to the large increase of SIV holders. In almost all of GAO's focus groups with principal SIV holders, participants expressed frustration at the need to take low-skilled jobs because they expected that their education and prior work experience would lead to skilled work. State and HHS have taken steps to address some resettlement challenges. For example, in 2017 State placed restrictions on where SIV holders could resettle and HHS announced a new grant to support career development programs for SIV holders, refugees, and others. In addition, State provides information to prospective SIV holders about resettlement. However, the information is general, and lacks detail on key issues such as housing affordability, employment, and available government assistance. Providing such specifics could lead to more informed decisions by SIV holders on where to resettle and help them more quickly adapt to potential challenges once in the United States. GAO recommends that 1) HHS consider including SIV holders in its annual survey on refugees' longer-term outcomes, and that 2) State provide more detailed information on key issues to prospective SIV holders. Both agencies agreed with our recommendations.", "document_type": "gao"}
{"report": "The LDA requires lobbyists to register with the Secretary of the Senate and the Clerk of the House and to file quarterly reports disclosing their respective lobbying activities. Lobbyists are required to file their registrations and reports electronically with the Secretary of the Senate and the Clerk of the House through a single entry point. Registrations and reports must be publicly available in downloadable, searchable databases from the Secretary of the Senate and the Clerk of the House. No specific statutory requirements exist for lobbyists to generate or maintain documentation in support of the information disclosed in the reports they file. However, guidance issued by the Secretary of the Senate and the Clerk of the House recommends that lobbyists retain copies of their filings and documentation supporting reported income and expenses for at least 6 years after they file their reports. The LDA requires that the Secretary of the Senate and the Clerk of the House guide and assist lobbyists with the registration and reporting requirements and develop common standards, rules, and procedures for LDA compliance. The Secretary of the Senate and the Clerk of the House review the guidance semiannually. It was last revised January 31, 2017, to (among other issues) update the registration threshold to reflect changes in the Consumer Price Index, and clarify the identification of clients and covered officials and issues related to rounding income and expenses. The guidance provides definitions of LDA terms, elaborates on registration and reporting requirements, includes specific examples of different scenarios, and provides explanations of why certain scenarios prompt or do not prompt disclosure under the LDA. The offices of the Secretary of the Senate and the Clerk of the House told us they continue to consider information we report on lobbying disclosure compliance when they periodically update the guidance. In addition, they told us they e-mail registered lobbyists quarterly on common compliance issues and reminders to file reports by the due dates. The LDA defines a lobbyist as an individual who is employed or retained by a client for compensation, who has made more than one lobbying contact (written or oral communication to covered officials, such as a high ranking agency official or a Member of Congress made on behalf of a client), and whose lobbying activities represent at least 20 percent of the time that he or she spends on behalf of the client during the quarter. Lobbying firms are persons or entities that have one or more employees who lobby on behalf of a client other than that person or entity. Figure 1 provides an overview of the registration and filing process. Lobbying firms are required to register with the Secretary of the Senate and the Clerk of the House for each client if the firms receive or expect to receive more than $3,000 in income from that client for lobbying activities. Lobbyists are also required to submit an LD-2 quarterly report for each registration filed. The LD-2s contain information that includes: the name of the lobbyist reporting on quarterly lobbying activities; the name of the client for whom the lobbyist lobbied; a list of individuals who acted as lobbyists on behalf of the client during the reporting period; whether any lobbyists served in covered positions in the executive or legislative branch such as high-ranking agency officials or congressional staff positions, in the previous 20 years; codes describing general issue areas, such as agriculture and education; a description of the specific lobbying issues; houses of Congress and federal agencies lobbied during the reporting reported income (or expenses for organizations with in-house lobbyists) related to lobbying activities during the quarter (rounded to the nearest $10,000). The LDA also requires lobbyists to report certain political contributions semiannually in the LD-203 report. These reports must be filed 30 days after the end of a semiannual period by each lobbying firm registered to lobby and by each individual listed as a lobbyist on a firm’s lobbying report. The lobbyists or lobbying firms must: list the name of each federal candidate or officeholder, leadership political action committee, or political party committee to which he or she contributed at least $200 in the aggregate during the semiannual period; report contributions made to presidential library foundations and presidential inaugural committees; report funds contributed to pay the cost of an event to honor or recognize an official who was previously in a covered position, funds paid to an entity named for or controlled by a covered official, and contributions to a person or entity in recognition of an official, or to pay the costs of a meeting or other event held by or in the name of a covered official; and certify that they have read and are familiar with the gift and travel rules of the Senate and House and that they have not provided, requested, or directed a gift or travel to a member, officer, or employee of Congress that would violate those rules. The Secretary of the Senate and the Clerk of the House, along with USAO, are responsible for ensuring LDA compliance. The Secretary of the Senate and the Clerk of the House notify lobbyists or lobbying firms in writing that they are not complying with the LDA reporting. Subsequently, they refer those lobbyists who fail to provide an appropriate response to USAO. USAO researches these referrals and sends additional noncompliance notices to the lobbyists or lobbying firms, requesting that they file reports or terminate their registration. If USAO does not receive a response after 60 days, it decides whether to pursue a civil or criminal case against each noncompliant lobbyist. A civil case could lead to penalties up to $200,000 for each violation, while a criminal case—usually pursued if a lobbyist’s noncompliance is found to be knowing and corrupt—could lead to a maximum of 5 years in prison. Generally, under the LDA, within 45 days of being employed or retained to make a lobbying contact on behalf of a client, the lobbyist must register by filing an LD-1 form with the Secretary of the Senate and the Clerk of the House. Thereafter, the lobbyist must file quarterly disclosure (LD-2) reports detailing the lobbying activities. Of the 3,433 new registrations we identified for the third and fourth quarters of 2016 and the first and second quarters of 2017, we matched 2,995 of them (87.2 percent) to corresponding LD-2 reports filed within the same quarter as the registration. These results are consistent with the findings we have reported in prior reviews. We used the House lobbyists’ disclosure database as the source of the reports. We also used an electronic matching algorithm that allows for misspellings and other minor inconsistencies between the registrations and reports. Figure 2 shows lobbyists filed disclosure reports as required for most new lobbying registrations from 2010 through 2017. For selected elements of lobbyists’ LD-2 reports that can be generalized to the population of lobbying reports, our findings have generally been consistent from year to year. Most lobbyists reporting $5,000 or more in income or expenses provided written documentation to varying degrees for the reporting elements in their disclosure reports. Figure 3 shows that for most LD-2 reports, lobbyists provided documentation for income and expenses for sampled reports from 2010 through 2017. However, in recent years our findings showed some variation in the estimated percentage of lobbyists who have reports with documentation for income and expense supporting lobbying activities. Specifically, our estimate for 2017 (99 percent) represents a statistically significant increase from 2016. Figure 4 shows that for some LD-2 reports, lobbyists did not round their income or expenses as the guidance requires. In 2017, we estimate 25 percent of reports did not round reported income or expenses according to the guidance. We have found that rounding difficulties have been a recurring issue on LD-2 reports from 2010 through 2017. As we previously reported, several lobbyists who listed expenses told us that based on their reading of the LD-2 form they believed they were required to report the exact amount. While this is not consistent with the LDA and the guidance, this may be a source of some of the confusion regarding rounding errors. In 2016, the guidance was updated to include an additional example about rounding expenses to the nearest $10,000. In 2017, 11 percent of lobbyists reported $10,000 or more in income or expenses. The LDA requires lobbyists to disclose lobbying contacts made with federal agencies on behalf of the client for the reporting period. This year, of the 98 LD-2 reports in our sample, 51 reports disclosed lobbying activities at federal agencies. Of those, lobbyists provided documentation for all lobbying activities at executive branch agencies for 34 LD-2 reports. Figures 5 through 8 show that lobbyists for most LD-2 reports provided documentation for selected elements of their LD-2 reports from 2010 through 2017. Lobbyists for an estimated 93 percent of LD-2 reports filed year-end 2016 for all lobbyists listed political contributions on the report as required. Figure 9 shows that lobbyists for most lobbying firms filed contribution reports as required in our sample from 2010 through 2017. All individual lobbyists and lobbying firms reporting lobbying activity are required to file LD-203 reports semiannually, even if they have no contributions to report, because they must certify compliance with the gift and travel rules. The LDA requires a lobbyist to disclose previously held covered positions in the executive or legislative branch, such as high ranking agency officials and congressional staff, when first registering as a lobbyist for a new client. This can be done either on a new LD-1 or on the quarterly LD- 2 filing when added as a new lobbyist. This year, we estimate that 15 percent of all LD-2 reports may not have properly disclosed previously held covered positions as required. As in our other reports, some lobbyists were still unclear about the need to disclose certain covered positions, such as paid congressional internships or certain executive agency positions. Figure 10 shows the extent to which lobbyists may not have properly disclosed one or more covered positions as required from 2010 through 2017. Lobbyists amended 15 of the 98 LD-2 disclosure reports in our original sample to change previously reported information after we contacted them. Of the 15 reports, 7 were amended after we notified the lobbyists of our review, but before we met with them. An additional 8 of the 15 reports were amended after we met with the lobbyists to review their documentation. We consistently find a notable number of amended LD-2 reports in our sample each year following notification of our review. This suggests that sometimes our contact spurs lobbyists to more closely scrutinize their reports than they would have without our review. Table 1 lists reasons lobbying firms in our sample amended their LD-1 or LD-2 reports. As part of our review, we compared contributions listed on lobbyists’ and lobbying firms’ LD-203 reports against those political contributions reported in the Federal Election Commission (FEC) database to identify whether political contributions were omitted on LD-203 reports in our sample. The sample of LD-203 reports we reviewed contained 80 reports with contributions and 80 reports without contributions. We estimate that overall for 2017, lobbyists failed to disclose one or more reportable contributions on 12 percent of reports. Additionally, ten LD-203 reports were amended in response to our review. For this element in prior reports, we reported an estimated minimum percentage of reports based on a one-sided 95 percent confidence interval rather than the estimated proportion as shown here. Estimates in the table have a maximum margin of error of 11 percentage points. The year to year differences are not statistically significant. Table 2 illustrates that from 2010 through 2017 most lobbyists disclosed FEC reportable contributions on their LD-203 reports as required. As part of our review, 88 different lobbying firms were included in our 2017 sample of LD-2 disclosure reports. Consistent with prior reviews, most lobbying firms reported that they found it “very easy” or “somewhat easy” to comply with reporting requirements. Of the 88 different lobbying firms in our sample, 34 reported that the disclosure requirements were “very easy,” 40 reported them “somewhat easy,” and 13 reported them “somewhat difficult” or “very difficult” (see figure 11). Most lobbying firms we surveyed rated the definitions of terms used in LD-2 reporting as “very easy” or “somewhat easy” to understand with regard to meeting their reporting requirements. This is consistent with prior reviews. Figures 12 through 16 show what lobbyists reported as their ease of understanding the terms associated with LD-2 reporting requirements from 2012 through 2017. U.S. Attorney’s Office (USAO) officials stated that they continue to have sufficient personnel resources and authority under the LDA to enforce reporting requirements. This includes imposing civil or criminal penalties for noncompliance. Noncompliance refers to a lobbyist’s or lobbying firm’s failure to comply with the LDA. However, USAO noted that the number of assigned personnel has decreased due to attrition. USAO officials stated that lobbyists resolve their noncompliance issues by filing LD-2, LD-203, or LD-2 amendments, or by terminating their registration, depending on the issue. Resolving referrals can take anywhere from a few days to years, depending on the circumstances. During this time, USAO creates summary reports from its database to track the overall number of referrals that are pending or become compliant as a result of the lobbyist receiving an e-mail, phone call, or noncompliance letter. Referrals remain in the pending category until they are resolved. The pending category is divided into the following areas: “initial research for referral,” “responded but not compliant,” “no response/waiting for a response,” “bad address,” and “unable to locate.” The USAO attempts to review and update all pending cases every six months. USAO focuses its enforcement efforts primarily on the “responded but not compliant” and the “no response/waiting for a response” groups. Officials told us that, if the USAO, after several unsuccessful attempts, has been unsuccessful in contacting the non-compliant firm or its lobbyist, USAO confers with both the Secretary of the Senate and the Clerk of the House to determine whether further action is needed. In the cases where the lobbying firm is repeatedly referred for not filing disclosure reports but does not appear to be actively lobbying, USAO suspends enforcement actions. USAO officials reported they will continue to monitor these firms and will resume enforcement actions if required. USAO received 3,213 referrals from both the Secretary of the Senate and the Clerk of the House for failure to comply with LD-2 reporting requirements cumulatively for filing years 2009 through 2015. Table 4 shows the number and status of the referrals received and the number of enforcement actions taken by USAO to bring lobbying firms into compliance. Enforcement actions include USAO attempts to bring lobbyists into compliance through letters, e-mails, and calls. About 45 percent (1,450 of 3,213) of the total referrals received are now compliant because lobbying firms either filed their reports or terminated their registrations. In addition, some of the referrals were found to be compliant when USAO received the referral. Therefore, no action was taken. This may occur when lobbying firms respond to the contact letters from the Secretary of the Senate and the Clerk of the House after USAO received the referrals. About 55 percent (1,752 of 3,213) of referrals are pending further action because USAO could not locate the lobbying firm, did not receive a response from the firm after an enforcement action, or plans to conduct additional research to determine if it can locate the lobbying firm. The remaining 11 referrals did not require action or were suspended because the lobbyist or client was no longer in business or the lobbyist was deceased. LD-203 referrals consist of two types: (1) LD-203(R) referrals represent lobbying firms that have failed to file LD-203 reports for their lobbying firm and (2) LD-203 referrals represent the lobbyists at the lobbying firm who have failed to file their individual LD-203 reports as required. USAO received 2,255 LD-203(R) referrals (cumulatively from 2009 through 2015) and 3,716 LD-203 referrals (cumulatively from 2009 through 2014 from the Secretary of the Senate and the Clerk of the House for lobbying firms and lobbyists for noncompliance with reporting requirements). LD- 203 referrals are more complicated than LD-2 referrals because both the lobbying firm and the individual lobbyists within the firm are each required to file a LD-203. Lobbyists employed by a lobbying firm typically use the firm’s contact information and not the lobbyists’ personal contact information. This makes it difficult to locate a lobbyist who is not in compliance and may have left the firm. USAO officials reported that, while many firms have assisted USAO by providing contact information for lobbyists, they are not required to do so. According to officials, USAO has difficulty pursuing LD-203 referrals for lobbyists who have departed a firm without leaving forwarding contact information with the firm. While USAO utilizes web searches and online databases, including social media, to find these missing lobbyists, it is not always successful. Table 5 shows the status of LD-203 (R) referrals received and the number of enforcement actions taken by USAO to bring lobbying firms into compliance. A little more than 44 percent (998 of 2,255) of the lobbying firms referred by the Secretary of the Senate and Clerk of the House for noncompliance from calendar years 2009 through 2015 are now considered compliant because firms either filed their reports or terminated their registrations. About 56 percent (1,251 of 2,255) of the referrals are pending further action. Table 6 shows that USAO received 3,716 LD-203 referrals from the Secretary of the Senate and Clerk of the House for lobbyists who failed to comply with LD-203 reporting requirements for calendar years 2009 through 2014. It also shows the status of the referrals received and the number of enforcement actions taken by USAO to bring lobbyists into compliance. In addition, table 6 shows that about 47 percent (1,741 of 3,716) of the lobbyists had come into compliance by filing their reports or are no longer registered as a lobbyist. About 53 percent (1,966 of 3,716) of the referrals are pending further action because USAO could not locate the lobbyist, did not receive a response from the lobbyist, or plans to conduct additional research to determine if it can locate the lobbyist. Table 7 shows that USAO received LD-203 referrals from the Secretary of the Senate and the Clerk of the House for 4,991 lobbyists who failed to comply with LD-203 reporting requirements for any filing year from 2009 through 2014. It also shows the status of compliance for individual lobbyists listed on referrals to USAO. About 51 percent (2,526 of 4,991) of the lobbyists had come into compliance by filing their reports or are no longer registered as a lobbyist. About 50 percent (2,465 of 4,991) of the referrals are pending action because USAO could not locate the lobbyists, did not receive a response from the lobbyists, or plans to conduct additional research to determine if it can locate the lobbyists. USAO officials said that many of the pending LD-203 referrals represent lobbyists who no longer lobby for the lobbying firms affiliated with the referrals, even though these lobbying firms may be listed on the lobbyist’s LD-203 report. According to USAO officials, lobbyists and lobbying firms who repeatedly fail to file reports are labeled chronic offenders and referred to one of the assigned attorneys for follow-up. USAO also receives complaints regarding lobbyists who are allegedly lobbying but never filed an LD-203. USAO officials added that USAO monitors and investigates chronic offenders to ultimately determine the appropriate enforcement actions, which may include settlement or other civil actions. In regards to the four active cases involving chronic offenders they reported to us in 2016, USAO officials noted that the agency is investigating one case, negotiating a resolution that will include a civil penalty in another case, and closing two other investigations without further action. In addition, USAO is reviewing its records to identify additional chronic offenders for further action due to noncompliance. We provided a draft of this report to the Department of Justice for review and comment. The Department of Justice provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Attorney General, Secretary of the Senate, Clerk of the House of Representatives, and interested congressional committees and members. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2717 or jonesy@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. Our objectives were to determine the extent to which lobbyists are able to demonstrate compliance with the Lobbying Disclosure Act of 1995, as amended (LDA) by providing documentation to support information contained on registrations and reports filed under the LDA; to identify challenges and potential improvements to compliance, if any; and to describe the resources and authorities available to the U.S. Attorney’s Office for the District of Columbia (USAO), its role in enforcing LDA compliance, and the efforts it has made to improve LDA enforcement. We used information in the lobbying disclosure database maintained by the Clerk of the House of Representatives (Clerk of the House). To assess whether these disclosure data were sufficiently reliable for the purposes of this report, we reviewed relevant documentation and consulted with knowledgeable officials. Although registrations and reports are filed through a single web portal, each chamber subsequently receives copies of the data and follows different data-cleaning, processing, and editing procedures before storing the data in either individual files (in the House) or databases (in the Senate). Currently, there is no means of reconciling discrepancies between the two databases caused by the differences in data processing. For example, Senate staff told us during previous reviews they set aside a greater proportion of registration and report submissions than the House for manual review before entering the information into the database. As a result, the Senate database would be slightly less current than the House database on any given day pending review and clearance. House staff told us during previous reviews that they rely heavily on automated processing. In addition, while they manually review reports that do not perfectly match information on file for a given lobbyist or client, staff members approve and upload such reports as originally filed by each lobbyist, even if the reports contain errors or discrepancies (such as a variant on how a name is spelled). Nevertheless, we do not have reasons to believe that the content of the Senate and House systems would vary substantially. Based on interviews with knowledgeable officials and a review of documentation, we determined that House disclosure data were sufficiently reliable for identifying a sample of quarterly disclosure reports (LD-2) and for assessing whether newly filed lobbyists also filed required reports. We used the House database for sampling LD-2 reports from the third and fourth quarters of 2016 and the first and second quarters of 2017, as well as for sampling year-end 2016 and midyear 2017 political contributions reports (LD-203). We also used the database for matching quarterly registrations with filed reports. We did not evaluate the Offices of the Secretary of the Senate or the Clerk of the House, both of which have key roles in the lobbying disclosure process. However, we did consult with officials from each office. They provided us with general background information at our request. To assess the extent to which lobbyists could provide evidence of their compliance with reporting requirements, we examined a stratified random sample of 98 LD-2 reports from the third and fourth quarters of 2016 and the first and second quarters of 2017. The sample size of 98 LD-2 reports for this year’s review represents an increase from the sample size selected for the 2015 and 2016 reviews, and is a return to the sample size selected in reviews prior to 2015. We increased the sample size because, in 2016, we observed a change in the estimate of the percentage of reports that had documentation of income and expenses (83 percent down from 92 percent in 2015). At that time, we were unable to state that this was a statistically significant change because, in part, the reduced sample size of 80 did not give us enough power to detect and report on the change of that size. We excluded reports with no lobbying activity or with income or expenses of less than $5,000 from our sampling frame. We drew our sample from 45,818 activity reports filed for the third and fourth quarters of 2016 and the first and second quarters of 2017 available in the public House database, as of our final download date for each quarter. Our sample of LD-2 reports was not designed to detect differences over time. However, we conducted tests of significance for changes from 2010 to 2017 for the generalizable elements of our review. We found that results were generally consistent from year to year and there were few statistically significant changes after using a Bonferroni adjustment to account for multiple comparisons. For this year’s review, we identified that the estimated change in the percent of LD-2 reports that provided written documentation for the income and expenses from 2016 to 2017 is notable. In recent years, our findings show some variation in the estimate percentage of reports with documentation. Specifically, our estimate for 2017 (99 percent) represents a statistically significant increase from 2016. These changes are identified in the report. The inability to detect significant differences from year to year in our results may be related to sampling error alone or the nature of our sample, which was relatively small and was designed only for cross-sectional analysis. Our sample is based on a stratified random selection and is only one of a large number of samples that we may have drawn. Because each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval. This interval would contain the actual population value for 95 percent of the samples that we could have drawn. The percentage estimates for LD-2 reports have 95 percent confidence intervals of within plus or minus 12 percentage points or fewer of the estimate itself. We contacted all the lobbyists and lobbying firms in our sample and, using a structured web-based survey, asked them to confirm key elements of the LD-2 and whether they could provide written documentation for key elements in their reports, including the amount of income reported for lobbying activities; the amount of expenses reported on lobbying activities; the names of those lobbyists listed in the report; the houses of Congress and federal agencies that they lobbied, and the issue codes listed to describe their lobbying activity. After reviewing the survey results for completeness, we interviewed lobbyists and lobbying firms to review the documentation they reported as having on their online survey for selected elements of their respective LD- 2 report. Prior to each interview, we conducted a search to determine whether lobbyists properly disclosed their covered position as required by the LDA. We reviewed the lobbyists’ previous work histories by searching lobbying firms’ websites, LinkedIn, Leadership Directories, Legistorm, and Google. Prior to 2008, lobbyists were only required to disclose covered official positions held within 2 years of registering as a lobbyist for the client. The Honest Leadership and Open Government Act of 2007 amended that time frame to require disclosure of positions held 20 years before the date the lobbyists first lobbied on behalf of the client. Lobbyists are required to disclose previously held covered official positions either on the client registration (LD-1) or on an LD-2 report. Consequently, those who held covered official positions may have disclosed the information on the LD-1 or a LD-2 report filed prior to the report we examined as part of our random sample. Therefore, where we found evidence that a lobbyist previously held a covered official position, and that information was not disclosed on the LD-2 report under review, we conducted an additional review of the publicly available Secretary of the Senate or Clerk of the House database to determine whether the lobbyist properly disclosed the covered official position on a prior report or LD-1. Finally, if a lobbyist appeared to hold a covered position that was not disclosed, we asked for an explanation at the interview with the lobbying firm to ensure that our research was accurate. In previous reports, we reported the lower bound of a 90 percent confidence interval to provide a minimum estimate of omitted covered positions and omitted contributions with a 95 percent confidence level. We did so to account for the possibility that our searches may have failed to identify all possible omitted covered positions and contributions. As we have developed our methodology over time, we are more confident in the comprehensiveness of our searches for these items. Accordingly, this report presents the estimated percentages for omitted contributions and omitted covered positions, rather than the minimum estimates. As a result, percentage estimates for these items will differ slightly from the minimum percentage estimates presented in prior reports. In addition to examining the content of the LD-2 reports, we confirmed whether the most recent LD-203 reports had been filed for each firm and lobbyist listed on the LD-2 reports in our random sample. Although this review represents a random selection of lobbyists and firms, it is not a direct probability sample of firms filing LD-2 reports or lobbyists listed on LD-2 reports. As such, we did not estimate the likelihood that LD-203 reports were appropriately filed for the population of firms or lobbyists listed on LD-2 reports. To determine if the LDA’s requirement for lobbyists to file a report in the quarter of registration was met for the third and fourth quarters of 2016 and the first and second quarters of 2017, we used data filed with the Clerk of the House to match newly filed registrations with corresponding disclosure reports. Using an electronic matching algorithm that includes strict and loose text matching procedures, we identified matching disclosure reports for 2,995, or 87.2 percent, of the 3,433 newly filed registrations. We began by standardizing client and lobbyist names in both the report and registration files (including removing punctuation and standardizing words and abbreviations, such as “company” and “CO”). We then matched reports and registrations using the House identification number (which is linked to a unique lobbyist-client pair), as well as the names of the lobbyist and client. For reports we could not match by identification number and standardized name, we also attempted to match reports and registrations by client and lobbyist name, allowing for variations in the names to accommodate minor misspellings or typos. For these cases, we used professional judgment to determine whether cases with typos were sufficiently similar to consider as matches. We could not readily identify matches in the report database for the remaining registrations using electronic means. To assess the accuracy of the LD-203 reports, we analyzed stratified random samples of LD-203 reports from the 30,594 total LD-203 reports. The first sample contains 80 reports of the 9,474 reports with political contributions and the second contains 80 reports of the 20,335 reports listing no contributions. Each sample contains 40 reports from the year- end 2016 filing period and 40 reports from the midyear 2017 filing period. The samples from 2017 allow us to generalize estimates in this report to either the population of LD-203 reports with contributions or the reports without contributions to within a 95 percent confidence interval of within plus or minus 11 percentage points or fewer. Although our sample of LD- 203 reports was not designed to detect differences over time, we conducted tests of significance for changes from 2010 to 2017 and found no statistically significant differences after adjusting for multiple comparisons. While the results provide some confidence that apparent fluctuations in our results across years are likely attributable to sampling error, the inability to detect significant differences may also be related to the nature of our sample, which was relatively small and designed only for cross- sectional analysis. We analyzed the contents of the LD-203 reports and compared them to contribution data found in the publicly available Federal Elections Commission’s (FEC) political contribution database. We consulted with staff at FEC responsible for administering the database. We determined that the data are sufficiently reliable for the purposes of our reporting objectives. We compared the FEC-reportable contributions on the LD-203 reports with information in the FEC database. The verification process required text and pattern matching procedures so we used professional judgment when assessing whether an individual listed is the same individual filing an LD-203. For contributions reported in the FEC database and not on the LD-203 report, we asked the lobbyists or organizations to explain why the contribution was not listed on the LD-203 report or to provide documentation of those contributions. As with covered positions on LD-2 disclosure reports, we cannot be certain that our review identified all cases of FEC-reportable contributions that were inappropriately omitted from a lobbyist’s LD-203 report. We did not estimate the percentage of other non-FEC political contributions that were omitted because they tend to constitute a small minority of all listed contributions and cannot be verified against an external source. To identify challenges to compliance, we used a structured web-based survey and obtained the views from 88 different lobbying firms included in our sample on any challenges to compliance. The number of different lobbying firms is 88, which is less than our original sample of 98 reports because some lobbying firms had more than one LD-2 report included in our sample. We calculated responses based on the number of different lobbying firms that we contacted rather than the number of interviews. Prior to our calculations, we removed the duplicate lobbying firms based on the most recent date of their responses. For those cases with the same response date, the decision rule was to keep the cases with the smallest assigned case identification number. To obtain their views, we asked them to rate their ease with complying with the LD-2 disclosure requirements using a scale of “very easy,” “somewhat easy,” “somewhat difficult,” or “very difficult.” In addition, using the same scale we asked them to rate the ease of understanding the terms associated with LD-2 reporting requirements. To describe the resources and authorities available to the U.S. Attorney’s Office for the District of Columbia (USAO) and its efforts to improve its LDA enforcement, we interviewed USAO officials. We obtained information on the capabilities of the system officials established to track and report compliance trends and referrals and on other practices established to focus resources on LDA enforcement. USAO provided us with reports from the tracking system on the number and status of referrals and chronically noncompliant lobbyists and lobbying firms. The mandate does not require us to identify lobbyists who failed to register and report in accordance with the LDA requirements, or determine for those lobbyists who did register and report whether all lobbying activity or contributions were disclosed. Therefore, this was outside the scope of our audit. We conducted this performance audit from April 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The random sample of lobbying disclosure reports we selected was based on unique combination of House ID, lobbyist, and client names (see table 8). See table 9 for a list of the lobbyists and lobbying firms from our random sample of lobbying contribution reports with contributions. See table 10 for a list of the lobbyists and lobbying firms from our random sample of lobbying contribution reports without contributions. In addition to the contact named above, Clifton G. Douglas Jr. (Assistant Director), Shirley Jones (Assistant General Counsel) and Ulyana Panchishin (Analyst-In-Charge) supervised the development of this report. James Ashley, Ann Czapiewski, Krista Loose, Kathleen Jones, Amanda Miller, Sharon Miller, Stewart W. Small, and Kayla L. Robinson made key contributions to this report. Assisting with lobbyist file reviews were Justine Augeri, Matthew Bond, James A. Howard, Jesse Jordan, Sherrice Kerns, Dalton Matthew Lauderback, Alexandria Palmer, Alan Rozzi, Shane Spencer, Jessica Walker, Ralanda Winborn, and Kate Wulff. Lobbying Disclosure: Observations on Lobbyists’ Compliance with New Disclosure Requirements. GAO-08-1099. Washington, D.C: September 30, 2008. 2008 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-09-487. Washington, D.C: April 1, 2009. 2009 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-10-499. Washington, D.C: April 1, 2010. 2010 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-11-452. Washington, D.C: April 1, 2011. 2011 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-12-492. Washington, D.C: March 30, 2012. 2012 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-13-437. Washington, D.C: April 1, 2013. 2013 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-14-485. Washington, D.C: May 28, 2014. 2014 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-15-310. Washington, D.C.: March 26, 2015. 2015 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-16-320. Washington, D.C.: March 24, 2016. 2016 Lobbying Disclosure: Observations on Lobbyists’ Compliance with Disclosure Requirements. GAO-17-385. Washington, D.C.: March 31, 2017.", "summary": "The LDA, as amended, requires lobbyists to file quarterly disclosure reports and semiannual reports on certain political contributions. The law also includes a provision for GAO to annually audit lobbyists' compliance with the LDA. GAO's objectives were to (1) determine the extent to which lobbyists can demonstrate compliance with disclosure requirements, (2) identify challenges to compliance that lobbyists report, and (3) describe the resources and authorities available to USAO in its role in enforcing LDA compliance, and the efforts USAO has made to improve enforcement. This is GAO's 11th report under the provision. GAO reviewed a stratified random sample of 98 quarterly disclosure LD-2 reports filed for the third and fourth quarters of calendar year 2016 and the first and second quarters of calendar year 2017. GAO also reviewed two random samples totaling 160 LD-203 reports from year-end 2016 and midyear 2017. This methodology allowed GAO to generalize to the population of 45,818 disclosure reports with $5,000 or more in lobbying activity, and 30,594 reports of federal political campaign contributions. GAO also met with officials from USAO to obtain status updates on its efforts to focus resources on lobbyists who fail to comply. GAO is not making any recommendations in this report. GAO provided a draft of this report to the Department of Justice for review and comment. The Department of Justice provided technical comments, which GAO incorporated as appropriate. For the 2017 reporting period, most lobbyists provided documentation for key elements of their disclosure reports to demonstrate compliance with the Lobbying Disclosure Act of 1995, as amended (LDA). For lobbying disclosure (LD-2) reports and political contributions (LD-203) reports filed during the third and fourth quarter of 2016 and the first and second quarter of 2017, GAO estimates that 87 percent of lobbyists filed reports as required for the quarter in which they first registered; the figure below describes the filing process and enforcement; 99 percent of all lobbyists who filed (up from 83 percent in 2016) could provide documentation for income and expenses; and 93 percent filed year-end 2016 LD-203 reports as required. These findings are generally consistent with prior reports GAO issued for the 2010 through 2016 reporting periods. However, in recent years GAO's findings showed some variation in the estimated percentage of reports with supporting documentation. For example, an estimated increase in lobbyists who could document expenses is notable in 2017 and represents a statistically significant increase from 2016. As in GAO's other reports, some lobbyists were still unclear about the need to disclose certain previously held covered positions, such as paid congressional internships or certain executive agency positions. GAO estimates that 15 percent of all LD-2 reports may not have properly disclosed previously held covered positions. On the other hand, over the past several years of reporting on lobbying disclosure, GAO found that most lobbyists in the sample rated the terms associated with LD-2 reporting as “very easy” or “somewhat easy” to understand. The U.S. Attorney's Office for the District of Columbia (USAO) stated it has sufficient resources and authority to enforce compliance with the LDA. USAO continued its efforts to bring lobbyists into compliance by reminding them to file reports or by applying civil penalties.", "document_type": "gao"}
{"report": "Created in 1968, the SFSP is authorized under the Richard B. Russell National School Lunch Act and generally provides free meals to children age 18 and under in low-income areas during certain periods when school is not in session. Specifically, the SFSP operates during school summer vacation periods between May through September, vacation periods in any month for programs operating on a continuous school calendar, and certain other times for areas affected by an unanticipated school closure, such as for a natural disaster. However, the majority of SFSP meals are served to children during the summer months. In fiscal years 2007 through 2016, federal expenditures on SFSP increased, according to FNS data, though there was a slight decrease between fiscal years 2015 and 2016 (see fig. 1). The SFSP is administered at the federal level by FNS through its national and regional offices. FNS is responsible for issuing regulations, instructions, and guidance; reviewing states’ program management and administration plans; overseeing program administration; and reimbursing states for meals served that meet program requirements. At the state level, the program is administered by state agencies and locally operated by state-approved sponsors, such as school districts, local government entities, or private nonprofit organizations. State agencies are responsible for approving, providing training to, and inspecting and monitoring sponsors and meal sites. Sponsors, in turn, are responsible for monitoring their SFSP meal sites, managing the meal service, and providing training to administrative staff and site operators. A sponsor may operate one site or multiple sites. Sites are physical locations in the community where children receive and consume meals in a supervised setting. According to FNS guidance, sites may be located in a variety of settings, including schools, parks, community centers, health clinics, hospitals, apartment complexes, churches, and migrant camps. States may approve different types of SFSP meal sites, including open sites, closed enrolled sites, and camps. Open sites operate in an area where at least half of the children are eligible for free or reduced-price school meals (referred to as “area eligible”), according to data from entities such as schools or the U.S. Census Bureau. Children are generally eligible for free or reduced-price school meals if their households have incomes at or below 185 percent of federal poverty guidelines. At open sites, meals are made available to all children in the area, and all meals served that meet program requirements are reimbursable. Closed enrolled sites, on the other hand, are open only to enrolled children, as opposed to the community at large. At closed enrolled sites, meals served to all children in attendance are reimbursable as long as at least half of the enrolled children are eligible for free or reduced-price school lunch. Unlike other types of sites, camps are reimbursed only for meals served to children who have been individually determined to be eligible for free or reduced-price school meals. SFSP meals must meet certain requirements in order to be eligible for federal reimbursement; for example, the meals must be served and consumed on-site at an approved site. Federal reimbursements for summer meals are provided for each breakfast, lunch, supper, or snack served to an eligible child at an eligible site that also meets federal requirements for menu components, scheduled meal times, and nutrition. For example, to meet nutritional requirements, a lunch or a supper must, at a minimum, include four components: 2 ounces of meat or a comparable serving of a meat alternate, 3/4 cup of fruits and/or vegetables (at least two kinds), a slice of bread or a comparable serving of another grain, and a cup of milk. In 2017, the federal reimbursement rate was $3.83 or $3.77 for each eligible SFSP lunch or supper served, depending on the type of meal site. Each site may serve up to two meals or one meal and one snack per day. Some flexibilities are available to FNS in implementing the SFSP program, under its waiver and demonstration authorities. Specifically, the National School Lunch Act authorizes the Secretary of Agriculture to waive, upon request of a state or eligible service provider, certain program requirements established under the National School Lunch Act or the Child Nutrition Act of 1966, as amended, including some for the SFSP. In order to grant a waiver request, the Secretary must determine that the waiver would facilitate the state or service provider’s ability to carry out the purpose of the program, and that the waiver will not increase the overall cost of the program to the federal government, among other things. In the event a waiver request is submitted, the Secretary is required to act promptly and state in writing whether the waiver request is granted or denied, and why. The Secretary is also required to periodically review the performance of waiver recipients, and submit an annual report to Congress summarizing the use of waivers and their effectiveness, among other details. In addition to this waiver authority, the Secretary is also authorized to carry out demonstration projects to develop and test methods of providing access to summer meals for low-income children in urban and rural areas, to reduce or eliminate the food insecurity and hunger of low-income children and improve their nutritional status. The Secretary is required to provide for an independent evaluation of the demonstration projects carried out under this authority, and submit an annual report to Congress on the status of each project and the results of the evaluations. The total number of SFSP meals served nationwide during the summer— one indicator of program participation—increased from 113 million meals in fiscal year 2007 to 149 million meals in fiscal year 2016, or by 32 percent, according to our analysis of FNS data. The number of SFSP meals served has generally increased from year to year over this 10-year period. Most recently, meals decreased by 6 percent from 156 million meals in summer 2015 to 149 million meals in summer 2016, according to our analysis of FNS data (see fig. 2). Factors that may have affected year-to-year fluctuations include changes in funding for summer programs, sponsor participation, weather, and the number of weekdays available for sites to serve meals within a given summer, according to FNS and state agency officials we interviewed. For example, state agency officials in one of the three selected states we visited said they believe that reductions in state and local funding for summer programs that also provide meals, and turnover of sponsors, including losing one of the state’s largest sponsors in a recent summer, affected the total number of SFSP meals served in their state in 2016. According to our analysis of FNS data, SFSP lunches served in the summer months increased by over 17 million from fiscal year 2007 through fiscal year 2016, accounting for almost half of the total increase in the number of SFSP meals served in that period. However, when comparing across each of the meal types, supper and breakfast had the largest percentage increases over the 10-year period, 50 and 48 percent, respectively (see table 1). In comparison, the number of SFSP lunches served increased by 26 percent from fiscal years 2007 through fiscal year 2016. From fiscal year 2007 through fiscal year 2016, there were increases in the numbers of meals served in both SFSP and NSLP, the largest child nutrition assistance program. Specifically, SFSP lunches served in July increased from 32 million to 40 million, or 24 percent, from fiscal year 2007 to 2016, and NSLP lunches served in March increased from 328 million to 376 million meals, or 15 percent, according to our analysis of FNS data. Although the programs generally serve similar populations, different factors likely affected the number of meals served by each program, in part because NSLP serves children in schools during the school year and SFSP serves children in a variety of settings during the summer months. Although states report the actual number of SFSP meals served to FNS, they estimate the number of children participating in SFSP, and information obtained from our state survey and FNS indicate that these participation estimates have been calculated inconsistently. FNS instructs state agencies on how to calculate a statewide estimate of children’s participation in the SFSP, referred to as average daily attendance (ADA), using sponsor-reported information on the number of meals served and days of operation in July of each year. However, states’ methods for calculating ADA have differed from state to state and from year to year, according to our review of states’ survey responses and FNS documents. For example, although FNS directed states to include the number of meals served in each site’s primary meal service— which may or may not be lunch—some states, according to our survey and FNS data, were calculating ADA using only meals served at lunch. FNS officials told us that these states were therefore not following the agency’s instructions. Further, some states have changed their methods for calculating ADA over time—five states reported in our survey that the method they used to calculate ADA in fiscal year 2016 differed from the one they used previously. While FNS clarified its instructions in May 2017 to help improve the consistency of states’ ADA calculations moving forward, ADA remains an unreliable estimate of children’s daily participation in SFSP for at least two reasons, according to our analysis. (See sidebar for the revised ADA calculation instructions.) First, ADA is based on summary data that does not account for existing variation in site days of operation, and second, it is based on July data, which does not reflect the month with the greatest number of meals served in every state. According to our analysis, ADA is an unreliable estimate of children’s participation in SFSP because it currently does not account for existing variation in the number of days that each site serves meals to children. Specifically, because FNS’s instructions indicate that sites’ ADAs are to be combined to provide a statewide ADA estimate, differences in the number of days of meal service are disregarded. As a result, ADA does not reflect the average number of children served SFSP meals daily throughout the month. Our analysis of site-level data from one of the selected states illustrates this limitation. In this state, multiple sites reported an ADA of 60 for July, yet two of those sites served meals to children on only 1 day of the month and another site served meals to children on 20 days. Although 120 children were served SFSP meals only 1 day in July across two of these sites, the combined ADA across all three sites, which we calculated following FNS’s instructions, inaccurately suggests an average of 180 children were participating in SFSP at these sites on a daily basis in July. According to our analysis, ADA is also an unreliable estimate of children’s participation in SFSP because it currently does not account for state variation in the month with the greatest number of SFSP meals served, potentially leading to an underestimate. According to FNS officials, the agency instructs states to calculate ADA for July because officials identified this as the month with the largest number of meals served nationwide. However, because of reasons such as state variations in school calendars, July is not the month with the largest number of meals served in every state. In one of the selected states, Arizona, using July to calculate ADA cuts the estimate almost in half. Specifically, we followed FNS’s instructions and calculated that Arizona’s ADA was 14,987 in July 2016 compared to 26,772 in June 2016. Nationwide, in summer 2016, 26 states served more SFSP meals in June or August than in July, according to our analysis of FNS data. However, without site level data on meals served and operating days, the extent to which these states had higher ADAs in June or August as compared to July is unknown. In its May 2017 memo to states revising the ADA calculation instructions, FNS said that it is critical that the agency’s means of estimating children’s participation in the SFSP is as accurate as possible because it helps inform program implementation at the national level and facilitates strategic planning and outreach to areas with low participation. In addition, Standards for Internal Control in the Federal Government state that agencies should maintain quality data and process it into quality information that is shared with stakeholders to help achieve agency goals. Although FNS has also collected information on other data that states collect on the SFSP, the agency has not yet used this information to help improve its estimate of children’s participation in the program. In 2015, FNS published a Request for Information, asking whether states or sponsors collect any SFSP data that are not reported to FNS. While FNS received responses from only 15 states, these responses suggest that some states collect additional data, such as site-level data that may allow for an improved estimate of children’s SFSP participation, potentially addressing the issues we found in our analysis. In response to the information FNS received, they followed up with up to 9 of the 15 states in 2016 and 2017 to explore the feasibility of collecting additional data and improving estimates of children’s participation. Although they took these steps, FNS officials told us they are cognizant of the burden on states and site operators that would be associated with additional reporting requirements. At this time, the agency has not taken further action to improve the estimate, such as addressing the reliability issues caused by variation in the number of operating days of meal sites and in the months with the greatest number of meals served by state. As a result, FNS’s understanding of children’s participation in the SFSP remains limited, which impairs its ability to both inform program implementation and facilitate strategic planning and outreach to areas with low participation. Other federal programs that operate solely in the summer, as well as those operating year-round, help feed low-income children in the summer months. These programs include the NSLP Seamless Summer Option, which provides nutrition assistance benefits solely in the summer, and several federal programs that operate year-round. In July 2016, in addition to the 70 million meals provided through the SFSP, 26 million meals were provided to low-income children through school food authorities participating in the NSLP’s Seamless Summer Option, according to FNS data. The Seamless Summer Option was established in 2004, and according to FNS, streamlines administrative requirements to encourage school food authorities providing free or reduced-price meals during the school year under the NSLP and SBP to continue providing meals to low-income children when school is not in session. For example, officials from a national organization involved in summer meals told us the Seamless Summer Option makes it easier for school food authorities to provide summer meals because they continue working with the same state agency, reporting the same information to the state, and operating without having to transition to a separate program. Nonetheless, school food authorities can choose to provide free summer meals to children through either the SFSP or Seamless Summer Option, and the majority of states (34) reported in our survey that a greater proportion of school food authorities participated in the SFSP than the Seamless Summer Option in summer 2016. According to FNS and selected state officials, this may be related to the generally lower meal reimbursement rates school food authorities participating in the Seamless Summer Option receive compared to the rates received by those participating in the SFSP. In summer 2016, the Seamless Summer Option added to the geographic availability of summer meal sites in two of the three states we visited as part of our review. School food authorities provided summer meals through the Seamless Summer Option in Arizona and Illinois, but not in Massachusetts, based on our analysis of data provided by these states. In Arizona and Illinois, school food authorities participating in the Seamless Summer Option added 643 and 298 summer meal sites, respectively, in the month with the largest number of SFSP meals served in each state (see fig. 3). In addition, some of the Seamless Summer Option sites in these two states provided meals to children in areas where there were no SFSP sites. For example, Seamless Summer Option sites provided meals in areas near the northeastern and southwestern corners of Arizona that lacked nearby SFSP sites. In addition to the SFSP and the Seamless Summer Option, the Summer Electronic Benefit Transfer for Children (Summer EBT) demonstration provided nutrition assistance benefits to 209,000 low-income children in summer 2016 in select areas across 6 states and 2 Indian Tribal Organizations, according to FNS officials. Since the summer of 2011, Summer EBT benefits have been provided to eligible households on an electronic benefits transfer card, which households use to purchase eligible foods at authorized retailers. Specifically, the demonstration has provided monthly benefits of $30 or $60 per eligible child to households with children in areas with a perceived high level of need, based on the demonstration grantees’ assessments of the percentage of children eligible for free or reduced-price school meals and the availability of the SFSP. Consistent with this, three of the states that participated in Summer EBT in 2016 reported through our survey that these benefits helped children who were unable to access summer meals through the SFSP or the Seamless Summer Option. Further, according to an FNS- funded evaluation, Summer EBT improved food security among low- income children who participated in the demonstration. Specifically, the evaluation found the receipt of these benefits reduced the number of children in the demonstration experiencing very low food security between 2011 and 2013 by one-third. Some low-income children also receive nutrition assistance in the summer through federal programs that operate year-round. According to FNS data, in June 2016, 5.8 million infants and children participated in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and 3 million children participated in the Child and Adult Care Food Program (CACFP). In addition, an average of 19.2 million children participated each month in the Supplemental Nutrition Assistance Program (SNAP) in fiscal year 2016, according to FNS data. These benefits are provided year-round, including when school is in session and children may also be eligible to receive school meals. In our previous work on federal domestic food assistance programs, we reported that no one program alone is intended to meet a household’s full nutritional needs. At that time, several officials and providers told us that the variety of food assistance programs offers eligible individuals and households different types of assistance and can help households fill the gaps and address the specific needs of individual members. For example, a mother with two children may rely on SNAP for her household’s basic groceries, the NSLP to feed a school-age child during the school year, and WIC to obtain supplemental foods for herself and an infant. Some low-income children also receive summer meals through nonfederal programs, according to our state survey and interviews with organizations involved in summer meals. Twenty-seven states reported in our survey that they were aware of other state- or non-state-funded programs that provided children of low-income households with meals in their states during the summer months. According to our analysis of state survey responses, local faith-based organizations and foodbanks were the most common types of entities operating these types of programs. Similarly, officials from FNS and two regional organizations we interviewed said they were aware of children receiving summer meals through nonfederal programs operated by faith- based and other community organizations. In addition, SFSP site operators at 6 of the 30 meal sites we visited in the selected states told us nearby foodbanks and faith-based organizations may also be providing children with free meals to some extent. For example, one of the meal sites we visited was operated by a foodbank that, in addition to the SFSP, provided food boxes to those in need and distributed food to other local community organizations to provide to persons in need of immediate assistance, including families with children. Although FNS and the majority of states do not collect data on nonfederal programs, results from our state survey and interviews with SFSP providers and organizations involved in summer meals indicate the reach of nonfederal programs is limited. In our survey, states reported that the geographic coverage of these nonfederal programs varied by state, with 11 states indicating that they operated in some portions of the state—the most common state response. In addition, 16 states reported that they were not aware of any nonfederal programs providing summer meals to children in their state (see fig. 4). Similarly, SFSP site operators at 24 of the 30 meal sites we visited were unaware of nonfederal programs providing meals to children in the areas in which they operated. In addition, officials from several national organizations involved in summer meals told us children have very few options for receiving summer meals beyond the federal summer meals programs. Specifically, officials from one national organization explained that food is often a significant part of the cost of a summer activity program for children and suggested that is one reason why organizations choose to participate in the SFSP. Although the SFSP provides for federal reimbursement of eligible meals and certain administrative and operating costs, nonfederal programs that provide children with summer meals may choose not to participate in the SFSP for several reasons, according to officials we interviewed from several organizations involved in summer meals. For example, some nonfederal program providers may not participate in the SFSP because they are unaware the program exists. Additionally, some nonfederal program providers may be aware of the SFSP, but choose not to participate because they do not want to follow certain program requirements, such as the nutrition or meal pattern standards. In addition, some providers may not participate in the program because they do not think they can handle certain aspects of the administrative workload associated with the SFSP. For example, a state official we interviewed told us the administrative workload associated with the SFSP can be particularly challenging, especially for smaller sponsors. Similarly, officials from a regional organization involved in summer meals told us one of the providers they work with who operated 10 meal sites chose to leave the SFSP because the paperwork required to operate the sites was too administratively burdensome for their volunteer site operators. States and SFSP providers reported challenges with meal sites, participation, and administration, though federal, state, and local entities have taken steps to improve these areas. Half or more of states reported in our survey that SFSP issues related to meal site availability, such as in rural areas, increasing children’s participation, and program administration were moderately to extremely challenging (see fig. 5). Overall, 41 states reported facing at least one challenge with the SFSP, while 9 reported facing none. Availability of transportation, low population density, and limited meal sites pose challenges for SFSP in rural areas, according to states we surveyed, selected national organizations, and state and local officials in the three selected states we visited. More than two-thirds of states in our survey reported they faced a moderate to extreme challenge with limited options in rural areas to transport children to summer meal sites (37), as well as with the distance to summer meal sites in rural areas resulting in low child turnout that affects the financial viability of site sponsorship (36). As officials from one national organization explained, it may not be cost- effective for sponsors to operate in remote or rural areas if there are not enough meal sites or children participating in the program. Similarly, a sponsor in one of the selected states indicated that there are large parts of the state where the distances between meal sites are substantial, and travel between them takes several hours. An official from one of the selected states said transportation challenges can lead to underserved rural areas, including Indian reservations. Of the three states we reviewed, each had rural areas with few or no federally funded meal sites in summer 2016. However, a majority of the children in some of those areas were eligible for free or reduced price school meals, according to Census data provided by FNS, and would therefore be “area eligible” for the purposes of SFSP. For example, as shown in figure 6, “area eligible” locations in rural western parts of Arizona did not have any SFSP or Seamless Summer Option meals sites in June 2016, the month with the greatest number of summer meals served in that state. States and SFSP providers have responded to challenges with meal sites in rural areas by using other meal delivery approaches—efforts that FNS has supported through information sharing and grants. For example, according to one national organization involved in summer meals, some SFSP providers offer vans or buses to transport children to meal sites or partner with local bus authorities to give children free rides to meal sites. Instead of transporting children to sites, other sponsors transport meals to children through mobile meal delivery, an alternative summer meal model used in 48 states according to our survey. In this model, sponsors deliver meals by bus, using a route with state-approved stops in a community, and children consume the meal at the stop under a supervised setting. According to FNS officials and representatives from national organizations, this approach can be particularly helpful for providing summer meals to children in rural areas. State officials in two selected states told us they use mobile meal delivery to help fill gaps in meal service and help children overcome the lack of transportation or resources in their community. To serve children in very remote areas with limited resources, a sponsor in one of the selected states reported piloting a model involving delivering frozen meals every other week to such areas and supplying equipment, such as freezers and microwaves, to support meal service. To help sponsors address challenges related to meal sites in rural areas, FNS has shared information on alternative delivery models through its SFSP toolkit and webinars and has also provided related grant funding. For example, in summer 2011 and 2012, FNS funded the Meal Delivery demonstration project to provide meals to children in rural areas where low population density, long distances, and transportation issues made it difficult for children to get to SFSP sites, making site and sponsor operation financially unsustainable. The demonstration project funded meals to children in rural areas of Delaware, Massachusetts, and New York, providing food delivery to homes or drop-off sites near homes of eligible children. More than half the states (30) in our survey reported they faced a moderate to extreme challenge reaching low-income children in communities that are not area eligible. Areas in which fewer than 50 percent of children qualify for free or reduced-price meals during the school year are not eligible to have open summer meal sites at which all children who come to the site can receive a free meal. As a result, some children who are eligible for free and reduced-price meals during the school year do not have open summer meal sites located in close proximity to their residences, according to several national organization officials and SFSP providers. Eligible children in these areas may instead be limited to other types of SFSP sites, such as closed enrolled summer meal sites, or nonfederal programs providing meals, if available. For example, in one of the selected states, a sponsor of SFSP sites funded meals without federal support at one site that they operated as an open site in order to serve low-income children residing in low-income housing. These children did not otherwise have access to a federally funded summer meals site, according to these officials, because the broader area was part of a school district that had a greater than 50 percent proportion of children from higher-income families. Recognizing that some children may reside in an area that is not area eligible but is immediately adjacent to such an area, FNS has allowed additional flexibility in establishing area eligibility for open meal sites. Specifically, in 2014 and 2016 policy memos, FNS expanded the ways in which states and sponsors can use Census data to establish area eligibility. For example, FNS has allowed states and sponsors to average Census data across adjacent geographic areas to determine area eligibility. FNS noted that these additional flexibilities help ensure meal sites can be located in more areas in which poor economic conditions exist. Nearly all states (50) reported in our survey that the availability of meal sites throughout the summer months was a factor critical to the success of the SFSP, yet more than half the states (27) also reported they faced a moderate to extreme challenge with limited meal site days of operation. Nineteen of the 40 states that provided information about site days of operation reported 1 day as the shortest length of operation for SFSP sites in their state in fiscal year 2016. Limited meal site days of operation was a significant challenge in one of the three selected states we visited, as almost one-quarter of sites operated for only 1 to 2 weeks across a 2-month period in summer 2016, and an additional half of sites operated for 3 to 4 weeks across that same period, according to our analysis of state data. In contrast, in the other two selected states, the majority of sites (64 and 76 percent, respectively) operated for 5 or more weeks during a 2-month period. SFSP sites may have limited days of operation for various reasons, such as constraints with program administration and costs, according to interviews with a national organization official and a sponsor in one of the selected states. Some SFSP providers and national organizations involved in summer meals have responded to these challenges by working to extend the days of operation of meal sites—efforts that FNS has supported through related grant funding. Officials from one meal site located at a school in one of the selected states told us that 2017 was the first year the site stayed open an additional 4 weeks after summer school classes ended in an effort to expand participation, an extension made possible through support from an experienced sponsor. In addition, officials from a national organization involved in sponsoring summer meals told us they encourage their local sites to operate in August—a month where there are generally fewer summer meal service offerings—to meet children’s needs. At the federal level, under its demonstration authority, FNS funded the Extending Length of Operation Incentive project, a grant which provided an additional 50-cent reimbursement for all lunch meals served at sites in Arkansas in 2010 that offered meals for 40 or more days. Two-thirds of states (34) reported through our survey that they also faced a moderate to extreme challenge with a lack of awareness of summer meal sites among children and families, a challenge also mentioned by SFSP providers in the selected states. Meal site operators in one selected state noted that making families aware that all children may receive a meal for free at open sites can be a challenge. For example, one sponsor operating a meal site in a school said the perception among some is that the meal program is only for children attending summer school, and not for others in the community. Although that site had outside banners and advertising to help address that misperception, another SFSP provider explained that having sufficient funds to market the SFSP and increase awareness among families is also a challenge. To address these challenges, state agencies, some SFSP providers, and FNS have taken steps to help promote awareness of the SFSP. For example, nearly all states (47) reported in our survey that they have increased their outreach efforts for the SFSP in the last 5 years. More than half of states (36) also reported increases in overall SFSP participation during that time, which they believe were related to their outreach efforts. The majority of states in our survey reported conducting outreach on the SFSP to groups including children, parents and guardians, and schools, among others, using methods such as flyers, email, newspapers, and social media (see fig. 7). Further, state agency officials and sponsors in the selected states reported that they have developed partnerships with state and local advocacy groups and community leaders, among others, to promote the SFSP. For example, one state agency official said they partner with local advocacy organizations to field calls from parents seeking information about summer meal sites through their hunger hotline. FNS has promoted the use of such partnerships, as well as traditional and social media, to raise awareness of the SFSP. In addition, FNS developed the Summer Meals Site Finder, an online mapping tool that provides information on summer meal sites nationwide. Attracting children of all ages to SFSP meal sites can also be a challenge, according to states and SFSP providers. More than half of the states (31) reported in our survey that they faced a moderate to extreme challenge with limited youth and teen participation at summer meal sites, and an official from a national organization involved in the SFSP explained that it is difficult to attract children to a meal site when the site is focused solely on food. Similarly, 46 states in our survey reported that providing age- appropriate programming and enrichment activities for children at summer meal sites is a factor critical to the success of the SFSP. However, some meal sites may lack the resources to add activities, according to some SFSP providers in the selected states as well as FNS and national organization officials. Attracting teens can be particularly challenging, in part because of meal service time periods, a lack of age- appropriate activities, and stigma, according to national organizations and providers we interviewed. For example, early morning meal sites generally attract younger kids as teens may be apt to sleep later in the summer, and teens may also perceive a stigma in participating in a free meal program and may face peer pressure not to eat. In addition, meal offerings at SFSP sites may also present challenges to teen participation. Specifically, because FNS bases minimum portion size requirements for meals on the needs of younger children, meals are not always adequate to meet the nutritional needs of teens, according to one sponsor we interviewed. Across the 30 meal sites in the 3 states we visited in summer 2016, we observed variety in the meals served during different meal services. (see fig. 8.) States and SFSP providers have collaborated with others and sought specific types of sites to help provide enrichment activities and attract certain age groups—efforts that FNS has supported through information sharing and related grant funding. Sponsors in the selected states said they have focused on partnerships with groups such as those focused on youth development, churches, libraries, and police or fire departments, to offer age-appropriate activities for children (see fig. 9). For example, programs with local police departments, such as Cops N Kids in one selected state, or libraries in two selected states, provided meal services in combination with youth development or other enrichment activities. (See sidebar for highlights on the Cops N Kids program.) One national organization official said activities at SFSP sites can help take away the stigma around the program because children are not just there for the meal. Efforts to rebrand the SFSP as a community event where entire families can participate at the meal site also can have this effect, which is why some sponsors in the selected states said they partnered with foodbanks to donate meals for adults. In addition, a sponsor in one selected state told us they adjusted their meal offerings to match the needs of children of different age groups, for example, by serving meals to younger children earlier in the day and meals to teens later in the day. To support participation from children of all ages, FNS has shared information on age-appropriate activities through its SFSP toolkit and provided related grant funding. For example, in 2010, FNS funded the Activity Incentive demonstration project, in which sponsors in Mississippi were provided with mini-grants to increase enrichment and recreational activities, such as education, tutoring, sports and games, arts and other activities, to draw children to meal sites. More than half the states reported in our survey that they faced a moderate to extreme challenge with limited state agency staffing (27), a limited amount of federal funding for SFSP administration (27), as well as ensuring sponsor participation to meet needs (28). In addition, 28 states reported in our survey that they faced a moderate to extreme challenge with sponsors not following program requirements. Limited staffing can affect a state agency’s ability to conduct efforts aimed at increasing participation, identifying potential sponsors, and reviewing and monitoring sponsors, according to national organization and state officials we interviewed. For example, increases in sponsors and sites requires additional staff and time to conduct pre-approval visits, sponsor and site reviews, vendor reviews, and technical assistance visits, which directly affects the amount of funding needed to support staff salaries and travel reimbursement, according to one state in our survey. However, because the SFSP administrative funds FNS provides to states are based on the number of meals served in the previous year, increasing the number of staff to help increase SFSP participation is difficult, according to a national organization official we interviewed. States reported a moderate to extreme challenge with the following issues related to ensuring sponsor participation: a lack of sponsors to meet summer meal needs, a lack of awareness of the summer meal program among potential sponsors or sites, completing federal requirements for monitoring of SFSP sponsors, and identifying potential sponsors. State agencies responsible for administering the SFSP reported relying on other resources and partners to help with program administration— strategies that FNS has supported through information sharing and its online tools. As discussed earlier, all three selected state agencies we interviewed told us they partner with advocacy groups to help expand and conduct outreach on the SFSP. Additionally, more than half the states in our survey reported several factors—which may ease the administrative burden on states—as critical to the success of the SFSP, including partnerships with SFSP sponsors (49) and retaining sponsors and sites over multiple summers (51). To support states’ use of alternative funding sources to help administer the SFSP, FNS has shared information on federal, state, and private funding and grant opportunities. FNS also developed the online Capacity Builder tool, which 35 states reported in our survey was moderately to extremely useful in identifying or confirming meal site eligibility in fiscal year 2017. Seventeen states reported in our survey that ensuring summer meal sites are in safe locations was moderately to very challenging, a challenge that some states and SFSP providers have taken steps to help address. State officials and SFSP providers in the selected states reported that when crime has occurred near a site, there are concerns about ensuring children’s safety while they are consuming meals at the site, as well as the safety of site staff delivering meals. Some sponsors noted, in particular, parents’ concerns for the safety of their children at meal sites in light of criminal activities in the surrounding area. To ensure children continue to have access to meals, some sponsors noted that in the event of an immediate threat at an outdoor meal site, site staff are sometimes able to bring children to a nearby indoor space instead. States and SFSP provider officials in two selected states told us they have also used other strategies, including partnerships with local law enforcement agencies, to help address safety concerns during the meal service and ensure children have access to meals. For example, national organizations involved in summer meals and sponsor officials in the selected states said they encourage partnerships with local police departments to use police escorts at meal sites or to follow mobile meal routes in situations where safety at the meal site is a concern. When violence or crime has occurred near a site, some states and SFSP sponsors have also sought flexibility from FNS with respect to the federal requirement that children consume summer meals on site, according to state and local officials. FNS has used its available authorities to grant some states and sponsors flexibility with respect to the requirement that children consume summer meals on site, such as when safety at the site is a concern; however, FNS has not clearly communicated to all states and sponsors the circumstances it considers when deciding whether to grant this flexibility. According to our review of letters FNS sent to multiple states approving their requests for this type of flexibility, the agency identified a consistent set of circumstances that needed to be met for it to grant this flexibility. These circumstances were described in the letters the agency sent to states and generally included verification that violent crime activities occurred within both a 6-block radius of the meal site and 72 hours prior to the meal service. FNS’s letters to states indicate that when documentation was provided to the agency showing that these circumstances existed at a summer meals site on a particular day or days, meals consumed by children off site on those days were eligible for federal reimbursement. Although FNS has issued guidance on the general processes for requesting flexibility from program requirements under its waiver and demonstration authorities, these guidance documents do not detail the specific circumstances that the agency considers when deciding whether to grant flexibility from the on-site requirement due to safety concerns. FNS has communicated this information only in its responses to specific state and sponsor requests, and it has not communicated these circumstances more broadly to all states and sponsors. FNS officials explained that they review state and sponsor requests for flexibility due to safety concerns on a case-by-case basis. However, they also acknowledged that the set of circumstances used for approval of state and sponsor requests for flexibility, which we identified in their letters to states, has been used repeatedly. Further, states and sponsors reported challenges obtaining the specific data needed for approval of a site for this type of flexibility, hampering some providers’ efforts to ensure safe delivery of meals. For example, state agency and sponsor officials in one selected state said obtaining the crime data needed to qualify for the flexibility can be an administrative burden on sponsors, and these data are not consistently available in a timely manner. According to state agency and sponsor officials in one of the selected states, daily crime statistics are not available in all areas, and while a sponsor can sometimes access current data on crime in a city, the most recent available data on crime in suburban areas are sometimes one year old. FNS is aware of state and local challenges obtaining the necessary crime data, according to our discussions with FNS officials. FNS officials acknowledged that while they have granted some state and sponsor requests to allow children to consume meals off site in certain areas where violence or crime has occurred, some sponsors were unable to implement the flexibility because they could not obtain the necessary crime data. To help achieve agency objectives and address related risks, the Standards for Internal Control in the Federal Government state that agencies should communicate key information to their internal and external stakeholders. Although FNS officials told us they do not have one set of circumstances under which they approve these requests, our review found only one set of circumstances under which this type of flexibility has been approved. However, FNS has not broadly communicated the circumstances it considers in deciding whether to approve requests for flexibility with respect to the requirement that children consume summer meals on site in areas with violence or crime. Unless FNS shares this information with all states and sponsors, states and sponsors will likely continue to be challenged to use this flexibility, hindering its usefulness in ensuring safe summer meal delivery to children. In addition, FNS has issued reports to Congress evaluating some of its demonstration projects, as required under its statutory authorities, but the agency has not issued any such reports to Congress specifically on the use of flexibilities with respect to the on-site requirement in areas where safety is a concern. As previously discussed, the agency is required to annually submit certain reports to Congress regarding the use of waivers and evaluations of projects carried out under its demonstration authority. Furthermore, Standards for Internal Control in the Federal Government state that management should use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. Yet, FNS has not evaluated nor reported on the use of waivers and demonstration projects in cases where safety was a concern. Although FNS requests reports from state agencies or sponsors that have received flexibility with summer meals delivery under FNS’s demonstration and waiver authorities, FNS officials told us they have not assessed whether their use of these flexibilities to address safety issues has been effective in ensuring safe meal delivery. FNS officials told us that they have not evaluated or reported on these flexibilities, in part, because they have limited information on their outcomes. Without understanding the impact of its use of these flexibilities, neither FNS nor Congress knows whether these flexibilities are helping provide meals to children. In addition to the challenges with safety at meal sites, sponsors also sometimes face administrative challenges when participating in multiple child nutrition programs that are operated by different state agencies or divisions within the same agency, according to officials from national and regional organizations and sponsors we interviewed. For example, officials from national organizations involved in summer meals told us the management of each child nutrition program and processes related to applications, funding, and oversight are fragmented in many states. For example, a sponsor in one of the selected states told us aspects of the SFSP and CACFP sponsor applications are highly duplicative and estimated it took 42 hours last year to complete duplicative paperwork. Another sponsor that provides school meals during the school year told us they had to fill out 60 additional pages of paperwork to provide summer meals, which coupled with having a state contact for the SFSP that was different from the one they worked with for the NSLP, was a significant burden for them. Officials from one national organization told us a lack of interoperability of some state agencies’ data systems has caused challenges and administrative burden for some sponsors. For example, in some states, different agencies oversee child nutrition programs, yet are unable to share data on sponsor approval, and therefore, sponsors are required to submit similar information to both, according to these officials. Duplicative paperwork can be particularly burdensome for some SFSP providers, as national organization officials and SFSP providers in the selected states said completing SFSP application paperwork can be especially challenging when a sponsor has staff shortages or no dedicated SFSP staff. Some selected states have worked with SFSP sponsors to help minimize the administrative burden. For example, state agency officials from one of the selected states said they have connected less-experienced sponsors to more-experienced sponsors in the community to help them with program administration. In one case, an experienced SFSP sponsor partnered with a small sponsor new to the program to help with SFSP administration, including helping them understand program rules and paperwork requirements. One SFSP sponsor also noted that their state agency took additional steps to ease administrative burden, such as making the forms for the CACFP more consistent with those for the SFSP and streamlining certain requirements for large and experienced sponsors, which the sponsor found helpful. At the federal level, FNS has established program and policy simplifications to help lessen the administrative burden on sponsors participating in multiple child nutrition programs, though the persistence of these challenges indicate that information about these simplifications has not reached all relevant state agencies. While FNS officials told us that some of the duplicative requirements may be a function of differences in statute, FNS provided guidance to states in 2011 and 2014 on simplified application procedures for institutions participating in CACFP that also wish to apply for SFSP. FNS noted in its guidance that in states where CACFP and SFSP are administered by different state agencies, state agencies are encouraged to work together to share information and streamline the application and agreement process as much as possible. FNS also addressed these simplifications in a state agency meeting in November 2017. Additionally, FNS provided guidance to states in 2012 on simplified application and review procedures for school food authorities participating in the NSLP that wish to also participate in the SFSP. Although FNS has shared this information with states in an attempt to make them aware of streamlining options, FNS officials noted that some states may choose not to implement them. Standards for Internal Control in the Federal Government state that management should externally communicate the necessary quality information to achieve the entity’s objectives, as well as periodically evaluate the methods of communication to ensure communication is effective and appropriate. FNS’s existing guidance addresses options for streamlining administrative requirements for sponsors participating in multiple child nutrition programs. However, information on program and policy simplifications available for sponsors participating in both NSLP and SFSP has not been shared with states recently, and challenges in this area persist, indicating this information has not reached all relevant state agencies. Without further efforts from FNS to disseminate information on current options for streamlining administrative requirements across child nutrition programs, overlapping and duplicative administrative requirements may limit children’s access to meals by discouraging sponsor participation in child nutrition programs. The purpose of the SFSP is to continue to provide children in low-income areas with nutritious meals over the summer when school is no longer in session, and to that end, the program provided 149 million SFSP meals to children in fiscal year 2016. Although meals served are one indicator of participation, FNS’s current estimates of children participating in SFSP are unreliable. Without additional understanding of children’s participation in the SFSP, FNS lacks information critical for informing program implementation, strategic planning, and outreach. The majority of states nationwide and SFSP providers in the three states we visited reported experiencing a number of challenges with the SFSP, and FNS has taken important steps to address these challenges. Two key challenges identified by officials in the selected states and national organizations we interviewed are ensuring summer meal sites are in safe locations, and meeting administrative requirements when participating in multiple child nutrition programs. FNS has taken steps to address these challenges by providing flexibilities in how meals are delivered to children and streamlining options for those providers participating in more than one child nutrition program. However, a lack of clarity concerning the circumstances under which FNS grants flexibilities in areas of violence and crime, and a lack of information on its use of these flexibilities and their impact on program administration, hinder efforts to ensure program goals are met. Furthermore, absent a reminder to states regarding existing options for streamlining administration across multiple nutrition programs, some providers may continue to be discouraged from participating in these programs due to duplicative and burdensome administrative requirements, which may ultimately limit the provision of nutritious meals to children. We are making the following four recommendations to FNS: The Administrator of FNS should improve its estimate of children’s participation in the SFSP by focusing on addressing, at a minimum, data reliability issues caused by variations in the number of operating days of meal sites and in the months in which states see the greatest number of meals served. (Recommendation 1) The Administrator of FNS should communicate to all SFSP stakeholders the circumstances it considers in approving requests for flexibility with respect to the requirement that children consume SFSP meals on-site in areas that have experienced crime and violence, taking into account the feasibility of accessing data needed for approval, to ensure safe delivery of meals to children. (Recommendation 2) The Administrator of FNS should evaluate and annually report to Congress, as required by statute, on its use of waivers and demonstration projects to grant states and sponsors flexibility with respect to the requirement that children consume SFSP meals on-site in areas experiencing crime or violence, to improve its understanding of the use and impact of granting these flexibilities on meeting program goals. (Recommendation 3) The Administrator of FNS should disseminate information about existing flexibilities available to state agencies to streamline administrative requirements for sponsors participating in the SFSP and other child nutrition programs to help lessen the administrative burden. For example, FNS could re-distribute existing guidance to state agencies that explains available flexibilities and encourage information sharing. (Recommendation 4) We provided a draft of this report to the Secretary of the USDA for review and comment. FNS officials provided technical comments, which we incorporated as appropriate. In addition, in oral comments, FNS officials, including the Deputy Administrator for Child Nutrition Programs, generally agreed with the recommendations in the report. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the USDA and interested congressional committees. The report will also be available at no charge on the GAO website at www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This appendix discusses in detail our methodology for addressing three research objectives: (1) What is known about participation in the Summer Food Service Program (SFSP) and how has it changed in the last 10 years? (2) What other programs help feed low-income children over the summer? and (3) What challenges exist, if any, in providing summer meals to children, and to what extent does the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) provide assistance to states and sponsors to address these challenges? In addition to the methods we discuss below, to address all three research objectives, we reviewed relevant federal laws, regulations, and guidance; interviewed FNS officials in its headquarters and seven regional offices; and interviewed a broad range of regional and nationwide organizations involved in the SFSP. In addition, we coordinated with officials in USDA’s Office of Inspector General on their ongoing work in this area. To address our first objective about participation in the SFSP, we analyzed FNS data on meals served for fiscal years 2007 through 2016. Specifically, we analyzed the total number of meals served nationwide through the SFSP from fiscal year 2007 through fiscal year 2016. Each month, states report to FNS the number of meals served by meal type (breakfast, lunch, snack, and supper) and the number of meals served by meal and sponsor type (e.g., government, nonprofit, etc.) using the FNS- 418 form. To add context on these trends, we also analyzed and compared the number of SFSP lunches served in July with the number of free and reduced-price lunches served to children in March through the National School Lunch Program (NSLP), the largest child nutrition assistance program, from fiscal year 2007 through fiscal year 2016. Each month, states report to FNS the number of meals served through the NSLP using the FNS-10 form. To assess the reliability of SFSP and NSLP data, we (1) performed electronic testing of relevant data elements, (2) reviewed existing information about the data and the system that produced them, and (3) interviewed agency officials knowledgeable about the data. Electronic testing included, but was not limited to, checks for missing data elements, duplicative records, and values outside a designated range or valid time period. We determined that these data were sufficiently reliable to identify the number of SFSP meals served and assess change over time. To further examine what is known about participation in the SFSP, we also reviewed FNS’s data on estimates of children’s participation in the program and determined that these estimates have been calculated inconsistently and are unreliable. To assess the reliability of these data, we reviewed documentation about the estimates, interviewed FNS officials, and asked states about the estimate calculation in our survey. As described in our findings, FNS does not collect data on the number of children participating in the SFSP. Instead, FNS relies on states’ estimates of children’s participation, which are based on other data reported by sponsors, such as the number of meals served and meal service days in July. To address our second objective about other programs that help feed children in the summer, we reviewed FNS’s estimate of the number of meals served through the NSLP’s Seamless Summer Option in fiscal year 2016. FNS does not collect data on the number of meals served through the Seamless Summer Option. Instead, FNS annually estimates the number of Seamless Summer Option meals served nationally by aggregating the number of free and reduced-price breakfasts, lunches, and snacks served through the School Breakfast Program (SBP) and NSLP in July. As previously noted, states report these data monthly to FNS. Although FNS does not know the actual number of meals served through the Seamless Summer Option, agency officials told us they believe the number of summer meals provided through the NSLP is small relative to the number of meals served through the Seamless Summer Option during the summer months. They noted that their use of July NSLP data to estimate the Seamless Summer Option meals likely overestimates the number of these meals for July and underestimates the number of these meals for the entire summer. To assess the reliability of the July NSLP data, we (1) performed electronic testing of relevant data elements, (2) reviewed existing information about the data and the system that produced them, and (3) interviewed agency officials knowledgeable about the data. Electronic testing included, but was not limited to, checking for missing data and data that fell outside of a reasonable range or date for the specific time period (July). We determined that these data were sufficiently reliable to describe the number of meals served. In addition to the data FNS requires states to report, some states collect summer meals data at the meal site level and we used such data from the three selected states to address all three objectives. For objective one, to examine the number of meals served and days of operation at each summer meals site, we analyzed site-level data for 2 months from summer 2016, including the month with the largest number of SFSP meals served in each selected state: Arizona (June and July 2016), Illinois (July and August 2016), and Massachusetts (July and August 2016). Each state also provided us with data on the number and types of meals served at each SFSP site, the site location, and the duration of time each site operated over the summer. Using the data provided by the states, we calculated the average daily attendance (ADA) for each meal site based on FNS’s instructions and examined the variation in ADA across sites and months. For our second objective on other programs, these selected states provided similar site level data for the state’s Seamless Summer Option sites, if applicable. We assessed the reliability of these data by (1) performing electronic testing of relevant data elements, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purposes of this report. For both our second objective on other programs and third objective about challenges in providing summer meals to children, we also examined meal site availability in the three selected states by mapping the locations of meal sites. On the maps, we included fiscal year 2016 area eligibility data from FNS’s Capacity Builder mapping tool, as provided by FNS. The site area eligibility data from FNS’s Capacity Builder is based on the U.S. Census Bureau’s 5-Year American Community Survey (ACS) estimates of children ages 0-12 and 0-18 eligible for free and reduced-price meals by Census block group and tract. According to FNS officials, FNS obtains 5-Year ACS estimates annually from the U.S. Census Bureau and updates its site area eligibility in the Capacity Builder accordingly. For fiscal year 2016, FNS used 2009- 2013 ACS data to identify and include site area eligibility in its Capacity Builder. To help inform all of our research objectives, we conducted a survey of the state agencies that oversee the SFSP in the 50 states and the District of Columbia. We administered our web-based survey between August and October 2017 and received 100 percent response rate. The survey included questions about participation in the SFSP, factors critical to the overall success of the SFSP, outreach efforts, federal technical assistance, barriers and challenges in providing summer meals, alternative summer feeding models, the NSLP’s Seamless Summer Option and the federal Summer Electronic Benefit Transfer for Children demonstration, and nonfederal programs that provide children of low- income households with meals during the summer months. The survey also requested data on SFSP sites participating in the program in fiscal year 2016 and the method state agencies used to calculate ADA in SFSP on the FNS-418 form in fiscal year 2016. Because this was not a sample survey, there are no sampling errors. However, the practical difficulties of conducting any survey may introduce nonsampling errors, such as variations in how respondents interpret questions and their willingness to offer accurate responses. We took steps to minimize nonsampling errors, including pretesting draft instruments and using a web-based administration system. Specifically, during survey development, we pretested draft instruments with SFSP staff from four states (Michigan, New Mexico, North Carolina, and South Dakota) in May 2017. We selected the pretest states based on information provided by officials from FNS’s regional offices and national organizations involved in summer meals about state administration of summer meals programs, with the goal of selecting a group of states with varied experiences. In the pretests, we were generally interested in the clarity, precision, and objectivity of the questions, as well as the flow and layout of the survey. For example, we wanted to ensure definitions used in the surveys were clear and known to the respondents, categories provided in close-ended questions were complete and exclusive, and the ordering of survey sections and the questions within each section were appropriate. We revised the final survey based on pretest results. Another step we took to minimize nonsampling errors was using a web-based survey. Allowing respondents to enter their responses directly into an electronic instrument created a record for each respondent in a data file and eliminated the need for and the errors associated with a manual data entry process. We did not fully validate specific information that states reported through our survey. To help inform all of our objectives and gather information about the SFSP directly at the local-level, we conducted 30 site visits in three states: Arizona (12 sites), Illinois (8 sites), and Massachusetts (10 sites) between June and July 2017, and interviewed organizations involved with the SFSP in each site visit state. We used U.S. Census Bureau data to select states and local areas within those states based on a high proportion of children in poverty, a mix of urban and rural locations, as well as a mix of sponsor and site type and diverse locations. We visited a wide variety of site locations including, but not limited to, schools, parks, community recreation areas, and libraries. At each SFSP site, we gathered information on local level factors related to SFSP participation and administration by interviewing the organization sponsoring the site, the site operators and staff, and those participating at the site using semi-structured questions. While interviewing SFSP sponsor organizations, we collected information on the sponsors’ roles in the SFSP, characteristics of the sites the organizations sponsored, outreach efforts, any challenges or barriers to SFSP administration and any efforts to address such challenges, relationships with the state agencies that administer the SFSP, relationships with FNS (national and regional offices), and the availability of nonfederally funded programs that provide meals to low-income children over the summer. During the interviews with site operators and staff, we collected information about site operation (e.g., site operating days, meals offered, etc.), any challenges to providing SFSP meals to children and any efforts to address such challenges, outreach efforts, and the proximity of the next closest meal site. The information we collected from those participating at the sites included their perspectives on the SFSP food, site food consumption habits, ease of travel to the site, and access to other SFSP sites. At each site, we made observations as to how the food was provided to the children, food consumption and waste, the approximate age range of the children being served, and availability of programs or activities (e.g., recreational sports). Using semi-structured questions, we also interviewed the state agencies responsible for administering the SFSP in the site visit states to gather further information on how the SFSP is administered in each state, statewide participation in the program, related data collection activities, any challenges to administering the program and any efforts to address such challenges, related outreach efforts, alternative meal delivery models being employed by SFSP sponsors, FNS guidance or technical assistance, and the availability of nonfederally funded programs that provide meals to low-income children over the summer. For states that indicated there were other challenge(s), we provided an open-ended question that requested a description of the challenge(s) and 14 states provided descriptions of other challenges, not shown here. For states that indicated there were other challenge(s), we provided an open-ended question that requested a description of the challenge(s) and 8 states provided descriptions of other challenges, not shown here. In addition to the contact named above, Rachel Frisk (Assistant Director), Claudine Pauselli (Analyst-in-Charge), Melissa Jaynes, and Matthew Nattinger made key contributions to this report. Also contributing to this report were Susan Aschoff, Sarah Cornetto, Ying Long, Jean McSween, Mimi Nguyen, Almeta Spencer, and Ashanta Williams.", "summary": "The SFSP, a federal nutrition assistance program, is intended to provide food to children in low-income areas during periods when area schools are closed for vacation. In the last decade, federal expenditures for SFSP have increased as the program has expanded, according to USDA data. GAO was asked to review the SFSP. This report examines (1) what is known about SFSP participation, (2) other programs that help feed low-income children over the summer, and (3) challenges, if any, in providing summer meals to children and the extent to which USDA provides assistance to address these challenges. GAO reviewed relevant federal laws, regulations, and guidance; analyzed USDA's SFSP data for fiscal years 2007 through 2016; surveyed state agencies responsible for administering the SFSP in 50 states and the District of Columbia; visited a nongeneralizable group of 3 states and 30 meal sites, selected based on Census data on child poverty rates and urban and rural locations; analyzed meal site data from the 3 states; and interviewed USDA, state and national organization officials, and SFSP providers, including sponsors and site operators. Nationwide, the total number of meals served to children in low-income areas through the Summer Food Service Program (SFSP) increased from 113 to 149 million (about 32 percent) from fiscal year 2007 through 2016. The U.S. Department of Agriculture (USDA) directs states to use the number of meals served, along with other data, to estimate the number of children participating in the SFSP. However, participation estimates have been calculated inconsistently from state to state and year to year. In 2017, USDA took steps to improve the consistency of participation estimates, noting they are critical for informing program implementation and strategic planning. However, GAO determined that the method USDA directs states to use will continue to provide unreliable estimates of participation, hindering USDA's ability to use them for these purposes. Other federal and nonfederal programs help feed low-income children over the summer to some extent, according to states GAO surveyed and SFSP providers and others GAO interviewed. For example, in July 2016, USDA data indicate about 26 million meals were served through a separate federal program that allows school meal providers to serve summer meals. Some children also received summer meals through nonfederal programs operated by faith-based organizations and foodbanks, though GAO's state survey and interviews with providers and national organizations indicate the reach of such efforts is limited. States and SFSP providers reported challenges with meal sites, participation, and program administration; USDA has taken steps to address these areas. Specifically, in GAO's survey, a majority of states reported challenges with availability and awareness of meal sites, as well as limited program participation and administrative capacity. National, state, and local officials have taken steps to address these issues, such as increasing outreach and offering activities to attract participation. In addition, 17 states in GAO's survey and providers in the states GAO visited reported a challenge with ensuring meal sites are in safe locations. To address this safety issue, USDA has granted some states and sponsors flexibility from the requirement that children consume meals on-site. However, USDA has not broadly communicated the circumstances it considers when granting this flexibility. Further, some states and sponsors that have requested this flexibility reported difficulty obtaining data to show these circumstances exist, hampering their ability to ensure safe meal delivery. GAO is making four recommendations, including that USDA improve estimates of children's participation in SFSP and communicate the circumstances it considers when granting flexibilities to ensure safe meal delivery. USDA generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "The Columbia River Basin is the fourth largest river basin in the United States and covers parts of seven states and British Columbia, Canada. It provides drainage for hundreds of rivers, creeks, and streams. More than 6 million acres of the Basin are irrigated agricultural land, and the Columbia River and its tributaries produce more hydroelectric power than any other North American river. The Columbia has 12 major tributaries, with the longest being the Snake River. The Columbia River itself flows more than 1,200 miles from its source in the Canadian Rockies to the Pacific Ocean, with the last 300 miles forming the border between the states of Oregon and Washington. The Basin has myriad dams and reservoirs—more than 250 reservoirs and approximately 150 other hydroelectric projects, including more than 35 major federal and nonfederal dams on the Columbia River and its major tributaries in the United States. For more details, see figure 1. The Basin provides environmental, economic, and social benefits to many public and private interests and is vital to many industries in the Pacific Northwest, including sport and commercial fisheries, agriculture, forestry, transportation, recreation, and electrical power generation. However, activities from these industries have affected the environment in the Basin and, among other impacts, impaired water quality in some areas to the point where human health is at risk and historic salmon and steelhead stocks are at risk or extinct. Under the Clean Water Act, states have identified many Columbia River tributaries, the Columbia River itself, and its estuary as impaired. Major sources of impairment to water quality include pollutant run-off from agricultural activities and storm-water on impermeable surfaces (e.g., paved parking lots and roads); habitat modification due to the hydroelectric dams and their associated reservoirs; legacy toxic contaminants, such as mercury and PCBs; and contaminants of emerging concern, such as discarded pharmaceuticals. In addition, EPA Superfund sites are located throughout the Basin and may have negatively impacted water quality in locations such as Portland Harbor in Oregon, the Hanford Site in Washington, and the Upper Columbia River at Lake Roosevelt in Washington. Figure 2 shows some sources that may lead to impairment of the Basin, including point and nonpoint sources of pollution. In the early to mid-1990s, the states of Washington and Oregon sponsored monitoring studies that identified dozens of sites in the lower reaches of the Columbia River where contaminants exceeded water quality standards for the presence of pesticides, toxic metals, and cyanide, among other findings. Further, in 1992, an EPA survey of contaminants in fish reported a potential health threat to tribal members and other people who eat fish from the Basin. More recently, a 2009 EPA report summarized findings contained in studies by USGS and NMFS (in conjunction with the University of California-Davis). The report noted that significant levels of toxic chemicals were found in fish and the waters they inhabit, including toxics banned from use since the 1970s, such as dichlorodiphenyltrichloroethane (commonly known as DDT) and PCBs, as well as emerging contaminants, such as chemicals used for flame retardants. This has led states to periodically issue fish, and in some cases shellfish, advisories throughout the Basin warning the public not to consume more than specified quantities of contaminated aquatic species or, in some cases, at all. In addition to potential human health impacts, other studies have found that some contaminants have negative impacts on fish and wildlife populations in the Basin. Since the 1990s, fewer sites in the Basin have been monitored for water quality, and investment in such monitoring has decreased, according to an EPA official. For example, according to staff from the Lower Columbia Estuary Partnership, monitoring sites on the mainstem lower Columbia River have decreased over time and currently one site is being monitored for toxics. The Clean Water Act and Endangered Species Act are the primary federal statutes driving many of the restoration efforts in the Columbia River Basin. A range of other laws, treaties, court decisions, and authorities also serve to create requirements for entities to implement restoration efforts in the Basin. Clean Water Act: The Clean Water Act was enacted in 1972 to “restore and maintain the chemical, physical, and biological integrity of the nation’s waters.” It establishes the basic structure for establishing surface water quality standards, as well as regulating discharges of pollutants into the waters of the United States, and provides various regulatory and non-regulatory tools for doing so. Under the Clean Water Act, EPA may allow states under certain circumstances to implement their own clean water programs and to enforce their requirements. EPA establishes by regulation the requirements for state enforcement authority, such as the authority to seek injunctive relief and civil and criminal penalties. National Estuary Program: In 1987, amendments to the Clean Water Act added Section 320, which established the National Estuary Program to promote comprehensive planning for, and conservation and management of, nationally significant estuaries, among other things. EPA oversees the program and has designated 28 estuaries as being of national significance, including the Lower Columbia Estuary. Based on this designation, in 1995 EPA and the governors of Washington and Oregon established the Lower Columbia Estuary Partnership. The Partnership works with federal, state, tribal, local, and nongovernmental entities to improve the lower Columbia River and its estuary by protecting and restoring ecosystems and enhancing clean water for current and future generations of fish, wildlife, and people. Under Clean Water Act Section 320, as the management conference for the estuary, the Lower Columbia Estuary Partnership is required to develop and implement a comprehensive conservation and management plan (CCMP) to restore and maintain the chemical, physical, and biological integrity of the estuary, including water quality. The CCMP for the lower Columbia River estuary covers the lower 146 miles of the Columbia River and its associated tributaries, or about 7 percent of the Basin overall, and is intended to reflect a scientific characterization of, and stakeholder concerns about, the estuary, including its water quality, habitats for animal and plant life, and other resource challenges. Figure 3 shows the area covered by the Lower Columbia Estuary Partnership’s CCMP. Clean Water Act Section 123 on Columbia River Basin Restoration: The Water Infrastructure Improvements for the Nation Act of 2016 amended the Clean Water Act by adding Section 123 on Columbia River Basin Restoration. The law requires EPA to establish the Columbia River Basin Restoration Program, which is to be a collaborative stakeholder-based program for environmental protection and restoration activities through the Basin. Legislation calling for establishment of a Columbia River Basin restoration program within EPA was introduced in 2010. According to a Congressional committee report accompanying the bill, a main finding was that while EPA in 2006 recognized the Columbia River Basin as one of the nation’s large aquatic ecosystems and had in place an organizational structure to manage restoration efforts being implemented in the lower Columbia River estuary, there was no congressionally authorized program or dedicated appropriations to support the water quality restoration and toxic reduction efforts throughout the Basin. Section 123 directs EPA to assess trends in water quality in the Basin, collect and assess data on potential causes of water quality problems, develop a program to provide grants to various entities, and establish a voluntary interagency Columbia River Basin Restoration Working Group (Working Group). The law also requires the President’s annual budget submission to include an interagency crosscut budget prepared by OMB that displays, for each federal agency involved in the protection and restoration of the Columbia River Basin, funding amounts obligated for those purposes in the preceding fiscal year, the estimated budget for the current fiscal year, and the proposed budget for the next fiscal year for related activities at each agency. Figure 4 shows the requirements of Clean Water Act Section 123. Endangered Species Act: Enacted in 1973, the purpose of the Endangered Species Act is to protect and recover imperiled species and the ecosystems upon which they depend. It is jointly administered by the U.S. Fish and Wildlife Service (FWS) and NMFS. Generally, the FWS manages land and freshwater species, and NMFS manages marine species and anadromous fish, such as salmon. Under the Endangered Species Act, species may be listed as either endangered or threatened. In the Basin, numerous species have been listed, including 13 species of salmon and steelhead. Under Section 7 of the act, federal agencies are to ensure that any actions they authorize, fund, or carry out, whether on federal or private lands, do not jeopardize listed species. To fulfill this responsibility, the agencies often must formally consult with FWS or NMFS, which issues a biological opinion assessing whether the agency action is likely to jeopardize the continued existence of the species or result in destruction or adverse modification of critical habitat. For example, three federal agencies—the Corps, BPA, and Bureau of Reclamation—operate and manage federal dams and other hydroelectric facilities that comprise the Federal Columbia River Power System under a biological opinion NMFS issued in 2008.The biological opinion includes, among other measures, performance standards for the survival rate of fish migrating upstream or downstream past the associated dams and reservoirs. Additional required mitigation actions include those related to habitat restoration, predation management, and hatchery management to mitigate for the adverse effects of the system, as well as numerous research, monitoring, and evaluation actions to support and inform adaptive management decisions. Large Aquatic Ecosystems: EPA has designated specific areas around the country as “large aquatic ecosystems.” Such ecosystems comprise multiple small watersheds and water resources within a large geographic area. Over the years, EPA has worked with other federal agencies, state and local governments, tribes, and others to develop specific geographic- based programs to protect and restore these areas, including the Chesapeake Bay and the Great Lakes. In 2006, EPA recognized the Columbia River Basin as a large aquatic ecosystem to help promote the development of new cooperative initiatives and efforts to improve water quality, remove contaminated sediments, restore native fish species, and preserve and restore aquatic habitat and ecosystems throughout the Basin. In 2008, EPA’s Office of Water established a national Council of Large Aquatic Ecosystems to work within the agency and better support and promote efforts being implemented by the geographic-based programs to protect these large aquatic ecosystems. EPA incorporated strategic goals and objectives for most large aquatic ecosystems into its strategic plan for fiscal years 2006 through 2011 and into its national water program guidance. Over time, for the majority of these large aquatic ecosystems—such as the Chesapeake Bay, Great Lakes, Long Island Sound, and Puget Sound—EPA formally established dedicated program offices and received congressional appropriations specifically for restoration efforts in each large aquatic ecosystems geographic area. See figure 5 for the large aquatic ecosystems designated by EPA throughout the United States. Multiple entities conduct activities related to restoration efforts in the Basin, including federal agencies, state agencies, federally and non- federally recognized tribes, tribal organizations, and nongovernmental entities. Along with their primary water, power, resource, and other management and regulatory responsibilities, federal, state, and tribal entities are responsible under various laws, treaties, executive orders, and court decisions for protecting, mitigating, and enhancing fish and wildlife resources in the Basin, among other things. Eleven federal agencies, within six departments, are involved with water quality-related restoration efforts in the Basin. The departments and agencies, and their respective roles, include: U.S. Department of Agriculture Forest Service: Manages national forests and grasslands under the principles of multiple use and sustained yield. Natural Resources Conservation Service (NRCS): Assists farmers, ranchers, and other landowners in developing and carrying out voluntary efforts to protect the nation’s natural resources. U.S. Department of Commerce NMFS: Conserves, protects, and manages living marine resources to ensure their continuation as functioning components of marine ecosystems and to afford economic opportunities; implements the Endangered Species Act for marine and anadromous species; and supports on-the-ground habitat restoration projects with funding and technical assistance. U.S. Department of Defense Corps: Designs, builds, and operates hydroelectric civil works projects in the Basin to provide electric power, navigation, flood control, and environmental protection. U.S. Department of Energy: Addresses U.S. energy, environmental, and nuclear challenges through science and technology solutions, including clean-up of the former Hanford plutonium production site for nuclear weapons in Washington. Bonneville Power Administration (BPA): BPA provides power and transmission services and markets the electricity generated by the Corps and Reclamation dams comprising the Federal Columbia River Power System. U.S. Department of the Interior Bureau of Land Management: Administers public lands and subsurface mineral resources under the principle of multiple use and sustained yield. FWS: Manages wildlife refuges; conserves, protects, and enhances fish, wildlife, and plants; and implements the Endangered Species Act for terrestrial species, migratory birds, certain marine mammals, and certain fish. Reclamation: Designs, constructs, and operates water projects for multiple purposes, including irrigation, hydropower production, municipal and industrial water supply, flood control, recreation, and fish and wildlife. USGS: Conducts objective scientific studies and provides information to address problems dealing with natural resources, geologic hazards, and the effects of environmental conditions on human and wildlife health. EPA: Protects human health and safeguards the natural environment by protecting the air, water, and land, including administration of the Clean Water Act. In response to our survey, various entities—federal and state agencies, tribes and tribal organizations, and nongovernmental entities—identified a range of restoration efforts they implemented related to improving water quality in the Columbia River Basin from fiscal years 2010 through 2016. Although there have been some plans to guide certain restoration efforts for parts of the Basin, there is no overall plan to guide water quality- related restoration efforts throughout the Columbia River Basin or a requirement for a federal agency or others to develop such a plan. We found that entities implemented their restoration efforts under a range of authorities and programmatic missions. At the federal and state levels, many of the restoration efforts were implemented as part of programs with a broader geographic scope than the Basin. For example, many of EPA’s efforts are part of programs that have a nationwide focus, such as the Clean Water Act Section 106 Water Pollution Control Grant Program, which provides grants to states, territories, interstate agencies, and eligible tribes to establish and administer water pollution control programs for the prevention, reduction, and elimination of pollution. Conversely, other restoration efforts have been implemented exclusively in the Columbia River Basin. For example, the Shoshone-Bannock Tribe’s Yankee Fork Restoration Program works to improve the floodplain and riparian zones along dredged sections of the Yankee Fork Salmon River. Appendix II provides a list of the restoration efforts implemented in the Columbia River Basin from fiscal years 2010 through 2016, based on entities’ responses to our survey. See table 1 for examples of a range of restoration efforts implemented by various entities in the Basin from fiscal years 2010 through 2016. Based on responses to our survey, we found that entities implemented restoration efforts in the Columbia River Basin for a variety of purposes, such as improving surface water quality or reducing toxic pollutants. Specifically, our survey listed five purposes and asked entities to identify whether each was a primary purpose, secondary purpose, or not a purpose of the respective restoration effort. Overall, the most common primary purposes identified were improving surface water quality and restoring and protecting habitat. For example, the Forest Service identified monitoring surface water quality as the sole purpose for its Pacific Northwest Region Aquatic Inventory and Monitoring effort, which inventories and monitors watershed and stream habitat conditions to provide information and feedback to improve resource protection and restoration programs. Similarly, FWS identified restoring and protecting habitat as the primary purpose of its National Fish Habitat Partnership Pacific Region effort. This effort—part of a nationwide program—focuses on restoring aquatic habitat important to fish species of regional significance in the Columbia River Basin. See table 2 for the purposes identified in our survey and examples of associated restoration efforts. In addition, we found that restoration efforts implemented in the Columbia River Basin can directly or indirectly support improving water quality. For example, some restoration efforts directly support improving water quality, such as efforts whose primary purpose included monitoring surface water quality. Other restoration efforts indirectly support improving water quality. For example, NRCS’ Conservation Stewardship Program’s primary purpose is helping agricultural producers, ranchers, and forest landowners expand their conservation activities to enhance natural resources while simultaneously improving their operations. These efforts do not directly focus on improving water quality, but activities implemented through these efforts may indirectly improve water quality in the Columbia River Basin. We found that entities’ approaches to collaboration for selected water quality-related restoration efforts in the Basin from fiscal years 2010 through 2016 varied based on the specific circumstances of the given effort. This was in part because there is no overall coordinating body to guide water quality-related restoration efforts throughout the Columbia River Basin or a requirement prior to the enactment of Section 123 for federal agencies or others to develop such a body. For example, certain efforts are required by law or regulation to use specific types of collaborative approaches (e.g., stakeholder review of proposed program plans), and other efforts that are voluntary in nature may use different approaches to engaging and maintaining collaborative efforts among relevant entities. For example, the Washington State Department of Ecology and others developed the dissolved oxygen total maximum daily load (TMDL) for the Spokane River and Lake Spokane through a regulatory process that included public review and comment. In contrast, entities such as the Lower Columbia Estuary Partnership and the Columbia River Toxics Reduction Working Group sought the voluntary involvement of other entities through their mutual interest in a common outcome, in this case restoring the lower Columbia River estuary and reducing toxics in the Basin, respectively. In addition, based on responses to our survey, the majority of restoration efforts in the Basin involved multiple entities. Specifically, for restoration efforts implemented in the Basin from fiscal years 2010 through 2016, respondents reported that approximately 71 percent of the efforts involved more than one entity and that approximately 29 percent were implemented solely by a lead entity. To highlight examples of collaborative approaches entities used for water quality-related restoration efforts, we selected five efforts for review. While these efforts are not generalizable to all restoration efforts in the Basin, they highlight specific collaborative approaches entities used for individual restoration efforts, as follows: Effort 1: The Corps Northwestern Division Reservoir Control Center Water Quality Program (2008-present) is a federally led effort designed to implement the 2008 Federal Columbia River Power System biological opinion, and collaboration is enabled through coordination meetings, facilitated by a neutral third party, to manage Corps project operations affecting water quality. For example, according to Corps guidelines, day-to-day coordination of Corps operations (e.g., voluntary water spill over dams) to meet the biological opinion’s requirements and comply with water quality standards occurs through biweekly or more frequent meetings of its operational-level interagency Technical Management Team. The team operates under institutionalized collaboration procedures that provide guidance for, among other things, membership, member roles and responsibilities, and procedures for meetings and decision making. According to agency documentation, meetings of the Technical Management Team are facilitated by an impartial contracted facilitator whose position is designed to enable team members the opportunity to fully participate in discussions and help members resolve conflicts as they arise. Effort 2: Washington State’s Spokane River & Lake Spokane Dissolved Oxygen TMDL (2004-present) is a state-led effort, regulatory in nature, and collaboration is enabled through an associated Foundational Concepts guiding document. Under the Clean Water Act, Washington State was required to develop a TMDL and associated water quality improvement plan for the Spokane River and Lake Spokane because the state identified several segments of these water bodies as having impaired water quality. In a 2004 draft TMDL, the state proposed phosphorus discharge requirements necessary for the river to meet the state’s water quality standards. However, not all responsible for point source pollution discharges believed that well-established technology existed that could achieve these requirements, according to the Foundational Concepts document. The state developed the document specifically to enhance and further enable a collaborative approach among the regulatory agencies and the pollution dischargers involved in revising and finalizing the TMDL, according to Washington State officials. The final TMDL document, issued in 2010, noted that technology was available that could bring current discharges much closer to the levels required by water quality standards, and that Washington State could develop a plan, approved by EPA, that would provide reasonable assurance that the standards could be achieved within 10 years. Effort 3: The Columbia River Toxics Reduction Working Group (2005-present) is an EPA-led effort, voluntary in nature, and collaboration is enabled by a joint signed executive statement signed in 2011. EPA developed the group—in conjunction with other relevant federal, state, tribal, local, and nonprofit partners—to better coordinate toxics reduction efforts in the Basin and to share related information within the context of each organization’s own roles and responsibilities. Executives from the partner agencies, tribes, and organizations demonstrated their leadership commitment for the Columbia River Toxics Reduction Working Group’s efforts by signing the joint statement. The executive statement was designed to publicly highlight their commitment to be partners involved with the Columbia River Toxics Reduction Working Group toward the collaborative efforts necessary to reduce toxics in the Basin. Effort 4: The Lower Columbia Estuary Partnership (1995-present) is an effort led by a nongovernmental organization, voluntary in nature, and collaboration is enabled through a management plan. The Partnership’s organizational purpose is to facilitate restoration efforts in the lower Columbia River estuary portion of the Basin by building on existing efforts, providing a regional framework for action, and filling gaps in understanding and planning, among other things. The Partnership’s CCMP guides the collaborative efforts of the Partnership and its associated stakeholders and identifies what the Partnership should be doing concerning regional coordination activities, as well as how such coordination should be pursued. Effort 5: The Confederated Tribes of the Umatilla Indian Reservation Fisheries Habitat Sub-Program (1987-present) is a tribal effort, sovereign in nature, and collaboration is enabled through the sub-program’s Umatilla River Vision guiding document. This fisheries habitat effort is designed to provide for sustainable harvest opportunities of aquatic species traditionally consumed by the Umatilla through protection, conservation, and restoration of related aquatic habitats, according to Umatilla tribal officials. The vision articulated by the tribe’s Fisheries Program is that the Umatilla Basin includes a healthy Umatilla River capable of providing sufficient quantities of the First Foods (i.e., water, salmon, deer, cous, and huckleberry) necessary to sustain the continuity of the tribe’s culture. The Umatilla tribes developed the Umatilla River Vision to help identify existing gaps in knowledge and the work that must be accomplished to reestablish a healthy watershed and restore fisheries habitat on the Umatilla Reservation. Umatilla tribal officials we interviewed stated that the document is applicable to all Umatilla aboriginal lands and guides all their restoration efforts and coordination with other entities, including federal and state officials and funding partners. In addition, we obtained the views of officials from 11 federal agencies on factors that may enable and hinder collaboration in the Basin. In identifying factors that enabled collaboration in their implementation of specific restoration efforts, officials from the 11 federal agencies most often identified the following: (1) having pre-existing relationships with partners, such as through participation in interagency bodies; (2) having clearly defined roles and responsibilities and common outcomes for restoration efforts across partners; and (3) identifying resource needs and the sources of resources to be used for such efforts. The officials also identified potential actions that could enhance basin-wide collaboration for restoration efforts beyond their individual efforts. For example, one official responded that collaboration could be improved by involving senior- level officials in discussing and establishing priorities for basin-wide restoration, so that each entity could then implement efforts across the Basin in a manner consistent with the priorities agreed to by the senior leaders. Other officials noted that implementing this action would require individual agencies and entities to provide staff time and needed resources to enable collaboration on broader basin-wide priorities, consistent with each agency’s individual missions and goals. An official also suggested, to enhance collaboration on basin-wide restoration, proactively involving relevant entities through presentations and document reviews to allow the entities to offer their suggestions and identify any objections they may have for a given effort. In addition, a different official suggested implementing basin-wide restoration monitoring and evaluation to determine which efforts are working well, which are not, and how any given effort may need to change to more efficiently or effectively restore the Basin. The officials from the 11 federal agencies most often identified the following factors that hindered collaboration in their implementation of specific restoration efforts: (1) lack of sufficient resources, (2) incompatibility of policies and procedures across agencies, and (3) lack of clearly defined common outcomes for restoration efforts across partners. The officials also identified challenges to collaboration for basin-wide restoration beyond their individual efforts. Among other things, one federal official identified as a challenge the variability of missions, authorities, and priorities among various agencies and entities pursuing restoration efforts in the Basin. According to officials, these factors make it difficult to establish mutually agreeable end-goals and means for restoration because various entities have potentially competing interests based on each organization’s primary mission. Specifically, prioritizing certain restoration efforts over others—as may occur through adoption of a basin-wide restoration strategy or plan—may lead some entities to not participate in basin-wide restoration activities. According to other officials, this is because an entity is most likely to prioritize its own efforts, not the efforts of other entities. Other challenges to basin-wide collaboration officials cited included the litigation surrounding restoration efforts in the Basin (e.g., lawsuits regarding salmon and steelhead recovery under the Endangered Species Act) and the associated potentially adversarial relationships among entities, as well as limited staff time and resources for collaborating with other entities. Entities responding to our survey reported that most of the restoration efforts they implemented in the Basin were supported through a mix of federal and nonfederal funding sources. For several reasons, we could not determine total federal expenditures to implement the restoration efforts identified through our survey. Instead, we collected data from five federal agencies (BPA, Corps, EPA, Forest Service, and USGS) to provide illustrative examples of federal water quality-related restoration expenditures in the Basin. Entities responding to our survey reported that most of their restoration efforts in the Basin were supported through a mix of federal and nonfederal funding sources. With respect to federal funding, responses to our survey indicated that nearly all of the restoration efforts identified through our survey received some level of federal funding. This includes funding appropriated to federal agencies for mission-driven activities that may have a primary purpose other than improving water quality and restoring the Basin. For example, according to agency officials, while improving water quality is not a primary mission of the Corps’ and Reclamation’s hydropower projects, maintaining compliance with water quality standards is a component of the operation and maintenance of these projects. Similarly, multiple federal agencies are involved in efforts to recover species protected under the Endangered Species Act and restore habitats that have been affected by operations of the Federal Columbia River Power System, particularly eliminating barriers to fish passage, operating fish hatcheries, and monitoring water temperatures to promote fish survival rates; those efforts indirectly benefit water quality. Several of the federal efforts we identified in our review do not directly implement restoration activities but provide financial and technical assistance to support other entities’ implementation of restoration efforts. These efforts include: EPA’s Clean Water Act Section 319 Nonpoint Source Implementation Grants Program, under which EPA provides grants to states to implement programs and fund programs that address nonpoint source pollution; NRCS’s Regional Conservation Partnership Program, which provides financial incentives and technical assistance for eligible partners, such as agricultural producers, to implement voluntary conservation measures that address a range of natural resource management concerns, including water quality degradation and loss of fish and wildlife habitat; NMFS’s Community-Based Restoration Program, which awards funds and provides technical assistance to national and regional partners and local grassroots organizations to restore habitat; and FWS’s Partners for Fish and Wildlife Program, which provides financial and technical assistance to private landowners to protect or restore wetlands, uplands, and riparian and instream habitats. For example, in fiscal year 2016, NMFS’s Community-Based Restoration Program awarded about $900,000 in grant funds to The Nature Conservancy to support its restoration of 330 acres of floodplain habitat at the confluence of two forks of the Willamette River. This effort provides a range of benefits, including improved water quality, improved fish passage, and increased hydrologic connectivity. In addition, more than half of the restoration efforts identified through our survey were implemented with a mix of federal and nonfederal funding sources, including most of the state efforts. These sources include support through direct financial awards or indirect support through in-kind services. For example, Reclamation’s Pacific Northwest Water Quality Program provided cost-reimbursable services and technical support to stakeholders, such as state agencies and watershed councils, in the design and implementation of water quality improvement plans. Similarly, the Lower Columbia Estuary Partnership’s 2017 annual report noted that for each $1 in federal funding the partnership received from EPA, the partnership raised an additional $9 in funding solicited from other federal, state, and private sources. In 2017, the partnership brought in $7.6 million in direct funding, most of which supported projects implemented by local organizations and businesses to restore habitat, monitor restoration work, and support outdoor education initiatives. The partnership also estimated that in 2017, it received in-kind services from a range of contributors, such as scientists, technical experts, and community members who volunteered more than 18,000 hours of their time to implement various partnership activities. The partnership valued these in- kind services at nearly $430,000. Some programs, such as the Corps’ Aquatic Ecosystem Restoration program, do not provide funding to other entities but include specific cost- sharing requirements for project sponsors to secure contributions of nonfederal funding. For example, nonfederal project sponsors are required to provide 35 percent of the construction costs for projects implemented through the Corps’ program, which can include land easements, rights-of-way, and necessary relocations. Other programs, such as NRCS’s Regional Conservation Partnership Program, do not include matching requirements for nonfederal funding but work with partners to identify other funding sources to supplement federal funding awards. While we were able to collect information about the general sources of funding that supported implementation of the restoration efforts in the Basin respondents identified in our survey, we could not determine the total amounts of federal expenditures for these efforts for several reasons. First, unlike efforts to restore other large aquatic ecosystems, there was no congressionally authorized program to protect and restore the Basin prior to 2016 or federal funding dedicated specifically for this purpose, according to EPA officials. In the absence of dedicated federal funding or a congressionally authorized program focused on restoring the Basin, agency data on water quality-related restoration expenditures in the Basin is not readily available. Second, because some of the efforts are supported with funding from national and statewide programs that have a broader geographic scope than the Basin, it can be difficult to identify the portion of program expenditures that were for activities located within the Basin. This includes national-level programs, such as the Forest Service’s National Best Management Practices Program and EPA’s Clean Water Act grant programs, as well as statewide water quality permit programs. For instance, officials we interviewed from the Washington State Department of Ecology explained that, because the state typically do not track expenditures by region or location, it would be difficult to provide consistent and comparable estimates of expenditures for their statewide programs because of the various methodologies they use to compile the information. Third, it can be difficult to determine how much of a program’s expenditures were for water quality-related restoration when the effort was implemented primarily for a different purpose or multiple purposes that may indirectly contribute to improving water quality. Several entities that responded to our survey indicated that they do not track expenditures by activity and that it would be difficult to estimate the portion of spending on restoration-related efforts. For example, Forest Service officials told us that for its Integrated Resource Restoration program, it is difficult to track expenditures for specific restoration activities in which the funding goes towards multiple objectives, such as vegetation management and wildlife species, in addition to water quality and aquatic resources. While data on total federal expenditures for restoring the Basin could not be determined, we collected expenditures from five federal agencies to provide illustrative examples of their spending on the restoration efforts they conducted across the Basin. Using responses to our initial survey, we selected efforts that respondents identified as being implemented for a variety of restoration purposes and for which information on expenditures would be available. As shown in table 3, we collected data on expenditures for fiscal years 2014 through 2016 for specific efforts implemented by the Corps, BPA, EPA, Forest Service, and USGS. The following examples provide more detailed information about each effort for which we collected information on federal expenditures: Corps’ Ecosystem Restoration Programs. The Corps implements several ecosystem restoration programs under various authorities for the purposes of restoring and protecting aquatic habitats and environmental quality throughout the Basin. Through the Aquatic Ecosystem Restoration Program and the Project Modifications for Improvement of the Environment program, the Corps is authorized to carry out cost-effective restoration projects at facilities it operates throughout the Basin. Under the Lower Columbia River Basin Restoration Program, the Corps conducts studies and ecosystem restoration projects to protect, monitor, and restore fish and wildlife habitat in the Lower Columbia River Estuary. Collectively, for fiscal years 2014 through 2016, the Corps reported expending approximately $15.6 million in federal funding to conduct 25 aquatic ecosystem restoration projects across the Basin; this amount included costs for program coordination. For example, the Corps partnered with the City of Portland on the Westmoreland Park Ecosystem Restoration project to remove barriers to fish passage for endangered salmon swimming in Crystal Springs Creek on their way to the Willamette River (see figure 6). For fiscal years 2014 through 2016, the Corps reported about $1.4 million in total expenditures for the project, which included activities such as restoring a stream channel and surrounding wetland vegetative zone along with replacing three small culverts with wider, natural bottom fish-friendly culverts to improve water quality and restore fish passage upstream. BPA’s Columbia River Basin Fish and Wildlife Program. According to BPA, this is one of the largest fish and wildlife protection programs in the country, annually funding hundreds of projects implemented in the Columbia River Basin by a wide range of federal, state, local, tribal, academic, and nongovernmental entities across four states. The program is implemented in partnership with the Northwest Power and Conservation Council, which makes recommendations on projects that should be funded and reviews the program at least every 5 years to develop updates as needed. BPA reported that from fiscal years 2014 through 2016, it provided an average of about $90 million per year in funding for projects that directly or indirectly benefitted water quality-related restoration efforts in the Basin, including projects to restore damaged fish habitat, improve hatchery practices, research, monitoring and evaluation, and water rights acquisitions. For example, in 2015, the program awarded $180,000 to fund habitat restoration actions to improve ecological functions, including water quality, as part of the Buckmire Slough Phase #1 project located near Vancouver Lake in southwest Washington (see figure 7). This restoration project reconnected about 65 acres of shallow water salmon habitat by removing two earthen berms and collapsed culverts and installed a channel- spanning pedestrian bridge to maintain trail access. According to BPA officials, the removal of the barriers helped improve fish passage and water flow through Buckmire Slough to the larger watershed that includes Vancouver Lake, the Lake River, and the Columbia River. EPA’s Lower Columbia Estuary Partnership. EPA reported that the Lower Columbia Estuary Partnership had total expenditures of about $37 million in federal funding from fiscal years 2014 through 2016. The funding supported a range of efforts and restoration objectives for the lower portion of the Columbia River Basin, including habitat restoration; long-term monitoring strategy for sediment, fish tissue, and water quality; outdoor education programs; and citizen and professional involvement. According to EPA officials, the Lower Columbia Estuary Partnership has received about $600,000 annually in funding through Clean Water Act Section 320, which primarily supports the administrative and management functions of the partnership, including work to solicit funding from other federal and nonfederal sources to implement restoration projects throughout the estuary. Additionally, from fiscal years 2014 through 2016, the Lower Columbia Estuary Partnership received approximately $3.4 million in funding from BPA and other federal partners to support implementation of a long-term monitoring strategy for sediment, fish tissue, and water quality in the lower Columbia River and estuary. The funding helped support the Partnership’s scientific and coordination staff as well as support sub-awards to outside experts in project design, data acquisition, and data analysis. The Partnership also received about $10 million in funding from BPA and other federal entities to fund multi-year projects, implemented by the Partnership and other local governments and nonprofit organizations, that contributed to the goal of restoring and protecting 25,000 acres of habitat to help the recovery of threatened and endangered salmon in the lower Columbia River and estuary. Forest Service’s Region 6 (Pacific Northwest) Watershed and Aquatic Restoration Program. According to Forest Service officials, this program includes all required inventory, assessment, planning and design, and permitting needed to implement watershed protection and restoration projects in the agency’s Pacific Northwest Region. Examples of the types of projects implemented through this program include: restoring fish passage and hydrologic connectivity at road- stream crossings; upgrading roads that are needed and decommissioning roads that are no longer needed; and protecting and restoring riparian areas to protect and restore stream temperatures. Forest Service reported expenditures of about $92 million in fiscal years 2014 through 2016 for these types of aquatic restoration projects implemented in national forests that contribute water flow to the Columbia River Basin. This includes about $4.6 million in funding received from other federal agencies, such as BPA, the Corps, Reclamation, FWS, Bureau of Land Management, and the Federal Highway Administration. It also includes approximately $19 million in funding provided to other federal, state, tribal, nongovernmental, and local entities to support implementation of their restoration-related projects in the Basin. USGS’s National Water Quality Programs. USGS reported total expenditures of about $40 million from fiscal years 2014 through 2016 for Columbia River Basin water quality-related restoration efforts. This includes funding through appropriations, matching funds, and cost- reimbursable activities for projects and studies implemented through its national programs and Idaho, Oregon, Washington, and Wyoming- Montana regional Water Science Centers. This includes around $12 million in expenditures for National Water Quality Program activities, which provide an understanding of whether water quality conditions are improving or worsening over time, and how natural features and human activities affect those conditions. One of the efforts implemented through this program during this time frame was a regional study, the Pacific Northwest Stream Quality Assessment; USGS expenditures for this effort were about $3.3 million. The objectives of the regional study included determining the status of stream quality across the region by assessing various water quality factors that are stressors on aquatic life—such as contaminants, toxicity, and streamflow—and evaluating their relative influence on biological communities. EPA and OMB have not yet implemented actions required under Clean Water Act Section 123, which was enacted in 2016. Specifically, EPA has not yet established the Columbia River Basin Restoration Program, including its associated Working Group. In addition, OMB has not yet prepared and submitted as part of the President’s annual budget request an interagency crosscut budget on federal agencies’ budgets for and spending on environmental protection and restoration efforts in the Basin. According to EPA officials we interviewed, the agency has not yet taken steps to establish the Columbia River Basin Restoration Program, including the Columbia River Basin Restoration Working Group, as directed by Clean Water Act Section 123. In addition, agency officials told us that they were not currently planning to do so, as the agency has not received dedicated funding appropriated for this purpose. These officials acknowledged, however, that the agency has not yet requested funding to implement the program nor initiated any studies or assessments to identify what resources it may need to establish the program. We have previously reported that the Project Management Institute’s The Standard for Program Management provides generally recognized leading practices for program management. It provides an overview of a program’s three life cycle phases and associated actions with each phase. The primary purpose of the first phase—program definition—is to progressively elaborate the goals and objectives to be addressed by the program, define the expected program outcomes and benefits, and seek approval for the program. This phase has two distinct but overlapping sub-phases: Program formulation: involves development of the business case for the program, including initiating studies and estimates of scope, resources, and cost. Program planning: commences upon formal approval of the program and leads to the formation of a program team to develop the program management plan. Upon completion of this first phase, an entity is to prepare a program management plan and, with final approval, the program commences. Consistent with the practices established in The Standard for Program Management, a program management plan would include, among other components, a schedule of the actions an entity is to take, as well as the resources and funding needed to establish a program. By developing a program management plan that includes a schedule of the actions the entity will take and the resources and funding needed to establish and implement the program and submitting this plan to the appropriate congressional authorizing committees as part of the fiscal year 2020 budget process, EPA will have more reasonable assurance that it can establish the program in a timely manner. Further, in establishing the program under Section 123, EPA will need to also establish the Working Group, which is to recommend and prioritize projects and actions and review the progress and effectiveness of restoration projects and actions implemented throughout the Basin. According to OMB officials we interviewed, the agency has not yet submitted an interagency crosscut budget or requested that federal agencies provide information on their budgets and spending for Columbia River Basin environmental protection and restoration efforts as directed by Clean Water Act Section 123. Specifically, the President’s budget is to include an interagency crosscut budget displaying amounts budgeted and obligated by each federal agency involved with environmental protection and restoration projects, programs, and studies relating to the Basin. While OMB officials acknowledged the agency is responsible for preparing the interagency crosscut budget for the Basin, they told us that the agency has only had preliminary internal discussions about the best approach for implementing the requirement, including whether to develop guidance that would define key terms and the processes agencies should follow in compiling the requested information. The officials, however, could not identify a time frame for when the agency anticipated finalizing any guidance or when it would begin requesting federal agencies provide OMB the information it needs to include in the interagency crosscut budget submission to Congress. Federal standards for internal control calls for an agency to design control activities to achieve objectives and respond to risks, such as by clearly documenting internal controls in a manner that allows the documentation to be readily available for examination (e.g., the documentation may appear in management directives, administrative policies, or operating manuals). By developing and providing guidance on the types of projects and activities that agencies should include in their reports, as well as what processes they should follow in compiling the related budget and spending information, OMB would have more reasonable assurance that the agencies provide comparable information about their restoration efforts. According to a 2011 Congressional Research Service report, an interagency crosscut budget is often used to present budget information from two or more agencies whose activities are targeted at a common policy goal or related policy goals. As outlined in a 2015 federal report, an interagency crosscut budget can help facilitate federal agency coordination and collaboration for restoration activities that can benefit from an integrated approach, and it can help increase cost effectiveness. That report also noted that collecting budget information from the agencies involved can help identify high-level trends in restoration-related funding over time. We recognize that agencies will differ in their budget and account management practices as well as the complexities of the federal budget process. However, as the 2011 Congressional Research Service report concluded, by providing agencies guidance and criteria that they can use to determine which projects and programs will be tracked across agencies, the process for developing an interagency crosscut budget can account for the differences in how agencies fund and implement their restoration-related efforts. The report also noted that crosscut budgets can help make data from multiple agencies more understandable and could be used to inform congressional oversight committees, participating agencies, and other entities implementing an ecosystem initiative. By directing each federal agency involved in the protection and restoration of the Basin to collect the information needed for the interagency crosscut budget and to submit this information to OMB for inclusion in the President’s budget request for fiscal year 2020, OMB can better inform Congress as it considers funding for restoration efforts in the Basin as part of the annual budget process. Federal agencies and other entities have undertaken a wide range of water quality-related restoration efforts in the Columbia River Basin for many years. The Water Infrastructure Improvements for the Nation Act of 2016 amended the Clean Water Act by adding Section 123 on Columbia River Basin Restoration, which requires the EPA Administrator to establish the Columbia River Basin Restoration Program, including its associated Working Group. This collaborative stakeholder-based program is to oversee and help coordinate environmental protection and restoration activities implemented throughout the Columbia River Basin. However, because EPA has not yet established the Program and Working Group, entities do not currently use a basin-wide collaborative approach to coordinate water quality-related restoration efforts being implemented throughout the Basin. Furthermore, EPA does not have a program management plan for this effort. By developing a program management plan for the effort, consistent with The Standard for Program Management, EPA will have more reasonable assurance that it can implement Clean Water Act Section 123 in a timely and effective manner. Furthermore, by establishing the Columbia River Basin Restoration Program, including the associated Working Group, EPA will be better positioned to carry out its responsibilities, which include prioritizing and evaluating the progress and effectiveness of environmental protection and restoration projects and actions implemented throughout the Columbia River Basin as required by law. In addition, Clean Water Act Section 123 requires the President’s budget to include an interagency crosscut budget displaying amounts budgeted and obligated by each federal agency involved with environmental protection and restoration projects, programs, and studies relating to the Columbia River Basin. Such a crosscut budget would include amounts obligated for the preceding fiscal year; an estimated budget for the current fiscal year; and a proposed budget for the next fiscal year for the Basin. Given the difficulties we identified in determining federal expenditures for water quality-related restoration efforts implemented in the Columbia River Basin, by developing definitions and guidance on the types of projects, programs, and studies federal agencies should include in their reports and processes to follow in compiling their budgets, OMB could help ensure that they provide consistent and comparable information that OMB needs for the crosscut budget submission to Congress. Having consistent and comparable information on federal agency expenditures and budgets is critical to helping ensure that Congress and the relevant appropriating committees can make informed decisions about funding Columbia River Basin restoration efforts in their annual budget deliberations. We are making a total of three recommendations, one to EPA and two to OMB. Specifically: The Administrator of the EPA should develop a program management plan that includes a schedule of the actions EPA will take and the resources and funding it needs to establish and implement the Columbia River Basin Restoration Program, including formation of the associated Columbia River Basin Restoration Working Group, and submit this plan to the appropriate congressional authorizing committees as part of the fiscal year 2020 budget process. (Recommendation 1). The Director of OMB should develop and provide guidance on the types of projects and activities that agencies involved in the protection and restoration of the Columbia River Basin should include in their reports, as well as the processes they should follow in compiling the related budget and spending information. (Recommendation 2). The Director of OMB should direct each federal agency involved in the protection and restoration of the Columbia River Basin to collect the information OMB needs for the interagency crosscut budget and to submit this information to OMB for inclusion in the interagency crosscut as part of the President’s budget request for fiscal year 2020. (Recommendation 3). We provided a draft of this report for review and comment to EPA, OMB, and the departments of Agriculture, Commerce, Defense, Energy, and the Interior. We also provided a draft of the report to the Idaho Department of Environmental Quality, Montana Department of Environmental Quality, Oregon Department of Environmental Quality, and Washington State Department of Ecology. EPA provided written comments, which are reproduced in appendix IV, and stated that it agreed with the conclusions and recommendation in our report. The Department of Agriculture also provided written comments, which are reproduced in appendix V. The departments of Defense and the Interior and the Washington State Department of Ecology responded by email that they did not have comments on the draft report. The departments of Commerce and Energy and the Idaho Department of Environmental Quality provided technical comments, which we incorporated as appropriate. OMB, the Montana Department of Environmental Quality, and the Oregon Department of Environmental Quality did not provide any comments. In its written comments, EPA stated that it agrees with our recommendation to develop a program management plan that includes schedule of the action it will take and the resources and funding needed to establish and implement the Columbia River Basin Restoration Program and associated Working Group as required under Clean Water Act Section 123. EPA stated that it will work with its partners within the existing governance structures to begin discussions on the development of a program management plan. As an initial step, the agency will reconvene the Columbia River Toxics Reduction Working Group to initiate discussion for how to approach implementation of Section 123. Further, EPA stated it stands ready to work with OMB on an interagency cross cut budget after OMB provides guidance on the types of projects and activities necessary to develop the budget. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Agriculture, Commerce, Defense, Energy, and the Interior; the Administrator of EPA; the Director of OMB; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report examines (1) restoration efforts to improve water quality in the Columbia River Basin from fiscal years 2010 through 2016; (2) approaches to collaboration that entities have used for selected efforts, including factors they identified that enabled or hindered collaboration in the Basin; (3) the sources of funding and federal funding expenditures; and, (4) the extent to which the Environmental Protection Agency (EPA) and the Office of Management and Budget (OMB) have implemented Clean Water Act Section 123. For all four objectives, we reviewed relevant laws, including the Clean Water Act. We also conducted interviews and reviewed documentation from entities around the Basin, including federal agencies, state agencies responsible for managing water quality in their state, federally and non- federally recognized tribes and tribal organizations, and nongovernmental organizations. We also conducted a site visit to Portland, Oregon to meet with officials from federal agencies, a tribal organization, and a nongovernmental entity regarding their activities related to restoration efforts in the Columbia River Basin. We limited the scope of our review to the United States, specifically to the four states with the largest square mileage in the Columbia River Basin: Idaho, Oregon, Montana, and Washington. To examine restoration efforts to improve water quality in the Columbia River Basin implemented from fiscal years 2010 through 2016, we administered a survey to entities that implement restoration efforts in the Basin (see app. III for a blank copy of the survey). The survey asked each entity to individually list any water quality-related programs they implemented in the Basin from fiscal years 2010 through 2016. The survey included maps of the Columbia River Basin to provide respondents a common point of reference. For each program, we asked respondents to identify: the program’s primary and secondary purposes; one or two key examples of the activities conducted as part of the whether the entity was the only entity responsible for implementing whether the entity was the lead entity responsible for implementing what other entities, if any, were involved with implementing the the primary authorities under which the entity implemented the program; the state(s) and area(s) within the Basin in which the program was implemented; a website containing primary source documents and other relevant information on the program; whether the entity received any federal funding to support implementation of the program; the sources of the federal funding, if any; whether the entity tracks expenditures of federal funding specifically for which fiscal years, if any, from fiscal years 2010 through 2016 the entity would be able to provide information on the annual amount of federal funding expended for this program; whether the entity would be able to provide actual expenditures, estimated expenditures, or neither for the annual amount of federal funding the entity expended on the program; how the entity collected expenditure data; any nonfederal sources of funding that supported the entity’s implementation of the program; and a primary point of contact for any follow-up questions on the program. We conducted telephone pretests of the survey with 4 entities and revised it in response to their comments. During this process, we sought to ensure that (1) the questions were clear and unambiguous, (2) we used terminology correctly, (3) the survey did not place an undue burden on respondents, and (4) respondents had sufficient information to answer the questions. We identified and sent the survey to 41 entities based on the following criteria: federal agencies whose missions relate to restoration efforts in the Basin, state agencies responsible for water quality issues for the four states within our scope, federally and non-federally recognized tribes, tribal organizations, and nongovernmental entities involved with restoration efforts within the Basin. We emailed the survey in an attached pdf form that respondents could return electronically after marking checkboxes or entering responses into open-answer boxes. We sent the survey with a cover letter on May 31, 2017. After 2 weeks, we sent a reminder email, attaching an additional copy of the survey, to entities who had not responded. After 4 weeks, we telephoned all respondents who had not returned the survey and asked them to participate. We received responses from the entities listed in Table 4. We received 32 completed surveys from all of the 16 federal and state agencies that we contacted and we received responses from 16 of the 25 federally and non-federally recognized tribes, tribal organizations, and nongovernmental entities that we contacted. Because we did not survey every entity implementing restoration efforts in the Basin, the results from our analysis may not include all restoration efforts implemented in the Columbia River Basin from fiscal years 2010 through 2016. To assess the accuracy and completeness of the responses, we reviewed and analyzed each completed survey. In particular, we contacted each respondent at least once to follow-up on their responses and allowed respondents to review, correct, and edit their responses if necessary. During this follow-up, we asked questions to ensure that the responses to each survey were complete, comparable, and accurate and to clarify ambiguous responses. After we completed this follow-up, we analyzed the list of compiled restoration efforts to assess whether each listed restoration effort met general criteria. For example, we assessed the responses to make sure the efforts represented a similar level of aggregation, specifically at a program level. As part of our assessment, we reviewed prior interviews and agency’s or entity’s documents and websites. For example, in some instances the name of a restoration effort listed in the survey did not match the name of the effort on the agency’s website. We recognize that despite implementation of our criteria, some ambiguity may remain about the programs included in the catalog. Based on our assessment, we further refined the list of restoration efforts and developed the final list as presented in Appendix II. To examine approaches to collaboration that entities—including federal agencies, states, tribes, and nongovernmental entities—have used for select efforts, we selected five case examples for in depth review. We used selection criteria to yield a limited number of efforts in the Columbia River Basin that were among the broadest in scope with regards to their geographic coverage and/or the number and type of entities involved (e.g., interstate vs. intrastate programs, entities from multiple levels of government) based on the survey responses we received. In addition, we selected these efforts, in part, to highlight collaborative practices for efforts implemented by a variety of entity types and with different primary purposes (i.e., improving or monitoring surface water quality, reducing toxic pollutants, recovering threatened or endangered species, or restoring and protecting habitat). We conducted interviews with officials from these five case example efforts on the collaborative practices they used to plan and implement their programs and requested related documentation for review. We derived the questions we used for the case interviews from our prior reports on practices that may enable collaboration. For example, we asked interviewees about mechanisms they used for their given effort to define intended outcomes and roles and responsibilities, identify resource needs (e.g., funding, staff) and their sources, and ensure the compatibility of policies and procedures across entities. Our prior reporting served as the conceptual framework for understanding the collaborative practices used by officials leading these case example efforts. We highlight in our report a single illustrative collaborative practice used for each effort. In addition, we separately emailed four questions to each of the 11 federal agencies with water quality-related restoration efforts and that responded to our survey, to solicit agency officials’ opinions on practices that may have enabled or hindered collaboration for efforts planned and implemented by their respective agency. We sent these emails to the same agency points of contact to which we sent the first survey designed to identify restoration efforts in the Basin or to other officials the agency identified as the relevant point of contact. We derived questions we emailed from our prior reporting on factors that may enable collaboration. We asked interviewees to consider efforts for which their agency had their most and least successful experiences in collaborating with other organizations on water quality-related restoration activities and to systematically rank factors, from a list we provided, that enabled or hindered their collaboration with the other organizations. We received written responses from all 11 agencies. Our prior reports served as the conceptual framework for developing the list of factors that we provided to the respondents and from which they selected those that applied to their agency’s experience. We highlight the most commonly identified collaboration enablers and hindrances. We systematically asked officials from the five case efforts and the 11 federal agencies that received the four questions we emailed for their perspectives on the most significant challenges, if any, to enhancing collaboration among entities involved in restoration efforts to improve water quality in the Basin. We also systematically asked the same officials for their suggestions, if any, for steps that could be taken to enhance collaboration among entities involved in restoration efforts to improve water quality in the Basin. We highlight some of the challenges and suggestions respondents offered. Last, to determine whether a mechanism exists for basin-wide collaboration on water quality-related restoration programs, we reviewed existing legislation and interviewed agency officials. To examine the sources of funding and federal funding expenditures in the Columbia River Basin, we interviewed agency officials, reviewed budget documents, analyzed responses to funding questions included in our initial survey, and analyzed expenditure data for selected federal efforts for fiscal years 2014 through 2016. Initially, we intended to use a second survey to collect comprehensive data on expenditures for each restoration effort that entities identified in response to our initial survey. However, in pretests with agency officials, we identified significant concerns with respect to the accuracy and completeness of information that we would gather through this approach that would limit our ability to compare expenditure data across agencies and efforts. Given the degree of variability, uncertainty, and lack of detail in the information agencies could provide, we concluded that the data would not be reliable for the purposes of estimating their expenditures of federal funding for their water-quality related restoration expenditures throughout the Columbia River Basin. To provide some information on expenditures, we decided to modify our comprehensive approach by shortening the time frame to fiscal years 2014 through 2016 and limiting the request to one restoration effort for each of the 11 federal agencies. We selected the 11 restoration efforts based on our review of the agencies’ responses to questions in our initial survey relating to the primary purpose(s) of the program and availability of expenditure data. We then conducted interviews with agency officials to learn more about the selected efforts and the availability and reliability of expenditure data. Based on these interviews, we determined that for 6 of the 11 programs, the efforts had limited activities in the Basin during this time frame or the agencies would only be able to provide limited information or would not be able to provide sufficiently reliable expenditure data for the selected effort. We then distributed a second survey to 5 agencies— Bonneville Power Administration (BPA), U.S. Army Corps of Engineers, EPA, U.S. Forest Service, and U.S. Geological Survey. In this survey, we requested expenditures information for a specified restoration effort and asked about the sources and processes the agencies followed in compiling the information. Based on our review of these responses, we determined that the expenditure information for these specific restoration efforts was sufficiently reliable for purposes of our reporting objective. To examine the extent to which EPA and OMB have implemented Clean Water Act Section 123, we reviewed the law and legislative history. We also requested documentation from and conducted interviews with knowledgeable officials at EPA and OMB. We also identified program management leading practices reported by the Project Management Institute’s The Standard for Program Management and discussed in our prior reports. For example, we considered the applicable leading practices for schedule and cost estimates, as well as other practices such as the development of program management plans. Table 5 provides a list of 188 Columbia River Basin water quality-related restoration efforts identified by 11 federal agencies, 4 state agencies, 4 nongovernmental organizations, and 11 tribes and tribal entities in their responses to our May 2017 survey, along with a brief description of each effort and the restoration purpose(s) it supported. This list is primarily based on the survey responses. The survey included definitions of key terms including program, implement, and purposes of the programs. After we received survey responses, we conducted multiple reviews of the information, including asking the entities to review and edit the information they provided. In some cases we supplemented their responses with additional information available through other sources, such as interviews with officials and reviews of agency documents, as appropriate. Given the size of the Basin and number of entities involved, for our survey we specifically requested respondents report the restoration efforts at a programmatic level. In some instances, we decided to consolidate certain efforts that appeared to be part of the same overall program and exclude other efforts that appeared to be project-level efforts. Although we made every attempt to gather a comprehensive list of restoration efforts implemented by the entities listed below, including verifying the information with the respective entities, this list may not capture all of the relevant restoration efforts they implemented in the timeframe covered by our review. Further, entities may have not have listed all of their relevant efforts. We also acknowledge that the list does not reflect restoration efforts in the Columbia River Basin that were implemented by other entities not included within the scope of our review. J. Alfredo Gómez, (202) 512-3841 or gomezj@gao.gov. In addition to the individual named above, Barbara Patterson (Assistant Director), Heather Dowey (Analyst in Charge), Stephen Betsock, Mark Braza, John Delicath, Carol Henn, Karen Howard, Vondalee Hunt, David Lysy, Jeff Malcolm, Michael Meleady, Dan C. Royer, Kiki Theodoropoulos, and Sarah Veale made key contributions to this report. Puget Sound Restoration: Additional Actions Could Improve Assessments of Progress. GAO-18-453. Washington, D.C.: July 19, 2018. Long Island Sound Restoration: Improved Reporting and Cost Estimates Could Help Guide Future Efforts. GAO-18-410. Washington, D.C.: July 12, 2018. Great Lakes Restoration Initiative: Improved Data Collection and Reporting Would Enhance Oversight. GAO-15-526. Washington, D.C.: July 21, 2015. Great Lakes Restoration Initiative: Further Actions Would Result in More Useful Assessments and Help Address Factors That Limit Progress. GAO-13-797. Washington, D.C.: September 27, 2013. Chesapeake Bay: Restoration Effort Needs Common Federal and State Goals and Assessment Approach. GAO-11-802. Washington, D.C.: September 15, 2011. Recent Actions by the Chesapeake Bay Program Are Positive Steps Toward More Effectively Guiding the Restoration Effort, but Additional Steps Are Needed. GAO-08-1131R. Washington, D.C.: August 28, 2008. South Florida Ecosystem: Restoration Is Moving Forward but Is Facing Significant Delays, Implementation Challenges, and Rising Costs.GAO-07-520. Washington, D.C.: June 4, 2007. Chesapeake Bay Program: Improved Strategies Are Needed to Better Assess, Report, and Manage Restoration Progress. GAO-06-96. Washington, D.C.: October 28, 2005. Great Lakes: Organizational Leadership and Restoration Goals Need to Be Better Defined for Monitoring Restoration Progress. GAO-04-1024. Washington, D.C.: September 28, 2004. Columbia River Basin: A Multilayered Collection of Directives and Plans Guides Federal Fish and Wildlife Activities. GAO-04-602. Washington, D.C.: June 4, 2004. Great Lakes: An Overall Strategy and Indicators for Measuring Progress Are Needed to Better Achieve Restoration Goals. GAO-03-515. Washington, D.C.: May 21, 2003. Columbia River Basin Salmon and Steelhead: Federal Agencies’ Recovery Responsibilities, Expenditures and Actions. GAO-02-612. Washington, D.C.: July, 26, 2002. South Florida Ecosystem Restoration: Substantial Progress Made in Developing a Strategic Plan, but Actions Still Needed. GAO-01-361. Washington, D.C.: May 27, 2001. Comprehensive Everglades Restoration Plan: Additional Water Quality Projects May be Needed and Could Increase Costs. GAO/RCED-00-235. Washington, D.C.: September 14, 2000.", "summary": "The Basin is one of the nation's largest watersheds and extends mainly through four Western states and into Canada. Activities such as power generation and agricultural practices have impaired water quality in some areas, so that human health is at risk and certain species, such as salmon, are threatened or extinct. In December 2016, Congress amended the Clean Water Act by adding Section 123, which requires EPA and OMB to take actions related to restoration efforts in the Basin. GAO was asked to review restoration efforts in the Basin. This report examines (1) efforts to improve water quality in the Basin from fiscal years 2010 through 2016; (2) approaches to collaboration that entities have used for selected efforts; (3) sources of funding and federal funding expenditures; and (4) the extent to which EPA and OMB have implemented Clean Water Act Section 123. GAO reviewed documentation, including laws, policies, and budget information; surveyed federal, state, tribal, and nongovernmental entities that GAO determined had participated in restoration efforts; and conducted interviews with officials from most of these entities. Various entities, including federal and state agencies and tribes, implemented restoration efforts to improve water quality in the Columbia River Basin from fiscal years 2010 through 2016, according to GAO survey results. Entities implemented a range of restoration efforts. Efforts included activities to improve surface water quality and restore and protect habitat. For example, the Kootenai Tribe of Idaho implemented projects on the Kootenai River to restore and maintain conditions that support all life stages of native fish. Entities used various collaborative approaches . Entities' approaches to collaboration for selected water quality-related efforts in the Basin varied. For example, the Environmental Protection Agency (EPA) sought various entities' voluntary involvement to coordinate toxics reduction efforts in the Basin. Total federal expenditures could not be determined . Entities reported using a mix of federal and nonfederal funding sources for restoration efforts in the Basin, but total federal expenditures could not be determined, in part because there is no federal funding dedicated to restoring the Basin. EPA and Office of Management and Budget ( OMB) have not yet implemented Section 123. According to EPA officials, the agency has not yet taken steps to establish the Columbia River Basin Restoration Program, as required by the Clean Water Act Section 123. EPA officials told GAO they have not received dedicated funding appropriated for this purpose; however, EPA has not yet requested funding to implement the program or identified needed resources. By developing a program management plan that identifies actions and resources needed, EPA would have more reasonable assurance that it can establish the program in a timely manner. Also, an interagency crosscut budget has not been submitted. According to OMB officials, they have had internal conversations on the approach to develop the budget but have not requested information from agencies. A crosscut budget would help ensure Congress is better informed as it considers funding for Basin restoration efforts. GAO is making three recommendations, including that EPA develop a program management plan for implementing the Columbia River Basin Restoration Program and that OMB compile and submit an interagency crosscut budget. EPA agreed with its recommendation. OMB did not comment, and GAO maintains its recommendations are valid.", "document_type": "gao"}
{"report": "This section provides a brief background into nutrient pollution, federal and state activities to address water pollution, and nutrient credit trading. According to EPA, nutrient pollution is one of America’s most widespread, costly, and challenging environmental problems. Nutrients are natural parts of aquatic ecosystems that support the growth of algae and aquatic plants, which provide food and habitat for fish, shellfish, and smaller organisms that live in water. However, when too many nutrients enter the environment, often as the direct result of human activities, the air and water can become polluted. The primary sources of nutrient pollution are fertilizer, animal manure, wastewater treatment plants, power plants, storm water runoff, cars, detergents, failing septic tanks, and pet waste. (See fig. 1.) Too much nitrogen and phosphorus in surface waters can cause algae to grow faster than ecosystems can handle. Significant increases in algae can harm water quality and habitats. Large growths of algae, called algal blooms, can severely reduce or eliminate oxygen in the water, leading to the illnesses and death of large numbers of fish. Some algal blooms are harmful to humans because they produce elevated levels of toxins and bacteria that can make people sick if they come into contact with or drink contaminated water or consume tainted fish or shellfish. According to a 2016 memorandum from EPA, nutrient pollution contributes to a trend of increasing numbers of harmful algal blooms in surface waters and consequentially a growing threat to public health and local economies. For instance, in 2016, algal blooms occurred along U.S. coastlines from Alaska to Florida, closing beaches, affecting tourism and local economies, and resulting in a state of emergency declaration in four coastal counties in Florida and more than 250 health advisories nationwide. The Clean Water Act establishes a nationwide approach improving and maintaining the quality of rivers, streams, lakes, and other surface water bodies. Under this approach, states—overseen by EPA—are to set water quality standards, monitor water quality, and assess water quality against the applicable standards. Water quality standards define the water quality goals of a water body, or portion thereof, by designating the use or uses to be made of the water and by setting criteria necessary to protect the uses. These standards establish an additional legal basis for controlling pollution entering the waters of the United States from point sources, such as wastewater treatment plants. Water quality standards include the following, among other things: designated uses of the water body, such as the protection and propagation of fish, shellfish, and wildlife; criteria to protect designated uses, such as specific criteria or levels for toxic or nutrient pollutants that could harm aquatic life; anti-degradation requirements that describe the conditions under which water quality may be lowered in surface waters while still protecting existing uses and high quality waters; and other general policies to address implementation issues. To protect a water body’s designated uses, a state must establish numeric criteria, or, where numeric criteria cannot be established or as a supplement to them, narrative or biomonitoring criteria. EPA has encouraged states to incorporate numeric criteria into water quality standards and TMDLs for water bodies with nutrient impairments because they require less interpretation to implement than narrative criteria. Numeric criteria express precise, measurable levels of particular chemicals or conditions allowable in a water body. In contrast, narrative criteria express in a qualitative form how to protect a designated use of a water body. Narrative criteria often describe the desired conditions of a water body as being “free from” certain negative conditions. For instance, to protect a designated use, narrative criteria could require that a particular water body be free from floating non-petroleum oils of vegetable or animal origin. According to EPA, under most circumstances, water quality criteria that limit specific toxic pollutants are expressed numerically. However, according to EPA officials, most water quality criteria that limit nutrient pollutants are expressed narratively. EPA has provided support to states on how to develop numeric criteria through written guidance, webinars, and workshops. According to EPA officials and data, however, there has been limited state progress in developing numeric criteria for nutrients. As of 2017, six states had at least one statewide numeric criterion for either nitrogen or phosphorus for some water bodies. Through the monitoring and assessment process, states are to identify water bodies that do not meet established water quality standards and are therefore considered to be impaired. The Clean Water Act generally requires—for each water body that a state has identified as impaired— that the state develop a TMDL for each pollutant impairing the water body. A TMDL reflects the calculation of the maximum amount of a pollutant that a water body can receive, while meeting and continuing to meet water quality standards for that particular pollutant. A TMDL determines a pollutant reduction target and allocates load reductions necessary to meet that target to both point and nonpoint source(s) of the pollutant, although under the Clean Water Act only point sources can be required to reduce pollutants. For a point source, legal discharge limits based on the targets identified in the TMDL are incorporated into an NPDES permit. An NPDES permit can be issued as an individual permit to a single facility, written to reflect site-specific conditions of that facility, or as a general permit for multiple facilities with similar operations and types of discharges. For example, Connecticut uses a general permit to implement the Long Island Sound TMDL. This permit authorizes 79 wastewater treatment facilities to discharge nitrogen into the sound and includes a specific nitrogen limit for each facility. Under the Clean Water Act and EPA’s regulations, states or EPA can typically determine the most appropriate geographic area and pollutants for each TMDL. The Chesapeake Bay TMDL is the largest TMDL that EPA has developed. This TMDL identifies the necessary nutrient pollution reductions across the bay jurisdictions, which encompass seven states in a 64,000-square-mile watershed, and comprise 276 smaller TMDLs for 92 individual Chesapeake Bay tributaries. Similarly, the Long Island Sound TMDL identifies the necessary nitrogen pollution reductions for parts of Connecticut and New York that discharge into the sound. In contrast, many TMDLs cover a single water body, such as a lake or a segment of a river. Unlike its approach for point sources, the Clean Water Act’s approach to curtailing nonpoint source pollution is largely voluntary. One of the primary ways that EPA addresses nonpoint source nutrient pollution is with the section 319 program. Through this grant-based program, EPA funds voluntary projects aimed at reducing nonpoint source pollution, particularly runoff from agricultural production. Grants from this program support a wide variety of activities including the development and implementation of best management practices (BMP), which are used to reduce or eliminate the introduction of pollutants into receiving waters. Some common agricultural BMPs include planting strips of trees or shrubs along stream banks to serve as buffers or planting cover crops, such as clover, in fields near water bodies to reduce nutrient runoff. EPA also encourages states to use nutrient credit trading to help address nutrient pollution. Nutrient credit trading programs are designed to allow a point source to purchase pollutant reduction credits from another point source or a nonpoint source in the same watershed with the intent of meeting the discharge limits established in an NPDES permit. These limits establish a baseline that credit generators must discharge below before they can sell credits. According to EPA guidance, point sources that exceed their discharge limit can buy credits to be compliant with their permits, and point sources that have discharged below their limits can sell credits. Because the Clean Water Act does not require nonpoint sources to meet nutrient reduction targets established in a TMDL, there is no demand to buy credits. However, nonpoint sources can sell credits in some programs once these sources have reduced pollution below the targets established in the TMDL for the watershed or geographic area. To provide states with guidance on developing and implementing trading programs, EPA issued its Water Quality Trading Policy in 2003 and its Water Quality Trading Toolkit for Permit Writers in 2007. According to the EPA toolkit, states have the flexibility to structure a trading program to meet state needs including the type of entities allowed to trade; the types of pollutants traded, such as nutrients; and the mechanism for carrying out the trades. Additionally, the legal and policy framework for trading programs can vary. The Clean Water Act does not explicitly identify trading as an option to comply with NPDES permits. According to EPA’s guidance, however, the act provides authority for EPA and states to develop a variety of programs and activities to control pollution; including trading programs, provided that these programs are consistent with the act. For instance, trading must not violate any of the act’s provisions, such as the anti-degradation policy, which maintains and protects the existing uses of water bodies, or the anti-backsliding policy, which prohibits the modification of existing NPDES permits with less stringent standards than those established in the previous permit. According to EPA data and interviews with EPA officials, in 2014, a total of 19 nutrient credit trading programs existed in 11 states. The majority of nutrient credit trades occurred in 3 states—Connecticut, Pennsylvania, and Virginia. Most point sources participating in these 3 state programs in 2014 did not purchase credits. However, EPA and state officials and stakeholders told us that trading provided point sources with flexibility that allowed them to manage risk, reduce the cost of compliance, and better manage the timing of upgrades of their nutrient removal technology. In 2014, a total of 19 nutrient credit trading programs existed in 11 states, according to EPA data and interviews with EPA officials. These 11 states were California, Connecticut, Florida, Georgia, Idaho, Minnesota, North Carolina, Ohio, Pennsylvania, South Carolina, and Virginia. Three of the states—Georgia, Minnesota, and North Carolina—had more than one nutrient credit trading program. Each program covered a specific watershed, portion of a watershed, municipality, or permit holder (see fig. 2). See appendix II for a list of the 19 programs. EPA documents and officials indicated that trading may be less viable in some locations than in others. EPA’s documentation discusses factors that can affect the viability of trading. For example, trading should occur within an area—such as a watershed—that is appropriately defined to ensure that trades will maintain water quality standards within that area. In a 2008 evaluation of water quality trading, EPA identified other location-specific conditions that influence whether trading occurs, including the regulatory environment, the nature of participants, and watershed characteristics. EPA officials in Region 9 explained, for example, that they do not see strong demand for nutrient credit trading in their region because there are not many nutrient impaired watersheds with a favorable combination of point sources that need credits and willing credit generators. Trading activity varied among the 19 programs. According to EPA data, not every state with a trading program had trades in 2014. According to EPA data and officials, the majority of nutrient credit trades occurred in 3 states—Connecticut, Pennsylvania, and Virginia—which were also the largest programs in terms of the number of participating point sources. According to state data and officials, the number of trades in these states in 2014 ranged from 31 to 151. (See table 1.) Under EPA guidance, each state has the flexibility to establish or approve a nutrient credit trading program or programs to meet its own situation. The three programs we reviewed are each structured somewhat differently. Specifically, see the following: Connecticut adopted legislation for a nutrient trading program in 2001. The state also issued a general permit in 2002 that allows 79 point sources in the Long Island Sound watershed to trade nitrogen credits. Connecticut’s program does not allow nonpoint sources to generate credits. All nutrient credit trades are automatically processed annually by the state credit exchange, known as Connecticut’s Nitrogen Credit Exchange Program. Connecticut state officials explained that, at the end of the year, the exchange compares each point source’s total pounds of nitrogen discharged to its discharge limit. Each point source that discharges less than its limit receives a payment from the exchange. Each point source that discharges more than its limit—and thus would be out of compliance with the general permit if it failed to secure credits in a timely manner—is billed for the credits needed to bring it into compliance with its discharge limits. Because these transactions are conducted annually, the number of trades reported for Connecticut in 2014 is the same as the number of participating point sources that purchased credits in 2014. Pennsylvania established its trading policy and guidance in 2005. The state issues individual NPDES permits to point sources that allow for trading both nitrogen and phosphorus credits in the Chesapeake Bay watershed. In this program, both point sources and nonpoint sources may generate credits to sell to point sources for compliance with permit limits. Like Connecticut, Pennsylvania has an exchange for buying and selling credits, which is called PENNVEST. Unlike Connecticut, the exchange does not automatically conduct trades at the end of the year. Instead, point sources and nonpoint sources can choose whether to use the exchange to buy or sell credits, or whether to conduct sales outside the exchange. Pennsylvania officials told us that sales typically occur outside the exchange. According to Pennsylvania officials, the proportion of trades going through the exchange has been less than 10 percent annually since 2014. Virginia established its trading program through state legislation in 2005. The state uses a general NPDES permit that allows point sources within the Virginia portion of the Chesapeake Bay watershed to trade nitrogen and phosphorus credits. The general permit does not normally allow point sources to use credits generated by nonpoint sources for compliance with the general permit. Point sources covered under this permit generally trade with each other through the Virginia Nutrient Credit Exchange Association, although there can be a handful of bilateral trades, according to Virginia officials and state data. In the three states we reviewed, most point sources participating in the trading programs did not purchase credits to meet nutrient discharge limits, according to state data and officials. Officials from each state explained that many point sources have upgraded their nutrient removal technology in order to help them meet discharge limits. For example, from 2002, when Connecticut’s trading program began, through 2014, 53 of the 79 point sources in Connecticut’s trading program had invested in new technology to improve nutrient removal, according to state documents. As a result, many of those point sources generate nutrient reductions that they can sell as credits and do not usually need to purchase credits, according to state data and officials. Most point sources in the three states we reviewed did not purchase credits in 2014. (See table 2.) The percentage of point sources in those trading programs that did purchase credits to meet discharge limits ranged from 14 to 49 percent, depending on the state. Specifically, see the following: In Virginia, 14 percent of point sources in the trading program purchased credits in 2014—the lowest percentage in the states we reviewed. Virginia officials told us that few point sources purchased credits because many point sources upgraded their nutrient removal technology before implementing the TMDL in anticipation of the stricter discharge limits and were able to meet discharge limits without purchasing credits. In Pennsylvania, 29 percent of point sources in the trading program purchased credits in 2014. Officials in Pennsylvania told us, however, that the demand for credits has continued to drop as point sources upgrade their nutrient removal technology. They said that most point sources that were planning to upgrade have done so. In Connecticut, 49 percent of point sources in the trading program purchased credits in 2014—the highest percentage of the states we reviewed. According to Connecticut’s 2014/2015 program report, the number of point sources that bought credits in 2014 was due to (1) increased discharges from three large wastewater treatment facilities that were under construction that year and (2) cold weather that affected the ability of point sources to remove nutrients from their discharges using biological processes. For comparison, 35 percent of point sources bought credits in Connecticut in 2015. A member of the Nutrient Credit Exchange Advisory Board in Connecticut told us that since the program began in 2002, the number of point sources that have needed to buy credits has generally decreased over time as these facilities have upgraded their nutrient removal technology. State officials expect this trend to continue in the future as more point sources complete their technology upgrades. For the point sources that did purchase credits in 2014, state officials in the three states we reviewed told us that the total amount (in pounds) of nutrients that point sources purchased as credits to meet their individual discharge limits was generally small relative to the aggregate discharge limits (see table 3). In addition, the number of credits purchased by point sources was generally much less than the number of credits generated (see table 4). However, because the three programs collect data differently, we could not make comparisons across all three states for both measures. Specifically, for two of the states—Connecticut and Virginia—we were able to compare the amount (in pounds) of nutrients purchased to the aggregate discharge limit, but we did not have comparable data for Pennsylvania. For the number of credits purchased relative to the number of credits available, we were able compare the data for Pennsylvania and Virginia, but we could not make the comparison for Connecticut. Nevertheless, the available state data show that the amount (in pounds) of nutrient credits purchased in these three programs in 2014 was generally small. The state data for 2014 showed that the amount of nutrient credits purchased in these three programs was generally small. Specifically, see the following: Point sources participating in Connecticut’s nutrient credit trading program in 2014 purchased about 645,000 pounds of nitrogen credits to meet individual discharge limits. In total, point sources in the program had an aggregate discharge limit of about 3.3 million pounds for nitrogen. Point sources in Connecticut purchased the most pounds relative to the aggregate discharge limit among the states we reviewed—about 20 percent. However, in 2014, point sources removed far more nutrients—5.3 million pounds of nitrogen—than the 645,000 pounds purchased. Point sources participating in Virginia’s nutrient credit trading program in 2014 purchased about 164,000 pounds of nitrogen credits and 35,000 pounds of phosphorus credits to meet individual discharge limits. In total, point sources in the program had an aggregate discharge limit of about 19 million pounds for nitrogen and 1.6 million pounds for phosphorus. Therefore, the pounds of nitrogen and phosphorus traded in Virginia in 2014 represented about 1 percent and 2 percent, respectively, of the aggregate discharge limit for these nutrients. In addition, the number of credits purchased by point sources in Virginia was less than the number of credits generated. Specifically, point sources in Virginia purchased about 164,000 nitrogen credits out of 6 million nitrogen credits generated, and about 35,000 phosphorus credits out of 797,000 phosphorus credits generated. Officials in Pennsylvania told us that the amount of nutrients traded in their program was small relative to the aggregate discharge limits, but they could not provide data in terms of pounds that we could use to make the comparison. However, data from Pennsylvania show that the number of credits purchased by point sources was generally much less than the number of credits generated. Specifically, point sources in Pennsylvania purchased about 805,000 nitrogen credits out of 1.9 million nitrogen credits generated, and about 85,000 phosphorus credits out of 111,000 phosphorus credits generated. In the three states we reviewed, most credits sold were generated by point sources, not nonpoint sources. As previously discussed, Pennsylvania was the only state we reviewed that allowed nonpoint sources to generate and sell credits. Of the credits sold in Pennsylvania, a relatively small percentage was sold by nonpoint sources. Specifically, nonpoint sources sold 36 percent of all nitrogen credits purchased in 2014 and 11 percent of all phosphorus credits. According to state officials, there were seven nonpoint source sellers of credits, including at least four sellers that aggregate credits generated by multiple agricultural operations. Although most point sources in these states did not buy credits in 2014, EPA officials, state officials, and point source stakeholders told us that nutrient credit trading was important because it gave point sources flexibility in meeting nutrient discharge limits. According to officials and stakeholders, this flexibility allowed point sources to manage risk, reduce the cost of compliance, and better manage the timing of upgrades of point sources’ nutrient removal technology. Specifically, see the following: Managing risk. Although each point source’s permit contains specific discharge limits, a point source’s actual discharge varies from year to year. For example, an official from the Virginia Nutrient Credit Exchange Association explained that point sources will forecast their anticipated discharge over a 5-year period. However, there can be considerable variance from the forecast for any given year because of, for example, unpredictable weather, which can upset biological nutrient removal processes. Therefore, nutrient trading gives point sources insurance against unexpectedly high discharges by allowing them to “true up” at the end of the year by buying credits from point sources that discharged below their limits. This reduces the risk that an individual point source faces noncompliance with its permitted limit. Reducing the cost of compliance. Stakeholders said that upgrading nutrient removal technology to meet discharge limits is economically feasible for some point sources but is potentially unaffordable for point sources with fewer financial resources and smaller economies of scale. For example, one point source credit buyer in Connecticut told us that the buyer’s facilities had invested in upgrading nutrient removal technology, but any additional upgrades to meet the discharge limits would not be economically feasible. The buyer explained that, within a trading program, those point sources with lower pollution control costs can generate additional reductions in pollution, which they can use to generate credits to sell to those point sources with higher pollution control costs. As a result, trading can make nutrient reduction efforts more cost-efficient system-wide. Managing the timing of upgrades. Trading helps point sources better manage the timing of upgrades to their nutrient removal technology, according to state officials and point source stakeholders. For example, a point source stakeholder in Virginia told us that it would have been difficult for all point sources to upgrade at once to meet the new discharge limits established in the NPDES permit under the TMDL, since there was a limited pool of engineers and construction companies that could install these upgrades, and that trading gave point sources time to schedule upgrades over several years. Additionally, in Pennsylvania, a point source credit buyer explained that the point source planned to complete a multi-year $34 million upgrade of its facilities in 2017 to meet discharge limits that came into effect in October 2012. To meet discharge limits in the meantime, the point source developed a program to purchase nitrogen credits from local nonpoint sources that would implement cover crop conservation practices to generate the necessary reductions. Therefore, trading allowed the point source to meet discharge limits during the period it was planning and completing the upgrade. Although nutrient credit trading has provided point sources with flexibility in meeting discharge limits, trading is not responsible for reducing nutrient pollution, according to EPA, state, and other stakeholders. These stakeholders told us that pollution reduction largely results from nutrient discharge limits in permits and the nutrient removal technology that point sources invest in to meet or reduce below those limits. States oversee nutrient credit trading programs by approving and verifying credit generation to ensure that credits represent real nutrient pollution reductions. EPA reviews permits, conducts periodic evaluations of point source facilities to ensure that trading is consistent with the Clean Water Act, and issues national-level guidance for nutrient credit trading. States oversee nutrient credit trading programs by approving and verifying credit generation to ensure that credits represent real nutrient pollution reductions. A state’s approval and verification process varies depending on whether the credit generator is a point or nonpoint source. For point sources, the states we reviewed followed a process for verifying credits that is based on the existing oversight process for NPDES permits. Because nonpoint sources do not have NPDES permits, states use a separate process to approve and verify that nonpoint sources’ pollution reduction activities have generated credits for trading. States we reviewed approve credit generation by point sources by including language that allows for trading in point sources’ individual or general NPDES permits. In Connecticut and Virginia, point sources covered under the states’ general permits are automatically approved to generate nutrient credits for trading. In Pennsylvania, point source facilities with language that allows for trading in their individual permits and that meet requirements in the state’s watershed implementation plan are approved to generate credits. In all three states, the language that allows for trading in these permits includes the individual discharge limit for each point source, which is called a baseline, for trading purposes. An approved point source is able to generate credits when it reduces its discharge below its baseline. To verify point source credits, the states we reviewed each use an oversight process based on its NPDES authority to oversee permits that include discharge monitoring and reporting, and inspections. Federal regulations require point sources with NPDES permits to periodically monitor compliance with the effluent limitations established in their permits and report the results to the permitting authority. Specific monitoring and reporting requirements, including the frequency of monitoring, are included in each permit. State officials in the three states we reviewed all told us that they use discharge monitoring reports to determine how many credits a point source has generated. For example, according to the terms of the general permit for nutrient discharges in Virginia, point sources must sample nitrogen and phosphorus from one time per month to three times per week, depending on the volume of discharge. By February 1 of each year, point sources must submit total annual nitrogen and phosphorus discharges to the Virginia Department of Environmental Quality using a discharge monitoring report, which covers discharges during the previous calendar year. State officials in Virginia told us that they review these reports for data quality and determine which point sources generated credits and which point sources must buy credits to meet discharge limits. Any credits that point sources intend to use for compliance during the previous calendar year must be purchased by June 1. In addition, state officials in all three states told us that they conduct periodic inspections of point source facilities to ensure that facilities are appropriately monitoring and reporting nutrient discharges as required under their permits. For example, officials in Pennsylvania told us that for point sources, the state’s Department of Environmental Protection conducts periodic inspections of point sources to ensure that they are meeting requirements that allow them to generate credits. These officials said that they generally inspect each facility at least once per year. In Pennsylvania, according to state officials and program documents, such as state regulations, a nonpoint source that seeks to generate credits must submit a request for credit certification. The request includes a description of how the nonpoint source intends to reduce nutrient pollution, such as through a BMP, and information about steps the nonpoint source will take to verify the credits including any relevant calculations, maps, and photographs. State officials review the request for technical acceptability and consistency with program requirements before approving credit generation. To verify nonpoint source credits after the credit-generating activity has taken place, officials in Pennsylvania told us that they review information about the performance of that activity, such as a BMP. According to the Pennsylvania Department of Environmental Protection’s website, officials review documentation to ensure that the credit-generating activity was implemented as described in the verification plan submitted with the certification request, and that all program requirements are met. In addition to reviewing documentation, officials may conduct activities such as monitoring the credit-generating activity, inspecting sites, and performing compliance audits. For example, as part of the verification process, a nonpoint source credit generator official told us that they had to provide before and after photos of the cover crop that was intended to prevent nutrient pollution in a local water body. They said that they provided documentation that the crops were planted at a certain time and were the appropriate types of crops. In addition, they provided calculations related to the crops planted and types of soil they were planted in, before the credits could be verified. EPA oversees trading programs as part of its oversight of NPDES to ensure that they are fully consistent with the Clean Water Act and its implementing regulations, in particular when questions or concerns arise, according to EPA policy. EPA officials told us that they conduct oversight primarily through the regional offices, which (1) review NPDES permits; (2) review and comment on state regulatory frameworks for trading; and (3) evaluate point source facilities by collecting discharge information and conducting periodic on-site inspections to ensure, for example, that sampling and record keeping practices are in order. Additionally, EPA headquarters provides national-level guidance and training to state programs and stakeholders. According to EPA officials, EPA’s regional offices review NPDES permits that allow for trading to ensure that these permits meet the standards of the Clean Water Act and are consistent with EPA’s policy and guidance on trading. The regional offices can object to these permits, if necessary. EPA can request changes to permits to ensure that they align with federal requirements. Although EPA does not review every NPDES permit, it will generally review permits that allow for trading because these permits could be considered more complicated, controversial, or challenging, according to EPA officials. In the states we reviewed, officials told us that EPA has reviewed NPDES permits that allow for trading and has at times requested that states make changes to the permits. For example, officials in Pennsylvania told us that EPA has reviewed 180 permits from large facilities in the state’s trading program and objected to 14 of them, requiring state officials to modify those permits. Officials in Virginia said that EPA has reviewed its general permit that allows for nutrient credit trading. Virginia officials said that, during the most recent EPA review, the agency issued a formal objection to the permit and asked the state to increase the sampling frequency in the permit’s monitoring guidelines. As a result, Virginia modified the permit to satisfy EPA’s request. In addition to reviewing NPDES permits, EPA regional officials told us that they review and comment on states’ regulatory frameworks for trading. Officials said that they review these frameworks to identify any issues in developing and implementing the programs and that they request that state permitting agencies make changes when necessary. For example, in 2012, EPA Region 3 completed reviews of all six states and the District of Columbia in the Chesapeake Bay watershed, including the trading programs for both Virginia and Pennsylvania. After reviewing Pennsylvania’s trading program, EPA raised concerns about the state’s calculation of the baseline for nonpoint source credit generation. In response to EPA’s concerns, officials in Pennsylvania told us that they made changes in the way nonpoint source credits are calculated. EPA’s involvement in reviewing state trading frameworks can vary, according to EPA and state officials. For example, because of specific authorities written into the Chesapeake Bay TMDL, EPA Region 3 plays a very active role in reviewing state trading programs, according to officials from Region 3. By comparison, Connecticut state officials told us that since EPA Region 1 granted its initial approval of Connecticut’s trading program, there has been little direct involvement by EPA in overseeing the program. Stakeholders in the states we reviewed and EPA regional officials told us that EPA conducts periodic evaluations of point source facilities by collecting discharge monitoring data and conducting inspections. Officials at EPA Region 3 told us that they conduct inspections of facilities, review records and sampling procedures, and evaluate credit generators. A nutrient credit generator in Pennsylvania told us that EPA has audited the facility’s process for converting nutrient-rich manure into energy, mineral products, and nutrient credits. State officials in Virginia and Connecticut told us that they report nutrient discharge data to EPA for review. In addition to oversight activities conducted by the regions, EPA conducts some oversight of nutrient credit trading at the national level. EPA’s oversight at the national level involves: (1) setting national guidance for trading, (2) offering training on nutrient credit trading to state officials and stakeholders, and (3) periodically collecting some data on nutrient credit trading programs. Specifically, see the following: Guidance. EPA has issued three documents that provide guidance to states to assist them in developing and implementing nutrient credit trading programs: EPA’s 2003 Water Quality Trading Policy; the 2004 Water Quality Trading Assessment Handbook; and the 2007 Water Quality Trading Toolkit for Permit Writers, which EPA updated in 2009. Training. EPA has offered training for NPDES permit writers to help them better understand how to write NPDES permits that incorporate provisions for nutrient credit trading, according to EPA officials. EPA and USDA also sponsored a 3-day water quality trading workshop in September 2015 in Lincoln, Nebraska, on a range of different subjects related to water quality trading. According to the workshop’s summary document, over 200 attendees participated, including water resource professionals; third-party environmental market makers; academics; representatives of federal, state, and local governments; representatives of non-governmental organizations; and agricultural and environmental stakeholders. Data collection. According to EPA officials, there is no requirement for permittees to report data about trading programs at a national level and EPA has no systematic way to collect this information. However, EPA manually collects some trading data, such as the names of programs with permits that allow for trading, which provides the agency with a general understanding of the extent to which trading is being used nationally. Officials told us that they plan to update national trading data at least every 2 years and make them available online in the fall of 2017. Stakeholders cited two key factors that have affected participation in nutrient credit trading—the presence of discharge limits for nutrients and the challenges of measuring nutrient reductions resulting from nonpoint sources’ implementation of BMPs. First, officials from the three states we reviewed, and other stakeholders we interviewed, cited the importance of discharge limits for nutrients as a driver to create demand for nutrient credit trading. Without such a driver, point sources have little incentive to purchase nutrient credits. According to EPA guidance, discharge limits—most commonly established in a TMDL—are the leading driver for nutrient credit trading markets. For the Pennsylvania and Virginia programs, the nutrient discharge limits are established in the Chesapeake Bay TMDL. For the Connecticut program, nutrient discharge limits are established in the Long Island Sound TMDL. The TMDL nutrient discharge limits are ultimately translated into discharge limits in the NPDES permits for point sources. Pennsylvania officials explained how discharge limits serve as a driver for trading. Officials stated that although the state established its nutrient trading program in 2005, the TMDL for Chesapeake Bay was not established until 2010. Officials noted that in the first years of the program, little trading took place because point sources did not have to meet nutrient discharge limits. Once EPA established the TMDL for the Chesapeake Bay—and Pennsylvania established discharge limits for point sources in the NPDES permits—demand for nutrient credit trading increased, according to Pennsylvania officials. Officials explained that if point sources had not yet upgraded their nutrient removal technology, and could not meet the NPDES permit discharge limits, they could buy nutrient credits to comply with discharge limits. EPA officials added that demand for trading could increase over the long term because of economic or population growth. In addition to programs in the three states, we also reviewed a program in the Ohio River Basin where nutrient credit trading activity has been limited, according to program officials. This multi-state trading program allows point and nonpoint sources in Ohio, Indiana, and Kentucky to generate and sell nutrient credits, and was designed as a pilot to test nutrient credit trading in case discharge limits were established. Program officials told us that while some credits have been generated and sold, participation in the program has been limited because there is no requirement—in either a TMDL or numeric water quality standards—for the point sources in these states to meet discharge limits. As the program is currently implemented, they said that credits are not purchased by point sources to comply with discharge limits but rather by corporations to meet internal sustainability goals or by philanthropists who want to invest in BMPs that address nutrient pollution in the Ohio River Basin. Unlike point sources, the Clean Water Act does not require nonpoint sources to meet nutrient discharge limits established in TMDLs or numeric water quality standards, and as a result, EPA said there is no federal regulatory driver creating demand for nonpoint sources to participate in nutrient credit trading programs. The second factor affecting participation in trading programs relates to the challenges of measuring nutrient reductions that result from nonpoint sources’ implementation of BMPs. According to EPA officials and guidance, federal and state agencies typically do not directly monitor nonpoint source pollution or the effectiveness of BMPs because the diffuse nature of nonpoint source pollution makes monitoring costly and impractical. Instead, agencies and other stakeholders rely on models to estimate the amount of pollution discharged by nonpoint sources and the effectiveness of BMPs. These models incorporate information about variables such as land use, soil type, and precipitation to estimate the amount of nutrients that will be reduced as the result of implementing a specific BMP. Even with these models, EPA guidance recommends that the programs use a rule that calls for nonpoint source credit generators to generate credits at a greater than a one-to-one basis to account for uncertainties in modeling. According to this guidance, the rule can also mitigate other uncertainties such as how well BMPs are designed and maintained and the risk of a BMP failing to produce the expected results. In part because of this uncertainty, two of the states we reviewed did not allow nonpoint sources to generate credits in their programs. State officials in Connecticut told us that it was easier for Connecticut to implement nutrient trading with point sources, as their discharges are easy to quantify. State officials in Virginia told us that point source to nonpoint source trading is complicated and they felt that they could meet their TMDL reduction goals solely with point source reductions. Pennsylvania does allow nonpoint sources to generate and sell credits but the state has developed a rule to help address some of these uncertainties. Specifically, Pennsylvania implemented a rule in 2016 requiring nonpoint sources to generate three nutrient credits for every nutrient credit sold. This rule was developed as an interim step to address EPA’s concern that the state’s calculation of the baseline for nonpoint source credit generation was not consistent with the reductions needed to meet the Chesapeake Bay TMDL goals. Pennsylvania’s rule, however, appears to have reduced the use of nonpoint source credits. State program data show that in 2016 approximately 115,000 nitrogen credits were available from nonpoint sources after the implementation of the rule, almost one-third the approximately 381,000 nitrogen credits that were available in 2014. An official at a wastewater treatment facility in south central Pennsylvania told us that the rule increased the cost to generate nonpoint source credits and reduced the number of nonpoint source credits available in Pennsylvania’s trading program. Specifically, to meet its discharge limits in 2014, this facility purchased approximately 75,000 nitrogen credits, 52,000 of which were generated from local farmers who installed BMPs on their land. In 2016, after the rule was implemented, the same facility purchased 95,000 nitrogen credits, only 5,000 of which were generated from local farmers. According to the point source officials, they could no longer rely solely on purchasing credits generated from local farmers because there were fewer nonpoint source credits available to purchase in 2016. To meet the discharge limit, this facility purchased the remaining credits they needed from other point sources because nonpoint source credits were not available. Pennsylvania officials told us that the decline in the number of nonpoint source credits is mostly due to the new rule. However, they said that other factors such as the low price of credits have also decreased the incentive to generate nonpoint source credits. According to EPA officials, the program should implement a stricter baseline, based on the pollution reduction targets established in the Chesapeake Bay TMDL. Pennsylvania officials told us that if they make the baseline requirements stricter, there may be no incentive for nonpoint sources to generate credits because it would be much more difficult to meet the minimum requirements and the cost of generating credits would be prohibitive. State officials and stakeholders also told us that even if a program allows nonpoint sources to trade, point sources often prefer to trade with other point sources because they have similar permit and monitoring requirements and are both legally liable for meeting discharge limits. Trading between point sources provides buyers with the assurance that the credits they purchase represent actual reductions and can be used for compliance with an NPDES permit. On September 12, 2017, we provided a draft of this report to EPA for review and comment. On September 29, 2017, EPA responded by email stating that its Office of Water had reviewed the draft report and EPA had no comments. We are sending copies of this report to the appropriate congressional committees, the Administrator of the Environmental Protection Agency, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix III. This report (1) examines the extent to which nutrient credit trading programs have been used and what the outcomes of the programs have been, (2) describes how states and the Environmental Protection Agency (EPA) oversee nutrient credit programs, and (3) describes what key factors stakeholders view as affecting participation in nutrient credit trading. To examine the extent to which nutrient credit trading programs have been used and what the outcomes of the programs have been, we first spoke with EPA headquarters and EPA regional officials and reviewed EPA data. EPA does not have a formal definition for water quality trading programs, of which nutrient credit trading is a subcategory, and is not required to keep information on these programs. EPA periodically gathers some limited information on trading programs, including the type of trading program, location, facilities participating, and estimated trades. The most recent data EPA had at the time we conducted our review were for 2014. EPA officials explained that the completeness and consistency of the data reported by states to EPA varied somewhat. For example, not all programs reported trading data for calendar year 2014. To verify the accuracy of EPA’s list of trading programs, we interviewed or e-mailed officials from all 10 EPA regions to confirm the presence or absence of trading programs in each state in 2014. For the 7 EPA regions with some form of trading program in their regions, we interviewed regional officials to gather more information about the type of trading conducted and whether there was trading activity in 2014. Using EPA’s information as a starting point, we developed a modified list of nutrient credit trading programs that existed in 2014. For our modified list, we excluded two programs, one from Region 5 and one from Region 10, from EPA’s data that did not trade nutrient credits. Based on our discussion with EPA officials, we also excluded trading programs that let residential septic system owners “trade” credits to encourage wastewater treatment facilities to take their systems online. We also excluded one program that included three states—the Ohio River Basin Interstate Water Quality Trading Project —because none of the participating states have discharge limits in their permits. In the process of interviewing EPA regions, we also added one program from Region 4 and two programs from Region 5 that EPA officials told us had been inadvertently left off EPA’s 2014 list. From this list, we then selected a nongeneralizable sample of the three nutrient credit trading programs—Connecticut, Pennsylvania, and Virginia—which appeared to have done the most trading and had the most participating point sources in 2014 for a more detailed examination. Because these programs were judgmentally selected, the results of our review of these programs cannot be generalized. For these three programs, we reviewed state laws and regulations, National Pollutant Discharge Elimination System (NPDES) permits, watershed implementation plans, program rules and policies, annual summaries of nutrient credit purchases and sales, and assessments of state trading programs when available. We also interviewed state and program officials and other stakeholders, such as point source and nonpoint source credit generators and buyers, to gather information on the programs, including structure, participants, number and type of trades, authorizing mechanisms, and outcomes. Specifically, to determine the number of trades we asked each state for its official list of trades from 2014, the most recent year for which we could get complete data from all programs. We counted each time a point source purchased credits as one trade. In addition, we asked states to provide us the number of point sources that purchased credits and the number of point sources in the trading programs, which we used to determine the percentage of point sources that purchased credits. The states post the number of point sources that purchased credits online, and the number of point sources in the program is identified in state documents. We also asked the states for the number of credits purchased and the aggregate discharge limit for point sources to determine the percentage of credits purchased in pounds of nutrients relative to the aggregate limit. The aggregate discharge limit is the maximum allowable discharge for point sources in the program. Because this limit represents the maximum amount of pollution allowable to meet water quality standards, it served as a point of reference for comparing the amount of discharge that was traded. We took these numbers from state records, and they are derived from the total maximum daily load, according to EPA policy. According to Virginia and Connecticut officials, in their programs one credit is equal to one equalized or delivered pound of pollution—that is, a pound of pollution after accounting for the delivery ratio. Pennsylvania could not provide us the number of pounds purchased. According to Pennsylvania officials, a nutrient credit does not equal a pound of pollution in their program because they use trading ratios, such as delivery ratios. This means that credits generated from different sources represent different nutrient reductions depending on where they are relative to the polluted water body. However, the aggregate discharge limit does not represent the pounds of nutrients that could have been traded, since the volume of trading was limited by the supply of credits, which was less than the aggregate discharge limit in Virginia and Pennsylvania. Specifically, to show this, we used state data on the number of credits generated and compared them with the number of credits purchased. Connecticut does not have data on the number of credits available. To assess the reliability of the state data, we visually reviewed the data for completeness and interviewed state officials responsible for collecting and using data about their quality assurance protocols and their confidence in the data. We found the data to be sufficiently reliable for our purposes and confirmed all final numbers with state officials. We interviewed state program officials in all three states to better understand the extent to which nutrient credit trading programs have been used and what the outcomes have been. During these interviews, we discussed the management of the programs, reviewed state trading data, and discussed the benefits and challenges of nutrient credit trading. We visited Pennsylvania to meet with program officials and stakeholders. Specifically, we met a representative of a credit aggregator that buys and sells credits from nonpoint source generators and toured a wastewater treatment facility that generates credits and a facility that generates nutrient credits by processing chicken manure into energy. We also spoke with buyers and sellers of nutrient credits in Connecticut and officials from the nutrient credit exchange in all three states. We did not audit these state trading programs or analyze their effectiveness or efficiency in meeting discharge limits or water quality standards. We also conducted a literature review of academic and economic journals. We searched peer-reviewed journals for articles published from 2011 through 2016 discussing water quality trading or nutrient credit trading. We did not find any additional trading programs in the United States that had not already been identified. To describe how states and EPA oversee nutrient credit programs, we reviewed relevant federal laws, regulations, and EPA policies and guidance related to nutrient credit trading. We reviewed state requirements for implementing the NPDES program, under the Clean Water Act and implementing regulations, which defines responsibilities applicable to states that serve as permitting authorities for overseeing point source permittees’ monitoring and reporting. These same authorities are used by states to oversee state trading programs. The Clean Water Act does not specifically authorize water quality trading, according to EPA officials; however, EPA has developed trading guidance for states interested in developing trading programs. We reviewed this guidance, specifically, EPA’s 2003 Water Quality Trading Policy and 2007 Water Quality Trading Toolkit for Permit Writers. We also reviewed state documents, such as watershed implementation plans, that identify trading program rules, and interviewed state officials and other stakeholders for our nongeneralizable sample of three nutrient credit trading programs. In our interviews we asked state officials how they oversee their trading programs. In particular, we asked how they approve point and nonpoint sources to generate credits, verify that a credit represents a real reduction in nutrient pollution, and monitor the buying and selling of credits to ensure that permit obligations are met. We also interviewed officials from EPA’s Office of Water and the 7 EPA regions with nutrient credit trading programs and asked them to describe EPA’s oversight role at the regional and national level. To describe what key factors stakeholders view as affecting participation in nutrient credit trading, we spoke with officials from EPA’s Office of Water, the 7 EPA regions with nutrient credit trading programs, and officials and stakeholders from the nongeneralizable sample of three nutrient credit trading programs. In addition, we reviewed documents and interviewed officials for one nongeneralizable multi-state trading program in the Ohio River Basin. We reviewed this program to better understand the key factors that can affect participation in nutrient trading programs. We interviewed officials from the institute that developed the program and corresponded with state officials from Kentucky and Ohio, two of the states involved in the Ohio Basin program. Finally, we interviewed representatives of stakeholder groups, such as those representing wastewater treatment facilities, national organizations for water issues, and agricultural conservation districts to get a broad perspective on the key factors that affect participation in nutrient credit trading programs. We identified 19 nutrient credit trading programs in 11 states and seven Environmental Protection Agency regions, in 2014.The 11 states that had programs are: California, Connecticut, Florida, Georgia, Idaho, Minnesota, North Carolina, Ohio, Pennsylvania, South Carolina, and Virginia (see table 5). In addition to the individual named above, Janet Frisch (Assistant Director), Chuck Bausell, Mark Braza, Ellen Fried, Patrick Harner, Karen Howard, Greg Marchand, Emily Ryan, Jason Trentacoste, and Daniel Will made key contributions this report. .", "summary": "Nutrient pollution—caused by excess nitrogen and phosphorus entering water bodies—poses significant risks to the nation's water quality. Nutrients can enter water bodies from point sources and nonpoint sources. The Clean Water Act establishes the basic structure for regulating discharges of pollutants, including excess nutrients. Under the act, authorized states—assisted and overseen by EPA—set limits on nutrients impairing a water body and limits on point source discharges. EPA encourages states to use nutrient credit trading to address nutrient pollution. According to EPA, trading allows a point source to meet nutrient discharge limits by buying pollutant credits from a source that has reduced its discharges more than required. GAO was asked to examine nutrient credit trading programs. This report describes (1) the extent to which nutrient credit trading programs have been used and what the outcomes of the programs have been, (2) how states and EPA oversee nutrient credit trading programs, and (3) what key factors stakeholders view as affecting participation in nutrient credit trading. GAO reviewed EPA documents and interviewed EPA officials to gather information on trading programs. GAO then selected a nongeneralizable sample of three programs with the most trades in 2014 (based on the most recent available data); reviewed program documents; and interviewed EPA, state, and program officials and other stakeholders about the programs. In 2014, 11 states had 19 nutrient credit trading programs, and trading provided flexibility for some point sources, such as wastewater treatment plants, to meet nutrient discharge limits, according to Environmental Protection Agency (EPA) data and officials. The majority of nutrient credit trading during 2014 occurred in three state programs—programs in Connecticut, Pennsylvania, and Virginia. A review of trading data from these programs showed that most point sources participating in the three state programs did not purchase credits in 2014 to meet their discharge limits, which are established in National Pollutant Discharge Elimination System (NPDES) permits under the Clean Water Act. For the point sources that did purchase credits in 2014, state officials in the three states told GAO that the total amount in pounds of nutrients that point sources purchased as credits was generally small. Nevertheless, state officials explained that nutrient credit trading was useful because it allowed point sources to manage risk, reduce the cost of compliance, and better manage the timing of upgrades of nutrient removal technology. States oversee nutrient credit trading programs, and EPA helps ensure that programs are consistent with the act. States oversee nutrient credit trading programs by approving and verifying the generation of credits to ensure that credits represent real reductions in nutrient pollution. A state's approval and verification process varies depending on whether the credit generator is a point or nonpoint source, such as runoff from agricultural and urban areas. For point sources, the states GAO reviewed followed a process for verifying credits that is based on the existing oversight process for NPDES permits. Because nonpoint sources do not have NPDES permits, states use a separate process to approve and verify that nonpoint sources' pollution reduction activities have generated credits for trading. When questions or concerns arise, EPA uses its oversight authority to ensure that trades and trading programs are fully consistent with the act. EPA officials told GAO that they conduct oversight primarily through the regional offices, which (1) review NPDES permits, (2) review and comment on state regulatory frameworks for trading, (3) conduct periodic on-site inspections, and (4) provide national-level guidance and training to state programs and stakeholders. According to stakeholders, two key factors have affected participation in nutrient credit trading—the presence of discharge limits for nutrients and the challenges of measuring the results of nonpoint sources' nutrient reduction activities. Officials from the three states GAO reviewed and other stakeholders cited the importance of discharge limits for nutrients as a driver to create demand for trading. Without such a driver, point sources have little incentive to purchase nutrient credits. The challenges of measuring nutrient reductions by nonpoint sources create uncertainties about the value of credits generated by nonpoint sources. In part, because of these uncertainties, the states GAO reviewed either did not allow nonpoint sources to trade or created special rules for nonpoint sources. State officials and stakeholders also told GAO that even if a program allows nonpoint sources to trade, point sources often prefer to trade with other point sources because they have similar permit and monitoring requirements.", "document_type": "gao"}
{"report": "In January 1961, the United States severed diplomatic relations with Cuba, followed by a total economic embargo declared by President Kennedy in February 1962. The resulting restrictions, including prohibitions on civil aviation between the United States and Cuba, remained in place over the subsequent 37 years until the Clinton Administration announced the start of public and private charter air service operations between the United States and Cuba in 1999. Charter service was the exclusive means of air transport between the United States and Cuba from the time these flights were announced in 1999 until August 2016. In February 2016, United States and Cuban officials signed a memorandum of understanding reestablishing regularly scheduled commercial air service between the two countries. Specifically, this memorandum of understanding allowed U.S. air carriers to operate 20 daily scheduled round trip flights between the United States and Havana and 10 daily round trip flights between the United States and each of the 8 other Cuban airports, as shown in figure 1. The reestablishment of scheduled commercial flights between the United States and Cuba followed a March 2016 Obama Administration change to Office of Foreign Assets Control (OFAC) travel regulations with regards to educational travel. While travel to Cuba for tourist purposes is prohibited, U.S. persons may be authorized to travel to Cuba for certain activities including family visits and educational activities. Specifically, this change allowed individuals traveling under the educational category to create their own schedule of travel and interaction with the Cuban people rather than being required to travel under this category only through a licensed group. On August 31, 2016, U.S. airlines began offering regularly scheduled commercial flights to Cuba. In June 2017, President Trump directed the Department of Treasury through OFAC to revise various categories of travel, and OFAC revised the categories in November 2017 to again generally require U.S. persons to travel to Cuba as part of a licensed group. The revised categories do not change the ability of public charter and scheduled commercial flights between both countries to operate. However, since these changes to the travel categories were announced, four air carriers that had been awarded scheduled round-trip flights between the United States and Cuba returned all or some of their allotted flights, citing lack of market demand. See figure 2 for further detail on the history of civil aviation between the United States and Cuba. Consistent with the Aviation Transportation Security Act and in accordance with existing statutory requirements, TSA assesses the effectiveness of security measures at foreign airports (1) served by a U.S. air carrier, (2) from which a foreign air carrier operates U.S.-bound flights, (3) that pose a high risk of introducing danger to international air travel, and (4) that are otherwise deemed appropriate by the Secretary of Homeland Security. The Secretary of DHS delegated to the TSA Administrator the responsibility for conducting foreign airport assessments, but retained responsibility for making the determination whether a foreign airport does not maintain and carry out effective security measures. In carrying out this function, the statute identifies measures that the Secretary must take in the event that he or she determines that an airport is not maintaining and carrying out effective security measures based on TSA assessments which can include, in some cases, revoking the authority of U.S. carriers to operate at the airport. In addition, TSA is to conduct inspections of U.S. air carriers and foreign air carriers operating U.S.-bound flights from foreign airports to ensure that they meet applicable security requirements. Currently, the Global Compliance Directorate, within TSA’s Office of Global Strategies, is responsible for conducting foreign airport assessments and air carrier inspections. TSA began performing foreign airport assessments and air carrier inspections in Cuba in 2007, when only charter carriers operated flights between the United States and Cuba. The first foreign airport assessment after regularly scheduled commercial air service resumed was conducted in Sierra Maestra Airport in Manzanillo, Cuba on October 19, 2016, and the first air carrier inspection after scheduled commercial service commenced was conducted for an American Airlines flight on October 24, 2016, at Juan Gualberto Gomez International Airport in Varadero. TSA assesses the effectiveness of security measures at foreign airports including those airports in Cuba offering U.S.-bound public charter and scheduled commercial flights using select aviation security standards and recommended practices adopted by International Civil Aviation Organization (ICAO), a United Nations organization representing 192 countries. ICAO is a specialized agency of the United Nations with a primary objective to provide for the safe, orderly, and efficient development of international civil aviation. ICAO member nations (i.e., contracting states) agree to cooperate with other contracting states to meet standardized international aviation security measures. ICAO standards and recommended practices address operational issues at an airport, such as ensuring that passengers and baggage are properly screened and that unauthorized individuals do not have access to restricted areas of an airport. ICAO standards also address non- operational issues, such as whether a foreign government has implemented a national civil aviation security program for regulating security procedures at its airports and whether airport officials implementing security controls are subject to background investigations, are appropriately trained, and are certified according to a foreign government’s national civil aviation security program. TSA utilizes 44 ICAO standards and recommended practices it sees as most critical in conducting its foreign airport assessments, which cover broad categories, including: passenger and cabin baggage security; and quality control. TSA uses a risk-informed approach to schedule foreign airport assessments across all foreign locations, including Cuba. TSA defines risk as a function of threat, vulnerability, and consequence. The agency uses various data sources to assess the likelihood of a location being targeted by bad actors, the protective measures in place to prevent an attack, and the impact of the loss from a potential attack. TSA categorizes airports into three risk tiers, with high risk airports assessed more frequently than moderate and low risk airports. TSA’s assessments of foreign airports are conducted by a team of inspectors, which generally includes one team leader and one team member. According to TSA, it generally takes 3 to 7 days to complete a foreign airport assessment. However, the amount of time and number of team members required to conduct an assessment varies based on several factors, including the size of the airport and the threat level to civil aviation in the host country. At the close of an airport assessment, inspectors brief foreign airport and government officials on the results as well as any recommendations for corrective actions and prepare an internal report. As part of the report, and as shown in table 1, TSA assigns a vulnerability score to each ICAO standard and recommended practice assessed as well as an overall vulnerability score for each airport, which corresponds to the level of compliance for each ICAO standard and recommended practice that TSA assesses. If the Secretary of Homeland Security determines that an airport does not maintain and carry out effective security measures, he or she shall, after advising the Secretary of State, take secretarial action. This generally includes notification to the appropriate authorities of security deficiencies identified, notification to the general public that the airport does not maintain effective security measures, publication of the identity of the airport in the Federal Register, and, when appropriate, modification of air carriers operations at that airport. According to TSA officials, no secretarial actions have been issued for Cuban airports since the resumption of public charter flights between the United States and Cuba in 1999 and scheduled commercial flights in 2016. Along with conducting airport assessments, the same TSA inspection teams also conduct air carrier inspections in foreign locations. During these inspections, a TSA inspection team examines each air carrier’s implementation of applicable security requirements, including their TSA- approved security programs, any amendments or alternative procedures to these security programs, and applicable security directives or emergency amendments. The frequency of air carrier inspections at each airport depends on a risk-informed approach and is influenced, in part, by the airport’s vulnerability to security breaches, since the security posture of each airport varies. In general, TSA’s procedures require it to conduct air carrier inspections at each airport on an annual or semi- annual basis depending on the airport’s vulnerability level, with some exceptions. At the close of an air carrier inspection, results are recorded into TSA’s Performance and Results Information System (PARIS) database. If an inspector finds that an air carrier is not in compliance with any applicable security requirements, additional steps are taken to correct and record those specific violations ranging from on-the-spot counseling for minor violations to sending a warning notice and/or a letter of correction, to issuing notices of civil penalties for more egregious violations. In extreme cases, TSA may withdraw its approval of an air carrier’s security program or suspend the air carrier’s operations. During fiscal years 2012 through 2017, TSA inspectors generally followed standard operating procedures for documenting foreign airport assessment results as required by TSA’s 2010 and 2016 Foreign Airport Assessment Program Standard Operating Procedures and Global Risk Analysis and Decision Support (GRADS) Business Rules. Similarly, TSA inspectors generally followed standard operating procedures for documenting air carrier inspection results in fiscal years 2016 and 2017 as required by the PARIS Business Rules. TSA also resolved reported deficiencies in a timely manner, and conducted foreign airport assessments at established intervals as required by TSA’s 2010 and 2016 procedures. Documentation: We found that data in most of the assessment reports TSA created in fiscal years 2012 through 2017 were generally complete with some reports missing some required information. Specifically: One airport assessment report did not answer required questions about training for aircraft pre-flight security checks and whether or not passenger screening met the requirements of Cuba’s national civil aviation program. Another airport assessment report did not indicate which security measures were being used to screen checked baggage, which is typically included in TSA’s airport profile report. A third airport assessment report did not have complete information regarding unescorted access to restricted areas. TSA officials explained that although inspectors did not document this information in the appropriate data fields within the report, they did record this information elsewhere within assessment documentation. We also found that data in air carrier inspection reports were generally complete and error-free. However, TSA was unable to provide full documentation for some of the air carrier inspections it conducted in Cuba in fiscal years 2016 and 2017. TSA officials attributed these missing documents to human error. We also identified errors or missing data fields in most of the air carrier inspections reports with complete documentation. For example: In reviewing air carriers’ compliance with a TSA security requirement for air carriers to notify U.S.-bound passengers that loaded firearms are prohibited in checked baggage, some inspection reports indicated that air carriers were simultaneously in compliance and not in compliance. Inspectors failed to document air carriers’ compliance with a TSA security requirement to prohibit unauthorized access to checked baggage during some air carrier inspections. The errors and missing data we identified constituted a relatively small proportion of the data in each inspection report, which include information on air carriers’ implementation of various TSA security requirements. TSA attributed these to human error and has since issued guidance and updated its air carrier inspection report template designed to better ensure that air carrier inspections are fully documented and less likely to contain such errors or missing data fields. Recording, Tracking, and Resolving Findings: We found that TSA generally followed procedures to record and track deficiencies identified during assessments at foreign airports and whether they have been resolved by the host government during subsequent visits. Among the foreign airport assessments conducted in Cuba in fiscal years 2012 through 2017, TSA recorded findings in several of them. In nearly all of the reports with findings, TSA followed its SOPs by recording findings and their root causes in an internal document and tracking the status of host country action to resolve each finding. In one report, TSA failed to record the root cause of a deficiency. This issue has been identified in a prior GAO report, and TSA is taking steps to resolve the issue by better documenting the root cause of each deficiency. We also found that TSA followed procedures to record, track, and resolve findings from air carrier inspections. Among the air carrier inspections TSA performed in fiscal years 2016 and 2017, TSA recorded several violations. In each instance, TSA recorded the root cause of each violation in PARIS, resolved each violation with on-the-spot counseling or investigation, and closed all air carrier findings in fiscal years 2016 and 2017 after air carriers took corrective action. Timeliness: During fiscal years 2012 through 2017, TSA generally completed foreign airport assessments in Cuba within the scheduled time frames per TSA’s policy. However, TSA explained that lapses can occur and that such deferments often take place worldwide due to scheduling conflicts, logistical issues, and operational concerns. Our analysis of TSA air carrier inspection data from fiscal years 2012 through 2016—a period in which public charter flights accounted for nearly all commercial air traffic between the United States and Cuba— revealed that TSA did not always inspect air carriers operating U.S.- bound flights from Cuba each fiscal year at frequencies established in TSA’s standard operating procedures. In general, public charter flights are operated by air carriers but arranged or sponsored by a charter operator. Consistent with scheduled service, TSA requires air carriers operating U.S.-bound public charters to adopt and implement a TSA- approved security program. For inspection purposes, TSA does not differentiate between scheduled service and public charter service and inspects these operations to the same TSA security program requirements. According to TSA’s Operational Implementation Plans for fiscal years 2012 through 2016, TSA’s stated objective was to inspect 100 percent of air carriers operating U.S.-bound flights from foreign locations at the frequency established in its standard operating procedures. Specifically, depending on an airport’s vulnerability rating, TSA’s standard operating procedures provide that air carriers are to be inspected on either an annual or semi-annual basis. However, our analysis of TSA inspection data during fiscal years 2012 through 2016 identified that among the air carriers we selected for our analysis, TSA conducted little over half of the required inspections in Cuba at the frequency established in its standard operating procedures. For example, our analysis revealed that TSA inspected an air carrier in September 2013 and April 2015, but did not do so in fiscal year 2014—a year in which this air carrier operated a total of 127 U.S.-bound flights. In response to our analysis, TSA officials explained that host government requests to reschedule inspections and the flight schedule data used to track public charter flights hinder TSA’s efforts to inspect 100 percent of air carriers operating U.S.-bound public charter flights in Cuba. Among the air carriers we selected for our analysis, TSA officials told us that 10 of the required air carrier inspections were not conducted at the established frequency due to external factors, including host government requests to reschedule TSA inspections. The officials told us that when planned air carrier inspections are deferred, TSA works with the host government to reschedule the inspection as close as possible to the original inspection date. In some instances, TSA has been unable to reschedule air carrier inspections within the specified time frame based on their risk level, and as a result, did not conduct the air carrier inspection at the established frequency. For example, TSA officials told us that the Cuban Government deferred air carrier inspections planned for June 2015 at one airport to November 2015 (in fiscal year 2016). Although TSA completed these inspections as rescheduled, the inspections were not conducted at this airport in fiscal year 2015, as required by its standard operating procedures. In another example, the officials told us that TSA did not conduct air carrier inspections at an airport in fiscal year 2014 because of deferrals and logistical challenges that hampered its attempt to reschedule. As a result, TSA did not conduct air carrier inspections at this airport—originally planned for July 2014—until 9 months later. Further, the flight schedule data TSA uses do not reliably identify and track public charter operations in Cuba. In an effort to conduct 100 percent of air carrier inspections due for completion each fiscal year, TSA develops an annual Master Work Plan which it uses to schedule air carrier inspections in Cuba and other foreign locations at the start of each fiscal year. According to TSA officials, TSA inspectors develop the Master Work Plan by collecting flight schedule data from a variety of sources, including past plans, past inspection data, Wikipedia, Secure Flight data, bi-annual flight schedules provided by air carriers, and airline and airport websites, among others, to identify the universe of air carriers requiring inspection in the upcoming fiscal year and track flight schedules. However, TSA officials told us that these flight schedule data are not always reliable and provide limited visibility into the universe of air carriers operating U.S-bound public charter flights from Cuba. For example, the flight schedule data TSA currently uses may fail to identify that an air carrier is operating U.S.-bound flights from a specific Cuban airport. In one such instance, TSA officials told us that during a planned air carrier inspection at one Cuban airport, TSA inspectors learned that the air carrier they intended to inspect had contracted with a different air carrier to operate the flight on its behalf. TSA was previously unaware that the air carrier contracted to operate the flight was operating U.S.-bound flights from that Cuban airport and proceeded to inspect it. Although external factors, including host government deferrals and flight schedule data, are outside of TSA’s control, TSA officials acknowledged that a tool that better corroborates and validates the flight schedule data it uses to track air carriers requiring inspection each fiscal year would improve the reliability of these data and help TSA ensure air carrier inspections in Cuba occur at the frequency established in its standard operating procedures. As of January 2018, TSA officials told us they were developing a new tool intended to more reliably track flight schedules worldwide. Specifically, TSA officials told us that this tool is intended to analyze the aggregate flight data it currently uses and corroborate and validate flight schedule information. According to TSA officials, the tool may help improve the reliability of the flight schedule data TSA uses to track air carriers requiring inspection each fiscal year. However, since this tool is still under development, TSA has yet to demonstrate whether it will ultimately improve the reliability of flight schedule data among public charters in Cuba. Further, since the tool relies on the data sources TSA already uses, the tool is unlikely to provide TSA with improved visibility into the universe of U.S.-bound public charters requiring inspection beyond those operations of which TSA is already aware. Without the ability to reliably identify and track U.S.-bound public charter operations in Cuba, TSA will be at risk of continuing to fall short of its stated goal of completing 100 percent of required air carrier inspections and, therefore, cannot ensure that all air carriers are implementing TSA security requirements for U.S.-bound flights departing Cuba. Developing and implementing a tool that corroborates and validates the data TSA currently uses can help TSA improve its ability to track flight schedules and schedule inspection visits to coincide with air carrier operations. Taking additional steps to better identify the universe of air carriers operating U.S.-bound flights from Cuba can provide TSA with greater assurance that it is accurately identifying all air carriers operating U.S.- bound flights from Cuba that require inspection. These steps can better position TSA to meet its goal of inspecting all air carriers operating U.S.- bound public charter flights from Cuba to the United States at least once per year—as established in its standard operating procedures—and help them ensure that these air carriers are implementing TSA security requirements. TSA found mixed levels of compliance with ICAO standards and recommended practices at Cuban airports during fiscal years 2012 through 2017. Specifically, of the Cuban airport assessments TSA conducted during this period, several resulted in no findings–meaning that TSA inspectors determined the airport was fully compliant with each ICAO standard and recommended practice the airport was assessed against. Of the remaining foreign airport assessments that did result in findings, TSA inspectors found that most of the airports were fully compliant with all but one or two of the ICAO standards and recommended practices. The instances of noncompliance fall within the following five categories: Access Control: During an assessment at one airport, TSA inspectors observed that a section of fencing along the perimeter had deteriorated and needed repair. TSA inspectors subsequently recommended that the fencing be repaired and, during a follow-up visit, TSA inspectors found that the perimeter fence had been repaired. During an assessment at another airport, TSA inspectors found that a checked baggage conveyor belt door was left open and unsecured. During subsequent visits, TSA inspectors observed that the baggage conveyor belt door was properly secured. Quality Control: During assessments at two airports, TSA inspectors observed that a comprehensive audit of these airports had not been conducted, in accordance with ICAO standards. TSA officials stated that if non-compliant findings such as these remain open, TSA will follow up on the finding until a TSA official is able to reassess the finding during a subsequent assessment. Aircraft and Inflight Security: During assessments at two airports, TSA inspectors found that airport officials did not have a formal oversight process in place to monitor air carriers to ensure that they performed an aircraft cabin search prior to departure. TSA officials stated they will follow up on such findings and look to ensure, for example, that corrective actions asserted by airport officials have been taken—in these cases, by ensuring trained security coordinators to conduct aircraft security searches have been assigned. Passenger and Baggage Security: During an assessment at one airport, TSA inspectors observed an issue with passenger screening. During a follow up visit, TSA inspectors observed passenger screening and determined the issue had been resolved. Fencing: During an assessment at one airport, inspectors found that the concrete perimeter wall was not topped with barbed wire, and during another assessment at a different airport, inspectors determined the perimeter fence needed to be augmented in height and manner of construction to increase its effectiveness. TSA officials stated that they plan to follow up on these findings during their next scheduled assessments. At another airport, TSA observed that excessive vegetation potentially compromised a section of airport perimeter fencing. TSA subsequently recommended that the issue be addressed and aviation authorities stated their intention to make necessary repairs. TSA’s air carrier inspection results show that, among the air carriers operating U.S.-bound scheduled commercial and public charter flights from Cuba that TSA inspected in fiscal years 2016 and 2017, more than two-thirds of these inspections resulted in no findings. A result of no findings means that TSA inspectors determined that air carriers operating these flights fully implemented all requirements in their TSA-approved security program at the time of inspection. For example, air carriers fully implemented security requirements such as access controls, area security, and checked baggage screening. TSA also found that air carriers generally implemented requirements concerning signs and notifications, passenger screening, and aircraft search at the time of inspection. For the one-third of inspections where air carriers had not fully implemented requirements, issues ranged from failure to notify U.S.- bound passengers that carry-on items and checked baggage are subject to search to inadequate aircraft searches. TSA subsequently closed each finding after the respective air carriers took corrective actions. These findings include: Bilingual Signs/Notifications: TSA inspectors discovered that air carriers at several airports failed to properly notify U.S.-bound passengers that all carry-on items and checked baggage are subject to search. TSA inspectors resolved each violation with on-the-spot counseling and recommended that Cuba’s airport security agency, the Empresa Cubana de Aeropuerto y Servicios Aeronáuticos (ECASA), post signs at the ticket counters or verbally advise U.S.-bound passengers that their property is subject to search and subsequently closed each finding. Figure 3 shows an example of bilingual signage, posted by ECASA in response to a violation, listing prohibited items at a Cuban airport. To implement their TSA-approved security programs, air carriers operating U.S.-bound flights from Cuba requested, and TSA approved, an amendment regarding the fulfillment of Ground Security Coordinator (GSC) roles and responsibilities at Cuban airports that went into effect in December 2017. In general, air carriers are required to designate a trained GSC for each U.S.-bound scheduled and public charter flight. Each designated GSC serves as the air carrier’s authorized representative for all security-related matters and must be present at the airport from the time the air carrier opens the first ticket counter for the day until the air carrier’s last flight scheduled for that day departs. For each U.S.-bound flight, designated GSCs are responsible for reviewing the implementation of relevant security requirements, including those outlined in each air carrier’s TSA-approved security program, such as the screening of passengers and checked baggage, aircraft security, and the prevention of unauthorized access to secure areas of the airport. Air carrier officials we spoke with told us that they generally contract with locally based GSCs or directly employ GSCs at foreign locations to serve as their authorized representatives and oversee security matters for each U.S.-bound flight. However, air carriers operating at Cuban airports have been unable to designate their own GSCs to review security matters for U.S.-bound flights for two reasons. First, the Government of Cuba controls most sectors of the economy and employs the majority of the Cuban workforce. As a result, according to an airline official we spoke with, there are no private security firms or trained GSCs in Cuba that air carriers can contract with to serve as their authorized representatives and review security matters for each U.S.-bound flight at Cuban airports. Second, TSA officials told us that the Government of Cuba employs Aviation Security Technicians (AST) to review security matters for each U.S.- bound flight at Cuban airports. According to these officials, ASTs undergo a training regimen similar to that of a GSC and can execute GSC roles and responsibilities. As a result, the Government of Cuba has not allowed air carriers to permanently station air carrier-employed GSCs at Cuban airports because, according to TSA officials, it believes ASTs already provide for these roles and responsibilities. Prior to the resumption of regularly scheduled commercial service between the United States and Cuba in August 2016, TSA responded to this issue by approving amendments to each air carrier’s security program. These amendments allowed air carriers operating in Cuba to utilize Cuban ASTs instead of their own designated GSCs to oversee security matters for each U.S.-bound flight at Cuban airports, provided ASTs are trained to execute all GSC functions in accordance with TSA requirements. Under these amendments, according to TSA officials, Cuban ASTs were responsible for overseeing security measures including Secure Flight prescreening as well as passenger and checked baggage screening, among others, whereas the air carriers were responsible for performing security measures aboard the aircraft, including cabin searches and preventing unauthorized access to the aircraft, among others. An official from one air carrier we spoke with stated that they found AST performance to be at least equivalent in quality to the performance of GSCs they contract with at other foreign airports. TSA officials anticipated that once regularly scheduled commercial service between the United States and Cuba commenced in August, 2016, the Government of Cuba would permit air carriers to designate their own GSCs to review security matters for each U.S.-bound flight at Cuban airports. As a result, TSA determined that it would not renew the existing amendments, but would permit both U.S.-bound scheduled commercial and public charters to operate under the existing amendment until it expired in September 2017. However, TSA officials told us that during a meeting in Havana in October 2016, the Government of Cuba informed TSA and air carriers that ASTs would continue to perform GSC functions at Cuban airports and that air carrier personnel were not authorized to perform GSC functions within Cuba. In August 2017, the Government of Cuba reiterated that it would not permit air carriers to designate GSCs at Cuban airports and that Cuban ASTs would continue executing these functions. In light of the situation, TSA decided in September 2017 to renew the amendments to air carriers’ programs allowing them to continue utilizing ASTs instead of their own designated GSCs at Cuban airports. These new amendments will expire in September 2019, at which point TSA, air carriers, and the Government of Cuba may revisit the GSC issue. Since 2007, TSA’s air carrier inspections have played a vital role in ensuring that air carriers operating U.S.-bound flights from Cuba meet security requirements designed to further ensure civil aviation security keep passengers out of harm’s way. These inspections allow TSA to identify security deficiencies and help air carriers address them through, for example, on-the-spot counseling. Exemplifying the importance of these inspections, TSA aims to inspect each air carrier operating flights from Cuba to the United States at each airport from which flights operate, in accordance with its standard operating procedures. However, for the air carriers selected for our analysis, many of the inspections in fiscal years 2012 through 2016 did not take place within the established time frames. While delays in inspections can occur due to deferments from host governments, our analysis revealed that many air carrier inspections that did not occur within the required time frames were because the flight schedule data TSA uses do not reliably identify or track public charter operations—which account for the majority of flights between the United States and Cuba in fiscal years 2012 through 2016. Without the ability to reliably identify and track U.S.-bound public charter operations in Cuba, TSA will be at risk of continuing to fall short of its stated goal of completing 100 percent of required air carrier inspections and, therefore, cannot ensure air carriers are implementing TSA security requirements for U.S.-bound flights departing Cuba. TSA has a tool under development that if successfully implemented, may help corroborate and validate the flight schedule data TSA uses and assist TSA in more reliably tracking U.S.-bound public charters from Cuba. Taking steps to better identify the universe of all public charters requiring inspection in Cuba would also help better position TSA to ensure that these air carriers are meeting essential security requirements. We are making the following recommendation to TSA: The Administrator of TSA should instruct the Office of Global Strategies to improve TSA’s ability to identify all public charter operations requiring inspection in Cuba and develop and implement a tool that corroborates and validates flight schedule data to more reliably track air carriers’ public charter operations between the United States and Cuba. (Recommendation 1) We provided a draft of our report to DHS for its review and comment. In June 2018, DHS provided written comments, which are noted below and reproduced in full in appendix II. DHS and the Department of Transportation provided technical comments in the prior sensitive report, which we also incorporated as appropriate in this report. DHS concurred with our recommendation in the report. The Department of State did not comment on the report. DHS concurred with our recommendation to develop and implement a tool that corroborates and validates flight schedule data to more reliably track air carriers’ public charter operations between the United States and Cuba. In its response letter, DHS described the challenges it faces in scheduling inspections for air carriers that have entered into lease or codeshare agreements with other carriers. We acknowledge the challenges TSA faces in identifying the correct flights and responsible regulated parties when scheduling inspections under the conditions described and are encouraged by TSA’s planned steps to better identify public charter flight operations and shared flights. DHS’s response letter describes steps that TSA is taking to develop a tool that aims to better analyze flight data to use in scheduling inspections and prompts manual confirmation of flight information when the automated system identifies lower confidence of flight operations. During the course of our review, TSA described this concept and explained how it plans to use it to better identify scheduled flights for air carrier inspections. However, as DHS indicates in its response letter, TSA is still exploring how to best integrate public charter flights into this tool. DHS also described planned improvement to TSA’s Master Work Plan (MWP) to corroborate and validate flight schedule data. While DHS does not specify what these improvements include and how they will lead to more reliable tracking of air carriers’ public charter operations between the United States and Cuba, we agree that improving the scheduling tool that is used to plan inspections is a good place to start. DHS also described planned updates to the rules that guide the management of data in its MWP. Specifically, TSA plans to record anomalies in operations identified before, during, and after visits, such as trip dates that were changed or air carriers that were scheduled to be inspected, but were not, as well as the reason why. Our analysis discovered some of these anomalies and explaining them required TSA to engage in a lengthy process of tracking down historical information that was not readily available. These improvements, if implemented, will be a helpful step in providing better historical information to track and validate carrier operations. Finally, DHS described TSA’s plans to work with aircraft operators, foreign air carriers, and U.S. Government agencies to directly obtain flight information. These efforts, if implemented as planned, represent a positive step for TSA in corroborating and validating flight schedule data to more reliably track air carriers’ public charter operations between the United States and Cuba. DHS acknowledges that these efforts are underway with an estimated completion date of March 2019. We will continue to monitor TSA’s progress in implementing these planned actions. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Homeland Security, the Secretary of the Department of State, and the Secretary of the Department of Transportation. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact William Russell at (202) 512-6360 or RussellW@gao.gov. Key contributors to this report are listed in appendix III. This report examines: (1) the extent to which the Transportation Security Administration (TSA) complied with its standard operating procedures (SOP) when assessing aviation security at Cuban airports in fiscal years 2012 through 2017, 2) the results of TSA’s Cuban airport assessments in fiscal years 2012 through 2017 and how these results compare to those for airports in the Caribbean region, and 3) the results of TSA’s air carrier inspections for Cuba in fiscal years 2016—when commercial scheduled air service between the U.S. and Cuba resumed—and 2017. This report is a public version of a prior sensitive report that we provided to you in May 2018. The sensitive report included part of an objective related to how the results of TSA’s foreign airport assessments for Cuba compared to others in the Caribbean region. TSA deemed some of the comparison results related to this objective to be sensitive, which must be protected from public disclosure. This public report also omits certain information that TSA deemed to be sensitive related to the specific number of airport assessments and air carrier inspections performed by TSA in Cuba, results of those assessments and inspections, and TSA’s risk-based approach in identifying U.S.-bound public charter operations from Cuba, among others. To provide context regarding the scale and magnitude of our findings, without disclosing sensitive information, we characterized specific numbers as some, many, or several. Although the information provided in this report is more limited in scope, as it excludes such sensitive information, it addresses the same objectives and uses the same overall methodology as the sensitive report. To collectively address all three objectives, we reviewed the relevant laws and regulations pursuant to which TSA conducts foreign airport assessments and air carrier inspections. We also reviewed various TSA documents on program management and strategic planning, including TSA’s master work plans for scheduling air foreign airport assessments and air carrier inspections. Specifically, we reviewed TSA’s 2016 standard operating procedures, which prescribes program and operational guidance for assessing security measures at foreign airports and inspecting air carriers and inform TSA personnel at all levels of what is expected of them in the implementation of the program. We also reviewed TSA’s Operational Implementation Plans, which establish program goals. In addition, we reviewed the job aids that TSA inspectors use during each assessment and inspection, which are intended to ensure that the TSA-specified International Civil Aviation Organization (ICAO) aviation security standards and recommended practices and air carrier implementation of TSA security requirements are fully evaluated during each assessment and inspection. To understand how TSA assesses and manages its Cuban airport and air carrier risk information, we obtained and reviewed documents on TSA’s methodology for assigning individual risk rankings (called tier rankings) to each Cuban airport it assesses. We also, interviewed TSA officials located at headquarters and in the field and interviewed other federal stakeholders, such as the Department of State and the Department of Transportation (DOT). Lastly, to obtain air carriers’ perspectives on aviation security in Cuba, we interviewed representatives from three air carriers that DOT licensed to operate scheduled commercial flights between the United States and Cuba. While the information obtained from these interviews cannot be generalized to all air carriers DOT licensed, these interviews provided insights into the carriers experiences. We outline the specific steps taken to answer each objective below. To determine the extent to which TSA followed its standard operating procedures when assessing aviation security in Cuba in fiscal years 2012 through 2017, we examined documentation for each of the foreign airport assessments conducted during the entire period and all air carrier inspections conducted in fiscal years 2016 and 2017 in Cuba for completeness and errors. For each finding resulting from Cuban airport assessments and air carrier inspections we reviewed, we examined the extent to which TSA followed its SOPs when following up and closing findings. We also analyzed Cuban airport assessment and air carrier inspection data to determine if TSA performed each assessment and inspection at the frequency established in its SOPs. Lastly, we met with TSA officials at headquarters and in the field to discuss how TSA inspectors apply their SOPs when assessing Cuban airports and inspecting air carriers in Cuba. To determine the completeness of TSA’s Cuban airport assessments in fiscal years 2012 through 2017, we analyzed and compared these assessment reports to TSA’s SOPs and the job aids which instruct inspectors on how to complete their assessments. In performing this analysis, we reviewed whether TSA inspectors followed their SOPs when assessing and documenting each Cuban airport’s compliance with applicable ICAO standard and recommended practices and the extent to which these documents contained missing data fields. Similarly, we reviewed documentation for each air carrier inspection TSA performed in fiscal years 2016 and 2017 for errors and completeness by analyzing and comparing these documents to TSA’s SOPs. In performing this analysis, we reviewed whether TSA inspectors followed their SOPs when inspecting and documenting each air carriers’ implementation of requirements in their TSA-approved security program and the extent to which these documents contained errors or missing data fields. When we identified discrepancies in the documentation for TSA’s Cuban airport assessments or air carrier inspections in Cuba, we met with TSA officials to discuss the cause of the discrepancies. To determine whether TSA inspectors followed their SOPs when recording, tracking, and resolving findings discovered during Cuban airport assessments and air carrier inspections in Cuba, we reviewed TSA’s SOPs governing finding follow up, closure and documentation of each finding, the status of each finding, and the actions TSA took to close findings. Specifically, we reviewed TSA findings discovered during Cuban airport assessments in fiscal years 2012 through 2017 by analyzing TSA’s Open Standards and Recommended Practices Finding Tool (OSFT), which TSA uses to monitor and track a foreign airport’s progress in resolving security deficiencies identified by TSA inspectors during previous assessments. To determine whether TSA inspectors followed their SOPs in response to a finding resulting from air carrier inspections in fiscal years 2016 through 2017, we reviewed TSA documentation of each finding and documentation on TSA’s findings response, follow-up, and closure, including air carrier inspection reports and enforcement investigative reports. To determine whether TSA performed Cuban airport assessments and air carrier inspections at the frequency established in TSA’s SOPs, we analyzed TSA data for all airport assessments from fiscal years 2012 through 2017. We also analyzed TSA air carrier inspection data from fiscal years 2012 through 2016 for a non-probability sample of 5 of the 18 air carriers operating U.S.-bound flights from Cuba that TSA inspected during this period along with flight traffic data for Cuba for these air carriers from the Department of Transportation’s Bureau of Transportation Statistics T-100 data bank, which contains data on all U.S.-bound departures from foreign airports, among other things. To assess the reliability of the T-100 data, we reviewed documentation on system controls and interviewed knowledgeable officials from the Bureau of Transportation Statistics. After determining that the T-100 data were sufficiently reliable for our intended use, we compared these data against inspection data for select air carriers. To assess the reliability of TSA’s assessment and inspection frequency data, we reviewed program documentation on system controls, interviewed knowledgeable officials from TSA and checked TSA’s frequency data for any potential gaps and errors. To select air carriers for our analysis, we identified air carriers (five in total) operating public charters flights—which accounted for the majority of flights from Cuba to the U.S. in fiscal years 2012 through 2016—that: 1) Operated at least 4 U.S.-bound flights in a single month or greater than 25 U.S.-bound flights within a fiscal year from one or more Cuban airports, and 2) DOT licensed to operate scheduled commercial flights following the policy change under the Obama Administration. Since we selected a non-probability sample of air carriers, the results of our analysis cannot be generalized to all air carriers that operated U.S.- bound flights from Cuban airports during this period, but did provide us with insights about TSA’s adherence to the frequency of air carrier inspections in accordance with its SOPs. To determine how TSA inspectors apply their SOPs when assessing Cuban airports and inspecting air carriers in Cuba, we interviewed officials at TSA headquarters and conducted site visits to TSA’s Miami Regional Operations Center (ROC) in Florida and in Cuba. During our site visit at the Miami ROC, which is responsible for conducting airport assessments and air carrier inspections in the Caribbean and South America, we met with the ROC manager and the TSA inspectors who conducted foreign airport assessments and air carrier inspections in Cuba. During these meetings, we discussed TSA’s assessments and inspections in Cuba, how they follow the SOPs when performing these assessments and inspections, and their perspectives on Cuban aviation security compared to other locations. On our visit to Cuba, we observed TSA inspectors from the Miami ROC conduct four air carrier inspections at Frank Pais Airport in Holguin and Antonio Maceo Airport in Santiago de Cuba. To describe the results of TSA’s Cuban airport assessments and air carrier inspections in Cuba, we obtained and analyzed relevant program documents and interviewed TSA officials on the results of its evaluations in Cuba. Specifically, we reviewed documentation for all Cuban airport assessments performed in fiscal years 2012 through 2017. We also analyzed TSA’s foreign airport assessment program vulnerability tracker, which TSA uses to record and track the vulnerability scores it assigns to each Cuban airport. Specifically, the tracking sheet contains vulnerability scores for each ICAO standard and recommended practice used in each assessment, as well as overall vulnerability scores of 1 through 5 assigned to each airport after each assessment. This overall airport vulnerability score is a representation of compliance or noncompliance with all ICAO standards and recommended practices against which TSA assesses Cuban airports. To describe air carrier inspection results in Cuba in fiscal years 2016—when scheduled commercial service between the U.S. and Cuba resumed—and 2017, we analyzed inspection data from all air carrier inspections TSA performed in Cuba during this period and reviewed each air carrier’s compliance with requirements in its TSA- approved security program, such as aircraft search and passenger screening. We also interviewed TSA managers and inspectors about their roles and responsibilities in determining and documenting inspection results in Cuba. We conducted this performance audit from February 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with TSA from May 2018 to July 2018 to prepare this nonsensitive version of the original sensitive report for public release. This public version was also prepared in accordance with these standards. In addition to the contact above, Kevin Heinz (Assistant Director); Josh Diosomito (Analyst-in-Charge); David Alexander; Bruce Crise; Taylor Hadfield; Eric Hauswirth; Tom Lombardi; Heidi Nielson, and Kevin Reeves made key contributions to this report.", "summary": "On August 31, 2016, as part of a shift in U.S. policy toward Cuba, air carriers resumed scheduled commercial flights between the United States and Cuba, a route previously only open to public and private charter carrier operations. In June 2017, travel restrictions were revised to require U.S. travelers going to Cuba to travel as part of a licensed group. TSA, the agency responsible for securing the nation's civil aviation system, assesses Cuban airports and inspects air carriers operating U.S-bound flights to ensure they have effective security measures in place. GAO was asked to review TSA's assessments of Cuban aviation security. This report examines (1) the extent to which TSA followed its standard operating procedures when assessing aviation security at Cuban airports in fiscal years 2012 through 2017; (2) the results of TSA's Cuban airport assessments in fiscal years 2012 through 2017; and (3) the results of TSA's air carrier inspections for Cuba in fiscal years 2016—when commercial scheduled air service between the United States and Cuba resumed—and 2017. GAO reviewed TSA policies and procedures, observed TSA air carrier inspections in Cuba, and compared TSA data on assessments and inspections to data from the Department of Transportation. The Transportation Security Administration (TSA) generally followed its standard operating procedures when documenting and resolving findings from its foreign airport assessments and air carrier inspections at Cuban airports in fiscal years 2012 through 2017. However, TSA did not perform all the required inspections of air carriers operating U.S.-bound public charter flights from Cuba. Specifically, GAO found that for the five air carriers selected for analysis, TSA performed approximately half of air carrier inspections in Cuba at the frequency established in its standard operating procedures in fiscal years 2012 through 2016. Of the inspections TSA did not perform, over half were not performed because TSA was not able to identify or reliably track U.S.-bound public charter operations from Cuba. Improving TSA's ability to identify public charters requiring inspection in Cuba and implementing a tool it is currently developing that more reliably tracks air carrier operations would better position TSA to meet its goal of inspecting all air carriers operating U.S.-bound public charter flights from Cuba at the frequency established in its standard operating procedures. Several of the Cuban airports TSA assessed in fiscal years 2012 through 2017 were fully compliant with International Civil Aviation Organization Standards at the time of assessment. The remaining airport assessments reported instances of noncompliance within the five categories: access control, quality control, aircraft and inflight security, passenger and baggage screening, and fencing. The majority of air carrier inspections TSA performed for Cuba in fiscal years 2016 and 2017 resulted in no findings, meaning that TSA determined air carriers operating these flights fully implemented all requirements in their TSA-approved security program at the time of inspection. The remaining inspections resulted in findings, which TSA closed after air carriers took corrective action. This is a public version of a sensitive report issued in May 2018. Information that TSA deemed to be sensitive is omitted from this report. GAO recommends that TSA improve its ability to identify all public charters requiring inspection in Cuba and develop and implement a tool that more reliably tracks public charter operations between the United States and Cuba. TSA concurred with our recommendation.", "document_type": "gao"}
{"report": "The Puget Sound basin—the southern half of the transboundary Salish Sea—consists of about 19 major watersheds, according to EPA, and spans much of western Washington State and portions of British Columbia, Canada, as shown in figure 1. The basin covers more than 10,000 square miles, including about 2,800 square miles of inland marine waters and thousands of rivers and streams. The Puget Sound basin features a wide variety of land uses, including highly urbanized areas, agricultural lands, large swaths of commercial forests, and areas that are largely protected from development, such as national parks and wildlife refuges. The Puget Sound Partnership has identified numerous environmental stressors that threaten Puget Sound and that have impaired water quality. In particular, the Partnership has reported that nonpoint sources of pollution, such as polluted stormwater runoff from roads and agricultural fields, are the biggest threats to Puget Sound water quality. Polluted stormwater runoff can also threaten sources of drinking water and carries toxic chemicals, nutrients, sediment, and bacteria into Puget Sound, where these pollutants can harm aquatic life. For instance, a 2017 study found that toxic stormwater runoff is linked to the high rates of adult coho salmon mortality that have been observed in some urban streams in central Puget Sound. Moreover, fish, shellfish, and other species that are contaminated by toxic chemicals and other pollutants in Puget Sound may subsequently pose a threat to other marine wildlife and to humans that consume them. For example, in 2017 the Partnership reported that approximately 16 percent of the roughly 225,000 acres managed for commercial shellfish harvesting in Puget Sound were closed because of water pollution caused by fecal bacteria from sources such as failing septic systems and agricultural runoff. Such closures have economic impacts, as Washington State is the country’s leading producer of farmed oysters, clams, and mussels, and much of this production comes from the Puget Sound region. In addition, contaminated shellfish may pose potential health threats to people who consume it, including tribes that rely on shellfish for subsistence and ceremonial uses. Human activities have also degraded habitats that salmon and other marine species depend on for survival. The Partnership has reported that some of the primary threats to Puget Sound habitats include hardened shorelines (such as shorelines that have been armored with seawalls), filled estuaries, channelized rivers, and altered floodplains. These threats affect habitats in various ways. For example, according to a 2018 Washington State report, seawalls interfere with natural coastal processes and cause beaches to erode, which in turn can decrease and degrade habitat for fish, birds, and wildlife. The report states that about 27 percent of the shoreline in Puget Sound has been armored by structures such as seawalls. Figure 2 illustrates the sources of water quality impairment and habitat degradation in the Puget Sound basin. Federal laws, including the Clean Water Act and the Endangered Species Act, play a role in addressing water quality issues and habitat degradation in Puget Sound. The Clean Water Act’s objective is to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. A 1987 amendment to the act created the National Estuary Program to, among other things, identify nationally significant estuaries that are threatened by pollution, development, or overuse, and promote comprehensive planning for, and conservation and management of, such estuaries. The National Estuary Program calls for management conferences to be convened for designated estuaries of national significance to, among other things, develop a comprehensive conservation and management plan (CCMP). The current CCMP for Puget Sound is The 2016 Action Agenda for Puget Sound, a document developed to meet both federal and state requirements. By federal statute, when selecting estuaries and convening management conferences, EPA is to give priority consideration to certain named estuaries, including Puget Sound. Under the act, EPA also works with Washington State to regulate water quality. The Endangered Species Act was enacted to, among other things, provide a means to conserve the ecosystems upon which endangered and threatened species depend and to provide a program for the conservation of such species. Several species in the Puget Sound basin are listed as endangered or threatened, including bull trout, Chinook salmon, Southern Resident Killer Whales (a population that spends spring, summer, and fall months in the Salish Sea, including Puget Sound), northern spotted owl, and steelhead trout. In addition to environmental laws that relate to Puget Sound waters and species, tribal treaty rights play an important role in restoration efforts within the basin’s watersheds. In particular, 19 federally recognized tribes are within the Puget Sound basin, and many of them have explicit treaty rights to the fish in Puget Sound waters. In 1974, a federal court held that the treaty tribes had the right to take up to 50 percent of the harvestable fish in areas where fishing rights had been reserved, an allocation upheld by the Supreme Court in 1979. In 1994, a federal court stated that tribes were also entitled to take half of the harvestable shellfish on most Washington beaches. According to several federal officials we interviewed, considerations relating to tribal treaty fishing rights have served as an important catalyst for some federal agencies’ restoration activities, particularly with regard to restoring and protecting habitat. Federal and state entities we surveyed identified numerous federal and state efforts that, in whole or in part, supported Puget Sound restoration from fiscal years 2012 through 2016. Some of these efforts focused exclusively on restoration activities in the Puget Sound basin, while others had a broader national, regional, or statewide focus or had a broader scope of work that did not center directly on restoration activities. These efforts were supported by a variety of federal and nonfederal funding sources, such as EPA’s National Estuary Program and Puget Sound Geographic Program, which together expended about $142 million for activities in Puget Sound during this time frame according to EPA data. However, total expenditures across all restoration efforts are unknown, in part because of data limitations such as difficulties isolating expenditures specific to the Puget Sound basin for some efforts. Through their responses to the first phase of our survey, officials from federal and state entities identified numerous efforts that supported Puget Sound restoration from fiscal years 2012 through 2016. Specifically, respondents from federal entities identified 73 federal efforts, and respondents from state entities identified 80 state efforts that, in whole or in part, supported Puget Sound restoration during this period. Appendix II lists the restoration efforts identified by federal entities, and appendix III lists the restoration efforts identified by state entities. According to the survey responses, the federal and state entities often worked with local governments, tribal entities, and nongovernmental organizations to carry out these efforts. These efforts primarily involved six types of restoration activities (see table 1). The federal and state restoration efforts carried out during this time period varied in geographic scope. Some of the efforts survey respondents reported focused exclusively on the Puget Sound basin, such as Washington State’s Puget Sound Acquisition and Restoration Fund. According to agency fact sheets, this fund has helped state agencies, local governments, and others carry out projects that address high-priority salmon habitat protection and restoration needs in Puget Sound. Other efforts that supported restoration activities in Puget Sound during the time frame we reviewed have a broader national, regional, or statewide focus. For example, EPA’s section 319 nonpoint source management program is a nationwide program that supports state and tribal efforts to address nonpoint sources of pollution. Within Puget Sound, EPA’s data show that the section 319 program has supported activities such as carrying out projects that target nonpoint source pollution from urban areas, agricultural lands, and marinas. The federal and state restoration efforts survey respondents identified also varied in programmatic scope, with some efforts focusing exclusively on restoration-related activities and other efforts supporting such activities within a broader scope of work. Through the U.S. Fish and Wildlife Service’s National Coastal Wetland Conservation Grant Program, Washington State carried out activities specifically aimed at restoring wetlands, estuaries, and marshes in Puget Sound. In contrast, some efforts survey respondents cited had a broader scope of work that did not center directly on restoration but included some activities that also benefited Puget Sound restoration. One such effort was the Natural Resources Conservation Service’s Environmental Quality Incentives Program, which helps farmers carry out conservation practices on agricultural land. According to agency documentation, such as the program’s website, some of these practices, such as those that reduce the amount of sediment and nutrients entering waterways, can also help improve water quality in the Puget Sound basin. Funding for Puget Sound restoration efforts has come from a wide variety of federal and nonfederal entities. At the federal level, some agencies, such as EPA and the National Oceanic and Atmospheric Administration (NOAA), supported restoration efforts by providing funds to other federal or nonfederal entities to carry out restoration projects. In contrast, other agencies, such as the U.S. Army Corps of Engineers, directly carried out restoration activities in Puget Sound, sometimes working in conjunction with nonfederal entities. Based on our analysis of survey responses and interviews with agency officials, we selected the following examples of federal programs to show the diversity in federal funding approaches in support of Puget Sound restoration and to illustrate how federal funds have been leveraged to obtain nonfederal contributions in support of restoration efforts. EPA’s National Estuary Program. According to EPA’s website, this program aims to protect and restore the water quality and ecological integrity of designated estuaries of national significance, such as Puget Sound. EPA Region 10 officials stated that the agency uses funds from this program in conjunction with funds from EPA’s Puget Sound Geographic Program to support restoration efforts. According to data provided by EPA, these programs together expended about $142 million for activities in Puget Sound from fiscal years 2012 through 2016. EPA provided most of these funds through grants to state and tribal entities. According to EPA Region 10 officials we interviewed, EPA requires an overall dollar-for-dollar nonfederal match for these grants, and the officials stated that the National Estuary Program funds have been leveraged to obtain significant nonfederal funding support for Puget Sound restoration efforts. For example, the Floodplains by Design program, a joint effort led by The Nature Conservancy and state agencies to restore natural floodplain functions, has used National Estuary Program funds to help leverage nonfederal funding support, according to the EPA officials. NOAA’s Pacific Coastal Salmon Recovery Fund. Under this program, NOAA awards funds through grants to state and tribal entities to carry out salmon recovery activities in five western states. In Washington State, NOAA provided funds to the Washington State Recreation and Conservation Office and the Northwest Indian Fisheries Commission for use in Puget Sound and other areas. According to data and estimates provided by NOAA, as of November 2017 these entities had expended or allocated about $59 million from this program for activities in the Puget Sound basin from fiscal years 2012 through 2016. This program requires a 33 percent match from state agencies, such as the Washington State Recreation and Conservation Office, that receive funds, and NOAA officials we interviewed said that Washington State usually exceeds this matching requirement. For example, a 2015 NOAA report cites a habitat restoration project in Puget Sound that received about $117,000 from the Pacific Coastal Salmon Recovery Fund and secured an additional $1.75 million in matching and other funds. Corps’ Puget Sound and Adjacent Waters Restoration Program. Under this program, the Corps carries out habitat restoration projects in Puget Sound in conjunction with nonfederal entities, such as cities. In 2000, Congress created this program and authorized $40 million to be appropriated to carry out the program. As of November 2017, the Corps had expended approximately $12 million over the life of the program on five restoration projects, according to data provided by the Corps. This program includes a cost-sharing requirement for the participating nonfederal entity to contribute at least 35 percent of the total project costs. Survey respondents cited nonfederal funds as the exclusive source of funding for about one-third of the state efforts presented in appendix III. For example, Washington State’s Puget Sound Acquisition and Restoration Fund, which the Partnership and the Washington State Recreation and Conservation Office jointly manage, has been a significant source of nonfederal funding for habitat restoration projects. According to expenditure data provided by the Partnership, the Puget Sound Acquisition and Restoration Fund expended approximately $100 million on restoration projects throughout Puget Sound from state fiscal years 2012 through 2016. In its response to our survey, the Recreation and Conservation Office stated that these projects included culvert replacements, levee setbacks, and acquisition of important habitat, among other things. When carrying out specific restoration projects in Puget Sound, federal and nonfederal officials we interviewed said that project managers may need to secure funds from multiple federal and nonfederal sources, such as the federal and state programs discussed above. According to tribal and local participants in our discussion groups, their experiences carrying out restoration projects has similarly shown a need to piece together multiple sources of funding for some projects. The discussion group participants said that this need commonly arises with expensive and complex projects that take a long time to complete, as reflected in the project examples below that involved tribal and local entities. Qwuloolt Estuary Restoration Project. According to a project fact sheet and officials, this project restored more than 350 acres of estuary habitat in the Snohomish River Delta that had previously been converted into farmland. By breaching existing levees and taking other actions to reestablish natural stream channels and allow for tidal inundation of the historic floodplain, this project aimed to restore salmon habitat and improve water quality in the estuary (see fig. 3). In 2016, NOAA reported that this project had led to improvements in salmon abundance, productivity, and diversity. The Tulalip Tribes of Washington served as the overall project manager and worked with numerous federal, state, and local partners to complete this project, which took more than 20 years and ended in 2015. According to tribal data, this project cost about $21 million and received funding from more than 20 federal, state, tribal, and local sources. Federal funds accounted for a little more than half of this amount; the Corps contributed the largest amount, around $5 million, using funds from the Puget Sound and Adjacent Waters Restoration Program. Seahurst Park Shoreline Restoration Project, Phase II. This phase of the project lasted from 2007 to 2014 and included removing about 1,800 feet of seawall, creating a small wetland, and restoring shoreline habitat at a coastal park in Burien, Washington (see fig. 4). Through these actions, this project aimed to improve nearshore marine habitat for salmon and other species, restore natural sedimentation processes, and improve recreational access to Puget Sound. The city of Burien led this effort in conjunction with the Corps. According to documentation provided by the city and the Corps, this phase of the project cost about $10 million and received funding from at least seven federal, state, and local sources, including EPA’s National Estuary Program, the Corps’ Puget Sound and Adjacent Waters Restoration Program, and Washington State’s Puget Sound Acquisition and Restoration Fund. As shown in the program and project examples above, we obtained expenditure information for a selection of programs and projects to help illustrate how federal and nonfederal funds have been used to support Puget Sound restoration. However, we found that the total amount of expenditures incurred for Puget Sound restoration across all federal and nonfederal efforts for fiscal years 2012 through 2016 is unknown. We identified two primary barriers to determining the total amount of expenditures. First, data limitations present challenges to obtaining accurate and consistent expenditure data across entities. For example, federal and state agency officials said that for some national and statewide programs, it is difficult to isolate expenditures specific to the Puget Sound basin or to quantify expenditures related to staff time that supported restoration-related activities. Second, no comprehensive database of Puget Sound restoration activities and expenditures exists. This issue was identified by the Washington State Joint Legislative Audit and Review Committee in its 2017 audit of the Puget Sound Partnership, which recommended that the Partnership and the Washington State Office of Financial Management develop a plan to create a more complete inventory of restoration efforts and related funding. Both agencies concurred with the recommendation, and the Partnership reported in December 2017 that a more complete inventory of efforts and funding would significantly enhance the agency’s ability to prioritize actions and recommend strategic investments. The Partnership reported that it plans to develop such an inventory by August 2019. Federal and nonfederal entities have established two primary interagency groups, the Puget Sound Management Conference and the Puget Sound Federal Task Force, to coordinate Puget Sound restoration efforts at the strategic level. Coordination also occurs at the project level and, according to our discussion group participants, has been most effective under certain circumstances, such as when written plans and agreements are in place to help entities work together across their normal jurisdictions. Federal and nonfederal entities provided their views on the benefits produced by the management conference and the federal task force as well as challenges that could limit the effectiveness of these groups, such as not having had continuous national-level leadership for the federal task force. Federal and nonfederal entities coordinate at the strategic level to, among other things, identify goals, develop strategies to achieve the goals, and set priorities for action. This coordination primarily occurs through two main interagency groups: the state-led Puget Sound Management Conference, which started in its current form in 2007, and the Puget Sound Federal Task Force, which started in 2016. Each group has developed a planning document to guide its efforts. Figure 5 provides an overview of each group’s structure and planning document. The management conference serves as the governance structure for Puget Sound restoration under the National Estuary Program and helps set the general direction for the restoration effort. To do so, the management conference brings together federal and nonfederal entities under a common planning process led by the Partnership to develop and periodically update the CCMP. EPA’s Region 10 office then works with EPA’s National Estuary Program national office to review and approve any new or updated CCMPs developed by the management conference. The CCMP serves as the primary planning document for Puget Sound restoration and identifies proposed near-term actions to help restore the Sound, nearly all of which are to be carried out by nonfederal entities. For example, one of the proposed near-term actions calls for a local university to sample contaminants of emerging concern in regional waters to help characterize risks and prioritize follow-up actions. The Puget Sound Federal Task Force complements the work of the management conference by coordinating the efforts of federal agencies in support of the CCMP and by helping these agencies work together to fulfill federal trust responsibilities to the tribes as they relate to The Puget Sound Federal Task Force Action Plan (Fiscal Years 2017-2021) (Federal Action Plan). The task force was created through a memorandum of understanding signed by nine federal agencies as of October 2016, and in January 2017 the task force released its Federal Action Plan, which is currently in draft form. The federal task force consists of a national-level leadership group—which focuses on higher-level policy, oversight, and coordination issues—and regional leadership and implementation teams that perform much of the on-the-ground implementation and coordination work of the task force. The national-level group is co-chaired by the Council on Environmental Quality (CEQ) and a co-chair that rotates among the other agencies. The task force’s regional teams are led by EPA’s Region 10 and a co-chair that rotates among the other agencies. According to EPA Region 10 officials, the draft Federal Action Plan developed by the task force is not intended to be a strategic plan with its own overarching restoration objectives. Instead, the federal task force used the priorities established in the CCMP and tribal documents, as well as salmon recovery priorities, as the basis for developing its draft Federal Action Plan, which identifies priority federal actions to help protect and restore Puget Sound. For example, to support the habitat-related priorities established in the 2016 CCMP and elsewhere, the draft Federal Action Plan identifies more than 40 priority federal actions that focus on protecting and restoring habitats, such as by removing fish passage barriers and implementing projects to restore estuaries. Based on our interviews with federal and nonfederal officials and the local and tribal discussion groups, federal and nonfederal entities coordinate at the project level to plan, secure funding for, and carry out specific restoration actions, such as projects to improve water quality or restore habitat in a particular location. According to federal officials, federal involvement at the project level varies and may range from providing funding to being more directly involved in project planning and implementation. Participants in our discussion groups said that local and tribal entities often lead the on-the-ground planning and implementation of restoration projects, including coordinating with other participating entities throughout a project’s lifecycle. For example, the Qwuloolt Estuary Restoration Project we previously discussed was largely led by a local tribe that coordinated the involvement of numerous federal, state, local, and nongovernmental entities throughout project planning, permitting, and implementation. The management conference recognizes nine local integrating organizations—local groups made up of various local, tribal, and other nonfederal participants—to, among other things, guide the implementation of the CCMP’s priorities at a local scale in specific geographic areas of Puget Sound. In addition, 15 salmon recovery lead entities, which are local watershed-based organizations that develop local salmon habitat recovery strategies and manage projects to implement the strategies, are active in the Puget Sound region. Representatives from these local integrating organizations, salmon recovery lead entities, and tribal entities participated in our moderated discussion groups and identified several factors that have helped to facilitate effective collaboration among entities on restoration projects. Some of the factors discussion group participants commonly cited were consistent with key features that we have previously identified as benefiting interagency collaboration, including: Involving all relevant participants. Discussion group participants highlighted the importance of ensuring that the appropriate entities are involved to bring together a broad range of knowledge, skills, and expertise in support of restoration projects. For example, one discussion group participant commented that his local organization’s ability to partner with both government and nongovernmental entities and harness their talents has enhanced its efficiency in carrying out restoration projects. Other participants stated that an important part of successfully involving all relevant participants has been early engagement with members of the local community to identify priorities and vet projects. In addition, several participants described projects that could not have been carried out without the financial, technical, and political support of diverse partners. Ensuring that the appropriate entities are involved is consistent with our previous work on interagency collaboration, which found that it is important to ensure that all relevant participants have been included in collaborative efforts, including federal agencies, state and local entities, and organizations from the private and nonprofit sectors. Bridging organizational cultures to build trust. Discussion group participants cited the long-standing relationships that have been built over time among different restoration partners as critical to developing the level of trust needed for project-level collaboration to succeed across organizational boundaries. For example, one participant said that having long-standing collaborative relationships with other partners has helped her local organization identify, secure funding for, and carry out good restoration projects. Another participant described a separate example of a local watershed council that has met monthly for 30 years, explaining that these meetings have developed a level of trust among the key partners that helps them work toward common goals and deal with difficult issues. We have previously reported that different agencies participating in any collaborative mechanism bring diverse organizational cultures to it. Accordingly, it is important to address these differences to enable a cohesive working relationship and to create the mutual trust required to enhance and sustain the collaborative effort. We have also reported that positive working relationships among participants from different agencies help to bridge organizational cultures, build trust, and foster communication, which then facilitates collaboration. Having written plans and agreements. Discussion group participants also described the benefits that have resulted from having local plans and agreements in place to help entities work together across their normal jurisdictions on restoration projects. For example, according to one local discussion group participant, the decades-old formal agreement among the local governments within his watershed was a fundamental reason for the restoration successes they achieved. The participant explained that this agreement has helped the local governments look beyond their immediate jurisdictions and think more broadly about priorities for the entire watershed. We have previously reported that agencies that articulate their agreements in formal documents can strengthen their commitment to working collaboratively. Federal and nonfederal entities we surveyed and interviewed identified benefits produced by the steps taken to coordinate restoration efforts, including the development of the management conference, the federal task force, and their respective planning documents. Federal and nonfederal officials generally described the management conference as having provided an effective forum for different entities to share their diverse views and work collaboratively to address priority restoration issues in Puget Sound. Moreover, officials said that the management conference has helped Puget Sound restoration by enabling federal and nonfederal entities to identify common goals and develop strategies to achieve the goals, among other things. These benefits are consistent with our previous work on interagency collaboration, which found that defining and articulating common outcomes and establishing strategies to achieve them are practices that can enhance and sustain collaboration. Federal officials credited the federal task force, and in particular the task force regional teams, with having helped to improve communication and coordination of efforts among federal agencies by bringing together a broad group of agencies to focus on issues surrounding Puget Sound restoration and tribal treaty rights. Other benefits of the task force that survey respondents identified include providing national-level awareness of restoration activities and providing a forum for nonfederal entities to engage with federal agencies on restoration or species-related issues. Federal and nonfederal entities also identified strengths of the key planning documents that the management conference and federal task force developed to help coordinate Puget Sound restoration efforts, based on our interviews and our analysis of survey responses. For example, 8 of the 27 federal and state entities that responded to our survey said the 2016 CCMP provides a clear blueprint or road map for the restoration of Puget Sound that helps guide restoration efforts in a common direction. In the case of the draft Federal Action Plan, survey respondents from 7 of the 27 federal and state entities said that one of the plan’s primary strengths is that it clearly defines a list of priority federal actions and identifies roles and responsibilities for implementing them. This is consistent with our previous work on interagency collaboration, which found that agreeing on roles and responsibilities is a leading practice that can help enhance and sustain collaborative efforts. In addition, one federal survey respondent credited the development of the draft Federal Action Plan with helping to raise awareness among federal agencies of each other’s efforts, which the respondent said has led to improved coordination. Federal and nonfederal entities also identified challenges the management conference faces that could limit its effectiveness as an interagency coordinating group. For example, according to Partnership officials we interviewed, within the management conference there are differing views and disagreements about how to balance local versus regional perspectives and decision-making authorities. In addition, some federal and nonfederal entities described the planning process to produce the CCMP as overly burdensome and frustrating. The Joint Legislative Audit and Review Committee’s 2017 audit of the Partnership similarly reported on frustration and planning fatigue among the entities they interviewed that stemmed from the frequency of plan updates, which state law had required take place every 2 years. In 2017, Washington State amended the law to extend the required planning cycle to every 4 years, which the Partnership said should result in a more effective use of time for the agency and its partners. We also found, through our analysis of agency documents and interviews with federal officials, that the federal task force faced an additional challenge that it has since addressed. Specifically, the federal task force did not have continuous leadership at the national level because the task force’s national leadership group was inactive for more than a year beginning in January 2017. During this time, CEQ, the permanent co- chair of the national-level task force leadership group, did not convene the group for meetings, and there was uncertainty about who would represent some agencies after the change in administration and subsequent changes in agency personnel, according to officials from the task force agencies. EPA Region 10 officials said that the federal task force’s regional implementation team remained active during this period and facilitated continued engagement among federal agencies and nonfederal partners at the regional level. Nevertheless, without an active national-level leadership group in place, the federal agencies did not have a fully functioning task force and were not in a position to fulfill some of the task force’s responsibilities under the memorandum of understanding, such as approving a federal action plan. In April 2018, a senior CEQ official informed us that CEQ had taken action in response to our discussions with CEQ staff about this challenge and convened a meeting of the national-level task force group on April 4, 2018. In addition, according to the CEQ official, the task force agencies have committed to working together going forward and plan to continue meeting. By working with the other federal agencies to hold this meeting and secure this commitment, CEQ has taken an important step toward addressing the challenge we identified and ensuring that national-level leadership is in place for the federal task force. The CCMP lays out the primary framework for assessing progress toward Puget Sound restoration, including six high-level goals created by state law and a variety of associated indicators and targets. The Partnership leads the management conference’s efforts to assess restoration progress under this framework, but its assessments have been limited because of insufficient data and because targets have not been established for all indicators. In addition, we found that the federal task force has limited ability to assess how the implementation of the Federal Action Plan, which is currently in draft form, contributes to overall restoration progress under the CCMP’s framework, because the task force has not clearly linked the plan’s priority federal actions to the framework’s goals, indicators, and targets. The CCMP lays out the primary framework for assessing progress toward Puget Sound restoration, including goals, indicators, and targets. In 2007, the Washington State legislature established six high-level goals for Puget Sound restoration that continue to guide the CCMP, with an overarching directive to strive to achieve the goals by 2020. The six high-level goals are: Healthy human population. A healthy human population supported by a healthy Puget Sound that is not threatened by changes in the ecosystem. Vibrant human quality of life. A quality of human life that is sustained by a functioning Puget Sound ecosystem. Thriving species and food web. Healthy and sustaining populations of native species in Puget Sound, including a robust food web. Protected and restored habitat. A healthy Puget Sound where freshwater, estuary, nearshore, marine, and upland habitats are protected, restored, and sustained. Abundant water. An ecosystem that is supported by groundwater levels as well as river and streamflow levels sufficient to sustain people, fish, and wildlife, and the natural functions of the environment. Healthy water quality. Fresh and marine waters and sediments of a sufficient quality so that the waters in the region are safe for drinking, swimming, shellfish harvest and consumption, and other human uses and enjoyment, and are not harmful to the native marine mammals, fish, birds, and shellfish of the region. The CCMP identifies 25 categories of measures, called vital signs, used to gauge the health of Puget Sound. Each vital sign is designed to support one of the six high-level goals. For example, the CCMP has assigned four vital signs—marine water quality, freshwater quality, marine sediment quality, and toxics in fish—to collectively assess progress toward the goal of healthy water quality. According to the CCMP, most vital signs are represented by one or more specific measures, called indicators, for a total of 47 indicators. Based on our analysis of Partnership data, more than half of these indicators have measurable recovery targets set for the year 2020, and some of the indicators also have measurable interim targets to assess incremental progress. Figure 6 provides an example of the relationship among goals, vital signs, indicators, and targets for 1 of the 47 indicators. To achieve the CCMP’s recovery targets, the Partnership, supported by other members of the management conference, has initiated an effort to develop implementation strategies that will outline, among other things, specific approaches, actions, and program and policy changes that are needed. According to the Partnership’s implementation strategy guidelines, each implementation strategy will focus on the recovery targets for indicators under a particular vital sign or a set of related vital signs. The guidelines state that the implementation strategies are to also estimate the costs of achieving recovery targets, including the cost- effectiveness of specific activities to inform decisions about priority investments and expectations for progress. Officials from EPA and the Partnership said no official estimates have yet been developed for the total costs to restore the Sound, but EPA Region 10 officials stated that investments on the order of tens of billions of dollars, if not more, will likely be necessary. According to EPA Region 10 officials, the implementation strategies will help more directly link investments to restoration progress, a step consistent with our previous reporting on enhancing the use of performance information. Specifically, in September 2005 we reported that linking cost with performance information brings performance concerns into planning and budgetary deliberations, prompting agencies to reassess their performance goals and strategies and to more clearly understand the cost of performance. The Partnership leads the management conference’s efforts to assess Puget Sound restoration progress and has taken steps to do so under the CCMP’s framework. In particular, the Partnership created the Puget Sound Ecosystem Monitoring Program to help monitor the effectiveness of restoration actions and assess restoration progress. The Puget Sound Ecosystem Monitoring Program includes representatives from federal entities, such as EPA, and nonfederal entities, such as state and local agencies. The Partnership uses information from the Puget Sound Ecosystem Monitoring Program and other sources to assess and report on restoration progress in a biennial State of the Sound report, which was most recently published in November 2017. The Partnership has assessed two primary aspects of restoration progress for the CCMP’s 47 indicators: (1) progress relative to baseline conditions and (2) progress toward the 2020 recovery targets. The 2017 State of the Sound reported the general results of assessments of progress relative to baseline conditions for 29 of the 47 indicators, with additional details available on the Partnership’s website. According to the State of the Sound, progress was made in some areas but many key indicators did not show improvement, as reflected below: Ten indicators improved compared to baseline data. For example, one of the indicators reported as improved was acres of harvestable shellfish beds, which is associated with the goal of a healthy human population. According to the Partnership’s website, from 2007 to 2016 the number of acres of harvestable shellfish beds increased by approximately 4,800 acres. Fifteen indicators showed mixed results or no improvement relative to baseline data. For example, one indicator reported as showing no improvement was the abundance of Puget Sound Chinook salmon populations, which is associated with the thriving species and food web goal. According to the Partnership’s website, these populations remain below desired levels. Four indicators worsened compared to baseline data. For example, another indicator for the thriving species and food web goal tracks the number of Southern Resident Killer Whales. According to the Partnership’s website, from 2010 to September 2017, the number of Southern Resident Killer Whales declined. However, the State of the Sound was unable to report on assessments of progress relative to baseline conditions for 18 of the 47 indicators because of data limitations. Specifically, the State of the Sound reported that there were insufficient data or no data available to assess progress relative to baseline conditions for these indicators. Based on our analysis of information on the Partnership’s website, the most common reason for these data insufficiencies is that the data for many indicators are in the early stages of collection and more time is needed to obtain enough data to assess progress. For example, the Partnership plans to assess nine indicators under the healthy human population and vibrant quality of life goals using new data collected through a survey, which the website states should allow the Partnership to assess progress within several years. According to a senior Partnership official, in addition to needing more time to collect data and assess progress for some indicators, resource limitations have posed a challenge to addressing some of the data gaps. The 2017 State of the Sound reported general information on the progress made toward recovery targets, with additional details available on the Partnership’s website. Based on our analysis of Partnership data, we found that the management conference has adopted measurable 2020 recovery targets for 31 of the 47 indicators. According to the State of the Sound, most indicators have not met their interim targets, and most of the 2020 targets are not likely to be attained, as reflected in the examples below. The Partnership reported that the indicator for restoration of floodplains showed some progress toward its 2020 target to restore 15 percent of degraded floodplain acreage in Puget Sound, but the 2020 target was still far from being met. According to the Partnership’s website on the Southern Resident Killer Whales indicator, the 2016 interim target of an end-of-year census of 91 whales was not met, and as of September 2017 the number of Southern Resident Killer Whales was well below the 2020 target of 95 whales. However, the overall ability to assess progress toward recovery targets has been limited because the management conference, led by the Partnership, has not established recovery targets for all indicators. Specifically, according to our analysis of Partnership data, recovery targets have not been established for 16 of the 47 indicators. We have previously reported on the importance of using performance measures to track progress in achieving goals and have identified key attributes of successful performance measures, such as having measurable targets. More specifically, a measurable target should have a numerical goal, without which it is difficult to tell whether performance is meeting expectations. Partnership officials we interviewed said that recovery targets have not been established for all indicators because they first focused on developing targets for indicators about which more information was known. The officials said they have not had sufficient resources to fully develop all of the indicators and associated recovery targets to assess progress, and that additional information and expertise are needed to develop targets for some indicators. According to EPA Region 10 officials we interviewed, developing targets for the remaining indicators would be useful, but given limited resources, it may be necessary to prioritize indicators for which to develop targets. We recognize that developing measurable recovery targets can take time and resources and that prioritizing among the remaining 16 indicators for the development of targets is important. The management conference plans to issue an updated CCMP in December 2018, with another update scheduled for 2022, according to Partnership officials. EPA officials said that EPA’s Region 10 office will be responsible for reviewing and approving these updated CCMPs in conjunction with EPA’s National Estuary Program national office. Partnership officials we interviewed said that the management conference intends to reexamine and, as appropriate, revise the indicators and targets during the development of the 2022 CCMP. EPA’s National Estuary Program guidance directs EPA regions to work with management conferences to ensure that revisions of the CCMP contain all the appropriate content, including quantitative performance measures where possible. By working with the management conference on future updates to the CCMP to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible, EPA would better position the Partnership to assess progress toward restoration goals. The federal task force has limited ability to assess how the implementation of its Federal Action Plan, currently in draft form, contributes to overall restoration progress under the CCMP’s framework, according to our analysis of agency documents and interviews. We found that except in a small number of cases, the federal task force has not clearly linked the priority federal actions identified in the draft Federal Action Plan to the CCMP’s goals, vital signs, indicators, or recovery targets. For example, one of the plan’s priority federal actions is to replace or remove culverts that pose a barrier to fish passage on Forest Service roads. However, the plan does not specify how the expected outcome of this action will contribute to the CCMP’s goals, vital signs, indicators, or recovery targets. The federal task force’s memorandum of understanding calls for the integration of federal efforts with those of nonfederal entities in the implementation of the CCMP. According to EPA Region 10 officials we interviewed, one of the primary purposes of the federal task force is to support the CCMP as the strategic plan for Puget Sound restoration, which includes the overarching goals and targets for the restoration effort. The federal task force’s regional implementation team is responsible for annually evaluating the Federal Action Plan and making any necessary modifications. As the permanent co-chair of the regional implementation team, EPA’s Region 10 office leads the effort to track and report information on the progress made in implementing the action plan, according to Region 10 officials. EPA has developed a tool to track the implementation of each priority federal action in the plan and has started to collect initial information from the other task force members, according to the Region 10 officials. The tracking tool documents the implementation status of each of the priority federal actions, but similar to the action plan, the tracking tool does not show how the actions are linked to the CCMP’s goals, vital signs, indicators, or recovery targets. We have previously reported on the importance of interagency collaborative efforts, such as federal task forces, to track and monitor progress toward their desired outcomes. In addition, we have reported that agencies can increase the value of their performance reporting by linking annual performance information with their goals, a leading practice for performance reporting. According to an EPA official involved in leading the regional implementation team, the draft Federal Action Plan did not link the priority federal actions to the CCMP’s framework for assessing restoration progress because the task force had focused on higher-level alignment between the organization of the action plan and the CCMP’s strategic initiatives, which focused on habitat, stormwater, and shellfish. In addition, the EPA official said that the tracking tool does not include such linkages because the tool has focused more narrowly on tracking the progress made in carrying out the priority federal actions. According to the EPA official, better documenting the linkage between the priority federal actions and the CCMP’s goals, vital signs, indicators, and targets would be helpful for assessing progress. The official said that he sees value in making these linkages more explicit, and that one opportunity to do so would be to add more detail in the tracking tool on how some of the key federal actions connect to the various elements of the CCMP’s framework for assessing progress. Similarly, some federal and state survey respondents reported that more explicitly linking the information in the Federal Action Plan to the CCMP would be helpful, based on our analysis of narrative responses about shortcomings to the draft Federal Action Plan and the plan’s alignment with the CCMP. By working with the appropriate members of the regional implementation team to clearly link, such as through the tracking tool, the plan’s priority federal actions to the CCMP’s framework for assessing progress toward Puget Sound restoration, EPA would better position the federal task force to assess the impact of its efforts and the implementation of the draft— and, if applicable, final—action plan. Federal and state respondents to our survey and tribal and local participants in our discussion groups identified a number of factors that may limit the long-term overall success of Puget Sound restoration efforts. Federal and nonfederal entities have control over some of these factors, such as coordination, but entities in the region may have less ability to influence other factors, such as climate change. To obtain views from federal and state agency officials, we asked survey respondents to rate the level of risk that 10 factors could pose to the long-term overall success of Puget Sound restoration efforts. We identified these factors based on our review of key restoration documents, such as the CCMP, and our interviews with federal and nonfederal entities. Figure 7 illustrates the number of survey respondents that identified each of the factors as posing a great risk. Through our analysis of the survey results, discussion group transcripts, federal and nonfederal documentation, and agency interviews, we found that federal and nonfederal entities consistently identified certain key factors as posing significant risks that may limit the success of Puget Sound restoration, including: Effects of population growth and increased development. According to estimates in the CCMP, the population of the Puget Sound region is projected to increase from roughly 4.5 million in 2016 to 7 million people by 2040. Survey respondents and discussion group participants explained that population growth and the associated increase in development threaten restoration efforts in a variety of ways. For example, population growth and development contribute to new habitat loss and water quality degradation and may contribute to increases in property values that can raise the costs of restoration projects that involve land acquisitions. Nearly all of the survey respondents rated this factor as posing a great risk, and the majority of survey respondents identified this factor as the single greatest risk to the long-term overall success of Puget Sound restoration efforts. Effects of climate change and ocean acidification. According to the CCMP, climate change and ocean acidification could affect many aspects of Puget Sound’s ecosystem and natural resources. In addition, a 2015 University of Washington report stated that projected increases in sea surface temperatures associated with climate change could harm salmon populations and increase the magnitude and frequency of harmful algal blooms in Puget Sound. Moreover, according to a report from the Washington State Blue Ribbon Panel on Ocean Acidification, more than 30 percent of Puget Sound’s marine species—including oysters, clams, mussels, and crabs—are believed to be vulnerable to ocean acidification because of its corrosive effects on some shelled organisms. According to a December 2017 report by the Washington Marine Resources Advisory Council, Washington’s waters are considered to be among the most highly affected by ocean acidification in the world. A variety of actions are under way in Washington State to respond to this threat, including the implementation of stormwater and nutrient reduction programs to reduce the severity of acidifying conditions and research on kelp cultivation to absorb carbon dioxide to improve seawater conditions. Funding constraints. Funding constraints cited by federal and nonfederal entities included concerns about securing funds for future restoration efforts and the administrative challenges associated with combining multiple sources of funding to carry out projects. According to Partnership officials we interviewed, many of the near-term actions called for in the CCMP are at risk of not being carried out because funding has not been secured for these actions. Discussion group participants also cited difficulties securing funds as a barrier for project implementation and stated that the challenges associated with having to cobble together funds from multiple sources can delay or threaten the success of restoration projects. The participants explained that managing the requirements of multiple funding sources can increase administrative burden and project complexity. Moreover, discussion group participants explained that the single-year funding cycles for some programs and the restrictions that are sometimes placed on how funds can be used present additional challenges, as they are not always compatible with the needs of more complex multi- year restoration projects. Participants in the discussion groups noted a critical need for predictable, consistent, multi-year funding to adequately and efficiently plan and carry out restoration activities. The factors identified by federal and nonfederal entities as posing a risk to the success of Puget Sound restoration efforts are consistent with some of our prior work on large-scale ecosystem restoration efforts in other parts of the country. Specifically, we previously reported that similar factors—including population growth, the effects of climate change, and funding constraints—may limit restoration efforts in the Great Lakes and Chesapeake Bay. Restoring Puget Sound is a large, complex, and potentially costly endeavor that involves many federal, state, local, tribal, and nongovernmental partners, and it faces a number of factors that may limit long-term success. Federal and nonfederal entities have made progress in coordinating the numerous restoration efforts underway by establishing the Puget Sound Management Conference and the Puget Sound Federal Task Force and by developing the CCMP and the draft Federal Action Plan. The Partnership, through its plans to develop a more complete inventory of restoration efforts and related funding, can make important information available for coordinating the management of the efforts moving forward. In addition, the Partnership has led the management conference’s efforts to assess restoration progress under the framework laid out in the CCMP, reporting in 2017 that while progress had been made in some areas, many key indicators had not shown improvement. However, these assessments have been limited by insufficient data, resources, and the lack of measurable targets, which have not been established for 16 of the 47 indicators. By working with the management conference on future updates to the CCMP to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible, EPA would better position the Partnership to assess progress toward restoration goals. In addition, the federal task force has made progress by coordinating its actions through the Federal Action Plan and can continue to make progress as it takes steps to implement the draft plan—and, if applicable, any final version of the plan that is approved. However, the task force has limited ability to assess how the implementation of its plan contributes to overall restoration progress because neither the plan nor the tracking tool developed by EPA’s Region 10 clearly link the plan’s priority federal actions to the goals, vital signs, indicators, or recovery targets that make up the CCMP’s framework. By working with the appropriate members of the regional implementation team to clearly link, such as through the tracking tool, the plan’s priority federal actions to the CCMP’s framework for assessing progress toward Puget Sound restoration, EPA would better position the federal task force to assess the impact of its efforts and the implementation of the draft—and, if applicable, final—action plan. We are making the following two recommendations to EPA: The EPA Region 10 Administrator should work with the management conference on future updates to the CCMP to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible. (Recommendation 1) The EPA Region 10 Administrator should work with the appropriate members of the federal task force regional implementation team to clearly link, such as through the tracking tool, the Federal Action Plan’s priority federal actions to the CCMP’s framework for assessing progress toward Puget Sound restoration. (Recommendation 2) We provided a draft of this report for review and comment to CEQ; the Departments of Agriculture, Commerce, Defense, Homeland Security, the Interior, and Transportation; EPA; and the Puget Sound Partnership. EPA provided written comments, which are reproduced in appendix IV, and stated that it generally agrees with the conclusions and recommendations in our report. The Departments of Commerce, Defense, Homeland Security, and the Interior responded by email that they did not have comments on the draft report. CEQ, the Department of Agriculture, and the Department of Transportation provided technical comments, which we incorporated as appropriate. The Partnership also provided written comments, which are reproduced in appendix V, and stated that our report does a good job describing a complex landscape. The Partnership’s comments included one technical comment, which we incorporated as appropriate, and highlighted several points that we made in the report, including the lack of targets for some indicators and other barriers to success, the importance of obtaining more comprehensive information on restoration expenditures, and the importance of linking the work of the federal task force to the CCMP. In its written comments, EPA stated that it appreciated the work we performed to understand the scope and intricacies of restoration efforts in Puget Sound and our coordination with multiple federal and nonfederal entities in developing our report. EPA agreed with our recommendation to work with the management conference to help prioritize among the indicators that currently lack measurable targets and ensure that such targets are developed for the highest priority indicators where possible. The agency stated that it has begun working with the Partnership and other management conference partners to identify this as a priority for the next review of the CCMP, as well as to develop a clear plan for advancing this priority. EPA also stated that progress has been made to evaluate the current set of indicators and vital signs as a result of a 2017 project led by the Partnership and that recommendations from that project will inform both adjustments to the current set of indicators and future target setting. In addition, EPA agreed with our recommendation to work with the appropriate members of the federal task force regional implementation team to clearly link the Federal Action Plan’s priority federal actions to the CCMP’s framework for assessing progress, and the agency highlighted steps it will take to do so. EPA stated that it has already met with the federal task force’s regional leadership and implementation teams and reached agreement to review the Federal Action Plan and specify how each action connects to the vital signs and other elements of the CCMP. EPA stated this this crosswalk process will begin in January 2019 after the updated CCMP is approved. We are sending copies of this report to the appropriate congressional committees; the Chair of CEQ; the Secretaries of Agriculture, Commerce, Defense, Homeland Security, the Interior, and Transportation; the Administrator of EPA; the Executive Director of the Puget Sound Partnership; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report examines (1) Puget Sound restoration efforts and related expenditures for fiscal years 2012 through 2016; (2) how federal and nonfederal entities coordinate their restoration efforts and their views on this coordination; (3) the framework for assessing progress toward Puget Sound restoration; and (4) key factors, if any, federal and nonfederal entities identified that may limit the success of Puget Sound restoration. To help us understand the legal framework supporting restoration efforts across these four objectives, we reviewed selected relevant federal and state laws, including the Clean Water Act, the Endangered Species Act, and Washington State law governing Puget Sound water quality protection and establishing the Puget Sound Partnership. To examine Puget Sound restoration efforts and related expenditures for fiscal years 2012 through 2016, we used the first phase of a two-phase survey to identify federal and state efforts that supported Puget Sound restoration during this time frame. We selected this period to allow us to obtain information on a range of restoration efforts carried out in recent years. In addition, we used the first phase of the survey to obtain information on the availability of expenditure data for the federal and state efforts and to help determine whether any limitations existed that would affect the reliability of such data. As part of developing the first phase of the survey, we conducted a pretest with the Partnership to check that the questions were clear and used terminology correctly and to ensure that we could obtain the requested information without placing an undue burden on agency officials. We sent the first phase of the survey to 15 federal and 11 state entities in June 2017, and all of them responded. We identified the 15 federal entities based on their participation in the Puget Sound Federal Caucus, a group formed of regional federal entities in 2007 to help coordinate federal restoration efforts in Puget Sound. The federal entities were the Bureau of Indian Affairs, Federal Emergency Management Agency, Federal Highway Administration, Federal Transit Administration, National Oceanic and Atmospheric Administration, National Park Service, Natural Resources Conservation Service, U.S. Army Corps of Engineers, U.S. Army Joint Base Lewis-McChord, U.S. Coast Guard, U.S. Environmental Protection Agency (EPA), U.S. Fish and Wildlife Service, U.S. Forest Service, U.S. Geological Survey, and the U.S. Navy. We identified the 11 Washington State entities based on our review of the comprehensive conservation and management plan (CCMP)—called The 2016 Action Agenda for Puget Sound—and our discussions with federal and state officials. The state entities were the Office of Financial Management, Puget Sound Partnership, Recreation and Conservation Office, Washington State Conservation Commission, and the Washington Departments of Agriculture, Commerce, Ecology, Fish and Wildlife, Health, Natural Resources, and Transportation. In the first phase of our survey, we requested specific information on federal and state efforts to support Puget Sound restoration. Table 2 summarizes the questions we are reporting on from the first phase of the survey. We also asked other questions that we do not specifically report on to provide additional context for the survey responses. For example, we asked the respondents whether their agency managed each effort on its own or jointly with other entities, and we asked whether their agency had provided funding from each effort to other entities. We used the first-phase survey results in part to develop catalogs of federal and state efforts that supported Puget Sound restoration from fiscal years 2012 through 2016. To obtain additional information about the federal and state efforts identified in the survey responses, we reviewed documentation, such as agency websites and reports, and interviewed agency officials. We incorporated this additional information as appropriate in the catalogs, and we then asked each entity to verify the accuracy of the information presented in the catalogs. Appendix II presents the catalog of federal efforts, and appendix III presents the catalog of state efforts. Based on the results of the first phase of the survey and additional follow- up interviews with agency officials, we determined that we would be unable to collect sufficiently reliable data to report on the total amount of expenditures that have supported Puget Sound restoration. In particular, we identified data limitations that would make it difficult for us to collect consistent, reliable, and comparable expenditure data across all of the federal and state entities’ efforts. These limitations included difficulties isolating expenditures within the geographic boundaries of Puget Sound for some efforts, difficulties isolating expenditures that supported restoration activities as opposed to other purposes, and difficulties quantifying administrative expenses, such as staff salaries and travel expenses, associated with specific efforts. As a result of these limitations, we limited our collection of expenditure data to a nongeneralizable sample of three federal programs and one state program to provide examples of the diversity in funding approaches used to support Puget Sound restoration. We considered the following factors in selecting these efforts: 1) their prominence in Puget Sound restoration, 2) variations in the federal and state entities involved in carrying them out, 3) variations in their size, and 4) evidence of reliable expenditure data. In addition, to help illustrate how federal and nonfederal funds are used together at the project level, we interviewed agency officials and obtained expenditure data for two recently completed restoration projects. We selected these projects because they had received funding from a variety of federal and nonfederal sources and illustrated how federal and nonfederal entities work together to carry out restoration projects. We also conducted two site visits to observe the outcomes of these projects. We assessed the reliability of the expenditure data for these program and project examples by comparing the data we obtained with data from other sources where possible, reviewing agency documentation, and interviewing knowledgeable agency officials. We found the data to be sufficiently reliable for our purposes. To examine how federal and nonfederal entities coordinate their restoration efforts in Puget Sound and their views on this coordination, we identified two key groups that coordinate among federal, state, local, tribal, and nongovernmental entities: the state-led Puget Sound Management Conference and the Puget Sound Federal Task Force, which replaced the Puget Sound Federal Caucus in 2016. We analyzed key restoration-related documentation, including the CCMP developed by the management conference and the federal task force’s draft The Puget Sound Federal Task Force Action Plan (Fiscal Years 2017-2021) (Federal Action Plan). We also interviewed officials from EPA and the Council on Environmental Quality about the implementation of the federal task force. In August 2017, we sent the second phase of our survey to the 15 federal and 11 state entities that had received the first phase, as well as to the Washington State Governor’s Office, to obtain their views on the coordination of restoration efforts and we received responses from all of the entities. The second phase of the survey featured, among other things, a series of open-ended and closed-ended questions about the role of the management conference and the federal task force in helping to coordinate restoration efforts and about the strengths and shortcomings of the CCMP and the draft Federal Action Plan. We refined the second phase of the survey based on pretests we conducted with two federal agencies and two state agencies to ensure that the questions were clear and used terminology correctly and that we could obtain the requested information without placing an undue burden on agency officials. Table 3 summarizes the questions we are reporting on from the second phase of the survey. We also asked other questions that we do not specifically report on to provide additional context for the survey responses. For example, we asked the respondents to identify what steps, if any, could be taken to improve the management conference and the federal task force, and we asked whether any entities were missing from these groups that should be included. We also held six moderated discussion groups, three with tribal representatives and three with local representatives, to obtain their views on factors that have helped and hindered their ability to implement restoration projects, including factors related to coordination. We selected the tribal and local entities to participate in the discussion groups because of their involvement in implementing restoration projects. We invited all 19 federally recognized tribes in the Puget Sound basin to participate in our discussion groups, as well as two tribal consortia that support restoration efforts. Representatives from 15 of these tribal entities participated in the tribal discussion groups. For the three local discussion groups, we invited all 9 local integrating organizations and all 15 salmon recovery lead entities within the Puget Sound basin to participate. Representatives from 7 of the local integrating organizations and 13 of the salmon recovery lead entities participated in the three local discussion groups. We conducted the six moderated discussion groups over the telephone in May and June 2017. During each discussion group, the GAO moderator asked participants to list factors that, in their experience, had helped their tribal or local entity implement restoration projects in Puget Sound, as well as factors that hindered their ability to do so. The moderator then asked participants to elaborate on how the factors had helped or hindered the implementation of restoration projects. When necessary, the moderator asked probing questions to further clarify participants’ comments. Two or three analysts transcribed each session and combined and reconciled notes to develop transcripts for each of the discussion groups. We analyzed the transcripts from the six discussion groups using qualitative analysis software to categorize the factors that helped and hindered the implementation of restoration projects. Prominent factors identified in the discussion groups that we discuss in the body of the report include factors related to administration and management, coordination, and resources. Other factors, such as laws and regulations, public awareness, and science were also raised to a lesser extent, and we do not discuss these in the body of the report. To obtain additional views on the coordination of Puget Sound restoration efforts, we interviewed federal and state agency officials as well as representatives from conservation, agricultural, and fishing industry organizations. We also obtained written responses from two Canadian agencies about their coordination of restoration activities with entities in the United States. We compared the information we obtained on the coordination of Puget Sound restoration efforts with selected leading collaboration practices that we previously identified and that were most relevant based on our initial audit work, such as leadership, bridging organizational cultures, and the inclusion of relevant participants. We also assessed federal entities’ implementation of the memorandum of understanding that established the federal task force. To examine the framework for assessing progress toward Puget Sound restoration, we reviewed laws, regulations, and key documents, such as the CCMP and the draft Federal Action Plan. We also reviewed the Partnership’s documentation on the results of its assessments of restoration progress. We identified some limitations associated with these results and noted those in our report where appropriate. We obtained additional views on efforts to assess progress from federal and nonfederal entities through the second phase of our survey and interviews described previously. For example, in the second phase of the survey, we asked the federal and state entities about their views on efforts to assess progress under the CCMP and the draft Federal Action Plan and about their views on the sufficiency of monitoring efforts in Puget Sound. We compared the information obtained through these steps with EPA’s National Estuary Program guidance and with leading practices for performance measurement and reporting to determine whether efforts to assess Puget Sound restoration progress have followed leading practices. To determine key factors, if any, federal and nonfederal entities identified that may limit the success of Puget Sound restoration, we used the second phase of our survey, which we described above, and our discussion groups to obtain views on factors that may pose a risk to the success of restoration efforts. We also reviewed the CCMP and other documentation and used our interviews with the federal and nonfederal entities described above to obtain views on limiting factors. In addition, we reviewed our prior work on large-scale ecosystem restoration efforts in other parts of the country, such as in the Great Lakes and Chesapeake Bay, to compare the key factors we identified in Puget Sound with factors that may limit restoration efforts that we identified in our past reports. We conducted this performance audit from October 2016 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. As part of our first objective to examine Puget Sound restoration efforts, we surveyed 15 federal entities and asked them to provide information about their efforts that have supported Puget Sound restoration activities. Based on our research and discussions with federal and state officials, we identified six general categories of restoration activities: Habitat restoration – projects or other activities intended to restore degraded habitats. Habitat protection – projects or other activities intended to protect high-quality habitats from future degradation. Water quality improvement – projects or other activities intended to improve the physical, chemical, or biological characteristics of waters within the Puget Sound basin by, for example, reducing stormwater runoff and other sources of water pollution. Monitoring – projects or other activities intended to monitor the physical, chemical, or biological characteristics of waters within the Puget Sound basin, including monitoring for the purposes of establishing baselines, identifying trends, and assessing the effectiveness or results of restoration activities. Research – research projects, studies, or other related activities intended to support Puget Sound restoration activities. Education and outreach – projects or other activities intended to educate the public about the state of Puget Sound and the pressures facing the basin or to elicit community support for restoration activities (e.g., by recruiting volunteers). Table 4 presents a catalog of applicable federal efforts from federal fiscal years 2012 through 2016 based on the survey responses from each federal entity. The table includes a wide range of efforts, including some efforts that focused exclusively on restoration-related activities and other efforts that had a broader scope of work that in some cases did not center directly on restoration. We further developed some information presented in the table based on information obtained from other sources, such as agency websites and documentation, and follow-up communications with the federal entities. We did not evaluate whether each entity had included all relevant efforts in their responses. As part of our first objective to examine Puget Sound restoration efforts, we surveyed 11 state entities and asked them to provide information about their efforts that have supported Puget Sound restoration activities. We used the same six general categories of restoration activities as in the catalog of federal efforts in appendix II: Table 5 presents a catalog of applicable state efforts from state fiscal years 2012 through 2016 based on the survey responses from each state entity. The table includes a wide range of efforts, including some efforts that focused exclusively on restoration-related activities and other efforts that had a broader scope of work that in some cases did not center directly on restoration. We further developed some information presented in the table based on information obtained from other sources, such as agency websites and documentation, and follow-up communications with the state entities. We did not evaluate whether each entity had included all relevant efforts in their responses. J. Alfredo Gómez, (202) 512-3841 or gomezj@gao.gov. In addition to the individual named above, Janet Frisch (Assistant Director), Susan Iott (Assistant Director), Joshua Wiener (Analyst in Charge), Chuck Bausell, Stephen Betsock, Mark Braza, Ellen Fried, Jack Granberg, Carol Henn, Gina Hoover, Karen Howard, Vondalee Hunt, Benjamin T. Licht, Jeffery Malcolm, John Mingus, Patricia Moye, Dan C. Royer, Sara Sullivan, Sarah Veale, and Arvin Wu made key contributions to this report. Great Lakes Restoration Initiative: Improved Data Collection and Reporting Would Enhance Oversight. GAO-15-526. Washington, D.C.: July 21, 2015. Great Lakes Restoration Initiative: Further Actions Would Result in More Useful Assessments and Help Address Factors That Limit Progress. GAO-13-797. Washington, D.C.: September 27, 2013. Chesapeake Bay: Restoration Effort Needs Common Federal and State Goals and Assessment Approach. GAO-11-802. Washington, D.C.: September 15, 2011. Recent Actions by the Chesapeake Bay Program Are Positive Steps Toward More Effectively Guiding the Restoration Effort, but Additional Steps Are Needed. GAO-08-1131R. Washington, D.C.: August 28, 2008. Coastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could Help Guide Future Restoration and Protection. GAO-08-130. Washington, D.C.: December 14, 2007. South Florida Ecosystem: Restoration Is Moving Forward but Is Facing Significant Delays, Implementation Challenges, and Rising Costs. GAO-07-520. Washington, D.C.: May 31, 2007. Chesapeake Bay Program: Improved Strategies Are Needed to Better Assess, Report, and Manage Restoration Progress. GAO-06-96. Washington, D.C.: October 28, 2005. Great Lakes: Organizational Leadership and Restoration Goals Need to Be Better Defined for Monitoring Restoration Progress. GAO-04-1024. Washington, D.C.: September 28, 2004. Great Lakes: An Overall Strategy and Indicators for Measuring Progress Are Needed to Better Achieve Restoration Goals. GAO-03-515. Washington, D.C.: April 30, 2003.", "summary": "Puget Sound is the nation's second-largest estuary and serves as an important economic engine in Washington State, supporting millions of people, major industries, and a wide variety of species. However, according to the CCMP, human use and development have degraded water quality and habitats and harmed critical species such as salmon. GAO was asked to review efforts to restore Puget Sound. This report examines, among other objectives, (1) Puget Sound restoration efforts and related expenditures for fiscal years 2012 through 2016, (2) how federal and nonfederal entities coordinate their restoration efforts, and (3) the framework for assessing progress toward Puget Sound restoration. GAO reviewed restoration plans and other documentation, conducted a two-phase survey of the more than 25 federal and state entities that GAO determined had participated in restoration efforts, conducted discussion groups with tribal and local representatives, and interviewed representatives from these federal and nonfederal entities. Through its survey of federal and Washington State entities, GAO identified numerous federal and state efforts that, in whole or in part, supported Puget Sound restoration from fiscal years 2012 through 2016. The efforts involved a variety of activities, including habitat protection, water quality improvement, and monitoring. Some of these efforts focused exclusively on Puget Sound restoration, while others had a broader geographic or programmatic scope. Funding for these efforts came from a variety of sources, such as the Environmental Protection Agency (EPA), which reported expending about $142 million for activities in Puget Sound through the National Estuary Program and the Puget Sound Geographic Program during this time frame. However, total expenditures for all efforts are unknown, in part because of difficulties isolating expenditures specific to Puget Sound. A 2017 state audit recommended that two state agencies develop a plan to create a more complete inventory of restoration efforts and related funding. The state agencies concurred and have plans to develop this inventory by August 2019. Federal and nonfederal entities coordinate restoration efforts through two primary interagency groups. First, the state-led Puget Sound Management Conference has developed a comprehensive conservation and management plan (CCMP), approved by EPA under the National Estuary Program, that serves as the primary planning document for Puget Sound restoration. Second, the Puget Sound Federal Task Force complements the work of the management conference by coordinating the efforts of federal agencies to support the CCMP, including by developing a draft Federal Action Plan that identifies priority federal actions to protect and restore Puget Sound. The CCMP lays out a framework for assessing restoration progress, including 6 goals, 47 indicators, and recovery targets for 31 of the indicators. In 2017, the Puget Sound Partnership, a state agency, reported that progress had been made in some areas, but many key indicators had not shown improvement. For example: One indicator that showed improvement was acres of harvestable shellfish beds, which the Partnership reported increased from 2007 to 2016. One indicator that showed no improvement was the abundance of Puget Sound Chinook salmon populations, which the Partnership reported remained below desired levels. The Partnership also reported that most of the 31 recovery targets that the management conference has adopted for 2020 are not likely to be attained. However, the Partnership's ability to assess progress has been limited in some instances, in part because the management conference has not developed targets for 16 of the 47 indicators. GAO has identified measurable targets as a key attribute of successful performance measures. By working with the management conference to help ensure that measurable targets are developed where possible for the highest priority indicators currently lacking such targets, EPA would better position the Partnership to assess progress toward restoration goals. GAO is making two recommendations, including that EPA work with the management conference to help ensure that measurable targets are developed where possible for the highest priority indicators currently lacking such targets. EPA agreed with GAO's recommendations and highlighted steps the agency has begun taking and plans to take to address the recommendations.", "document_type": "gao"}
{"report": "RPS are long-lived sources of spacecraft electrical power and heating that are rugged, compact, highly reliable, and relatively insensitive to radiation and other effects of the space environment, according to NASA documentation. Such systems can provide spacecraft power for more than a decade and can do so billions of miles from the sun. Twenty-seven U.S. missions have used RPS over the past 5 decades. The current RPS design, the Multi-Mission Radioisotope Thermoelectric Generator (MMRTG), converts heat given off by Pu-238 into about 120 watts of electrical power at the beginning of its life—a 6 percent power conversion efficiency. One MMRTG contains 32 general purpose heat source (GPHS) fuel clads in the form of pressed Pu-238 pellets encapsulated in iridium. NASA’s PSD science portfolio includes a wide array of missions that seek to address a variety of scientific objectives and answer many questions about the solar system, from how life began to how the solar system is evolving. Scientific and mission objectives influence the types of equipment needed for the mission, including the mission’s power source. According to NASA officials we interviewed, missions in NASA’s PSD portfolio are generally classified in three ways: Flagship. Flagship missions are the largest and most expensive class of NASA’s missions, costing $2 billion or more, and are given the highest priority for resources, including funding, infrastructure, and launch support. Past Flagship missions that have used RPS include the Galileo, Cassini, and Curiosity missions. NASA’s Mars 2020 mission is a planned Flagship mission using RPS. New Frontiers. New Frontiers missions focus on enhancing our understanding of the solar system and have a development cost cap of $850 million. To date, there has been one New Frontiers mission using RPS (New Horizons). Discovery. Missions in the Discovery program have a development cost cap of $450 million to $500 million and have shorter development time frames, according to NASA officials and documentation. No Discovery mission has been powered by RPS. DOE oversees the design, development, fabrication, testing, and delivery of RPS to meet NASA’s overall systems requirements, specifications, and schedules. DOE’s goal under its Supply Project is to reach a full Pu-238 production rate of 1.5 kg per year by 2023, at the earliest, with a late completion date of 2026. DOE also established an interim production rate of 300 to 500 grams per year by 2019, to ensure an adequate supply of Pu-238 for NASA’s near-term missions, before the full production rate goal is achieved. The Supply Project involves a number of steps across several DOE national laboratories, including the use of two DOE research reactors—the High Flux Isotope Reactor at ORNL, and the Advanced Test Reactor at INL. NASA began fully funding DOE’s Supply Project in 2011, and since 2014, has been responsible for funding all aspects of RPS production operations, according to NASA documents. NASA funds DOE’s efforts to build, test, and fuel RPS, as well as to update equipment and sustain staffing levels associated with RPS production between missions. Since 2014 NASA has provided, on average, approximately $50 million per year to support DOE’s ongoing operations and maintenance of RPS production equipment. Since its inception until early 2017, DOE has used a short-term and incremental segmented management approach to manage the Supply Project. NASA selects RPS to power its missions primarily based on scientific objectives and mission destinations. According to NASA officials we interviewed, the need for RPS is usually apparent based on the mission’s scientific objectives and destination. For instance, an RPS is more likely to be needed for a mission to a distant planet, where minimal sunlight reduces the effectiveness of solar power. NASA officials we interviewed stated that, consistent with the National Space Policy, the agency uses RPS when they enable or significantly enhance a mission, or when alternative power sources, such as solar power, might significantly compromise mission objectives. NASA prioritizes mission selection based on missions identified in the National Academy of Sciences’ decadal survey report, which represents the highest priorities of the scientific community and includes many missions that require the use of RPS. Prior to the establishment of DOE’s Supply Project in fiscal year 2011, NASA officials we interviewed stated that mission selections were influenced by the limited amount of available Pu-238. These same officials told us that missions are now selected independently from decisions about how they will be powered. However, projected availability of Pu-238 is factored into whether an RPS is available for a specific mission opportunity. In addition to the scientific objectives of planned and potential space exploration missions, several other factors may affect NASA’s demand for RPS and Pu-238: Costs associated with missions that typically require RPS. According to NASA officials, RPS have typically been used on Flagship missions that cost $2 billion or more. NASA can support no more than one mission using RPS about every 4 years—or two to three missions per decade—based on expected agency funding levels. Cost of RPS relative to mission costs. According to NASA officials, New Frontiers missions may be good candidates to use RPS; however, given the cost cap for this mission class, one RPS would account for about 9 percent of the mission’s budget, while three RPS would account for almost 14 percent. For Discovery missions, for which the cost of using RPS would represent a large portion of a Discovery mission budget, a single RPS would represent more than 17 percent of a mission’s development cap. DOE’s production capability. According to DOE officials we interviewed, it can take up to 6 years to acquire, fuel, test, and deliver a new RPS for a NASA mission. According to DOE and NASA officials we interviewed, given the current floor space dedicated to RPS development at INL and limits on staff exposure to radiation at LANL, DOE only has the capacity to produce three to four RPS at one time. To accommodate DOE’s current RPS production capability, NASA officials we interviewed said they will not select two consecutive missions requiring RPS. Technological advances may reduce the demand for Pu-238 and thus RPS. For example, according to NASA officials, advances in solar power technology have realistically expanded the ability to use solar power for missions for which it would not have been considered before, and these advances could help address low levels of light intensity for deep space missions. NASA also is developing new RPS technologies that may reduce its demand for Pu-238 and thus RPS. For example, NASA officials told us that they plan to invest in dynamic RPS technology that could increase RPS efficiency and require less RPS to achieve mission power. NASA research indicates that dynamic RPS designs could be more than four times as efficient as the current MMRTG design. The Supply Project goal of producing 1.5 kg of Pu-238 per year was established to support two to three PSD missions using RPS each decade, and NASA does not anticipate other potential users to affect demand for RPS or Pu-238, according to NASA and DOE officials and documentation we reviewed. DOE planning documents and NASA officials we interviewed stated that current RPS and Pu-238 production levels expected from the Supply Project are intended to only meet PSD’s demand. NASA officials said that they did not account for potential demand from other potential users within NASA, the national security community, or commercial sectors when establishing current Pu-238 production goals. DOE has made progress meeting NASA’s future demand for Pu-238 to fuel RPS. A chronology of key DOE planned RPS and Pu-238 production activities, and NASA’s mission-related activities, are shown in figure 1. DOE demonstrated a proof of concept for new Pu-238 production, and has made approximately 100 grams of new Pu-238 isotope under its Supply Project, since the project’s inception in 2011. However, given DOE’s Supply Project and RPS production schedule, and NASA’s current space exploration plans to use up to four RPS for its Mars 2020 and New Frontiers #4 missions, DOE’s existing Pu-238 supply will be exhausted by 2025. Moreover, DOE officials we interviewed from INL, LANL, and ORNL identified several challenges, including perfecting and scaling up chemical processing and the availability of reactors, that need to be overcome for DOE to meet its projected Supply Project goal of producing 1.5 kg per year of Pu-238 by 2026, at the latest. If these challenges are not overcome, DOE could experience delays in producing Pu-238 to fuel RPS for future NASA missions. DOE’s ability to meet its production goal and support future NASA missions is at risk if certain steps for chemical processing necessary for the production of Pu-238 are not improved and scaled up. According to DOE officials we interviewed, DOE is still in the experimental stage and has not perfected certain chemical processing measures required to extract new Pu-238 isotope from irradiated targets, creating a bottleneck in the Supply Project and putting production goals at risk. In addition, reactor availability will be necessary for DOE to achieve its Pu-238 production goals. Officials we interviewed at INL and ORNL said that achieving 1.5 kg of Pu-238 per year is contingent on the availability of positions within both the High Flux Isotope Reactor (HFIR) and the Advanced Test Reactor (ATR) to irradiate neptunium targets for conversion to Pu-238 isotope. DOE officials said HFIR can produce approximately 600 grams of Pu-238 isotope and they plan to use positions within ATR to achieve full production goals; however, ATR has not been qualified for Supply Project work. In addition, DOE officials said that ATR’s availability for the Supply Project may be limited due to competition from other users. DOE officials said that they will be unable to meet full Pu-238 production goals if positions in ATR, which are already over-utilized, are not available for Pu-238 isotope production and that they do not have a plan to address this challenge. These and other challenges identified in our September 2017 report may place DOE’s RPS and Pu-238 production goals at risk, in part, because of the short-term and incremental segmented management approach DOE had used to manage the Supply Project since its inception in 2011 through early 2017. In March 2017, DOE officials we interviewed said that the agency anticipated moving to a constant GPHS production rate approach to help provide funding flexibility and stabilize RPS production staffing levels between NASA missions. In June 2017, DOE officials we interviewed said that implementing a constant GPHS production rate approach would also address other previously identified challenges associated with RPS production and the Supply Project and therefore decided to discontinue its short-term and incremental segmented management approach. However, DOE officials we interviewed did not describe how the new constant GPHS production rate approach would help them address some of the longer-term challenges previously identified by the agency, such as scaling up and perfecting chemical processing. We found that DOE has yet to develop an implementation plan for the new approach, with defined tasks and milestones, that can be used to show progress toward assessing challenges, demonstrate how risks are being addressed, or assist in making adjustments to its efforts when necessary. Our previous work has shown that without defined tasks and milestones, it is difficult for agencies to set priorities, use resources efficiently, and monitor progress toward achieving program objectives. In our September 2017 report, we recommended that DOE develop a plan that outlined interim steps and milestones that would allow the agency to monitor and assess the implementation of its new approach for managing Pu-238 and RPS production. DOE agreed with our recommendation and noted it was in the process of implementing an approach for the RPS supply chain that was more responsive to NASA’s needs, among other things. DOE also noted that it was developing an integrated program plan to implement and document the agency’s new approach and expected this to be completed in September 2018. We believe that the development of an integrated program plan is an important step and that any such plan should include defined tasks and milestones, so that DOE can demonstrate progress toward achieving its RPS supply chain goals. In addition, in our September 2017 report we identified another factor that could undermine DOE’s ability to inform NASA about previously identified challenges to reach its full Pu-238 production goal. We found that DOE does not maintain a comprehensive system for tracking RPS production risks and, instead, relies on individual laboratories to track and manage risks specific to their laboratories. Standards for Internal Control in the Federal Government call for agency management to identify, analyze, and respond to risks related to achieving defined objectives. We recommended that DOE develop a more comprehensive system to track systemic risks, beyond the specific technical risks identified by individual laboratories. Doing so would better position DOE to assess the long-term effects of the challenges associated with its Pu-238 and RPS production objectives. DOE agreed with our recommendation and stated that the agency would include steps to ensure that its risk assessment system would include comprehensive programmatic risks. Finally, in our September 2017 report we found that DOE’s new approach to managing RPS and Pu-238 production does not allow for DOE to adequately communicate long-term challenges to NASA. It is also unclear how DOE will use its new management approach to communicate to NASA challenges related to Pu-238 production. As a result, NASA may not have adequate information to plan for future missions using RPS. Standards for Internal Control in the Federal Government call for agency management to use quality information to achieve agency objectives and communicate quality information externally through reporting lines so that external parties can help achieve agency objectives and address related risks. In our September 2017 report, we recommended that DOE assess the long-term effects that known challenges may have on Pu-238 production quantities, time frames, and required funding, and communicate these potential effects to NASA. DOE stated that it agreed with our recommendation and would work with NASA to identify, assess, and develop plans to address known challenges. DOE also stated that the agency expected to complete this effort in September 2019. Chairman Babin, Ranking Member Bera, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this statement, please contact Shelby Oakley at (202) 512-3841 or OakleyS@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to the report on which this testimony is based are Jonathan Gill (Assistant Director); Samuel Blake, Kevin Bray, John Delicath, Jennifer Echard, Cindy Gilbert, Timothy Guinane, John Hocker, Michael Kaeser, Jason Lee, Tim Persons, Danny Royer, Aaron Shiffrin, Kiki Theodoropoulos, Kristin VanWychen, and John Warren. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's September 2017 report, entitled Space Exploration: DOE Could Improve Planning and Communication Related to Plutonium-238 and Radioisotope Power Systems Production Challenges ( GAO-17-673 ). The National Aeronautics and Space Administration (NASA) selects radioisotope power systems (RPS) for missions primarily based on the agency's scientific objectives and mission destinations. Prior to the establishment of the Department of Energy's (DOE) Supply Project in fiscal year 2011 to produce new plutonium-238 (Pu-238), NASA officials said that Pu-238 supply was a limiting factor in selecting RPS-powered missions. After the initiation of the Supply Project, however, NASA officials GAO interviewed said that missions are selected independently of decisions on how to power them. Once a mission is selected, NASA considers power sources early in its mission review process. Multiple factors could affect NASA's demand for RPS and Pu-238. For example, high costs associated with RPS and missions can affect the demand for RPS because, according to officials, NASA's budget can only support one RPS mission about every 4 years. Expected technological advances in RPS efficiency could reduce NASA's demand for RPS and Pu-238. DOE has made progress in reestablishing Pu-238 production to meet NASA's future demand to fuel RPS and has identified challenges to meeting its production goals. Specifically, since the start of the Supply Project, DOE has produced 100 grams of Pu-238 and expects to finalize production processes and produce interim quantities by 2019. However, DOE has also identified several challenges to meeting the Supply Project goal of producing 1.5 kilograms (kg) of new Pu-238 per year by 2026. DOE officials GAO interviewed said that DOE has not perfected the chemical processing required to extract new Pu-238 from irradiated targets to meet production goals. These officials also said that achieving the Pu-238 production goal is contingent on the use of two reactors, but only one reactor is currently qualified for Pu-238 production while the second reactor awaits scheduled maintenance. Moreover, while DOE has adopted a new approach for managing the Supply Project and RPS production—based on a constant production approach—the agency has not developed an implementation plan that identifies milestones and interim steps that can be used to demonstrate progress in meeting production goals and addressing previously identified challenges. GAO's prior work shows that plans that include milestones and interim steps help an agency to set priorities, use resources efficiently, and monitor progress in achieving agency goals. By developing a plan with milestones and interim steps for DOE's approach to managing Pu-238 and RPS production, DOE can show progress in implementing its approach and make adjustments when necessary. Lastly, DOE's new approach to managing the Supply Project does not improve its ability to assess the potential long-term effects of challenges DOE identified, such as chemical processing and reactor availability, or to communicate these effects to NASA. For example, DOE officials did not explain how the new approach would help assess the long-term effects of challenges, such as those related to chemical processing. Under Standards for Internal Control in the Federal Government , agencies should use quality information to achieve objectives and to communicate externally, so that external parties can help achieve agency objectives. Without the ability to assess the long-term effects of known challenges and communicate those effects to NASA, DOE may be jeopardizing NASA's ability to use RPS as a power source for future missions.", "document_type": "gao"}
{"report": "Document services at DOD are generally encompassed by three broad categories, shown in figure 1. Printing and reproduction includes the high-speed, high-volume reproduction of printed documents, as well as the distribution of those products. Documents are printed internally by DOD components, which include the military services, or printing is procured through an organization such as DLA Document Services, the Government Publishing Office (GPO), or a commercial vendor. Device procurement covers the acquisition of all office-level and production-level equipment. Office-level equipment includes printers; copiers; multi-function devices (MFDs), which perform multiple functions—printing, copying, scanning, and faxing—in one device; and all other devices that produce documents on-site and in low volume. Production-level equipment can include offset printers, digital presses, and other devices that are capable of high- speed, high-volume production of documents. Electronic content management is the digitization of printed documents and the creation and management of electronic content management systems, such as databases and automation services. The Under Secretary of Defense for Acquisition and Sustainment is the principal staff assistant and advisor to the Secretary of Defense on document services policies and programs and provides policy guidance regarding the operation and management of document services. DOD’s Instruction on document services also designates DLA Document Services as DOD’s single manager for printing and high-speed, high- volume duplication. This includes both the operation of DOD’s in-house print facilities and the procurement of such services from outside DOD. It also establishes DLA Document Services as the preferred provider of document conversion and automation services within DOD. DOD is in the process of revising its instruction on document services and is considering changes to DLA’s single manager role. DLA Document Services customer service network is comprised of a headquarters located in New Cumberland, Pennsylvania and 132 production facilities worldwide. Each military service also provides internally some document services of the type assigned to DLA. Service-level implementing guidance governs how each military service will provide document service-related activities to its components, commands, and organizations, such as through the Army Publishing Directorate, the Navy’s Chief Information Officer, and the Marine Corps Publishing and Logistics Systems Management Section. The Air Force’s major commands operate their own printing operations, according to a service official. DLA funds document services through the Defense-wide Working Capital Fund, which covers DLA’s costs for purchasing various commodities and providing services. DOD components and other customers, such as other federal agencies, reimburse the Defense-wide Working Capital Fund through the purchase of these commodities and services. In obtaining document services from DLA, DOD components—including the military services—use annual appropriations and their own working capital funds to reimburse the Defense-wide Working Capital Fund. DLA Document Services’ primary customers, by sales, are shown in table 1. DOD components can also fund document services outside of DLA Document Services with annual appropriations. Beginning in 2011, Congress, the federal government, and DOD initiated efforts to increase efficiencies in various areas involving document services. For example, Executive Order 13589 directed agencies to pursue steps to reduce administrative costs across the federal government by setting reduction goals for certain areas, such as printing and employee use of IT devices. According to DOD, it set—and achieved—a goal of a 20 percent reduction in fiscal year 2013 spending in these areas. Following this effort, in 2015, the Senate Committee on Appropriations recommended that DOD work with the Office of Management and Budget to reduce costs for printing and reproduction by 34 percent. DOD issued a report in December 2016 that identified the reductions it would make to achieve this goal. The plan focused on two main areas: emphasizing electronic content management over a reliance on printed materials and reducing the number of print devices. Starting in fiscal year 2015, DLA Document Services undertook a separate but complementary effort to further increase efficiencies and better accomplish its mission of providing document services to DOD and the military services. Figure 2 provides a time line of efficiency initiatives related to DOD’s document services. We discuss the status of these efforts later in this report. DOD has taken steps toward achieving efficiencies in its document services, including implementing a transformation plan for DLA Document Services, taking steps to reduce the cost and number of office print devices, and increasing its use of electronic content management. However, we identified four areas where further gains may be possible: better managing fragmentation in printing and reproduction services, reducing overlap in procuring print devices, meeting goals to reduce the number of print devices, and consolidating locations that provide mission specialty printing. In fiscal year 2015, DLA Document Services developed and, starting in fiscal year 2017, began implementing a transformation plan to further increase efficiencies and better accomplish its mission of providing document services to DOD and the military services. The objective of this transformation plan is to transition DOD from on-site printing to digital, online services by transforming the way customers, the workforce, and in- house facilities operate. Based on the plan, DLA Document Services is closing or consolidating 74 of its 112 brick and mortar facilities in the continental United States over the course of fiscal years 2018 and 2019, bringing its footprint to 38 facilities. An internal analysis of the transformation plan, conducted by DLA, estimates annual savings of 20 percent compared to DLA Document Services’ fiscal year 2017 operating costs once the plan is fully implemented in fiscal year 2019. Figure 3 shows DLA Document Services’ facility footprint prior to the implementation of its transformation plan and the locations it intends to retain following completion of the plan in fiscal year 2019. The transformation plan also calls for DLA Document Services to adjust the size and composition of its workforce by the plan’s completion in fiscal year 2019. For example, DLA Document Services intends to reduce its total number of full-time equivalent positions from about 600 to about 400, mainly through Voluntary Early Retirement Agreements and Voluntary Separation Incentive Payments. According to officials, DLA Document Services is also in the process of converting existing positions and hiring staff as customer relations specialists at each of the consolidated facilities. These officials noted that these positions are intended to help customers learn about and access the full range of services offered by DLA Document Services, including printing and reproduction services, office print devices, and electronic content management services. The goal of establishing these positions, officials stated, is to help facilitate the increased use of technology to meet customers’ needs, because DLA Document Services intends to transition customers to using an online portal to fulfill their printing needs. According to DLA, it is hiring many of the customer relations specialists from current DLA Document Services locations, and the planned reduction in its total full-time equivalent positions is a net reduction that accounts for the hiring of, and conversion of existing positions to, these customer relations specialists. DLA Document Services also plans to use and expand its existing public and private sector partnerships to support an increased emphasis on online services as it implements its transformation plan. For example, DLA Document Services currently works in partnership with GPO’s GPOExpress, an online portal for fulfilling printing and reproduction services in cooperation with FedEx Office. For those customer orders that DLA Document Services is unable to fulfill in-house, whether due to workload or lack of capability, GPO and GPOExpress meet these needs. According to a GPO official, GPOExpress will also serve customers located in areas where DLA Document Services has closed or consolidated 74 of its 112 U.S. facilities. We found that DLA Document Services’ transformation plan generally reflects leading practices for initiatives to consolidate physical infrastructure or management functions. For example, DLA Document Services identified goals for its transformation plan, ensured top leadership engagement, dedicated an implementation team, and established metrics that it is using to track progress toward the plan’s goals. As of June 2018, DLA Document Services is ahead in its goals for overall personnel reductions and for hiring customer service representatives and is behind on its goal for closing facilities, as shown in table 2. According to DLA Document Services officials, delays in reducing facilities have been due to a variety of factors, including earlier delays in hiring customer service representatives, equipment removal, and administrative delays at installations. There have also been delays as DLA Document Services has sought to minimize the effect of the consolidations on affected employees by offering buyout packages or transfers. DLA Document Services officials told us they anticipate that their efforts to consolidate facilities and reduce the overall number of employees will begin to achieve savings by fiscal year 2020. DOD, including the military services, has also taken steps to reduce the cost and number of office-level print devices, including identifying goals for reducing the number of print devices and plans for each military service to establish a mandatory source (e.g., one particular contract or organization) for obtaining print devices. The Army and Air Force have each established their own service-wide contracts for obtaining print devices and have mandated their use, while the Department of the Navy has mandated that the Navy and Marine Corps use DLA Document Services to obtain these devices. Military service officials told us that consolidating purchases with a single service-wide source reduces the cost of these devices by taking advantage of economies of scale, because vendors can offer better pricing for larger numbers of customer orders. Our previous work on strategic sourcing—a process that moves agencies away from numerous individual purchases to an aggregate approach—shows that such practices can allow agencies to better manage acquisitions and reduce costs. In addition, DOD and the military services have identified reducing the number of print devices as an opportunity for significant savings and have established guidance on reducing the number of these devices. DOD’s Chief Information Officer (CIO) issued a memorandum in 2012 on, among other things, reducing the number of print devices to one per office space of 12 or fewer users and assessing the ratio of printers to employees in larger spaces. In response to this memorandum and to Army Audit Agency findings of excessive user-to-printer ratios, the Secretary of the Army issued guidance in fiscal year 2013, requiring all Army commands, organizations, and activities to assess print capacity and plan for reductions, if necessary, based on the results of those assessments, which the Army last completed in fiscal year 2014. The Department of the Navy, in adopting DLA Document Services as the exclusive source for acquiring and sustaining print devices for the Navy and Marine Corps, also directed Department of the Navy officials to work with DLA Document Services to conduct assessments and develop a phased execution plan regarding the number and type of print devices Navy and Marine Corps organizations require. DLA began conducting these assessments for the Navy and Marine Corps in fiscal year 2014. In conducting these assessments, DLA Document Services reviews the inventory, cost, and use of output devices within an organization and then conducts an analysis that results in recommendations. According to DLA Document Services, its recommendations are designed to optimize an organization’s equipment to meet the organization’s needs, while reducing cost by shifting from single-function, or standalone devices, to shared, multifunction devices. Led by DLA Document Services, DOD has also made greater use of electronic content management, with the objective of reducing the volume and cost of printed materials. DLA Document Services is using a number of electronic content management systems, including its Document Automation and Content Services, and has deployed those systems for a number of DOD customers, such as DLA Distribution and U.S. Transportation Command. According to DLA Document Services officials, because Document Automation and Content Services functions as one large system with separate libraries for individual customers, and costs for the system are shared, increasing adoption of the system will reduce costs for each organization using the system. DOD’s document services initiatives have gained efficiencies, but we identified four areas where further gains may be possible, including (1) managing fragmentation in printing and reproduction services, (2) reducing overlap in procuring print devices, (3) meeting goals to reduce the number of print devices, and (4) consolidating locations that provide mission specialty printing. Our review found that DOD components, including the military services, use multiple approaches to obtain printing and reproduction services. These approaches include (1) using DLA Document Services to obtain printing and reproduction services, which, in turn, can outsource the work to GPO; (2) obtaining these services directly from GPO and its network of private sector vendors without first involving DLA Document Services; and (3) providing these services at in-house print locations, as shown in figure 4. For example, according to DLA Document Service officials, the Army Publishing Directorate, which is responsible for obtaining print services for the Department of the Army and local commands in the Washington, D.C. region, has been given authority by DLA Document Services to obtain printing and reproduction services directly from GPO under a contract that DLA Document Services established for that purpose. In contrast, the Army Marketing and Research Group (AMRG), which is responsible for developing and distributing printed materials for recruitment, obtains services directly from GPO without the involvement of DLA Document Services. Finally, some DOD components, such as the Navy, Marine Corps, and National Guard Bureau, also operate their own in-house print facilities. In our interviews with military service officials, they stated that they obtained services outside of DLA Document Services because of concerns regarding the cost, quality, and timeliness of its work, including inefficiencies that can result from using DLA Document Services to obtain printing services that are ultimately outsourced to GPO. For example, an analysis by the Army Publishing Directorate found that ordering directly through GPO results in savings of 35 percent, compared to fulfilling the same orders in house through DLA Document Services. In addition, headquarters officials with the Army and Navy stated that there have been significant delays in obtaining services through DLA Document Services, including cases where GPO ultimately fulfilled the orders. Navy officials also said that there were issues with the quality of DLA Document Services’ work, including orders they had to return repeatedly because of quality issues. Further, Army officials—as well as DLA Document Services—acknowledged that certain print jobs, including some bulk printing or magazine- and advertising-quality printing, are beyond DLA Document Services’ capabilities to provide in house. According to DLA Document Services officials, DLA Document Services offers value as a single manager for printing and reproduction services, including when GPO fulfills printing and reproduction orders. For example, DLA Document Services may be able to identify different options that allow customers to reduce costs, such as different contract options that GPO may not identify. Officials also said that DLA provides administrative support, such as centralized billing and record keeping, that the military services would have to replicate in their absence. These officials also stated that they were unaware of any persistent problems with the quality or timeliness of DLA Document Services’ work, and that they work with customers to resolve such issues when they arise. As noted above, DOD is in the process of revising DOD Instruction 5330.03, and a draft of the revision continues to assign DLA as the single manager for printing and reproduction services within DOD. However, despite the concerns expressed by some military service officials, DOD has not assessed the extent to which DLA Document Services is fulfilling its duties in accordance with DOD Instruction 5330.03 when considering any revisions to the instruction. Specifically, DOD has not assessed whether the products and services DLA Document Services provides are based on “best value,” as determined by quality, price, and delivery time, in accordance with the instruction. According to both DLA Document Services officials and the official at the office of the Under Secretary of Defense for Acquisition and Sustainment who is responsible for document services policy, the office of Acquisition and Sustainment has had minimal involvement in ensuring that DLA Document Services is fulfilling its duties in accordance with the instruction. For example, DOD’s last formal report on defense agencies and DOD field activities, including DLA Document Services, was completed in 2013, before DLA Document Services began implementing its transformation plan. Because it has not assessed DLA Document Services’ provision of document services since 2013, DOD has not ensured that DLA Document Services is providing the best value in an efficient and effective way. In light of changes such as DLA Document Services’ transformation plan, DOD has also not determined whether DLA’s single manager role as it is currently constituted is the most effective and efficient model for providing printing and reproduction services, or whether additional efficiencies may be possible. For instance, as a part of its transformation plan, DLA Document Services is increasing its use of GPO to fulfill customer orders, in lieu of using its in-house print facilities. As previously discussed, DLA Document Services can provide certain arrangements—such as establishing term contracts with GPO for certain customers while still providing administrative support for those customers—which may allow for greater efficiencies in printing and reproduction services. However, the draft revision to DOD Instruction 5330.03 does not address how DLA Document Services might use or expand these more flexible arrangements in light of its transformation plan. DOD Instruction 5025.01 requires that, when revising DOD issuances—such as DOD Instructions—the relevant Office of the Secretary of Defense component head will ensure that each assignment of authority or responsibility is verified to be a current requirement and is appropriately assigned. Without assessing whether DLA’s single manager role as it is currently constituted is the most effective and efficient model for providing printing and reproduction services in light of the current transformation plan, DOD may miss opportunities to gain additional efficiencies and better manage fragmentation when obtaining these services. Our review found that DOD has not implemented a department-wide approach for acquiring print devices, and DOD components use at least four different sources to acquire them, with costs that vary widely for similar devices. For example, as one of its services, DLA Document Services provides print devices, as well as associated maintenance and supplies, to DOD components. The Department of the Navy has adopted DLA Document Services as the exclusive source for acquiring and sustaining print devices for the Navy and Marine Corps. In addition, both the Army and Air Force have established their own contracts for print devices. Further, the Defense Information Systems Agency’s Joint Service Provider delivers print devices to organizations in the Pentagon and the national capital region, including the headquarters organizations of some of the military services, and officials noted that they use a government-wide contract managed by the National Aeronautics and Space Administration. Based on DLA Document Services’ assessments of customers’ print device requirements, its print device procurement service resulted in savings of between 33 and 45 percent compared to the customers’ prior costs for devices, primarily because of reductions in unnecessary devices and efficiencies that are gained through the economies of scale of a single organization procuring these devices. More specifically, DLA Document Services, as a part of its print device procurement service, assesses customers’ device requirements, which officials told us generally results in reducing the number of devices and the associated costs. In addition, DLA Document Services is pursuing, with the support of the General Services Administration, a “best-in-class” designation for its print device procurement service as a part of an effort to reduce costs by using multi-agency and government-wide acquisition vehicles. Army and Air Force officials told us that they had established their own print device procurement sources primarily because they believed that these sources are less expensive than using DLA Document Services. This is primarily because DLA Document Services charges administrative and overhead costs to support its operations, such as facility and maintenance costs, whereas the services’ own contracts do not require any additional fees, according to these officials. However, service officials were unable to provide any analyses or other documentation to support these determinations, and some service officials have been reassessing their approach to obtaining devices. For example, Air Force officials told us they recognize that print procurement services like those provided by DLA Document Services can result in savings, and these officials plan to issue guidance instructing commands to use either DLA Document Services or a similar service offered through the General Services Administration. Conversely, the Marine Corps official responsible for implementing the Department of the Navy’s policy on print devices told us that two installations had reported that the mandated use of DLA Document Services for print device procurement had not yielded savings. That official told us that the office plans to survey additional Marine Corps installations and may make recommendations on the current policy as a result. Our analysis found differences in cost among the contracts for similar devices and associated services (see fig. 5). However, we were unable to determine which sources provided the greatest value, because of differences in device specifications (such as handling different paper sizes or the capability to be used on classified networks), approaches to obtaining devices, and whether associated maintenance services and supplies were included. We analyzed DLA Document Services’ standard pricing for customers, contractor quotes for the Army’s mandatory source, and standard pricing for the Air Force’s mandatory source for devices with similar capabilities offered by two or more of the sources, and we found that prices varied widely. For example, we found that DLA Document Services offered customers high capacity color multifunction devices for between $280 and $315 a month, including maintenance and supplies. Vendor quotes we reviewed for similar devices through the Army’s mandatory source were for between $185 and $479 a month, not including maintenance and supplies, while the cost under the Air Force’s mandatory source was between $92 and $145, including maintenance but excluding supplies. Our prior work on strategic sourcing—an approach to procurement that moves away from numerous individual procurements to a broader aggregate approach—has found that this approach can result in considerable savings. OMB has also promoted category management— an approach that includes strategic sourcing as well as improving data analysis and more frequently using private sector (as well as government) best practices. OMB also encourages the use of multi-agency and government-wide approaches to acquiring goods and services. Our work has further found that collecting and using transactional data—information generated when the government purchases goods or services from a vendor, including specific details such as descriptions, part numbers, quantities, and prices paid for the items purchased—can help ensure that the benefits of strategic sourcing are maintained. The proposed revisions to DOD Instruction 5330.03 would designate the DLA Director as DOD’s single manager for procuring print devices. The current version of the Instruction designates DLA Document Services as the preferred provider for document conversion and automation services, which includes print device procurement services. Further consolidation of print device procurement, such as under DLA Document Services, might reduce costs. However, it is unclear what approach represents the best value to the government. This is because DOD has not conducted an analysis to establish which approach—or approaches—to obtaining print devices would be most cost effective, according to officials from DOD, DLA, and the military services. By assessing which approach to acquiring print devices represents the best value to the department, DOD would be better positioned, as it revises DOD Instruction 5330.03, to establish a policy that consolidates print device procurements and further reduces its costs. Beginning in fiscal year 2012, the DOD CIO and some of the military services established goals for reducing the number of print devices, which—according to internal DOD analyses—would save millions of dollars annually. DOD’s Chief Information Officer (CIO) issued a memorandum in 2012, which instructed DOD components, including the military services, to issue guidance to, among other things, reduce the number of print devices to one per office space of 12 or fewer users and assess the ratio of printers to employees in larger spaces. However, the services have not demonstrated that they have achieved their goals for print device reductions. Specifically, we found the following: Army: The Secretary of the Army issued guidance in 2013, requiring all Army commands, organizations, and activities to assess print device capacity and plan for reductions if necessary based on the results of those assessments. The guidance noted that those reductions could save millions of dollars annually. The guidance also included a requirement for biannual reporting by all Army commands, organizations, and activities on their print device inventory, number of printing devices required, and annual costs for printing device acquisitions. In June 2014, Army commands reported an average of 5 users for each single function printer, compared to an industry standard of 7 users per device and a DOD goal of one print device per office space of 12 or fewer users and assessing the ratio of printers to employees in larger spaces. According to Headquarters, Department of the Army officials, however, Army commands objected to the workload associated with this reporting requirement and discontinued issuing the reports. As a result, the Army did not follow through with enforcing the reporting, which limited the ability of Army officials to ensure that Army commands achieved the planned reductions. Navy and Marine Corps: The Department of the Navy established guidance in 2013, directing Department of the Navy officials to work with DLA Document Services to conduct assessments and develop a phased execution plan for the number and type of print devices Navy and Marine Corps organizations require. The guidance also directed Department of the Navy officials to develop policy requiring that the acquisition of new devices be exclusively through DLA Document Services. DLA subsequently conducted these assessments and found that the Navy and Marine Corps had an average of one device for every seven users. DLA Document Services recommended further reductions in the number of print devices across the Navy and Marine Corps, which it estimated could save over $63 million annually. However, Department of the Navy officials were unable to provide us with data on the total number of Navy and Marine Corps print devices that would indicate whether these device reductions and savings had occurred. Air Force: The Air Force did not issue any guidance based on the CIO memorandum. In response to our review, the Air Force developed draft guidance on print device management, which includes a goal of increasing the ratio of users to devices from 4 users per device to 12 users per device. The draft guidance also includes requirements for quarterly reporting by the Air Force Information Technology Business Analytics Office on the number of devices and related metrics to monitor progress. According to an Air Force analysis, doing so would achieve savings of over $67 million as it replaces or retires devices. As of July 2018, the Air Force had not fully implemented this guidance. Efforts by the military services to demonstrate that they have achieved print device reduction goals have been limited because they have not monitored the actions they have taken to reduce the number of print devices. Military service officials we interviewed said they were unaware of any efforts by the DOD CIO to ensure that device reductions occurred and that DOD components achieved their planned savings, such as providing information to the CIO on the status of their efforts to implement the guidance in the memorandum or data on reductions in the number of devices. Standards for internal control state that management should implement control activities through policies that use quality information to achieve an entity’s objectives, monitor the internal control system, and evaluate the results of the system. Efforts to implement the memorandum to achieve print device reduction goals have also been limited because responsibility for implementation was not clearly assigned. According to a DOD CIO official, the responsibility for the memorandum is not clearly assigned to a member of the CIO staff. This official also stated that because of the consolidation of information technology services in the Pentagon and the national capital region, the Defense Information Systems Agency’s Joint Service Provider assumed responsibility for implementing the memorandum. According to Joint Service Provider officials, however, they were only responsible for implementing the memorandum for the customers they serve in the Pentagon and the national capital region, and not for other DOD components outside those areas, such as military services. Standards for internal control state that management should ensure that key roles in operating the internal control system are clearly assigned. In the absence of these controls, such as reporting procedures to monitor actions to reduce the number of print devices and establishing clear responsibility for implementing the CIO memorandum, DOD has been unable to ensure that it is achieving any estimated savings, which could represent tens of millions of dollars annually. DLA Document Services may be able to realize additional savings from further consolidating facilities beyond those already identified, but it does not currently plan to do so, and it does not have the complete data it would need to make those determinations. As a part of its transformation plan, DLA Document Services identified 38 of its 112 facilities in the continental United States that it would retain. DLA Document Services officials stated that they considered a number of factors in determining whether to consolidate or retain facilities, including the number of staff and customers and the facilities’ workloads, but that they generally consolidated or retained facilities based on whether the facility provided “mission specialty” services. These mission specialties are services that DLA Document Services officials believe cannot be easily outsourced, such as printing and reproduction of classified and sensitive documents and on-demand printing and distribution of certain technical materials. However, our analysis of DLA Document Services data found that some facilities retained for certain mission specialties were responsible for a relatively small share of business for those specialties in fiscal year 2016 (the last full year for which data were provided), which suggests that further consolidations are possible. For example, for each of the four mission specialties for which DLA Document Services provided us with revenue data, the bottom quartile (25 percent) of the facilities retained for each specialty were responsible for less than 5 percent of the total revenue for that specialty, as shown in figure 6. We also found some cases in which DLA Document Services retained facilities that reported less revenue for a given specialty than facilities that it did not retain. According to officials, DLA Document Services took a number of factors into consideration in deciding on consolidations, including the complexity of the work at a facility and whether nearby sites could fulfill the orders. According to these officials, this allowed them to consolidate some facilities even if those facilities had greater revenue from a given mission specialty than other facilities. DOD Instruction 5330.03 requires DLA Document Services to provide effective and efficient document services support to DOD components. Our key practices for efficiency initiatives also note the importance of targeting both short-term and long-term efficiency initiatives. DLA Document Services officials stated that they would consider additional consolidations of facilities, but they have not conducted any analysis or planning to gain further efficiencies and do not currently have plans to do so. These officials stated they are committed to implementing the current transformation plan as announced. Officials also stated that they want to have a better sense of the results from the current transformation, including how workloads may change among facilities as consolidations occur, before considering additional consolidations. DLA Document Services’ current transformation plan includes the possible consolidation of facilities outside the continental United States following the implementation of its current plan (which only addressed facilities inside the continental United States); it does not have any plans for further consolidations within the continental United States. We also found that DLA Document Services did not have revenue data on all of its mission specialties to inform any future decisions on facility consolidations. Standards for internal control state that entities’ management should use quality information to achieve the entities’ objectives. However, DLA Document Services could not provide revenue data on three specific mission specialties—sensitive, classified, and Naval Nuclear Propulsion Information—for which it retained 30 of its facilities, including some that it retained exclusively for those specialties. According to DLA Document Services officials, they did not collect revenue data for these mission specialties because the facilities responsible for processing this type of information were generally retained, regardless of the revenue they produced, due to the sensitive nature of this work. As noted above, our analysis of available mission specialty data found that some facilities that DLA retained for certain mission specialties did a relatively small share of business for those specialties, indicating that there may be opportunities for additional facility consolidations. DLA Document Services officials told us that they had consulted with managers at the facilities about the amount of sensitive and classified they conducted. Because of these consultations, DLA Document Services is closing some facilities that handled sensitive and classified information. However, DLA Document Services does not routinely collect these data as it does for other mission specialties. By collecting and analyzing more complete revenue data on its mission specialties and using those data to evaluate opportunities for further consolidations, DLA Document Services would be better positioned to determine if opportunities exist to achieve additional cost savings. DOD reports some financial information regarding its document services, but this information does not accurately capture the scope of its document services mission. We reviewed the O&M obligations for printing and reproduction in fiscal years 2012 through 2016 that were reported to Congress by the military services. The total obligations ranged from about $534 million to about $736 million annually for the 5-year period (see fig. 7). Our analysis found that DOD’s O&M budget materials for printing and reproduction are inaccurate in two ways. First, the budget materials include obligations that are primarily for non-printing activities, such as the purchase of advertising and radio and television time. DOD and military service financial management officials prepare budget justification materials for their O&M funding requests on an annual basis. DOD and the services report printing and reproduction costs in the Summary of Price and Program Changes budget exhibit (the “OP-32”). It contains information by line item, detailing, among other items, printing and reproduction and related operations performed by the military services, DLA, or GPO. It also contains elements of expenses for purchases related to document services that are provided by DLA. The OP-32 exhibits are provided to Congress with the budget justification materials accompanying the President’s annual budget request. Officials from AMRG told us that, in accordance with Army guidance, printing and reproduction obligations are coupled with other obligations, including the purchase of advertising space and radio and television time for recruiting activities. Data provided by these officials show that in fiscal year 2016, AMRG’s obligations for printing and reproduction accounted for only about $2 million, or 2 percent, of the Army’s total fiscal year 2016 obligations included in the printing and reproduction line of the OP-32. Obligations for the publication of notices, advertising, and radio and television time accounted for about $78 million, or 63 percent, of the obligations reported for printing and reproduction. According to officials, the Navy, Air Force, and Marine Corps also follow their respective guidance on reporting printing and reproduction obligations together with these other obligations. Second, the budget justification information does not represent the full scope of the military services’ document services mission. Specifically, we found that the military services’ annual budget requests do not provide distinct information on two areas of their document services mission— print device procurement and electronic content management. Data we reviewed indicate that the military services obligate a considerable amount of resources in these areas. For example, according to DLA Document Services, sales to DOD and the military services for its print device services are comparable to sales for its printing and reproduction services. According to DLA data, in fiscal year 2017, it received in revenue about $108 million for print device and about $105 million for printing and reproduction services. Officials from the military services told us that obligations for these activities are included within the budget requests for various IT procurement categories. For example, Army Budget Office officials noted that the budget request for IT procurement and office supplies would include estimates associated with the purchase and sustainment of devices, but those line items would include other, non-printing obligations as well. According to these officials, the Army has made efforts to standardize the procurement of information technology, including collecting better data on spending for these types of devices. They told us that these efforts will result in shifts in how those obligations are reported in budget justification materials. The accuracy and completeness of DOD’s financial information about its document services can affect the allocation of budgetary resources, and inaccurate or incomplete information can hamper initiatives to gain further efficiencies. The Handbook of Federal Accounting Standards states that its managerial cost accounting concepts and standards are aimed at agencies providing reliable and timely information on the full costs of their federal programs that congressional and executive decision makers can use in making decisions about allocating federal resources and program managers can use in making decisions to improve operating economy and efficiency. DOD’s Financial Management Regulation lays out the structure of the budget exhibits that the military services develop during the department’s budget process. According to a DOD Comptroller official, DOD has historically reported its budget requests following the format prescribed by the Financial Management Regulation, and it follows this format in its reporting of printing and reproduction costs that are coupled with non-printing costs. Although the department has followed this format, the House Armed Services Committee has expressed concern about the military services’ printing budgets, noting that they were excessive and that portions of the budgets should be realigned to address unfunded readiness priorities. Further, as we discussed earlier in this report, DOD has outlined specific steps it intends to take to achieve a recommended goal of 34 percent reduction in spending on its printing and related activities. Without quality information on the scope of its document services mission, DOD will lack the information it needs to assess whether it is achieving this goal. To assess its progress toward achieving this goal, it will be critical for decision makers to have accurate financial information. According to a DOD Comptroller official, the Financial Management Regulation provides flexibility in how obligations are categorized and reported internally and to Congress, but DOD has not evaluated options to report more accurate funding information on its document services. Unless DOD evaluates options to report more accurate funding information and takes steps to improve the accuracy of its budgetary and financial information reporting, DOD and Congress will not have the full visibility over these costs that they need to make informed decisions. DOD is taking important steps to address congressional concerns about its spending on document service activities. Most notably, DOD is implementing its plan to transform its DLA Document Services mission and has taken certain steps to reduce the number and cost of print devices. These efforts have begun to produce results, but DOD can do more to build on these gains. By better managing fragmentation in printing and reproduction services, DOD could ensure that DLA Document Services is providing the best value in obtaining document services. DOD could further reduce overlap in print device procurement by assessing the various approaches employed by DLA and the military services to determine what constitutes the most cost-effective approach for the department. DOD has set goals intended to reduce the number of print devices and realize tens of millions of dollars in savings each year, but it has not demonstrated that it has achieved these savings, because of limitations in internal controls. Additional efforts aimed at collecting and analyzing information to examine areas for further consolidation of DLA Document Services’ mission specialty locations might provide DOD with additional cost savings. DOD’s O&M budget materials for printing and reproduction activities include information on non-printing activities that make up a much larger portion of its reported spending than printing does. In addition, these O&M budget materials omit information that would capture the full scope of DOD’s document services mission, such as device procurement and electronic content management, which are included with information technology budget materials. By providing more accurate costs for its document services activities, DOD would ensure that Congress and departmental leaders have the insight needed to make informed decisions. We are making a total of six recommendations to DOD. The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment assesses whether DLA Document Services’ single manager role for printing and reproduction provides the best value to the government—as determined by quality, price, and delivery time and in light of DLA Document Services’ transformation plan—and whether any additional efficiencies are possible, and use the results of that assessment to inform the revision of DOD Instruction 5330.03. (Recommendation 1) The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment assesses whether DOD’s current approach to obtaining print devices represents the best value to the government or whether other approaches, such as further consolidations under DLA Document Services as a proposed single manager for print device procurement, would be more cost effective. (Recommendation 2) The Secretary of Defense should ensure that the DOD CIO implements controls, such as reporting procedures, to routinely monitor actions to reduce the number of print devices, consistent with department-wide goals for reducing the number of print devices that are included in the CIO’s 2012 memorandum. (Recommendation 3) The Secretary of Defense should ensure that the DOD CIO assigns responsibility for implementing the CIO’s 2012 memorandum on optimizing the use of employee information technology devices. (Recommendation 4) The Secretary of Defense should ensure that the Director, DLA, in coordination with the Director, DLA Document Services and following implementation of the current transformation plan, gathers data on workload revenue at retained facilities and all mission specialties and evaluate whether additional opportunities for consolidation exist based on those data. (Recommendation 5) The Secretary of Defense should ensure that the Under Secretary of Defense (Comptroller), in consultation with the military services and DLA, evaluates options to report more accurate funding information and takes steps to improve the accuracy of its budgetary and financial information reporting on document services internally and to Congress, including making distinctions between printing and non-printing-related costs and information on device procurement and electronic content management. This information could be provided as part of DOD’s annual O&M budget justification materials. (Recommendation 6) We provided a draft of this report to DOD for review and comment. In its written comments, DOD concurred with five recommendations and identified specific actions and time frames for addressing them, and it partially concurred with the remaining recommendation. DOD’s written comments are reprinted in their entirety in appendix II. DOD also provided technical comments, which we incorporated into the report, where appropriate. DOD partially concurred with our recommendation that the Under Secretary of Defense (Comptroller), in consultation with the military services and DLA, evaluate options to report more accurate funding information and take steps to improve the accuracy of budgetary and financial information reporting on document services internally and to Congress, including making distinctions between printing and non- printing-related costs and information on device procurement and electronic content management. Our recommendation noted that this information could be provided as part of DOD’s annual O&M budget justification materials. DOD stated that the budget materials it submits to Congress are in compliance with OMB Circular A-11’s definitions of printing and reproduction and equipment. It further noted that Working Capital Fund exhibits provided with each annual budget include a breakout, by service, of the appropriated and Working Capital Fund activities and a detailed accounting of unit cost and pricing for all sub- activities of DLA Document Services. As we noted in our report, a DOD Comptroller official told us that the Financial Management Regulation provides DOD with flexibility in categorizing and reporting obligations internally and to Congress. However, we found that, based on this flexibility, DOD’s O&M budget materials reported obligations for printing and reproduction that were primarily for non-printing activities, such as the purchase of advertising and radio and television time. This budget information did not represent the full scope of DOD’s document services mission, since it omitted obligations for print device procurement and electronic content management. We also reported that DOD had not evaluated options to report more accurate funding information on its document services. DOD’s comments did not include plans to address this recommendation. We continue to believe that by providing more accurate costs for its document services activities, DOD would ensure that Congress and departmental leaders have the insight needed to make more informed decisions. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the DOD Chief Information Officer, the Under Secretary of Defense (Comptroller), the Under Secretary of Defense for Acquisition and Sustainment, the Director, Defense Logistics Agency, the Secretaries of the Army, Navy, and Air Force, and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to evaluate (1) the progress the Department of Defense (DOD) has made in achieving efficiencies in its document services and opportunities, if any, for further efficiencies, and (2) the extent to which DOD reports accurate financial information about its document services to key stakeholders. For our first objective, we reviewed DOD documents and interviewed DOD officials in order to understand how each military service obtains document services and identify department-wide and military service efficiency initiatives for these services. We also reviewed the Defense Logistics Agency’s (DLA) and the military services’ document services activities and compared them with a DOD statutory periodic review; DOD Instructions and other guidance; Office of Management and Budget (OMB) guidance; internal control standards; and best practices for consolidation initiatives, efficiency initiatives, and strategic sourcing to identify any potentially unnecessary duplication, overlap, or fragmentation and any opportunities for greater efficiencies. For specific efficiency initiatives identified by DOD officials or in DOD documents, we interviewed DOD officials regarding their progress in implementing and meeting the goals of these initiatives. To evaluate DLA Document Services’ transformation plan, we interviewed DLA Document Services officials, reviewed DLA Document Services documents regarding the plan, and assessed that plan based on leading practices for consolidation and efficiency initiatives. To assess the plan against these practices, one analyst reviewed the testimony and documents provided and compared it to our key questions to consider when evaluating proposals to consolidate physical infrastructure and management functions. A second analyst reviewed and concurred with the first analyst’s assessments. In any cases where there was a disagreement, the analysts discussed any discrepancies. If they were not resolved, a third analyst reviewed the assessments. To assess the extent to which there may be additional opportunities for facility consolidations, we obtained DLA Document Services data on revenue reported by each facility, which DOD Document Services officials told us they used in determining which facilities to consolidate as a part of their transformation plan. We analyzed the share of mission specialty revenue reported by facilities that (1) were retained by DLA Document Services for a given mission specialty, (2) were retained but not for a given specialty, and (3) were not retained. We further divided those facilities retained for a given specialty into quartiles to better understand the concentration of revenue in those facilities. To assess the reliability of these data, we interviewed DLA Documents Services officials regarding how the data were gathered, analyzed, reported, and used. We found that these data were reliable for the purpose of analyzing the shares of mission specialty revenue represented by each facility or group of facilities. To compare the cost of print devices offered by DLA Document Services, the Army, and the Air Force, we gathered and analyzed data on the monthly cost of multifunction devices with comparable specifications. We compared costs for similar devices based on device specifications including print speeds, monthly volumes, and paper capacities. Because Army and Air Force costs are estimated and there might be other differences in device specifications, approaches to obtaining devices, and which associated services were included, this analysis does not allow us to conclude which sources provide the greatest value. However, it illustrates differences in the cost of print devices across sources. For DLA Document Services, we used DLA Document Services’ standard monthly pricing for 2018 for various categories of multifunction devices. For the Army, Army officials were unable to provide data on the cost of multifunction devices purchased by Army customers. Instead, they provided us with documentation of vendor responses to requests for quotes from the Army’s mandatory source for print devices from April 2017 through January 2018. We reviewed those documents and assigned each device to a DLA Document Services category, based on the device’s specifications as identified in the documentation. We then estimated the monthly cost for each device. For leased devices, we used the monthly cost of the lease. For purchased devices, we used the total cost of the device divided by an estimated service life for the device. We estimated this service life using some indication available in the documentation, such as the length of time a maintenance agreement or extended warranty was provided for the device. Army officials provided 183 quotes for devices. Of those, we were able to include 24 in our analysis. We excluded the other 159 because either we could not determine the cost for individual devices in a quote, there was not enough information on a device’s specifications, there was no DLA Document Services equivalent for the device, or we were unable to estimate a service life based on the information provided. Because the information included all vendor quotes provided and not just those that were selected by a customer, the costs may not represent the actual costs of devices to the customer. For the Air Force, we used an estimated average monthly cost based the standard pricing included in the Air Force’s 2018 catalog for print devices. We reviewed the catalog and assigned each multifunction device offered to a DLA Document Services category, based on the devices’ specifications. The Air Force’s catalog contained 32 devices; we were able to determine the equivalent DLA Document Services category for 13 of those devices. All devices in the Air Force’s catalog are available for purchase and include a 4-year maintenance agreement; therefore, we estimated the average monthly cost as the purchase price divided by 48. To evaluate the extent to which DOD reports accurate and complete financial information to key stakeholders to manage its document services, we analyzed DOD’s operation and maintenance (O&M) budget justification materials for fiscal years 2012 through 2016 and Defense Logistics Agency data on its document services mission. We focused our review on O&M obligations reported by DLA and the military services, which accounted for an average of about 92 percent of DOD’s total document service costs reported by DLA Document Services in fiscal years 2012 through 2016. We interviewed officials, including officials from the Office of the Under Secretary of Defense (Comptroller), DLA Document Services, and the military services to determine how they reported costs for document services. We assessed the information we collected against federal accounting standards on how information should be recorded and communicated to management and others. To determine the reliability of the O&M budget justification data provided to us by DOD, we obtained information on how the data were collected, managed, and used through interviews with relevant officials. We determined that the data were sufficiently reliable to represent the military services’ total O&M obligations for document services for fiscal years 2012 through 2016. We interviewed officials and, where appropriate, obtained documentation, from the following organizations: Office of the Under Secretary of Defense for Acquisition, Technology Office of the Under Secretary of Defense (Comptroller) Department of Defense Chief Information Officer Defense Logistics Agency – Chief Information Officer Defense Logistics Agency – Document Services Defense Information Systems Agency – Joint Service Provider Army Chief Information Officer Army Publishing Directorate Army Marketing Research Group Army 7th Signal Command Headquarters Air Force – Chief Information Officer Department of the Navy – Chief Information Officer Headquarters Marine Corps Command, Control, Communications, Headquarters Marine Corps Publishing and Logistics Headquarters Marine Corps Budget and Execution Marine Corps Combat Camera Marine Corps Reprographic Equipment Management Program We conducted this performance audit from August 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Matthew Ullengren (Assistant Director), Adam Hatton (Analyst in Charge), Adam Brooks, Joanne Landesman, Amie Lesser, Daniel Ramsey, Carter Stevens, and Walter Vance made key contributions to this report.", "summary": "DOD has reported printing costs that totaled about $608 million, on average, during fiscal years 2010 through 2015. DLA Document Services has key DOD-wide responsibilities for (1) printing and reproduction, (2) print device procurement, and (3) electronic content management (e.g., digital document repositories). Other DOD components, including the military services, also maintain some document services capabilities at various locations. House Report 115-200 accompanying a bill for the National Defense Authorization Act for fiscal year 2018 included a provision for GAO to examine DOD's document services. This report evaluates (1) the progress DOD has made in achieving efficiencies in its document services and opportunities, if any, to achieve further efficiencies, and (2) the extent to which DOD reports accurate financial information about its document services to key stakeholders. GAO reviewed documents and interviewed officials regarding DOD's efficiency initiatives, including DLA Document Services' transformation plan; reviewed print device procurement contracts and pricing information; and analyzed DOD budget data for fiscal years 2012 through 2016. The Department of Defense (DOD) has taken steps to achieve efficiencies in its document services, including implementing a transformation plan to consolidate existing Defense Logistics Agency (DLA) Document Services facilities. However, GAO identified four areas where further gains may be possible: Managing fragmentation in printing and reproduction services. DOD has designated DLA Document Services as the single manager for printing and reproduction services, but DOD customers, citing concerns with DLA's services, have also obtained these services directly from the Government Publishing Office and via in-house print facilities (see fig.). DOD has not assessed DLA's performance in this role or whether additional efficiencies may be possible in light of DLA's transformation plan. Reducing overlap in procuring print devices. GAO found that DOD components used at least four different contract sources to acquire print devices. DOD has not assessed which acquisition approach represents the best value; doing so might better position DOD to further reduce its costs. Meeting goals to reduce the number of print devices. DOD and the military services have not demonstrated that they achieved established goals for reducing the number of print devices. Additional controls and assignment of oversight responsibilities to monitor progress could better enable DOD to achieve its cost savings goals, estimated to be millions of dollars annually. Consolidating DLA facilities. DLA is closing or consolidating 74 of its 112 facilities in the United States. However, GAO found that for four of seven types of specialty services, DLA plans to retain facilities that are responsible for less than 5 percent of the total revenue for each of those specialties, which suggests that further consolidations are possible. DOD includes the cost of non-printing activities, such as the purchase of advertising time for recruiting, within its budget materials for printing and reproduction. It does not include costs to acquire print devices and for electronic content management. As a result, DOD and the Congress lack the oversight into total document services costs needed to make informed decisions. GAO is making six recommendations, including that DOD evaluate options to achieve additional cost savings and other efficiencies in its document services and report more accurate budget data. DOD generally agreed with the recommendations.", "document_type": "gao"}
{"report": "The rise of e-commerce has contributed to a fundamental change in the market for counterfeit goods, according to our analysis of documents from CBP, ICE, and international organizations and our interviews with CBP and ICE officials. U.S. agencies and international organizations have observed a shift in the sale of counterfeit goods from “underground” or secondary markets, such as flea markets or sidewalk vendors, to primary markets, including e-commerce websites, corporate and government supply chains, and traditional retail stores. Whereas secondary markets are often characterized by consumers who are knowingly purchasing counterfeits, primary markets involve counterfeiters who try to deceive consumers into purchasing goods they believe are authentic. This shift has been accompanied by changes in the ways in which counterfeit goods are sold. In the past, consumers could often rely on indicators such as the location of sale or the goods’ appearance or price to identify counterfeit goods in the marketplace. However, counterfeiters have now adopted new ways to deceive consumers. For example, as consumers increasingly purchase goods online, counterfeiters may exploit third-party online marketplaces to gain an appearance of legitimacy and access to consumers. When selling online, counterfeiters may post pictures of authentic goods on the websites where they are selling counterfeits and may post pseudonymous reviews of their products or businesses in order to appear legitimate. Additionally, by setting the price of a counterfeit at, or close to, the retail price of a genuine good, counterfeiters may deceive consumers, who will pay the higher price because they believe the goods are real or who believe that they are getting a slight bargain on genuine goods. According to CBP seizure data and CBP officials, the volume, variety, and methods of shipment of counterfeit goods seized by CBP and ICE have changed in recent years. CBP reports indicate that the number of IPR seizures increased by 38 percent in fiscal years 2012 through 2016. According to CBP data, approximately 88 percent of IPR seizures made during this period were shipped from China and Hong Kong. The variety of products being counterfeited has also increased, according to CBP officials. CBP and ICE officials noted that, while many consumers may think of luxury handbags or watches as the most commonly counterfeited goods, counterfeiting occurs in nearly every industry and across a broad range of products. In addition, according to CBP data we reviewed and officials we spoke to, the methods of importing counterfeit goods into the United States have changed in recent years. Specifically, express carriers and international mail have become the predominant form of transportation for IPR-infringing goods entering the United States, constituting approximately 90 percent of all IPR seizures in fiscal years 2015 and 2016, according to CBP data. In an attempt to illustrate the risk that consumers may unknowingly encounter counterfeit products online, we purchased a nongeneralizable sample of four types of consumer products—shoes, travel mugs, cosmetics, and phone chargers—from third-party sellers on five popular e-commerce websites. According to CBP data we reviewed and officials we spoke to, CBP often seizes IPR-infringing counterfeits of these types of products. As table 1 shows, the rights holders for the four selected products we purchased determined that 20 of the 47 items were counterfeit. We did not identify any clear reasons for the variation among the counterfeit and authentic items that we purchased based on the products that they represented, the e-commerce websites where we bought the items, or the third-party sellers from whom we bought them. For three of the four product types, at least one item we purchased was determined to be counterfeit, with results varying considerably by product. Representatives of the rights holders also could not provide a specific explanation for the variation among authentic and counterfeit goods that we received. They noted that the results of covert test purchases can fluctuate depending on enforcement activities and the variety of goods and sellers on a particular website on a given day. Rights-holder testing also showed that we purchased at least one counterfeit item and one authentic item from each of the five e-commerce websites. In addition, our analysis of the customer ratings of third-party sellers from whom we bought the items did not provide any clear indications that could warn consumers that a product marketed online may be counterfeit. For example, we received both counterfeit and authentic items from third- party sellers with ratings that were less than 70 percent positive as well as sellers with ratings that were up to 100 percent positive. Rights holders were able to determine that items we purchased were not authentic on the basis of inferior quality, incorrect markings or construction, and incorrect labeling. Some counterfeit items we purchased were easily identifiable as likely counterfeit once we received them. For example, one item contained misspellings of “Austin, TX” and “Made in China.” Other items could be more difficult for a typical consumer to identify as counterfeit. For example, the rights holder for a cosmetic product we purchased identified one counterfeit item on the basis of discrepancies in the color, composition, and design of the authentic and counterfeit items’ packaging. Counterfeit goods may also lack key elements of certification markings and other identifiers. For example, on a counterfeit phone charger we purchased, the UL certification mark did not include all components of the authentic mark. Figure 1 shows examples of these counterfeit items. The risks associated with the types of counterfeit goods we purchased can extend beyond the infringement of a company’s IPR. For example, a UL investigation of counterfeit iPhone adapters found a 99 percent failure rate in 400 counterfeit adapters tested for safety, fire, and shock hazards and found that 12 of the adapters tested posed a risk of lethal electrocution to the user. Similarly, according to a rights holder representative, counterfeits of common consumer goods, such as Yeti travel mugs, may contain higher-than-approved concentrations of dangerous chemicals such as lead, posing health risks to consumers. According to ICE, seized counterfeit cosmetics have been found to contain hazardous substances, including cyanide, arsenic, mercury, lead, urine, and rat droppings. Representatives of rights holders and e-commerce websites whom we interviewed reported taking independent action to try to protect IPR within their areas of responsibility. For example, both rights holders and e- commerce websites maintain IPR protection teams that work with one another and with law enforcement to address infringement issues. E- commerce websites may also take a variety of steps to block and remove counterfeit items listed by third-party sellers. These efforts rely on data collected through a variety of means, including consumer reporting of counterfeits, rights-holder notifications of IPR infringement, and corporate efforts to vet potential third-party sellers, according to private sector representatives. Our January 2018 report includes information on steps that consumer protection organizations and government agencies recommend consumers take to limit the risk of purchasing counterfeits online. These steps include, for example, buying only from authorized retailers online, avoiding prices that look “too good to be true,” and reporting counterfeit purchases. We identified a number of key challenges that the changes in the market for counterfeit goods can pose to CBP and ICE as well as to the private sector. First, the increasing sophistication of counterfeits can make it difficult for law enforcement officers to distinguish between legitimate and counterfeit goods. Second, as the range of counterfeit goods expands, CBP has a wider variety of goods to screen, which requires CBP officials to have in-depth knowledge of a broad range of products and of how to identify counterfeits. Third, counterfeiters may break up large shipments into multiple smaller express carrier or mail packages to decrease the risk of losing significant quantities of merchandise to a single seizure. This shift toward smaller express shipments of counterfeit goods to the United States poses challenges to CBP and ICE because, according to CBP officials, seizure processing requires roughly the same amount of time and resources regardless of shipment size or value. The changing marketplace also presents challenges to the private sector, according to representatives from rights holders and e-commerce websites. For example, it is more difficult for rights holders and e- commerce websites to identify and investigate individual counterfeit cases, because e-commerce websites face a growing inventory from a larger registry of sellers. Tracking goods from known counterfeiters through various website fulfillment and delivery mechanisms is also a significant challenge for the private sector. Furthermore, the growth of e- commerce has accelerated the pace at which counterfeiters can gain access to consumers or reinvent themselves if shut down. CBP and ICE engage in a number of activities to enhance IPR enforcement; however, while ICE has assessed some of its efforts, CBP has taken limited steps to do so. CBP’s and ICE’s IPR enforcement activities broadly include detecting imports of potentially IPR-infringing goods, conducting special operations at U.S. ports, engaging with international partners, and undertaking localized pilot programs or port- led initiatives. CBP and ICE have collected some performance data on activities we reviewed, and ICE has taken some steps to better understand the impact of its efforts, such as creating a process to track cases it deems significant. However, we found that CBP has conducted limited evaluation of its efforts to enhance IPR enforcement. Consequently, we concluded that CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities. We recommended in our report that CBP take steps to evaluate the effectiveness of its IPR enforcement efforts; CBP concurred with this recommendation. Our analysis showed that CBP and ICE interagency collaboration on IPR enforcement is generally consistent with the following selected key practices for effective interagency collaboration: (1) define and articulate a common outcome; (2) establish mutually reinforcing or joint strategies; (3) identify and address needs by leveraging resources; (4) agree on roles and responsibilities; and (5) establish compatible policies, procedures, and other means to operate across agency boundaries. For example, the agencies may leverage resources by collocating staff or sharing their expertise. CBP and ICE have also issued guidance and developed standard operating procedures to clarify roles and responsibilities. CBP and ICE also coordinate with the private sector in a variety of ways, such as obtaining private sector assistance to determine whether detained goods are authentic and to conduct training. Representatives of rights holders and e-commerce websites noted that information shared by law enforcement entities is critical to private sector IPR enforcement, such as pursuing civil action against a counterfeiter or removing counterfeit items from websites. In the Trade Facilitation and Trade Enforcement Act of 2015, Congress provided CBP with explicit authority to share certain information with trademark and copyright owners before completing a seizure. CBP officials stated that they share information about identified counterfeits with e-commerce websites and rights holders to the extent possible under current regulations. However, according to private sector representatives we spoke to, restrictions on the amount and type of information about seized items shared by CBP limit the ability of rights holders and e-commerce websites to protect IPR. CBP officials noted that there are legal limitations to the amount and type of information they can share, particularly if the e-commerce website is not listed as the importer on forms submitted to CBP. Several private sector representatives stated that receiving additional information from CBP would enhance their ability to protect IPR. Representatives of one website noted that information on the exterior of seized packages, such as business identifiers on packages destined for distribution centers, would be helpful for identifying groups of counterfeit merchandise from the same seller. However, according to CBP officials, CBP cannot provide such information to e-commerce websites. Representatives of one e-commerce website noted that ICE sometimes shares information related to an investigation, but that ICE’s involvement in the enforcement process begins only after CBP has identified and seized counterfeit items. Representatives of two e-commerce websites stated that, because of the limited information shared by CBP, they may not be aware of IPR-infringing goods offered for sale on their websites, even if CBP has seized related items from the same seller. According to CBP officials, CBP is reviewing options for sharing additional information with rights holders and e-commerce websites and is assessing what, if any, additional information would be beneficial to share with private sector entities. CBP officials stated that they have not yet determined whether changes to the amount and types of information provided to e-commerce websites would require regulatory changes or additional legal authorities. These officials also said that they have discussed differences in CBP’s and ICE’s information sharing with ICE officials. In our report, we recommended that CBP, in consultation with ICE, assess what, if any, additional information would be beneficial to share with the private sector and, as appropriate, take action to enhance information sharing where possible. CBP concurred with this recommendation. Chairman Hatch, Ranking Member Wyden, and Members of the Committee, this concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Kimberly Gianopoulos, Director, International Affairs and Trade, at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Joyee Dasgupta, Kara Marshall, Katie Bassion, Kristen Timko, Reid Lowe, Sarah Collins, Neil Doherty, Ramon Rodriguez, Helina Wong, Julie Spetz, Kevin Loh, Wayne McElrath, Grace Lui, James Murphy, Mary Moutsos, Justin Fisher, Rachel Stoiko, and Sarah Veale. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's January 2018 report, entitled Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market , ( GAO-18-216 ). Changes in the market for counterfeit goods entering the United States pose new challenges for consumers, the private sector, and U.S. agencies that enforce intellectual property rights (IPR). Specifically, growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products. For example, 20 of 47 items GAO purchased from third-party sellers on popular consumer websites were counterfeit, according to testing by the products' rights holders (see table), highlighting potential risks to consumers. The changes in the market for counterfeit goods can also pose challenges to the private sector—for example, the challenge of distinguishing counterfeit from authentic goods listed for sale online—and complicate the enforcement efforts of U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE). CBP and ICE engage in a number of activities to enhance IPR enforcement; however, while ICE has assessed some of its efforts, CBP has taken limited steps to do so. CBP's and ICE's IPR enforcement activities broadly include detecting imports of potentially IPR-infringing goods, conducting special operations at U.S. ports, engaging with international partners, and undertaking localized pilot programs or port-led initiatives. CBP and ICE have collected some performance data for each of the eight activities GAO reviewed, and ICE has taken some steps to understand the impact of its efforts. However, CBP has conducted limited evaluation of its efforts to enhance IPR enforcement. Consequently, CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities. CBP and ICE generally collaborate on IPR enforcement, but according to private sector representatives, restrictions on CBP's information sharing limit private sector enforcement efforts. GAO found that CBP and ICE have undertaken efforts that align with selected key practices for interagency collaboration, such as participating in developing a national IPR enforcement strategy and agreeing on roles and responsibilities. However, sharing additional information about seized items with rights-holding companies and e-commerce websites could improve enforcement, according to private sector representatives. CBP officials said they share information to the extent allowed under current regulations, but CBP has not completed an assessment of what, if any, additional information would be beneficial to share with private sector entities. Without such an assessment, CBP will not know if sharing additional information requires regulatory or legal changes.", "document_type": "gao"}
{"report": "Fintech—originally short for financial technology—refers to the use of technology and innovation to provide financial products and services. For purposes of this report, fintech firms are nontraditional technology- enabled providers, such as start-ups or more established technology firms, such as Apple or Google, that are offering traditional financial products or services to consumers. Fintech products or services are typically provided—sometimes exclusively—through the Internet or via mobile devices, such as smartphones, rather than being provided through face-to-face visits to financial institution branches. The products and services that fintech firms offer include: payments between individuals, and between individuals and loans to consumers and businesses; advice on wealth management or general financial activities; and distributed ledger technology used to make payments, record and track asset ownership, and other purposes. Various fintech firms offer ways for individuals to make payments and transfer value, including for purchasing goods or services or for transferring money to individuals domestically or internationally. The payments offered by these providers are often conducted using applications (apps) on smartphones or other mobile devices. Often these fintech payments involve the use of accounts linked to existing debit or credit cards and are processed through the existing networks and channels for these types of payments. In some cases, fintech providers may also route their payments through the Automated Clearing House networks, which have traditionally been used to facilitate automatic bill paying to utilities or other merchants or funds transfers between banks. Fintech payments can also be made by charging a consumer’s phone bill. For example, consumers can send charity contributions via text or charge in-app purchases to their mobile phone bill. One common fintech payment method involves mobile wallets, or electronic versions of consumers’ wallets, which offer consumers the convenience of conducting transactions without having to enter credit or debit card information for each transaction. Using a mobile wallet, consumers can store payment card information and other information on their mobile devices that is often needed to complete a purchase. Generally, mobile wallets replace sensitive information with random values—a process called tokenization—to provide greater security when making a payment, and transmit this information using existing credit and debit card networks. A variety of fintech firms provide mobile wallets, including Apple, Google, and Samsung. Consumers may use mobile wallets to make payments to other consumers or to businesses; in mobile applications; through mobile browsers; or in-person at a store’s point-of-sale terminal. Some providers, such as Paypal and Venmo, allow individuals to create accounts on mobile devices to make payments funded by debit or credit cards, as well receive and store funds sent to the account owner that can be used to make payments to others or buy goods from merchants. Figure 1 illustrates how a mobile wallet enables the payment information to be transferred by allowing compatible devices to exchange data when placed in very close proximity to each other using various technologies, such as wireless communication. Regarding the total volume of payments by fintech providers, the association representing state banking supervisors estimated that fintech payment firms were likely used to facilitate payments or currency exchanges of up to $189 billion in the first 2 quarters of 2017. In a 2016 report on consumers’ use of mobile financial services, the Federal Reserve’s survey of more than 2,220 respondents found that over 30 percent of consumers aged 18-44 had made payments using mobile phones sometime during 2015. According to a report by the Smart Payment Association, 200,000 locations accepted Apple Pay when it was launched in September 2014, but by February 2016, this number had reached 2 million. According to Paypal, it had 218 million active customer accounts at the end of the third quarter of 2017 and processed over 6 billion payments valued at more than $354 billion in 2016. Fintech lenders—often referred to as marketplace lenders and which operate almost exclusively online —offer a variety of loan types and may use different sources of funds than traditional lenders. The types of loans offered by fintech providers include consumer and small business loans. While these lenders may use traditional means of assessing borrowers’ creditworthiness, such as credit scores, they also may analyze large amounts of additional or alternative sources of data on other aspects of borrower characteristics, such as information from bank accounts, to determine creditworthiness. Fintech lenders can follow various models. For example, some conduct person-to-person lending in which loans are financed by individual investors. In other cases, the funds for these loans can come from institutional investors such as hedge funds, financial institutions, or from notes sold to individual investors. In some cases, funding for loans is obtained by securitizing previously-made loans and selling securities backed by the cashflows from the underlying loans. The fintech lenders that use external capital are referred to as direct lenders and include such firms as SoFi and Earnest. Figure 2 below shows the flow of funds for typical direct lenders. Other fintech lenders include lenders that partner with depository institutions—including banks or credit unions—to originate loans that are then purchased by the lender or by another investor. Examples of lenders partnered with depository institutions include LendingClub Corporation, Prosper, and Upstart. Figure 3 shows the flow of funds for such lenders. Some lenders, such as OnDeck, have now developed hybrid models, selling some whole loans to institutional investors while retaining servicing responsibilities. One firm that tracks fintech activities reported that the volume of lending by 13 of the most significant lenders had reached about $61 billion as of the end of September 2016, and other market monitors estimate that fintech lending volumes could grow to as much as $90 billion to $122 billion by 2020. Fintech firms are also offering wealth management or other financial advice, some with minimal or no human interaction. For example, new firms called robo-advisers are offering investors advice using algorithms based on these investors’ data and risk preferences to provide advice on recommended asset holdings and allocations. Fintech firms offering these advice services include Betterment, Personal Capital, and Wealthfront. Figure 4 illustrates a typical case of a consumer using a fintech wealth management adviser. One research firm estimated in July 2017 that robo-adviser firms would have as much as $1 trillion in assets under management by 2020 and as much as $4 trillion by 2022. In addition, some fintech firms—referred to as financial account aggregators—allow consumers to aggregate the information from their various financial accounts, including their assets in bank accounts and brokerage accounts, to enable them to better see their financial health and receive advice on alternative ways to save money or manage their finances. Consumers can access this combined information either online or on mobile devices. Account aggregator firms offering this type of advice on savings and other activities include Mint and HelloWallet. Distributed ledger technology (DLT) is a secured way of conducting transfers of digital assets in a near real-time basis potentially without the need for a central authority. DLT involves a distributed database maintained over a network of connected computers that allows network participants to share and retain identical cryptographically secured records. Such networks can consist of individuals, financial entities, or other businesses. Blockchain is one type of DLT. A blockchain is a shared digital ledger that records transactions in a public or private network. Distributed to all members in the network, the ledger permanently records, in a sequential chain of cryptographically secured blocks, the history of transactions that take place among the participants in the network. DLT products can have different types of access control. For example, some may be “unpermissioned” (public) ledgers that are open to everyone to contribute data to the ledger and have no central control, while others may be “permissioned” (private) ledgers that allow only certain participants to add records and verify the contents of the ledger. The financial services industry has identified various potential uses for DLT. These include tracking international money transfers or tracking the changes of ownership of various financial assets, such as or securities like bonds or stocks or derivatives like swaps contracts. In addition, DLT is being used to track ownership of bitcoin, a virtual currency, specifically using a blockchain. Some companies are using DLT to raise funds. According to a recent bulletin by U.S. securities regulators, these virtual coins or tokens are being created and then disseminated using DLT as part of offerings known as token sales or initial coin offerings. As part of these token sales, purchasers may use fiat currency (e.g., U.S. dollars) or virtual currencies to buy these virtual coins or tokens. Currently, the capital raised from the sales may be used to fund development of a digital platform, software, or other project; or, the virtual tokens or coins may be used to access the platform, use the software, or otherwise participate in the project. After they are issued, in some cases the virtual coins or tokens may be resold to others in a secondary market on virtual currency exchanges or other platforms. A variety of federal and state regulatory bodies may oversee fintech firms or their activities to the extent these firms provide a regulated payment; lending; wealth management; or distributed ledger technology service or activity. Table 1 explains the basic functions of the relevant federal regulators. In addition to the federal regulators above, various state entities also conduct regulatory activities over fintech firms operating within their jurisdictions. According to the association representing state regulators, state financial services regulators license and supervise activities, such as money transmission, consumer lending, and debt collection, irrespective of technology deployed. Nonbank financial service providers that offer services directly to consumers are likely subject to state oversight. In addition to state financial services regulators, state securities regulators, state entities that oversee corporate activities, and state attorneys general have jurisdiction over certain fintech firms. In general, these entities may have authority to license or register firms, conduct exams, and take enforcement actions for violations of state laws or regulatory requirements. Fintech products in payments; lending; wealth management; and distributed ledger technology can provide consumers and the broader financial system with various benefits but may also pose risks similar to those of traditional products. While existing laws apply to fintech products and services in most cases, some products pose additional risks that may not be sufficiently covered by existing laws. According to our prior work, literature we reviewed, and stakeholders we interviewed, consumer benefits of fintech products include greater convenience; lower cost; increased financial inclusion; faster services; and improved security. Greater convenience: Consumers can use fintech products and services on their mobile device to make payments; transfer money; easily obtain payment for shared expenses; obtain loans; or to receive investment advice without the time and expense of visiting a financial service provider’s physical location. They can also access these services outside of standard business hours. In addition, the ability to see information from all of their financial accounts together in a single dashboard provided by an account aggregator is more convenient than reviewing information from each account on separate statements. Lower cost: Innovations in payments, including the use of DLT, could reduce the cost of payments for consumers. For example, one fintech firm uses DLT to reduce the operational and liquidity costs traditionally incurred with some international payments. Some fintech providers do not charge fees for payments, so consumers save by avoiding paying for checks or incurring automated teller machine fees. In addition, because fintech providers often do not have overhead costs associated with physical locations and use automation instead of relying on large staffs to provide services, they may be able to pass these cost savings on to consumers. For example, according to a Treasury report, automated loan processing, underwriting, and servicing may allow fintech lenders to offer lower rates or fees on their loans because they have to hire fewer loan officers. Similarly, automation in robo-advising could allow consumers to obtain investment advice at a lower cost than if they obtained services from a firm that relied more heavily upon human advisers. Increased financial inclusion: Using alternative data may allow fintech lenders to offer loans to consumers whose traditional credit history may have been insufficient for banks to extend them credit. CFPB officials stated that using alternative data—including bill payment history as a proxy for debt repayment—could expand responsible access to credit, particularly to some consumers who are among the estimated 45 million people who lack traditional credit scores. Similarly, a study by FDIC staff noted that fintech accounts may also enable consumers whose traditional accounts are closed due to lack of profitability for the provider or other reasons to continue to have access to financial services. Also, robo-advising services can make investment advice more accessible to consumers who cannot meet account minimums at traditional advisers by offering lower account minimums. Faster services: Automation may reduce transaction times for services like loan approval or investment advice. Stored payment data in fintech providers’ mobile wallets may reduce transaction time for online purchases because consumers do not need to reenter billing information. Further, such data may reduce transaction time for in- store purchases because transactions using contactless payments are faster than transactions using card readers and cash. Peer-to- peer payments made via mobile wallets may transfer money faster than checks. Also, using DLT may greatly reduce settlement times for currency, derivatives, and securities transactions by improving processes or reducing the number of entities involved in a transaction. For example, one firm is using DLT to reduce settlement for securities from 2 days to the same day. Improved security: While credit and debit transactions have traditionally transmitted sensitive information that can be hacked and used to make fraudulent transfers, fintech providers’ mobile wallets generally replace this sensitive information with randomly generated numbers that mitigate the risk that transaction information can be used fraudulently (tokenization), according to the Federal Reserve’s Mobile Payments Industry Workgroup. Similarly, while lost or stolen credit and debit cards can be used to make fraudulent payments, a lost or stolen mobile device can have security features that protect a mobile wallet from unauthorized use. For example, according to FTC, mobile device features such as device passwords, fingerprint readers, and face recognition software can help protect consumer accounts from unauthorized access. Additionally, FCC notes in a consumer guide that consumers’ ability to disable their mobile devices remotely can help prevent fraudulent use of a consumer’s fintech provider accounts if their mobile devices have been lost or stolen. Further, mobile device Global Positioning System (GPS) data can help identify suspicious activity in consumer accounts or to ensure that a mobile phone being used at a particular merchant is actually at that location, according to the Federal Reserve’s Mobile Payments Industry Workgroup and others. The literature we reviewed and stakeholders we interviewed also identified potential risks fintech products pose to consumers, including fraud, discrimination, and unsuitable advice. In general, these risks are similar to those posed by traditional financial products. While laws that apply to traditional products also apply to fintech products in most cases, some fintech products pose additional risks that may not be sufficiently addressed by existing laws. While the legal framework for consumer protection applies to many of the risks associated with fintech products, the extent to which consumers benefit from these protections is a function of the existing regulatory framework and its coverage of fintech activity. We discuss the regulatory framework for fintech products in greater detail later in this report. Consumers face the risk of unauthorized transactions regardless of whether they use a traditional or fintech firm to make payments. CFPB officials we interviewed told us that some fintech products, such as mobile wallets, increase the number of firms involved in a transaction, which may increase the risk of unauthorized transactions. However, when consumers fund their mobile wallets by linking to traditional funding sources—debit or credit cards or bank accounts—consumer protection laws such as the Electronic Fund Transfer Act and the Truth in Lending Act generally apply. These acts and their implementing regulations provide that consumers can dispute charges to these accounts and liability for losses may be limited to $0 if disputes are made within specified time frames. Consumer protection laws, such as the Electronic Fund Transfer Act, which apply to traditional funding sources, do not yet cover payments funded by mobile wallet balances or mobile carrier billing. To address this gap in protections for mobile wallet funds, CFPB issued a final rule on prepaid accounts that will extend protections for error resolution and liability for unauthorized transfers to prepaid account and mobile wallet balances. This rule had previously been scheduled to become effective in April 2018, but in January 2018, CFPB delayed the effective date of the rule to April 1, 2019. However, fintech firms we interviewed told us that even when certain consumer protections are not required by statute or regulation, they voluntarily provide similar protections and disclose these protections in their terms of service. Agencies have also issued tips for consumers to safeguard their mobile devices and identify fraudulent payments. Similarly, wireless carriers have taken steps to mitigate fraudulent billing in response to enforcement actions, including offering services that prevent third parties from adding charges to consumer bills without consumers’ knowledge or permission— a practice known as “cramming.” However, FCC has found that fraudulent billing continues to be a problem. FCC’s July 2017 proposed cramming rule seeks to codify the agency’s existing prohibition against fraudulent billing through language explicitly prohibiting wireless carriers from placing third-party charges on consumers’ bills without consumer verification. In addition, FCC and FTC have issued tips for consumers and firms publicizing practices that help avoid cramming. Consumers also face the risk their funds could be lost due to the failure of their payment provider. Although consumers with funds in a bank account have protection from this risk through federal deposit insurance up to $250,000, consumers with funds in a mobile wallet may not be similarly protected. To address this risk, some fintech firms deposit consumers’ mobile wallet balances into an FDIC-insured bank or savings association, resulting in the funds being insured by FDIC up to the applicable deposit insurance limit in the event of the failure of the bank or savings association. Other fintech firms voluntarily disclose to consumers in their terms and conditions that any mobile wallet balances they hold are not FDIC insured. However, according to the Conference of State Bank Supervisors (CSBS), 49 states have laws that require fintech firms engaged in money transmission or stored value to self-insure through bonding, holding investments against funds held or transmitted, and meeting minimum net worth requirements. Further, consumers face the risk that their mobile wallet balances will not be accessible in a timely manner. Under the Expedited Funds Availability Act, banks are required to make customers’ deposited funds available to them within prescribed time frames. For example, banks are typically required to make funds a customer receives through an electronic transfer available by the next business day. However, as nonbanks, fintech firms are not subject to this act’s requirements and therefore do not have to make mobile wallet balances available under the same time frames. For example, one fintech firm we interviewed told us that most transfers from mobile wallets to bank accounts make funds available by the next business day, but certain circumstances, such as suspicious account activity, may cause the firm to delay transfers a few days. Another fintech firm we interviewed told us that transfer amounts are limited based on anti-money laundering requirements. However, fintech firms we spoke with voluntarily disclose the availability of funds and any limits on access in the terms and conditions provided to customers when they create their accounts. However, FTC recently settled with a fintech payment provider for delays in fund accessibility experienced by its users. In its complaint, FTC charged that the firm had failed to disclose that these funds could be frozen or removed based on the results of the firm’s review of the underlying transaction. As a result, consumers complained that at times, the firm delayed the withdrawal of funds or reversed the underlying transactions after initially notifying them that the funds were available. Consumers face risks associated with unclear terms and conditions regardless of whether they borrow from a traditional or fintech lender. For example, consumers could have difficulty understanding their repayment obligations or how those terms compare to terms offered by other lenders. However, the Truth in Lending Act requires lenders to provide consumers with standardized, easy-to-understand information about the terms of the loan and enables consumers to make claims against lenders for violating Truth in Lending Act requirements. Consumers also face risk of discrimination and unfair credit practices regardless of whether they borrow from a traditional or fintech lender. However, these risks may not be fully understood with fintech lenders that use alternative underwriting standards and consumer data—such as information on rent payments and college attended. For example, fintech firms assessing applicants’ creditworthiness with criteria highly correlated with a protected class—such as race or marital status—may lead to a disproportionate negative effect. As with traditional lenders, federal fair lending laws, such as the Equal Credit Opportunity Act, apply to fintech lenders. In addition, some fintech lenders have taken steps that aim to address this risk. For example, one fintech lender said it monitors the effect any changes to their underwriting models may have on fair lending risk. Consumers face risk of harm due to inaccurate credit assessments, but these risks are also less understood with fintech lenders that use alternative data to underwrite loans. For example, inaccurate data or models used by a fintech lender could classify borrowers as higher credit risks than they actually are. This could result in those borrowers paying unnecessarily high interest rates and increasing their risk of default or could result in creditworthy borrowers being denied credit. Whereas the Fair Credit Reporting Act requires that borrowers have an opportunity to check and correct inaccuracies in credit reports, borrowers could face more challenges in checking and correcting alternative data that some fintech lenders use to make underwriting decisions because alternative data are not typically reflected in credit reports. However, the Equal Credit Opportunity Act requires lenders, including fintech lenders, that deny credit to applicants to disclose the specific reasons for denial. Alternatively, if the fintech lender’s underwriting is too lax, loans could be made to borrowers who lack the ability to repay them. Borrowers who default under these circumstances then face limited access to and higher prices for credit in the future. Consumers face risks of receiving unsuitable investment advice regardless of whether they obtain advice from a traditional or robo- adviser. While a human adviser may be able to mitigate this risk by probing consumers for more information to assess needs, risk tolerance, or other important factors, a robo-adviser’s ability to mitigate this risk may be based on a discrete set of questions to develop a customer profile. In addition, advisers could make inaccurate or inappropriate economic assumptions, perhaps due to a failure to factor in changing economic conditions, which could result in flawed investment recommendations. While human advisers may be able to mitigate this risk to some degree based on their ability to adjust to economic conditions, a robo-adviser’s ability to mitigate this risk is based on whether its algorithm has been updated to reflect the most recent economic conditions. Because, as we discuss below, robo-advisers generally are required to comply with the same requirements as traditional investment advisers, customers of robo- advisers and traditional advisers receive the same protection from these risks. Consumers who use fintech services that provide an aggregated view of their accounts at other financial institutions could potentially be more exposed to losses due to fraud. If a consumer authorizes an account aggregator to access their financial accounts and grants the aggregator authority to make transfers, the consumer may be liable for fraudulent transfers made. CFPB is studying risks associated with entities that rely on access to consumer financial accounts and account-related information, and has issued a related request for information (we address this issue later in this report). DLT can be used to issue and distribute digital assets known as tokens to consumers and investors. Virtual currencies—tokens that are digital representations of value that are not government-issued legal tender— could pose some unique risks to consumers. For example, the ability of virtual currency users to recover funds lost due to fraud or errors may be more limited than that of customers using traditional products like payment cards or bank transfers to make payments. Whereas traditional transactions can be reversed to correct fraud or errors, many virtual currency transactions are designed to be irreversible. Also, unlike storing dollars in a bank account, if a consumer stores their virtual currency in a mobile wallet, their wallet provider may disclaim responsibility for replacing virtual currency that is stolen. Further, CFPB’s prepaid accounts rule, which will extend consumer protections to prepaid cards and mobile wallets with stored value, explicitly does not extend consumer protections to virtual currencies. However, firms that transmit, exchange, hold, or otherwise control virtual currency may be subject to state consumer protection law. In addition to fraud and errors, consumers who use virtual currencies may face other risks of loss. Federal deposit insurance does not apply to virtual currency balances. As a result, according to FDIC staff, consumers could face losses if they store their virtual currencies with a mobile wallet firm that goes out of business unless the firm offers private insurance. Further, if consumers store their virtual currency on their own and misplace or forget their account access information, they may lose access to their funds. Unlike bank accounts for which users can reset passwords or usernames, some wallets do not offer a way to reset such information. To help consumers address these risks, federal agencies and state regulators have issued documents publicizing practices that may help consumers use virtual currency more safely. Tokens—which may also function similarly to a security—could pose some unique risks to investors, and some investor protections may not be available. Token sales, sometimes known as initial coin offerings or ICOs, are being used by firms to raise capital from investors and may pose investor risks, including fraud and theft. For example, one firm allegedly promised investors it would invest its token sale earnings in real estate, but instead allegedly defrauded investors of their investments. Fraud and theft are risks of other securities offerings, and investors receive protections from these risks under the Securities Act of 1933 and the Securities Exchange Act of 1934 for token sales that meet SEC’s definition of a security. However, these protections do not apply to investors who participate in token sales that do not meet the definition of a security. In December 2017, SEC issued a cease-and-desist order to one firm for failure to register their token sale with SEC. In addition, SEC has reported that an investor’s ability to recover funds may be limited if key parties to token sales are located overseas or operating unlawfully. To help investors address these risks, SEC and FINRA have issued documents publicizing risks of token sale investment. Tokens traded on a platform may also be considered commodities and may pose investor risks including fraud and theft. Platforms that facilitate leveraged, margined, or financed trading of tokens may be subject to a requirement to register with the CFTC. To help investors understand tokens, CFTC has issued a report publicizing potential risks of virtual currencies and clarifying cases in which investors may be at risk because CFTC does not have oversight authority. For example, virtual currency and token exchanges that conduct certain spot or cash market transactions but do not use leverage, margin, or financing are not required to follow all of the rules that regulated exchanges are required to follow. DLT applications may pose other unknown risks compared to the technologies and processes they replace, given that the technology is in the early stages of development. For example, CFTC and the Federal Reserve have identified cybersecurity and operational risks as potential risks of DLT. FDIC officials said that finality of a transaction under a DLT settlement may potentially raise legal challenges. Also, applications of DLT that depend on consensus for validating transactions are vulnerable to a “51 percent attack,” which could defraud consumers by revising their transactions or sending fraudulent payments. However, according to market observers, such an attack is unlikely and has not been carried out. Consumers face the risk of financial loss due to data breaches regardless of whether they use a traditional or fintech firm, and these breaches could undermine the financial system by eroding consumer trust in financial institutions. Similar to traditional products and services that collect sensitive consumer information and are connected to the Internet, fintech products and services may be vulnerable to cyberattack and can pose data security risks. In addition, one market observer we interviewed told us that hackers may target these new fintech firms before their security systems are mature. However, according to literature we reviewed and fintech firms and market observers we interviewed, some fintech firms have adopted technologies or practices designed to mitigate security risks. For example, new fintech firms can use the latest information technology systems to secure their products instead of having to update older systems. Additionally, as discussed above, some fintech firms use new techniques and leverage mobile device features to enhance data security, and one fintech firm said that it also uses technology that contacts clients if a data breach issue arises. Like traditional financial institutions, rules and guidelines implementing the Gramm-Leach-Bliley Act (GLBA) generally require fintech firms to secure customer information. In addition, some regulators have issued guidance to consumers publicizing practices that help avoid security problems when using fintech products. Regulators have also issued guidance to businesses including fintech firms that recommends that they adopt policies and procedures that address the prevention and detection of, and response to, cybersecurity threats. For example, the New York State Department of Financial Services requires regulated entities to meet cybersecurity requirements outlined in regulation. Some fintech firms may also pose privacy concerns because they may collect more consumer data than traditional firms. For example, fintech lenders that use alternative data in underwriting may have sensitive information about consumers’ educational background, mobile phone payments, or other data. One fintech firm we spoke with requires consumers to provide additional data, such as what a payment is for, in order to make peer-to-peer payments. Some data aggregators may hold consumer data without disclosing what rights consumers have to delete the data or prevent the data from being shared with other parties. A leak of these or other data held by fintech firms may expose characteristics that people view as sensitive. GLBA generally requires fintech firms and traditional financial institutions to safeguard nonpublic personal information about customers. According to literature we reviewed and fintech firms and market observers we interviewed, as with data security, some fintech firms use new technologies or mobile device features to mitigate data privacy risks. In addition, some regulators have issued guidance to consumers publicizing practices that help maintain privacy when using online products and services, including those provided by fintech firms. Regulators have also issued GLBA guidance to businesses including fintech firms recommending that they adopt policies and procedures to prevent, detect, and address privacy threats. Similar to traditional products and services, fintech products may be used to facilitate illicit activities, including money laundering, terrorist financing, and evading sanctions program requirements. For example, in 2015, the Financial Action Task Force (FATF) reported that new payment methods pose an emerging terrorist finance vulnerability because users can access these methods from anywhere in the world and it is difficult for enforcement agencies to identify the beneficiary. However, FATF found that the extent to which terrorist groups actually exploit these technologies is unclear and said that enforcement agencies should monitor these risks for developments. Further, FATF has stated that fintech innovations provide an opportunity to bring anti-money laundering efforts into the 21st century by reducing dependency on cash and informal systems and making it easier for authorities to detect and follow illicit financial flows. Relevant laws that prohibit financial crimes apply to fintech products. For example, the Bank Secrecy Act (which established reporting, recordkeeping, and other anti-money laundering requirements) and economic sanctions programs (which create economic penalties in support of U.S. policy priorities) apply to all financial firms that transmit money regardless of whether they use traditional or fintech products. Finally, market observers have questioned whether fintech activities could create risks to overall financial stability, but many have said such risks are relatively minimal due to fintech firms’ small market presence. While direct or indirect linkages between large financial institutions could lead financial problems at one firm to create similar problems for other firms that can undermine financial stability, studies by regulators in various countries and international organizations found that fintech firms have not generally reached a level of interconnectedness where their financial distress would threaten the stability of other financial system participants. For example, the Bank for International Settlements and the Financial Stability Board reported that in 2015 fintech accounted for 2 percent of new credit in the United States. Additionally, after assessing virtual currencies, the European Central Bank concluded in a November 2017 report that virtual currencies were not a threat to financial stability due to their limited connection with the real economy, their low volume traded, and the lack of wide user acceptance. However, the Financial Stability Board and other market observers have noted that fintech firms could potentially affect financial stability in both positive and negative ways as the activities and firms evolve. For example, fintech firms could help decentralize and diversify the financial services market, and they could diversify exposure to risk by increasing access to financial services for consumers and small businesses. On the other hand, providers could potentially also increase risks to financial stability. For example, robo-advisers could amplify swings in asset prices if their risk models rely on similar algorithms, making the portfolio allocation methods of robo-advisers more highly correlated than those of traditional advisers, although according to the Financial Stability Oversight Council, this risk could also arise if traditional advisers follow similar allocation strategies. Similarly, according to the Financial Stability Board, fintech lenders could potentially amplify swings in credit availability if the investors that fund many marketplace lending products are more willing to fund loans during market upturns or less willing to fund loans during market downturns. To help balance these potential benefits and risks, the Financial Stability Board recommended that international bodies and national authorities continue to monitor the issues and consider the effects of fintech in their risk assessments and regulatory frameworks. The extent to which fintech firms are subject to federal oversight of their compliance with applicable consumer or other laws varied. Fintech firms that offer investment advice typically register with and are subject to examinations by federal securities regulators. Some fintech firms providing payments or loans that have partnered with federally regulated banks or credit unions may receive indirect oversight from federal financial regulators as part of their efforts to ensure that their regulated entities are adequately managing the risks of these arrangements. Nonpartnered fintech firms would not typically be subject to routine examinations by a federal financial regulator but would instead be subject to state regulatory oversight and enforcement. While fintech firms and financial institutions are subject to different degrees of routine federal oversight, we found that indications of fintech firms causing widespread harm were limited as they were subject to fewer complaints than large financial institutions. Fintech robo-advisers offering wealth management advice would generally be subject to the same federal and state oversight as traditional investment advisers. Under the Investment Advisers Act of 1940 and state securities laws, any entity or individual that offers investment advice for compensation generally must register as an investment adviser—with SEC or states—and adhere to various reporting and conduct requirements. When providing advice, investment advisers—traditional or fintech—are considered fiduciaries to their clients, which means they owe a duty of care and loyalty to their clients, and they must disclose all actual or potential conflicts of interest, and act in their clients’ best interest. To review for compliance with this standard and other applicable requirements, staff from SEC and state securities regulators conduct examinations of registered investment advisers. Specifically, state regulators are responsible for conducting examinations of investment advisers that operate in fewer than 15 states and hold client assets under management of less than $100 million. However, according to staff from the North American Securities Administrators Association—a membership organization for state, provincial, and territorial securities administrators in the United States, Canada, and Mexico—no robo-adviser firms were solely regulated by the states as of October 2017. Some fintech firms may be subject to indirect federal oversight as part of relationships they have entered into with regulated financial institutions. If fintech firms partner with federally-regulated financial institutions, such as a bank or credit union, federal financial regulators may conduct examinations of the regulated financial intuition that could include some review of the extent to which the fintech firm may affect the partner financial institution’s adherence to relevant regulations through the services provided to the financial institution. Regulators conduct these examinations in order to assess the risk to the regulated institution because the failure of the fintech firm to follow such laws could expose the bank or credit union to financial or other risks. As part of the indirect oversight of fintech firms, the financial institution would be expected by its regulators, under various third-party guidance issuances by these regulators, to ensure that any risks to the institution resulting from the relationship with the fintech firm are assessed and mitigated. Among other things, banks and credit unions should conduct due diligence on potential third-party partners, including having a process within the institution for managing the risks posed to their institution by the third party. For example, OCC third-party guidance states that banks should adopt risk management processes that are commensurate with the level of risk and complexity of the third-party relationship. These processes include establishing risk-mitigating controls, retaining appropriate documentation of the bank’s efforts to obtain information on third parties, and ensuring that contracts meet the bank’s compliance needs. Although fintech firms partnering with federally regulated institutions would be expected to follow the practices in this guidance, the extent to which they would be overseen by a federal financial regulator was limited. For example, FDIC and OCC staff told us that they had examined a fintech firm that provides financial account aggregation services to regulated institutions. This review focused on the fintech firm’s data security rather than its activities with consumers. FDIC staff also said they conducted exploratory discussions with some fintech lenders, but these firms were not part of their technology service provider examination program. However, as of November 2017, FDIC and OCC staff noted that they had not completed examinations of fintech firms within our scope. NCUA staff noted that NCUA does not have authority to examine services provided to credit unions by third-party service providers. In order to examine any services provided to credit unions, NCUA must rely on credit unions voluntarily providing information on the third-party service provider. However, NCUA’s staff noted some of their examiners had accompanied state regulators in an examination that involved a credit union’s partnership with a fintech payments firm. Fintech firms not providing investment advice or partnered with federally- regulated financial institutions would be subject to routine oversight by a federal regulator only under certain circumstances. For example, CFPB could examine some fintech firms as a result of its examination authorities. Specifically, it has supervisory authority over certain nondepository institutions, including mortgage lenders and servicers, payday and student loan providers, and “larger participants” in consumer financial product and service markets, which could include fintech providers. CFPB has conducted or plans to conduct examinations of fintech firms that meet the agency’s definition of ‘“larger participants” in sectors for which they have designated such participants. For example, according to CFPB staff, it has conducted a stand-alone examination of a fintech payments company that provides international remittances, and it has scheduled an examination of a fintech lender that provides student loans. As of October 2017, it had not defined other “larger participants” specifically for other markets in which fintech firms may be active, but it is considering a proposed rule to supervise larger participants in the personal loan markets, which might include larger fintech lenders. CFPB may also conduct examinations of individual companies that it determines pose risks to consumers, as identified in public orders. Furthermore, CFPB’s supervisory authority also extends to third-party service providers of nondepository institutions overseen by the agency. Fintech firms may also be subject to examinations related to their compliance with anti-money laundering laws and related requirements. FinCEN, which is responsible for administering federal anti-money laundering laws, has authority to examine any fintech firms conducting money transmission, according to Treasury officials. These firms would be required to comply with the applicable anti-money laundering and counter-terrorist financing requirements, including registering with FinCEN, establishing anti-money laundering programs, and reporting suspicious activities to FinCEN. However, FinCEN delegates routine anti- money laundering examinations of federally-chartered or registered financial institutions to the federal financial institution regulators. In other cases, firms subject to anti-money laundering requirements, including fintech payments or lending firms, could be examined by state regulators and the Internal Revenue Service. Fintech firms not subject to routine federal supervisory oversight would instead generally be subject to state oversight. As of October 2017, 49 states, as well as the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands, required entities that provide money transfer services—which may include some fintech payments firms—to obtain licenses to conduct such activities in their jurisdictions according to documents from state regulator associations and CSBS staff. In addition, all states and the District of Columbia required lending licenses for consumer lenders operating in their states, according to CSBS staff. Furthermore, some states have created or provided guidance on licensing statutes in order to include virtual currencies. For example, in 2015 New York finalized a new license for virtual currency businesses under New York’s financial services law. State regulators in these jurisdictions conduct examinations of the firms that hold licenses to assess their compliance with safety and soundness and various other requirements. In addition, CSBS staff stated that as of February 2018, approximately 37 states authorize state regulators to examine banks’ third-party service providers—which could include fintech companies. According to state regulators we interviewed in Illinois, New York, and California, their agencies use the same approach to regulate and examine fintech firms and traditional financial institutions providing similar services. Furthermore, according to state regulatory associations and some state regulatory agencies, fintech firms such as money transmitters undergo regular supervision through on-site examinations to monitor compliance with federal and state capital, liquidity, and consumer protection requirements. For example, Money Transmitters Regulators Association staff said that state regulators examine MSBs at least every 3 years depending on risk assessment and previous examination record, and that state examinations cover federal and state laws, including data security and anti-money laundering requirements. Similarly, staff from one state regulator noted that they conduct consumer protection examinations of direct lenders and take enforcement action if they identify potential violations. CSBS staff noted that state requirements do not differ for fintech firms because the requirements and examinations are activity- based. For example, most states have anti-money laundering requirements within their money transmitter license laws. Due to state anti-money laundering examination cycles, CSBS staff stated that MSBs licensed in 40 or more total states experience an examination at least once every 14 months. Outside of examinations, fintech firms that violate federal and state regulations can be subject to enforcement actions by federal and state agencies with such authorities. The OCC, Federal Reserve, and FDIC may have enforcement jurisdiction over fintech firms when the fintech firm is an “institution affiliated party” under the Federal Deposit Insurance Act or a service provider under the Bank Service Company Act. In addition, CFPB can take enforcement action against institutions under its jurisdiction for noncompliance with federal consumer protection laws. For example, in 2016, CFPB used its unfair, deceptive, or abusive acts or practices authorities to investigate and issue a consent order against a fintech firm operating an online payment system, which CFPB determined had made deceptive data security claims to customers. FTC can also take enforcement actions against fintech firms not registered or chartered as a bank for violations of any federal consumer laws FTC enforces, including the FTC Act’s prohibition against unfair or deceptive acts or practices. For example, in 2015, FTC took action against the providers of a smartphone application, alleging that they deceived consumers and installed hidden malicious software code to generate virtual currencies for the providers without consumer permission. It can also bring enforcement action against non-bank service providers that maintain or process customer information under its GLBA authority. Other federal entities can pursue enforcement action against fintech firms. The Department of the Treasury’s Office of Foreign Assets Control can take action against fintech firms that violate U.S. sanctions regulations. In addition, FinCEN can also pursue enforcement measures against fintech firms that transmit funds—such as certain fintech payment and lending firms—due to its authority to enforce compliance with the Bank Secrecy Act’s anti-money laundering and prevention of terrorist financing provisions. For example, FinCEN took enforcement action in May 2015 against the fintech firm Ripple—a company that allows users to make peer-to-peer transfers in any currency using a DLT-enabled process—for violating anti-money laundering requirements through its sale of virtual currency. In 2016, CFTC brought an enforcement action against a Hong Kong-based fintech firm for offering illegal off-exchange financed retail commodity transactions in bitcoin and other cryptocurrencies, and for failing to register as a futures commission merchant. Finally, state regulators can also take enforcement action against financial institutions and fintech firms that violate state data security or consumer protection laws. In addition, state attorneys general may bring actions against fintech companies through consumer protection and deceptive trade practice acts, according to the National Association of Attorneys General. Some fintech companies may not be subject to any federal or state financial oversight if they do not meet federal or state definitions of a money service or other regulated business. For example, some fintech payments firms—such as certain mobile wallet providers—might not be subject to state or federal money service business requirements because their role in the payment process does not specifically involve transmitting money, according to state and federal regulators. One mobile wallet provider claimed that it is not subject to federal financial regulatory oversight because it does not transfer funds or authorize transactions, but instead facilitates the transfer of customer data as part of the credit card or debit card networks; it also does not retain any of its consumers’ personal data, including data on purchase content, location, or dollar amount. Available regulatory data show that the number of consumer complaints against fintech activities appears modest compared to traditional providers. For example, although our analysis of the CFPB’s consumer complaint database has limitations in assessing risk, the number of published complaints submitted against several prominent fintech firms from April 2012 through September 2017 included in this database was generally low, when compared to select large financial institutions. Our analysis showed that for 13 large firms offering fintech payments, lending, investment advice, financial account aggregation, or virtual currencies, only 5 of the firms had complaints in the CFPB database, with 4 having received fewer than 400 complaints. The largest number of published complaints had been submitted against a large fintech payment provider with over 3,500 published complaints. Further, the number of published complaints submitted against the fintech payment provider was relatively small compared to the number of published complaints submitted against other, often larger financial institutions. For example, our analysis showed that 10 large financial institutions each received between approximately 14,300 and 67,300 total complaints April 2012 through September 2017. In addition, various federal regulators, including CFPB and FTC, can address the risk of consumer harm by taking actions against fintech firms for deceptive or unfair acts or practices when warranted. For example, in 2016, FTC reached a settlement with a firm that sold machinery designed to create virtual currencies—a process known as mining—and allegedly had been deceiving its customers about the availability and profitability of the machinery. As noted earlier, FTC also settled with a fintech payment provider in February 2018 over complaints by thousands of consumers the company had received regarding confusion over its funds availability practices. Additionally, in 2016 CFPB assessed a $100,000 civil penalty against a fintech payments firm for deceiving consumers about its data security practices and the safety of its online payment system. Fintech firms can find that the complexity of the U.S. financial regulatory system creates challenges in identifying the laws and regulations that apply to their activities, and that complying with state licensing and reporting requirements can be expensive and time-consuming for mobile payment providers and fintech lenders. Also, federal agencies could improve collaboration and clarify issues related to financial account aggregation by making sure that interagency efforts dedicated to fintech include all relevant participants and incorporate other leading practices. In addition, because banks are liable for risks posed by third parties, fintech firms may face delays in entering into partnerships with banks. The complex U.S. financial regulatory structure can complicate fintech firms’ ability to identify the laws with which they must comply and clarify the regulatory status of their activities. As noted in our past reports, regulatory oversight is fragmented across multiple regulators at the federal level, and also involves regulatory bodies in the 50 states and other U.S. jurisdictions. Fintech firms and other stakeholders we interviewed told us that it was difficult for fintech firms to navigate this structure. In particular, understanding the laws and regulations that may apply to fintech firms was not easy because existing regulations were sometimes developed before the type of product or service they are now offering existed. In addition, the cost of researching applicable laws and regulations can be particularly significant for fintech firms that begin as technology start-ups with small staffs and limited venture capital funding. Fintech payments and DLT firms and other market participants told us that navigating this regulatory complexity can result in some firms delaying the launch of innovative products and services—or not launching them in the United States—because the fintech firms are worried about regulatory interpretation. For example, staff from one U.S. firm that developed a DLT payments technology told us that they and their peers only work with foreign customers due to the fragmented U.S. financial regulatory structure and lack of unified positions across agencies on related topics. However, several U.S. regulators have issued rules and guidance to help fintech firms understand where their products and services may fit within the complex financial regulatory structure, as shown in the following examples. In December 2017, the Federal Reserve’s Consumer Compliance Outlook newsletter included an article that offered financial institutions and fintech firms general guideposts for evaluating unfair and deceptive practices and fair lending risk related to fintech, with a focus on alternative data. Also, in 2016, a special edition of Consumer Compliance Outlook focused on fintech, including summarizing relevant federal laws, regulations, and guidance that may apply to mobile payments, fintech lending, and digital wealth management. For example, the newsletter listed laws and regulations related to credit, privacy, and data security; anti-money laundering requirements; and consumer and investor protection. In 2016, CFPB issued a final rule that will extend wide-ranging protections to consumers holding prepaid accounts, including peer-to- peer payments and mobile wallets that can store funds. Also, in 2015, CFPB issued a set of nonbinding consumer protection principles for new faster payment systems, which outline CFPB expectations for payment services providers. In February 2017, SEC issued updated guidance on robo-advisers that addresses the substance and presentation of disclosures provided to clients on the robo-adviser and the investment advisory services it offers, the obligation to obtain information from clients to ensure that recommended investments are suitable, and the need to implement effective compliance programs reasonably designed to address the unique nature of providing automated advice. Similarly, in March 2016, FINRA issued a report on effective practices related to digital investment advice and reminded FINRA-registered broker- dealers of their obligations under FINRA rules. In 2013, FinCEN issued guidance that clarified the applicability of anti- money laundering and related regulations to participants in certain virtual currency systems, and in 2014 FinCEN issued administrative rulings that further clarified the types of market participants to which the 2013 guidance applies. In October 2017, CFTC issued a report on virtual currencies that explains that it considers virtual currencies to be commodities, outlines related examples of permissible and prohibited activities, and cautions investors and users on the potential risks of virtual currencies. In July 2017, SEC issued a report on DLT token sales, which cautions market participants that sales with certain characteristics may be subject to the requirements of federal securities laws. In general, the report uses one company’s token sale as an example to illustrate how SEC could consider a token sale to be a securities offering, and why companies offering such products would have to register the offering with SEC or qualify for an exemption. In August 2017, FINRA also issued an investor alert on DLT token sales, which includes questions for investors to ask before participating in such sales. In January 2017, FINRA issued a report on DLT uses more broadly, which outlines key regulatory considerations for firms that want to use DLT in equity, debt, and derivatives markets. For example, the report outlines securities-related regulatory considerations for DLT applications that could alter securities clearing arrangements, be used for recordkeeping by broker-dealers, or change the equity or debt trading process, among other things. As mentioned previously, although federal oversight applies to some fintech firms, fintech payments and lending firms not subject to routine federal oversight must typically obtain state licenses based on their activities. Banks can choose to be chartered at the state level or as a national bank, which generally exempts them from state licensing requirements and examination. In contrast, fintech payment providers operating as MSBs—including those using DLT—and fintech firms offering consumer loans must typically hold licenses in each state in which they operate. Similarly, as mentioned above, small robo-advisers would generally have to be licensed in states in which they wish to operate. State regulators and other market observers we interviewed told us that they believe state regulation of fintech firms provides benefits. Several market participants and observers said that states understand the needs of their local economies, consumers, and market participants and can use their authorities to craft tailored policy and regulation. For example, New York regulators created a special license for virtual currency firms. New York regulators told us that they did so because of New York’s status as a financial and innovation hub, as well as activities and concerns of virtual currency firms operating within their jurisdiction. In addition, state regulators may complement the federal oversight structure by dedicating additional resources to helping educate fintech firms on regulatory requirements and making sure that firms follow these requirements. For example, two state regulators told us that they work closely with many fintech start-ups to help educate them on regulatory requirements before they apply for licenses or begin operations, and a state regulatory association told us that fintech firms and state regulators often meet to discuss regulatory concerns. Representatives of a state regulatory association told us that federal agencies also rely increasingly on state examinations to ensure compliance with anti-money laundering requirements. Similarly, an industry association and state regulators told us that they believe states are very responsive to consumer complaints. For example, one state regulator told us that they investigate hundreds of consumer complaints per month and believed they often resolved consumer complaints more quickly than their federal consumer protection counterparts, although CFPB staff told us that CFPB handles thousands of complaints per month. California regulators also told us they have initiated their own investigations into the extent to which fintech lenders comply with state lending and securities laws, and risks that fintech lenders may pose to consumers and to markets. However, complying with fragmented state licensing and reporting requirements can be expensive and time-consuming for mobile payment providers and fintech lenders. For example, stakeholders we interviewed said that obtaining all state licenses generally costs fintech payments firms and lenders $1 million to $30 million, including legal fees, state bonds, and direct regulatory costs. Also, market participants and observers told us that fintech firms may spend a lot of time on state examinations because state exam requirements vary and numerous states may examine a fintech firm in 1 year. For example, staff from a state regulatory association said that states may examine fintech firms subject to coordinated multistate exams 2 or 3 times per year, and as many as 30 different state regulators per year may examine firms that are subject to state-by-state exams. Although these challenges are not unique to fintech firms, they may be more significant for fintech firms than for other MSBs and lenders. For example, some MSBs and lenders operate in a limited geographic area that can require them to be licensed by one state only. Other firms operate in multiple states or nationwide, but may have started with a license in one state and then obtained additional licenses and spread these compliance costs as they grew over time. In contrast, fintech firms are generally online-only businesses that likely seek to operate nationwide from their inception, which immediately requires licenses in all states and generates higher up-front compliance costs that may strain limited venture capital funding. For example, one firm we interviewed that funds fintech start-ups told us that one of their fintech firms spent half of the venture capital funds it had raised obtaining state licenses. As a result, some firms may choose not to operate in the United States. For example, one DLT provider we interviewed told us that although they are based in the United States, they operate abroad exclusively because state licensing costs are prohibitively expensive. Bank partnerships and specialized operating charters offered by federal and state banking regulators may help fintech firms more easily operate nationwide by generally preempting state licensing requirements. For example, some fintech payments firms and fintech lenders have chosen to partner with nationally chartered and state-chartered banks, which allows them to operate nationwide without having to obtain individual state licenses. Also, two fintech lenders have applied for an Industrial Loan Corporation (ILC) charter, an FDIC-supervised state banking charter, which commercial firms other than regulated financial institutions can obtain in certain states to operate nationally. Such ILCs would also be overseen by FDIC if they obtain FDIC deposit insurance. In addition, in December 2016, OCC announced its intent to consider applications for special-purpose national bank charters from fintech firms such as lenders, which would allow such firms to operate nationally under a single national bank charter if finalized. However, OCC officials we interviewed told us that this special-purpose national bank charter is on hold because they are still reviewing whether to go forward with the proposal, and CSBS has filed a lawsuit against OCC challenging the fintech charter. Some fintech lending firms and an industry association representing payments firms have expressed interest in applying for this special charter, but other stakeholders we interviewed told us that the proposed fintech charter may not be a good option for small fintech firms if the capital requirements are the same as those for banks. In addition, state regulators are taking steps to make it easier for fintech firms seeking to operate across multiple states. For example, CSBS staff we interviewed told us that states leverage the Nationwide Multistate Licensing System—which enables firms to submit one application with information that fulfills most of the licensing requirements of each state that participates in this system. Staff from CSBS, some fintech firms, and an industry observer we interviewed said that although the multistate licensing system has reduced administrative requirements somewhat, firms still have to make additional filings to address certain requirements unique to some states. In February 2018, seven state regulators also agreed to standardize key elements of the MSB licensing process and mutually accept licensing findings. Additionally, in 2013, state regulators established the Multi-State MSB Examination Taskforce, which coordinates and facilitates multistate supervision of MSBs. CSBS staff told us that multistate exams have made the state MSB exam process more efficient for state regulators and MSBs. In May 2017, the CSBS also announced they would be expanding efforts to modernize state regulation of fintech firms. For example, under this initiative, officials we interviewed told us they plan to redesign their multistate licensing system to provide a more streamlined licensing process for new applicants and shift state resources to higher-risk cases by 2018; plan to harmonize multistate supervision by establishing model approaches to key aspects of nonbank supervision, making examinations more uniform, identifying and reporting violations at the national level, and creating a common technology platform for examinations by 2019; and have formed a fintech industry advisory panel—with sub-groups on payments, lending, and banking—to identify licensing and regulatory challenges. Although a few fintech market participants and observers we interviewed told us that they thought regulatory collaboration on fintech was sufficient, the majority of market participants and observers we interviewed who commented on interagency collaboration said that it could generally be improved. Some also cited additional areas in which better interagency collaboration could facilitate innovation: Use of alternative data and modeling in fintech lending. Fintech lenders may face challenges because agencies with authorities related to consumer protection and fair lending have not issued guidance on the use of alternative data and modeling. For example, one fintech lender we interviewed told us that they discussed using alternative data to assess creditworthiness with FDIC and FTC, but they do not understand what each agency might consider to be an unfair, deceptive, or abusive practice because the agencies have not coordinated positions. Staff we interviewed from two consulting firms that advise on fintech told us that lack of clarity or coordination on fair lending and use of alternative data and modeling creates uncertainty for fintech lenders. This has led some fintech lenders to forgo use of alternative data for underwriting purposes since they do not know if it will produce outcomes that violate fair lending laws and regulations. However, FDIC staff told us that FDIC applies the same standards as FTC in determining whether an act or practice is unfair or deceptive and that existing guidance on fair lending applies broadly to traditional and nontraditional modeling techniques and data sources. OCC special-purpose national bank charter. A few market participants and observers we interviewed told us that fintech payment providers and lenders may face challenges because OCC has not sufficiently coordinated with the Federal Reserve and FDIC on OCC’s special-purpose national bank charter. Despite OCC discussion with the Federal Reserve, the charter proposal does not specify whether recipients could access the Federal Reserve payments system. Federal Reserve officials have said that the Federal Reserve will likely not take any policy positions or make any legal interpretations about the proposed charter until OCC finalizes the charter’s terms and a firm applies for a charter. Officials have said that this is their position because the potential policy and legal interpretation issues that could arise related to membership and access to Federal Reserve services will require a case-by-case, fact- specific inquiry unique to any firm that moves forward with an application. One fintech lender we interviewed told us that obtaining consistent and complete information from OCC and the Federal Reserve on the specific rights this charter would grant a fintech lender had been challenging, and that this lack of consistency and clarity could discourage fintech firms from applying for the charter. However, OCC staff we interviewed told us that the charter is not yet final and that they facilitate communication between fintech firms that are interested in the special charter and the Federal Reserve. Also, OCC staff said that they briefed FDIC staff on the special charter, but will coordinate further if appropriate. Differing regulatory interpretation of consumer protection requirements. As discussed above, fintech firms may be subject to CFPB oversight and limited federal financial regulatory oversight if they also partner with financial institutions. In addition, FTC and CFPB can also take enforcement actions against fintech firms not registered or chartered as a bank for violations of any federal consumer protection laws they enforce. Fintech firms we spoke with said that this can cause challenges because firms are concerned that regulators may have different interpretations of what conduct might merit consumer protection enforcement actions, and a research and consulting firm we interviewed that works with fintech start-ups told us that this is one of the industry’s biggest challenges. Similarly, the potential for differing regulatory interpretation may limit the effectiveness of agency efforts to innovate. For example, fintech firms can apply for a CFPB No Action Letter, which is intended to reduce regulatory uncertainty for financial products or services that promise substantial consumer benefit but face uncertainty regarding consumer protection requirements. However, some entities we spoke with said that few firms have applied, in part because a letter provided by CFPB may not preclude prudential regulators or FTC from taking enforcement actions in cases where they have jurisdiction. Although stakeholders indicated that agencies could improve interagency collaboration on other fintech issues, federal agencies said that they already collaborate through a variety of informal and formal channels at the domestic and international levels. Domestically, in addition to informal discussions and participation in fintech events hosted by other agencies, some agencies have coordinated examinations of third-party service providers and enforcement actions. For example, in 2014 and 2015, CFPB, FCC, FTC, and state regulators coordinated on enforcement actions related to unauthorized mobile carrier billing charges. Also, U.S. agencies have had informal discussions regarding fintech with their foreign counterparts. For example, Treasury staff have discussed regulations designed to counter money laundering and terrorist financing with officials from countries such as France and the United Kingdom. In addition, federal agencies have begun to collaborate on fintech regulatory issues through formal interagency working groups that are primarily concerned with other financial regulatory issues. For example, at the domestic level, U.S. prudential regulators have discussed issues related to potential risks of fintech lending and DLT through the Financial Stability Oversight Council. At the international level, the Federal Reserve represents the United States at the Bank for International Settlements, which has published papers on fintech topics including payments, fintech lending, and DLT. For more information on these efforts and others, see appendix II. Further, federal agencies said that they have recently organized the following interagency collaborative groups dedicated to fintech, as detailed in appendix II: In March 2017, the Federal Reserve convened the Interagency Fintech Discussion Forum, an informal group which meets approximately every 4 to 6 weeks and aims to facilitate information sharing among consumer compliance staff from the federal banking regulators on fintech consumer protection issues and supervisory outcomes. Discussion topics have included account aggregation, alternative data and modeling techniques, and third-party oversight. In 2016, Treasury created the Interagency Working Group on Marketplace Lending, which was active over the course of fiscal year 2016, meeting 3 times. This group shared information among industry participants and public interest groups, and discussed issues from a Treasury report on benefits and risks associated with online marketplace lending. In 2010, the Federal Reserve Banks of Atlanta and Boston created the Mobile Payments Industry Workgroup to facilitate discussions among industry stakeholders about how a successful mobile payments system could evolve in the United States. This group also functions as an interagency collaboration mechanism through biennial meetings between industry stakeholders and relevant regulators that update industry on regulatory concerns, identify potential regulatory gaps, and educate regulators on mobile payment technologies. However, we found that these groups do not include all relevant participants. For example, NCUA was not included in the Interagency Fintech Discussion Forum or the Interagency Working Group on Marketplace Lending, and FCC has not participated in the biennial regulator meetings of the Mobile Payments Industry Workgroup since 2012. Federal Reserve staff said that they did not include NCUA in the Interagency Fintech Discussion Forum because NCUA is not a bank regulator. Treasury staff noted that staff who could explain why NCUA had not been invited to participate in the Interagency Working Group on Marketplace Lending were no longer with the agency. Similarly, FCC staff could not recall why they had not participated in recent biennial regulator meetings of the Mobile Payments Industry Workgroup. However, NCUA has experiences and perspectives that would make it a relevant participant in the Interagency Fintech Discussion Forum, and NCUA officials said that they would participate in these interagency efforts if invited. NCUA would be a relevant participant because, although it does not oversee banks, it oversees credit unions that have entered into partnerships with fintech lenders and virtual currency exchanges, and could enter into partnerships with other fintech firms. Similar to fintech partnerships with banks, these partnerships could create risks related to safety and soundness and consumer protection. Further, NCUA’s 2018– 2022 draft strategic plan includes fintech as a key risk to the credit union system because fintech could provide a competitive challenge to credit unions or take advantage of differences in how credit unions and fintech firms are regulated, among other things. Likewise, as Federal Reserve staff have acknowledged, FCC could be a relevant participant in biennial regulators meetings of the Mobile Payments Industry Workgroup because FCC could share valuable insight on regulatory concerns related to mobile device security with other regulators and industry participants. Specifically, FCC has facilitated and encouraged industry efforts to improve security of mobile devices, on which consumers make fintech payments, and has conducted related consumer education efforts. FCC staff said they would consider participating in future biennial regulator meetings of the Mobile Payments Industry Workgroup if the topics discussed aligned with FCC’s work on mobile device security. Our past work has identified key practices relating to collaborative mechanisms among agencies that increase their effectiveness, such as including participants with the appropriate knowledge, skills, and abilities. In addition, these key practices also state that an interagency group should continue to reach out to potential participants who may have a shared interest in order to ensure that opportunities for achieving outcomes are not missed. However, we found that interagency collaborative efforts dedicated to fintech issues were not fully leveraging relevant agency expertise. Lack of NCUA participation in the Interagency Fintech Discussion Forum may preclude NCUA and the other participating agencies from sharing information that could be useful in efforts to oversee the risks that fintech poses to their regulated institutions. Similarly, lack of FCC participation in the biennial regulators meetings of the Mobile Payments Industry Workgroup could preclude industry participants from receiving updates on FCC regulatory concerns related to mobile device security and could preclude FCC from learning about new risks that fintech payments products pose to mobile device security. Furthermore, OCC and international bodies have identified fintech as an area where collaboration among agencies can be helpful. For example, OCC has stated that collaboration among supervisors can promote a common understanding and consistent application of laws, regulations, and guidance through steps such as establishing regular channels of communication. At the international level, the Bank for International Settlements has recommended that bank supervisors in jurisdictions where responsibilities related to fintech are fragmented among a number of regulators with overlapping authorities should collaborate with other relevant agencies to develop standards and regulatory oversight for fintech, as appropriate. Similarly, the Financial Stability Board has suggested that responsible agencies further open lines of communication to address cross-cutting fintech issues. Among other consumer protection issues related to financial account aggregation, market participants do not agree about whether consumers using account aggregators will be reimbursed if they experience fraudulent losses in their financial accounts. While some account aggregators negotiate contracts with the financial institutions that hold the consumer accounts that are being aggregated, other account aggregators have no relationship with the financial institutions holding the consumer accounts that they access on behalf of those consumers. Officials from at least one large bank have made public statements that they may not reimburse losses from consumer accounts if the consumer provided his or her account credentials to an account aggregator and fraudulent activity subsequently occurs in the consumer’s account. In contrast, some account aggregators and consumer protection groups have argued that consumer protection law establishes that banks retain the obligation to reimburse losses due to transactions not authorized by the consumers. To date, CFPB and the Federal Reserve have taken varying public positions on this disagreement among market participants, and some regulators told us that they have held related discussions with market participants and observers. In October 2017, CFPB issued principles for consumer-authorized financial data sharing and aggregation that stated that consumers should have reasonable and practical means to dispute and resolve instances of unauthorized transactions. However, CFPB’s principles are not binding and federal financial regulators have not issued guidance or rules to clarify this issue. As previously mentioned, CFPB also issued a request for information studying these topics to various industry members, observers, and consumers in November 2016. A member of the Board of Governors of the Federal Reserve System has publicly stated that industry stakeholders will need to come to agreement on which party bears responsibility for unauthorized transactions. Also, Federal Reserve staff told us that some financial institutions and account aggregators are negotiating contractual arrangements that could address this issue on a case-by-case basis. In addition, staff from FDIC, the Federal Reserve, and OCC said that they have discussed related issues with market participants and observers. The financial regulators have recently begun to hold collaborative information sharing discussions on consumer compliance issues surrounding financial account aggregation, but this collaboration has not resulted in any coordinated public outcomes on the issues. In May 2017, the federal financial regulators—CFPB, the Federal Reserve, FDIC, NCUA, and OCC—and representatives of state financial regulators began to share information on account aggregation and related consumer compliance issues through the Federal Financial Institutions Examination Council (FFIEC) Task Force on Supervision and the FFIEC Task Force on Consumer Compliance. The regulators are collaborating through FFIEC because they acknowledge that account aggregation issues cross agency jurisdictions. According to participating agency officials, FFIEC discussions have covered responsibilities for consumer reimbursement due to fraudulent charges and access to consumer data, generated an internal paper on consumer compliance issues, and previewed CFPB’s principles for consumer-authorized financial data sharing and aggregation prior to publication. However, as of November 2017, these efforts have not generated public outcomes to guide market participants. The federal financial regulators’ missions include ensuring that consumers are protected. CFPB’s primary mission is to protect consumers in the financial marketplace, including ensuring that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation. Similarly, according to their mission and vision statements, the banking and credit union regulators help protect consumer rights by supervising financial institutions to help ensure compliance with consumer protections. However, some of the regulators told us that they have not taken more steps to resolve the disagreements surrounding financial account aggregation because they are concerned over acting too quickly. For example, Federal Reserve staff we interviewed told us that premature regulatory action could be detrimental to the negotiations between individual financial institutions and financial account aggregators. Similarly, OCC staff we interviewed told us that OCC staff does not recommend publishing guidance or rules while the account aggregation industry is evolving because regulation should not constantly change. Nonetheless, the financial regulators could take additional steps to address these issues without prematurely issuing rules or regulations. Further, the FFIEC IT Examination Handbook on e-Banking’s appendix on aggregation services, which the financial regulators use in their examinations of banks, indicates that the financial regulators have been aware since at least 2003 that regulatory requirements related to consumer protection responsibilities of financial account aggregators are not clear. Incorporating leading practices on collaboration could strengthen the efforts that regulators are making to address financial account aggregation issues. As discussed previously, our prior work has developed interagency collaboration principles that make efforts among agencies more likely to be effective. These principles find that collaborative efforts should define the short-term and long-term outcomes that the collaboration is seeking to achieve and clarify the roles and responsibilities of the participating agencies, among other things. Although banking regulators and CFPB have discussed issues related to account aggregation within FFIEC, these discussions have not yet defined outcomes or produced any public outcomes to help guide fintech firms and traditional financial institutions which could help lead to market- based solutions, or defined agency roles and responsibilities. In addition, market participants, CSBS staff, and a member of the Board of Governors of the Federal Reserve System have said that additional collaboration on financial account aggregation issues—including reimbursement for unauthorized transactions—would be beneficial. Similarly, in its 2017 annual report, the Financial Stability Oversight Council encouraged financial regulators to monitor how fintech products affect consumers and regulated entities and to coordinate regulatory approaches, as appropriate. Acting collaboratively to help address consumer compliance issues related to financial account aggregation could help financial regulators better meet their consumer protection missions. Improved collaboration could help regulators and market participants resolve disagreements over account aggregation and related consumer compliance issues more quickly and in a manner that balances the competing interests involved. Taking steps now, while the discussion on financial account aggregation is in its relatively early stages, could help federal regulators better address these needs over the long term. Until regulators coordinate and assist the industry in clarifying and balancing the valid interests on both sides, consumers could have to choose between facing potential losses or not using what they may find to be an otherwise valuable financial service, and fintech firms providing useful services to consumers will face barriers to providing their offerings more broadly. Partnerships between fintech firms and financial institutions are increasingly common because such partnerships offer benefits to both parties involved. According to literature we reviewed and market participants and observers we interviewed, the benefits to banks can include the ability to meet consumer demand by providing their customers with access to innovative products that provide good user experiences without having to dedicate extensive internal time or resources. Market observers and Federal Reserve staff we interviewed told us that this benefit may be particularly important for small banks and credit unions, which have fewer staff and fewer financial resources for research and development. Similarly, the benefits to fintech firms can include access to banking services and networks, customer acquisition, and assistance with regulatory compliance. Some fintech firms enter contractual agreements to partner with banks through white-labeling, a type of partnership where the bank markets the fintech firm’s product as its own when soliciting customers. Other fintech firms enter contractual partnerships with banks as stand-alone third-party relationships. For example, some fintech lenders make loans to customers and partner with a bank that originates or purchases loans sourced through the fintech lender. However, because banks are liable for risks posed by third parties as discussed above, fintech firms may face delays in entering into partnerships with banks. Financial regulators have issued guidance on risk management for financial institutions’ relationships with third parties. Among other things, this guidance explains that financial institutions are expected to conduct proper due diligence in selecting partners and to monitor the activities conducted by third parties for compliance with relevant laws, rules, and regulations, considering areas such as consumer protection, anti-money laundering/counter-terrorist financing, and security and privacy requirements. Banks, fintech firms, and market observers we interviewed told us that banks may interpret this guidance conservatively. Large banks may also spend significant time conducting due diligence on the practices and controls in place at the fintech firms seeking to partner with them in order to prevent unnecessary compliance or operational risks, while a banking association told us that small banks with fewer resources to dedicate to due diligence may be unwilling to risk partnering with fintech firms. Banks, fintech firms, and market observers we interviewed told us that bank due diligence can also lead to lengthy delays in establishing partnerships, which can put fintech firms at risk of going out of business if they do not have sufficient funding and are not able to access new customers through a bank partner. For example, officials we interviewed from one bank told us that it takes about 18 months to launch a partnership with a fintech firm, and acknowledged that this is too slow to align with venture capital funding cycles that many fintech providers rely upon. Regulators abroad have addressed the emergence of financial innovation through various means, including establishing innovation offices; establishing mechanisms for allowing fintech firms to conduct trial operations; holding innovation competitions; providing funding for firms through business accelerators; and using various methods to coordinate with other regulators domestically and internationally. While certain U.S. regulators have adopted similar efforts, further adoption of these approaches by U.S. regulators could facilitate interactions between regulators and fintech firms and improve regulators’ knowledge of fintech products. However, some initiatives may not be appropriate for the U.S. regulatory structure. For example, adopting certain initiatives could raise concerns about U.S. agencies picking winners, in which firms that participate in these programs may be better positioned to succeed than other firms. Further, particular initiatives may not align with agencies’ legal authorities or missions. Citing the complexity of the U.S. financial regulatory system, fintech firms and industry observers noted having difficulty identifying which regulations they were subject to or which regulators would oversee their activities. Further, one fintech firm noted that when they were able to identify their regulators, they had difficulty finding a point of contact at the regulators. Officials from three regulators that we interviewed also noted that they had been contacted by fintech firms that were confused about their regulatory status and did not fall under the agency’s regulatory authority, but were subject to oversight by other regulators. Regulators in the U.S. and abroad have taken steps to better facilitate interactions with fintech firms, including by establishing innovation offices with dedicated staff to serve as a front door for start-up firms or innovators to find information on regulation and to contact the agency. These innovation offices generally maintain a webpage hosted on the agencies’ websites, a dedicated e-mail address, or dedicated staff. Through these innovation offices, some agencies offer services including office hours during which regulatory staff are available to meet and provide informal guidance. For example, CFPB officials said that, as of August 2017, they had met with approximately 115 companies in four such events in New York and San Francisco, under the agency’s Project Catalyst. Similarly, OCC officials noted that through their Office of Innovation, they have been able to answer regulatory questions for fintech firms and connect firms to relevant OCC offices. Since the launch of LabCFTC, CFTC’s innovation office, in May 2017, CFTC officials have met with more than 100 entities through office hour sessions in New York, Chicago, and Washington, D.C. In addition to office hours, several regulators have held fintech events through their innovation offices. For example, FTC has held three fintech forum events comprising panel discussions with industry experts, covering topics such as marketplace lending and distributed ledger technology. Several regulators have also issued publications on various fintech topics, which are posted to the dedicated webpages for those agencies with innovation offices. Some regulators from other jurisdictions also facilitated regular interaction with firms through their innovation offices. For example, through its Innovation Hub, the United Kingdom’s (UK) Financial Conduct Authority offers informal regulatory guidance to individual firms directly and through posted publications; operates its regulatory sandbox, described below; and engages with industry participants through various events. Similarly, through a program called Looking Glass, the Monetary Authority of Singapore offers fintech firms training and consultation on regulation and provides a space for fintech firms to give product demonstrations to regulators and banks. Regulators and fintech firms we interviewed abroad said that these innovation offices have helped firms better understand their regulatory obligations and help regulators identify and address risks early. For example, representatives of a robo-adviser firm we interviewed in Hong Kong said that their interactions with the Hong Kong Securities and Futures Commission’s innovation office—known as the Fintech Contact Point—made identifying and obtaining guidance from the appropriate regulatory officials easier, which helped the firm more efficiently develop a product compliant with applicable regulations. Some fintech firms and industry observers stated that U.S. regulators’ innovation offices have helped fintech firms by offering a point of contact for new entrants in the industry. Additionally, in a 2009 report, we created a framework that identified characteristics of an effective financial regulatory system. One of the characteristics was that regulators should oversee new products as they come onto the market to take action as needed to protect consumers and investors, without unnecessarily hindering innovation. Figure 5 summarizes efforts that we reviewed by regulators in the U.S. and abroad to implement initiatives to improve interactions with fintech firms. However, FDIC and NCUA have not established innovation offices for various reasons. For example, FDIC staff said that, although the agency has not formally evaluated establishing an innovation office, they have met with fintech firms to discuss deposit insurance applications. Associated with the deposit application process, the agency has established central points of contact for all interested parties, not only fintech firms. NCUA said that its lack of legal authority over third-party service providers limited the usefulness of an innovation office, since fintech providers are often third-party service providers. However, by not dedicating specific staff, as occurs with the establishment of an innovation office, these regulators could be less able to interact with fintech firms in their sectors and fintech firms that partner with their regulated entities. Other regulators who, similar to FDIC and NCUA, generally do not directly oversee third-party providers, though they may have such authority, have noted benefits from establishing innovation offices. For example, OCC, which has a similar mission to these two regulators, has formed such an office and OCC staff said that the agency has benefited by learning about industry trends involving fintech and by improving interactions with fintech firms and banks. Similarly, Federal Reserve officials we interviewed said that efforts through its innovation office have helped staff better understand fintech issues and have particularly helped its examiners better understand banks that partner with fintech companies. Consideration of establishing innovation offices, as many U.S. regulators have recently done, could help FDIC and NCUA better enable new firms to become familiar with regulatory requirements and could better facilitate interaction between the agencies and fintech service providers. Internationally, some regulators have taken various approaches that help educate their staff on emerging products and help innovators develop products in limited-risk environments (see fig. 6). Based on interviews with regulators and firms abroad and a literature review, initiatives that we studied include regulatory sandboxes, proofs-of-concepts, innovation competitions or awards, and agency-led accelerators. Regulatory sandboxes that we studied were agency-led programs that allow firms to test innovative products; services; business models; or delivery mechanisms in a live environment, subject to agreed-upon testing parameters. The proofs of concept that we reviewed were similar to sandboxes, but for these programs regulators issued a request for proposals to industry to develop a product that is conceptual; that is, an idea for a product that is not yet on the market. In the fintech competitions that we studied, regulators invited firms to develop solutions to problem statements drafted by agencies or financial institutions. Accelerators that we reviewed provided funding; access to regulators and mentors; connections to outside funding sources; potential clients; and working space to fintech firms and start-ups. One approach regulators abroad were using to learn about fintech activities was regulatory sandboxes. While a few U.S. regulators have undertaken efforts that are similar to regulatory sandboxes, most have not. Two regulators that we interviewed stated that tools already exist, such as the comment process, to fulfill the role of a sandbox by helping them better understand innovation and assist in the development of rules and guidance. However, other U.S. regulators said that creating regulatory sandboxes by using tools such as No Action Letters could benefit regulators and firms. Based on our analysis of selected jurisdictions’ efforts, regulatory sandbox programs generally may include the following elements: firms apply to participate; firms and regulators agree on the parameters of how products or services will be tested, such as the number of consumers or transactions included in the test, the required product disclosures, or the time frame of the test; firms secure the appropriate licenses, if applicable; and firms and regulators interact regularly. In some cases, the sandbox may include limited regulatory relief. For example, UK regulators we interviewed noted that they can waive or modify a rule, issue a “no enforcement action” letter, or provide a restricted license for a firm participating in the sandbox. However, these tools are used on a case-by-case basis for the duration of the sandbox test, are not used for every participating firm, and would not limit any consumer protections. Further, UK regulators we interviewed said that while waiving or modifying rules is possible, they are only used on an exceptional basis. Similarly, Singapore regulators said that they can relax specific legal and regulatory requirements, such as capital requirements, on a case-by-case basis for firms while they are participating in the sandbox. Also, Hong Kong regulators allow firms to operate without full regulatory compliance for the limited product offerings within the sandbox. Similar to UK and Singapore regulators, Hong Kong regulators we interviewed said that they have put safeguards in place to protect consumers from and manage the risk of the regulatory relief. For a more detailed description of the Hong Kong, Singapore, and UK sandboxes, see appendix III. Regulators and market participants we interviewed abroad said that these fintech sandboxes have helped regulators better understand products and more effectively determine appropriate regulatory approaches while limiting the risk that the failure of a fintech firm could pose to consumers. Some participating firms we interviewed told us they benefited by being able to test products with customers, make changes to their business model, and understand how their products would be regulated. Moreover, two participating firms and a regulator we interviewed said that firms are able to introduce their products to the market more quickly because they are able to test their products in the market while becoming compliant with laws and regulations. One fintech firm that participated in the UK sandbox pointed out that the UK regulators better understood their firm’s technology and business model because of interactions in the sandbox. For example, although the company and regulatory officials had previously disagreed on whether the firm’s product needed to be regulated, after gaining a better understanding of the company’s business model through interactions in the sandbox, the regulatory officials agreed that the product did not require regulatory oversight. Similarly, Singapore regulators we interviewed noted that their sandbox provides them a hands-on approach to learning about new technologies and how the technologies align with regulatory requirements. Some U.S. regulators have programs that share some characteristics with sandboxes. As shown in figure 6, CFPB, SEC, and CFTC have issued No Action Letters in which agency staff state that they do not intend to recommend certain regulatory action against the firms if they offer the products in the way described in a request letter to the regulator. The issuance of such letters could assist fintech firms in cases in which the applicability of existing regulations to their product is unclear. However, similar to sandboxes abroad, CFPB officials stated that No Action Letters do not provide safe harbor for companies taking actions that are clearly not allowed under U.S. consumer regulations. As of March 6, 2018, CFPB had issued one No Action Letter to Upstart Network, a company that uses alternative data to assess creditworthiness and underwrite loans. As a condition of the No Action Letter, Upstart will regularly report lending and compliance information to CFPB to mitigate risk to consumers and inform CFPB about the impact of alternative data on lending decisions. In addition, CFPB officials we interviewed said that they can use a similar tool known as trial disclosure waivers, which allow industry participants to seek CFPB approval to test an innovative disclosure or way of delivering a disclosure to consumers that includes a safe harbor provision during which the industry participant may be exempted from statutory or regulatory requirements. As of March 6, 2018, CFPB had not issued any trial disclosure waivers. Through its Project Catalyst, CFPB has also established a research pilot program where it collaborates with firms that are testing innovative products to understand consumer use and policy implications of innovative products. CFPB officials said that research pilots have similar elements to sandboxes, including participant application, agreement of testing parameters, and regular meetings between CFPB and the participating firm. Four firms have concluded research pilots with CFPB and three other firms are currently participating in pilots. Similarly, OCC officials said that they are considering developing a pilot program, which will allow banks or fintech firms partnering with banks to test innovative products with the involvement and interaction of OCC staff. OCC officials said that they have not set a date for determining whether to go forward or implement the program. Another approach regulators abroad were using to learn about fintech activities was establishing proofs of concept. The proofs of concept that we studied are similar to sandboxes in that the regulator has regular interaction with the company to better understand the product or technology, but the product is not introduced into the market during the proof of concept period. For example, the Bank of England, through its Accelerator program, uses proofs of concept to have firms develop technology that can help the agency improve its operations, according to agency officials. The Hong Kong Monetary Authority, which, among other things, regulates banks in its jurisdiction, uses proofs of concept to allow industry participants to develop products that are conceptual and not ready for market implementation. A firm we interviewed that participated in a proof of concept with Hong Kong Monetary Authority said that it offered the regulator the opportunity to gain a working understanding of the technology, while providing a test environment for the company to tailor the technology to adhere to regulatory requirements. CFTC officials noted that they are exploring the ability to conduct proofs of concept through LabCFTC. CFTC officials noted that the agency would be well positioned to conduct proofs of concept because they already collect large amounts of market data that could potentially be leveraged for such projects. However, CFTC officials expressed concerns that receiving services as part of proofs of concept may violate gift or procurement laws. The Federal Reserve Bank of Boston participates in a collaborative effort called Hyperledger, which serves a similar purpose as a proof of concept for the Federal Reserve Bank. Hyperledger is a collaborative effort involving public and private entities created to advance the use of blockchain technologies across various sectors. As observers in the Hyperledger, Federal Reserve Bank staff have gained hands-on experience with blockchain technology by experimenting with uses of the technology. None of the other regulators with whom we spoke said that they planned to conduct proofs of concept. Another approach used by regulators abroad for learning about fintech activities was establishing fintech competitions or awards to encourage financial innovation. Winning firms receive recognition, contracts, or cash prizes. For example, the Monetary Authority of Singapore operated an international competition called Hackcelerator to crowdsource innovative solutions to problems that Singaporean financial institutions identified, including insurance, customer identification, and data analytics, according to officials. Singapore regulators have also established FinTech Awards, which provide ex-post recognition to FinTech solutions that have been implemented. CFTC officials said that they are seeking public input to establish prize competitions and intend to launch such competitions in 2018. FTC officials said that in 2017, the agency challenged participants to create a technical solution, or tools, that consumers could use to guard against security vulnerabilities in software found on the Internet of Things devices in their homes. FINRA staff noted that the agency holds internal innovation competitions, called CREATEathons, in which FINRA staff compete to develop solutions to various problems identified internally by staff. While external parties do not participate in these competitions, teams can consult with firms. Some U.S. regulators pointed out that while some regulators abroad are mandated to promote competition, no such mandate exists among most U.S. financial regulators. Two governments we studied abroad were also learning about fintech by establishing incubators or accelerators to encourage the development of a country’s fintech industry and talent pool. The accelerators provide funding, access to regulators and mentors, connections to outside funding sources, potential clients, and working space to fintech firms and start- ups. For example, officials we interviewed from SG Innovate, Singapore’s government led accelerator, said that the agency helps Singaporean businesses expand overseas, bring companies to Singapore, and connect start-ups to regulators and funding, among other things. None of the U.S. regulators we interviewed said that they planned to establish such accelerator programs. Regulators from the U.S. and abroad pointed out that the U.S. fintech industry is more developed than those of other jurisdictions with many fintech firms, large talent pools, and significant amounts of private funding or privately run accelerators. Regulators and market participants we interviewed abroad said that these knowledge-building initiatives have helped regulators learn about new products and business models and have allowed firms to test products. Although CFTC and SEC can issue No Action Letters, those agencies have not adopted other approaches similar to these knowledge-building initiatives described above. Further, FDIC, the Federal Reserve, and NCUA have not adopted any of these approaches. U.S. regulators said that these initiatives could raise concerns about favoring certain competitors over others and also noted that they may not have the authority to initiate these programs. However, despite similar potential constraints with regard to competition and authority limitations, CFPB and OCC have formally evaluated undertaking relevant knowledge-building initiatives, through conversations with regulators abroad, general research, and documentation of their efforts; and they have begun developing similar approaches, according to agency officials. A characteristic of an effective financial regulatory system we identified in our 2009 framework was that a regulatory system should be flexible and forward looking, which would allow regulators to readily adapt to market innovations and changes. Consideration by U.S. regulators of adopting approaches taken by regulators abroad, where appropriate, could result in the implementation of initiatives that help improve their overall ability to oversee fintech and how it affects the entities they currently regulate. While constraints may limit the ability or willingness of regulators to fully adopt these practices, opportunities exist to assess ways to tailor them to the U.S context. Regulatory coordination is less of an issue for regulators abroad because most jurisdictions have fewer financial regulators. For example, the UK has 3 agencies involved in financial regulation, Singapore has 1 financial regulator, and Hong Kong has 4 financial regulators, compared to the 10 federal agencies involved in the regulation of fintech in some capacity in the United States. However, regulators abroad have undertaken efforts to bolster coordination among domestic regulators—as applicable—as well as regulators abroad and industry representatives (see fig. 7). These collaborative efforts include advisory councils and steering committees dedicated to fintech issues; and fintech-specific cooperation agreements. In the jurisdictions we examined, two agencies have established fintech advisory councils or steering committees of industry participants and government officials. Fintech advisory councils and steering committees may provide a valuable connection to industry, through which U.S. regulators could gain insight into industry developments. For example, the Hong Kong securities regulator has established an advisory council comprised of members with knowledge and experience of various parts of Hong Kong’s fintech industry. Officials of this agency told us that the advisory council provides valuable market data, a forum that offers firms a preliminary check for interpretation of their rules and updates on emerging issues. Advisory council members said that the council gives this regulator a cross-functional perspective from industry experts and enables the agency to learn about emerging issues and related regulatory challenges early in their development. Selected U.S. regulators have established formal advisory committees dedicated to fintech issues, as shown in figure 7. FINRA has established a Fintech Industry Committee through which FINRA member and nonmember firms are provided a platform for ongoing dialogue and analysis of fintech developments related to FINRA’s purview. FINRA officials said that the agency has also established the FinTech Advisory Group, a forum to identify and prioritize FinTech topics and coordinate appropriate regulatory approaches with key stakeholders. CFTC staff noted that the agency restarted its Technology Advisory Committee in late 2017 to explore a range of fintech topics and augment the work of LabCFTC. FDIC officials noted that the agency has a Fintech Steering Committee, which aims to help FDIC understand fintech developments by identifying, discussing, and monitoring fintech trends through reports from the staff working groups that the steering committee has established. The Fintech Steering Committee had not made any formal recommendations as of March 13, 2018. As previously mentioned, U.S regulators we interviewed said that they have coordinated with other regulators and industry through various mechanisms, as the following examples illustrate. (For additional information on interagency collaborative efforts, see app. II). The Federal Reserve has coordinated with relevant industry participants and other regulators including CFPB, FDIC, FTC, NCUA, OCC, Treasury, and CSBS through its Mobile Payments Industry Working Group and its Faster Payments Task Force. FTC solicits insight from industry participants, observers, and regulators through its fintech forums. Regulators have also coordinated with each other through domestic and international interagency financial regulatory bodies, as well as a recently organized interagency collaborative group dedicated to fintech, the prudential regulators’ Interagency Fintech Discussion Forum. Some regulators abroad have cooperation agreements with other regulators abroad to share information and to help fintech firms begin operations in other jurisdictions. For example, Singapore regulatory staff told us that the regulator has 16 such agreements with entities from 15 regions that typically consist of (1) referrals to regulatory counterparts for firms attempting to operate in a new country, (2) guidance to firms on regulation in the firm’s new country of operation, and (3) information exchange among regulators and between regulators and fintech firms. UK regulators said that these agreements outline how the agencies in each country pledge to assist each other’s fintech firms seeking to operate in their country with business-to-business contacts, office space, and other assistance. For example, regulators can discuss trends related to their authorities and share information on fintech firms seeking to expand operations in the other country. A fintech firm we interviewed said that because much financial innovation is international in scope, sharing information across borders with cooperation agreements is important for regulators to understand the new technologies and to be responsive to risks. On February 19, 2018, CFTC and UK Financial Conduct Authority signed a cooperation agreement, which, according to CFTC officials, will focus on information sharing and facilitate referrals of fintech companies interested in entering the other regulator’s market. None of the other U.S. regulators that we interviewed had fintech-specific cooperation agreements with regulators abroad. Most of them said that existing memoranda of understanding were sufficient to facilitate information sharing. One regulator we interviewed abroad noted that establishing fintech-specific cooperation agreements with U.S. regulators is difficult because no direct regulatory counterpart exists since the U.S. financial regulatory structure is significantly different from those of other jurisdictions. The emergence of various fintech products has produced benefits to consumers and others. Fintech products often pose risks to those of traditional financial products, although in some cases fintech products pose additional risks. While existing consumer protection and other laws apply to some fintech products and services, in some cases fintech transactions may not be covered by such protections. The extent to which the activities of fintech providers are subject to routine federal oversight varies, but fintech firms not overseen by a federal body generally are subject to oversight by state regulators. While limited evidence of widespread problems has surfaced to date, as the prevalence of fintech products grows, risks posed by segments of the industry that regulators do not routinely examine could correspondingly grow. Therefore, efforts regulators by regulators to monitor developments and risks posed by these firms and their financial innovations remains a sound approach. With fintech products spanning across financial sectors and jurisdictions of the numerous U.S. regulatory bodies, many parties have called for improved regulatory coordination. While regulators have taken steps to collaborate, opportunities remain to improve collaboration in line with GAO’s leading practices. For example, the Interagency Fintech Discussion Forum and the biennial meetings of the Federal Reserve Mobile Payments Industry Workgroup do not include NCUA and FCC, respectively, agencies that could add valuable perspectives. Without these agencies, these efforts are not fully leveraging relevant agency expertise, and NCUA and FCC may be precluded from learning about risks that are relevant to their authorities. Among other consumer protection issues related to financial account aggregation, market participants do not agree about whether consumers using account aggregators will be reimbursed if they experience fraudulent losses in their financial accounts. Until regulators coordinate and assist the industry in clarifying and balancing the valid interests of consumers, financial account aggregators, and financial institutions, consumers could have to choose between facing potential losses or not using what they may find to be an otherwise valuable financial service. Although regulators have been reluctant to act too quickly in light of related industry efforts, they could increase collaboration to address key issues such as consumer reimbursement for unauthorized transactions. Aligning ongoing collaborative efforts with leading practices could help regulators and market participants resolve disagreements over financial account aggregation and related consumer compliance issues more quickly and in a manner that balances the competing interests involved. With our past work finding that an effective financial regulatory system needs to be flexible and forward looking to allow regulators to more readily adapt and oversee new products, U.S. regulators could potentially improve their oversight of innovative fintech activities by considering adoption of some of the efforts already being successfully used by regulators abroad. While constraints may limit the ability or willingness of regulators to fully adopt these practices, opportunities exist to assess ways to tailor them to the U.S. context. Some U.S. regulators have established innovation offices that can help fintech providers more easily obtain needed information from relevant regulators; however, FDIC and NCUA have not established such offices, which could help facilitate these regulators’ interactions with fintech firms and with the entities they regulate. Also, initiatives such as regulatory sandboxes or proofs-of- concept that provide fintech firms the opportunity to operate and share information with appropriate regulators have helped regulators abroad educate their staff and thereby improve their oversight capacities. However, the Federal Reserve, CFTC, FDIC, NCUA, and SEC have not initiated such programs due to concerns about favoring certain competitors over others or that they may not have the authority to initiate these programs. While constraints may limit the ability or willingness of regulators to fully adopt these practices, additional consideration by these regulators of some of the approaches taken by regulators abroad could assist U.S. regulators in learning more about new financial technologies that could provide useful knowledge for their own regulatory activities. We are making a total of sixteen recommendations. The Chair of the Board of Governors of the Federal Reserve System should invite NCUA to participate in the Interagency Fintech Discussion Forum. (Recommendation 1) The Chairman of the Federal Communications Commission (FCC) should discuss with the Presidents of the Federal Reserve Banks of Atlanta and Boston whether the topics of the 2018-2019 biennial regulators meeting of the Federal Reserve’s Mobile Payments Industry Working Group would make FCC participation beneficial to the FCC or the group, and take steps accordingly. (Recommendation 2) The President of the Federal Reserve Bank of Atlanta should discuss with the Chairman of the FCC and the President of the Federal Reserve Banks of Boston whether the topics of the 2018-2019 biennial regulators meeting of the Federal Reserve’s Mobile Payments Industry Working Group would make FCC participation beneficial to the FCC or the group, and take steps accordingly. (Recommendation 3) The President of the Federal Reserve Bank of Boston should discuss with the Chairman of the FCC and the President of the Federal Reserve Banks of Atlanta whether the topics of the 2018-2019 biennial regulators meeting of the Federal Reserve’s Mobile Payments Industry Working Group would make FCC participation beneficial to the FCC or the group, and take steps accordingly. (Recommendation 4) The Director of the Consumer Financial Protection Bureau should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers’ use of account aggregation services. (Recommendation 5) The Chair of the Board of Governors of the Federal Reserve System should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers’ use of account aggregation services. (Recommendation 6) The Chairman of the Federal Deposit Insurance Corporation should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers’ use of account aggregation services. (Recommendation 7) The Chairman of the National Credit Union Administration should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers’ use of account aggregation services. (Recommendation 8) The Comptroller of the Currency should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers’ use of account aggregation services. (Recommendation 9) The Chairman of the Federal Deposit Insurance Corporation should formally evaluate the feasibility and benefit of establishing an office of innovation or clear contact point, including at least a website with a dedicated email address. (Recommendation 10) The Chairman of the National Credit Union Administration should formally evaluate the feasibility and benefit of establishing an office of innovation or clear contact point, including at least a website with a dedicated email address. (Recommendation 11) The Chair of the Board of Governors of the Federal Reserve System should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation. (Recommendation 12) The Chairman of the Commodity Futures Trading Commission should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation. (Recommendation 13) The Chairman of the Federal Deposit Insurance Corporation should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation. (Recommendation 14) The Chairman of the National Credit Union Administration should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation. (Recommendation 15) The Chairman of the Securities and Exchange Commission should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation. (Recommendation 16) We provided a draft of this report to CFPB; CFTC; FCC; FDIC; the Federal Reserve; FTC; NCUA; OCC; SEC; and Treasury, as well as CSBS and FINRA. We received written comments from all of these agencies except for Treasury and FINRA; the comments are reprinted in appendixes IV through XII, respectively. Agencies to which we directed recommendations agreed with our recommendations, as detailed below. All of these agencies except FCC and NCUA also provided technical comments, which we incorporated as appropriate. In response to our recommendation that CFPB engage in collaborative discussions that incorporate leading practices with other financial regulators on financial account aggregation issues, CFPB stated in its letter that it concurred. CFPB stated that it has taken steps to address related issues independently. CFPB also noted that it has participated in related ongoing collaborative discussions and that it would continue to do so. CFTC concurred with our recommendation that it formally evaluate adopting knowledge-building initiatives related to financial innovation. CFTC also noted that it is either using or exploring the use of some of the knowledge-building initiatives identified in the report. However, the agency also raised concerns that, without targeted legislative changes, some of those initiatives may violate federal procurement laws and gift prohibitions. In its letter, FCC agreed with our recommendation that it should discuss with the Presidents of the Federal Reserve Banks of Atlanta and Boston whether the topics of the 2018–2019 biennial regulator meeting of the Federal Reserve’s Mobile Payments Industry Working Group would make FCC participation beneficial to FCC or the group, and take steps accordingly. FCC noted that it will reach out to the Federal Reserve Banks of Atlanta and Boston to determine whether FCC participation would be beneficial. Regarding our recommendation that FDIC engage in collaborative discussions that incorporate leading practices with other financial regulators on financial account aggregation issues, FDIC stated in its letter that it recognizes the benefits of engaging in collaborative discussions with other relevant regulators. It noted that it has been involved in ongoing collaborative discussions about such issues and that it would continue to do so, particularly regarding liability for unauthorized transactions and consumer reimbursement. Regarding our recommendation that FDIC formally evaluate the feasibility and benefit of establishing an Office of Innovation or clear contact point, FDIC stated that it would conduct such an evaluation, and acknowledged that it has a long history of engaging in open dialogue with any party interested in discussing matters related to FDIC’s mission and responsibilities. Regarding our recommendation that it formally evaluate adopting knowledge building initiatives related to financial innovation, FDIC stated that it recognizes the importance of knowledge building and has developed a framework and implemented initiatives to facilitate this. It also noted that it will continue ongoing efforts to build knowledge related to financial innovation and will consider other relevant knowledge building initiatives, as appropriate. In response to our recommendations that the Federal Reserve include NCUA and FCC in relevant working groups, the Federal Reserve stated in its letter that its Board staff would seek NCUA’s participation and that staff from the Reserve Banks in Atlanta and Boston would discuss FCC’s participation in relevant working groups. Regarding our recommendation that the Federal Reserve engage in collaborative discussions that incorporate leading practices with other financial regulators regarding financial account aggregation issues, the Federal Reserve acknowledged the importance of working together to ensure that consumers were protected, and noted a variety of ways it already coordinates on such issues, and noted that it will continue to engage in such discussions to address the important issues surrounding reimbursement for consumers using these services. Regarding our recommendation that it formally evaluate adopting knowledge-building initiatives related to financial innovation, the Federal Reserve noted that it recognizes the importance of such efforts and has recently organized a team of experts to ensure that fintech-related information is shared across its organization. NCUA stated in its letter that it concurred with our recommendations to engage in collaborative discussions that incorporate leading practices with other financial regulators on financial account aggregation issues, formally evaluate the feasibility and benefit of establishing an office of innovation or clear contact point, and formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge- building initiatives related to financial innovation. NCUA noted that evaluations of fintech activities are challenging for NCUA because it does not have vendor authority like the other federal banking regulators. We have previously raised NCUA’s lack of vendor authority as a matter for congressional consideration. NCUA stated it will continue to monitor risks posed by fintech firms to the credit union industry by working with the banking regulators. Regarding our recommendation that OCC engage in collaborative discussions that incorporate leading practices with other financial regulators on financial account aggregation issues, OCC stated in its letter that it recognizes the importance of this recommendation. It noted that it has been involved in ongoing collaborative discussions about such issues and that it would continue to do so. SEC stated in its letter that it concurred with our recommendation to formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation. SEC also stated that it will coordinate with other agencies as appropriate during its assessment. In its letter, CSBS drew connections between steps that state regulators have taken and those that we are recommending to federal agencies. CSBS also provided additional information regarding state licensing requirements, which we incorporated into our report. Additionally, CSBS expressed support for our recommendations on federal interagency collaboration and stated that it would support related efforts that respected the role of state regulators. In addition, CSBS said that these efforts could benefit from the participation of state regulators and that it would be willing to participate if invited. Similarly, CSBS expressed support for our recommendations that certain federal agencies formally evaluate the feasibility and benefit of establishing an office of innovation or clear contact point and formally evaluate the feasibility and benefit of adopting knowledge-building initiatives related to financial innovation. However, CSBS also cautioned that knowledge-building initiatives should not preempt state consumer protection and licensing laws for fintech payment providers or fintech lenders. As agreed with your offices, we are sending this report to the appropriate members of Congress; CFPB; CFTC; FCC; FDIC; the Board of Governors of the Federal Reserve; FTC; NCUA; OCC; SEC; and Treasury, as well as CSBS and FINRA. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. This report examines (1) fintech benefits, risks, and extent of legal or regulatory protections for users; (2) efforts by U.S. regulators to oversee fintech activities; (3) challenges that the regulatory environment poses to fintech firms; and (4) the steps taken by domestic and other countries’ regulators to encourage financial innovation within their countries. While fintech does not have a standard definition, for the purposes of this report we focused on products and services leveraging technological advances offered by financial institutions; nonbank financial companies; and technology companies within the payment, lending, and wealth management sectors, as well as products or services operating under distributed ledger technology (DLT). Within these four identified sectors, we examined particular products and services. In the payments technologies sector we limited our scope to mobile wallets, peer-to-peer payments, and peer-to-business payments products and services. To identify these four sectors, we conducted background research and reviewed prior GAO reports on fintech, person-to-person lending, and virtual currencies. In the fintech lending sector, we focused on consumer lending—including credit card and home improvement loans—and small business lending services from direct and platform lending models; however, we did not include mortgage lending in our scope, due to the significant amount of regulation within the subsector. In the digital wealth management sector, we examined firms that exclusively offer advice using algorithms based on consumers’ data and risk preferences to assist or provide investment recommendations and financial advice directly to consumers. We also examined issues relating to fintech account aggregation companies that consolidate and display data from consumers’ accounts across financial institutions to help consumers more easily see their overall financial health. For DLT, we focused on providers that used DLT in payments and securities processing and token sales. We also included information on the use of DLT in virtual currencies, such as bitcoin and Ethereum. We also reviewed available data on transaction volumes for the payments, lending, and robo advising sectors. To identify the benefits provided and risks posed to consumers by fintech services, we conducted a literature review of agency, industry participant, and industry observer documents that analyzed developments within fintech. Using ProQuest, Scopus, SSRN, and Nexis.com databases in the literature review, we identified over 500 relevant articles out of over 1,100 search results by using search terms associated with the four fintech subsectors mentioned above. Our search included articles from 2011 to October 2017. To determine the usefulness of the studies for inclusion, we conducted a review of search results involving multiple content reviews by GAO analysts to determine which relevant articles could (1) provide credible sources of information to help address our researchable questions, or (2) help identify knowledgeable persons or groups to interview. We excluded documents based on the following criteria that eliminated articles that were (1) duplicated; (2) related to countries outside our review; (3) about virtual currencies; (4) categorized as “marginally relevant” by analysts based on the article’s title, publication date, and source; (5) less recent documents from each author or source; (6) from news outlets or nonauthoritative sources; or (7) deemed irrelevant or not useful. To obtain the financial services and fintech stakeholder perspectives on fintech benefits and risk, we reviewed academic papers, reports, and studies by other organizations on fintech activities we identified through a literature search. We also conducted over 120 interviews with financial regulators; banks; fintech providers; consumer groups; trade associations; academics; think tanks; and consulting and law firms. We identified potential interviewees by conducting Internet research; reviewing literature search results; reviewing recommended interviewees from our initial interviews; and selecting interviewees based on their relevance to the scope of our review. We selected fintech firms and financial intuitions, industry observers, and federal agencies based on the product or service conducted by the firm, expertise of the industry observers, and oversight authority of the federal agencies. We identified fintech benefits and risk by speaking with relevant regulators and other knowledgeable parties including: the Board of Governors of the Federal Reserve System (Federal Reserve); the Federal Deposit Insurance Corporation (FDIC); the National Credit Union Administration (NCUA); the Office of the Comptroller of the Currency (OCC); the Commodity Futures Trading Commission (CFTC); the Bureau of Consumer Financial Protection, known as the Consumer Financial Protection Bureau (CFPB); the Department of the Treasury (Treasury); the Federal Communications Commission; Federal Trade Commission (FTC); the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC); and the Small Business Administration. To obtain state-level perspectives we interviewed representatives of the Conference of State Bank Supervisors (CSBS), National Association of Attorneys General, Money Transmitter Regulators Association, National Association of State Credit Union Supervisors, and the North American Securities Administrators Association. We also interviewed staff from three state financial regulatory agencies in states with active fintech firms and regulatory activities: California, Illinois, and New York. To assess the regulatory environment and various challenges faced by fintech firms, we identified relevant laws and regulations pertaining to fintech companies within our scope by reviewing prior GAO reports on financial regulation and fintech, interviewed agency staff and industry participants, and analyzed relevant agency documents, including relevant laws and regulations. We also reviewed guidance; final rulemakings; initiatives; and enforcement actions from agencies. To obtain federal regulatory perspectives, we interviewed staff from the Federal Reserve, FDIC, NCUA, OCC, CFTC, CFPB, Treasury, FTC, FINRA, SEC, and SBA. To determine the steps taken by domestic and other countries’ regulators to encourage financial innovation in their countries, we conducted fieldwork—including interviews with regulatory agencies, fintech firms, and industry observers, as well as, observations of fintech programs—in the United Kingdom, Singapore, and Hong Kong. We also conducted interviews with a regulatory organization and fintech firms operating in Canada. We identified and selected countries for our fieldwork through criteria that focused on the extent to which these locations had significant (1) financial services activities, (2) fintech activities, and (3) fintech regulatory approaches. We conducted Internet research, literature searches, and interviews to identify relevant foreign regulators within the selected fieldwork sites. To obtain other countries’ regulator perspectives, we interviewed and analyzed agency documents on regulatory efforts and views on fintech innovations within their financial markets from regulators in Hong Kong, Singapore, and the United Kingdom. To obtain the perspective of fintech firms operating in the selected fieldwork sites, we conducted Internet research, literature searches, and interviews to determine relevant fintech firms and foreign trade associations, including recommendations from domestic industry participants and observers. We conducted this performance audit from initiation August 2016 to March 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In this appendix, we present interagency working groups (including task forces and other interagency collaborative bodies) that have discussed fintech issues, and in some cases, taken specific actions. This list includes interagency groups that are dedicated exclusively to fintech as well as those that may discuss fintech as part of their broader financial regulatory focus. Also, it includes interagency groups that operate at both the domestic and international levels (see tables 2 and 3). This list is based on information we obtained from the federal financial regulatory agencies we met with and is not intended to be an exhaustive list. According to officials, the purpose of the Financial Conduct Authority’s (FCA) sandbox is to allow firms to test innovative products, services, or business models in a live market environment, while ensuring that appropriate protections are in place. FCA has stated that its sandbox has (1) reduced the time and cost of getting innovative ideas to market; (2) facilitated access to finance for innovators; (3) enabled products to be tested and introduced to the market; and (4) helped the agency build appropriate consumer protection safeguards into new products and services. The characteristics of the FCA sandbox, according to the agency, are listed below. Eligible Participants: Currently regulated firms as well as unregulated firms. Eligibility Criteria: Firms submit an application outlining how they meet the eligibility criteria for testing, which are (1) carrying out or supporting financial services business in the UK; (2) genuinely innovative; (3) identifiable consumer benefit; (4) need for sandbox testing; and (5) ready to test. Testing Parameters: If a firm is unauthorized it must obtain authorization or restricted authorization prior to participation in the sandbox. Prior to participating in the sandbox a firm must design, and obtain agreement on, the parameters of the sandbox test, including the duration; customer selection; customer safeguards; disclosures; data; and testing plans. FCA has four ways that it can help firms operate more easily in its sandbox. First, it can provide restricted authorizations that are a tailored authorization process for firms accepted into the sandbox. Any authorization or registration is restricted to allow firms to test only their ideas as agreed upon with agency staff, which is intended to make the process easier for firms to meet requirements and reduce the cost and time to initiate the test, according to the agency. Second, FCA provides individual guidance to firms in the sandbox that are unclear on how the agency’s rules apply, whereby FCA will interpret the regulatory requirements in the context of the firm’s specific test. Third, in some cases, FCA may be able to waive or modify an unduly burdensome rule for the purposes of the sandbox test, but it cannot waive national or international laws. Finally, FCA can issue no enforcement action letters in cases where they cannot issue individual guidance or waivers but they believe regulatory relief is justified for the circumstances of the sandbox. According to the agency, no enforcement action letters are offered only during the duration of the sandbox test to firms that keep to the agreed- upon testing parameters and that treat customers fairly. Also, no enforcement action letters only apply to FCA disciplinary action and do not limit any liabilities to consumers. Officials we interviewed noted that rule waivers and no enforcement action letters are rarely used tools. As of January 2018, FCA had received more than 200 sandbox applications. Eighteen firms had successfully graduated from the first cohort, 24 firms were preparing to test in the second cohort, and 18 other firms were accepted to test in the third cohort. Recognizing that when lack of clarity over whether a new financial service complies with legal and regulatory requirements could cause some financial institutions or start-ups to choose not to implement an innovation, the Monetary Authority of Singapore’s (MAS) purpose in establishing its sandbox was to encourage such experimentation so that promising innovations could be tested in the market and have a chance for wider adoption, according to the agency. In addition, the agency stated that sandbox tests include safeguards to contain the consequences of failure and maintain the overall safety and soundness of the financial system. The characteristics of the MAS sandbox, according to MAS, are listed below. Eligible Participants: Firms that are looking to apply technology in an innovative way to provide financial services that are regulated by MAS, including financial institutions, fintech firms, and professional services firms partnering with such firms. Eligibility Criteria: Firms submit an application outlining how they meet the eligibility criteria for testing, which are that (1) the product uses new technology or existing technology in an innovative way, (2) the product benefits consumers or industry, and (3) the firm intends to deploy the product in Singapore on a broader scale after exiting the sandbox. Testing Parameters: Firms must define the following testing parameters prior to participating in the sandbox: (1) clearly defined test scenarios and expected outcomes must be established; (2) boundary conditions that facilitate meaningful experiments while sufficiently protecting the interests of consumers and maintaining the safety and soundness of the industry must be in place; (3) the firm assesses and mitigates significant associated risks; and (4) an acceptable exit and transition strategy must be defined. MAS stated that it will consider relaxing various regulatory requirements for the duration of the sandbox test. However, they emphasized that their sandbox is not intended and cannot be used as a means to circumvent legal and regulatory requirements. MAS staff determines the specific legal and regulatory requirements that they may be willing to relax on a case- by-case basis. According to MAS, some of the regulatory requirements that could be relaxed included maintenance of certain levels of financial soundness, solvency, capital adequacy, and credit ratings as well as licensing fees, board composition requirements, and management experience requirements, among others. However, MAS has also laid out some requirements that it will not consider relaxing, including those regarding consumer information confidentiality, anti-money laundering, and countering terrorist financing. MAS officials said that all firms in the sandbox will receive some form of regulatory relaxation. As of November 2017, MAS had received more than 30 sandbox applications. One firm had successfully graduated, and a few other firms were testing or were in the process of initiating a sandbox test. According to the Hong Kong Monetary Authority (HKMA), the purpose of the HKMA sandbox is to enable banks and technology firms to gather data and user feedback so that they can make changes to their innovations, thereby expediting the launch of new products and reducing development costs. HKMA officials stated that the sandbox allows banks and their partnering technology firms to conduct pilot trials of their fintech initiatives involving a limited number of participating customers without the need to achieve full compliance with HKMA’s supervisory requirements. The characteristics of the HKMA sandbox, according to the agency, are listed below. Eligible Participants: Regulated banks and their partnering technology firms. Eligibility Criteria: Fintech initiatives that are intended to be launched by banks in Hong Kong are eligible for the sandbox. Testing Parameters: Participating firms must (1) define the scope, phases, timing, and termination of the sandbox test; (2) establish customer protection measures, including disclosures, complaint handling, and compensation for consumer loss; (3) establishing risk management controls; and (4) establish a monitoring program for the sandbox test. Similar to MAS, HKMA stated that its sandbox should not be used as a means to bypass applicable supervisory requirements; however, HKMA will relax regulatory requirements on a case-by-case basis. As of November 2017, nine banks had participated in 26 HKMA sandbox tests. Twelve of these tests had been completed and banks collaborated with fintech firms in 15 of the tests. Lawrance L. Evans, Jr., (202) 512-8678 or evansl@gao.gov. In addition to the contact named above, Cody Goebel (Assistant Director); Chloe Brown (Analyst-in-Charge); Chris Ross; Davis Judson; Ian P. Moloney; and Bethany Benitez made key contributions to this report. Also contributing to this report were Joanna Berry; Timothy Bober; Richard Hung; Pamela Davidson; Tovah Rom; Cynthia Saunders; and Jena Sinkfield.", "summary": "Advances in technology and the widespread use of the Internet and mobile communication devices have helped fuel the rise of traditional financial services provided by non-traditional technology-enabled providers, often referred to as fintech. GAO was asked to provide information on various aspects of fintech activities. This report addresses fintech payment, lending, wealth management, and other products. GAO assesses 1) fintech benefits, risks, and protections for users; 2) regulatory oversight of fintech firms; 3) regulatory challenges for fintech firms; and 4) the steps taken by domestic and other countries' regulators to encourage financial innovation within their countries. GAO reviewed available data, literature, and agency documents; analyzed relevant laws and regulations; and conducted interviews with over 120 federal and state regulators, market participants, and observers, and regulators in 4 countries with active fintech sectors and varying regulatory approaches. Fintech products—including payments, lending, wealth management, and others—generally provide benefits to consumers, such as convenience and lower costs. For example, fintech robo-advisers offer low cost investment advice provided solely by algorithms instead of humans. Fintech products pose similar risks as traditional products, but their risks may not always be sufficiently addressed by existing laws and regulations. Also, regulators and others noted that fintech activities create data security and privacy concerns and could potentially impact overall financial stability as fintech grows. The extent to which fintech firms are subject to federal oversight of their compliance with applicable laws varies. Securities regulators can oversee fintech investment advisers in the same ways as traditional investment advisers. Federal regulators may review some activities of fintech lenders or payment firms as part of overseeing risks arising from these firms' partnerships with banks or credit unions. In other cases, state regulators primarily oversee fintech firms, but federal regulators could take enforcement actions. Regulators have published consumer complaints against fintech firms, but indications of widespread consumer harm appear limited. The U.S. regulatory structure poses challenges to fintech firms. With numerous regulators, fintech firms noted that identifying the applicable laws and how their activities will be regulated can be difficult. Although regulators have issued some guidance, fintech payment and lending firms say complying with fragmented state requirements is costly and time-consuming. Regulators are collaborating in various ways, including engaging in discussions on financial protections for customers that may experience harm when their accounts are aggregated by a fintech firm and unauthorized transactions occur. Market participants disagree over reimbursement for such consumers, and key regulators are reluctant to act prematurely. Given their mandated consumer protection missions, regulators could act collaboratively to better ensure that consumers avoid financial harm and continue to benefit from these services. GAO has identified leading practices for interagency collaboration, including defining agency roles and responsibilities and defining outcomes. Implementing these practices could increase the effectiveness of regulators' efforts to help resolve this conflict. Regulators abroad have taken various approaches to encourage fintech innovation. These include establishing innovation offices to help fintech firms understand applicable regulations and foster regulatory interactions. Some use “regulatory sandboxes” that allow fintech firms to offer products on a limited scale and provide valuable knowledge about products and risks to both firms and regulators. Regulators abroad also established various mechanisms to coordinate with other agencies on financial innovation. While some U.S. regulators have taken similar steps, others have not due to concerns of favoring certain competitors or perceived lack of authority. While these constraints may limit regulators' ability to take such steps, considering these approaches could result in better interactions between U.S. regulators and fintech firms and help regulators increase their understanding of fintech products. This would be consistent with GAO's framework calling for regulatory systems to be flexible and forward looking to help regulators adapt to market innovations. GAO is making numerous recommendations related to improving interagency coordination on fintech, addressing competing concerns on financial account aggregation, and evaluating whether it would be feasible and beneficial to adopt regulatory approaches similar to those undertaken by regulators in jurisdictions outside of the United States. In written comments on a draft of this report, the agencies stated that they concurred with GAO's recommendations and would take responsive steps.", "document_type": "gao"}
{"report": "DOD’s organizational structure includes the Office of the Secretary of Defense, the Joint Chiefs of Staff, the military departments, numerous defense agencies and field activities, and various unified combatant commands that contribute to the oversight of DOD’s acquisition programs. Prior to February 2018, the former Under Secretary of Defense for Acquisition, Technology, and Logistics also served as the principal acquisition official of the department and was the acquisition advisor to the Secretary of Defense. The former Under Secretary also served as the Defense Acquisition Executive and was the official responsible for supervising the acquisition of MAIS programs. The former Under Secretary’s authority included directing the military services and defense agencies on acquisition matters and making milestone decisions for MAIS and other programs. This official also had policy and procedural authority for the defense acquisition system, which establishes the steps that DOD programs generally take to plan, design, acquire, deploy, operate, and maintain the department’s information systems. However, as of February 2018, the department changed the way it conducts business and operations with the statutory elimination of the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics. The statute contains a provision that required DOD to establish a new Office of the Under Secretary of Defense for Research and Engineering to be responsible for driving innovation and acceleration of the advancement of warfighting capability. In addition, a new Office of the Under Secretary of Defense for Acquisition and Sustainment was created to focus on delivering proven technology more quickly. The creation of these offices within the department is intended to shift the principal focus of the Office of the Secretary of Defense from a role of program oversight to that of directing major department investments. Further, the statutory creation of a Chief Management Officer to replace the former Deputy Chief Management Officer is intended to improve the quality and productivity of the department’s business operations. In January 2015, DOD updated its guidelines that outline the framework for MAIS programs. This framework consists of six models for acquiring and deploying a program, including two hybrid models that each describe how a program may be structured based on the type of product being acquired (e.g., software-intensive programs and hardware-intensive programs). A generic acquisition model that shows all of the program life- cycle phases and key decision points is depicted in figure 1 and described below. Materiel solution analysis: Refine the initial system solution (concept) and create a strategy for acquiring the solution. A decision—referred to as Milestone A—is made at the end of this phase to authorize entry into the technology maturation and risk reduction phase. Technology maturation and risk: Determine the preferred technology solution and validate that it is affordable, satisfies program requirements, and has acceptable technical risk. A decision—referred to as Milestone B—is made at the end of this phase to authorize entry of the program into the engineering and manufacturing development phase and award development contracts. An acquisition program baseline is first established at the Milestone B decision point. A program’s first acquisition program baseline contains the original life-cycle cost estimate (which includes acquisition and operations and maintenance costs), the schedule estimate (which consists of major milestones and decision points), and performance parameters that were approved for that program by the milestone decision authority. The first baseline is established after the program has refined user requirements and identified the most appropriate technology solution that demonstrates that it can meet users’ needs. Engineering and manufacturing development: Develop a system and demonstrate through testing that the system meets all program requirements. A decision—referred to as Milestone C—is made during this phase to authorize entry of the system into the production and deployment phase or into limited deployment in support of operational testing. Production and deployment: Achieve an operational capability that meets program requirements, as verified through independent operational tests and evaluation, and implement the system at all applicable locations. Operations and support: Operationally sustain the system in the most cost-effective manner over its life cycle. We have developed and identified leading practices for governing IT investments to help guide organizations to better manage and oversee their projects. GAO’s Information Technology Investment Management guide states that good performance data and stakeholder oversight are elements that can lead to positive outcomes, such as helping to ensure a project is keeping to its initial cost, schedule, and performance goals. The guide also states that projects should be reviewed at regular intervals to monitor performance so that stakeholders can be aware of and review any differences between actual outcomes and goals. In addition, we and other entities, such as the Software Engineering Institute at Carnegie Mellon University, have identified leading practices to help guide organizations to effectively plan and manage their acquisitions of major IT systems. Our prior reviews have shown that proper implementation of such practices can significantly increase the likelihood of delivering promised system capabilities on time and within budget. These practices include, but are not limited to: Requirements management: Requirements establish what the system is to do, how well it is to do it, and how it is to interact with other systems. Appropriate requirements management involves eliciting and developing customer and stakeholder requirements, and analyzing them to ensure that they will meet users’ needs and expectations. It also consists of validating requirements as the system is being developed to ensure that the final systems to be deployed will perform as intended in an operational environment. Risk management: Risk management is a process for anticipating problems and developing plans to take appropriate steps to mitigate risks and minimize their impact on program commitments. It involves identifying and documenting risks, categorizing them based on their estimated impact, prioritizing them, developing risk mitigation strategies, and tracking progress in executing the strategies. According to GAO’s Information Technology Investment Management guide, leading practices for managing IT projects include: instituting the investment board, which is the process for creating and defining the membership, guiding policies, operations, roles, responsibilities, and authorities within the organization; identifying decision authorities for making important acquisition decisions; providing oversight whereby the organization monitors each project on its performance progress (e.g., establishing and tracking baseline estimates on cost and schedule goals, and thresholds to identify high risk on cost and schedule); and capturing and providing performance information about a particular investment (project) to decision makers at regular intervals (e.g., quarterly and annually). To align MAIS programs with the functions they perform, DOD recently made changes in how it characterizes its MAIS programs and, as a result, different programs must follow different management policies. Specifically, in April 2017, DOD identified 10 of 34 total MAIS programs as business programs and the Director, Acquisition Resources and Analysis announced that these programs would adhere to DOD’s Instruction 5000.75 policy for management and oversight. Further, in November 2017, the former Under Secretary of Defense for Acquisition, Technology, and Logistics announced that non-business MAIS programs would adhere to DOD’s Instruction 5000.02 policy for management and oversight. However, the policies used for MAIS business programs are not consistent in their adherence to leading IT management practices. For example, while the policy for non-business MAIS programs is consistent in its adherence to all four of the leading IT management practices, the policy for MAIS business programs is consistent in its adherence to only two of the four practices. Table 1 shows our analysis of DOD’s policies for non-business MAIS programs and MAIS business program and their adherence to the leading IT management practices. As shown in the table, DOD’s policy for non-business MAIS programs adheres to all four leading IT management practices. For example, the policy requires non-business MAIS programs to report the status of each program’s cost, schedule, and technical performance information quarterly and annually. The policy also designates specific decision makers who are responsible for monitoring and overseeing the progress of non-business system MAIS programs. Further, the policy requires each program to establish and report their initial baseline estimates and current estimates on cost and schedule so their performance can be tracked and monitored. In addition, to identify when programs may be at risk of significant cost or schedule increases, the policy requires programs to predetermine cost and schedule threshold estimates as an early warning indicator on when programs reach the point where they are at increased risk. In contrast, DOD’s policy for MAIS business programs policy only adheres to two of the four practices. Specifically, the policy adheres to the practice of instituting an investment board with processes for creating and defining the membership, policies, operations, roles, responsibilities, and authorities within the organization. In addition, the policy identifies decision authorities for making important executive-level acquisition decisions. However, the policy does not specify the establishment of initial and current baseline estimates on cost and schedule, and does not specify the reporting of threshold cost and schedule estimates to identify the point when programs may be at high risk. In addition, the policy does not adhere to leading practices requiring the periodic (quarterly and annual) reporting of performance information to stakeholders. To help address the need for improved guidance, the former Under Secretary of Defense for Acquisition, Technology and Logistics established a cross-functional team that is to examine the future of non- business MAIS programs and MAIS business programs from a policy, organization, management, and reporting perspective. The team was expected to provide its recommendations to the Under Secretary of Defense for Acquisition and Sustainment by March 15, 2018. However, because no final decisions had been made by the Under Secretary as of that date, it is unclear what specific actions the department will take regarding its policy recommendations, among other recommendations, to improve the management of non-business MAIS programs and MAIS business programs. Until DOD updates its policy for MAIS business programs to adhere to leading practices on the establishment of baseline estimates on cost and schedule to include threshold estimates on cost and schedule to identify when programs may be at high risk, stakeholders may not have the information they need to manage and oversee MAIS business programs. Further, unless the department updates its policy for MAIS business programs to adhere to the leading practice for periodically (quarterly and annually) reporting essential performance information, stakeholders may not have the information they need to make informed decisions for managing and overseeing MAIS business programs. All of the 15 selected MAIS programs had either increased or decreased their planned cost estimates, and 10 of them had delays in their planned schedule estimates when comparing the first acquisition program baseline to the most recent acquisition program baseline estimates. The changes in the cost estimates ranged from a decrease of $1.6 billion (-41 percent) to an increase of $1.5 billion (163 percent), and slippages in the schedule estimates ranged from a delay of 5 years to a delay of 5 months. Further, 9 of the 15 selected programs had conducted testing in which we could report on the number of performance targets met for each program. Of those 9, 6 programs reported that they had met all of their performance targets. The remaining 3 programs reported that they met several but not all performance targets. The following table shows the extent of changes in planned cost and schedule estimates for the selected MAIS programs since the first baseline estimate, as well as the number of performance targets met. All 15 selected MAIS programs had experienced increases or decreases in their planned cost estimates when comparing the initial, or first, baseline estimate to the current estimate. Specifically, 10 programs had decreases in their cost estimates that ranged from $1.2 million (less than -1 percent) for the Defense Agencies Initiative, Increment 2 program to $1.6 billion (-41 percent) for the Air Force’s Base Information Transport Infrastructure Wired program. Program officials reported that reductions in planned cost estimates were due to changes in program scope. Specifically, the reasons for reduction in cost include: Program scope changes. Officials for the Air Force’s Joint Space Operations Center Mission System Increment 2 program reported that its 12 percent cost decrease was due to a reduction in its estimate for operations and support that was changed from 20 years to 10 years. Officials for the Defense Information Systems Agency’s Global Combat Support System–Joint Increment 8 program reported that its 20 percent cost decrease was due to a reduction in the program’s scope for the number of development hours required to meet the logistics and operational needs. In addition, officials for the Defense Information Systems Agency’s Teleport Generation 3 program reported that its 22 percent cost decrease was due to a revised scope in terms of what is needed at the Milestone C decision point for low rate production. Design reconfiguration. Officials for the Air Force’s Base Information Transport Infrastructure Wired program reported that its 41 percent cost decrease was due to a reduction in the program’s scope when they changed from a base network system to a critical core configuration. In addition, 5 of the programs had experienced cost increases. These cost increases ranged from $2.9 million (less than 1 percent) for the Army’s Logistics Modernization Program Increment 2 to $1.5 billion (163 percent) for the Army’s Tactical Mission Command program. Program officials reported a variety of reasons for the increases in planned cost estimates. These reasons included the following: Underestimating schedule. Officials for the Air Force’s Defense Enterprise Accounting and Management System Increment 1 program attributed its 60 percent cost increase to underestimating the level of effort that was needed to develop the system within the estimated schedule. For example, the program did not account for software upgrades and, when this effort was added to the schedule to account for the work, the cost increased. Contractor issues. Officials from the National Security Agency’s Key Management Infrastructure Increment 2 program attributed its cost increase of 14 percent to schedule delays caused by the contractor and, as a result, increased funding at the Milestone C decision point. Underestimating development and test efforts. Officials from the Army’s Tactical Mission Command program attributed the cost increase of 163 percent to higher than expected costs to conduct research and developmental tests. Ten of the 15 selected MAIS programs had experienced changes in their planned schedule estimates, and 5 programs had no changes to their schedule estimates. The changes consisted of schedule slippages that ranged from 5 months for both the Army’s Logistics Modernization Program Increment 2 and the Defense Health Agency’s Department of Defense Healthcare Management System program, to 5 years for the Defense Enterprise Accounting and Management System Increment 1 program. Program officials reported that delays in the planned schedule estimates were due to unplanned budget reductions or unrealistic expectations regarding project milestones. Specifically, the reasons for these schedule slippages included: Aggressive schedule, funding reduction, and contract issues. Officials for the Air Force’s Joint Space Operations Center Mission System Increment 2 program attributed its schedule slippage of 2 years and 11 months to funding reductions of $18.9 million in fiscal years 2013 and 2014. In addition, the officials noted that an aggressive schedule for a Milestone B decision, contracting issues in the earlier acquisition phase, and longer than expected time to obtain personnel had contributed to the slippage. Longer than expected time to reach deployment. Officials for the Air Force’s Defense Enterprise Accounting and Management System Increment 1 program reported that its schedule slippage of 5 years occurred because of a change in the approach to deliver the system in multiple increments, thereby increasing the amount of time it would take to reach the deployment decision milestone. Also, officials for the Defense Information Systems Agency’s Teleport Generation 3 program reported a 3-year and 2-month slip. This schedule delay was due to the program’s inability to develop the mobile user and system interface capability by the estimated deployment milestone. Further, program officials for the Navy’s Consolidated Afloat Networks and Enterprise Services program attributed its schedule slip of 2 years and 6 months to a longer than expected maintenance period for the test platform and to a lengthy budget approval process, resulting in a slippage in the deployment date. Unplanned procurement fund reduction. Officials for the Army’s Global Combat Support System-Army program reported that its schedule delay of 11 months was due, in part, to a $16 million dollar decrease to the fiscal year 2016 budget. This unplanned reduction in procurement fund affected their ability to field the system as originally planned. Contractor staffing issues. Officials for the National Security Agency’s Key Management Infrastructure Increment 2 program reported significant schedule delays due to the contractor’s inability to staff the program with software developers that had the required security clearances. As a result, a critical change was reported in January 2012 that led to a new independent cost estimate, which extended program development by 10 months. The new estimate included additional time to improve the governance structure, such as increasing discipline across the oversight process, adding more stakeholder interaction, and improving the use of metrics. Among other information, DOD uses key performance parameters as a metric to report on programs’ progress toward meeting system performance targets. This information includes a description of the performance characteristics, the objective and threshold value for each target and, importantly, whether the target has been met in demonstrating performance. Of the nine programs we evaluated, six programs reported that they met all of their performance targets. For example, the Navy’s Common Aviation Command and Control System, Increment 1 program reported in May 2017 that both of its technical performance targets had been met. According to the program, these targets were related to the readiness of the system to fully support all operational activities and satisfy all technical requirements for military operations and the fusion of all kinds of data onto any workstation. In another example, the Army’s Logistics Modernization Program Increment 2 program reported in June 2017 that all seven of its performance targets had been met. According to the program, these targets were related to the system’s ability to support military operations, exchange information in the network, provide system and information assurance in a disaster recovery scenario, and be operationally available. Further, three programs reported that they met several, but not all, of their performance targets. For example, the Navy’s Consolidated Afloat Networks and Enterprise Services program reported that it met eight of nine performance targets. According to program officials, the remaining target (i.e., network shall fully support joint critical operational activities) had not been met because the program lacked an operational platform that was required to demonstrate its performance. The Defense Information Systems Agency’s Teleport Generation 3 program reported that it met 8 of 12 performance targets. According to programs officials, the remaining 4 targets (i.e., coverage to allow warfighter communications, capacity to provide 100 percent of the required services, and interoperability with military and commercial frequencies and wave forms) had not been met because the program needed to field multiple systems and perform solution testing, which they expect to be completed in fiscal year 2018. Further, the Air Force’s Defense Enterprise Accounting and Management System Increment 1 program officials reported that it met 3 of 4 targets (i.e., compliance with requirements, network ready, and sustainment to ensure materiel availability). The officials reported that the program did not meet the remaining target because it was waiting for an evaluation of cyber test results before proceeding. According to the Software Engineering Institute’s Capability Maturity Model Integration® for Acquisition (CMMI®-ACQ), an appropriate requirements management process involves establishing an agreed-upon set of requirements, ensuring traceability between requirements and work products, and managing any changes to the requirements in collaboration with stakeholders. Likewise, an effective risk management process identifies potential problems before they occur, so that risk-handling activities may be planned and invoked, as needed, across the life of the project in order to mitigate the potential for adverse impacts. Leading requirements management practices help organizations to better manage the design, development, and delivery of systems within established cost and schedule time frames. These practices include developing an understanding with the requirements providers of the meaning of the requirements, obtaining commitment to requirements from project participants, managing changes to requirements as they evolve during the project, maintaining bidirectional traceability among requirements and work, ensuring that project plans and work products remain aligned with requirements. An effective risk management process includes the following leading practices determining risk sources and categories; defining parameters used to analyze and categorize risks and to control the risk management effort; establishing and maintaining the strategy to be used for risk identifying and documenting risks; evaluating and categorizing each identified risk using defined risk categories and parameters, and determining its relative priority; developing a risk mitigation plan in accordance with the risk monitoring the status of each risk periodically and implementing the risk mitigation plan as appropriate. The three selected MAIS programs that we evaluated had fully implemented most, but not all, of the five leading practices for managing requirements and the seven leading practices for managing risks. Specifically, two of three programs implemented all of the requirements management practices, while one program implemented most, but not all, of the practices. Further, one of three programs implemented all of the risk management practices, while two programs implemented most, but not all of the practices. Table 3 shows the extent to which practices were implemented by the three selected programs. Two of the three programs had fully implemented the requirements management practices. The other program had partially implemented two practices and fully implemented three practices. Navy — Navy Consolidated Afloat Networks and Enterprise Services The Navy had fully implemented the five requirements management practices for the Consolidated Afloat Networks and Enterprise Services program. For example, the program developed an understanding with requirements providers of the meaning of the requirements. Specifically, there was a plan for documenting, managing, and controlling changes to requirements throughout the system lifecycle. This plan served as the primary guidance for integrating the management of all specified and derived requirements for the Consolidated Afloat Networks and Enterprise Services system program. In addition, the program had established criteria for determining requirements providers. Specifically, roles and responsibilities for requirements management had been identified. Further, the program managed changes to requirements as they evolved during the project. For example, the program provided evidence that it maintains a requirements change history, including the rationale for changes. Defense Logistics Agency — Defense Agencies Initiative, Increment 2 The Defense Logistics Agency had fully implemented the five requirements management practices for the Defense Agencies Initiative, Increment 2. For example, the program had established objective criteria for the evaluation and acceptance of requirements. Specifically, there was a process in place to develop and finalize deliverables in support of the business requirements identified by the stakeholders, ensure that requirements management activities were performed in a timely manner throughout the life of the project, and review and approve requirements deliverables. Further, throughout the process, the requirements manager tracked requirements changes and maintained traceability of end user needs to the system performance specification. The Defense Health Agency had fully implemented three and partially implemented two of the five requirements management practices for the Defense Healthcare Management System Modernization program. For example, the program had established objective criteria for the evaluation and acceptance of requirements. Specifically, any new or updated requirements were presented to a Configuration Steering Board for review and approval prior to any changes being made. Further, throughout the process, the requirements manager tracked requirements changes and maintained traceability to ensure they were documented. The program has not developed an understanding with the requirements providers on the specific meaning of the requirements. For example, although the program had developed a requirements management plan which provided guidance in this area, according to program officials, the plan was not signed and approved based on the recent shift of the program from a non-business MAIS program to a MAIS business program operating under DOD Instruction 5000.75. Program officials stated that the requirements management plan is not expected to be complete until final guidance is provided by the Office of the Secretary. Regardless of this recent shift, the program should have already had an approved requirements management plan in place since program initiation. In the absence of an approved plan, the program lacks assurance that it can effectively communicate and manage requirements practices. Further, the program had not demonstrated that it identified any changes that should be made to plans and work products resulting from changes to the requirements baseline. Programs officials stated that efforts to review modifications to the plan due to requirements changes had not been conducted, but they expected the review and approval to be done at some future date. However, they could not provide a specific time frame. According to CMMI®-ACQ, until project plans and work products are updated to coincide with changes in requirements, the program will not be able to effectively identify inconsistencies between requirement changes and project plans and work products, and initiate corrective actions to resolve them. One program had fully implemented the risk management practices, while two had fully implemented all but one practice. Navy — Navy Consolidated Afloat Networks and Enterprise Services The Navy had fully implemented six and partially implemented one risk management practice for the Consolidated Afloat Networks and Enterprise Services system program. For example, the program’s risks defined consistent criteria for evaluating and quantifying risk likelihood and severity levels. Specifically, the program provided a risk exposure (e.g., a risk source used to examine and oversee changes that impact the project), which is the value that is given to a risk event, a product, or the overall program based on the analysis of the probability and consequences of the event. Further, the program’s Risk Management Guide outlined risk performance, cost, and schedule criteria. In addition, the program demonstrated that it included the cost and benefits of implementing risk mitigation plans. Specifically, a risk’s description provided the cost impacts associated with the risk, which in turn provided evidence that cost and benefits were considered during risk evaluation. However, the Navy partially implemented one practice. Specifically, although the program provided its failover/recovery plan that is intended to return the program to a state of readiness after a failure, the plan did not explicitly identify environmental elements. A program official stated that environmental factors, such as risks that could negatively affect their work, is understood, but these factors had not been documented in the plan. Further, the official stated that the program should update the plan accordingly, but did not provide a time frame to complete this effort. Until all potential issues, hazards, threats, and vulnerabilities that could negatively affect work efforts have been identified in the plan, successful risk management cannot be ensured. Defense Logistics Agency—Defense Agencies Initiative, Increment 2 The Defense Logistics Agency had fully implemented all seven risk management practices for the Defense Agencies Initiative, Increment 2. For example, the program identified program risks, including risk sources, categories, and stakeholders. In addition, Defense Agencies Initiative, Increment 2 risks followed consistent criteria for evaluating and quantifying risk likelihood and severity levels. Specifically, risk level was based on a combination of factors to include both likelihood and consequence. In all instances, consensus on the risk levels was required between the risk owner and the customer counterpart. Further, the program’s contingency plan provided guidance when outages fell into one of three disaster categories including natural disasters, man-made disasters, and technological disasters. Defense Health Agency—Defense Healthcare Management System Modernization The Defense Health Agency had fully implemented six and partially implemented one of the seven risk management practices for the Defense Healthcare Management System Modernization program. For example, the program’s risks followed consistent criteria for evaluating and quantifying risk likelihood and severity levels. Specifically, the program’s Risk and Issue Management Plan described how to assess the impact level in each risk area (performance, project and program schedules, and cost). Further, the program prioritized risks for mitigation. For example, risks were categorized and charted as low, medium, or high, and grouped accordingly in the program’s risk register. Further, the program’s Disaster Recovery Plan provides processes that allowed rapid support recovery for critical operations during a disaster, including environmental disasters such as tornadoes. Regarding the partially implemented practice, the program provided an example of a risk mitigation plan. However, the program indicated that costs and benefits were not quantified within the program-level risk mitigation plans. According to CMMI®-ACQ, risk mitigation activities should be examined for benefits they provide versus resources they will expend. Just like any other design activity, alternative plans may need to be developed and costs and benefits of each alternative assessed. However, the program does not require that costs and benefits be included as part of its risk mitigation planning efforts. As a result, the information for making an informed decision on cost and benefits of risk mitigation solutions is limited. Program officials did not indicate whether they have plans to implement this practice, and did not provide an explanation as to why they are unable to provide this information. Until the program quantifies costs and benefits, it will not be able to effectively select the most appropriate risk mitigation plan to address each risk. While DOD’s policy for non-business MAIS programs adheres to all four leading IT management practices, the department’s policy for MAIS business programs does not adhere to two leading practices on establishing initial and current baseline estimates on cost and schedule and predetermining threshold estimates, as well as reporting periodically on performance information to stakeholders. Until DOD adheres to these practices in its policies that govern MAIS business programs, it cannot ensure that stakeholders will have the information they need to manage and oversee their investments. Following leading IT acquisition practices on requirements and risk management is essential to help programs effectively plan and direct their development and acquisition efforts. All of the leading IT acquisition practices for requirements and risk management had been fully or partially implemented by three programs that we reviewed. However, the Defense Health Agency’s Defense Healthcare Management System Modernization has not finalized its requirements management plan nor has it identified changes that should be made to plans and work products resulting from changes to the requirements baseline. Until the program addresses these practices, it will lack a comprehensive plan for managing its requirements and it may not be able to effectively identify inconsistencies and initiate corrective actions. Further, the Navy Consolidated Afloat Networks and Enterprise Services program did not fully identify and document risks that could negatively affect work efforts. In addition, the Defense Health Agency’s Defense Healthcare Management System Modernization did not quantify costs and benefits of risk mitigation within its program-level risk mitigation plans. As a result, successful risk management for avoiding, reducing, and controlling the probability of risk occurrence cannot be ensured. We are making the following three recommendations to the Secretary of Defense to direct: The Under Secretary of Defense for Acquisition and Sustainment to update the policy or guidance for MAIS business programs. Specifically, the update should include the following elements: establishment of initial and current baseline cost and schedule predetermined threshold cost and schedule estimates to identify the point when programs may be at high risk, and quarterly and annual reports on the performance of programs to stakeholders. (Recommendation 1) The Director of the Defense Health Agency to direct the program manager for the Defense Healthcare Management System Modernization program to: finalize and approve its requirements management plan, identify and document changes that should be made to plans and work products resulting from changes to the requirements baseline, and quantify costs and benefits of risk mitigation within its program- level risk mitigation plans. (Recommendation 2) The Secretary of the Navy to direct the program manager for the Navy Consolidated Afloat Networks and Enterprise Services program to: identify and document, in the failover/recovery plan, all potential external environmental issues, such as hazards, threats, and vulnerabilities that could negatively affect work efforts. (Recommendation 3) DOD provided written comments on a draft of this report, which are reproduced in appendix II. In its comments, the department partially concurred with our first recommendation and concurred with the two other recommendations. DOD partially concurred with the first recommendation on updating the policy or guidance for MAIS business programs. Specifically, the Under Secretary of Defense for Acquisition and Sustainment stated that regarding establishing baselines, the DOD Instruction 5000.75 requires establishment of cost, schedule, and performance parameters for each release before development or delivery. The 5000.75 also requires consideration of program progress against baselined cost, schedule, and performance as a criterion at the limited deployment and full deployment decision points. A baseline requirement thus exists in DOD Instruction 5000.75 but it is not described as an acquisition program baseline, which may be familiar to readers of DOD Instruction 5000.02. However, the Under Secretary added that the Army’s implementation guidance includes guidance that states each increment must have an acquisition program baseline with its own set of threshold and objective values set by the user. While we agree that the existing policy requires such parameters to be captured and included in the department’s decision making process, we found the policy to be vague in its discussion of these parameters and to not clearly define what a baseline is, or which baselines are to be used or reported for comparison purposes. For example, the policy does not make a distinction between the initial acquisition program baseline, current baseline, and baseline deviations. Yet, such information is important because it provides a basis for decision makers to identify the extent to which a program may have deviated from its initial cost, schedule, or technical performance baseline. By making these distinctions in the policy, the department’s policy for its MAIS business programs will be more consistent with its other policy for non-business MAIS programs with regard to the way an acquisition program baseline is defined and the elements that should be captured and reported to its decision makers. In turn, the program managers who prepare these reports and the decision makers who rely on them will have information that is consistently and succinctly prepared for making credible decisions. Regarding adding provisions in its policy for the establishment of predetermined thresholds, the Under Secretary stated that the 5000.75 states that the milestone decision authority is responsible for delivery within cost, schedule, and performance parameters, and the milestone decision authority is to do this by establishing oversight controls for programs, including procedures to report and address variances. The Under Secretary added that the 5000.75 does not suggest the practice of establishing a predetermined threshold for the variance, and DOD will consider the addition of this feature to the 5000.75 update. Finally, regarding providing periodic annual and quarterly reports to the department’s leadership, the Under Secretary stated that such a periodic report would add value only if there had been no recent communication of program status from the program office to the leadership or stakeholders communities. While such communication is expected to occur frequently, its regularity is not specified in current policy or guidance. The Under Secretary stated that DOD will consider adding a provision for a report to leadership and functional stakeholder if such communication has not occurred within the past 3 or 4 months. DOD concurred with the second and third recommendations related to the department’s implementation of selected IT management practices. Regarding the second recommendation, the Under Secretary of Defense for Acquisition and Sustainment agreed to direct the Defense Healthcare Management System Modernization program manager to update and approve the requirements management plan, identify and document changes to the requirements baseline, and quantify the costs and benefits in the risk mitigation plans. Further, regarding the third recommendation, the Secretary of the Navy agreed to direct the program manager to identify and document all potential external environmental issues that could negatively affect work efforts for the Navy’s Consolidated Afloat Networks and Enterprise Services program. By taking these steps, these programs should be better positioned to effectively identify inconsistencies in managing changes to their requirements, and be more responsive to the potential for environmental issues. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; the Under Secretary of Defense for Acquisition and Sustainment; the Director of the Defense Health Agency; and other interested parties. This report also is available at no charge on the GAO website at http://www.gao.gov. Should you or your staffs have any questions on information discussed in this report, please contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. The National Defense Authorization Act for Fiscal Year 2012 mandated that we select, assess, and report on selected major automated information systems (MAIS) programs annually through March 2018. GAO satisfied the statutory mandate by submitting a draft of this report to the congressional committees on March 29, 2018. This final version of the report is the sixth and last report in the series of annual mandated assessments. Our objectives were to: (1) assess the Department of Defense’s (DOD) policy for the management and oversight of MAIS programs; (2) describe the extent to which selected MAIS programs have changed their planned cost and schedule estimates and met performance targets; and (3) assess the extent to which selected MAIS programs have used leading information technology (IT) acquisition practices, including requirements and risk management. To address the first objective, we identified four leading IT management practices in GAO’s Information Technology Investment Management guide and compared DOD’s policy adherence to those practices. These leading practices are: instituting the investment board, which is the process for creating and defining the membership, guiding policies, operations, roles, responsibilities, and authorities within the organization; identifying decision authorities for making important acquisition decisions; providing oversight whereby the organization monitors each project on its performance progress (e.g., establishing and tracking baseline estimates on cost and schedule goals, and thresholds to identify high risk on cost and schedule); and capturing and providing performance information about a particular investment (project) to decision makers at regular intervals (e.g., quarterly and annually). We then compared DOD’s policies used to manage and oversee the department’s non-business MAIS programs and MAIS business programs against these leading IT management practices. The department’s policy documents for managing and overseeing non-business MAIS programs and MAIS business programs include the: Memorandum by the Under Secretary of Defense for Acquisition, Technology, and Logistics, dated November 17, 2017, regarding the regulatory response to the repeal of title 10, United States Code, Chapter 144A, Major Automated Information System Programs. Memorandum by the Under Secretary of Defense for Acquisition, Technology, and Logistics, dated April 24, 2017, regarding the transition of programs to business system categories. DOD Instruction 5000.75, Business Systems Requirements and Acquisition, effective February 2, 2017. DOD Instruction 5000.02, Operation of the Defense Acquisition System, effective February 2, 2017. We also interviewed an official from the former Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, who was responsible for the development of plans and policy for the administration regarding the management and monitoring of non-business MAIS programs and MAIS business programs To address the second objective, we used DOD’s official list of 34 business and non-business MAIS programs, as of April 18, 2017, to establish a basis for selecting programs. Of the 34 programs, we selected the 15 business and non-business MAIS programs that met our criteria: programs must be unclassified and have an initial acquisition program baseline that could be used as a reference point for evaluating cost, schedule, and technical performance characteristics. We then collected and analyzed key documents, reports, and artifacts for each program and summarized the information on estimated cost, schedule, and technical performance goals, including their latest program status in meeting those estimated goals. Next, we analyzed and compared each selected program’s first acquisition program baseline cost estimate to the latest estimate to determine the extent to which planned program costs had changed. Specifically, we used the total life-cycle cost estimate and analyzed and compared them to the latest estimate to determine the extent to which planned program costs had changed. Similarly, to determine the extent to which these programs changed their planned schedule estimates, we compared each program’s first acquisition program baseline schedule to the latest schedule. To determine whether the selected programs met their performance targets, we analyzed each program’s self-identified system performance targets and compared them against actual system performance metrics and latest test reports. We also reviewed additional information on each program’s cost, schedule, and performance, including program documentation, such as DOD’s MAIS annual and quarterly reports, acquisition program baselines, system test reports, and our prior reports. We then aggregated and summarized the results of these analyses across the programs. To address the third objective, we started with the list of the 15 programs from the second objective as a basis for selecting three MAIS programs as case studies. We used a combination of the following criteria to select the MAIS programs to review. Programs used in a most recent MAIS review were eliminated from consideration. The program was not designated as classified. The program had a baseline. Based on these criteria, we chose the following systems: Navy Consolidated Afloat Networks and Enterprise Services; Defense Logistics Agency’s Defense Agencies Initiative, Increment 2; Defense Health Agency’s Defense Healthcare Management System Modernization. We then analyzed each selected program’s IT acquisition documentation and compared it to key requirements and risk management and leading practices—including Software Engineering Institute’s Capability Maturity Model® Integration for Acquisition (CMMI- ACQ) practices—to determine the extent to which the programs were implementing these practices. In particular, the requirements management practices we reviewed were: develop an understanding with the requirements providers on the meaning of the requirements, obtain commitment to requirements from project participants, manage changes to requirements as they evolve during the project, maintain bidirectional traceability among requirements and work, and ensure that project plans and work products remain aligned with requirements. Specifically, we analyzed program requirements documentation, including requirements management plans, requirements traceability matrices, requirements change forms, technical performance assessments, and requirements board meeting minutes. Additionally, we interviewed program officials to obtain additional information about their requirements management practices. The conclusions reached for this objective are not generalizable to the larger population of 34 business and non-business MAIS programs. We also reviewed the following risk management practices: determine risk sources and categories; define parameters used to analyze and categorize risks and to control the risk management effort; establish and maintain the strategy to be used for risk management; identify and document risks; evaluate and categorize each identified risk using defined risk categories and parameters, and determine its relative priority; develop a risk mitigation plan in accordance with the risk management strategy; and monitor the status of each risk periodically and implement the risk mitigation plan as appropriate. Specifically, we analyzed program risk documentation, including risk reports, risk-level assignments, risk management plans, risk mitigation plans, and risk board meeting minutes. Additionally, we interviewed program officials to obtain additional information about their risks and risk management practices. To assess the reliability of the data of these programs we used to support the findings in this report, we corroborated program office responses with relevant program documentation and interviews with agency officials. We found no data reliability issues and determined that the data used in this report were sufficiently reliable for our reporting purposes. We have also made appropriate attribution indicating the sources of the data. We conducted this performance audit from April 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact name above, the following staff also made key contributions to this report: Eric Winter (Assistant Director), John Ortiz (Analyst in Charge), Alex Bennett, Neha Bhatt, Chris Businsky, and Rebecca Eyler.", "summary": "DOD's MAIS programs are intended to help the agency sustain its key operations. In April 2017, recognizing that MAIS programs met different mission needs, DOD categorized its MAIS programs into business and non-business systems. The National Defense Authorization Act for Fiscal Year 2012 includes a provision for GAO to select, assess, and report on DOD's MAIS programs annually through March 2018. GAO's objectives, among others, were to (1) assess DOD's policies for managing and overseeing MAIS programs and (2) describe the extent to which selected MAIS programs have changed their planned cost and schedule estimates and met technical performance goals. To address these objectives, GAO compared DOD's policies for managing and overseeing all 34 MAIS programs (24 non-business programs and 10 business programs) to leading IT management practices. GAO also compared 15 selected programs' initial cost, schedule, and performance baselines to their current acquisition program estimates. The strength of Department of Defense's (DOD) policies for managing and overseeing major automated information system (MAIS) programs varies. Specifically, the policy for managing 24 non-business MAIS programs adheres to leading information technology (IT) management practices, but the policy for managing 10 MAIS business programs does not always do so (see table). When DOD categorized 10 of the 34 MAIS programs as MAIS business programs, it also directed these programs to adhere to DOD's business systems policy (DOD Instruction 5000.75). However, the department directed those programs to use a policy for the management and oversight of MAIS business programs that was not fully comprehensive. Until DOD updates its business systems policy to address gaps in establishing performance information such as baseline estimates on program cost and schedule goals, identifying thresholds to identify high risk, and requiring periodic reports to be provided to stakeholders at regular intervals, stakeholders will likely not have all the information they need to manage and oversee MAIS business programs. While all 15 business and non-business MAIS programs had either increased or decreased their planned cost estimates and the majority had delays in their planned schedule estimates, the majority of the 9 programs that had performance targets met those performance goals. Specifically, the decreases and increases in cost estimates ranged from a decrease of $1.6 billion (-41 percent) to an increase of $1.5 billion (163 percent). The decreases in planned cost were largely due to scope reduction, while cost increases were due to underestimating levels of effort and contracting issues. The slippages in schedule estimates ranged from a delay of 5 years to 5 months; these delays were caused by unrealistic expectations or unplanned changes. Six of the 9 programs that had performance targets met all of them, while the other 3 met several but not all of their performance targets. The other 6 programs were in the early stages of system development and had not begun performance testing. GAO is making three recommendations, including that DOD update its policy for managing MAIS business programs to include baseline estimates. DOD partially concurred with this recommendation, and fully concurred with the other two recommendations. GAO continues to believe that all the recommendations are warranted.", "document_type": "gao"}
{"report": "We found in September 2012, and in our July 2018 review, that the Coast Guard’s approach of relying on the annual budget process and the 5-year CIP to manage portfolio affordability does not provide the best basis for making decisions to develop a more balanced and affordable portfolio in the long term. Further, in June 2014, we found that there is no evidence that short-term budget decisions will result in a good long-term strategy, and the Coast Guard’s annual budget-driven trade-off approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. This situation results in trade-off decisions between capability and cost being pushed into the future. For example, since 2010, the Coast Guard has a stated requirement for three medium polar icebreakers, but it has only one operational medium icebreaker, the Healy, which has an expected end of service life—the total period for which an asset is designed to operate—in 2029. Despite the requirement for three medium polar icebreakers, Coast Guard officials said they are not currently assessing acquisition of the medium polar icebreakers because they are focusing on the heavy icebreaker acquisition and plan to assess the costs and benefits of acquiring medium polar icebreakers at a later time. As required by statute, the Coast Guard has, since 2012, prepared a 5- year CIP that it is required to update and submit annually with the administration’s budget request. The 5-year CIP is the Coast Guard’s key acquisition portfolio planning tool. However, in our July 2018 review, we found that shortcomings of that plan that limit its effectiveness. Specifically, we found that the Coast Guard’s 5-year CIPs continue to demonstrate a pattern of certain ineffective planning practices, such as not identifying priorities or trade-offs between acquisition programs and not providing information about the effect of current decisions on the overall affordability of the acquisition portfolio. These shortcomings limit the Coast Guard’s ability to manage the affordability of its acquisition portfolio. Coast Guard officials said the CIP reflects the highest priorities of the department within the given top funding level and that prioritization and trade-off decisions are made as part of the annual budget cycle. However, the reasoning behind these decisions, and the resulting impacts on affected programs, are not articulated in the CIPs. While the Coast Guard is not required under statute to identify the effects of trade-off decisions in the CIP, failing to show which acquisitions would take on more risk—such as delays to certain recapitalization efforts—so other acquisitions can be prioritized and adequately funded within budget parameters also makes it difficult for Congress and other stakeholders, such as Department of Homeland Security (DHS) and the Office of Management and Budget (OMB), to understand any other options the Coast Guard considered. GAO’s Cost Estimating and Assessment Guide states that comparative analyses showing facts and supporting details among competing alternatives, such as budget priorities, should consider trade-offs needed to identify solutions and manage risk. In the report we issued today, we recommended that the Coast Guard work with Congress to include a discussion of the acquisition programs it prioritized and describe how trade-off decisions made could affect other acquisition programs in the Coast Guard’s annual 5-year CIP. DHS agreed with our recommendation and plans to include additional information in future CIP reports to address how trade-off decisions could affect other major acquisition programs. The Coast Guard plans to implement this recommendation by March 2020. In June 2014, we found that the Coast Guard needed to take a more strategic approach in managing its acquisition portfolio. We recommended that the Coast Guard develop a 20-year fleet modernization plan that would identify all acquisitions necessary for maintaining at least its current level of service and the fiscal resources necessary to build these assets. DHS concurred with this recommendation and the Coast Guard is in the process of developing a 20-year Long-Term Major Acquisitions Plan to guide and manage the affordability of its acquisition portfolio, but DHS has not yet approved the plan. Such an analysis would facilitate a fuller understanding of the affordability challenges facing the Coast Guard while it builds the Offshore Patrol Cutter, among other major acquisitions. The lack of a long-term plan and continuing to determine priorities and make trade-off decisions based on the annual budget have rendered the Coast Guard’s acquisition planning reactive. We found that reactive planning and the Coast Guard’s constrained budget environment have created a bow wave of near-term unfunded acquisitions, negatively affecting future acquisition efforts and potentially affecting future operations. This bow wave consists of new acquisition programs and recapitalization efforts, as well as high-cost maintenance projects that use the same acquisition construction and improvements account, which continue to put pressure on available resources. These projects include some that are not currently identified in the 5-year CIP. For instance, the Coast Guard’s 87-foot patrol boats are forecast to require recapitalization beginning in 2023. Additionally, the ocean-going 175-foot coastal buoy tenders are past the point in their service lives when a midlife maintenance availability would normally have been conducted. In July 2018, we found that that the Coast Guard has historically operated vessels well past their expected end of service life, and it will likely need to do so with these assets given limited available acquisition funding. The Coast Guard has a management body—the Executive Oversight Council—in place to conduct oversight of its major acquisition programs; however, this management body has not conducted oversight across the entire acquisition portfolio using a comprehensive, collective approach. Among the Coast Guard’s three cross-directorate groups that have roles in the acquisition process, we found in July 2018 that the Executive Oversight Council is best positioned to oversee the portfolio collectively and has the potential to implement key portfolio-wide management practices, including conducting formal reviews and issuing reports. This council has cross-directorate senior-level management representation, access to information on acquisition programs, and support from the other two cross-directorate groups (the Systems Integration Team and the Resource Councils). However, this council has not carried out these portfolio-wide practices. In 2014, the Coast Guard updated the Executive Oversight Council’s charter, in response to our September 2012 recommendation, adding the responsibility for portfolio-wide oversight to include conducting an annual review to assess and oversee acquisitions collectively. However, in our July 2018 review, we found that the Coast Guard revised the council’s charter in June 2017, removing this responsibility. According to Executive Oversight Council officials, this responsibility was removed from the 2017 charter because the council did not conduct these annual reviews. Instead, Executive Oversight Council officials indicated that the council facilitates a balanced and affordable portfolio of acquisition programs through the individual program-level reviews. Best practices states that successful organizations assess product investments in aggregate, rather than as independent projects products or programs. For example, by considering the requirements, acquisition, and budget processes collectively, it helps organizations prioritize their product investments. Further, we found that the Executive Oversight Council has not engaged in overseeing or reporting on the acquisition portfolio collectively and annually. OMB’s 2017 Capital Programming Guide outlines a capital programming process, including how agencies should effectively and collectively manage a portfolio of capital assets. This OMB guidance states that a senior-level executive review committee should be responsible for reviewing the agency’s entire capital asset portfolio on a periodic basis and for making decisions or priorities on the proper composition of agency assets needed to achieve strategic goals and objectives within the budget limits. In the case of the Coast Guard, only the Executive Oversight Council has members at the senior-level executive level and has the responsibility for oversight of its major acquisition programs. Without conducting comprehensive, collective portfolio reviews at the senior management level, the Coast Guard does not have sufficient cross-directorate information to determine needed trade-offs in the major acquisitions realm, considering budget realities. It is also limiting its ability to make strategic decisions on future requirements and capability gaps in a timely manner within the acquisition portfolio. In our July 2018 report on Coast Guard recapitalization efforts, we recommended that the Commandant of the Coast Guard should require the Executive Oversight Council, in its role to facilitate a balanced and affordable acquisition portfolio, to annually review the acquisition portfolio collectively, specifically for long-term affordability. DHS disagreed with our recommendation stating that other bodies within the Coast Guard, such as the Investment Board, Deputies Council, and Investment Review Board—are responsible for making decisions regarding out-year funding, while the Executive Oversight Council works outside of the annual budget process. DHS also stated that, to meet the spirit of our recommendation, the Coast Guard will update the Executive Oversight Council’s charter to require a review of the collective acquisition portfolio, specifically evaluating long-term planning. We believe that updating the Executive Oversight Council’s charter to include long-term- planning is a positive step. However, we continue to believe that in addition to long-term planning, the Executive Oversight Council should include the major acquisition portfolio’s budget realities faced by the Coast Guard in its reviews, or long-term affordability. If the planning accounts for long-term funding considerations to achieve the Coast Guard’s acquisition goals and objectives, we believe the intent of our recommendation would be met. The Coast Guard’s short-term planning focus has, in part, driven the acquisition of its heavy polar icebreaker program to its current situation— trying to meet a highly optimistic schedule. The heavy polar icebreaker program is intended to field three new icebreakers to replace the Coast Guard’s sole operational heavy polar icebreaker, the Polar Star. The Polar Star is expected to reach the end of its service life between 2020 and 2023 while the first heavy polar icebreaker is expected to be delivered in fiscal year 2023, with the second and third icebreakers expected to be delivered in 2025 and 2026, respectively. Figure 1 shows the potential icebreaking capability gap. We are currently conducting a review of the heavy polar icebreaker acquisition, and, preliminarily, we have found that the Coast Guard set an optimistic schedule baseline for the delivery dates for new polar icebreakers based on the ice-breaking capability gap rather than an analysis of what is realistic and feasible. Rather than building a schedule based on knowledge—such as determining realistic schedule targets and analyzing how much time to include in the schedule to buffer against potential delays, and comprehensively assessing schedule risks—the Coast Guard used the estimated end date of the Polar Star’s service life as the primary driver to set the lead icebreaker’s objective (or target) delivery date of September 2023 and threshold (latest acceptable) delivery date of March 2024. Design study information provided by several shipbuilders estimated that it could take up to 3.5 years to build the lead icebreaker, but the Coast Guard is planning for a more optimistic estimate of 2.5 years for the delivery date. Our best practices for developing project schedules state that estimating how long an activity takes should be based on the effort required to complete the activity and the resources available and not driven by a specific completion date. In addition, preliminary findings indicate the Coast Guard did not conduct analysis to identify a reasonable amount of margin or time to include in the program schedule baseline to account for any delays in the program. The current heavy polar icebreaker’s schedule includes only 6 months of margin between the Coast Guard’s target and latest acceptable delivery dates. However, our analysis of recent shipbuilding acquisitions shows that longer schedule delays, whether they are in the program’s control or not, should be expected. For example, among the 12 selected shipbuilding acquisition programs active in the last 10 years that we analyzed, the Navy and the Coast Guard have delayed delivery of all but one lead ship from their original planned delivery dates, with delays ranging from 9 to 75 months. We have found in our past shipbuilding work that delays have resulted from a number of issues, including redesign work to address discoveries during pre-delivery testing, and key system integration problems, and design quality issues among others. However, Coast Guard officials told us such risks are not accounted for in the Heavy Polar Icebreaker schedule. We plan to issue a report on the Coast Guard’s heavy polar icebreaker acquisition this summer. In addition, we will continue to review this program in our annual assessment of major acquisition programs. We found in July 2018 that the Coast Guard’s heavy polar icebreaker Polar Star and the Medium Endurance Cutters are currently either approaching or operating beyond the end of their design service lives. These cutters are in need of major maintenance overhauls—or Service Life Extension Projects (SLEP)—in order to continue providing capabilities to operators. According to Coast Guard officials, SLEPs are necessary because the Coast Guard does not have the funds available to initiate a new major acquisition program to recapitalize these assets in the short term, or because a significant amount of maintenance work is required to keep these assets operational until replacements are fielded. These planned SLEPs involve several risks including scheduling and funding. After being placed in a nonoperational status in 2006 due to equipment problems, the Coast Guard conducted reactivation work on the Polar Star from 2010 to 2013, and the icebreaker resumed its primary mission for the annual deployment to the National Science Foundation’s McMurdo Research Facility in Antarctica in 2014. Further, our July 2018 review indicated that the Coast Guard is planning a SLEP on the Polar Star to keep it operational until the first and second new heavy polar icebreakers are delivered in order to bridge a potential operational gap. This approach, according to Coast Guard officials, would allow the Coast Guard to operate a minimum of two heavy icebreakers once the first polar icebreaker is delivered and provide the Coast Guard with a self-rescue capability—the ability for one icebreaker to rescue the other if it became incapacitated while performing icebreaking operations. However, we found that the Coast Guard’s plans to conduct this SLEP during its annual depot-level maintenance periods—that is, maintenance that is beyond the capability of the crew of a cutter or other asset—may not be feasible given the amount of maintenance already required on the cutter. Specifically, the Polar Star’s mission capable rating (an asset’s availability to conduct operations) has been decreasing in recent years and reached a low point of 29 percent—well below the target of 41 percent—from October 2016 to September 2017. Based on mission capable data, we found this was mostly due to additional time spent in depot-level maintenance, which has increased in recent years from about 6 months in 2015 to more than 8 months in 2017. Additionally, the Polar Star has required extensions of about 3 months for its annual dry dock periods—the period of time when a cutter is removed from the water so that maintenance can be conducted—in 2016 and 2017 to complete required maintenance activities. These dry docks were originally planned to last between 2 1/2 months and 4 months. We found in July 2018 that these delays and extensions are likely to continue as the cutter ages. According to Coast Guard officials, the Polar Star’s SLEP work will be conducted during the annual dry dock periods by adding an additional 1 or 2 months to the annual dry docks. However, if the work is unable to be completed during this timeframe, it could force the Coast Guard to miss its commitment to conduct its annual Antarctica mission. Coast Guard maintenance officials stated that until the Polar Star completes the SLEP, its repairs will likely continue to get more expensive and time consuming. As we found in July 2017, the Polar Star SLEP effort has a rough-order cost estimate of $75 million, which is based on the reactivation work completed in 2013. However, we found this estimate may be unrealistic based on assumptions the Coast Guard used, such as that it would continue to use parts from the Coast Guard’s other heavy polar icebreaker, the Polar Sea, which has been inactive since 2010. The Coast Guard’s recent assessment of the Polar Star’s material condition— the physical condition of the cutter, which includes the hull structure, habitability, major equipment systems, and spare parts availability—was completed in January 2018. The material assessment stated that many of the available parts from the Polar Sea have already been removed and installed on the Polar Star. As a result of the finite parts available from the Polar Sea, the Coast Guard may have to acquire new parts for the Polar Star that could increase the $75 million SLEP estimate. The Polar Star’s recent material assessment will form the basis to determine which systems will be overhauled during the SLEP and for a more detailed cost estimate. The Coast Guard expects the Polar Star SLEP to begin by June 2020, at which time the Polar Star could reach the end of its current useful service life (currently projected to be between 2020 to 2023). This timeline contains risk that the Polar Star could be rendered inoperable before the cutter is able to undergo a SLEP. We will continue to monitor the Polar Star’s SLEP through our annual review of DHS programs. The Coast Guard operates two fleets of Medium Endurance Cutters (270- foot and 210-foot cutters) and both are either approaching or have exceeded their design service lives. According to Coast Guard officials, there are no plans to extend the service lives of the 210-foot Medium Endurance Cutters due to the age of the vessels (some of the cutters will be over 60 years old when they are expected to be removed from service). However, we found in July 2018 that, according to Coast Guard maintenance officials, the primary problem facing the 270-foot Medium Endurance Cutters is obsolescence of parts. The cutters have several systems that are no longer manufactured, and in many cases the original manufacturer no longer makes parts for the systems, such as the generators, fire pumps, and main diesel engines. To sustain the 270-foot Medium Endurance Cutters until the replacement cutters—the Offshore Patrol Cutters—are delivered, the Coast Guard is planning to conduct a SLEP. Coast Guard officials stated they are evaluating how many of the 13 270-foot cutters will undergo the SLEP. According to Coast Guard officials, the Offshore Patrol Cutter acquisition program is on track to meet its cost and schedule goals. The Coast Guard is in the process of completing the design of the cutter before starting construction, which is in-line with GAO-identified shipbuilding best practices. In addition, Coast Guard officials stated that the program is using state-of-the-market technology that has been proved on other ships as opposed to state-of-the-art technology, which lowers the risk of the program. The Coast Guard expects to start construction of the first Offshore Patrol Cutter in fiscal year 2019 and procure a total of 25 ships, with plans to initially fund one cutter per year and eventually two cutters per year until all 25 cutters are delivered. Further, Coast Guard officials have stated that if the Offshore Patrol Cutter program experiences any delays, it will likely decrease the Coast Guard’s operational capacity because the legacy Medium Endurance Cutters will likely require increased downtime for maintenance and other issues, reducing their availability. As we indicated earlier, short-term planning limits the Coast Guard’s ability to identify and consider tradeoffs with its acquisition portfolio. The Coast Guard is evaluating how long the 270-foot Medium Endurance Cutters should remain in service. According to Coast Guard officials, this decision is at least partially dependent on the delivery of the Offshore Patrol Cutters—specifically the shipbuilder’s ability to deliver 2 cutters per year, which is expected to start in fiscal year 2024 with the 4th and 5th cutters. Officials stated that the Coast Guard does not plan to operate any Medium Endurance Cutters once all 25 Offshore Patrol Cutters are operational, yet the fiscal year 2018 through 2022 CIP report indicates that 7 of the 270-foot Medium Endurance Cutters will still be in service when all 25 Offshore Patrol Cutters are delivered and operational. Officials said this is a contingency plan in case not all Offshore Patrol Cutters are delivered on time. Figure 2 shows the planned delivery dates for the Offshore Patrol Cutters and the proposed decommissioning dates for the legacy Medium Endurance Cutters. The fiscal year 2018 through 2022 CIP shows that there is little, if any, gap between when the 210-foot and 270-foot Medium Endurance Cutters will be removed from service and when the Offshore Patrol Cutters will be operational. However, both Medium Endurance Cutter classes will be well past their end of service lives by the time they are decommissioned. For instance, in our July 2012 report, we found that the 210-foot Medium Endurance Cutter Dependable reached its end of service life in 2006. Nevertheless, based on the fiscal year 2018 through 2022 CIP, we found that the Coast Guard plans for the cutter to operate for an additional 23 years (until 2029) without any major sustainment work to extend its service life. While it is not unusual for the Coast Guard to operate cutters for longer than originally planned, the lack of a more comprehensive, collective portfolio management approach, in part, will result in some of the Medium Endurance Cutters operating over 60 years, which is 30 years beyond their original design service lives. In addition, the Coast Guard’s own assessments indicate likely challenges. For instance, the Coast Guard’s February 2017 Sustainability Assessment of the 210-foot Medium Endurance Cutters, it rated 5 of the 14 cutters as a high risk for sustainability, which reflects either a poor material condition or high maintenance costs. Moreover, the most recent material condition assessments for the Medium Endurance Cutters, completed in 2015, found that 210-foot Medium Endurance Cutters cannot be expected to meet operational requirements using the normal depot-level maintenance funding levels due to the time required to complete maintenance and the increased maintenance costs in recent years; and mission effectiveness of the 270-foot Medium Endurance Cutters will continue to degrade without a near-continuous recapitalization of older sub-systems. In July 2012, we found that as assets age beyond their design service lives, they can negatively affect the Coast Guard’s operational capacity to meet mission requirements as the cutters require more maintenance. We will continue to monitor the Medium Endurance Cutters’ SLEP and the Offshore Patrol Cutter acquisition in our annual review of major acquisition programs. In conclusion, as the Coast Guard continues modernizing its fleet and sustaining existing assets for longer than planned, it is important that it develops a more strategic and comprehensive approach for managing its portfolio so that future requirements and capability gaps can be addressed in a timely manner. The Coast Guard has a history of using its annual budgets to plan its acquisition portfolio, which leads to ever changing priorities and creates deferred acquisitions and a bow wave of future funding requirements. This bow wave has begun and the Coast Guard will continue to add to it until it begins to have a longer-term focus, such as with the creation of the 20-year Long Term Major Acquisition Plan that we recommended in 2014. The Coast Guard has an opportunity with this plan to lay the foundation for the success of the future acquisition portfolio by showing what assets are needed and how much it is expected to cost, and it will position itself to provide decision makers with critical knowledge needed to prioritize its constrained acquisition funding. In the meantime, the Coast Guard would benefit from describing in the 5-year CIP how the annual trade-off decisions that are made could affect other acquisition programs. This would help decision makers understand the needs of the Coast Guard so that they can know how to better allocate taxpayer dollars as they invest in new more capable Coast Guard assets. Chairman Hunter, Ranking Member Garamendi, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions. If you or your staff have any questions about this statement, please contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Rick Cederholm, Assistant Director; Peter W. Anderson; John Crawford; Claire Li; Roxanna Sun; and David Wishard. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The Coast Guard, a component within DHS, is spending billions of dollars to acquire assets, such as cutters and aircraft. This portfolio of major acquisition programs is intended to help the Coast Guard accomplish its missions—including interdicting illegal drugs and search and rescue missions. GAO's extensive prior work on Coast Guard acquisitions has found that the Coast Guard's reliance on its annual budget process to manage its portfolio is a major management challenge. In the report issued today, GAO discusses particular challenges with the Coast Guard's approach in managing its acquisition portfolio, such as not performing a collective assessment of the portfolio to ensure affordability. This statement addresses the challenges the Coast Guard faces in (1) managing its overall acquisition portfolio, and (2) sustaining aging assets. This statement is based on GAO's extensive body of published and ongoing work examining the Coast Guard's acquisition efforts over several years. The Coast Guard's approach of relying on the annual budget process and the 5-year Capital Investment Plan (CIP) to manage its acquisition portfolio does not provide the best basis for making decisions to develop a more balanced and affordable portfolio in the long term. Specifically, the Coast Guard's annual budget-driven trade-off approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. Further, Coast Guard officials have told GAO the CIP reflects trade-off decisions made as part of the annual budget process, but it does not describe the effects of those trade-offs because including such information is not statutorily required. This short-term approach has also left the Coast Guard with a bow wave of near-term unfunded acquisition programs, putting future missions at risk. Until these trade-offs are transparent to all stakeholders and decision makers, the effectiveness of Coast Guard's long-term acquisition portfolio planning is limited. Until new assets being acquired become available, the Coast Guard plans to rely on aging assets, many of which are already past their intended service lives—the time an asset is expected to operate. For example, the Coast Guard plans to replace the Medium Endurance Cutters (see figure) with the Offshore Patrol Cutters beginning in 2023, but the Medium Endurance Cutters exhausted their intended service lives in 2014. The Coast Guard plans to extend service lives for some of the Medium Endurance Cutters to keep them operating longer; however, maintenance for these vessels is becoming more expensive, and some systems are obsolete. GAO will continue to monitor the maintenance effort for the Medium Endurance Cutter and the Offshore Patrol Cutter acquisition in an annual review of Department of Homeland Security (DHS) major acquisition programs. The report on which this statement is primarily based ( GAO-18-454 ) recommends that the Coast Guard work with Congress to include in its annual CIP a discussion of how trade-off decisions could affect other acquisition programs. DHS agreed with this recommendation. GAO has also made other recommendations in this area in the past, as discussed in this testimony.", "document_type": "gao"}
{"report": "IHS was established within the Public Health Service in 1955 to provide health services to members of AI/AN tribes, primarily in rural areas on or near reservations. IHS provides these services directly through a network of hospitals, clinics and health stations, while also providing funds to tribally operated facilities. These federally and tribally operated facilities are located primarily in service areas that are rural, isolated, and underserved. In fiscal year 2017, IHS allocated about $1.9 billion for health services provided by federally and tribally operated facilities. Federally operated IHS facilities, which received over 5.2 million outpatient visits and over 15,000 inpatient admissions in 2016, provide mostly primary and emergency care, as well as some ancillary and specialty services in 26 hospitals, 55 health centers, and 21 health stations. According to IHS, federally operated IHS hospitals range in size from 4 to 133 beds and generally are open 24 hours a day for emergency care needs; health centers offer a range of care, including primary care services and some ancillary services, such as pharmacy, laboratory, and X-ray services, and are open for at least 40 hours a week; and health stations offer only primary care services on a regularly scheduled basis and are open fewer than 40 hours a week. The 12 IHS area offices are responsible for distributing funds to the facilities in their areas, monitoring their operation, and providing guidance and technical assistance (see fig. 1). In addition, five human resources regional offices assist the area offices in the recruitment and hiring of providers. IHS federally operated facilities employ both federal civil service personnel and Commissioned Corps officers. IHS may pay higher salaries for certain federal civil service providers through the development and implementation of special pay tables, which specify the ranges of salaries that these certain providers can receive. According to IHS officials, the Commissioned Corps officers follow the same process for applying for positions at IHS as federal civil service employees. However, the Commissioned Corps officers are uniformed health professionals whose pay and allowances are different. IHS also supplements its workforce capacity with both temporary and long-term contracts with individual physicians or a medical staffing company. IHS downloads information on all funded and active positions from the Capital Human Resource Management System, an HHS data system used for personnel and payment transactions that IHS began using in 2016 to track all employee vacancies. According to IHS officials, the accuracy of the data is verified quarterly by regional human resources officers. As the IHS health care workforce also includes Commissioned Corps officers—who have a separate personnel system—the information on Commissioned Corps officers assigned to IHS are entered into the Capital Human Resource Management System manually, according to IHS officials. According to the National Rural Health Association, the challenges of rural health care delivery are different than those in urban areas. These challenges include those related to more complex patient health status and poorer socioeconomic conditions, as well as physician workforce shortages. According to the Agency for Healthcare Research and Quality, compared with their urban counterparts, residents of rural counties are older, poorer, more likely to be overweight or obese, and sicker. Those living in rural areas also have greater transportation difficulties reaching health care providers, often traveling great distances to reach a doctor or hospital. Exacerbating these challenges is a relative scarcity of medical providers in rural areas compared to urban areas. For example, the National Center for Health Statistics reported the primary care physician- to-patient ratio in rural areas in 2012 was 39.8 physicians per 100,000 people, compared to 53.3 physicians per 100,000 in urban areas. IHS data demonstrate large percentages of vacancies for providers in the 8 areas in which IHS has substantial direct care responsibilities. As of November 2017, the overall percentage of vacancies for physicians, nurses, nurse practitioners, CRNAs, certified nurse midwives, physician assistants, dentists, and pharmacists in these areas was 25 percent, ranging from 13 to 31 percent across the areas. (See fig. 2) However, variation in vacancy rates existed among provider types across IHS areas. For example, while the overall percentage of vacancies for physicians, nurses, nurse practitioners, dentists, and physician assistants each exceeded 25 percent, the vacancy rate for pharmacists was less than 25 percent. In addition, for certain provider types in some areas, more than one-third of the positions were vacant. For example, although 29 percent of the total positions for physicians across these 8 areas were vacant, the vacancy rate ranged from 21 percent in the Oklahoma City area to 46 percent in the Bemidji and Billings areas. (See fig. 3.) As another example, although 27 percent of the total positions for nurses across these 8 areas were vacant, the vacancy rate ranged from 10 percent in the Oklahoma City area to 36 percent in the Albuquerque and Bemidji areas. (See fig. 4.) Similarly, across these 8 areas 32 percent of the total positions for nurse practitioners were vacant, ranging from 12 percent in the Oklahoma City area to 47 percent in the Albuquerque area; 27 percent of the total positions for dentists were vacant, ranging from 14 percent in the Phoenix area to 39 percent in the Bemidji area; and 30 percent of the total positions for physician assistants were vacant, and although 4 of the areas had few such positions (the Albuquerque, Bemidji, Oklahoma City, and Portland areas each had 7 or fewer positions), the percentage of vacancies in the 4 areas with 15 or more such positions ranged from 21 percent in the Phoenix area to 40 percent in the Billings area. In contrast, 13 percent of the total positions for pharmacists were vacant, ranging from 3 percent in the Bemidji area to 17 percent in the Albuquerque area. For more information about the vacancies for specific clinical positions, see appendix I. While sizeable vacancies existed across provider types and areas, the majority of positions in all eight areas were occupied by civilians, and about 13 percent were filled by Commissioned Corps officers who are fulfilling assignments with a minimum 2-year term. The percentages of positions by IHS area that were vacant, filled by civilians, and filled by Commissioned Corps officers as of November 2017 are shown in figure 5. IHS officials told us they have experienced considerable challenges in filling vacancies for providers—as well as negative effects on patient care and provider satisfaction when positions are vacant. According to IHS officials, the rural locations and geographic isolation of some IHS facilities create recruitment and retention difficulties. IHS data indicate that 36 of the 102 IHS facilities, including four hospitals, are identified as isolated hardship (ISOHAR) posts. Agency documentation describes ISOHAR posts as ‘‘unusually difficult, which may present moderate to severe physical hardships for individuals assigned to that geographic location,’’ and states that physical hardships may include crime or violence, pollution, isolation, a harsh climate, scarcity of goods on the local market, and other problems. In addition, IHS has reported that insufficient housing, substandard schools, lack of entertainment opportunities, and shopping centers located more than three hours away are all typical not only of ISOHAR posts, but also of many other IHS facility locations. Officials stated that, especially for job candidates and employees with families, these can be critical factors in choosing whether or not to accept or stay in a position. For example, officials from the Portland Area office told us the Colville Service Unit has experienced challenges recruiting physicians because the service unit is 110 miles away from Spokane, and many of the smaller towns nearby have limited amenities—including limited employment opportunities for spouses and school systems that may not meet the expectations of some prospective employees. In addition to hardships generally associated with rural locations, IHS facilities can experience additional challenges specific to recruiting and retaining providers for facilities on tribal lands. For example, Navajo area officials told us that providers who are non-native or are not married to a tribal member generally must go off the reservation to find housing if it is not provided by IHS. According to IHS, the Navajo Nation is one of the largest Indian reservations in the United States, consisting of more than 25,000 contiguous square miles and three satellite communities, and extending into portions of Arizona, New Mexico, and Utah. Living off the reservation can result in long commutes, contributing to a difficult work- life balance. Furthermore, IHS officials noted, public transportation such as buses or trains do not exist in proximity to most IHS facilities. IHS facility staff told us long-standing vacancies have a direct negative effect on patient access to quality health care, as well as employee morale. Officials from multiple facilities we visited told us they have had to cut certain patient services due to ongoing provider vacancies. For example, officials from the Phoenix Area office told us the Nevada Skies Youth Wellness Center, an adolescent substance abuse treatment center, decreased the number of beds available due to staffing vacancies. Similarly, officials from the Rosebud Hospital stated the facility has diverted obstetrics patients to other facilities since July 2016 due to a shortage of physicians, nurses, and nurse anesthetists. During the diversion, those patients were referred to other hospitals in Valentine, Nebraska, and Winner, South Dakota—about 45 miles away. An official from the Sioux San Hospital said that because of vacancies in the diagnostic testing laboratory, the hospital stopped conducting Chlamydia tests in-house and instead sends specimens out to another laboratory for testing. As a result, the official stated it takes about a week longer to get the test results, which can delay treatment. In addition facility staff we interviewed told us the increased stress and fatigue of providers working to make up for staffing shortages results in decreased employee morale. These staff stated that, in some cases, this stress and fatigue has caused providers to leave IHS. One doctor we spoke with described this dynamic of vacancies begetting additional vacancies as a “never-ending cycle” for the facility. In an effort to recruit and retain permanent employees, IHS has used strategies that are similar to strategies used by VHA and tribal facilities in our review. Specifically, IHS has provided financial incentives, professional development opportunities, and some access to housing. The agency has also taken steps to recruit students and connect with potential applicants through webinars, career fairs, and conferences. IHS offers increased special salary rates for certain health care positions, as well as other financial incentives, such as recruitment and retention bonuses. IHS also offers student loan repayments, in return for health professionals’ commitment to work at IHS for a specified period of time. Special salary rates. IHS offers special higher salary rates for physicians, dentists, nurses, CRNAs, certified nurse midwives, nurse practitioners, optometrists, pharmacists, and physician assistants. IHS officials stated that special salary rates are an important recruitment and retention tool for providers, and that without them, federally operated IHS facilities would be at a competitive disadvantage with the private sector, VHA, and tribally operated facilities. In 2015 IHS reported that recruiting and retaining CRNAs was “an ongoing problem for IHS—mostly due to pay,” and the agency rarely had “a sufficient applicant pool.” IHS reported “CRNA services were integral to IHS operations” and without the ability to recruit and retain these providers, IHS was “at risk of having to curtail services to clients.” As a result, according to IHS officials, the agency developed special salary rates for CRNAs, which became effective on December 31, 2015. As of November 2017, IHS had no CRNA vacancies. However, according to IHS officials, the agency has only developed seven national special pay tables and two local special pay tables for Alaska, as of January 2018, due to a lack of human resources personnel trained in this process. Officials told us only one human resources staff person at IHS is experienced with developing special pay tables, which takes a substantial amount of work. However, they stated that this task is only one of her job responsibilities, and she can complete about one special pay table each year. In comparison, according to an official, VHA has developed and regularly revises over 3,000 special salary rates based on local market conditions. For example, IHS officials stated that Phoenix Indian Medical Center cannot offer salaries that are competitive with VHA because salaries for providers in the Phoenix area are relatively high compared to national salaries, and IHS has not developed local salary rates in the Phoenix market. For example, using pay rates effective January 7, 2018, a nurse just starting a career in the Phoenix area could make $63,871 at VHA (local pay table), versus $44,835 at IHS (national pay table). Although offering increased salaries is an important strategy that IHS uses for recruitment, IHS still experiences challenges in offering competitive salaries. Officials from two area offices told us the maximum amount for a physician salary or certain nursing salaries were not enough for some potential hires, who sought employment elsewhere. While IHS may seek approval from HHS to exceed the maximum salary of certain pay tables, IHS officials said the approval process can be lengthy, which has resulted in the loss of promising candidates—including emergency medicine, general surgery, radiology, and anesthesiologist providers. Similarly, officials from one area office stated that federally operated IHS facilities have experienced challenges competing with other health care systems in recruiting local health care providers, including tribally operated facilities. For example, officials from the Oklahoma City area office told us their area has four of the largest American Indian tribes in the country running their own health systems. According to these officials, in addition to IHS funds, these tribes use money from other sources to pay health care salaries. IHS officials explained that, as a result, tribes can pay higher salaries and may be able to offer other incentives that IHS is unable to provide. Recruitment, relocation, and retention incentives. IHS may offer recruitment, relocation, and retention incentives. Specifically, for positions that are difficult to fill or for individuals who are unlikely to accept the position without an incentive, IHS may offer potential employees a recruitment incentive up to 25 percent of their annual salary. IHS may also pay a relocation incentive for a current employee who must relocate for a position that would otherwise be difficult to fill. In addition, IHS may pay a retention incentive of up to 25 percent of an employee’s current salary if he or she (1) has unusually high or unique qualifications or if there is a special need of the agency, which makes retention essential, or (2) is likely to leave IHS without the retention incentive. Officials from the Phoenix area office told us IHS facilities use the retention bonuses extensively for nursing staff, in particular, to help match the market pay. IHS also analyzed the recruitment and retention of nurses and, as a result of this analysis, requested an exception to the 25 percent limit on recruitment, relocation, and retention incentives, from the Office of Personnel Management (OPM). In December, 2017, OPM approved IHS’s request to offer incentives up to 50 percent, and IHS officials told us that they are currently reviewing implementation options. Loan repayment. IHS’s Loan Repayment Program pays provider education loans in exchange for an initial two-year service commitment to practice in health facilities serving AI/AN communities. Recipients agree to serve two years in exchange for up to $20,000 per year in loan repayment funding and up to an additional $5,000 per year to offset tax liability, which IHS pays directly to the Internal Revenue Service. Loan repayment recipients can extend their initial two-year contract on an annual basis until their original approved educational loan debt is paid. In fiscal year 2017, a total of 1,267 providers—about 8 percent of the federal IHS workforce—were receiving IHS loan repayments. This included 434 new two-year contracts, 396 one-year extension contracts, and 437 providers starting the second year of their fiscal year 2016 two-year contract. However, IHS’s Loan Repayment Program is not able to pay for the loans of all providers who request it due to limited funding. According to officials in one area office, this has caused providers to either decline a job offer or leave IHS. According to IHS’s fiscal year 2019 budget justification, in fiscal year 2017, 412 providers employed by IHS who applied for loan repayment, did not receive one. An additional 376 applicants either declined a job offer because they did not receive loan repayment funding or were unable to find a suitable assignment meeting their personal or professional needs. Officials in the Billings Area Office told us several physicians stated during exit interviews that they were leaving because they did not receive the loan repayment funding they hoped to receive. According to area office officials, the Billings area lost 5 physicians in 2 weeks because they were not awarded loan repayments. In addition to its own loan repayment program, IHS has worked with HHS’s Health Resources and Services Administration (HRSA) to increase opportunities for providers to apply for loan repayment through the National Health Service Corps. Specifically, IHS worked with HRSA to increase the number of facilities deemed medically underserved and therefore designated Health Professional Shortage Areas. According to IHS, this resulted in 684 health care delivery sites for placement of National Health Service Corps providers, and the number of placements increased to 443 providers as of August 2016. As of January 2018, according to IHS officials, there were 499 providers serving at 797 eligible sites. Applicants cannot receive loan repayment from more than one program concurrently. Officials from several facilities told us they provide access to professional development opportunities for IHS employees as a retention tool. For example, Northern Navajo Medical Facility (Shiprock) officials said they are sending nurse managers and two to three potential future leaders to the American Organization of Nurse Executive trainings. Officials told us this training allows the nurses to network with private executives and look at fellowships. In addition, Chinle Comprehensive Health Care Facility officials told us they paid for a 2-year residency at University of Texas Health Science Center so one of their dentists could obtain additional training in pediatric dentistry. Officials told us that, in return, the dentist agreed to stay at the Chinle Comprehensive Health Care Facility for 6 years. In addition, Shiprock service unit officials told us they have offered their providers, through a partnership with the University of New Mexico, an online Masters of Science in Public Health program in health management. When housing is limited near IHS facilities, IHS has made some housing available to assist with recruitment and retention of providers. Area officials told us federally operated IHS facilities in the Albuquerque, Great Plains, Phoenix, Billings, and Navajo areas provide some government- subsidized housing for providers and their families. At four of the seven facilities we visited—the Kayenta Health Center, Chinle Comprehensive Health Care Facility, Rosebud Hospital, and Pine Ridge Hospital—we observed some staff housing. Kayenta Health Center. Officials from Kayenta Health Center told us that they provide 158 housing units, from 1 bedroom to 4 bedrooms. In addition, the facility has a 19-unit building, similar to a hotel (fully furnished), for temporary contract providers. Officials said they are considering opening units in this building to permanent employees. Chinle Comprehensive Health Care Facility. Officials from Chinle Comprehensive Health Care Facility told us there are 264, 1 to 4 bedroom housing units available for providers both on its campus and nearby. IHS officials also told us they provide access to 19 parking spaces for camping vehicles. Rosebud Hospital. Officials from Rosebud Hospital stated they provide 150 housing units and are also constructing a 19-unit hotel- style building. They said that most, if not all, candidates from outside of the area ask about housing unit availability when deciding whether to accept a position. Pine Ridge Hospital. Officials from Pine Ridge Hospital told us that IHS also provides 105 housing units for its employees. IHS officials explained the housing is a necessity for on-call providers because staff without on-site housing are required to commute extreme distances in very harsh environments to locate housing outside of reservation boundaries. See figure 6 for examples of government-subsidized provider housing near the Kayenta Health Center, Chinle Comprehensive Health Care Facility, Rosebud Hospital, and Pine Ridge Hospital. See appendix II for information about housing provided by one selected tribe. However, there is a greater demand for housing than IHS can provide. During our site visit, Chinle Health Care Facility officials stated that government-subsidized housing availability to meet employee demand is severely limited at all of their three facilities, and the availability of private housing in the community is “non-existent.” As a result, IHS officials from Chinle told us that some providers commute 60 to 90 minutes to work one-way each day. IHS officials told us that, after conducting a needs assessment in 2016, they determined the unmet need for housing at IHS facilities was 1,100 units. According to these officials, the needs assessment also helped them identify some of the greatest needs for housing. The President’s fiscal year 2017 budget proposal for IHS requested $12 million to build new staff housing units “in isolated and remote locations for healthcare professionals to enhance recruitment and retention.” According to agency officials, based on its needs assessment, HHS provided $24 million to build new staff housing units at the Rosebud and Pine Ridge hospitals in the Great Plains area, at the Crownpoint and Chinle health care facilities in the Navajo areas, and at the Supai clinic in the Phoenix area. IHS has also taken steps to recruit future providers by providing scholarships, externships, internships, and residency rotations to health professional students. Scholarships. IHS’s scholarship program provides financial support to qualified AI/AN candidates in exchange for a minimum 2-year service commitment within an Indian health program. Nearly 7,000 AI/AN students have received scholarship awards since the program started in 1978. The awards include (1) scholarships for candidates enrolled in preparatory or undergraduate prerequisite courses in preparation for entry to a health professions school, (2) pre-graduate scholarships for candidates enrolled in courses leading to a bachelor’s degree, including pre-medicine, pre-dentistry, and pre-podiatry, and (3) health professions scholarships for candidates who are enrolled in an eligible health profession degree program. According to IHS, in fiscal year 2017, there were 805 new scholarship applications submitted. After evaluating the applications, 331 applications were deemed eligible for funding, and the program was able to fund 108 new awards. The IHS Scholarship program also reviewed applications from previously awarded scholars who were continuing their education. In fiscal year 2017, 154 continuation awards were funded. In addition to the scholarship program, according to IHS officials, the agency funds two medical students enrolled at the Uniformed Service University of the Health Sciences each year. Each graduate agrees to a 10-year obligation to IHS after medical school graduation and completion of training. In future years, IHS endeavors to fund two additional medical students at the Uniformed Service University of Health Sciences. Externships and internships. IHS provides scholarship recipients with opportunities to receive clinical experience in IHS facilities. In fiscal year 2017, the agency funded 94 students, who were employed for 30 to 120 workdays per calendar year. In addition, IHS provides externships to students temporarily called to active duty as Commissioned Corps officers through the Commissioned Officer Student Training and Extern Program (COSTEP). IHS officials said that the agency funded about 60-70 students in COSTEP in 2016. IHS also offers a Virtual Internship program through a partnership with the Department of State. Virtual interns spend 10 hours a week from September through May working remotely on their projects, which have included producing bilingual Navajo and English videos for rural health clinics, developing Navajo-specific health education materials on palliative care, improving behavioral health data collection methods, and creating social media strategies and campaigns for health promotion. For the 2017-2018 academic year, about 15 students are participating in virtual internships with IHS. Residency rotations. IHS service units offer rotation opportunities for medical, nursing, optometry, dental, and pharmacy residents as a recruitment tool because research shows students are likely to stay and practice medicine in the area where they studied. For example, the Oklahoma City area has a Memorandum of Agreement with the Oklahoma State College of Medicine, which permits area officials to annually recruit up to two residents from the current year’s residency class to become federal employees while completing their residency program. For every year that IHS sponsors the residents’ position at the university, the resident has a one-year service obligation. In addition, IHS officials from Chinle stated that the service unit participates in educational agreements with numerous universities and residency programs to host medical students, nursing students, and medical residents for rotations. According to officials, recent graduates from residency programs applying for permanent positions with the Chinle Comprehensive Health Care Facility often cite prior rotations at the service unit, or word of mouth from students or residents who have rotated through the service unit, as a reason for applying. The IHS Pharmacy Resident Program is another recruitment program that offers residency training to pharmacists who are willing to serve in high-need locations. Pharmacy residents who are Commissioned Corps officers are required to complete 2 years of service at an IHS federal or tribal facility. Twenty-six Commissioned Corps and civilian pharmacists participate in the Pharmacy Residency Program. See app. II for information on residency programs at tribally operated facilities. IHS officials said they have conducted webinars and career fairs in an attempt to connect with health professional students. For example, in 2016, IHS conducted two informational webinars to recruit Commissioned Corps applicants to facilities in the Great Plains area with critical clinical vacancies. According to IHS officials, approximately 60 applicants attended the two webinars, resulting in 15 nurse hires. In addition, Nashville area officials stated that the area office conducted a marketing campaign at the National Congress of American Indians Conference. Officials explained that the area office provided information about desirable aspects of living in the Nashville area and collected e-mail addresses and areas of interest from potential job candidates. IHS’s Office of Human Resources also partners with HRSA’s Bureau of Health Workforce by participating in nationwide virtual career fairs to promote the National Health Service Corps scholarship and loan repayment opportunities. IHS has also worked with the Office of the Surgeon General to increase the recruitment and retention of Commissioned Corps officers. In May 2017, the Office of the Surgeon General gave IHS priority access to new Commissioned Corps leads—meaning IHS has at least 30 days to make contact with potential applicants to the Commissioned Corps before other agencies have the opportunity to contact them. According to IHS officials, since being given priority access to Commissioned Corps leads, the agency has made 20 direct clinical care selections, of which 15 have entered on duty. In addition to its recruitment and retention strategies, IHS uses strategies to mitigate the negative effects of vacancies by helping to maintain patient access to services, and helping to reduce provider burnout when positions are vacant. Specifically, IHS provides telehealth services; implements alternative staffing models, including hiring nurse practitioners and physician assistants in lieu of physicians; temporarily assigns Commissioned Corps officers to alternate duty stations as needed; and contracts with temporary providers. IHS’s telehealth services include two agency-wide programs that provide teleophthalmology and telebehavioral health services. Teleophthalmology. The IHS Joslin Vision Network (IHS-JVN) Teleophthalmology Program provides annual diabetic eye exams to AI/AN patients in almost all IHS areas with federally operated facilities. According to IHS, patients’ retinal images are scanned locally and sent to a reading center where doctors interpret the images and report back. Officials told us the IHS-JVN program examined 22,000 patients in 2016. Telebehavioral health. The Telebehavioral Health Center of Excellence provides direct care services through video conferencing to patients at remote facilities from providers at IHS facilities that are able to provide the services. These services are provided in all IHS areas with federally operated facilities, and more than 5,800 patient visits occurred in 2016. Additionally, officials told us there are regional telebehavioral health programs, such as in the Oklahoma City area that, combined with the Telebehavioral Health Center of Excellence, saw over 10,000 patients in 2016. IHS officials stated that patients appreciate the telebehavioral services in their communities, because they are the only behavioral health services available in many communities. The IHS psychiatrist who provides services is located in Oklahoma City because, according to IHS officials, it is easier to recruit providers to a more urban location. In addition to these agency-wide telehealth programs, IHS officials identified multiple other local telehealth arrangements that facility staff have developed to help maintain patient access to medical services. For example, there is a diabetes consultant for the Portland area who conducts telenutrition services. There is also a teledermatology program for the Phoenix Area federal facilities operated out of the Phoenix Indian Medical Center. Additionally, several service units—including Pine Ridge Hospital, Rosebud Hospital, and the Sioux San Medical Center—have contracts for emergency department telehealth services. Figure 7 shows telehealth equipment in the Rosebud Hospital emergency department. Staff from multiple facilities told us they have implemented alternative staffing models to focus on hiring for non-physician practitioner positions because these positions are slightly easier to fill. For example, Northern Navajo Medical Center officials told us the facility, facing an emergency department physician shortage, hired physician assistants and nurse practitioners instead. These officials said they converted two physician positions into four physician assistant and nurse practitioner positions. In addition, Chinle officials stated that they added two physician assistants to the urgent care department due to complaints about patient wait times, and patient wait times have decreased as a result. Officials also mentioned dental therapists as an additional type of clinical professional who may be added to the Chinle Health Care Facility staffing model because the service unit has been unable to recruit and retain enough dentists to meet patient need. IHS officials stated that they have worked with the Office the Surgeon General to deploy Commissioned Corps officers, mainly to the Great Plains area, and have also coordinated voluntary temporary duty assignments of Commissioned Corps officers (within IHS and from other agencies) to temporarily fill staffing shortages or meet other mission- critical needs. IHS officials stated that Commissioned Corps officers may also be temporarily assigned to an IHS site to provide services, such as behavioral health support during a suicide cluster. IHS officials from 9 of the 10 geographic areas with federally operated facilities and all seven facilities in our review told us they regularly use temporary contract providers—such as through locum tenens contracts and contracts with university fellowship programs—to maintain patient access to care when positions are vacant. Locum tenens. Officials from the Kayenta Health Center said they contract with temporary providers to compensate for vacancies, and the facility contracts with about 9 providers who rotate to fill 3 vacant emergency department positions. Officials from the Portland area stated that they use temporary providers when there is a staffing shortage with providers. They explained that the Portland area has provider vacancies that have been open for years, and temporary providers fill these vacancies for an extended period of time, usually with a rotating series of providers. Chinle Health Care Facility officials said temporary providers, when of sufficiently high quality, have been recruited to join the permanent corps of civilian service staff. However, they told us locum tenens can cost between $50,000-$200,000 more annually than permanent physicians’ salaries, exclusive of benefits, depending on the specialties and hourly rates associated with the contracts. They said they are finding that increasingly higher hourly rates are needed to ensure a sufficient supply of high-quality temporary providers. IHS officials at all levels of the agency told us they prefer to hire permanent providers, rather than use locum tenens contracts. Facility officials explained that persistent turnover in temporary staff may jeopardize continuity of care. For example, Sioux San Medical Center officials expressed concern about the quality of the care provided by temporary contractors, as well as the consistency of the care provided because the contractors rotate frequently. IHS officials told us that many providers prefer to be on contract due to the higher compensation rates as a contractor, even when taking federal benefits into account. University physicians. IHS officials explained that area offices may also contract with university fellowship programs to provide visiting providers. For example, according to IHS, the Chinle Health Care Facility has entered into long-term contractual agreements with two academic fellowship programs—University of California-San Francisco Health Program and the University of Utah Global Health Fellowship. Officials told us these programs provide U.S. residency- trained, board certified physicians interested in global health to work 6-month assignments alternating with another fellow at an international site. In addition, IHS officials stated that the Navajo area office is collaborating with the University of California-San Francisco and its global health fellowship to assign global health fellows to a Navajo Area site for 6 months out of each year. The officials explained that 24 fellows were placed in Navajo-area facilities in 2017 at costs substantially lower than that of locum tenens contracts. According to IHS, the Great Plains area office has collaborated with the University of Washington’s global health fellowship program to assign global health fellows in Internal Medicine to Pine Ridge Hospital for 11- month placements. Agency-wide information on the extent to which facilities use these temporary providers, and the amount spent on them, is not readily available to IHS leadership. While IHS has agency-wide information on vacancies through the Capital Human Resource Management System, IHS delegates the acquisitions process for temporary provider contracts to the head of each area-level Contracting Office. Therefore, agency-wide information on the number of full-time equivalent employees that are temporary providers working at IHS facilities, as well as the cost of these providers, is not readily available. As discussed, officials we spoke with at IHS facilities told us that temporary providers can cost more depending on the specialties and hourly rates. Without agency-wide information on the extent to which such providers are used, IHS is not fully informed about facilities’ reliance and expenditures on temporary providers or their potential effect on patient care, which is inconsistent with federal internal control standards regarding the availability of relevant information to facilitate management decision making and performance monitoring. Specifically, federal internal controls standards state that agency management should obtain, process, and use quality information to make informed decisions and evaluate the agency’s performance in achieving key objectives and addressing risks. IHS’s lack of agency-wide information on the costs and number of temporary providers used at its facilities impedes its ability to make decisions about how best to target its resources to address gaps in provider staffing and ensure that health services are available and accessible across IHS facilities. Maintaining a stable clinical workforce capable of providing quality and timely care is critical for IHS to ensure that comprehensive health services are available and accessible to American Indian/Alaska Native people. However, despite efforts to recruit and retain providers, IHS continues to face considerable challenges to overcome its long-standing struggle to fill sizeable provider vacancies, including geographic isolation and limited amenities. Although IHS is authorized to offer recruitment and retention incentives, such as loan repayments and subsidized housing, the demand for these incentives has been greater than the agency can meet due to resource constraints. However, more complete information on contract providers could help IHS officials make decisions on where to better target its limited resources to address gaps in provider staffing and ensure that health services are available and accessible to American Indian/Alaska Native people across IHS facilities. We are making the following recommendation to IHS: The Director of IHS should obtain, on an agency-wide basis, information on temporary provider contractors, including their associated cost and number of full-time equivalents, and use this information to inform decisions about resource allocation and provider staffing. (Recommendation 1) We provided a draft of this report to HHS and the Department of Veterans Affairs (VA) for review and comment. We received written comments from HHS that are reprinted in appendix III. HHS concurred with our recommendation. In its comments, HHS stated that IHS plans to update its policies by December 2018 to include a centralized reporting mechanism requirement for all temporary contracts issued for providers. HHS also stated that, upon finalization of the policy, IHS will broadly incorporate and implement the reporting mechanism agency-wide and maintain it on an annual basis. HHS also provided technical comments, which we incorporated as appropriate. VA provided comments on a draft of this report in an email, stating that VA officials continue to work to improve recruitment and retention of providers at VHA to ensure that they have the correct number of providers with the appropriate skills. We are sending copies of this report to HHS, the Department of Veterans Affairs, and appropriate congressional committees. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov/. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or farbj@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix IV. Appendix I: Provider Vacancies with the Indian Health Service (IHS) IHS data collected in November 2017, included the number of positions and vacancies for several types of providers, including physicians, nurses, dentists, pharmacists, nurse practitioners, certified registered nurse anesthetists, certified nurse midwives, and physician assistants. Most of these positions are in the 8 of 12 IHS areas in which IHS has substantial direct care responsibilities. Vacancies for nurse practitioners, nurse midwives, dentists, pharmacists, and physician assistants are provided in this appendix. Nurse practitioners. Nationwide, 97 of 303 positions were vacant in November 2017, and vacancy rates in the 8 areas in which IHS has substantial direct care responsibilities ranged from 12 percent in the Oklahoma City area to 47 percent in the Albuquerque area. (See fig. 8) Certified nurse midwives. Nationwide, 8 of 55 positions were vacant in November 2017. See table 1. Dentists. Nationwide, 81 of 306 positions were vacant in November 2017 and vacancy rates in the 8 areas in which IHS has substantial direct care responsibilities ranged from 14 percent in the Phoenix area to 39 percent in the Bemidji area. (See fig. 9.) Pharmacists. Nationwide, 80 of 637 positions were vacant in November 2017 and vacancy rates in the 8 areas in which IHS has substantial direct care responsibilities ranged from 3 percent in the Bemidji area to 17 percent in the Albuquerque area. (See fig. 10.) Physician assistants. Nationwide, 37 of 125 positions were vacant in November 2017. See table 2. Tribal officials from the Chickasaw Nation and Choctaw Nation described their use of strategies to address vacancies, which were very similar to strategies used by the Indian Health Service (IHS). Like the IHS, one tribe uses the availability of housing units near its medical facility as a recruitment tool for health care providers. Both tribes that described their strategies to recruit and retain providers told us they use their physician residency program in Family Medicine as a recruitment tool. Availability of housing units near the medical facility. Tribal officials from the Choctaw Nation told us the tribe uses housing units—58 housing units that range from studio apartments to multi- room houses—as a recruitment strategy for providers. The provider housing units are occupied by physicians, as well as by physician residents who need housing during their residency or for medical students doing clinical rotations through the facility. According to tribal officials, a factor they considered in making housing units available for providers was the location of its hospital in a rural area of Oklahoma, in a town with a population of about 1,000, which lacks sufficient housing. In September 2017, tribal officials told us all the available housing units were occupied, and the tribe was in the process of constructing at least two 4-bedroom houses. See fig. 11 for photos of a completed multi-room house and one under construction. Offering the housing units to provider staff is also part of the tribe’s overall strategy of offering quality-of-life benefits to attract and retain providers. Implementing Accredited Physician Residency Programs. Tribal officials we interviewed noted that they developed physician training programs—specifically graduate medical education, commonly known as residency training—which they use as an important recruitment tool for physicians. One tribe has implemented its Family Medicine residency program, while the other tribe intends for its Family Medicine residency program to be operational in July 2018. Both residency programs are accredited by the American Osteopathic Association, in addition to the American College of Osteopathic Family Practice for one tribe and the American Council for Graduate Medical Education for the other tribe. One program is accredited for 3 resident physicians per year for a total of 9 physician residents at a time, while the other program is accredited for 4 resident physicians per year. We previously found that physicians may practice in geographic areas similar to those where they complete their residency training. Tribal officials with the implemented Family Medicine residency program told us it is successful in that they hired 7 of the 9 residents who completed the residency program. There is also a retention benefit—current providers have the opportunity to stay up-to-date on the latest medical treatment methods by serving as either mentors or as faculty for the residents. In addition to the contact named above, Kathleen M. King (Director), Ann Tynan (Assistant Director), Kelly DeMots (Assistant Director/Analyst-in- Charge), Sam Amrhein, Kristen Anderson, Muriel Brown, Kaitlin Farquharson, Peter Mann-King, Maria Ralenkotter, Lisa Rogers, and Jennifer Whitworth made key contributions to this report.", "summary": "IHS is charged with providing health care to AI/AN people who are members or descendants of 573 tribes. According to IHS, AI/AN people born today have a life expectancy that is 5.5 years less than all races in the United States, and they die at higher rates than other Americans from preventable causes. The ability to recruit and retain a stable clinical workforce capable of providing quality and timely care is critical for IHS. GAO was asked to review provider vacancies at IHS. This report examines (1) IHS provider vacancies and challenges filling them; (2) strategies IHS has used to recruit and retain providers; and (3) strategies IHS has used to mitigate the negative effects of provider vacancies. GAO reviewed IHS human resources data for the provider positions that the agency tracks. GAO also reviewed policies, federal internal control standards, and legal authorities related to providers in federally operated IHS facilities. GAO interviewed IHS officials at the headquarters and area level and at selected facilities. GAO selected facilities based on variation in their number of direct care outpatient visits and inpatient hospital beds in 2014. Indian Health Service (IHS) data show sizeable vacancy rates for clinical care providers in the eight IHS geographic areas where the agency provides substantial direct care to American Indian/Alaska Native (AI/AN) people. The overall vacancy rate for providers—physicians, nurses, nurse practitioners, certified registered nurse anesthetists, certified nurse midwives, physician assistants, dentists, and pharmacists—was 25 percent, ranging from 13 to 31 percent across the areas. IHS officials told GAO that challenges to filling these vacancies include the rural location of many IHS facilities and insufficient housing for providers. Officials said long-standing vacancies have a negative effect on patient access, quality of care, and employee morale. IHS uses multiple strategies to recruit and retain providers, including offering increased salaries for certain positions, but it still faces challenges matching local market salaries. IHS also offers other financial incentives, and has made some housing available when possible. In addition, IHS uses strategies, such as contracting with temporary providers, to maintain patient access to services and reduce provider burnout. Officials said these temporary providers are more costly than salaried employees and can interrupt patients' continuity of care. However, IHS lacks agency-wide information on the costs and number of temporary providers used at its facilities, which impedes IHS officials' ability to target its resources to address gaps in provider staffing and ensure access to health services across IHS facilities. GAO recommends that IHS obtain, on an agency-wide basis, information on temporary provider contractors, including their associated cost and number of full-time equivalents, and use this information to inform decisions about resource allocation and provider staffing. IHS concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "CSPF is a defined benefit multiemployer pension plan. Multiemployer plans are often created and maintained through collective bargaining agreements between labor unions and two or more employers, so that workers who move from job to job and employer to employer within an industry can continue to accrue pension benefits within the same plan over the course of their careers. Multiemployer plans are typically found in industries with many small employers such as trucking, building and construction, and retail food sales. In 2017, there were about 1,400 defined benefit multiemployer plans nationwide covering more than 10 million participants. Most multiemployer plans are jointly administered and governed by a board of trustees selected by labor and management. The labor union typically determines how the trustees representing labor are chosen and the contributing employers or an employer association typically determines how the trustees representing management are chosen. The trustees set the overall plan policy, direct plan activities, and set benefit levels (see fig. 1). Multiemployer plans are “prefunded,” or funded in advance, primarily by employer contributions. The employer contribution is generally negotiated through a collective bargaining agreement, and is often based on a dollar amount per hour worked by each employee covered by the agreement. Employer contributions are pooled in a trust fund for investment purposes, to pay benefits to retirees and their beneficiaries, and for administrative expenses. Multiemployer plan trustees typically decide how the trust fund should be invested to meet the plan’s objectives, but the trustees can use investment managers to determine how the trust fund should be invested. Multiemployer plan trust funds can be allocated among many different types of assets, any of which can generally be passively- or actively-managed, domestically or internationally based, or publicly or nonpublicly traded (see table 1). A plan’s funded percentage is its ratio of plan assets to plan liabilities. Because the amount needed to pay pension benefits for many years into the future cannot be known with certainty due to a variety of economic and demographic factors, including the potential volatility of asset values, estimates of a plan’s funded percentage may vary from year to year. Defined benefit pension plans use a “discount rate” to convert projected future benefits into their “present value.” The discount rate is the interest rate used to determine the current value of estimated future benefit payments and is an integral part of estimating a plan’s liabilities. The higher the discount rate, the lower the plan’s estimate of its liability. Multiemployer plans use an “assumed-return approach” that bases the discount rate on a long-term assumed average rate of return on the pension plan’s assets. Under this approach, the discount rate depends on the allocation of plan assets. For example, a reallocation of plan assets into more stocks and fewer bonds typically increases the discount rate, which reduces the estimated value of plan liabilities, and therefore, reduces the minimum amount of funding required. Looking at the entire “multiemployer system”—the aggregation of multiemployer plans governed by ERISA and insured by PBGC—shows that while the system was significantly underfunded around 2001 and 2009, its funded position has improved since 2009. Specifically, analyses published by the Center for Retirement Research at Boston College and the Society of Actuaries used plan regulatory filings to calculate the funded status for the system and determined that it was approaching 80 percent funded by 2014 after falling during the 2008 market downturn. However, some observers have noted that while many plans are making progress toward their minimum targets, a subset of plans face serious financial difficulties. Multiemployer retirement benefits are generally determined by the board of trustees. The bargaining parties negotiate a contribution rate and the trustees adopt or amend the plan’s benefit formulas and provisions. Decisions to increase benefits or change the plan are also typically made by the board of trustees. Benefit amounts are generally based on a worker’s years of service and either a flat dollar amount or the worker’s wage or salary history, subject to further adjustment based on the age of retirement. CSPF was established in 1955 to provide pension benefits to International Brotherhood of Teamsters union members (Teamsters) in the trucking industry, and it is one of the largest multiemployer plans. In the late 1970s, CSPF was the subject of investigations by the IRS within the U.S. Department of the Treasury (Treasury), and by DOL and the U.S. Department of Justice (DOJ). The DOL investigation ultimately resulted in the establishment of a federal court-enforceable consent decree in 1982 that remains in force today. CSPF held more than $4.3 billion in Net Assets at the end of 1982 after the consent decree was established. The plan’s Net Assets peaked at nearly $26.8 billion at the end of 2007 and declined to about $15.3 billion at the end of 2016 (see fig. 2). As of 2016, CSPF reported that it had about 1,400 contributing employers and almost 385,000 participants. The number of active CSPF participants has declined over time. In 2016, 16 percent of about 385,000 participants were active, i.e., still working in covered employment that resulted in employer contributions to the plan. In comparison, CSPF reported in 1982 that 69 percent of more than 466,000 participants were active participants. Since the 1980s, CSPF’s ratio of active to nonworking participants has declined more dramatically than the average for multiemployer plans. By 2015, only three of the plan’s 50 largest employers from 1980 still paid into the plan, and for each full-time active employee there were over five nonworking participants, mainly retirees. As a result, benefit payments to CSPF retirees have exceeded employer contributions in every year since 1984. Thus, CSPF has generally drawn down its investment assets. In 2016, CSPF withdrew over $2 billion from investment assets (see fig. 3.). CSPF has historically had fewer plan assets than were needed to fully fund the accrued liability—the difference referred to as unfunded liability. In 1982, we reported that CSPF was “thinly funded”—as the January 1, 1980, actuarial valuation report showed the plan’s unfunded liability was about $6 billion—and suggested that IRS should closely monitor CSPF’s financial status. In 2015, the plan’s actuary certified that the plan was in “critical and declining” status. The plan has been operating under an ERISA-required rehabilitation plan since March 25, 2008, which is expected to last indefinitely. As of January 1, 2017, the plan was funded to about 38 percent of its accrued liability. In September 2015, CSPF filed an application with Treasury seeking approval to reduce benefits pursuant to provisions in the Multiemployer Pension Reform Act of 2014 (MPRA), which is fully discussed later in this section. The application was denied in May 2016 based, in part, on Treasury’s determination that the plan’s proposed benefit suspensions were not reasonably estimated to allow the plan to remain solvent. In 2017, CSPF announced it would no longer be able to avoid the projected insolvency. (See app. II for a timeline of key events affecting CSPF.) As previously mentioned, CSPF was the subject of investigations in the 1970s by IRS, DOL, and DOJ. DOL’s investigation focused on numerous loan and investment practices alleged to constitute fiduciary breaches under ERISA, such as loans made to companies on the verge of bankruptcy, additional loans made to borrowers who had histories of delinquency, loans to borrowers to pay interest on outstanding loans that the fund recorded as interest income, and lack of controls over rental income. As a result of its investigation, DOL filed suit against the former trustees of CSPF and, in September 1982, the parties entered into a consent decree, which remains in force today. The consent decree provides measures intended to ensure that the plan complies with the requirements of ERISA, including providing for oversight by the court and DOL, and prescribes roles for multiple parties in its administration. For example, certain plan activities must be submitted to DOL for comment and to the court for approval, including new trustee approvals and some investment manager appointments. According to DOL, to prevent criminal influence from regaining a foothold of control over plan assets, the consent decree generally requires court-approved independent asset managers—called “named fiduciaries”—to manage CSPF’s investments. CSPF’s trustees are generally prohibited from managing assets; however, they remain responsible for selecting, subject to court approval, and overseeing named fiduciaries and monitoring plan performance. To focus attention on compliance with ERISA fiduciary responsibility provisions, the consent decree provides for a court-appointed independent special counsel with authority to observe plan activities and oversee and report on the plan. (See app. III for additional detail on the key provisions of the consent decree.) In 1974, Congress passed ERISA to protect the interests of participants and beneficiaries of private sector employee benefit plans. Among other things, ERISA requires plans to meet certain requirements and minimum standards. DOL, IRS, and PBGC are generally responsible for administering ERISA and related regulations. DOL has primary responsibility for administering and enforcing the fiduciary responsibility provisions under Part 4 of Title I of ERISA, which include the requirement that plan fiduciaries act prudently and in the sole interest of participants and beneficiaries. Treasury, specifically the IRS, is charged with determining whether a private sector pension plan qualifies for preferential tax treatment under the Internal Revenue Code. Additionally, the IRS is generally responsible for enforcing ERISA’s minimum funding requirements, among other things. ERISA generally requires that multiemployer plans meet minimum funding standards, which specify a funding target that must be met over a specified period of time. The funding target for such plans is measured based on assumptions as to future investment returns, rates of mortality, retirement ages, and other economic and demographic assumptions. Under the standards, a plan must collect a minimum level of contributions each year to show progress toward meeting its target, or the plan employers may be assessed excise taxes and owe the plan for missed contributions plus interest. Minimum contribution levels may vary from year to year due to a variety of economic and demographic factors, such as addressing differences between assumed investment returns and the plan’s actual investment returns. To protect retirees’ pension benefits in the event that plan sponsors are unable to pay plan benefits, PBGC was created by ERISA. PBGC is financed through mandatory insurance premiums paid by plans and plan sponsors, with premium rates set by law. PBGC operates two distinct insurance programs: one for multiemployer plans and another for single- employer plans. Each program has separate insurance funds and different benefit guarantee rules. The events that trigger PBGC intervention differ between multiemployer and single-employer plans. For multiemployer plans, the triggering event is plan insolvency, the point at which a plan begins to run out of money while not having sufficient assets to pay the full benefits that were originally promised when due. PBGC does not take over operations of an insolvent multiemployer plan; rather, it provides loan assistance to pay administrative expenses and benefits up to the PBGC-guaranteed level. According to PBGC, only once in its history has a financial assistance loan from the multiemployer pension insurance program been repaid. In 2017, PBGC provided financial assistance to 72 insolvent multiemployer plans for an aggregate amount of $141 million. For single-employer plans the triggering event is termination of an underfunded plan—generally, when the employer goes out of business or enters bankruptcy. When this happens, PBGC takes over the plan’s assets, administration, and payment of plan benefits (up to the statutory limit). The PBGC-guaranteed benefit amounts for multiemployer plans and the premiums assessed by PBGC to cover those benefit guarantees are significantly lower than those for single-employer plans. Each insured multiemployer plan pays flat-rate insurance premiums to PBGC based on the number of participants covered. The annual premium rate for plan years beginning in January 2017 was $28 per participant and it is adjusted annually based on the national average wage index. (See app. II for the PBGC premium rates that have been in effect since the consent decree was established in 1982.) When plans receive financial assistance, participants face a reduction in benefits. For example, using 2013 data, PBGC estimated 21 percent of more than 59,000 selected participants in insolvent multiemployer plans then receiving financial assistance from PBGC faced a benefit reduction. The proportion of participants facing reductions due to the statutory guarantee limits is expected to increase. About 51 percent of almost 20,000 selected participants in plans that PBGC believed would require future assistance were projected to face a benefit reduction. Since 2013, the deficit in PBGC’s multiemployer program has increased by nearly 700 percent, from a deficit of $8.3 billion at the end of fiscal year 2013 to $65.1 billion at the end of fiscal year 2017. PBGC estimated that at of the end of 2016, the present value of net new claims by multiemployer plans over the next 10 years would be about $24 billion, or approximately 20 percent higher than its 2015 projections. The program is projected to become insolvent within approximately 8 years. If that happens, participants who rely on PBGC guarantees will receive only a very small fraction of current statutory guarantees. According to PBGC, most participants would receive less than $2,000 a year and in many cases, much less. We have identified PBGC’s insurance programs as high-risk. This designation was made in part because multiemployer plans that are currently insolvent, or likely to become insolvent in the near future, represent a significant financial threat to the agency’s insurance program. We designated the single-employer program as high-risk in July 2003, and added the multiemployer program in January 2009. Both insurance programs remain on our high-risk list. Multiemployer Pension Plan Amendments Act of 1980 Among other things, the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) made employers liable for a share of unfunded plan benefits when they withdraw from a plan, unless otherwise relieved of their liability, and strengthened certain funding requirements. An employer that chooses to withdraw from a multiemployer plan may be required to continue to contribute if the plan does not have sufficient assets to cover the plan’s current and known future liabilities at the time the employer withdraws; however, these payments may not fully cover the withdrawing employer’s portion of the plan’s liabilities. In such cases, the employers remaining in the plan may effectively assume the remaining liability. The Pension Protection Act of 2006 The Pension Protection Act of 2006 (PPA) was intended to improve the funding of seriously underfunded multiemployer plans, among other things. It included provisions that require plans in poor financial health to take action to improve their financial condition over the long term and established two categories of troubled plans: (1) “endangered status” or “yellow zone” plans (this category also includes a sub-category of “seriously endangered”), and (2) more seriously troubled “critical status” or “red zone” plans. PPA further required plans in the endangered and critical zones to develop written plans to improve their financial condition, such as by revising benefit structures, increasing contributions, or both, within a prescribed time frame. Multiemployer plans in yellow or red zone status must document their remediation strategies in a written plan, notify plan participants, and report annually on whether scheduled progress has been made. Since the 2008 market decline, the number of participants in endangered and critical plans has generally been decreasing (see fig. 4). The Multiemployer Pension Reform Act of 2014 In response to the funding crisis facing PBGC and multiemployer pension plans, the Multiemployer Pension Reform Act of 2014 (MPRA) made changes to the multiemployer system that were intended to improve its financial condition. Key changes included: Creation of critical and declining status. MPRA created a new category, “critical and declining,” for plans in critical status projected to become insolvent during the current plan year or within any of the 14 succeeding plan years, or in certain circumstances, within any of the 19 succeeding plan years. In 2017, PBGC reported that more than 100 multiemployer plans (more than 7 percent of plans) representing approximately 1 million participants (about 10 percent of participants) have been determined to be “critical and declining.” Permitted reduction of accrued benefits. MPRA permits plans to reduce participants’ and beneficiaries’ accrued retirement benefits if the plan can demonstrate such action is necessary to remain solvent. Plans apply to Treasury for the authority to reduce benefits. Treasury, in consultation with PBGC and DOL, reviews the applications and determines whether the proposed changes would enable the plan to remain solvent. Increased PBGC premiums. MPRA also increased the PBGC premiums for multiemployer plans from $12 to $26 (per participant per plan year) in 2015 and from $26 to $28 in plan year 2017. The annual premium in subsequent years is indexed to changes in the national average wage index. Creation of new framework of rules for partition. Partition allows a multiemployer plan to split into two plans—the original and a successor. Partitions are intended to relieve stress on the original plan by transferring the benefits of some participants to a successor plan funded by PBGC and to help retain participant benefits in the plans at levels higher than the PBGC-guaranteed levels. At the time the consent decree was established in 1982, CSPF had less than half the estimated funds needed to cover plan liabilities (and to pay associated benefits over the lifetime of participants) and it has not attained 100 percent of its estimated funding need since then, according to regulatory filings. CSPF’s 1982 Form 5500 we reviewed shows that the plan was less than 40 percent funded prior to the consent decree becoming effective. Over the next two decades, the plan generally made progress toward achieving its targeted level of funding but was never more than 75 percent funded, and funding has generally deteriorated since its 2002 filing (see fig. 5). Overall, the plan’s unfunded liability increased by approximately $11.2 billion (in inflation-adjusted dollars) between January 1983 and January 2016. As a consequence, participant benefits were never fully secured by plan assets over this period, as measured by ERISA’s minimum funding standards, and the plan consistently needed to collect contributions in excess of those needed to fund new benefit accruals to try to make up for its underfunded status. CSPF officials and other stakeholders identified several factors that contributed to CSPF’s critical financial condition and reflect the challenges faced by many multiemployer plans. For example, like CSPF, many multiemployer plans have experienced financial difficulties due to a combination of investment losses and insufficient employer contributions. In addition to being underfunded prior to the consent decree going into effect, stakeholders identified other specific factors that contributed to CSPF’s critical financial condition, such as trends within the national trucking industry and its workforce, funding challenges and common investment practices of multiemployer plans, and the impact of market downturns on long-term investment performance. Stakeholders also described the effects of the 2007 withdrawal of a key employer, United Parcel Service (UPS), on CSPF’s critical financial condition. Stakeholders we interviewed said changes to the workforce, such as declining union membership rates and changes resulting from industry deregulation, affected CSPF and some other multiemployer plans by reducing the number of workers able to participate in their plans. While the multiemployer structure distributes bankruptcy risk across many employers, for any particular multiemployer plan employers are often concentrated in the same industry, making the plans vulnerable to industry- specific trends and risks. For example, stakeholders noted the impact that the Motor Carrier Act of 1980 had on the trucking industry. Specifically, deregulation of the trucking industry reduced government oversight and regulation over interstate trucking shipping rates. The trucking industry became increasingly dominated by nonunion trucking companies resulting in the bankruptcy of many unionized trucking companies, according to stakeholders. New trucking companies typically did not join multiemployer plans because their labor force was not unionized and this, coupled with the bankruptcy of many contributing employers, contributed to a decrease in active participant populations for many plans serving the industry. As the total number of active participants in a plan declines, the resources from which to collect employer contributions declines proportionally. Stakeholders also said these changes were unforeseeable. Limitations on a plan’s ability to increase contributions mean that a plan has less capacity to recover from an underfunded position or to make up for investment returns that fall short of expectations. A decline in the number of active workers can also accelerate plan “maturity,” as measured by the ratio of nonworking to working participants. Plan maturity has implications for a plan’s investment practices and the time frame over which the plan must be funded. According to PBGC’s data for the multiemployer plans it insures, there were approximately three active participants for every nonworking participant in 1980 (3:1); by 2014, the ratio was approximately one active worker for every two nonworking participants (1:2). Figure 6 shows the change in the percentages of active and nonworking participants for the multiemployer plans that PBGC insures. CSPF saw an even more dramatic change in its active to nonworking participant ratio from 1982 through 2015. In 1982, there were more than two active workers for every nonworking participant (2:1) and by 2016 that ratio had fallen to approximately one active worker for every five nonworking participants (1:5) (see fig. 7). Because CSPF’s contributing employers were largely trucking companies, stakeholders said this made the fund especially vulnerable to industry-wide shocks. Like the industry as a whole, CSPF was unable to attract new employers to replace exiting employers, in part because of the lack of new unionized employers. CSPF officials said that changes to the trucking industry and its workforce also led to other challenges for the plan. For example, contributions to the plan declined with the shrinking number of active workers. CSPF officials told us they could not significantly increase the contribution rate paid by remaining employers because of the financial hardship it would cause, and as a result, the plan’s ability to recover from its underfunded position was limited. CSPF officials said that this increased the plan’s reliance on investment returns to try to close the gap between its assets and liabilities. Stakeholders we interviewed cited challenges inherent in multiemployer plans’ funding and investment practices, and described how the challenges may have contributed to the critical financial condition of some plans, including CSPF. Stakeholders said that CSPF and many other multiemployer plans have been challenged by employer withdrawals. An employer withdrawal reduces the plan’s number of active worker participants, thereby reducing its contribution base and accelerating plan maturity. A withdrawing employer generally must pay a share of any unfunded benefits. Stakeholders identified several ways in which the withdrawal liability framework could result in a withdrawing employer underpaying its share of an unfunded liability. We have previously reported on the challenges associated with withdrawal liability, including: withdrawal liability assessments are often paid over time, and payment amounts are based on prior contribution rates rather than the employer’s actual withdrawal liability assessment. withdrawal liability payments are subject to a 20-year cap, regardless of whether an employer’s share of unfunded benefits has been fully paid within this 20-year timeframe; plans often did not collect some or all of the scheduled withdrawal liability payments because employers went bankrupt before completing their scheduled payments; and fears of withdrawal liability exposure increasing over time could be an incentive for participating employers to leave a plan and a disincentive for new employers to join a plan; Stakeholders we interviewed also added that the calculation used to determine withdrawal liability may use an investment return assumption that inherently transfers risk to the plan. When exiting employers do not pay their share of unfunded benefits, any remaining and future employers participating in the plan may effectively assume the unpaid share as a part of their own potential withdrawal liability as well as responsibility for the exiting employer’s “orphaned” participants. Participating employers may negotiate a withdrawal if they perceive a risk that the value of their potential withdrawal liability might grow significantly over time. In its MPRA application, CSPF cited employer withdrawals and bankruptcies as a significant challenge for the plan. CSPF reported that after deregulation, the number of contributing employers dropped by over 70 percent. While some of the drop could be due to the consolidation of trucking companies after deregulation, CSPF officials cited several cases in which employers went bankrupt or withdrew from the plan, which reduced the plan’s contribution base and accelerated its maturity. Additionally, when employers went bankrupt, they often did not pay their full withdrawal liability. For example, CSPF said two of its major contributing employers left the plan between 2001 and 2003, and left $290 million of more than $403 million in withdrawal liability unpaid after they went bankrupt. Stakeholders identified funding timeframes as a factor that contributed to the challenges facing many multiemployer plans, including CSPF. ERISA’s minimum funding standards have historically allowed multiemployer plans to amortize, or spread out the period of time for funding certain events, such as investment shortfalls and benefit improvements. For example, CSPF began a 40-year amortization of approximately $6.1 billion in underfunding on January 1, 1981, giving the plan until the end of 2021 to fully fund that amount. Longer amortization periods increase the risk of plan underfunding due to the number and magnitude of changes in the plan’s environment that may occur, such as a general decline in participants or deregulation of an industry. The Pension Protection Act of 2006 shortened amortization periods for single- employer plans to 7 years and the amortization periods for multiemployer plans to 15 years. Shorter amortization periods provide greater benefit security to plan participants by reducing an unfunded liability more rapidly. In addition, shorter amortization periods can be better aligned with the projected timing of benefit payments for a mature plan. However, shorter periods can be a source of hardship for plans with financially troubled contributing employers because they may require higher contributions. According to CSPF officials, CSPF requested and received an additional 10-year amortization extension from the IRS in 2005 after relating that contribution requirements could force participating employers into bankruptcy. One CSPF representative said an amortization extension can also help avoid subjecting the plan’s employers to IRS excise taxes for failing to make required minimum contributions. Stakeholders we interviewed said that certain common investment practices may have played a role in the critical financial condition of CSPF and other mature and declining plans. In general, multiemployer plans invest in portfolios that are expected, on average, to produce higher returns than a low-risk portfolio, such as one composed entirely of U.S. Treasury securities. Stakeholders also stated that these investment practices may have been too risky because returns can be more volatile, and the higher expected returns might not be achieved. In addition, the Congressional Budget Office has reported that if “plans had been required to fund their benefit liabilities—at the time those liabilities were accrued—with safer investments, such as bonds, the underfunding of multiemployer plans would have been far less significant and would pose less risk to PBGC and beneficiaries.” Stakeholders also told us that for mature plans like CSPF, these investment practices can pose further challenges. Mature plans, with fewer active employees, have less ability to recoup losses through increased contributions and have less time to recoup losses through investment returns before benefits must be paid. Market corrections, such as those that occurred in 2001 through 2002 and in 2008, can be particularly challenging to mature plans and their participants, especially if a mature plan is also significantly underfunded. Mature plans could mitigate these risks by investing more conservatively, however, the resulting lower expected returns from more conservative investing necessitates higher funding targets and contribution rates, which could be a hardship for employers in an industry with struggling employers. Alternatively, a plan that invests more conservatively may provide lower promised benefits to accommodate the level of contributions it can collect. Lower investment returns from a more conservative investment policy would cost employers more in contributions and could potentially result in employers leaving the plan. Further, investing in a conservative portfolio would be relatively unique among multiemployer plans, and stakeholders said plan managers may feel they are acting in a prudent fashion by investing similarly to their peers. Underfunded plans like CSPF may not see conservative investment as an option if they cannot raise the contributions necessary to fully fund their vested benefits. Officials from CSPF told us that, because they lacked the ability to significantly increase revenue or decrease accrued benefits, the named fiduciaries sought incrementally higher investment returns to meet funding thresholds required by the amortization extension they received in 2005. On the other hand, there are challenges associated with risk bearing investments. In our prior work, we reported that multiemployer plans generally develop an assumed average rate of investment return and use that assumption to determine funding targets, required contributions, and the potential cost of benefit improvements. Experts we interviewed for that report told us that using a portfolio’s expected return to value the cost of benefits increases the risk that insufficient assets could be on hand when needed. They also told us that using the portfolio’s expected return to calculate liabilities could incentivize plans to invest in riskier assets and to negotiate higher benefit levels because the higher returns expected from riskier portfolios can result in lower reported liabilities. Plan Terms Set through Collective Bargaining Stakeholders we interviewed said that plan terms, such as contribution rates, which are set through the collective bargaining process, can create an additional challenge for multiemployer plans. Employers in multiemployer plans generally are not required to contribute beyond what they have agreed to in collective bargaining, and these required employer contributions generally do not change during the term of a collective bargaining agreement. CSPF officials said that up until the early 2000s, plan officials did not request modifications to collective bargaining agreements, such as reallocating contribution dollars, to respond to adverse investment returns. Stakeholders highlighted the effects of market downturns on multiemployer plan assets as another contributing factor to CSPF’s critical financial condition and that of other multiemployer plans. Failure to achieve assumed returns has the effect of increasing unfunded liabilities. For the multiemployer system in aggregate, the average annual return on plan assets over the 2002 to 2014 period was about 6.1 percent, well short of typical assumed returns of 7.0 or 7.5 percent in 2002. Many multiemployer plans were especially impacted by the 2008 market downturn. PBGC estimated that from 2007 to 2009, the value of all multiemployer plan assets fell by approximately 24 percent, or $103 billion, after accounting for contributions to and payments from the plans. Although asset values recovered to some extent after 2009, some plans continued to be significantly underfunded, and stakeholders said this could be due to the contribution base not being sufficient to help recover from investment shortfalls. CSPF’s investment performance since 2000 has reflected performance similar to other multiemployer plans and the plan went from 73 percent funded in 2000 to about 38 percent funded in 2017. While the plan used an assumed rate of return of 7.5 to 8.0 percent per year between 2000 and 2014, our analysis of the plan’s regulatory filings shows that the plan’s weighted-average investment return over this period was about 4.9 percent per year. CSPF officials said the 2008 downturn significantly reduced CSPF’s assets and it was unable to sufficiently recoup those losses when the market rebounded in 2009. Plan assets declined from $26.8 billion at the beginning of 2008 to $17.4 billion at the beginning of 2009, with $7.5 billion of the decline attributable to investment losses. Despite reporting a 26 percent return on assets during 2009, CSPF had only $19.5 billion in assets at the end of 2009 because benefits and expenses exceeded the contributions it collected and because it had fewer assets generating returns for the plan. By the end of 2009, CSPF’s funding target was $35.9 billion but the fund had less than $20 billion that could be used to generate investment returns. If CSPF’s portfolio had returned 7.5 percent per year over the 2000-2014 period, instead of the approximately 4.9 percent we calculated, we estimate that the portfolio value would have exceeded $32.0 billion at the end of 2014, or 91 percent of its Actuarial Accrued Liability. In addition to the factors mentioned that affected many multiemployer plans, stakeholders we interviewed also noted the unique effect of the UPS withdrawal on CSPF. In 2007, UPS negotiated with the International Brotherhood of Teamsters for a withdrawal from CSPF and paid a withdrawal liability payment of $6.1 billion. This payment was invested just prior to the 2008 market downturn. Moreover, the loss of UPS, CSPF’s largest contributing employer, reduced the plan’s ability to collect needed contributions if the plan became more underfunded. A UPS official said that, following the market decline of 2001-2002, the company considered whether it should withdraw from all multiemployer plans because it did not want to be the sole contributing employer in any plan. According to this official, UPS considered the large number of UPS employees in CSPF and the plan’s demographics—such as an older population and fewer employers—in its decision to withdraw. CSPF officials said they did not want UPS to withdraw because its annual contributions accounted for about one-third of all contributions to the plan. CSPF officials also told us that, prior to the UPS withdrawal, they had expected the population of active UPS workers in the plan to grow over time. UPS’ withdrawal of 30 percent of CSPF’s active workers, in combination with the significant market downturn just after UPS withdrew, reflected the loss of working members and investment challenges on a large scale. Additionally, stakeholders noted that although each of the factors that contributed to CSPF’s critical financial condition individually is important, their interrelated nature also had a cumulative effect on the plan. Industry deregulation, declines in collective bargaining, and the plan’s significantly underfunded financial condition all impaired CSPF’s ability to maintain a population of active workers sufficient to supply its need for contributions when investment shortfalls developed. Given historical rules for plan funding and industry stresses, CSPF was unable to capture adequate funding from participating employers either before or after they withdrew from the plan. The plan’s financial condition was further impaired when long-term investment performance fell short of expectations. For an underfunded, mature plan such as CSPF, the cumulative effect of these factors was described by some stakeholders as too much for CSPF to overcome. There have been three distinct periods related to CSPF’s investment policy after the original consent decree took effect: the early period, from the consent decree’s effective date in September 1982 through October 1993, during which named fiduciaries set different investment policies and sold many of CSPF’s troubled assets—mostly real estate; a middle period from November 1993 through early 2017, during which CSPF’s investment policies were consistently weighted towards equities and its asset allocation varied, with notable equity allocation increases occurring from year-ends 1993-1995 and 2000-2002; and the current period, starting in January 2017, during which named fiduciaries and CSPF trustees are moving assets into fixed income ahead of insolvency. Appendix I has a detailed timeline that includes changes to CSPF’s investment policies since the consent decree was established in 1982. The original consent decree placed exclusive responsibility for controlling and managing the plan’s assets with an independent asset manager, called a named fiduciary. Additionally, the original consent decree prohibited CSPF trustees from managing assets or making investment decisions and gave a single named fiduciary the authority to set and change the plan’s investment objectives and policies, subject to court approval (see fig. 8). During this period, two successive named fiduciaries—first Equitable Life Assurance Society of the United States (Equitable) and then Morgan Stanley—set and executed the plan’s investment objectives using similar investment philosophies, but differing investment return goals and target asset allocations (see fig. 9). Both named fiduciaries planned to sell the plan’s troubled real estate assets from the pre-consent decree era. They also limited nonpublicly traded investments to 35 percent of the plan’s assets and set broad allocation targets for new real estate, fixed income, and equity assets. In 1984, Morgan Stanley considered a dedicated bond portfolio in its capacity as the plan’s named fiduciary, but after review, Morgan Stanley decided similar results could be obtained through other investment strategies. In executing these policies, the plan’s asset allocation varied from year to year. Starting in 1987 and in subsequent years during the early period, Morgan Stanley invested a majority of the plan’s assets in fixed income assets—more than half of which were passively managed—and all equity assets were allocated to domestic equity through 1992. By 1989, CSPF officials reported that nearly all troubled real estate assets had been sold and Morgan Stanley’s responsibilities and risk of potential fiduciary liability were reduced, permitting a concomitant reduction in fees paid to the named fiduciary (see fig. 10). During the middle period, CSPF’s investment policy was broad and consistently directed that asset allocations be weighted toward equities. In 1993, Morgan Stanley revised its investment policy statement for CSPF to eliminate asset allocation targets for each asset class and instead specified that the plan invest a majority of assets in equity or equity-type securities and no more than 25 percent in nonpublicly traded assets. After 1999, CSPF’s investment policy under other, successive named fiduciaries continued to be broad and generally specified that the plan should invest a majority of assets in equity or equity-type securities. Specifically J.P. Morgan’s and Northern Trust’s consecutive investment policies for part of the plan’s assets continued to specify that a majority of the plan’s assets be invested in equity or equity-type securities and no more than 15 percent be invested in nonpublicly traded assets. Goldman Sachs’ investment policy for another part of the plan’s assets did not specify asset allocation details but indicated slightly higher tolerance for risk in conjunction with its equity portfolio. CSPF trustees said that named fiduciaries considered investing in alternative assets, but instead chose to increase the plan’s allocation to equity assets. The named fiduciaries’ investment policies did not vary significantly over this period because CSPF officials said that the plan’s overarching investment objective of achieving full funding did not change, even though there were key changes to the plan’s investment management structure during this time period. Specifically, starting in 1999, the plan temporarily shifted to a dual named fiduciary structure and increased its use of passively-managed accounts—both described in detail below— changing the named fiduciary structure that had been in place since the original consent decree (see fig. 11). More specifically, the two key changes to the plan’s investment management structure were: A temporary shift to a dual named fiduciary structure. Effective in 1999, CSPF proposed and the court approved allocating plan assets between two named fiduciaries instead of one in order to diversify CSPF’s investment approach, among other things. Both named fiduciaries were in charge of setting and executing separate policies for plan assets they managed—called “Group A” and “Group B” assets—irrespective of the other named fiduciary’s allocations. During this time, the two named fiduciaries were J.P. Morgan/Northern Trust and Goldman Sachs. Specifically, J.P. Morgan was named fiduciary between 2000 and 2005 and Northern Trust between 2005 and 2007 for “Group A” assets. Goldman Sachs was named fiduciary for “Group B” assets between 2000 and 2010. In 2010, an investment consultant found the performance of two named fiduciaries under the dual named fiduciary structure had been similar and more expensive than it would be under a proposed move back to a single named fiduciary. Accordingly, CSPF officials proposed, and the court approved, consolidation of all assets allocated to named fiduciaries in August 2010, with Northern Trust as the plan’s single named fiduciary. An increased use of passively-managed accounts. Between 2003 and 2010, the portion of assets that named fiduciaries managed declined as the plan moved 50 percent of its assets into three passively-managed accounts. Specifically, in 2003, 20 percent of CSPF’s assets were transitioned into a passively-managed domestic fixed income account to lower the plan’s investment management fees. In addition, both of the named fiduciaries reported that they had not outperformed the industry index for the domestic fixed income assets they managed after they were approved as named fiduciaries in 1999 and 2000 through February 2003. Similarly, in 2007 and 2010, CSPF officials said that two more passively-managed accounts were created to further reduce plan fees. Specifically, in 2007, 20 percent of plan assets were moved into a passively-managed domestic equity account. Then, in 2010, an additional 10 percent of the plan’s assets were allocated to passively-managed accounts—5 percent were allocated to a new passively-managed international equity account and 5 percent were added to the passively-managed domestic equity account. CSPF officials and named fiduciary representatives also said that the plan’s investment policies did not change in response to a couple of the events that contributed to CSPF’s critical financial condition. For example, when UPS withdrew from the plan in December 2007, it paid $6.1 billion in a lump sum to fulfill its withdrawal liability. Consistent with the named fiduciaries’ investment policies during this time period, the majority of this withdrawal payment was invested in equity assets. Specifically, the court approved the UPS withdrawal liability payment to be allocated: $1 billion to Northern Trust to be invested primarily in short-term fixed income assets, $0.9 billion to the passively-managed domestic fixed income account, and $4.2 billion to partially fund the newly created passively- managed domestic equity account. As a result of the 2008 market downturn, the balance of each of CSPF’s accounts—Northern Trust’s named fiduciary account, the passively-managed domestic fixed income and domestic equity accounts, and Goldman Sachs’ named fiduciary account—declined because of investment losses or withdrawals from investment assets to pay benefits and expenses. Some of the declines in each account were reversed by investment gains in 2009. Although the changes made to CSPF’s investment management structure did not lead to investment policy changes during the middle period, they altered the process by which the policy was set and executed. In particular, trustee responsibilities in the policy process grew after CSPF trustees became responsible for developing investment policy statements and selecting and overseeing managers of the passively-managed accounts, subject to court approval. In addition, CSPF officials said the addition of passively-managed accounts between 2003 and 2010 had the effect of creating broad bounds within which the named fiduciary could set the plan’s asset allocation. For example, when the plan moved 20 percent of total plan assets into the passively-managed domestic fixed income account in 2003, this placed an upper bound on the plan’s total equity allocation at 80 percent. Similarly, since 2010 the 30 percent of total plan assets in passively-managed equity accounts has placed a lower bound on the plan’s total equity allocation at 30 percent (see fig. 12). Nevertheless, named fiduciaries maintained the largest role in setting and executing CSPF’s investment policy throughout the middle period. From 1993 to 2003, named fiduciaries managed all of the plan’s investment assets, and from 2003 to 2009, when the plan added two of the current passively-managed accounts, named fiduciaries still held the majority of the plan’s assets. It has only been since 2010 that the assets in passively-managed accounts equaled those managed by the named fiduciary. Furthermore, Northern Trust representatives said they considered the plan’s allocations to passively-managed accounts when developing the objectives and target asset allocations for the assets they managed. Northern Trust representatives also said they discussed the plan’s overall asset allocation with trustees, but the trustees, and ultimately the court, were responsible for the decision to move 50 percent of the plan’s assets into passively-managed accounts. After the 1993 policy change that specified the plan would invest a majority of assets in equity or equity-type securities, CSPF’s asset allocation changed significantly. For example, during the middle period the plan’s allocation to equities increased from 37 percent at the end of 1993 to 69 percent at the end of 2002, and its allocation to cash plus fixed income decreased from 63 percent at the end of 1993 to 27 percent at the end of 2002. In particular, Morgan Stanley increased the plan’s allocation to equity assets from 37 percent at the end of 1993 to 63 percent at the end of 1995, with the percentage in equities almost or above 50 percent through the end of 1999. From 1993 through 1999, Morgan Stanley generally decreased the plan’s allocation to fixed income assets and increased its allocation to international equity (reaching a high of about 28 percent of the plan’s assets in 1995), an asset class in which the plan had not previously invested (see fig. 13). After 1999, the plan’s asset allocation continued to be weighted towards equities. After the market downturn in 2001, CSPF trustees told us that J.P. Morgan and Goldman Sachs explicitly increased the equity allocation in an attempt to generate higher investment returns and increase the plan’s funded ratio—the plan’s overarching investment objective. Between 2000 and mid-2010, when the plan had two named fiduciaries, equity assets increased from about 58 percent at the end of 2000 to between 66 and 70 percent at the end of 2001 and each year thereafter until the end of 2009, mostly based on the named fiduciaries’ decisions to increase the plan’s allocation to domestic equity assets. When Northern Trust became the sole named fiduciary in 2010, the proportion of equity assets declined from almost 72 percent at the end of 2010 to almost 63 percent at the end of 2016. During this time, Northern Trust generally decreased the plan’s allocation to domestic equity assets, increased the allocation to actively-managed fixed income, and started investing in global infrastructure assets. Northern Trust representatives said CSPF’s recent portfolio had been kept relatively aggressive in an attempt to achieve the returns the plan would need to become fully funded while balancing risk (see fig. 14). CSPF’s deteriorating financial condition precipitated a recent investment policy change that will move plan assets into fixed income and cash equivalent investments ahead of projected insolvency. In early 2017, Northern Trust representatives revised the plan’s investment policy because they, in consultation with the trustees, believed the plan had no additional options to avoid insolvency (see textbox). This change to the plan’s outlook led to a significant change in the plan’s investment objective, from a goal of fully funding the plan to instead forestalling insolvency as long as possible while reducing the volatility of the plan’s funding. Northern Trust representatives and CSPF officials revised applicable plan investment policy statements and started to gradually transition the plan’s “return seeking assets”—such as equities and high yield and emerging markets debt—to high quality investment grade debt and U.S. Treasury securities with intermediate and short-term maturities. Northern Trust’s new investment policy specified the assets under its control would not be invested in nonpublicly traded securities, in order to manage risk and provide liquidity. CSPF Has Limited Options to Achieve Solvency As of March 2018, the Central States, Southeast and Southwest Areas Pension Fund (CSPF) was projected to be insolvent on January 1, 2025. As of July 2017, CSPF officials said that the following measures (in isolation) could help the plan avoid insolvency: 18 percent year-over-year investment returns (infinite horizon), or 250 percent contribution increases (with no employer attrition), or 46 percent across-the-board benefit cut. However, CSPF officials said that investment returns and contribution increases of these magnitudes were untenable, and CSPF’s application to reduce accrued benefits under the Multiemployer Pension Reform Act of 2014 (MPRA) was denied in 2016. CSPF officials and Northern Trust representatives said these asset allocation changes are intended to provide participants greater certainty regarding their benefits and reduce the plan’s exposure to market risk and volatility until it is projected to become insolvent on January 1, 2025 (see fig. 15). Northern Trust is expected to continue to manage 50 percent of the plan’s investment assets until the plan becomes insolvent. While the total amount of assets in the passively-managed accounts will continue to constitute 50 percent of the plan’s assets, the trustees plan to transfer assets from the passively-managed domestic and international equity accounts into the passively-managed domestic fixed income account, which will be gradually transitioned to shorter-term or cash-equivalent fixed-income securities sometime before the end of March 2020 (see fig. 16). CSPF officials said the changes will reduce the amount of fees and transaction costs paid by the plan. Specifically, investment management fees are expected to generally decrease as the plan moves into shorter duration fixed income assets. In addition, Northern Trust’s plan is designed to reduce transaction costs in two ways: (1) in the near term, Northern Trust plans to liquidate “return-seeking assets” so the cash it receives can be used directly to pay benefits, and (2) it plans to synchronize the fund’s benefit payments with the maturity dates of fixed income assets it purchases so cash received can be used directly to pay benefits. Both of these design features are intended to eliminate the need to reinvest assets, which might entail additional transaction costs. Our analysis of available data from several different sources shows the returns on CSPF’s investments and the fees related to investment management and other plan administration activities appear generally in line with similar pension plans or other large institutional investors of similar size. The annual returns on CSPF’s investments in recent decades have generally been in line with the annual returns of a customized peer group provided by the investment consultant Wilshire. The comparison group data is from Wilshire’s Trust Universe Comparison Service (TUCS)—a tool used by CSPF to compare its investment returns to a group of peers. Over the 22 years covered by our analysis, CSPF’s returns were above the median in 12 years and below the median the other 10. Figure 17 illustrates how CSPF’s annual investment returns compare to CSPF’s customized peer group of master trusts with over $3 billion in assets. CSPF’s annual investment returns tended to fluctuate relative to the annual median of the TUCS peer group over the 1995 through 2016 period. For example, in 14 of the 22 years analyzed, its annual return was in the highest or lowest 25 percent of returns (7 years each). Further, in 3 years, its investment returns fell either within the top 5 percent of returns (1996, 2009) or bottom 5 percent (1998). In 8 of the 22 years, CSPF’s annual return was within the middle 50 percent of its TUCS peer group. The TUCS data we analyzed also included median portfolio allocations for the group of CSPF’s peers. Table 2 compares CSPF’s asset allocations for selected asset categories to the median allocations of its TUCS comparator group. In 1996, compared to the TUCS medians, CSPF had relatively lower proportions of its assets in both equities and fixed income and a relatively higher proportion in real estate. Twenty years later (2016), CSPF had relatively higher proportions of its assets in both equities and fixed income (about 15 and 7 percentage points, respectively) than the respective medians for its peer group. However, the relatively large difference between CSPF’s 2016 equity allocation and the median allocation of its peer group may be a result of the peers moving into different asset classes. For example, there is a relatively large difference, in the other direction, in the allocation to alternative investments (see table 2). We did not identify an alternative asset category in CSPF’s asset reports for 2016, but the TUCS comparator group median asset allocation in that year is 11.8 percent of assets. Similar to our findings when comparing the returns on CSPF’s investments to a customized peer group of other large institutional funds, the annual returns on CSPF’s investments in recent decades have also generally been in line with the annual returns for a group of similar multiemployer pension plans. To create a group of comparable plans, we selected plans that had a similar degree of “maturity” to CSPF in 2000, as such plans may face similar cash flow challenges to those facing CSPF. This comparator group ultimately consisted of 15 plans in addition to CSPF. Relative to less mature plans, mature plans generally have a greater proportion of liabilities attributable to retired participants receiving benefit payments and a lower proportion attributable to active participants (i.e., workers) earning benefits. Mature plans may have limited capacity to make up for insufficient investment returns through employer contributions. Similar to the comparison against other large institutional fund returns based on TUCS data, our comparison against other mature multiemployer plan returns based on Form 5500 data shows that CSPF’s annual returns fluctuate relative to the median annual return for the mature plan comparator group (see fig. 18). For example, in 12 of the 15 years, CSPF’s annual return was in the highest or lowest 25 percent of returns (7 times high and 5 times low). In 3 of the 15 years analyzed, CSPF’s annual return fell within the middle 50 percent of the peer group. Overall, from 2000 to 2014, CSPF’s annual return was above the group median return in 9 of the 15 years—and lower than the median return in the other 6 years. Relative to its peers, CSPF’s annual returns performed worst during economic downturns and best in years coming out of such downturns. CSPF’s annual investment return was in the bottom 10 percent of returns in 2001, 2002, and 2008. Alternatively, its annual return was in the top 10 percent of returns from 2003 to 2006, in 2009, and in 2012. Additionally, the dollar-weighted average annual return for CSPF over the 2000 through 2014 period was roughly the same as the median for the mature plan comparison group. Specifically, the dollar-weighted average annual return over this period for CSPF was roughly 4.9 percent, while the median dollar-weighted average annual return over this period among the comparison plans with continuous data was 4.8 percent. Our analysis of investment returns for mature plans compares investment returns for a set of peers that includes only multiemployer defined benefit plans. However, as with the comparison against other large institutional funds, the comparisons against other mature plans are not measures of over- or under-performance relative to an index or benchmark. Similarly, as with the earlier comparison, the analysis does not account for variations in the levels of investment risk taken by the plans. Our analysis of Form 5500 data shows CSPF’s investment fees and administrative expenses were in line with other large multiemployer plans. Plan investment fees and administrative expenses are often paid from plan assets so many plans seek to keep these fees and expenses low. Additionally, investment fees are likely to be related to the value of assets under management, and plans with greater asset values tend to be able to negotiate more advantageous fee rates. According to a pension consultant and a DOL publication, investment management fees are typically a large defined benefit plan’s largest category of expense, but a pension plan also incurs a number of lesser expenses related to administering the plan. Administrative expenses (other than investment fees) may include those for: audit and bookkeeping/accounting services; legal services to the plan (opinions, litigation and advice); administrative services provided by contractors; plan staff salaries and expenses; plan overhead and supplies; and other miscellaneous expenses. These administrative expenses relate to plan operations beyond the management of the assets, including the day-to-day expenses for basic administrative services such as participant services and record keeping. Furthermore, some of these expenses can vary based on the number of participants in the plan. To compare CSPF’s fees and expenses against similarly sized plans, we tallied various investment fee-related and other administrative expenses and compared CSPF to a group of multiemployer defined benefit plans that were among the 19 largest plans in terms of assets as of January 1, 2014. According to CSPF’s 2014 Form 5500, CSPF spent about $46.5 million on investment fees (or $47.6 million in 2016 dollars) and had about $17.4 billion in assets (or $17.8 billion in 2016 dollars) as of the end of the year—resulting in an investment fee expense ratio of about 27 basis points, or 0.27 percent. Over the 2000 to 2014 period, CSPF’s average annual investment fee expense ratio was 34 basis points (0.34 percent) while the median of the averages for our large plan comparison group was 37 basis points (0.37 percent). While CSPF’s average investment fee expense ratio was below the median for its comparison group over the period we examined, the relationship of CSPF’s annual ratio to the annual median changed over time. CSPF’s annual investment-fee expense ratio was consistently at or above the median from 2000 through 2006, but was below the median thereafter. In addition, CSPF’s average investment fee expenses over the period that followed 2006 were 26 percent less than the average over the period before 2007. (They averaged 39 basis points, or 0.39 percent, from 2000 through 2006 and 29 basis points, or 0.29 percent, from 2007 through 2014.) Two events may have contributed to this change. First, CSPF introduced the passively-managed accounts beginning in 2003—as noted earlier, and CSPF moved certain assets to those accounts in an effort to reduce fees. Second, the change back to a single named fiduciary, which was suggested as an expense saving move, occurred in the middle of the 2007 to 2014 period analyzed. Figure 19 illustrates how CSPF’s investment fee expense ratio compares to other large plans. Our analysis uses investment fee data reported in the Form 5500 that does not include details about the sources of the fees. Investment fees may be sensitive to a plan’s particular investment strategy and the way assets are allocated. For example, with CSPF, a named fiduciary has responsibility for executing the investment strategy and allocations. According to a representative from Northern Trust—the current named fiduciary—CSPF pays a fee of about 5 basis points for named fiduciary services, and this, combined with investment management fees, is in line with investment fees for other clients (though the overall fees depend on the types of asset allocations and investment strategies). Figure 20 shows how CSPF’s administrative (or non-investment) expenses compare to those of other large plans on a per participant basis. According to CSPF’s 2014 Form 5500, CSPF spent about $38 million on administrative expenses ($39 million in 2016 dollars)—the third most among the 20 peer plans. However, when these expenses are expressed relative to the number of plan participants, CSPF had per participant expenses of $98 in 2014, which is about 16 percent less than the median of the large comparator group, $117. Over the period studied, CSPF’s administrative expenses per participant were at or above the large comparator median in 3 years (2001, 2004, and 2005), but lower than the median in all other years of the 2000 to 2014 period. CSPF’s administrative expenses were also in line with a broader group of comparators. For example, PBGC reported on 2014 administrative expenses of a population of large multiemployer plans (plans with more than 5,000 participants). By closely replicating the methodology of that study, we found CSPF’s expenses of $98 per participant in 2014 fell below the median expense rate of $124 dollars per participant but above the lowest quartile of this group of large multiemployer plans. In comparing administrative expenses as a percentage of benefits paid, we found CSPF’s administrative expenses were among the lowest 5 percent of this group of large multiemployer plans. We performed a similar comparison against the peer group of large plans. CSPF had the lowest administrative expense rate among the large plan peer group in 2014, paying administrative expenses at a rate of 1.4 percent of benefits paid. In addition, CSPF’s annual administrative expenses as a percentage of benefits were below the median of our peer group of large plans in all years we reviewed. Our analysis of administrative expenses is highly summarized and does not account for possibly unique sources of administrative expenses. Plans may have unique organizational structures and attribute expenses differently. For example, one plan may contract a significant portion of administrative duties with a third-party, while another plan may administer the plan in-house. According to an actuary we interviewed, most multiemployer plans are administered by a third-party, but the plan’s in- house staff will still retain a number of duties. Additionally, the amount of individual administrative expenses could vary significantly by plan depending on the importance of the related administrative function in the plan’s organization. We provided a draft of the report to the U.S. Department of Labor, U.S. Department of the Treasury, and the Pension Benefit Guaranty Corporation for review and comment. We received technical comments from the U.S. Department of Labor and the Pension Benefit Guaranty Corporation, which we incorporated as appropriate. The U.S. Department of the Treasury provided no comments. We will send copies to the appropriate congressional committees, the Secretary of Labor, the Secretary of the Treasury, Director of the Pension Benefit Guaranty Corporation, and other interested parties. This report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao.gov or Frank Todisco at (202) 512-2700 or todiscof@gao.gov. Mr. Todisco meets the qualification standards of the American Academy of Actuaries to address the actuarial issues contained in this report. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Our objectives were to review: (1) what is known about the factors that contributed to the Central States, Southeast and Southwest Areas Pension Fund’s (CSPF) critical financial condition; (2) what has been CSPF’s investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how has CSPF performed over time, particularly compared to similar pension plans. For all objectives, we reviewed relevant federal laws and regulations, literature, and documentation the U.S. Department of Labor (DOL) and CSPF officials provided, including reports prepared by the court- appointed independent special counsel. We interviewed knowledgeable industry stakeholders, participant advocates, CSPF officials, International Brotherhood of Teamsters officials and members, and federal officials— including officials from the Pension Benefit Guaranty Corporation (PBGC), DOL, and the U.S. Department of the Treasury (Treasury). To describe the major factors that led to CSPF’s critical financial condition, we conducted semi-structured interviews and reviewed CSPF documentation, relevant scholarly materials, trade and industry articles, government reports, conference papers, research publications, and working papers. We also collected actuarial, financial, and other data on current and historical measures of plan assets, liabilities, investment performance, and other factors, and performed our own analyses of these data. The data and documentation collected were generally from the plan or agencies that oversee pensions. We determined the information to be generally reliable for the purposes of our objectives. To describe CSPF’s investment policy and the process by which it was set and executed we (1) reviewed CSPF’s investment policy statements, court orders and consent decree amendments, and other documentation provided by CSPF officials; (2) interviewed CSPF officials, including pension plan staff, the board of trustees, and the investment advisor, and representatives of the named fiduciary serving the plan at the time of our review; and (3) summarized certain aspects of CSPF’s assets using year- end performance reports prepared by the named fiduciaries. To describe how CSPF has performed over time compared to similar pension plans, we analyzed investment and fee data from DOL’s Form 5500, the government’s primary source of pension information. We also examined CSPF’s investment returns in comparison to a customized Wilshire Associates’ (Wilshire) Trust Universe Comparison Service (TUCS) benchmark of trusts with $3 billion or more in assets. CSPF provided these data and the data are included in the independent special counsel reports. Wilshire provided supplemental data using the same benchmark specifications. We reviewed three types of documentation provided by CSPF for changes in named fiduciaries; changes in investment policy, strategy, and asset allocation; major issues that affected funding; and how these issues affected CSPF’s investment strategy and policy. Select independent special counsel reports. CSPF officials provided 4th quarter reports for each year from 1982 through 2002 and available quarterly reports from 2003 through 2007. We downloaded all available quarterly reports from 2008 through 2017 from CSPF’s website. Select board of trustee meeting minutes. We requested board of trustee meeting minutes from 1983, 1994-95, 1998-2005, 2007-2010, and 2016 so we could review trustee discussions from the first full year the plan was covered by the 1982 consent decree, the most recent full year; periods that included a recession and/or when the plan’s assets performed poorly; and periods that preceded a change or reappointment of the named fiduciary. CSPF officials selected portions of the trustee meeting minutes from those years that pertained to the following topics: named fiduciary reports concerning investment performance; discussions relating to the amortization extension the Internal Revenue Service (IRS) granted to the plan and the contribution rate increases the plan required of participating employers in an effort to comply with funding targets required as condition of the IRS-approved amortization extension; major amendments to the plan; significant reports concerning the plan’s financial condition; amendments to the consent decree; discussions relating to any inquiries or issues DOL raised; discussions of named fiduciary appointments or resignations; discussions of particularly significant contributing employer delinquencies, bankruptcies, and settlements; and discussions relating to the independent special counsel. In addition to the board of trustee meeting minutes, CSPF officials provided select documentation on similar topics a former secretary of the board of trustees retained (1995 through 2008). Select correspondence between CSPF and DOL. CSPF officials provided select correspondence with DOL from 1987 through 2017 relating to DOL’s oversight of the plan. CSPF officials said they provided all records of those communications that related to significant, substantive, and nonroutine issues. The correspondence excluded other documents, such as periodic reports concerning asset rebalancing and correspondence related to fairly noncontroversial motions to the consent decree. In addition, DOL provided documentation throughout the course of our engagement, including documentation it provided between September and October 2017 that it had not previously identified as being relevant to our review. We completed an on-site file review at DOL in September 2017, and DOL sent us additional electronic documentation in September and October 2017. Overall, we reviewed extensive documentation from DOL—spanning over 10,000 pages of paper-based and electronic files— and spent substantial time cataloging and categorizing it. However, DOL officials reported that certain documentation related to CSPF was no longer available because it had only been retained for the time specified in the records retention policy of the relevant office. We conducted 23 semi-structured interviews with federal agency officials and other stakeholders, including affected parties, and persons knowledgeable about unions, participants and retirees, the trucking industry, collective bargaining agreements, and multiemployer pension plans. We also interviewed three stakeholders with actuarial expertise to specifically understand actuarial standards and procedures. We selected knowledgeable stakeholders based on review of literature and prior GAO work, and recommendations from other stakeholders. We judgmentally selected stakeholders whose expertise coincided with the scope of our objectives and who would be able to provide a broad range of perspectives. In our semi-structured interviews we asked about key factors affecting the plan, the broader regulatory and financial environment in which multiemployer plans operate, and solvency options for plans like CSPF. We reviewed CSPF’s investment policy statements after CSPF entered into a consent decree in 1982, most of which are documented in the consent decree or other court orders. Seven of the investment policy statements were developed by named fiduciaries in consultation with the plan’s board of trustees and four were developed by the trustees. (See fig. 21.) From each investment policy statement, we compiled relevant information on: (1) investment philosophy and plan characteristics considered in developing it, (2) investment return benchmarks, (3) asset allocation, and (4) strategies and assets. See table 3 for select asset allocation information. To describe how CSPF’s investment policy was executed, we compiled information from performance reports prepared by named fiduciaries. We reported CSPF’s asset allocation generally based on the aggregate asset allocation categories CSPF’s named fiduciaries assigned in those reports. CSPF provided these reports for the end of each year 1984 through 2016—except 1992 and 1995, for which it provided reports as of the end of November. Information we compiled included the plan’s: account breakdown (i.e., assets in named fiduciary and passively- asset allocation; and investment assets withdrawn to pay benefits and administrative expenses. When possible, we checked the information from year-end performance reports against that in other sources. Specifically, to ensure we captured the vast majority of the plan’s assets in our asset summary we compared the total amount of plan assets named fiduciaries reported with Net Assets reported in CSPF’s Form 5500 filings, available from 1982 through 2016. We generally found these totals to be similar for each year—in most years the difference was about or under 1 percent. Also, named fiduciary performance reports included information on withdrawals from investment assets to meet pension and administrative expense obligations as of the end of each year, except for 1995 and 1999-present. For 1995 through 2016, we compiled this information from independent special counsel reports. For years in which we had overlapping information, 1996 through 1998, we found the reported totals were similar—no more than about 0.6 percent difference in each of those years. Based on our review we believe that the differences were insignificant to our overall analysis and did not impact our findings. To determine investment returns, investment fees, and administrative expenses for CSPF and related comparator group multiemployer defined benefit plans, we analyzed electronic Form 5500 information, the primary, federal source of private pension data. We analyzed information from 2000 through 2014, the most current and complete year at the time we performed our analysis. We began our analysis with 2000 data as data on investment returns and plan fees is primarily found in the Schedule H. Schedule H information was first collected in 1999. But we begin our analysis with 2000 data as electronic data became more reliable the year after the schedule was introduced. We have previously reported on the problems associated with the electronic data of the Form 5500. To mitigate problems associated with the data, we used Form 5500 research data from PBGC. PBGC analysts routinely and systematically correct the raw 5500 data submitted by plans, and PBGC’s Form 5500 research data are thought to be the most accurate electronic versions. Although we did not independently audit the veracity of the PBGC data, we took steps to assess the reliability of the data and determined the data to be sufficiently reliable for our purposes. For example, we performed computer analyses of the data and identified inconsistencies and other indications of error and took steps to correct inconsistencies or errors. A second analyst checked all computer analyses. Funded status is a comparison of plan assets to plan liabilities. One measure of funded status is the funded percentage, which is calculated by dividing plan assets by plan liabilities. Another measure of funded status is the dollar amount of difference between plan assets and plan liabilities; the excess of plan liabilities over plan assets is the unfunded liability (or surplus if assets exceed liabilities). In this report, we measured funded status using the Actuarial Value of Assets and the Actuarial Accrued Liability, which are the basic measures used to determine the annual required minimum contribution for multiemployer plans under ERISA. We chose these measures because of the consistent availability of data for these measures. There are other ways to measure plan assets and plan liabilities. The Actuarial Value of Assets can be a “smoothed” value that differs from the market value of plan assets. The Actuarial Accrued Liability depends on the choice of actuarial cost method and discount rate, and on whether it is determined on an ongoing plan basis or a plan close-out basis. While different measures of plan assets and liabilities will produce different measures of funded status at any particular point in time, we found that our use of the Actuarial Value of Assets and the Actuarial Accrued Liability was sufficient for our purposes, which included examining the plan’s progress relative to statutory funding standards as well as its trend over time. We developed multiple comparison groups for our analysis. The general rationale behind these comparator groups is to identify plans with similar fundamental characteristics, such as plan size or plan maturity, for purposes of investment return and fee and expense comparisons. We created the following two comparator groups: 1. Large plans (in terms of assets). We ordered multiemployer defined benefit plans by descending 2014 plan assets (line 2a of the 2014 of the Schedule MB). Because one of our key analyses of the data involves comparing investment returns across plans, we also limited the comparable plans to those that share a common plan year to CSPF (specifically if they have the same plan year-end of December 31). We selected the 20 plans that had the largest plan asset values. This includes CSPF, which was the second largest multiemployer plan as of the beginning of 2014. Because these comparator plans are among the largest, they should have similar cost advantages. For example, for investment management services, they should have similar advantages in obtaining lower fees and thus garner greater net returns due to the more favorable fee structures. 2. Mature plans (in terms of retiree liability proportions). We ordered multiemployer defined benefit plans by their similarity to CSPF’s ratio of retiree to total liabilities as of the beginning of calendar year 2000. The ratio of retiree to total liabilities is defined as line 2(b)1(3) of the 2000 Schedule B divided by total liabilities of line 2(b)4(3) of the 2000 Schedule B. To compare retiree to total liability ratios, we created a variable for the absolute value of the difference between CSPF’s ratio and that of a given plan. We ordered the plans by ascending differences in the ratios (excluding any with missing differences). CSPF was the top plan because its difference is zero by definition. Because one of our key analyses of the data involved comparing investment returns across plans, we also limited the comparable plans to those that shared a common plan year with CSPF (specifically if they have the same plan year-end of December 31). Of the plans that had the same plan year as CSPF and assets over $300 million, we selected the 20 plans (including CSPF) that had the smallest absolute difference from CSPF in the retiree-to-total liability ratio. Plans with a high ratio of liabilities attributable to retirees will have a relatively large portion of future benefit payments attributable to those that are older and retired. By selecting plans that were similarly mature to CSPF (and had $300 million in assets as of the beginning of 2000), we identified plans that may have had a similar basis for their plan investments, similar cash flow characteristics, or similar potential deviations between time-weighted and dollar-weighted average investment returns over time (see section below entitled “Calculation of Average Investment Return over Multiple Years”). That is, these plans should have roughly similar cost advantages and similar considerations in their investment objectives such as the balance of cash flows into and out of the fund and the plans’ investment horizons. Similarity in the balance of cash flows is important because it helps to mitigate the influence of plan maturity on the weighted average investment return over multiple years. The year 2000 was used to select the group because the primary purpose of this group is comparison of investment returns for plans that are similarly situated at the beginning of the period being analyzed. Our calculation of investment returns is based on the investment return calculation expressed in the Form 5500 instructions for the Schedule MB. Specifically the instructions of the 2014 Schedule MB state: Enter the estimated rate of return on the current value of plan assets for the 1-year period ending on the valuation date. (The current value is the same as the fair market value—see line 1b(1) instructions.) For this purpose, the rate of return is determined by using the formula 2I/(A + B – I), where I is the dollar amount of the investment return, A is the current value of the assets 1 year ago, and B is the current value of the assets on the current valuation date. Enter rates to the nearest .1 percent. If entering a negative number, enter a minus sign (“ - “) to the left of the number. After preliminary analysis of the variable and consultation with a GAO senior actuary, we determined that Form 5500, Schedule H contains all the information necessary to derive the calculation for years prior to 2008—as far back as 1999 when the Schedule H first came into existence. Additionally, we made adjustments for the timing of cash flows, to the extent indicated by the data. For example, employer and employee contributions that were considered receivable at the end of the prior year and thus included in the Schedule MB calculation were instead included in the year when the plan received the cash for the contribution. Thus, our calculation of annual rate of return is expressed as line items of the 2014 Schedule H to be: 2 * / [[{item1(f)a} – {item 1(b)1(a)} - {item 1(b)2(a)} - {item 1j(a)}] + [{item1(f)b} – {item 1(b)1(b)} - {item 1(b)2(b)} - {item 1j(b)}] – [{item 2d} - {item 2a(3)} – {item 2c}]] Or expressed with expository names as: (2 * (TLINCOME - TOTLCON - OTHERINCOMEW)) / ((TASSTSBY - (ERCONBOY + EECONBOY + OTHER_LIAB_BOY_AMT)) + (TASSTSEY - (ERCONEOY + EECONEOY + OTHER_LIAB_EOY_AMT)) - (TLINCOME - TOTLCON - OTHERINCOMEW)) For purposes of data reliability and validation of our results, we ran permutations of the calculation to see how, if at all, certain items could influence the calculation. In two permutations, we changed the timing of net asset transfers to or from other plans. (This occurs when, for example, there is a plan merger.) A senior actuary determined whether the calculations with/without net asset transfers affected our calculation. If the timing of the net transfer caused the investment return calculation to vary by more than 0.1 percent, we excluded the data for that particular plan in that particular year. We also ran another calculation that did not include “other” income so we could estimate the impact of not adjusting for such information. Historical average investment returns over multiple years can be calculated in at least two different ways. One measure is the “time- weighted” average return, calculated as a geometric average of the annual returns during the period. A time-weighted average measures average investment performance without regard to the order of the annual returns or the impact of different plan circumstances over time. Another measure is the “dollar-weighted” average return–also known as the “internal rate of return” (and also referred to as the “cash flow weighted” return in this report)—which reflects the impact of the plan’s cash flow pattern. The dollar-weighted average return is the rate that, when applied over time to the asset value at the beginning of the period and to each year’s net cash flow into or out of the plan over the period, reproduces the asset value at the end of the period. We calculated dollar-weighted average returns (along with some time- weighted returns for comparison), for both CSPF and for the multiemployer system as a whole, as discussed in the report. We used a market value of plan assets for this purpose. The dollar-weighted average captures the impact of negative cash flow on average investment return. For example, with negative cash flow, investment results in an earlier year can have a bigger impact than investment results in a later year because more money is at stake in the earlier year. Using the same beginning-of-period asset value, and subsequent annual net cash flows into or out of the plan, used in calculating the dollar- weighted average return, we also performed a hypothetical calculation of what CSPF’s end-of-period asset value would have been if the plan had earned 7.5 percent per year instead of its actual return. Conceptually, there are multiple ways to express investment fees, but our analysis used the following two methods for calculating them: Investment fee ratio. Investment fees [line 2i(3) of the 2014 Schedule H] divided by end-of-year net assets [line 1l(b) of the 2014 Schedule H] less receivables [line 1b(1)(b); line 1b(2)(b); and line 1b(3)(b) of the 2014 Schedule H]. Investment fees per participant. Investment fees [line 2i(3) of the 2014 Schedule H] divided by total (end-of-year) participants [line 6f of the 2014 main form]. We define administrative expenses as all other expenses besides investment fees. In part, we used this definition of administrative expenses as it represents the expenses that remain after excluding investment fees. In addition, according to a PBGC analyst, this is the unit of analysis that they also used in their study of administrative expenses. Administrative expense to benefits paid. This is administrative expenses (professional, contract and other) divided by benefits paid. For administrative expenses we derived the value by taking total expenses less investment fees . For benefits paid, we used the 2014 Schedule H, line 2e(1), “Benefit payment and payments to provide benefits directly to participants or beneficiaries, including direct rollovers.” However, if the benefit payment value for such payments is missing or zero, we used the 2014 Schedule H, line 2e(4) “Total Benefit Payments” since the plan may be expressing their benefit payments on another line. Administrative expense per participant. Administrative expenses (professional, contract and other) divided by total (end-of-year) participants . For administrative expenses we derived the value by taking total expenses [line 2i(5) of the 2014 Schedule H] less investment fees [line 2i(3) of the 2014 Schedule H]. PBGC Study on Administrative Expenses PBGC has reported on administrative expenses and included various breakouts of these data in past data book supplements. The calculations of administrative expenses in this report are similar to those used by PBGC. Certain differences may exist because our calculation did not include certain multiemployer plans that reported missing data. Additionally, our population of multiemployer plans included only those plans exclusively associated with defined benefit features. The table below compares our results for plans with 5,000 or more participants, which is a subset of plans analyzed in the PBGC study. Our results used a sample that includes three fewer plans than the PBGC study, but our distributional results were within one-tenth percent for the administrative expense ratio and within $5 of the administrative expenses per participant (see table 4). Comparing the administrative expenses across reports using other statistics such as the minimum, maximum and standard deviation shows similar results for the PBGC and our analysis (see table 5). The mean administrative expenses per participant differ by $2.47. This difference is 1.5 percent lower than the PBGC estimate and could be a result of the difference in sample size. We also performed additional analyses as summarized below. We compared CSPF’s annual returns against plans that have the largest assets among multiemployer defined benefit plans (with the same plan year as CSPF) and CSPF’s results against these plans were broadly similar to results for the mature plans (see fig. 22). We compared CSPF’s administrative expenses as a percentage of benefit paid against other large plans. As noted in this report, CSPF has the lowest relative administrative expenses among the comparators in 2014 with administrative expenses at 1.4 percent of benefits (see fig. 23). In addition, CSPF’s administrative expenses as a percentage of benefits were consistently below the median. For our analysis of Wilshire TUCS data, we used two sources of data. Data from 1999 through 2016 was provided by CSPF. CSPF provided reports of their TUCS custom comparison group, master trusts with greater than $3 billion in assets. These data also included the year-end return results for the total fund (also known as the combined fund) as well as returns by subcategory such as a specific named fiduciary or fund. For example, subcategories listed for year-end 2006 included the results for both named fiduciaries (Goldman Sachs and Northern Trust) as well as the passively-managed accounts (then known as the CSSS fund). The custom comparison groups for the 1999 through 2016 data were determined each year in early-February of the year following the December 31 return results for the prior year. Thus, over time more master trusts were added (or subtracted) depending on the level of assets for the master trusts in that year. For example, the return results for year- end 1999 are determined as of February 10, 2000 and the group of master trusts with more than $3 billion contains 62 observations. The number of trusts in the custom group of master trusts with more than $3 billion generally grew over time with the number peaking with the return results for year-end 2014 (determined as of February 9, 2015), which contains 124 observations. The TUCS data from 1995 through 1998 was provided by Wilshire. The comparison group for these data were not selected each year, but, instead, selected retrospectively. For example, the comparison group of master trusts with more than $3 billion from 1995 through 1998 was selected as of January 9, 2017. There were 99 reported observations in 1995 and 132 observations in 1998. In addition, the 1995 through 1998 TUCS data did not include specific returns for CSPF. We were able to find the annual year-end return in the December (i.e. year-end) management report, which for these years was provided by the named fiduciary, Morgan Stanley. Below is a list of selected events that have affected the Central States, Southeast and Southwest Areas Pension Fund (CSPF) as identified through a review of relevant documentation and interviews with stakeholders and agency officials. It is not intended to be an exhaustive list of the events that have impacted CSPF, nor is it intended to include comprehensive descriptions of each event. On September 22, 1982, the Department of Labor (DOL) entered into a court-enforceable consent decree with the Central States Southeast and Southwest Areas Pension Fund (CSPF) to help ensure the plan’s assets were managed for the sole benefit of the plan’s participants and beneficiaries as required by the Employee Retirement Income Security Act of 1974 (ERISA). The consent decree has been amended several times and currently remains in effect, as amended, under the jurisdiction of the Federal Court for the Northern District of Illinois, Eastern Division. Below is a description of the key parties to and their primary responsibilities under the consent decree. The consent decree defines roles and responsibilities for its parties, including the court, the court-appointed independent special counsel, DOL, the plan and its Board of Trustees, and the independent asset manager, which is called the named fiduciary. The primary role of the court is to oversee and enforce the consent decree. Specifically, the court: appointed an independent special counsel to assist it in administering has approval over the appointment of named fiduciaries and trustees; has approval over the appointment of investment managers of the may, for good cause shown, remove a named fiduciary after 60 days’ notice provided to the named fiduciary and DOL; and may, upon request by the plan, dissolve the consent decree absent good cause shown by DOL why the consent decree should continue in effect. The court-appointed independent special counsel is intended to serve the court by assisting in identifying and resolving issues that arise in connection with the plan’s compliance with the consent decree and Part 4 of Title I of ERISA, and to report on the plan to the court. Specifically, the independent special counsel: has full authority to examine the plan’s activities and oversee and report on the plan’s performance of the undertakings of the consent decree; may, with court approval, employ attorneys, accountants, investigators, and others reasonably necessary and appropriate to aid him in the exercise of his responsibilities; has full access to all documents, books, records, personnel, files, and information of whatever type or description in the possession, custody, or control of the plan; may attend meetings of the plan, including meetings of the board of trustees and any meetings at which plan-related matters are discussed or considered; can petition the court to compel the plan to cooperate with the independent special counsel in the performance of his duties and responsibilities; may consult with DOL, the Internal Revenue Service, and other agencies, as appropriate, but must provide access to DOL upon its request to any documents prepared by the independent special counsel within the exercise of his power; is required to file quarterly reports, as well as any other reports the independent special counsel deems necessary or appropriate, with the court, and provide copies to DOL and the plan; may have other powers, duties, and responsibilities that the court may later determine are appropriate; and cannot be discharged or terminated during the duration of the consent decree except for leave of court, and upon the termination, discharge, death, incapacity, or resignation of an independent special counsel, the court will appoint a successor. Under the consent decree, DOL has an oversight role and may object to certain proposed plan changes. Specifically, DOL: may request and review certain reports provided by the plan and any documents prepared by the independent special counsel in the exercise of his authority; may object to the appointment of proposed trustees, named fiduciaries, investment managers of the passively-managed accounts, and asset custodians; receives notice of proposed changes to the plan’s investment policy statements from the plan; and may object to the dissolution of the consent decree. The plan must operate in full compliance with the consent decree, with ERISA, and with any conditions contained in determination letters it receives from the Internal Revenue Service. Specifically, CSPF, its board of trustees, and its internal audit staff must meet certain requirements. is required to use an independent asset manager known as the named fiduciary; must rebid the named fiduciary role at least once within every 6 years, with the option to extend the appointment for 1 calendar year; may remove a named fiduciary without cause shown on 6 months’ written notice to the named fiduciary and DOL; must cooperate with the independent special counsel in the performance of his duties and responsibilities and with DOL in its continuing investigation and enforcement responsibilities under ERISA; is required to recommend to the court three replacement candidates, agreeable to DOL, to replace an outgoing independent special counsel; and is required to maintain a qualified internal audit staff to monitor its affairs. is required to appoint, subject to court approval, the investment managers of the passively-managed accounts; is prohibited from authorizing any future acquisitions, investments, or dispositions of plan assets on a direct or indirect basis unless specifically allowed by the consent decree; and is required to comply with ERISA fiduciary duties, such as monitoring the performance of the assets of the plan, under Part 4 of Title I of ERISA. is required to review benefit administration, administrative expenditures, and the allocation of plan receipts to investments and administration; and is required to prepare monthly reports setting forth any findings and recommendations, in cooperation with the executive director of the plan, and make copies available to the independent special counsel and, upon request, to DOL and the court. The independent asset managers, known as named fiduciaries, are appointed by the plan’s trustees, subject to court approval, and have exclusive responsibility and authority to manage and control all assets of the plan allocated to them. Specifically, the named fiduciaries: may allocate plan assets among different types of investments and have exclusive authority to appoint, replace, and remove those have responsibility and authority to monitor the performance of their are required to develop, in consultation with the Board of Trustees, and implement investment policy statements for the assets they manage, giving appropriate regards to CSPF’s actuarial requirements. In addition to the individual named above David Lehrer (Assistant Director), Charles J. Ford, (Analyst-in-Charge), Laurel Beedon, Jessica Moscovitch, Layla Moughari, Joseph Silvestri, Anjali Tekchandani, Margaret J. Weber, Adam Wendel, and Miranda J. Wickham made key contributions to this report. Also contributing to this report were Susan Aschoff, Deborah K. Bland, Helen Desaulniers, Laura Hoffrey, Jennifer Gregory, Sheila McCoy, Mimi Nguyen, Jessica Orr, Monica P. Savoy, and Seyda Wentworth. Central States Pension Fund: Department of Labor Activities under the Consent Decree and Federal Law. GAO-18-105. Washington, D.C.: June 4, 2018. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Pension Plan Valuation: Views on Using Multiple Measures to Offer a More Complete Financial Picture. GAO-14-264. Washington, D.C.: September 30, 2014. Private Pensions: Clarity of Required Reports and Disclosures Could Be Improved. GAO-14-92. Washington, D.C.: November 21, 2013. Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies. GAO-13-240. Washington, D.C.: March 28, 2013. Private Pensions: Multiemployer Plans and PBGC Face Urgent Challenges. GAO-13-428T. Washington, D.C.: March 5, 2013. Pension Benefit Guaranty Corporation: Redesigned Premium Structure Could Better Align Rates with Risk from Plan Sponsors. GAO-13-58. Washington, D.C.: November 7, 2012. Private Pensions: Changes Needed to Better Protect Multiemployer Pension Benefits. GAO-11-79. Washington, D.C.: October 18, 2010. Private Pensions: Long-standing Challenges Remain for Multiemployer Pension Plans. GAO-10-708T. Washington, D.C.: May 27, 2010. The Department of Labor’s Oversight of the Management of the Teamsters’ Central States Pension and Health and Welfare Funds. GAO/HRD-85-73. Washington, D.C.: July 18, 1985. Investigation to Reform Teamsters’ Central States Pension Fund Found Inadequate. HRD-82-13. Washington, D.C.: April 28, 1982.", "summary": "Multiemployer plans are collectively bargained pension agreements often between labor unions and two or more employers. CSPF is one of the nation's largest multiemployer defined benefit pension plans, covering about 385,000 participants. Since 1982, the plan has operated under a court-enforceable consent decree which, among other things, requires that the plan's assets be managed by independent parties. Within 7 years, CSPF estimates that the plan's financial condition will require severe benefit cuts. GAO was asked to review the events and factors that led to the plan's critical financial status and how its investment outcomes compare to similar plans. GAO describes (1) what is known about the factors that contributed to CSPF's critical financial condition; (2) what has been CSPF's investment policy, and the process for setting and executing it, since the consent decree was established; and (3) how CSPF's investments have performed over time, particularly compared to similar pension plans. GAO reviewed relevant federal laws and regulations; interviewed CSPF representatives, International Brotherhood of Teamsters officials and members, federal officials, and knowledgeable industry stakeholders; reviewed CSPF documentation including investment policy statements and board of trustee meeting minutes; and analyzed investment returns and fees from required, annual pension plan filings and from consultant benchmarking reports. The Central States, Southeast and Southwest Areas Pension Fund (CSPF) was established in 1955 to provide pension benefits to trucking industry workers, and is one of the largest multiemployer plans. According to its regulatory filings, CSPF had less than half the estimated funds needed to cover plan liabilities in 1982 at the time it entered into a court-enforceable consent decree that provides for oversight of certain plan activities. Since then, CSPF has made some progress toward achieving its targeted level of funding; however, CSPF has never been more than 75 percent funded and its funding level has weakened since 2002, as shown in the figure below. Stakeholders GAO interviewed identified numerous factors that contributed to CSPF's financial condition. For example, stakeholders stated that changes within the trucking industry as well as a decline in union membership contributed to CSPF's inability to maintain a healthy contribution base. CSPF's active participants made up about 69 percent of all participants in 1982, but accounted for only 16 percent in 2016. The most dramatic change in active participants occurred in 2007 when the United Parcel Service, Inc. (UPS) withdrew from the plan. At that time, UPS accounted for about 30 percent of the plan's active participants (i.e. workers). In addition, the market declines of 2001 to 2002 and 2008 had a significant negative impact on the plan's long-term investment performance. Stakeholders noted that while each individual factor contributed to CSPF's critical financial condition, the interrelated nature of the factors also had a cumulative effect on the plan's financial condition. Both CSPF's investment policy and the process for setting and executing it have changed several times since the consent decree was established in 1982. The original consent decree gave an independent asset manager—called a named fiduciary—exclusive authority to set and change the plan's investment policies and manage plan assets, and prohibited CSPF trustees from managing assets or making investment decisions. Initially, the named fiduciaries sold the troubled real estate assets acquired during the pre-consent decree era. Subsequent changes include the following: In 1993, the named fiduciaries started to increase investment in equities, and their policies continued to direct that asset allocations be weighted toward equities until early 2017. Between 2003 and 2010, the court approved three plan decisions to move a total of 50 percent of CSPF's assets into passively-managed accounts (passive management typically seeks to match the performance of a specific market index and reduce investment fees). An early-2017 investment policy change precipitated by CSPF's deteriorating financial condition will continue to move plan assets into fixed income investments ahead of projected insolvency, or the date when CSPF is expected to have insufficient assets to pay promised benefits when due. As a result, assets will be gradually transitioned from “return-seeking assets”—such as equities and emerging markets debt—to high-quality investment grade debt and U.S. Treasury securities with intermediate and short-term maturities. The plan is projected to become insolvent on January 1, 2025. CSPF officials and named fiduciary representatives said these changes are intended to reduce the plan's exposure to market risk and volatility, and provide participants greater certainty prior to projected insolvency. GAO found that CSPF's investment returns and expenses were generally in line with similarly sized institutional investors and with demographically similar multiemployer pension plans. For example, GAO's analysis of returns using the peer group measure used by CSPF known as the Wilshire Associates' Trust Universe Comparison Service (TUCS), showed that CSPF's annual investment returns since 1995 were above the median about as many times as they were below. Similarly, comparing CSPF's returns to a peer group of similar multiemployer defined benefit plans using federally required annual reports found that CSPF's annual investment returns were in line with those of its peers. Specifically, CSPF's annual returns were above the median nine times and below it six times—and CSPF's overall (dollar-weighted) average annual return from 2000 through 2014 was close to that of the peer median average return of 4.8 percent. In addition, GAO found that CSPF's investment fees and other administrative expenses have also been in line with other large multiemployer plans. For example: CSPF's investment fees as a percentage of assets were about 9 percent lower than the median of large defined benefit multiemployer plans over the 2000 through 2014 period—though much of that difference is accounted for by a relative reduction in investment fees since 2007. CSPF's investment fees as a percentage of assets were, on average, about 34 basis points (or 0.34 percent). CSPF's administrative expenses related to the day-to-day operations of the plan have also been in line with other large multiemployer plans. CSPF's administrative expenses per participant were below the median for large defined benefit multiemployer plans for 12 of the 15 years over the 2000 through 2014 period. As of 2014, CSPF's administrative expense was $98 per participant, which is about 16 percent less than the median for large defined benefit multiemployer plans. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "According to Education, 50.3 million students were enrolled in more than 98,000 public elementary and secondary schools nationwide in the 2014- 2015 school year. These individual public schools are overseen by approximately 16,000 local educational agencies (referred to in this report as school districts) which are, in turn, overseen and supported by state educational agencies. School districts can range in size from one school (for example, in rural areas) to hundreds of schools in large urban and suburban areas. For example, the 100 largest districts in the United States together have approximately 16,000 schools and enroll about 11 million students. In addition, charter schools are public schools created to achieve a number of goals, such as encouraging innovation in public education. Oversight of charter schools can vary, with some states establishing charter schools as their own school district and other states allowing charter schools to be either a distinct school district in themselves or part of a larger district. Charter schools are often responsible for their own facilities; these may be located in non-traditional school buildings, and may lease part or all of their space. Typically, state educational agencies are responsible for administering state and federal education laws, disbursing state and federal funds, and providing guidance to school districts and schools across the state. State educational agencies frequently provide funds for capital improvements to school facilities, which school districts may use to address issues related to lead in school drinking water, among other things. Different state agencies, including agencies for education, health, and environmental protection, may provide school districts with guidance on testing and remediation of lead in school drinking water. Within a school district, responsibility for water management may be held by individuals in different positions, such as facilities managers or environmental specialists. Lead is a neurotoxin that can accumulate in the body over time with long- lasting effects, particularly for children. According to the CDC, lead in drinking water can cause health effects if it enters the bloodstream and causes an elevated blood lead level. Lead in a child’s body can slow down growth and development, damage hearing and speech, and lead to learning disabilities. For adults, lead can have detrimental effects on cardiovascular, renal, and reproductive systems and can prompt memory loss. In pregnant women, lead stored in bones (due to lead exposure prior to and during pregnancy) can be released as maternal calcium used to form the bones of the fetus, reduce fetal growth, and increase risk of miscarriage and stillbirth. The presence of lead in the bloodstream can disappear relatively quickly, but bones can retain the toxin for decades. Lead in bones may be released into the blood, re-exposing organ systems long after the original exposure. The concentration of lead, total amount consumed, and duration of exposure influence the severity of health effects. The health consequences of lead exposure can differ from person to person and are affected by the cumulative dose of lead and the vulnerability of the individual person regardless of whether the lead exposure is from food, water, soil, dust, or air. Although there are medical therapies to remove lead from the body, they cannot undo the damage it has already caused. For these reasons, EPA, CDC, and others recommend the prevention of lead exposure to the extent possible, recognizing that lead is widespread in the environment. The SDWA authorizes EPA to set standards for drinking water contaminants in public water systems. For a given contaminant the act requires EPA to first establish a maximum contaminant level goal, which is the level at which no known or anticipated adverse effects on the health of persons occur and which allows an adequate margin of safety. EPA must then set an enforceable maximum contaminant level as close to the maximum contaminant level goal as is feasible, or require water systems to use a treatment technique to prevent known or anticipated adverse effects on the health of persons to the extent feasible. Feasible means the level is achievable using the best available technology or treatment technique. In 1991 EPA issued the LCR, which it revised in 2000 and 2007, establishing regulations for water systems covered by the SDWA. Lead concentration in water is typically measured in micrograms of lead per liter of water (also referred to as “parts per billion” or ppb). The rule established a maximum contaminant level goal of zero, because EPA concluded that there was no established safe level of lead exposure. EPA decided not to establish an enforceable maximum contaminant level, concluding that any level reasonably close to the goal would result in widespread noncompliance, and therefore was not feasible. Instead, the rule established an “action level” of 15 micrograms of lead per liter (15 ppb) in a one liter sample of tap water, a level that EPA believed was generally representative of what could be feasibly achieved at the tap. The action level is a screening tool for determining when certain follow-up actions are needed, which may include corrosion control treatment, public education, and lead service line replacement. Sample results that exceed the lead action level do not by themselves constitute violations of the rule. If the lead action level is exceeded in more than 10 percent of tap water samples collected during any monitoring period (that is, if the 90th percentile level is greater than the action level), a water system must take actions to reduce exposure. Several amendments to the SDWA are relevant to testing for lead in school drinking water. In 1988, the SDWA was amended by the Lead Contamination Control Act (LCCA), which banned the manufacture and sale of drinking water coolers with lead-lined tanks containing more than 8 percent lead; the statute defined a drinking water cooler as containing 8 percent lead or less as “lead-free.” The LCCA also required states to establish testing and remediation programs for schools. However, in 1996 a federal circuit court held that this requirement was unconstitutional. In 2011, Congress passed the Reduction of Lead in Drinking Water Act, which amended the SDWA by lowering the maximum allowable lead content in “lead-free” plumbing materials such as pipes. This provision became effective on January 4, 2014. In 2016, Congress passed the Water Infrastructure Improvements for the Nation Act which, among other things, amended the SDWA, to establish a grant program for states to assist school districts in voluntary testing for lead contamination in drinking water at schools. As a condition of receiving funds, school districts are required to test for lead using standards that are at least as stringent as those in federal guidance for schools. In March 2018, Congress appropriated $20 million to EPA for this grant program. Lead can enter drinking water when service lines or plumbing fixtures that contain lead corrode, especially where the water has high acidity or low mineral content. According to EPA, lead typically enters school drinking water as a result of interaction with lead-containing plumbing materials and fixtures within the building. Although lead pipes and lead solder were not commonly used after 1986, water fountains and other fixtures were allowed to have up to 8 percent lead until 2014, as previously mentioned. Consequently, both older and newer school buildings can have lead in drinking water. Some water in a school building is not for consumption, such as water from a janitorial sink or garden hose, so lead in these water sources presents less risk to students. (See fig. 1.) The best way to know if a school’s water is contaminated with lead is to test the water after it has gone through a school’s pipes, faucets, and other fixtures. To facilitate testing efforts, EPA suggests that schools implement programs for reducing lead in drinking water and developed the 3Ts for Reducing Lead in Drinking Water in Schools: Revised Technical Guidance (3Ts guidance) in 2006, which provides information on: (1) training school officials about the potential causes and health effects of lead in drinking water; (2) testing drinking water in schools to identify potential problems and take corrective actions as necessary; and (3) telling students, parents, staff, and the larger community about monitoring programs, potential risks, the results of testing, and remediation actions. The purpose of the 3Ts guidance is to help schools minimize students’ and staffs’ exposure to lead in drinking water. The guidance provides recommendations and suggestions for how to address lead in school drinking water, but does not establish requirements for schools to follow. According to the guidance, if school districts follow the procedures described in guidance, they will be assured their facilities do not have elevated levels of lead in their drinking water. The guidance recommends taking 250 milliliter samples of water from every drinking water source in a school building and having the samples analyzed by an accredited laboratory. Based on the test results of the samples, the guidance recommends remedial action if the samples are found to have an elevated concentration of lead, which is identified by using an action level. While school districts may have discretion to set their own action level, the 3Ts guidance strongly recommends taking remedial action if a school district finds lead at or above 20 ppb in a 250 milliliter sample of water. School districts can take a variety of actions including replacing pipes, replacing fixtures, running water through the system before consumption (known as flushing), or providing bottled water. However, since the amount of lead in school drinking water may change over time for a variety of reasons—for example, the natural aging of plumbing materials or a disturbance nearby, such as construction—the results obtained by one test are not necessarily indicative of results which may be obtained in the future. With no federal law requiring testing for lead in school drinking water, federal agencies play a limited role: Education’s mission includes fostering educational excellence and promoting student achievement, and the agency disseminates guidance to states and school districts about lead in school drinking water, but does not administer any related grants. EPA’s Office of Ground Water and Drinking Water provides voluntary guidance to schools on how to test for and remediate lead in school drinking water, as part of EPA’s mission to inform the public about environmental risks. In addition, EPA’s Office of Children’s Health Protection is responsible for working with EPA’s 10 regional offices via their healthy schools coordinators, who communicate with schools and help to disseminate the 3Ts guidance. CDC administers the School Health Policies and Practices Study, a periodic survey to monitor national health objectives that pertain to schools and school districts. The 2016 data, the most recent available, provide information on the number of school districts that periodically test for lead in their drinking water. Under the 2005 memorandum signed by these three agencies to encourage lead testing and remediation in schools, Education’s role includes working with EPA and other groups to encourage testing, and disseminating materials to schools. EPA agreed to update guidance for schools, and provide tools to facilitate testing for lead in school drinking water. CDC’s role includes identifying public health organizations to work with and facilitating dissemination of materials to state health organizations. Lead in School Drinking Water Survey Results at a Glance An estimated 43 percent of school districts tested for lead in school drinking water, but 41 percent did not, and 16 percent did not know. o Some districts tested drinking water in all sources of consumable water in all of their schools, while other school districts tested only some sources. o Among the reasons for not testing, school districts said they either did not identify a need to test or were not required to do so. Of those that tested, an estimated 37 percent of school districts found elevated lead levels—levels of lead above the district’s threshold for taking remedial action—in school drinking water. o School districts varied in terms of the threshold they used, with some using 15 ppb or 20 ppb and others using a lower threshold. School districts varied in whether they tested for lead in school drinking water and whether they discovered elevated levels of lead. For example, an estimated 88 percent of the largest 100 school districts tested compared with 42 percent of other school districts. All school districts that found elevated lead reported taking steps to reduce or eliminate the lead, including replacing water fountains or providing bottled water. Nationwide, school districts vary in terms of whether they have tested for lead in school drinking water, with many not testing. According to our survey of school districts, an estimated 43 percent tested for lead in school drinking water in at least one school in the last 12 months, while 41 percent had not tested. An estimated 35 million students were enrolled in districts that tested as compared with 12 million students in districts that did not test. An estimated 16 percent of school districts, enrolling about 6 million students, reported that they did not know whether they had tested or not. (See fig. 2.) Of school districts that tested for lead in school drinking water, some tested all consumable water sources in all of their schools, while others may have only tested some sources in all schools or all sources in some schools. Among the reasons provided by survey respondents for not testing in all schools, some said the age of the building was the primary consideration. For example, an official in one school district we visited told us they began testing in buildings constructed before 1989, but after receiving results that some water sources had elevated lead levels, the district decided to test all of their school buildings. Other reasons reported for testing some, but not all, schools included testing schools only when a complaint about discolored water was received or testing only new schools or schools that were renovated. In addition, school districts varied in whether they sampled from every consumable water source, or just some of the sources, in their schools. For example, one district official told us they took one sample from each type of water fountain in each school, assuming that, if a sampled fountain was found to have an elevated level of lead, then all of the other fountains of that type would also have elevated lead levels. However, EPA’s 3Ts guidance recommends that every water source that is regularly used for drinking or cooking be sampled. Further, stakeholders and environmental and educational officials we interviewed said that results from one water fountain, faucet, or any other consumable water source cannot be used to predict whether lead will be found in other sources. In our survey, the median amount spent by school districts to test for lead in school drinking water during the past 12 months varied substantially, depending on the number of schools in which tests were conducted (see table 1). School districts may have paid for services such as collecting water samples, analyzing and reporting results, and consultants. For example, an official in a small, rural school district—with three schools housed in one building—told us his district spent $180 to test all eight fixtures. In contrast, officials in a large, urban school district told us they spent about $2.1 million to test over 11,000 fixtures in over 500 schools. Some school districts, especially larger ones, incurred costs to hire consultants to advise them and help design a plan to take samples, among other things. EPA’s 3Ts guidance recommends determining how to communicate information about lead testing programs with parents, governing officials, and other stakeholders before testing. Of school districts that reported testing for lead in school drinking water in our survey, an estimated 76 percent informed their local school board and 59 percent informed parents about their plans to test; similar percentages provided information about the testing results. We identified a range of approaches to communicating testing efforts in the 17 school districts we interviewed. Some school districts reported issuing press releases, putting letters in multiple languages in students’ backpacks, sending emails to parents, holding public meetings, and releasing information through social media. Before testing, one district created a website with a list of dates when it planned to test the drinking water in every one of its schools. In contrast, other school districts communicated with parents and the press only upon request. Officials in one district we visited said they did not post lead testing results on their website, because they wanted to avoid causing undue concern, adding that “more information isn’t necessarily better, especially when tests showed just trace amounts of lead.” School districts generally have discretion to determine how frequently they test for lead in school drinking water except when prescribed in state law, and most school districts responding to our survey had no specific schedule for recurring testing. Specifically, an estimated: 27 percent of school districts plan to test “as needed,” 25 percent have no schedule to conduct recurring tests, and 15 percent do not know. The remaining school districts reported a range of frequencies for conducting additional tests or said they were developing a schedule to conduct tests on a recurring basis. School district officials and stakeholders we interviewed told us that it is important to test for lead in drinking water on a recurring basis, because lead can leach into school drinking water at any time. In our survey, we asked school districts reporting that they had not tested for lead in school drinking water in the last 12 months (41 percent of districts) to provide us with one or more reasons why they had not tested. Of these school districts, an estimated 53 percent reported that they did not identify a need to test and 53 percent reported they were not required to test (see fig. 3). Of school districts that reported testing for lead in school drinking water, an estimated 37 percent of districts found elevated levels of lead in school drinking water, while 57 percent of districts did not find lead (see fig. 4). Of those that found lead in drinking water, most found lead above their selected action level in some of their schools, while some districts found lead above their action level in all of their schools. For example, officials in one large school district told us they tested over 10,000 sources of water, including drinking fountains and food preparation fixtures, and found that over 3,600 water sources had lead at or above the district’s action level of 15 parts per billion (ppb). The findings resulted in extensive remediation efforts, officials said. Further, district officials reported different action levels they used to determine when to take steps such as replacing a water fountain or installing a filter. School districts generally may select their own action level, resulting in different action levels between districts. Of school districts that reported testing for lead in school drinking water, an estimated 44 percent set an action level between 15 ppb and 19 ppb. The action levels chosen by the rest of the school districts ranged from a low of 1 ppb whereby action would be taken if any lead at all was detected to a high 20 ppb where action would be taken if lead was found at or above 20 ppb. (See appendix II for the estimated percentage of school districts that set other action levels.) Though fewer than half of school districts reported testing for lead in school drinking water, our analysis of school districts’ survey responses shows that these estimates varied depending on the size and population density of the district as well as its geographic location. For example, among the largest 100 school districts, an estimated 88 percent reported they had tested for lead in school drinking water in at least one school in the last 12 months compared with 42 percent of all other districts nationwide. An estimated 59 percent of the largest 100 school districts that tested discovered elevated levels of lead compared to 36 percent of all other districts that tested (see table 2). In addition, an estimated 86 percent of school districts in the Northeast region of the United States tested for lead in school drinking water, compared to less than half of school districts in other geographic regions. Similarly, about half of school districts in the Northeast and about 8 percent in the South found elevated levels of lead, compared to their selected action level. (See fig. 5.) In our survey, every school district that reported finding lead in school drinking water above their selected action level reported taking steps to reduce or eliminate the lead. For example, an estimated 71 percent said they replaced water fountains, 63 percent took water fountains out of service without replacing them, and 62 percent flushed the school’s water system (see fig. 6). School districts officials we interviewed told us they took a range of remedial actions generally consistent with those reported to us in our survey. For example, an official in one district told us that 129 of the 608 fixtures tested above the district’s action level of “any detectable level.” He said they installed filters on all of the 106 sink faucets with elevated lead and replaced all of the 23 drinking fountains with elevated lead. The district official explained that they re-tested fixtures after the filters and new fountains were installed, and did not detect any lead in their drinking water. Officials in another school district told us that approximately 3,600 of their fixtures were found to have lead above their action level of 15 ppb. They told us the district turned off the water at the affected fixtures as an interim measure and provided bottled water to students and staff. Though they had not yet finalized their plans at the time of our interview, they said they were planning to replace the fixtures and replace old pipes with new pipes. District officials said they plan to pay for their remediation efforts using local capital improvement funds from a recently-approved bond initiative. Similar to the cost of testing, the median amount spent by school districts to remediate lead in school drinking water during the past 12 months varied substantially, depending on the number of schools in which a district took action to remediate lead (see table 3). The median expenditure for school districts taking action in one to four schools was $4,000 compared to a median expenditure for school districts taking action in 51 or more schools of $278,000. EPA regional officials provided examples of eight states that have requirements for schools to test for lead in drinking water as of September 2017: California, Illinois, Maryland, Minnesota, New Jersey, New York, Virginia, and the District of Columbia. State requirements differ in terms of which schools are included, testing protocols, communicating results, and funding. (See fig. 7.) (For a list of testing components for the eight states, see appendix IV.) According to stakeholders we interviewed, most state legislation on testing for lead in school drinking water has been introduced in the past 2 years. Of the eight states, three states have completed one round of required testing, while other states are in the early stages of implementation or have not yet begun, according to state officials. School districts in Illinois, New Jersey, and New York completed a round of testing for lead in school drinking water by December 2017. Testing in the District of Columbia was in progress as of April 2018. Minnesota requires school districts to develop a plan to test by July 2018 and California requires that water systems sample all covered public schools in their service area by July 2019. According to state officials, schools in Maryland must test by July 2020. In Virginia, no timeline for testing is indicated in the requirement. In addition, requirements in these eight states vary in terms of covered schools and frequency of testing. For example, in Maryland, all schools, including charter and private schools, are required to test their water for lead by July 2020 and must re-test every 3 years. After regulations were approved in July 2016, New Jersey required testing within a year in all traditional public schools, charter schools, and certain private schools, and re-testing every 6 years, according to state officials. Illinois’ requirement is for public and private elementary schools constructed before 2000 to test their drinking water for lead, and does not mandate re- testing. Seven of the eight states include at least some charter schools in their testing requirements (New York does not). State testing requirements also differ in terms of action level, sample sizes, and number of samples, according to state documents. States can choose their own lead threshold or action level for remediation, and the eight states have chosen levels ranging from any detectable level in Illinois to 20 ppb in Maryland. Six of the eight states have chosen to use 250 milliliter samples of water, while California is using a one liter sample size, and Virginia delegates to school districts to choose their action level and sample size. Some states specify that all drinking water sources in a building must be tested, such as in New York and New Jersey, or allow a smaller number of samples to be tested, such as in California, which recommends that water systems take between one and five samples per school. To implement its testing requirement, the District of Columbia has installed filters in all school drinking water sources, and plans to test the filtered water from each fixture for elevated lead annually. The responsibility for the costs of testing and remediation also differ by state. According to state officials, in Minnesota, the costs of testing may be eligible for reimbursement from the state, and in the District of Columbia, the Department of General Services is responsible for the cost. California requires that public water systems cover the cost of testing for all public schools in their jurisdiction. In all other states we looked at, schools or school districts are at least partially responsible for the costs of testing. Additionally, most schools or school districts are responsible for the costs of remediation, although Minnesota, New York, and the District of Columbia will provide funds to help with the costs of remediation as well. Seven of the eight state requirements have a provision for communicating the results of lead sampling and testing in schools. For example, Minnesota requires all test results be made public and New York requires that results be communicated to students’ families. Maryland and New Jersey require that results above the action level be reported to the responsible state agency, such as the Department of the Environment or the Department of Education, and that sample results that find elevated levels of lead be communicated to students’ families. Illinois requires that all results be made available to families and that individual letters to families also be sent if lead levels over 5 ppb are found. In contrast, Virginia does not include a provision to communicate testing results in its testing requirement for schools. According to stakeholders and state officials we interviewed, states have several other common issues to consider in implementing a state testing and remediation program. First, states need to ensure that their efforts, which can be significant given the thousands of schools that operate in each state, can be completed with limited resources and by a legislated deadline. Second, coordination between relevant state agencies, which will vary by state, may be challenging. Because of the nature of testing for lead in school drinking water, multiple government agencies may be involved, necessitating a balance of responsibilities and information- sharing between these state agencies. Finally, state officials told us that imposing requirements without providing funding to implement them may be a challenge for schools in complying with testing and remediation requirements. Apart from the states with requirements to test for lead in school drinking water discussed in this report, at least 13 additional states had also provided funding or in-kind support to school districts to assist with voluntary lead testing and remediation, according to EPA regional offices. Those states are Arizona, Colorado, Idaho, Indiana, Maine, Massachusetts, Michigan, New Mexico, Ohio, Oregon, Rhode Island, Vermont, and Washington. In Massachusetts, for example, officials told us the state used $2.8 million from the state Clean Water Trust to fund a voluntary program for sampling and testing for all participating public schools in 2016 and 2017. Massachusetts contracted with a state university to assist schools with testing for lead in drinking water. When the program completed its first round of testing in February 2017, 818 schools throughout the state had participated, and the state has begun a second round of sampling with remaining funds from the Clean Water Trust. In Oregon, officials told us the state legislature provided funding for matching grants of up to $8 million to larger school districts for facilities improvements, and made $5 million of emergency funds available to reimburse school districts for laboratory fees associated with drinking water testing as part of the state’s efforts to address student safety. States can also provide technical assistance to support school districts in their efforts to test for and remediate lead in drinking water. The five states we visited provided a range of technical assistance to school districts. For example, to implement the voluntary assistance program in Massachusetts, the contracted university told us they hired 15 additional staff and assisted schools in designing sampling plans, taking samples, and sending them for testing. University officials told us they oversaw the sampling of all drinking water sources in each participating school and sent the sample to state certified laboratories for analysis. State officials encouraged schools to shut off all fixtures in which water tested at or above the action level of 15 ppb and provided guidance on actions to take, such as removing and replacing fixtures, using signage to indicate fixtures not to be used for drinking water, and implementing a flushing program. The state developed an online reporting tool so that all test results could be publicly posted. State officials also supported schools in communicating lead testing results to parents and the community. Other states we visited provided technical assistance to school districts through webinars, guidance documents, in-person presentations, and responding to inquiries. In Oregon, the state Department of Education and the state Health Authority collaborated in 2016 to provide guidance to schools on addressing lead in drinking water. The Governor issued a directive requesting all school districts test for lead in their buildings and the Health Authority requested that districts send them the results. In Texas, officials at the Commission for Environmental Quality have made presentations to schools on water sampling protocols and provided templates for school districts to communicate results. Officials told us that an increased number of school districts have contacted them in the past year seeking guidance, and, in response, they directed districts to EPA’s 3Ts guidance and a list of accredited laboratories. In Illinois, state officials partnered with the state chapter of the American Water Works Association to provide a guidance document for drinking water sampling and testing to assist schools in complying with new testing requirements. In Georgia, officials at the Department of Natural Resources told us they promote the 3Ts guidance on their website and have offered themselves as a resource on school testing at presentations with local water associations. EPA provides several voluntary resources, such as guidance, training, and technical assistance, to states and school districts regarding testing for and remediation of lead in school drinking water, but some school districts we surveyed and officials we interviewed said more information would be helpful. The Lead Contamination Control Act of 1988 (LCCA) required EPA to publish a guidance document and testing protocol to assist schools in their testing and remediation efforts. EPA’s Office of Ground Water and Drinking Water issued its 3Ts guidance which provides information on training school officials, testing drinking water in schools, and telling the school and broader community about these efforts. Of the school districts that reported in our survey using the 3Ts guidance to inform their lead testing efforts, an estimated 68 percent found the guidance extremely or very helpful for conducting tests. The Office of Ground Water and Drinking Water also developed an additional online resource—known as the 3Ts guidance toolkit—to further assist states and school districts with their lead in drinking water prevention programs by providing fact sheets and brochures for community members, among other things. Some states have used the 3Ts guidance as a resource for their state programs, according to EPA officials. For example, a New York regulation directs schools to use the 3Ts guidance as a technical reference when implementing their state- required lead testing and remediation programs. The Office of Ground Water and Drinking Water provides training to support states and school districts with their lead testing and remediation programs. In June 2017, EPA started a quarterly webinar series to highlight school district efforts to test for lead. These webinars include presentations from school officials and key partners that conducted lead testing and remediation. For example, on June 21, 2017, officials from Denver Public Schools and Denver Water presented on their efforts to test for lead in the public school system. EPA’s approach to providing guidance and technical assistance to states and school districts is determined by each of the 10 EPA regional offices. Some EPA regional offices provide the 3Ts guidance to school districts upon request and others conduct outreach to share the guidance, typically through their healthy schools coordinator when discussing other topics, such as indoor air quality and managing chemicals. EPA regional offices also provide technical assistance by request, typically through phone consultations with school districts that have questions regarding the 3Ts guidance, according to EPA headquarters officials. Officials also indicated that the agency has received more requests for technical assistance from schools over the past few years regarding lead in drinking water. Officials in EPA Regions 1 in Boston and 2 in New York City told us they provided technical assistance to school districts by conducting lead testing and analysis in school facilities and Region 9 in San Francisco provided technical assistance by reviewing school district testing protocols. For example, EPA Region 2 officials said between 2002 and 2016 they worked with one to two school districts per year to assist with their lead testing efforts. As part of this effort, the regional office provided funding for sampling and analysis. Officials said they prioritized school districts based on population size and whether the community had elevated blood lead levels. Other EPA regional office approaches included identifying resources and guidance for relevant state agencies and facilitating information sharing by connecting districts that have tested for lead with districts that are interested in doing so. However, most EPA regional offices do not provide technical assistance in the form of testing, analysis, or remediation to school districts, and some do little or no outreach to communicate the importance of testing for and remediating lead in school drinking water. According to federal standards for internal control, management should externally communicate the necessary quality information to achieve the entity’s objectives. Each EPA regional office’s approach to providing resources to states and school districts varies based on differing regional priorities and available resources, according to EPA headquarters officials. Additionally, officials said that this decentralized model of providing support and technical assistance related to lead testing and remediation in schools is appropriate because of the number of schools across the United States. However, based on our survey we found school district familiarity with the 3Ts guidance varied by geographic area (see fig. 8). An estimated 54 percent of school districts in the Northeast reported familiarity with the 3Ts guidance, compared with 17 percent of districts in the South. Furthermore, the Northeast was the only geographic area with more school districts reporting that they were familiar with the 3Ts guidance than not. This awareness corresponds with the efforts made by the state of Massachusetts and EPA’s regional offices in the Northeast to distribute the 3Ts guidance and conduct lead testing and remediation in school districts. By promoting further efforts to communicate the importance of lead testing to schools to help ensure that their lead testing programs are in line with good practices included in the 3Ts guidance, EPA regional offices that have not focused on this issue could leverage the recent efforts of other regional offices to provide technical assistance and guidance, and other forms of support. EPA’s 3Ts guidance emphasizes the importance of taking action to remediate elevated lead in school drinking water, but the agency’s guidance on a recommended action level for states and school districts is not current and contains elements that could be misleading. Although the guidance recommends that school districts prioritize taking action if lead levels from water fountains and other outlets used for consumption exceed 20 ppb (based on a 250 milliliter water sample), EPA officials told us when the guidance was originally developed in response to the 1988 LCCA requirement, the agency did not have information available to recommend an action level specifically designed for schools. Furthermore, EPA officials told us that the action level in the 3Ts guidance is not a health-based standard. However, there are statements in the guidance that appear to suggest otherwise. For example, the guidance states that EPA strongly recommends that all water outlets in all schools that provide water for drinking or cooking meet a “standard” of 20 ppb lead or less and that school officials who follow the steps included in the document, including using a 20 ppb action level, will be “assured” that school facilities do not have elevated lead in the drinking water. The use of the terms “standard” and “assured” are potentially misleading and could suggest that the 20 ppb action level is protective of health. Further, state and school district officials may be familiar with the 15 ppb action level (based on a 1 liter water sample) for public water systems aimed at identifying system-wide problems under the LCR, which may also create confusion around the 20 ppb action level included in the 3Ts guidance. According to our survey, an estimated 67 percent of school districts reported using an action level less than the 20 ppb recommended in the 3Ts guidance. We found that nearly half of school districts used action levels between 15 ppb and 19 ppb. Although these action levels— the 20 ppb from the 3Ts guidance and the 15 ppb from the LCR—are intended for different purposes, the difference creates confusion for some state and school district officials. Also, according to our survey, an estimated 56 percent of school districts reported they would find it helpful to have clearer guidance on what level of lead to use as the action level for deciding to take steps to remediate lead in drinking water. In addition, officials we interviewed in four of the five states we visited said there is a need for clearer guidance on the action level. EPA officials agreed that the difference between the two action levels creates confusion for states and school districts. In addition to wanting clearer guidance on choosing lead action levels, about half of the school districts we surveyed said they would also like additional information to help inform their lead testing and remediation programs. Specifically, school districts reported that they want information on a recommended schedule for lead testing, how to remediate elevated lead levels, and information associated with testing and remediation costs (see fig. 9). For example, an estimated 54 percent of school districts responded that they would like additional information on a testing schedule, as did officials in 10 of the 17 school districts and one of the five states we interviewed. EPA’s 3Ts guidance does not include information to help school districts determine a schedule for retesting their schools. Officials in one school district told us they need information for determining retesting schedules for lead in their school drinking water, and that—without guidance—they chose to retest every 5 years, acknowledging that this decision was made without a clear rationale. Further, an estimated 62 percent of school districts reported wanting additional information on remedial actions to take to address elevated lead. For example, officials from the Massachusetts Department of Environmental Protection told us that they would like additional guidance on evaluating remedial actions to address elevated lead in the fixtures or the plumbing system. Officials with EPA’s Office of Ground Water and Drinking Water hold quarterly meetings with regional officials to obtain input on potential improvements to the 3Ts guidance, but have not made any revisions. EPA has not substantially updated the 3Ts guidance since October 2006 and does not have firm plans or time frames for providing additional information, including on the action level and other key topics such as a recommended schedule for testing. EPA officials said that they may update the 3Ts guidance before the LCR is updated, but did not provide a specific time frame for doing so. EPA has efforts underway to reconsider the action level for the LCR, which may include a change in the action level from one that is based on technical feasibility, to one that also considers lead exposure in vulnerable populations such as infants and young children, which EPA refers to as a health-based benchmark. EPA anticipates issuing comprehensive revisions to the LCR by February 2020. While the 3Ts guidance is not contingent on the LCR, EPA officials told us they would consider updates to the 3Ts guidance, including the 20 ppb action level, as they consider revisions to the LCR. By updating the 3Ts guidance to include an action level for school districts that incorporates available scientific modeling regarding vulnerable population exposures, EPA could have greater assurance that school districts are able to limit children’s exposure to lead. EPA has emphasized the importance of addressing elevated lead levels in school drinking water through its 3Ts guidance, but has not communicated necessary information about action levels and other key topics consistent with the external communication standard under federal standards for internal control. According to EPA, CDC, and others, eliminating sources of lead before exposure can occur is considered the best strategy to protect children from potential adverse health outcomes. EPA officials also told us that clear guidance is important because testing for lead in drinking water requires technical expertise. But without providing interim or updated guidance to help school districts choose an action level for lead remediation EPA will continue to provide schools with confusing information regarding whether to remediate, which may not adequately limit potential lead exposure to students and staff. Furthermore, without important information on key topics, such as a recommended schedule for lead testing, how to remediate elevated lead levels, and information associated with testing and remediation costs school districts are at risk of making misinformed decisions regarding their lead testing and remediation efforts. Education has not played a significant role in supporting state and school districts efforts to test for and remediate lead in school drinking water, and there has been limited collaboration between Education and EPA, according to officials. In 2005, Education, EPA, CDC, and other entities involved with drinking water signed the Memorandum of Understanding on Reducing Lead Levels in Drinking Water in Schools and Child Care Facilities (the memorandum) to encourage and support schools’ efforts to test for lead in drinking water and to support actions to reduce children’s exposure to lead. According to the memorandum, Education’s role is to identify the appropriate school organizations with which to work and facilitate dissemination of materials and tools to schools in collaboration with EPA. In addition, EPA’s role is to update relevant guidance documents for school districts—resulting in the production of the 3Ts guidance in 2006—raising awareness, and collaborating with other federal agencies and associations, among other things. Education officials told us that the agency does not have any ongoing efforts related to implementing the memorandum. However, Education and EPA officials were not aware of the memorandum being terminated by either agency and told us the memorandum remains in effect. Although Education does not have any ongoing efforts related to implementing the memorandum, the agency’s websites, including the Readiness and Emergency Management for Schools Technical Assistance Center (REMS TA Center) website, and the Green Strides portal, provide links to EPA guidance and webinars on lead testing and remediation. The REMS TA Center website, which is largely focused on emergency management planning, includes a link to EPA’s 3Ts guidance and other resources on lead exposure and children, but does not provide information regarding the importance of testing for lead in school drinking water. Education’s Green Strides portal includes a link to a number of EPA’s webinars on lead in school drinking water, but does not include all of the quarterly webinars started in June 2017 to highlight school district efforts to test for lead. An Education official told us that these EPA webinars are identified by Education without coordinating with EPA officials. Further, when searching on Education’s website for lead in school drinking water, the 3Ts guidance does not show up. Education officials acknowledged that information regarding lead testing and remediation is difficult to find on Education’s website and they could take steps to make federal guidance on lead in school drinking water more accessible. The federal government has developed guidelines to help federal agencies improve their experience with customers through websites. One such resource is Guidelines for Improving Digital Services developed by the federal Digital Services Advisory Group. It states that federal agencies should take steps to make guidance easy to find and accessible. Making guidance easy to find and accessible such as by clarifying which links contain guidance; highlighting new or important guidance; improving their websites’ search function; and categorizing guidance on Education’s websites could help raise school district awareness of the guidance, which is currently low in most areas of the country. Many school districts are not familiar with EPA guidance related to lead testing and remediation. Specifically, an estimated 60 percent of school districts reported in our survey that they were not familiar with the EPA’s 3Ts guidance. Most school district officials from our site visits told us they did not have contact with EPA prior to or during their lead testing and some said they would not have thought to go to EPA for guidance. Likewise, EPA officials reported they had received feedback from school district officials indicating that they do not know where to go for information about testing for and remediating lead in drinking water. Rather, school district officials may look to their state educational agency or Education for guidance on lead testing and remediation, as they might do when looking for guidance on other topics. Education and EPA do not regularly collaborate to support state and school districts’ efforts related to lead in school drinking water, according to EPA and Education officials. Education officials said the agency does not have a role in ensuring safe drinking water in schools, and that the mitigation of environmental health concerns in school facilities is a state and local function. Therefore, the agency does not collaborate with EPA to disseminate the 3Ts guidance beyond posting links to related guidance on their websites and newsletters. EPA officials told us they do not know which office they should collaborate with at Education. EPA regional officials also said they do not collaborate with Education to disseminate the guidance to states and school districts. However, in the 2005 memorandum, EPA and Education agreed to work together to encourage school districts to test drinking water for lead; disseminate results to parents, students, staff, and other interested stakeholders; and take appropriate actions to correct elevated lead levels. There are many school districts that have not tested for lead in school drinking water, and some conducted testing without the assistance of federal guidance—although the large majority (68 percent) of school districts who use the guidance reported finding it helpful. Officials in 11 of 17 school districts we interviewed that had conducted lead testing told us they were familiar with the 3Ts guidance and 9 of those districts said they found it helpful for designing their lead testing programs. Increased encouragement and dissemination of EPA resources about lead in school drinking water by Education and EPA could help school districts test for and remediate lead in drinking water using good practices and reduce the potential risk of exposure for students and staff. Children are particularly at risk of experiencing the adverse effects of lead exposure from a variety of sources, including drinking water. While there is no federal law requiring lead testing for drinking water in most schools, some states and school districts have decided to test for lead in the drinking water to help protect students. However, there are a number of school districts that have not tested for lead and some that do not know if they have tested for lead in their drinking water, according to our nationwide survey. Even in states and school districts that have opted to test, officials may choose different action levels to identify elevated lead and may choose different testing protocols that do not test all fixtures in all schools. EPA has developed helpful guidance—3Ts—and webinars for states and school districts to support efforts to test and remediate lead in school drinking water. However, some EPA regional offices have not communicated the importance of testing for and remediating lead to states and school districts. By promoting further efforts to communicate the importance of lead testing to school districts to help ensure that their lead testing programs are in line with good practices, including the 3Ts guidance, regional offices that have not focused on this issue could build on the recent efforts of other regional offices to provide technical assistance and guidance and other forms of support. State and school district officials can use EPA’s 3Ts guidance to help ensure that their drinking water testing and remediation efforts are in line with good practices and said that it has been helpful for establishing their programs. However, statements in the guidance—which has not been updated in over a decade—that suggest the action level described will ensure that school facilities do not have elevated lead in their drinking water are misleading. In addition, state and school district officials told us that additional guidance—including information on a recommended schedule for retesting as well as on costs associated with testing and remediation—could help school districts make more informed decisions regarding their testing and remediation efforts. Without providing interim or updated guidance, EPA is providing schools with confusing and out of date information, which can increase the risk of school districts making uninformed decisions. EPA officials said they would consider updates to the 3Ts action level while the revisions to the LCR are being completed. However, the longer school districts are without the additional information they need to conduct their efforts in line with good practices and continue to rely on confusing and misleading information, the more challenges they will face in trying to limit children’s exposure to lead. After EPA revises the LCR, the agency would have greater assurance that school districts are limiting children’s exposure to lead by considering whether to develop, as part of its guidance, a health-based level for schools that incorporates available scientific modeling regarding vulnerable population exposures. Finally, although Education provides information to states and school districts on lead testing and remediation through the agency’s websites, that information is difficult to find. Further, Education’s website does not include all of EPA’s quarterly webinars to highlight school district efforts to test for lead. By making guidance accessible, Education could improve school district awareness of EPA resources about lead in school drinking water. In addition, EPA and Education should improve their collaboration to encourage and support lead testing and remediation efforts by states and school districts. EPA has the expertise to develop guidance and provide technical assistance to states and school districts, while Education, based on its mission to promote student achievement, should collaborate with EPA to disseminate guidance and raise awareness of lead in drinking water as an issue that could impact student success. Although over one-third of districts that tested found elevated levels of lead, many districts have still not been tested. Unless EPA and Education encourage additional school districts to test for lead, many students and school staff may be at risk of lead exposure. We are making a total of seven recommendations, including five to EPA and two to Education: The Assistant Administrator for Water of EPA’s Office of Water should promote further efforts to communicate the importance of testing for lead in school drinking water to address what has been a varied approach by regional offices. For example, the Assistant Administrator could direct those offices with limited involvement to build on the recent efforts of several regional offices to provide technical assistance and guidance, and other forms of support. (Recommendation 1) The Assistant Administrator for Water of EPA’s Office of Water should provide interim or updated guidance to help schools choose an action level for lead remediation and more clearly explain that the action level currently described in the 3Ts guidance is not a health-based standard. (Recommendation 2) The Assistant Administrator for Water of EPA’s Office of Water should, following the agency’s revisions to the LCR, consider whether to develop a health-based level, to include in its guidance for school districts, that incorporates available scientific modeling regarding vulnerable population exposures and is consistent with the LCR. (Recommendation 3) The Assistant Administrator for Water of EPA’s Office of Water should provide information to states and school districts concerning schedules for testing school drinking water for lead, actions to take if lead is found in the drinking water, and costs of testing and remediation. (Recommendation 4) The Assistant Secretary for Elementary and Secondary Education should improve the usability of Education’s websites to ensure that the states and school districts can more easily find and access federal guidance to address lead in school drinking water, by taking actions such as clarifying which links contain guidance; highlighting new or important guidance; improving their websites’ search function; and categorizing guidance. (Recommendation 5) The Assistant Administrator for Water of EPA’s Office of Water and the Director of the Office of Children’s Health Protection should collaborate with Education to encourage testing for lead in school drinking water. This effort could include further dissemination of EPA guidance related to lead testing and remediation in schools or sending letters to states to encourage testing in all school districts that have not yet done so. (Recommendation 6) The Assistant Secretary for Elementary and Secondary Education should collaborate with EPA to encourage testing for lead in school drinking water. This effort could include disseminating EPA guidance related to lead testing and remediation in schools or sending letters to states to encourage testing in all school districts that have not yet done so. (Recommendation 7) We provided a draft of this report to EPA, Education, and CDC for review and comment. EPA and Education provided written comments that are reproduced in appendixes VII and VIII respectively. EPA also provided technical comments, which we incorporated as appropriate. CDC did not provide comments. We also provided relevant excerpts to selected states and incorporated their technical comments as appropriate. In its written comments, EPA stated that it agreed with our recommendations and noted a number of actions it plans to take to implement them. For example, EPA said its Office of Ground Water and Drinking Water is holding regular meetings with regional offices and other EPA offices to obtain input on improving the 3Ts guidance. Potential revisions include updates to implementation practices, the sampling protocol, and the action level, including clarifying descriptions of different action levels and standards. Also, EPA said that while it has not yet determined the role of a health-based benchmark for lead in drinking water in the revised LCR, it sees value in providing states, drinking water systems, and the public with a greater understanding of the potential health implications for vulnerable populations of specific levels of lead in drinking water. EPA said it would continue to reach out to states and schools to provide information, technical assistance, and training and will continue to make the 3Ts guidance available. EPA also said it would work with Education to ensure that school districts and other stakeholders are aware of additional resources EPA is developing. In its written comments, Education stated that it agreed with our recommendations and noted a number of actions it plans to take to implement them. In response to our recommendation to improve Education’s websites, Education said it would identify and include an information portal dedicated to enhancing the usability of federal resources related to testing for and addressing lead in school drinking water. Also, Education said it is interested in increasing coordination across all levels of government and it shares the view expressed in our report that improved federal coordination, including with EPA, will better enhance collaboration to encourage testing for lead in school drinking water. Education said it would develop a plan for disseminating relevant resources to its key stakeholder groups and explore how best to coordinate with states to disseminate EPA’s guidance on lead testing and remediation to school districts. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, the Administrator of the Environmental Protection Agency, the Secretary of Education, the Director of the Centers for Disease Control and Prevention, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact us at (617) 788-0580 or nowickij@gao.gov or (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. In this report, we examined three objectives: (1) the extent to which school districts are testing for, finding, and remediating lead in school drinking water; (2) the extent to which states require or support testing for and remediating lead in school drinking water by school districts; and (3) the extent to which federal agencies are supporting state and school district efforts to test for and remediate lead. To address these objectives, we conducted a web-based survey of school districts, interviews with selected state and school district officials, a review of applicable requirements in selected states, a review of relevant federal laws and regulations, and interviews with federal agency officials and representatives of stakeholder organizations. We conducted this performance audit from October 2016 through July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To examine the extent to which school districts are testing for and remediating lead in school drinking water, we designed and administered a generalizable survey of a stratified random sample of U.S. local educational agencies (LEA), which we refer to as school districts throughout the report. The survey included questions about school district efforts to test for lead in school drinking water, such as the number of schools in which tests were conducted, the costs of testing, and whether parents or others were notified about the testing efforts. We also asked questions about remediation efforts, such as whether lead was discovered in school drinking water, the specific remediation efforts that were implemented, and whether parents or others were notified about the remediation efforts. Further, we asked about officials’ familiarity with the Environmental Protection Agency’s (EPA) guidance entitled 3Ts for Reducing Lead in Drinking Water in Schools, (3Ts guidance) whether the guidance was used, and the extent to which it was helpful in conducting tests, remediating lead, and communicating with parents and others. We directed the survey to school district superintendents or other cognizant officials, such as facilities directors. See appendix II which includes the survey questions and estimates. We defined our target population to be all school districts in the 50 U.S. states and the District of Columbia that are not under the jurisdiction of the Department of Defense or Bureau of Indian Education. We used the LEA Universe database from Department of Education’s (Education) Common Core of Data (CCD) for the 2014-2015 school year to our sampling frame. For the purpose of our survey, our sample was limited to school districts that: were located in the District of Columbia or the 50 states; had a LEA type code of 1, 2, 4, 5, 7, and 8; had one or more schools and one or more students; and were not closed according to the 2014-2015 School Year. The resulting sample frame included 16,452 school districts and we selected a stratified random sample of 549 school districts. We stratified the sampling frame into 13 mutually exclusive strata based on urban classification and poverty classification. We further stratified the school districts classified as being in a city by charter status. We selected the largest 100 school districts with certainty. We determined the minimum sample size needed to achieve precision levels of plus or minus 12 percentage points or fewer, at the 95 percent confidence level. We then increased the sample size within each stratum for an expected response rate of 70 percent. We defined the three urban classifications based on the National Center for Education Statistics (NCES) urban-centric locale code. To build a general measure of the poverty level for each school district we used the proportion of students eligible for free or reduced-price lunch (FRPL) as indicated in the CCD data and classified these into the following three groups: High-poverty – More than 75 percent of students in the school district were eligible for FRPL; Mid-poverty – Between 25.1 and 75.0 percent of students in the school district were eligible for FRPL; and Low-poverty – 25 percent or fewer students in the school district were eligible for FRPL. We assessed the reliability of the CCD data by reviewing existing documentation about the data and performing electronic testing on required data elements and determined they were sufficiently reliable for the purpose of our report. We administered the survey from July to October 2017 (the survey asked school districts to report information based on the 12 months prior to their completing the survey.) To obtain the maximum number of responses to our survey, we sent reminder emails to nonrespondents and contacted nonrespondents over the telephone. We identified that four of the 549 sampled school districts were closed and one was a “cyber-school” with no building, so these were removed from the sample. Of the remaining 544 eligible sampled school districts, we received valid responses from 373, resulting in an unweighted response rate of 68 percent. We conducted an analysis of our survey results to identify potential sources of nonresponse bias using a multivariate logistic regression model. We examined the response propensity of the sampled school districts by several demographic characteristics. These characteristics included poverty, urbanicity, and charter status. We did not find any other population characteristics significantly affected survey response propensity except those used in stratification (charter schools and the largest 100 school districts). Based on the response bias analysis and the 68 percent response rate across stratum, we determined that estimates based on adjusted weights reflecting the response rate are generalizable to the population of eligible school districts and are sufficiently reliable for the purposes of this report. We took steps to minimize non-sampling errors, including pretesting draft instruments and using a web-based administration system. As we began to develop the survey, we met with officials from seven school districts to explore the feasibility of responding to the survey questions. We then pretested the draft instrument from April to June 2017 with officials in eight school districts—including one charter school district—in cities and suburbs in different states. In the pretests, we asked about the clarity of the questions and the flow and layout of the survey. The EPA also reviewed and provided us comments on a draft version of the survey. Based on feedback from the pretests and EPA’s review, we made revisions to the survey instrument. To further minimize non-sampling errors, we used a web-based survey, which allowed respondents to enter their responses directly into an electronic instrument. Using this method automatically created a record for each respondent and eliminated the errors associated with a manual data entry process. We express the precision of our particular sample’s results as a 95 percent confidence interval (for example, plus or minus 10 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that each of the confidence intervals in this report will include the true values in the study population. To analyze differences in the percentages of school districts that reported they tested for lead in school drinking water and those that discovered lead, we compared weighted survey estimates generated for school districts in different levels of the following subgroups: Poverty: low poverty, mid poverty, and high poverty; Racial composition: majority-minority and majority white; Region: Northeast, South, Midwest, and West; Population density: urban, suburban, and rural/town; Urban charter school: in urban areas, charter district and non-charter Largest 100: largest 100 districts (based on student enrollment) and all other districts. For each subgroup, we produced percentage estimates and standard errors for each level and used these results to confirm the significance of the differences between weighted survey estimates. To examine school districts’ testing and remediation efforts and state support of those efforts, we conducted site visits in five states—Georgia, Illinois, Massachusetts, Oregon, and Texas—from February to October 2017. We selected these states because they varied in the extent to which they required testing of school drinking water for lead and they are located in geographic areas covered by different EPA regional offices. Within these states, we selected 17 school districts that had tested for lead in school drinking water and to achieve variation in the size and population density (urban, suburban, and rural) of the district as well as including one charter school district. Site visits generally consisted of interviews with officials in state agencies and school districts and officials in the local EPA regional office: State interviews: We interviewed officials in state environment, education, and health agencies, depending on whether they had information related to school district testing for lead in school drinking water in their state. The topics we discussed were the agencies’ roles and responsibilities related to testing for and remediation of lead in school drinking water, any related state requirements, policies, and guidance, communication and public notification about testing and remediation efforts and, as appropriate, coordination among multiple state agencies. We also discussed similar topics related to lead-based paint. In Massachusetts, we interviewed representatives with the University of Massachusetts, because of their role in implementing the state’s program to support school district efforts to test for lead in school drinking water. School Districts: Within the five site visit states, we interviewed officials in 14 school districts in person and in three school districts by phone (because we were not able to meet with them in person). We also selected one charter school that functions as its own school district which had conducted tests for lead in school drinking water. Similar to our school district survey, the interview topics we discussed with district officials included testing for and remediation of lead in school drinking water, use of guidance (such as the 3Ts guidance) and efforts to communicate or coordinate with any federal, state, or local agencies, including any other school districts. Within 13 of the school districts, we visited at least one school in which the district had tested for lead in drinking water and, as needed, took remedial action in order to gain an in-depth understanding of their testing and remediation efforts. EPA Regional Offices: We interviewed officials in all 10 EPA Regional offices. We met in-person with officials in the regional offices 1, 4, 5, and 6 and conducted phone interviews with officials in regional offices 2, 3, 7, 8, 9, and 10. We generally discussed EPA officials’ roles and responsibilities related to testing for lead in school drinking water and paint and efforts in states and school districts in their region. Information we gathered from these interviews, while not generalizable, represents the conditions present in the states and school districts at the time of our interviews and may be illustrative of efforts in other states and school districts. As part of our effort to examine school districts’ testing and remediation efforts and state support of those efforts, we reviewed related state requirements. To determine whether states had related requirements, we asked all EPA regional offices if states in their region had requirements related to testing for lead in school drinking water. EPA provided examples of eight states (California, Illinois, Maryland, Minnesota, New Jersey, New York, Virginia, and the District of Columbia that had such requirements. We reviewed relevant laws, regulations, and policy documents for these states. We then confirmed the details of the related requirements with the appropriate state officials via structured questionnaires. Also, we used available documentation to corroborate and verify the testing requirements of the states that EPA identified. GAO did not conduct an independent search of state laws. To examine the extent to which federal agencies have collaborated in supporting state and school district efforts to test for and remediate lead, we reviewed relevant federal laws, including the Water Infrastructure Improvements for the Nation Act of 2016, Reduction of Lead in Drinking Water Act of 2011, the Safe Drinking Water Act of 1974, as amended, and the Lead Contamination Control Act of 1988; regulations, such as the Lead and Copper Rule; and guidance, such as the 3Ts guidance. We also reviewed documentation including the Memorandum of Understanding on Reducing Lead Levels in Drinking Water in Schools and Child Care Facilities signed in 2005 by EPA, Education and the Centers for Disease Control and Prevention (CDC); Federal Partners in School Health Charter; EPA training webinar information; and other relevant guidance including the 3Ts guidance tool kit. We interviewed officials from EPA’s Office of Ground Water and Drinking Water and Office of Children’s Health Protection and officials in all 10 of EPA regional offices regarding their approach to providing support to states and school district on lead testing and remediation. We interviewed officials from Education’s Office of Safe and Healthy Students and officials from the CDC. During these interviews, we interviewed officials about the Memorandum of Understanding and about the Federal Partners in School Health initiative, both of which represent collaborative efforts that address lead in school drinking water, among other topics. We evaluated federal efforts to collaborate and support lead testing and remediation in schools against federal standards for internal control, which call for agencies to communicate quality information to external parties, among other things. We also evaluated federal efforts against the Memorandum of Understanding, in which EPA, Education, and CDC agreed to encourage testing drinking water for lead and communicate with key stakeholders, among other things. To inform all of our research objectives, we interviewed representatives with the National Conference of State Legislatures, National Center for Healthy Housing, National Alliance of Public Charter Schools, the DC Public Charter School Board, and the 21st Century School Fund. We also attended a workshop entitled “Eliminating Lead Risks in Schools and Child Care Facilities” in December 2017. The questions we asked in our survey of local educational agencies (referred to in this report as school districts) are shown below. Our survey was comprised of closed- and open-ended questions. In this appendix, we include all survey questions and aggregate results of responses to the closed-ended questions; we do not provide information on responses provided to the open-ended questions. Estimates noted with superscript “a” are based on 20 or fewer responses and were not included in our findings. For a more detailed discussion of our survey methodology, see appendix I. 1. Do any schools in your local educational agency (LEA) obtain drinking water from a public water system such as a city or municipal water plant? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) No (Skip to 20) Don’t know (Skip to 20) Section B: Testing for Lead in School Drinking Water 2. Is there a requirement that the drinking water in your LEA’s schools be tested for lead? (Please answer “Yes” regardless of whether that requirement comes from your state, municipality, local educational agency or any other governmental entity.) (Check one.) 95 percent confidence interval – lower bound (percentage) 3. Regardless of whether your LEA is required to test for lead in school drinking water, have tests been conducted for lead in the drinking water in at least one of your schools in the past 12 months? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If yes to 3: 3A. What is the number of schools in which tests were conducted in the past 12 months? Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 3B. About how many samples were taken from sources of drinking water such as water fountains and sinks in each school? (Check one.) 95 percent confidence interval – lower bound (percentage) 3C. Did any of the following develop the sampling plan, draw the samples of water, and analyze the samples? (Check all that apply.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 3D. What size samples were taken? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3D: What sample size was used? 3E: To the best of your knowledge, did the personnel drawing or analyzing samples follow a testing protocol that offers guidance on developing the sampling plan, drawing samples of water, or analyzing samples? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) No (Skip to 3F) Don’t know (Skip to 3F) If ‘yes’ to 3E: a. To the best of your knowledge, were any of the following entities involved in developing the protocol? (Check one per row.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) Contractor / water testing company EPA or another federal government agency A local government agency (aside from your LEA) If ‘other’ to 3Eh: What other entities were involved in developing the protocol? 3F. If tests were conducted in some schools in your LEA in the past 12 months—but were not conducted in every school—how was it determined which schools would be tested? (Check one per row.) Not applicable: tests were conducted in every school (Skip to 3G) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3Fe: In what other ways did your LEA use to determine which schools would be tested? 3G. How much do you estimate your LEA has spent on testing for lead in school drinking water in the past 12 months? (Please answer this question for lead testing only; the survey asks about expenditures to address concerns identified through testing later. Also, please include materials, labor, and any other expenditures related to lead testing in your estimate.) Estimated Number (Median) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 3H. Did your LEA use any of the following sources of funding for the testing in the past 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3H: What other sources of funding did your LEA use? 3I. In the past 12 months, did your LEA notify the following groups that it was planning to test for lead in school drinking water before conducting the tests? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) General public (e.g., media) If ‘other’ to 3I: What other groups did your LEA notify that it was planning to test for lead in school drinking water before conducting the tests? 3J. In the past 12 months, did your LEA report the testing results to the following groups after completing the tests? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) General public (e.g., media) If ‘other’ to 3J: To what other groups did your LEA report the testing results? 3K. If ‘no’ to 3: Were any of the following a reason your LEA did not conduct any tests in any schools in the last 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 3K: For what other reasons did your LEA not conduct any tests in any schools in the last 12 months? 4. Does your LEA have a schedule for recurring tests to determine the amount of lead in the drinking water in your schools within any of the following time frames? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) Section C: Remediation of Lead in School Drinking Water 5. Has your LEA discovered any level of lead in the drinking water of any of your schools (as a result of testing) in the last 12 months? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 5A. What lead concentration (measured in “parts per billion” or “ppb”) did your LEA use to initiate remedial action? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 5A: What lead concentration did your LEA use to initiate remedial action? 5B. In the last 12 months, how many schools had at least one test result–including as few as one sample in one school–greater than the lead level your LEA used to initiate action? (Please answer regardless of whether these results were discovered in the first of multiple rounds of testing.) 5C.To address lead discovered in school drinking water, has your LEA taken any of the following actions in any of your schools in the past 12 months? 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 5D. If ‘no’ to every item in 5C: What are the reasons why your LEA has not taken actions in any of your schools in the past 12 months? 5E. If ‘yes’ to any item in 5C: How much do you estimate your LEA has spent on taking actions in the past 12 months? (Please include materials, labor, and any other expenditures related to lead remediation in your estimate.) Estimated Number (Median) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 5F. Did your LEA use any of the following sources of funding to take actions in the past 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other’ to 5F: What other sources of funding did your LEA use to take actions in the past 12 months? 5G. Did your LEA notify the following groups about its actions in the past 12 months? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) General public (e.g., media) If ‘other’ to 5G: What other groups has your LEA notified about its remedial actions in the past 12 months? 6. Does your LEA have a schedule to flush the water system as a result of concerns about lead in drinking water in at least one of your schools within any of the following time frames? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) 7. Does your LEA have plans to take actions to eliminate or reduce lead in school drinking water (for example, replace drinking water fountains, replace pipes) in at least one of your schools? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘according to a schedule’ to 7: how would you describe the schedule that your LEA has developed? Section D: Guidance Regarding Lead Testing and Remediation 8. Prior to receiving this survey, were you familiar with guidance issued by the U.S. Environmental Protection Agency entitled “3Ts for Reducing Lead in Drinking Water in Schools”? (Please answer “Yes” if you had read or used the”3Ts” prior to receiving this survey.) (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8: did your LEA (or a contractor working on behalf of your LEA) follow or refer to “3Ts” during your efforts to test for or remediate lead in school drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8A: How helpful was 3Ts for conducting tests for lead in your schools’ drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8A: How helpful was 3Ts for remediating lead in your schools’ drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘yes’ to 8A: How helpful was 3Ts for communicating with parents and other stakeholders about lead in your schools’ drinking water? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) What else, if anything, would make 3Ts more helpful? 9. Did your LEA (or a contractor working on behalf of your LEA) use any other guidance (for example, best practices, manuals, protocols, webinars) in your LEA’s efforts to test for lead in your schools’ drinking water, take remedial actions, or for notification purposes? (Check one.) 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) What other guidance was used? 10. Would your LEA find any of the following helpful? (Check one per row). 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) Clearer guidance on a level of lead in school drinking water at which we should take action Additional guidance on determining a schedule for 41 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) regularly testing for lead in school drinking water Additional guidance on actions to take if lead is found in school drinking water Information on the costs of testing for lead in school drinking water Information on the costs of remediating lead in school drinking water 18 95 percent confidence interval – lower bound (percentage) 95 percent confidence interval – upper bound (percentage) If ‘other guidance or information’ to 10: What other guidance or information would be helpful? Section E: Inspecting Schools for Lead Based Paint Section F: Remediation of Lead Based Paint in Schools Section G: Other Questions 16. How many schools are owned or operated by your LEA? Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 17. How many schools in your LEA were built before 1986? (If a building has additions, we mean the original structure/the original part of the building.) Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 18. How many schools in your LEA were built before 1978? (If a building has additions, we mean the original structure/the original part of the building.) Estimated Number (Mean) 95 percent confidence interval – lower bound (number) 95 percent confidence interval – upper bound (number) (Respondent reported number) 19. Is there anything else you would like to share with us regarding lead testing, inspection, or remediation efforts in your school or LEA (drinking water or paint)? 20. What is the name, title, e-mail address, and telephone number of the person responsible for completing this survey? Section H: Completion 21. Please check one of the options below. Clicking on “Completed” indicates that your answers are official and final. Your answers will not be used unless you have done this. (Check one.) 95 percent confidence interval – lower bound (percentage) Charter schools comprise a small but growing group of public schools. In contrast to most traditional public schools, many charter schools are responsible for financing their own buildings and other facilities. As a result, charters schools vary in terms of whether they own their own building or pay rent, and whether they operate in buildings originally designed as a school or in buildings which have been redesigned for educational purposes. Sometimes charter schools may also share space in their building with others, such as non-profit organizations. In addition to differences in facility access and finance, charter school governance also varies. In some states, charter schools function as their own school district, while in other states, charter schools have the option to choose between being a distinct school district or part of a larger school district. To determine the extent to which charter school districts were testing for lead in school drinking water and finding and remediating lead, our survey included charter school districts in two ways: our sampling design included three strata specifically for charter school districts in urban areas; in addition, charter school districts were retained in the sampling population, such that they could be randomly selected in our other strata. While we generally received too few responses from charter school districts to report their data separately, we are able to estimate that about 36 percent of charter school districts tested for lead in school drinking water. To learn more about experiences of charter schools, we visited one charter school district and interviewed representatives of the DC Public Charter School Board (DC PCSB). The charter school district we visited consisted of one charter school in a building it leased. The school had 10 sources of consumable water, all of which were tested in 2016 and were found to have lead below the district’s selected action level of 15 parts per billion. Before testing, district officials met with the building owner who agreed to cover the cost of any remediation. Officials with the DC PCSB told us that it paid to have tests conducted in every charter school in the District of Columbia. According to DC PCSB officials, between March and June 2016, 95 charter schools were tested, and lead above their action level of 15 parts per billion was discovered in 20 schools. Officials estimated their testing costs to be about $100,000, which was subsequently reimbursed by the District of Columbia’s Office of State Superintendent of Education. They also said that charter schools were responsible for taking steps to remediate the lead and recommended schools flush their water systems and use filters. Communication of results Not specified 5 ppb in a 250 ml sample (from filtered fixture) The Environmental Protection Agency (EPA) provides information on its website for the public on lead in drinking water. EPA’s website includes, among other documents, a December 2005 brochure for the public and school districts entitled “3Ts for Reducing Lead in Drinking Water in Schools” (see fig.10). In addition to the individuals named above, Diane Raynes (Assistant Director), Scott Spicer (Assistant Director), Jason Palmer (Analyst-in- Charge), Amanda K. Goolden, Rich Johnson, Grant Mallie, Jean McSween, Dae Park, James Rebbe, Sarah M. Sheehan, and Alexandra Squitieri made significant contributions to this report. Also contributing to this report were Susan Aschoff, David Blanding, Mimi Nguyen, Tahra Nichols, Dan C. Royer, Kiki Theodoropoulos, and Kim Yamane. Lead Paint in Housing: HUD Should Strengthen Grant Processes, Compliance Monitoring, and Performance Assessment. GAO-18-394. Washington, D.C.: June 19, 2018. Drinking Water: Additional Data and Statistical Analysis May Enhance EPA’s Oversight of the Lead and Copper Rule. GAO-17-424. Washington, D.C.: September 1, 2017. Environmental Health: EPA Has Made Substantial Progress but Could Improve Processes for Considering Children’s Health. GAO-13-254. Washington, D.C.: August 12, 2013. Lead in Tap Water: CDC Public Health Communications Need Improvement. GAO-11-279. Washington, D.C.: March 14, 2011. Environmental Health: High-level Strategy and Leadership Needed to Continue Progress toward Protecting Children from Environmental Threats. GAO-10-205. Washington, D.C.: January 28, 2010. Drinking Water: EPA Should Strengthen Ongoing Efforts to Ensure That Consumers Are Protected from Lead Contamination. GAO-06-148. Washington, D.C.: January 4, 2006.", "summary": "No federal law requires testing of drinking water for lead in schools that receive water from public water systems, although these systems are regulated by the EPA. Lead can leach into water from plumbing materials inside a school. The discovery of toxic levels of lead in water in Flint, Michigan, in 2015 has renewed awareness about the danger lead exposure poses to public health, especially for children. GAO was asked to review school practices for lead testing and remediation. This report examines the extent to which (1) school districts are testing for, finding, and remediating lead in drinking water; (2) states are supporting these efforts; and (3) federal agencies are supporting state and school district efforts. GAO administered a web-based survey to a stratified, random sample of 549 school districts, the results of which are generalizable to all school districts. GAO visited or interviewed officials with 17 school districts with experience in lead testing, spread among 5 states, selected for geographic variation. GAO also interviewed federal and state officials and reviewed relevant laws and documents. An estimated 43 percent of school districts, serving 35 million students, tested for lead in school drinking water in 2016 or 2017, according to GAO's nationwide survey of school districts. An estimated 41 percent of school districts, serving 12 million students, had not tested for lead. GAO's survey showed that, among school districts that did test, an estimated 37 percent found elevated lead (lead at levels above their selected threshold for taking remedial action.) (See figure.) All school districts that found elevated lead in drinking water reported taking steps to reduce or eliminate exposure to lead, including replacing water fountains, installing filters or new fixtures, or providing bottled water. According to the Environmental Protection Agency (EPA), at least 8 states have requirements that schools test for lead in drinking water as of 2017, and at least 13 additional states supported school districts' voluntary efforts with funding or in-kind support for testing and remediation. In addition, the five states GAO visited provided examples of technical assistance to support testing in schools. EPA provides guidance and other resources to states and school districts regarding testing and remediating lead in drinking water, and the Department of Education (Education) provides some of this information on its websites. School district officials that used EPA's written guidance said they generally found it helpful. Although EPA guidance emphasizes the importance of addressing elevated lead levels, GAO found that some aspects of the guidance, such as the threshold for taking remedial action, were potentially misleading and unclear, which can put school districts at risk of making uninformed decisions. In addition, many school districts reported a lack of familiarity with EPA's guidance, and their familiarity varied by region of the country. Education and EPA do not regularly collaborate to support state and school district efforts on lead in drinking water, despite agreeing to do so in a 2005 memorandum of understanding. Such collaboration could encourage testing and ensure that more school districts will have the necessary information to limit student and staff exposure to lead. GAO is making seven recommendations, including that EPA update its guidance on how schools should determine lead levels requiring action and for EPA and Education to collaborate to further disseminate guidance and encourage testing for lead. EPA and Education agreed with the recommendations.", "document_type": "gao"}
{"report": "Fighter pilots staff both operational and non-operational positions, and fighter pilots alternate between these positions throughout their career. Operational positions include both flying (i.e., combat pilot or instructor pilot positions) and non-flying positions, such as a close air support duty officer in an Air Operations Center or an air controller in a ground infantry unit. In flying positions, fighter pilots operate aircraft that are critical to achieving and maintaining air dominance during combat operations and include Air Force, Navy, and Marine Corps fixed-wing fighter and attack aircraft with air-to-air, air-to-ground, and electronic warfare missions. These aircraft operate during the first days of a conflict to penetrate enemy air space, defeat air defenses, and achieve air dominance, allowing follow-on ground, air, and naval forces freedom to operate within the battle space. Once air dominance is established, fighter aircraft continue to strike ground targets for the remainder of the conflict. Some fighter aircraft are also essential to protecting the homeland by responding to potential airborne and ground-based threats. Fighter pilots are assigned a variety of tasks when they are in an operational squadron. As well as studying for flights, flying, and debriefing, fighter pilots must also perform other squadron duties, such as coordinating squadron travel to external training locations, scheduling daily flights, or overseeing squadron maintenance departments. In addition to these duties, fighter pilots are required to complete common military training (i.e., training that is required for all military personnel and is not linked to a particular occupation). In May 2017, we reported that common military training comprises more than half of mandatory training requirements in the military services (not including additional training that the military services may require for specific groups of servicemembers, such as fighter pilots). Non-operational positions are generally non-flying positions and include assignments to headquarters or combatant command positions. Certain non-operational positions can only be filled by qualified pilots. For example, certain positions require fighter pilots due to the need for specialized technical knowledge, such as writing operational manuals for fighter aircraft. Other non-operational positions are more general in nature and are divided among officer communities in a military service. For example, Navy officials told us that certain shore assignments—positions that do not involve deployment—can be staffed by officers from aviation, submarine, or surface warfare communities. DOD’s current fighter aircraft fleet is comprised of both legacy and new aircraft (see fig. 1). The legacy aircraft include Air Force F-16, F-15, A-10, and F-22A and Navy and Marine Corps F/A-18A-D, EA-6B, and AV-8B. Most of these aircraft were purchased in the 1970s and 1980s and are more than 25 years old on average. DOD has been recapitalizing this aging legacy fleet by acquiring and fielding new aircraft, namely the Navy’s F/A-18E/F and EA-18G and the joint service F-35. The Departments of the Air Force and the Navy are operating many of their fixed-wing aircraft well beyond their original designed service lives, and some of these legacy aircraft are confronted with sustainment challenges that affect their availability. In 2017, senior Air Force and Navy officials testified before the House Armed Services Committee regarding, among other things, the maintenance and sustainment issues relating to aging aircraft that are affecting the readiness of their forces. According to Air Force, Navy, and Marine Corps guidance, the military services are to determine personnel requirements for military units. Service officials told us that this process includes squadron requirements—that is, the number of operational positions in a fighter pilot squadron that a military service has determined should be staffed by a qualified fighter pilot. Squadron requirements are primarily based on the missions the squadrons are expected to fulfill, and the military services use a variety of inputs to determine fighter pilot squadron requirements. These inputs include the projected operations of fighter squadrons, analyses of the amount of workload in the squadrons, the number of aircraft assigned to the squadrons, and the planned ratio of fighter pilots to aircraft. The military services are to determine the required number of fighter pilots to staff squadrons and meet operational mission needs and to document these in squadron staffing documents. The military services also determine the rank that pilots should have when staffing specific positions in a squadron—for example, Marine Corps F/A-18 squadron staffing documents specify the rank that should be held by pilots leading specific departments such as those for safety, operations, and maintenance. According to service officials, the military services then staff squadron requirements to the extent possible based on the number of those requirements funded by Congress and the number of trained and qualified personnel available to be staffed to those positions (see fig. 2). We refer to these funded positions as authorizations. Military service workforce planning documents acknowledge that, after this process, a squadron’s staffing level may be lower than the established squadron requirements—a readiness risk that the military services manage by assigning a higher priority to the staffing of certain positions, such as those in deployed squadrons. The military services vary in how they define when gaps between authorizations and staffing levels become a shortage. Specifically, fighter pilot staffing levels of 85 to 99 percent of authorizations could be considered a shortage, depending on the military service. For example, Air Force officials told us that their established practice is that pilot communities with less than 100 percent of authorizations are considered to be insufficiently staffed. Navy officials told us that they have a shortage when they are unable to fully staff deploying squadrons. Marine Corps personnel documents reflect that Marine Corps communities with less than 85 percent of authorizations are considered “unhealthy.” The process of staffing fighter pilots is managed in the Air Force by the Air Force Personnel Center, in the Navy by the Navy Personnel Command, and in the Marine Corps by the Deputy Commandant for Manpower and Reserve Affairs. According to service guidance, the Secretaries are to review squadron requirements, and this review is required every 2 years for the Air Force and the Marine Corps and every 5 years for the Navy. Further, DOD guidance states that staffing requirements are driven by workload and shall be established at the minimum levels necessary to accomplish mission and performance objectives. According to Air Force, Navy, and Marine Corps data, each military service had fewer fighter pilots than authorizations from fiscal years 2013 through 2017, and the Air Force and the Marine Corps project that these gaps will continue for several years. According to service officials, because of low numbers of fighter pilots, the military services are unable to staff all operational fighter pilot positions. According to the military services, deploying squadrons have been fully staffed with fighter pilots, due to staffing approaches that include extending deployments and augmenting deployed squadrons with fighter pilots from other squadrons. Service officials identified multiple factors that have led to low numbers of fighter pilots, including challenges in training and retaining fighter pilots. To increase fighter pilot numbers, the military services are taking a variety of actions. According to Air Force, Navy, and Marine Corps data, each military service had fewer fighter pilots than authorizations (i.e., funded positions) from fiscal years 2013 through 2017. Specifically, the Air Force and the Marine Corps had fewer fighter pilots than authorizations for most years from fiscal years 2006 through 2017. The magnitude of these gaps has grown since fiscal year 2006 and is projected to continue through at least fiscal year 2023. The Navy had fewer fighter pilots than authorizations in fiscal years 2013 through 2017. According to service officials, these gaps between fighter pilot numbers and authorizations have prevented the military services from fully staffing operational positions, including in non- deployed squadrons and training units. According to Air Force pilot staffing level and authorizations data for fiscal years 2006 through 2017, the Air Force had fewer fighter pilots than authorizations for 11 of 12 years from fiscal years 2006 through 2017. This gap grew from 192 fighter pilots (5 percent of authorizations) in fiscal year 2006 to 1,005 (27 percent) in fiscal year 2017. According to briefing documents prepared by the Air Force, this gap is concentrated among fighter pilots with fewer than 8 years of experience. The Air Force forecasts that the fighter pilot gap will persist over time, even as the Air Force takes steps to train more fighter pilots and improve retention. Figure 3 shows the Air Force fighter pilot staffing levels and authorizations for fiscal years 2006 through 2017. For information on trends for all Air Force fixed-wing aircraft pilot communities, see appendix II. According to Air Force data, the Air Force generally had sufficient fighter pilots to staff operational positions for fighter pilots for fiscal years 2006 through 2013. Air Force officials added that during that period, Air Force fighter pilot gaps were generally limited to non-operational positions, such as staff assignments at Air Force headquarters or combatant commands. However, our analysis found that the Air Force has been unable to fully staff operational positions since fiscal year 2014. The gap between staffing levels and operational positions increased from 39 fighter pilots (1 percent of authorizations) in fiscal year 2014 to 399 (13 percent) in fiscal year 2017. According to Navy fighter pilot staffing levels and authorizations data for fiscal years 2013 through 2017, the Navy had fewer fighter pilots than authorizations for each of these fiscal years. Specifically, in fiscal year 2013 the Navy had a gap of 57 fighter pilots (12 percent) at the first tour milestone (i.e., a fighter pilot’s first operational tour at sea completed between 3 and 6 years of service), and this gap grew to 136 fighter pilots (26 percent) in fiscal year 2017 (see fig. 4). Navy officials told us that they believe current gaps in the fighter pilot community could increase through mid-2019. For information on trends for all Navy fixed-wing aircraft pilot communities, see appendix III. According to Marine Corps pilot staffing levels and authorizations data for fiscal years 2006 through 2017, the Marine Corps had fewer fighter pilots than authorizations during that time frame. This gap grew from 63 fighter pilots (6 percent of authorizations) in fiscal year 2006 to 262 (24 percent) in fiscal year 2017. Further, according to Marine Corps data, the gap is concentrated in the Marine Corps’ junior fighter pilot population (i.e., those fighter pilots below the rank of Officer-4—a major). The Marine Corps forecasts that the fighter pilot gap will decrease over time as the Marine Corps phases out legacy aircraft and takes steps to improve retention. Figure 5 shows the Marine Corps active component fighter pilot staffing levels and authorizations for fiscal years 2006 through 2017. For information on trends for all Marine Corps fixed-wing aircraft pilot communities, see appendix IV. In addition, Marine Corps data showed that the Marine Corps was unable to fully staff fighter pilot operational positions since fiscal year 2016. The gap between staffing levels and operational positions increased from 12 fighter pilots (1 percent of authorizations) to 57 (7 percent) in fiscal years 2016 through 2017. Although all of the military services had fewer fighter pilots than authorizations in fiscal years 2013 through 2017, service officials stated that deploying squadrons have been fully staffed with fighter pilots. Service officials reported using various approaches to continue to fully staff deploying fighter squadrons, including (1) prioritizing staffing fighter pilots to flying positions that require fighter pilot-specific technical skills; (2) using senior pilots to staff junior positions; and (3) having pilots deploy for longer and more frequently than planned, including on deployments with other squadrons. For example, Navy officials told us that approaches such as extending fighter pilots’ deployments allowed them to reduce the fiscal year 2017 first tour fighter pilot gap from 136 pilots (26 percent) to 75 pilots (15 percent). However, squadron leaders and fighter pilots told us that these approaches are having a negative impact on the fighter pilot workforce. Specifically, squadron leaders and fighter pilots told us that the high pace of operations for senior fighter pilots has limited their availability to train junior pilots, which has constrained the military services’ ability to increase the number of pilots with specific qualifications. In addition, fighter pilots told us that increased frequency of individual deployments cause instability for their families and lead to career dissatisfaction. Additionally, as we have previously reported, a high tempo of operations has increased the challenge of aviation squadrons to rebuild readiness. For example, according to Air Force officials, high deployment rates for Air Force squadrons have resulted in less time for squadrons to complete their full training requirements because high deployment rates mean that there are fewer aircraft available for training at home stations. Service officials report that they can also mitigate low numbers of fighter pilots by leveraging surpluses in other pilot communities. For example, as outlined in Air Force documents supporting pilot retention bonuses, the Air Force has staffed mobility pilots (i.e., cargo transport and aerial refueling pilots) to instructor pilot positions for certain basic flying training that would otherwise be staffed by fighter pilots. The Navy can also staff certain Department Head positions designated for fighter pilots with non- pilot aviators from that community. According to military service data, fighter pilot communities generally have the largest gaps among all military fixed-wing pilot communities. For example, in fiscal year 2017 the Air Force had 73 percent of the fighter pilots it needed, while the bomber community, which had the second largest gap among Air Force fixed- wing pilot communities, had 85 percent of the pilots it needed. According to service officials, squadron leaders, and fighter pilots, multiple inter-related factors have reduced each military service’s number of fighter pilots. Factors cited include reductions to active duty end strength, aircraft readiness challenges, and declining retention. Reductions to active duty military end strength have contributed to reductions in fighter pilot staffing levels. Service officials told us that reductions to military service end strength targets as part of the 2008 drawdown of forces in Iraq and Afghanistan and funding reductions related to the Budget Control Act of 2011 led to reductions in the fighter pilot workforce. For example, the Air Force offered 54 fighter pilots early retirement incentives in fiscal years 2014 through 2015, while the Marine Corps offered 49 fighter pilots early retirement options between fiscal years 2013 through 2016. Further, as we have previously reported, the Air Force used fighter pilots to meet the initial demand for UAS operators. Air Force officials told us that they removed 206 of those pilots from the fighter pilot community in fiscal years 2011 through 2012. Reduced force structure has also decreased the opportunities for fighter pilots to gain experience in their aircraft. For example, the Air Force reported that the number of total Air Force fighter squadrons (including the reserve components) declined from 134 in fiscal year 1989 to 55 in fiscal year 2017 (a 59-percent decrease), and as such fewer squadrons are available to provide newly trained fighter pilots with flying experience. Reduced aircraft availability has affected fighter pilots’ ability to meet flight hour targets. Service leaders told us that this has resulted in delays in training new pilots with the necessary qualifications to participate in certain missions. Specifically, according to November 2017 testimony, Air Force, Navy, and Marine Corps leaders reported that fighter pilots do not meet military service flight hour targets—in part due to reduced aircraft availability. For example, Navy and Marine Corps leaders testified that Navy and Marine Corps F/A-18 pilots average 13.5 and 12.7 flight hours per month, respectively, compared with goals of 20.1 and 15.7 hours per month. A senior Air Force leader testified before Congress that Air Force fighter pilots average about 16 flight hours per month. In June 2017 we reported on readiness challenges in Air Force and Marine Corps aviation squadrons. The military services have trained fewer fighter pilots than targeted over the last decade. In fiscal years 2007 through 2016, the Air Force trained 12 percent fewer new fighter pilots than the targeted amount, while the Navy and the Marine Corps each trained 8 percent fewer new fighter pilots than the targeted amount. Fighter pilots told us that the need to prioritize the staffing of experienced pilots to deploying squadrons has limited the number of experienced personnel available to train newer pilots at home stations. Recent Safety Concerns Regarding Onboard Systems in Naval Aircraft In April 2017, the Navy paused all basic flight training on the T-45 aircraft due to safety concerns regarding the oxygen supply and atmospheric pressurization systems aboard the training aircraft. The Navy and the Marine Corps share basic flight training resources, including training for fixed-wing aircraft pilots on T-45 aircraft. Navy and Marine Corps officials told us that if these basic training squadrons are unable to produce newly trained fighter pilots on schedule, this can lead to a decreased number of new fighter pilots in both military services. The F/A-18 has also been affected by problems with onboard oxygen supply systems leading to hypoxia, which can occur when aircrews receive insufficient or contaminated oxygen on board the aircraft. In August 2017 the Navy established a team to lead its effort to research and prevent these problems in fixed- wing aircraft. numbers of trained pilots. In addition, aircraft readiness challenges led the Navy to pause flight training on the T-45 training aircraft in April 2017 due to safety concerns regarding the oxygen supply systems aboard the training aircraft. Navy officials reported that gaps in first tour operational positions designated for all fixed-wing aircraft pilot communities could grow from 86 pilots in fiscal year 2017 to about 100 in fiscal year 2019. Declining retention has also contributed to low fighter pilot numbers. Our analysis of Air Force and Navy bonus retention data shows that retention of experienced fighter pilots has declined in recent years. We found that the number of Air Force fighter pilots that have signed retention contracts decreased from 63 percent in fiscal year 2013 to 35 percent in fiscal year 2017 (see fig. 6). This decline has continued even as the Air Force increased its maximum aviation bonus contract from $125,000 in fiscal year 2012 to $225,000 beginning in fiscal year 2013, the highest amount offered by any of the military services. According to Navy retention data, the Navy pool of fighter pilots eligible for the Department Head milestone (i.e., a mid-career operational leadership tour for different aspects of squadron management for pilots with between about 11 and 13 years of service) has shrunk over time. Navy officials told us that, as a result, the percentage of fighter pilots selected for the Department Head milestone has increased. For example, the Department Head selection rate for Navy F/A-18 pilots increased from 49 percent in fiscal year 2012 to 100 percent in fiscal year 2017. Further, the Navy did not meet its goals for fighter pilots signing retention bonuses at the Department Head milestone in fiscal years 2013 through 2017. For example, the Navy fell short of its retention bonus target of 73 fighter pilots by 38 pilots (48 percent of the target) for fiscal year 2017. In comparison, the surveillance and transport pilot community met or exceeded its target of pilots who signed a bonus contract 2 out of 5 years during that same period, while the maritime patrol pilot community met or exceeded its target 4 out of 5 years. Figure 7 shows the Navy Department Head active component fixed-wing pilot retention bonus take rate for fiscal years 2013 through 2017. Squadron leaders and fighter pilots we met with attributed declining retention to the staffing approaches being used by the military services to mitigate fighter pilot gaps and fully staff deployed squadrons. For example, squadron leaders told us that assigning senior fighter pilots to junior positions hurts retention by reducing leadership opportunities believed to be necessary for promotion. Fighter pilots also told us that quality of life has decreased as a result of longer and more frequent deployments. Further, fighter pilots told us that understaffing fighter pilots in operational units has resulted in an increased workload per pilot and lower quality of service for non-deployed fighter pilots in those units. The Air Force has developed and implemented initiatives to help increase fighter pilot numbers, and the Navy and the Marine Corps are developing initiatives to address overall retention concerns. The Air Force established a dedicated team to identify and develop initiatives specifically to address its reported fighter pilot shortage, and this effort has resulted in over 35 implemented initiatives. The Navy and the Marine Corps have not formulated initiatives specifically for fighter pilots, but have identified actions to address retention concerns. Navy and Marine Corps officials stated that, because the military services can still staff authorizations for deployed squadrons, they do not believe their staffing levels of fighter pilots have reached a critical shortage. However, Navy and Marine Corps personnel management officials we met with told us that they are closely monitoring trends in fighter pilot retention, and they believe that decreased retention in the near future may exacerbate fighter pilot gaps in their military services. The military services’ initiatives are summarized below. The Air Force established a dedicated effort to address fighter pilot workforce challenges, and many initiatives from this effort have been implemented. Specifically, in March 2016, the Chief of Staff of the Air Force directed the initiation of an effort to address the Air Force fighter pilot shortage. The Air Force created a Fighter Enterprise Tiger Team in March 2016, and began formulating initiatives to address the fighter pilot shortage that the Air Force identified. For example, as the result of one initiative, 126 contractors have been placed in fighter squadrons to assist with administrative tasks and reduce workload for fighter pilots, and additional contractor support is in the process of being added. Also, in the fall of 2016 the Air Force reinstated its award program to recognize fighter pilots for superior performance. According to a member of the Air Force’s Fighter Enterprise Tiger Team, the awards are non-monetary, but because they are merit- based they can help fighter pilots to be more competitive when being assessed for promotion. In February 2017, the Air Force effort was expanded from a focus on fighter pilots to include all rated personnel and renamed the Aircrew Crisis Task Force. The 37 initiatives implemented by the Air Force as of November 2017 as a result of the Fighter Enterprise Tiger Team and Aircrew Crisis Task Force efforts are presented in appendix V. The Navy is formulating a service-wide strategy—referred to as Sailor 2025—which includes over 40 initiatives to address retention issues throughout the Navy. We identified 10 initiatives from Sailor 2025 that may address some of the retention issues raised in our discussion groups with fighter pilots—such as dissatisfaction with the assignments and promotion processes. For example, Navy officials told us they are developing staffing software to manage assignments and make the process more transparent and flexible. The Navy is also testing a new performance evaluation system to more accurately evaluate sailor performance. In addition, the Navy has adjusted the existing aviation bonus program by increasing the maximum bonus amount for fighter pilots from $25,000 to $30,000 per year for fiscal year 2018. To increase the number of available fighter aircraft, the Navy has also established a Rhino Readiness Recovery team— referring to the Navy’s term for the F/A-18 E-F Super Hornet aircraft— to identify and address readiness challenges in that community. Navy officials told us they believe their approaches are sufficient to address any potential future Navy fighter pilot gaps. In November 2017, the Marine Corps reinstated the aviation bonus program last offered by the Marine Corps in fiscal year 2011. The Marine Corps is offering 2-year contracts totaling $40,000 to fighter pilots who have completed their service obligation—except for those fighter pilots assigned to the EA-6B aircraft. However, the Marine Corps is not in the process of developing any non-monetary initiatives to address pilot retention. Rather, the Marine Corps is addressing aircraft readiness challenges—an issue consistently raised by fighter pilots in our discussion groups—by establishing four lines of effort to increase the number of available fighter aircraft for fighter squadrons. Marine Corps officials told us that they have begun implementing multiple initiatives for those lines of effort. For example, one initiative is focused on improving availability of aircraft spare parts by increasing their funding and modernizing the spare parts supply chain. Another initiative is focused on growing the maintenance workforce and retaining experienced aircraft maintainers. Specifically, the Marine Corps is offering retention bonuses to experienced aircraft maintainers. Fighter pilots and squadron leaders told us that the fighter pilot occupation has significantly changed in recent years, but the military services have not reevaluated fighter squadron requirements. Fighter pilots and squadron leaders from each of the military services consistently told us that the fighter pilot occupation has significantly changed in recent years due to changes in fighter aircraft tactics and technology, additional training requirements, and the removal of administrative support positions from squadrons. The fighter pilots added that these changes have led to an unsustainable increase in workload. As discussed earlier, squadron requirements—the number of fighter pilots needed to meet operational mission needs—are calculated by the military services using a variety of inputs, including workload. Once these requirements are funded by Congress, they are an “authorization.” Service guidance requires squadron requirements to be reevaluated on a 2-year schedule (5 years for the Navy) and to be updated as conditions change. For the Air Force, guidance defines staffing requirements as the staffing needed to accomplish a job, mission, or program, and notes that staffing should be sized to reflect the minimum essential level to accomplish the required workload. The Office of the Administrative Assistant to the Secretary of the Air Force (Resources), along with Major Command manpower staffs establish staffing standards and, at a minimum, by policy are to reevaluate these standards for applicability and updates every 2 years, or earlier if dictated by significant workload or mission changes. The Air Force Manpower Analysis Agency determines staffing resource requirements and provides staffing and management consultation services to Air Force functional communities for improved resource utilization and enhanced mission effectiveness and efficiency. The Air Force could not provide specifics on the most recent updates to squadron requirements, because such data were stored in a database that managed requirements on a position-by-position basis, rather than aggregated by squadron. Air Force pilots and squadron leaders consistently told us that changing conditions in fighter squadrons, such as a higher pace of changes to tactics and technology, increased training requirements, and reduced administrative support, have increased fighter pilot workload. However, Air Force officials told us that metrics that inform squadron requirements (i.e., crew ratios, the targeted ratio of pilots to aircraft) have not been increased because the Air Force is instead prioritizing the effort to recapitalize its fleet of fighter aircraft. Separately from reevaluating squadron requirements, Air Force officials told us that they have implemented changes to address workload concerns cited by fighter pilots—such as adding contractor staff in squadrons to provide administrative support, as part of initiatives to address fighter pilot shortages they have identified. According to Air Force officials, the Air Force is currently reassessing non-operational requirements for fighter pilots (i.e., non-flying positions at headquarters organizations). Air Force officials told us that this reassessment is focused on determining which non-operational requirements currently assigned to fighter pilots could be assigned to other types of officers or pilots, to reduce the overall number of fighter pilot requirements. For the Navy, squadron requirements are dependent on the current wartime requirements developed by the Navy, referred to as the Required Operational Capability and Projected Operational Environment of a particular squadron, aircraft configuration, specified operating profile, computed workload, and established doctrinal constraints. The June 2017 update to the relevant Navy guidance reduced the frequency of the reviews of these requirements from every 2 years to every 5 years, with updates as required by those officials responsible for specific units. Navy officials told us that reviews are to be completed every 2 years, but updates are only made to squadron staffing documents if specific events occur, such as additional aircraft being assigned to a squadron. Navy officials added that they believe squadron requirements are accurate and updated with sufficient frequency. However, Navy pilots and squadron leaders consistently told us that changing conditions in fighter squadrons, such as a higher pace of changes to tactics and technology, increased training requirements, and more frequent individual deployments, have increased fighter pilot workload. However, the Navy has not recently updated squadron requirements to reflect such changes. Specifically, Navy fighter pilot squadron requirements are outlined in 15 Navy squadron staffing documents, and as of November 2017, 9 out of 15 of those documents had not been updated within the last 2 years. For the Marine Corps, guidance states that reviews to optimize force structure will be conducted every 2 years, taking into consideration new and emerging requirements. Marine Corps pilots and squadron leaders consistently told us that changing conditions in fighter squadrons, such as a higher pace of changes to tactics and technology, reduced aircraft availability, and more frequent individual deployments, have increased fighter pilot workload. However, the Marine Corps has not updated squadron requirements to reflect such changes. Specifically, Marine Corps fighter pilot squadron requirements are outlined in four fighter squadron staffing documents, and, as of November 2017, none had been updated within the last 2 years. Marine Corps squadron leaders and fighter pilots told us that updates to squadron requirements are not being conducted for squadrons of legacy aircraft, but added that they believe updates are warranted due to the continued delays in fielding the F-35 and resulting extensions to the planned service of legacy platforms. Marine Corps officials told us that they have not updated squadron requirements because (1) Marine Corps fighter pilot authorizations and staffing levels are below squadron requirements, so any increase to squadron requirements would require a significant increase to fighter pilot authorizations, and (2) the Marine Corps has faced challenges obtaining technical assistance to conduct workload assessments in fighter squadrons. The Navy Manpower Analysis Center conducts workload reviews of squadrons, based on specific events such as changes to the amount of time needed for maintaining the specific type of aircraft. Navy and Marine Corps fighter pilots we met with told us that they have had difficulties maintaining fighter jets in their squadrons, and Navy and Marine Corps leaders have made similar statements in congressional testimony. Further, Marine Corps officials told us that they have had difficulty utilizing the Navy Manpower Analysis Center to update workload analyses for their fighter squadrons, as they believed the center prioritizes work for Navy organizations. Navy Manpower Analysis Center officials told us that there is no formal requirement for their organization to conduct analyses for the Marine Corps, but that they respond to such requests on an ad-hoc basis. They added that the Marine Corps Combat Development Command has formal responsibility for updating Marine Corps workload analyses. We have previously reported that the size and data collection capacity of the Navy Manpower Analysis Center has limited the Navy’s capacity to carry out periodic workload reassessments, which may be a contributing factor to chronic under-staffing of ship crews. According to a DOD planning document, funding for UAS platforms was expected to grow by 17 percent in fiscal years 2014 through 2018. Moreover, in 2015, the Secretary of the Navy directed the establishment of a Deputy Assistant Secretary of the Navy for Unmanned Systems and announced that the F-35 will likely be the last cockpit-operated strike fighter aircraft the Department of the Navy will buy or fly. The Chief of Naval Operations announced in 2017 that the future of the Navy includes UAS systems as an integral part of the future fleet and must be purchased in large numbers to expand naval presence in key areas. For example, the Navy is developing a UAS platform—the MQ-25 Stingray— which is intended to replace that portion of the F/A-18 fighter aircraft’s mission set that involves re-fueling other F/A-18 aircraft. Also, in 2015 the Secretary of the Air Force stated that UAS pilots were flying on average about four times more hours than pilots in cockpit- operated aircraft. Further, a document outlining the Air Force’s vision for UAS for fiscal years 2009 through 2047 notes that systems will work in tandem with cockpit-operated aircraft, for example to attack air-defense systems, and that autonomous technologies will potentially allow one pilot to direct multiple aircraft, leading to personnel efficiencies. Although the impact of UAS on the fighter pilot workforce appears to be significant, the Air Force, the Navy, and the Marine Corps have not accounted for the planned increased use of UAS to complete missions similar to those carried out by fighter aircraft, and the potential impact of these changes on fighter pilot requirements. Specifically, Air Force and Navy officials told us that their military services have not conducted an assessment of the impact of future UAS operations on fighter pilot requirements. While the UAS platforms that are expected to overlap with fighter aircraft missions will not be fielded until the mid-2020s, the length of time required to develop an experienced fighter pilot compels the military services to begin incorporating these planned changes to fighter pilot requirements promptly. For example, Navy fighter pilots who are entering initial training in 2018 will not have completed their active duty service obligation (currently 8 years after Navy pilots complete flight training) when the MQ-25 Stingray system is expected to be fielded in 2026. A key tenet of human capital planning is determining existing and future skills and competencies, and associated workforce gaps. Without steps by the military services, to include reevaluating workload and taking into account the impact that the planned use of UAS will have on the fighter pilot workforce, the military services will not fully know the extent and nature of gaps between fighter pilot numbers and authorizations and how to best target actions to address these gaps. Fighter pilots are critical to achieving and maintaining air dominance during combat operations. To achieve that mission, the military services must have appropriate numbers of qualified fighter pilots. Service officials report that no unit is deploying without 100 percent of its fighter pilots, and they believe that they will continue to be able to meet their operational missions. Nevertheless, the Air Force, the Navy, and the Marine Corps, are reporting fewer fighter pilots than authorizations, and they project that these gaps will continue through at least fiscal year 2023. Without re- evaluating fighter pilot requirements, it will be difficult for the military services to accurately determine the number of fighter pilots needed to complete missions and help ensure success in combat. Specifically, without updating squadron requirements to reflect the growing administrative burden on fighter pilots in non-deployed squadrons, the currently identified differences between fighter pilot numbers and authorizations may be understated. By contrast, without updating future fighter pilot requirements to take into account changing roles and missions—in particular the increasing role of UAS in combat operations— forecasted fighter pilot gaps may be overstated. In short, reevaluating fighter pilot requirements is a key first step to help the military services clearly determine the magnitude of the gaps and target strategies to meet their personnel needs. We are making the following three recommendations: The Secretary of the Air Force should ensure that the Director of Operations and the Air Force Manpower Analysis Agency reevaluate fighter pilot squadron requirements, to include updating current assumptions of fighter pilot workload, and assessing the impact of future incorporation of UAS platforms into combat aviation. (Recommendation 1) The Secretary of the Navy should ensure that the Chief of Naval Operations reevaluate fighter pilot squadron requirements, to include updating current assumptions of fighter pilot workload, and assessing the impact of future incorporation of UAS platforms into combat aviation. (Recommendation 2) The Secretary of the Navy should ensure that the Commandant of the Marine Corps and the Deputy Commandant for Aviation reevaluate fighter pilot squadron requirements. (Recommendation 3) We provided a draft of this report to DOD for review and comment. We had initially recommended that the Marine Corps also assess the impact of UAS platforms on fighter pilot squadron requirements, but removed that portion of the third recommendation because Marine Corps officials told us that Marine Corps UAS squadrons will continue to be resourced with operators through the accession process and Marine Corps UAS operator requirements do not affect either pilot inventories or fighter pilot workload. In its written comments, reproduced in appendix VI, DOD concurred with our recommendations, citing its commitment to addressing manpower, personnel, and training challenges for the fighter pilot community and broader aviation and aviation support capabilities. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to appropriate congressional committees; the Secretary of Defense; the Secretary of the Air Force; the Secretary of the Navy; and the Commandant of the Marine Corps. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. To assess the extent to which the military services had differences in the number of fighter pilots compared to authorizations, as well as contributing factors and service initiatives to address the differences, we obtained and analyzed data on authorizations designated for pilots and corresponding staffing levels of pilots for all fixed-wing, cockpit-operated (hereafter referred to as fixed-wing) aircraft communities in the Air Force, the Navy, and the Marine Corps. We did not include the Army in the scope of our review because the Army does not operate fighter aircraft. For the Air Force and the Marine Corps active component, we compared pilot staffing levels with authorizations for all fixed-wing aircraft communities for fiscal years 2006 through 2017. We obtained and analyzed projected authorizations and staffing levels for the same pilot communities for fiscal years 2018 through 2023. We further obtained and reviewed Marine Corps data on fighter pilot operational position staffing targets and staffing levels for fiscal year 2017 and similar Air Force data for fiscal year 2018. We also compared Air Force and Marine Corps reserve component fighter pilot staffing levels with authorizations for fiscal years 2006 through 2017. For the Navy, we obtained and analyzed data on authorizations designated for active and reserve component pilots for fiscal years 2006 through 2017, and staffing levels for all Navy fixed-wing aircraft communities in the active component for fiscal years 2011 through 2017. However, the Navy’s authorization data did not specify how many fighter pilots were assigned to non-flying assignments because the Navy does not fully assign non-flying authorizations to specific communities, unlike the Air Force and the Marine Corps. Therefore, we were unable to conduct an analysis comparing total Navy fighter pilot staffing levels with authorizations, as we did for the Air Force and the Marine Corps. We instead obtained and analyzed Navy data on differences between authorizations and pilot staffing levels for first operational tour, Department Head, and Command positions for all fixed-wing aircraft pilot communities in the active component. We also obtained and analyzed Navy data on differences between staffing targets and pilot staffing levels for the Navy Reserve for fiscal year 2017, the only year of data available. We also obtained and analyzed Navy retention data for pilots eligible for Department Head assignments, a mid-career milestone in fixed-wing communities for fiscal years 2011 through 2017. Retention data for the Department Head milestone are made available in annual aviation continuation pay reports to Congress. Fiscal year 2018 retention data will be available in fiscal year 2019. We further obtained and analyzed the number of fighter pilots the Air Force, the Navy, and the Marine Corps trained in fiscal years 2007 through 2016. To assess the reliability of the data we obtained, we reviewed corroborating documentation, analyzed the data for inconsistencies, and interviewed service officials about the reliability of the data. We determined that the data we used were sufficiently reliable to describe the trends in personnel staffing levels and authorizations for the time period included in our scope. We met with DOD and service officials to discuss the results of our analysis and factors that may have contributed to low numbers of fighter pilots. We also collected and reviewed service documentation regarding the factors they identified. We interviewed service officials and reviewed documentation to identify any initiatives taken or planned to increase fighter pilot numbers. In addition, we selected a non-generalizable sample of locations where fighter pilots are stationed (see table 1). We selected these locations based on geographic diversity (one location for each military service in both the eastern and western portions of the contiguous United States), a diversity of types of fighter aircraft, and a mix of squadron types at the locations (i.e., operational squadrons, training squadrons, and reserve component squadrons). In selecting locations we also considered the availability of pilots due to conflicts with deployment or training events. At each location, we moderated one to two discussion groups with fighter pilots for a total of 13 discussion groups ranging from between 3 and 20 pilots per group. We held separate sessions with junior and senior pilots at all locations, except for at Naval Air Station Oceana, Marine Corps Air Station Cherry Point, and Marine Corps Air Station Miramar, due to pilot availability. We also interviewed unit leadership at these locations (i.e., wing and squadron commanders and executive officers) to obtain their perspective on the status of the fighter pilot workforce. While these discussion groups and interviews allowed us to learn about many important aspects of the fighter pilot workforce from the perspective of fighter pilots and squadron leaders, they were designed to provide anecdotal information and not results that would be representative of all the department’s more than 5,000 fighter pilots as of fiscal year 2017. To assess the extent to which the military services have reevaluated squadron requirements for the number of fighter pilots needed, including the consideration of UAS pilot requirements, we reviewed service guidance to determine the frequency with which elements of fighter pilot squadron requirements are to be reevaluated, reviewed service documentation, and interviewed service officials to determine the extent to which these elements had been reevaluated on schedule, reviewed service documentation regarding the planned mix of cockpit-operated and remotely-operated aviation platforms for future operations, and discussed with service officials the extent to which these plans are incorporated into forecasts of fighter pilot squadron requirements. We conducted this performance audit from November 2016 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Air Force uses pilots from both the active and reserve components to staff fixed-wing, cockpit-operated (hereafter referred to as fixed-wing) aircraft pilot positions that Congress authorizes and funds through appropriations. These Air Force pilots staff a mix of operational and non- operational positions. Operational positions include both flying (e.g., combat pilot or instructor pilot positions) and non-flying positions (e.g., close air support duty officer positions in an Air Operations Center) that directly support combat operations. Non-operational positions are generally non-flying, and include assignments to headquarters or combatant command positions, some of which can be staffed by other types of Air Force officers. This appendix compares Air Force pilot staffing levels with authorizations for operational and non-operational positions for all fixed-wing aircraft communities for fiscal years 2006 through 2017. Air Force fixed-wing community pilots operate fighter, bomber, mobility, surveillance, and special operations aircraft. Fighter pilots operate tactical aircraft that engage in air-to-air and air-to-surface attacks and include the A-10, F-15, F-16, F-22A, and F-35 aircraft. Bomber pilots operate aircraft to deliver munitions and include the B-1, B-2, and B-52 aircraft. Mobility pilots operate aircraft used for aerial refueling and troop and cargo transport and include the C-17 and KC-135 aircraft. Surveillance pilots operate aircraft used for surveillance and reconnaissance to support ground troops and include the E-8 and U-2 aircraft. Special operations pilots operate aircraft that provide close-air support for ground troops, including the AC-130. Air Force officials report that they can staff certain operational positions designated for fighter pilots with pilots from other pilot communities that have surpluses. For example, Air Force officials told us they can staff mobility or surveillance pilots (communities which both had a surplus of pilots in fiscal year 2017) to certain basic flying training instructor pilot positions that would otherwise be staffed by fighter pilots. Figure 8 shows the Air Force active component fixed-wing aircraft community pilot staffing levels and authorizations for fiscal year 2017. According to Air Force data for the active component, the Air Force had fewer fighter pilots than authorizations in 11 of 12 years from fiscal year 2006 through fiscal year 2017. This gap grew from 192 fighter pilots (5 percent of authorizations) in fiscal year 2006 to 1,005 (27 percent of authorizations) in fiscal year 2017. Figure 9 shows the comparison of the Air Force’s active component fighter pilot staffing levels with authorizations for fiscal years 2006 through 2017. According to Air Force data for the reserve components the Air National Guard and the Air Force Reserve, the Air Force had fewer fighter pilots than authorizations every fiscal year from fiscal year 2006 through 2017. For example, the Air Force reported that the reserve components had a gap of 271 fighter pilots (17 percent of authorizations) in fiscal year 2017. Figure 10 illustrates the gap between staffing levels and authorizations for Air Force fighter pilots in the reserve components for fiscal years 2006 through 2017. According to Air Force data for the active component, the Air Force had fewer bomber pilots than authorizations in fiscal years 2014 through 2017. This gap grew from 11 bomber pilots (1 percent of authorizations) in fiscal year 2014 to 135 (15 percent of authorizations) in fiscal year 2017. Figure 11 shows the comparison of the Air Force’s active component bomber pilot staffing levels with authorizations for fiscal years 2006 through 2017. According to Air Force data for the active component, the Air Force had more mobility pilots than authorizations from fiscal year 2006 through fiscal year 2017. This surplus peaked at 1,637 mobility pilots (132 percent of authorizations) in fiscal year 2011, and declined to 264 (105 percent of authorizations) in fiscal year 2017. Figure 12 shows the comparison of the Air Force’s active component mobility pilot staffing levels with authorizations for fiscal years 2006 through 2017. According to Air Force data for the active component for fiscal years 2006 through 2017, the Air Force had fewer surveillance pilots than authorizations in fiscal years 2012 and 2013. In fiscal year 2017, the surplus was 220 surveillance pilots (128 percent of authorizations). Figure 13 shows the comparison of the Air Force’s active component surveillance pilot staffing levels with authorizations for fiscal years 2006 through 2017. According to Air Force data for the active component, the Air Force had fewer special operations pilots than authorizations from fiscal year 2006 through fiscal year 2017. Special operations pilot staffing levels and authorizations have increased substantially from fiscal year 2009 through fiscal year 2017. Further, the gap between the staffing levels and authorizations decreased from 342 special operations pilots (29 percent of authorizations) in fiscal year 2009 to 227 (14 percent of authorizations) in fiscal year 2017. Figure 14 shows the comparison of the Air Force’s active component special operations pilot staffing levels with authorizations for fiscal years 2006 through 2017. The Navy uses pilots from both the active and reserve component to staff fixed-wing, cockpit operated (hereafter referred to as fixed-wing) aircraft pilot positions that Congress authorizes and funds through appropriations. These Navy pilots staff a mix of operational and non-operational positions. Operational positions include both flying (i.e., combat pilot or instructor pilot) and non-flying positions that directly support combat operations. Non-operational positions are generally non-flying positions, and include assignments to positions at headquarters or in the combatant commands that can be staffed by other types of Navy officers. The Navy does not separate non-operational fighter pilot authorizations from authorizations for other pilots. As a result, this appendix only presents Navy pilot staffing levels for those communities for fiscal years 2011 through 2017, and compares Navy pilot staffing levels to specific operational positions. Specifically, we compared authorizations and pilot staffing levels for Navy first operational tour, Department Head, and Command positions for all fixed-wing, cockpit-operated aircraft communities in the active component for fiscal years 2013 through 2017. Navy fixed-wing community pilots operate fighter, surveillance and transport, and maritime patrol aircraft. Navy fighter pilots operate tactical aircraft for air defense and support. Fighter aircraft include both legacy and Super Hornet variants of the F/A-18, as well as newer tactical aircraft such as the EA-18G developed for electronic warfare and the F- 35. Surveillance and transport pilots operate turboprop aircraft, including the E-2D for surveillance and airborne early warning missions and the C- 2A for troop and cargo transport between aircraft carriers and shore bases. Maritime patrol pilots operate jet aircraft for missions including anti-submarine warfare and anti-surface warfare, and include aircraft such as the P-8A. According to Navy personnel data, Navy fighter pilot staffing levels decreased from 1,707 fighter pilots in fiscal year 2015 to 1,548 (a 9- percent decrease) in fiscal year 2017. Figure 15 compares changes in the Navy fighter, surveillance and transport, and maritime patrol pilot staffing levels for fiscal years 2011 through 2017. According to Navy fixed-wing pilot staffing levels and authorizations data for the first tour milestone (i.e., pilots’ first operational tours at sea for pilots generally with between 3 and 6 years of service), the Navy was unable to fully staff fighter pilot, surveillance and transport, and maritime patrol operational positions from fiscal years 2013 through 2017. The fighter pilot gap grew from 57 fighter pilots (12 percent of authorizations) in fiscal year 2013 to 136 fighter pilots (26 percent) in fiscal year 2017. The surveillance and transport pilot gap varied from 29 pilots (20 percent of authorizations) in fiscal year 2013 to 30 pilots (23 percent) in fiscal year 2017, while the maritime patrol community pilot gap decreased from 112 pilots (23 percent of authorizations) in fiscal year 2013 to 4 pilots (1 percent) in fiscal year 2017. Figure 16 compares the Navy active component fighter pilot, surveillance and transport, and maritime patrol communities’ first tour staffing levels and authorizations for operational positions for fiscal years 2013 through 2017. According to Navy fixed-wing aviator staffing levels and authorizations data for the Department Head milestone (i.e., a mid-career operational leadership tour for different aspects of squadron management for pilots with between about 11 and 13 years of service), the military service had more fighter, surveillance and transport, and maritime patrol aviators than authorizations for fiscal years 2013 through 2017. However, the surplus of fighter aviators compared with authorizations decreased from 68 aviators (133 percent of authorizations) in fiscal year 2013 to 28 aviators (114 percent) in fiscal year 2017. Figure 17 compares the Navy active component fighter, surveillance and transport, and maritime patrol aviator communities’ Department Head staffing levels and authorizations for operational positions for fiscal years 2013 through 2017. According to Navy fixed-wing aviator staffing levels and authorizations data for the Command milestone (i.e., a leadership tour for Commanders, including squadron commander, for aviators with between about 17 and 19 years of service) the number of fighter, surveillance and transport, and maritime patrol aviators compared with authorizations increased from fiscal years 2013 through 2017. For example, while the fighter pilot community had fewer aviators than authorizations in fiscal year 2013 (a gap totaling 2 percent of authorizations), it had a surplus of aviators in fiscal year 2017 (2 percent above authorizations). Figure 18 compares the Navy active component fighter, surveillance and transport, and maritime patrol aviator communities’ Command milestone staffing levels and authorizations for fiscal years 2013 through 2017. The Marine Corps uses pilots from both the active and reserve components to staff fixed-wing, cockpit-operated (hereafter referred to as fixed-wing) aircraft pilot positions that Congress authorizes and funds through appropriations. These Marine Corps pilots staff a mix of operational and non-operational positions. Operational positions include both flying (e.g., combat pilot or instructor pilot positions) and non-flying positions (e.g., air controller in a ground infantry unit) that generally support combat operations. Non-operational positions are generally non- flying and include assignments to headquarters or combatant command positions, some of which can be staffed by other types of Marine Corps officers. This appendix compares Marine Corps pilot staffing levels with authorizations for operational and non-operational positions for all fixed- wing aircraft communities for fiscal years 2006 through 2017. Marine Corps fixed-wing community pilots operate fighter, tiltrotor, and tanker aircraft. Fighter pilots operate tactical aircraft for air defense and close air support and attack missions, and include the EA-6B, AV-8B, F/A-18, and F-35. Tiltrotor pilots operate the MV-22—an aircraft that operates as a helicopter for takeoffs and landings and, once airborne, converts to a turboprop aircraft—and is used to transport combat troops and equipment. Tanker pilots operate the KC-130, an aircraft used for in- flight refueling and transport of troops and equipment. According to Marine Corps data for the active component, the Marine Corps had fewer pilots than authorizations in all of its fixed-wing communities in fiscal year 2017. The Marine Corps forecasts this gap will persist through at least fiscal year 2023. Figure 19 shows the Marine Corps active component fixed-wing pilot staffing levels and authorizations for fiscal year 2017. According to Marine Corps data for the active component, the Marine Corps had fewer fighter pilots than authorizations from fiscal year 2006 through fiscal year 2017. This gap grew from 63 fighter pilots (6 percent of authorizations) in fiscal year 2006 to 322 fighter pilots (24 percent) in fiscal year 2017. Figure 20 shows the comparison of the Marine Corps’ active component fighter pilot staffing levels and authorizations for fiscal years 2006 through 2017. According to Marine Corps data for the active component, the Marine Corps had fewer fighter pilots than operational positions in fiscal years 2016 and 2017. Figure 21 shows the comparison of the Marine Corps’ active component fighter pilot staffing levels with operational positions for fiscal years 2006 through 2017. According to Marine Corps data for the reserve component, the Marine Corps Reserve, a community that the Marine Corps uses to augment its available staffing levels of active duty pilots, had more fighter pilots than authorizations for 8 of 12 years in fiscal years 2006 through 2017. The Marine Corps had a gap of seven reserve component fighter pilots (6 percent of authorizations) for fiscal year 2017. Figure 22 shows the Marine Corps Reserve fighter pilot staffing levels and authorizations for fiscal years 2006 through 2017. According to Marine Corps data for the active component, the Marine Corps had fewer junior fighter pilots—those pilots between grades Officer-1 and Officer-3—than authorizations from fiscal year 2006 through fiscal year 2017. Marine Corps officials told us that, as a result, the Marine Corps assigns pilots at the Officer-4 grade to staff positions designated for junior pilots. For example, in fiscal year 2017 the Marine Corps needed an additional 309 junior fighter pilots (48 percent of authorizations) to fill all authorizations. Figure 23 shows the comparison of the Marine Corps active component junior and senior fighter pilot staffing levels and authorizations for fiscal year 2017. According to Marine Corps data for the active component, the Marine Corps had fewer tiltrotor pilots than authorizations from fiscal year 2006 through fiscal year 2017. Tiltrotor pilot staffing levels and authorizations have increased substantially from fiscal year 2006 through fiscal year 2017. Further, the gap between the staffing levels and authorizations has decreased from 137 tiltrotor pilots (70 percent of authorizations) in fiscal year 2006 to 322 tiltrotor pilots (34 percent of authorizations) in fiscal year 2017. Figure 24 shows the comparison of the Marine Corps active component tiltrotor pilot staffing levels and authorizations in fiscal years 2006 through 2017. According to Marine Corps active component data, the Marine Corps had fewer tanker pilots than authorizations from fiscal year 2006 through fiscal year 2017. This gap decreased from 86 tanker pilots in fiscal year 2006 (22 percent of authorizations) to 18 tanker pilots (5 percent of authorizations) in fiscal year 2017. Figure 25 shows the comparison of the Marine Corps active component tanker pilot staffing levels and authorizations for fiscal years 2006 through 2017. In March 2016, the Chief of Staff of the Air Force created the Fighter Enterprise Tiger Team to address the fighter pilot shortage that the Air Force identified. In February 2017, the Air Force effort was expanded to include all rated personnel and renamed the Aircrew Crisis Task Force. According to Air Force officials, the task force has focused on the following areas to improve fighter pilot retention: work/life balance, quality of service, and monetary compensation. In August 2017 the Aircrew Crisis Task Force held a Dedicated Aircrew Retention Team Summit that included organizing discussion groups with pilots to obtain information on retention challenges. According to Air Force officials, in September 2017, the task force presented 25 of the 44 recommendations developed at the summit to the Chief of Staff of the Air Force and as of November 2017 the Chief of Staff had decided to implement 2 of them immediately and conduct additional analysis on the other 23. The recommendations being analyzed include reducing the length and number of deployments for fighter pilots and converting some non-flying fighter pilot positions to UAS pilot positions. As of November 2017, these efforts had resulted in 37 implemented initiatives (see table 2). In addition to the contact named above, key contributors to this report were Lori Atkinson, Assistant Director; Vincent Buquicchio, Timothy Carr, Mae Jones, Foster Kerrison, Amie Lesser, Michael Silver, and Nell Williams. Military Personnel: Actions Needed to Better Position the Navy and the Marine Corps to Support Expanding Unmanned Systems Operations. GAO-18-162. Washington, D.C.: February 6, 2018. Department of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017. DOD Training: DOD Has Taken Steps to Assess Common Military Training. GAO-17-468. Washington, D.C.: May 23, 2017. Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18, 2017. High Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Military Compensation: Additional Actions Are Needed to Better Manage Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.: February 3, 2017. Unmanned Aerial Systems: Air Force and Army Should Improve Human Capital Planning for Pilot Workforces. GAO-17-53. Washington, D.C.: January 31, 2017. Unmanned Aerial Systems: Further Actions Needed to Fully Address Air Force and Army Pilot Workforce Challenges. GAO-16-527T. Washington, D.C.: March 16, 2016. Unmanned Aerial Systems: Actions Needed to Improve DOD Pilot Training. GAO-15-461. Washington, D.C.: May 14, 2015. Air Force: Actions Needed to Strengthen Management of Unmanned Aerial System Pilots. GAO-14-316. Washington, D.C.: April 10, 2014. Tactical Aircraft: DOD’s Ability to Meet Future Requirements Is Uncertain, with Key Analyses Needed to Inform Upcoming Investment Decisions. GAO-10-789. Washington, D.C.: July 29, 2010. Unmanned Aircraft Systems: Comprehensive Planning and a Results- Oriented Training Strategy Are Needed to Support Growing Inventories. GAO-10-331. Washington, D.C.: March 26, 2010. Human Capital: Key Principles for Effective Strategic Workforce Planning. GAO-04-39. Washington, D.C.: December 11, 2003. Military Personnel: Actions Needed to Better Define Pilot Requirements and Promote Retention. GAO/NSIAD-99-211. Washington, D.C.: August 20, 1999.", "summary": "Fighter pilots operate aircraft that are critical to achieving and maintaining air dominance during combat operations. The military services invest significant time and funding to train, compensate, and retain fighter pilots. According to Air Force officials, it costs between $3-$11 million and takes approximately 5 years to develop an individual fighter pilot to lead combat missions. Senate Report 114-255 included a provision for GAO to review the Department of Defense's (DOD) management of the fighter pilot workforce. GAO's report (1) assesses the extent to which the military services had differences in the number of fighter pilots compared to authorizations, and describes any contributing factors as well as initiatives to address the differences, and (2) assesses the extent to which the military services had reevaluated squadron requirements for the number of fighter pilots needed, including consideration of UAS pilot requirements. GAO analyzed military service personnel data, documentation on service initiatives to address factors contributing to fighter pilot shortages, and service documentation of requirements; met with a non-generalizable sample of fighter pilots at seven locations; and interviewed DOD and service officials. The Air Force, the Navy, and the Marine Corps had gaps between the actual numbers of fighter pilots and authorizations (i.e. funded positions) in fiscal years (FY) 2013 through 2017. In FY 2017 the Air Force's gap was the widest at 27 percent of authorizations (see fig. below) and is projected to continue through FY 2023. The Marine Corps' gap grew from 6 percent in FY 2006 to 24 percent in FY 2017; it is concentrated in fighter pilots below the rank of major. While the Navy did not have comparable data, it had a gap at fighter pilots' first operational tours that grew from 12 percent in FY 2013 to 26 percent in FY 2017, and Navy officials stated it could increase through mid-2019. Service officials attributed these gaps to aircraft readiness challenges, reduced training opportunities, and increased attrition of fighter pilots due to career dissatisfaction. To help increase fighter pilot numbers, the military services are taking actions, including increasing the amounts of financial incentives to retain pilots. The military services have not recently reevaluated squadron requirements to reflect increased fighter pilot workload and the emergence of unmanned aerial systems (UAS). According to service guidance, squadron requirements are to be reviewed on a 2-year schedule and to be updated as conditions change (in June 2017 the Navy revised its guidance to extend its schedule from 2 years to 5 years). However, service officials acknowledged that they have not updated all squadron requirements within the last 2 years. These officials stated that the requirements have not been reevaluated because existing conditions do not warrant the change. However, fighter pilots and squadron leaders interviewed at locations GAO visited consistently stated that the typical workload has significantly increased in recent years due to, among other things, changes in fighter aircraft tactics and technology and reductions to administrative support in squadrons. Further, the military services have not assessed the effect of increased reliance on UAS on fighter pilot requirements. The Air Force's vision for UAS notes that systems will work in tandem with cockpit-operated aircraft and that autonomous technologies will potentially lead to personnel efficiencies. Without re-evaluating squadron requirements to reflect current and emerging conditions, the nature of the gap may be inaccurate and thus make it difficult for the military services to target strategies to meet their personnel needs. GAO recommends that the Air Force, the Navy, and the Marine Corps reevaluate fighter pilot squadron requirements. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "First authorized in 1972, the Pell Grant Program awards federally-funded grants to low-income undergraduate and certain post-baccalaureate students who are enrolled in a degree or certificate program (which can include vocational programs) and have federally-defined financial need. Education’s Office of Federal Student Aid administers the Pell Grant program and other federal student aid programs—grants, loans, and work-study—authorized under Title IV of the Higher Education Act of 1965, as amended. Students are eligible to receive Pell grants for no more than 12 semesters (or the equivalent). The maximum allowable Pell grant for the 2018-2019 school year was $6,095. The amount a student receives is based on a formula that compares the estimated cost to attend a particular school with a student’s expected family contribution toward that cost. A student’s expected family contribution is determined by considering his or her income and assets, or for students who are dependent or independent students who are married, their income and assets as well as that of their parents or spouses. Students are eligible for federal need-based aid if their cost of attending a school is more than their expected family contribution. Students incarcerated in federal or state penal institutions have been ineligible for Pell grants since the enactment of the Violent Crime Control and Law Enforcement Act of 1994. Beginning in the 2016-2017 school year, the Second Chance Pell pilot has allowed a limited number of students to receive Pell grants despite their incarceration. In general, to be eligible to receive federal student aid (including Pell grants), Department of Education guidance states that an applicant must: be a citizen or eligible noncitizen of the United States; have a valid Social Security Number; have a high school diploma or a General Education Development certificate, or have completed homeschooling; be enrolled in an eligible program as a regular student seeking a maintain satisfactory academic progress; not owe a refund on a federal student grant or be in default on a federal student loan; register (or already be registered) with the Selective Service System, if the person is a male and not currently on active duty in the U.S. Armed Forces; and not have a conviction for the possession or sale of illegal drugs for an offense that occurred while the person was receiving federal student aid (such as grants, work-study, or loans). For the Pell grant program, an applicant must also demonstrate financial need and not have obtained a bachelor’s degree or a first professional degree. In the 2016-2017 school year, more than 18.6 million prospective students applied for federal student aid by submitting the Free Application for Federal Student Aid (FAFSA). The FAFSA consists of more than 100 questions that collect information ranging from basic contact information to the current value of assets. Several questions ask for financial information, which could require applicants (and their parents and spouses, if they are dependent or married) to rely upon information located on tax returns, as well as information from bank, business, and investment records. Incarcerated individuals in the Second Chance Pell pilot are required to apply for financial aid using the same process as students in the non-incarcerated population. After Education processes an applicant’s FAFSA, a report is sent to the applicant or made available online. This report includes the applicant’s expected family contribution, the types of federal aid for which the applicant qualifies, and information about any errors—such as questions the applicant did not complete—that Education identified during FAFSA processing. Schools send applicants award letters after admission, providing students with types and amounts of federal, state, and institutional aid, should the student decide to enroll. Education uses a process called “verification” to help identify and correct erroneous or missing information in students’ FAFSAs, which helps the department’s efforts to reduce improper payments of federal student aid. Education selects approximately 30 percent of FAFSAs for verification each academic year and schools are required to work with the selected students to confirm the accuracy of the information provided on their FAFSAs. A student is responsible for gathering the necessary documentation—such as prior years’ tax returns or proof of having obtained a high school diploma—and providing it to the school financial aid office, which compares the information submitted in the FAFSA to the student’s supporting documentation. If there is a difference between the student’s documentation and what he or she submitted on the FAFSA, the FAFSA information may need to be corrected. When selecting FAFSAs for verification, Education aims to select those FAFSAs with the highest statistical probability of error and the impact of such error on award amounts. Education’s specific criteria for selecting FAFSAs for verification is not public information; however, the department periodically refines its process for selecting FAFSAs to reduce the burden of verification on applicants, their families, and schools while maintaining the integrity of the federal student aid programs. Education publishes a list of potential verification items for each award year in the Federal Register. The items that schools are required to verify for a given application are selected by Education from that list. For the 2018-2019 school year, the items for verification are shown below: Adjusted gross income, U.S. income tax paid, Untaxed portions of Individual Retirement Arrangement distributions, Untaxed portions of pensions, Individual Retirement Arrangement deductions and payments, Tax-exempt interest income, Income earned from work, Household size, Number of household members in college, High school completion status, Education credits, and Identity and statement of educational purpose. The body of literature on prisoners’ participation in educational programs while incarcerated suggests there may be benefits for participants, the facilities in which they are housed, and taxpayers. However, positive benefits attributed to postsecondary correctional education are not always clear because the students who would have done better post-release may have been more willing or motivated to participate in the program anyway. See appendix II for a summary of selected research on correctional education. See appendix III for additional information on the educational attainment of the prison population. In response to an August 2015 Federal Register notice announcing the pilot, Education officials reported receiving applications from over 200 schools seeking to participate. The officials said they selected schools for the pilot that varied along several characteristics, including location and size, as well as ensuring that selected schools did not have a history of compliance issues or other problems delivering federal student aid. Education selected 64 schools to participate in the pilot and officially notified schools in June of 2016 that Pell-funded courses could begin as early as July 1 of that year. The 64 schools are located across 26 states and include public and private nonprofit 2- and 4-year schools. Figure 1 below shows the locations and numbers of the 64 schools selected to participate in the pilot and figure 2 includes additional information on 3 schools participating in the pilot that were included our sample. Appendix IV includes a complete list of the schools Education selected to participate in the pilot and select characteristics of those schools. To prepare for the pilot, Education took a number of actions. For example, Education hosted four webinars for officials at schools selected to participate in the pilot. The first two webinars occurred in September 2015, during which Education officials discussed the pilot’s objectives and strategies for establishing effective partnerships between schools and prisons. The third webinar took place in July 2016 and covered how to navigate the federal financial aid application process and the information Education planned to collect from schools, among other topics. Education held the final webinar in August 2016 in collaboration with the Department of Justice. The webinar contained information on how schools and their prison partners could develop shared goals, roles, expectations, policies, and procedures, and how these might be incorporated into a memorandum of understanding. Education also developed a Frequently Asked Questions page on its website and responded to questions submitted by school officials via email. In addition, Education hosted breakout sessions for Second Chance Pell schools at its annual Federal Student Aid Training Conference in 2016, 2017, and 2018. School officials reported working with a variety of stakeholders to prepare for and to implement the pilot. For instance, officials from 7 of 12 schools we interviewed said they collaborated with one or more additional stakeholders within the school, such as individuals working in academic departments, financial aid, the registrar, the bursar, and academic advising. For example, officials from one school said administrators partnered with the bursar and the registrar to ensure that incarcerated students were not unenrolled from classes if their Pell grants took longer to be disbursed than those for non-incarcerated students. Officials from 10 of 12 schools we interviewed talked about the importance of coordinating with staff at the prison, and officials from 9 schools said coordinating with their states’ departments of corrections was important for implementing the pilot. For example, officials from one school said their state Department of Corrections demolished a wall at one participating prison in order to provide more classroom and study space for the program. Finally, schools described collaborating with organizations that help facilitate college courses in prisons. For example, officials from all 12 schools we interviewed said that Vera provided technical assistance, such as information-sharing and opportunities to network with other pilot schools. Officials from one school also noted that they partner with Hudson Link, an organization that recruits students for postsecondary correctional education programs and supports students’ reentry upon release, among other activities. Across the pilot’s first 2 years, 59 Second Chance Pell schools disbursed approximately $35.6 million in Pell grants to a total of 8,769 individual students. See table 1 for a comparison between the first and second school years. Not all of the 64 schools selected for the pilot began offering Pell-funded classes at the start of year one. Specifically, 11 of the 64 selected schools were unable to offer classes in the pilot’s first year and 5 of the 64 selected schools did not offer classes in the second year. Education officials told us that some schools needed additional time to stand up their programs, as the department allowed, for a number of reasons. For example, officials said: Some schools with new correctional education programs faced delays obtaining accreditation for those programs. Some schools needed additional time to work out operational details, such as obtaining credentials or security clearances in order for faculty and staff to enter the prison. Some schools needed additional time to build relationships with correctional partners. Figure 3 shows incarcerated students taking college classes inside two New York prisons. School officials we interviewed said that they experienced some challenges establishing incarcerated applicants’ eligibility for aid, including establishing an applicant’s citizenship or eligible non-citizenship and providing accurate Social Security Numbers or Alien Registration Numbers. For example, officials from 6 of the 12 schools we interviewed said that some of their incarcerated applicants did not know or have access to their Social Security Number. The two most commonly- identified reasons applicants were initially ineligible for Pell grants were (1) some applicants had not registered for Selective Service, and (2) some had an existing federal student loan in default status. Schools and applicants faced challenges addressing these reasons. Selective Service. Generally, to be eligible to receive Pell grants, applicable male students must have registered with the Selective Service. However, for male students who have not registered, institutions may determine that the student is not ineligible for a Pell grant if the student can demonstrate by submitting evidence to the institution that (1) he was unable to present himself for registration because of reasons beyond his control—such as hospitalization, incarceration, or institutionalization—or (2) he is over 26 and when he was between the ages of 18 to 26, he did not knowingly and willfully fail to register with the Selective Service. Education data showed that about 15 percent of the FAFSAs submitted in the pilot’s first year were from applicants who had not registered for Selective Service. In comparison, 2 percent of FAFSAs in the overall population were submitted by applicants who had not registered. School officials said that many applicants had been continuously incarcerated between ages 18 to 26, but that obtaining documentation to demonstrate this was difficult in some circumstances. For example, officials from one school reported that obtaining records from juvenile correctional facilities was challenging and officials at another school said that applicants did not always know or have access to their exact dates of incarceration. Men over age 26 who had not been continuously incarcerated but who wished to apply for federal financial aid must obtain an official response from the Selective Service System confirming that the individual did not register, but should not be denied federal benefits. To obtain this official response, the student can write or call the Selective Service System with a detailed description of the circumstances he believed prevented him from registering at the required time. The individual would then provide the official written response from the Selective Service System to his school financial aid office, which would evaluate whether his failure to register was knowing or willful. Officials from 7 of the 12 schools we interviewed said the process to obtain documentation from the Selective Service System was difficult or time-consuming. Student Loan Default. Applicants are generally ineligible for Pell grants if they have a prior federal student loan in default status. Education data showed that about 10 percent of FAFSAs in the first year of the pilot were submitted by applicants with an existing federal student loan in default status. In comparison, about 2 percent of FAFSAs in the overall population were submitted by applicants with an existing loan in default status. Officials from all 12 schools we interviewed said at least some of their incarcerated applicants had existing federal student loans in default status. There are options, however, for individuals to remove default status from their loans, potentially regaining eligibility for Pell grants. For example, borrowers may rehabilitate their student loans by entering into and completing a written agreement that requires the borrower to make nine on-time monthly payments within 10 consecutive months. These income-driven payments can be as low as $5 per month. According to school officials, however, removing default status from loans can be challenging for incarcerated individuals. For example, officials from one school we interviewed said applicants generally cannot make phone calls to set up loan repayment plans and instead have to rely on postal mail for completing the necessary paperwork. Also, officials from another school we interviewed said that for applicants who must rely on family members outside the prison to make the required payments, there is no guarantee that the family will do so. Additionally, borrowers may rehabilitate a loan only once. Despite these challenges, officials from five schools said they had applicants who were working to rehabilitate their loans, such as by paying from wages earned through prison work or by having family members make payments on their behalf. Officials from two of those schools said they had one or more applicants who successfully rehabilitated their loans and were able to enroll in the pilot. According to school officials we interviewed, verifying incarcerated applicants’ income and assets was challenging, in particular, because of circumstances unique to applicants being in prison. Communication between the applicant, the applicant’s family, and the school’s financial aid office is limited by virtue of the applicant’s confinement. For example, incarcerated applicants were typically unable to be reached via phone or email to answer questions, according to school officials we interviewed, and completing verification paperwork sometimes required multiple trips to the prison, which in some cases was more than an hour away. Further, incarcerated applicants sometimes did not have access to their personal files or records and faced difficulties obtaining documentation, such as copies of high school transcripts and tax records, which may be required for financial aid officers in the event the applicant is chosen for verification. Education guidance indicates that under certain circumstances, the school may accept alternate forms of documentation from the correctional facility if that documentation provides the information the school has requested. For example, the school may accept documentation from the correctional facility that shows an individual was incarcerated for the entire corresponding tax year, rather than requiring the applicant to obtain a letter of non-filing from the Internal Revenue Service. School officials said that some dependent and married students had trouble providing the school financial aid office with income documentation for others, such as a parent or spouse. According to Education data, approximately 2 percent of incarcerated applicants in the first year of the pilot were dependent, and nearly 11 percent were married. If an applicant selected for verification is dependent or married, he or she is required to provide the school with documentation to verify household income. Officials from 7 of the 12 schools we interviewed said that sometimes an applicant had trouble securing required documents from a parent or spouse. If an applicant cannot provide the required documentation of the income and assets of his parent or spouse, the school cannot verify the individual’s FAFSA information and cannot award a Pell grant. School officials indicated that these challenges were compounded by the selection of a high percentage of Second Chance Pell FAFSAs for verification. Education uses a number of criteria to select FAFSAs for verification, which the department does not share publicly. However, Education officials said that being eligible for a Pell grant and reporting no income are two such criteria. As a result, schools that serve more Pell- eligible applicants are likely to have more of their applicants’ FAFSAs selected for verification than schools that serve fewer Pell-eligible applicants. Accordingly, 76 percent and 59 percent of pilot FAFSAs were selected for verification in the 2016-2017 and 2017-2018 school years, respectively. Education’s verification selection rate for non- incarcerated, Pell-eligible applicants was 53 percent in the 2017-2018 school year. Figure 4 below shows Education’s verification selection rates for non-incarcerated Pell-eligible applicants and incarcerated applicants in these first two school years. Officials from 8 of the 12 schools we interviewed reported hiring additional staff or allocating more staff hours to help manage the increased administrative workload. For example, Officials from one school said their school added six full-time employees to process financial aid for their pilot students. A financial aid officer from another school stated that her workload has increased since the pilot began, and she has taken on additional tasks, such as training other staff to fill in when she could not travel to the prison. Officials from another school said they have added positions in the academic, administrative, and financial aid departments to handle the additional administrative workload. In addition, officials from 9 of 12 schools said they developed new approaches to address challenges related to processing FAFSAs submitted by incarcerated applicants. For example: Start Early: Officials from one school reported collecting FAFSAs earlier in the second year than they had in the first year to allow for additional time to collect documentation for applicants who may be selected for verification. An incarcerated student we spoke with echoed this challenge when he spoke of difficulties locating prior years’ tax returns. See sidebar for additional experiences shared by incarcerated students we met with. Officials from two schools reported having applicants complete verification-related paperwork, such as requests for supporting documentation from federal entities like the Internal Revenue Service, at the same time they completed their FAFSA. The officials said this approach reduced the number of visits the officials had to make to the prison and helped school officials and incarcerated applicants keep track of the required paperwork. Pre-screen Applicants: Officials from two schools reported pre- screening their incarcerated applicants for common issues that affect financial aid eligibility so that they could work with applicants to begin to correct these issues (such as helping applicants learn how to make payments to rehabilitate loan default status). Other schools used pre- screening to reduce the school’s workload, since they were able to exclude ineligible applicants before they submitted a FAFSA. Track and Report on Status: Officials from one school said their information technology department developed a system that generates a report on the documentation that incarcerated applicants have provided and the documentation that remains outstanding. The report also contains notes from staff members on their document requests with the Selective Service System, Internal Revenue Service, and other agencies. School officials we interviewed reported that providing college courses in prisons required them to develop new processes and generate creative solutions to help overcome technology limitations, space limitations, and the transfer of students to other prisons, among other limitations. For example, officials from 9 of the 12 schools said that limited technology in prisons, especially limited access to the Internet, presented a challenge. An official from one school said that classroom discussions were enhanced by the low-technology setting. To overcome technology limitations, officials from one school said that it partnered with the state libraries to develop a solution to deliver research materials to students. Specifically, an incarcerated student mails a research request to a state library. Once received, a librarian will locate the requested articles and electronically send the material to the prison’s secure printer. A prison staff member will then deliver the material to the student. default status and could not access a prior year’s tax return, making the process take longer. Officials from 9 of the 12 schools we interviewed said that space and scheduling limitations in prisons also presented a challenge. School officials told us they must compete for classroom space with other programming that is offered—or in some cases required by law, such as GED education—to inmates. Officials from two schools said they hold night and weekend classes to address such limitations. Officials from one school also reported that prison staff changed incarcerated students’ schedules (such as meal times and other scheduled activities) to accommodate their academic needs. Additionally, some prison officials reported relocating all the student inmates into the same housing unit to help create a positive learning environment. helps inmates be less idle and therefore less likely to engage in negative behavior. elevates the status of students in the prison, and the younger people look up to him and his college-going peers. Officials from 7 of the 12 schools we interviewed said at least one incarcerated student was either transferred to another prison or was released during the pilot. To address the issue of students being transferred to a different prison, officials from three schools said they developed an agreement with their state’s department of corrections that students participating in the pilot would not be transferred to other facilities until the end of the academic term. and open a nonprofit organization serving youth. December 2018. He plans to work toward becoming a home inspector and attend classes at the main campus, where he has applied for an academic scholarship. released by the end of 2018, was proud to be leaving prison with a college degree. He plans to start a business and mentor young men to pursue education. year sentence. He plans to start a business upon release and had developed a business plan as part of his studies. He also plans to work with at-risk young men to steer them away from crime and towards education. To monitor Pell dollars spent and other aspects of the pilot, Education systematically collects data from participating schools. Education requires schools to report data monthly, to complete an annual report, and to respond to a survey each academic year. Education officials said they use schools’ monthly reporting—which is limited to the participating students’ Social Security Numbers and last names—to monitor Pell grant disbursements. Education requires schools to report annually on the students who completed FAFSAs, including the number of credits that students attempted and earned and the dollar amount students were assessed for tuition and fees, for example. Education officials reported that they will follow up with schools that are not reporting data to determine if the school either has no data to report or needs further assistance from the department. As part of its annual survey to schools, Education asks officials to describe any challenges their schools faced when implementing the pilot, such as the roles and responsibilities of schools and corrections partners for helping incarcerated applicants complete FAFSAs, as well as how academic programs were determined. In addition, Education asks schools to share examples of any challenges their schools faced when implementing the pilot. Education sent its first annual survey to Second Chance Pell schools in August 2018, in which it asked school officials to reflect on the pilot’s first year (2016-2017 school year). Education officials reported that all schools had completed the required reporting for the first year of the pilot (2016-2017) and that as of November 2018, 47 schools had completed their reporting for the second year of the pilot (2017- 2018). Specific data elements collected by Education for the pilot are presented in appendix V. A key component of the Experimental Sites Initiative—of which Second Chance Pell is a part—is rigorous evaluation of whether experiments achieve their stated objectives. Education is directed to review and evaluate the experiences of schools participating in its experimental sites and report biennially on the findings and conclusions reached regarding each of the experiments conducted. Further, the department is directed to make recommendations for amendments to improve and streamline the Higher Education Act, which includes the delivery of federal student financial aid, based on the results of the experiments. However, Education has not established how it intends to evaluate Second Chance Pell or measure the pilot’s performance against its objectives. During the course of our review, Education officials provided us with several reasons as to why they were not planning to evaluate the pilot. First, officials said there was no dedicated funding set aside for an external evaluation of the pilot. Second, Education officials said they did not intend to make recommendations regarding changes to federal student financial aid eligibility based on the results of the pilot. Rather than conducting an evaluation, they explained, Education intends to report descriptive information on the pilot, such as the number of students served and the amount of aid disbursed, as it has done in prior reports on its experimental sites. In Education’s most recent report on the experimental sites (of the 2010-2011 school year), the department reported that it aggregated outcome measures (such as numbers of students in each experiment) and reviewed comments submitted by participating schools. However, the report noted that this type of anecdotal information could not be used to determine whether experiments were ultimately successful. The purpose of a pilot is generally to inform a decision on whether and how to implement a new approach in a broader setting. In this context, leading practices for effective pilot design state that agencies should evaluate the final results of a pilot in order to draw conclusions on whether, how, and when to integrate pilot activities into overall efforts. As noted above, Education is required to review and evaluate experiments under the Experimental Sites Initiative and make subsequent recommendations, as appropriate, for amendments to improve and streamline the Higher Education Act, which includes the delivery of federal student financial aid. In this context, we inquired about steps Education could take now, should an evaluation of Second Chance Pell be pursued (including an evaluation limited to an internal effort using existing resources). Education officials agreed that even without funding for an external evaluation, they could use the data they are already collecting to internally evaluate the pilot. In its comments on the draft report, Education stated that it was now planning to evaluate the pilot, consistent with the objectives set out in the Federal Register, and described a number of steps it was taking to do so. We are pleased to see the Department taking these important steps to determining the pilot’s impact. An evaluation of Second Chance Pell can help provide policymakers with the information needed to make decisions about the future of Pell grants for incarcerated students. Pell grants help open the door to a college education for millions of low- income students every school year. However, over the past 24 years, incarcerated students have been generally ineligible for Pell grants. Education’s Second Chance Pell pilot presents an opportunity for policy makers and others to see whether participation in postsecondary educational opportunities increases when Pell grants are again made available, and to determine what impacts a college education has on an incarcerated person’s academic and life outcomes. These impacts may be consistent with past research, which suggests possible benefits to formerly-incarcerated individuals, prisons, and local communities. Second Chance Pell, by the end of its second year of implementation, has allowed thousands of incarcerated students to receive financial aid for college. Evaluating the pilot can help assure Education and Congress have the information needed to make decisions about the future of Pell grants for incarcerated students. We are making the following recommendation to Education: The Secretary of Education should complete its evaluation of Second Chance Pell in order to report on the pilot’s findings and conclusions reached. We provided a copy of this report to Education and DOJ for review and comment. Education provided written comments, which are reproduced in full in appendix VI. DOJ did not provide written comments. Regarding our recommendation to evaluate Second Chance Pell and report on its findings, Education concurred, with clarification. Education stated that it is already taking a number of actions to evaluate the pilot, including gathering information from participating schools and other sources. Education also stated that it will be analyzing the data it is collecting to report on the pilot’s objectives. Education, accordingly, suggested the recommendation should be worded that the Department “continue to” evaluate Second Chance Pell. We describe Education’s data collection efforts in our report; however, at the time of our review Education was not able to provide evidence that it was evaluating the pilot and stated on more than one occasion that it planned to report descriptive information about the pilot’s outcomes (such as the amount of Pell dollars disbursed), because it did not have funding for an evaluation. We are pleased to see that the Department is now planning to evaluate the pilot and report on the pilot’s objectives, and accordingly, we revised our report and recommendation to state that Education should complete its evaluation. An evaluation of Second Chance Pell that goes beyond summarizing descriptive information can help provide policymakers with the information needed to make decisions about the future of Pell grants for incarcerated students. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Education, Attorney General, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members that made key contributions to this report are listed in appendix VII. To identify the actions Education and other stakeholders took to implement the Second Chance Pell pilot, we reviewed summary-level data from the Department of Education (Education) regarding the first two years of the pilot—school years 2016-2017 and 2017-2018—on the schools that participated in the pilot, the number of incarcerated individuals who applied for and received Pell grants, and other aspects of the pilot. To ensure the reliability of these data, we reviewed agency documentation about the data and the system that produced them and interviewed officials from Education responsible for collecting and validating the data. We found the data to be sufficiently reliable for our purposes. To further identify the actions taken, we reviewed Education’s published guidance on implementing the Second Chance Pell pilot, including the department’s webinars, action plans, and Frequently Asked Questions document. Additionally, we interviewed officials from the Department of Justice, as well as Education’s Office of Federal Student Aid, on the actions taken to prepare for the pilot and the guidance and support provided to participants, among other topics. We also interviewed representatives from three research groups—the Urban Institute, the Vera Institute of Justice (Vera), and New America—in order to gain additional insight on the effects of postsecondary correctional education as well as the design and implementation of the Second Chance Pell pilot. To further identify what actions schools and correctional facilities took to implement the pilot, we interviewed officials from a non-generalizable sample of 12 schools participating in the pilot. We also interviewed officials from seven correctional facilities who partnered with the participating schools. We used a sampling procedure in which we selected participating schools with particular characteristics to capture both common experiences and important variations among those with differing characteristics. We selected schools to represent a range of characteristics, including public and private nonprofit schools; schools with existing postsecondary correctional education programs and those with programs launched for the pilot; and schools with a varying number of correctional institution partners (ranging from 1 to 18 partners). We selected schools that offered bachelor’s degrees to students participating in the pilot as well as those that offered certificates and associate’s degrees. We included one school serving a women’s prison, one school that is classified as one of the Historically Black Colleges and Universities, and four schools that are classified as Hispanic Serving Institutions in our sample. Results from nonprobability samples cannot be used to make inferences about a population. Although our findings cannot be generalized to all schools that are participating in the pilot, they do provide useful insight into the experiences of pilot participants. To describe the experiences that participating schools are having as they implement the Second Chance Pell pilot, we interviewed officials from the non-generalizable sample of schools (and correctional partners) we described above. Additionally, we visited three prisons (Jessup Correctional Institution in Maryland, Mission Creek Corrections Center for Women in Washington State, and Sing Sing Correctional Facility in New York) and one school campus (City University of New York) in order to observe classrooms and student resources such as libraries and study spaces and to talk with selected individuals about their experiences participating in the pilot. Specifically, one of the prisons for men that we visited identified five Second Chance Pell students for us to interview. Each interview was conducted in a private classroom setting with one student and two of our staff members. Each interview lasted between 5 and 10 minutes. Each student was asked the same set of questions about his experience applying for and participating in the Second Chance Pell Pilot Program. Although these interviews were only conducted at one site and are therefore not generalizable to all students participating in the pilot program, they provide insight about the students’ experiences. We also observed a pilot-funded class in session at that prison. On one college campus, we interviewed a student who participated in the pilot while he was incarcerated and who was now released and continuing his education on campus. These sites were selected for variation in experience delivering college classes in prisons, number of students served, and to allow us to observe both men’s and women’s prison facilities. To further understand schools’ experiences as they implement the pilot, in June 2018 we attended the third-annual convening of Second Chance Pell partners, which was a 2-day conference for participating schools, their correctional partners, and other stakeholders, hosted by Vera. To assess how Education is monitoring and evaluating the pilot, and what opportunities, if any, exist for improvement, we reviewed Education’s documentation on the pilot’s objectives (including any evaluation objectives), and analyzed the data collection instruments Education uses to monitor the pilot. We met with Office of Federal Student Aid officials to discuss the department’s plans for evaluating and reporting on the pilot’s results. We compared Education’s efforts to leading practices we identified for effective pilot design and evaluation. We interviewed officials knowledgeable in the area of evaluation and prison education, including officials from the Urban Institute, Vera, the Washington State Board of Community and Technical Colleges, and New America. Finally, we asked officials from our purposive sample of schools about their experiences with Education’s reporting requirements, perspectives on what additional information Education could collect to demonstrate the outcomes of the pilot, and how schools themselves were measuring the performance of their programs apart from what they were reporting to Education. We conducted this performance audit from January 2018 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To determine what is known about the effects of participation in postsecondary correctional education, we conducted a literature search for studies that analyzed the relationship between inmate participation in postsecondary educational programs while incarcerated and outcomes both while in prison and after release. Our literature search identified 221 published studies for review using a three-stage process. We: (1) Searched 16 authoritative bibliographic databases such as SCOPUS, ERIC, PsychINFO, and ProQuest’s Dissertations and Theses Professional using relevant search terms, such as “postsecondary correctional education,” “postsecondary education,” and “prison,” (2) Identified citations in the studies detailed above that appeared germane to our research interests and did not already appear in our list of studies, and (3) Identified several organizations with subject matter expertise, based on mentions in the studies detailed above and organizations identified in our prior work. We consulted the website of each organization for any studies on the effects of correctional education. To assess each study’s methodological rigor, we obtained information about each study’s methodology. We based our assessments on generally accepted social science standards. We eliminated studies that met any of the following criteria: (1) published prior to 2000; (2) considered the education level of inmates, rather than participating in education while incarcerated; (3) did not include postsecondary educational programs; (4) did not use appropriate statistical methods to adjust, or control, for group differences; or (5) involved a comparison group that was not applicable to our research interests, such as juveniles. In the first stage of the review, we examined the study abstracts. Following the first stage of the review, 42 studies remained. In the second stage, we read the full description of the study’s methodology. Following the second stage, 20 studies remained for our in-depth review. Based on our review of the literature described above, studies found that inmates who participated in a correctional education program while incarcerated generally achieved more positive outcomes after release (e.g. higher employment, lower recidivism) than inmates who did not participate in a correctional education program while incarcerated. In 2013, RAND Corporation published a meta-analysis of 58 studies and found that inmates who participated in correctional education had 43 percent lower odds of recidivating than non-participants, and 13 percent higher odds of obtaining employment. Many studies we reviewed that tested impacts on one or more measures of recidivism have also found that incarcerated students who participated in a postsecondary program or earned a postsecondary degree while in prison were less likely to be re-arrested or re-incarcerated than those who did not participate. Some research, however, has found that program completion may lead to positive effects more than participation alone. For example, in one study, researchers found completion of a postsecondary program while in prison was associated with significantly and substantively lower odds of returning to prison for either a new crime or a parole violation, but participation in a postsecondary program without completion offered no benefit relative to not having participated at all. Additionally, not all researchers have observed positive effects in all study settings. In one three-state study, researchers found that those who participated in a correctional education program were less likely to be re-arrested, re- convicted, and re-incarcerated in two states; in the third state, there were no significant differences between participants and non-participants. Additionally, some research suggests incarcerated students who participated in a postsecondary program while in prison were more likely to find employment after release, work more hours, or earn higher wages than those who did not participate, but this was not always found. For example, in one study, earning a postsecondary credential while incarcerated was associated with an increase in total hours worked and total wages earned in the first 2 years after release; however, it was not associated with an increase in the odds of finding employment. Additionally, one study of inmates in three states found no statistically significant difference in post-release employment in the 3-year follow-up among participants in a correctional education program compared to non- participants. Several studies found that correctional education had positive outcomes for taxpayers due to lower re-incarceration costs. For example, the RAND Corporation estimated that for every dollar spent on correctional education, five dollars are saved on three-year re-incarceration costs. Another cost analysis in Washington State found that correctional education had a return-on-investment of $19.62 for participants and taxpayers for each dollar spent, and vocational education in prison had a return-on-investment of $13.21 for each dollar spent. A few studies focused on outcomes for participants while they were still in prison, and these generally suggest positive effects. For example, one qualitative study found that participants in a postsecondary correctional education program reported experiencing increased self-esteem and motivation to reach their goals. A few other studies suggested that participation in education programming reduced misconduct. In one study, participants in college programs (but not other education programs) reported receiving fewer tickets for misconduct. A 2006 meta-analysis, however, found that participating in an educational or vocational program was not as effective at reducing misconduct as were other types of programming. The research we identified on correctional education has several limitations. First, the identified studies often measure dependent and independent variables in a variety of ways, which makes comparison of outcomes across studies difficult. For example, some studies define “recidivism” as rearrest within 3 years, while others measure it as re- arrest or reincarceration within 1 year. Another example is that many studies define “participation in education” as participation in a vocational, secondary, or postsecondary program, while others define it as participation specifically in a postsecondary program. Second, of the studies we reviewed all but one include a small, geographically limited, or otherwise non-generalizable sample. Third, many of the studies we reviewed do not examine whether and how characteristics of facilities or implementation procedures may have influenced—negatively or positively—outcomes among participants. We identified nine articles that specifically discuss implementation and facility characteristics; however, none employ robust methodologies to test whether and how these characteristics lead to better outcomes among participants. A fourth limitation is selection bias, which is the possibility that incarcerated students who choose to take classes are meaningfully different from those who choose not to enroll, and that difference is the underlying cause of their positive outcomes. For example, it is possible that incarcerated people who take educational classes are already at the lowest risk of recidivating and have the highest motivation to succeed after release. If this is the case, then lower rates of recidivism and higher rates of employment may be an effect of these characteristics rather than an effect of taking classes while incarcerated. While some of the studies we reviewed took methodological steps to reduce selection bias, not all did. The United States had an estimated 6.6 million prisoners under the jurisdiction of state and federal correctional authorities as of December 31, 2016 (year-end), according to the Bureau of Justice Statistics. According to an analysis of 2009 American Community Survey data, Black, Hispanic, and other non-white individuals make up about 32 percent of the total household population but are about 64 percent of the male prison population. Further, 23 percent of incarcerated men had received some postsecondary education, compared to about 56 percent of men in the household (non-incarcerated) population as shown below in figure 5. Among the incarcerated population, the analysis also found differences in educational attainment by race. Specifically, for men age 18-24, about 10 percent of black men and about 11 percent of Hispanic men had completed at least some college, compared to about 17 percent of white (non-Hispanic) men. The educational characteristics of incarcerated women were similar to that of men. Specifically, incarcerated women have lower levels of educational attainment compared to women living in households; however, incarcerated women had overall higher levels of educational attainment compared to incarcerated men. Fifty-eight percent of women in the household population had some postsecondary education compared to about 31 percent of incarcerated women, as shown below in figure 6. In addition to the contact name above, Melissa Emrey-Arras (Director), Brett Fallavollita (Assistant Director), Charlotte Gamble (Analyst in Charge), Sarah Williamson, Marissa Jones Friedman, Billy Commons, Elizabeth Dretsch, Eric Hauswirth, Debra Prescott, Kevin Reeves, and Ben Sinoff made key contributions to this report.", "summary": "Incarcerated students are generally prohibited from receiving Pell grants, which provide need-based federal financial aid to low-income undergraduate students. However, Education has the authority to waive specific statutory or regulatory requirements for providing federal student aid at schools approved to participate in its experiments. Accordingly, the department initiated the multi-year Second Chance Pell pilot in 2015 to test whether allowing incarcerated individuals to receive Pell grants increases their participation in higher education programs and influences their academic and life outcomes, or creates any obstacles to schools' administration of federal financial aid programs. GAO was asked to review the Second Chance Pell pilot. This report examines (1) actions Education, schools, and other stakeholders have taken to implement the pilot; (2) experiences participating schools are having as they implement the pilot; and (3) how Education is monitoring and evaluating the pilot and whether opportunities for improvement exist. GAO analyzed summary-level Education data from the 2016-2017 and 2017-2018 school years and interviewed a non-generalizable sample of 12 schools (and associated prison partners) that were selected for variation in type of school (i.e., public and private nonprofit), type of prisons served, and other variables. GAO also interviewed Education officials. The Department of Education (Education) selected 64 schools across 26 states to participate in the Second Chance Pell pilot, and participating schools collaborated with prisons and other stakeholders to implement the pilot. Across the pilot's first 2 years, schools awarded approximately $35.6 million in Pell grants to about 8,800 incarcerated students. Officials from the 12 schools GAO interviewed reported experiencing some challenges implementing the pilot. First, school officials said they experienced challenges establishing incarcerated applicants' eligibility for Pell grants, since some applicants had not registered for Selective Service and some had an existing federal student loan in default. However, many applicants were able to complete the necessary steps—such as making a set number of payments on their defaulted loans—to reestablish eligibility. Second, obtaining documents from incarcerated applicants to support verification—which helps the department's efforts to reduce improper payments of federal student aid—was another challenge officials reported. School officials also said that providing college classes in prisons required them to develop new processes and creative solutions to overcome technology limitations, space limitations, and the transfer of students to other prisons. Officials from 8 of 12 schools told GAO they hired additional staff or developed new approaches in response to their pilot efforts. Incarcerated College Students inside New York's Sing Sing Correctional Facility Education monitors the pilot by collecting data from participating schools, but had not established how it intended to evaluate Second Chance Pell or measure the pilot's performance against its objectives. Education is required to review and evaluate experiments under the Experimental Sites Initiative—of which Second Chance Pell is a part—and make recommendations, as appropriate, to improve the delivery of federal student aid. In its comments on the draft report, Education stated that it was planning to evaluate the pilot, consistent with the pilot's objectives, and described a number of steps it was taking to do so. Completing this evaluation can help ensure policymakers have the information needed to make decisions about the future of Pell grants for incarcerated students. GAO recommends that the Secretary of Education complete its evaluation of the pilot to report on its findings and conclusions. Education concurred, with clarification, and stated that it had actions underway to evaluate the pilot.", "document_type": "gao"}
{"report": "HHS-OIG has the authority to exclude providers and other entities that have committed certain acts from participation in federal health care programs. According to HHS-OIG guidance, exclusion is a remedial measure designed to protect federal health care programs from any entity whose participation constitutes a risk to the programs or to program beneficiaries. Federal health care programs will not pay for any items or services furnished, ordered, or prescribed by excluded entities. Exclusions are mandatory under certain circumstances and permissive in others. In particular, mandatory exclusion applies to offenses that result in convictions relating to patient abuse or neglect and other crimes related to federal health care programs. When these offenses occur, but there is no criminal conviction, HHS-OIG may exercise its permissive exclusion authority. In certain circumstances where HHS-OIG can exercise its permissive exclusion authority, it evaluates each situation and decides what action to take based on its assessment of the future risk the entity poses to federal health care programs. Actions that HHS-OIG can consider taking include the following: Exclusion. HHS-OIG will exclude the highest-risk entities from participation in federal health care programs. Require the entity to enter into an agreement. HHS-OIG can require an entity to enter into a CIA or IA in exchange for a release of HHS-OIG’s exclusion authority. According to HHS-OIG guidance, the goals of these agreements are to strengthen an entity’s compliance program and promote compliance so that any issues in the future can be prevented or identified, reported and corrected. Heightened scrutiny. According to HHS-OIG officials, heightened scrutiny is reserved for situations in which the agency determined that an agreement was warranted but the entity was uncooperative. In such situations, HHS-OIG considers what other unilateral monitoring steps it can take to impose greater scrutiny. For example, according to HHS-OIG guidance, the agency has audited, evaluated, or investigated entities after fraud settlements when the entity would not enter into an agreement with HHS-OIG and it has made referrals to the Centers for Medicare & Medicaid Services for claims reviews. Reserve exclusion authority. For certain entities, HHS-OIG may reserve its exclusion authority and take “no further action,” meaning that HHS-OIG will not exclude the entity at that time and will not require the entity to enter into an agreement. Release of exclusion authority. In certain circumstances, HHS-OIG will release its exclusion authority without imposing additional requirements. Specifically, HHS-OIG may do this in situations in which the entity has self-disclosed the fraudulent conduct to HHS-OIG or has agreed to integrity obligations with a state or the DOJ that HHS- OIG has determined are sufficient. In situations in which HHS-OIG is evaluating whether to exercise its permissive exclusion authority, DOJ is often separately negotiating a settlement of the civil and/or criminal case against the entity on behalf of the federal government. Typically, such settlements resolve allegations that the entity is liable under the False Claims Act for submitting false claims to federal health care programs. According to both HHS-OIG and DOJ officials, if there is a related DOJ civil or criminal case and HHS-OIG officials are also negotiating an agreement with the entity in lieu of exclusion, the DOJ and HHS-OIG negotiations often occur at the same time or “on a parallel track.” However, according to these officials, while HHS-OIG and DOJ officials share information as needed, each engage in separate negotiations with the entity. According to HHS-OIG officials, there are also situations in which HHS-OIG enters into an agreement when there is not a related DOJ legal settlement. The Office of Counsel to the Inspector General within HHS-OIG is responsible for negotiating agreements and for monitoring them once they take effect. All agreements include provisions that identify the enforcement actions HHS-OIG can take when it finds that an entity has not complied with the terms of its agreement. These enforcement provisions outline the monetary penalties, referred to in the agreements as stipulated penalties, which HHS-OIG will demand if it identifies that the entity has failed to comply with certain agreement terms. The enforcement provisions also outline what constitutes a material breach of the agreement and indicate that exclusion can result if the entity is found to have materially breached its agreement. Examples of a material breach of the agreement include repeated violations of any of the agreement’s obligations and the failure to respond to a demand letter from HHS-OIG concerning the payment of stipulated penalties. From July 2005 through July 2017, HHS-OIG entered into 652 new agreements—an average of about 50 agreements per year—ranging from a high of 83 to a low of 37. The agreements were almost exclusively CIAs, which apply to larger corporations, and IAs, which apply to individual practitioners and entities such as small physician groups. HHS- OIG has used CIAs and IAs exclusively since 2010. From 2010 to July 2017, 74 percent of agreements have been CIAs and 26 percent of agreements have been IAs. See figure 1 for more information on the number and types of agreements since July 2005. HHS-OIG officials said that the agency transitioned away from other agreement types because of certain limitations that made them less useful than CIAs and IAs. For example, one historical agreement type— Certification of Compliance Agreements—did not provide sufficient opportunities for oversight, yet it required significant resources to create, officials said. Another discontinued agreement type—Settlement Agreement with Integrity Provisions—was negotiated as part of the DOJ settlement, such that HHS-OIG needed to work through DOJ if there was a need to take action for noncompliance. Although HHS-OIG and DOJ negotiate their agreements and settlements separately now, the majority of CIAs and IAs, are still associated with a DOJ legal settlement. Of the 652 agreements from July 2005 through July 2017, 619 were paired with a DOJ settlement, while 33 were the result of HHS-OIG independently exercising its exclusion authority. The total number of agreements in effect each year for the period we reviewed, which includes new agreements and ongoing agreements from past years, has decreased. Between 2006 and 2016 (the earliest and latest full years included in HHS-OIG’s database), the number of agreements in effect for any part of the calendar year decreased by 44 percent (see fig. 2). According to HHS-OIG officials, this is because, over time, the agency has increasingly focused its resources on entities that present the highest risk of potential fraud. Specifically, HHS-OIG officials said that in 2006 they first imposed a monetary threshold for damages caused to federal health care programs, above which the agency would pursue an agreement. HHS-OIG officials told us that they initially set this threshold at $100,000, but that in 2014 the agency increased it to $500,000 for smaller entities (i.e., those eligible for IAs) and $1 million for larger entities (i.e., those eligible for CIAs). HHS-OIG officials added that the monetary threshold is one factor that triggers pursuit of an agreement, and that risk of beneficiary harm may also cause the agency to seek an agreement, even when damages are low. HHS-OIG, in using these criteria, said that it is foregoing pursuing agreements with low-damage, lower-risk entities, instead taking no further action but reserving its exclusion authority. HHS-OIG entered into agreements with a wide range of entities, but most were concentrated among a few types of entities. Specifically, HHS-OIG entered into agreements with 30 different types of entities from July 2005 through July 2017, though slightly more than half of the agreements were with 3 types—individual/small group practices, hospitals, and skilled nursing facilities. Another quarter of the agreements were with medical group practices, pharmaceutical manufacturers, clinics, medical device manufacturers, and ambulance companies. (See fig. 3.) HHS-OIG officials stated that it is rare for the agency to enter into multiple agreements with the same entity, adding that the few entities that have had multiple agreements were generally large corporations with multiple divisions or sites, and that the agreements applied to different areas of the firms’ business. Our analysis of HHS-OIG data showed that 15 entities had more than one agreement from July 2005 through July 2017. In other situations, HHS-OIG extended an ongoing agreement, rather than entering a new agreement with the same entity, in light of new allegations that arose during the time the agreement was in effect. From July 2005 through July 2017, the time periods for five agreements were extended beyond the standard five years to reflect new settlements with DOJ. Almost all of the agreements we reviewed were negotiated by HHS-OIG at the same time DOJ was negotiating a legal settlement with the entity to resolve related allegations under the False Claims Act. Many of these allegations resulted from cases filed by a whistleblower under the False Claims Act’s qui tam provisions—commonly referred to as qui tam cases. Slightly more than half of HHS-OIG agreements are with entities who settled qui tam cases. From July 2005 through July 2017, agreements imposed by HHS-OIG as a result of claims alleged by a whistleblower in a qui tam case increased in prevalence compared to agreements that were not associated with a qui tam case. (See fig. 4.) The DOJ-negotiated settlement amounts associated with qui tam cases, among those entities that also entered into an agreement with HHS-OIG, greatly exceeded the settlement amounts negotiated for non-qui tam cases and make up most of the total settlement amounts. From July 2005 through July 2017, total settlement amounts, among those entities that also entered into an agreement with HHS-OIG, were $16.1 billion for qui tam cases and $3.1 billion for all others. A spike in settlement amounts in 2012 reflects two settlements, one of $2 billion and another of $800 million, with two pharmaceutical manufacturers. (See fig. 5.) Although pharmaceutical manufacturers accounted for about 6 percent of entities subject to an agreement with HHS-OIG from July 2005 through July 2017, they represent a large share of the settlement amounts DOJ negotiated with those entities: $11.8 billion out of $19.2 billion (62 percent). The next largest shares of settlement amounts DOJ negotiated were with hospitals at $2.5 billion and medical device manufacturers at almost $900 million. Most of the pharmaceutical settlements associated with HHS-OIG agreements were qui tam cases (31 of 37 agreements), and a third of all qui tam settlement amounts were associated with just 4 pharmaceutical qui tam cases. HHS-OIG guidance includes the criteria that agency officials said they follow to determine whether to exercise the agency’s permissive exclusion authority, or take an alternate action, such as entering into an agreement with an entity. According to HHS-OIG officials and agency guidance, each situation is evaluated on a risk continuum and the course of action chosen is based on the agency’s assessment of the future risk the entity poses to federal health care programs. HHS-OIG has four broad categories of criteria that it applies in deciding where an entity falls on the risk continuum and which action to take. These four categories are (1) the nature and circumstances of the conduct; (2) conduct during the government’s investigation; 3) whether the entity has made efforts to improve its conduct; and 4) the entity’s history of compliance. According to HHS-OIG officials, the agency will exclude the highest-risk entities, and since fiscal year 2011, under its permissive exclusion authority, HHS-OIG has excluded 65 entities that were the subject of a related DOJ legal settlement. However, HHS-OIG guidance states that HHS-OIG often concludes that exclusion is not necessary, so long as the entity will enter into an agreement with the agency. For new agreements from July 2005 through July 2017, our review of HHS-OIG data showed that there were four main types of initial allegations that resulted in the entity entering into an agreement with HHS-OIG. This included: billing for services not rendered - 194 agreements (about 30 percent); provision of medically unnecessary services - 136 agreements (about acts prohibited under the Anti-Kickback statute - 135 agreements (about 21 percent); and misrepresentation of services and/or products – 131 agreements (about 20 percent). The majority of agreements (about 63 percent) were associated with one initial allegation. However, some agreements were associated with more than one initial allegation: about 23 percent of agreements from July 2005 through July 2017 were associated with two initial allegations and about 15 percent were associated with three or more initial allegations. We compared the provisions required in selected agreements to those outlined in HHS-OIG’s current agreement templates and found that the provisions were generally similar. All of HHS-OIG’s templates and the agreements we reviewed were organized into the same broad sections. For example, all of the templates and agreements contained sections detailing the information entities were required to submit to HHS-OIG in an initial implementation report and in annual reports, and all agreements had a section that outlined the enforcement provisions for the agreement. In addition, there generally was a standard term for agreements of either three or five years depending on the type of agreement. All 23 of the CIAs we reviewed had a term of five years, and of the nine IAs we reviewed, five had a 5-year term and four had a 3-year term. The IAs with a longer 5-year term generally were older agreements from 2010 or 2011. According to HHS-OIG officials, the current practice is to negotiate 3-year terms for IAs and 5-year terms for CIAs. HHS-OIG has developed agreement templates that include standard provisions to address the risks an entity’s noncompliance could pose to federal health care programs. Additionally, in some templates, provisions are included to address the specific types of conduct that gave rise to the agreement. HHS-OIG has four templates for use in negotiating CIAs and two for negotiating IAs, and HHS-OIG officials said that they will use one of the six templates as a starting point when drafting an agreement. HHS-OIG officials told us that the terms included in agreements are similar across CIAs and IAs because certain provisions are non- negotiable. For example, officials said that they always include provisions requiring an entity to hire a compliance officer, submit annual reports, and provide HHS-OIG with access to the entity when requested. Across the various types of templates, there are similar standard provisions, and our review of selected agreements found many of the same provisions. For example, among the 32 agreements we reviewed: All 32 agreements required the entity to engage an independent review organization to perform the agreement’s required reviews, including claims reviews. Entities have retained a variety of individuals and businesses as their independent review organization, ranging from small regional consulting firms to large national consulting or accounting firms. For agreements HHS-OIG has entered into from July 2005 through July 2017, our review of the agency’s data found that there were 173 unique associated independent review organizations. All 32 agreements had training and education requirements, although the specifics of the required training, such as the number of hours or the specific topics, varied across agreements. 28 of the 32 agreements reviewed required the entity to have a compliance officer. The four agreements that did not require this were two IAs for small group practices, one for a medical group practice, and one for a clinic that named an individual practitioner as a party to the agreement. Although agreements shared many standard provisions, some provisions were unique to either CIAs or IAs. Many of the CIAs that we reviewed included provisions detailing specific responsibilities for the entity’s board of directors (18 of 23 CIAs) and requirements for certain high-level employees to annually certify that they were in compliance with federal health care program requirements and the provisions of the agreement (12 of 23 CIAs). None of the nine IA’s we reviewed included these provisions. On the other hand, all nine IAs we reviewed (and one CIA) had provisions regarding third-party billing. If the provider subject to the agreement contracted with a third-party billing company to submit claims on the provider’s behalf, these agreements required the provider to certify that they did not have an ownership or controlling interest in the third- party billing company. In addition to agreement type, provisions also varied due to the nature of the conduct that led to the agreement or the type of entity entering into the agreement. For example, some agreements included provisions intended to ensure compliance with the Anti-Kickback statute and Stark law (8 of 32). HHS-OIG officials told us that specific provisions related to the Anti-Kickback statute and Stark law would only be present in agreements when the conduct that had led to the agreement involved acts prohibited under those statutes, such as prohibited kickbacks or improper referral arrangements. Other agreements include provisions specific to monitoring quality of care issues. For example, one of the agreements we reviewed was a quality of care CIA that required the entity to retain an independent monitor to examine, among other things, the entity’s internal quality control systems and its response to quality of care issues. In addition, 2 of the 32 agreements we reviewed were with pharmaceutical manufacturers and contained provisions not in other agreements because they would only be relevant to a pharmaceutical manufacturer. For example, both agreements we reviewed had a requirement that the manufacturers, within 30 days, provide HHS-OIG with a copy of any written communication with the Food and Drug Administration that materially discussed the actual or potential unlawful or improper promotion of the manufacturer’s product. According to HHS-OIG data, most of the 652 agreements entered into from July 2005 through July 2017 (about 95 percent) required the entity to perform at least one review as part of the agreement. The most common types of required reviews captured in HHS-OIG’s database during this time were reviews of health care claims, unallowable costs, and arrangements. Slightly more than half of the agreements (19 of 32) we reviewed required the entity to perform a claims review. Fifteen of these were annual claims reviews and four were quarterly claims reviews. In addition, slightly more than a quarter of agreements we reviewed (9 of 32) required an unallowable costs review. Finally, a quarter of the agreements (8 of 32) required the entity to perform an arrangements review. The eight agreements requiring an arrangements review were the same agreements that included a section with provisions related to compliance with the Anti-Kickback statute and Stark law. A few agreements had required reviews that were not common across the agreements we reviewed and usually related to the types of services that the entity provided. For example, three agreements we reviewed required the entity to conduct a cardiac catheterization procedures review, described as an evaluation and analysis of the medical necessity and appropriateness of interventions performed either in the entity’s cardiac catheterization lab or by the provider. According to HHS-OIG officials, the agency assigns a monitor to each agreement—an HHS-OIG staff attorney or program analyst—who, for the duration of the agreement, oversees the entity’s compliance with the terms of its agreement. Per officials and what is outlined in internal agency documents that describe how to monitor agreements, the monitors’ responsibilities include: Reviewing the information that entities provide in their initial implementation report, annual reports, and any other reports required under the agreement within the time frames established by internal HHS-OIG guidance. Communicating with entities to provide assistance to those who need help in understanding the requirements or to request additional information when a required report has missing or incomplete information. Reviewing and responding to periodic correspondence received from entities, including notifications required by the agreement, reportable event disclosures, and other communications from the entity. Drafting any letters that are sent to the entity, if noncompliance is identified, including letters demanding the payment of penalties— referred to as stipulated penalty demand letters. Conducting site visits to verify that the entities are complying with the agreements properly. According to internal HHS-OIG guidance, monitors are to select sites primarily based on concerns that they may have with specific entities, as well as other factors, such as the type of provider, the size or complexity of the entity, length of the agreement, and the severity or complexity of the offenses that resulted in the agreement. According to internal HHS-OIG guidance regarding site visit protocol and agency officials we spoke to, during site visits, HHS-OIG officials may conduct document reviews of training records, policies and procedures, or other documents; hold meetings with the compliance officer or board members; or tour the facility, among other activities. Officials said that two HHS-OIG officials typically conduct the site visit—the agreement’s monitor and one other official—and the site visits typically last about one day to a day-and-a-half. For agreements entered into from July 2005 through July 2017, we found that HHS-OIG officials conducted 211 site visits that were associated with 155 agreements. Thirty of these agreements were associated with more than one site visit ranging from 2 to 10 visits. The majority of the 211 site visits were for CIAs (about 87 percent). During the full calendar years from 2006 through 2016, HHS- OIG completed an average of 18 site visits each year. Although most entities comply with the provisions of their agreements, according to HHS-OIG officials, when noncompliance occurs, the most common issue is the late submission of required reports or reviews. According to HHS-OIG officials, other types of noncompliance range from falsely certifying the accuracy of reported information to submitting reports that do not include the required elements. According to officials and as outlined in agreements, HHS-OIG addresses noncompliance through a series of escalating steps, which, in rare instances, may result in the HHS-OIG imposing penalties on an entity as laid out in the agreement (stipulated penalties) or even exclusion of an entity from federal health care programs. Steps HHS-OIG takes to address noncompliance may include: Working with the entity before taking official action. For example, officials told us that monitors typically request additional documentation or information from providers when they identify potential issues rather than imposing stipulated penalties immediately. Demanding that the entity pay stipulated penalties. HHS-OIG will send a stipulated penalties demand letter to an entity in accordance with the breach and default terms of the agreement. The stipulated penalty amounts for noncompliance with the different provisions are specified in the agreement. According to officials, the stipulated penalty amounts in agreements are non-negotiable and the amounts associated with noncompliance with specific provisions do not change across agreements. The stipulated penalties in agreements range from $1,000 to $50,000 per violation. For example, for each day an entity fails to submit a complete annual report to HHS-OIG by the submission deadline, the stipulated penalty is $2,500 for CIAs and $1,500 for IAs. In addition, for all agreements, each false certification submitted by or on behalf of the entity results in a stipulated penalty of $50,000. For agreements entered into from July 2005 through July 2017, our review of HHS-OIG data found that HHS-OIG issued 41 letters demanding stipulated penalties (between 0 and 7 letters per year) for actions such as the failure to submit annual reports and employing individuals excluded from participation in federal health care programs. In total, HHS-OIG collected about $5.4 million in stipulated penalties during this time. Penalty amounts demanded in each letter ranged from $1,000 to over $3 million, with a median of $18,000. According to HHS-OIG, the stipulated penalty of over $3 million was a record penalty for failure to comply with an agreement. This penalty, according to HHS-OIG, resulted from the entity’s failure to correct improper billing processes and poor claims submission practices that had led to error rates and overpayments to the company by Medicare for hospice services. These issues were uncovered through the claims reviews required under the agreement and HHS-OIG’s site visits to the company’s facilities. Determining that the entity is in material breach of the agreement. As defined in agreements, this determination may result from repeated or flagrant violations of agreement obligations; failure to notify HHS-OIG of certain reportable events; failure to take corrective actions or make appropriate refunds; failure to respond to a stipulated penalties demand letter; or failure to engage an independent review organization. From July 2005 through July 2017, HHS-OIG issued 10 material breach letters to entities informing them that HHS-OIG intended to exclude them. However, the 10 material breach letters were associated with only 6 agreements, and 5 of the 10 material breach letters issued were to the same entity. These five letters were issued to the entity between March 2012 and January 2014 for a series of alleged material breaches of its agreement including, among other things, a failure to report serious quality of care reportable events or to perform training required under the terms of its agreement. This entity, which was a national chain of clinics that primarily provided dental services to children on Medicaid, was ultimately excluded in September 2014 from participation in federal health care programs, including Medicaid, for a period of five years. Excluding an entity from participation in federal health care programs. For agreements entered into from July 2005 through July 2017, we found that HHS-OIG has issued five exclusion letters to entities for failing to adhere to their agreements. These exclusion letters were associated with four agreements—2 CIAs and 2 IAs. According to HHS-OIG’s data, these exclusions occurred in 2007 (1), 2014 (1), and 2015 (2). The four entities that were excluded included a durable medical equipment provider, a national chain of clinics, a practice management company, and a medical group practice. An agreement affords the entity the opportunity to respond to a material breach letter prior to the issuance of a notice of exclusion. However, an HHS-OIG official said that, given the multiple steps involved in the breach and default process, it is unlikely that a breach would be addressed satisfactorily by the entity at this stage in the process. Of the four entities that HHS-OIG excluded, three had also previously received a notice of material breach from HHS-OIG. We provided a draft of this report to HHS and DOJ for review and comment. These departments provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS, the Attorney General, and the Inspector General of HHS. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the contact named above, Karen Doran (Assistant Director), Alison Goetsch (Analyst-in-Charge), and Perry Parsons made key contributions to this report. Also contributing were Sam Amrhein, Muriel Brown, Dan Ries, Jennifer Rudisill, and Merrile Sing.", "summary": "HHS-OIG has the authority to exclude providers and other entities that have committed certain acts, such as submitting false or fraudulent claims, from participation in federal health care programs. However, HHS-OIG can enter into agreements—CIAs and IAs—with providers and other entities as an alternative to exclusion. HHS-OIG is responsible for negotiating such agreements—which it typically does at the same time the Department of Justice (DOJ) is negotiating a legal settlement to resolve related allegations—and then monitoring the entities' compliance with them. GAO was asked to review HHS-OIG's use of these agreements. This report describes (1) the number of agreements and their general characteristics; (2) the circumstances that may lead to an agreement and the standard provisions of agreements; and (3) monitoring efforts and actions taken, if any, in response to noncompliance with the agreements. GAO examined agreements entered into from July 2005 (when HHS-OIG created its database) through July 2017 (most current at the time of GAO's analyses) and used HHS-OIG data to describe agreements' characteristics and actions to address noncompliance. GAO reviewed HHS-OIG documentation, including agreement templates and a selection of agreements to identify standard provisions. GAO also interviewed HHS-OIG and DOJ officials. GAO provided a draft of this report to HHS and DOJ. The agencies provided technical comments, which were incorporated as appropriate. To help improve adherence to federal health care program requirements by entities that have allegedly engaged in certain acts, such as submitting false or fraudulent claims, the Department of Health and Human Services' Office of Inspector General (HHS-OIG) entered into 652 agreements with those entities from July 2005 to July 2017. Since 2010, two types of agreements have been used: Corporate Integrity Agreements (CIA) and Integrity Agreements (IA). The more commonly used CIAs apply to larger entities, compared to IAs, which apply to individual practitioners or small businesses. From July 2005 through July 2017, about half of all agreements were with 3 types of entities—individual or small group practices, hospitals, and skilled nursing facilities. For new agreements since July 2005, the most common initial allegations that led to an entity entering into an agreement included billing for services not provided and providing medically unnecessary services. When negotiating agreements, HHS-OIG uses one of six templates that address the different types of entities or conduct involved. Across agreements the provisions are generally similar—for example, requirements to provide training on specified topics or to hire a compliance officer. HHS-OIG uses multiple strategies to oversee agreements, such as requiring periodic reports from the entities that demonstrate compliance and assigning a monitor to review these reports and conduct site visits. HHS-OIG can also take certain actions to address noncompliance. For example, for new agreements from July 2005 through July 2017, HHS-OIG imposed monetary penalties 41 times, ranging from $1,000 to more than $3 million (median of $18,000), and excluded 4 entities from participation in federal health care programs.", "document_type": "gao"}
{"report": "Since DHS’s creation in 2003, significant internal control and financial management system deficiencies have hampered its ability to reasonably assure effective financial management and to manage operations. These deficiencies contributed to our decision to designate DHS’s management functions, including financial management, as high risk. To help address these deficiencies, DHS initiated a decentralized approach to upgrade or replace legacy financial management systems and has been evaluating various options for modernizing them, including the use of SSPs. DHS initiated three projects for modernizing the systems of selected DHS components, including its TRIO modernization project. The TRIO project has focused on migrating the financial management systems of Coast Guard, DNDO, and TSA to a modernized solution provided by IBC. DHS’s efforts to effectively assess and manage risks associated with this project are essential to DHS’s realizing its modernization goals. In 2013, OMB issued a memorandum directing agencies to consider federal SSPs as part of their AAs. Also, in May 2014, Treasury and OMB designated IBC as one of four federal SSPs for financial management to provide core accounting and other services to federal agencies. This designation was based on Treasury and OMB’s evaluation of the four service providers’ ability to assist federal agencies in meeting their accounting and financial management needs, including experience with implementing financial management systems and providing other financial management services to customers, cost of services provided, compliance with financial management and internal control requirements, commitment to shared services, capacity, and long-term growth strategy. FIT’s responsibilities related to the governance and oversight of federal SSPs were subsequently transferred to USSM after USSM was established in October 2015. Because of concerns that its Core Accounting System (CAS) Suite was outdated, inefficient, and did not reliably meet requirements, Coast Guard completed an AA in January 2012 to assist in developing a path forward for modernizing its financial management system. In August 2012, Coast Guard established its CAS Replacement project team to further evaluate two of the alternatives considered in its AA and develop a recommended course of action. In addition, Coast Guard determined that hosting, owning, operating, and managing a financial management system were not among its core competencies. Because TSA and DNDO also relied on CAS as their primary accounting system, they also conducted AAs to identify the best alternative for transitioning to a modernized financial management system solution. The AAs conducted by the TRIO components during 2012 and 2013 considered the use of federal and commercial SSPs and other options. In addition, Coast Guard completed additional market research including further analysis of commercial SSPs in June 2013. In July 2013, the TRIO components determined that migrating to a federal SSP was the best course of action and subsequently conducted discovery phase efforts with IBC from November 2013 through May 2014 to further explore the functional requirements for procurement, asset, and financial management services. Based on these efforts, in July 2014, the TRIO components recommended that they proceed with implementation of the IBC shared services solution. In August 2014, FIT and OMB concurred with this recommendation, and DHS entered into an interagency agreement (IAA) with IBC for implementation. Figure 1 shows a timeline of these key events. The IAA for implementation and related performance work statement included a description of the services that IBC is to provide and the roles and responsibilities of DHS, the TRIO components, and IBC. The IAA also required IBC to prepare a detailed project management plan describing how the requirements would be managed and updated and an integrated master schedule (IMS) for identifying tasks to be completed, duration, percentage completed, dependencies, critical path, and milestones. According to the February 2015 project management plan, DNDO, TSA, and Coast Guard were expected to go-live on the IBC solution in the first quarter of fiscal years 2016, 2017, and 2018, respectively. However, in May 2016, DHS and IBC determined that TSA’s and Coast Guard’s planned implementation dates were not viable because of various challenges impacting the TRIO project and recommended a 1-year delay for their respective implementation dates. Figure 2 summarizes planned and completed key implementation events for the TRIO project as of May 2016. GAO, SEI, and other entities have developed and identified best practices to help guide organizations in effectively planning and managing various activities, including acquisitions of major information technology systems. These include GAO’s identified best practices for the AOA process and best practices identified by SEI for risk management. GAO-identified best practices for AOA process. GAO identified 22 best practices for a reliable, high-quality AOA process that can be applied to a wide range of activities in which an alternative must be selected from a set of possible options, as well as to a broad range of capability areas, projects, and programs. These practices can provide a framework to help ensure that entities consistently and reliably select the project alternative that best meets mission needs. Not conforming to these best practices may lead to an unreliable process, and the entity will lack assurance that the preferred alternative best meets the mission needs. Appendix II provides additional details on GAO’s identified AOA process best practices and how they can be applied to a wide range of activities in which an alternative must be selected from a set of possible options, as well as to a broad range of capability areas, projects, and programs. SEI’s risk management practices. SEI’s practices for the risk management process area call for the identification of potential problems before they occur so that risk-handling activities can be planned throughout the life of a project to mitigate adverse impacts on achieving objectives. These practices are determining risk sources and categories, defining parameters used to analyze and categorize risks and to control the risk management effort, establishing and maintaining the strategy to be used for risk identifying and documenting risks, evaluating and categorizing each identified risk using defined risk categories and parameters and determining its relative priority, developing a risk mitigation plan in accordance with the risk monitoring the status of each risk periodically and implementing the risk mitigation plan as appropriate. Although the TRIO components conducted AAs to identify the preferred alternative for modernizing their financial management systems, their efforts did not always follow best practices. For example, Coast Guard’s and TSA’s AAs supporting their selection of migrating to a federal SSP for modernizing their financial management systems did not fully or substantially meet all four characteristics of a reliable, high-quality AOA process. In addition, we found that DHS guidance did not fully or substantially incorporate five of GAO’s identified best practices for conducting an AOA process. The TRIO components’ AAs included descriptions of the key factors, such as scores for each alternative against the selection criteria used to assess it. Based on these AAs, DHS and the TRIO components selected the federal SSP alternative as their preferred choice and subsequently selected IBC as their federal SSP. However, because Coast Guard’s and TSA’s AAs did not fully or substantially meet all four characteristics of a reliable, high-quality AOA process, they are at increased risk regarding their decision on the solution that represents the best alternative for meeting their mission needs. Based on the extent to which the DHS TRIO components followed the GAO-identified 22 best practices for conducting an AOA process, we found that DNDO’s AA process substantially met the four characteristics of a reliable, high-quality AOA process while the Coast Guard and TSA AA processes both substantially met one and partially met three of these four characteristics. For example, we found that TSA’s AA partially met the “well-documented” characteristic, in part, because risk mitigation strategies, assumptions, and constraints associated with each alternative were not discussed in its AA. In addition, we found that Coast Guard’s AA partially met the “credible” characteristic, in part, because there was no indication that it contained sensitivity analyses, an evaluation of the impact of changing assumptions on its overall costs or benefits analyses. Our overall assessment is summarized in table 1. Appendix III provides additional details on our assessment of the TRIO components’ AAs for each of the GAO-identified 22 AOA best practices. Further, in comparing DHS AOA and AA guidance to the GAO-identified 22 AOA process best practices, we found that although DHS’s guidance for conducting both AOAs and AAs fully or substantially incorporated 17 of the identified best practices, the guidance did not fully or substantially incorporate 5 of these practices. For example, although the guidance addressed risk management in general terms, it did not detail the need to document risk mitigation strategies for each alternative. Not documenting the risks and related mitigation strategies for each alternative prevents decision makers from performing a meaningful trade-off analysis necessary to choose a recommended alternative. In addition, while DHS guidance describes the need for an AA or AOA review, it describes reviews conducted within the organizational chain of command and does not address the need for an independent review—one of the most reliable means to validate an AOA process. Further, although the guidance noted that weights for selection criteria may become more subjective when they cannot be derived analytically, additional guidance on weighting selection criteria was limited. Our overall assessment is summarized in table 2. Because of these limitations in guidance, and because Coast Guard and TSA did not fully adhere to the GAO-identified best practices, Coast Guard’s and TSA’s AAs did not fully or substantially reflect all four characteristics of a reliable, high-quality AOA process. As a result, Coast Guard and TSA increased their risk of selecting a solution that may not represent the best alternative for meeting their mission needs. Documentation supporting TRIO components’ AA efforts included descriptions of the key factors, metrics, and processes involved in conducting their analyses, including the (1) alternatives considered, (2) market research conducted, (3) three alternatives evaluated, (4) selection criteria used by each and how the criteria were weighted, (5) scores for each alternative against the selection criteria, and (6) alternatives that scored the best under the AOA evaluation. The TRIO components conducted market research to develop reasonable alternative solutions for consideration. For example, through its market research, TSA identified OMB-designated federal SSPs and commercial entities as potential alternatives for hosting and implementing a modernized and integrated financial management system. According to its AA, TSA was able to gain an understanding of the offerings, capabilities, and related costs associated with these alternatives through reviews of documentation and interviews. After developing a diverse range of financial system modernization alternatives for consideration, each of the TRIO components assessed them for viability using various factors—such as measures of effectiveness, cost, risk, and value—and identified the three top-rated alternatives for further evaluation. For example, Coast Guard identified nine alternatives for consideration and analyzed, scored, and ranked them to determine its top three alternatives for further analysis: incrementally improve the current CAS Suite and remove certain outdated components, host the financial management system internally using software and tools already owned, and use an SSP to host the financial management system. Each component identified its three alternatives for further evaluation and used defined selection criteria to rate them. For example, DNDO’s selection criteria included four categories of operational effectiveness that were weighted according to their level of importance. Based on their evaluations, each component identified the best alternative for its respective financial management system needs. According to Coast Guard’s November 2012 decision memorandum, Coast Guard further narrowed the alternatives it focused on to (1) using an SSP to host its financial management system and (2) hosting the system internally using already-owned software and tools, and it also gathered rough order of magnitude cost estimates for both alternatives. Based on its evaluation, Coast Guard determined that the two alternatives were comparable. According to this memorandum, Coast Guard further determined that owning, hosting, operating, and managing a financial management system were not among its core competencies. Based on this determination, OMB direction to agencies to use (with limited exceptions) shared services, and other factors, Coast Guard decided that migrating to an SSP was the best alternative. TSA found in its February 2013 analysis that the differences between federal and commercial SSP alternatives were not significant and, as a result, recommended that a competitive procurement be conducted to better evaluate each alternative. However, DHS officials told us that TSA subsequently determined that a competitive procurement was not warranted and chose to migrate to a federal SSP. This determination was based on additional OMB guidance issued in March 2013 directing agencies to consider federal SSPs as part of their AAs and stating that commercial SSPs are an appropriate solution and would be funded by OMB only in instances in which the agency’s business case demonstrates that a commercial SSP can provide a better value for the federal government. In addition, DNDO determined that migrating to a federal SSP was its best alternative in May 2013. Because its preliminary research focused primarily on the federal SSP marketplace, Coast Guard conducted additional market research to include a more robust analysis of commercial SSPs. Coast Guard’s June 2013 market research report described the results of this effort, including its evaluation of responses from 11 commercial SSPs. Coast Guard reported that none of the commercial SSPs that responded could meet all 44 specific financial management system requirements and the extent to which they could meet them varied significantly. Based on these results, Coast Guard determined that there was a lack of maturity in the commercial SSP market for federal financial management. According to the report, this overall assessment was based on various considerations of information provided by commercial SSP respondents, including the wide variety of proposed configurations, solutions, prices, and implementation schedules, the lack of federal experience and service for agency-wide capabilities, and insufficient length of service to establish positive trends in audit performance; the lack of similar offerings that implied a lack of strong competition between comparable products that would exert downward pressure on cost; and the lack of like product offerings, which increases the likelihood of higher switching costs in the case of poor performance because of increased difficulty in moving from one “turnkey” service to another. In July 2013, the TRIO components and DHS selected the federal SSP alternative as their preferred choice and subsequently selected IBC as their federal SSP. DHS officials told us that IBC was selected based on (1) DHS’s reliance on OMB and Treasury’s designation of IBC as a federal SSP, (2) OMB guidance to consider the use of federal SSPs, and (3) a review of the availability of the four federal SSPs indicating that IBC was the only one available to meet the requirements and implementation schedule at that time. In August 2013, DHS notified OMB that the TRIO components had performed extensive market research and finalized their respective AAs and independently concluded that migrating to a federal SSP was in the best interests of the government. Also, in August 2013, FIT notified OMB regarding the TRIO components’ AA efforts and that the TRIO components would proceed to the discovery phase with IBC. According to FIT’s notification memorandum to OMB, the TRIO components’ AAs demonstrated that migrating to a federal SSP was the best value to the federal government and that the components identified IBC as a suitable partner based on the results of their market research into federal SSPs. Risk management best practices call for the identification of potential problems before they occur so that risk-handling activities can be planned throughout the life of the project to mitigate adverse impacts on achieving objectives. These best practices involve (1) preparing for risk management, (2) identifying and analyzing risks, and (3) mitigating identified risks. Preparing for risk management involves determining risk sources and categories and developing risk mitigation techniques. Identifying and analyzing risks includes determining those that are associated with cost, schedule, and performance and evaluating identified risks using defined risk parameters. Mitigating risks includes determining the levels and thresholds at which a risk becomes unacceptable and triggers the execution of a risk mitigation plan or contingency plan; determining the costs and benefits of implementing the risk mitigation plan for each risk; monitoring risk status; and providing a method for tracking open risk-handling action items to closure. Based on our evaluation, we found that DHS processes generally reflected three of seven specific risk management best practices and partially reflected the remaining four practices. Table 3 summarizes the extent to which DHS followed these seven best practices for managing TRIO project risks. Additional details on DHS and TRIO component efforts to address these practices are summarized following this table. Prepare for risk management. Key aspects of processes established by DHS and TRIO components related to the three best practices associated with preparing for risk management: Determine risk sources and categories. This practice calls for a basis for systematically examining circumstances that affect the ability of the project to meet its objective and a mechanism for collecting and organizing risks. DHS and the TRIO components established processes that met this best practice. For example, DHS reviewed the integrated master schedule that IBC prepared to identify sources of risk and defined risk categories in TRIO project policies. Define risk parameters. Risk parameters are used to provide common and consistent criteria for comparing risks to be managed. The best practice includes defining criteria for evaluating and quantifying risk likelihood and severity levels and defining thresholds for each risk category to determine whether risk is acceptable or unacceptable and to trigger management action. DHS partially met this best practice. DHS’s risk management program defined rating scales to provide consistent criteria for evaluating and quantifying risk likelihood and severity levels. However, DHS’s Risk Management Planning Handbook and related template for developing risk management plans for projects did not address the need for thresholds relevant to each category of risk to facilitate review of performance metrics in order to determine when risks become unacceptable or to invoke selected risk-handling options when monitored risks exceed defined thresholds. Establish a risk management strategy. A risk management strategy addresses specific actions and the management approach used to apply and control the risk management program, including identifying sources of risk, the scheme used to categorize risks, and parameters used to evaluate and control risks for effective handling. DHS met this best practice. DHS and IBC established risk management policies and plans for the TRIO project based on DHS acquisition guidance, which provided a framework for a risk management program. Collectively, these policies and plans constitute a risk management strategy. DHS and IBC have periodically updated these documents to maintain the scope of the risk management effort; the methods and tools to be used for risk identification, risk analysis, risk mitigation, risk monitoring, and communication; the prioritization of risks; and the allocation of resources for risk mitigation. Identify and analyze risks. Key aspects of processes established by DHS and the TRIO components related to the two best practices associated with identifying and analyzing risks: Identify risks. Risk identification should be an organized, thorough process to seek out probable or realistic risks to achieving objectives. This practice recognizes that risks should be identified and described understandably before they can be analyzed and managed properly. Using categories and parameters developed in the risk management strategy and identified sources of risk guides the identification of risks associated with cost, schedule, and performance. To identify risks, best practice elements include reviewing the work breakdown structure (WBS) and project plan to help ensure that all aspects of the work have been considered. Best practices for documenting risks include documenting the context, conditions, and potential consequences of each risk and identifying the relevant stakeholders associated with each risk. DHS partially met this best practice. DHS’s July 2016 risk register contained a wide range of risks associated with defined risk categories. It also reflected DHS’s review of the TRIO project’s integrated master schedule that IBC prepared based on the WBS and work plans that IBC also developed. The risk register documented the context, conditions, potential consequences, and relevant stakeholders associated with each risk. However, DHS’s documented risk management processes did not identify all significant risks or reflect its efforts to revisit risks that had previously been closed. For example, DHS officials told us that IBC was unable to provide sufficient, reliable cost and schedule information for project monitoring; however, a risk reflecting these concerns was not included on its July 2016 risk register. Further, the risk register included certain closed risks related to the need for a governance structure and strategy for ensuring that IBC met performance, cost, and schedule objectives. Although DHS had ongoing concerns about its ability to ensure that IBC met these objectives, the risk register did not reflect efforts to revisit these risks to determine whether their status needed revision or if other risks should be included on the risk register to address its accountability concerns. In addition, DHS did not always take timely action to document its consideration of risks identified by its independent verification and validation (IV&V) contractor for potential inclusion on its risk register. For example, the IV&V contractor identified a risk related to inefficiencies in DHS’s document review process in June 2015 that was not included on DHS’s risk register until February 2016. DHS officials indicated that a crosswalk between the DHS risk register and IV&V contractor risk management observations was performed weekly; however, results of these weekly reviews were not documented. Evaluate, categorize, and prioritize risks. Risk assessment uses defined categories and parameters to determine the priority of each risk to assist in determining when appropriate management attention is required. Best practices for analyzing risks include categorizing risks according to defined risk categories, evaluating identified risks using defined risk parameters, and prioritizing risks for mitigation. DHS’s processes met this practice. For example, the documented risk management program included application of defined risk categories and parameters for all identified risks, providing a means for reviewing risks and determining the likelihood and severity of risks being realized. The TRIO project’s Joint Risk Management Integrated Project Team provided consistency to the application of parameters by reviewing risk assessments when risks were first identified. By determining exposure ratings for each identified risk, DHS prioritized risks for monitoring and allocation of resources for risk mitigation. Mitigate risks. Key aspects of processes established by DHS and the TRIO components related to the two best practices associated with mitigating risks: Develop risk mitigation plans. Risk mitigation plans are developed in accordance with the risk management strategy and include a recommended course of action for each critical risk. The risk mitigation plan for a given risk includes techniques and methods used to avoid, reduce, and control the probability of risk occurrence; the extent of damage incurred should the risk occur; or both. Elements of this practice include determining the levels and thresholds that define when a risk becomes unacceptable and triggers the execution of a risk mitigation plan or contingency plan, identifying the person or group responsible for addressing each risk, determining the costs and benefits of implementing the risk mitigation plan for each risk, developing an overall risk mitigation plan for the work to orchestrate the implementation of individual risk mitigation plans, and developing contingency plans for selected critical risks in the event impacts associated with the risks are realized. DHS partially met this best practice. DHS’s risk management program documentation reflected the development of risk response plans for most risks, including all those determined to be of medium and high exposure level. DHS identified those responsible for addressing each risk. However, DHS and IBC did not always develop sufficiently detailed risk mitigation plans including specific risk-handling action items, determination of the costs and benefits of implementing the risk mitigation plan for each risk, and developing contingency plans for selected critical risks in the event that their impacts are realized. For example, a risk associated with IBC’s capacity and experience for migrating large agencies the size of Coast Guard and TSA was identified in July 2014. Although DHS developed plans to help mitigate this risk, a contingency plan was not developed prior to realizing the adverse impact of not implementing Coast Guard and TSA on IBC’s modernized solution. Rather, a contingency plan working group (CPWG) to address this and other concerns was established in January 2017, over 2 years after the risk was initially identified. Further, thresholds were not used within the risk management program to define when a risk becomes unacceptable, triggering the execution of a risk mitigation plan or contingency plan. Implement risk mitigation plans. Risk mitigation plans are implemented to facilitate a proactive program to regularly monitor risks and the status and results of risk-handling actions to effectively control and manage risks during the work effort. Best practice elements include revisiting and reevaluating risk status at regular intervals to support the discovery of new risks or new risk-handling options that can require reassessment of risks and re-planning of risk mitigation efforts. Elements also include providing a method for tracking open risk-handling action items to closure, establishing a schedule or period of performance for each risk-handling activity, invoking selected risk-handling options when monitored risks exceed defined thresholds, and providing a continued commitment of resources for each risk mitigation plan. DHS partially met this best practice. Risk monitoring of the TRIO project consisted of reviews performed by DHS and TRIO component officials responsible for risk management and oversight functions. These reviews considered significant risks, risks approaching realization events, and the effect of management intervention on the resolution of risks. These reviews also relied, in part, on data contained in DHS’s risk register, which represents the official repository of TRIO project risks and information on the status of risks and related risk mitigation efforts. However, other aspects of DHS’s efforts to implement risk mitigation plans did not fully adhere to certain elements associated with this best practice. For example, we identified certain issues that raised questions concerning the accuracy of data contained in the risk register, such as (1) the lack of clear markings indicating when the accuracy of data on each risk was last confirmed, including risk records that had not been modified in the previous 3 months, and (2) certain risks for which the estimated risk impact date had already occurred but its status risk according to DHS’s risk register did not reflect that it had been realized and become an issue. In addition, DHS officials stated that IBC did not provide sufficiently detailed, reliable cost and schedule information that could have been used to monitor TRIO project risks more effectively. DHS’s ability to monitor cost, schedule, and other performance metrics was also limited because of the lack of thresholds for management involvement, as noted above. DHS’s implementation of risk monitoring plans was further limited by other issues, including (1) a period of performance for each risk-handling activity, which includes a start date and anticipated completion date to control and monitor risk mitigation efforts, was not always established and (2) an inability to fully track open risk-handling action items to closure existed because of the lack of sufficient detail on specific risk-handling activities in the DHS risk register. According to DHS officials, DHS relied heavily on IBC to manage risks associated with the TRIO project and, in particular, those for which IBC was assigned as the risk owner. They also acknowledged DHS’s responsibility for overseeing IBC’s TRIO project risk management efforts and described various actions taken to address growing concerns regarding IBC’s efforts. For example, DHS created the Joint Risk Management Integrated Project Team, in part, to provide a forum in which IBC could obtain assistance in developing risk responses and discuss DHS’s risk mitigation concerns. Further, to help reduce exposure of underlying risks, DHS offered assistance to IBC’s project management functions, such as developing the integrated master schedule and performing quality control checks on project deliverables. Despite these efforts, DHS officials stated that challenges associated with the IAA structure and terms of the performance work statement with IBC on the TRIO project limited DHS’s visibility into IBC’s overall cost, schedule, and performance controls and ability to oversee IBC’s risk management efforts. For example, they stated that the performance work statement did not specify the level of reporting to be provided by IBC on cost, schedule, and performance in sufficient detail to effectively monitor progress on achieving key project objectives. Further, the limitations to managing risks related to the best practices we assessed as partially met were largely attributable to limitations in DHS and TRIO project guidance and policies. For example, DHS’s Risk Management Planning Handbook and related template for developing risk management plans for projects does not address the need to define thresholds to facilitate review of performance metrics to determine when risks become unacceptable. Also, TRIO project policies did not address the need to periodically revisit consideration of risk sources other than IMS-related milestones, specify periods of performance for specific risk- handling activities, or define an interval for updating and certifying risk statuses. In addition, DHS guidance and TRIO project policies did not describe the need to consider and document risks specifically related to the lack of sufficient, reliable cost and schedule information to properly manage and oversee the project or for timely disposition of risks that its IV&V contractor identified. Further, TRIO project risk management policies and management tools used to implement them address best practice elements such as determination of the costs and benefits of implementing risk mitigation plans, developing contingency plans, and developing specific risk-handling action items. However, these policies do not require, and the risk register was not designed to specifically capture, these elements in documented risk mitigation plans. By not adopting important elements of risk management best practices into project guidance, DHS and the TRIO components increase the risk that potential problems would not be identified before they occur and that activities to mitigate adverse impacts would not be effectively planned and initiated. Although DHS has taken various actions to manage the risks of using IBC for the TRIO project, including some that were consistent with best practices, the TRIO project has experienced challenges raising concerns regarding the extent to which its objectives will be achieved. In connection with these challenges, the TRIO components notified DHS during April 2016 through January 2017 that certain baseline cost and schedule objectives had not been, or were projected to not be, achieved as planned. According to these notifications and DHS officials we interviewed, several key factors and challenges significantly impacted DHS’s and IBC’s ability to achieve TRIO project objectives as intended. In addition, IBC, FIT, and USSM officials identified similar issues impacting the TRIO project. In connection with these challenges, DHS and IBC began contingency planning efforts in January 2017 to identify and assess viable options for improving program performance and addressing key TRIO project priorities. Plans for DHS’s path forward on the TRIO project, as of May 2017, involve significant changes, such as transitioning away from using IBC and a 2-year delay in completing Coast Guard and TSA’s migration to a modernized solution. We grouped the key factors and challenges impacting the TRIO project that DHS, IBC, FIT, and USSM officials and OMB staff identified into five broad categories: (1) project resources, (2) project schedule, (3) complex requirements, (4) project costs, and (5) project management and communications. The key factors and challenges related to each category are summarized below. Project resources: Concerns about IBC’s experience and its capacity to handle a modernization project involving agencies the size of Coast Guard and TSA were identified as significant risks in July 2014, resulting from discovery phase efforts completed prior to DHS and IBC’s entering the implementation phase in August 2014. According to DHS officials, status reports, and other documentation, key TRIO project challenges related to resources included concerns that (1) IBC encountered federal employee hiring challenges and was unable to ramp up and deploy the resources necessary to meet required deliverables, and (2) IBC experienced significant turnover of key stakeholders which adversely impacted its ability to achieve TRIO project objectives. In connection with DHS’s decision to use IBC for the TRIO project, DHS officials told us that DHS relied heavily on OMB and Treasury’s designation of IBC as a federal SSP and their related assessment of IBC’s capacity and experience. DHS officials also told us that DHS relied on FIT’s federal agency migration evaluation model during discovery phase efforts that focused on assessing the functionality of the software rather than assessing IBC’s (1) capacity, experience, and capability; (2) ability to address more complex software configurations and interfaces associated with large agencies; and (3) cost, schedule, and performance metrics. DHS officials stated that issues related to IBC’s capacity and experience represented the most significant challenge impacting the TRIO project. IBC officials acknowledged that IBC was unable to ramp up its resources until after the project had begun and that the IBC project team experienced significant turnover in key leadership and TRIO project positions over the course of the project. IBC officials also acknowledged that during its early efforts on the TRIO project, assigned IBC staff lacked the experience and expertise necessary for managing large-scale projects and, as a result, many of the risks initially identified were not effectively addressed. FIT and USSM officials and OMB staff also acknowledged that resource challenges significantly impacted the TRIO project. A FIT official acknowledged that assessing software functionality, rather than implementation, was emphasized during the discovery process. Although DHS relied on OMB and Treasury’s designation of IBC as a federal SSP, this FIT official also told us that because agencies’ specific needs can vary significantly, agencies are responsible for conducting sufficient due diligence to assess a federal SSP’s ability to meet their requirements. Project schedule: DHS, IBC, FIT, and USSM officials acknowledged that migrating the TRIO components to IBC within original time frames was a significant challenge given the overall magnitude and complexity of the TRIO project. According to DHS officials and TRIO project documentation, DHS identified delays in completing various tasks and milestones including providing design phase technical documentation and design processing proposed change requests; meeting proposed baseline schedules for implementing Coast Guard and TSA on the modernized IBC solution; and achieving initial operating capability requirements and stabilizing the production environment after DNDO’s migration to IBC because of various issues related to reporting, invoice payment processing, contract management processes, and resolving help desk tickets in a timely manner. DHS officials also stated that IBC did not consistently update the IMS to ensure that it accurately reflected all required tasks, the completion status, and the resources required to complete them. Concerns related to meeting milestones and updating the IMS were discussed during periodic status update meetings that included DHS, IBC, OMB, FIT, and USSM officials. IBC and DHS officials acknowledged that processes for communicating and resolving issues were not always efficient and contributed to schedule delays. In addition, in November 2016, USSM noted several concerns based on its review of a draft IMS supporting TSA’s re-planning efforts to go-live in October 2017. USSM’s concerns included an incomplete project scope and schedule and need for additional discovery to determine cost and level of effort, an extremely aggressive schedule with very limited contingencies for the lack of interim checkpoints or oversight on tasks exceeding 30 days, the need for a resource-loaded IMS that incorporates an appropriate level of detail, and the need for an expedited program governance strategy and escalation path that DHS and IBC leadership could use to make program decisions within the time allotted on the schedule. Complex requirements: DHS, IBC, FIT, and USSM officials acknowledged the overall complexity of the TRIO project and that the lack of a detailed understanding of the components’ requirements earlier in the project impacted IBC’s and DHS’s ability to satisfy the requirements as planned. For example, USSM and FIT officials told us that under the shared services model, the approach for onboarding new customers usually involves migrating to a proven configuration of a solution that is already being used by the provider’s existing customers. However, rather than taking this approach, DHS and IBC agreed to implement a more recent version of Oracle Federal Financial software (version 12.2) with integrated contract life cycle and project modules. Under this approach, IBC’s plans included migrating other existing customers to this upgraded environment. USSM officials told us that migrating TRIO components to a new solution that required configuring new software and related applications and developing related interfaces introduced additional complexities that contributed to issues on the TRIO project. According to a FIT official, the functionality of this more recent version of software is very different than that of the version IBC’s existing customers used. This official stated that IBC did not have the needed government personnel with knowledge and experience associated with this new software, a condition that likely contributed to the challenges experienced on the TRIO project. IBC officials acknowledged that IBC’s lack of familiarity with Oracle 12.2 increased the complexity of the TRIO project. In addition, DHS and IBC perspectives on the need for changes differed because of the lack of clarity regarding TRIO project requirements. DHS officials told us that many change requests on the TRIO project reflected the need for required functionality based on previously stated requirements. They also told us that they did not consider DNDO-related requirements to be overly complex when compared to those associated with IBC’s similarly sized customers. However, DHS officials stated that as of June 2017, IBC has not yet met DNDO’s needs to deliver a functioning travel system interface and other requirements. According to IBC officials, TRIO project change requests to address components’ requirements were extensive and included significant customizations to meet unique requirements that were not aligned with the federal shared service model. IBC officials noted additional challenges in addressing TRIO project requirements related to DHS’s efforts to address certain organizational change management and business process reengineering responsibilities. According to IBC officials, in some instances, the TRIO components provided conflicting requirements related to the same process that would have been more consistent had DHS completed more of its business process reengineering efforts prior to providing them to IBC. Project costs: According to the July 2014 discovery report, proposed implementation costs for the TRIO project totaled $89.9 million. However, according to DHS officials and TRIO project documentation, estimated costs significantly increased because of schedule delays, unanticipated complexities, and other challenges. In January 2017, DHS prepared a summary of estimated TRIO project implementation costs associated with its IAA with IBC. According to this summary, estimated IBC-related TRIO project implementation costs through fiscal year 2017 increased by approximately $42.8 million (54 percent) from the $79.2 million provided in the original August 2014 IAA with IBC as a result of modifications required, in part, to address challenges impacting the project. DHS officials also expressed concerns regarding increases in estimated operations and maintenance costs for the IBC solution. For example, according to a December 2016 memorandum to DHS on action items associated with failing to meet the baseline schedule date for initial operational capability, DNDO stated that IBC’s updated projected costs of operations and maintenance of its system were unaffordable. In connection with these costs, DHS officials also stated that IBC determined that separate, rather than shared, help desk resources were required to support the TRIO project because it was significantly different from the solution that IBC’s existing customers used. As a result, the officials indicated that these costs were more than originally expected. However, IBC officials told us that a portion of the increase in help desk- related costs was also due to DNDO employees not using the system properly because they were not sufficiently trained on it before it was implemented. In addition, challenges impacting the TRIO project have contributed to significant changes in the path forward on the project; as a result, the extent to which overall TRIO project modernization costs will be impacted going forward has not yet been determined. Project management and communication: According to DHS officials, various program management-related challenges impacted the TRIO project. For example, they expressed concerns regarding the effectiveness of IBC’s project management efforts including cost, schedule, and change management as well as IBC’s allocation of resources and slow decision-making process. They also stated that DHS provided significant time and resources to make up for fundamental project management activities that were under IBC’s control and not performed. In addition, DHS officials identified limitations associated with (1) poorly defined service level agreements and program performance metrics, (2) poor quality control plan, and (3) the lack of mechanisms for measuring delivery and addressing concerns regarding IBC’s performance. DHS officials told us that although various mechanisms can be used to hold commercial vendors accountable—such as cure notices, quality assurance surveillance plans, and incentives or disincentives to monitor performance—few mechanisms are available to hold federal agency service providers accountable for performance concerns. DHS officials also acknowledged challenges in their project management and communication efforts and identified lessons learned to help improve future efforts, including the need to establish a performance-based contract to determine objective and enforceable activity level metrics; be more prepared for organizational changes; improve vendor, project, and schedule management efforts; better understand SSP resource plans and monitor SSP efforts to help ensure that sufficient resources are secured timely; and centralize program management for financial system modernization functions, rather than continuing with the structure used on the TRIO project—for example, the TRIO project’s program management structure consisted of program management offices at the component level performing cost, schedule, and technical monitoring activities with DHS headquarters’ involvement focused on governance and oversight, resulting in duplicate efforts across components. IBC officials acknowledged challenges concerning IBC’s lack of sufficient resources and turnover, as described above. However, they told us that DHS’s approach to project management often resulted in duplicative meetings and a lengthy decision-making process involving several officials and multiple review and approval processes. According to USSM officials, the TRIO project team focused an unbalanced portion of its efforts on the delivery of technology at the expense of organizational change management, communication management, and other project management areas. For example, the failure to incorporate lessons learned from DNDO’s deployment adversely affected subsequent TRIO project implementation efforts, as change management activities did not address previously encountered risks. An OMB staff member concurred with the lessons learned that DHS identified, including those indicating the need for stronger project management. While the project is ongoing, the OMB staff member noted the importance of DHS having well-defined requirements for the project and better coordination to achieve the desired outcomes. In connection with TRIO project challenges, DHS officials told us that IBC notified DHS in April 2016 that it would not be able to meet the planned October 2016 implementation date for TSA. In response, DHS and IBC established the TSA Replan Tiger Team to perform a detailed assessment of potential courses of action. According to DHS officials, DHS and IBC subsequently took various actions to help address these and other challenges impacting the TRIO project, as summarized below. May 2016: IBC requested additional funding for fiscal year 2016 for 14 additional IBC and contractor personnel to strengthen program coordination and management support. According to DHS officials, DHS provided this requested funding along with additional funding to establish a business integration office to help strengthen cross organizational communication. DHS determined that plans for migrating TSA and Coast Guard to IBC during the first quarter of fiscal years 2017 and 2018, respectively, were not viable. As a result, their planned migrations were each extended an additional year. June 2016: DHS and IBC developed a comprehensive remediation plan to track progress on efforts to resolve numerous issues associated with DNDO’s production environment that continued to hamper its stability since going live in November 2015. According to DHS officials, these issues related to invoice payment and interest accruals, contract life cycle management, reporting, and other activities and have required numerous work-arounds to execute business processes. August to October 2016: DHS, Coast Guard, and IBC determined that a similar replanning effort was needed for Coast Guard’s successful migration to IBC. According to DHS officials, IBC indicated that it was unable to simultaneously provide DNDO production and TSA implementation support while also addressing the complexities related to Coast Guard. DHS officials told us that another Tiger Team established to address Coast Guard issues failed to complete the scope of its charter, and as a result, Coast Guard was forced to assume a minimum of a 2- year delay (rather than the 1-year delay previously determined in May 2016) and that this significantly increased program costs. They further stated that some of the team’s deliverables have not been initiated or remain outstanding as of June 2017. December 2016: IBC communicated to DHS that it cannot support the discovery phase with DHS’s CUBE modernization project. In addition, DHS approved the establishment of a Joint Program Management Office to serve as the overarching program management for DHS financial systems modernization projects. According to DHS officials, using a department-wide approach will enable DHS to more effectively leverage the resources and expertise across all modernization projects. January 2017: IBC communicated to DHS that it cannot support Coast Guard implementation in October 2018, and DHS and IBC established a joint CPWG to assess viable options for improving program performance and addressing stakeholder concerns and key TRIO project priorities. February 2017: DHS and IBC issued a joint memorandum to provide an update on contingency planning discussions. DHS and IBC shared commitments and determinations included (1) stabilizing the DNDO production environment and executing TSA implementation activities, (2) delivering the best value for the government and ensuring mutual success to the greatest extent possible, (3) preserving and protecting the current investment, and (4) making TSA implementation the first priority. In addition, DHS and IBC presented two options as representing the best opportunities for success in improving program performance and addressing stakeholder concerns: (1) continue with the status quo plan for Coast Guard implementation in October 2019, with significant improvements to program management and overall support capability and capacity, or (2) platform replacement. Platform replacement was presented as the preferred path toward meeting the needs of both DHS and IBC. Under this option, DHS and IBC would proceed with TSA implementation and work toward an orderly transition of TRIO components to an alternate service provider, hosting location, or both. March 2017: According to DHS officials, DHS, IBC, and USSM officials met to review certain critical success criteria for TSA’s implementation. Based on these discussions, it was determined that TSA would not go live with IBC in fiscal year 2018 given the high-risk schedule and critical criteria involved and the Coast Guard implementation would also be delayed accordingly. Further, TSA release 3.0 would be delivered in October 2017 or as soon as possible thereafter. In addition, the CPWG would continue working to identify an alternative path forward, and DHS and IBC would identify and evaluate critical transition activities and timelines. April 2017: The CPWG recommended moving away from IBC to a commercial service provider leveraging the cloud as the best course of action to complete TRIO project implementation and as the most fiscally responsible approach from a long-term sustainment and cost perspective. The CPWG’s recommendation was based on its analysis of six options and proposed a transition timeline, including key activities, as shown in figure 3. May 2017: During its May 3, 2017 briefing of the Financial Systems Modernization Executive Steering Committee, DHS indicated that two of the options that the CPWG considered were no longer viable, including the CPWG’s recommendation to transition to a commercial cloud service provider because the software was not yet cloud-ready. DHS ranked the remaining four options using 13 OMB risk factors as selection criteria and determined that migrating the solution to a DHS data center represented the best option going forward. In addition, DHS decided to move forward with discovery efforts related to this option. According to its briefing presentation and DHS officials, the notional timeline of planned key events for the TRIO project included various items, as shown in figure 4. DHS officials indicated that DHS expects to present the findings and recommendations resulting from discovery efforts associated with this new path forward to USSM and OMB for concurrence. As of August 2017, results of this effort were under review by DHS leadership. The TRIO project represents a key element of DHS’s efforts to address long-standing deficiencies in its financial management systems and further improve financial management. Following best practices to manage risks effectively can help provide increased assurance that large, complex projects—such as the TRIO project—will achieve planned objectives. DNDO’s AA process substantially met the four characteristics of a reliable, high-quality AOA process. However, Coast Guard’s and TSA’s AAs substantially met one and partially met three of these four characteristics. Further, DHS did not always follow best practices for managing the risks of using IBC for the TRIO project. As a result, TRIO components faced an increased risk that the solution they chose would not represent the best alternative for meeting their mission needs and that the risks impacting the TRIO project would not be effectively managed to mitigate adverse impacts. In addition, significant challenges have impacted the TRIO project, raising concerns about the extent to which objectives will be achieved as planned. Plans for DHS’s path forward on the TRIO project, as of May 2017, involve significant changes, such as transitioning away from IBC and a 2-year delay in completing Coast Guard’s and TSA’s migration to a modernized solution. Without greater adherence to best practices for analyzing alternatives and managing project risks, DHS continues to face increased risk that its financial management system modernization project will not provide reasonable assurance of achieving its mission objectives. We are making the following two recommendations to DHS: The DHS Under Secretary for Management should develop and implement effective processes and improve guidance to reasonably assure that future AAs fully follow AOA process best practices and reflect the four characteristics of a reliable, high-quality AOA process. (Recommendation 1) The DHS Under Secretary for Management should improve the Risk Management Planning Handbook and other relevant guidance for managing risks associated with financial management system modernization projects to fully incorporate risk management best practices, including defining thresholds to facilitate review of performance metrics to determine when risks become unacceptable; identifying and analyzing risks to include periodically reconsidering risk sources, documenting risks specifically related to the lack of sufficient, reliable cost and schedule information needed to help properly manage and oversee the project, and timely disposition of IV&V contractor-identified risks; developing risk mitigation plans with specific risk-handling activities, the costs and benefits of implementing them, and contingency plans for selected critical risks; and implementing risk mitigation plans to include establishing periods of performance for risk-handling activities and defining time intervals for updating and certifying the accuracy and completeness of information on risks in DHS’s risk register. (Recommendation 2) We provided a draft of this product to DHS and the Department of the Interior for comment. In its comments, reprinted in appendix IV, DHS concurred with our recommendations and provided details on its implementation of the recommendations as discussed below. In addition, DHS provided technical comments, which we incorporated as appropriate. The Department of the Interior only provided technical comments, which we incorporated as appropriate. DHS stated that it remains committed to its financial system modernization program. Specifically, regarding our first recommendation to develop and implement effective processes and improve guidance to reasonably assure that future AAs fully follow AOA process best practices and reflect the four characteristics of a reliable, high-quality AOA process, DHS stated that it agrees that effective processes and guidance are necessary to assure best practices. DHS also stated that it is important to note that the GAO-identified best practices were published more than 2 years after the TRIO components’ AAs were completed. While this is the case, as discussed in our report, these best practices are based on long- standing, fundamental tenets of sound decision making and economic analysis and were identified by compiling and reviewing commonly mentioned AOA policies and guidance that are known to and have been used by government and private sector entities. DHS also stated that it has already implemented this recommendation through its issuance of guidance and instructions in 2016 and that a copy of this additional guidance and instructions was provided to GAO. However, the documentation provided by DHS does not fully address our recommendation. As part of our recommendation follow-up process, we will coordinate with DHS to obtain additional information on its efforts to address our recommendation. With regard to our second recommendation to improve the Risk Management Planning Handbook and other relevant guidance, DHS stated that it concurred and agreed that the Risk Management Planning Handbook required updating to fully incorporate risk management best practices. In addition, DHS described actions it will take, and has taken, to revise and publish an updated handbook. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Homeland Security, the DHS Under Secretary for Management, the Acting DHS Chief Financial Officer, the Secretary of the Interior, and the Director of the Interior Business Center. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-9869 or khana@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix V. To determine the extent to which the Department of Homeland Security (DHS) followed best practices in analyzing the alternatives used in choosing the preferred alternative for modernizing TRIO components’ financial management systems, we reviewed information that the TRIO components provided as part of their alternatives analysis (AA) process, referred to as the AA body of work, which includes the AA and other supporting documentation that is not specifically included in the AA. In addition, we discussed the DHS AA process with the TRIO components and DHS officials. We evaluated each TRIO component’s AA body of work and assessed this information against the GAO-identified 22 analysis of alternatives (AOA) process best practices. We then scored each AA against those best practices. In appendix II, these GAO- identified best practices are described in detail. Our evaluation comprised the following steps: (1) two GAO analysts separately examined the AA information received for each component, providing a score for each of 18 best practices; (2) a third GAO analyst resolved any differences between the two analysts’ initial scoring; and (3) a GAO specialist on AOA best practices, independent of the audit team, reviewed the team’s AA documentation, scores, and analyses for consistency. The GAO specialist also assessed the four best practices related to cost estimating. We used the average scores for each best practice to determine an overall score for four summary characteristics—well-documented, comprehensive, unbiased, and credible—of a reliable, high-quality AOA process at each TRIO component. Next, we shared our preliminary analysis with the TRIO components and DHS, and requested their technical comments and any additional information for our further consideration. For those characteristics of the AA process that received a score of partially met or below, we met with TRIO component and DHS officials to discuss potential reasons that an AA did not always conform to best practices. Finally, using the same methodology and scoring process explained above, we performed a final assessment based on our preliminary analysis and the comments and additional information received. The best practices were not used to determine whether DHS made the correct decision in selecting Department of the Interior’s Interior Business Center (IBC) to implement the financial management systems modernization solution or whether the TRIO project would have arrived at a different conclusion had it more fully conformed to these best practices. We also reviewed DHS guidance for conducting AOAs and AAs against the GAO-identified 22 AOA process best practices using the same methodology described above for reviewing the TRIO components’ AAs. In the course of applying these best practices to a TRIO component’s AA and to DHS guidance for the AA process, we assessed the reasonableness of the information we collected. We determined that the information from the DHS AA process was sufficiently reliable to use in assessing the TRIO components’ AAs and DHS guidance against these 22 best practices. To determine the key factors, metrics, and processes used by the TRIO components in developing and evaluating DHS’s alternative solutions and final choice for financial system modernization, we reviewed each component’s AA, including a description of (1) the alternatives considered, (2) the market research conducted, (3) the three alternatives evaluated, (4) the selection criteria used and how the criteria were weighted, (5) how each alternative scored against the selection criteria, and (6) the alternative that scored the best according to the component’s evaluation. To determine the extent to which DHS managed the risks of using IBC consistent with risk management best practices, we reviewed DHS’s and TRIO components’ risk management guidance and other documentation supporting their risk management efforts, including risk registers, mitigation plans, status reports, and risk management meeting minutes. We also met with officials to gain an understanding of the key processes and documents used for managing and reporting on TRIO project risks. We assessed the processes against best practices that the Software Engineering Institute (SEI) identified. The practices we selected are fundamental to effective risk management activities. These practices are identified in SEI’s Capability Maturity Model® Integration (CMMI®) for Acquisition, Version 1.3. In particular, the key best practices for preparing for risk management are determine risk sources and categories, define risk parameters, and establish a risk management strategy. The key best practices for identifying and analyzing risks are evaluate, categorize, and prioritize risks. The key best practices for mitigating identified risks are develop risk mitigation plans and implement risk mitigation plans. We applied the criteria from the CMMI risk management process area to determine the extent to which the expected practices were implemented, or future activities were planned for, by the program office. The rating system we used is as follows: (1) meets, or generally satisfies all elements of the specific practice; (2) partially meets, or generally satisfies a portion of specific practice elements; and (3) does not meet, or does not satisfy specific practice elements. In the context of the best practices methodology, we assessed the reliability of TRIO project risk data contained in DHS’s risk register. We interviewed officials on how the risk register was developed and maintained, including key control activities used to provide reasonable assurance of the accuracy of the information reported in the register. We reviewed DHS’s July 2016 risk register and minutes from risk management committee meetings (one meeting per quarter, randomly selected). Of 120 TRIO project risks on the July 2016 risk register, we found 13 risks with missing data. Of 47 active risks identified, 28 risk records had not been modified in the previous 3 months and the register did not indicate when their accuracy was last confirmed and 35 risks were beyond their indicated impact dates but had not been marked as issues. We concluded that the pervasiveness of these data reliability problems decreased the usefulness of the risk register in connection with managing TRIO project risks. To determine the key factors or challenges that have impacted the TRIO project and DHS’s plans for completing remaining key priorities, we met with DHS, IBC, Office of Financial Innovation and Transformation, and Unified Shared Services Management office officials and Office of Management and Budget staff to obtain their perspectives. In addition, we reviewed documentation provided by these officials, including TRIO project status reports and memorandums, leadership briefings, and other presentations. We conducted this performance audit from March 2016 to September 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Many guides describe an approach to an analysis of alternatives (AOA); however, there is no single set of practices for the AOA process that has been broadly recognized by both the government and private sector entities. GAO has previously identified 22 best practices for an AOA process by (1) compiling and reviewing commonly mentioned AOA policies and guidance used by different government and private sector entities and (2) incorporating experts’ comments on a draft set of practices to develop a final set of practices. These practices are based on longstanding, fundamental tenets of sound decision making and economic analysis. In addition, these practices can be applied to a wide range of activities in which an alternative must be selected from a set of possible options, as well as to a broad range of capability areas, projects, and programs. These practices can provide a framework to help ensure that entities consistently and reliably select the project alternative that best meets mission needs. The guidance below is an overview of the key principles that lead to a successful AOA process and not as a “how to” guide with detailed instructions for each best practice identified. The 22 best practices that GAO identified are grouped into the following five phases: 1. Initialize the AOA process: Includes best practices that are applied before starting the process of identifying, analyzing, and selecting alternatives. This includes determining the mission need and functional requirements, developing the study time frame, creating a study plan, and determining who conducts the analysis. 2. Identify alternatives: Includes best practices that help ensure that the alternatives to be analyzed are sufficient, diverse, and viable. 3. Analyze alternatives: Includes best practices that compare the alternatives to be analyzed. The best practices in this category help ensure that the team conducting the analysis uses a standard, quantitative process to assess the alternatives. 4. Document and review the AOA process: Includes best practices that would be applied throughout the AOA process, such as documenting all steps taken to initialize, identify, and analyze alternatives and to select a preferred alternative in a single document. 5. Select a preferred alternative: Includes a best practice that is applied by the decision maker to compare alternatives and to select a preferred alternative. The five phases address different themes of analysis necessary to complete the AOA process, and comprise the beginning of the AOA process (defining the mission needs and functional requirements) through the final step of the AOA process (selecting a preferred alternative). We also identified four characteristics that relate to a reliable, high-quality AOA process—that the AOA process is well-documented, comprehensive, unbiased, and credible. Table 4 shows the four characteristics and their relevant AOA best practices. Conforming to the 22 best practices helps ensure that the preferred alternative selected is the one that best meets the agency’s mission needs. Not conforming to the best practices may lead to an unreliable AOA process, and the agency will not have assurance that the preferred alternative best meets mission needs. The Department of Homeland Security’s TRIO components—the U.S. Coast Guard (Coast Guard), Transportation Security Administration (TSA), and Domestic Nuclear Detection Office (DNDO)—conducted alternatives analyses (AA) during 2012 and 2013 to determine the best alternative for transitioning to a modernized financial management system solution. We evaluated the TRIO components’ AA processes against analysis of alternatives (AOA) best practices GAO identified as necessary characteristics of a reliable, high-quality AOA process (described in app. II). GAO’s assessment of the extent to which Coast Guard’s, TSA’s, and DNDO’s AAs met each of the 22 best practices is detailed in tables 5, 6, and 7. In addition to the contact named above, James Kernen (Assistant Director), William Brown, Courtney Cox, Eric Essig, Valerie Freeman, Matthew Gardner, Jason Lee, Jennifer Leotta, and Madhav Panwar made key contributions to this report.", "summary": "To help address long-standing financial management system deficiencies, DHS initiated its TRIO project, which has focused on migrating three of its components to a modernized financial management system provided by IBC, an OMB-designated, federal SSP. House Report Number 3128 included a provision for GAO to assess the risks of DHS using IBC in connection with its modernization efforts. This report examines (1) the extent to which DHS and the TRIO components followed best practices in analyzing alternatives, and the key factors, metrics, and processes used in their choice of a modernized financial management system; (2) the extent to which DHS managed the risks of using IBC for its TRIO project consistent with risk management best practices; and (3) the key factors and challenges that have impacted the TRIO project and DHS's plans for completing remaining key priorities. GAO interviewed key officials, reviewed relevant documents, and determined whether DHS followed best practices identified by GAO as necessary characteristics of a reliable, high-quality AOA process and other risk management best practices. The Department of Homeland Security's (DHS) TRIO project represents a key effort to address long-standing financial management system deficiencies. During 2012 and 2013, the TRIO components—U.S. Coast Guard (Coast Guard), Transportation Security Administration (TSA), and Domestic Nuclear Detection Office (DNDO)—each completed an alternatives analysis (AA) to determine a preferred alternative for modernizing its financial management system. GAO found that DNDO's AA substantially met the four characteristics—well-documented, comprehensive, unbiased, and credible—that GAO previously identified for a reliable, high-quality analysis of alternatives (AOA) process. However, Coast Guard's and TSA's AAs did not fully or substantially meet three of these characteristics, and DHS guidance for conducting AAs did not substantially incorporate certain best practices, such as identifying significant risks and mitigation strategies and performing an independent review to help validate the AOA process. Based on these analyses and other factors, the TRIO components determined that migrating to a federal shared service provider (SSP) represented the best alternative, and in 2014, DHS selected the Department of the Interior's Interior Business Center (IBC) as the federal SSP for the project. However, because Coast Guard's and TSA's AAs did not fully or substantially reflect all of the characteristics noted above, they are at increased risk that the alternative selected may not achieve mission needs. DHS also did not fully follow best practices for managing project risks related to its use of IBC on the TRIO project. Specifically, DHS followed three of seven risk management best practices, such as determining risk sources and categories and establishing a risk management strategy. However, it did not fully follow four best practices for defining risk parameters, identifying risks, developing risk mitigation plans, and implementing these plans largely because its guidance did not sufficiently address these best practices. For example, although DHS created joint teams with IBC and provided additional resources to IBC to help address risk mitigation concerns, it did not always develop sufficiently detailed risk mitigation plans that also included contingency plans for selected critical risks. As a result, although IBC's capacity and experience for migrating large agencies the size of Coast Guard and TSA was identified as a risk in July 2014, a contingency plan working group to address this concern was not established until January 2017. By not fully following risk management best practices, DHS is at increased risk that potential problems may not be identified or properly mitigated. DHS, IBC, Office of Management and Budget (OMB), and other federal oversight agencies identified various challenges that have impacted the TRIO project and contributed to a 2-year delay in the implementation of Coast Guard's and TSA's modernized solutions. These challenges include the lack of sufficient resources, aggressive schedule, complex requirements, increased costs, and project management and communication concerns. To help address these challenges, DHS and IBC established review teams and have taken other steps to assess potential mitigating steps. In May 2017, DHS determined that migrating the solution from IBC to a DHS data center represented the best option and initiated discovery efforts to further assess this as its path forward for the TRIO project. GAO recommends that DHS more fully follow best practices for conducting an AOA process and managing risks. DHS concurred with GAO's recommendations and described actions it will take, or has taken, in response.", "document_type": "gao"}
{"report": "The countries of the Caribbean are diverse in size, culture, and level of development, and face various interrelated economic and security challenges. According to a recent International Monetary Fund report, Caribbean countries have recently fallen into a pattern of low growth and high debt, and those with tourism-intensive economies are characterized by high rates of unemployment. They have endured frequent natural disasters that reduced economic output and imposed reconstruction costs, as well as deep macroeconomic, financial, and structural challenges that have resulted in lower-than anticipated rates of economic growth, according to the same report. Recent reports emphasize that crime and violence in the Caribbean have inflicted widespread costs, generating a climate of fear for citizens and diminishing economic growth. These reports note that Caribbean countries have some of the highest per-capita murder rates in the world, with assault rates that are significantly above the world average, and high crime rates have stretched the capacity of their criminal justice systems, which are small and largely characterized as weak and ineffective. Because of their location between drug production sources in South America and consumer markets in North America and Europe, Caribbean countries have become a major transit zone for illicit drugs, particularly drugs destined for the United States. With long coastlines that are difficult to comprehensively patrol, and limited air and sea capabilities to support interdictions, the Caribbean countries often struggle to control territorial waters and stem the flow of drugs northwards. Over the years, the United States has created several initiatives to engage with the countries of the Caribbean Basin region to address economic and political issues. In May 2010, the United States, Caribbean Community member states, and the Dominican Republic formally launched CBSI to strengthen regional cooperation on security. At its inception in 2010, CBSI’s aim was to increase citizen safety through provision of U.S. foreign assistance to CBSI partner countries to reduce illicit trafficking, improve public safety and security, and promote social justice; these three “pillars” remain the overall goals of CBSI. There are thirteen CBSI partner countries—Antigua and Barbuda, Bahamas, Barbados, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago (see fig. 1). The U.S. agencies and offices currently funding CBSI activities are State’s Bureau of International Narcotics and Law Enforcement Affairs (INL), State’s Bureau of Political-Military Affairs (PM), and USAID (see fig. 2). State’s Bureau of Western Hemisphere Affairs (WHA) plays a coordinating role for CBSI. To implement CBSI activities, State and USAID partner with nongovernmental and multilateral organizations as well as other government agencies, such as DOD and the Departments of Homeland Security, Justice, and Treasury. From fiscal years 2010 through 2018, U.S. agencies have allocated more than $560 million in funding for CBSI activities. Since fiscal year 2012, annual allocations have remained relatively constant, ranging between $56.6 million and $63.5 million. Of the 13 CBSI partner countries, U.S. agencies have provided the most CBSI funding to the Dominican Republic, Jamaica, and the countries covered by the Eastern Caribbean embassy. State and USAID disbursed funds to support activities in partner countries that improve law enforcement and maritime interdiction capabilities, support activities to train and otherwise improve the capabilities of national security institutions, prevent crime and violence, and deter and detect border criminal activity. These activities are generally aligned with the three pillars of CBSI. From fiscal years 2010 through 2018, State and USAID allocated more than $560 million in funding for CBSI activities. Of that amount, U.S. agencies have disbursed or committed approximately $361 million for CBSI activities in the 13 CBSI partner countries and for region-wide activities. Funding for CBSI activities comes from a combination of U.S. foreign assistance accounts—mostly through INCLE, ESF, and FMF, with a small amount of funding provided through NADR and DA (see textbox). U.S. Foreign Assistance Accounts That Have Been Used to Fund Caribbean Basin Security Initiative (CBSI) Activities International Narcotics Control and Law Enforcement (INCLE): The Department of State (State)’s Bureau of International Narcotics and Law Enforcement Affairs (INL) manages the INCLE account, which provides assistance to foreign countries and international organizations to develop and implement policies and programs that maintain the rule of law and strengthen institutional law enforcement and judicial capabilities, including countering drug flows and combatting transnational crime. Generally, INCLE funds are available for obligation for 2 fiscal years and must be disbursed within 5 years of the end of the period of availability for new obligations. Economic Support Fund (ESF): State and the U.S. Agency for International Development (USAID) share responsibility for managing the ESF account. For CBSI activities, it is primarily USAID who uses ESF funds to assist foreign countries in meeting their political, economic, and security needs. Generally, ESF funds are available for obligation for 2 fiscal years and must be disbursed within 5 years of the end of the period of availability for new obligations. Foreign Military Financing (FMF): State’s Bureau of Political-Military Affairs manages the FMF account, which provides grants and loans to foreign governments and international organizations for the acquisition of U.S. defense equipment, services, and training. The Department of Defense is the main implementer of this funding. Previous acts appropriating funds for FMF have generally provided that such funds are available for obligation for 1 year, and deem such funds to be obligated upon apportionment. Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR): State manages the NADR account, which funds contributions to organizations supporting nonproliferation and provides assistance to foreign countries for nonproliferation, antiterrorism, demining, export control assistance, and other related activities. Generally, NADR funds are available for obligation for 2 fiscal years and must be disbursed within 5 years of the end of the period of availability for new obligations. Development Assistance (DA): USAID manages the DA account, which responds to long-term challenges to human and economic security by funding activities in areas such as economic growth and education. Generally, DA funds are available for obligation for 2 fiscal years and must be disbursed within 5 years of the end of the period of availability for new obligations. Since 2012, allocations have remained relatively constant each year, ranging between $56.6 million and $63.5 million. Table 1 summarizes the INCLE, ESF, NADR, and DA allocations and disbursements and the FMF allocations and commitments by year of appropriation. Appendix II includes a breakdown of allocated, obligated, and disbursed funds for INCLE, ESF, NADR, and DA accounts; appendix III includes a breakdown of FMF funding that State has allocated and committed to CBSI. Since fiscal year 2010, U.S. agencies have provided the most CBSI funding to the Dominican Republic, Jamaica, and the countries covered by the Eastern Caribbean embassy. These countries received approximately 66 percent of total CBSI allocations from fiscal years 2010 through 2018. Approximately 13 percent of total CBSI allocations went to the Bahamas, Guyana, Suriname, and Trinidad and Tobago, while 21 percent of total CBSI allocations went to regional activities. Table 2 provides a breakdown of allocated funds by country for CBSI activities. State and USAID fund various security activities in partner countries. State uses INCLE and FMF funds to conduct activities in support of CBSI goals at all seven embassies, covering all 13 CBSI countries. State uses several different implementing mechanisms—including contracts, cooperative agreements, and interagency agreements. According to INL officials, INL has an average of 10-50 distinct ongoing activities within any individual country program at any given time, ranging from multi-year, multi-million dollar embedded advisory programs to one-time procurements for equipment or individual trainings. USAID uses ESF funds for activities in three missions—the Dominican Republic, Eastern and Southern Caribbean, and Jamaica. In general, USAID uses similar implementing mechanisms, but typically has fewer projects that cover multiple years. State primarily focuses on funding CBSI activities that fall within the pillar of reducing illicit trafficking, and USAID concentrates on funding activities within the pillar of promoting social justice. Both agencies fund activities in the pillar of improving public safety and security. Reducing illicit trafficking. State uses INCLE and FMF funds, through interagency agreements with DOD and other implementing partners, to increase Caribbean countries’ control over their territorial maritime domain and reduce illicit trafficking, such as narcotics and firearms, as the examples below illustrate. Eastern Caribbean. INL and PM have provided training and equipment to the Regional Security System, a collective defense organization of Eastern Caribbean countries whose responsibilities include regional law enforcement training and narcotics interdiction. For example, U.S. assistance funded the refurbishment of aircraft operated by the Regional Security System to provide equipment for intelligence, surveillance, and reconnaissance related to drug interdiction. Jamaica. INL and PM have provided boats to the government of Jamaica to increase the government’s capacity to conduct counternarcotic operations (see fig. 3). Throughout the Caribbean. INL supports activities providing training, technical assistance, policy guidance, and basic equipment to enhance the capacity of CBSI countries to combat illicit small arms and ammunition trafficking through operational forensic ballistics. Throughout the Caribbean. State uses an interagency agreement to support the Technical Assistance Field Team (TAFT) program. This program, supported by both FMF and INCLE funds, aims to build maritime capacity of partner countries throughout the Caribbean. The team is composed of 15 Coast Guard and DOD engineers, technicians, specialists, and logisticians, based at U.S. Southern Command, who assist Caribbean maritime security forces with maintenance and sustainment issues. The advisors have worked to implement inventory management systems within CBSI countries and conduct regular site visits to CBSI countries to assist in the maintenance and logistics of maritime assets. Promoting social justice. USAID and its implementing partners— multilateral and nongovernmental organizations, for the most part—use ESF funds in an effort to increase economic opportunities for at-risk youth and vulnerable populations, improve community and law enforcement cooperation, improve the juvenile justice sector, and reduce corruption in public and private sectors. Dominican Republic. USAID has provided assistance for community- based activities, such as the Community Justice Houses. These centers are designed to provide services related to the justice sector, such as public defense and mediation efforts for populations in areas of high violence that have limited access to traditional justice institutions. Dominican Republic and Barbados. USAID’s implementing partners work with at-risk youth to provide skills training and education for those individuals in vulnerable populations. Jamaica. USAID’s implementing partners work with youth in the juvenile justice system to provide marketable technical skills, life skills, and individualized psychosocial attention to assist in their reintegration into society. Eastern and Southern Caribbean. USAID partners use a community- based approach to crime prevention to identify the underlying causes of crime and violence by collecting standardized crime data across the region. Increasing public safety and security. State uses INCLE to fund activities to increase the rule of law and reduce transnational crime. USAID uses ESF to support public safety and security activities by funding training and support programs that aim to build institutional capacity for police and judicial systems. Jamaica. INL works to enhance the government of Jamaica’s capacity to disrupt and deter money laundering operations and other financial crimes by providing technical assistance, equipment and training for combating money laundering and financial crime, and for the seizure of criminally-acquired assets. Eastern Caribbean. INL uses training, technical assistance, equipment purchases, and operational support to combat financial crimes and increase asset forfeiture efforts. Dominican Republic. INL has provided funding for the government’s creation of a centralized emergency “911” response system to increase citizen safety and security. Dominican Republic. Both INL and USAID provide assistance to the Dominican National Police, and USAID’s implementing partners work with the judicial sector to improve the skills of prosecutors (see fig. 4). INL provides assistance to the Dominican National Police through funding training to increase police professionalization and supports training on enforcing legislation for prosecutors and judges. USAID funding works to support the reform and modernization of the Dominican National Police by strengthening the management capacity and accountability of the organization. USAID implementing partners also work with prosecutors to strengthen the criminal justice system in the Dominican Republic. The United States and Caribbean countries meet periodically to set strategic goals and to designate high-level priorities for the subsequent year, and U.S. agencies individually plan and report on CBSI activities on a country-specific basis through a variety of reporting mechanisms (see fig. 5). However, State has not created an initiative-wide mechanism for planning and reporting on CBSI activities and the U.S. government cannot assess initiative-wide progress. At the strategic and political level, U.S. government agencies and CBSI partner countries engage on a periodic basis to set strategic goals and to designate high-level priorities for the subsequent year. The process involves various technical working groups meeting throughout the year, culminating in the Caribbean-United States Security Cooperation Dialogue meeting, attended by the Caribbean Community, the Dominican Republic, the United States, and other interested Caribbean states and international partners. At the 2017 meeting, participants set strategic goals by reaffirming the initiative’s three pillars of substantially reducing illicit trafficking, advancing public safety and security, and promoting social justice. Participants also produced a high-level plan of action that aimed to strengthen commitment and accountability of the countries involved and to ensure political support for implementation. Within each goal, the plan identified high-level priorities such as counternarcotics, anti-money laundering, border security, justice reform, and anti- corruption. At the implementation level, State and USAID separately plan and report their CBSI activities, generally on a country-specific basis. Within State, INL develops multi-year country plans that are the basis for making decisions on CBSI activities for each country, according to INL officials. The plans describe objectives within a country for program areas such as law enforcement professionalization, rule of law, and counternarcotics, and include performance indicators related to those program areas. INL developed a country plan for each of the seven embassies in CBSI from fiscal years 2017 through 2021. In addition, a portion of INL’s CBSI funding is devoted to regional activities (i.e., activities that are implemented in more than one CBSI country), and INL developed the CBSI Regional Implementation Plan to describe the objectives and performance indicators for regional activities. The CBSI activities that are funded through FMF are planned and implemented by DOD in coordination with PM. USAID uses its Country Development Cooperation Strategies (CDCS) as the basis for planning CBSI activities in each country, according to USAID officials. USAID developed a CDCS for each of the three missions that have a USAID presence among the CBSI countries—Eastern and Southern Caribbean, the Dominican Republic, and Jamaica. The strategies outline priorities for each mission and typically cover 5 years. In each of the CDCS, USAID outlines three development objectives, including one that is CBSI-related—on crime prevention and reduction— and two that are not CBSI-related—on climate change and health care. According to INL and USAID officials, coordination of CBSI activities between the two agencies primarily occurs at the embassy level through routine meetings. Officials at embassies in the CBSI countries also compile bimonthly reporting cables that contain information on selected CBSI activities. State’s WHA, which plays a coordinating role for CBSI, holds monthly coordination meetings for INL, PM, and USAID officials in Washington, D.C. to discuss high-level issues and upcoming events relevant to the initiative, as well as to prepare for meetings with Caribbean partners, according to officials. While State and USAID set strategic goals and priorities with CBSI partner countries and plan for and report on CBSI activities within each agency or bureau, State has not established a CBSI-wide planning and reporting mechanism that links agencies’ activities to the three overall CBSI goals. State and USAID typically use Integrated Country Strategies (ICS) to strategically plan in a given country, and Performance Plans and Reports (PPR) to assess progress made relative to the foreign assistance priorities in a given country. Each of the U.S. embassies that cover the CBSI countries has both an ICS and PPR. However, the PPRs for the individual CBSI countries are for bi-lateral funds, and the ICSs serve as a whole-of-U.S.-government strategy in a country. According to State officials, since CBSI is a regional initiative, CBSI activities are included in the scope of the relevant regional planning and reporting documents. These regional documents include the WHA Joint Regional Strategy and the WHA PPR. However, these documents represent the entire Western Hemisphere and are not specific to CBSI activities. The Joint Regional Strategy does not serve as a planning mechanism for CBSI-wide activities and does not establish CBSI specific targets or performance indicators. Moreover, while the PPR reports outputs and outcomes, CBSI results are aggregated with other regionally funded activities in the Western Hemisphere, such as the Central America Regional Security Initiative. For example, while the PPR may report the number of judicial personnel trained with U.S. government assistance, that number may include officials in the Dominican Republic, Jamaica, Honduras, or any other number of countries within the Western Hemisphere. Therefore, the most recent WHA PPR does not serve as a CBSI reporting mechanism as it is not possible to always know which results are related to CBSI activities, and the CBSI-wide outputs and outcomes can be indiscernible from other regional efforts. In 2012, State created the CBSI Results Framework, recognizing the importance of tracking initiative-wide results. The Framework included the three CBSI pillars—reducing illicit trafficking, improving public safety and security, and promoting social justice—and specified intermediate results, such as reducing drug demand in target areas, improving security at ports of entry, and improving community and law enforcement cooperation. Each of the intermediate results included performance indicators for measuring and reporting CBSI results. According to WHA officials, WHA had envisioned establishing baseline data, obtaining annual reporting from each embassy, and reporting on a subset of the indicators. However, neither State nor USAID currently use the framework to gauge overall progress of CBSI. State officials that we interviewed were not aware of the reason for discontinuing use of the framework and stated that the decision to discontinue using it pre-dated their tenure. According to State officials and our assessment of program documentation, State does not currently use the framework in any official capacity. While USAID officials stated that they continue to use the framework as internal guidance on CBSI’s direction, they stated that they do not use it to track progress. The delivery of U.S. foreign assistance often involves multiple agencies or a whole-of-government approach. We have previously identified key elements for effectively aligning foreign assistance strategies in situations where multiple agencies are working together to deliver foreign assistance, such as CBSI. These elements include, among others, the establishment of interagency coordination mechanisms, integration of strategies with relevant higher- or lower-level strategies, and assessment of progress toward strategic goals through the articulation of desired results, activities to achieve the results, performance indicators, and monitoring and evaluation plans and reports. We found that agencies that establish strategies aligned with partner agencies’ activities, processes, and resources are better positioned to accomplish common goals, objectives, and outcomes. For foreign assistance that involves multiple agencies, strategies that consistently address agencies’ roles and responsibilities and interagency coordination mechanisms can help guide implementation and reduce potential program fragmentation. The absence of a functioning CBSI-wide planning and reporting mechanism leaves open the possibility that State’s and USAID’s existing planning efforts may be inadequate in ensuring that activities are effectively coordinated to reduce fragmentation or overlap. In 2016, USAID contracted for an independent assessment of all of its CBSI activities. Since USAID implements CBSI in conjunction with other U.S. agencies, such as State, one of the objectives within the assessment was to determine the degree to which USAID’s activities were complementary with those of other U.S. agencies and whether there were instances of overlap. The assessment noted that coordination and information exchange between the agencies about individual CBSI activities and their components appeared to be relatively ad hoc and was primarily seen as the mandate of staff in the field, though at that level, information sharing and coordination had been widely variable. It noted that in general, the level and type of communication between USAID and INL tended to be influenced by personalities, and information was not shared systematically. The assessment concluded that there was a potential for overlap between USAID and INL and recommended that USAID and INL take several actions to strengthen information sharing and coordinate and align activities. This coordination is important since overlap or unintended competition between INL’s and USAID’s CBSI activities has been documented on at least one occasion. According to the fiscal year 2017 annual report submitted by an implementing partner for one of USAID’s activities in the Dominican Republic, the partner was directed to suspend several of its activities related to training to strengthen standards for criminal case preparation and training for police and prosecutors, reportedly because State realigned the task to INL. The report cited poor delineation of roles and relationships as an underlying cause. While State and USAID set strategic goals and plan and report on CBSI activities in individual countries, the U.S. government does not have a functioning initiative-wide planning and reporting mechanism that links CBSI activities to overall goals or specifies a means for assessing initiative-wide progress through articulation of desired results, performance indicators, and a monitoring and evaluation plan. Without such a mechanism that establishes consistent performance indicators across agencies, countries, and activities and determines baselines and targets, it is difficult to measure CBSI’s activities across the initiative, making it difficult to assess any progress made toward achieving CBSI’s overall goals. Consequently, the U.S. government has limited ability to evaluate CBSI’s successes and limitations and use such information to better guide future decision-making. USAID and implementing partners have established objectives and performance indicators for selected CBSI activities that we reviewed and have been measuring and reporting on progress for those activities. Within State, INL and implementing partners have established objectives and performance indicators for all of the activities that we reviewed, and INL and PM receive quarterly monitoring reports containing performance information on the TAFT program. In response to identified weaknesses in its program monitoring, INL is taking steps to improve program monitoring for its Western Hemisphere programs, which include CBSI activities. State and USAID policies related to program management—found in the FAM and ADS, respectively—require the establishment of objectives and performance indicators for program monitoring. We found that USAID and its implementing partners established objectives and performance indicators for all 10 of the CBSI activities in our sample and use these indicators to measure activity progress. Table 3 includes examples of the types of indicators established for USAID activities in our sample. In addition to establishing performance indicators, USAID and its implementing partners are using these indicators to measure the progress of CBSI activities. We found that implementing partners for nearly all of the activities in our sample had submitted progress reports to USAID that used the performance indicators to measure progress and identify challenges in achieving the activities’ goals. State and its implementing partners also established objectives and performance indicators for all 15 of the CBSI activities that we reviewed. See table 4 for examples of the types of indicators established for INL activities in our sample. INL cannot ensure the reliability of its CBSI program monitoring data but is taking steps to improve its ability to consistently collect and store such data for its activities in the Western Hemisphere, including CBSI activities. We have previously reported that effective program monitoring of foreign assistance requires quality data for performance reporting. Specifically, leading practices for monitoring of foreign assistance activities include development of objectives and relevant performance indicators, procedures for assuring quality of data on performance indicators, and submission of performance reports. According to INL officials, in the absence of a centrally available data management system, program monitoring data is collected and maintained at each embassy. As a result, compiling and providing program monitoring data is time-consuming. For example, when we requested a list of all completed and ongoing INL-funded CBSI activities from fiscal years 2012 through 2017, INL responded that it would take several months to compile that information. Further, INL officials told us that they cannot ensure the reliability of their program monitoring data because of questions about the comparability of data collected across embassies. During the course of our work, INL officials at headquarters and overseas told us that program monitoring is conducted differently in every embassy, and program monitoring data is not defined or recorded in a standardized manner. These variations can result in discrepancies in how program performance data is defined and collected. For example, INL officials explained that in order to collect drug seizure information that can be analyzed across countries, the data needs to be collected in the same units of measurement and over the same time period in each country, but currently, they are not. According to INL, absent a standardized data collection process, it is difficult to track data trends across programs. INL has expressed concerns about its program monitoring and an inability to centrally collect reliable program monitoring data. In 2015, an independent evaluation of INL’s CBSI activities noted that lack of monitoring information hinders INL’s efforts to link assistance directly to goals, objectives, and results laid out in the CBSI Results Framework. It recommended that INL prioritize improving internal program monitoring capacity. INL’s Functional Bureau Strategy, released in 2018, states that INL’s program monitoring efforts are often constrained by the availability of reliable data. In response to these concerns about program monitoring, the INL office for Western Hemisphere Programs contracted with a private firm in 2017 to improve its program monitoring capabilities by creating new performance indicators meant to standardize data collection across INL’s programs in the Western Hemisphere and better capture the impact of INL’s assistance. The contract also included the creation of a centralized data management system for collecting and storing the program monitoring data associated with the performance indicators. According to INL officials and progress reports submitted by the contractor, some progress has been made. To date, the contractors have been studying the availability of data, reviewing existing performance indicators, and proposing new indicators. The contractors have been considering options for designing and building the centralized data management system. However, INL officials acknowledge that data challenges remain, such as the issue of how to collect standardized data from each of the embassies and how to build a functioning data management system that is compatible with State requirements. As of October 2018, according to INL officials, the characteristics of the centralized data management system had not yet been determined, and consequently, they are uncertain what capabilities the final data management system will have. Therefore, it is unclear whether the system will allow for the consistent collection and storage of reliable program monitoring data for all CBSI activities and the ability to distinguish these data from those of other Western Hemisphere activities. In the absence of centrally-available, reliable data for CBSI activities, INL may continue to struggle with effective program monitoring for these activities. The Caribbean region faces a variety of economic and security challenges that jeopardize the region’s economic growth and development. Because of close societal ties and geographic proximity, these challenges also threaten U.S. security. CBSI was created to respond to these threats—to provide mutually beneficial assistance that would increase citizen security for residents of the Caribbean region and bolster economic opportunities. However, while U.S. agencies have allocated more than $560 million to CBSI since 2010, they cannot attest to the initiative’s success or failure. State’s WHA, which plays the coordinating role for CBSI, has not established an initiative-wide planning and reporting mechanism that ensures CBSI activities are being coordinated to maximize the impact of assistance and prevent overlap, and that provides a means for assessing overall progress. Without such a mechanism, the ability to demonstrate the efficacy of the initiative, and to emphasize positive results that have been achieved, is limited. Although USAID and State have established objectives and performance indicators for the CBSI activities we reviewed, State does not have a process for centrally collecting and storing reliable program monitoring data for the activities it funds through CBSI, particularly those managed by INL. While INL is taking steps to address these challenges by improving program monitoring across its activities in the western hemisphere, without reliable performance data specific to CBSI, State cannot report comprehensively or accurately on its CBSI activities or track data trends across countries. We are making the following two recommendations to State: The Secretary of State should, in consultation with USAID and other stakeholders as appropriate, create an initiative-wide planning and reporting mechanism for CBSI that includes the ability to monitor, evaluate, and report the results of their collaborative efforts (Recommendation 1). The Secretary of State should ensure that INL’s Office of Western Hemisphere Programs develops and implements a data management system for centrally collecting reliable program monitoring data for all INL- funded CBSI activities through its current program monitoring contract or by some other means (Recommendation 2). We provided a draft of this report to State and USAID, DOD, the Department of Justice, and the Department of Homeland Security for review and comment. In its comments, reproduced in appendix IV, State concurred with our two recommendations. State noted that it plans to develop an updated Results Framework for CBSI that will provide the basis for initiative-wide planning and reporting. State also noted that INL’s Office of Western Hemisphere Programs is working through its existing monitoring and evaluation contract to improve centralized data collection and is developing plans for an enhanced data management system that will facilitate the collection and management of both strategic and implementer-reported data. In addition, State reported that INL is developing complementary bureau-wide monitoring and evaluation guidance and procedures to ensure the consistency and reliability of collected data across INL programs, which include CBSI activities. USAID also provided written comments, which we have reproduced in appendix V. State, USAID, DOD, and the Department of Homeland Security provided technical comments, which we have incorporated as appropriate. The Department of Justice reviewed the report but did not provide comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of USAID, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. We were asked to review security assistance to the Caribbean region provided through the Caribbean Basin Security Initiative (CBSI). In this report we (1) provide information on U.S. funding for CBSI activities, (2) examine the extent to which the U.S. Department of State (State) and U.S. Agency for International Development (USAID), in conjunction with other agencies, have implemented a planning and reporting process for CBSI, and (3) examine the extent to which State and USAID have established objectives and performance indicators to measure the progress of their CBSI activities. To provide information on U.S. funding for CBSI, we obtained State and USAID data for fiscal years 2010 through 2018. We analyzed these data to determine allocations, unobligated balances, unliquidated obligations, and disbursements by fiscal year, funding account, and country. We compared the data to those previously reported to identify inconsistencies, and interviewed State and USAID officials. We determined these data were sufficiently reliable for reporting allocations, unobligated balances, unliquidated obligations, and disbursements by fiscal year, funding account, and country. To obtain additional detail on the types of assistance provided by the United States, we reviewed activity documentation; interviewed State and USAID officials in Washington, D.C. and traveled to Barbados, the Dominican Republic, and Jamaica to meet with State, USAID, and implementing partner officials. We also observed CBSI activities in these countries. We selected these countries for fieldwork because they were among the countries receiving the largest amount of CBSI funding and the embassies there included CBSI program officials from State and USAID. The findings from these countries are not generalizable to all CBSI countries. To determine the extent to which State and USAID have implemented a planning and reporting mechanism for CBSI, we obtained relevant CBSI planning and reporting documents, including State Bureau of International Narcotics and Law Enforcement Affairs (INL) country and regional implementation plans and documents related to the Caribbean-U.S. Security Cooperation Dialogue; and strategy documents such as Integrated Country Strategies, Country Development Cooperation Strategies, and Functional Bureau Strategies. We also assessed relevant Performance Plans and Reports for Caribbean countries and the Western Hemisphere and interviewed State officials to determine how information on CBSI activities is aggregated and reported on a country level and initiative-wide basis. In addition, we interviewed relevant State and USAID officials in Washington, D.C. and in Barbados, the Dominican Republic, and Jamaica, about their planning processes for CBSI activities. We compared the planning and reporting procedures in place to the key elements for effectively aligning foreign assistance strategies in situations where multiple agencies work together to deliver foreign assistance. To determine the extent to which State and USAID have established objectives and performance indicators to measure the progress of CBSI activities, we selected three case study countries—Barbados, the Dominican Republic, and Jamaica. We selected these three countries because they receive the greatest amount of CBSI funding and because they have program officials from State and USAID in their embassies. We requested lists of all ongoing and completed CBSI activities from State and USAID for fiscal years 2012 through 2017 and used the lists to select a non-generalizable sample of activities, 15 implemented by State and 10 by USAID. The activities were chosen to provide a range of implementing partners, types of activity, and location. We requested State and USAID documentation related to the activities in our sample, including applications for funding, contracts, agreements, program monitoring and progress reports, financial reports, and evaluations. We reviewed the documentation to assess the performance management practices in place for these activities, as well as country-level and regional-level reporting related to the activities—specifically focusing on the use of program objectives and performance indicators, which are used to set and measure progress toward program goals. The objectives and performance indicators in place for these activities do not represent those in place for all CBSI activities, but offer illustrative examples. We compared the performance management practices in place for the sample activities to State and USAID policies. For the Technical Assistance Field Team (TAFT) program implemented by the Department of Defense (DOD) and the U.S. Coast Guard on behalf of State’s Bureau of Political-Military Affairs, we reviewed quarterly reports between fiscal years 2014 and 2018 for performance management information. The TAFT program is designed to provide technical assistance to enhance operational readiness and maintenance of equipment used by CBSI countries. The quarterly reports include articulation of objectives, descriptive information on the support TAFT members provided during each visit, assessments of host country capabilities, and details on where, when, and how funds were expended. While this information is not reported in the same manner as State’s and USAID’s performance data, we determined it appropriate to treat the information provided in the TAFT quarterly reports as comparable to the setting of objectives and performance indicators as generally carried out by State and USAID. We also interviewed State, USAID, DOD, the Department of Justice, the Department of Homeland Security, and other implementing partner officials in Washington, D.C.; Barbados; the Dominican Republic; and Jamaica; and conducted site visits in these countries to determine the types of performance indicators tracked and reported on for each activity. We conducted this performance audit from November 2017 to February 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To demonstrate how funding for Caribbean Basin Security Initiative (CBSI) activities have been allocated, obligated and disbursed, we are providing a status of CBSI funds as of November 2018. Tables 5-9 below show CBSI funding from the International Narcotics Control and Law Enforcement (INCLE); Economic Support Fund (ESF); Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR); and Development Assistance (DA) accounts. These tables illustrate, by year of appropriation, how U.S agencies have allocated, obligated, and disbursed funds for activities in CBSI partner countries. Specifically, the tables include unobligated balances—that is, portions of allocated funds that have not yet been obligated—and unliquidated obligations (i.e. obligated balances)—that is, amounts already incurred for which payment has not yet been made. Table 10 below provides the status of Caribbean Basin Security Initiative (CBSI) Foreign Military Financing (FMF) funds as of November 2018. The presentation of FMF allocations and commitments in this table is different from presentations on allocations, obligations, and disbursements of the other CBSI accounts in tables 5-9 in appendix II because FMF funds are budgeted and tracked in a different way. The Defense Security Cooperation Agency (DSCA) and the Defense Financing and Accounting Service (DFAS) are responsible for the financial systems that account for FMF funds as well as for tracking the implementation and expenditure of those funds. According to DSCA officials, FMF funds are obligated on apportionment. Further, DSCA’s system can track only uncommitted and committed amounts, not unliquidated obligations or disbursements, of FMF funds. DFAS tracks obligations and disbursements using the Defense Integrated Finance System; however, there is no direct link between the DSCA and DFAS systems and the DFAS system does not track funding for specific initiatives, such as CBSI. In addition to the contact named above, Thomas Costa (Assistant Director), Jennifer Young, Martin Wilson, Peter Choi, Debbie Chung, Benjamin Licht, Martin de Alteriis, Neil Doherty, and Mark Dowling made key contributions to this report.", "summary": "The Caribbean region, which shares geographic proximity and common interests with the United States, faces high rates of crime and violence. In 2010, the United States and Caribbean countries formally launched CBSI, which aims to increase citizen safety. GAO was asked to examine U.S. assistance through CBSI. This report (1) discusses U.S. funding for CBSI activities, (2) examines the extent to which there is a planning and reporting process for CBSI, and (3) examines the extent to which State and USAID have established objectives and performance indicators to measure progress of their CBSI activities. GAO analyzed State and USAID data; assessed government strategies and performance reports; selected a non-generalizable sample of 25 CBSI activities and analyzed State and USAID documentation related to those activities; interviewed relevant officials; and conducted fieldwork in Barbados, Dominican Republic, and Jamaica, which are the countries generally receiving the most CBSI funding. U.S. agencies have allocated more than $560 million for the Caribbean Basin Security Initiative (CBSI) from fiscal years 2010 through 2018 for activities related to the three pillars of CBSI—reduce illicit trafficking (such as in narcotics and firearms), improve public safety and security, and promote social justice. For example, State Department's (State) Bureau of International Narcotics and Law Enforcement Affairs (INL) has ongoing activities such as advisory programs and equipment procurements, while the U.S. Agency for International Development (USAID) has activities aimed at increasing economic opportunities for at-risk youth and improving the skills of prosecutors. The U.S. government has undertaken some planning and reporting of CBSI activities, but State has not created an initiative-wide planning and reporting mechanism. Agencies individually set strategic goals and priorities with CBSI countries and plan and report on their CBSI activities on a country-specific basis. However, State has not created an initiative-wide planning and reporting mechanism that facilitates interagency coordination or establishes consistent performance indicators across agencies, countries, and activities—key elements for effectively aligning foreign assistance strategies. Without such a planning and reporting mechanism, overall progress of the initiative cannot be assessed. State and USAID have established objectives and performance indicators for selected CBSI activities, and INL is taking steps to improve identified weaknesses in its program monitoring. State and USAID had established objectives and performance indicators for the 25 activities in our sample. However, INL cannot ensure the reliability of its program monitoring data because collection and maintenance of this data is conducted differently in each country and there is no centralized data storage system. INL recently contracted to improve and standardize its program monitoring data for Western Hemisphere activities, but according to INL officials, data challenges remain—in particular, how to collect standardized data from each of the embassies and how to build a data management system that is compatible with State requirements. Without reliable data, INL may continue to struggle with program monitoring of CBSI activities. GAO recommends that State (1) create an initiative-wide planning and reporting mechanism for CBSI that includes the ability to monitor, evaluate, and report the results of collaborative efforts, and (2) ensure that INL develops and implements a data management system for centrally collecting reliable CBSI data. State agreed with the recommendations, noting that it plans to develop an updated Results Framework for initiative-wide planning and reporting and to improve centralized data collection through an enhanced data management system.", "document_type": "gao"}
{"report": "We testified before the Senate Committee on Armed Services in September 2017 after four significant mishaps at sea resulted in the loss of 17 sailors’ lives and serious damage to Navy ships. We reported on some of the Navy’s challenges, including the degraded condition and expired training certifications of ships homeported overseas, reductions to ship crews that contributed to sailor overwork and safety risks, and an inability to complete maintenance on time. Since that time, the Navy has completed two internal reviews to address these and other challenges, identifying 111 recommendations to improve surface fleet readiness. The Navy formed an executive group to guide and closely track the implementation of recommendations, and its reform efforts are ongoing. As of November 2018, the Navy reported that it had implemented 78 (i.e., 70 percent) of these recommendations. Navy officials recognize that full implementation will take significant time and management attention to address the fundamental readiness challenges identified. In figure 1, we show photographs of two of the four Navy ships involved in significant mishaps that occurred in 2017. Both the USS Fitzgerald and the USS John S. McCain were involved in collisions that resulted in sailor fatalities. DOD has reported that more than a decade of conflict, budget uncertainty, and reductions in force structure have degraded its readiness; in response, the department has made rebuilding readiness a priority. The 2018 National Defense Strategy emphasizes that restoring and retaining readiness across the entire spectrum of conflict is critical to success in the emerging security environment. Nevertheless, DOD reported that readiness of the total military force remains low and has remained so since 2013. Our work has shown that the Navy has experienced increasing maintenance challenges as a high pace of operations has continued and maintenance has been deferred. Maintenance and personnel challenges also hinder readiness recovery of Navy aircraft. For the Marine Corps, our work has shown that ground force readiness has improved and remained stable in recent years, but acute readiness problems remain in aviation units. Over the past year, DOD has made department-wide progress in developing a plan to rebuild the readiness of the military force, with the military services providing regular input on the status of their readiness recovery efforts. In August 2018, we reported that the Office of the Secretary of Defense has developed a Readiness Recovery Framework that the department is using to guide the services’ efforts and plans to use to regularly assess, validate, and monitor readiness recovery. The Office of the Secretary of Defense and the services have recently revised readiness goals and accompanying recovery strategies, metrics, and milestones to align with the 2018 National Defense Strategy and Defense Planning Guidance. We have ongoing work assessing DOD’s progress in achieveing its overall readiness goals. DOD’s readiness rebuilding efforts are occurring in a challenging context that requires the department to make difficult decisions regarding how best to address continuing operational demands while preparing for future challenges. Our work has shown that an important aspect of this, across all of the services, is determining an appropriate balance between maintaining and upgrading legacy weapon systems currently in operational use and procuring new ones to overcome rapidly advancing future threats. Based on updated information we received in November 2018, the Navy has taken steps to provide dedicated training time so its surface forces may meet existing Navy training standards and their training is certified when they deploy. However, the Navy continues to struggle with rebuilding the readiness of the existing fleet due to enduring maintenance and manning challenges. As the Navy seeks to expand its fleet by 25 percent, these challenges will likely be further exacerbated and the Navy will likely face additional affordability challenges. After the collisions in 2017, the Navy focused on training surface ship crews to its existing standards. We testified in September 2017 that there were no dedicated training periods built into the operational schedules of the cruisers and destroyers based in Japan and 37 percent of training certifications for these surface ship crews had lapsed as of June 2017. Since that time, the Navy has worked to ensure surface ships are certified before they are deployed. For example, the Navy has established controls to limit waivers that allowed training lapses to worsen, now requiring multiple high-level approvals for ships to operate uncertified. Based on our analysis of updated data, the Navy has improved markedly in the percentage of cruisers and destroyers with lapsed certifications in Japan, from 41 percent of certifications expired in September 2017 to 9 percent as of November 2018, with less than 3 percent of certifications expired on ships in operational status. While the Navy has demonstrated its commitment to ensuring that crews are certified prior to deploying, training for amphibious operations and higher-level collective training may not be fully implemented for several years. In September 2017, we reported that some Marine Corps units were limited in their ability to complete training to conduct an amphibious operation—a military operation that is launched from the sea to introduce a landing force ashore—by several factors, including a decline in the number of amphibious ships from 62 in 1990 to 32 as of November 2018, access to range space, and a high pace of deployments, among others. We recommended that the Navy and the Marine Corps develop an approach to mitigate their amphibious operations training shortfalls as the services await the arrival of additional amphibious ships into the fleet. Marine Corps officials told us that the Marine Corps and the Navy are working together to maximize amphibious training opportunities. Additionally, the Navy has plans to phase in high-level collective training into the operational schedules of its ships homeported in Japan over the next several years. Previously, advanced and integrated training involving multiple ships was conducted ad hoc if at all for ships homeported in Japan. Such collective training is important because the 2018 National Defense Strategy states that the department’s principal priority is to prepare for threats from strategic competitors due to the magnitude of the threat they pose. However, in November 2018, officials from Fleet Forces Command told us that fully implementing its training approach to prepare for advanced adversaries would not be fully implemented across the fleet for several years. We have reported that the Navy faces persistent challenges in completing maintenance on time and providing sufficient manning to its ships. Unless these challenges are addressed, the Navy will be hampered in its ability to rebuild readiness and prepare for the future. Our work has found that the Navy has been unable to complete ship and submarine maintenance on time, resulting in continuing schedule delays that reduce time for training and operations and create costly inefficiencies in a resource constrained environment. The Navy’s readiness recovery is premised on the rigorous adherence to deployment, training, and maintenance schedules. However, we reported in May 2016 on the difficulty that both the public and private shipyards were having in completing maintenance on time. We reported that, from 2011 through 2014, about 28 percent of scheduled maintenance for surface combatants was completed on time and 11 percent was completed on time for aircraft carriers. We updated these data as of November 2018 to include maintenance periods completed through the end of fiscal year 2018 and found that the Navy continues to struggle to complete maintenance on time. For fiscal years 2012-2018, our analysis for key portions of the Navy fleet shows that 30 percent of Navy maintenance was completed on time, leading to more than 27,000 days in which ships were delayed and unavailable for training and operations as shown in figure 2 below. In addition to affecting training and operations, maintenance delays are costly. In November 2018, we examined attack submarine maintenance delays and reported that the Navy was incurring significant operating and support costs to crew, maintain, and support attack submarines that are delayed getting into and out of shipyard maintenance periods. We estimated that over the past 10 years the Navy has spent $1.5 billion in fiscal year 2018 constant dollars to support attack submarines that provide no operational capability—those sitting idle no longer certified to conduct normal operations—while waiting to enter the shipyards, and those delayed in completing their maintenance at the shipyards (see figure 3). We recommended that the Navy analyze how it allocates its maintenance workload across public and private shipyards. DOD concurred with our recommendation, stating that it has taken the first steps to take a more holistic view of submarine maintenance requirements and impacts across both the public and private shipyards. In an update provided in November 2018, the Navy told us that they are developing a contracting strategy to conduct two additional depot maintenance periods at private shipyards in the future. Our prior work has shown that three primary factors at the naval shipyards contribute to maintenance delays: Poor conditions and aging equipment limit the ability of the shipyards to meet current and future demands. We reported in September 2017 that facility and equipment limitations at the shipyards contributed to maintenance delays for the aircraft carriers and submarines, hindering the shipyards’ ability to support the Navy. Specifically, we found that the shipyards would be unable to support an estimated one-third of maintenance periods planned over the next 23 years. We recommended that the Navy take steps to improve its management of shipyard investments; the Navy concurred with this recommendation and we are encouraged by its response. For example, the Navy has developed a plan for the optimal placement of facilities and major equipment at each public shipyard, which the Navy estimates can ultimately increase its maintenance efficiency by reducing personnel and materiel travel by an average of 65 percent. This equates to recovering about 328,000 man days per year—an amount roughly equal to that of an aircraft carrier maintenance period. However, the Navy’s preliminary estimate —that this effort will require an estimated $21 billion and 20 years to address—is well beyond historical funding levels, and does not include some potentially significant costs (e.g., for utilities, roads, or environmental remediation). Shipyard workforce gaps and inexperience are limiting factors. The Navy has reported a variety of workforce challenges at the Navy’s four public shipyards such as hiring personnel in a timely manner and providing personnel with the training necessary to gain proficiency in critical skills. The Navy has noted that some occupations require years of training before workers become proficient. According to Navy officials, a large portion of its workforce is inexperienced. For example, 45 percent of the Puget Sound and 30 percent of the Portsmouth Naval Shipyards’ skilled workforce have fewer than 5 years of experience. According to DOD officials, workforce shortages and inexperience contribute to maintenance delays. For example, at Pearl Harbor Naval Shipyard, two submarines were delayed approximately 20 months, in part because of shortages in ship fitters and welders, among other skilled personnel. Most of DOD’s depots, which include the naval shipyards, have taken actions to maintain critical skills through retention incentives, bonuses, and awards. We plan to issue a report examining DOD’s depot skill gaps, including those at the naval shipyards, later this month. Depot supply support may not be cost-effective. In June 2016, we reported that the naval shipyards and other depots had not implemented actions that would likely improve the cost-effectiveness of their supply operations. Specifically, the Navy had not transferred certain functions to the Defense Logistics Agency (DLA) at the shipyards in the same manner as the Navy and Air Force did for their aviation depots. The Navy and Air Force aviation depots that transferred these functions to DLA had reaped a number of efficiencies in their supply operations, including a 10-percent reduction in backorders over a 5-year period. We recommended that the Navy analyze whether such a transfer of functions is warranted at the shipyards and the Navy concurred with the recommendation. However, as of October 2018, the Navy had not conducted a comprehensive analysis of transferring these functions and had provided no plans to do so. In May 2017, we reported that the Navy’s process for determining manpower requirements—the number and skill mix of sailors needed on the Navy’s ships—did not fully account for all ship workload. The Navy was using outdated standards to calculate the size of ship crews that may have been leading to overburdened crews working long hours. We recommended steps to help ensure the Navy’s manpower requirements meet the needs of the existing and future surface fleet, and the Navy has been studying ship workload and revising its guidance. As of November 2018, the Navy was continuing to analyze the manpower requirements of its ship classes to better size and compose ship crews, and the Navy was also working to improve shipboard manning. However, these efforts are not yet complete and it is too early to assess their effectiveness. Until manpower requirements are reassessed across the fleet, the Navy risks that ship crews will continue to be undersized and sailors will be overworked with potential negative effects on readiness and safety. Additionally, the Navy provided information in November 2018 that showed that it is taking steps to ensure that ships have a minimum percentage of crew assigned and with the appropriate skills. The Navy has prioritized manning its surface ships homeported overseas. The Navy established a minimum threshold of filling at least 95 percent of authorized billets in its ship crews with sailors (referred to as fill), with a minimum goal of 92 percent of those sailors having the right qualifications for the billet (known as fit). According to Navy officials, the Navy is for the most part meeting its fill goals Navy-wide, but has not consistently met its fit goals. However, during group discussions in November 2018 with ship crews and interviews with Navy officials in Japan, we learned that the Navy’s methods for tracking fit and fill do not account for sailor experience and may be inaccurately capturing the actual presence of sailors onboard and available for duty on its ships. Moreover, sailors consistently told us that ship workload has not decreased, and it is still extremely challenging to complete all required workload while getting enough sleep. Navy officials told us that manning challenges will continue through at least fiscal year 2021 as the Navy increases its end strength and trains its new sailors to gain the proper mix of skills to operate and maintain the fleet. To meet continued operational demands, the Navy is planning for the most significant fleet size increase in over 30 years. According to the Navy’s fiscal year 2019 shipbuilding plan, the Navy plans to build and maintain a fleet of 355 battle force ships—an increase of about 25 percent above the Navy’s current force of 287 ships. To reach its goal, the Navy plans to buy 301 ships through 2048 and extend the service life of its 66 Arleigh Burke class destroyers and up to 7 attack submarines. Together, the fiscal year 2019 shipbuilding plan and the service life extensions would allow the Navy to reach a 355-ship fleet by the 2030s. Congressional Budget Office reporting and our past work have shown that the Navy has consistently and significantly underestimated the cost and timeframes for delivering new ships to the fleet. For example, the Navy estimates that buying the new ships specified in the fiscal year 2019 plan would cost $631 billion over 30 years while the Congressional Budget Office has estimated that those new ships would cost $801 billion—a difference of 27 percent. We also reported in June 2018 that acquisition outcomes for ship classes built during the last 10 years have often not achieved cost, schedule, quality, or performance goals that were established. Furthermore, we have reported that: all 8 of the lead ships delivered over the past decade that we reviewed were provided to the fleet behind schedule, and more than half of those ships were delayed by more than 2 years, and six ships of different classes valued at $6.3 billion were delivered to the Navy with varying degrees of incomplete work and quality problems. As a result of past cost and schedule problems, our work has shown that the Navy has a less-capable and smaller fleet today than it planned over 10 years ago. The Navy has also received $24 billion more in funding than it originally planned in its 2007 long-range shipbuilding plan but has 50 fewer ships in its inventory today, as compared with the goals it first established. Therefore, we have reported that as the Navy moves forward in implementing its shipbuilding plan it will be paramount for the Navy to learn from and apply lessons learned from the past. In addition to the cost of buying the ships and submarines to expand fleet size, the Navy will likely face affordability challenges with regard to the manning of an expanded fleet with the right number of sailors with the right mix of skills. In May 2017, we reported that the personnel costs for surface ship classes in fiscal years 2000-2015 were the largest share of total operating and support costs and that careful planning will be needed as new ships are brought into the fleet. We also reported that crew sizes on recently inducted ship classes grew from original projections as the Navy gained experience operating them. For example, the total crew size of Littoral Combat Ships has grown from 75 in 2003 to 98 personnel in 2016, a 31-percent increase. Navy officials told us that they plan to better articulate the personnel and resources needed for a larger fleet after fully accounting for workload and right-sizing ship crews. The Navy’s end strength has since increased by over 11,000 personnel from fiscal year 2017 levels, which should help alleviate manning challenges as the fleet grows. In November 2018, officials from Fleet Forces Command provided us with projections of its manning shortfalls continuing through at least fiscal year 2021 and steps it was planning to take to mitigate them. Our work has shown that Navy and Marine Corps aircraft availability has been limited by aging aircraft, delayed maintenance, and insufficient supply support. Pilot and maintenance personnel shortfalls further limit readiness recovery across legacy air platforms. The growing F-35 program, which is meant to replace many aging aircraft, has presented additional operational and sustainment challenges, which will likely persist into the future if not corrected. DOD, the Navy, and the Marine Corps have emphasized mission capability of critical aviation platforms— including the Navy and Marine Corps F/A-18s and F-35s—and are taking steps to improve availability, but these efforts will take time to realize results. Navy and Marine Corps aircraft availability has been limited by challenges associated with aging aircraft fleets, depot maintenance, and supply support challenges that limit the services’ ability to keep aviation units ready. The Navy and Marine Corps spend billions of dollars each year on sustainment, such as for spare parts and depot maintenance, to meet aircraft availability goals. However, aircraft availability rates have generally declined since fiscal year 2011. While specific aircraft availability data are considered sensitive by the Navy and the Marine Corps, and cannot be discussed in detail, we found in September 2018 that the Navy and the Marine Corps generally did not meet aircraft availability goals in fiscal years 2011-2016 for the seven aircraft we reviewed. In updating data in November 2018, we found that none of the aircraft met aircraft availability goals for fiscal years 2017 and 2018. According to the Navy, the pace of operations has increased wear and tear on its aircraft and decreased the time available for maintenance and modernization—a necessity for an aging fleet. For example, the average age of a legacy F/A-18A-D Hornet is 26 years, of an AV-8B Harrier is 21 years, and of the C-2A Greyhound is 29 years. Both services expect these aircraft will continue to be used for the foreseeable future and in some cases into the 2030s. The Navy and the Marine Corps face delays in the arrival of the F-35 to replace their legacy F/A-18A-D Hornets and AV-8B Harriers. To compensate for the delay, the Navy and the Marine Corps are planning to procure additional aircraft, such as the F/A-18E-F Super Hornet, and extend the service life and upgrade the capabilities of their legacy aircraft. However, these efforts and the sustainment of the Navy and Marine Corps legacy aircraft fleet face key challenges as shown in figure 4. Specifically, our prior work has shown that the Navy and the Marine Corps are confronted with two sets of challenges in sustaining their aircraft: Depot maintenance complexities for aging aircraft and spare parts availability. Depot maintenance on aging weapon systems, including Navy and Marine Corps aircraft, becomes less predictable as structural fatigue occurs and parts that were not expected to be replaced begin to wear out. While the Navy and the Marine Corps reported that sustainment funding accounts, such as those for depot maintenance and spare parts, have been funded at increased levels in fiscal years 2017 and 2018, efforts to improve spare parts availability take time to produce results due to long lead times for acquiring some items. In addition, Navy and Marine Corps aircraft face challenges associated with diminishing manufacturing sources and parts obsolescence. DOD has a program intended to manage these risks, but we reported in September 2017 that its implementation varied across DOD weapon system program offices. We made recommendations to improve the program’s management; DOD concurred and has initiated improvement efforts. Maintenance personnel inexperience and retention. The Navy has had difficulty attracting and retaining skilled maintainers, such as sheet metal workers and machinists at its aviation depots (i.e., Fleet Readiness Centers), which directly affects its ability to complete planned maintenance. Some of the depots experienced challenges attracting and retaining skilled personnel due to competition with nearby contractors that are able to offer higher pay, according to Navy depot officials. Similar to the shipyards, the aviation depots also lack experienced personnel, affecting the efficiency and quality of maintenance. For example, 41 percent of the skilled workers at Fleet Readiness Center Southwest have 2 years or fewer of experience. Workforce inexperience and attrition of skilled personnel were some of the reasons cited for machining defects detected in the landing gear for F/A-18, E-2, and C-2A aircraft by a recent Navy report. All of the depots have undertaken retention efforts such as incentives, bonuses, and awards to address these issues. Until the Navy and Marine Corps address maintenance and supply challenges it will be difficult to meet Secretary of Defense-established mission capability goals. Specifically, in September 2018, the Secretary of Defense issued a memorandum emphasizing that a key component of implementing the 2018 National Defense Strategy is ensuring critical aviation platforms meet their mission capability targets by the end of fiscal year 2019. The memorandum established a goal of achieving a minimum of 80-percent mission capable rates for various aircraft, including for the Navy’s and Marine Corps’ F/A-18 inventories, by the end of fiscal year 2019 while also reducing operating and maintenance costs. To accomplish this, the Navy and the Marine Corps developed the Return to Readiness strategy in November 2018 that includes a broad array of actions to improve the availability of spare parts and evaluate the application of best commercial practices to naval aviation sustainment, among other actions. Office of the Secretary of Defense and Navy program officials told us, and based on our prior work we agree, that this goal will be challenging to achieve by the end of fiscal year 2019. We reported in April 2018 that fighter pilot shortages in the Navy and the Marine Corps have been worsening in recent years and shortfalls are projected to remain through at least fiscal year 2023. Our analysis of Navy and Marine Corps data showed that the Navy’s shortage of first operational tour fighter pilots more than doubled from 12 percent in fiscal year 2013 to 26 percent in fiscal year 2017. Similarly, the Marine Corps’ overall shortage of fighter pilots quadrupled from 6 percent in fiscal year 2006 to 24 percent in fiscal year 2017. Also, as we reported in April 2018, service officials attributed the pilot shortages to reduced training opportunities and increased attrition due to career dissatisfaction, among other factors. Officials from both services stated at the time that they have ensured that deploying squadrons have been fully staffed with fighter pilots by using various approaches including using senior pilots to staff junior positions and having pilots deploy more frequently and for longer periods. However, we reported that squadron leaders and fighter pilots said that these approaches had a negative impact on the fighter pilot training and retention and ultimately may be exacerbating the situation. Further compounding their pilot shortages, we also found that the services have not recently reevaluated squadron requirements to reflect an increased fighter pilot workload. As a result, the reported shortage actually could be greater. The services were taking actions, including increasing retention incentives for fighter pilots. To help determine the magnitude of the shortages and help target strategies to better meet their personnel needs, we recommended, and the Navy and Marine Corps agreed, to reevaluate fighter pilot squadron requirements. Sustainment challenges are not just an issue for older aircraft, but represent an enduring challenge for the F-35 Lightning II aircraft—a key component to the future of tactical aviation for the Navy and Marine Corps. The Navy and Marine Corps are both flying F-35s now as the program ramps up development, and they plan to procure nearly 700 aircraft over the coming decades. The sustainment costs of the F-35 fleet are projected to exceed $1 trillion over its 60-year life cycle. In October 2017, we reported that: F-35B aircraft (including Marine Corps aircraft) were available (i.e., the aircraft were safe to fly, available for use, and able to perform at least one tasked mission) about 52 percent of the time from March 2017 through June 2017, which fell short of the 65-percent goal established by the Marine Corps for non-deployed units and F-35B aircraft (including Marine Corps aircraft) were fully mission capable (i.e., the aircraft were capable of accomplishing all tasked missions) about 15 percent of the time from March 2017 through June 2017, which fell short of the 60-percent goal established by the Marine Corps for non-deployed units. We also reported on numerous sustainment challenges leading to less than desirable outcomes for F-35 warfighter readiness. For example, F-35 aircraft were unable to fly 22 percent of the time because of parts shortages from January 2017 through August 7, 2017. Additionally, DOD’s capabilities to repair F-35 parts at military depots were 6 years behind schedule, which resulted in average part repair times that are twice that of the program’s objective. As DOD gains experience with the F-35, our work has shown that the department has encountered additional challenges. In 2017, the Marine Corps became the first military service to station F-35 aircraft overseas, transferring aircraft to Iwakuni, Japan. While in the Pacific, DOD expects to disperse its F-35s into smaller detachments to outmaneuver the enemy and counter regional threats. However, in April 2018, we reported that this approach posed logistics and supply challenges. In June 2018, we reported that the F-35 program had not improved its reliability and maintainability over the past year and continued to fall short on half of its performance targets. Furthermore, we found that the program may not meet its required targets before each variant of the F-35 is expected to demonstrate maturity—the point at which the aircraft has flown enough hours to predictably determine reliability and maintainability over its lifespan. This means that the Navy and the Marine Corps may have to decide whether they are willing to accept less reliable and maintainable aircraft than originally planned. Among other outcomes, this could result in higher maintenance costs and lower aircraft availability than anticipated which also could pose readiness challenges in the future. As we reported in October 2017, the poor reliability of certain parts is already contributing to shortages of F-35 spare parts. Challenges posed by the F-35 program are largely the result of sustainment plans that do not fully include or consider key requirements. Our work has shown that planning for sustainment and aligning its funding are critical if DOD wants to meet its aircraft availability goals and effectively deploy to support operations. To address the challenges associated with F-35 sustainment and operational deployment, we recommended that DOD revise its sustainment plans, align associated funding, and mitigate the risks associated with key supply chain-related challenges for deployed F-35s in the Pacific, among others. DOD concurred with these recommendations and stated that it is taking steps to address them. Furthermore, as previously discussed, the Secretary of Defense has established an 80-percent mission capability goal for critical aviation assets, including the F-35. Due to current low availability and numerous sustainment issues, the F-35 fleet will be challenged in meeting the goal. In sum, the Navy’s and Marine Corps’ significant readiness challenges have developed over more than a decade of conflict, budget uncertainty, and reductions in force structure. Both services have made encouraging progress identifying the causes of their readiness decline and have begun efforts to arrest and reverse it; however, our prior work shows that fully addressing the persistent readiness challenges will require years of sustained management attention. Our work cited today contains 25 specific recommendations to the Navy and the Marine Corps and an additional 20 recommendations to various other DOD components to assist these services in rebuilding the readiness of their forces and in modernizing for the future. Attention to these recommendations can assist the Navy and the Marine Corps as they seek to rebuild the readiness of their forces. Chairmen Wicker and Sullivan, Ranking Members Hirono and Kaine, and Members of the Subcommittees, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. If you or your staff have questions about this testimony, please contact John H. Pendleton, Director, Defense Capabilities and Management at (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Suzanne Wren, Assistant Director; Clarine Allen; Steven Banovac; John Bumgarner; Chris Cronin; Benjamin Emmel; Cynthia Grant; Mae Jones; Amie Lesser; Tobin McMurdie; Shahrzad Nikoo; Carol Petersen; Cody Raysinger; Michael Silver; John E. “Jet” Trubey; and Chris Watson. Over the past 4 years, we have issued a number of reports related to Navy and Marine Corps readiness and we used them to develop this statement. Table 1 summarizes the recommendations in these reports. The Department of Defense (DOD) concurred with most of the 45 recommendations and has many actions underway. However, DOD has not fully implemented any of the recommendations to date. For each of the reports, the specific recommendations and any progress made in implementing them are summarized in tables 2 through 16. Report numbers with a C or RC suffix are classified. Report numbers with a SU suffix are sensitive but unclassified. Classified and sensitive but unclassified reports are available to personnel with the proper clearances and need to know, upon request. Navy Readiness: Actions Needed to Address Costly Maintenance Delays Facing the Attack Submarine Fleet. GAO-19-229. Washington, D.C.: November 19, 2018. Air Force Readiness: Actions Needed to Rebuild Readiness and Prepare for the Future. GAO-19-120T. Washington, D.C.: October 10, 2018. Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need to Be Clarified. GAO-18-678. Washington, D.C.: September 10, 2018. Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need Clarification. GAO-18-146SU. Washington, D.C.: April 25, 2018. Military Readiness: Update on DOD’s Progress in Developing a Readiness Rebuilding Plan. GAO-18-441RC. Washington, D.C.: August 10, 2018. (SECRET) Military Personnel: Collecting Additional Data Could Enhance Pilot Retention Efforts. GAO-18-439. Washington, D.C.: June 21, 2018. F-35 Joint Strike Fighter: Development Is Nearly Complete, but Deficiencies Found in Testing Need to Be Resolved. GAO-18-321. Washington, D.C.: June 5, 2018. Warfighter Support: DOD Needs to Share F-35 Operational Lessons Across the Military Services. GAO-18-464R. Washington, D.C.: April 25, 2018. Military Readiness: Clear Policy and Reliable Data Would Help DOD Better Manage Service Members’ Time Away from Home. GAO-18-253. Washington, D.C.: April 25, 2018. Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce Requirements. GAO-18-113. Washington, D.C.: April 11, 2018. Military Aircraft: F-35 Brings Increased Capabilities, but the Marine Corps Needs to Assess Challenges Associated with Operating in the Pacific. GAO-18-79C. Washington, D.C.: March 28, 2018. (SECRET) Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training. GAO-18-212T. Washington, DC.: December 1, 2017. F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting Readiness and Cost Transparency. GAO-18-75. Washington, D.C.: October 26, 2017. Defense Supply Chain: DOD Needs Complete Information on Single Sources of Supply to Proactively Manage the Risks. GAO-17-768. Washington, D.C.: September 28, 2017. Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training. GAO-17-789. Washington, D.C.: September 26, 2017. Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet. GAO-17-809T. Washington, D.C.: September 19, 2017. Naval Shipyards: Actions Needed to Improve Poor Conditions That Affect Operation. GAO-17-548. Washington, D.C.: September 12, 2017. Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet. GAO-17-798T. Washington, D.C.: September 7, 2017. Navy Readiness: Actions Needed to Maintain Viable Surge Sealift and Combat Logistics Fleets GAO-17-503. Washington, D.C.: August 22, 2017 (reissued on Oct 31, 2017). Department of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017. Military Readiness: Coastal Riverine Force Challenges. GAO-17-462C. Washington, D.C.: June 13, 2017. (SECRET) Navy Shipbuilding: Policy Changes Needed to Improve the Post-Delivery Process and Ship Quality. GAO-17-418. Washington, D.C.: July 13, 2017 Offshore Petroleum Discharge System: The Navy Has Not Mitigated Risk Associated with System Limitations. GAO-17-531C. Washington, D.C.: June 22, 2017. (SECRET) Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18, 2017. Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-841. Washington, D.C.: September 7, 2016. Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-534C. Washington, D.C.: June 30, 2016. (SECRET) Defense Inventory: Further Analysis and Enhanced Metrics Could Improve Service Supply and Depot Operations. GAO-16-450. Washington, D.C.: June 9, 2016. Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016. (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May 2, 2016. F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its Central Logistics System. GAO-16-439. Washington, D.C.: April 14, 2016. Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports. GAO-15-329. Washington, D.C.: May 29, 2015. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The 2018 National Defense Strategy emphasizes that restoring and retaining readiness is critical to success in the emerging security environment. The Navy and Marine Corps are working to rebuild the readiness of their forces while growing and modernizing their aging fleet of ships and aircraft. However, achieving readiness recovery goals will take years as both services continue to be challenged to rebuild readiness amid continued operational demands. This statement provides information on current and future readiness challenges facing (1) the Navy ship and submarine fleet and (2) Navy and Marine Corps aviation. GAO also discusses prior recommendations on Navy and Marine Corps readiness and progress to address them. This statement is based on previously published work since 2015 related to Navy and Marine Corps readiness challenges, including shipyard workforce and capital investment, ship crewing, weapon system sustainment, the fighter pilot workforce, and modernizing force structure. GAO conducted site visits to the Pacific fleet in November 2018 and analyzed updated data, as appropriate. The Navy has taken steps to address training shortfalls in the surface fleet, but faces persistent maintenance and personnel challenges as it seeks to rebuild ship and submarine readiness. While the Navy has corrective actions underway, they will take years to implement. Following ship collisions in 2017, the Navy has taken steps to ensure its crews are trained to standards prior to deployment and made significant progress in those efforts. However, the Navy has struggled to complete ship maintenance—with only 30 percent of maintenance completed on time since fiscal year 2012—leading to thousands of days that ships were unavailable for training and operations (see figure). Additionally, manning shortfalls and experience gaps continue to contribute to high sailor workload and are likely to continue through at least fiscal year 2021. The Navy has developed a plan to improve shipyards and is re-examining its ship manning, among other actions; however, these positive steps have not yet fully addressed GAO's recommendations. Looking to the future, the Navy has indicated that it wants to grow its fleet to meet demands. However, the costs of such growth are not yet known and would likely require resourcing well above currently planned levels. Navy and Marine Corps aircraft availability has been limited due to numerous challenges (see figure). Specifically, the seven aircraft GAO reviewed have generally experienced decreasing availability since fiscal year 2011 and did not meet availability goals in fiscal years 2017 and 2018. The F-35—the future of naval aviation—also has not met availability goals due to part shortages and poor sustainment planning. In September 2018, the Department of Defense established aggressive targets for aircraft availability. While the Navy and Marine Corps are taking actions to improve aircraft availability, including addressing GAO's recommendations, aviation readiness will take many years to recover. GAO has made a total of 45 recommendations in the prior work described in this statement. The Department of Defense concurred with most of them, and has many actions underway, but has not yet fully implemented any. Attention to these recommendations can assist the Navy and the Marine Corps as they seek to rebuild the readiness of their forces.", "document_type": "gao"}
{"report": "VHA’s patient advocacy program is intended to provide veterans with a means to provide feedback about health care services they receive at VAMCs. VHA sets forth minimum expectations for VAMCs’ administration of the program, including that veterans must have easy access to a patient advocate and must have their complaints addressed in a convenient and timely manner. The patient advocacy program is administered at the VAMC level. Each of VA’s 170 VAMCs is responsible for making at least one patient advocate available to respond to veterans’ feedback, and for ensuring that feedback is recorded in PATS. VAMCs may designate other staff to assist patient advocates in responding to feedback, such as lead patient advocates and service-level advocates. Service-level advocates, such as nurses or administrative staff, are designated at some VAMCs to respond to veterans’ feedback before involving a patient advocate. All VAMC staff that have a designated role in the administration of the patient advocacy program are referred to as patient advocacy program staff. In addition to designating program staff, VAMCs may use a variety of methods to make veterans aware of the patient advocacy program, such as displaying signage on site and including information about the program on their websites. (See app. I for more information on the methods selected VAMCs used to make veterans aware of the program.) Patient advocacy program staff enter veterans’ feedback in PATS using a report of contact (ROC) and assign one or more issue codes that generally describe the nature of the feedback, such as coordination of care. (See app. II for additional information on entering veterans’ feedback into PATS.) Each piece of feedback shared is categorized as either a request for information, compliment, or complaint. VHA’s handbook for the program specifies certain goals for data collection and resolution—specifically, that all complaints should be entered in PATS to enable a comprehensive understanding of veterans’ issues and concerns to, in turn, identify potential system-wide improvements; and responses should occur no later than 7 days after the complaint is made. With this guidance, patient advocacy program staff use a variety of approaches for entering veterans’ feedback in PATS and closing it in the system once addressed. For example, when VAMCs have designated service-level advocates, the process for entering and closing feedback in PATS is generally different than the approach used by VAMCs that have only patient advocates. (See fig. 1.) Patient advocacy program staff at each VAMC are assisted by a VISN- level coordinator who acts as a liaison between the VAMCs and VHA and is responsible for ensuring consistency in PATS data collection within the VISN. The VISN director is responsible for designating the coordinator and ensuring that each VAMC within the VISN has at least one patient advocate. The VHA office responsible for overseeing the patient advocacy program changed as a result of CARA. From January 2011 to July 2017, the program was overseen by OPCC&CT under VHA’s Deputy Under Secretary for Health for Operations & Management. CARA included a provision for VHA to establish OPA to begin overseeing the program and specified that this office would report directly to the Under Secretary for Health, a higher-level office within VHA. Although OPCC&CT is no longer responsible for overseeing the program, it is to continue to play an advisory role to OPA during the initial phases of its work, according to OPCC&CT officials. Many of OPA’s oversight responsibilities are specified in CARA including ensuring that patient advocates advocate on behalf of veterans, manage PATS, and identify trends in the data to determine whether there are opportunities for improving veterans’ health care. Also, OPA’s director is required to ensure that patient advocates receive relevant, consistent training across VAMCs. When establishing the office in July 2017, VHA officials wrote a memo indicating that OPA’s primary objectives were to implement a standardized policy for the patient advocacy program and to resolve any system-wide issues, such as concerns about care across VAMCs identified through veterans’ feedback. In addition, in August 2017, OPA began soliciting feedback from VAMCs on various aspects of the patient advocacy program to identify improvement priorities and best practices. By September 2017, OPA had identified an acting program director, established a workgroup (called the National Strategic Workgroup) to develop recommendations related to program administration, and finalized a charter that identifies workgroup deliverables. VHA has provided limited guidance to VAMCs on the governance of the patient advocacy program. Specifically, VHA provided limited guidance on how to meet the program’s expectations that veterans have easy access to a patient advocate who will hear their complaints and address them in a timely manner. While VHA’s handbook for the program provides general information on the responsibilities of patient advocacy program staff, it does not specify the VAMC department to which patient advocates should report to help ensure VAMCs meet these expectations. According to VHA officials, the lack of specific guidance was intentional and due in part to VHA officials’ view that leadership at each VAMC is in the best position to understand the needs of veterans at their facilities, and therefore should have flexibility to make decisions about governance in response to those needs. In addition to providing limited guidance to VAMCs, VHA’s patient advocacy program handbook is out of date and does not incorporate recent agency-wide changes, such as those made in response to VHA Strategic Plan FY 2013 – 2018 which identifies the goal of providing proactive, patient-driven health care. The handbook for the program was issued in 2005, expired in 2010, and as of January 2018, no updates had been released. In the absence of an updated document, VAMCs are still expected to follow the outdated handbook. However, the handbook does not identify the responsibilities of the current VHA office responsible for overseeing the program. Instead, it identifies the responsibilities of the VHA office that oversaw the program before OPCC&CT began overseeing the program in 2011. In recent years, OPCC&CT reviewed the implementation of the patient advocacy program at some VAMCs and provided specific recommendations on how to change program governance to better reflect a more proactive patient advocacy program model. However, the recommendations from these reviews were provided only to some VAMCs; guidance that could be applicable to all VAMCs was not added to the handbook. OPCC&CT officials stated that they did not update the handbook because they decided to instead spend time trying to understand recent feedback they received from VAMC officials and ensure that any updates would reflect system-wide shifts as a result of VHA’s strategic plan. OPCC&CT’s limited and outdated guidance to VAMCs on the governance of the patient advocacy program is inconsistent with federal internal control standards for the control environment, which require agencies to establish an organizational structure, assign responsibility, and delegate authority to achieve agency objectives—key aspects of governance. To do so, an agency may develop an organizational structure that assigns responsibilities to discrete units and defines reporting lines at all levels of the organization. Without providing specific, timely guidance to VAMCs on the governance of the patient advocacy program, the program is at risk of not meeting its minimum expectations. In light of the limited and outdated guidance on the governance of the program, patient advocacy program staff at most of our selected VAMCs noted that the VAMC department to which patient advocates report can have a direct effect on the ability of staff to resolve veterans’ complaints. For example, patient advocates at one VAMC said because of the program’s position within the organization, they did not have the authority to ensure that VAMC officials external to the patient advocacy program, such as physicians, quickly engaged in responding to veterans’ complaints. In these cases, a patient advocate would contact the physician to resolve a complaint, but may not have received a response until the matter was brought to the attention of the physician’s supervisor—a reporting line that is outside of the patient advocacy program at this VAMC. Officials from several of our selected VAMCs and VSOs noted that the position of the patient advocacy program within VAMCs may not give patient advocates the authority to require VAMC staff to respond to veterans’ complaints. They added that conflict-of- interest concerns could arise when a veteran has a complaint about a VAMC for which the patient advocate works. (See app. III for additional information on the governance of the patient advocacy program at selected VAMCs.) In VA’s written comments on a draft of this report, which are reproduced in Appendix IV, VA stated that it issued its new directive for the patient advocacy program that had been in development as we were conducting our review. While the updated directive specifies that a VAMC’s lead patient advocate should report to the facility director, it does not specify the VAMC department to which other patient advocacy program staff, including patient advocates who are not designated as lead patient advocates and service-level advocates, should report. In addition, OPA’s National Strategic Workgroup recently submitted recommendations to OPA on the governance of the patient advocacy program. OPA officials stated that they plan to prioritize the recommendations and elicit feedback from VISN directors on how to operationalize the recommendations. However, it is unclear whether OPA will provide additional guidance related to the governance of the program based on these recommendations, such as guidance on the VAMC department to which all types of patient advocacy program staff should report. Until actions to address the weaknesses we found are completed, guidance on the governance of the program will continue to be lacking. VHA has provided limited guidance to VAMCs on the number and type of patient advocacy program staff needed to ensure that complaints from veterans are addressed in a convenient and timely manner. According to VHA’s existing handbook for the program, every VAMC should have at least one patient advocate and appropriate administrative, technical, and clerical support should be provided to allow for efficient performance of the responsibilities of program staff. OPCC&CT did not provide guidance on how VAMCs should determine the appropriate number of administrative, technical, and clerical staff or type of patient advocacy program staff, such as lead patient advocates and service-level advocates. According to officials, this was because no assessment was conducted to identify what staff resources would be needed to meet the expectations of the program. In the absence of such an assessment, OPCC&CT instead relied on each VAMC to determine what resources would be needed based on the facility’s size and services provided. However, VHA’s handbook for the program does not provide instruction for VAMC or VISN officials on how to determine the number and type of staff needed for the program. OPCC&CT officials added that budget constraints can also affect a VAMC’s ability to hire the appropriate staff for the program. (See app. III for additional information on the number and type of patient advocacy program staff at selected VAMCs.) Officials at all but one of the selected VAMCs stated that program staff at their VAMCs had more work to do than they could handle. For example, VAMC officials cited backlogs in work, such as calls from veterans not being answered, messages not being responded to, voicemail boxes being full, and not all veterans’ feedback being entered into PATS. Officials from one VAMC we spoke with in July 2017 stated that due to workload demands and not enough patient advocacy program staff at their VAMC, they had roughly 300 unanswered phone calls at that time from veterans who want to provide feedback to a patient advocate. Officials from several VSOs we spoke with stated that there is not enough patient advocate staff, adding that veterans reported that their calls to patient advocates were not answered, they were unable to reach an advocate, or their calls were not responded to in a timely manner. The lack of staffing guidance is inconsistent with GAO’s Key Principles for Effective Strategic Workforce Planning, which states that workforce planning is essential to addressing an organization’s critical need to align its human capital program with its current and emerging mission and programmatic goals. Further, federal internal control standards require agencies to design control activities to achieve objectives, a key aspect of effectively staffing a program. Such control activities may include effectively managing the agency’s workforce, such as by continually assessing the knowledge, skills, and abilities of the workforce to achieve organizational goals. The lack of guidance on staffing may impede VAMCs’ efforts to ensure that they have the appropriate number and type of staff to administer the patient advocacy program. The resulting misalignment of staff resources could have negatively affected VAMCs’ ability to achieve the program’s objectives, including addressing veterans’ complaints in a timely manner. For example, if there are not a sufficient number of patient advocates to respond to veterans’ phone calls in a timely manner, VAMCs may not be able to ensure that patient advocates can respond to veterans’ complaints within 7 days, as called for by VHA’s handbook for the program. According to VHA officials, OPA analyzed feedback from VAMCs on the factors that should be considered in developing national guidelines for staffing, such as facility size and complexity level, and directed its National Strategic Workgroup to develop recommendations for determining the extent to which VAMCs have utilized various patient advocacy program staff, such as service-level advocates, by the spring of 2018. However, OPA expects that these efforts will result in recommendations for consideration, and it is unclear what steps, if any, will be taken based on the recommendations. Until actions to address the weaknesses we found are completed, the lack of guidance for VAMCs on determining the appropriate number and types of staff will put the patient advocacy program at risk of being unable to address veterans’ complaints in a convenient and timely manner. VHA has recently developed a list of recommended training for patient advocates. In the spring of 2017, OPCC&CT officials updated a recommended training list for patient advocates developed before 2011 when OPCC&CT began overseeing the patient advocacy program. The training list covers a wide variety of topics, including how to enter and examine trends in PATS data, as well as key responsibilities of patient advocates outlined in VHA’s handbook for the program. OPCC&CT officials stated that they would like to make the trainings required, but have not pursued this because of the lengthy process within VHA to designate required training for a specific group of staff. To update the list in 2017, OPCC&CT convened a workgroup (which included several patient advocates) to determine whether the old training list was sufficient, and the workgroup shared its suggested updates with VISN- level coordinators for distribution to VAMCs in April 2017. We found that OPCC&CT has not developed an approach to routinely assess the training needs of patient advocates. Rather, OPCC&CT officials stated that they relied on VAMC and VISN staff to conduct these assessments. However, VHA’s handbook for the program does not specify that VAMC or VISN officials are responsible for conducting routine assessments of patient advocates’ training needs. None of our selected VAMCs routinely conducted assessments of the training needs of patient advocates, such as assessing whether advocates were adequately trained to carry out their responsibilities. Officials from two VAMCs said they used ad hoc approaches to assess training needs. For example, one patient advocate supervisor stated that training is offered on an “as needed” basis in patient advocate meetings when a training need is identified. The lack of an approach for routinely assessing the training needs of patient advocates is inconsistent with federal standards for internal control related to control activities. Under these standards relating to human capital, management ensures that training is aimed at developing and retaining employee knowledge, skills, and abilities to meet changing organizational needs. Management should also continually assess the knowledge, skills, and ability needs of a program so that the program is able to obtain a workforce that has the required knowledge, skills, and abilities to achieve organizational goals. Without an approach for routinely assessing the training needs of patient advocates, VHA may not be able to clearly identify gaps in the knowledge and skills of these staff over time, which, in turn, could put the program at risk of not meeting its goals. For example, if there is a gap in understanding among patient advocates that all complaints should be entered into PATS, addressing veterans’ complaints may be delayed, if addressed at all, and opportunities to analyze complaint data for the purpose of identifying system-wide improvements may be missed. According to VHA officials, OPA analyzed feedback from VAMCs on the training needs of patient advocates, including how to correctly enter data into PATS, and directed its National Strategic Workgroup to develop recommendations for assessing the training needs of patient advocates by the spring of 2018. OPA expects that these efforts will result in recommendations for OPA to consider, but it is unclear what steps, if any, will be taken based on the recommendations. Until actions to address the weaknesses we found are completed, the lack of routine assessments of training needs will continue to put the program at risk of staff not having the requisite skills and knowledge to carry out their duties. VHA has not monitored the completion of training for patient advocates. Specifically, OPCC&CT officials said that they did not monitor the extent to which patient advocates completed the recommended training distributed in April 2017. Instead, these officials relied on patient advocate supervisors to monitor training completion. However, VHA’s handbook for the program does not specify that patient advocate supervisors are responsible for monitoring the completion of training for patient advocates. Half of patient advocate supervisors at our selected VAMCs did not track the completion of patient advocacy training. Patient advocate supervisors said that they are able to track the completion of general VA employee training through VA’s Talent Management System. However, most training specific to patient advocacy were generally not included in this system during the period of our review. Officials from our selected VAMCs who did track patient advocacy training used various methods to record completion, such as keeping attendance lists for the training provided. Taking steps to monitor training completion would be consistent with GAO’s Guide for Assessing Strategic Training and Development Efforts in the Federal Government which identifies components of the training and development process, including having agencies collect and monitor data corresponding to establishing training objectives. Monitoring training completion would also be consistent with federal standards for internal control related to control activities. Under these standards relating to human capital, management ensures that training is aimed at developing and retaining employee knowledge, skills, and abilities to meet changing organizational needs. Management also continually assesses the knowledge, skills, and ability needs of a program so that the program is able to obtain a workforce that has the required knowledge, skills, and abilities to achieve organizational goals—key components for monitoring training completion. If patient advocates are not properly trained in how to use PATS to document and resolve complaints, tracking the status of complaints may be more difficult, which could increase the likelihood that they are not addressed in a timely manner, if at all. Further, CARA specifies that the director of OPA should ensure that patient advocates receive training specific to patient advocacy. According to VHA officials, OPA did not obtain information on whether patient advocates completed recommended training and did not identify an approach for monitoring training completion moving forward. Without monitoring training completion, there is an increased risk that patient advocates have not received the training they need to effectively fulfill their responsibilities such as advocating on behalf of veterans and consistently using PATS to document and resolve complaints. VHA officials have not monitored PATS data-entry practices to ensure complaints were always entered into PATS and issue codes were assigned consistently to ROCs. OPCC&CT officials told us they did not monitor the data-entry practices of patient advocacy program staff to ensure that all complaints were entered into PATS, a key goal according to VHA’s handbook for the program. Rather, they relied on VISN and VAMC officials to ensure that program staff entered all complaints into PATS. Officials from two of the five VISNs we interviewed stated that they did not perform any audits or checks of the data entered into PATS by patient program staff at VAMCs. We also found inconsistencies in the extent to which VAMC officials entered complaints into PATS, with complaints always entered into PATS at one of our selected VAMCs, while at other VAMCs some complaints were left unrecorded, according to officials. For example, at one VAMC, officials stated that over a third of the complaints received were not entered into PATS due to the competing workload demands of patient advocates. Similarly, at another selected VAMC, almost a quarter of the complaints received were not entered into PATS, according to patient advocates there who explained that they primarily used a document outside of PATS to record veterans’ feedback. In addition, OPCC&CT officials told us they did not monitor whether patient advocates used a consistent practice to assign issue codes to veterans’ feedback recorded into PATS. Using a consistent data-entry practice is important to ensure that PATS data can be compared across VAMCs to better enable an accurate and comprehensive understanding of veterans’ issues and concerns, a goal of the patient advocacy program. OPCC&CT officials stated that they relied on VISN-level coordinators to monitor coding practices because VHA’s handbook for the program states that these coordinators should develop VISN-wide consistent approaches for entering complaints into PATS. VISN-level coordinators from two selected VISNs stated that they created a standard practice for assigning issue codes within a particular VISN; however, the coding practices differed between VISNs, making national level analysis difficult. We also found inconsistencies in how VAMC officials coded specific veterans’ feedback. For example, patient advocates did not use consistent practices to code issues related to the Veterans Choice Program (Choice Program), one of the most common types of issues patient advocates told us they hear about from veterans. Officials from one of our selected VAMCs said they code feedback related to the Choice Program under a specific “request for information” issue code, regardless of whether the feedback was a request for information, compliment, or complaint. In contrast, officials at another VAMC stated that they typically code feedback related to the Choice Program as a complaint related to billing. (See app. II for additional information on data- entry practices at selected VAMCs.) OPCC&CT’s lack of monitoring of PATS data-entry practices is inconsistent with GAO’s Assessing the Reliability of Computer-Processed Data which identifies the importance of consistent data-entry practices to ensure that data are reasonably complete and accurate. Further, federal standards for internal control related to information and communications require agencies to use quality information, such as relevant data from reliable sources, to achieve the agency’s objectives. Under internal control standards for control activities, management also is to monitor performance to achieve objectives. Without OPCC&CT monitoring data- entry practices, the patient advocacy program is at risk of not meeting its goal that all complaints are entered into PATS and there is an increased likelihood of VHA not having an accurate understanding of veterans’ complaints across VAMCs. Moving forward, in fall 2017, OPA distributed meeting minutes to all VISN and VAMC directors stating that all veterans’ feedback should be consistently recorded in PATS. OPA officials also updated some of the issue codes in PATS in fall 2017 and added a code specifically for community care issues, such as issues related to the Choice Program. In addition, OPA officials stated that they plan to promote the consistent assignment of issue codes to veterans’ feedback through national training, but have not specified when this training will occur or if OPA staff will monitor patient advocates’ consistent assignment of issue codes or of data-entry practices generally. Until these actions are completed, however, the gaps in monitoring of PATS data-entry practices that we identified will continue to exist, putting the program at risk of incomplete or unreliable data that may not allow an accurate understanding of veterans’ complaints, critical to making system-wide improvements. VHA officials have not systematically reviewed PATS data to assess program performance and identify potential system-wide improvements, goals of the patient advocacy program. Specifically, OPCC&CT officials stated that they reviewed PATS data in response to inquiries, but did not conduct systematic reviews of the data over time. For example, they did not track VAMC performance on responding to complaints in a timely manner or track the most common complaints across VAMCs to identify potential opportunities for system-wide improvements. OPCC&CT officials stated that they did not conduct systematic reviews of PATS data because VISN and VAMC officials were primarily responsible for these analyses. However, according to VHA’s handbook for the patient advocacy program, VHA officials have a responsibility to examine PATS data for trends across VAMCs and identify any areas for system- wide improvement. Officials stated that it was challenging to analyze PATS information included in narrative text, such as descriptions of veterans’ feedback. Not reviewing PATS data is inconsistent with federal standards for internal control for monitoring which require agencies to establish and operate monitoring activities, such as assessing the quality of performance over time, and evaluate the results. Further, not conducting systematic assessments of PATS data made it difficult for OPCC&CT to determine program performance, such as whether the program was meeting its goal that all complaints are entered into PATS and responded to within 7 days. Officials explained that VHA interprets this goal to mean that complaints are closed in PATS within 7 days. According to VA, between FY 2014 and FY 2017 there were more than 53,000 complaints per year open for greater than 7 days. If OPCC&CT officials had conducted systematic reviews of PATS data, they may have been able to identify that there were a significant number of complaints open for longer than 7 days and consider what actions should be taken, such as providing additional guidance to VAMCs on how to address complaints in a timely manner. Furthermore, without systematically reviewing PATS data across VAMCs to identify potential system-wide improvements, OPCC&CT officials may have been unaware of important care issues across VAMCs. For example, patient advocates from several of our selected VAMCs stated that opioid prescription issues are among the most common complaints they received from veterans. If OPCC&CT officials were to have systematically reviewed PATS data across VAMCs to determine the prevalence of these types of complaints, they could have identified the need to address them on a national level and consider system-wide policies or guidance in response. According to VHA officials, OPA is in the process of identifying the data it needs to review on a routine basis, and directed its National Strategic Workgroup to identify program data that could be reviewed to assess program performance and identify potential system-wide improvements by the spring of 2018. However, OPA expects that these efforts will result in recommendations for OPA to consider, and it is unclear what steps, if any, will be taken based on the recommendations. Until actions to address the weaknesses we found are completed, the lack of a systematic review of PATS data will persist, putting the program at continued risk of missed opportunities for identifying and addressing weaknesses across VAMCs. As one of the largest health care delivery systems in the nation, it is critically important for VHA to ensure that each veteran who receives health care services has easy access to an advocate who listens to that veteran’s feedback and responds in a timely manner. This is especially important given concerns about veterans’ ability to receive timely and quality care. However, VHA’s efforts to ensure that the patient advocacy program is meeting its goals—to identify potential system-wide improvements and respond to complaints within 7 days—have fallen short. OPCC&CT did not provide sufficient oversight to the program in the four key areas of governance, staffing, training, and data-entry practices, which has left the program at risk for not meeting its goals. VHA’s newly established OPA has initiated plans to improve the patient advocacy program in these four areas; however, most of these plans center around a workgroup that will make recommendations for OPA to consider, and it is unclear what specific actions, if any, will be taken based on these recommendations. Further, documentation for several of OPA’s planned efforts has not been finalized. Unless specific actions to address the weaknesses we identified are completed expeditiously, the program is at risk of not meeting its goals, including addressing veterans’ complaints in a convenient and timely manner. Furthermore, without addressing the weaknesses we identified, OPA misses opportunities to review PATS data across VAMCs to identify potential system-wide issues that, if addressed, could significantly improve the experience of veterans. Such reviews are critical to ensuring that VHA is taking steps to both meet its goal in its strategic plan to provide veterans with timely and quality health care, and to address recent issues it has faced, such as veterans’ ability to access care in a timely manner. We are making the following six recommendations to the VHA Undersecretary for Health: provide updated guidance to VAMCs on the governance of the patient advocacy program, including clear definitions of reporting lines. (Recommendation 1) assess and provide guidance to VAMCs on appropriately staffing the patient advocacy program, including guidance on how to determine the appropriate number and type of staff. (Recommendation 2) develop an approach to routinely assess the training needs of patient advocates. (Recommendation 3) monitor the completion of training for patient advocates. (Recommendation 4) monitor PATS data-entry practices to ensure all complaints are entered into PATS and that veterans’ feedback is coded consistently. (Recommendation 5) systematically review PATS data to assess program performance and identify potential system-wide improvements. (Recommendation 6) We provided a draft of this report to VA for comment. In its written comments, which are reproduced in Appendix IV, VA concurred with our recommendations and noted that it recently issued the new directive for patient advocacy that had been in development as we were conducting our review. The directive supersedes the outdated handbook for the patient advocacy program and describes certain aspects of program governance, including certain reporting lines, roles, and responsibilities. Accordingly, VA requested that we close our first recommendation related to governance. We revised our report to reflect the issuance of the new directive. However, we do not believe the directive fully implements our recommendation. While the updated directive specifies that a VAMC’s lead patient advocate should report to the facility director, it does not specify the VAMC department to which other patient advocacy program staff, including patient advocates who are not designated as lead patient advocates and service-level advocates, should report. Until VA specifies the reporting lines for these other patient advocacy program staff, our recommendation will remain open. In addition, VA stated in its written comments that OPA has efforts underway related to staffing, training, and PATS data entry and assessment and provided estimated completion dates for these efforts. We will monitor VA’s efforts to address our recommendations. VA did not provide technical comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, the Under Secretary for Health, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in Appendix V. Our eight selected Department of Veterans Affairs (VA) medical centers (VAMC) use a variety of methods to make veterans or their representatives aware of the patient advocacy program, including providing brochures on the program, displaying signage, and providing program information on the VAMC’s website. (See fig. 2 for examples of patient advocacy program signage at some of the VAMCs we visited.) Patient advocacy program staff, such as patient advocates or service- level advocates who are designated to respond to veterans’ feedback, enter feedback from veterans or their representatives in the Veterans Health Administration (VHA) Patient Advocate Tracking System (PATS) by creating a report of contact (ROC). Each ROC includes basic information regarding the individuals involved, a description of the feedback provided by the veteran, and a description of the steps taken to resolve the issue. Patient advocacy program staff assign one or more issue codes that generally describe the nature of the feedback, such as “coordination of care.” (See figures 3 and 4.) In order to organize veterans’ feedback, VHA categorizes feedback as either requests for information, compliments, or complaints. Within each of these categories VHA defines specific issue codes for program staff to select from based on the description of the veteran’s feedback. (See table 2.) The Comprehensive Addiction and Recovery Act of 2016 (CARA), includes a provision for every VAMC to display the purpose of the program, along with the contact information of a patient advocate at the facility, in as many prominent locations as deemed appropriate to be seen by the largest percentage of veterans. In September 2016, VHA Central Office sent a memo to Veterans Integrated Service Network (VISN) directors explaining this requirement and an Office of Patient Centered Care and Cultural Transformation (OPCC&CT) official obtained confirmation from all VHA facilities that this requirement was met in October 2016. Nevertheless, officials from two veterans service organizations (VSO) we interviewed stated they often encounter veterans who are not aware of the patient advocacy program. According to VA, in fiscal year (FY) 2017, there were 268,114 veterans associated with ROCs entered in PATS. VA also reported that, in the same year, patient advocacy program staff entered 414,256 unique reports of contact in PATS. According to VA, from the unique reports of contact in PATS, program staff documented 473,564 issues, which included (but were not limited to) 112,722 requests for information, 35,839 compliments, and 325,003 complaints. See table 3 for the top five issues that patient advocacy program staff across VAMCs entered in PATS for FY 2017. According to VA, in FY 2017, a total of 1,391 program staff system-wide entered data in PATS. In the same year, according to PATS, veterans, rather than family members or friends, most often provided feedback to patient advocacy program staff. Our eight selected VAMCs varied in the number of patient level advocates and service-level advocates who had access to PATS, whether veterans’ feedback was recorded outside of PATS, and which issue code or codes were used to record feedback related to the Veterans Choice Program. (See table 4.) Examples of methods that patient advocates and service-level advocates used at selected VAMCs to record veterans’ feedback outside of PATS included call logs and tracking spreadsheets. VAMC officials indicated that recording information outside of PATS helped them track their responses to veterans’ feedback. Some of the information recorded outside of PATS was additional information that is not required to be entered into PATS, such as requests for information. The eight Department of Veterans Affairs (VA) medical centers (VAMC) selected for our review used a variety of approaches to govern the patient advocacy program, resulting in differences in the number of positions for patient advocates and service-level advocates and the title of the positions. Service-level advocates, such as nurses or administrative staff, are designated at some VAMCs to respond to veterans’ feedback before involving a patient advocate. (See table 5.) Patient advocates reported to a variety of departments among our selected VAMCs. At two of the VAMCs, patient advocates reported to the customer or consumer relations department, while at three, patient advocates reported to the quality management department. In addition, the placement of the department that patient advocates reported to within the VAMC differed. For example, the patient advocate supervisor at one of the selected VAMCs said that patient advocates reported to the customer service manager, who did not report directly to the VAMC director. At another VAMC, the patient advocate reported directly to the VAMC director. In addition to the Veterans Health Administration (VHA) handbook for the patient advocacy program, all eight of our selected VAMCs developed their own policies for the administration of the program, and these policies varied. For example, while almost all of the policies specified the responsibilities with respect to the patient advocacy program of the service chiefs—officials who oversee the administration and operation of service lines such as primary care, these responsibilities varied. For example, two of the policies required service chiefs to incorporate veterans’ feedback into performance measures used for VAMC staff external to the patient advocacy program, such as physicians, while the other policies did not. We also found variation between our selected VAMCs with respect to whether they had written descriptions of the service-level advocates’ roles. Of the six VAMCs that designated service-level advocates, three had written descriptions of their roles, while three did not. Further, among the VAMCs that had a written description of the role of a service-level advocate, the expectations for these advocates varied. For example, one VAMC’s written description specified that service-level advocates are expected to enter veterans’ feedback into PATS within 7 days of receiving the feedback. The written descriptions at the other two VAMCs did not specify this expectation. In addition to the contact named above, Hernán Bozzolo (Assistant Director), Rebecca Rust Williamson (Analyst-in-Charge), Jennie F. Apter, Q. Akbar Husain, and Emily Loriso made key contributions to this report. Also contributing were Julie Flowers, Jacquelyn Hamilton, and Vikki Porter.", "summary": "VHA has designated patient advocates at each VAMC to receive and document feedback from veterans or their representatives, including requests for information, compliments, and complaints. In recent years, the importance of a strong patient advocacy program has taken on new significance given concerns with VHA's ability to provide veterans timely access to health care, among other issues. The Comprehensive Addiction and Recovery Act of 2016 included a provision for GAO to review VHA's patient advocacy program. This report examines the extent to which VHA has (1) provided guidance on the governance of the program; (2) provided guidance on staffing the program; (3) assessed the training needs of patient advocates and monitored training completion; and (4) monitored patient advocacy program data-entry practices and reviewed program data. GAO reviewed VHA and VAMC documents, including summaries of program data. GAO interviewed VHA officials about the program, as well as officials from a non-generalizable selection of eight VAMCs and five VISNs selected based on the volume of veteran complaints and other factors. GAO also compared VHA policies and practices to federal internal control standards. The Veterans Health Administration (VHA) provided limited guidance to Department of Veterans Affairs (VA) medical centers (VAMC) on the governance of its patient advocacy program and its guidance, a program handbook, has been outdated since 2010. VAMCs are still expected to follow the outdated handbook, which does not provide needed details on governance, such as specifying the VAMC department to which patient advocates should report. Officials from most of the VAMCs that GAO reviewed noted that the VAMC department to which patient advocates report can have a direct effect on the ability of staff to resolve veterans' complaints. The lack of updated and complete guidance may impede the patient advocacy program from meeting its expectations, to receive and address complaints from veterans in a convenient and timely manner. VHA also has provided limited guidance to VAMCs on staffing the patient advocacy program. VHA's handbook states that every VAMC should have at least one patient advocate and appropriate support staff; however, it did not provide guidance on how to determine the number and type of staff needed. Officials at all but one of the eight VAMCs in GAO's review stated that their patient advocacy program staff had more work to do than they could accomplish. This limited guidance on staffing could impede VAMCs' efforts to ensure that they have the appropriate number and type of staff to address veterans' complaints in a timely manner. Further, VHA has recommended training for patient advocates, but it has not developed an approach to routinely assess their training needs or monitored training completion. VHA officials stated that they relied on VAMC and Veterans Integrated Service Network (VISN) staff to conduct these activities. However, GAO found that for the eight VAMCs in its review, the training needs of patient advocates were not routinely assessed, and training completion was not always monitored. Without conducting these activities, VHA increases its risk that staff may not be adequately trained to advocate on behalf of veterans. Finally, VHA has not monitored patient advocacy program data-entry practices or reviewed the data to assess program performance. VHA officials stated that they relied on VISN and VAMC officials to ensure that all complaints were consistently entered into VHA's Patient Advocate Tracking System (PATS). However, GAO identified inconsistencies in the extent to which VAMC officials did so. VHA's lack of monitoring may pose a risk that not all complaints are entered into this tracking system—a goal of the program. Additionally, VHA officials stated they did not systemically review data in the system to assess program performance and identify potential system-wide improvements because VHA considered this the responsibility of VAMCs. As a result, VHA officials may miss opportunities to improve veterans' experiences. VHA is beginning to address many of these governance, staffing, training, and data issues, including directing a workgroup to provide recommendations by spring of 2018. However, because the recommendations will be advisory, and because program deadlines have slipped in the past, the nature and timing of the actions needed to resolve these issues remain unclear. GAO is making 6 recommendations to improve guidance for and oversight of the patient advocacy program, focusing on governance, staffing, training, and PATS data entry and assessment. VA concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "This section provides information on select agent regulations and program roles, responsibilities, and requirements; and the history of the Select Agent Program. The Select Agent Program is fragmented because oversight responsibility is, by law, split between CDC and APHIS. The two agencies have delineated roles and responsibilities to regulate laboratories—including conducting inspections and other activities—that possess, use, or transfer biological select agents. CDC’s Division of Select Agents and Toxins is responsible for the oversight and regulation of select agents that could pose a threat to public health and safety, such as the Ebola virus. APHIS’s Agriculture Select Agent Services is responsible for the oversight and regulation of select agents that could pose a threat to animal or plant health or animal or plant products, such as the virus that causes foot-and- mouth disease. Some select agents, such as Bacillus anthracis (the bacterium that causes anthrax), are regulated by both agencies because they pose a threat to both human and animal health; these agents are known as overlap agents. As part of their oversight, CDC and APHIS maintain a list of select agents that they are required to review and republish at least every 2 years. Generally, laboratories (including those at federal agencies and private institutions) and individuals who possess, use, or transfer these select agents must register with CDC or APHIS and renew their registration every 3 years. Most laboratories registered with the Select Agent Program are registered with CDC (238 of 276). (See fig. 1 for information about the laboratories registered with the program.) In fiscal year 2016, CDC’s budget to manage its component of the Select Agent Program was about $21 million and APHIS’s was about $5.5 million. Select agent regulations govern the possession, use, and transfer of designated select agents. To apply for a certificate of registration, the laboratory must submit an application package to either CDC or APHIS, and laboratory personnel must submit to a security risk assessment conducted by the Federal Bureau of Investigation (FBI). The Select Agent Program conducts an on-site inspection before issuing a new certificate of registration or renewing an existing registration; both are valid for a maximum of 3 years. Once approved, a laboratory’s certification of registration may be amended to reflect changes in circumstances, such as replacement of the responsible official or other personnel changes, changes in ownership or control of the laboratory, changes in the activities involving any select agents, or the addition or removal of any select agents. As a condition of registration, the select agent regulations require each laboratory to designate an individual to be its responsible official, who is responsible for ensuring compliance with the regulations. In addition, the regulations require laboratories to develop various written plans, as well as provide training and maintain records of training and other activities. For example, the regulations require that laboratories registered with the program develop and implement a written security plan sufficient to safeguard each select agent against unauthorized access, theft, loss, or release; develop and implement a written biological safety plan that is commensurate with the risk of the select agent, given its intended use; provide training on biological safety and security for individuals with access to select agents; and maintain records on the activities covered by the select agent regulations. Several historical security incidents involving hazardous pathogens resulted in a series of laws and other regulatory activity that served to establish and amend the Select Agent Program. First, Congress passed section 511 of the Antiterrorism and Effective Death Penalty Act of 1996 after an individual in the United States unlawfully obtained Yersinia pestis, the bacterium that causes plague, by mail order. Section 511 directed the Secretary of HHS to promulgate regulations identifying a list of biological agents that have the potential to pose a severe threat to public health and safety, providing procedures governing the transfer of those agents, and establishing safeguards to prevent unauthorized access to those agents for purposes of terrorism or other criminal activities. The HHS Secretary delegated the authority to regulate select agents to CDC, thus establishing the Select Agent Program in its initial form. In carrying out this authority, CDC required laboratories transferring select agents to be registered with the program. After the terrorist events of September 11, 2001, and the subsequent anthrax attacks in October 2001, Congress passed the USA PATRIOT Act of 2001 and the Public Health Security and Bioterrorism Preparedness and Response Act of 2002. These acts significantly expanded the Select Agent Program by restricting access to select agents and increasing safeguards and security measures for select agents. The 2002 act also expanded the program to include not only the regulation of the transfer but also the use and possession of select agents, and it granted comparable authority to USDA for select agents that pose a threat to animal or plant health, or animal or plant products. The Secretary of Agriculture delegated the authority to regulate select agents that affect animal or plant health to APHIS. The act also required HHS and USDA to coordinate on overlap agents and required the Secretaries of both departments to establish, maintain, and biennially review and republish the select agent list, making revisions as appropriate to protect the public. On July 2, 2010, the President signed Executive Order 13546, “Optimizing the Security of Biological Select Agents and Toxins in the United States.” The executive order directed HHS and USDA, as a part of their ongoing review, to tier the select agents on the list, consider shortening the list, and establish physical security standards for select agents with the highest risk of misuse; HHS and USDA did so in final rules published October 5, 2012. About half of the laboratories registered with the program as of December 2016 were registered to work with tier 1 agents (142 of 276). The Select Agent Program does not fully meet key elements of effective oversight. In particular, the program has oversight shortcomings related to each of the five key elements: independence, performing reviews, technical expertise, transparency, and enforcement. In addition, the program does not have joint strategic planning documents to guide its oversight efforts, such as a joint strategic plan and workforce plan; it did, however, begin taking steps to develop a joint strategic plan over the course of our review. The Select Agent Program does not fully meet our key elements of effective oversight. Specifically, the program is not independent from all laboratories it oversees, and it has not formally assessed the potential risks posed by its current organizational structure. In addition, the program regularly performs reviews of laboratories’ compliance with regulatory and program requirements, but these reviews may not target the activities that pose the highest risk to biological safety and security. Moreover, even though the program has taken steps to hire additional staff and enhance the technical expertise of its staff, workforce and training gaps remain. The program has increased transparency since 2016, but the information it shares is limited and there is no consensus about what additional information could be shared, given security concerns. Lastly, the Select Agent Program has authority to enforce compliance with program requirements, but is still working to address past concerns about the need for greater consistency and clarity in actions it takes in exercising this authority. Independence The organization conducting oversight should be structurally distinct and separate from the entities it oversees. According to our key elements of effective oversight, to be independent, the organization conducting oversight should be structurally distinct and separate from the entities it oversees. The Select Agent Program is not structurally distinct and separate from all of the laboratories it oversees but has taken some steps to reduce conflicts of interest potentially posed by its current structure within CDC and APHIS. The two components of the Select Agent Program are located in CDC and APHIS, both of which also have high-containment laboratories registered with the program. Many experts at our meeting raised concerns that the Select Agent Program cannot be entirely independent in its oversight of CDC and APHIS laboratories because the Select Agent Program is composed of divisions of those agencies. In particular, one expert stated that to be independent, the agencies cannot regulate themselves, and others said that the agencies’ oversight of their own laboratories may present a conflict of interest. However, laboratories owned by CDC and APHIS are not generally located within the same agency divisions and thus are not in the same chain of command as the Select Agent Program. The one exception is an APHIS-owned complex of laboratories in the same division as the APHIS component of the program, but that complex is registered with CDC, which means that CDC leads its inspections and oversight. Senior program officials, many laboratory representatives, and some experts cited a number of benefits to the Select Agent Program’s current structure within CDC and APHIS, including the ability for inspectors to have access to experts and other support from their respective divisions. For example, program officials said that the Select Agent Program had reached out to CDC scientists for assistance in developing guidance documents for the program. In addition, inspectors sometimes obtain technical assistance from experts in CDC and APHIS, such as in cases where the inspectors are not familiar with certain techniques or equipment being used in a registered laboratory. However, program officials also said that they have tried to limit the extent that they rely on CDC and APHIS scientists from outside the program, so as not to raise concerns about conflicts of interest. Senior program officials from CDC and APHIS also said that the Select Agent Program’s current locations within the two agencies allow for access to additional support as needed, including additional funds and administrative services. Senior program officials from CDC further stated that being located in an office focused on preparedness and response is advantageous because the Select Agent Program can quickly pivot into incident response mode, allowing for rapid response and assessment of incidents that occur in registered laboratories. They noted that this location proved advantageous during an incident in 2015, for example, when the program responded to the discovery that a DOD laboratory had inadvertently sent live Bacillus anthracis, the bacterium that causes anthrax, to nearly 200 laboratories. The location of the program has also raised some concerns in the past, which the Select Agent Program has taken some steps to address. In response to past concerns about conflicts of interest and separation of duties raised by HHS OIG, APHIS, and us, both CDC and APHIS made structural changes to increase the Select Agent Program’s independence within their respective agencies. In particular, in 2003, in response to concerns from HHS OIG and us, CDC moved its component of the Select Agent Program into the agency’s Office of Public Health Preparedness and Response because that office did not have any laboratories registered with the program. (See fig. 2 for HHS’s organizational chart, including a depiction of where CDC’s Select Agent Program component currently sits in relation to other agency divisions.) According to CDC officials, the director of the CDC component of the Select Agent Program has access to senior leadership at CDC as needed. Similarly, since 2013, APHIS has also made some organizational changes, including realigning supervisory responsibilities for the program and creating a direct line of communication from the director of the APHIS component of the Select Agent Program to the APHIS administrator. Previously, the program reported to a director whose division had a suite of laboratories that the program inspects. Now it is managed through APHIS’s National Import Export Services, which has different senior-level managers that report directly to the Office of the Administrator rather than the managers who oversee registered laboratories. According to agency officials, these changes increased the level of independence between the Select Agent Program and APHIS-owned laboratories but did not fully address the appearance of a lack of independence within APHIS, since the agency’s organizational chart still places the APHIS component of the Select Agent Program under Veterinary Services. (See fig. 3 for USDA’s organizational chart, including a depiction of where APHIS’s Select Agent Program component currently sits in relation to other agency divisions). The APHIS director of the Select Agent Program and the Associate Administrator of APHIS meet regularly to discuss incidents involving select agents, enforcement actions, and operation of the Select Agent Program, among other issues, according to agency officials, but this reporting structure is not documented. According to federal standards for internal control, management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives and should develop and maintain documentation of its internal control system. Until APHIS formally documents the reporting structure for its component of the Select Agent Program from the APHIS director of the program to the administrator of APHIS, it will continue to appear to have conflicts of interest in its oversight of APHIS-owned laboratories. In addition to these structural changes, the program has put mechanisms in place to reduce organizational conflicts of interest, but the agencies do not always follow a key mechanism. In particular, CDC and APHIS signed a memorandum of understanding in 2012 that stated that APHIS would provide the lead inspector for all inspections of registered laboratories owned by CDC. However, in practice, CDC inspectors still participate in inspection activities because of their expertise in human agents. In March 2015, the memorandum was amended to state that CDC would lead inspections of all USDA-owned laboratories. However, since the memorandum was amended, the APHIS component of the Select Agent Program has led at least three inspections of USDA- owned or operated laboratories. In particular, APHIS led an inspection of a laboratory owned by another USDA agency, the Agricultural Research Service, in November 2015; one run by the Agricultural Research Service and APHIS scientists in May 2015; and one owned by APHIS in December 2015. APHIS officials we interviewed said that they had overlooked this amendment to the memorandum of understanding and the program does not have a process in place to help ensure the memorandum is followed. According to federal standards for internal control, management should design control activities to achieve objectives and respond to risk. Such internal control activities help ensure that management directives such as those outlined in the memorandum of understanding are carried out, and should be effective and efficient in accomplishing the program’s control objectives. One example of a control activity would be establishing a process to ensure APHIS and CDC comply with the memorandum to help ensure APHIS does not inspect its own laboratories. Without establishing control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding, the Select Agent Program cannot have reasonable assurance that its key mechanism to reduce conflicts of interest is implemented. Although the Select Agent Program has taken steps to help reduce conflicts of interest, it has generally done so in response to concerns raised by others. The program itself has not formally assessed all potential risks posed by its current structure and the effectiveness of its mechanisms to address those risks. For example, the program did not identify all of the areas noted above that may present conflicts of interest and has not considered whether there may be additional areas of concern. An expert in our meeting identified benefits of an independent, third-party review of the Select Agent Program. For example, we and other audit organizations are subject to an external peer review at least once every 3 years that includes a review of documentation related to independence, among other issues. According to senior program officials we interviewed, the program as a whole has not engaged in comprehensive risk management activities but they would be willing to do so in the future. OMB’s Circular A-123 requires federal agencies to integrate risk management activities into their program management to help ensure they are effectively managing risks that could affect the achievement of agency objectives. According to the circular, once initial risks are identified, it is important for agencies to regularly re-examine risks to identify new risks or changes to existing risks. In addition, federal internal control standards state that management should identify, analyze, and respond to risks related to achieving defined objectives. Without (1) regularly assessing the potential risks posed by the program’s current structure and the effectiveness of its mechanisms to address them, such as by commissioning external reviews, and (2) taking actions as necessary to ensure any identified risks are addressed, the program may not be aware of or effectively mitigate impairments to its independence that could affect its ability to achieve its objectives. Ability to perform reviews The organization should have the access and working knowledge necessary to review compliance with requirements. According to our key elements of effective oversight, the organization conducting oversight should have the ability to perform reviews, including access to facilities and working knowledge necessary to review compliance with requirements. The Select Agent Program performs several types of reviews to ensure compliance with regulatory and program requirements, including registration inspections for laboratories seeking certification to use select agents, renewal inspections for laboratories seeking to renew their registration, and verification inspections. (See fig. 4 for additional information on these inspections). The program has the ability to access any registered laboratory for inspection, including without prior notification. Inspections typically include review of registration and other documents—such as biological safety and security plans and inventory and personnel training records— as well as physical inspections of laboratory workspace and interviews with laboratory representatives, among other inspection activities. During inspections, Select Agent Program inspectors go through checklists that are based on the select agent regulations, the Biosafety in Microbiological and Biomedical Laboratories manual, and guidelines from NIH. The inspections cover a variety of topics—such as facility design and operation, incident response, security, training, records management, and biological safety—and may last anywhere from 1 day with 1 or 2 inspectors for simpler laboratories, to a couple of weeks with up to 10 inspectors for larger and more complex laboratories. Most laboratory representatives we spoke with said that the inspectors generally had the working knowledge necessary to review compliance and that the inspections and resulting reports were in-depth and generally fair and accurate. However, the program may not target the highest-risk activities in its inspections, in part because it has not formally assessed which activities pose the highest risk to biological safety and security. According to Select Agent Program officials, the program’s policy is to conduct at least one verification inspection of all registered laboratories—regardless of their past history or performance—between each 3-year renewal inspection, and the program may consider additional inspections at laboratories that pose a higher risk. Specifically, the program scores laboratories’ risk based on a number of factors, such as past inspection findings. However, a 2017 HHS OIG report found that the CDC component of the Select Agent Program had evaluated some, but not all, variables that could inform the risk a laboratory poses to health and safety and concluded that CDC may wish to enhance its risk assessment by considering additional factors, such as whether a laboratory has previously reported losses or releases of a select agent, to better inform a laboratory’s level of risk over time. In addition, some experts at our meeting and laboratory representatives we interviewed raised concerns that the program’s inspections do not target resources to the highest-risk activities. For example, some experts said that the program has historically not put enough emphasis on verifying that certain laboratory procedures are safe and effective, which some said may have contributed to high-profile incidents in 2014 and 2015 in which select agents were inadvertently released from high-containment laboratories. However, according to the Select Agent Program, the program does not validate or verify laboratory procedures as it is the responsibility of the laboratories themselves to do so. Further, many experts at our meeting and laboratory representatives we interviewed raised concerns about the amount of time inspectors spend assessing compliance with inventory controls (e.g., by counting and examining vials containing select agents) and reviewing inventory records during the inspection process, which takes time away from inspecting other aspects of biological safety and security. Experts at our meeting said that these activities do little to reduce the risk of theft of select agents because samples could be clandestinely removed from vials and replicated without being detected by the inventory controls currently in place. Finally, other laboratory representatives told us that activities to assess compliance with certain program requirements did little to reduce risk and were unnecessarily burdensome, such as time- consuming reviews of records so that nicknames such as “Rob” match up to registered names, such as “Robert.” These inspection activities are generally intended to address biological security concerns, such as theft; however, recent high-profile incidents at registered laboratories have been related to biological safety rather than security, and no thefts have been reported since 2003, when notification requirements were first implemented, according to program officials and documents. Experts at our meeting generally agreed that the Select Agent Program has historically put more focus on security than on biological safety in its reviews, given that the program was established in response to terrorist incidents. For example, some experts said that the program has not focused enough on ensuring the health and safety of researchers and reducing the potential for their exposure to select agents, which some noted are more likely to occur than thefts due to security issues. Many experts questioned if the focus on security continues to be appropriate, in light of recent biological safety incidents. According to senior APHIS officials we interviewed, the Select Agent Program has been mandated to focus on security and if they move the program’s focus too far from security to biological safety, they may lose the goals established when the program was formed. They also noted that, according to the select agent regulations, laboratories are responsible for developing and implementing a written biological safety plan, and therefore a balance should be maintained between the laboratories’ execution of these plans and the level of oversight from the Select Agent Program. In addition, these officials stated that, during inspections, it is much easier for inspectors to ensure laboratories are meeting security requirements than carrying out their biological safety plans. For example, inspectors can easily check to make sure laboratories have required security barriers in place, such as locks on doors, but it is harder to measure whether laboratories are carrying out laboratory procedures safely. They also noted that the program does not want to be prescriptive with respect to biological safety so that laboratories can implement those biological safety practices that are most appropriate for their facility. A 2015 internal review of the CDC component of the Select Agent Program acknowledged uncertainties and gaps in understanding how best to balance laboratories’ ability to conduct critical research using select agents with the program’s need to ensure the safety and security of the public and laboratory workers. The resulting report recommended that the CDC and APHIS components of the program work together to analyze inspection and investigation data to identify trends and associations between inspection findings and risk and to improve the inspection process. According to program officials we interviewed, the Select Agent Program has not yet addressed the recommendation because the program does not currently have adequate tools to do so. They noted that the program is transitioning to a new database that will enhance their ability to analyze program data to identify such trends and associations and thereby guide improvements to the inspection process. However, the program did not provide a plan for when or how the program will carry out these analyses or use the information to improve the inspection process. Federal internal control standards state that management should identify, analyze, and respond to risks related to achieving defined objectives. In addition, the Project Management Institute’s Standard for Program Management calls for program scheduling planning as a leading practice to ensure organizational activities are completed. Without developing and implementing a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities, the Select Agent Program will not have assurance that it is effectively balancing the potential safety and security gains from its oversight efforts against the use of program resources and the effect on laboratories’ research. According to our key elements of effective oversight, the organization conducting oversight should have sufficient staff with the expertise to perform sound safety and security assessments. CDC and APHIS have hired additional staff for the program and improved training to enhance expertise, but workforce and training gaps remain. Technical expertise The organization should have sufficient staff with the expertise to perform sound safety and security assessments. The CDC and APHIS components of the Select Agent Program increased the number of full-time federal inspectors in 2016 and 2017, but have faced challenges in hiring and retaining sufficient staff with the requisite expertise to perform the necessary work in a timely manner. According to agency reports, agency officials, and laboratory representatives, Select Agent Program inspectors are subject to a large workload with an intensive travel schedule. Inspectors perform a variety of tasks, including conducting on-site inspections of laboratories, developing written reports of inspection results, processing requests for amendments to laboratory registrations, and communicating program requirements to laboratory representatives. According to agency reports and inspectors we spoke with, inspectors often travel 30 percent to 50 percent or more of their time in performing their duties. This intensive workload and travel schedule has led to delays in both the issuing of inspection reports and processing of registration amendments. According to a 2017 CDC report, the time to process CDC’s inspection reports in 2016 ranged from 4 to 224 business days, with about 27 percent of reports exceeding the Select Agent Program’s 30-day target for issuance. Workload issues were cited as one of the key reasons for delays. A 2016 APHIS internal report also identified delays in issuing inspection reports. According to the 2016 report, the time to process APHIS’s inspection reports in 2014 averaged 36 days, but some reports were issued more than 100 days from the date the inspection concluded. Similarly, the processing time for amendments to registrations, which the program has not routinely tracked in the past, generally varies from a couple of weeks or months to approve simpler amendments (such as personnel changes) to a year or more to approve major changes to facilities (such as adding new laboratory space), according to laboratory representatives. Delays in issuing inspection reports or processing amendments may hamper the implementation of corrective measures to address safety issues identified in inspections or impede laboratories’ research on select agents, according to agency reports and laboratory representatives. For example, representatives from one laboratory told us that they lost grant funding because it took over a year for the Select Agent Program to review and approve an amendment to its registration to allow the proposed research to be conducted. Workload issues have also created problems with retention, according to agency documents and program officials we interviewed, and have sometimes resulted in staff from the APHIS component of the Select Agent Program being assigned responsibilities outside their areas of expertise. For example, at the time of our review, an APHIS security specialist was given the additional responsibility of conducting reviews not related to his area of expertise, such as inspecting ventilation systems, which are critical to ensuring select agents are not released into the environment. According to the 2016 internal APHIS report, the APHIS component of the program has historically struggled with resource deficiencies and has had to implement strategies to fulfill its legal mandates and meet basic goals and objectives within its limited resources. Both the CDC and APHIS components of the Select Agent Program have individually taken steps to identify and address gaps in their workforce but have not coordinated these actions to manage fragmentation across the program. CDC developed a formal workforce plan for its component of the Select Agent Program in 2016, identified and secured the necessary resources to implement the plan, and is working to fill needed positions. As of August 2017, the CDC component of the program had 7 vacancies out of its 51 total inspector positions. APHIS also identified additional needed positions, through development of its 5-year business plan, and has used money from an APHIS contingency fund to fill them. APHIS hired additional inspectors in 2016 and 2017 and now has 11 inspector positions, up from 7 in 2015. APHIS also added several other new positions in the first half of 2017, including a scientific officer, a security manager, and a program analyst, among others. However, according to program officials we interviewed, even with the additional recently hired inspectors, the program may not have adequate staff to handle surges in workload. For example, if there is a need to respond to critical incidents similar to those that occurred at CDC and DOD in 2014 and 2015, the program may find it challenging to respond to those incidents in addition to meeting its annual inspection schedule. Moreover, according to the 2016 APHIS internal review and CDC and APHIS officials we interviewed, the complexity of laboratories that work with select agents, the select agent regulations, and inspections have continued to increase, which may continue to contribute to workload issues in the future. Program officials we interviewed said they are hopeful that the new database the program is implementing will allow the program to gain efficiencies in amendment processing and other areas, which may reduce workload issues in the future. Training to Improve or Maintain Expertise Most laboratory representatives we interviewed said that, in their experience, Select Agent Program inspectors generally had appropriate expertise to perform reviews. According to agency documents, the vast majority of the program’s inspectors have advanced degrees, including many inspectors from CDC with doctoral degrees in microbiology or related fields and many inspectors from APHIS with doctoral degrees in veterinary medicine. However, CDC and APHIS internal reviews from 2015 and 2016, respectively, as well as some laboratory representatives we interviewed, identified some shortcomings and inconsistencies in inspectors’ expertise and approach related to their regulatory responsibilities. In particular, the reports found that inspectors had inconsistent knowledge about the select agent regulations, variabilities in skill level, and divergent approaches to inspections, both within and across the two components of the Select Agent Program. In addition, several laboratory representatives said that some inspectors imposed requirements on laboratories that the inspectors considered to be best practices rather than requirements of the select agent regulations or items on inspection checklists. Both CDC and APHIS officials in the program identified gaps in the training available to maintain their expertise. CDC inspectors we interviewed told us they need additional training opportunities to keep up with scientific changes in the field, such as advances in laboratory techniques and equipment. APHIS officials we interviewed also identified areas where they need additional training, including in facilities and engineering aspects of laboratories; decontamination; and new laboratory techniques, technologies, and equipment. In addition, some APHIS inspectors we interviewed said that they sometimes do not have the necessary knowledge to effectively perform all aspects of inspections and, in some cases, depend on inspectors from CDC to address gaps in expertise. Relying on CDC inspectors when APHIS is inspecting CDC- owned laboratories raises conflict of interest concerns. Furthermore, according to inspectors from both CDC and APHIS, they are rarely able to attend external conferences or other external training because of their intensive workload and travel schedules and because they must compete for training funds with CDC or APHIS scientists who are not assigned to the program. Priority is given to those scientists presenting information at conferences, which Select Agent Program staff rarely do because their inspection work is not the type of information shared at conferences, according to program officials. In response to these concerns, both the CDC and APHIS components of the Select Agent Program have individually taken steps to improve training for program staff, including inspectors, but have not always coordinated steps to manage fragmentation across the program. For example, in 2016, APHIS increased training opportunities for two inspectors to better enable them to inspect BSL-4 laboratories. In addition, CDC developed a training strategy that identified various areas in its training program that needed improvement, including the need to provide funding support for existing training activities and enhanced professional development opportunities. According to CDC’s training strategy, the complexity of the inspector position and evolving science on select agents demand ongoing training and professional development opportunities for staff. Among other recommendations, the strategy identified the need for three additional full- time-equivalent positions in the training area—in addition to the one the CDC component of the program currently has; as of August 2017, CDC was in the process of hiring one additional training specialist. APHIS has not developed a similar formal training strategy, but during the course of our review, APHIS sought and received approval and funds to hire a full-time training coordinator, which it was in the process of filling as of July 2017. Because APHIS has not had a training coordinator dedicated to the Select Agent Program in the past, the APHIS component of the program has generally relied on CDC to address training needs, although APHIS does provide its own training to its inspectors and has coordinated with CDC to develop some training, according to APHIS officials. A senior APHIS official noted that having its own training coordinator moving forward will help ensure APHIS’s training needs are met, as animal inspection needs have not explicitly been addressed in the past when CDC has taken the lead on training. Transparency The organization should provide access to key information, as applicable, to those most affected by operations. According to our key elements of effective oversight, the organization conducting oversight should provide access to key information, as applicable, to those most affected by operations. Past White House and other reports, as well as experts at our meeting, also emphasized the importance of transparency, including the sharing of information on incidents and lessons learned, in the Select Agent Program. However, the program limits the information it shares about registered laboratories and violations of the select agent regulations, mainly because of security concerns. For example, the program does not disclose to the public or other laboratories the locations of laboratories registered with the program, the agents that laboratories work with, or details on violations of select agent regulations. The Select Agent Program has recently increased the transparency of high-level laboratory and program information it shares with the public and registered laboratories, partly in response to recent federal reports. For example, in 2016, the Select Agent Program issued its first annual public report on the program. The report provided a variety of information, such as background information on the program, statistics about registered laboratories, and aggregated information on the potential losses and releases reported to the program. In 2015, the program developed a mechanism for laboratories to request interpretation of the select agent regulations from the program and has since published several regulatory interpretations on its website. In addition, starting in summer 2016, the Select Agent Program worked with a nongovernmental organization, the American Biological Safety Association International, to develop an online forum for registered laboratories to share information with one another, which laboratory representatives told us has been very helpful. The Select Agent Program also held a workshop for responsible officials from registered laboratories in December 2016 to disseminate program information; the workshop also provided the opportunity for attendees to interact. Many laboratory representatives told us that this was very helpful, and some noted that they had not had an opportunity to communicate and share lessons learned with responsible officials from other registered laboratories in the past. Even so, some experts, agency officials, and laboratory representatives we interviewed said there needs to be more transparency to the public about select agent research and incidents in order to increase public trust concerning the activities conducted at high-containment laboratories. For example, several laboratory representatives noted that the media has incorrectly described their laboratories as conducting “bioterror” research, when the research they conduct is to mitigate the consequences of a bioterrorist attack—for example, by developing vaccines and other measures to help diagnose, prevent, or treat exposure to or infection with select agents. On the other hand, many laboratory representatives told us that the program was already sharing an appropriate amount of information with the public. According to officials from HHS and USDA, this issue has been examined and discussed extensively within their departments, partly in response to recent federal reports. CDC officials pointed out that laboratories themselves could share additional information about their select agent research and any incidents. For example, the U.S. Army Medical Research Institute for Infectious Diseases and the National Biodefense Analysis and Countermeasures Center, both at Fort Detrick in Maryland, and the Galveston National Laboratory in Galveston, Texas, voluntarily share information about their select agent research and incidents with the public via their websites. In addition, many laboratory representatives we interviewed said the program needs to be more transparent for registered laboratories. In particular, some said that it would be helpful for the program to share more information among laboratories about select agent research and incidents to enhance the sharing of lessons learned to improve biological safety and security. According to experts at our meeting, it is important for information, such as lessons learned from incidents, to be shared among laboratories so that they can learn from one another’s experiences to improve their own operations. Some laboratory representatives also said that it would be helpful for the Select Agent Program to provide additional guidance in certain areas, such as regarding the use and storage of toxins. Federal internal control standards state that management should internally and externally communicate the necessary quality information to achieve the entity’s objectives. However, there is no consensus about what additional information should be shared with laboratories. Without determining what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the Select Agent Program to share with registered laboratories, the program may be missing opportunities to provide key information that ultimately could help improve biological safety and security. According to our key elements of effective oversight, the organization conducting oversight should have clear and sufficient authority to require entities to achieve compliance with requirements. The Select Agent Program has the authority to and takes a range of enforcement actions for violations of the select agent regulations and is working to address concerns about the clarity and consistency of enforcement actions. When the Select Agent Program identifies a possible violation of the select agent regulations, the program may take several types of compliance or enforcement actions, as follows: Administrative actions: The Select Agent Program can propose a corrective action plan; suspend or revoke a registered laboratory’s registration; or deny a laboratory’s application to possess, use, or transfer select agents. Referrals to HHS OIG or APHIS’s Investigative and Enforcement Services: The Select Agent Program may refer violations to HHS OIG or APHIS’s Investigative and Enforcement Services, both of which can levy civil money penalties, issue a Notice of Violation letter, or close the case. Referral to the FBI: The Select Agent Program can refer possible violations involving criminal negligence, criminal intent, or suspicious activity or person to the FBI for further investigation. Criminal enforcement may include imprisonment for up to 5 years, a fine, or both. The Select Agent Program has taken enforcement actions against laboratories but did not always do so consistently or according to any available criteria. The Select Agent Program has taken a range of enforcement actions for violations of the select agent regulations— including suspending or revoking registrations or proposing corrective action plans—as well as referring violations to HHS OIG or APHIS’s Investigative and Enforcement Services for further investigation. Following investigation, HHS OIG and APHIS’s Investigative and Enforcement Services have taken other enforcement actions, including levying civil money penalties and issuing Notice of Violation letters. However, we previously found in 2016 that the Select Agent Program did not consistently refer laboratories to investigative entities for violations of the select agent regulations or enforce regulations related to incidents involving incomplete inactivation, and we found that this appears to be true beyond incidents involving incomplete inactivation as well. For example, from 2003 through 2016, the program suspended or revoked 10 laboratories’ registrations in response to violations of the select agent regulations, only 1 of which was a federal laboratory, and neither HHS OIG nor APHIS’s Investigative and Enforcement Services have levied a civil money penalty against a federal laboratory. Moreover, we previously found that the program referred various laboratories to HHS OIG for incidents involving incomplete inactivation but did not refer HHS laboratories for two incidents in 2014. We recommended in 2016 that the Select Agent Program develop and implement consistent criteria and documentation requirements for referring laboratories to investigative entities and enforcing regulations. The Select Agent Program is taking steps to address such past concerns about the need for greater consistency and clarity in enforcement actions and implement our recommendation. In particular, in September 2017, the program finalized a document that provides guidance on when to refer laboratories for violations and options for enforcement. This document categorizes regulatory departures along a spectrum of severity with associated enforcement options, so that inspectors and laboratories have a clear understanding of what to expect during and as a result of inspections, regardless of which Select Agent Program component conducts them. In addition, the CDC component of the program worked with HHS OIG to develop criteria to guide referrals to OIG, which CDC finalized and implemented in June 2017. APHIS is not developing a similar document at this time because APHIS officials believe the guidance on when to refer laboratories for violations and options for enforcement actions described above provides sufficient guidance on referrals for the Select Agent Program. The program’s development of guidance with criteria is a positive step and the program continues to develop associated documentation requirements for referring violations to investigative entities and enforcing regulations, according to a senior program official. As of August 2017, the Select Agent Program does not have joint strategic planning documents to guide its shared oversight efforts across CDC and APHIS. For example, the program does not have a joint mission statement to collectively define what the program seeks to accomplish through its oversight. It also does not yet have a strategic plan, although it is taking steps to develop one. Agencies can use strategic plans to set goals and identify performance measures for gauging progress towards those goals. Strategic plans can also outline how agencies plan to collaborate with each other to help achieve goals and objectives, as well as describe the strategies and resources required to achieve the goals and objectives. Mission statements for the two components of the Federal Select Agent Program The Centers for Disease Control and Prevention’s (CDC) Division of Select Agents and Toxins reduces the risks for thefts, losses, and releases of biological agents by ensuring regulated laboratories or importers are safe and select agents are secure through its monitoring of facilities and enforcement of regulations. The Animal and Plant Health Inspection Service’s (APHIS) Agriculture Select Agent Services is a team of Agriculture Health Professionals dedicated to providing superior customer service to safeguard the health of domestic animals, plants, and their products from agricultural biological agents and toxins. Each component of the program has conducted some strategic planning—each has an individual mission statement, some strategic planning documents, and performance measures—but the components differ in what they seek to achieve and how they measure the effectiveness of their efforts. For example, according to CDC officials, in the past, the CDC component has developed yearly strategic goals, such as to improve regulatory oversight through inspections and the biological safety and security of laboratories. In contrast, APHIS developed a 5-year business plan for its component of the Select Agent Program in 2014, which it updated in July 2017. In addition, it identified a number of annual goals in 2015, 2016, and 2017, such as developing additional BSL-4 training and filling vacancies in existing and new positions. CDC’s and APHIS’s performance measures also differ. For example, CDC has a range of performance measures, such as tracking the number of laboratory-acquired infections and the timeliness of inspection reports, whereas APHIS’s performance measures address the number of thefts, losses, and releases involving select agents and the processing of amendments. The Select Agent Program also does not have a joint workforce plan that collectively identifies workforce and training needs to ensure the program as a whole has the appropriate workforce with sufficient expertise to carry out its responsibilities and that resources are being leveraged appropriately across the two components of the program. According to our past work, strategic workforce planning is an essential tool to help agencies align their workforces with their current and emerging missions and develop long-term strategies for acquiring, developing, and retaining staff. Moreover, the Select Agent Program has not collectively determined its training needs. The APHIS component of the program has generally relied on CDC to help meet its ongoing training needs, as noted, but we found through our review of CDC’s training strategy that it did not specifically address APHIS’s training needs. According to program officials, joint training provided in the past has not always explicitly addressed animal inspection needs, as noted. Program officials noted that the program has taken some steps to coordinate training, such as holding joint inspector training and webinars. Senior program officials told us that, even without joint strategic planning documents, the CDC and APHIS components of the Select Agent Program manage fragmentation by collaborating on many aspects of the program, such as through maintaining frequent communication at the director level. They also said that the program had not developed a joint mission statement or strategic planning tools in the past because they prioritized other efforts in recent years, including responding to incidents that occurred in 2014 and 2015, addressing recommendations from recent reports, and developing a new database for the Select Agent Program. In addition, each component of the program has generally focused on its own agency’s needs when conducting workforce planning. One senior CDC official said that the Select Agent Program had always been in “reactive mode” and noted that the program could improve its oversight if it took a more strategic view. During the course of our review, senior program officials told us that they were taking steps to develop a joint strategic plan for the Select Agent Program and, in August 2017, the program began soliciting bids from contractors for the plan’s development. The statement of work for the contract states that the contractor shall develop guiding principles for the Select Agent Program along with a mission statement, strategic goals and objectives, and performance measures, among other requirements. However, the statement of work for the contract does not have any requirements related to development of a joint workforce plan. We have found in the past that agencies’ strategic workforce planning should be clearly linked to the agency’s mission and long-term goals developed during the strategic planning process. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program to better manage fragmentation by improving how it leverages resources to ensure all workforce and training needs are met; this assessment should be done in conjunction with the development of the strategic plan. Leveraging of resources is especially important given fiscal constraints and the uneven level of resources across the two components of the program. Selected countries and regulatory sectors employ approaches to promote effective oversight that, in some cases, differ from those of the Select Agent Program. For example, other countries and sectors have regulatory bodies that are structurally independent from the entities they oversee, take a risk-based approach to performing reviews, rely on scientists and other laboratory personnel to have requisite technical expertise on the pathogens and activities in their laboratories, share incident information on their public websites, and have prosecutorial authority when incidents occur. Some countries and sectors we reviewed have regulatory bodies that are structurally independent from the entities they oversee. For example, Great Britain’s Health and Safety Executive, whose mission is to protect worker and public health and safety and who oversees laboratories that work with pathogens, is an independent central government agency, according to officials. It has a chief executive accountable to the UK government’s Department of Work and Pensions and a public-private board composed of representatives from a range of industries, including trade unions. Officials noted that this structure, an independent agency with direct access to a departmental head, allows the Health and Safety Executive to have control over defining its own budget and staffing needs. According to officials from the Health and Safety Executive and laboratory representatives we interviewed, one strength of this approach is that it avoids potential organizational conflicts of interest because none of the laboratories that the Health and Safety Executive oversees are part of the same agency. Great Britain’s Health and Safety Executive The Health and Safety Executive is an independent regulator in Great Britain whose mission is to prevent death, injury, and illness in the workplace. It was originally established following a government review of the health and safety system in the country in 1974. One division within the Health and Safety Executive—the Chemical, Explosives and Microbiological Hazards Division—regulates sectors that have the potential for low- probability, high-consequence incidents, including work in high-containment laboratories. It began overseeing laboratories following a smallpox outbreak in 1978. Great Britain reviewed the regulations for animal pathogens and rewrote them to make them more aligned with the human pathogen and genetically modified organism frameworks after a 2007 safety incident in which a Great Britain laboratory inadvertently released foot and mouth disease into the environment. The Health and Safety Executive is responsible for safety oversight of pathogens that present a risk to human health as well as animal pathogens. A separate entity, the National Counter Terrorism Security Office, is responsible for security oversight of a subset of pathogens that pose biological security concerns, similar to the United States’ select agents. The Health and Safety Executive and the National Counter Terrorism Security Office work closely together in providing oversight, according to officials. As of July 2017, Great Britain had a total of 434 registered high-containment laboratories across the government, academic, and private sectors. Some other regulatory sectors in the United States are also structurally independent from regulated facilities as a mechanism to ensure independence. For example, prior to the creation of NRC in 1974, the U.S. Atomic Energy Commission was responsible for both promotion and oversight of the nuclear industry. The Energy Reorganization Act of 1974 established NRC as a separate, independent entity. According to a relevant Senate committee report, this was a response to growing criticism that there was a basic conflict between the U.S. Atomic Energy Commission’s regulation of the nuclear power industry and its development and promotion of new technology for the industry. Independence is one of NRC’s “Principles of Good Regulation” that the commission seeks to follow in carrying out its regulatory activities. NRC’s Office of Nuclear Reactor Regulation uses performance metrics associated with these principles—including measures of the objectivity and independence of its inspectors—to annually evaluate the effectiveness of its Reactor Oversight Process in meeting its pre- established goals and intended outcomes. This office reports the results of this analysis to NRC in an annual report on the self-assessment of the Reactor Oversight Process. Other countries and sectors we reviewed have adopted risk-based approaches to reviewing compliance with regulatory requirements. In particular, regulators in some countries, including Great Britain and Canada, apply a risk-based approach to target their reviews to laboratories with a documented history of performance issues or those conducting higher-risk activities. Great Britain’s Health and Safety Executive prioritizes which laboratories to inspect during the year by assessing the level of risk a specific laboratory or program may have on worker or public health and safety or the environment, according to officials. This assessment takes into consideration factors such as which pathogens pose a greater risk, how these pathogens are used in the laboratory, and the potential consequences of an incident. For example, officials noted that a laboratory complex that works with many pathogens that may pose a significant risk to the country—such as animal pathogens that affect livestock and the food supply—may be subject to more oversight and additional inspections from regulators, based on the associated risk assessment, than a diagnostic laboratory that may destroy samples after testing. The Public Health Agency of Canada is responsible for promoting and protecting the health of Canadians through various public health initiatives. It was established in 2004, partly in response to an outbreak of severe acute respiratory syndrome (SARS) in 2003, when it became evident that Canada had no legal requirements for domestic laboratories to report information such as whether they were working with SARS samples, and therefore officials could not determine the potential scope of the problem. The agency sits under Canada’s Minister of Health and its Centre for Biosecurity is responsible for administering and enforcing Canada’s Human Pathogens and Toxins Act to oversee the safe and secure handling of human pathogens and toxins. The act came into full force in December 2015, following an extensive consultation process with stakeholders. The Centre for Biosecurity has authority to license and oversee laboratory activities involving human pathogens and toxins, some animal pathogens, and a subset of human pathogens that have additional biological security concerns. Oversight responsibility for the other animal pathogens rests with the Canadian Food Inspection Agency. As of June 2017, Canada had a total of 63 licensed high-containment laboratories across the government, academic, and private sectors. Similarly, officials from the Public Health Agency of Canada’s Centre for Biosecurity, whose mission is to protect the health and safety of the public against the risks posed by human pathogens and toxins, stated that their division for the oversight of laboratories that work with pathogens also has a risk-based licensing and inspection scheme. Under this scheme, the stringency of licensing and inspection requirements largely depends on the pathogen’s risk level. In addition, the Public Health Agency of Canada places different requirements on activities carried out in laboratories depending on their sector (e.g., public health or research) because it determined that activities in certain sectors present a higher risk than others, with the research sector having the highest associated risks. As such, the Public Health Agency of Canada places additional requirements on research scientists conducting certain activities with pathogens than it does with respect to personnel conducting activities in other types of laboratories. For example, the agency requires research scientists to develop and submit documentation that demonstrates a reasonable plan to manage risk and promote compliance with requirements. Officials noted that this approach helps the agency to understand where best to focus its efforts to achieve the desired risk mitigation results. According to officials from both Great Britain and Canada, this risk-based approach helps the oversight bodies in both countries focus their limited resources on laboratories they have identified as having the highest risks. In addition, Great Britain’s Health and Safety Executive and the Public Health Agency of Canada apply a risk-based approach in determining the focus of their inspections. For example, according to agency officials in Great Britain and Canada, because they have not found stringent inventory requirements to be effective in reducing biological safety risks in the laboratory, neither country places as much focus, time, or resources on inventory management as the Select Agent Program does. For example, neither country spends time during every inspection counting and examining vials and comparing them to inventory logs, according to officials. Instead, Great Britain’s Health and Safety Executive’s approach is to sample laboratories’ biological safety measures and assess whether they have mechanisms in place to mitigate the consequences of incidents should they occur. Similarly, in Canada, the Canadian Biosafety Standard requires that laboratories working with pathogens in high-containment have an inventory tracking system that is based on the risks internally identified by the laboratory, in order to allow for timely identification of missing vials if necessary. In addition to having less prescriptive inventory requirements than the Select Agent Program, both Great Britain’s Health and Safety Executive and the Public Health Agency of Canada generally focus their oversight on (1) biological safety, and (2) regulation of all potentially hazardous pathogens in laboratories. In contrast, the Select Agent Program originated from security-related concerns and regulates only those pathogens identified on the U.S. select agent list and no other pathogens, such as West Nile virus, that may be handled in high- containment but are not select agents. In both Great Britain and Canada, specific biological safety incidents provided the impetus for establishing oversight for laboratories that work with pathogens and, as a result, their regulatory agencies generally focus on biological safety. Both Great Britain and Canada have additional oversight requirements, such as security clearances for personnel, for a limited number of pathogens for which they have heightened security concerns, similar to the security requirements for working with select agents in the U.S. For example, in Great Britain, the Health and Safety Executive focuses on only biological safety in its oversight of high-containment laboratories and works with the National Counter Terrorism Security Office for oversight of pathogens with biological security concerns. In addition, to ensure compliance with biological safety regulations, officials we interviewed in Great Britain and Canada told us it was beneficial for their programs to have oversight over all hazardous pathogens that present biological safety risks to laboratory workers and the public, regardless of their containment level and their potential to pose biological security concerns. For example, the Public Health Agency of Canada regulates any pathogens with characteristics that require handling in laboratories equivalent to U.S. BSL-2, -3, or -4, which currently covers thousands of pathogens, according to officials, as opposed to the 66 agents on the U.S.’s select agent list. NRC also considers risk in its oversight of nuclear reactors, fuel cycle facilities, and radioactive materials. In particular, for facilities that work with nuclear materials, NRC conducts inspections of a fraction of these facilities each year because, according to officials, there is a lower risk associated with nuclear materials than there is with nuclear power plants. There are no resident inspectors at these facilities; instead, the frequency of inspections for nuclear materials is based on the risk associated with, among other things, the specific material and each facility’s past performance. Sites with past issues will receive more attention, while sites with a history of good performance will generally be subject to the minimum frequency of inspections applicable to that type of site. In contrast, as part of its Reactor Oversight Process, NRC places at least two resident inspectors at each of the country’s commercial nuclear power plants because they pose a higher risk. For nuclear power plants, potential incidents can have high-consequences and far-reaching effects, such as the effects of the 2011 nuclear accident at the Fukushima Daiichi reactor in Japan. To ensure that each nuclear power plant is complying with federal safety requirements, these inspectors oversee a variety of activities on a daily basis, including by visiting control rooms, reviewing logbooks, performing visual assessments, and observing tests and repairs. Other countries have adopted various approaches to help ensure they have access to individuals with the appropriate expertise to perform sound safety and security assessments. According to officials in Great Britain, regulators at the Health and Safety Executive have access to external expert advisory committees to advise on issues related to new or emerging pathogens, diseases, or other scientific issues that inspectors may encounter during inspections or when developing policy. Health and Safety Executive officials noted that they generally go to the committees with questions of science and not regulation, as the inspectors are expected to be experts in biological safety and Great Britain regulations. Both France and Germany also have expert advisory committees that regulators can consult on scientific and technical issues, according to officials from these countries. Merging Oversight of Human and Animal Pathogens in Great Britain and Canada Great Britain merged the inspection and oversight responsibilities for human and animal pathogens into one oversight body, the Health and Safety Executive, in 2008, following the 2007 accidental release of foot and mouth disease into the environment. Oversight of animal pathogens was originally under the United Kingdom’s Department for Environment, Food, and Rural Affairs (DEFRA). When oversight of animal pathogens was first transferred to the Health and Safety Executive, DEFRA initially retained the licensing of sites with animal pathogens. In 2015, DEFRA transferred all oversight responsibilities, including licensing, to the Health and Safety Executive, but retained responsibilities for policy matters. According to agency officials and laboratory representatives in Great Britain, this change had a number of benefits, including creating a single agency contact for laboratories that work with regulated pathogens, strengthening the oversight of animal pathogens, and improving the logistics and ease of the system. Similarly, in 2013, Canada transferred the oversight responsibility for a subset of animal pathogens from the Canadian Food Inspection Agency (CFIA) to the Public Health Agency of Canada to strengthen and harmonize its biological safety oversight framework and reduce the regulatory and administrative burden on researchers and laboratory officials. CFIA continues to issue permits for other animal pathogens, such as emerging animal diseases, which, according to officials, only make up a small number of pathogens. Officials from the Public Health Agency of Canada noted that they address the issue of technical expertise in part by placing substantial responsibility on the scientists and other personnel in each laboratory to understand and address the risks associated with their specific work, such as the equipment and procedures used in that laboratory. Officials from the Public Health Agency of Canada noted that personnel working in licensed laboratories are the ones most at risk if a safety lapse or other incident occurs, so the agency expects the responsible individuals at the laboratories to reinforce the requirements and help ensure everyone works safely and is in compliance with requirements. Under this approach, the main responsibility is with the laboratory officials to understand and manage the risks inherent in the work being performed at their facility, while the role of the inspector is to verify that they have taken appropriate steps to identify and address the risks. According to officials in the Netherlands, regulators place responsibility for laboratory biological safety on biological safety officers at each of the laboratories by accrediting them for the oversight of biological safety. Regulators conduct the accreditation process, which includes a review of personnel credentials, before individuals can be accredited. A 2-day course on the laws—such as details of biological safety requirements, case studies, review of transportation rules, and incident examples—is offered to each new accredited biological safety officer. Biological safety officers usually first seek accreditation for the equivalent of U.S. BSL-1 or -2 laboratories and must request additional reviews to receive accreditation for higher levels after acquiring the requisite knowledge and applied laboratory experience for the levels for which they are requesting accreditation. Officials from the Netherlands noted that it is important to have biological safety officers in laboratories as these individuals are versed in biological safety and can convey to researchers what they should be doing to ensure safety, as the regulator cannot be on-site every day. Some countries and regulatory sectors have approaches that provide transparency to entities and the public in a number of ways. For example, in Great Britain, the Health and Safety Executive shares information on licensing, enforcement actions, and prosecutions, among other information, through its website and the public register. Health and Safety Executive officials noted that the agency also issues information to licensed laboratories when there are safety alerts, lessons learned, or key decisions that it feels are pertinent to the regulated community. However, officials limit the sharing of any information that is sensitive or has security concerns, such as the names of individuals cleared to work with pathogens, which poses additional security concerns. Regulators in the Netherlands stated that they are also authorized to share a great deal of information related to some regulated pathogens, such as laboratory risk assessments, with the public and individuals who request the information. Similarly, in Switzerland, the public can request some information about laboratory licenses and the types of activities that occur at laboratories, but regulators do not share information on laboratory exposures because, according to a Swiss official, the public is not generally affected by them so the officials do not feel a need to share such information. NRC shares safety-related information on nuclear facilities with the public, including by posting the locations of nuclear facilities, inspection reports, and policies on its website. According to NRC officials, NRC believes transparency is important because, otherwise, secrecy can lead to distrust and negatively affect NRC’s relationship with industry and the public. In addition, NRC has written policies available on its website that detail what information it shares with registered facilities and the public, as well as guidance for NRC staff on what they can and cannot share. NRC officials stated that NRC strives for a balance between openness and security and that, because the nuclear sector’s needs and the public’s concerns are constantly changing, it is important to reassess policies as the necessity arises. For example, after the September 11, 2001, terrorist attacks, NRC decided to remove some information from the public sphere in response to concerns that such information could be misused and exploited for future terrorist attacks. The Federal Aviation Administration also shares information with the public through its Aviation Safety Information Analysis and Sharing System, which collects information from multiple databases, including voluntarily reported near-miss data and accident information. This system is intended to promote an open exchange of safety information to continuously improve aviation safety, and it allows users to perform integrated queries, search safety data, and review incident investigations conducted by the National Transportation Safety Board. For example, analysts from the Federal Aviation Administration analyzed data from the Aviation Safety Information Analysis and Sharing System to determine which weather-related factors posed the biggest threats to pilots and aircraft. In addition, the Federal Aviation Administration provides public access to a library of lessons learned from historically significant, policy- shaping accidents to share key knowledge across the industry to improve aviation safety through the application of such lessons and to understand how the current safety regime has been influenced by past accidents. For example, the library discusses how two similar high-terrain crashes in the 1990s led to a requirement in 2000 to install a warning system in aircraft to reduce the incidence of such terrain accidents. Countries and regulatory sectors we reviewed employ a range of mechanisms to take enforcement actions against entities or to encourage incident reporting. For example, Great Britain, Canada, France, and Switzerland all have the ability to pursue criminal prosecution in response to serious violations of their laws or regulations governing high- containment laboratories, in addition to the ability to suspend work or shut down laboratories. In Canada, penalties for the most serious violations can include up to 10 years in prison. Officials from the Public Health Agency of Canada and representatives from laboratories we spoke with noted that laboratory personnel are still encouraged to report incidents in laboratories, such as laboratory-acquired infections, regardless of the potentially heavy penalties, because certain information that is voluntarily provided during the course of an incident cannot then be used in any subsequent criminal proceedings against that individual. In addition, experts from our meeting noted that the nonpunitive nature of airline reporting systems also encourages people to report incidents, which in turn provides valuable information to regulators, pilots, airlines, and the public that has been used to improve airline safety, as noted. In their joint management of the Select Agent Program, CDC and APHIS share a critical role in ensuring that important research on select agents can be conducted in high-containment laboratories in a safe and secure manner. This role is especially important given the significant risks that pathogens handled in high-containment laboratories may pose to laboratory workers and the public. The Select Agent Program has made a number of improvements over the past few years, such as hiring additional staff and sharing more information with the public and registered laboratories. Nevertheless, the program does not fully meet all key elements of effective oversight. For example, the program is not independent in that it is not structurally distinct and separate from all of the laboratories it oversees. Both CDC and APHIS have individually made structural changes and put mechanisms in place to reduce conflicts of interest, but the APHIS component of the program has not documented the reporting process it developed to reduce conflicts of interest. Until APHIS formally documents the reporting structure for its component of the program from the APHIS director of the program to the administrator of APHIS, it will continue to appear to have conflicts of interest in its oversight of APHIS-owned laboratories. Moreover, APHIS has, on at least three occasions, inspected its own or other USDA laboratories, which is not in keeping with the memorandum of understanding it signed with the CDC component of the program. Without establishing control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding, the Select Agent Program cannot have reasonable assurance that its key mechanism to reduce conflicts of interest is implemented. In addition, the program has not formally assessed all potential risks posed by its current structure and the effectiveness of its mechanisms to address those risks. For example, the program did not identify some areas that may present conflicts of interest, such as APHIS carrying out inspections of its own laboratories, and has not considered whether there may be additional areas of concern. Without (1) regularly assessing the potential risks posed by the program’s current structure and the effectiveness of its mechanisms to address them, such as by commissioning external reviews, and (2) taking actions as necessary to ensure any identified risks are addressed, the program may not be aware of or effectively mitigate impairments to its independence that could affect its ability to achieve its objectives. Further, regarding the ability to perform reviews, the program may not be targeting the highest-risk laboratory activities in its inspections and other oversight efforts. Without developing and implementing a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities, the program will not have assurance that it is effectively balancing the potential safety and security gains from its oversight efforts against the use of program resources and the effect on laboratories’ research. Moreover, the program is not fully transparent because it shares only limited information about lessons learned and other matters with registered laboratories, and there is no consensus about what additional information should be shared. Without determining what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the Select Agent Program to share with registered laboratories, the program may be missing opportunities to provide key information that ultimately could help improve biological safety and security. In addition, the program has not had clarity and consistency in its enforcement actions and is taking steps to address our past recommendation. Further, regarding technical expertise, the two components of the Select Agent Program have individually hired additional staff for the program and improved training to enhance expertise, but workforce and training gaps remain. Although the program has begun to take steps towards development of a joint strategic plan to collectively guide oversight efforts, it does not have a joint workforce plan. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program to better manage fragmentation by improving how it leverages resources to ensure all workforce and training needs are met; this assessment should be done in conjunction with the development of the strategic plan. Leveraging of resources is especially important given fiscal constraints and the uneven level of resources across the two components of the program. We are making 11 recommendations to the agencies that manage the Select Agent Program, including 6 to APHIS and 5 to CDC: To improve independence, the Administrator of APHIS should formally document the reporting structure for the APHIS component of the Select Agent Program from the APHIS director of the program to the Administrator of APHIS. (Recommendation 1) To improve independence, the CDC director of the Select Agent Program should work with APHIS to establish control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding. (Recommendation 2) To improve independence, the APHIS director of the Select Agent Program should work with CDC to establish control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding. (Recommendation 3) To improve independence, the CDC director of the Select Agent Program should regularly assess the potential risks posed by the program’s structure and the effectiveness of its mechanisms to address those risks, such as by commissioning external reviews, and take actions as necessary to ensure that any identified risks are addressed so that impairments to independence do not affect its ability to achieve its objectives. (Recommendation 4) To improve independence, the APHIS director of the Select Agent Program should regularly assess the potential risks posed by the program’s structure and the effectiveness of its mechanisms to address those risks, such as by commissioning external reviews, and take actions as necessary to ensure any identified risks are addressed so that impairments to independence do not affect its ability to achieve its objectives. (Recommendation 5) To improve the ability to perform reviews, the CDC director of the Select Agent Program should work with APHIS to develop and implement a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities. (Recommendation 6) To improve the ability to perform reviews, the APHIS director of the Select Agent Program should work with CDC to develop and implement a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities. (Recommendation 7) To improve transparency, the CDC director of the Select Agent Program should work with APHIS to determine what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the program to share with registered laboratories. (Recommendation 8) To improve transparency, the APHIS director of the Select Agent Program should work with CDC to determine what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the program to share with registered laboratories. (Recommendation 9) To improve technical expertise and overcome fragmentation, the CDC director of the Select Agent Program should work with APHIS to develop a joint workforce plan that assesses workforce and training needs for the program as a whole. This assessment should be done in conjunction with the development of the strategic plan. (Recommendation 10) To improve technical expertise and overcome fragmentation, the APHIS director of the Select Agent Program should work with CDC to develop a joint workforce plan that assesses workforce and training needs for the program as a whole. This assessment should be done in conjunction with the development of the strategic plan. (Recommendation 11) We provided a draft of this report for review and comment to DOD, HHS, the Department of Homeland Security, NRC, the Department of Transportation, and USDA. We also provided copies to officials from Great Britain, Canada, and the Netherlands, as well as experts who participated in our expert meeting at the National Academy of Sciences. HHS and USDA—the agencies to whose components our recommendations are directed—both provided written comments agreeing with all of our recommendations. These comments are reprinted in appendixes III and IV, respectively. In their comments, HHS and USDA provided additional information about steps they are taking, or planning to take, to improve their oversight of select agents and to address our recommendations. For example, HHS and USDA stated that the Select Agent Program will explore options to improve independence, including reexamining previous reviews and assessing the need for additional reviews to ensure potential risks posed by the program’s structure are adequately assessed and addressed. In addition, to improve the ability to perform reviews, HHS and USDA stated that the Select Agent Program is transitioning to a new secure information system that will allow the program to develop analytical tools and procedures to analyze risk- related data to improve the inspection process. Further, to enhance transparency, HHS and USDA said the program is exploring ways to disseminate information regarding common deficiencies identified during inspections. Finally, to improve technical expertise and overcome fragmentation, HHS and USDA said that the program has initiated contract support for development of a joint strategic plan that will include the assessment of workforce and training needs. HHS and USDA also provided technical comments, as did the Department of Homeland Security; officials from Great Britain, Canada, and the Netherlands; and a number of experts who participated in our expert meeting at the National Academy of Sciences. We incorporated these comments as appropriate. DOD, NRC, and the Department of Transportation did not comment on this report. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Secretaries of Agriculture, Defense, Health and Human Services, Homeland Security, and Transportation; the Chairman of NRC; the Director of CDC; the Administrator of APHIS; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Timothy M. Persons, Chief Scientist, at (202) 512-6412 or personst@gao.gov or John Neumann, Director, Natural Resources and Environment, at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This appendix describes the steps we took to confirm the applicability of five elements of effective oversight we have used in the past for our evaluation of the Federal Select Agent Program (Select Agent Program). We have used these key elements in the past for assessing the effectiveness of oversight in other areas where low probability adverse events can have significant and far-reaching effects. These elements are as follows: Independence: The organization conducting oversight should be structurally distinct and separate from the entities it oversees. Ability to perform reviews: The organization should have the access and working knowledge necessary to review compliance with requirements. Technical expertise: The organization should have sufficient staff with the expertise to perform sound safety and security assessments. Transparency: The organization should provide access to key information, as applicable, to those most affected by operations. Enforcement authority: The organization should have clear and sufficient authority to require that entities achieve compliance with requirements. We took several steps to confirm the applicability of these elements for our examination of the Select Agent Program. First, we discussed the applicability of the criteria with senior officials from both components of the Select Agent Program, within the Centers for Disease Control and Prevention (CDC) and the Animal and Plant Health Inspection Service (APHIS). Second, we discussed the elements with representatives from the American Society of Microbiology and American Biological Safety Association International, which were selected because of their focus on microbiology and biological safety, respectively. Finally, we discussed the elements with experts during our National Academy of Sciences meeting (see app. II for information on this meeting). The officials, representatives, and experts generally agreed that the five elements were appropriate for our examination of the Select Agent Program. We compared information from federal documents about the Select Agent Program’s oversight, interviews with laboratory representatives and agency officials, and our expert meeting against the five elements of effective oversight. Security Systems, University of Maryland Andrew Cottam, Ph.D., Head of the Microbiology and Biotechnology Unit, Health and Safety Executive, United Kingdom John Eakin, Principal Investigator, Air Data Research David Franz, DVM and Ph.D., Former Commander, United States Army Medical Research Institute for Infectious Diseases Gigi Kwik Gronvall, Ph.D., Senior Associate, Johns Hopkins Center for Health Marianne Heisz, Ph.D., Director, Office of Biosafety Programs and Planning, Public Health Agency of Canada Ruthanne Huising, Ph.D., Associate Professor, McGill University Gavin Huntley-Fenner, Ph.D., Principal Consultant, Huntley-Fenner Advisors Joseph Kanabrocki, Ph.D. and NRCM(SM), Associate Vice-President for Research Safety, Professor of Microbiology, University of Chicago Paul Keim, Ph.D., Regents Professor and Cowden Chair, Northern Arizona James LeDuc, Ph.D., Director, Galveston National Laboratory, University of Texas Medical Branch Carol Linden, Ph.D., Director, Office of Regulatory Science and Innovation, Food Allison MacFarlane, Ph.D., Professor and Director, Center for International Science and Technology Policy, George Washington University Brian O’Shea, Ph.D., Senior Biological Safety Officer, Battelle Memorial Institute Karlene Roberts, Ph.D., Professor Emeritus, Haas School of Business, University Jonathan Rosen, Principal Industrial Hygiene Safety and Health Consultant, AJ Rosen and Associates, LLC The comments of these experts generally represented the views of the experts themselves and not the agency, university, or company with which they are affiliated. The meeting with these experts was held at NAS in January 2017. To identify experts to participate in the meeting, we worked iteratively with NAS staff to identify and review biographical information and relevant qualifications of experts, as well as factors such as representation from academia, industry, and federal government and expertise in a range of areas. The Board on Life Sciences of NAS solicited nominations for the expert panel from its extensive contacts in laboratory safety, biological security, and other regulatory sectors, such as occupational safety and health, airline safety, food safety, and chemical safety. These contacts included current and former committee members, current and former members of the Board on Life Sciences, and select members of NAS. NAS received responses from approximately 45 nominees. From this initial list, NAS selected experts based on their knowledge and expertise in the above-mentioned areas as well as their ability to attend the meeting on the chosen dates and obtained our approval of its selections. In order to facilitate discussion among participants, NAS did not include any federal employees or contractors of the Select Agent Program. The final list of 18 experts was then evaluated for any conflicts of interest. A conflict of interest was considered to be any current or financial or other interest that might conflict with the service of an individual because it (1) could impair objectivity and (2) could create an unfair competitive advantage for any person or organization. The 18 experts were determined to be free of conflicts of interest, and the group as a whole was judged to have no inappropriate biases. We developed the session topics for the 2-day meeting based on our researchable objectives and issues that we identified in our audit work, including our analysis of agency documents and interviews with agency officials and representatives from registered laboratories. The meeting was recorded and transcribed to ensure that we accurately captured the experts’ statements, and we reviewed and analyzed the transcripts as a source of evidence. Although the expert meeting was not designed to reach formal consensus on the issues, a number of themes emerged from the group’s discussion to which there was general agreement. In addition to the individuals named above, Mary Denigan-Macauley (Assistant Director), Sushil Sharma (Assistant Director), Amy Bowser, William Carrigg, Marcia Crosse, Caitlin Dardenne, Shana Deitch, Karen Doran, Jack Melling, Cynthia Norris, Lesley Rinner, Sara Sullivan, Walter Vance, and Elizabeth Wood made key contributions to this report.", "summary": "Safety lapses continue to occur at some of the 276 laboratories in the United States that conduct research on select agents—such as Ebola virus or anthrax bacteria—that may cause serious or lethal infection in humans, animals, or plants, raising concerns about whether oversight is effective. GAO was asked to review the federal oversight approach for select agents and approaches from other countries or regulatory sectors. This report (1) evaluates the extent to which the Select Agent Program has elements of effective oversight and strategic planning documents to guide it, and (2) identifies approaches selected countries and regulatory sectors have used to promote effective oversight. GAO convened a meeting of experts with the help of the National Academy of Sciences to discuss oversight of select agents. GAO also reviewed relevant laws, regulations, and guidance, and interviewed officials from the Select Agent Program and laboratories it oversees. GAO also reviewed documents and interviewed officials from two countries and other U.S. sectors selected because they have alternate oversight approaches. The Federal Select Agent Program (Select Agent Program)—jointly managed by the Departments of Health and Human Services (HHS) and Agriculture (USDA)—oversees laboratories' handling of certain hazardous pathogens known as select agents, but the program does not fully meet all key elements of effective oversight, as illustrated in the following examples: GAO's past work identified independence as a key element of effective oversight. However, the Select Agent Program is not structurally independent from all laboratories it oversees, and it has not assessed risks posed by its current structure or the effectiveness of mechanisms it has to reduce organizational conflicts of interest. Without conducting such assessments and taking actions as needed to address risks, the program may not effectively mitigate impairments to its independence. Another key element of effective oversight is the ability to perform reviews. Some experts and laboratory representatives raised concerns that the program's reviews may not target the highest-risk activities, in part because it has not formally assessed which activities pose the highest risk. Without assessing the risk of activities it oversees and targeting its resources appropriately, the program cannot ensure it is balancing its resources against their impact. Technical expertise is another key element GAO identified in past work. The Select Agent Program has taken steps to hire additional expert staff and improve training, but workforce and training gaps remain. Moreover, the program does not have joint strategic planning documents to guide its oversight. Although it began taking steps to develop a joint strategic plan during GAO's review, the program is not developing workforce plans as part of this effort. GAO's past work has found that strategic workforce planning is an essential tool to help agencies align their workforces with their missions and develop long-term strategies for acquiring, developing, and retaining staff. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program leverage resources to ensure all workforce and training needs are met. Selected countries and regulatory sectors GAO reviewed promote effective oversight using approaches that differ from the U.S. Select Agent Program's approaches: In Great Britain, oversight of laboratories that work with pathogens is under an independent government agency focused on health and safety. In both Great Britain and Canada, regulators focus their oversight on (1) biological safety, due to safety incidents which provided the impetus for laboratory oversight in these countries; and (2) regulation of all potentially hazardous pathogens and activities in laboratories. GAO is making 11 recommendations for the Select Agent Program, including to (1) assess risks from its current structure and the effectiveness of its mechanisms to reduce conflicts of interest and address risks as needed, (2) assess the risk of activities it oversees and target reviews to high-risk activities, and (3) develop a joint workforce plan. HHS and USDA agreed with GAO's recommendations. or John Neumann at (202) 512-3841 or neumannj@gao.gov .", "document_type": "gao"}
{"report": "DOD uses two related but distinct terms to differentiate between individual service members’ time away from home versus unit deployments: Perstempo: The amount of time individual service members serve on official duty at a location or under circumstances that make it infeasible for them to spend off-duty time in the housing in which they reside including for deployment events, such as operations, exercises, and unit training, and non-deployment events, such as individual training and hospitalization. Operational tempo: The rate at which military units are involved in all military activities, including contingency operations, exercises, and training deployments. Operational deployments are one type of deployment event, but do not account for all of the time individuals spend away from home. As a result, individual perstempo is typically higher than operational tempo. The National Defense Authorization Act for Fiscal Year 2000 included a provision that required the Under Secretary of Defense for Personnel and Readiness to monitor the perstempo of the armed forces, and required DOD to manage the number of days its service members are deployed. Section 991 of title 10 defines “perstempo” as the amount of time members of the armed forces are engaged in their official duties at a location or under circumstances that make it infeasible for a member to spend off-duty time in the housing in which the member resides. The law establishes thresholds for deployment perstempo events—220 deployment perstempo days in a 365-day period and 400 deployment perstempo days in a 730-day period. The law also requires the Secretary of Defense or a delegated official to approve when service members exceed these thresholds, and requires DOD to establish a system for tracking and recording the number of deployment perstempo days for each member of the armed forces. Additionally, DOD obtained the statutory authority to pay service members an allowance for lengthy or numerous deployment perstempo events. Congress authorized DOD to waive the deployment perstempo thresholds and recordkeeping requirement, which in turn would prohibit the payment of high-deployment allowances, if the department found that the waiver is necessary in the interests of national security. See figure 1 for a timeline of these and additional congressional and DOD actions related to perstempo. In the aftermath of the September 11th attacks, the Deputy Secretary of Defense issued a memorandum that suspended the requirements to manage deployment days for service members and the payment of high- deployment allowances. As a matter of DOD policy, the memorandum did not suspend the recordkeeping requirement included in section 991 of title 10. In May 2001, the Under Secretary of Defense for Personnel and Readiness issued an instruction that described policy, responsibilities, procedures, and information requirements for reporting of active duty military personnel records, and this instruction included requirements for perstempo reporting. In 2009, the Under Secretary of Defense for Personnel and Readiness issued another instruction, DOD Instruction 1336.07, that was focused on the reporting of perstempo and the instruction identifies responsibilities, procedures, and information- reporting requirements for perstempo. In particular, DOD Instruction 1336.07 states that the: Under Secretary of Defense for Personnel and Readiness is responsible for providing overall policy guidance for DOD reporting of all perstempo events; Director of the Defense Human Resources Activity, through the Defense Manpower Data Center, is required to maintain a perstempo events database; Secretaries of the military departments are responsible for implementing these reporting requirements whenever service members participate in or are associated with a perstempo event or activity; and services must record all perstempo events, including deployment events such as operations, exercises, and unit training as well as non- deployment events such as individual training and hospitalization. In November 2013, the Under Secretary of Defense for Personnel and Readiness issued a memorandum conveying that the amount of time that a unit, detachment, or individual service member can be operationally deployed should be equal to or less than the amount of time not deployed. Operational deployments are one of the deployment perstempo events. The memorandum also requires the military services to register perstempo events. DOD’s stated intent in the memorandum was for commanders at every level to ensure that individual service members, regardless of unit assignment, are not repeatedly exposed to combat, do not experience disproportionate deployments, and do not spend extended periods of time away from home unless required by operational necessity. We have reported on perstempo and readiness in multiple prior reports. For example, in 1996 we reported on DOD’s actions to mitigate the impact of high perstempo, including efforts to create systems for measuring perstempo. We reported that DOD had not issued regulations for the long-term management of perstempo and had not directed the services to have policies that limit perstempo. Further, we reported that it was difficult for DOD to determine the amount of perstempo time for military personnel for multiple reasons, including that the services had different systems for tracking deployments. We recommended that DOD (1) issue guidance on managing perstempo that states whether each service should have a goal for the maximum perstempo time for personnel and (2) issue regulations defining the minimum perstempo data that each service must collect and maintain. DOD concurred with these recommendations and, as we noted earlier, the Under Secretary of Defense for Personnel and Readiness issued DOD Instruction 1336.5 in 2001 that described policy, responsibilities, procedures, and information requirements for perstempo reporting. However, our recommendation has not been fully implemented because DOD Instruction 1336.5 did not include guidance on managing perstempo that states whether each service should have a goal for the maximum perstempo time for personnel, as discussed later in the report. In 2007, we found that Army and Marine Corps perstempo data were incomplete and inaccurate due to a lack of quality controls. We recommended that the Office of the Under Secretary of Defense for Personnel and Readiness provide guidance that directs the Army and Marine Corps to develop quality control procedures for validating the accuracy of the perstempo data. DOD concurred with our recommendation and in 2009 issued DOD Instruction 1336.07; however, our recommendation has not been fully implemented because the instruction did not provide guidance that directs the Army and Marine Corps to develop quality control procedures for validating the accuracy of perstempo data, as discussed later in the report. Finally, our work has identified several challenges with readiness rebuilding due in part to the high pace of operations that drives up perstempo. In 2016, we reported that the global security environment will likely continue to require significant reliance on U.S. military forces to respond to a range of demands, and the military services have attributed low readiness levels to increasingly long and frequent deployments, reduced force structure, and continuing and emerging demands. We also reported that DOD implementation and oversight of department-wide readiness rebuilding efforts did not fully include key elements of sound planning. We recommended, among other things, that DOD and the services establish comprehensive readiness goals and strategies for implementing them, as well as associated metrics that can be used to evaluate whether readiness recovery efforts are achieving intended outcomes. DOD generally concurred with our recommendations and the department has taken some steps to improve the readiness of the military forces, but it has not yet taken steps to fully implement our recommendations. DOD, service, and SOCOM policies vary in identifying specific and measurable thresholds on perstempo for individual service members. DOD policy focuses on time away for deployment, which is a part of perstempo but does not encompass the full range of activities that can take service members away from home. Specifically, a 2013 memorandum from the Under Secretary of Defense for Personnel and Readiness states that individual service members should not be deployed longer than they are at their home station. However, the memorandum describes perstempo only in general terms—stating that individual service members should not serve extended periods of time away from their homestation unless required by operational necessity. An official in the Office of the Under Secretary of Defense for Personnel and Readiness acknowledged that the department has not defined DOD’s perstempo threshold—to encompass non-deployment events—in specific and measurable terms and has not directed the services to establish such perstempo thresholds. The Navy and SOCOM have established perstempo thresholds in their policies and clarified which types of perstempo events apply to their thresholds. While these policies vary slightly, both the Navy and SOCOM describe in their policies the need to balance the pace of operations with the quality of life of their service members. More specifically: Navy: In 2014, the Navy issued an instruction that includes a perstempo threshold that identifies the number of days that individual Navy service members may serve away from home. The Navy’s instruction established a threshold of 220 days in a 365-day period or 400 days in a 730-day period. The Navy’s instruction also identified that the threshold applies to all deployment perstempo events—which comprise operations, exercises, unit training, temporary duty, and homestation training. Special Operations Command: In 2016, SOCOM issued a policy memorandum that establishes a perstempo threshold that identifies the number of days that individual SOCOM service members may serve away from home. The policy memorandum established a perstempo threshold of 480 days in a 730-day period. SOCOM’s policy memorandum also clarified that the threshold applies to both deployment perstempo events (e.g., operational deployments and exercises) and non-deployment perstempo events (e.g., serving as a student or trainee at a school and performing administrative, guard, or detail duties in garrison at the service member’s permanent duty station). In contrast, the Army, the Air Force, and the Marine Corps are either not enforcing or have not established a specific and measurable perstempo threshold in their policies. Officials from these services told us that they focus on managing the impact of deployments consistent with the 2013 memorandum from the Under Secretary of Defense for Personnel and Readiness, but noted that the memorandum does not set specific perstempo limits. As a result, each service has taken a slightly different approach: Army: In 2015, the Army issued a regulation that identified the number of days that a service member may spend away from home; however, Army officials told us it is not being enforced. The regulation updated the Army’s policy to include a perstempo threshold. The regulation also defined the events that could be counted toward that threshold and included a provision for the Army to manage its personnel to that threshold. However, Army headquarters officials told us that the Army is not enforcing this perstempo threshold and that the Army only added these provisions to emphasize that collecting perstempo data was a priority. According to the Army regulation, the Secretary of the Army may suspend the applicability of this perstempo program in the interest of national security, but Army headquarters officials told us that the Secretary of the Army had not suspended the perstempo program and the officials could not provide any official action that suspended the requirement. Air Force: The Air Force does not have a specific and measurable perstempo threshold in policy. An Air Force personnel instruction states that the Air Force considers service members who spend more than 120 days on temporary duty to have a high perstempo. However, Air Force headquarters officials told us that this policy does not establish a threshold for the amount of time that Air Force personnel may serve away from their homestation and that the Air Force does not require units to manage the assignments of their personnel to ensure that they do not spend more than 120 days on temporary duty. Air Force headquarters officials told us that they did not think they needed to include thresholds for perstempo in Air Force policies expressed in specific, measurable terms because the Air Force relies on unit commanders to manage the perstempo of individual service members and they believed that a perstempo threshold would affect a small number of their service members. Marine Corps: The Marine Corps also does not have a specific and measurable perstempo threshold in its policy, but its policy accounts for perstempo time in determining individual service members’ eligibility for overseas deployments, among other things. For example, Marine Corps Order 1300.8 adjusts and delays the date that service members are scheduled to deploy overseas by the amount of perstempo time accrued for those service members. The Marine Corps also issued an administrative message directing unit commanders to manage the perstempo of individual service members. However, neither of these policies establishes a specific and measurable perstempo threshold. Marine Corps officials told us that it has studied the effects of high rates of perstempo on retention and told us that these studies have not provided the Marine Corps evidence that perstempo drives retention. The approach taken by the Army, the Air Force, and the Marine Corps— to focus primarily on deployments—reflects the focus placed on deployments in DOD’s policy but this approach omits perstempo events, such as training and exercises. Such activities can take service members away from home for long periods. For example, Air Force officials told us that F-16 pilots spend considerable amounts of time participating in multiple exercises every year that require them to spend significant time away from their homestation. Similarly, a 2011 study conducted by CNA found that perstempo was very high for service members in the III Marine Expeditionary Force in Okinawa and Hawaii because of the number of exercises in which those service members participated. In particular, the study found that service members in the III Marine Expeditionary Force participate in over 70 exercises and training events per year. Additionally, relying on unit commanders to monitor the perstempo of service members without providing specific and measurable guidance leaves it to the interpretation of unit commanders to define excessive time away. Standards for Internal Control in the Federal Government state that management should define objectives in specific and measurable terms to enable it to identify risks to achieving those objectives. The standards also state that specific terms are those that are fully and clearly set forth so they can be easily understood, and measurable terms are those that allow for the assessment of performance toward achieving objectives. As we reported in 2007, shortly after the September 11, 2001, attacks, DOD shifted its focus away from collecting and maintaining perstempo data and began focusing on collecting and maintaining data to track deployments related to major operations, which does not include the full range of perstempo events. DOD continued this focus on managing deployments versus perstempo in its issuance of the 2013 memorandum. Furthermore, even as it has continued to waive the statutory perstempo thresholds and cited the effect of the high pace of operations and training on service members, DOD has not taken action to focus attention on the management of perstempo thresholds within the services and DOD. As a result, the services have taken differing approaches, with the Army, the Air Force, and the Marine Corps having no specific and measurable thresholds. Through providing specific and measurable department-wide perstempo thresholds in DOD guidance or directing the services and SOCOM to establish and follow service-specific thresholds for its service members, DOD will be better able to judge whether service members are spending too much total time away from home and, if so, whether there have been any associated effects on military readiness. DOD does not have reliable perstempo data, which limits its ability to effectively monitor perstempo across the department. In part due to the incompleteness of the perstempo data, an official within the Office of the Under Secretary of Defense for Personnel and Readiness told us that the office cannot monitor perstempo even though section 136 of title 10 makes the office responsible for doing so. For example, a December 2017 Defense Manpower Data Center analysis indicated that perstempo data are missing records for at least 145,000 individuals that deployed in fiscal years 2014-2016. In addition, officials from the Office of Cost Assessment and Program Evaluation told us that they attempted to analyze the effects of high rates of perstempo on unit readiness in 2016 but that they were unable to draw conclusions from the analysis because, among other things, the perstempo data were incomplete. Officials explained that certain events were not captured in the perstempo data consistently, such as Army rotations to a combined training center. Senior service officials also told us that the analysis had limited usefulness due to unreliable data. Although data are incomplete, our analysis of available data indicates that tens of thousands of service personnel experienced high rates of perstempo in fiscal year 2016. Because the perstempo policies vary widely, we anchored our analysis to the 220 days in a 365-day period identified in the currently waived statutory threshold. Using that benchmark, we estimate that at least 51,000 service personnel spent more than 7 months away from their homestation in fiscal year 2016 (see table 1). Moreover, we believe these numbers may be far higher because our analysis is limited by incomplete perstempo data as stated above. Additionally, our estimate likely understates the number of servicemembers as we excluded records from our analysis because they were missing an end date in the data system for the perstempo event. Further, we found that the perstempo records we analyzed for fiscal years 2012 through 2016 were also missing other information, which limits the utility of the data for users and decision makers. For example, we found that 30 percent of perstempo records for fiscal years 2012 through 2016 were missing information that identifies the service member’s occupation, 14 percent were missing information that identifies the purpose of the perstempo event, and 8 percent were missing information that identifies the category of perstempo event. Incomplete and unreliable data have presented management problems, particularly for the Navy and SOCOM as they have sought to manage the perstempo of their service members. For example, a Naval Personnel Command official who oversees the Navy’s perstempo program told us that the 18,000 Navy personnel with more than 220 perstempo days in fiscal year 2016—that we estimated using Defense Manpower Data Center data—likely significantly understates the actual number of Navy personnel with high rates of perstempo. The official stated that the Navy’s data showed that more than 31,000 Navy service members were away from home more than 220 days in fiscal year 2016—a difference of about 13,000 personnel. Officials from the Navy and Defense Manpower Data Center were unable to explain the discrepancy. Moreover, Navy officials told us that the Navy oversees perstempo by requiring subordinate commands to obtain waivers when service members exceed 220 days in a year. However, the Navy had waivers for about 6,000 personnel in 2016, or only about one-fifth of the personnel the Navy’s own data indicated were gone more than 220 days. To address this, the Navy Personnel Command official told us that the Navy plans to establish an automated system to verify that Navy service members who have exceeded the Navy’s 220-day perstempo threshold have a waiver. In addition, a SOCOM headquarters official told us that the command does not have reliable perstempo data on its service members because of limitations in the command’s information technology system. As a result, SOCOM does not currently have the ability to determine whether its units are adhering to the SOCOM perstempo threshold. The official told us that SOCOM is working to address the problem with this information technology system. We previously reported on challenges DOD has had with collecting reliable perstempo data in 1996 and 2007. While the department has made some progress, the reliability of perstempo data has remained a persistent challenge for the department. In 1996, we reported that DOD could not measure the increase in time away from home because no department-wide data system existed to track it. DOD generally agreed with our findings and recommendations and indicated that it had taken, and would continue to take, initiatives to manage perstempo. In 2007, we reported that Army and Marine Corps perstempo data were inaccurate and incomplete because of the lack of quality controls. We recommended that the Under Secretary of Defense for Personnel and Readiness provide guidance directing the Army and Marine Corps to develop quality control procedures for validating the accuracy of the perstempo data they collect and report to the Defense Manpower Data Center. The department concurred with the recommendation and issued an instruction in 2009 that required the services to report perstempo data to the Defense Manpower Data Center. However, the Under Secretary of Defense for Personnel and Readiness has not fully implemented our recommendation because the instruction did not direct the Army and Marine Corps to develop quality control procedures for validating the accuracy of their perstempo data. The Standards for Internal Control in the Federal Government state that management should use quality information to achieve its objectives and that such information should be complete and accurate. The underlying reason that perstempo data are not reliable is that DOD has not emphasized the collection of complete and reliable perstempo data. Specifically, an official from the Office of the Under Secretary of Defense for Personnel and Readiness told us that the office last reviewed perstempo data in 2012 and, at that time, determined that these data were not fully reliable. The official also told us that to address this challenge the office reiterated the requirement that the services must collect perstempo data in its 2013 memorandum, but the memorandum did not emphasize that the perstempo data collected should be complete and reliable. Without taking steps to improve the quality of its perstempo data, DOD will be limited in its ability to assess the amount of time service members are serving away from home for all perstempo events and use that information to assist them in monitoring and gauging the stress on the force. In the years since 2001, senior DOD leaders have expressed concern about the impact of a high pace of military operations and the high pace has continued for portions of the force. DOD has taken steps to limit operational deployments for individual service members, but has been less focused on the impact of total time away from home on personnel, commonly called perstempo. Total time away from home includes the training and other activities that can take service members away from home for long periods. DOD has two primary and long-standing challenges in managing perstempo: setting clear policy and gathering reliable data. First, DOD has not established a perstempo policy with specific and measurable thresholds even as it has waived a statutory requirement that sets such thresholds. In the absence of clear and specific guidance, the Navy and SOCOM have set their own thresholds. By contrast, the Army set a threshold but does not enforce it and the limits for Air Force and Marine Corps service members are unclear. Unless DOD ensures that perstempo thresholds are established and followed across the department in specific and measurable terms, DOD will be unable to judge when individual service members are spending too much time away from home. Second, perstempo data are unreliable across the department—primarily because they are incomplete—but high perstempo is affecting tens of thousands of personnel. For example, available data indicate that at least 51,000 active duty personnel spent more than 7 months per year away from home in fiscal year 2016, and the number may be considerably higher. Incomplete perstempo data are a persistent problem that continues to hamper efforts to oversee the impact of time on duty away from home on individual service members. Until DOD and the military services take steps to emphasize the collection of complete and reliable perstempo data, DOD will be limited in its ability to oversee the time its personnel are spending away from home or gauge the stress on the force. We are making two recommendations to DOD. The Secretary of Defense should ensure that the Under Secretary of Defense for Personnel and Readiness, in conjunction with the Secretaries of the Army, the Navy, and the Air Force; the Commandant of the Marine Corps; and the Commanding General of SOCOM, clarify its guidance on perstempo thresholds as long as the statutory thresholds are waived by either establishing specific and measurable department-wide perstempo thresholds in DOD policy or ensuring that the Army, the Air Force, and the Marine Corps establish and follow their own service-specific guidance on thresholds. (Recommendation 1) The Secretary of Defense should ensure that the Under Secretary of Defense for Personnel and Readiness, in conjunction with the Secretaries of the Army, the Navy, and the Air Force; the Commandant of the Marine Corps; and the Commanding General of SOCOM, take steps to emphasize the collection of complete and reliable perstempo data so that DOD, the services, and SOCOM can monitor perstempo. (Recommendation 2) We provided a draft of this report to DOD for review and comment. In written comments, DOD concurred with our two recommendations. DOD separately provided technical comments, which we incorporated as appropriate. DOD’s written comments are reprinted in their entirety in appendix I. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Under Secretary of Defense for Personnel and Readiness; the Secretaries of the Air Force, the Army, and the Navy; the Commandant of the Marine Corps; and the Commanding General of SOCOM. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix II. John H. Pendleton, (202) 512-3489 or pendletonj@gao.gov. In addition to the contact named above, Patricia Lentini, Assistant Director; Suellen Foth; Mae Jones; James P. Klein; Amie Lesser; Ricardo Marquez; Shari Nikoo; Joshua Parr; and Michael Silver made key contributions to this report. Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Affecting the Fleet. GAO-17-809T. Washington D.C.: September 19, 2017. Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet. GAO-17-798T. Washington, D.C.: September 7, 2017. Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-841. Washington, D.C.: September 19, 2016. Special Operations Forces: Opportunities Exist to Improve Transparency of Funding and Assess Potential to Lessen Some Deployments. GAO-15-571. Washington, D.C.: July 16, 2015. Military Personnel: DOD Lacks Reliable Perstempo Data and Needs Quality Controls to Improve Data Accuracy. GAO-07-780. Washington, D.C.: July 17, 2007. Military Readiness: A Clear Policy Is Needed to Guide Management of Frequently Deployed Units. NSIAD-96-105. Washington, D.C.: April 8, 1996.", "summary": "In 1999, Congress required DOD to monitor the time that individual service members spend away from home and set a threshold to limit excessive time away. At the time, the threshold was no more than 220 days served away from home in a 365-day period. In the interest of national security, in 2001 DOD exercised a provision in the law and waived the requirement to limit time away for service members. Recently, DOD leaders have stated that the continued high pace of military operations have limited their ability to rebuild readiness. Senate Report 114-255 includes a provision for GAO to review the root causes of degraded readiness, including reviewing DOD's management of perstempo. This report assesses the extent to which DOD, the services, and SOCOM have (1) policies with specific and measurable thresholds on perstempo and (2) reliable data to monitor perstempo. GAO analyzed DOD, service, and SOCOM perstempo policies and analyzed DOD-wide perstempo data for fiscal years 2012-2016. The Department of Defense (DOD), military service, and U.S. Special Operations Command (SOCOM) policies vary in identifying specific and measurable thresholds on the total time individual service members can be away from home, known as personnel tempo or “perstempo.” DOD's policy issued in 2013 states that service members should not be deployed for longer than they are at home. However, the policy does not set thresholds for perstempo, which includes time away from home for exercises and training in addition to deployment. Service members are sometimes away from home for long periods for training, exercises, or other activities. For example, Air Force officials told GAO that F-16 pilots participate in multiple exercises every year that require them to spend significant time away from home. The Navy and SOCOM set specific and measurable perstempo thresholds in policy in 2014 and 2016, respectively. However, the other services either are not enforcing or have not established specific and measurable perstempo thresholds in their policies. DOD has maintained the waiver of statutory perstempo thresholds since 2001, and officials have cited the effect of the high pace of operations and training on service members; however, DOD has not taken action to focus attention on the management of perstempo thresholds within the services and department-wide. Unless DOD ensures that perstempo thresholds are established and followed while statutory thresholds are waived, DOD will be unable to judge whether service members are spending too much total time away from home and, if so, whether this has resulted in any associated effects on military readiness. DOD does not have reliable data to monitor perstempo because the data are incomplete. Based on available DOD-wide data, GAO estimated that for fiscal year 2016 at least 51,000 service personnel spent more than 7 months away from home. However, that number is conservative because the analysis is limited by incomplete data. Specifically: DOD analysis shows that perstempo records are missing for at least 145,000 personnel who deployed in fiscal years 2014-2016. For fiscal years 2012-2016, 30 percent of DOD's perstempo records were missing information that identifies service members' occupations, 14 percent were missing information that identifies the purpose of the perstempo events, and 8 percent were missing information that identifies the category of perstempo events. The Navy identified about 13,000 personnel who spent more than 220 days away from home in fiscal year 2016 but were not accounted for in the DOD-wide data, and DOD officials could not explain why they were missing. Without taking steps to emphasize the collection of complete and reliable perstempo data, DOD will be limited in its ability to assess the amount of time service members are serving away from home for all perstempo events and in its ability to use that information to assist in gauging the stress on the force. GAO recommends that DOD (1) clarify its policy to include specific and measurable department-wide perstempo thresholds for use while statutory thresholds are waived or ensure service-level policies are established and followed, and (2) take steps to emphasize the collection of complete and reliable perstempo data. DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "CFIUS was established by executive order in 1975 to monitor the effect of and to coordinate U.S. policy on foreign investment in the United States. In 1988, Congress enacted the Exon-Florio amendment adding section 721 to the Defense Production Act of 1950, which authorized the President to investigate the effect of certain foreign acquisitions of U.S. companies on national security and to suspend or prohibit acquisitions that might threaten to impair national security. The President delegated this investigative authority to CFIUS. The Foreign Investment and National Security Act of 2007 further amended the Defense Production Act and formally established CFIUS in statute. CFIUS is responsible for reviewing and investigating covered transactions to determine the effects of the transaction on national security. The Foreign Investment and National Security Act of 2007 does not formally define national security, but provides a number of factors for consideration by CFIUS and the President in determining whether a covered transaction poses a national security risk. These factors include the potential national security effects on U.S. critical technologies and whether the transaction could result in the control of a U.S. business by a foreign government (for a full list of factors, see Appendix III). CFIUS may also consider other factors in determining whether a transaction poses a national security risk. Chaired by the Secretary of the Treasury, CFIUS includes voting members from the Departments of Commerce, Defense, Energy, State, Justice, and Homeland Security; the Office of the U.S. Trade Representative; and the Office of Science and Technology Policy. Treasury is responsible for a number of tasks. According to Treasury officials, these tasks include coordinating operations of the committee, facilitating information collection from parties involved in the transaction (such as a foreign acquirer and U.S. business owner involved in an acquisition), reviewing and sharing data on mergers and acquisitions with member agencies, and managing CFIUS time frames. Treasury also communicates with the parties on CFIUS’s behalf. The committee generally has three core functions: review and investigate transactions that have been voluntarily submitted—or notified—to the committee by the parties to the transaction and take action as necessary to address potential national security concerns; monitor and enforce compliance with mitigation agreements; and identify transactions of concern that have not been voluntarily notified to CFIUS for review, referred to in this report as non-notified transactions. The Foreign Investment and National Security Act of 2007 does not require that parties notify CFIUS of a transaction. In examining covered transactions, CFIUS members seek to identify and address, as appropriate, any national security concerns that arise as a result of the transaction. CFIUS reviews notices that have been voluntarily submitted—or notified—to the committee by parties to potentially covered transactions. Notices to CFIUS contain information concerning the nature of the transaction and the parties involved, such as the business activities performed by the U.S. business and any products or services supplied to the U.S. government. After receiving a notice, Treasury drafts an analysis to assess whether the transaction submitted is a covered transaction, meaning whether the transaction could result in foreign control of a U.S. business. With limited exceptions, a transaction receives safe harbor—meaning the transaction cannot be reviewed again—when the CFIUS process is completed and the committee has determined that the transaction may proceed. CFIUS does not review every transaction or investment by foreign entities. According to Treasury officials, there are certain transactions by foreign entities that CFIUS does not have the authority to review. These non-covered transactions and investments include the establishment of a business, referred to as a greenfield investment, and acquisitions of assets—such as equipment, intellectual property, or real property—if such assets do not constitute a U.S. business. If CFIUS member agencies become aware of a transaction that might be covered that has not been voluntarily notified to the committee and may raise national security considerations, CFIUS may invite the parties to the transaction to submit a notice. CFIUS may choose to unilaterally review any transaction that could be covered. Treasury, DOD, and several other member agencies have processes for identifying non-notified transactions for CFIUS to potentially review. The CFIUS process for examining transactions that have been notified to the committee is comprised of up to four stages: national security review (30 days), national security investigation (45 days), and presidential action. In some cases, before a transaction is accepted and reviewed by CFIUS, Treasury may conduct a pre-notice consultation with parties to a transaction. This is not a required part of the process. For the purposes of this review, we focus on three stages—the national security review, national security investigation, and presidential action. For each transaction accepted and reviewed by CFIUS, an agency or agencies with relevant expertise are identified to act as a co-lead with Treasury. Each agency in turn distributes the transaction to various offices within its agency to provide an assessment of the transaction and identify national security risks, which is then provided to CFIUS. For example, the committee may reach consensus that no investigation is required if it is determined that the covered transaction will not impair national security or that the national security concerns are addressed under existing authorities, such as export controls. If these conclusions are reached, the national security review ends, and the transaction proceeds. However, if, for example, an agency identifies an unresolved national security risk, the agency may draft a risk-based analysis and CFIUS may undertake a national security investigation. If during the investigation the committee members reach consensus that a national security risk exists, but the risks can be mitigated, mitigation agreement measures are drafted to address those risks, and these measures are negotiated with the other members of the committee and the parties to the transaction. The CFIUS process may conclude after consensus is reached by all agencies and the co-lead agencies certify to members of Congress that there are no unresolved national security concerns, and the transaction receives safe harbor. At the end of the national security investigation, if the committee does not reach consensus that there are no unresolved national security concerns or the committee concludes by consensus that a foreign investment threatens to impair national security and the threat cannot be mitigated, CFIUS elevates the transaction to the President. The President may prohibit or suspend the transaction. At any point prior to the conclusion of the process, parties may request to withdraw from the CFIUS process. In some cases, the notice is resubmitted once the parties believe that they have addressed the committee’s concerns; in other cases, the companies may choose to withdraw and abandon their transaction. See figure 1 for an overview of the CFIUS process for reviewing and investigating selected transactions. DOD Instruction 2000.25, Procedures for Reviewing and Monitoring Transactions Filed with the Committee on Foreign Investment in the United States (DOD’s Instruction), provides policy and guidance on the DOD CFIUS process and assigns responsibilities in that process. In March 2011, DOD’s CFIUS responsibilities were reassigned from the Defense Technology Security Administration to the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (OUSD (AT&L)). The transfer of responsibilities, effective in fiscal year 2012, was intended to better align CFIUS’s mission with the DOD office responsible for industrial policy. Within OUSD (AT&L), MIBP serves as the lead office for CFIUS, reviews transactions for DOD equities, and distributes them to more than 30 organizations within DOD—referred to in this report as DOD components —to determine whether the transaction poses any national security concerns. These component reviewers include organizations within the Office of the Secretary of Defense, as well as the military departments, among others. For a full list of DOD component reviewers, see appendix I. According to MIBP’s processes, it is responsible for reviewing and compiling comments and input from all DOD component reviewers during the 30-day national security review. When national security concerns with a transaction are identified, MIBP is to coordinate with affected DOD component reviewers to clarify issues and arrive at consensus on the DOD position for the transaction. DOD is typically designated as a co- lead agency for transactions where it has identified equities—such as transactions involving companies that are DOD suppliers—or other potential national security concerns. If no national security concerns are identified by DOD, MIBP will recommend that the transaction proceed. However, if national security concerns are identified by DOD and the committee requires additional time to complete its review, DOD recommends that the transaction proceed to a 45-day national security investigation period. During this period, MIBP coordinates with DOD component reviewers to draft and deliver a risk-based analysis to Treasury within the statutory investigation time frame. The assessment provides a description of the risk—in terms of threat, vulnerability, and consequence—arising from the covered transaction. If the risks can be addressed, DOD develops measures to be included in the mitigation agreement that it is then responsible for monitoring and enforcing as a signatory agency to the mitigation agreement. DOD guidance identifies three basic types of mitigation measures: 1. Technical mitigation measures, which seek to address risks related to vulnerabilities or critical assets with sensitive source codes, cutting- edge technologies, and communications infrastructure. 2. Personnel mitigation measures, which seek to address risks arising from foreign personnel having access to sensitive technology or other critical assets. 3. Management control mitigation measures, which seek to oversee companies’ ongoing implementation of mitigation agreements related to technical or personnel mitigation measures. DOD, along with other lead agencies, carries out its monitoring responsibilities on behalf of the committee and reports back to the committee on the status of their responsibilities and company compliance on at least a quarterly basis. DOD’s Instruction requires the identification of feasible measures to mitigate or eliminate the risks posed by a transaction and emphasizes that adequate resources, in terms of personnel and budget, should be provided to DOD and the components for monitoring and ensuring compliance with mitigation agreements. We have conducted prior work related to CFIUS issues, including whether CFIUS has the resources to address its current workload and whether CFIUS is able to address national security concerns related to the proximity of certain real estate transactions to defense test and training ranges. In February 2018, we reported on CFIUS workload and staffing as well as stakeholder perspectives on potential changes to CFIUS. We found that as the volume and complexity of CFIUS reviews have increased in recent years, member agency officials have expressed concerns that current CFIUS staffing levels may not be adequate to complete core functions of the committee. We recommended that Treasury should coordinate member agencies’ efforts to better understand the staffing levels needed to address the current and projected CFIUS workload associated with core committee functions. Treasury agreed with our recommendation. In December 2014, in reviewing DOD’s assessment of foreign encroachment risks on federally managed land, we found that DOD did not have the information it needed to determine whether activities by foreign entities near test and training ranges, such as performing certain sensitive training techniques, could pose a threat to its mission. We also reported that CFIUS is the only formal option in regard to transactions involving foreign companies or entities that accounts for national security concerns related to proximity to military test and training ranges. We recommended that DOD develop and implement guidance for conducting an assessment of risks to test and training ranges from foreign encroachment. We also recommended that DOD collaborate with other federal agencies managing land and transactions adjacent to DOD’s test and training ranges to obtain additional information on transactions near these ranges. DOD agreed with our recommendations and has begun collecting data to identify locations the military services consider to be at risk from foreign encroachment and collaborating with federal land management agencies, as discussed later in the report. DOD has reviewed hundreds of transactions involving foreign acquirers and U.S. businesses since 2012, but faces several challenges in identifying and addressing national security concerns through the CFIUS process. These challenges are: (1) resources not aligned with an increasing workload; (2) some national security concerns not defined or addressed in DOD’s Instruction; (3) some investments that pose national security concerns not always able to be addressed through the CFIUS process; and (4) current component reviewer responsibilities and CFIUS processes not reflected in DOD’s Instruction. DOD faces challenges addressing an increasing CFIUS workload with its current resources. For example, we found that the number of DOD personnel with CFIUS responsibilities has not kept pace with the growing workload. The number of transactions CFIUS reviewed from 2012 through 2017 more than doubled, increasing from 114 transactions to 238 transactions. During that time, the number of transactions DOD was responsible for co-leading increased by about 57 percent, to 99 transactions in calendar year 2017. From 2016 through 2017 alone, these increases resulted in DOD reviewing almost 65 additional transactions, and co-leading about 30 additional transactions, a substantial increase in workload in one year. DOD also experienced an increase in the cumulative number of mitigation agreements it was responsible for monitoring, more than doubling from 39 in 2012 to 84 in 2017. Figure 2 provides additional information on DOD’s workload and authorized positions in MIBP—the lead DOD office for CFIUS. Based on our review of data on transactions reviewed by CFIUS, DOD’s workload has also been affected by the volume and amount of time spent on the transactions it has reviewed. We found almost half of DOD’s co-led transactions from 2015 through 2016—83 of 136 transactions, or 61 percent—required 45-day national security investigations. According to Treasury officials, the number of transactions requiring national security investigations increases member agencies’ workload because these transactions are usually more complex and require additional resources to review. Further, 9 DOD co-led transactions from 2015 through 2016 were withdrawn and resubmitted to CFIUS, and another 7 were withdrawn and abandoned because of national security concerns or because the committee was going to recommend that the transaction be prohibited. MIBP officials told us that withdrawn and resubmitted or withdrawn and abandoned transactions indicate the complexity of their workload, because a significant number of hours are spent either reviewing resubmitted transactions or justifying the committee’s decision to prohibit the transactions. Moreover, MIBP officials said that depending on the scope and complexity of the national security concerns identified within a transaction, they have had to redirect resources from other functions to support their review responsibilities. As a result, the official said there have been instances where MIBP has had to shift priorities and delay performing other CFIUS tasks in order to assist with reviewing high priority transactions. In addition to reviewing transactions, as a co-lead agency, DOD is also responsible for negotiating any mitigation agreements or other conditions necessary to protect national security, and monitoring compliance with those agreements or conditions. However, according to DOD officials and documents we reviewed, there are limited resources within MIBP and at the DOD component level to do so. For example, MIBP officials said that the volume and complexity of mitigation agreements have increased their workload monitoring these agreements and strained their available resources. Specific details on the effect of mitigation agreement workload increases on MIBP’s resources have been omitted because that information is considered sensitive. In addition, MIBP officials stated that because mitigation agreements typically do not expire, the number of agreements MIBP will be responsible for monitoring will continue to increase in the future. For example, based on our review of MIBP mitigation agreement information, 6 transactions with active mitigation agreements that MIBP is monitoring have been in place for 10 years or more. We also found that MIBP has limited personnel available to identify transactions not voluntarily filed with CFIUS—non-notified transactions— that could pose national security concerns. In the absence of voluntary reporting by the parties involved or independent discovery of the transaction, it is possible that CFIUS may not review a non-notified covered transaction that could pose a risk to national security. To address this concern, MIBP officials began efforts to identify and research non- notified transactions in fiscal year 2016 and, at one point, had up to four personnel involved in this effort. However, according to MIBP officials, three of those personnel were reassigned to help conduct reviews of notified transactions, leaving one person responsible for identifying and researching non-notified transactions relevant to DOD. Specific details on the effect of limited personnel on MIBP’s ability to identify non-notified transactions have been omitted because the information is considered sensitive. To perform its CFIUS responsibilities, OUSD (AT&L) began receiving some funding for CFIUS in fiscal year 2014—on average about $2.4 million dollars a year. However, according to an MIBP official, the funding MIBP receives for CFIUS is typically received after other priorities within OUSD (AT&L) have been addressed. Further, OUSD (AT&L)’s funding does not include CFIUS responsibilities being performed by the other DOD components, which according to MIBP officials do not typically have their own resources for performing CFIUS responsibilities. Among the components we spoke with, the amount of time and personnel dedicated to CFIUS responsibilities varies greatly. According to these components, the amount of time and personnel reviewing transactions ranged from one person dedicating a few hours a month at one component, to a full-time responsibility for six personnel at another component. However, most of the components we spoke with said that CFIUS is a part-time responsibility, and only four of the nine components we spoke with had dedicated personnel to support CFIUS responsibilities. MIBP officials confirmed that the components often have limited personnel and funding to perform CFIUS responsibilities, which can affect the level of involvement components have in reviewing transactions, monitoring mitigation agreements, and researching the non-notified transactions. Recognizing the resource constraints posed by its increased workload, MIBP has taken some steps to assess and adjust its CFIUS resources. For example, MIBP received an increase in its authorized positions in fiscal years 2016 and 2017. Specifically, authorized positions increased from 12 to 17, and according to MIBP officials, 16 of the 17 positions were filled as of October 2017. In January 2017, MIBP requested that component reviewers estimate their CFIUS resource needs to address increases in CFIUS workload. According to an MIBP official, this information was used to support a fiscal year 2019 request for additional funding and personnel to perform CFIUS responsibilities department- wide, and for funding to further develop information technology solutions for managing DOD’s CFIUS process. However, MIBP officials told us their request was only partially funded by the department, and that MIBP would have to determine how to distribute the funding received across the various components to perform its CFIUS responsibilities. DOD’s Instruction states that DOD components shall ensure that adequate resources, in terms of personnel and budget, are available for statutorily required mitigation agreement monitoring and compliance activities. Moreover, federal internal control standards state an agency should establish the organizational structure necessary to achieve its objectives and periodically reevaluate this structure. In this case, this includes the resources needed to accomplish CFIUS responsibilities, such as monitoring mitigation agreements and identifying non-notified transactions. However, according to an MIBP official, prior increases in authorized positions were not added based on any formal review or analysis of resource needs or capability gaps. While MIBP has taken some steps to address its resource limitations, MIBP and some other DOD component officials we spoke with who have CFIUS responsibilities continue to face resource constraints to address their growing workload. Even after receiving approval for some additional funding across DOD to support CFIUS responsibilities, DOD’s resource limitations could be further exacerbated if the number of transactions continues to increase. Without a formal analysis to assess and prioritize the resources necessary for performing its current and future CFIUS responsibilities, DOD will likely face challenges carrying out the duties and responsibilities outlined in its CFIUS policy. In addition to keeping up with the workload involved in reviewing notified transactions, the risks include not knowing whether violations of mitigation agreements or non-notified transactions are occurring that could pose risks to national security. DOD faces evolving national security concerns from foreign investments in U.S. businesses developing emerging technologies and in proximity to critical military locations, but there are inconsistencies in how DOD is reviewing these investments. DOD’s Instruction identifies factors to assess relevant to DOD national security interests, such as whether a firm produces critical technologies or unique defense capabilities, or whether a company being acquired is part of DOD critical infrastructure that is essential to project, support, or sustain military forces. However, DOD’s Instruction does not address the extent to which emerging technologies and proximity to critical military locations are considered under these factors, or whether and how components should review and prioritize transactions for these concerns. Emerging Technology: Officials at several of the DOD components we spoke with identified challenges addressing concerns related to emerging technology, such as artificial intelligence and robotics, through the CFIUS process and varied as to whether they elevate concerns with transactions involving emerging technology. For example, officials at four components said that it can be difficult to explain the risks associated with foreign investment in U.S. businesses developing emerging technologies, particularly if the technology in question is not already being used in a defense program or not being acquired through a traditional merger or acquisition. Officials from another component noted that it can be difficult to identify vulnerabilities and explain the need to protect early stage technologies through the CFIUS process if the technology is not advanced enough. DOD’s Instruction defines critical technologies based in part on those items that are already subject to export controls, but does not specify the types of emerging technologies that could be of concern for the department. Officials at several components noted that it can be difficult for them to identify which emerging technologies are going to be important to DOD to know whether transactions should be mitigated or prohibited. DOD has several lists identifying critical technologies or assets, but does not have an agreed-upon list of emerging technologies that should be protected from foreign investment, making it difficult for components to know which emerging technologies are of concern to the department. A recent DOD report noted that having an agreed-upon list of critical technologies would provide clarity on which transactions reviewed by CFIUS should be prohibited or suspended. According to MIBP officials, they recently initiated a study to identify leading companies and technology areas critical to the department now and in the future. They intend for the study, planned to be completed in spring of 2018, to identify critical and emerging technology sectors and companies not currently included in the defense industrial base. According to DOD officials knowledgeable of the study, MIBP plans to use the results to work with the department’s Office of Small Business and others on ways to use internal DOD resources to protect emerging technologies and intellectual property that are critical to DOD before they are subject to foreign investment. However, officials did not state how the study would help them address emerging technology through CFIUS-related reviews or whether the results of the study would inform changes to DOD’s Instruction or otherwise be used to help guide components on which emerging technologies are critical to the department. Proximity: Each of the military departments varies in how it reviews transactions for proximity to critical military locations. According to DOD reports, transactions near certain military locations can present encroachment issues or opportunities for persistent surveillance and collection of sensitive information of training procedures or of the integration of certain technological capabilities into major weapon systems. When asked about how transactions are reviewed for proximity concerns, MIBP officials said they defer to the military departments to identify what constitutes a concern and do not limit proximity to certain locations. Moreover, MIBP officials stated that depending on the transaction, proximity concerns can arise regardless of distance to a critical location, and that the circumstances surrounding a transaction should be reviewed on a case-by-case basis to account for those concerns. Proximity is not defined in the current DOD Instruction or listed as a factor that the military departments should consider when reviewing transactions. Officials from two of the military departments we spoke with review every transaction on a case-by-case basis for proximity concerns. According to documentation from the third department, it limits its reviews to acquiring companies from certain countries and only assesses those transactions for proximity concerns if the target location is within a certain distance of designated critical locations or assets. These different approaches for reviewing transactions have resulted in inconsistencies among the military departments in the types of proximity concerns they elevate to CFIUS. For example, in one transaction, we found that officials from the third military department recognized a concern near a training range used by all three military departments. While the transaction was ultimately withdrawn because CFIUS planned to recommend that the President prohibit or suspend the transaction, the third department did not identify a national security risk because it did not meet its criteria. Officials from this military department stated that greater clarification on the types of proximity concerns DOD wants to elevate through the CFIUS process, as well as criteria that component reviewers should use to identify risks, would be helpful. Our prior work has identified challenges DOD faces in identifying risks to foreign encroachment near defense training ranges. In a December 2014 report, we recommended that DOD develop and implement guidance for assessing risks to certain test and training ranges from foreign encroachment based on mission criticalities and level of threat. According to DOD officials, they recently conducted a data call to the military departments to identify the locations that they consider to be at risk from foreign encroachment. DOD plans to use this information to develop guidance, not related to the CFIUS process, to assess the risks that test and training ranges face from foreign encroachment. Federal internal control standards state that agencies should clearly define objectives and risk tolerances; identify, analyze, and respond to risks, and communicate necessary information to achieve their objectives. DOD is taking steps to identify and assess areas of concern related to emerging technology and proximity, but these efforts are not specific to the CFIUS process and have not yet been completed or communicated to components through DOD’s Instruction, or otherwise. As a result, the components lack clear and consistent guidance on how to review transactions for these specific types of national security concerns facing the department. Without clarity on the types of transactions and national security risks that should be addressed, for example by incorporating the results of its efforts into DOD’s Instruction, component reviewers will likely continue to be inconsistent in reviewing transactions and identifying and prioritizing national security concerns. In addition to challenges identifying certain national security concerns within DOD, CFIUS officials at Treasury and DOD indicated that national security concerns for some foreign investments—such as those related to critical and emerging technologies and proximity to certain military locations—can arise that the committee does not have the authority to review. For example, pursuant to CFIUS regulations, the purchase of property that does not constitute a U.S. business by a foreign person or the licensing of emerging intellectual property to a foreign person are not covered transactions and therefore not addressed through the CFIUS process. As shown in figure 3, while some foreign investments that may result in national security concerns related to critical and emerging technology and proximity are addressed through the CFIUS process, others are not. According to DOD reports, CFIUS is one of the only tools able to address foreign investment in the United States, but is limited in its ability to address some investments in emerging technology and in proximity to military locations. Without the ability to address national security concerns arising from these investments, DOD is at risk of losing access to technologies, assets, and locations critical to maintaining and advancing U.S. technological superiority. A June 2017 DOD report found that although CFIUS is one of the only tools available to address technology transfers as a result of foreign investment, it is not effective at stopping technology transfer for investments that are not addressed through the CFIUS process, like certain joint ventures and other minority investments that do not result in foreign control. However, according to DOD documents and officials, these investments can result in technology transfers that threaten U.S. national security. For example, according to the DOD report, Chinese investors have been active in emerging technology sectors like artificial intelligence, augmented and virtual reality, and robotics, and Chinese investment in venture-backed start-ups is on the rise. The report also found that China’s continued foreign investment in critical emerging technology companies may have consequences for DOD’s ability to work with these companies in the future and its ability to maintain U.S. technological superiority. DOD officials cited concerns with their inability to address certain investments through the CFIUS process that can result in technology transfers or limit DOD access to emerging technologies. For example, DOD officials from three components cited instances when companies entered into joint ventures or other investment structures after withdrawing their transaction from the CFIUS process. A DOD official at one component cited a 2016 transaction where CFIUS planned to recommend that the President prohibit the transaction to prevent the transfer of a critical technology from a U.S. company to a foreign acquirer. Following the companies’ subsequent withdrawal from the CFIUS process, they entered into a joint venture. While CFIUS is aware of the joint venture and that it could result in the same transfer of technology CFIUS attempted to prevent by proposing to prohibit the original transaction, the committee has not yet determined whether it can be addressed through the CFIUS process because CFIUS is only able to review certain types of joint ventures. According to Treasury officials, when these circumstances arise they are sometimes able to review the joint venture, depending on the structure of the investment and whether it meets the definition of a covered transaction pursuant to law and associated regulations. Yet, even if this joint venture is ultimately reviewed as a covered transaction, the technology that DOD and CFIUS were originally concerned with may have already been transferred to the foreign acquirer. DOD and Treasury officials also identified concerns with broader foreign investment trends in critical and emerging technology that may not be addressed through the CFIUS process. For example, according to MIBP officials, they are concerned about foreign-owned enterprises exploiting critical technologies by structuring investments to avoid the CFIUS process, and noted that multiple investment structures exist that can allow foreign acquirers to gain access and influence over critical capabilities. DOD and Treasury officials acknowledged the importance of critical and emerging technologies and the consequences to DOD’s technological superiority if adversaries are able to use these technologies to advance their own military capabilities. According to Treasury officials, determining whether and how CFIUS should expand its scope to address these concerns is one of the challenges they have encountered when they have considered potential legislative changes to the CFIUS process. For example, they said that if the scope of the law was expanded, it could pose additional resource challenges, as CFIUS agencies would be required to review an expanded number of potentially complex transactions. According to federal internal control standards, agencies should identify, analyze, and respond to significant changes that could affect their operations. As noted earlier, DOD is in the process of identifying emerging technologies that will be essential to the defense industrial base, an important step towards informing future decision-making within the department. However, according to MIBP officials, the study will primarily be focused on identifying specific technology companies of importance to the department. As noted earlier, the study is not specific to CFIUS, and as a result plans for the study do not indicate that it will identify and assess other limitations facing MIBP, like those encountered addressing certain types of foreign investments that are not addressed through the CFIUS process but that pose risks to DOD’s technological and military superiority. Given the importance of critical and emerging technology to DOD, assessing any challenges DOD faces addressing certain foreign investments in critical and emerging technologies through the CFIUS process, and considering whether additional authority is needed, would better position DOD to address any unresolved national security concerns associated with these types of foreign investments. Without such an assessment, DOD remains at risk of not having the necessary tools and authorities to prevent the transfer of critical and emerging technologies to foreign acquirers, which is important for maintaining a viable defense industrial base and U.S. technological superiority. Some proximity concerns near critical military locations can be addressed by CFIUS, but DOD also identified challenges addressing proximity concerns with investments that are not able to be addressed through the CFIUS process. For example, the establishment of businesses (which may include land purchases) in the United States that do not include an existing U.S. business—referred to as greenfield investments—are not considered covered transactions, but can pose proximity concerns when near certain military locations. Officials at MIBP and several other components expressed concerns with their inability to address proximity concerns arising from these investments, which can pose significant national security risks and limit DOD’s ability to perform necessary test and training activities. We identified at least two greenfield investments that have occurred since 2016 that have posed proximity concerns near critical military locations, and were not able to be addressed through the CFIUS process. One investment involving a purchase of land presented risks due to its proximity to an Air Force base. According to DOD’s Report to Congress 2017 Sustainable Ranges, the investment involved a U.S. company with substantial foreign financing, potentially subjecting training range missions performed at the base to persistent monitoring by a foreign government. According to officials, although the Air Force identified concerns with the investment, because it did not result in foreign control of a U.S. business, it was determined to not be a covered transaction. Officials from another military department identified an investment that was not voluntarily filed with CFIUS and posed proximity issues near a training range. According to military department officials, the investment involved the same foreign acquirer that had been a source of concern in other voluntarily filed CFIUS transactions. The military department elevated its concerns to CFIUS through the non-notified process, but, according to officials, Treasury ultimately determined that it was not a covered transaction because there was no foreign control over a U.S. business. Moreover, because the investment was already completed, the company had started construction that threatened to encroach upon a training range that is one of only two in the country available to perform certain types of training. Military department officials said it was too soon to determine the effect that this investment would have on their ability to perform training, but emphasized the criticality of protecting unique testing and training range spaces. Our prior work on defense training ranges also identified limitations DOD faces in addressing proximity and encroachment concerns from foreign investment. For example, we found in 2014 that officials from the Navy and Air Force, in particular, had concerns about the number of investment-related projects by foreign entities near their ranges (such as leases for mining or oil or natural gas exploration), which could pose potential security risks. However, we reported that DOD does not have access to the information needed to determine whether foreign investment activities near testing and training ranges pose a threat because other civilian federal agencies, such as the Departments of Interior and Transportation, that are responsible for approving these transactions face legal, regulatory, or resource challenges that prevent them from collecting information unrelated to their missions. We found that, although DOD has had some success obtaining information on foreign investment near test and training ranges, these efforts have been based on informal coordination between military liaisons at certain bases and local Department of Interior representatives. In addition to our recommendation that DOD develop and implement guidance for assessing risks to certain test and training ranges from foreign encroachment, we recommended that DOD collaborate with these other federal agencies to gather additional information needed for transactions in proximity to DOD test and training ranges, and seek legislative relief if needed. DOD concurred with our recommendations and has taken some steps to address them. For example, as noted earlier, DOD is in the process of developing guidance to assess risks to test and training ranges based on its identification of locations it considers to be at risk from foreign encroachment. According to DOD officials, they have also drafted legislative proposals to address limitations to their ability to gather information from the land management agencies on foreign investments in proximity to critical military locations. According to DOD officials, these proposals have not been submitted to Congress due to concerns raised by the federal land management agencies, but DOD continues to explore the possibility of legislative action to address these concerns. We also reported that DOD uses multiple methods, in coordination with other federal agencies, to identify potential business activities near DOD test and training ranges. But CFIUS is the only formal option in regard to transactions involving foreign companies or entities that accounts for national security concerns. A 2015 DOD report to Congress on security risks related to foreign investment in the United States found that there are no authorities in the current federal land management framework that would require federal land management agencies to prevent a transaction from occurring if DOD identified a national security concern. The report further states that CFIUS and the Foreign Investment and National Security Act of 2007 are the only federal authorities available to DOD to assess national security risks posed by foreign investment in the vicinity of critical military locations, like DOD training and test ranges, but that the CFIUS process is not intended to address such national security risks. While CFIUS is able to address proximity concerns that arise through covered transactions, DOD has reported that it has limited ability to identify, assess, and mitigate national security concerns for investments that are not considered covered transactions through CFIUS, such as greenfield investments. However, DOD’s report does not identify, assess, or make recommendations about what additional DOD authority, if any, would be necessary to address these concerns, and as noted earlier, DOD’s efforts to develop and implement guidance based on its identification of locations that they consider to be at risk from foreign encroachment are still in progress. According to federal internal control standards, agencies should establish policies and procedures to respond to risks; and identify, analyze, and respond to significant changes that could affect their operations. DOD is in the process of identifying locations it considers to be at risk from foreign encroachment, which can eventually be used to inform its review of foreign investments for proximity concerns, but DOD states that it is currently unable to address concerns related to greenfield investments through the CFIUS process because they are not considered covered transactions. Moreover, DOD reported that CFIUS is not a DOD-led process, and DOD is just one of nine member agencies. Members of Congress have recently proposed legislation that would expand the definition of covered transactions to include foreign acquisitions or leases of real estate in proximity to U.S. military locations, but the legislation is pending. Taking additional steps to assess what authority, if any, is needed to address foreign investment in proximity to certain critical military locations and raising these concerns to Congress, as necessary, would better position DOD to address its concerns. Until DOD completes efforts to develop and implement guidance assessing risks to critical locations that should be protected from foreign encroachment, and assesses what authority, if any, is necessary to independently address concerns with investments near these areas, it remains at risk of not protecting these locations from the national security risks posed by foreign adversaries. Detailed location information is not always included in notices submitted to CFIUS, which can affect DOD’s ability to review transactions for their proximity to critical military locations. Some CFIUS transactions can involve numerous properties or locations, and information on the geographic coordinates of these locations is used by MIBP and the components when determining if there could be national security concerns with a transaction. Specific details on the use of geographic coordinates to identify whether a transaction may pose proximity concerns near critical military locations have been omitted because the information is sensitive. According to Treasury officials, DOD often requests geographic coordinates once a notice is submitted, and Treasury officials said they have attempted to gather more detailed location information as part of notices. However, officials at one military department said that while there have been improvements in the availability of this information in notices, there are still some companies that do not include the geographic coordinate information. Treasury officials stated that CFIUS has the authority to require this information from companies and has considered revising its regulations to require this information. However, Treasury has not yet done so. Federal internal control standards state that agencies should establish policies and procedures to respond to risk and use quality information to achieve its objectives. Requiring information on geographic coordinates for all target locations in notices submitted to CFIUS will improve DOD’s ability to more efficiently identify and address proximity concerns with covered transactions. DOD’s Instruction identifies CFIUS-related responsibilities and processes for reviewing transactions, but that policy has not been updated to reflect current component reviewer roles and responsibilities or processes for addressing non-notified transactions that may pose national security concerns for the department. The current DOD Instruction was issued in 2010—prior to the transfer of CFIUS responsibilities from the Defense Technology Security Administration to MIBP—but has not been updated to reflect the change. Moreover, the Instruction includes a list of the types of information components should provide to request a non-notified transaction be submitted to CFIUS for further action but has no guidance or expectations for whether or how components should identify and research them. In addition to DOD’s Instruction, which is the guiding policy for DOD’s CFIUS procedures, in June 2016, MIBP developed an internal process document describing its process for reviewing CFIUS transactions; developing and monitoring mitigation agreements; and identifying and reviewing non-notified transactions. While MIBP officials said the process document is based on the DOD Instruction and is more up-to-date, it is intended to be an internal reference document for MIBP employees and contractors, and it has not been distributed more broadly to the components involved in reviewing transactions for CFIUS. Moreover, the DOD Instruction does not reflect the department’s responsibilities for reviewing transactions. For example, MIBP’s internal process document identifies advisory and primary reviewers who are responsible for providing inputs on transactions. However, based on our review of the DOD Instruction, advisory and primary component responsibilities are not differentiated, and several of the advisory reviewers that are identified in MIBP’s internal process document are not listed as reviewers in the current Instruction. For example, according to DOD documentation and officials, the Assistant Secretary of Defense for Research and Engineering is an advisory reviewer for CFIUS cases and coordinates input from several other reviewers—including the Defense MicroElectronics Activity and Defense Advanced Research Projects Agency—to determine if a transaction involves a critical technology. However, the Assistant Secretary of Defense for Research and Engineering’s responsibilities for coordinating these inputs are not identified in the current DOD Instruction, nor is this office listed as a reviewer. Our review of DOD’s Instruction, internal guidance, and other documentation identified several other discrepancies between component responsibilities identified in the Instruction and what is occurring in practice. For example, the Under Secretary of Defense for Personnel and Readiness, among other things, coordinates with OUSD (AT&L) and the Director of Operational Test and Evaluation on the effects of encroachment on DOD test and training areas. While MIBP officials identified the Office of the Under Secretary of Defense for Personnel and Readiness as a CFIUS reviewer, this office is not identified as a reviewer in the DOD Instruction or internal MIBP process document. In addition to not having up-to-date information on reviewer roles and responsibilities, the DOD Instruction does not include guidance on how MIBP and the components should identify and research non-notified transactions that may pose national security concerns. As discussed above, because the CFIUS process is based on voluntary notices submitted by parties to transactions, DOD and Treasury officials stated that it is important to monitor foreign acquisitions of U.S. companies that are not filed with CFIUS to determine if any may present national security concerns. As shown in figure 4, there were approximately 1,680 mergers and acquisitions involving foreign acquisitions of U.S. companies in 2016. While not all foreign acquisitions of U.S companies pose national security concerns that would warrant them being reviewed by CFIUS, DOD officials acknowledged challenges with their ability to identify and research these transactions. Specific details on the challenges DOD faces identifying non-notified transactions have been omitted because the information is considered sensitive. In addition to challenges identifying non-notified transactions within MIBP, DOD component reviewers’ awareness of the non-notified transaction process varied across the components that we spoke with, and participation in this part of the process is ad hoc. For example, five of the nine components in our sample said they do not have processes in place to identify transactions that have not been voluntarily filed but present risks to national security that could warrant CFIUS review. Officials from four components we spoke with said they have identified non-notified transactions. However, officials from most other DOD components told us they either are not involved or occasionally review non-notified transactions once MIBP identifies them, and they do not proactively perform non-notified transaction research, in part due to resource constraints. Officials from some components were also uncertain about whether they should elevate some non-notified transactions of concern. For example, DOD’s Instruction does not explain when, pursuant to CFIUS regulations, joint ventures are covered transactions. It also does not explain that, even if a non-notified transaction has been completed—meaning a foreign acquirer has already finalized the purchase of a U.S. company—CFIUS can still recommend that the President suspend or prohibit the transaction. Officials from two components said that they are aware of completed joint ventures or other transactions that were of concern but not voluntarily filed, and that they did not elevate them. According to these officials, they assumed the joint ventures would not be covered or that there was nothing CFIUS could do to address their concerns. In May 2017, the MIBP official responsible for non-notified transactions began a DOD pilot working group for researching non-notified transactions. According to the official, the working group is intended to leverage component reviewer resources and involve them in performing research on non-notified transactions identified by MIBP. However, as of June 2017, participation in the group was limited to 5 of the more than 30 DOD component reviewers, and its processes for reviewing and distributing transactions are still evolving. While this action represents a positive step towards establishing and formalizing efforts to identify non- notified transactions, MIBP officials expressed concern that their ability to identify transactions that may pose risks is not as developed as they would like it to be. Specific details on MIBP’s ability to identify transactions that may pose risks have been omitted because the information is considered sensitive. In contrast to DOD’s limited non-notified guidance, the Department of Homeland Security, another member agency of CFIUS, has guidance for reviewing non-notified transactions in its Instruction for Department of Homeland Security Participation in the Committee on Foreign Investment in the United States. According to the Instruction, each week a digest of non-notified transactions is to be sent to Department of Homeland Security components for review, and selected components are required to provide any concerns with the transaction within 7 days. The Department of Homeland Security then determines whether to prepare a non-notified request to forward the transaction on to CFIUS so that the committee can determine whether the transaction merits further action. Federal internal control standards state that agencies should identify and document agency responsibilities and processes in policy, and periodically review and update policies based on changes. According to MIBP officials, they have been revising DOD’s Instruction for over 3 years, and recently began the formal department-wide review process. MIBP officials said they had not released updated guidance to reflect changes in responsibilities and processes sooner because of challenges with employee attrition and leadership changes, which have resulted in multiple rewrites. However, several components we spoke with referenced the need for updated or standardized guidance to inform their CFIUS review responsibilities and the development of their own component-level guidance. It has been over 5 years since MIBP was assigned responsibility for CFIUS, raising questions about the prioritization of CFIUS within the department. Without clear and updated guidance on reviewer responsibilities and established processes and guidance on the identification and review of non-notified transactions, DOD is at risk of inconsistencies in its review of transactions, and it may be unable to address non-notified transactions that pose national security concerns in a timely and efficient manner. As noted above, mitigation agreements address any threats to national security posed by a transaction. DOD is responsible for most of the CFIUS mitigation agreements, but faces a variety of challenges when taking action to mitigate national security concerns and ensure the effectiveness of the agreements. These challenges relate to insufficient personnel resources compared to MIBP’s workload, and unclear communication about the delineation of responsibilities between MIBP and the DOD components. Moreover, DOD has not reported to Congress on its responsibilities for monitoring and enforcing mitigation agreements. DOD is responsible for more mitigation agreements than other CFIUS member agencies, monitoring 84 of the total of 141 mitigation agreements for CFIUS, or about 60 percent as of the end of calendar year 2017. DOD’s responsibility for mitigation agreements more than doubled between 2012 and 2017. Figure 5 shows how DOD’s CFIUS mitigation agreement-related responsibilities have increased since 2000. We reviewed Treasury data on transactions from January 2015 through December 2016 to identify the types of national security concerns DOD mitigated through the CFIUS process. We found that the 22 mitigation agreements implemented by DOD during this period included acquisitions of U.S. companies in the aerospace, energy, real estate, and information technology industries, among others. Seventeen of these agreements were implemented to address either supply assurance—DOD’s access to certain products or services—or proximity issues. Based on the Committee on Foreign Investment in the United States Annual Report to Congress for Calendar Year 2015 and our review of DOD documentation, the mitigation measures that have been negotiated and adopted since 2015 may require the parties to the transaction to take actions such as: Ensuring that only authorized persons have access to certain technology and information; Appointing a U.S. government approved security officer; Providing annual reports and independent audits; Notifying security officers or relevant U.S. government parties in advance of foreign national visits to the U.S. business for approval; Providing written notification when additional assets are purchased; Providing written notification and obtaining CFIUS approval of other parties joining the joint venture; and Requiring supply assurance for products or services being provided to the government. Based on our review of a non-generalizable sample of nine mitigation agreements provided by one of the DOD component reviewers, mitigation agreements typically have more than one measure. For example, there were between 4 and 10 different measures in each agreement we reviewed, and in one agreement, one measure required the submission of more than 100 reports. While some of the mitigation measures require the parties to the agreement to take action and report to DOD, MIBP also monitors and enforces compliance with mitigation measures by conducting on-site compliance reviews and investigations if violations are discovered. If a company violates a mitigation agreement, CFIUS has the authority to impose penalties, although, according to Treasury and DOD officials, the committee has not taken action to enforce penalties for non-compliance with a mitigation agreement. CFIUS regulations state that any person who intentionally or through gross negligence violates a material provision of a mitigation agreement may be liable for a civil penalty not to exceed $250,000 per violation or the value of the transaction, whichever is greater. DOD officials and the Deputy Assistant Secretary for Investment Security at Treasury stated that the regulatory standard regarding taking action against a company that has violated a mitigation agreement is high. They noted it is difficult to prove that a company violated a mitigation agreement intentionally or through gross negligence, and that the national security effect may exist even if the cause of the violation is ordinary negligence. In October 2017, MIBP officials reported six instances since 2013 where companies were not in compliance with their mitigation agreements, but stated that none of these instances were the result of intentional or grossly negligent actions. They told us that DOD has not recommended that CFIUS take action to impose penalties in these cases. In general, according to Treasury and MIBP officials, CFIUS member agencies work with companies to establish a culture of compliance and correct violations of the mitigation agreements as opposed to imposing fines or penalties. MIBP and the DOD components face a variety of challenges, to include developing and monitoring mitigation agreements as a result of limited personnel resources compared to an increasing workload; and communicating about mitigation agreement responsibilities between DOD and the components. Some of the specific details on personnel resource challenges and communication between MIBP and the components have been omitted because the information is sensitive. In addition to resource challenges within MIBP, resources for mitigation agreement-related activities within the DOD components are also limited and can vary. Officials from at least one component stated that they are not involved in developing or monitoring mitigation agreements because they do not have the resources to do so. Further, citing concerns with DOD’s ability to effectively oversee mitigation agreements, officials from three DOD components stated that DOD should recommend prohibiting transactions more often than imposing mitigation agreements. For example, an official from one DOD component with CFIUS responsibilities stated that it is not plausible that these agreements can be properly executed because adversaries have the resources to conceal the fact that they are not complying with the mitigation agreement. Officials from another DOD component also expressed concerns with mitigation agreement enforcement, and stated that they were likely to recommend prohibiting transactions in the future instead of negotiating mitigation agreements in transactions where a national security risk has been identified. A June 2017 DOD report on technology transfer and emerging technology found that given concerns about the cost and effectiveness of mitigation agreements, if the mitigation agreements cannot be simple, CFIUS should recommend that the President suspend or prohibit the transaction. Similarly, officials at the Navy stated that mitigation measures are more effective if they can be fully implemented before the transaction is closed, as opposed to those that require ongoing monitoring. MIBP officials stated that if resource shortfalls continue, they run the risk of having to recommend that the President prohibit transactions because they are unable to implement or monitor additional mitigation agreements. To bolster available DOD resources for monitoring mitigation agreements, MIBP is in the process of expanding on a case-by-case basis its use of third-party monitors—private auditing and consulting firms approved by DOD and CFIUS but paid for by the foreign acquirer. In these instances, the acquirer is responsible for contracting with qualified third-party independent monitors, which MIBP officials stated they believe could result in cost savings to the government by reducing the resources it uses to respond to routine notifications and requests for approval. MIBP officials stated that this concept would allow MIBP to better extend control over the range of agreements by focusing on monitoring the third-party monitors. However, these officials also acknowledged that the use of third-party monitors can present an inherent conflict of interest by having foreign acquirers funding their own compliance and mitigation agreement monitoring. It is too soon to assess the effect of the expansion of third- party monitoring on improving MIBP’s ability to oversee compliance with mitigation agreements. In addition, we found that MIBP has not clearly communicated expectations and responsibilities for developing and monitoring mitigation agreements to some DOD components. This has led to confusion about what is expected of the components during this part of the process and raised uncertainty within the components we met with about the effectiveness of the mitigation agreements. For example, DOD’s Instruction requires components to identify, as applicable, mitigation agreement measures as part of their risk-based analysis and participate in monitoring the mitigation agreements in instances when they have identified a risk. However, officials from several DOD components said that they either do not include mitigation measures in their risk-based analysis or have been asked not to by MIBP. According to Treasury officials, the CFIUS process has been updated and the proposal of mitigation measures can occur before or during the development of an agency’s risk-based analysis, but this information is not reflected in DOD’s Instruction, and DOD officials could not identify whether or how this change in process had been communicated to the components. In addition, officials at one DOD component cited examples of unclear communication regarding their responsibilities for mitigation agreement documentation. For example, these officials told us they requested, but did not receive, documentation from MIBP to ensure compliance with four of the nine mitigation agreements it is responsible for monitoring. According to documentation from this component, it had not received approximately 110 of 133 documents and other reporting requirements that were necessary to determine whether the company was in compliance with the mitigation agreement. According to MIBP officials, they had received the required documentation from the company but did not share it with the component because they were not related to the mitigation agreement measures that the component was responsible for monitoring. As a result of this miscommunication, the component thought that it was responsible for reviewing the missing documentation. MIBP officials stated that they plan to expand and improve their capability to provide DOD components access to the necessary documentation in the future. Officials from MIBP and the component said MIBP currently maintains a shared drive where it stores mitigation agreement documentation, but not all components have access to this documentation. Additionally, while DOD’s Instruction states that DOD components that propose mitigation measures should participate in overseeing those measures, two of the nine components in our sample reported being actively involved in ensuring compliance with mitigation agreements or performing site visits. Two components have allocated several full-time personnel to the task and another has guidance that directs its involvement in CFIUS mitigation agreement monitoring. For example, Navy officials said they have established an office to review transactions that may pose proximity-related risks and monitor proximity-related mitigation agreements, but they have not been given the authority by MIBP to make a final determination regarding whether parties are in compliance with the agreements or to participate in all discussions with the parties. MIBP officials stated that they seek component input on all mitigation agreements, but that MIBP has taken the lead in developing and monitoring DOD mitigation agreements and ensuring compliance because the DOD components have not historically had the resources to dedicate to this responsibility. DOD’s Instruction identifies oversight and communication mechanisms that have not been implemented, but could assist the department in addressing challenges monitoring and ensuring compliance with its CFIUS mitigation agreements. For example, DOD’s Instruction establishes a CFIUS Monitoring Committee, made up of relevant DOD component reviewers, to serve as the focal point for DOD monitoring. Among other things, the CFIUS Monitoring Committee was intended to meet quarterly. DOD’s Instruction also calls for the development of a DOD CFIUS Strategic Mitigation Plan to include things such as: identification of strategic policy for mitigation and monitoring efforts, taking into account resource management and filing trends; identification of methods to substantiate and document company compliance with mitigation agreements and maintain records of that compliance; and annual analysis of past mitigation in order to determine if past approaches to monitoring and mitigation can be improved. However, according to MIBP officials, the CFIUS Monitoring Committee and the Strategic Mitigation Plan were not implemented because MIBP did not have the resources to do so. MIBP officials also said they did not see the establishment of the CFIUS Monitoring Committee with relevant DOD components as necessary because MIBP has taken primary responsibility for monitoring mitigation agreements. In addition to not implementing these oversight and communication mechanisms, MIBP has not updated DOD’s Instruction to account for policies that are no longer practiced, such as requiring proposed mitigation measures as part of the risk-based analysis, or having components take responsibility for monitoring the mitigation measures they recommend. According to federal internal control standards, to achieve an entity’s objectives, management assigns responsibility and delegates authority to key roles throughout the entity. In addition, management should internally communicate the necessary quality information to achieve the entity’s objectives. Updated and improved guidance, including communication about MIBP’s management of mitigation agreements and component involvement in developing and monitoring them, could help provide additional oversight of DOD’s mitigation agreements and address resource challenges associated with an increasing workload. DOD has not reported its findings to Congress on a review regarding monitoring and enforcing mitigation agreements. A 2013 House Report asked the Secretary of Defense to review the role of the Deputy Assistant Secretary of MIBP in monitoring CFIUS mitigation agreements in which DOD was the lead or co-lead and determine if the Defense Security Service is suited to perform these functions, and report the findings. The House Armed Services Committee noted concerns over whether MIBP, as a policy organization, has the resources and technical expertise to provide reasonable oversight of implementation and compliance with mitigation agreements. The House Report stated that DOD may benefit from leveraging the capabilities of the Defense Security Service, which already reviews every CFIUS filing on behalf of the National Industrial Security Program, and monitors compliance with its own mitigation agreements as part of that program. DOD was to report on the findings on the review in 2013, but, according to MIBP officials, it has been delayed because disagreement exists within DOD regarding where responsibility for monitoring mitigation agreements should reside. Both MIBP and Defense Security Service officials we spoke with said that their office is the best equipped to perform CFIUS mitigation agreement responsibilities. As a result, formal coordination of the department’s response has not been completed. As of January 2018, MIBP officials said that while they recognize the need to complete the response, DOD has not committed to a specific time frame for the response. Reporting the findings to the congressional defense committees will facilitate the identification of current challenges related to CFIUS mitigation agreement oversight, and could address questions about the capabilities and responsibilities necessary to effectively monitor and enforce CFIUS mitigation agreements. Growing foreign direct investment in the United States provides important economic benefits, but can also pose national security risks when that investment comes from potential adversaries. Ensuring that DOD has the resources, processes, and information necessary to perform its responsibilities under CFIUS is essential at a time when the number and complexity of transactions being reviewed by CFIUS has grown significantly. According to officials, the types of investments that pose risks have evolved, making questions about foreign control difficult to determine and mitigate, including investments involving important emerging technologies or real estate purchases in close proximity to sensitive military locations. In light of these issues, assessing CFIUS resource requirements across the department, completing efforts to identify and communicate critical national security concerns, assessing whether DOD has the necessary authority to address these concerns, and ensuring its policies and practices reflect current DOD component reviewers and processes will be essential to DOD’s ability to address the evolving risks it faces from foreign investment. For national security concerns that DOD determines it does not have the authority to address, it may be necessary for DOD to seek legislative action. Further, without updating DOD’s CFIUS guidance to reflect current requirements and reporting on reviews requested by a committee of Congress on the department’s responsibilities for monitoring mitigation agreements, DOD will likely continue to face challenges facilitating intra-departmental communication and questions about the prioritization of CFIUS within DOD. We are making a total of eight recommendations: four to the Secretary of Defense, three to the Deputy Assistant Secretary of Defense for MIBP, and one to the Secretary of the Treasury. Specifically: The Secretary of Defense should assess CFIUS resource requirements within MIBP and DOD component reviewers in light of increasing workload, and prioritize personnel and funding resources accordingly to review, mitigate, and monitor transactions that are of concern to the department. (Recommendation 1) The Secretary of Defense, in coordination with the Deputy Assistant Secretary of Defense for MIBP and Office of the Under Secretary of Defense, Personnel and Readiness, should incorporate the results of its efforts to identify, assess, and prioritize national security concerns related to foreign investment in emerging technologies and in proximity to certain critical military locations, into DOD Instruction 2000.25 and communicate the results to DOD component reviewers. (Recommendation 2) Following the completion of its emerging technology study, the Deputy Assistant Secretary of Defense for MIBP should assess what additional authorities may be necessary to address risks related to foreign investment in critical and emerging technologies, and seek legislative action to address risks posed by these investments as appropriate. (Recommendation 3) Following the department’s efforts to identify critical locations and develop and implement guidance assessing risks to these locations from foreign encroachment, the Secretary of Defense should assess what additional authorities, if any, may be necessary to address national security risks from foreign investments in proximity to these locations, and seek legislative action as appropriate. (Recommendation 4) The Secretary of the Treasury should provide clarification to parties filing a notice of a transaction with CFIUS that for filings involving multiple locations, geographic coordinates are required to be part of the notification. (Recommendation 5) The Deputy Assistant Secretary of Defense for MIBP should update DOD Instruction 2000.25, to include additional guidance and clarification regarding DOD component responsibilities during the CFIUS process and DOD processes for identifying non-notified transactions. (Recommendation 6) The Deputy Assistant Secretary of Defense for MIBP should update and implement requirements identified in DOD Instruction 2000.25 regarding management and oversight of mitigation agreements, such as taking into account the resources needed to effectively monitor agreements, improving communication methods between MIBP and the DOD components, and clarifying component responsibilities in developing and monitoring mitigation agreements. (Recommendation 7) The Secretary of Defense should submit the response to the House Report reviewing the role of the Deputy Assistant Secretary of Defense for MIBP in monitoring CFIUS mitigation agreements, and determining if the Defense Security Service is suited to perform these functions. (Recommendation 8) DOD and Treasury provided written comments on a draft of the sensitive report. These comments are reprinted in appendixes IV and V, respectively. We also received technical comments from both agencies, which we incorporated as appropriate. Both departments concurred with our recommendations. In its written comments, DOD agreed to use a recent assessment of CFIUS resource needs to inform its upcoming budget requests. We acknowledge MIBP’s recent efforts to identify and prioritize resource needs in support of its CFIUS responsibilities. As DOD develops its budget request, we encourage the department to consider increases in DOD’s CFIUS workload and the resources required to support essential CFIUS functions, like monitoring mitigation agreements and identifying non-notified transactions that may pose national security risks. DOD also agreed to update its guidance related to CFIUS procedures and responsibilities, and complete assessments about additional authorities the department may need to address national security concerns related to foreign investments in U.S. companies developing critical and emerging technologies or in proximity to critical military locations. In its comments, DOD stated it has identified over 40 critical military locations and expects to develop guidance for assessing the risks posed by foreign investments in proximity to these locations. DOD also agreed to complete its response to the House Report reviewing MIBP’s role in monitoring CFIUS mitigation agreements. In its comments, DOD stated it is continuing to explore the implementation of third-party monitors as an alternative solution for monitoring CFIUS mitigation agreements. In its written comments, Treasury concurred with our recommendation to provide clarification that parties filing a notice with CFIUS should include geographic coordinates as part of their notice. Treasury has updated information on its website to clarify that addresses and/or geographic coordinates are required for a CFIUS filing to be considered complete. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Deputy Assistant Secretary of Defense for MIBP, and the Secretary of the Treasury. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report assesses factors, if any, that affect the Department of Defense’s (DOD) ability to (1) identify and address national security concerns through the Committee on Foreign Investment in the United States (CFIUS) process, and (2) develop and monitor mitigation agreements through the CFIUS process. This report is a public version of a sensitive report that we issued on April 5, 2018. DOD and the Department of the Treasury (Treasury) deemed some of the information in our April report to be sensitive, which must be protected from public disclosure. Therefore, this report omits sensitive information related to (1) DOD’s resources to perform certain CFIUS functions, like monitoring mitigation agreements and identifying non- notified transactions; (2) the availability of location information as part of notices that companies file with CFIUS; and (3) the resources and communication required between DOD and the components to develop and monitor mitigation agreements through the CFIUS process. Although the information provided in this report is more limited, this report addresses the same objectives and uses the same methodology as the sensitive report. To assess what factors, if any, affect DOD’s ability to identify and address national security concerns through the CFIUS process, we reviewed relevant documentation, including: CFIUS-related laws and Department of the Treasury (Treasury) regulations; DOD policies and guidance; and DOD and CFIUS internal reports to identify DOD’s responsibilities and processes for identifying and addressing national security concerns through the CFIUS process. While there are other authorities, including export controls such as the International Traffic in Arms Regulations and Export Administration Regulations, which in certain circumstances may be used to address national security concerns that arise through foreign investment, our review focused on the DOD’s responsibilities addressing national security concerns through the CFIUS process. To assess DOD’s efforts to identify and address national security concerns it identified, we gathered and analyzed data on transactions that DOD was responsible for co-leading from January 1, 2012, through December 31, 2017, the most recent data available. To identify resources dedicated to supporting CFIUS activities within the Office of Manufacturing and Industrial Base Policy (MIBP)—the DOD office responsible for coordinating the CFIUS process on behalf of DOD—we analyzed MIBP data from 2012 through 2017 on DOD personnel resources, and reviewed budget amounts from 2012 through 2016 for DOD CFIUS activities from DOD budget documents. To identify the outcomes of transactions not voluntarily filed with CFIUS—known as non-notified transactions—we gathered and analyzed data on the number of non-notified transactions MIBP has identified and researched since the beginning of fiscal year 2016, when they started formally tracking that information. Based on information on the collection and management of Treasury and DOD transaction data, our review of related documentation, and interviews with relevant Treasury and DOD officials, we determined that these data were sufficiently reliable for the purposes of this report. To identify challenges DOD faces addressing certain national security concerns, such as protecting emerging and critical technology and foreign investments in proximity to certain critical military locations, we reviewed a non- generalizable sample of CFIUS case file information for seven transactions. We selected these transactions based on examples identified by DOD components, and the types of national security concerns, including those related to emerging technology and proximity, that DOD officials identified throughout the review. We interviewed officials at Treasury, MIBP, and selected DOD component reviewers to discuss DOD’s CFIUS workload and resources. In this report, we define resources as the authorized positions, assigned personnel, personnel performing contract services related to CFIUS functions, and CFIUS- related costs. We also discussed with these officials any limitations to addressing certain national security concerns—like protecting emerging technology and foreign investment in proximity to critical military locations—through CFIUS, and guidance for the CFIUS process and identifying non-notified transactions. Additional information on the DOD components included in this review can be found below. To identify calendar year 2016 mergers and acquisitions involving U.S. businesses, and the proportion of those mergers and acquisitions involving foreign acquirers, we reviewed data available from the Bloomberg Terminal, which is a commercial database containing data on mergers and acquisitions. We gathered data on total 2016 mergers and acquisitions involving U.S. companies that were announced, pending, or completed. We also gathered data on 2016 mergers and acquisitions that were announced, pending, or completed involving U.S. companies and foreign acquirers to illustrate the number of potentially covered transactions that may not be voluntarily notified to CFIUS. We assessed the reliability of these data by reviewing relevant documentation and ensuring the data gathered aligned with the search criteria identified. We determined the data were sufficiently reliable for our purposes of displaying total U.S. mergers and acquisitions and the proportion of those transactions that involve foreign acquirers and thus could be potentially covered transactions by CFIUS. To assess what factors, if any, affect DOD’s ability to develop and monitor mitigation agreements through the CFIUS process, we reviewed CFIUS- related laws and regulations and DOD policies and guidance to identify DOD and its component reviewers’ responsibilities and processes for developing and monitoring compliance with mitigation agreements. We also reviewed the Committee on Foreign Investment in the United States Annual Report to Congress for Calendar Years 2014 and 2015. To identify actions DOD has taken to mitigate national security concerns, we analyzed data to identify the number of mitigation agreements DOD is responsible for and actions DOD has taken to mitigate and monitor transactions with national security concerns from January 1, 2012 through December 31, 2017, the most recent data available. Based on information on the collection and management of Treasury and DOD CFIUS mitigation agreement data, our review of related documentation, and interviews with relevant Treasury and DOD officials, we determined that these data were sufficiently reliable for the purposes of this report. We also reviewed executive summaries compiled by MIBP of the DOD-co-led transactions with mitigation agreements, as well as selected CFIUS case file documentation for seven transactions. We interviewed officials at Treasury, MIBP, and DOD component reviewers to identify any challenges they face developing and enforcing mitigation agreements. To provide illustrative examples of the types of measures included in CFIUS mitigation agreements, we reviewed all of the active mitigation agreements from one component with responsibilities for monitoring mitigation agreements involving proximity issues. These agreements are not generalizable to other components. To gather a range of views on issues related to both objectives, we selected a non-generalizable sample of nine DOD component reviewers responsible for identifying, reviewing, and investigating transactions. These components included officials from: the Departments of the Army, Air Force, and Navy; the DOD Chief Information Officer, the Defense Information Systems Agency; the Defense MicroElectronics Activity; the Defense Advanced Research Projects Agency; the National Security Agency; and the Office of Manufacturing and Industrial Base Policy, Industrial Base Assessments. Our selection was based primarily on these components’ responsibilities for reviewing and investigating transactions for key issues DOD identified as relevant to its review of transactions, including risks related to emerging technology and proximity risks. We also solicited MIBP’s recommendations to identify components with varying levels of participation and input into the CFIUS process. We interviewed all nine components and in some cases also received written responses from them to identify similarities and differences in their processes, any challenges they face identifying and addressing national security concerns through CFIUS, and their involvement and any challenges they face developing or monitoring mitigation agreements. Findings based on information collected from the nine components cannot be generalized to all DOD components. In addition to the components included in our sample, we also interviewed and received documentation from other DOD organizations about the CFIUS process. These organizations included officials from: the Defense Innovation Unit Experimental; the Defense Security Service; the Defense Technology Security Administration; the Assistant Secretary of Defense for Research and Engineering; and the Office of the Under Secretary of Defense for Intelligence. We do not include information gathered from these other components in statements based on our non-generalizable sample. The performance audit upon which this report is based was conducted from January 2017 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with DOD and Treasury from April 2018 to July 2018 to prepare this unclassified version of the original sensitive report for public release. This public version was also prepared in accordance with these standards. In addition to the contact names above, W. William Russell (Assistant Director), Katherine Trimble (Assistant Director), Meghan Perez (Analyst- in-Charge), and Heather B. Miller were principal contributors to this report. In addition, the following people made contributions to this report: Justin Fisher, Stephanie Gustafson, Kate Lenane, Alyssa Weir, and Robin Wilson.", "summary": "Foreign acquisitions of U.S. companies can pose challenges for the U.S. government as it balances the economic benefits of foreign direct investment with the need to protect national security. CFIUS is an interagency group, led by Treasury, that reviews certain transactions—foreign acquisitions or mergers of U.S. businesses—to determine their effect on U.S. national security and whether the transaction may proceed. GAO was asked to review DOD's ability, as a member of CFIUS, to address defense issues. This report assesses factors, if any, that affect DOD's ability to identify and address national security concerns through the CFIUS process, among other objectives. GAO analyzed data on DOD co-led transactions from January 2012 through December 2017, the most recent data available. GAO also interviewed DOD and Treasury officials and reviewed documentation to identify DOD's CFIUS processes, resources, and responsibilities and selected a non-generalizable sample of nine DOD component reviewers, based on their participation in the CFIUS process. The Department of Defense (DOD) faces challenges identifying and addressing evolving national security concerns posed by some foreign investments in the United States. Resources: DOD's Office of Manufacturing and Industrial Base Policy represents the department and coordinates DOD's participation on the Committee on Foreign Investment in the United States (CFIUS). As a committee member, DOD co-leads CFIUS's review and investigation of transactions between foreign acquirers and U.S. businesses where it has expertise. DOD co-led 99 transactions in calendar year 2017, or 57 percent more transactions than it co-led in 2012, while the annual authorized positions increased from 12 to 17 during that same time period. DOD's workload has also been affected by the volume and complexity of the transactions it is responsible for co-leading, in addition to other CFIUS responsibilities, such as identifying transactions that foreign acquirers do not voluntarily file with CFIUS. DOD has taken some steps to address its resource limitations, but has not fully assessed the department-wide resources needed to address its growing workload. Emerging Technology and Proximity: DOD officials identified some investments that pose national security concerns from foreign acquirers gaining access to emerging technologies or being in close proximity to critical military locations, which, according to officials, cannot always be addressed through CFIUS because the investments would not result in foreign control of a U.S. business. DOD and Department of the Treasury (Treasury) officials said addressing these investments may require legislative action. DOD is taking steps to identify critical emerging technologies and military locations that should be protected from foreign investment. However, DOD has not fully assessed risks from these types of foreign investment or what additional authorities, if any, may be necessary for it to address them. Policy: DOD's CFIUS Instruction does not clearly identify some reviewer responsibilities or processes for identifying transactions that foreign acquirers do not voluntarily file with CFIUS. The policy is also outdated and inconsistent with current practices. DOD's CFIUS Instruction and federal internal control standards emphasize the importance of assessing organizational structures, policies, and procedures to respond to risks. Without assessing resources needed to address its CFIUS workload and risks from foreign investment in emerging technologies or in proximity to critical military locations, and ensuring its policies and processes clearly reflect the issues facing the department, DOD is at risk of being unable to respond to evolving national security concerns. This is a public version of a sensitive report that GAO issued in April 2018. Information that DOD and Treasury deemed sensitive has been omitted. GAO is making eight recommendations, including that DOD assess resources needed to address workload, assess risks from foreign investment in emerging technologies and in close proximity to critical military locations, and update its policies and processes to better reflect the evolving national security concerns facing the department. DOD and Treasury agreed with GAO's recommendations, and have identified some actions to address them.", "document_type": "gao"}
{"report": "Drug manufacturers seeking to develop and receive approval to market an orphan drug go through two separate FDA processes. The drug manufacturer may first apply for orphan designation, where FDA determines if the drug is eligible and meets the criteria for designation. The manufacturer may then apply to FDA for approval to market the orphan drug. There are a variety of circumstances under which a manufacturer’s drug is eligible for orphan designation. A drug is eligible for orphan designation when it is intended to treat a disease that affects fewer than 200,000 people in the United States. A drug is also eligible for orphan designation when it is intended to treat a disease that affects 200,000 or more people in the United States and there is no reasonable expectation of recovering the cost of drug development and marketing from U.S. sales. In addition, a drug that is intended to treat a specific population of a non-rare disease (known as an orphan subset) is eligible for orphan designation when a property of the drug (e.g., toxicity profile, mechanism of action, or prior clinical experience) limits its use to this subset of the population. FDA’s Office of Orphan Products Development (OOPD) administers the orphan drug program and evaluates orphan designation applications. When a drug manufacturer submits a designation application, OOPD receives and assigns it to a reviewer based on factors such as prior experience related to a particular rare disease and workload across OOPD reviewers. The drug manufacturer’s application is required to include such items as a description of the rare disease, documentation of the number of people affected by the disease in the United States (the population estimate), and a scientific rationale explaining why the drug may effectively treat the disease. The manufacturer can submit an orphan designation application at any point prior to submitting a marketing application. When making an orphan designation decision, OOPD guidance requires reviewers to evaluate the manufacturer’s application and record information about the drug and disease on a standard review template. OOPD reviewers are also expected to independently verify certain information included in the application. For example, OOPD reviewers may review independent sources to verify the population estimate provided by the manufacturer, including comparing the population estimate against prior related orphan designations. Once the OOPD reviewer’s decision is recorded on the standard review template, it undergoes a secondary review that has typically been completed by the Director of the Orphan Drug Designation Program. This secondary review is intended to ensure the quality of the application review and the consistency of the review across all related designation applications. There are three possible outcomes from the designation review: (1) the orphan designation is granted, (2) the application is pending with the manufacturer due to OOPD finding it deficient, or (3) the orphan designation is denied. OOPD sends the drug manufacturer a decision letter detailing the outcome of its review. If the application is pending or denied, the decision letter describes OOPD’s concerns with granting the orphan designation (e.g., insufficient evidence to support its scientific rationale) and the manufacturer may address these concerns either in an amendment to the original application (for pending status) or as a new application (for denied status). (See fig. 1.) FDA’s marketing approval process is the same for all drugs, regardless of orphan status. (See fig. 2.) Once a manufacturer has assessed the safety and efficacy of a new drug through preclinical testing and clinical trials, it may apply to FDA for approval to market the drug in the United States. To do so, a drug manufacturer submits its research in a new drug application (NDA) or biologic license application (BLA) to FDA, which then reviews and approves the drug for marketing if it is shown to be safe and effective for its intended use. The two FDA centers responsible for reviewing applications to market drugs in the United States are the Center for Biologics Evaluation and Research (CBER) and the Center for Drug Evaluation and Research (CDER). Upon completing its review of a marketing application, FDA will send an action letter with its determination to the drug manufacturer. The time elapsed from the date FDA receives the application to the date it issues an action letter informing the drug manufacturer of the agency’s decision is defined as one review cycle. If FDA does not approve the marketing application and the drug manufacturer resubmits the application, a new review cycle begins. When FDA approves a drug manufacturer’s marketing application, it approves the drug to treat one or more specific uses, known as indications. The approved indication is based on the clinical trial data provided in the manufacturer’s marketing application and is typically narrower than the orphan designation, which is based on early drug development data for the drug’s intended use in the rare disease. For example, one drug was granted orphan designation for the treatment of cystic fibrosis (the rare disease), while the drug’s marketing approval was for the treatment of cystic fibrosis in patients 12 years and older who have a certain genetic mutation (the indication). The orphan drug marketing exclusivity incentive (a period of protection from competition) only applies to the drug’s approved indication. OOPD determines orphan drug marketing exclusivity after receiving notification of the drug’s marketing approval from CBER and CDER. Because orphan drugs are often developed to treat patients with unmet medical needs, they may be eligible for one or more of FDA’s expedited programs. FDA’s four expedited programs—accelerated approval, breakthrough therapy designation, fast track designation, and priority review—are intended to facilitate and expedite the development and review of new drugs to address unmet medical needs in the treatment of a serious disease. Depending on the type of expedited program, manufacturers of new drugs may receive a variety of benefits, such as additional opportunities to meet with and obtain advice from FDA officials during drug development or a shorter FDA review time goal for the marketing application. In June 2017, FDA issued its Orphan Drug Modernization Plan and has implemented a number of steps under the plan to address the demand for orphan designations. According to OOPD data, the number of new designation applications received grew from 185 in 2008 to 527 in 2017 (an increase of 185 percent), while the number of designations granted also grew during the same period. (See fig. 3.) Prior to implementing the modernization plan, OOPD had amassed a backlog of 138 applications that were pending review for more than 120 days. The modernization plan therefore established two goals: (1) eliminating the backlog of designation applications within 90 days (by September 25, 2017), and (2) ensuring that new designation applications are reviewed within 90 days of receipt. To accomplish its first goal, the modernization plan outlined seven actions FDA planned to take to temporarily increase OOPD resources for reviewing designation applications. For example, the agency established an experienced team of senior OOPD reviewers to focus solely on the backlog of designation applications. In addition, OOPD initially enlisted temporary assistance from CBER and CDER reviewers who expressed interest in helping clear the backlog. FDA officials told us OOPD also subsequently received reviewer assistance from the Office of Medical Products and Tobacco. OOPD trained these additional reviewers on the orphan designation review process and criteria for granting orphan status. As a result of these efforts, FDA cleared the application backlog by August 28, 2017, nearly a month ahead of its goal. (See table 1 for the seven actions FDA took as part of its modernization plan to clear the designation application backlog.) To accomplish FDA’s second goal of reviewing new designation applications within 90 days of receipt, the modernization plan outlined eight steps the agency planned to take to improve the efficiency of its application review process. For example, OOPD implemented a standard review template in October 2017 that it had developed under the modernization plan’s first goal to address the backlog of applications. This template outlines information that reviewers are supposed to record, as applicable, from each application and evaluate when making a designation decision—namely, the (1) background information, (2) clinical superiority analysis, (3) orphan subset analysis, (4) population estimate, and (5) scientific rationale that the drug may effectively treat the disease. (See app. I for more information about what is recorded in OOPD’s review template.) The review template also includes the designation recommendation, as well as the secondary reviewer’s concurrence with the designation determination. FDA officials reported that before implementing this review template, OOPD reviewers documented less-structured narrative information about each application on a prior form. In addition, OOPD introduced online training for manufacturers on the information to include in a designation application and the common issues OOPD has encountered when reviewing an application. According to officials, this training is intended to enhance the consistency and quality of designation applications, which may ultimately reduce OOPD requests for additional information from manufacturers. (See table 2 for the eight steps the agency took to improve the timeliness of its designation application review process.) In July 2017, OOPD began using the new internal tracking report to monitor adherence to its 90-day timeliness goal. As of March 2018, FDA officials reported that OOPD management has received these tracking reports on a daily basis, which identify the number of days that have elapsed for each application pending review, among other things. According to these tracking reports, OOPD has overall met its 90-day timeliness goal for reviewing designation applications since mid- September 2017 and has completed most application reviews within 60 days of receipt. For example, as of July 20, 2018, OOPD had 35 applications pending review for 0 to 30 days; 31 applications pending review for 31 to 60 days; 9 applications pending review for 61 to 90 days; and no applications pending review for more than 90 days. OOPD applies two consistent criteria (i.e., two particular criteria that all designation applications must meet) when determining whether to grant a drug orphan status: (1) the disease that the drug is intended to treat affects fewer than 200,000 people in the United States, and (2) there is adequate scientific rationale that the drug may effectively treat the disease. For circumstances involving orphan subsets of a non-rare disease or clinical superiority, additional criteria are required for orphan designation. According to OOPD data, of the 3,690 orphan designation applications received from 2008 to 2017, OOPD determined that the majority of them met these criteria and granted them orphan status. Specifically, approximately 71 percent of applications were granted orphan designation as of April 2018. The remaining designation applications were placed in a pending status awaiting the manufacturer’s response to OOPD concerns (21 percent), denied orphan designation (5 percent), or withdrawn (2 percent). (See table 3.) In addition, our analysis of 148 OOPD review templates completed for new designation applications received from October to December 2017 provided further detail on OOPD’s designation determinations since implementing its Orphan Drug Modernization Plan. We found that for this time period, 87 designation applications (59 percent) were granted orphan status, 57 designation applications (39 percent) were placed in pending status awaiting further information from the manufacturer, and 4 designation applications (3 percent) were denied orphan status. The most common reason OOPD did not grant orphan designation was due to concerns with the adequacy of the manufacturer’s scientific rationale, which occurred in 43 of the 61 pending or denied review templates. OOPD reviewers noted various concerns with the scientific rationale provided in these designation applications, including that the manufacturer did not provide sufficient or adequate data to support their scientific rationale, or that the manufacturer did not provide data from the strongest available model for testing the drug. Of the five review template sections where reviewers are required to record information, we found that OOPD does not ensure that all required information is consistently recorded in the background information section and evaluated when making designation decisions. OOPD instructs reviewers to document background information, including elements of the regulatory history of the drug (e.g., U.S. and foreign marketing history), and previous orphan designations for both the drug and the disease. Our analysis found that 102 of 148 OOPD review templates were missing one or more elements of the regulatory history of a drug. (See table 4.) In addition, we found that 19 of 148 review templates did not capture all prior orphan designations for the drug and disease. In one case, the OOPD reviewer did not record any prior orphan designation for the disease in the review template and placed the designation application in pending status due to concerns with the manufacturer’s population estimate. However, the disease that was the subject of the application had 36 related orphan designations at the time of the review, 7 of which had been granted in 2017. According to FDA officials, although the background information required in the review template may not directly affect a designation decision, it provides important context that is critical to ensuring a complete review of a designation application. For example, FDA officials told us that in cases where the designation application is for a disease with little published information available, it may help to know the drug’s U.S. marketing history to identify whether CBER or CDER has experience with the disease. Additionally, the prior orphan designation history can help the OOPD reviewer identify previously accepted methodologies to estimate the population for a disease. Despite requiring its reviewers to record background information for each designation application, OOPD’s guidance does not provide instructions on how to use this information when evaluating the applications. Internal control standards for the federal government specify that agencies should record relevant, reliable, and timely information, and process that information into quality data that enables staff to carry out their responsibilities. Without instructions on how to use the background information required in its review templates, OOPD reviewers may not consistently use all of the information needed to conduct a complete evaluation of a designation application. Additionally, OOPD instructs its reviewers to consider evidence found in independent sources to verify the population estimate provided in a designation application. However, in 23 of 148 OOPD review templates, reviewers did not include the results of any such independent verification in their evaluation of the manufacturer’s population estimate. Internal control standards state that agencies should conduct checks of their recorded data to ensure its accuracy and completeness, but we found that OOPD does not fully conduct such data checks. Without ensuring that its reviewers conduct and record the results of independent verification of population estimates, OOPD cannot be assured that quality information is consistently informing its designation determinations. For the 148 templates we reviewed, we found that OOPD granted orphan designation to 26 applications missing required information. Specifically, we found that OOPD granted designation to 11 applications where the reviewer did not record prior orphan designation history, to 13 applications where the reviewer did not document independent verification of the manufacturer’s population estimate, and to 2 applications where the reviewer did neither. In cases where the background information was incomplete or there was no documentation of independent verification of the manufacturer’s population estimate, there also was no evidence that the secondary reviewer verified the completeness of these sections of the review templates. Approximately 71 percent of orphan designation applications received by FDA from 2008 to 2017 were for drugs intended to treat diseases affecting 100,000 or fewer people. In addition, half of the applications received during this time frame were for drugs intended to treat populations of 50,000 or fewer people. (See fig. 4.) For applications that OOPD granted orphan designation, the population estimates for the diseases they were intended to treat ranged from 0 to 199,966 people. Of 3,491 orphan designation applications OOPD received from 2008 to 2017, over half were for the therapeutic areas of oncology (30 percent), neurology (13 percent), hematology (7 percent), and gastroenterology and liver (6 percent). Thirty-seven other therapeutic areas accounted for the remaining 44 percent of applications, with each therapeutic area accounting for 5 percent or fewer of designation applications received during this time frame. Some of these other therapeutic areas included pulmonary, immunology, cardiology, and dermatology. (See fig. 5.) Additionally, our analysis of 148 OOPD review templates from October to December 2017 found that 29 applications (20 percent) requested orphan status based on an orphan subset claim, 7 of which were granted orphan designation; and 7 applications (5 percent) requested orphan status based on a clinical superiority claim, 2 of which were granted orphan designation. FDA approved 351 orphan drugs for marketing from 2008 to 2017. Orphan drug marketing approvals have increased over this period, from 17 in 2008 to 77 in 2017, and have accounted for an increasing proportion of all FDA marketing approvals. Orphan drug marketing approvals also vary by certain characteristics, but were typically in one of two therapeutic areas and required about 9 months for FDA review, among other commonalities. Therapeutic area. From 2008 to 2017, 53.3 percent of orphan drug marketing approvals were in one of two therapeutic areas that were also common for granted designations: oncology (42.5 percent) and hematology (10.8 percent). There were 27 different therapeutic areas overall, with 7 of those areas having 10 or more approved orphan drugs. (See app. II for FDA’s orphan drug marketing approvals from 2008 to 2017 by therapeutic area.) Number of indications. Of the 351 orphan drug marketing approvals from 2008 to 2017, there were 252 unique drugs, because drugs can be approved for more than one orphan indication. For example, the oncology drug Velcade received FDA approval in 2008 as a first-line therapy for multiple myeloma, and received approval for a second indication in 2014 for treatment of mantle cell lymphoma if the patient has not received at least one prior therapy. (See app. II.) The majority of drugs had one orphan indication (77.4 percent) or two orphan indications (15.9 percent). However, several drugs (6.7 percent) were approved to treat three or more orphan indications. Two oncology drugs had the most approved orphan indications: Imbruvica (10 orphan indications) and Avastin (9 orphan indications). New drug or new indication for previously approved drug. The majority (61.5 percent) of orphan drug marketing approvals from 2008 to 2017 have been for a new drug not previously approved for any use, while the remainder (38.5 percent) have been for a new indication for a drug previously approved to treat a rare or non-rare disease. (See fig. 6.) Of the new orphan drugs that received marketing approval, the majority have been for novel uses—new molecular entities or new therapeutic biologics that are often innovative and serve previously unmet medical needs, or otherwise significantly help to advance patient care and public health. FDA review time. For orphan drug marketing approvals from 2008 to 2017, the median time from FDA receiving a marketing application to approval was about 9 months, and ranged from 75 days to about 17 years. FDA averaged about 1.2 review cycles for these drugs, with the number of cycles ranging from one to four reviews. Two neurology drugs each had the largest number of reviews (four). Expedited programs. Approximately 71 percent of orphan drug marketing approvals from 2008 to 2017 benefitted from at least one type of FDA’s four primary expedited programs (accelerated approval, breakthrough therapy designation, fast track designation, or priority review). Most orphan drug approvals in each year received priority review, while less than half received accelerated approval, breakthrough therapy designation, or fast track designation in the year the drug was approved. (See fig. 7.) Very few (six) orphan drug approvals were granted all four of these expedited programs in the year approved. To address rare disease drug development challenges, FDA has established guidance for internal and public use, and offered training to its reviewers. FDA’s guidance and training on rare diseases includes topics related to more general drug development issues, as well as the agency’s marketing approval process as it applies to orphan drugs. In general, FDA’s review centers—CBER and CDER—are responsible for establishing guidance on general rare disease drug development issues. For example, FDA published draft guidance for industry in August 2015 on common issues in rare disease drug development. The guidance discusses important aspects of drug development, such as the need for an adequate understanding of the natural history of the disease and the drug’s proposed mechanism of action, and the standard of evidence to establish safety and effectiveness. CBER published additional draft guidance in July 2018 on rare disease drug development specific to gene therapy in order to help manufacturers consider issues such as limited study population size, safety issues, and outcomes. FDA has also conducted studies to understand rare disease drug development challenges. In March 2011, FDA issued a report to Congress on the strengths and weaknesses of its regulatory process with respect to rare and neglected tropical diseases. In that report, a group of expert FDA officials found that its regulations allowed experienced reviewers to use flexibility and scientific judgment in determining the safety and efficacy of rare disease drugs. However, the group also noted areas for improvement, such as the need to develop training for FDA reviewers and to increase communication efforts with stakeholders, including industry and advocacy organizations. One other key area the group identified was the need to analyze the agency’s orphan drug marketing approvals to further understand the factors helping or hindering drug development. To do so, FDA analyzed a subset of orphan drug approvals and published two studies: FDA’s February 2012 publication on rare disease drug approvals between 2006 and 2011 found that substantial proportions of marketing approvals were for innovative drugs, and most clinical studies were highly unique in terms of the study design, controls, and outcome measures used. FDA concluded that developing defined policy and consistency around such diverse drugs and unique clinical studies would be difficult. FDA’s May 2012 publication on marketing applications between 2006 and 2010 concluded that, due to the high approval rates for applications targeting rare diseases in its study, increased efforts in the agency’s review process would be unlikely to substantially increase the number of new rare disease drugs. FDA’s patient engagement programs have also focused on rare disease drug development. As of February 2016, the agency reported that nearly half of patient-focused drug development meetings—meetings to obtain the patient perspective on specific diseases and their treatments—have been focused on rare diseases. In addition, four of six patient advocacy groups we interviewed said that they used this type of meeting or another structured meeting to provide FDA input on their rare disease. One patient advocacy group told us that its meeting with FDA helped lead to issued guidance on drug development for Duchenne muscular dystrophy. As part of its efforts to better inform reviewers about the agency’s regulatory framework and drug development challenges with respect to rare diseases, FDA has developed a training course and holds an annual all-day meeting for reviewers. (See table 5.) In its rare disease training course, FDA describes its authority to be flexible in reviewing marketing applications for rare disease drugs. Multiple studies found that FDA has regularly used this flexibility in approving rare disease therapies; for example, by allowing marketing approval based on one adequate and well-controlled study, rather than requiring two. Stakeholders we interviewed, including industry experts and patient advocacy groups, and research we reviewed identified general rare disease drug development challenges, as well as more specific concerns pertaining to the ODA incentives and pricing. However, opinions of some of the concerns attributed to the ODA incentives varied among stakeholders. Barriers to rare disease drug development. The two barriers to rare disease drug development most commonly cited among stakeholders we interviewed were (1) the need for more basic scientific research (e.g., understanding patient experiences and progression of symptoms, known as a disease’s natural history), and (2) the difficulty in recruiting small populations for clinical trials. One drug manufacturer explained that, when a disease affects a small population, it is hard to identify and recruit participants, because they may be geographically dispersed or have to travel long distances to participate in the trial. Identifying these participants and enrolling them into a clinical trial is therefore both labor- and resource-intensive. A number of studies conducted by FDA and others identified similar challenges, as well as other rare disease drug development issues. For example, a 2010 study by the National Academies of Science, Engineering, and Medicine noted that researchers still lack a basic understanding of the mechanisms that underlie many rare diseases. Another drug development challenge identified in the study is attracting trained investigators to study rare diseases. To address some of these challenges, OOPD has a number of grant programs focused on rare disease drug development, including one that funds studies that track the natural history of a disease over time to identify demographic, genetic, environmental, and other variables that may lead to drug development. In addition, FDA’s fiscal year 2019 budget justification includes a request for funds to develop clinical trial networks to create an understanding of the natural history and clinical outcomes of rare diseases. Significance of ODA incentives in fostering drug development. Although many stakeholders we spoke with categorized the ODA’s incentives as significant to rare disease drug development, two stakeholder groups we spoke with—industry experts and drug manufacturers—largely categorized the incentives as less important than did other stakeholders. For example, two of four drug manufacturers we interviewed told us that their company’s drug development decisions are based on the disease areas it wants to target and not due to ODA incentives. In addition, several stakeholders noted non-ODA drivers of orphan drug growth, including the ability to command high prices and advances in scientific discovery for some rare diseases. Several studies also noted limitations of the ODA incentives, including the structure of the orphan drug tax credit, the decreasing impact of the marketing exclusivity incentive in protecting orphan drugs from competition, and the ability of the incentives to target “truly” rare conditions that would not otherwise have obtained sufficient investment. For example, the Congressional Research Service reported in December 2016 that the benefits of the orphan drug tax credit are limited to companies with positive tax liabilities. As a result, the Congressional Research Service concluded that the typical small startup company investing in the development of an orphan drug may be unable to take advantage of the tax credit during its first few years of operation when its expenses exceed its revenue and cash flow may be a problem. Certain circumstances under which drug manufacturers may obtain ODA incentives. Several stakeholders we spoke with were critical of how drug manufacturers may obtain ODA incentives, such as for drugs that were already approved to treat another disease or for multiple orphan designations for the same drug. For example, one industry expert argued that granting multiple orphan designations for the same drug subverts the purpose of the ODA to support development of drugs that may not otherwise be profitable, as a drug manufacturer can make a return on investment from the drug from multiple patient groups rather than just one. In contrast, many patient advocacy groups we spoke with noted that drug manufacturers’ ability to obtain ODA incentives under certain circumstances, such as multiple orphan designations for the same drug, are needed for further investment in drug development. In particular, they noted that this provides an incentive for manufacturers to demonstrate their drugs are safe and effective for individuals who have a rare disease (particularly for FDA-approved drugs with an unapproved use—known as off-label use) and account for any differences within rare diseases. A number of studies raised similar concerns about these and other issues, including off-label use of orphan drugs. Specifically, one study noted that, due to increasing investment in precision medicine, manufacturers may develop drugs treating a particular genetic subset of a non-rare disease. These subsets may qualify for ODA incentives, even though they may not face the same development challenges as “true” rare diseases. For example, three orphan drugs were approved as treatments for a subset of non-small cell lung cancers that have a specific gene mutation. According to the study, these drugs can also be used off- label for diseases other than the non-small cell lung cancer subset for which they were originally approved. FDA has taken steps in recent years to address certain circumstances under which drug manufacturers may obtain orphan designation. For example, the agency recently issued guidance stating that it no longer plans to grant orphan designation to pediatric subsets of non-rare diseases. The agency attributed its decision, in part, to a loophole that could result in a drug receiving an orphan designation for a pediatric subset being exempt from requirements under the Pediatric Research Equity Act to study drug safety and effectiveness in pediatric subpopulations. FDA also held a workshop in May 2018 to seek input on appropriate orphan designation for certain oncology treatments to stay current with evolving knowledge. Orphan drug pricing. Stakeholders we interviewed and research we identified also raised concerns about the high prices drug manufacturers can charge for orphan drugs when receiving ODA incentives. Several stakeholders we spoke with noted that it was difficult to discuss the ODA without addressing concerns with how orphan drugs are priced. For example, one patient advocacy group told us that it may be appropriate for a drug to receive multiple orphan designations, but that the drug manufacturer should revise the price of its drug to reflect the number of orphan designations. Several studies have also pointed to high orphan drug prices as a public health challenge in terms of access and affordability, particularly when orphan drug development may be less costly than non-orphan drugs due to smaller and fewer efficacy and safety trials, shorter FDA review time, higher marketing approval success rates, and lower marketing costs. One study found an inverse relationship between the price of orphan drugs and their volume of use (i.e., the more expensive the orphan drug, the fewer patients who use the drug), and noted that over the past 20 years spending on medicine in the U.S. market has shifted increasingly toward drugs that treat relatively few people, such as those with rare diseases. With significant unmet need for most rare diseases, the ODA provides manufacturers with a variety of incentives if they develop drugs that meet orphan designation criteria. To ensure that drug manufacturers’ claims in their orphan designation applications are accurate, FDA must conduct thorough and consistent evaluations. FDA took several steps beginning in June 2017 to improve the consistency and efficiency of these evaluations, including introducing a standard review template and guidance for completing it. However, we found that FDA does not always ensure that all information is consistently recorded in its review templates and evaluated when making designation determinations, which are critical steps needed to understand the full context of a drug’s intended use in the rare disease. FDA has a number of options it could take to ensure that reviewers obtain all necessary information and use it to inform orphan designation determinations. For example, we found that FDA’s guidance was not always clear in instructing reviewers how they should use the information they record. Clarifying these requirements in guidance could help reviewers make use of this information, including the secondary reviewers who ensure the consistency and quality of designation reviews. While FDA action to improve its designation reviews will not address the broader rare disease drug development challenges identified by stakeholders we interviewed and research we analyzed, it could help FDA ensure the consistency of its review process, particularly as demand for orphan designations continues to grow. We are making the following recommendation to FDA: The Commissioner of FDA should ensure that information from orphan drug designation applications is consistently recorded in OOPD review templates and evaluated by OOPD reviewers when making an orphan designation decision. (Recommendation 1) We provided a draft of this report to the Department of Health and Human Services (HHS) for comment. In its written comments, reproduced in appendix III, the agency concurred with our recommendation. HHS also provided technical comments, which we incorporated as appropriate. In its response, HHS stated that it would consider our recommendation as part of FDA’s ongoing efforts to evaluate and revise the designation review template, and to train reviewers. Regarding the background information in the review template, HHS also noted that many drugs requesting orphan designation do not have relevant regulatory history, particularly adverse actions, as these drugs are early in drug development at the time of requesting orphan designation. However, HHS agreed with the importance of consistently documenting and utilizing background information, and stated that FDA will continue to apply consistent criteria to its review decisions. We are sending copies of this report to the Secretary of Health and Human Services, appropriate congressional committees, and other interested parties. The report is also available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact us at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. In October 2017, the Food and Drug Administration’s Office of Orphan Products Development (OOPD) introduced a standard review template, along with guidance for how to complete it, to aid its reviewers in evaluating orphan designation applications. OOPD guidance instructs its reviewers to record information about the drug and disease on the standard review template, as well as the results of independent verification done for certain information included in the application. The template is then used with the designation application to determine whether to grant orphan designation to a drug. (See table 6 for the information recorded in OOPD review templates.) The Food and Drug Administration (FDA) approved 351 orphan drugs for marketing from 2008 to 2017 in 27 different therapeutic areas. Forty-two percent (149) of orphan drug marketing approvals were in oncology, with six other therapeutic areas having 10 or more approved orphan drugs. (See table 7 for information on orphan drug marketing approvals from 2008 to 2017 by therapeutic area.) Additionally, the 351 orphan drug marketing approvals were for 252 unique drugs, because drugs can be approved for more than one orphan indication. The majority of drugs had one orphan indication (77.4 percent) or two orphan indications (15.9 percent). However, several drugs (6.7 percent) were approved to treat three or more orphan indications. In addition to the contact named above, Marcia Crosse (Director), Robert Copeland (Assistant Director), E. Jane Whipple (Analyst-in-Charge), and Brienne Tierney made key contributions to this report. Also contributing were Kaitlin Farquharson, Alison Granger, Drew Long, and Vikki Porter.", "summary": "The ODA provides incentives, including tax credits and exclusive marketing rights, for manufacturers to develop drugs to treat rare diseases, which are typically defined as affecting fewer than 200,000 people in the United States. Approximately 7,000 rare diseases affect an estimated 30 million people in the United States, and only 5 percent of rare diseases have FDA-approved treatments. GAO was asked to examine FDA's orphan drug processes. In this report, GAO examines, among other things, (1) the actions FDA has taken to address the growing demand for orphan designations; (2) the extent to which FDA has used consistent criteria and complete information in reviewing orphan designation applications; and (3) the steps FDA has taken to address rare disease drug development challenges. GAO analyzed FDA documents and data, as well as all designation review templates FDA completed as of March 2018 for applications received from October to December 2017. GAO interviewed agency officials, as well as stakeholders, including drug manufacturers, industry experts, and patient advocacy groups. The Food and Drug Administration's (FDA) Office of Orphan Products Development is responsible for reviewing drug manufacturer applications for orphan designation. Drugs granted this designation treat rare diseases and may receive various incentives under the Orphan Drug Act (ODA). As the number of orphan designation applications received and granted has grown, FDA outlined several process changes in its June 2017 modernization plan to improve designation review timeliness and consistency. In evaluating designation applications, FDA reviewers generally apply two consistent criteria—(1) the size of the rare disease population, and (2) the scientific rationale that the drug may effectively treat the disease. To inform their evaluation, reviewers must record certain background information in a standard review template, such as the drug's U.S. marketing history. Officials told us this information provides important context, such as whether FDA has experience with a little known disease, critical to ensuring a complete designation application review. However, GAO's analysis of 148 designation review templates found that FDA does not consistently record or evaluate background information when making designation decisions. For example, 48 of 148 review templates GAO analyzed were missing information on the drug's U.S. marketing history. As such, FDA cannot be sure that reviewers are conducting complete evaluations that include all critical information needed for assessing its criteria. Stakeholders GAO interviewed and research GAO reviewed identified a number of rare disease drug development challenges, such as the difficulty in recruiting small populations for clinical trials, with differing opinions about the ODA incentives. For example, several stakeholders were critical of manufacturers obtaining multiple orphan designations—and ODA incentives—for the same drug when the drug may otherwise be profitable from treating multiple patient groups. However, many patient advocacy groups noted that granting ODA incentives in these circumstances is needed to encourage drug manufacturers to study the safety and efficacy of drugs in rare disease populations. FDA should ensure that all required information for reviews of orphan designation applications is consistently recorded and evaluated. The agency concurred with our recommendation.", "document_type": "gao"}
{"report": "The Federal Acquisition Streamlining Act of 1994 established a preference within the federal government to procure commercial items rather than items developed exclusively for the government. Between fiscal years 2013 and 2018, Congress passed additional legislation to address various aspects of how DOD defines and purchases commercial items, and how DOD makes commercial item and price reasonableness determinations. For example, legislation passed in 2015 included a provision stating DOD contracting officers may presume that previously established commercial item determinations shall serve as determinations for future procurements of an item. The law further stipulated that if a prior determination is not used for an item previously determined to be commercial, the contracting officer must request a review by the head of the contracting activity to either confirm that it is still valid or issue a revised determination. In January 2018, DOD revised its regulations and corresponding procedures, guidance, and information related to the procurement of commercial items to reflect recent legislative changes. The DFARS was updated to provide guidance to contracting officers for making price reasonableness determinations, promote consistency in making commercial item determinations (including updating guidance regarding the use of prior determinations), and expand opportunities for nontraditional defense contractors to do business with DOD. The department also updated its Guidebook for Acquiring Commercial Items, which includes information on how to define, determine, and price commercial items, to reflect the regulatory changes. Also in January 2018, a DOD advisory panel established to help streamline the defense acquisition process released a report with recommendations to revise definitions related to commercial buying and minimize government-unique terms applicable to commercial buying. During the pre-award process for commercial procurement actions over $1 million, two distinct determinations take place: 1. a contracting officer must determine in writing whether a product or service being procured is commercial, and 2. the contracting officer must determine if the offered price is fair and reasonable. According to the DOD Guidebook for Acquiring Commercial Items, the government’s ability to acquire affordable products and services significantly improves when contracting officers have in-depth knowledge of the market. The guidebook establishes that market research should be an ongoing effort throughout the commercial item procurement process to: (1) identify the industry and market for capabilities or technologies; (2) identify prices at which the capabilities or technologies have been sold or offered for sale; and, (3) continuously capture market information at different points to ensure the best acquisition. When determining a fair and reasonable price, market research should be conducted in order to compare the proposed price to market pricing. Figure 1 illustrates the process contracting officers generally follow to make commercial item and price reasonableness determinations for more complex procurements. The contracting officer is ultimately responsible for making these determinations, but, as appropriate, he or she may seek the assistance of the Defense Contract Audit Agency (DCAA), military service organizations such as the Navy Price Fighters or the Air Force Pricing Center of Excellence, or the DCMA Commercial Item Group. The DCMA Commercial Item Group, which became operational in 2016, provides recommendations on commercial item determinations within DOD. It has created six Commercial Item Centers of Excellence, each of which has its own area of market expertise, to assist contracting officers in making timely and consistent commercial item determinations. These centers are staffed with engineers and price/cost analysts who advise and make recommendations on commerciality based on market analysis, commercial item reviews and determinations, and commercial pricing analysis. Additionally, the centers provide training and assistance to the DOD acquisition community on various techniques and tools used to evaluate commercial items and commercial item pricing. In order to make a commerciality determination, contracting officers may need information specifying whether the items have been sold or offered for sale to the general public. And, as noted above, the contracting officer must determine that the government is getting a fair and reasonable price. Some of this information may be acquired through market research; however, as appropriate, the contracting officer may require or request that the contractors submit information, such as price lists and sales invoices, with their offers or during the evaluation. For more details on the information and data required for commercial item and price reasonableness determinations at different times in the procurement process, see appendix II. In the case studies we examined, we found four interrelated factors that influenced how DOD determines if an item is commercial and whether the price is fair and reasonable, and that each factor had its own set of challenges: Availability of marketplace information Ability to obtain contractor data Extent of modifications to an item needed to satisfy DOD Reliability of prior commercial item determinations Despite these challenges, contract award was not typically delayed. In other cases where DOD was not able to obtain the information or data it needed to make a determination, the department’s options, such as not awarding the contract or exploring other suppliers, were often not feasible because DOD was working in a sole-source environment and not procuring the item was not an option. When there is a healthy marketplace of items and services that the government wants to buy, contracting officers can more readily support their commerciality and price reasonableness determinations. However, in our review, we identified cases in which limited market information made such determinations more involved. For example, the Army was working with a contractor to acquire repair and upgrade services for navigation systems. The contractor said the services were commercial, but when the contracting officer conducted market research to determine the commerciality of the services, she found no similar services available in the commercial market. According to a contracting official, the Army’s particular units had to be nuclear hardened to withstand an explosion and needed some functional interfaces added, which made finding a similar commercial service difficult. In the end, the DCMA’s Commercial Item Group officials completed an on-site review of the manufacturing process to gain an in-depth understanding of the services provided. Using this additional information, the contracting officer deemed the services commercial. In contrast, for a previous report on commercial item acquisitions, we reviewed selected Air Force contracts for information technology services and video teleconferencing design and installation. Because these items and services are available in the commercial marketplace, the availability of information helped the contracting officers efficiently determine that the items were commercial and that the prices were fair and reasonable. Contracting officials from our case studies had difficulty obtaining information from contractors after they could not find adequate information in the marketplace. This difficulty occurred for a number of reasons, including the contractor’s own challenges in obtaining information from their subcontractors. While several of the contracts we reviewed showed that either the prime contractor or subcontractor eventually provided sufficient information, obtaining this information was not without difficulties. For example: In a $1.7 billion Army sole-source contract for helicopter engines, the prime contractor asserted that two small engine parts—provided by a subcontractor—were commercial, but did not provide any documents to support its assertion. After several requests for information on commercial sales data, the prime contractor provided invoices for a commercial engine that contained similar engine parts. The prime contractor representative told us the reason it took so long to provide the requested information was because the subcontractor would not provide commercial sales data. As a result, the prime contractor needed to research commercial engines that used similar parts in order to support the commerciality assertion. In an $873 million Air Force sole-source contract for aircraft engines, the contracting officer had difficulty obtaining commercial sales data through market research for engine castings. The prime contractor did not initially provide support for its assertion that the castings were commercial, stating that it had difficulty obtaining supporting information from its subcontractor. Air Force officials visited the subcontractor’s facility to determine that the item was a modified version of a commercial item and was therefore commercial. In a $53 million Navy sole-source contract for KC-130J aircraft propeller engineering and sustainment services, the contracting officer told us she had difficulty determining if the proposed prices for these commercial services were fair and reasonable because the contractor provided invoices with the prices redacted. After several months of back and forth, the contractor provided unredacted invoices for similar services, which the contracting officer used to determine price reasonableness. A contractor representative told us that the contractor initially provided the redacted invoices in order to quickly respond to the Navy’s request for information, but that additional time was needed to evaluate if releasing the unredacted price information would violate a contractual agreement the contractor had with its suppliers. In other cases, the contractor provided information or data that the contracting officer considered insufficient to support a commercial item or price reasonableness determination. For example: In an F-15 aircraft production contract, Air Force contracting officials had difficulty determining whether the prices of oil bypass valves were fair and reasonable due to redactions in data the subcontractor provided. The subcontractor’s proposed price was four times more than it had previously charged the government for the same item, according to contracting officials. To support its prices, the subcontractor provided a commercial price list and customer invoices with redacted customer information, which the subcontractor considered to be proprietary. According to contracting officials, the redacted invoices did not provide enough detail to confirm whether non-governmental end users were paying a price similar to the proposed price in the Air Force contract. The subcontractor subsequently provided a customer list associated with the redacted invoices. Also, while the subcontractor showed that its proposed price was lower than its commercial price list, contracting officers did not consider subcontractor-provided support sufficient to explain why the proposed price was higher than what the government had previously paid. According to contracting officials, the prime contractor absorbed the price difference between the subcontractor’s proposed price and what the Air Force paid for the valves. On a $2 million Army task order for navigation software upgrades on Global Positioning System (GPS) units used in missiles, the DCMA Commercial Item Group obtained redacted invoices and quotes from a subcontractor to determine commerciality. But this information did not provide enough detail to substantiate the commerciality determination. A subcontractor representative told us that the company provided redacted information to the government because contractual agreements with its customers required them to not reveal the customer name. After evaluating multiple factors, the DCMA Commercial Item Group concluded that the GPS units did not match the form, fit, or function of the commercial ones, and recommended that this service and item were not commercial. Contractor representatives cited multiple reasons why they were unable to provide data (see text box). Examples of Reasons Contractors Cited for Not Providing Data: One prime contractor told us that some subcontractors are unwilling to provide information, such as unredacted invoices, to them and therefore prime contractors cannot provide this information to the government. Some subcontractors we interviewed explained that certain information, such as customer names and prices paid in invoices, is considered proprietary data. One subcontractor representative said that while the company cannot provide unredacted invoices to a prime contractor, it is willing to provide this information directly to the government, such as the DCMA Commercial Item Group, which can verify the content of the invoices at the contractors’ facilities. Additionally, one contractor representative told us that when a previously determined commercial item is later determined noncommercial, specific cost or pricing data can be difficult to gather for companies that operate primarily in the commercial market. This is because these companies were not previously required to collect and provide this cost or pricing data to the government. For example, the subcontractor that produces an item for the Army told us that this item had been previously purchased by the government on a commercial basis under an agreement that was later canceled in 2014. When the government later determined this item was noncommercial, the subcontractor had difficulty providing detailed cost data for the government’s units because they are procured on the same manufacturing line as their commercial units. According to contractor officials, the costs for subcomponents and labor hours for engineers that work on these units are pooled together with cost for the commercial business. A contracting officer’s ability to obtain data is further affected once an item has been deemed commercial. Several contracting officers told us that once an item is determined commercial, contractors are less willing to provide any pricing data. While certified cost and pricing data cannot be required, the government can request uncertified data if needed to make a price reasonableness determination. As previously noted, we found cases in which contractor-provided information included redacted invoices as evidence that an item was commercial. When the government later requested uncertified cost and pricing data to determine price reasonableness—after exhausting government and public market research resources—the contractors were not willing or able to provide the data. In most cases contractors eventually provided data after multiple requests. Our case studies showed that determining commerciality and price reasonableness for items that are modified from the commercial variant can be difficult, in part, because what can be deemed ‘a minor modification’ is subject to interpretation. The commercial item definition includes some types of commercial items that have minor modifications not customarily available in the commercial marketplace, but that are made to meet federal government requirements. For our case studies, when prime contractors or subcontractors claimed a modified item was commercial, contracting officers had to take extra steps to determine whether the commerciality assertions appropriately met the commercial item definition, such as completing a comparative analysis of commercial items to the modified item. However, determinations in our case studies were challenging to make because the items were generally acquired through sole-source procurements and had no identified commercial market. This made it more difficult for the contracting officer to make a determination based on market research. In one of our case studies, there was a difference of opinion within DOD as to whether a modified item was commercial. The prime contractor for an Army sole-source contract procuring modified fuel systems to meet military safety, crashworthiness, and ballistic tolerance requirements for Blackhawk helicopters claimed that its modified fuel system was a commercial item. However the contracting officer found no commercial market existed for this item so the contracting officer had to take additional steps. To make a commerciality determination, the contracting officer sought assistance from the DCMA Commercial Item Group, which recommended that the fuel system was not commercial. The contracting officer submitted a request to waive the requirement for certified cost or pricing data. The DOD official reviewing the waiver request discovered that the fuel system had previously been determined commercial for another helicopter program and the Director of Defense Pricing concurred with that commerciality determination. Some of our case studies exhibited challenges related to prior commercial item determinations: The Navy contracted for a radio used in a variety of aircraft throughout DOD. The contracting officer stated that the radio had been considered commercial for 20 years. However, for the most recent follow-on contract the contracting officer, who was new to the program, reviewed the prior determination and found it to be in error. In the prior determination the radio was compared to another radio considered noncommercial. As part of his review for the new determination, the contracting officer consulted with Air Force officials because they procure the same radio for some of their aircraft programs. The contracting officer ultimately determined that the radio was, in fact, commercial by comparing it—at the suggestion of the Air Force—to a different radio with similar features that is sold commercially to the public. According to the contracting officer, the Navy also benefited because the radio they had purchased for 20 years was also cheaper and more capable than the one that was sold commercially, to which it was compared. For a $2.5 billion Air Force sole-source contract, the prime contractor asserted that a cargo part, called a winch—which had previously been sold to the government as a commercial item—was commercial. However the contracting officer reviewed the support for the prior commercial item determination and found it was based on sales to a holding company for a foreign government. Additional information requested and received included catalog prices and the invoice to the foreign holding company. The contracting officer determined this support was not sufficient for determining commerciality because sales to foreign governments were not considered commercial sales. Additionally, market research did not yield any commercial sales or evidence that the part was sold in the commercial marketplace. The part was determined noncommercial. The National Defense Authorization Act for Fiscal Year 2016 states contracting officers may presume a prior commercial item determination made by a DOD component shall serve as a determination for subsequent procurements of an item. In fact, if a previous determination is not used, a contracting officer must request that the head of the contracting activity review the prior determination and either confirm its validity or issue a revised determination. Most contracting officers with whom we spoke indicated that prior determinations should be reviewed to determine if they were made under similar terms and conditions and whether circumstances have changed since the determinations were made. We found diverse opinions among contracting officers on whether they would elevate concerns about a previous determination to the head of the contracting activity. Some contracting officers said they would elevate the determination if they had supporting data while others would be hesitant under most circumstances due to the extensive process involved. Despite the different factors involved, for most of our case studies, challenges in making the commercial item and price reasonableness determinations did not ultimately affect the government’s ability to award the contract as planned. The time it took for the contractor to provide information to the government and the government to make a determination ranged from a few days to over a year. In most of our case studies, contracting officials said that this time did not solely affect the contract award because other factors, such as staff changes or awarding multiple contracts at the same time, also delayed the process. However, in two of our 15 cases, contracting officers told us they were delayed in awarding contracts when the contractor did not provide the requested information in the anticipated timeframe. In one example, an Army contracting official told us that a contract award was delayed when a subcontractor did not provide information to the contractor to support its commerciality assertion. The contracting officer noted that this delay also placed the program at risk of a funding loss because the service reallocated funding to another program that it viewed as less risky. Finally, contractors told us that they have taken steps to improve how they assert the commerciality of their items. For example, several contractors now use standardized forms to make commercial item assertions and keep prior assertions in a centralized place. Several contractor representatives we spoke with also told us that they have an internal panel of experts review commercial item and price reasonableness assertions to ensure consistency and that the assertions meet federal regulations. The contractors’ hope is that these forms and processes will help reduce the back and forth in requesting information among the government, prime contractor, and subcontractors. In addition, some contractor representatives told us that they work with the DCMA Commercial Item Group to better understand what information contracting officers are requesting and to obtain assistance with subcontractors that are unwilling to provide information to the prime contractor. Some contracting officials told us that they have few options at their disposal when they have difficulty obtaining information from the contractor to make a commercial item or price reasonableness determination in a sole-source environment. For example: For a $2 million Army task order for engineering services to upgrade navigation software and several GPS units with these upgrades, the contracting officer stated that procuring from an alternative source was not an option because this GPS was unique to the program and qualifying a different GPS would cost an estimated $50 million. In a nearly $2 million sole-source delivery order for Blackhawk helicopter fuel tanks, the Army contracting official told us that the program needed this fuel tank because the tank’s configuration was specific to the helicopter. As a result, the contracting official said they could not walk away from the contractor. The contracting official further noted that certifying an item from a second source would be cost and time prohibitive for the government. Although in most of our sole-source case studies other options (e.g., contracting with a different vendor) were not viewed as being feasible, we did have one case where DOD made the choice to not award a contract, when the government and contractor could not agree on a reasonable price. DLA wanted to negotiate a long-term contract for night vision goggles, but after the contracting officer made repeated attempts to obtain data from the contractor, they could not agree on a fair and reasonable price. The prices were over 45 percent higher than prices that DLA had previously paid for the same item. As a result, the acquisition was canceled, and according to the contracting officer, the government plans to buy quantities as needed through an existing vehicle. Another option is to elevate issues to DOD management, which can make a determination on whether an item is commercial and is being offered at a fair and reasonable price. One example from our case studies includes a $1.7 billion Army sole source contract for helicopter engines. The contractor asserted commerciality for the engines, which had historically been procured as a noncommercial item. After extensive market research, the contracting officer asked for information from the contractor to support its commerciality assertion, but had difficulty obtaining it. According to the contracting officer, the Army discussed the possibility of not awarding this contract, but this was not considered feasible since the engine is used in multiple aircraft. After months of back and forth between the contracting officer and contractor, this commerciality issue was elevated to the Director of Defense Pricing, who agreed with the contracting officer’s assessment that the engines were not commercial and procured them on that basis. DOD has taken steps to share more information across the department to inform commercial item and price reasonableness determinations, but efforts to date are in early stages of development or happening informally across the department. Despite these efforts, contracting officers still face challenges in obtaining adequate information to make informed commercial item and price reasonableness determinations, in part because no comprehensive information sharing strategy exists to outline responsibilities and funding of these efforts. DOD officials told us they plan to explore other options for the sharing of commercial item information, such as communities of practice, but have not made any formal plans. One information sharing effort still in its early stages is the DCMA Commercial Item Group’s publicly available database, created in 2017 to centralize commercial item information across DOD. The database, however, has not been fully established as an effective tool. In its current form it consists of a spreadsheet primarily listing items that contracting officers have determined to be commercial. According to DCMA Commercial Item Group officials, the database contains fewer items than expected because not all DOD contracting officers have submitted their commercial item determinations. The Office of Defense Procurement and Acquisition Policy updated its Guidebook for Acquiring Commercial Items in January 2018 to state that a commercial item determination is not complete until the contracting officer submits it to the DCMA Commercial Item Group along with a summary of pricing information. These submissions are meant to improve consistency and efficiency in making commercial item determinations. On February 22, 2018, the Air Force Deputy Assistant Secretary for Contracting issued a memorandum that reminded its contracting officers of this responsibility. We found that the database has limitations. For example, it includes only a list of items evaluated and not the results of recommendations made on commerciality by the DCMA Commercial Item Group. These recommendations can be obtained by contacting the office directly. DCMA officials stated results of their recommendations are specifically not included in the public database because of concerns that a prime contractor may prefer a subcontractor with a commercial item determination over another without one. Most commercial item determinations included in the database go back only to 2016, since this is when the DCMA Commercial Item Group began collecting them. Additionally, DCMA Commercial Item Group officials said they have no funding to support the database. Officials plan to meet with DOD’s Office of Defense Procurement and Acquisition Policy to discuss funding and other potential systems to maintain the information as well as provide DOD officials with direct access to copies of previous determinations and related information. Defense Procurement and Acquisition Policy and DCMA officials acknowledged that DOD has not yet determined who is responsible for the funding and upkeep of this information. Internal control standards promote assigning responsibility and delegating authority to key roles to achieve an organization’s objectives. Without appropriate funding and clearly defined roles and responsibilities for management and upkeep of the database, its effectiveness as a tool to provide contracting officers with information to help make commercial item determinations will continue to be limited. While the database serves as a means to formally share information to help contracting officers make commercial item and price reasonableness determinations, contracting officers in our case studies noted instances where informal sharing of information between programs and services led to improved outcomes, such as a lower price. For example, In a $257 million sole source MQ-9 aircraft contract, the Air Force contracting team questioned whether a modified commercial engine being provided by a subcontractor was offered at a fair and reasonable price. While the Air Force contracting team relied on uncertified cost and pricing data provided by the subcontractor, a contracting official told us that the team also relied on information shared by Air Force officials in other programs that were procuring similar commercial items at the same time. The contracting team discovered that another contracting official obtained a lower price for a similar commercial item, and as a result, used this information to negotiate a lower price. In the procurement for radios used in a variety of aircraft, as discussed earlier, Navy contracting officials used informal information sharing to make a commercial item determination. The Navy obtained information from the Air Force, which was procuring the same radio and which had performed a review in January 2017 that it shared with the Navy. The review noted that other similar commercial radios existed and that a comparison of this radio to these other commercial radios could help determine that the radio is commercial. Navy contracting officials, using the Air Force’s review as well as their own technical analysis, determined the radios were a modified commercial item. Despite the creation of the database and the informal information sharing that occurs, contracting officers still face challenges in obtaining adequate information to make informed commercial item and price reasonableness determinations. Specifically, DOD lacks a strategy for improving the sharing of commercial item and price reasonableness information across the department, such as efforts like the DCMA Commercial Item Group’s database. Internal control standards promote effective sharing of information to ensure managers have the information they need to make informed decisions. In addition, internal control standards state that management should communicate information internally and assign responsibilities for key roles while also considering the cost necessary to communicate the information. In an environment where information is difficult to obtain from the contractor, as we have outlined in this report, the ability for contracting officers to have easy access to all necessary commerciality and pricing information within DOD is critical. If DOD does not have such information easily available, contracting officers will continue to struggle with obtaining all the information they need to make informed and efficient commercial item and price reasonableness determinations. When dealing with a limited marketplace and price data, determining commerciality and price reasonableness can be challenging for DOD’s contracting staff. Ultimately, the effectiveness of determining commerciality and fair and reasonable prices will depend on what meaningful information the government successfully obtains to conduct its analysis. Therefore, information sharing within the department is critical in helping DOD’s contracting officers determine commerciality and reasonable prices on DOD’s acquisitions. As our findings show, DOD has made some efforts to facilitate the sharing of information, such as establishing the DCMA Commercial Item Group. This group, in turn, set up a database to increase the accessibility and utility of commercial and pricing data. But the database is not yet robust enough to eliminate the need for more sharing of information—formal or informal—across the department. Enhancing information sharing efforts could address some of the challenges we identified. Further, clearly defining the roles and responsibilities for management of the database and identifying viable funding sources to support the upkeep of the database will help ensure it becomes a useful resource for contracting officials. We are making the following recommendation to DOD: The Director of Defense Procurement and Acquisition Policy should work with the Defense Contract Management Agency to develop a strategy for sharing information related to commerciality and price reasonableness determinations across DOD, including a plan to increase the information available in the Commercial Item alternative mechanisms to share information, either formal or informal; and assignments of roles and responsibilities with regard to sharing commercial item information, including how the database should be funded, supported, and maintained. We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix III, DOD concurred with our recommendation, stating that it plans to issue a policy memo requiring all commercial item determinations made after September 30, 2018 to be included in the existing commercial item database. DOD further stated that it will update its commercial item determination form to enhance informal information sharing. In addition, DOD stated that the Director of Defense Pricing within the Defense Procurement and Acquisition Policy office and the Director of DCMA will enter into a memorandum of agreement specifying roles and responsibilities in determining commercial item policy and funding the commercial item database. DOD also provided technical comments, which were incorporated as appropriate. We are sending copies of this report to the appropriate congressional committee, the Secretary of Defense, and the Director of Defense Procurement and Acquisition Policy. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or woodsw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Our objectives were to: (1) identify the factors that influenced the Department of Defense’s (DOD) commercial item and price reasonableness determinations and (2) assess the extent to which DOD has taken steps to make information available to help make these determinations. To identify factors that influence the process and what DOD has done to address them, we reviewed relevant sections of the Federal Acquisition Regulation (FAR); Department of Defense Federal Acquisition Regulation Supplement; DOD memorandums; policy, guidance, and instructions related to the acquisition of commercial items, including the Guidebook for Acquiring Commercial Items Part A: Commercial Item Determination and Part B: Price Reasonableness Determination; and service-specific guidance regarding commercial items. To assess challenges in making commercial item and price reasonableness determinations, we identified a non-generalizable sample of contracts which were reported by DOD officials and contractors as a contract where it was difficult to make commercial item determinations, price reasonableness determinations, or both, from a variety of sources. Due to limitations of the Federal Procurement Data System-Next Generation (FPDS-NG) we could not identify all DOD commercial item acquisitions in the data system, specifically contracts that had been coded as having used procedures other than FAR Part 12, Acquisition of Commercial Items. Additionally, contracts which had issues in making commercial item or price reasonableness determinations would not be identifiable in FPDS-NG. Due to these limitations, we requested that three DOD services – Air Force, Army, and Navy – and the Defense Logistics Agency (DLA) each provide us with five contracts that had points of contention with the commercial item determination or the price reasonableness determination, either at the prime contract or subcontract level. We also identified contracts by asking officials at the Defense Contract Management Agency (DCMA) Commercial Item Group and the Navy Price Fighters for contracts as well as identified contracts through previous GAO work. Additionally, we asked contractors to identify contracts they believed had issues in determining commerciality and/or price reasonableness. One contractor identified two contracts, which we reviewed, but did not find to have any issues concerning commerciality or price reasonableness. From these requests we collected a non- generalizable sample of 56 contracts for commercial items. From the non-generalizable sample of 56 contracts, we selected 15 contracts awarded between 2010 and 2018 that met various criteria as case studies. We selected 4 case studies from the Air Force, 4 from the Army, 5 from the Navy, and 2 from DLA. The 15 case studies were selected to represent: (1) multiple services; (2) a variety of issues with commercial item or price reasonableness determinations, (3) reoccurring prime contractors or subcontractors, and (4) a mix of product and services acquired. We conducted an in-depth review of these contracts and selected related orders to assess what challenges occurred when the contracting officer was determining whether an item was commercial and whether the price was fair and reasonable, and why these challenges occurred. To assess challenges in making commercial item and price reasonableness determinations, we reviewed the contract file documentation for the 15 case studies, and interviewed contracting and pricing officials. We reviewed documentation including commercial item determinations, price negotiation memorandums, market research, and DCMA Commercial Item Group and Defense Contract Audit Agency reports. We also interviewed contracting officials and contractors to obtain perspectives on how an item was determined to be commercial and then subsequently, determined to be offered at a fair and reasonable price. We interviewed contracting officers to obtain their views on the effect the new Guidebook for Acquiring Commercial Items and recently passed legislation would have on these challenges, and how they might affect contracts in the future. We interviewed officials from the DCMA Commercial Item Group to understand how they assist contracting officers in making determinations, and about the publicly available database that centralizes commercial item information. We also reviewed this database to understand what types of information it contained. Additionally, we discussed the management and funding of the database with the Office of Defense Procurement and Acquisition Policy. We interviewed contractors to discuss commercial item and price reasonableness issues on the selected contracts, discuss general areas of concern with regard to commercial item and price reasonableness determinations, and identify other contentious contracts. We conducted this performance audit from July 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on audit objectives. Appendix II: DOD General Process for Making Commercial Item and Price Reasonableness Determinations applicable to most of the contracts in our case studies because all but one of the contracts were awarded before the DFARS changes were implemented. Furthermore, where the Federal Acquisition Regulation (FAR) and DFARS differed in terminology (e.g., the FAR noted a requirement for “data” to determine price reasonableness but the DFARS noted a requirement for “information”), the table and report use the DFARS terminology. In addition to the contact named above, Tatiana Winger (Assistant Director), Emily Bond, Jared Dmello, Lorraine Ettaro, Julie Hadley, Julia Kennon, Timothy Moss, Miranda Riemer, Raffaele (Ralph) Roffo, and Carmen Yeung made key contributions to this report.", "summary": "DOD buys goods and services from the commercial market to take advantage of new innovations and save on acquisition costs. However, the department's process for determining whether an item can be purchased commercially—and, at a fair and reasonable price—can be long and challenging in certain situations. GAO was asked to review this process. This report identifies (1) factors that influenced DOD's commercial item and price reasonableness determinations, and (2) the extent to which DOD has taken steps to make information available to facilitate these determinations. To conduct this work, GAO examined federal regulations and guidance and selected case studies, which included a non-generalizable sample of 15 contracts awarded between fiscal years 2010 and 2018. GAO identified the case studies based on input from multiple sources that those contracts involved commercial item or price reasonableness determination challenges. GAO interviewed government and contractor officials responsible for those contracts. The Department of Defense (DOD) has a process to determine if an item is available for purchase in the commercial marketplace at a reasonable price. Among selected case studies, GAO found four interrelated factors, each with its set of challenges that influenced how and whether DOD determines if an item is commercial and if its price is reasonable. These factors are: Availability of marketplace information : Market research is a key component that informs commercial item and price reasonableness determinations. However, GAO found that obtaining market-related information can be challenging because the products DOD requires may not be widely available in the commercial marketplace. Ability to obtain contractor data : When adequate market information is not available, DOD officials turn to the contractor for information to support the commercial item determination or data to make a price reasonableness determination. In the case studies GAO reviewed, most contractors provided relevant information, but not without delays and challenges. For example, while pricing data is key to DOD's ability to determine price reasonableness, several contracting officers reported that contractors were less willing to provide this data once an item was determined commercial. Extent of modifications to an item : When a commercial item must be modified to meet DOD's requirements, DOD officials may have to take additional steps, such as completing a comparative analysis of commercial items to the modified item. For example, in one case, a commercial navigation system had to be modified to withstand an explosion. To make the commercial item determination DOD officials had to make an on-site visit to the manufacturer to gain in-depth understanding of the services provided and to ensure they met DOD requirements. Reliability of prior commercial item determinations : Contracting officers may presume that an item is commercial if a DOD component had previously made that determination. However, GAO found that, in some cases, contracting officers reviewing a prior determination discovered that it was based on inaccurate information. DOD has taken steps to share more information across the department to inform these determinations, but efforts are in early stages of development or informal. No comprehensive information sharing strategy exists. In 2016, DOD established the Commercial Item Group within the Defense Contract Management Agency to provide recommendations on commercial item determinations. This group created a publicly available database to centralize commercial item information across DOD. However, this effort is incomplete. Also, according to DOD officials, they have not yet established who is responsible for the funding and upkeep of the information. Additionally, GAO case studies included instances where informal information sharing resulted in better outcomes, such as a lower price. Creating more opportunities to share information internally is crucial for DOD to facilitate a timely and efficient process in making these determinations and ensuring the best financial outcome for the government. GAO recommends that DOD develop a strategy for how information related to commerciality and price reasonableness determinations should be shared across the department, including making improvements to the existing database and determining responsibilities for its funding and upkeep. DOD agreed with GAO's recommendation and stated that actions will be taken starting in 2018 to address it.", "document_type": "gao"}
{"report": "In 1973, the U.S. Supreme Court concluded in Roe v. Wade that a woman has a fundamental right protected by the U.S. Constitution to decide whether to terminate her pregnancy. However, the Court also recognized that a state may have an interest sufficient to regulate abortion after the first trimester of the pregnancy or proscribe abortion after the fetus reaches viability, the point at which the fetus could live outside the womb. Over time, states have adopted a range of abortion- related laws or policies, including the following examples. Gestational limits: Prohibiting abortions after a specified gestational age. Insurance limitations: Limiting insurance coverage of abortions to certain circumstances in either publicly or privately funded insurance plans. Laws regulating abortion providers: Requiring abortion providers to meet certain standards, such as standards that specify facility room size or corridor widths. Mandatory counseling: Requiring specific information, including information on fetal development or gestational age of the fetus, be provided to a woman prior to an abortion. Parental involvement: Requiring the consent or notification of one or both parents for minors seeking an abortion. Waiting periods: Requiring a certain amount of time to elapse between informed consent—which may include mandatory counseling—and having an abortion. Since Roe v. Wade was decided, many of these state laws have been challenged, and the Court, in reviewing these laws, has considered whether they impose an undue burden on a woman’s right to choose an abortion. Most recently, in 2016, the Court found that two Texas laws regulating abortion providers offered few, if any, health benefits and posed a substantial obstacle to women seeking abortions. Therefore, the Court found that these two Texas laws constituted an undue burden and were unconstitutional. The number of abortions performed in the United States has steadily declined over the past 30 years, with the abortion rate reaching its lowest point in 2014—the most recent year data were available—at 14.6 abortions per 1,000 women of reproductive age, according to a 2017 study. This study attributed this decline primarily to a decrease in the number of unintended pregnancies and to a lesser extent, laws or policies that may limit women’s access to abortions. Abortions are typically performed in a clinic or other nonhospital setting and involve one of two methods: medical abortion or surgical abortion. Medical abortions involve using prescription drugs to terminate a pregnancy. The prescription drug mifepristone, sold under the brand name Mifeprex, in combination with the prescription drug misoprostol, is the only Food and Drug Administration (FDA) approved medication for medical abortions in the United States, and is approved for use through 10 weeks gestation. FDA has restricted the administration of Mifeprex to patients in certain healthcare settings under the supervision of a certified prescriber; thus, the drug cannot be sold in retail pharmacies. According to Danco Laboratories, the manufacturer of Mifeprex, there is at least one certified Mifeprex provider in every state. Surgical abortions, which can involve different procedures depending on the stage of a women’s pregnancy, account for the majority of abortions in the United States. However, according to a recent study, the incidence of medical abortions increased 7 percent from 2011 to 2014, with medical abortions accounting for 31 percent of all nonhospital abortions in 2014. Medicaid expenditures are financed by both the federal government and the states. In order to receive federal funding for Medicaid expenditures, states must adhere to a broad set of federal requirements and administer their programs consistent with individual state plans approved by CMS. However, Medicaid, by design, allows significant flexibility for states to design and implement their programs. States have some discretion in, among other things, setting Medicaid eligibility standards and provider payment rates; determining the amount, scope, and duration of covered benefits; and developing their own administrative structures. For example, states must cover certain mandatory populations and services—including abortions in cases of rape, incest, or life endangerment—but may impose certain requirements on that coverage, such as requiring authorization before a service is provided. States may also opt to cover other optional populations and services, including abortions for which federal funding is not available. States may also decide how Medicaid-covered services provided to beneficiaries will be delivered. For example, states may pay health care providers for each service they provide—referred to as fee-for-service (FFS)—or contract with managed care organizations (MCO) to provide a specific set of Medicaid-covered services to beneficiaries and pay them a set amount per beneficiary, typically per month. While most states use both delivery systems, the percentage of beneficiaries served through comprehensive MCOs has grown in recent years, and represented nearly 70 percent of all Medicaid beneficiaries in 2016. Oversight of the Medicaid program is also shared by the federal government and the states, and is aimed, in part, at ensuring that funds are used appropriately and that beneficiaries have access to covered services. With respect to abortion coverage, federal law and CMS guidance outline specific requirements for federal funding to be available. For example, states that claim federal funding for abortions in the case of life endangerment must obtain a physician’s certification that the abortion is necessary for this purpose. While there is not a similar certification requirement for federal funding of abortions in cases of rape or incest, CMS guidance specifies that states may impose certain additional requirements on providers and beneficiaries as a condition of Medicaid payment for abortions eligible for federal funding, provided such requirements are reasonable and do not deny or impede coverage for such abortions. In the case of medical abortions, federal law does not specifically require Medicaid coverage of the prescription drugs used to terminate a pregnancy. However, state Medicaid programs that opt to cover prescription drugs—which is the case in all 51 states—are generally required to cover outpatient drugs of any manufacturer participating in the Medicaid Drug Rebate Program. Danco Laboratories has a rebate agreement for Mifeprex, and, as result, states should generally cover it for abortions in the circumstances eligible for federal funding. In determining states’ compliance with this requirement, CMS guidance states that the agency will consider several factors, including a state’s authority to set limitations on covered outpatient drugs under relevant state laws. To inform its oversight of Medicaid, CMS relies on state-reported data that contain information on multiple aspects of the program. States claiming federal funding for Medicaid services, including abortions, are required to report quarterly expenditures to CMS on the form CMS-64. CMS uses these data to pay states for the federal share of program spending and the agency is responsible for ensuring that federal payments are made appropriately. Additionally, states submit Medicaid expenditure and utilization data that can be linked to individual beneficiaries to CMS on a monthly basis through the agency’s new Transformed Medicaid Statistical Information System (T-MSIS). Through provider interviews, we identified multiple factors that could present challenges to women accessing abortions, but the extent to which these factors were present in a state varied, as did their effect on access. In addition, the studies we reviewed examined some of these factors more than others, but often pointed to the challenges they could pose. Medicaid beneficiaries may experience further challenges accessing abortions in some states due to variation in Medicaid abortion coverage and related payment requirements. We identified seven key factors as potential challenges to women accessing abortions based on our interviews with eight selected providers: (1) gestational limits; (2) mandatory counseling; (3) out-of- pocket costs; (4) parental involvement; (5) provider availability; (6) stigma and harassment; and (7) waiting periods. (See table 1.) The extent to which these factors are present in a state varies. For example, one provider who did not identify stigma and harassment as a factor affecting women in the state it operates in noted that women from all over the country come to its clinics. The provider said this was because women see its clinics as a safer place to obtain an abortion than seeking care in their own state, where they would likely be stigmatized or harassed. Additionally, providers in some states told us that they were able to cover the entire cost of the abortion and pay for associated costs, such as transportation, for women who could not afford to pay, while providers in other states said that they could not cover the entire cost of the abortion due to funding limitations. See figure 1 for an example of differences in factors present in two states. In addition, a factor could be more challenging in one state versus another, depending on the details of the factor and other factors present. For example, one provider noted that the 24-hour waiting period in one state it serves poses a minimal challenge, because women can complete part of the process online and only make one visit to the abortion provider. Conversely, a provider in another state said that the state’s 72- hour waiting period requires two in-person visits and that the same doctor be present at both, which can create delays in care and increase costs, particularly if the woman needs to travel a long distance for her appointments. Differences in access can also exist within a state. Most notably, some selected providers pointed out that women in a state’s rural areas typically have more limited access to abortion providers than those who live in the state’s urban areas. The 52 studies we reviewed examined the key abortion access factors identified through our interviews with selected providers, though some factors were studied more than others. (See app. I.) Most of the reviewed studies conducted statistical analyses to evaluate the effects of a factor on abortion access and often identified access challenges. For example, nearly two-thirds of the statistical studies for the three most commonly studied factors—out-of-pocket costs, parental involvement, and provider availability—found that the factor adversely affected a measure of abortion access. (See table 2.) The other factors identified by providers—gestational limits, stigma and harassment, mandatory counseling, and waiting periods—were less frequently examined in the reviewed studies, and the findings from these studies were more mixed. For example, gestational limits and stigma and harassment were the least studied of all the factors with only three and two studies, respectively, and the reviewed studies found both adverse effects on access, as well as effects that were statistically insignificant. While there were more studies on waiting periods, the results were similarly mixed, with at least one study suggesting that the type of waiting period could change the effect on access. This study found that while a waiting period requiring two in-person visits could delay care, the effect of waiting periods that required fewer in-person visits was not significant. Finally, for mandatory counseling, the studies we reviewed rarely found that the factor had a statistically significant effect on a measure of abortion access (2 of 10 studies). In responding to our survey, 29 states reported limiting abortion coverage for Medicaid beneficiaries to the three circumstances required under federal law—rape, incest, and life endangerment—while 21 states reported broader abortion coverage. The remaining state, South Dakota, reported that it limits abortion coverage for Medicaid beneficiaries to circumstances when the pregnancy endangers the life of the woman, and does not cover abortions in cases of rape or incest. CMS confirmed that South Dakota’s Medicaid state plan does not include coverage of abortions in cases of rape or incest, and shared a letter it sent to the state in 1994 outlining that the state’s coverage did not comply with federal law and expressing CMS’s intent to work with the state on possible solutions. However, according to CMS officials, the agency has not taken any action since that time to ensure South Dakota’s compliance, and does not have plans to do so. As a result, Medicaid beneficiaries in South Dakota do not have Medicaid coverage for abortions in cases of rape or incest. States also varied in the extent to which their Medicaid programs covered Mifeprex, the prescription drug most commonly used for medical abortions. (See fig. 2.) As previously noted, state Medicaid programs that opt to cover prescription drugs—which is the case in all 51 states—are generally required to cover outpatient drugs of any manufacturer participating in the Medicaid Drug Rebate Program, subject to a few statutory exceptions. CMS officials told us that Mifeprex, which became a covered outpatient drug in 2001, does not meet any of the exceptions for categorical exclusion from coverage. However, 14 states reported that they do not cover Mifeprex. Without such coverage, Medicaid beneficiaries seeking abortions in these states would have to find another way to pay for the drug or undergo a surgical abortion instead. CMS officials were not aware that these states did not cover Mifeprex, and thus the agency had not taken any action to address states’ non-compliance. Beyond differences in the scope of their abortion coverage, states varied in the types of requirements they imposed as a condition of Medicaid payment for abortions eligible for federal funding, which could also affect women’s access to the procedure. Provider certification that the abortion met the circumstances of rape, incest, or life endangerment was the most common requirement reported by states. Other commonly reported requirements included provider certification of counseling, beneficiary certification of rape or incest, documentation of rape or incest, and prior authorization by the state Medicaid agency. (See table 3.) The details of particular requirements also varied across states. For example, among the 32 state Medicaid programs that claimed federal funding for abortions, we reviewed available documents implementing the federal requirement that physicians certify the abortion is necessary in the case of life endangerment and found differences among the states. In particular, some states’ documents incorporated the statutory wording of the life endangerment exception, others incorporated the wording of the related federal regulation, and others used different wording. Additionally, CMS officials told us that the agency does not require that physicians fill out a specified form to meet the certification requirement, and the 32 states varied in whether or not they had such a form. In another example, of the 14 states that required documentation of cases of rape or incest, some states specifically required a police report, and other states allowed the beneficiary the option of either filing a police report or filing a report with another public agency, such as a public health agency. Finally, states also varied in terms of the number of requirements they imposed specific to Medicaid payment of abortions eligible for federal funding. For example, some states had no requirements specifically for these abortions, while one state had all five of the requirements most commonly reported. In general, states that used state-only funds to cover abortions in circumstances beyond those eligible for federal funding had fewer requirements. (See fig. 3.) Our interviews with the eight selected providers suggest that the scope of a state’s Medicaid abortion coverage and related payment requirements could affect abortion access. For example, six selected providers said that they rarely submit abortion claims to state Medicaid programs that limit abortion coverage to circumstances eligible for federal funding, in part, because obtaining payment is challenging; involves multiple, often unclear requirements; and frequently results in denied claims. One of these providers noted that not obtaining Medicaid payment puts additional pressure on already strained resources, affecting its ability to cover abortions for women in general. Conversely, two providers operating in states with broader Medicaid abortion coverage stated that they frequently submit claims for abortions and receive payment. State-reported information on denied abortion claims suggests that the difficulty the selected providers faced in obtaining Medicaid payment for abortions eligible for federal funding in certain states could exist in other states. Specifically, among the 15 states reporting information on denials of payment for abortions in circumstances eligible for federal funding, denial rates ranged from 4 percent to nearly 90 percent, with about half of the 15 states reporting denial rates of 60 percent or more. While we did not ask states to report on their reasons for denying Medicaid payment for abortions, some states provided this information. For example, one state said that its high denial rate is due to the initial denial of all claims for abortions in cases of life endangerment that do not have the recipient’s address, as required by federal regulation. In addition, 7 states reported having no payment denials, 4 of which did not receive any claims for abortions eligible for federal funding over the 5- year period. Findings from the studies we reviewed also highlight the potential effect of states’ Medicaid coverage and payment requirements on a woman’s access to abortions. Eight studies that examined the effect of limiting Medicaid abortion coverage to those eligible for federal funding found that such coverage limits were associated with a reduction in the number of women having abortions. For example, one of these studies analyzed national data from 1985 to 2005 and found that limiting Medicaid coverage to abortions eligible for federal funding reduced a state’s abortion rate by 8 to 9 percent. In addition, six studies that examined providers’ experiences obtaining Medicaid payment for abortions corroborated many of the concerns raised by our selected providers. For example, one study examining abortion provider experiences in six states found that many providers choose not to bill Medicaid for abortions, because obtaining payment for the procedure requires a significant time commitment, and when states do pay, the amount is typically lower than the cost of providing the abortion. The usefulness of federal information—namely CMS-64 data—for identifying the number of abortions eligible for federal Medicaid funding is limited, which could hamper CMS’s efforts to ensure proper payments and states’ coverage of abortions in cases of rape, incest, or life endangerment. In particular, the CMS-64 does not include the following information. Abortions states paid for through MCOs. The CMS-64 does not include information on abortions eligible for federal funding provided to Medicaid beneficiaries through MCOs, because states are not required to identify expenditures for individual managed care services on the form. In our survey, 23 states reported claiming federal Medicaid funding for abortions from fiscal years 2013 through 2017 that were, at least in part, paid for through MCOs. Abortions in states reporting FFS abortions incorrectly. The CMS-64 is also an incomplete information source, because of inaccurate state reporting. CMS requires states to report FFS abortions for which they claim federal funding on line 14 of the form. However, in our survey, eight states reported that they include the costs of such abortions on other lines of the CMS-64, such as on the lines for outpatient hospital or physician services. According to agency officials, CMS conducts quarterly reviews of the CMS-64 data states report. CMS officials also said that reviewers are not required to confirm whether states that report no abortions on line 14 have accurately reported the information, which means that reviewers may not identify states reporting abortions elsewhere. As a result, information from the CMS-64 does not accurately reflect the number of FFS abortions for all states that may be claiming federal Medicaid funding. In addition, because state Medicaid programs use the CMS-64 to claim federal funding for services provided, the form does not include information from states that covered abortions for Medicaid beneficiaries in circumstances of rape, incest, or life endangerment, but did not seek federal funding for those costs. In our survey, 15 states—accounting for nearly half the Medicaid population nationwide—reported that, from fiscal years 2013 through 2017, they did not claim federal funding for abortions covered by their programs. In comparison with the CMS-64 data, the information states reported through our survey was more comprehensive. For example, 16 states claiming federal Medicaid funding provided us information on the number of abortions paid for through MCOs, information that was not captured on the CMS-64 as individual services, but often represented a significant portion of the abortions covered by these states. Similarly, the 8 states we identified as incorrectly reporting their FFS abortions on the CMS-64 reported the number of such abortions to us, and these states accounted for half of all FFS abortions for which states reported claiming federal funding in our survey. As a result, the number of abortions for which states claimed federal funding that was reported to us was substantially higher than the number in CMS’s annual reports to Congress on such abortions, which are based on CMS-64 data. From fiscal year 2013 to fiscal year 2016—the latest year of data available from CMS’s annual reports—our survey identified nearly 5,000 abortions for which states claimed federal funding versus the approximately 550 identified in the agency’s reports. However, the information on abortions eligible for federal funding that states reported to us was also incomplete. Nine states, accounting for about one-third of total Medicaid enrollment, were unable to provide any information. These states use only state funds to pay for abortions, and, for example, do not require providers to report the circumstance for the abortion when requesting Medicaid payment, including those eligible for federal funding. Six states provided only FFS information, though they also reported paying for abortions through MCOs. Because over 60 percent of Medicaid beneficiaries in five of these states are enrolled in MCOs, information was not available for a significant portion of their beneficiaries. There were also other, smaller gaps in the states’ information. For example, six states were not able to provide information for at least 1 year of the survey time frame, and one state was not able to provide information on abortions in the case of life endangerment, which, based on information provided by other states, typically accounts for the majority of abortions eligible for federal Medicaid funding. While not always complete, 42 states reported information to us on abortions eligible for federal Medicaid funding, which showed a wide range in the number of procedures covered across states. Most of these states (37 of 42) reported covering 15 or fewer abortions eligible for federal funding per year, on average, from fiscal years 2013 through 2017, though this number may be understated in some states due to the data limitations discussed above. However, during this same time frame, 3 states (Iowa, South Dakota, and Wyoming) reported covering no abortions eligible for federal funding, and 2 states (Nevada and Pennsylvania) reported annually covering an average of more than 300 and 700 such abortions, respectively. (See app. II.) Additionally, when excluding Nevada and Pennsylvania, states reporting information showed an aggregate decrease in the number of abortions eligible for federal Medicaid funding they covered during the fiscal year 2013 through fiscal year 2017 time period (from 383 to 200). When data from these two states were included, there was an aggregate increase (from 876 to 1,544), as the number of abortions covered by Nevada and Pennsylvania was much higher in later years. T-MSIS could be a potential future source of more complete information on the number of abortions eligible for federal Medicaid funding. However, in two reports issued in January 2017 and December 2017, we examined T-MSIS implementation and identified issues with the completeness and comparability of T-MSIS data across states, as well as uncertainty with respect to how CMS will ensure the quality of the data or use them for oversight purposes. Based on our findings, we recommended that CMS expedite efforts to ensure the quality of T-MSIS data and articulate its plan and associated time frame for using these data for oversight. CMS agreed with these recommendations, but as of October 2018, the agency had not fully implemented them, and we continue to believe that these recommendations remain valid. Further, due to ongoing concerns regarding the quality of T-MSIS data and the small number of abortion services relative to other Medicaid services, CMS officials said that the agency has focused its oversight efforts in other areas. CMS has a central role in monitoring states’ compliance with federal requirements for coverage of abortions eligible for federal funding in the Medicaid program. However, our work identified limitations in CMS’s oversight. In the case of South Dakota, CMS is aware that the state does not cover abortions in cases of rape or incest, as required by federal law, but has not taken any action in 25 years to ensure the state’s compliance. CMS was not aware of the14 states that reported not covering Mifeprex despite the requirement to do so under federal law. Without such coverage, Medicaid beneficiaries seeking abortions in these states would have to find another way to pay for the drug or undergo a surgical abortion. Finally, incomplete federal data on the number of abortions eligible for federal Medicaid funding—in part, due to inaccuracies that we identified in the reporting of these expenditures by eight states—limit the agency’s ability to ensure that states are covering such abortions and that federal payments are made appropriately. We are making the following three recommendations to the Administrator of CMS. CMS should take action to ensure South Dakota’s Medicaid state plan provides coverage for abortions in cases of rape and in cases of incest, in addition to life endangerment, to comply with federal law, which currently requires such coverage. (Recommendation 1) CMS should determine the extent to which state Medicaid programs are in compliance with federal requirements regarding coverage of Mifeprex and take actions to ensure compliance, as appropriate. (Recommendation 2) CMS should determine the extent to which state Medicaid programs are accurately reporting fee-for-service abortions on line 14 of the CMS-64 and take actions to ensure accuracy, as appropriate. (Recommendation 3) We provided a draft of this product to the Department of Health and Human Services for comment. In its written comments, HHS concurred with our recommendations and indicated a commitment to working with states to address them. In doing so, HHS noted that while CMS encourages states to design their Medicaid programs to meet the needs of local beneficiaries, states must operate their programs consistent with all applicable federal laws, including those referenced in our report. HHS also provided technical comments, which we incorporated as appropriate. HHS’s comments are reprinted in appendix III. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of HHS, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. Major contributors to this report are listed in appendix IV. To identify studies examining factors that may present challenges to women, including Medicaid beneficiaries, accessing abortions, we conducted a literature review of recently published studies. Specifically, we searched for relevant studies published from January 2007 through September 2017. We searched various peer reviewed and industry journals using databases, including ProQuest, CINAHL, Dialog, and Scopus. Key terms included various combinations and iterations of “abortion,” “access,” “challenge,” “limit,” “restrict,” “obtain,” “deny,” “state regulation,” “state law,” “state rule,” “state policy,” “Medicaid,” “parental consent,” “parental notification,” “counseling,” “waiting period,” “ultrasound,” “ambulatory surgical,” “surgical center,” “admitting privileges,” “hospital distance,” “hospital proximity,” “hospital miles,” “room size,” “corridor,” “procedure room,” “transfer patient,” “targeted regulation of abortion providers,” “TRAP law,” “stigma,” “violence,” “protest,” harass,” “gestational limit,” “term limit,” “out-of-pocket,” “expense,” “provider availability,” “provider shortage,” and “provider participation.” From our search, we identified 637 studies. We systemically reviewed the abstracts of these studies to determine which ones examined factors that may present challenges to women accessing abortions. In doing so, we excluded studies where the research (1) was not focused on the United States; (2) was not empirically analytical, such as theoretical articles and opinion pieces; (3) did not directly analyze the effect of a factor on a woman’s ability to obtain an abortion (i.e., analyzed the effect of a factor on mental health outcomes, contraception use, or unintended birth); (4) did not focus on the civilian population; (5) evaluated personal characteristics or issues that may present challenges to obtaining abortions, such as income level or age; and (6) analyzed a number of factors together so the individual effect of any one factor could not be identified. For the studies remaining, we examined their methodologies to determine whether they were sufficiently reliable for the purposes of our reporting objectives. After taking these steps, 52 studies remained. The 52 studies were then reviewed and coded by analysts to determine the type of abortion access factor identified. We focused our analysis on key factors identified through interviews with selected abortion providers: (1) gestational limits; (2) mandatory counseling; (3) Medicaid challenges; (4) out-of-pocket costs, (5) parental involvement, (6) provider availability, including certain state laws regulating abortion providers; (7) stigma or harassment; and (8) waiting periods. Table 4 identifies these 52 studies and summarizes the factors they examined. Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov. In addition to the contact named above, Susan Anthony (Assistant Director), Rachel Svoboda, (Analyst-in-Charge), Marcia Crosse, Julianne Flowers, Sandra George, Ashley Nurhussein, Sara Rizik, and Jennifer Rudisill made key contributions to this report. Also contributing were Sarah Gilliland, Kaitlin Farquharson, Drew Long, Vikki Porter, and Eric Wedum.", "summary": "While federal law prohibits federal funding for abortions in most circumstances, state Medicaid programs are required to cover abortions in limited circumstances. CMS is responsible for monitoring state compliance with federal requirements. However, concerns have been raised about challenges women may face obtaining Medicaid coverage for abortions eligible for federal funding, as well as with abortion access more broadly. GAO was asked to review issues related to abortion access. This report examines (1) factors that may present challenges to women, including Medicaid beneficiaries, accessing abortions; and (2) federal and state information on the number of abortions eligible for federal Medicaid funding. GAO reviewed federal laws, regulations, and data sources; surveyed and received responses from Medicaid program officials in all 50 states and the District of Columbia; conducted a literature review; and interviewed CMS officials and eight abortion providers selected based on factors such as variation in Medicaid abortion coverage and geography. Women could face various challenges accessing abortions depending on where they live, and Medicaid beneficiaries may face additional challenges in some states. GAO identified seven key factors that could pose challenges to women accessing abortions, based on its interviews with providers and review of the literature: gestational limits, mandatory counseling, out-of-pocket costs, parental involvement requirements, provider availability, stigma and harassment, and waiting period requirements. The presence of these factors and their effect on abortion access—such as delays in care or increased costs—varied by state. GAO also found that state variation in Medicaid abortion coverage and payment requirements could further complicate access for program beneficiaries. State Medicaid programs are generally required to cover abortions and can seek federal funding for such coverage when the pregnancy is the result of an act of rape or incest, or the life of the pregnant woman would be endangered unless an abortion is performed. States may also cover abortions under other circumstances, but federal funds may not be used. In GAO's survey, one state reported not covering abortions in cases of rape or incest, and 14 states reported not covering the drug used in medical abortions, which they are generally required to cover if the abortion is otherwise eligible for federal funding. Officials from the Centers for Medicare & Medicaid Services (CMS), the federal agency that oversees Medicaid, were unaware that these states were not covering the drug, and thus, have not taken any actions to address states' non-compliance. Federal information on the number of abortions eligible for federal Medicaid funding is incomplete, limiting CMS's ability to ensure proper payments and states' coverage of such abortions. For example, the form CMS-64, which states use to report Medicaid expenditures, does not collect information on the number of abortions paid for by managed care—the delivery system serving most Medicaid beneficiaries. It also does not include this information from 8 states that GAO identified as incorrectly reporting abortion costs on the form. While also not complete, state information reported in GAO's survey was more comprehensive, and showed a wide range in the number of abortions eligible for federal funding covered across the 42 states that reported such information. GAO is making three recommendations to CMS to ensure state compliance with federal requirements for Medicaid abortion coverage, including coverage of the drug used for medical abortions. The Department of Health and Human Services concurred with these recommendations.", "document_type": "gao"}
{"report": "The technology sector has major employment hubs across the country, including the San Francisco Bay area, the greater New York City region, and the Washington-Arlington-Alexandria region (see fig. 1). In addition, technology workers are employed at companies outside the technology sector, such as in the retail or financial services industries. For example, a large retail company may require technology workers to create and manage their online sales activities, but the company itself would be considered part of the retail industry. Private companies are generally prohibited by federal law from discriminating in employment on the basis of race, color, religion, sex, national origin, age, and disability status. Additionally, federal contractors and subcontractors are generally required to take affirmative action to ensure that all applicants and employees are treated without regard to race, sex, color, religion, national origin, sexual orientation, and gender identity, and to employ or advance in employment qualified individuals with disabilities and qualified covered veterans. EEOC is responsible for enforcement of federal antidiscrimination laws, and OFCCP enforces affirmative action and nondiscrimination requirements for federal contractors. EEOC and OFCCP have some shared activities and have established a memorandum of understanding (MOU) to minimize any duplication of effort. For example, under the MOU, individual complaints filed with OFCCP alleging discrimination under Title VII are generally referred to EEOC. In addition, on occasions when EEOC receives a complaint not within its purview, such as cases that involve veteran status, but over which it believes OFCCP has jurisdiction, it will refer the complaint to OFCCP. The EEOC, created by Title VII of the Civil Rights Act of 1964, enforces federal laws that prohibit employment discrimination on the basis of race, sex, color, religion, national origin, age, and disability. As the nation’s primary enforcer of antidiscrimination laws, EEOC investigates charges of employment discrimination from the public, litigates major cases, and conducts outreach to prevent discrimination by educating employers and workers. In fiscal year 2016, EEOC received about 91,500 charges, secured more than $482 million for victims of discrimination, and filed 114 lawsuits. According to EEOC, many states, counties, cities, and towns have their own laws prohibiting discrimination, usually similar to those EEOC enforces, as well as agencies responsible for enforcing those laws, called Fair Employment Practices Agencies. However, in some cases, these agencies enforce laws that offer greater protection to workers. An individual can file a charge with either the EEOC or with a Fair Employment Practices Agency. When an individual initially files with a Fair Employment Practices Agency that has a worksharing agreement with the EEOC, and the allegation is covered by a law enforced by the EEOC, the Fair Employment Practices Agency will dual file the charge with EEOC (meaning EEOC will receive a copy of the charge), but will usually retain the charge for processing. If the charge is initially filed with EEOC and the charge is also covered by state or local law, EEOC dual files the charge with the state or local Fair Employment Practices Agency (meaning the Fair Employment Practices Agency will receive a copy of the charge), but EEOC ordinarily retains the charge for processing. EEOC also pursues a limited number of cases each year designed to combat systemic discrimination, defined by the agency as patterns or practices where the alleged discrimination presented by a complainant has a broad impact on an industry, profession, company, or geographic location. EEOC can also initiate a systemic investigation under Title VII with the approval of an EEOC commissioner, called a “commissioner charge”, provided the commissioner finds there is a reasonable basis for the investigation. In addition, EEOC district directors can approve systemic investigations, called “directed investigations” which are initiated by EEOC field office directors under the Age Discrimination in Employment Act and the Equal Pay Act. Under Title VII, EEOC generally requires that large employers and non- exempt federal contractors file Employer Information Reports (EEO-1 reports) annually, which collect employees’ demographic data by business location on sex, race, and ethnic group for 10 occupational job categories. According to EEOC documentation, EEO-1 data are used in investigations of Title VII violations, litigation, research, comparative analyses, class action suits, and affirmative action plans. The OFCCP is responsible for ensuring that the nearly 200,000 federal contractor establishments comply with federal nondiscrimination and affirmative action requirements. Under Executive Order 11246 and other federal laws and regulations, covered federal contractors and subcontractors are prohibited from discriminating in employment on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin and are required to take affirmative action to help ensure that all applicants and employees are treated without regard to these factors. In general, OFCCP’s regulations require covered contractors to comply with certain recordkeeping and reporting requirements, and provide for enforcement procedures such as compliance evaluations and complaint investigations to assist OFCCP in ensuring federal contractor compliance with these regulations. Among other provisions, OFCCP’s regulations generally require that covered contractors prepare and maintain an affirmative action program (AAP). Under OFCCP’s regulations, an AAP is a management tool that is designed to ensure equal employment opportunity, with an underlying premise that the gender, racial, and ethnic makeup of a contractor’s workforce should be representative of the labor pools from which the contractor recruits and selects. Companies must create an AAP for each business establishment—generally, a physical facility or unit that produces the goods or services, such as a factory, office, or store for the federal contractor. An AAP will also include any practical steps to address underrepresentation of women and minorities, such as expanding employment opportunities to underrepresented groups. Covered contractors must also comply with certain recordkeeping requirements, including records pertaining to hiring, promotion, lay off or termination, rates of pay, and applications, among other records. OFCCP’s enforcement program represents the majority of the agency’s activity and is carried out primarily by using compliance officers, who evaluate contractors’ compliance with various requirements, according to agency officials. In addition to conducting compliance evaluations, OFCCP also conducts investigations in response to complaints. In 2016, we reported that according to OFCCP officials, responding to complaints accounted for close to 16 percent of OFCCP’s enforcement activities. OFCCP selects contractor establishments for evaluations based on a number of neutrally applied factors, such as employee count at the establishment, contract value, or contract expiration date. We previously found that OFCCP reviews, on average, 2 percent of federal contractor establishments annually. As we previously reported, as part of its compliance evaluations, OFCCP is to review the selected contractor’s hiring, promotion, compensation, termination, and other employment practices to determine whether contractors are maintaining nondiscriminatory hiring and employment practices. OFCCP conducts evaluations at the establishment level. When a contractor establishment is selected for evaluation, OFCCP sends the contractor a “scheduling letter” requesting the AAP and supporting data, such as the percentage of women and minority staff at the workplace by job group. Then, a compliance officer is to conduct a desk audit, which is an off-site review of the submitted materials. If necessary, the compliance officer may also conduct an on-site review or further off-site analysis to make a final determination as to whether the contractor is in compliance. In addition to looking at whether federal contractors maintain nondiscriminatory hiring and employment practices, which can result in finding discrimination violations, OFCCP also frequently finds other types of violations, such as failure to keep necessary records or conduct annual reviews of equal employment and affirmative action efforts. These findings by the agency often require administrative changes on the part of the contractor, such as improved record-keeping. There are many different forms of remedies for discrimination violations, including financial, employment, and organizational change remedies. Although rare, under some circumstances, OFCCP may bar a contractor from doing business with the government. From 2005 to 2015, the estimated number of workers in the technology workforce—people who worked in mathematics, computing, or engineering occupations—increased at a higher rate (24 percent) than the estimated number of workers in the general workforce (9 percent), according to ACS data. In 2015, the technology workforce comprised an estimated 7.5 million workers, an increase of slightly over 1.4 million workers since 2005. (For a complete list of the occupations we include as technology occupations, see appendix II). Most technology workers have a college degree and have a higher median income than workers in the general workforce. Specifically, in 2015, an estimated 69 percent of technology workers held at least a bachelor’s degree, compared to 31 percent of workers in the general workforce. In 2015, the estimated median income for technology workers was $81,000 compared to $42,000 for the general workforce. From 2005 to 2015, the percentage of women in the technology workforce remained flat and women remained a smaller proportion of the technology workforce compared to their representation in the general workforce. In 2015, women represented 22 percent (about 1.6 million workers) of workers in technology occupations, compared to 48.7 percent of workers in the general workforce (see fig. 2). Although the estimated percentage of minority technology workers as a whole had grown since 2005, we found that this trend did not apply to Black technology workers. Specifically, from 2005 through 2015, although the number of Black workers increased as the technology workforce grew, there was no statistically significant change in their representation as a percentage of the entire technology workforce. In contrast, from 2005 to 2015, Hispanic and Asian technology workers had statistically significant increases in their representation in the technology workforce. Even with the increase in their numbers in the technology workforce, Black and Hispanic technology workers remained a smaller proportion of these workers compared to their representation in the general workforce. In contrast, Asian workers were an increasing share of the technology workforce, where they remained more represented than they were in the general workforce (see fig. 3). We found that when we examined gender representation for each minority group, both Black and Hispanic men and women were less represented in the technology workforce compared to their representation in the general workforce. The same was true for White women, whereas White men, Asian men, and Asian women were more represented in the technology workforce compared to their representation in the general workforce (see fig. 4). We defined the technology sector as those companies that have the highest concentration of technology workers and are in such industries as computer systems design and software publishing. Companies categorized as outside the technology sector, for example, retail or finance companies, may still employ some technology workers. However, we found differences in median incomes for technology workers within and outside the technology sector. In 2015, technology workers employed in the technology sector earned an estimated median income of $89,000 compared to median incomes of $78,000 for those working outside the technology sector. We also compared the characteristics of technology workers within the technology sector and outside the technology sector, and found male and Asian technology workers were relatively more represented in the technology sector than outside the technology sector. Similar to the lower representation of female, Black, and Hispanic technology workers in technology occupations, we found technology workers from these groups were also more likely to work outside the technology sector than in the technology sector. For example, according to our analysis of 2015 ACS data, women represented an estimated 18 percent of all technology workers employed in the technology sector, compared to 25 percent of all technology workers employed outside the technology sector (see fig. 5). White technology workers were also more represented outside the technology sector than within the technology sector. Companies in the technology sector also employ non-technical workers such as sales people, and the lower representation of women and certain minorities in the technology sector was also present in such non-technical job categories. According to our analysis of EEO-1 data, women were less represented across the full range of management and non- management positions at companies within the technology sector, including at leading technology companies, compared to their representation in companies outside the technology sector. We determined this by comparing specific occupations at companies both within and outside the technology sectors using 2015 EEO-1 data. For example, women held about 19 percent of senior-level management positions at companies in the technology sector compared to nearly 31 percent of such positions at companies outside the technology sector in 2015. Women were also less represented in all of the remaining job categories (mid-level managers, professionals, technicians, and all other jobs) in the technology sector. (See fig. 6.) Comparing EEO-1 data at three points in time for 2007, 2011, and 2015, we found women’s representation in management positions as well as among professionals and technicians at companies within the technology sector remained at about the same level, and decreased for “all other jobs” (see table 1). Similar to women, Black and Hispanic workers were less represented across multiple job categories in companies within the technology sector compared to those outside the technology sector (see fig.7). For example, 1.8 percent of senior level managers in the technology sector were Black compared to 3.4 percent of senior level managers in all other sectors. Appendix IV provides percentages for each minority group in different job categories within and outside the technology sector. The lower representation of Black workers in the technology sector relative to their representation in other sectors was consistent across all job categories (mid-level managers, professionals, technicians, and “all other jobs”). Hispanic workers were less represented in the technology sector compared to outside the technology sector across all job categories (senior and mid-level managers, professionals, technicians, and “all other jobs”). Compared to their representation across job categories within the technology sector in general, Black and Hispanic workers had slightly greater representation at the leading technology companies in senior management and technician categories, and lower representation among mid-level managers, professionals, and holders of “all other jobs.” Asian workers comprised a greater proportion of managerial and professional roles in the technology sector than in other sectors, according to our analysis of 2015 EEO-1 data. Asian workers represented 11.0 percent of senior level managers in the technology sector compared to 4.3 percent in industries outside the technology sector. This higher representation of Asian workers in the technology sector was consistent among mid-level managers, professionals and technicians. Asian workers were more represented in the same categories at the leading technology companies. However, a lower proportion of Asian workers held senior management positions compared to their representation in professional positions in both the technology sector and leading technology companies. Further, the proportion of Asian workers in mid-level management positions was also lower than their representation in professional positions, from which mid-level managers might be selected, in both the technology sector and leading technology companies. In contrast, a higher proportion of White workers were in senior and mid- level management positions compared to their representation in professional positions in both the technology sector and leading technology companies. Comparing EEO-1 data at three points in time—2007, 2011, and 2015— we saw varied representation across job categories in the technology sector by race/ethnicity. For example, Black workers decreased in their representation in all job categories in the technology sector from 2007 to 2015. In contrast, Hispanic and Asian workers increased in their representation in all job categories we examined from 2007 to 2015 (see table 2). Several factors may contribute to the lower representation of female, Hispanic, and Black workers in the technology workforce and at companies in the technology sector, based on research and interviews with researchers and representatives from workforce and industry organizations and technology companies. These include the lower diversity of degree earners in technology-related fields, and company- based factors such as hiring practices and retention of women and underrepresented minorities. The smaller proportion of women in the technology workforce may reflect the number of women earning technology-related degrees. Slightly over two-thirds of technology workers report having earned their bachelor’s degree in a computer, engineering, mathematics, or technology field. However, according to our analysis of 2014 IPEDS data, the percentage of technology-related bachelor’s and master’s degrees earned by women is far less than for men, although women were comparable to men in their receipt of science, technology, engineering, and math (STEM) degrees, and surpassed men in obtaining degrees in all other fields. In 2014, about 60,000 women were awarded technology-related bachelor’s or master’s degrees (compared to about 50,000 in 2004) and about 190,000 men were awarded such degrees (compared to about 147,000 in 2004). (See fig. 8.) An estimated 218,000 technology workers were added to the technology workforce in 2015, according to our analysis of 2015 American Community Survey data from the U.S. Census Bureau. In addition, technology degrees are also issued at the associate’s level. Two researchers told us that women often have the academic preparation to enter into technology-related degree programs, but they may choose not to pursue such degrees because of instances of gender bias within technology classes. Our prior work reported on studies that found women leave STEM fields at a higher rate than their male peers, citing one study that found women leave STEM academic positions at a higher rate than men in part due to dissatisfaction with departmental culture, faculty leadership, and research support. Further, a 2012 consulting firm report found that businesses viewed as male-dominated tended to attract fewer women at the entry level. In addition, according to our analysis of 2014 IPEDS data, three minority racial or ethnic groups each constituted 10 percent or fewer of bachelor’s and master’s degree earners in a technology-related field. Specifically, among the 202,200 earners of degrees in a technology-related field in 2014, there were about 20,000 Hispanic recipients, 13,000 Black recipients, and 18,000 recipients who were Multiracial or other race, which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i.e. respondents who selected one or more racial designations. Among all minority groups, Asian students, including Pacific Islander, earned the highest proportion of technology- related degrees (about 24,000 individuals). (See fig. 9). One barrier to entry into technology degree paths for Black and Hispanic students may be lower likelihood of access to preparatory academic programs in secondary school. In 2016, we reported that the K-12 public schools in the United States with students who are mostly Black or Hispanic offered disproportionately fewer math and science classes for their students. One researcher told us some colleges and universities, to help these students be academically successful, provide additional academic support such as tutoring to help bridge knowledge gaps. To address the uneven access to preparatory math and science classes, representatives from five technology companies told us they have started to invest in exposing Black and Hispanic children to technology occupations by, for example, developing online resources targeted to them and their parents and creating partnerships with secondary schools to improve their academic preparation in computer science. However, we have previously also reported that the number of students graduating with STEM degrees may not be a good measure of the supply of STEM workers because students often pursue careers in fields different from the ones they studied. For example, a lower percentage of women who obtained technology-related degrees became technology workers compared to men who earned the same degrees, according to our analysis of 2015 ACS data. Specifically, among women who earned technology degrees, an estimated 33 percent worked as a technology worker compared to 45 percent of men who earned technology degrees. Several representatives we interviewed from workforce and industry organizations and technology companies told us that recruitment practices may also have affected diversity in the technology workforce. For example, representatives from three workforce and industry organizations said technology companies tend to recruit from a select number of universities and colleges, thereby limiting their pool of potential applicants. To address this, representatives from several of the technology companies we interviewed told us they had changed recruitment practices and offered internships targeted to underrepresented groups. For example, representatives of four technology companies told us that their companies had expanded recruitment to include more schools. Representatives from two companies told us they offer programs such as summer and semester internships for which the company actively recruits from Historically Black Colleges and Universities and other specific schools to increase its pool of diverse candidates. In addition, representatives from workforce organizations and technology companies discussed concerns and strategies to address companies’ hiring practices and internal cultures that may limit workforce diversity. For example, one of these representatives said that technology companies often offer financial incentives to current employees to make referrals for new hires, which can result in reliance on social networks. These networks may be largely comprised of the same race and this practice therefore makes it harder for potential candidates from demographically different groups to have their resumes reviewed. Another workforce organization representative reported that some hiring managers filter out eligible candidates if their background and qualifications are not the same as those of previously successful employees. To address these concerns, representatives from one technology company told us that they had moved away from depending on referrals since this practice may result in leaders hiring people within their own networks, which generally does not increase diversity of gender or race/ethnicity. In addition, representatives from another company said they plan to begin reviewing resumes with names removed to limit bias by the reviewer. Further, representatives we interviewed from three technology companies told us they offer training to employees to help employees identify their own, unconscious biases. Other factors may affect retention of women and underrepresented minorities. For example, a representative from a workforce organization said that women leave technology occupations at a higher rate than men because they feel as if they have not been given the same opportunities for promotion and advancement within the company. A 2016 study that examined women in engineering and science found that women’s concerns about pay and promotion are often an issue in male-dominated fields regardless of the industry. Further, this study found that retention difficulties become more severe as the share of men in the workforce increased and that affected women’s pay and promotion. Representatives from one company told us another challenge is the lack of Black workers at the top levels, which might make it more difficult for Black employees in particular to see a leadership path. Representatives we interviewed from five technology companies told us they had implemented efforts to increase retention and promotion rates among minority and female workers, for example, by developing a diversity and inclusion newsletter, employee resource groups with executive sponsors, and internal training and classes for employees to improve their readiness to be promoted. Representatives from five technology companies told us that commitment of top leadership is an important factor that can help women and underrepresented minorities in the technology sector. For example, representatives from one company told us that top management support for diversity efforts, such as setting hiring goals, can help move a company in the direction of achieving representation goals and that leadership is very important to this effort. Representatives from several companies told us that there is often a business case for such changes: These companies work in a diverse, global environment and strive to make better products for diverse users. However, our prior work on workforce diversity in the financial services sector found that some diversity initiatives faced challenges gaining the \"buy-in\" of key employees, such as the middle managers who are often responsible for implementing such programs. According to EEOC officials, EEOC primarily oversees compliance with equal employment opportunity requirements by investigating workers’ individual charges of employment discrimination filed against companies. EEOC has publicly acknowledged the low levels of diversity in the technology sector. However, we were unable to identify a specific number of charges received by EEOC against companies in industries that are part of this sector because EEOC does not require investigators to record the industry of the charged company. EEOC’s database of charges and enforcement actions—the Integrated Mission System (IMS)—has a data field for the North American Industry Classification System (NAICS) industry code, the standard used by federal statistical agencies in classifying business establishments. However, we found that it is completed for only about half the entries in the system. EEOC officials in both the San Francisco and New York district offices told us that, while they cannot readily identify individual charges against technology companies, they believe they have received far fewer charges against technology companies than they would have expected given the public attention to the issue of diversity in the technology sector. In terms of systemic cases, according to EEOC, as of June 2017, the commission had 255 systemic cases pending since fiscal year 2011 involving technology companies (13 of these were initiated as commissioner charges and 8 were directed investigations involving age discrimination or pay parity issues). Officials from the New York region reported that they had seen an increase in systemic cases against technology companies in the past 3 years, largely involving practices of information technology staffing firms. Several EEOC officials we interviewed noted that technology workers may be initiating few complaints at the federal level due to factors such as fear of retaliation from employers or the availability of other employment or legal options. According to EEOC officials, fear of retaliation can affect charges across sectors and, given the growth in the technology workforce, an individual who feels discriminated against may simply leave the company because there are many other opportunities for individuals with technical skills. They also said that technology workers may generally have greater wealth and can afford to hire private attorneys to sue in state court rather than go through the EEOC. Moreover, they said that some states, including California, have stronger employment discrimination laws that allow for better remedies than federal laws, which could lead employees to file charges at the state level rather than with the EEOC. In addition, EEOC has acknowledged in a 2016 report that binding arbitration policies, which require individuals to submit their claims to private arbiters rather than courts, can also deter workers from bringing discrimination claims to the agency, leaving significant violations in entire segments of the workforce unreported. The report stated that an increasing number of arbitration policies have added bans on class actions that prevent individuals from joining together to challenge practices in any forum. The report concluded that the use of arbitration policies hinders EEOC’s ability to detect and remedy potential systemic violations. Researchers report that the use of such clauses has grown and data on federal civil filings for civil rights employment cases reflect a marked reduction in the number of such filings. Beyond pursuing charges, EEOC has taken some steps to address diversity in the technology sector including research and outreach efforts. In May 2016, citing the technology sector as a source for an increasing number of U.S. jobs, EEOC released a report analyzing EEO-1 data on diversity in the technology sector in tandem with a commission meeting raising awareness on the topic. In addition, EEOC’s fiscal year 2017- 2021 Strategic Enforcement Plan identified barriers to hiring and recruiting in the technology sector as a strategic priority. EEOC has also been involved in outreach efforts with the technology sector. For example, the EEOC Pacific Region described more than 15 in-person or webinar events since 2014 in collaboration with OFCCP and local organizations focused on diversity in the technology sector. The topics of these events included equity in pay and the activities of these two agencies in enforcing nondiscrimination laws. Finally, in fall 2016, EEOC initiated an internal working group to identify practices to help improve gender and racial diversity in technology, but as of June 2017 had no progress to report. OFCCP’s regulations require covered federal contractors to take proactive steps to ensure equal employment opportunity. OFCCP annually conducts routine evaluations of selected federal contractors, which includes those in the technology sector, for compliance with federal nondiscrimination and affirmative action requirements. To the extent that technology contractors are selected for evaluation through OFCCP’s normal selection process, these contractors are assessed for compliance with nondiscrimination and affirmative action laws as are other selected contractors. While evaluation of technology contractors occurs in the course of OFCCP’s routine activities, OFCCP does not currently use type of industry as a selection factor, according to officials. We also found that few (less than 1 percent) of OFCCP’s 2,911 closed technology contractor evaluations from fiscal years 2011 through 2016 resulted in discrimination violations, though 13 percent resulted in other violations, such as record- keeping violations and failure to establish an affirmative action program (AAP). An AAP is a key tool OFCCP requires contractors to complete to ensure equal employment opportunity. The remaining 86 percent of evaluations either found no violations or ended in administrative closure. Technology contractor evaluations that had discrimination violations resulted in back pay, salary adjustments, or other benefits totaling more than $4.5 million for 15,316 individuals (averaging about $300 per award) for fiscal years 2011 through 2016. The vast majority of discrimination violations were on the basis of gender or race/ethnicity rather than disability or veteran status. Corrective actions OFCCP identified for federal technology contractors over this timeframe also included requiring contractors to fill a total of 410 job vacancies as they arise with applicants who had been denied employment on the basis of discrimination. In addition, OFCCP recently filed three complaints against technology companies. According to our analysis, OFCCP conducted evaluations on 36 of the 65 leading technology companies from fiscal year 2011 through fiscal year 2016. During this timeframe there were 272 reviews of establishments— physical business locations—affiliated with these 36 companies. Based on these evaluations, 15 of the 36 companies had administrative violations, and 2 of the 36 also had discrimination violations. As a result of the discrimination findings against these leading technology companies, 541 individuals received monetary benefits totaling $783,387 (an average of $1,448 per award). In terms of other steps to conduct oversight of the technology sector, OFCCP officials in the Pacific Region said they are hiring compliance officers with legal training to be better able to address needs for reviews in the technology sector, such as responding to lawyers representing technology contractors. Officials in both the Pacific and Northeast regions work closely with statisticians and labor economists on their cases, an effort officials said has increased over the past few years. OFCCP has also requested funding in its fiscal year 2018 congressional budget justification to establish centers in San Francisco and New York that would develop expertise to handle large, complex compliance evaluations in specific industries, including information technology. We found that by not requiring an industry code in its investigations data, EEOC cannot analyze charge data by industry to help identify investigation and outreach priorities, in contradiction to EEOC strategic planning documents and EEOC Inspector General reports, which have emphasized the importance of doing so. By not requiring the use of the NAICS code for each entry in IMS, EEOC is limited in its ability to use these data for the purposes of identifying charges by industry sector and conducting sector-related analyses. Officials were aware of substantial gaps in coding of charges by industry and acknowledged limitations in the commission’s ability to analyze its investigations data by industry. However, officials expressed concern that routinely creating more complete records of the companies against which charges had been filed would require investigators to divert attention from their efforts to investigate charges. EEOC officials explained that the charging party provides initial information on the respondent company and requiring EEOC personnel to generate this information would slow down the process. They said their priority is to investigate individual charges, not to address larger trends or target specific industries. “The Strategic Enforcement Plan recommends using EEOC data to allow our enforcement and outreach efforts to focus on areas of significant concern. This might include tailoring outreach efforts for industries that experience greater likelihood of certain charges or informing enforcement decisions based on knowledge that certain industries have persistent problems, such as harassment. The data maintained in IMS provide a rich resource of information that can be used to explore the characteristics of industries that appear to have higher levels of certain allegations than comparative industries.” In addition, reports completed by the Urban Institute for the EEOC Office of Inspector General in 2013 and 2015 similarly recommended analysis of charge data, including by industry, to help identify priorities and measure performance. While EEOC has plans to review a year of IMS data to clean it and determine how best to add missing industry codes, among other objectives, officials could not provide a specific timeframe for when this review would begin and end. Standards for internal control in the federal government state that management should use quality information to achieve the agency’s objectives and objectives should be defined in specific terms so they are understood at all levels of the entity. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. Efforts to scrub these data and identify missing codes could help EEOC determine how to collect industry information on an ongoing basis for all entries. Doing so would also help EEOC determine the level of NAICS code that would be feasible and useful for investigators to identify and input into IMS. Without analyzing its data on charges across industries, EEOC’s ability to proactively identify priorities for its outreach and enforcement resource use is limited. We found that OFCCP also faces challenges that may hinder the agency’s oversight of technology companies. Specifically, OFCCP reported facing delays in receiving information from federal contractors, including technology companies, but has not yet evaluated whether its own policies and practices also impede its efforts to hold federal technology contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups. In addition, OFCCP regulations do not require federal contractors to disaggregate data for the purpose of determining placement goals for hiring, which may hinder contractors’ efforts to implement effective affirmative action programs. OFCCP has not analyzed delays in obtaining information from contractors OFCCP officials told us that they face delays in obtaining complete, accurate, and timely documentation from federal contractors, including technology companies, as part of the compliance review process. They said this limited their access to critical information and hindered OFCCP’s ability to determine whether discrimination had occurred. Officials in the Pacific Region reported that when issues are identified during OFCCP’s initial review that will require additional data, the data requests can be extensive. Consequently, technology contractors are taking longer to submit complete and accurate data that are needed to conduct analyses of the contractor’s workforce. In addition, officials in both the Pacific and Northeast regions reported that companies may not provide raw data as requested, or provide access to employees for OFCCP to interview, which is part of the compliance review process. Using 2015 OFCCP compliance evaluation data, we previously reported that close to 85 percent of contractor establishments across all sectors did not submit an AAP within 30 days of being scheduled for an OFCCP compliance evaluation, as required by OFCCP policy. Officials told us of the potential need for a more flexible set of investigatory tools or sanctions, such as subpoena power to speed up data-gathering or penalties for delays in providing information, in order to obtain accurate and timely information. In the case of incomplete data, OFCCP officials said one option is to enter into an agreement with the contractor whereby the contractor will gather the missing data, and OFCCP will monitor the contractor’s efforts and review detailed records at a later date. However, they said that such an agreement could give the contractor an opportunity to modify the data in the contractor’s favor. Currently, OFCCP’s primary sanction is the threat of debarment, which makes a company ineligible to receive future federal contracts. At the same time, OFCCP officials acknowledged there may additionally be delays in their own review processes. In prior work, we’ve reported concerns by contractors and industry groups about lengthy and expansive OFCCP evaluations. However, OFCCP has not analyzed its data on closed evaluations to assess the cause of delays, which would help determine whether changes should be made to its internal processes or if stronger sanctions to obtain information from contractors are needed. Internal control standards state that management should identify, analyze, and respond to risks related to achieving its objectives. Further, it states that management should design appropriate mechanisms to enforce its directives to achieve those objectives and address related risks. Without more information on the root cause of the delays, these delays may continue, straining resources and inhibiting OFCCP’s efforts to identify potential discrimination. “An affirmative action program is a management tool designed to ensure equal employment opportunity. A central premise underlying affirmative action is that, absent discrimination, over time a contractor’s workforce, generally, will reflect the gender, racial and ethnic profile of the labor pools from which the contractor recruits and selects. Affirmative action programs contain a diagnostic component which includes a number of quantitative analyses designed to evaluate the composition of the workforce of the contractor and compare it to the composition of the relevant labor pools. Affirmative action programs also include action- oriented programs. If women and minorities are not being employed at a rate to be expected given their availability in the relevant labor pool, the contractor’s affirmative action program includes specific practical steps designed to address this underutilization.” “The placement goal-setting process . . . contemplates that contractors will, where required, establish a single goal for all minorities. In the event of a substantial disparity in the utilization of a particular minority group or in the utilization of women or women of a particular minority group, a contractor may be required to establish separate goals for those groups.” According to OFCCP officials, a contractor may be required to establish separate goals for particular minority groups as part of a compliance review. We found, however, that OFCCP’s regulations do not require federal contractors to disaggregate demographic data for the purpose of establishing placement goals in their AAP. This may hinder their efforts to implement effective AAPs, which are designed to assist the company in achieving a workforce that reflects the gender, racial, and ethnic profile of the labor pools from which the contractor recruits and selects. OFCCP officials in headquarters and in the field said, based on their experience evaluating companies’ compliance, it was not common for companies to have placement goals disaggregated by race and ethnicity in their AAPs. A diversity and inclusion officer we interviewed from one large technology contractor noted that the requirement in the AAP to identify the need for placement goals for minorities as a whole does not address underrepresentation in certain minority groups. According to the officer, the company does not count Asian workers in setting the company’s diversity goals because Asians are well represented and the company believes it should set a placement goal for groups for which the company knows it needs to make progress. Citing comments received during development of other regulations, OFCCP officials cautioned that an analysis of utilization disaggregated by race/ethnicity may be more challenging for smaller companies with fewer employees. Further, looking at trends in diversity for minorities as a whole may not assist a company’s affirmative action efforts to identify groups that need particular outreach or support. Specifically, our analysis of workforce data found differences in representation for Black and Hispanic workers in the technology workforce compared to Asian workers. Under the current AAP regulations, companies may opt not to detect and address underrepresentation of particular minority groups since OFCCP does not require placement goals disaggregated by race/ethnicity. While OFCCP may be able to detect underrepresentation of particular minority groups during its reviews, the office reviews only 2 percent of federal contractor establishments each year. OFCCP officials said that they would need to amend their regulations in order to require disaggregated race/ethnicity information for placement goals on AAPs. The officials said disaggregating race in placement goals could help an establishment determine how to tailor outreach accordingly or better identify impediments to its equal employment opportunity efforts. However, they have not pursued this regulatory change because of competing priorities on their regulatory agenda. OFCCP’s mission includes holding federal contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups. However, not requiring contractors to set placement goals for each minority group may hinder OFCCP’s ability to effectively achieve this mission. OFCCP has not reviewed key aspects of its current approach to evaluations OFCCP officials report the agency intends to incorporate additional information on gender, racial, and ethnic disparities by industry into its compliance evaluation selection process, but we found the methodology to determine the disparities may have weaknesses. We have previously reported on the challenges OFCCP faces with its enforcement efforts, and identified additional areas that may limit OFCCP’s enforcement of federal contractors’ equal employment and affirmative action efforts. For example, our 2016 report found that OFCCP’s weak compliance evaluation selection process, reliance on voluntary compliance, and lack of staff training create several challenges to its enforcement efforts. This report found that because OFCCP was not able to identify which factors are associated with risk of noncompliance, the agency does not have reasonable assurance that it is focusing its efforts on those contractors at greatest risk of not following nondiscrimination or affirmative action requirements. OFCCP agreed with recommendations we made to address these areas and detailed steps the agency would take. In particular, to strengthen its compliance evaluation process to select contractors at greatest risk of potential discrimination, the agency stated that it planned to incorporate information on pay disparities and employment disparities. OFCCP officials indicated this information would be based on analysis of gender and race/ethnicity by industry using ACS data and EEO-1 compensation data that was to be collected beginning March 2018. However, in August 2017, the Office of Management and Budget issued a memo suspending the pay-related data collection aspects of the EEO-1 form. Despite this change, OFCCP officials said they are exploring other options for focusing on compensation disparities by industry, including through the use of ACS data, administrative data, a previous study conducted by the Department of Labor, as well as options proposed by contractors. We also found OFCCP’s current methodology for identifying disparities by industry with the ACS data may have some weaknesses that could affect the accuracy of the outcomes. For example, its reliance on the broadest industry level available may not sufficiently identify specific industries at elevated risk. Further, the methodology includes future plans to conduct the analysis for metropolitan areas. Given the importance of regional and local labor markets for assessing affirmative action efforts, regional and local analysis should also be completed before OFCCP incorporates this analysis into its selection process. It is important that OFCCP use reliable information in modifying its basic processes and setting priorities. For the reasons cited earlier regarding the importance of using quality information to make management decisions, it is important that OFCCP assess the quality of the methods for its analysis of employment disparities among industries. Without doing so, OFCCP may not accurately identify industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements so it can focus its limited investigation resources most effectively. Further, according to OFCCP officials, although the agency has made slight changes to various thresholds and factors for its selection process, the agency has not made any significant changes to the selection process for about 10 years, and has made no changes to its establishment-based approach since OFCCP was founded in 1965. While OFCCP currently grounds its review of a contractor in a particular physical establishment, OFCCP officials acknowledged the changing nature of a company’s work can involve multiple locations and corresponding changes in the scope of hiring and recruitment. Officials we interviewed from five of our eight selected technology companies discussed their work spread across locations, including the United States or overseas, and the related challenges they face with OFCCP’s establishment-based approach to reviews. One company representative said the AAP is not useful because site specific plans do not connect to business decisions. However, OFCCP has not reviewed the implications for the effectiveness of its mission of continuing with its establishment-based approach to conducting compliance evaluations. In addition, OFCCP officials acknowledged their inability, in identifying establishments for review, to consistently identify and include all subcontractors to which OFCCP rules should apply. They said the agency has not assessed the potential significance of any omissions of subcontractors from the oversight process. Internal control standards state that management should identify risks throughout the entity related to achieving its defined objectives to form a basis for designing risk responses, as well as the importance of periodically reviewing policies, procedures and related control activities for continued relevance and effectiveness in achieving the agency’s objectives. OFCCP officials said they have informally discussed how to adjust their work based on how work is performed in today’s economy—with virtual sites, workplace flexibilities, and nontraditional forms of employment. However, due to competing priorities, they have not conducted a formal review of these key aspects of its current approach to selecting entities for review. They acknowledged such a review would be useful. Without assessing its current approach to its establishment-based reviews and identification of all relevant subcontractors, OFCCP does not have reasonable assurance that its approach can identify discrimination occurring within the companies it oversees and may be missing opportunities to identify more effective practices or adjust its methods to external changes. While OFCCP has offered an option—the Functional Affirmative Action Program (FAAP)—for companies to move away from establishment- based reviews and which may be more appropriate for some multi– establishment contractors, uptake has been low and the agency has not conducted an evaluation of this program. Since 2002, OFCCP has allowed companies to create FAAPs, with OFCCP approval, which are based on a business function or unit that may exist at multiple establishments. As of May 2017, 73 companies across all industries had FAAPs in place. Further, some of the companies we interviewed were unaware that the FAAP was an option or believed it was cumbersome to establish given the complexity of their workforce. Asked why the FAAP has not been more broadly adopted, OFCCP officials hypothesized it could have to do with a requirement intended to ensure that companies with FAAPs would be reviewed at least as often as others, but that may result in these companies being reviewed more often than most. Standards for internal control for government agencies state that management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives. Reviewing and refining the FAAP program could help OFCCP improve its ability to achieve its objectives and may provide broader insight for OFCCP’s overall enforcement approach. Jobs in the high paying technology sector are projected to grow in coming years. Female, Black, and Hispanic workers, however, comprised a smaller proportion of technology workers compared to their representation in the general workforce from 2005 through 2015, and have also been less represented among technology workers inside the technology sector than outside it. Both EEOC’s and OFCCP’s mission is to combat discrimination and support equal employment opportunity for U.S. workers; however, weaknesses in their processes impact the effectiveness of their efforts. When conducting investigations, EEOC has not been consistently capturing information on industry codes. This impedes its ability to conduct industry sector analysis that could be used to more effectively focus its limited enforcement resources and outreach activities. Similarly, OFCCP faces delays in its compliance review process but it has not analyzed its closed evaluations to understand the causes of these delays and whether its processes need to be modified to reduce them. In addition, as part of their affirmative action programs federal contractors are only required to set placement goals for all minorities in general. By not requiring contractors to disaggregate demographic data for the purpose of establishing placement goals, OFCCP has limited assurance that these contractors are setting goals that will address potential underrepresentation in certain minority groups. Further, OFCCP plans to incorporate information on disparities by industry into its process for selecting establishments for compliance evaluations, but has not fully assessed its planned methods. Without such assessment, OFCCP may use a process that does not effectively identify the industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements. In addition, key aspects of OFCCP’s approach to compliance reviews of contractors’ affirmative action efforts have not changed in over 50 years, whereas the structure and locations of these companies’ work have changed. Finally, although OFCCP has developed an alternative affirmative action program for multi-establishment contractors, few contractors participate in this program. Because OFCCP has not evaluated the program, it does not have information to determine why there has not been greater uptake and whether it provides a more effective alternative to an establishment-based AAP. We are making a total of six recommendations, including one to EEOC and five to OFCCP. Specifically: The Chair of the EEOC should develop a timeline to complete the planned effort to clean IMS data for a one-year period and add missing industry code data. (Recommendation 1) The Director of OFCCP should analyze internal process data from closed evaluations to better understand the cause of delays that occur during compliance evaluations and make changes accordingly. (Recommendation 2) The Director of OFCCP should take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities, incorporating any appropriate accommodation for company size. For example, OFCCP could provide guidance to contractors to include more specific goals in their AAP or assess the feasibility of amending their regulations to require them to do so. (Recommendation 3) The Director of OFCCP should assess the quality of the methods used by OFCCP to incorporate consideration of disparities by industry into its process for selecting contractor establishments for compliance evaluation. It should use the results of this assessment in finalizing its procedures for identifying contractor establishments at greatest risk of noncompliance. (Recommendation 4) The Director of OFCCP should evaluate the current approach used for identifying entities for compliance review and determine whether modifications are needed to reflect current workplace structures and locations or to ensure that subcontractors are included. (Recommendation 5) The Director of OFCCP should evaluate the Functional Affirmative Action Program to assess its usefulness as an effective alternative to an establishment-based program, and determine what improvements, if any, could be made to better encourage contractor participation. (Recommendation 6) We provided a draft of this report to the Departments of Labor (DOL), Commerce, the Equal Employment Opportunity Commission (EEOC) and the National Science Foundation (NSF). We received written comments from DOL that are reproduced in appendix V. In addition, DOL, Commerce, EEOC, and NSF provided technical comments which we incorporated into the report as appropriate. DOL agreed with 4 of the 5 recommendations we made to improve oversight of federal contractors, and identified some steps it plans to take to implement them. Specifically, the department agreed with our recommendations to analyze internal process data to better understand the cause of delays that occur during compliance evaluations, assess the quality of methods used to incorporate consideration of disparities by industry into the process to select contractors for review, and to evaluate its current approach to identifying entities for review in light of changes in workplace structures, as well as its Functional Affirmative Action Program. DOL stated that it appreciated, but neither agreed nor disagreed, with our recommendation to take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities. The department said this would require a regulatory change with little immediate benefit as contractors are already required to collect demographic data on each employee and applicant, and must conduct in- depth analyses of their total employment processes to identify where impediments to equal opportunity exist. While we acknowledge these data collection requirements for federal contractors, we remain concerned that without requiring contractors to also establish placement goals to address any underrepresentation for specific minority groups, contractors may not develop objectives or targets to make affirmative action efforts work. We maintain, therefore, that DOL should take steps toward requiring contractors to develop placement goals disaggregated by race/ethnicity. EEOC provided us a memo that it characterized as technical comments on the draft report. In these comments, EEOC neither agreed nor disagreed with our recommendation to develop a timeline to complete its planned effort to clean IMS data for a one-year period, which would include adding missing industry codes, but stated that it was taking some actions to enhance these data. We continue to maintain a timeline should be developed to complete this review, which is needed for the commission to conduct industry sector analysis that could be used to more effectively focus its limited resources and outreach activities. EEOC also emphasized the importance of systemic investigations, noting that while outreach may be somewhat useful in generating charges, individual charges are unlikely to make a substantial impact on a systemic practice affecting an entire employment sector. We maintain that the ability to analyze IMS data by industry could help EEOC to focus its resource use, including for systemic investigations. EEOC also noted staffing and resource constraints as issues faced by the commission. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Labor, the Chair of the Equal Employment Opportunity Commission, the Secretary of Commerce, and the Director of the National Science Foundation. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff should have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. Our two objectives were to: (1) identify the demographic trends in the technology workforce over the past 10 years, and (2) assess the efforts by the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) to oversee technology companies and technology contractors’ compliance with equal employment opportunity and affirmative action requirements. This appendix provides details of the data sources used to answer these questions, the analyses we conducted, and any limitations we encountered. There is no commonly accepted definition of the technology sector or technology-oriented occupations. To arrive at our definition for the technology sector, we identified industries with the highest concentration of technology-oriented occupations, a similar approach to what other federal agencies have used recently to analyze trends within this sector. To identify technology-oriented occupations, we reviewed relevant research and interviewed researchers and other individuals knowledgeable about the technology sector. Based on this research, we defined technology-oriented occupations to include all computer, engineering and mathematical occupations, including managers. We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and crosswalked those occupations to the corresponding U.S. Census Bureau occupation codes to conduct our analysis. (For a complete list of the occupations we included as technology occupations, see appendix II). We defined the technology sector as a group of industries with the highest concentration of technology workers. Using data from the American Community Survey, an ongoing national survey conducted by the U.S. Census Bureau that collects information from a sample of households, we identified the 15 industries with the highest concentration of technology workers. For this analysis, we used Census industry codes since we used this dataset for many of our analyses. The concentration of technology workers in these industries ranged from a high of 62.2 percent in the computer systems design and related services industry to a low of 19.33 percent in the wired telecommunications carriers industry (see table 3). Companies in the technology sector also employ non-technical workers, such as sales people. We cross-walked the industries we identified in the American Community Survey with corresponding industry codes from the North American Industry Classification System (NAICS), which is the standard used by federal statistical agencies in classifying business establishments. The other data sets used in this review use NAICS codes to identify industry. The NAICS system has six levels of industry classification, with the smallest level (2-digit code) providing the most general industry classification, and the largest (6-digit) providing the most specific classification. In total, we identified 55 6-digit NAICS industry codes that comprise the technology sector using this method. (See appendix III for a list of the 6-digit NAICS codes and industry names that correspond to the Census industries we identified.) We compared our list of industries to those included in the 2016 reports by EEOC and the BLS on the technology sector. While each report includes a somewhat different set of industries depending on the authors’ particular definition of technology occupations, most of the 15 industries we selected overlap with industries selected in these other reviews. Stemming from their particular focus, these reports included some additional industries and/or occupations excluded from our analysis, such as those in the life sciences. We also compared our findings on the demographic trends in the technology workforce to 2016 EEOC and Census Bureau reports that reviewed diversity in the technology sector. Despite the definitional and methodological variations, the demographic trends found in these other reports were generally comparable to our findings. To determine the demographic trends in the technology workforce over the past decade, we analyzed quantitative data on technology workers within and outside the technology sector from 2005 through 2015 from the Census Bureau’s Public Use Microdata Sample of the American Community Survey (ACS) for the years 2005, 2007, 2009, 2011, 2013, and 2015. ACS is an ongoing national survey that collects information from a sample of households. We analyzed trend data for gender, race, and ethnicity, and median salary by occupation and sector, and analyzed point-in-time data on educational background by occupation. We analyzed the percentage of technology workers who earned bachelor’s degrees in computer, engineering, mathematics, and technology fields. For median salary, we analyzed data for workers who were employed full-time, which included those who, over the past 12 months, reported usually working 35 hours or more per week and 50 weeks or more per year, and those with wages greater than zero. To account for the sample representation and design used in the ACS, we used the person weight present in the ACS data. We used the successive difference replication method to estimate the standard errors around any population estimate. For each comparison, we tested the statistical significance of the difference for men and women and for specific racial and ethnic groups at the p-value <0.05 level. In addition, we tested the statistical significance of the change between 2005 and 2015 for each gender and racial/ethnic group. For race categories using ACS data in this report, we included only non- Hispanic members of White, Black, Asian, and Other categories. For the Asian category, we included Asian American, Native Hawaiian or Other Pacific Islander. The Hispanic category incorporated Hispanics of all races. Our analysis included American Indian or Alaskan Native, and Two or More Races, in the category reported as “Other.” We assessed the reliability of the ACS generally and of data elements that were critical to our analyses and determined that they were sufficiently reliable for our analyses. Specifically, we reviewed documentation on the general design and methods of the ACS and on the specific elements of the ACS data that were used in our analysis. We interviewed Census Bureau officials knowledgeable about the ACS data and completed our own electronic data testing to assess the accuracy and completeness of the data used in our analyses. To determine workforce trends in companies within the technology sector and at leading information technology companies, we analyzed data from EEOC’s Employer Information Reports (EEO-1) for the years 2007, 2011, and 2015. We report EEO-1 data starting in 2007 because EEOC made significant changes to its requirements related to the reporting of EEO-1 data over time. For example, beginning in 2007, EEOC changed its requirements related to the reporting of data on managers and changed its practices for collecting certain racial/ethnicity information. EEO-1 reports contain firm-level data that is annually submitted to EEOC, generally by private-sector firms with at least 100 employees or federal contractors with at least 50 employees that have a contract, subcontract or purchase order amounting to $50,000 or more. Companies that fit the above criteria submit separate EEO-1 reports for their headquarters as well as each establishment facility. EEOC requires employers to use the North American Industry Classification System (NAICS) to classify their industry. To identify trends using EEO-1 data for workers, we analyzed data for companies with the NAICS codes we initially identified as technology industries. We selected the leading information technology companies using Standard & Poor’s (S&P) 500 Information Technology Index list, which identifies the largest public information technology companies at a given time. In October 2016, this list consisted of 67 companies in the world that have stocks trading with the United States, and we analyzed EEO-1 data from 65 of these companies. For both analyses, we analyzed EEO-1 data from all job categories by gender, race and ethnicity, and industry sectors. For job categories, the EEO-1 form collects data on 10 major job categories including 1) Executives, Senior Level Officials and Managers; 2) First/Mid-Level Officials and Managers; 3) Professionals; 4) Technicians; 5) Sales Workers; 6) Administrative Support Workers; 7) Craft Workers; 8) Operatives; 9) Laborers and Helpers; and 10) Service Workers. In our analysis, “all other jobs” combines sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers. We used the race/ethnicity categories used by the EEOC as follows: White, Black or African American, Asian (including Native Hawaiian or Other Pacific Islander), Hispanic or Latino, and “Two or more Races” (including American Indian or Alaska Native). We assessed the reliability of the EEO-1 data and determined that despite limitations, they were sufficiently reliable for our analyses. To determine the reliability of the EEO-1 data that we received from EEOC, we interviewed knowledgeable EEOC officials, reviewed relevant documents provided by agency officials and obtained on its website, and performed manual data testing for missing variables. For our analysis of technology degree earners, we used degree completion data tabulated by the National Science Foundation from the National Center for Education Statistics’ Integrated Postsecondary Education Data System (IPEDS) for the year 2014. Using a variety of sources, such as academic research and interviews with representatives from academia, we defined technology-related fields as degree programs in computer science, engineering, and mathematics. We analyzed IPEDS data by race and gender and who had obtained a bachelor’s or master’s degree in technology-related fields. We determined that the potential external candidates for technology positions generally had obtained either a bachelor’s or a master’s degree in a technology-related field. We used the race/ethnicity categories used by IPEDS as follows: White, Black, Asian (including Pacific Islander), Hispanic, and Multiracial or other (which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i.e. respondents who selected one or more racial designations). Race and ethnicity breakouts are for U.S. citizens and permanent residents only, and thus do not include data on temporary residents. The analysis by gender includes temporary residents. To determine the reliability of IPEDs data, we reviewed relevant documents obtained on the National Center for Education Statistics website, such as annual methodology reports and the handbook of NCES survey methods. We determined that data from IPEDs were sufficiently reliable for our purposes. To identify how EEOC and OFCCP have overseen technology companies’ compliance with federal equal opportunity and affirmative action requirements, we reviewed relevant federal statutes and regulations, EEOC and OFCCP policies, strategic planning documents, and operational manuals. We interviewed EEOC and OFCCP officials in headquarters, and in two regional locations selected based on the large proportion of technology companies in those areas. At EEOC, we met with officials from the San Francisco and New York district offices. At OFCCP, we met with officials from the Pacific and Northeast regional offices. To explore charges of discrimination filed with the EEOC against technology companies, we planned to analyze data from the EEOC Integrated Mission System (IMS), which contains records on EEOC charges and enforcement activities. However, since industry code is not a mandatory field for investigators to complete, roughly half the entries did not have an industry code. Therefore, we could not reliably identify technology companies that have faced charges or enforcement. We attempted to match information we had developed on federal technology contractors with charges filed in the IMS database. Depending on the matching method we used, this yielded very different results and we determined this was not a sufficiently reliable method. Further, any matching method we used would have excluded technology companies that did not hold a federal contract. To obtain information on evaluations of technology contractors completed by OFCCP and complaints received against technology contractors, we took a two-step approach. First, using the Federal Procurement Data System–Next Generation (FPDS-NG), we developed a list of company establishments and their subsidiaries that received federal contract obligations in fiscal years 2011-2015 under any of the 55 NAICS codes we included above as technology industries. We selected only company establishments that received 50 percent or more of their total federal contract obligations under these NAICS codes. Each establishment was counted only once regardless of how many federal contracts it received during the time period. Using this method, we identified 43,448 establishments in our pool of “technology contractors.” To identify subsidiaries, which are also subject to OFCCP requirements and evaluations, we identified any other establishments that shared the global vendor code with the contractors we identified, regardless of their NAICS code. This yielded 2,116 additional contractors. Second, we matched the names (removing suffixes) of the technology contractors and their subsidiaries that we identified in FPDS-NG against OFCCP’s data on their evaluations of contractors to identify the evaluations of technology contractors that OFCCP opened and completed from fiscal year 2011 through fiscal year 2016. We conducted a similar matching exercise to identify the complaints OFCCP received against technology companies. In addition, we identified which of the leading technology companies had completed evaluations between fiscal year 2011 through 2016. We obtained information during interviews with researchers, and representatives of workforce and industry organizations and associations. In addition, we interviewed diversity and compliance representatives of eight of the leading information technology companies located in the San Francisco Bay area which were also federal contractors to discuss their efforts to increase diversity and to gain their perspectives on the federal role in overseeing compliance with nondiscrimination laws. These companies were: Cisco Systems, Inc. Facebook, Inc. Google Inc. Hewlett Packard Enterprise Company Intuit Inc. Oracle America, Inc. This is the list of technology occupations that we used in our analyses. We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and cross- walked those occupations to the corresponding U.S. Census Bureau occupation codes. This is the list of the 55 6-digit North American Industry Classification System (NAICS) codes we identified as technology-related industries. To develop this list, we identified the 15 industries with the highest concentration of technology workers using U.S. Census Bureau industry codes and then used the U.S. Census Bureau’s 2012 Industry Code List for Household Surveys to crosswalk the Census codes with NAICS codes. In addition to the contact named above, Betty Ward-Zukerman (Assistant Director), Kate Blumenreich (Analyst-in-Charge), Sheranda Campbell, Julianne Hartmann Cutts, Clarita Mrena, Moon Parks, Alexandra Rouse, and John Yee made significant contributions to all phases of the work. Also contributing to this report were Rachel Beers, James Bennett, Hedieh Fusfield, Julia Kennon, Jean McSween, Jessica Orr, Dae Park, James Rebbe, Almeta Spencer, and Alexandra Squitieri.", "summary": "Technology companies are a major source of high-paying U.S. jobs, but some have questioned the sector's commitment to equal employment opportunity. EEOC provides federal oversight of nondiscrimination requirements by investigating charges of discrimination, and OFCCP enforces federal contractors' compliance with affirmative action requirements. GAO was asked to review workforce trends in the technology sector and federal oversight. This report examines (1) trends in the gender, racial, and ethnic composition of the technology sector workforce; and (2) EEOC and OFCCP oversight of technology companies' compliance with equal employment and affirmative action requirements. GAO analyzed workforce data from the American Community Survey for 2005-2015 and EEOC Employer Information Reports for 2007-2015, the latest data available during our analysis. GAO analyzed OFCCP data on compliance evaluations for fiscal years 2011-2016. GAO interviewed agency officials, researchers, and workforce, industry, and company representatives. The estimated percentage of minority technology workers increased from 2005 to 2015, but GAO found that no growth occurred for female and Black workers, whereas Asian and Hispanic workers made statistically significant increases (see figure). Further, female, Black, and Hispanic workers remain a smaller proportion of the technology workforce—mathematics, computing, and engineering occupations—compared to their representation in the general workforce. These groups have also been less represented among technology workers inside the technology sector than outside it. In contrast, Asian workers were more represented in these occupations than in the general workforce. Stakeholders and researchers GAO interviewed identified several factors that may have contributed to the lower representation of certain groups, such as fewer women and minorities graduating with technical degrees and company hiring and retention practices. Both the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) have taken steps to enforce equal employment and affirmative action requirements in the technology sector, but face limitations. While EEOC has identified barriers to recruitment and hiring in the technology sector as a strategic priority, when EEOC conducts investigations, it does not systematically record the type of industry, therefore limiting sector-related analyses to help focus its efforts. EEOC has plans to determine how to add missing industry codes but has not set a timeframe to do this. In addition, OFCCP's regulations may hinder its ability to enforce contractors' compliance because OFCCP directs contractors to set placement goals for all minorities as a group rather than for specific racial/ethnic groups. OFCCP also has not made changes to its establishment-based approach to selecting entities for review in decades, even though changes have occurred in how workplaces are structured. Without taking steps to address these issues, OFCCP may miss opportunities to hold contractors responsible for complying with affirmative action and nondiscrimination requirements. GAO makes 6 recommendations, including that EEOC develop a timeline to improve industry data collection and OFCCP take steps toward requiring more specific minority placement goals by contractors and assess key aspects of its selection approach. EEOC neither agreed nor disagreed with its recommendation, and OFCCP stated the need for regulatory change to alter placement goal requirements. GAO continues to believe actions are needed, as discussed in the report.", "document_type": "gao"}
{"report": "Set-top boxes provide a variety of functions, including enabling consumers to access their video subscriptions. They also secure the video provider’s content to ensure that the subscriber can access only the channels subscribed to, and prevent unauthorized use, such as recording of content that subscribers do not have the right to record. Among other features, set-top boxes may also allow subscribers to: view a channel guide and search for programming and record content for later viewing; view linear programming—meaning video programming that appears on a given channel at a given time; and view video on demand—meaning video programming available for consumers to access when they want to instead of at a specific time. Traditionally, video content flows from content producers to households through various intermediaries (see fig. 1). Content producers negotiate and agree to a variety of terms and conditions with the networks or local television stations that carry the content, and those networks further negotiate and agree to terms and conditions with the MVPDs that distribute the content to subscribers. For example, a content producer may agree that in addition to its program showing on the linear cable channel at a specific time, its program is also available on demand, but only for a specific period of time. Furthermore, networks may negotiate for and agree to a range of terms with MVPDs regarding channel placement and other items. Protections programmed into the set-top box help ensure that such agreements are implemented. For over two decades, federal statutes and regulations have sought to foster consumer choice for video services and devices to access such services. The Cable Television Consumer Protection and Competition Act of 1992, for example, requires FCC to report annually on the status of competition in the video marketplace. Furthermore, Section 629 of the Communications Act of 1934, as amended by the Telecommunications Act of 1996 (“the Act,”) directed FCC to assure the commercial availability of devices that access MVPD service (which currently are typically set-top boxes) by making them available from third parties unaffiliated with MVPDs. In response to the Act, FCC adopted regulations in October 2003 that allowed the direct connection of digital navigation devices (typically, set- top boxes) purchased from third parties to MVPD systems. To receive and display MVPD content, these devices require a CableCARD, a card provided by a subscriber’s MVPD and installed in the third party set-top box or other device, allowing a subscriber to view secure content they subscribe to with their MVPD. As a result, such third party devices, which remain available today, are known as CableCARD devices. Subsequent to the adoption of its CableCARD regulations, as noted earlier, FCC issued a Notice of Proposed Rulemaking in February 2016 that was intended to provide consumers additional choice for set-top boxes. In the proposed rule, FCC tentatively concluded that despite the availability of CableCARD devices, the market for navigation devices (such as set-top boxes) was not competitive, citing a previous analysis that found that approximately 99 percent of MVPD subscribers continued to lease a set-top box from their MVPD. Therefore, FCC stated in the proposed rule that it should adopt new regulations. Moreover, FCC stated that technological advances since the CableCARD regulations had been adopted enabled new solutions that, with certain ground rules, would make it easier to finally fulfill the purpose of the Act. One goal of the proposed rule was to allow third party manufacturers to create new devices and user interfaces—the means through which users interact with a set-top box such as the menus, remote control, and methods of searching for programming—to access MVPD services. For such devices to work, the proposal required MVPDs to transmit to third party devices video programming content and data about that programming, including channel listings and schedules and data on what programming subscribers are entitled to access. Such devices, as proposed, would not rely on a CableCARD and would be compatible with any MVPD’s service. As such, as envisioned by FCC, the proposed rule would enable a consumer to switch MVPDs without having to change the set-top box. In September 2016, after receiving input from a wide range of stakeholders, the former FCC Chairman issued a three page fact sheet providing an overview of a proposed final rule that the Chairman scheduled for Commission vote in September 2016. According to the fact sheet, MVPDs would have been required to offer consumers a free electronic application (commonly referred to as an “app”), which would be controlled by the MVPD, that subscribers could download onto a variety of Internet-capable devices such as tablets and smartphones to access the programming they subscribe to. Under this scenario, control over the user interface would have been maintained by the MVPD, not the third- party device manufacturer, as the original proposed rule envisioned. However, the former Chairman ultimately deleted the proposed final rule from the list of items scheduled for consideration at the September 2016 meeting, and action on the proposed rule is no longer pending for consideration. While over 75 percent of households still subscribe to MVPDs for video services and rely on a set-top box leased from their provider to access content, the Internet has created more opportunities for consumers to access video programming services in ways that do not require a leased set-top box. These providers vary regarding the types of video services they offer: Content aggregators (e.g., Netflix and Amazon): These providers offer video on-demand through a subscription. They aggregate content from multiple sources and may provide their own content (e.g., Netflix’s original series House of Cards) along with content from other programmers. There are also niche aggregators such as Indie Flix that provide specialized programming. Direct to Consumer (e.g., CBS All Access, HBONow, and Univision Now): Some programmers and networks that distribute their content through MVPDs are now separately providing live and on-demand content directly to consumers through the Internet for a monthly subscription. Consumers do not have to subscribe to an MVPD to subscribe to such content. For example, HBO provides its content on demand to its customers through the HBO Now app without requiring a customer to subscribe through an MVPD. Virtual Service Providers (e.g. Sling TV, DIRECTV Now, and PlayStation Vue): These providers use a model similar to the MVPD model by providing live and on-demand programming from a variety of networks over the Internet in generally smaller channel lineups. Such services are targeted to households looking for a smaller channel line- up at a lower cost than from MVPDs. According to Kagan, subscriptions to content aggregators and direct to consumer Internet-based services are expected to grow from 109 million in 2016 to 137 million in 2020. Many new Internet video services have launched since 2005, and there has been a particularly large growth since 2014. (See fig. 2.) Subscribers can access Internet-based video services using many different Internet-connected devices and do not need a set-top box. These devices include stand-alone devices such as video game consoles (e.g., Xbox One), laptops, tablets, smart phones, and smart TVs—which include an integrated computer with an Internet browser, operating system, and apps to stream Internet video subscriptions without a separate device. Third party manufacturers have also developed streaming media devices (e.g., Roku) designed to allow viewers to watch Internet-provided content on their television set. Some of these devices, such as tablets, allow consumers to view video programming content in or out of the home with an Internet connection. Figure 3 below shows the variety of devices, including set-top boxes, households can use to access video programming. These new Internet-based providers offer greater choice in video services, eliminating the need to lease a set-top box for households that choose to subscribe to one or more of these providers in lieu of an MVPD subscription. According to Kagan, the percentage of households subscribing to MVPDs is down from a peak of approximately 91 percent of households wired for service in 2009 to 79 percent in 2016, and Kagan estimates that in 2016 there were 29 million households that either cancelled their MVPD subscription or never had it. Additionally, Kagan projects that there will be a continued decline in MVPD video subscriptions by 2020, when 74 percent of households will subscribe to MVPDs, in part due to competition from Internet video programming. Eight of 11 industry experts and analysts we interviewed also stated that they believed MVPDs’ market share is falling due in part to Internet video. Kagan reports based on results of an online survey it conducted of households that never had an MVPD subscription that many in this group are generally younger and have less income than other households, and have in the past relied on over-the-air television because the cost of MVPD service is too high. One industry expert told us that it is unclear what will happen to these younger households’ viewing habits as they age. According to this expert, in the past these younger non-subscribers would eventually subscribe to MVPDs as their income grew, but it is no longer clear that this will happen due in part to Internet video options. While consumers are increasingly subscribing to Internet programming that does not require a set-top box, the market for alternative devices to access programming is also growing. According to Kagan, sales of these alternative devices, such as streaming devices and smart TVs, have been growing. (See fig.4.) For example, Kagan estimates that 70 percent of television shipments in 2016 were smart TVs. Many subscribers to MVPDs are still reliant on at least one set-top box, usually leased from their provider, to access video programming. In the wake of FCC’s 2003 CableCARD regulations, third-party providers developed CableCARD devices that consumers could purchase at retail outlets and use to access their MVPD subscription with a CableCARD. Such devices are still available currently. For example, one of the better- known of these options, the TiVo set-top box, was available on Amazon.com as of July 2017. However, in spite of the commercial availability of these devices, according to FCC in its 2016 proposed rule, about 99 percent of subscribers to MVPDs lease at least one set-top box from their MVPD. While all five of the large cable providers we interviewed said that their customers have the option of using a third party device, they all added that very few customers do so and the majority lease their set-top box. All five of the large cable providers we interviewed cited limited customer interest as key reason consumers did not adopt third party CableCARD devices. Each also cited one or more of the following reasons: limited functionality, including limited ability to access on-demand content when devices were first available; high up-front costs to purchase a third party device; and the ease of leasing a set-top box from a provider, which will replace the box if it breaks, compared to owning a third party device where if it breaks the consumer may have to buy a new one. However, public interest organizations we interviewed stated they believe that the low rate of adoption of CableCARD devices was due to limited support from MVPDs. Specifically, representatives of one public interest group we interviewed stated that MVPDs have not been advocates of third party devices and have not devoted customer service toward this effort, for example by providing their technicians with training. They also stated that MVPDs have made it difficult for customers to use CableCARD devices by, for example, requiring technicians to install the CableCARD. Representatives of one public interest group also stated that because MVPDs charge their customers a monthly fee for using CableCARD devices, as they do for a set-top box, customers have little financial incentive to adopt these alternative devices. Another public interest group stated that MVPDs do not make their subscribers aware of their ability to purchase and use such devices. Although subscribers to MVPDs generally require a set-top box in most cases to access content they subscribe to, many MVPDs are also offering their video programming over the Internet and through alternative devices. For example, according to Kagan, MVPDs have started to allow consumers to access their subscription content via the Internet in and out of the home, on multiple devices, and when they want, for example: Many cable networks allow subscribers to MVPDs that carry that network to access live or on-demand content through an app or website specific to that network. MVPDs do not develop or control these apps and websites. Such service is often referred to as “television everywhere.” Kagan forecasts that views of Internet-based television everywhere from MVPDs will increase from approximately 5.4 billion views in 2016 to 11 billion views in 2020. All nine of the larger MVPDs we interviewed told us that their customers can access some “television everywhere” content online. Many MVPDs have also developed their own apps allowing their subscribers to access a range of content. Eight of the nine larger MVPDs told us they have developed apps for Internet-capable devices such as smart phones and tablets that allow their subscribers to access content in and out of the home. Such apps may allow for viewing both live and on-demand content. For example, consumers can use a Comcast application on their smart phone out of their home to view content. In addition, some MVPDs have developed apps for streaming devices such as Roku. In some, but not all, cases such apps can be used as a replacement for a set-top box; however, only three of the nine larger MVPDs we interviewed said that their subscribers may be able to use apps and alternative devices to access their subscriptions without the need for any set-top box. For example, one MVPD told us that customers can use an app on a Roku streaming device to access content without needing any set-top boxes. These changes by MVPDs may be due to competition from new Internet- based services; 10 out of 11 industry experts and analysts we interviewed told us that MVPDs are providing access to their programming through alternative devices other than set-top boxes due to such competition. Despite growth in alternative devices and services, a Kagan report indicated and MVPDs we interviewed told us that set-top boxes will still play an important role in the near future for accessing video content from MVPDs as the industry replaces many current set-top boxes with higher end versions. For example, the set-top box for one MVPD we interviewed now provides advanced functions such as voice control, universal searching, and increased storage of programming. All nine larger MVPDs we interviewed told us that they foresee the set-top box still playing a role in their service in the near future, and only three said their customers may be able to access their subscriptions solely on alternative devices without the need for a set-top box. One MVPD told us that although it sees video providers moving to apps on their own in the future, there will still be an option for consumers to access content from their set-top box. This MVPD has made upgrades to its set-top box to provide more features and has incorporated Internet video applications such as Netflix directly into its set-top box. Additionally, eight out of the 11 experts and industry analysts we interviewed said that they expect the set-top box to continue to be needed for traditional provider services for households in the future. One expert stated that the set-top box is the most efficient way to access and deliver programming, and that it remains the best solution for consumers and an important component of video programming. While the Internet has provided consumers with more choice for accessing video programming without subscribing to an MVPD and using an associated set-top box, consumers must have broadband access to be able to use these alternative products. However, FCC, in a 2016 broadband progress report, estimated that 10 percent of the population does not have adequate access to in-home fixed broadband Internet and the lack of broadband access is particularly concentrated in rural and tribal areas. Although subscriptions to broadband Internet service are rising as those to MVPD video services are declining, most households are dependent upon MVPDs to receive broadband Internet service. According to FCC, 97 percent of consumers are reliant on their MVPD for broadband service, and according to Kagan the ten largest video providers account for 91 percent of broadband subscriptions. However, as we recently reported, continuing technological changes may provide new options for obtaining access to broadband as, in the future, wireless Internet access may be able to serve as a substitute to in-home broadband for some consumers, and satellite-provided Internet service may also become an option for consumers who don’t have access to in-home wired broadband. For example, Kagan expects wireless broadband to serve as a growing substitute choice for consumers with the advancement of higher speeds in the future. Most selected stakeholders and industry experts we spoke to did not see a need for FCC to intervene in the set-top box market at this time, given the changes taking place that provide consumers with more choices for services and devices to access video programming. All 11 of the experts and analysts we interviewed said that the industry is moving away from set-top boxes on its own by providing content through other means and 9 of those 11 added that, as a result, there is no need for FCC regulatory intervention. Furthermore, only 8 of the 35 total industry stakeholders we interviewed stated that regulations are needed. These stakeholders pointed to the development of apps and devices beyond set-top boxes that consumers can use to access video content. For example, one of the larger MVPDs said that competitive pressures have pushed the company to offer consumers new ways and devices with which to access the content they subscribe to. However, representatives of all three public interest organizations we interviewed said that FCC regulations are still needed to promote consumer choice for devices. Specifically, representatives of one public interest organization we interviewed said that although the market has evolved to provide more device choices for consumers, the fact that almost all MVPD subscribers lease a set-top box shows that the intent of the Act has not yet been met. They added that while MVPDs have been increasing the development of apps for their subscribers to access content, these apps so far do not have all the functionality of leased set- top boxes, meaning that the apps are not an adequate substitute. As discussed earlier, despite the growth in apps, most larger MVPDs we interviewed still require their subscribers to have at least one set-top box. Some industry stakeholders and experts and analysts we interviewed thought that FCC’s proposed rule could have had negative effects on MVPDs as well as other industry participants, including content providers. As discussed earlier, the proposed rule would have required MVPDs to transmit information—including video programming itself—to third party devices. According to representatives of one industry association we interviewed, this could have meant that MVPDs, and the programmers whose content they distribute, would lose control over content that they had created or purchased the distribution rights to. Programmers negotiate terms and conditions—such as channel lineup and other issues—with MVPDs that distribute their content. Some stakeholders expressed concern that under the proposed rule there would be no guarantee that third party device and service companies would adhere to all those terms and conditions under which that content was provided to the MVPDs. Some MVPDs and programmers expressed concern that some third-party device companies might modify the stream of programming by, for example, changing channel placement or overlaying advertising. Five of the 11 experts and analysts we interviewed thought that the proposed rule could have led to copyright violations. Almost all larger MVPDs, broadcast networks, and independent and diverse programmers and interest groups we interviewed expressed concerns that should there be copyright violations, content providers could also be negatively affected. For example, one industry association said if a third party device were to overlay advertising on a program, the value of advertising availability that is usually sold by broadcast or cable networks or by cable distributors would decrease since there might be competing advertising displayed to viewers. This stakeholder added that any reduced ad revenues would, in turn, reduce the ability to invest in content. Seven of the 11 experts and analysts we interviewed reported that the proposed rule could negatively affect content providers. Furthermore, some stakeholders told us that they believed the possible negative effects of the proposed rule could have especially affected independent and diverse programmers such as Vme, a national Spanish language network. According to one independent and diverse programmer we interviewed, its business is dependent upon agreements with MVPDs that distribute its programming. Those agreements include a range of terms including advertising restrictions and channel placement. To the extent a third party could modify the content—such as by overlaying advertising—that programmer would have a harder time negotiating with MVPDs, potentially reducing the compensation received from MVPDs for carrying its channel, thus harming its business model. Furthermore, according to a letter written by the Copyright Office, the proposed rule could have interfered with the rights of copyright owners to license their works by requiring MVPDs to provide content to third parties that would not necessarily have a contractual relationship with the copyright owner. However, some other stakeholders we interviewed stated that they believed there was little likelihood that the proposed rule would have led to licensing terms not being followed and reported that the proposed rule may have provided public benefits, specifically: Two public interest groups we interviewed said that because there have not been violations with copyrights on CableCARD devices, such violations would be unlikely on any new devices that would have been created under the rule. Representatives with one industry association representing technology companies said that the proposed rule could have benefited independent and diverse programmers by increasing the number of devices available to consumers to access content, providing such programmers with increased opportunities for consumers to find their content. Representatives with one public interest group said that consumers would benefit from the proposed rule as new devices created in response to the rule would increase access to programming on new devices, thus increasing programming options overall. Representatives with a device manufacturer said that the proposal could have provided consumers with new and innovative ways to access video content. In commenting on a draft of this report, FCC noted that the limited action of taking a not- yet-adopted proposal off circulation would not generally be an occasion for providing a regulatory impact analysis since such an action would have no regulatory effect. limited interest in adopting such devices for a variety of reasons, such as the ease of leasing a set-top box from a provider, which will replace the box if it breaks, compared to owning a third party device where if it breaks the consumer may have to buy a new one. The proposed rule also contained limited analysis of the potential effects of this rule on consumers, MVPDs, or others. For example, while FCC supported the proposed rule by stating that the average household pays over $230 a year in set-top box lease fees, the proposal did not estimate the extent to which any increased competition in the market for set-top boxes might lead to cost savings for consumers. More broadly, FCC has conducted some analysis of the evolving video market, which, as discussed earlier, is providing consumers with more choices for both video services as well as devices to access services. For example, FCC’s most recent congressionally mandated annual video competition report— published in January 2017—includes discussion of the increasing popularity of Internet-based video services and the competitive pressures they have placed on MVPDs, among other things. While the Act requires FCC to set regulations to assure the commercial availability of devices to access MVPD services, it also states that any regulations implemented under the statute shall cease to apply if FCC deems that: (1) the market for MVPDs is fully competitive, (2) the market for devices used to access MVPD services is fully competitive, and (3) the elimination of the regulations would promote competition and the public interest. While, as discussed above, FCC has conducted some analyses related to these issues, neither the proposed rule nor the recent video competition report reflect a comprehensive analysis looking at how these interrelated issues affect each other. In addition, May 2017 letters to Congress from the new FCC Chairman stating his intention to not move forward with this issue did not contain or cite any analysis supporting that decision.33 Specifically, FCC’s analyses do not consider the effect that increasing consumer choice for video services has on the importance of consumer choice for devices to access MVPD services. Increased consumer choice for services may reduce the market power of MVPDs and may restrict what they can do and what they can charge for set-top boxes—as well as potentially spurring innovation in how they offer access to their MVPD services. While the 2017 video competition report touches on consumer choice for both services and for devices, it does not discuss the extent to which new choices for services have affected the importance of consumer choice for devices. Furthermore, this analysis does not consider what level of consumer choice for devices must exist for the market for devices to be “fully competitive.” While FCC’s former Chairman believed that new regulations were needed to fulfill the requirements of the Act, the current Chairman believes that the 2016 proposed rule did not further his goal of promoting a clear, consumer-focused, fair, and competitive regulatory path for video programming delivery. As stated earlier, the proposed rule contained limited analysis. In addition, the new Chairman’s letters to Congress noted that he had removed his predecessor’s proposal from circulation but were silent as to whether the Commission would take any future action in this proceeding. A future Commission may again determine that regulations are needed or decide not to take any further action on this issue. In commenting on a draft of this report, FCC noted that the limited action of taking a not- yet-adopted proposal off circulation would not generally be an occasion for providing a regulatory impact analysis since such an action would have no regulatory effect. access MVPDs. Such an analysis, conducted as part of FCC’s existing annual video competition reports—which, as discussed, already include relevant analyses—could help FCC determine if additional regulations are needed. The market for video services and devices to access video services has evolved significantly in recent years so that consumers now have considerably more choices for video services and devices to access such services than when Congress passed the Telecommunications Act of 1996. Given the fast pace of change in the video market in recent years and the likelihood that it will continue to evolve to offer consumers more choices in how they access video content, it is important that FCC analyze the implications of these changes for its responsibilities under the Act to assure the commercial availability for devices that can access MVPD programming. However, FCC has not conducted a comprehensive analysis to support an informed decision as to whether further action is needed or not. FCC’s recently proposed rule and most recent annual video competition report contain limited analysis of the extent to which Internet-based providers affect consumer choice for video programming and what that change means for the importance of consumer choice for devices in the context of the Act. In contrast, a comprehensive analysis could inform FCC as to whether the market conditions of competition for both video services and devices have been reached under which, as stated in the Act, any regulations implemented under the statute shall cease to apply. Should such analysis show that those market conditions have not yet been reached, a clear articulation by FCC of what elements have and have not yet been met could help as a benchmark in FCC’s further consideration of this issue as the market likely continues to evolve. Without more comprehensive analysis of the industry’s evolution and its effects on consumer choice for devices to access MVPD services, FCC could potentially take regulatory action—or choose not to take action—in a way that is not beneficial to consumers and does not meet the goals of the Act. To help ensure that any future decisions by FCC regarding its efforts under the Act are based on comprehensive analysis, we recommend that FCC, as part of its future annual video competition reports, analyze how the ongoing evolution in the video programming market affects competition in the related market for set-top boxes and devices, including how this evolution affects the extent to which consumer choice for devices to access MVPD content remains a relevant aspect of the competitive environment. (Recommendation 1) We provided a draft of this report to FCC and the Library of Congress for review and comment. FCC responded with a letter in which it agreed with our recommendation. This letter is reprinted in appendix II. FCC also provided technical comments that we incorporated as appropriate. The Library of Congress reviewed our report and did not provide any comments. We are sending copies of this report to interested Congressional committees and the Chairman of the FCC. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made significant contributions to this report are listed in Appendix III. The following tables list the industry stakeholders and industry analysts and experts GAO interviewed as part of this engagement. Mark Goldstein, (202) 512-2834 or goldsteinm@gao.gov. In addition to the contact above, Alwynne Wilbur (Assistant Director); Matt Rosenberg (Analyst in Charge); Amy Abramowitz; West Coile; Leia Dickerson; Sharon Dyer; Camilo Flores; Joshua Ormond; Nitin Rao; Amy Rosewarne; and Elizabeth Wood made key contributions to this report.", "summary": "Millions of households subscribe to cable, satellite, and telephone companies—known as MVPDs—for television, which is generally delivered via a set-top box attached to a television. Congress directed FCC to adopt regulations to assure a commercial market for devices to access MVPDs, and in February 2016, FCC proposed a rule intended to do so. Many industry stakeholders raised concerns about the proposal's potential effects, and FCC did not issue the proposed rule. This report examines: (1) the role of set-top boxes in accessing video programming content and (2) views of selected stakeholders and experts on the need for FCC regulation regarding set-top boxes and FCC's analysis of such need. GAO analyzed data from a media research group regarding the video market and interviewed 35 industry stakeholders including 12 MVPDs, 5 video content producers, 3 device manufacturers, 12 industry associations, and others; GAO selected stakeholders based on comments filed with FCC on its 2016 proposed rule. GAO also interviewed 11 industry analysts and experts selected based on industry coverage and publications. Set-top boxes play a significant but diminishing role in delivering video content in an evolving video market. Subscribers to multichannel video programming distributors (MVPD)—companies that provide pay television services via subscriptions such as cable and satellite companies—generally need a set-top box to access MVPD television services, and most subscribers lease a set-top box from their MVPD. However, consumers can now access video through a wide range of Internet-based services without a set-top box, using a variety of Internet-capable devices, such as tablets. Internet-based services include those providing on-demand video such as Netflix and some, such as Sling TV, providing live content similar to that from MVPDs. Some Internet-capable devices, such as Roku, allow people to watch Internet-based video on televisions. In recent years, subscriptions to MVPDs have fallen as more Internet-based services have become available. Partly in response to this competition, many MVPDs have begun offering content over the Internet to subscribers, accessible on many Internet-capable devices, including streaming devices that display it on televisions. While in most cases, MVPD subscribers still need a set-top box, a few MVPDs GAO interviewed now allow subscribers to access content they subscribe to solely over the Internet, without a set-top box. The Federal Communications Commission (FCC) has conducted limited analysis of the need for regulations to assure a commercial market for devices, such as set-top boxes, to access MVPD services. Most stakeholders and experts GAO interviewed said that further regulations for this purpose were not needed, given recent changes in the video content market. FCC is directed by law to set regulations to assure a commercial market for devices to access MVPD services. However, the law also specifies that any such regulations may no longer apply if FCC determines that the markets for both MVPD services and devices to access MVPDs are fully competitive. Moreover, while it does not extend to independent agencies, Office of Management and Budget guidance says agencies could use analyses to evaluate the need for proposed actions. However, FCC proposed a new rule in 2016 to promote a commercial set-top box market without undertaking a comprehensive analysis of the competitiveness of the market to support the proposed rule. FCC did not enact a final rule. Stakeholders had differing views on the potential effects of the proposed rule, but some raised concerns that the rule could have had negative effects on MVPDs and content providers. As described above, widespread changes in the video market in recent years have expanded consumers' choices for video services as well as devices to access those services. Nineteen of the 35 industry stakeholders GAO interviewed said rules are not needed at this time, while 8 said rules are still needed. (The rest gave uncertain answers or did not comment on this issue.) Without a comprehensive analysis, FCC lacks information on the extent of consumer choice and, furthermore, the extent to which increased options for video services affect the relative importance of consumer choice for devices to access MVPDs. Such an analysis could help FCC determine if additional regulations are needed and, as the market likely continues its rapid evolution, could serve as a benchmark in FCC's further consideration of whether market conditions have been met such that regulations may no longer apply. GAO recommends that FCC conduct a comprehensive analysis of how recent industry changes related to video services affect consumer choice for devices to access video services. FCC agreed with GAO's recommendation and provided technical comments that GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "The 2014 National Strategy defines wildlife trafficking as including all aspects of the trade, from poaching and transit through consumer use. The National Strategy outlines the guiding principles and strategic priorities for U.S. efforts to stem illegal trade in wildlife, and one of the top three priorities identified is to “Reduce Demand for Illegally Traded Wildlife.” Specifically, the National Strategy states that, as a strategic priority, reducing demand for illegally traded wildlife calls for raising public awareness of the harms done by wildlife trafficking through outreach in the United States and public diplomacy abroad. The National Strategy also states that the Task Force will seek to enlist individual consumers in this fight through education and outreach to reduce demand for these products and change consumption patterns that drive wildlife trafficking. While the Implementation Plan outlines a unique set of activities to reduce demand, other activities under the plan’s objectives may indirectly affect demand. For example, one of the objectives under “Reduce Demand for Illegally Traded Wildlife” is to raise public awareness and recognition of wildlife trafficking and its negative impacts and associated risks of prosecution (emphasis added) as a means to change harmful consumption patterns. Implementing robust legal frameworks and effective enforcement increases the risk of prosecution, which may deter not only wildlife traffickers but also consumers, who may risk legal penalties. For the purposes of this report, we consider efforts to reduce consumption of wildlife and law enforcement efforts to prevent illegal use of wildlife as demand reduction-related activities. The Implementation Plan designates various U.S. agencies to lead or participate in achieving the strategic priority of reducing demand for illegally traded wildlife, which are outlined in table 1. In fiscal years 2014 through 2017, Congress directed that not less than certain specified amounts, totaling $271 million over the 4 fiscal years, be made available to combat wildlife trafficking (see fig. 1). Since September 2016, U.S. agencies and global stakeholders have taken a range of actions to address CWT issues (see fig. 2). For example, in October 2016, Congress passed the Eliminate, Neutralize, and Disrupt (END) Wildlife Trafficking Act of 2016. Among other things, the act calls for the Secretary of State, in consultation with the Secretaries of the Interior and Commerce, to submit an annual report that lists each country determined by the Secretary of State to be a focus country and a country of concern. The act also directs the Task Force to submit an annual strategic assessment of its work and provide a briefing to Congress. Additionally, the 17th Meeting of the Conference of the Parties for the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) took place September 24, 2016, to October 5, 2016. In December 2016, China announced that it would close its domestic ivory market by the end of 2017, and in March 2017, China announced closure of 67 ivory carving entities and retail outlets across the country. As reported by the United Nations, the International Criminal Police Organization (INTERPOL), and other sources, wildlife trafficking networks span the globe. Although sources have attempted to measure trade flows, there is no precise estimate of illegally traded wildlife, and available estimates are subject to uncertainty. In 2014, the United Nations Environment Programme (UNEP) reported that various sources estimate the global scale of illegal wildlife trade is between $7 billion and $23 billion annually. In 2016, UNEP and INTERPOL estimated that the scale of wildlife crime may have increased, based on a rise in environmental crime. They estimate that environmental crime increased by 26 percent since 2014 and continues to increase by 5 to 7 percent annually. Illegal, unreported, and unregulated (IUU) fishing often are not included in these estimates since discussion of wildlife trafficking, as it relates to marine species, focuses on those species protected under CITES and under statutes such as the Endangered Species Act and the Marine Mammal Protection Act, according to NOAA. While IUU fishing targets commercially harvested marine species, as the Implementation Plan outlines, the trafficking of fisheries products is a form of wildlife trafficking. In 2016, UNEP and INTERPOL estimated that the global scale of IUU fishing ranges from $11 billion to $24 billion annually. The United States, China, and countries in Southeast Asia consume many types of legal and illegal wildlife for diverse purposes. It is difficult to measure demand for illegal wildlife and wildlife products due to the illicit nature of the trade, but various data sources and reports provide examples of the range of wildlife demand by illustrating types of wildlife that are seized by governments and purchased by consumers. U.S. trade in wildlife and wildlife products includes a variety of wildlife such as live reptiles, birds, mammals, and elephant ivory, according to law enforcement information, reports, and government and NGO officials. FWS and NOAA data on wildlife products seized at U.S. ports provide examples of the diversity of illegally traded wildlife in the United States. FWS and NOAA may seize wildlife products for a variety of reasons that include import, export, or sale of endangered or threatened species protected under U.S. laws and regulations. For example, FWS may seize a shipment due to invalid documentation needed to clear the shipment. From 2007 to 2016, the top 10 wildlife shipments—by species or species group—seized nationally by FWS were coral, crocodile, conch, deer, python, sea turtle, mollusks, ginseng, clam, and seahorse. These seized wildlife were in a variety of forms when confiscated, as shown in table 2. For example, more than half of seized seahorse shipments were dead whole animals, and a smaller percentage were medicinal parts or products. During the past 10 years, more than one-third of the wildlife shipments seized by FWS were confiscated while being imported from or exported to Mexico (13.6 percent), China (13 percent), Canada (8.6 percent). Additional examples of wildlife seized by FWS are shown in figure 3 and in appendix II. Seizure data from NOAA Fisheries’ Office of Law Enforcement show that it has also seized a variety of marine wildlife products. From 2007 to 2016, confiscated shipments have included whale teeth and meat, seal oil pills, shark fins, and seal fur products like mittens and boots, according to NOAA’s seizure data. Seizure data from FWS and NOAA provide a helpful illustration of wildlife that has been confiscated at U.S. ports but may not be fully reflective of the illegal wildlife trade and consumption. Seizure data show the types of wildlife confiscated at ports of entry in a country, but there are limits to what these data can tell us about the demand for products like illegally traded wildlife. Various factors influence the number of seizures at any given time or in any location such as the level of illicit trade and the level and efficacy of enforcement efforts. For example, as part of their enforcement, both NOAA and FWS conduct inspections of shipments at U.S. ports. In some cases, they conduct targeted inspections that may be based on information they have about a particular species or market, which may influence detection and seizures of illegal products. NOAA and FWS officials indicated that they can increase their enforcement efforts by targeting investigations on specific species or products. This additional effort may result in the seizure of more shipments than would be made using routine inspection processes. In 2016, the NGO WildAid published a baseline survey conducted by KRC Research to inform a public awareness campaign effort with FWS. The survey reported that roughly 1 in 10 respondents in the United States indicated that they had purchased or knew someone who had purchased live animals such as iguanas, parrots, parakeets, or tortoises. A smaller proportion of those that responded (roughly 1 in 20) reported that they had purchased or knew someone who had purchased ivory. Reporting by the International Fund for Animal Welfare in 2013 also identifies the United States as a key end market for reptiles such as crocodiles, pythons, and caimans and for wildlife products such as ivory. Based on reporting and discussions with U.S. government officials, there may be varying reasons for the demand for wildlife and wildlife products. Potential drivers of demand in the United States—in particular demand for illegal wildlife from Latin America— may include a desire for rare and exotic plants and animals, according to reporting by Defenders of Wildlife. FWS officials in Miami told us that some of the wildlife products they confiscate—such as products from cruise passengers— were purchased by travelers who were unaware of the restrictions on the wildlife product. FWS and U.S. Customs and Border Protection (CBP) officials told us that consumers use wildlife for many different purposes, including as pets, trophies, jewelry, food, religious items, and for medicinal purposes. For example, FWS officials in Miami told us that coral is often smuggled as part of the pet trade for use in aquariums. At the Port of Miami, an FWS official told us that FWS has also seized queen conch meat, which is exported from the Caribbean as a delicacy, according to FWS. During investigations, FWS has found wildlife intended to be used as art or trophies. During the course of their investigations, FWS officials in Miami have found a rhino bust being sold for $80,000 and a giraffe bust being sold for $100,000. FWS has also seized scarlet macaw feathers being used in jewelry, elephant ivory carved as decorative pieces, and taxidermy big cats seized as hunting trophies. Demand for illegally traded wildlife in China and countries in Southeast Asia includes many wildlife species and end uses, according to reports and government and NGO officials in the region. For example, iconic wildlife such as elephants and rhinos are often cited in reports and by officials in the field as examples of wildlife consumption in China and Southeast Asia, but other wildlife, such as pangolins, bears, sharks, and sea turtles are also named among the wildlife being consumed. China is a consumption country for illegal wildlife, while Hong Kong, Thailand, and Vietnam are consumption and transit locations, according to officials we spoke with from the U.S. government, foreign governments, international organizations, and NGOs in these locations. Thailand often serves as a transshipment point for illegal wildlife due to its land borders with China, Laos, and Cambodia, according to government of Thailand officials. Government officials in Vietnam stated a similar claim, explaining that the country is often a transshipment point due to its land borders with China and Laos. Table 3 displays examples of wildlife consumed and trafficked in China, Hong Kong, Thailand, and Vietnam, according to U.S. government, foreign government, and NGO officials in-location and at DOI Headquarters. The International Fund for Animal Welfare has reported that China is the world’s largest consumer of illegal wildlife products due to its demand for ivory, rhino horn, pangolin scales, bear bile, tiger bone, and shark fin soup. According to analysis by the United Nations Office on Drugs and Crime (UNODC) of seizure data from the World Wildlife Seizure database, China was the destination for about 40 percent of the ivory shipments that had reported destinations from 2006 to 2015. Reports also identify Thailand as a part of the illegal ivory trade. INTERPOL’s 2015 investigation, Operation Worthy II, resulted in seizures of several tons of elephant ivory in Thailand and Singapore. TRAFFIC, the wildlife trade monitoring network, visited retail outlets in Bangkok, Thailand, during certain periods in 2013 and 2014 and, through covert surveys of vendors, found bangles, rings, toothpicks, hairpins, chopsticks, sculptures, and other products made of ivory for sale. TRAFFIC reports that for seven consecutive months, from November 2013 to May 2014, their surveys found more than 10,000 ivory items openly on display for sale in Bangkok. An NGO official we spoke with in China told us that part of the NGO’s efforts includes targeting Chinese tourists traveling to Africa and Southeast Asia to prevent purchasing of ivory as well as rhino horn. UNODC has reported that more than two-thirds of rhino horns seized from 2006 to 2015 were destined for China or Vietnam. Government officials in Hong Kong told us that they have also seized a variety of wildlife products such as pangolin scales and turtles. Examples of wildlife products seized by the government of Hong Kong are shown in figure 4 and in appendix II. Hong Kong’s government has also seized elephant ivory, though as of March 2017, certain registered ivory can be legally traded in Hong Kong under a license. The Organisation for Economic Co-operation and Development reports that high economic growth may fuel consumer demand for status goods such as art from elephant ivory and traditional medicine using rhino horn. According to NGO officials we met with in Vietnam and China, consumers purchase illegal wildlife products as a status symbol or to demonstrate wealth. Wildlife is considered to be expensive and exotic in these countries, and there is conspicuous consumption in some areas, according to State officials in Vietnam and an FWS attaché. UNODC reports that a survey of 18 restaurants— identified as high end by UNODC— in Vietnam found that all of these restaurants sold pangolin meat. UNEP and INTERPOL describe a similar phenomenon of a culture of conspicuous consumption for wildlife products that indicate wealth. These organizations report that buyers place higher value on illegal wildlife products when they are considered rare and uncommon and thus drive up prices for illegal wildlife. Higher prices and the perception of luxury associated with products such as tiger pelts and shark fin soup may attract consumers who want to display their wealth, according to Global Financial Integrity. Another end use of illegally traded wildlife is in traditional medicine in China and Vietnam, according to State and NGO officials in these countries. They stated that there are beliefs that certain wildlife provide health benefits; for example, pangolin scales are believed to help lactating mothers produce milk. State and NGO officials noted that traditional Chinese medicine has a long history of using various wildlife products. For example, American ginseng root is often consumed as a medicinal ingredient in China, according to FWS. While export of American ginseng is permitted, there are restrictions based on factors such as the age of the root. FWS has seized American ginseng root being exported from the United States to China, and the Hong Kong government has seized American ginseng being smuggled into Hong Kong. For additional examples of how wildlife is consumed, see the side bar for results from surveys conducted by USAID’s Asia’s Regional Response to Endangered Species Trafficking (ARREST) program. State has led diplomacy efforts and implemented training and outreach programs in Southeast Asia and China. Diplomacy: State’s diplomatic CWT efforts have included coordinating discussions between the U.S. and Chinese presidents in 2015 that, according to State, contributed to China and the United States jointly committing to further restrict ivory exports and imports. In June 2016, State and China’s State Forestry Administration also led the breakout session on wildlife trafficking during the eighth round of the U.S.-China Strategic and Economic Dialogue in Beijing. In December 2016, China announced that it would implement a domestic ivory ban, and in March 2017, China announced the closure of approximately one-third of the country’s licensed ivory stores and carvers. Training programs: State’s INL works to build law enforcement capacity abroad by supporting various trainings and workshops. For example, in 2015, Thailand INL funded training in wildlife trafficking and environmental crimes for 179 participants. In 2016, ILEA Bangkok sponsored two FWS-led CWT training courses and one environmental crimes course led by officials of the U.S. Environmental Protection Agency. During our field visit to Bangkok, we observed an ILEA course on combating wildlife trafficking for law enforcement officers, which is shown in figure 7. Through the United Nations Office on Drugs and Crime, INL funds Border Liaison Offices in Burma, Cambodia, Laos, Thailand, and Vietnam, intended to enhance interdiction and investigation capacity at land borders to prevent illicit trafficking. At these offices, INL has supported training for officials on wildlife trafficking detection and investigations. Outreach efforts: State has supported and implemented activities to raise awareness about wildlife trafficking in Southeast Asia and China. For example, State collaborated with USAID and the government of Vietnam to implement Operation Game Change, a 2015 awareness- raising effort designed to inform the Vietnamese public about wildlife trafficking issues such as the trade in rhino horn. In 2016, for World Wildlife Day, State’s Acting Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs published an opinion editorial for the South China Post in Hong Kong to raise awareness about the illegal trade in elephant ivory. USAID conducts a range of CWT activities that are part of biodiversity, conservation, or other initiatives, but it has four major initiatives explicitly dedicated to CWT in Asia. Asia’s Regional Response to Endangered Species Trafficking: ARREST was a multiyear program completed in 2016. The program was designed to curb wildlife trafficking by reducing consumer demand, strengthening law enforcement capacity, and boosting regional learning networks. As part of ARREST’s demand reduction objective, the program implemented various awareness-raising efforts such as the iThink campaign, which developed and displayed public service announcements in airports and subways in China, Thailand, and Vietnam and on television stations in China and Vietnam. Through the initiative dubbed “Wildlife Friendly Skies,” the ARREST program raised awareness among airline and airport staff in transport hubs identified as hotspots for wildlife trafficking, which included Bangkok, Thailand; Guangzhou, China; Hanoi, Vietnam; Nairobi, Kenya; and Nanning, China. The ARREST program also held various courses aimed at strengthening capacity across Asia. For example, the program held 14 courses for 195 trainees who were from Cambodia, Indonesia, Lao People’s Democratic Republic, Thailand, and Vietnam to train participants on completing wildlife crime investigations. Saving Species: This USAID project began in 2016 and is a 5-year, $9.9 million effort to combat wildlife trafficking in Vietnam. The project specifically aims to reduce consumer demand for and consumption of illegal wildlife and wildlife products, strengthen wildlife law enforcement and prosecution, and improve and harmonize the legal framework for prosecuting wildlife crimes in Vietnam. Some of the project’s planned activities for the first year include market surveys focused on demand for wildlife such as elephant ivory, rhinos, pangolins, and tigers. The project plans to use the survey results to inform its awareness campaign messaging. The project also plans to conduct capacity assessments of enforcement agencies in Vietnam to inform development of targeted training curricula, modules, and materials. Wildlife Asia: This USAID activity, in collaboration with the Association of Southeast Asian Nations, aims to reduce the demand for wildlife products and to improve regional action to end wildlife crime in Southeast Asia and China. As of August 2016, USAID has issued one contract, with an estimated value of $22.9 million, to implement this activity. Protect Wildlife: This USAID project began in 2016 and is a 5-year, $24.5 million effort to reduce threats to biodiversity in the Philippines such as poaching and the illegal trade of wildlife and wildlife products as well as to sustain healthy ecosystems. USAID is working with public and private partners in the Philippines to strengthen conservation policies and improve habitat management and on-site and off-site enforcement systems. USAID also conducts biodiversity and conservation initiatives that have CWT-related objectives but are not dedicated solely to CWT. For example, USAID implemented the Ecosystems Improved for Sustainable Fisheries project in the Philippines, designed to conserve marine biodiversity, enhance ecosystem productivity, and improve law enforcement at fisheries to combat illegal, unreported, and unregulated fishing. DOJ, NOAA, and Homeland Security also support efforts to combat wildlife trafficking in the United States and Asia. DOJ prosecutes criminals and publicizes through press releases the results of criminal convictions to encourage public awareness of this issue. DOJ also has participated in capacity-building workshops in Burma, Laos, Thailand, and Vietnam and CWT events such as the 2016 Hanoi Conference on Illegal Wildlife Trade and the annual U.S.–China Joint Liaison Group on law enforcement, in which DOJ, State’s INL, and other agencies participate in the Anti- smuggling Working Group. According to DOJ officials, DOJ also regularly advocates the use of the United Nations Transnational Organized Crime Convention as a legal basis for international cooperation to combat wildlife trafficking. Domestically, NOAA inspects and seizes shipments at U.S. ports, investigates cases of wildlife trafficking, and raises awareness about wildlife crimes. NOAA has a liaison at Homeland Security’s CTAC and, according to NOAA officials, the CTAC has allowed NOAA to more proactively target shipments and improve coordination with FWS and CBP through daily interaction and more information sharing. As part of their efforts to raise awareness about wildlife trafficking, NOAA also works with DOJ, FWS, and State’s Bureau of Public Affairs to publicly report information on and raise awareness about law enforcement efforts such as seizures. Internationally, NOAA provides technical assistance, conducts capacity-building, and serves as a resource in international policy discussions. For example, in collaboration with USAID, an analysis unit from NOAA assisted the Philippines in developing an intelligence assessment of illegal trade and trafficking in marine species. In November 2015, NOAA Office of Law Enforcement officers participated in the Association of Southeast Asian Nations Trade and Environmental Dialogue in Malaysia, providing presentations on illegal, unreported, and unregulated (IUU) fishing and ways to combat the trade in IUU fish and fish products. DHS’s CBP supports and coordinates with FWS and NOAA to interdict illegal wildlife shipments at U.S. ports. ICE HSI investigates wildlife crime in the United States, and in Asia it supports foreign government CWT efforts through capacity building and information sharing. For example, in Vietnam, ICE HSI regularly shares information on wildlife seizures with the host government to support investigations. In 2015, in Thailand, ICE HSI conducted a 5-day workshop on advanced wildlife trafficking investigations for officials across the government. Although agencies have worked together to combat wildlife trafficking, disagreement on roles and responsibilities has hindered some CWT activities in Southeast Asia, according to some officials. In prior work, we defined collaboration broadly as any joint activity that is intended to produce more public value than could be produced when the organizations act alone. We also identified practices that can enhance and sustain collaborative efforts, including establishing mutually reinforcing or joint strategies, defining and articulating a common outcome, and agreeing on roles and responsibilities. We found that agencies applied some collaboration mechanisms but also have an opportunity to improve on agreeing on roles and responsibilities. For example, the White House established a joint strategy, the National Strategy for Combating Wildlife Trafficking, in 2014. The strategy lays out guiding principles and strategic priorities for U.S. efforts to stem illegal trade in wildlife. In Southeast Asia, the U.S. embassy in Malaysia’s Integrated Country Strategy articulates mission goals and objectives for a coordinated effort among all U.S. agencies and includes prevention of illegal wildlife trafficking as a key activity, according to officials. In addition, U.S. missions in Bangladesh, Cambodia, India, Laos, Nepal, Thailand, and Vietnam are developing CWT-specific country strategies, according to officials. Agencies also defined and articulated a common outcome, outlined in the National Strategy for Combating Wildlife Trafficking Implementation Plan (Implementation Plan). The Implementation Plan states that success relies on agencies working in concert to carry out the objectives, which include strengthening enforcement, reducing demand for illegally traded wildlife, and building international cooperation. Under three strategic priorities, the Implementation Plan identifies 24 objectives and ways to measure progress for each. In Southeast Asia, State and USAID officials told us that they work toward those shared outcomes. In particular, they stated that to achieve the shared outcome of reducing demand for wildlife products, they cooperated on raising public awareness. For example, State collaborated with USAID in Vietnam to implement Operation Game Change, a 2015 awareness-raising effort designed to inform the Vietnamese public about wildlife trafficking issues. In addition, to achieve the common outcome of strengthening law enforcement capacity, USAID is partnering with State, FWS, and DHS and other nongovernmental actors to implement the Reducing Opportunities for Unlawful Transport of Endangered Species program, which aims to increase enforcement capacity at ports of entry in Vietnam and other countries. The Implementation Plan designates various U.S. agencies to lead or participate in achieving CWT strategic priorities, so it provides high-level direction on agency roles. However, the Implementation Plan does not define specific roles and responsibilities at the working level for mission staff implementing programs and activities. Officials at some missions reported that agreement on roles, responsibilities, and priorities facilitated collaboration on CWT activities in some instances. For example, an FWS attaché in the region told us that there has been effective collaboration between FWS, State, and ICE HSI due to agreement on roles and a shared understanding of key law enforcement terms and responsibilities. In Thailand, FWS and ICE HSI officials told us that they share information on cases, and FWS and State officials indicated that they have jointly conducted a variety of capacity-building activities across the region. State officials at ILEA in Bangkok attributed their successful regional collaboration with FWS to a mutual understanding that CWT capacity building is a responsibility that should be prioritized. State officials in Cambodia indicated that their Embassy CWT Interagency Working Group has been a forum for discussion among agencies in Cambodia to collaborate on CWT roles and activities. The working group has a designated lead agency and provides a forum to prevent or resolve potential differences in points of view among the agencies. However, some officials also reported instances of disagreement on roles and responsibilities that they said led to bad outcomes. For example, at the mission in Bangkok, Thailand, which coordinates CWT activities across the Southeast Asia region, agencies’ disagreements on roles and responsibilities have resulted in the delivery of inappropriate training activities and interference with U.S. efforts to cooperate with a foreign government, according to some officials. Specifically, FWS, State, and ICE HSI have disagreed with USAID on the roles and responsibilities that USAID implementing partners play with regard to law enforcement activities. USAID officials stated that they entrust their implementing partners to conduct law enforcement training and believe they sufficiently involve their U.S. agency counterparts. However, FWS, State, and ICE HSI officials believe that due to their law enforcement responsibilities specifically related to strengthening host countries’ antiwildlife trafficking enforcement efforts, they should be consulted and involved to a greater degree on activities directly related to such efforts. In Thailand, a USAID implementing partner’s lack of collaboration with U.S. law enforcement entities resulted in inappropriate training activities, according to some officials. Officials from FWS, ICE HSI, and an NGO told us that a CWT course conducted by a USAID implementing partner in Thailand was inappropriate due to a focus on ambush and military tactics, which are not suitable for the park rangers that received the training. In addition, another training course conducted in Thailand was not tailored for that country’s landscape, according to a U.S. official, who explained that the Thai officers receiving the training would be unable to apply its lessons locally due to differences in terrain. FWS and ICE HSI officials stated that they were not sufficiently consulted prior to the training and, although they have provided feedback to USAID about these issues, they expressed concern that USAID had not fully considered the feedback. USAID officials indicated that training on ambush or military tactics would not have been allowed, and they have no evidence it occurred. USAID officials also stated that they were unaware of training that was not properly tailored and that host countries generally praised training that was provided by its implementing partner. FWS and State officials in Thailand also told us that agencies’ and implementing partners’ efforts to share information on wildlife crime with foreign governments have been fragmented due to disagreements about roles. For example, USAID’s implementing partners and FWS separately approached foreign government entities to provide information or support during a recent law enforcement seizure of wildlife products. According to State and FWS officials in Thailand, while USAID’s implementing partner has a role in providing information that can support CWT activities, U.S. agencies in-country are responsible for official engagement on law enforcement matters and, therefore, should take the lead in communicating with host governments, particularly in criminal investigations. According to USAID officials, USAID and its implementing partners share this responsibility and have a role to play. USAID officials told us that they were aware of the difference in views and acknowledged that there may have been instances in which an implementing partner overstepped. USAID officials further explained that they have made an effort to address this particular issue by changing its implementing partner as well as changing their CWT program structure from a cooperative agreement to a contract so that USAID has more oversight and control. The new implementing partner also brought in a law enforcement expert to help ensure that training and related activities will be appropriate, according to USAID officials. In addition, the new USAID program specifies that coordination with other agencies is required, and USAID conducted a regional workshop in March 2017 to serve as a mechanism for coordination. However, even after this conference, officials indicated that some agencies still had not agreed on the appropriate balance for how implementing partners should collaborate with U.S. law enforcement on criminal investigations. According to State and FWS officials, differences in agency views of their roles have hindered U.S. efforts to cooperate with a foreign government and confuse foreign government officials who may not realize that an implementing partner is not a U.S. government agency and thus does not have the same authority. USAID officials indicated that they were unaware of instances where its implementing partner interfered with U.S. efforts to cooperate with a foreign government. Our work has shown that although collaborative mechanisms differ in complexity and scope, they all benefit from certain key features, including clarity of roles and responsibilities. For example, our work also notes that agreement on roles and responsibilities helped agencies determine who will lead a collaborative effort, clarify who will perform specific tasks, organize joint and individual efforts, and facilitate decision making. In addition, we have previously reported that key issues agencies should consider whether participating agencies have clarified the roles and responsibilities of participants in collaborative efforts and whether participating agencies have agreed to a process for making and enforcing decisions. Some U.S. missions in Southeast Asia are developing CWT- specific country strategies, which could provide a platform for the Task Force to give additional guidance on roles and responsibilities of mission staff engaged in CWT efforts in the region. Doing so would help clarify which agency will do what and facilitate maximum use of resources. FWS uses a range of measures to track the progress of its partners and grantees. For example, FWS has established standard indicators for CWT, which include the following: the number of arrests of large-scale wildlife traffickers resulting from a project’s investigations, operations support, or both; and the number of wildlife traffickers who have been arrested who are successfully prosecuted. Specifically for public relations efforts, the guidance calls for applicants to identify the desired behavior that the campaign is intended to encourage. In addition, FWS required 2017 CWT project proposals to identify all expected outputs or products of key project activities. This may include management plans, brochures, posters, training manuals, number of people trained, workshops held, hours of training provided, and equipment purchased. One FWS-funded program designed to counter pangolin trafficking to China by laying the foundations for reducing consumer demand provides an illustrative example of how it applied FWS monitoring guidance. Among other activities, the program proposed developing and piloting strategies to change behavior, with the goal of eliminating the market for illegally traded wildlife in key areas. The proposal identifies outputs, such as reports on consumer demand, and states that key components of developing a demand reduction strategy include identification of target audiences and the specific behaviors that the campaign aims to change. Quarterly reports as of April 2017 have described progress toward goals, outlining methodological details on how motivation and potential barriers for desired behavior will be measured. The program is scheduled to conclude in September 2017. The FWS Office of Law Enforcement Strategic Plan 2016 – 2020 identifies a set of CWT-related metrics for CWT, such as interdictions, penalties, fines, and value of illegal activities. FWS reports this information publicly. For example, Operation Crash, an ongoing nationwide criminal investigation led by FWS that focuses on the illegal trade in rhinoceros horn and elephant ivory, has resulted in 32 individuals sentenced and approximately 34 years of total prison sentences, $2 million in fines, and $6 million in forfeitures as of February 2017. Regarding U.S.-based partnerships, FWS monitored the U.S. Illegal Wildlife Demand Reduction Campaign by tracking the estimated number of people who see the ads (reach) and the number of times content is displayed (impressions). From launch through the middle of the second quarter of fiscal year 2017, FWS reported the following: Billboards: Monthly, about 5 million travelers are estimated to pass by the airport billboards at the international airports of Atlanta, Georgia; Chicago, Illinois; Los Angeles, California; and Miami, Florida. To date, an estimated total of about 45 million travelers have passed through these airports and may have seen the messages. Social media: On September 7, 2016, FWS and its implementing partner, WildAid, launched the campaign with joint press conferences held at the Atlanta International Airport and at the Los Angeles International Airport. This resulted in more than 1 million impressions on Twitter, engagement of more than 236,000 friends on Facebook, and 5,000 new followers on Instagram. In addition, at the beginning of the campaign, WildAid completed a public survey to assess what percentage of the U.S. general public was aware of wildlife trafficking. At the conclusion of the 3-year campaign, WildAid intends to facilitate another public survey to evaluate the effectiveness of the campaign, with results expected in late 2018. INL’s Guide to Developing a Performance Measurement Plan states that program teams are to monitor project activities and results in order to identify project successes and challenges, guide resource allocations, and facilitate improved performance. According to a State official, INL requires every CWT program implementer to provide quarterly progress and financial reports and final programmatic and financial reports. Quarterly reports must provide a quantitative and qualitative analysis of work performed and include, among other things, results achieved, challenges encountered, and action taken. At the end of a program, INL extracts best practices and lessons learned for future planning, according to a State official. We examined monitoring documentation related to three INL CWT programs as illustrative examples, described below. From February to March 2016, State’s ILEA in Thailand provided a Wildlife Trafficking Investigators course designed to cover a range of topics, including case management, corruption, and wildlife identification. The report covering the first quarter of calendar year 2016 for this program describes progress made toward objectives and identifies challenges and corrective action. For example, the report states that students participated in crime scene processing, surveillance, undercover operations, interviewing, raid planning, and case presentation exercises – all reflective of a specific performance measurement objective. The report also identifies challenges such as securing role players for exercises and proposes using FWS instructors and ILEA staff as a solution. State provided an approximately $2 million grant, running from September 2015 to September 2017, to the Wildlife Conservation Society (WCS) aimed at strengthening the capacity of government and law enforcement officials on wildlife trafficking across key countries in Latin America and Asia. The report covering the first quarter of calendar year 2017 for this program describes progress and activities related to objectives. For example, one activity is intended to strengthen legislative frameworks to combat wildlife trafficking, and the report states that in Vietnam, WCS has been providing inputs to articles of the penal code relevant to wildlife protection. State provided approximately $400,000 to UNODC and the University of Washington for a program running from September 2015 to September 2017 to facilitate forensic DNA analysis of ivory seizures in Africa and Asia. The most recent quarterly report for the program provides information on results associated with objectives. For example, one objective is to conduct DNA analysis on 175 African elephant reference samples, and the report indicates that over 100 samples had been analyzed from countries in Africa. USAID’s Evaluation Policy states that performance monitoring reveals whether implementation is on track and that project managers will ensure that implementing partners collect relevant monitoring data. To monitor ARREST, USAID’s implementing partner collected and self-reported data on activities and progress against main goals. For example, the implementing partner reported in 2016 that to strengthen law enforcement, ARREST trained approximately 2,300 people. To reduce consumption of endangered species, ARREST’s iThink campaign at its peak reached more than 40 million people per day, according to the partner’s report. In addition, a contractor analyzed ARREST’s iThink demand reduction campaign results. According to its report, 62 percent of the audience in China had received the message after 6 months. In Thailand, 63 percent of the audience had received the message, while in Vietnam, 75 percent of the audience had received the message. The report also provided suggestions for future work based on lessons learned, such as segmenting the market, incorporating social norms, and increasing the emphasis on social media. USAID designed monitoring elements into and developed plans for its recently initiated programs in Southeast Asia. For example, USAID’s request for proposal (RFP) for Saving Species Vietnam, issued in January 2016 prior to the contract award, identifies key results and illustrative indicators for the main tasks. Specifically, the RFP suggests metrics for reducing consumer demand, such as percentage of target audience that receives the intended message and percentage change in purchases of targeted illegal wildlife products. In addition, the RFP calls for quarterly reports that must include, among other things, performance indicator results against targets. USAID’s RFP for Wildlife Asia also designed monitoring into the program from the start by including similar elements. In May 2017, USAID produced an Activity Monitoring, Evaluation and Learning Plan for Saving Species (MEL Plan), which includes a Results Framework that identifies the purpose of the program and details associated tasks and key results. According to the MEL Plan, the Results Framework was developed based on a range of inputs, including USAID’s Measuring Efforts to Combating Wildlife Crime – A Toolkit for Improving Action and Accountability. The MEL Plan also provides a mix of output and outcome performance indicators with baselines and targets, to be used for communication and decision making. In addition, the MEL Plan calls for Pause and Reflect Sessions, Annual Strategic Reviews, work planning sessions, and other key learning events to reflect on progress and use that knowledge to adapt accordingly. In May 2017, USAID also produced a draft MEL Plan for Wildlife Asia, which provides performance indicators with baselines and targets. In addition, the April 2017 draft MEL Plan for the Philippines Protect Wildlife program contains similar information and, according to USAID officials, the MEL Plan used the action and accountability toolkit to inform the development of CWT metrics. One USAID CWT program in Asia conducted a midterm evaluation, but State and FWS have not conducted any evaluations. State has not conducted any evaluations of INL CWT activities because none meet State’s criteria for completing an evaluation, including funding and duration thresholds, according to a State official. FWS has not conducted any evaluations of its CWT activities in Asia but has established a new CWT-focused branch, which is developing a strategic plan, a framework, and indicators to measure progress and success for CWT efforts. In March 2016, the Task Force released an annual progress report that describes U.S. government accomplishments; however, according to an official, the Task Force does not plan to issue a progress report in 2017 due to vacancies in leadership and because agencies are working on a similar report planned for completion sometime in 2017, in response to the Eliminate, Neutralize, and Disrupt Wildlife Trafficking Act of 2016. USAID’s Evaluation Policy states that for each project, consideration will be given during the design phase to the performance evaluation that will be undertaken. The ARREST program conducted a midterm evaluation, and we assessed it against key elements to determine the quality of the evaluation. We have previously reported that addressing or requiring certain elements provides the basis for a high-quality evaluation. For this analysis, we considered a range of criteria, including the following: Evaluation questions align with program goals. Target population and sampling method are appropriate, given the scope and nature of the evaluation questions. Data collection is appropriate for answering the evaluation questions. Data analysis is appropriate to answer the evaluation questions. We found that overall, the midterm evaluation was acceptable in quality, although it fell short of fully addressing all the key elements. For example, the evaluation generally met the first two elements above. However, the evaluation only partially met the element for data collection and data analysis. For example, the evaluation did not clearly specify how survey recipients had been selected and did not provide precise details about how qualitative data from in-person interviews had been analyzed. USAID did not conduct a final evaluation of ARREST because, according to officials, the timing of a late midterm evaluation was such that its findings were used in the development of the new Wildlife Asia program, and it would not have been cost-effective to conduct a final evaluation, among other reasons. The draft Wildlife Asia MEL Plan identifies plans to prepare for a midterm and final performance evaluation at the middle and end of the program time line, and USAID officials confirmed that they intend to conduct evaluations of the program. The Saving Species MEL Plan indicates that program officials will work in collaboration with USAID to conduct a midterm evaluation and that one objective will be to provide recommendations in order to improve effectiveness and evaluate factors that help or hinder the achievement of expected outcomes and objectives. The MEL Plan also calls for a third-party firm, identified by USAID through a competitive process, to conduct the evaluation in the third year of the program. The draft Philippines Protect Wildlife MEL Plan indicates that the program will conduct a midterm and final evaluation. FWS, State, and USAID guidance states that agencies should learn from monitoring and evaluation efforts so they can identify what works, what does not work, and why. For example, from monitoring the first year of implementation, FWS learned from its domestic campaign that most Americans consider themselves wildlife lovers, but most know little about wildlife trafficking, indicating the need for outreach and education efforts. State officials told us that they took stock of regional CWT activities in Asia to improve program planning. As a result, before launching the next set of CWT courses, INL is conducting a needs assessment to clarify skill gaps, impact potential, and alignment with other activities. In addition, INL is examining approaches to strengthen sustainability such as adding train-the-trainer courses. USAID and implementing partner officials told us that they learned lessons during the implementation of ARREST and applied or plan to apply them to new programs. For example, in response to ARREST’s midterm evaluation recommendation to focus demand reduction efforts increasingly on behavior change communication, officials stated that they adjusted the message of their campaign advertisements to target behavior change and worked to recruit a range of key opinion leaders to maximize reach and impact. USAID intends to carry this lesson over to its new regional program, according to 2016 plans that call for the use of behavior change communication methodologies, as opposed to one-off public relations campaigns, in demand reduction activities. Officials told us that in practice this means future campaigns will focus on specific species, such as pangolins, and target Chinese and Vietnamese consumers who believe pangolin scales can help with lactation. USAID’s implementing partner for Saving Species also identified possible ways to improve the impact and sustainability of CWT training. For example, instead of providing traditional, onetime classroom training, officials plan to establish mentoring and on-the-job training programs in which officials in similar roles teach one another. This facilitates learning and may help identify CWT champions, enhancing sustainability and effectiveness, according to program officials. Wildlife trafficking, worth at least an estimated $7 billion annually, continues to push some protected and endangered animal species to the brink of extinction. Although agencies have worked together to combat wildlife trafficking, as outlined in the National Strategy for Combating Wildlife Trafficking Implementation Plan, disagreement on roles and responsibilities has hindered some CWT activities in Southeast Asia. We have previously reported that key issues agencies should consider include whether participating agencies have clarified the roles and responsibilities of participants in collaborative efforts and whether participating agencies have agreed to a process for making and enforcing decisions. Agencies have collaborated on a range of CWT activities, including building law enforcement capacity, raising awareness, and helping spur partner-nation action on CWT. While agencies have applied some practices that can enhance and sustain collaborative efforts, such as establishing joint strategies and defining a common outcome, some officials in Southeast Asia reported a level of disagreement on roles and responsibilities, resulting in the delivery of inappropriate training activities and in the hindering of U.S. efforts to cooperate with a foreign government. DOI, State, and USAID are members of the Presidential Task Force on Wildlife Trafficking that is charged with coordinating among agencies combating wildlife trafficking efforts. By ensuring that all relevant member agencies have agreed on and clearly defined roles and responsibilities, agencies will have more reasonable assurance that they can effectively marshal the contributions of all agencies to take full advantage of their expertise and resources in addressing CWT issues. Taking steps to clarify specific roles and responsibilities, for example by including them in a CWT country strategy or other document, could help improve coordination, help ensure activities are mutually reinforcing, reduce the risk of fragmented efforts, and maximize the impact of CWT activities in Southeast Asia. GAO is making the following three recommendations: The Secretary of the Interior should work with the Task Force to clarify roles and responsibilities of mission staff engaged in collaborative efforts on combating wildlife trafficking in Southeast Asia. (Recommendation 1) The Secretary of State should work with the Task Force to clarify roles and responsibilities of mission staff engaged in collaborative efforts on combating wildlife trafficking in Southeast Asia. (Recommendation 2) The Administrator of the U.S. Agency for International Development should work with the Task Force to clarify roles and responsibilities of mission staff engaged in collaborative efforts on combating wildlife trafficking in Southeast Asia. (Recommendation 3) We provided a draft of this report for review and comment to the Departments of Commerce, Homeland Security, the Interior, Justice, State, and the Treasury, and USAID. The Departments of the Interior and State and USAID agreed with our recommendations, and their comments are reproduced in appendixes III, IV, and V, respectively. The Departments of Commerce, the Interior, Justice, and State and USAID provided us with technical comments, which we incorporated as appropriate. In its comments, USAID indicated that it objects to the phrase “bad outcomes”, the word “inappropriate,” and the description related to an implementing partner that may have “overstepped” as used in our discussion of agency collaboration. We attribute that language specifically to certain agency officials, acknowledge differences in agency views, and include perspectives from USAID officials for balance. In its comments, DOI notes that that the content in the report that most directly substantiates the recommendations occasionally reads as disagreements involving a few specific activities among a small number of U. S. government personnel. Our findings focus on a limited set of people and activities but reflect a clear opportunity to clarify roles and responsibilities. Moreover, as we mention, the mission in Bangkok coordinates CWT activities across the Southeast Asia region, so efforts to improve collaboration potentially would have a broad effect and benefit. We are sending copies of this report to the appropriate congressional committees and to the Secretaries of Commerce, Homeland Security, the Interior, State, and the Treasury; the Attorney General of the United States; the Administrator of USAID. In addition, the report is available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8612, or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and of Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VI. This report examines (1) what is known about the demand for illegal wildlife and wildlife products in the United States and in Asia, (2) actions agencies are taking to reduce demand for illegal wildlife products in the United States and Asia, and (3) the extent to which the U.S. Fish and Wildlife Service (FWS) within the Department of the Interior (DOI), the U.S. Department of State (State), and the U.S. Agency for International Development (USAID) are assessing the effectiveness of their combating wildlife trafficking (CWT) activities. We limited the scope of this review to the United States and Asia— identified as major markets for the illegal wildlife demand—to complement our 2016 report and to provide geographical diversity in our work. We selected these geographic areas based on our review of reports on demand for illegally traded wildlife and discussions with U.S. government agencies. To address our objectives, we analyzed agency documentation and met with officials from DOI, State, USAID, the Department of Justice, and the Department of Commerce’s National Oceanic and Atmospheric Administration, which have designated roles in the National Strategy for Combating Wildlife Trafficking Implementation Plan to lead or participate in efforts to reduce illegal wildlife demand; the Department of Homeland Security, which has a role in enforcement and capacity-building efforts; and nongovernmental organizations (NGO) that focus on combating wildlife trafficking. We conducted fieldwork in Miami, Florida; China; Hong Kong; Thailand; and Vietnam. We selected these locations using a combination of criteria: (1) Since fiscal year 2014, the location has received at least $1 million in U.S. government funding for efforts related to CWT; (2) CWT activities are under way in the location; and (3) the location has the presence of at least two U.S. government agencies conducting CWT work. This sample is not generalizable to all the locations in which the United States has CWT-related programs. While in each location in Asia, we interviewed officials who played a role in CWT activities, which included officials from State, USAID, and the Departments of Homeland Security and the Interior. We also interviewed officials from host governments responsible for the management of natural resources and parks and representatives from NGOs, some of which were involved in implementing U.S. government programs related to awareness raising, law enforcement, and other CWT objectives. To describe what is known about the demand for illegal wildlife and wildlife products in the United States and in Asia, we reviewed reports on wildlife trafficking produced by United Nations organizations, the Organisation for Economic Co-operation and Development, and NGOs about the demand for these products in our locations of interest. We also reviewed surveys conducted for programs partially or fully funded by U.S. agencies that asked questions about purchasing behaviors for these products in the United States, China, Vietnam, and Thailand. These reports were either recommended to us by officials we interviewed or had been identified during our prior work on the supply of wildlife products. We reviewed the methodologies described in the reports and surveys and determined they were sufficiently reasonable for providing examples of wildlife and wildlife products traded and consumed and drivers for consumption in China and countries in Southeast Asia. However, it was beyond the scope of this review to determine the reliability of the underlying data. Many of these reports depend heavily on seizure data, which have limitations. The amount and location of seizures depend on law enforcement efforts, efficacy of law enforcement efforts, presence of illicit trade, and other factors, which are difficult to isolate. Additionally, we analyzed national seizure data from the FWS’s Law Enforcement Management Information System to report on wildlife confiscated in the United States. To assess the reliability of these data, we interviewed agency officials, reviewed documentation about the data, and conducted basic logical tests. We reviewed the 42,100 seizure records that FWS provided for logical consistency and removed a few hundred records for which we found duplicative, unknown, or blank values. Overall, we determined the data are sufficiently reliable for the purposes of identifying wildlife products seized between fiscal years 2007 and 2016. Data on seizures may not be indicative of underlying trends in trade and consumption, as they are dependent upon factors such as enforcement and techniques used by those importing the goods. To gather perspectives on demand for illegally traded wildlife in China and Southeast Asia, during our field visits to China, Hong Kong, Thailand, and Vietnam, we interviewed officials from DOI, State, USAID, the Department of Homeland Security, and officials at foreign ministries, NGOs that are implementing partners for U.S. agencies or have cooperated with U.S. agencies on CWT activities, and one company. We interviewed the company for illustrative purposes. To examine actions agencies are taking to reduce demand for illegal wildlife products in the United States and Asia, we interviewed relevant officials and reviewed information, including agency and implementing partner documentation of CWT-related projects, programs, and grants. We also analyzed how agencies combating wildlife trafficking in Southeast Asia are applying selected practices that can enhance and sustain collaborative efforts. As we have previously reported, such practices include establishing mutually reinforcing or joint strategies, defining and articulating a common outcome, and agreeing on roles and responsibilities. In addition, we conducted fieldwork at the Port of Miami and interviewed U.S. government officials at this location to obtain insights on U.S. government activities. We selected the Port of Miami because it has been the site of large-scale CWT operations, and agency officials identified Miami as a hub for wildlife trade and an illustrative example of U.S. government CWT operations. We also conducted fieldwork in China and Vietnam, where we visited rescue centers and interviewed host government officials and NGO representatives. To examine the extent to which FWS, State, and USAID are assessing the effectiveness of their CWT activities, we selected programs to analyze, spoke with agency officials, and reviewed documentation from the programs selected. We included programs that had started, finished, or been ongoing from the beginning of fiscal year 2015 to the end of fiscal year 2016 and that are or were solely dedicated to CWT. Specifically for State, programs must have been identified by its Bureau of International Narcotics and Law Enforcement Affairs as a discrete activity that contributed to CWT and must have been at least 3 months into implementation. Specifically for USAID, programs must have (or have had) funding greater than $1 million. To assess agency monitoring practices, we analyzed agency guidance on monitoring and examined selected programs as illustrative examples of how agencies applied their own guidance. To assess evaluation practices, we assessed a USAID midterm evaluation against key elements to determine quality. Two social science analysts independently assessed this evaluation using the same criteria, methods, and procedures that we developed for GAO-17-316. The analysts met and reconciled any initial differences in their assessments. We conducted this performance audit from October 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following photographs (see fig. 8-26) were taken by GAO staff during field visits to Miami, Florida; Beijing, China; Hong Kong; Bangkok, Thailand; and Hanoi, Vietnam. GAO observed and photographed the following: shipment inspections conducted by U.S. Fish and Wildlife Service inspectors at the Port of Miami; examples of wildlife that are traded in the United States; examples of wildlife and wildlife products that have been seized by the U.S. Fish and Wildlife Service; examples of wildlife and wildlife products that have been seized in antiwildlife trafficking awareness campaigns at the Hartsfield–Jackson Atlanta International Airport; Beijing Capital International Airport; Hong Kong International Airport; Suvarnabhumi Airport, Bangkok, Thailand; Chatuchak Market in Bangkok, Thailand; and a highway in Hanoi, Vietnam; wildlife at the Beijing Rescue and Rehabilitation Center; the Endangered Primate Rescue Center, Cuc Phuong National Park, Vietnam; and the Carnivore and Pangolin Rescue Center, Cuc Phuong National Park, Vietnam; and shops that sell ivory products in Hong Kong. To view these photographs online, please click on this hyperlink. Kimberly M. Gianopoulos, (202) 512-8612, or gianopoulosk@gao.gov. In addition to the individual named above, Judith Williams (Assistant Director), Marc Castellano (Analyst-in-Charge), David Dayton, Martin De Alteriis, Neil Doherty, Mark Dowling, Michael Hoffman, and Jasmine Senior made key contributions to this report.", "summary": "Wildlife trafficking—illegal trade in wildlife—is estimated to be worth $7 billion to $23 billion annually and, according to State, continues to push some protected and endangered animal species to the brink of extinction. In 2013, President Obama issued an executive order that established an interagency Task Force charged with developing a strategy to guide U.S. efforts to combat wildlife trafficking. GAO was asked to review U.S. agencies' CWT efforts. GAO's September 2016 report on wildlife trafficking focused on supply side activities ( GAO-16-717 ). This report focuses on demand side activities and examines, among other things, (1) what is known about the demand for illegal wildlife and wildlife products in the United States and in Asia and (2) actions agencies are taking to reduce demand for illegal wildlife products in the United States and in Asia. GAO reviewed information from U.S. agencies and international and nongovernmental organizations and interviewed U.S. officials in Washington, D.C., and Miami, Florida, and U.S. and foreign government officials in China, Thailand, and Vietnam. In the United States, China, and countries in Southeast Asia, there is diverse demand for illegally traded wildlife, according to data, reports, and various officials. The Department of the Interior's (Interior) U.S. Fish and Wildlife Service (FWS) has seized a variety of wildlife at U.S. ports, such as coral for aquariums, conch meat for food, seahorses for medicinal purposes, and crocodile skin for fashion items. In China and Southeast Asian countries, reports and officials have identified seizures and consumption of illegally traded wildlife products such as rhino horn, elephant ivory, pangolins (shown below), turtles, and sharks, among others, used for purposes such as food, decoration, pets, or traditional medicine. U.S. agencies are taking actions designed to reduce demand for illegal wildlife, including building law enforcement capacity and raising awareness, but disagreement on roles and responsibilities has hindered some combating wildlife trafficking (CWT) activities in Southeast Asia. FWS inspects shipments in the United States and facilitates law enforcement capacity building with partner nations overseas. The Department of State (State) conducts diplomatic efforts, some of which contributed to a joint announcement by China and the United States to implement restrictions on both countries' domestic ivory trade. The U.S. Agency for International Development (USAID) works with local organizations abroad to support programs intended to reduce wildlife demand, strengthen regional cooperation, and increase law enforcement capacity. Several other agencies also contribute expertise or resources to support various demand reduction activities. Certain practices can enhance and sustain collaborative efforts, such as establishing joint strategies, defining a common outcome, and agreeing on roles and responsibilities. GAO found that agencies applied the first two practices but could improve with regard to agreement on roles and responsibilities in Southeast Asia. For example, although the National Strategy for Combating Wildlife Trafficking Implementation Plan designates various Task Force agencies to lead or participate in achieving CWT strategic priorities, it does not define specific roles and responsibilities at the working level. Agencies have different views on roles and responsibilities in Southeast Asia. According to some officials, this disagreement resulted in inappropriate training activities and hindered U.S. cooperation with a host nation. More clearly defining roles and responsibilities would enhance agency collaboration. GAO recommends that Interior, State, and USAID work to clarify roles and responsibilities for staff collaborating on combating wildlife trafficking efforts in Southeast Asia. Agencies agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Coast Guard shore infrastructure includes buildings and structures, which it has organized into 13 asset types, known as asset lines. Table 1 provides information on Coast Guard asset lines, including examples of assets, the number within each asset line in 2017, and the Coast Guard’s estimated replacement value of each asset line in 2017—the most recent value available at the time of our review. The Coast Guard’s Office of Civil Engineering sets Coast Guard-wide civil engineering policy, which includes facility planning, design, construction, maintenance, and disposal. The Coast Guard’s Shore Infrastructure Logistics Center, established in 2009, is to manage and coordinate infrastructure condition assessments via six regional Civil Engineering Units (CEUs), along with other divisions and offices. The condition of individual shore infrastructure assets is determined by CEU personnel and civil engineers in the field. According to Coast Guard officials, every Coast Guard facility, such as a base or boat station, is to be inspected by a CEU representative every 3 years. The representative is to conduct a facility condition assessment of all shore infrastructure assets—buildings and structures—located at that facility. According to Coast Guard CEU officials, the representative is to identify if any new maintenance-related deficiencies exist at the facility and add them to the backlog of projects, review the previous backlog, and verify that the Coast Guard’s shore facilities’ inventory records are correct. This process is intended to help define the current conditions of assets and identify maintenance needs. According to Coast Guard guidance, the Shore Infrastructure Logistics Center also establishes project priorities for the acquisition, programmed depot maintenance, major repair, and modification of Coast Guard shore facilities, and implements shore infrastructure policies. Among other things, the Shore Infrastructure Logistics Center is to (1) assure that all Coast Guard facilities meet their operational and functional requirements, (2) take corrective action before advanced deterioration requires major repairs, (3) ensure preventative maintenance is performed on a routine schedule, and (4) prevent over-maintenance and under-maintenance. In addition, this guidance states that all Coast Guard property must have a documented, standardized system of maintenance for facilities by designated personnel familiar with, and properly trained on, the maintenance system in place to support its shore infrastructure. In 2016, the Coast Guard’s civil engineering program began using requirements-based budget planning to determine shore infrastructure funding needs. According to the Coast Guard, a requirements-based budget is an estimate of the cost to operate and sustain the Coast Guard’s shore infrastructure portfolio of assets over the lifecycle of the asset, from initial construction or capital investment through divestiture or demolition. Coast Guard budgeting for shore infrastructure distinguishes between procurement and acquisitions and recurring and non-recurring maintenance, among other things. Procurement and acquisitions encompasses major projects to alter, acquire, or build new infrastructure—for example, modifying the bay doors on a boat garage so that larger boats can be accommodated. In contrast, there are two types of maintenance for shore infrastructure. Routine recurring maintenance, known as Organizational-Level Maintenance (OLM), includes tasks such as clearing moss and debris from a rooftop drain or applying caulk to seal a building. Non-recurring maintenance, known as Depot-Level Maintenance (DLM), consists of major maintenance tasks that are beyond the capability of an individual unit, such as replacing exterior doors and windows. The Coast Guard uses three accounts for its shore infrastructure. Amounts in the Procurement, Construction and Improvements (PC&I) account are used for the acquisition, procurement, construction, rebuilding, and improvement of shore facilities and are directed to specific projects. Amounts in the shore OLM account are used for routine recurring maintenance, and amounts in the DLM account are used for major maintenance and repair of Coast Guard real property. See Table 2 for additional information about these accounts. The Coast Guard makes decisions regarding the allotment of resources for shore infrastructure through PC&I, regional DLM, and central DLM planning boards, which meet twice annually to prioritize Coast Guard shore infrastructure needs on the basis of expected appropriations and other factors, such as damage caused by natural disasters. These boards are responsible for evaluating potential shore infrastructure projects that have been identified by managers who are responsible for evaluating, ranking, and recommending projects to the boards within their specified product line. For example, aviation asset line managers are responsible for aviation-related shore infrastructure projects, such as runways, landing areas, and hangars. Table 3 provides specific information on these planning board responsibilities and members. Figure 1 shows how the planning boards are to prioritize shore infrastructure projects. Additional details about the planning boards’ processes, including the extent to which they are documented and align with leading practices, are described later in this report. The Coast Guard is statutorily required to provide a list of each unfunded priority, including unfunded shore infrastructure priorities, to certain committees of Congress to support the President’s budget, and its 5- year Capital Investment Plan (CIP). The term ‘unfunded priority’ means a program or mission requirement that (1) has not been selected for funding in the applicable proposed budget, (2) is necessary to fulfill a requirement associated with an operational need, and (3) the Commandant would have recommended for inclusion in the applicable proposed budget had additional resources been available, or had the requirement emerged before the budget was submitted. As of 2017, the Coast Guard’s annual report on shore infrastructure stated that 45 percent of Coast Guard assets have exceeded their service lives. The Coast Guard also reported that its overall shore inventory has a 65-year service life. For example, the Coast Guard’s 2017 shore infrastructure report identified at least 65 percent of aviation pavements, 60 percent of aviation fuel facilities, and at least 53 percent of piers—all of which the Coast Guard has identified as mission-critical assets—as being past their service lives. Coast Guard officials told us that the agency had changed their service life standard from 50 years to service lives linked to each asset’s assigned category code, based on Department of Defense (DOD) standards, before they reported service life calculations in their 2017 annual report on shore infrastructure. As a result of this change, some shore infrastructure that has been in service 50 to 65 years, which would previously have been identified as past its service life, will be characterized by the Coast Guard as within its service life—a better condition than the Coast Guard would have reported under its 50-year standard. Additionally, in 2017, the Coast Guard rated its overall shore infrastructure condition as a C- based on criteria it derived from standards developed by the American Society of Civil Engineers. Some asset lines, such as aviation, whose assets are generally mission-critical, are rated lower. For example, the Coast Guard rated its industrial asset line as a D, in part because 8 of the 9 assets which comprise the Coast Guard Yard—the only Coast Guard facility that can perform drydock maintenance on large Coast Guard ships—are more than 5 years beyond their service life. Table 4 shows additional detail about Coast Guard asset lines, including the rate at which the Coast Guard reported these assets were functioning past their service life, and the condition grades assigned by the Coast Guard for fiscal year 2017. According to Coast Guard officials, the demand placed on the Coast Guard’s shore infrastructure in recent years has increased because of the new ships and aircraft the Coast Guard has acquired. For example, a senior Coast Guard official told us that the agency has recently needed to upgrade some of its hangars with liquid oxygen storage facilities in order to support the Coast Guard’s new HC-27A aircraft. Another official told us that because the Coast Guard’s National Security Cutters—which the Coast Guard began operating in 2010—are 40 feet longer than the High Endurance Cutters they are replacing, the Coast Guard has had to either build new piers or lengthen existing ones. Coast Guard data show that it will cost at least $2.6 billion to address its two project backlogs—(1) recapitalization and new construction, and (2) deferred maintenance. Given the level at which the Coast Guard has been requesting such funding, it will take many years for the agency to address the backlogs. For example, the Coast Guard estimated that based on its fiscal year 2017 appropriation it would take 395 years to address its current $1.77 billion PC&I recapitalization and new construction backlog, assuming that funding would continue at this level. This time frame estimate does not include the Coast Guard’s deferred DLM maintenance backlog, which the Coast Guard estimated to be nearly $900 million in fiscal year 2018. Table 5 provides information on the Coast Guard’s two shore infrastructure backlogs as of August 2018. However, the number of projects in the Coast Guard’s backlogs and the associated cost for addressing them is incomplete. In July 2018, Coast Guard officials told us that the majority of the projects on the PC&I backlog do not yet have associated cost estimates, and thus have not been factored into the backlog cost estimates they have previously reported to Congress. In November 2018, the Coast Guard told us there were 205 projects on the PC&I backlog without cost estimates. Officials explained that they have not prepared cost estimates for these projects because they are in the preliminary stage of development and cost estimates would not be accurate. Figure 2 shows the number of projects with cost estimates and the estimated value of its PC&I backlog for fiscal years 2012 through 2018. See appendix II for additional details. In addition to the estimated $2.6 billion backlogs of PC&I recapitalization and new construction and DLM deferred maintenance projects, the Coast Guard carries out routine and recurring maintenance and repairs (maintenance) through OLM funding. However, Coast Guard officials stated that funding for maintenance projects cannot be disaggregated from overall OLM funding. The Coast Guard’s 2017 shore infrastructure annual report states that industry studies establish that the most effective maintenance organizations spend about 17 percent of their staff labor effort on corrective maintenance (i.e., repairs) and 83 percent on preventative maintenance (e.g., activities such as changing buildings systems’ filters and oil, resealing pavement surfaces, or repainting buildings). However, Coast Guard’s analysis of OLM records indicated that 66 percent of their facilities’ staff labor effort was used for corrective maintenance. This imbalance indicates that fewer funds are available for preventative maintenance than industry studies suggest, which could increase costs and affect service lives if preventative maintenance cannot be performed to the extent necessary. The annual report further stated that the significant investment needed for corrective maintenance reflects the state of the Coast Guard’s aging infrastructure and the strain it places on maintenance personnel. Moreover, Coast Guard officials testified to Congress in June 2017 that aging infrastructure adversely affects operational efficiency. Further, in July 2018 Congressional testimony by the Coast Guard Deputy Commandant for Mission Support stated that the agency needs to rebuild shore infrastructure readiness with sound investments in operations and maintenance, but budget realities result in deferred maintenance, fewer spare parts, and infrastructure reliability and security concerns. The Coast Guard’s process to manage its shore infrastructure recapitalization and deferred maintenance backlogs does not fully meet 6 of 9 leading practices we have previously identified for managing public sector maintenance backlogs. Specifically, of the nine leading practices, the Coast Guard met three, partially met three, and did not meet three, as shown in Table 6. We, as well as others, have identified that deferring maintenance and repair backlogs can lead to higher costs in the long term and pose risks to safety and agencies’ missions. The Coast Guard met 3 of 9 leading practices for managing public maintenance backlogs by identifying the types of risks posed by not making timely investments in its shore facilities; identifying the types of assets, such as buildings, that are mission-critical; and by establishing guidance that identifies the primary methods to be used for delivering maintenance and repair activities, among other things. We have previously found that these three practices are an important step toward increased transparency and more effective management of maintenance backlogs. According to leading practices, agencies should identify the types of risks posed by not investing in deteriorating facilities, systems, and components because this is important for providing more transparency in the decision-making process, and for communicating with staff at all organizational levels. The Coast Guard has a process to identify, document and report risks in its annual shore infrastructure reports for fiscal years 2015 through 2017. These reports identified the types of risks the Coast Guard faces in not investing in its facilities, including financial risk, capability risk, and operational readiness risk, but did not specifically measure these risks. The Coast Guard met this leading practice because the leading practice requires agencies to identify risk in general terms—for example, in terms of increased lifecycle costs, or risk to operations. The leading practice does not require the agency to quantify or measure this risk by, for example, calculating the probability that a building or structure will fail and impair the Coast Guard’s operations. Leading practices state that agencies should identify buildings as mission-critical and mission-supportive to help establish where maintenance and repair investments should be targeted, to ensure that funds are being used effectively. Since at least 2012, the Coast Guard has documented its process to classify all of its real property under a tier system and established minimum investment targets by tier as part of its central DLM planning boards. These tiers—mission-critical versus mission-supportive—were incorporated into the guidance that Coast Guard decision-makers are to follow in their deliberations about project funding and to help them determine how to target funding more effectively. For example, the Coast Guard’s PC&I planning board guidance for fiscal years 2019 through 2023 prioritized expenditures on shore infrastructure-supporting front line operations such as piers or runways over shore infrastructure providing indirect support to front line operations such as administrative buildings. Identification of the primary methods of delivery for maintenance and repair activities is intended to help agencies determine the level of resources that should be allocated to each type of maintenance activity and to repair projects, according to leading practices. The Coast Guard’s Civil Engineering Manual and other guidance documents detail how the maintenance and repair program is structured and how budget accounts are to be utilized. For example, the manual defined how projects should be classified and funded—e.g., DLM or OLM—which has helped to determine the Coast Guard units responsible for carrying out these maintenance or repair activities. The Coast Guard partially met 3 of 9 leading practices for managing public sector maintenance backlogs, including conducting condition assessments, establishing performance goals and measures, and aligning property portfolios with mission needs and disposing of unnecessary assets. Conducting periodic condition assessments are an effective approach for facility management as identifying condition deficiencies can inform budgeting decisions, according to leading practices. Under the Coast Guard’s process, facility condition assessments are to be used to evaluate the condition of infrastructure and identify deficiencies. These assessments are to lead to the creation of the maintenance and recapitalization projects that then compose the Coast Guard’s deferred maintenance backlogs. However, the Coast Guard partially met this leading practice because it has not issued specific guidance on how these assessments are to be conducted, nor do the six CEUs follow a standardized or consistent process for conducting their assessments, according to Coast Guard field and headquarters officials. Further, Coast Guard officials at 5 of the 6 CEUs told us that some or all of the officials who conduct facility condition assessments serve on a rotational basis. As a result, the level of familiarity inspectors have with the facilities they inspect may vary, which could lead to differences in the assessments they produce. Moreover, while inspectors at 3 of the 6 CEUs are to use checklists when conducting their inspections, all of these checklists are different, and the other three CEUs do not currently use checklists. We found that these differences have contributed to inconsistencies in the information collected. For example, assessment results we analyzed used different scales for prioritizing maintenance projects, such as letter grades or red/amber/green scales. One assessment we reviewed listed both DLM and OLM projects, and provided the unit commander with detailed instructions accompanied by pictures explaining how to address these issues, whereas other assessments only identified DLM projects or “items of concern.” One senior official acknowledged that the Coast Guard did not have standardized assessments, and that developing them had not been the highest priority among numerous guidance documents the Coast Guard is trying to complete. Without standardized assessments, the Coast Guard’s ability to systematically compare projects for prioritization is limited, and this could directly impact its ability to establish appropriate levels of funding for addressing the backlog, as identified in this leading practice. Coast Guard officials told us they intend to issue guidance to standardize facility condition assessments, but they could not provide a date for completing the guidance that would be issued. Moreover, according to the Coast Guard, it began to modernize its shore infrastructure civil engineering management in 2006, and it has been working to develop its current asset management model, including updating guidance, since 2013. By executing plans for a standardized facility condition assessment process and developing a plan with milestones and timeframes for standardizing the process, the Coast Guard will be better positioned with more consistent data to prioritize and plan its shore infrastructure projects. According to leading practices, establishing performance goals, baselines for performance outcomes, and performance measures allows agencies to track the effectiveness of maintenance and repair investments, provide feedback on progress, and indicate where investment objectives, outcomes, or procedures require adjustment. According to Coast Guard guidance, the Chief of the Office of Civil Engineering and the Shore Infrastructure Logistics Center are to identify and promulgate performance metrics annually. The Coast Guard partially met this leading practice by documenting and tracking facility condition information using a letter grade system and reporting this in its annual reports from 2015 through 2017. However, the Coast Guard has not set performance goals for improving an asset’s grade, or established baselines to indicate where investments require adjustment, because it continues to revise the formula it uses to calculate the letter grades. Consequently, the letter grades from fiscal years 2015 through 2017 are not comparable year to year to measure performance. Definitions of Performance Management Common Terms Performance goal - a target level of performance expressed as a tangible, measurable objective against which actual achievement can be compared, including a goal expressed as a quantitative standard, value, or rate. A performance goal is comprised of a measure, a time frame, and a target. Performance measure - a tabulation, calculation, recording of activity or effort, or assessment of results compared to intended purpose, that can be expressed quantitatively or in another way that indicates a level or degree of performance. Performance target - quantifiable or otherwise measurable characteristic typically expressed as a number that tells how well or at what level an agency or one of its components aspires to perform. Baselines for Performance Outcomes- a quantifiable point at which an effort began and from which a change in outcomes can be measured and documented. In 2017, the Coast Guard reported a new performance measure for its maintenance efforts, called Average Condition Index, which reflects the average condition of the assets weighted by their replacement value. The Coast Guard set targets for this measure, but it did not establish what actions it would take to meet these targets. Limitations with the Coast Guard’s performance measures for its shore infrastructure are not a new issue, as they were also identified in 2015 by an external study commissioned by the Coast Guard. Specifically, the study reported that the Coast Guard’s condition index, which was more than 15 years old at the time, was not defensible because it lacked trend data and analysis capabilities. This study recommended that the Coast Guard develop key performance measures, among other things, for managing its shore infrastructure. Coast Guard officials told us that it has collected data and drafted some performance measures, but they have not yet implemented the recommendations from the 2015 study or set a time frame for doing so because they had not identified it as a priority. Establishing goals, measures, and baselines would better position the Coast Guard to assess their effectiveness and take appropriate actions to improve the condition of its shore infrastructure. Leading practices state that agencies should efficiently employ available resources, limit construction of new facilities, adapt existing buildings to new uses, and transfer ownership of unneeded buildings to other public or private organizations to align real property with mission needs. In addition, facilities that are functionally obsolete, not needed to support an agency’s mission, not historically significant, or not suitable for transfer or adaptive reuse should be demolished whenever it is cost effective to do so, under this leading practice. We have previously reported that the eventual need to address deferred maintenance and repair could significantly affect an agency’s future budget resources. The Coast Guard has made limited progress and partially met this leading practice by disposing of some unneeded assets, but it has not consistently or extensively aligned its property and mission needs. For example, in 2017, the Coast Guard’s Civil Engineering Units and facility engineers reviewed all projects on its $1.77 billion PC&I project backlog and removed 132 projects from it because, according to officials, they were either no longer valid as a result of mission changes, a non-PC&I alternative/solution was found to be more beneficial, or the need was met through another project. This validation effort was a positive step toward aligning property and mission needs, but it raises questions about whether and to what extent the PC&I backlog is routinely and consistently managed to ensure that projects reflect mission needs. The Coast Guard made some progress aligning property and mission needs through the sale of some assets. For example, in 2017, it sold 189 of its 2,961 housing assets through use of an initiative to divest itself of some housing assets—an effort which garnered $26.8 million in total sales proceeds over the life of the program. However, the Coast Guard’s ability to dispose of unneeded assets has been limited in some instances. For example, in 2013, the Coast Guard identified 18 multimission stations with duplicative coverage that could be permanently closed, using a process based on criteria that reflected mission needs. In October 2017, we reported that closing these stations could potentially generate $290 million in cost savings over 20 years; however, as of September 2018, the Coast Guard had taken no action to close these stations or establish time frames for their closure, although Coast Guard agreed with our recommendation that they do so. Moreover, our analysis of Coast Guard planning documents found that 5 of the 18 multimission stations recommended for closure in 2013 have projects on the Coast Guard’s current PC&I backlog. For example, Station Shark River, in New Jersey, was recommended for recapitalization in fiscal year 2017, despite Coast Guard recommendations to close the station in 1988, 1996, 2007, and 2013. Notably, the Coast Guard has made multiple attempts in previous years to close stations that it deemed suitable for closure but was unable to close them due to congressional intervention, and subsequent legislation prohibiting closures. Given the Coast Guard’s competing acquisition, operational, and maintenance needs, and PC&I backlog that will cost at least $1.77 billion to address, difficult trade- off decisions to align real property needs by disposing of unneeded assets may help to mitigate some resource challenges. The Coast Guard did not meet 3 of 9 leading practices for managing shore infrastructure backlogs, including establishing clear maintenance and repair investment objectives, employing models for predicting the outcomes of investments and analyzing trade-offs, and structuring budgets and related information to address maintenance backlogs. Agencies with maintenance and repair responsibilities should determine what outcomes are most important to achieve and set priorities among them, according to leading practices. Coast Guard provided guidance for central DLM planning boards, which calls for stakeholders to identify which projects will be reviewed by the planning boards, for board members to consider project trade-offs and to make recommendations on which projects to fund, and for stakeholders to then review the results. However, Coast Guard headquarters did not provide documented guidance to the six CEUs responsible for administering regional DLM planning boards—a process intended to establish clear objectives or priorities among outcomes to be achieved for approximately 70 percent of the Coast Guard’s DLM funds. Coast Guard headquarters officials told us that they instead rely on each CEU to hold their respective regional planning boards in accordance with locally established practices. However, only 1 of the 6 CEUs has developed and implemented written guidance for its DLM planning board process, and it is not clear how these boards set objectives or priorities among outcomes to be achieved. The Coast Guard provided some documentation detailing how regional DLM planning board inputs and subsequent decisions were linked to decision-making criteria for one regional DLM planning board meeting hosted by one of its nine Districts. Table 7, among other things, shows the limited extent of documentation to substantiate Coast Guard decisions. However, the Coast Guard did not meet this leading practice because it could not demonstrate, with documentation, how decisions were linked to criteria for its PC&I planning board meetings, central DLM planning board meetings, or any other regional DLM planning board meeting. Without the full range of information on which planning board decisions were made, neither we, nor the Coast Guard, could substantiate the extent to which the Coast Guard followed its processes or evaluate whether its processes for managing shore infrastructure projects were sound. OMB guidance calls for agencies to use information to support decision- making, such as whether an asset is continuing to meet business needs and contribute to goals, and whether there are smarter or more cost effective ways to deliver the function. This guidance is comparable to the leading practice discussed above, which calls for agencies to establish clear maintenance and repair investment objectives and set priorities among outcomes to be achieved. Additionally, according to OMB, agencies are to have a plan for periodic, results-oriented evaluations of program effectiveness, and agencies should discuss the results of these evaluations when proposing reauthorizations. Establishing guidance for planning boards to document project prioritization decision-making, as well as the impact of trade-off decisions, would allow agency decision makers, and Congress, to better understand Coast Guard priorities and how shore infrastructure project priorities might potentially affect other priorities. The Coast Guard was unable to provide documentation showing how it prioritized projects for a number of reasons, including that they didn’t have written guidance, documentation to verify the use of standardized meeting inputs such as presentations, and meeting minutes. Furthermore, officials could not explain why certain documentation was not maintained to demonstrate how the Coast Guard had made and prioritized funding decisions. Such documentation may allow the Coast Guard to show, for example, why repairing a station they previously wanted to close is a higher priority than fixing a station they appear to need to perform maintenance on certain assets (see fig. 3). To ensure that investment decisions are aligned with agency missions and goals, agencies should employ models to predict the future condition and performance of its facilities as a portfolio, according to leading practices. Performance-prediction models predict the deterioration of building components over time and are important because certain facility components are particularly prone to deterioration or failure, thus requiring more frequent maintenance or repairs. A 2015 review of the Coast Guard’s asset management framework identified the benefit of analyzing tradeoffs between reactive and preventative maintenance and described how preventative maintenance efforts could translate into cost savings. Coast Guard officials provided one example of its efforts to model outcomes, but it did not meet this leading practice because it has not properly used the results of this model to optimize competing investments for that asset line or any other asset line or provided documentary evidence verifying that it properly applied it. In December 2017, a Coast Guard Aviation Pavement Study employed a model that found that the Coast Guard could more efficiently prioritize investment in aviation pavement. It also identified strategies to achieve a long-term sustainable pavement condition. A proposed fiscal year 2018 to 2020 Coast Guard aviation pavement maintenance and recapitalization plan proposed using the study results and recommended actions that it said could save the Coast Guard $13.8 million by accelerating investment in aviation pavement sooner rather than deferring such maintenance and recapitalization. According to Coast Guard officials, the analytical approach outlined in its 2017 study could be applied to all 13 of its shore infrastructure asset lines. However, the Coast Guard has not properly implemented a maintenance and recapitalization strategy based on the results of its aviation pavement plan, nor has it applied the analytical approach from this plan to other asset lines. Coast Guard officials told us they have not fully acted on the aviation pavement plan nor developed models for other asset lines. Specifically, a Coast Guard official described actions the agency is taking as piecemeal; 1 of 5 PC&I projects identified by their plan has been prioritized and funded. According to Coast Guard officials, the other pavement projects continue to be a priority for the asset line, but funding decisions have been deferred due to resource constraints and other competing priorities. As a result of not properly implementing its plan, it is unclear if the Coast Guard will achieve the cost savings it projected. By not employing similar models across its asset lines for predicting the outcome of investments, analyzing trade-offs, and optimizing decisions among competing investments, the Coast Guard is missing opportunities to potentially identify and achieve cost savings across other asset lines. According to leading practices, agencies should structure maintenance and repair budgets to differentiate between funding allotted for routine maintenance and repairs, and funding allotted to addressing maintenance and repair backlogs, to help ensure that underfunding does not affect the health and safety or reduce the productivity of employees, among other things. We found that Coast Guard budget requests did not provide Congress with accurate information about its funding needs. Specifically, we found that the Coast Guard did not meet this leading practice as its budget requests (1) have not clearly identified funding allotted for routine shore infrastructure maintenance needs, and (2) have not generally addressed deferred maintenance and repair deficiencies, resulting in increases to its backlogs. In addition, the Coast Guard has not included information in its Unfunded Priorities Lists and other related reports that clearly articulated trade-offs, or aligned with its requirements-based budget targets for shore infrastructure. Coast Guard officials were not able tell us why they have not requested maintenance and repair funding to adequately address their shore infrastructure backlog of deferred maintenance and repair deficiencies. First, we found that Coast Guard budget requests did not clearly identify funding allotted for routine shore infrastructure maintenance needs to address backlogs. Specifically, we found that budget requests related to shore infrastructure for fiscal years 2012 through 2019 did not provide Congress with required and complete information, as previously noted, necessary to inform decision-makers of the risks posed by untimely investments in maintenance and repair backlogs. While major maintenance and repair funding can be tracked within the Coast Guard’s budget, funding for routine recurring maintenance for shore infrastructure is embedded in a budget account that is used for both maintenance and operational expenses. As a result, the Coast Guard could not disaggregate expenditures from this account or determine how much funding goes towards routine maintenance. Second, we found that Coast Guard budget requests did not generally identify funding to address any backlogs of deferred maintenance or recapitalization, except for one fiscal year—2012—when the Coast Guard requested $93 million to recapitalize deteriorated/obsolete facilities and address the highest priority Shore Facilities Requirements List backlog items. The 2012 budget request also noted that the health and maintenance of its shore facilities are foundational for the safe and effective execution of Coast Guard missions. However, the Coast Guard reported on some challenges to completing maintenance projects. For example, Coast Guard officials we interviewed stated that the annual Congressional Budget cycle has contributed to infrastructure management challenges because they are prohibited from signing contracts for maintenance projects during continuing resolutions. For example, since the fiscal year 2018 budget was not passed until March 2018, they had to rush during the summer, their busiest time of year, to establish contracts and work orders to ensure projects were funded before the end of the fiscal year on September 30th. Third, we found that the Coast Guard’s annual Unfunded Priorities Lists and other reports, including their 5-Year CIP, did not clearly describe trade-offs. In July 2018, we reported that by continuing to manage its operational asset acquisitions through its annual budget process and 5- year CIP, the Coast Guard creates constant churn as program baselines must continually realign with budget realities, instead of budgets being formulated to support program baselines. Coast Guard officials said that prioritization and trade-off decisions are made as part of the annual budget cycle, and that the shore infrastructure projects on its Unfunded Priorities List reflect the highest priorities for the department within the given top level funding. However, the annual Unfunded Priorities List does not clearly articulate prioritization decisions, including information about trade-offs among competing project alternatives, as well as the impacts on missions conducted from shore facilities in disrepair that had not been prioritized in previous years. According to Coast Guard officials, and as we previously reported, such information is not included in the 5- Year CIP or Unfunded Priorities List because it is not statutorily required. These information shortcomings are consistent with previous findings and recommendations that the DHS Office of Inspector General has made. Finally, we found that Coast Guard budget requests have not been aligned with its requirements-based budget targets for shore infrastructure. For example, we found that Coast Guard budget requests have not identified appropriations sufficient to meet its DLM maintenance and repair targets, which call for annual expenditures equal to two percent of plant replacement value. According to the Coast Guard, meeting its target for DLM would require allocating about $260 to $392 million annually for these repairs. Coast Guard officials told us that they have made difficult decisions to postpone necessary facility maintenance and construction projects in order to address other competing priorities related to mission execution, such as maintaining, operating, and recapitalizing its aging surface and air fleets. Between fiscal years 2012 and 2017, the Coast Guard reported that it expended an average of $208 million per year on DLM, and officials stated that the Coast Guard never met its target during this time period. Similarly, Coast Guard budget requests have not been in alignment with its PC&I targets for recapitalization. For example, Coast Guard recapitalization targets show a far greater need for funding than the allotments from the appropriations it requested between fiscal years 2012 and 2019. Specifically, Coast Guard targets for recapitalization of shore assets indicate that $290 to $392 million in PC&I funding is needed annually. However, the Coast Guard budget requests for fiscal years 2012 through 2018 have ranged between about $5 million and about $99 million annually, as shown in Table 8. Notwithstanding the mismatch between Coast Guard budget requests and its requirements-based budget targets, allotments for Coast Guard shore PC&I from its appropriations in fiscal years 2016 through 2018 exceeded the Coast Guard’s requests. For example, in fiscal year 2016, the Coast Guard’s allotment of $130 million was almost three times the nearly $47 million requested. In 2018, the almost $45 million allotted was more than four times the $10 million requested. Explanatory materials on the annual appropriations act for fiscal year 2018 indicated that the appropriated funding above requested amounts was to be used for modernization and recapitalization of facilities, and facility improvements, among other things. Without accurate and transparent information about the Coast Guard’s budgetary requirements, Congress will lack critical information that could help to prioritize funding to address the Coast Guard’s shore infrastructure backlogs. The Coast Guard’s inventory of shore infrastructure assets is vast, aging, and vulnerable to damage from extreme weather. Many of these assets are also critical to the Coast Guard’s operational mission performance. The Coast Guard has taken some steps to manage this infrastructure by implementing 3 of 9 leading practices for managing public sector maintenance backlogs—including identifying assets that are mission- critical, identifying risks posed by untimely investments, and identifying the primary methods for delivering maintenance and repair activities. However, significant work remains if the Coast Guard is going to make headway on reducing its backlog of at least $2.6 billion. Fully implementing the three leading practices that the Coast Guard now partially meets could help ensure that it benefits from establishing timeframes for and enhancing its guidance, establishing its performance metrics, baselines, and targets, and shedding unneeded assets. Additionally, fully implementing the leading practices that it does not meet—including implementing new approaches for documenting its project prioritization decisions, developing models that could help identify cost savings, and providing Congress with transparent and requirements- based budget requests that clearly identify alternatives and trade-offs— could help the Coast Guard more efficiently manage existing resources and better position the Coast Guard and Congress to address the shore infrastructure challenges. We are recommending the following six actions to the Coast Guard: The Commandant of the Coast Guard should direct the program managers to develop a plan with milestones and time frames for standardizing Coast Guard’s facility condition assessments. (Recommendation 1) The Commandant of the Coast Guard should direct program managers to establish shore infrastructure performance goals, measures, and baselines to track the effectiveness of maintenance and repair investments and provide feedback on progress made. (Recommendation 2) The Commandant of the Coast Guard should work with Congress to develop and implement a process to routinely align Coast Guard’s shore infrastructure portfolio with mission needs, including by disposing of all unneeded assets. (Recommendation 3) The Commandant of the Coast Guard should establish guidance for planning boards to document inputs, deliberations, and project prioritization decisions for infrastructure maintenance projects. (Recommendation 4) The Commandant of the Coast Guard should employ models for its asset lines for predicting the outcome of investments, analyzing trade- offs, and optimizing decisions among competing investments. (Recommendation 5) The Commandant of the Coast Guard should include supporting details about competing project alternatives and report trade-offs in Congressional budget requests and related reports. (Recommendation 6) We provided a draft of this report to DHS for review and comment. In its comments, reproduced in appendix III, DHS concurred with our recommendations. DHS, through the Coast Guard, also provided technical comments, which we incorporated as appropriate. DHS concurred with our first recommendation that the Commandant of the Coast Guard direct program managers to develop a plan with milestones and time frames for standardizing the Coast Guard’s facility condition assessments. DHS stated that the Coast Guard plans to complete a standardized facility condition assessment by December 2019. However, to fully implement the recommendation, the Coast Guard needs to ensure that it standardizes the process for conducting facility assessments—action that goes beyond completing a singular standardized facility assessment. DHS concurred with our second recommendation that the Commandant of the Coast Guard direct program managers to establish shore infrastructure performance goals, measures, and baselines to track the effectiveness of maintenance and repair investments and provide feedback on progress made. DHS stated that the Coast Guard plans to develop initial shore infrastructure measures with associated goals and baselines during its annual strategic planning process and expects to complete this process in March 2020. DHS concurred with our third recommendation that the Commandant of the Coast Guard work with Congress to develop and implement a process to routinely align the Coast Guard’s shore infrastructure portfolio with mission needs, including by disposing of all unneeded assets. DHS stated that the Coast Guard plans to establish, by June 2020, a process to assess current and projected operational and mission support needs to identify and recommend disposal of unneeded land, buildings, and structures. The Coast Guard reported that in the interim it will continue to communicate with Congress about unneeded assets through its required annual Conveyance of Coast Guard Real Property Report. The Coast Guard reported that in the interim it will continue to communicate with Congress about unneeded assets through its required annual Conveyance of Coast Guard Real Property Report. DHS concurred with our fourth recommendation that the Commandant of the Coast Guard establish guidance for planning boards to document inputs, deliberations, and project prioritization decisions for infrastructure maintenance projects. DHS stated that the Coast Guard plans to review existing guidance and issue updates as necessary and that promulgation of this guidance for its next planning boards will be completed by December 2019. To fully implement this recommendation, the Coast Guard needs to ensure that its guidance requires that inputs, deliberations, and project prioritization decisions for these boards are all fully documented. DHS concurred with our fifth recommendation that the Commandant of the Coast Guard employ models for its asset lines for predicting the outcome of investments, analyzing trade-offs, and optimizing decisions among competing investments. DHS stated that the Coast Guard plans to assess the use of modeling tools used by the Department of Defense as well as other alternatives to enhance its real property asset management capability. DHS stated that the Coast Guard expects to complete its initial identification of alternatives in December 2019 and complete its examination of alternatives in December 2020. DHS concurred with our sixth recommendation that the Commandant of the Coast Guard include supporting details about competing project alternatives and report trade-offs in Congressional budget requests and related reports. DHS stated that the Coast Guard plans to submit future budget proposals based on OMB guidance and will include additional information in its Congressionally-mandated future Unfunded Priorities Lists. To fully implement this recommendation, the Coast Guard needs to ensure it includes supporting details about competing project alternatives and report on trade-offs, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or AndersonN@gao.gov. GAO staff who made key contributions to this report are listed in appendix IV. The objectives of this report are to evaluate (1) what is known about the condition and costs of managing the Coast Guard’s shore infrastructure, and (2) the extent to which the Coast Guard’s process for managing its shore infrastructure meets leading practices for managing public maintenance backlogs. To identify what is known about the condition and costs of managing the Coast Guard’s shore infrastructure, we reviewed three Coast Guard annual reports on shore infrastructure, issued for 2015 through 2017. We also reviewed Coast Guard documentation and data on its shore infrastructure inventory to describe the condition and costs of managing these assets. To measure the size of the Coast Guard’s total backlog, we examined the Coast Guard’s shore Acquisition, Construction, & Improvements (AC&I) backlog of projects the Coast Guard has identified as necessary to fulfill its missions (i.e., its Shore Facilities Requirements List) from fiscal years 2012 through 2018, as well as its depot-level maintenance backlog as of March 2018. We also reviewed planning and budget documents to determine how the backlog has changed over time. To identify the appropriation targets the Coast Guard identified as needed to address these backlogs, we reviewed guidance and budget data for the three appropriations related to shore infrastructure, reviewed planning and budget documents such as Coast Guard’s annual Unfunded Priorities List—which are lists of projects the Coast Guard would undertake if funding were available—and the Coast Guard’s annual Congressional Budget Justifications for fiscal years 2012 through 2019, to demonstrate how the backlog has changed over time relative to budgeted funds. We also interviewed Coast Guard officials at headquarters and in the field to obtain their perspectives on the appropriation targets and budget formulation process. To obtain additional information about the condition of the Coast Guard’s infrastructure in different parts of the country, we interviewed officials from each of the Coast Guard’s six geographically-organized Civil Engineering Units (CEUs), which are responsible for implementing both District and Headquarters directives. We also interviewed officials from the Coast Guard’s two geographically-defined Area Commands—Pacific Area (PACAREA) and Atlantic Area (LANTAREA), who vote on the Procurement, Construction and Improvements (PC&I) and central DLM planning boards. To review the Coast Guard’s longer-term planning process for its shore infrastructure, we reviewed the Coast Guard’s 5-year Capital Investment Plan and interviewed agency officials. To assess the reliability of the Coast Guard’s data discussed in this report, we interviewed knowledgeable agency officials, reviewed documentation, and electronically tested the data for obvious errors and anomalies. Specifically, we interviewed Coast Guard officials and discussed the mechanisms they use to assess the quality of their data and the extent to which Coast Guard employs quality control mechanisms, such as automated edit checks. Additionally, in August 2018, the Coast Guard informed us that its data on its shore infrastructure may not be complete if field inspectors did not identify problems at the facilities they inspected. Coast Guard officials also told us in July 2018 that not all projects on the Coast Guard’s PC&I backlog have cost estimates. As a result, the amount of funding needed to address the Coast Guard’s backlog of shore infrastructure projects could be understated because the Coast Guard has not identified all deficiencies that exist at its facilities nor estimated the cost to fix all of the deficiencies it knows about. Despite these limitations, we determined that the Coast Guard’s data are sufficiently reliable for the purposes of reporting on the Coast Guard’s overall portfolio of shore infrastructure assets and the minimum amount of money the Coast Guard identified as needed to complete deferred repair and PC&I projects. To identify leading practices for managing backlogs of deferred maintenance projects, we reviewed our prior work and the literature on deferred maintenance and repair as it pertains to federal real property portfolios. In our prior work, we identified nine leading practices based on studies conducted by the National Research Council (NRC) of the National Academy of Sciences between 1998 and 2012. These studies were (1) Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation’s Public Assets (1998); (2) Investments in Federal Facilities: Asset Management Strategies for the 21st Century (2004); (3) Predicting Outcomes from Investments in Maintenance and Repair for Federal Facilities (2012). As we previously reported, the nine leading practices we employed were the ones we identified as being the most relevant and appropriate to federal agencies managing their deferred maintenance and repair backlogs, however these practices do not represent all actions that federal agencies can employ to improve management of their real property to include their real property maintenance and repair backlogs. To evaluate the extent to which the Coast Guard’s process for managing its shore infrastructure met leading practices for managing public maintenance backlogs, we analyzed Coast Guard plans, policies, procedures, and related laws for managing, maintaining and repairing shore infrastructure. We identified and analyzed Coast Guard guidance on its decision-making process for determining maintenance and repair decisions, and assessed Coast Guard practices against our main criteria, the leading practice discussed above. We also compared Coast Guard practices with the Office of Management and Budget’s (OMB) program evaluation and capital programming guidance. We used the following scale to evaluate the Coast Guard’s management of its shore infrastructure deferred maintenance and repair: Met—The Coast Guard properly considered the leading practice and demonstrated with documentary evidence that it had fully applied it. Partially Met—The Coast Guard properly considered and demonstrated with some documentary evidence that it had applied the leading practice to some extent. Not Met—The Coast Guard did not properly consider or apply the leading practice and had no documentary evidence verifying that it had applied it. To further our understanding of the Coast Guard’s process for prioritizing PC&I and deferred maintenance projects and the extent to which Coast Guard actions aligned with the aforementioned leading practices, we interviewed knowledgeable Coast Guard officials with a role in making or implementing decisions related to shore infrastructure to obtain their perspectives. Specifically, we interviewed officials from Coast Guard units to (1) obtain information about local conditions and maintenance practices, and/or to (2) obtain information on the experiences these officials had pertaining to the PC&I planning board, central DLM planning board, and/or regional DLM planning board processes. We interviewed officials from all six of the Coast Guard’s regional Civil Engineering Units (CEU) which are responsible for assessing the condition of Coast Guard’s shore infrastructure to obtain their perspectives on this topic and to determine the extent to which data from one CEU is comparable to data from another. We also interviewed officials from the Atlantic and Pacific Areas in order to obtain a high-level regional perspective on requirements, conditions, and planning efforts. To evaluate how Coast Guard leadership assesses the condition of its infrastructure and makes trade-offs between competing projects, we also interviewed officials from Coast Guard headquarters units which oversee Coast Guard’s shore infrastructure. These interviews included officials from the Office of Civil Engineering, the Shore Infrastructure Logistics Center, the Facilities Operations & Support Division, and the Office of the Assistant Commandant for Capability. To identify examples of (1) what is known about the condition and costs of managing the Coast Guard’s shore infrastructure, and (2) obtain information about the Coast Guard’s process for managing its shore infrastructure, we conducted a site visit to Coast Guard Base Alameda in Alameda, CA. The selection of Base Alameda for our site visit was based on the concentration there of regional Coast Guard leadership and Coast Guard facilities. Our findings from our Base Alameda site visit are not generalizable to other Coast Guard facilities. Additionally, because the Coast Guard personnel we interviewed were not necessarily performing the same function or role, or even stationed in Alameda, for all years covered by our review (2012-2018), our findings from these interviews are not necessarily generalizable across time. Taken as a whole, however, our site visit provided us with insights into the condition of the Coast Guard’s shore infrastructure and into the processes the Coast Guard uses to maintain, repair, and replace these assets. We conducted this performance audit from November 2017 to February 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides summary statistics for the Coast Guard’s Procurement, Construction, and Improvements (PC&I) backlog as of June, for 2012 through 2018. Table 9 provides details of individual shore infrastructure projects on the PC&I backlog, table 10 provides details of aids to navigation and projects that were grouped together by the Coast Guard for planning purposes, and table 11 sums values in tables 9 and 10. Nathan J. Anderson, (202) 512-3841 or andersonn@gao.gov. In addition to the contact above, Dawn Hoff (Assistant Director), Andrew Curry (Analyst-in-Charge), Michael Armes, John Bauckman, Chuck Bausell, Rick Cederholm, Billy Commons, John Crawford, Michele Fejfar, Peter Haderlein, Eric Hauswirth, Landis Lindsey, Michael Pinkham, Maria Mercado, Jan Montgomery, Forrest Rule, Christine San, and Adam Vogt made key contributions to this report.", "summary": "The Coast Guard, within the Department of Homeland Security (DHS), owns or leases more than 20,000 shore facilities, such as piers, docks, boat stations, air stations, and housing units, at more than 2,700 locations. In June 2017, the Coast Guard testified to Congress that it had a $1.6 billion recapitalization backlog for its shore infrastructure, which had a replacement value of about $20 billion. GAO was asked to review the Coast Guard's management of its shore infrastructure. This report examines: (1) what is known about the condition and costs of managing the Coast Guard's shore infrastructure, and (2) the extent to which the Coast Guard's process for managing its shore infrastructure meets leading practices. To answer these questions, GAO reviewed relevant laws and Coast Guard annual reports on its shore infrastructure, analyzed Coast Guard data, and interviewed Coast Guard officials. GAO also compared Coast Guard policies and procedures, and actions taken during fiscal years 2012 through 2018 to manage its shore infrastructure, against the leading practices that GAO previously identified for managing public sector maintenance backlogs. About 45 percent of the Coast Guard's shore infrastructure is beyond its service life, and its current backlogs of maintenance and recapitalization projects, as of 2018, will cost at least $2.6 billion to address, according to Coast Guard information. The deferred maintenance backlog included more than 5,600 projects, with an estimated cost of $900 million. The recapitalization and new construction backlog had 125 projects, with an estimated cost of at least $1.77 billion as of 2018 (see figure). GAO's analysis of Coast Guard data found that as of November 2018 there were hundreds of recapitalization projects without cost estimates—the majority of recapitalization projects. Coast Guard officials told GAO that these projects are in the preliminary stages of development. The Coast Guard's process for managing its shore infrastructure did not fully meet 6 of 9 leading practices that GAO previously identified. Of the nine leading practices, the Coast Guard met three, partially met three, and did not meet three. For example, the Coast Guard generally has not employed models for predicting the outcome of maintenance investments and optimizing among competing investments, as called for in leading practices. In one instance, the Coast Guard used a model to optimize maintenance for its aviation pavement and, according to Coast Guard officials, found that it could save nearly $14 million by accelerating investment in this area (e.g., paving runways) sooner rather than deferring such maintenance. Coast Guard officials told us that such modeling could be applied within and across all of its shore infrastructure asset types, but the Coast Guard did not implement the results of this model and does not require their use. Without requiring the use of such models, the Coast Guard could be missing opportunities to achieve cost savings and better manage its maintenance backlogs. GAO is making six recommendations, which DHS agreed to implement, including that the Coast Guard align its management of its shore infrastructure backlogs with leading practices by requiring the use of models for predicting the outcome of, and optimizing among, competing investments for maintenance projects.", "document_type": "gao"}
{"report": "According to Air Force officials, the Air Force has 82 HH-60G helicopters designated to meet its personnel recovery mission requirements. The remaining 14 HH-60Gs are designated for training and, development and testing. Figure 1 shows the Air Force’s inventory of HH-60G Pave Hawk helicopters as of May 2018. The Air Combat Command is the lead command for personnel recovery helicopters and as such has responsibility for all requirements associated with the helicopters, and for program funding. Formal training of helicopter aircrews takes place at Kirtland and Nellis Air Force Bases. The formal training unit at Kirtland Air Force Base is the only integrated unit with both active and reserve component forces, but the unit’s helicopters are assigned to the active component. All other HH-60G Pave Hawk units consist solely of active or solely of reserve component forces. Figure 2 shows the locations and components of the HH-60G rescue squadrons. It also shows the numbers of helicopters at each location. It takes several years to fully train a helicopter pilot. Pilots spend about a year and half in their general introductory and specialized helicopter training. For Air Force HH-60 pilots, this initial qualification training occurs at Kirtland Air Force Base. Following that, the pilots continue their training at their assigned operational squadrons. According to weapons school officials, a few experienced HH-60 pilots are selected to attend the HH-60 weapons school at Nellis Air Force Base where the pilots assist in the development of tactics, techniques, and procedures for the HH-60 community. Figure 3 shows a typical training timeline for HH-60G pilots. The material condition of the Air Force’s HH-60G fleet has declined and maintenance challenges have increased, in part due to extensions beyond the initially designed service life of the helicopters. In November 2017, the Air Force’s HH-60Gs were about 5 percent below their desired “mission capable” rate of 75 percent, which refers to the material condition of a squadron’s possessed aircraft and their abilities to conduct their designed missions. Mission capable rates have shown some year- to-year fluctuations, without any clear trends. However, for each of the past 5 years, the helicopters’ mission capable rates have been below the Air Force’s goal, and for fiscal year 2017, 68 percent of the 96 helicopter fleet were mission capable. As the helicopters have aged, the amount of time spent conducting maintenance on them has increased. For example, according to Air Force officials, in fiscal year 2013 the fleet averaged about 21 maintenance manhours for every HH-60G flight hour. However, by fiscal year 2017, the maintenance time spent had increased to an average of more than 25 maintenance manhours for every flight hour. According to officials, the increased time conducting maintenance is a result of an aging helicopter that requires more intensive maintenance. Further, according to officials, in 2007 the average amount of time required to conduct more extensive depot-level maintenance was 233 days, but by fiscal year 2017 it was 332 days, more than a 40 percent increase. Air Force maintenance data for fiscal years 2013-2017 show that airframes, turboshaft engines, and flight controls (see fig. 4) were the HH-60G elements that failed most often. According to Air Force officials, these structural and major component failures can require time-consuming maintenance that negatively affects availability and mission capable rates. According to Air Force flight-hour data, the average flight hours across the HH-60G fleet have increased by nearly 20 percent from fiscal year 2013 through May 2018. Air Force officials stated that the HH-60G was initially designed to have a service life of approximately 6,000 flight hours. However, in May 2018, the fleet-wide average was approximately 7,100 flight hours, or about 18 percent more than their initial expected service life. Table 1 shows that, as of May 2018, HH-60G training aircraft averaged about 10,500 flight hours, while the primary mission and back up aircraft averaged about 6,600 flight hours. The Air Force’s two developmental and testing aircraft had an average of 5,500 flight hours. According to Air Force officials, this is because developmental and testing aircraft are flown to test specific aircraft elements and not on regular missions. As flight hours increase more maintenance is required and maintenance challenges increase, according to Air Force officials. According to Air Force officials, the Combat Rescue Helicopter fielding schedule, which was included in the contract for the new helicopters, was designed to ensure that helicopters with the highest flying hours are generally replaced first. The officials told us that this is why the active component units, which have higher flying-hour averages, would begin receiving their new Combat Rescue Helicopters in fiscal year 2020. Based on the current Combat Rescue Helicopter fielding schedule, the Air Force Reserve is scheduled to receive its new helicopters beginning in fiscal year 2026. The Air National Guard is scheduled to receive refurbished Operational Loss Replacement helicopters in fiscal year 2019 and the new Combat Rescue Helicopters beginning in fiscal year 2027. The last Combat Rescue Helicopters are scheduled to be fielded to all three components in fiscal year 2029. Figure 5 shows the timeline for the transition to the new Combat Rescue Helicopters. On average, the active component helicopters had about 2,000 more flight hours per helicopter than the reserve component helicopters, in May 2018, as shown in figure 6. Specifically, the active component helicopters had on average 7,700 flight-hours, while the reserve component helicopters averaged 5,800 flight hours. The active component helicopters in figure 6 include the Kirtland training helicopters, which averaged about 10,600 flight hours per helicopter. According to Air Force officials, due in part to the high number of flight hours per aircraft, Kirtland is one of the first squadrons scheduled to receive the new Combat Rescue Helicopters. Specifically, Kirtland is scheduled to begin receiving its new helicopters in fiscal year 2020. Among the reserve component, the Air National Guard helicopters have an average of about 6,200 flight hours while the Air Force Reserve helicopters have an average of about 5,500 flight-hours per aircraft. However, the Combat Rescue Helicopter fielding schedule shows that the Air National Guard squadrons are last to receive the new Combat Rescue Helicopters. According to Air Force officials, to address the later fielding of the new Combat Rescue Helicopters to the Air National Guard, beginning in fiscal year 2019 the Air Force is replacing all of the Air National Guard’s helicopters with refurbished Army helicopters. These helicopters will be upgraded to the Air Force’s HH-60G configuration and will each have 3,000 or fewer flight hours. These refurbished helicopters are commonly referred to as the Operational Loss Replacement helicopters. According to Air Force officials the Operational Loss Replacement helicopters are expected to increase squadron helicopter reliability and are expected to reduce unscheduled maintenance until the Air National Guard squadrons receive their new Combat Rescue Helicopters. Due to the Air Force fielding schedule for the Combat Rescue Helicopters, the Air Force may face a challenge in supporting formal training for its reserve component squadrons during fiscal years 2025 through 2028. The rescue squadrons at Kirtland and Nellis Air Force Bases conduct all formal HH-60G training, and by fiscal year 2025, are scheduled to transition to providing formal training for the new Combat Rescue Helicopters. Specifically, these formal training units are scheduled to completely transition to the Combat Rescue Helicopter and will have divested all of their legacy HH-60G aircraft, as shown in figure 7. However, other squadrons will continue to fly the HH-60G aircraft after fiscal year 2025. Specifically, seven rescue squadrons will fly the legacy HH-60Gs in fiscal year 2025, and some will continue flying the HH-60Gs until fiscal year 2028 and so will continue to need formal training to fly that helicopter throughout that period. According to the Combat Rescue Helicopter fielding schedule shown in figure 8, the reserve component squadrons will receive most of their Combat Rescue Helicopters between fiscal years 2026 through 2028. The Air National Guard squadrons will not receive their primary mission Combat Rescue Helicopters until fiscal year 2028. This is 3 years after the formal training units at Kirtland and Nellis will have stopped training students on the legacy HH-60Gs. The Air Force Reserve and Air National Guard did not concur with the Combat Rescue Helicopter fielding schedule. Reserve Component officials said they did not concur, in part, because the Air Force did not coordinate the fielding schedule prior to the contract’s approval in 2014. However, according to Headquarters Air Force officials, the Combat Rescue Helicopter fielding schedule was coordinated with and approved by all components prior to the 2014 contract being approved. Further, Air Force officials stated they plan to maintain the fielding schedule because changing it would require the renegotiation of the contract and would likely result in increased costs and possibly a delay in delivery of the new helicopters. The Combat Rescue Helicopter contract was developed as a fixed-price contract. According to Air Force officials, as part of this fixed- price contract, specific terms such as base locations and order of delivery were predetermined. According to Air Force officials, while the Combat Rescue Helicopter contract does allow for some variation in the quantity of helicopters procured each year, there is no location and order variation permitted without the renegotiation of price. According to the Air Force, any changes outside the included variation of the number of aircraft to be purchased in a given year (i.e. change in the order or location of the bases) would negate the firm-fixed prices in the year where the change occurred, and in all the remaining years of the contract. Specifically, if changes are made to the order or location of the bases, potential contract line items that could increase include base level spares, readiness spares packages, support equipment, interim supply support and field support representatives for both aircraft and training systems. According to Air Force officials, fielding schedule changes could also put at risk the ability to provide timely funding for the military construction projects necessary to house new simulators at the rescue squadrons’ bases. These officials stated that the current Combat Rescue Helicopter fixed-price contract is ahead of schedule and within budget, as of June 2018. Air Force officials said they expect to have new helicopters by March 2020, 3 months ahead of schedule. They also said that if changes are made to the order of deliveries under the contract, the contract would have to be renegotiated which would, in turn, likely slow the delivery of the new helicopters and increase contract costs. Air Force officials acknowledge that based on the current fielding schedule there is a potential training gap that will occur in fiscal years 2025 through 2028 when the formal training units will no longer have any HH-60Gs available to train the reserve component. As of June 2018, Air Force officials told us that the Air Force was considering a number of options to address future training issues, including the following: The Air Force would provide legacy HH-60G helicopters, for a limited time, to the Air National Guard squadron at Kirtland Air Force Base. This would allow the Air National Guard to continue providing initial and requalification training on the legacy HH-60G helicopters for several years after the active component portion of the formal training unit at Kirtland Air Force Base has divested its legacy HH-60G helicopters. The Air Force would require personnel that have completed training on the Combat Rescue Helicopter at Kirtland Air Force Base to then receive additional training for the legacy platform at their home stations if their squadrons are still flying the HH-60Gs. We provided a draft of this report to DOD for review and comment. DOD told us that they had no comments on the draft report. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense and the Secretary of the Air Force. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3489 or at pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II. Following disagreements over the Air Force’s proposals to reduce aircraft and Air National Guard end strength, the National Defense Authorization Act for Fiscal Year 2013 established the National Commission on the Structure of the Air Force. The act required the commission to conduct a study to determine whether, and how, the Air Force structure should be modified to best fulfill mission requirements in a manner consistent with available resources. In January 2014, the commission issued its final report, which included 42 recommendations. The Air Force agreed with 41 of the 42 commission’s recommendations. The recommendations varied in size, scope, and duration, and they focused on a range of topics from personnel policies and systems to determining the appropriate balance between the active and reserve component. However, as we reported in 2016 many of the recommendations were interrelated and the Air Force grouped the recommendations into various lines of effort and assigned senior officials responsibility for tracking the implementation of each line of effort. The “Total Force Continuum” has half (21) of the commission’s 42 recommendations. Recommendation 11 is part of this line of effort and it states: As the Air Force acquires new equipment, force integration plans should adhere to the principle of proportional and concurrent fielding across the components. This means that, in advance of full integration, new equipment will arrive at Air Reserve Component units simultaneously with its arrival at Active Component units in the proportional share of each component. As the Air Force Reserve and Active Component become fully integrated, the Air Force should ensure that the Air National Guard receives new technology concurrent with the integrated units. The Air Force should no longer recapitalize by cascading equipment from the Active Component to the Reserve Components. In accordance with Section 1055 of the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015, the Air Force provided the congressional defense committees with annual responses to the commission’s recommendations. In its initial response, the Air Force stated that it was embracing the commission’s intent and viewed the recommendations as a holistic approach to improving the service. With regard to recommendation 11, the Air Force stated that it agreed in principle with the recommendation and would make every attempt to concurrently and proportionally equip all components to be the most capable force within today’s constrained resources. In its 2017 response, the Air Force cited the Combat Rescue Helicopters as one of the examples of how it is implementing recommendation 11. Specifically, the Air Force reported that its future fielding of the CRH shows the Air Force’s commitment to concurrent and proportional fielding of equipment amongst its components. Headquarters, Air Force officials elaborated on this response in response to our request for clarification, stating that the Air Force was replacing all its personnel recovery helicopters—for both its active and reserve component units—under a single contract and that it would not cascade any of its active component helicopters to its reserve component units. As of August 2017, the Air Force stated it had completed its review of recommendation 11 and it updated its Air Force Policy Directive 10-3, Operational Utilization of the Air Reserve Component Forces in November 2017, to better reflect the intent of the recommendation. In addition to the contact named above, Michael Ferren, Assistant Director; Vincent Buquicchio; Mae Jones; Leigh Ann Sheffield; Mike Silver; and Nicole Volchko made key contributions to this report.", "summary": "Since the 1980s, the Air Force has used its HH-60G Pave Hawk helicopters to conduct life-saving missions, including for personnel recovery and medical evacuations. The aging HH-60G inventory has shrunk over the years as a result of mishaps. As the inventory was declining, the Air Force began efforts to replace its fleet with the new Combat Rescue Helicopter. The National Defense Authorization Act for fiscal year 2018 includes a provision for GAO to review HH-60G replacement programs. This report examines: (1) the maintenance condition and service life of the Air Force's HH-60G Pave Hawk helicopters; (2) the Air Force's schedule for fielding the new Combat Rescue Helicopter in the active and reserve components; and (3) any training challenges the Air Force has identified related to this schedule. GAO analyzed flight hour and availability data and contracts and fielding schedule for new and refurbished personnel recovery helicopters for the Air Force. GAO also analyzed documentation, and interviewed officials from the Air Force Headquarters, the Air Force major commands, including the Air National Guard and Air Force Reserve, and training and test and evaluation units to discuss challenges the Air Force expects to face as it fields its new helicopters. The material condition of the Air Forces' aging HH-60G fleet has declined and maintenance challenges have increased, in part due to extensions beyond the designed service life of the helicopters. About 68 percent of the 96-helicopter fleet were mission-capable as of fiscal year 2017, below the Air Force desired mission-capable rate of 75 percent. The fleet is experiencing maintenance challenges. For example, the helicopters undergoing depot-level maintenance spent an average of 332 days undergoing such maintenance in fiscal year 2017 compared with 233 days in fiscal year 2007, more than a 40-percent increase. Air Force officials attribute these challenges to the helicopters exceeding their initially planned service life. Currently, available helicopters across the fleet average about 7,100 flight hours about 18 percent more than their initial expected service life of 6,000 hours. According to Air Force officials, the schedule for fielding the new Combat Rescue Helicopters generally prioritizes the replacement of helicopters with the highest number of flight hours; as a result, the active component is scheduled to begin receiving its new helicopters in fiscal year 2020, 6 years before the reserve component. In May 2018, the Air Force's active component HH-60Gs averaged about 2,000 more flight hours per helicopter than the reserve component. Under the fielding schedule, the Air National Guard squadrons are to receive new Combat Rescue Helicopters beginning in 2027, at the end of the fielding period. According to officials, in the meantime, to address aging helicopters in the Air National Guard, the Guard is scheduled to receive refurbished Army helicopters beginning in 2019. According to Air Force officials, these helicopters will have 3,000 or fewer flight hours and will be upgraded to the Air Force's HH-60G configuration. The Air Force officials explained that these helicopters are expected to increase reliability rates, reduce the need for unscheduled maintenance, and bridge the gap until the Air National Guard receives the new Combat Rescue Helicopters. Due to the Air Force fielding schedule for the Combat Rescue Helicopters, the Air Force may face a challenge in supporting formal training for reserve component squadrons in fiscal year 2025 through 2028. The training squadrons at Kirtland and Nellis Air Force Bases conduct all formal HH-60G training for both the active and reserve components. By 2025, these training squadrons are scheduled to be completely transitioned to the new Combat Rescue Helicopters. Given the fielding schedule, the training squadrons will not have any legacy HH-60Gs for formal training for the reserve component. However, some squadrons in the reserve component are scheduled to continue flying HH-60Gs until 2028 and will still need formal training. Air Force reserve component officials did not concur with the new Combat Rescue Helicopter fielding schedule. However, Air Force officials said that they plan to maintain their fielding schedule because changing it would require renegotiation of the contract, likely increase costs, and possibly delay delivery of the new helicopters. Air Force officials acknowledged this potential training issue and told GAO that the Air Force was considering options to address it; including retaining some legacy HH-60Gs at a training squadron to provide training during any gap period. GAO is not making any recommendations in this report. GAO requested comments from the DOD, but none were provided.", "document_type": "gao"}
{"report": "DOD has defined audit readiness as having the capabilities in place that allow an auditor to plan and perform a full financial statement audit that results in actionable feedback to DOD. In DOD’s May 2016 FIAR Plan Status Report, the DON initially asserted that it would be audit ready with regard to real property (including construction-in-progress) for the existence and completeness assertions by June 2016 and with regard to the valuation assertion by March 2017. Subsequently, in DOD’s November 2016 FIAR Plan Status Report, the DON asserted that it would be audit ready for the existence, completeness, and valuation assertions by March 2017. In DOD’s May 2017 FIAR Plan Status Report, the DON reported that it had validated that the existence and completeness assertions for real property. Ultimately, the DON reported in DOD’s November 2017 FIAR Plan Status Report that it had achieved audit readiness for the existence and completeness assertions and was in the process of determining audit readiness for the valuation assertion. In August 2016, the Federal Accounting Standards Advisory Board issued Statement of Federal Financial Accounting Standards (SFFAS) No. 50, which allows reporting entities to apply alternative valuation methods in establishing opening balances of general property, plant, and equipment (G-PP&E). Such alternative valuation methods may be applied in reporting periods beginning after September 30, 2016. SFFAS No. 50 permits each reporting entity to use alternative methods when presenting financial statements, or one or more line items, (1) for the first time or (2) after a period during which existing systems could not provide the information necessary for producing financial statements in accordance with generally accepted accounting principles (GAAP) without using alternative methods. SFFAS No. 50 permits reporting entities to apply an alternative method only once per line item after the period during which the existing systems could not provide the information for producing financial statements in accordance with GAAP. As of March 2018, the Navy has not made an unreserved assertion attesting that its opening balances of G-PP&E are reported in accordance with SFFAS No. 50. After opening balances are established using an alternative valuation method, federal accounting standards require historical cost to be used in valuing G-PP&E acquired or constructed. DOD already uses plant replacement value (PRV) for decision making and management purposes and has reported that it will use PRV to develop opening balances for the Navy’s buildings. Navy is also currently using PRV (an allowable alternative valuation method under SFFAS No. 50) for financial statement reporting of its buildings and plans to do so until the DON makes an unreserved assertion that its financial statements or its G-PP&E line item or reported assets classes are presented fairly in accordance with GAAP. PRV represents an estimate of the replacement cost in current year dollars to design and construct a facility to replace an existing facility at the same location. As such, the replacement (or construction) cost factor, generally applied to buildings as a dollar amount multiplied by square footage, is also indexed to increase or decrease the amount to account for other variations in costs for different geographic areas or complexity of the facility. Once the calculation prescribed by the formula has resulted in PRV, accumulated depreciation is computed based on the placed in service date. Figure 1 shows an example of the PRV formula being applied to an enlisted housing facility. The valuation adjustment factors, as shown below, vary by location and use of the building. Acquisitions and capital improvements made to existing buildings during subsequent financial periods are to be recorded at the actual cost of obtaining the asset or improvement and placing it into service. Internal control activities, as defined in Standards for Internal Control in the Federal Government, are the policies, procedures, and techniques that enforce management’s directives to achieve the entity’s objectives and address related risks. A deficiency in internal control exists when the design, implementation, or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to achieve control objectives and address related risks. We identified internal control deficiencies that impaired the Navy’s ability to assert that as of September 30, 2016, (1) buildings recorded in iNFADS and reported as assets in Navy’s financial statements existed and (2) all of the Navy’s buildings were recorded in iNFADS and correctly reported as assets in Navy’s financial statements. As shown in figure 2, the effects of these internal control deficiencies contributed to the Navy (1) continuing to maintain records in iNFADS for buildings that had been demolished, sometimes many years ago, and including these buildings as assets in its financial statements; (2) excluding some of the buildings that it owns from being recorded in iNFADS and reported as assets in its financial statements; (3) erroneously reporting nonfunctional buildings as assets in its financial statements; and (4) excluding certain buildings from being reported as assets in its financial statements that met or exceeded DOD’s capitalization threshold. While the Navy had written procedures for the multistep process for disposal of real property by demolition, these procedures and related control activities were not properly designed to reasonably assure that demolished buildings were recorded as disposed and removed from the accounting records. Specifically, the procedures and related control activities did not reasonably assure that RPAOs were provided with a signed demolition approval document and the related disposal form. Without these documents, an RPAO may not be aware that a building has been demolished and therefore may not take the appropriate actions to record the asset as disposed in iNFADS so that the asset record is subsequently removed from iNFADS at the end of the fiscal year and the asset is thereby not included in Navy’s financial statements. When a building is designated for disposal, multiple parties are involved in the demolition process. This business process can involve the installation’s Public Works Department; the Regional Commander; the Facilities Engineering Command realty specialist; the Commander, Navy Installations Command; the demolition project manager; the demolition contractor; and the General Services Administration. The multiple functional offices involved in the disposal by demolition business process and the lack of communication between the offices can result in buildings being demolished without the RPAO’s knowledge. The Navy’s procedures for the disposal of real property by demolition state that the RPAO is to receive a signed demolition approval document from the installation’s Public Works Department. After the demolition has been completed, the project manager is to work with the demolition contractor (if applicable), the planner, and the RPAO to complete the disposal form. The RPAO, within 10 days of the completion of the demolition, is to upload supporting documentation about the disposed asset into iNFADS and create the iNFADS disposal record. The Navy’s procedures did not include a control activity, such as a step to verify the RPAO’s receipt of a signed demolition approval document and disposal form, to reasonably assure that the RPAOs are notified of all building demolitions. These notifications are critical so that each RPAO can properly account for a building by creating an iNFADS disposal record, which ultimately results in records for demolished buildings being deleted from iNFADS and therefore not included as assets in the financial statements. During our testing of a nongeneralizable sample of buildings in iNFADS, we identified buildings that had been demolished prior to September 30, 2016, but were still recorded in iNFADS as of September 30, 2016, and therefore were reported as assets in Navy’s financial statements as of September 30, 2016. According to SFFAS No. 6, Accounting for Property, Plant, and Equipment, assets, including real property, shall be removed from the asset accounts along with the associated accumulated depreciation if the asset no longer provides service to the operations of the entity. The inclusion of demolished buildings in iNFADS results in inaccurate Navy real property records and can lead to an overstatement of reported balances for real property in Navy’s financial statements. Of the 40 buildings for which we performed book-to-floor tests for existence, we found that 4 had been destroyed and no longer physically existed but were still recorded in iNFADS and reported as assets in Navy’s financial statements. Because we used a nongeneralizable sample of buildings, results from the sample cannot be used to make inferences about all of the Navy’s buildings. The four demolished buildings are described below. A six-car garage building had been demolished several years ago according to the Navy, but its operational status was shown as active in iNFADS as of September 30, 2016. Navy officials stated that while the actual demolition date for this building is not known, based on the demolition drawing for another building nearby, it appears to the Navy that the garage was demolished prior to 2001. A marina shop building was demolished as of June 30, 2016, so that a new building could be constructed at the same location. As of September 30, 2016, the operational status of this marina shop was shown as active in iNFADS. The disposal of the marina shop building was not recorded in iNFADS until May 2017. A storage building was demolished in February 2016 but was still recorded in iNFADS as of September 30, 2016. The RPAO was not notified that the building had been demolished until April 2016. After searching for the relevant paperwork, which could not be located, the RPAO prepared the disposal form that was dated December 20, 2016. An aviation warehouse, which had previously been demolished, was still recorded in iNFADS as of September 30, 2016. According to Navy officials, the demolition package was initiated in 2013, but the warehouse needed to remain in iNFADS until the site restoration work was completed. Based on available information, the warehouse was demolished around May 2014. The site restoration work was completed in 2016, but the RPAO was never notified. According to supporting documentation, a search for the relevant paperwork was completed, after which the building was recorded in iNFADS as disposed in March 2017. Consistent with our findings, the Navy Office of Financial Operations, in preparing a white paper on real property accumulated depreciation, also found that there were buildings recorded as existing in iNFADS that did not exist. For this white paper, the Navy selected a generalizable sample of 650 real property assets, including buildings, to test. Noted in the white paper as of May 31, 2017, only 584 of the 650 sampled real property assets were able to be tested. Specifically, 51 could not be validated, and an additional 15 real property assets, or 2.5 percent of the sample, were found to not exist, but were still recorded in iNFADS as existing. Based on Navy’s testing, we estimated that 2.5 percent of real property in the Navy’s iNFADS database as of May 2016 no longer existed but had not been recorded in iNFADS as disposed. During some of our site visits, the RPAOs stated that some buildings acquired or constructed with non-military construction funds (Non- MILCON) and that cost under $750,000 were not recorded in iNFADS. A Navy official confirmed that there were issues with recording Non- MILCON construction costing $250,000 and above, but under $750,000, for financial reporting purposes. Specifically, buildings or capital improvements are sometimes built using other Non-MILCON funding, and in some cases, an entity other than NAVFAC spends the funds. The RPAOs therefore may not know of buildings constructed as Non-MILCON projects if NAVFAC was not involved in the construction project. For example, at one location, we observed a sentry house that had been constructed for the Navy using Non-MILCON funding around 2006. However, the sentry house was not recorded into iNFADS until 2014 when the building was identified as existing through the Navy’s physical inventory procedures. NAVFAC did not have final procedures and related control activities to reasonably assure that buildings funded with Non-MILCON funding below $750,000 were consistently recorded in iNFADS and, if the cost exceeded the capitalization threshold, were reported as assets in the Navy’s financial statements. In 2015, the Navy began to develop both the process and system changes required to track construction-in-progress costs for the Navy’s Non-MILCON projects with costs greater than $750,000, so that the cost of the buildings associated with these projects would be properly recorded in iNFADS. In March 2017, NAVFAC updated its BMS process document with the steps for Non-MILCON buildings with costs greater than $750,000 and adopted the new guidance in May 2017. According to NAVFAC officials, the Navy has already determined that an equivalent detailed process is needed for Navy Non-MILCON buildings costing less than $750,000 to reasonably assure that the RPAOs are aware of these projects. The RPAOs are not involved in project authorization or project funding and otherwise would be unaware of these Non-MILCON projects. As a result, the RPAOs may not know of Non- MILCON buildings acquired or constructed with operations and maintenance or other Non-MILCON funding under $750,000 and accordingly do not have documentation to record the buildings’ acquisitions in iNFADS. A BMS process document that addresses Non- MILCON projects costing under $750,000 is being developed. However, according to a Navy official, a completion date has not been set for finalizing this document. Until effective procedures are implemented, Navy buildings constructed with Non-MILCON funding costing less than $750,000 may not be timely recorded in iNFADS, which would cause iNFADS to have incomplete information. If the buildings are not recorded in iNFADS, the buildings will not be reported as assets in the financial statements, as required, when the cost of the building meets or exceeds the Navy’s capitalization threshold of $250,000. NAVFAC did not have written procedures requiring buildings coded as nonfunctional in iNFADS to be excluded when accumulating data from iNFADS for financial reporting purposes, nor did it have related control activities to provide reasonable assurance that such buildings were excluded. As a result, the Navy incorrectly included the amounts associated with buildings coded as nonfunctional when accumulating iNFADS information for financial reporting purposes. Specifically, based on our aggregation of iNFADS data, the Navy erroneously reported 189 buildings coded as nonfunctional, amounting to $411 million in gross value, $403 million in accumulated depreciation, and $8 million in net book value, as assets in the financial statements as of September 30, 2016. For example, one building coded as nonfunctional that we observed during our site visits was constructed in 1909, with a PRV of over $5 million in iNFADS. The building has been vacant and unusable since September 11, 2002, but was included as an asset in the financial statements for fiscal year 2016. According to federal accounting standards, fully impaired assets, such as nonfunctional buildings, should not be included in an entity’s financial statements and related notes. Specifically, SFFAS No. 6, Accounting for Property, Plant, and Equipment, states that G-PP&E, which includes real property, shall be removed from the accounts along with the associated accumulated depreciation if the asset no longer provides service to the operations of the entity. Moreover, SFFAS No. 44, Accounting for Impairment of General Property, Plant, and Equipment Remaining in Use, reiterates the requirement of SFFAS No. 6 by stating that fully impaired assets should be removed from the G-PP&E accounts along with the associated accumulated depreciation if, prior to disposal, the asset no longer provides service in the operations of the entity. Navy officials confirmed that they do not have written procedures or related control activities requiring buildings coded as nonfunctional in iNFADS to be excluded when accumulating iNFADS data for financial statement reporting purposes. As a result, for fiscal year 2016, the Navy erroneously included buildings coded as nonfunctional as assets on its financial statements. Navy officials agreed that nonfunctional buildings meet the impairment definition of SFFAS No. 6 and No. 44, as these buildings no longer provide service to Navy operations, and therefore should be removed from the G-PP&E accounts. For fiscal year 2017, Navy officials stated that nonfunctional buildings were reclassified from the asset class that includes buildings to the “Other” asset class. However, both asset classes were reported as G-PP&E on the balance sheet, and as a result, the nonfunctional buildings were again reported as assets in the G-PP&E line item in the Navy’s financial statements. NAVFAC officials confirmed that they did not have written procedures and related control activities to reasonably assure that buildings recorded in iNFADS that met or exceeded DOD’s established capitalization threshold are properly included as assets in Navy’s financial statements. For financial reporting, the Navy’s policy is to capitalize buildings based on the established capitalization threshold in effect when each building was placed in service. According to Navy officials, buildings placed in service from October 1, 2007, through September 30, 2013, should have been included as assets in the financial statements if the buildings were valued at or above $20,000, the capitalization threshold that was in place during that period. However, for buildings placed in service during this period, the Navy continued to use the previous capitalization threshold of $100,000 rather than the $20,000 threshold. An Office of the Secretary of Defense memorandum dated September 20, 2013, directed the services to increase the capitalization threshold to $250,000 for assets acquired and placed in service on or after October 1, 2013, and the Navy implemented this change. Further, the Navy incorrectly reported in the notes to its fiscal year 2016 and 2017 financial statements that the $20,000 capitalization threshold was used for real property. Navy officials stated that when DOD’s capitalization threshold was changed to $20,000, the Navy did not adopt the reduced threshold pending an evaluation of changes needed to iNFADS and the development of procedures to implement the lower threshold. Because the Navy did not adopt DOD’s $20,000 capitalization threshold and instead continued to use the $100,000 threshold, buildings placed in service in fiscal years 2008 through 2013 with a value at or above $20,000 but less than $100,000 were not reported as assets in the Navy’s financial statements as of September 30, 2016, and in prior years. Navy officials could not quantify the effect on its financial statements that occurred based on the Navy’s use of the $100,000 capitalization threshold instead of the $20,000 threshold for fiscal years 2008 through 2013. Additionally, the Navy by not adopting DOD’s $20,000 capitalization threshold resulted in inconsistent reporting in DOD’s consolidated financial statements. The Navy faces several challenges in valuing its buildings in accordance with federal accounting standards, including (1) finalizing documentation of actual cost information for buildings that are acquired and placed in service after the Navy’s opening balances have been established based on alternative valuation methods permitted by SFFAS No. 50; (2) capturing and recording costs of improvements that should be reported; (3) consistently completing asset evaluations for each building every 5 years as required by DOD Instruction 4165.14 to help ensure that each building’s information in iNFADS is correct; and (4) determining placed in service dates for previously unrecorded buildings that are subsequently discovered/identified through physical inventories/asset evaluations. Navy officials are aware of these challenges and have various efforts under way to address them. Effective implementation of these efforts is crucial to help address these challenges. As we have previously reported, each completed military construction project includes the DD-1354, Transfer and Acceptance of DOD Real Property, to formally transfer ownership from the constructing entity to the acquiring entity. The final version of the DD-1354 documents the final total cost of the project in iNFADS, the source of real property information for financial reporting. Navy officials acknowledge that significant delays may occur in getting to the final version of the DD-1354, which occurs after all costs are determined. If there are issues such as cost overruns or contract disputes, the delays in completing the final version of the form can be substantial. The Navy considers these substantial delays in getting to the final version of the DD-1354 to be an obstacle to timely documenting the final costs of buildings that are acquired and placed in service after the Navy’s opening balances have been established, based on alternative valuation methods permitted by SFFAS No. 50. During our site visits when we tested 79 buildings, we identified 13 buildings, either constructed or with capital improvements made from 2012 through 2016, for which a final DD-1354 had not yet been completed. According to several RPAOs we interviewed, getting to the final version of the DD-1354 is a complicated process, requiring coordination among multiple responsible parties and units, and determines all costs associated with the construction. For example, a complex project that involves the construction and demolition of multiple buildings makes the allocation of the construction costs among the buildings of the project considerably challenging. According to SFFAS No. 6, costs associated with capital improvements— those that extend the useful life of a building or improve its capacity—are to be recorded in the accountable real property system if the actual cost exceeds the capitalization threshold. Navy officials reported that one obstacle to capitalizing the costs of improvements is determining the actual costs associated with the projects for capital improvements that are made after the opening balances are established using alternative valuation methods. The Navy has developed and is testing its methodology to properly account for capital improvements to buildings. This methodology uses an automated link from the Facilities Information System (which has the construction-in-progress account) to iNFADS. The success of this methodology will be critical for capturing capital improvements for buildings. The inability to account for the total costs associated with capital improvements to buildings after the opening balances have been established using alternative valuation methods would result in the undervaluing of the total actual cost and annual depreciation expense associated with the buildings. Once PRV is used to establish the opening balance for buildings, the Navy must accurately record capital improvements in iNFADS in order to appropriately value the buildings and record the correct depreciation expense. We observed that the Navy has taken steps to improve the quality of its asset evaluations by completing and maintaining supporting documentation. However, we found that the Navy has not consistently completed asset evaluations for each building every 5 years as required by DOD policy. An asset evaluation is a key Navy control to help ensure that the information recorded in iNFADS is accurate. While the Navy issued a revised BMS process document formalizing asset evaluations procedures, these evaluations have not been performed every 5 years as required. Specifically, in a June 30, 2017, Navy analysis, the Navy determined that while an asset evaluation is required to be performed every 5 years, the asset evaluations had not been done for more than 5 years for 17.4 percent of real property, including buildings. When asset evaluations are not done every 5 years for each building, there is an increased risk that information in iNFADS may not be accurate. In addition, as a part of asset evaluations, Navy personnel verify key information, including the square footage of buildings that is used for the PRV calculation. The Navy has efforts under way to perform asset evaluations for those buildings for which these evaluations had not been completed in a 5-year period, including using contractors to help complete the asset evaluations. As stated in DOD’s Financial Management Regulation, real property assets and capital improvements to these assets are to be capitalized as of the date each asset was placed in service. Navy officials occasionally identify existing buildings that have not been recorded in iNFADS and are referred to as buildings found by inventory. These buildings are often identified through NAVFAC’s asset evaluations and periodic virtual inventories. For these buildings, the placed in service dates may not be known. While DOD and the Navy have subsequently developed procedures for determining the placed in service dates for buildings found by inventory, for some Navy buildings, the placed in service date recorded in iNFADS was the date the building was found, rather than the actual placed in service date. According to previous guidance, if a placed in service date could not be identified through the due diligence process, then the building was recorded as placed in service as of the date it was found. The Navy’s BMS process document for real property found by inventory, dated October 25, 2016, stated each building found by inventory is to be recorded with an estimated placed in service date determined using the criteria provided in DOD’s February 2015 guidance. We were told that until December 2016, any building found by inventory was recorded with a placed in service date of the day the building was found. The Navy’s use of the date the building was found by inventory as the placed in service date can substantially affect the information in iNFADS. For example, one of the buildings in our nongeneralizable sample was an old, abandoned maintenance shed. However, based on the iNFADS property record, the building appeared to be a relatively new building based on the recorded placed in service date of August 16, 2016, the date it was found by inventory (see fig. 3). As a result, the building is recorded in iNFADS on August 16, 2016, the placed in service date and therefore the accumulated depreciation would be less than a building with an older placed in service date. The complete, timely, and accurate recording of the placed in service date information enables ensures reliable and accurate reporting of real property information in DOD’s financial statements. Navy officials are aware of the challenges discussed above and have various efforts under way to address them. Effective implementation of these efforts is crucial to help address these challenges. The Navy’s inability to accurately account for real property assets, specifically its buildings, continues to be a material weakness reported by independent auditors. Inadequate procedures and internal control deficiencies prevent the Navy from accurately recording and reporting its buildings and knowing how many buildings it actually owns. Some buildings recorded in the Navy’s accountable real property system, iNFADS, do not exist. Similarly, the Navy does not have adequate procedures and related controls to reasonably assure that all Non- MILCON buildings and capital improvements costing less than $750,000 are recorded in iNFADS. Additionally, the Navy erroneously reported nonfunctional buildings as assets in its financial statements and excluded certain buildings that met or exceeded DOD’s capitalization threshold as assets in its financial statements. As a result of these deficiencies, the Navy does not have adequate information to support reliable reporting of real property in its annual financial statements, and DOD, Congress, and others do not have reliable, useful, and timely information for decision making. We are making the following four recommendations to the Navy. The Commander of NAVFAC should develop and implement procedures and related control activities for real property disposed of by demolition to provide reasonable assurance that the RPAOs timely receive a signed demolition approval document and disposal form, so that demolished buildings are recorded as disposals in iNFADS and removed at the end of the fiscal year. (Recommendation 1) The Commander of NAVFAC should finalize and implement written procedures and related control activities to reasonably assure that all buildings costing less than $750,000 and funded with Non-MILCON funding are recorded in the Navy’s iNFADS and therefore included as assets in the financial statements if they meet or exceed the Navy’s capitalization threshold. (Recommendation 2) The Commander of NAVFAC should develop and implement written procedures and related control activities to reasonably assure that buildings coded as nonfunctional in iNFADS are excluded for financial statement reporting purposes. (Recommendation 3) The Commander of NAVFAC should develop and implement written procedures and related control activities related to DOD’s capitalization thresholds and outline the specific information to be accumulated from iNFADS to reasonably assure that real property assets are properly reported for financial statement reporting purposes. (Recommendation 4) We provided a draft of this report to the Navy for comment. In its comments, reproduced in appendix II, the Navy concurred with our four recommendations. We are sending copies of this report to the Secretary of Defense, the Under Secretary of Defense (Comptroller)/Chief Financial Officer, the Deputy Chief Financial Officer, the Office of the Assistant Secretary of Defense (Energy, Installations, and Environment), the Assistant Secretary of the Navy (Energy, Installations and Environment), the Assistant Secretary of the Navy (Financial Management & Comptroller), the Director of the Office of Management and Budget, and appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (404) 679-1873 or cordreyw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. This engagement was initiated in connection with the statutory requirement for GAO to audit the U.S. government’s consolidated financial statements. The focus of this engagement was the United States Navy’s (Navy) real property, specifically buildings, because the Department of the Navy was the first military department to initially assert real property audit readiness for existence and completeness. Our objectives were to (1) determine the extent to which the Navy had internal control deficiencies, if any, that may impair its ability to assert that its buildings, as reported in its financial statements, exist and that the information about the buildings is complete and adequately supported by property records and (2) identify the challenges, if any, that the Navy faces in valuing its buildings in accordance with federal accounting standards. To address our first objective, we interviewed Department of Defense (DOD) and Navy officials and reviewed relevant documentation, including the Naval Facilities Engineering Command’s (NAVFAC) Business Management System (BMS) process documents, which are similar to desktop procedures, to identify control activities over buildings. We reviewed the results from prior real property audit readiness testing conducted by a contractor that the Navy engaged to help it achieve audit readiness for its real property. We performed data analyses of buildings in the Navy’s accountable real property system, the internet Navy Facility Assets Data Store (iNFADS) as of September 30, 2016. To assess the reliability of data we used, we reviewed relevant Navy documentation, interviewed knowledgeable officials, reviewed policies and procedures regarding collecting and maintaining the data, performed data analyses to look for logical inconsistencies, and traced a nongeneralizable sample of buildings to supporting documents. We concluded that the data elements we used from iNFADS were sufficiently reliable for the purposes of selecting a nongeneralizable sample of buildings to test. We selected the Norfolk and San Diego geographic areas for site visits because of the numerous bases in each area and the proximity of 5 installations to one another in each of the areas. We analyzed data from the iNFADS database as of September 30, 2016, to select buildings that fit our selection criteria for our nongeneralizable sample of buildings for book-to-floor testing from these two geographic areas. These selection criteria included age of the buildings (both older and newer buildings); square footage of the buildings, including small buildings (such as sentry houses) and large buildings (such as training facilities and barracks); cost per square foot of the buildings, including lower cost (such as warehouses) and higher cost (sentry houses with sophisticated electronics); use of the buildings, to include a variety of uses (such as electrical substations, training facilities, and offices); and operational status code of the buildings, including active and nonfunctional. We conducted site visits in Norfolk and San Diego to interview real property accountable officers (RPAO), observe buildings, and review the available supporting documents for the sample buildings. We tested 40 buildings book to floor by visiting these buildings at 10 Navy installations across two geographic areas. During our site visits, we also selected a nongeneralizable sample of a total of 39 buildings on Navy installations to be tested floor to book—19 from 5 Norfolk and 20 from 5 San Diego areas. We met with the RPAOs at each of the10 installations and tested by observation whether the 40 buildings selected for book-to-floor testing existed. In addition to testing for existence, we compared the descriptions of the buildings in iNFADS with the buildings that we observed. For example, if the placed in service date in iNFADS was recent, we would observe whether it was a newer building. We selected a nongeneralizable sample of buildings for floor-to-book testing based on proximity to the buildings we had selected for book-to-floor testing. For the 39 buildings that we tested floor to book, we reviewed available supporting documents. We also reviewed a Navy Office of Financial Operations white paper on the risk and potential amount of material misstatement of accumulated depreciation on the Navy’s general fund consolidated balance sheet. This white paper presented the results of a statistical sample for which 15 selected real property assets were excluded from testing because the assets no longer existed. Two social science specialists with expertise in research design and statistics reviewed the methodology and sampling used in this study and found them to be sufficient for the purposes of estimating the proportion of Navy real property assets reported as existing in iNFADS that did not exist as of May 31, 2017. We used the sampling information in the study to create a confidence interval around the estimate of the proportion of buildings at the 95 percent confidence level. To address our second objective, we reviewed federal accounting standards, including Statement of Federal Financial Accounting Standard (SFFAS) No. 50, and the Navy’s documents for recording assets into iNFADS. We also interviewed agency officials responsible for financial reporting and real property management, including the RPAOs at the installations we visited, to identify the challenges the Navy faces in recording buildings at actual cost once the opening balances have been established according to SFFAS No. 50. While our audit objectives focused on certain control activities related to (1) the existence and completeness of the Navy’s buildings as reported in its financial statements and the completeness and adequacy of supporting property records for those buildings and (2) the valuation of the Navy’s buildings in accordance with federal accounting standards, we did not evaluate all control activities and other components of internal control. If we had done so, additional deficiencies may or may not have been identified that could impair the effectiveness of the control activities evaluated as part of this audit. We conducted this performance audit from September 2016 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, the following individuals made key contributions to this report: Paul Kinney (Assistant Director), Marcia Carlsen, Dennis Clarke, Francine DelVecchio, Maxine Hattery, Jason Kelly, Jared Minsk, Lisa Motley, Robert Sharpe, Sandra Silzer, and Shana Wallace.", "summary": "This engagement was initiated in connection with the statutory requirement for GAO to audit the U.S. government's consolidated financial statements. The 2018 National Defense Authorization Act requires that the Secretary of Defense ensure that a full audit is performed on the financial statements of DOD for each fiscal year and that the results be submitted to Congress no later than March 31 of the following fiscal year. The Navy was the first military department to assert real property audit readiness related to DOD's Financial Improvement and Audit Readiness effort. For this report, GAO's objectives were to (1) determine the extent to which the Navy had internal control deficiencies, if any, that may impair its ability to assert that its buildings, as reported in its financial statements, exist and that the information about these buildings is complete and adequately supported by property records and (2) identify the challenges, if any, that Navy faces in valuing its buildings in accordance with federal accounting standards. GAO reviewed the Navy's policies and procedures for control activities over its buildings, performed data analyses, and tested a nongeneralizable sample of buildings. GAO also discussed with Navy officials the challenges in complying with federal accounting standards for valuing its buildings. Although the United States Navy (Navy) has taken actions to become audit ready for its real property, GAO identified internal control deficiencies that impaired the Navy's ability to assert that (1) buildings recorded in the internet Navy Facility Assets Data Store (iNFADS), the Navy's real property system, and reported as assets in its financial statements existed and (2) all of the Navy's buildings were recorded in iNFADS and correctly reported as assets in the Navy's financial statements. As shown in the figure below, the effects of these internal control deficiencies contributed to the Navy (1) continuing to maintain records in iNFADS for buildings that had been demolished, sometimes many years ago, and include these buildings as assets in its financial statements; (2) excluding some of the buildings it owns from being recorded in iNFADS and reported as assets in its financial statements; (3) erroneously reporting nonfunctional buildings as assets in its financial statements; and (4) excluding certain buildings from being reported as assets in its financial statements that met or exceeded the Department of Defense's (DOD) capitalization threshold. The Navy has various efforts under way to address challenges in valuing its buildings for financial reporting in accordance with federal accounting standards. Navy officials have acknowledged that significant delays can sometimes occur in the Navy being able to complete supporting documentation of the final costs to properly report buildings in its financial statements. Additionally, implementation of the Navy's new methodology to properly account for capital improvements will be critical for capturing accurate costs for buildings. Furthermore, the Navy has not consistently completed a physical inventory (asset evaluation) for each building every 5 years as required by DOD policy. These asset evaluations are an important control to help ensure that the information recorded for buildings in iNFADS is accurate. Finally, the Navy also faces a challenge in determining the placed in service dates for those buildings found through inventory procedures. The Navy's use of the date the building was found rather than the estimated date the building was placed in service can substantially affect the accuracy of the information in the Navy's systems and financial statements. Navy officials are aware of these challenges and have various efforts under way to address them. Effective implementation of these efforts is crucial to help address these challenges. GAO is making four recommendations to the Navy to improve internal controls for its buildings by implementing needed written procedures and control activities. The Navy concurred with these recommendations.", "document_type": "gao"}
{"report": "WMATA was created in 1967 through an interstate compact—matching legislation passed by the District of Columbia, state of Maryland, and Commonwealth of Virginia, and then ratified by Congress—to plan, develop, finance, and operate a regional transportation system in the National Capital area. A board of eight voting directors and eight alternate directors governs WMATA. The directors are appointed by the District of Columbia, Virginia, Maryland, and the federal government, with each appointing two voting and two alternate directors. WMATA operates six rail lines—the Red, Orange, Blue, Green, Yellow, and Silver Lines—connecting various locations within the District of Columbia, Maryland, and Virginia. WMATA’s rail system has 118 linear miles of guideway: 51 miles of subway, 58 miles at ground level, and 9 miles on aerial structures. WMATA’s capital investments are funded through multiple sources. These include a combination of grants it receives from the federal government, along with matching funds and other contributions it receives from the states and local jurisdictions in which it operates (see fig. 1). From fiscal years 2011 through 2017, WMATA received about $5.8 billion in capital funding. Over half of this funding came from the federal government ($3.2 billion), and state and local jurisdictions provided 41 percent ($2.4 billion). WMATA also took on about $230 million in long- term debt to finance its capital program during this time period. The federal funding included grant awards, in addition to annual appropriations authorized under PRIIA. In 2008, PRIIA authorized $1.5 billion to WMATA, available in increments over 10 years beginning in fiscal year 2009, or until expended, for capital improvements and preventive maintenance. PRIIA funding and certain federal grants require state or local jurisdictions to provide matching funds. Additionally, a large portion of funding from state and local jurisdictions is governed by capital-funding agreements, which are periodically negotiated between WMATA and the states and localities. From fiscal years 2011 through 2017, state and local jurisdictions contributed on average about $340 million annually to WMATA, generally for capital purposes. The annual capital contributions from the jurisdictions are expected to more than double as a result of the recent legislation enacted by the District of Columbia, Maryland, and Virginia in 2018. In addition, WMATA officials told us that it will have the ability to further leverage this dedicated funding and issue debt to finance its capital projects. WMATA has several steps in its capital planning process. These include developing the following: Capital Needs Inventory. WMATA periodically identifies its capital investment needs in this inventory. WMATA issued a Capital Needs Inventory in February 2010 and another in November 2016, each covering a 10-year period. According to WMATA, Capital Needs Inventories help inform the annual capital budget and capital improvement program. Annual Capital Budget. Each year, WMATA prepares an annual capital budget, which identifies projects WMATA plans to undertake in the next fiscal year. WMATA’s fiscal year 2019 annual capital budget was approved by the board of directors at $1.3 billion. Six-Year Capital Improvement Program. Within WMATA’s annual capital budget, WMATA includes a Six-Year Capital Improvement Program identifying capital projects WMATA plans to implement over a 6-year period. WMATA’s most recent Six-Year Capital Improvement Program (covering the fiscal year 2019—2024 period) was approved by the board of directors at $8.5 billion. According to WMATA officials, WMATA is currently implementing a new capital planning process through which it will develop its fiscal year 2020 Capital Budget and fiscal year 2020-2025 Six-Year Capital Improvement Program. WMATA adopts and implements the capital budget by June 30 for the new fiscal year, which begins on July 1. The fiscal year 2020 Capital Budget is scheduled to be adopted and implemented by June 30, 2019. Among other things, the goals and objectives of this new capital planning process are to construct an objective, data-driven, and risk-based approach to estimate major rehabilitation and capital asset replacement needs; build a capital investment prioritization methodology aligned with WMATA’s strategic goals and grounded in asset inventory and condition assessments; and develop a process that will support the construction and ongoing stewardship of its Transit Asset Management Plan. The latter is discussed in more detail below. WMATA has also recently undertaken efforts to address issues related to the condition and maintenance of its track. After SafeTrack concluded in June 2017, WMATA implemented what officials describe as its first track preventive maintenance program designed to incorporate industry-wide best practices related to track maintenance, in order to improve the rail system’s long-term safety and reliability. The new program commenced in June 2017, and WMATA’s board reduced late-night service to allow for longer maintenance work hours. To make the best use of the extra maintenance hours, WMATA focused its new program on six separate initiatives that together would address what WMATA viewed as its two most pressing track maintenance concerns—electrical fires caused by cable and insulator defects along the track wayside, and defects to the track itself, including unsecured rail fasteners and worn track switches (see table 1). These initiatives are planned to cover the entire transit system and will take various amounts of time to complete. FTA also plays a role in WMATA activities by providing and directing the use of federal funds, overseeing safety, and requiring transit asset management. FTA provides grants that support capital investment in public transportation, consistent with locally developed transportation plans, and has provided such funding to WMATA as noted above. Additionally, though states play a role in safety oversight of rail transit systems through state safety oversight programs, FTA also has the authority to conduct various safety oversight activities such as inspections and investigations. Furthermore, FTA has the authority to assume temporary, direct safety oversight of a rail transit system if it finds the state safety oversight program is inadequate, among other things. After FTA conducted a safety management inspection and issued a safety directive with 91 required actions, it found WMATA’s state safety- oversight program to be inadequate and assumed direct safety-oversight of WMATA in October 2015. Finally, FTA is responsible for assisting public transportation systems to achieve and maintain their infrastructure, equipment, and vehicles in a state of good repair. Specifically, in July 2016, FTA issued regulations establishing a National Transit Asset Management System. Applicable transit agencies were required to have an initial transit asset management plan completed by October 1, 2018. For “tier I providers,” such as WMATA, this plan is to contain nine elements, including an inventory of the number and type of capital assets, and a condition assessment of those inventoried assets for which a provider has direct capital responsibility. WMATA completed its Transit Asset Management plan, dated October 1, 2018. This plan outlines WMATA’s policy, approach, and targeted actions to improve its asset management practices over the next 4 years. WMATA expends its capital funds on a variety of capital assets as part of its capital budget and Capital Improvement Program. From fiscal year 2011 through 2017, WMATA expended approximately $5.9 billion on capital investments. Of this amount, WMATA expended the largest portion on assets related to the replacement, rehabilitation, and maintenance of its revenue vehicles (railcars, buses, and vans) and lesser amounts on other categories of assets, as discussed below and shown in figure 2. Rail and Bus Vehicle Fleet: WMATA expended approximately $2.16 billion (36 percent) of the total $5.9 billion on projects related to its rail and bus fleet from fiscal years 2011 through 2017. The $2.16 billion included approximately $1.1 billion (51 percent) on replacing, expanding, and rehabilitating its rail fleet and approximately $956 million (44 percent) on its bus fleet. According to WMATA, it initiated its railcar replacement program in 2005 to increase capacity and reduce maintenance costs. In addition, a June 2009 Red Line collision of two trains near Fort Totten resulted in nine deaths and led the NTSB to recommend that WMATA retire and replace all 1000 series railcars. From fiscal year 2011 through 2017, WMATA expended almost $656 million on replacing these and other railcars and expanding its overall fleet. This effort includes WMATA’s planned purchase of a total of 748 new 7000-series railcars (see fig. 3). Approximately $530 million was expended on replacing vehicles from fiscal years 2015 through 2017. For example, in fiscal year 2017 WMATA accepted delivery of about 50 percent (364 railcars) of its planned purchase of 748, 7000-series railcars. WMATA expects to complete its current railcar replacement program by fiscal year 2024, with an estimated total program cost of about $1.7 billion. Fixed Rail Infrastructure: WMATA expended about $1.23 billion of the total $5.9 billion (21 percent) to maintain its fixed-rail infrastructure. Of this $1.23 billion, WMATA expended about $650 million (53 percent) on rail infrastructure and rehabilitation projects and $573 million (47 percent) on improvements to its track and structures (e.g., bridges and tunnels). According to WMATA, the rail infrastructure and rehabilitation projects began in 2009 and were the first comprehensive rehabilitation of WMATA’s rail infrastructure in its history. Typical projects included rehabilitating WMATA’s water drainage pumps and tunnel ventilation, fire, and communications systems, among other things. WMATA work related to track and structures involved the maintenance and rehabilitation of the steel rail that guides railcars, the cross ties and fasteners that hold the rail in place, the third rail that provides power to trains, and the bridges and tunnels the track runs on or through. The share of WMATA’s total capital expenditures going to track and structures increased from about $80 million in fiscal year 2016 to $158 million in fiscal year 2017. This expenditure was primarily to implement SafeTrack. Maintenance Facilities and Equipment: WMATA expended approximately $1.1 billion of the total $5.9 billion (19 percent) on assets related to maintenance facilities and equipment, which include rail yards, bus garages, and equipment used to rehabilitate and maintain WMATA’s track and vehicle fleet. For example, from fiscal years 2011 through 2017 WMATA expended approximately $75 million in constructing the Cinder Bed Road bus maintenance facility in Lorton, Virginia. Passenger and Other Facilities: WMATA expended about $814 million of the total $5.9 billion (14 percent) on passenger, business, and security support facilities. Such facilities include rail and bus stations, police facilities, and elevator and escalator rehabilitation. Business Systems and Project Management Support: WMATA also expended about $628 million of the total $5.9 billion (11 percent) on assets related to operations and business support software and equipment. From fiscal years 2011 through 2017, WMATA frequently over-estimated in its annual budgets the annual amount of capital investments it could implement (see fig.4). Out of the approximately $7.5 billion that WMATA budgeted for capital investments over this period, it expended approximately $5.9 billion (80 percent). WMATA’s ability to fully expend its capital budget has varied from year to year. Specifically, WMATA expended about 65 percent ($700 million) of its $1.1 billion capital budget in fiscal year 2015, compared with 85 percent ($1.1 billion) of its $1.2 billion capital budget in fiscal year 2016. In fiscal year 2017, WMATA expended nearly 100 percent of its $1.18 billion capital budget. WMATA attributed the increased expenditures to intensified efforts to address deferred maintenance, primarily through the SafeTrack initiative and an increased delivery and acceptance rate for the new 7000-series railcars, among other things. The total amount expended in fiscal year 2017 to replace the older railcars with new vehicles totaled about $335 million. According to WMATA, there are a number of reasons why it has not fully expended its capital budget in any given year: Contracting and Scheduling Issues: WMATA officials stated that there were contract and scheduling delays in the implementation of planned capital projects. For example, WMATA officials said contracts were sometimes not executed during the fiscal year in which funds were originally budgeted for the work, and in other instances contract work was not carried out according to schedule and expenditures were delayed. Changing Priorities: WMATA officials stated that in some instances, the reevaluation and reprioritization of contracted projects affected WMATA’s ability to expend its capital budget. In such cases, new capital needs were sometimes identified and prioritized over other needs, which caused delays in work schedules and potential financial claims by contractors due to delays. For example, WMATA stated that in fiscal year 2011 the initiation of the Red Line rehabilitation program was delayed as a result of the prioritization of the safety needs in response to the 2009 Fort Totten accident. Federal Reimbursement Restrictions: WMATA officials cited FTA restrictions on its reimbursement of federal funds between fiscal years 2014 and 2015 as a reason for its inability to expend budgeted capital funds in those years. In a financial management oversight review completed by FTA in 2014, FTA found material weaknesses and significant deficiencies in WMATA’s financial management controls, policies, and procedures regarding its receipt of federal grant funds. Based on these preliminary findings, FTA restricted WMATA’s ability to automatically access federal grant reimbursements until WMATA undertook corrective actions. During these years, WMATA reported its management slowed expenditures on targeted capital projects due to concerns over reimbursement of grants. By October 2017, after WMATA implemented an action plan to improve its financial controls, FTA reinstated WMATA’s ability to automatically receive all awarded federal funds on a regular schedule. Unpredictable Funding: WMATA officials stated that unpredictable funding affected the level of its capital expenditures from year to year. Since WMATA had multi-year capital projects with multi-year procurements, according to WMATA officials, uncertainty with regard to how much capital funding would be received on an annual basis affected the implementation of projects. Inadequate Capital Planning Process: WMATA attributed some of its inability to expend budgeted capital funds to the absence of a uniform and efficient capital planning process. According to WMATA, it lacked formal procedures to initiate projects and newer projects often experienced delays in implementation, which delayed expenditures on these projects. Later in this report, we discuss WMATA’s efforts to develop a new capital planning process. Although WMATA expended more of its capital budget in fiscal year 2017 than it had in prior years, it estimated that capital spending will need to increase even more to address state-of-good-repair needs. In 2016, WMATA projected that its state-of-good-repair needs amounted to about $17.4 billion from 2017 through 2026. This level is almost $10 billion more than WMATA estimated for its state-of-good-repair needs from 2011 through 2020 in its February 2010 Capital Needs Inventory. WMATA officials attributed the increase to a capital planning process insufficient to identify capital needs and an increase in cost of needs that were previously unmet. In addition, WMATA officials said the quality and quantity of asset data had improved over time. To address its state-of- good-repair needs, in November 2016 WMATA estimated that it will need to expend about $1.74 billion annually on capital expenditures from 2017 through 2026. This is more than twice the $845 million average annual capital expenditures from fiscal year 2011 through fiscal year 2017. WMATA’s new capital planning process could address some of the weaknesses it identified in the previous process, such as better distinguishing capital needs (investments in groups of related assets) from capital projects (investments in specific assets). However, WMATA has not established documented policies and procedures to guide the developed performance measures to assess capital projects and the capital planning process; and developed a plan to obtain complete information about the inventory and condition of WMATA assets. These remaining weaknesses could hinder sound capital investment decisions. WMATA’s new capital planning process could facilitate better identification of capital investment needs. Leading practices for capital planning, among other things, call for an organization to conduct a comprehensive assessment of its needs to meet its mission. WMATA uses the Capital Needs Inventory to assess its capital needs over a 10- year period across its various assets and help identify specific projects to include on subsequent capital improvement programs. In November 2016, WMATA issued its most recent Capital Needs Inventory, covering calendar year 2017 through 2026, and reported there were weaknesses and limitations in the process used to prepare the previous Capital Needs Inventory, issued in 2010. Those weaknesses and the actions WMATA has taken to address them include the following: Distinguishing capital needs from capital projects. WMATA reported in 2016 that the 2010 Capital Needs Inventory was primarily a list of proposed projects and did not provide proper attention to evaluating WMATA’s overall asset needs and the readiness of projects for programming in the capital improvement program. WMATA has taken actions to potentially address this weakness. In April 2016, WMATA issued a policy/instruction document that established policies and procedures for preparing capital needs inventories. This document defined the process for capital needs identification and established a framework evaluating and prioritizing capital investment needs. Among other things, this framework requires that WMATA departments develop capital needs justification packages and that these packages be reviewed by the Capital Program Advisory Committee for completeness and accuracy before being forwarded for further review. The guidance also requires that WMATA’s strategic objectives be considered when identifying and prioritizing capital projects. Qualitative rather than quantitative prioritization of needs. In 2016, WMATA reported that the prioritization of capital needs in the 2010 Capital Needs Inventory was primarily based on qualitative assessments by management rather than being driven by quantitative information and condition assessments. According to WMATA, the 2010 Capital Needs Inventory was largely based on the professional judgment of staff in consideration of WMATA’s strategic goals but was not data-driven. WMATA has taken actions to address this weakness by issuing a policy that requires WMATA’s senior management serving on the Capital Program Advisory Committee to use a more quantitative-based capital prioritization formula in preparing the Capital Needs Inventory. For example, the November 2016 Capital Needs Inventory used a quantitative approach to rank and prioritize capital needs. This approach included the use of four criteria—asset condition, safety and security, service delivery, and ridership impact— to numerically score capital needs and WMATA then used a risk- based weighting approach to combine these criteria into a single overall prioritization score. While WMATA has addressed some weaknesses it identified in its prior planning, it has not established documented policies and procedures to guide the annual capital planning process, or developed measures to assess capital project and program performance and a plan to obtain complete information on its assets and their physical condition. Although WMATA established policies and procedures for prioritizing capital needs—that is, investments in groups of related assets—for the 2016 Capital Needs Inventory, it has not established documented policies and procedures for the new capital planning process, including how WMATA will rank and select individual projects to address those needs through its annual capital budgets and Six-Year Capital Improvement Program. For example, through its Capital Needs Inventory WMATA stated it needed to invest $17.4 billion over a 10-year period to address its state-of-good-repair needs, including replacing vehicles, rehabilitating stations, and investing in other types of assets. WMATA uses the annual capital budget and Six-Year Capital Improvement Program to identify the specific projects to be funded to meet the 10-year investment needs. However, because WMATA has not established documented policies and procedures for the new capital planning process, it has not yet identified the specific methodologies to rank and select projects for funding on an annual basis. According to WMATA officials, the legacy annual capital planning process was based on implementing the list of projects that resulted from its 2010 Capital Needs Inventory and WMATA did not have a documented capital planning process that it followed on an annual basis. WMATA officials told us that the legacy capital planning process was “ad hoc” in nature, in part because WMATA was reacting to emergencies. For example, because WMATA needed to address the NTSB recommendation to replace the 1000-series railcars and address FTA safety directives after the 2015 smoke incident at the L’Enfant Plaza Station, it did not adhere to a formal annual-planning process. The COSO internal control standards point out the importance of organizations documenting their processes to facilitate retention and sharing of organizational knowledge. Leading practices contained in the Executive Guide also recommend that organizations have defined processes for ranking and selecting projects for capital funding. In addition, the Executive Guide noted that organizations find it beneficial to rank projects because the number of requested projects often exceeds available funding. Officials from all five of the peer transit agencies we spoke with told us they had or planned to develop documented processes for making capital investment decisions. For example, officials from four of the five peer transit agencies we spoke with said they use a project scoring and ranking system in their capital planning process, and officials from the fifth agency told us it plans to develop such a system. Officials from one agency provided us with its project evaluation and scoring system that assigns scores using eight selection criteria that are tied to the agency’s strategic business plan and state priorities. The selection criteria include such things as system preservation, safety, and cost-effectiveness. Officials from another agency told us they use an analytical tool to score projects and that every project (new or existing) gets re-scored annually. As a result of WMATA not having documented policies and procedures for its capital planning process, it is unclear how important parts of the process will work and the basis for WMATA’s investment decisions. WMATA has outlined some high-level policies for the capital planning process and prepared limited guidance for certain parts of the process. For example, WMATA officials told us that its recently issued Transit Asset Management Plan contains asset management policies that address the ranking and selecting of capital projects. Although the Transit Asset Management Plan discusses the process for estimating and prioritizing capital needs and, which are precursors of projects, the plan does not specifically address how projects would be selected for annual capital budgets and the capital improvement program. In addition, WMATA developed limited guidance for staff to use in developing new capital projects. Under this guidance, capital funds could be provided to evaluate, plan, and develop projects. While this guidance may be useful for developing projects, it does not establish the policies and procedures WMATA will follow to decide which projects will be funded through the annual capital budget and the capital improvement program. Further, the documentation prepared by WMATA to date does not establish policies and procedures for the entire capital planning process and how decisions will be made throughout the process. WMATA reported in its fiscal year 2019 annual budget that it had created a capital program manual that identifies the roles, responsibilities, processes, and calendars of events to inform the fiscal year 2020 capital program. WMATA officials told us that the previous Director of the Capital Planning and Program Management Department had included this information in the draft budget proposal when these documents were being developed. However, WMATA officials told us that these documents were not completed, and that the information was mistakenly not removed from the budget before the previous director of the department left the agency. WMATA officials told us they plan to formalize policies, procedures, and manuals for the fiscal year 2021–2026 capital-investment program cycle. The current leadership of the Capital Planning and Program Management Department told us that given the time-constraints facing WMATA in the current fiscal year 2020 planning cycle, WMATA decided not to formally document the new capital planning process until after WMATA has had a chance to test it through the current planning cycle to see how it works. According to the official, the department’s leadership has instructed staff to document steps taken in implementing the new process so that WMATA will have the opportunity to learn from the new process and make necessary changes before developing formal, written procedures that will guide future planning cycles. Although delaying formal development of policies and procedures may provide an opportunity to learn from the process while implementing it, it does not provide the guidance necessary now as WMATA uses its new capital planning process to develop the fiscal year 2020 capital program. In particular, because WMATA has not established policies and procedures for ranking and selecting projects, WMATA does not have a framework or clear criteria for programming projects in the annual capital budget for fiscal year 2020. WMATA has proposed a fiscal year 2020 capital budget of $1.4 billion. In addition, WMATA’s plan to document steps taken in implementing the new process as it is occurring does not provide reasonable assurance that WMATA is making decisions using a consistent process to direct investments toward WMATA’s highest priority needs. A consistent process is all the more important to ensure that WMATA does not continue to use an ad-hoc process for capital investment decisions, as it did in its legacy process. WMATA’s annual capital spending is anticipated to increase substantially over the fiscal year 2020-2025 period, as WMATA expects to be programing the additional $500 million annually for capital purposes committed by the District of Columbia, Maryland, and Virginia. Without a documented planning process that includes procedures for ranking and selecting projects for funding in the fiscal year 2020 capital budget, WMATA’s stakeholders lack reasonable assurance that WMATA’s capital investment decisions will be made using a sound and transparent process. WMATA has also not developed performance measures to assess capital projects and the capital planning process. Leading practices from the Executive Guide suggest that one way to determine if a capital investment achieved the benefits that were intended when it was selected is to evaluate its performance using measures that reflect a variety of outcomes and perspectives. By looking at a mixture of measures, such as financial improvement and customer satisfaction, managers can assess performance based on a comprehensive view of the needs and objectives of the organization. Leading organizations we studied in preparing the Executive Guide, such as private sector companies, use financial and non-financial criteria for success that are tied to organizational goals and objectives. According to the Executive Guide, project-specific performance measures are then used to develop unit performance measures and goals, which are ultimately used to determine how well an organization is meeting its goals and objectives. WMATA officials told us they have not developed performance measures for assessing the performance of individual projects or the capital planning process as a whole. One WMATA official told us that WMATA would like to evaluate results of the new capital planning process to determine whether organizational goals have been met. The official suggested that WMATA would work with a consultant to demonstrate a linkage between capital planning goals and WMATA’s organizational goals. However, the official did not indicate when this step would occur or provide additional information. Moreover, it is unclear whether the official’s intentions for this effort would result in measures for assessing individual projects as well as the overall capital planning process. By developing measures, WMATA will be better positioned to assess whether specific capital investments met their intended outcomes or if the capital planning process itself is helping WMATA achieve its strategic goals and objectives and effectively using taxpayer funds. WMATA also does not have a complete inventory or physical condition assessments of its assets. Leading practices for good capital decision- making call for organizations to conduct a comprehensive assessment of their needs and identify the organization’s capabilities to meet these needs. This process includes taking an inventory of assets and their condition and assessing where there are gaps in meeting organizational needs. The Transit Cooperative Research Program has also identified asset inventory and condition assessments as the first step in determining what asset rehabilitations and replacements are needed as transit providers address their state-of-good-repair requirements. Asset inventories and condition assessments provide critical information for capital-investment decision making. WMATA has initiated various efforts to obtain better information about its assets and their condition. These efforts have included: Transit Asset Inventory and Condition Assessment Project. In 2016, WMATA began this project to provide a physical inventory of WMATA assets and their condition, in part to comply with FTA’s Transit Asset Management regulations. According to WMATA, this project was to be the cornerstone in ensuring a complete, consistent, accurate, and centralized repository of relevant asset-related data. However, WMATA officials said that the project primarily focused on obtaining an inventory and condition assessment of WMATA facilities and equipment. A February 2018 WMATA memo to senior management stated that even when the project was completed, WMATA would still lack a robust database of track, guideway, infrastructure (e.g., tunnels and bridges), systems, and communication assets—elements that the November 2016 Capital Needs Inventory noted were the largest gaps in the asset information used to support capital needs forecasting. According to WMATA, this project produced inventory and condition assessments for about 30 percent of WMATA’s asset base. As of October 2018, WMATA considered the project complete since it provided information to help prepare WMATA’s completed Transit Asset Management Plan, dated October 1, 2018. WMATA officials noted that they will continue to develop their asset inventories and condition assessments through its new Enterprise Asset Management Program, described below. Enterprise Asset Management Program. In December 2017, WMATA began development of an Enterprise Asset Management Program. According to WMATA, this program is an effort to institutionalize asset management practices that are aligned with industry best practices to provide, among other things, high quality asset data for informed decision-making, including for capital planning. Expected program tasks include updating asset records and improving and consolidating asset inventories in WMATA’s asset system of record (called Maximo). WMATA’s efforts to develop more complete asset inventory and condition assessments are not complete. Among other things, WMATA documentation on the Enterprise Asset Management Program cited “inattention, poor standardization, and organizational silos” as factors that have resulted in WMATA having multiple sets of asset records in various states of accuracy and usefulness. The Enterprise Asset Management Program, according to WMATA, is an effort to help address this situation and improve asset data quality, including inventory and condition assessments. Although WMATA is developing a new Enterprise Asset Management Program, it has yet to develop a plan for obtaining a complete inventory or physical condition assessments of its assets. The Project Management Institute’s Guide to the Project Management Body of Knowledge, PMBOK® Guide describes the elements of good project management and their importance in achieving organizational goals. Among these elements are: Having a project charter that formally authorizes a project, that commits resources to the activity, and that provides a direct link to organizational strategic objectives; Preparing a project plan to define the basis of the project’s work and how the work will be performed; and Establishing a monitoring and control process to track, review, and report overall progress in meeting the plan’s objectives. WMATA has prepared draft documents that describe how it will implement the Enterprise Asset Management Program and that contain some elements of good project management. For example, in January 2018 WMATA circulated a proposed charter that once approved would authorize the Enterprise Asset Management program, identify needed resources, and link to WMATA’s strategic goals. As of October 2018, this proposed charter had not yet been finalized. Draft program documents also indicate there would be a monitoring and control process that would establish regular reporting to internal stakeholders to assess program accomplishments and progress implementing the program. While WMATA has developed a proposed charter and a monitoring and control process for its Enterprise Asset Management Program, it has not established a plan for collecting asset inventory and condition assessment information. The draft program charter includes general tasks for updating asset records and improving and consolidating asset inventory data in Maximo. However, a plan would provide more specific details for how the work would be completed, such as the information to be collected on different assets, how and when this information would be consolidated into Maximo, milestones for completing the work, or how the effort would be funded. Without a plan to obtain asset inventory and condition assessment information WMATA will continue to lack critical information needed for good capital planning and sound investment decision-making. WMATA has reported significant progress toward its goals of reducing track defects and fire incidents, but still faces several challenges with implementing its track preventive maintenance program. WMATA defines an incident as any unplanned event that disrupts rail revenue service. According to WMATA officials, within the track preventive maintenance program WMATA seeks to reduce incidents specifically caused by electrical wayside fires and track defects each by 50 percent from fiscal year 2017 to fiscal year 2019. WMATA reported that in fiscal year 2018 it had met its goal for track defect incidents but not for electrical wayside fires. According to officials, track defect incidents—which include incidents caused by defective fasteners, switches, and “ballast”—were reduced by 50 percent from a total of 778 in fiscal year 2017 to 387 in fiscal year 2018. Electrical-wayside-fire incidents—including incidents caused by cable and insulator fires—went down 20 percent from a total of 55 in fiscal year 2017 to 44 in fiscal year 2018 (see fig.5). Although WMATA has reduced both track defect incidents and electrical fires, the track preventive maintenance program is not intended to address the full range of all defects and track fires that may occur on the system. WMATA officials told us that the track preventive maintenance program specifically seeks to reduce electrical-wayside-fire incidents, which are a specific sub-set of overall track fires, and does not include non-electrical fires or smoke incidents, such as the ones caused by railcars or debris. WMATA captures and publicly reports the non-electrical fires as part of its quarterly Metro Performance Report, but according to WMATA officials, these fires are not specifically addressed through the track preventive maintenance program. While electrical fires decreased in fiscal year 2018, non-electrical fires did not change, as WMATA reported 23 non-electrical fires for both fiscal years 2017 and 2018. Additionally the track preventive maintenance program addresses a certain sub-set of track defect incidents such as those caused by loose fasteners and defective switches. According to WMATA, these track defect incidents can be addressed through its track geometry, torqueing, and switch maintenance initiatives. WMATA addresses other types of track defects, such as rail breaks and third-rail defects, through its capital program. However, according to WMATA, track defects attributable to the capital program are still included as part of the overall goal to reduce all track defect incidents by 50 percent by fiscal year 2019. WMATA established goals for completing each of the six track preventive maintenance initiatives within a certain time period and reported that in fiscal year 2018 it was on-track to meet or exceed those goals for four of the initiatives. For example, in implementing its “cable meggering” initiative, WMATA established a goal to inspect and replace electric cables across its entire rail system within 4 years. According to WMATA, it met its target for fiscal year 2018 by completing 25 percent of the entire system in that year. In addition to cable meggering, WMATA also met its annual targets for the switch maintenance, track bed cleaning, and stray current-testing initiatives. As for the two initiatives behind schedule, the torqueing initiative was 70 percent complete and the tamping initiative stood at 90 percent for the 2018 target (see table 2). Officials told us they have developed various ways to improve efficiency with these initiatives. For instance, WMATA improved the productivity of its switch maintenance initiative by separating the work to inspect the switches from the follow-up repair work to grind and weld them. These activities had previously been conducted by the same team. However, WMATA faces challenges in implementing the track preventive maintenance program moving forward. WMATA officials described track preventive maintenance as a necessary operation that must be continuously performed and balanced in conjunction with regular train operations that provide service to their customers. According to WMATA officials, executing this new program requires regular refinements to ensure it continues to progress toward its desired outcomes. Among the implementation challenges identified by WMATA officials were the following: Securing Sufficient Track Time. WMATA officials told us that getting adequate time to perform track maintenance is difficult because it requires reducing the number of hours in which WMATA provides service to customers. Consequently, increased maintenance hours can result in lost revenue. Officials from the peer transit agencies we interviewed stated that the tension between conducting maintenance and providing service is common in the transit industry. According to WMATA officials, prior to SafeTrack, windows for performing track maintenance were not sufficient to complete all necessary work, partially because of this need to balance maintenance hours and service hours. To address this issue, WMATA increased its weekly overnight work hours from 33 hours to 39 hours during SafeTrack. After SafeTrack was complete, WMATA extended weekly overnight work hours again to a total of 41 hours. However, maintaining these extended overnight work hours past fiscal year 2019 requires approval from WMATA’s board of directors. As a result, the long-term viability of WMATA’s track preventive maintenance program is partially dependent on the board’s decision to balance the competing demands for service hours and maintenance time. Work Time Productivity. To maintain extended track-maintenance hours into succeeding years, it will be important for WMATA to demonstrate the new program’s productivity. According to WMATA officials, making the most productive use of the extended working hours is a challenge, but it will be necessary to justify the extended maintenance windows. WMATA officials told us that only a portion of overnight work hours yields productive maintenance time. For example, once a line ceases operations, it takes an additional hour for all trains to reach their final destination, and another hour after that to safely turn off all power running to the track and then establish a work zone. Once maintenance work is completed, additional time must be allotted for restoring power and allowing trains to move back into position. Because of these requirements, a five-hour work window may only yield two hours of productive work time (called “wrench time”). For this reason, WMATA began tracking its wrench time at the beginning of fiscal year 2018. As of June 2018, WMATA reported that average wrench time had increased from about 2.0 hours per day in July 2017 to 2.37 hours. Resource Constraints. According to WMATA officials, having sufficient people with the necessary skills and experience to perform track maintenance work is a significant challenge. For instance, expanded maintenance windows have increased WMATA’s workforce requirements. As a result, WMATA has used contractors to assist with its stray-current testing and track bed cleaning initiatives. In another example, WMATA’s torqueing initiative is particularly resource intensive as the entire rail system contains 135 miles of “direct fixation” track, where the torqueing work is being done, and over 504,000 fasteners to check and tighten as necessary. According to WMATA officials, bolts and fasteners are torqued during their initial installment and then again 90 days afterward as part of the initial capital expenditure. After that, any subsequent torqueing is executed as part of the new track preventive maintenance program. WMATA stated that the torqueing initiative seeks to torque all 135 miles of direct fixation track annually. WMATA officials said the torqueing initiative is a mix of contractor and in-house staff, with contractors supplementing WMATA forces as needed. WMATA’s track preventive maintenance program has followed certain leading program management practices such as establishing key performance metrics and monitoring progress toward them. Leading practices recommend that organizations establish performance baselines for their programs and communicate performance metrics to key stakeholders. For instance, as previously noted, WMATA established a measureable program goal to reduce track-defect and electrical-wayside- fire incidents by 50 percent within 2 years, and WMATA also established time periods to complete its system-wide preventive maintenance initiatives. In addition, WMATA’s Rail Services Department—which manages the track preventive maintenance program—among other things, holds a monthly “RailSTAT” meeting in which the teams leading the preventive maintenance initiatives report their progress toward these goals to WMATA’s management. However, WMATA’s program does not fully align with other applicable internal-control standards or leading program-management practices. Specifically, COSO internal control standards and leading practices identified by the Project Management Institute’s The Standard for Program Management stresses the importance of identifying and assessing program risks and developing a program management plan. COSO recommends that organizations identify risks to the achievement of its objectives and analyze risks as a basis for determining how the risks should be managed. Furthermore, the risk identification is to be comprehensive. The Standard for Program Management also recommends that when identifying risks, the assessments be both qualitative and quantitative in nature. Regarding program management plans: The Standard for Program Management recommends that organizations develop program management plans that align with organizational goals and objectives. This includes aligning the program management plan with the organization’s overall strategic plan. Elements of the plan are to provide a roadmap that identifies such things as milestones and decision points to guide program activities. In developing the track preventive maintenance program, WMATA did not fully identify or quantitatively assess risks associated with the program. WMATA officials told us that in developing the track preventive maintenance program they used their professional judgment to identify track-defect and fire incidents as the most significant risks that they needed to address through the program. However, WMATA’s risk identification was not comprehensive in nature, as it only considered two technical aspects of track maintenance: electrical fires and track defects. As previously mentioned, non-electrical fires—which were not included in the scope of the program or risk assessment—did not change from fiscal year 2017 through 2018 and represent approximately 30 percent of all fires on the system over those years. Although WMATA officials told us in designing the program they reviewed track-related incident data from 2016, they did not quantitatively analyze the impact of these incidents on service or safety. In addition, WMATA did not consider broader strategic risks to its program, such as the availability of a program’s funding and stakeholders’ support for the continuation of the program. Specifically, while WMATA has identified several challenges with implementing the program—such as securing sufficient track time, demonstrating work time productivity, and overcoming resource constraints—none of these factors, or potential mitigations, were documented in a risk assessment in developing the program. WMATA has also not prepared a program management plan for the track preventive maintenance program. Although WMATA has identified program goals, officials told us that WMATA has not formally documented the overall structure of the program or how it would be implemented. Instead, the officials said the presentations they provide to WMATA’s board of directors, along with their ongoing staff and executive team meetings, regarding the track preventive maintenance program cover the relevant information needed for running the program. While providing such information to the WMATA board of directors provides some accountability for the program, these presentations do not represent a formal program management plan that links with WMATA’s strategic plan or that identifies milestones and decision points necessary to guide the program. As we previously reported, WMATA did not develop a project management plan before starting its SafeTrack work, and due to this omission and other issues, we found that WMATA lacked assurance that the approach taken with SafeTrack was the most effective way to identify and address safety issues. Furthermore, as this is the first time WMATA has implemented a track preventive maintenance program, a program management plan could help formally establish the program, provide strategic guidance for this new program by providing accountability for both internal and external stakeholders, and ensure that program goals are met. A program management plan could also provide practical benefits, such as helping ensure that WMATA’s extended overnight work hours are efficiently implemented and that sufficient resources are devoted to the program. Without the strategic direction provided by a comprehensive risk assessment and a formal program management plan, WMATA lacks a documented vision for how the track preventive maintenance program should be structured and implemented in order to meet the agency’s strategic goals and improve track safety. Specifically, without a risk assessment that uses quantitative and qualitative data to assess risks— such as data for all fires on the system and qualitative risks such as securing sufficient time for maintenance—WMATA lacks assurance that the program is comprehensively designed to address risks affecting the safety of the rail system or other risks that could hinder the program’s success. Moreover, a program management plan that draws on information from a comprehensive risk assessment would provide WMATA officials with the assurance that they are prepared to respond to current and future challenges that could threaten the long-term viability of the program. Finally, although WMATA developed the track preventive maintenance program to prevent the need for another emergency repair project like SafeTrack, without a formal program management plan, the WMATA employees charged with managing and implementing the program lack an important document to guide their decision-making to meet that objective and the agency’s overall strategic objectives. Developing a program management plan would outline the specific requirements to successfully implement the program, including necessary track time, expected productivity of program initiatives, and required resources. Furthermore, it would provide WMATA’s board of directors with confidence that the program has a clear roadmap with milestones and decision points as the board considers maintaining the extended overnight work hours necessary to implement the program. WMATA’s rail and bus systems provide nearly a million passenger trips each day, and those passengers rely on WMATA for safe and reliable public transportation in the nation’s capital and the surrounding areas. The federal, state, and local jurisdictions that fund WMATA expect WMATA to wisely use taxpayer funds to ensure the system is safe and reliable. WMATA can better meet these expectations by establishing documented policies and procedures that outline how the new capital planning process will work and the basis of investment decisions. In addition, developing measures to assess the performance of individual projects and the capital planning process would provide greater assurance to WMATA’s funding partners that its investment decisions result in a measurable improvement in operating performance, reliability, or other metrics. Furthermore, WMATA’s recent efforts to establish an Enterprise Asset Management Program, once finalized, could help WMATA develop a more complete inventory of its assets and collect critical information on their condition—both of which are consistent with sound capital planning. However, without a plan that provides specific details for obtaining this information, WMATA will continue to lack the critical asset information necessary to make lasting improvements in its capital planning process and make sound capital-investment decisions. Similarly, track preventive maintenance plays a critical role as WMATA works to reduce the track defects and fires that have endangered safety and service reliability. WMATA could better demonstrate the direction of the track preventive maintenance program and how it can improve track safety by more comprehensively assessing the technical and broader risks facing the program and by developing a formal plan that provides greater assurance WMATA is prepared to address challenges that could threaten the long-term viability of the program. Both actions would help WMATA better focus the program on critical maintenance needs and demonstrate its value to WMATA’s board of directors and other stakeholders as WMATA endeavors to provide safe, reliable, and quality service to its riders. We are making the following five recommendations to WMATA. The General Manager of WMATA should establish documented policies and procedures for the new capital planning process. These policies and procedures should include methodologies for ranking and selecting capital projects for funding in WMATA’s fiscal year 2020 capital budget and fiscal years 2020-2025 Capital Improvement Program and for future planning cycles. (Recommendation 1) The General Manager of WMATA should develop performance measures to be used for assessing capital investments and the capital planning process to determine if the investments and planning process have achieved their planned goals and objectives. (Recommendation 2) The General Manager of WMATA should develop a plan for obtaining complete information regarding WMATA’s asset inventory and physical condition assessments, including assets related to track and structures. (Recommendation 3) The General Manager of WMATA should conduct a comprehensive risk assessment of the track preventive maintenance program that includes both a quantitative and qualitative assessment of relevant program risks. In addition to considering technical program risks, WMATA should also consider broader program risks, such as the availability of funding for the program and stakeholders’ support. (Recommendation 4) The General Manager of WMATA should prepare a formal program management plan for the track preventive maintenance program that aligns with WMATA’s strategic plan, addresses how the program is linked to overall strategic goals and objectives, and includes program milestones and decision points. (Recommendation 5) We provided a draft of this report to WMATA and the Department of Transportation for review and comment. WMATA provided written comments, which are reprinted in appendix II, and technical comments, which we incorporated as appropriate in the report. The Department of Transportation provided technical comments, which we incorporated as appropriate. WMATA concurred in part, or with the intent of four of the recommendations, and disagreed with a fifth. Specifically, regarding the first recommendation, which is that WMATA establish documented policies and procedures for the new capital planning process, and that the policies and procedures include methodologies for ranking and selecting capital projects for the fiscal year 2020 capital budget and fiscal year 2020—2025 capital-improvement program. WMATA stated that it agreed with the recommendation, in part. WMATA said it will continue its efforts to finalize and document policies and procedures for the capital planning process for fiscal year 2021 and beyond. WMATA noted that it already has in place numerous planning tools, such as the 2016 Capital Needs Inventory assessment, which helped inform the fiscal year 2020 capital planning process. According to WMATA, it is currently reviewing policies, procedures, training materials, and other documents for the fiscal year 2020 planning process, and those documents will be updated and formalized through final documentation in fiscal year 2021. WMATA noted that it anticipates that many of the elements we recommend regarding the capital planning process will be part of the process documented in fiscal year 2021. For example, WMATA expects that additional automation, decision-making, governance, and reporting capabilities, will be part of the process that will be documented for fiscal year 2021. However, while WMATA has tools available to inform the capital planning process, it has not prepared documented policies and procedures for this process in fiscal year 2020. As we reported, without documented policies and procedures, including those for ranking and selecting projects for the fiscal year 2020 capital budget, WMATA’s stakeholders do not have reasonable assurance that capital investment decisions are made using a sound and transparent process. Taking action now to establish methodologies for ranking and selecting projects for the fiscal year 2020 capital budget would provide WMATA with an opportunity to improve upon those methodologies for the fiscal year 2021 capital planning process to better ensure investments are directed to WMATA’s highest priority needs. As such, we continue to believe this recommendation is valid and that WMATA should fully implement it. Regarding the second recommendation that WMATA develop performance measures for assessing capital investments and the capital planning process, WMATA stated that it agreed with the intent of the recommendation. WMATA also stated that it has developed such measures through compliance with federal requirements, including the FTA’s performance-based planning requirements and the requirement under MAP-21 that tier I transit providers, such as WMATA, establish state-of-good-repair targets that are linked to the capital program. WMATA noted these targets are set forth in its Transit Asset Management Plan. Although WMATA’s October 2018 Transit Asset Management plan includes some broad performance measures and targets for the state-of-good-repair for its various asset classes, as we reported, WMATA has not developed performance measures to assess individual capital projects or the capital planning process itself, as suggested by leading practices in the Executive Guide. As discussed in the report, such measures are important to determine if capital investments have achieved their expected benefits and if they have achieved organizational goals. Leading practices also indicate that by using a mixture of measures managers can assess performance based on a comprehensive view of the needs and objectives of an organization. These needs and objectives can go beyond just the state-of-good-repair to include such things as measures for assessing projects that would improve service reliability, expand capacity, or achieve financial objectives. We continue to believe that fully implementing this recommendation would help ensure that capital investments meet their intended outcomes and that the capital planning process helps WMATA achieve its strategic goals and objectives. Regarding the third recommendation that WMATA develop a plan for obtaining complete information about asset inventories and condition assessments, WMATA stated that it agreed with the intent of the recommendation and that its 2018 Transit Asset Management Plan outlines plans for continuing its asset inventory update. WMATA also said that it is working to ensure it has a complete asset inventory that addresses legacy information and that includes accurate, up-to-date condition assessments. As we reported, the Enterprise Asset Management Program—the program that WMATA told us it plans to use to continue development of asset inventories and condition assessments—includes some elements of good project management, but it also lacks an established plan for collecting asset inventory and condition assessment information. Without a plan to obtain asset inventory and condition assessment information WMATA will continue to lack critical information needed for good capital planning and sound investment decision-making. Thus, we continue to believe that this recommendation is valid and that WMATA should fully implement it. Regarding the fourth recommendation that WMATA conduct a comprehensive risk assessment of the track preventive maintenance program that includes both quantitative and qualitative assessment of relevant program risks, WMATA stated that it agreed with the intent of the recommendation and is putting in place a new process that will address it. Specifically, WMATA stated it is in the process of developing a new Reliability Centered Maintenance process that will include a comprehensive risk assessment of track infrastructure that includes consideration of broader risks such as costs, funding, and track access. According to WMATA, the new process is an engineering framework that will define the maintenance regimen, including preventive maintenance, and improve safety, reliability, and cost-effectiveness. During our review, WMATA officials did not discuss the Reliability Centered Maintenance process in detail or provide documentation that allowed us to evaluate how this process might interface with the current track preventive maintenance program. As a result, we were not able to evaluate how it might address identification and assessment of risks associated with track preventive maintenance. As we reported, going forward track preventive maintenance will play a critical role as WMATA works to reduce track defects and fires. We will review WMATA’s actions to conduct a comprehensive risk assessment as part of our routine recommendation follow-up process. Regarding the fifth recommendation that WMATA prepare a formal program management plan for the track preventive maintenance program, WMATA stated that it disagreed with the recommendation. WMATA noted that specific technical details of the track preventive maintenance program are evolving as it better understands the most effective maintenance regime through implementation of the Reliability Centered Maintenance process. WMATA stated that it believes the framework of Reliability Centered Maintenance is better suited to the ongoing mission of physical asset management than traditional project and program management tools. According to WMATA, the purpose of Reliability Centered Maintenance is to ensure that all efforts are focused on the safety, reliability, and cost-effectiveness of assets through their lifecycle, which is more relevant and applicable to WMATA’s strategic plan than any individual preventive maintenance program. As stated above, WMATA did not provide details about Reliability Centered Maintenance during our review so we are not able to evaluate this process in relation to the track preventive maintenance program. We will review WMATA’s actions related to implementation of the Reliability Centered Maintenance process as part of our routine recommendation follow-up process. We continue to believe this recommendation is valid and that WMATA should fully implement it. We will send copies of this report to appropriate congressional committees, the Secretary of Transportation, the Administrator of the Federal Transit Administration, and the General Manager of WMATA. In addition, we will make copies available to others upon request, and the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines: (1) How WMATA expended its capital funding from fiscal years 2011 through 2017; (2) How WMATA’s new capital planning process addresses weaknesses it identified in the previous process; and (3) WMATA’s progress toward its track preventive maintenance goals and how the program aligns with leading program management practices. For each of our objectives we reviewed pertinent federal statutes and regulations as well as WMATA and FTA policies and documents. We also selected a non-generalizable sample of five similar U.S. transit agencies based on similarity to WMATA in transit route mileage, system use, capital spending, system age, and rail fleet age. We also factored geographical diversity into our selection process. We then interviewed the officials from these selected transit agencies using a standard set of questions to learn how they utilize their capital funds, conduct capital planning, and oversee maintenance; and then we compared their processes to WMATA. Transit route mileage, system use, capital spending, and rail fleet age were measured using data from FTA’s National Transit Database. We measured system age according to data available within the American Public Transportation Association’s 2017 Public Transportation Fact Book, and geographical diversity was determined through data available from the U.S. Census Bureau. The transit agencies we selected were: (1) Bay Area Rapid Transit, Oakland, California; (2) Chicago Transit Authority, Chicago, Illinois; (3) Massachusetts Bay Transportation Authority, Boston, Massachusetts; (4) Metropolitan Atlanta Rapid Transit Authority, Atlanta, Georgia; and (5) Southeastern Pennsylvania Transportation Authority, Philadelphia, Pennsylvania. To assess WMATA’s capital spending from 2011 through 2017, we interviewed knowledgeable officials from WMATA and FTA and also reviewed WMATA annual budgets, fourth-quarter and year-end financial reports, budget reconciliation reports, comprehensive annual financial reports, and FTA grant awards. We selected fiscal year 2011 because it was the first year in which WMATA received federal funding authorized by the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), and we selected fiscal year 2017 because it was the most recent year that capital expenditure data were available at the time of our review. By analyzing this information we determined that the following sources provided the most comprehensive and reliable available data on each of the following topics for our report (see table 3): We collected the aforementioned data, analyzed them to identify errors or other anomalies, and interviewed officials to determine how the data are compiled and checked for accuracy. We determined that these data had some limitations, as an external audit report of WMATA financial information for fiscal year 2016 noted a material weakness with WMATA’s process for accounting acquisition costs of capital assets. Specifically, there were inconsistencies between WMATA’s general ledger and sub- ledger, which are used to record acquisition costs, depreciation, and other financial information related to capital assets. As a result, additional steps were required to reconcile the differences between the two sources and could have resulted in a material error. However, after interviewing WMATA officials about the weakness and assessing the available financial information, we determined that the data we used were sufficiently reliable for our purpose of showing general trends of capital expenditures. Our analysis sought to depict how WMATA allocates and expends funds according to major asset categories within its capital-improvement plan. However, these asset categories only remained consistent from 2011 through 2015, and were revised during 2016 and 2017. However, we determined that each asset category consisted of Capital Improvement Projects that were each assigned a number. These projects and their corresponding numbers remained in existence from fiscal year 2011 through 2017, even though the asset categories were updated in fiscal year 2016. Tracking by Capital Improvement Project number provided a means to report consistently through that time period. Therefore, we used the asset categories from fiscal years 2011 through 2015 as our base reporting categories. These categories consisted of: (1) Vehicles/Vehicle Parts, (2) Rail System Infrastructure Rehabilitation, (3) Maintenance Facilities, (4) Systems and Technology, (5) Track and Structures, (6) Passenger Facilities, (7) Maintenance Equipment, (8) Other Facilities, and (9) Project Management and Support. We consolidated WMATA’s nine asset categories into five asset categories in order to represent broader categories of investment: Rail and Bus Vehicle Fleet (Vehicle/Vehicle Parts), Fixed Rail Infrastructure (Rail System Infrastructure and Track and Structures), Maintenance Facilities and Equipment (Maintenance Facilities and Maintenance Equipment), Passenger and Other Facilities (Passenger Facilities and Other Facilities), and Business Systems and Project Management Support (Systems and Technology and Project Management and Support). We then reviewed WMATA’s fiscal year 2016 Fourth Quarter Report, fiscal year 2017 Fourth Quarter Report, and fiscal year 2017 Budget Reconciliation Report to match each project number from those two years to their corresponding category from fiscal year 2011 through 2015. To assess WMATA’s new capital planning process and how it addresses weaknesses WMATA identified in the previous process, we interviewed WMATA officials about their capital planning process and reviewed WMATA documentation related to the capital planning process. This included Capital Needs Inventories, WMATA’s policy for preparation of the 2010 and 2016 Capital Needs Inventories, annual capital budgets—to include capital improvement programs, and guidance documents issued by WMATA related to submitting projects for inclusion in the annual capital budget. We also reviewed the fiscal year 2018 business plan for WMATA’s Capital Planning and Program Management Department. We also interviewed officials from the Metropolitan Washington Council of Governments, the American Public Transportation Association, and FTA to discuss WMATA’s capital planning and budgeting processes. Furthermore, we compared WMATA’s capital planning practices to leading practices identified in GAO’s Executive Guide. The Executive Guide was used since it identifies leading practices for capital decision- making that are applicable to a wide variety of organizations, both public and private. For example, the Executive Guide developed leading capital planning practices by (1) identifying government and private sector organizations recognized for outstanding capital decision-making practices and (2) identifying and describing the leading capital decision- making practices implemented by these organizations. To identify leading practices for capital planning, we also reviewed Transit Cooperative Research Program Report 157. This report developed a framework for transit agencies to use when prioritizing the rehabilitation and replacement of capital assets and discusses leading practices in how to do this. We also identified project management principles from the Project Management Institute, Inc. Finally, we discussed capital planning with the peer transit agencies and prepared a summary of various aspects of capital planning in these agencies. To examine progress toward goals in WMATA’s track preventive maintenance program and how the program compares with leading program management practices, we reviewed WMATA documentation about the program, interviewed WMATA officials, and analyzed track- defect data and electrical-wayside-fire data provided by WMATA for fiscal years 2016 through 2018—which were the only years detailed track defect and electrical fire incident data were available. In order to determine whether the data provided were sufficiently reliable, we checked the data for errors, conducted interviews with knowledgeable officials to learn their procedures for collecting and analyzing the data, and performed independent tests that included verifying WMATA’s final tally of track defect and fire incidents and verifying there were no extended periods of time where data was missing. We also provided a set of data reliability questions to determine whether procedures were sufficient. After performing these steps we determined that the data were sufficiently reliable for the purposes of our report. In our interviews with WMATA, officials also described what goals they had created for the track preventive maintenance program, their progress in meeting those goals, and provided documentation to demonstrate their progress, which we reviewed. We also interviewed officials from the American Public Transportation Association and the American Railway Engineering and Maintenance-of-Way Association about best maintenance practices in the transit industry. We then compared WMATA’s track preventive maintenance program to leading program management practices identified by the Project Management Institute, Inc.’s The Standard for Program Management and internal control standards published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Project Management Institute’s, standards are utilized worldwide and provide guidance on how to manage various aspects of projects, programs, and portfolios. In particular, The Standard for Program Management provides guidance that is generally recognized to support good program-management practices for most programs, most of the time. We conducted our work from November 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Matt Barranca (Assistant Director), Richard Jorgenson (Analyst in Charge), Melissa Bodeau, Lacey Coppage, Cory Gerlach, Erin Guinn-Villareal, Kirsten Lauber, Joshua Ormond, and Patrick Tierney made significant contributions to this report.", "summary": "Safety incidents in recent years on WMATA's rail system have raised questions about its processes for performing critical maintenance and replacing capital assets. WMATA initiated a new preventive maintenance program for its rail track in 2017, and is currently implementing a new capital planning process. GAO was asked to examine issues related to WMATA's capital funding and maintenance practices. This report examines: (1) how WMATA spent its capital funds from fiscal years 2011 through 2017, (2) how WMATA's new capital planning process addresses weaknesses it identified in the prior process, and (3) WMATA's progress toward its track preventive maintenance program's goals and how the program aligns with leading program management practices. GAO analyzed WMATA's financial and program information, interviewed officials of WMATA, the Federal Transit Administration, and five transit agencies selected for similarities to WMATA. GAO compared WMATA's capital planning process and track maintenance program with leading practices. From fiscal years 2011 through 2017, the Washington Metropolitan Area Transit Authority (WMATA) spent almost $6 billion on a variety of capital assets, with the largest share spent on improving its rail and bus fleet (see figure). Over this period, WMATA's capital spending was, on average, about $845 million annually. WMATA's new capital planning process could address some weaknesses it identified in the prior process. WMATA established a framework for quantitatively prioritizing capital needs (investments to a group of related assets) over a 10-year period. However, WMATA has not established documented policies and procedures for implementing the new process, such as those for selecting specific projects for funding in its annual capital budget. WMATA is currently using its new capital planning process to make fiscal year 2020 investment decisions. WMATA has proposed a fiscal year 2020 capital budget of $1.4 billion. Without documented policies and procedures for implementing the new planning process, WMATA's stakeholders do not have reasonable assurance that WMATA is following a sound process for making investment decisions. WMATA has made significant progress toward its track preventive maintenance program's goals, which are to reduce both track-defect and electrical-fire incidents by 50 percent in fiscal year 2019 compared with 2017. In fiscal year 2018, WMATA met its goal for reducing track defect incidents and reduced electrical fire incidents by 20 percent. However, in designing the program, WMATA did not fully assess risks. For example, WMATA did not quantitatively assess the impact of track defects or electrical fires on its ability to provide service, nor did it consider other risks such as non-electrical track fires, which represent about 30 percent of all fires on the system, or other factors, such as resources or track time. Without a comprehensive risk assessment, WMATA lacks reasonable assurance that the program is designed to address risks affecting the safety of the rail system or other risks that could hinder the new program's success. GAO is making five recommendations, including that WMATA establish documented policies and procedures for the new capital planning process and conduct a comprehensive risk assessment for the track preventive maintenance program. WMATA described actions planned or underway to address GAO's recommendations. GAO believes the recommendations should be fully implemented, as discussed in the report.", "document_type": "gao"}
{"report": "According to State, the OAS is the primary inter-American political forum through which the United States engages with other countries in the Western Hemisphere to promote democracy, human rights, security, and development. While PAHO, IICA, and PAIGH are independent organizations, the Charter of the Organization of American States directs them to take into account the recommendations of the OAS General Assembly and Councils. PAHO, a specialized international health agency for the Americas, works with member countries throughout the region to improve and protect people’s health and serves as the Regional Office for the Americas of the World Health Organization, the United Nations agency on health. IICA, among other things, supports its member states’ efforts to achieve agricultural development and rural well-being through consultation and the administration of agricultural projects through agreements with the OAS and other entities. PAIGH specializes in regional cartography, geography, history, and geophysics and has facilitated the settlement of regional border disputes. Member states collectively finance these organizations by providing assessed contributions in accordance with the organizations’ regulations. The member states’ assessed contributions are intended to finance the organizations’ regular budgets, which generally cover the organizations’ day-to-day operating expenses, such as facilities and salaries. The budgets are based on each organization’s total approved quota assessment and other projected income. Member states of each organization meet to review and approve the organizations’ budgets. The exact dollar amount each member state is responsible for providing corresponds to its assessed percentage of the total approved quota assessment for any given year. In October 2013, the United States enacted the Organization of American States Revitalization and Reform Act of 2013 (Reform Act). The Reform Act directed the Secretary of State to, among other things, submit “a multiyear strategy that…identifies a path toward the adoption of necessary reforms that would lead to an assessed fee structure in which no member state would pay more than 50 percent of the OAS’s assessed yearly fees.” According to the Reform Act, it is the sense of Congress that, among other things, it is in the interest of the United States, OAS member states, and a modernized OAS that the OAS move toward an assessed quota structure that (1) assures the financial sustainability of the organization and (2) establishes, by October 2018, that no member state pays more than 50 percent of the organization’s assessed fees. In June 2017, we reported that the United States’ assessed contributions constituted over 57 percent of total assessed contributions by member states to four inter-American organizations from 2014 through 2016 (see table 1). During this time, the annual U.S. percentages (or quotas) of these organizations’ assessed contributions have remained about the same. Therefore, the actual amounts assessed to the United States generally remained the same. All four organizations apply a similar assessed quota structure that uses the relative size of member states’ economies, among other things, to help determine each member state’s assessed contributions. The OAS determines the assessed quota for each member state based on the United Nations’ methodology, as adapted for the OAS, using criteria that include gross national income, debt burden, and per capita income. The other three organizations use OAS’s system for determining member states’ quotas to calculate their member states’ assessed contributions. Thus, any change in the OAS’s assessed quota structure should be reflected at PAHO, IICA, and PAIGH, according to their respective processes regarding the determination of assessed contributions. The U.S. share of assessed contributions may be reduced in the future. The Reform Act required State to submit a strategy identifying, among other things, a path toward the adoption of necessary reforms to the OAS’s assessed quota structure that would lead to a structure in which no member state would pay more than 50 percent of OAS assessed contributions. In response to that requirement, State told us that they submitted to Congress a strategy that included working with OAS member states toward ensuring that the OAS would not assess any single member state a quota of more than 50 percent of all OAS assessed contributions. State officials informed us that they worked with other OAS member states, including Canada and Mexico, to explore assessed quota reform options. For example, State officials consulted with their counterparts from Mexico to review the OAS’s assessed quota structure and to consult on alternatives that would adjust all member states’ quotas so that no member state’s quota exceeds 50 percent of the OAS’s assessed contributions. Subsequent to our June 2017 report, at the OAS General Assembly in June 2017, OAS member states voted to draft a proposal to modify the quota structure to potentially reduce the maximum assessed quota to below 50 percent. According to State officials, the modification to the quota structure, if approved, would be gradual and would not be implemented until 2019. State, HHS, USAID, and USDA fund activities at OAS, PAHO, and IICA in the form of assistance agreements. In our December 2017 report, we reviewed 12 such agreements across the four agencies and found that State and USDA did not include all key monitoring provisions in their agreements as called for by applicable guidance. State has taken corrective action since the grants were awarded. We also found that all four agencies did not have full documentation of 18 of the 42 monitoring activities required by the 12 assistance agreements we reviewed. State and HHS both initiated corrective action prior to our review of the grants. The United States provided voluntary contributions to OAS, PAHO, and IICA through project-specific assistance agreements, such as grants and cooperative agreements. According to U.S. agency officials, the organizations’ regional knowledge and technical expertise make them effective implementing partners for projects serving U.S. national interests and priorities throughout the hemisphere. From calendar years 2014 through 2016, the United States provided voluntary contributions totaling about $105 million to the OAS, PAHO, and IICA, as shown in table 2. In 2016, for example, the United States contributed $32 million, or approximately 22 percent of the total of $143 million from all member states. According to U.S. officials, levels of U.S. voluntary contributions vary year-to-year due to factors that include the schedule of multiyear agreement disbursements, sudden crises, and member states’ priorities. For example, in 2016, USAID approved an assistance agreement for $2 million to OAS to support international observation of government elections in Haiti. In our review of 12 selected assistance agreements from State, HHS, USAID, and USDA (out of a total of 60 active agreements during calendar years 2014 through 2016), we found that none of the agencies had both consistently included all the key monitoring provisions for their agreements and fully documented the monitoring activities required by those provisions. For example, USDA did not have full documentation, such as financial reports, of any of its 10 required monitoring activities, and USAID did not have full documentation of 2 of its 11 required monitoring activities (financial and performance reports). U.S. agencies could have greater assurance that the organizations are using these funds as intended if they enhanced their monitoring of their assistance agreements. Each of the four agencies has established applicable guidance that calls for agencies to conduct monitoring activities as part of their oversight of their assistance agreements. The agencies implement their guidance by including key provisions to carry out required monitoring activities as part of their agreements. Federal standards for internal control call for agencies to include in agreements all key provisions delineating the parties’ responsibilities. For the 12 agreements we reviewed, the number of key monitoring provisions per agreement varied depending on when the agency issued and updated its guidance relative to when the agreements were approved. Federal standards for internal control call for agencies to document internal controls, transactions, and significant events. Specifically, internal control standards state that agency management should include internal control activities (e.g., monitoring activities) in policies or directives for transactions such as assistance agreements. For the 12 assistance agreements we reviewed, USDA and State did not include provisions implementing 6 of the 55 total (11 percent) monitoring activities required by applicable guidance (see table 3). For example, State did not include two of the key monitoring provisions (a risk assessment and a monitoring plan) in one of its agreements. State took corrective action in 2015 by issuing a standard operating procedure. The agencies specify the requirements to fulfill the key monitoring provisions in the individual assistance agreements, such as by requiring financial reports on a quarterly basis or including specific information in performance reports. Grants officers, if they deem it necessary or appropriate, include additional monitoring provisions requiring activities beyond those required by the applicable guidance, such as site visits. Federal standards for internal control call for agency management to design monitoring activities, such as financial and performance reporting, so that all transactions are completely and accurately recorded. Recording these activities maintains their relevance and value to management in controlling operations and making decisions. Without access to complete monitoring documentation, the agencies risk weakening the effectiveness of these controls. None of the four U.S. agencies had full documentation of all of the monitoring activities required by their agreements we reviewed (see table 4). The agencies did not have full documentation of monitoring activities for 9 of the 12 agreements we reviewed. For the 42 monitoring activities identified across all of the individual agreements, the four agencies did not have full documentation of 18 of the activities (43 percent). However, State took corrective action in May 2017 to address its gaps in documentation, and according to HHS officials, the Food and Drug Administration addressed its gap in documentation by implementing its agreement monitoring program in fiscal year 2018. In our December 2017 report, we found that the strategic goals of the four inter-American organizations are predominantly aligned with the high- level strategic goals for the Western Hemisphere documented by State, USAID, HHS, and USDA, as shown in table 5. For example, four of the five goals in State and USAID’s Joint Strategy correspond with goals at the OAS, IICA, and PAIGH. According to officials, the agencies all consider U.S. strategic goals when deciding which projects to fund at OAS, PAHO, and IICA. U.S. agencies, on an ongoing basis, evaluate each inter-American organization to ensure U.S. and organization goals are aligned. For example, according to USAID officials, USAID’s assistance project design and approval policies and procedures ensure that all USAID-funded activities are linked to applicable U.S. and USAID strategies. In conclusion, monitoring the implementation of U.S. assistance agreements and fully documenting the results of such monitoring are key management controls to help ensure that U.S. agreement recipients use federal funds appropriately and effectively. The agencies risk weakening the effectiveness of these controls by not including in their assistance agreements all the key monitoring provisions called for by applicable agency guidance. Further, if the agencies do not have full documentation of the agreements’ required monitoring activities, they may not be able to effectively manage federally funded projects that support U.S. strategic goals. In addition, agencies may not have all the information they need to make budgetary and programmatic decisions. In our December 2017 report, we recommended that (1) USDA ensure inclusion of all monitoring provisions as part of agreements and (2) USAID and USDA ensure full documentation of monitoring activities. The agencies concurred with these recommendations and indicated that they will take actions to address them. For example, USAID said it would issue an agency notice to remind all agreement officers to maintain complete files for each agreement. Chairman Cook, Ranking Member Sires, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Thomas Melito, Director, International Affairs and Trade at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony include Pierre Toureille (Assistant Director), Julia Jebo Grant (Analyst-in- Charge), Leslie Stubbs, Paul Sturm, Alana Miller, Shirley Min, Kira Self, and Rhonda Horried. In addition, David Dayton, Martin de Alteriis, Neil Doherty, Jeff Isaacs, and Alex Welsh provided technical assistance. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The United States belongs to several inter-American organizations, including the OAS, PAHO, IICA, and PAIGH, which promote democracy, security, health care, agricultural development, and scientific exchange in the Western Hemisphere. The United States helps finance these organizations' operating expenses through assessed contributions. The United States also provides voluntary contributions through the federal funding of assistance agreements to OAS, PAHO, and IICA. This testimony is based on GAO's June and December 2017 reports that, among other things, (1) determined the amounts and percentages of U.S. assessed contributions to the four organizations, (2) assessed the extent to which U.S. agencies included and documented key monitoring provisions as part of their assistance agreements, and (3) assessed the extent to which the organizations' strategic goals align with those of U.S. agencies. GAO analyzed documents and interviewed officials from State, HHS, USAID, USDA, and the four organizations. GAO analyzed the four organizations' audited financial reports and a nongeneralizable sample of 12 assistance agreements awarded by State, USAID, HHS, and USDA active in calendar years 2014 through 2016. While the United States' assessed contributions constituted over 57 percent of total assessed contributions by member states to four inter-American organizations from 2014 to 2016, the U.S. share may be reduced in the near future (see table). In response to a statutory requirement, the U.S. Department of State (State) said it submitted to Congress a strategy that included working with the Organization of American States (OAS) member states toward ensuring that the OAS would not assess any single member state a contribution amounting to more than 50 percent of all OAS assessed contributions. At the OAS General Assembly in June 2017, OAS member states voted to draft a proposal to modify its system for determining member states' assessed contributions to potentially reduce the maximum assessed contribution to below 50 percent. The other three organizations use OAS's system for setting assessed contributions. Hence, any change in contributions at OAS should also be reflected at Pan American Health Organization (PAHO), Inter-American Institute for Cooperation on Agriculture (IICA), and the Pan-American Institute of Geography and History (PAIGH). State, the Department of Health and Human Services (HHS), the U.S. Agency for International Development (USAID), and the U.S. Department of Agriculture (USDA) provide voluntary contributions to OAS, PAHO, and IICA in the form of assistance agreements (e.g., grants and cooperative agreements). In December 2017, GAO reported that its review of 12 such agreements across the four agencies found that State and USDA did not include all key monitoring provisions in their agreements as called for by applicable guidance. State has since taken corrective action. GAO also found that all four U.S. agencies did not have full documentation of 18 of the 42 monitoring activities required by the 12 assistance agreements GAO reviewed. For example, USDA did not have full documentation, such as financial reports, of any of its 10 required monitoring activities, and USAID did not have full documentation of 2 of its 11 required activities. State and HHS said they initiated corrective action before our review. If an agency does not have full documentation of monitoring activities, it may lack information needed to make appropriate budgetary and programmatic decisions. GAO found that the strategic goals of the OAS, PAHO, IICA, and PAIGH are predominantly aligned with the strategic goals of State, USAID, HHS, and USDA. According to agency officials, the agencies employ mechanisms to ensure that assistance agreements with these organizations align with U.S. goals. In its December 2017 report, GAO recommended that (1) USDA ensure inclusion of all monitoring provisions as part of agreements and (2) USAID and USDA ensure full documentation of monitoring activities. USDA and USAID concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "An amphibious force is comprised of an (1) amphibious task force and a (2) landing force together with other forces that are trained, organized, and equipped for amphibious operations. The amphibious task force is a group of Navy amphibious ships, most frequently deployed as an Amphibious Ready Group (ARG). The landing force is a Marine Air- Ground Task Force—which includes certain elements, such as command, aviation, ground, and logistics—embarked aboard the Navy amphibious ships. A Marine Expeditionary Unit (MEU) is the most-commonly deployed Marine Air-Ground Task Force. Together, this amphibious force is referred to as an ARG-MEU. An ARG consists of a minimum of three amphibious ships, typically an amphibious assault ship, an amphibious transport dock ship, and an amphibious dock landing ship. Navy ships train to a list of mission- essential tasks that are assigned based on the ship’s required operational capabilities and projected operational environments. Most surface combatants, including cruisers, destroyers, and all amphibious ships, have mission-essential tasks related to amphibious operations. Figure 1 shows the current number of amphibious ships by class and a description of their capabilities. An MEU consists of around 2,000 Marines, their aircraft, their landing craft, their combat equipment, and about 15 days’ worth of supplies. The MEU includes a standing command element; a ground element consisting of a battalion landing team; an aviation element consisting of a composite aviation squadron of multiple types of aircraft; and a logistics element consisting of a combat logistics battalion. Marine Corps units also train to accomplish a set of mission-essential tasks for the designed capabilities of the unit. Many Marine Corps units within the command, aviation, ground, and logistics elements have an amphibious-related mission- essential task. To be certified in the mission-essential task of amphibious operations, Marine Corps units must train to a standard that may require the use of amphibious ships. The Marine Corps’ use of virtual training devices has increased over time, and advances in technology have resulted in the acquisition of simulators and simulations with additional capabilities designed to help individual Marines and units acquire and refine skills through more concentrated and repetitive training. For example, the Marine Corps utilizes a constructive simulation that provides commanders with training for amphibious operations, among other missions. The Marine Corps has introduced other virtual training devices to prepare Marines for operational conditions and for emerging threats, such as devices to replicate a variety of vehicles for driver training and egress trainers, among others. The Navy stated it does not utilize virtual training devices that simulate amphibious operations, including ship-to-shore movement. In our September 2017 report, we found that Navy and Marine Corps units deploying as part of ARG-MEUs completed required training for amphibious operations, but the Marine Corps has been unable to consistently accomplish training for other service amphibious operations priorities. Specifically, based on our review of deployment certification messages from 2014 through 2016, we found that each deploying Navy ARG completed training for the amphibious operations mission in accordance with training standards. Similarly, we found that each MEU completed all of its mission-essential tasks that are required during the predeployment training program. These mission-essential tasks cover areas such as amphibious raid, amphibious assault, and noncombatant evacuation operations, among other operations. However, we also reported that based on our review of unit-level readiness data from fiscal year 2014 through 2016, Marine Corps units were unable to fully accomplish training for other amphibious operations priorities. These shortfalls include home-station unit training to support contingency requirements, service-level exercises, and experimentation and concept development for amphibious operations. For example, Marine Corps officials cited shortfalls in their ability to conduct service- level exercises that train individuals and units on amphibious operations- related skills, as well as provide opportunities to conduct experimentation and concept development for amphibious operations. In our September 2017 report, we identified several factors that created shortfalls in training for amphibious operations priorities. Based on our analysis of interviews with 23 Marine Corps units, we found that all 23 units cited the lack of available amphibious ships as the primary factor limiting training for home-station units. The Navy’s fleet of amphibious ships has declined by half in the last 25 years, from 62 in 1990 to 31 today, with current shipbuilding plans calling for four additional amphibious ships to be added by fiscal year 2024, increasing the total number of amphibious ships to 35 (see fig. 2). Marine Corps officials from the 23 units we interviewed also cited other factors that limit opportunities for amphibious operations training, including the following: Access to range space. Seventeen of 23 Marine Corps units we interviewed identified access to range space as a factor that can limit their ability to conduct amphibious operations training. Unit officials told us that priority for training resources, including range access, is given to units that will be part of a MEU deployment, leaving little range time available for other units. Maintenance delays, bad weather, and transit time. Ten of 23 Marine Corps units told us that changes to an amphibious ship’s schedule resulting from maintenance overruns or bad weather have also reduced the time available for a ship to be used for training. The transit time a ship needs to reach Marine Corps units has further reduced the time available for training. High pace of deployments. Five of 23 Marine Corps units told us that the high pace of deployments and need to prepare for upcoming deployments limited their opportunity to conduct training for amphibious operations. In our September 2017 report, we identified some steps that the Navy and Marine Corps have taken to mitigate the training shortfall for their amphibious operations priorities, such as by better defining the amount of amphibious operations capabilities and capacity needed to achieve the services’ wartime requirements. However, we found these efforts are incomplete because the services’ current approach for amphibious operations training does not incorporate strategic training and leading risk-management practices. Specifically, we found that: The Marine Corps does not prioritize all available training resources. For Marine Corps units not scheduled for a MEU deployment, officials described an ad hoc process to allocate any remaining available amphibious ship training time among home- station units. Specifically, officials stated that the current process identifies units that are available for training when an amphibious ship becomes available rather than a process that aligns the next highest- priority units for training with available amphibious ships. The Navy and Marine Corps do not systematically evaluate a full range of training resource alternatives to achieve amphibious operations priorities. Given the limited availability of amphibious ships for training, the Navy and Marine Corps have not systematically incorporated selected training resource alternatives into home-station training plans. During our review, we identified a number of alternatives that could help mitigate the risk to the services’ amphibious capability due to limited training opportunities. These alternatives could include utilizing additional training opportunities during an amphibious ship’s basic phase of training; using alternative platforms for training, such as Marine Prepositioning Force ships; utilizing smaller Navy craft or pier-side ships to meet training requirements; and leveraging developmental and operational test events. The Navy and Marine Corps have not developed a process or set of metrics to monitor progress toward achieving its amphibious operations training priorities and mitigating existing shortfalls. Current reporting systems do not allow officials to assess the services’ progress in achieving amphibious operations priorities or to monitor efforts to establish comprehensive amphibious operations training programs. For example, we found that the Marine Corps does not capture complete data on the full demand for training time with Navy amphibious ships that could be used for such assessments. In our September 2017 report, we recommended that the Navy and Marine Corps develop an approach to prioritize available training resources, systematically evaluate among training resource alternatives to achieve amphibious operations priorities, and monitor progress toward achieving them. DOD concurred with our recommendation and stated that the Secretary of the Navy would develop an amphibious operations training construct capitalizing on the application of primary and alternative training resources. While the Marine Corps has stated that the use of virtual training could help mitigate some of the limitations of training in a live-only environment and taken some steps to integrate these devices into operational training, we identified gaps in its process to develop and use them. Specifically, based on our review of a selection of 6 virtual training devices, we found weaknesses in three key areas: Front-end planning. The Marine Corps’ process for conducting front- end planning and analysis to support the acquisition of its virtual training devices does not include consideration of critical factors for integrating virtual training devices into operational training, such as the specific training tasks the device is intended to address, how the device would be used to meet proficiency goals, or available time for units to train with the device. As a result, the Marine Corps does not have a reasonable basis to ensure that it is acquiring the right number and type of virtual training devices to meet its operational training needs. Expected and actual usage data. The Marine Corps does not consistently consider expected and actual usage data for virtual training devices to support its investment decisions. In the absence of these data, the Marine Corps risks sustained investment in virtual training devices that do not meet operational training needs. Training effectiveness. The Marine Corps does not consistently evaluate the effectiveness of its virtual training devices to accomplish operational training. Without a well-defined process to consistently evaluate the effectiveness of virtual training devices for training, the Marine Corps risks investing in devices whose value to operational training is undetermined. In our September 2017 report, we recommended that the Marine Corps develop guidance for the development and use of virtual training devices to address these gaps. DOD concurred with the recommendation and stated it would work with the Commandant of the Marine Corps in its development and implementation actions associated with the use of virtual training devices. The Navy and Marine Corps have taken some steps to improve coordination between the two services, to include issuing strategic documents that discuss the importance of improving naval integration and establishing mechanisms to coordinate their amphibious operations training capabilities. However, in our September 2017 report we found that the services have not fully incorporated leading collaboration practices that would help drive efforts to improve naval integration. Our prior work on interagency collaboration has found that certain practices can help enhance and sustain collaboration among federal agencies. I would like to highlight a few practices that would especially benefit the Navy and Marine Corps’ efforts to improve integration for amphibious operations. Common outcomes and joint strategy. The Navy and Marine Corps have issued strategic documents that discuss the importance of improving naval integration, but the services have not developed a joint strategy that defines and articulates common outcomes to achieve naval integration. This first critical step will enable them to fully incorporate other leading collaboration practices aimed at achieving a common purpose. Compatible policies, procedures, and systems. The Navy and Marine Corps have not fully established compatible policies and procedures, such as common training tasks and standards and agreed-upon roles and responsibilities, to ensure their efforts to achieve improved naval integration are consistent and sustained. We also found that some of the Navy and Marine Corps’ systems for managing and conducting integrated training are incompatible, leading to inefficiencies in the process to manage unit-level training events. Leverage resources to maximize training opportunities. The services are looking to better leverage available training resources for amphibious operations. However, we identified examples of potential training opportunities during surface warfare tactical training and community relations events where enhancing the services’ collaborative efforts could take greater advantage of available training time for amphibious operations. Mechanisms to monitor results and reinforce accountability. The Navy and Marine have not developed mechanisms to monitor, evaluate, and report on results in improving naval integration and to align efforts to maximize training opportunities. Service-level strategy documents establish critical tasks to improve naval integration, but do not constitute a process or mechanism to jointly reinforce accountability for their naval integration efforts. In our September 2017 report, we recommended that the Navy and Marine Corps clarify the organizations responsible and set time frames to define and articulate common outcomes for naval integration, and use those outcomes to develop a joint strategy, more fully establish compatible policies, procedures, and systems, better leverage training resources, and establish mechanisms to monitor results. DOD concurred with the recommendation and stated it will develop mutual service naval integration terminology, and training resource application and organizational monitoring constructs to achieve common amphibious operations training outcomes. Chairman Wilson, Ranking Member Bordallo, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. For questions about this statement, please contact Cary Russell at (202) 512-5431, or at russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony are Matt Ullengren and Russell Bryan. Other staff who made contributions to the report cited in this testimony are identified in the source product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's September 2017 report, entitled Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training ( GAO-17-789 ). Navy and Marine Corps units that are deploying as part of an Amphibious Ready Group and Marine Expeditionary Unit (ARG-MEU) completed their required training for amphibious operations, but other Marine Corps units have been limited in their ability to conduct training for other amphibious operations–related priorities. GAO found that several factors, to include the decline in the fleet of the Navy's amphibious ships from 62 in 1990 to 31 today limited the ability of Marine Corps units to conduct training for other priorities, such as recurring training for home-station units (see figure). As a result, training completion for amphibious operations was low for some but not all Marine Corps units from fiscal years 2014 through 2016. The services have taken steps to address amphibious training shortfalls, such as more comprehensively determining units that require training. However, these efforts are incomplete because the services do not have an approach to prioritize available training resources, evaluate training resource alternatives, and monitor progress towards achieving priorities. Thus, the services are not well positioned to mitigate any training shortfalls. The Navy and Marine Corps have taken some steps to improve coordination between the two services, but have not fully incorporated leading collaboration practices to improve integration of the two services—naval integration—for amphibious operations. For example, the Navy and Marine Corps have not defined and articulated common outcomes for naval integration that would help them align efforts to maximize training opportunities for amphibious operations. The Marine Corps has taken steps to better integrate virtual training devices into operational training, but gaps remain in its process to develop and use them. GAO found that for selected virtual training devices, the Marine Corps did not conduct front-end analysis that considered key factors, such as the specific training tasks that a device would accomplish; consider device usage data to support its investment decisions; or evaluate the effectiveness of existing virtual training devices because of weaknesses in the service's guidance. As a result, the Marine Corps risks investing in devices that are not cost-effective and whose value to operational training is undetermined.", "document_type": "gao"}
{"report": "We monitor the progress that Congress and executive branch agencies have made in addressing the issues we identified in each of our last seven annual reports. As shown in table 4, Congress and executive branch agencies have made consistent progress in addressing many of the actions we identified from 2011 to 2017. As of March 2018, 376 (52 percent) of the actions we identified from 2011 to 2017 have been fully addressed. See our online Action Tracker for the status of all actions. The progress Congress and executive branch agencies have made in addressing our open actions has resulted in $178 billion in financial benefits, including roughly $125 billion in financial benefits from 2010 through 2017, with at least an additional $53 billion in estimated benefits projected to accrue in 2018 or later. Table 5 highlights examples of these results. These financial benefits continue to grow as we identify and document additional agency actions that respond to our recommendations. For example, in recent months CMS has formalized changes to its oversight of spending allowed for large Medicaid demonstrations, which allow states to test new ways to deliver or pay for care. These demonstrations, by HHS policy, should not raise federal costs over what the program would have cost without the demonstration—that is, they should be budget neutral. But our past work has shown that the spending HHS had authorized for these demonstrations was much higher than what was justified, as HHS had allowed states to use questionable methods when proposing spending for their demonstrations. CMS’s new policy partially responds to a longstanding recommendation we have made to better ensure that valid methods are used to demonstrate budget neutrality. We anticipate that CMS’s recent actions could potentially reduce the federal government’s liability for Medicaid by billions, or tens of billions, annually. While not all actions result in financial benefits to taxpayers, all of our suggested actions, when implemented, can result in other benefits—for instance, they make government more efficient or eliminate, reduce, or improve management of fragmented, overlapping, or duplicative programs. For example, such benefits can be seen in the results of our work on the government’s acquisition of space programs. For over two decades, we and others have reported on problems caused by fragmented leadership and a lack of a single authority in oversight of these multibillion dollar programs. In 2012, we made a recommendation aimed at strengthening leadership and authority of space systems acquisitions. In response, in 2017 the President revived the National Space Council to provide a coordinated process for developing and monitoring the implementation of national space policy and strategy. Separately, in the National Defense Authorization Act for Fiscal Year 2018, Congress made changes to certain DOD space leadership positions and required the department to conduct a review and identify a recommended organizational and management structure for its national security space components, and submit related reports. The act also required DOD to contract with a federally funded research and development center not closely affiliated with the Air Force to develop a plan to establish a separate military department responsible for DOD national security space activities. These actions could reduce fragmentation and speed decision making in the development of a substantial investment in space systems. While Congress and executive branch agencies have made progress toward addressing the 798 total actions we have identified since 2011, further steps are needed to fully address the 365 actions that are partially addressed or not addressed. We estimate that tens of billions of dollars in additional financial benefits could be realized should Congress and executive branch agencies fully address open actions. In addition to producing financial benefits, these actions make government more efficient; improve major government programs or agencies; reduce the risk of mismanagement, fraud, waste, and abuse; and increase assurance that programs comply with laws and funds are legally spent. Congress has used our work to identify legislative solutions to achieve cost savings, address emerging problems, and find efficiencies in federal agencies and programs. Our work has contributed to a number of key authorizations and appropriations. In addition, congressional oversight of agencies’ efforts has been critical in realizing the full benefits of our suggested actions addressed to the executive branch, and it will continue to be critical in the future. In our 2011 to 2018 annual reports, we directed 100 actions to Congress, including the 3 new congressional actions we identified in 2018. Of the 100 actions, 58 remain open (11 of which were partially addressed and 47 were not addressed or new) as of March 2018. Table 6 highlights areas with significant open actions directed to Congress. Appendix I has a full list of all open congressional actions. In our 2011 to 2018 annual reports, we directed 698 actions to executive branch agencies, including 65 new actions identified in 2018. Of the 698 actions, 307 remained open as of March 2018. Of these open actions, 164 were partially addressed and 143 were not addressed or new. While these open actions span the government, a substantial number of them are directed to seven agencies that made up 83 percent—$3.7 trillion—of federal outlays in fiscal year 2017 and have the largest number of open actions (see figures 2 and 3). As shown in figure 3, seven agencies have at least 25 open actions. The following sections highlight examples of open actions across those seven major agencies. In our 2011 to 2018 reports, we directed 176 actions to DOD in areas that center on DOD’s effectiveness in providing the military forces needed to deter war and to protect the security of the United States. As of March 2018, 74 of these 176 actions remained open. DOD represented about 14 percent of federal spending in fiscal year 2017, with outlays totaling about $635.5 billion. Our work suggests that effectively implementing these open actions, including those related to areas listed in table 7, could yield substantial financial benefits and improve DOD’s effectiveness. In our 2011 to 2018 reports, we directed 111 actions to HHS in areas that contribute to HHS’s mission to enhance the health and well-being of Americans. HHS provides health coverage for over 145 million Americans through three principal programs—Medicare, Medicaid, and the Children’s Health Insurance Program—as well as the health-insurance marketplaces. HHS also operates other public health-related agencies such as the Food and Drug Administration, the Centers for Disease Control and Prevention, and the National Institutes of Health. HHS represented about 27 percent of the fiscal year 2017 federal budget, with outlays totaling about $1.2 trillion. As of March 2018, 56 of HHS’s 111 actions remained open. Our work suggests that effectively implementing these actions, including those related to areas listed in table 8, could reduce costs, provide services more efficiently, and yield substantial financial benefits. In our 2011 to 2018 reports, we directed 91 actions to the Internal Revenue Service (IRS) in areas that contribute to effectively and efficiently providing high-quality service to taxpayers and enforcing the law with integrity and fairness to all. As of March 2018, 38 of these 91 actions remained open. The funding of the federal government depends largely upon IRS’s ability to collect taxes legally owed. Our work suggests that effective implementation of our open actions, including those related to areas listed in table 9, could increase revenues through better compliance or reduce costs. In our 2011 to 2018 reports, we directed 79 actions to the Department of Homeland Security (DHS) in areas that contribute to the effective implementation of its mission. In fiscal year 2017, DHS spent about $63.6 billion, about 1.4 percent of federal outlays. As of March 2018, 31 of the 79 actions to DHS remained open. Fully implementing these actions, including those related to areas listed in table 10, could result in financial benefits and substantial improvements in agency operations. Many of the results the federal government seeks to achieve require the coordinated effort of more than one federal agency, level of government, or sector. OMB manages and coordinates many government-wide efforts. In our 2011 to 2018 reports, we directed 66 actions to OMB in areas to improve the efficiency and effectiveness of government-wide programs and activities. As of March 2018, 30 of the 66 actions to OMB remained open. Fully implementing these actions, including those related to areas listed in table 11, could yield significant financial benefits and substantial program improvements across government. In our 2011 to 2018 reports, we directed 32 actions to the Social Security Administration (SSA) in areas that contribute to SSA providing financial assistance to eligible individuals through Social Security retirement and disability benefits and Supplemental Security Income (SSI) payments. As of March 2018, 27 of these 32 actions remained open. In fiscal year 2017, SSA spent about $1 trillion, roughly 22 percent of federal outlays. While most of SSA’s funding is used to pay Social Security retirement, survivors, and disability benefits from the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund, our work suggests that effective implementation of these actions, including the examples listed in table 12, could result in significant benefits. In our 2011 to 2018 reports, we directed 54 actions to the Department of Veterans Affairs (VA) in areas that contribute to VA effectively and efficiently achieving its mission to promote the health, welfare, and dignity of all veterans by ensuring that they receive medical care, benefits, and social support. As of March 2018, 25 of these 54 actions remained open. In fiscal year 2017, VA spent about $183.0 billion—about 4 percent of federal outlays—for veterans’ benefits and services. Our work suggests that effective implementation of these actions, including those related to areas listed in table 13, could yield cost savings and efficiencies that would improve the delivery of services to the nation’s veterans and their families. We will continue to look for additional or emerging instances of fragmentation, overlap, and duplication and opportunities for cost savings or revenue enhancement. Likewise, we will continue to monitor developments in the areas we have already identified. We stand ready to assist this and other committees in further analyzing the issues we have identified and evaluating potential solutions. Thank you, Chairman Enzi, Ranking Member Sanders, and Members of the Committee; this concludes my prepared statement. I would be pleased to answer questions. For further information on this testimony or our April 26, 2018 report, please contact J. Christopher Mihm, Managing Director, Strategic Issues, at (202) 512-6806 or mihmj@gao.gov, and Jessica Lucas-Judy, Director, Strategic Issues, at (202) 512-9110 or lucasjudyj@gao.gov. Contact points for the individual areas listed in our 2018 annual report can be found at the end of each area in GAO-18-371SP. Contact points for our Congressional Relations and Public Affairs offices may be found on the last page of this statement. In our 2011 to 2018 annual reports, we directed 100 actions to Congress, of which 58 remain open. Of the 58 open congressional actions, 11 are partially addressed and 47 are not addressed or new, as of March 2018. See table 14.", "summary": "The federal government faces a long- term, unsustainable fiscal path based on an imbalance between federal revenues and spending. While addressing this imbalance will require fiscal policy changes, in the near term opportunities exist in a number of areas to improve this situation, including where federal programs or activities are fragmented, overlapping, or duplicative. To call attention to these opportunities, Congress included a provision in statute for GAO to identify and report on federal programs, agencies, offices, and initiatives—either within departments or government-wide—that have duplicative goals or activities. GAO also identifies areas that are fragmented or overlapping and additional opportunities to achieve cost savings or enhance revenue collection. GAO's 2018 annual report is its eighth in this series ( GAO-18-371SP ). This statement discusses new areas identified in GAO's 2018 annual report; the progress made in addressing actions GAO identified in its 2011 to 2017 reports; and examples of open actions directed to Congress or executive branch agencies. To identify what actions exist to address these issues, GAO reviewed and updated prior work, including recommendations for executive action and matters for congressional consideration. GAO's 2018 annual report identifies 68 new actions that Congress or executive branch agencies can take to improve the efficiency and effectiveness of government in 23 new program areas. For example: The Department of Defense (DOD) could potentially save approximately $527 million over 5 years by minimizing unnecessary overlap and duplication in its U.S. distribution centers for troop support goods. The Department of Energy may be able to reduce certain risks and save tens of billions of dollars by adopting alternative approaches to treat a portion of its low-activity radioactive waste at its Hanford Site. The Department of Veterans Affairs could potentially save tens of millions of dollars when acquiring medical and surgical supplies by better adhering to supply chain practices of leading hospitals. The Coast Guard should close its boat stations that provide unnecessarily duplicative search and rescue coverage to improve operations and potentially save millions of dollars . Significant progress has been made in addressing many of the 724 actions that GAO identified from 2011 to 2017. As of March 2018, Congress and executive branch agencies have fully or partially addressed 551 (76 percent) of these actions. This has resulted in about $178 billion in financial benefits, of which $125 billion has been realized and at least an additional $53 billion is estimated to accrue. These estimates are based on a variety of sources that considered different time periods, assumptions, and methodologies. GAO estimates that tens of billions of additional dollars could be saved should Congress and executive branch agencies fully address the remaining 365 open actions, including the 68 new ones identified in 2018. Further steps are needed to fully address these remaining actions. For example: Congress and the Internal Revenue Service could realize hundreds of millions of dollars in savings and increased revenues by enhancing online services and improving efforts to prevent identity theft refund fraud. Medicare could save $1 to 2 billion annually if Congress equalized the rates paid for certain health care services, which often vary depending on where the service is performed. DOD could achieve billions of dollars in savings over the next several years by continuing to employ best management practices on its weapon systems acquisition programs. Congress could consider modifying how Medicare pays certain cancer hospitals to achieve almost $500 million annually in program savings. The Social Security Administration could help prevent the loss of billions of dollars by preventing overpayments to beneficiaries of the Disability Insurance program and improper waivers of beneficiaries' overpayment debt. Congress could consider modifying tobacco tax rates to eliminate significant tax differentials between similar products to address future revenue losses caused by manufacturers and consumers substituting tobacco products. Federal losses ranged from $2.6 to 3.7 billion between April 2009 and February 2014.", "document_type": "gao"}
{"report": "This section provides an overview of the (1) San Francisco Bay Delta watershed, (2) multiple water demands in the watershed, (3) selected laws and agreements related to restoration efforts in the watershed, and (4) funding for restoration efforts in the watershed. The San Francisco Bay Delta watershed is a single, complex ecosystem covering more than 75,000 square miles, almost entirely in California. It includes a diversity of fresh, brackish, and salt water ecosystems. Figure 1 shows the watershed and its three major geographic areas and their subregions. The watershed’s three major geographic areas contain unique, yet inherently interconnected environmental and cultural features and face similar water quality and other threats: San Francisco Bay and its local watershed (Bay). The San Francisco Bay is the large body of mostly salt water through which the local watershed, as well as the entire Bay Delta watershed, drains into the Pacific Ocean. According to U.S. Census data, more than 7 million people live in the nine-county Bay area containing the local watershed—an area with one of the nation’s densest populations. Large cities, such as San Jose, San Francisco, and Oakland; their suburbs, including Silicon Valley; and numerous other cities occupy much of the land surrounding the Bay. Since the California Gold Rush in the mid-1800s, most of the Bay’s historical wetlands have been filled for development or converted to farmland or industrial salt ponds, and the loss of these natural features has removed important barriers for flood and erosion control. Because of its urban setting and location at the downstream end of the watershed, the Bay’s water quality faces threats from numerous sources of pollution, including sewage, trash, urban and industrial runoff (e.g., metals, solvents, and inorganic chemicals), and runoff from agriculture and past mining activities upstream (e.g., nutrients, pesticides, and metals). Sacramento-San Joaquin Delta (Delta). The Sacramento-San Joaquin Delta comprises roughly 1,000 square miles where the fresh waters of the Sacramento and San Joaquin Rivers converge south of the city of Sacramento before flowing into the San Francisco Bay through a network of more than 50 islands. It is a largely rural area that is also home to more than 500,000 people living mostly on its suburban periphery, and its communities and farmland are protected from flooding by approximately 1,100 miles of levees. During the California Gold Rush, settlers diked the Delta’s channels and waterways and began building levees to create dry land, resulting in the loss of nearly all of the original wetlands in the area. As a result, the Delta has been converted from an historic plain of seasonally flooded brackish and freshwater wetlands to a mosaic of channelized waterways surrounding its islands. According to reports, many of these islands have subsequently subsided up to 25 feet below sea level due largely to the use of groundwater and farming, which can cause the islands’ rich peat soil to oxidize and erode. The Delta is a major outdoor recreation destination for activities such as fishing and boating. Its key water quality threats include agricultural, urban, and past mining runoff. In addition, the complex system of water supply infrastructure projects built throughout the watershed diverts fresh water from the Delta to other parts of the state, changing the saltwater content of much of the area’s wetlands and marshes. Upper watershed. The upper watershed is the vast area where the watershed’s rivers, streams, and tributaries originate at the crest of the Sierra Nevada and other mountain ranges and then travel hundreds of miles through California’s Central Valley, the nation’s most productive agricultural area, according to USDA. The upper watershed includes three subregions: the Sacramento River watershed in northern California, through which water generally flows south; the San Joaquin River watershed in central California, through which water generally flows west and then north; and the Tulare Lake Basin in southern California, through which water no longer drains naturally. About 5 million people live throughout the area in a mix of rural and urban communities, including large inland cities, such as Fresno and Sacramento. In the upper watershed, the Sierra Nevada snowpack serves as temporary storage for roughly one-third to one- half of California’s water, depending on the year. Most of the major rivers hold reservoirs to capture and store the snowmelt for longer- term use. As a result of mining, agriculture, and water infrastructure development, the area’s historic water flows have been highly modified, the Central Valley’s historic grasslands and flood plains have been converted to managed wetlands and are often threatened by land subsidence, and runoff from agriculture and past mining activities are dominant threats to water quality in low-lying areas. In the mountains and foothills, forest fires can threaten water quality, mostly by causing erosion that increases sediment in streams. The Bay and Delta together form the San Francisco Bay/Sacramento-San Joaquin Delta Estuary, often referred to as the Bay Delta, one of the largest estuaries in North America. The Bay Delta is the ecosystem created by the mixing of salt water from the Pacific Ocean and fresh water from the Sacramento and San Joaquin Rivers and their tributaries. It provides habitat for about 750 species of plants and animals, including more than 130 species of fish. It also contains more than 700,000 acres of farmland, and millions of users access it each year for recreational activities, such as hunting, boating, and fishing. In contrast to the managed wetlands of the upper watershed, the Bay Delta wetlands are tidal areas—brackish wetland influenced by the push and pull of ocean tides. Even with the tidal influence, the saltwater content of the Bay Delta is also heavily influenced by the amount of fresh water available, much of which is diverted by water supply infrastructure projects and can vary due to multiple water demands. Because of the watershed’s economic, environmental, and cultural importance, it has been the subject of political and legal battles over multiple water demands for decades. Beginning in the 1930s, federal and then state water projects—two complex networks of dams, pumps, reservoirs, canals, and other facilities—have diverted water from the Sacramento and San Joaquin Rivers to agricultural, industrial, and urban consumers in the Bay area and southern parts of California. The federal Central Valley Project primarily diverts water for agricultural use, and the California State Water Project, which was developed in the 1960s, primarily diverts water for drinking and industrial use. Hundreds of water contractors, such as the Westlands Water District and the Metropolitan Water District of Southern California, purchase water from these projects, which can divert about 20 to 70 percent of the natural water flowing into the Bay Delta, depending on legal limits and seasonal levels of precipitation. Other water demands include habitat needs for threatened and endangered species such as the Delta smelt (a fish) and various salmon species. In particular, federal agencies have developed instream flow requirements for these species of fish that require water to be released from dams upstream to help maintain adequate water quality and temperature for the fish. As a result, most of the water in the watershed is managed by federal, state, and local water projects for use by private and investor-owned water agencies and districts and their customers, as well as for fish and habitat purposes. Any proposed changes to this complicated water allocation system—which accounts for California’s largest supply of fresh water—often raise concerns among water users about losing water, receiving reduced priority for water supplies, or obtaining water of poor quality. For example, according to one study, the state of California has allocated more water rights than what could be available naturally. Other concerns involve the system’s infrastructure— the system depends largely on a complex network of aging levees, many of which were first built in the mid-1800s—and the possible effects on water supply and quality. Specifically, earthquakes, floods, subsidence, or sea level rise could cause these levees to fail and put the state’s fresh water supply at risk from saltwater contamination. As a result of these and other concerns, many stakeholders in the watershed have been, and continue to be, involved in legal actions over multiple water demands. Construction and operation of the Central Valley Project and the State Water Project has fundamentally altered the physical environment of the Bay, Delta, and parts of the upper watershed, where nearly every tributary has been dammed to create reservoirs to supply these water projects. By the late 1980s, species decline and water quality problems became so critical in the Bay Delta that stakeholders raised concerns that the continued operation of these projects might be conflicting with federal and state water quality and endangered species laws (discussed below). In 1992, the Central Valley Project Improvement Act amended the Central Valley Project authorizations, which previously focused primarily on certain uses such as irrigation and power generation. The act specifies, among other things, a number of actions for the purposes of protecting, restoring, and enhancing fish, wildlife, and associated habitats in the Central Valley and Trinity River basins in California. The act’s stated purposes include, among other things, to achieve a reasonable balance among competing demands for use of Central Valley Project water, including the requirements of fish and wildlife, agriculture, municipal and industrial and power contractors. Under the act, Reclamation implements several programs, including those to restore habitat on Central Valley rivers and streams, improve diversion facilities to protect certain juvenile fish, and deliver water supplies for critical wetland habitat supporting resident and migratory waterfowl and threatened and endangered species. To address the increasingly complex issues surrounding the Bay Delta, the federal and California state governments reached an agreement to create the CALFED Bay-Delta Program (CALFED) in 1995 to restore ecological health, improve water quality, fortify water management infrastructure, and increase water supply reliability. From 1995 through 2009, about 20 federal and state agencies collaborated through this program, issuing a record of decision in 2000 outlining CALFED goals and programs and implementing federal and state legislation enacted in the early 2000s. Under the National Environmental Policy Act of 1969, agencies issue a record of decision at the end of the environmental impact statement process, which they are required to conduct for major federal actions that have a significant effect on the environment. The 2000 record of decision established a program with 12 components, including water quality and ecosystem restoration, to be managed by state and federal agencies. According to the record of decision, CALFED’s water quality goal was to provide good water quality for the millions of Californians who rely on the Delta for all or a part of their drinking water. CALFED’s goal for ecosystem restoration under the record of decision was to improve aquatic and terrestrial habitats and natural processes to support stable, self-sustaining populations of diverse and valuable plant and animal species through an adaptive management process. This process includes reevaluating or updating goals, activities, or performance measures based on the results of ongoing monitoring and progress assessments. Under the record of decision, the water quality and ecosystem restoration programs include activities throughout the Bay, Delta, and upper watershed. In 2002, California enacted the California Bay-Delta Act, which established the California Bay-Delta Authority to oversee CALFED. In 2004, the Calfed Bay-Delta Authorization Act (CALFED Act), a federal law, implemented the record of decision, directed federal agencies to coordinate CALFED activities with California state agencies, and authorized federal agencies to participate in the California Bay-Delta Authority as nonvoting members for the full duration of the period it continued to be authorized by state law. CALFED received federal appropriations to develop and implement ecosystem protection and restoration projects. Section 105 of the act requires Interior to report annually on the accomplishments of various program components, including those related to additional water storage and ecosystem restoration. Section 106 of the act requires OMB, in coordination with the governor of California, to report annually on all expenditures since 1998 to achieve the program’s objectives. However, in 2009, California repealed the California Bay-Delta Act and abolished the California Bay-Delta Authority, replacing it with the Delta Reform Act and the Delta Stewardship Council. The 2009 law focused state efforts more specifically on the Delta, in part by tasking the council with developing an enforceable Delta Plan for promoting a healthy Delta ecosystem and a more reliable water supply. According to a report by the California Legislative Analyst’s Office, the CALFED federal-state partnership ended due to several challenges, including uncertain financing, weak governance, and a lack of accountability. Although California state law was amended in 2009, the federal CALFED Act has not been significantly amended since its enactment in 2004. As we reported in June 2015, although the CALFED record of decision remains in effect, the state’s future direction for Bay Delta activities are likely to be coordinated through the Delta Plan. The Delta Plan was, under certain conditions, to incorporate a 50-year conservation plan initiated by the state, in cooperation with Reclamation, in 2006. The 50- year plan proposed restoring approximately 150,000 acres of wetlands, grasslands, and other areas in and around the Delta over 50 years and addressing water supply reliability concerns by building two large tunnels to transport fresh water under the Delta. In 2015, facing uncertainties in obtaining permits to implement the plan, the state replaced the 50-year plan with two separate initiatives managed by the California Natural Resources Agency: (1) California EcoRestore, which aims to begin restoring at least 30,000 Delta acres over 5 years, and (2) California WaterFix, which includes building the two tunnels from the 50-year plan. The ecosystem chapter of the Delta Plan is being amended, and the amended chapter is anticipated to be complete by early 2019, according to Delta Stewardship Council officials. While it does not directly incorporate EcoRestore, the Delta Plan ecosystem amendment currently under development acknowledges that EcoRestore’s successful implementation is needed to achieve the restoration objectives in the Delta Reform Act, according to Delta Stewardship Council officials. In addition to the CALFED Act and the Central Valley Project Improvement Act, other federal laws, including water quality and endangered species laws, are relevant to restoration efforts in the watershed. Some relevant laws include the following: The Clean Water Act. The objective of this act is to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. A 1987 amendment to the act created the National Estuary Program to promote comprehensive planning for, and conservation and management of, estuaries of national significance. The National Estuary Program calls for the development of comprehensive conservation and management plans (CCMP) for these designated estuaries, including the Bay Delta estuary, which was designated under the program in 1987. Under the act, EPA also works with California to regulate water quality. In addition, section 404 of the Clean Water Act generally prohibits the discharge of dredged or fill material into waters of the United States without a permit from the Corps. The Corps administers the permitting responsibilities of the section 404 program while EPA develops, in conjunction with the Corps, the substantive environmental criteria that permit applicants must meet. The Endangered Species Act. This act was enacted to, among other things, provide a means to conserve the ecosystem upon which endangered species and threatened species depend and to provide a program for the conservation of such endangered species and threatened species. Under the act, species may be listed as endangered or threatened. Several species in the watershed are listed as threatened or endangered, including the Delta smelt, steelhead trout, spring- and winter-run Chinook salmon, Ridgway’s rail (a bird), salt marsh harvest mouse, red-legged frog, and California tiger salamander. NOAA’s National Marine Fisheries Service and the U.S. Fish and Wildlife Service, depending on the species, implement the act, including by issuing biological opinions regarding the potential effects of proposed federal actions on endangered and threatened species. The San Joaquin River Restoration Settlement Act. In conjunction with the settlement this act implements, it outlines, among other things, measures to achieve the goals of restoration of the San Joaquin River and the successful reintroduction of California Central Valley spring-run Chinook salmon. Under the act, Reclamation is to coordinate several actions, including the expansion of a segment of the San Joaquin River to provide habitat for juvenile salmon. Across the watershed, funding for restoration efforts typically comes from a variety of federal, state, local, nongovernmental, and private entities. According to Interior officials, federal funding includes approximately $37 million per year for CALFED overall and additional funding for implementation of the Central Valley Project Improvement Act, available for certain projects in the Delta and upper watershed. Also, according to Interior officials, the U.S. Geological Survey funds research and monitoring to support water quality management, water operations, and restoration. Additional federal sources of funding include grant programs from EPA, NOAA, and the U.S. Fish and Wildlife Service and projects funded through Reclamation, in addition to funding for water projects that can include a restoration component. For example, Reclamation has provided about $37 million annually since fiscal year 2015 for the San Joaquin River Restoration Program. A number of other federal entities, including USDA’s Natural Resources Conservation Service, also fund restoration projects in the watershed. For example, USDA’s Natural Resources Conservation Service has programs, such as the Environmental Quality Incentives Program and the Agricultural Conservation Easement Program, to support farm conservation efforts throughout the Central Valley. Funding from state sources primarily comes from state water and conservation agencies and is funded through statewide bonds and the state’s general fund. For example, in 2014, California voters authorized $7.5 billion in bonds to fund ecosystems and watershed protection and restoration; water supply infrastructure projects, including surface and groundwater storage; and drinking water protection across the state, including the San Francisco Bay Delta watershed. In addition to the bond funding, in 2016, voters from nine Bay area counties authorized an annual $12 parcel tax that is expected to raise approximately $500 million over 20 years for Bay wetlands restoration, as well as other multi-benefit projects. In the Delta, in addition to federal and state funding for restoration efforts, according to state officials, funding often comes from water contractors that pay for major restoration efforts through their obligations under the State Water Project to address biological opinions issued by federal regulatory agencies for endangered or threatened species. For example, water contractors are responsible for funding restoration efforts under the state’s California EcoRestore initiative, including at least $205 million to restore 8,000 acres of fish habitat and $171 million for 17,000 acres of floodplain improvements. EcoRestore began in 2015, and total costs for projects are expected to reach at least $300 million in the initiative’s first 4 years, according to the California Natural Resources Agency. According to officials from several federal and nonfederal entities, including EPA and the San Francisco Estuary Partnership, no official estimates exist for the expected total future costs to restore the entire watershed, though some estimates have been developed for limited types of activities. For example, regarding cost estimates, the San Francisco Estuary Partnership typically refers to Save the Bay’s 2007 Greening the Bay report, which estimates that it will cost almost $1.5 billion over 50 years to restore the 36,176 acres of Bay shoreline already set aside for restoration. Overall, according to related reports, investments on the order of tens of billions of dollars would likely be necessary to restore the entire watershed. Federal and nonfederal entities, including state agencies and nongovernmental organizations, carry out and coordinate a wide range of restoration efforts in the watershed. These entities coordinate comprehensive restoration efforts in the Bay and Delta primarily through two coordinating bodies—the San Francisco Estuary Partnership and the Delta Plan Interagency Implementation Committee, respectively. In the upper watershed, federal and nonfederal entities do not have a coordinating body for comprehensive restoration efforts, but they do coordinate restoration efforts through plans specific to entities, projects, or restoration topics. In 2009, federal entities first developed an Interim Federal Action Plan for coordinating federal restoration efforts across the entire watershed, but not all of the entities are using the plan. Federal and nonfederal entities carry out a wide range of restoration efforts—i.e., water quality improvement and ecosystem restoration—that can involve multiple entities, vary in geographic scope, span multiple years, and are intended to achieve multiple benefits. According to our review of reports and interviews with officials from federal and nonfederal entities, water quality improvement efforts include projects intended to improve the physical, chemical, or biological characteristics of water, and ecosystem restoration efforts include projects to restore degraded habitats. According to these interviews, restoration efforts can target a range of priorities, including conservation, resiliency, mitigation, monitoring, and enhancement. In addition, these efforts can directly or indirectly support water quality improvement and ecosystem restoration goals and objectives, and they can encompass a variety of activities, such as planning, project selection, project implementation, permitting, funding, technical assistance, and assessment. Figure 2 shows the locations and different habitat types for a number of the completed and ongoing restoration projects implemented by federal and nonfederal entities— partly under the CCMP, California EcoRestore, and other efforts—in the Bay Delta Estuary. Restoration efforts in the watershed can involve multiple levels of government, as well as nongovernmental organizations. For example, the South Bay Salt Pond Restoration Project near San Jose, California—the largest tidal wetland restoration project on the west coast of the United States, according to the project’s website—is a joint effort among the U.S. Fish and Wildlife Service, California Department of Fish and Wildlife, and the California State Coastal Conservancy, along with local governments, donors, consultants, and other participants. Similarly, the Hamilton Wetland Restoration Project near Novato, California, which involves the restoration of tidal and seasonal wetlands, is a joint effort among the Corps, California State Coastal Conservancy—the nonfederal sponsor and landowner—and other federal and nonfederal entities. Restoration efforts in the watershed also vary in geographic scope and can span jurisdictions. The South Bay Salt Pond Restoration Project includes federal and state land and, according to the project’s website, is expected to restore more than 15,000 acres of industrial salt ponds to tidal marsh and other wetland habitats in three counties located along the shores of the southern part of San Francisco Bay. (See fig. 3.) The Hamilton Wetland Restoration Project comprises state-owned land and, according to the California State Coastal Conservancy, has the purpose to restore approximately 2,600 acres to tidal wetland on a former army airfield and adjacent properties along the San Francisco Bay in an area 25 miles north of San Francisco. (See fig. 4.) In contrast, other efforts include project areas on farms. For example, under its Environmental Quality Incentives Program, USDA’s Natural Resources Conservation Service has focused on providing conservation planning, among other services, for farm operators and nonindustrial forestland owners, including tribes. Officials from several federal and nonfederal entities, including EPA, the San Francisco Estuary Partnership, the Central Valley Joint Venture, and the California State Coastal Conservancy, stated that the primary focus of restoration efforts varied from one geographic area to another. For example, according to some of these officials, efforts to restore tidal wetlands are prevalent in the Bay, and efforts to address land subsidence are prevalent in the Delta. (See fig. 5.) Restoration efforts in the watershed can span multiple years. For example, the South Bay Salt Pond Restoration Project is an ongoing, multi-phase, 50-year effort that began with the acquisition of former industrial salt ponds in 2003. Likewise, the Hamilton Wetland Restoration Project is an ongoing, multi-phase effort that began in 1999. In the upper watershed, planning began in 2012 for California EcoRestore’s ongoing Yolo Bypass Salmonid Habitat Restoration and Fish Passage Project, which aims to increase floodplain habitat for endangered and threatened fish species in the Sacramento River watershed. Restoration efforts in the watershed can also have multiple primary benefits. For example, the Hamilton Wetland Restoration Project was designed to reverse years of land subsidence, restore wetlands, reestablish historic habitat for wildlife and endangered species, and beneficially reuse dredged sediment. Multiple benefits could also accrue over time. For instance, according to the California State Coastal Conservancy, while the Hamilton Wetland Restoration Project currently provides habitat for migratory water birds and fish, it is expected to become thickly vegetated with a complex network of tidal channels that provide habitat for several threatened and endangered species. Restoration efforts can also provide multiple secondary benefits. For example, restoring wetlands may provide resilience against sea level rise, habitat for wildlife, and an area for recreation. Federal and nonfederal entities coordinate comprehensive restoration efforts in the Bay and Delta through the San Francisco Estuary Partnership and the Delta Plan Interagency Implementation Committee, respectively. In the upper watershed, federal and nonfederal entities coordinate specific restoration efforts through plans specific to entities, projects, or restoration topics. Specifically: Bay. In the Bay, federal and nonfederal entities coordinate comprehensive restoration efforts through the San Francisco Estuary Partnership. The partnership was established in 1987 and receives funding from EPA’s National Estuary Program to implement the CCMP for the San Francisco Estuary (i.e., the Bay Delta). The partnership’s members include federal, state, and local government entities; nongovernmental organizations, such as conservation groups; and a utility commission. The partnership’s members provided input on developing and revising the CCMP and have integrated goals into the CCMP from their own topic- or entity-specific strategic plans. Partnership members also coordinate restoration efforts guided by the CCMP. For example, the U.S. Fish and Wildlife Service, U.S. Geological Survey, the California State Coastal Conservancy, and the California Department of Fish and Wildlife work to coordinate on managed wetlands and ponds—one of the restoration efforts outlined in the CCMP. Furthermore, partnership members may carry out various activities for restoration projects in the Bay, such as project planning, regulating and permitting (e.g., for dredging and extracting sediment), on-the-ground project implementation, and scientific monitoring. Partnership members meet quarterly and participate in a conference every 2 years to provide updates on the status of projects, share scientific research, and present monitoring results. Delta. In the Delta, federal and nonfederal entities coordinate comprehensive restoration efforts through the Delta Plan Interagency Implementation Committee. This committee was created in 2013 by the Delta Stewardship Council, the state agency responsible for overseeing the Delta Plan—the state’s plan for promoting a more reliable water supply and a healthy ecosystem. The committee is made up of representatives from 7 federal and 11 state entities and helps implement the Delta Plan. Members of the committee may also carry out various activities for restoration projects in the Delta, such as scientific monitoring, on-the-ground project implementation, project planning, and regulating and permitting (e.g., for placing materials such as concrete structures or rocks into the water to support levees). The committee meets twice a year and participates in conferences to gather scientific consensus or to share recent research. Some committee members are also members of the San Francisco Estuary Partnership and coordinate separately through initiatives that may have predated the committee and that are specific to entities, projects, or restoration topics. Upper watershed. In the upper watershed, while federal and nonfederal entities do not have a coordinating body for comprehensive restoration efforts, they coordinate restoration efforts through plans specific to entities, projects, or restoration topics. For example, 20 federal, state, and nongovernmental entities coordinate through the Central Valley Joint Venture—a partnership with the mission to conserve migratory bird habitat—and its implementation plan. Likewise, dozens of federal, state, and local government entities coordinate to implement the Central Valley Flood Protection Plan, a plan adopted by California’s Central Valley Flood Protection Board for managing flood risk. In addition, NOAA, the U.S. Fish and Wildlife Service, and the California Department of Fish and Wildlife coordinate on implementing a conservation strategy in parts of the Central Valley. A federal memorandum of understanding and an Interim Federal Action Plan outline how federal entities are to coordinate the federal government’s restoration activities and support state efforts across the entire watershed. The California Bay-Delta Memorandum of Understanding among Federal Agencies, signed in September 2009, established a Federal Bay-Delta Leadership Committee to coordinate federal efforts related to restoration and water management across the entire watershed while the state structure was transitioning from the California Bay-Delta Authority to the Delta Stewardship Council, and the state therefore was no longer participating in the originally structured CALFED federal-state partnership. According to the memorandum, this federal committee was to be led by Interior and CEQ and to meet regularly. The signatories of the memorandum also agreed to develop a federal work plan to outline near-term federal actions and begin to identify and prioritize key longer-term federal actions for restoration efforts and water management across the watershed. The entities issued an Interim Federal Action Plan in December 2009. The Interim Federal Action Plan organizes federal actions into four priorities, including working with state and local authorities on joint project planning to ensure healthy Bay Delta ecosystems and to improve water quality. Specifically, the federal entities agreed to build projects to improve water supply, including through conservation efforts in municipal areas and on agricultural lands; to fund habitat restoration projects for threatened and endangered fish across the watershed; and to assess the effects of pollutants such as mercury and pesticides on water quality. According to the Interim Federal Action Plan, these priorities cut across different federal entities’ missions and activities in the watershed. Further, the Interim Federal Action Plan includes actions aimed at ensuring the effective and efficient use of federal resources, such as by leveraging nonfederal resources. In late 2010, the agencies that signed the memorandum provided a status update on the Interim Federal Action Plan that confirmed the federal government’s support of state efforts in the watershed. The status update directs the federal government to review the components of any proposed restoration plan and understand the costs and benefits such a plan would have on federal water resources and taxpayers. The President’s fiscal year 2019 budget, which sets the administration’s top- level priorities and was released in February 2018, reaffirmed the federal government’s commitment to the Interim Federal Action Plan and stated that the plan is under the leadership of CEQ, Interior, and the Delta Stewardship Council. OMB staff stated the Interim Federal Action Plan provides overall guidance to federal agencies and clarifies that the agencies should focus their various actions in the watershed on the plan’s four priorities, including while working with nonfederal entities through collaborative bodies. Nonetheless, not all federal entities are using the Interim Federal Action Plan. Officials from the USDA Natural Resources Conservation Service told us they use the plan to determine conservation funding levels and priorities in the watershed. However, a former official who was responsible for CEQ’s Bay Delta portfolio said that although the plan still matches the needs of the watershed, agencies had stopped following it in the past several years because the plan had become less of a priority for the administration. In addition, EPA and NOAA officials stated they were not aware of agencies following the plan in the past several years. According to the plan, its most important aspect is the federal government’s reaffirmation of its partnership with state and local entities and its commitment to coordinate actions with them. Yet, of the 31 nonfederal entities responding to our survey questionnaire, 11 indicated that they were not at all familiar with the Interim Federal Action Plan, and another 9 indicated that they were slightly familiar with it. Further, according to Interior officials, although restoration efforts described in the Interim Federal Action Plan have largely remained the same and its functions and activities are still relevant, the plan is outdated. In particular, according to these officials, the Interim Federal Action Plan refers to the state’s 50-year conservation plan, which California is no longer pursuing. Moreover, according to Interior and EPA officials, the Federal Bay-Delta Leadership Committee—the coordinating body for the Interim Federal Action Plan—has not convened since the Delta Plan was developed in May 2013, even though the memorandum called for the committee to meet on a regular basis. Instead, according to Interior officials, the state-led Delta Plan Interagency Implementation Committee has replaced the federal leadership committee as the coordinating body for federal efforts in the watershed. Interior and EPA officials we interviewed said the federal role outlined in the Interim Federal Action Plan is no longer relevant because of recent leadership and strategic changes in the watershed resulting from the state’s withdrawal from the originally structured CALFED program and increased focus on the Delta through the Delta Stewardship Council. According to OMB staff and Interior and Delta Stewardship Council officials, the Delta Plan Interagency Implementation Committee is the current approach for coordinating among and between federal and state entities, and according to Interior officials, federal participation in the committee is key. The committee, however, focuses specifically on the Delta, and the Delta Plan generally does not include restoration efforts in the Bay and the upper watershed. Restoration requires a robust watershed-wide approach, according to the Interim Federal Action Plan, because the Bay, Delta, and upper watershed systems are interconnected. Specifically, according to one respondent to our survey, actions in the upper watershed affect water quality improvement and ecosystem restoration success in the Delta and ultimately the Bay. For example, according to California state officials, carefully timed water releases from dams in the upper watershed are the only way to control saltwater content in the Delta, which is critical for agriculture and urban water supply. Further, a National Research Council report states that Delta planning cannot be successful if it is not integrated into statewide planning because the Delta is fed by large upstream watersheds and water from the Delta is used outside the region, such as in the Bay. In addition, federal funding supports efforts throughout the watershed. While the Interim Federal Action Plan is consistent with several of our leading practices for collaboration, it is not being used by all federal agencies. As we reported in 2012, key considerations for implementing interagency collaborative mechanisms include whether participating agencies have clarified roles and responsibilities, developed ways to continually update and monitor written agreements on how agencies coordinate, and identified how leadership will be sustained over the long term. We have found that agencies that articulate their agreements in formal documents, such as plans, can strengthen their commitment to working collaboratively and that transitions and inconsistent leadership can weaken coordination. A written document can incorporate agreements reached among participants in any or all of the following areas: leadership, accountability, roles and responsibilities, and resources. Although the Interim Federal Action Plan reflects several of these practices, it is not being used to lead overall federal efforts and has not been updated to reflect current roles and responsibilities in the watershed, in particular the transition of coordination from the plan’s federal leadership committee to the Delta Plan Interagency Implementation Committee and the state’s increased focus on the Delta. Further, the Delta Plan Interagency Implementation Committee is not an interagency coordination mechanism for the federal and state agencies to communicate complete information for the entire watershed. Updating, including revising or refocusing, the Interim Federal Action Plan could help federal entities more fully coordinate with and support nonfederal restoration efforts across the watershed. EPA and Interior officials stated that coordination among the regions is challenging because agency missions and activities can be siloed. Officials from the Delta Stewardship Council told us that without coordinating with federal entities, they found it difficult to plan resources and work with federal entities. In addition, 31 of the 48 federal and nonfederal entities that responded to our survey questionnaire indicated that coordination of goals for the entire watershed was a very great or great challenge. Moreover, according to our analysis of questionnaire responses, 29 of 48 federal and nonfederal entities indicated that coordination among partners at different levels of government was a very great or great challenge. For example, in narrative responses to our survey questionnaire, one respondent stated that restoration projects can be delayed because many federal and nonfederal entities focus narrowly on their own missions without considering those of other stakeholders. By updating or revising the plan to outline and reflect entities’ roles and responsibilities in light of the changes in the state’s role and other relevant developments since 2009, and notifying all participating entities to ensure they are aware of the plan and their role in it, Interior and CEQ could help clarify the federal government’s role in supporting restoration efforts in the watershed and help ensure the effective use of federal resources in these efforts. Federal and nonfederal entities have developed measurable goals for comprehensive restoration efforts in the Bay and Delta and for specific restoration efforts in the upper watershed. Federal and nonfederal entities have also developed approaches to assess progress for restoration efforts in the Bay and Delta and for some goals in the upper watershed. In the Bay and Delta, the San Francisco Estuary Partnership uses indicators to rate the goals as good, fair, or poor, and in 2015, the partnership rated the overall state of the Delta as in fair to poor condition and the Bay as healthier. Federal and nonfederal entities have developed measurable goals for comprehensive restoration efforts in the Bay and Delta through the coordinating bodies for these areas and have developed measurable goals for specific restoration efforts in the upper watershed. The coordinating bodies have documented the goals in plans, which often contain action items aimed at achieving those goals. In addition, all three of the regions share some similar goals, such as ecosystem restoration, climate resilience, and water quality. Federal and nonfederal entities have developed measurable goals for comprehensive restoration efforts in the Bay through the San Francisco Estuary Partnership. The partnership documented these goals in the CCMP, which provides a 35-year vision for restoring the estuary. The most recent CCMP, updated in 2016, contains four long-term goals related to broad restoration efforts: ecosystem restoration, climate resilience, water quality and quantity, and governance. Each goal contains three objectives, which detail desired outcomes that make progress toward achieving goals. To achieve the goals and objectives, the plan also identifies 32 actions—each of which can be associated with multiple goals and objectives—that lay out 112 priority tasks for the next 5 years. Figure 6 shows an example of a priority task and how it relates to the actions, objectives, and goals. The 2016 CCMP also includes measurements to track progress for all actions and links the plan’s goals, objectives, and actions to 33 environmental indicators established by the partnership. Federal and nonfederal entities have developed measurable goals for comprehensive restoration efforts in the Delta through the Delta Stewardship Council and documented them in the Delta Plan, first published in 2013. The Delta Plan contains six goals and establishes funding principles to support implementation of the Delta Plan as a whole. Four of the goals—protecting, restoring, and enhancing the Delta ecosystem; reducing climate-related risks; improving water quality; and governance—are similar to those of the CCMP. To accomplish all six goals and meet the funding principles, the Delta Plan sets forth 87 provisions for various entities, such as local, state, and federal agencies. Fourteen of these provisions are legally enforceable regulatory policies. The Delta Plan also has 159 performance measures associated with these goals and provisions. For example, under improving water quality, the Delta Plan includes a provision related to priority habitat restoration areas. (See fig. 7.) Federal and nonfederal entities developed measurable goals for specific efforts in the upper watershed and documented these goals in plans specific to entities, projects, or restoration topics. These plans include goals similar to those outlined in the CCMP or the Delta Plan—such as ecosystem restoration, climate resilience, and improved water quality— and some of the goals have associated performance measures. For example, several federal and nonfederal entities documented in the Central Valley Joint Venture Implementation Plan the acreage they would like to enhance annually for conserving migratory bird habitat—a specific ecosystem restoration effort. Another group, California’s Central Valley Flood Protection Board, documented in the state’s Central Valley Flood Protection Plan that it would like to increase infrastructure performance in populous areas to result in a more resilient flood management system— an example of a specific resiliency goal. This goal contains tracking metrics, including measuring the miles of levees repaired or improved. In addition, Interior produces metrics and reports for activities under the Central Valley Project Improvement Act. Federal and nonfederal entities have developed indicators to assess and report progress toward some of the measurable goals in the Bay, and have applied these in the Delta as well. In the Bay, the San Francisco Bay Regional Water Quality Control Board has implemented regional monitoring pilot studies since 1989, and in 1992 it established a regional monitoring program led by a nonprofit science center. In 1991, in addition to water quality, the science center began reporting on the monitoring and assessment of ecosystem restoration and resilience in the estuary, such as changes over time in pollution, dredging, and numbers of endangered and threatened fish and wildlife. The San Francisco Estuary Partnership then used the science center’s restoration and resilience assessments to create the 1993 CCMP goals. At the same time, partly in response to a recommendation from the CCMP, the science center became the San Francisco Estuary Institute, a nonprofit scientific organization that performs monitoring to inform watershed management. The San Francisco Estuary Partnership began reporting on water quality progress in 2011. The first of these reports, titled the State of San Francisco Bay, focused on the Bay. In the Delta, the Delta Stewardship Council in 2013 began working to coordinate scientific monitoring efforts based on the goals outlined in the Delta Plan. Scientific monitoring efforts in the Delta include a regional water quality monitoring program, begun by the Central Valley Regional Water Quality Control Board in 2015. The monitoring efforts also include the Interagency Ecological Program, a consortium of state and federal agencies that have collaborated to monitor and research ecological conditions in the Delta since the 1970s, including by contributing to the CALFED science program. Based on the results of these separate monitoring efforts, the Delta Stewardship Council has a process in place to periodically update the Delta Plan’s performance measures and goals. In 2015, the San Francisco Estuary Partnership updated its assessment and report to include both the Bay and the Delta and renamed it State of the Estuary. The partnership plans to update these reports approximately every 5 years and include both the Bay and the Delta. For the 2015 report, more than 100 scientists from entities such as the San Francisco Estuary Institute, the U.S. Geological Survey, and the Delta Stewardship Council collaborated to monitor and assess estuary health against environmental indicators established by the partnership. The report includes 17 indicators specifically for the Bay, 8 indicators specifically for the Delta, and 4 estuary-wide indicators (see table 1). The report rates the status of the indicators—such as the safety of water for swimming, the safety of fish to eat, and the level of harbor seal populations—as good, fair, or poor. For example, the State of the Estuary report assessed the regional extent of tidal marsh in the Bay as “fair” and “improving” and the Yolo Floodplain Flows in the Delta as “poor;” however, the report did not detail the partnership’s methodology for delineating between “fair” and “poor” assessments. On the basis of its assessment, the partnership rated the Delta and Suisun Bay ecosystems as being in fair to poor condition and the Bay as healthier. In the upper watershed, progress assessment is tied to entity- and topic- specific plans and is not summarized by any one group or in one report. For example, California’s Central Valley Flood Protection Board assigns agencies to keep track of data toward tracking metrics for the goals of the Central Valley Flood Protection Plan. In another example, the state’s California EcoRestore initiative provides progress reports on restoration projects to mitigate damage caused by water conveyance programs. Information on the status of all restoration efforts across the watershed, including their accomplishments, is unknown because, while the information is being developed, complete and current information is not being fully collected or reported. Total expenditures for fiscal years 2007 through 2016 are unknown, in part because federal reports do not include complete or reliable data for federal and state expenditures in the watershed. Information on the status of all restoration efforts across the watershed, including their accomplishments, is unknown because complete and current information is not being fully collected or reported. At the state level, the San Francisco Estuary Institute and the Delta Stewardship Council each maintains a database with information about federal and nonfederal restoration efforts, including those implemented during fiscal years 2007 through 2016, but neither database contains data on all restoration efforts in the watershed. Specifically: EcoAltas. The San Francisco Estuary Institute, in cooperation with the San Francisco Bay Joint Venture, maintains the EcoAtlas database, which is the more comprehensive of the two databases. EcoAtlas integrates stream and wetland maps, restoration information, and monitoring results with land use, transportation, and other information important to the state’s wetlands. According to institute officials, the database was originally designed to focus on the Bay and includes information on nearly every restoration effort in the Bay. According to these officials, the institute is working to update EcoAtlas and gather information on all efforts across the watershed. Officials from several federal and nonfederal entities—including NOAA, the institute, the San Francisco Bay Joint Venture, and the Central Valley Joint Venture—told us that the completeness of EcoAtlas’s data on restoration efforts in the Delta is catching up to that for the Bay, but a lot of work remains to gather more complete data in the upper watershed, such as by gathering more complete project information from entities conducting restoration work there. DeltaView. The Delta Stewardship Council’s DeltaView database collects state and federal data on efforts directly related to implementing the state’s Delta Plan goals. As a result, DeltaView does not include information for all restoration efforts in the Delta since, for example, local government agencies and other nonfederal entities may also conduct restoration efforts in the Delta. According to its website, DeltaView is designed to track and report on Delta Plan progress and help the Delta Plan Interagency Implementation Committee make more informed decisions about implementing the Delta Plan. According to council officials, because it is designed to focus on the Delta, DeltaView does not include efforts in the Bay or upper watershed unless they directly affect the Delta. Further, while officials who manage EcoAtlas and DeltaView take steps to check the completeness of the data, such as using regional administrators to oversee project completeness for EcoAltas or following up with agency officials annually for DeltaView, they stated it is difficult to confirm their completeness because they largely rely on self-reporting by different federal and nonfederal entities. Council officials stated that while the information in EcoAtlas is generally more comprehensive, DeltaView’s information on restoration efforts in the Delta is more complete than EcoAtlas’s information about the Delta, and they are working with the institute on ways to merge the two databases to make more complete information available in a single database. On the federal level, section 105 of the CALFED Act requires Interior, in cooperation with the Governor of California, to submit a report annually to Congress that, among other things, describes the status of implementation of all CALFED components, such as water quality and ecosystem restoration across the watershed. Under the act, the report is to include the progress made in meeting certain goals as well as accomplishments in achieving certain CALFED objectives during the past fiscal year. However, according to Interior officials, the department issued the most recent of these reports in February 2009. Interior officials stated that the California Bay-Delta Authority used to collect information on all the projects in the watershed and prepare and submit these reports. However, since the California Bay-Delta Authority was abolished and replaced by the Delta Stewardship Council, Interior does not obtain this information from any state entity, although Interior is still required to submit the report annually to Congress. Because Interior has not issued a report since 2009, when the California Bay-Delta Authority was abolished, and because other sources of information on restoration efforts such as EcoAtlas are not yet fully developed, no complete or current information on the progress of restoration efforts is available. According to Interior officials, the requirement to report is outdated and the department does not have information to report because it stopped obtaining data from the California Bay-Delta Authority after it was abolished. However, Interior and other federal agencies continue to work with state agencies on the state’s current Delta Plan, which replaced the state’s CALFED plans. Also, according to Interior officials, the department has not reached out to the state to identify new sources of information, given the change in state plans or agency structure. Section 105 of the CALFED Act requires Interior, in consultation with California’s governor, to report annually on “the status of implementation of all components of the Calfed Bay-Delta Program.” The law goes on to identify the specific objectives on which Interior is to report, which include activities that Interior and other federal agencies are currently carrying out, such as research and wetland restoration. According to respondents to our survey questionnaire, having such information could help stakeholders make more informed decisions about these efforts. Specifically, according to our analysis of responses, 32 of 48 federal and nonfederal entities indicated that it would be very or extremely important to have reports on progress of federal and nonfederal entities in implementing restoration activities. In addition, according to our analysis of responses, 27 of 48 federal and nonfederal entities indicated that it would be very or extremely important to have reports on accomplishments of federal and nonfederal entities in achieving the objectives of restoration activities. Without attempting to obtain and report state information as required under section 105 of the CALFED Act, Interior will not have reasonable assurance that it is providing Congress, or others, with the information needed to monitor federal and nonfederal restoration activities. Total expenditures for all restoration efforts in the watershed for fiscal years 2007 through 2016 are unknown in part because federal reports do not include complete or reliable expenditure data, and other tracking mechanisms are still developing this information. San Francisco Estuary Institute officials stated that EcoAtlas recently began to include expenditure data for the on-the-ground costs of implementing restoration projects, but overall expenditure data on these projects are still incomplete. In addition, as discussed earlier, EcoAtlas is still in the process of gathering complete information for efforts in the Delta and upper watershed. DeltaView includes federal and state expenditure data for efforts in the Delta; however, according to Delta Stewardship Council officials, it does not include data for all restoration efforts in the Delta, such as those funded by nongovernmental organizations. The institute’s plans to expand EcoAtlas to include expenditures and data on efforts across the watershed, including by working with the council to merge the two databases, indicates that entities are taking steps to gather more complete information. As they continue to do so, more information will be available to report on expenditures for restoration efforts in the watershed. One source of information on federal and state expenditures across the watershed is OMB’s interagency budget crosscut reports for CALFED activities; however, these reports do not contain complete or accurate expenditure data. Section 106 of the CALFED Act requires OMB to submit a financial report annually to Congress, in coordination with the Governor of California and certified by the Secretary of the Interior, that includes, among other things, an interagency budget crosscut report. The report is to display each participating federal agency’s proposed budget for the upcoming fiscal year to carry out CALFED activities and identify all expenditures since 1998 by the federal and state governments to achieve the objectives of CALFED, which, as noted previously, include water quality and ecosystem restoration components. The report is also to contain a detailed accounting of all funds received and obligated by all federal and state agencies responsible for implementing CALFED activities during the past fiscal year. According to OMB staff, since California abolished the California Bay- Delta Authority in 2009, the state no longer submits state data for the crosscut report, so the agency only includes data reported by federal agencies in the crosscut reports and tables. OMB staff said this is because the state no longer has an agency organized around reporting this information. The Delta Stewardship Council has responsibility for the former state agency’s activities, but given its narrower focus on the Delta, it is unclear whether the council could submit data to OMB for the entire watershed. According to OMB staff, OMB has not asked the Delta Stewardship Council or any other state entities to submit the data they do have to OMB; however, a council official told us the council would like an opportunity to work on the crosscut report. Survey responses indicate that the state crosscut data could be helpful to federal and nonfederal entities. We asked survey respondents to indicate how important, if at all, they thought reports on all federal or state expenditures and funding committed to be spent (i.e., obligations) on restoration activities would be when they carry out activities related to these responsibilities in the San Francisco Bay Delta watershed. According to our analysis of survey responses, 24 of 48 federal and nonfederal entities indicated that it would be very or extremely important to have reports on both federal and state expenditures. Also, according to our analysis of survey responses, 27 of 48 federal and nonfederal entities indicated that it would be very or extremely important to have reports on federal obligations, and 24 of the 48 entities indicated that it would be very or extremely important to have reports on state obligations. Without attempting to obtain and report state information as required under section 106 of the CALFED Act, OMB will not have reasonable assurance that it is providing Congress with the information it needs to monitor federal and nonfederal restoration expenditures. In addition, while there was written guidance for submitting crosscut data for fiscal years 1998 through 2011, OMB has not updated its written guidance on reporting data for the CALFED Act since the guidance expired in 2011 to reflect who should report what data. Instead, according to OMB staff, it has generally provided oral instruction to agencies on what data to submit. As a result, we found that federal agencies reported different types of data for OMB to include in the budget crosscut and that the budget crosscut was therefore not reliable for the purposes of reviewing total expenditures. Some federal agencies, including EPA and the U.S. Geological Survey, note in their crosscut submissions that the data provided are funding levels or allocations, rather than expenditures. In addition, Interior reported that it submits obligations, which are also different than expenditures. As a result, the crosscut reports and tables may include a mix of federal budget authority, obligations, and expenditures, depending on the type of data the agencies choose to submit. According to OMB staff, while OMB reports federal budget authority data for the most recent fiscal year in the crosscut report, OMB relies on agencies to submit data on prior year expenditures for inclusion in the crosscut. However, the crosscut report itself labels the data reported as “enacted” dollars—or budget authority—but does not mention expenditures. Some federal officials said that clearer guidance would be helpful. For example, USDA officials stated that it would be helpful for OMB to clarify whether to submit estimated funding allocations or actual obligations and to provide more specific information about the types of restoration projects to include because the data USDA currently submits provide a narrow scope for the agency’s restoration-related work in the watershed. The lack of updated guidance is inconsistent with federal standards for internal control, which call for an agency to design control activities to achieve objectives and manage risks. Such control activities include clearly documenting internal controls, and the documentation may appear in management directives, administrative policies, or operating manuals. Because OMB has not updated its written guidance on reporting data since the guidance expired in 2011 to clearly communicate what data agencies should report, its mechanism for tracking data—the crosscut reports and tables—does not include complete or reliable expenditure data. As a result, congressional and other federal and nonfederal decision makers may not have the information they need to determine that resources are being used efficiently or effectively. For example, in a September 2017 report, Interior’s Office of Inspector General found that Reclamation obtained $50 million over 7 years for CALFED-related purposes using a process that it did not disclose to Congress through available mechanisms, including OMB’s crosscut reports. According to the Inspector General’s report, these crosscuts assist the President in considering the necessary and appropriate level of funding for each of the agencies in carrying out its responsibilities under CALFED. By directing its staff to update its written guidance for federal and state agencies on submitting data for its budget crosscut reports, OMB will have more reasonable assurance that it is helping those agencies provide current, complete, and accurate data to help congressional and other decision makers achieve restoration objectives. Several factors may limit restoration progress or pose risks to the long- term overall success of such efforts in the San Francisco Bay Delta watershed, according to our analysis of questionnaire responses from 48 federal and nonfederal entities. These factors reflect characteristics of watersheds in other parts of the country that we have previously discussed, including funding constraints and the effects of climate change (see fig. 8). Federal and nonfederal entities also identified up to three factors that pose the greatest risks to the long-term overall success of water quality improvement and ecosystem restoration efforts in the San Francisco Bay Delta watershed. Specifically, based on our analysis of the survey results, we found that federal and nonfederal entities consistently identified the following risks: Competing interests of water users, including residential, commercial, agricultural, and environmental. According to our analysis of survey responses, this particular risk varies by geographic area in the watershed. For example, 20 of 25 entities that indicated they conduct restoration work in the Sacramento River Watershed— part of the upper watershed region—identified this factor as a greatest risk. By comparison, 19 of 34 entities that indicated they conduct restoration work in the Bay identified this factor as a greatest risk. In its survey responses, one nonfederal entity indicated that the distribution of water and other natural resources among competing interests is not clearly defined or not distributed in a method that satisfies all parties. Therefore, according to this entity, stakeholders who are not satisfied with natural resources distribution may be hesitant to invest time and money in conservation practices that benefit water quality. In another survey response, a federal entity described competing interests as one of the biggest roadblocks in planning and implementing water quality improvement and ecosystem restoration in the Bay Delta region. This entity explained that there is an extremely limited freshwater supply in the region and interests that compete for it have resulted in several lawsuits and delays for restoration projects. Obtaining sufficient federal funding for water quality improvement and ecosystem restoration activities. Of the 48 survey respondents, 24 indicated that this factor is one of the greatest risks to long-term overall success of water quality improvement and ecosystem restoration efforts. According to one nonfederal entity’s survey response, funding for ecosystem restoration in the Bay area traditionally has come from a mix of federal and state sources. For example, the entity said a local source that will provide nearly $500 million over 20 years recently was established but needs to be leveraged by significant state and federal dollars to meet the estimated $1.5 billion needed for restoration in the Bay area. In its response to our survey, one federal entity stated that federal funding is extremely limited for restoration activities that are not part of mitigation efforts. The federal entity also stated that federal funding for long-term monitoring of restoration success and water quality improvement is difficult to sustain because these efforts are not eye- catching and do not provide quick results. A nonfederal entity stated that many state entities rely on federal grants to perform activities that result in improved water quality and ecosystem restoration. Planning for the effects of climate change. In their survey responses, 24 of 48 entities indicated that this factor is one of the greatest risks to long-term overall success of water quality improvement and ecosystem restoration efforts. One nonfederal entity said expected reductions in the Sierra Nevada snow pack—the largest source of water supply for the watershed—will result in increased demand on limited local water sources. Other respondents noted a need to consider addressing the effects of climate change at a high level. For instance, one nonfederal entity said successfully planning for climate change includes planning and coordinating at the watershed level, not at the project or jurisdictional level. Another nonfederal entity said the potential impact of sea level rise is great and ecosystem restoration solutions will require much more regional planning and agreement than more traditional engineering solutions. However, entities also acknowledged the challenges associated with planning for the effects of climate change with incomplete information. For example, in its response to our questionnaire, one entity stated it is difficult to understand the impact on water quality resulting from conservation practices on working lands, at both the private landowner level and the watershed level, if the projects have not incorporated climate change impacts such as flooding and sediment erosion. The factors identified by federal and nonfederal entities that may limit or pose a risk to restoration efforts are generally consistent with our prior work on large-scale ecosystem restoration efforts in other parts of the country (see Related GAO Products at the end of this report). For example, we previously reported that similar factors, such as funding constraints and the effects of climate change, may limit restoration efforts in the Great Lakes and Chesapeake Bay. Survey responses also indicate that some of these risks can be interrelated. For example, one federal entity said that while certain shoreline restoration and levee stabilization projects could ameliorate the effects of climate change, finding adequate funding to plan for and implement such projects is extremely difficult. According to this entity, all the competing interests and limited freshwater supply in the watershed further exacerbates these difficulties. In response to our questionnaire, federal and nonfederal entities identified what they consider to be the most important action that could be taken at a federal level to help improve restoration efforts in the watershed. For example, seven entities mentioned actions related to streamlining or coordinating federal permitting processes. Half of the entities that responded to our questionnaire also indicated a need for actions related to federal funding, and four entities indicated a need to use the best available science to direct restoration efforts. The complex nature of the restoration efforts in the San Francisco Bay Delta watershed demands a high level of coordination across a large number of entities and competing interests. The results of federal and nonfederal entities working together can be seen in parts of the watershed, such as the Bay, where this work has resulted in the development of comprehensive regional strategies, sources of funding for some restoration projects, an expanding regional database, and an inventory of potential projects. In other parts of the watershed, particularly the Delta, coordination has wavered. The CALFED Act was enacted in 2004 to implement, at the federal level, a federal-state partnership for restoring the San Francisco Bay Delta watershed. When the state of California withdrew from the originally structured CALFED federal-state partnership in 2009, the effort to coordinate across the entire watershed transitioned and the focus of coordination became the Delta Plan, a state-led effort. Key federal entities, including Interior and CEQ, continue to have interests across the watershed, such as coordinating or conducting programs and projects and expending resources. To that end, in 2009 they developed a unifying vision for the federal government through the Interim Federal Action Plan. However, as the state continues to change its focus within the watershed, the Interim Federal Action Plan has become outdated, and not all relevant federal entities are using it. By updating or revising the plan to outline and reflect entities’ roles and responsibilities in light of the changes in the state’s role and other relevant developments since 2009, and by notifying all participating entities to ensure they are aware of the plan and their role in it, Interior and CEQ could help clarify the federal government’s role in supporting restoration efforts in the watershed and help ensure the effective use of federal resources in these efforts. In addition, since California stopped participating in the originally structured CALFED partnership, information on projects and expenditures for restoration and other activities in the watershed have not been completely reported, or reported at all. Although California abolished the California Bay-Delta Authority, the requirements for Interior to report on the status of implementation of all CALFED components, including water quality and ecosystem restoration efforts, and for OMB to submit a financial report, including an interagency budget crosscut report, still exist, and information about related restoration efforts and expenditures remains unknown. By coordinating with the appropriate state entities to obtain and report the information available to meet the CALFED Act’s requirements, Interior and OMB would have more reasonable assurance that they are providing the information congressional and other decision makers need to monitor the restoration efforts and associated expenditures. Further, by directing staff to update OMB’s written guidance for federal and state agencies on submitting data for its budget crosscut reports, OMB would have more reasonable assurance that it is helping those agencies provide current, complete, and accurate data to help decision makers achieve restoration objectives. We are making seven recommendations—two each to Interior and CEQ to address issues with the Interim Federal Action Plan; one each to Interior and OMB to obtain and report information; and one to OMB to update its budget crosscut guidance. Specifically: The Secretary of the Interior should work with the Chair of CEQ to update or revise the Interim Federal Action Plan for the California Bay-Delta to outline and reflect entity roles and responsibilities in light of changes in the state of California’s role and other relevant developments since 2009. (Recommendation 1) The Secretary of the Interior should notify all participating entities to ensure they are aware of the Interim Federal Action Plan and their role in it. (Recommendation 2) The Chair of CEQ should work with the Secretary of the Interior to update or revise the Interim Federal Action Plan for the California Bay-Delta to outline and reflect entity roles and responsibilities in light of changes in the state of California’s role and other relevant developments since 2009. (Recommendation 3) The Chair of CEQ should notify all participating entities to ensure they are aware of the Interim Federal Action Plan and their role in it. (Recommendation 4) The Secretary of the Interior should coordinate with appropriate state entities to obtain and report the information available to meet the requirements under section 105 of the CALFED Act. (Recommendation 5) The Director of OMB should coordinate with appropriate state entities to obtain and report the information available to meet the requirements under section 106 of the CALFED Act. (Recommendation 6) The Director of OMB should direct staff to update OMB’s written guidance for federal and state agencies on submitting data for the budget crosscut reports OMB is required to submit under section 106 of the CALFED Act. (Recommendation 7) We provided a draft of this report for review and comment to CEQ, EPA, OMB, and the Departments of Agriculture, Commerce, Defense, and the Interior. We also provided the California Delta Stewardship Council a draft of this report for review and comment. Interior provided written comments and stated that it partially concurred with our three recommendations to the department; Interior also provided technical comments, which we incorporated into the report as appropriate. In an email from CEQ’s Deputy General Counsel, CEQ provided technical comments, which we incorporated into the report as appropriate, but the agency neither agreed nor disagreed with our recommendations to it. In oral comments provided on August 8, 2018, OMB neither agreed nor disagreed with our two recommendations to the agency, but OMB staff suggested some additional language to the recommendations. In addition, USDA and Commerce provided technical comments, which we incorporated into the report as appropriate. Defense and EPA informed us that they had no comments on the draft report. The California Delta Stewardship Council provided written comments stating that its staff generally agreed with the “sum” of the recommendations in the report. The council also provided technical comments, which we incorporated into the report as appropriate. In its written comments, reproduced in appendix IV, Interior stated that the department appreciated our review of the coordination of watershed restoration efforts among federal and nonfederal entities and that it partially concurred with our three recommendations to the department. Specifically, regarding our first two recommendations to update or revise the Interim Federal Action Plan and notify all participating entities of their role in the plan, Interior stated that the department believes revisiting the Interim Federal Action Plan is not the most efficient course of action because the state-led Delta Plan Interagency Implementation Committee now serves as the coordination group. Interior stated that it will continue to actively participate in the committee, which includes participation and leadership from federal agencies at the regional and Washington office levels. However, as we discuss in the report, the committee focuses on only one region of the watershed (the Delta), and federal agencies fund and carry out restoration efforts across all three regions of the watershed. Further, as we discuss in the report, the President’s fiscal year 2019 budget states that federal activities are coordinated through the Interim Federal Action Plan rather than the state-led committee. Also, Interior’s letter states that its bureaus are concurrently engaged with the state of California in multiple activities in the Bay Delta that span their respective mission areas. This provides further support for the plan to be updated or revised to include these types of activities. Thus, we continue to believe that Interior should update or revise the plan to better reflect changes in the state’s role and other relevant developments since 2009. Regarding our third recommendation to Interior that it coordinate with the state to meet reporting requirements, Interior stated that the California Delta Stewardship Council compiles and reports on funding information and progress for federal and state agencies and that Interior could coordinate with the state on information not reported by the council. As we discuss in the report, the council’s reporting efforts focus on only the Delta, although federal funding and efforts span the entire watershed; therefore, the council’s reporting efforts cannot fully address Interior’s reporting requirements. In addition, Interior has not reached out to state entities for this information since 2009, when the state agency from which Interior had previously obtained state data was abolished. Thus, we continue to believe that Interior should coordinate with the appropriate state entities to obtain and report the information available to meet the CALFED Act’s reporting requirements. We note that Interior said it would actively participate in the Delta Plan Interagency Implementation Committee and could seek to coordinate with the state on information not reported by the Delta Stewardship Council, and we are encouraged that the department recognizes the need to take these actions. In oral comments regarding our first recommendation to OMB that it coordinate with the state to meet reporting requirements, OMB staff said it is unclear whether the Director of OMB has the authority to require or compel the state or its agencies to provide data to OMB on restoration and other projects they are carrying out. The staff suggested that we revise the recommendation to state that the Director of OMB should “consider whether there are additional opportunities to” coordinate with appropriate state entities to obtain and report the available information. Our recommendation is for OMB to coordinate with appropriate state entities, not to require or compel them to do so. In addition, as stated in its written comments (reproduced in appendix V), the California Delta Stewardship Council—the state agency responsible for the activities of the abolished California Bay-Delta Authority—would welcome the opportunity to coordinate with OMB and contribute to the budget crosscut reports. Furthermore, Section 106 of the CALFED Act requires OMB to submit a financial report annually to Congress, in coordination with the Governor of California, that includes an interagency budget crosscut report. Thus, we believe that the recommendation is worded appropriately and captures the actions that OMB should take to coordinate with the appropriate state entities to obtain and report the information available to meet the CALFED Act's reporting requirements. In oral comments regarding our second recommendation to OMB that it update its written guidance for federal and state agencies on submitting data for the budget crosscut reports, OMB staff said that the agency does not have the expertise to validate or verify the quality of the information agencies submit and is not confident that the data collected will be reliable. The staff said that other entities with day-to-day experience with the programs and data and with the relevant statutory authority may be in a better position to obtain, report, and verify the quality of restoration data. The staff suggested that we revise the recommendation to state that the Director of OMB should “assess whether to” update OMB’s written guidance for federal and state agencies on submitting data for the budget crosscut reports. However, OMB’s current approach is resulting in the reporting of unreliable data. As reported above, OMB has generally provided oral instruction to agencies since its written guidance expired in 2011; as a result, the crosscut reports and tables may include a mix of federal budget authority, obligations, and expenditures. Further, Section 106 of the CALFED Act requires, among other things, that OMB identify all expenditures since 1998 by the federal and state governments to achieve CALFED objectives. Therefore, we continue to believe that OMB should update its written guidance to clarify the type of data that agencies should submit in order to ensure it is reporting the data required by the CALFED Act. We note that our recommendation does not direct OMB staff to validate or verify the quality of the information; instead, it states that OMB should clarify in guidance what data agencies should provide. In addition, if OMB determines it is appropriate, updated written guidance could advise agencies to validate and verify the data before submitting it to OMB. In its written comments, reproduced in appendix V, the California Delta Stewardship Council made four comments on the themes outlined in the recommendations of our report and two specific comments on the report’s description of the Delta. Commenting on the themes outlined in the recommendations, the council stated that: No entity in California has the sole responsibility or authority for managing water supply and the Delta ecosystem; instead, authority, expertise, and resources are spread out among a cadre of federal, state, and local agencies. The council further said that its Delta Plan Interagency Implementation Committee plays a vital coordination role for the 17 state and federal agencies operating in the Delta, that federal participation is critical to the committee’s success, and that it encourages federal agencies to continue to attend and actively participate in the committee. There is a history of coordination in the Bay Delta systems, as evidenced by events such as the State of the Estuary Conference and the Bay Delta Science Conference, as well as the CCMP. Given that the upper watershed currently lacks a collaborative structure such as the implementation committee, the council said that further exploration should be done as to how this gap could be filled. The council is not currently in contact with CEQ and OMB and would welcome the opportunity to coordinate with them should a revised Interim Federal Action Plan be pursued. The council also stated that, to the extent possible, such a revised plan should consider and build on existing planning frameworks such as the Delta Plan and the CCMP. As stated in the report, the council welcomes the opportunity to contribute to the CALFED budget crosscut reports. In addition, the council made two specific comments on the report’s description of the Delta. First, it stated that our report is thorough in discussing many aspects of the watershed, but it somewhat neglects the importance of levees, particularly in the Delta. While we provide an overview of levees in the background section, a more detailed discussion of these and other water infrastructure facilities is beyond the scope of this review, which is to examine restoration efforts in the watershed and does not include detailed examination of issues related to water supply. Second, the council stated that the report should mention and consider characteristics associated with the Delta as an evolving place, which refers to the council’s efforts to consider the interaction between environmental and social factors—such as cultural values and socio- economic issues—into decision making for the Delta. We believe our discussion of federal and nonfederal coordination roles within and across the watershed’s three major regions, including the Delta, appropriately considers the interaction between environmental and social factors, within the scope of this review. We are sending copies of this report to the appropriate congressional committees, the Chair of CEQ; the Secretaries of Agriculture, Commerce, Defense, and the Interior; the Administrator of EPA; the Director of OMB; the Executive Officer of the California Delta Stewardship Council; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. Many federal and nonfederal entities, including state and local government agencies and nongovernmental organizations, have roles related to water quality improvement and ecosystem restoration efforts in the San Francisco Bay Delta watershed. Different combinations of federal and nonfederal entities work throughout the watershed and its three major geographic areas, which are the San Francisco Bay and its local watershed (Bay), the Sacramento-San Joaquin Delta (Delta), and the upper watershed, which includes California’s Central Valley and the western slope of the Sierra Nevada Mountains. See below for a list of federal and nonfederal entities and a brief description of some of their restoration-related roles in the watershed. We selected these entities based on our review of documents provided by, and interviews with, federal and nonfederal entities. Several federal entities have roles related to water quality improvement and ecosystem restoration efforts in the watershed. All federal agencies listed are signatories to the 2009 memorandum of understanding, unless otherwise noted. Federal agencies and some of their restoration-related roles include the following: Executive Office of the President. Council on Environmental Quality (CEQ). Under the 2009 memorandum of understanding, CEQ is to work with the Secretary of the Interior in coordinating the development and implementation of federal policy and initiatives in Bay-Delta matters and is the co- chair of the Federal Bay-Delta Leadership Committee. Office of Management and Budget (OMB). OMB is not a signatory to the 2009 memorandum of understanding, but under the Calfed Bay-Delta Authorization Act (CALFED Act), OMB is required to annually submit a financial report to Congress, in coordination with the Governor of California and certified by the Secretary of the Interior, that includes, among other things, an interagency budget crosscut report that identifies all expenditures since 1998 by the federal and state governments to achieve the objectives of the Calfed Bay-Delta Program (CALFED). CALFED program components include, among other things, water quality and ecosystem restoration. U.S. Army Corps of Engineers. According to Corps officials, the Corps plans and implements projects, including ecosystem restoration projects; participates in regional planning, while using its own return- on-investment analysis for prioritizing projects; and helps the state water agencies maintain levees. The Corps also issues permits for the discharge of dredged or fill material under section 404 of the Clean Water Act. U.S. Department of Agriculture (USDA). Natural Resources Conservation Service (NRCS). Through general conservation programs and also its targeted Bay Delta Initiative, NRCS and its local partners aim to address the critical water quantity, water quality, and habitat restoration needs of the Bay Delta region by implementing voluntary conservation practices on private lands. NRCS provides agricultural producers technical and financial assistance in the Bay Delta region to implement conservation practices and establish conservation easements that improve water quality and quantity and restore and protect wetland, riparian, and wet meadow habitat. U.S. Forest Service. The Pacific Southwest Region of the U.S. Forest Service manages 20 million acres of National Forest land in California. National forests supply 50 percent of the water in California and form the watershed of most major aqueducts and more than 2,400 reservoirs throughout the state. According to U.S. Forest Service officials, the agency’s management actions on National Forest land in California are focused on ecological restoration, with the goal of retaining and restoring the ecological resilience, including water quality, of terrestrial and aquatic ecosystems. According to these officials, this work is often accomplished using an “all lands” approach to restoration, by coordinating and collaborating across forests and wildlands regardless of ownership. Ecological restoration management actions that contribute to water quality include meadow, river, and riparian restoration to improve watershed function, as well as fuels reduction activities, such as forest thinning and prescribed fire. According to these officials, many forest lands have dense fuels and are highly susceptible to severe wildfire, which causes increased erosion rates and sedimentation and negatively affects water quality and delivery. U.S. Department of Commerce. National Oceanic and Atmospheric Administration (NOAA). NOAA implements the Endangered Species Act for certain species. Under section 7 of the act, federal agencies must ensure that any action they authorize, fund, or carry out is not likely to jeopardize the continued existence of any endangered or threatened species or result in the destruction or adverse modification of its critical habitat. To fulfill this responsibility, federal agencies must consult with NOAA’s National Marine Fisheries Service, depending on the affected species, to assess the potential effects of proposed actions. Formal consultations between federal agencies and the National Marine Fisheries Service or U.S. Fish and Wildlife Service are required where a proposed action could have an adverse effect on listed species or designated critical habitat; these consultations conclude with issuance of biological opinions by the National Marine Fisheries Service or U.S. Fish and Wildlife Service. NOAA also obtains, manages, and expends funding to conduct habitat restoration. According to NOAA officials, NOAA’s Restoration Center has directed federal funds toward restoration projects in the Bay Delta. In addition, funds from natural resource damage assessments have been used for habitat restoration in San Francisco Bay, according to NOAA officials. U.S. Department of the Interior. Under the 2009 memorandum of understanding, Interior is to serve as the lead for developing and coordinating federal policy and initiatives in Bay-Delta matters and is the co-chair of the Federal Bay-Delta Leadership Committee. Under the CALFED Act, Interior is required to annually submit a report to Congress, in cooperation with the Governor of California, that, among other things, describes the status of implementation of all CALFED components, which include water quality and ecosystem restoration components. Bureau of Reclamation. Reclamation administers the Central Valley Project, which has long-term contracts to supply water to more than 250 contractors in 29 of California’s 58 counties, and implements a number of actions under the Central Valley Project Improvement Act. The act was enacted for several purposes, including to protect, restore, and enhance fish, wildlife, and associated habitats. Reclamation also implements other actions, such as those under the San Joaquin River Restoration Settlement Act. U.S. Fish and Wildlife Service. The U.S. Fish and Wildlife Service implements the Endangered Species Act for certain species. According to agency officials, the U.S. Fish and Wildlife Service is also a major landowner, with several National Wildlife Refuges throughout the watershed where restoration efforts are implemented. Additionally, according to agency officials, the U.S. Fish and Wildlife Service provides funding through grant programs, such as the North American Wetlands Conservation, National Coastal Wetlands Conservation, and Wildlife and Sportfish Restoration programs, and provides technical assistance through efforts, such as the Partner for Fish and Wildlife, Coastal, and Tribal Wildlife programs. U.S. Geological Survey. According to U.S. Geological Survey officials, the agency’s role in the watershed includes conducting physical, chemical, and biological monitoring and scientific investigations to support water and water quality management, fish and wildlife management, and infrastructure management and protection. According to officials, the agency also provides policy- neutral technical support to Interior and other federal, state, and local entities. U.S. Environmental Protection Agency (EPA). EPA implements the Clean Water Act, including management of the National Estuary Program. According to agency officials, EPA also provides authorization, financial support, and oversight of the California State Water Resources Control Board, the partner state agency charged with implementing Clean Water Act programs in California, and provides direct funding, technical assistance, and oversight of programs and projects achieving Clean Water Act goals in the state. Several state government entities in California have roles related to water quality improvement and ecosystem restoration efforts in the watershed. A list of selected state agencies and information from the agencies summarizing their restoration-related roles follows: California Delta Stewardship Council. The Delta Stewardship Council is a planning and science agency, with some regulatory authority. The council develops and reviews the Delta Plan, the implementation of which is to further the restoration of the Delta ecosystem and a reliable water supply. The council also funds research, synthesizes and communicates scientific information to decision makers, and coordinates with Delta agencies to promote science-based adaptive management. In addition, the council establishes and oversees the Delta Plan Interagency Implementation Committee, a joint state-federal committee that implements the Delta Plan. California Natural Resources Agency. The Natural Resources Agency is a resource management agency, with some regulatory authority. Central Valley Flood Protection Board. The Central Valley Flood Protection Board establishes and enforces standards for the maintenance and operation of the flood control system; develops and implements the state’s flood protection plan for the Central Valley; and coordinates activities among the Corps and local flood control agencies. Department of Fish and Wildlife. The Department of Fish and Wildlife plans, collaborates on, enforces, and funds species management, habitat conservation, and wetlands restoration. According to agency officials, the department also is a major owner of land where restoration efforts take place, such as the Napa-Sonoma Marsh Wildlife Area and Eden Landing Ecological Reserve, and houses the California Wildlife Conservation Board, which provides funding for restoration projects. Department of Water Resources. The Department of Water Resources administers the California State Water Project, including sales to water contractors. The department also implements and funds—through the State Water Project—two fish habitat restoration projects in response to NOAA and U.S. Fish and Wildlife Service biological opinions. In addition, the department develops the California Water Plan, the state’s overall water resources plan. Sacramento-San Joaquin Delta Conservancy. The Sacramento- San Joaquin Delta Conservancy plans, collaborates on (with local communities), implements, and funds projects in the Delta and Suisun Marsh to protect, improve, and restore habitats and ecosystems, improve water quality, and support water-related agricultural sustainability, among other things. San Francisco Bay Conservation and Development Commission. The San Francisco Bay Conservation and Development Commission plans, collaborates on, and regulates the San Francisco Bay, Bay shoreline, and Suisun Marsh; it also permits projects that fill or extract materials from the Bay. Sierra Nevada Conservancy. The Sierra Nevada Conservancy plans, collaborates on, implements, and funds projects in parts of the upper watershed to protect, improve, and restore habitats and ecosystems, improve water quality, and prepare for climate change, among other things. State Coastal Conservancy. The State Coastal Conservancy plans, collaborates on, implements, and funds—partly through voter-approved bonds—projects around the Bay to protect and improve natural lands, improve water quality and wildlife habitats, and prepare for climate change, among other things. California Environmental Protection Agency. The California Environmental Protection Agency is a regulatory agency. State Water Resources Control Board. The State Water Resources Control Board allocates water rights, adjudicates water rights disputes, develops statewide protection plans, establishes water quality standards, and guides the nine regional water quality control boards. San Francisco Bay Regional Water Quality Control Board. One of nine regional water quality control boards in California, the San Francisco Bay Regional Water Quality Control Board exercises rulemaking and regulatory activities for the Bay. Central Valley Regional Water Quality Control Board. One of nine regional water quality control boards in California, the Central Valley Regional Water Quality Control Board exercises rulemaking and regulatory activities for the Central Valley (including the Delta) of the upper watershed. Other nonfederal entities—including local and regional government agencies, nongovernmental organizations, private businesses, and private landowners—have roles related to water quality improvement and ecosystem restoration efforts in the watershed. Other nonfederal entities and some of their restoration-related roles include the following: Central Valley Joint Venture. The Central Valley Joint Venture is a cooperative, regional partnership—partially supported through the U.S. Fish and Wildlife Service and established under the North American Waterfowl Management Plan—that plans and coordinates migratory bird and other habitat restoration and conservation in the Central Valley. San Francisco Estuary Institute. The San Francisco Estuary Institute is a nonprofit science center that provides data and other technical tools for assessing the health of the waters, wetlands, wildlife, and landscapes of the Bay and Delta; manages the EcoAtlas database of restoration projects; and works closely with the California State Water Resources Control Board and the San Francisco Estuary Partnership. San Francisco Estuary Partnership. The San Francisco Estuary Partnership is a cooperative, regional partnership that develops and manages the comprehensive conservation and management plan for the San Francisco Estuary (i.e., the Bay Delta) under EPA’s National Estuary Program, including coordinating projects and leveraging funds. The partnership is staffed by the nine-county Association of Bay Area Governments and housed by the San Francisco Bay Regional Water Quality Control Board. San Francisco Bay Joint Venture. The San Francisco Bay Joint Venture is a cooperative, regional partnership—organized through the U.S. Fish and Wildlife Service and established under the North American Waterfowl Management Plan—that plans and coordinates migratory bird and other habitat restoration and conservation in the Bay. Other regional government agencies. Other regional government agencies have a variety of restoration-related roles, depending on the entity. In addition to the San Francisco Estuary Partnership, examples of regional government agencies with restoration roles in the watershed include the Bay Area Clean Water Agencies, Bay Area Flood Protection Agencies Association, and California Association of Resource Conservation Districts. Nongovernmental organizations. Other nongovernmental organizations have restoration-related roles in the watershed, including the Audubon Society, Bay Planning Coalition, Ducks Unlimited, Nature Conservancy, and Save the Bay. Local governments. Local governments have a variety of restoration-related roles, depending on the entity. For example, according to U.S. Fish and Wildlife officials, Marin and San Mateo Counties are recognized leaders in planning for climate resiliency in wetland restoration. Also, Alameda County uses sediment excavated from flood control district channels to build or create wetlands to provide vital wildlife habitat. In addition, water treatment facilities work with the California State Water Resources Control Board to help fund the San Francisco Estuary Institute’s water quality monitoring program. Dredging businesses. Dredging businesses work with the California State Water Resources Control Board to help fund the San Francisco Estuary Institute’s water quality monitoring program. Water contractors. Through obligations under the Central Valley Project and State Water Project, water contractors help fund certain restoration projects required under biological opinions by various regulatory agencies, including NOAA, the U.S. Fish and Wildlife Service, and the California Department of Fish and Wildlife, according to state officials. Private landowners. Some private landowners collaborate on or sell land for various restoration and conservation projects. Private landowners include businesses (e.g., technology companies and an industrial salt pond owner) and farmers in the Bay and farmers and ranchers throughout the Delta and upper watershed. In this report, we examine (1) the extent to which federal and nonfederal entities coordinate their San Francisco Bay Delta watershed restoration efforts, (2) the extent to which federal and nonfederal entities have developed measurable goals and approaches to assess progress for San Francisco Bay Delta watershed restoration efforts, (3) information on the status of San Francisco Bay Delta watershed restoration efforts and related expenditures for fiscal years 2007 through 2016, and (4) key factors that may limit San Francisco Bay Delta watershed restoration, according to federal and nonfederal entities. To address all four objectives, we reviewed relevant federal and state laws and documents. We also interviewed officials from more than 28 federal, state, and other entities we identified through our review of laws and documents, snowball sampling, and their participation in regional interagency groups conducting restoration work in the San Francisco Bay Delta watershed. During these interviews, we asked about, among other things, restoration plans that coordinate multiple aspects of water quality improvement and ecosystem restoration efforts on a regional level in the San Francisco Bay Delta watershed. Officials and representatives we interviewed identified the Comprehensive Conservation and Management Plan (CCMP) and the Delta Plan as the overarching regional strategies for the Bay and Delta, respectively. We considered these strategies “comprehensive regional plans” and reviewed them to address our objectives. To address our objectives, we obtained information from a questionnaire we sent to all 61 federal, state, and other entities that serve on the boards or implementation committees of regional interagency groups conducting restoration work in our geographic scope. These groups were the San Francisco Bay Joint Venture, San Francisco Estuary Partnership, Delta Plan Interagency Implementation Committee, and Central Valley Joint Venture. The survey group includes many of the entities listed above in appendix I. We also sent this questionnaire to federal agencies that are signatories of the CALFED record of decision and 4 other relevant organizations identified through snowball sampling. We initially identified and distributed our questionnaire to 78 entities. We sent a single questionnaire to each nonfederal entity (e.g., state agency, nongovernmental organization, local government agency, etc.) and sent more than one questionnaire, as appropriate, to federal agencies that have offices or officials working in different parts of the watershed. We determined which federal level to survey based on a review of agency organizational charts and inquiries with agency officials. We considered each office or federal designee to be a separate federal entity due to the distinct nature of their work based on geographic region. To ensure we got survey responses that reflect the opinions of an entity, we included instructions for survey points of contact to collaborate with colleagues, as needed, and indicated that we only wanted one survey response from each entity. After we began our survey effort, we identified 6 entities as out of scope for a variety of reasons, such as being a subgroup of another entity we surveyed. Our final population of surveyed entities was 72, of which 48 responded to our questionnaire, a response rate of 67 percent. In our questionnaire, we collected information on water quality improvement and ecosystem restoration efforts in the San Francisco Bay Delta watershed, including, among other things, (1) challenges that may limit restoration progress; (2) risks to the long-term overall success of water quality improvement and ecosystem restoration efforts; and (3) types of reports that entities could consider important when carrying out responsibilities related to water quality improvement and ecosystem restoration. To ensure that our survey questions were appropriate and that respondents could answer them in a reliable and meaningful way, we conducted survey pre-tests with 5 entities from the study population, had the questionnaire reviewed by an independent reviewer within GAO, and revised the questionnaire as appropriate based on the results of these efforts. The survey questionnaire used for this review is in appendix III. Our survey field period ran from December 4, 2017, through January 29, 2018. We distributed the questionnaire electronically through email. After the requested return date passed, we emailed or telephoned respondents who had not returned the questionnaire and asked them to respond. By January 29, 2018, we received 48 questionnaires. In order to minimize potential nonresponse bias, we reviewed the key characteristics of respondents to ensure we received completed questionnaires from each of our population subgroups. Because this was not a sample questionnaire, it has no sampling errors. However, the practical difficulties of conducting any survey may introduce nonsampling errors, such as difficulties in interpreting a particular question or sources of information available to respondents, which can introduce unwanted variability into the survey results. We took steps in developing the questionnaire, collecting the data, and analyzing them to minimize such nonsampling error. Survey questionnaires may also be subject to error in entering and analyzing data. We implemented quality control procedures on our data entry by verifying the accuracy of the process. We noted any missing, irregular, or incorrect responses by the respondent and resolved these responses, as needed, through email correspondence with the relevant entities. To examine the extent to which federal and nonfederal entities coordinate their San Francisco Bay Delta watershed restoration efforts, we interviewed officials from federal, state, and other entities to identify key regional plans and coordination efforts. We reviewed these plans and efforts and compared federal coordination efforts against a selection of our leading practices for collaboration to assess the extent to which federal entities followed these practices. The selected leading practices for collaboration include whether participating agencies have clarified roles and responsibilities, developed ways to continually update and monitor written agreements on how agencies coordinate, and identified how leadership will be sustained over the long-term. Our questionnaire discussed above also surveyed entities to identify coordination-related challenges, if any. To understand what restoration projects were being carried out, we obtained information from the San Francisco Estuary Institute’s EcoAtlas database and the Delta Stewardship Council’s DeltaView database on restoration projects. We also conducted site visits to a nonprobability sample of four projects selected to provide illustrative examples of a variety of restoration activities in different locations in the watershed. We identified these sites by asking knowledgeable stakeholders about restoration projects in each region of the watershed that involved a variety of partners, including federal agencies, that were at various stages of completion. We then arranged visits that would allow us to observe projects in each region that illustrated a range of these selection criteria. We also conducted site visits to water project facilities, including a reservoir, dam, and pumping station. In addition, we attended the State of the San Francisco Estuary Conference in Oakland, California, on October 10 and 11, 2017, and observed many presentations and panel discussions on topics ranging from Delta restoration planning to pesticides in the estuary, by a wide range of officials from federal and nonfederal entities conducting restoration efforts across the watershed. To examine the extent to which federal and nonfederal entities have developed measurable goals and approaches to assess progress for San Francisco Bay Delta watershed restoration efforts, we reviewed comprehensive regional plans and related goals and progress reports, including the technical appendix for the State of the Estuary report. To do so, we looked for factors such as goals with quantifiable metrics and targets, as well as indicators used to assess and report progress. We also interviewed officials from federal, state, and other entities, including scientific groups, about efforts to develop measurable goals and assess restoration progress. To examine information on the status of San Francisco Bay Delta watershed restoration efforts and related expenditures for fiscal years 2007 through 2016, we obtained and analyzed available data—collected from the EcoAtlas and DeltaView databases—that included information about projects, expenditures, and cost estimates for this period. This period covers the time before and after the state withdrew from the CALFED federal-state partnership, as originally structured, and includes the last full fiscal year for which the most recent data were available at the time of our review. We assessed the reliability of these data by interviewing knowledgeable officials and reviewing database documentation and determined that they were not reliable for purposes of identifying all restoration projects across the entire watershed and for reporting related expenditure data. We also reviewed federal and state reports on budget requests and authority for that period and interviewed officials from federal, state, and other entities about available sources of data on projects, expenditures, and cost estimates. We also obtained and reviewed OMB’s Bay Delta budget crosscuts, which include financial information for San Francisco Bay Delta watershed restoration efforts reported by federal and state agencies, for fiscal years 2007 through 2019. We assessed the reliability of the data in the federal budget crosscut reports and tables by interviewing federal agency officials about what data they provided for the reports and tables and analyzing the data provided in the crosscut reports. We determined that the data were reliable only to report examples of the magnitude of funding for individual agencies. We determined that these data were not reliable to aggregate funding levels across programs and agencies or to compare funding levels of the various agencies, as we discuss in this report. We then compared OMB’s written guidance on submitting data for the crosscut reports with federal standards for internal control to assess the extent to which federal agencies followed the standard for design of control activities. To determine key factors that may limit San Francisco Bay Delta watershed restoration, according to federal and nonfederal entities, we sent the survey questionnaire described above to federal, state, and other entities to obtain views on (1) challenges that may limit restoration progress and (2) risks to the long-term overall success of water quality improvement and ecosystem restoration efforts. We also interviewed officials from federal, state, and other entities about factors that may limit restoration progress, as well as reviewed progress reports and studies exploring these factors. We conducted this performance audit from April 2017 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Janet Frisch (Assistant Director), Susan Iott (Assistant Director), Chad M. Gorman (Analyst-in- Charge), Chuck Bausell, Stephen Betsock, Mark Braza, Marissa Dondoe, Ellen Fried, Carol Henn, Karen Howard, Richard Johnson, Gwen Kirby, Ben Licht, John Mingus, Tricia Moye, Rebecca Parkhurst, Sara Sullivan, Sarah Veale, Michelle R. Wong, Elizabeth Wood, and Edith Yuh made key contributions to this report. Great Lakes Restoration Initiative: Improved Data Collection and Reporting Would Enhance Oversight. GAO-15-526. Washington, DC: July 21, 2015. Bureau of Reclamation: Financial Information for Three California Water Programs. GAO-15-468R. Washington, DC: June 4, 2015. Great Lakes Restoration Initiative: Further Actions Would Result in More Useful Assessments and Help Address Factors That Limit Progress. GAO-13-797. Washington, DC: September 27, 2013. Chesapeake Bay: Restoration Effort Needs Common Federal and State Goals and Assessment Approach. GAO-11-802. Washington, DC: September 15, 2011. Recent Actions by the Chesapeake Bay Program Are Positive Steps Toward More Effectively Guiding the Restoration Effort, but Additional Steps Are Needed. GAO-08-1131R. Washington, DC: August 28, 2008. Coastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could Help Guide Future Restoration and Protection. GAO-08-130. Washington, DC: December 14, 2007. South Florida Ecosystem: Restoration Is Moving Forward but Is Facing Significant Delays, Implementation Challenges, and Rising Costs. GAO-07-520. Washington, DC: May 31, 2007. Chesapeake Bay Program: Improved Strategies Are Needed to Better Assess, Report, and Manage Restoration Progress. GAO-06-96. Washington, DC: October 28, 2005. Great Lakes: Organizational Leadership and Restoration Goals Need to Be Better Defined for Monitoring Restoration Progress. GAO-04-1024. Washington, DC: September 28, 2004. Watershed Management: Better Coordination of Data Collection Efforts Needed to Support Key Decisions. GAO-04-382. Washington, DC: June 7, 2004. Great Lakes: An Overall Strategy and Indicators for Measuring Progress Are Needed to Better Achieve Restoration Goals. GAO-03-515. Washington, DC: April 30, 2003.", "summary": "The San Francisco Bay Delta watershed—which drains a vast area of California from the Sierra Nevada Mountains to the Pacific Ocean—supplies drinking water for 25 million people and provides irrigation for about half the nation's fruit and vegetable production. Decades of development and agriculture have led to large reductions in water quality and supply, natural flood protection, and habitats across the watershed's three major regions: the Bay, the Delta, and the upper watershed. Federal entities have been working with nonfederal entities for decades to protect and restore the watershed. GAO was asked to review restoration efforts in the watershed. This report examines, among other objectives, (1) the extent to which federal and nonfederal entities coordinate watershed restoration efforts and (2) information on the status of these efforts and related expenditures for fiscal years 2007 through 2016, the most recent data available. GAO reviewed laws; regional databases, plans, and reports; and budget documents. It also surveyed the 72 members of interagency groups (48 responded) and interviewed federal and nonfederal officials. Federal entities, including the Department of the Interior, and nonfederal entities, such as California state agencies and nonprofits, carry out and coordinate a wide range of restoration efforts in the San Francisco Bay Delta watershed. These efforts have multiple benefits, such as improved water quality and habitat in restored marshland (see fig. below). The entities coordinate comprehensive efforts in the San Francisco Bay area (Bay) and Sacramento-San Joaquin Delta (Delta) through two groups. Federal efforts across the watershed are to be led and coordinated by Interior and the Council on Environmental Quality (CEQ) through a 2009 Interim Federal Action Plan, but not all federal entities are using the plan. Interior officials said the plan is no longer relevant because state and federal roles have changed. For example, they said a state-led committee acts as the coordinating body for federal entities; however, this committee focuses on one region of the watershed, while federal funding supports efforts in all three regions. By updating or revising the Interim Action Plan, Interior and CEQ could help clarify federal roles in supporting restoration efforts in the watershed. Information on the status of all restoration efforts across the watershed, including their accomplishments, is unknown because information is not being fully collected or reported. Also, related expenditures for fiscal years 2007 through 2016 are unknown, in part because federal reports do not include complete or reliable data for restoration efforts in the watershed. The 2004 CALFED Bay-Delta Authorization Act requires Interior and the Office of Management and Budget (OMB) to report annually to Congress on restoration accomplishments and federal and state expenditures in the watershed, respectively. Interior has not issued these reports since 2009, when the state agency from which Interior had obtained the state data was abolished. OMB has issued its reports with federal, but not state, data for the same reason. However, Interior and OMB have not reached out to other state entities for this information. Without obtaining and reporting available information, as required by law, Interior and OMB will not have reasonable assurance that they are providing Congress with the information needed to monitor federal and nonfederal restoration efforts and expenditures. GAO made seven recommendations, including that Interior and CEQ update or revise the Interim Federal Action Plan and that Interior and OMB coordinate with the state to meet the CALFED Act's reporting requirements. Interior partially concurred with the recommendations, and CEQ and OMB neither agreed nor disagreed with them. GAO maintains its recommendations are valid.", "document_type": "gao"}
{"report": "In our report, we found that, according to data from CBP’s Seized Asset and Case Tracking System (SEACATS), during fiscal years 2012 through 2016 CBP conducted about 308,000 seizures of inbound international items that may pose a threat to U.S. security, health and safety, business, and ecology. Of those, CBP seized about 70 percent from mail and 30 percent from express cargo. Seized items are categorized in SEACATS as either drugs or merchandise. Among the approximately 308,000 seizures, illegal or inadmissible drugs accounted for about 47 percent of total seizures and merchandise accounted for about 53 percent. According to testimony by a U.S. Immigration and Customs Enforcement official, a recent increase in deaths related to the synthetic opioid fentanyl has resulted in an increased focus on identifying methods by which traffickers bring fentanyl into the United States. In fiscal years 2012 through 2015, CBP’s seizure data reflect zero seizures of fentanyl, but according to CBP, fentanyl seizures would have been captured under other categories in SEACATS. According to CBP, a specific category code for fentanyl was added to SEACATS in fiscal year 2016. SEACATS reflects 53 seizures of fentanyl in fiscal year 2016 via both mail and express cargo. As mail and express cargo arrive in the United States, both USPS and express consignment operators provide items to CBP for inspection. Express consignment operators accept items for delivery to the United States at points of sale in foreign countries and provide EAD to CBP prior to the items’ scheduled arrival in the United States. CBP then analyzes the EAD and provides lists of targeted items to express consignment operators. However, unlike express consignment operators, USPS is not currently required to provide CBP with EAD for inbound international mail and does not have control over mail prior to its arrival in the United States. Thus, USPS relies on foreign postal operators to collect and provide EAD voluntarily or by mutual agreement. According to USPS data, USPS received EAD for about one third of all inbound international mail (excluding letters, flats, and military/diplomatic mail) for the period from April 2016 through March 2017. For the month of March 2017 (the most recent data available at the time of our review), USPS data indicate that EAD was available for roughly half of all inbound international mail (excluding letters, flats, and military/diplomatic mail). In 2014 and 2015, USPS and CBP initiated two pilot programs at the New York International Service Center (ISC) to target certain mail for inspection using some of the EAD obtained under data-sharing agreements with foreign postal operators. At the time of our review, CBP did not use EAD to target mail for inspection outside of these pilots. According to USPS documents, the goal of these pilots is to test the effectiveness of placing holds on mail that has been targeted by CBP based on EAD. Under the pilots, CBP uses EAD to target a small number of pieces of mail each day. According to USPS officials, when USPS employees scan either individual targeted pieces or larger sacks containing this targeted mail, they are alerted that CBP has targeted the item and set the item or sack aside for inspection. Since the pilots began, USPS has made efforts to locate and provide CBP with the targeted mail and CBP has collected performance data on the percentage of targeted mail USPS has provided for inspection: about 82 percent for one pilot, and about 58 percent for the other. In our report we note that, according to USPS and CBP, USPS has been unable to provide some targeted mail for inspection because locating targeted mail once it arrives at an ISC has been a challenge. Specifically, USPS ISCs may receive thousands of large sacks of mail per day that are scanned as they are accepted. Each sack may contain hundreds of pieces of mail that are not individually scanned upon arrival. As a result, locating a targeted item requires manually sorting through the entire sack, and USPS employees may overlook the item while sorting through the larger sack to locate targeted mail. According to USPS officials, at the time of our review they were testing an automated method to identify targeted mail within these larger sacks. Standards for internal control in the federal government state that defining program goals in specific and measurable terms allows for the assessment of performance toward achieving objectives. However, while USPS and CBP have collected some performance information for these pilots (including the percentage of targeted mail provided for inspection), this information is not linked to a specific performance target agreed upon by USPS and CBP—such as a specific percentage of targeted mail provided to CBP for inspection. Further, the agencies have not conducted an analysis to determine if the pilot programs are achieving desired outcomes. In our report, we concluded that, because CBP and USPS lack clear performance goals for these pilots, they risk spending additional time and resources expanding them prior to fully assessing the pilots’ success or failure. As such, we recommended that CBP, in conjunction with USPS, (1) establish measureable performance goals for pilot programs and (2) assess the performance of the pilots in achieving these goals. The Department of Homeland Security concurred with this recommendation and plans to implement it by February 28, 2018. In our report we found that the costs and benefits of using EAD to target mail for inspection are unclear. For example, according to USPS and CBP officials, increasing the use of EAD to target mail for inspection may have benefits, such as reducing the volume of inspected mail and increasing the percentage of inspections that result in identification of a threatening or illegal item. This potential outcome could decrease time and resources needed for the screening process—potentially decreasing costs—and may increase the security of inbound mail. However, the costs of collecting and implementing the use of EAD are not yet known, and neither USPS nor CPB currently collect the data necessary to know whether using EAD might increase the security of inbound mail or decrease the time and costs associated with screening. Specifically, regarding the costs of collecting EAD, USPS has not calculated the current costs of collecting EAD from countries with which it has data-sharing agreements, but officials stated that USPS does not incur significant additional costs for each new designated postal operator or type of mail for which it begins collecting EAD. While some of the costs of obtaining EAD may be borne by designated postal operators in other countries, rather than directly by USPS, costs to USPS to use EAD to target mail for inspection may include: equipment and personnel required to identify targeted mail (such as equipment required to sort through hundreds of pieces of mail to identify a single piece of mail), and software upgrades required to exchange data with foreign postal operators and with CBP. In our report we found that an analysis of the costs associated with planned efforts is particularly critical given USPS’s financial challenges. As we recently found, USPS reported a net loss of $5.6 billion in fiscal year 2016—its 10th consecutive year of net losses. In light of this situation, any expenditure of financial resources to make any additional infrastructure and information technology upgrades necessary to implement the use of EAD for targeting merit careful consideration. Beyond costs, in our report we also determined that USPS and CBP have not performed an analysis of the benefits of using EAD to target mail for inspection, including the effectiveness of targeted inspection based on EAD relative to other methods of selecting mail for inspection. Thus, the extent to which targeting based on EAD might result in an increased ability to identify threats or other benefits over current methods is unknown. For example, CBP has collected data on the percentage of inspections resulting in a seizure for mail inspected as a result of targeting in the pilot programs at the New York ISC. However, CBP does not collect comparable data for seizures resulting from inspections conducted based on current methods of choosing mail for inspection. Moreover, USPS and CBP experience challenges related to inspecting mail that may limit their ability to effectively use EAD to target mail for screening and, thus, to experience EAD’s possible benefits. For example, USPS depends on foreign postal operators to make EAD available. According to USPS and State Department officials, however, those operators may not share the same security priorities as USPS and CBP and may not make EAD available. If the amount of available EAD remains limited for inbound mail, this may reduce the effectiveness of CBP’s targeting efforts or could constrain CBP’s ability to reduce the volume of mail it inspects. Our prior work has found that in designing preventive measures—such as the screening of inbound mail to identify potential threats—it is helpful to conduct a thorough assessment of vulnerabilities as well as cost-benefit analyses of alternative strategies. In the absence of information on the relative costs of various methods of selecting mail for inspection as well as their effectiveness at identifying potential threats in inbound mail, USPS and CBP are unable to fully understand whether obtaining additional EAD for targeting purposes will provide security or resource benefits. In our report, we therefore concluded that, particularly in light of the challenges that collecting and using these data present, it is important that CBP and USPS carefully consider actions to enhance inbound international mail security to avoid wasting time and money on potentially ineffective and costly endeavors. As such, we recommended that CBP, in conjunction with USPS, evaluate the relative costs and benefits of collecting EAD for targeting mail for inspection in comparison to other methods. The Department of Homeland Security concurred with this recommendation and plans to implement it by February 28, 2018. In conclusion, existing pilots could be used as an opportunity for CBP and USPS to: (1) articulate performance goals for the pilots, (2) collect data and assess the pilots on their success in enabling USPS to provide targeted mail to CBP for inspection, and (3) assess the costs and benefits of various methods of choosing mail for inspection. We are encouraged that USPS and the Department of Homeland Security agreed with our findings and recommendations. Effective implementation of our recommendations should help CBP and USPS ensure that efforts to collect and use EAD to target mail for inspection achieve the desired security and resource benefits. Chairman Meadows, Ranking Member Connolly, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Lori Rectanus, Director, Physical Infrastructure Issues at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Derrick Collins and Katie Hamer. Other staff who made contributions to the report cited in this testimony are identified in the source product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes information contained in GAO's August 2017 report, entitled International Mail Security: Costs and Benefits of Using Electronic Data to Screen Mail Need to Be Assessed ( GAO-17-606 ). U.S. Customs and Border Protection (CBP) is the primary federal agency tasked with targeting and inspecting inbound international items and seizing illegal goods, including illegal or inadmissible drugs and merchandise. As mail and express cargo arrive in the United States, both the U.S. Postal Service (USPS) and express consignment operators (such as FedEx and DHL) provide items to CBP for inspection. However, unlike express consignment operators, USPS is not currently required to provide CBP with electronic advance data (EAD), such as the shipper's and recipient's name and address, for inbound international mail and does not have control over mail prior to its arrival in the United States. Thus, USPS relies on foreign postal operators to collect and provide EAD voluntarily or by mutual agreement. In 2014 and 2015, USPS and CBP initiated two pilot programs at the New York International Service Center (ISC) to target certain mail for inspection using some of the EAD obtained under data-sharing agreements with foreign postal operators. Under the pilots, CBP uses EAD to target a small number of pieces of mail each day. According to USPS officials, when USPS employees scan either individual targeted pieces or larger sacks containing this targeted mail, they are alerted that CBP has targeted the item and set the item or sack aside for inspection. According to USPS and CBP, USPS has been unable to provide some targeted mail for inspection because locating targeted mail once it arrives at an ISC has been a challenge. Since the pilots began, USPS has provided CBP with about 82 percent of targeted mail for one pilot, and about 58 percent of targeted mail for the other. However, while USPS and CBP have collected some performance information for these pilots (including the percentage of targeted mail provided for inspection), this information is not linked to a specific performance target agreed upon by USPS and CBP--such as a specific percentage of targeted mail provided to CBP for inspection. Further, the agencies have not conducted an analysis to determine if the pilot programs are achieving desired outcomes. Because CBP and USPS lack clear performance goals for these pilots, they risk spending additional time and resources expanding them prior to fully assessing the pilots' success or failure. In our report we found that the costs and benefits of using EAD to target mail for inspection are unclear. For example, according to USPS and CBP officials, increasing the use of EAD to target mail for inspection may have benefits, such as reducing time and resources needed for the screening process--potentially decreasing costs--and may increase the security of inbound mail. However, the costs of collecting and implementing the use of EAD are not yet known, and neither USPS nor CPB currently collect the data necessary to know whether using EAD might increase the security of inbound mail or decrease the time and costs associated with screening. For example, CBP has collected data on the percentage of inspections resulting in a seizure for mail inspected as a result of targeting in the pilot programs at the New York ISC. However, CBP does not collect comparable data for seizures resulting from inspections conducted based on current methods of choosing mail for inspection. In light of the challenges that collecting and using these data present, it is important that CBP and USPS carefully consider actions to enhance inbound international mail security to avoid wasting time and money on potentially ineffective and costly endeavors. In our report, we recommended that CBP, in coordination with USPS: (1) establish measureable performance goals to assess pilot programs and (2) evaluate the costs and benefits of using EAD to target mail for inspection compared with other targeting methods. CBP and USPS agreed with these recommendations and CBP plans to implement them by February 28, 2018.", "document_type": "gao"}
{"report": "In 2014, USAID established the Lab as a USAID bureau by merging and restructuring two offices—the Office of Science and Technology and the Office of Innovation and Development Alliances. According to USAID officials, the agency moved a number of the two offices’ core programs and activities, along with staffing functions, to the Lab. In a January 2014 notification, USAID informed Congress of its intent to establish the Lab and noted initial staffing levels, funding, and short-term plans. The Lab is generally subject to guidance pertaining to operating units and bureaus, including policies and procedures set out in USAID’s ADS. It also publishes and contributes to various performance and financial reporting of information, such as USAID’s Annual Performance Plan and Report, which are provided to Congress and available to the public, according to Lab officials. The Lab was created to work collaboratively within USAID and with other government and nongovernment partners to produce development innovations, among other things. According to Lab officials, the Lab seeks to improve USAID’s ability to harness the power of science, technology, innovation, and partnerships (STIP) with private and public sectors by funding and scaling breakthroughs that would accelerate the completion of foreign policy and development goals. The Lab has a two-part mission: 1. Produce development breakthroughs and innovations by funding, testing, and scaling proven solutions that will affect millions of people. 2. Accelerate the transformation of development enterprise (i.e., to build capacity of the public and private sectors to work in the development arena) by opening it to people everywhere with good ideas, promoting new and deepening existing partnerships, applying data and evidence, and harnessing scientific and technological advances. The Lab’s mission, objectives, and goals are laid out in its strategic plan, which has evolved since the Lab’s creation. In fiscal years 2014 and 2015, the Lab operated under an initial strategy that focused on examining the delivery capabilities and constraints of current and ongoing Lab programs; prioritizing investments of time and resources; and confirming new activities and programs. The strategy for fiscal years 2016 through 2020 presents a results framework that includes the Lab’s two- part mission statement as well as five objective statements and corresponding intermediate result statements explaining how the Lab intends to achieve its goals (see fig. 1). The Lab, which is headed by an Executive Director, includes five centers—the Center for Development Research, the Center for Digital Development, the Center for Development Innovation, the Center for Transformational Partnerships, and the Center for Agency Integration— each focused on one of the Lab’s five strategic objectives. The Lab also includes two offices, the Office of Engagement and Communication and the Office of Evaluation and Impact Assessment, which provide support services. Figure 2 shows the Lab’s organizational structure. Table 1 describes each of the Lab’s centers and offices. In April 2018, the USAID Administrator announced agency reorganization plans that will affect the Lab. USAID leadership plans to create a new Bureau for Development, Democracy, and Innovation and a Bureau for Policy, Resources, and Performance. According to USAID, the new bureaus will combine existing operating units that provide technical and program design support and expertise into a “one-stop shop” of consultancies that USAID missions can utilize. The new bureaus will absorb the Lab, along with other units, and track its contributions using new metrics that measure customer service to determine whether missions and bureaus have access to the right expertise at the right time, according to the USAID Administrator. As of October 2018, USAID had not indicated time frames for implementing the reorganization plans. To achieve its objectives and goals, the Lab funds and manages awards (which result in activities) that cover STIP programming as well as the Lab’s operations. The Lab uses a number of different mechanisms—for example, broad agency announcement procedures, annual program statements, and requests for applications—when making awards, which include grants, cooperative agreements, and contracts. Global Development Alliance A Global Development Alliance (GDA) is a partnership involving the U.S. Agency for International Development (USAID) and the private sector. GDA partners work together to develop and implement activities that leverage and apply assets and expertise to advance core business interests, achieve USAID’s development objectives, and increase the sustainable impact of USAID’s development investments. Generally, according to USAID, the value of private sector expertise, capabilities, and resources contributed to an alliance must equal and, in general, should significantly exceed the value of resources provided by USAID. The Lab also holds competitions focused on new ideas, approaches, and technologies to address development problems, and awards prizes to individuals or groups that meet the competition’s requirements. Some awards include funding from USAID as well as cash or in-kind contributions from non-USAID sources in the private or public sector. The Lab refers to the use of all non-USAID contributions as leverage and reports leverage as a programmatic performance indicator. According to USAID documents, the agency seeks to build partnerships that leverage the assets, skills, and resources of the public, private, and nonprofit sectors to deliver sustainable development impact. Examples of such leverage contributions include donated cash, services, or supplies from implementing partners or third parties to specific awards managed by the Lab. Third parties contributing to Lab managed programs have included foreign governments, international organizations, businesses and corporations, philanthropic foundations, non-governmental organizations, and higher education institutions, among others. One method USAID has approached this goal is through Global Development Alliances (see sidebar). Staff in the Lab’s five centers, offices, and Lab-Wide Priorities manage more than 25 programs and portfolios, which encompass projects and activities under a specific issue, aligned with the Lab’s five strategic objectives. The programs focus on development research (science objective), digital development (technology objective), innovation ventures (innovation objective), and private-sector engagement (partnerships objective). Table 2 shows examples of programs and portfolios aligned with each strategic objective. Examples of the Lab’s programs and activities include the following (see app. II for more information about these and other Lab programs): Staff in the Lab’s Center for Development Innovation manage the Grand Challenges for Development initiative, intended to foster innovations to address key global health and development problems. Since 2011, USAID and its partners have launched 10 Grand Challenges that are implemented by USAID bureaus, including the Lab. The Lab is responsible for managing the Securing Water for Food Grand Challenge and also the Scaling Off-Grid Energy Grand Challenge. Other USAID bureaus implement the other eight Grand Challenges (see app. III for a description of the Grand Challenges). Staff in the Lab’s Center for Development Research manage the Higher Education Solutions Network. The program is a partnership with seven universities that also work with partners in academia, the private sector, civil society, and governments worldwide. The universities established eight development labs that focus on efforts to solve a range of development problems. The Lab’s two offices support various aspects of the centers’ programs and portfolios, such as internally promoting center programs throughout USAID and conducting monitoring and evaluation activities. Types of STIP Services Provided by the Global Development Lab Digital development: Technologies and data-driven approaches to extend the reach of development programs Catalyzing innovation: Integration of design methodologies, development innovations, and programming solutions to solve development challenges differently. Partnerships/private sector engagement: Relationships between USAID and one or many organizations, including private sector entities, in an effort to create development impact. Scientific research and capacity building: Application of science and research to solve development problems. In addition to managing programs, the centers provide a variety of STIP- focused services and support, including assistance with programming, to USAID field missions and headquarters bureaus as part of the Lab’s mission to accelerate development impact. According to Lab documentation, the Lab can provide services related to country and regional strategic planning; project design and implementation; activity design and implementation; and monitoring and evaluation. The Lab’s STIP services fall into several categories—digital development, catalyzing innovation, partnerships and private sector engagement, and scientific research and capacity building, according to Lab documents (see sidebar). The centers, led by the Center for Agency Integration, deliver internal STIP services and mechanisms through toolkits, training, advisory services, and assessment and analysis of STIP activities or programming, according to Lab documentation. For example, at the request of missions or bureaus, the Digital Finance team in the Center for Digital Development can, among other things, review and provide technical input on awards related to digital finance. In addition, the Lab has provided advisory services to USAID operating units regarding innovative design or methods, such as co-creation, which can be used throughout the program cycle including in procurement (i.e., the broad agency announcement, annual program statements, etc.). According to Lab officials, some services are funded by the Lab at no cost to USAID operating units, while other services must be funded by the USAID operating units through funding mechanisms such as “buy-ins” or cooperative agreements. Lab data for fiscal years 2014 through 2017 show that the Lab provided services or support frequently in digital development activities, such as geospatial support to USAID field operations, and partnership services. For example, the Lab has provided technical services to missions around the world related to the GeoCenter (housed in the Center for Digital Development), which supports the application of advanced data and geographic analysis to international development challenges to improve the strategic planning, design, monitoring, and evaluation of USAID’s programs. In addition, the Lab provided partnership services related to private-sector engagement, including technical assistance and consultative services to USAID missions for more efficiently engaging, building, and maintaining relationships with the private sector at local or regional levels. Officials we interviewed at USAID missions and headquarters bureaus described services or tools they had received from the Lab, such as technical advice and training related to establishing private-sector partnerships and leveraging funding. For example, some USAID headquarters officials told us they had taken Lab-led private-sector engagement training that addressed developing collaborations with external stakeholders, establishing risk-sharing agreements, and engaging investors and other financial sector actors. In addition, some mission officials stated that they were involved in Lab-supported programs such as the Partnerships for Enhanced Engagement in Research and the Partnering to Accelerate Entrepreneurship Initiative and had received Lab support related to geographic information system mapping. One mission had a Lab-funded embedded advisor who provided technical assistance to a country’s Ministry of Health. According to Lab officials, demand for the Lab’s services and support exceeds the Lab’s capacity and its resources. Allocations of program funds from USAID to the Lab have decreased over the past few fiscal years, from $170.7 million in fiscal year 2015 to $77 million in fiscal year 2017. Similarly, the Lab’s obligations of program funds have also decreased since fiscal year 2015, according to Lab data. Obligations reached around $170 million in fiscal year 2015, the Lab’s first full year of operations. By fiscal year 2016, the Lab’s obligations had decreased to about $109 million—a reduction of over 35 percent. Although the Lab is still obligating fiscal year 2017 funding, its obligations would not exceed $77 million if it obligated the full amount of program funding provided to the Lab. As table 3 shows, from fiscal year 2014 through fiscal year 2017, the Lab obligated over $435 million of its program funds for its centers and support services (see app. IV for an overview of funding from various appropriations accounts in fiscal years 2014-2017). According to Lab officials, the program funds cover Lab- managed programs and programming (including funding for awards comprised of many activities) and the centers’ services, STIP activities, and staffing (including contractors), among other things (see app. V for a discussion of Lab-managed activities and corresponding obligations for fiscal years 2014-2017). As table 3 shows, in fiscal years 2014 through 2017, the Lab’s Center for Development Innovation obligated the most funds overall. The center houses the Development Innovation Ventures, a portfolio of innovations with the goal of reducing global poverty. Borrowing from the private sector’s venture capital model, the portfolio seeks to identify and test innovative development solutions based on three principles: rigorous evidence, cost-effectiveness, and potential to scale up. Lab officials indicated that the Lab has reassessed and realigned programming priorities because of decreased funding. For example, the Lab temporarily suspended new applications for awards through the Development Innovation Ventures program from the end of July 2017 due to budget uncertainties in fiscal year 2018. However, Lab officials indicated that the Lab has recently secured funding for new applications for the program. Funding decreases have also caused the Lab to scale back or put some programs on hold, according to Lab officials. For example, the Lab scaled back its Partnering to Accelerate Entrepreneurship Initiative; its Lab-Wide Priorities; and its Monitoring, Evaluation, Research, and Learning Innovation programs. The Lab also put its partnerships with NextGen missions on hold indefinitely, according to Lab officials. In addition, the Lab reported that it has been able to provide only minimal support for multi-stakeholder partnerships, such as the Digital Impact Alliance and the Global Innovation Fund. The number of staff in the Lab has decreased since fiscal year 2015, the first year for which staffing numbers are available. Lab staff include both direct-hire staff, comprising civil service and foreign-service employees, and contractors with specialized skills who supplement the efforts of direct-hire staff. Contractors have made up at least 35 percent or more of staff each fiscal year since 2015. The total number of staff, including direct-hire staff and contractors, decreased by over 30 percent from fiscal years 2015 through 2018, dropping from 224 in fiscal year 2015 to 155 in fiscal year 2018 (see table 4). Lab information shows that the staff primarily comprise senior technical and professional experts and that about 80 percent of staff are on time- limited appointments, which can last 1 to 5 years, according to Lab officials. Further, according to Lab officials, due to the ever-changing nature of work in the Lab, staff may work on multiple projects and activities across several teams or may be assigned to work with one team or on a single project until it is completed. For example, Lab officials stated that when Lab-Wide Priorities are established, staff members are brought in to contribute to these efforts while also working on activities in the centers they support. In addition to declining staff numbers overall, since fiscal year 2015, the number of direct-hire staff employed by the Lab has decreased. According to Lab officials, because of the technical focus of its programming, the Lab has not been able to staff all authorized positions with direct-hire employees who have the necessary expertise. Instead, the Lab has filled some of these positions with contractors or science fellows. The Lab also uses a variety of other hiring mechanisms, such as the Participating Agency Service Agreement with the Department of Agriculture and the American Association for Advancement of Science fellows, to allow for flexibility and obtain the needed expertise to implement STIP and technical services throughout USAID. By fiscal year 2017, the Center for Digital Development had 40 staff members—the highest overall number, including the highest number of contractor staff members—among all the Lab’s centers. This center’s contractor staff primarily consisted of technical specialists assisting the GeoCenter (see app. VI for numbers of direct hires and contractors at each center in fiscal years 2015-2018). Lab officials stated that the decline in staff numbers—primarily direct-hire staff—over the years was due to a number of factors, including a government-wide hiring freeze, budget constraints, and a high attrition rate among the Lab’s staff beginning in 2017. According to several Lab officials, the high attrition rate was due to uncertainty about the USAID reorganization and its impact on the Lab, since a large percentage of the Lab’s staff is employed on a term-limited basis. Our review of Lab documents showed that, for all 24 Lab-managed awards we reviewed, the Lab consistently documented certain oversight requirements for non-USAID contributions (i.e., committed, rather than actual, contributions from the private sector, the public sector, and other U.S. government agencies). We reviewed 24 Lab-managed awards that included non-USAID contributions to determine whether the Lab documented its compliance with key award oversight requirements we identified in USAID and Lab guidance. For all 24 awards, the Lab documented its compliance with the following key requirements: report funding amounts committed from non-USAID sources; conduct valuations of in-kind contributions, as applicable; document partners met cost-share or matching funds, if required; maintain copies of the award agreement and any modifications. Additionally, for awards receiving in-kind contributions, the Lab maintained documentation in award files demonstrating that officials reviewed the valuation of in-kind services and supplies. Further, in the 10 awards we reviewed containing cost-share requirements, the Lab maintained documentation to show partners’ progress in meeting those requirements. We found that the Lab’s management information system contained outdated data on non-USAID contributions, which the Lab reports as leverage. According to ADS 596, information should be communicated to relevant personnel at all levels within an organization and the information should be relevant, reliable, and timely. Further, Standards for Internal Control in the Federal Government states that management should use quality information to achieve the entity’s objectives, including obtaining relevant data from reliable internal sources in a timely manner. Further, the Lab’s “Internal Guide to Accounting for Leverage” (internal guide) states that data on non-USAID contributions will be collected from Lab teams semi-annually. Our analysis of data in the Lab’s management information system found that one of two tables used to develop a number of internal and external reports contained outdated data for 10 of the 24 awards we reviewed and, in some cases, had not been updated for more than 2 years. Although this table showed a total of about $24.5 million in non-USAID contributions for these 10 awards, award documentation provided by the Lab showed the updated amount of non-USAID contributions to be about $12.1 million. For example, for an award aimed at providing hydro- powered irrigation pumps in Nepal, the table showed committed non- USAID contributions of about $262,000, while our review of award documentation found that the updated amount was about $410,000. For another award aimed at providing drip irrigation systems for small-plot farmers in India, the table showed partners had committed $362,000 in non-USAID contributions. However, in reviewing award documentation, we found that partners had ultimately committed about $61,600 to this award. The Lab’s internal guide does not provide instructions for ensuring that the non-USAID contributions data in USAID’s management information system are timely. According to Lab officials, the outdated data we identified resulted from staff’s failure to manually enter updated data in both of the two tables used for external reporting. Lab officials stated that leverage data are entered manually because the Lab’s management information system does not have the capacity to automatically update the tables. However, we found that the Lab’s internal guide does not describe the Lab’s current process for entering leverage data in the system or include instructions for ensuring that these data are regularly updated. Instead, the internal guide refers to a data collection practice that predates the Lab’s management information system and that, according to Lab officials, is no longer in use. To the extent that the Lab used outdated data when generating external reports and budget exercises, it risks reporting incorrect information about non-USAID contributions to Lab awards. According to Lab officials, the table with outdated data on non-USAID contributions that we identified in the Lab’s management information system is one of the data sources that the Lab uses for reports to the USAID Administrator’s Leadership Council and the Department of State and in USAID’s Annual Performance Plan and Report. According to Lab documentation, the Lab also uses these data to develop a number of annual budget formulation and justification exercises, including congressional communications. Providing instructions for updating all non-USAID contributions data in its management information system could help the Lab strengthen the timeliness and reliability of these data and of the external reports that include them. The Lab’s internal guide does not require its public reporting of data on non-USAID contributions, or leverage, to disclose the types of contributions represented. According to ADS 596, information should be communicated to relevant personnel at all levels within an organization and the information should be relevant, reliable, and timely. In addition, according to Standards for Internal Control in the Federal Government, management should externally communicate complete and accurate information to achieve an entity’s objectives. The Lab defines leverage more broadly than the Agency’s definition found in USAID’s ADS 303. Specifically, these definitions differ in two ways. First, the Lab definition includes cost-share contributions, which the ADS definition excludes. Second, the ADS definition limits leverage to public-private partnership awards, while the Lab’s definition does not contain a similar limitation. Because the Lab’s definition of leverage differs from the definition in ADS, the Lab uses two separate indicators to track non-USAID contributions, according to Lab officials. For the leverage data it collects for USAID reporting on public-private partnerships, the Lab adheres to the ADS definition, accounting as leverage all non-USAID resources, excluding cost sharing, that are expected to be applied to a program in USAID public-private partnership awards. For the leverage data it collects for its internal performance management and external reports, the Lab accounts in its leverage calculations all cost-share contributions (from both private and public-sector partners); all other contributions (from the private sector, the public sector, and other U.S. government agencies); and gifts (from bilateral donors). According to Lab officials, the Lab’s definition of leverage differs from the ADS definition because the Lab partners with both the private and public sectors in its contracts and awards, and the Lab’s more expansive definition allows it to fully account for all non-USAID contributions. However, despite the difference in the Lab’s and USAID’s definitions, the Lab’s internal guide does not require that its public reporting of leverage data identify the types of non-USAID contributions represented in the data. As a result, the Lab’s public reporting—for example, on its webpage—provides the total amount leveraged but does not specify the types of contributions committed by non-USAID partners. Given the difference between the Lab’s definition used in its public reporting and the ADS definition of leverage, USAID lacks assurance that it is reporting transparent data on leveraged non-USAID contributions. Moreover, because the Lab’s internal guide does not require the Lab’s public reporting of leverage to disclose the types of contributions, Congress and the public lack access to complete information about the extent and nature of the Lab’s partnerships. By specifying the types of non-USAID contributions included in its data on leveraging, the Lab could increase the transparency of its public reporting for this key metric. The Lab uses various tools, such as its results framework, portfolio reviews, strategic learning reviews, and evaluations, established by USAID policy or Lab-specific practices to assess its performance. Because the Lab has existed only since 2014 and has had a strategy only since 2016, it has been able to collect a limited amount of data with which to assess its performance to show any trends in achieving results. However, the performance assessment tools that the Lab uses have identified both positive results and some weaknesses or challenges. The Lab’s strategy for fiscal years 2016 through 2020 includes a results framework comprising the Lab’s five strategic objectives, as shown previously in figure 1. For each strategic objective, the framework presents a corresponding development objective—that is, the most ambitious result that a Lab center aims to achieve through its projects and activities—as well as targets the Lab is focused on achieving by 2020. Progress toward the targets is tracked with annual and, in some cases, semi-annual performance indicators, according to Lab officials (see app. VIII for a list and descriptions of the Lab’s indicators). According to Lab officials, the Lab considers the results framework a living document and adjusts indicators and targets as necessary based on changing circumstances. The Lab’s indicator data indicate that, overall, the Lab met or exceeded its targets slightly more often than it did not meet them (see table 5). As table 5 indicates, the Lab met or exceeded its targets for 20 of its 39 indicators in fiscal years 2016 and 2017. For example, for one indicator— total number of program or policy changes made by public sector, private sector, or other development actors that are influenced by Lab-funded research results or related scientific activities—the Lab reported that it exceeded its target for both fiscal years. The Lab’s targets for this indicator for fiscal years 2016 and 2017 were set at 42 and 48, respectively, with reported results of 83 and 84. For another indicator— total dollar value of private and public capital catalyzed for early-stage entrepreneurs as a result of USAID support—the Lab reported it had exceeded its fiscal year 2017 target of $575 million, with an actual result of around $686 million. In addition, the Lab improved its performance for seven indicators, according to its data. For instance, for agency integration indicators—such as the number of operating units that have integrated STIP at the strategic, programmatic, and organizational levels—the Lab went from not meeting its targets in fiscal year 2016 to exceeding its targets in fiscal year 2017. The Lab’s indicator data also show some areas in which the Lab has faced challenges or has not met its targets. As table 5 shows, the Lab did not meet its targets for 19 of the 39 indicators in fiscal years 2016 and 2017. For example, for one indicator—number of operating units that have integrated STIP at the strategic, programmatic, and organizational levels—the Lab did not meet its targets of 15 and 20, respectively, for fiscal years 2016 and 2017, with reported results of 12 and 19. For another indicator—number of smart innovation methods adopted by USAID operating units—the Lab set a target of eight but reported an actual result of six. Moreover, from fiscal year 2016 to fiscal year 2017, the Lab’s performance declined for seven indicators. For instance, for innovation indicators—number of system actors engaged in innovation methods and number of smart innovation methods adopted by agency operating units—the Lab went from exceeding its targets in fiscal year 2016 to not meeting them in fiscal year 2017. Lab officials stated that the Lab’s performance goals were meant to be ambitious and that the Lab would adjust goals on the basis of resource and budget constraints. The Lab has implemented biannual portfolio reviews of projects and activities. According to Lab officials, the portfolio reviews assess progress toward strategic objectives, provide Lab staff an opportunity to share lessons learned, and foster collaboration across the centers. In fiscal years 2016 and 2017, the Lab conducted four portfolio reviews— two at midyear and two at the end of both years. Each portfolio review discussed the performance of each center, examined how well the center was meeting the targets for its performance indicators, and addressed topics such as key achievements and challenges and priority evaluation and research questions for the upcoming fiscal year. Lab officials stated that portfolio reviews have helped the Lab become more rigorous and better understand the reasons for implementing the various projects and activities. The Lab’s portfolio reviews for fiscal years 2016 and 2017 highlight, among other things, lessons learned and achievements made for particular projects and toward the Lab’s overall strategic objectives and targets. The reviews also note challenges faced Lab-wide as well as planned adjustments to address these challenges. Examples of the portfolio reviews’ findings, by strategic objective, include the following for each of the five Lab centers: Science. The review noted that lessons learned by the Center for Development Research included emphasis on managing relationships and the need to communicate with missions about the ways in which research can help them contribute to their objectives. The review also noted that the center’s challenges included striking the right balance between different elements of the science objective in the Lab strategy and developing mission-focused tools for integrating research. Technology. The review noted that the Center for Digital Development achieved largely positive ratings for digital development training and for a substantial amount of technical assistance, trainings, and knowledge products. The review also noted that the center had faced some challenges, such as staffing constraints that limited staff’s ability to prioritize both internal and external engagements. Innovation. The review noted that the Center for Development Innovation had several achievements, including positive feedback from innovators who received technical assistance from the center as well as agency partners who received program design services. The challenges noted included the center’s need for more engagement with key missions and for finding balance between advisory services and direct project implementation. Partnerships. The review noted that the Center for Transformational Partnerships had identified lessons learned in areas such as the center’s ability to support missions by helping them to identify opportunities and determine when and where partnership makes sense. One challenge that the review identified was the possibility that the center’s limited resources might inhibit technical assistance to missions and bureaus. Planned adjustments included prioritizing advisory and liaison support to the regions that have lower capacity for private sector engagement. Agency integration. The review noted that the Center for Agency Integration achieved several successes, including introducing the Lab and STIP to over 30 Foreign Service nationals (i.e., local, non-U.S. citizens employed by USAID), several of whom continued to champion STIP at their missions. The review also noted challenges, such as staffing and capacity gaps, that hampered training efforts as well as USAID staff being overwhelmed by the amount of information flowing from the Lab. In October 2017, the Lab implemented an evaluation, research, and learning plan that includes practices recommended for bureaus. According to Lab officials, the Lab’s plan is intended to help build evidence within and across the centers and ensure that resources are prioritized to support evaluation and research. As part of this plan, the Lab identified five key questions for all of the centers that evaluations, research, and learning efforts should attempt to help answer. According to Lab officials, the Lab began holding strategic learning reviews, beginning in spring 2018, to help it address theories of change—that is, descriptions of how and why a result is expected to be achieved through a particular project or activity. The Lab developed the reviews to complement its portfolio reviews, according to Lab officials. The Lab, led by the Office of Evaluation and Impact Assessment, completed its first cross-Lab strategic learning reviews in the spring of 2018, according to Lab officials. The reviews focused on three of five key questions in the Lab’s evaluation, research, and learning plan: addressing adaptive management; supporting innovators, entrepreneurs, and researchers; and sustaining results. According to the Lab, the 2-hour sessions, in which Lab officials and other selected agency subject-matter experts participated, resulted in discussions about issues that the participants considered most important for the Lab to address or improve in the future. For example, participants identified actions that could be currently achieved, such as designating time for “pause and reflect” exercises, particularly for reducing USAID’s administrative burden for first-time Lab partners that lack the capacity to manage USAID requirements; and focusing on larger market-enabling environments rather than on a single value chain. According to Lab documents, the Lab plans to use data from the reviews to develop recommendations that will be reflected in an action memo and to track any actions the Lab takes to implement the recommendations. Lab officials stated that the Lab plans to hold three additional 2-hour strategic learning reviews in fall 2018. Evaluation Evaluation is the systematic collection and analysis of information about the characteristics and outcomes of programs and projects that provides a basis for judgments to improve effectiveness and/or inform decisions about current and future programming. The Lab assesses its performance through evaluations (see sidebar). According to Lab officials, the Lab has conducted both external evaluations and internal evaluations, and the majority of its performance evaluations are external. As of October 2018, the Lab had primarily completed performance evaluations, although Lab officials reported that the Lab was also conducting three impact evaluations and one developmental evaluation. In addition to conducting evaluations, the Lab conducts assessments—management tools used to gather information about context or operating environment or to review an activity or project. As of October 2018, the Lab reported that it had completed 7 external performance evaluations of its programs or projects and had an additional 12 ongoing evaluations, both internal and external. The Lab’s completed performance evaluations cover a variety of programs, activities, and USAID services, such as the Securing Water for Food Grand Challenge project and the Lab’s technical assistance services. We reviewed the seven completed external performance evaluations and found that they identified a range of program strengths as well as challenges or weaknesses. For example: Mid-Term Review of Securing Water for Food: A Grand Challenge for Development. The evaluation identified program strengths, such as a diversity of innovations in the portfolio. The evaluation also found that the program had potential weaknesses, including a lack of focus on innovations for locations with greater water scarcity. Mid-Term Evaluation of the Partnerships for Enhanced Engagement in Research Program. The evaluation found, among other things, that partnerships between scientists in developing countries and in the United States have been of value for scientific output and strengthening professional relationships. In addition, the evaluation identified potential weaknesses in the program, including the need to facilitate broader dissemination of research findings by convening program grantees, the private sector, government officials, and civil society partners to network and share findings as well as policy and program challenges. Mid-Term Evaluation of the Higher Education Solutions Network. The evaluation found, among other things, that development labs housed in seven higher education institutions have begun providing data to inform USAID operating units’ decision making, collaborating to develop and test new technologies and innovative approaches, and engaging in knowledge sharing and learning. Additional findings included the need for Higher Education Solutions Network labs to streamline activities, adjust resource allocations, and increase synergies based on the insights gained through the first 5 years. Global Broadband and Innovations Alliance Performance Evaluation. The evaluation found, among other things, successful outcomes of specific projects focused on sustainably increasing broadband internet connectivity in the developing world. The evaluation also found that USAID had been challenged by changing leadership in the agency, which resulted in shifting priorities. In addition, the evaluation found that limited marketing of the mechanism to missions and other bureaus and offices resulted in lower-than- expected initial buy-in from the missions. STIP Integration Performance Evaluation: West Africa Regional and Uganda. The evaluation found, among other things, that mission staff want to build their capacity to use STIP but would prefer more demand-driven services from the Lab, rather than services that do not align with mission strategies. In addition to completing formal evaluations, the Lab has completed over 15 assessments of its activities or projects since 2014 and also is conducting a number of ongoing assessments. The completed assessments reflect work in all five centers and cover areas such as digital finance services, co-creation, and STIP integration. Since its establishment as a USAID bureau more than 4 years ago, the Lab has supported the agency’s efforts to address science, technology, innovation, and partnerships. Further, the Lab has funded and managed opportunities for innovators to propose new ideas, approaches, and technologies that tie into USAID’s overall development goals and programming. The Lab’s centers have pursued global partnerships with a wide range of non-USAID public and private sector stakeholders in an effort to augment their programming and further their efforts. However, because non-USAID contributions data that the Lab collects are not always current, some of the leverage data the Lab reports internally and externally to help demonstrate its accomplishments risks being outdated. Moreover, because the Lab’s Internal Guide to Accounting for Leverage does not require its public reporting of leverage data to identify the types of contributions represented, the Lab’s public reporting lacks transparency. Ensuring that the Lab’s internal data on non-USAID contributions are updated and that its publicly reported information about leveraged resources from the public and private sector is transparent will enable the Lab and USAID to better demonstrate to Congress and American taxpayers that the agency is maximizing its use of development resources to pursue new and innovative approaches to development challenges. We are making the following two recommendations to USAID: The USAID Administrator should ensure that the Executive Director of the Lab assures that the Lab’s Internal Guide to Accounting for Leverage includes instructions to update all non-USAID contributions data in the Lab’s management information system at least annually. (Recommendation 1) The USAID Administrator should ensure that the Executive Director of the Lab assures that the Lab’s Internal Guide to Accounting for Leverage requires that the Lab’s public reporting of leverage data discloses the types of non-USAID contributions represented. (Recommendation 2) We provided a draft of this report to USAID for review and comment. USAID provided written comments that are reprinted in appendix IX. In its letter, USAID concurred with, and indicated that it is already addressing, both recommendations. In addition, USAID provided technical comments on the draft, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the USAID Administrator, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix X. In this report, we examine (1) the Global Development Lab’s (the Lab) programs, funding, and staffing resources, (2) the extent to which the Lab has documented its oversight of awards with non-U.S. Agency for International Development (USAID) contributions and clearly reported these contributions, and (3) the tools that the Lab uses to assess its performance as well as results that such assessments have shown. To examine the Lab’s programs, funding, and staffing resources, we reviewed and analyzed Lab program, funding, and staffing documents and data covering fiscal years 2014 to 2017. We reviewed the congressional notification in which USAID advised Congress of its intent to establish the Lab, program description documents, as well as the Lab’s current strategy document which contains the Lab’s results framework and strategic objectives covering science, technology, innovation, partnerships (STIP), and agency integration. In addition, we reviewed documents that provided information on services and tools the Lab provides to operating units within USAID. We reviewed and analyzed Lab funding data, by appropriations accounts, which included allocations and obligations for Lab programs by centers and offices covering fiscal years 2014 to 2017. The Lab did not yet have fiscal year 2018 funding information available. In addition, we reviewed and analyzed obligation data on Lab-managed activities for fiscal years 2014 to 2017. To report on staffing, we reviewed and analyzed Lab staffing data for fiscal years 2015 to 2018 which included data on the number of direct hire staff and contractors, hiring mechanisms used to bring staff on board, as well information on the centers and offices the staff worked in. To assess the reliability of the staffing data for fiscal years 2015 to 2018 and the funding data for fiscal years 2014 to 2017, we compared and corroborated information provided by the Lab with staffing and funding information in the Congressional Budget Justifications for the fiscal years. On the basis of the checks we performed, we determined these data to be sufficiently reliable for the purposes of this report. We interviewed Lab officials representing every center—Center for Development Research, Center for Digital Development, Center for Development Innovation, Center for Transformational Partnerships, and Center for Agency Integration; each support office—Office of Engagement and Communication, and Office of Evaluation and Impact Assessment; and all Lab-Wide Priorities—Ebola, Digital Development for Feed the Future, and Beyond the Grid—to understand the Lab’s organizational structure, roles and responsibilities, programs, and services, among other things. We also spoke with officials in the Administrative Management Services and Program and Strategic Planning offices, which cover the Lab’s financial and human resources, as well as strategic planning and reporting. To obtain insight into the Lab’s interaction and STIP integration within USAID, we also interviewed agency officials from five USAID bureaus in Washington, D.C.— Democracy, Conflict, and Humanitarian Assistance; Economic Growth, Education, and Environment; Food Security; Global Health; and Policy, Planning, and Learning; and from six USAID missions overseas— Albania, Cambodia, Guinea, Haiti, Uganda, and the Regional Development Mission for Asia. To determine the number of activities the Lab managed from fiscal years 2014 through 2017, and the amount it had obligated for these activities in this timeframe, we reviewed and analyzed data from USAID’s financial management system—Phoenix. Additionally, we met with Lab officials responsible for managing and reviewing the data in this system. To ensure that we accounted for only programmatic activities in our timeframe, we removed activities, in consultation with Lab Officials, from the dataset that pertained to institutional support contracts and fellowships. We also met with officials from each of the Lab’s centers to discuss the activities that they manage. We determined that the data were sufficiently reliable to account for Lab managed activities. To address oversight and documentation of awards with non-USAID contributions, we reviewed Lab and USAID policies and guidance for oversight of non-USAID contributions as of fiscal year 2017, including Lab guidance, and relevant chapters of USAID’s Automated Directives System (ADS), which contain the agency’s policy. We analyzed Lab- managed awards with committed funding from non-USAID partners from fiscal years 2014 through 2017 (a total of 154) from the Lab’s information management system DevResults, which we determined was sufficient to allow us to select a sample of these awards for further review. Our sample included 24 awards, which represented all Lab-managed awards containing non-USAID contributions issued on or after fiscal year 2014, and ending in or before fiscal year 2017. We selected these timeframes to ensure that the awards we reviewed did not predate the creation of the Lab (fiscal year 2014) and to ensure that activities and all award documentation on activities had been completed. To assess the reliability of these committed funding data, we reviewed documentation and interviewed USAID officials to identify and rectify any missing or erroneous data. Since we selected only awards in our given timeframe, the results cannot be generalized to all Lab managed awards receiving non-USAID committed contributions. We determined that the data and information were sufficiently reliable to compare against award documentation. The awards we reviewed covered four of the Lab’s five objectives: science (1 award), technology (3 awards), innovation (19 awards), and partnerships (1 award). To determine the extent to which the Lab had documented certain oversight requirements for these awards, we reviewed award documentation contained in the 24 award files against key oversight requirements and best practices established by USAID and the Lab. These oversight requirements include: report committed funding amounts received from non-USAID sources; conduct valuations of in-kind contributions, as applicable; document partners met cost-share or matching funds, if required; and maintain copies of the award agreement and any modifications. To determine the extent to which the Lab’s information management system contained current data on non-USAID contributions, we reviewed committed funding data for the 24 selected awards in this system against documentation in the award files. We also reviewed the Lab’s guidance on accounting for non-USAID contributions in addition to meeting with Lab officials responsible for data input and oversight of such contributions. However, we did not independently assess the accuracy of the committed contributions against actual contribution amounts because the Lab does not collect data on actual contributions received in all of its awards. To determine the extent to which the Lab’s guidance on accounting for non-USAID contributions differs from USAID agency guidance, we compared guidance documents provided by the Lab with agency guidance from USAID’s ADS 303. Among other guidance documents, we reviewed the Lab’s Global Development Lab Internal Guide to Accounting for Leverage, and the Lab’s “Indicator Reference Sheet.” We also interviewed Lab officials responsible for implementing the Lab’s guidance for accounting for non-USAID contributions, as well as officials from USAID’s office of Policy, Planning, and Learning who are responsible for developing and updating ADS guidance on non-USAID contributions. We also reviewed the Lab’s public reporting of non-USAID contributions on USAID’s website. To report on the tools that the Lab uses to assess its performance, we reviewed and analyzed numerous Lab program and performance documents. These included the Lab’s strategic plan that covers fiscal years 2016 to 2020 and the Lab’s results framework that outlines the strategic objectives; Performance Management Plan; evaluation, research, and learning plan; Lab portfolio reviews; and Lab strategic learning reviews. To learn about the Lab’s performance management, program evaluation, and assessment process, we interviewed Lab officials from the Office of Evaluation and Impact Assessment and the Program and Strategic Planning office. We reviewed sections of USAID’s ADS 201 that pertain to strategic planning and implementation; project design and implementation; activity design and implementation; and monitoring, evaluation, and learning. We also spoke with officials in the Bureau for Policy, Planning, and Learning regarding the performance management requirements for bureaus outlined in ADS 201. To report on the results of the Lab’s performance indicators, we reviewed indicator data from the Lab for fiscal years 2014 to 2017. Since the Lab’s strategy was created in 2016, we focused our analysis on indicator data for fiscal years 2016 and 2017 that represent the Lab’s objectives as laid out in the Lab’s Results Framework. The Lab provided this information from DevResults, to include targets and measurements for each indicator by fiscal year. The data that we received from the Lab contained over 250 total indicators, which included those at the objective level, intermediate level, and sub-intermediate results level. We identified and analyzed 39 indicators representing the objective and intermediate results levels (for the science, technology, innovation, partnerships, and agency integration objectives) and looked at the targets and actuals for these for fiscal years 2016 and 2017. We compared each target value with the actual value to determine whether the Lab met, exceeded, or did not meet its targets for each indicator. If the target and the actual were the same value, we designated this as “meets.” If the target value was less than the actual value, we designated this as “exceeds.” Finally, if the target value was more than the actual value, we designated this as “does not meet.” We also identified indicators (both at the objective and intermediate results levels) where the Lab improved its performance from fiscal year 2016 to fiscal year 2017 as well as indicators where the Lab had declined in its performance from fiscal year 2016 to fiscal year 2017. To assess the reliability of the Lab’s performance data base, we interviewed Lab officials and reviewed documentation, and we determined that the data was sufficiently reliable for the purposes of comparing the Lab’s targets to reported results. However, it was beyond the scope of this engagement to assess the reliability of each of the 39 indicators. To report the results of the Lab’s seven external evaluations, we reviewed the completed external evaluations that were conducted in 2016 and 2017. As applicable, we looked at the purpose of those evaluations, findings, lessons learned, and any challenges to the program or project that the evaluation covered. We did not assess whether the Lab met its evaluation requirements under ADS 201, as this issue was outside of the scope of our review. We did not independently assess the methodology that was used in the evaluations. To report the results of the Lab’s portfolio reviews, we reviewed four portfolio reviews—two at midyear and two at the end of the year—that the Lab conducted in fiscal years 2016 and 2017. The portfolio reviews included sections on the Lab’s five objectives. As the portfolio reviews used different approaches to collect information, we analyzed them and identified headings in the documents that pointed towards results, including findings, challenges, achievements, and lessons learned and summarized this information. To report on the results of the strategic learning reviews, we reviewed the three strategic learning reviews—each a 2-page document—that the Lab had conducted in spring of 2018. We summarized each review and reported on each of the reviews’ questions and one of the “now what” actions from each review to provide an illustrative example. We conducted this performance audit from July 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Global Development Lab’s (the Lab) five centers, its offices, and Lab- Wide Priorities manage more than 20 key programs and portfolios. The following are descriptions of key programs or portfolios implemented or managed by the Lab’s five centers—Development Research, Digital Development, Development Innovation, Transformational Partnerships, and Agency Integration. Higher Education Solutions Network (HESN): According to Lab documentation, HESN is a partnership with seven universities working with partners worldwide. Leveraging nearly equal investments from each higher education institution, the universities established eight development labs that collaborate with a network of 685 partner institutions in academia, the private sector, civil society, and government across 69 countries. HESN’s development labs work with the U.S. Agency for International Development (USAID) to address problems faced by developing countries. Partnership for Enhanced Engagement in Research (PEER): According to Lab documentation, PEER supports competitively awarded grants for collaborative research projects led by developing country scientists and engineers who partner with American researchers. PEER-funded scientists conduct applied research that can inform public policy or new practices in development with a goal of creating and leading new innovations or generating evidence for how to scale innovations. PEER also builds research capacity by providing funds, tools, technical assistance, and research opportunities for local scientists and students. The program is implemented in partnership with the U.S. National Academy of Sciences. Science and Research Fellowship Programs: According to Lab documentation, the Lab supports three fellowship programs that are characterized by a commitment to the use of science, technology, innovation, and partnerships. The American Association for the Advancement of Science (AAAS) Science and Technology Policy Fellowship and the Jefferson Science Fellowship both bring scientists and technical experts to serve 1- to 2-year fellowships at the U.S. Agency for International Development, contributing their knowledge and analytical skills to development policy, research, and programming. Further, the Research and Innovation (RI) Fellowship program connects U.S. graduate student researchers research, or technical expertise, to address pressing development challenges. Research Policy Support: According to Lab documentation, the Lab provides advice to the agency on implementing the USAID Scientific Research Policy. This may include areas like peer review and open access to research products including data and USAID staff publications. Digital Inclusion: According to Lab documentation, the Lab helps improve connectivity by expanding access to the internet in countries where USAID works to help ensure that the most marginalized citizens have the skills and resources to be active participants in the digital economy. The team supports missions to integrate internet solutions into existing programs to ensure health clinics, schools, and other critical facilities are connected and offer access to modern internet services. Development Informatics (portfolio): According to Lab documentation, the Lab seeks to make development more adaptive, efficient, and responsive to citizens and decision makers by helping transform the use of data and technology throughout development. The Lab supports mission investments in technology platforms that can collect and analyze data more efficiently to improve strategic planning and program implementation. The Lab also leads the public advocacy campaign for the Principles for Digital Development, a set of agency best practices for applying digital technology and data in development. GeoCenter: According to Lab documentation, the Lab applies geographic and other data analysis to improve the strategic planning, design, implementation, monitoring, and evaluation of USAID’s programs. The GeoCenter works directly with USAID bureaus and missions to integrate geographic analysis, futures analysis (including scenario planning), and data analytics to inform development decisions. The team also leads a geospatial community of 50 geographic information systems specialists in field-based missions and in Washington, D.C. Digital Finance (portfolio): According to Lab documentation, the Lab’s Digital Financial Services team is working with USAID missions and bureaus through multi-stakeholder alliances and direct technical assistance to help the world’s financially excluded and underserved populations obtain access to and use financial services that meet their needs. The Digital Finance team has worked with over 30 missions and agency operating units to improve operational and programmatic efficiency as a means to accelerating development objectives within USAID projects and programs. Development Innovation Ventures (DIV): According to Lab documentation, DIV is the agency’s venture capital-inspired, tiered, evidence-based funding model that invests comparatively small amounts in relatively unproven concepts, and continues to support only those that prove to work. It applies three core criteria to its application review process—evidence of impact, cost-effectiveness, and potential to scale. DIV accepts applications at three different funding stages from Proof of Concept ($25,000-150,000); Testing ($150,000–$1.5 million); and Transitioning to Scale ($1.5 million–$15 million). Grand Challenges for Development: According to Lab documentation, grand challenges call on the global community to discover, test, and accelerate innovative solutions around specific global challenges. The Lab is also leading efforts to apply innovation methods such as funding for challenges and prizes to accelerate innovation or incentivize action toward specific outcomes, such as the development of more efficient, lower-cost refrigeration solutions in the recently launched Off-Grid Refrigeration Competition. The Global Innovation Exchange: According to Lab documentation, this effort is an online platform to convene and connect innovators, funders, and experts working on development innovations around the world. The exchange is co-funded by USAID, the Australian Department of Foreign Affairs and Trade, the Korea International Cooperation Agency, and the Bill and Melinda Gates Foundation. Innovative Design (portfolio): According to Lab documentation, innovative design tools and approaches can help make a process more open and collaborative, incorporate human-centered design, or find a more innovative approach to solving a development problem. The Lab works to reframe development challenges, reach new audiences, and spur new ways of solving problems. It seeks to equip USAID teams with skills to design innovative programs using tools like design thinking and co- creation. It also builds diverse networks around critical systems challenges and facilitates a dialogue on the practice of innovation and design across USAID and the industry. Global Development Alliances (GDAs): According to Lab documentation, GDAs are partnerships between USAID and the private sector that use market-based solutions to advance broader development objectives. These partnerships combine the assets and experiences of the private sector to leverage capital, investments, creativity, and access to markets to work to solve the complex problems facing governments, businesses, and communities. GDAs leverage market-based solutions to advance broader development objectives. GDAs are co-designed, co-funded, and co-managed by all partners involved so that the risks, responsibilities, and rewards of partnership are shared. Partnering to Accelerate Entrepreneurship (PACE): According to Lab documentation, the Lab’s PACE initiative catalyzes private-sector investment into early-stage enterprises and helps entrepreneurs grow their businesses. Diaspora Engagement (portfolio): According to Lab documentation, the diaspora engagement is a core focus area for the Lab, which works with non-traditional partners in diaspora communities and organizations in under-addressed technical areas to test and incubate innovative partnership models. Science, Technology, Innovation, and Partnerships (STIP) Agency Integration (portfolio): According to Lab documentation, the Lab supports the application of STIP across the agency by providing technical assistance, training, and catalytic investments in mission-driven STIP programs. In fiscal year 2016, the Lab worked closely with eight missions to integrate STIP tools and approaches to accelerate their development objectives. For example, the Lab is supporting ongoing efforts with the Uganda mission and a range of local partners, including the government of Uganda, to promote and source local, sustainable off-grid power solutions to impact a majority of underserved citizens. Digital Development for Feed the Future: According to Lab documentation, the Lab is collaborating with USAID’s Bureau for Food Security on integrating digital technologies into Feed the Future activities to accelerate reductions in global hunger, malnutrition, and poverty. An example includes facilitating greater precision agriculture through richer data collection, analysis, and packaging. Operational Innovation: According to Lab documentation, the Operations Innovations Team collaborates with partners to test and demonstrate viable disruptions which improve efficiency and effectiveness of Agency’s internal business processes, practices, and procedures. Since 2011, the U.S. Agency for International Development (USAID) and its partners have launched 10 Grand Challenges for Development. Grand Challenges for Development mobilize governments, companies, and foundations around important issues. According to USAID, through these programs, USAID and public and private partners bring in new voices to solve development problems through sourcing new solutions, testing new ideas, and scaling (expanding) what works. Table 6 includes a description of each of the Grand Challenges, identifies the founding partners, and lists the primary bureau within USAID responsible for the programs. According to Global Development Lab (the Lab) officials, the Lab manages Securing Water for Food and Scaling Off-Grid Energy Grand Challenges. The Global Development Lab’s (the Lab) funding comes from different appropriations accounts. While the majority of the funding for fiscal years 2014 to 2017 is from the Development Assistance account, the Lab has also received lesser amounts of funding from four other accounts (see table 7). In fiscal years 2014 through 2017, the Global Development Lab (the Lab) managed a total of 339 activities addressing science, technology, innovation, and partnerships implemented by partners and obligated about $371 million for these awards. As figure 3 shows, the number of activities the Lab managed increased each year during this period, from 149 in fiscal year 2014 to 226 in fiscal year 2017. Obligated funding for all activities also increased annually until fiscal year 2017, when it declined by 27 percent. The Global Development Lab obligated funds to other activities it managed during this period that are not reflected in the data presented. These include obligations for institutional support contracts and staff fellowships. In fiscal years 2014 through 2017, four of the Lab’s centers managed a variety of activities addressing the Lab’s science, technology, innovation, and partnerships objectives. The Center for Development Research managed 28 activities addressing the Lab’s science objective. Obligations for these activities totaled about $120.4 million. The majority of this funding went to two programs, the Higher Education Solutions Network (about $81.2 million) and the Partnership for Enhanced Engagement in Research (about $27.7 million). The Center for Digital Development managed 17 activities addressing the Lab’s technology objective, ranging from providing geospatial satellite imagery to increasing the use of mobile money and e- payments in developing countries. Obligations for these activities totaled $64.5 million, with the majority of this funding going to Digital Finance activities. The Center for Development Innovation managed 205 activities addressing the Lab’s innovation objective. Obligations for these activities totaled about $115.4 million. This funding went to three programs: the Development Innovation Ventures program (about $57 million), the Innovation Acceleration program (about $19.3 million) and the Innovation Design program (about $39.2). The Lab’s Innovation Acceleration and Design program houses the Securing Water for Food Grand Challenge. The Center for Transformational Partnerships managed 37 activities addressing the Lab’s partnerships objective. Obligations for these activities totaled $39.8 million. For example, the Lab obligated about $13.9 million for the Partnering to Accelerate Entrepreneurship program, which aims to bring private-sector investment into businesses at early stages of development, among other things. In addition, other U.S. Agency for International Development (USAID) missions and bureaus have provided funding to Lab-managed projects through buy-ins. From fiscal years 2014 to 2017, USAID missions and bureaus provided funding to 55 Lab-managed projects, totaling $53 million. According to Lab officials, missions and bureaus can buy into projects in the development stage and can also buy into existing projects. For example, according to officials at USAID’s mission in Haiti, the Lab developed and funded a Higher Education Solutions Network project in Haiti, which provided the Haitian Ministry of Planning with capacity- building training to improve the collection of development and funding data for all donors in the country. Because the USAID mission saw the value of this project, it bought into the project, using its own funding, to allow the project to continue for an additional 2 years. The Global Development Lab (the Lab) has numerous contractors who provide technical expertise in the centers and fill gaps when direct-hire staff are not available, according to Lab officials. In fiscal years 2016 to 2018, the Center for Digital Development had the most contractors of all the centers (see table 8). The contractors in this center are technical specialists mainly in the Lab’s GeoCenter, which uses geographic information systems to collect data to help aid development decisions in countries around the world. In fiscal year 2018, there were more contractors than direct-hire staff in the Center for Digital Development. Officials in the five U.S. Agency for International Development (USAID) bureaus and six missions we spoke with provided positive feedback on their interactions with the Global Development Lab (the Lab) but also identified some challenges. USAID officials identified numerous positive aspects or benefits of working with the Lab, such as the following: Lab staff brings diverse expertise and outside perspectives to the agency and provides technical assistance to projects that would not have been implemented otherwise. For example, some USAID officials mentioned that the Lab staff has insight into innovative approaches—whether procurement-related or project design and monitoring—and that the Lab has the ability to bring in contractors with specific technical expertise that the traditional development arena lacks. Lab staff is responsive and often willing to help with technical issues. Some USAID staff mentioned that Lab staff provide expertise and answer questions on an informal basis, sometimes covering areas where they are not the assigned point of contact with a particular bureau or mission. The Lab coordinates cross-cutting projects across the agency, such as the Grand Challenges for Development. Some bureau officials stated that Lab officials have been able to share their perspectives at training and other activities which has allowed them to be aware of what others across USAID are doing relevant to activities related to science, technology, innovation, and partnerships (STIP). The Lab funds projects and activities that missions and USAID headquarters operating units cannot afford. Some USAID officials mentioned that the Lab has sent staff out to provide STIP training, with the Lab covering the costs. However, some officials also mentioned that they have seen that recent budget cuts have had an impact on the Lab’s funding for more recent activities. The Lab holds trainings on topics such as procurement processes and private sector engagement that have helped missions and bureaus adopt new approaches to work and development partnerships. USAID officials also noted problematic aspects or challenges in working with the Lab, such as: Some Lab services can be cost prohibitive. For example, some mission officials mentioned that Lab resources are centralized in headquarters and therefore the cost to missions might be high and not affordable. Staff turnover at the Lab is frequent, making it difficult for bureau or mission officials to maintain relationships with the Lab. For example, some officials stated there has not been consistent contact with the Lab due to Lab staff frequently moving around or leaving. This has included changes in contacts for agreement officer representatives responsible for awards impacting the mission. The centers’ services and the ways in which bureaus or missions could work most effectively with the Labs are not always clear. For example, some mission and bureau officials mentioned that Lab staff does not always understand a country’s context when suggesting or deploying potential programs or activities related to STIP. This includes working to integrate STIP activities or innovations into the Country Development Cooperation Strategy when these might not be feasible for a country context or responsive to the needs of the mission. USAID officials noted that when they have provided feedback to the Lab, the Lab has generally been responsive. In addition, bureau officials mentioned that the Lab’s communications have improved. The Global Development Lab (the Lab) established its performance indicators when it created its strategy in fiscal year 2016 to cover fiscal years 2016-2020. The Lab’s results framework, which is reflected in the strategy, includes the Lab’s objective statements and intermediate results statement from which the Lab’s performance indicators flow. See table 9 for a description of indicators for the Lab’s five strategic objectives for fiscal years 2016 to 2017. In addition to the contact named above, Leslie Holen (Assistant Director), Andrea Riba Miller (Analyst in Charge), Nick Jepson, and Kelly Friedman made key contributions to this report. Also contributing were Martin De Alteriis, Jeff Isaacs, Chris Keblitis, Reid Lowe, Aldo Salerno, and Nicole Willems.", "summary": "The Lab was created as a USAID bureau in April 2014. The Lab was intended to institutionalize and improve USAID's ability to harness and leverage science, technology, innovation, and partnerships in addressing development issues and goals worldwide. The Lab supports projects and activities and announces, issues, and manages awards—or funding opportunities—for innovators to propose new ideas, approaches, and technologies. The Lab also incorporates external (i.e., non-USAID) contributions into its programming. Senate Report 114-290 included a provision for GAO to review the Lab. GAO's report examines, among other things, (1) the Lab's programs, funding, and staffing resources and (2) the extent to which the Lab has documented its oversight of awards with non-USAID contributions and clearly reported these contributions. GAO reviewed and analyzed agency documents and interviewed agency officials in Washington, D.C., and from six missions. GAO also analyzed selected Lab documentation for fiscal years 2014 through 2017. The U.S. Agency for International Development's (USAID) Global Development Lab (the Lab) has programs and activities for each of its five strategic objectives: science, technology, innovation, and partnerships (STIP) and agency integration of STIP. The Lab comprises five centers and two support offices (see figure). The centers house more than 25 Lab programs focused on issues such as development research, digital development, innovation ventures, and private sector engagement. The Lab's funding for its programs has generally been decreasing, as have its staffing numbers, since fiscal year 2015. USAID allocations of program funds to the Lab decreased from $170.7 million in fiscal year 2015 to $77 million in fiscal year 2017. Although the Lab has documented its oversight of awards that include non-USAID contributions, some data it collects for these contributions are outdated and its public reporting of such data lacks transparency. For awards GAO reviewed, the Lab consistently documented its compliance with key award oversight requirements. However, its Internal Guide to Accounting for Leverage (internal guide) does not include instructions for ensuring the data for these contributions are current. As a result, GAO found the Lab's management information system contained outdated data for non-USAID contributions in 10 of 24 awards GAO reviewed. The Lab publicly reports a broader range of non-USAID contributions than the types described in USAID policy. However, the Lab's internal guide does not require the Lab to disclose the types of contributions represented in its public reporting. As a result, the Lab's public reporting of such contributions lacks transparency. USAID policy and standards for internal control in the federal government require the use and communication of timely and reliable information. Revising the Lab's internal guide to include instructions for updating data on non-USAID contributions and requiring the Lab's public reporting to disclose the types of contributions represented would help the Lab ensure accuracy and transparency in the information it reports to Congress and the public. GAO recommends that USAID ensure that the Lab revises its Internal Guide to Accounting for Leverage to (1) include instructions for updating data on non-USAID contributions for awards and (2) require its public reporting of non-USAID contributions to disclose the types of contributions represented. USAID concurred with both recommendations.", "document_type": "gao"}
{"report": "A high-quality, reliable cost estimate is a key tool for budgeting, planning, and managing the 2020 Census. According to OMB, programs must maintain current and well-documented estimates of program costs, and these estimates must encompass the full life-cycle of the program. Among other things, OMB states that generating reliable program cost estimates is a critical function necessary to support OMB’s capital programming process. Without this capability, agencies are at risk of experiencing program cost overruns, missed deadlines, and performance shortfalls. A reliable cost estimate is critical to the success of any federal government program. With the information from reliable estimates, managers can: make informed investment decisions, allocate program resources, measure program progress, proactively correct course when warranted, and ensure overall accountability for results. To be considered reliable, a cost estimate must meet the criteria for each of the four characteristics outlined in our Cost Estimating and Assessment Guide. According to our analysis, a cost estimate is considered reliable if the overall assessment ratings for each of the four characteristics are substantially or fully met. If any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable. Those characteristics are: Well-documented: An estimate is thoroughly documented, including source data and significance, clearly detailed calculations and results, and explanations of why particular methods and references were chosen. Data can be traced to their source documents. Accurate: An estimate is unbiased, the work is not overly conservative or overly optimistic, and is based on an assessment of most likely costs. Few, if any, mathematical mistakes are present. Credible: Any limitations of the analysis because of uncertainty or bias surrounding data or assumptions are discussed. Major assumptions are varied, and other outcomes are recomputed, to determine how sensitive they are to changes in the assumptions. Risk and uncertainty analysis is performed to determine the level of risk associated with the estimate. The estimate’s results are cross- checked, and an independent cost estimate (ICE) is conducted to see whether other estimation methods produce similar results. Comprehensive: An estimate has enough detail to ensure that cost elements are neither omitted nor double counted. All cost-influencing ground rules and assumptions are detailed in the estimate’s documentation. Meeting best practices outlined in our Cost Estimating and Assessment Guide for a reliable cost estimate has been a long-standing challenge for the Bureau. In 2008 we reported that the 2010 Census cost estimate was not reliable because it lacked documentation and was not comprehensive, accurate, or credible. For example, in our 2008 report on the Bureau’s cost estimation process, Bureau officials were unable to provide documentation that supported the assumptions for the initial 2001 life-cycle cost estimate as well as the updates. Consequently, we recommended that the Bureau establish guidance, policies, and procedures for estimating costs that would meet best practices criteria. The Bureau agreed with the recommendation and said at the time that it already had efforts underway to improve its future cost estimation methods and systems. Moreover, weaknesses in the life-cycle cost estimate were one reason we designated the 2010 Census a GAO High- Risk Area in 2008. In 2012 we reported that, while the Bureau was taking steps to strengthen its life-cycle cost estimates, it had not yet established guidance for developing cost estimates. We recommended that the Bureau finalize its guidance, policies, and procedures for cost estimation in accordance with best practices. The Bureau agreed with the overall theme of the report but did not comment on the recommendation. During this review we found that the Bureau took steps to address this recommendation, which is discussed later in this report. Such guidance can help to institutionalize best practices and ensure consistent processes and operations for producing reliable estimates. In a 2016 report we found that the October 2015 version of the Bureau’s life-cycle cost estimate for the 2020 Census was not reliable. Overall, we reported that the 2020 Census life-cycle cost estimate partially met two of the characteristics of a reliable cost estimate (comprehensive and accurate) and minimally met the other two (well-documented and credible). We recommended that the Bureau take specific steps to ensure its cost estimate meets the characteristics of a high-quality estimate. The Bureau agreed with this recommendation, and took steps to improve the reliability of its cost estimate, which we focus on later in this report. Consequently, an unreliable life-cycle cost estimate is one of the reasons we designated the 2020 Census a GAO High-Risk Area in 2017. In October 2015, the Bureau estimated the cost of the 2020 Census to be $12.3 billion. According to the Bureau, the October 2015 version was the Bureau’s first attempt to model the life-cycle cost of its planned 2020 Census, in contrast to its earlier 2011 estimate, which the Bureau said was intended to produce an approximation of potential savings and to begin developing the methodology for producing decennial life-cycle cost estimates covering all phases of the decennial life cycle. To help control costs while maintaining accuracy, the Bureau introduced significant change to how it conducts the decennial census in 2020. Its planned innovations include reengineering how it builds its address list, improving self-response by encouraging the use of the Internet and telephone, using administrative records to reduce field work, and reengineering field operations using technology to reduce manual effort and improve productivity. In contrast to the estimated $12.3 billion in 2015, the 2020 Census would cost $17.8 billion in constant 2020 dollars if the Bureau repeated the 2010 Census design and methods, according to the Bureau’s estimates. In October 2017, Commerce announced that it had updated the October 2015 life-cycle cost estimate, projecting the life-cycle cost of the 2020 Census to be $15.6 billion, an increase of over $3 billion (27 percent) over its 2015 estimate. (See figure 1.) In developing the 2017 version of the cost estimate, Bureau cost estimators identified cost inputs, their ranges for possible outcomes, and overall cost estimating relationships (i.e., logical or mathematical formulas, or both). To identify cost inputs and the ranges of potential outcomes, the Bureau worked with subject matter experts and used historical data to support assumptions and generate inputs. The Bureau’s cost estimation team used a software tool to generate the cost estimate. Because cost estimates predict future program costs, uncertainty is always associated with them. For example, data from the past (such as fuel prices) may not always be relevant in the future. Risk and uncertainty refer to the fact that because a cost estimate is a forecast, there is always a chance that the actual cost will differ from the estimate. One way to determine whether a program is realistically budgeted is to perform an uncertainty analysis, so that the probability associated with achieving its point estimate can be determined, usually relying on simulations such as those of Monte Carlo methods. This can be particularly useful in portraying the uncertainty implications of various cost estimates. Consistent with cost estimation practices outlined in our Cost Estimating and Assessment Guide, the estimate was compared with two independent cost estimates (ICE), developed by Commerce’s Office of Acquisition Management (OAM) and the Bureau’s Office of Cost Estimation, Analysis, and Assessment. The offices producing the ICEs and the cost estimate team worked together to examine the process each used, an effort known as the reconciliation process. Through this reconciliation, the Bureau identified areas where discrepancies existed and elements that could require additional review and possible improvement. According to Bureau documentation the estimate will be updated as the program meets milestones and to reflect changes in technical or program assumptions. Figure 2 details the Bureau’s cost estimation process. OAM was involved extensively in the development of the 2017 estimate, an increased involvement compared to 2015, according to Bureau officials. OAM participated in regular review meetings throughout the development of the estimate and also developed an independent cost estimate, as shown in the figure below. End-to-end system testing activities for the 2020 Census are currently underway in Providence, Rhode Island. According to the Bureau, information collected from the test, such as overall response rates and the use of administrative records to inform census records, will inform future versions of the life-cycle cost estimate. Some updates from the test will be incorporated into the next cost estimate, which will be available in the first quarter of the coming fiscal year. Since our June 2016 report, in which we reviewed the Bureau’s 2015 version of the cost estimate, the Bureau has made significant progress. For example, the Bureau has put into place a work breakdown structure (WBS) that defines the work, products, activities, and resources necessary to accomplish the 2020 Census and is standardized for use in budget planning, operational planning, and cost estimation. However, the Bureau’s October 2017 cost estimate for the 2020 Census does not fully reflect characteristics of a high-quality estimate as described in our Cost Estimating and Assessment Guide and cannot be considered reliable. Our Cost Estimating and Assessment Guide describes best practices for developing reliable cost estimates. For our reporting needs, we collapsed these best practices into four characteristics for sound cost estimating— comprehensive, well-documented, accurate, and credible—and identified specific best practices for each characteristic. To be considered reliable, an organization must meet or substantially meet each characteristic. Our review found the Bureau met or substantially met three out of the four characteristics of a reliable cost estimate, while it partially met one characteristic: well-documented. When compared to the October 2015 estimate, the 2017 estimate shows considerable improvement. (See figure 3 below.) Cost estimates are considered valid if they are well-documented to the point they can be easily repeated or updated and can be traced to original sources through auditing, according to best practices. The Bureau only partially met the criteria for well-documented, as set forth in our Cost Estimating and Assessment Guide. A cost estimate that does not fully meet the criteria for well-documented cannot be used by management to make informed and effective implementation decisions. The well-documented characteristic comprises five best practices. The Bureau substantially met two out of five best practices (as shown in figure 4). First, the estimate describes in sufficient detail the calculations performed and the estimating methodology used to derive each element’s cost, and the cost estimate had been reviewed by management. Since cost estimates can inform key decisions and budget requests, it is vital that management review and understand how the estimate was developed, including risks associated with the underlying data and methods. The cost estimate only partially met three best practices for the characteristic of being well-documented. In general, some documentation was missing, inconsistent, or difficult to understand. First, we found that source data did not always support the information described in the basis of estimate document or could not be found in the files provided for two of the Bureau’s largest field operations: Address Canvassing and Non- Response Follow-Up (NRFU). For example, the cost estimate documentation referred to actual data from the 2010 Census and information obtained from experts as sources for address canvassing rework rates. However, the folder source documents provided as support for the basis of estimate did not include this information. Next, in several cases, we could not replicate calculations, such as for mileage costs, using the description provided. Lastly, we found that some of the cost elements did not trace clearly to supporting spreadsheets and assumption documents. Failure to document an estimate in enough detail makes it more difficult to replicate calculations, or to detect possible errors in the estimate; reduces transparency of the estimation process; and can undermine the ability to use the information to improve future cost estimates or even to reconcile the estimate with another independent cost estimate. The Bureau told us it would continue to make improvements to ensure the estimate is well- documented. For the estimate to be considered well-documented, the Bureau will need to address these issues. An accurate cost estimate supports measurement of program progress by providing unbiased and correct data, which can help management ensure accountability for scheduled results. We found the Bureau’s cost estimate substantially met the criteria for accuracy. As shown in figure 5, and in line with best practices outlined in our Cost Estimating and Assessment Guide, the estimate was not overly optimistic; appeared to be free of errors; was based on historical data or input from subject matter experts; and, according to Bureau officials, is updated regularly as information becomes available. The Bureau can enhance the accuracy of their estimate by increasing the level of detail included in the documentation, such as detail on specific inflation indices used, and by monitoring actual costs against estimates. We identified areas for improvement, which, according to Bureau officials, will be addressed as part of its ongoing efforts. For example, while the basis of estimate document describes different inflation indexes, it was not clear exactly which indexes were applied to the various cost elements in the estimate. Also, evidence of how variances between estimated costs and actual expenses would be tracked over time was not available at the time of our analysis. Tools to track variance enable management to measure progress against planned outcomes. Bureau officials stated that they already have systems in place that can be adapted for tracking estimated and actual costs. All estimates include a certain amount of informed judgment about the future. Assumptions made at the start of a program can turn out to be inaccurate. Credible cost estimates identify limitations due to uncertainty or bias surrounding data or assumptions, and control for these uncertainties by identifying and quantifying cost elements that represent the most risk. We found that the Bureau’s cost estimate substantially met the criteria for credible, as shown in figure 6 below. The Bureau’s cost estimate clearly identifies risks and uncertainties, and describes approaches taken to mitigate them. In line with best practices outlined in our Cost Estimating and Assessment Guide, the Bureau did the following: Sensitivity analysis. The Bureau conducted sensitivity analysis to identify possible changes to estimated costs for the 2020 Census based on varying major assumptions, parameters, and data inputs. For example, the Bureau calculated the likely cost implications for a range of possible response rates to identify a range of projected costs and to calculate appropriate reserves for risk. Bureau officials stated that they also identified the estimate input parameters that contributed the most to estimate uncertainty. Risk and uncertainty analysis. A cost estimate is a forecast, and as such, there is always a chance that the actual cost will differ from the estimate. Uncertainty is the indefiniteness about the outcome of a situation. Uncertainty is assessed in cost estimate models to estimate the risk (or probability) that a specific funding level will be exceeded. We found the Bureau performed an uncertainty analysis on a portion of the estimate to determine whether estimated costs were realistic and to establish the probability of achieving projections outlined in the estimate. The Bureau used a combination of modeling based on Monte Carlo analysis and allocations of funding for risks. The Monte Carlo simulation was performed on a portion of the estimate to account for uncertainty around various operational parameters for which a range of outcomes was possible, including Internet response rates and the extent to which data collection issues might be resolved using administrative records. To account for the inherent uncertainty of assumptions included within the life-cycle cost estimate, the Bureau added funding to the cost estimate totaling approximately $292 million to account for risks based on the results of the Monte Carlo analysis. For other risks, such as acquisition lead time and the possibility of delays in information technology (IT) development, contingency funding was added to the estimate to reflect the potential cost of resolving these issues, through use of a backup system or an alternative approach. These are described as “special risks” in the Bureau’s basis of estimate, and total approximately $171 million. Based on additional sensitivity analysis, the Bureau added approximately $965 million to the cost estimate to reflect discrete risks outlined in the risk register as well as those associated with (1) variability in self-response rates, (2) the effect of fluctuations in the size and wage rate of the temporary workforce on the cost of field operations, and (3) the potential need to reduce the enumerator-to- manager staffing ratio in case expected efficiencies in field operations are not realized. In addition to these provisions, the Secretary of Commerce added a contingency amount of about $1.2 billion to account for what the Bureau refers to as unknown-unknowns. Bureau documentation states that conducting a decennial census is an extremely complex, high-risk operation. In order to mitigate some of the risk, contingency funding must be available to initiate ad hoc activities necessary to overcome unforeseen issues. According to Bureau documentation these include such risks as natural disasters or cyber-attacks. The Bureau provides a description of how the general risk contingency is calculated. However, this description does not clearly link calculated amounts to the risks themselves. In our June 2016 report we reported the Bureau had not properly accounted for risk and recommended the Bureau, in part; improve control over how risk and uncertainty are accounted for. We continue to believe the prior recommendation from our June 2016 report remains valid and should be addressed: that the Bureau properly account for risk in the 2020 Census cost estimate, among other things. As such, risks need to be linked to the $1.2 billion general risk contingency fund. Independent cost estimate. According to best practices outlined in our Cost Estimating and Assessment Guide, an independent cost estimate should be performed to determine whether alternate estimate approaches produce similar results. The Bureau compared their estimate with two independent cost estimates, developed by Commerce’s Office of Acquisition Management and the Bureau’s Office of Cost Estimation and Assessment. As part of their process for finalizing the cost estimate, Bureau officials reconciled differences between the estimates in discussions with the two offices, resulting in more conservative assumptions by the Bureau around risk and uncertainty in both cases. In addition to implementing our recommendation to properly account for risk, going forward, while the Bureau substantially met the credibility characteristic it will be important for them to also integrate regular cross-checks of methodology into their cost estimation process. In our analysis we observed that no specific cross-checks of cost methodology were performed. According to the Bureau, cross- checks were not performed because the Bureau considered the independent cost estimates as overall cross-checks on the reliability of their methodology and did not conduct additional cross-checks. The main purpose of cross-checking is to determine whether alternative methods for specific cost elements within the cost estimate could produce similar results. An independent cost estimate, though important for the credibility of an estimate, does not fulfill the same function as a targeted cross-check of individual elements. Comprehensive estimates have enough detail to ensure that cost elements are neither omitted nor double-counted, all cost-influencing assumptions are detailed in the estimate’s documentation, and a work breakdown structure is defined. Our analysis of the 2017 cost estimate demonstrates improvement over the 2015 cost estimate when the Bureau’s cost estimate only partially met the criteria for comprehensive. We found the Bureau met or substantially met all four best practices for the comprehensive characteristic, as shown in figure 7. For example, all life-cycle costs are included in the estimate along with a complete description of the 2020 Census program and current schedule. We also found that the Bureau substantially met criteria for documenting cost influencing ground rules and assumptions. A standardized WBS (as detailed in table 1) with supporting dictionary outlines the major work of the program and describes the activities and deliverables at the project level where costs are tracked. In 2016, the Bureau’s WBS did not contain sufficient detail and we found significant differences in the presentation of the work between sources. In 2017, based on our review of Bureau documentation and interviews with Bureau officials, we found that the WBS is standardized and cost elements are presented in detail. The WBS is a necessary program management tool because it provides a basic framework for a variety of related tasks like estimating costs, developing schedules, identifying resources, determining where risks may occur, and providing the means for measuring program status. Although the Bureau’s updated life-cycle cost estimate reflects three of the four characteristics of a reliable cost estimate, we are not making any new recommendations to the Bureau in this report. We continue to believe the prior recommendation, made in 2016, remains relevant: that the Secretary of Commerce ensure that the Bureau finalizes the steps needed to fully meet the characteristics of a high-quality estimate, most notably in the well-documented area. The Bureau told us it has used our best practices for cost estimation to develop their cost estimate, and will focus on those best practices that require attention moving forward. Without a reliable cost estimate, the Bureau is limited in its ability to make informed decisions about program resources and to effectively measure progress against operational objectives. OMB, in its guidance for preparing and executing agency budgets, cites that credible cost estimates are vital for sound management decision making and for any program or capital project to succeed. A well- developed cost estimate serves as a tool for program development and oversight, supporting management to make informed decisions. According to the Bureau, the 2020 Census cost estimate is used as a management tool to guide decision making. Bureau officials stated the cost estimate is used to examine the cost impact of program changes. For example, the cost estimate served as the basis for the fiscal year 2019 funding request developed by the Bureau. The Bureau also said it used the 2020 Census life-cycle cost estimate to establish cost controls during budget formulation activities and to monitor spending levels for fiscal year 2019 activities. According to the Bureau, as detailed operational and implementation plans are defined, the 2020 Census life- cycle cost estimate has been and will continue to be used to support ongoing “what-if” analyses in determining the cost impacts of design decisions. Specifically, using the cost estimate to model the impact of changes on overall cost, the Bureau adjusted the scope of the Census Enterprise Data Collection and Processing (CEDCaP) operation. The processes for developing and updating estimates are designed to inform management about program progress and the use of program resources, supporting cost-driven planning efforts and well-informed decision making. Our work has identified a number of best practices for use in developing guidance related to cost estimation and analysis that are the basis of effective program cost estimating and should result in reliable and valid cost estimates that management can use for making informed decisions. In 2012 we reported that the Bureau had not yet established guidance for developing cost estimates. We recommended that the Bureau establish guidance, policies, and procedures for developing cost estimates that would meet best practice criteria. The Bureau agreed with the theme of the report but did not specifically agree with the recommendation. Moreover, in June 2016, we also reported that the cost estimation team did not record how and why it changed assumptions that were provided to it and did not document the sources of all data it used. The documentation of these changes to assumptions did not happen because the Bureau lacked written guidance and procedures for the cost estimation team to follow. During this review we found the Bureau has since established reliable guidance, processes, and policies for developing cost estimates and managing the cost estimation process. The following documents, shown in table 2, establish roles and responsibilities for oversight and approval of cost estimation processes, provide a detailed description of the steps taken to produce a high-quality cost estimate, and clarify the process for updating the cost estimate and associated documents over the life of a project. The Decennial Census Program’s Cost Estimate and Analysis Process, which provides a detailed description of the steps taken to produce a high-quality estimate, is reliable as it met the criteria for 8 steps and substantially met the criteria for 4 steps of the 12 best steps outlined in our Cost Estimating and Assessment Guide, as shown below in figure 8. To avoid cost overruns and to support high performance, it will be important for the Bureau to abide by their newly developed policies and guidance and continue to use the life-cycle cost estimate as a management tool. The 2017 life-cycle cost estimate includes significantly higher costs than those included in the 2015 estimate. In 2015, the Bureau estimated that they could conduct the operation at a cost of $12.3 billion in constant 2020 dollars. The Bureau’s latest cost estimate, announced in October 2017, reflects the same design, but at an expected cost of $15.6 billion. Figure 9 below shows the change in cost by WBS category for 2015 and 2017. The largest increases occurred in the Response, Managerial Contingency, and Census/Survey Engineering categories. Increased costs of $1.3 billion in the response category (costs related to collecting, maintaining, and processing survey response data) were in part due to reduced assumptions for self-response rates, leading to increases in the amount of data collected in the field, which is more costly to the Bureau. Contingency allocations increased overall from $1.35 billion in 2015 to $2.6 billion in 2017, as the Bureau gained a greater understanding of risks facing the 2020 Census. Increases of $838 million in the Census/Survey Engineering category were due mainly to the cost of an IT contract for integrating decennial survey systems that was not included in the 2015 cost estimate. Bureau officials attribute a decrease of $551 million in estimated costs for Program Management to changes in the categorization of costs associated with risks: In the 2017 version of the estimate, estimated costs related to program risks were allocated to their corresponding WBS element. More generally, factors that contributed to cost fluctuations between the 2015 and 2017 cost estimates include: changes in assumptions for census operations, improved ability to anticipate and quantify risk, an overall increase in IT costs, and more defined contract requirements. Several assumptions for the implementation of the 2020 Census have changed since the 2015 cost estimate. Some assumptions contributing to cost changes, mainly in the Response (related to collecting and processing response data) and Frame (the mapping and collecting addresses to frame enumeration activities) categories, include the following: Self-response rates. Changes in assumptions for expected self- response rates contributed to increases in the response category, as the assumed rate decreased from 63.5 percent in 2015 to 60.5 percent in 2017, thereby increasing the anticipated percentage and associated cost of nonresponse follow-up. When the Bureau does not receive responses by mail, phone, or Internet, census enumerators visit each nonresponding household to obtain data. Thus, reduced self-response rates lead to increases in the amount of data collected in the field, which is more costly to the Bureau. Bureau officials attributed this decrease to a forecasted reduction in Internet response due to added authentication steps at log in and the elimination of the function allowing users to save their responses and return later to complete the survey. Productivity rates. The productivity of enumerators collecting data for NRFU is another variable in the cost estimate that was updated, contributing to cost increases in the response category. Expected productivity rates for NRFU decreased from the 2015 estimate of 4 attempts per hour to 2.9. According to Bureau documentation, this more conservative estimate is based on historical data, rather than research and test data. In-office address canvassing rates. The Bureau will not go door-to- door to conduct in-field address canvassing across the country to update address and map information for every housing unit, as it has in prior decennial censuses. Rather, some areas would only need a review of their address and map information using computer imagery and third-party data sources—what the Bureau calls “in-office” address canvassing procedures. However, in March 2017, citing budget uncertainty the Bureau decided to discontinue one of the phases of in-office review address canvassing for the 2020 Census. The cancellation of that phase of in-office review is expected to increase the number of housing units canvassed in-field by 5 percent (from 25 to 30 percent of all canvassed housing units). In-field canvassing is more labor intensive compared to in office procedures. The 2017 version of the cost estimate reflects this increase in workload for in-field address canvassing, though overall changes in estimated costs for the Frame category, of which Address Canvassing is a part, were minimal. Staffing. Updated analysis resulted in changes to several staffing assumptions, which resulted in decreases across WBS categories. Changes included reduced pay rates for field data collection staff based on current labor market conditions and reductions in the length of staff engagement. In general, contingency allocations increased overall from $1.35 billion in 2015 to $2.6 billion in 2017. This increase in contingency can be attributed, in part, to the Bureau gaining a clearer understanding of risk and uncertainty in the 2020 Census as it approaches. The Bureau developed some of its contingency based on proven risk management techniques, including Monte Carlo analysis and allocated funding for known risk scenarios. The 2017 estimate includes close to $1.4 billion in estimated costs for these risks, almost three times the amount included in the 2015 estimate. The basis of estimate contains detail on the various risks and the process for calculating the associated contingency. The 2017 version also includes a contingency amount of $1.2 billion for general risks, or unknown-unknowns, such as natural disasters and cyber-attacks. Contingency amounts were reallocated within the WBS to more closely reflect the nature of the risk: Bureau officials attribute a decrease from the 2015 estimate of $551 million in estimated costs for program management to changes in the categorization of costs associated with risks. Officials stated that, in 2015, discrete program risks were previously consolidated as program management costs. In 2017, these discrete costs were reallocated to associate risks with the appropriate WBS element. For example, contingency amounts related to the likelihood of achieving a certain response rate previously included in the program management work breakdown category are now a part of the “response” work breakdown category. Increases in IT costs, totaling $1.59 billion, represented almost 50 percent of the total cost increase from 2015 to 2017. The total share of IT costs as a percentage of total census costs increased from 28 percent in 2015 to 32 percent in 2017, or from $3.41 billion to approximately $5 billion. Increases in IT costs are spread across seven cost categories. Figure 10 shows the IT and non-IT cost by WBS for the 2017 cost estimate. IT costs in infrastructure, response data, and census/survey WBSs account for the majority of the approximately $5 billion. The Bureau’s October 2015 cost estimate included IT costs for, among other things, system engineering, test and evaluation, and infrastructure, as well as for a portion of the Census Enterprise Data Collection and Processing (CEDCaP) program. The 2017 estimated IT cost increases were due, in large part, to the Bureau (1) updating the cost estimate for CEDCaP; (2) including an estimate for technical integration services that contributed to increases in the Census and Survey Engineering category; and (3) updating costs related to other major contracts (such as mobile device as a service, field IT services, and payroll systems). Bureau documents described an overall improvement in the Bureau’s ability to define and specify contract requirements. This resulted in updated estimates for several contracts, including for the Census Questionnaire Assistance (CQA) contract. Assumptions regarding call volume to the CQA were increased by 5 percent to account for expected response by phone after the elimination of the option to save Internet responses and return to complete the form later. The Bureau also cited updated cost data and the results of reconciliation with independent cost estimates as factors contributing to the increased costs of other major contracts, including for the procurement of data collection devices. The Secretary of Commerce provided comments on a draft of this report on August 2, 2018. The comments are reprinted in appendix II. The Department of Commerce generally agreed with our findings regarding the improvements the Census Bureau has made in its cost estimates. However, Commerce did not agree with our assessment that the Bureau’s 2017 lifecycle cost estimate is “not reliable.” Commerce noted that it had conducted two independent cost analyses and was satisfied that the cost estimate was reliable. The Bureau also provided technical comments that we incorporated, as appropriate. We maintain that, to be considered reliable, a cost estimate must meet or substantially meet the criteria for each of the four characteristics outlined in our Cost Estimating and Assessment Guide. These characteristics are derived from measures consistently applied by cost estimating organizations throughout the federal government and industry and are considered best practices for the development of reliable cost estimates. Without a reliable cost estimate, the Bureau is limited in its ability to make informed decisions about program resources and to effectively measure progress against operational objectives. Thus, while the Bureau has made considerable progress in all four of the characteristics, it has only partially met the criteria for the characteristic of being well-documented. Until the Bureau meets or substantially meets the criteria for this characteristic, the cost estimate cannot be considered reliable. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of the report to the appropriate congressional committees, the Secretary of Commerce, the Under Secretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and other interested parties. In addition, this report is available at no charge on the GAO website at http://gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The purpose of our review was to evaluate the reliability of the Census Bureau’s (Bureau) life-cycle cost estimate using our Cost Estimating and Assessment Guide. We reviewed (1) the extent to which the Bureau’s life-cycle cost estimate and associated guidance met our best practices for cost estimation using documentation and information obtained in discussions with the Bureau related to the 2020 life-cycle cost estimate and (2) compared the 2015 and 2017 life-cycle cost estimates to describe key drivers of cost growth. For both objectives we reviewed documentation from the Bureau on the 2020 life-cycle cost estimate and interviewed Bureau and Department of Commerce officials. For the first objective, we relied on our Cost Estimating and Assessment Guide as criteria. Our cost specialists assessed measures consistently applied by cost-estimating organizations throughout the federal government and industry and considered best-practices for developing reliable cost estimates. We analyzed the cost estimating practices used by the Bureau against these best practices and evaluated them in four categories: comprehensive, well-documented, accurate, and credible. Comprehensive. The cost estimate should include both government and contractor costs of the program over its full life-cycle, from inception of the program through design, development, deployment, and operation and maintenance to retirement of the program. It should also completely define the program, reflect the current schedule, and be technically reasonable. Comprehensive cost estimates should be structured in sufficient detail to ensure that cost elements are neither omitted nor double counted. Specifically, the cost estimate should be based on a product-oriented work breakdown structure (WBS) that allows a program to track cost and schedule by defined deliverables, such as hardware or software components. Finally, where information is limited and judgments are made, the cost estimate should document all cost-influencing assumptions. Well-documented. A good cost estimate—while taking the form of a single number—is supported by detailed documentation that describes how it was derived and how the expected funding will be spent in order to achieve a given objective. Therefore, the documentation should capture in writing such things as the source data used, the calculations performed and their results, and the estimating methodology used to derive each WBS element’s cost. Moreover, this information should be captured in such a way that the data used to derive the estimate can be traced back to, and verified against, their sources so that the estimate can be easily replicated and updated. The documentation should also discuss the technical baseline description and how the data were normalized. Finally, the documentation should include evidence that the cost estimate was reviewed and accepted by management. Accurate. The cost estimate should provide for results that are unbiased, and it should not be overly conservative or optimistic. An estimate is accurate when it is based on an assessment of most likely costs; adjusted properly for inflation; and contains few, if any, minor mistakes. In addition, a cost estimate should be updated regularly to reflect significant changes in the program—such as when schedules or other assumptions change—and actual costs, so that it is always reflecting current status. During the update process, variances between planned and actual costs should be documented, explained, and reviewed. Among other things, the estimate should be grounded in a historical record of cost estimating and actual experiences on other comparable programs. Credible. The cost estimate should discuss any limitations of the analysis because of uncertainty or biases surrounding data or assumptions. Major assumptions should be varied, and other outcomes recomputed to determine how sensitive they are to changes in the assumptions. Risk and uncertainty analysis should be performed to determine the level of risk associated with the estimate. Further, the estimate’s cost drivers should be cross-checked, and an independent cost estimate conducted by a group outside the acquiring organization should be developed to determine whether other estimating methods produce similar results. If any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high- quality estimate and cannot be considered reliable. We also analyzed the Bureau’s cost estimation and analysis guidance and evaluated them against a 12-step process outlined in our Cost Estimation and Assessment Guide. A high-quality cost estimating process integrates the following: 1. Define estimate’s purpose. 2. Develop estimating plan. 3. Define program characteristics. 4. Determine estimating structure. 5. Identify ground rules and assumptions. 6. Obtain data. 7. Develop point estimate and compare it to an independent cost estimate. 8. Conduct sensitivity analysis. 9. Conduct risk and uncertainty analysis. 10. Document the estimate. 11. Present estimate to management for approval. 12. Update the estimate to reflect actual costs and changes. These 12 steps, when followed correctly, should result in reliable and valid cost estimates that management can use for making informed decisions. If any of the steps in the Bureau’s process do not meet, minimally meet, or partially meet the 12 steps, then the cost estimate guidance does not fully reflect best practices for developing a high-quality estimate and cannot be considered reliable. Lastly, to describe key drivers of cost growth, we compared cost information included in the 2015 and 2017 cost estimates. We analyzed both summary and detailed cost information to assess key changes in totals overall, by WBS category, and by information technology (IT) vs. Non-IT costs. We used this analysis in conjunction with information received from the Bureau during interviews and through document transfers to describe overall changes in the cost estimate from 2015 to 2017. We conducted this performance audit from December 2017 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Lisa Pearson (Assistant Director), Karen Cassidy (Analyst in Charge), Brian Bothwell, Jackie Chapin, Ann Czapiewski, Jason Lee, Ty Mitchell, Kayla Robinson, and Tim Wexler made significant contributions to this report.", "summary": "In October 2017, the Department of Commerce (Commerce) announced that the projected life-cycle cost of the 2020 Census had climbed to $15.6 billion, a more than $3 billion (27 percent) increase over its 2015 estimate. A high-quality, reliable cost estimate is a key tool for budgeting, planning, and managing the 2020 Census. Without this capability, the Bureau is at risk of experiencing program cost overruns, missed deadlines, and performance shortfalls. GAO was asked to evaluate the reliability of the Bureau's life-cycle cost estimate. This report evaluates the reliability of the Bureau's revised life-cycle cost estimate for the 2020 Census and the extent to which the Bureau is using it as a management tool, and compares the 2015 and 2017 cost estimates to describe key drivers of cost growth. GAO reviewed documentary and testimonial evidence from Bureau officials responsible for developing the 2020 Census cost estimate and used its cost assessment guide ( GAO-09-3SP ) as criteria. Since 2015, the Census Bureau (Bureau) has made significant progress in improving its ability to develop a reliable cost estimate. While improvements have been made, the Bureau's October 2017 cost estimate for the 2020 Census does not fully reflect all the characteristics of a reliable estimate. (See figure.) Specifically, for the characteristic of being well-documented, GAO found that some of the source data either did not support the information described in the cost estimate or was not in the files provided for two of its largest field operations. In GAO's assessment of the 2015 version of the 2020 Census cost estimate, GAO recommended that the Bureau take steps to ensure that each of the characteristics of a reliable cost estimate is met. The Bureau agreed and has taken steps, but has not fully implemented this recommendation. A reliable cost estimate serves as a tool for program development and oversight, helping management make informed decisions. During this review, GAO found the Bureau used the cost estimate to inform decision making. Factors that contributed to cost fluctuations between the 2015 and 2017 cost estimates include: Changes in assumptions. Among other changes, a decrease in the assumed rate for self-response from 63.5 percent in 2015 to 60.5 percent in 2017 increased the cost of collecting responses from nonresponding housing units. Improved ability to anticipate and quantify risk. In general, contingency allocations designed to address the effects of potential risks increased overall from $1.3 billion in 2015 to $2.6 billion in 2017. An overall increase in information technology (IT) costs. IT cost increases, totaling $1.59 billion, represented almost 50 percent of the total cost increase from 2015 to 2017. GAO is not making any new recommendations but maintains its earlier recommendation—that the Secretary of Commerce direct the Bureau to take specific steps to ensure its cost estimate meets the characteristics of a high-quality estimate. In its response to this report, Commerce generally agreed with the findings related to cost estimation improvements, but disagreed that the cost estimate was not reliable. However, until GAO's recommendation is fully implemented the cost estimate cannot be considered reliable.", "document_type": "gao"}
{"report": "The Under Secretary of Defense for Acquisition and Sustainment has overall responsibility and oversight for DOD’s real property and provides overarching guidance and procedures for real property management. The Assistant Secretary of Defense for Energy, Installations, and Environment, assists with developing policy and guidance for real property inventory and serves as the focal point for all matters related to the inventory of real property assets. The military services and WHS are responsible for implementing policies, programs, and procedures in accordance with OSD’s guidance to maintain an accurate and complete real property inventory. They are also responsible for ensuring that real property requirements are being met when other DOD components, such as defense agencies and DOD field activities, utilize real property under their jurisdiction. The defense agencies and DOD field activities are responsible for confirming that all real property assets that they occupy, operate, or maintain are contained within the real property inventory and for reconciling any real property data, when needed, with their supporting military service or WHS. Real property inventory data are used at the installation, military service, and OSD levels for the recording, planning, managing, and reporting of DOD real property assets, as shown in figure 1. Installation level. Real property officials are to record transactions to document new acquisitions, changes to existing facilities, and disposals and to collect information—including physical characteristics, space usage, and facility condition—on the real property at each installation. Officials are to enter this information into corresponding military service or WHS real property data systems. Installation officials stated they use real property information for a variety of purposes such as prioritizing facilities for sustainment and restoration projects, preparing installation master plans, and conducting fire and safety planning. Service level. Military service headquarters and WHS use inventory information to oversee and manage their real property needs across their installations. For example, according to officials, these data inform how they use property to support their missions and to budget for required sustainment, restoration, or construction of real property. In addition, this information is used to account for real property asset holdings that are included in financial statements prepared to meet federal financial reporting requirements. OSD level. OSD requires that the military services and WHS submit their real property inventories to be compiled into a department-wide data set—RPAD. The OSD focal point is responsible for providing information from the RPAD to assist various OSD offices with responsibilities for budget and mission planning. For example, the information is used in budgeting for sustainment of facilities. Additionally, OSD offices use the information in mission planning for certain DOD components—defense agencies, DOD field activities, and U.S. Special Operations Command—and for certain types of facilities, including sustainable buildings, historic property, and ranges. Moreover, OSD uses this information to meet reporting requirements outside of DOD. These include reports to Congress on the utilization of DOD’s facilities. All executive branch federal agencies are required to annually submit real property data to the General Services Administration to compile into the Federal Real Property Profile. DOD also reports information to the Office of Management and Budget on disposals and square footage of certain types of purposes to meet report requirements for the National Strategy for the Efficient Use of Real Property. OSD provides annual guidance that gives specific requirements for content and format for the military services’ RPAD submissions, including data elements and any associated business rules. For fiscal year 2016, OSD required 216 data elements to be maintained in RPAD and provided a data dictionary, called the Real Property Information Model, which defines these elements. OSD also has a process to verify and validate the data the military services and WHS submitted annually to the RPAD that includes OSD using a verification and validation tool to determine whether each data element has an entry that is in the correct format and complies with established business rules. When data anomalies are discovered with the data, OSD provides the data back to the submitting organization for review and correction as necessary. The military services and WHS certify annually that the real property information submitted to OSD accurately reflects each of their inventories. Some key real property data elements are significant for planning and reporting on real property assets: Operational status. A code used to identify the current operational status of the real property asset, such as whether the site location of the asset is active, the existence of the asset, and the usage of the asset. Asset review. A date used to document any type of review of an asset. DOD requires that each facility be physically inventoried on a cycle—every 5 years for non-historic facilities and every 3 years for historic facilities. Plant replacement value. A calculation of the cost to replace the current physical plant (facilities and supporting infrastructure) using today’s construction costs (labor and materials) and standards (methodologies and codes). Utilization rate. A percentage (on a scale 0 to 150) used to represent the extent to which a real property asset is used by the primary user for the current program based on its design purpose. DOD has not established cutoff points to determine unutilized, underutilized, and utilized real property. However, according to OSD officials, DOD considers a utilization rate of 101 to 150 as over utilized, meaning an asset’s available space is not sufficient to meet the primary user’s space requirement. Facility condition. A measure of a facility’s physical condition that is expressed as a percentage (on a scale of 0 to 100). Factors used to calculate the facility condition include the facility’s estimated deferred maintenance and repair costs and the facility’s plant replacement value. DOD guidance states a condition of 0 to 59 is failing; 60 to 79 is poor; 80 to 89 is fair; and 90 to 100 is good. Figure 2 displays these real property data elements. DOD has undertaken several financial management improvement initiatives over the years to address deficiencies in business systems, processes, and controls through its Financial Improvement and Audit Readiness (FIAR) Plan. The FIAR Plan guidance includes 40 of the data elements required to be reported to OSD and maintained in RPAD within the scope of the effort. As part of the department’s FIAR effort, each of the military services developed individual plans to prepare their management processes, such as their accountability systems and procedures for real property, which would be tested during financial audit. The military services’ real property efforts to prepare for financial audit have included developing manuals, monitoring activities such as testing of the implementation of real property procedures, and implementation of corrective actions to address identified deficiencies in the processes and procedures. DOD’s RPAD has data quality issues specific to accuracy of certain data elements and completeness of the dataset, although certain data we reviewed improved since fiscal year 2014. Accuracy of data elements and completeness of RPAD are important to OSD, other federal agencies, and Congress because they use this information to determine facility sustainment funding and to understand DOD’s utilization of its real property as a means to identify potential excess property for disposal, among other things. We found that accuracy of certain data in the selected set of key data elements we reviewed improved while other data contained discrepancies that resulted in inaccuracies in RPAD for fiscal years 2014 through 2016. For some data we reviewed, the magnitude of such discrepancies decreased while others increased from fiscal year 2014 to fiscal year 2016. Specifically, we found: Operational status. For operational status codes that are not an active status, such as an asset that was determined to be excess or surplus, or disposed, OSD’s business rules require a corresponding date that documents when the status was determined or when a disposal was completed. If the corresponding date is not provided, then the operational status cannot be verified as correct. Our analysis of operational status from fiscal year 2014 through fiscal year 2016 found improvements in data on surplus and disposed facilities. The percentage of surplus and disposed facilities without a valid date improved from 37.5 percent to 0 percent and 3.3 percent to 0.3 percent, respectively. However, the percentage of excess facilities without a valid date increased from 22.7 percent to 47.9 percent. Asset review date. All facilities are required to have a date that documents a physical inventory; these reviews are to be conducted at least every 5 years, unless a historic asset. The percentage of facilities with a review date older than 5 years improved from 34.1 percent in fiscal year 2014 to 22.1 percent in fiscal year 2016. RPAD in fiscal year 2016 indicated that 143,420 facilities had a physical inventory date that was older than 5 years, which suggests that the information for these facilities may not be accurate because the information has not been updated within the required time frame. According to real property installation officials, overdue dates can occur because the physical inventory was either not conducted or the information from the physical inventory was not entered into the military services’ data systems. The percentage of facilities with a missing review date increased from 3.4 percent in fiscal year 2014 to 7.2 percent in fiscal year 2016. Plant replacement value. All facilities are required to have a plant replacement value not less than zero, meaning it cannot be a negative number. For all 3 fiscal years, none of the facilities had a negative plant replacement value and missing entries were an insignificant number. The business rules allow for values of zero though these entries may potentially create problems for other data elements that use plant replacement value as part of their calculation. For example, plant replacement value is a denominator in the formula used to calculate facility condition index. If a plant replacement value is zero, the facility condition index cannot be determined. The percentage of facilities with a plant replacement value of zero declined from 3.4 percent in fiscal year 2014 to 2.3 percent in fiscal year 2016. Utilization rate. All facilities are required to have a utilization rate from 0 to 150. The percentage of facilities missing a utilization rate improved from 23.3 percent in fiscal year 2014 to 2.4 percent in fiscal year 2015 before increasing to 14.4 percent in fiscal year 2016. As such, in fiscal year 2016, about 93,600 facilities did not have an indication of the utilization and this information was not available to users of RPAD. Facility condition index. All facilities are required to have a facility condition from 0 to 100. The percentage of facilities that had missing facility condition entries increased from 0.5 percent in fiscal year 2014 to 5.6 percent in fiscal year 2016. Figure 3 displays our analysis of discrepancies between the information requirements and data entries in RPAD. RPAD did not include all of DOD’s existing real property assets in fiscal years 2014 through 2016, resulting in an incomplete data set. Specifically, we found (1) the military services have not recorded all assets that existed and reflected previously disposed facilities that no longer existed as active in their respective data systems, (2) the military services did not report all assets in the RPAD submission to OSD that were recorded in each military service’s data system, and (3) OSD did not include all assets reported by the military services in RPAD, as shown in figure 4. We and others found instances of facilities that existed that the military services did not record in their data systems and of disposed facilities that no longer existed but were still reflected as active in RPAD. During our 12 site visits, officials at two installations stated that there were real property assets on their installations that were not recorded in their real property data system at the time of our visit. For example, real property officials at an Army installation identified over 2,000 existing assets—primarily linear structures—that were not in the inventory. Real property officials at a Marine Corps installation acknowledged that they were aware of assets that were not recorded in the data system but did not know the quantity of these. The officials stated they were in the process of reconciling the real property inventory with the assets in existence on the installation. In May 2018, Marine Corps Headquarters officials stated they plan to send real property officials to this location from other installations to assist with entering identified assets into the inventory. With the additional support, the officials expect the reconciliation to be completed in fiscal year 2019, 3 years earlier than initially planned. Moreover, in our review of 120 facilities during site visits, we found that 6 of the facilities had been disposed of but were recorded as active in the fiscal year 2015 RPAD data of the Air Force and Army. For example, all four of the Army’s disposals occurred previous to fiscal year 2015 but were not entered into the data system until fiscal year 2016. The changes were made and reflected in the inventory submission for fiscal year 2016. Also, one of the Air Force’s assets, fencing, had been disposed of years ago with the housing project that it enclosed, but was not included in the original disposal documentation. The real property installation officials had identified this omission when reviewing the list of assets that we selected for our review and began documenting the disposal prior to our site visit. DOD reported in its 2017 Agency Financial Report that material weaknesses in its internal controls over real property resulted in, among other things, that the department could not substantiate that all existing assets were recorded in the military services data systems. Similar to our site visit results, the Navy Office of Financial Operations also reported in June 2017 that 15 of 650 real property assets tested from a non- generalizable sample were reported to have been disposed of, but were not recorded as disposed of or removed from the Navy’s data system. Additionally, we found RPAD did not include some facilities that were in the military services’ data systems. The number and total plant replacement value across these three data sets should be identical, but were not in each of the 3 years that we reviewed. This means information on the excluded real property was not available to users of RPAD or to the Federal Real Property Profile. Specifically, The military services did not report all facilities in their data systems to OSD for inclusion into RPAD. Our analysis found the Army, Navy, and Marine Corps did not report to OSD between approximately 40,900 facilities (6.1 percent) and 103,600 facilities (15.9 percent) of the facilities included in their data systems in fiscal years 2014 through 2016. If all of these facilities still existed during those years, these unreported facilities had a total plant replacement value that ranged from $12.8 billion to $56.5 billion during the 3 fiscal years. We could not include the Air Force in this analysis because it was not able to provide its end-of-year real property inventory for fiscal years 2014 through 2016. Air Force officials stated that their contractor did not archive copies of the end-of-year real property inventory for these years but would begin to do so for fiscal year 2017. OSD did not include all facilities reported by the military services and WHS in RPAD. Additionally, our analysis showed that the number of facilities OSD did not include in RPAD ranged from about 3,300 facilities (0.5 percent) to 19,400 facilities (2.6 percent) of the facilities reported by the military services and WHS in fiscal years 2014 through 2016. If all of these facilities still existed during those years, the total plant replacement value of the unreported facilities ranged from $3.4 billion to $21.6 billion. OSD and military service officials agreed that accuracy and completeness issues with real property have been a long standing issue, but stated recent audit efforts associated with FIAR should result in some improvements of the data. For example, military service installations officials stated that they are working to reconcile differences between existing real property and information in their data systems to include adding existing assets that are not in the data system and correcting information on disposed assets. Moreover, military service officials stated that they have emphasized conducting timely physical inventories and require installations to report on the currency of their physical inventories. According to officials, when reporting real property to OSD and when OSD consolidates this information into RPAD, assets with significant errors in their records are excluded to improve the accuracy of the information in the data set. The officials explained as the accuracy of the data improves through physical inventories, fewer assets will be excluded in the reporting process, which will improve completeness of RPAD. However, as we describe further in this report, the audit efforts will not correct all identified accuracy and completeness issues. DOD’s processes for recording and reporting real property data have deficiencies that contribute to inaccuracies and incompleteness in the RPAD data. Specifically, we identified inconsistencies in the military services’ recording of real property transactions and physical inventories of assets. In addition, we found the military services have not corrected identified discrepancies in their real property data reported to OSD in the annual RPAD submissions. According to a DOD instruction, OSD must establish, issue, and maintain data requirements for DOD’s real property inventory. As such, DOD requires that the military services maintain an accurate and complete record of their real property, regardless of the organization using or funding the real property. The real property accountable officers at each installation must implement processes to ensure that all real property transactions are auditable and that information recorded, including physical inspections, is accurate, complete and retained in accordance with applicable laws and regulations. OSD also requires that the military services report their real property data for RPAD following OSD requirements and that they utilize OSD’s verification and validation tool to identify discrepancies between data entries and DOD’s real property information requirements. OSD and the military services have developed some procedures to implement these policies. For example, OSD established an annual reporting process, to include defining the specific content and format for the submission of information. Moreover, the military services have developed written procedures that clarify how specific transactions should be conducted. For example, the Marine Corps has developed detailed guidance on control processes for appropriately documenting disposed assets. The Navy has developed procedures for conducting physical inventories. The Army has defined roles and responsibilities for accounting for real property, including changes to facility function (i.e., category code). Lastly, the Air Force has developed overall policies and procedures for accounting for real property that defines the roles and responsibilities of accountable officials. The processes for recording real property information include documenting and entering into the data system when transactions— acquisition of, change to, and disposal of a real property asset—or physical inventories occur. To document a transaction or physical inventory, real property installation officials are expected to complete the required supporting records. According to Standards for Internal Control in the Federal Government, appropriately designed control activities could include requiring documentation should be completed within a reasonable time frame after the event occurs. Then, the officials are to promptly enter the updated information into the real property data system. DOD also requires a review of each real property asset record, including a physical inventory of each real property asset every 5 years for non- historic assets or every 3 years for historic assets. Physical inventories help ensure current and accurate information on assets are reflected in the military services’ data systems. Furthermore, the Standards for Internal Control in the Federal Government require agencies to design control activities to achieve objectives, to monitor activities, and to remediate identified deficiencies on a timely basis. Such activities could include appropriately documenting and accurately and timely recording transactions, and implementing procedures to help ensure that processes are monitored and evaluated for deficiencies on an ongoing basis, corrective actions are determined for any identified deficiencies, and these actions are completed and documented to correct deficiencies on a timely basis. We and the military services identified that transactions were not being consistently documented with required supporting records or entered into the military services’ data systems within reasonable time frames. Specifically, during our site visits to 12 military services’ installations, officials at 5 installations stated that they were experiencing delays with documenting and entering into the data system some transactions. According to the officials, this occurred due to challenges with obtaining required information from contractors, heavy workloads, and staff shortages. Moreover, the military services found through testing in 2017 that they did not consistently document transactions with required supporting records or enter real property transactions into the data system. The military services conducted these tests as part of their preparation for financial statement audits to identify deficiencies in the recording of real property transactions. The military services were then to develop corrective action plans and remedy any identified deficiencies prior to the department’s audit of the fiscal year 2018 financial statements. Specifically, The Air Force conducted tests in March 2017 and reported that of 271 assets tested, 171 did not have appropriate supporting records. The Air Force also reported in a separate test of 27 assets that 17 of these were not timely or accurately recorded. The Army conducted tests in October 2017 and reported that more than half of the assets selected did not pass its testing for one or more of the 9 key data elements associated with plant replacement value. Lack of adequate supporting records was the most common reason for test failure. The Navy conducted tests in October 2017 and identified documentation issues or key elements that were not timely or accurately entered into its data system for 11 out of 58 assets tested. The Marine Corps conducted tests in July 2017 and identified documentation issues or key elements that were not timely or accurately entered into its data system for 20 of 55 assets tested. We and the military services have identified that real property installation officials do not consistently document or enter physical inventory information into the military services’ data systems. We found during our site visits to 12 military service installations that for 21 facilities out of 106 facilities tested, real property installation officials had not entered physical inventory information in the military services’ data system within the last 5 years. The 21 facilities we reviewed included 16 from the Air Force (with 2 reflected as being last inventoried in January 1934 or October 1992), 4 from the Army, and 1 from the Marine Corps (which showed as being been last inventoried in November 2003). The military services also identified similar inconsistencies with recording physical inventories in testing of their real property assets as part of their preparation for financial statement audits: The Air Force conducted tests in March 2017 and reported that installation officials, for 89 out of 281 assets tested, did not have complete supporting records or did not timely provide the most recent physical inventory checklist that reconciled with the Air Force’s data system. The Army conducted tests in September 2016 and reported 1 of the 5 installations tested did not have adequate supporting records for asset changes identified in physical inventories. The Navy conducted tests in June 2017, and reported 5,918 of the 34,104 assets tested had not had a physical inventory for more than 5 years. Furthermore, in October 2017, the Navy reported that 9 of 41 assets it tested did not have supporting records that the inventory was performed per DOD requirements for timeliness. The Marine Corps had an external auditor conduct tests in September 2017 and reported that installation officials could not support the last physical inventory performed for 83 of 998 assets tested. The military services did not fully monitor recording processes on an ongoing basis, including evaluating whether or the extent to which activities are being carried out and remediating any identified deficiencies. We found that this occurred in part due to the military services not being required to conduct ongoing monitoring of the processes used for recording real property transactions and physical inventories. According to military service officials, they conduct monitoring of recording and have begun developing corrective action plans as part of the recent audit readiness effort that are based on the Financial Improvement and Audit Readiness Guidance. However, this guidance aimed principally at improving financial reporting addresses 40 of the 216 data elements required to be maintained in RPAD. DOD has not determined to what extent the remaining data elements are a priority for other management purposes beyond financial reporting. Accordingly, the remaining 176 data elements, or approximately 80 percent, are not required to be monitored. For example, the recording of RPAD-required data elements for dates that support an operational status of excess, surplus, and disposed or document when a facility was built are not included in current monitoring efforts. The monitoring of the recording of only about 20 percent of the required data elements in RPAD results in inaccurate and incomplete data not being systemically evaluated and corrective actions not being taken to resolve the issues. Unless the military services are required to monitor on an ongoing basis the processes used for recording all required real property information, DOD will continue to have data quality issues related to accuracy and completeness in the military services’ data systems that will be reflected in RPAD. The military services have not corrected identified discrepancies in their real property data reported to OSD in the annual RPAD submissions. OSD provided the military services with a verification and validation tool to identify data that does not comply with information requirements. Specifically, from fiscal years 2014 through 2016, the military services used OSD’s verification and validation tool to identify discrepancies and submitted reports summarizing the results to OSD, but have not corrected all discrepancies identified by the tool. According to real property installation officials, they have not been directed by headquarters to correct discrepancies in their data systems that were identified in their annual RPAD submission. Our review of 120 assets during the 12 installation site visits confirmed that 61 assets with discrepancies in five key data elements tested in the fiscal year 2015 RPAD data set continued to have these discrepancies in 2017. Based on our analysis, the military services have not corrected identified discrepancies in part because OSD’s guidance for annual RPAD reporting does not define which data elements were most significant to the department’s decision making and should be a priority for correction. Furthermore, we found that the guidance does not require the military services to develop and implement corrective action plans to remediate discrepancies in significant data elements in their data systems that are identified by OSD’s verification and validation tool. According to OSD and military service officials, identifying significant data elements could assist with streamlining and prioritization of efforts to improve data quality. In addition, OSD officials agreed that requiring the services to develop and implement corrective action plans would benefit data quality, but stated there are challenges with the verification and validation tool that would need to be addressed to leverage its full potential. By OSD not defining significant data elements and coordinating corrective action plans to remediate discrepancies, the military services may continue to submit information with discrepancies from year to year in some data elements and will miss an opportunity to improve the accuracy of inventory data. DOD has not addressed three risks—unfilled real property positions to manage its data, lack of a department-wide approach to improving data quality, and a limited plan for the implementation of its expanded data platform—that diminish its ability to use real property information to manage its real property. We found that DOD has not addressed how it will overcome unfilled real property positions throughout the department, which poses a risk to data quality. For example, real property installation officials at 10 of 12 installations we visited told us that they had unfilled real property positions, including real property accountable officers, engineers, realty specialists, planners, and space management analysts. Real property installation officials told us that their unfilled real property positions contributed to workload backlogs and prevented them from sufficiently maintaining their real property data. The Army, Marine Corps, and Navy completed various workforce plans that found they did not have a sufficiently sized workforce to adequately maintain their real property data: Army: In March 2015, the Army completed a workforce analysis that found current authorized manning documents are short 223 real property positions of the total 495 positions required to perform these functions, which include real property accountable officers and realty specialists. Marine Corps: In August 2016, the Marine Corps identified that it had an immediate need for 20 real property accountable officer positions to effectively maintain its real property data. According to Marine Corps officials, they have since filled 19 of the 20 positions. Navy: For its fiscal year 2018 planning, the Navy identified a need for 63 real property positions—ranging from real property accountable officers to geospatial specialists—to meet real property requirements. The Air Force has not identified the workforce it needs to maintain quality data on its real property, but Air Force officials told us in May 2018, that they are beginning efforts to better understand their workforce needs. OSD and military service officials stated that they continually face challenges due to unfilled real property positions. However, they do not expect to fill all of their authorized positions because senior leadership has prioritized staffing at other offices and military service officials stated that they face challenges in finding qualified applicants for open positions. Despite the recognized needs, DOD has not outlined how it plans to overcome challenges related to its unfilled real property positions. According to an OSD official, OSD cannot direct the military services to fill their real property positions; however, OSD has not coordinated with the military services to identify opportunities to overcome unfilled positions. Potential opportunities may include using available staff more efficiently or evaluating opportunities to better address how they will manage unfilled positions. Absent a department-wide approach to improving data at various levels within DOD, military service headquarters have individually initiated actions to improve data quality for certain data elements. These efforts are largely uncoordinated and result in inconsistent approaches to address similar data quality risks and may contribute to inefficient use of resources and accuracy issues in the real property data. For example, military service headquarters officials told us they have taken action to improve data quality when they do not receive specific guidance from OSD, including communicating priorities to installations and developing contracts to improve select data elements. We found instances where the military services took different actions to improve their information on utilization rates prior to OSD issuing a memorandum to have a standardized approach to determine this information. For example, the Army developed a database to record space authorization information for each asset. The Marine Corps used a contract to obtain space utilization information at certain installations. Moreover, a Marine Corps headquarters official stated in some cases that after Marine Corps headquarters implemented its own policy and provided guidance to the installations to fill a gap that OSD issued guidance with a different approach. The official stated that the Marine Corps had spent financial resources on a contract to improve a data element that they later had to categorize in a different way due to OSD guidance. Also, real property installation officials at a Marine Corps installation stated that their headquarters had made large-scale changes to the records of their housing assets due to a new approach to determine specific data elements for those assets, which resulted in inaccuracies. Officials noted that headquarters later retracted that approach and restored the records. In addition, we observed in our review of real property records during the site visits that real property installation officials did not apply the same criteria for determining an asset’s operational status for the codes of disposed, closed, and nonfunctional that resulted in inaccuracies. Navy regional command officials provided written guidance and a decision support tool for determining appropriate codes for operational status to help improve accuracy within this data element. However, according to real property installation officials, the Air Force and Army did not have similar guidance. OSD and military service officials agreed that better coordination among OSD and the military services would assist their effort to improve data quality. OSD has not fully identified how it will complete implementation of a new module for real property within its expanded data platform, known as the Data Analytics and Integration Support platform, and DOD faces a risk to information accessibility as it may not fully realize the anticipated benefits of the effort. OSD currently uses the platform for generating unique identification numbers for its real property assets and as a dashboard for tools related to military construction planning. However, OSD has neither outlined how it will accomplish its stated objectives and goals for expansion of this platform as OSD’s new data system for real property, nor has it set time frames for the expansion. In September 2017, OSD modified its contract for updating the Data Analytics and Integration Support platform, but that contract does not specify when full implementation of the expansion to include a new module for real property will occur. OSD is planning to expand the use of the Data Analytics and Integration Support platform to make it a near real-time, department-wide information source of required real property information accessible to a greater number of users who manage real property. If implemented, this expanded platform would replace DOD’s annual data call to the military services for end-of-year real property information to compile into the RPAD. Further, the expanded platform would interface daily with the military service data systems. This would provide near real-time information to users for the department-wide management of DOD’s real property. According to OSD officials, users could also access real property information themselves and run their own data analyses when OSD expands this platform to replace the annual data call to the military services. Figure 5 displays a comparison of RPAD to the proposed expansion of the Data Analytics and Integration Support platform. OSD officials told us that the military services will need to ensure their data systems can fully interface with the Data Analytics and Implementation Support platform for full integration to occur. Specifically, the officials stated that the Army’s data system can fully interface with OSD’s expanded platform, but the Navy wants to test how its data system would interface with the platform before it can fully connect. In addition, officials noted that the Air Force’s current data system is the least compatible with OSD’s expanded data platform because it is currently working to design and implement a new data system for real property. OSD and Air Force, Marine Corps, and Navy officials noted that they are aware the military service data systems are not fully integrated with OSD’s expanded data platform. Guidance from DOD and the Office of Management and Budget note that risk management is integral to effective program management. The Standards for Internal Control in the Federal Government states management should define objectives clearly such as through specific and measurable terms that allow for the assessment of performance toward achieving those objectives and that management should identify, analyze, and respond to risks related to achieving defined objectives. The office of the Assistant Secretary of Defense for Energy, Installations, and Environment is responsible for providing the guidance and procedures for implementing real property management policy, including ensuring the information is available to determine if an asset is used effectively. One way an organization can manage risk is by developing a risk management strategy that identifies risks to program objectives, and includes time frames and performance metrics for addressing those risks. DOD has taken some actions that when fully implemented should result in some improvements to select data elements and the potential to enhance information accessibility. However, in part, DOD’s weaknesses with quality information on real property and accessibility to this information continue to exist because DOD has not developed a strategy that identifies and addresses risks, such as those previously described, and includes time frames and performance metrics. OSD and military service officials agreed that a strategy for addressing risks would help the department to further its effort to improve the quality and accessibility of the information. Developing and implementing such a strategy would allow the department to take key steps toward improving its information for managing its real property. Without a strategy for improving the quality of the data and information used to manage its real property, DOD, Congress, the Office of Management and Budget, and the General Services Administration will not have information needed for effective decision making and do not have reasonable assurance that risks to data quality and information accessibility are being managed appropriately. Specifically, information would be limited in decision making related to improving space management at installations, to adequately sustaining DOD’s real property assets, and to accurately generating financial statements. DOD’s efforts to reform its real property management is complicated by not having quality data on its large inventory of assets—over 568,000 facilities with an estimated combined plant replacement value of about $1 trillion. An accurate and complete inventory of its assets is essential for DOD to make informed management decisions about its real property. The department has taken action to improve data quality of some data elements through financial improvement and audit readiness efforts. However, deficiencies in the processes for recording and reporting real property data continue to lead to inaccurate and incomplete information. The military services do not require monitoring of the recording of all required real property information, to include evaluating on an ongoing basis whether or to what extent these activities are carried out and remediating any identified deficiencies. In addition, OSD has not defined which data elements were significant to the department’s decision making and which should be a priority for correction. Also, the military services do not have plans to correct the discrepancies in significant data elements in their data systems that are identified by OSD’s verification and validation tool. Without taking actions to address these deficiencies, DOD will continue to have inaccurate and incomplete real property data and unreliable information in RPAD. DOD also has not developed a strategy that establishes time frames and performance metrics to address risks to data quality and information accessibility. Specifically, DOD faces risks related to unfilled real property positions, a lack of a department-wide approach to improving data, and a limited plan for implementation of OSD’s expanded data platform. Without a strategy to address these risks, DOD is missing an opportunity to ensure that the information needed for effective decision making, such as budget decisions and oversight by Congress, is available to meet real property accountability and reporting objectives and to avoid inefficient and potentially costly workarounds, such as additional data calls to installations. We are making a total of 6 recommendations to the Department of Defense: The Secretary of the Army should require monitoring of its processes used for recording all required real property information—to include evaluating on an ongoing basis whether or to what extent these activities are being carried out—and remediating any identified deficiencies. (Recommendation 1) The Secretary of the Navy should require monitoring of Navy and Marine Corps processes used for recording all required real property information—to include evaluating on an ongoing basis whether or to what extent these activities are being carried out—and remediating any identified deficiencies. (Recommendation 2) The Secretary of the Air Force should require monitoring of its processes used for recording all required real property information—to include evaluating on an ongoing basis whether or to what extent these activities are being carried out—and remediating any identified deficiencies. (Recommendation 3) The Secretary of Defense should ensure that the Undersecretary of Defense for Acquisition and Sustainment, in collaboration with the military services, defines and documents which data elements within the RPAD submissions are most significant for decision-making. (Recommendation 4) The Secretary of Defense should ensure that the Undersecretary of Defense for Acquisition and Sustainment, in collaboration with the military services, coordinates on corrective action plans to remediate discrepancies in significant data elements in its real property data system that are identified by OSD’s verification and validation tool. (Recommendation 5) The Secretary of Defense should ensure that the Undersecretary of Defense for Acquisition and Sustainment, in collaboration with the military services, develops a strategy that identifies and addresses risks to data quality and information accessibility. At a minimum, this strategy should establish time frames and performance metrics for addressing risks related to (1) unfilled real property positions, (2) a lack of a department- wide approach to improving its data, and (3) implementation of OSD’s expanded data platform. (Recommendation 6) We provided a draft of this report to DOD for comment. In written comments, DOD concurred with four recommendations and partially concurred with three recommendations. DOD’s comments are summarized below. DOD also provided technical comments, which we incorporated as appropriate. In written comments, DOD stated that Recommendations 2 and 3 should be combined to more appropriately align with authority and responsibility of the U.S. Navy and U.S. Marine Corps as a single Military Department and DOD concurred with the combination of the two recommendations. Based on these comments, we combined the draft recommendations for separate actions by the Secretary of the Navy and the Commandant of the Marine Corps into one recommendation. In our final report, the action is addressed to the Secretary of the Navy in Recommendation 2 and our total number of recommendations is decreased to six. DOD partially concurred with our recommendation that the Undersecretary of Defense for Acquisition and Sustainment collaborate with the military services to develop a strategy that identifies and addresses risks to data quality and information accessibility (Recommendation 6). We recommended that the strategy, at a minimum, include timeframes and performance metrics for addressing risks and include other specific information. However, DOD stated that it plans to collaborate with the military services on separate service strategies that reflect each military service’s operating environment. We continue to believe that DOD would benefit from one department-wide strategy to improve data quality and information accessibility. For example, we found that the military services’ efforts to improve data quality have been largely uncoordinated and had led to inconsistent approaches, which may have contributed to data inaccuracies. Further, we found that OSD has not fully identified how it will complete implementation of a data platform expansion to include real property information and may not realize the anticipated benefits of the effort. The platform is an effort managed by OSD and would benefit from a single DOD strategy addressing key points noted in our recommendation. Accordingly, we believe our recommendation remains warranted. DOD’s comments are reprinted in their entirety in appendix II. We are sending copies of this report to the appropriate congressional committees and to the Secretary of Defense; the Under Secretary of Defense for Acquisition and Sustainment; the Under Secretary of Defense (Comptroller); and Secretaries of the Departments of Air Force, Army, and Navy, the Commandant of the Marine Corps, and the Director of Washington Headquarters Services. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Brian J. Lepore at (202) 512-4523 or leporeb@gao.gov or William J. Cordrey at (404) 679-1873 or cordreyw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are listed on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. For the military services and Washington Headquarters Services’ real property inventories, DOD requires that the data elements shown below in table 1 be validated through a physical inventory of each real property asset. Physical inventories are to be performed every 5 years or every 3 years for historic assets. In addition to the contacts named above, Gina Hoffman (Assistant Director), Paul Kinney (Assistant Director), Susan Langley (Analyst-in- Charge), Scott Bruckner, Vincent Buquicchio, Josh Edelman, Chad Hinsch, Brad Johnson, Amie Lesser, Carol Petersen, Sam Portnow, Richard Powelson, Michael Silver, and John Yee made key contributions to this report. DOD Financial Management: The Navy Needs to Improve Internal Control Over Its Buildings, GAO-18-289. Washington, D.C.: May 10, 2018. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO-17-317. Washington, D.C.: February 15, 2017. Defense Facility Condition: Revised Guidance Needed to Improve Oversight of Assessments and Ratings, GAO-16-662. Washington, D.C.: June 23, 2016. DOD Financial Management: Greater Visibility Needed to Better Assess Audit Readiness for Property, Plant, and Equipment, GAO-16-383. Washington, D.C.: May 26, 2016. Defense Infrastructure: More Accurate Data Would Allow DOD to Improve the Tracking, Management, and Security of Its Leased Facilities, GAO-16-101. Washington, D.C.: March 15, 2016. Underutilized Facilities: DOD and GSA Information Sharing May Enhance Opportunities to Use Space at Military Installations, GAO-15-346. Washington, D.C.: June 18, 2015. Defense Infrastructure: DOD Needs to Improve Its Efforts to Identify Unutilized and Underutilized Facilities, GAO-14-538. Washington, D.C.: September 8, 2014. Defense Infrastructure: Army Brigade Combat Team Inactivations Informed by Analyses, but Actions Needed to Improve Stationing Process, GAO-14-76. Washington, D.C.: December 11, 2013. Federal Real Property: Greater Transparency and Strategic Focus Needed for High-Value GSA Leases, GAO-13-744. Washington, D.C.: September 19, 2013. Military Bases: Opportunities Exist to Improve Future Base Realignment and Closure Rounds, GAO-13-149. Washington, D.C.: March 7, 2013. Military Base Realignments and Closures: Updated Costs and Savings Estimates from BRAC 2005, GAO-12-709R. Washington, D.C.: June 29, 2012. Excess Facilities: DOD Needs More Complete Information and a Strategy to Guide Its Future Disposal Efforts, GAO-11-814. Washington, D.C.: September 19, 2011. Defense Infrastructure: The Enhanced Use Lease Program Requires Management Attention, GAO-11-574. Washington, D.C.: June 30, 2011. Federal Real Property: Progress Made on Planning and Data, but Unneeded Owned and Leased Facilities Remain, GAO-11-520T. Washington, D.C.: April 6, 2011. Military Base Realignment and Closures: DOD Is Taking Steps to Mitigate Challenges but Is Not Fully Reporting Some Additional Costs, GAO-10-725R. Washington, D.C.: July 21, 2010. Defense Infrastructure: Continued Management Attention Is Needed to Support Installation Facilities and Operations, GAO-08-502. Washington, D.C.: April 24, 2008. Federal Real Property: Progress Made Toward Addressing Problems, but Underlying Obstacles Continue to Hamper Reform, GAO-07-349. Washington, D.C.: April 13, 2007. Defense Infrastructure: Issues Need to Be Addressed in Managing and Funding Base Operations and Facilities Support, GAO-05-556. Washington, D.C.: June 15, 2005. Defense Infrastructure: Changes in Funding Priorities and Strategic Planning Needed to Improve the Condition of Military Facilities, GAO-03-274. Washington, D.C.: February 19, 2003. Defense Infrastructure: Military Services Lack Reliable Data on Historic Properties, GAO-01-437. Washington, D.C.: April 6, 2001. Military Infrastructure: Real Property Management Needs Improvement, GAO/NSIAD-99-100. Washington, D.C.: September 7, 1999.", "summary": "DOD manages a portfolio of real property assets that as of fiscal year 2016 reportedly included about 568,000 facilities with a combined plant replacement value of about $1 trillion and 27.2 million acres of land. DOD requires the military services and Washington Headquarters Services to collect and maintain information about each of the assets in their inventories to assist the department with management decision making. In May 2017, the House Armed Services Committee, Subcommittee on Readiness, asked GAO to review DOD's management and use of its real property data. This report evaluates (1) how accurately and completely RPAD reflects DOD's real property assets, (2) DOD's processes to ensure accuracy and completeness in recording and reporting real property data, and (3) DOD's actions to ensure it has addressed risks that may affect the use of real property information for managing its assets. GAO analyzed the RPAD and military services' data for fiscal years 2014-2016; reviewed documentation; conducted site visits; and interviewed DOD officials. GAO found that the Department of Defense's (DOD) Real Property Assets Database (RPAD) contained inaccurate data and lacked completeness, although certain data that GAO reviewed had improved their accuracy since fiscal year 2014. RPAD is a department-wide database of real property data annually compiled by the Office of the Secretary of Defense from the inventories of the military services and DOD's Washington Headquarters Services, which manages real property in the National Capital region. DOD uses RPAD to report on DOD's real property to Congress and other federal agencies, such as the Office of Management and Budget and the General Services Administration to assist in managing federal real property. DOD has weaknesses in its processes for recording and reporting real property data that have led to inaccurate and incomplete information. GAO and others found military services have not consistently recorded real property transactions (i.e., acquisition of, change to, and disposal of a real property asset) and physical inventories of assets. GAO also found that the military services have not corrected identified discrepancies in their data systems, such as missing entries for utilization and facility condition and overdue asset reviews. GAO reviewed records of 120 facilities with identified discrepancies in fiscal year 2015 RPAD data and compared them to the records in the respective data system in 2017 and found that 61 discrepancies remained. The military services had corrected the data in the remaining 59 reviewed facilities in their data systems. DOD's efforts to prepare for an upcoming financial audit have helped identify issues and improve accuracy of some data. However, if DOD does not require the military services to fully monitor recording processes and implement corrective actions to resolve data discrepancies, the department will continue to have incomplete and inaccurate real property data and unreliable RPAD information. DOD has not addressed three risks that can adversely affect its ability to use its information to manage its real property. Specifically, DOD (1) has unfilled real property positions limiting its capacity to manage its data, (2) lacks a department-wide approach to improving its data quality, and (3) has not identified how it will complete implementation of an effort to improve access to data. These risks exist, in part, because DOD has not developed a strategy that identifies and addresses risks with accompanying time frames and performance metrics. If DOD does not develop a strategy that identifies and addresses risks to data quality and information accessibility, DOD may miss the opportunity to reasonably ensure that the information needed for effective decision making by DOD, Congress, and other federal agencies is available to meet real property accountability and reporting objectives. GAO is making six recommendations to improve DOD's real property data, including fully monitoring recording processes; developing and implementing corrective actions for identified data discrepancies; and developing a strategy to address risks associated with data quality and information accessibility. DOD concurred or partially concurred with all draft recommendations. In response, GAO agreed to combine two recommendations.", "document_type": "gao"}
{"report": "The federal government is the largest real property owner in the United States with a vast inventory costing billions of dollars annually to operate and maintain. Federally owned buildings include courthouses, offices, warehouses, schools, hospitals, housing, data centers, and laboratories, among other things. GSA acts as the federal government’s landlord, and is responsible for designing, constructing, and managing federal buildings for other federal agencies and the judiciary to occupy. There are currently approximately 1,600 federally owned buildings under GSA’s custody and control. According to the Office of Management and Budget (OMB), agencies, including GSA, should have accurate information on acquisition and “lifecycle” costs of current and proposed assets, including costs for designing and constructing the building, O&M, and disposal. For example, when planning and designing new federal buildings, GSA must analyze building energy and water systems (e.g., for air conditioning and heating) to identify those with the lowest acquisition and operating costs. In addition, once the building is constructed, GSA building managers and O&M contractors are responsible for maintaining the building, which includes tasks related to recurring maintenance and repair (e.g., on heating and cooling systems), maintaining the property’s roads and grounds, cleaning and janitorial services, and paying for utilities. In 1994, GSA instituted the Design Excellence Program, a process for designing, constructing, renovating, altering, and repairing federal courthouses and office buildings. This program was developed in response to criticisms that federal buildings lacked architectural distinction. It stresses creativity in the design of buildings with the intent of constructing spaces that meet the tenant’s functional needs while also becoming public landmarks. More specifically, the program aims to meet several guidelines—called the Guiding Principles for Federal Architecture— including designing spaces that: reflect the dignity, enterprise, vigor, and stability of the U.S. government; avoid uniformity; and are built in locations in which federal buildings can be incorporated into the existing public streets and landscape. According to GSA officials, the Design Excellence Program also streamlines how GSA selects and manages the private-sector architects and engineering firms it hires for new projects. The process consists of four primary stages: planning for the prospective tenant’s needs and general project details (e.g., request for proposal announcement); selecting and working with an architectural and engineering firm to design the building; selecting a contractor to construct the building; and occupancy by the tenants. The process is overseen by a GSA project team, consisting of a project manager, contracting officer, officials from GSA’s Office of the Chief Architect, and additional subject matter experts, who work with the federal tenant that plans to occupy the space. A large number of the federal courthouses and office buildings constructed and controlled by GSA in the last 20 years have been completed under the Design Excellence Program. Under the program, GSA has constructed 78 facilities including 62 courthouses and 16 federal office buildings, including a data center and laboratories. These buildings account for more than 36-million square feet of space, are located in 33 states and the District of Columbia, and many have won architecture and design awards. Figure 1 shows examples of federal courthouses and office buildings constructed under the Design Excellence Program. According to interviews with GSA officials and building tenants, GSA has made choices in some Design Excellence buildings intended to reduce long-term O&M costs. For example: Increased natural light. All 10 of the Design Excellence buildings we visited were designed to include interior natural light, which some building managers reported reduced energy costs. According to GSA officials, natural light is not only aesthetically pleasing; it also improves lighting quality for building tenants and reduces lighting costs. For example, the First Street Federal Courthouse (Los Angeles, California) has a light well as part of its atrium and a serrated glass façade that maximizes natural light. Building officials said that 22 of the 24 courtrooms in the building receive natural light from multiple sources, reducing energy usage and requiring less frequent replacement of lighting. In addition, building officials at the Albert Armendariz, Sr., U.S. Courthouse (El Paso, Texas) reported extensive natural light from a three story window wall and the front atrium; both features provide ample light for building tenants. (See fig. 2). Durable and easily maintained materials and finishes. In most of the 10 Design Excellence buildings we visited, GSA officials and building tenants reported selecting materials and finishes that (1) are highly durable and easy and inexpensive to clean; (2) are expected to last a long time; and (3) required little maintenance. For example, the lobby walls and floors of the Ronald Reagan Federal Building and Courthouse (Santa Ana, California) are made out of travertine, a very durable stone, which has lasted more than 15 years without the need for repairs or replacement. In addition, officials at a few buildings noted that the decision to install carpet tiles in lieu of large patches of carpet has made it very easy and relatively inexpensive to maintain and repair office spaces and courtrooms. Low-maintenance landscaping. Several of the 10 Design Excellence buildings we visited incorporated native flora into the landscape design, which can reduce energy and water costs. For example, officials planted native, drought resistant plants around the First Street Federal Courthouse (Los Angeles, California). Building officials at the Las Cruces U.S. Courthouse (Las Cruces, New Mexico), which is located in a desert environment, also reported most of the native landscape around the courthouse does not require watering. According to our survey respondents—building managers at all 78 Design Excellence buildings included in our review—certain GSA design choices, such as multistory atriums and custom windows, have resulted in increased O&M costs compared to an average GSA building without those features. Almost all Design Excellence building managers (76 out of 78) reported that certain design choices resulted in increased O&M costs that would not have occurred had that design choice not been selected. For example, 67 out of 78 building managers for Design Excellence buildings stated that the effect of including multistory open spaces, like atriums, increased O&M costs due to the challenges associated with heating and cooling, making needed repairs, and cleaning these spaces. (See table 1). Building managers and tenants we spoke with confirmed our survey results, and provided examples of design choices that resulted in unexpected O&M cost increases. For example, officials noted increased O&M costs associated with separate structures and multistory atriums that were difficult to access for cleaning and repairs. Separate Structures. Managers from only 21 of 78 Design Excellence buildings reported having an attached, but separate structure (e.g., pavilions, rotundas, restaurants, and other additional spaces connected to the building), but managers at 19 of those buildings stated that the effect of such design features increased O&M costs. For example, one federal building we visited had a rotunda with a domed roof that, according to building managers, has multiple gutter leaks that are not currently accessible due to the design of the space. As a result, maintenance staff continuously patch the ceiling without addressing the cause of the leaks (see fig. 3). Atriums and Lobbies. Managers from 67 of 78 Design Excellence buildings reported their buildings’ multistory atriums and lobbies increased O&M costs. Several GSA managers we interviewed identified additional costs to maintain a multistory atrium or lobby, including costs for renting expensive scaffolding or mechanical lifts. For example, one Design Excellence building we visited has water leaks in the lobby ceiling, which can only be reached by extensive and expensive scaffolding (see fig. 4). Large, Custom Windows. Managers from 65 of 78 Design Excellence buildings reported that the effect of design choices related to their buildings’ windows increased O&M costs. In addition, several Design Excellence buildings we visited had custom or uniquely shaped windows, which occasionally increased the costs to replace, repair, or maintain them. For example, GSA officials at one courthouse reported repairing one two-story, custom-made window pane, which cost $80,000 to fabricate and $50,000 to install. The courthouse had eight of these windows, and a GSA official stated that the windows are an attractive feature of the building that introduced natural light, but a different window choice would have been cheaper to maintain (see fig. 5). Mission Spaces. Managers from 48 Design Excellence buildings reported that the effect of design choices related to mission spaces (i.e., spaces in which federal employees conduct work) increased O&M costs. Specifically, managers from 32 buildings stated that design choices made in mission spaces increased repair costs, and managers from 30 buildings reported increased cleaning costs. GSA officials at several buildings we visited discussed challenges accessing and maintaining mechanical systems incorporated into tenant mission spaces. For example, one Design Excellence building includes a heating, ventilation, and air-conditioning (HVAC) system that is hidden under a raised floor within mission spaces. Because building managers cannot easily access the system, there are maintenance delays and challenges identifying and making necessary repairs, which ultimately result in higher O&M costs. Building officials reported they considered replacing the HVAC system, but doing so would cost approximately $55 million. (See fig. 6). Other Design Choices. According to Design Excellence building managers that responded to our survey and at locations we visited, the effect of several other design choices including energy efficient elements (e.g., solar panels and green roofs), courtyards, floors, and circulation (e.g., hallways, stairways, and elevators) increased O&M costs. For example, according to these officials, (1) the design of green roofs led to water leaks; (2) the design of courtyards led to problems maintaining unique landscaping; (3) flooring choices, specifically selected materials, led to premature scuffing and cracking; and (4) the design of hallways and stairways made them difficult to maintain. With the Design Excellence Program, GSA aims to create buildings that are cost-effective and function well for tenants. However, GSA makes design choices for Design Excellence buildings during the planning and design stages of new projects without fully considering the effect of these choices on O&M costs and functionality. GSA does not estimate most O&M costs during planning and design. Specifically, according to GSA officials we interviewed and planning documents we reviewed, when planning and designing new buildings, officials estimate the costs of major energy systems, such as boilers and chillers. However, based on our review of GSA and industry data, these systems only account for about one-third of O&M costs in Design Excellence buildings. GSA officials stated that they do not estimate the remaining two-thirds of O&M costs—which include maintenance, cleaning, and landscaping—until late in the building’s construction. However, GSA officials also said that it would be costly to make significant design changes at that point in the process. In addition, the O&M estimates for maintenance, cleaning, and landscaping are for the purpose of selecting a contractor to provide these services, not as a means for addressing or reducing future O&M costs, according to officials. GSA building and regional managers who are responsible for addressing the O&M consequences of design choices told us that they were not always integrated or asked to participate in planning and designing new Design Excellence buildings. Specifically, GSA building and regional managers at several of the buildings we visited stated that they were never, or seldom, consulted on O&M costs and issues during the design process, nor did they have an opportunity to review design documents. A few GSA building managers we spoke with stated that on rare occasions when they were consulted their input was rarely incorporated, or was requested too late in the construction stage to allow for necessary changes. According to these officials, if given the chance, they could have highlighted issues with certain design choices that would significantly increase O&M costs and could have offered potential solutions to reduce those costs. Officials responsible for overseeing the Design Excellence Program told us that other officials with an understanding of issues surrounding O&M are involved in the process for designing new buildings through, for example, subject matter reviews of the design concepts. Officials agreed, however, that more could be done to formally involve the perspective of facilities staff, such as building managers, who are responsible for the day-to-day management of O&M. We found that GSA’s lack of consideration of how design choices may affect the O&M costs of Design Excellence buildings could be attributed to existing procedures that do not emphasize the need to consider such costs during the planning and design stage. Specifically, GSA’s procedures for planning, designing, and constructing new Design Excellence buildings focus on design creativity, construction challenges, budget, and schedule and do not direct GSA to estimate O&M costs during planning and design. While these procedures promote several factors to consider in a building’s design—including aesthetics, functionality, and constructability—and generally require firms to submit documentation on budget and schedule, they do not call for information on expected O&M costs. In addition, these procedures do not include seeking input on design decisions from facilities personnel who will have responsibility for the ongoing O&M once the building is occupied. Federal standards for internal control state that federal agencies should use complete and relevant information when making decisions and design control activities, including procedures, to achieve objectives. These federal standards also state that federal agencies should ensure the communication of information internally, for example through procedures that allow management to receive quality information from personnel, to help achieve the entity’s objectives. In addition, guidance from GSA and the Office of Management and Budget directs officials to consider and strive for the lowest possible costs, including O&M costs, when designing buildings. Information on how specific design choices could affect ongoing O&M costs would allow GSA to better understand the impact of those choices. Such information is critical as O&M accounts for a significant proportion of resources dedicated to federal buildings over the long-term. According to GSA and industry associations, O&M costs are significantly higher over time than all other costs, including for construction, and typically account for between 60 and 80 percent of building lifecycle costs. To illustrate this point, we analyzed GSA construction and O&M data for Design Excellence buildings. As figure 7 shows, we estimate that over an average building’s age (60 years) the total construction and O&M costs for GSA’s 78 existing Design Excellence buildings could be about $18 billion—$8.1 billion for construction (45 percent) and $9.9 billion for O&M (55 percent). Because GSA’s procedures do not direct officials to estimate about two-thirds of O&M costs or fully integrate officials with an understanding of the O&M consequences of design decisions, officials may not have been aware of how design choices would affect approximately $6.6 billion (two-thirds of $9.9 billion) in O&M costs. In addition, without procedures that clearly emphasize the need to more fully consider O&M costs in Design Excellence buildings during the planning and design stage, GSA and other stakeholders may not have a complete picture of all relevant information necessary to make informed decisions on how to best design future federal buildings. GSA realizes that the focus of Design Excellence projects has been on design and construction, not O&M costs, and, in September 2017, initiated a process, called “Operational Excellence”, to more fully consider O&M costs. This process includes considering ways to more fully consider O&M costs during planning and design, including developing a cost tool that would estimate future O&M costs. In addition, GSA is considering ways to update existing procedures for designing and constructing new buildings to include a more comprehensive evaluation of potential O&M costs, for example, by more fully integrating knowledgeable personnel at key stages. However, according to GSA officials, they are still in the early stages of determining what needs to be done in part due to a small staff, which includes one full-time employee and one part-time employee. As of March 2018, GSA has not established a schedule for updating its procedures to require considering O&M during design. Most design choices made for Design Excellence buildings, including the shape and size of courtrooms and the lighting in hallways, have had a positive effect on overall building functionality (i.e., helped the tenant agency achieve its mission), according to officials we surveyed and interviewed. For example, GSA building managers we surveyed reported the functionality of at least one design choice in most buildings (72 of 78 buildings) as good or very good. Specifically, they reported that in most buildings, the overall functionality of design choices was good in many of the areas we asked them about. In addition, building managers reported that the functionality of the following design choices was also good or very good: selected material color (53 buildings) and lighting (58 buildings); shape and size of the space (61 buildings); pedestrian circulation (61 buildings); and temperature control in the areas critical for a building’s operation, such as courtrooms or office space (46 buildings). GSA and tenant agency officials whom we interviewed were also positive about how the design choices affected the functionality of their buildings, especially the use of windows and atriums to allow natural light. Tenants also reported they enjoyed other features of the new buildings, including commissioned artwork and the design of the interior and exterior. Tenants’ satisfaction with the function of Design Excellence buildings may, in part, reflect the condition of their previous office space. For example, one tenant noted that moving from temporary trailers into a state-of-the-art courthouse was a substantial functional improvement. However, we found that increased spending on certain design choices did not always provide improved functionality for the building tenant. For example, GSA building managers reported that in many buildings (67 of 78) atriums and lobbies (i.e., vertical penetrations) have increased O&M costs due to higher repair, cleaning, and energy costs. At the same time, building managers reported that in 51 of those 67 buildings, choices made in the design of multistory atriums and lobbies, e.g., material color and lighting, did not have a positive effect on building functionality (see table 2). Similarly, the decision to install solar panels and green roofs (e.g., energy efficient elements), increased O&M costs in several areas, particularly repair costs, but in over half of the buildings with these features, building managers did not report an improvement in functionality. For example, in two courthouses we visited solar panels installed with the intention of saving on energy costs are not supplying as much power as expected and, therefore, have not yet provided the expected energy benefits. Tenants we interviewed also noted that in some cases, design choices have not functioned well and are costly to maintain and operate. According to a tenant at one Design Excellence office building, while the decision to construct a multistory atrium has added aesthetic value for federal employees, it has also resulted in challenges balancing air pressure between the atrium and the adjacent office spaces. These differences in air pressure have resulted in uncomfortable working conditions, such as fluctuating temperatures, which have hampered productivity. Another tenant told us about design choices such as long hallways and elevators that do not stop at all floors, making it difficult for tenant employees to move efficiently through the building. Some of these design choices, such as elevators with mechanical systems at the bottom of the elevator shaft, have proven costly to maintain as they age more quickly. Other tenants noted that the selection of heating and cooling systems, which automatically adjust building temperatures based on time of day, for example, have not functioned as planned, resulting in variable temperatures and employee discomfort. In addition, GSA has sometimes made design choices in buildings that do not apply to one of the primary functional goals of the Design Excellence Program—to serve as a landmark that positively represents the federal government to the public. Specifically, GSA does not consider that some buildings, due to their purpose or location, are unlikely to function as landmarks because they have limited interaction with or limited visibility by the public. In this regard, we found that most Design Excellence buildings (66 of 78) are visible and accessible to the general public, i.e., “public-facing”. Many of these buildings have succeeded in becoming public landmarks and several have won awards for their design. Specifically, 62 serve as courthouses, which are visible from public streets and people may enter to observe judicial proceedings or conduct personal business. See figure 8 for an example of a Design Excellence courthouse with publicly visible exteriors and interiors. Four serve as office buildings for various federal agencies that are publicly accessible. In contrast, we found that 12 Design Excellence office buildings restrict the public from accessing interior spaces. Specifically, Seven can be seen from public sidewalks or roads, even though the building is not open to the public, such as the U.S. Secret Service Headquarters and FBI field office buildings. As a result, these buildings’ exteriors could be public landmarks that represent the federal government, but the interior design features are not publicly accessible. For example, the Ronald H. Brown U.S. Mission to the United Nations Building in New York City has an impressive and publicly visible exterior façade but restricts public access to a multi- story rotunda and art space (see fig. 9). Five have obstructed views from public roads and sidewalks in addition to restricting public access to the interior. Neither the exterior nor interior design choices, which can be expensive to operate and maintain, in these buildings can be seen or appreciated by the public. For example, according to the tenant agency and GSA officials, the visually impressive interior atrium and courtyard at the Ariel Rios Federal Building have proven logistically challenging and expensive to maintain and are not accessible to the public. In addition, the façade of the National Oceanic and Atmospheric Administration Satellite Operations Facility, which, according to GSA officials, is expensive to maintain and repair, is not accessible by the public. (See fig. 10). According to GSA officials, when they carry out their planning and design for Design Excellence buildings, they do not differentiate between buildings that will be public-facing and those that will not. This approach may be in part due to the fact that GSA’s procedures for planning and designing new Design Excellence buildings do not call for consideration of how design choices may have different functional benefits, including whether the interior and exterior of planned buildings would be accessible to the public. Federal standards for internal control state that federal agencies should use complete and relevant information when making decisions and designing control activities, including procedures to achieve objectives. By taking a “one size fits all” approach and not considering the functionality of design choices, such as how a building’s location and intended use will affect the public’s ability to see the exterior and interior, GSA may be selecting design choices that increase O&M costs without improving functionality. According to GSA officials, GSA currently does not systematically collect and share information on how design choices made for previous Design Excellence projects have affected O&M costs with the project teams— consisting of a project manager, contracting officer, and other GSA officials—that are responsible for overseeing the planning and design of new buildings. GSA has evaluated what is and is not working effectively in some existing Design Excellence buildings and has on occasion shared these evaluations with project teams. For example, GSA has evaluated the performance of 6 out of 78 Design Excellence buildings. These evaluations included identifying design decisions that led to higher O&M costs and, on one occasion, developed a formal presentation to share these lessons with the team working on a new Design Excellence project. According to officials, GSA requires agency personnel with subject matter expertise to review building design concepts provided by private-sector architects and engineers. GSA also fosters information sharing through procedures that encourage project teams to exchange ideas, lessons learned, and concerns. However, these processes either (1) are not done in a consistent or systematic way, or (2) require information sharing among a small group of officials, i.e., a project team, which might not have visibility over the extensive design choices made in all existing buildings. While all of these information-sharing initiatives offer benefits, GSA’s procedures do not include a systematic collection and sharing of information with the project teams responsible for managing new Design Excellence projects on how design choices affected O&M costs in existing Design Excellence buildings. According to GSA officials, they are considering formalizing this sort of information collection and sharing as part of the Operational Excellence process, but as previously noted, GSA is in the early stages of setting up this initiative and has not established a schedule for completing its actions or updating its procedures. As discussed, some design choices in existing Design Excellence buildings have decreased or increased O&M costs. Since GSA does not systematically share how these types of design choices affected O&M costs with teams responsible for planning and designing new buildings, similar issues could occur in future buildings. For example, we previously mentioned that building managers indicated that using durable materials, low maintenance landscaping, and energy-efficient lighting can reduce long-term O&M costs. Building managers also reported common issues caused by design choices that led to increased costs including: Inefficiently located mechanical systems. Building managers reported the location of mechanical systems in Design Excellence buildings often led to increased cost. Specifically, building managers reported the location of these systems increased repair costs (41 out of 77 buildings) and energy costs (32 out of 77 buildings). In the Design Excellence buildings we visited, building managers and tenants reported issues with the location of mechanical systems (4 buildings). For example, officials indicated that air-conditioning systems were placed in inefficient locations that required more energy usage because water had to be pumped unnecessarily far distances (see fig. 11). Difficult-to-access lights. Building managers reported that design choices for the location of interior lights increased maintenance costs in the majority of Design Excellence buildings (55). In particular, managers reported that the location of lights in atriums and lobbies (38 buildings) and courtrooms and other mission spaces (33 buildings) increased costs. In addition, GSA officials at locations we visited said that lights above tall staircases, ceiling lights in atriums and auditoriums, and lights directly above permanent structures led to additional costs, including the need to use scaffolding or rent large equipment to maintain these lights. (See fig. 12). One way that a majority of GSA building managers (61) we surveyed are attempting to mitigate high maintenance cost for lighting issues is to install energy efficient equipment, such as light-emitting diode (LED) lights. Difficult-to-maintain materials and finishes. In 68 Design Excellence buildings, building managers reported that materials or finishes were chosen that are easily worn. Similarly, in buildings we visited (4 buildings), GSA officials reported that decisions on the materials used or configuration of exterior surfaces (e.g., the roof or façade) of a Design Excellence building led to repair and maintenance problems, particularly water leaks. (See fig. 13). Hard to clean surfaces. Cleaning surfaces, especially in atriums, can be a challenge for maintaining Design Excellence buildings. For example, building managers we surveyed reported that the decision to install certain types of window treatments increased cleaning costs (49 buildings). In three buildings we visited, building managers and tenants also said Design Excellence buildings required special equipment or scaffolding to clean windows or surfaces, which led to increased cleaning costs. (See fig. 14). According to federal standards for internal control, agencies should use and communicate complete and relevant information when designing control activities, including procedures to achieve objectives. Without a formalized process for systematically collecting and sharing how design choices affected O&M costs in existing buildings, designs for future Design Excellence buildings may not benefit from the successful strategies used by others to reduce O&M costs or may continue to repeat problematic choices that may result in increased O&M costs. Through the Design Excellence Program, GSA has achieved excellence in architecture and the design of federal buildings. Buildings constructed under the Design Excellence Program have created unique and aesthetically pleasing workspaces, have met the functional needs of tenant agencies, and have become public landmarks. However, because GSA does not have program procedures that call for consideration of how certain design features may affect O&M, it may not be fully aware of the costs of including these features in its building design and plans. Specifically, GSA does not estimate or gather all perspectives from building and regional managers on the full O&M costs of design choices, or consider the extent to which they will improve the functionality of the building for tenants and the public. For example, GSA’s one-size fits all approach in designing these buildings does not consider whether non- public buildings need the same costly architectural elements as buildings intended to serve as public landmarks. Further, GSA is missing opportunities to improve future building designs by not systematically gathering and sharing information on the common design choices that had both positive and negative effects on O&M costs. Without a clear picture of the ongoing costs of these choices, GSA and other stakeholders are missing critical information to better inform the design and construction of new buildings. While GSA has just begun an Operational Excellence initiative to help identify future O&M costs, it is not clear what actions GSA will take to improve consideration of O&M costs during planning and design or when it will take those actions. We are making the following four recommendations to GSA: The Administrator of the General Services Administration should update existing procedures to require GSA officials to estimate the full operations and maintenance costs of design choices in the planning and design process for new Design Excellence buildings. (Recommendation 1) The Administrator of the General Services Administration should update existing procedures to require GSA officials to obtain information from personnel responsible for addressing the operations and maintenance consequences of design choices at key decision points during the planning and design of new Design Excellence buildings. (Recommendation 2) The Administrator of the General Services Administration should update existing procedures to require GSA officials to further consider and document, during the planning and design of new Design Excellence buildings, how design choices may affect building functionality, such as whether a building is publicly visible and accessible. (Recommendation 3) The Administrator of the General Services Administration should update existing procedures to require GSA officials to systematically collect and share information with project teams responsible for overseeing the planning and design of new buildings on the positive and negative effects of common design choices on operations and maintenance costs in existing Design Excellence buildings. (Recommendation 4) We provided a draft of this report to GSA, the U.S. Administrative Office of Courts, the Department of Homeland Security, the Department of Justice, and the Department of Commerce for comment. In written comments, reproduced in appendix IV, GSA stated that it agreed with our recommendations and provided several technical comments. GSA clarified its policies for selecting and analyzing the lifecycle costs of building systems. In addition, GSA stated that table 2 in our report did not capture the full functional benefits and reasons for making certain design choices. As we noted in the report, this table does not preclude that a specific design choice may be functional or have functional benefits. We also included several of the examples GSA highlighted in their comments, such as the functional need for a separate structure, which may serve key security functions. GSA also stated that our conclusions did not indicate that most Design Excellence buildings functioned well. We added language to the conclusions to clarify this point. The U.S. Administrative Office of Courts, the Department of Homeland Security, the Department of Justice, and the Department of Commerce did not provide comments. We are sending copies of this report to the appropriate congressional committees, the Administrator of the General Services Administration, Director of the Administrative Office of U.S. Courts, Attorney General, and the Secretaries of Homeland Security and Commerce. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report assesses the extent to which: (1) the General Services Administration (GSA) made design choices that affect operations and maintenance (O&M) costs; (2) GSA considers O&M costs and functionality when planning and designing buildings; and (3) GSA systematically collects and shares information on O&M costs related to design choices in existing buildings. To address all of our objectives, we reviewed applicable federal regulations; GSA procedures, policies, and standards for designing, constructing, and operating federal facilities, including specific policies and procedures for Design Excellence buildings; our prior work; and reports by other federal agencies and related professional organizations on topics, including the standard costs of operating and maintaining office buildings. Our review examined 78 federal buildings and courthouses that GSA constructed under the Design Excellence Program—referred to as “Design Excellence buildings”—since the program started in 1994. At our request, GSA provided a list of all buildings under the agency’s custody and control that were constructed under the Design Excellence Program. Based on input from GSA officials indicating that large campuses were unlikely to have reliable O&M data, we excluded nine buildings that are part of the White Oak Campus in Silver Spring, Maryland. We reviewed relevant GSA documents pertaining to the remaining 78 Design Excellence buildings, including the most recent Asset Business Plans detailing investment needs for maintenance and repairs, strategies for efficient operations, building use, and tenant satisfaction. We analyzed GSA-provided historical data on construction and O&M costs from 2000 to 2016 for the buildings in our review and projected O&M future costs. To calculate our projection, we made several assumptions, including (1) that annual O&M costs would increase at the same level as 2016 O&M costs ($174 million), and (2) that Design Excellence buildings will reach the average age of all current GSA buildings (60 years). We assessed the reliability of these data through electronic testing and reviewing documentation on the data. We determined that the data provided were sufficiently reliable for the purpose of illustrating the extent to which O&M costs make up total building costs. We also conducted a web-based survey of GSA building managers responsible for overseeing O&M for the 78 Design Excellence buildings included in our review. The survey addressed the extent to which certain design choices affect O&M costs and building functionality. We developed the survey based on our objectives, prior GAO work, and site visits to 10 Design Excellence buildings. We pretested the survey with GSA officials at three Design Excellence buildings, which were selected based on building age, location, total square feet, fiscal year 2016 O&M costs, and the building’s primary use (e.g., office or courthouse). As part of our pretesting, we asked GSA building managers to explain their understanding of survey questions and made edits based on their comments. We conducted the survey from November 2017 to March 2018 and our response rate was 100 percent (78 out of 78). See appendix III for a copy of the survey and summarized responses. We visited 10 Design Excellence buildings in three GSA regions to view design choices and O&M activities. As part of these site visits, we conducted interviews that included tenant agencies located in these buildings, GSA building managers responsible for managing these buildings and officials from GSA regional offices with oversight responsibilities for these buildings. To select our site visit locations and ensure geographic and agency diversity, we considered several factors including building operating costs, size, location, and the tenant agency. Based on these criteria we selected the buildings listed in table 3. The interviews and tours we conducted during our site visits do not allow us to generalize the findings to all Design Excellence buildings. Information gathered from our site visits did allow us to show how O&M costs were considered in specific Design Excellence buildings and the effects of design choices. We also interviewed GSA officials located in GSA Headquarters within the Office of Design and Construction, including the Chief Architect, and the Office of Facilities Management. We also interviewed GSA regional officials within the Office of Facilities Management in four of GSA’s 11 regional offices: Greater Southwest Region, National Capital Region, Pacific Rim Region, and Southeast Sunbelt Region. We selected regional offices based on the location of our site visits and included one additional regional office based on it having the highest total O&M operating costs of the eight remaining regional offices. We discussed several topics with GSA officials, including how O&M costs were considered during planning and design and how information on the O&M costs of design choices are shared. To determine the extent to which GSA considers O&M costs and functionality when planning and designing buildings, we analyzed Federal Real Property Profile (FRPP) data. Our analysis of U.S. government- owned office buildings that are less than 40 years old, occupied, and needed for a tenant’s mission, identified five potentially relevant variables to explain variation in the O&M costs: building type (i.e., whether a building was constructed under the Design Excellence Program), size, age, and condition of the building, as well as the median hourly wage of O&M services in the building’s location. After controlling for these variables, we found that size and median hourly wage but not building type had a statistically significant relationship to O&M costs. We assessed the reliability of these data through electronic testing as well as a review of documentation for each federal data source. We determined that the data provided were sufficiently reliable for the purpose of describing our attempts to identify factors that influence O&M costs in federal buildings. We also requested and received additional information from the building managers of Design Excellence federal office buildings. Specifically we asked for information on the extent to which these federal office buildings are public-facing, have restrictions on public entry and are visible from public sidewalks or roads, and what the daily volume of public visitors was. We compared GSA’s efforts to consider O&M costs in the planning and design of Design Excellence buildings to pertinent Standards for Internal Control in the Federal Government on using complete and relevant information when making decisions and design control activities, including procedures, to achieve objectives, as well as on communicating information internally. In addition, we compared GSA’s efforts to consider these costs in the planning and design of Design Excellence buildings to guidance from GSA and the Office of Management and Budget that directs agency officials to consider and strive for the lowest possible costs, including O&M costs, when designing buildings. We also compared GSA’s efforts to consider functionality when planning and designing these buildings to pertinent Standards for Internal Control in the Federal Government on using complete and relevant information when making decisions and design control activities, including procedures, to achieve objectives. To assess the extent to which GSA systematically collects and shares information on O&M costs related to design choices in existing Design Excellence buildings, we reviewed Post Occupancy Evaluations commissioned by GSA on six Design Excellence buildings. These evaluations contain information, such as how GSA buildings are performing and the extent to which they comply with GSA’s federal standards for public buildings. These evaluations can include reviews of operations and maintenance documentation, interviews and surveys with building occupants, and interviews with relevant GSA staff, architectural and engineering design team staff, and an on-site evaluation. We also compared GSA’s process for collecting and sharing how design choices affected O&M costs in existing buildings to pertinent Standards for Internal Control in the Federal Government on using and communicating complete and relevant information when designing control activities, including procedures, to achieve objectives. We conducted this performance audit from May 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. GSA created the Design Excellence Program in 1994. Under this program, GSA has constructed 78 buildings in 33 states and the District of Columbia, buildings that range in size from about 35,000- to over 3- million gross square feet (see table 4). Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov. In addition to the contact named above, Keith Cunningham (Assistant Director); Matthew Cook (Analyst in Charge); Eli Albagli; Sarah Arnett; Colin Ashwood; Melissa Bodeau; Lacey Coppage; Caitlin Cusati; Terrence Lam; Joshua Ormond; Dae Park; Minette Richardson; Kelly Rubin; Ardith Spence; and Dave Wise made key contributions to this report.", "summary": "Since 1994, GSA has spent more than $8 billion to construct 78 new federal buildings through its Design Excellence program. Some design choices can affect a building's O&M costs and functionality. GAO was asked to review GSA's ability to manage O&M costs under the Design Excellence program. This report assesses the extent to which: (1) GSA's design choices affect O&M costs; (2) GSA considers O&M costs and functionality when planning and designing buildings; and (3) GSA systematically collects and shares information on O&M costs. GAO conducted a web-based survey of building managers for the 78 Design Excellence buildings. GAO also visited 10 Design Excellence buildings in three GSA regions selected based on several factors, including geographic and agency diversity. GAO reviewed GSA documents, and interviewed GSA officials and building tenants. Information obtained through site visits and interviews is not generalizable. The goals of the General Services Administration's (GSA) Design Excellence Program are to creatively design federal buildings that meet federal agencies' functional needs and become public landmarks. Some design choices for Design Excellence buildings have decreased ongoing operations and maintenance (O&M) costs, but others have increased those costs. GSA's building managers and tenants told GAO that design choices that have reduced O&M costs include the use of durable materials and low maintenance landscaping. Other design choices have increased O&M costs. For example, according to GAO's survey of 78 building managers of Design Excellence buildings, multistory atriums often led to additional O&M costs, including the need to erect expensive scaffolding for maintenance. While GSA aims to create Design Excellence buildings that are cost-effective and functional, it makes design choices without fully considering their effect on O&M costs and functionality. For example, GSA officials do not estimate the majority of O&M costs, such as the building maintenance associated with their design choices until the design is almost finalized. This outcome is partly because GSA procedures do not direct GSA officials to develop such estimates during the design and planning of Design Excellence buildings and because building and regional managers responsible for addressing the O&M consequences are also not involved in the design and planning process. As a result, important cost information that could help building project teams make the most cost-effective design choices is not available to help them. In addition, while building managers GAO surveyed reported that GSA's design choices generally support a building's functionality, they also reported that some design choices increased O&M costs without improving functionality. For example, they identified design choices related to material color and lighting that increased O&M costs but did not enhance the functionality of the building for the tenants. Although GSA has developed some information on how design choices can affect O&M costs, it does not consistently collect and share such information. For example, GSA has evaluated the performance of only six Design Excellence buildings, and does not systematically collect information on how design choices have affected O&M costs in all existing buildings. Without a process to collect and share such information, future buildings may not benefit from these lessons, and problematic choices may be repeated. GAO is making four recommendations to update existing GSA procedures for planning and designing new buildings to: (1) estimate full O&M costs; (2) obtain information from personnel responsible for addressing the O&M consequences of design decisions; (3) further consider how design choices may affect building functionality; and (4) systematically collect and share lessons from existing buildings. GSA agreed with these recommendations.", "document_type": "gao"}
{"report": "This section describes (1) the purpose of LEPs and the process that NNSA and DOD use to manage them, known as the phase 6.X process; (2) the management of the ongoing LEP for the W76 warhead—an important historical reference for the B61-12 LEP—and the status of the two other ongoing LEPs; (3) future nuclear modernization plans and our past conclusions and recommendations on the affordability of these plans; and (4) the objectives of the B61-12 LEP and the roles and responsibilities of NNSA and the Air Force in conducting the program. NNSA and DOD undertake LEPs to refurbish or replace nuclear weapons’ components to extend their lives, enhance their safety and security characteristics, and consolidate the stockpile into fewer weapon types to minimize maintenance and testing costs while preserving needed military capabilities. NNSA and DOD jointly manage LEPs under a multi-step process known as the phase 6.X process. The B61-12 LEP is currently in phase 6.4 (production engineering) of this process. Figure 1 illustrates the phase 6.X process. The phase 6.X process and the roles and functions of DOD, DOE, and NNSA in nuclear weapon refurbishment activities are described in a guidance document known as the Procedural Guideline for the Phase 6.X Process. The document also calls for NNSA to formally update its program cost estimate and reissue it as the baseline cost report prior to entering phase 6.4. In January 2017, NNSA issued a supplemental directive that also directs the Office of Cost Estimating and Program Evaluation to prepare an independent cost estimate for each nuclear weapon system undergoing life extension before an LEP enters phase 6.4. The Procedural Guideline for the Phase 6.X Process also describes the roles and functions of two joint bodies that provide oversight and approval functions to LEPs and other nuclear weapons-related activities: the Nuclear Weapons Council and its Standing and Safety Committee. The Nuclear Weapons Council is the joint DOD and DOE activity that serves as the focal point for interagency activities to maintain the nuclear weapons stockpile. Its membership includes the Under Secretary of Defense for Acquisition, Technology and Logistics (generally the Chair); the Under Secretary of Defense for Policy; the Vice Chairman of the Joint Chiefs of Staff; the Commander of U.S. Strategic Command; and the Department of Energy’s Under Secretary for Nuclear Security, who also serves as the Administrator of the National Nuclear Security Administration. In addition, the Nuclear Weapons Council charters a Project Officers Group for each weapon system to provide a technical forum for weapon development and management activities. Each Project Officers Group is led by a project officer from either the Navy or Air Force, the two military services that maintain and operate nuclear weapons. According to B61-12 program officials, the W76-1 LEP—which NNSA expects to complete in fiscal year 2019—has served as an important historical reference as NNSA prepared its plans and cost estimates for the B61-12 LEP. In August 2017, NNSA issued a study documenting lessons learned from difficulties it encountered in managing the W76-1 LEP. According to the study, prior to the W76-1 LEP, NNSA had not undertaken full-scale weapon system design activities since the 1982 design of the W88 warhead. Among other findings, the lessons learned study stressed the importance of using modern tools to validate and manage an LEP’s system and technical requirements to maintain cost, schedule, and performance during all phases of the program. This finding is consistent with our March 2009 findings that NNSA and DOD established an unrealistic schedule for the W76-1 LEP, did not establish a consistent cost baseline, and did not effectively manage technical risks in the program. These problems resulted in delays, additional expenditures, and difficulties tracking the cost of the program. Notably, the program had to delay first production of the W76-1 from September 2007 to September 2008 when it encountered problems with the final test batch of a key material, known as Fogbank. We recommended that NNSA develop realistic schedules for the W76-1 and future LEPs that build in additional time for unexpected technical challenges that may delay the programs. NNSA agreed with our recommendation and has taken steps toward improvement in this area, which we continue to monitor. In addition to the B61-12 and W76-1 LEPs, NNSA and DOD are managing two other LEPs: the W88 Alteration 370 program and the W80- 4 LEP. Table 1 provides basic information on all four ongoing LEPs. In addition to the four ongoing LEPs, NNSA and DOD have outlined plans for several future nuclear weapon modernization programs: Under NNSA’s current program of record, which does not yet reflect new requirements that will be generated based on the 2018 Nuclear Posture Review, NNSA has plans for life extension efforts to transition the nuclear stockpile to three interoperable ballistic missile warheads and two air-delivered weapons. NNSA has described this plan as the 3+2 strategy. To undertake this strategy, NNSA has proposed initiating a series of interoperable warhead programs between about 2020 and 2060. NNSA’s plans for the first ballistic missile warhead in the 3+2 strategy—the Interoperable Warhead 1—indicate that, if authorized by Congress, the warhead would cost an estimated $12.4 billion from 2020 to 2041. As we reported in August 2015, NNSA paused the Interoperable Warhead 1 program in fiscal year 2014 to provide more time to study the concept of interoperability and to reduce uncertainty about the agency’s ability to achieve necessary plutonium and uranium capabilities to support the LEP. Under its current program of record, NNSA plans to resume the Interoperable Warhead 1 program in fiscal year 2019. Under its current program of record, NNSA has also begun preliminary planning for Interoperable Warhead 2, Interoperable Warhead 3, and B61-12 follow-on programs that, if authorized, would start in the 2020s and 2030s. In the 2018 Nuclear Posture Review, DOD stated a near-term intention to modify a small number of existing submarine-launched ballistic missile warheads to provide a low-yield option, and a long- term intention to pursue a modern nuclear-armed sea-launched cruise missile. The NNSA Administrator stated in March 2018 that NNSA would continue to work with DOD to determine the resources, time, and funding required to address these and other policies specified in the Nuclear Posture Review. As we concluded in an April 2017 report, these plans come during a particularly challenging decade for NNSA’s nuclear modernization efforts, as the agency plans to simultaneously execute at least four LEPs along with major construction projects, such as efforts to modernize NNSA’s uranium and plutonium capabilities. We further concluded that NNSA’s modernization budget estimates for fiscal years 2022 through 2026 may exceed the funding levels programmed for modernization in future budgets, raising affordability concerns. Moreover, we concluded that NNSA had not addressed a projected “bow wave” of future funding needs—that is, an impending and significant increase in requirements for additional funds—or the mismatch between potential funding needs and potential funding available. We recommended that NNSA include an assessment of the affordability of NNSA’s portfolio of modernization programs in future versions of the Stockpile Stewardship and Management Plan—for example, by presenting options NNSA could consider to bring its estimates of modernization funding needs into alignment with potential future budgets. NNSA did not explicitly agree or disagree with our recommendation, but we will continue to monitor any actions NNSA takes in response to the recommendation. The B61-12 LEP has several objectives: consolidating the nuclear bomb stockpile, improving the accuracy of the resulting weapon through a new guidance assembly, and addressing other age-related issues. Consolidating the stockpile. Under the B61-12 LEP, NNSA and the Air Force plan to consolidate and replace four of the five variants of the B61 that were in the active stockpile at the time the B61 LEP began. Improving accuracy. The B61-12 is to be equipped with a new tail kit guidance assembly that enables it to be delivered with greater accuracy than the B61 bombs it replaces, which are equipped with parachutes. More specifically, according to Air Force officials and documents, the assembly will provide the B61-12 with a guided freefall capability while retaining a ballistic (unguided) delivery capability. The greater accuracy of the B61-12 is to enable the B61-12 to meet all the military requirements for which past versions of the B61 were designed. Addressing other age-related issues. The B61-12 LEP is to extend the service life of the B61 by at least 20 years, make field maintenance of the weapon easier for Air Force technicians, and provide modern security features. NNSA manages its B61-12 LEP activities through a federal program office on Kirtland Air Force Base in Albuquerque, New Mexico, under the direction of the federal program manager. It manages the work of six government-owned, contractor-operated NNSA laboratories and sites that serve as design and production agencies for the LEP. Sandia National Laboratories, also located on Kirtland Air Force Base, serves as the systems-level integrator for the overall weapon design. Figure 2 shows the six sites participating in the B61-12 LEP and their respective roles. The Air Force’s responsibilities, in addition to managing the acquisition of the tail kit guidance assembly, include integrating the B61-12 with its delivery aircraft and the operational flight program software of these aircraft. The Air Force Nuclear Weapons Center, also at Kirtland Air Force Base and under the direction of the Air Force lead project officer, manages technical integration and other LEP-related tasks required to qualify, certify, and field the weapon. The delivery aircraft that carry the B61-12 are being designed to deliver the weapon in two different modes with two different systems, the second of which provides the enhanced capabilities offered by the new tail kit guidance assembly. System 1 aircraft will have an analog interface with the B61-12 that is designed to deliver the weapon in a ballistic mode, with the tail kit in a fixed position. System 2 aircraft will have a digital interface with the B61-12, enabling the guided delivery capability afforded by the tail kit assembly. Figure 3 illustrates the delivery aircraft for the B61-12. NNSA substantially incorporated most of the cost estimating best practices identified by our past work when it developed the $7.6 billion program cost estimate for the B61-12 LEP. Our cost estimating guide identifies best practices for developing a high-quality, reliable cost estimate and identifies four characteristics of such an estimate: it is comprehensive, well-documented, accurate, and credible. These four characteristics and some of the best practices that underlie them are illustrated in figure 4. We assessed the B61-12 program cost estimate by comparing it with the best practices identified in our cost estimating guide and found that it substantially met the criteria for all four characteristics of a high-quality, reliable cost estimate (see fig. 5). A summary of our assessment is presented below, including reasons that the program cost estimate substantially met the criteria under each of the four characteristics as well as some examples of the best practices that the cost estimate could have more fully incorporated. Appendix I provides additional information on our assessment. Comprehensive: Substantially Met. The program established a consistent and clearly defined work breakdown structure—a hierarchical structure that subdivides the work necessary to accomplish the program’s objectives into smaller elements—to ensure that costs were not double-counted or omitted. The clearly defined work breakdown structure also helped the B61-12 program office manage the process of integrating each site contractor’s estimate for the cost of its activities into the overall program estimate. To more fully incorporate the criteria for a comprehensive cost estimate, the program would have had to take additional steps, such as including the full life-cycle costs associated with the B61-12 weapon in the estimate. Specifically, the estimate would have had to include costs such as program costs incurred prior to phase 6.3, the cost of NNSA federal program office personnel, components that are being shared by different nuclear weapon programs (such as the weapon’s radar), and costs associated with maintenance of the B61-12 after the LEP ends and the weapon enters the stockpile. In addition, the estimate would have had to include an assessment of how the program would be affected if key assumptions, such as the timing of the delivery of the tail kit guidance assembly, did not hold true. Nevertheless, the program incorporated practices that substantially met the criteria for a comprehensive cost estimate, which we believe contributed to the program’s estimate being reliable. Well-documented: Substantially met. In our visits to NNSA sites and our associated review of site contractors’ documents, we found that site contractors provided detailed documentation of their contributions to the cost estimate to the B61-12 program office. At all of the sites we visited, experienced cost estimating teams captured specific information on the data and data sources used to inform their estimates. To more fully incorporate the criteria for a well-documented cost estimate, the documentation that the site contractors provided to the NNSA program office would have had to capture the reliability of the underlying data and discuss how the data were normalized. Nevertheless, the program incorporated practices that substantially met the criteria for a well-documented cost estimate, which we believe contributed to the program’s estimate being reliable. Accurate: Substantially met. Technical personnel at both the NNSA sites and the Albuquerque federal program office discussed program risks to ensure that the program estimate represented a most likely, unbiased cost. Furthermore, all of the site-level cost estimates we examined—which the federal program office integrates into the overall program cost estimate—drew on historical data from primary sources, including internal financial systems from either past B61 costs or previous LEPs. Use of such sources is consistent with the best practice of grounding the estimates in a historical record of cost estimating and actual experiences on other comparable programs. In addition, the federal program office routinely reviews contract performance reports from each of the B61-12 sites to track variances between estimated and actual costs on a monthly basis. To more fully incorporate the criteria for an accurate cost estimate, the program would have had to use site estimates that were calculated in base- year dollars and then uniformly adjusted for inflation at the program level, and clearly defined the method it used to determine inflation indexes. Instead, all of the site contractors developed their cost estimates in then-year dollars and applied varied inflation indexes. Nevertheless, the program incorporated practices that substantially met the criteria for an accurate cost estimate, which we believe contributed to the program’s estimate being reliable. Credible: Substantially met. The B61-12 LEP became the first LEP to undergo a statutorily required independent cost estimate, conducted by the Office of Cost Estimating and Program Evaluation. Additionally, a different NNSA office developed a third cost estimate for the program to aid in the preparation of NNSA’s budget materials. Each of these three estimates used a different methodology. NNSA used this third estimate to cross-check overall program costs. Moreover, to assess risk and uncertainty in the program, most of the site estimates we reviewed included a detailed, quantifiable risk assessment for their portion of the overall program estimate. To more fully incorporate the criteria for a credible cost estimate, the program’s sensitivity analysis would have had to more fully examine and document cost impacts for the overall estimate and the individual site estimates. Instead, according to NNSA officials, it focused primarily on schedule and critical path analysis. Moreover, to more fully incorporate the criteria for a credible cost estimate, the program would have had to address risk correlation and the calculation of confidence levels differently. In the program’s analysis of risks and uncertainties in the program, we found the program inconsistently examined correlation among program risks. Specifically, according to NNSA officials, to arrive at the 70 percent confidence level for the overall program cost estimate, the program office added site-level cost estimates together at the 50 percent and 70 percent confidence levels. As noted in our cost guide, adding risk results for the underlying estimates in this way results in an incorrect confidence level for the overall estimate. Nevertheless, the program incorporated practices that substantially met the criteria for a credible cost estimate, which we believe contributed to the program’s estimate being reliable. We consider a cost estimate to be reliable if the overall assessment ratings for each of the four characteristics are substantially or fully met—as was the case with the B61-12 program cost estimate, which substantially met these criteria. For that reason, we are not making recommendations related to the program’s use of cost estimating best practices. However, by fully incorporating all of the best practices for the four characteristics, NNSA can better ensure that its future cost estimates are of high quality and reliable. The $7.6 billion program cost estimate for the B61-12 LEP differs from the $10 billion independent cost estimate primarily because the program office used different methods and assumptions than the Office of Cost Estimating and Program Evaluation, which prepared the independent cost estimate. The B61-12 program developed its estimate by compiling site- specific cost and schedule estimates for activities at each of the NNSA sites participating in the LEP; in contrast, the independent cost estimate projected a cost and completion date by evaluating program activities completed to date and applying a historical model to estimate costs and durations for remaining activities. As noted in our cost guide, both of these methods are commonly applied. To reconcile the differences between the two estimates, high-ranking NNSA officials met with officials from the B61-12 program office and the Office of Cost Estimating and Program Evaluation to discuss the estimates in 2016. However, NNSA did not document the rationale for its decision to use the program office’s lower estimate unchanged or a plan for how it would take the independent cost estimate into consideration. We previously recommended that NNSA should establish a requirement for its management to document and justify key decisions based on a reconciliation of LEP cost estimates with the Office of Cost Estimating and Program Evaluation’s independent cost estimates. NNSA agreed with this recommendation. Cost estimating best practices specify that programs should develop a point estimate—the best guess at the program’s cost estimate, given the underlying data—by collecting, analyzing, and validating program data and then using one of several commonly used methods for estimating the program’s cost. Once a program has developed a point estimate, the program should compare it to an independent cost estimate, which gives an objective measure of whether the program’s point estimate is reasonable. In January 2017, NNSA issued two directives implementing statutory requirements for the Office of Cost Estimating and Program Evaluation to develop independent cost estimates for NNSA programs, including LEPs. The differences between the respective cost estimating methods, both of which are valid, used by the B61-12 program office and the Office of Cost Estimating and Program Evaluation are the primary reason for the differences between the program estimate and the independent cost estimate. According to B61-12 program officials, the program generally developed its point estimate by using a “bottom-up” method formally known as the “engineering build-up” cost estimating method. In using this method, a program subdivides the work necessary to accomplish its objectives into a work breakdown structure. The program then develops estimates of costs at the lowest level of the work breakdown structure, one piece at a time, and uses the sum of the pieces to form the overall estimate. To develop its cost estimate, the B61-12 program office required all participating NNSA site contractors to prepare and submit their own cost estimates for the work to be performed on the LEP and provided instructions on what data to provide to the program office. For example, these instructions specified that all sites must apply a bottom-up estimating approach that includes detailed quantities and integrated resource-loaded schedules for all work breakdown structure elements under their management. The program office then compiled the site- provided information in a database to arrive at a total program cost. The program office also aggregated schedule information from the sites, which maintain detailed resource-loaded integrated site schedules, to develop an NNSA Integrated Master Schedule. As we previously noted, the program office estimated in October 2016, based on this process, that NNSA’s portion of work on the B61-12 LEP would cost $7.6 billion and that the LEP would be completed in fiscal year 2025, with a first production unit date of March 2020. In contrast, to develop the independent cost estimate, the Office of Cost Estimating and Program Evaluation used an estimating method that employed data on the B61-12 LEP’s actual performance, coupled with historical information from the W76-1 LEP for stages of the phase 6.X process that the B61-12 LEP had not yet reached. Specifically, the office gathered data on 1,600 activities in the NNSA Integrated Master Schedule for the LEP. The office tracked these 1,600 activities from August 2014 through March 2016 by evaluating data from successive versions of the NNSA Integrated Master Schedule, which the B61-12 program office updates monthly based on actual program performance to date. In a memo summarizing the office’s independent cost estimate, the office stated that the program’s task completion rate lagged the baseline plan. The office concluded that the LEP’s first production unit date would occur 2 years after the March 2020 target date unless the program took measures to reduce the LEP’s scope by removing tasks, delaying activities until after the first production unit date, or relaxing requirements to accommodate less mature components than originally planned. The office also concluded, based on the program’s spending rate of approximately $45 million per month, that pre-first production unit costs would increase by about $1 billion over the program’s estimate. To estimate the cost and schedule of the program after the first production unit date, the office used both B61-12 LEP actuals and historical information from the W76-1 LEP, comparing W76-1 funding levels to B61- 12 spending levels. On the basis of its analysis, the office concluded that full-scale production of the B61-12 would cost approximately $1 billion more than the program office estimated. All told, the independent cost estimate projected that the B61-12 LEP would cost approximately $10.0 billion and take about 2 years longer—with a projected completion date in fiscal year 2027—barring changes to the program’s scope. The B61-12 program office and the Office of Cost Estimating and Program Evaluation also have differences of opinion regarding the continued validity of the August 2014 schedule performance data and its relevance to the independent cost estimate. According to B61-12 program officials, the information in the NNSA Integrated Master Schedule improved and changed after the Office of Cost Estimating and Program Evaluation gathered initial schedule performance data in August 2014 and used this information as a starting point to evaluate the program’s performance. These issues include the following: The officials described the data available to the Office of Cost Estimating and Program Evaluation in August 2014 as tentative, saying that the program can now use the NNSA Integrated Master Schedule to track performance at a more detailed level. According to B61-12 program officials, the program made important decisions that affected components on the program schedule’s critical path at the time the August 2014 schedule performance data were gathered. Subsequent to establishing the baseline, for example, the program office restructured the path to first production unit for high- explosives components, correcting errors that had been captured in the August 2014 data and changing to a more streamlined approach to qualify high-explosives components from legacy material. This decision affected the program’s critical path to first production unit, moving the completion date earlier. The program undertook schedule recovery efforts that eased schedule constraints affecting other program elements that were on the critical path at the time of the August 2014 data. As a result of these factors, B61-12 program officials said that the entire baseline schedule that the Office of Cost Estimating and Program Evaluation analyzed appeared more problematic than the updated schedule and that the entirety of the independent cost estimate was thrown off by the obsolete August 2014 data. Officials from the Office of Cost Estimating and Program Evaluation told us they disagree with the B61-12 program office’s assessment of the independent cost estimate schedule analysis. These officials said that they understand that the schedule baseline is continuously changing but that the independent cost estimate schedule analysis is not dependent on a particular baseline. Rather, they said that the analysis is based on actual schedule performance for the 1,600 activities that represent the scope required to achieve the design maturity and that the program office specified in August 2014 as needed to reach the first production unit (phase 6.5) milestone. Officials from the Office of Cost Estimating and Program Evaluation said that although they will not formally assess the B61-12 LEP’s schedule again until the end of phase 6.4 of the program, their informal analysis of NNSA Integrated Master Schedule data as of February 2017 still showed the same rate of activity completion that underpinned the office’s independent cost estimate. At some point, according to these officials, the program will have to double or even triple its rate of activity completion to finish the LEP on schedule, which will increase cost. In contrast, B61-12 program officials stated that, given the improved quality of the program’s integrated master schedule data, they expect that the independent cost estimate that the Office of Cost Estimating and Program Evaluation prepares at the end of phase 6.4 of the LEP will be closer to the program’s estimate than to the October 2016 independent cost estimate. Program officials also said that the program’s performance to date supports their position that the program cost estimate is accurate. The positions of the two offices also differ regarding the B61-12 program’s ability to accelerate work in the production stages of the LEP to ensure that the LEP meets its completion date. B61-12 program officials stated that they have options other than to complete tasks sequentially and at a steady rate, so they do not expect the “straight-line” level of productivity assumed in the independent cost estimate analysis to occur. For example, some parts do not have to be built in a particular sequence. Instead, program officials said, the production agencies can build different lots of components when they are ready, so technologies that are ready earlier than others can be moved to production in the war reserve lot while other components remain in earlier stages. They also said that the program would not maintain an even spending rate of $45 million per month, as suggested in the independent cost estimate. Rather, they noted, the program’s spending rate is currently $55 million a month, and the program plans for it to rise to $65 million per month as the current production engineering phase of the LEP draws to a close and the production agencies accelerate their activities. These factors notwithstanding, one Office of Cost Estimating and Program Evaluation official observed that activities in the later stages of an LEP remain complex and carry risks. The official cited the history of the challenges that led to the delay of first production of the W76-1, cited earlier in this report, and said that the B61-12 program faces the added challenges of having to integrate with several delivery aircraft and of having more electronic components than the W76-1. As noted in our cost estimating guide, studies have shown limited opportunity for getting a delayed program back on track after it is more than 15 percent to 20 percent complete. Cost estimating best practices specify that a program cost estimate and an independent cost estimate should be reconciled and that differences between them should be examined and discussed to achieve understanding of overall program risk. Officials from NNSA, including from the Office of Cost Estimating and Program Evaluation and the B61- 12 program office, told us that they held several discussions in 2016 regarding the differences between the program estimate and the independent cost estimate. These included a meeting with the second- highest ranking official in NNSA—the principal deputy administrator— during which the respective offices presented their estimates and explained the methods used to produce them. After these meetings, the principal deputy administrator and the NNSA Administrator agreed to approve the program estimate unchanged. According to B61-12 program officials, the program adapted some of its practices as a result of their interactions with the Office of Cost Estimating and Program Evaluation. For example, officials said that they changed the program’s procedure for baseline changes to ensure consistency across the participating sites. The program also began to conduct baseline execution index analyses, as the Office of Cost Estimating and Program Evaluation recommended. Baseline execution index analyses track a program’s execution of tasks to date by monitoring the percentage of activities that a program has completed early or on time and that have a baseline for completion within the month the analysis is conducted. According to program officials, similar to a schedule performance index in an earned value management system, the baseline execution index gives an alternate cumulative measure that gives a program an opportunity to improve as it proceeds. However, B61-12 program officials said that they did not document the rationale for adopting the program cost estimate without making changes informed by the independent cost estimate. They told us that any attempt to combine the results of the two estimates would have been difficult, considering the significant differences between the program’s cost estimating model and the Office of Cost Estimating and Program Evaluation’s model. We recommended in a January 2018 report that NNSA should establish a requirement for its management to document and justify key decisions based on a reconciliation of LEP cost estimates with the Office of Cost Estimating and Program Evaluation’s independent cost estimates. We concluded in the report that without a requirement for its management to document and justify key decisions based on a reconciliation of program cost estimates with the Office of Cost Estimating and Program Evaluation’s independent cost estimates, NNSA may not have assurance that the independent cost estimates are being appropriately incorporated into the LEP decision-making process, potentially decreasing the reliability of program cost estimates. Our prior work has shown that, in general, because the independent cost estimate team is outside the acquisition chain, is not associated with the program, and has nothing at stake with regard to program outcome or funding decisions, its estimate is usually considered more accurate than the program’s internal estimate. In addition, our prior work has shown that independent cost estimates are historically higher than program office cost estimates because the team conducting the independent cost estimate is more objective and less prone to accept optimistic assumptions. However, we have also found that because independent cost estimates are typically higher than program office cost estimates, in some cases management may choose to ignore them because the estimates are too high. NNSA agreed with our January 2018 recommendation, stating that by March 2018, it would establish a protocol to document management decisions regarding significant variances between LEP cost estimates and the independent cost estimates produced by the Office of Cost Estimating and Program Evaluation. However, NNSA has not provided evidence that it has done so. We continue to believe that documenting key decisions regarding cost estimates is particularly important in the context of LEPs, where decisions could increase a program’s costs by billions of dollars. NNSA and DOD have identified and are managing various risks that could complicate efforts to meet the fiscal year 2025 completion date for the B61-12 LEP. Some of these risks that the agencies are managing are within the program’s areas of responsibility, such as an aggressive flight test schedule, and additional risks could be identified within these areas. To manage risks, the program uses a formal risk management process and has taken steps such as consolidating flight tests and holding more regular meetings between NNSA’s design and production agencies. The program also faces risks that program officials told us lie outside the program’s direct control—such as risks related to the F-35 delivery aircraft, nuclear certification, and NATO coordination issues—and officials said they have provided information to the responsible DOD organizations to help address these risks. NNSA and DOD have taken steps to identify and help manage risks within the B61-12 LEP’s responsibility, and program officials said that they may identify additional risks as the program progresses. More specifically, the program has a formal risk management process through which it has identified risks and could identify additional risks as the program proceeds, according to agency officials. Risks already identified and being managed include risks related to the program’s aggressive schedule of flight tests and to finalizing design and coordinating procurement and delivery of components. The B61-12 LEP has a formal risk management process that has identified joint NNSA and Air Force risks within the program’s areas of responsibility that could significantly impact the overall program’s schedule, its cost, or the technical performance of the weapon. According to program officials and the Program Joint Risk Management Plan, this process calls for each program element in NNSA or the Air Force to be responsible for identifying and managing risks at the lowest level possible. After the program element reviews and documents a risk, it then reviews the risk to determine its applicability to be considered a joint risk—that is, a risk that has the potential to affect any of the top-level program milestones or the program’s ability to successfully meet system performance requirements. Program officials told us that the Air Force lead project officer decides whether to accept the risk into the joint risk list. Senior management oversees those risks through a formal management plan. The process includes continual reviews to identify new risks that may emerge. The Joint Risk Review Board meets as new potential risks are identified to review their likelihood and consequence. Officials from both the Office of Cost Estimating and Program Evaluation and DOD’s Office of Nuclear Matters told us that during phase 6.4 and thereafter, the program may still discover new risks—”unknown unknowns”—during technical tests to qualify components and the development of production processes. The process also has steps to manage risks and remove them from the joint high-risk list, if the Joint Risk Management Board judges them to have been resolved to closure or a low-risk status, according to program officials. NNSA and DOD program officials said that the program’s risk management process has resulted in the resolution of about three- quarters of the identified high risks on the joint risk list. They also observed that the program’s Selected Acquisition Reports, through which NNSA and the Air Force report to the congressional defense committees on the program’s cost and schedule, have been unchanged since 2013 regarding major program milestones. Program officials said that to provide a 90-day schedule buffer and add flexibility to the program’s schedule in the event of unexpected difficulties, the program has planned to reach phase 6.5 in December 2019, ahead of the phase 6.5 date of March 2020 that is reported in the Selected Acquisition Reports. However, other officials told us that it is too soon to say whether the program can manage the identified risks, or other unidentified risks, to prevent delays in a program that has relatively little schedule margin. Problems can emerge even during the first production stage of an LEP, as happened in the W76-1 LEP due to the Fogbank production challenges we discuss earlier in this report and in our March 2009 review of W76 and B61 modernization efforts. DOD and NNSA officials we interviewed generally agreed that the program faces risks in completing an aggressive flight testing schedule to support the first production unit deadline. According to the officials, the B61-12 program needs to complete more than 60 flight tests over a 3- year period to meet this deadline. Completing the tests entails actively coordinating with the Air Force organizations that manage the various aircraft that will carry the B61-12 weapon: the B-2 bomber and the F-15, F-16, F-35, and PA-200 fighters. According to B61-12 program officials, aircraft may not be available when needed for the planned flight testing. This risk is of particular concern for B-2 bombers, they said, because only one B-2 test unit is available and it is in heavy demand for other Air Force purposes. Program officials characterized the flight test schedule as aggressive and ambitious, but feasible, and told us the program has managed the risks caused by the tight testing timeframes by coordinating with the responsible organizations and consolidating tests to minimize the amount of time required on each type of aircraft. Further, when aircraft are not available as planned, program officials said they can revise the sequence of tests. For instance, they accommodated the unavailability of a B-2 test asset on a planned test date by moving up a test date on the F- 16. This schedule adjustment avoided a ripple effect of delays on the overall testing schedule, according to Air Force officials. The video in figure 6 shows an F-16 dropping an inert B61-12 bomb during a flight test on March 14, 2017. NNSA and DOD have identified and taken steps to manage risks related to finalizing the weapon’s design and coordinating the procurement and delivery of components. These risks include: Technical risks associated with the design and production of various components. Officials told us some components of the bomb and tail kit assembly are on the program’s list of joint risks. They said that their use of the joint risk management process calls management attention to potentially serious risks and helps the program to manage these risks as early and as continually as possible. For example, NNSA officials said that when technical risks arose in designing one classified component on the program’s critical path—potentially affecting the design schedule—they augmented the design team with additional scientists in an effort to ensure that the component would be completed in time to support the production schedule. Similarly, to manage design risks related to the exacting specifications for certain components, Kansas City National Security Campus is working to develop sufficiently precise gages to measure the required specifications during production. Late design changes from design agencies provided to the production agencies. NNSA’s Fiscal Year 2018 Stockpile Stewardship and Management Plan identified late changes to component design as a risk facing the B61-12 program and other LEPs. Contractor officials we interviewed from the Kansas City National Security Campus and the Pantex Plant said that late changes to weapon design requirements from the Sandia and Los Alamos design agencies could create schedule problems for establishing production processes at the production sites. Kansas City National Security Campus officials expressed concerns that some component requirements continue to change—some arising from testing results—which creates a tension between improving the design and stabilizing production requirements and processes. Pantex officials also told us about a potentially significant production delay if late design changes require Pantex to get new production tools or testers. Late design changes could occur as scientists at the design agencies analyze test results. Flight tests, for example, produce a volume of information. Officials at the federal program office in Albuquerque said that 4 test flights on the B-2, conducted in July 2017, produced 4 to 6 hours’ worth of data per flight. Officials at both the Pantex and Kansas City sites said they have developed management strategies to provide some flexibility in their production schedules, such as speeding production by having staff work longer shifts. Moreover, because of lessons learned from prior LEPs, officials at both sites told us that coordination between production sites and design agencies has significantly improved over past practices— specifically, by having ongoing engagement that started earlier in the weapon development process. For instance, Pantex officials told us that they hold monthly meetings with design agencies to discuss design changes. A Pantex official told us that, as a result of addressing production concerns early, design requirements developed at the design agencies are less likely to result in unanticipated production problems. Vendor risks associated with procuring various bomb components. According to NNSA officials we interviewed, some bomb components are procured through single commercial vendors, in small lots, or are unusual. Kansas City National Security Campus officials told us that they had to replace one vendor that could no longer provide a certain material and that they generally risk losing potential or existing vendors because vendors prefer contracts for larger volumes of components than NNSA needs for the B61-12 bomb. In addition, unique materials for the bomb include certain components with specific compositions of rubber and plastics. Officials at the Kansas City National Security Campus said that they have encountered difficulties with getting rubber and plastic components from vendors that consistently meet composition specifications or with sustaining vendors’ interest in producing small batches of precision-manufactured components. In one such instance, they said they improved incentives and communication with a vendor to avoid losing a source for a key component. The officials said they also contract with smaller vendors when larger vendors may not be interested in the size of the contract NNSA offers. Delays in delivery of components from other production sites to Pantex for full bomb assembly. NNSA and Pantex officials told us that Pantex, which will assemble the full B61-12 bomb, depends on the other production sites delivering the components in a timely manner. NNSA production sites are scheduled to provide components to Pantex 120 days before the first production unit date. Pantex and NNSA officials have identified some schedule flexibility for assembling the first production unit at Pantex, depending on which components have delayed deliveries. Specifically, if the delayed components are those needed later in the assembly process, such as the bomb’s nose assembly, Pantex could stay on schedule by assembling other delivered components until the delayed components are needed. Delivery of other components, such as detonators, is more time- sensitive, and it is essential that these be delivered on time for assembly to proceed as planned, according to Pantex officials. According to program officials, certain risks that may have a bearing on the B61-12 LEP or that may affect the fielding of the weapon lie in areas outside the program’s direct control. Nevertheless, program managers have taken steps to coordinate with other responsible parties to help address these risks. For example, two of the three delivery aircraft designated as system 2 aircraft—the F-35 and the B-2—have not yet completed development and procurement of operational flight program software that will enable the aircraft to deliver the B61-12 with the enhanced accuracy offered by the tail kit assembly, a key feature of the LEP. B61-12 program officials told us that the program offices responsible for each of these aircraft must manage the development and procurement of the operational flight program software. To help inform the software development process, the B61-12 program provided the F-35 and B-2 program offices with information about the weapon’s interface with the airplane, including information from flight tests performed on an earlier version of the F-35, according to program officials. NNSA and DOD officials characterized B-2 development related to the B61-12 as significantly more advanced than F-35 development. Specifically, Air Force officials said that a developmental version of the B-2 operational flight program software was fielded and certified in 2017 and would undergo final weapon system demonstration flight tests in October 2019 and nuclear design certification in June 2020. By contrast, they said that the F-35 software will not be ready for nuclear design certification until January 2023, after the B61-12 program’s first production unit date. The F-35 program office will be responsible for funding tests and aircraft- weapon integration activities, according to the Air Force officials. Because of the need to defer some flight tests until the software for the B-2 and F- 35 aircraft is ready, only one of the three system 2 delivery aircraft has undergone testing of the B61-12 bomb’s capabilities in its system 2 setting: the F-15E, on which NNSA and DOD conducted the first system 2 tests of the B61-12 in August 2017. Other risks outside the program’s direct control concern nuclear certification and the NATO mission. Nuclear certification—ensuring that people and objects that come into contact with the weapon will not adversely affect its performance characteristics—is a prerequisite to fielding the B61-12 and other nuclear weapons, but it is the responsibility of the Air Force organizations that manage the delivery aircraft. In a classified report issued in January 2018, we discuss risks related to nuclear certification of dual capable aircraft, which are able to deliver conventional munitions or nuclear bombs. B61-12 program officials told us that they are working to address these risks by providing information on the weapon to all of the organizations that manage the delivery aircraft. Similarly, in another classified report issued in February 2018, we discuss a risk related to the NATO mission that may affect the B61-12 LEP; program officials told us that they are working to address this risk, as well. We made recommendations in the two classified reports related to these risks; the responsible agencies agreed with our recommendations and stated their intention to take action in response to them. We provided a draft of this product to NNSA and DOD for comment. NNSA provided technical comments, which we incorporated as appropriate. DOD indicated that it did not have any comments. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Defense and Energy, the Administrator of NNSA, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to the report are listed in appendix II. Best practice The cost estimate includes all life cycle costs. The cost estimate completely defines the program, reflects the current schedule, and is technically reasonable. The cost estimate work breakdown structure—a hierarchical structure that subdivides the work necessary to accomplish the program’s objectives into smaller elements—is product-oriented, traceable to the statement of work/objective, and at an appropriate level of detail to ensure that cost elements are neither omitted nor double-counted. The estimate documents all cost-influencing ground rules and assumptions. The documentation should capture the source data used, the reliability of the data, and how the data were normalized. The documentation describes in sufficient detail the calculations performed and the estimating methodology used to derive each element’s cost. The documentation describes step by step how the estimate was developed so that a cost analyst unfamiliar with the program could understand what was done and replicate it. The documentation discusses the technical baseline description, and the data in the baseline is consistent with the estimate. The documentation provides evidence that the cost estimate was reviewed and accepted by management. The cost estimate results are unbiased, not overly conservative or optimistic, and based on an assessment of most likely costs. The estimate has been adjusted properly for inflation. The estimate contains few, if any, minor mistakes. The cost estimate is regularly updated to reflect significant changes in the program so that it always reflects current status. Variances between planned and actual costs are documented, explained, and reviewed. The estimate is based on a historical record of cost estimating and actual experiences from other comparable programs. Best practice The cost estimate includes a sensitivity analysis that identifies a range of possible costs based on varying major assumptions, parameters, and data inputs. A risk and uncertainty analysis was conducted that quantified the imperfectly understood risks and identified the effects of changing key cost driver assumptions and factors. Major cost elements were cross checked to see whether results were similar. An independent cost estimate was conducted by a group outside the acquiring organization to determine whether other estimating methods produce similar results. In addition to the contact named above, Jonathan Gill (Assistant Director), Rob Grace (Analyst in Charge), Terry Hanford (Senior Analyst), and Jennifer Leotta (Senior Operations Research Analyst) made key contributions to this report. Also contributing to this report were Antoinette C. Capaccio, Scott Fletcher, Penney Harwell Caramia, Cynthia Norris, Karen Richey, and Sara Sullivan.", "summary": "Weapons in the U.S. nuclear stockpile are aging. To refurbish or replace nuclear weapons' aging components, NNSA and DOD undertake LEPs. The B61-12 LEP is the most complex and expensive LEP to date. In October 2016, NNSA formalized a program cost estimate of about $7.6 billion, which is lower than an independent cost estimate of about $10 billion. Senate Report 113-44 included a provision for GAO to periodically assess the status of the B61-12 LEP. This report assesses (1) the extent to which NNSA followed best practices for cost estimation in producing the program cost estimate for the B61-12 LEP; (2) the reasons for differences between the program cost estimate and the independent cost estimate and how the differences were reconciled; and (3) the extent to which NNSA and DOD have identified and managed program risks. GAO assessed the program cost estimate against best practices, reviewed NNSA and DOD documents, conducted site visits to four NNSA and Air Force sites responsible for design, production, and management activities, and interviewed NNSA and DOD officials. The National Nuclear Security Administration (NNSA) incorporated most cost estimating best practices to develop the program cost estimate for the B61-12 Life Extension Program (LEP), which seeks to consolidate four versions of a nuclear weapon—the B61 bomb—into a bomb called the B61-12. As shown in the figure below, the program substantially met best practices for ensuring the estimate was comprehensive, well-documented, accurate, and credible. The B61-12 LEP's program cost estimate differs from an estimate prepared by another NNSA office independent of the program primarily because the program used different methods and assumptions than the independent office. The program developed its estimate by compiling cost and schedule estimates for activities at each of the NNSA contractor sites participating in the LEP. In contrast, the independent office evaluated program activities completed to date and applied a historical model to estimate costs and durations for remaining activities. NNSA management met with officials from both offices to reconcile the estimates but did not document the rationale for adopting the program estimate unchanged. GAO recommended in a January 2018 report that NNSA document and justify such decisions, in part because GAO's prior work has shown that independent cost estimates historically are higher than programs' cost estimates because the team conducting the independent estimate is more objective and less prone to accept optimistic assumptions. In response to the January 2018 report, NNSA agreed to establish a protocol to document management decisions on significant variances between program and independent cost estimates, but it has not yet provided evidence that it has done so. NNSA and the Department of Defense (DOD) have identified and are managing risks that could complicate efforts to meet the LEP's fiscal year 2025 completion date. Risks within the program's areas of responsibility include an aggressive flight test schedule for bomb delivery aircraft. The program is managing these and other risks with a formal risk management process. The program has also taken steps to address risks outside its direct control, such as risks related to the readiness and certification of the weapon's F-35 delivery aircraft, by providing information to the responsible DOD organizations. GAO is making no new recommendations but discusses a prior recommendation that NNSA document and justify decisions regarding independent cost estimates. NNSA provided technical comments, which GAO incorporated as appropriate. DOD did not have any comments.", "document_type": "gao"}
{"report": "NNSA’s strategic materials programs include a broad range of activities. The programs often include (1) building unique new facilities, (2) modifying and repairing existing facilities and equipment, and (3) developing and deploying new technologies for processing and producing strategic nuclear materials. The programs may involve multiple NNSA and DOE sites and multiple facilities at a given site. For example, since the days of the Manhattan Project, a large portion of the nation’s uranium mission has been executed at the Y-12 National Security Complex in Oak Ridge, Tennessee, with uranium production and associated operations housed in several nuclear facilities within the complex. These facilities are in some cases more than 60 years old. NNSA’s uranium program is coordinating efforts to build the UPF, invest in the infrastructure of existing facilities to extend their lives, and develop and deploy several new technologies that are expected to increase the efficiency and effectiveness of uranium processing. Collectively, these uranium program activities may take more than 2 decades to implement and cost several billion dollars. NNSA’s 2017 future-years nuclear security program estimate projected that NNSA would need about $1.4 billion in fiscal year 2018 to carry out its annual activities associated with the management of these strategic materials programs (see table 1). NNSA documents indicate that the agency expects to spend about $7.7 billion over the next 5 years on activities related to managing its strategic materials. This spending, which would represent about 12 percent of the approximately $63 billion NNSA expects to spend on all weapons activities over this same time period, includes: $4.8 billion for costs related to construction of facilities and other capital equipment purchases that will be used to support the strategic materials mission; and $2.9 billion for program costs related to general activities such as reducing risk and ensuring sufficient supply, as well as the consolidation, disposition, tracking, and accounting of nuclear materials. Program managers are an important part of the federal government’s workforce. They interact with the managers of individual projects to provide support and guidance on those projects but also must take a broad view of the overall objectives of programs and an agency’s organizational culture. According to leading practices outlined by the Project Management Institute, organizations develop program plans, capture and understand stakeholder needs, and establish processes for maintaining program management oversight, among other activities. Recognizing the importance of improving program management, in December 2016 the President signed the ‘‘Program Management Improvement Accountability Act” that required the Office of Management and Budget to, among other things, adopt and oversee implementation of government-wide standards, policies, and guidelines for program and project management for executive agencies and assess the quality and effectiveness of program management for these agencies. We have previously reported on DOE’s and NNSA’s program management challenges. In March 2009, we found that NNSA and the Department of Defense (DOD) established unrealistic schedules, did not establish consistent cost baselines, and did not effectively manage technical risks in some of their nuclear weapon life extension programs. These problems resulted in delays, additional expenditures, difficulties tracking the cost of the programs, and difficulties in meeting all of NNSA’s and DOD’s technical objectives. We recommended that NNSA develop and use consistent budget assumptions and criteria for the baseline to track costs over time, among other actions. NNSA agreed with our recommendations and made changes to its cost estimating procedures. In November 2014, we found that the lack of requirements for programs meant that DOE could not ensure that it was developing fully credible cost estimates for programs. We recommended that DOE revise its program management directives to require that programs develop life-cycle cost estimates in accordance with our 12 cost-estimating best practice steps. DOE agreed with our recommendation but has not yet incorporated the best practice steps into its program management directives. In February 2016, we found that the B61-12 life extension program, the most complex such program NNSA has undertaken to date, faces ongoing management challenges in some areas, including staff shortfalls and an earned value management system that has yet to be tested. We did not make any recommendations but reiterated previous recommendations such as those already mentioned. In November 2016, we found that DOE and NNSA had not established organization-wide policies or practices addressing leading practices related to program management, and we recommended that DOE do so. DOE did not agree or disagree with this recommendation. NNSA, however, in late 2016 instituted a training program for program management. NNSA’s stockpile stewardship program has established strategic materials as one of the major elements to sustain the nation’s nuclear weapons stockpile. According to NNSA budget documents, the strategic materials programs help ensure the sustainment of nuclear material processing capabilities and fund the stabilization, consolidation, disposition, tracking, and accounting of nuclear materials. Strategic materials are generally not available, or are available only in limited quantities, from commercial suppliers because of their specific properties and use in nuclear weapons or for other national security purposes. NNSA named strategic material program managers in 2014 and 2015 to integrate, oversee, plan, and execute material strategies for uranium (including domestic uranium enrichment), plutonium, and tritium. In addition to the general program management challenges highlighted above, we have also reported previously on challenges facing NNSA’s strategic materials programs: In July 2015, we found that NNSA had identified various challenges in its lithium production strategy that may impact its ability to meet demand for lithium in the future. These challenges included insufficient supply of lithium material and constraints facing NNSA’s efforts to replace the aging lithium production facility. We recommended that NNSA objectively consider all alternatives, without preference for a particular solution, as it proceeds with its analysis of alternatives process. NNSA neither agreed nor disagreed with our recommendation but did undertake a formal analysis of alternatives in 2017, according to NNSA officials. In August 2016, we found that NNSA had not documented important requirements for its plutonium program at Los Alamos National Laboratory in New Mexico. We recommended that, among other things, NNSA should update its program requirements. NNSA outlined actions taken and planned to address this recommendation. NNSA’s Office of Defense Programs has set program requirements for the strategic materials programs and has established the roles and responsibilities of the programs’ managers. NNSA defined these program requirements in two documents issued in 2016 and 2017. Collectively these documents set documentation requirements as well as established the roles and responsibilities of the strategic materials program managers. According to NNSA officials, these requirements apply to each of the programs, including the lithium program. These requirements are outlined below. Program Execution Instruction (2016) – In January 2016, NNSA approved a Program Execution Instruction that defines requirements for carrying out NNSA defense programs, such as the strategic materials programs. This instruction outlines a series of requirements that vary based on the categorization—and therefore the rigor—of management applied to a program. Of the four categories outlined in the instruction—Standard Management, Enhanced Management A, Enhanced Management B, and Capital Acquisition Management—NNSA has generally designated the strategic materials programs as “Enhanced Management B,” the most rigorous designation applicable to this type of program, according to NNSA officials. The “Enhanced Management B” programs are required to have the following elements documented: a program plan, a work breakdown structure that details the work elements necessary to organize the total work scope with cost estimates, a decision analysis, an integrated master schedule that includes the entire scope of work required for the program’s successful execution, a performance management approach, and a lessons learned/best practices review. According to the instruction, if the scope, cost, and schedule of a program are more complex, moving to a more rigorous program management category is often required. According to the instruction, when enhanced complexity and risk are associated with a program, among other things, “Enhanced Management B” is the appropriate designation. The instruction also allows for programs to “tailor,” or modify, the application of certain requirements depending on risk and other factors. Program Management Policy for Weapons and Strategic Materials Programs (2017) – NNSA issued a program management policy in January 2017 that defines general roles and responsibilities for all four strategic materials program managers. This policy broadly outlines the managers’ authority and responsibilities for managing the strategic materials; these responsibilities include developing program documentation and managing risk. According to NNSA officials we interviewed, the policy is based on NNSA’s experience in implementing the uranium program in 2014. The policy requires each of the strategic materials programs to develop a number of guidance documents, including a mission strategy, mission requirements, and a technology development plan. For each program, the policy also requires the formation of a strategic materials mission working group that is comprised of the key stakeholders involved in the program. NNSA officials told us that they are making progress in implementing the program requirements outlined for each of the strategic materials programs, although some are further along than others. However, these officials said that relatively few staff had been assigned to these programs, which has challenged implementation efforts. For its two strategic materials programs established in 2014—uranium and domestic uranium enrichment—NNSA officials told us that they are generally meeting the strategic materials program management requirements outlined in the Program Execution Instruction and the Program Management Policy for Weapons and Strategic Materials. NNSA officials identified documents for each program, including mission strategy, mission requirements, program plan, and work breakdown structure. For the other programs, according to agency officials, NNSA is still working to meet these requirements, though the tritium program met all requirements during the course of this review. More specifically, according to agency officials: The plutonium sustainment program has met some of the Program Execution Instruction requirements to date, including having in place a program plan, work breakdown structure, and decision analysis, but not an integrated master schedule (although one is being developed, according to agency officials). The plutonium program also has a mission strategy in place, as called for by the Program Management Policy for Weapons and Strategic Materials, but has not yet met the other strategic materials program management requirements. According to agency officials, those requirements are being developed. The tritium sustainment program has recently met the Program Execution Instruction requirements as well, including having a program plan, work breakdown structure, integrated master schedule, and performance management approach in place. Additionally, the program recently updated documentation to meet the Program Management Policy requirements including revising its Strategic Material Mission Working Group in 2017, according to agency officials. The lithium program is early in its development, and no program manager has been appointed yet, pending senior NNSA leadership decisions. NNSA has a lithium mission strategy, a mission requirements matrix, and a technology development plan in place, as required by the Program Management Policy for Weapons and Strategic Materials, but the rest of the strategic materials program management requirements are still in the process of being developed, according to agency officials. NNSA officials said that even though the lithium program is not subject to the same requirements, they intend for it to meet all of the same requirements as the other strategic materials programs. Officials from the Office of Defense Programs, including the strategic materials program managers themselves, said that a shortage of staff has presented a challenge in terms of implementing the requirements of the strategic materials programs and meeting their missions. According to NNSA officials, all of the strategic materials programs have been assigned relatively few federal staff to implement the programs. The officials also said that while they plan to have all five strategic materials programs fully meet the requirements and operate as cohesive programs, the lack of staff has hampered their efforts to do so. For example, the plutonium manager said more staff were needed to successfully implement the program, and the lithium lead point of contact said that at least two full-time staff members would be required to accomplish the work needed to make the lithium program meet program requirements. Specifically, according to agency officials as of October 2017, in addition to contractor support: the uranium program had the program manager and two federal staff assigned; the domestic uranium enrichment program had the program manager and one federal staff assigned; the plutonium program had the program manager and one federal staff member; the tritium program had the program manager and no dedicated staff, relying instead on staff in other programs such as a federal program manager from a different program who acts as staff for this program; and the lithium program had the lead point of contact and no dedicated staff, although a contracted senior technical advisor provides some support. NNSA officials cited competing agency priorities and current perceived staffing limits as the primary impediments to assigning more staff to these programs. First, according to agency officials, the relative newness of the strategic materials programs and competing agency priorities to modernize the nuclear weapons infrastructure and modernize and extend the lives of current nuclear weapons have meant that federal staff are in high demand across the agency. This concern is consistent with issues we have identified in our past work as well. For example, in April 2017, we noted NNSA’s ambitious, costly, decades-long effort to modernize the nation’s nuclear security enterprise. In addition to ongoing and planned infrastructure modernization, some of which is associated with the strategic materials programs, this modernization includes four ongoing expensive weapons refurbishments and efforts to improve the agency’s research, development, testing, and evaluation capabilities by, for example, continuing efforts in advanced modeling, simulation, and computing. Similarly, we found in September 2016 that the competing agency priorities for infrastructure modernization and weapons refurbishments had negatively affected another NNSA program: the Enhanced Surveillance Program. Second, NNSA officials said that they have limited flexibility when it comes to increasing federal staff levels. Specifically, in each year that the total number of federal employees at NNSA exceeds 1,690, the Administrator is required by law to submit to the congressional defense committees a report justifying such excess. In the NNSA Administrator’s testimony before the Senate Appropriations Subcommittee on Energy and Water Development in June 2017, he stated that since 2010, NNSA’s program funding had increased 28 percent, while its federal staffing levels had decreased by 17 percent. He said that initial results from a yet-to-be- completed study by the Office of Personnel Management in support of the Reform of Government Initiative indicate the need for a 20 percent increase in federal staff at NNSA. We have also previously reported that staffing shortages have affected NNSA’s efforts to improve management capability. For example, we reported in October 2014 that NNSA determined that inadequate levels of federal staff had contributed to management problems with the UPF project. As a result, NNSA increased staffing levels for the UPF project office from 9 full-time equivalents in 2012 to more than 50 as of January 2014. According to NNSA officials, the additional staff enabled NNSA to conduct more robust oversight of the contractor’s design efforts than was previously possible. Similarly, in 2016, we found that the B61-12 life extension program, the most costly and complex such program undertaken to date, successfully requested that NNSA enlarge its program office staff from 3 to 8 full-time equivalent staff to provide more management capability. However, we found that even with this increase in federal staff, some NNSA and DOD officials said that they believe that NNSA needs two to three times more personnel in the federal program manager’s office to ensure sufficient federal management and oversight. One area that we noted in this review is that with regard to the strategic materials programs, NNSA has not conducted a workforce needs assessment. Strategic materials program officials acknowledged that they had neither specifically assessed the number or skills of staff needed to manage the strategic materials programs, nor did they have current plans to do such an assessment. Our prior work on strategic human capital management has identified certain activities or practices that can help an agency strategically manage its human capital. These activities include determining the critical skills and competencies that will be needed to achieve the programs’ missions and developing strategies to address gaps in the number, deployment, and alignment of staff needed. NNSA officials said that individual offices have attempted over time to assess resource and skill needs but that these efforts have been hampered by, among other things, a lack of staff. By determining the critical skills and competencies needed to achieve each strategic material program’s mission and using this determination to develop strategies to address any gaps in the number, deployment, and alignment of staff needed, NNSA may find it has better information to justify increased staffing levels for its strategic materials programs. Since 2014, NNSA has taken steps to establish programs to maintain and modernize the nation’s nuclear weapons stockpile, including appointing federal program managers for four of the five strategic materials programs, as well as steps to establish and organize the programs according to internal program management requirements. This is a significant step given the importance, cost, and complexity of these strategic materials programs. However, NNSA has made varying progress implementing these strategic materials programs, in part because these programs may not have been allotted staff and management capacity commensurate with their cost and scope of work. Although strategic materials program officials acknowledged staffing limitations, they have not determined the critical skills and competencies that will be needed to meet program requirements and, ultimately, achieve the programs’ missions. By determining the critical skills and competencies needed to achieve each strategic materials programs’ missions and using that determination to develop strategies to address any gaps in the number, deployment, and alignment of staff needed, NNSA may find it has more information to justify increased staffing levels for its strategic materials programs. The NNSA Administrator should determine the critical skills and competencies that will be needed for the strategic materials programs and use this determination to develop strategies for addressing challenges, if any, related to the number, deployment, and alignment of program staff (Recommendation 1). We provided a draft of this report to DOE and NNSA for their review and comment. NNSA provided written comments, which are reproduced in full in appendix II, as well as technical comments, which we incorporated in our report as appropriate. In its comments, NNSA agreed with our recommendation and stated that the recommendation is consistent with the programs’ current evolution. NNSA further stated that it recognizes the need to define the range of skills and competencies necessary to execute the programs' critical missions and that it plans to identify the complete set of core competencies needed for these programs by December 31, 2018. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, the Administrator of the National Nuclear Security Administration, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: Strategic Nuclear Materials Managed by the National Nuclear Security Administration (NNSA) NNSA has established programs for ensuring the supply of each of the following strategic materials as well as the capability to process them: Uranium – National security needs for uranium are met using a large existing inventory of previously enriched uranium. Although NNSA has estimated that stocks are sufficient for projected needs, existing uranium needs to be purified, machined, and recovered from existing operations. The Y-12 National Security Complex in Oak Ridge, Tennessee, is the NNSA site for conducting enriched uranium activities, producing uranium-related components for nuclear warheads and bombs, and processing feedstock for nuclear fuel for the U.S. Navy. In 2004, NNSA decided to construct a new Uranium Processing Facility (UPF) that consolidated the functions of four separate uranium facilities into a single building. In 2014, NNSA, on the advice of a peer review team, decided to pursue a uranium program that includes a smaller UPF and, among other program elements, modifications to existing uranium buildings and capabilities to include several new uranium processing technologies. Construction on the UPF continues at the Y-12 site, and NNSA continues to request funds for that project. Fiscal year 2018 funds are to be used for construction of some related subprojects. According to NNSA officials, the UPF is expected to be complete by 2025 and cost no more than $6.5 billion. NNSA estimates that additional investments needed to upgrade existing uranium facilities will cost about $20 million per year for the next 20 years. Domestic Uranium Enrichment – To produce tritium, the Tennessee Valley Authority (TVA) must use unobligated uranium in certain nuclear reactors, under an interagency agreement between Department of Energy (DOE) and TVA. The United States has not had a sustained uranium enrichment capability since the 2013 closure of the Paducah Gaseous Diffusion Plant, which was originally constructed in 1952. In 2014, NNSA created the domestic uranium enrichment program manager position with responsibility to sustain the agency’s supply of low-enriched uranium for tritium production. We currently have ongoing work reviewing the program’s plan to ensure supply through 2060. NNSA estimated that over the next 5 years alone, these activities will likely cost more than $400 million. Plutonium – A set of aging facilities at Los Alamos National Laboratory provides the backbone of NNSA’s plutonium work, such as certifying the safety of existing nuclear weapons’ plutonium pits and producing new pits to extend the life of nuclear weapons in the stockpile. NNSA conducts plutonium analysis in the Chemistry and Metallurgy Research facility, which was built in the 1950s, but NNSA plans to cease programmatic operations in this facility by 2019 because of its aging infrastructure and because it sits on a seismic fault line. NNSA produces pits and conducts pit surveillance in the 38- year-old high-hazard, high-security Plutonium Facility 4 at Los Alamos. Other important plutonium activities, such as NNSA’s plutonium disposition efforts and the processing of plutonium used to provide heat sources for space missions, are not included in the plutonium manager’s portfolio because other program offices are responsible for these activities, according to NNSA officials. Officials said that these program offices coordinate capability and facility needs with the plutonium program manager. In August 2014, DOE cancelled plans to construct the nuclear facility that was part of the overall Chemistry and Metallurgy Research Replacement (CMRR), which was approved in 2005 to replace the aging Chemistry and Metallurgy Research facility. In its place, DOE approved the implementation of the first part of NNSA’s new plutonium strategy: the revised CMRR project, which includes a subproject to remove contaminated equipment no longer in use in Plutonium Facility 4, install new plutonium analysis equipment, and modify an existing building to handle higher quantities of plutonium. NNSA estimated that the CMRR project would cost from $2.4 billion to $2.9 billion and be completed by 2024. In addition, in November 2015, DOE approved the mission need for the implementation of the second part of the strategy: building modular nuclear facilities to add high- hazard, high-security laboratory space at Los Alamos (the Plutonium Modular Approach) to meet plutonium pit production requirements. NNSA estimated that the Plutonium Modular Approach could cost from $1.3 billion to $3.0 billion and be completed by the end of 2027. Tritium – NNSA has relied on tritium produced many years ago; recycling and recovery of existing tritium is currently the source of most of the tritium in the stockpile, according to NNSA officials. However, tritium decays relatively rapidly, and in 2015 NNSA identified a need to produce additional tritium. To produce tritium, lithium target rods—called tritium-producing burnable absorber rods— are irradiated in TVA’s reactors. The irradiated rods are transported to DOE’s Tritium Extraction Facility at the Savannah River Site in South Carolina, where they are processed in a specialized facility to extract and then prepare the tritium for nuclear warheads. NNSA requested $9.8 million in design funds in fiscal year 2018 for construction of a new tritium production capability. In its fiscal year 2018 budget request, NNSA estimated that this facility would cost about $425 million and be approved for operations in 2027. Lithium – Lithium is a key component of nuclear weapons and is essential for their refurbishment. NNSA has a sufficient supply of enriched lithium-6 (the isotope used in refurbishments and for tritium production), but that lithium is stored in another form and must undergo complex processing before it can be used for these purposes. NNSA halted certain aspects of its lithium processing operation—conducted at its Y-12 site in Oak Ridge, Tennessee—in May 2013 due to the condition of the site’s 72-year-old lithium production facility. Currently, NNSA is relying on a less complex but also less efficient process that results in a loss of approximately 50 percent of material. In 2013, NNSA developed a lithium production strategy that proposed a new lithium production facility, which the agency estimated would cost more than $500 million. NNSA plans to request $30.4 million in fiscal year 2019 for construction of this facility. This strategy includes sustaining current infrastructure and deploying new technologies to sustain lithium production. In addition to the contact above, Jonathan Gill (Assistant Director), Alisa Beyninson, Antoinette Capaccio, Jeff Larson, Cynthia Norris, and Kiki Theodoropoulos made key contributions to this report. Modernizing the Nuclear Security Enterprise: A Complete Scope of Work Is Needed to Develop Timely Cost and Schedule Information for the Uranium Program. GAO-17-577. Washington, D.C.: September 8, 2017. Program Management: DOE Needs to Develop a Comprehensive Policy and Training Program. GAO-17-51. Washington, D.C.: November 21, 2016. DOE Project Management: NNSA Needs to Clarify Requirements for Its Plutonium Analysis Project at Los Alamos. GAO-16-585. Washington, D.C.: August 9, 2016. Modernizing the Nuclear Security Enterprise: NNSA’s Budget Estimates Increased but May Not Align with All Anticipated Costs. GAO-16-290. Washington, D.C.: March 4, 2016. Modernizing the Nuclear Security Enterprise: NNSA Increased Its Budget Estimates, but Estimates for Key Stockpile and Infrastructure Programs Need Improvement. GAO-15-499. Washington, D.C.: August 6, 2015. DOE Project Management: NNSA Should Ensure Equal Consideration of Alternatives for Lithium Production. GAO-15-525. Washington, D.C.: July 13, 2015. DOE and NNSA Project Management: Analysis of Alternatives Could Be Improved by Incorporating Best Practices. GAO-15-37. Washington, D.C.: December 11, 2014. Project and Program Management: DOE Needs to Revise Requirements and Guidance for Cost Estimating and Related Reviews. GAO-15-29. Washington, D.C.: November 25, 2014. Nuclear Weapons: Some Actions Have Been Taken to Address Challenges with the Uranium Processing Facility Design. GAO-15-126. Washington, D.C.: October 10, 2014. Nuclear Weapons: Technology Development Efforts for the Uranium Processing Facility. GAO-14-295. Washington, D.C.: April 18, 2014. Plutonium Disposition Program: DOE Needs to Analyze the Root Causes of Cost Increases and Develop Better Cost Estimates. GAO-14-231. Washington, D.C.: February 13, 2014. Nuclear Weapons: Information on Safety Concerns with the Uranium Processing Facility. GAO-14-79R. Washington, D.C.: October 25, 2013. Nuclear Weapons: Factors Leading to Cost Increases with the Uranium Processing Facility. GAO-13-686R. Washington, D.C.: July 12, 2013. Nuclear Weapons: National Nuclear Security Administration’s Plans for Its Uranium Processing Facility Should Better Reflect Funding Estimates and Technology Readiness. GAO-11-103. Washington, D.C.: November 19, 2010.", "summary": "NNSA is responsible for ensuring a sustainable supply of strategic materials critical to the nation's nuclear security missions, as well as the capability to process these materials. NNSA estimates that strategic materials management activities will cost about $7.7 billion over the next 5 years. The House Report accompanying H.R. 4909, a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to review NNSA's management of its strategic materials programs. This report examines (1) the extent to which NNSA has, for these programs, defined requirements, including program manager roles and responsibilities, and (2) the progress of NNSA's implementation of those program requirements. GAO reviewed NNSA program management policies and documents related to its strategic materials program manager positions and interviewed NNSA officials and program managers. The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) manages strategic materials programs for uranium, plutonium, tritium, and lithium—materials that are critical to national security. NNSA has set program requirements that each of the programs must follow and has established the roles and responsibilities of the program managers. NNSA has defined these requirements in two documents: Program Execution Instruction (2016). Outlines requirements for program management documents, such as a program plan, cost and schedule estimates, and an integrated master schedule that includes the entire scope of work for successful execution. Program Management Policy (2017). Outlines the program managers' authority and requirements for managing the strategic materials programs, such as managing risk, and requires each program to develop documents, such as a mission strategy and technology development plan. NNSA officials reported that the agency is making progress implementing the requirements outlined for each of the strategic materials programs, although some of the programs are farther along than others. For example: The uranium and domestic uranium enrichment programs established in 2014 are the furthest along and have developed the documents needed to meet strategic program requirements. The plutonium program has met some of the requirements, such as developing a program plan, work breakdown structure, and decision analysis, but does not yet have an integrated master schedule. The tritium program met the requirements during the course of GAO's review. The lithium program, which is the newest, has made the least amount of progress and to date has developed only a mission strategy, a mission requirements matrix, and a technology development plan. According to NNSA officials, shortage of staff assigned to the strategic materials programs has been the primary reason hampering progress in implementing the program requirements. For example, a lithium program manager has not yet been assigned, and all the other programs have identified the need for additional staff beyond the one or two staff currently assigned to each. According to officials, competing agency priorities and perceived staffing limits are the primary impediments to assigning more staff to these programs. However, GAO also found that NNSA has not determined the critical skills and competencies needed for these programs. GAO's prior work has identified certain activities or practices that can help an agency strategically manage its human capital. These activities include determining the critical skills and competencies that will be needed to achieve the program's mission and developing strategies to address gaps in the number, deployment, and alignment of staff needed. By determining the critical skills and competencies needed for the strategic materials programs and using this determination to develop strategies to address any gaps in the number, deployment, and alignment of program staff, NNSA may have the information it needs to better justify increased staffing levels for the programs. GAO recommends that NNSA determine the critical skills and competencies that will be needed for the strategic materials programs and use this determination to develop strategies for addressing any gaps related to the number, deployment, and alignment of program staff. NNSA agreed with GAO's recommendation.", "document_type": "gao"}
{"report": "FAR Part 15 describes the use of several competitive source selection processes to meet agency needs, which include the LPTA process and tradeoff process on a best value continuum (see fig. 1). The FAR states that when using the LPTA process, tradeoffs are not permitted. DOD may elect to use the LPTA process where the requirement is clearly defined and the risk of unsuccessful contract performance is minimal. In such cases, DOD can determine that cost or price should play a dominant role in the source selection. When using the LPTA process, DOD specifies its minimum requirements in the solicitation. Firms submit their proposals and DOD determines which of the proposals meet those requirements. No tradeoffs between cost or price and non-cost factors (for example, technical capabilities or past performance) are permitted. Non-cost factors are rated on an acceptable or unacceptable basis. The award is made based on the lowest priced, technically acceptable proposal submitted to the government. With either the LPTA or the tradeoff process, contracting officials may establish a competitive range and conduct discussions with offerors before selecting an offer for award. By contrast, DOD may elect to use the tradeoff process in acquisitions where the requirement is less definitive, more development work is required, or the acquisition has a greater performance risk. In these instances, non-cost factors may play a dominant role in the source selection process. Tradeoffs between price and non-cost factors allow DOD to accept other than the lowest priced proposal. The FAR requires DOD to state in the solicitation whether all evaluation factors other than cost or price, when combined, are significantly more important than, approximately equal to, or significantly less important than cost or price. Contracting officials have broad discretion in the selection of the evaluation criteria that will be used in an acquisition. A written acquisition plan generally should include a description of the acquisition’s source selection process and the relationship of the evaluation factors to the acquisition objectives, but the FAR does not explicitly require contracting officials to document the reasons why the specific source selection procedures or evaluation factors were chosen. DOD’s March 2016 Source Selection Procedures offer additional guidance regarding the use of the LPTA source selection process. The procedures are mandatory for acquisitions conducted as part of a major system acquisition program and all competitively negotiated FAR part 15 acquisitions with an estimated value over $10 million. The March 2016 guide states that the LPTA source selection process may be used in situations where there would not be any value on a product or service exceeding the required technical or performance requirements. The guide also states that such situations may include acquisitions for well-defined, commercial, or non-complex products or services; where risk of unsuccessful contract performance is minimal; and where DOD has determined there would be no need or value to pay more for higher performance. Section 813, as amended, requires that DOD revise the DFARS to require that the LPTA process only be used in situations when the following eight criteria are met. 1. DOD can clearly describe the minimum requirements in terms of performance objectives, measures, and standards that will be used to determine acceptability of offers. 2. DOD would realize no, or little, value from a proposal exceeding the solicitation’s minimum technical requirements. 3. The proposed technical approaches can be evaluated with little or no subjectivity as to the desirability of one versus the other. 4. There is a high degree of certainty that a review of technical proposals other than that of the lowest-price offeror would not identity factors that could provide other benefits to the government. 5. The contracting officer has included a justification for the use of the LPTA process in the contract file. 6. The lowest price reflects full life-cycle costs, including for operations and support. 7. DOD would realize little or no additional innovation or future technological advantage by using a different methodology. 8. For the acquisition of goods, the goods being purchased are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. Section 813 required DOD to revise the DFARS within 120 days of enactment of the National Defense Authorization Act for Fiscal Year 2017. The NDAA was enacted December 23, 2016, but, as of November 2018, the DFARS had not been revised. A Defense Pricing and Contracting (DPC) official stated the revisions are in process but were delayed due to a number of reasons, including the need for the revisions to reflect two additional criteria that were added to Section 813 (shown as criteria (7) and (8) in the list above) through subsequent provisions in Section 822 of the National Defense Authorization Act for Fiscal Year 2018, and compliance with Executive Order 13771, which calls for the reduction and control of regulatory costs. The DPC official stated that until the DFARS is updated, DOD contracting officials are not required to consider the Section 813 criteria. The FAR describes a wide selection of contract types that may be used in acquisitions. One of those types is an IDIQ contract, which provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period of time. The FAR implements a statutory preference for multiple-award IDIQ contracts, which are awarded to two or more contractors under a single solicitation. These contracts allow agencies to establish a group of prequalified contractors to compete for future orders under streamlined ordering process once agencies determine their specific needs. These contracts can be awarded using a source selection process that is on the best value continuum, such as LPTA or tradeoff. When a concrete need arises, a contracting officer will issue a task order for services or delivery order for products. DOD frequently issues orders under IDIQ contracts to address its needs. DOD obligated approximately $133 billion—40 percent of its total fiscal year 2017 contract obligations— through such orders. With certain exceptions, the FAR requires that when a contracting officer places an order under a multiple-award IDIQ contract, the contracting officer must provide all of the IDIQ contract holders a “fair opportunity” to be considered for the order. Generally, a contracting officer placing an order exceeding the simplified acquisition threshold must provide a “fair notice” that includes the basis upon which the selection will be made to all contractors offering the required products or services under the multiple-award contract. We have previously found that DOD has awarded IDIQ contracts using the tradeoff process but then issued orders off of those IDIQ contracts using either the LPTA process or a tradeoff process. In other words, DOD employs both the LPTA and tradeoff processes for competitive orders issued against the same IDIQ contract, depending upon the requirement. Since 2010, we have issued three reports on DOD’s use of source selection processes. In October 2010, we found that, for 60 of the 88 contracts we reviewed, DOD used a tradeoff process and weighted non- cost factors as more important than price. In these cases, DOD was willing to pay more when a firm demonstrated it understood complex technical issues more thoroughly, could provide a needed product or service to meet deadlines, or had a proven track record in successfully delivering products or services of a similar nature. In addition, we determined that when making tradeoff decisions, DOD selected a lower priced proposal nearly as often as it selected a higher technically rated, but more costly, proposal. In so doing, DOD chose not to pay more than $800 million in proposed costs by selecting a lower priced offer over a higher technically rated offer in 18 of the contracts we reviewed. The majority of solicitations where non-cost factors were equal to or less important than cost were for less complex requirements. We also found that DOD faced several challenges when using the best value tradeoff process, including difficulties in developing meaningful evaluation factors, the additional time investment needed to conduct best value tradeoff procurements, and a greater level of business judgment required of acquisition staff when compared to other acquisition approaches. To help DOD effectively employ the best value tradeoff process, we recommended that DOD develop training elements such as case studies that focus on reaching tradeoff decisions. DOD concurred and implemented the recommendation in August 2012. In 2014, we found that DOD had increased its use of the LPTA process for new contracts with obligations over $25 million, using the LPTA source selection process to award an estimated 36 percent of new fiscal year 2013 contracts compared to 26 percent in fiscal year 2009. We found that contracting officials’ decisions on which source selection process would be used was generally rooted in knowledge about the requirements and contractors. For contracts with obligations over $25 million, DOD used the LPTA source selection process primarily to acquire commercial products such as fuel, and we identified relatively few uses of the LPTA process to acquire higher dollar services. For contracts with obligations over $1 million and under $25 million, DOD used the LPTA process an estimated 45 percent of the time for a mix of products and services, including fuel, aircraft parts, computer equipment, construction-related services, engineering support services, and ship maintenance and repairs. We did not make recommendations to DOD in this report. In 2017, we reviewed contracts that DOD awarded using the LPTA process for service categories for which Section 813 established the LPTA process is to be avoided to the maximum extent practicable, such as those for information technology, knowledge based services, cybersecurity, and other professional support services. We found that the Army, Navy, and Air Force rarely used the LPTA source selection process for information technology and selected support services contracts valued at $10 million or more that were awarded in the first half of fiscal year 2017. Our analysis found that the three military departments awarded 781 new contracts valued at $10 million or more during this time frame. Of these 781 contracts, 133 contracts were awarded for information technology and support services. However, only 9 of the 133 contracts used the LPTA source selection process. In addition, we found that contracting officials’ reasons for using the LPTA process were generally consistent with the criteria listed in Section 813. We did not make recommendations to DOD in this report. Based upon the results of our generalizable sample, we estimate that about 26 percent of contracts and orders competitively awarded by the Army, Navy, Air Force, and DLA valued at $5 million and above in fiscal year 2017 used the LPTA process. Table 1 shows the number and percentage of contracts and orders in our sample that we estimate to have used the LPTA process. We reviewed the 46 contracts and orders for which the Army, Navy, Air Force and DLA used the LPTA process and found that 20 were for products and 26 for services. Within this sample, the Army, Navy, Air Force, and DLA bought a variety of products and services (see figure 2). Contracting officials associated with the 14 contracts and orders we selected used the LPTA process, in part, because they determined there was no tradeoff available or determined that DOD would not derive any benefit from paying a premium for offers that exceeded the minimum capabilities. As previously mentioned, DOD’s March 2016 Source Selection Procedures currently states that the LPTA process may be used when there would not be additional value to a product or service exceeding the required technical or performance requirements. Therefore, these determinations are consistent with the DOD’s current guidance. The following examples illustrate contracting officials’ rationale for using the LPTA process. A DLA contracting official awarded a contract for natural gas with a ceiling value of approximately $14.8 million over a 2-year ordering period. The contracting official stated that no tradeoffs were available because the requirement was specifically for natural gas that would be used in government owned facilities across multiple states and an alternative fuel source was not required. Therefore, offerors were evaluated, from a technical acceptability perspective, on whether they were able to deliver the amount of natural gas required by the specified time frames. Similarly, the Marine Corps purchased over 15,400 general-purpose laptops with an estimated value of approximately $14.1 million. To meet a DOD initiative of upgrading general use laptops to Windows 10, Marine Corps officials determined that a commercially available laptop would meet their requirements. Marine Corps contracting officials stated that through their market research they noted there were laptops with additional capabilities available; however, they determined it was not beneficial to pay for higher capabilities. Overall, for the 14 contracts and orders we reviewed, contracting officials identified several reasons for using the LPTA process (see table 2). In many cases, contracting officials cited more than one reason. The following examples illustrate reasons contracting officials identified for the use of the LPTA process. The Air Force awarded a foreign military sales IDIQ contract, with a maximum ordering value of $65 million, to provide planned maintenance and supply support services for F-16 aircraft owned by Taiwan. The contract had a one-month mobilization period, a 5-year base ordering period, and two 1-year option ordering periods. According to Air Force officials, the contract’s requirements were well- defined because the standard tasks and processes, such as engine maintenance, corrosion prevention, and aircraft washing, are strictly defined by an Air Force instruction. Contracting officials determined there was a low risk of contractor failure because (1) the pool of qualified firms interested in performing this type of contract is limited, and (2) the incumbent workforce had to be offered the chance to continue working under any new contract, regardless of the management company that won the award. The Navy issued an order under a multiple-award IDIQ contract, with a value of $6.1 million, to renovate office space in two buildings at a naval air station. The Navy determined that the risk of contractor failure on this order was low because the contractor was pre-qualified as part of the initial contract award. Additionally, contracting officials stated the requirement was well-defined, as the contractor was required to renovate the space according to the plans provided by the Navy. The Navy awarded a multiple award IDIQ contract with an estimated maximum value of $502.6 million, over a one-year base period and four 1-year options, for repair and maintenance of non-nuclear surface ships harbored in San Diego. Navy officials considered the requirements non-complex due to the nature of the work to be performed. In this case, the tasks included welding, marine pipefitting, sheet metal forming, and electrical/electronic repairs, among others, which were to adhere to established standards that would be specified in the orders. The contracting officials stated that for more complex repairs they would use a different contract. DLA awarded a contract with an estimated value of $5.7 million, over a 2-year ordering period, for a commercial jet fuel system icing inhibitor to be delivered to Middle Eastern destinations, such as Qatar. Given that the additive was a commercial product, DLA determined that awarding the contract to the offeror that could deliver the required quantity within specific time frames at the lowest price was in the government’s best interests. Of the 14 contracts and orders we reviewed, 4 orders were for services that Section 813 identified as those that DOD should, to the maximum extent practicable, avoid using the LPTA process. These four orders were for cybersecurity services, information technology services, and knowledge-based professional services. DOD contracting officials’ rationale for using the LPTA process for these four orders were also consistent with guidance in DOD’s March 2016 Source Selection Procedures, as illustrated below: The Air Force issued an order with an estimated value of $11.6 million, with a 1-year base period and four 1-year options, for healthcare information technology system support services at several European military installations. These services included help desk support and network administration services, such as maintenance, administration, and troubleshooting services for the local computer servers. Air Force contracting officials stated the requirements were well-defined, as the services have been provided by a contractor for a long time and were well understood. Further, the officials stated they confirmed that the requiring office was not willing to pay for additional services beyond the minimum requirements. Contracting officials also determined there was a low risk of contractor failure because they were placing an order under a multiple-award IDIQ contract and all contract holders were pre-qualified to perform the work. The Air Force issued an order with a reported value of $21.6 million, with a 1-year base period and four 1-year options, for information technology services, which included cybersecurity services, network management administration, requirements analysis, and communications planning at a European military installation. Air Force contracting officials stated the requirements for this contract were well-understood, as the Air Force had been contracting for these services for more than 15 years. Further, contracting officials stated the contractor was required to use an existing government software program to identify any information technology threats. Finally, contracting officials determined there was a low risk of contractor failure because they were issuing an order under a multiple-award IDIQ contract for which all contract holders were pre-qualified to perform the work. The Army issued an order with an estimated value of $10.7 million, with a 1-year base period and two 1-year options, for professional support services at the United States Army Sergeants Major Academy at Biggs Army Airfield, El Paso, Texas. Under this order, the contractor was to provide instructors to teach a pre-existing curriculum to Sergeants Major and Master Sergeants in strategic operations, preparing them to take positions throughout the DOD. The order provided that the instructors should be former Army sergeants and hold a Master’s degree, with a preference for a Master’s degree in adult education. In addition, the instructors had to have or had to obtain specific Army contractor instruction certifications. Therefore, the contracting official stated there was no benefit in having instructors that exceeded these recommended qualifications. The Navy issued an order with a value of approximately $10 million and a period of performance of approximately four years and five months for installation of furniture/equipment onboard the USS George Washington aircraft carrier. Tasks included removing furniture, installing new, furniture in the same place, and painting, among others, to maintain ship habitability. Contracting officials determined there was no value in performing a tradeoff because the tasks were for routine work and all of the IDIQ contract holders previously were found to have the technical capability to perform the work. Contracting officials stated that they generally considered five of the eight criteria in Section 813 when awarding the 14 contracts and orders we reviewed. This was done, in part, because according to contracting officials, those criteria are inherently considered by contracting officials when determining which source selection process should be used. Further, based on our analysis, these five criteria are generally reflected in DOD’s March 2016 Source Selection Procedures. Table 3 illustrates whether contracting officials considered the Section 813 criteria when they decided to use the LPTA process for the 14 contracts and orders we reviewed. As previously discussed, DOD has not yet updated regulations to put the Section 813 criteria into effect. A DPC official stated that until DOD regulations are updated, DOD contracting officials are not required to consider the Section 813 criteria. Most of the contract files we reviewed did not include a written justification for the use of the LPTA process. A DPC official stated when the DFARS is updated to implement Section 813, DOD intends to include a requirement for contracting officials to prepare a written justification for the use of the LPTA process. Some contracting officials were uncertain how to address the other two criteria that were generally not considered. For example, 4 of the 14 contracts and orders that we reviewed were for products. As stated above, one of the Section 813 criteria will require contracting officers who are purchasing goods to determine that the goods are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. Two of the four contracting officials for the products we reviewed stated they made this determination for these purchases. However, the other two stated that they would not have known how to consider this criterion for their procurements. Specifically, a Marine Corps contracting official who purchased general use computers stated it was unclear if a computer that will be replaced every 5 years would be considered to have a short shelf life. Additionally, an Air Force contracting official who purchased Blackberry licenses stated that it was unclear if this criterion would apply to such licenses, and if it did, whether a 1-year license would be considered a short-shelf life. As a result, this contracting official stated he would not know how to consider this criterion in similar acquisitions. Additionally, 12 of the 14 contracting officials we interviewed raised a number of questions about how to consider full life-cycle costs, including operations and support, which is another criterion under Section 813. In this regard, Eight contracting officials did not think life-cycle costs applied to their acquisitions and therefore they did not understand what costs they would have considered. For example, an Army contracting official who purchased construction quality assurance and oversight services stated the concept of life-cycle costs generally applies to products, not services. Similarly, a DLA official who contracted for a de-icing agent stated that this particular product does not have life-cycle costs associated with it. Three contracting officials raised questions regarding who would be in the best position to determine life-cycle costs. For instance, an Air Force contracting official stated life-cycle costs are determined by the requiring office, not by the contracting office, so it was not clear what role the contracting office would have in evaluating life-cycle costs. One contracting official who awarded an IDIQ contract stated this criterion would not apply to such an award because specific requirements would be determined when issuing orders under the IDIQ contract. Therefore, the contracting officer believed that any life- cycle costs should be considered when issuing subsequent orders. In the two remaining cases, one contracting official stated he was not confused by this criterion, but did not consider life-cycle costs when awarding the contract to provide instructors at the Army Sergeants Major Academy. In another case, the contracting official stated life-cycle costs for a $14.8 million contract for natural gas had been considered, but the official determined there were no life-cycle costs associated with the use of natural gas in this instance. As previously discussed, DOD has not yet revised the DFARS to include the criteria specified in Section 813, nor has DOD’s March 2016 source selection procedures been updated to address consideration of the new criteria. A DPC official stated that the DFARS is in the process of being updated and will reflect Section 813. For example, the official stated that the updated regulation will require written justifications for using the LPTA process. This official, however, could not comment on whether the revisions will provide clarification, beyond what was written in Section 813, on how to apply the two criteria that DOD contracting officials generally found confusing. Without further clarification, such confusion is likely to continue. As a result, contracting officials will be at risk of not consistently applying the criteria in Section 813. Our work also found differing opinions on whether the criteria in Section 813 would apply to the issuance of competitive orders under multiple- award IDIQ contracts. Our prior work has found that such orders represent a significant portion of DOD’s annual contract obligations. For example, 7 of the 14 contracting officials generally stated the criteria in Section 813 could apply at the order level depending on the nature of the requirement. They stated that requirements are determined when issuing orders and, as a result, it is possible that methods including the LPTA process or a tradeoff process could be used when issuing orders. Conversely, the remaining 7 contracting officials stated the criteria should not apply to the issuance of orders, in part, because these criteria would generally have been considered at the time the IDIQ contract was awarded. Military department policy officials we interviewed generally believed that the criteria in Section 813 should not be applicable to orders. When we raised this issue, a DPC official stated that DOD plans to address whether the Section 813 criteria are applicable to orders when DOD revises the DFARS. As DOD prepares to revise the DFARS to implement the eight criteria in Section 813, as amended, it has an opportunity to address the issues we identified. DOD stated its intent to require a written justification for using LPTA and to address whether the Section 813 criteria are applicable to the issuance of task and delivery orders. It is equally important that, in revising the regulation, DOD also clarify how contracting officers are to determine if a good is expendable in nature, nontechnical or have a short life expectancy or shelf life, and how they are to consider if the lowest price reflects full life-cycle costs, including for operations and support for services as well as products. Absent additional direction, contracting officials across DOD may not understand how to consistently apply these criteria when using the LPTA process. We are making the following two recommendations to DOD: The Secretary of Defense should ensure that the Director, Defense Pricing and Contracting , addresses how contracting officials using the LPTA process should apply the Section 813 criterion regarding procurement for goods that are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life as revisions to the DFARS are considered. (Recommendation 1) The Secretary of Defense should ensure that the Director, Defense Pricing and Contracting addresses how contracting officials using the LPTA process should apply the Section 813 criterion regarding full life- cycle costs, including for operations and support as revisions to the DFARS are considered. (Recommendation 2) We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in Appendix I, DOD concurred with both of our recommendations. DOD stated that, in addition to its ongoing efforts to update its regulations, a new DFARS Procedures, Guidance and Information case was opened on October 25, 2018 to provide contracting officers with supplemental internal guidance on applying the new criteria for using LPTA. DOD anticipates that the revised regulations and the internal guidance will be published in the fourth quarter of fiscal year 2019. DOD also provided technical comments, which were incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Director, Defense Pricing and Contracting. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Justin Jaynes (Assistant Director), Victoria Klepacz (Analyst in Charge), Jennifer Baker, Matthew Crosby, Lorraine Ettaro, Stephanie Gustafson, Julia Kennon, Roxanna Sun, Jay Still, Alyssa Weir, and Khristi Wilkins made key contributions to this report.", "summary": "When awarding a contract competitively, DOD may use the LPTA process, under which the lowest price is the determining factor when selecting an offer. Section 813, as amended, contained a provision for GAO to submit four annual reports on DOD's use of the LPTA process for contracts exceeding $5 million as well as how contracting officials considered eight specific criteria. GAO issued its first report in response to this provision in November 2017. This second report, among other things, assesses the extent to which (1) DOD used the LPTA process in fiscal year 2017 and (2) contracting officials considered Section 813 criteria when using the LPTA process. GAO selected a generalizable sample of 172 DOD contracts and orders valued at $5 million and above that were competitively awarded in fiscal year 2017. GAO verified that 46 of these contracts and orders used the LPTA process by reviewing solicitations. GAO selected 14 contracts and orders from the 46 based on the most frequently purchased products and services, reviewed documents, and interviewed officials to determine if the Section 813 criteria were considered. GAO estimates that about 26 percent of the Department of Defense's (DOD) contracts and orders valued $5 million and above in fiscal year 2017 were competitively awarded using the lowest price technically acceptable (LPTA) process. DOD used the LPTA process to buy such things as equipment, fuel, information technology services and construction services. Section 813 of the National Defense Authorization Act for Fiscal Year 2017, as amended, mandated that DOD revise its regulations to require that eight criteria be considered when using the LPTA process. As of September 2018, DOD had not yet done so. Accordingly, a DOD acquisition policy official stated that contracting officers are not yet required to consider these criteria. Nevertheless, GAO found that contracting officials generally considered five of the eight criteria for the 14 contracts and orders GAO reviewed (see table). Source: GAO analysis of Section 813, DOD source selection guidance, contract file documents and interviews with contracting officials. | GAO-19-54 A DOD official stated that the updated regulations will reflect these eight criteria, including that justifications be documented. However, the official could not comment on whether the revisions will clarify how DOD contracting officials should implement the two other criteria that were generally not considered. Some contracting officials GAO interviewed were confused about how to apply these two criteria. Four of the 14 contracting officials stated that they did not understand how to apply the criterion regarding whether purchased goods are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. Additionally, 8 of the 14 contracting officials stated the criterion regarding an assessment of life-cycle costs was not applicable to their acquisitions. Absent clarification on how to consider these two criteria, DOD increases the risk that its contracting officials will not consistently implement the requirements in Section 813, as amended. GAO recommends that DOD address, as regulations are updated, how contracting officials should apply two Section 813 criteria that were generally not considered. DOD concurred with the recommendations and plans to revise its regulations and issue additional guidance by the end of fiscal year 2019.", "document_type": "gao"}
{"report": "DOD’s MILCON appropriations are used to fund the acquisition, construction, installation, and equipping of temporary or permanent public works, military installations, facilities, and real property needed to support U.S. military forces in the United States and overseas. As with other DOD activities, no funds may be appropriated in any fiscal year or obligated or expended for MILCON activities unless such funds have been specifically authorized by law. Each year, the National Defense Authorization Act authorizes amounts to be appropriated in each of the 18 programmatic MILCON appropriations accounts. Individual or conference committee reports accompanying each fiscal year’s National Defense Authorization Act provide specific congressional direction on authorized funding levels designated for specific construction projects supported by the various MILCON accounts. Similarly, conference committee reports or explanatory statements accompanying each fiscal year’s appropriations acts establish appropriated funding levels for MILCON projects. The process through which the active component requests funding for construction projects is supported by DOD’s Form 1391 Military Construction Project Data (Form 1391). The Form 1391 is to be used to support each project proposed for inclusion in the MILCON appropriations request submitted concurrently with all other DOD appropriations requests annually. The forms are to be used for both new projects as well as urgent unforeseen projects. The Form 1391 describes the scope, total project costs, and estimates of specific project elements. Costs associated with other project elements such as contingency and supervision, inspection, and design are also to be captured and included in the total requested amount. Finally, the Form 1391 is to include a description of the proposed construction and a requirements statement indicating what requirement the project provides. Project budget estimates are initially developed at the installation level and are provided to the next responsible level for review, validation, refinement, prioritization, and approval. Administrative support is to be provided when requested across the departments, but ultimately the installation is the originator and the primary responsible entity in developing the completed Form 1391. MILCON appropriations are generally available for obligation for 5 fiscal years, at which time the appropriation expires. For 5 years after they expire, appropriations are available for limited purposes, such as liquidating obligations made during the period of availability or adjusting contract costs. After these 5 years, any remaining unexpended amounts, whether obligated or unobligated, are canceled and returned to the U.S. Treasury. Once funds are returned to the U.S. Treasury, they are no longer available for any purposes. DOD obligates its appropriations throughout the period in which the appropriation is available. An “unobligated balance” is the difference between the total appropriation amount and total obligations made against the appropriated amounts. An “unexpended balance” is the total of obligated but unliquidated and unobligated amounts. According to DOD officials, available but unobligated amounts no longer needed may be either rescinded by Congress or reprogrammed to other MILCON projects that the active component identifies as needing additional funding. Reprogrammed amounts may be used to fund other projects where there are shortfalls; for projects authorized by Congress but not specifically funded through the appropriations process; for emergency projects, such as for facilities destroyed by fires. DOD’s flexibility to reprogram without congressional approval is limited by the amount to be reprogrammed to a particular project. DOD’s Financial Management Regulation requires prior congressional approval for a reprogramming that would result in an increase exceeding 25 percent of a project’s authorized base amount or $2 million, whichever is less. Prior approval is not required when established costs or project-related thresholds are not reached. According to DOD officials, reprogrammings requiring congressional approval are called “above-threshold reprogrammings” and those that do not are called “below-threshold reprogrammings.” DOD designates construction agents for the military departments and defense agencies with primary responsibility for developing and refining MILCON proposals and cost estimates, and to manage the design and construction of projects. Typically, the Army Corps of Engineers is the construction agent for Army MILCON-funded projects and the Naval Facilities Engineering Command is the construction agent for Navy and Marine Corps MILCON-funded projects. Either of those DOD entities can be the construction agent for the defense agencies and activities, such as for the Missile Defense Agency or Defense Education Activity, with the approval of the military department having jurisdiction of the real property facility. However, both the Army and the Navy may use each other’s construction agent if it is in the interest of efficiency and cost- effectiveness or when otherwise considered appropriate. The Air Force may use either the Army Corps of Engineers or Naval Facilities Engineering Command for its projects. Additionally, the Air Force Civil Engineer Center, although not a designated construction agent, reviews and approves requirements for Air Force MILCON cost estimates, and in some cases may design and construct Air Force projects where both the Air Force and the commander of the assigned construction agent agree that it is the most efficient, expeditious, and cost-effective means to complete the project. Within DOD there are two levels of military construction guidance: the Unified Facilities Criteria and component-level guidance. The Unified Facilities Criteria are overarching, DOD-wide technical manuals and standards used for planning, design, construction, restoration, and maintenance of DOD facility projects. The Unified Facilities Criteria was designed to standardize and streamline the process for developing, maintaining, and disseminating criteria in support of MILCON. The Unified Facilities Criteria contains guidance describing methods, procedures, and formats for the preparation of construction cost estimates and construction contract modification estimates, among other types of guidance. The Unified Facilities Criteria is to be used to the greatest extent possible by all the DOD regardless of funding source. In addition to the Unified Facilities Criteria, the military departments and agencies have also developed their own internal guidance on MILCON, providing further direction on conducting activities such as cost analysis and determining facility requirements. We developed the GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs (Cost Guide) to assist federal agencies in developing reliable cost estimates and also as a tool for evaluating existing cost estimating procedures. To develop the Cost Guide, our cost experts assessed measures applied by cost estimating organizations throughout the federal government and industry and considered best practices for the development of reliable cost estimates. While the Cost Guide has a focus on developing cost estimates in the context of government acquisition programs, it outlines best practices that are generally applicable to cost estimation in a variety of circumstances. These best practices can be used to assess (1) the specific project cost estimates an agency develops to determine whether they meet the four characteristics—comprehensive, well-documented, accurate, and credible—for being reliable and (2) an agency’s cost estimating guidance and procedures to see how well they incorporate all the steps needed for producing a high-quality cost estimate. Figure 1 shows the four characteristics and associated best practices for each that define a reliable cost estimate and table 1 shows the 12 steps identified in the Cost Guide that, if followed correctly, should result in high-quality cost estimates that management can use for making informed decisions. During fiscal years 2005 through 2016, Congress appropriated about $66 billion in MILCON funds to the active component and, as of September 30, 2016, the active component had obligated all but about $5.1 billion and expended all but about $11 billion of those funds. Of the $5.1 billion that remains unobligated, about $4.6 billion was unexpired and available for new obligations (i.e., from fiscal year 2013 through 2016 appropriations). Table 2 shows the active component’s combined MILCON appropriations, obligations, and unexpended funds from fiscal year 2005 through fiscal year 2016. In general, during the early first few years of a MILCON appropriation available for 5 years, it is often likely that most of the funds will remain unobligated. For example, as shown in table 2 above, of the nearly $3.9 billion appropriated for military construction for the active component from the fiscal year 2016-2020 appropriation, only about $1.1 billion had been obligated as of September 30, 2016. This is not surprising given the time that it takes to award, obligate and disburse funds for projects. Ultimately, though, as an appropriation nears its expiration date, all or nearly all of the amounts have generally been obligated. In fact, as shown in table 2, for each MILCON appropriation received by the active component prior to fiscal year 2013 (fiscal years 2005 through 2012), less than 2 percent of each year’s appropriation was unexpended as of September 30, 2016. In appendix II, we provide additional analysis of the active component’s unexpended and unobligated balances, by appropriation year and by military department. Although ultimately, the active component obligates and expends most of its MILCON appropriations, the active component can experience a wide range of differences between initial cost estimates and final costs during the execution of individual MILCON projects, resulting in savings or shortfalls depending on the project. For example, we found that from fiscal year 2010 through fiscal year 2016, the active component achieved about $4.2 billion in MILCON project savings as a result, for example, of canceled projects, projects with lower than expected contractor bids, or the use of less expensive building materials. In appendix III, we provide additional analysis of the active component’s estimated initial costs and the contract award amounts that were funded by MILCON appropriations for fiscal year 2010 through fiscal year 2016. The active component reprogrammed about $1.6 billion in MILCON appropriations to fund shortfalls caused by emergency projects, projects that were authorized but did not receive specific appropriations, and projects needing additional funding in fiscal years 2010 through 2016. Of this amount, the Army reprogrammed about $789 million of about $14 billion in appropriated MILCON funds; the Navy, about $535 million of about $14 billion in appropriated MILCON funds; and the Air Force, about $295 million of about $7 billion in appropriated MILCON funds. Table 3 shows the number and amounts of above-threshold reprogrammings by the active component for fiscal years 2010 through 2016. As seen in table 3, for any given year there are typically hundreds of millions of dollars reprogrammed. There are generally multiple active or canceled projects that result in cost savings, which may be used to fund authorized but not specifically funded projects. Below are three examples where the active component funded MILCON projects with amounts reprogrammed from other projects: Repair Shop at Andersen Air Force Base, Guam: This is an Air Force project to construct a pacific air resiliency low observable/corrosion control/composite repair shop in Guam. It is an authorized project that did not receive specific funding during the appropriation process but was fully funded by reprogrammed cost savings from active construction projects. Congress authorized $34.4 million for the repair shop in fiscal year 2015; however, no funds were specifically appropriated for the project. According to Air Force officials, since this was their top unfunded military construction priority, they used $34.4 million in savings achieved from other projects to construct the repair shop. Table 4 lists the three projects whose MILCON funds were reprogrammed for the repair shop at Andersen Air Force Base in Guam. Training Facility at the Naval Air Station at Mayport, Florida: This is a Navy project to construct a littoral combat ship training facility in Florida. It is a specifically funded project requiring additional funds that received reprogrammed amounts from a canceled project. In fiscal year 2014, the initial cost as listed on the Form 1391 was estimated to be $20.5 million, but project costs increased by 41 percent to an estimated $28.9 million, according to a fiscal year 2016 reprogramming request to Congress. As detailed in the reprogramming request, the Navy attributed the increased cost to underestimated mission simulator and communication line requirements. To fund the increased costs, the Navy used $8.3 million in savings from a canceled project to complete the facility. Table 5 lists the canceled project that resulted in funds being reprogrammed for the training facility at Mayport. Barracks at Presidio of Monterey, California: This is an Army project to construct a trainee barracks in California. It is a specifically funded project in need of additional funds that received reprogrammed amounts from active and canceled construction projects. In fiscal year 2011, the initial cost for the project as listed on the Form 1391 was estimated to be $63 million, but project costs increased by 51 percent to $95 million, according to a fiscal year 2015 reprogramming request to Congress. As detailed in the reprogramming request, the Army attributed the increased costs to a 3-year delay in construction and the need to move the project to a small, steep-terrain site. The reprogramming request further noted that the delay in construction was due to the discovery at the proposed construction site of a seismic fault and a plant that is an endangered species. To fund the increased costs, the Army sought to reprogram funds from the savings achieved from the active and canceled projects. Table 6 lists the projects that generated the reprogrammed funds used for the barracks at Presidio. Our analyses of the cost estimates for three selected projects shows that the cost estimates were not reliable, and DOD’s cost estimating guidance does not fully incorporate all the steps needed for producing reliable estimates. We examined the cost estimates of three high-value military construction projects and noted that the initial cost estimates increased for all three projects, with cost estimates for two of the projects increasing by over 30 percent and the other, by about 7 percent. Specifically: Strategic Command Operations Building, Offutt Air Force Base, Nebraska. The project to construct a nuclear, space, and network command and control operations building for the command at Offutt Air Force Base, Nebraska, increased from an initial cost estimate in fiscal year 2012 of $564 million to $601 million in fiscal year 2014 (or a 7-percent increase). According to a fiscal year 2014 reprogramming request to Congress, the Air Force attributed the increased cost to the fact that the project team did not appreciate the full scope, complexity, and risk of such an information technology- intensive project. These cost issues are similar to challenges we have reported on for other information technology-intensive MILCON projects. The Air Force is the project owner and the Army Corps of Engineers is the construction agent for this project. Command Headquarters and Cyberspace Operations Building, Fort Meade, Maryland. The project to construct a command headquarters and cyberspace operations building with sensitive compartmented information facility in Fort Meade, Maryland, increased from an initial cost estimate in fiscal year 2013 of $84 million to $110 million in fiscal year 2015 (or a 31-percent increase). As detailed in the fiscal year 2015 reprogramming request, the Navy attributed the increased cost to higher than expected construction costs due to increased demand on the labor workforce in the Washington, D.C./Baltimore area and underestimated electrical power requirements. The Navy is the project owner and the Army Corps of Engineers is the construction agent for this project. Elementary School Camp Foster, Japan. The project to replace an elementary school at Camp Foster, Japan increased from an initial cost estimate in fiscal year 2012 of $79 million to $107 million in fiscal year 2014 (or a 35-percent increase). As detailed on the fiscal year 2014 reprogramming request, the Department of Defense Education Activity attributed the increased cost to the volatile construction climate in Japan caused by natural disasters; Japanese government policies, economic stimulus, and reform; and the planned developments for the 2020 Tokyo Olympic Games. Although this project is not owned by any of the military departments, it is being managed by the Army Corps of Engineers in its role as a DOD construction agent through which it plays an important role in the development of the construction cost estimate. The Department of Defense Education Activity is the project owner and the Army Corps of Engineers is the construction agent. To determine the reliability of the cost estimates for these three selected projects, we assessed the cost estimates against the best practices for developing a reliable estimate in our Cost Guide. As previously discussed, the Cost Guide defines the four characteristics— comprehensive, well documented, accurate, and credible—of a reliable cost estimate and the associated best practices related to each characteristic. In conducting these assessments, we examined both the Form 1391 estimate (i.e., the estimate used to develop the budget) and the independent government estimate i.e., (the estimate used to award the contract) for each project. Our analysis of the cost estimates for the three selected projects shows that the cost estimators did not follow all the best practices listed for each of the four characteristics. As a result, none of the characteristics were fully or substantially met. To be reliable, a cost estimate must substantially or fully meet each of the four characteristics. As the Cost Guide states, if any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable. Table 7 provides the results of our assessment of the cost estimates for each of the three selected projects. The Cost Guide also identifies 12 steps that, when incorporated into an agency’s cost estimating procedures and guidance, are more likely to result in reliable and valid cost estimates. However, our analysis of DOD’s department-wide cost estimating guidance—the Unified Facilities Criteria—found that the criteria did not include all of these 12 steps. The Unified Facilities Criteria incorporates some of the 12 steps to some degree, but not others, and as a result DOD is at a greater risk of developing estimates that are not reliable. Table 8 provides our assessment of the extent to which DOD’s Unified Facilities Criteria incorporates the 12 steps needed to develop a high-quality, reliable cost estimate. Each of the military departments is required to follow the Unified Facilities Criteria to the greatest extent possible when designing and constructing facilities. However, as shown by the table above, there are shortcomings in these criteria when compared with our Cost Guide. Despite these shortcomings, the military departments have gone beyond the Unified Facilities Criteria and developed their own guidance that more closely aligns with our Cost Guide. For example, for both the “determining the estimating structure” and “obtain the data” steps, we found that all three military departments had developed their own guidance that more closely aligned with the 12 steps than the Unified Criteria did. In addition, some military departments are also making improvements to their cost estimating processes, but these improvements have not been fully implemented yet. For example, the Air Force Civil Engineer Center is implementing a cost estimate improvement plan to include the training of nearly 700 airmen and has conducted a study that directly ties the 12 steps in the Cost Guide to the associated tasks to be completed by the Air Force cost estimator to meet each individual step. However, the actions contained in the cost improvement plan have not been fully implemented and still remain in the concept phase. Similarly, although the Army Corps of Engineers is investigating expanding the use the of cost and schedule risk analysis—which could align with the best practices in the Cost Guide—that the Army currently conducts for selected civil work construction projects to its high-cost military construction projects, the Army has not formally required the use of these tools. In appendix IV, we describe the guidance the military departments have developed beyond the Unified Facilities Criteria. The Cost Guide is designed to establish a consistent methodology that is based on best practices and that can be used across the federal government for developing, managing, and evaluating capital program cost estimates. Air Force and Army Corps of Engineers officials noted that there may be instances in which following all the 12 steps of the Cost Guide for every MILCON project would not be appropriate to the risk level of the project. For example, it may not be realistic or to the military departments’ benefit for the military departments to conduct a sensitivity and uncertainty analysis or develop an independent cost estimate for all the construction projects they initiate every year, especially for low-cost projects. We agree that it may not be suitable to fully apply all 12 of the cost estimating steps in the Cost Guide to all MILCON projects. However, incorporating the 12 steps into the Unified Facilities Criteria would establish consistency across DOD in the cost estimating process by ensuring that, for each MILCON project, each step in the Cost Guide would at least be considered. Furthermore, DOD could choose to establish thresholds—based on, for example, the dollar values of the projects—to guide the services in implementing the 12 steps for the most valuable projects. Skipping or not considering any step of the 12-step cost estimating process, especially for high-value projects such as those in our case studies, increases the risk that cost estimates may use improper assumptions, lack appropriate definition, or be otherwise unreliable. Without improving the Unified Facilities Criteria with respect to cost estimating processes, DOD and the services will not be positioned well to provide reliable cost estimates to DOD and congressional decision- makers. Each year DOD receives billions of dollars in MILCON appropriations to use for projects in the United States and overseas. The quality of project cost estimates are of great importance since those estimates are the basis for DOD’s requests for appropriations. While DOD’s policy is that MILCON cost estimates be prepared as accurately as possible in order to reflect the full cost of constructing DOD facilities, DOD’s Unified Facilities Criteria—the department’s primary construction criteria for developing cost estimates—does not fully incorporate all of the steps needed for producing reliable cost estimates. Until DOD incorporates the 12 steps of high-quality, reliable cost estimating into this department-wide construction criteria, DOD and congressional decision-makers may not have reliable estimates to inform their decisions regarding appropriations and the oversight of projects. We are making one recommendation to DOD: The Secretary of Defense should ensure that the Assistant Secretary of Defense for Energy, Installations, and the Environment work with DOD’s construction agents, military departments, and other offices to improve DOD’s MILCON cost estimating guidance (i.e., DOD’s Unified Facilities Criteria) by fully incorporating all the steps needed for developing high- quality reliable cost estimates. (Recommendation 1) We provided a draft of this report to DOD. In written comments, which are reprinted in their entirety in appendix VI, DOD partially concurred with our recommendation. DOD also provided technical comments that have been incorporated into the report as appropriate. DOD partially concurred with our recommendation to improve its cost estimating guidance by fully incorporating all 12 steps needed for developing high-quality, reliable estimates. DOD stated that it did not believe that it is suitable to fully apply all 12 steps to any construction project due to characteristics of the military construction program that DOD believes differ from those of major system or weapon acquisition programs. However, DOD also stated that it concurred with the intent and general applicability of the twelve steps to military construction and that DOD cost estimating guidance lacks specificity in several of these areas. DOD acknowledged that expanding its cost guidance to more fully incorporate these steps would benefit the military construction program, and that it is planning to address this by revising its cost guidance during Fiscal Year 2019. In our report, we recognize that it may not be appropriate to fully apply all 12 steps to each construction project. For example, it may not be realistic or to the military departments’ benefit to conduct a sensitivity and uncertainty analysis or develop an independent cost estimate for all the construction projects they initiate every year, especially for low-cost projects. Accordingly, we did not recommend that DOD fully apply all 12 steps to each construction project, but rather that it fully incorporate the 12 steps into the Unified Facilities Criteria so that, at least, each step is considered for each project. DOD could then choose to establish thresholds—based on, for example, the dollar values of the projects—to determine for which the 12 steps should be fully applied or other circumstances in which some steps might not be applicable. We believe DOD’s planned revisions will meet the general intent of our recommendation. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense, the Secretaries of the Army, Navy, and Air Force. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. To examine the active component’s military construction (MILCON) obligations and expended balances, we reviewed MILCON appropriations found in appropriations acts, including accompanying explanatory statements and conference committee reports from fiscal year 2005 through 2016. Further, we analyzed the obligation and disbursement data of the active component‘s MILCON accounts, appropriation status reports, bid savings reports, as well as annual reports from the U.S. Department of the Treasury. We also collected and compared project data from each of the active component on projects that had been initiated and completed during fiscal year 2010 through fiscal year 2016. Specifically, we compared the initial estimate as shown on the Form 1391—the form DOD uses to submit requirements and justifications in support of its funding requests to Congress—with the contract award amount and analyzed any differences between the two. To examine the amount of MILCON reprogramming during fiscal years 2010 and 2016 by the active component, we reviewed DOD’s requests to Congress to reprogram MILCON funds from one project to another. We calculated the total number of times such requests were made and the dollar amounts for fiscal year 2010 through fiscal year 2016. We selected this time frame because the reprogramming requests were readily available from DOD. In addition, we judgmentally selected three projects from this same time frame and reviewed accompanying Forms 1391 and the reprogramming requests associated with the projects to illustrate instances in which savings from one MILCON project funded another project. We collected and analyzed data for fiscal years 2005 through 2016 on the active component MILCON appropriations, obligations, and disbursements and we collected reprogramming data for fiscal years 2010 through 2016. We assessed the reliability of the data by interviewing knowledgeable officials about the data and the steps that they had taken to verify the data’s accuracy. We determined that the data were sufficiently reliable for our objectives. To determine the extent to which DOD’s MILCON cost estimates are reliable and DOD’s guidance for producing estimates fully incorporates all of the steps needed for developing reliable estimates, we compared the process for developing three selected projects with the characteristics and best practices for developing a reliable estimate identified in GAO’s Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs (the Cost Guide). This guide is a compilation of cost estimating best practices drawn from across industry and federal government. We selected our projects from the universe of projects that we reasonably expected could have begun execution (i.e., projects initiated during fiscal years 2012-2014); projects that were underway, but not substantially completed (i.e., between 10- and 75- percent complete); and projects that constituted a significant financial investment (i.e., projects with appropriations of $75 million or greater). Ultimately, of 690 total projects we identified DOD-wide, 13 met these criteria and, from this sample, we selected the 3 projects included in this report: (1) the construction of a replacement elementary school at Camp Foster, Japan; (2) the construction of a Strategic Command operations building at Offutt Air Force Base, Nebraska; and (3) the construction of a Marine Corps command headquarters and cyberspace operations building in Fort Meade, Maryland. In conducting the assessments for these three selected projects, we examined the processes used to develop both the Form 1391 estimate (i.e the form DOD uses to submit project-level requirements and justifications in support of its MILCON funding requests to Congress ) and the independent government estimate (i.e., the estimate used to award the contract) to determine whether the project cost estimates had the characteristics of a high-quality and reliable cost estimate, as defined in the Cost Guide. These projects are not intended to be a projectable sample, but to illustrate how cost estimates are assessed against best practices. Although the Camp Foster project is not owned by any of the active component, the construction and planning of the project is being led by the Army Corps of Engineers in its capacity as a DOD construction agent and, as such, we decided to include it in our review. Additionally, we reviewed DOD’s Unified Facilities Criteria and the active component’s respective guidance related to MILCON cost estimating and compared them with the steps needed for developing reliable estimates identified in the Cost Guide. We also interviewed military project cost estimators and active component construction agents to discuss the requirements and guidance they follow in preparing, documenting, and reviewing project cost estimates. Table 9 details the documents we reviewed for our cost estimating assessments. We conducted this performance audit from January 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In this appendix we provide the supporting details on the active component’s unobligated and unexpended balances of military construction (MILCON) appropriations for fiscal years 2005 through 2016. We include details on unobligated and unexpended balances by appropriation year and include individual tables for each military department of the active component. Overall, the active component had high obligation and expenditure rates associated with MILCON appropriations that have expired or been canceled. The Army, the Air Force, and the Navy consistently expended over 90 percent of amounts appropriated in fiscal years 2005 through 2011. This appendix also provides supporting details on the active component’s execution of MILCON appropriations for fiscal years 2010 through 2016. Using Department of Defense (DOD) data, we identified two groups of MILCON projects: congressionally directed and other. “Congressionally directed” projects are those MILCON projects specifically identified in an appropriation act, explanatory statement, and/or committee reports accompanying the appropriation act for a specific fiscal year. “Other” projects refer to congressionally directed MILCON projects identified in an appropriation act, explanatory statement, and/or conference committee reports in a previous fiscal year. Overall, the active component obligated about 89 percent of its fiscal years 2010 through 2012 appropriations for congressionally directed projects whose appropriations expired on September 30, 2017. Tables 10 through 12 present detailed information on unexpended and unobligated balances for each military department of the active component’s MILCON appropriation for fiscal years 2005 through 2016, as reported by DOD as of September 30, 2016. Table 10 shows that for fiscal years 2005 through 2012, the Army expended almost all of its MILCON appropriations. Specifically, with the exception of fiscal year 2012, the Army expended at least 90 percent of its appropriations received each fiscal year for 2005 through 2011. Unexpended rates for amounts appropriated for fiscal years 2014 through 2016 vary and unobligated amounts for these years remain available for new obligations. Table 11 shows that, for fiscal years 2005 through 2013, the Air Force expended almost all of its MILCON appropriations. Specifically, the Air Force expended at least 95 percent of its appropriations received each year for fiscal years 2005 through 2011 and also in fiscal year 2013. Unexpended rates for amounts appropriated for fiscal years 2014 through 2016 vary and unobligated amounts for these years remain available for new obligations. Table 12 shows that for fiscal years 2005 through 2012, the Navy expended almost all of its MILCON appropriations. Specifically, the Navy expended at least 90 percent of its appropriations received each fiscal year for 2005 through 2011. Unexpended rates for amounts appropriated for fiscal years 2014 through 2016 vary and unobligated amounts for these years remain available for new obligations. Tables 13 through 15 provide detailed information on budget execution for each active duty military department’s MILCON appropriation for “congressionally directed” and “other” MILCON projects for fiscal years 2010 through 2016, as reported by DOD as of September 30, 2016. Table13 shows the obligations made by the Army for MILCON appropriations for fiscal years 2010 through 2016. We analyzed the obligations made during these appropriations’ period of availability for congressionally directed and other MILCON projects. For fiscal year 2010, using data in the table, we found that about 97.2 percent of obligations were for congressionally directed projects and 2.8 percent were for other projects, as discussed above. In fiscal year 2011, about 94 percent of obligations were for congressionally directed projects and 4.2 percent were for other projects; and in fiscal year 2012, about 86.5 percent of obligations were for congressionally directed projects and 7.2 percent were for other projects. Table 14 shows the obligations made by the Air Force for MILCON appropriations for fiscal years 2010 through 2016. We analyzed the obligations made during these appropriations’ period of availability for congressionally directed and other MILCON projects. For fiscal year 2010, using the data listed in the table, we found that 90.5 percent of obligations were for congressionally directed projects and 7.3 percent were for other projects, as discussed above. In fiscal year 2011, about 84.3 percent of obligations were for congressionally directed projects and 12.9 percent were for other projects; and in fiscal year 2012, about 87.5 percent of obligations were for congressionally directed projects and 9.0 percent were for other projects. Table 15 shows the obligations made by the Navy for MILCON appropriations for fiscal years 2010 through 2016. We analyzed the obligations made during these appropriations’ period of availability for congressionally directed and other MILCON projects. For fiscal year 2010, using data in the table, we found that 84.7 percent of obligations were for congressionally directed projects and 15.0 percent were for other projects, as discussed above. In fiscal year 2011, about 87.7 percent of obligations were for congressionally directed projects and 11.8 percent were for other projects; and in fiscal year 2012, about 85.5 percent of obligations were for congressionally directed projects and 13.4 percent for other projects. This appendix provides information on our analysis of DOD’s estimated initial costs and contract award amounts of projects that had been initiated and completed during fiscal year 2010 through fiscal year 2016 by the active component. An official from the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment told us that, to determine whether initial cost estimates were over- or underestimated, a comparison between initial Form 1391 estimates and contract award amounts would be a valid approach since contract award amounts are, in general, estimates of the same requirements identified on a Form 1391. The official also noted that supervision, inspection, overhead, and contingency costs included on a Form 1391 are not included in contract award amounts, which could create differences between the Form 1391 cost estimates and contract award prices. Because of this, we excluded the supervision, inspection, overhead, and contingency costs from the Form 1391 estimates in the table below to eliminate those differences. Form 1391 cost estimates may also vary from contract award amounts for reasons such as changes in project size or scope, changes in project characteristics, unexpectedly high or low contractor bids, or differences in expected building material costs, among other things. A negative percent change from the Form 1391 estimate to the contract award amount indicates the estimated project cost was overestimated and a positive percent change indicates the project was underestimated. We did not determine the precise reasons for any differences between estimated costs and contract award amounts. Table 16 lists information on 414 completed projects funded with military construction (MILCON) appropriations during fiscal year 2010 through fiscal year 2016 sorted by largest percentage overestimated to largest percentage underestimated. The military departments of the active component have gone beyond the Unified Facilities Criteria and developed their own guidance for military construction (MILCON) that more closely aligns with the 12 steps needed for developing high-quality, reliable estimates. Table 17 describes the guidance developed by the military departments to align with those steps. In addition to the contact named above, Maria Storts, Assistant Director; Bonita Anderson; Shawn Arbogast; Ronald Bergman; Brian Bothwell; Robert Brown; Farrah Graham; Mae Jones; Jennifer Leotta; Amie Lesser; Felicia Lopez; Carol Petersen; Vikki Porter; Steve Pruitt; and Karen Richey made key contributions to this report.", "summary": "Between fiscal years 2005 and 2016, Congress annually appropriated between $2.5 to $9.6 billion in MILCON funding for the active component of the U.S. military to use for projects worldwide. Reliable project construction cost estimates are of great importance, since those estimates drive these appropriations. House Report 114-537 accompanying a proposed bill authorizing national defense activities for fiscal year 2017 included a provision for GAO to report on DOD's MILCON cost estimating. This report examines the extent to which (1) the active component obligated and expended the MILCON appropriations received during fiscal years 2005-2016, (2) the active component reprogrammed MILCON appropriations during fiscal years 2010 through 2016, and (3) DOD's MILCON cost estimates are reliable for selected projects and DOD's guidance for developing estimates fully incorporates the steps needed for developing reliable estimates. GAO analyzed the active components' MILCON execution data and reviewed DOD's guidance for cost estimating and compared it with the best practices identified in GAO's Cost Estimating and Assessment Guide . During fiscal years 2005 through 2016, Congress appropriated about $66 billion in military construction funds (MILCON) to the active duty Army, Navy, and Air Force (referred to as the active component) for projects. As of September 30, 2016, the active component had obligated all but about $5.1 billion and expended all but about $11 billion of those funds. Of the $5.1 billion remaining unobligated, about $4.6 billion was still available to be obligated because MILCON appropriations are generally available for new obligations for 5 years. According to Department of Defense (DOD) officials, available but unobligated amounts no longer needed may be either taken back by Congress or reprogrammed to other MILCON projects that the active component identifies as needing additional funding. During fiscal years 2010 through 2016, the active component reprogrammed about $1.6 billion in MILCON appropriations to fund emergency projects, projects that were authorized but did not receive specific appropriations, and projects needing additional funding. Of this amount, the Army reprogrammed about $789 million; the Navy, about $535 million; and the Air Force, about $295 million. DOD's guidance does not fully incorporate the steps needed for developing reliable estimates and the estimates for three projects that GAO reviewed were not reliable. Specifically, two of the three high-value projects GAO examined experienced a more than 30-percent increase from the initial cost estimates submitted to Congress. GAO determined that DOD cost estimators did not follow all the best practices associated with the four characteristics—comprehensive, well-documented, accurate, and credible—of a reliable estimate for these projects. GAO's Cost Estimating and Assessment Guide identifies 12 steps that, if used, are more likely to result in reliable and valid cost estimates. However, as shown below, DOD's construction guidance—the Unified Facilities Criteria—does not include all of these steps. Until DOD incorporates these steps, DOD and congressional decision-makers may not have reliable estimates to inform their decisions regarding appropriations and the oversight of projects. GAO recommends that DOD ensure that its cost estimating guidance fully incorporate the steps needed for developing reliable cost estimates. DOD partially concurred with GAO's recommendation and stated that it will issue revised cost guidance in fiscal year 2019 that more fully incorporates those steps that would benefit the military construction program.", "document_type": "gao"}
{"report": "Medicare pays for laboratory tests that are performed individually or in a group. For individual tests, laboratories submit claims to Medicare for each test they perform that is on the CLFS; tests are identified using a billing code. Prior to the implementation of PAMA in 2018, the payment rates on the CLFS were based on rates charged for laboratory tests in 1984 through 1985 adjusted for inflation. Additionally, 57 geographic jurisdictions had their own fee schedules for laboratory tests. CMS used the 57 separate fee schedules to calculate a national limitation amount, which served as the maximum payment for individual laboratory tests. Thus, the payment rate for an individual test was the lesser of the amount claimed by the laboratory, the local fee for a geographic area, or the national limitation amount for a particular test. Medicare pays bundled payment rates for certain laboratory tests that are performed as a group, called panel tests. Panel tests can be divided into two categories—those without billing codes and those with billing codes. Panel tests without billing codes are composed of at least 2 of 23 distinct component tests. Additionally, there are 7 specific combinations of these 23 component tests that are commonly used and have their own billing code. Prior to 2018, Medicare paid for both types of panel tests (those without or with a billing code) using a bundled rate based on the number of tests performed, with modest payment increases for each additional test conducted. For example, in 2017, Medicare paid $7.15 for panel tests with two component tests and $9.12 for panel tests with 3 component tests, with a maximum bundled payment rate of $16.64 for all 23 component tests. Prior to 2018, the Medicare Administrative Contractors would count the number of tests performed before determining the appropriate bundled payment rate. For those panel tests with a billing code, the payment rate was the same if laboratories used the associated billing code for the panel test or listed each of the component tests separately. After PAMA’s implementation in 2018, the 57 separate fee schedules for individual laboratory tests were replaced with a single national fee schedule. The payment rates for this single national fee schedule were based on private-payer rates for laboratory tests paid from January 1, 2016 through June 30, 2016. Specifically, the payment rate for an individual test was generally based on the median private-payer rates for a given test, weighted by test volume. Payment for panel tests also changed in 2018. For panel tests without billing codes, Medicare Administrative Contractors no longer counted the number of component tests performed to determine the bundled payment rate; instead, Medicare paid the separate rate for each component test in the panel. For panel tests with a billing code, the payment rate depended on how the laboratory submitted the claim. If a laboratory used the billing code associated with the panel test, Medicare paid the bundled payment rate for that billing code. If a laboratory submitted a claim for the panel test, but listed each of the component tests separately instead of using the panel test’s billing code, Medicare paid the individual payment rate for each component test. Table 1 below summarizes the changes to payment rates before and after 2018. Multiple types of laboratories receive payment under Medicare. The three laboratory types that received the most revenue from the CLFS in 2016 were independent laboratories, hospital-outreach laboratories, and physician-office laboratories. (See table 2.) Estimates of the size of the total U.S. laboratory market vary. For example, the Healthcare Fraud Prevention Partnership estimated that the laboratory industry received $87 billion in revenue in 2017, while another market report estimated the laboratory industry received $75 billion in revenue in 2016. Similar to Medicare, the three laboratory types that generally receive the most revenue overall are independent laboratories, hospital-outreach laboratories, and physician-office laboratories, when laboratory tests performed in hospital inpatient and outpatient settings were excluded. Estimates of revenue received by these laboratories also vary. For example, in recent years, estimates of the share of laboratory industry revenue generated by independent laboratories ranged from 37 percent to 54 percent. Additionally, estimates of revenue generated by hospital- outreach laboratories recently ranged from 21 to 35 percent, and physician-office laboratories ranged from 4 to 11 percent of total laboratory industry revenue. Private-payer rates for laboratory tests conducted by the three largest laboratory types generally vary by type and other characteristics, according to market reports and the laboratory industry officials we interviewed. Independent laboratories. These laboratories generally receive lower private-payer rates than other types of laboratories, according to industry officials we interviewed. Market reports we reviewed noted that about half of the independent laboratory market is dominated by two national laboratories and that these national laboratories provide more competitive pricing by performing a large volume of tests at one time. Medicare accounted for a smaller proportion of the revenue earned by these two national laboratories (12 percent), compared to other laboratories, according to another market report we reviewed. In contrast, a different market report noted that smaller, independent laboratories tend to earn more of their revenue from Medicare (34 percent). Hospital-outreach laboratories. These hospital-affiliated laboratories typically receive relatively higher private-payer rates, according to industry officials we interviewed. Although hospital- outreach laboratories perform tests similar to other laboratories, they can obtain above-average payment rates by leveraging the market power of their affiliated hospital when negotiating rates with private payers, according to industry officials and market reports. Hospital-outreach laboratories generally receive about 25 to 30 percent of their revenue from the Medicare CLFS. Physician-office laboratories. Physician-office laboratories typically receive higher private-payer rates than independent laboratories, according to a recent analysis by a laboratory industry association. This industry association also noted that the cost structure to operate in a setting such as a physician-office laboratory is different than in large independent laboratories, as the physician-office laboratory is unable to conduct a large number of tests at one time. Officials from another industry association we interviewed said that payment rates for these laboratories are generally dependent on the size of the physician practice group. These same officials told us that larger physician groups (e.g., 10 or more physicians) typically negotiate higher rates from private payers than smaller physician groups. Most physician-office laboratories received less than $25,000 in revenue per year from Medicare, according to CMS. Additionally, in 2013, the Department of Health and Human Services Office of Inspector General found that Medicare’s payment rates on the CLFS were higher than rates paid by some private health insurance plans. Specifically, it found that Medicare rates for laboratory tests were 18 percent to 30 percent higher than rates paid by certain insurers under health benefits plans for federal employees. Definition of Applicable Laboratories Required to Report Private-Payer Data to CMS CMS defined applicable laboratories as those meeting four criteria: (1) they met the definition of laboratory under regulations implementing the Clinical Laboratory Improvement Amendments of 1988; (2) they billed Medicare Part B under their own Medicare billing number, also called the national provider identifier; (3) more than 50 percent of their total Medicare revenues came from the Clinical Laboratory Fee Schedule (CLFS) and/or the Physician Fee Schedule; and (4) they received at least $12,500 in Medicare revenue from the CLFS from January 1, 2016, through June 30, 2016. CMS analyzed private-payer data it collected from about 2,000 laboratories to develop new payment rates for individual laboratory tests on the CLFS. PAMA defined laboratories required to report private-payer data, called applicable laboratories, as laboratories that meet certain criteria. (See sidebar.) Applicable laboratories with their own specific billing number, the NPI, submitted these data to CMS. If one organization operated multiple applicable laboratories, each with its own NPI, then the organization could report data to CMS for multiple applicable laboratories. CMS collected data from applicable laboratories on payments they received from private payers during the first half of 2016. Specifically, CMS collected data on (1) the unique billing code associated with a laboratory test; (2) the private-payer rate for each laboratory test for which final payment was made during the data collection period (January 1, 2016, through June 30, 2016); and (3) the volume of tests performed for each unique billing code at that private- payer rate. For the data CMS collected between January 1, 2017, and May 30, 2017, CMS relied on the entities reporting to CMS to attest to the completeness and accuracy of the data they submitted. CMS relied on each laboratory to identify whether or not it was an applicable laboratory and took steps to assist laboratories in meeting reporting requirements. According to CMS officials, they relied on laboratories to self-identify as applicable laboratories because they were unable to accurately identify the number of laboratories required to report. To assist laboratories, CMS issued multiple guidance documents to the industry outlining the criteria for being an applicable laboratory and describing the type of data CMS intended to collect. CMS also conducted educational calls when the proposed and final rules were issued and prior to the data collection period. CMS officials told us they conducted additional outreach activities, including holding conference calls with national laboratory associations and attending professional conferences. Officials said they used these outreach activities in addition to the guidance issued to inform laboratories of the reporting requirements for applicable laboratories, for example. In addition, CMS established a revenue threshold of $12,500 in an effort to reduce the reporting burden for entities that receive a relatively small amount of revenues under the CLFS. In its final rule, CMS noted that it expected that many of the laboratories that would be below this revenue threshold and, thus exempt from reporting data to CMS, would be physician-office laboratories. CMS also chose to use the NPI in its definition of applicable laboratory in the final rule to allow hospital- outreach laboratories that use their own NPI to submit data to the agency. In its proposed rule, CMS suggested using an alternative identification number to the NPI. However, according to the final rule, CMS chose to use the NPI in its definition of applicable laboratory to allow those hospital-outreach laboratories billing using their own NPI to submit private-payer data to the agency. According to CMS, at the end of the 5-month submission period, the agency had received data from approximately 2,000 applicable laboratories, representing a volume of almost 248 million laboratory tests; these data accounted for about $31 billion in revenue from private payers. CMS reported that the data it collected included private-payer rates for 96 percent of the 1,347 eligible billing codes on the CLFS. CMS used these data to calculate a median, private-payer rate, weighted by volume and phased in this change by limiting payment-rate reductions to 10 percent per year. Beginning in 2018, these new payment rates served as the single, national payment rate for individual laboratory tests. These payment rates were also used for the individual, component tests that make up panel tests and were used when laboratories billed Medicare for panel tests by listing the component tests separately. In general, the median payments rates, weighted for volume, that CMS calculated were lower than Medicare’s previous payment rates for most laboratory tests. According to our analysis, these median payment rates were lower than the corresponding 2017 CLFS national limitation amounts (the maximum that CMS would pay for laboratory tests) for approximately 88 percent of tests. Figure 1 below describes the percentage difference between these median payment rates and Medicare’s 2017 national limitation amounts for laboratory tests. The final payment rates that CMS calculated, which included the 10- percent, phased in, payment-rate reductions, will remain in effect until December 31, 2020; PAMA requires CMS to calculate new payment rates for the CLFS every 3 years. Reporting entities will next be required to submit data on private-payer rates to CMS in early 2020, for final payments made from January 1, 2019 through June 30, 2019. PAMA capped any reductions for the second 3-year cycle after implementation to a maximum of 15 percent per year. CMS did not collect private-payer data from all laboratories required to report this information and did not estimate how much data was not reported by these laboratories, according to agency officials. CMS relied on laboratories to determine whether they met data reporting requirements and submit data accordingly. CMS emphasized the importance of receiving data from all laboratories required to report by stating that it is critical that CMS collect complete data on private-payer rates in order to set accurate Medicare rates. However, agency officials told us that CMS did not receive data from all laboratories required to report. They also told us that CMS did not have the information available to estimate how much data was missing because not all laboratories reported or the extent to which the data collected were representative of all of the data that laboratories were required to report. Prior to collecting private-payer data, CMS estimated that laboratories subject to reporting requirements would receive more than 90 percent of CLFS expenditures to physician-office laboratories and independent laboratories. Specifically, based on its analysis of 2013 Medicare expenditures, CMS estimated that reporting requirements would apply to the laboratories that received 92 percent of CLFS payments to physician- office laboratories and 99 percent of CLFS payments to independent laboratories. After laboratories reported private-payer data, we analyzed the share of CLFS expenditures received by the laboratories that reported. Our analysis found that CMS collected data from laboratories that received the majority of CLFS payments to physician-office, independent, and other non-hospital laboratories in 2016. However, the laboratories that reported private-payer data received less than 70 percent of CLFS expenditures to physician-office, independent, and other non-hospital laboratories. Specifically, using Medicare claims data, we calculated that CMS collected data from laboratories that received 68 percent of 2016 CLFS payments to physician-office, independent, and other non-hospital laboratories. Although it did not collect complete data, CMS concluded that it collected sufficient private-payer data to set Medicare payment rates and that collecting more data from additional laboratories that were required to report would not significantly affect Medicare expenditures. This conclusion was based, in part, on a sensitivity analyses that CMS conducted of the effects that collecting certain types and amounts of additional data would have on weighted median private-payer rates and the effects those rates could have on Medicare payment rates and, thus, expenditures. Results from these analyses showed that Medicare expenditures based on the CLFS would have changed by 2 percent or less after collecting more data from the various types of laboratories. For example, CMS estimated that doubling the amount of private-payer data from physician-office laboratories would increase expenditures by 2 percent and collecting ten times as much data from hospital outreach laboratories would increase expenditures by 1 percent. (See fig. 2.) PAMA’s 10-percent limit on annual payment-rate reductions likely reduced the effect that incomplete private-payer data could have on the CLFS because this limit applied to most Medicare payment rates for laboratory tests. As demonstrated in figure 1, while 59 percent of tests had median private-payer rates that were at least 30 percent less than their respective 2017 national limitation amounts, CMS published Medicare rates for these tests for 2018 through 2020 that were reduced by only 10 percent per year as a result of this limit. For example, a hypothetical laboratory test with a 2017 CLFS national limitation amount of $10.00 and a median private-payer rate of $7.00 would result in CLFS rates of $9.00 in 2018, $8.10 in 2019, and $7.29 in 2020. Changes to median private-payer rates due to collecting more complete data or eliminating inaccurate data would have no effect on Medicare payment rates from 2018 through 2020 for this hypothetical test if they resulted in new median rates of $7.29 or less. Our analysis of the potential effects that collecting data from additional laboratories could have had on Medicare payment rates and expenditures found that the effect of CMS not collecting complete data would likely have been greater absent PAMA’s limits on annual reductions to Medicare payment rates. As a result, CMS may face challenges setting accurate Medicare rates if it does not collect complete data from all laboratories required to report in the future when PAMA allows for greater annual payment-rate reductions. To conduct this analysis, we used the private-payer data CMS collected to analyze the range of effects that collecting additional data could have on Medicare expenditures, assuming 2016 utilization rates remain constant. The extent of these effects depends on the amount of additional data CMS would need to collect to obtain complete data and whether the payment rates in these additional data would have been greater or less than the medians of the rates reported. For example, we estimated that if CMS needed to collect 20 percent more data for its collection to be complete, doing so could increase Medicare CLFS expenditures from 2018 through 2020 by as much as 3 percent or reduce them by as much as 3 percent depending on the payment rates in these additional data. However, if annual limits to Medicare payment-rate reductions were not applied, collecting these additional data could increase CLFS expenditures by as much as 9 percent or reduce them by as much as 9 percent. (See fig. 3 and app. II for additional information about these estimates.) As demonstrated in figure 2, CMS did analyze how collecting certain types and amounts of data from additional laboratories would affect Medicare expenditures. However, without valid estimates of how much more data these additional laboratories were required to report and how much these data would change median payment rates, it remains unknown whether CMS’s analyses estimate the actual risk of setting Medicare payment rates that do not reflect private-payer rates from all applicable laboratories, as mandated by PAMA. CMS could have compared the data it collected with independent information on the payment rates laboratories were required to report, for example. The independent information could be estimated by auditing a random sample of laboratories or could be estimated using data from third-party vendors, if these vendors could supply relevant and reliable information. We found that CMS mitigated challenges to setting accurate Medicare payment rates by identifying, analyzing, and responding to potentially inaccurate private-payer data. CMS addressed potentially inaccurate private-payer data and other data that CMS determined did not meet reporting requirements. CMS removed or replaced data from four reporting entities that appeared to have or confirmed having reported revenue—which is the payment rate multiplied by the volume of tests paid at that rate—instead of payment rates. We estimated that if CMS had included these data that CLFS expenditures from 2018 through 2020 would have increased by 7 percent. CMS removed data it determined were reported in error including duplicate submissions and submissions with payment rates of $0.00. We estimated that removing these data will change CLFS expenditures from 2018 through 2020 by less than one percent. CMS identified four other types of potentially inaccurate data that it determined would not significantly impact Medicare payment rates or expenditures and did not exclude them from calculations of median private-payer rates. CMS considered the following potentially inaccurate data to have met its reporting requirements: 1. data from 57 entities that reported particularly high rates in at least 60 percent of their data, 2. data from 12 entities that reported particularly low rates in at least 50 percent of their data, 3. data with payment rates that were 10 times greater than the 2017 national limitation amounts or 10 times less than these amounts, and 4. data from laboratories that may not have met the $12,500 low- expenditure threshold or that reported data from a hospital NPI instead of a laboratory NPI. We found that each of these four types of potentially inaccurate data would have changed estimated Medicare CLFS expenditures from 2018 through 2020 by 1 percent or less if CMS had instead excluded the data. To conduct this analysis, we recalculated Medicare rates after excluding each type of data and estimated Medicare expenditures assuming 2016 rates of utilization. Although weighted median private-payer rates were lower than Medicare’s 2017 national limitation amounts for 88 percent of tests, we estimated the total Medicare expenditures based on the 2018 CLFS would likely increase by 3 percent ($225 million overall) compared to 2016 expenditures, assuming test utilization remained at 2016 levels. This increase in estimated expenditures is due, in part, to CMS’s use of above-average payment rates as a baseline to calculate payment rates for those laboratory tests affected by PAMA’s annual payment-rate reduction limit of 10 percent. (See fig. 4.) When applying the 10-percent payment-rate reduction limit, CMS used as its starting point the 2017 national limitation amounts in order to set a single, national payment rate for each laboratory test. Thus, the Medicare payment rate for a test in 2018 could not be less than 90 percent of the test’s 2017 national limitation amount. However, prior to 2018, some payment rates were commonly lower than the national limitation amounts because they were based on the lesser of (1) the amount billed on claims, (2) the local fee for a geographic area, or (3) a national limitation amount, and because panel tests had different bundled payment rates. As a result, by reducing payment rates from national limitation amounts, CMS did not always reduce rates from what Medicare actually paid. Panel tests, in particular, frequently received bundled payment rates that differed substantially from national limitation amounts associated with their billing codes prior to 2018. We compared national limitation amounts, which represent maximum Medicare payment rates for tests, with the average amounts Medicare allowed for payment in 2016, which reflect actual Medicare payment rates. For example, figure 5 below shows that the 2017 national limitation amount for comprehensive metabolic panel tests ($14.49) was substantially higher than both the average amount Medicare allowed for payment in 2016 ($11.45) and the median payment rate laboratories reported receiving from private payers ($9.08). As a result, using the 2017 national limitation amount as a basis for payment reductions caused Medicare’s payment rate to increase from an average allowed amount of $11.45 in 2016, to a payment rate of $13.04 in 2018, instead of decreasing towards a lower median private- payer rate of $9.08. By increasing average payment rates rather than phasing in reductions to rates, CMS’s implementation may lead to paying more than necessary for some tests. Federal standards for internal control for information and communications require agency management to use quality information to achieve its objectives. Basing reductions on national limitation amounts rather than more relevant information on how much Medicare actually paid—such as the average allowable amounts in 2016, for example—could result in Medicare paying more than necessary by $733 million from 2018 through 2020, according to our estimates. In implementing PAMA, CMS eliminated bundled rates for panel tests that lack billing codes and started paying separately for each component test instead. CMS also implemented the 2018 CLFS in a manner that could lead to unbundling payment rates for panel tests with billing codes. If payment rates for all panel tests were unbundled, we estimated that Medicare expenditures could increase by $218 million for panel tests that lack billing codes and by as much as $10.1 billion for panel tests with billing codes from 2018 through 2020. CMS also estimated that there could be significant risks of paying more than necessary associated with unbundling and has taken initial steps to monitor these risks and explore possible responses, but had not yet responded to these risks as of July 2018. CMS Unbundled Payment Rates for Panel Tests without Billing Codes Beginning in 2018, CMS no longer uses bundled payment rates for panel tests without billing codes and instead pays laboratories individual payments for each component test that comprises these panel tests. However, CMS staff and members of its advisory panel discussed concerns with this approach. At an advisory panel meeting in 2016, CMS staff relayed concerns from stakeholders that CMS would not be able to collect valid data on private-payer rates for these panel tests. According to agency staff, stakeholders had informed CMS that private payers commonly use bundled payment rates for these panel tests, but laboratories would only be able to report unbundled payment rates for individual component tests. We estimated that unbundling these payment rates would increase Medicare expenditures from 2018 through 2020 by $218 million in comparison to the estimated Medicare expenditures over the same time period based on Medicare’s 2016 utilization and allowable amounts. For example, under the 2016 CLFS, Medicare paid approximately 435,000 claims for panel tests that included the laboratory tests assay of creatinine (HCPCS code 82565) and assay of urea nitrogen (HCPCS code 84520) at an average bundled payment rate of $6.82. In contrast, under the 2018 CLFS, these two component tests are reimbursed individually at $6.33 and $4.88, respectively, or $11.21 combined—a 63 percent increase. Despite concerns about the validity of available private-payer data on component tests for panel tests without billing codes, CMS used these data to set payment rates for component tests. CMS officials told us that they stopped using bundled payment rates for these panel tests because it is not clear that CMS has the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for each test. However, in July 2018, CMS officials told us the agency was reviewing its authority regarding this issue. CMS officials told us they are exploring alternative approaches that could limit increases to Medicare expenditures but had not yet determined what additional legal authority would be needed, if any, and did not know when CMS would make this determination. Agency officials told us that CMS has taken initial steps to monitor unbundling and explore possible responses, including the following: Monitoring unbundling: CMS has begun monitoring changes in panel test utilization, payment rates, and expenditures associated with its implementation of PAMA, according to officials. For example, CMS officials told us that preliminary data indicated that Medicare payments for individual component tests of panel tests has increased substantially in 2018, but, as of July 2018, it was too early to draw conclusions from these data because laboratories have up to one year to submit claims for tests. Collecting input on alternatives: In 2016, a subcommittee of an advisory panel that CMS established reviewed Medicare’s use of bundled payment rates for panel tests and published different approaches for CMS to consider implementing in combination with other changes to implement PAMA. CMS’s Implementation of PAMA May Have Allowed Unbundling of Payment Rates for Panel Tests with Billing Codes Beginning in 2018, laboratories that submit claims for any of the seven panel tests with billing codes by using the billing codes for the individual component tests now receive the payment rate for each component test, rather than the bundled rate. Prior to 2018, laboratories could submit claims for these panel tests either by using the specific codes for panel tests or by billing separately for each of the component tests, and, regardless of how laboratories submitted claims, Medicare Administrative Contractors would pay bundled payment rates based on how many of the 23 component tests were conducted. However, CMS instructed Medicare Administrative Contractors to stop bundling payment rates for tests that are billed individually on claims rather than billed on claims using codes for panel tests, beginning in 2018. CMS did so because it was not clear that CMS had the authority to combine the individual component tests into groups for bundled payment as it did before 2018 due to PAMA’s reference to payments for individual tests, according to agency officials. This change could potentially have a large effect on Medicare spending. For example, if a laboratory submitted a claim individually for the 14 component tests that comprise a comprehensive metabolic panel it would receive a payment of $81.91, a 528 percent increase from the 2018 Medicare bundled payment rate of $13.04 for this panel test. (See fig. 6.) Improving how reductions to payment rates for panel tests are phased in could mitigate, but not completely counteract, the effect of unbundling these payment rates. For example, for the comprehensive metabolic panel test described in figure 6, basing maximum reductions on 2016 average allowable amounts would result in a 2018 Medicare bundled payment rate of $10.31 instead of $13.04 and individual payment rates for the 14 component tests that total $56.06—a 32 percent decrease from $81.91 that Medicare would otherwise pay. If the payment rate for each panel test with a billing code were unbundled, we estimated that Medicare expenditures for these tests from 2018 through 2020 could reach $13.5 billion, a $10.1 billion increase from the $3.3 billion we estimated Medicare would spend using the bundled payment rates in the CLFS. Similarly, prior to implementing PAMA, CMS estimated that Medicare expenditures to physician-office, independent, and other non-hospital laboratories could potentially increase as much as $2.5 billion in 2018, alone if it paid for the same number of panel tests with billing codes as it did in 2016 but paid for each component test individually. These estimates represent an upper limit on the increased expenditures that could occur if every laboratory stopped using panel test billing codes and instead used the billing codes for individual component tests. We do not know the extent to which laboratories will stop filing claims using panel test billing codes. CMS officials also told us that they were aware of the risks associated with paying for the individual component tests instead of the bundled payment rate for a panel test with a billing code. However, CMS guidance, which was effective in 2018, continued to allow laboratories to use the billing codes for individual component tests rather than the billing code for the panel. CMS officials explained that this was due to PAMA’s reference to payments for individual tests, similar to CMS’s decision to stop paying bundled rates for panel tests without billing codes. At the time we did our work, CMS had not implemented a response to these risks but had taken some initial steps to monitor unbundling and consider alternative approaches to Medicare payment rates for these tests. HHS provided additional information on planned activities to address these risks in its written comments on a draft of this report. (See app. III.) CMS collected data on private-payer rates from laboratories that were required to report these data, but not all laboratories complied with the reporting requirement, and the extent of noncompliance remains unclear. PAMA’s provision directing CMS to phase in payment-rate reductions to Medicare payment rates likely moderates the potential adverse effects of incomplete private-payer data. However, in the future, failing to collect complete data could substantially affect Medicare payment rates because private-payer rates alone will determine Medicare payment rates. In addition, we estimated that Medicare expenditures on laboratory tests will be $733 million higher from 2018 through 2020, because CMS started phasing in payment-rate reductions from national limitation amounts instead of more relevant data on actual payment rates, such as average allowable amounts. Finally, changes to payment rates, billing practices, and testing practices could increase Medicare expenditures by as much as $10.3 billion from 2018 through 2020, if CMS does not address the risks associated with unbundling payment rates for panel tests. Agency officials indicated that it was unclear if PAMA limited CMS’s ability to combine individual component tests into groups for bundled payment, and, as of July 2018, CMS was reviewing this matter but did not know when it would make a determination. We are making the following three recommendations to CMS: The Administrator of CMS should take steps to collect all of the data from all laboratories that are required to report. If only partial data can be collected, CMS should estimate how incomplete data would affect Medicare payment rates and address any significant challenges to setting accurate Medicare rates. (Recommendation 1) The Administrator of CMS should phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018 rather than the national limitation amounts. CMS should revise these rates as soon as practicable to prevent paying more than necessary. (Recommendation 2) The Administrator of CMS should use bundled rates for panel tests, consistent with its practice prior to 2018, rather than paying for them individually; if necessary, the Administrator of CMS should seek legislative authority to do so. (Recommendation 3) We provided a draft of this report to HHS for review and comment. HHs provided written comments, which are reproduced in appendix III. HHS also provided technical comments, which we incorporated as appropriate. HHS concurred with our first recommendation to take steps to collect all data from laboratories required to report and commented that it is evaluating ways to increase reporting. In particular, in a November 2018 final rule, HHS changed the definition of an applicable laboratory, which it expects will increase the number of laboratories required to report data on private-payer rates to the agency. HHS neither agreed nor disagreed with our second recommendation to phase in payment-rate reductions that start from the actual payment rates Medicare paid prior to 2018. HHS noted that any changes to the phasing in of payment-rate reductions would need to be implemented through rulemaking. We estimated that by using the national limitation amounts as a starting point for these reductions, Medicare expenditures would increase by $733 million from 2018 through 2020. For this reason, we continue to believe CMS should revise these rates as soon as practicable and through whatever mechanism CMS determines appropriate. HHS neither agreed nor disagreed with our third recommendation to use bundled rates for panel tests. However, HHS commented that it is taking steps to address this issue. More specifically, for panel tests with billing codes, HHS is working to implement an automated process to identify claims for panel tests that should receive bundled payments, similar to the process used to bundle payment rates for these panel tests prior to PAMA’s implementation and anticipates implementing this change by the summer of 2019. In addition, HHS posted guidance on November 14, 2018, stating that the panel tests with billing codes, laboratories should submit claims using the corresponding code rather than the codes for the separate component tests beginning in 2019. To reduce the potential of paying more than necessary, we believe it is important that CMS implement its proposed automated process to allow for these payments as soon as possible. In contrast, for panel tests without billing codes, HHS commented that it is continuing to review its authority and considering other approaches to payment for these panel tests, such as adding codes to the CLFS. We estimate that unbundling the payment for these panel tests could increase Medicare expenditures by $218 million from 2018 through 2020 compared to expenditures based on Medicare’s 2016 utilization, and the actual amount could be higher if utilization increases. For this reason, we believe CMS should implement bundled payment rates for these panel tests to avoid excess payments. We are sending copies of this report to the appropriate congressional committees and the Administrator of CMS. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Table of Key Dates Related to Developing the New Payment Rates for the 2018 Clinical Laboratory Fee Schedule Event Centers for Medicare and Medicaid Services (CMS) issued the CLFS proposed rule. CMS issued responses to frequently asked questions regarding the CLFS proposed rule. CMS issued the CLFS final rule. CMS issued responses to frequently asked questions regarding the CLFS final rule. CMS held the joint Annual Laboratory Public Meeting and Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. CMS issued laboratory billing codes subject to data collection and reporting. CMS issued guidance to laboratories for collecting and reporting data. CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. CMS issued the CLFS data reporting template. CMS collected data on (1) the billing code associated with a laboratory test; (2) the private-payer rate for each laboratory test for which final payment was made during the data collection period (i.e., January 1, 2016, through June 30, 2016); and (3) the volume of tests performed for each billing code at that private-payer rate. CMS issued additional guidance for laboratories as the data collection period began. CMS issued the CLFS fee-for-service data collection user’s manual. CMS issued revised guidance to laboratories for collecting and reporting data. CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. CMS released the proposed CLFS rates. CMS held a Medicare Advisory Panel on Clinical Diagnostic Laboratory Tests meeting. Deadline for stakeholders to submit comments on the proposed CLFS rates to CMS. CMS issued the final CLFS rates. New CLFS rates became effective. Table 4 below demonstrates the challenges the Centers for Medicare & Medicaid Services (CMS) faces in setting accurate Medicare payment rates to the extent it does not collect complete data from laboratories on private-payer rates. Specifically, the table shows the potential effect that collecting additional data for each laboratory test could have on Medicare expenditures and how this effect could vary depending on (1) the amount of additional data collected, (2) payment rates in the additional data, and (3) limits to annual reductions in Medicare payment rates. These limits are in place from 2018 through 2023 to phase in changes to payment rates. In addition to the contact named above, Martin T. Gahart, Assistant Director; Gay Hee Lee, Analyst-in-Charge; Kaitlin Farquharson, Sandra George, Dan Lee, Elizabeth T. Morrison, Laurie Pachter, Vikki Porter, and Russell Voth made key contributions to this report.", "summary": "Medicare paid $7.1 billion for 433 million laboratory tests in 2017. These tests help health care providers prevent, diagnose, and treat diseases. PAMA included a provision for GAO to review CMS's implementation of new payment rates for these tests. This report addresses, among other objectives, (1) how CMS developed the new payment rates; (2) challenges CMS faced in setting accurate payment rates and what factors may have mitigated these challenges; and (3) the potential effect of the new payment rates on Medicare expenditures. GAO analyzed 2016 Medicare claims data (the most recent data available when GAO started its work and the year on which new payment rates were based) and private-payer data CMS collected. GAO also interviewed CMS and industry officials. The Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) revised the Clinical Laboratory Fee Schedule (CLFS) for 2018, establishing new Medicare payment rates for laboratory services. Prior to 2018, these rates were based on historical laboratory fees and were typically higher than the rates paid by private payers. The Protecting Access to Medicare Act of 2014 (PAMA) required CMS to develop a national fee schedule for laboratory tests based on private-payer data. To revise the rates, CMS collected data on private-payer rates from approximately 2,000 laboratories and calculated median payment rates, weighted by volume. GAO found that the median private-payer rates were lower than Medicare's maximum payment rates in 2017 for 88 percent of tests. CMS is gradually phasing in reductions to Medicare payment rates, limited annually at 10 percent over a 3-year period (2018 through 2020), as outlined in PAMA. CMS relied on laboratories to determine whether they met data reporting requirements, but agency officials told GAO that CMS did not receive data from all laboratories required to report. CMS did not estimate the amount of data it should have received from laboratories that were required to report but did not. CMS took steps to exclude inaccurate private-payer data and estimated how collecting certain types and amounts of additional private-payer data could affect Medicare expenditures. However, it is not known whether CMS's estimates reflect the actual risk of incomplete data resulting in inaccurate Medicare payment rates. GAO found that PAMA's phased in reductions to new Medicare payment rates likely mitigated this risk of inaccurate Medicare payment rates from 2018 through 2020. However, GAO found that collecting incomplete data could have a larger effect on the accuracy of Medicare payment rates in future years when PAMA allows for greater payment-rate reductions. CMS's implementation of the new payment rates could lead Medicare to pay billions of dollars more than is necessary and result in CLFS expenditures increasing from what Medicare paid prior to 2018 for two reasons. First, CMS used the maximum Medicare payment rates in 2017 as a baseline to start the phase in of payment-rate reductions instead of using actual Medicare payment rates. This resulted in excess payments for some laboratory tests and, in some cases, higher payment rates than those Medicare previously paid, on average. GAO estimated that Medicare expenditures from 2018 through 2020 may be $733 million more than if CMS had phased in payment-rate reductions based on the average payment rates in 2016. Second, CMS stopped paying a bundled payment rate for certain panel tests (groups of laboratory tests generally performed together), as was its practice prior to 2018, because CMS had not yet clarified its authority to do so under PAMA, according to officials. CMS is currently reviewing whether it has the authority to bundle payment rates for panel tests to reflect the efficiency of conducting a group of tests. GAO estimated that if the payment rate for each panel test were unbundled, Medicare expenditures could increase by as much as $10.3 billion from 2018 through 2020 compared to estimated Medicare expenditures using lower bundled payment rates for panel tests. GAO recommends that the Administrator of CMS (1) collect complete private-payer data from all laboratories required to report or address the estimated effects of incomplete data, (2) phase in payment-rate reductions that start from the actual payment rates rather than the maximum payment rates Medicare paid prior to 2018, and (3) use bundled rates for panel tests. HHS concurred with GAO's first recommendation, neither agreed nor disagreed with the other two, and has since issued guidance to help address the third. GAO believes CMS should fully address these recommendations to prevent Medicare from paying more than is necessary.", "document_type": "gao"}
{"report": "IRS authenticates taxpayers to provide the agency with reasonable assurance that it is interacting with the legitimate taxpayer. IRS verifies that it is interacting with the legitimate taxpayer through identity proofing and authentication. Identity proofing is the process of first establishing that people are actually who they claim to be. Authentication is the process of verifying that returning users are who they say they are by requiring the use of one or more authenticators—such as a password, a cryptographic key, or a fingerprint—before allowing them access to sensitive data or a resource. In this report, we refer to both steps collectively as “authentication.” For high-risk interactions, such as access to prior year tax information, authentication can help IRS avoid improperly disclosing PII or issuing a fraudulent refund. Authentication is particularly important for combatting IDT refund fraud, which occurs when a fraudster obtains an individual’s SSN, date of birth, or other PII and uses it to file a fraudulent tax return seeking a refund. IDT refund fraud can also affect businesses. Specifically, fraudsters can use business information to file a fraudulent corporate return requesting a refund. According to IRS officials, fraudsters can file false employer Form W-2, Wage and Tax Statements (W-2) to support fraudulent individual returns seeking refunds. We have previously reported that when IRS suspects that a tax return is fraudulent, it will stop the return from further processing, and attempt to notify and authenticate the taxpayer before issuing the refund. Authentication can be accomplished using different methods depending on the risk of the interaction. Single-factor authentication: Useful when someone wants to access a low-risk system or service, this method may require only a user name and password. Multi-factor authentication: For high-risk interactions such as access to systems that include PII or financial information, this method requires at least two of the following: “something you know” (e.g., a user name and password); “something you have” (e.g., a mobile phone or cryptographic key); or “something you are” (e.g., a fingerprint or other biometric data). Designing authentication programs involves a balancing act—IRS needs to prevent fraudsters from passing authentication using stolen taxpayer information, but it must balance that against the burden on legitimate taxpayers who must also authenticate. If IRS makes the authentication process too stringent, legitimate taxpayers may not be able to successfully authenticate to, for example, access their prior year tax information or have IRS release a frozen refund. Conversely, if the process is too easy, fraudsters will likely be able to authenticate as easily as legitimate taxpayers. Industry representatives told us that identity proofing and authentication are becoming more difficult with the wide availability of PII. Further, according to NIST, it is challenging for organizations to authenticate users remotely via a web application because the processes and technologies to establish and use digital identities offer multiple opportunities for impersonation or other attacks. These interactions may become even more difficult and risky for organizations like IRS, who may interact with a taxpayer only once a year. As shown by the data breaches discussed at the beginning of this report, fraudsters are persistent in their efforts to exploit weaknesses in online systems and, in the context of IRS, access sensitive taxpayer information. For example, IRS reported that, between January and March 2017, fraudsters were able to use PII to access information from 100,000 taxpayer accounts through IRS’s Data Retrieval Tool. According to the Treasury Inspector General for Tax Administration, identity thieves may have used PII obtained outside the tax system to start the Free Application for Federal Student Aid (FAFSA) application process and access tax information through the Data Retrieval Tool. Further, we have previously reported that fraudsters can use PII obtained in a data breach to more easily create fraudulent returns that resemble authentic tax returns, making it more difficult for IRS to detect potential fraud. Even as IRS has adapted its IDT defenses, fraudsters have developed more complex and sophisticated methods to bypass those defenses and commit fraud undetected. IDT refund fraud affects IRS, state revenue offices, tax preparers, tax software companies, and financial institutions. According to industry representatives, as these entities improve security in one area prone to fraud, fraudsters’ methods evolve to target a weaker area. For example, in March 2016, IRS alerted payroll and human resource professionals of a phishing e-mail scheme in which fraudsters posed as company executives and requested personal information on employees via e-mail, including W-2s. With this information, fraudsters can imitate the legitimate taxpayer and file fraudulent tax returns seeking refunds. In January 2018, IRS reported that the agency received about 100 reports of W-2 phishing schemes in 2016 and about 900 reports in 2017. IRS also reported that more than 200 employers, affecting hundreds of thousands of employees, were victimized by W-2 phishing schemes in 2017. IRS is working to address these challenges, in part, by collaborating with industry—including tax software companies, the tax preparer community, and financial institutions—as well as state partners. In March 2015, the former IRS Commissioner convened a Security Summit with industry and states to improve information sharing and fraud detection and to address common challenges. The Summit led to the creation of seven workgroups to combat IDT refund fraud across multiple platforms. Each workgroup is led by three co-leads—one each from IRS, state departments of revenue or state associations, and industry partners. These workgroups collaborate on initiatives to improve IDT refund fraud prevention and detection, including authentication. In 2015, IRS also established the Identity Assurance Office (IAO) to increase insight into authentication and fraud detection needs agency- wide, including authentication services delivered via four channels: telephone, online, in-person, and correspondence (i.e., postal mail— hereafter referred to as mail—or fax). Among other responsibilities, IAO works with stakeholders across IRS to review the agency’s various authentication programs, including assessing risks of current and planned authentication efforts across the four channels and identifying ways to mitigate these risks. In December 2016, IAO released its IRS Identity Assurance Strategy and Roadmap (Roadmap) for developing a modern and secure authentication environment for all taxpayers, regardless of how they interact with IRS. Among other things, the National Institute of Standards and Technology (NIST) develops and maintains standards, guidelines, recommendations, and research on the security and privacy of information and information systems. In June 2017, NIST released guidance on digital authentication to help agencies improve the security of their identity-proofing and authentication programs. In its new guidance, NIST breaks down the digital identity environment into three separate components of assurance: 1. Identity proofing: establishing that the person is actually who they 2. Authentication: establishing that the person attempting to access a service is in control of one or more valid authenticators associated with that person’s identity; and 3. Federation: the concept that one set of user credentials can be used to access multiple systems. The guidance directs agencies to assess the risk for each component of identity assurance, rather than conducting a single risk assessment for the entire process. According to NIST officials, this new approach provides flexibility in choosing identity proofing and authentication solutions; aligns with existing, standards-based market offerings; is modular and cost-effective; and enhances individual privacy. In addition to NIST’s new requirements for authentication, recent technology advances and private-sector innovation are providing new options for identity proofing and authenticating users, including in cases where, for example, IRS interacts with taxpayers once a year. Some examples of these technologies include physical biometrics, such as facial recognition, as well as behavioral biometrics, such as voice patterns, computer keystroke or mouse use patterns, swipe patterns, and gait analysis. According to IRS documents and discussions with officials, the agency considers risks to both the taxpayer and IRS when making decisions about how to approach authentication, which is consistent with federal guidelines. In making these decisions, IRS considers how individuals would be affected by the unauthorized release of sensitive information. IRS also considers the impact on the agency, including the potential for financial loss or harm to IRS programs or services, and loss of public trust. In 2016, IRS identified over 100 interactions between the agency and taxpayers that require authentication. The interactions range in risk level and IRS categorized them based on the potential for incorrect payment of refunds, disclosure of taxpayer information, and critical impacts on IRS operations. High-risk interactions include when an individual taxpayer establishes an online account with IRS, which provides access to prior year tax information and other PII, or when a taxpayer is asked to confirm his identify before IRS processes what the agency considers to be a potentially fraudulent tax return. Lower-risk interactions include paying a tax bill online. According to IRS, as the risk level of taxpayer interactions increases—for example, interactions that involve sensitive financial information—the authentication process becomes more rigorous. This enhanced security helps reduce the possibility that a fraudster can successfully authenticate. Further, if tax professionals want to conduct business with IRS online, such as when working on behalf of a client to file a return or request a prior year’s tax transcript, they must establish an account and authenticate their identity. According to IRS, the agency determines the means by which a taxpayer or tax professional can authenticate his or her identity and what data are required during the authentication process to appropriately minimize risk to the agency. IRS officials told us that the agency works to balance potential risks against its resources and mission to provide all taxpayers access to IRS services and support. IRS performs authentication through the following channels. Telephone. Taxpayers can authenticate via telephone with a customer service representative (CSR) for selected higher-risk interactions with IRS, such as in cases of suspected IDT refund fraud. Telephone authentication can require taxpayers to respond to knowledge-based questions that a fraudster would not likely know. For example, for high- risk interactions, taxpayers must answer additional tax return-related questions. Taxpayers who fail to respond correctly to these questions are then required to authenticate in person at a Taxpayer Assistance Center. For certain lower-risk interactions, taxpayers can authenticate through an automated telephone system. In-person. For some interactions with IRS, taxpayers can authenticate their identity directly with an IRS employee at 1 of IRS’s approximately 400 Taxpayer Assistance Centers located throughout the country. Taxpayers may need to present one or more government-issued forms of identification and other documents, such as a utility statement, depending on the level of authentication required for the specific interaction. Online. IRS authenticates taxpayers online for both high-risk and lower- risk interactions. For high-risk interactions such as requesting a tax transcript or looking up an Identity Protection Personal Identification Number (IP PIN), taxpayers must pass a multi-factor authentication process using IRS’s Secure Access platform. IRS launched Secure Access in June 2016 following the Get Transcript data breach and, as of April 2018, was using it for 11 applications including authentication for Get Transcript, IP PIN, and the online account. Officials told us they plan to implement Secure Access for other IRS applications in 2018. Taxpayers authenticating through Secure Access establish an account by providing IRS with a valid e-mail address, basic personal information, and personal financial information. Taxpayers then provide IRS a mobile phone number and IRS sends the phone an activation code that the taxpayer enters online. This step validates that the taxpayer possesses the mobile phone. IRS authenticates returning users via a security code. For lower-risk interactions, taxpayers may authenticate online by answering several knowledge-based questions, such as questions about their current return to learn the status of their refund. Correspondence. In some cases, taxpayers can submit documents or request tax information via correspondence, which are then reviewed by IRS and authenticated by matching against information in IRS’s systems. This method can require that IRS send the requested documents (such as a tax transcript) only to the taxpayer’s address of record, or require the taxpayer to include a photocopy of identification. For example, in some instances, taxpayers who cannot authenticate via telephone and cannot travel to a Taxpayer Assistance Center in person may be able to authenticate by mail. Each authentication channel requires different IRS resources. These resources include IRS staff and overhead; contracts with vendors that provide identity verification services; and costs inherent to the specific channel, such as mailing costs. Figure 1 summarizes IRS’s authentication channels and illustrates a number of the interactions that taxpayers or tax professionals can accomplish through one, or several, channels. It also illustrates the differences in costs per transaction. According to IRS data, in-person authentication at a Taxpayer Assistance Center is the most expensive way to authenticate taxpayers (about $89 per interaction), followed by telephone (about $54 per interaction). Online authentication costs the least, at less than $1 per interaction. According to the National Taxpayer Advocate, while requiring the appropriate level of authentication is necessary to protect IRS against fraudsters, the agency also needs to offer taxpayers a range of options for interacting with IRS. In this report, we focus on four key IRS programs and services that require authentication: Taxpayer Protection Program (TPP). Through TPP, IRS reviews tax returns that are flagged by IRS’s IDT filters as potentially fraudulent, such as when a return includes characteristics of known fraud schemes. IRS sends a letter notifying taxpayers that they must authenticate their identity before IRS will process the return or issue a refund. According to IRS, in fiscal year 2017, more than 1.9 million taxpayers received such a notification, and IRS authenticated about 1.17 million of them. These taxpayers could verify their identity via telephone, in-person, and correspondence. In August 2016, IRS suspended its TPP online authentication service because of potential system security weaknesses. In mid-March 2018, IRS relaunched the first phase of a more secure TPP online authentication service, which is discussed later in this report. Get Transcript. This service allows individual taxpayers to request and receive a copy of their prior years’ tax information. The transcript contains information from the taxpayer’s tax filing history, such as information from Form 1040, U.S. Individual Income Tax Return, that can be used, for example, when applying for a mortgage or student loan, or to electronically file (e-file) an upcoming tax return. Taxpayers can request the transcript online or in-person (to be delivered online or via mail); over the telephone (to be delivered via correspondence); or by correspondence (to be delivered via mail). Taxpayers must provide authentication information before IRS will process their request. According to IRS, in fiscal year 2017, IRS delivered about 26.4 million transcripts, with about 59 percent of transcripts delivered online. IP PIN. IRS assigns each victim of IDT a single-use identification number to be used to file a future electronic or paper tax return. IRS also offers taxpayers in Florida, Georgia, and the District of Columbia the option to request an IP PIN to help prevent IDT in these high tax- related IDT locations. IRS automatically rejects e-filed returns if they do not include the IP PIN and will delay paper returns for extra examination when taxpayers file without the IP PIN. According to IRS, the agency mailed 3.5 million IP PINs to be used during the 2017 filing season. IRS’s Online Services. IRS has developed a number of online services that require taxpayers and tax professionals to authenticate before accessing information online. For example, taxpayers who have established a verified online account can set up an online payment plan. Taxpayers can also check the status of their refund, as well as update their address of record. Taxpayers can also use IRS’s mobile application for some of these actions, such as checking the status of a refund or making a payment to IRS. Similarly, through IRS’s e-Services, tax professionals who have been vetted and approved by IRS can manage their e-file accounts, file tax returns on behalf of clients, and view their clients’ tax return information. As noted in figure 2, the volume of taxpayers authenticated for each IRS program or service varies by channel. Further, although TPP costs IRS more than Get Transcript and affects far fewer taxpayers, IRS reported that TPP helped prevent $5.3 billion in lost tax revenue in calendar year 2016. IRS has identified high-level strategic campaigns, or efforts to enhance identity assurance, in its Identity Assurance Strategy and Roadmap (Roadmap) and has established a business process to support these efforts. However, IRS has not articulated relative priorities for the foundational initiatives supporting its strategic efforts or the resources it will require to complete them. As discussed earlier, IRS’s 2016 Roadmap is the agency’s plan for developing a modern and secure authentication environment for all taxpayers regardless of how they interact with IRS. The Roadmap outlines six core authentication objectives, followed by 10 high-level strategic efforts, and 14 foundational initiatives to help IRS address its authentication challenges and identify opportunities for future investment. (See appendix II.) Further, IRS has identified about 90 activities to support its foundational initiatives and the responsible organizations and general duration to complete them. These initiatives include, for example, implementing a risk assessment framework that can be applied across all authentication channels and services; developing a framework of identity proofing and authentication requirements for third parties accessing and using IRS data and services; and improving taxpayer assurance by sending automated electronic alerts to taxpayers, such as when they file a return. To support implementation of these initiatives, IRS established a 12- member executive governance board. Board members are senior executives from business units across IRS, including the Identity Assurance Office (IAO), IT Applications Development, IT Cyber Security, and Wage and Investment. The board helps to monitor progress, risks, and challenges associated with implementing its Roadmap, and has generally met monthly since January 2017. Our prior work on government performance has identified several leading practices for planning at the program or initiative level. Among other things, these practices call for strategic plans to contain the goals and objectives of a program and the human, financial, and information resources required to complete them. Leading practices also call for agencies to develop estimates of benefits and costs to help prioritize new investments. Following these practices can help agencies establish priorities in a complex environment. IRS has made progress on some of the strategic efforts identified in its Roadmap. For example, consistent with its core objectives, IRS has taken steps to enhance fraud detection by improving telephone authentication procedures and expanding its online authentication services. In October 2016, IRS implemented a new process for high-risk telephone authentication, which includes generating questions for the taxpayer using data from internal IRS systems instead of from third-party data or credit reporting agencies. In addition, in March 2018, IRS launched the first phase of its improved online authentication service for TPP, called ID Verify. According to IRS officials, the first phase of the service will be available to taxpayers who did not file the return in question and appear to be victims of IDT refund fraud. The second phase, which IRS plans to implement later in 2018, will expand the service to all taxpayers selected for TPP. While IRS’s Roadmap demonstrates the breadth of the agency’s strategic vision and core objectives, it does not articulate the resources IRS needs to implement any of its 14 foundational initiatives and their supporting activities. For example, one of IRS’s foundational initiatives is to send event-driven notifications to taxpayers, such as when they file a return or request a tax transcript. Such notifications could help IRS detect potentially fraudulent activity at the earliest stage and improve authentication of tax returns. The Roadmap identifies seven supporting activities for this foundational initiative. One is to provide taxpayers with greater control over their online accounts. Another supporting activity is to determine methods for sending notifications to taxpayers about activity on their account. However, IRS has not identified the resources required to complete these activities, and the Roadmap notes that six of the seven activities will take between 6 months to 3 years to complete. In December 2017, IRS officials stated that they had developed business requirements for the foundational initiative to give taxpayers greater control over their online accounts. However, IRS has not identified funding for the initiative’s other supporting activities—such as developing requirements to send push notifications to taxpayers—and implementing them will depend on the availability of future resources. Further, while IRS has developed a business process that would help the agency prioritize initiatives, the process has not been fully implemented. In 2015, we recommended that IRS estimate and document the costs, benefits, and risks of possible options for taxpayer authentication, in accordance with OMB and NIST guidance. Consistent with our recommendation and its Roadmap, IRS developed a process to assess the costs, benefits, and risks of current and potential authentication tools. In May 2017, IRS implemented its business decision model to analyze and improve its online taxpayer authentication services and provided us with results from an analysis for implementing a text-to-voice functionality for IRS’s Secure Access online authentication platform. This function would allow taxpayers the option of receiving an automated voice code for authentication on a verified landline (instead of a text message on a mobile phone). As a result of this analysis, IRS approved the proposal to implement this tool. However, in December 2017, IRS officials stated that the text-to-voice tool is not moving forward because of other competing IT improvements and funding constraints. Further, IAO has not yet applied the business decision model to other potential authentication initiatives, such as those identified in its Roadmap. In December 2017, IRS officials stated that each of the strategic efforts and foundational initiatives identified in the Roadmap are a high priority, and they are working to address them concurrently while balancing the availability of resources against the greatest threats to the tax environment. We recognize that a strategy is necessarily high-level and that IRS must remain flexible and use necessary resources to respond to unexpected threats. At the same time, clearly identifying resources and prioritizing its initiatives and activities will help clarify the relationships between IRS’s authentication efforts and resource needs relative to expected benefits. Further, such efforts may also help IRS establish clearer timelines and better respond to unexpected events. While IRS has generally performed regular risk assessments on its online authentication applications, it does not perform comparable assessments to identify, assess, and mitigate risks for its telephone, in-person, and correspondence authentication channels. Federal guidance directs agencies to regularly assess and address the risks of government IT systems. Specifically, OMB requires agencies to conduct annual risk assessments on IT systems performing remote authentication. The assessments should also be conducted when the agency plans to modify its business processes or technology. This includes reviewing new and existing electronic transactions to ensure that authentication processes provide the appropriate level of assurance outlined in NIST guidance. While federal guidelines broadly require agencies to identify and manage risks and establish specific requirements for programs using online authentication, no corresponding federal guidelines exist for telephone, in-person, and correspondence authentication, although we have previously reported that federal guidance and standards are applicable to IRS’s phone authentication. Similarly, our Framework for Managing Fraud Risks in Federal Programs directs agencies to conduct fraud risk assessments at regular intervals and when there are changes to the program operating environment, as assessing fraud risks is an iterative process. Previously, such risk assessments have helped IRS identify security weaknesses and, in some cases, have led the agency to take an authentication service offline. For example, in response to a recommendation we made in May 2016, IRS performed an updated risk assessment on TPP’s online authentication service, a key defense against IDT refund fraud. Based on the results of this assessment, IRS disabled its online authentication service until it could appropriately address the security weaknesses that it identified. Consistent with federal guidance, IRS has identified and analyzed risks associated with services and programs requiring online authentication, including TPP, Get Transcript, and IP PIN, among others. Further, IRS has made recent progress in updating risk assessments and improving security for its online authentication applications. Specifically, between June 2017 and April 2018, IRS reassessed authentication risk levels for some online applications, mitigated risks by moving additional applications behind its Secure Access authentication platform, and identified other compensating controls to appropriately protect its systems. In December 2017, IRS officials stated that they were working to bring remaining authentication applications in line with their most recent risk assessment. They expected to complete this work by the last quarter of fiscal year 2018. IRS has efforts underway to identify risks for telephone, in-person, and correspondence authentication, but has made limited progress implementing its process for assessing risks for all taxpayer authentication channels. As previously discussed, in 2016, IRS identified over 100 interactions that require taxpayer authentication and categorized these into three high-level risk outcomes. According to IRS’s risk assessment process, the next step is for IRS business units to assess the effects of incorrect authentication for each interaction or program, identify gaps in existing processes, and develop options to address the gaps. IRS officials stated that this process involves conducting scenario-based workshops with subject matter experts. However, as of March 2018, this process has only been applied to TPP and one other IRS business practice. In early 2017, IRS conducted a 2- day, internal, scenario-based workshop to assess risks and impacts and to identify gaps for TPP authentication. Workshop participants identified 45 short-, medium-, and long-term potential enhancements to TPP’s authentication processes. However, IRS had not performed similar risk impact assessments for other programs that rely on telephone, in-person, and correspondence authentication—including Get Transcript and IP PIN—and officials do not have a plan or timeline for conducting these assessments. Further, IRS has not developed a plan with time frames to address the deficiencies it identified for TPP. In December 2017, IRS officials stated they are reviewing the 45 TPP enhancements identified by workshop participants, but have no clear plans to implement them because of resource constraints. IRS has made limited overall progress on this front because it does not have a policy that requires regular assessments and timely mitigation of identified issues for telephone, in-person, and correspondence authentication, as is required for online authentication programs and services. IRS also does not have guidelines for mitigating authentication risks to these channels in a timely manner. In late November 2017, the Director of IAO stated that IAO alone does not have the authority to create and implement a policy that compels other IRS business units to use its risk assessment process or mitigate issues in a timely manner. Officials from other IRS business units stated that they continually assess risks to telephone, in-person and correspondence authentication, even without a policy to do so. However, IRS could not provide evidence of such prior risk assessments or risk mitigation plans. IRS’s Roadmap states that it will implement a secure authentication platform for taxpayers regardless of how they interact with IRS—online, via telephone, in- person, or correspondence—to help ensure that information is secure and that the agency is interacting with a legitimate taxpayer. Without a policy for conducting risk assessments for these channels and addressing deficiencies in a timely manner, IRS may underestimate known risks and overlook emerging threats to the tax environment. As a result, these channels may be more vulnerable to fraudulent activity, including unauthorized attempts to access taxpayer information. IRS has established internal controls including procedures and mechanisms to monitor performance of online authentication, but does not have similar controls in place to monitor the performance of telephone, in-person, and correspondence authentication. Federal standards for internal control call for agencies to design their information systems in a way that meets operational needs and allows the agency to respond to risks. Further, agencies are to collect and use quality information to make informed decisions. Quality information is appropriate, current, complete, accurate, accessible, and provided on a timely basis. Further, to have an effective internal control system, agencies should also establish procedures to monitor and evaluate the performance of programs and systems as part of the normal course of operations. To this end, monitoring should be performed on an ongoing basis, and any deficiencies the agency has identified should be addressed in a timely manner. Monitoring activities are even more critical in an environment where the risk of fraud is high because such efforts allow an agency to quickly respond to emerging risks to minimize the impact of fraud. Further, IRS’s Strategic Plan calls for its organizations to use analytics and research to improve program effectiveness and foster a timely, data-driven decision-making environment. According to IRS documentation and discussions with officials, the Secure Access online authentication platform allows IRS to conduct near real-time monitoring of taxpayer authentication outcomes. Specifically, for each online service using Secure Access, IRS is able to monitor on a daily basis how many taxpayers registered for an account; rates of successful and unsuccessful identity proofing and verification; and suspicious user patterns, such as multiple login attempts. IRS is also able to monitor system error codes for specific steps in the authentication process, such as when the secure messaging process fails. IRS officials stated that this enhanced performance monitoring of online authentication began in June 2016, and it is helping IRS determine where in the authentication process taxpayers may be having difficulties and potential causes of the problem. However, IRS does not have comparable procedures and mechanisms to monitor authentication outcomes for telephone, in-person, and correspondence authentication, particularly for TPP, one of IRS’s key defenses against IDT refund fraud. Further, since August 2016, taxpayers have been able to authenticate using only these channels. IRS currently uses its Account Management Services (AMS) to capture telephone and in-person authentication outcomes for TPP; however, as discussed below, this is not an effective mechanism for monitoring authentication outcomes. AMS is IRS’s primary application for recording, storing, and retrieving information on all types of taxpayer interactions over time. IRS’s customer service representatives (CSR) use AMS to, among other things, record information related to taxpayer authentication performed over the phone or in person for TPP. According to IRS documentation, AMS includes a field where the CSR is to enter the authentication outcome and also an area where the CSR enters notes on the details of the taxpayer interaction. In the context of TPP, IRS officials stated that CSRs use the notes field to record, for example, the reason why the taxpayer failed the authentication process, and other information important for other CSRs to know. IRS also relies on another application to review the status of TPP cases, such as if a case is open or closed. To better understand how CSRs are implementing procedures to capture TPP authentication outcomes in AMS, we analyzed data in AMS from January through October 2017. The result of our analysis and related discussions with IRS officials indicate three primary internal controls issues. First, IRS does not have a reliable, direct mechanism to collect data on the number of taxpayers who pass and fail telephone, in-person, and correspondence authentication. Second, data quality issues make it difficult for IRS to understand why taxpayers may be failing these authentication processes. Third, the IRS organizations responsible for monitoring these channels do not have access to complete AMS data, making it difficult for IRS to identify potential authentication issues and develop solutions to address them. No mechanism to collect reliable, direct data on authentication passes and failures. As previously discussed, when a taxpayer calls IRS or visits a Taxpayer Assistance Center in regard to a TPP letter, the CSR is to enter the result of the authentication (i.e., pass or fail) into AMS with one of nine codes that accurately reflects the authentication outcome. However, AMS does not have a separate, discrete field where the CSR is to enter this information. The field available to capture authentication information is shared with 68 other issue codes, increasing the likelihood that the CSR may select a more generic issue, such as “identity theft” instead of one of the nine codes designated for TPP. Further, one of the TPP outcome codes, called “other issue,” may be too broad for useful analysis. Of the data we reviewed, we found that about one-third of TPP authentication cases were categorized as “other issue,” which provides no information on the authentication outcome. According to IRS’s procedures, this category is to be used in various scenarios, including when IRS does not have enough information to generate questions for authenticating the taxpayer, and in other cases when a taxpayer fails telephone authentication and must go to a Taxpayer Assistance Center. However, by combining all of these issues into one broad category, IRS has limited insight into the size of each particular problem and may be underestimating the number of taxpayers who fail TPP authentication. Further, IRS does not directly capture the results of correspondence- based authentication in AMS and is therefore unable to monitor pass and failure rates for this channel. Issues with data quality. We selected a generalizable random sample of AMS cases identified as TPP authentication failures for January through October 2017 and identified several data quality issues based on our analysis. First, we found that an estimated 19 percent of cases were categorized as an authentication failure, but the content of the CSR notes indicated otherwise. Further, we could not determine a clear match between the TPP authentication outcome and the CSR notes in an additional estimated 18 percent of cases. For example, in these instances, the CSRs’ notes provided no information on why the taxpayer failed authentication, or the notes were clearly unrelated to TPP. Second, we found that CSRs do not consistently enter useful information in the notes explaining why a taxpayer failed authentication, which could provide IRS management with valuable feedback on characteristics of potential fraud or problem areas for legitimate taxpayers. Specifically, our analysis showed that in an estimated 63 percent of cases, CSRs’ notes contained information that was useful or somewhat useful for helping IRS understand why a taxpayer failed authentication. In the estimated 37 percent of cases where we determined that the notes were not useful, CSRs generally documented the outcome (i.e., authentication failure) but not the details on why the taxpayer failed. We recognize that a portion of the TPP authentication failures may represent fraudsters trying to authenticate as a legitimate taxpayer. However, given that IRS’s fraud detection systems have a history of high false positive rates, these failures may also represent legitimate taxpayers who may be having trouble authenticating. Further, while the CSR notes could provide IRS potentially valuable information on why taxpayers may be failing authentication, further data analysis may prove difficult. This is because this information is captured in a free-text notes field, rather than in a drop-down list or other standardized way to record data that can then be analyzed. Further, during our analysis of AMS data, we found variation in the way CSRs enter notes, particularly in their use of abbreviations and shorthand on why a taxpayer failed authentication. Such variation makes systematic data analysis difficult. According to IRS officials and documents we reviewed, there may be several causes for the data quality issues. For example, as noted earlier, CSRs may not be selecting the correct TPP authentication outcome code because there are too many options and procedures may be unclear. IRS officials also noted that when a taxpayer contacts IRS about TPP authentication, they may want to discuss multiple issues. In these cases, the CSR may choose to record information on another issue instead of the authentication outcome. Complete AMS data sets are not readily available for analysis. In addition to the issues described above, the organizations responsible for monitoring TPP telephone and in-person authentication data do not have access to complete AMS data for TPP. IRS officials responsible for managing TPP told us that they do not have direct access to AMS data reports because they are not the system’s business owner. Instead, they receive a weekly extract of AMS data from IRS’s IT department. However, officials stated that this weekly data extract is limited to approximately the first 5,000 records for each issue area or outcome code, including the codes for TPP. IRS IT officials stated that they limited the file size of the AMS weekly report because it became too large to share internally via e- mail. IT officials stated that the free-text notes entries in AMS were the main cause for large file sizes. However, this procedure of emailing an extract of the data, rather than providing direct access to AMS, makes it difficult for IRS to perform comprehensive analyses and ongoing monitoring for TPP using AMS. To put this into further context, IRS officials reported that in fiscal year 2017, they authenticated about 1.13 million taxpayers for TPP via telephone and at Taxpayer Assistance Centers. However, we found only about 471,600 records with a TPP outcome code in the AMS data IRS provided to us. This represents only about 42 percent of the records we were expecting to see in AMS. IRS officials stated that the discrepancy was likely due to the AMS record limit described above. Yet, in the course of our analysis, we found that only a small number of outcome codes over 42 weeks appeared to be affected by this record limit. (See appendix I for details.) IRS officials could not confirm additional explanations for the discrepancy in the number of records. IRS’s Office of Research, Applied Analytics, and Statistics (RAAS) performs research and quantitative analysis on TPP and has studied authentication performance. For example, in April 2017, RAAS reported results of a newly implemented TPP authentication procedure and found that while the new procedures helped to reduce call times, CSRs were not following the procedures correctly in an estimated 44 percent of the calls. According to IRS officials, RAAS’s research efforts provide IRS management with insight into TPP performance and officials have identified areas where TPP can be improved. However, officials face similar data limitations we described above. Further, officials from IRS’s RAAS division stated that they must submit a formal data request with IT in order to receive additional data beyond what is included in the AMS weekly extract. While valuable, these research efforts are not a substitute for ongoing monitoring using complete, reliable data, which would allow IRS to identify and address potential problems in a more timely manner. IRS officials acknowledged that AMS has limitations and stated that they are in the process of planning a new capability in another system to analyze how taxpayers perform on specific questions during the high-risk authentication process. However, this capability will not address the issues in AMS we described above. Further, as of late November 2017, officials were uncertain when this capability would be implemented because of IT funding constraints. Without effective internal control procedures and mechanisms for collecting authentication outcome data, ensuring data quality, and using these data to perform comprehensive analyses and ongoing monitoring of TPP, IRS will continue to have limited insight into its taxpayer authentication operations. As a result, IRS may be challenged in identifying current and emerging threats to the tax system. Through the Security Summit, IRS is working with states, software companies, and financial industry partners to identify how best to address IDT and refund fraud. In February 2018, IRS announced that its key indicators for IDT dropped for the second year in a row and the number of taxpayers who reported they were victims of IDT in 2017 fell by about 40 percent, in part because of the Security Summit’s ongoing efforts to stop suspected fraudulent returns from entering tax processing systems. IRS has also included key efforts led by the Security Summit in its Roadmap. The Security Summit’s authentication workgroup leads several initiatives aimed at verifying the authenticity of the taxpayer and the tax return at the time of filing. One initiative involves analyzing data elements that are collected during the tax return preparation and filing process. In filing season 2017, the authentication workgroup collected data on 62 elements, 37 of which were new for that year. These elements included, for example, trusted customer requirements and other characteristics of the return. In addition, in 2016 the authentication workgroup worked with software providers to improve authentication procedures to protect taxpayers against their accounts being taken over by criminals. According to IRS officials, these improvements were some of the most visible to taxpayers because they included new password standards to access tax software and required the use of security questions. Authentication workgroup leaders also described their efforts to collaborate with industry to address authentication challenges. For example, in 2017, IRS, payroll service providers, and tax software providers expanded the Form W-2, Wage and Tax Statements (W-2) verification code pilot program. The goal of this program is to verify W-2 data submitted by taxpayers on e-filed individual tax returns, using a unique 16-character verification code printed on the form. According to IRS, verification codes appeared on more than 60 million W-2s issued for tax year 2017, compared with about 27.5 million W-2s issued for tax year 2016. Overall, co-leads from each of the sectors expressed positive views about the level of commitment and cooperation guiding the Security Summit authentication efforts. Officials with whom we spoke stated that they are dedicated to continuing to address authentication issues collaboratively because they all have an interest in improving authentication to reduce tax refund fraud. As described above, in June 2017, NIST released guidance related to online authentication that agencies will need to implement to ensure they are authenticating users in a secure manner. NIST’s guidance is designed to (1) describe the risk management process for selecting appropriate digital identity services and (2) help agencies implement authentication programs that provide reasonable risk-based assurances that a returning user is the same user that previously accessed the service. Adherence to the NIST guidance will help IRS provide reasonable risk-based assurance that the person accessing IRS services is who they claim to be. Further, OMB guidance states that federal legacy systems have 12 months to comply with a new NIST publication, while systems under development or undergoing a major transformation need to use the current revision when deployed. IRS officials told us they have met with NIST officials and plan to update IRS systems and applications to comply with the new security guidelines. IRS officials also noted that the agency has taken preliminary steps to implement the new guidelines. For example, in December 2017, IRS implemented a more secure authentication option through its mobile app, IRS2Go. After taxpayers link their online account with the mobile app, they can use the app to generate a security code to log into their online account. This option is in line with NIST’s new guidance and provides taxpayers with an alternative to receiving the security code via a text message. IRS has also taken other preliminary steps to implement the new NIST guidance, including forming a task force to guide the implementation of NIST guidance, working with the Security Summit to develop an authentication framework that incorporates the new guidance for state and industry partners, starting an analysis to identify gaps between IRS’s current authentication procedures and the new NIST guidance, and updating authentication procedures. However, IRS has not yet established detailed plans, including timelines, milestone dates, and resource needs, for fully implementing the new guidance. IRS officials cited several reasons for the delay. They said the agency will have to balance maintaining current authentication programs with developing IT infrastructure to support technologies that are compliant with the new guidance. In addition, officials stated that they will need to take a slower, incremental approach to updating authentication programs because of resource constraints. In March 2018, IRS officials provided us a draft, high-level analysis of IRS systems relative to the new NIST guidance, including some action items to address potential gaps. This preliminary analysis is a first step to help IRS identify gaps between IRS’s current authentication methods and the new NIST guidance. However, it does not include steps needed to implement the high-level action items, a timeline with milestones, or the resources needed to implement improvements to bring IRS into compliance with the new NIST guidance. IT officials stated that IRS intends to develop its implementation roadmap through 2018 and begin implementing technical solutions in 2019. However, those officials did not identify the technical solutions nor did they have a prioritization plan or documentation of a timeline to fully implement the new NIST guidance. Implementing the new NIST guidance and updating authentication programs to be protected by the appropriate level of assurance is consistent with federal standards for internal control and IRS’s Roadmap. Standards for Internal Control notes that agencies should identify, analyze, and respond to risks, as well as assess whether risk response actions sufficiently reduce risk to an acceptable level. Further, one of IRS’s initiatives in its Roadmap is to strengthen e-authentication and ensure it is in compliance with federal regulations, which includes guidance from NIST. Developing a plan that includes timelines with specific milestones and resource needs to implement the new NIST guidance is consistent with leading practices for effective planning and management. Specifically, in our prior work on the Government Performance and Results Act, we found that developing and using specific milestones and timelines to guide and gauge progress toward achieving an agency’s desired result is a leading practice for effective strategic planning and management. Further, our body of work on IRS has noted that developing project plans with measurable goals, schedules, and resources can help the agency more effectively plan new projects and initiatives. According to IRS officials, IRS must balance the needs of its existing authentication efforts against potential new investments. IRS’s gap analysis on current authentication procedures relative to the NIST guidance may help IRS prioritize which improvements are most critical. However, without clear plans, timelines, and milestones for performing this work, IRS may not be positioned to address the most vulnerable areas in a timely manner. IRS’s timely implementation of NIST’s new guidance is critical, as it can help the agency mitigate potential security weaknesses in its existing online authentication programs. While IRS has made some progress in improving its authentication programs, the agency lacks a comprehensive, repeatable process to identify and evaluate potential new authentication technologies and approaches. IRS’s planning documents have noted a commitment to identify and leverage authentication best practices from outside organizations to protect taxpayer data and support IRS business needs. Specifically, IRS’s Roadmap states that the agency will leverage leading technology and implementation practices from the private and public sectors through a repeatable environmental scan process and, when appropriate, collaborate with partners to address its authentication needs. Similarly, IRS’s Strategic Plan notes that the agency will invest in innovative, secure technology needed to protect taxpayer data and support the business needs of the agency and its partners. IRS officials told us the agency continuously researches new identity assurance processes and technologies and has talked with other agencies, industry groups, and vendors to better understand how particular technology solutions could apply to IRS’s environment. Further, according to officials, IRS plans to work with an outside organization to analyze third-party identity proofing and authentication services; however, IRS is in the initial phases of this effort. IRS also recently established the Commissioner’s Identity Assurance Executive Steering Committee to help oversee IRS’s authentication efforts agency-wide. This committee is intended to serve as an advisory body, creating a forum for agency-wide collaboration, as well as providing guidance and direction for identity assurance implementation. IRS provided us documentation that it reviewed some available authentication technologies and their pros and cons in February 2016, and told us that this research helped them develop their Roadmap. However, IRS officials could not provide documentation on more recent evaluations of the broader authentication environment, or evidence of a repeatable, comprehensive process to identify and evaluate available authentication technologies and services. IRS officials stated that one way the agency evaluates potential technologies is through limited pilots or “innovation studies.” For example, from October 2017 to January 2018, IRS conducted a limited pilot to explore the feasibility of having a third-party identity assurance service provider authenticate taxpayers on behalf of IRS. Officials stated that this pilot was possible because it required little upfront investment by IRS. Specifically, IRS received a grant from NIST to implement it, and officials stated that it required minimal integration with IRS’s IT infrastructure. In January 2018, IRS officials stated they were reviewing the results of the pilot, but had not decided on any next steps. Further, IRS officials stated that the agency is considering other pilots, including one to assist with IRS’s telephone authentication and one to enhance security checks during the Individual Taxpayer Identification Number application process. However, while IRS has completed preliminary planning for these pilots, it has not established priorities or timelines because each pilot requires IT support, for example, to ensure the application can be integrated with IRS’s infrastructure and to make any technical changes. Further, in December 2017, IRS officials stated that all innovation studies were on hold until resources become available. IRS may benefit from considering new ways of approaching its authentication efforts, as other public and private entities face similar challenges of authenticating users. Our discussions with representatives from industry and financial institutions and with government officials indicate that there is no single, ideal taxpayer authentication solution that will solve IRS’s challenges related to IDT refund fraud. Further, representatives from industry and financial institutions and government officials with whom we spoke advocated a layered approach to authentication that relies on multiple strategies and sources of information, while giving taxpayers options for further protecting their information. Based on our discussions with representatives from industry and state departments of revenue and government officials, some options IRS could consider include the following: Expanding existing IRS services to further protect taxpayers. As discussed earlier, IRS’s online account offers taxpayers several services, including the ability to set up a payment plan and make payments to IRS and view their tax history. In fiscal year 2017, about 808,000 taxpayers created online accounts, and IRS expects this number to grow. IRS’s Roadmap has identified enhancing taxpayer assurance by expanding authentication, such as generating and sending event-driven notifications to taxpayers to help IRS authenticate returns, which could help IRS quickly validate legitimate returns. With this option, IRS may be able to further protect taxpayers from IDT refund fraud. For example, IRS could develop additional functionality for the online account that allows the taxpayer to designate a bank account or a preference for a paper check for receiving a tax refund. If a fraudster filed a return with different information, the return would automatically be rejected. In February 2018, IRS officials stated that their strategic vision includes empowering taxpayers to manage their online account; however, when these services offer the ability to change personal or financial information, there is greater potential for fraudsters to exploit them. Federated model. A federated authentication approach allows an organization to rely on trusted authentication credentials from another entity to log into its systems, potentially without needing to save information from the trusted source. (See figure 3.) One example of a federated authentication model is when people use their Google or Facebook credentials to log into a different website or mobile application. IRS could use a trusted authentication credential from the private or public sector, or another federal agency. The General Services Administration (GSA) has developed a single sign-on authentication platform for federal agencies called Login.gov. In March 2018, GSA officials told us that the Office of Personnel Management and Customers and Border Patrol were using Login.gov and that several other agencies plan to use the authentication platform. According to IRS officials, IRS and Department of the Treasury officials have met with GSA to discuss whether Login.gov could meet IRS’s authentication needs. In December 2017, IRS IT officials said they are tracking Login.gov’s progress and capabilities and want to ensure that GSA officials understand IRS’s requirements. IRS officials said that the agency is interested in being able to federate with different organizations, but does not want to limit federating to one entity, since different taxpayers will want to use different credentials. IRS officials also noted that the agency will need to implement additional IT infrastructure to support a federated model for authentication. Possession-based authentication. This type of authentication offers users a convenient, added layer of security when used as a second factor for accessing websites or systems that would otherwise rely on a username and password for single-factor authentication. As shown in figure 4, Universal Authentication Framework (UAF) solutions use biometrics, such as an embedded fingerprint, facial recognition, or voice recognition sensor on a computer or smart phone, eliminating the need for a password. Similarly, authentication with a Universal Second Factor (U2F) uses a trusted device or “security key” for authentication in addition to a username and password. According to a representative from the Fast Identity Online (FIDO) Alliance, UAF standards and U2F devices comply with NIST’s new guidance for digital authentication. While IRS is not likely to provide the devices to taxpayers, it could enable its systems to accept these types of standards-based authentication technology for taxpayers who elect to use UAF or U2F devices. For example, taxpayers could use a UAF or U2F device when logging into their IRS online account for additional protection. States’ strategies for authentication. When we met with representatives from five states to discuss how they authenticate taxpayers, representatives from three states volunteered that they use driver’s license information to help authenticate taxpayers and tax returns. One state we met with compares driver’s license information to other state agency data to help authenticate returns. IRS could investigate making driver’s license information, or other government identification, a requirement when filing a federal return, and work with states and other outside organizations to assist with authentication. This information could be a key factor in verifying that the legitimate taxpayer is filing the return. While some industry representatives told us driver’s license information is a good credential for identity- proofing, this information can be compromised. For example, fraudsters can use stolen PII to obtain fraudulent driver’s licenses. Contracting with outside organizations. Several private-sector organizations offer identity proofing and authentication services. We spoke with officials from the Department of Veterans Affairs (VA) and representatives from the State of Alabama’s Department of Revenue, both of which are currently using such services. VA is using a third- party service to identity proof and authenticate veterans accessing services through www.vets.gov. For the 2018 filing season, Alabama has contracted with a third-party organization to offer taxpayers a service that sends them an alert when a return is filed using their name, and authenticates the return as legitimate using a selfie. This photo is then digitally compared to their driver’s license photo. IRS could evaluate these services to see if any meet their needs. Working with trusted partners. IRS could partner with organizations it trusts that are accessible to taxpayers and enable the partners to identity-proof and authenticate taxpayers. Trusted partners could include tax preparers, financial institutions, or other federal agencies. In November 2017, IRS officials told us that they had been discussing an in-person identity proofing study with the Social Security Administration (SSA), where SSA would identity proof taxpayers and transmit the authentication data to IRS. However, in June 2018, IRS officials stated that discussions with SSA are ongoing, and they have not made a decision about next steps because SSA is concerned about resources. IRS is also exploring working with the U.S. Postal Service on an information-sharing initiative that could help IRS identify potential IDT. Throughout the course of our work, IRS officials stated that improving the security of IRS’s online authentication applications is a high priority and further noted that IRS must ensure that the highest-risk authentication improvements are completed first. In January 2018, IRS officials stated that the agency’s priority is implementing tax reform, which will use IRS’s limited IT resources. Further, officials noted that priorities, including resources required to develop project estimates, are determined by IRS’s appropriate executive steering committees. Developing a repeatable, comprehensive process to identify and evaluate different alternatives for taxpayer authentication, such as the ones described above, is consistent with leading practices and can help IRS ensure that it has a sound rationale for its investment decisions. It can also help ensure that IRS has the resources it needs to make authentication improvements in a timely manner. For example, these evaluations may involve developing and documenting a business case for selected initiatives in IRS’s Roadmap. Such a process could compare options for in-house authentication solutions with solutions available in the private sector based on estimates of cost, schedule, and benefits, as applicable. By identifying options and performing such an evaluation, IRS may find, for example, that an authentication technology available in the private sector already complies with the new NIST guidelines, offers IRS additional fraud detection capabilities, or is less expensive than developing a similar capability in-house. On the other hand, the process may show that minor improvements to a technology IRS is already using can provide the most secure option in relatively short time, given appropriate resources. This information could be communicated to IRS’s executive steering committees, as well as to Congress, to help IRS identify resource needs and ensure it is pursuing the most efficient and effective authentication improvements to protect IRS and taxpayers against evolving threats. IRS’s authentication environment is one component of a broad, complex IT infrastructure, and the agency faces many challenges as it modernizes its tax systems. However, given the availability of PII and the prevalence of cyberattacks, developing a repeatable, comprehensive process to identify and evaluate alternative options for taxpayer authentication and implementing improvements can help IRS ensure it is authenticating taxpayers in the most secure manner. IRS documentation acknowledges that a hybrid authentication approach using in-house solutions, third-party services, and working with trusted partners is the best approach to implementing the new NIST guidance and expanding IRS’s authentication coverage. However, without a process to comprehensively identify and evaluate available or emerging authentication technologies and models, IRS may be missing an opportunity to implement the most secure, robust technologies to authenticate and protect taxpayers. Further, including these authentication options and prioritizing them with other initiatives included in IRS’s Roadmap would help IRS ensure it is working on the highest priority authentication improvements first. It also provides a way for IRS to communicate its strategy and plan for authentication to IRS management and external stakeholders. Each year, IRS authenticates millions of taxpayers via telephone, online, in-person, or correspondence to verify potentially fraudulent tax returns, provide taxpayers access to a tax transcript, or issue a replacement IP PIN. IRS’s cost to authenticate taxpayers varies widely, with in-person authentication at a Taxpayer Assistance Center costing about $89 per interaction and online authentication costing less than $1 per interaction. The challenge for IRS is to provide taxpayers with options to interact with the agency, while providing IRS with reasonable assurance that it is authenticating the legitimate taxpayer. In its Roadmap, IRS has identified high-level strategic efforts and numerous foundational initiatives to address its most pressing authentication challenges. IRS has made progress in several areas identified in its Roadmap. However, identifying the resources the agency will need to complete its foundational initiatives and further prioritizing them would help IRS better understand the relationship between its competing priorities and limited IT resources. Further, while IRS has made progress in identifying risks and establishing internal control activities to monitor online taxpayer authentication, it has not established equally rigorous controls for telephone, in-person, and correspondence authentication. First, IRS does not have a policy for identifying, assessing, and mitigating risks for these authentication channels. Second, IRS does not have effective internal controls for collecting reliable, useful data on telephone, in-person, and correspondence authentication outcomes for TPP and for using these data to monitor authentication operations. Without effective controls for collecting these data and using it for monitoring, IRS may not be positioned to identify potential vulnerabilities in its operations and the necessary improvements. Given the widespread availability of PII that fraudsters can use to perpetrate tax fraud, it is essential for IRS to strengthen taxpayer authentication to stay ahead of fraudsters’ schemes. Completing an analysis of IRS’s current authentication procedures relative to new NIST guidance may help IRS identify and prioritize which improvements are most critical. Developing a timeline with milestones and resource needs to implement NIST’s new guidance can help guide IRS’s implementation and help officials gauge progress and ensure the most critical improvements are made in a timely manner. Further, implementing NIST’s new guidance can help IRS ensure its online authentication applications are appropriately protecting IRS information. While improving IRS’s current authentication programs would help IRS further protect taxpayer information and identify and prevent fraud, IRS may not need to conduct all of its taxpayer authentication activities in-house nor build IRS- specific authentication solutions: there are many additional tools and partners IRS could consider. Further, developing a repeatable, comprehensive process to identify and evaluate potential authentication technologies and services will help IRS avoid missing opportunities for improving authentication. Further, including and prioritizing these authentication technologies and services in IRS’s Roadmap could provide useful information to decision makers given IRS’s concerns over competing IT priorities and limited resources. We are making the following 11 recommendations to IRS: The Commissioner of Internal Revenue should direct the Identity Assurance Office, in collaboration with other IRS business partners, to estimate the resources (i.e., financial and human) required for the foundational initiatives and supporting activities identified in its Identity Assurance Strategy and Roadmap. (Recommendation 1) Based on the estimates developed in Recommendation 1, the Commissioner of Internal Revenue should direct the Identity Assurance Office to prioritize foundational initiatives in its Identity Assurance Strategy and Roadmap. (Recommendation 2) The Commissioner of Internal Revenue should establish a policy for conducting risk assessments for telephone, in-person, and correspondence channels for authentication. This policy should include, for example, the frequency of assessments to be performed and timeframes for addressing deficiencies. (Recommendation 3) Consistent with the policy developed in Recommendation 3, the Commissioner of Internal Revenue should direct the Identity Assurance Office and IRS business owners to develop a plan for performing risk assessments for telephone, in-person, and correspondence channels for authentication. (Recommendation 4) The Commissioner of Internal Revenue should establish a mechanism to collect data on outcomes for telephone, in-person, and correspondence authentication, consistent with federal standards for internal control. (Recommendation 5) The Commissioner of Internal Revenue should revise or establish, as appropriate, procedures to ensure data quality in the Account Management Services (AMS) consistent with federal standards for internal control. (Recommendation 6) The Commissioner of Internal Revenue should ensure that IRS business units have access to complete AMS data to monitor authentication performance and identify potential issues. (Recommendation 7) The Commissioner of Internal Revenue should direct the Identity Assurance Office and other appropriate business partners to develop a plan—including a timeline, milestone dates, and resources needed—for implementing changes to its online authentication programs consistent with new NIST guidance. (Recommendation 8) In accordance with the plan developed in Recommendation 8, the Commissioner of Internal Revenue should implement improvements to IRS’s systems to fully implement NIST’s new guidance. (Recommendation 9) The Commissioner of Internal Revenue should develop a repeatable, comprehensive process to identify and evaluate alternative options for improving taxpayer authentication, including technologies in use by industry, states, or other trusted partners. (Recommendation 10) Based on the approach developed in Recommendation 10, the Commissioner of Internal Revenue should include and prioritize these options, as appropriate, in IRS’s Identity Assurance Strategy and Roadmap. (Recommendation 11) We provided a draft of this report to the Commissioner of Internal Revenue for review and comment. In its written comments, which are summarized below and reproduced in appendix III, IRS agreed with our 11 recommendations and stated that it is taking action to address them. IRS agreed with our recommendations to identify resources and prioritize the foundational authentication initiatives identified in its Roadmap. IRS noted that the Roadmap is a concept document outlining potential strategic initiatives and IRS has not finalized its approach. IRS stated that once it finalizes its authentication approach, it will estimate the resources required for each initiative and prioritize them, consistent with our recommendation. As stated earlier, we recognize that a strategy is a high- level plan and may need to change based on agency needs. Nevertheless, IRS’s timely attention to identifying resources and prioritizing its approved authentication initiatives will better position the agency to respond to known and unknown threats to the tax system. Further, IRS agreed with our recommendations to develop a plan for fully implementing NIST’s new authentication guidance and make the necessary improvements to its systems. In its written comments, IRS noted that its ability to complete these efforts will depend on the availability of resources. As noted throughout our report, we recognize the challenge of balancing competing IT priorities and limited resources, but given the importance of implementing authentication improvements consistent with NIST’s guidance, we continue to believe it should be a high priority. Additional actions, including addressing our recommendations, will help IRS further mitigate potential security weaknesses in its existing online authentication programs and help prevent potentially hundreds of millions of dollars in fraudulent refunds from being issued. IRS also agreed with our other seven recommendations, but did not provide additional details on how it plans to address them. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Chairmen and Ranking Members of other Senate and House committees and subcommittees that have appropriation, authorization, and oversight responsibilities for IRS. We will also send copies of the report to the Commissioner of Internal Revenue and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix IV. Our objectives were to (1) describe the taxpayer interactions that require authentication, including the general rationale behind the requirements, and the Internal Revenue Service’s (IRS) authentication methods; (2) assess what IRS is doing to monitor and improve its authentication methods, both internally and collaboratively through the Security Summit, to secure taxpayer information and reduce identity theft refund fraud; and (3) evaluate what else, if anything, IRS can do to strengthen its authentication methods while improving services to taxpayers. To describe the interactions that require taxpayer authentication and IRS’s methods to do so, we reviewed IRS documents, policies and procedures, IRS data and information on the number of taxpayers authenticated by channel, and interviewed knowledgeable IRS officials. IRS documents and policies we reviewed included IRS’s Authentication Strategy: Current State Touchpoints, IRS’s Identity Assurance Strategy and Roadmap (Roadmap), and Internal Revenue Manuals related to taxpayer authentication. For this report, we focused on the following four IRS programs and services because they require taxpayer authentication, verify a significant number of taxpayer identities each year, and illustrate IRS’s different approaches to authentication: the Taxpayer Protection Program (TPP), Get Transcript, Identity Protection Personal Identification Number (IP PIN), and IRS’s online services. We reviewed IRS-reported data and information on taxpayer authentication volumes and per transaction costs for these programs for fiscal years 2016 and 2017. To assess the reliability of this data, we examined it for errors and talked with knowledgeable IRS officials. We determined that the data were sufficiently reliable for our purposes. We also interviewed knowledgeable IRS officials on the agency’s authentication programs and services to understand different authentication options offered to taxpayers through various channels: in-person, online, telephone, and correspondence. To assess IRS’s efforts to monitor and improve authentication internally and through the Security Summit, we reviewed IRS policies, procedures, authentication risk assessments, and data from IRS systems on authentication performance. We compared IRS’s efforts to applicable activities in the Roadmap, IRS’s Strategic Plan Fiscal Years 2014-2017 (Strategic Plan), Standards for Internal Control in the Federal Government, GAO’s Framework for Managing Fraud Risks in Federal Programs, and relevant National Institute of Standards and Technology (NIST) guidance. We interviewed IRS officials in IRS’s Return Integrity and Compliance Services (RICS), Identity Assurance Office (IAO), and Information Technology (IT) knowledgeable about the agency’s taxpayer authentication programs. For additional context and informational purposes, we visited IRS’s Andover, Massachusetts call center to observe IRS customer service representatives (CSR) authenticating taxpayers for TPP. We also interviewed IRS, state, and industry co-leads from the Security Summit’s Authentication workgroup and Strategic Threat Assessment and Response workgroup to understand IRS’s collaborative efforts to improve taxpayer authentication. To better understand IRS’s efforts to authenticate taxpayers via telephone and in person, and how CSRs record data for TPP authentication, we obtained data from IRS’s Accounts Management System (AMS) for the weeks January 1, 2017, through October 23, 2017. This was the most recent and complete set of data at the time of our review. We reviewed AMS records coded with any of the nine TPP authentication outcome codes for tax years 2015, 2016, or with “0.” We assessed the reliability of the data by: (1) performing electronic testing of key data elements, including checks for missing, out-of-range, or logically inaccurate data; (2) reviewing documents for information about the data and IRS’s systems; and (3) interviewing officials knowledgeable about the data to discuss any limitations. During these discussions, IRS officials stated that the AMS data we received may not include all available records in AMS. This is because the IRS office that creates the weekly AMS data report includes only the first 5,000 records for each outcome code. To assess whether this was an issue for our data set, we reviewed record counts for each of the nine TPP outcome codes for the 42 weeks of data IRS provided us. We found 12 out of these 378 instances (3 percent) where the data appeared to be affected by the 5,000 record cutoff. Each of these instances occurred in the “TPP- Other – Sent to TAC” issue code for which we planned no further analysis. Specifically, we did not include this issue code in the generalizable random probability sample described below. As a result, we determined that the data were sufficiently reliable for the purposes of our report. To assess the quality and usefulness of the data CSRs enter into AMS for TPP, we selected a random, generalizable sample of records CSRs coded as a TPP authentication failure. We stratified the population into two groups: (1) high-risk authentication failures, and (2) all other authentication failures. From each population, we drew a random sample of 96 records independently, reflecting the population size of each stratum and to be able to detect a 10 percent difference in absolute value between the sample estimate and true population number with a 95 percent confidence level; that is, a 1 out of 20 chance of failure. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Each sample record was subsequently weighted in the analysis to account statistically for all the cases in the population, including those which were not selected. Two analysts independently reviewed each sample record to determine (1) whether the TPP authentication outcome code generally aligned with the CSR’s notes and (2) the extent to which the CSR notes were useful in understanding why a taxpayer failed authentication. First, the analysts categorized each record in the sample as “aligned” (authentication outcome code and content of CSR notes are clearly aligned); “not aligned” (authentication outcome code and content of CSR notes are clearly not aligned); or “cannot determine” (if the content of the CSR notes was unclear and the analyst could not confidently determine that the record was aligned or not aligned). Next, for each record in the sample, the analysts categorized the content of the notes as one of the following: Useful: CSR notes provided a clear explanation of why the taxpayer failed authentication (e.g., question failed; taxpayer did not have proper identification; or taxpayer did not have copy of tax return during the call/visit). Somewhat Useful: CSR notes provided some information on where in the process or why a taxpayer failed, but no clear explanation of the specific reason (e.g., taxpayer passed disclosure, but could not answer high risk questions). Not Useful: CSR notes were blank, or provided no useful information on where in the process or why a taxpayer failed authentication. Cannot Determine: This was selected when the content of the CSR notes was unclear and the analyst could not determine if information was useful. After the independent review, the analysts discussed their results and resolved any disagreements. Based on these results, we determined how many records in the sample were “aligned,” “not aligned,” or “unable to determine.” Further, we analyzed records categorized as “aligned” to determine how many included CSR notes that were useful, somewhat useful, or not useful. To evaluate what else, if anything, IRS can do to strengthen its authentication methods while improving services to taxpayers, we interviewed knowledgeable officials from IRS and reviewed documentation to understand IRS’s current authentication methods, future plans for authentication, and challenges IRS faces in taxpayer authentication. We also interviewed knowledgeable officials at the General Services Administration/18F to understand their work on a government-wide authentication platform, Login.gov, and how IRS may be able to use this technology in the future. We also interviewed Department of Veterans Affairs officials to understand how they authenticate veterans applying for benefits at www.vets.gov. Further, we met with knowledgeable officials from NIST on their guidelines for online identity-proofing and authentication, which were released in June 2017. To understand current and emerging authentication strategies and technologies, we interviewed representatives from state departments of revenue and from industry. We also interviewed knowledgeable officials from the Office of Management and Budget’s (OMB) U.S. Digital Service to understand their work with IRS in 2016 in launching IRS’s Secure Access online authentication platform and to understand any emerging technologies and standards for authentication. We interviewed a nongeneralizable selection of knowledgeable state and industry representatives based on referrals from NIST officials, and other government and industry representatives knowledgeable on tax issues, including co-chairs from the Security Summit’s Authentication workgroup. In total we met with representatives from five state departments of revenue, one association representing state tax officials, three financial institution organizations, one financial service industry association, three identity-proofing/authentication organizations, and four tax industry organizations. Finally, we compared IRS’s authentication programs and plans for future improvements to its Roadmap, Standards for Internal Control, GAO’s Information Technology Investment Management framework, principles for project planning, GAO’s prior work on the Government Performance and Results Act, GAO’s Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs, and NIST and OMB guidance to determine ways IRS could strengthen its authentication methods, while improving taxpayer service. We conducted this performance audit from January 2017 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Prioritize technology and processes for e- Authentication to enhance identification, verification, and authorization capabilities as taxpayers continue to shift toward electronically filing. Establish a central authentication policy across the enterprise (i.e., channels and functions) In addition to the contact named above, Neil Pinney (Assistant Director), Dawn Bidne, Matthew Bond, Mark Canter, Jehan Chase, Heather A. Collins (Analyst-in-Charge), Michele Fejfar, Robert Gebhart, Steven Flint, Dae Park, and Robert Robinson made significant contributions to this report. Tax Fraud and Noncompliance: IRS Can Strengthen Pre-refund Verification and Explore More Uses. GAO-18-224. Washington, D.C.: January 30, 2018. Identity Theft: Improved Collaboration Could Increase Success of IRS Initiatives to Prevent Refund Fraud. GAO-18-20. Washington, D.C.: November 28, 2017. Financial Audit: IRS’s Fiscal Years 2017 and 2016 Financial Statements. GAO-18-165. Washington, D.C.: November 9, 2017. Information Technology: Management Attention Is Needed to Successfully Modernize Tax Processing Systems. GAO-18-153T. Washington, D.C., October 4, 2017. 2017 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-17-491SP. Washington, D.C.: April 26, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. 2016 Filing Season: IRS Improved Telephone Service but Needs to Better Assist Identity Theft Victims and Prevent Release of Fraudulent Refunds. GAO-17-186. Washington, D.C.: January 31, 2017. Information Technology: Federal Agencies Need to Address Aging Legacy Systems. GAO-16-468. Washington, D.C.: May 25, 2016. Identity Theft and Tax Fraud: IRS Needs to Update Its Risk Assessment for the Taxpayer Protection Program. GAO-16-508. Washington, D.C.: May 24, 2016. Information Security: IRS Needs to Further Improve Controls over Taxpayer Data and Continue to Combat Identity Theft Refund Fraud. GAO-16-589T. Washington, D.C.: April 12, 2016. Information Security: IRS Needs to Further Improve Controls over Financial and Taxpayer Data. GAO-16-398. Washington, D.C.: March 28, 2016. Information Security: IRS Needs to Continue Improving Controls over Financial and Taxpayer Data. GAO-15-337. Washington, D.C.: March 19, 2015. Identity Theft and Tax Fraud: Enhanced Authentication Could Combat Refund Fraud, but IRS Lacks an Estimate of Costs, Benefits and Risks. GAO-15-119. Washington, D.C.: January 20, 2015. Identity Theft: Additional Actions Could Help IRS Combat the Large, Evolving Threat of Refund Fraud. GAO-14-633. Washington, D.C.: August 20, 2014. Internal Revenue Service: 2013 Tax Filing Season Performance to Date and Budget Data. GAO-13-541R. Washington, D.C.: April 15, 2013.", "summary": "Strong preventive controls can help IRS defend itself against identity theft refund fraud. These controls include taxpayer authentication—the process by which IRS verifies identities before allowing people access to a resource; sensitive data; or, in some cases, a tax refund. The risk of fraud has increased as more personally identifiable information has become available as a result of, for example, large-scale cyberattacks on various entities. IRS's ability to continuously monitor and improve taxpayer authentication is a critical step in protecting billions of dollars from fraudsters. GAO was asked to examine IRS's efforts to authenticate taxpayers. This report (1) describes the taxpayer interactions that require authentication and IRS's methods; (2) assesses what IRS is doing to monitor and improve taxpayer authentication; and (3) determines what else, if anything, IRS can do to strengthen taxpayer authentication in the future. To meet these objectives, GAO reviewed IRS documents and data, evaluated IRS processes against relevant federal internal control standards and guidance, and interviewed IRS officials and state and industry representatives. The Internal Revenue Service (IRS) has identified over 100 interactions requiring taxpayer authentication based on potential risks to IRS and individuals. IRS authenticates millions of taxpayers each year via telephone, online, in person, and correspondence to ensure that it is interacting with legitimate taxpayers. IRS's estimated costs to authenticate taxpayers vary by channel. IRS has made progress on monitoring and improving authentication, including developing an authentication strategy with high-level strategic efforts. However, it has not prioritized the initiatives supporting its strategy nor identified the resources required to complete them, consistent with program management leading practices. Doing so would help IRS clarify relationships between its authentication efforts and articulate resource needs relative to expected benefits. Further, while IRS regularly assesses risks to and monitors its online authentication applications, it has not established equally rigorous internal controls for its telephone, in-person, and correspondence channels, including mechanisms to collect reliable, useful data to monitor authentication outcomes. As a result, IRS may not identify current or emerging threats to the tax system. IRS can further strengthen authentication to stay ahead of fraudsters. While IRS has taken preliminary steps to implement National Institute of Standards and Technology's (NIST) new guidance for secure digital authentication, it does not have clear plans and timelines to fully implement it by June 2018, as required by the Office of Management and Budget. As a result, IRS may not be positioned to address its most vulnerable authentication areas in a timely manner. Further, IRS lacks a comprehensive process to evaluate potential new authentication technologies. Industry representatives, financial institutions, and government officials told GAO that the best authentication approach relies on multiple strategies and sources of information, while giving taxpayers options for actively protecting their identity. Evaluating alternatives for taxpayer authentication will help IRS avoid missing opportunities for improving authentication. GAO is making 11 recommendations to IRS to estimate resources for and prioritize its authentication initiatives, address internal control issues to better monitor authentication, develop a plan to fully implement new NIST guidance, and develop a process to evaluate potential authentication technologies. IRS agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "The cost of the census has been escalating over the last several decennials. The 2010 decennial was the costliest U.S. Census in history at about $12.3 billion, and was about 31 percent more costly than the $9.4 billion 2000 Census (in 2020 dollars). The average cost for counting a housing unit increased from about $16 in 1970 to around $92 in 2010 (in 2020 dollars). According to the Bureau, the total cost of the 2020 Census is estimated to be approximately $12.5 billion dollars (in 2020 dollars). As discussed later in this statement, however, the cost of the 2020 Census will likely be higher than this current estimate. Meanwhile, the return of census questionnaires by mail (the primary mode of data collection) declined over this period from 78 percent in 1970 to 63 percent in 2010 (see figure 1). Declining mail response rates—a key indicator in determining the cost-effectiveness of the census—are significant and lead to higher costs. This is because the Bureau sends temporary workers to each non-responding household to obtain census data. As a result, non-response follow-up is the Bureau’s largest and most costly field operation. In many ways, the Bureau has had to invest substantially more resources each decade to match the results of prior enumerations. Further, achieving a complete and accurate census is becoming an increasingly daunting task, in part, because the nation’s population is growing larger, more diverse, and more reluctant to participate. When the census misses a person who should have been included, it results in an undercount; conversely, an overcount occurs when an individual is counted more than once. Such errors are particularly problematic because of their impact on various subgroups. Minorities, renters, and children, for example, are more likely to be undercounted by the census. The Bureau faces an additional challenge of locating unconventional and hidden housing units, such as converted basements and attics. For example, as shown in figure 2, what appears to be a small, single-family house could contain an apartment, as suggested by its two doorbells. If an address is not in the Bureau’s address file, its residents are less likely to be included in the census. The basic design of the enumeration—mail out and mail back of the census questionnaire with in-person follow-up for non-respondents—has been in use since 1970. However, a key lesson learned from the 2010 Census and earlier enumerations, is that this “traditional” design is no longer capable of cost-effectively counting the population. In response to its own assessments, our recommendations, and studies by other organizations, the Bureau has fundamentally re-examined its approach for conducting the 2020 Census. Specifically, its plan for 2020 includes four broad innovation areas (re-engineering field operations, using administrative records, verifying addresses in-office, and developing an Internet self-response option). The Bureau has estimated that these innovations could result in savings of over $5 billion (in 2020 dollars) when compared to its estimates of the cost for conducting the census with traditional methods. However, in June 2016, we reported that the Bureau’s life-cycle cost estimate of $12.5 billion, developed in October 2015, was not reliable and did not adequately account for risk, as discussed later in this statement. Bureau Plans to Use IT to Drive Innovation To help drive these innovations, the Bureau plans to rely on both new and legacy IT systems and infrastructure. For example, the Bureau is developing or modifying 11 IT systems as part of an enterprise-wide initiative called Census Enterprise Data Collection and Processing (CEDCaP), which is managed within the Bureau’s IT Directorate. This initiative is a large and complex modernization program intended to deliver a system-of-systems to support all of the Bureau’s survey data collection and processing functions, rather than continuing to rely on unique, survey-specific systems with redundant capabilities. In addition, according to Bureau officials, the 2020 Census Directorate or other Bureau divisions are developing or modifying 32 other IT systems. To help inform, validate, and refine the operational design of the 2020 Census, and to test several of the IT systems, the Bureau has held a series of operational tests since 2012. Among these, in March 2017, the Bureau conducted a nationwide test (referred to as the 2017 Census Test) of households responding to census questions using paper, the Internet, or the phone. This test evaluated key new IT components, such as the Internet self-response system and the use of a cloud-based infrastructure. The Bureau is currently conducting the 2018 End-to-End Test, which began in August 2017 and runs through April 2019. It is the Bureau’s final opportunity to test all key systems and operations to ensure readiness for the 2020 Census. The Bureau’s plans for this test include, among other things, address canvassing, self-response (via paper, Internet, and phone), and nonresponse follow-up. To support its 2018 End-to-End Test, the Bureau plans to deploy and use 43 systems incrementally to support nine operations from December 2016 through the end of the test in April 2019. These nine operations are: (1) in-office address canvassing, (2) recruiting staff for address canvassing, (3) training for address canvassing, (4) in-field address canvassing, (5) recruiting staff for field enumeration, (6) training for field enumeration, (7) self-response (i.e., Internet, phone, or paper), (8) field enumeration, and (9) tabulation and dissemination. Appendix I includes additional details about the 43 systems, the operation or operations they support, and key deployment dates. The four innovation areas the Bureau plans for 2020 show promise for a more cost-effective head count (see table 1). However, the innovations also introduce new risks, in part, because they include new procedures and technology that have not been used extensively in earlier decennials, if at all. Our prior work has shown the importance of the Bureau conducting a robust testing program, including the 2018 End-to-End Test. However, because of funding uncertainty the Bureau canceled the field components of the 2017 Census Test including non-response follow- up, a key census operation. In November 2016, we reported that the cancelation of the 2017 field tests was a lost opportunity to test, refine, and integrate operations and systems, and that it put more pressure on the 2018 End-to-End Test to demonstrate that enumeration activities will function under census-like conditions as needed for 2020. In May 2017, the Bureau scaled back the operational scope of the 2018 End-to-End and, of the three planned test sites, only the Rhode Island site would fully implement the 2018 End- to-End Test. The Washington and West Virginia state test sites would test address canvassing. In addition, due to budgetary concerns, the Bureau decided to remove three coverage measurement operations (and the technology that supports them) from the scope of the test. Without sufficient testing, operational problems can go undiscovered and the opportunity to improve operations will be lost, in part because the 2018 End-to-End Test is the last opportunity to demonstrate census technology and procedures across a range of geographic locations, housing types, and demographic groups. Administrative records—information already provided to the government as it administers other programs, such as mail collection by the U.S. Postal Service—have been discussed and used for the decennial census since the 1970s, and for 2020 the Bureau plans a more significant role for them. In July 2017, we reported that the Bureau had taken steps to ensure that its use of administrative records would lower the cost and improve the accuracy of the 2020 Census. For example, the Bureau set a rule that it would only use administrative records to count a household when a minimum amount of information was present within data sources. According to the Bureau, this would help ensure that administrative records are used only in circumstances where research has shown them to be most accurate. Additionally, before using any administrative records to support census operations, the Bureau determined it will subject each source to a quality assurance process that includes, among other things, basic checks for data integrity as well as assessments by subject matter experts of the information’s fitness for various uses by the Bureau. (See figure 3.) According to the Bureau, it links administrative records data sources to complement each other, improving their reliability and completeness. The Bureau also creates an anonymous personal identifier for each individual in the data to reduce the risk of disclosure once the data are linked across sources. In July 2017, we reported that the Bureau had already tested the uses of administrative records that hold the most potential for reducing census costs, such as counting people who did not respond to census mailings. The Bureau planned to test additional applications of administrative records for the first time during the 2018 End-to-End Test. For example, the Bureau planned to use administrative records to support quality control during its non-response field enumeration. The Bureau planned to compare response data collected by enumerators to administrative records and flag significant differences based on predefined rules. The differences might be in the total count of persons in a household or in specific combinations of personal characteristics, such as age or race. According to the Bureau, flagging such differences could be used to help identify which enumeration cases to reinterview as part of the quality control operation. However, we reported in October 2015 that the Bureau faced other challenges with using administrative records for the 2020 Census. For example, although the Bureau has no control over the accuracy of data provided to it by other agencies, it is responsible for ensuring that data it uses for the 2020 Census are of sufficient quality for their planned uses. Another challenge we identified in 2015 is the extent to which the public will accept government agencies sharing personal data for the purposes of the census. The Bureau has recognized these challenges within its risk registers. In-Office Address Canvassing. The Bureau has re-engineered its approach to building its master address list for 2020. Specifically, by relying on multiple sources of imagery and administrative data, the Bureau anticipates constructing its address list with far less door-to-door field canvassing compared to previous censuses. One major change the Bureau has made consists of using in-office address canvassing—a two-phase process that was to systematically review small geographic areas nationwide, known as census blocks, to identify those that will not need to be canvassed in the field, as shown in figure 4. The Bureau estimated that the two phases of in-office canvassing would have resulted in roughly 25 percent of housing units requiring in-field canvassing, instead of canvassing nearly all housing units in the field as done in prior decennials. With in-office address canvassing census workers compare current aerial imagery for a given block with imagery for that block dating to the time of the last decennial census in 2010. During this first phase, called Interactive Review, specially trained census workers identify whether a block appears to have experienced change in the number of housing units, flagging each block either as stable—free of population growth, decline, or uncertainty in what is happening in the imagery over time—or “active,” in which case it moves to the next phase. Addresses in stable blocks are not marked for in-field canvassing. For blocks where change is detected or suspected, the Bureau was to use a second phase of in-office canvassing, known as Active Block Resolution, to attempt to resolve the status of each address and housing unit in question within that block. During this phase, census workers use aerial imagery, street imagery, and data from the U.S. Postal Service, as well as from state, local, and tribal partners when reviewing blocks. If a block can be fully resolved during this phase of in-office canvassing, the changes are recorded in the Bureau’s master address file. If a block cannot be fully resolved during the second phase of in-office canvassing, then the entire block, or some portion of the block, is flagged for inclusion in the in-field canvassing operation. A first pass of the entire country for in-office address canvassing began in September 2015 and was completed in June 2017. In-field canvassing for the 2020 Census is scheduled to begin in August 2019. However, in July 2017 we reported that the Bureau altered its design for re-engineered address canvassing because of budget uncertainty by suspending the second phase of in-office address canvassing. Without the second phase of in-office address canvassing, blocks that are not resolved by phase one will have a greater chance of requiring in-field canvassing. Bureau officials told us at that time that they anticipated that canceling the second phase of in-office address canvassing altogether would increase their estimated in-field canvassing workload by 5 percentage points, from 25 percent to 30 percent of housing units— increasing costs. The Bureau did not develop cost and quality information on address canvassing projects, and detailed information on cost tradeoffs was not available when we requested it. The information the Bureau had did not break out the estimated cost of the different phases of in-office address canvassing through 2020. However, the total estimated cost for both phases one and two was approximately $22 million. Thus, this suspension might save a portion of the $22 million, but it will potentially increase the cost of the address canvassing operation downstream. Our July 2017 report recommended, and the Bureau agreed, that the Bureau should use its evaluations before 2020 to determine the implications of in- office address canvassing on the cost and quality of address canvassing, and use this information to justify decisions related to its re-engineered address canvassing approach. In-Field Address Canvassing for the 2018 End-to-End Test. On August 28, 2017, temporary census employees known as address listers began implementing the in-field component of address canvassing for the 2018 End-to-End Test. Listers walked the streets of designated census blocks at all three test sites to verify addresses and geographic locations. The operation ended on September 27, 2017. As part of our ongoing work, we visited all three test sites and observed 18 listers conduct address canvassing. Generally, we found that listers were able to conduct address canvassing as planned. However, we also noted several challenges. We shared the following preliminary observations from our site visits with the Bureau: Internet connectivity was problematic at the West Virginia test site. We spoke to four census field supervisors that described certain areas as dead spots where Internet and cell phone service were not available. We also were told by those same supervisors that only certain cell service providers worked in certain areas. In order to access the Internet or cell service in those areas, census workers sometimes needed to drive several miles. The allocation of lister assignments was not always optimal. Listers were supposed to be provided assignments close to where they live in order to optimize their local knowledge and to limit the numbers of miles being driven by listers to and from their assignment area. Bureau officials told us this was a challenge at all three test sites. Moreover, at one site the area census manager told us that some listers were being assigned work in another county even though blocks were still unassigned closer to where they resided. Relying on local knowledge and limiting the number of miles can increase both the efficiency and effectiveness of address canvassing. The assignment of some of the large blocks early in the operations was not occurring as planned. At all three 2018 End-to-End Test sites Bureau managers had to manually assign some large blocks (some blocks had hundreds of housing units). It is important to assign large blocks early on because leaving the large blocks to be canvassed until the end of the operation could jeopardize the timely completion of address canvassing. The global positioning system-derived location for the lister was not always corresponding to the location on the map. A Bureau official confirmed that at all three test sites, the location icon jumped around or was on the wrong street. According to a Bureau official, listers were told to override the global positioning system-derived location when confirming the geographic location of the residence. We have discussed these challenges with Bureau officials who stated that overall they are satisfied with the implementation of address canvassing but also agreed that resolving challenges discovered during address canvassing, some of which can affect the operation’s efficiency and effectiveness, will be important before the 2020 Census. We will continue to monitor address canvassing operation and plan to issue a report in the winter of 2018. We have previously reported that the Bureau faced challenges in managing and overseeing IT programs, systems, and contractors supporting the 2020 Census. Specifically, it has been challenged in managing schedules, costs, contracts, and governance and internal coordination for its IT systems. As a result of these challenges, the Bureau is at risk of being unable to fully implement key IT systems necessary to support the 2020 Census. We have previously recommended that the Bureau take action to improve its implementation and management of IT in areas such as governance and internal coordination. We also have ongoing work reviewing each of these areas. Our ongoing work has indicated that the Bureau faces significant challenges in managing the schedule for developing and testing systems for the 2018 End-to-End Test that began in August 2017. In this regard, the Bureau still has significant development and testing work that remains to be completed. As of August 2017, of the 43 systems in the test, the Bureau reported that 4 systems had completed development and integration testing, while the remaining 39 systems had not completed these activities. Of these 39 systems, the Bureau reported that it had deployed a portion of the functionality for 21 systems to support address canvassing for the 2018 End-to-End Test; however, it had not yet deployed any functionality for the remaining 18 systems for the test. Figure 5 summarizes the development and testing status for the 43 systems planned for the 2018 End-to-End Test, and appendix I includes additional information on the status of development and testing for these systems. Moreover, due to challenges experienced during systems development, the Bureau has delayed key IT milestone dates (e.g., dates to begin integration testing) by several months for the systems supporting six of the nine operations in the 2018 End-to-End Test. Figure 6 depicts the delays to the deployment dates for the operations in the 2018 End-to-End Test, as of August 2017. However, our ongoing work also indicates that the Bureau is at risk of not meeting the updated milestone dates. For example, in June 2017 the Bureau reported that at least two of the systems expected to be used in the self-response operation (the Internet self-response system and the call center system) are at risk of not meeting the delayed milestone dates. In addition, in September 2017 the Bureau reported that at least two of the systems expected to be used in the field enumeration operation (the enumeration system and the operational control system) are at risk of not meeting their delayed dates. Combined, these delays reduce the time available to conduct the security reviews and approvals for the systems being used in the 2018 End-to- End Test. We previously testified in May 2017 that the Bureau faced similar challenges leading up to the 2017 Census Test, including experiencing delays in system development that led to compressed time frames for security reviews and approvals. Specifically, we noted that the Bureau did not have time to thoroughly assess the low-impact components of one system and complete penetration testing for another system prior to the test, but accepted the security risks and uncertainty due to compressed time frames. We concluded that, for the 2018 End-to- End Test, it will be important that these security assessments are completed in a timely manner and that risks are at an acceptable level before the systems are deployed. The Bureau noted that, if it continues to be behind schedule, field operations for the 2018 End-to-End Test will not be performed as planned. Bureau officials are evaluating options to decrease the impact of these delays on integration testing and security review activities by, for example, utilizing additional staff. We have ongoing work reviewing the Bureau’s development and testing delays and the impacts of these delays on systems readiness for the 2018 End-to-End Test. The Bureau faces challenges in reporting and controlling IT cost growth. In April 2017, the Bureau briefed us on its efforts to estimate the costs for the 2020 Census, during which it presented IT costs of about $2.4 billion from fiscal years 2018 through 2021. Based on this information and other corroborating IT contract information provided by the Bureau, we testified in May 2017 that the Bureau had identified at least $2 billion in IT costs. However, in June 2017, Bureau officials in the 2020 Census Directorate told us that the data they provided in April 2017 did not reflect all IT costs for the 2020 program. The officials provided us with an analysis of the Bureau’s October 2015 cost estimate that identified $3.4 billion in total IT costs from fiscal years 2012 through 2023. These costs included, among other things, those associated with system engineering, test and evaluation, and infrastructure, as well as a portion of the costs for the CEDCaP program. Yet, our ongoing work determined that the Bureau’s $3.4 billion cost estimate does not reflect its current plans for acquiring IT to be used during the 2020 Census and that the related costs are likely to increase: In August 2016, the Bureau awarded a technical integration contract for about $886 million, a cost that was not reflected in the $3.4 billion expected IT costs. More recently, in May 2017, we testified that the scope of work for this contract had increased since the contract was awarded; thus, the corresponding contract costs were likely to rise above $886 million, as well. In March 2017, the Bureau reported that the contract associated with the call center and IT system to support the collection of census data over the phone was projected to overrun its initial estimated cost by at least $40 million. In May 2017, the Bureau reported that the CEDCaP program’s cost estimate was increasing by about $400 million—from its original estimate of $548 million in 2013 to a revised estimate of $965 million in May 2017. In June 2017, the Bureau awarded a contract for mobile devices and associated services for about $283 million, an amount that is about $137 million higher than the cost for these devices and services identified in its October 2015 estimate. As a result of these factors, the Bureau’s $3.4 billion estimate of IT costs is likely to be at least $1.4 billion higher, thus increasing the total costs to at least $4.8 billion. Figure 7 identifies the Bureau estimate of total IT costs associated with the 2020 program as of October 2015, as well as anticipated cost increases as of August 2017. IT cost information that is accurately reported and clearly communicated is necessary so that Congress and the public have confidence that taxpayer funds are being spent in an appropriate manner. However, changes in the Bureau’s reporting of these total costs, combined with cost growth since the October 2015 estimate, raise questions as to whether the Bureau has a complete understanding of the IT costs associated with the 2020 program. In this regard, we have previously reported on issues with the Bureau’s cost estimating practices (which are discussed in more detail later in this statement). To address these issues, in October 2017, officials stated that the Bureau is developing a new cost estimate for the entire 2020 Census program, which they expect to release by the end of this fall. Our ongoing work also determined that the Bureau faces challenges in managing its significant contractor support. The Bureau is relying on contractor support in many key areas of the 2020 Census. For example, it is relying on contractors to develop a number of key systems and components of the IT infrastructure. These activities include (1) developing the IT platform that is to be used to collect data from a majority of respondents—those using the Internet, telephone, and non- response follow-up activities; (2) procuring the mobile devices and cellular service to be used for non-response follow-up; and (3) developing the infrastructure in the field offices. According to Bureau officials, contractors are also providing support in areas such as fraud detection, cloud computing services, and disaster recovery. In addition to the development of key technology, the Bureau is relying on contractor support for integrating all of the key systems and infrastructure. The Bureau awarded a contract to integrate the 2020 Census systems and infrastructure in August 2016. The contractor’s work was to include evaluating the systems and infrastructure and acquiring the infrastructure (e.g., cloud or data center) to meet the Bureau’s scalability and performance needs. It was also to include integrating all of the systems, supporting technical testing activities, and developing plans for ensuring the continuity of operations. Since the contract was awarded, the Bureau has modified the scope to also include assisting with operational testing activities, conducting performance testing for two Internet self-response systems, and technical support for the implementation of the paper data capture system. However, our ongoing work has indicated that the Bureau is facing staffing challenges that could impact its ability to manage and oversee the technical integration contractor. Specifically, the Bureau is managing the integration contractor through a government program management office, but this office is still filling vacancies. As of October 2017, the Bureau reported that 35 of the office’s 58 federal employee positions were vacant. As a result, this program management office may not be able to provide adequate oversight of contractor cost, schedule, and performance. The delays during the 2017 Test and preparations for the 2018 End-to- End Test raises concerns regarding the Bureau’s ability to effectively perform contractor management. As we reported in November 2016, a greater reliance on contractors for these key components of the 2020 Census requires the Bureau to focus on sound management and oversight of the key contracts, projects, and systems. As part of our ongoing work, we plan to monitor the Bureau’s progress in managing its contractor support. Effective IT governance can drive change, provide oversight, and ensure accountability for results. Further, effective IT governance was envisioned in the provisions referred to as the Federal Information Technology Acquisition Reform Act (FITARA), which strengthened and reinforced the role of the departmental CIO. To ensure executive-level oversight of the key systems and technology, the Bureau’s CIO (or a representative) is a member of the governance boards that oversee all of the operations and technology for the 2020 Census. However, in August 2016 we reported on challenges the Bureau has had with IT governance and internal coordination, including weaknesses in its ability to monitor and control IT project costs, schedules, and performance. We made eight recommendations to the Department of Commerce to direct the Bureau to, among other things, better ensure that risks are adequately identified and schedules are aligned. The department agreed with our recommendations. However, as of October 2017, the Bureau had only fully implemented one recommendation and had taken initial steps toward implementing others. Further, given the schedule delays and cost increases previously mentioned, and the vast amount of development, testing, and security assessments left to be completed, we remain concerned about executive- level oversight of systems and security. Moving forward, it will be important that the CIO and other agency executives continue to use a collaborative governance approach to effectively manage risks and ensure that the IT solutions meet the needs of the agency within cost and schedule. As part of our ongoing work, we plan to monitor the steps the Bureau is taking to effectively oversee and manage the development and acquisition of its IT systems. In November 2016, we described the significant challenges that the Bureau faced in securing systems and data for the 2020 Census, and we noted that tight time frames could exacerbate these challenges. Two such challenges were (1) ensuring that individuals gain only limited and appropriate access to the 2020 Census data, including personally identifiable information (PII) (e.g., name, address, and date of birth), and (2) making certain that security assessments were completed in a timely manner and that risks were at an acceptable level. Protecting PII, for example, is especially important because a majority of the 43 systems to be used in the 2018 End-to-End Test contain PII, as reflected in figure 8. To address these and other challenges, federal law and guidance specify requirements for protecting federal information and information systems, such as those to be used in the 2020 Census. Specifically, the Federal Information Security Management Act of 2002 and the Federal Information Security Modernization Act of 2014 (FISMA) require executive branch agencies to develop, document, and implement an agency-wide program to provide security for the information and information systems that support operations and assets of the agency. Accordingly, the National Institute of Standards and Technology (NIST) developed risk management framework guidance for agencies to follow in developing information security programs. Additionally, the Office of Management and Budget’s (OMB) revised Circular A-130 on managing federal information resources required agencies to implement the NIST risk management framework to integrate information security and risk management activities into the system development life cycle. In accordance with FISMA, NIST guidance, and OMB guidance, the Office of the CIO established a risk management framework. This framework requires that system developers ensure that each of the systems undergoes a full security assessment, and that system developers remediate critical deficiencies. In addition, according to the Bureau’s framework, system developers must ensure that each component of a system has its own system security plan, which documents how the Bureau plans to implement security controls. As a result, system developers for a single system might develop multiple system security plans (in some cases as many as 34 plans), which all have to be approved as part of the system’s complete security documentation. We have ongoing work that is reviewing the extent to which the Bureau’s framework meets the specific requirements of the NIST guidance. According to the Bureau’s framework, each of the 43 systems in the 2018 End-to-End Test will need to have complete security documentation (such as system security plans) and an approved authorization to operate prior to their use in the 2018 End-to-End Test. However, our ongoing work indicates that, while the Bureau is completing these steps for the 43 systems to be used in the 2018 End-to-End Test, significant work remains. Specifically: None of the 43 systems are fully authorized to operate through the completion of the 2018 End-to-End Test. Bureau officials from the CIO’s Office of Information Security stated that these systems will need to be reauthorized because, among other things, they have additional development work planned that may require the systems to be reauthorized; are being moved to a different infrastructure environment (e.g., from a data center to a cloud-based environment); or have a current authorization that expires before the completion of the 2018 End-to-End Test. The amount of work remaining is concerning because the test has already begun and the delays experienced in system development and testing mentioned earlier reduce the time available for performing the security assessments needed to fully authorize these systems before the completion of the 2018 End-to-End test. Thirty-seven systems have a current authorization to operate, but the Bureau will need to reauthorize these systems before the completion of the 2018 End-to-End Test. This is due to the reasons mentioned previously, such as additional development work planned and changes to the infrastructure environments. Two systems have not yet obtained an authorization to operate. For the remaining four systems, the Bureau has not yet provided us with documentation about the current authorization status. Figure 9 depicts the authorization to operate status for the systems being used in the 2018 End-to-End Test, as reported by the Bureau. Because many of the systems that will be a part of the 2018 End-to-End Test are not yet fully developed, the Bureau has not finalized all of the security controls to be implemented; assessed those controls; developed plans to remediate control weaknesses; and determined whether there is time to fully remediate any deficiencies before the systems are needed for the test. In addition, as discussed earlier, the Bureau is facing system development challenges that are delaying the completion of milestones and compressing the time available for security testing activities. As we previously reported, while the large-scale technological changes (such as Internet self-response) increase the likelihood of efficiency and effectiveness gains, they also introduce many information security challenges. The 2018 End-to-End Test also involves collecting PII on hundreds of thousands of households across the country, which further increases the need to properly secure these systems. Thus, it will be important that the Bureau provides adequate time to perform these security assessments, completes them in a timely manner, and ensures that risks are at an acceptable level before the systems are deployed. We plan to continue monitoring the Bureau’s progress in securing its IT systems and data as part of our ongoing work. In June 2016, we reported that the Bureau’s October 2015 update of its life-cycle cost estimate for the 2020 Census did not conform to the four characteristics that constitute best practices, and, as a result, the estimate was unreliable. Cost estimates that appropriately account for risks facing an agency can help an agency manage large, complex activities like the 2020 Census, as well as help Congress make funding decisions and provide oversight. Cost estimates are also necessary to inform decisions to fund one program over another, to develop annual budget requests, to determine what resources are needed, and to develop baselines for measuring performance. In June 2016, we reported that, although the Bureau had taken steps to improve its capacity to carry out an effective cost estimate, such as establishing an independent cost estimation office, its October 2015 version of the estimate for the 2020 Census only partially met the characteristics of two best practices (comprehensive and accurate) and minimally met the other two (well-documented and credible). All four characteristics need to be substantially met in order for an estimate to be deemed high-quality: Comprehensive. To be comprehensive an estimate should have enough detail to ensure that cost elements are neither omitted nor double-counted, and all cost-influencing assumptions are detailed in the estimate’s documentation, among other things, according to best practices. In June 2016, we reported that, while Bureau officials were able to provide us with several documents that included projections and assumptions that were used in the cost estimate, we found the estimate to be partially comprehensive because it was unclear if all life-cycle costs were included in the estimate or if the cost estimate completely defined the program. Accurate. Accurate estimates are unbiased and contain few mathematical mistakes. We reported in June 2016 that the estimate partially met best practices for this characteristic, in part because we could not independently verify the calculations the Bureau used within its cost model, which the Bureau did not have documented or explained outside its cost model. Well-documented. Cost estimates are considered valid if they are well-documented to the point they can be easily repeated or updated and can be traced to original sources through auditing, according to best practices. In June 2016, we reported that, while the Bureau provided some documentation of supporting data, it did not describe how the source data were incorporated. Credible. Credible cost estimates must clearly identify limitations due to uncertainty or bias surrounding the data or assumptions, according to best practices. In June 2016, we reported that the estimate minimally met best practices for this characteristic in part because the Bureau carried out its risk and uncertainty analysis only for about $4.6 billion (37 percent) of the $12.5 billion total estimated life-cycle cost, excluding, for example, consideration of uncertainty over what the decennial census’s estimated part will be of the total cost of CEDCaP. In June 2016, we recommended that the Bureau take action to ensure its 2020 Census cost estimate meets all four characteristic of a reliable cost estimate. The Bureau agreed with our recommendation. We also reported in June 2016 that risks were not properly accounted for in the cost estimate and recommended that the Bureau properly account for risk to ensure there are appropriate levels for budgeted contingencies, and those recommendations have not yet been implemented. In October 2017, Bureau officials told us they were making progress towards implementing our recommendations and would provide us with that documentation when the cost estimate and supporting documentation are finalized. Moreover, Bureau officials also told us that an updated cost estimate would be available by the end of this fall. However, until the Bureau updates its estimate and we have the opportunity to review its reliability, questions will surround the quality of the 2020 Census cost estimate and the basis for any 2020 Census annual budgetary figures. While the Bureau has not updated its October 2015 cost estimate, several events since then indicate that the cost of the current design will be higher. For example: As previously mentioned, in August 2016 an $886 million IT integration contract was awarded. According to Bureau officials, there was no reference to this contract in the documentation for the planned contract costs supporting the October 2015 life-cycle cost estimate. In March 2017, the Bureau suspended part of how it is verifying address in-office procedures using on-screen imagery—one of its four key design innovations intended to control the cost of the 2020 Census. According to Bureau officials, the suspension of the one part of in-office canvassing will increase the workload of the more expensive in-field (door-to-door address identification) by at least five percentage points, from 25 percent to 30 percent of housing units— increasing the cost over what had been assumed as part of the earlier cost estimate. Based on cost assumptions underlying its October 2015 life-cycle cost estimate, we found, as part of our prior work, that the potential addition of five percentage points to the field workload alone could reduce the Bureau’s cost savings by $26.6 million. As earlier discussed, in May 2017, Bureau officials reported that the cost of the CEDCaP program has now increased by over $400 million, from about $548 million to $965 million. Cost estimates are also used by the Bureau as a tool to inform the annual budget process. However, since the Bureau did not fully follow best practices for developing and maintaining the life-cycle cost estimate, as previously described, annual budget requests based on that cost estimate may not be fully informed. A high-quality cost estimate is the foundation of a good budget. A major purpose of a cost estimate is to support the budget process by providing an estimate of the funding required to efficiently execute a program. Because most programs do not remain static but evolve over time, developing a cost estimate should not be a onetime event but rather a recurrent process. Effective program and cost control requires ongoing revisions to the cost estimate and budget. Using a reliable life-cycle cost estimate to formulate the budget could help the Bureau ensure that all costs are fully accounted for so that resources are adequate to support the program. Credible cost estimates could also help the Bureau effectively defend budgets to the Department of Commerce, OMB, and Congress. Concerns about the soundness of the life cycle cost estimate and the quality of annual budgets related to the 2020 Census are particularly important because the bulk of funds will be obligated in fiscal years 2019 through 2020. In our June 2016 report on the Bureau’s life-cycle cost estimate we made several recommendations with which the Bureau agreed. We will continue to monitor the Bureau’s efforts to address these recommendations. In conclusion, the Bureau has made progress in revamping its approach to the census and testing the new design. However, it faces considerable challenges and uncertainties in (1) implementing the cost-saving innovations; (2) managing the development and security of key IT systems; and (3) developing a quality cost estimate for the 2020 Census. For these reasons, the 2020 Census is a GAO high risk area. Continued management attention is vital for ensuring risks are managed, the Bureau’s preparations stay on-track, and the Bureau is held accountable for implementing the enumeration as planned. We will continue to assess the Bureau’s efforts to conduct a cost-effective enumeration and look forward to keeping Congress informed of the Bureau’s progress. Chairman Gowdy, Ranking Member Cummings, and Members of the Committee, this completes our prepared statement. We would be pleased to respond to any questions that you may have. If you have any questions about this statement, please contact David A. Powner at (202) 512-9286 or by e-mail at pownerd@gao.gov or Robert Goldenkoff at (202) 512-2757 or by e-mail at goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other key contributors to this testimony include Lisa Pearson (Assistant Director); Jon Ticehurst (Assistant Director); Kate Sharkey (Analyst in Charge); Mark Abraham, Dewi Djunaidy; Hoyt Lacy; Andrea Starosciak; Umesh Thakkar; Timothy Wexler; and Katherine Wulff. Staff who made key contributions to the reports cited in this statement are identified in the source products. As part of its 2018 End-to-End Test, the Census Bureau (Bureau) plans to deploy 43 systems incrementally to support nine operations from December 2016 through the end of the test in April 2019. The nine operations are: (1) in-office address canvassing, (2) recruiting for address canvassing, (3) training for address canvassing, (4) in-field address canvassing operation, (5) recruiting for field enumeration, (6) training for field enumeration, (7) self-response (i.e., Internet, phone, or paper) operation, (8) field enumeration operation, and (9) tabulation and dissemination. According to the Bureau, a single system may be deployed multiple times throughout the test (with additional or new functionality) if that system is needed for more than one of these operations. Table 1 describes the status as of August 2017 of development and integration testing for each system in the 2018 End-to-End Test. Specifically, as of August 2017, the Bureau had completed both development work and integration testing for 4 systems, and was in the process of completing development and testing for 39 systems.", "summary": "One of the Bureau's most important functions is to conduct a complete and accurate decennial census of the U.S. population, which is mandated by the Constitution and provides vital data for the nation. A complete count of the nation's population is an enormous undertaking as the Bureau seeks to control the cost of the census, implement operational innovations, and use new and modified IT systems. In recent years, GAO has identified challenges that raise serious concerns about the Bureau's ability to conduct a cost-effective count. For these reasons, GAO added the 2020 Census to its high-risk list in February 2017. In light of these challenges, GAO was asked to testify about the Bureau's progress in preparing for the 2020 Census. To do so, GAO summarized its prior work regarding the Bureau's planning efforts for the 2020 Census. GAO also included observations from its ongoing work on the 2018 End-to-End Test. This information is related to, among other things, recent decisions on preparations for the 2020 Census; progress on key systems to be used for the 2018 End-to-End Test, including the status of IT security assessments; execution of the test at three test sites; and efforts to update the life-cycle cost estimate. The Census Bureau (Bureau) is planning several innovations for the 2020 Decennial Census, including re-engineering field operations, using administrative records to supplement census data, verifying addresses in-office using on-screen imagery, and allowing the public to respond using the Internet. These innovations show promise for controlling costs, but they also introduce new risks, in part because they include new procedures and technologies that have not been used extensively in earlier decennial censuses, if at all. GAO's prior work has emphasized the importance of the Bureau conducting a robust testing program to demonstrate that the systems and operations perform as intended under census-like conditions prior to the 2020 Census. However, because of budget uncertainties the Bureau canceled its 2017 field test and then scaled back its 2018 End-to End Test, placing these innovation areas more at risk. The Bureau continues to face challenges in managing and overseeing the information technology (IT) programs, systems, and contracts supporting the 2020 Census. For example, GAO's ongoing work indicates that the system development schedule leading up to the 2018 End-to-End test has experienced several delays. Further, the Bureau has not yet addressed several security risks and challenges to secure its systems and data, including making certain that security assessments are completed in a timely manner and that risks are at an acceptable level. Given that certain operations for the 2018 End-to-End Test began in August 2017, it is important that the Bureau quickly address these challenges. GAO plans to monitor the Bureau's progress as part of its ongoing work. In addition, the Bureau's cost estimate is not reliable and is out-of-date. Specifically, in June 2016, GAO reported that the cost estimate for the 2020 Census did not fully reflect characteristics of a high-quality estimate and could not be considered reliable. Moreover, since the Bureau did not follow cost estimation best practices, its annual budget requests based on the cost estimate may not be fully informed. Additionally, the Bureau has not yet updated its October 2015 cost estimate, but GAO expects that the cost of the current census design (around $12.5 billion in 2020 constant dollars) will increase due to, for example, expected increases in 2020 program IT costs (see figure). GAO made several recommendations to address these concerns, and the Bureau plans to address these recommendations in an updated cost estimate to be released later this fall. Over the past 4 years, we have made 33 recommendations specific to the 2020 Census to address the issues raised in this testimony and others. As of October 2017, the Bureau had fully implemented 10 of the recommendations, and was at varying stages of implementing the remaining recommendations. or Robert Goldenkoff at (202) 512-2757 or goldenkoffr@gao.gov .", "document_type": "gao"}
{"report": "Section 1115A establishes certain requirements for the Innovation Center that relate to the selection of models, use of resources, and evaluation of models. These requirements include: consulting with representatives of relevant federal agencies, as well as clinical and analytical experts in medicine or health care management, when carrying out its duties as described in the law; ensuring models address deficits in care that have led to poor clinical outcomes or potentially avoidable spending; making no less than $25 million of the Innovation Center’s dedicated funding available for model design, implementation, and evaluation each fiscal year starting in 2011; evaluating each model to analyze its effects on spending and quality of care, and making these evaluations public; and modifying or terminating a model any time after testing and evaluation has begun unless it determines that the model either improves quality of care without increasing spending levels, reduces spending without reducing quality, or both. Under section 1115A, certain requirements applicable to previous CMS demonstrations are inapplicable to models tested under the Innovation Center. For example, while prior demonstrations generally required congressional approval in order to be expanded, section 1115A allows CMS to expand Innovation Center models—including on a nationwide basis—through the rulemaking process if the following conditions are met: (1) the agency determines that the expansion is expected to reduce spending without reducing the quality of care, or improve quality without increasing spending; (2) CMS’s Office of the Actuary certifies that the expansion will reduce or not increase net program spending; and (3) the agency determines that the expansion would not deny or limit coverage or benefits for beneficiaries. In addition, certain requirements previously cited by the Medicare Payment Advisory Commission as administrative barriers to the timely completion of demonstrations are inapplicable. Specifically, section 1115A provides the following: HHS cannot require that an Innovation Center model initially be budget neutral—that is, designed so that estimated federal expenditures under the model are expected to be no more than they would have been without the model—prior to approving a model for testing. Certain CMS actions in testing and expanding Innovation Center models cannot be subject to administrative or judicial review. The Paperwork Reduction Act—which generally requires agencies to submit all proposed information collection efforts to the Office of Management and Budget (OMB) for approval and provide a 60-day period for public comment when they want to collect data on 10 or more individuals—does not apply to Innovation Center models. The Innovation Center uses a combination of staff and contractors to test models. Since the center became operational in November 2010, the number of staff increased steadily through the end of fiscal year 2016. (See fig. 1.) As of September 30, 2017, there were 617 staff—a slight decrease in the number of staff from the end of the prior fiscal year. Officials indicated that, in the future, changes in the model portfolio may require additional staff to manage and support model development and implementation. However, officials do not anticipate needing to increase staffing levels at the same pace as they did between fiscal years 2011 and 2016. Additionally, the Innovation Center uses third-party contactors to perform functions related to the implementation of models and to perform evaluations of the changes in the quality of care furnished and program spending under a model. The Innovation Center has organized its 617 staff members primarily into eight groups and the Office of the Director. Four of the eight groups are responsible for coordinating the development and implementation of models. Staff in these four groups primarily lead efforts in developing model designs and obtaining approval for their models from CMS and HHS. Once a model is approved, staff coordinate the remaining implementation steps, including soliciting and selecting participants and overseeing the model during the testing and evaluation period. The other four groups perform key functions that support model development and implementation, such as reviewing ideas submitted for consideration as possible models, overseeing the evaluations of models, providing feedback to model participants about their performance, disseminating lessons learned across models, and monitoring budget resources. The Office of the Director, in general, has oversight responsibilities for the models led by these groups. Table 1 provides information on the staffing groups within the Innovation Center. The Innovation Center has developed internal agency guidance that outlines a general process used by the four model groups for developing and implementing models. (See fig. 2.) Appendix I provides additional information about the general process for implementing models. The Innovation Center has organized its models into seven categories based on delivery and payment approaches tested and program beneficiaries covered. The seven categories are as follows: Accountable Care. This category includes models built around accountable care organizations (ACOs)—groups of coordinated health care providers who are held responsible for the care of a group of patients. The models are designed to encourage ACOs to invest in infrastructure and care processes for improving coordination, efficiency, and quality of care for Medicare beneficiaries. Episode-based payment initiatives. This category includes models in which providers are held accountable for the Medicare spending and quality of care received by beneficiaries during an “episode of care,” which begins with a health care event (e.g., hospitalization) and continues for a limited time after. Initiatives Focused on Medicare-Medicaid Beneficiaries. This category includes models focused on better serving individuals eligible for both Medicaid and Medicare in a cost-effective manner. Initiatives Focused on Medicaid and CHIP Populations. This category includes models administered by participating states to lower spending and improve quality of care for Medicaid and CHIP beneficiaries. Initiatives to Accelerate the Development and Testing of New Payment and Service Delivery Models. This category includes models where the Innovation Center works with participants to test state-based and locally developed models, covering Medicare beneficiaries, Medicaid beneficiaries, or both. Initiatives to Speed the Adoption of Best Practices. This category includes models in which the Innovation Center collaborates with health care providers, federal agencies, and other stakeholders to test ways of disseminating evidence-based best practices that improve Medicare spending and quality of care for beneficiaries. Primary Care Transformation. This category includes models that use advanced primary care practices—also called “medical homes”— to emphasize prevention, health information technology, care coordination, and shared decision-making among patients and their providers. For certain categories, the Innovation Center assigns primary responsibility for developing and implementing models to a single model group; for some other categories, the responsibility is shared across different groups. For example, the center assigned responsibility for models in the ACO and the Primary Care Transformation categories to the Seamless Care Model Group, whereas the responsibility for models in the Initiatives to Accelerate the Development and Testing of New Payment and Service Delivery Models categories were assigned across all four model groups. Appendix II provides a summary of the number of models organized under each category and a description of each model. As of March 1, 2018, the Innovation Center had implemented 37 models under section 1115A of the Social Security Act. (See fig. 3.) Of those 37 models, the testing period has concluded for 10 of them. In addition, the Innovation Center has announced two models to begin testing in 2018. Innovation Center models varied based on several characteristics, including delivery and payment approaches tested and program(s) covered. Delivery and payment approaches varied across all implemented and announced models—even models organized by the Innovation Center under the same model category. For example, the six models that tested an episode-based payment approach varied in terms of how episodes were defined, including the clinical and surgical episodes to which models applied. In addition, some models included multiple approaches for achieving changes in health care delivery or payment. Models also differed in terms of the programs covered, with 22 models covering Medicare only, 9 models covering Medicare and Medicaid, one model covering Medicaid and CHIP, and 7 models covering all three programs. Other characteristics by which models varied include the nature of model participation for providers (voluntary or mandatory) and the source of innovation (i.e., federal, state, or local initiatives). See table 2 for a breakdown of models across selected characteristics. Appendix II provides a full description of all models implemented and announced by the Innovation Center. In September 2017, the Innovation Center provided some insight into its future plans when it issued an informal “request for information” that identified guiding principles under which models will be designed going forward, described focus areas for new models, and requested feedback from stakeholders. One of the guiding principles focused on voluntary models—a principle consistent with a final rule published in December 2017 canceling four mandatory participation models in development and making participation in a fifth mandatory model voluntary for some geographic areas. Other guiding principles included promoting competition based on quality, outcomes, and costs; empowering beneficiaries, their families, and caregivers to take ownership of their health; and using data-driven insights to ensure cost-effective care that also leads to improvements in beneficiary outcomes. In addition, the Innovation Center indicated the following focus areas for new model development: additional advanced alternative payment models; consumer-directed care and market-based innovation models; physician specialty models; prescription drug models; Medicare Advantage innovation models; state-based and local innovation, including Medicaid- focused models; mental and behavioral health models; and program integrity. According to Innovation Center documentation, through September 30, 2016, the center obligated over $5.6 billion of the $10 billion appropriated for fiscal years 2011 through 2019 under section 1115A of the Social Security Act. The obligated amounts for individual models during this period ranged from $8.4 million to over $967 million, and varied based on model scope and design. For example, a model where the Innovation Center used its waiver authority to provide additional flexibility to participants (rather than additional funding) required only $8.4 million in obligations for the evaluation of the model and implementation activities. In contrast, a model where the Innovation Center awarded funding to a broad set of partners, including providers, local government, and public- private partnerships, to test their own care delivery and payment models required more than $870 million in obligations for payments to awardees and used over $95 million for contractor evaluations and other activities that supported model development and implementation. Innovation Center spending falls into three categories: model programs, innovation support, and administration. Model programs include obligations that directly support individual models and delivery system reform initiatives. Innovation support includes center-wide operational expenses that are not directly attributable to a single model. Administration includes permanent federal full-time equivalent payroll expenses, administrative contracts, administrative interagency agreements, and general administrative expenses. As the Innovation Center implemented additional models each year, total annual obligations increased steadily from approximately $95 million in fiscal year 2011 to more than $1.3 billion in fiscal year 2015, but decreased slightly in fiscal year 2016. (See fig. 4) Most of these total obligations were for model programs, which followed a similar pattern, increasing from $51 million in 2011 to about $1.1 billion in fiscal year 2015, with a slight decrease in fiscal year 2016. According to officials, the 2016 decrease in obligations for model programs was due in part to some of the earlier, expensive models ending and to newer models being less costly than the older models. Officials noted, for example, that a number of newer models incorporated basic program infrastructure used in previously implemented models, which allowed for reduced model costs. Officials also indicated that the decrease in obligations may be due to newer models using payment approaches that are funded by the Medicare Trust Fund, rather than funded by the Innovation Center’s dedicated appropriation. The center’s obligations for both innovation support and administration increased from around $20 million for each category in fiscal year 2011 to about $163 million for innovation support and $119 million for administration in fiscal year 2016. Officials told us that as obligations for model programs grew, so did obligations for innovation support and administration, which includes indirect costs and contractor assistance. The Innovation Center has used the results from model evaluations to generate ideas for new models. For some of the early implemented models, evaluation results showed reduced spending and maintained or improved quality of care, but also identified model design limitations that could affect those results. According to officials, in some of these instances, the Innovation Center has developed new models that build upon the approaches of earlier models, but include adjustments intended to address identified limitations (see text box). Evaluations of Implemented Models The evaluation of each model is performed by a third-party contractor, who generally determines the effect of a model on quality of care and program spending by comparing data for model participants to those of a comparison group of providers and beneficiaries with characteristics similar to model participants. For purposes of the evaluation, the Innovation Center has the authority to require the collection and submission of necessary data by model participants. Accordingly, the third-party contractor collects both quantitative and qualitative data. The quantitative data are used to assess program spending and quality of care and the qualitative data are used to provide the context needed to understand the quantitative results. Example of A Model That Tests the Same General Delivery and Payment Approach of a Previously Implemented Model While Addressing Limitations Bundled Payment for Care Improvement (BPCI) Model 2 tested an episode-based delivery and payment approach in which the Innovation Center set a benchmark, or target, price for all Medicare services a beneficiary might receive during a clinical episode—defined by BPCI Model 2 as the initial hospital stay and all services received up to 90 days after discharge. If the total spending for Medicare services during an episode was lower than the target price, participating hospitals would receive payments in addition to the normal fee-for-service payments. If the total spending for Medicare services during an episode was higher than the target price, participating hospitals would have to reimburse Medicare. Participants could select up to 48 different clinical episodes under the model. The evaluation of BPCI Model 2 found that orthopedic surgery episodes—of which approximately 90 percent were hip and knee joint replacement surgeries—may have resulted in reduced program spending and improved quality of care. However, the evaluation also identified limitations affecting those results. For example, the target prices for hip and knee replacement surgeries did not account for potential differences in Medicare spending between elective surgeries and surgeries required after a fracture. As a result of this limitation, hospitals could attempt to control spending by limiting the number of episodes associated with higher cost beneficiaries (i.e., those requiring surgery due to a fracture). In part to address the design issue identified under BPCI Model 2, Innovation Center officials told us they developed the Comprehensive Care for Joint Replacement (CJR) model. Implemented in April 2016, the CJR model tests the same general delivery and payment approach used in BPCI Model 2, but focuses specifically on hip and knee joint replacement surgical episodes and adjusts the target price to account for the higher spending related to hip and knee joint replacement surgeries following a fracture. As of March 1, 2018, no evaluations of the CJR model have been publicly released. The Innovation Center has also used the results from evaluations as one way to improve the operational and participant support for new models. According to officials, evaluations have helped them identify lessons learned regarding support systems, such as which types of systems work well with which types of models, and then the center incorporated those lessons when designing the systems for new models. For example, officials noted that the experience with the learning system from the Bundled Payments for Care Improvement (BPCI) models informed the learning system for the Comprehensive Care for Joint Replacement (CJR) model. The lessons learned helped the Innovation Center better identify where participants would need additional support and the learning activities—such as webinars and implementation guides—to provide the needed support during the early stages of model implementation. Innovation Center officials told us that these lessons from evaluations helped ensure that each successive model built upon the collective experience of models implemented by the center. The Innovation Center also has used evaluation results to make periodic changes to models during the testing period. According to officials, these changes include adjustments to the delivery and payment approaches tested, such as refining the target population, broadening the geographic focus, and refinements of spending calculations. Innovation Center officials noted that, in general, such changes were limited to minimize their effects on the evaluation of program spending and quality of care. Officials also identified changes to operational and participant support systems, which have included changes to the timing of participant data reporting, revisions to how data are collected from participants, and changes to the way learning materials are delivered to participants. According to officials, these types of changes are generally intended to help improve the experience of participants. According to Innovation Center officials, evaluation results may also be used in making a decision to terminate a model prior to the end of its planned testing period. However, officials stated that the Innovation Center has not terminated any models prior to the conclusion of their testing periods, either based on the results of an evaluation or for other reasons. The Innovation Center used evaluation results in recommending two models be certified for expansion. According to Innovation Center officials, the evaluation of each model adequately demonstrated that the delivery and payment approach tested reduced Medicare spending while maintaining or improving quality of care. Based on these results, the Innovation Center formally requested that CMS’s Office of the Actuary analyze the financial impact of a potential expansion of each model. The two models were: Pioneer ACO. Pioneer ACO tested an ACO delivery and payment approach that gave providers an opportunity to be paid a relatively greater share of savings generated, compared to participants in other ACO models, in exchange for accepting financial responsibility for any losses. In year 3 of the model, ACOs that met certain levels of savings in the first two years could elect to receive a portion of their Medicare fee-for-service payments in the form of predetermined, per beneficiary per month payments. YMCA of the USA Diabetes Prevention Program (Diabetes Prevention Program). The Diabetes Prevention Program applied a lifestyle change program recognized by the Centers for Disease Control and Prevention to reduce to the risk of Type 2 diabetes for at- risk Medicare beneficiaries. The Diabetes Prevention Program was a part of the Health Care Innovation Awards Round One model. When assessing the Pioneer ACO and Diabetes Prevention Program models for expansion, the officials from the Office of the Actuary considered the model evaluation results that were available and information from other sources. For example, the assessment of Pioneer ACO used historical shared savings calculations and beneficiary attribution data from ACOs in the Medicare Shared Saving Program and Pioneer ACO; Medicare claims and enrollment data; and published studies. According to CMS officials, a model evaluation and a certification for expansion differ in that a model evaluation assesses the historical impact of a delivery and payment approach for model participants only, while a certification for expansion assesses the future impact on program spending across all beneficiaries, payers, and providers who would be affected by the expanded model. Based on its assessments, the Office of the Actuary certified both models for expansion and steps have been taken to expand them. In certifying Pioneer ACO, the Office of the Actuary concluded that because ACOs, in general, have been shown to produce savings relative to Medicare fee- for-service, an expansion of Pioneer ACO would generate further savings to the Medicare program. According to officials, CMS expanded Pioneer ACO by incorporating elements of the model—through rulemaking—as one of the options that providers may choose under the Medicare Shared Savings Program. For the Diabetes Prevention Program, the Office of the Actuary concluded that certain changes considered as part of the expansion would, in the near term, improve upon the original savings achieved as part of the Health Care Innovation Awards as well as savings achieved in similar diabetes prevention programs. The Innovation Center has expanded—through rulemaking—the Diabetes Prevention Program under a new, nationwide model to be implemented in April 2018. In addition, officials from the Innovation Center and the Office of the Actuary discussed potentially assessing whether Partnership for Patients should be certified for expansion. Partnership for Patients is a model that leveraged federal, state, local, and private programs to spread proven practices for reducing preventable hospital-acquired conditions and readmissions across acute care hospitals. According to officials, the Innovation Center shared the results for Partnership for Patients—which showed improved quality of care in the form of reduced preventable hospital-acquired conditions and readmissions—with the officials from the Office of the Actuary. After discussing these issues, Innovation Center officials decided not to request a formal analysis for certification of expansion. To assess is own performance, the Innovation Center established three center-wide performance goals and related measures. Goal 1: Reduce the growth of healthcare costs while promoting better health and health care quality through delivery system reform. This goal has three performance measures that focus on ACOs. As shown in table 3, the Innovation Center has reported mixed results in achieving the targets set. According to agency reported data, the Innovation Center met the targets for 2 of its 3 Goal 1 performance measures for 2015. For the remaining measure—the percentage of ACOs that shared in savings—the center did not meet its target during either of the two years for which data were available. According to officials, when results fall short of targets, they examine the causes and make appropriate adjustments to the program. Officials stated that the missed target was driven by the high growth in the number of ACOs that were new—and therefore would not yet be expected to achieve a level of savings in which they could share—and not by ACO performance deficits. As a result, officials decided that no adjustments were required to the Medicare Shared Savings Program or other ACO Models to help improve performance. However, as shown in table 3, the Innovation Center set a target for 2016 that was lower than the 2015 target. For 2017, the Innovation Center lowered the expectation for growth compared to previous years, setting a target that was 1 percent higher than the 2016 target. Moving forward, CMS believes that as more ACOs gain experience, more will share in savings. Additionally, the agency expects that with additional performance years, the targets for the measure will become more refined. Goal 2: Identify, test, and improve payment and service delivery models. This goal has one performance measure, which identifies the number of models that currently indicate (1) cost savings while maintaining or improving quality or (2) improving quality while maintaining or reducing cost. As of September 30, 2016, the Innovation Center reported that four section 1115A model tests have met these criteria (see table 4). Goal 3: Accelerate the spread of successful practices and models. For this goal, the first performance measure focuses on the number of states developing and implementing a health system transformation and payment reform plan. The second measure focuses on increasing the percentage of active model participants who are involved in Innovation Center or related learning activities. As shown in table 5, the Innovation Center reported meeting its target for the first measure for both fiscal years 2015 and 2016, but not meeting its target for the second measure. For the second measure, the Innovation Center noted in its report to Congress that although the results for fiscal year 2016 showed a slight decrease in overall participation in Innovation Center or related learning activities, the majority of models performed higher than their individual targets. Several models underperformed, however, bringing down the overall percentage rate. In addition to the Goal 3 performance measures, the Innovation Center identifies two related contextual indicators—which according to officials are measures that provide supporting information to help understand trends or other information related to the goal. The first contextual indicator provides a snapshot of Medicare beneficiary participation at a given point in time for all models operational for more than 6 months. In fiscal year 2016, CMS reported that over 3.6 million Medicare fee-for- service beneficiaries participated in models, representing approximately 9 percent of Medicare fee-for-service beneficiaries. The second contextual indicator provides information to help understand the level of interest and participation among providers in the Innovation Center’s model portfolio. In fiscal year 2016, the Center estimates that 103,291 providers participated in Innovation Center payment and service delivery models. In addition to the three goals established by the Innovation Center, CMS has established an agency-wide goal related to the center’s performance. In 2015, CMS announced goals to help drive Medicare, and the health care system at large, toward rewarding the quality of care instead of the quantity of care provided to beneficiaries. One of these goals was to shift Medicare health care payments from volume to value using alternative payment models established under the Innovation Center. This agency- wide goal has one performance measure, which is to increase the percentage of Medicare fee-for-service payments tied to alternative payment models, such as ACOs or bundled payment arrangements. As shown in table 6, CMS reported meeting its target for 2015 and 2016. Looking forward, officials told us that the Innovation Center has developed a methodology to estimate a forecasted return on investment for the model portfolio, and is in the early stages of refining the methodology and applying it broadly across the portfolio in 2018. As part of the development efforts, the Innovation Center expects to utilize standard investment measures used in the public and private sectors. We provided a draft of this report to HHS for comment. The Department provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Center for Medicare and Medicaid Innovation’s General Process for Implementing Models An agency may issue a request for information for planning purposes. As of March 1, 2018, the Center for Medicare and Medicaid Innovation (Innovation Center) organized its models into seven categories based on delivery and payment approaches tested and program beneficiaries covered. Table 8 provides the number of models implemented and announced, organized under each category. The Innovation Center organized seven of its models under the Accountable Care category. (See table 9.) The Innovation Center organized seven of its models under the Episode- Based Payment Initiatives category. (See table 10.) The Innovation Center organized three of its models under the Initiatives Focused on Medicare-Medicaid Enrollees category. (See table 11.) The Innovation Center organized one of its models under the category, Initiatives Focused on the Medicaid and Children’s Health Insurance Program Population. (See table 12.) The Innovation Center organized 14 of its models under the category, Initiatives to Accelerate the Development and Testing of New Payment and Service Delivery Models. (See table 13.) The Innovation Center organized three of its models under the category, Initiatives to Speed the Adoption of Best Practices. (See table 14.) The Innovation Center organized four of its models under the category, Primary Care Transformation. (See table 15.) In addition to models required by section 1115A of the Social Security Act, as added by the section 3021 of Patient Protection and Affordable Care Act, the Center for Medicare and Medicaid Innovation implemented six models under different provisions of the Patient Protection and Affordable Care Act. (See table 16.) In addition to the contact named above, Greg Giusto (Assistant Director), Aaron Holling (Analyst-in-Charge), Ashley Dixon, and Rachel Rhodes made key contributions to this report. Also contributing to the report were Sam Amrhein, Muriel Brown, and Emily Wilson.", "summary": "The Patient Protection and Affordable Care Act created the Innovation Center within CMS to test new approaches to health care delivery and payment—known as models—for use in Medicare, Medicaid, or CHIP. The Innovation Center became operational in November 2010. In 2012, GAO reported on the early implementation of the Innovation Center. GAO found that, during the first 16 months of operations, the Innovation Center focused on implementing 17 new models and developed preliminary plans for evaluating the effects of each model and for assessing the center's overall performance. GAO was asked to update its previous work. In this report, GAO: (1) describes the status of payment and delivery models implemented and the resources used; (2) describes the center's use of model evaluations; and (3) examines the center's assessment of its own performance. GAO reviewed available documentation, such as model fact sheets and frequently asked questions, and evaluation reports for models that have been implemented. GAO reviewed obligation data and performance information for the time period for which complete data or information were available. GAO also interviewed officials from the Innovation Center and CMS's Office of the Actuary. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate. As of March 1, 2018, the Center for Medicare and Medicaid Innovation (Innovation Center) had implemented 37 models that test new approaches for delivering and paying for health care with the goal of reducing spending and improving quality of care. These models varied based on several characteristics, including the program covered—Medicare, Medicaid, the Children's Health Insurance Program (CHIP), or some combination of the three—and the nature of provider participation—voluntary or mandatory. Going forward, the Innovation Center indicated that the center plans to continue focusing on the use of voluntary participation models and to develop models in new areas, including prescription drugs, Medicare Advantage, mental and behavioral health, and program integrity. Through fiscal year 2016, the Innovation Center obligated $5.6 billion of its $10 billion appropriation for fiscal years 2011 through 2019. The Innovation Center has used evaluations of models (1) to inform the development of additional models, (2) to make changes to models as they are implemented, and (3) to recommend models for expansion. For example, Innovation Center officials noted that, for some instances where evaluations have shown reduced spending with maintained or improved quality of care, the center has developed new models that build upon the approaches of earlier models, but with adjustments intended to address reported limitations. In addition, the Innovation Center used evaluations to recommend two models to the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary for certification for expansion. According to CMS officials, a model evaluation and a certification for expansion differ in that a model evaluation assesses the impact of a delivery and payment approach for model participants only, while a certification for expansion assesses the future impact on program spending more broadly across all beneficiaries, payers, and providers who would be affected by the expanded model. As a result, the Office of the Actuary used the results of the evaluation and other information, such as Medicare claims data and published studies, to certify the expansion of both models. To assess the center's overall performance, the Innovation Center established performance goals and related measures and reported meeting its targets for some goals in 2015, the latest year for which data were available (see table below). Innovation Center officials told GAO that the center also recently developed a methodology to estimate a forecasted return on investment for its model portfolio. The center is in the early stages of refining the methodology and applying it broadly across its models.", "document_type": "gao"}
{"report": "The federal government plans to invest about $96 billion in fiscal year 2018 for IT that is critical to the health, economy, and security of the nation. However, prior IT expenditures have often resulted in significant cost overruns, schedule delays, and questionable mission-related achievements. For example, The Department of Health and Human Services’ website, Healthcare.gov, and its supporting systems, which were to facilitate the establishment of a federal health insurance marketplace by January 2014, encountered significant cost increases, schedule slips, and delayed functionality. In a series of reports, we identified numerous planning, oversight, security, and system development challenges faced by this program. For almost two decades, the Department of Veterans Affairs (VA) has undertaken numerous initiatives with the Department of Defense (DOD) that were intended to advance the ability of the two departments to share electronic health records. In our report of the departments’ efforts in 2015, we reported that the departments had not identified outcome-oriented goals and metrics to clearly define what they aimed to achieve from their interoperability efforts, resulting in numerous failures. During most of the last 20 years, VA has also been planning to modernize its system separately from DOD. Recently, the Secretary of VA announced that the department plans to use the same electronic health record system that DOD is in the process of acquiring. However, the significant challenges that have confronted VA in its efforts contributed to our designation of VA health care as a high risk area. The Department of Homeland Security’s U.S. Citizenship and Immigration Services’ Transformation Program, which was initiated to address processing inefficiencies and transform the agency’s current paper-based system into an electronic account-based system, has faced continual management and development challenges, limiting its progress and ability to achieve its goals of enhanced national security and system integrity, better customer service, and operational efficiency. The U.S. Citizenship and Immigration Services estimates that the program’s cost increased by approximately $1 billion and its schedule was delayed by over 4 years from its initial approved baseline. The Office of Personnel Management’s Retirement Systems Modernization program, which was intended to improve the efficiency and effectiveness of its retirement claims processing, was canceled in February 2011 after the agency had spent approximately $231 million on a third attempt to automate the processing of federal employee retirement claims. As previously stated, due to the challenges associated with acquiring IT across the federal government, in 2015, we added improving the management of IT acquisitions and operations to our list of high-risk areas. We recently issued an update to our high-risk report and determined that, while progress has been made in addressing the high- risk area of IT acquisitions and operations, significant work remains to be completed. For example, as of May 2017, OMB and federal agencies had implemented 380 (or about 47 percent) of the 803 recommendations that we had made from fiscal years 2010 through 2015 related to IT acquisitions and operations. By law, OMB is to oversee federal agencies’ management of information and information technology. Within OMB, primary responsibility for oversight of federal IT has been given to the Administrator of the Office of Electronic Government and Information Technology, who is also called the Federal Chief Information Officer (Federal CIO). According to OMB, this oversight responsibility covers about 800 major and nearly 5,700 non-major IT investments across the federal government. As a part of the oversight, the E-Gov office develops policy and reviews federal agencies’ IT strategic plans. In addition, OMB establishes processes to analyze, track, and evaluate the risks and results of IT investments made by executive agencies, and issues guidance on processes for selecting and overseeing agency privacy and security protections for information and information systems. OMB has also implemented a series of initiatives to improve the oversight of underperforming investments and more effectively manage IT. These initiatives include the following: Federal IT Dashboard. In June 2009, to further improve the transparency into and oversight of federal agencies’ IT investments, OMB deployed the Federal IT Dashboard, a public website with information on the performance of these investments. OMB provided guidance to the agencies on the information they should maintain and update on the dashboard. Currently, the dashboard displays information on the cost, schedule, and performance of close to 800 major IT investments at 26 federal agencies. In addition, agencies are to submit ratings from their CIOs to the dashboard, which, according to OMB’s instructions, should reflect the level of risk facing an investment relative to that investment’s ability to accomplish its goals. The public display of these data is intended to allow OMB, other oversight bodies, and the general public to hold agencies accountable for mission-related outcomes. Over the past 7 years, we have issued a series of reports that have noted both significant steps OMB has taken to enhance the oversight, transparency, and accountability of federal IT investments by creating the dashboard, as well as issues with the accuracy and reliability of the data it contains. TechStat reviews. In January 2010, the Federal CIO began leading TechStat reviews—face-to-face meetings to discuss whether to terminate or turn around IT investments that are in danger of failing or are not producing results. These meetings involved OMB and agency leadership and were intended to increase accountability and improve performance. OMB reported that federal agencies achieved over $3 billion in cost savings or avoidances as a result of these reviews in 2010. Subsequently, it empowered agency CIOs to begin holding their own TechStat reviews by June 2012. OMB’s 2015 guidance specified that the TechStat reviews were to be held with agency leadership, not led by OMB as in the past, and that agencies were only required to notify OMB of the meetings’ occurrence and report the results. In November 2015, we testified that OMB had conducted only one TechStat review between March 2013 and October 2015, and had not listed any related savings in its quarterly reporting to Congress since June 2012. In April 2017, OMB reported that it had not led a TechStat review since 2015. A report issued by the Federal CIO Council in January 2017, entitled The State of Federal Information Technology, noted that shifting TechStat reviews from OMB to agencies had diminished the executive scrutiny and impact of the initiative. PortfolioStat sessions. To better manage existing IT systems, in 2012, OMB launched the PortfolioStat initiative, which required agencies to conduct an annual, agency-wide portfolio review to, among other things, reduce commodity IT spending and demonstrate how their investments aligned with the agency’s mission and business functions. These reviews were to be held between the Federal CIO and agency leadership. In 2014 and 2015, OMB’s PortfolioStat guidance also called for it and agencies to identify high impact IT programs that merited additional support and oversight by OMB and/or agency leadership, and for these programs to be discussed during a PortfolioStat session. The 2015 guidance also changed the frequency of the PortfolioStat sessions from annually to quarterly, and the level of participation to no longer require attendance by the Federal CIO or the agency’s Deputy Secretary. The Federal Information Technology Acquisition Reform provisions (commonly referred to as FITARA) enacted as a part of the Carl Levin and Howard P. ‘Buck’ McKeon National Defense Authorization Act for Fiscal Year 2015 aimed to improve federal IT acquisition and operations and recognized the importance of these OMB initiatives by incorporating certain requirements into the law. For example, among other things, the act requires OMB to publicly display investment performance information and review federal agencies’ IT investment portfolios. Further, as previously mentioned, the December 2014 explanatory statement for the Consolidated Appropriations Act, 2015, stated that OMB was to identify the top 10 high priority IT programs under development in the federal government and report on their status quarterly. Additionally, in December 2015, in the explanatory statement for the Consolidated Appropriations Act, 2016, Congress stated that USDS, an OMB component, was to provide a quarterly status report on its current projects, including the top 10 high priority programs. The current mission of USDS is to deliver better government services to the American people through technology and design. USDS is focused on, among other things, improving the nation’s most important digital services used by the public, and modernizing procurement processes and practices for the digital era. To execute its mission, USDS recruits private sector experts, such as IT engineers and designers and leading civil servants, and deploys small teams to federal agencies. It selects which projects it will apply resources to and generally initiates the effort with the federal agency that owns the IT projects. In August 2016, we reported that USDS had developed procedures and criteria for selecting and prioritizing projects to work on. The current administration has initiated additional efforts aimed at improving federal IT, including digital services. Specifically, in March 2017, the administration established the Office of American Innovation, which has a mission to, among other things, make recommendations to the President on policies and plans aimed at improving federal government operations and services and modernizing federal IT. In doing so, the office is to consult with both OMB and the Office of Science and Technology Policy. Further, in May 2017, the administration established the American Technology Council, which has a goal of helping to transform and modernize federal agency IT and how the federal government uses and delivers digital services. The Federal CIO and the USDS Administrator are members of this council. OMB reported that it undertook a structured approach to identifying the top 10 high priority IT programs it reported to Congress in June 2015 and June 2016. Specifically, staff in the E-Gov office, including the Unit Chief for the Agency Oversight and Implementation team, stated that they chose the top 10 programs from a list of high impact programs that OMB separately maintains. They added that their approach was not guided by any documented procedures or scoring techniques to distinguish the programs. Analysts in the E-Gov office told us that, to identify the high impact programs from which the top 10 high priority programs were selected, they used program information from IT portfolio summaries, monthly IT dashboard updates, and quarterly integrated data collection submissions that OMB receives from agencies. They also considered several additional factors, such as risk exposure, public impact, public use, criticality to agency mission, size, and cost. In addition, they considered input from USDS leadership and OMB budget examiners, as well as our reports, inspectors general reports, and CIO risk ratings. Further, the analysts stated that OMB sought input from officials of the 24 Chief Financial Officers Act agencies to gain a better understanding of the importance of each program. In the end, based on all of the information considered, E-Gov staff made a judgment call regarding which of the agencies’ programs to identify as being high impact. According to these staff, on average, two high impact programs are identified for each of the 24 agencies, with at least one program being identified for each agency, and as many as four programs being identified for some larger agencies. Further, according to the staff, the Federal CIO approved the process for selecting the high impact programs. In addition, in determining the top 10 high priority programs, the E-Gov staff stated that they identified on the high impact list those programs that they believed were representative of the most important IT programs across federal agencies. They also considered other factors, such as whether a program had generated legislative interest or had performance issues. They added that the Federal CIO then approved the list of top 10 programs that they had selected. OMB subsequently issued two reports to Congress—in June 2015 and June 2016—that identified the top 10 high priority programs. Along with the status of each program, the reports identified the IT investments that were a part of each program as well as total IT spending, average CIO risk rating, major milestones, and the level of involvement USDS has with the program. Table 1 lists the programs that OMB identified in the two reports. As shown in the table, OMB made two changes to the top 10 list in 2016. Specifically, it replaced the Social Security Administration’s Service Modernization program with the agency’s Disability Case Processing System due to a change in focus within the agency. In addition, it replaced VA’s Medical Appointment Scheduling System with VA’s Medical 21st Century Development Core program, which is a larger effort that encompasses the scheduling system. E-Gov staff reported that the high priority programs were already receiving greater oversight than what was provided to the other major programs due to their high impact designation. Specifically, the staff stated that OMB provides additional oversight to high impact IT programs by regularly communicating about them through quarterly, monthly, weekly, or daily meetings with agency CIOs and program staff, depending on the risk and profile of the program. In contrast, communication is much less frequent for other major IT systems. The staff added they also discuss high impact programs with agencies during quarterly PortfolioStat meetings. Further, they stated that they can request that agencies perform a TechStat review, if needed, for a troubled high impact program. Most agencies that owned the high priority programs identified in the June 2016 report confirmed that OMB had already provided increased oversight for the high priority programs when they were originally designated as high impact programs. Specifically, officials from six of the eight agencies stated that the programs were discussed during quarterly PortfolioStat sessions, and officials from five agencies stated that OMB had provided action items for them to address with regard to their programs. Further, officials from six agencies stated that OMB’s oversight included periodic meetings (e.g., daily, weekly, or bi-weekly). Its oversight also included participation in a TechStat review of a high impact program performed by the Social Security Administration. Nevertheless, while additional OMB oversight of the high impact programs (and, accordingly, the identified high priority programs) is a positive step, the Federal CIO was not directly involved in this oversight. According to the E-Gov staff, the Federal CIO does not typically get involved with overseeing individual IT programs due to the large number of programs. However, the results of past CIO-led TechStat reviews suggest that the Federal CIO’s involvement in overseeing such programs does have significantly positive results. Specifically, as previously mentioned, CIO-led TechStat reviews of IT investments performed in 2010 resulted in $3 billion in savings and cost avoidance. Further, during a September 2016 Comptroller General forum to explore challenges and opportunities for improving federal IT acquisitions and operations, current and former CIOs and other participants pointed to the importance of OMB’s oversight and guidance, and specifically, to the role of the Federal CIO in helping to ensure effective IT governance. The participants cited specific OMB initiatives undertaken by the Federal CIO, including the TechStat reviews that had resulted in greater accountability and positive results. Thus, without the involvement of the Federal CIO more directly and regularly in the oversight of high impact and high priority programs, including leading TechStat reviews for the programs, OMB is likely to miss significant opportunities to improve accountability for and achieve positive results from the federal government’s IT investments. OMB issued two reports on the high priority programs—one in 2015 and another in 2016. While these reports provided the requested information they were not issued quarterly. According to the E-Gov staff, OMB was not able to report quarterly on the programs because of other competing reporting requirements, limited resources available to draft the report, and the amount of time it takes to get its reports fully reviewed. Moreover, the staff stated that they stopped issuing the high priority reports in 2016 because they believe the explanatory statement to the Consolidated Appropriations Act, 2016, no longer directed them to continue reporting on the programs. Specifically, the explanatory statement directed USDS to provide a quarterly report to the Committees on Appropriations of the House and Senate describing the status of current USDS teams and projects, including the top 10 high priority programs, a list of USDS accomplishments, and agency project proposals. Both E-Gov staff and USDS staff said they determined this to mean that OMB should report on the USDS projects considered to be high priority given USDS’s responsibilities. In addition, USDS staff stated that they did not receive any feedback from congressional stakeholders indicating otherwise. However, continued identification and reporting on the top ten high priority programs, and not just USDS projects, would further enhance congressional oversight by providing congressional stakeholders with information on high priority programs that is not readily available. Such information could also be useful for current administration IT governance entities such as the Office of American Innovation and the American Technology Council, to assist them with prioritizing their efforts to modernize federal agency IT. USDS has developed a process for identifying and prioritizing the IT projects to which it provides support. Moreover, as we have previously reported, its project selection process is consistent with best practices, which state that organizations should establish and implement procedures for prioritizing projects that include identifying selection criteria to help consistently select projects based on their contributions to the strategic goals of the organization. In explaining the process used to identify projects, USDS staff stated that they obtained input from various sources, including the Federal IT Dashboard, leadership of the relevant federal agency, E-Gov analysts, and GAO reports. In addition, the staff said they considered the high impact programs identified by the E-Gov office; they also coordinated with E-Gov analysts through monthly meetings to incorporate issues of significance to E-Gov into their selection process. To further facilitate the selection process, the USDS staff established three questions as criteria for prioritizing agencies’ IT projects, in the following order of importance: (1) What will do the greatest good for the greatest number of people in the greatest need? (2) How effective and cost efficient will the USDS investment be? (3) What potential exists to scale or reuse a technological solution across the government? The staff said they used the criteria to create a list of all potential projects, including their descriptions and information on resource needs; they updated the list when they identified additional projects that met the criteria. This list was subsequently used by USDS leadership to make decisions about which projects to pursue. According to the staff, an important consideration when selecting a project was whether there was executive sponsorship from the agency. They added that executive sponsorship ensures that USDS has the help it needs to make changes to the projects, and it affects the efficiency and cost-effectiveness of USDS’s investment. Projects that were not selected went into a backlog that is to be used to select a project when a team becomes available to work on a new engagement. USDS has issued two reports to Congress on the status of its projects— one in December 2016 and the other in July 2017. The report issued in December 2016 summarized the status of 11 projects that USDS is engaged in at federal agencies, and 3 broader initiatives that are intended to improve the performance and cost-effectiveness of government digital services. According to USDS staff, the 11 projects had broad impact and had made the most significant progress. For example, these included the VA’s Vets.gov project, which is intended to assist the department in developing a new digital application for healthcare, and DOD’s Defense Travel System, a system that facilitates travel for all DOD employees. Further, USDS reported on the status of their efforts for these three initiatives: modernizing procurement processes, development of federal shared services, and hiring top technical talent. The July 2017 report included summaries for 10 projects, including 5 new projects. Specifically, the new projects were the General Service Administration’s Login.gov project, the Small Business Administration’s effort to modernize small business certification for government contractors, DOD’s Advisor Network system, DOD’s Defense Personal Property System, and transforming federal IT procurement through digital acquisition training. In addition, 6 projects that were discussed in the December 2016 report were not included in the July 2017 report. Table 2 provides a complete list of the projects identified in the two reports. Our analysis determined that four of the projects identified in USDS’s reports were among the high priority programs that OMB’s E-Gov office had identified in its June 2015 and June 2016 reports to Congress. These projects were Healthcare.Gov, Disability Claim Processing, modernizing the immigration system at the Department of Homeland Security, and improving the Visa program at the Department of State. However, USDS’s report does not specify this or provide an update on the status of the other high priority programs. USDS staff stated that they did not address all of the top 10 high priority programs because, as stated earlier in this report, they interpreted Congress’s 2016 request as being focused on USDS’s priority projects and not on the programs previously identified by E-Gov. As mentioned earlier, however, continuing to identify and report on the top 10 high priority IT programs while also reporting on USDS’s projects would further enhance congressional oversight and current administration IT governance entities’ efforts by providing stakeholders with information on high priority programs and USDS projects that is not readily available. Further, although USDS was directed to report quarterly, it did not do so. Instead, it issued a report in December 2016, nearly a year after Congress’s direction, and in July 2017, nearly 7 months after its first report. In discussing this matter, USDS staff said they were not able to report quarterly due to the time and effort needed to prepare and review a report. As a result, USDS’s reporting did not provide congressional stakeholders with the timely information needed to support their oversight responsibilities. While OMB’s 2015 and 2016 reports to Congress on the top 10 high priority programs included the status of the programs, their total IT spending, and other information to assist Congress in monitoring the progress of critical programs, OMB did not issue the reports quarterly as directed in the explanatory statement. In addition, OMB does not plan on continuing to issue the top 10 high priority reports because it believes that, in 2016, Congress directed the agency to instead focus on providing a status of USDS’s most important projects. Further, OMB’s December 2016 and July 2017 reports on USDS’s projects did not address the top 10 high priority programs across the government. However, continued reporting on the top 10 high priority programs would further enhance congressional oversight by providing congressional stakeholders with information that is not readily available on those programs in the greatest need of attention. Reporting on the top 10 high priority programs could also be useful for IT governance entities such as the Office of American Innovation and the American Technology Council, to assist them with prioritizing their efforts to modernize federal agency IT. Moreover, OMB did not issue the high priority programs and USDS reports on a quarterly basis as requested. Without OMB’s quarterly reporting on the progress of both the top 10 high priority programs and the status of the USDS projects, congressional stakeholders and others may lack the timely information they need to support their oversight and other responsibilities. Finally, while additional OMB oversight of the high impact programs (and, accordingly, the identified high priority programs) is a positive step, the Federal CIO was not directly involved in the oversight of these programs. Based on the positive impact of direct Federal CIO involvement in leading investment reviews in the past, such involvement could significantly improve program outcomes. We are making the following three recommendations to OMB: The Director of OMB should continue to identify and report to Congress on the status of the top 10 high priority IT programs and the extent to which USDS is involved in the programs, as was done in June 2015 and June 2016. In doing so, the Director should ensure that these reports are issued quarterly. (Recommendation 1) The Director of OMB should ensure that the Federal CIO is directly involved in the oversight of high priority programs. (Recommendation 2) The Director of OMB should continue to report on the status of USDS projects. In doing so, the Director should ensure that the reports are issued quarterly. (Recommendation 3) We received comments on our draft report via e-mail from the OMB liaison to GAO. In the comments, OMB did not specifically state whether it agreed or disagreed with our recommendations. Rather, OMB stated that it has concerns with GAO’s alternative interpretations of law and that GAO’s findings and conclusions are rooted in an incorrect legal interpretation of OMB’s annual appropriation. Specifically, it stated that GAO considers reporting requirements specific to an annual appropriation to apply for all future annual appropriations. However, OMB’s characterization is incorrect, as we did not assert this legal conclusion. As stated in our report, in the explanatory statement accompanying the Consolidated and Further Continuing Appropriations Act, 2015, Congress directed OMB to identify the 10 highest priority IT investment programs (referred to in our report as the top 10 high priority programs) that are under development across federal agencies and report on their status each quarter. Subsequently, the explanatory statement accompanying the Consolidated Appropriations Act, 2016, directed USDS to provide a quarterly status report on, among other things, current USDS projects, including the top 10 high priority programs. Our report does not conclude that the language of either explanatory statement establishes a legally binding requirement, whether applicable only to the subject fiscal year or beyond. GAO’s conclusions are based on the view that continued identification and reporting on the top 10 high priority programs, and not just USDS projects, would help to enhance congressional oversight. Identifying and reporting on the top 10 high priority programs is important because such information is not readily available. We have revised relevant statements in the report to clarify our message in this regard. Further, while GAO did not assert a legal conclusion, we have, nonetheless, removed all references to our “interpretation” of the explanatory statement so as to avoid the inference that we are making legal conclusions. OMB also said our conclusion that it has stopped reporting altogether is incorrect. However, our report does not state that OMB has stopped reporting altogether. Rather, our report states that OMB stopped issuing reports on the top 10 high priority IT programs due to its interpretation of the 2016 explanatory statement and, instead, switched to reporting on the status of USDS’s projects. In addition, OMB stated that, while it agreed that the reports have not been submitted on a quarterly basis, it provided Congress with the requested information for the four quarters of the relevant fiscal years. In addition, OMB stated that USDS is currently discussing with congressional stakeholders whether providing quarterly briefings, instead of reports, would address the quarterly reporting requirement. As noted in our report, timely (i.e., quarterly) information would enhance congressional and other stakeholders’ oversight responsibilities. Therefore, we maintain that our recommendation for reporting quarterly is appropriate. Finally, OMB stated that it disagreed with our conclusion that the lack of personal Federal CIO involvement in high priority IT programs had resulted in inadequate oversight. While we state that the Federal CIO was not directly involved in overseeing the high priority programs, we did not conclude that this resulted in inadequate oversight. Rather, we stated that the results of past CIO-led TechStat reviews suggest that more direct and regular involvement of the Federal CIO would improve accountability and achieve positive results for the federal government’s investments. Thus, we continue to believe that our recommendation to ensure that the Federal CIO is directly involved in overseeing high priority programs is appropriate. OMB also provided technical comments, which we have incorporated into the report as appropriate. We are sending copies of this report to interested congressional committees, the Director of the Office of Management and Budget, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the contact named above, Sabine Paul (Assistant Director), Scott Borre (Analyst in Charge), Nancy Glover, Lori Martinez, Bradley Roach, and Marshall Williams, Jr. made key contributions to the report.", "summary": "The federal government plans to spend almost $96 billion on IT investments in fiscal year 2018; however, as GAO has previously found, too often these investments have cost overruns and schedule delays. To enhance oversight of IT programs, for 2015, Congress directed OMB to identify the 10 highest priority IT programs that are under development across federal agencies and report on their status each quarter. Further, for 2016, Congress directed USDS to provide a quarterly report of current USDS projects, including the top 10 high priority programs. GAO was asked to review OMB's oversight of high priority programs. This review evaluated (1) OMB's process for identifying, overseeing, and reporting on the high priority IT investment programs and (2) USDS's process for identifying and prioritizing its projects, including its consideration of the high priority programs, and its reporting on the projects. GAO analyzed OMB memorandums and reports to Congress and interviewed OMB staff, including from USDS. In addition, GAO compared USDS's processes with IT management best practices. The Office of Management and Budget's (OMB) Office of E-Government and Information Technology (E-Gov) reported that it undertook a structured approach to identify the top 10 high priority IT programs in reports to Congress in June 2015 and June 2016. Specifically, OMB staff stated that they chose the top 10 programs from a longer list of agency programs requiring additional oversight (referred to as high impact programs). E-Gov staff reported that the high priority programs were already receiving greater oversight than what was provided to the other major programs due to their high impact designation. This additional oversight included frequent meetings with agency Chief Information Officer (CIO) leadership and quarterly meetings with OMB staff. However, the Federal CIO was not directly involved in this oversight. According to E-Gov staff, the Federal CIO does not typically get involved in individual programs due to the large number of programs. However, past experience has shown that Federal CIO involvement has had a significant impact. For example, Federal CIO-led reviews of troubled projects, known as TechStat reviews, resulted in $3 billion in savings in 2010. Until OMB ensures that the Federal CIO is more directly involved in the oversight of these high priority programs, it may be missing a key opportunity to improve accountability and achieve positive results. OMB's 2015 and 2016 reports to Congress on the top 10 high priority programs identified the status of the programs and major milestones. However, the reports were not issued on a quarterly basis, as directed. E-Gov staff stated that they were unable to do so because of other competing reporting requirements and the limited resources available to draft and fully review the report on a quarterly basis. In addition, OMB stopped issuing the reports on the top 10 high priority IT programs after June 2016. OMB stated that Congress' 2016 direction to the U.S. Digital Service (USDS)—an OMB component—to provide a quarterly report that described the status of USDS teams and projects, including the top 10 high priority programs, meant that OMB should only report on USDS projects considered to be high priority. However, continued identification and reporting on the top 10 high priority programs, and not just USDS projects, would further enhance congressional oversight by providing congressional stakeholders information that is not readily available on those programs in the greatest need of attention. USDS issued reports to Congress on the status of its key projects in December 2016 and July 2017; however, the reports did not address the top 10 high priority programs as directed by Congress, according to OMB staff, because of OMB's interpretation of Congress's direction. In addition, the reports were not issued quarterly, as directed. USDS staff attributed this to the time and effort needed to review and prepare the report. However, continuing to identify and report on the top 10 high priority programs while also reporting on USDS's projects would help to enhance congressional oversight and current administration IT governance entities' efforts by providing stakeholders with information that is not readily available. GAO is making three recommendations to OMB for enhancing the oversight of high priority programs and continuing to report on both these programs and USDS projects. OMB neither agreed nor disagreed with the recommendations but disagreed with several of GAO's conclusions, which GAO continues to believe are valid as discussed in the report.", "document_type": "gao"}
{"report": "This section provides an overview of 1) DOE’s administration of its advanced fossil energy R&D program, and 2) DOE’s Loan Guarantee Program (LGP). Within DOE, FE carries out DOE’s program for fossil energy R&D, which includes federal research, development, and demonstration efforts on advanced power generation; power plant efficiency; water management; and carbon capture and storage (CCS) technologies. CCS is a process that involves capturing man-made CO at its source and storing it permanently underground. The program for fossil energy R&D also includes the development of technological solutions for the development of U.S. unconventional oil and gas domestic resources, such as from shale formations. FE also oversees the operations, infrastructure, and R&D at NETL, among other things. NETL officials told us that NETL has dual roles: it serves as project manager for advanced fossil energy R&D projects that receive federal assistance, and, as a DOE national laboratory, it also conducts applied research. FE and NETL collaborate on the selection and administration of the awards for advanced fossil energy R&D projects, according to DOE officials. DOE’s efforts to administer its program for advanced fossil energy R&D take place across a spectrum of activities, including providing financial assistance for large demonstration projects. In the 1980s and early 1990s, DOE’s fossil energy R&D program primarily focused on reducing emissions of harmful pollutants from coal-fired power plants, particularly sulfur dioxide and nitrogen oxide. For example, DOE began its large demonstration projects of advanced coal technologies in the mid-1980s; this work focused on R&D to mitigate acid rain and to reduce the pollutants released from coal combustion. More recently, DOE has provided funding for advanced fossil energy R&D to reduce COemissions by developing beneficial uses for COfrom coal-fired power plants, and to improve methods for CCS, among other things. As we have previously reported, CCS is a key technology that shows potential for reducing CO Specifically, CCS technologies separate and capture CO from other gases produced when combusting or gasifying coal, compress it, then transport it to underground geologic formations such as saline aquifers—porous rock filled with brine—or oil and natural gas reservoirs, where the captured CO in large quantities: the Boundary Dam plant in Canada and the Petra Nova plant in Texas. Both plants retrofitted CCS technology to existing plants. A third fossil-fueled, electricity-generating operation, the Kemper County Energy Facility in Mississippi, was scheduled to begin CCS operations in 2016, but cost overruns and delays in construction and operations led to the suspension of the plant’s CCS component in June 2017. Each of these power plants using CCS systems may be described as a first-of-its-kind venture, using technologies developed at a pilot scale ramped up to commercial scale. It is not unusual for projects in the demonstration phase of the R&D process to experience higher-than-anticipated costs, delays, and other challenges, according to a 2017 Congressional Research Service report. DOE generally uses announcements of opportunities for federal financial assistance to competitively solicit potential applicants of advanced fossil energy R&D projects. According to DOE officials, the department sets priorities for its advanced fossil energy R&D funding each year based in part on the amount appropriated for FE R&D and on FE’s R&D plans, as well as any direction that Congress may have specified for certain types of technology R&D. DOE’s advanced fossil energy R&D projects typically lasted for multiple years. DOE sets milestones for technical progress for each year of a project to ensure that funding recipients accomplish a specific R&D objective or set of objectives, according to DOE officials. The recipient may submit some form of report on its progress on the R&D as well as accomplishments to DOE for review and approval to continue. DOE officials told us they review the progress of the recipient at each phase and the project continuation is subject to the recipient’s technical progress, the recipient’s compliance with all of the other terms—including any financial terms—of the agreement, and the availability of DOE’s funds, based on congressional appropriations. The LGP was originally designed to address a fundamental impediment to innovative and advanced energy projects: securing enough affordable financing to survive the period between developing innovative technologies and commercializing them. As we have previously reported, these projects have risks, such as technology risk—the risk that the new technology will not perform as expected—and execution risk—the risk that the borrower or project will not perform as expected. Because the risks that commercial lenders must assume to support new technologies can put the cost of private financing out of reach, companies may not be able to commercialize innovative technologies without the federal government’s financial support. Federal loan guarantee programs such as the LGP can help companies obtain financing because the federal government agrees to reimburse the lender for the guaranteed amount if a borrower defaults. Section 1703 of EPAct authorizes DOE to provide loan guarantees for projects that avoid, reduce, or sequester air pollutants or man-made emissions of greenhouse gases and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued. EPAct describes several categories of projects that are eligible for guarantees under the program, including, among others, renewable energy systems, efficient end-use energy technologies, advanced nuclear facilities, advanced fossil energy technology, and CCS technologies. DOE’s Loan Programs Office, which administers the LGP, had issued three loan guarantees under Section 1703 supporting nuclear technologies as of August 2018, but none supporting advanced fossil energy or any other technologies. DOE provided $2.66 billion in funding for 794 advanced fossil energy R&D projects started from fiscal years 2010 through 2017. These 794 projects included 9 later-stage large demonstration projects and 785 other advanced fossil energy R&D projects. DOE provided $1.12 billion in funding to nine large projects aimed at demonstrating the commercial viability of CCS technologies. DOE provided $1.54 billion in funding to 785 other R&D projects for both coal and oil and gas technologies, mostly to universities and industry, located in 46 states and the District of Columbia. For nine large demonstration projects started from fiscal years 2010 through 2017, DOE provided $1.12 billion in funding. These projects received that funding from appropriations from the American Recovery and Reinvestment Act of 2009 (Recovery Act) and supported efforts to reduce the financial and technical risks of commercial CCS, according to a 2017 report by the Congressional Research Service. Six demonstration projects researched CCS technologies using coal, while three used other fuels, namely methane, ethanol, and petcoke. Recipients were generally required to provide a certain percentage of the cost of each R&D project, called cost share. Specifically, to receive funding, recipients of funding for the nine large demonstration projects agreed to pay at least $610 million in cost share for the demonstration projects. Three of those demonstration projects remained active at the end of fiscal year 2017. Four projects had their support withdrawn by DOE, and two were withdrawn by the recipient. These projects ended due to several factors such as a lack of technical progress, the closure of the Recovery Act appropriations account on September 30, 2015, and changing economic conditions—such as decreased natural gas prices which resulted in changes in the relative prices of coal and natural gas. The nine large demonstration projects represented over 40 percent of the $2.66 billion in advanced fossil energy R&D funding for the 794 projects (see fig. 1). Of the $1.12 billion in funding for the advanced fossil energy demonstration projects, DOE provided $616 million in funding for three large demonstration projects that started in fiscal year 2010 and that remained active as of the end of fiscal year 2017. Petra Nova Parish Holdings of Texas has a demonstration project underway that has retrofitted an existing coal-fired power plant in Texas with post-combustion carbon capture technology, according to DOE documentation. The objective of this project is to demonstrate the ability to capture 90 percent of the CO According to DOE documentation, DOE’s involvement with the project is scheduled to conclude in December 2019. The Petra Nova project captured and stored its first 1 million metric tons of CO in November 2017, according to DOE officials. Archer Daniel Midlands of Illinois had a demonstration project underway to capture CO per year using dehydration and compression processes and sequester it in the Mt. Simon Sandstone formation (a saline reservoir) in Illinois. DOE provided $141 million in funding for the project from fiscal years 2010 through 2017. DOE’s involvement with the project is scheduled to conclude in September 2019, according to DOE documentation. During calendar year 2017, the project captured and stored over 500,000 metric tons of CO emitted from two large steam-methane reformers, which produce hydrogen from methane, for its demonstration project in Texas. The captured gas is compressed and sent via pipeline to oil fields in eastern Texas to be used for enhanced oil recovery and thereby sequestered, according to DOE documentation. DOE provided $284 million in funding for the project from fiscal years 2010 through 2017. DOE’s involvement under this demonstration project’s award concluded the last day of fiscal year 2017. DOE provided $1.54 billion in funding for 785 other advanced fossil energy R&D projects started from fiscal year 2010 through 2017. For these 785 R&D projects, DOE provided: on average, $2.0 million per project; a median of $0.8 million per project; less than $5 million to 91.8 percent (721) of the 785 projects; and less than $1 million to 58.1 percent (456) of the projects. For projects started from fiscal years 2010 through 2017, total funding for projects by fiscal year started ranged from less than $100 million to more than $300 million (see fig. 2). As noted earlier, recipients of DOE’s R&D funding were generally required to provide cost share to support the cost of each R&D project. For 661 of the 785 projects, the initially agreed-upon dollar amount to be covered by recipients was $617 million in cost-share. Recipients did not provide a cost-share for the remaining 124 of the 785 projects, which were predominantly grants without cost share requirements, according to DOE officials. According to DOE data, DOE provided the largest amount of funding for projects started in 2010 because DOE received a supplemental appropriation for fossil energy R&D through the Recovery Act. DOE provided funding for 72 of the coal technologies research projects— totaling $237 million—using appropriations from the Recovery Act, according to DOE data. Of the 785 R&D projects for which DOE provided funding, most advanced fossil energy projects researched coal technologies rather than oil and gas, and recipients of the funding were generally universities and industry groups that were distributed across the country. Of the 785 projects, 698 (about 89 percent) involved coal technologies, receiving $1.40 billion (about 91 percent) of the $1.54 billion in funding DOE provided for the projects. The remaining projects and funding supported R&D for oil and gas technologies, according to DOE’s categorization of the projects by fuel type (see table 1). Within each fuel type, projects researched various technology types, such as R&D on coal gasification systems and the mitigation of methane emissions from natural gas infrastructure. The funding for the 785 R&D projects ranged from $5,000 for a research conference (oil and gas) to $125 million for a research facility focused on next-generation CCS technologies (coal). so that it does not change phases, but rather undergoes drastic density changes over small ranges of temperature and pressure. Such cycles have shown the potential for increased heat-to- electricity conversion efficiencies, high power density, and simplicity of operation compared to existing steam-based power cycles. $5,000 for a research conference to $29 million for the University of Texas at Austin’s active project on the deep-water characterization and scientific assessment of gas hydrates. Specifically, DOE identified the following four categories as oil and gas-related research areas: Gas Hydrates: The development of technologies to find, characterize, and recover methane from gas hydrates through field testing, numerical simulation, and laboratory experimentation, among other things. For example, DOE provided the University of California-San Diego $350,000 in funding for a 3-year active project to characterize the baselines and changes in gas hydrate systems. Natural Gas Infrastructure: The monitoring of the U.S. natural gas pipeline network, which includes more than 300,000 miles of interstate and intrastate transmission pipelines. For example, DOE provided the University of Pittsburgh $1.2 million in funding for a 3-year active project on multi-functional fiber sensors for pipeline monitoring and methane detections. Onshore Unconventional Resources: The production of hydrocarbons―primarily natural gas―from shale formations. For example, DOE provided the Ground Water Protection Council, of Oklahoma, $13 million for an 8-year project for data management and regulatory approaches related to hydraulic fracturing and geologic sequestration of CO The R&D projects in this area included research on geologic uncertainty prediction of oil and gas, and improvement of subsea systems reliability through automation and advanced technology. The recipients of the funding for the 785 advanced fossil energy R&D projects were mostly universities and industry groups that were located in 47 states and the District of Columbia. Of these recipients, approximately 51 percent were universities; 43 percent were industry groups; and 5 percent were other entities, including other federal agencies, such as the U.S. Geological Survey (see table 2). While university recipients received funding for a majority of projects, industry recipients received a majority of the funding (see table 3). Recipients were located in 47 states and the District of Columbia. The three states with the highest number of projects with recipients located in their states were Texas (100), California (61), and Ohio (53). The three states where recipients received the most funding were Texas (about $169 million), Alabama (about $161 million), and California (about $152 million) (see fig. 3). Although DOE issued three solicitations for applications for advanced fossil energy loan guarantees—most recently in fiscal year 2014, for up to $8 billion in loan guarantees—DOE had not guaranteed any loans for advanced fossil energy as of August 2018. Specifically, the 2006 and 2008 advanced fossil energy solicitations were for projects that involved coal-based power generation and that would incorporate CCS, coal gasification, or other beneficial uses of carbon, among other things. However, neither solicitation resulted in any loan guarantees, in part because during this timeframe of the late 2000s, natural gas prices fell, causing a shift in the market, which led to such coal-related projects no longer being economically competitive, according to DOE officials. According to the fiscal year 2014 solicitation, applicants could use any fossil fuel—including coal, oil, or natural gas—that would reduce, avoid, or sequester greenhouse gases. In response to the 2014 advanced fossil energy solicitation, DOE officials told us that DOE had received 19 applications total. According to DOE officials: Five fossil energy applicants were actively moving through the process of review as of August 2018. For example, in January 2018, one applicant issued a press release stating that it was pursuing a $1.9 billion loan guarantee to support the development of infrastructure for a proposed underground storage facility for natural gas liquids and intermediates. Nine fossil energy applicants had been idle or not following up with the Loan Programs Office. Three applicants did not meet certain eligibility requirements. Two companies withdrew their applications—one in 2014, and one in 2018. Of the five advanced fossil energy applicants actively in the process of DOE review, DOE offered a conditional commitment to guarantee up to $2 billion in loans to one applicant—Lake Charles Methanol—in December 2016. As we have previously reported, a conditional commitment is one where DOE commits to issue a loan guarantee if the applicant satisfies specific requirements. According to information on the DOE website, the Lake Charles Methanol plant in Louisiana would produce methanol from the gasification of petcoke, and capture and transport the CO to Texas for enhanced oil recovery. According to DOE documentation, the Lake Charles project planned to leverage the work and experience gained from the earlier DOE demonstration project by Leucadia Energy. We provided a draft of this report to DOE for review and comment. DOE provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In this report, we describe 1) the Department of Energy’s (DOE) funding of advanced fossil energy research and development (R&D) projects started from fiscal years 2010 through 2017 and the types of projects and recipients that received funding, and 2) DOE’s loan guarantees, if any, for advanced fossil energy projects from fiscal year 2006 through August 2018. You asked us to review DOE’s funding for advanced fossil energy projects. To address the first objective, we reviewed relevant laws, regulations, and DOE guidance. We analyzed DOE advanced fossil energy R&D project data for fiscal years 2010 through 2017. We focused our review on advanced fossil energy R&D projects that received funding through the Office of Fossil Energy’s (FE) National Energy Technology Laboratory (NETL) because the 794 projects represent all of the advanced fossil energy R&D projects in our scope started from fiscal years 2010 through 2017. We used fiscal year 2010 as the start date because DOE officials told us that DOE’s current data management system came into use for the R&D projects that started in fiscal year 2010. We used fiscal year 2017 as the end date because that was the most recent complete year for which data were available. DOE provided us with a spreadsheet that included key project information—such as the name of the recipient of the R&D funding and the project start date—as well as obligations data for each project started for the period of our review (fiscal years 2010 through 2017), by the fiscal year during which the project was started, by summing the obligations for the project from each year. We reported on DOE’s funding for these R&D projects; DOE generally provided financial assistance for these projects through grants or cooperative agreements. In addition, NETL’s in-house R&D work was outside of the scope of our review. To assess the reliability of the funding data, as well as the specific project information for the 794 R&D projects, we interviewed data specialists at DOE Headquarters, FE, and NETL and reviewed DOE internal guidance for the maintenance of agency data. We found the data to be sufficiently reliable for our purposes. We also reviewed DOE websites and documentation, including fact sheets, and interviewed officials from FE and NETL. To characterize the kinds of groups that received advanced fossil energy R&D funding, we developed the following definitions for coding each recipient: University: any institution of higher education, such as a public or non-profit private college, junior college, or university. Federal financial assistance means assistance that non-federal entities receive or administer in the form of grants, property, cooperative agreements, food commodities, direct appropriations, or other assistance, and can also include loans, loan guarantees, interest subsidies, and insurance, depending on the context, but does not include amounts received as reimbursement for services rendered to individuals in accordance with OMB- issued guidance. 2 C.F.R. § 200.40. See also 31 U.S.C. § 7501(5). A grant agreement is generally defined as a legal instrument of financial assistance between a federal awarding agency and a non-federal entity that is used to enter into a relationship the principal purpose of which is to transfer anything of value from the federal awarding agency to the non-federal entity to carry out a public purpose authorized by law, and not to acquire property or services for the federal awarding agency’s direct benefit or use. 2 C.F.R. § 200.51. A cooperative agreement is distinguished from a grant in that it provides for substantial involvement between the federal awarding agency and the non-federal entity in carrying out the activity contemplated by the federal award. 2 C.F.R. § 200.24. For purposes of our report, we use the term awards to refer to both grants and cooperative agreements. organized primarily for profit. Industry includes some organizations that were founded as non-profit corporations but call themselves “companies” and/or describe “serving clients.” Other: any entity not associated with a university or industry. Other includes groups such as other federal government agencies, as well as non-profit corporations and other entities which we could not identify conclusively as either industry or universities. We used these three categories, and their definitions, to guide us in the coding process. After developing these definitions, three analysts independently coded each recipient as a university, industry, or other. Our method was to examine the identifying information on each recipient’s website and decide which category best described the entity. We also had an independent analyst check the coding category that we had assigned to each recipient and verify that we had made a reasonable coding decision. To describe the status of DOE’s advanced fossil energy loan guarantees, we reviewed relevant laws, regulations, and guidance, as well as past GAO reports describing DOE’s administration of the loan program. We also reviewed summary information that DOE provided on applications for loan guarantees for advanced fossil energy projects. We analyzed information that DOE provided on applications for loan guarantees for advanced fossil energy projects under the Loan Guarantee Program (LGP) and other related information for fiscal year 2006 through August 2018. We used fiscal year 2006 as the start date because it was the first year that DOE issued an advanced fossil energy project solicitation—an announcement of opportunities for loan guarantees for advanced fossil energy projects—and we used August 2018 as the end date in order to provide the most up-to-date information as possible. We also reviewed the advanced fossil energy project solicitations DOE issued during this timeframe. To assess the reliability of the summary information, we interviewed LGP staff who maintain the information for the advanced fossil energy applications, and reviewed DOE documentation. We found the data to be sufficiently reliable for our purposes. In addition, we interviewed officials from the Loan Programs Office who work on the LGP. We conducted this performance audit from March 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Karla Springer (Assistant Director), Rebecca Makar (Analyst-in-Charge), TC Corless, Cindy Gilbert, Carol Henn, Kirk Menard, Patricia Moye, Sheryl Stein, and Sara Sullivan made key contributions to this report. Also contributing to this report were Carolyn Blocker, Marcia Carlsen, Nirmal Chaudhary, Jaci Evans, Ryan Gottschall, Keesha Luebke, and John Yee.", "summary": "One aspect of DOE's mission is to secure U.S. leadership in energy technologies. To that end, DOE funds R&D for energy projects, including for advanced fossil energy (innovative technologies for coal, natural gas, and oil). DOE provides funding for R&D projects, including large projects designed to demonstrate the commercial viability of technologies. Also, DOE is authorized to make loan guarantees to support certain energy projects through its Loan Guarantee Program, which is administered by its Loan Programs Office. GAO was asked to review DOE's funding for advanced fossil energy projects. This report describes DOE's funding for advanced fossil energy R&D projects started from fiscal years 2010 through 2017 and the types of projects and recipients that received funding, among other objectives. For purposes of this report, GAO used the term funding to mean obligations. GAO analyzed relevant laws, regulations, and guidance; DOE data on R&D funding for fiscal years 2010 through 2017; and DOE documents. GAO also interviewed DOE officials in the Office of Fossil Energy, the National Energy Technology Laboratory, and the Loan Programs Office. The Department of Energy (DOE) provided $2.66 billion in funding, or obligations, for 794 research and development (R&D) projects started from fiscal years 2010 through 2017 to develop advanced fossil energy technologies. Such technologies include processes for converting coal into synthesis gas composed primarily of carbon monoxide and hydrogen, and recovering methane from gas hydrates. Of the $2.66 billion, DOE provided $1.12 billion in funding for 9 later-stage, large demonstration projects, which were to assess the readiness for commercial viability of carbon capture and storage (CCS) technologies. CCS involves capturing man-made carbon dioxide at its source and storing it permanently underground. DOE provided the remaining $1.54 billion in funding for 785 other projects in amounts that were relatively small—over half were for less than $1 million. Six demonstration projects researched CCS technologies using coal, while three used other fuels. The nine demonstration projects received funding ranging from $13 million to $284 million. As shown in the figure, three projects implementing CCS technologies were active as of the end of fiscal year 2017. Also, DOE withdrew its support for four projects, and two projects were withdrawn by the recipients—all before completion. These projects did not reach completion due to several factors, such as a lack of technical progress, or changes in the relative prices of coal and natural gas that made the projects economically unviable. Of the 785 other projects, about 89 percent involved R&D of coal technologies, such as coal gasification—the conversion of carbon-containing material into synthesis gas. The other 11 percent of the 785 projects involved R&D of oil and gas technologies, such as the development of technologies to find, characterize, and recover methane from gas hydrates. GAO is not making any recommendations.", "document_type": "gao"}
{"report": "and individuals made by an employee who believes he or she has witnessed certain wrongdoing, such as gross mismanagement Reprisal Complaint: Following a disclosure, a complaint that an employee has experienced reprisal as a result of the disclosure, such as demotion or discharge. For contractor and grantee employees at NASA, whistleblower protections have changed over time. For example, by statute, in 2007, NASA contractor employees were protected against reprisal if they disclosed information relating to a substantial violation of law related to a contract. However, in 2008, amendments to the whistleblower statute provided protections only to those contractor employees at NASA who reported “a substantial and specific danger to public health or safety.” In 2013, the statute was amended again to include disclosures of gross mismanagement of a NASA contract or grant, a gross waste of Administration funds, and abuse of authority relating to a NASA contract or grant, or a violation of law, rule, or regulation related to a NASA contract or grant. In 2014, the statute was further amended with the only significant change to protect grantee and subgrantee employees. See table 1 for detailed description of the 2008, 2013, and 2014 amendments of the statute. Under the current statute, the NASA Office of Inspector General and Administrator have different responsibilities. Since the 2014 amendments, contractor, subcontractor, grantee, and subgrantee employees are protected from reprisal if they disclose to certain persons or bodies information they reasonably believe is evidence of gross mismanagement of a federal contract or grant, a gross waste of federal funds, an abuse of authority relating to a federal contract or grant, a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a federal contract or grant. Additionally, contractor employees may make whistleblower disclosures to several entities, including a management official at the contractor. Figure 1 depicts the disclosure process and the complaint process. NASA OIG Role: Upon receiving a reprisal complaint, the OIG must evaluate whether a reprisal complaint is covered under the statute. In addition to the steps described in figure 1 for investigating complaints, there are instances when the OIG does not investigate. The OIG might not investigate for a variety of reasons, such as in cases where the complaint is already under investigation by another authority such as another OIG, or otherwise does not allege a violation of the law, such as if whistleblower disclosure does not constitute gross fraud, waste, abuse or mismanagement. If the OIG determines the case is not covered under the statute, it may then notify the complainant that no further action will be taken on the reprisal complaint. Administrator Role: Upon receipt of the NASA OIG investigation report, the NASA Administrator (the head of agency) has 30 days to determine whether the contractor made a prohibited reprisal and issue an order denying or granting relief. According to NASA officials, during the 30-day period after the agency head receives the OIG report, the agency practice has been to ask the OIG for any additional investigative work and also afford the complainant and the contractor an opportunity to submit a written response to the OIG report. Any person adversely affected or aggrieved by the administrator’s order may, within 60 days of issuance, obtain a limited review by the U.S. circuit court of appeals. Agency Procurement Official Role: Under the NFS regulations, NASA contracting officers are also responsible for inserting an NFS whistleblower clause into applicable contracts that requires contractors communicate to their employees their rights under the statute. The NFS whistleblower clause lays out the responsibility of contractors to communicate to their employees their rights under the statute, in writing and in their predominant native language. All contracts over the simplified acquisition threshold awarded on or after July 29, 2014, require a whistleblower clause. The statute also requires NASA to make best efforts to include a clause providing for the applicability of the 2013 amendments in contracts awarded before July 1, 2013—the effective date of the 2013 amendments—that have undergone major contract modifications. The terms “best efforts” and “major modifications” are not defined in the statute. Unlike provisions affecting contractors, the statute does not require NASA to ensure that grantees or subgrantees notify employees in writing of their rights under the statute. From 2008 to June 2017, NASA OIG addressed whistleblower reprisal complaints within required time frames, according to OIG officials. At the time we initiated this review, the OIG’s guidance for handling reprisal complaints had been updated to reflect most statutory changes; however, it did not include guidance regarding subgrantees. During the course of our review, the OIG updated the investigation guidance in October 2017 to include subgrantee employees. NASA OIG completed 6 reprisal investigations within required time frames. The OIG received 277 whistleblower disclosures leading to 48 reprisal complaints from 2008 through June 2017, and handled those complaints within required time frames, according OIG officials. For the 6 of those reprisal complaints that were investigated, the OIG used extensions. OIG officials said that extensions may be necessary for a number of reasons, including that the complaint may be highly technical in nature, requiring the OIG to find subject matter expertise to better understand the nature of the whistleblower complaint and whether it constitutes gross fraud, waste, abuse, or mismanagement. When the OIG receives a reprisal complaint, complainants are asked to fill out a whistleblower complaint form and an investigation is initiated. See figure 2 below for the process by which the OIG conducts its investigations. In addition, there were 5 complaints currently under investigation and 37 complaints during this time frame that the NASA OIG did not investigate because the OIG deemed them to be frivolous, determined they were not covered under the statute, or the complaint was handled in another forum, such as the court system or by another OIG. Complaints were deemed frivolous for several reasons, including if the complainant did not want to disclose his or her identity and proceed with the claim, or the whistleblower disclosure happened after the reprisal. OIG officials told us that when cases are disposed of without an investigation, the OIG notifies the complainant of the decision in writing. Figure 3 shows the disposition of the 48 reprisal complaints received from 2008 through June 2017. The OIG has developed guidance for conducting investigations, which includes a chapter on contractor and grantee whistleblower reprisal complaints. Although most changes to the statute (such as to whom reprisal may be reported) had been incorporated into the investigation guidance, the initial guidance provided to us by the OIG did not include a 2014 statutory requirement to extend protections to subgrantees. During the course of our review, in October 2017, the OIG updated its guidance for investigating reprisal complaints to include subgrantee employees. Because subgrantees are now protected by statute, including them in the investigation policy will help ensure they are consistently extended protections through OIG investigations. In addition to its guidance, OIG officials said they have developed training specific to whistleblower investigations for new investigators, conducted internal training for investigators, and external training for contractor employees. Additionally, the OIG Investigators’ Central Field Office conducts periodic training for investigators that includes any updates to whistleblower protections. With regard to external training, the OIG officials said that investigators at some of the NASA centers—with the largest contract activity—have conducted on-site training for some contractors. This training is conducted as part of general fraud awareness training. The Administrator failed to meet the required review time frame and issue an order of final determination of reprisal for 5 completed investigations received from the OIG from 2008 through June 2017. In all 5 cases, the Administrator took longer than the 30 days to issue an order. In one of those 5 complaints, an official from the Office of General Counsel was unable to provide us with the issued order and said he did not believe one was completed, and could not provide an explanation as to why an order was not completed. For the 5 reprisal complaints, figure 4 shows the number of days from when the Administrator received an OIG report of findings to the time when an order of final determination was documented. In addition to the 5 complaints mentioned above, there was another OIG investigation of a reprisal complaint that did not require response from the administrator within 30 days, but was finalized within our review time frame, for a total of 6 completed OIG investigations of reprisal complaints. For 3 of the 6 complaints, the OIG found that reprisal had occurred and reported those findings to the administrator for final determination of reprisal. The Administrator determined that none of these 3 complaints qualified for protection under the law. For 2 of these complaints, the Administrator found that they did not qualify for protections because they fell under the 2008 version of the statute and failed to allege a violation specific to public health and safety. In 2017, a court affirmed the Administrator’s position. For the third complaint, the Administrator determined reprisal could not be substantiated due to the complainant not meeting the standards of evidence under the statute. Further, we found that NASA does not have a standard process in place for the Administrator to review cases that qualify for protections under the statute and issue an order of final determination. According to an official from the Office of General Counsel, the agency has no standard process to ensure the contractors are afforded due process, among other things. The official from Office of General Counsel said the Administrator may need to conduct an additional investigation in some cases. He said that each case is different and would have to be handled on a case by case basis. In addition, the official said the Administrator may need to conduct hearings, independent of the OIG. Moreover, the official from Office of General Counsel highlighted concern that the Administrator’s office does not have the resources to conduct additional investigative work, which he said is a key contributor for the office’s inability to meet the 30-day timeline to issue an order of final determination. Despite acknowledging these challenges, the Administrator does not have a formal process or criteria to monitor and evaluate the way the office handles issuing an order of final determination of reprisal to ensure that it meets the statutory time requirements. Because the Administrator took longer than 30 days to respond to all reprisal complaints, including one where the Office of General Counsel failed to provide evidence that the Administrator responded at all, there may be the unintended consequence of disincentivizing future whistleblowers from making disclosures who fear their complaint will not be handled timely. Internal controls require that management should establish and operate monitoring activities to monitor the internal control system, evaluate the results, and take appropriate action to address issues on a timely basis. Without monitoring, evaluating, and taking appropriate corrective action based on the way the Administrator or his or her designee makes a final determination of reprisal, there is no assurance that whistleblower reprisal complaints will be handled within required time frames in the future. In almost all of the contracts we reviewed, NASA had met its obligation to ensure its contractors are communicating whistleblower protections to their employees through a whistleblower contract clause. We also found that NASA has put in place guidance to its contracting workforce on the protections, and guidance on when to include the whistleblower clause in contracts. However, we found that some NASA officials have interpreted this guidance differently. Further, NASA’s guidance does not reflect an agency-wide policy on when to include the whistleblower clause when modifying a contract. In most cases, NASA included a clause regarding whistleblower reprisal protections in applicable contracts to ensure contractors communicate rights to its employees. But we found that the clause was not included in all relevant contracts in our review. Based on our review of a generalizable sample of contracts, we estimate that 98 percent of contracts would be expected to include a whistleblower clause at the time new contracts were awarded in applicable contracts in 2016, and 2 percent would not. Within our sample, 4 contracts did not have a whistleblower reprisal clause. After we shared our contract file review findings with NASA officials, they modified 3 of the 4 contracts to include the missing required whistleblower clause. For the remaining contract, the contractor performance was complete, the contract had been closed, and no further action will be taken. According to NASA procurement officials, human error, combined with its former contract writing system, could explain why the contracts in our sample did not have the required clause. They explained that the former contracting writing system relied on templates and did not automatically include the NFS clause into all contracts. Under this system, contracting officers used templates that included a list of all potential or applicable NFS and FAR clauses, which are incorporated through a manual process. Officials said that if a clause were included in the templates, it is unlikely that it would be removed because doing so would require supervisory approval. NASA procurement officials told us that the agency launched a new contract writing system in June 2017. They said that under the new contract writing system, contracting officers use a logic system that prepopulates each contract with required clauses. They said that the new automated system will likely lead to fewer human errors because inserting the clause will not be a manual process. Because the new system is still being implemented, we were unable to evaluate whether the risk of human error has been reduced or eliminated to ensure applicable contract awards have the clause. Under the previous and current systems, NASA contracts are to undergo various levels of review prior to award—including attorney review—at the centers or headquarters based on risk level and dollar thresholds. For example, contracts awarded by JSC valued at over $50 million are to be reviewed by headquarters. NASA procurement officials stated that they conduct procurement management reviews, and centers conduct annual self-assessments; however, at one center, officials pointed out that these reviews have not previously included whether a whistleblower clause is included in new contracts or major modifications. They said this is because reviews typically focus on known issues or program risk, and inclusion of the whistleblower clause has not been previously identified as an issue or risk. Contractors we spoke with were generally aware of their responsibilities to communicate reprisal protections to their employees because their contracts with NASA included the required NFS whistleblower clause. In response to our review, NASA procurement officials said they plan to include a review of the inclusion of NFS whistleblower clause in future compliance reviews as an area of emphasis and will instruct centers to include whether the clause is included in applicable contracts as part of the centers’ self-assessment process. Three elements of NASA’s whistleblower reprisal protection guidance—its procurement notice, NFS clause, and definition of major modification— contribute to potential confusion or inconsistent application of whistleblower reprisal protections. First, in July 2014, NASA notified its contracting officials of the changes to the NFS required by the 2013 amendments to section 2409 Title 10 of the U.S. code through a procurement notice 04-80, but this notice has been interpreted differently by officials in NASA Headquarters, a NASA center, and the OIG. Procurement notices are drafted by NASA Headquarters, reviewed and approved by NASA general counsel and NASA’s Office of Procurement. The NASA centers, acting through their procurement offices and, as needed their legal counsel, review and implement the notices. After the procurement notice was issued, some NASA officials interpreted it differently. For example, in one instance, a NASA center Chief Counsel’s office attorney advised a center procurement official that reprisal protections found in the 2013 amendments extend to contractors’ employees working on contracts awarded before the effective date of the amendments. This is true, he said, regardless of whether the contract contains any clause explicitly making the 2013 amendments applicable. However, both the OIG and the Administrator’s counsel have expressed a different understanding of the statute conveyed in the notice, stating that a clause making the 2013 amendments applicable must be in a contract in order for the complainant to be protected under the statute. Later, the attorney from the center Chief Counsel’s office revised his understanding of the statute and concluded the procurement notice was not accurate as written. Second, NASA personnel have different understandings about whether the NFS clause is sufficient for contractor employees to be covered by the statute. The NFS clause instructs contractors to inform their employees in writing of contractor whistleblower employee rights; but, unlike the FAR clause that is used to implement similar legislation for other agencies, the NFS clause does not state that employees working on the contract are subject to the whistleblower rights and remedies. The attorney from a NASA center said that the NFS clause is enough to ensure contractor employees are given rights under the statute. However, OIG officials have said that without including that element of the clause, employees working under NASA contracts awarded prior to the effective date of the 2013 amendments may not be covered by those amendments. See table 2 for description of the clauses and their differences. Third, the lack of agency-wide guidance for when to include the clause in major modifications leads to different implementation of the requirement. The 2013 amendments require that NASA makes best efforts to include a whistleblower clause in contracts undergoing a major modification. NASA’s July 2014 procurement notice also encourages contracting officers to include the NFS whistleblower clause when issuing major modifications to contracts awarded before July 29, 2014. However, it does not specify what a major modification is under this statute, and the statute itself does not define “major.” According to NASA procurement officials at headquarters and at two NASA centers, it is at the discretion of the NASA Centers’ offices of procurement and contracting officers to decide if a clause is inserted into modifications, and whether they are considered major. Procurement officials and the contracting officers we spoke with told us that there is no definition of major modifications in the law, regulation, or NASA Headquarters or Center policies or guidance. NASA procurement officials said this is because it could be different for each contract and the contracting officer makes the determination based upon the facts related to the situation. Nevertheless, without communicating the factors to consider when determining whether a modification is major and whether that contract should or should not include the clause, NASA and the Centers’ procurement officials are at risk of potential inconsistent incorporation of the clause among applicable contracts. One attorney in NASA’s General Counsel’s Office said there may be costs associated with asking a contractor to insert new clauses—such as the whistleblower clause—into an existing contract during a major modification because it would require a bilateral negotiation between the contractor and the agency. However, one contractor we spoke with said that there would be no cost to adding the clause and that doing so would not be an issue because the whistleblower clause is consistent with the internal whistleblower policies and practices of the institution. Further, he said that the institution he represents would be hesitant to argue against inclusion of the NFS clause in its contracts with NASA. Internal control standards require that an entity should internally communicate necessary quality information in order to meet requirements of the mission. These 3 areas of potential confusion related to NASA’s current guidance could result in different application of the law, unless they are clarified. Although whistleblower protections are now extended to grantee employees by statute, NASA does not have a mechanism in place to communicate the protections to grantees or subgrantee employees. Unlike the requirement for NASA to ensure contractors communicate whistleblower reprisal rights to their employees in writing and in the employees’ predominant language, the statute does not prescribe a similar requirement for NASA to ensure that grantees communicate whistleblower reprisal rights to their employees. During the grant application process, NASA requires grantees to attest that they will not require grantee employees to sign confidentiality agreements that would prohibit them from reporting fraud, waste, and abuse. NASA officials said that grant awards do not include a mechanism, such as a term or condition, to encourage NASA grantees to notify their employees of their whistleblower reprisal protections. In the 10 NASA grants from fiscal year 2016 that we reviewed, there was no requirement included for grantees to communicate these protections to employees. However, we found that all 10 grants included a statement that each award was subject to all applicable laws and regulations of the United States in effect on the date of award, including the Uniform Guidance. For federal grants in general, the Uniform Guidance provides a government- wide framework for grants management. Within this guidance, there is a reference to the whistleblower protections in the statute; however, it does not explicitly describe the statute’s requirements. The grant advocacy group and representatives of three NASA grantees we spoke with were aware that some protections exist and noted that many grantees have their own whistleblower policies, but were not aware of the specific protections provided by the statute, which indicates that opportunities exist for improving communications between NASA and its grantees about these protections. Further, representatives of the grant advocacy group noted that the whistleblower protections for grantee employees were not specifically mentioned at recent annual meetings where grantees and federal officials discuss issues that affect grantees. Internal controls require that management externally communicate the necessary quality information to achieve the entity’s objectives. Without additional communication about the protections provided by the statute, grantees may not fully understand or appreciate the significance of the rights afforded to their employees, and grantee employees may not be aware of their whistleblower reprisal protections, which could hinder their willingness to report instances of fraud, waste, and abuse. Because contractor and grantee employee whistleblowers risk reprisal after disclosing potential fraud, waste, abuse and mismanagement, ensuring they are protected from retaliation or adverse consequences is critical. Without monitoring and evaluating the timeliness of reviewing and responding to reprisal complaints, the Administrator may not be prepared to determine reprisal on future cases within the statutorily required 30 days. Additionally, although NASA has developed guidance related to contractor protections, this guidance has led to inconsistent interpretation of the law and could potentially lead to inconsistent application of how contractor protections for employees are conveyed. More clear guidance would help contracting officers determine when to incorporate the NFS clause into major modifications to ensure consistency throughout the agency. Finally, because unlike contracts, there is no similar clause for grants, NASA is in the position to help ensure grantees know their employees’ rights against reprisal if they observe and disclose fraud, waste, abuse or mismanagement. However, NASA has not effectively communicated to grantees information about these provisions and as a result grantees and their employees may not be fully aware of these protections. Consequently, if they witness fraud, waste, abuse or mismanagement, they may not be willing to disclose those for fear of reprisal. We are making three recommendations to NASA: The Administrator should monitor, evaluate, and make appropriate corrective actions, such as a documented process, to ensure it reviews reprisal complaints in a timely manner. (Recommendation 1) The Administrator should review NASA’s guidance or develop other guidance, including defining major modification, to clarify when whistleblower protections are conveyed. (Recommendation 2) The Administrator should communicate whistleblower protections to grantees and subgrantees and their employees. (Recommendation 3) We provided a draft of this product to NASA for review and comment. NASA provided written comments on a draft of this report. In its written comments, reprinted in appendix II, NASA concurred with all three recommendations. In its response to our recommendations NASA agreed to develop and document a process to ensure it reviews reprisal complaints in a timely manner to ensure all parties’ due process rights are protected, review existing procurement policy and clarify guidance as appropriate, and update NASA grant guidance to communicate whistleblower protections to grantees, sub-grantees and their employees. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and members. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or oakleys@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. To assess the extent to which National Aeronautics and Space Administration’s (NASA) Office of Inspector General (OIG) has investigated contractor and grantee whistleblower reprisal complaints and developed guidance for the investigations, we reviewed data provided by the NASA OIG on the total number of whistleblower allegations of fraud, waste, abuse, misconduct, or mismanagement and reprisal claims. We also reviewed the number of contractor and grantee employee whistleblower allegations and reprisal complaints provided by the OIG and the outcomes or decisions reached by the OIG of a reprisal complaint from fiscal years 2008 through 2017. We assessed the reliability of these data by asking the NASA OIG to describe the source(s) of information used and steps taken to identify the numbers provided, and limitations and caveats that would affect GAO’s use of the data—such as the data being self-reported by the OIG and Office of General Counsel. Based on these steps, we determined the data to be sufficient for our purposes of determining how the complaints were addressed. Additionally, we reviewed relevant documentation to assess the extent to which the NASA OIG was conducting investigations and communicating findings to the NASA Administrator within required time frames. To determine the extent NASA OIG developed guidance, we interviewed or obtained written answers from OIG officials about their processes and practices for investigating whistleblower reprisal complaints. We reviewed the guidance and training and other materials that NASA OIG uses to implement whistleblower protection investigations. We also visited Johnson Space Center (JSC)—selected because it had the highest number of reprisal cases from 2008 through 2017—to discuss policies and procedures specific to that center with OIG investigators and the OIG program manager for whistleblower protections. Because they are also a part of the Investigators’ Central Field Office, we also spoke with investigators at Marshall Space Flight Center and Kennedy Space Center. To assess the extent to which NASA’s Administrator meets the statutory timeliness requirements to review reprisal complaints, we reviewed the timeliness of the Administrator’s final determination to ensure that NASA was meeting statutory requirements. Specifically, we reviewed relevant documentation to assess the extent to which the Administrator was making final determination of reprisal in 30 days—the required review period specified by statute. We reviewed the Administrator’s documentation on the final disposition of reprisal investigations and compared the date of the Administrator’s final decision to the date of receipt of the reprisal investigations from the NASA OIG. We also conducted interviews with the Office of General Counsel, who spoke on behalf of the Administrator. To assess the extent to which NASA communicated the applicable whistleblower reprisal protections externally with contractors, we reviewed a generalizable sample of NASA contracts to determine the extent a required whistleblower clause was included. We used the Federal Procurement Data System-Next Generation (FPDS-NG) to generate a sample of contract actions over $300,000 that were awarded by NASA in fiscal year 2016. We selected contracts that were not only over the simplified acquisition threshold (generally $150,000), but were over $300,000 to account for possible exceptions and to ensure that we were sampling contracts that would be required to include a whistleblower reprisal clause. From the 270 contracts identified, for purposes of examining the inclusion of NASA Federal Acquisition Regulation Supplement (NFS) clause 1852.203-71 (or other potentially applicable clauses) in NASA contracts, a legal requirement, we selected a generalizable random sample of 100 contracts. The sample is projectable to NASA fiscal year 2016 contracts; however, we did not make a case by case legal determination for contracts not in our sample. We randomly selected 10 contracts from each center that awarded new contracts in 2016, and for those centers that did not have 10 contracts, we selected all contracts. The remaining contracts were then pulled from the NASA Shared Services Center (NSSC) because that center does a majority of NASA’s contracting. We asked for contracts awarded in fiscal year 2016 to ensure we were sampling contracts that are required to have the clause and would be reasonably accessible by NASA. We excluded interagency contracts and task or delivery orders awarded using blanket purchase agreements to ensure we sampled base contracts awarded by NASA, not other agencies. We estimated the percentage of NASA contracts expected to include whistleblower clause(s) as the weighted average of results from the 10 contracting centers. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that could have been drawn. Because each sample could have provided different estimates, we express the uncertainty associated with any particular estimate as a 95 percent confidence interval. This is the interval that, with repeated sampling, would be expected to contain the actual population value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that this confidence interval contains the true percentage of contracts expected to include whistleblower clause(s); however, to assess legal compliance we would have to make a case by case determination, which we did not do. We conducted data reliability checks on the FPDS-NG dataset by comparing it to contract documentation obtained from contract files and determined it was sufficiently reliable for our purposes. Additionally, we conducted interviews with NASA procurement officials and contracting officers at multiple locations including NASA Headquarters, NSSC and JSC to discuss any additional measures NASA takes to communicate whistleblower protections to its contractors and their contractor employees. To further assess internal communication, we reviewed relevant documentation, including guidance, and conducted interviews with procurement officials, NASA’s Office of General Counsel, and Chief Counsels at JSC, NSSC, and Marshall Space Flight Center. To assess the extent to which NASA communicated the applicable whistleblower reprisal protections with grantees, we reviewed a non- generalizable sample of grants awarded by NASA in fiscal year 2016 to determine whether NASA grants included a mechanism notifying grantees of their employees’ whistleblower rights and reprisal protections. We used FPDS-NG to identify a non-generalizable random sample of 10 grants awarded by NASA in fiscal year 2016 for review to determine whether any of the selected grants included a mechanism to communicate whistleblower reprisal protections to grantee employees. We conducted data reliability checks on the FPDS-NG data by comparing it to grant documentation obtained from grant awards and determined it was sufficiently reliable for our purposes. Additionally, we conducted interviews with NASA grant making officials to discuss any additional measures NASA takes to communicate whistleblower reprisal protections to its grantees and their grantee employees. Finally, in order to learn about contractor and grantee experiences during NASA’s implementation of enhanced whistleblower protections, we conducted interviews with or received written answers to questions from a selected group of NASA contractors and grantees. Using FPDS-NG data, we selected institutions with the highest and lowest contracts (including small business contracts) and grants by obligations in 2016. Using these selection criteria, we selected three contractors and three grantees to meet with based on the amount of funds obligated in 2016. We ultimately interviewed or obtained written answers from all selected contractors and grantees. Additionally, we spoke with two advocacy groups, one about grants and one about contracts. We conducted this performance audit from March 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Penny Berrier (Assistant Director), Mary Diop, Lorraine Ettaro, Alexandra Gebhard, Kurt Gurka, Stephanie Gustafson, Julia Kennon, Jordan Kudrna, Kate Lenane, Roxanna Sun, and Khristi Wilkins made key contributions to this report.", "summary": "NASA obligated over $18 billion in contracts and more than $1 billion in grants in fiscal year 2016, and it relies on a significant number of contractor and grantee employees to accomplish its work. These employees are legally protected from reprisal—such as demotion or firing—for whistleblowing. GAO was asked to review NASA's whistleblower reprisal protections for contractor and grantee employees. This report addresses, among other things, the extent to which (1) NASA's Inspector General investigated contractor and grantee whistleblower reprisal complaints; (2) NASA's Administrator reviewed reprisal complaints in a timely manner; and (3) NASA communicated the applicable whistleblower reprisal protections to contractors. GAO reviewed NASA and its Inspector General's policies and guidance; reviewed a generalizable sample of 100 contracts from all NASA centers with contracts in fiscal year 2016; and interviewed relevant officials and contractors, grantees, and advocacy groups. From 2008 through June 2017, National Aeronautics and Space Administration (NASA) contractor and grantee employees submitted 48 reprisal complaints such as alleged firing or demotion for reporting fraud, waste, or abuse within the government. NASA's Inspector General addressed all 48 complaints, completed investigations for 6 of those complaints, and forwarded investigation reports to the NASA Administrator, who is responsible for making a final determination of whether reprisal occurred. The Administrator determined that none of the complaints qualified for protection under the law. Further, in 5 of the 6 cases forwarded by the OIG, the Administrator was required by statute to make a final determination of reprisal within 30 days. GAO found that the Administrator did not meet this required time frame for all 5 cases and had no documented response for one of them (see figure for all 5 cases). According to officials from NASA's Office of General Counsel, each case must be handled on a case by case basis to ensure due process and 30 days is insufficient time to issue an order of final determination of reprisal. However, in order to ensure that whistleblower reprisal complaints are handled within required timeframes, NASA would have to monitor and evaluate its processes for making final determinations of reprisal, but it has not yet taken this step. Consequently, NASA does not know what changes may be needed to ensure that it is meeting the statutory 30-day requirement. NASA communicates whistleblower protections to contractors through inclusion of a required contract clause. For example, GAO found that almost all—98 percent—of contracts would be expected to include a whistleblower clause as required by statute. However, certain elements of NASA whistleblower protection guidance have contributed to a different understanding of reprisal protections among officials at headquarters, a NASA center, and the Inspector General. For example, a July 2014 procurement notice and contract clause language resulted in different interpretations about when the protections apply. Federal internal control standards require that an entity should communicate necessary quality information internally to meet the objectives of its mission. Without additional clarity in its guidance on when the protections apply, NASA centers and procurement officials will be at risk of inconsistent implementation of the law. GAO is making three recommendations to NASA, including evaluating the process for reviewing reprisal complaints to ensure it is meeting the required timeframe and clarifying guidance on when protections apply to contractor employees. NASA agreed with the recommendations and plans to develop a documented process to ensure it reviews reprisal complaints in a timely manner and clarify guidance as appropriate, among other things.", "document_type": "gao"}
{"report": "State is the lead agency responsible for implementing American foreign policy and representing the United States abroad. It operates over 275 embassies, consulates, and other posts worldwide, staffed by over 13,000 Foreign Service officers. State has the authority to grant allowances to employees serving overseas to offset the cost of living and working overseas as well as to recruit and retain employees who serve in difficult and dangerous locations. Two key offices within State are involved in administering and processing allowances for overseas employees. State’s Office of Allowances in the Bureau of Administration develops and coordinates policies, regulations, standards, and procedures to administer allowances under the Department of State Standardized Regulations. The office compiles statistics on overseas living costs and conditions and computes the established allowances to compensate U.S. government civilian employees for costs and hardships related to assignments abroad. State’s Bureau of the Comptroller and Global Financial Services (CGFS) processes allowances for State employees through the Consolidated American Payroll Processing System, State’s payroll system, and captures information on payments for all allowances through the Global Financial Management System, State’s accounting system. State uses the Consolidated American Payroll Processing System to process American employees’ pay, including allowances paid directly to employees. This system generally captures information on the location where an employee is assigned. According to State officials, the Global Financial Management System captures information on all State payments, including those paid through vouchers, such as for rent paid directly to the landlord. State provides 14 allowances to employees serving overseas to compensate them for the costs and hardships related to foreign assignments across four broad categories—cost-of-living, recruitment and retention incentives, quarters, and other allowances. Table 1 includes a brief summary of these allowances. Cost-of-living allowances reimburse employees for certain excess costs, exclusive of any quarters costs, incurred from employment overseas. The following six allowances fall into this category: The post allowance is granted to employees officially stationed at posts or foreign areas where the cost of living, exclusive of the cost of quarters, is substantially higher than in Washington, D.C. It is designed to permit employees to spend the same portion of their salaries for standard living expenses as they would if they were living in Washington, D.C. The Office of Allowances updates the post allowance at least every other year based, in part, on a survey filled out by posts. As part of this process, posts must collect and compile prices for a sample basket of goods from stores that U.S. government employees serving at that post frequent (see fig. 1). For example, as of September 3, 2017, Embassy Port-au-Prince had a post allowance rate of 20 percent and was expected to submit its next required survey in June 2018. The foreign transfer allowance defrays an employee’s extraordinary, necessary, and reasonable costs when he transfers to a post in a foreign area. This allowance includes four expense types— predeparture subsistence, wardrobe, lease penalty, and miscellaneous. The predeparture subsistence expense portion assists employees with the cost of temporary lodging, meals, laundry, and dry cleaning for up to 10 days when they vacate their permanent residence in the United States before traveling to their overseas post. This allowance may be granted before the employees’ final departure from the United States, beginning not more than 30 days after they vacate their residence. The reimbursement rate is based on the per diem rate of their U.S. post. Employees are eligible for the wardrobe expense portion when they transfer across two climate zones for a new foreign assignment. For example, if an employee were to transfer from Saint Petersburg, Russia (zone 1), to Doha, Qatar (zone 3), then the employee would receive a wardrobe allowance. This allowance is a flat rate of $600 for individuals, $1,000 for employee and one family member, or $1,300 for employees and multiple family members. The lease penalty expense portion offsets a residential lease penalty unavoidably incurred by employees when they transfer. The miscellaneous expense portion covers employees’ expenses incurred from moving, such as pet transportation, vehicle registration, and driver’s license fees. These expenses are capped at the lesser of either 1 week’s salary or $650 for an individual, or 2 weeks’ salary or $1,300 for a family. The home service transfer allowance defrays an employee’s extraordinary, necessary, and reasonable costs when she transfers from an overseas post to a post in the United States. To qualify for this allowance, the employee must agree to work for the U.S. government for at least 12 months after her transfer. Similar to the foreign transfer allowance, the home service transfer allowance includes four expense types—subsistence, wardrobe, lease penalty, and miscellaneous. The subsistence expense portion covers the same types of expenses as the predeparture subsistence expense portion. However, employees are also eligible to receive reimbursements upon return to the United States based on the per diem rate for the first 30 days and then a prorated rate thereafter. The wardrobe, lease penalty, and miscellaneous expense types are the same for the home service transfer as for the foreign service transfer. The separate maintenance allowance (SMA) defrays the additional expense of maintaining family members at another location (1) because of dangerous, notably unhealthful, or excessively adverse living conditions at the overseas post of assignment, (2) for the convenience of the U.S. government, or (3) because of special needs or hardships involving the employee or a family member. There are three types—involuntary, voluntary, and transitional. Involuntary SMA is provided when State determines that there is an adverse, dangerous, or notably unhealthful condition that should exclude family members from accompanying employees at a post. The annual rate is based on family size ranging from $6,800 for one child only to $23,000 for an adult and four or more family members. Voluntary SMA can be authorized based on an employee’s request for special needs or hardship at posts for reasons including, but not limited to, career, health, educational, or family considerations. The annual rate is based on family size, ranging from $5,300 for one child only to $18,000 for an adult and four or more family members. Transitional SMA is granted for a limited time after a post’s evacuation status changes or in connection with the beginning or end of an unaccompanied posting. It is paid at a daily rate based on the number of eligible family members, the standard continental U.S. per diem rate, and the amount of time the employee receives the allowance. The education allowance defrays extraordinary and necessary costs, not otherwise compensated for, to obtain adequate elementary and secondary education for dependent children at overseas posts that would normally be free of charge in the United States. State’s Office of Overseas Schools determines the adequacy of schools at posts. State determines the approved rate based on allowable education expenses for (1) a school at the post, (2) a school away from the post, (3) home schooling / private instruction, or (4) special-needs education. For example, employees assigned to New Delhi can send their school-aged children to the American Embassy School, which State has determined is the least-expensive adequate school at post (see fig. 2). Tuition for this school costs State between about $18,000 and $30,000 per child per year, depending on the child’s grade level. The educational travel allowance annually covers the travel expenses of one round trip for each dependent between a school attended and the overseas post of assignment. This benefit is primarily intended to reunite a full-time, postsecondary student attending college (including the postbaccalaureate level), or technical or vocational school with the employee / parent serving the U.S. government in the foreign area. Educational travel cannot be paid at the same time as the education allowance. Recruitment and retention incentive allowances compensate employees for service at posts where conditions may be difficult or dangerous. State uses the following three allowances to recruit and retain staff at posts: Hardship pay compensates employees for service in foreign areas where conditions of environment differ substantially from conditions of environment in the continental United States in that the living conditions are extraordinarily difficult, involve excessive physical hardship, or are notably unhealthy. Employees assigned to designated posts can earn hardship pay at rates ranging from 5 to 35 percent above basic compensation in 5 percent increments, based on the severity of the hardship as determined by State. Danger pay compensates employees for service in foreign areas where conditions of civil insurrection, civil war, terrorism, or wartime conditions threaten physical harm or imminent danger to the health or well-being of the employee. Employees in designated danger pay locations are granted between 15 and 35 percent above basic compensation, in 10 percent increments, based on whether family members are allowed at overseas posts. The difficult-to-staff incentive differential is paid to employees assigned to a 15 percent or higher hardship pay post after State has determined that especially adverse conditions of environment warrant additional pay as an incentive to fill the employee’s position at that post. State must establish a history of difficulty in filling positions at a post prior to posts being eligible for this incentive. For example, employees posted in Lagos, Nigeria, were eligible for this allowance following the 2016 bidding cycle. Employees filling these positions can earn 15 percent above their basic compensation. However, the difficult-to-staff incentive and danger pay allowance combined cannot exceed 35 percent of basic pay. Employees must agree to a 3-year assignment to receive the difficult-to-staff incentive. Quarters allowances reimburse employees for substantially all costs for either temporary or residence quarters at posts where government housing is not provided. According to State officials, while most overseas posts provide government-leased or owned housing for employees and their families at no cost to the employee, employees can receive the following three allowances to assist with housing costs: The living quarters allowance defrays the annual cost of suitable, adequate living quarters for the employee and his or her family at an overseas post where government-leased or government-owned housing is not provided. Rates vary by post and are designed to substantially cover the average employee’s costs for rent, utilities, required taxes levied by the local government, and other allowable expenses. According to State officials, while most posts provide government housing, employees assigned to posts in Canada and Bern, Switzerland, for example, primarily rely on the rental market. The temporary quarters subsistence allowance assists with the reasonable cost of temporary lodging, meals, and laundry in a foreign area when an employee first arrives at a new post and permanent quarters are not yet available, or when an employee is getting ready to depart the overseas post permanently and must vacate residential quarters. The rate is based on the per diem at post, the size of an employee’s family, and the amount of time the employee receives the allowance. Employees cannot receive this allowance while receiving the post allowance. The extraordinary quarters allowance is typically granted for up to 90 days to employees and eligible family members at an overseas post when they are required to partially or completely vacate their permanent quarters because of renovations, repairs, or unhealthy or dangerous conditions in their permanent quarters. The rate is based on the per diem at post, post allowance, and family size. In contrast to the temporary quarters subsistence allowance, employees can continue to receive the post allowance when they receive the extraordinary quarters allowance. State offers two additional allowances designed to reimburse employees who must maintain an official residence or employees who incur expenses representing the U.S. government in an official capacity to a foreign government. The official residence expense reimburses a principal representative, such as an ambassador, at an overseas post for expenses related to operating and maintaining a suitable official residence in-country when those expenses exceed the usual expenses incurred if he were serving at the post in any other official capacity. The allowance is intended to offset the cost of representing the United States abroad when a principal representative extends official hospitality to foreign dignitaries and important visitors and by hosting appropriate ceremonies (for an example, see fig. 3). Generally, principal representatives are expected to direct at least 3.5 percent of their salary toward maintaining their residences, and State may reimburse expenses above that. The representation allowance reimburses employees, including foreign national employees, and adult family members acting with or on behalf of employees, for expenses incurred in establishing and maintaining relationships of value to the United States in foreign countries. Reimbursement may include costs for entertainment and customary gifts or gratuities; for entertainment expenses, it must be clearly demonstrated that the purpose is to directly promote U.S. foreign policy interests, that the expenditure is not for personal recreation, and that it is not otherwise prohibited by regulation. State spent $2.9 billion on 14 allowances from fiscal years 2011 through 2016, 70 percent of which went to the three most expensive allowances— the education allowance, hardship pay, and post allowance. The education allowance accounted for 30 percent of the total ($853.0 million), hardship pay accounted for 25 percent ($732.3 million), and the post allowance accounted for 15 percent ($417.3 million). The other 11 allowances accounted for the remaining 30 percent of the total ($870.0 million) in fiscal years 2011 through 2016 (see fig. 4). Each of these 11 allowances accounted for less than 10 percent of total spending, ranging from danger pay ($266.5 million) to the educational travel allowance ($11.4 million). For additional information on State spending across all 14 allowances by fiscal year, see appendix II. State spent almost $480 million annually on the 14 allowances from fiscal years 2011 through 2016, with varying amounts for individual allowances. The lowest annual spending on such allowances during this period was $462.3 million in fiscal year 2011 and the highest was $496.1 million, in fiscal year 2014 (see fig. 5). Trends in spending for individual allowances varied from fiscal years 2011 through 2016, with the largest variation in spending from the cost-of-living allowances. The largest increase in absolute spending across all allowances during this period, as well as the largest single allowance expenditure, was for the education allowance ($39.7 million). While the overall spending for dependent education increased each year, State officials noted that the spending on this allowance varied by post and year based on the number of dependent children of overseas employees and increasing education costs at some posts. The largest decrease in absolute spending across all allowances during this period was for the post allowance ($21.1 million). According to State officials, this variation was caused, at least in part, by fluctuation in the strength of the dollar against major global currencies. The other cost-of-living allowances— SMA, home service transfer, foreign transfer, and educational travel—had relatively smaller fluctuations in dollar spending across fiscal years. For example, State explained that the region’s increased volatility from the “Arab Spring” may have contributed to the change in SMA spending from fiscal years 2011 to 2012 (see fig. 6). According to State officials, this unrest likely caused more volatile security situations at many State posts, resulting in fewer family members of overseas employees living at the assigned post of their parent or spouse, and, therefore, an increase in SMA support. Recruitment and retention incentive allowances had the largest net decrease in allowance spending from fiscal years 2011 through 2016, about $10.6 million. Hardship pay increased by $5.3 million, with its largest single year change between fiscal years 2015 and 2016 following State’s 2015 revisions to its process for determining hardship pay rates. In conjunction with an increase in hardship pay, danger pay decreased by $15.6 million during this period. The difficult-to-staff incentive differential remained relatively constant, decreasing by about $264,000 (see fig. 7). State’s spending on quarters allowances decreased from fiscal years 2011 through 2016 by almost $1 million. According to State officials, over this period State shifted employees from the living quarters allowance into U.S. government owned and leased facilities. They explained that, as of August 22, 2017, a limited number of posts in Canada and Switzerland relied primarily on the living quarters allowance, as opposed to U.S. government-provided housing. For the extraordinary quarters allowance, State officials explained that short-term, unexpected facilities issues that render a house uninhabitable—such as water damage, mold remediation, or fire—cause variations in spending. These costs can vary significantly by year and by post. Spending on the temporary quarters subsistence allowance increased by $1.6 million from fiscal years 2011 through 2016 (see fig. 8). The other allowances category consists of the official residence expense and representation allowances. The official residence expense spending at posts decreased by $2.6 million from fiscal years 2011 through 2016. The representation allowance increased by $6.6 million during the same period (see fig. 9). State’s spending on the post allowance, SMA, hardship pay, and danger pay varies substantially by country because these expenditures are determined by factors specific to each post and allowance. For the post allowance, spending by country reflects allowance rates, the number of State employees, and the size of State employees’ families at each of the country’s posts. Spending for SMA, by country, depends upon the number of State employees maintaining their families away from post. Spending for hardship pay and danger pay, by country, reflects the allowance rate and number of State employees permanently assigned to posts in each country. For example, in fiscal year 2016 State spent about the same amount on hardship pay in Dhaka, Bangladesh (a post eligible for 35 percent hardship pay), as it did in Bangkok, Thailand (a post eligible for 10 percent hardship pay) because State had more than twice as many personnel assigned to Thailand as to Bangladesh. Figure 10 shows a map of State’s post allowance spending by country for fiscal years 2011 through 2016. State provided this allowance in about 170 countries worldwide in that period. Figure 11 shows State’s spending on SMA. Employees received an SMA across about 170 countries from fiscal year 2011 through 2016. Figure 12 shows State’s spending on hardship pay. About 140 countries had posts eligible for hardship pay from fiscal years 2011 through 2016. As illustrated in figure 13, countries with danger pay spending in fiscal years 2011 through 2016 are largely concentrated in the Middle East and Africa. Employees from posts in about 30 countries received danger pay from fiscal years 2011 through 2016. Several countries with danger pay spending during this period—including Mexico, Colombia, and Saudi Arabia—were no longer eligible for danger pay as of February 5, 2017. We provided a draft of this report to State for comment. State provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of State. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-8980 or courtsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix II. The objectives of this report were to (1) describe the allowances the Department of State (State) offers its employees serving overseas and (2) examine the amount State spent annually on these allowances from fiscal years 2011 through 2016. To describe the different allowances offered by State to employees serving overseas, we reviewed the Foreign Affairs Manual (FAM), Foreign Affairs Handbooks, the Department of State Standardized Regulations, and other State information. We selected 14 allowances to include in our scope based on 3 FAM Exhibit 3210. From this list we excluded the advance-of-pay allowance because it is not an additional outlay from State’s budget. To examine State’s spending at overseas posts for these allowances, we analyzed data in fiscal years 2011 through 2016 from State’s Consolidated American Payroll Processing System and State’s Global Financial Management System, which are administered by State’s Bureau of the Comptroller and Global Financial Services (CGFS). We used the Global Financial Management System, State’s accounting system, to analyze the foreign transfer, home service transfer, education allowance, educational travel, difficult-to-staff incentive, living quarters, temporary quarters subsistence, extraordinary living quarters, official residence expense, and representation allowances. We used the Consolidated American Payroll Processing System, State’s payroll system, to analyze post allowance, separate maintenance allowance (SMA), hardship pay, and danger pay expenditures, including information on the outlays by country. Because CGFS processes these four allowances through payroll, it provided us with spending data for the 26 pay periods that best approximated each fiscal year from 2011 through 2016, and we used these data to summarize spending by fiscal year. All spending in this report is presented in nominal dollars. We also used the gross domestic product price index to analyze trends in hardship and danger pay, expressed in terms of constant (inflation-adjusted) dollars. To assess the reliability of the data that State provided, we performed testing to identify missing data, outliers, and errors; and interviewed Office of Allowances officials in Washington, D.C., and CGFS officials in Charleston, South Carolina. We determined that the data we used were sufficiently reliable for the purposes of summarizing spending by country for the post allowance, SMA, hardship pay, and danger pay and by fiscal years 2011–2016 for all allowances. We also communicated with State officials from the Office of Allowances, CGFS, and the Bureau of Overseas Building Operations about changes in allowance expenditures over time. We conducted this performance audit from May 2017 through November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our description and analysis based on our audit objectives. Appendix II: Department of State Spending for Allowances for Employees Serving at Overseas Posts, Fiscal Years 2011–2016 417,283 37,900 46,441 55,019 852,972 11,367 (21,055) (347) In addition to the contact named above, Hynek Kalkus (Assistant Director), Alana Miller (Analyst-in-Charge), Ashley Alley, Timothy Carr, Debbie Chung, Gita Devaney, Neil Doherty, Jill Lacey, Drew Lindsey, and Eli Stiefel made key contributions to this report.", "summary": "State spends millions of dollars annually on allowances to compensate its employees for costs and hardships related to foreign assignments. Many of these assignments are critical to U.S. foreign policy objectives. In accordance with U.S. law, State employees working abroad may be reimbursed for costs related to working overseas, including the cost of living in expensive locations, dependent education costs, and the costs of maintaining family members away from post. They also may be eligible for such allowances in locations where they encounter harsh or dangerous living conditions. These allowances cover over 13,000 employees across more than 275 posts. GAO was asked to review State's administration of allowances for its employees. GAO's September 2017 report focused on State hardship and danger pay allowances ( GAO-17-715 ), while this report (1) describes all of the allowances that State offers its employees serving overseas and (2) examines the amount State spent annually on these allowances in fiscal years 2011 through 2016. GAO analyzed State data and documents and communicated with State officials in Washington, D.C., and Charleston, South Carolina, the location of State's Bureau of the Comptroller and Global Financial Services. The Department of State (State) offers 14 different allowances to compensate State employees serving at overseas posts for costs and hardships related to foreign assignments across four categories. Cost-of-living allowances consist of six types of allowances that reimburse employees for certain costs incurred from employment overseas, such as the cost for dependent education that would normally be free in the United States. Recruitment and retention incentive allowances consist of three types of allowances that compensate employees for service at posts where conditions may be difficult or dangerous. For example, hardship pay compensates employees for service where conditions differ substantially from those in the United States. Quarters allowances consist of three types of allowances that reimburse employees for substantially all housing costs at posts where government housing is not provided. For example, the temporary quarters subsistence allowance pays for temporary housing when government-provided housing is not available. Other allowances consist of two types of allowances that reimburse employees, such as ambassadors, who must maintain an official residence in-country or employees who incur expenses representing the U.S. government in an official capacity to a foreign government. State spent almost $480 million per year on its 14 allowances for employees serving overseas, totaling almost $2.9 billion in fiscal years 2011 through 2016. Most of this amount went toward cost-of-living and recruitment and retention allowances. During this period, the three largest individual allowances accounted for about 70 percent of the total spending on all allowances. These were the education allowance, about $853.0 million; hardship pay, about $732.3 million; and post allowance, used to offset the higher cost of living at certain posts, about $417.3 million.", "document_type": "gao"}
{"report": "This section provides an overview of patenting in the United States, patent infringement litigation, and administrative proceedings for patent validity challenges. It also includes a brief history of court decisions that clarified eligibility requirements for the Patent Trial and Appeal Board’s CBM program. See “Related GAO Products” at the end of this report for a list of our prior work related to patents and intellectual property. In the United States, patents may be granted by USPTO for any new and useful process or machine, or any new and useful improvement on an existing process or machine, but there are some exceptions. Laws of nature, physical phenomena, and abstract ideas are not patentable. The U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have refined the boundaries of these exceptions over time, allowing some subject matter that was previously not patentable to become so. For example, U.S. Supreme Court decisions in the 1970s found mathematical formulas used by computers (i.e., software) were like laws of nature and therefore not patentable subject matter. However, a 1981 Supreme Court decision overturned USPTO’s denial of a patent application for a mathematical formula and a programmed digital computer because, as a process, the claimed invention was patentable subject matter. Similarly, business methods were widely considered unpatentable subject matter until 1998, when the U.S. Court of Appeals for the Federal Circuit ruled in the State Street Bank decision that they were patentable. In 2014, however, the Supreme Court effectively limited the patentability of some business methods by ruling in Alice Corp. Pty. Ltd. v. CLS Bank Int’l that using a generic computer to implement an abstract idea is not patentable. Traditionally, economic theory has held that intellectual property rights, such as those conferred by patents, can help encourage innovation and stimulate economic growth. Exclusive rights provided by patents, for example, can help patent owners recoup investments in technology and earn greater profits than if their patented technologies could be freely imitated. Moreover, to the extent that intellectual property rights encourage specialization, innovators may be more productive than they would be in the absence of patent laws. Because of complex trade-offs, however, some economists hold a more nuanced view of the potential for patents to promote innovation and increase productivity. By increasing the cost of using technologies, for example, patents may discourage not only diffusion of these technologies but also cumulative innovation that uses such technologies to develop new technologies. In addition, attempts to quantify the effect of patents on economic growth often fail to account for the creation of useful knowledge outside the patent system. Furthermore, to the extent that innovation occurs in the absence of patent laws, the need for patents can vary across industries or over time. Some researchers have suggested that some patents are currently limiting innovation, especially in areas such as software and computer technologies that overlap with business methods. USPTO receives hundreds of thousands of applications each year from inventors seeking patents to protect their work. According to USPTO data, applications for patents have increased in recent years, and the share of patents granted for business methods has significantly increased over the past 2 decades (see fig. 1). In calendar year 2014, patents related to business methods accounted for more than 28 percent of all issued patents. A patent’s claims define the legal boundaries of the invention, often in complex technical language. A patent application can be written to define an invention broadly or narrowly. Patent applicants often prefer broader claims because their competitors are less able to avoid infringement by making only small changes to their patented invention, as we reported in June 2016. Before issuing a patent, USPTO patent examiners determine whether claimed inventions in the application meet requirements for patentable subject matter, novelty, non-obviousness, and clarity—the four patentability grounds that are established by statute. Patent examiners assess whether the claimed invention consists of patentable subject matter and also ensure that the claims are described clearly enough to enable a person skilled in the art to make the claimed invention. In addition, examiners determine whether a patent application’s claimed invention is novel and non-obvious by comparing the application’s content to “prior art”— existing patents and patent applications both in the United States and abroad, as well as non-patent literature such as scientific articles. In February 2015, USPTO launched an Enhanced Patent Quality Initiative, which included several proposals designed to improve the quality of patent examination and issued patents. However, we found in June 2016 that USPTO faced challenges in issuing patents in accordance with standards. For example, we found that a majority of examiners (67 percent) said they have somewhat or much less time than needed to complete an examination, given a typical workload, and many examiners felt a time pressure that reduced their ability to conduct thorough searches. Examiners also said that it was difficult to issue patents that met the statutory requirements because of the limited availability of and access to non-patent prior art such as offers for sale and public use. Examiners said another limitation is their being responsible for examinations in subject areas in which they do not have adequate technical knowledge. We made seven recommendations to USPTO aimed at improving patent quality, clarity, and prior art search. USPTO agreed with the recommendations and is working to address them. Patent owners can bring infringement lawsuits against anyone who uses, makes, sells, offers to sell, or imports the patented invention without authorization. Only a small percentage of patents in force are ever litigated, but some scholars believe that low-quality patents can make such litigation not only more complex and expensive but also more frequent. During an infringement case, the accused infringer may seek to have the lawsuit dismissed by showing the patent is invalid. When the courts rule on validity, they generally invalidate almost half of the patents, according to academic research. Exactly what a patent covers and whether another product infringes the patent’s claims are rarely easy questions to resolve in litigation, and defending a patent infringement lawsuit in district court can take years and cost millions of dollars, not including damages if infringement is found. Whatever the outcome, costly litigation can leave defendants with fewer resources for innovation. Consequently, patent infringement defendants often find it in their best interest to settle lawsuits quickly, as we reported in August 2013. The AIA in 2011 created the Patent Trial and Appeal Board and stated any references in federal law to USPTO’s then-existing Board of Patent Appeals and Interferences be deemed to refer to the new board. By statute, the Patent Trial and Appeal Board consists of the USPTO Director, Deputy Director, Commissioner for Patents, Commissioner for Trademarks, and administrative patent judges. In practice, to issue decisions in the matters that come before it, the board involves more than 300 people serving in many positions, according to the board. The board is led by the Chief Judge and Deputy Chief Judge, who, along with other members of senior management, meet regularly to discuss operational and procedural matters of importance to the board’s overall mission, according to the board. The AIA created three new administrative proceedings for the board to administer, each with different statutory rules (see table 1). Two proceedings were made permanent: Post-grant review provides a 9-month opportunity following the issuance of a patent during which a third party can file a petition to challenge a patent’s validity on any of the four statutory grounds: subject matter eligibility, novelty, non-obviousness, and clarity. Inter partes review is available to third parties for the life of the patent, but on a limited set of grounds (non-novelty or obviousness), and on a limited set of acceptable prior art (previously issued patents and printed publications). The third proceeding—the CBM program—was included in the act as a temporary proceeding that can be used to challenge a patent at any point in its life, as allowable under the inter partes review program. However, under the CBM program, only a party (e.g., a company or an individual) that is sued or charged in an infringement suit can petition. Such petitioners can challenge a patent’s validity on any of the four statutory grounds without the limits on prior art in inter partes review. Additionally, rules about which arguments parties are officially barred from being raised again in later legal actions (called estoppel provisions) are less restrictive under the CBM program than for the other two board proceedings. However, the body of patents that qualify for review under the CBM program is limited to those that claim a non-technological method involved in the practice, administration, or management of a financial service or product. A patent is “technological” if it claims a technological feature that solves a technical problem using a technical solution. Many software and business method patents issued in the wake of State Street Bank describe implementing an abstract idea on a generic computer. Since the Supreme Court’s 2014 decision in Alice, which closely aligns with the CBM program’s “non-technological” designation, these types of ideas are no longer thought to be patentable. Inter partes review is the most-used of the proceedings created by the AIA and the one stakeholders we interviewed were most familiar with when they discussed the Patent Trial and Appeal Board. The other proceedings have been used less frequently, likely because of the short window for filing a challenge, in the case of post-grant review, and because of additional restrictions on what patents may be challenged, in the case of CBM. Under statute and regulation, the full review process at the Patent Trial and Appeal Board for any of the three proceedings generally takes up to 18 months and comprises two phases: (1) the petition phase, which lasts up to 6 months, and (2) the trial phase, which generally lasts up to 12 months. During the petition phase, the petitioner—typically a party accused of patent infringement, in the CBM program— files a petition challenging the validity of one or more of the patent’s claims and pays fees for each challenged claim. In some cases, a petitioner will file more than one petition challenging a patent. This might occur when a petitioner is constrained by the maximum number of pages allowed in a petition. Multiple petitions can also be filed against a single patent if the patent owner has sued more than one party for infringement, and each files a separate petition challenging the patent’s validity. Petitioners might also file a petition under more than one proceeding, either concurrently or sequentially. When a petition is received and the fees paid, administrative personnel of the board, under direction of the Chief Judge, assign three technically trained administrative patent judges to the case. According to agency documents, these three-judge panels are put together taking into account many factors, including technical experience, experience at the board, potential conflicts of interest, and availability. The patent owner may then, within 3 months of the petition date, file a preliminary response to the petitioner’s arguments. Within 3 months of submission of any preliminary response, or the last date on which such response may be filed, the panel of judges determines whether to allow the petition to move to the trial phase for review. This determination is called the “institution decision.” According to statute and regulations, in the case of the CBM program and post-grant review, a panel of judges may not institute a review unless the information presented in the petition, if not rebutted, would demonstrate that it is “more likely than not” that at least one of the claims challenged in the petition is unpatentable, or in the case of inter partes review, if the petitioner has a “reasonable likelihood” of prevailing. The first step in the trial phase is discovery (a step that exists in all federal civil litigation), during which the parties produce documents or testimony relevant to the challenged claims. Each party has 3 months to file discovery documents for the panel of judges’ review. If a petitioner and patent owner do not settle a case or it does not otherwise terminate, the case will proceed to the oral hearing. The hearing is an opportunity for the parties to make their strongest arguments and to answer judges’ questions, according to a board official, and after the hearing, the panel of judges will deliberate over the course of a few weeks or months and then issue its final written decision. The final written decision must be issued within 1 year of the institution decision, with limited exceptions. The patent owner may, for example, cancel one or more claims in the patent in an attempt to avoid institution of the trial. Figure 2, shows the progression of a case from the petitioner’s filing to the panel of judges issuing a final written decision. Under its Standard Operating Procedures, every Patent Trial and Appeal Board decision is, by default, a routine opinion until it is designated as “representative,” “informative,” or “precedential.” Representative decisions typically provide a representative sample of outcomes on a particular matter; they are not binding authority. Informative decisions provide norms on recurring issues, guidance on issues of first impression, and guidance on the board’s rules and practices; they are not binding authority. Precedential decisions are binding authority and emphasize decisions that resolve conflicts or address novel questions. Nominations for these designations can be made by a Patent Trial and Appeal Board judge, the Chief Judge, the Director of USPTO, the Deputy Director of USPTO, the Commissioner for Patents, or the Commissioner for Trademarks. Also, a member of the public may nominate a decision for a precedential designation within 60 days of its issuance. The Chief Judge can designate a nominated decision as representative or informative, but under Standard Operating Procedures, a precedential designation requires a majority agreement among all voting members of the board, including administrative patent judges and statutory members, as well as concurrence by the Director of the USPTO. Petitioners and patent owners may appeal the final written decisions of the Patent Trial and Appeal Board to the U.S. Court of Appeals for the Federal Circuit, just as unsatisfied plaintiffs or defendants may appeal a federal district court decision, and decisions may ultimately be appealed to the U.S. Supreme Court. The following decisions have significantly influenced the eligibility rules for CBM review, for different reasons: In Cuozzo Speed Technologies, LLC v. Lee (June 2016), the U.S. Supreme Court affirmed the board’s use of the “broadest reasonable construction” standard—meaning the ordinary meaning that someone skilled in the art would reach—to define the language of the claims during post-grant review as a reasonable exercise of the board’s rulemaking authority. Defining claim language using the broadest reasonable interpretation meant that the number of business method patents that could be determined as financial in nature is larger than it would otherwise be, so more patents are potentially eligible for review under the CBM program. In Unwired Planet, LLC v. Google Inc. (November 2016), the U.S. Court of Appeals for the Federal Circuit ruled that the USPTO’s policy of assessing whether a claim’s activities were “incidental” or “complementary” to a financial activity was too broad a standard to apply when determining whether a patent claim was eligible for a CBM review. The court stated that, to be CBM-eligible, a patent must claim a method used in the practice, administration, or management of a financial product or service. Applying this narrower standard effectively reduced the number of patents accepted for review under the CBM program. In Secure Axcess, LLC v. PNC Bank Nat’l Assoc. (February 2017), the U.S. Court of Appeals for the Federal Circuit clarified that a CBM patent must specifically have a claim that contains an element of financial activity in order for a patent to qualify for review under the CBM program. Like the Unwired Planet decision, the narrower standard expressed by the court has led to fewer patents being eligible for review under the CBM program. From September 2012 through September 2017, parties accused of patent infringement filed 524 petitions challenging the validity of 359 distinct patents under the CBM program, resulting in rulings against about one-third of these patents. The average monthly number of CBM petitions fluctuated during this period, but use of the program has declined since about 2015. Some stakeholders have expressed concern about multiple petitions being filed against the same patent, but our analysis of petition data showed that the vast majority of patents challenged under the CBM program were challenged once or twice. Overall, through September 2017, the Patent Trial and Appeal Board completed reviews of 329 of the 359 patents challenged under the program, and the board ruled at least some challenged patent claims unpatentable in about one-third of these patents. Parties accused of patent infringement filed 524 petitions for patent review under the CBM program from September 2012 through September 2017, with the number of petitions per month fluctuating but tapering off over time (see fig. 3). During this 5-year period, an average of more than 9 petitions per month were filed under the CBM program, but this average rate has declined since 2015 to fewer than 5 per month in the last fiscal year, with no petitions filed in August or September 2017. As a point of comparison, the number of petitions for inter partes review has generally increased over the 5-year period. Stakeholders we interviewed suggested several possible reasons for the decline in CBM petitions. Specifically, some stakeholders told us that recent Federal Circuit and Supreme Court decisions that have changed what is patentable subject matter and the eligibility criteria for CBM review may have reduced the set of business method patents eligible for CBM review. Some stakeholders also suggested CBM petitioners successfully targeted the lowest-quality business method patents in the early years of the program, and now that those patents have been challenged, there are fewer patents that do not meet patentability requirements. Another possibility, according to stakeholders, is that owners of business method patents are wary of asserting their intellectual property and risking its invalidation, especially in light of the Alice decision, which effectively limited the patentability of some business methods. As a result, according to these stakeholders, fewer such patents end up in litigation and subsequently before the Patent Trial and Appeal Board. Some stakeholders also told us the CBM program has reduced patent infringement lawsuits, including some filed by non- practicing entities. In addition, a few stakeholders told us some patent owners may be waiting until after the CBM program sunsets to assert their patents. Some stakeholders we interviewed were concerned about multiple petitions being filed against the same patents; however, our analysis showed that the vast majority of the 359 distinct patents challenged under the CBM program were challenged only once or twice under that program. Stakeholders have suggested that petitioners are, in some cases, using the CBM program and the inter partes review program as tools to increase costs borne by patent owners, and in the case of the CBM program, as a tool to delay district court proceedings. Some stakeholders have stated that the use of the AIA trials in this manner amounts to harassment, and at least one stakeholder has written letters to USPTO requesting the Director to intervene. However, our analysis of petition data showed that among the 359 patents challenged under the CBM program, 73.3 percent were challenged once and 18.4 percent were challenged twice during the 5- year period we reviewed. Another thirty patents, or 8.4 percent, were challenged more than twice under the CBM program during this period (see fig. 4). Of these 30 patents, in many cases multiple parties challenged a single patent; in others, a single petitioner or set of petitioners challenged a patent multiple times. In addition, of the 359 patents challenged under the CBM program during the 5-year period we reviewed, 92 were also challenged at least once in inter partes review. In some instances, petitioners filed concurrent petitions for CBM and inter partes review if, for example, they were unsure if the claims were eligible for a CBM review. In other instances, petitioners first sought CBM review and, when that was unsuccessful, filed an inter partes review. In these cases, petitioners may initially be seeking CBM review because of the additional grounds available for challenging the patents, and then turning to the inter partes review program if the CBM challenge proves unsuccessful. In other instances, petitioners first had success under the inter partes review program and then filed another petition under the CBM or inter partes review programs, according to our analysis of petition data. When including patent challenges under both the CBM and inter partes review programs, 52.1 percent of the 359 patents challenged under the CBM program were challenged once and 29.3 percent were challenged twice (see fig. 4). More than half of the patents challenged under both programs (50 of 92 patents) did not have any challenged patent claims instituted for trial under the CBM program, meaning that those patents, in many cases, did not meet the CBM program’s eligibility requirements and may have been more appropriately challenged with an inter partes review. There are several other reasons why petitioners may file more than one petition against a single patent, according to stakeholders we interviewed. First, the board limits the number of pages that a petitioner may use to submit prior art and arguments for invalidity. Some petitioners might file more than one petition so they have room to present all of their art and arguments at once. Data we analyzed on CBM petitions show that many follow-on petitions are filed on or near the same day as the first petition, supporting this argument. Second, in some cases the patent owner may not identify all the asserted patent claims in the district court right away or may change the set of asserted claims later in the proceedings, necessitating an additional CBM or inter partes review petition to cover the new claims. Third, in order to get the expensive district court proceedings stayed—that is, halted pending the board’s decision on the patent’s validity—a petitioner may file a CBM petition on patentability or clarity grounds soon after the district court trial commences, because these arguments require limited time to formulate. Later, once the petitioner takes the time to investigate the prior art, the petitioner might file a second petition challenging the patent for non-novelty or obviousness. In our analysis of petition data, we found some examples that were consistent with this approach. Fourth, if a patent owner charges multiple entities with patent infringement, each of the alleged infringers has an individual right to file a petition challenging the patent’s validity. The defendants in the infringement suits who become petitioners at the board may collaborate with one another and join their cases, but they may also choose to file petitions individually. In our analysis of petition data, we found examples of both. Petitioners might choose to join their cases in order to share the cost of counsel, while others may choose not to join their cases, perhaps because they use substantially different art and arguments in their petitions. Our analysis of the petition data found some examples of multiple petitions against a single patent that may raise questions about the legitimacy of the follow-on petitions. In some instances, a second, follow- on petition challenging the patent’s validity on the same statutory grounds as it did in the first petition was filed by the same petitioner after the first petition was denied institution. This type of multiple petitioning may occur when, for instance, a procedural termination resulted from a technical error in the first petition. Board officials said it may also occur because a petitioner is using the first denial of institution to alter the arguments and guide the second petition, a strategy that the board has labeled “road- mapping.” In other instances, a single petitioner filed a second, follow-on petition challenging the patent on different statutory grounds after the first petition was denied institution. These follow-on petitions may be legitimate attempts to correct simple errors in the first petitions, or they may reflect practices that might raise questions about whether the program is being used as intended. Patent Trial and Appeal Board officials are aware of concerns over multiple petitions and recently concluded a study about the prevalence of such practices in relation to all three types of proceedings created by the AIA. The board found that almost two-thirds (63.4 percent) of follow-on petitions were filed on or near the same day as the first petition. Nearly three in four (72.4 percent) follow-on petitions were filed before the institution decision on the first petition. These findings suggest that most petitioners are not waiting to use the board’s decision of non-institution as a guide for developing a second petition. Moreover, the board officials we interviewed told us they are empowered to deny a petition if they determine the petition presents the same or substantially the same prior art or arguments previously presented in another petition. Board officials told us they had denied several recent petitions on this basis. In addition, in a recent precedential opinion, the board clarified the characteristics it looks for to determine whether it should deny an inter partes review when a petitioner submits a follow-on petition. These characteristics include whether the petitioner previously filed a petition against the same patent claims; whether the petitioner provides adequate explanation for the time elapsed between filing two or more petitions against the same patent claims; and whether the petitioner knew, or should have known, about the prior art presented in the second petition at the time of the first petition. The Patent Trial and Appeal Board has ruled unpatentable some or all of the patent claims instituted for trial in about one-third of challenged patents and about one-third of petitions under the CBM program. Data on petition outcomes, however, are open to different interpretations depending on how they are presented. For example, board judges ruled some or all of the patent claims considered at trial unpatentable in 96.7 percent of petitions (175 of 181) under the CBM program for which they issued a final written decision from September 2012 through September 2017. On the basis of this statistic, the board could seem to invalidate the majority of the patents it reviews, as noted by some stakeholders. However, this outcome is predictable given the criteria for institution of a CBM trial—a judge panel will institute a petition to the trial phase if it is “more likely than not” that at least one of the claims challenged in a petition is unpatentable—which tips outcomes for instituted petitions toward rulings of unpatentability. In addition, board judges did not issue final written decisions for all petitions that enter the trial phase because the parties often reach a settlement before the final written decision. When taking into account all of the CBM petitions that had an outcome as of Sept 30, 2017, board judges ruled some or all of the claims considered at trial unpatentable in 35.6 percent of the cases (175 of 492). The results are similar when considered by patent rather than by petition. Specifically, for patents challenged between September 2012 and September 2017 and for which a final written decision was issued in at least one petition, 95.2 percent of patents (120 of 126) had some or all the patent claims that were instituted for trial ruled unpatentable. However, because not all challenged patent claims are instituted for trial and because final written decisions are not issued for all petitions that enter the trial phase, it is also accurate to say the board judges ruled some or all of the patent claims unpatentable for 36.5 percent of challenged patents (120 of the 329) that had an outcome as of September 30, 2017 (see fig. 5). Changes in petition outcomes over time also challenge the idea that the board invalidates most patents it reviews. In particular, the percentage of CBM petitions instituted for trial has decreased over time (see fig. 6). In 2012, about 80.0 percent of CBM petitions had some or all challenged claims instituted. In comparison, in 2016 about 53.5 percent of CBM petitions had some or all claims instituted. Preliminary data for 2017 suggests that this trend might continue: through September 2017, about 38.5 percent of CBM petitions had some or all claims instituted. Similar to the decline in number of petitions filed, this trend might have a few explanations, according to stakeholders. Specifically, board panels might be less likely to institute a petition for trial based on conclusions of the U.S. Court of Appeals for the Federal Circuit in Unwired Planet and Secure Axcess. Another possibility is that the patents in earlier cases represented the easiest targets for validity challenges, and thus the more recent challenges are based on shakier legal grounds and less likely to meet the CBM program’s institution threshold. In addition to declining institution rates, there has been an increase in the percentage of CBM petitions that settle before reaching an outcome. Specifically, the percentage of cases where the parties settled their dispute either before or after the institution decision increased from about 6.7 percent in 2012 to about 28.9 percent in 2016. When a case before the board is settled, it generally concludes any concurrent district court infringement case. The patent owner’s intellectual property remains in place, and the patent owner is free to assert the patent against other alleged infringers later. The Patent Trial and Appeal Board has completed all trials under AIA- authorized proceedings within statutorily directed time frames, according to board data, and the board has taken steps to review issues that could affect the consistency of its trial proceedings and decisions and to engage with stakeholders to improve its proceedings. To ensure timeliness of trial proceedings, the board provided a checklist of information and time frames to petitioners and patent owners, among other things. According to board documents and interviews with officials, the board has also taken steps to review and assess its trial proceedings and decisions, but it does not have guidance for reviewing trial decisions, or the processes that lead to the decisions, for consistency. The board has also taken several steps to engage with stakeholders regarding various aspects of trial proceedings. According to data on Patent Trial and Appeal Board proceedings, as of September 31, 2017, all trials under AIA-authorized proceedings, including the CBM program, have been completed within statutorily directed time frames. The board maintains a database of trial proceedings that includes the date of each petition, decision to institute a trial, and final written decision. Board officials we interviewed told us the timeliness of decisions to institute a trial and of final written decisions has not been a concern in the 5 years that it has operated. According to board officials, as of November 2017, two AIA trials—one under the inter partes review program and one under the CBM program—have been extended for good cause past the typical 1-year time limit between the institution decision and the final written decision, as allowed by statute. Board officials told us they have taken several steps to ensure that trials are completed within required time frames. According to board documentation, between 2012 and 2017, for example, the board hired more than 150 additional administrative patent judges, in part to preside over AIA trials. In addition, the board has taken several proactive administrative steps to help ensure that stakeholders are aware of requirements for information filing and dates. For example, when a petition is filed, the board’s administrative staff creates a checklist of information required and due dates, and communicates these dates and requirements to petitioners and patent owners throughout the trial. Some stakeholders have expressed concern that AIA trial time frames are too short and deprive patent owners and petitioners of due process rights. One patent attorney that we spoke with, for example, noted that the short time frames limit discovery. As directed by the AIA, a final determination for a review generally must be issued not later than 1 year after the date a review has been instituted, and the director may extend that period by up to 6 months for good cause. Board officials we interviewed stated that they do not believe parties are having trouble completing discovery activities in the time allotted in view of the limited discovery allowed at the board. Board officials further stated that they have not found compelling reasons to extend trial proceedings on the basis of the need for additional discovery. As reflected in USPTO’s strategic plan, timeliness of the board’s trial process is a key program goal, and board officials said trials would be extended only in unusual circumstances. In addition, board officials stated that the board adheres to the 12-month timeline for final written decisions because this timeline gives the district courts a definitive and predictable endpoint for the trials. The Patent Trial and Appeal Board has decision review processes that help ensure trial decisions are revisited as appropriate, but the board cannot ensure the consistency of these decisions because it does not have guidance for reviewing them or the processes that lead to them. For trials still in progress, board officials told us that there are several ways that management gets involved in reviews. According to officials, a review of an ongoing trial is triggered if and when a paneled judge raises any issue deserving of management attention. Such issues are brought to the attention of the Chief Judge or other members of the board’s management team and are acted upon at their discretion. According to board officials, the usual response is a management meeting with the three-judge panel, with the goal of ensuring the judges are aware of any precedent or ongoing trials dealing with similar issues. The officials said these review meetings are also meant to ensure that board management is aware of any decisions that may be relevant to the stakeholder community or the public. According to board officials, issues that may prompt action include those that are not routine in nature, that involve novel questions of law, or that may result in decisions that could contradict previous board decisions. Board officials called these review meetings the first step for keeping track of key issues. Board officials told us these reviews raise a fair number of issues, but the process relies on self-reporting by the judges, and board officials told us the effectiveness of these reviews is not measured. Board officials also told us that a separate internal review process has evolved over time, whereby a small group of board judges, in consultation with board management, seeks to ensure decision quality and consistency by reading a large number of draft AIA trial decisions and giving feedback or suggestions to authoring judges prior to issuance. The board is currently drafting a formal charter that will outline the group’s function, reviewer selection, and membership term. According to board officials, these reviews are meant to help ensure consistency with applicable board rules, other board decisions, and Federal Circuit and Supreme Court case law. In addition, such reviews may result in coaching and training to increase an individual judge’s quality of performance. Regarding completed trials, board officials told us they review any board AIA trial decisions that are appealed to the U.S. Court of Appeals for the Federal Circuit and that the appeals court reverses or remands. Specifically, the board monitors Federal Circuit decisions and board management then reviews any reversals or remands for opportunities to improve processes and stay abreast of emerging issues. According to board officials, for any reversal or remand, board management and members of the three-judge panel that decided the case meet to discuss what steps could have been taken to avoid the Federal Circuit reversal or remand, and what else can be learned from the Federal Circuit decision. In some instances, according to officials, the board will host a session where all board judges are invited to review and discuss the trial court decision and the decision of the Federal Circuit. In addition, board officials told us they track data on Federal Circuit affirmances, remands, and reversals. The board has recently updated its Standard Operating Procedure to provide guidance on how it handles cases remanded by the Federal Circuit. This procedure creates internal norms to promote timeliness and consistency of the board’s response to remands. The procedure includes a goal for the board to issue decisions on remands within 6 months of receipt and calls on the Chief Judge and the Deputy Chief Judge to discuss each remanded case with the presiding three- judge panel before the panel expends substantial effort on the case. The Chief Judge may also elect to expand the panel assigned to the remanded case, when deemed prudent. Furthermore, officials told us that all board decisions—including final written decisions, decisions to institute a trial, and any substantive orders—are reviewed by board judges on the date of issuance. Specifically, a rotating group of judges, on a voluntary basis, reads and analyzes each day’s decisions and, according to board officials, sends a summary list of the number of decisions made that day along with a brief decision summary for any cases where key issues of interest were raised. Board officials said that most decisions are straightforward and generally not summarized in detail. For decisions highlighted in the summary report, according to officials, a lead judge, in most cases, will then review the decision more closely. Example summary lists provided to us by the board show brief summaries of a trial involving interpretations of prior art admissibility and a trial dealing with an interpretation of a challenge based on clarity. Finally, board officials told us that the board has begun to increase the number of trial decisions considered for precedential and informative designations as part of its efforts to ensure the consistency of trial decisions. Board officials also told us that increasing the number of these designations had not been a priority while the AIA trial procedures and processes were being operationalized and as the board was hiring more than 150 administrative patent judges over the past 5 years. However, officials said that they are now taking steps to simplify the vetting and voting process, and the board expects more precedential and informative designations going forward. Taken together, the board’s review processes help ensure that board trial decisions are reviewed in some manner. However, because the board does not have documented procedures for how to review decisions for consistency, the board cannot fully ensure the consistency of the decisions or the processes that lead to them. USPTO’s 2014-2018 strategic plan includes the goal to “optimize patent quality and timeliness,” which includes an objective to “maintain ability to provide high-quality decisions.” As part of this objective, the plan states that it is “critical for the to ensure consistency in its decisions through review of decisions in proceedings.” Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks. Such control activities include clearly documenting internal control in a manner that allows the documentation to be readily available for examination. The documentation may appear in management directives, administrative policies, or operating manuals. However, the board has not yet clearly documented how judges are to review trial decisions, or the processes that lead to the decisions, to ensure consistency. Without developing guidance, such as documented procedures, outlining the steps USPTO will take to review the Patent Trial and Appeal Board decisions and the processes that lead to decisions, USPTO cannot ensure that it is fully meeting the objective of ensuring consistency of its decisions. The Patent Trial and Appeal Board has taken several steps to engage stakeholders regarding trial proceedings and decisions and address related concerns. USPTO’s strategic plan states that the board should expand outreach to stakeholders by providing opportunities for interaction and updates on board operations and other important issues. The board has done so through several types of public outreach efforts, including participating in roundtables, webinars, and judicial conferences, among other activities. The board has made several changes to policies and procedures based on stakeholder feedback gathered through these mechanisms. For example, after the Patent Trial and Appeal Board had been operational for about 18 months, it conducted a series of eight roundtables in April and May of 2014 at locations around the country to publicly share information concerning trial proceedings, to obtain public feedback on these proceedings, and to launch the process of revisiting its trial rules and trial practice guide. At these roundtables, the board provided the public with statistics summarizing the administrative trial proceedings, as well as lessons learned for filing effective petitions, engaging in successful discovery and amendment practice, and effectively presenting a case at oral hearing, among other things. The board also asked for and received feedback from the public on the AIA administrative trial proceeding rules and trial practice guide, as well as on experiences in general with the AIA administrative trial proceedings. Subsequent to the 2014 roundtables, the USPTO sought public input on all aspects of AIA trial proceedings through a June 27, 2014 Federal Register notice, which included 17 specific questions regarding certain trial rules, such as claim construction, the claim amendment process, and good cause trial extensions. USPTO took a two-step approach in responding to the 37 comments received in response to this Federal Register notice. First, USPTO implemented several immediate changes to board proceedings, including changes to page limits for some documents. According to the annual report of USPTO’s Patent Public Advisory Committee, these changes were favorably received by the stakeholder community. Second, in April 2016, the board implemented more substantive changes, including allowing testimonial evidence to be submitted with a patent owner’s preliminary response to a petition and changing from a page limit to a word count for major briefings, among other things. In addition to roundtables, the board has engaged with stakeholders through several other mechanisms, including webinars and judicial conferences. For example, in February 2015, the board announced its inaugural “Boardside Chat” lunchtime webinar series, which has been held bi-monthly ever since. These webinars are designed to update the public on current board activities and statistics, and to allow a means for the board to regularly receive public feedback about AIA trial proceedings and any issues of concern. Topics discussed at these events include key trial decisions, proposed changes to trial rules, and best practices for prior art presentations in AIA trials, among other things. Since 2015, the board has hosted an annual judicial conference, where the board engages with stakeholders and educates them about AIA trial proceedings, answers questions, and receives feedback. Board judges present trial statistics, information about the internal functioning of the board, practice tips, and engage in discussions on topics of current interest to stakeholders. Topics have included motions to amend and the prevalence of multiple petitions. More recently, the board has conducted other outreach sessions, including: an August 2017 roundtable meeting with stakeholders from the American Intellectual Property Law Association to address a broad range of topics affecting practitioners before the board, including how patent claims are interpreted, claim amendments, and conditions under which multiple petitions from a single petitioner would be denied; a webinar on August 31, 2017, addressing common evidentiary issues that occur during AIA trial proceedings; and a webinar on September 12, 2017, with the Chief Judge to commemorate the 5th anniversary of the board, where discussion topics included the origins and mission of the board, recent board developments, and operational procedures. According to USPTO’s Patent Public Advisory Committee, this type of outreach provides a valuable two-way conduit for constructive flow of information to and from the board. In addition to these various outreach efforts, stakeholders are encouraged to provide feedback to the board, on any topic related to trial proceedings, by e-mail or telephone. Board officials we interviewed told us that they review information obtained from stakeholders during roundtable meetings and other outreach events and implement changes to policies and procedures where applicable. The officials told us that stakeholder feedback has been used to inform updates to the board’s trial rules guidance, to modify rules of practice, and in updating Standard Operating Procedures. In addition, board officials told us that in response to stakeholder concerns, they conducted two extensive studies covering motions to amend and the filing of multiple petitions against a single patent. Furthermore, board officials told us that they have held training sessions for judges regarding specific areas of interest to stakeholders. Lastly, board officials also told us that the board’s website, including the frequently-asked-questions pages, is updated with information relevant to stakeholders, including stakeholder concerns. For example, written stakeholder comments submitted in response to a proposed rulemaking are posted on the USPTO website for public viewing. Stakeholders we interviewed generally agreed that the CBM program has reduced litigation, and many said there is value in maintaining some aspects of the program. Stakeholders generally agreed that the CBM program has contributed to a decrease in litigation involving business methods patents and that the program has had positive effects on innovation and investment. Most stakeholders also said there is value in maintaining, among other things, the ability to challenge patents on all four statutory grounds before the Patent Trial and Appeal Board. Stakeholders we interviewed generally agreed the CBM program has reduced litigation involving business method patents because the CBM program allows these patents to be more easily challenged than in district courts. Stakeholders told us that fewer business method patent lawsuits are filed and that existing lawsuits are often dropped after patents have been through the CBM program. However, stakeholders also noted that the Supreme Court’s 2014 decision in Alice may have also reduced the number of business method patent lawsuits. Patents that would be found invalid under Alice are often very similar to the patents that are eligible for challenge under the CBM program, and in some cases, according to stakeholders, it is cheaper and more efficient to challenge a patent’s validity in district court using Alice than it is to use the CBM program. Stakeholders described the following additional effects of the CBM program: Business method patent assertion is riskier. The CBM program makes it riskier to assert business method patents because, compared with district court, the program offers a cheaper and more efficient way for alleged infringers to challenge a patent’s validity. District court litigation can take several years and cost several million dollars, while CBM trials are limited to 18 months and generally cost much less. In addition, technically trained board judges have greater expertise in patent law than an average district court judge and jury, and are often better able to understand complex patentability issues. Because of this, some alleged infringers are more willing to present complex arguments—such as questions about whether the patent meets standards for clarity—to the board than to a jury. As a result, the CBM program has deterred owners of financial business method patents from asserting their patents for fear those patents will be ruled unpatentable. According to stakeholders, the existence of CBM challenges has put downward pressure on settlement amounts. Patent owners may want to avoid the risk of their patent being invalidated and will demand lower settlement amounts to avoid the risk of CBM and district court proceedings. Petitioners, too, told us they use this knowledge to negotiate lower settlement fees. In addition, because challenges under the CBM program may suspend the parallel district court proceedings, it is more difficult for patent owners to expect quick settlements from alleged infringers looking to avoid the rapidly increasing court costs associated with lengthy trials. The parties can still reach settlements after the alleged infringer files a challenge under the CBM program, but the patent owners have less leverage in negotiations. On the other hand, for patent owners willing to go through a CBM challenge, their patents will emerge stronger having survived the additional review according to stakeholders we interviewed. Business method patent owners have adjusted assertion strategies to avoid the CBM program. Patent owners are focused on asserting business method patents that are higher quality and less vulnerable to challenge under the CBM program or based on the Supreme Court’s decision in Alice; in other words, those patents that describe a technological invention that is not abstract and implemented on a generic computer. In addition, a few stakeholders told us that they have abandoned some claims in certain patents to avoid the possibility of their patents being challenged under the CBM program. Stakeholders also told us that patent owners seem to be asserting more patents, and more claims, than before the CBM program was implemented, as a strategy either to ratchet up defense costs for accused infringers and secure a settlement or to at least have success with some of the infringement charges. In addition, some stakeholders said that because the board charges fees for each petition challenging a patent, asserting more patents is a strategy to increase expected costs of defending against infringement and, thus, to increase the likelihood of a settlement. However, our analysis of RPX litigation data from 2007 to 2017 did not support these assertions. Patent litigation data did not show an increase in the monthly average number of patents asserted per case among cases involving one or more business method patents. The CBM program has decreased the value of business method patents. The CBM program has decreased the value of business method patents generally, even beyond those focused on financial services. Several stakeholders told us that the board’s broad initial interpretation of the CBM program’s eligibility requirements contributed to an increased risk to a wider swath of business method and software patents than was intended by Congress. Stakeholders told us that any patent tangentially related to financial business methods has been devalued because it could potentially be challenged under the CBM program. In addition, stakeholders said they believed that the threat of such challenges has decreased the value of all business method patents, including those that might ultimately survive a CBM challenge. Some stakeholders pointed to a decrease in licensing of business method patents and others suggested that patents have lost value on the secondary patent market. Available data that we reviewed, though limited, support the claims that patent values on the secondary market have fallen. A few stakeholders, however, told us that to the extent these patents have lost value, the devaluation is related to problems with patent quality. Stakeholders generally agreed the effects of the CBM program on innovation and investment have been minimal or mostly positive. More specifically, stakeholders told us that the CBM program is good for overall innovation and investment in financial technologies in that the program eliminates overly broad (non-specific), low-quality patents. Stakeholders told us they believe the existence and assertion of overly broad patents is bad for innovation, in part because defending against alleged infringement is expensive and time-consuming, even under the CBM program. Assertion of overly broad, unclear, or otherwise low-quality patents acts much like a tax on investment, according to stakeholders. Stakeholders also told us that removing such patents from the marketplace promotes innovation because it prevents these patents from blocking new innovation. According to stakeholders, innovation is represented by the quality of the patents issued rather than the quantity. A large number of patents in a technology space, according to stakeholders, can make it difficult to innovate within that crowded space. A few stakeholders had differing views, stating that the CBM program has affected some companies’ ability to protect a business model with a business method patent, although one stakeholder acknowledged that the Supreme Court’s decision in Alice has also had an effect. These types of comments were generally from stakeholders with company-specific interests, including individual patent owners and companies that have had patents invalidated under the CBM program. Other stakeholders, however, including those in the financial services industry, told us that innovation in their field is robust. For example, these companies are developing mobile-payment and blockchain technologies, and the companies have not seen any negative effects from the CBM program on their ability to innovate, patent, and invest in these financial services technologies. Stakeholders generally agreed that the CBM program and the other post- grant programs have had a positive effect on patent quality, as patent applicants are more and more aware of what it takes to ensure a patent will survive a post-grant challenge. Several stakeholders highlighted extra steps they have taken before and during the patent application and examination stages to ensure their patents will stand up to any eventual challenges. For example, one patent owner told us how his company proactively worked to get its patent examined by a foreign patent office, in an effort to understand any quality issues with the patent, before submitting a patent application to USPTO. Another stakeholder told us about an extended back-and-forth with the USPTO examiner. This stakeholder told us that the additional effort taken during the examination process resulted in a patent that is much clearer and that will be more likely to stand up to additional scrutiny. Most stakeholders told us there was value in maintaining aspects of the CBM program, including the ability to challenge patents on all four statutory grounds at the Patent Trial and Appeal Board, and many told us that it would be useful to expand this capability to a broader set of patents beyond business methods. However, there was no strong consensus among stakeholders for how the AIA trials should be designed in the future. Stakeholders generally agreed that the ability to challenge a patent’s validity on subject matter eligibility grounds remains important, although there was not broad agreement among stakeholders regarding how far that ability should extend beyond business method patents. Stakeholders we interviewed pointed to inconsistencies in how federal courts interpret subject matter eligibility requirements and said that challenges on subject matter eligibility grounds should remain an option at the Patent Trial and Appeal Board because of the board’s expertise over the courts. Some stakeholders said subject matter eligibility challenges were important for a wider scope of patents than just business methods because concerns about subject matter eligibility that apply to business method patents extend to software-related patents in general. In addition, a few stakeholders suggested that subject matter eligibility challenges should be available for patents in all areas of technology. The continued prevalence of challenges in district courts based on the Supreme Court’s decision in Alice, for business method patents and for a wider array of patents, highlights the importance of retaining the ability to challenge patent validity at the board on subject matter eligibility grounds. Similarly, stakeholders told us that patent clarity problems exist beyond business method patents. Stakeholders said that the federal courts and jurors do not necessarily have the expertise to interpret patent clarity requirements and that the technically trained Patent Trial and Appeal Board judges were better suited to make patentability determinations, including on clarity grounds. One stakeholder, for example, told us that petitioners can delve much deeper into the invalidity argument on patent clarity grounds at a CBM trials than they can as defendants in district court, mostly because the board judges have the requisite technical expertise. In addition, many stakeholders told us that challenging patents on clarity grounds was also important for a much broader array of patents than business method patents, and some suggested that these challenges should remain an option for all patents challenged at the board. In June 2016, we reported that more than 40 percent of patent examiners experience pressure to avoid rejecting a patent application because of problems with clarity and we recommended additional steps USPTO could take to improve patent clarity. This suggests there are a potentially large number of patents, beyond and including business method patents, that could benefit from a second look by the board on these grounds, and inter partes review does not allow patents to be challenged on clarity grounds. Stakeholders discussed several other topics related to the future of the CBM program: Post-grant review is not an effective substitute for the CBM program for challenging patents on subject matter eligibility and patent clarity grounds. Stakeholders told us that the 9-month window, after a patent is issued, to file challenges using post-grant review is too short to make it an effective substitute for the CBM program. Post-grant review was established as a permanent mechanism at the board for challenging all patents on all statutory grounds. However, only 78 petitions have been filed for post-grant review through September 30, 2017. According to stakeholders, few companies have the resources to continuously monitor patent issuance in real time. In addition, even if companies do discover patents that are relevant to their business, companies, in general, are not willing or able to spend resources challenging patents that may never be used as the basis for an infringement lawsuit. As a result, the public essentially does not have the ability to challenge most patents on subject matter eligibility and clarity grounds, according to stakeholders. CBM challenges should not be limited to a specific technology. Although the CBM program was designed to address a problem caused by a narrow set of patents, some stakeholders told us they are troubled by CBM’s focus on patents for financial services and products. Stakeholders said that singling out such services and products is unfair and that the need to determine eligibility for review created uncertainty for patent owners. In addition, some stakeholders told us that the singling out of a particular subset of patents may raise questions about compliance with an international treaty. Concerns remain about business method and software-related patents. Some stakeholders told us the patents that the CBM program was designed to address have largely been addressed by improved examination at USPTO, reducing the need for the program. In addition, some stakeholders told us that the CBM program, which was designed to be temporary, had largely succeeded in addressing the problems with business method patents. However, other stakeholders told us that patents of questionable validity, including business method and software patents, continue to be issued by the patent office. Given these continuing concerns over software-related patents, several stakeholders suggested that one viable option for the future of the CBM program is to expand its eligibility beyond financial services patents to cover all software-related patents. In addition, in contrast to the inter partes review program, the CBM program allows any form of prior art to be used to challenge a patent on novelty or obviousness grounds. This broader allowance for prior art is important because many software and business method patents were preceded by prior art not found in existing patents or printed publications. In 2016, we reported on a number of patent quality challenges at USPTO and made several recommendations to help improve the quality and clarity of issued patents. In that report, we estimated that almost 70 percent of patent examiners did not have enough time to complete a thorough examination of patent applications given a typical examiner’s workload. Given these time constraints and other patent quality challenges, the Patent Trial and Appeal Board has provided a means to challenge low-quality patents after they have been issued. Stakeholders generally agreed that the CBM program has reduced lawsuits in the federal courts involving business method patents, and many stakeholders were in favor of maintaining aspects of the program. The board has a track record of issuing timely decisions that have largely been upheld by the U.S. Court of Appeals for the Federal Circuit. However, the board does not have guidance, such as documented procedures, for reviewing trial decisions and the processes that led to the decisions. Without developing guidance, such as documented procedures, that outlines the steps USPTO will take to review the Patent Trial and Appeal Board’s decisions and the processes that lead to decisions, USPTO cannot fully ensure that it is meeting the objective of ensuring consistency of its decisions. We are making the following recommendation to USPTO: The Director of USPTO should develop guidance, such as documented procedures, for judges reviewing the Patent Trial and Appeal Board’s decisions and the processes that lead to the decisions. (Recommendation 1) We provided a draft of this report to the Department of Commerce for review and comment. In its comments, reproduced in appendix II, the department agreed with the recommendation and stated that it has begun taking steps to address it, including drafting a formal, written charter that documents procedures for reviewing board decisions. The department further stated that it intends to address the recommendation within one year. In addition, it provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 8 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Commerce, and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Our objectives were to (1) describe the extent to which the Patent Trial and Appeal Board’s Transitional Program For Covered Business Method Patents (CBM program) has been used to challenge patents, and the results of those challenges; (2) examine the extent to which USPTO ensures timeliness of trial decisions, reviews decisions for consistency, and engages with stakeholders to improve its administrative proceedings for the program; and (3) discuss stakeholder views on the effects of the CBM program and whether it should be extended past its scheduled September 2020 sunset date. To describe the extent to which the CBM program has been used to challenge patents, and the results of those challenges, we obtained data on board proceedings from two companies—RPX Corporation and Unified Patents—that included information on all of the board’s proceedings from September 2012 through September 2017. RPX and Unified Patents collect, compile, and analyze data from the U.S. Patent and Trademark Office’s publicly available data system. Both companies manually review these data to verify variables and to manually code additional information from other publicly available board documents. We conducted data quality testing, interviewed relevant officials, and reviewed relevant documentation for the data. We found these data to be sufficiently reliable for the purposes of our reporting objectives. For petitions filed at the board, data from RPX and Unified Patents include information on the patent in dispute, including its U.S. patent number, petition-filing dates, and trial institution and final written decision dates. RPX data include the patent claims challenged and the statutory grounds on which they were challenged. In addition, RPX data includes which patent claims were instituted for trial on which statutory grounds, and which patent claims were ruled unpatentable on which statutory grounds. RPX and Unified Patents provided the names of the petitioners and patent owners, as well as whether the patent owner is an operating company or one of several classifications of non-practicing entities. RPX also provided the names of the parties’ attorneys. We categorized which program each petition was filed under (CBM, inter partes review, or post- grant review) to enable comparisons across programs. We used the data from Unified Patents on Patent Trial and Appeal Board proceedings to supplement the RPX data for outcomes of each petition. Specifically, we compared the Unified Patents’ outcome variable—which describes the final outcome of the proceeding—and the RPX outcome variable to create a new variable that reflects the full available information about each petition’s outcome. There were some—fewer than 3 percent of cases—where the two variable values were inconsistent with one another. In these cases, we reviewed trial documentation to determine the correct value for the outcome variable. The Unified Patents outcome variable sometimes had more information than the RPX variable. For example, cases that were terminated because of settlement were identified as settlements in the Unified Patents data, but not in the RPX data. We retained the additional detail for our analysis. To determine trial outcomes at the patent level, we analyzed the petition in which the patent proceeded the furthest in the CBM process. For example, if a patent was challenged under the CBM program multiple times—for example, three times—and two petitions were not instituted to the trial phase and one was instituted and then settled before the board judges issued a final written decision, we used the petition that proceeded the furthest for our patent-level analysis of outcomes. In this way, we were able to report what happened to patents under the CBM program, while not double-counting those patents that were challenged more than once. To examine the extent to which USPTO ensures trial timeliness, reviews past decisions for consistency, and engages with stakeholders to improve its administrative proceedings for the program, we reviewed the America Invents Act (AIA); USPTO’s strategic plan; the Patent Trial and Appeal Board’s policy and guidance documents, including the Trial Practice Guide; and we interviewed board officials on several occasions. We compared USPTO’s efforts to review decisions for consistency against USPTO’s current strategic plan as well as Standards for Internal Control in the Federal Government (commonly referred to as the “Green Book”). In addition, we reviewed publicly available information documenting the steps the board takes to engage with stakeholders, including documentation of webinars, judicial conferences, and roundtable discussions. To obtain stakeholder views on the effects of the CBM program and whether it should be extended, we conducted semi-structured interviews with 38 stakeholders knowledgeable about the CBM program. To identify these stakeholders, we first identified the following sets of stakeholder groups: petitioners and patent owners who have been involved with CBM trials; attorneys who have represented clients with board proceedings; industry trade groups; academic and legal commentators; public interest groups; and venture capitalists. We identified petitioners, patent owners, and attorneys who had been involved in board proceedings using data from RPX Corporation and Unified Patents. We ranked petitioners, patent owners, and attorneys based on how many CBM cases they had been involved with, and how many inter partes review cases they had been involved with in front of the board. We then requested, via email, interviews with several stakeholders from each stakeholder group, and began our semi-structured interviews as stakeholders accepted our invitation. During our initial set of semi-structured interviews, we identified additional stakeholders through an iterative process known as a “snowball selection method,” whereby during each interview we solicited names of additional stakeholders it would be useful to interview. As we obtained the names of additional stakeholders, we requested additional interviews, conducted interviews, and solicited additional stakeholders, until we (a) had interviewed four or more stakeholders from each identified stakeholder group and (b) found that stakeholder responses were, in general, commonly describing the same broad themes and relevant points that previous stakeholders had described about the topics we were discussing. In total, the stakeholders we recruited and interviewed did not form a random, statistically representative sample of all relevant stakeholders. As such, we cannot generalize the results of the interviews. However, these stakeholder groups and the stakeholders we interviewed provide a broad spectrum of informed opinions on the CBM program. Of the 38 stakeholders interviewed, 14 had previously petitioned CBM against more than one patent owner, and many of those had also petitioned an inter partes review. In addition, we interviewed 6 patent owners that had been involved in multiple CBM trials. We also interviewed attorneys from 5 law firms that have represented multiple petitioners and patents owners in CBM cases. In addition, we interviewed officials from 4 trade groups, 4 venture capital firms, and 5 academics and legal commentators, all of whom had interest and expertise in the CBM program. During our semi-structured interviews, we asked stakeholders the following three broad questions: How much and in what way has the existence of the CBM program affected patent assertion strategies since 2012? How much has the CBM program influenced investment decisions and innovation for technologies related to financial-services business methods? Should the CBM program be allowed to expire in September 2020 or should it be renewed? For each question, we used a consistent set of follow-up prompts to ensure that we fully covered all aspects of each topic with the stakeholders, that we received complete answers, and that we were able to accurately record the responses. While we asked every stakeholder each of the three questions, we did so keeping in mind the particular background and experience of each stakeholder because experience and expertise differed across our wide range of stakeholders. As such, during each interview, we focused on the topics where the stakeholder had the most experience, expertise, or knowledge. To systematically analyze the information we collected during our semi- structured interviews, we used qualitative analysis software to group the responses into categories and themes. All information was individually coded by two analysts. We classified individual responses according to these broad themes, which generally corresponded to our main questions: The effect of the CBM program on patent assertion and litigation. The effect of the CBM program on innovation and investment in business methods. The future of the CBM program. Within each broad theme, we labeled and organized sub-themes. We established the sub-themes by identifying natural clusters of stakeholder responses. We analyzed the categorized themes and sub-themes to draw inferences about the effectiveness of the CBM program by taking the following steps: We first examined the amount and nature of agreement and disagreement between responses within each theme and sub-theme. We then assessed the strength of the arguments supporting each categorized response, and considered factors including the number of stakeholders who discussed a topic, including the strength of the rationale for each viewpoint and other supporting evidence provided. We also considered the way in which stakeholders’ interests could influence their perspectives. In this report, we present the themes with the strongest and most consistent support based on rationale including the prevalence of each argument, the presence of credible evidence in support of statements, and the amount of consistency and corroboration of themes across stakeholders. Because stakeholders do not make up a defined population that we could sample from, and because the stakeholders we interviewed had a wide range of experience and expertise, we did not tally up similar responses and do not present stakeholder responses based solely on how many stakeholders agreed or disagreed with a given statement. We conducted this performance audit from November 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, the following individuals made contributions to this report: Rob Marek (Assistant Director), Kevin Bray, Mark Braza, Richard Burkard, Stephanie Gaines, Michael Krafve, Cynthia Norris, Ardith Spence, Sara Sullivan, and Sarah Williamson. Intellectual Property: Patent Office Should Define Quality, Reassess Incentives, and Improve Clarity. GAO-16-490. Washington, D.C.: June 30, 2016. Intellectual Property: Patent Office Should Strengthen Search Capabilities and Better Monitor Examiners’ Work. GAO-16-479. Washington, D.C.: June 30, 2016. Intellectual Property: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality. GAO-13-465. Washington, D.C.: August 22, 2013. U.S. Patent and Trademark Office: Performance Management Processes. GAO-10-946R. Washington, D.C.: September 24, 2010. Intellectual Property: Enhanced Planning by U.S. Personnel Overseas Could Strengthen Efforts. GAO-09-863. Washington, D.C.: September 30, 2009. Check 21 Act: Most Consumers Have Accepted and Banks Are Progressing Toward Full Adoption of Check Truncation. GAO-09-8. Washington, D.C.: October 28, 2008. U.S. Patent and Trademark Office: Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog. GAO-08-527T. Washington, D.C.: February 27, 2008. U.S. Patent And Trademark Office: Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog. GAO-07-1102. Washington, D.C.: September 4, 2007. Intellectual Property: Improvements Needed to Better Manage Patent Office Automation and Address Workforce Challenges. GAO-05-1008T. Washington, D.C.: September 8, 2005. Intellectual Property: Key Processes for Managing Patent Automation Strategy Need Strengthening. GAO-05-336. Washington, D.C.: June 17, 2005. Intellectual Property: USPTO Has Made Progress in Hiring Examiners, but Challenges to Retention Remain. GAO-05-720. Washington, D.C.: June 17, 2005.", "summary": "Patents can promote innovation by giving inventors exclusive rights to their inventions, and patent owners can bring infringement lawsuits against anyone who uses, makes, sells, offers to sell, or imports a patented invention without authorization. As GAO previously reported, such lawsuits can take years and cost several million dollars. USPTO's CBM program provides a trial proceeding to challenge a patent's validity at USPTO's board for, according to stakeholders, a fraction of the time and money that would be spent in the federal courts. The CBM program began in September 2012 and is slated to sunset in September 2020. GAO was asked to examine the CBM program. This report (1) describes the extent to which the program has been used to challenge patents, and the results of those challenges; (2) examines the extent to which USPTO ensures timeliness of trial decisions, reviews decisions for consistency, and engages with stakeholders to improve proceedings for the program; and (3) discusses stakeholder views on the effects of the program and whether it should be extended past its sunset date. GAO analyzed CBM trial data from September 2012 through September 2017, reviewed USPTO documents, and interviewed 38 stakeholders, such as legal and academic commentators, selected for their knowledge of or direct involvement in such trials. From September 2012 through September 2017, entities facing patent infringement lawsuits filed 524 petitions challenging the validity of 359 patents under the U.S. Patent and Trademark Office's (USPTO) covered business method (CBM) program, resulting in decisions against about one-third of these patents. The CBM program provides entities facing infringement lawsuits an opportunity to challenge the validity of a business method patent by demonstrating that it did not meet requirements for patentability. Business method patents focus on ways of doing business in areas such as banking or e-commerce. The rate of filing petitions over this period has fluctuated but has generally declined since 2015, and none were filed in August or September 2017. USPTO has taken several steps to ensure the timeliness of trial decisions, review past decisions, and engage with stakeholders to improve proceedings under the program: Timeliness: USPTO regularly informs relevant parties about paperwork requirements and due dates throughout trials. According to program data, as of September 2017, all 181 completed trials were completed within statutorily required time frames. Decision review: USPTO has taken several steps to review its decisions and has monitored the rate at which the Court of Appeals for the Federal Circuit affirms or reverses them. However, USPTO does not have guidance, such as documented procedures, for reviewing trial decisions, or the processes leading to decisions, for consistency. Without guidance, such as documented procedures, USPTO cannot fully ensure that it is meeting its objective of ensuring consistency of decisions. Stakeholder engagement: USPTO judges have engaged with stakeholders by participating in public roundtables and webinars, and attending judicial conferences, among other things. Stakeholders GAO interviewed generally agreed that the CBM program has reduced lawsuits involving business method patents in the federal courts. While many stakeholders favored maintaining aspects of the program, there was not strong consensus among stakeholders for how future trials should be designed. GAO recommends that USPTO develop guidance, such as documented procedures, for reviewing trial decisions for consistency. USPTO agreed with GAO's recommendation.", "document_type": "gao"}
{"report": "In our September 2018 report, we found that from 2010 through 2016 the number of Native American youth in federal and state and local justice systems declined across all phases of the justice process—arrest, adjudication, and confinement—according to our analysis of available data. At the federal level, arrests by federal agencies dropped from 60 Native American youth in 2010 to 20 in 2016, and at the state and local level, arrests of Native American youth declined by almost 40 percent from 18,295 arrested in 2010 to 11,002 in 2016. Our analysis also found that the vast majority of these Native American youth came into contact with state and local justice systems, not the federal system. For example, from 2010 through 2016, there were 105,487 total arrests of Native American youth reported by state and local law enforcement agencies (LEAs). In contrast, there were 246 Native American youth held in federal custody by the U.S. Marshals Service due to arrest by federal LEAs during the same period. We also found a number of similarities between Native American and non-Native American youth in state and local justice systems. For example, the offenses that Native American youth and non-Native American youth were arrested, adjudicated, and confined for were generally similar. In contrast, our analysis also showed a number of differences between Native American and non-Native American youth in the federal justice system. For example, our analysis showed variation in the types of offenses committed by each group. From fiscal years 2010 through 2016, the majority of Native American youth in the federal justice system were arrested, adjudicated, or confined for offenses against a person, with the top two specific offenses being assault and sex offenses. In contrast, the majority of involvement of non-Native American youth in the federal system during the same period was due to public order or drug and alcohol offenses at all three stages, with the top two specific offenses being drug and immigration related. Our September 2018 report contains additional information on the differences between Native American and non-Native American youth involved with the federal justice system. Further, we found that the percent of Native American youth involved in most state and local systems was generally similar to their representation in the youth populations in those states. For example, our analysis found that the majority (about 75 percent) of Native American youth arrested by state and local LEAs from calendar years 2010 through 2016 were located in 10 states: Alaska, Arizona, Minnesota, Montana, New Mexico, North Dakota, Oklahoma, South Dakota, Washington, and Wisconsin. These 10 states had among the highest percent of Native Americans in their states’ overall youth populations, according to 2016 U.S. Census estimates we reviewed. In 2016, the largest number of arrests by state and local LEAs occurred in Arizona and South Dakota. In contrast, we found that representation of Native American youth arrested, referred for adjudication, and confined at the federal level during the period reviewed was greater (13 to 19 percent) than their representation in the nationwide youth population (1.6 percent). DOJ officials told us that the population of Native Americans in the federal justice system has historically been higher than their share in the nationwide population, and they attributed this and other differences shown by our analysis to federal government jurisdiction over certain crimes in Indian country, as well as the absence of general federal government jurisdiction over non-Native American youth. According to DOJ officials, this jurisdiction requires the federal government to prosecute offenses that would commonly be prosecuted by states if committed outside of Indian country. According to DOJ officials, a small handful of federal criminal statutes apply to all juveniles, such as immigration and drug statutes, but the federal government has been granted greater jurisdiction over Native American youth than non-Native American youth by federal laws that apply to crimes committed in Indian Country, such as the Major Crimes Act. For example, one DOJ official noted that the Major Crimes Act gives the federal government exclusive jurisdiction over crimes such as burglary and sex offenses committed in Indian country. This differs from the treatment of non-Native American youth, who are not prosecuted in the federal system for the same types of offenses, because the federal government does not have jurisdiction over those youth for such offenses. Non-Native American youth are instead subject to the general juvenile delinquency jurisdiction of state and local courts. Additionally, DOJ officials stated that tribal justice systems are often underfunded and do not have the capacity to handle Native American youths’ cases. Therefore, they stated that when both federal and tribal justice systems have jurisdiction, the federal system might be the only system in which the youth’s case may be adjudicated. For these reasons, the percentage of Native American youth offenders in the federal justice system is higher than non-Native American juveniles in accordance with population size, according to DOJ officials. Representatives from four of the five Native American organizations we interviewed, whose mission and scope of work focus on Native American juvenile justice issues and that have a national or geographically specific perspective, noted that federal jurisdiction is a key contributor to the higher percentage of Native American youth involved at the federal justice level. Additionally, representatives from all five organizations noted, similarly to DOJ officials, that federal jurisdiction over crimes in Indian country is typically for more serious offenses (specifically under the Major Crimes Act), such as offenses against a person. Comprehensive data from tribal justice systems on the involvement of Native American youth were not available. However, we identified and reviewed a few data sources that provided insights about the arrest, adjudication, and confinement of Native American youth by tribal justice systems. See appendix II for a summary of our analysis of data from these sources. In our September 2018 report, we identified 122 discretionary grants and cooperative agreements (grant programs) offered by DOJ and HHS from fiscal years 2015 through 2017 that could help prevent or address delinquency among Native American youth. DOJ and HHS made approximately $1.2 billion in first-year awards through the 122 programs over the period, of which the agencies awarded about $207.7 million to tribal governments or Native American organizations. A list of the 122 programs, which focus on a range of issues such as violence or trauma, justice system reform, alcohol and substance abuse, and reentry and recidivism, can be found in our September 2018 report. The 122 DOJ and HHS grant programs we identified included 27 programs that specified tribes or Native Americans as a primary beneficiary and 95 programs that did not specify these populations but could include them as beneficiaries. For example, the Department of Justice’s Office of Juvenile Justice and Delinquency Prevention offered the Defending Childhood American Indian/Alaska Native Policy Initiative: Supporting Trauma-Informed Juvenile Justice Systems for Tribes program for funding in fiscal year 2016. The goal of this program— increasing the capacity of federally recognized tribes’ juvenile justice and related systems to improve the life outcomes of youth who are at risk or who are involved in the justice system and to reduce youth exposure to violence—explicitly focused on tribal communities. On the other hand, the Sober Truth on Preventing Underage Drinking Act grant program, which HHS’s Substance Abuse and Mental Health Services Administration offered for funding in fiscal year 2016 to prevent and reduce alcohol use among youth and young adults, is an example of a program that did not specify tribes or Native Americans as a primary beneficiary but could include them as beneficiaries. We found that tribal governments and Native American organizations were eligible for almost all of the grant programs we identified. Specifically, they were eligible to apply for 70 of 73 DOJ programs and 48 of 49 HHS programs. However, although tribal governments and Native American organizations were eligible to apply for almost all of the programs, we found in a non-generalizable sample of applications we reviewed that they applied primarily for the programs that specified tribes or Native Americans as a primary beneficiary. For example, we reviewed applications for 18 DOJ grant programs and found that tribal governments and Native American organizations accounted for over 99 percent of the applications for the 5 grant programs within the sample that specified tribes or Native Americans as a primary beneficiary. However, tribal governments and Native American organizations accounted for about 1 percent of the applications for the 13 programs in the sample that did not specify tribes or Native Americans as a primary beneficiary. We interviewed officials from DOJ’s Office of Justice Programs (OJP) and seven HHS operating divisions to obtain their perspectives on why tribal governments and Native American organizations might not apply for grant programs that do not specify them as a primary beneficiary. They identified various reasons, including that tribal governments and Native American organizations might not be aware that they are eligible to apply for certain grant programs; might believe that their applications to grant programs that do not specify tribes or Native Americans as a primary beneficiary will not be competitive with other applications; or might prefer to apply for those grant programs that specify tribes or Native Americans as a primary beneficiary. We also interviewed representatives from 10 tribal governments and Native American organizations, who provided perspectives on whether or not a grant program’s focus on tribes or Native Americans as a primary beneficiary affected their decision to apply for the program. Officials from 6 of 10 tribal governments and Native American organizations indicated that they would consider any grant program that met the needs of their communities, while the remaining 4 indicated that a grant program’s focus or lack thereof on tribes or Native Americans could affect their ability to apply for it. Officials from the 10 tribal governments and Native American organizations also identified various federal practices they found helpful or challenging when applying for grant programs related to preventing or addressing delinquency among Native American youth. When asked what federal practices, if any, were particularly helpful when applying to receive federal funding, they most frequently responded that they found it particularly helpful to be able to call or meet with federal officials if they had questions about or needed help on their applications. Regarding the biggest challenges, they cited short application deadlines, difficulties collecting data for grant program applications, and a scarcity of grant writers and other personnel needed to complete a quality application. In addition, DOJ OJP and HHS officials provided perspectives on why some tribal governments and Native American organizations might be more successful in applying for federal funding than others. The officials stated, among other things, that larger and better-resourced tribal governments and Native American organizations were more successful at applying for federal funding and that previously successful grant program applicants were more likely to be successful again. More detailed information on the perspectives from tribal governments, Native American organizations, and agency officials regarding the factors they believe affect the ability of tribal governments and Native American organizations to apply successfully for federal grant programs can be found in our September 2018 report. Chairman Hoeven, Vice Chairman Udall, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions you may have at this time. For our September 2018 report, we obtained and analyzed record-level and summary data from federal, state and local, and tribal justice systems from 2010 through 2016. Figure 1 illustrates the data sources we included in our report for each phase of the justice process (arrest, adjudication, and confinement) in each justice system (federal, state and local, and tribal). Generally, state and local entities include those managed by states, counties, or municipalities. Comprehensive data from tribal justice systems on the involvement of American Indian and Alaska Native (Native American) youth were not available. However, in our September 2018 report, we identified and reviewed a few data sources that can provide certain insights about the arrest, adjudication, and confinement of Native American youth by tribal justice systems. The following is a summary of our analysis of data from these sources. Arrests. Although comprehensive data on the number of tribal law enforcement agency (LEA) arrests were not available, we obtained and reviewed admission records from three juvenile detention centers in Indian country managed by the Department of the Interior’s Bureau of Indian Affairs (BIA). Based on those records, at least 388 Native American tribal youth were admitted to these three facilities in 2016, as shown in table 1. In the Northern Cheyenne facility, for which we obtained records for 5 years, the number of youth admitted increased yearly between 2012 and 2016, from 14 to 204. According to BIA officials, this growth in the number of youth admitted to the Northern Cheyenne facility likely reflects an increase in admissions of Native American youth from surrounding tribes. Specifically, because the Northern Cheyenne facility is centrally located, the officials said that the facility admits youth from other tribes, which have grown accustomed to sending their youth to the facility. BIA officials also noted that the Northern Cheyenne facility services an area where there is a high rate of delinquency among youth, and because the facility works well with Native American youth struggling with delinquency issues, many tribes elect to send their delinquent youth to the facility. Further, since 2012, the Northern Cheyenne facility increased its bed space and staff, thus increasing its capacity to admit more youth, according to BIA officials. Even though comprehensive tribal arrest data were not available, we reported in September 2018 that the Department of Justice’s (DOJ) Bureau of Justice Statistics (BJS) was undertaking an effort to increase collection of arrest data from tribal LEAs. Specifically, this data collection activity is the Census of Tribal Law Enforcement Agencies. This collection activity, which BJS plans to conduct in 2019, is to capture information including tribal LEA workloads and arrests, tribal LEA access to and participation in regional and national justice database systems, and tribal LEA reporting of crime data into FBI databases. Adjudication. Comprehensive data were not available to describe the extent to which tribal courts processed Native American youth or found them guilty. However, BJS concluded a tribal court data collection effort— the National Survey of Tribal Court Systems—in 2015. Through this survey, BJS gathered information from more than 300 tribal courts and other tribal judicial entities on their criminal, civil, domestic violence, and youth caseloads, and pretrial and probation programs, among other things. DOJ officials told us that BJS has analyzed the data, and plans to release results in the future. Confinement. According to data published by BJS, the number of youth in Indian country jails declined from 190 in 2014 to 170 in 2016 (about an 11 percent decrease). If you or your staff have any questions about this testimony, please contact Gretta L. Goodwin, Director, Homeland Security and Justice at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Tonnye’ Conner-White, Assistant Director; Steven Rocker, Analyst-in- Charge; Haley Dunn; Angelina Torres; Taylor Matheson; Anne Akin; Paul Hobart; Jamarla Edwards; Claire Peachey; Eric Hauswirth; Heidi Neilson; Amanda Miller; and Elizabeth Dretsch. Key contributors to the previous work on which this testimony is based are listed in our September 2018 report. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's September 2018 report, entitled Native American Youth: Involvement in Justice Systems and Information on Grants to Help Address Juvenile Delinquency ( GAO-18-591 ). GAO's analysis of available data found that the number of American Indian and Alaska Native (Native American) youth in federal and state and local justice systems declined across all phases of the justice process—arrest, adjudication, and confinement—from 2010 through 2016. During this period, state and local arrests of Native American youth declined by almost 40 percent from 18,295 in 2010 to 11,002 in 2016. The vast majority of Native American youth came into contact with state and local justice systems rather than the federal system. However, more Native American youth were involved in the federal system than their percentage in the nationwide population (1.6 percent). For example, of all youth arrested by federal entities during the period, 18 percent were Native American. According to Department of Justice (DOJ) officials, this is due to federal jurisdiction over certain crimes involving Native Americans. Comprehensive data on Native American youth involvement in tribal justice systems were not available for analysis. GAO's analysis showed several differences between Native American and non-Native American youth in the federal justice system. For example, the majority of Native American youths' involvement was for offenses against a person, such as assault and sex offenses. In contrast, the majority of non-Native American youths' involvement was for public order offenses (e.g., immigration violations) or drug or alcohol offenses. On the other hand, in state and local justice systems, the involvement of Native American and non-Native American youth showed many similarities, such as similar offenses for each group. DOJ and the Department of Health and Human Services (HHS) offered at least 122 discretionary grants and cooperative agreements (grant programs) from fiscal years 2015 through 2017 that could be used to address juvenile delinquency among Native American youth. DOJ and HHS made approximately $1.2 billion in first-year awards to grantees during the period, of which the agencies awarded approximately $207.7 million to tribal governments or Native American organizations. Officials from the agencies, tribal governments, and Native American organizations identified factors they believe affect success in applying for grant programs. For example, some tribal governments and Native American organizations found being able to call or meet with federal officials during the application process helpful but found that short application deadlines are a challenge.", "document_type": "gao"}
{"report": "VHA policy requires that all medical facilities provide a safe, clean, functional environment for patients, visitors, and employees. The Joint Commission, an organization that accredits medical centers and other hospitals throughout the country, has developed standards that require medical centers to undertake several actions that relate to engineering, environmental management, and safety including: maintaining the patient environment by ensuring that a suitable temperature is maintained, that areas are clean and appropriately lighted, and furnishings and equipment are in good repair; managing utility systems to ensure operational reliability; and minimizing fire hazards and providing a safety system in case of fire. To help ensure medical centers maintain these standards, VHA requires medical centers to conduct regular environment of care inspections of the facility. According to VHA officials, because of the large size of many medical centers, most conduct environment of care inspections in a different part of their facility every week throughout the year. In 2016, a VHA directive formally established VHA’s Comprehensive Environment of Care Program (Environment of Care Program) and outlined management and oversight responsibilities for the program. Environment of care inspections are a main component of the program. In addition to the environment of care inspections, VHA uses other inspections to help execute and oversee facility operations and maintenance functions. For example, every 3 years, VA contracts for Facility Condition Assessments, where contractors evaluate all buildings and major systems at a medical facility (e.g., structural, mechanical, plumbing, and others) and identifies needed repairs and replacements. This inspection gives a graded score from A to F for VHA facilities, with “C minus” as the average facility score received for overall infrastructure conditions at VHA facilities as of 2015. This inspection focuses on major systems, while environment of care inspections focus on day-to-day facility conditions, including that of patient-care areas. Furthermore, preventative maintenance inspections are usually conducted on systems, such as boilers or heating, ventilation, and air-conditioning (HVAC) systems, and would vary in frequency based on the manufacturer requirements. Medical center staff also noted that facility operations and maintenance issues may be identified by staff in the course of their day- to-day duties and reported to engineering for repair. VHA medical centers employ staff trained in plumbing, carpentry, grounds maintenance, and other trades needed to maintain facilities, as well as housekeeping staff. These employees are responsible for carrying out the work necessary to ensure medical centers comply with safety standards, and VHA policies and inspection requirements. The majority of funding for medical centers, including funding for operations and maintenance, is determined on the basis of past years’ allocations, veteran populations served, and the types of services provided. The budget for VA medical facilities has increased by approximately 30 percent over the last 5 fiscal years. The medical center director or a designee, such as the medical center’s Environment of Care Coordinator, has the overall responsibility for managing and leading weekly environment of care inspections at a medical center. Each medical center should have an environment of care committee, and the medical center director or a designee should facilitate committee meetings to discuss the environment of care processes, findings, trends, and any other related issues. Inspections are conducted by an environment of care inspection team, which is made up of representatives from various facility departments, including, among others: Environmental Management Service—which is responsible for ensuring a state of physical and biological cleanliness, including proper handling of waste materials—and Engineering Service, which is responsible for utilities that allow the physical plant to function, including basic systems such as heating and electrical, among others. According to VHA guidance, the team is to conduct its inspections using a VHA checklist as a guide to determine if there are any deficiencies. For example, the checklist includes questions such as: Are there loose floor tiles/carpet? Are ceiling tiles stained or other signs of leaks? Are there any electrical hazards present? Team members record information on deficiencies that they identify into an Environment of Care inspections database, which is used to document and track the status of deficiencies. During interviews with medical center staff at all six of the medical centers included in our review, officials told us they follow the environment of care inspections process that VHA guidance outlines. At two of the medical centers we visited, we accompanied inspections team on environment of care inspections and observed staff following this process. The inspection teams walked through the areas designated for inspection, for example examining conditions of floors, ceilings and fire safety systems. Also, as we discuss later in the report, VHA officials also monitor aspects of the inspections process, such as who attends the inspection. VHA officials told us they also collect data on performance measures related to utilization of the environment of care checklists and environment of care inspections process but no longer track these measures because medical centers achieved 100 percent utilization of these measures in 2015. Figure 1 below details the process used to identify and address deficiencies, as outlined in VHA guidance. As previously mentioned, VHA guidance considers these inspections to be critical to all aspects of patient care in a medical facility, and officials at all six medical centers confirmed that they rely on these inspections to identify needed repairs. For example, officials in one medical center noted that the frequency and thoroughness of these inspections has helped them determine day-to-day wear and tear issues and informed their planning processes. Medical center staff noted that condition deficiencies identified through this process are often minor but are nonetheless important to maintenance of a clean and safe patient environment. For example, a damaged or stained ceiling tile identified during an inspection could be a potential safety hazard to patients or indicate an issue with leaking pipes. The replacement of the tile itself is a minor repair, but that repair could be an indication of an important maintenance issue at the medical center. As table 2 below shows, the deficiencies commonly identified through the inspections process include items that need to be cleaned or dusted or walls that need minor repairs. Medical center staff we interviewed said, in general, the most common environment of care deficiencies can be addressed by medical center staff, but medical centers told us they sometimes use contractors if warranted. In most cases, a deficiency can be addressed with simple repairs such as patching and repainting walls, replacing stained and damaged tiles, or by cleaning. On our site visits, we saw examples of the types of issues that medical center staff address during environment of care inspections. In one case, we were shown a recurring deficiency at the medical center caused by moving hospital beds. Moving beds in and out of rooms was damaging the plaster corners of a wall near the door. We were also shown the solution, which was a metal corner guard the medical center had installed in some rooms, and the center was working to install corner guards in other locations as funds became available. Figure 2 below shows examples of deficiencies we observed during environment of care inspections at medical centers. Other types of condition deficiencies that are not directly in the environment of care, such as a broken boiler, typically would not be identified during environment of care inspections, but rather medical center staff said they are identified during scheduled preventive maintenance activities, or during other facility inspections. Regardless of how they are identified, more serious repairs often require a different funding and approval process than day-to-day maintenance. For example, if significant damage occurred to a medical center’s roof and the cost of repairs is greater than $25,000, it would most likely be deemed a non-recurring maintenance project and would require approval from either the VISN or VA’s central office. The buildings that VHA manages are, on average, 55 years old, and many have substantial capital repair and improvement needs. A VA- commissioned report noted that there were significant barriers that facility management staff faced in maintaining facilities to a high quality. According to the report, while some of these barriers involved immediate resource constraints such as budgets for staffing and conducting maintenance and janitorial tasks, the root cause of many of these issues is the general age and underlying condition of VHA facilities. Engineering officials at medical centers told us that the amount of work associated with conducting weekly inspections and addressing environment of care deficiencies is substantial. For example, according to VHA’s data for fiscal year 2017, medical centers reported conducting about 11,000 weekly inspections, during which more than 128,000 deficiencies were identified. Most deficiencies were closed within 14 business days, as required by VHA policy, but nearly 30,000 deficiencies across all medical centers had not been addressed within 14 days or had been addressed through a plan for future work. One significant factor contributing to the number of deficiencies and the associated workload is the advanced age of many medical centers. A VHA commissioned study found that the general age and underlying condition of medical centers, including VHA buildings’ being older than 50 years on average and lack of capital investment to address infrastructure concerns, are the root causes of many barriers that facility management staff faced in achieving their objectives of maintaining high quality facilities, and exacerbate the workload issues at these medical centers. This observation was echoed by medical center officials in our review. For example at one medical center officials told us that in some cases, correcting deficiencies found on an environment of care inspection is a temporary solution for issues related to aging structures that need extensive repairs and renovations. For example, a roof that needs to be repaired due to leaks and other structural issues may result in an increase in the number of interior ceiling tiles with water stains. Maintenance staff must then continue to identify and replace stained ceiling tiles, until the root cause, which is subject to a different funding and approval process, is addressed. Also, medical center staff we interviewed said the administrative requirements associated with the environment of care program contributed to workload challenges. Medical center staff are responsible for entering deficiency data into the Environment of Care inspections database, which is used to document and track results from the environment of care inspections. The same staff can also be responsible for reconciling the environment of care inspections database with other systems, like the medical center’s work order system and other inspections databases. Medical center staff said that each deficiency can result in as many as four or more separate data entry actions in the Environment of Care inspections database and in a separate system used to track work orders. As an example of the administrative workload related to the inspection process, the Long Beach medical center in California, whose main building was built in 1967, reported the most deficiencies in its VISN. According to VHA data, this medical center reported more than 3,500 environment of care deficiencies related to facility condition in fiscal year 2017, and medical center officials said this resulted in as many as 12,000 or more separate data-entry actions. Additionally, VHA’s aging information technology systems exacerbate the administrative workload. VA medical center officials told us that VHA’s work order system lacks interoperability with the Environment of Care inspections database, resulting in the need to manually record information on deficiencies in both systems. Officials we spoke with at VA medical centers told us that this process can substantially add to post-inspection workload and to the administrative burden associated with tracking and closing out deficiencies. Medical center staff also noted that it can often be the same staff member performing environment of care inspections, conducting the work to correct deficiencies, and performing administrative tasks. Limitations in VA’s information technology systems, among other things, led GAO to designate VA health care as a high-risk area. Information technology limitations we previously identified at VA include the outdated, inefficient nature of certain systems and a lack of system interoperability. Staffing shortages have also been recognized by VA’s Central Office staff as an issue that needs to be addressed across VA facilities. For example, officials said that in addition to the engineering staff’s shortages discussed below, there is also a known shortage at many medical centers of qualified cleaning and janitorial staff, a shortage that can affect the ability for medical centers to quickly address some of the environment of care deficiencies. Additionally, we have previously reported that VA is collaborating with the Office of Personnel Management to address challenges with recruiting and retaining engineering positions. Officials at medical centers included in our review discussed the difficulty of recruiting and retaining employees to perform maintenance work, such as painters, electricians, and other relevant maintenance trades. All six of the medical centers reported vacancies during the last year in engineering department positions that are needed to complete maintenance and repairs, such as electricians and painters. The extent to which these medical centers experienced vacancies, however, varied widely. The lowest number of reported vacancies by a medical center was two and the highest number of reported vacancies was 49. Factors cited by medical center officials on why they had difficulty hiring and retaining staff encompassed a range of issues, including loss of long-time staff due to retirement, and a lack of qualified applicants for vacant positions. For example, medical centers located in and around Los Angeles, California, reported that their location—in a high cost of living area with a competitive private-sector jobs market—affected their ability to recruit and retain these employees. Conversely, medical centers located farther from urban areas reported difficulty finding and retaining staff due to their relatively rural locations and smaller overall population. Officials from all six medical centers said that while they endeavor to address all environment of care deficiencies in accordance with the inspection requirements, these vacancies affected their ability to perform maintenance and repair functions. For example, officials from one medical center reported that four out of seven electrician positions at their medical center were vacant. The officials said in addition to their rural location, their need for engineering staff knowledgeable in a range of electrical systems made recruitment difficult. Their facility has buildings that are over 50 years old, as well as newer buildings, with significantly different electrical systems. The officials noted that while all electrical work was eventually completed, the lack of staff slowed or deferred repairs, or required contract labor. Another medical center noted that a shortage of relevant engineering staff meant that work orders and preventative maintenance functions were backlogged and that they had to utilize overtime to accomplish required functions. When faced with changing workload demands and staffing shortages, medical centers can, and do, utilize contractors. While VHA provides guidance and oversight to ensure medical centers implement the environment of care inspection process, it lacks performance goals, objectives, and measures that would enable it to assess how well it is achieving its policy of a clean, safe, and functional environment. We have previously found that results-oriented organizations set performance goals to define desired program outcomes and develop performance measures that are clearly linked to these performance goals and outcomes. Program goals communicate what results the agency seeks, and performance measures show the progress the agency is making toward achieving program goals. Performance measurement also gives managers crucial information to identify gaps in program performance and plan any needed improvements. Without such goals and measures in place, VHA is limited in its ability to effectively manage the Environment of Care Program, including making effective use of program data and addressing obstacles to improving program performance. VHA’s oversight of the Environment of Care Program focuses on ensuring that medical centers are conducting the inspections according to VHA requirements. To help medical centers achieve compliance with the inspection requirements, VHA does the following: develops guidance for medical center and VISN staff on their roles and responsibilities in conducting inspections and compliance monitoring, and on how to use the Environment of Care inspections database software; oversees the deployment and maintenance of the Environment of Care inspections database software, which medical centers use to track deficiencies and staff attendance at inspections, among other things; and provides summary reports from inspections data on deficiencies, closure status, and staff attendance rate at inspections to officials at the medical center and VISN-level for program management purposes To monitor a medical center’s compliance with environment of care requirements, VHA tracks three measures, which, according to VHA officials, were established to ensure that medical centers were meeting requirements related to the inspections process, such as having relevant staff present for the inspections. Table 3 below shows the three measures VHA currently uses along with the related performance targets. We have previously reported that performance measures should focus on outcomes to help agencies manage programs to achieve desired results. VHA’s current measures do not indicate whether desired outcomes are being achieved or how effective inspections are but rather whether staff are following policies related to inspections. As a result, these measures provide program managers with little information on the actual quality of the environment of care, such as the level of cleanliness and safety provided. For example: One performance measure is based on the requirement that medical centers address deficiencies within 14 days, either by fixing the problem or by preparing an action plan describing how the problem will be fixed. However, because this requirement can be met with an action plan, it is not a useful measure for understanding the deficiencies that have not yet been remediated. Similarly, the two performance measures on staff attendance at inspections do not directly relate to the condition of the facility but reflect the level of compliance with inspection requirements. We spoke with officials at one medical center who said vacancies within their information security office prevented them from meeting the inspection team attendance measure. However, officials said the staff absence did not affect the inspection team’s ability to perform an inspection and determine facility deficiencies, given that relevant engineering staff was present. Furthermore, we have previously reported that VHA needs to strengthen aspects of the environment of care inspection process to ensure more complete and accurate data on medical center compliance with environment of care standards, and provide better oversight of the system. VHA has not defined program goals and objectives and related performance measures, and is therefore limited in its ability to determine how well program activities, including the environment of care inspection process, are supporting the agency’s broader policy of providing a clean, safe, and functional environment. VHA’s current performance measures are not tied to specific performance goals for the Environment of Care Program, as such goals have not yet been created. Nor do these performance measures provide useful information on the actual condition of facilities or desired outcomes. As a result, these metrics provide VHA with limited information on how to better manage the program to ensure clean, safe, and functional medical facilities that, at a minimum, meet the Joint Commission standards. Without clearly defined and outcome- oriented goals, it will be challenging for VHA to determine what type of evaluative information it will need to monitor the progress of the Environment of Care Program, identify how system-wide challenges such as staffing shortages are affecting outcomes, and improve medical center conditions. VHA has stated it intends to create goals and objectives for the Environment of Care Program, along with performance measures to assess whether the goals and objectives are being achieved, but it has not yet done so. The VHA directive from 2016 that created the Environment of Care Program directed program officials to establish a steering committee, whose responsibilities would include, among other things, developing goals, objectives, and related performance measures for the program. According to a VHA official, VHA formed this committee in January 2018, following delays caused by leadership vacancies and competing demands within the agency. In June 2018, the committee finalized its charter, which states that the scope of the committee’s activities is to include defining goals, objectives, performance metrics, and targets for the Environment of Care Program. VHA officials do not have a timeline in place for when they expect to complete the steps they defined in the charter. To provide quality care for the nation’s veterans, medical centers must be clean, safe, and functional. This standard can be a challenge given the substantial capital repair and improvement needs in many of these facilities. The Environment of Care Program is an important part of VHA’s efforts to ensure medical centers are maintained in accordance with accreditation requirements. However, absent clear goals, objectives, and performance measures, and a timeline for developing them, VHA will continue to be limited in its ability to assess how effective the program is at ensuring a safe, clean, and functional environment. Setting outcome- oriented program goals and objectives provides structure to then reevaluate existing performance measures or set new ones, all of which would improve oversight, help VHA determine the effectiveness of the program, and target areas in need of improvement. We are making the following recommendation to VHA: The Undersecretary for Health should set a timeline for defining goals, objectives, and outcome-oriented performance measures for the Environment of Care Program. (Recommendation 1) We provided a draft of this product to VA for comment. In its written comments, reproduced in appendix I, VA stated it concurred with our recommendation. VA also provided technical comments, which we incorporated as appropriate. Additionally, VA provided general comments on our report. In those general comments, VA questioned how we characterized the Environment of Care Program in the context of Facility Condition Assessments, the age of its buildings, and software interoperability, and stated that responsibility for a successful Environment of Care Program lies at the medical center. We agree it is important to have a strong Environment of Care Program that is facilitated by leadership at the medical center and VISN-levels. However, even with strong leadership and a robust Environment of Care Program, underlying facility condition issues—impacted by the age of the facility—can affect the kind of deficiencies found during inspections. These challenges impacted elements of the Environment of Care Program at all of the medical centers in our review. VA also stated that the report did not adequately reflect the significance of the environment of care committees at each medical center, and that performance measures at the national level are measures of compliance, not a measure of success. We have made relevant revisions in the report to reflect the role these committees play as a part of the inspections process. We also agree with VA that the metrics established nationally are not a measure of success for the various medical centers’ Environment of Care Programs. While the primary responsibility for the Environment of Care Program and its inspections is at the medical center and VISN-level, it is still important for VA to have national level performance measures. Without them, gauging national level performance and analyzing trends across medical centers is difficult. In concurring with our recommendation, VA has positioned itself to create and implement measures to support medical centers and the Environment of Care Program. VA also made comments related to the non-recurring maintenance approval and funding process, and highlighted a pilot to test a tool to replace its current facility condition assessment. We have made revisions to footnotes and relevant report sections as appropriate to address the changes noted by VA to the non-recurring maintenance approval and funding process, and added a footnote acknowledging the pilot. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, the Undersecretary of Veterans Affairs for Health, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact Andrew Von Ah at (202) 512-2834 or vonaha@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Appendix II: Inspections Related to the Condition of Veterans Health Administration’s (VHA) Facilities Purpose The Facility Condition Assessment evaluates all buildings and major systems at a medical facility and identifies needed repairs and replacements. This inspection gives a graded score from A to F for VHA facilities. Frequency Facility Condition Assessments are done on a rotating basis, with each Veterans Integrated Service Network (VISN) being evaluated every 3 years. The information gathered during each Facility Condition Assessment is put into a Facility Condition Assessment database for each facility identified by building, system, and condition. Each system has an associated cost for identified repairs and replacements. These data allow for planning and expenditure of resources within the VISNs. This information enables the VISN to plan, manage, and direct capital resources against identified needs in a consistently managed approach across the VA system. Green Environmental Management System ensures VHA compliance with relevant federal, state and local environmental statutes and regulations; increases the efficiency of energy, water and other resource usage; helps reduce regulated air emissions; utilizes pollution prevention principles; incorporates environmentally preferable practices for the design, construction and operation of buildings; and ensures that VHA facilities are good neighbors in the local communities. Green Environmental Management System inspections are done annually. The primary purpose and intent of the Annual Workplace Evaluation is to ensure occupational safety and health evaluations of all worksites are completed and comply with Occupational Safety and Health Administration and agency requirements. The objective is to evaluate Occupational Safety and Health Administration compliance, current building conditions, work practices, and Occupational Safety and Health Administration program implementation throughout the facility and at offsite campuses such as rented office buildings, clinics, labs, etc. Annual Workplace Evaluations are required to be performed at least once every fiscal year. The Annual Workplace Evaluation must be scheduled at least once during a 12- month period +/- 3 months from the start date of the previous Annual Workplace Evaluation. In addition to the contact named above, Heather J. Halliwell (Assistant Director), Betsey Ward-Jenks (Analyst-in-Charge), Dwayne Curry, and Colleen A. Taylor made key contributions to this report. Also contributing were Kelly Rubin, Michelle Weathers, and Crystal Wesco.", "summary": "VHA oversees one of the largest health care systems, serving approximately 9-million veterans at numerous health care facilities, including 170 medical centers. To ensure a safe environment for veterans and employees, VHA must keep its facilities clean and well maintained. GAO was asked to examine (1) how VHA medical centers identify maintenance and repair needs and challenges they face in addressing those needs, and (2) to what extent VHA provides oversight to ensure medical centers are providing a safe, clean, and functional environment. GAO reviewed VHA's procedures and standards related to facility operations and maintenance functions at medical centers and interviewed VHA's administrative office officials regarding oversight of these functions. GAO also interviewed VHA officials from three regional offices and six medical centers selected based on factors such as geographic location and veteran population served, and conducted site visits at four of these medical centers. Veterans Health Administration's (VHA) medical centers conduct regular inspections of the settings in which patients receive health care services, called the “environment of care”, to identify maintenance and repair needs. These inspections also help ensure compliance with accreditation standards requiring, among other things, that utility systems operate properly and that areas are clean and in good repair. The main three steps in the process associated with these inspections are shown below. In addition to the environment of care inspections, VHA conducts other periodic assessments of facilities' major systems, such as plumbing and air conditioning. VHA inspections routinely identify deficiencies reflective of an aging infrastructure—VHA's buildings are on average 55 years old. This situation in turn is leading to workload and staffing challenges in addressing maintenance and repair needs. For example, according to VHA's 2017 data, medical centers reported conducting approximately 11,000 total inspections for the year that resulted in about 128,000 identified deficiencies. Most of these deficiencies were closed within 14 business days, as required by VHA. However, nearly 30,000 of them were not closed or had been addressed through a plan for future work. Medical center officials added that correcting deficiencies may only be a temporary solution for issues related to aging structures that need extensive repairs and renovations. In addition, VA headquarters and field officials said that staff vacancies are common and can affect the efficiency and speed of maintenance and repairs. VHA provides guidance and selected oversight to ensure medical centers implement the process for environment of care inspections. However, VHA lacks performance goals, objectives, and measures that would enable it to provide effective oversight, address challenges, and assess how well it is achieving a clean, safe, and functional environment. As part of ensuring compliance with the inspection process, VHA measures whether medical centers meet certain requirements, such as having appropriate staff present for inspections. VHA does not, however, have measures that enable it to assess how well medical centers are achieving desired outcomes. Although it has stated its intent to develop such measures, VHA has not yet committed to a time frame for doing so. GAO recommends that VHA set a timeline for defining goals, objectives, and outcome-oriented performance measures that can address challenges and help achieve a clean and safe care environment. VA concurred with the recommendation and provided general and technical comments, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "Investments in federal IT have the potential to make agencies more efficient in fulfilling their missions. However, as we have previously reported, these investments too often result in failed projects that incur cost overruns and schedule slippages, while contributing little to mission- related outcomes. For example: The Farm Service Agency’s Modernize and Innovate the Delivery of Agricultural Systems program, which was to replace aging hardware and software applications that process benefits to farmers, was halted in July 2014 after investing about 10 years and at least $423 million, while only delivering about 20 percent of the functionality that was originally planned. Defense’s Expeditionary Combat Support System was canceled in December 2012, after spending more than a billion dollars and failing to deploy within 5 years of initially obligating funds. VA’s Financial and Logistics Integrated Technology Enterprise program was intended to be delivered by 2014 at a total estimated cost of $609 million, but was terminated in October 2011 due to challenges in managing the program. OPM’s Retirement Systems Modernization program was canceled in February 2011, after spending approximately $231 million on the agency’s third attempt to automate the processing of federal employee retirement claims. DHS’s Secure Border Initiative Network program was ended in January 2011, after the department obligated more than $1 billion to the program, because the program did not meet cost-effectiveness and viability standards. The tri-agency (Defense, NASA, and the National Oceanic and Atmospheric Administration) National Polar-orbiting Operational Environmental Satellite System was a weather satellite program that was disbanded by the White House Office of Science and Technology Policy in February 2010 after the program spent 16 years and almost $5 billion. The VA Scheduling Replacement Project was terminated in September 2009 after spending an estimated $127 million over 9 years. One approach to reducing software development risks is to divide investments into smaller parts, or increments. While a traditional waterfall software development effort usually is broadly scoped, multiyear, and produces a product at the end of a sequence of phases, an incremental development approach delivers software products in smaller modules with shorter time frames. This development technique has been recognized in prior law since 1996 and in OMB guidance since 2000. By following an incremental development approach, agencies have the potential to: deliver capabilities to their users more rapidly, giving them more flexibility to respond to changing agency priorities; increase the likelihood that each project will achieve its cost, schedule, and performance goals; obtain additional feedback from users, increasing the probability that each successive increment and project will meet user needs; more easily incorporate emerging technologies; and terminate a poorly performing investment, with fewer sunk costs. Since 2000, OMB Circular A-130 has directed agencies to incorporate an incremental development approach into their policies and ensure that investments implement them. Further, since 2012, OMB has required that functionality be delivered at least every 6 months. In addition, FITARA states that OMB is to require in its annual IT capital planning guidance that covered agency CIOs certify that IT investments are adequately implementing incremental development, as defined in capital planning guidance issued by OMB. Accordingly, in June 2015, OMB released two related sets of guidance on the implementation of FITARA that included instructions pertaining to CIO certification of adequate incremental development. In particular, agencies were to, among other things: Develop policies and processes which ensure CIO certification. OMB required agencies to define IT policies and processes which ensure that the CIO certifies that IT resources are adequately implementing incremental development. In the guidance, OMB defined adequate incremental development as the planned and actual delivery of new or modified technical functionality to users that occurs at least every 6 months for development of software or services. Report the status of CIO certification. OMB’s guidance required agency CIOs to certify in each major IT investment’s business case whether the investment’s plan for the current year adequately implements incremental development. OMB uses the major IT business cases to monitor major investments once they are funded. Performance information on each major investment, including the status of incremental delivery, is made publicly available on the web-based IT Dashboard. In using the IT Dashboard, OMB intends to provide transparency and oversight into these agencies’ investments. This public display of data is also intended to allow Congress and government oversight bodies, as well as the general public, to hold agencies accountable for the results and progress of the investments. Further, OMB issued its fiscal year 2018 and fiscal year 2019 capital planning guidance in June 2016 and August 2017, respectively, which required agency CIOs to provide the certifications needed to demonstrate compliance with FITARA. During the past several years, we have reported on a variety of challenges related to improving federal IT acquisitions through the use of incremental development. In 2011, we identified seven successful investment acquisitions and nine common factors critical to their success. Specifically, we reported that department officials had identified seven successful investments that best achieved their respective cost, schedule, scope, and performance goals. Notably, all of these were smaller increments, phases, or releases of larger projects. For example, the Defense investment in our sample was the seventh increment of an ongoing investment; Energy’s system was the first of two phases; the DHS investment was rolled out to two locations prior to deployment to 37 additional locations; and Transportation’s investment had been part of a prototype deployed to four airports. Common factors critical to the success of three or more of the seven investments were: 1. Program officials were actively engaged with stakeholders. 2. Program staff had the necessary knowledge and skills. 3. Senior department and agency executives supported the programs. 4. End users and stakeholders were involved in the development of requirements. 5. End users participated in testing system functionality prior to formal end-user acceptance testing. 6. Government and contractor staff were stable and consistent. 7. Program staff prioritized requirements. 8. Program officials maintained regular communication with the prime contractor. 9. Programs received sufficient funding. These critical factors help support OMB’s objective of improving the management of large-scale IT acquisitions across the federal government. In May 2014, we reported on the status of incremental development at five agencies (Defense, DHS, HHS, Transportation, and VA). We noted that these agencies planned to deliver functionality for fewer than half of the investments in 12-month cycles and that only about one-fourth of these investments would deliver in 6-month increments, as required by OMB. Additionally, OMB staff reported to us that they did not expect that many investments would meet the 6-month requirement. Therefore, we questioned whether a 6-month delivery requirement was an appropriate government-wide goal and whether OMB should instead consider a 12- month time frame, as called for in its IT Reform Plan. Accordingly, we recommended that OMB require projects to deliver functionality at least every 12 months. OMB disagreed with our recommendation, asserting that changing the requirement from 6 to 12 months would reduce the emphasis on incremental development that it had been advocating and that 6 months was an appropriate goal. However, we noted in our report, agencies’ plans to deliver functionality every 6 months was low and it would not always be practical for certain types of investments to deliver functionality every 6 months. We therefore continue to believe our recommendation is appropriate. We also recommended that OMB develop and issue clearer guidance on incremental development to ensure that it has the necessary information to oversee the extent to which projects and investments are implementing its guidance. OMB took action to address this recommendation and issued capital planning guidance in fiscal year 2016 that requires agencies to report on whether each of their projects has delivered a production release every 6 months and to provide a rationale if functionality is not being delivered. In addition, we recommended that the five selected agencies—Defense, DHS, HHS, Transportation, and VA— update and implement their associated policies. Most agencies agreed with our recommendation or had no comment. As of September 2017, Defense, DHS, Transportation, and VA have addressed our recommendation. In February 2015, we added improving the management of IT acquisitions and operations to our high-risk list, citing a lack of disciplined and effective management and inconsistent application of best practices to the successful acquisition of IT projects throughout the federal government. In particular, we noted the critical importance of implementing incremental development in order to reduce investment risk and called on federal agencies to ensure that a minimum of 80 percent of the government’s major acquisitions deliver functionality at least every 12 months. In August 2016, we reported on the status of incremental development and noted that, for fiscal year 2016, 22 agencies had reported on the IT Dashboard that 64 percent of their software development projects would deliver useable functionality every 6 months, as required by OMB. However, shortcomings in OMB’s guidance—the lack of clarity regarding the types of projects where incremental development would not apply, and how the status of these nonsoftware projects should be reported— affected the accuracy of the data on the IT Dashboard. We therefore recommended in August 2016 that OMB clarify its existing guidance regarding what IT investments were and were not subject to requirements on the use of incremental development and how CIOs should report the status of projects that were not subject to these requirements. OMB did not specifically agree or disagree with our recommendation, but stated that it generally agreed with our report. In April 2017, OMB staff reported that the agency had taken action and included language to address our recommendation in its fiscal year 2018 guidance; however, an analysis of that guidance showed that it still lacked direction on how CIOs are to report the status of nonsoftware projects. In addition, for our August 2016 report, we reviewed seven departments’ guidance and found that only three departments (Commerce, DHS, and Transportation) had policies and processes to ensure that the CIO would certify that IT investments were adequately implementing incremental development in accordance with FITARA. We therefore made recommendations to the remaining four departments (Defense, Education, HHS, and Treasury) to establish a policy and process for the certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA. Two departments concurred with our recommendation, one department disagreed, and one department did not comment. As of August 2017, none of the four departments had taken action to address the recommendation; as discussed later in the report. We issued an update to our high-risk report in February 2017 and noted that, while progress has been made in addressing this high-risk area, significant work remains to be completed. For example, as of December 2016, OMB and agencies had implemented 366 (or about 46 percent) of the 803 open recommendations that we had made from fiscal years 2010 through 2015 related to IT acquisitions and operations. We also noted that agencies needed to make demonstrated progress in delivering functionality every 12 months on major acquisitions. Further, in April 2017, we reported on the results of a forum, convened by the Comptroller General on September 14, 2016, to explore challenges and opportunities for CIOs to improve federal IT acquisitions and operations—with the goal of better informing policymakers and government leadership. Thirteen current and former federal agency CIOs, members of Congress, and private sector IT executives noted the importance of federal agencies’ IT procurement offices and processes evolving to align with new technologies, as agencies are not always set up to take advantage of acquisitions using Agile development processes. Agencies reported to OMB through the IT Dashboard that more than half of their major software development investments were certified by the CIO as implementing adequate incremental development as of August 2016. For the remaining investments, the agencies offered various interpretations regarding what investments needed to be certified. For example, officials of several agencies reported that they were not utilizing incremental development for certain investments. In other instances, agencies did not provide a response to OMB regarding the question in the major IT business case about certification, or responded that they did not consider certification to be applicable for their investments. However, based on OMB’s guidance, a number of these “not applicable” responses were incorrectly reported, as these agencies had investments that included software development and were, therefore, required to report on the certification of adequate incremental development. In addition, officials from a majority of the agencies reported that multiple challenges had impacted their ability to implement adequate incremental development. These challenges related to inefficient governance processes; procurement delays; the lack of stable, prioritized requirements; and organizational and cultural changes associated with the transition from a traditional software methodology to an incremental methodology. Nevertheless, officials from 21 agencies reported that the certification process was beneficial because they used the information obtained during the process to assist with management oversight of major IT investments, including identifying investments that could be using a more effective incremental approach and using lessons learned to improve the agency’s incremental processes. FITARA states that, in its annual IT capital planning guidance, OMB is to require CIOs to certify that IT investments are adequately implementing incremental development. In 2015, OMB defined adequate incremental development as the planned and actual delivery of new or modified technical functionality to users that occurs at least every 6 months for development of software or services. Further, OMB’s IT capital planning guidance for fiscal year 2017 required CIOs to certify whether their agencies’ major IT investments had adequately implemented incremental development for the current year. Specifically, agencies were to respond to a question in the major IT business case regarding whether the CIO certified adequate incremental development for each investment with a response of either yes, no, or not applicable. Agencies’ responses to this question are publicly reported by OMB on the IT Dashboard. As of August 31, 2016, 21 of the 24 agencies in our review had reported on the IT Dashboard a total of 166 major software development investments that were planned to be primarily in development for fiscal year 2017. Of these 166 investments, the agencies reported that 62 percent (103 investments) were certified by the CIO as using adequate incremental development for fiscal year 2017, as shown in table 1 in alphabetical order by department and agency. (For additional details on the certification status of the 166 investments, see appendix II.) For the remaining 63 investments, 8 agencies either reported in the major IT business case that the investment was not certified as adequately implementing incremental development or that certification was not applicable. Three other agencies did not provide a response to the question regarding certification in the major IT business case submitted to OMB. Figure 1 shows the breakdown of responses by agency regarding investments that were not certified as implementing adequate incremental development, as reported on the IT Dashboard. Officials in the Office of the CIO at each of the 3 agencies provided a variety of reasons for why the 11 investments were not certified as implementing adequate incremental development. For example, HHS officials noted that certain investments are required to meet complex statutory requirements and, thus, a 6-month release schedule is not always appropriate for them. Interior officials stated that their investment had just been categorized as a major investment and, at the time of the submission of certification status, a baseline had not been approved. The officials stated, however, that the baseline has since been approved and the investment is expected to deliver functionality every 6 months. Further, SSA officials reported that 3 investments were not software development initiatives even though 2 of these investments had been inaccurately reported as such on the IT Dashboard. Regarding the 33 investments for which the 3 agencies did not provide a response in the major IT business case for the investment, officials from each agency’s Office of the CIO attributed the lack of a response to either data entry errors or the agency not being required to publicly report this information for the investments. In particular, USDA and Treasury officials reported that the lack of certification data on the IT Dashboard was the result of a data entry error. Treasury officials also stated that the agency’s missing responses were due to a lack of administrative oversight in reviewing the data for accuracy and consistency. The officials noted that the Treasury CIO had certified all of the agency’s investments but some investments failed to select the proper response in the business case. Defense officials reported that 16 investments were categorized as national security systems and, therefore, were exempt from public reporting on the IT Dashboard (though not exempt from acquisition policies regarding the use of incremental development). The officials said that they did not provide a response on the remaining 7 investments because 1 investment was not a software development effort and the other 6 investments were designated as major automated information systems and, therefore, the agency did not have to submit business cases to OMB with this information. Lastly, officials from the Office of the CIO at 7 agencies reported a variety of reasons for why they had provided a response of “not applicable” for 19 investments. For example, Interior officials stated that, at the time of the certification submission, the investment did not have any approved development projects and, therefore, the agency had indicated not applicable in its response for the one investment. However, the officials stated that the investment’s projects have since been approved and the CIO has reviewed the investment and certified adequate incremental development. For the remaining 18 investments at the other 6 agencies (Commerce, DHS, Education, Energy, HHS, and Transportation), officials from each agency’s Office of the CIO reported that the majority of the projects associated with their investments were not primarily related to software development, or that they were using either a non-incremental development methodology or a mixed non-incremental/incremental development methodology. As a result, the officials believed the certification of adequate incremental development was not applicable, even though at least one project within each of the investments involved software development. However, based on OMB’s guidance, these “not applicable” responses for the 18 investments were incorrectly reported and the agencies should have provided either a “yes” or “no” response to the certification question because the investment included software development. Specifically, OMB’s fiscal year 2017 capital planning guidance states that certification of incremental development applies to any investment that is developing software or services, as noted in its definition of adequate incremental development. In addition, staff in OMB’s Office of E-Government and Information Technology stated that a “not applicable” response to the question was only acceptable in cases where software development was not occurring, such as an investment related to infrastructure or technology refreshment of equipment. Staff in the Office of E-Government and Information Technology acknowledged the need for more meaningful oversight of agencies’ use of incremental development and stated that, beginning in fiscal year 2018, OMB will no longer require agencies to report CIO certification information in their investments’ major IT business cases or on the IT Dashboard. Rather, OMB staff stated that agencies would be required to separately provide the certifications needed to demonstrate compliance with FITARA. OMB’s revised approach and agencies’ implementation of OMB’s guidance are further discussed later in this report. Regardless of the reporting requirements in place, it remains critical that federal agencies report accurate incremental development information to OMB because of OMB’s plans to use this information for investment management and oversight. However, our September 2016 work has highlighted the poor quality of data related to incremental development at the project level, including whether a project is delivering a release every 6 months. Specifically, we reviewed seven agencies’ major IT software projects and found inconsistencies that affected the accuracy of the reported rates of delivery for all agencies—and at least a 10 percentage point difference in the reported rate on the IT Dashboard for five of these agencies. We therefore made recommendations to the seven agencies to improve their reporting of incremental development data on the IT Dashboard. Having accurate data on agency investments’ use of incremental development is critical for providing oversight and management of these investments and to ensure that OMB and lawmakers can hold CIOs accountable for the investments’ performance. We have previously made recommendations to Commerce, Defense, DHS, Education, HHS, Transportation, and Treasury to improve the accuracy of reporting on the IT Dashboard and continue to believe these recommendations are appropriate. In addition, until Energy, SSA, and USDA improve their reporting of incremental development data on the IT Dashboard, their efforts to improve the use of incremental development may not be successful. As a result, the agencies increase the risk that the potential impact of utilizing incremental development to more quickly deliver useful functionality to users and improve the likelihood that these multimillion dollar projects will meet their stated goals, may not be realized. The majority of the 24 agencies in our review reported that multiple challenges had impacted their ability to adequately implement incremental development for their major IT software development investments. In particular, when presented with a list of challenges identified by our past work on incremental development, 21 of the agencies selected seven common challenges to developing investments incrementally. Each of these seven challenges was selected by 5 or more agencies. For example: 14 agencies identified problems with program staff over-utilization and the lack of skills and experience as their top challenge; 6 agencies reported that development work was slowed by inefficient governance and oversight processes; 5 agencies reported that development schedules were impeded by procurement delays; and 5 agencies identified the lack of stable, prioritized requirements as a challenge. In addition, 3 agencies identified a new challenge which had not been described in our prior work. Specifically, they reported that organizational and cultural changes associated with the transition from a traditional waterfall software methodology to an incremental methodology required more time and resources to implement than anticipated. Table 2 summarizes the common challenges identified by agencies and the number of agencies that reported each challenge, ranked by number of agencies reporting the challenge. Examples of the challenges—and actions taken to overcome them—are discussed following the table. Project staff were over-utilized or lacked the necessary skills and experience. Officials from the Office of the CIO at 14 agencies (DHS, Education, EPA, GSA, Justice, NASA, NRC, OPM, SBA, SSA, State, Treasury, USAID, and VA) reported challenges in implementing incremental development practices associated with project staff, such as a lack of staff with the necessary skills and experience in utilizing incremental approaches, inadequate training on these approaches, overutilization of business or subject matter experts, and the lack of engagement between product owners and subject matter experts. To address these challenges, agency officials reported implementing new approaches, such as training programs focused on incremental development, coaching strategies to assist project managers in managing acquisitions, and hiring practices. For example, among these agencies: DHS officials reported that project staffs’ lack of necessary skills and experience in understanding the requirements for managing major IT acquisitions is an ongoing issue, not only related to incremental development, but also to IT program and project management. The officials stated that they had developed an acquisition coaching and assistance strategy that was intended to establish an experienced team of acquisition coaches who were up-to-date on the latest acquisition, contracting, and development techniques to assist project managers in managing the acquisitions. The officials stated that they hoped to present lessons learned and recommendations on this strategy to the agency’s Agile working group in summer 2017. Treasury officials reported a significant need for specialized engineers, architects, and developers with skills in older programming languages to maintain its many legacy systems. For example, officials noted that the agency is modernizing its core taxpayer account processing applications, which utilized antiquated programming languages, to more modernized platforms. Treasury officials noted that they have been shifting staff to meet immediate needs; augmenting teams with contractors, where possible; and hiring new staff to fill critical open positions. Nevertheless, the officials said they have had to slow work on four key projects and delay the launch of other projects. In addition, the officials stated that they are relying on contractors more to meet the agency’s staffing needs. EPA officials noted that, as the agency transitions from using waterfall software development approaches to Agile-based approaches, it needs more skilled staff with experience in Agile development. These officials stated that the agency’s CIO had taken several actions to address this challenge, including creating an Office of Digital Services and Technical Architecture to promote Agile and user-centered design, establishing a fellowship program to bring outside Agile experts into the project teams, and creating a blanket purchase agreement to allow agency project teams to purchase Agile programming and consulting services. According to NRC officials, one of the greatest incremental delivery challenges has been the difficulty of engaging sufficient business area product owners and subject matter experts. For example, the officials explained that, despite product owners’ enthusiasm for increased engagement with developers, the demands of the agency’s core mission work presents challenges for these owners in being available for meetings related to Agile development activities. NRC officials informed us that the agency had addressed the challenge by working to establish a predictable, recurring schedule for product owner and subject matter expert engagement on development projects, where expectations are communicated to management about time commitments. Further, agency officials from a number of the 14 agencies that experienced this challenge reported varying approaches to implementing new incremental development training. For example, Treasury officials stated that the agency has developed in-house training for existing developers to meet the needs of its modernized programs. Education officials noted that the agency identified a select team of IT professionals within the agency to receive formal training in incremental development practices. Further, VA officials told us that its Enterprise Program Management Office is focused on training IT personnel on incremental development principles. Finally, SSA officials reported that the agency had launched a training program that had sent hundreds of developers through a 6-week boot camp program, which included courses in incremental development and modern coding languages. Programs did not receive sufficient funding or received funding later than needed. Officials from the Office of the CIO at nine agencies (GSA, NASA, OPM, SSA, State, Treasury, USAID, USDA, and VA) reported challenges associated with programs not receiving sufficient funding or not receiving funding until late in the fiscal year. These challenges were a result of changing funding priorities, budget cuts, and continuing resolutions, which disrupted delivery schedules and required agencies to delay, reprioritize, or discontinue the rollout of particular investments or modernization activities. Agencies reported adopting various approaches to overcome the challenges in this area, such as delaying project schedules, developing alternate plans for delivering functionality, and using flexible contracting strategies. For example: USDA officials reported that funding for a number of projects was not available until late in the fiscal year, which impacted project schedules. The officials stated that one component agency addressed the funding delay by adjusting schedule start dates for projects relative to the current fiscal year, which helped to improve schedule projections. OPM officials told us that they had faced challenges in performing work on incremental projects due to a lack of available resources caused by delays in receiving funding. The officials stated that they addressed this challenge by developing alternate plans to delivering incremental functionality with a different scope or focus for the system. VA officials reported that they faced challenges with funding IT efforts that span multiple years. The officials noted that administrative priorities often change over time, impacting the level of funding approved in subsequent years to undertake incremental development projects. To address this, officials noted that they used flexible contracting strategies—such as options that allow the government to continue the contract only when funding is assured, adjusting a contract’s time frames to match a delay, adjusting schedules, designing contracts so that a vendor is paid based on completion of measured functionality, and using the change request process to contribute funding to other projects. Treasury officials stated that the lack of a dedicated funding commitment had led to difficulties in longer-term strategic planning for IT improvements. The officials stated that resources assigned to certain IT projects had to be leveraged for legislatively mandated investments, causing project delays and pauses for these projects. As a result, the officials reported that the agency had been reviewing core initiatives and infrastructure programs, such as infrastructure, hardware, and software refresh and process improvements, to determine if they can scale back scope or lengthen schedules. The officials said that at least one program has been formally paused. Projects experienced management and organizational challenges that introduced delays. Officials from the Office of the CIO at seven agencies (Commerce, Interior, NASA, NRC, NSF, SBA, and Transportation) reported that management and organizational challenges had introduced delays in delivering functionality to users. These challenges included delays in testing and meeting delivery schedules due to dependencies on other systems or projects and a lack of approved software or appropriate equipment. Agency officials reported implementing various approaches to overcome these challenges, such as addressing external dependencies, tailoring development processes, and providing waivers for the acquisition of software and hardware. For example: Commerce officials reported that they faced organizational challenges in meeting scheduled delivery time frames due to delays with another project that was not ready for testing. In particular, the officials reported that one of their systems was ready for testing but experienced delays because the system had an interface with another system that was not ready for testing. The officials said that the delay in Commerce’s ability to test its system resulted in missed delivery milestones. In order to continue development, the project team separately tested its system without including the interface functionality. NRC officials reported that they had experienced delays in meeting their incremental projects’ delivery schedules due to dependencies on multiple complex projects. These officials told us that the agency addressed these delays by improving existing processes and implementing a change control board and an enterprise test development environment. SBA officials reported that delays were introduced when the agency did not have necessary software and hardware available for development activities. Officials noted that these challenges were a result of the agency not maintaining an updated inventory of approved software and developers not having access to laptops needed for development activities. SBA officials stated that the agency addressed the lack of approved software and equipment needed for incremental development by processing a waiver to use software tools and procuring laptops for the developers. Incremental development work was slowed by inefficient governance and oversight processes. Officials from the Office of the CIO at six agencies (DHS, HUD, NRC, State, USAID, and USDA) reported that they had experienced challenges in developing projects incrementally because they were required to follow agency processes that were lengthy, inefficient, or not easily adaptable to a more rapid incremental delivery release schedule. Agency officials also noted that a lack of understanding among project staff regarding the benefits of incremental development was a challenge. The officials reported implementing new guidance and management processes to overcome these challenges. For example: DHS officials reported that inefficient governance and oversight processes had caused delays in obtaining necessary approvals for moving projects forward. Specifically, these officials reported that the agency’s acquisition lifecycle framework did not allow for tailoring any of its processes to accommodate Agile development. The officials noted that these challenges were addressed with the publication of updated lifecycle documents that incorporated incremental development guidance into the agency’s policies and procedures. HUD officials reported that the agency’s internal approval process for the Privacy Act System of Record Notice did not accommodate incremental releases. Specifically, the agency’s incremental development process called for the release of functionality every 60 days, but the agency’s Privacy Office required 90 to 180 days to complete its approval process. HUD officials reported that the Office of the CIO is collaborating with the Privacy Office to expedite the existing approval process, and have proposed that a single system of record notice be prepared for each incremental development project, rather than one for each release. USAID officials reported that the time needed for defining and incorporating changes in response to IT security and privacy standards, processes, and artifacts provided before the system is granted an Authority to Operate is a challenge. These officials stated that the Office of the CIO has acquired additional knowledgeable staff to support projects in the incorporation and execution of security and privacy requirements. State officials reported that applying incremental development principles to projects has been a challenge because agency personnel have lacked a clear understanding of the benefits of incremental development and how to apply incremental concepts to unique project types. These officials reported that the agency was updating its guidance and processes to place greater emphasis on the importance of incremental development, and that the agency had established a review process to ensure projects plan for implementing incremental development. Project characteristics made rapid delivery of functionality infeasible or impracticable. Officials from the Office of the CIO at six agencies (Interior, Justice, Labor, SSA, Transportation, and Treasury) reported that they believed rapid delivery of functionality was infeasible or impracticable for projects that addressed human health and safety concerns, had legislative mandates that established immovable delivery time frames, were primarily for infrastructure deployment, were updates to existing systems to address legal or other regulatory changes, or were updates to legacy systems that utilize old programming languages. However, none of the agencies identified solutions for these challenges that enabled them to deliver functionality in the 6-month time frames required by OMB. For example: Transportation officials noted that Federal Aviation Administration projects, like those for its Next Generation Air Transportation System, are unique and complex due to safety concerns that impact the national airspace. As a result, these investments require years of design, development, and testing, which officials believe precludes using incremental approaches that must deliver usable functionality every 6 months. Labor officials reported that certain projects, which are initiated in response to an executive order or other external mandate, come with required delivery time frames. This results in relatively short development schedules that do not lend themselves to using an incremental approach. Justice officials reported that several of the agency’s investments primarily dealt with the deployment of secure telecommunications, data centers, and other network infrastructure, making it difficult to translate that delivery into meaningful increments. Justice officials stated that they did not deploy incremental development because the projects were infrastructure projects. Treasury officials reported that the development and maintenance of some major investments, such as the agency’s legacy tax systems, are not conducive to a 6-month delivery schedule due to the number of modifications that must be made based on changes to the tax laws, legislative mandates, and other system updates. Treasury officials stated that the agency has established a mature governance process for rolling out changes to these tax systems so there is only one annual update to the systems. SSA officials stated that using an incremental software development approach to modernize the agency’s legacy applications was challenging because the code for these applications was unstructured, overly complex, heavily interdependent, and utilized old programming languages. The officials stated that, in order to modernize these legacy applications, the project teams had to break programming changes into useful segments, streamline imbedded business process requirements, and rewrite the code using modern programming languages. As a result, the officials stated that these activities could not, at least initially, deliver functionality in smaller increments. Incremental development schedules were impeded by procurement delays. Officials from the Office of the CIO at five agencies (Education, HUD, Interior, OPM, and USDA) reported that they had experienced challenges with meeting incremental development schedules due to delays in getting contracts awarded or getting contract modifications approved. To overcome this challenge, agency officials reported that they negotiated with vendors and worked with the offices of procurement within their agencies to reduce delays and ensure all paperwork was completed in the time frames required. For example: Education officials reported that the agency uses contractors to perform most of its software development work. These officials stated that modifying existing contracts to require the use of incremental development approaches had caused delays in getting vendors to deliver functionality in 6-month increments. Education officials reported that they had negotiated with vendors to restructure delivery schedules in order to meet incremental delivery time frames. HUD officials reported that they had faced challenges in meeting project schedules due to delays in getting paperwork approved by the agency’s procurement office, which was busy with end-of-year activities. To address this, HUD officials stated that they collaborated with the Office of the Chief Procurement Officer to ensure the project teams submitted the required documentation for approval in advance of the procurement office’s end-of-year activities. OPM officials noted that they had faced challenges with adapting their procurement process to use incremental approaches. The officials stated that they worked with their Office of Procurement to incorporate incremental development procurement methodologies in order to reduce the time from contract initiation to award, as well as to reduce the amount of contract documentation and its complexity. Programs did not have stable, prioritized requirements. Officials from the Office of the CIO at five agencies (DHS, Justice, NSF, Transportation, and VA) reported that maintaining stable requirements, including defining a set of initial requirements, handling ongoing changes, and managing stakeholder expectations regarding the scope of, and number of changes to requirements, were challenges. To overcome these challenges, agencies reported strengthening standards, implementing training and coaching, and exercising better requirements and business practices. For example: DHS officials stated that managing stakeholder expectations related to requirements was challenging because product owners and business users expected project requirements not to change once they were developed, while development teams had planned for requirements to change and be reprioritized over the course of the project since the team was using an incremental approach. These officials reported that they issued new guidance and offered assistance and coaching for programs and projects to better identify and document needs and requirements, while encouraging business users to plan for and prioritize the backlog of items to be deployed incrementally. Justice officials reported that it was a challenge to finalize the scope of work for various projects because disparate stakeholders had competing priorities which led to constant changes in the requirements. The officials noted that, for one of the agency’s projects, the project team is currently establishing a process to obtain consensus on stakeholder priorities in advance. For other projects, Justice teams have sought or received training from experienced, certified Agile experts in developing customer requirements. NSF officials reported that, when first establishing its incremental development program, the agency had experienced challenges in defining a stable set of priority requirements for the initial increments. The officials told us that, to address this challenge, they elevated customers to fill the leadership roles of the working groups that provided the requirements to ensure the requirements of each increment were well defined and clearly prioritized. VA officials reported that, while the agency has transitioned to Agile development methods over the past several months, it still works through challenges in developing detailed user stories with its business partners, and reported many instances when a project was undertaken without knowing the full scope of requirements. VA officials reported that they took several actions to help address this challenge, including introducing a new development methodology to promote incremental development principles, and establishing an account management office that works with business partners to ensure detailed business cases are prepared prior to approval. They also integrated more rapid prototyping into the planning stages as a way to gather requirements and test assumptions early and cheaply. Organizational changes associated with the transition from a traditional software methodology to an incremental development methodology require time and resources. Officials from the Office of the CIO at three agencies (EPA, GSA, and Labor) independently reported challenges related to organizational changes, such as staff adapting to the culture shift from being business customers to taking on a more active role as product owners and project managers in the software development process. For example: EPA officials stated that the agency had experienced challenges as staff transitioned from using waterfall development practices to Agile practices because there had been skepticism within the agency on whether an Agile approach could meet the requirements for agency systems. The officials stated that the CIO had established an office to provide support to project teams that needed assistance in adopting Agile approaches, created a community of practice group, and developed guides and other maturity models to provide guidance on the adoption of Agile methodologies. GSA officials explained that implementing incremental delivery has required a culture shift for the agency’s business customers who were accustomed to having a different set of roles and responsibilities in the traditional software development process than what is used in the incremental development process. The officials stated that they have worked to train their customers to better capture the vision of what needs to be built and to be more active product owners and managers in communicating with the development team. As a result, the officials in the GSA Office of the CIO stated that they are enabling the business customers to serve as better product owners. The officials further stated that, by implementing this change, project staffs have (1) defined and prioritized clearer requirements; (2) selected the proper technical tools to support business needs; (3) worked with the contracting office to develop better-defined contracting documents and make contract awards; (4) identified dependencies associated with development efforts; and (5) provided transparency on what work has been completed, what work is planned, and the challenges associated with the investments. Additionally, three agencies (Defense, Energy, and HHS) reported no challenges with implementing incremental development. However, officials from all three agencies discussed issues surrounding the use of incremental development, both as part of this review and as part of our prior work. In particular, Energy officials had told us that they had projects that failed to adequately employ incremental development practices, which required follow-up with program managers to identify corrective actions. Also, both Defense and HHS officials have reported facing management and organizational challenges, such as dependencies on integrating changes with other systems, which impacted the delivery of functionality every 6 months. Defense officials noted that many of the agency’s investments were complex and could not adhere to a 6-month delivery schedule. Federal investments may continue to encounter increased cost and schedule risks if agencies cannot adequately implement incremental development approaches. The discussion of challenges identified in this report—and the range of actions taken by the agencies to address them— is a valuable resource that could have the potential to help agencies that face similar concerns. Although a number of agencies identified challenges in utilizing incremental development, officials in the Office of the CIO at 21 of the 24 agencies also reported that the CIO certification process was beneficial to their agencies because it had assisted them in overseeing the management of agency investments. For example, officials from 13 agencies reported that they used the information derived from the certification process to identify challenged development projects that could be using a more effective incremental development approach and officials from 2 agencies stated that the information helped them determine whether an investment should undergo a TechStat review. Table 3 lists the four benefits reported by federal agencies in utilizing the CIO certification process and the number of agencies that reported each activity, ranked by number of agencies reporting the challenge. Examples of the benefits agency officials identified from these investment management oversight activities are discussed following the table. More effective use of incremental development approaches. Officials from the Office of the CIO at 13 agencies (Defense, DHS, Education, Energy, EPA, GSA, Interior, NASA, NRC, SBA, SSA, Transportation, and USDA) stated that they review the information about the investment’s use of incremental development to identify projects that could be implementing a more effective incremental development approach. For example, Energy, GSA, and SBA officials stated that they review projects not using adequate incremental development in order to identify necessary corrective actions, such as: (1) breaking out projects into shorter duration activities; (2) implementing the use of investment reviews, whereby funds are released incrementally upon completion of clear success criteria; (3) developing major IT investment business cases that outline project plans for incremental development; and (4) monitoring new and existing investments to ensure delivery of capabilities within schedule and cost thresholds. In addition, DHS, NASA, NRC, and SSA officials reported that the CIO uses the information to make corrections to projects that are not adequately implementing incremental development through such actions as the CIO’s office: (1) working with project team officials to convert project activities to an incremental approach; (2) requiring any deviations from approved releases of software development products to be approved by the CIO; (3) requiring projects that deviate from the use of adequate incremental development principles to be approved by the CIO; and (4) determining which investments must use incremental development, and requiring the projects to do so. Provide oversight of IT investments. Officials from the Office of the CIO at seven agencies (Commerce, Interior, Labor, OPM, NSF, State, and VA) stated that they use the information to provide oversight of IT investments. In particular, Interior and NSF officials reported that their CIOs use the information obtained during the performance measurement baseline approval process to make decisions regarding the agency’s major IT investments. For Interior, officials stated that the types of decisions the CIO may make include, but are not limited to, accelerating delivery, reducing scope, or halting or terminating an IT project. For NSF, officials stated that the decisions could result in changes to program objectives or scope of individual projects under the program, redirection of resources, changes to planned levels of expenditure, or recommendations for corrective actions based on the evaluation. In addition, Commerce officials stated that investment data are reviewed by the CIO on a monthly basis and, based on the status, can undergo further scrutiny at a review board meeting or other CIO review process. Labor officials noted that its capital planning team updates the CIO’s rating and explanation for each major IT investment in the agency’s capital planning and investment control system, and submits the rating information to the IT Dashboard each month. Improve incremental development processes. Officials from the Office of the CIO at five agencies (DHS, EPA, HUD, Justice, and USDA) stated that they leveraged the information to improve their incremental development processes. For instance, USDA officials reported that they leveraged the results of the certification process to build an incremental development community of practice. DHS officials stated that they developed coaching and other assistance to help convert projects to an incremental process. Lastly, Justice officials stated that they utilized the results of the certification process to: (1) develop best practices and lessons learned on using incremental development, (2) establish additional training, and (3) establish mentoring programs or other familiarization with incremental techniques to support business improvement. Determine if a TechStat is warranted. Officials from the Office of the CIO at two agencies (Labor and SBA) stated that they use the results of the certification process to determine whether an investment should undergo a TechStat review. In particular, Labor officials stated that if an investment is rated as high risk for 3 consecutive months during the review process, then a TechStat is initiated. In addition, SBA officials noted that, as part of their certification process, the Office of the CIO portfolio management team meets with the CIO to determine if any IT investments should have a Techstat review. Given the significant size of the federal government’s annual investment in IT and the often disappointing results from IT development efforts, finding innovative ways to improve the quality and timeliness of agencies’ IT investments may help improve these development efforts. The discussion of benefits identified with using the certification process—and the range of management oversight activities taken by the agencies— may have the potential to help agencies improve their management and oversight of IT acquisitions. Of the 24 agencies in our review, only 4 had clearly defined processes and policies to ensure that the CIO will certify that major IT investments are adequately implementing incremental development. The remaining 20 agencies either did not include details such as the role of the CIO in the certification process or how certification would be documented, or had not yet finalized a policy. OMB’s fiscal year 2018 guidance was not clear regarding what actions agencies should take to demonstrate compliance with FITARA’s certification requirement. However, OMB issued its new fiscal year 2019 guidance in August 2017, which addressed the weaknesses we identified. A provision in FITARA, enacted in December 2014, states that, in its annual IT capital planning guidance, OMB is to require agency CIOs to certify that IT investments are adequately implementing incremental development. Subsequent OMB guidance on the law’s implementation, issued in June 2015, directed agency CIOs to define processes and policies for their agencies which ensure that they certify that IT resources are adequately implementing incremental development. As part of the guidance, OMB defined adequate incremental development as the development of software or services, with planned or actual delivery of new or modified technical functionality to users that occurs at least every 6 months. OMB’s guidance allows agencies the flexibility to define the processes that CIOs use for ensuring the certification of adequate incremental development. For example, CIOs can rely on internal governance processes, such as investment and capital planning processes, to evaluate agency investments for adequate use of incremental development. In addition, agency CIOs are to use OMB’s definition of adequate incremental development when developing their certification processes and determining whether to certify that their investments met these criteria. While OMB’s guidance is not specific on what elements should be included in these certification policies and processes, GAO’s Information Technology Investment Management framework notes that policies and procedures should be clearly defined, including the role of appropriate stakeholders, and have appropriate artifacts to document decisions made. Although OMB’s requirement has been in place since June 2015, only 4 of the 24 agencies we reviewed (Commerce, DHS, Energy, and Transportation) have clearly defined processes and policies intended to ensure that their CIOs certify that major IT investments are adequately implementing incremental development. Specifically, all 4 agencies’ policies contained all the elements that we evaluated in the agency guidance: descriptions of the role of the CIO in the process; how the CIO’s certification will be documented; and definitions of incremental development and time frames for delivering functionality consistent with OMB guidance. However, the remaining 20 agencies did not have clearly defined processes and policies in place because their documentation either did not describe the CIOs’ role in the certification process or how certification would be documented, define incremental development and provide delivery time frames consistent with OMB guidance; or the policy had not yet been finalized. The results of our analysis of agencies’ policies is shown in figure 2, while additional details regarding the status of the 24 agencies’ incremental policies are provided in appendix III. The four agencies that had clearly defined policies for certification took a variety of approaches to defining how the CIOs would conduct the review and certification of major IT investments, determining how certification would be documented, and ensuring OMB’s guidance regarding the definition of adequate incremental development and delivery time frames was followed. Specifically: Commerce’s capital planning guidance requires bureau CIOs or other accountable officials to review project documentation regarding project deliverables and issue an e-mail or other time-stamped document that certifies the adequate implementation of incremental development. In addition, Commerce guidance adheres to OMB’s guidance requiring delivery time frames every 6 months or less and sets forth a definition of adequate incremental development that is consistent with OMB guidance. DHS’s technical investment review guidance states that the CIO is to conduct a review of each investment using an investment review checklist that includes information provided by project managers as to whether the investments have used incremental development adequately. The CIO is to certify whether the project is implementing incremental delivery at least every 6 months and document this certification in the checklist. DHS guidance also includes a definition of adequate incremental development and time frames for delivering functionality that are consistent with OMB guidance. Energy’s capital planning guidance states that the CIO is to review and certify each investment’s adequate use of incremental development as part of monthly investment review board meetings and during the monthly review of the IT Dashboard data. The status of this certification is documented in the agency’s monthly investment summary spreadsheet. In addition, Energy’s guidance adheres to OMB’s definition of adequate incremental development and its associated delivery time frames for its incremental development activities. Transportation’s investment management guidance states that the CIO is to conduct a review of the investment as part of the investment review board process; this board is co-chaired by the agency CIO. The CIO is to certify adequate incremental development in the signed investment decision review document. In addition, Transportation’s guidance adheres to OMB’s definition of adequate incremental development and delivery time frames. However, the remaining 20 agencies did not have clearly defined policies and processes in place to ensure CIOs are certifying each major IT investment’s adequate incremental development. In particular, while officials from the Office of the CIO at 11 agencies asserted that they had a policy for CIO certification, these policies lacked details, such as a description of the role of the CIO in the process, a description of how certification would be documented, and definitions of incremental development and delivery time frames consistent with OMB guidance. Table 4 details our evaluation of the certification policies provided to us by the 11 agencies. Agency officials in the Office of the CIO at each of the 11 agencies provided a variety of reasons for why their policies lacked details regarding the role of the CIO in the process and how certification was documented, or did not include definitions for incremental development and delivery time frames. For example, State officials reported that updating their policies to comply with FITARA was not seen as a priority until Congress conducted its own evaluation of incremental development in May 2016. They stated that their new policy is currently in the process of being finalized but no time frames for finalization were provided. However, we could not determine whether the guidance is expected to address the issues we identified because State provided us excerpts of its new draft policy and the new proposed guidance that did not include any details in the areas we identified. In addition, GSA officials stated that they had used existing governance bodies and processes to determine whether the investment would be certified. The officials stated that they did not see a reason to create a separate policy for CIO certification, since the agency always looks at using incremental development for new projects and the agency certifies the investment in the major IT business case. Further, OPM officials stated that their agency had been on a path to address the FITARA requirements, but progress was slowed due to the lack of a budget for fiscal year 2017. The officials stated that they intend to update the agency’s policies, but had no firm plans for doing so pending the availability of budgetary resources. Lastly, NSF officials stated that they have not seen the need to have a policy on CIO certification for a number of reasons. NSF reported that it is a small agency with few large IT investments, and many of those are legacy systems in operations and maintenance, rather than development. Therefore, according to the officials, the agency has not had many occasions for the CIO to need to certify adequate incremental development for major IT investments. Second, the officials stated that the NSF CIO is actively involved in the investment review process and did not feel a policy was needed to describe these activities. Third, NSF officials stated that it is their belief that policies are generally only required to correct something which is not working. Lastly, NSF officials stated that the agency’s definition of an Agile sprint was its definition of incremental development. However, sprints are not released directly to users, and therefore, the definition is not consistent with OMB guidance. However, the officials said they might reconsider developing a policy, but did not provide a time frame for doing so. Finally, 9 agencies had not yet finalized a CIO certification policy. Office of the CIO officials in each of these agencies reported that they had relied on existing IT governance processes and budget mechanisms, or created new targeted IT reviews to determine the CIO certification for fiscal year 2017 that was reported on the IT Dashboard. For example, HHS officials reported that the agency used existing project and investment milestone reviews as part of its enterprise performance lifecycle to determine whether the investment would be certified as having adequate incremental development. SBA officials told us that the agency’s portfolio management team met with investment managers during the monthly update process for the IT Dashboard, while USAID officials noted that the agency’s CIO reviews the incremental development status of all major investment software development projects on a monthly basis. Further, Justice officials reported that the IT Investment Oversight Manager’s staff reviewed the major business cases and requested justification for software development investments that were not: (1) using an iterative or Agile methodology, (2) expected to have a production release containing usable functionality every 6 months, or (3) showing an actual or planned date for deployment production within a 6-month time frame. In addition, while six of these agencies reported plans to finalize a policy for CIO certification by December 2017, one agency reported its policy would be finalized in 2018, and two agencies did not provide a time frame for finalizing a policy. Figure 3 below shows the agencies’ reported time frames for finalizing a policy on CIO certification of incremental development. Officials from each agency’s Office of the CIO provided a variety of reasons for why they had not yet developed or finalized policies for CIO certification of adequate incremental development. For example, EPA officials stated that the agency has been focusing on standing up the programs and structures needed to support incremental development and, thus, had not prioritized developing a policy. In addition, EPA officials stated that they had not developed a definition of functionality or time frames, but that their guidance points to industry standards. SBA officials stated that, since the majority of the agency’s investments were in operations and maintenance, they did not see the need to have policies or procedures for incremental development. In addition, HUD, NASA, and USAID officials reported that their agencies were in the process of finalizing policies, but had experienced delays due to the number of stakeholder comments or limited staff resources. Lastly, Defense officials stated that they had included information in their fiscal year 2018 budget submission guidance for component CIOs to certify adequate incremental development and were working to incorporate this process into their Financial Management Regulations, which were to be finalized in the first quarter of fiscal year 2018. However, the officials stated that the agency’s process is driven by its efforts to comply with whatever process OMB requires in the annual capital planning guidance and, thus, they would not have a separate certification policy from the budget guidance. Additionally, Defense officials reported that, for their agency’s investments, delivery every 12 to 18 months was more appropriate than the 6 months that OMB requires. Nevertheless, while Defense officials may believe that 12 to 18 month delivery cycles may be more appropriate for their work, OMB’s guidance requires agencies to deliver functionality at least every 6 months and does not allow for exceptions. We previously recommended that Defense establish a policy on the CIO certification of incremental development. Until this guidance is finalized, Defense may not be able to ensure incremental development practices are adequately implemented at the agency. We therefore continue to believe the recommendation is appropriate. Annual CIO certification of incremental development is critical to ensuring that agency CIOs exercise the proper authority and oversight over their agencies’ major IT investments. Having appropriate authority and oversight helps to create IT systems that add value and are aligned with agencies’ missions, while reducing the risks associated with low-value and wasteful investments. In the absence of clearly defined policies, agencies continue to run the risk of failing to deliver major investments in a cost-effective and efficient manner. We have previously made recommendations to Defense, Education, HHS, and Treasury to establish CIO certification policies, but as noted in this report, these agencies still have not yet finalized their guidance to clearly detail their agencies’ processes for certification. Therefore, we continue to believe these recommendations are appropriate. Agencies that lacked finalized policies may not be able to meet their reported time frames for finalizing their certification policies, since agency officials have noted that their approval processes are quite lengthy, and in some cases, the proposed dates for completion have changed several times. In addition, several policies were still being developed. Therefore, we cannot be assured that these documents will fully address the areas we noted. Until the 20 agencies update or finalize processes and policies for CIO certification, including defining the role of the CIO in the process, describing how certification will be documented, and including definitions of incremental development and delivery time frames consistent with OMB guidance, they will not be able to fully ensure adequate implementation of, or benefit from, incremental development practices. As a result, the agencies increase the risk that federal government resources will not be used in the most effective and efficient manner. FITARA states that OMB is to require in an agency’s annual IT capital planning guidance that each covered agency CIO certify that IT investments are adequately implementing incremental development, as defined in capital planning guidance issued by OMB. However, since the law was enacted in December 2014, OMB has taken three different approaches to address this reporting requirement. Of the approaches, one did not clearly and consistently provide agencies with the direction needed to effectively implement this important provision and report the status of certification. As previously noted, OMB’s fiscal year 2017 IT capital planning guidance (issued in June 2015) required each major IT investment to respond to a question in the associated major IT business case regarding whether the CIO certified the adequate implementation of incremental development with either a yes, no, or not applicable. This reporting approach required that agency CIOs provide an explicit statement regarding the certification of adequate implementation of incremental development for each major IT investment. Further, this approach allowed for the status of CIO certification of each investment to be publicly reported on the IT Dashboard via the investment’s major IT business case. However, OMB’s capital planning guidance for fiscal year 2018 (issued in June 2016) lacked clarity regarding how agencies were to address the requirement certifying adequate incremental development. While the 2018 guidance states that agency CIOs are to provide the certifications needed to demonstrate compliance with FITARA, there is no specific reference to the provision requiring CIO certification of adequate incremental development. As a result of this change, OMB placed the burden on agencies to know and understand how to demonstrate compliance with FITARA’s incremental development provision. Further, because of the lack of clarity in the guidance as to what agencies were to provide, OMB could not demonstrate how the fiscal year 2018 guidance ensured that agencies provided the certifications specifically called for in the law. OMB staff explained that the changes to the fiscal year 2018 capital planning guidance were made with the intent to rely on agencies’ reported responses on the IT Dashboard regarding the use of incremental development by an investment’s projects, rather than relying on an agency’s response to the yes, no, or not applicable question about the status of an investment’s certification of incremental development. Providing a clear and consistent approach for agencies to follow in reporting the status of certification is critical to ensure that agencies are able to comply with this key FITARA provision and to ensure that CIOs are held accountable for the performance of their major IT investments. OMB staff from the Office of E-Government and Information Technology stated that the fiscal year 2019 guidance would be responsive to the issues we raised. Accordingly, in August 2017, OMB issued its fiscal year 2019 guidance, which addressed the weaknesses we identified in the previous fiscal year’s guidance. Specifically, the revised guidance requires agency CIOs to make an explicit statement regarding the extent to which the CIO is able to certify the use of incremental development, and to include a copy of that statement in the agency’s public congressional budget justification materials. As part of the statement, an agency CIO must also identify which specific bureaus or offices are using incremental development on all of their investments. Agency CIO certification of the use of adequate incremental development for major IT investments is critical to ensuring that agencies are making the best effort possible to create IT systems that add value while reducing the risks associated with low-value and wasteful investments. These changes to OMB’s fiscal year 2019 guidance provide a key improvement for ensuring that agency CIOs have a consistent approach to follow in providing the certifications specifically called for in the law. One of the aims of FITARA was to encourage the use of incremental development throughout the federal government and, as of August 2016, more than half of the 24 agencies’ IT investments had been certified as adequately implementing incremental development, as required by FITARA and defined in OMB guidance. However, a number of responses for agency investments were incorrectly reported and it will be critical that agencies continue to improve the accuracy of investment data reported on the IT Dashboard. While we have previously made recommendations to numerous agencies to improve the accuracy of reporting on the IT Dashboard, issues with reporting remain, reinforcing the need for agencies to ensure that accurate data are made available for the oversight and management of their investments. In addition, while OMB issued guidance in June 2015, requiring agency CIOs to define policies and processes for CIO certification, as of August 2017, only 4 of 24 agencies had established policies that clearly define these processes. At this point, over 2 years since the law’s enactment, it is critical that agencies take action to put in place appropriate incremental certification polices to ensure CIOs exercise the proper authority and oversight over major IT investments, as required by law. Otherwise, agencies run the risk of not realizing the benefits of incremental development, as well as not implementing FITARA’s requirement for incremental development. While we previously made recommendations to Defense, Education, HHS, and Treasury to establish CIO certification policies, these agencies have still not yet finalized their guidance, and therefore, we continue to believe these recommendations are appropriate. Further, OMB has taken three different approaches to addressing FITARA’s reporting requirement for CIO certification and one did not clearly and consistently provide agencies with the direction needed to effectively implement this important provision and report the status of certification. OMB’s fiscal year 2017 capital planning guidance was helpful to agencies, in that it clearly directed agencies on how to publicly report their certifications. This also helped Congress in its oversight of agencies’ FITARA compliance. In contrast, OMB’s fiscal year 2018 capital planning guidance was a step backward, and OMB could not demonstrate how the guidance ensured that agencies provided the certifications specifically called for in the law. Going forward, the changes in guidance that OMB has implemented for fiscal year 2019 recognize the importance of providing clear direction to CIOs and how critical it is for agencies to create IT systems that add value while reducing the risks associated with low-value and wasteful investments. We are making a total of 19 recommendations to 17 departments and agencies in our review. Specifically: The Secretary of Energy should ensure that the CIO of Energy reports major IT investment information related to incremental development accurately in accordance with OMB guidance. (Recommendation 1) The Secretary of Agriculture should ensure that the CIO of USDA reports major IT investment information related to incremental development accurately in accordance with OMB guidance. (Recommendation 2) The Commissioner of the Social Security Administration should ensure that the CIO of SSA reports major IT investment information related to incremental development accurately in accordance with OMB guidance. (Recommendation 3) The Secretary of Housing and Urban Development should ensure that the CIO of HUD establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 4) The Secretary of the Interior should ensure that the CIO of Interior updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development, consistent with OMB guidance. (Recommendation 5) The Attorney General of the United States should ensure that the CIO of Justice establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 6) The Secretary of Labor should ensure that the CIO of Labor updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes a description of the CIO’s role in the certification process and a description of how CIO certification will be documented. (Recommendation 7) The Secretary of State should ensure that the CIO of State updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 8) The Secretary of Agriculture should ensure that the CIO of USDA establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 9) The Secretary of Veterans Affairs should ensure that the CIO of VA updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes a description of the CIO’s role in the certification process and a description of how CIO certification will be documented. (Recommendation 10) The Administrator of EPA should ensure that the CIO of EPA establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 11) The Administrator of GSA should ensure that the CIO of GSA updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes a description of the CIO’s role in the certification process and a description of how CIO certification will be documented. (Recommendation 12) The Administrator of NASA should ensure that the CIO of NASA establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 13) The Director of the NSF should ensure that the CIO of NSF updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 14) The Chairman of NRC should ensure that the CIO of NRC establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes a description of the CIO’s role in the certification process and a description of how CIO certification will be documented. (Recommendation 15) The Director of OPM should ensure that the CIO of OPM updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes a description of the CIO’s role in the certification process and a description of how CIO certification will be documented. (Recommendation 16) The Administrator of SBA should ensure that the CIO of SBA establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 17) The Commissioner of the Social Security Administration should ensure that the CIO of SSA updates the agency’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes a description of the CIO’s role in the certification process and a description of how CIO certification will be documented. (Recommendation 18) The Administrator of USAID should ensure that the CIO of USAID establishes an agency-wide policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA, and confirm that it includes: a description of the CIO’s role in the certification process; a description of how CIO certification will be documented; and a definition of incremental development and time frames for delivering functionality, consistent with OMB guidance. (Recommendation 19) We received comments on a draft of this report from OMB and the 24 agencies that we reviewed. Of the 17 agencies to which we made recommendations, 11 agencies agreed with our recommendations, 1 agency partially agreed, and 5 agencies did not state whether they agreed or disagreed with the recommendations. In addition, of the 7 agencies and OMB to which we did not make recommendations, 2 agencies agreed with the report and 5 agencies stated that they had no comments on the report. OMB did not agree with certain findings in the report. In addition, OMB and multiple agencies provided technical comments on the report, which we incorporated as appropriate. The following discusses the comments received from each agency to which we made a recommendation. In written comments, Energy concurred with our recommendation to ensure that the CIO reports major IT investment information related to incremental development accurately in accordance with OMB guidance, and described actions it has taken to address the recommendation. Specifically, the agency stated that its Office of the CIO reviews the accuracy of Energy’s major IT investment project reporting related to incremental development as part of monthly IT Dashboard and Investment Review Board meetings. By taking these actions, the agency considered the recommendation closed. As noted earlier in our report, we identified issues with the accuracy of Energy’s reported data related to the certification of incremental development. If Energy consistently and effectively implements its reviews of IT Dashboard data, as described, these actions should help to improve the accuracy of reported incremental development data on the IT Dashboard. We plan to continue to monitor the agency’s reporting of its incremental data on the IT Dashboard and accordingly, consider our recommendation to currently remain open. Energy’s comments are reprinted in appendix IV. In written comments, HUD concurred with our recommendation to establish an agency-wide policy and process for CIO certification of adequate incremental development and stated that it would provide more definitive information and timelines on how it plans to address the recommendation once our final report is issued. HUD’s comments are reprinted in appendix V. In written comments, Interior stated that the agency concurred with our recommendation to update the agency’s policy and process for CIO certification of adequate incremental development and described planned actions to implement it. Specifically, the agency reported that it is committed to updating its existing policy to include a description of the CIO’s role in the incremental development certification process, a description of how the CIO’s certification is documented, and a definition of incremental development, consistent with OMB’s guidance. Interior’s comments are reprinted in appendix VI. In an e-mail received on September 15, 2017, an audit liaison specialist in Justice’s Audit Liaison Group in the Internal Review and Evaluation Office stated that the agency agreed with our recommendation to establish an agency-wide policy and process for CIO certification of adequate incremental development and described planned actions to implement it. Specifically, the official stated that Justice will amend existing policy and processes to implement this recommendation. In addition, the official stated that Justice is fully supportive of incremental development and has drafted documentation, including guidance on an incremental system development life cycle. In an e-mail received on September 5, 2017, an administrative officer in Labor’s Office of the Assistant Secretary for Administration and Management stated that the agency had no comments on the report. In written comments, State did not say whether the agency agreed or disagreed with our recommendation to update the agency’s policy and process for CIO certification of adequate incremental development, but described ongoing actions to implement it. Specifically, the agency reported that it has developed an incremental development policy that addresses the recommendation we noted in our report. The agency added that the policy is currently in the process of being approved. State’s comments are reprinted in appendix VII. In an e-mail received on September 1, 2017, a senior advisor in the USDA Office of the CIO’s Enterprise Management office stated that the agency concurred with our findings and recommendations to report major IT investment incremental development information accurately and to establish an agency-wide policy and process for CIO certification of adequate incremental development, and had no further comments. In written comments, VA partially concurred with our recommendation to update the agency’s policy and process for CIO certification of adequate incremental development, stating that, while the agency does not currently have a policy in place outlining the CIO certification process, the agency CIO does direct that all investments utilize Agile and incremental delivery. The agency stated that it would take action to address our recommendation by drafting a policy that outlines the CIO’s role in the certification process and describes how certification will be documented. The agency added that the policy is targeted for completion by November 2017. If implemented as planned, these actions should address the intent of our recommendation. VA’s comments are reprinted in appendix VIII. In written comments, EPA stated that the agency generally agreed with our recommendation to establish an agency-wide policy and process for CIO certification of adequate incremental development, and presentation of facts in the report. The agency also noted that the policy developed in response to our recommendation is to address FITARA issues above and beyond the certification of incremental development. In addition, the agency noted a technical correction to a sentence in our report related to EPA’s use of information from certification. We have incorporated changes to the draft, as appropriate, to address this comment. EPA’s comments are reprinted in appendix IX. In written comments, GSA agreed with our recommendation to update the agency’s policy and process for CIO certification of adequate incremental development and reported that it would develop and implement a plan to fully address it. GSA’s comments are reprinted in appendix X. In written comments, NASA concurred with the recommendation to establish an agency-wide policy and process for CIO certification of adequate incremental development and described ongoing actions to implement it. Specifically, the agency stated that it is currently updating its policies to address the incremental development requirement. In this regard, NASA Policy Directive 2800.1 is to include a responsibility for the Office of the CIO to certify that IT resources are adequately implementing incremental development. In addition, NASA Policy Directive 7120.7 is being updated to include a definition of incremental development and processes for ensuing that the CIO certifies incremental development. According to the agency, these policies are estimated to be completed by March 2018. NASA’s comments are reprinted in XI. In an e-mail received on September 14, 2017, a senior advisor in NSF’s Office of the Director/Office of Integrative Activities stated that the agency had no comments on our report. In written comments, NRC stated that it was in general agreement with the findings in our report. The agency did not state whether it agreed or disagreed with our recommendation to establish an agency- wide policy and process for CIO certification of adequate incremental development, but described the planned action to implement the recommendation. Specifically, the agency reported that it plans to establish agency-wide, formalized processes and procedures for the CIO to approve the incremental development of major IT investments by December 31, 2017. NRC’s comments are reprinted in appendix XII. In written comments, OPM concurred with the recommendation to update the agency’s policy and process for CIO certification of adequate incremental development and described planned actions to implement it. Specifically, the agency reported that it intends to update its policies and processes to include a description of the CIO’s role in the certification process and a description of how certification will be documented. OPM’s comments are reprinted in appendix XIII. In an e-mail received on September 11, 2017, a program manager in SBA’s Office of Congressional and Legislative Affairs stated that the agency concurred with our recommendation to establish an agency- wide policy and process for CIO certification of adequate incremental development, and had no further comments. In written comments, SSA agreed with our two recommendations to report major IT investment incremental development information accurately and establish an agency-wide policy and process for CIO certification of adequate incremental development, and described planned actions being taken or planned to implement them. Specifically, the agency reported that it had implemented two new processes to support incremental development certification. According to the agency, each IT investment program manager is to answer a series of questions about the investment’s status and also certify whether their investment adequately implements incremental development. This information is to be used in the CIO’s ongoing investment evaluation process for reporting investment information on the IT Dashboard. SSA reported that these new processes are to be defined in an upcoming revision to the agency’s Capital Planning and Investment Control Guide. SSA’s comments are reprinted in appendix XIV. In written comments, USAID did not state whether it agreed or disagreed with our recommendation to establish an agency-wide policy and process for CIO certification of adequate incremental development, but described ongoing actions to implement the recommendation. Specifically, the agency reported that it is in the process of establishing an agency-wide policy and process for the CIO’s certification of adequate incremental development. It estimates that this policy will be implemented by August 31, 2018. USAID’s comments are reprinted in appendix XV. In addition to the aforementioned comments, the seven agencies and OMB to which we did not make recommendations provided the following responses. In written comments, Commerce stated that the agency concurred with the report as written. Commerce’s comments are reprinted in appendix XVI. In an e-mail received on September 7, 2017, a GAO Affairs staff member in Defense’s Executive Services Directorate stated that the agency had no formal comments on the report. In an e-mail received on September 8, 2017, a staff member in Education’s Office of the Secretary/Executive Secretariat stated that the agency had no comments on the report. In an e-mail received on September 11, 2017, an audit liaison in HHS’s Office of the Assistant Secretary for Legislation stated that the agency had no comments on the report. In an e-mail received on September 11, 2017, a program analyst in DHS’s GAO-Office of Inspector General’s Liaison Office stated that the agency would not be sending a management response letter. In an e-mail received on September 8, 2017, the Director of Audit Relations and Program Improvement in Transportation’s Office of the Secretary stated that the agency would not be providing a written management response. In an e-mail received on September 15, 2017, a supervisory IT specialist/GAO-Office of Inspector General liaison in Treasury’s Office of the CIO stated that the agency generally agreed with the report. The agency also provided comments related to various challenges discussed in the report. Specifically, the official described Treasury’s efforts to address challenges noted in the report related to project staff lacking the necessary skills for implementing incremental development practices and programs not receiving sufficient funding. In this regard, the official stated that the agency continues to develop knowledge, skills, and abilities for project managers and IT specialists and continues to provide specialized programming training to its IT staff in order to move to more modern programming languages and IT tools as part of system modernization efforts. In addition, the official stated that, to address challenges related to programs receiving sufficient funding, Treasury continues to adjust planned and ongoing projects to align with the availability of funds and external mandates. In an e-mail received on September 19, 2017, an OMB Assistant General Counsel stated that the agency generally disagreed with the tone, tenor, and conclusions of law reflected in aspects of our report. Among the concerns was that we had asserted that OMB’s prior year’s guidance to agencies on CIO certification of incremental development was not in compliance with OMB’s statutory obligations under FITARA. As our report states, FITARA mandates OMB to include in its annual IT capital planning guidance, a requirement that CIOs certify that investments are adequately implementing incremental development as defined in the guidance. We reported that OMB had issued guidance for fiscal years 2017, 2018, and 2019. However, we noted that the fiscal year 2018 guidance differed from the guidance issued in the other two fiscal years in that it did not clearly establish how agency CIOs were to demonstrate compliance with FITARA’s certification of adequate incremental development provision. Instead, the fiscal year 2018 guidance placed the burden on agencies to know and understand how to implement the FITARA requirement. Thus, while we concluded that OMB’s fiscal year 2018 guidance was not clear on how agencies were to certify adequate incremental development, we did not assert that this guidance failed to comply with FITARA. Accordingly, we did not make a conclusion of law regarding OMB’s guidance, as the e-mail stated. We continue to believe that our assessment of the fiscal year 2018 guidance is correct. OMB also stated that it disagreed with our conclusion that OMB could not demonstrate compliance with FITARA. However, our report did not make the conclusion that is stated in OMB’s response. As noted above, our report pointed out that OMB’s fiscal year 2018 guidance lacked clarity in terms of specifically stating what information agencies were to provide OMB in order to be compliant with FITARA’s requirement that agency CIOs certify incremental development. Therefore, we concluded that OMB could not demonstrate how the fiscal year 2018 guidance ensured that agencies provided the certifications specifically called for in the law. As such, we continue to believe that our conclusion is appropriate. Further, OMB stated that our conclusion was predicated on OMB’s reluctance to share agency pre-decisional budget information. It is up to OMB to demonstrate that its fiscal year 2018 guidance ensured agency compliance with FITARA. Though OMB asserted that our conclusion was based on OMB’s reluctance to share agency pre- decisional budget information, our conclusion was instead based on the fact that OMB provided no documentary evidence to establish how agencies complied with the FITARA certification requirement for fiscal year 2018. Consequently, we believe our assessment that OMB could not demonstrate how the fiscal year 2018 guidance ensured that agencies provided the certifications specifically called for in the law is accurate. In a subsequent e-mail to us on October 4, 2017, the OMB Assistant General Counsel provided additional comments related to the disagreements described above. Specifically, OMB stated that our report’s “focus on the use of the term ‘certification’ was confusing in that appears to reference the term ‘certify’ [found in the FITARA provision on the adequate use of incremental development], and also seems to be a reference to the requirement that CIOs ‘approve’ and define development processes.” In our report, we discuss FITARA’s requirement that OMB annually issue capital planning guidance requiring agency CIOs to certify that IT investments are adequately implementing incremental development. We analyzed the guidance that OMB has issued to meet this requirement over the past 3 years, and we evaluated agencies’ progress in implementing that guidance. In doing so, we noted that OMB had also issued supplementary FITARA implementation guidance in June 2015 that required agencies to define policies and processes to ensure that the CIO certifies that IT resources are adequately implementing incremental development. Throughout our discussion, we clearly delineate between the incremental development certification provided to OMB by an agency’s CIO and the agency’s policies and processes that support and inform that certification. As such, we believe we have used the term “certification” appropriately and consistently throughout our report. We are sending copies of this report to interested congressional committees, the Director of the Office of Management and Budget, the Secretaries and agency heads of the departments and agencies in this report, and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov. If you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix XVII. Our objectives for this engagement were to determine (1) the number of investments certified by agencies as implementing adequate incremental development and any reported challenges that impact the agencies’ incremental delivery of functionality; and (2) whether agencies are establishing policies and processes for chief information officer (CIO) certification of incremental development in accordance with the Federal Information Technology Acquisition Reform Act provisions (commonly referred to as FITARA) enacted as a part of the Carl Levin and Howard P. ‘Buck’ McKeon National Defense Authorization Act for Fiscal Year 2015. For our first objective, we obtained and analyzed major information technology (IT) investment data reported by agencies on the IT Dashboard as of August 31, 2016, for fiscal year 2017, which was the first year that the Office of Management and Budget (OMB) required the 24 covered agencies to report the status of CIO certification of incremental development for each investment. We chose this date because it was the final day updated fiscal year 2017 data from the agencies would be publicly available until the release of the President’s fiscal year 2018 budget submission. Initially, we analyzed the fiscal year 2017 data of major IT software development investments that were planning to allocate at least 50 percent of their funding to development, modernization, and enhancement activities. We then reviewed agency responses to the question regarding CIO certification of adequate incremental development and eliminated any investment where the agency’s rationale for choosing “not applicable” was due to the investment not undertaking software development activities. In doing so, we identified a total of 166 investments from 21 agencies. Three agencies (National Aeronautics and Space Administration, National Science Foundation, and U.S. Nuclear Regulatory Commission) out of the 24 in our review did not have any investments that met these criteria for fiscal year 2017. For the 21 agencies with major IT investments to review, we then determined the total number of investments that agencies reported were certified by the CIO for adequate incremental development. We also reviewed and summarized agency responses reported on the IT Dashboard for investments that did not have CIO certification. To help determine the reliability of the reported agency CIO certification data on the IT Dashboard, we presented the results of our analysis of CIO certification responses to officials from each agency’s Office of the CIO that were involved in investment management and software development activities and solicited their input and explanations for the results. Two agencies each provided an update on one of their investments, which we have incorporated as appropriate. We determined that the data were sufficiently reliable for the purpose of this report. In order to identify the challenges impacting the agencies’ incremental delivery of functionality, we developed a list of common challenges based on our prior work, in which eight agencies reported that the following eight challenges inhibited their delivery of functionality: 1. project staff were over-utilized or lacked the necessary skills and 2. programs did not receive sufficient funding or received funding later 3. projects experienced management and organizational challenges that introduced delays; 4. development work was slowed by inefficient governance and 5. project characteristics made rapid delivery of functionality infeasible or 6. development schedules were impeded by procurement delays; 7. programs did not have stable, prioritized requirements; and 8. incremental development was impeded by select technologies. We sent the list of challenges to each of the 24 agencies and asked officials from the Office of the CIO at each agency involved with investment management and software development activities to identify their top three challenges from this list that impacted their ability to deliver incremental functionality for major IT investments. We also asked agency officials to identify any challenges that were not included in the list, but which were also among their top three challenges. Finally, we asked agencies to explain what actions were taken to address the reported challenges and describe the extent to which the challenges were overcome. Because of the open-ended nature of the agencies’ responses to our questions, we conducted a content analysis of the information we received in order to identify common challenges that impact agencies’ ability to deliver incremental functionality. In doing so, team members individually reviewed the challenges reported by agencies and assigned them to various categories. Team members then compared categorization schemes, discussed the differences, and reached agreement on the final list of challenges by totaling the number of times each challenge was mentioned. For those challenges that were prompted by the list we provided to agencies, we reported challenges that were identified by five or more agencies. Three agencies also identified a new challenge that was not on our list, which we reported due to the number of agencies reporting it as a challenge. Three of the 24 agencies in our review (Departments of Defense, Energy, and Health and Human Services) reported that they had no challenges with implementing incremental development. We also asked the agencies in our review how the CIO utilized the information obtained during the process of certifying investments’ adequate incremental development to make decisions regarding the agency’s major IT investments. Because of the wide variety of responses we received from agencies, we conducted a content analysis of the information in order to identify ways the CIOs used the information. In doing so, team members individually reviewed agencies’ responses and assigned them to various categories. Team members then compared their categorization schemes, discussed the differences, and reached agreement on the final characterization of ways in which agencies benefited from the certification process. For our second objective, we analyzed the 24 agencies’ policies and processes governing the CIO certification of adequate incremental development to determine whether those policies and processes were consistent with FITARA. The provision states that OMB is to require in its annual IT capital planning guidance that agency CIOs covered by the law certify that IT investments are adequately implementing incremental development. To assess this, we reviewed guidance issued by OMB on the implementation of FITARA, and assessed agencies’ documentation of incremental development certification policies and processes against GAO’s IT investment management framework. This framework states that an organization’s policies and procedures should be clearly defined, in that they provide details regarding the role of appropriate stakeholders and the artifacts to document decisions made. Because of the wide variety of responses and documents we received from agencies related to their incremental development certification processes, we conducted a content analysis of the information in order to determine compliance with OMB’s guidance. In doing so, team members individually reviewed agencies’ responses and documents and assigned them to various categories and sub-categories. Team members then compared their categorization schemes, discussed the differences, and reached agreement on the final characterization of compliance with OMB guidance. In cases where agencies provided multiple policies or documents, we followed up to clarify which portions were considered by the agency to support the CIO certification requirement. In analyzing whether the agencies’ policies on CIO certification met FITARA, OMB, and GAO criteria, we assessed whether the policies clearly defined the role of the CIO in the certification of adequate incremental development, and described how CIO certification was documented. We also reviewed agencies’ incremental development policies and processes to identify the agencies’ definitions of incremental development and time frames for delivering functionality to determine whether they were consistent with OMB guidance. Agencies found to not have a policy where the CIO process was clearly defined were evaluated as such for one of two reasons: either the agency’s formal policy did not completely address our assessment criteria or the agency’s policy had not yet been finalized. For agencies that told us they had not yet finalized a policy for certification, we asked them to explain the process, if any, used by the agency to certify major IT investments for fiscal year 2017. In addition, we interviewed staff from OMB’s Office of E-Government and Information Technology regarding its guidance to agencies related to FITARA’s incremental development certification provision. We conducted this performance audit from July 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 5 lists the 166 major information technology (IT) software development investments primarily in development, as reported on the IT Dashboard as of August 31, 2016, and the agency’s reported response to the question in the major IT business case regarding whether the agency’s Chief Information Officer certified the adequate use of incremental development for the investment for fiscal year 2017. All 166 investments reported in the major IT business case that the investment included software development. In addition to the individual named above, the following staff made key contributions to this report: Dave Hinchman (Assistant Director), Chris Businsky, Rebecca Eyler, Justin Fisher, Valerie Hopkins (Analyst in Charge), Sandra Kerr, James MacAulay, Jamelyn Payan, Priscilla Smith, and Andrew Stavisky.", "summary": "Investments in federal IT too often result in failed projects that incur cost overruns and schedule slippages. Recognizing the severity of issues related to government-wide IT management, Congress enacted federal IT acquisition reform legislation in December 2014. Among other things, the law states that OMB require in its annual IT capital planning guidance that CIOs certify that IT investments are adequately implementing incremental development. GAO was asked to review agencies' use of incremental development. This report addresses the number of investments certified by agency CIOs as implementing adequate incremental development and any reported challenges, and whether agencies' CIO certification policies and processes were in accordance with FITARA. GAO analyzed data for major IT investments in development, as reported by 24 agencies, and identified their reported challenges and use of certification information. GAO also reviewed the 24 agencies' policies and processes for the CIO certification of incremental development and interviewed OMB staff. Agencies reported that 62 percent of major information technology (IT) software development investments were certified by the agency Chief Information Officer (CIO) for implementing adequate incremental development in fiscal year 2017, as required by the Federal IT Acquisition Reform Act (FITARA) as of August 2016. However, a number of responses for the remaining investments were incorrectly reported due to agency error. Officials from 21 of the 24 agencies in GAO's review reported that challenges hindered their ability to implement incremental development, which included: (1) inefficient governance processes; (2) procurement delays; and (3) organizational changes associated with transitioning from a traditional software methodology that takes years to deliver a product, to incremental development, which delivers products in shorter time frames. Nevertheless, agencies reported that the certification process was beneficial because they used the information from the process to assist with identifying investments that could more effectively use an incremental approach, and using lessons learned to improve the agencies' incremental processes. As of August 2017, only 4 of the 24 agencies had clearly defined CIO incremental development certification policies and processes that contained: descriptions of the role of the CIO in the process; how the CIO's certification will be documented; and included definitions of incremental development and time frames for delivering functionality consistent with Office of Management and Budget (OMB) guidance (see figure). In addition, OMB's fiscal year 2018 capital planning guidance did not establish how agency CIOs are to make explicit statements to demonstrate compliance with FITARA's incremental provisions, while the 2017 guidance did. However, OMB's fiscal year 2019 guidance provides clear direction on reporting incremental certification and is a positive step in addressing this issue. GAO is making 19 recommendations to 17 agencies, including 3 to improve reporting accuracy and 16 to update or establish certification policies. Eleven agencies agreed with GAO's recommendations, 1 partially agreed, and 5 did not state whether they agreed or disagreed. OMB disagreed with several of GAO's conclusions, which GAO continues to believe are valid, as discussed in the report.", "document_type": "gao"}
{"report": "The mission of the IRS, an agency within the Department of the Treasury (Treasury), is to provide America’s taxpayers with top quality service by helping them understand and meet their tax responsibilities; and to enforce the tax law with integrity and fairness to all. In carrying out its mission, IRS annually collects over $3 trillion in taxes from millions of individual taxpayers and numerous other types of taxpayers. It also manages the distribution of over $400 billion in refunds. To guide its future direction, the agency has six strategic goals: (1) empower and enable all taxpayers to meet their tax obligations; (2) protect the integrity of the tax system by encouraging compliance through administering and enforcing the tax code; (3) collaborate with external partners proactively to improve tax administration; (4) cultivate a well-equipped, diverse, flexible and engaged workforce; (5) advance data access, usability and analytics to inform decision making and improve operational outcomes; and (6) drive increased agility, efficiency, effectiveness and security in IRS operations. The mission of IRS’s Information Technology organization is to deliver IT services and solutions that drive effective tax administration to ensure public confidence. It is led by the Chief Information Officer (CIO), who oversees several subordinate offices. Figure 1 shows the structure of IRS’s Information Technology organization. For fiscal year 2016, IRS’s IT portfolio contained 137 investments, of which 23 were classified as major. According to the agency, it spent approximately $2.7 billion on its IT investments during fiscal year 2016. Of the $2.7 billion, approximately $1.9 billion (70 percent) was spent for operations and maintenance activities, and approximately $800 million (30 percent) was spent for development, modernization, and enhancement. Among the agency’s investments that we selected for our review, the following four were primarily in development during fiscal year 2016: The Affordable Care Act (ACA) Administration investment encompasses the planning, development, and implementation of IT systems needed to support IRS’s tax administration responsibilities associated with the Patient Protection and Affordable Care Act. The agency reported spending $253 million on this investment in fiscal year 2016. Customer Account Data Engine 2 (CADE 2) is to, among other things, provide daily processing of taxpayer accounts, address a financial material weakness, and maintain a clean audit opinion. It is expected to replace the nearly 50 year old IMF system that IRS is using to process individual taxpayer accounts. A key project supporting CADE 2 is the Individual Tax Processing Engine project, which, according to the agency, is a complex effort to, among other things, convert approximately 200,000 lines of IMF’s legacy assembly language code to Java. According to IRS, the agency has completed an initial phase of converting the assembly language code for core IMF components to Java; however, significant work remains to complete the conversion. Specifically, in October 2017, IRS’s CIO stated that the agency could deliver a system to replace the core IMF components in 5 years if the agency was provided with 50 to 60 employees and the associated funding, direct hire authority to hire employees with the right skills, and approximately $85 million each year. The agency reported spending $182.6 million on CADE 2 in fiscal year 2016. The Return Review Program (RRP) is IRS’s primary system for fraud detection. As such, it supports the agency’s capabilities to detect, resolve, and prevent criminal and civil tax noncompliance. According to IRS, as of May 2017, the system had helped protect over $4.5 billion in revenue. The agency reported spending $100.2 million on this investment in fiscal year 2016. Enterprise Case Management (ECM) is to provide an enterprise solution for performing case management across IRS’s business units. According to the agency, its current systems provide limited visibility into case management practices between programs, process redundancies, and multiple handoffs that can lead to, among other things, increased risks; and ECM is expected to address these limitations. The agency reported spending $38.1 million on the investment in fiscal year 2016. Five other investments that we selected for our review were in the operations and maintenance phase during fiscal year 2016: MSSS represents approximately 73 percent of IRS’s IT infrastructure. Specifically, this investment encompasses the design, development, and deployment of servers, middleware and large systems, and enterprise storage infrastructures, including systems software products, databases, and operating systems. The MSSS investment began in 1970. The agency reported spending $499.4 million on this investment in fiscal year 2016. Telecommunications Systems and Support (TSS) provides the voice and data network infrastructure services, video services, and engineering throughout IRS. The TSS investment began in 2001. The agency reported spending $336.4 million on this investment in fiscal year 2016. End User Systems and Services (EUSS) provides desktops, laptops, mobile devices, software, incident management services, and asset management services to end users in IRS. The EUSS investment began in 2002. The agency reported spending $238.0 million on this investment in fiscal year 2016. IDRS is used by IRS employees to review tax information, issue notices to taxpayers, and update taxpayer records. The IDRS investment began in 1973. The agency reported spending $15.8 million on this investment in fiscal year 2016. IMF is IRS’s system for processing individual taxpayer account data. Using this system, accounts are updated, taxes are assessed, and refunds are generated as required during each tax filing period. Virtually all IRS information system applications and processes depend on output, directly or indirectly, from this data source. As previously noted, the agency uses assembly language code to program this system, which began in the late 1960s. The agency intends to decommission IMF once CADE 2 is fully implemented; however, as we recently reported, the agency has not provided a target date for decommissioning IMF. The agency reported spending $14.3 million on this investment in fiscal year 2016. For several years, we have reported on the performance of IRS’s IT investments and identified opportunities for improving the management of these investments. In February 2015, we reported that the agency had provided summary-level Chief Technology Officer risk assessment ratings for the majority of IT investments in quarterly reporting to Congress. However, the agency did not provide such ratings for selected investments for which Congress required detailed reporting, including CADE 2 and RRP, which are the subject of this review. We noted that summary-level risk assessment ratings would improve the visibility into risks faced by the investments and provide Congress with the information to more easily determine the investments requiring greater attention. Consequently, we recommended that IRS provide summary-level risk assessment ratings for all major investments in its quarterly reporting to Congress. In response to our recommendation, IRS began providing summary- level risk information for all major investments in its fiscal year 2015 second quarter report to Congress. In its report for the fourth quarter of fiscal year 2016, the agency reported that selected aging systems were facing increased risks. In this regard, the agency CIO provided a risk assessment rating for major IT investments, which incorporated risks associated with people, infrastructure, deferred scope, and delivery of agreed-upon scope. IRS reported that two investments had risk ratings that went from yellow to red. Specifically, IMF received a red risk rating for the people factor and CADE 2 received a red risk rating for the delivery of agreed upon scope factor. In a report in June 2016, we noted, among other things, that CADE 2 and ACA did not report information on planned versus actual delivery of functionality in accordance with best practices. In addition, ACA did not report timely information on planned versus actual costs. Accordingly, we recommended that IRS report, at least quarterly, scope and cost performance for CADE 2 and ACA, consistent with best practices. In response to our recommendation, the agency began reporting on planned versus actual delivery of functionality for CADE 2 starting in fiscal year 2016. However, the agency has not reported on planned versus actual functionality for ACA. In March 2017, officials responsible for managing the investment told us that the agency had not implemented the recommendation because it did not see the benefit in doing so given that the remaining development work was minimal. IRS subsequently completed the development work for ACA in September 2017, at which point the investment transitioned to operations and maintenance. Given the status of the investment, we agree that the recommendation is no longer applicable. In addition, our prior work has emphasized the importance of IRS more effectively managing its legacy systems. As part of a government-wide review in November 2013, we reported on the extent to which 10 agencies’ large investments had undergone operational analyses—a key performance evaluation and oversight mechanism required by OMB to ensure investments in the operations and maintenance phase continue to meet agency needs. We noted that MSSS had not had an operational analysis for fiscal year 2012. As a result, we recommended that Treasury perform an operational analysis for the investment. The department did not comment on our recommendation but subsequently performed an operational analysis for the MSSS investment. In May 2016, we reported on legacy IT systems across the federal government, noting that these systems were becoming increasingly obsolete and that many of them used outdated software languages and hardware parts that were unsupported by the vendor. As part of that work, we highlighted Treasury’s use of assembly language code and Common Business Oriented Language (COBOL)—a programming language developed in the late 1950s and early 1960s—to program its legacy systems. We noted the need for agencies to move to more modern, maintainable languages, as appropriate and feasible. Further, we noted that a leading IT research and advisory company had reported that organizations using COBOL should consider replacing the language, and that there should be a shift in focus to using more modern languages for new products. We also pointed out that the use of COBOL presents challenges for agencies given that procurement and operating costs associated with this language will steadily rise, and because fewer people with the proper skill sets are available to support the language. Further, we reported that IMF was over 50 years old and, although IRS was working to modernize it, the agency did not have a time frame for completing the modernization or replacement. In addition, we noted that IRS did have not have specific activities or timelines for updating MSSS and EUSS. Thus, we recommended that Treasury direct the CIO to identify and plan to modernize or replace IRS’s legacy systems. The department had no comments on our recommendation. We have also previously reported on agencies’ IT workforce planning efforts. Specifically, in November 2016 we identified eight key IT workforce planning activities based on relevant laws and guidance and noted that the five federal departments in our review, including Treasury, had mixed progress in addressing the activities. We made one recommendation to Treasury and the department agreed with our recommendation. The performance of selected IRS IT investments has varied. In this regard, we found that the four selected investments in development had spent less than planned, and that most were behind schedule and had delivered less scope than planned. In addition most of these investments had significant variances, meaning that actual cost, schedule, or scope varied from plans by more than 10 percent. For the five selected investments in the operations and maintenance phase, we found that most had met all of their operational performance targets and all performed operational analyses required by OMB. However, none of the analyses addressed all key factors specified in OMB’s guidance. Best practices highlight the importance of monitoring the performance of projects in development by comparing actual cost, schedule, and scope to plans in order to allow appropriate corrective actions if actual performance deviates significantly from planned performance. With regard to the four selected investments in development that we reviewed, IRS reported cost, schedule, and scope performance information for ECM, CADE 2, and RRP, but the agency reported only cost and schedule information for ACA. Table 1 provides details reported by the agency on the performance of these IT investments. Regarding ECM, the agency reported that it spent $1.5 million less than budgeted, had an approximately 9 percent schedule overrun for the three projects it worked on during the time frame of our review, and delivered about 90 percent of planned scope. However, after 18 months of working with a contractor, the agency paused all development activities for the investment because the product that was being delivered did not meet the agency’s needs. Specifically, according to agency officials, including the CIO, the contractor’s solution was not sufficiently automated to be scalable across the agency. Thus, IRS subsequently established a new effort to acquire a product that would be aligned with its business needs. The officials stated that the strategy for acquiring the new product includes collaboration with other agencies on experiences in implementing enterprise case management systems and requesting information on potential solutions from commercial vendors. Regarding CADE 2, IRS reported that it spent $4 million less than it budgeted, had a 54 percent schedule overrun for the 15 projects it worked on during the time frame of our review, and delivered 46 percent of the planned scope. Officials responsible for managing CADE 2 stated that the cost, schedule, and scope variances from planned performance were due to human resource and funding shortages. Specifically, the agency reported that it does not have an adequate number of staff with expertise in assembly language code and tax processing to perform development work on both its core tax processing system (IMF) and its tax processing system modernization effort (CADE 2), or enough Java programmers to develop and maintain new code. As a result, the agency paused 7 of the 15 projects. (IRS’s efforts to address its human resources constraints are discussed later in this report.) For RRP, the agency reported that it spent $29.5 million less than budgeted, had a 19 percent schedule overrun for the 4 projects it worked on during the time frame of our review, and delivered about 80 percent of planned scope. According to the agency, these variances were due to, among other things, overestimation of planned costs, deferral of planned scope to a future release, and additional time needed to address a development defect. For ACA, the agency reported that it spent $41.6 million less than planned and was on time for the four projects it worked on. According to the agency, the cost variance was due to, among other things, an initial overestimation of the costs to complete planned work. IRS did not track scope delivery for ACA and, as a result, we could not determine the scope performance for the investment. As previously mentioned, in June 2016, we recommended that IRS report on actual scope information for ACA at least quarterly. In its March 2017 response to the recommendation, the agency stated that it did not see the benefits of implementing the recommendation for the investment given the minimal development work remaining. IRS has since completed this development work and transitioned ACA to the operations and maintenance phase. We agree that the recommendation is no longer applicable given the status of the investment. According to OMB’s fiscal year 2016 capital planning guidance, ongoing performance of operational investments should be monitored to ensure the investments are meeting the needs of the agency, are delivering expected value, and/or are consistent with the agency’s enterprise architecture. To achieve these goals, agencies are required to establish and publically report on five operational metrics for major IT investments, as well as planned and actual performance against these metrics. According to OMB, these metrics seek to answer more subjective questions about areas such as customer satisfaction and financial performance. IRS reported operational performance metrics, as required, for the five selected investments we reviewed that were in the operations and maintenance phase. Further, three of these investments—IMF, MSSS, and TSS—met all of their operational performance targets, and the remaining two investments—IDRS and EUSS—met four of five operational performance targets during the time frame that we reviewed. Table 2 lists the operational performance metrics for each of the five investments, the metrics’ areas of focus, as well as the extent to which IRS met planned performance targets. With regard to the investments that did not meet their performance targets: IDRS did not meet its target for IRS employees’ usage of the investment for 9 out of the 18 months we reviewed. Officials responsible for managing IDRS stated that this was likely due to a reduction in the number of staff at the agency who access taxpayer accounts and to a lag experienced early in the months before notices are sent out for the filing year. EUSS did not meet its target for the average amount of time IRS employees wait to receive telephone support for 6 out of the 18 months we reviewed. According to officials responsible for managing EUSS, this target was missed due to the attrition of telephone support staff and the agency’s inability to hire additional support staff. OMB’s fiscal year 2016 capital programming guidance highlights the importance of operational analyses in examining the ongoing performance of operational investments. The guidance further notes that such analyses should be conducted at least annually and should address, among other things, the following: the extent to which the investment supports customer processes as designed, and how well the investment is delivering the goods or services it was designed to deliver; how well the investment contributes to achieving the organizations a comparison of current performance with a pre-established cost alternative methods of achieving the same mission needs and greater utilization of technology or consolidation of investments to better meet organizational goals. The five selected investments that we reviewed in the operations and maintenance phase performed operational analyses that addressed most, but not all of these key factors identified in OMB guidance. Specifically, four of the investments addressed five of the six factors, and one investment addressed four of the factors. Table 3 provides our assessment of the investments’ operational analyses. With regard to the investments that did not address all key factors identified in OMB’s guidance: The IMF operational analysis did not address the factor associated with greater utilization of technology or consolidation of investments to better meet organizational goals. Specifically, the analysis stated that the agency is researching the validity of converting legacy assembly language code to a modern programming language. However, the analysis did not more broadly address greater utilization of technology or consolidation to better meet organizational goals, consistent with the key factor in OMB’s guidance. In addition, the analysis did not reflect IRS’s progress to date in modernizing IMF and the associated challenges. This omission is concerning given the risk exposure from the agency’s continued use of the legacy assembly language code. (Such risk is further discussed later in this report.) With respect to IDRS, while the investment is intended to, among other things, provide for systemic review of tax information, issue notices to taxpayers, and update taxpayer records, IRS’s performance metrics generally focused on system availability and usage and did not address the extent to which the intended functionality was being provided. Agency officials agreed that IDRS’s metrics could be improved to address the extent to which intended functionality is being provided. For TSS, while the investment provides, among other things, video conferencing and enterprise voice and fax services, the operational analysis did not address how well these service offerings were being delivered. IRS officials stated that they had instead evaluated these service offerings in a post-implementation review, which is a one-time effort conducted after an investment has completed development. However, by not addressing the factor in the operational analysis, which is an annual exercise, IRS risks not being continually informed of the extent to which the investment is meeting the needs of the agency. In addition, the operational analysis for the TSS investment did not appropriately include a comparison of current performance with a pre-established cost baseline. Specifically, while the analysis included planned and actual cost figures for fiscal year 2016, the planned cost figure was not complete as it did not account for reimbursable costs and user fees. Regarding MSSS, the operational analysis did not address alternative methods of achieving the same mission needs and strategic goals. Senior officials in IRS’s Information Technology organization stated that the agency had performed analyses of alternative methods for achieving mission needs and strategic goals, but these analyses were not included in the operational analysis for the investment. The operational analysis for EUSS did not appropriately include a comparison of current performance with a pre-established cost baseline. Specifically, while the analysis included planned and actual cost figures for fiscal year 2016, the planned cost figure was not complete as it did not include multi-year funding and user fees. A Branch Chief for the IDRS investment stated that IRS has used the same operational performance metrics for the investment for 10 to 15 years, and the agency has not revisited them to justify their validity over time or to modify them. The Branch Chief further noted that the operational performance metrics are usage-based and do not provide a qualitative measure of how well the investment is delivering intended services. IRS officials did not identify the causes for the deficiencies we noted with the other selected investments’ operational analyses. Until IRS addresses the shortcomings noted for the selected operational investments, the agency risks not having critical information needed to determine whether the investments fully meet intended objectives and whether there are alternative ways to efficiently meet the agency’s mission. Three selected investments we reviewed—IMF, IDRS, and MSSS—are facing significant risks due to their reliance on legacy programming languages, outdated hardware, and a shortage of human resources with critical skills. However, IRS has not implemented steps needed to effectively manage these risks—and thus, the agency’s ability to carry out its tax processing and modernization efforts may be impacted. Two of the three selected investments—IMF and IDRS—rely on legacy programming languages, resulting in increased risk to continuing operation of these investments. Specifically, IRS reported that IMF is written in assembly language code and COBOL, and IDRS is written in COBOL. As we previously reported, reliance on assembly language code and COBOL has risks, such as a rise in procurement and operating costs, and a decrease in the availability of individuals with the proper skill sets. In addition, one investment in our review—MSSS—relies on a significant amount of outdated hardware. Specifically, at the start of fiscal year 2017, the agency reported an inventory of approximately $684.2 million in hardware associated with this investment. Of this amount, approximately $430.3 million, or 63 percent, was for outdated hardware, with about 21 percent of that amount directly supporting tax processing. The $430.3 million is broken down as follows: $112.6 million in communications equipment, which includes devices such as network switches and telephone systems; $171.5 million in systems supporting IRS employees, which includes desktop and laptop computers, scanners, and printers; $88.9 million in equipment directly supporting tax processing, which includes servers and UNISYS mainframes; and $57.3 million in storage equipment, which includes automated tape libraries and disk arrays. Figure 2 illustrates the categories of hardware associated with MSSS, including outdated hardware. IRS officials stated that the outdated hardware associated with MSSS is expensive to maintain because it is often past the warranty. Specifically, after a warranty for hardware ends, the maintenance fees for this hardware commonly increase by approximately 25 percent per year. In addition, the officials stated that, relying on this hardware has the potential to expose IRS to equipment failures that could preclude its systems from supporting the annual tax filing season and expanding the systems and tools for enforcement approaches, among other things. The three selected investments—IMF, MSSS, and IDRS—are also facing risks due to the attrition of key personnel. For example, IMF program officials noted that developers are responsible for maintaining taxpayer accounts and applying business rules associated with the tax process for a given situation or tax year, and thus require skills beyond creating or updating lines of code. However, according to an internal staffing report for IMF for 2011 to 2017, the agency experienced attrition of developers skilled in legacy programming languages and tax processing, exposing the investment to increased risks of not being able to successfully process tax information. For example: According to the report, from 2011 to 2017, 24 developers responsible for performing work on the IMF investment retired or were transferred to other positions. In addition, as a result of this attrition, 32 developers were available to perform IMF system updates for the 2017 tax filing season, which was about 4 developers (5,840 work hours) less than needed to perform the work. Further, as of July 2017, IMF projected a shortage of 3 developers (4,042 work hours) needed for the 2018 tax filing season. In an internal document identifying options to address the loss of knowledge caused by the attrition of staff for IMF, IRS reported that it has taken various actions as a result of the ongoing attrition of developers. Among others, these actions include: (1) cancelation of planned system enhancements; (2) training and transfer of developers from other projects to perform work on IMF; and (3) reduction in the amount of development work being completed for CADE 2 to address a financial material weakness. According to IMF risk logs, the investment also reported potential impacts on tax processing as a result of the attrition. These impacts include (1) the agency’s delay in implementing modifications to IMF for the filing season to reflect changes in the tax law, (2) tax processing delays due to the lack of adequate institutional knowledge to resolve complex issues, and (3) a lack of necessary data from IMF, which the agency uses as input for other tax processing systems. Further, according to the agency’s CIO, it takes 4 to 5 years to train developers performing work on the IMF investment. The agency, however, is facing challenges with such training and development. For example, IMF program staff stated that the agency has historically recruited and trained future developers from within the agency, where staff had an understanding of IRS business processes and concepts. However, according to the program staff, budgetary reductions limiting travel, moving costs, or stipends, have prevented the agency from continuing such efforts. According to our analysis of an IRS report showing staffing allocations for MSSS, as of April 2017, IRS reported that there were 12 COBOL developers supporting the MSSS investment. Agency officials noted impacts as a result of attrition among its developers, such as the loss of historical knowledge and expertise required to ensure proper maintenance of systems and prevent disruptions during the tax filing season. With regard to IDRS, IRS officials reported the attrition of 30 developers from January 2012 through January 2017. In addition, these officials noted that, as of March 2017, the attrition had resulted in a shortage of 20 developers required to complete work on the investment. In addition, the agency identified 10 “single points of failure” for this investment, meaning that only one staff is available to support a function. Further, the officials noted that attrition of staff may result in (1) a delay in updating systems to reflect tax law changes and (2) IRS’s inability to complete critical IDRS project activities on time. We established an evaluation framework based on leading practices from The Software Engineering Institute and OMB guidance. The framework consists of 6 practices and 22 associated activities for managing IT investment risks. Table 4 identifies these practices and activities. IRS has not fully implemented all of the key practices for managing risks for any of the three selected legacy investments that we reviewed. Specifically, based on our analysis, the agency fully implemented one key practice and partially implemented the remaining five for IMF; fully implemented two key practices, partially implemented two, and did not implement the remaining two for IDRS; fully implemented one key practice, partially implemented three, and did not implement the remaining two for MSSS. Table 5 provides our assessment of the extent to which IRS implemented key risk management practices for the selected three legacy investments. IRS fully implemented one key risk management practice for IMF. Specifically, IRS officials responsible for managing IMF risks stated that the agency continuously identified risks through, among other things, monthly meetings. Further, these risks were documented using the Item Tracking Reporting and Control tool, IRS’s risk and issue repository. In addition, we determined that IRS partially implemented the remaining five key risk management practices for IMF. Specifically, the agency prepared for risk management by using IRS’s Application Development organization risk management strategy along with the Item Tracking Reporting and Control tool, which describe how projects are to identify, analyze, prioritize, mitigate, and monitor risks and issues. However, the risk management strategy did not address risk constraints or risk assumptions. In addition, IRS’s risk analysis for IMF included criteria for evaluating and quantifying risk likelihood and severity, but it did not address residual risk, which is the exposure remaining after action has been taken to manage a risk. Further, the agency’s prioritization of risks for IMF included consideration of risk criticality, but did not include the creation of a risk profile, which documents the highest priority risks. With respect to risk mitigation, IRS developed a Stabilization Plan in December 2016 for IMF, and used the Item Tracking Reporting and Control tool. The Stabilization Plan and tool addressed risk mitigation plans, which included specific actions to be taken, as well as an assignment of responsibility and commitment of resources. Further, the agency documented the rationale for accepted IMF risks and established a schedule or period of performance for risk handling activities. However, IRS did not meet the activities for developing alternative courses of action for all critical risks, and establishing threshold values for acceptability of risks, or threshold values for each risk category. Finally, regarding monitoring, IRS reviewed risks at least annually, but did not implement a strategy to escalate and monitor unresolved risks, even though the Application Development risk management strategy outlined a process for doing so. Further, the agency did not compare risks status to acceptability thresholds to determine the need for implementing a risk mitigation plan. Officials responsible for overseeing risk management activities for the investment also did not review its risk management process at least annually to ensure that the process remains appropriate and effective. IRS fully implemented two of the key risk management practices for IDRS. Specifically, the agency continuously identified IDRS risks via bi- weekly meetings and documented risks using the Item Tracking Reporting and Control tool. In addition, the agency prioritized risks based on a documented risk inventory and risk profile. In addition, IRS partially implemented two key practices. Specifically, similar to IMF, the agency prepared the IDRS investment for risk management by using IRS’s Application Development organization risk management strategy; however, it did not address risk constraints or risk assumptions. Further, the agency partially analyzed IDRS risks by including criteria for evaluating and quantifying risk likelihood and severity; however, it did not include residual risks and, thus, may not be aware of additional risk mitigation actions that are needed. Further, IRS did not implement the remaining two practices. With respect to risk mitigation, as of March 2017, the agency did not include risk mitigation plans, as required, for 15 of the 20 risks identified for IDRS. Further, the agency did not maintain dates for risk handling activities for the investment, as the majority of completion dates and projected impact dates for identified risks had passed and these dates were not updated. The agency also did not meet any of the key activities for monitoring identified risks for the investment. For example, it did not compare risk status to acceptability thresholds to determine the need for implementing a risk mitigation plan. Further, the agency did not provide evidence that executive leadership is monitoring all top risks for IDRS. For example, while IRS officials closed 19 of 20 identified risks noting that these risks were tracked by the Applications Development Risk Review Board, the meeting minutes that we received from this board did not show that the risks were being monitored. Lastly, IRS did not review the IDRS risk management process at least annually. IRS fully addressed one key risk management practice for MSSS. Specifically, the agency prioritized risks in the MSSS risk log by assigning “red,” “yellow,” and “green” indicators to identified risks. Further, IRS identified the most significant risks for the MSSS investment in a weekly status report which is intended to address the agency’s readiness to support the tax filing season. IRS partially implemented three practices for MSSS. The agency continuously identified the investment’s risks via several processes. For example, the agency uses its Sustaining Infrastructure Program to address infrastructure components in need of replacement. According to IRS officials and documentation on the Sustaining Infrastructure Program, the program includes (1) an identification of aging infrastructure components; and (2) risk scoring and ranking of the components based on age, the extent to which the asset is associated with critical IRS processes, and the asset’s impact on operations. IRS officials stated that this process results in a prioritized list of assets that are candidates for replacement. In addition, the agency documents MSSS risks via a risk log; however, the risk log does not include all risks for the investment. For example, while officials responsible for managing the MSSS investment told us about human resource risks, these risks were not included in the risk log. The agency also partially mitigated the investment’s risks by developing risk mitigation plans and specific actions for the items identified in its risk log; however, the actions did not include a schedule or period of performance. IRS also did not establish threshold values for MSSS risk categories, or alternative courses of action for critical risks. The agency partially monitored MSSS risks by reviewing risks regularly, providing executive monitoring of top risks, and implementing a strategy to escalate unresolved risks. However, the agency did not compare risk status to acceptability thresholds to determine the need for implementing a risk mitigation plan. In addition, an IRS official responsible for managing risk and issue data for the MSSS investment stated that IRS did not review the risk management process for MSSS annually. Instead, the officials only updated the date and version number on the document that captures this process. In addition, IRS did not implement two key practices. First, the agency did not prepare the MSSS investment for risk management. Specifically, while the agency provided the risk management plan intended to document how it prepares the investment for risk management, we found—and IRS’s Director for Demand Management and Project Governance, and approver of this plan confirmed—that the plan did not describe the risk management activities that the agency was carrying out for the investment. In addition, the agency did not meet key activities for analyzing MSSS risks. For example, the agency used criteria for evaluating and quantifying risk likelihood but it did not document criteria to analyze the severity of all of its risks or consider inherent and residual risks. IRS cited various reasons for the inconsistent implementation of risk management key practices for the three selected investments. For example, IDRS officials responsible for risk management stated that their current guidance did not clearly address some of the key practices. Further, MSSS officials responsible for risk management stated that the majority of the risk management activities for the investment are not documented. In addition, MSSS officials stated that selected risks were not documented due to their perception that a reduced budget and hiring freeze would not allow the agency to mitigate the risks. However, documenting these risks would ensure that IRS appropriately forms a baseline for initiating risk management activities. Until IRS fully implements all of the key practices for managing risks, it will be challenged to successfully identify and mitigate risks before they adversely impact the agency’s ability to carry out its mission. As we have previously reported, implementing effective IT workforce planning practices can better position agencies to address human capital risks. Accordingly, our prior work has highlighted four key IT workforce planning practices and supporting activities identified in various laws enacted and guidance issued over the past 20 years that call for agencies to perform workforce planning activities. These key practices are (1) setting the strategic direction for workforce planning, (2) analyzing the workforce to identify skill gaps, (3) developing strategies to address skill gaps, and (4) monitoring and reporting on progress in addressing skill gaps. The key IT workforce planning practices and supporting activities are identified below. While IRS has initiated IT workforce planning efforts, the agency has not yet implemented any of the four IT workforce planning practices. Specifically, we found that the Human Capital Office and IT organization have collaboratively developed a tool to automate the IT workforce planning process but the tool is in the initial stages of implementation and IRS has not yet performed any of the activities associated with setting the strategic direction for workforce planning. In addition, the agency has developed an inventory of its current IT workforce but it has not yet developed the competency and staffing requirements nor conducted any of the activities associated with analyzing the workforce to identify skill gaps, developing strategies to address skill gaps, or monitoring and reporting on progress in addressing skill gaps for the agency. While IRS has not implemented key practices for IT workforce planning at the agency level, staff for IMF and CADE 2—two of the four investments selected for our review—provided evidence of efforts they had taken to address their workforce needs. For example, For IMF, in 2016, IRS established a process for continuously matching the current workforce capacity, in terms of skills and staffing, with a projected level of work. In addition, IMF staff identified competencies and staffing requirements for the investment, and assessed the gaps in competencies and staffing by assessing net available staff hours with needed staff hours for particular skill types. Lastly, IMF staff developed strategies and implemented activities in an effort to address IT skill gaps by creating a Stabilization Plan, which includes short and long-term activities for training and realignment of resources. For CADE 2, IRS conducted an assessment in 2015 to identify government and contractor resource needs and utilization. IRS also identified skill gaps and developed strategies and implemented activities such as knowledge transfer sessions to begin addressing these skill gaps. The CADE 2 program manager stated that the program is waiting for additional guidance and direction from the human capital office, as the work in this area was a rudimentary one- time effort. Staff for the remaining two investments we reviewed—IDRS and RRP— stated that they were awaiting further implementation of the agency-wide workforce planning tool to address their IT workforce planning needs. IRS officials attributed the limited progress in implementing IT workforce planning practices to resource constraints and competing priorities. Nevertheless, until the agency implements these practices, it will continue to face challenges in assessing and addressing the gaps in knowledge and skills that are critical to the success of its key investments, some of which we identified earlier in the report. IRS has performed operational analyses to examine the ongoing performance of some IT investments, but it has not fully addressed key factors specified in OMB guidance. Until IRS fully addresses all key factors for performing operational analyses, the agency risks not having the information it needs to determine whether the investments fully meet intended objectives, or if there are alternative or more efficient ways to do so. In addition, IRS faces significant risks that could impact key tax processing investments. Specifically, IMF, IDRS, and MSSS are reliant on legacy programming languages and outdated hardware, and the agency is experiencing shortages of staff with the skills to support these investments. However, the agency has not implemented key risk management practices, placing the tax processing and modernization efforts at risk. By fully implementing key risk management practices, IRS will have better assurance that it is proactively addressing risks before they can impact the agency’s ability to carry out its mission. Further, although human capital risks have in part led to significant cost, schedule, and scope variances for CADE 2, a key modernization system, IRS has not implemented key IT workforce planning practices. Specifically, while the agency has initiated efforts to address workforce planning agency- wide, which it plans to continue, the efforts have not yet been implemented for all of the agency’s IT investments. Until IRS implements effective key workforce planning practices, it will not be best positioned to address the human capital risks it faces and ensure the timely and effective delivery of its investments. We are making the following 21 recommendations to IRS: The Commissioner of the IRS should ensure the operational analysis for IMF fully addresses greater utilization of technology or consolidation of investments to better meet organizational goals. (Recommendation 1) The Commissioner of the IRS should ensure the operational analysis for IDRS addresses the extent to which the investments support customer processes as designed, and how well the investments are delivering the goods or services they were designed to deliver. (Recommendation 2) The Commissioner of the IRS should ensure the operational analysis for TSS addresses the extent to which the investments support customer processes as designed, and how well the investments are delivering the goods or services they were designed to deliver. (Recommendation 3) The Commissioner of the IRS should ensure the operational analysis for TSS includes a comparison of current performance with a pre-established cost baseline. (Recommendation 4) The Commissioner of the IRS should ensure the operational analysis for EUSS includes a comparison of current performance with a pre- established cost baseline. (Recommendation 5) The Commissioner of the IRS should ensure the operational analysis for MSSS addresses alternative methods of achieving the same mission needs and strategic goals. (Recommendation 6) The Commissioner of the IRS should fully implement the risk management key practice associated with preparing for risk management for the IMF investment. (Recommendation 7) The Commissioner of the IRS should fully implement the risk management key practice associated with analyzing risk for the IMF investment. (Recommendation 8) The Commissioner of the IRS should fully implement the risk management key practice for prioritizing risk for the IMF investment. (Recommendation 9) The Commissioner of the IRS should fully implement the risk management key practice associated with mitigating risk for the IMF investment. (Recommendation 10) The Commissioner of the IRS should fully implement the risk management key practice associated with monitoring, reporting, and controlling risk for the IMF investment. (Recommendation 11) The Commissioner of the IRS should fully implement the risk management key practice associated with preparing for risk management for the IDRS investment. (Recommendation 12) The Commissioner of the IRS should fully implement the risk management key practice associated with analyzing risk for the IDRS investment. (Recommendation 13) The Commissioner of the IRS should fully implement the risk management key practice associated with mitigating risk for the IDRS investment. (Recommendation 14) The Commissioner of the IRS should fully implement the risk management key practice associated with monitoring, reporting, and controlling risk for the IDRS investment. (Recommendation 15) The Commissioner of the IRS should fully implement the risk management key practice associated with preparing for risk management for the MSSS investment. (Recommendation 16) The Commissioner of the IRS should fully implement the risk management key practice associated with identifying risk for the MSSS investment. (Recommendation 17) The Commissioner of the IRS should fully implement the risk management key practice associated with analyzing risk for the MSSS investment. (Recommendation 18) The Commissioner of the IRS should fully implement the risk management key practice associated with mitigating risk for the MSSS investment. (Recommendation 19) The Commissioner of the IRS should fully implement the risk management key practice associated with monitoring, reporting, and controlling risk for the MSSS investment. (Recommendation 20) The Commissioner of the IRS should fully implement IT workforce planning practices, including the following actions (1) setting the strategic direction for workforce planning; (2) analyzing the workforce to identify skill gaps; (3) developing strategies and implementing activities to address skill gaps; and (4) monitoring and reporting on progress in addressing skill gaps. (Recommendation 21) We received written comments on a draft of this report from IRS. In its comments, which are reproduced in appendix II, IRS did not state whether it agreed or disagreed with our recommendations. However, the agency acknowledged the importance of strengthening its risk management process by implementing the key leading practices we identified, and described actions underway which confirm the significance of the risks described in our report. The agency also reported actions it has taken since the end of our review to address the IT workforce planning recommendation and stated that it would provide a detailed corrective action plan addressing each of our recommendations. Further, IRS provided technical comments, which we incorporated, as appropriate. We are sending copies of this report to interested congressional committees, the Commissioner of IRS, and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov. If you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Our objectives were to (1) evaluate the performance of selected Internal Revenue Service (IRS) information technology (IT) investments, (2) summarize any risks associated with selected legacy systems and evaluate the steps IRS has taken to manage them, and (3) determine the extent to which IRS has implemented key IT workforce planning practices. To select investments for our review, we first considered investments identified by IRS as essential to tax processing. We then considered the following factors: (1) investments impacting the greatest number of IRS business areas and associated services based on our review of IRS’s 2016 Technology Roadmap; (2) investments with the highest levels of funding for fiscal year 2016, as reported on the Federal IT Dashboard; (3) investments that IRS’s Chief Information Officer rated as having significant risk with respect to human capital or infrastructure; and (4) investments with planned future system migration efforts as outlined in IRS’s Enterprise Transition Plan. In addition, we considered a mix of investments in development and operations and maintenance. We selected the following nine investments (presented in order of those considered mission critical, followed by those most prominently meeting the above selection factors): (1) Individual Master File (IMF), (2) Integrated Data Retrieval System (IDRS), (3) Telecommunications Systems and Support (TSS), (4) Mainframes and Servers Services and Support (MSSS), (5) End User Systems and Services (EUSS), (6) Enterprise Case Management (ECM), (7) Customer Account Data Engine 2 (CADE 2), (8) Return Review Program (RRP), and (9) Affordable Care Act Administration (ACA). To address our first objective, we analyzed IRS’s reporting on the performance of the nine investments in our selection. The investments included four that were primarily in development—CADE 2, RRP, ECM, and ACA—and five that were primarily in the operations and maintenance phase—IMF, IDRS, TSS, MSSS, and EUSS. For the three investments which were using IRS’s Investment Performance Tool—CADE 2, RRP, and ECM—we compiled and analyzed quarterly reports showing planned versus actual cost, schedule, and scope for work IRS was performing on these investments during fiscal year 2016 through the first 2 quarters of 2017. For the fourth investment—ACA—we compared reported planned and actual costs, as well as planned and actual completion dates for development activities for fiscal year 2016 and the first 2 quarters of 2017. IRS did not report information on ACA’s performance in meeting scope goals. In addition, for the five operational investments, we compiled and analyzed operational performance information reported for the selected investments for fiscal year 2016 and the first 2 quarters of 2017; this information included, where reported, the performance target and actual results for each metric. Further, we determined the extent to which an operational analysis was performed for each of the investments in accordance with best practices. To do so, we obtained operational analyses for fiscal year 2016 and analyzed the analyses against relevant practices outlined in the Office of Management and Budget’s (OMB) fiscal year 2016 capital programming guidance. To assess the reliability of the data for the investments in development used for this objective, we interviewed officials responsible for overseeing the use of the Investment Performance Tool to confirm the completeness of the data generated from the tool, as well as our understanding of what these data represent. We also followed up with these officials to discuss detected anomalies we found in the performance data. In addition, we relied on data reliability assessments we previously completed on IRS’s financial management system because it is a source of the actual cost data found in the Investment Performance Tool. Finally, we followed up on IRS’s actions to address recommendations we previously made to improve the reliability of the cost, schedule, and scope performance data. While we found additional actions are needed to address our recommendations, we determined the investments’ data are sufficiently reliable for our purposes. With respect to the reported operational performance data, we reviewed documentation describing the performance metrics and interviewed IRS officials regarding the process for reporting such metrics. We determined these data were sufficiently reliable for purposes of reporting on operational performance. For our second objective, we selected three investments from our initial selection of nine—IMF, IDRS, and MSSS—because they were placed into operation in the late 1960s and early 1970s, and are therefore considered legacy investments. To summarize the risks associated with these investments, we reviewed, among other things, risk logs captured in IRS’s Item Tracking Reporting and Control tool and risk detail reports. In addition, we obtained resource assessment documentation, where available, and documentation from IRS identifying staff availability and the legacy programming languages supporting these investments. We also identified aged hardware components supporting the selected investments by obtaining reports from the Knowledge, Incident/Problem, Service Asset Management system. This system is used for tracking and managing IRS assets, to include recording and tracking asset acquisitions, transfers, and disposals. We supplemented our review of documentation with interviews of IRS officials responsible for software and infrastructure maintenance. To evaluate the steps IRS has taken to mitigate risks, we analyzed documentation such as risk management plans; risk logs captured in IRS’s Item Tracking Reporting and Control tool and through other means; risk detail reports that included the probability, impact, and overall status for identified risks; risk mitigation plans; and meeting minutes from IRS’s Applications Development Risk Review Board. We also interviewed IRS officials involved in the risk management process, including software developers responsible for maintaining aging programming languages, system administrators, and risk coordinators. We selected officials based on (1) the median number of years the officials had worked to support the investment; (2) their position as an investment Branch Chief or Section Chief in order to fairly represent the management’s perspective on matters discussed; (3) consideration of employees who serve in more than one role in the risk management process in order to obtain diverse perspectives on the process; and (4) their fair representation of all programming language types and infrastructure supporting the investments. We evaluated IRS’s risk management efforts by comparing information obtained to key practices from the Software Engineering Institute’s Capability Maturity Model® Integration for Development, as well as OMB guidance. To assess the reliability of the data used for our second objective, we interviewed officials responsible for overseeing the use of IRS’s Item Tracking Reporting and Control tool and users of this tool to determine if the tool was being consistently implemented. In addition, as part of our interviews with software developers responsible for maintaining aging programming languages, we determined the extent to which risks shared by these officials were consistent with formally documented risks. Lastly, we corroborated IRS’s identification of legacy programming languages, and infrastructure components with our staff possessing expert knowledge of IRS’s IT environment. We determined these data were sufficiently reliable for purposes of describing risks faced by selected investments, as well as for evaluating IRS’s risk management efforts. For our third objective, we obtained documentation describing a tool that IRS is planning to implement agency-wide to address IT workforce planning. Further, we obtained a demonstration of the functionality provided by this tool, and interviewed officials in IRS’s human capital office, as well as investment staff, to determine the extent to which this tool has been implemented across the agency. We also obtained and reviewed information relative to cross-functional acquisition training, efforts intended to strengthen IT program management, and results of IT skills assessments. We compared IRS’s efforts to key practices for IT workforce planning derived from sources, including the Clinger-Cohen Act of 1996, Office of Personnel Management workforce planning guidance, and OMB Circular A-130, and identified in our report on IT workforce planning efforts. In addition, we selected four investments from our initial selection of nine—IMF, IDRS, CADE 2, and RRP—to identify efforts they had taken to address their workforce needs. We selected the four investments based on one or more of the following factors: (1) mission critical designation by IRS, (2) exposure to human capital risk, or (3) status as a key development effort at IRS. Officials responsible for managing two of the investments—IMF and CADE 2—provided information on their efforts. For IMF, we reviewed workforce capacity planning documentation as well as short and long- term workforce plans to assess IMF implementation of workforce planning efforts such as skills gap analysis, development of strategies and implementation of activities to address IT skills gaps, and monitoring and reporting progress in addressing IT skills gaps. For CADE 2, we reviewed documentation from its resource assessment conducted in 2015, which included information relative to resource needs and skills gaps. In addition, we reviewed documentation of efforts to address skills gaps, including training and knowledge transfer programs. We conducted this performance audit from November 2016 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, the following staff made key contributions to this report: Sabine Paul (Assistant Director), Bradley Roach (Analyst in Charge), Andrew Banister, Mark Canter, Vern Cumarasegaran, Rebecca Eyler, Paul Middleton, and Martin Skorczynski.", "summary": "IRS relies extensively on IT investments to annually collect more than $3 trillion in taxes, distribute more than $400 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. For fiscal years 2016 and 2017, the agency reported spending approximately $2.7 billion and $2.6 billion, respectively, for IT investments. GAO was asked to review IRS's IT operations. GAO's specific objectives were to (1) evaluate the performance of selected IRS IT investments, (2) summarize any risks associated with selected legacy systems and evaluate the steps the agency has taken to manage such risks, and (3) determine the extent to which IRS has implemented key IT workforce planning practices. GAO analyzed planned versus actual performance information for nine selected investments for fiscal year 2016 and the first 2 quarters of fiscal year 2017—four in development and five in the operations and maintenance phase; identified risks facing three legacy investments and analyzed IRS's efforts to manage these risks against key practices; and analyzed IRS's IT workforce planning efforts against best practices. The performance of the Internal Revenue Service's (IRS) selected information technology (IT) investments that GAO reviewed varied. Specifically, the four selected investments in the development phase that GAO reviewed spent less than planned, but most were behind schedule and delivered less scope than planned (see table below). In addition, the five selected investments in the operations and maintenance phase that GAO reviewed had performed internal qualitative assessments of performance as required by the Office of Management and Budget (OMB); however, none of the analyses addressed all key factors specified in OMB guidance. Three investments GAO reviewed in the operations and maintenance phase that are legacy investments—Individual Master File (IMF), Integrated Data Retrieval System (IDRS), and Mainframes and Servers Services and Support (MSSS)— are facing significant risks due to their reliance on legacy programming languages, outdated hardware, and a shortage of human resources with critical skills. For example, IRS reported that it used assembly language code and Common Business Oriented Language (both developed in the 1950s) for IMF and IDRS, which exposes these investments to a rise in procurement and operating costs, and a decrease in staff available with the proper skill sets. Further, MSSS relies on a significant amount of outdated hardware exposing the investment to rising warranty and maintenance fees, as well as equipment failures. Despite these risks, the agency has not fully implemented key risk management practices and may be challenged in mitigating risks effectively so that they do not impact the agency's ability to carry out its mission. IRS has not yet fully implemented any of the key IT workforce planning practices GAO has previously identified. Specifically, the agency has developed a tool to automate the IT workforce planning process, but the tool is in the initial stages of implementation. IRS officials attributed the limited progress in implementing IT workforce planning practices to resource constraints and competing priorities. Nevertheless, until the agency fully implements these practices, it will continue to face challenges in assessing and addressing the gaps in knowledge and skills that are critical to the success of its key IT investments. GAO recommends that IRS perform operational analyses consistent with guidance, implement key risk management practices, and fully implement key IT workforce planning practices. IRS did not agree or disagree with the recommendations, but said it would provide a plan for addressing each recommendation.", "document_type": "gao"}
{"report": "Under the Homeland Security Act of 2002, responsibility for the apprehension, temporary detention, transfer, and repatriation of unaccompanied children is delegated to DHS; and responsibility for coordinating and implementing the care and placement of unaccompanied children is delegated HHS’s Office of Refugee Resettlement (ORR). U.S. Customs and Border Protection’s U.S. Border Patrol and Office of Field Operations (OFO), as well as U.S. Immigration and Customs Enforcement (ICE), apprehend, process, temporarily detain, and care for unaccompanied children who enter the United States with no lawful immigration status. ICE’s Office of Enforcement and Removal Operations is generally responsible for transferring unaccompanied children, as appropriate, to ORR, or repatriating them to their countries of nationality or last habitual residence. Under the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (Trafficking Victims Protection Reauthorization Act), unaccompanied children in the custody of any federal department or agency, including DHS, must be transferred to ORR within 72 hours after determining that they are unaccompanied children, except in exceptional circumstances. ORR has cooperative agreements with residential care providers to house and care for unaccompanied children while they are in ORR custody. The aim is to provide housing and care in the least restrictive environment commensurate with the children’s safety and emotional and physical needs. In addition, these residential care providers, referred to here as grantees, are also responsible for identifying and assessing the suitability of potential sponsors—generally a parent or other relative in the country—who can care for the child after they leave ORR custody. To do this, grantees collect information from potential sponsors and run various background checks. In cases in which there are questions about the ability of the sponsor to meet the child’s needs and provide a safe environment, and for children included in specified categories under the Trafficking Victims Protection Reauthorization Act, a home study is also conducted. In certain circumstances ORR may also arrange for post- release services for the child. Release to a sponsor does not grant unaccompanied children legal immigration status. Children are scheduled for removal proceedings in immigration courts to determine whether they will be ordered removed from the United States or granted immigration relief. There are several types of immigration relief that may be available to these children, for example, asylum or Special Immigrant Juvenile status. In response to a recommendation in our 2015 report, DHS and HHS have agreed to establish a joint collaborative process for the referral and transfer of unaccompanied children from DHS to ORR shelters, but the process has not yet been implemented. It will be important to ensure that, once implemented, this process has clearly defined roles and responsibilities for each agency, as we recommended. In 2015, we reported that the interagency process to refer unaccompanied children from DHS to ORR shelters was inefficient and vulnerable to error. For example, as of April 2015, DHS and ORR relied on e-mail communication and manual data entry to coordinate the transfer of unaccompanied children to shelters because each agency used its own data system and these systems did not automatically communicate information with one another. These modes of communication made the referral and placement process vulnerable to error and possible delay in the transfer of these children from DHS to ORR. Each DHS component also submitted shelter requests to ORR in a different way. We reported that the roles and responsibilities of DHS components were not consistent during the referral and placement process, and DHS points of contact for ORR varied across Border Patrol sectors and ICE and OFO areas of operation. Further, we noted that the inefficiencies in the placement process for unaccompanied children had been a long-standing challenge for DHS and ORR. Therefore, we recommended that DHS and HHS jointly develop and implement a documented interagency process with clearly defined roles and responsibilities, as well as procedures to disseminate placement decisions, for all agencies involved in referring and placing unaccompanied children in ORR shelters. The agencies agreed with this recommendation and in response, DHS and HHS finalized a memorandum of agreement (MOA) in February 2016. The MOA provides a framework for coordinating each agency’s responsibilities and establishing procedures, shared goals, and interagency cooperation with respect to unaccompanied children. The MOA states that DHS and HHS agree to establish a joint concept of operations. According to the MOA, this joint concept is to include, among other things, standard protocols for consistent interagency cooperation on the care, processing, and transport of these children during both steady state operations, as well as in the event the number of unaccompanied children exceeds standard capabilities and existing resources. In February 2018, HHS officials told us that the agency is reviewing a draft of the DHS-HHS joint concept of operations. To fully address our recommendation, DHS and HHS will need to ensure that this joint concept, once finalized and implemented, includes a documented interagency process with clearly defined roles and responsibilities, as well as procedures to disseminate placement decisions, as we recommended. In response to a recommendation in our 2016 report, ORR reported taking steps to improve monitoring of its grantees, including reviewing its monitoring protocols and ensuring all grantees were monitored over a 2- year period. These steps should increase the timeliness, completeness, and consistency of ORR’s monitoring; however, ORR needs to ensure that its updated processes and protocols are fully implemented and in use. In 2016, we reported that ORR relies on grantees to provide care for unaccompanied children, such as housing and educational, medical, and therapeutic services, and to document in children’s case files the services they provide. Grantees are required to provide these services and to document that they did so. However, in our 2016 report, we found that documents—such as legal presentation acknowledgment forms, records of group counseling sessions, or clinical progress notes—were often missing from the 27 randomly selected case files we reviewed. In addition, we identified several cases in which forms that were present in the files were not signed or dated. We found that although ORR used its web-based data system to track some information about the services children received, and grantees reported on the services they provided in their annual reports, the documents contained in case files were the primary source of information about the services provided to individual children. We concluded that without including all of the documents in case files, it was difficult for ORR to verify that required services were actually provided in accordance with ORR policy and cooperative agreements. In our 2016 report, we noted that ORR’s most comprehensive monitoring of grantees occurred during on-site visits, but that onsite visits to facilities were inconsistent. Prior to fiscal year 2014, project officers were supposed to conduct on-site monitoring of facilities at least once a year. However, we found in our review of agency data that many facilities had not received a monitoring visit for several years. For example, ORR had not visited 15 facilities for as many as 7 years. In 2014, ORR revised its on-site monitoring program to ensure better coverage of grantees and implemented a biennial on-site monitoring schedule. Nevertheless, ORR did not meet its goal to visit all of its facilities by the end of fiscal year 2015, citing lack of resources. In our 2016 report, we concluded that without consistently monitoring its grantees, ORR cannot know whether they were complying with their agreements and that children were receiving needed services. We recommended that the Secretary of HHS direct ORR to review its monitoring program to ensure that onsite visits are conducted in a timely manner, case files are systematically reviewed as part of or separate from onsite visits, and that grantees properly document the services they provide to children. HHS concurred with this recommendation and stated that it had created a new monitoring initiative workgroup to examine opportunities for further improvement. Since our 2016 report, ORR has reported achieving more timely and complete monitoring. In May 2017, ORR issued a summary of its fiscal year 2016 monitoring showing that monitoring of all of its 88 grantees was completed over the 2-year period of fiscal years 2015 and 2016. As a result of this monitoring, the agency reported issuing 786 corrective actions, almost all of which were closed within 90 days. The most common corrective actions were related to incomplete case file documentation and inconsistent implementation of some of ORR policies and procedures, according to ORR. Subsequently, for the 2-year period of fiscal years 2017 and 2018, ORR reported that as of April 2018, it had completed monitoring of 65 grantees and planned to complete monitoring of all of its remaining 39 grantees by the end of the fiscal year. In addition, ORR has reported that it is taking steps to ensure its monitoring processes and protocols are more systematic and uniform. During 2016, ORR announced a new Monitoring Initiative with the goal of establishing a comprehensive system of monitoring for all ORR-funded programs; HHS reported that it had conducted three trainings for ORR Project Officers and was in the process of adding two to three additional Project Officer positions to the unaccompanied children program. In April 2018, HHS reported that ORR was in the process of reviewing and revising its monitoring tools, and planned to have final versions of these tools completed by the end of fiscal year 2018. Once ORR completes its review of its monitoring tools and fully implements its revised protocols, these steps, along with its more timely monitoring, should help ensure an improved monitoring program. In 2016, we reported that ORR grantees that provide day-to-day care of unaccompanied children are responsible for identifying and screening sponsors prior to releasing children to them. During children’s initial intake process, case managers ask them about potential sponsors with whom they hope to reunite. Within 24 hours of identifying potential sponsors, case managers are required to send them a Family Reunification Application to complete. The application includes questions about the sponsor and other people living in the sponsor’s home, including whether anyone in the household has a contagious disease or criminal history. Additionally, the application asks for information about who will care for the child if the sponsor is required to leave the United States or becomes unable to provide care. Grantees also ask potential sponsors to provide documents to establish their identity and relationship to the child, and they conduct background checks. The types of background checks conducted depend on the sponsor’s relationship to the child (see table 1). In certain circumstances prescribed by the Trafficking Victims Protection Reauthorization Act or ORR policy, a home study must also be conducted before the child is released to the sponsor. Additionally, other household members are also subjected to background checks in certain situations, such as when a documented risk to the safety of the unaccompanied child is identified, the child is especially vulnerable, and/or the case is being referred for a mandatory home study. In our 2016 report, we found that between January 7, 2014, and April 17, 2015, nearly 52,000 children from El Salvador, Guatemala, or Honduras were released to sponsors by ORR. Of these children, nearly 60 percent were released to a parent. Fewer than 9 percent of these children were released to a non-familial sponsor, such as a family friend, and less than 1 percent of these children were released to a sponsor with whom their family had no previous connection (see table 2). Historically, most of these unaccompanied children have been adolescents 14 to 17 years of age, but about a quarter of the children from these three countries in 2014 and early 2015 were younger. In response to a recommendation in our 2016 report, ORR reported taking various steps to collect additional information on the services provided to unaccompanied children after they are released from ORR custody. We welcome this progress, but continue to believe that further steps are needed to fully address our recommendation. In 2016, we reported that limited information was available about post- release services provided to children and their sponsors. Post-release services include such things as guidance to the sponsor to ensure the safest environment possible for the child; assistance accessing legal, medical, mental health, and educational services for the child; and information on initiating steps to establish guardianship, if necessary. The Trafficking Victims Protection Reauthorization Act requires ORR to provide post-release services to children if a home study was conducted, and authorizes ORR to provide these services to some additional children. Our 2016 report noted that ORR was in a position to compile the data it collects on post-release services, and to share the data internally and externally with other federal and state agencies to help them better understand the circumstances these children face when they are released to their sponsors. ORR was already collecting some information from its post-release grantees on services provided to children after they left ORR custody, and its newly instituted well-being calls and National Call Center would allow it to collect additional information about these children. However, at the time, ORR did not have processes in place to ensure that all of these data were reliable, systematically collected, and compiled in summary form to provide useful information about this population for its use and for other government agencies, such as state child welfare services. As a result, in our 2016 report, we recommended that the Secretary of HHS direct ORR to develop a process to ensure all information collected through its existing post-release efforts are reliable and systematically collected, so that the information could be compiled in summary form to provide useful information to other entities internally and externally. HHS concurred and stated that ORR would implement an approved data collection process that would provide more systematic and standardized information on post-release services and that it would make this information available to other entities internally and externally. At the time of our 2016 study, a relatively small percentage of unaccompanied children who had left ORR custody were receiving post- release services. Officials said ORR’s responsibility typically ended after it transferred custody of children to their sponsors. We found that slightly less than 10 percent of unaccompanied children received post-release services in fiscal year 2014, including those for whom a home study was conducted. However, the percentage of unaccompanied youth receiving post-release services has increased in recent years. According to publicly available ORR data, approximately 31 percent of unaccompanied youth received such services in fiscal year 2015, 20 percent in fiscal year 2016, and 32 percent in fiscal year 2017. In addition, during 2015, ORR had taken steps to expand eligibility criteria for post-release services. According to ORR officials, these changes included making all children released to a non-relative or distant relative eligible for such services. ORR also began operating a National Call Center help-line in May 2015. Children who contacted ORR’s National Call Center within 180 days of release and who reported experiencing (or being at risk of experiencing) a placement disruption, also became eligible for post-release services, according to ORR officials. Additionally, our 2016 report noted that in August 2015, ORR had instituted a new policy requiring grantee facility staff to place follow-up calls, referred to as Safety and Well Being follow-up calls, to all children and their sponsors 30 days after the children are placed to determine whether they were still living with their sponsors, enrolled in or attending school, and aware of upcoming removal proceedings, and to ensure that they were safe. ORR’s policy required grantees to attempt to contact the sponsor and child at least three times. In August 2017, ORR told us that the agency had created new guidance on case reporting, records management, retention, and information- sharing requirements for post-release service provider, and that it had collected data on Safety and Well Being follow-up calls that had been made to children and their sponsors. For example, ORR told us that during the first quarter of fiscal year 2016, its grantees reached 87 percent of unaccompanied children and 90 percent of sponsors by phone within 30 to 37 days after the child’s release from ORR care. In the second quarter of fiscal year 2016, these figures were 80 percent and 88 percent, respectively. ORR also said that the agency had developed a plan for collecting and analyzing National Call Center data. However, as of April 2018, ORR officials noted that case management functionality had not yet been built into ORR’s web-based portal. Further, ORR officials told us that the agency planned to create uniform data collection reporting forms for grantees providing post-release services, but as of April 2018, it had not developed these forms. ORR’s steps represent progress towards systematically collecting information that can be used internally and shared, as appropriate, with external agencies; however, to ensure our recommendation is fully addressed, ORR will need to complete its data collection and reporting efforts. With respect to unaccompanied children’s immigration proceedings, we reported in 2016 that several different outcomes are possible, and that the outcomes for many children had not yet been determined. An unaccompanied child who is in removal proceedings can apply for various types of lawful immigration status with DHS’s U.S. Citizenship and Immigration Services (USCIS), including asylum and Special Immigration Juvenile status. Alternatively, an unaccompanied child who has not sought, or has not been granted, certain immigration benefits within the jurisdiction of USCIS, may still have various forms of relief available to him or her during immigration proceedings. For example, an immigration judge may order the child removed from the United States, close the case administratively, terminate the case, allow the child to voluntary depart the United States, or grant the child relief or protection from removal. Moreover, a judge’s initial decision does not necessarily indicate the end of the removal proceedings. For example, cases that are administratively closed can be reopened, new charges may be filed in cases that are terminated, and children may appeal a removal order. In addition, in cases involving a child who receives a removal order in absentia, and a motion to reopen the child’s case has been properly filed, the child is granted a stay of removal pending a decision on the motion by the immigration judge. In our 2016 report, we found that according to ICE data on final removal orders from fiscal year 2010 through August 15, 2015, ICE removed 10,766 unaccompanied children, and about 63 percent of these children (6,751) were from El Salvador, Guatemala, or Honduras. Chairman Portman, Ranking Member Carper, and Members of the Subcommittee, this concludes my prepared remarks. I would be happy to answer any questions that you may have. For further information regarding this testimony, please contact Kathryn A. Larin at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Margie K. Shields (Assistant Director), David Barish (Analyst-in-Charge), James Bennett, Kathryn Bernet, Ramona Burton, Rebecca Gambler, Theresa Lo, Jean McSween, James Rebbe, Almeta Spencer, Kate van Gelder, and James Whitcomb. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "ORR is responsible for coordinating and implementing the care and placement of unaccompanied children—that is, children who enter the United States with no lawful immigration status. The number of these children taken into custody by DHS and placed in ORR's care rose from about 6,600 in fiscal year 2011 to nearly 57,500 in fiscal year 2014, many coming from Central America. Though declining somewhat, the number has remained well above historical levels. In fiscal year 2017, DHS referred 40,810 such children to ORR. This testimony discusses efforts by DHS and HHS to improve the placement and care of unaccompanied children in four key areas: (1) the process by which unaccompanied children are transferred from DHS to ORR custody; (2) how ORR monitors the care of unaccompanied children in its custody; (3) how ORR identifies and screens sponsors before children are transferred to their care; and (4) what is known about services these children receive after they leave ORR custody. This testimony is based primarily on the findings from two prior GAO reports: a 2015 report on actions needed to ensure unaccompanied children receive required care in DHS custody; and a 2016 report on further actions HHS could take to monitor their care. This testimony also includes updated information on the progress agencies have made in implementing GAO's recommendations, and more recent statistics from publicly available sources. The Department of Homeland Security (DHS) and Department of Health and Human Services (HHS) have agreed to establish a joint collaborative process for the referral and placement of unaccompanied children, but the process has not yet been implemented. In 2015, GAO reported that the interagency process for referring unaccompanied children from DHS to HHS's Office of Refugee Resettlement (ORR) shelters was inefficient and vulnerable to error, and that each agency's role and responsibilities were unclear. GAO recommended that DHS and HHS jointly develop and implement an interagency process with clearly defined roles and responsibilities, as well as procedures to disseminate placement decisions, for all agencies involved. In February 2018, HHS officials told GAO that the agency was reviewing a draft of the DHS-HHS joint concept of operations. ORR has reported taking steps to improve monitoring of grantees that provided services to unaccompanied children. In 2016, GAO reported that ORR relied on grantees to document and annually report on the care they provide for unaccompanied children, such as housing and educational, medical, and therapeutic services, but documents were often missing and ORR was not able to complete all of its planned visits. GAO recommended that ORR review its monitoring program to ensure that onsite visits are conducted in a timely manner, that case files are systematically reviewed, and that grantees properly document the services they provide. Since 2016, ORR has reported that its grantee monitoring has improved, with more timely completion of on-site monitoring of all its grantees. ORR relies on grantees to identify and screen sponsors before placing children with them. In 2016, GAO reported that most unaccompanied children from certain Central American countries were released to a parent or other relative, in accordance with ORR policy (see figure). Sponsors' Relationship to Unaccompanied Children from El Salvador, Guatemala, and Honduras (Released from Custody from January 7, 2014, through April 17, 2015) In 2016, GAO reported that limited information was available on the services provided to children after they leave ORR care, and recommended that HHS develop processes to ensure its post-release activities provide reliable and useful summary data. Subsequent data from ORR indicate that the percentage of children receiving these services has increased, from about 10 percent in fiscal year 2014, to about 32 percent in fiscal year 2017. Also, in August 2017, ORR officials said that new case reporting requirements had been added to ORR's policy guide; however, further steps are needed to ensure the systematic collection of these data to provide useful information on post-release services across agencies, as GAO recommended.", "document_type": "gao"}
{"report": "Long Island Sound is an estuary, a body of water where fresh water from rivers draining from the land mixes with salt water from the ocean, in this case the Atlantic Ocean. The Sound is 113 miles long and 21 miles across at its widest point, with an average depth of 63 feet and a deepest point of 320 feet. The Sound’s coastline is 583 miles and includes more than 60 bays, with beaches and harbors where people interact most frequently with the Sound. As shown in figure 1, the Sound is bordered by Connecticut to the north and New York to the south and west, and its watershed includes parts of Massachusetts, New Hampshire, Rhode Island, and Vermont. Nearly all of Connecticut’s waters drain into the Sound, as do waters from the northern portion of Long Island and the New York City metropolitan area. New York City is the most populous city in the United States. In 1985, congressional committees directed EPA to work with states to research, monitor, and assess estuaries including the Sound. Around the same time, Connecticut, New York, and EPA raised concerns about pollution in the Sound due to the presence of a large population living near it, as well as 44 wastewater treatment plants and other industries that discharged into the Sound. In addition, they also raised concerns about pollution coming from sources that were not easily identified, such as runoff from land surrounding the Sound. To restore the health of the Sound, EPA partnered with the two states in 1985 to form the Long Island Sound Study, a partnership consisting of federal and state agencies, nonprofit and public organizations, and individuals dedicated to restoring and protecting the Sound. The Study has several committees and work groups that help to develop and implement the comprehensive conservation and management plan for the Sound. These groups include the Science and Technical Advisory Committee and the Citizens Advisory Committee, as well as the Water Quality Monitoring Work Group and the Habitat Restoration and Stewardship Work Group, which are responsible for facilitating improved collection, coordination, management, and interpretation of water quality, and promoting restoration of the Sound through an improved understanding of current threats. In 1987, the National Estuary Program was established under amendments to the Clean Water Act; the act further required EPA to give priority consideration to Long Island Sound, among others. According to EPA, the National Estuary Program is a community-based program designed to restore and maintain the ecological integrity of estuaries of national significance. One year after the program was established, EPA designated the Sound as such an estuary. Under the program, each estuary of national significance has a management conference that is required to develop a comprehensive conservation and management plan to restore and maintain the chemical, physical, and biological integrity of the estuary, including water quality, among other things. In 1990, the Long Island Sound Improvement Act required EPA to establish the Office of the Management Conference of the Long Island Sound Study, to be directed by an EPA official and to assist the Long Island Sound Study in carrying out its goals. The act required the Long Island Sound Study Office, as directed by EPA, to provide administrative and technical support to the management conference, or the Study. The act also required the Long Island Sound Study Office to report biennially on progress made in implementing the comprehensive conservation and management plan starting no more than 2 years after issuing the final plan. The Study, assisted by the Office, developed two reports—the Protection and Progress report and Sound Health report—to show progress toward the 1994 plan and issued the reports about every 2 years from 2001 through 2013. According to the Study, the purpose of the Protection and Progress report was to highlight regional efforts to restore and protect Long Island Sound, and the purpose of the Sound Health report was to provide a snapshot of the environmental health of Long Island Sound. In addition, the Study collects, tracks, and publishes information about environmental indicators on its website periodically, and has produced reports that summarized work done to carry out the 1994 plan. In its 1994 plan, the Study identified six priority problems and created associated goals (see table 1). In the 1994 plan, the Study identified hypoxia as the major water quality problem in the Sound, defining hypoxia as dissolved oxygen concentrations of less than 3 milligrams of oxygen per liter of water and noting that levels less than that are inadequate to support healthy populations of estuarine organisms. The Study noted that hypoxia caused significant, adverse ecological effects in the bottom water habitats of the Sound, such as reducing the abundance and diversity of adult fish and possibly reducing other species’ resistance to disease. According to the National Oceanic and Atmospheric Administration, the most common cause of hypoxia is nutrient pollution, specifically discharges of nitrogen and phosphorus. As shown in figure 2, sources of nutrient pollution include wastewater discharged from wastewater treatment plant pipes and runoff from agricultural fields, stormwater, and groundwater. Excess nutrients can cause algae—which occur naturally in oceans, lakes, rivers, and other water bodies—to rapidly multiply, resulting in algal blooms that can discolor the water or accumulate as thick scums and mats. When the algae die they sink and decompose, and this decomposition consumes oxygen that is dissolved in water and used by fish and shellfish to live. Reduced oxygen levels, in turn, can lead to increased mortality for fish, shellfish, and other aquatic populations, or can drive some species to relocate to more oxygenated waters. Water in estuaries is naturally stratified, with less dense fresh warmer water generally staying on top, and denser salty cool water on the bottom. In 2000, Connecticut and New York developed a total maximum daily load (TMDL) to achieve water quality standards for dissolved oxygen in Long Island Sound. In the TMDL, the states described efforts to manage hypoxia and identified nitrogen as the key contributor to hypoxia and identified the sources and amounts of nitrogen contributed to the Sound. These include wastewater treatment plants in Connecticut and New York; combined sewer overflows (CSO); nonpoint source pollution, or runoff from sources such as residences and farms that includes stormwater and groundwater; and atmospheric deposition. The TMDL set a 15-year nitrogen reduction goal for Connecticut and New York, from both point and nonpoint sources of nitrogen, to be achieved by August 2014. The TMDL also calls for implementing management actions for nitrogen entering the Sound from other states where feasible. In the TMDL, Connecticut and New York identified the need for an adaptive management approach because it would require nitrogen reduction beyond the limits of technology current at the time. The states also agreed to reassess the nitrogen reduction goals and revise the TMDL as necessary. Although the Study has collected a wide range of data to measure the health of Long Island Sound and has issued periodic progress reports since 2001, these progress reports have not contained a comprehensive assessment of progress toward the goals of the 1994 plan. In the absence of a comprehensive assessment of progress, Study members we interviewed said that they believe that moderate progress has been made toward goals associated with five of the six priority problems identified in the 1994 plan. The Study has collected a wide range of data used to measure the health of Long Island Sound. According to a Study member, the Study began identifying and collecting these data in 1998 with the purpose of evaluating progress toward achieving the goals of the 1994 plan. The data were gathered by federal and state agencies and universities, and were provided to the Study, which published the data on its website. As of November 2017, the data on the website were organized into groups of environmental indicators including water quality, marine and coastal animals, land use and population, and habitats. We found that many of the indicators and their data could be linked to goals associated with the six priority problems in the 1994 plan. Examples of these indicators and the related data and associated goals are shown in table 2. As required by the Long Island Sound Improvement Act, since 2001, the Study has issued periodic progress reports—five Protection and Progress reports and six Sound Health reports, available on the Study’s website— that have focused on specific examples of the restoration effort. The most recent of these reports were organized into sections that can be linked to the priority problems identified in the 1994 plan. For example, the most recent Protection and Progress report, issued in 2013, included sections on water quality and habitat restoration efforts that can be linked to the priority problems “hypoxia” and “management and conservation of living resources and their habitats.” The most recent progress reports also included examples of progress using indicator data that we could link to some of the goals and priority problems in the 1994 plan, such as the following: Both reports included examples of progress that could be linked with the priority problem “hypoxia.” The Protection and Progress report identified pounds of nitrogen discharged into the Sound from 2001 through 2012 and provided data showing reduced nitrogen discharges over time, which the Study stated it expected to result in decreased hypoxic areas and increased dissolved oxygen. The Sound Health report identified both the area, in square miles, and duration, in days, of hypoxia in the Sound from 1987 through 2012. The Protection and Progress report included examples of progress that could be linked to the goal to increase the abundance and distribution of harvestable species, which is associated with the priority problem “management and conservation of living resources and their habitats.” For example, the Protection and Progress report included examples of progress in the number of river miles restored from 1998 through 2012 as well as the number of fish returning to the rivers. The Sound Health report included examples of progress that could be linked to both goals associated with the priority problem “pathogen contamination.” These goals were to (1) increase the amount of area certified or approved for shellfish harvesting while adequately protecting the public health and (2) eliminate public bathing beach closures while adequately protecting the public health. The Sound Health report identified the number of beach closure and advisory days from 1993 through 2011 and the number of acres approved for shellfish harvesting from 2005 through 2011. However, the Study’s progress reports did not contain a comprehensive assessment of the progress toward the goals of the 1994 plan. Specifically, the progress reports included examples of progress using indicator data and they did not include a comparison of that progress against a specific amount to be achieved—a numerical goal. For example, the Protection and Progress report included an example of progress on pathogen contamination, but the report did not include a comparison of the data on acres of shellfish harvesting areas against a numerical goal for the amount of acres of shellfish approved for harvesting. In addition, the Sound Health report included examples of progress on toxic substances, but the report did not include a comparison of the reduction of toxics discharged into the Sound against a numerical goal for the reduction of toxic inputs. As we have previously reported, having a numerical goal permits expected performance to be compared with actual results. Part of the challenge for the Study to conduct such an assessment arises from the fact that only one of the goals in the 1994 plan had numerical goals against which the Study could compare progress. According to a Study member, because the rest of the goals were not numerical goals, a comprehensive assessment of progress toward achieving the 1994 plan was not conducted. Although such an assessment was not conducted, the Study has made available a comprehensive assessment of available science and data about the environmental dynamics of the Sound in the 2014 publication Long Island Sound: Prospects for the Urban Sea. The book—written by scientists from federal and state agencies and universities—includes sections on the geology and chemistry of the Sound; development patterns in the area surrounding the Sound; metals, contaminants, and nutrients discharged to the Sound; and management options for the Sound. Prospects for the Urban Sea identified science gaps and research needs and made several recommendations, including better characterizing the relationship between smaller bays and inlets and the Sound, integrating climate change across programs, prioritizing management of existing pollution sources and impairments, and improving data management and interpretation. According to Study members, the book served as a reference for scientists conducting research in Long Island Sound and as the basis for the 2015 plan. In the absence of a comprehensive assessment of progress, we asked study members for their views regarding progress made since 1994. Nearly all of the Study members we interviewed who provided a response about progress made toward the goals of the 1994 plan agreed that the restoration effort has made moderate progress, and they cited various data to support their views. Specifically, Study members believed that moderate progress has been made toward achieving goals for five of the six priority problems: (1) toxic substances, (2) pathogen contamination, (3) floatable debris, (4) management and conservation of living resources and their habitats, and (5) land use and development. However, Study members agreed that they have not made similar progress toward the goal associated with the priority problem hypoxia because they had not observed the reductions in hypoxia that they expected; representatives from the New York State Department of Environmental Conservation said that the defined hypoxia goals have been met. Table 3 shows the number of Study members we interviewed who said moderate progress has been made toward goals associated with five of the priority problems in the 1994 plan and the number of Study members who provided views about progress. Although the Study members we interviewed cited various data to support their views, without a comprehensive assessment of that data it is not possible to definitively determine to what extent their assessment of progress reflects actual progress made. The following summarizes Study members’ views about all six of the priority problems and data they cited. The goal in the 1994 plan associated with the priority problem “toxic substances” was to protect and restore the Sound from the adverse effects of toxic substance contamination by reducing toxic inputs, cleaning up contaminated sites, and effectively managing risk to human users. Toxic substances include metals, such as mercury and lead, and chlorinated hydrocarbons, such as the pesticide dichlorodiphenyltrichloroethane, commonly known as DDT. These substances were released from industrial and wastewater treatment plants into the air and into rivers and streams that flow to the Sound. The Study reported in a 2012 progress report that bans of toxic substances, stricter regulation of industrial facilities, and a decline in manufacturing contributed to the reduction of toxic substances. All nine Study members who provided a response about progress toward this goal said that moderate progress has been made. As evidence that moderate progress has been made, Study members cited data from EPA’s Toxics Release Inventory. For example, two Study members said that the EPA data showed that toxic releases into the Long Island Sound watershed have been reduced. In addition, two Study members identified concerns about new toxic substances identified in the Sound. Specifically, they said that monitoring and research is needed to understand how toxic substances found in pharmaceutical and personal products may affect the Sound. One program that monitors toxic substances in the Sound is the Mussel Watch program, run by the National Oceanic and Atmospheric Administration’s National Centers for Coastal Ocean Science. The program examines tissues of shellfish, such as oysters, to measure toxic substances that were previously unknown or unidentified that may negatively affect the Sound or human health. The research includes monitoring of substances found in everyday products including pharmaceuticals, personal care products, furniture, and plastics. The two goals in the 1994 plan associated with the priority problem “pathogen contamination” were (1) to increase the amount of area certified or approved for shellfish harvesting while adequately protecting the public health and (2) to eliminate public bathing beach closures while adequately protecting the public health. Pathogens include bacteria or viruses from animal waste or inadequately treated sewage discharge that can accumulate in shellfish. Human consumption of contaminated shellfish can lead to illness and disease. Nine of the 10 Study members who provided a response about progress toward these goals said that moderate progress has been made. As evidence that moderate progress has been made, some Study members cited data on the number of acres approved for shellfish harvesting and on the number of beach closures and advisory days. For example, according to one Study member, since 2010 there has been an increase in the number of acres certified for shellfishing in New York’s portion of Long Island Sound. Seven of the nine Study members who said that moderate progress has been made toward this priority problem also said that improvements in wastewater treatment plants and regulation of sewage discharge from boats have reduced the amount of pathogens in the Sound, such as by reducing the amount of waste discharged into the Sound. Several of the Study members said that these improvements have included municipalities investing in wastewater treatment plant upgrades to address combined sewer overflow (CSO) pollution. For example, New York City officials said that the city spent $2.5 billion on infrastructure projects, such as improvements in wastewater treatment plants and CSO retention tanks. As a result, the officials said that New York City’s wastewater treatment plants can manage more stormwater, leading to fewer CSOs and reduced pathogen discharges overall. The two goals in the 1994 plan associated with the priority problem floatable debris were (1) to reduce the flow of litter from its major sources and (2) to collect and pick it up once it is in the Sound. Floatable debris in the Sound mostly consists of plastic bags, plastic bottles, and food wrappers. This debris is washed into the Sound through stormwater and CSOs. In the 1994 plan, the Study proposed actions to reduce the flow of floatable debris into the Sound in two ways, engaging volunteers in cleanup efforts and collecting it from combined sewers before it enters the Sound. Nine of the 10 Study members who provided a response about progress toward these goals said that moderate progress has been made. Three Study members said that recycling or public outreach programs may have contributed to progress made in part by increasing public awareness of the problem. As evidence that moderate progress has been made, Study members cited data from coastal cleanups and from New York City’s boom and skim program. For example, one Study member said that beach cleanup data show a reduction in debris collected from beach cleanups and another Study member stated that New York City has installed screens at some CSO outflows to capture debris in runoff released to the waters of Long Island Sound. The three goals in the 1994 plan associated with the priority problem “management and conservation of living resources and their habitats” were to (1) assure a healthy ecosystem with balanced and diverse populations of indigenous plants and animals, (2) increase the abundance and distribution of harvestable species, and (3) assure that edible species are suitable for unrestricted human consumption. In the 1994 plan, the Study reported that it would focus on managing water quality, habitats, and species to address these goals. In particular, the Study reported in the 1994 plan that the destruction of coastal habitats has had a major impact on the diversity and abundance of plants and animals in and along the Sound. Eleven of the 12 Study members who provided a response about progress toward these goals said that moderate progress has been made. As evidence that moderate progress has been made, Study members cited data on several indicators, including acres of coast habitat and acres of eelgrass restored, marine mammal sightings, and the number of nesting pairs of coastal birds. For example, one Study member cited an increase in the abundance of eelgrass beds as support for moderate progress toward that type of habitat. Two other Study members cited increased sightings of dolphins and whales in the Sound as an indicator of improved habitat. The five goals in the 1994 plan associated with the priority problem “land use and development” were to: (1) reduce the impacts from existing development to improve water quality, (2) minimize the impacts from new development to prevent further degradation of water quality, (3) expand information, training, and education for land use decisions to effectively incorporate water quality and habitat protection, (4) conserve natural resources and open space, and (5) improve public access so that the public can use and enjoy Long Island Sound. According to EPA, impervious cover—land cover that does not allow water to infiltrate into the ground—increases the amount of stormwater that runs off into streams, rivers, and other water bodies. Stormwater runoff can carry pollutants such as pathogens, toxic substances, and nutrients to storm drains, rivers, and streams that flow into the Sound. According to the 1994 plan, one way to reduce impervious cover and control stormwater runoff is through the use of green infrastructure. Green infrastructure includes practices and structures to manage stormwater that use or mimic natural processes to slow stormwater runoff, filter pollutants from the runoff, and facilitate stormwater storage for future use or to replenish groundwater. An example of a green infrastructure project implemented around the Sound is a bioswale, a vegetated area adjacent to a road, designed to collect and filter stormwater, cleaning the water and improving water quality by allowing it to seep into the soil. Figure 3 shows a bioswale developed for use in New Haven, Connecticut, as part of a Long Island Sound restoration project. Eleven of the 12 Study members who provided a response about progress toward these goals said that moderate progress has been made. As evidence, Study members cited data on changes in impervious cover. Study members also cited data on open space acquisitions as showing progress toward the goals related to this problem. According to Study members, one way that the Study protected open space was by identifying locations around the Sound that should be acquired and protected from development. Specifically, in 2006, the Study designated 33 locations, called Stewardship Areas, to protect habitat and wildlife from encroaching development. Stewardship Areas are locations within the Long Island Sound region that have significant ecological, educational, open space, public access, or recreational value and are protected from development. Figure 4 shows the locations of the 33 Stewardship Areas in the Long Island Sound region. The goal in the 1994 plan associated with the priority problem “hypoxia” was to increase dissolved oxygen levels in the Sound to eliminate adverse impacts of hypoxia resulting from human activities. All 11 of the Study members who provided a response about progress toward this goal agreed that nitrogen has been reduced in the Sound since the 1994 plan, while 4 said that they have not observed the expected reduction in hypoxia. According to the 1994 plan, Study members based their expectation on a water quality model they used at the time. As evidence for nitrogen reduction in the Sound, Study members said that both Connecticut and New York met their 15-year TMDL wasteload allocation target to reduce nitrogen discharged into the Sound by 58.5 percent. To achieve their nitrogen targets, the Study reported that the states upgraded wastewater treatment plants. For example, communities in both states upgraded their plants with biological nutrient removal, a process in which bacteria break down and remove the reactive nitrogen found in human waste. According to EPA officials, recovery from hypoxia in coastal waters will not be rapid or predictable and evidence shows that dissolved oxygen levels in the Sound are recovering because of nitrogen reductions. According to Study members, hypoxia is a complex phenomenon affected by a number of factors that help to explain characteristics of hypoxia in the Sound. For example, three Study members said that an increase in water temperature can exacerbate hypoxia; warmer water holds less oxygen than cold water. As a result, in summer months the combination of temperature and salinity contributes to the isolation of the bottom layer of water from the usually well-oxygenated surface layer. Two Study members said that another factor that affects hypoxia is precipitation. For example, heavy rainfall could increase the amount of stormwater runoff that carries nutrients, such as nitrogen, into the Sound, which could lead to an increase in algal blooms and hypoxia. According to the 2012 Sound Health report, in 2012, Hurricane Sandy’s storm surge overwhelmed many wastewater treatment plants, and stormwater runoff entered the Sound. In addition, four Study members said that there may be a lag between a reduction in nitrogen and a reduction in levels of hypoxia. Several Study members said that the water quality model they used in 1994 to predict the relationship between hypoxia and nitrogen may have incorrectly predicted the effect of reducing nitrogen on hypoxia or could be improved to better show the relationship between the two. Beginning in 2005, the Study conducted an evaluation of its water quality model that identified fundamental weaknesses with how the model captured the dynamics of hypoxia and mixing of water layers in the Sound. Subsequently, the Study has funded the development of a new model that it expects will more accurately reflect the relationship of the various sources of nitrogen and hypoxia. A Study member said that it was not possible to predict when the new model would be ready because of the nature of the work. However, the Study member added that it may be 10 to 20 years before the data show if and how nitrogen reduction efforts based on the new model reduce hypoxia. The 2015 plan has four goals to improve water quality and restore and protect ecosystem functions, among others. Each goal is associated with one of four broad themes: clean water and healthy watersheds, thriving habitats and wildlife, sustainable and resilient communities, and sound science and inclusive management. To achieve the goals, the Study developed specific outcomes, objectives, strategies, and action plans but stated that factors such as insufficient funding and climate change may hinder restoration efforts. In addition, most Study members stated that even if the goals of the 2015 plan are met, new and emerging challenges will require restoration efforts to continue, at a minimum, to monitor the Sound. The 2015 plan has four goals, associated with four themes to improve water quality and other ecosystem functions in the Sound while creating sustainable communities and using sound science as a basis for restoration. According to the 2015 plan, the goals and associated themes were developed by building upon the progress already made toward the 1994 plan and years of research and monitoring of the Sound. As previously mentioned, Study members said that the book they published with many scientists helped to develop the 2015 plan. The book Long Island Sound: Prospects for the Urban Sea, synthesized the advances in science made over the past decades in understanding the Sound. Study members also said that an update of the plan was needed to incorporate an improved understanding of the Sound and to address new issues that might affect restoration of the Sound. The four goals and their associated themes are as follows. Clean water and healthy watersheds. The goal associated with this theme addresses improving water quality through reducing contaminant and nutrient loads from the land and waters impacting the Sound. According to the 2015 plan, the condition of the Sound depends on the quality of the water draining from the land around it and, although progress has been made, the issues affecting water quality in the 1994 plan remain. These issues include hypoxia, pathogens, and development. Eelgrass Eelgrass (Zostera marina) is a rooted underwater plant with ribbon-like strands that form beds and meadows in estuaries. These beds are a haven for crabs, scallops, numerous species of fish, and other wildlife because the beds provide for them a habitat, protection from predators, nursery grounds, food, and oxygen. Additionally, eelgrass improves water clarity by filtering pollutants from runoff and by absorbing nutrients such as nitrogen and phosphorus. It also protects shorelines from erosion by absorbing wave energy. Eelgrass health can be negatively affected by excessive nutrients, limited sunlight exposure, and high water temperatures. For these reasons, the Long Island Sound Study uses eelgrass growth as an indicator for good water quality. Thriving habitats and abundant wildlife. The goal associated with this theme addresses restoring and protecting the Sound’s ecological balance, including fish and shellfish populations and ecologically significant shorelines and habitats along the Sound, to benefit both people and the environment. According to the 2015 plan, the 1994 plan identified habitats and living resources to manage and protect and the Study identified 12 types of coastal habitats for restoration, including beaches and dunes, cliffs and bluffs, estuarine embayments, coastal and island forests, freshwater wetlands, coastal grasslands, intertidal flats, rocky intertidal zones, riverine migratory corridors, submerged aquatic vegetation such as eelgrass, shellfish reefs, and tidal wetlands. While progress has been made through acquiring thousands of acres of land, according to the 2015 plan, habitat connectivity and riverine migratory corridor reconnection can be improved. Sustainable and resilient communities. The goal associated with this theme addresses supporting communities to use, appreciate, and help protect the Sound. According to the 2015 plan, local government leadership, private sector engagement, community organizations, and individual stewardship will be needed to restore the Sound. The theme focuses efforts on communities, which was not a focus of the 1994 plan. Sound science and inclusive management. The goal associated with this theme seeks to ensure the Study is using sound science and cross-jurisdictional governance that is inclusive, adaptive, innovative, and accountable throughout its restoration efforts in the Sound. According to the 2015 plan, the Sound and its watershed covers more than 16,000 square miles in six states and includes hundreds of local watersheds. Management of the Sound involves collaboration and governance among numerous partners and stakeholders who need thorough understanding of the issues. According to the plan, such understanding comes from research, monitoring, assessment, mapping, and modeling programs. To achieve the goals associated with the plan’s four themes, the Study also developed outcomes, objectives, strategies, and implementation actions and published these in the 2015 plan and supplemental documents. The 2015 plan defines outcomes as “broad results needed to achieve the goals.” For example, as shown in table 4, an outcome associated with the “clean water and healthy watersheds” theme is “to improve research, monitoring, and modeling for water quality.” Each outcome has multiple associated objectives, which are the accomplishments needed to achieve each outcome, and each objective has multiple strategies. To carry out each strategy, the Study has developed 139 implementation actions, which are specific actions such as estimating future phosphorus loads or promoting eelgrass management. The Study also developed four supplemental documents, one for each theme, that describe the 139 implementation actions and steps to be taken in 2015 through 2019 and the expected outcomes. Study members we interviewed said numerous factors may hinder Long Island Sound restoration progress, including insufficient funding, climate change, insufficient scientific understanding or data-related issues, development and population growth, and insufficient public appreciation of the Sound. (See app. II for a list of all the factors Study members identified that may hinder progress.) Of the 17 Study members we interviewed about factors that may hinder progress, 14 said that insufficient funding can, for example, hinder their ability to manage restoration efforts, mitigate the effects of development and population growth, implement new projects, or effectively conduct existing projects. One Study member said that development and population growth can be overcome with mitigation activities, but that these require funding. Another Study member said that insufficient funding leads to vacant staff positions and that the Study member’s organization is strained with small staff numbers. This limits the Study’s ability to coordinate among the many agencies and programs working on restoration. Another Study member identified the effects of insufficient funding on a restoration project. Specifically, a town received a Study grant for a green infrastructure project near the Sound, but the town modified the project because the grant was smaller than what the project needed. The project plan included constructing the building with permeable parking surfaces and green features, such as rain gardens, to help improve water quality. According to a town official, the town wanted to do more green features but because it received a smaller grant, the number of permeable surfaces and green features the town could build were limited. Nine of the 17 Study members we interviewed said that climate change can hinder restoration progress. Study members discussed different types of effects that may be possible, such as affecting water temperature, weather, and sea level. For example, two Study members said that warmer waters caused by climate change could increase the Sound’s susceptibility to hypoxia by increasing the risk of potential harmful algal blooms and the length of time low-dissolved oxygen remained at hypoxic levels. Another Study member stated that warmer waters can cause outbreaks of the naturally occurring bacterium Vibrio parahaemolyticus, which accumulates in shellfish and affects the shellfishing industry. In addition, two Study members said that changes in weather caused by climate change could cause an increase in stormwater and therefore the amount of pathogens washed into the Sound; another Study member said that increased storm activity could destroy marshes. According to the Study, salt marsh vegetation in tidal wetlands helps protect against erosion and typically manages to accumulate enough sediment and organic matter to keep up with naturally-occurring, gradual sea level rise. However, the Study reported that tidal wetlands in the Sound may not be able to keep up with the rise in sea level projected to result from climate change. One Study member said that marshes are already being affected by increased coastal flooding that may be caused by sea level rise. As we reported in November 2013, changes in the climate—including warmer temperatures, changes in precipitation patterns, rising sea levels, and more frequent and intense storms—affect water resources in a number of ways, such as erosion and inundation in coastal areas. In particular, we reported that a 2011 federal agency review of the potential impacts of climate change on water resources identified four interrelated areas of concern for water resource managers. One of the four is protecting coastal and ocean resources as rising sea levels and changes in storm frequency, intensity, and duration impact coastal infrastructure. Also, in September 2014, we reported that ocean acidification—the increased absorption of carbon dioxide emitted by humans into the oceans—is resulting in chemical changes in the oceans that may pose risks for some marine species and ecosystems, as well as for the human communities that rely upon them for food and commerce. Tidal wetlands and salt marshes Wetlands are areas that are inundated or saturated by surface or groundwater and that have a prevalence of vegetation adapted for life in saturated soil conditions. Tidal wetlands are specifically linked to estuaries—locations where sea water mixes with fresh water to form an environment of varying salinity. Tidal wetlands are among the most productive ecosystems in the world, providing food, shelter, and breeding or nursery grounds for many species of wildlife. Salt marshes are a type of tidal wetlands that have been flooded and drained by salt water brought in by the tides. Salt marshes help protect the land from flooding and erosion in stormy weather, and filter pollutants contained in storm water runoff. Tidal wetlands are threatened by changes in the climate causing sea levels to rise more rapidly, which can cause tidal wetlands to convert to open water. In addition, one expert we interviewed said that gains in restoring marshes and wetlands already made by the Study may be lost due to rising sea levels. To address this problem, another expert we interviewed said that techniques such as spraying material dredged from the Sound, such as sand and silt, across these areas for the purpose of raising wetlands or marshes are being tested to keep up with sea level rise. One expert also said that increased water temperatures around the Sound may make the water uninhabitable for shellfish. EPA officials said that while increased water temperatures will affect the relative abundance and distribution of shellfish in the Sound, it cannot be concluded that the Sound will become uninhabitable for shellfish because of increased water temperatures. In addition, as we reported in October 2016, unusually high water temperatures may enhance the growth of harmful algal blooms that produce toxins causing neurological and other damage in fish populations. Warming waters will also increase the Sound’s susceptibility to hypoxia because the solubility of oxygen decreases as water temperature increases. Five of the 17 Study members we interviewed said that insufficient scientific understanding and data related issues would hinder progress toward restoration of the Sound. For example, one Study member highlighted the need to better understand the relationship between nutrients and hypoxia. That Study member also said that incomplete data on nutrients, particularly from nonpoint sources, may hinder progress. Another Study member said that obtaining data is difficult, in particular for areas such as embayments and tributaries that are still affected with nonpoint source pollution. Three of the 17 study members we interviewed said that development and population growth will also hinder the progress of restoration. In addition, 7 of the 17 Study members said that the Sound cannot be restored to past conditions, and a key reason why is that development and increased human population have led to changes in the Sound that hinder full restoration. For example, one Study member said that increased population and development can negatively affect water quality because it resulted in a greater amount of impervious cover such as highways and roads, which in turn increases the nutrient and sediment pollution in runoff. Microbeads Microbeads are pieces of manufactured polyethylene plastic 5 millimeters or less in size that are added as exfoliants to health and beauty products, such as some cleansers and toothpastes. These tiny particles may pass through some water filtration systems and end up in the oceans and the Great Lakes, posing a potential threat to aquatic life. For example, microbeads can look like food to fish and other marine organisms. Once ingested, microbeads can obstruct an animal’s digestive system. In addition, microbeads can absorb contaminants that can be hazardous to animals that eat the microbeads, and, in turn, can harm the animals and people that consume them. Three of the 17 Study members we interviewed said that insufficient public appreciation of the Sound would hinder progress toward restoration. In this context, two Study members highlighted that much of the land along the Sound is privately owned, which makes it difficult for some to travel to the Sound or to appreciate it. Nearly all of the Study members who we interviewed said that even if the goals associated with the four themes of the 2015 plan are achieved, restoration efforts will need to continue into the future because the Sound will continue to face new challenges and threats and that the Study will need to continue monitoring the Sound to understand them. For example, microbeads are an emerging issue that was not addressed in the 2015 plan. In 2015, after the Study issued the 2015 plan, a Southern Connecticut State University research team reported that it had found microbeads in New Haven Harbor, Connecticut. Microbeads are small pieces of plastic found in common household products that can make their way into waterbodies and threaten aquatic life. In December 2015, the federal government enacted the Microbead-Free Water Act of 2015, which banned the manufacturing, distribution, and offer for sale into interstate commerce of rinse-off cosmetics that contain intentionally- added plastic microbeads. In addition, in June 2015, Connecticut had enacted legislation that phased in bans on the manufacturing, import, sale, or offer for sale of personal care products and over-the-counter drugs that contain microbeads in that state. New York had proposed legislation to address the issue of microbeads in early 2015 but did not enact it. Study members said that they plan to use 20 long-term targets with associated indicators to measure progress toward the goals associated with the four themes of the 2015 plan. While 18 of the long-term targets currently have numerical goals, they do not yet have associated intermediate targets that can be used to monitor progress; but EPA officials said that the Study is working to establish them. In March 2018, the Study issued web pages for each of the 20 targets to report on such progress, but, as of June 2018, these pages do not yet fully incorporate leading practices of performance reporting. Study members said that they have identified and plan to use 20 long- term targets with associated indicators to measure progress toward the goals of the 2015 plan (see app. III for a complete list of the 20 long-term targets and their associated indicators). The 20 targets are grouped by the four themes in the 2015 plan. All of the targets include indicators that describe how the targets will be achieved, and all but two of those indicators currently have numerical goals, with a value to be achieved by 2035. For example, the indicator for the target “approved shellfish areas” in the “clean waters and healthy watersheds” theme has a numerical goal to upgrade the percentage of shellfish acreage restricted or closed for shellfishing in 2014 in Connecticut and New York by 5 percent by 2035. According to the 2015 plan, to achieve a 5 percent increase, the states would need to upgrade 17,400 of the 349,000 acres of closed or conditionally closed shellfish areas. Of the 20 targets in the 2015 plan, the 2 that do not yet have indicators with numerical goals are “habitat connectivity” and “public engagement and knowledge.” Two of the Study members responsible for updating the indicators said that the Study is developing numerical goals for each target. According to these Study members, the main reason that these targets do not yet have numerical goals is that presently there are insufficient data that can be analyzed and interpreted to establish them. Study members are in the process of collecting data that will be used to finalize a numerical goal. These Study members said that it may take a year or more to collect the necessary data. Generally, the 19 experts we interviewed agreed that the indicators used by the Study were valid, accurate, and reliable ways to measure progress for the 20 long-term targets, but some experts also suggested improvements. For 12 of the 20 indicators, all of the experts we interviewed agreed that they were valid, accurate, and reliable. For example, one expert pointed out that the indicator for the riparian buffer extent target is the only practical way to measure progress. Another expert said that the indicator for the coastal habitat extent target is a good choice because it can show progress that the public can easily understand. A few experts suggested improvements to make some of the indicators more useful for measuring progress. For example, one expert said that the indicator for the target “extent of hypoxia” would be better if the focus were on the Western Sound, where hypoxia is a greater problem. The expert also questioned why the Study is concerned with hypoxia across the entire Sound when some areas are only slightly hypoxic and not big enough to have a great impact on the overall level of hypoxia in the Sound. EPA officials responded that the target “extent of hypoxia” is focused on the Western Sound. They added that it must be noted that target applies everywhere in the Study because changes in water quality could occur anywhere in the Sound. For the other eight indicators, not all experts we interviewed agreed on these indicators. For example, for the tidal wetlands indicator—the acreage of tidal wetlands restored to help restore tidal flow—eight of nine experts we interviewed said that the indicator was valid, accurate, and reliable, but one expert said that it was too simplistic. This expert said that a better indicator would focus on the amount and health of marsh grasses that are planted to restore the tidal wetlands. This is because marsh grass health is affected by nitrogen levels and sea level rise, which also impact tidal wetlands. For the approved shellfish area indicator—the acreage of approved shellfishing areas—six of eight experts we interviewed said that the indicator was valid, accurate, and reliable, but two experts disagreed. One of these experts said that the target is part of the theme to improve water quality and that shellfishing areas can be approved for administrative reasons that are not related to water quality improvement. The other expert added that certain shellfish areas in New York are closed because budget constraints limit the number of reviews that can be conducted to reopen shellfishing areas. The use of numerical goals to monitor progress toward the 20 long-term targets is consistent with leading practices for performance management that we have identified in our previous work. We have found that a key attribute of successful performance measures is that they have quantifiable numerical goals or other measurable values that permit expected performance to be compared with actual results. Additionally, we have reported that intermediate goals and measures can be used to show progress or contribution to intended results. During the course of our work, we shared with Study members our concern that only 2 of the 20 long-term targets have intermediate targets. In response, in web pages for the 20 targets available in June 2018, the Study had established intermediate targets for an additional 10 of the 18 long-term targets that did not have intermediate targets. For these 10 targets, the Study identified how much progress would need to be made each year to achieve each target’s numerical goal by 2035. For example, for the approved shellfish areas target, the intermediate target is “to approve more than 850 acres of currently closed shellfish areas per year to reach the goal of approving 17,400 acres by 2035.” For the remaining 13 targets without intermediate targets, EPA officials said that the Study is working to establish intermediate targets using the indicator data collected by federal and state agencies. By incorporating intermediate targets into its web pages to report on progress, the Study can better ensure its members, the public, and Congress have important information on whether the Study is making progress toward achieving its long-term targets or whether additional actions need to be taken. As previously mentioned, the Long Island Sound Improvement Act of 1990 required the Study to report every 2 years on progress made in implementing the comprehensive conservation and management plan. The Study reported through 2013, using the Protection and Progress and Sound Health reports but did not report again until it issued web pages for the 20 long-term targets in March 2018. According to an EPA official, the Study did not report on the evaluation of progress during that 5-year period because EPA was working with Study members to adapt the Study’s reports to the 2015 plan indicators and to update the format of its web pages to report on progress. An EPA official said that the Study plans to use the web pages the agency issued in March 2018 to report progress on each of the 20 long-term targets. Our previous work on performance management states that reporting on performance should involve leading practices such as (1) evaluating performance compared to a plan, (2) reviewing performance for a preceding period of time (for example, 5 years), and (3) evaluating actions for unmet goals. We have found the following benefits of these leading practices: Evaluating performance compared to a plan allows agencies to describe the performance indicators established in the plan and the performance achieved to meet them. In addition, evaluating performance could help agencies understand the relationship between their activities and the results they hope to achieve. Reviewing performance for a preceding period of time, including baseline and trend data, can help agencies ensure that individuals using the report review the information in context and identify whether performance targets are realistic given the past performance. In addition, the data can assist individuals who use the report to draw more informed conclusions than they would by comparing only a single year’s performance against a target. Evaluating actions for unmet goals explains why the goal was not met, provides plans and schedules to achieve the goal, and, if the goal is impractical, why it is impractical. Explaining the reasons for any unmet goals allows agencies to recommend actions that can be taken to achieve the goals, or needed changes to the goals. In our review of the Study’s web pages in June 2018, we found that the Study has not yet fully incorporated the three leading practices for reporting on performance. The Study used the three practices to varying extents, as described below. Evaluating performance compared to the 2015 plan for 19 targets. We believe that the Study fully incorporated this practice by creating a status bar on the web pages for 19 of the 20 ecosystem targets to indicate if progress toward a target’s numerical goal was behind schedule, on track, ahead of schedule, or if the numerical goal was met. For example, the Study reported that progress for the target “approved shellfish areas” was behind schedule. Reviewing performance for a preceding period of time for 11 targets. We believe that the Study partially incorporated this practice by reporting progress data for 5 or more preceding years for 11 targets but not the remaining 9. For example, on the web page for the tidal wetlands extent target, the Study reported progress data for each year from 1998 to 2017. Evaluating actions for unmet goals for four targets. We believe that the Study partially incorporated this practice by explaining why the goal was not met for 4 targets but did not explain why the goal was not met for 15 targets. For example, for the target “public access to beaches and waterways,” the Study reported that increasing the number of public access points may be difficult because there are many privately owned properties along the Long Island Sound coast. However, the Study provided plans and schedules to achieve unmet goals for only two targets. For example, the Study reported that to achieve the numerical goal for protected open space, an average of 200 acres of Connecticut land and 150 of New York land needs to be protected each year. An EPA official said that the web pages may undergo further modifications and that the Study plans to update information about the targets annually or according to how frequently the underlying data are collected. By working with the Study as it finalizes its reporting format to incorporate the leading practices of performance reporting, EPA could help ensure that the Study provides the public and Congress with the information they need to determine whether the Study is making progress toward achieving the long-term targets associated with the goals of the 2015 plan, or whether the Study should take additional action to meet the targets. Seven Study members who provided expenditure data to us expended at least $466 million on restoration activities in the Sound from fiscal years 2012 through 2016, although the total expenditures by all Study members over this period are unknown. In the 2015 plan, the Study estimated that future activities will cost at least $18.9 billion over 20 years, but these estimates may not reflect all future restoration costs because they address only some of the plan’s long-term targets. Of the seven Study members who provided expenditure data to us, four Study members said that they provide funding for restoration activities specifically for the Sound. Officials from EPA, the states of Connecticut and New York, and the U.S. Fish and Wildlife Service said that they expended at least $466 million on activities to restore Long Island Sound from fiscal years 2012 through 2016. Table 5 shows their reported expenditures on restoration activities in Long Island Sound from fiscal years 2012 through 2016. The states of Connecticut and New York expended the majority of the $466 million to restore Long Island Sound from fiscal years 2012 through 2016. According to a Connecticut Department of Energy and Environmental Protection official, Connecticut expended about $106 million on restoration activities from fiscal years 2012 through 2016. These activities included more than $10 million for habitat restoration, more than $14 million for land acquisition, and more than $81 million for nitrogen reduction. According to the official, Connecticut expended more than $21 million in fiscal year 2012 to upgrade equipment at three wastewater treatment plants to reduce nitrogen discharged from the plants into the Sound. New York State Department of Environmental Conservation officials said that the agency could not provide us with the total amount the agency expended on Sound restoration activities in fiscal years 2012 through 2016 because the agency does not track expenditures specific to Long Island Sound restoration. However, they provided examples of activities for which they expended about $337 million. The three activities for which officials provided examples of expenditures were to upgrade wastewater treatment plants. From fiscal years 2012 through 2016, EPA reported expending about $22 million to operate the Long Island Sound Study, including about $19 million from the agency’s Long Island Sound program and about $3 million from the National Estuary Program. On average, EPA reported expending about $4.5 million per year on Study operations, such as public outreach and education, monitoring, modeling, research, and activities to achieve the 1994 and 2015 plans. Of the $4.5 million per year, the Study provided an average of $1.3 million per year to the Long Island Sound Futures Fund. The Long Island Sound Futures Fund is a grant program that, according to the Study, funds activities in local communities that aim to protect and restore the Sound. For example, the Long Island Sound Futures Fund awarded $150,000 to the New York City Department of Parks and Recreation in 2016 to construct a living shoreline in Douglaston, New York. The purpose of this project was to stop the continued loss of urban salt marsh by reestablishing up to one acre of salt marsh and enhancing nearby forest, upland, and coastal grassland habitat. A U.S. Fish and Wildlife Service official said that the agency expended about $1 million in 39 activities from fiscal years 2012 through 2016. According to Long Island Sound Futures Fund documents, funds provided to the Long Island Sound Futures Fund are used to pay for restoration projects. For example, the U.S. Fish and Wildlife Service provided $55,392 in fiscal year 2016 to a project to restore a 12-acre coastal forest in the Village of Mamaroneck, New York. The focus of the project is to reverse forest fragmentation and degradation by removing non-native plants and planting native trees, shrubs, and herbs. In addition to the funds expended by the four Study members above, officials from three other Study members—the Natural Resources Conservation Service, the U.S. Geological Survey, and the U.S. Army Corps of Engineers—also said that they expended funds for restoration activities in the region around the Sound but do not isolate expenditures made specifically for the Sound. For example, officials from these Study members said that the agencies expended funds for activities in the region that contributed to restoration but were not intended solely to restore the Sound. They each provided examples of restoration expenditures or costs for fiscal years 2012 through 2016: the National Resource Conservation Service expended $54 million through programs such as the Environmental Quality Incentives Program; the U.S. Geological Survey expended about $3.8 million on data monitoring and other activities; and the U.S. Army Corps of Engineers expended $27 million for 13 projects. Study members estimated in the 2015 plan that future restoration activities would cost at least $18.9 billion over 20 years. Nearly all the amount was for activities addressing the goal to achieve clean waters and healthy watersheds. As shown in table 6, Study members estimated that activities under that goal could cost at least $18.1 billion from 2015 through 2035. The cost estimate included $5.5 billion specifically for work on wastewater treatment plants in New York, Connecticut, and the upper watershed states, which may include upgrading the plants with available technologies for nutrient removal. Study members also estimated that activities to reduce nitrogen by addressing CSOs and urban stormwater in Connecticut may cost at least $4.4 billion and $700 million. Finally, the cost estimate included $12.4 billion to complete ongoing work in New York and Connecticut to reduce overflows from combined sewer systems as well as sewer systems that are not combined with stormwater systems. The remainder of the $18.9 billion was for activities related to goals to achieve thriving habitats and other restoration themes. As shown in table 7, Study members estimated that these other activities could cost $778 million from 2015 through 2035. According to the 2015 plan, activities to address the goals to achieve thriving habitats and abundant wildlife, such as by protecting open space, may cost $650 million—$500 million in New York and $150 million in Connecticut. These activities could include acquiring properties that the Study has identified as high priority for conservation to minimize coastal development in the future. Study members also estimated in the 2015 plan that Connecticut and New York would spend about $4 million each on education activities. These activities could include volunteer and outreach efforts for the general public at the 33 Long Island Sound Stewardship Areas, such as how human disturbance can affect wildlife. Economic guidance generally states that investment decisions should be informed by a consideration of both benefits and costs of relevant alternatives. For example, the Office of Management and Budget (OMB) has issued guidance on estimating costs and benefits to help federal agencies efficiently allocate resources through well-informed decision making about activities. This guidance includes OMB Circular A-94, which we have previously identified as providing leading practices for economic analysis. OMB Circular A-94 directs agencies to follow certain economic guidelines for estimating costs and conducting cost- effectiveness analyses of federal programs or policies to promote efficient resource allocation through well-informed decision making in certain circumstances. The guidance applies to federal agencies and programs, but we have previously found that it provides leading practices for economic analysis of investment decisions. Under OMB Circular A-94, a cost estimate is to include a comprehensive assessment of the costs. By developing its $18.9 billion estimate, the Long Island Sound Study has taken steps to assess the potential costs of future restoration activities. However, the 2015 plan includes 20-year cost estimates for activities related to 10 of the 20 long-term targets that the Study plans to achieve. These cost estimates focus primarily on activities to achieve clean waters and healthy watersheds and thriving habitats and abundant wildlife. These include restoration activities that address wastewater treatment plants to help achieve the long-term target nitrogen loading, and restoration activities to conserve open space to achieve the long-term target protected open spaces. However, the total does not include the cost of activities to achieve other long-term targets such as river miles restored for fish passage, tidal wetlands extent, marine debris, and public access to beaches and waterways. A Study member said that the Study completed 20-year estimates for proposed restoration activities where feasible and included them in the 2015 plan. The Study member also said that EPA worked with Study members to develop cost estimates using costs for past restoration activities. However, the Study member said that the exact course of action, and therefore costs, for many of the long-term targets were not defined and were still uncertain. For example, the Study only recently invested funds to evaluate nitrogen reduction targets to attain water quality standards, which can be used to determine the scope of work needed and costs to inform a cost estimate associated with achieving the nitrogen loading target. OMB Circular A-94 recognizes that estimates of costs are typically uncertain because of imprecision in underlying data and assumptions and states that this uncertainty can and should be part of the analysis and estimate. According to the circular, because such uncertainty is basic to many analyses, its effects should be analyzed and reported. One way to handle such uncertainty in a cost estimate is to perform a sensitivity analysis, which will result in a range of possible cost estimates. By working with Study members to develop cost estimates that include analyses of uncertainties for each of the targets in the plan, EPA and the Study could better estimate the comprehensive costs for Long Island Sound restoration and could better allocate resources and make decisions about their financial investments in the Sound. In addition to the 20-year cost estimates, the 2015 plan contained four supplemental documents that described the 139 implementation actions for carrying out the strategies for the plan’s four themes in greater detail as well as estimated costs for carrying out those implementation actions for fiscal years 2015 through 2019. EPA’s funding guidance for comprehensive conservation and management plans states that agencies should estimate the range of potential costs of all actions to implement the plan. For the four 5-year supplemental documents that it developed, EPA worked with the Study to create four cost ranges: (1) $0 to $25,000; (2) $25,000 to $150,000; (3) $150,000 to $1 million; and (4) greater than $1 million. The Study then assigned these ranges to the implementation actions in the four 5-year implementation plans for each theme. However, the Study only assigned 75 percent of the 139 implementation actions in the 2015 plan to these four ranges. Instead of a cost range, the Study identified the funding needs for more than a third of the remaining 25 percent of the actions as staff time or not applicable. A Study member said that the Study did not assign a range of costs for staff time and identified some action costs as not applicable because, for example, the work required would be intermittent or the associated costs were accounted for in other implementation actions. According to Circular A-94, uncertainty, such as staff time, should be included in a cost estimate. In addition, implementation actions for which costs are accounted for elsewhere could be assigned to the Study’s first cost range, $0 to $25,000. According to the Study member, estimates of potential cost ranges for the implementation actions could be included in future supplements to the 2015 plan. By working with the Study to estimate the range of potential costs for all the implementation actions and including the estimates in future supplements to the 2015 plan, EPA would have better assurance that Study members have complete information to guide resource allocation decisions about activities to achieve the goals of the 2015 plan. By identifying six priority problems and associated goals in the 1994 plan and taking actions to achieve these goals, the Study, with EPA as director, has provided a long-standing focus on improving the water quality and other ecosystem functions in the Sound and its surrounding watershed. In its updated 2015 plan, the Study identifies further actions to be taken and has identified numerical goals for almost all of the 20 long- term targets in the 2015 plan, which unlike the 1994 plan, will enable the Study to do a comprehensive assessment of progress toward the numerical goals of the 2015 plan. As of June 2018, the Study has not yet fully incorporated leading practices for performance reporting, such as evaluating actions for unmet goals, in the web pages the Study plans to use to report progress for the 20 long-term targets. By working with the Study as it finalizes its reporting format, EPA can ensure that the leading practices of performance reporting are fully incorporated, which in turn will help ensure that the Study is providing information to the public and Congress about its restoration progress. In addition, the 2015 plan includes 20-year cost estimates for some, but not all the activities related to the 20 long-term targets that the Study plans to achieve. By working with Study members to develop cost estimates that include analyses of uncertainties for each of the targets in the plan, EPA and the Study could better estimate the comprehensive costs for Long Island Sound restoration and ensure better resource allocation decisions for the Sound. In addition, the Study has not estimated the range of potential costs of all 139 implementation actions in the 2015 plan. By working with the Study to estimate the range of potential costs for all the implementation actions and including the estimates in future supplements to the 2015 plan, EPA would have reasonable assurance that Study members have considered complete cost information when making resource allocation decisions about activities to achieve the goals of the 2015 plan. We are making the following three recommendations to the Environmental Protection Agency in its capacity as the Director of the Long Island Sound Study, in coordination with Study members: The Director, working with the Study, should ensure that as the Study finalizes its reporting format, it fully incorporates leading practices of performance reporting. (Recommendation 1) The Director, working with the Study, should develop cost estimates that include analyses of uncertainties for each of the targets in the 2015 plan. (Recommendation 2) The Director, working with the Study, should estimate the range of potential costs for all implementation actions and include the estimates in future supplements to the 2015 plan. (Recommendation 3) We provided a draft of this report to EPA and the departments of Agriculture, Commerce, Defense, and the Interior for their review and comment. We also provided a draft of the report to the Connecticut Department of Energy and Environmental Protection and the New York State Department of Environmental Conservation for their review and comment. EPA provided written comments, which are reproduced in appendix V, and stated that it agreed with the conclusions and recommendations in our report. EPA also provided technical comments, which we incorporated as appropriate. The departments of Agriculture, Defense, and the Interior, and the Connecticut Department of Energy and Environmental Protection responded by email that they did not have comments on the draft report. The Department of Commerce and the New York State Department of Environmental Conservation provided technical comments, which we incorporated as appropriate. In a letter signed by the Regional Administrators of EPA Region 1 and Region 2, EPA stated that the report is timely because the Study is working to transition from the 1994 plan to evaluating and reporting on the 2015 plan and highlighted steps the agency will take to meet our recommendations. EPA stated that working with the Study the agency: plans to further evaluate, develop, and apply leading practices of performance reporting as it finalizes its reporting format, estimating enhancements to the reporting format will be available on the Study’s website by the end of 2019; will evaluate the range of costs needed to attain each of the targets and include cost estimates with uncertainty bounds in future updates of the plan, expecting the enhanced cost information will be available on the Study’s website by the end of 2019; and will ensure that the planned update to implementation actions includes a range of costs for all implementation actions, estimating actions will be completed in 2020. In its written comments, EPA suggested two specific revisions to our report. First, EPA stated that the Study has established more intermediate goals than we included in our report. In our report, we said that as of March 2018, the Study had established intermediate targets for 7 of the 20 long-term ecosystem targets. According to EPA’s comments, applying the methodology that we used in the report to the 20 ecosystem targets results in 11 targets having intermediate goals. EPA also stated that the agency will work with the Study to better communicate these existing intermediate goals on the web pages reporting ecosystem progress. In response to this information, we analyzed the Study’s web pages that were available in June 2018 and agreed that five additional ecosystem targets had intermediate goals as of that date. We revised the report to include this information. Second, EPA stated that the report’s statement that the 2015 plan estimates that future implementation activities may cost nearly $21.9 billion is a misleading interpretation of the 2015 plan’s implementation costs because the plan does not present that figure. EPA stated that table 6 in our report appeared to double count Connecticut’s combined sewer overflow costs in the 2015 plan by including both the $4.4 billion taken from text and $3 billion taken from a table in the plan. Although we presented these data to EPA during our review, the error was not caught until the draft report was reviewed. EPA stated that the 2015 plan is admittedly unclear in attributing costs to specific categories and that the agency will work with the Study to clarify the estimated implementation costs in future updates. In response to EPA’s comments, we reviewed the 2015 plan and removed the $3 billion cost estimate for Connecticut’s combined sewer overflow from table 6 and revised the total cost estimate for future restoration activities to $18.9 billion. We are sending copies of this report to the appropriate congressional committees, Administrator of EPA, Secretary of Agriculture, Secretary of Commerce, Secretary of Defense, Secretary of the Interior, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VI. This appendix provides information on the scope of work and the methodology used to examine (1) what is known about the progress made toward achieving the 1994 Long Island Sound Comprehensive Conservation and Management Plan (1994 plan); (2) the goals of the 2015 Long Island Sound Comprehensive Conservation and Management Plan (2015 plan) and factors that may hinder progress according to Long Island Sound Study (the Study) members; (3) how Study members plan to measure and report on progress toward the goals of the 2015 plan; and (4) what Study members expended on restoration activities in fiscal years 2012 through 2016 and cost estimates for future activities. To examine what is known about the progress toward achieving the 1994 plan, we analyzed the plan to gain a better understanding of it and identify any goals associated with the six priority problems. We also analyzed data from the Study’s website in November 2017, the Study’s most recent progress reports, and the book Long Island Sound: Prospects for the Urban Sea—a summary of available science and environmental data for the Long Island Sound (the Sound). We analyzed the Study’s most recent progress reports—Protection and Progress and Sound Health. We analyzed data that were on the Study’s website in November 2017 because the time frame coincided with the time frames of our review. These data, reports, and the book included examples of progress but did not assess performance toward the goals associated with the priority problems in the 1994 plan. Therefore, we asked Study members for their responses on progress and the data that supported their responses. To do so, we interviewed Study members to obtain their views about progress toward the 1994 plan. For our interviews with Study members, we contacted all 16 members of the Study and representatives of the 5 Study work groups that were active at the time of this review. Of the 16 Study members, 14 agreed to participate in this review: (1) Department of Agriculture’s Natural Resources Conservation Service; (2) Department of Commerce’s National Marine Fisheries Service; (3) Department of Defense’s U.S. Army Corps of Engineers; the Department of the Interior’s (4) U.S. Fish and Wildlife Service and (5) U.S. Geological Survey; (6) Environmental Protection Agency (EPA); (7) Connecticut Sea Grant; (8) Connecticut Department of Energy and Environmental Protection; (9) New York State Department of Environmental Conservation; (10) New York Department of State; (11) New York City Department of Environmental Protection; (12) the New England Interstate Water Pollution Control Commission; (13) the Study’s Citizens Advisory Committee; and (14) the Study’s Science and Technical Advisory Committee. The 5 Study work groups are (1) Climate Change and Sentinel Monitoring Work Group, (2) Habitat Restoration and Stewardship Work Group, (3) Public Involvement and Education Work Group, (4) Water Quality Monitoring Work Group, and (5) Watersheds and Embayment Work Group. Representatives from all 5 work group agreed to participate in this review. We asked the following question for each priority problem: “Since 1994, how much progress has been made addressing the priority problem in Long Island Sound: no progress, little progress, moderate progress, or goal has been met?” For purposes of reporting responses to this question, we refer to Study members and work group representatives collectively as Study members. The New York State Departments of Environmental Conservation and State provided their responses together, and therefore we counted the two agencies as one Study member. The New England Interstate Water Pollution Control Commission did not provide a response to this question. As a result, 17 Study members provided responses to this question. As part of the interviews, we also asked Study members, “What evidence are you basing your response on?” We did not independently assess the reliability of the data they cited for the purpose of evaluating if the data showed progress toward addressing the priority problems. Instead, we noted the limitations the Study associated with the data to better interpret Study members’ views. For some priority problems, Study members said that they were unable to provide a response because they did not have sufficient knowledge or data about progress toward the associated goals. As a result, the total number of Study members who answered these questions varied by priority problem and, for each priority problem, we identified the total who provided a response. In addition, we visited two Long Island Sound restoration projects to observe restoration activities and learn how these activities may contribute to progress toward the goals of the 1994 plan. To examine the goals of the 2015 plan and factors that may hinder progress according to Study members, we analyzed the 2015 plan to obtain information about the goals to achieve four themes in the plan. In the interviews with the 17 Study members described above, we asked them “What factors, if any, may hinder achievement of the 2015 plan’s goals.” More than one Study member representative was present in many of the interviews and each representative in the interviews could identify as many factors as they thought necessary. As a result, the number of times a factor was identified—54—was greater than number of Study members. We narrowed the number of responses to 11 categories by grouping together factors that were the same or were similar. In those cases that more than one representative of the same Study member identified the same factor, we counted that factor only once for that Study member in order to generate the statements we used in the report. See appendix II for a complete list of all the factors that were identified, the number of Study members who identified each factor, and how we grouped those factors into the 11 categories. To examine how Study members plan to measure and report on progress toward achieving the 2015 plan, we analyzed sections of the plan that contained goals associated with four themes and relevant web pages that the Study issued in March 2018 and then analyzed them again in June 2018. We also conducted interviews with subject matter experts to obtain their views on the sections of the 2015 plan that contained the themes and goals, and with Study members to learn how they planned to report on progress toward the 2015 plan. As a result of our analysis of the 2015 plan and interviews with Study members, we identified the 20 long-term targets and associated indicators that Study members plan to use to measure progress toward the 2015 plan, and determined that the Study plans to report on progress using the web pages. For our interviews with subject matter experts, we identified individuals with expertise on the 20-long term targets and their associated indicators. We identified 73 experts by asking Study members to recommend experts and identifying the contributors to Long Island Sound: Prospects for the Urban Sea. We removed from this list those individuals whom we had already interviewed, those who represented a Study member, those who were involved with the development of the 2015 plan, and those whose contact information we were unable to obtain from the Study member or an Internet search. We invited by email the remaining 47 experts to participate in interviews to obtain their views about the 20 long- term targets and their associated indicators. We also provided the experts with a list of the 20 targets and indicators and asked them to review the targets and to “select those that you would be comfortable speaking about based on your knowledge and expertise.” Of the 34 experts who responded, we interviewed 19 about the targets they had expertise in and could discuss. The remaining 15 experts chose not to participate or said that they were ineligible because they were either involved with the development of the 2015 plan or affiliated with a Study member. We then interviewed the 19 experts about each of the targets and associated indicators that they said they had identified. The experts we interviewed included members of academia, as well as one state official and one county official. Not all of the 19 experts were able to address each of 20 targets and associated indicators. As a result, the total number of expert responses varied for each target and associated indicator and we identified the total number of experts who responded to questions about each target and associated indicator. Because we used a nonprobability sample, the information obtained from these interviews is not generalizable to other individuals with expertise on the 20 long-term targets and their associated indicators but provides illustrative information. For our analysis of the web pages the Study published in March 2018, we used GAO’s prior work on performance management reporting, which identified leading practices that have the potential for enhancing the general usefulness of performance reports as vehicles for providing decision makers and the public with information to assess progress. We then analyzed the web pages to determine the extent to which they incorporated these leading practices. To examine what Study members expended on restoration activities in fiscal years 2012 through 2016 and cost estimates for future activities, we took the following steps: we analyzed EPA’s Justification of Appropriation Estimates for Committee on Appropriations for fiscal years 2014 through 2018 to obtain the relevant EPA expenditure data; we obtained and analyzed expenditure data from other Study members; and we analyzed the cost estimate information in the 2015 plan. We chose this time period because it was the most recent period for which expenditure data were available during the time frames for our review. Of the 12 Study members described above, 7 provided at least some expenditure data, 4 said that they do not fund restoration activities, and 1 did not reply to our request for expenditure data. We were unable to compare expenditure data across Study members because three Study members said that they spend funds for restoration activities in the region around Long Island Sound but do not isolate expenditures made specifically for it. We assessed the reliability of these data through interviews with Study members who were familiar with these data. We found these data to be sufficiently reliable for the purpose of this reporting objective with the limitation that they represent the minimum amount of Study member expenditures on restoration activities in fiscal years 2012 through 2016. Further, we attended two Study meetings (on April 12, 2017, by phone, and May 11, 2017, in person) to obtain information about how Study members make expenditure decisions for restoration activities. For our analysis of cost estimate information in the 2015 plan, we consulted the Office of Management and Budget Circular A-94, which provides general guidance for estimating costs, and analyzed EPA’s funding guidance for comprehensive conservation and management plans. We then analyzed the cost estimates in the 2015 plan to determine the extent to which they followed the Office of Management and Budget and EPA guidance. In our interviews with Study members and subject matter experts described above, we determined that Study members had not developed other cost estimates for restoring Long Island Sound, and experts were unaware of other such estimates. We also interviewed relevant officials from EPA, the Connecticut Department of Energy and Environmental Protection, and the New York State Department of Environmental Conservation to obtain information about how the cost estimates in the 2015 plan were created. We conducted this performance audit from January 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In our review of the Long Island Sound restoration efforts, we asked Long Island Sound Study (the Study) members to identify factors that may hinder Long Island Sound restoration progress. Specifically, we asked the following question to all 17 Study members we interviewed: “What factors, if any, may hinder achievement of the goals of the 2015 Long Island Sound Comprehensive and Conservation Management Plan.” More than one Study member representative was present in many of the interviews and each representative could identify one or more factors. As a result, the number of factors identified—54—was greater than number of Study members who identified the factor. Table 8 shows the 11 categories of factors, the number of times factors in those categories were identified, and the number of Study members who identified each factor. We narrowed the number of responses to 11 factor categories by grouping together factors that were the same or were similar. Table 9 shows each factor category, each of the original factors that Study members identified, and the number of times the factor was identified by Study members. The 2015 Long Island Sound Comprehensive Conservation and Management Plan has four broad themes—clean water and healthy watersheds, thriving habitats and abundant wildlife, sustainable and resilient communities, and sound science and inclusive management— and associated goals. It also has 20 long-term targets with associated indicators (see table 10). We interviewed a nonprobability sample of 19 individuals with expertise on Long Island Sound to obtain their views on the 20 long-term targets and their associated indicators that the Long Island Sound Study said they plan to use to measure progress toward the goals of the 2015 Long Island Sound Comprehensive Conservation and Management Plan. We asked each expert to review the targets and associated indicators and to “select those that you would be comfortable speaking about based on your knowledge and expertise.” We then conducted interviews with each expert, and asked “is the indicator a valid, accurate, and reliable way to measure progress to achieve the target?” Table 11 shows the expert’s responses for each target. In addition to the contact named above, Susan Iott (Assistant Director), Michelle K. Treistman (Analyst-in-Charge), Chuck Bausell, Mark Braza, Ellen Fried, Benjamin T. Licht, James I. McCully, Katya E. Rodriguez, and Sara Sullivan made key contributions to this report. Great Lakes Restoration Initiative: Improved Data Collection and Reporting Would Enhance Oversight. GAO-15-526. Washington, D.C.: July 21, 2015. Great Lakes Restoration Initiative: Further Actions Would Result in More Useful Assessments and Help Address Factors That Limit Progress. GAO-13-797. Washington, D.C.: September 27, 2013. Chesapeake Bay: Restoration Effort Needs Common Federal and State Goals and Assessment Approach. GAO-11-802. Washington, D.C.: September 15, 2011. Recent Actions by the Chesapeake Bay Program Are Positive Steps Toward More Effectively Guiding the Restoration Effort, but Additional Steps Are Needed. GAO-08-1131R. Washington, D.C.: August 28, 2008. Coastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could Help Guide Future Restoration and Protection. GAO-08-130. Washington, D.C.: December 14, 2007. South Florida Ecosystem: Restoration Is Moving Forward but Is Facing Significant Delays, Implementation Challenges, and Rising Costs.GAO-07-520. Washington, D.C.: May 31, 2007. Chesapeake Bay Program: Improved Strategies Are Needed to Better Assess, Report, and Manage Restoration Progress. GAO-06-96. Washington, D.C.: October 28, 2005. Great Lakes: Organizational Leadership and Restoration Goals Need to Be Better Defined for Monitoring Restoration Progress. GAO-04-1024. Washington, D.C.: September 28, 2004. Great Lakes: An Overall Strategy and Indicators for Measuring Progress Are Needed to Better Achieve Restoration Goals. GAO-03-515. Washington, D.C.: April 30, 2003.", "summary": "Long Island Sound, an estuary bordered by Connecticut and New York, provides numerous economic and recreational benefits. However, development and pollution have resulted in environmental impacts, such as the degradation of water quality. EPA partnered with both states to create the Study to restore and protect the Sound. The Study developed a comprehensive conservation and management plan in 1994 and updated the plan in 2015. GAO was asked to examine federal efforts to restore the Sound. This report examines, among other objectives, (1) what is known about the progress made toward achieving the 1994 plan, (2) how Study members plan to measure and report on progress toward achieving the 2015 plan, and (3) estimated costs of the restoration. GAO reviewed Study plans, reports, and data. GAO also interviewed 12 Study members—including federal and state agency officials—and representatives of 5 Study work groups about restoration efforts and progress made. The Long Island Sound Study (the Study) is a federal-state partnership formed in 1985 to restore Long Island Sound. The Environmental Protection Agency (EPA) and officials from Connecticut and New York provide oversight for the Study, which includes federal and state agencies, nonprofit organizations, and other groups. GAO found the following: Progress toward 1994 Plan. The Study established an initial plan for the Sound in 1994 and has collected data on certain indicators of the Sound's health and published progress reports on its website. However, the Study has not comprehensively assessed progress against the 1994 plan. In the absence of such an assessment, GAO interviewed Study members who generally agreed that moderate progress has been made in achieving goals for five of the six problem areas in the 1994 plan. Without a comprehensive assessment, it is not possible to determine the extent these views reflect actual progress. Reporting Progress for the 2015 Plan. The Study's 2015 management plan identifies 20 long-term targets and associated numerical indicators that will be used to measure future progress. The Study has also updated the format for pages on its website to provide more consistent progress reports for these targets. However, the reports do not yet fully incorporate leading practices for performance reporting that GAO has previously identified. For example, they do not include evaluations of goals that are not met for 15 targets. By ensuring that leading practices are fully incorporated into the Study's performance reporting efforts, EPA can help the Study better assess and report on future progress. Estimating Costs of Restoration. The Study has estimated that the future costs of restoration will be at least $18.9 billion through 2035. However, the current estimates are understated because they do not include the costs of all activities that will be needed to accomplish the 2015 plan, and they do not reflect the uncertainty associated with some of the costs. By capturing the full costs and uncertainties in cost estimates, the Study can provide decision makers critical information needed to allocate resources effectively. GAO recommends that EPA work with the Study to ensure that it fully incorporates leading practices into its performance reporting efforts and that its cost estimates include the full range of activities as well as those for which there is uncertainty. EPA agreed with GAO's recommendations and highlighted steps the agency will take to meet the recommendations.", "document_type": "gao"}
{"report": "Although the Bureau goes to great lengths to conduct an accurate count of the nation’s population, some degree of inaccuracy is inevitable. When the census misses a person who should have been included, it results in an undercount. An overcount occurs when an individual is counted more than once or in the wrong place. These errors are problematic because certain groups such as minorities, young children, and renters are more likely to be missed in the census, while other groups such as those who may own a second, seasonal home are more likely to be counted more than once. As census data are used to apportion seats in Congress, redraw congressional districts, and allocate billions of dollars in federal assistance each year, improving coverage and reducing undercounts are important. As an example, the Bureau reported that the 2010 Census did not have a significant net undercount or overcount nationally. However, as shown in figure 1, errors in census coverage were unevenly distributed through the population. For example, the Bureau estimated that it missed nearly 5 percent of American Indians living on reservations—the sociodemographic group with the highest percent net undercount in 2010—whereas the Bureau estimated it overcounted almost 1 percent of non-Hispanic whites. In addition to those groups with characteristics the Bureau can measure—based on their responses to certain questions asked on the census questionnaire—there are many other hard-to-count groups, some of which cut across sociodemographic groups, as shown in table 1. For example, lesbian, gay, bisexual, transgender, or queer/questioning persons or persons who distrust government can cut across all sociodemographic groups. There are complex reasons why certain groups are considered hard-to- count. According to Bureau officials, for example, one way to think about the hard-to-count problem is to consider what groups are hard to locate, contact, persuade, and interview for the census (see figure 2). Hard-to-locate. Some groups are hard-to-locate because where they live is unknown, or they move frequently. For example, the Bureau faces difficulty counting persons experiencing homelessness. Adding to this difficulty are reported increases in the prevalence and complexity of outdoor encampments across the country. Inhabitants design many of these encampments to remain hidden; some people may remain in an encampment for years while other people may move frequently. Hard-to-persuade. Other groups are hard-to-persuade to participate in the census. For example, while the Bureau had identified those who distrust government as a hard-to-count group based on research prior to the 2010 Census, in November 2017, the Bureau reported to its National Advisory Committee an increase in unprompted confidentiality concerns raised by individuals in focus groups and pretests for the 2020 Census and other surveys. Multiple factors. Some groups are hard to count for multiple complex reasons. For example, a Bureau taskforce found that households with young children up to 4 years old may be missed altogether due to frequent moves between rental units (hard-to-contact). Moreover, some households studied—such as complex households with multiple generations—also appeared to be confused about whether or not to include their young children when completing the questionnaire or when being interviewed by census enumerators. The Bureau also found that language barriers sometimes resulted in households leaving young children off their census or other survey questionnaire (hard-to- interview). An appropriation in the American Recovery and Reinvestment Act of 2009 (Recovery Act) allowed the Bureau to increase the funding of the Bureau’s 2010 Census partnership and communications efforts. The Bureau has partnered with governments, businesses, and local community organizations to help promote the census. The Bureau has also relied on a communications campaign including paid advertisements in national and targeted markets to help build awareness of the census. After adjusting for inflation, the Bureau spent about $123 million to expand its advertising and about $125 million to expand its partnership efforts (in 2017 dollars), primarily by hiring additional partnership-related staff beyond original plans. Partnership staff hired to support the 2010 Census were responsible for mobilizing local support for the census by working with local organizations to promote participation. Partnership staff for the 2010 Census included a mix of partnership specialists—responsible for building relationships with and obtaining commitments from governments, local businesses, and other organizations to help promote the census—managers, graphic designers, and clerical support positions. After receiving Recovery Act funding, the Bureau created a new partnership assistant position. After the partnership specialists had established agreements with local organizations, these partnership assistants were responsible for supporting the implementation of promotion efforts, such as by staffing fairs and other events. Bureau officials told us that they believed that creating a new partnership assistant position would help promote census awareness. The Consolidated Appropriations Act, 2018 directed the Bureau to conduct its fiscal year 2018 partnership and communications efforts in preparation for the 2020 Census at a level and staffing no less than the Bureau conducted during fiscal year 2008 in preparation for the 2010 Census. The act appropriated more than $2.5 billion for the Periodic Censuses and Programs account, which according to Bureau officials includes over $1 billion from the Bureau’s fiscal year 2019 budget request intended to smooth transition of funding between fiscal years, such as in the event of a continuing resolution. The Bureau will continue to rely on its Integrated Partnership and Communications operation—designed to communicate the importance of census participation and motivate self-response—as a key component of its efforts to improve enumeration of hard-to-count persons in the 2020 Census. Evaluations conducted by the Bureau found that its partnership and communications efforts had positive effects on increasing awareness and participation among the hard-to-count in prior censuses. Because of the positive effects, the Bureau has begun outreach to the more than 257,000 tribal, state, and local governments as well as other businesses and organizations it partnered with in 2010. For example, the Bureau plans to continue using “trusted voices”—individuals or groups with relevance, importance, and relatability to a given population, such as local leaders and gatekeepers within isolated communities—to promote the census. As part of this effort, the Bureau plans to continue outreach initiatives to specific constituencies, such as to faith-based communities, and, through its Foreign Born/Immigrant initiative, to outreach and communicate with recent immigrants, undocumented residents, refugees, and migrant and seasonal farm workers. In addition, the Bureau still plans to advertise in national and targeted markets. For example, to support its 2020 outreach efforts, including to hard-to-count groups, the Bureau awarded a communications contract in August 2016 to Young and Rubicam, an advertising firm. As has been done in prior censuses, this contractor has enlisted 14 partners and subcontractors to help it reach specific sociodemographic groups, such as American Indian and Alaska Native populations and Hispanic communities. Given the increasingly complex task of counting those historically missed in the census, the Bureau has taken steps or plans to enhance some aspects of the initiatives under its Integrated Partnership and Communications operation and to other key operations compared to the 2010 Census, as shown in table 2. For example, the Bureau overhauled a metric it has used to help manage and target field work for its partnerships to areas with hard-to-count populations, basing it now on predictions of each household’s likelihood to self-respond to the census. Using this new low response score metric, the Bureau created a publicly available online mapping tool for its partnership staff and other users to better understand the sociodemographic make-up of their assigned areas and to plan their outreach efforts accordingly. Moreover, as we previously recommended in 2010, the Bureau also plans to develop predictive models to help allocate its advertising using: (1) these predictive response data, (2) results describing the complexity of difficult enumeration from its recent “behaviors, attitudes, and motivators survey” study and focus groups, and (3) other third-party data. The Bureau is still evaluating certain initiatives before deciding whether or not to include them in its 2020 plans. For example, as part of the 2018 End-to-End Test currently underway in Providence, Rhode Island, the Bureau is piloting the use of Internet kiosks in selected post offices to help allow persons to self-respond to the census. Bureau officials said they will decide whether to move forward with the use of kiosks in post offices in 2020 after evaluating the pilot and the test. In addition, according to the Bureau’s current planning documents, the Bureau has plans to change other key operations to help improve the enumeration of certain hard-to-count groups. For example, to help address the complex undercount of young children, the Bureau revised the census questionnaire and instructions to enumerators to more explicitly mention the inclusion of grandchildren and any non-relatives in household population counts. In addition, the Bureau’s planning documents describe plans to offer administrators at certain group quarters locations, such as college dormitories, the option to electronically transfer their rosters to the Bureau. Bureau officials said that this planned change will help reduce the need for enumerators to visit those locations, and that such an efficiency gain will allow them to devote resources on the ground to other harder to enumerate group quarters. Recognizing the importance of reaching an increasingly linguistically diverse population, the Bureau has also made significant changes to its Language Services operation for 2020, including increasing the number of non-English languages formally supported by the Bureau. Table 3 below summarizes changes in the number of languages the Bureau plans to support. According to the Bureau, this larger choice of languages should increase the percentage of limited-English-speaking households directly supported by that operation from 78 percent in 2010 to 87 percent in 2020. The Bureau is still assessing the level of non-English support it will directly provide through advertising, partnership, and promotional materials. Bureau officials stated that they will decide the number of — and which—non-English languages to support after it has completed research on how best to segment advertising markets in fall 2018. Until then, it has committed to at least 12 non-English languages—which is less than half of the 27 non-English languages similarly supported in the 2010 Census. Bureau officials said that one action they will take to mitigate any effects if the Bureau decides on a fewer number of languages for 2020 is to provide language-independent media templates—including scripts to videos ready for non-English voiceovers— to any partner groups that may need them. The Bureau has also formalized its language translation capabilities for the non-English languages it chooses to support based on 2010 Census evaluations that found, among other things, that the Bureau’s lack of sufficient oversight of its translation process hampered consistency of its translation of promotion and outreach materials. For the 2020 Census, Bureau officials said they intend to rely on in-house translation experts adhering to translation industry standards. Bureau officials stated that the Bureau will not attempt to oversee the translations that partners may make into less commonly spoken languages using the Bureau’s language-neutral materials when trying to reach more isolated language areas, though officials stated that its partners, including contractors for advertising, will rely on Bureau-developed language glossaries for census terminology when translating into other languages. The Bureau estimates total spending for its 2020 partnership and communications outreach efforts to be similar to what it reported spending on those efforts for the 2010 Census after adjusting for inflation. Specifically, according to documents supporting the Bureau’s most recent life cycle cost estimate for the 2020 Census, the Bureau may spend about $850 million in its outreach to promote the 2020 Census, compared to nearly $830 million in total spending in comparable categories for the 2010 Census. (See table 4.) Partnership staff. According to the Bureau’s current planning documents, it will hire nearly twice as many partnership specialists— responsible for building relationships and obtaining commitments from organizations—to support the 2020 Census than it hired to support the 2010 Census. Despite this planned increase in partnership specialists, the Bureau’s total estimated spending on partnership staff—$248 million—is less than the $334 million the Bureau reported spending in the same cost category for 2010 after adjusting for inflation. This change is in part because the Bureau does not plan to hire any partnership assistants to support the 2020 Census. According to Bureau planning data from the 2010 Census, the Bureau planned to hire over 1,700 partnership assistants—those that assisted specialists for the 2010 Census—with Recovery Act funding. As noted previously, Bureau officials said that the additional funding it received from the Recovery Act in 2009 (about $125 million in 2017 dollars) largely funded the hiring of these partnership assistants. The effect of the Recovery Act funding on partnership hiring is shown in figure 3 below. According to Bureau officials, without the Recovery Act funding and its direction for the Bureau to increase hiring in order to stimulate the economy, the Bureau would not have hired the large number of partnership assistants that it did. According to Bureau officials, this shift in hiring toward more partnership specialists will enable a greater focus on creating more partnerships and require greater reliance on partner organizations to help with staffing for outreach and promotion events in local communities that partnership assistants were used for in the 2010 Census. While the ability of future partners to help with these events remains to be seen, Bureau officials involved in early outreach with partners stated that they believe this planned approach shows early promise based on the over 1,500 partners they have engaged for the 2020 Census so far. Headquarters support. The $111 million amount the Bureau plans to spend in headquarters support for outreach efforts is similar to the $106 million it spent in the 2010 Census after adjusting for inflation. According to Bureau documents, this support will be used for advertising, media, and partnership efforts. Communications campaign. The Bureau plans to spend more in its communications campaign category in the 2020 Census than what it reported spending in this area during the 2010 Census—$492 million compared to $388 million after adjusting for inflation, according to the Bureau’s cost estimation documents. The campaign will include paid advertising and the development of promotional materials. According to Bureau officials, they will initiate much of this spending in May 2019. This larger figure includes about $152 million for additional contracted services still being planned, but provisionally allocated for various advertising support efforts with the balance for various partnership materials not included in other contracts. The Bureau does not plan to repeat its “2010 Census Road Tour” involving a large mobile display and over a dozen cargo vans that were driven to promotional events around the country at a cost of about $16.6 million after adjusting for inflation. While the Bureau did not conduct a formal evaluation of the initiative’s effectiveness at encouraging response during the 2010 Census, Bureau officials told us that they do not believe it was as effective a use of resources compared to the other options they are planning for 2020. An evaluation conducted by the Bureau of its 2010 partnership efforts recommended that, for the 2020 Census, the Bureau hire at least a core group of partnership staff 3 years prior to census day instead of the 2 years prior as was done for the 2010 Census. Consistent with that recommendation, according to Bureau officials, the Bureau hired five partnership specialists for the 2020 Census in October 2015—more than 2 years earlier in the decennial cycle than its first hiring of partnership specialists in January 2008 for the 2010 Census, as shown in figure 4. Bureau officials told us that this hiring helped the Bureau complete tribal consultations earlier than it had for the 2010 Census. Moreover, the Bureau continued its early hiring with 39 more partnership specialists in fiscal year 2017. Bureau officials said that, with the additional year of preparation, these staff initiated outreach to the highest level of government in each of the 50 states, the District of Columbia, and Puerto Rico, resulting in, as of April 2018, partnership staff having obtained commitments or statements of interest from all but two state governments to form State Complete Count Commissions/Committees. These Commissions/Committees are intended to help form partnerships at the highest levels of government within each state and leverage each state’s vested interest in a timely and complete count of its population. Bureau officials said they also recently further accelerated the Bureau’s planned time frames for hiring partnership specialists. These officials said that with the funds made available in the Fiscal Year 2018 Consolidated Appropriations Omnibus, the Bureau began posting job announcements for about 70 partnership specialists in April 2018 and hopes to begin hiring in July 2018—3 months earlier than October 2018, as had otherwise been planned. In addition, with 2018 funds, Bureau officials said they are working to identify elements of the communications campaign to begin earlier than the planned start date of October 1, 2018. The Bureau and the lead communications contractor identified possible efforts to start months earlier. According to Bureau officials, they are finalizing how to accelerate these efforts, including the Statistics in Schools initiative, media planning, and hosting a creative development workshop with the communications contractors. According to the Bureau and as shown in figure 5, over one-third of its 35 operations (14 of 35) are designed, at least in part, to help improve the enumeration of hard-to-count groups. These efforts range from the earliest field data collection operations—such as address canvassing when the Bureau aims to identify all possible addresses where people live, including hidden housing units such as basement apartments or attics—to some of its later field operations, such as nonresponse follow- up when census enumerators visit each household that did not self- respond. Each of the 35 operations is implemented by a separate team that manages and controls its activities and, according to Bureau governance documents, is also responsible for reviewing and managing its risks, schedule, and scope, as well as developing needed capability requirements. Team leads are responsible for ensuring integration with other operation teams, and escalating risks to management, as well as ensuring communication upward to the various governance bodies overseeing the decentralized structure. Operational decisions within the scope of plans that have been approved by the governance bodies are made at the team level, while ultimate responsibility rests with respective associate directors for the decennial, field, communications, and other directorates, whose staff largely comprise the teams, and the Director of the Census Bureau itself. The Bureau exercises change control over the scope, schedule, and documentation of its baseline program design, with a change control board comprising process and program managers with responsibility over the operational teams. Approved changes are formally communicated via e-mail to stakeholders in the change control process. Managing decentralized operations in such a way can be effective and provide an agency flexibility in responding to changing conditions on the ground, such as when adapting census methods in response to natural disasters as the Bureau had to do during the 2010 Census for areas affected by Hurricane Katrina. However, such decentralization also presents a challenge to management as it tries to ensure the integration of its efforts to improve enumeration of the hard-to-count groups. To help address the challenge of managing so many hard-to-count efforts that cut across the decentralized operations, during our review, the Bureau developed a draft operational design document. This document describes the major operations and initiatives that contribute to, at least in part, its goal to improve the enumeration of hard-to-count groups in the 2020 Census. This is the Bureau’s first comprehensive look at the hard- to-count goal for the 2020 Census. Bureau officials said that they developed the document because they realized that looking across the Bureau’s operations and how they relate to difficulties enumerating hard- to-count groups would provide them a useful perspective that could help identify any gaps or interdependencies in their various hard-to-count efforts. Bureau officials said they plan to refine and include this document as a chapter in the fall 2018 update of their broader 2020 Census Operational Plan. Although this is a good first step to elevate the visibility of the hard-to-count goal, we identified a number of other areas where additional steps or management focus may be needed in order to help ensure integration of certain hard-to-count related efforts, including the following: During exchanges of information between the Bureau and its National Advisory Committee in 2017 and 2018, the Bureau proposed using additional focus groups with certain population groups, census interviewers, and trusted community messengers. These focus groups are intended to identify root causes and ways to overcome the confidentiality concerns increasingly being raised by respondents in the Bureau’s earlier testing by helping to inform messaging and outreach plans as well as staff support documents and training materials. However, as of May 1, 2018, the Bureau reported that it had yet to identity the resources needed to conduct the additional focus groups it had proposed. If the Bureau is going to take this step, it would need to complete its analysis from these proposed focus groups with interviewers and others before starting to develop its 2020 messaging, currently scheduled to begin in October 2018. Any delays in scheduling these activities could have an effect on activities intended to help improve enumeration of the hard-to-count in other related operations. The detailed operational plans for 10 of the Bureau’s 14 hard-to- count-related operations have been documented and released publicly. However, we found that several of the detailed plans already released—while self-described as being updated over time to reflect changes in strategies based on ongoing planning, research, and testing—are nearly two years old and may not reflect more recent decisions made. Attention by Bureau management to the details of these operational plans as they are updated will be critical to ensure that their interdependencies with other efforts are accounted for. Similarly, as of May 2018, little detail is available about what interdependencies the other 4 hard-to-count related efforts will have on the overall 2020 Census Operational Plan and on the Bureau’s efforts to improve the enumeration of the hard-to-count in particular. For example, the Bureau’s operation to enumerate persons at transitory locations—key to counting mobile persons, including those living at motels or with traveling carnivals—is one of the 4 efforts without a detailed operational plan yet. Because the Bureau is not scheduled to test the integration of this enumeration with other systems before the 2020 Census, it remains to be seen how its forthcoming design may interact with other related operations and systems. While Bureau officials stated that procedures likely to be used for this operation are well established from prior censuses, they also stated that there may be significant changes from the past in the process the Bureau uses to determine where to count persons in this operation and may rely on changes in the non-ID processing operation—helping enumerate persons not having a pre-assigned census identification number. With less than 2 years to go until Census Day (April 1, 2020), there is little room for delay in considering how forthcoming details on hard-to-count efforts yet to be finalized— or changed based on ongoing testing or other decisions—may have consequences on other related efforts. According to the Project Management Institute’s A Guide to the Project Management Body of Knowledge, integrated change control can help address overall risk to related efforts, which often arises from changes made without consideration of the overall goals or plans. A significant amount of hard-to-count-related planning for the 2020 Census is currently underway, and in the less than 2 years remaining before Census Day, it will be important for Bureau management to maintain a focus that helps ensure that hard-to-count-related decisions yet to be made as well as any changes to those already made are integrated with other related efforts. Focused attention on these efforts will also help ensure that any interdependencies, synergies, or gaps are identified and included in the change-control processes the Bureau already has in place. As noted previously, a key component of the 2010 Census was the hiring of partnership staff to help build relationships with and obtain commitments from local organizations to help encourage census participation, particularly among hard-to-count groups. For the 2020 Census, in addition to the core relationship-building skills, Bureau officials said they are working to identify specialized skills needed to operate partnership initiatives in a 2020 environment, such as advanced knowledge of digital media. However, the Bureau faces a significant challenge in hiring these kinds of staff because it is operating in a much tighter labor market than it did prior to the 2010 Census. As a result, it may not be able to hire the partnership staff with the skills it now needs as easily as it had in the past. According to Bureau of Labor Statistics data, the unemployment rate in January 2008, when the Bureau first hired partnership staff for the 2010 Census, was 5 percent. That number increased to more than 7 percent by December 2008, and then ranged from more than 7.5 percent to 10 percent in 2009 and through Census Day in April 2010. During this time, the Bureau hired nearly 3,000 partnership staff, many of which the Bureau hired in a few short months after receiving additional funding from the Recovery Act. The unemployment rate is substantially lower now as we approach the comparable part of the decade for the 2020 Census. Specifically, the rate has ranged from 4.9 percent in October 2016, when the Bureau starting hiring for an early round of about 40 partnership staff, to less than 4 percent in May 2018. Bureau officials reported experiencing challenges during these early hiring efforts for partnership staff, although they were ultimately able to fill the nearly 40 positions the Bureau sought to fill across its six census regions. Bureau officials in the regional field offices reported observing smaller applicant pools, declined job offers, and early turnover due to a lower pay rate the Bureau offered compared to the local economy. Moreover, these officials reported seeing fewer applicants through local job markets, which had been successful recruiting mechanisms in the prior census. According to the Bureau’s planning documents, the Bureau plans to ramp up its hiring of partnership specialists between July 2018 and 2019. If the unemployment rate generally holds steady at around the 4 percent of May 2018, the Bureau will likely face challenges recruiting and retaining partnership staff with the critical skills needed. Bureau officials said that they will develop customized recruiting strategies to fill specific needs as they identify and refine the mix of partnership skills needed to support their 2020 efforts. For example, Bureau officials acknowledged the need to more effectively use USAJobs, the federal recruiting website, and targeted job announcements. They also identified the possibility of hiring additional partnership staff for short- term assignments closer to census day to help meet specific needs, such as assisting with non-English language enumeration and connecting with faith-based or immigrant communities in areas with low participation. Following through on its plans to identify an optimal mix of skill-sets and tailored recruiting strategies, in accordance with leading practices, will be important for the Bureau as it operates in a tight labor market because delays or shortfalls in hiring partnership staff could put the Bureau’s plans for building support for the census at risk. As the Bureau has decided to rely more heavily on partnership specialists as part of its outreach and promotion strategy to reach hard-to-count groups and still faces decisions about where to staff them, it has done so without the benefit of data on its actual hiring of partnership staff from the 2010 Census. During our review, the Bureau was unable to readily provide us with data on the actual number or timing of partnership specialists and assistants hired to support the 2010 Census, and instead, we had to use detailed Bureau planning documents for our analysis. Bureau officials reported that their records in 2010 did not clearly link the positions and grades recorded in the payroll system for individual staff who were hired to support a different operation to the roles they subsequently played in carrying out the partnership efforts. Standards for Internal Control in the Federal Government state that management should use quality information to achieve the entity’s objectives. Bureau officials recognize the importance of having such data readily available both for evaluating implemented efforts and for future planning, and said they will take steps to better record these types of data for the 2020 Census. Doing so will better position the Bureau to evaluate the effectiveness of its hiring strategy and tradeoffs in alternative approaches, to learn lessons from the 2020 implementation, and to optimize related staffing strategies in the future. Much of the Bureau’s planning efforts to help address the longstanding challenge of enumerating hard-to-count groups in the 2020 Census are underway. Importantly, the various operations and initiatives related to the hard-to-count are either in the planning or early implementation stages. While the Bureau has taken some steps to better understand the scope of these efforts, going forward, it will be important for the Bureau to ensure that management maintains a focus on forthcoming changes and decisions on hard-to-count related efforts to ensure they are integrated with other hard-to-count related efforts across the Bureau’s decentralized operations. Doing so will help the Bureau identify possible synergies, interdependencies, or gaps specific to how they might affect the Bureau’s ability to improve the census and help address overall risk to related efforts. In addition, information about related efforts in prior censuses can help inform management and its ongoing planning. However, the Bureau’s lack of complete and reliable data on hiring partnership staff for the 2010 Census—such as numbers, dates, and positions filled—affects its ability to fully consider tradeoffs it is making among types of staff it plans to hire for the 2020 Census. As the Bureau continues to ramp up its hiring of partnership specialists and other staff to support enumeration of the hard- to-count, improved recording of hiring numbers, dates, and positions filled—particularly for staff supporting multiple operations—can help position the Bureau to evaluate the effectiveness of its hiring strategy and support efforts to optimize any related hiring in future censuses. We are making the following two recommendations to the Department of Commerce and the Census Bureau: The Secretary of Commerce should ensure the Director of the U.S. Census Bureau takes steps to ensure that forthcoming changes and decisions on hard-to-count related efforts are integrated with other hard-to-count related efforts across the Bureau’s decentralized operations. (Recommendation 1) The Secretary of Commerce should ensure the Director of the U.S. Census Bureau takes steps to ensure for the purposes of evaluation and future planning that information is recorded and available on partnership hiring numbers, dates, positions filled, and in support of what part of the 2020 Census. (Recommendation 2) We provided a draft of this report to the Department of Commerce. In its written comments, reproduced in appendix I the Department of Commerce agreed with our findings and recommendations and said it would develop an action plan to address them. The Census Bureau also provided technical comments that we incorporated, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Commerce, the Undersecretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and the appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at https://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. The GAO staff that made major contributions to this report are listed in appendix II. Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov. In addition to the contact named above, Ty Mitchell, Assistant Director; Chris Falcone, Analyst-in-Charge; Mark Abraham, Ann Czapiewski, Kayla Robinson, Cynthia Saunders, and Stewart Small made key contributions to this report.", "summary": "A goal for the 2020 Census is to count everyone once, only once, and in the right place. Achieving a complete and accurate census is becoming an increasingly complex task, in part because the nation's population is growing larger, more diverse, and more reluctant to participate. When the census misses a person who should have been included, it results in an undercount. Historically, certain sociodemographic groups have been undercounted in the census, which is particularly problematic given the many uses of census data. GAO was asked to review the Bureau's plans for enumerating hard-to-count groups in the 2020 Census. This report examines (1) the Bureau's plans for improving the enumeration of the hard-to-count in 2020, and how that compares with 2010; and (2) the challenges the Bureau faces in improving the enumeration of the hard-to-count in 2020. GAO reviewed Bureau planning, budget, operational, and evaluation documents as well as documents of the hard-to-count related working groups of the Bureau's National Advisory Committee; and interviewed Bureau officials. The Census Bureau's (Bureau) plans for enumerating groups considered hard-to-count, such as minorities, renters, and young children, in the 2020 Census includes the use of both traditional and enhanced initiatives. For example, the Bureau plans to continue using certain outreach efforts used in 2010, such as a communications campaign with paid advertising, partnerships with local organizations, and targeted outreach to immigrant and faith-based organizations. The Bureau also plans enhancements to its outreach efforts compared to 2010. For example, to help address the undercount of young children, the Bureau revised the census questionnaire and instructions to enumerators to more explicitly include grandchildren in counts. Other planned changes include: Expanded languages: The Bureau plans to offer more non-English language response options and instructional materials than for 2010. More partnership specialists: The Bureau plans to hire nearly twice as many partnership specialists as it had planned for the 2010 Census to recruit partner organizations in local communities. Earlier partnership hiring : The Bureau started hiring a small number of partnership staff in October 2015—2 years earlier than it did for 2010. While efforts have been made, enumerating hard-to-count persons in 2020 will not be easy. Aside from the inherent difficulties of counting such individuals, the Bureau faces certain management challenges related to its hard-to-count efforts. First, the Bureau's hard-to-count efforts are distributed across over one third of its 35 operations supporting the 2020 Census. And while decentralized operations can provide flexibility, to enhance visibility over these hard-to-count efforts, the Bureau recently developed a draft operational document. However, the Bureau will continue to face challenges in ensuring its hard-to-count efforts integrate with each other. For example, some of the detailed plans for 10 of the hard-to-count efforts were released in 2016 and are awaiting updates, while 4 plans have yet to be released. With less than 2 years until Census Day (April 1, 2020), there is little room for delay. Therefore, to ensure that emerging plans related to the hard-to-count efforts integrate with existing plans, Bureau management will need to continue its focus on control of the changes in hard-to-count efforts moving forward. Second, the Bureau faces a challenge of a tighter labor market than existed prior to 2010 that could potentially create shortfalls or delays in its hiring of partnership staff who are needed to reach small and hard-to-count communities. In early hiring for 2020, Bureau officials reported smaller than expected applicant pools, declined offers, and turnover. Although it has plans to identify critical skills for 2020 and for tailored recruiting, collecting data on its hiring efforts will also be important. Currently, the Bureau lacks data from its 2010 Census that could have helped inform its partnership-staff hiring efforts for 2020. GAO recommends that the Bureau take steps to ensure that forthcoming changes and decisions on its hard-to-count related efforts are integrated with other operational efforts and that it collects data on its 2020 partnership hiring efforts. The Department of Commerce agreed with GAO's recommendations, and the Bureau provided technical comments that were incorporated, as appropriate.", "document_type": "gao"}
{"report": "In order to receive federal matching funds, states report expenditures quarterly to CMS on the CMS-64. States are required to report their expenditures to CMS within 30 days of the end of each quarter, but may adjust their past reporting for up to 2 years after the expenditure was made, referred to as the 2-year filing limit. Adjustments can reflect resolved disputes or reclassifications of expenditures. Expenditures reported after the 2-year filing limit are generally not eligible for a federal match, with certain exceptions. The CMS-64 is a series of forms that capture expenditure data for different aspects of states’ Medicaid programs, such as different types of services, populations, and different federal matching rates. (See table 1 for examples of the expenditure types captured by the CMS-64.) States report their expenditures quarterly on the CMS-64 at an aggregate level— such as a state’s total expenditures for such categories of services as inpatient hospital services—and these reported expenditures are not linked to individual enrollees or services. States’ reporting may vary depending on the features of their Medicaid program. Some examples of this variation include the following: States that expanded eligibility under PPACA would need to report expenditures not only by the type of services (e.g., inpatient hospital services), but also by populations receiving different federal matching rates, such as expansion enrollees. States with waivers—that is, where the state received approval from HHS to waive certain Medicaid requirements in order to test and evaluate new approaches for delivering and financing care under a demonstration—would need to report those expenditures associated with these waivers on additional forms. CMS is responsible for assuring that expenditures reported by states are supported and allowable, meaning that the state actually made and recorded the expenditure and that the expenditure is consistent with Medicaid requirements. CMS regional offices perform the ongoing oversight, with enhanced oversight procedures in the 20 states with the highest federal Medicaid expenditures. (See fig.1) CMS is required to review the expenditures reported by states each quarter. (See fig. 2.) Regional office reviewers have 50 days to review the expenditures and compute the federal share of states’ Medicaid expenditures. As part of the quarterly review, regional office reviewers also check that expenditures receive the correct matching rate. In general, the amount of federal funds that states receive for Medicaid services is determined annually by a statutory formula—the Federal Medical Assistance Percentage (FMAP), which results in a specific federal matching rate for each state. However, there are a number of exceptions where higher federal matching rates can apply for certain types of beneficiaries, services, or administrative costs. See table 2 for examples of higher matching rates that apply for expenditures for certain types of enrollees, services, or administrative costs. When CMS identifies questionable expenditures or errors through its reviews, there are several ways that they can be resolved, as summarized below. Deferral of federal funds. CMS can defer federal matching funds if, during the quarterly review, the regional office reviewer needs additional information to determine whether a particular expenditure is allowable. The reviewer may recommend that CMS defer the expenditure until the state provides additional support or corrects the reporting. State reducing reported expenditures. If the state agrees that the questionable expenditure is an error, the state can submit an adjusted report during the quarterly review or make an adjustment in a subsequent quarter. These adjustments prevent federal payments for those expenditures. Disallowance of expenditure. If CMS determines an expenditure is not allowable, CMS can issue a disallowance, and the state returns federal funds through reductions in future federal allocations. States may appeal disallowances. CMS uses a variety of processes to assure that state-reported expenditures are supported during quarterly reviews and performs focused financial management reviews on expenditures considered at risk of not complying with Medicaid requirements. Although we found that CMS was identifying errors and compliance issues using both review methods, we also found weaknesses in how CMS targets its oversight resources to address risks. CMS uses quarterly reviews to assess whether expenditures are supported by the state’s accounting systems; are in accordance with CMS approved methodologies, plans, and spending caps; and whether there are significant unexplained variances—changes in expenditures— from one quarter to the next (referred to as a variance analysis). CMS review procedures include validation measures that check to ensure that expenditures were reported within the 2-year limit, which is a check done on all types of expenditures. Another validation measure compares expenditures to various approval documents. For example, when a state has a waiver in place, expenditures are reviewed against waiver agreements that authorize payment for specified services or populations. Other examples include comparing supplemental payment expenditures to caps set for those expenditures. (See table 3.) Our examination of the quarterly reviews indicated that the reviews involved significant coordination with other CMS staff and the state. In addition to reviewing state documentation, officials from two regional offices told us that they consult other regional office staff who oversee the approval of new expenditures to ensure that expenditures reflect approved program features. For example, officials in region 9 told us that in reviewing managed care expenditures, they consult with their colleagues who review the state’s payment methodologies for capitated payments. In reviewing information technology development expenditures—which are subject to a higher federal matching rate— reviewers for all six selected states examined advanced planning documents, which requires coordination with staff who approve those documents to ensure that the state was receiving the correct matching rates and staying within the approved amounts. With regard to coordination with states, we found that regional reviewers for all six reviews contacted states to follow-up on issues identified during the review. Officials also described being in regular contact with states to stay abreast of program, system, and staffing changes to inform their reviews. For example, according to regional officials, Arkansas experienced some significant and unexpected staffing challenges in 2016 that resulted in delays in the state reporting expenditures and returning federal overpayments, and the reviewer worked closely with state staff to track the state’s progress. We found evidence that reviewers identified errors during their quarterly reviews. In the six quarterly reviews we examined, regional offices identified errors in three of the six states. For example, region 3 reviewers found errors in Maryland’s expenditure reporting—including claims for the wrong matching rate for two enrollees who were not eligible for PPACA’s Medicaid expansion and reporting provider incentive payments on the wrong line—and worked with the state to correct those errors. Additionally, region 9 reviewers found errors in California’s reporting of expenditures. For example, they found that the state reported waiver expenditures for the incorrect time period, which has implications for CMS’s ability to monitor and enforce spending limits for the waiver. Reviewers worked with the state to correct those errors. To supplement the quarterly reviews, CMS generally directs regional offices to conduct a focused financial management review (FMR) each year on an area of high risk within the region, typically within one state. According to regional officials, CMS uses these reviews to investigate expenditures in greater depth and detail than is reasonable within the timeframes of a quarterly review. For example, reviewers can examine individual claims for services from providers or the methodologies developed for certain payment types. Regional reviewers also use these reviews to investigate errors that could not have been detected by the quarterly review. For example, regional office 6 officials told us that they uncovered inappropriate financing arrangements when they used an FMR to examine how Texas financed the state share of its supplemental payments to hospitals in one of its counties. To do so, the regional office reviewed payments from the state to the provider, project plans, and interviewed providers—steps that are not part of the quarterly review process. Rather, in the quarterly review, the reviewer only checks that state-reported payments are supported by state accounting records and are within applicable caps; thus, inappropriate financing of the state share would not have been detected through the quarterly review. In fiscal years 2014 through 2017, CMS used FMRs to review various expenditures considered to be at risk for not complying with Medicaid requirements. Specifically, as outlined in annual work plans, regional offices planned to conduct 31 FMRs and estimated that the total amount of federal funds at risk in expenditure areas covered by their planned reviews was $12 billion. (See app. I.) Planned FMRs targeted a wide range of topics, with the reviews most frequently targeting expenditures for the Medicaid expansion population. (See table 4.) We found that CMS frequently identified compliance issues through FMRs. As of March 2018, CMS reported that reviewers had identified compliance issues with financial impact in 11 of the 31 planned FMRs, though most of those findings were still under review. More findings from the planned FMRs are likely as some of the reviews were still ongoing. We reviewed the draft results for 5 FMRs. Among these, CMS found that four states were reporting expenditures that were not allowable. For example, as noted earlier, a 2014 FMR on supplemental payments in Texas revealed inappropriate funding arrangements, and CMS issued a disallowance for approximately $27 million. In some cases, FMRs did not have apparent financial findings, but identified significant internal control weaknesses in the state and recommended specific corrective actions— such as better aligning eligibility and expenditures systems to better detect and correct irregularities—that would provide greater assurances that federal funds are appropriately spent. Both the quarterly reviews and the FMRs occur in conjunction with other ongoing CMS financial oversight activities. For example in addition to reviewing expenditures, regional office reviewers assess how states estimate their costs, set payment rates for managed care and home and community based services, and allocate costs among different Medicaid administrative activities under their cost allocation plans. CMS officials told us that issues relating to state compliance with Medicaid requirements for expenditures could be identified during these other oversight activities and could inform follow-up during the quarterly reviews or be the subject of a FMR. Officials also told us that since FMRs were instituted, the agency has built in more front-end procedures for preventing problems with the accuracy and allowability of reported expenditures. As examples, they cited their work on managed care rate reviews, among other things. We identified two weaknesses in how CMS is allocating resources for overseeing state-reported expenditures that limited the agency’s ability to target risk in its efforts to assure that these expenditures are supported and consistent with Medicaid requirements. First, we found that CMS has allocated similar staff resources to states with differing levels of risk. For example, the staff resources dedicated to reviewing California’s expenditures—ranking first nationally in expenditures and constituting 15 percent of all federal Medicaid expenditures—are comparable to significantly smaller states in other regions, despite California’s history of reporting challenges and its inability to provide electronic records, which requires on-site review. (See fig. 3.) CMS has allocated 2.2 staff to review California’s expenditures in contrast to one person to review Arkansas’ expenditures, which constitute 1 percent of federal Medicaid expenditures, and Arkansas does not have a similar history of complex reporting challenges. We also found that California’s reviewers have set a higher threshold for investigating variances in reported expenditures than in the five other selected states. Specifically, reviewers investigated variances in California of plus or minus 10 percent if the variances represented more than 2 percent of medical expenditures, or $450 million in the quarter we reviewed. The state experienced an approximately 24 percent increase in its prescription drug expenditures—roughly $200 million—during that quarter, but the variance was deemed not significant. In contrast, for two of our five other selected states, we found that reviewers generally investigated variances of plus or minus 10 percent regardless of the dollar amount of the variance and in the remaining three states they had significantly lower dollar thresholds than used for California. Second, CMS reported cancelling the FMR requirement for regional offices in 17 out of 51 instances in the last 5 years when faced with resource constraints. In some cases, CMS excused individual regional offices from conducting planned FMRs due to staff shortage as the agency did for regions 3 and 7 in 2014; region 8 in 2016; and regions 3, 7, 8, and 9 in 2018. In 2015, according to CMS officials, all 10 regions were excused from conducting an FMR, because the regional offices needed their staff to focus on implementing new procedures for validating expenditures for the Medicaid expansion population. In addition to cancelling FMRs, CMS was delayed in finalizing FMRs. Among the eight FMRs that were conducted in fiscal year 2014, three have been issued as final reports, CMS decided no report was needed on a fourth, and the four remaining FMRs from 2014 were still under review as of March 2018, delaying important feedback to states on their vulnerabilities. According to CMS officials, resource constraints have contributed to both of these weaknesses. Our analysis of staffing data indicated that, from fiscal years 2014 to 2018, the number of full time equivalent staff dedicated to financial oversight activities declined by approximately 19 percent across all 10 regions. These staff are responsible not only for completing the quarterly reviews and FMRs, but also other financial oversight activities, including resolving audit findings and other on-going oversight activities noted previously. During this period, federal Medicaid expenditures are estimated to have increased by approximately 31 percent, and the reporting of expenditures has grown more complex. In addition to the decline in dedicated staff, officials told us they faced challenges in filling vacancies either because of hiring restrictions or challenges in recruiting qualified candidates. Officials described instances where regional offices shared resources with other offices to address critical gaps in resources. For example region 9 was able to obtain part-time assistance from a region 6 reviewer to help review California’s expenditures. However, CMS officials told us that they had not permanently reallocated resources between regional offices, because all regional offices are under-resourced given their various oversight responsibilities as of May 2018. With regard to cancelling FMRs, CMS officials noted that other oversight responsibilities, including the quarterly reviews, are required under statute or regulation and thus have a higher priority than FMRs. Compounding its resource allocation challenges, CMS has not conducted a comprehensive, national assessment of risk to determine whether resources for financial oversight activities are (1) adequate and (2) allocated—both across regional offices and oversight tools—to focus on the greatest areas of risk. Agency officials told us that they have not conducted a formal risk assessment, because they are assessing risk on an on-going basis, allocating resources within each region accordingly and sharing resources across regions to the extent possible. However, this approach does not make clear whether the level of resources dedicated to financial oversight nationally is adequate given the risk. Federal internal control standards for risk assessment require agencies to identify and analyze risks related to achieving the defined objectives (i.e., assuring that state-reported expenditures are in accordance with Medicaid rules), and respond to risks based on the significance of the risk. Without completing a comprehensive, national assessment of risk and determining whether staff resources dedicated to financial oversight are adequate and allocated commensurate with risk, CMS is missing an opportunity to improve its ability to identify errors in reported expenditures that could result in hundreds of millions of dollars in potential savings to the Medicaid program. CMS reviewers in the selected regional offices we reviewed did not consistently perform variance analyses—which compare changes in expenditures from the quarter under review to the previous quarter—of higher matched expenditures during quarterly reviews. Further, the sampling procedures used to examine Medicaid expansion expenditures did not account for varying risks across states. CMS has multiple procedures in place to review expenditures that receive a higher federal matching rate. As with other expenditures, reviewers are required to complete a variance analysis, comparing reported expenditures in the quarter under review to those reported in the prior quarter and investigating variances above a certain threshold. However, we found that our three selected regional offices were not consistently conducting these analyses across several different types of expenditures with higher matching rates. While CMS’s internal guidance required that regional offices conduct variance analyses on expenditures with higher matching rates, we found that for the quarter we investigated (generally the 1st quarter of fiscal year 2017), our selected regional offices did not consistently do so for three types of expenditures that we reviewed: IHS, family planning, and certain women with breast or cervical cancer. Two of the three regional offices (regions 3 and 9) did not conduct or did not document these required variance analyses, and the remaining regional office (region 6) conducted the analyses but deviated from standard procedures outlined in CMS guidance, as summarized below. CMS region 3. Reviewers did not conduct variance analyses for either Maryland or Pennsylvania. Regional office staff with whom we spoke said that as part of the quarterly review they conduct the standard variance analysis on category of service lines of the CMS-64. Expenditures for IHS, family planning and services for certain women with breast or cervical cancer are not separately identified at that level. Although CMS reviewers said they thought the standard analysis was sufficient, net changes within a broad service category may obscure major changes within these higher matched expenditures. For example, examining changes in total inpatient hospital expenditures would not necessarily reveal a significant variance limited to inpatient expenditures in IHS facilities that receive a higher federal match. CMS region 9. Reviewers told us that they examined higher matched expenditures for California; however, no variance analyses of IHS, family planning, or breast or cervical cancer services were included in the work papers provided to us. In addition, they told us that they do not conduct a variance analysis on IHS, family planning, and services for certain women with breast or cervical cancer for Nevada, noting that expenditures in these areas tend to be quite small. CMS region 6. Reviewers conducted a variance analysis of these higher matched expenditures for Arkansas and Texas and provided us documentation; however, the documentation showed some deviation from the required steps specified in CMS’s guidance. For example, for Texas, spending on two of the three categories was beyond the threshold for significance, but the reviewer did not document any follow-up with the state. Although expenditures for IHS, family planning, and certain women with breast or cervical cancer constituted a small share of total federal spending on Medicaid services—roughly 1 percent—combined spending on these categories was approximately $1 billion in the first quarter of fiscal year 2017. Our analysis indicated that variances in spending for these three services ranged widely across our six states, and in four of the states, some of their expenditures were above the thresholds for significance. (See fig. 4.) For example, in regional office 3, Maryland experienced a significant variance in its family planning expenditures—an increase of approximately $8 million dollars or 7,700 percent from the previous quarter—but there was no indication in the documentation provided that the regional office identified or investigated that variance. Similar to the variance analyses for other higher matched expenditure types, we found that the selected regional offices did not consistently conduct variance analyses on expenditures reported for the Medicaid expansion population. First, although five of our six states opted to expand Medicaid under PPACA, two of the five states (Maryland and Pennsylvania) were not subjected to a variance analysis for their expansion populations, a segment that accounted for nearly $7 billion in Medicaid expenditures in fiscal year 2016. Among the remaining three states, CMS regional office staff conducted a variance analysis, but in two of them, the reviewers did not document whether they investigated significant variances, leaving it unclear whether this required step was taken. Specifically, for two of the three remaining states—Arkansas and Nevada—reviewers did not document which variances were deemed significant or that any such variances were discussed with state officials. The guidance specified in CMS’s quarterly review guide is not always clear or consistent. For example: For IHS, family planning, and certain women with breast or cervical cancer, the guidance is explicit that the analysis is required, but the automated variance report used by reviewers for the step does not include these expenditures. For Medicaid expansion expenditures, the review guide is not explicit about whether a variance analysis is required, but CMS has an automated variance report available for these expenditures, which suggests that such an analysis was expected. The guidance suggests that a variance analysis should be conducted for expansion enrollees; however, it does not specify whether the analysis should be conducted in conjunction with—or take the place of—more in-depth examinations. According to federal internal controls standards for information and communication, agencies should communicate the information necessary for staff to achieve the agency’s objectives. CMS’s guidance on conducting variance analyses for types of expenditures with higher federal matching rates has not been sufficiently clear to assure that such analyses are being consistently conducted. By not consistently conducting such checks, errors may be going undetected and CMS may be providing federal funds at a higher matching rate than is allowable. CMS has additional procedures in place to review service expenditures reported for the Medicaid expansion population, a category of expenditures that received a 95 percent federal match in 2017. Specifically, in addition to a variance analysis, CMS guidance specifies that each regional office reviewer is to review claims for a sample. The guide directs the reviewer to obtain a full list of all expansion enrollees from the state and to select 30 to 40 for further review. Next, the reviewer is to obtain supporting documentation from the state listing the eligibility factors for the sampled enrollees, such as age, pregnancy status, Medicare enrollment, and income. The reviewer is to select a single claim for each enrollee and verify that the corresponding expenditures were reported under the correct federal matching rate category—i.e., that the sample claim for each individual was accounted for in the relevant section of the CMS-64. The review guide specifies that the sample review be conducted each quarter unless the state has had four consecutive quarters with three or fewer errors, in which case, the sampling must be performed only annually. We found that regional offices were identifying errors in their sampling reviews. For example, region 3 reviewers found that Pennsylvania had incorrectly categorized an individual in the sample as a Medicaid expansion enrollee, with the selected expenditures initially reported as eligible for the higher matching rate. According to CMS central office officials, the sampling methodology has helped identify systemic issues with state expenditure systems in some states and resulted in corrections, adjustments, and in one case, a disallowance. Under current procedures, among our five selected states that expanded Medicaid under PPACA, all five were determined to have had four consecutive clean quarters according to agency officials; that is, the state had three or fewer errors in each quarter. Nationally, all but one of the 33 states that have implemented Medicaid expansion under PPACA had four consecutive clean quarters as of March 2018, according to CMS officials. We found, however, that CMS’s procedures for sampling reviews had a key weakness in that they did not account for varying risks across states, as illustrated in the following examples. We found that sample size does not account for significant differences in program size. For example, both California and Arkansas have expanded Medicaid under PPACA, and regional office staff told us they reviewed claims for 30 expansion enrollees in each of the two states, despite the fact that California has over 10 times as many expansion enrollees as Arkansas. Region 9 officials told us that for California they had initially sampled 100 enrollees during the first quarter they were required to conduct this analysis, but the review was time consuming given staff resources, and they were advised by CMS’s central office to limit their sample to 30 individuals. CMS officials told us that the sampling procedures are resource intensive and that the sample size they decided upon was what they thought they had the resources to complete. Additionally, the sample size does not account for previously identified risks in a state’s program. Specifically, as we noted in a 2015 report, CMS’s sampling review of expansion expenditures was not linked to or informed by reviews of eligibility determinations conducted by CMS, some of which identified high levels of eligibility determination errors. According to CMS officials, the expenditure review is primarily intended to ensure that states are correctly assigning expenditures for the expanded eligibility groups as initially determined, not whether the eligibility determination is correct. Federal standards for internal control related to risk assessment require that agencies identify, analyze, and respond to risks. However, because CMS’s sampling methodology does not account for risk factors like program size and high levels of eligibility determination errors, the agency’s review of expansion population expenditures may be missing opportunities to detect systemic issues with improperly matched expenditures. Quarterly variance analyses and sampling of Medicaid expansion enrollees can be supplemented by financial management reviews. For fiscal year 2016, CMS recommended regional offices conduct FMRs on expenditure claims for expansion enrollees. As of March 2018, however, regional offices had completed an FMR on Medicaid expansion expenditures in only one state, with no findings, and were in the process of completing FMRs for five other states. According to CMS officials, no additional reviews in this area were planned for fiscal year 2018. Financial Impact of Expenditure Reviews Compared with Program Integrity Recoveries The impact of CMS’s expenditure review activities is greater than the impact from other program integrity efforts. For example, in fiscal year 2015, CMS resolved errors through expenditure reviews that saved over $1.4 billion in federal funds. In the same year, CMS reported that efforts by states and the federal government to identify improper payments to providers—for example, services that were billed by a provider but were not received by a beneficiary—resulted in recoveries that totaled $852.9 million, in both state and federal funds. In fiscal years 2014 through 2017, CMS’s regional offices resolved expenditure errors that reduced federal spending by over $5.1 billion, with at least $1 billion in errors resolved in each of three of those four years. Errors were resolved through states agreeing to reduce their reported expenditures, which prevented federal payments to the state for those expenditures; and through CMS issuing disallowances, under which states are required to return federal funds. Although CMS resolved over $1 billion in expenditure errors in each year of fiscal years 2014 through 2016, CMS resolved less than $600 million in fiscal year 2017. CMS officials explained that this change likely reflects delays in clearance of disallowances due to the transition between presidential administrations. (See fig. 3.) In addition to these resolved errors, as of the end of 2017, CMS had $4.47 billion in outstanding deferrals of federal funds, where CMS was delaying federal funds until additional information was provided. Expenditures flagged for deferrals may or may not represent errors. All 10 CMS regional offices resolved errors from fiscal years 2014 through 2017, though the magnitude varied across regions. (See table 5.) Among the 10 regional offices, 9 reported that they had resolved errors through states agreeing to reduce reported expenditures. Additionally, 9 regional offices issued a total of 49 disallowances across 16 states, with the majority of the disallowances occurring in regional offices 2 and 3. Finally, all 10 regional offices had taken deferrals for questionable expenditures, with 22 states having outstanding “active” deferrals that had not been resolved as of the fourth quarter of fiscal year 2017, which ranged in amount from $178 to $444 million. CMS officials told us that the range of resolved errors and deferred funds across regional offices may reflect differences in the proportion of high-expenditure states. For example, regional office 4 oversees four states ranking in the top 20 in terms of Medicaid expenditures, while regional office 8 does not oversee any top- 20 states. The variation may also reflect large actions taken in specific states. For example, the majority of the disallowed funds in regional office 2 from fiscal years 2014 to 2017 were due to a single disallowance of $1.26 billion in one state. The financial significance of individual errors resolved by CMS’s regional offices varied significantly. We found that regional offices resolved errors that ranged from reporting errors that had no federal financial impact— such as expenditures that were allowable, but were reported on the incorrect line—to hundreds of millions of dollars in expenditures that were found to be unallowable under Medicaid requirements. Over the fiscal years we reviewed, more than half of the disallowances CMS issued were less than $15 million; however, in four states CMS issued disallowances of over $100 million, including a disallowance of over $1 billion in New York. (See fig. 5.) In some cases, actions taken by CMS to resolve errors were the culmination of years of work. For example, over several years the California Medicaid program reported a large volume of expenditures for which it did not yet have sufficient supporting documentation. The regional office officials told us that the state reported these expenditures in order to comply with the 2-year filing limit, and had reported these as “placeholder claims,” with the intention of providing additional support at a later time. Over the course of at least 6 years, CMS deferred hundreds of millions of dollars in federal funds related to these placeholder claims. Of the active deferrals as of the end of fiscal year 2017, most of the total amount of deferred funds was taken for expenditures in California, which represented $3.4 billion of the $4.5 billion in total active deferrals. According to CMS officials, in 2015, CMS prohibited California from reporting additional placeholder claims. Region 9 officials told us that they continue to work with the state to clear the deferrals related to this issue. They were able to resolve 9 related deferrals in fiscal year 2017; however, another over 60 deferrals were still unresolved. The growth of federal Medicaid expenditures, estimated at about $370 billion in fiscal year 2017, makes it critically important to assure expenditures are consistent with Medicaid requirements. CMS has a variety of processes in place to review state-reported expenditures, and those reviews have resulted in CMS resolving errors that have saved the federal government a considerable amount of money; over $5 billion in the last 4 years. However, the increasing complexity of expenditure reporting is occurring as resources to review these expenditures are decreasing, hindering CMS’s ability to target risk and potentially allowing for hundreds of millions of federal dollars in errors to go undetected. In the absence of a comprehensive risk assessment, which CMS has not conducted, CMS may be missing opportunities to better target resources to higher risk expenditures and increase the savings from these oversight activities. The variety of different matching rates has contributed to the increased complexity of CMS’s expenditure reviews. Although CMS has review procedures in place to assure that the correct matching rate is applied for services and populations receiving a higher federal matching rate, unclear guidance has contributed to inconsistency in the extent to which these reviews are conducted. In addition, we found weaknesses in the sampling methodology CMS requires its regional offices to use to help ensure that expenditures for Medicaid expansion enrollees—expenditures that receive a higher matching rate and that represented almost 20 percent of total federal Medicaid spending in 2016—are consistent with Medicaid requirements. In particular, the methodology does not account for risk factors like program size or vulnerabilities in state eligibility-determination processes and systems. As a result of the inconsistency in reviews and a sampling methodology that does not consider program risk, errors may be going undetected, resulting in CMS providing federal funds at higher federal matching rates than is allowable. In addition, CMS could be missing opportunities to identify any systemic issues that may contribute to such errors. We are making the following three recommendations to CMS: 1. The Administrator of CMS should complete a comprehensive, national risk assessment and take steps, as needed, to assure that resources to oversee expenditures reported by states are adequate and allocated based on areas of highest risk. (Recommendation 1) 2. The Administrator of CMS should clarify in internal guidance when a variance analysis on expenditures with higher match rates is required. (Recommendation 2) 3. The Administrator of CMS should revise the sampling methodology for reviewing expenditures for the Medicaid expansion population to better target reviews to areas of high risk. (Recommendation 3) We provided a draft of this report to HHS for review and comment. HHS concurred with all three recommendations, noting that it takes seriously its responsibilities to protect taxpayer funds by conducting thorough oversight of states’ claims for federal Medicaid expenditures. Regarding our first recommendation—that CMS complete a comprehensive, national risk assessment and take steps to assure that resources are adequate and allocated based on risk—HHS noted that CMS will complete such an assessment, and, based on this review, will determine the appropriate allocation of resources based on expenditures, program risk, and historical financial issues. CMS will also identify opportunities to increase resources. Regarding our second recommendation—clarifying internal guidance on when a variance analysis on higher matched expenditures is required—HHS noted that CMS will issue such internal guidance. Regarding our third recommendation—that CMS revise the sampling methodology for reviewing expenditures for the Medicaid expansion population to better target reviews to areas of high risk—HHS noted CMS is considering ways to revise its methodology. HHS’s comments are reproduced in appendix II. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services, appropriate congressional committees, and other interested parties. The correspondence is also available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Public psychiatric residential treatment facilities Medicare Part B premium buy-ins Outpatient hospital reimbursement for mental health services Review of comprehensive psychiatric emergency program rates Provider taxes implemented to avoid program reductions Health homes data and expenditures reporting Provider incentive payments for health information technology 1115 demonstration provider incentive payments Public psychiatric residential treatment facilities Managed care organizations’ provider payments Provider incentive payments for health information technology Federally qualified health center reimbursement payments Eligibility and enrollment maintenance and operations Managed care organizations’ reporting of drug rebates 3 CMS cancelled these 2014 FMRs due to a staffing shortage. Region 8 was excused from the requirement to conduct an FMR in 2016 due to staffing constraints. In addition to the contact named above, Susan Barnidge (Assistant Director), Jasleen Modi (Analyst-in-Charge), Caroline Hale, Perry Parsons, and Sierra Gaffney made key contributions to this report. Also contributing were Giselle Hicks, Drew Long, and Jennifer Whitworth.", "summary": "Medicaid has grown by over 50 percent over the last decade, with about $370 billion in federal spending in fiscal year 2017. CMS is responsible for assuring that expenditures—reported quarterly by states—are consistent with Medicaid requirements and matched with the correct amount of federal funds. CMS's review of reported expenditures has become increasingly complex due to variation in states' Medicaid programs and an increasing number of different matching rates. GAO was asked to examine CMS's oversight of state-reported Medicaid expenditures. In this report, GAO examined how CMS assures that (1) expenditures are supported and consistent with requirements; and (2) the correct federal matching rates were applied to expenditures subject to a higher match. GAO also examined the financial impact of resolved errors. GAO reviewed documentation for the most recently completed quarterly reviews by 3 of CMS's 10 regional offices for six states that varied by Medicaid program expenditures and design. GAO also reviewed policies, procedures, and data on resolved errors; and interviewed CMS and state officials. GAO assessed CMS's oversight processes against federal standards for internal control. The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, has various review processes in place to assure that expenditures reported by states are supported and consistent with Medicaid requirements. The agency also has processes to review that the correct federal matching rates were applied to expenditures receiving a higher than standard federal matching rate, which can include certain types of services and populations. These processes collectively have had a considerable federal financial benefit, with CMS resolving errors that reduced federal spending by over $5.1 billion in fiscal years 2014 through 2017. However, GAO identified weaknesses in how CMS targets its resources to address risks when reviewing whether expenditures are supported and consistent with requirements. CMS devotes similar levels of staff resources to review expenditures despite differing levels of risk across states. For example, the number of staff reviewing California's expenditures—which represent 15 percent of federal Medicaid spending—is similar to the number reviewing Arkansas' expenditures, which represents 1 percent of federal Medicaid spending. CMS cancelled in-depth financial management reviews in 17 out of 51 instances over the last 5 years. These reviews target expenditures considered by CMS to be at risk of not meeting program requirements. CMS told GAO that resource constraints contributed to both weaknesses. However, the agency has not completed a comprehensive assessment of risk to (1) determine whether oversight resources are adequate and (2) focus on the most significant areas of risk. Absent such an assessment, CMS is missing an opportunity to identify errors in reported expenditures that could result in substantial savings to the Medicaid program. GAO also found limitations in CMS's processes for reviewing expenditures that receive a higher federal matching rate. Internal guidance for examining variances in these expenditures was unclear, and not all reviewers in the three CMS regional offices GAO reviewed were investigating significant variances in quarter-to-quarter expenditures. Review procedures for expenditures for individuals newly eligible for Medicaid under the Patient Protection and Affordable Care Act were not tailored to different risk levels among states. For example, in its reviews of a sample of claims for this population, CMS reviewed claims for the same number of enrollees—30—in California as for Arkansas, even though California had 10 times the number of newly eligible enrollees as Arkansas. Without clear internal guidance and better targeting of risks in its review procedures for expenditures receiving higher matching rates, CMS may overpay states. GAO is making three recommendations, including that CMS improve its risk-based targeting of oversight efforts and resources, and clarify related internal guidance. The Department of Health and Human Services concurred with these recommendations.", "document_type": "gao"}
{"report": "The federal government began preparing and we began auditing the consolidated financial statements of the U.S. government in fiscal year 1997. However, we have been unable to render an opinion on them in part because of serious financial management problems at DOD that have prevented its financial statements from being auditable. Pursuant to the NDAA for Fiscal Year 2010, DOD developed and has updated a Financial Improvement and Audit Readiness (FIAR) Plan. The FIAR Plan includes the specific actions to be taken and costs associated with (1) correcting the financial management deficiencies that impair DOD’s ability to prepare complete, reliable, and timely financial management information and (2) ensuring that DOD’s financial statements are validated as ready for audit by September 30, 2017. Further, the NDAA for Fiscal Year 2014 mandated that the Secretary of Defense ensure that an audit is performed on DOD’s fiscal year 2018 financial statements and that the results are submitted to Congress no later than March 31, 2019. DOD has undertaken several financial management improvement initiatives over the years to address deficiencies in business systems, processes, and controls through its FIAR Plan and financial management reform methodology contained in its FIAR Guidance. In its April 2016 FIAR Guidance, DOD identified seven critical capabilities that are necessary to achieve auditability. One of the seven critical capabilities identified is the ability to support or eliminate certain material JVs and other adjustments made to financial transactions, trial balances, and financial statements. As of September 2015, DOD determined that the largest portion attributable to the billions of dollars of unsupported JVs relates to the Army’s general fund. In 2015, DOD created the Working Group, made up of both Army and DFAS personnel, to develop solutions to reduce the number of required JVs and reduce or eliminate the number of unsupported JVs that affect the Army’s general fund. In July 2016, DOD’s Office of the Inspector General (OIG) released a report indicating that about 90 percent of the dollar value and number of the Army general fund JVs the OIG tested, which were defined by the Army as “supported,” were in fact unsupported because the JVs either (1) forced account balances to agree with other data sources without reconciling the differences or determining which data sources were correct, (2) corrected errors or reclassified amounts to other accounts without adequately documenting why the JVs were needed, or (3) changed ending balances of accounts without adequate documentation to support the JVs. DOD acknowledged in its November 2016 FIAR Plan Status Report that it still faces a significant challenge in reducing the number and amount of unsupported JVs. The November 2016 FIAR Plan Status Report also set a December 2016 completion date for the Army to (1) perform JV root cause analyses for all financial statements for all JVs and (2) implement corrective action plans and verify successful implementation of DFAS’s corrective actions. As shown in figure 1, the Army uses multiple systems to document, record, and report activities at the transaction level, which are then consolidated and uploaded into DOD’s reporting system known as the Defense Departmental Reporting System (DDRS). JVs can be used to record accounting entries and make any necessary corrections or adjustments within any of these systems at the transaction level or consolidated level. JVs can also be manually entered or system generated in the accounting systems. Manual JVs are those prepared by DFAS personnel to adjust errors identified during financial statement compilation, to record necessary accounting entries caused by system limitations or timing differences, and to prepare required month- and year- end closing accounting entries. System-generated JVs are those automatically generated based on system change requests and without manual involvement by DFAS personnel. The General Fund Enterprise Business System (GFEBS) is the Army’s primary accounting system used to record the majority of the Army’s activities, including budget execution, procurement, civilian pay, collections, and disbursements. The Army also has a separate accounting system for supply-related transactions called the Global Combat Support System (GCSS). Accounting entries for transactions recorded in GCSS are sent to GFEBS to consolidate all of the Army’s transaction data into a single accounting system. Then, at month’s end, all the information in GFEBS is uploaded into the budgetary module of DDRS known as the Defense Departmental Reporting System-Budgetary (DDRS-B). The Army also has several legacy systems that continue to process transactions but were not designed to interface with GFEBS as the accounting formats are not compatible. Therefore, at each month’s end, the balances for the legacy systems are configured into a format that can be read by DDRS-B and crosswalks to the accounts within the DDRS-B accounting system before they are sent to DDRS-B. Once the balances have been uploaded, DDRS-B performs edit checks to identify any errors that may exist. DFAS personnel then pull the data into the Electronic Error Correction and Transaction Analysis (ELECTRA) application to review any errors identified during the edit checks and use ELECTRA to create a JV to be uploaded into DDRS-B that makes necessary corrections or adjustments. After the Army has consolidated all information into DDRS-B from both GFEBS and legacy systems each month, DFAS personnel will review the information to determine whether any additional JVs are necessary to correct errors identified during the reconciliation process or to record any JVs that could not be processed prior to the upload into DDRS-B. On a quarterly basis after all necessary corrections are made, all information in DDRS-B is consolidated and uploaded into a second module within DDRS known as the Defense Departmental Reporting System-Audited Financial Statements (DDRS-AFS), which is used to prepare the financial statements. At this level, additional JVs can be made if DFAS personnel determine that further corrections are necessary or if information is received subsequent to the upload from DDRS-B. The Working Group has been actively working toward implementing new processes to support JVs and eliminate unsupported JVs in the Army’s general fund. From October 2016 to March 2017, the Working Group, based on DFAS-produced metrics, reported that it had identified more than 121,000 unsupported JVs totaling $455 billion. The Working Group prioritized its identifying of root causes of unsupported JVs based upon factors such as potential correction complexity, materiality, and volume. In the May 2017 FIAR Plan Status Report, DOD stated that the Army had completed its root cause analyses for all JVs. However, we found that the analyses have been performed on only a small percentage of the total number of unsupported JVs that existed as of March 2017 and cannot be considered completed for all unsupported JVs. In addition, members of the Working Group confirmed as of June 2017 that the Working Group has not yet performed all analyses necessary and stated that the Working Group’s efforts will be an ongoing, iterative process because of anticipated new challenges that continually arise from new business processes or programs. A critical capability to achieve auditability, described in the April 2016 FIAR Guidance, is that all material JVs be supported and the population of accounting entries reconcile with each financial statement line item as well as the originating system of the accounting entry. As highlighted in figure 2, the Working Group focused its efforts on manual JVs processed at the consolidated level within DDRS-B as these JVs were consistent with its prioritization method in conducting the analyses and getting the financial statements audit ready. In December 2015, DFAS began requiring a form to be attached to all manual DDRS-B JVs that serves as a checklist of all documents necessary to be included for a JV to be considered supported. However, as indicated on the metrics provided through March 2017, manual unsupported JVs were still being recorded in DDRS-B. Further, as of March 2017, the Working Group had not included in its root cause analyses (1) any unsupported JVs at the transaction level, such as within GFEBS, which are mostly attributed to year-end closing accounting entries; (2) any unsupported JVs within DDRS-AFS, which are used to prepare the financial statements; or (3) system-generated JVs. As a result, a significant number of JVs still require analyses. Our review of the population of unsupported JVs from October 2016 to March 2017 found that system-generated JVs made up 90 percent in dollar value and 97 percent in number of total unsupported JVs. In July 2016, the DOD OIG similarly found that the Working Group had not been analyzing its system-generated JVs and recommended that the Working Group periodically review system-generated JVs to understand the reasons for the JVs and to verify the support for the JVs. Acting on the DOD OIG’s recommendation, members of the Working Group indicated that in March 2017, the Working Group began including system- generated JVs in its population of JVs to analyze but had not yet begun its analyses or identified any root causes. In addition, members of the Working Group stated that in February 2017, the Working Group began planning a new initiative called the Business Mission Area Champions (BMAC) Initiative. This initiative is to expand the Working Group’s analyses of root causes for JVs beyond those recorded at the consolidated level within DDRS-B and begin analyzing transaction-level JVs recorded in its systems that feed into DDRS-B before consolidation, such as GFEBS. However, as of May 2017, no details have been developed, such as planned actions or timelines. Therefore, because of the recent inclusion of the large population of system-generated JVs in the total population and because the BMAC Initiative is not yet under way, a significant amount of analyses remains to fully identify root causes and ultimately correct the Army’s overall unsupported JV issue. Figure 3 summarizes the progress of the Working Group’s root cause analyses of unsupported JVs as of March 2017. According to OMB Circular A-123, agencies should perform a root cause analysis of the deficiencies to ensure that subsequent strategies and plans address the root cause of the problem and not just the symptoms. Identifying and developing an understanding of the root cause is management’s responsibility. In addition, Standards for Internal Control in the Federal Government states that management should complete and document corrective actions to remediate control deficiencies on a timely basis. Because it has not yet performed root cause analyses on the majority of unsupported JVs, the Working Group has not been able to identify appropriate corrective actions to eliminate such unsupported JVs and ultimately help produce auditable financial statements for the Army’s general fund. As of March 2017, members of the Working Group reported that the Working Group had developed 38 corrective action plans to address all of the identified root causes of unsupported manual JVs at the consolidated level in DDRS-B for the Army’s general fund. According to these members, of the 38 corrective action plans developed, 18 have been implemented. In addition, because the root cause analyses have been limited, the Working Group has not yet been able to determine how many more corrective action plans will need to be developed to resolve the unsupported JV issue. Further, we found that the Working Group’s monitoring of corrective action plan implementation does not include a method that sufficiently identifies the progress that has been made toward fully addressing the issue of unsupported JVs or to what extent each implemented corrective action plan has reduced unsupported JVs. The April 2016 FIAR Guidance provides specific tasks for DOD reporting entities, including the Army, to complete so that DOD can achieve its audit readiness objective. One of these tasks specific to JVs is to describe plans for implementing corrective actions to address the root causes of unsupported JVs. In addition, the Implementation Guide for OMB Circular A-123 recommends that management identify measurable indicators to better assess progress and more rapidly make course corrections to ensure timely and effective resolution of identified issues. In order to monitor whether a corrective action plan was implemented effectively, members of the Working Group stated that the Working Group uses metrics to monitor implementation of corrective actions for unsupported manual JVs at the consolidated level in DDRS-B. DFAS creates monthly metrics reports of DDRS-B accounting entries that include all unsupported and supported JVs for the month. The JVs used to create these metrics are the same JVs that the Working Group uses to conduct its JV root cause analyses. However, the metrics organize the JVs into broad categories that do not provide enough details to link to the categories that the Working Group uses. For example, the metrics use broad categories, such as data calls or correcting entries to classify the JVs, whereas the root cause analyses are conducted at a more detailed level, such as for a specific transaction. The Working Group was unable to demonstrate to us which metric category was affected by the corrective action plan implemented for each root cause identified. In addition, the Working Group’s reported progress was based on an increase in the percentage of supported JVs in relation to the total population of JVs from October 2016 to March 2017 as reported in the metrics. However, during this period, the metrics also show an increase in the actual number and dollar amount of manual unsupported JVs. Specifically, based on the Working Group’s reporting method, the percentage of unsupported manual JVs decreased in relation to the total population of manual JVs from October 2016 to March 2017 by 8 percent in the number of JVs and 14 percent in the dollar value of JVs. However, the actual number and dollar value of the unsupported manual JVs reported on the October 2016 and March 2017 metrics increased from 329 to 462 and from a total of $3.3 billion and $7.0 billion, respectively. Because the metrics used to monitor corrective action plans do not clearly indicate which JVs are affected by a specific root cause identified, resolved JVs cannot be tied to an implemented corrective action plan. Therefore, the Working Group is unable to demonstrate to what extent it has moved closer to eliminating and reducing unsupported JVs and to what extent the Army’s financial statements are becoming auditable for fiscal year 2018. In addition, according to members of the Working Group as of March 2017, 16 of the 20 remaining corrective action plans developed are pending implementation because they require system changes, which need to be negotiated with the contractor selected to make the system changes. Therefore, the Working Group has developed temporary mitigating procedures to support those JVs required to be recorded until system changes are implemented. For example, one of the root causes that the Working Group identified was a JV recorded in DDRS-B related to the accounting entry to record a customer refund from a prior year purchase. When DFAS personnel record an accounting entry for a customer refund from a prior year purchase into GFEBS, the system erroneously records the transaction as a current year refund, through the reimbursements and other income earned—collected account, rather than as a current year obligation and outlay as required by OMB Circular A-11, Preparation, Submission, and Execution of the Budget. Until this system change is made to GFEBS so that it can differentiate between the return of a prior year purchase or a current year purchase, DFAS has to reverse each entry and record the current year obligation and outlay with an additional JV into DDRS-B to correct the error made and include with the JV an explanation of the situation as well as detail level transactions to support the JV. DFAS considers this type of support to be a temporary solution; however, until system changes are made, the Working Group will be unable to implement the corrective action plans developed and resolve the root causes identified or determine whether the corrective action plan developed for this issue will be effective. Since 2015, the Working Group has been analyzing manual unsupported JVs in DDRS-B to determine their root causes and to concentrate its efforts on getting the Army’s financial statements audit ready. As of March 2017, the Working Group had not analyzed system-generated JVs that constitute 90 percent of the total dollar value or 97 percent of the total number of unsupported JVs because of the volume and potential correction complexity of these JVs. Also, the Working Group had not analyzed unsupported JVs at the transaction level or in DDRS-AFS. Although we recognize that these efforts will be an ongoing, iterative process, until the Working Group has identified and completed its analyses of root causes for all unsupported JVs, the Army will not be able to correct the overall unsupported JV issue. As of March 2017, the Working Group had developed 38 corrective action plans and verified successful implementation of 18 corrective action plans to address the issue of unsupported JVs in the Army’s general fund. However, because the Working Group’s root cause analyses were limited to a small percentage of the total unsupported JVs, the development of corrective action plans was likewise limited. In addition, the metrics used to analyze JVs and monitor implemented corrective actions are not designed to provide the level of detail necessary to sufficiently monitor whether root causes identified are resolved through corrective action plans. As a result, the Army cannot determine to what extent it has reduced unsupported JVs in its general fund and how much more effort is required to fully address the issue and help ensure that the Army’s financial statements will be auditable for fiscal year 2018. We are making the following two recommendations to the Army: The Assistant Secretary of the Army for Financial Management and Comptroller should ensure that the Working Group identifies and analyzes the full population of manual unsupported JVs at the transaction level and in DDRS-AFS and determines the root causes for these JVs. (Recommendation 1) The Assistant Secretary of the Army for Financial Management and Comptroller should work with DFAS to enhance the monthly JV metrics report or develop another method to sufficiently monitor the extent to which the Working Group has identified the root causes of unsupported JVs and to determine the extent to which unsupported JVs are being reduced based on the implemented corrective actions. (Recommendation 2) We provided a draft of this report to the Army for review and comment. In its written comments, reprinted in appendix II, the Army concurred with our recommendations and provided information on actions it has taken or plans to take to address them. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense (Comptroller) and Chief Financial Officer, the Deputy Chief Financial Officer, the Director of Financial Improvement and Audit Readiness, the Secretary of the Army, and the Director of the Defense Finance and Accounting Service. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9869 or khana@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Our objectives were to report on the extent to which the Journal Voucher Working Group (Working Group) had, as of March 2017, (1) performed analyses to determine the root causes of unsupported journal vouchers (JV) for the Department of the Army’s (Army) general fund and (2) developed and monitored the implementation of corrective action plans to address identified root causes of unsupported JVs. To address our first objective, we reviewed our prior relevant reports and reports by the Department of Defense (DOD) and DOD’s Office of Inspector General to gain an understanding of the nature of the issues identified related to the Army’s unsupported JVs for its general fund and how they affect DOD’s audit readiness as described in the Financial Improvement and Audit Readiness (FIAR) Guidance. We also reviewed various Army, Defense Finance and Accounting Service, and DOD financial reporting guidance; performed walk-throughs of the JV process; and interviewed agency officials to gain an understanding of the processes for recording JVs and analyzing causes of unsupported JVs, including (1) the various types of JVs recorded and reasons why the JVs are unsupported, (2) parties responsible for preparing and approving JVs, and (3) requirements for determining and documenting the root causes of unsupported JVs and monitoring such efforts. Further, we obtained the Working Group’s root cause analyses performed and completed as of March 2017. We analyzed the documentation provided and interviewed agency officials to determine the extent to which (1) root cause analyses have been performed for all unsupported JVs of the Army’s general fund and (2) root causes had been identified to address the issue of unsupported JVs. We also reviewed documentation provided to determine whether the Working Group was including all unsupported JVs in the population used for analyses. To address our second objective, we obtained the Working Group’s documentation of corrective action plans developed and implemented as of March 2017 to address the root causes identified by the Working Group. We inquired about the development and the status and implementation of each corrective action plan. We also inquired about the steps the Working Group has taken to validate and monitor the effectiveness of corrective action plans that have been implemented to address root causes identified. We also inquired about how the Working Group measures its progress using the monthly JV metrics reports, which the Working Group identified as its primary source for monitoring progress, and analyzed the JV metrics reports from October 2016 to March 2017. Further, we inquired of the reasons why corrective action plans had not been fully implemented. We also interviewed members of the Working Group to confirm our understanding of any limitations or challenges identified during the root cause analyses. We obtained their views on these or other concerns and reviewed relevant documentation supporting their evaluation of the root causes, efforts to address the root causes, and the potential impact on the Army’s financial management and future auditability. We interviewed Army officials about efforts to monitor the effectiveness of the Working Group’s corrective action plans to determine what actions, if any, the Army has taken to monitor the corrective action plans regarding deficiencies related to unsupported JVs. We considered whether the Working Group’s efforts for developing and monitoring the implementation of corrective action plans addressing identified deficiencies followed the relevant criteria contained in internal control standards; Office of Management and Budget Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control; and DOD FIAR Guidance. We conducted this performance audit from December 2015 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, the following individuals made key contributions to this report: Lynda Downing (Assistant Director), Francine DelVecchio, Natasha Guerra, Cole Haase, Jason Kelly, and David Scouten.", "summary": "The Department of Defense (DOD) remains on GAO's High-Risk List in part because of its long-standing financial management deficiencies, which have prevented it from having auditable financial statements. One of the contributing factors is the billions of dollars of unsupported JVs within DOD's accounting systems, with the largest portion attributable to the Army's general fund. Because the National Defense Authorization Act for Fiscal Year 2014 required that DOD submit audit results to Congress for fiscal year 2018, a Working Group was established to address the Army's unsupported JVs, including analyzing root causes and developing corrective action plans. This report examines to what extent the Working Group, as of March 2017, has performed analyses and developed corrective action plans to address identified root causes. GAO reviewed and analyzed relevant documentation and interviewed agency officials and members of the Working Group. Since February 2015, the Journal Voucher Working Group (Working Group), which is comprised of Department of the Army (Army) and Defense Finance and Accounting Service personnel, has been actively working toward implementing new processes to address inadequate support for journal vouchers (JV) in the Army's general fund. JVs are accounting entries manually entered or system generated to record corrections or adjustments in an accounting system. From October 2016 to March 2017, the Working Group identified more than 121,000 unsupported JVs totaling $455 billion in one of its reporting systems, Defense Departmental Reporting System-Budgetary (DDRS-B). In the May 2017 Financial Improvement and Audit Readiness Plan Status Report, the Army stated that it had completed its root cause analyses for all JVs. However, GAO found that the Working Group had conducted the analyses on only a small percentage of the total number of unsupported JVs that existed as of March 2017. Specifically, as of March 2017, the Working Group had been focusing on manual JVs processed in DDRS-B, which only represent 10 percent of the dollar value and 3 percent in the total number of unsupported JVs in that system alone. Therefore, the analyses cannot be considered complete because the Working Group had not yet analyzed the remainder of the population, including those in other systems. Members of the Working Group indicated that in March 2017, the Working Group began including system-generated JVs in its analyses, which made up 90 percent in dollar value and 97 percent in total number of unsupported JVs processed in DDRS-B as of March 2017, but had not yet begun identifying any root causes. Members of the Working Group stated that these efforts will be an ongoing, iterative process because of anticipated new challenges that continually arise from new business processes or programs. As of March 2017, the Working Group reported that it had developed 38 corrective action plans to address all of the identified root causes of unsupported manual JVs in DDRS-B for the Army's general fund. According to members of the Working Group, 18 of the 38 have been implemented. However, the Working Group is unable to determine how many more corrective action plans will need to be developed to resolve the unsupported JV issue until the root cause analyses are complete. Further, GAO found that the Working Group's monitoring of corrective action plan implementation does not include a method that sufficiently identifies the progress toward fully addressing the issue of unsupported JVs or to what extent each implemented corrective action plan has reduced unsupported JVs. Members of the Working Group stated that the Working Group uses monthly JV metrics reports to monitor its implemented corrective actions, but the reports are not designed to provide the level of detail necessary to sufficiently monitor whether root causes identified are resolved through corrective action plans. Therefore, the metrics cannot demonstrate to what extent the Working Group has reduced unsupported JVs and how much more effort is required to fully address the issue and help ensure that the Army's financial statements are auditable for fiscal year 2018. GAO recommends that the Army (1) ensure that the entire population of unsupported JVs is identified and analyzed and (2) develop metrics that sufficiently monitor the extent to which the Working Group has identified root causes and determine the extent to which unsupported JVs are being reduced based on the implemented corrective actions. The Army concurred with GAO's recommendations and provided information on actions it has taken or plans to take to address them.", "document_type": "gao"}
{"report": "Multiple federal departments and agencies—including DOD—have responsibilities as part of their missions to assess the threat of biological agents and carry out key biodefense roles as delineated in Homeland Security Presidential Directive 10, Biodefense for the 21st Century, and the National Strategy for Countering Biological Threats. Since the 2001 anthrax incident, in which powdered Bacillus anthracis spores were deliberately put into letters that were mailed through the U.S. postal system that resulted in five deaths, the federal government has experienced growth and proliferation of research programs to protect public health and agriculture in the event of a natural emergency, man- made biological incident, or act of biological terrorism. DOD laboratories that handle and research deadly pathogens are important components of the U.S. biodefense infrastructure that supports such biological research programs. Select agent research is subject to federal oversight and regulations and is guided by the principles and practices of biosafety and biosecurity. The Federal Select Agent Program was established to regulate the possession, use, and transfer of BSAT, in response to security concerns following bioterrorism attacks in the 1990s and early 2000s. The Federal Select Agent Program is jointly managed by the Centers for Disease Control and Prevention (CDC), Division of Select Agents and Toxins, within the Department of Health and Human Services (HHS), and the Animal and Plant Health Inspection Service (APHIS), Agriculture Select Agent Services, within the Department of Agriculture (USDA). These two agencies jointly regulate and oversee laboratories in the United States that are registered to work with BSAT. The Federal Select Agent Program also conducts inspections of registered entities for compliance with the select agent regulations. CBDP was established to develop defense capabilities to protect the warfighter from current and emerging chemical and biological threats. The CBDP Enterprise’s mission is to enable the warfighter to deter, prevent, protect against, mitigate, respond to, and recover from chemical, biological, radiological, and nuclear threats and effects as part of a layered, integrated defense. The CBDP Enterprise conducts research and develops defenses against chemical threats—such as cyanide and mustard gases—and biological threats—such as anthrax and Ebola—and tests and evaluates capabilities and products to protect military forces from them. We reported in June 2015 on the need for DOD to designate an entity to identify, align, and manage its chemical and biological defense infrastructure, which includes its BSAT-related infrastructure. We found that CBDP had not fully identified the infrastructure capabilities required to address threats, had not planned to identify potential duplication without considering information from existing federal studies, and had not updated its guidance and planning process to include specific responsibilities and time frames for risk assessments. As a result, we recommended, among other things, that DOD identify and designate an entity within the CBDP Enterprise with the responsibility and authority to lead the effort to ensure achievement of infrastructure goals, and establish time lines and milestones for achieving the goals it has identified for chemical and biological infrastructure, including the Program Analysis and Integration Office’s 2008 recommendation that the CBDP Enterprise identify its required infrastructure capabilities. DOD concurred with all of our recommendations. In response to our recommendations, DOD, among other things, designated an infrastructure manager for CBDP and is implementing a three-phase process to identify and define the roles and responsibilities of the position by the end of 2018. As part of its BSAT infrastructure, DOD currently has five covered facilities that contain various laboratories across the military services that possess and handle BSAT. Each of these facilities currently is registered with the Federal Select Agent Program to possess BSAT in the United States. A sixth DOD facility, the BioTesting Division at Dugway Proving Ground, Utah, is working to regain its certification as a covered facility (see fig. 1). DOD officials said that other DOD facilities, in addition to these six, are registered with the Federal Select Agent Program to handle BSAT in an emergency outbreak situation. However, according to DOD officials, they do not currently possess BSAT. CBDP officials stated that DOD used to have more facilities that possessed and handled BSAT, but as a result of prior base realignment and closure activities, the department has consolidated its BSAT laboratory capabilities within the six facilities highlighted in figure 1, based on the unique capabilities and missions performed by each facility to support the warfighter. One of these unique capabilities, for example, is the Whole System Live Agent Test Chamber located at the BioTesting Division at Dugway Proving Ground, Utah, a one-of-a-kind chamber designed and constructed primarily for biological agent aerosol testing. For more information on the unique capabilities DOD has identified for each of the DOD laboratories that handle BSAT, scroll over figure 1 to see an interactive display of information on each facility or see appendix II for static images of this information. DOD and the military services have issued a number of policies and guidance aimed at ensuring safety and security for BSAT materials and establishing standards for the handling of BSAT within DOD facilities. In particular, DOD issued Instruction 5210.88, Security Standards for Safeguarding Biological Select Agents and Toxins (BSAT), which established security standards for safeguarding BSAT materials and identified roles and responsibilities for BSAT biosecurity. These include oversight responsibilities for the BSAT security program, which is led by the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs. Oversight responsibilities include establishing security standards for safeguarding BSAT, coordinating with the Federal Select Agent Program, and establishing and maintaining a database of all BSAT at DOD covered facilities. In response to DOD Instruction 5210.88, each of the military services has received waivers or issued separate policies for securing BSAT materials. The Army has been granted a waiver to its existing policies that are inconsistent with DOD Instruction 5210.88 and, according to Army officials, is in the process of updating its policies to align with the DOD instruction. According to Navy officials, the Navy has been granted waivers while it is updating existing policies that do not currently align with DOD Instruction 5210.88. The Air Force has issued policies directing alignment with the DOD instruction. Further, a national strategy and a number of executive orders and presidential directives have been issued addressing a range of concerns, such as biological defense and safety and security for handling BSAT. For example, in 2010 the President issued an executive order directing federal agencies to harmonize their policies and guidance on BSAT to align them with the select agent regulations in order to mitigate any conflicting direction and promote research and innovation. In May 2015, DOD discovered that the Life Sciences Division—currently known as the BioTesting Division—at Dugway Proving Ground, Utah, had inadvertently made 575 shipments from 2004 through 2015 of incompletely inactivated Bacillus anthracis—the bacterium that causes anthrax—to 194 laboratories and contractors worldwide (see fig. 2 for locations). Laboratory officials at Dugway Proving Ground believed that the samples of Bacillus anthracis (see sidebar) they were shipping had been inactivated—that the hazardous effects of the pathogen had been destroyed, while the pathogen retained characteristics of interest for research purposes. DOD was inactivating samples to support research on the detection, identification, and characterization of biological threats (see fig. 3). Anthrax is a serious infectious disease caused by the pathogen known as Bacillus anthracis. This pathogen occurs naturally in soil and commonly affects domestic and wild animals around the world. It can survive in the environment for decades. Contact with Bacillus anthracis can cause severe illness in both humans and animals. The bacteria can multiply, spread out in the body, produce toxins (poisons), and cause severe illness. Humans can be infected by breathing in spores, eating food or drinking water that is contaminated with spores, or getting spores in a cut or scrape in the skin. It is very uncommon for people in the United States to become sick with anthrax. Because Bacillus anthracis is both infectious and exceptionally resilient, it is ideally suited for potential adversaries’ biological weapons programs. Therefore, Department of Defense (DOD) biodefense officials believe that it is critical for the department to have a strong countermeasures program to protect the warfighter against this dangerous pathogen. As of March 2018, DOD reported having implemented 18 of 35 recommendations in the Army’s 2015 investigation report. DOD reported that it has actions under way to implement the remaining 17 recommendations. The Secretary of the Army, as Executive Agent for DOD’s BSAT Biosafety and Biosecurity Program, is responsible for implementing the recommendations from the 2015 investigation report. Since 2015, the Army has taken multiple types of actions—including operational, administrative, and personnel actions—to implement the recommendations from the report. We asked DOD to characterize the relative priority of the recommendations and describe those actions that have been taken or are under way. DOD reported that 12 recommendations were considered “high” priority, 7 of these being assessed as implemented and 5 as in progress, 18 recommendations were considered “moderate” priority, 10 of these being assessed as implemented and 8 as in progress, and 5 recommendations were considered “low” priority, 1 being assessed as implemented and 4 as in progress. Appendix III shows the implementation status of the 35 recommendations from the Army’s 2015 investigation report that we reviewed. Rather than focus exclusively on the recommendations from the Army’s 2015 investigation report, the BSAT Biorisk Program Office (BBPO) incorporated actions to implement the 2015 recommendations into broader Army efforts to improve biosafety, biosecurity, and overall program management. Appendix IV describes BBPO’s roles and responsibilities. For example, Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program, incorporates some of the recommendations from the Army’s 2015 investigation report, such as establishing a mentorship program for laboratory staff and others who work with BSAT, as well as directing studies into the science of inactivation of Bacillus anthracis. In addition, the Army has developed implementation guidance to carry out Army Directive 2016-24, which provides clarification on the directive and on the reporting requirements to the BBPO and Executive Agent Responsible Official (hereafter referred to as the EARO) in support of the NDAA for Fiscal Year 2017. BBPO officials told us that recommendations from the Army’s 2015 investigation report that are not incorporated in the directive have been or are being addressed through a combination of establishing working groups and, at one time, through a General Officers Steering Committee. This committee monitored implementation through updates to the EARO and the Director of the Army Staff. For example, BBPO officials told us that, from 2016 to 2017, quarterly meetings between the General Officers Steering Committee and the Director of the Army Staff were used to discuss the status of requirements in Army Directive 2016-24. These quarterly meetings also provided status updates on target completion dates for the Army’s 2015 investigation report recommendations that were incorporated in the directive. We found that the quarterly information briefs included information on the status and time frames for implementing recommendations that were incorporated into the Army directive. In carrying out broader biosafety efforts and implementing recommendations from the Army’s 2015 investigation report as well as recommendations from other entities, BBPO has established processes to track the status of actions that it has taken and monitor time lines for completion by responsible DOD organizations. This helps BBPO understand what actions have been taken and where they fit into a larger plan to improve biosafety at specific facilities and organizations and across the DOD BSAT enterprise. According to Standards for Internal Control in the Federal Government, an internal control provides reasonable assurance that the objectives of an entity will be achieved, including the use of ongoing monitoring, evaluations, or a combination of the two to obtain reasonable assurance of the operating effectiveness of the entity’s internal controls over the assigned process. It also states that managers should identify, analyze, and respond to risks. Such evaluations and risk assessments are necessary to help officials understand whether the actions they have taken—or will take—address the situations that prompted the original recommendations. We found that BBPO’s approach to planning for and executing actions to implement the 2015 Army recommendations and other recommendations fulfills the monitoring element of the internal control standards. BBPO has not, however, systematically carried out the evaluation element. Based on our review of DOD documentation, such as the quarterly information briefs on status of recommendations, and on subsequent interviews with BBPO officials, we found that BBPO has not developed an approach to assess the effectiveness of each implemented recommendation in achieving its intended purpose. According to DOD officials, BBPO has been focused on implementing not only the recommendations from the 2015 Army investigation report but also its broader efforts for the DOD BSAT Biosafety and Biosecurity Program and has not yet formalized an approach to evaluating the effectiveness of actions taken to address the recommendations from the 2015 Army investigation report. There are many ways to assess effectiveness that could assist BBPO in improving its implementation processes. One approach we found related to DOD’s implementation of recommendations for the defense nuclear enterprise provides an example that may be useful. In 2017, we reported on DOD’s process to monitor progress and identify risks while implementing recommendations within the defense nuclear enterprise—a community that, like chemical and biological defense, operates in a low- probability, high-risk environment. In that report, we noted that DOD’s Office of Cost Assessment and Program Evaluation had developed a tracking tool that applied a systematic approach for stating the underlying problem, identifying and overseeing offices of responsibility, implementation actions, milestones, and metrics to measure the effectiveness of the actions taken toward implementing each of the recommendations to support the defense nuclear enterprise. We also found that identifying risks can help an agency to track and measure the completion of tasks over time. This example incorporates both the monitoring and evaluation elements of internal control that we discussed earlier. Measuring the effectiveness of each implemented recommendation would help bolster BBPO’s existing efforts. It would also help BBPO to better determine whether the actions taken are working, whether there are unintended consequences, or if further action is necessary. In response to the 2015 incident at Dugway Proving Ground and various subsequent DOD and external reviews of management, operational, coordination, safety, and quality assurance incidents between 2004 and 2015, DOD has initiated a broad range of efforts to address these types of incidents and to improve DOD’s BSAT enterprise. The designation of the Army as the DOD Executive Agent for the DOD Biosafety and Biosecurity Program is one example of DOD’s efforts to improve management. Prior to 2015, there was no centralized oversight authority for DOD’s BSAT enterprise. The Secretary of the Army’s designation as the Executive Agent and subsequent delegation of this authority to The Army Surgeon General has, according to BBPO and laboratory officials, resulted in improved coordination and communication across DOD and with the Federal Select Agent Program. According to these same officials, BBPO also has contributed to improved communication between DOD laboratories by establishing working groups and is developing a process for approving standard operating procedures for working with BSAT across the CBDP Enterprise. DOD has made key safety improvements by taking a number of actions to address the incident at Dugway Proving Ground and the recommendations from the Army’s 2015 investigation report. These key safety improvements include (1) establishing a DOD Executive Agent and a support office to provide oversight, (2) implementing improved quality control and assurance standards at its covered facilities, (3) developing a new quality management system, (4) conducting additional scientific studies on BSAT inactivation, and (5) taking multiple actions to address requirements associated with Army Directive 2016-24 and the Army’s 2015 investigation report. Appendix V provides detailed information on the key safety improvements DOD has completed in response to the incident at Dugway Proving Ground and the recommendations from the Army’s investigation report. According to BBPO officials, in addition to implementing improved quality control and assurance standards at covered facilities, they also have established a quality control and assurance working group to address and track implementation of the recommendations in accordance with the Army’s Implementation Guidance for Army Directive 2016-24 and to implement the quality control and assurance measures from section 218 of the NDAA for Fiscal Year 2017. Further, the EARO has established a BSAT Biorisk and Scientific Review Panel to review and assess biosafety and biosecurity concerns associated with new and existing procedures conducted at DOD BSAT laboratories and to provide recommendations to the EARO on their acceptability for use to enhance biosafety and biosecurity across the DOD BSAT programs. To provide additional insights into DOD’s actions to make safety improvements and to better understand the effects of those actions on laboratory staff and operations following the 2015 incident at Dugway Proving Ground, we conducted facilitated discussions with a non- generalizable sample of supervisory and non-supervisory staff at the six DOD laboratories that handled BSAT. We used these facilitated discussions to obtain the views of those laboratory staff who have and will be implementing key biosafety and biosecurity actions from multiple sources. Appendix VI presents selected comments, organized by key themes, from laboratory staff at DOD facilities that handle BSAT in response to actions taken by DOD following the 2015 incident at Dugway Proving Ground. We heard a broad range of views on the effects of the Dugway incidents as well as the effects of subsequent actions to improve the BSAT Biosafety and Biosecurity Program. For example, some individuals were concerned about the effect of administrative requirements on the efficiency of their work, while others believed that the organizational changes made by the Army have improved communication and coordination. We did not validate any of the views expressed to us, but they may be of value to BBPO and officials throughout the BSAT enterprise in considering both how their program efforts are perceived and how best to carry them out. BBPO has begun to develop a draft concept plan to establish roles and responsibilities for the BSAT Biosafety and Biosecurity Program. However, we found that BBPO has not developed a strategy or implementation plan for the long term. BBPO’s draft concept plan identified manpower and funding requirements for the BSAT Biorisk Program Office but did not go further in laying out a strategy and implementation plan. According to BBPO officials, BBPO currently is relying on DOD Instruction 5210.88 as overarching guidance for managing BSAT biosecurity operations and bringing DOD into compliance with Executive Order 13546, Optimizing the Security of Biological Select Agents and Toxins in the United States, and select agent regulations. BBPO also relies on DOD Manual 6055.18-M for managing DOD BSAT biosafety operations. In addition, DOD is in the process of drafting an overarching directive for the combined DOD BSAT Biosafety and Biosecurity Program that will be based on DOD Instruction 5210.88 and DOD Manual 6055.18-M. According to BBPO officials, BBPO plans to develop a multi-service policy to consolidate biosafety and biosecurity initiatives for combined biorisk management and replace Army Directive 2016-24 once the Army has fully implemented its directive. While efforts to develop the draft concept plan and overarching guidance are important, BBPO has not identified long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, an evaluation plan for monitoring goals and objectives, and an overall time frame for completion of a strategy and implementation plan. According to Office of Management and Budget Circular (OMB) A-11, in addition to fulfilling the requirements of the GPRA Modernization Act of 2010, strategic planning serves a number of important management functions related to achieving an agency’s mission. For example, strategic planning is a valuable tool for communicating a vision for the future and should include goals and objectives that align with resources and guide decision making to accomplish priorities and improve outcomes. An overall strategy would also help to prioritize funding; accomplish priorities to improve outcomes; and coordinate biosafety and biosecurity protocols, practices, and procedures to achieve harmonization across the military services and the DOD BSAT enterprise. To accomplish these things, a strategy and implementation plan can include such things as long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, and a time frame for completion. BBPO officials acknowledged that they need a strategy and implementation plan for the BSAT Biosafety and Biosecurity Program. They said that once they complete the concept plan, they will develop a strategy that will include specific goals and tasks to support programmatic efforts. They explained that they have not been able to develop a strategy and implementation plan because BBPO still is organizing the office and carrying out its other responsibilities while working toward obtaining stakeholder support for the program. As DOD completes a concept plan for the program and turns its attention to a strategy and implementation plan for the program over the long term, BBPO has an opportunity to incorporate the following key elements typically found in such strategies and implementation plans and specified in OMB guidance: long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, evaluation of the plan to monitor goals and objectives, and an overall time frame for completion of the strategy and implementation plan. Without a strategy and implementation plan, Dugway Proving Ground and DOD’s currently covered facilities may not be able to determine how to inform DOD’s long- term planning efforts. In addition, components of the DOD BSAT enterprise may remain unclear about the department’s strategy to harmonize BSAT operations to ensure safety, security, and standardization of procedures throughout DOD’s BSAT enterprise. A strategy and implementation plan could also help ensure unity of command among the military services to employ department-wide policies and procedures for managing the biosafety and biosecurity of BSAT. They also could help DOD to identify the capabilities necessary to support laboratory improvements, mitigate biological mishaps similar to the 2015 incident at Dugway Proving Ground, and allocate resources that support the BSAT enterprise. The Army has not fully institutionalized measures to ensure that its biological test and evaluation mission remains independent from its biological research and development mission at Edgewood Chemical Biological Center. This is important for preventing undue influence of test and evaluation procedures on research and development procedures, and vice versa. In April 2016, the Army issued General Order 2016-04 in response to a recommendation from the Army’s Biosafety Task Force, which directed the transfer of the West Desert Test Center – Life Sciences Division at Dugway Proving Ground, Utah, and its reassignment to the U.S. Army Materiel Command-Research, Development and Engineering Command – U.S. Army Edgewood Chemical Biological Center at Aberdeen Proving Ground, Maryland. This transfer took place in July 2016, and the former Life Sciences Division was subsequently renamed the BioTesting Division. Edgewood Chemical Biological Center’s traditional mission primarily is focused on research and development, while the West Desert Test Center’s traditional mission is focused on test and evaluation. DOD subsequently reported to the congressional defense committees on April 10, 2017, that it had realigned the BioTesting Division in order to place it under staff with more experience in handling BSAT. According to the CBDP’s 2017 Annual Report to Congress, the realignment of the BioTesting Division will enable tracking, reporting, and meeting of audit requirements within an approved framework for managing governance, risks, and compliance. Figure 4 illustrates the transfer of command and control of the BioTesting Division. Officials at Edgewood Chemical Biological Center identified a number of steps they have taken and plan to take to address concerns related to potential conflict of interest, including the following: In June 2016, the Army Test and Evaluation Command and Army Research, Development and Engineering Command signed a memorandum of agreement addressing reassignment of the BioTesting Division that lays out roles and responsibilities for test processes and procedures between the two entities. The memorandum also notes that the Research, Development and Engineering Command will develop a mitigation strategy for conflicts of interest when Edgewood Chemical Biological Center is the developer and the BioTesting Division is the tester. In November 2017, Edgewood Chemical Biological Center elevated the BioTesting Division from a branch to a division to raise its visibility and alleviate concerns about independence between the test and evaluation functions and the research and development functions of Edgewood Chemical Biological Center. However, as of March 2018, the Army has not institutionalized measures, such as policies, standard operating procedures, protocols, and roles and responsibilities to ensure independence between the biological research and development mission and the test and evaluation mission. Specifically, the Army has not provided any measures beyond the memorandum of agreement that acknowledged the potential for conflict of interest, such as the conditions under which one or more officials—even without intent—exercises undue influence of test and evaluation mission procedures on research and development procedures. The Army also recognizes the need for a mitigation strategy—to ensure independence between the biological research and development function and the test and evaluation function that takes the transfer of command and control into account. The memorandum of agreement does not contain, for example, criteria that distinguish the mission requirements for operational test and evaluation for the BioTesting Division from the mission requirements for research and development, and risk management guidelines to mitigate risks associated with potential conflicts of interest between the Edgewood Chemical Biological Center research and development mission and the BioTesting Division’s test and evaluation mission. Army officials explained that a mitigation strategy has not been developed—and that there is no time frame for developing such a strategy—because there is no testing of BSAT materials under way at the BioTesting Division, since its BSAT registration has been withdrawn. According to Army officials, this condition could last for at least 1 to 2 years. While a mitigation strategy to prevent potential conflict of interest is envisioned by the memorandum of agreement, Edgewood Chemical Biological Center officials currently are focused on re-registering the BioTesting Division with the Federal Select Agent Program and bringing it back up to full operational capability. A senior official at Edgewood Chemical Biological Center acknowledged that the risk to independence between Edgewood Chemical Biological Center and the BioTesting Division is an issue that remains unresolved and there are currently no measures in place to prevent potential conflict of interest. According to Army Regulation 73-1, Test and Evaluation: Test and Evaluation Policy, independence is important to ensure that the decision maker is provided with, for example, unbiased, objective advice about the status of the development of a system. In addition, as we have reported, independence between research and development functions and test and evaluation functions is key to the effectiveness of operational test and evaluation. We have reported long-standing conflicts between the research and development mission and the test and evaluation mission when there is a lack of independence, including (1) how many and what types of tests to conduct; (2) when testing should occur; (3) what data to collect, how to collect it, and how best to analyze it; and (4) what conclusions are supportable given the analysis and the limitations of the test program. One example where the Army considered a potential conflict of interest was between the Army Test and Evaluation Command’s chemical test and evaluation mission and Edgewood Chemical Biological Center’s chemical research and development mission. Specifically, Army Directive 2016-24 directed the Army Test and Evaluation Command to conduct a separate evaluation to determine whether to transfer the “remaining elements,” that is, the chemical mission, from West Desert Test Center to Edgewood Chemical Biological Center. Officials from the Army Test and Evaluation Command stated that after developing alternative courses of action, they decided—in contrast to their decision on the biological mission—to keep the chemical mission under the Army Test and Evaluation Command rather than transferring it to the Edgewood Chemical Biological Center. According to officials at the Army Test and Evaluation Command, the transfer of operational command and control of their chemical mission could create an independence issue by placing the chemical test and evaluation function within the same command as the research and development function. The chemical mission represents a major operational command and control element of the Army Test and Evaluation Command. Without measures in place to preserve independence—such as criteria that establish mission requirements for operational test and evaluation for the BioTesting Division or risk management guidelines—there is a potential risk to the independence of the testing and evaluation mission conducted by the BioTesting Division. For example, the BioTesting Division might be compelled to prioritize the testing of Edgewood Chemical Biological Center products over those of other DOD and non- DOD customers. Officials in the Army Test and Evaluation Command stated that the transfer of the biological test and evaluation mission may increase the complexity of the evaluation mission by requiring additional coordination. Furthermore, the BioTesting Division’s procedures on particular efforts could be influenced, resulting in test and evaluation that may not be objective or reliable. Without developing measures to prevent conflicts of interest, the Army will not have reasonable assurance of the independence of the BioTesting Division’s test and evaluation mission. DOD has not completed its BSAT infrastructure study to determine its infrastructure needs, as required by the NDAA for Fiscal Year 2017. DOD was to report to the congressional defense committees by February 1, 2017, among other things, on the results of its study to evaluate (1) the feasibility of consolidating covered facilities within a unified command to minimize risk, (2) opportunities to partner with industry for the production of BSAT and related services in lieu of maintaining such capabilities within the Army, and (3) whether operations under the BSAT production program should be transferred to another government or commercial laboratory that might be better suited to produce BSAT for non-DOD customers. Moreover, Standards for Internal Control in the Federal Government provides specific guidance to federal agencies on how to communicate clearly defined objectives that are to be achieved— including time frames for completing those objectives—and to inform decision makers in a timely manner. DOD provided a report to the congressional defense committees on April 10, 2017, stating that the department is still identifying its BSAT infrastructure requirements. However, as of March 2018, CBDP officials acknowledged that these study efforts are still ongoing and that there are no estimated time frames for completing any of them. DOD officials stated that they are focusing on identifying enterprise-wide infrastructure for CBDP, of which BSAT infrastructure is just one part. Officials explained that they have prioritized their efforts to first address the recommendations from our 2015 report, which included calling for DOD to designate an entity to take responsibility for CBDP Enterprise infrastructure. CBDP officials stated that when they established the infrastructure manager position, they decided to study CBDP Enterprise infrastructure from a “clean slate” and leverage lessons learned from previous studies. According to DOD officials, this information will be used to identify any capability gaps, right-size the CBDP Enterprise infrastructure, and support DOD’s final report to Congress regarding BSAT infrastructure. Regarding DOD’s first required task—to study the feasibility of consolidating covered facilities within a unified command to minimize risk—DOD officials stated that study efforts are ongoing and highlighted initial consolidation actions the department has taken. Specifically, DOD officials stated that (1) DOD had established the Secretary of the Army as Executive Agent to further consolidate command oversight of DOD’s BSAT Biosafety and Biosecurity Program and (2) the Army had transferred the command and control of the BioTesting Division from the Army Test and Evaluation Command to Edgewood Chemical Biological Center, as previously discussed. Regarding DOD’s second required task, DOD officials stated that the Army and DOD have not yet begun any specific studies on opportunities to partner with industry to produce BSAT and related services as an alternative to maintaining these capabilities within the Army. CBDP officials stated that they continually look for opportunities to partner with industry on production. CBDP officials told us that they plan to determine if there are opportunities to partner with industry after the CBDP Enterprise-wide study effort is completed. In the meantime, officials highlighted that the Army’s Defense Biological Product Assurance Office within the Joint Program Executive Office for Chemical and Biological Defense—formerly known as the Critical Reagents Program—has taken action to study its office’s BSAT-related commercial product line, which has resulted in the office divesting itself of inactivated BSAT materials. Regarding the third required task, the NDAA for Fiscal Year 2017 required DOD to study whether BSAT production operations should be transferred to another government or commercial laboratory that might be better suited to produce BSAT for non-DOD customers. DOD reported that it has taken steps to support a future decision on this issue and, according to DOD officials, once it has completed the CBDP Enterprise- wide study of infrastructure capabilities and capacity, it will determine whether the BSAT community needs to transfer any part of its production to another entity. With regard to the production of BSAT for non-DOD customers, Army officials stated that when the BioTesting Division at Dugway Proving Ground becomes fully operational and re-registers with the Federal Select Agent Program in fiscal year 2019, it will no longer be producing and shipping BSAT to non-DOD customers. The Army took steps to address the issue prior to the NDAA for Fiscal Year 2017. Specifically, in August 2015, the Army established a Biosafety Task Force working group that examined, among other things, DOD’s covered facilities and options for locations for producing BSAT. Subsequently, in February 2016, the Army recommended that additional analysis be conducted before any decision is made to change the current BSAT laboratory infrastructure. Appendix VII shows what DOD has reported and completed in response to the requirements in the NDAA for Fiscal Year 2017. The NDAA for Fiscal Year 2017 is not the first time that DOD has been directed to review its BSAT infrastructure. Biosafety, biosecurity, and biodefense issues have been long-standing concerns for the nation. We found that the federal government—including DOD—has spent over a decade studying biosafety and biosecurity issues, including BSAT infrastructure. DOD has contributed to and is continuing to support a number of federal efforts regarding size, safety, security, and oversight of high-containment laboratories across the United States, including the efforts of the Federal Experts Security Advisory Panel and Fast Track Action Committee to examine the size and scope of laboratories working with BSAT across the United States. Appendix VIII describes and provides a summary of selected federal panels, task forces, and working groups that have examined biosafety, biosecurity and biodefense issues since 2004. (Our prior reports related to these matters are included in Related GAO Products at the end of this report.) According to CBDP officials, once CBDP gathers information on the capacity and needs of its enterprise-wide infrastructure and determines where there are capability gaps, it anticipates providing a report to the congressional defense committees. These officials said that the report will provide information on whether DOD should consolidate or transfer infrastructure and opportunities to partner with industry on BSAT. The EARO has periodically met with congressional authorizers, according to BBPO officials, to provide programmatic updates on the DOD BSAT Biosafety and Biosecurity Program. However, CBDP officials stated that they have not provided an update to the congressional defense committees on the results of the study efforts since they issued their preliminary report on April 10, 2017. In addition, CBDP officials told us that they do not have an estimated time frame for when they will be able to provide the final report on the results of the study of BSAT infrastructure. DOD has reported that its mandated study efforts on BSAT-related infrastructure still are ongoing because DOD is focused first on identifying CBDP Enterprise-wide infrastructure and has no estimated time frames for completing the mandated study. Unless DOD establishes time frames for finalizing its study, decision makers will not have reasonable assurance that DOD is taking the necessary steps in a timely manner to provide the required BSAT infrastructure CBDP needs to support the warfighter. The inadvertent shipments of incompletely inactivated Bacillus anthracis from Dugway Proving Ground, according to the Army’s 2015 investigation report, constituted serious breaches of regulations and raised biosafety and biosecurity concerns. Since then, DOD has taken steps to improve biosafety and biosecurity and made significant progress in addressing the recommendations from the Army’s investigation report. The department currently has an opportunity to take several additional management actions that, if implemented fully, will help it capitalize on the progress that it has made. Addressing the gap in assessing how effectively the recommendations and actions taken address the original condition and contributing factors they were intended to resolve would bolster the Army’s long-term efforts. The Army could incorporate such an approach into its existing processes to monitor the implementation of recommendations from the Army’s 2015 investigation report. The Army clearly has a concept in mind for the BSAT Biosafety and Biosecurity Program. However, that concept does not constitute a strategy and implementation plan that identifies specific long-term goals, objectives, external factors that can affect goals, and tasks to support programmatic efforts through the use of metrics to gauge progress; milestones; an evaluation of the plan; and an overall time frame for completion. Without a strategy and implementation plan, the Army may not be able to harmonize BSAT operations to ensure safety, security, and standardization of procedures throughout DOD’s BSAT enterprise. The Army recognizes that the transfer of operational command and control of the BioTesting Division from West Desert Test Center at Dugway Proving Ground, Utah, to Edgewood Chemical Biological Center at Aberdeen Proving Ground, Maryland, could result in unintended consequences, such as a potential risk to the independence of the testing and evaluation mission. However, although Army officials said they intend to develop a strategy to mitigate this risk, there is no time frame for doing so, because there is no testing under way at the BioTesting Division and there will be none for at least 1 to 2 years. This hiatus in testing should not preclude Army efforts to develop a mitigation strategy. Without measures in place to prevent or mitigate a risk to independence, the transfer of operational command and control could ultimately compromise the quality of future technologies used by the warfighter. Finally, DOD is focusing on identifying the enterprise-wide infrastructure necessary for CBDP. However, it has not yet determined time frames for completion of the study required by the NDAA for Fiscal Year 2017 related to consolidation of command, transfer of BSAT production responsibilities, and opportunities to partner with industry for the production of BSAT. Without time frames for reporting on the final results of this study, DOD is unable to provide decision makers with key information needed to determine infrastructure requirements for the BSAT program and contribute to federal-level efforts to determine the appropriate number of high-containment laboratories in the United States. We are making the following four recommendations to the Department of Defense: The Secretary of the Army should ensure that The Surgeon General of the Army, as the EARO for DOD’s BSAT Biosafety and Biosecurity Program, incorporates into existing processes an approach for assessing how effectively the recommendations from the Army’s 2015 investigation report address the original condition and contributing factors that they were intended to resolve. (Recommendation 1) The Secretary of the Army should ensure that The Surgeon General of the Army, as the EARO for DOD’s BSAT Biosafety and Biosecurity Program, develops a strategy and implementation plan for the DOD BSAT Biosafety and Biosecurity Program that includes long-term goals, objectives, external factors that can affect goals, use of metrics to gauge progress, an evaluation plan for monitoring goals and objectives, and a time frame for completion. (Recommendation 2) The Secretary of the Army should ensure that the Commander of Army Materiel Command establishes measures to prevent the potential risk to independence posed by transferring operational command and control of the BioTesting Division from West Desert Test Center to the Edgewood Chemical Biological Center. Such measures could include, for example, criteria that establish mission requirements for operational test and evaluation for the BioTesting Division, in accordance with DOD and Army regulations, and risk management guidelines to mitigate risks associated with potential conflicts of interest between the Edgewood Chemical Biological Center research and development mission and the BioTesting Division’s test and evaluation mission. (Recommendation 3) The Secretary of Defense should ensure that the Deputy Assistant Secretary of Defense for Chemical and Biological Defense establishes time frames to complete the study and its evaluations required by the NDAA for Fiscal Year 2017, Section 218(d), regarding the feasibility of consolidating covered facilities within a unified command, opportunities to partner with other industry for the production of BSAT, and transfer of BSAT production responsibilities. (Recommendation 4) In written comments on a draft of this report, DOD concurred with all four of our recommendations, discussed actions it is taking and plans to take to implement them, and provided target dates for completing implementation of these actions. The full text of DOD’s written comments are reprinted in appendix IX. DOD also provided us with several technical comments, which we incorporated in the report, as appropriate. We believe these actions, if fully implemented, will address our recommendations. USDA and HHS did not provide formal agency comments on a draft of this report, but provided us with a technical comment, which we incorporated in the report, as appropriate. We are sending copies of this report to the congressional defense committees as well as other appropriate congressional committees; the Secretaries of Defense, Agriculture, and Health and Human Services; the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs; the Deputy Assistant Secretary of Defense for Chemical and Biological Defense; the Department of Defense Inspector General; the Secretaries of the Army, the Air Force, and the Navy and the Commandant of the Marine Corps; the Directors, Centers for Disease Control and Prevention and Animal and Plant Health Inspection Service; and other cognizant officials, as appropriate. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact Joseph Kirschbaum at (202) 512-9971 or KirschbaumJ@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix X. The National Defense Authorization Act (NDAA) for Fiscal Year 2017 included a provision for us to report on the Department of Defense’s (DOD) actions to address findings and recommendations of the Army’s December 2015 investigation report (hereafter, the Army’s 2015 investigation report) regarding the inadvertent shipment of incompletely inactivated Bacillus anthracis from Dugway Proving Ground, Utah. It also included a provision for us to report on DOD’s efforts to implement quality control and assurance measures for the department’s Biological Select Agents and Toxins (BSAT) Biosafety and Biosecurity Program, among other things. This report discusses the extent to which (1) DOD has implemented the recommendations from the Army’s 2015 investigation report and has developed an approach to measure the effectiveness of actions taken to address the recommendations, (2) the Army has implemented the BSAT Biosafety and Biosecurity Program and developed a strategy and implementation plan, (3) the Army has developed measures to ensure that its biological test and evaluation mission remains independent under its biological research and development mission, and (4) DOD has carried out a study and evaluation in compliance with the requirements contained in section 218, subsection (d), of the NDAA for Fiscal Year 2017. To determine how DOD has implemented the recommendations from the Army’s 2015 investigation report and has developed an approach to measure the effectiveness of actions taken to address the recommendations, we reviewed the Army’s 2015 investigation report recommendations and assessed the subsequent actions that DOD had taken to address those recommendations. To determine whether specific recommendations have been addressed, we analyzed guidance that DOD and the Army issued to instruct department and military service activities on roles and responsibilities and implementation efforts to support DOD’s BSAT Biosafety and Biosecurity Program, such as DOD Instruction 5210.88, Security Standards for Safeguarding Biological Select Agents and Toxins (BSAT); Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program; and Implementation Guidance for Army Directive 2016-24. We also analyzed supporting documentation from DOD officials to demonstrate how those specific recommendations were addressed. As of March 2018, DOD had designated a priority level and had updated the completion status of its implementation for each of the 35 of 39 recommendations from the Army’s 2015 investigation report that we reviewed. This update and priority level designation was conducted at our request. We also asked that DOD provide us with milestones and risk assessments associated with the implementation of the recommendations from the Army’s investigation report. However, DOD was unable to provide this information. (We did not review the 4 recommendations in the investigation report that pertain to individual accountability.) We interviewed cognizant DOD and military service officials to obtain their perspectives on efforts to address the recommendations in response to the 2015 incident at Dugway Proving Ground. In addition, we reviewed Standards for Internal Control in the Federal Government and DOD Instruction 5010.40, Managers’ Internal Control Program Procedures to identify criteria for communicating quality information and performing monitoring and reporting activities. To determine the extent to which the Army has implemented the BSAT Biosafety and Biosecurity Program and developed a strategy and implementation plan, we obtained documentation from DOD officials on current policies, procedures, and directives identifying oversight and governance authorities involved in supporting DOD’s BSAT Biosafety and Biosecurity Program. Also, we obtained examples of working groups responsible for developing quality control and assurance guidance and standard operating procedures for working with BSAT in DOD laboratories and across the Chemical and Biological Defense Program (CBPD) Enterprise. In addition, we compared the actions of the BSAT Biorisk Program Office (BBPO), such as developing the draft Department of Defense Biological Select Agents and Toxins Biorisk Program Office Concept Plan, to leading practices for sound management identified in the GPRA Modernization Act of 2010, and the Army’s 2015 investigation report recommendations. Further, we interviewed DOD officials from the military services to determine their strategies and efforts in supporting DOD’s plans to effectively manage DOD’s BSAT Biosafety and Biosecurity Program. We also interviewed cognizant officials to determine any biosafety and biosecurity improvements made since the 2015 incident at Dugway Proving Ground. We toured all six DOD BSAT laboratory facilities, five of which currently are responsible for handling BSAT, to observe the current physical space—both operational and under construction—for handling and testing BSAT. These site visits were conducted at the (1) BioTesting Division, Dugway Proving Ground, Utah; (2) Edgewood Chemical Biological Center, Aberdeen Proving Ground, Maryland; (3) U.S. Army Medical Research Institute of Infectious Diseases, Fort Detrick, Maryland; (4) Naval Medical Research Center, Fort Detrick, Maryland; (5) Chemical, Biological, and Radiological Defense Division, Naval Surface Warfare Center – Dahlgren Division, Dahlgren, Virginia; and (6) 711th Human Performance Wing, Wright – Patterson Air Force Base, Ohio. We also conducted facilitated discussions between September 2017 and November 2017 with groups of laboratory non-supervisory staff at each of the six DOD BSAT laboratories—five of which currently are responsible for handling BSAT—to obtain their views of the effects of the 2015 discovery at Dugway Proving Ground and the subsequent investigation and management actions to respond to identified problems. Generally, discussion groups are designed to obtain in-depth testimonial information about participants’ views, opinions, and/or experiences on specific issues, which cannot be easily obtained from single interviews. In preparation for each discussion group, we asked the leadership at each of the six DOD laboratories to distribute our e-mail inviting all laboratory staff to participate in an on-site discussion group. These small groups consisted of self-selected volunteers, and were not random samples of research staff at each of these laboratories. The number of non-supervisory laboratory staff participants in each group ranged from 3 to 17 and totaled 44 participants. A GAO team member facilitated each discussion group, using a structured discussion guide with open-ended questions. The team did not record the discussions. Instead, multiple GAO team members took notes of the discussion, without ascribing comments to specific individuals. We later summarized the information collected for each discussion group and identified recurring themes. We did not design these discussion groups to provide results that were generalizable to the whole research staff at each laboratory. Laboratory staff who did not participate in these discussion groups may have different opinions and observations from those who participated in our discussion groups. Moreover, while we designed our discussion method to encourage participants to offer whatever comments they wished, we cannot assume that participants mentioned all of the effects that may have influenced their laboratory activities since 2015. We also reviewed our prior work on the management of hazardous biological agents in high-containment laboratories at federal departments and agencies, including DOD. A list of related GAO products on high- containment laboratories is included in the Related GAO Products pages at the end of this report. To examine the extent to which DOD has developed measures to ensure that the BioTesting Division’s test and evaluation mission remains independent from the research and development mission that resides at Edgewood Chemical Biological Center, we reviewed and compared Army Regulation 73-1 on testing and evaluation to Army General Order 2016-04, which first directed the transfer of the Life Sciences Division— later renamed the BioTesting Division—from the Army Test and Evaluation Command to Edgewood Chemical Biological Center. We also compared AR 73-1 to Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program, which provided additional guidelines for this transfer. We also reviewed the memorandum of agreement between the Army Test and Evaluation Command and the Army Research, Development and Engineering Command to assess plans, roles, and responsibilities for transfer and reassignment of the BioTesting Division from the West Desert Test Center to the Edgewood Chemical Biological Center. We also conducted interviews with senior staff at the BioTesting Division, the West Desert Test Center, and the Edgewood Chemical Biological Center to determine what procedures are in place to ensure that the BioTesting Division’s test and evaluation activities are not being influenced by the Edgewood Chemical Biological Center’s research and development efforts. To examine the extent to which DOD has carried out a study and evaluation in compliance with the requirements contained in section 218, subsection (d), of the NDAA for Fiscal Year 2017, we compared the relevant requirements from the NDAA for Fiscal Year 2017 with DOD’s April 10, 2017, report to the congressional defense committees to determine whether the report included all of the required elements concerning consolidation, transfer, and opportunities to partner with industry on the production of BSAT. We also obtained—through interviews with agency and written responses—the status of DOD’s efforts to address NDAA for Fiscal Year 2017 concerning infrastructure requirements for the BSAT program and enterprise-wide infrastructure for CBDP. We reviewed the Standards for Internal Control in the Federal Government to identify criteria providing guidance to federal agencies to communicate clearly defined objectives that are to be achieved, including time frames for completing those objectives and informing decision makers. Information used in our analysis primarily covers the period from May 2015 through July 2018 and the information is the most recent available. We included budget information from fiscal year 2016 to fiscal year 2018. To conduct our work, we obtained documentation and interviewed cognizant officials from DOD organizations, offices, and military commands responsible for funding, managing, and overseeing the production, handling, testing, and shipment of BSAT; the Departments of Health and Human Services (HHS) and Agriculture (USDA) agencies that manage the Federal Select Agent Program, which jointly regulate and oversee covered entities in the United States that are registered to possess, use, and transfer BSAT; and all six DOD BSAT laboratories, five of which currently are responsible for handling BSAT. See below for a complete list of organizations and agencies. Centers for Disease Control and Prevention, Atlanta, Georgia We conducted this performance audit from May 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. ECBC fosters research, development, testing, and application of technologies for protecting warfighters, first responders, and the nation from chemical and biological warfare agents. ECBC currently is developing better ways to remotely detect these chemical and biological materials and technologies to counter everything from homemade explosives to biological aerosols to traditional and non-traditional chemical hazards. USAMRIID’s mission is to provide leading edge medical capabilities to deter and defend against current and emerging biological threat agents. USAMRIID has the largest BSAT program within DOD and is committed to protecting U.S. Armed Forces from biological threats worldwide by conducting a range of efforts in the research and development of medical countermeasures and other technologies to prevent or mitigate the health effects of biological agents and emerging diseases. ECBC BioTesting Division, Dugway Proving Ground’s primary mission is to support the Chemical Biological Defense Program through test and evaluation of biological systems, methodologies, and any associated need that requires biological capabilities. ECBC Dugway possesses the Whole System Live Agent Test Chamber, a high capacity, one-of-a-kind biological agent aerosol containment chamber designed and constructed primarily for biological warfare agent aerosol-detection system testing. The Chemical, Biological, Radiological Defense Division at NSWCDD provides full-spectrum life cycle support for chemical, biological, and radiological detection, protection, decontamination, and modeling and simulation systems. This mission includes shipboard, fixed-site, and expeditionary chemical, biological, and radiological defense applications. NSWCDD maintains the only Navy Biological Safety Level-3 laboratory devoted to non-medical chemical, biological, and radiological defense applications, and is a leader in chemical and biological decontamination research, centering on the decontamination of Bacillus anthracis. The Biological Defense Research Directorate at the Naval Medical Research Center serves as a national resource providing testing and analysis for the presence of potential biological hazards. The researchers are considered leaders in the field of detection, including hand-held assays, molecular diagnostics, and confirmatory analysis. The 711th Human Performance Wing conducts research on technologies for the rapid detection of chemical, biological, and radiological events; hyperbaric medical research; and light, durable intensive care capabilities for aeromedical evacuation. It also has the nation’s only Radiological Assessment Teams available for 24/7 deployment. The National Defense Authorization Act for Fiscal Year 2017 contained a provision for us to review the actions taken by the Department of Defense (DOD) to address the findings and recommendations of the Army’s 2015 investigation report regarding the incident at Dugway Proving Ground, including any actions taken to address the culture of complacency in the biological select agents and toxins (BSAT) program that was identified in the report. As of March 2018, DOD had designated a priority level and had updated the completion status of its implementation for each of the 35 of 39 recommendations from the Army’s 2015 investigation report that we reviewed. This update and priority level designation was conducted at GAO’s request. We also asked that DOD provide us with milestones and risk assessments associated with the implementation of the recommendations from the Army’s investigation report. However, DOD was unable to provide this information. We did not review the 4 recommendations in the investigation report that pertain to individual accountability. Of the 35 recommendations, DOD officials identified 12 as high priority, 18 as moderate priority, and 5 as low priority. DOD officials also provided us with an update of the completion status for implementation of each of the recommendations. Of those 35 recommendations, DOD officials indicated that 18 had been completed and 17 were in progress. (We did not independently assess whether each recommendation and DOD’s subsequent actions addressed the problems identified in the Army’s report.) Table 2 lists the 35 recommendations (tasks) by category, the priority assigned to each recommendation by DOD, the reported actions DOD has taken to address them, and the completion status DOD has reported for each as of March 2018. The Deputy Secretary of Defense designated the Secretary of the Army on July 23, 2015, as the Executive Agent for the Department of Defense’s (DOD) Biological Select Agents and Toxins (BSAT) Biosafety Program. According to DOD Instruction 5210.88, the Secretary of the Army is responsible for performing technical reviews and conducting inspections, and harmonizing protocols and procedures across DOD laboratories that handle BSAT. DOD used a sequential delegation of authority to establish leadership roles and responsibilities initially for the DOD BSAT Biosafety Program and subsequently for the DOD BSAT Biosecurity Program. First, on October 26, 2015, the Secretary of the Army designated The Surgeon General of the Army as the Executive Agent Responsible Official (EARO) for the DOD BSAT Biosafety Program to consolidate oversight of BSAT biosafety operations across the department. Second, on December 9, 2016, The Surgeon General of the Army further delegated EARO authority to the Commanding General, U.S. Army Medical Research and Materiel Command, for the DOD BSAT Biosafety Program. Third, on January 3, 2017, the Deputy Secretary of Defense designated the Secretary of the Army as the DOD Executive Agent for the BSAT Biosecurity Program. Fourth, on March 31, 2017, the Secretary of the Army further designated The Surgeon General of the Army as the EARO for the DOD BSAT Biosecurity Program. Finally, on May 30, 2017, The Surgeon General of the Army delegated EARO responsibility for the DOD BSAT Biosecurity Program to the Commanding General, U.S. Army Medical Research and Materiel Command. Army Directive 2016-24, Department of Defense Biological Select Agent and Toxins Biosafety Program, directs The Surgeon General of the Army to coordinate with the Office of the Deputy Assistant Secretary of Defense for Chemical and Biological Defense for requirements and resources— including force structure, manpower, and infrastructure—and to prioritize resources for research requirements to advance the field of BSAT biosafety. Figure 10 shows the alignment and organization of offices within DOD and the military services that are responsible for carrying out and supporting the Chemical and Biological Defense Program Enterprise. According to BSAT Biorisk Program Office (BBPO) officials, BBPO was established in March 2016 to support the EARO in its oversight of DOD’s BSAT Biosafety and Biosecurity Program and implementation of tasks and recommendations in Army Directive 2016-24. BBPO manages a scientific review panel, inspection of DOD laboratories, harmonization of DOD’s BSAT-related regulations and procedures, and coordination of interaction and information with the Federal Select Agent Program. BBPO also is responsible for establishing a system to track and manage BSAT and BSAT-related products across DOD, providing oversight for laboratory biosafety, and advancing BSAT-related scientific research to address knowledge gaps. According to DOD officials, in fiscal year 2016, BBPO received approximately $805,000 for operation costs; in fiscal year 2017, BBPO received approximately $2 million. In addition, in fiscal year 2018, BBPO received approximately $2 million. As part of BBPO’s oversight responsibilities, it acts as a single point of contact for coordinating with the Federal Select Agent Program. In June 2017, the EARO and the directors of the Centers for Disease Control and Prevention, Division of Select Agents and Toxins, and the Animal and Plant Health Inspection Service (APHIS), Agriculture Select Agent Services, on behalf of the Federal Select Agent Program, executed a memorandum of understanding that articulates agency responsibilities. This memorandum includes (1) oversight coordination, (2) Centers for Disease Control and Prevention and APHIS notifying DOD BSAT Biosafety and Biosecurity Programs of any referrals of a DOD-registered entity to the Department of Health and Human Services Office of Inspector General that may involve compliance violations with select agent regulations, and (3) facilitating coordinated inspections. For example, according to BBPO officials, BBPO receives every inspection report and reviews it for DOD-wide implications. The Army has established a joint service inspection program that is led by the Department of the Army Inspector General. That office, according to BBPO officials, has worked closely with the Federal Select Agent Program in coordination with BBPO to enhance the effectiveness of joint inspections and unannounced or short-notice inspections. According to an Army official, the Department of the Army Inspector General coordinates with the other military services’ Inspectors General, who identify subject matter experts with operational experience to serve on every joint service inspection team. In addition, BBPO officials told us that, as part of its oversight and coordination responsibilities, the office established the BSAT Biorisk and Scientific Review Panel, which was formally chartered in August 2017. This panel is charged with convening at least twice a year to review and assess biosafety, biosecurity, and technical concerns associated with currently established and new procedures conducted at DOD BSAT laboratories. The panel will review and assess scientific evidence that supports the mitigation of biosafety risks and provide recommendations to the EARO on approval of new or existing laboratory procedures. It also serves in an advisory capacity to the EARO on any matters that pertain to biosafety and biosecurity associated with BSAT-related research. The Department of Defense (DOD) has made key safety improvements by taking a number of actions to address the incident at Dugway Proving Ground and the recommendations from the Army’s 2015 investigation report. Key safety improvements include (1) establishing a DOD Executive Agent and a support office to provide oversight, (2) implementing improved quality control and assurance standards at its covered facilities, (3) developing a new quality management system, (4) conducting additional scientific studies on biological select agents and toxin (BSAT) inactivation, and (5) taking multiple actions to address Army Directive 2016-24 and the Army’s 2015 investigation report. These safety improvements are discussed below in more detail. One of the key safety improvements DOD took in response to the incident at Dugway Proving Ground was to establish an Executive Agent for the BSAT Biosafety and Biosecurity Program (see appendix IV). Specifically, at the direction of the Deputy Secretary of Defense, the Secretary of the Army was designated in July 2015 as the Executive Agent for DOD’s BSAT Biosafety Program, and subsequently in January 2017 as the Executive Agent for the DOD BSAT Biosecurity Program. In October 2015, the Secretary of the Army further designated The Surgeon General of the Army as the Executive Agent Responsible Official for the DOD BSAT Biosafety Program to consolidate oversight of BSAT biosafety operations across the department. The Secretary of the Army, as outlined in DOD Instruction 5210.88, is responsible for performing technical reviews, conducting inspections, and harmonizing protocols and procedures across DOD laboratories that handle BSAT. Another key safety improvement DOD took in response to the incident at Dugway Proving Ground was to improve quality control and assurance at Dugway and other DOD facilities that currently handle BSAT. The Army’s 2015 investigation report made several recommendations to the Army to enhance and improve quality control and assurance at Dugway Proving Ground. These included (1) establishing a quality control and assurance manager, (2) carrying out an environmental sampling and inspection program, and (3) developing and enhancing the video surveillance program. BSAT Biorisk Program Office (BBPO) officials explained that the DOD BSAT laboratories had some quality control and assurance measures in place prior to the National Defense Authorization Act (NDAA) for Fiscal Year 2017. The quality control and assurance recommendations from the Army’s 2015 investigation report, which initially applied only to Dugway Proving Ground, were subsequently enacted in section 218 of the NDAA for Fiscal Year 2017 to apply to all DOD covered facilities. These requirements include: 1. designation of an external manager to oversee quality assurance and 2. environmental sampling and inspections; 3. production procedures that prohibit operations where live BSAT are used in the same laboratory where viability testing is conducted; 4. production procedures that prohibit work on multiple organisms or multiple strains of one organism within the same biosafety cabinet; 5. a video surveillance program that uses video monitoring as a tool to improve laboratory practices in accordance with regulatory requirements; 6. formal, recurring data reviews of production in an effort to identify trends and nonconformance issues before such issues affect end products; 7. validated protocols for production processes to ensure that process deviations are adequately vetted prior to implementation; and 8. maintenance and calibration procedures and schedules for all tools, equipment, and irradiators. BBPO officials told us that, in response to the requirements in the NDAA for Fiscal Year 2017, they are developing a department-wide quality control and assurance program for the BSAT community. BBPO also developed several policies that address the measures mandated by the NDAA for Fiscal Year 2017. These policies address setting minimum requirements for (1) monitoring environmental quality, (2) performing maintenance on laboratory equipment, and (3) controlling laboratory cross-contamination between organisms or strains within the same biological safety cabinet and between live and inactivated BSAT. DOD officials said that some NDAA for Fiscal Year 2017 requirements do not necessarily apply to every laboratory. According to DOD officials, some of these requirements are no longer relevant as a result of certain events, such as the inadvertent shipment of incompletely inactivated anthrax from the BioTesting Division at Dugway Proving Ground that currently is not handling BSAT. Furthermore, some of the requirements need further clarification. For example, the NDAA for Fiscal Year 2017 required DOD covered facilities to implement quality control and quality assurance measures, including a video surveillance program that uses video monitoring, in accordance with regulatory requirements. (In providing technical comments on a draft of this report, both the Department of Health and Human Services’ Centers for Disease Control and Prevention and Department of Agriculture’s Animal and Plant Health Inspection Service—which jointly manage the Federal Select Agent Program—said that select agent regulations do not require development and utilization of a video surveillance program.) The Army’s 2015 investigation report also recommended the development and utilization of a video surveillance program in accordance with Federal Select Agent Program regulatory requirements. DOD officials stated that there is no such requirement in federal select agent regulations and, therefore, to implement a video surveillance program would result in laboratories having an unfunded requirement for maintenance costs. According to a BBPO official, DOD officials reached out to congressional staff to obtain clarification on implementing this requirement and, according to these officials, were advised to “interpret the requirement as appropriate.” DOD officials stated that because the federal select agent regulations do not require video surveillance, DOD is not obligated to implement a video surveillance program in accordance with the provision in the NDAA for Fiscal Year 2017. Army Regulation 190-17 for the BSAT security program, however, already includes a requirement that all Army Biosafety Level-3 and 4 laboratories have operational closed-circuit television cameras installed and positioned so that all areas of the research room can be viewed. In response to the NDAA for Fiscal Year 2017 and its requirement to implement a video surveillance program, BBPO officials stated that recommendations for the use of video surveillance are being established by the Quality Assurance Working Group that supports BBPO for all laboratories in each of the military services that handle BSAT. Example of a Potential Quality Control and Assurance Procedure at the Department of Defense (DOD) DOD’s future quality management system will include critical control points for helping to prevent personnel from making mistakes while conducting scientific procedures. For example, a certain procedure for extracting genetic information from pathogens that also inactivates pathogens uses a chemical mixture called TRIzol. The quality management system will include a critical control point for this procedure in the form of achieving a ratio of pathogen sample to the amount of TRIzol. In this new system, the scientist or laboratory technician may be required to enter the amount into the new system to show that the ratio is correct to inactivate the pathogen. DOD officials report that, to enhance quality control and assurance at Dugway Proving Ground and across DOD’s currently covered facilities, the Joint Program Executive Office for Chemical and Biological Defense, on behalf of BBPO, is in the process of developing a new quality management system known as the Joint Interagency Biorisk System. The system would centralize information on DOD’s BSAT Biosafety and Biosecurity Program, such as operational and governance documentation. For example, the system would gather applicable quality assurance-related information from Dugway Proving Ground and DOD’s currently covered facilities to provide BBPO with the ability to track inventory and shipment of BSAT materials and ensure that approvals and waivers for exceptions to laboratory protocols are made at the appropriate level, among other things. DOD currently is identifying the critical control points that would be built into the Joint Interagency Biosafety System to ensure quality throughout the BSAT handling, production, storage, containment, shipment, destruction, and inactivation processes. According to officials from BBPO, DOD’s future quality management system will include critical control points to help personnel prevent mistakes while conducting scientific procedures (see sidebar for additional information). In response to the results of DOD’s July 2015 30-day review, the Deputy Secretary of Defense directed the Under Secretary of Defense for Acquisition, Technology and Logistics to develop a plan for research related to the development of standardized irradiation and viability testing protocols. The Army’s subsequent 2015 investigation report also identified specific actions the Secretary of the Army should consider taking, including directing additional research to address existing gaps in scientific knowledge regarding the inactivation of BSAT. Chemical and Biological Defense Program officials said that they are developing a validated method for inactivating Bacillus anthracis spores using irradiation to improve safety. DOD reported completion of the first phase of the study for developing a validated method with scientists from three DOD laboratories, using a weakened strain of Bacillus anthracis. The second phase of the Bacillus anthracis inactivation study was completed in October 2017, according to Army officials, using a potentially lethal strain of Bacillus anthracis. In April 2018, DOD officials stated that as a result of the first two phases of this study, they have received approval from peer reviewers to publish their study results, which will recommend these results as a validated inactivation method. The next step will be to analyze the data from these studies to determine whether additional studies are needed to answer further questions about factors that may affect testing for the presence of live pathogens. Since 2015, the Army also has taken multiple types of actions specifically at Dugway Proving Ground—including operational, administrative, and personnel actions—to implement the recommendations from the Army’s 2015 investigation report. The report made several recommendations for improvements at the BioTesting Division at Dugway Proving Ground. The Army’s subsequent Directive 2016-24 assigned responsibility for implementing some of these recommendations and called for additional actions, including reassigning command and control of the division to the Army’s Edgewood Chemical Biological Center at Aberdeen Proving Ground, Maryland. According to DOD officials, as part of this action, a new management team was established at the BioTesting Division that includes new managers responsible for quality control and assurance. In addition to hiring personnel, the BioTesting Division established training programs for all laboratory staff, including training sessions on biological safety, for which participants received certification after completing coursework. In response to the 2015 incident at Dugway Proving Ground, the Centers for Disease Control and Prevention suspended Dugway Proving Ground’s BioTesting Division’s certificate of registration in accordance with federal select agent regulations in August 2015. In May 2017, DOD’s request for withdrawal of the laboratory’s registration was approved and remaining BSAT in its possession was either transferred or destroyed. DOD officials explained that the withdrawal of the BioTesting Division’s registration has allowed the division time to implement recommendations, modernize and make repairs to laboratories, and retrain personnel without the added burden of continuous inspections. Officials from the BioTesting Division stated that they are in the process of re-registering with the Federal Select Agent Program and are taking a phased approach in anticipation of reaching full operational status in fiscal year 2019. Figure 11 is a timeline of selected actions DOD has taken. Because BBPO is focused on broader issues and not just the Army’s 2015 investigation report recommendations, BBPO officials have also compiled and consolidated recommendations and actions from multiple reports, including the Army’s 2015 investigation report, the DOD Review Committee Report, a DOD Inspector General report, and the NDAA for Fiscal Year 2017. BBPO officials explained that they developed tasks to operationalize the recommendations and acknowledged that BBPO and the now-terminated General Officers Steering Committee had not yet developed a standardized definition for recommendations deemed complete. BBPO officials told us they consider all of these recommendations to be part of their broader DOD biosafety efforts. As part of our review, we conducted facilitated discussions between September 2017 and November 2017 using a self-selected sample of supervisory and non-supervisory staff at six Department of Defense (DOD) laboratories, five of which currently handle biological select agents and toxins (BSAT). The purpose of the discussions was to better understand the effects of DOD actions on laboratory staff and operations following the 2015 discovery that staff at Dugway Proving Ground had incompletely inactivated Bacillus anthracis and subsequently shipped live anthrax to multiple locations. The intent was to obtain the views of those laboratory staff who have and will be implementing recommendations from multiple reports. Using a protocol we developed, one of our analysts facilitated each discussion group by asking a similar set of questions about effects of the DOD response to the 2015 incident at Dugway Proving Ground. Our analysts documented laboratory staffs’ comments as closely as possible to the original language used by participants. During subsequent reviews and sorting (coding) of the participants comments, we found that four key themes emerged. Within each of the four themes, our analysts also identified related sub-themes. For the purposes of selecting individual comments as shown in table 3 below, our analysts considered several factors including clarity and relevance to our study’s objectives. Our self-selected convenience sample of laboratory staff provided comments describing the various effects of the 2015 anthrax incident on laboratory staff and operations. We did not verify the factual basis of the laboratory staff comments. Moreover, the comments that we have identified cannot be generalized to all DOD laboratory staff at the six facilities we visited. Table 3 lists the key theme, sub-theme, and selected comments made by laboratory staff during our facilitated discussion groups at each of the six DOD covered laboratories, five of which currently handle BSAT. The Department of Defense (DOD) issued a report to the defense congressional committees on April 10, 2017, in response to section 218 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017. As of March 2018, DOD officials stated that the tasks required by the NDAA for Fiscal Year 2017 to study the consolidation of commands, opportunities to partner with industry for the production of biological select agents and toxins (BSAT), and the transfer of BSAT production responsibilities are still ongoing. Table 4 shows the status of DOD’s efforts to respond to the tasks required by the NDAA for Fiscal Year 2017. Biosafety, biosecurity, and biodefense issues have been a long-standing concern for the nation. The federal government has been examining biosafety, biosecurity, and biodefense issues for over a decade through many voluntary and federally mandated commissions, task forces, and federal panels and working groups. These issues have been reviewed from a variety of perspectives—scientific, regulatory, academic, health, national defense, and homeland security. Table 5 provides a summary of some key recommendations and observations to address biosafety, biosecurity, and biodefense issues and related topics. The Department of Defense (DOD) participated in many of these efforts, some of which are ongoing, including the National Science Advisory Board for Biosecurity and the Federal Experts Security Advisory Panel. Observations represent comments made by individual participants and do not represent organizational recommendations. In addition to the contact name above, GAO staff who made key contributions on this report include Mark A. Pross (Assistant Director); Latrealle Lee (Analyst-in-Charge); Amy Bowser; Patricia Farrell Donahue, Ph.D.; Alexandra Gonzalez; Ashley Grant, Ph.D.; Matthew Jacobs; Joanne Landesman; Amie Lesser; Amber Lopez Roberts; Timothy M. Persons, Ph.D.; Bethann Ritter Snyder, and Lillian Yob. assay: A quantitative or qualitative procedure for detecting the presence, estimating the concentration, and/or determining the biological activity of a macromolecule (e.g., an antibody or antigen, molecule, ion, cell, pathogen, etc.). Assays are based on measurable parameters that allow differentiation between sample and control. biodefense: Prevention, protection against, and mitigations for biological threats that could have catastrophic consequences to the nation. biological agent: Microorganism (or derived toxin) that causes disease in humans, animals, or plants. biological weapon: A harmful biological agent used as a weapon to cause death or disease usually on a large scale. biorisk management: The effective management of risks posed by working with infectious agents and toxins in laboratories; it includes a range of practices and procedures to ensure the biosecurity, biosafety, and biocontainment of those infectious agents and toxins. biosafety: The combination of practices, procedures, and equipment that protect laboratory workers, the public, and the environment from the infectious agents and toxins used in the laboratory. biosecurity: The measures taken to protect infectious agents and toxins from loss, theft, or misuse. biotechnology: The manipulation of living organisms or their components to produce useful usually commercial products. biological select agents and toxins certified personnel: Personnel certified and cleared to work with biological select agents and toxins. covered facility: Any facility of the Department of Defense that produces biological select agents and toxins. decontamination: The removal or count reduction of contaminating pathogens present on an object. Federal Select Agent Program: A regulatory program established to regulate the possession, use, and transfer of biological select agents and toxins. high-containment laboratory: Biosafety level (BSL)-3 or 4 facilities in which studies are conducted on a variety of dangerous pathogens and toxins. inactivation: A procedure to render pathogens as non-toxic while retaining characteristics of interest for future use. irradiation: A process by which radiation (e.g., ultraviolet light, gamma rays, and X-rays) is used. nonviable: A pathogen that is no longer capable of growing, replicating, infecting, or causing disease. protocol: A detailed plan for a scientific procedure. select agent: A biological agent or toxin that (1) potentially poses a severe threat to public health and safety, animal or plant health, or animal or plant products and (2) is regulated by select agent rules for possession, use, and transfer (7 C.F.R. Part 331 (2018), 9 C.F.R. Part 121 (2018), and 42 C.F.R. Part 73 (2018)). toxin: The toxic material or product of plants, animals, microorganisms (including, but not limited to, bacteria, viruses, fungi, or protozoa), or infectious substances, or a recombinant or synthesized molecule, whatever their origin and method of production, and includes (1) any poisonous substance or biological product that may be engineered as a result of biotechnology produced by a living organism or (2) any poisonous isomer or biological product, homolog, or derivative of such a substance. ultracentrifuge: A high-speed centrifuge able to separate colloidal and other small particles and used especially in determining the sizes of such particles or the molecular weights of large molecules. validation: For the purpose of inactivation methods, the method must be scientifically sound and produce consistent results each time it is used such that the expected result can be ensured. Methods of validation may include (1) use of the exact conditions of a commonly accepted method that has been validated, (2) a published method with adherence to the exact published conditions, or (3) for in-house methods, validation testing should include the specific conditions used and appropriate controls (from the Federal Select Agent Program). validated inactivation procedure: A procedure to render a select agent non-viable but which allows the select agent to retain characteristics of interest for future use; or to render any nucleic acids that can produce infectious forms of any select agent virus non-infectious for future use. The efficacy of the procedure is confirmed by demonstrating the material is free of all viable select agents. DOD Personnel: Further Actions Needed to Strengthen Oversight and Coordination of Defense Laboratories’ Hiring Efforts. GAO-18-417. Washington, D.C.: May 30, 2018. High-Containment Laboratories: Coordinated Efforts Needed to Further Strengthen Oversight of Select Agents. GAO-18-197T. Washington, D.C.: November 2, 2017. High-Containment Laboratories: Coordinated Actions Needed to Enhance the Select Agent Program’s Oversight of Hazardous Pathogens. GAO-18-145. Washington, D.C.: October 19, 2017. Biodefense: Federal Efforts to Develop Biological Threat Awareness. GAO-18-155. Washington, D.C.: October 11, 2017. Public Health Information Technology: HHS Has Made Little Progress toward Implementing Enhanced Situational Awareness Network Capabilities. GAO-17-377. Washington, D.C.: September 6, 2017. High-Containment Laboratories: Actions Needed to Mitigate Risk of Potential Exposure and Release of Dangerous Pathogens. GAO-16-871T. Washington, D.C.: September 23, 2016. High-Containment Laboratories: Improved Oversight of Dangerous Pathogens Needed to Mitigate Risk. GAO-16-642. Washington, D.C.: August 30, 2016. High-Containment Laboratories: Comprehensive and Up-to-Date Policies and Stronger Oversight Mechanisms Needed to Improve Safety. GAO-16-305. Washington, D.C.: March 21, 2016. High-Containment Laboratories: Preliminary Observations on Federal Efforts to Address Weaknesses Exposed by Recent Safety Lapses. GAO-15-792T. Washington, D.C.: July 28, 2015. Chemical and Biological Defense: Designated Entity Needed to Identify, Align, and Manage DOD’s Infrastructure. GAO-15-257. Washington, D.C.: June 25, 2015. Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 2014. High-Containment Laboratories: Recent Incidents of Biosafety Lapses. GAO-14-785T. Washington, D.C.: July 16, 2014. High-Containment Laboratories: Assessment of the Nation’s Need Is Missing. GAO-13-466R. Washington, D.C: February 25, 2013. Homeland Security: Agriculture Inspection Program Has Made Some Improvements, but Management Challenges Persist. GAO-12-885. Washington, D.C.: September 27, 2012. Environmental Justice: EPA Needs to Take Additional Actions to Help Ensure Effective Implementation. GAO-12-77. Washington, D.C.: October 6, 2011. High-Containment Biosafety Laboratories: Preliminary Observations on the Oversight of the Proliferation of BSL-3 and BSL-4 Laboratories in the United States. GAO-08-108T. Washington, D.C.: October 4, 2007. Test and Evaluation: Impact of DOD’s Office of the Director of Operational Test and Evaluation. GAO/NSIAD-98-22. Washington, D.C.: October 24, 1997.", "summary": "In May 2015, DOD discovered that one of its laboratories (formerly called the Life Sciences Division) at Dugway Proving Ground, Utah, had inadvertently made 575 shipments of live Bacillus anthracis —the bacterium that causes anthrax—to 194 laboratories and contractors worldwide from 2004 through 2015. A December 2015 investigation by the Army determined that there was insufficient evidence to establish a single point of failure and made recommendations for improving safety and security at DOD laboratories that handle BSAT. The NDAA for Fiscal Year 2017 included a provision for GAO to review DOD's actions to address the Army's recommendations. GAO assessed the extent to which (1) DOD has implemented recommendations from the Army's 2015 investigation report, (2) the Army has implemented the BSAT Biosafety and Biosecurity Program and developed a strategy and implementation plan, (3) the Army's biological T&E mission is independent from its biological R&D mission, and (4) DOD has carried out a required study and evaluation. GAO reviewed DOD documents and key actions in response to the Army's recommendations and conducted site visits to DOD's BSAT laboratories. The Department of Defense (DOD) has made progress by taking a number of actions to address the 35 recommendations from the Army's 2015 investigation report on the inadvertent shipments of live Bacillus anthracis (anthrax). However, DOD has not yet developed an approach to measure the effectiveness of these actions. As of March 2018, DOD reports 18 recommendations as having been implemented and 17 as having actions under way to implement them. These actions are part of a broader effort to improve biosafety, biosecurity, and overall program management. For example, in March 2016, DOD established the Biological Select Agents and Toxins (BSAT) Biorisk Program Office to assist in overseeing the BSAT Biosafety and Biosecurity Program and implementation of the recommendations. Measuring the effectiveness of each implemented recommendation would help better determine if the actions taken are working, if there are unintended consequences, or if further action is necessary. The Secretary of the Army, as DOD's Executive Agent, has implemented a BSAT Biosafety and Biosecurity Program to improve management, coordination, safety, and quality assurance for the DOD BSAT enterprise. However, DOD has not developed a strategy and implementation plan for managing the program. Without a strategy and implementation plan, Dugway Proving Ground, Utah, and DOD's laboratory facilities that currently produce and handle BSAT may be unclear about DOD's strategy to harmonize BSAT operations to ensure safety, security, and standardization of procedures throughout DOD's BSAT enterprise. The Army has not fully institutionalized measures to ensure that its biological test and evaluation (T&E) mission remains independent from its biological research and development (R&D) mission so that its T&E procedures are objective and reliable. In April 2016, the Army directed the transfer of the operational T&E mission from West Desert Test Center-Life Sciences Division at Dugway Proving Ground, Utah, to Edgewood Chemical Biological Center, Maryland. The Army issued a memorandum of agreement between the two entities to lay out roles and responsibilities for test processes and procedures. However, the memorandum does not distinguish T&E from R&D mission requirements, and does not contain guidelines to mitigate risks associated with potential conflicts of interest between the R&D and T&E missions. Without these measures, there is a potential risk to the independence of the T&E mission. The National Defense Authorization Act (NDAA) for Fiscal Year 2017 required DOD to report by February 1, 2017, on the feasibility of consolidating BSAT facilities within a unified command, partnering with industry for the production of BSAT in lieu of maintaining such capabilities within the Army, and whether such operations should be transferred to another government or commercial laboratory. DOD has not completed this required study and evaluation of its BSAT infrastructure which, when complete, will affect the future infrastructure of the BSAT Biosafety and Biosecurity Program. Further, DOD officials have no estimated time frames for when DOD will complete the study and evaluation. Without time frames for completing the study and evaluation, DOD is unable to provide decision makers with key information on its infrastructure requirements. GAO recommends that DOD develop an approach to assess the effectiveness of the recommendations, a strategy and implementation plan for its BSAT Biosafety and Biosecurity Program, measures to ensure independence, and time frames to complete a study. DOD concurred with all four of GAO's recommendations.", "document_type": "gao"}
{"report": "The HUBZone Act of 1997 (which established the HUBZone program) identified HUBZones as (1) qualified census tracts, which are determined generally by area poverty rate or household income; (2) qualified nonmetropolitan counties, which are determined generally by area unemployment rate or median household income; and (3) lands meeting certain criteria within the boundaries of an Indian reservation. Congress subsequently expanded the criteria for HUBZones to add former military bases, counties in difficult development areas outside the continental United States, and certain areas affected by disasters. According to SBA officials, 5,306 firms were HUBZone certified as of July 1, 2018. As of that date, there were 20,154 HUBZone qualified census tracts, 834 HUBZone qualified non-metropolitan counties, 125 HUBZone base realignment and closure areas, 593 HUBZone Native American lands (Indian lands), and 95 HUBZone qualified disaster areas (87 qualified disaster census tracts and 8 qualified disaster non-metropolitan counties). The HUBZone program provides certified small businesses located in designated areas with contracting opportunities in the form of set-asides, sole-source awards, and price-evaluation preferences. A set-aside restricts competition for a federal contract to specified contractors. For example, competition may be restricted to SBA-certified HUBZone businesses if there is a reasonable expectation of at least two SBA- certified HUBZone bidders and a fair market price. A sole-source award is a federal contract awarded, or proposed for award, without competition. Also, in any full and open competition for a federal contract, the HUBZone price evaluation preference allows the price that a HUBZone firm offers to be deemed lower than the price of another offeror (if the HUBZone firm’s offer is not more than 10 percent higher than the other offer and the other offeror is not a small business concern). To be certified to participate in the HUBZone program, a firm must meet the following criteria: when combined with its affiliates, be small by SBA size be at least 51 percent owned and controlled by U.S. citizens, or owned by an Indian Tribal Government, Alaska Native Corporation, Community Development Corporation, or small agricultural cooperative; have its principal office—the location where the greatest number of employees perform their work—in a HUBZone; and have at least 35 percent of its employees reside in a HUBZone. In a 2008 report, we found that SBA had relied on information that firms entered into an online application system called the HUBZone Certification Tracking System to indicate they met the size, ownership, location, and employee residence standards. At the time, SBA performed limited verification of the self-reported information. Although agency staff could request additional supporting documentation, SBA did not have specific guidance or criteria for such requests. Thus, we recommended that SBA develop and implement guidance to more routinely and consistently obtain supporting documentation from applicant firms. SBA agreed with the recommendation and changed its certification procedures. Since fiscal year 2009, SBA has required all firms applying for HUBZone certification to provide supporting documentation about their size, ownership, location, and employees’ residence, which the agency then is to review to verify the firm’s eligibility for the program. According to SBA officials, the current initial certification process has two components: (1) submission and review of an online application, which is processed by SBA through the HUBZone Certification Tracking System; and (2) submission of corroborative documentation, which SBA processes through a document review. The tracking system contains information on firms that apply to the HUBZone program, as well as on certified firms that apply for recertification. Firms wishing to remain in the program must recertify their continued eligibility to SBA every 3 years. The tracking system automatically identifies firms that are due for recertification and sends notifications to those firms. In 2015, we reported that SBA implemented controls for certification, but generally did not require firms seeking recertification to submit any information to verify continued eligibility. Instead, the agency relied on firms’ attestations of continued eligibility. According to SBA officials at the time, they did not believe they needed to request supporting documentation from recertifying firms because all firms in the program had undergone a full document review. We noted that SBA could apply a risk-based approach to its recertification process to review and verify information from firms that appeared to pose the most risk to the program. We concluded that recertification essentially remained a self-certification process. We recommended that SBA reassess its recertification process and add additional controls, such as developing criteria and guidance on using a risk-based approach to requesting and verifying firm information. SBA agreed with our recommendation and noted it would assess the process. In March 2017, we reported that SBA planned to address our recommendation using a technology solution. According to federal internal control standards and GAO’s fraud risk framework, managers in executive branch agencies are responsible for managing fraud risks and implementing practices for combating those risks. When fraud risks can be identified and mitigated, fraud may be less likely to occur. Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that management should consider the potential for fraud when identifying, analyzing, and responding to risks. Risk management is a formal and disciplined practice for addressing risk and reducing it to an acceptable level. In July 2015, we issued the fraud risk framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. The Fraud Reduction and Data Analytics Act of 2015 required the Office of Management and Budget to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities. In July 2016, the Office of Management and Budget issued guidelines that, among other things, affirm managers should adhere to the leading practices identified in GAO’s fraud risk framework. The National Defense Authorization Act for Fiscal Year 2018 includes a number of provisions relating to the HUBZone program. For example, the act requires SBA (by January 1, 2020) to verify the accuracy of documentation provided by a HUBZone firm seeking recertification to determine whether the firm remains qualified for HUBZone certification. The act also requires SBA to begin conducting examinations of qualified HUBZone firms by January 1, 2020, using a risk-based analysis to select firms to be examined. According to the act, these risk-based examinations are intended to ensure that each firm examined meets the program requirements for certification. The act also specifies that any small business that SBA determines to have misrepresented its status as a qualified HUBZone firm be subject to liability for fraud. On June 16, 2016, SBA announced it had revised the definition of qualified census tracts eligible to be designated as HUBZones to provide more opportunities for firms in Puerto Rico. Previously, in addition to poverty rate and income, SBA applied a statutory population cap that limited the number of eligible census tracts. According to the announcement, SBA had determined that the 20 percent population cap was not in keeping with the spirit and intent of the HUBZone program. On June 30, 2016, PROMESA authorized an exemption to the 20 percent cap for HUBZone designations in Puerto Rico for a limited time (10 years or until the date on which the Financial Oversight and Management Board for Puerto Rico ceased to exist, whichever came first). It also required SBA to promulgate regulations to implement the exemption. SBA promulgated the regulations, which became effective December 22, 2017. By lifting the population cap in June 2016, SBA increased the number of eligible census tracts in Puerto Rico by 516 (from 260 to 776). As a result, nearly all of Puerto Rico now qualifies as a HUBZone (see fig.1). In 2017, two major hurricanes (Irma and Maria) hit Puerto Rico. Hurricane Irma skirted Puerto Rico and left more than 1 million people without power. Hurricane Maria, a Category 4 hurricane, made landfall and caused catastrophic damage. For instance, Hurricane Maria wiped out the power grid, resulting in outages across Puerto Rico that continued for months after the storm. The majority of the island had its power restored by April 4, 2018, according to the Department of Energy. However, the power grid remains fragile. For example, Puerto Rico experienced an island-wide outage on April 18, 2018. In response to the PROMESA provision to implement a risk-based approach to HUBZone certification and recertification, SBA adopted certification and recertification criteria and guidance on March 27, 2017, for requesting and verifying information. Since 2009 and in response to a prior GAO recommendation, SBA has required and reviewed documentation from all small businesses seeking initial certification to show compliance with HUBZone eligibility requirements. The criteria and guidance adopted by SBA in March 2017 did not change the HUBZone certification process. SBA’s internal guidance directs staff to review and confirm the accuracy of all documentation provided by the firms applying for HUBZone certification. However, the 2017 guidance and criteria introduced some documentation requirements to the recertification process. (Before March 2017, firms seeking HUBZone recertification were not required to submit documentation to demonstrate continued compliance with eligibility requirements.) Currently, any certified firm seeking recertification that received $1 million or more in HUBZone contract dollars since its last certification or recertification has to demonstrate compliance with the 35 percent HUBZone employee residency and principal office requirements. More specifically, under the March 2017 guidance and criteria, certified HUBZone small business concerns that have received $1 million or more in HUBZone contract dollars since their initial certification or most recent recertification must submit (1) a list of all current employees, identifying the name of the employees, their addresses, the number of hours they worked per month, and the location at which they performed their work; and (2) payroll documentation. HUBZone firms seeking recertification that have not received $1 million in HUBZone contract dollars are not required to submit documentation supporting continual eligibility for the program. SBA officials stated that they had completed a risk assessment of their HUBZone recertification process to develop the March 2017 guidance and criteria. In our 2015 report, we found SBA did not require firms to submit supporting documentation as part of the recertification process—in effect, firms self-certified. We recommended that SBA conduct an assessment of the recertification process and implement additional controls, such as developing criteria and guidance on using a risk-based approach to requesting and verifying firm information. However, as of July 31, 2018, SBA had not provided documentation of when the risk assessment was performed or of what risks were identified and considered in developing the criteria and guidance. SBA officials stated that out of necessity, given their current information system and staffing resources, they chose the $1 million threshold as the only criterion for their risk-based approach. As of July 31, 2018, SBA also had not provided documentation of what analysis was performed to establish the $1 million threshold. According to SBA officials, the threshold was determined based on the belief that, when a firm received contract awards over $1 million, it increased opportunity for the firm to fall out of compliance with HUBZone requirements. SBA officials noted that they plan to review the current threshold at the end of fiscal year 2018 and that the threshold amount will likely decrease because a relatively small number of firms have exceeded the $1 million threshold. Based on our analysis of Federal Procurement Data System- Next Generation data, we estimated that from fiscal year 2015 through fiscal year 2017 about 9 percent of HUBZone firms nationally exceeded the $1 million threshold. SBA officials also noted that the agency has been developing a new information system to replace the current certification tracking system. According to SBA officials, the new system will help simplify the application process and allow firms to submit additional documentation more easily. SBA officials said the 2017 criteria and guidance will be built into the parameters of the new information system, which will allow SBA to expand the review of documentation submitted by firms seeking recertification. Officials have stated that subject to funding and resources, the HUBZone Certification Tracking System is scheduled to be decommissioned in fiscal year 2019. In the past, SBA has implemented a number of actions to better ensure that only eligible firms participate in the HUBZone program and to address internal control weaknesses that we have identified in previous GAO reports. However, in 2015, we found that SBA lacked key controls for its recertification process. Specifically, SBA did not require firms to submit supporting documentation as part of the recertification process—in effect, firms self-certified. We reported that by not routinely requiring and reviewing key supporting documentation from recertification applicants, SBA was missing an additional opportunity to reduce the risk that ineligible firms obtain HUBZone contracts. We recommended that SBA conduct an assessment of the recertification process and implement additional controls, such as developing criteria and guidance on using a risk-based approach to requesting and verifying firm information. Standards for Internal Control in the Federal Government state that management should identify, analyze, and respond to risks related to achieving the defined objectives of the program. Additionally, the standards state that management should use a risk assessment to identify and analyze risks related to achieving the defined objectives to form a basis for designing risk responses. Once identified, management can analyze the identified risks to estimate their significance and design responses to the analyzed risks. Similarly, according to GAO’s fraud risk framework, leading practices for managing fraud risk include identifying inherent fraud risks affecting the program, assessing the likelihood and impact of inherent fraud risks, and examining the suitability of existing fraud controls. The Fraud Reduction and Data Analytics Act of 2015 states that agencies shall conduct an evaluation of fraud risks using a risk-based approach, and then design and implement financial and administrative control activities to mitigate identified fraud risks. Additionally, as discussed above, the National Defense Authorization Act for Fiscal Year 2018 requires that SBA perform examinations of HUBZone firms using a risk-based selection process. As we reported in 2015, the characteristics of firms and the status of HUBZone areas—the bases for program eligibility—can often change, and need to be monitored. We continue to believe that conducting a risk assessment of the recertification process would help inform a risk-based approach to reviewing and verifying information from firms that appear to pose the most risk to the program. For example, a risk assessment could help inform SBA’s planned review of the current threshold for requesting and verifying information from firms seeking HUBZone recertification. Our review of 12 case files for Puerto Rican firms that recently received HUBZone certification found incomplete documentation for certification reviews (and by extension, recertification reviews) and undocumented procedures. SBA also did not consistently follow its procedures to complete three distinct levels of review when approving the 12 firms for certification. Representatives of firms in Puerto Rico with whom we spoke said certification was generally straightforward, but identified some challenges, including with providing documentation. We found that all 12 cases we reviewed in a non-generalizable sample of Puerto Rican firms that had received HUBZone certification between March 2017 and March 2018 had complete documentation to demonstrate that the primary office was located in a HUBZone. However, we also found that documents were missing, illegible, or did not corroborate the information claimed regarding employees’ residency for 9 of 12 firms that we reviewed. We focused on the document review process for the principal office location and the employee residency requirements because, according to SBA’s March 2017 guidance for the certification and recertification processes, firms must corroborate their compliance with these requirements at both certification and recertification. In addition, SBA officials told us that the document review process is essentially the same for firms seeking certification as it is for firms seeing recertification. We also reviewed the files of two HUBZone firms in Puerto Rico that were subject to recertification between March 2017 and March 2018, but neither met the threshold to trigger a document review under the updated criteria and guidance. SBA’s guidance for the certification process requires firms to submit documentation so that SBA can verify that a firm meets the employee residency and principal location requirements. The documentation must show that each individual is an employee of the firm (payroll documentation), each individual asserted to be a HUBZone resident lives at the address they claim (proof of address, such as a driver’s license), and the address is in a HUBZone (copy of a HUBZone map indicating the employee and his or her address), and the firm’s primary office is located in a HUBZone (such as a copy of a lease or rental agreement and list of employees who work there). Additionally, SBA’s internal policy manuals describe procedures that analysts are to follow in reviewing and verifying these documents, including the types of documents that firms may submit to demonstrate eligibility, and scenarios in which analysts should request additional information or clarification from the firm (for example, if a driver’s license is expired). For 9 of 12 cases we reviewed, SBA lacked complete documentation to verify that every employee asserted to be a HUBZone resident lived in a HUBZone. That is, although SBA analysts contacted firms during the certification process to obtain additional documentation, and firms responded to the requests, SBA analysts still had incomplete information for 9 of the 12 cases at the time they approved the firms. In 5 of these 9 cases, the firm would not be eligible for HUBZone certification if the SBA analyst had not counted employees for which documentation was missing or did not corroborate the information claimed regarding an employee’s address. Specifically, in 3 cases, the address on the employee’s identification for at least one employee did not match the address at which the firm claimed the employee lived. in 3 cases, the identification for at least one employee was expired. in 1 case, the copies of the HUBZone maps did not indicate to which employees they referred. in 1 case, payroll documentation demonstrating that individuals were employees of the firm was missing. in the other 4 cases, the firm still would be eligible for HUBZone certification (would meet the 35 percent residency requirement) even if the analyst had not counted the employee for which documentation was missing or illegible (1 case) or for which identification did not match the claimed residency address (4 cases). We also identified an inconsistency when reviewing the case files for the only Puerto Rican HUBZone firm recertified between June 2017 and May 2018. Specifically, the firm reported on its application that it had zero employees, but also claimed 19 of its employees lived in a HUBZone. The firm did not provide any supporting documentation because it did not meet the threshold in the new recertification criteria to require a document review. SBA officials said this likely resulted from a display error in the online system. SBA officials said that they did not contact the recertifying firm because the firm was not required to submit corroborating documentation. However, without confirmation of the correct total number of employees, SBA analysts would not be able to determine the firm’s compliance with the employee residency requirement (35 percent living in a HUBZone) and therefore would not be able to determine the firm’s eligibility to continue HUBZone participation. SBA officials explained how they handled incomplete information provided by firms by describing other procedures that analysts followed in these cases. For example, if any employee’s address did not match across the firm’s employee list, the employee’s identification, or the HUBZone map, the analyst reviewing the firm’s application would request clarification and enter the address from the identification into the current HUBZone map. Or if the address could not be plotted, the analyst would presume the employee lived in a HUBZone if the broader geographic area on their identification (such as zip code) was clearly in a HUBZone. SBA officials said this approach is useful for applications from firms in Puerto Rico, because of difficulties with mapping addresses in the territory. SBA officials also said that if a firm did not provide documentation for an employee or SBA could not verify it, but the firm clearly met the 35 percent resident requirement, the analyst would not follow up with additional documentation requests and not count that employee as a HUBZone resident. However, these procedures are not documented in SBA’s internal written policies for certifying HUBZone firms and analysts did not document their use of these procedures in the case files we reviewed. Specifically, the policy manuals do not include certain procedures SBA officials explained to us they used for the document review process, such as assumptions of eligibility for addresses located in a broader geographic area that is clearly a HUBZone. SBA has not updated its three internal policy manuals since 2014, 2010 and 2007, respectively. According to SBA officials, analysts rely on oral direction from the HUBZone program director or deputy to review and process HUBZone certifications and recertifications to supplement outdated policy documents. Internal control standards state that management should document in policies the internal control responsibilities of the organization. Because SBA has not updated its internal policy manuals, analysts who review applications for HUBZone certification and recertification may not be consistently following applicable internal policies and procedures. As a result, management does not have reasonable assurance that analysts are following procedures correctly to obtain and review all of the required documents from firms. Without such review, SBA may not have reasonable assurance that firms meet the eligibility criteria for HUBZone participation—which increases the risk of ineligible firms participating in the program. Because SBA officials told us that firms seeking recertification that meet the threshold for additional document review undergo essentially the same reviews as firms seeking certification, the gaps in certification cases that we observed suggest that gaps are possible in recertification as well. SBA did not consistently follow its quality review procedures to complete three distinct levels of review when approving the 12 Puerto Rican firms in our non-generalizable sample for certification. In 4 of 12 cases, one person reviewed the application for two levels of review; in the other 8 cases, three different analysts reviewed the application. We found that SBA notified all 12 firms of their approval in writing, in accordance with its policy. SBA’s internal policy states that the certification process has three levels of review: (1) an analyst reviews the application documents and makes a recommendation to approve or deny the firm, (2) a senior analyst reviews the application and the first analyst’s recommendation, and (3) the program director or deputy finalizes the approval or denial and notifies the firm of the decision. The three levels of review are intended to provide quality assurance. For example, the second analyst reviews the case file and the first analyst’s recommendation for completeness, accuracy, and consistency with eligibility criteria. SBA officials told us that, in some cases, one individual’s review may count as two of the three levels of reviews in order to make the most efficient use of available analyst capacity. SBA officials said the deputy director reviewed several applications from Puerto Rican firms, including the four cases we identified, as part of work to develop an application screening tool and to engage the Puerto Rico district office when processing applications from firms in Puerto Rico. These reviews were counted as two of the three levels of review. Officials said that in these cases, the program director completes the final review and should annotate the case file notes about the quality assurance actions that were taken. In three of the four cases, the program director noted that she completed the final review and approval but not what quality assurance actions were taken; the deputy director completed both the second and final review in the other case. SBA officials described the third-level review (final approval or denial) as a high-level review to ensure no questions or unresolved matters are outstanding in order to approve or deny the application. Therefore, it is not likely that the program director would be reviewing supporting documents to identify any problems that could be identified if an additional analyst conducted a second-level, quality assurance review. Internal control standards state that management should design control activities at various levels with a segregation of duties, and periodically review its procedures and associated internal control activities for effectiveness. Management should also monitor its internal control system through ongoing monitoring to assess the quality and effectiveness of the internal control system’s performance over time. SBA provided an assurance letter prepared in response to the Federal Managers Financial Integrity Act that stated the agency evaluated the Office of HUBZone’s internal controls and concluded the controls were effective. However, it is not known to what extent SBA reviewed staff’s compliance with certification and recertification quality review procedures as part of this assessment, because the letter does not describe what steps SBA took to conduct the evaluation. Without reviewing staff compliance with certification and recertification procedures, SBA lacks reasonable assurance that analysts follow such procedures and that internal controls function effectively. This increases the risk that ineligible firms could receive HUBZone certification and thus contracting preferences to which they are not entitled. Representatives of nine HUBZone firms we interviewed in Puerto Rico were not aware of changes made to the recertification process, but said that the certification process they followed was straightforward and generally easy. However, they reported some challenges, including with documentation. Representatives of most of the firms said that the most difficult part of the certification process was documenting the address for their primary office location and employees’ residences to show they are located in a HUBZone. They said this is time-consuming and tedious, especially for firms with many employees. Although they felt that SBA’s HUBZone mapping software had improved, they said the formatting of addresses in Puerto Rico creates a challenge, consistent with what we reported in 2017. One representative described having to pinpoint locations manually in Google Maps to obtain geographic coordinates, and then enter the coordinates into SBA’s HUBZone map instead of street addresses. Other representatives noted that some of their employees have informal living arrangements and cannot easily provide proof of address. Some representatives said that they struggled with the specific time frames that payroll documentation must cover. SBA requires firms to submit payroll documentation for the pay period that includes the date of their application and a sufficient number of preceding payrolls to cover a 4-week period, but firms said it was difficult to submit payroll reports at exactly the right time to meet this requirement. According to representatives from HUBZone firms and two economic development organizations we interviewed, some challenges with certification may be unique to firms in Puerto Rico, including the address format issue described above. Representatives from one firm and the economic development organizations said that some firms in Puerto Rico may face language barriers if Spanish is their primary language, or if they lack formal documentation required for certification, such as not having computerized records. The 2017 hurricanes also created several challenges for firms. For example, some firms did not have electricity and closed for several months. Firms that closed while trying to obtain HUBZone certification could not respond to follow-up requests from SBA immediately or provide documentation of their business operations for the time period in which they were affected. Representatives from firms we interviewed said they had little contact with SBA other than in relation to compliance. Although some have attended SBA events, representatives said they generally worked with SBA partner organizations, such as the Federal Contracting Center and Small Business and Technology Development Center to obtain assistance with gaining HUBZone certification and applying for federal contracts. Representatives from three firms we interviewed said that officials from SBA visited their offices to provide technical assistance support. According to SBA officials in Washington, D.C., they have improved their communications with firms and increased outreach for the HUBZone program in recent years. For example, the HUBZone tracking system automatically generates emails to firms, such as reminders that they are due for recertification, which according to SBA officials, has eliminated the backlog of recertifications on which we reported in February 2017. Representatives from the Puerto Rico District Office also said they increased promotion of the HUBZone program in recent years through monthly events and seminars on all SBA programs across Puerto Rico, including a seminar on obtaining HUBZone certification. Representatives from the district office said they are not involved with the certification and recertification processes, but provide support by conducting from three to six site visits to HUBZone firms annually in Puerto Rico and the U.S. Virgin Islands. An increase in HUBZone set-aside contracts could theoretically help deliver economic impact to Puerto Rico, but it is likely too soon to assess larger-scale economic benefits resulting from HUBZone program expansion in Puerto Rico as of June 2018. From fiscal years 2006 through June 2018, the share of HUBZone set-aside contracts as a percentage of small business contracts in Puerto Rico has remained low despite sharp increases in the number of HUBZone firms and overall federal contracting in Puerto Rico. Over this period, small businesses in Puerto Rico have been winning a large and increasing percentage of total federal contracting obligations in Puerto Rico. Firms, economic development organizations, and SBA representatives said any impacts of HUBZone expansion in Puerto Rico may not yet be observable due to hurricane-related setbacks. They also identified longer-standing challenges that Puerto Rican firms have faced in obtaining HUBZone set- aside contracts consistent with those we identified in 2017. In 2018, SBA established a procurement center representative (PCR) in Puerto Rico, which the agency expects will help address some of those challenges. Based on our analysis as of June 30, 2018, it appears that larger-scale economic benefits from HUBZone expansion have not been realized (it may be too early to assess the impact of program expansion). While HUBZone certification alone likely would not have a direct economic impact (such as on job creation) in Puerto Rico, the expansion of HUBZones in Puerto Rico, which now cover nearly the entire island, gives opportunities to more firms to qualify for and pursue preferential contracting opportunities. The number of HUBZone firms has risen since the expansion—from 20 in September 2016 to 101 as of June 30, 2018. The program could help deliver economic impacts if HUBZone firms received contract awards as a result of contract preferences such as set- aside or sole-source contracts. For instance, employees hired to fulfill HUBZone set-aside contracts could represent jobs created in Puerto Rico (if those contracts otherwise would have been awarded to a firm outside Puerto Rico). However, if the contract otherwise would have been awarded to another Puerto Rican firm, the new jobs would represent an economic transfer, not jobs created. Our analysis of HUBZone set-aside contracts in Puerto Rico indicated that a few, newly certified HUBZone firms received set-aside contracts, which can be a source of job creation. Six of the nine firms that received HUBZone set-aside contracts in fiscal years 2017 and 2018 (through June 2018), totaling $5.1 million, were certified after the 2016 program expansion. One newly certified HUBZone firm that we interviewed said that program expansion resulted in the firm becoming HUBZone- eligible. The firm’s representative said that it obtained a 5-year HUBZone set-aside contract for $700,000, which resulted in the firm hiring six employees to fulfill the contract. But HUBZone set-aside contract obligations have remained largely unchanged in recent years, and firms face both temporary and longer- standing challenges in accessing and winning contract awards, as we discuss later in this section. For a description of contracting trends in Puerto Rico, see appendix II. Based on our analysis, federal contracts to businesses in Puerto Rico increased from $355 million in fiscal year 2015 to $841 million in fiscal year 2018 (through June 2018). Similarly, federal contracts to small businesses in Puerto Rico increased from $244 million to $688 million in the same period (see fig. 2). Although HUBZone set-aside contract obligations have remained largely unchanged in recent years, small businesses in Puerto Rico also have been winning a large and increasing percentage of total federal contracting obligations in Puerto Rico. Specifically, federal contract obligations to small businesses located in Puerto Rico as a percentage of total federal contract obligations in Puerto Rico increased from 69 percent in fiscal year 2015 to 82 percent in fiscal year 2018 (through June 2018). A significant portion of the increase in overall contracting and small business contracting to Puerto Rican firms in fiscal year 2018 (through June 2018) was related to hurricane relief. Specifically, we calculated that 55 percent of total federal contracting obligations in Puerto Rico and 64 percent of obligations awarded to Puerto Rican small businesses in fiscal 2018 were associated with hurricane relief. While the obligations for federal contracting to small businesses in Puerto Rico sharply increased in recent years, as did the number of HUBZone firms, the share of HUBZone set-asides as a percentage of small business contracts in Puerto Rico remained low and relatively unchanged (see fig. 3). HUBZone set-aside contract obligations increased from negative $20,881 in fiscal year 2016 to $3.8 million in fiscal year 2017 (1 percent of the total value of small business contracts in Puerto Rico). The set-aside obligations dropped to $1.7 million through June 2018 (0.2 percent of the total value of small business contracts in Puerto Rico). Representatives of two economic development organizations that we interviewed stated that continued low use of HUBZone set-aside contracts by contracting agencies could subsequently decrease firms’ willingness to participate in the HUBZone program in Puerto Rico. Representatives of firms and two economic development organizations noted that the process of monitoring, identifying, and applying for HUBZone set-aside contracts is time consuming and without the availability of set-aside contracts program participation may not be worthwhile for firms in Puerto Rico. Representatives of firms and two economic development organizations and SBA officials in Washington D.C. and the Puerto Rico District Office told us that use of HUBZone set-aside contracts and any resulting economic impacts of HUBZone expansion in Puerto Rico may not yet be observable because of temporary challenges, such as advance contracts and outmigration due to the 2017 hurricanes. One temporary challenge they cited was the use of advance contracts by agencies in response to the 2017 hurricanes. In advance contracts, an agency establishes contracts before a disaster for goods and services typically needed during a disaster response. Such contracts may prevent contracting officers from establishing a HUBZone set-aside on contracts awarded for disaster response and recovery. For example, a representative from one firm we interviewed said that in the wake of the 2017 hurricanes it had ample supplies of a vaccine in high demand on the island. The firm’s representative thought that contracting officers previously established an advance contract with a company in the continental United States to supply the vaccine. Therefore, contracting officers were unable to contract the Puerto Rican HUBZone firm to supply the vaccine to the island. However, SBA officials in the Puerto Rico District Office told us that once advance contracts are completed, the contracting agency can replace the contract with another contract to perform those services, which could be a HUBZone set-aside contract. Representatives of firms and one economic development organization and SBA officials in the Puerto Rico District Office told us that outmigration from Puerto Rico after the 2017 hurricanes reduced the amount of talent and workers available to fulfill contracts. Representatives of one firm said that contracting officers may be concerned that the defection of talent from Puerto Rico could limit firms’ abilities to complete contracts, limiting the contracting officers’ willingness to set aside contracts. However, representatives of firms and one economic development organization said that contracts can be fulfilled by multiple Puerto Rican firms if necessary. Also, representatives of firms and one economic development organization said that people who left the island have started returning and replenishing the workforce. Representatives of firms and two economic development organizations and SBA officials in Washington D.C. and the Puerto Rico District Office also identified longer-standing challenges to increased use of HUBZone set-aside contracts in Puerto Rico, including difficulty meeting procurement requirements, limited knowledge of the federal contracting process, lack of access to contracting officers, and award of contracts to firms outside Puerto Rico. These concerns are similar to those we recognized in our 2017 report on SBA contracting program in Puerto Rico. Representatives of some firms we interviewed stated that procurement requirements for federal contracts (such as performance history for construction contracts) posed challenges for small businesses in Puerto Rico. Representatives of some firms said that as an island, Puerto Rico faces specific challenges in meeting procurement requirements. For example, one firm’s representative said that the construction of a school required a business to demonstrate experience in developing several schools in the past. According to this representative, opportunities to construct schools are limited in Puerto Rico and many Puerto Rican firms would be capable of fulfilling these contracts, but relevant experience constructing similar buildings is not considered as meeting this requirement. In 2017, we reported that the experience of construction businesses in Puerto Rico does not match procurement requirements, which are often standardized to mainland building standards and do not consider unique conditions in Puerto Rico. As a result, firms and associations that we interviewed in 2017 said that agencies’ contracting officers may not consider the experience of Puerto Rican businesses as qualifying. Representatives from four associations that we interviewed in 2017 stated that construction businesses in Puerto Rico demonstrate in their construction plans greater understanding of building requirements in Puerto Rico, such as accounting for tropical climate or the risk of seismic activity, but these factors were not incorporated into federal procurement requirements. Representatives of firms and two economic development organizations and SBA officials in the Puerto Rico District Office said that limited knowledge of the federal contracting process can be a challenge for HUBZone firms in Puerto Rico. One firm’s representative explained that responding to agencies’ requests for information was important because to create a HUBZone set-aside contract a federal agency must demonstrate that at least two firms could compete for the contract. Another firm’s representative said that because it was unaware of the importance of responding to the requests for information, it had not responded to requests for information for any contract opportunities. Firms’ representatives also noted that the process of responding to requests for information and requests for proposals is time consuming and often infeasible because they lack the financial and personnel resources of larger businesses. Firms can obtain information about federal and small business contracting from several sources. Firms’ representatives we interviewed said that they generally seek assistance from SBA partner organizations, such as the Federal Contracting Center and Small Business and Technology Development Center, to gain a better understanding of the contracting process. Officials from SBA’s Puerto Rico District Office said that they hold regular training on contracting programs and how to navigate the contracting process. The District Office also holds one-on-one appointments with businesses to help them navigate the federal contracting process and has offered training on proposal writing. Representatives of firms we interviewed said that obtaining HUBZone set- aside contracts was difficult for small businesses in Puerto Rico partially because of a lack of access to contracting officers. Most firms’ representatives we interviewed said that, similar to obtaining assistance in navigating the contracting process, they seek assistance from SBA partner organizations, such as the Federal Contracting Center and Small Business and Technology Development Center, to identify HUBZone contract opportunities and connect with contracting officers. Firms’ representatives also said that they attend conferences and matchmaking events at which they meet contracting officers; however, they said that this approach has not yet helped them to obtain increased HUBZone set-aside contracts in Puerto Rico. One firm’s representative said that the advice at networking events is that firms should approach contracting officers, but small businesses do not have the contacts to approach contracting officers. Representatives of some firms said that SBA should act as an advocate or facilitator to provide connections between small businesses and contracting officers. Some of the firms’ representatives noted that in the absence of HUBZone set-aside contracts, they tend to pursue subcontracts with companies that have prime federal contracts. Representatives of two economic development organizations we interviewed said that most HUBZone set-aside contracts and most of the hurricane relief-related contracts performed in Puerto Rico were awarded to firms outside Puerto Rico. In 2017, we similarly reported that representatives from four associations stated that challenges such as lack of access to contracting officers and difficulty meeting procurement requirements led to concerns about contracts being awarded to businesses located outside of Puerto Rico for work to be performed in Puerto Rico. Representatives of firms and one economic development organization also pointed out that for some industries, work does not need to be physically performed at the contract location; therefore, Puerto Rican HUBZone firms could be competitive for contracts located in other states. According to firms and one economic development organization, this is especially true in the technology industry, which is well represented in Puerto Rico with multiple HUBZone firms. However, representatives of the Puerto Rican technology firms we contacted noted that they have experienced great difficulty obtaining HUBZone contracts. One firm’s representative suggested that this challenge might be partially due to Puerto Rican firms having less experience than firms outside of Puerto Rico in competing for HUBZone set-aside contracts. To compete for contracts, one firm said that its chief executive officer permanently moved to Washington, D.C., and another firm said its staff travels to Washington, D.C., once a month. In 2018, SBA established a PCR in Puerto Rico and SBA officials said the agency expects that the PCR will help address some of the challenges discussed previously. SBA PCRs work with federal agencies and small businesses to identify contracting opportunities for small businesses. The Puerto Rico PCR said that she plans to hold events for HUBZone firms to help them better understand and navigate the federal contracting process. For example, she plans to hold a Federal Acquisition Regulation “boot camp,” a 40-hour training to educate firms on the federal contracting process. She also stated that through regular interaction with other PCRs and with contracting officers, she can identify and discuss opportunities for HUBZone set-aside contracts for Puerto Rican small businesses. One economic development organization we interviewed said that it is too early to see an effect of the new Puerto Rico PCR, but that they have met with her and have been encouraged by her efforts to date. In 2017, we reported that several stakeholders identified the lack of an SBA PCR in Puerto Rico as a disadvantage for small businesses in Puerto Rico seeking contracts with the federal government. According to a representative from the Federal Contracting Center that we interviewed in 2017, having a PCR in Puerto Rico is important because the PCR can advocate for small businesses there. For example, the PCR can work with contracting officers to determine small business set-asides, make adjustments to procurement requirements, and make agency contracting officers more aware of businesses in Puerto Rico. According to one economic development organization’s representative, the PCR could assist local businesses and promote businesses located in Puerto Rico to federal agencies. Our review of a sample of 12 case files for Puerto Rican firms certified between March 2017 and March 2018 found that SBA lacked complete documentation for one of two requirements we reviewed and did not consistently follow its own procedures for quality control reviews when approving firms. This suggests potential gaps in internal controls for both the certification and recertification processes, as SBA reviews firms’ compliance with program requirements at both certification and recertification. Although SBA policy includes documentation reviews and a quality control process, its internal policy manuals do not reflect all document review procedures, and analysts did not always follow procedures for quality control reviews. SBA has not updated its policy manuals and, it is not known to what extent it has reviewed staff compliance with the quality review procedures. Although SBA provided an assurance letter stating its internal controls are effective, the letter did not describe steps taken in the evaluation. Documenting all procedures would help ensure that analysts consistently follow policy when certifying and recertifying firms. Documented reviews of staff compliance also could serve to identify and remediate any noncompliance with certification and recertification processes. Both actions would serve to strengthen the verification function in the HUBZone program, which is necessary to help ensure that only eligible firms participate in the program. We are making two recommendations to SBA. Specifically: The Administrator of SBA should update the agency’s internal policy manuals for certification and recertification reviews to reflect existing policies and procedures not currently in written guidance. (Recommendation 1) The Administrator of SBA should conduct and document reviews of staff compliance with procedures associated with HUBZone certification and recertification. (Recommendation 2) We provided a draft of this report for review and comment to SBA. In response, SBA provided written comments, which are reproduced in appendix III. SBA also provided technical comments, which we incorporated as appropriate. SBA generally agreed with both of our recommendations. However, SBA disagreed with three of our findings in the draft report. In the draft report, we stated that SBA’s guidance for the certification process requires firms to submit documentation so that SBA can verify that a firm meets the employee residency requirement, including documentation showing that each employee’s address is located in a HUBZone, for employees claimed to be HUBZone residents. We noted that documents were missing, illegible, or did not corroborate the information claimed regarding at least one employee’s residency for 9 of 12 certifying firms that we reviewed. We also stated that in 5 of these 9 cases, the firm would not be eligible for HUBZone certification if the SBA analyst had not counted such employees. In its comments, SBA stated that it is only required to verify that no fewer than 35 percent of a HUBZone firm’s employees reside in a HUBZone. SBA asserted that it had sufficient documentation to conclude that at least 35 percent of each firm’s employees resided in a HUBZone for each of the 12 firms we reviewed. While SBA analysts may have addressed insufficient documentation by following additional procedures, which are described in the report, we found that these procedures were not documented in SBA’s internal written policies for certifying HUBZone firms and analysts did not document their use of these procedures in the case files we reviewed. Therefore, we were not able to verify that SBA took such steps to verify the employees’ addresses. In the draft report, we identified an inconsistency when reviewing the case files for the only Puerto Rican HUBZone firm recertified between June 2017 and May 2018. Specifically, the firm reported on its application that it had zero employees, but also claimed 19 of its employees lived in a HUBZone. In its comments, SBA stated that these numbers came from a program examination system that is no longer used by the agency and therefore would not have been administratively correct to use in the 2017 recertification process. However, the file we received from SBA’s HUBZone Certification Tracking System asks for such information and had a response date noted as December 26, 2017. We recognize and noted that the firm was not required to submit corroborating documentation to verify employee information, because it was under the $1 million threshold. However, SBA policy states that recertifying firms must represent that the circumstances relative to their eligibility at the time of certification have not materially changed. In this instance, SBA recertified the firm when basic information obtained for the firm appeared to be erroneous and did not indicate that the firm was in compliance with the employee residency requirement. In the draft report, we stated that SBA did not consistently follow its quality review procedures to complete three distinct levels of review when approving the 12 Puerto Rican firms in our non-generalizable sample for certification. In its comments, SBA stated that while its legacy system, the HUBZone Certification Tracking System, requires three levels of review, its internal policies do not require that each level of review be performed by different staff. However, SBA internal policies that we reviewed state that the three levels of review should be conducted by different people, specifically an analyst, a senior analyst, and the program director. Furthermore, internal control standards state that management should design control activities at various levels with a segregation of duties, and periodically review its procedures and associated internal control activities for effectiveness. We are sending copies of this report to congressional committees, the Small Business Administration, and other interested parties. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Our objectives in this report were to (1) examine the Small Business Administration’s (SBA) development of criteria and guidance on using a risk-based approach for certifying and recertifying Historically Underutilized Business Zone (HUBZone) firms, (2) examine SBA’s implementation of the revised policies and procedures for firms located in Puerto Rico, and (3) describe any economic impacts of HUBZone expansion and recent trends in federal small business contracting in Puerto Rico. To examine SBA’s development of its criteria and guidance for HUBZone certification and recertification, we reviewed SBA’s policies and procedures for certifying and monitoring HUBZone firms. To learn about SBA’s risk-based approach, we interviewed officials at the headquarters level responsible for certifying and recertifying HUBZone firms. We reviewed prior GAO and SBA Office of Inspector General reports, applicable statutes and regulations, and SBA documents. We also compared the development of SBA’s certification and recertification processes with federal internal control standards and relevant federal guidance and statutes for managing fraud risk. To examine SBA’s implementation of the revised recertification processes in Puerto Rico, we used SBA’s Dynamic Small Business Search database to identify HUBZone firms located in Puerto Rico that received HUBZone certification after March 27, 2017. We examined SBA’s document review process for Puerto Rican firms that received HUBZone certification or were due for recertification between March 2017 and March 2018. We reviewed the case files for a non-generalizable sample of 12 firms that received initial certification and two firms that were due for recertification during this time period. We reviewed documents submitted by firms to SBA as part of the initial certification process. But we were unable to examine the document review component of recertification directly. According to SBA officials, only two firms in Puerto Rico recertified between March 27, 2017, and May 30, 2018, when we received the applicant case files from SBA, and neither met the threshold of $1 million in contract awards to trigger a full document review. From SBA’s small business database, we identified 443 firms in Puerto Rico that had had HUBZone certification at any point as of March 12, 2018, and removed 350 firms that exited the program in order to review only currently certified firms (leaving 93 certified firms). From this universe, we identified 47 HUBZone-certified firms located in Puerto Rico with a certification date later than March 27, 2017, after removing duplicates. We chose a judgmental sample of 12 firms that we randomly selected from the total of 47 firms using a random number generator. We checked the city and industry of each of the 12 firms to confirm the firms provided some geographical and industry variation. Results from this sample are not generalizable to all HUBZone-certified firms. We examined the contents of the case files for each of the 12 firms, which included the application the firm submitted through SBA’s HUBZone Certification Tracking System and supporting documents that firms submitted to corroborate their eligibility, including proof of office location, payroll documentation, HUBZone maps, and employees’ identification such as driver’s licenses. We compared the case file contents to SBA’s guidance on which documents firms must submit and internal guidance for analysts reviewing applications. To determine which documents to review, we compared SBA’s list of required documents for certification to those required at recertification and identified which are similar. We reviewed SBA analysts’ notes, which are recorded in the HUBZone tracking system to verify that they reviewed the documents to determine the firms’ eligibility. We also reviewed any emails exchanged between SBA and the applicant to identify cases in which SBA requested follow-up from the firm. We reviewed the name of the SBA analyst who completed each level of review, as indicated in the tracking system file, to determine whether SBA followed its policy of completing three levels of review. We also reviewed the tracking system files to verify the final approval and whether SBA sent the certification notice to the firm. We compared these files to SBA’s internal policy manuals. To describe any economic impacts of the expansion of the HUBZone program in Puerto Rico, and to describe recent federal contracting trends, we used SBA’s small business database and federal procurement data from the Federal Procurement Data System-Next Generation. We analyzed the number of firms in designated HUBZones in Puerto Rico and the amount of federal contract obligations awarded to the firms from fiscal year 2006 through June of fiscal year 2018—that is, from the starting point for the analysis we used in our 2017 report to the most recent available data at the time of our current review. We assessed the reliability of the two databases by reviewing database guides and prior GAO work, and determined them to be reliable for the purposes of that analysis. For all of the objectives, we also interviewed SBA officials in Washington, D.C., and Puerto Rico and representatives from the Puerto Rico Chamber of Commerce and the Federal Contracting Center. In addition, we conducted a site visit to San Juan, Puerto Rico, in May 2018. There, we conducted two discussion groups and one interview with representatives from nine HUBZone firms located in Puerto Rico to obtain their perspectives on the HUBZone certification process, federal contracting opportunities, economic impacts of HUBZone expansion in Puerto Rico, and economic impacts of the 2017 hurricanes. We invited every Puerto Rican HUBZone firm to participate in the discussion groups and met with the nine firms that responded to our email. The views of representatives from these firms are not generalizable. We conducted this performance audit from February 2018 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides information, based on our analysis of federal procurement data, on small business contracting in Puerto Rico, including the use of socioeconomic set-aside contracts and contracting by sector and agency. Annual federal contract obligations to small businesses in Puerto Rico more than doubled from fiscal year 2015 through June 2018. Small businesses in Puerto Rico also won a larger percentage of total federal contracting obligations in Puerto Rico. Although federal contract obligations to small businesses in Puerto Rico sharply increased in recent years, obligations through set-aside contracts for the Historically Underutilized Business Zone (HUBZone), 8(a) Business Development, Women-Owned Small Business, and Service- Disabled Veteran-Owned Small Business programs remained relatively unchanged (see fig. 4). The increases in federal contract obligations to small businesses in fiscal years 2017 and 2018 came mostly through free and open competition and awards reserved for small businesses that excluding those for the 8(a), HUBZone, Women-Owned Small Business, and Service-Disabled Veteran-Owned Small Business programs. HUBZone set-aside contract obligations increased from negative $20,881 in fiscal year 2016 to $3.8 million in fiscal year 2017 (1 percent of the total value of small business contracts in Puerto Rico), but dropped to $1.7 million through June 2018 (0.2 percent of the total value of small business contracts in Puerto Rico). Furthermore, 17.3 percent of the $21.9 million in contract obligations awarded to Puerto Rican HUBZone firms in fiscal year 2017 were through HUBZone set-aside contracts, and 3.3 percent of the $50.5 million awarded in fiscal year 2018 (see fig. 5). Other socioeconomic set-asides accounted for the highest share of obligations awarded (76.6 percent in 2017 and 80.1 percent in 2018) and free and open competition accounted for the rest (6.1 percent in 2017 and 16.6 percent in 2018). The fiscal year 2017 increase in federal contracting obligations in Puerto Rico were not substantially tied to hurricane relief since Hurricane Irma and Hurricane Maria hit Puerto Rico in September, the last month of the fiscal year. One percent of total federal contracting obligations in Puerto Rico and 1 percent of obligations awarded to Puerto Rican small businesses were associated with hurricane relief (see table 1). However, a significant portion of the increase in overall contracting and small business contracting to Puerto Rican firms in fiscal year 2018 (through June 2018) was related to hurricane relief. Specifically, 55.3 percent of total federal contracting obligations in Puerto Rico and 64.3 percent of obligation awarded to Puerto Rican small businesses were associated with hurricane relief. Furthermore, 16.1 percent of HUBZone set-aside contract obligations awarded to Puerto Rican firms were hurricane-related through June 2018. In fiscal years 2017 and 2018, overall federal prime contracting obligations in Puerto Rico and those awarded to small businesses in Puerto Rico were concentrated in the construction sector (about 25 percent in 2018), the manufacturing sector (about 20 percent in 2018), and the administrative and support and waste management sector (about 36 percent in 2018). For contracts awarded using HUBZone set-asides in Puerto Rico, the construction sector (about 52 percent in 2018), the information sector (about 11 percent in 2018), and the health care sector (about 37 percent in 2018) were most represented (see table 2). Among federal agencies, the Department of Defense has awarded the greatest percentage of overall federal prime contracting obligations, obligations to small businesses, and HUBZone set-aside contract obligations to firms located in Puerto Rico. Specifically, in fiscal year 2018, Department of Defense contract obligations represented 58 percent of total obligations, 64 percent of obligations to small businesses, and 84 percent of HUBZone set-aside obligations to Puerto Rican firms (see table 3). Although, Department of Homeland Security contract obligations in Puerto Rico typically have represented less than 3 percent of total obligations and less than 5 percent of obligations to small businesses in Puerto Rico, those percentages increased to 21 percent and 23 percent, respectively, in fiscal year 2018 due to hurricane-related contracts awarded to Puerto Rican firms. William B. Shear, (202) 512-8678 or shearw@gao.gov. In addition to the contact named above, Harry Medina (Assistant Director), Chris Ross (Analyst in Charge), Tarik Carter, Lilia Chaidez, Pamela Davidson, Erika Huber, Julia Kennon, John McGrail, John Mingus, Barbara Roesmann, and Jena Sinkfield made key contributions to this report.", "summary": "The HUBZone program is intended to stimulate economic development in economically distressed areas. Certified HUBZone firms are eligible for federal contracting benefits, including limited competition awards such as set-aside contracts, and are required to be recertified every 3 years. The Puerto Rico Oversight, Management, and Economic Stability Act of 2016 required SBA to develop criteria and guidance for a risk-based approach to verify firm eligibility for the program and included a provision for GAO to review SBA's development and implementation of the required criteria and guidance. This report examines, among other objectives, (1) SBA's development of criteria and guidance on using a risk-based approach for certifying and recertifying HUBZone firms, and (2) SBA's implementation of the revised policies and procedures for firms located in Puerto Rico. GAO analyzed SBA documents and reviewed files of a non-generalizable sample of 12 firms located in Puerto Rico that received certification between March 2017 and March 2018. GAO also interviewed SBA officials, representatives from HUBZone-certified firms in Puerto Rico, and local economic development agencies in Puerto Rico. The Small Business Administration (SBA) adopted criteria and guidance for a risk-based approach to certifying and recertifying firms for the Historically Underutilized Business Zone (HUBZone) program in March 2017, but the extent to which it conducted a risk assessment to inform its approach is unclear. In 2009, in response to GAO's prior recommendations to address weaknesses in the HUBZone certification process, SBA increased documentation requirements for certification, but not recertification (which every 3 years determines continued program eligibility). In March 2017, SBA changed its recertification criteria and guidance to require firms with $1 million or more in HUBZone contract awards to provide documentation to support continuing eligibility. SBA officials stated they completed a risk assessment of the HUBZone recertification process, but as of July 2018, had not provided GAO with documentation on when they performed the risk assessment, which risks were identified and considered, or what analysis established the $1 million threshold. GAO previously found SBA lacked key controls for its recertification process and recommended in 2015 that SBA assess the process. GAO continues to believe that an assessment of the recertification process would help inform a risk-based approach to reviewing and verifying information from firms that appear to pose the most risk to the program. Based on GAO's review of case files for a non-generalizable sample of 12 firms in Puerto Rico that received HUBZone certification in March 2017–March 2018, SBA did not consistently document or follow its policies and procedures for certification reviews. SBA did not have complete documentation in 9 of 12 cases. SBA officials described alternative procedures they used to determine firms' eligibility, but SBA has not updated its internal policy manuals to reflect these procedures and analysts did not document use of such procedures in the files GAO reviewed. In 4 of 12 cases, SBA did not follow its policy to conduct three levels of review (by an analyst, a senior analyst, and the program director or deputy) when determining to approve or deny a firm. It is not known to what extent SBA reviewed staff compliance with certification and recertification review procedures. SBA provided an assurance letter stating it evaluated the Office of HUBZone's internal controls and concluded the controls were effective, but the letter did not specify what steps SBA took for the evaluation. Standards for internal control state management should document its control policies and conduct periodic reviews to ensure controls are effective. Because SBA has not updated its internal policy manuals or conducted a documented review of staff compliance with its quality review procedures, it lacks reasonable assurance that firms are eligible or its review process is effective. In turn, this increases the risk of ineligible firms participating in the HUBZone program and receiving contracting preferences to which they are not entitled. GAO recommends that SBA (1) update internal policy manuals to reflect current policies and procedures, and (2) review and document staff compliance with procedures for certification and recertification reviews of firms. SBA generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), as amended, establishes the process for states or tribal entities to request a presidential disaster declaration. The act also generally defines the federal government’s role during the response and recovery after a disaster and establishes the programs and process through which the federal government provides disaster assistance to state, local governments, tribal entities and individuals. In addition to its central role in recommending to the President whether to declare a disaster, FEMA has primary responsibility for coordinating the federal response when a disaster is declared as well as recovery, which typically consists of providing grants to assist state and tribal entities to alleviate the damage resulting from such disasters. Once a disaster is declared, FEMA provides assistance through the IA, Public Assistance, and Hazard Mitigation Assistance programs. For instance, some declarations may provide grants only for IA and others only for Public Assistance. Hazard Mitigation Assistance grants, on the other hand, are available for all declarations if the affected area has a FEMA-approved Hazard Mitigation plan. The process for requesting assistance is the same for the three types of assistance. Under the Stafford Act, states’ governors or tribal chief executives may request federal assistance, if state and tribal resources are overwhelmed after a disaster. As part of the request to the President, a governor or tribal chief executive must affirm that the state or tribe has implemented an emergency plan and that the situation is of such severity and magnitude that effective response is beyond the capabilities of the state or tribal entity, among other things. After a state or tribe submits a request for disaster declaration through FEMA’s regional office, the regional office is to evaluate the request and make a regional recommendation through the RVAR, which is submitted to FEMA headquarters for further review. The FEMA administrator then is to review the state’s or tribe’s request and the RVAR, and recommend to the President whether a disaster declaration is warranted. Figure 1 shows the process for a disaster declaration from the time a disaster occurs until the President approves or denies a declaration request. The IA program provides financial and direct assistance to disaster victims for expenses and needs that cannot be met through other means, such as insurance. The IA comprises five different programs as shown below. When states or tribal entities request disaster declarations, they may request assistance under any or all of the five programs. Likewise, when the President makes a disaster declaration, the declaration may authorize IA which may also include any or all of the five IA programs. 1. Individuals and Households Program provides assistance to eligible disaster survivors with necessary expenses and serious needs which they are unable to meet through other means, such as insurance. According to FEMA headquarter officials, direct assistance is provided to individuals to meet housing needs. 2. Crisis Counseling Program assists individuals and communities by providing community-based outreach and psycho-educational services. 3. Disaster Legal Services provides assistance through an agreement with the Young Lawyers Division of the American Bar Association for free legal help to survivors who are unable to secure legal services adequate to meet their disaster-related needs. 4. Disaster Case Management Program involves a partnership between a FEMA disaster case manager and a survivor to develop and carry out a Disaster Recovery Plan. 5. Disaster Unemployment Assistance provides unemployment benefits and reemployment services to individuals who have become unemployed as a result of a major disaster and who are not eligible for regular state unemployment insurance. In accordance with its responsibilities under the Stafford Act, FEMA issued a regulation in 1999 that outlines the six factors regional and headquarters officials are to consider when assessing requests for a disaster declaration and when developing a recommendation to the President for a federal disaster declaration. The regulation states that FEMA considers the six factors not only to evaluate the need for IA but also to measure the severity, magnitude, and impact of the disaster. The state or tribe provides information on these factors when submitting its disaster declaration request. The six factors for IA include the following: 1. Concentration of Damages—characterizes the density of the damage in individual communities. The regulation states that highly concentrated damages “generally indicate a greater need for federal assistance than widespread and scattered damages throughout a state.” For example, concentration of damage data includes the numbers of homes destroyed, homes with major or minor damages, and homes affected. 2. Trauma—the regulation provides conditions that might cause trauma including large numbers of injuries and deaths, large-scale disruption of normal community functions, and emergency needs such as extended loss of power or water. 3. Special Populations—FEMA considers the impact of the disaster on special populations, such as low-income populations, the elderly, or the unemployed. 4. Voluntary Agency Assistance—involves the availability and capabilities of voluntary, faith, and community-based organizations, and state and local programs to help meet both the emergency and recovery needs of individuals affected by disasters. 5. Insurance Coverage—addresses the level of insurance coverage among those affected by disasters. Because disaster assistance cannot duplicate insurance coverage, as recognized in the regulation, if a disaster occurred where almost all of the damaged dwellings were fully insured for the damage that was sustained, FEMA could conclude that a disaster declaration by the President was not necessary in accordance with this factor. 6. Average Amount of Individual Assistance by State—according to the regulation, there is no set threshold for recommending IA. However, it states that the averages, depicted in table 1, may prove useful to states and voluntary agencies as they develop plans and programs to meet the needs of disaster victims. The inference is that these averages generally indicate the amount of damages that could be expected for a state based on its size (small, medium, and large). The averages contained within the regulation and depicted in table 1 are based on disasters that occurred between July of 1994 and July of 1999. The President declared 57 percent of all IA declaration requests from calendars years 2008 through 2016, with total IA obligations of approximately $8.6 billion. FEMA received 294 IA declaration requests from calendar years 2008 through 2016. Of these, the President declared 168 requests (57 percent), and 51 percent of these declarations were from Regions IV and VI, as shown in table 2. Additionally, of the 126 IA declaration requests denied by the President, Regions X and IX had the highest percentage of denials, at 71 percent (10 out of 14) and 67 percent (12 out of 18), respectively, and Region I had the lowest percentage of denials at 13 percent (2 out of 15), as shown in table 3. See appendix I for the number of IA declarations requested, declared, and denied by states and tribes from each FEMA region for disaster declarations requested from calendar years 2008 through 2016. According to a FEMA headquarters official, when a disaster declaration is denied, FEMA sends a denial letter to states or tribes based on the review of all the information available. The letter generally states that the damage was not of such severity and magnitude as to be beyond the capabilities of the state, affected local governments, and voluntary agencies, and accordingly the supplemental federal assistance is not necessary. Of the emergency management officials we interviewed in 11 states, officials in five states reported that FEMA provided a rationale behind the denial, while officials in three states reported that no rationale was provided. Among the various types of disasters for which IA declaration requests were received, severe storms, flooding, and tornados accounted for the highest number of IA requests, with drought, fishery closure, and contaminated water being the least common, as shown in table 4. FEMA obligated a total of approximately $8.6 billion in IA for disaster declarations made from calendar years 2008 through 2016. These actual obligations were provided to 46 states and they ranged from less than $1 million to more than $1 billion as shown in figure 2. See appendix II for FEMA’s IA actual obligations by state and type of disasters for disaster declarations made from calendars years 2008 through 2016. Additionally, actual obligations for IA declarations made from calendar years 2008 through 2016 varied greatly by FEMA region, as also shown in figure 3. For example, FEMA Region VI had the highest obligations at around $3.3 billion. Region X had the lowest obligations at $24.8 million. As shown in table 5, the amount of obligations for disasters declarations also varied greatly by state. For example, Louisiana had the highest obligations at approximately $2 billion, followed by New York and Texas at about $1.3 billion and $1.1 billion, respectively. The state with the lowest obligations was the U.S. Virgin Islands at about $2,100. Six of FEMA’s 10 regional offices reported using all six regulatory factors when evaluating states’ or tribes’ IA declaration requests. Officials from the other 4 regions reported using five of the six factors, with the exception being the average amount of individual assistance by state factor. These officials noted that they do not use this factor because FEMA considers the factor to be outdated or they consider all of the factors holistically. Officials from FEMA’s regional offices also generally reported that the extent to which they consider the six IA regulatory factors equally in all cases varies, depending on the circumstances of the related disaster. Specifically, officials from 7 of the 10 regions stated that they use the regulatory factors on a case-by-case basis as certain factors are more relevant than others based on the disaster. For example, if a tornado hits a rural community and completely destroys all properties within the community with no death or injury, then the regulatory factor for trauma may not be as applicable, while the concentration of damages regulatory factor would have greater relevance. On the other hand, if a tornado hits the center of a town resulting in damages with death and injuries, then the trauma regulatory factor would become more important to consider. Additionally, officials in 3 of the 10 regions reported that in addition to the six regulatory factors, they also take into account institutional knowledge and staff experience when evaluating the regulatory factors. For example, officials in one region stated that their staff have more than 10 years of IA declaration experience, and as such, they are familiar with the extent of the information needed and collect the information accordingly. Based on our analysis of RVARs from July 2012 through December 2016 used to recommend approving or denying IA requests, FEMA regional offices did not consistently obtain and document information on all elements of the IA regulatory factors. As described earlier, FEMA regions are to use the RVAR to document information on the IA factors and to recommend to the FEMA administrator whether a disaster should be declared. According to FEMA headquarters officials, FEMA developed the RVAR template in June 2012 to help ensure consistency across regions when making recommendations to headquarters on IA declaration requests. Officials stated that prior to the template, information on the six factors was mainly provided in narrative format. The new template listed the various elements found within each of the six regulatory factors, guiding the regional offices to provide information based on those elements. For example, instead of providing a general narrative on the trauma factor, the new template listed the elements to be provided under trauma, such as the number of injuries and deaths, as well as information on power outages and disruption of other community functions and services. Also, instead of summarizing the concentration of damages factor, the template allowed regional offices to categorize the damage concentration as low, medium, high, or extreme. Furthermore, the template also provided a uniform format to present quantitative information such as the number of homes destroyed; whether home damages are major or minor; the number of homes affected; and level of home ownership. See appendix III for a sample RVAR template. We analyzed 81 RVARs developed by the 10 FEMA regions from July 2012 through December 2016 and found that regions did not consistently obtain and document information on all elements related to each of the six regulatory factors in their RVARs. As shown in table 6, all 81 RVARs had at least some elements documented but not all for each of the IA regulatory factors. For example, for the IA concentration of damages regulatory factor, the six elements to be addressed include the number of homes destroyed, damaged or affected, damage concentration, and damage to critical facilities. While 44 of the 81 RVARs documented all of the six elements, 37 documented some but not all of the elements. Similarly, for the trauma regulatory factor, the four elements to be addressed include injuries, death, power outages, and disruption of community functions. While 30 of the 81 RVARs documented all of the four elements, 51 documented some but not all of the elements. For the insurance coverage factor, while five RVARs documented all of the elements, 73 RVARs documented some but not all of the elements. Elements under this factor include home ownership, insurance, and flood insurance, when applicable. None of the six regulatory factors were fully documented across all RVARs. See appendix IV for detailed information on the extent to which all of the elements of the six regulatory factors were documented in the RVARs from July 2012 through December 2016. FEMA headquarters officials acknowledged that information related to all the elements for each of the IA regulatory factors were missing from the RVARs. They stated that they had not collected all information on all factors because one factor may have more weight than another based on the specific incident that has occurred. However, they also indicated that they do not fully know and have not evaluated all of the reasons why a region may have omitted information on an element of a factor. FEMA headquarters officials agreed that having complete information on all elements of the regulatory factors in the RVARs would assist in their recommendation process. Standards for Internal Control in the Federal Government suggest that agencies should establish and operate monitoring activities to ensure that internal controls—such as the documentation of all of the elements of the IA regulatory factors FEMA regions considered—are effective, and to take corrective actions as appropriate. Because it is unclear why regions are not completely documenting all elements related to the current six regulatory factors, such an evaluation could help FEMA identify whether any corrective steps are needed. Doing so could help FEMA ensure it is achieving its stated goals in providing consistency in the evaluation process and in the types of factors it considers. Officials we interviewed in 9 of the 10 FEMA regions and state emergency management offices in all 11 states reported the positive relationship they maintain with each other as a strength in the IA declaration process. For example, both FEMA regional officials and state emergency management officials stated that they have a good working relationship and are in regular communication via telephone or in-person meetings with each other. Also, state emergency management officials we spoke to stated that whenever they are in need of assistance, they know they can reach out to FEMA regional officials for assistance. However, FEMA regional and state emergency management officials we spoke to also reported various challenges with the process. These include the subjective nature of the IA regulatory factors given the lack of eligibility thresholds, the lack of transparency in the decision-making process, and difficulty gathering information on IA regulatory factors. Subjective nature of the IA factors and lack of eligibility thresholds. Officials from 9 of 10 FEMA regions stated the subjective nature of the IA program is a challenge; and officials in 6 of the 10 regions also said they found the lack of eligibility thresholds a challenge. An official in one region stated that unlike FEMA’s Public Assistance program, which has minimum thresholds for eligibility, it is unclear when states should apply for IA funds. Under the Public Assistance program, for example, for states or tribes to qualify for assistance, they must demonstrate that they have sustained a minimum of $1 million in damages and the impact of damages must amount to $1.00 per capita in the state. An official in another region explained that although the subjectivity of the IA factors provides flexibility in determining the type of IA program needed, having some quantifiable criteria could help officials explain to states why their requests were denied or approved. Similarly, officials we interviewed in 7 of the 11 states said they found the subjective nature of the factors with no threshold to be a challenge. A state emergency management official in one state said this subjectivity makes it difficult to determine whether or not the state should make an IA request. A state emergency management official in another state reported that the subjectivity can cause the IA declaration process to be inconsistent, and it is not always clear how or why certain declarations were approved and others were not. Further, a state emergency management official in an additional state also pointed to the subjective nature of the factors with no threshold as a reason for not being able to provide a more detailed rationale behind a declaration denial. To illustrate this, table 7 shows how four states requested IA declarations related to the same tornado in 2012 and varied in what they reported across the six IA factors, such as the levels of damages incurred, special populations among their residents, and insurance coverage. Two of these four states—Kentucky and Indiana—received IA declarations and the other two—Ohio and Illinois—were denied. Lack of transparency. Another challenge reported by FEMA regional and state emergency management officials was the lack of transparency in how FEMA evaluates and provides a recommendation to the President on whether a declaration is warranted. For example, officials we interviewed in 4 of 10 regions indicated the lack of transparency as a challenge. A FEMA official in one region stated that the region would like more transparency regarding what FEMA headquarters recommends to the President and whether the President’s decision aligns with FEMA’s recommendation. State emergency management officials we interviewed in 10 of 11 states also reported that lack of transparency with the IA process is a challenge. For example, an emergency management official in one state said it is not clear how or if FEMA considers all of the factors. Also, an emergency management official in another state reported that it was unclear to him why his state’s declaration request was denied while the requests of other states with similar incidents were declared. Difficulty gathering information on IA regulatory factors. Officials in 4 of 10 FEMA regions reported difficulty gathering information, such as income or insurance coverage, as a challenge. An official in one region stated that it is difficult to obtain information related to IA factors from states. For example, the official said that calculating the concentration of damages is difficult absent technical guidance from FEMA headquarters, as the current guidance only accounts for the number of structure damage but not the impact of damage. Further, officials in two FEMA regions stated that states lack a dedicated IA official, making it difficult for state officials, who play multiple roles, to provide the necessary information related to the IA factors in their IA declaration request. Additionally, a state emergency management official in one state also reported that lack of staff resources in her state makes it difficult to verify all the local damage assessments prior to making a declaration request. Pursuant to the Sandy Recovery Improvement Act of 2013, in November 2015, FEMA issued a Notice of Proposed Rulemaking to revise the six current IA regulatory factors to the following proposed factors: state fiscal capacity and resource availability; uninsured home and personal property losses; disaster-impacted population profile; impact to community infrastructure; casualties; and disaster-related unemployment. According to FEMA headquarters officials, the revisions aim to provide more objective criteria, clarify the threshold for eligibility, and speed the declaration. The officials said the proposed rule also seeks to provide additional clarity and guidance for all the established factors. Table 8 shows FEMA’s description of current and proposed IA factors. FEMA received public comments from 14 states in the Federal Register during the comment period for the proposed rule and proposed guidance. The 14 states expressed concern about the proposed factor for state fiscal capacity and resource availability, including the reliability and relevance of data sources such as total taxable resources. These states expressed concern that the data collection necessary to meet the new requirements would fall upon them, adding to the cost burden of completing an IA disaster declaration request. They also explained that the use of total taxable resources and other similar data is not an effective way to assess a state’s current ability to provide resources following a disaster. Also, these states indicated that the data points such as total taxable resources and per capita personal income that would be used to evaluate state fiscal capacity are outdated and inaccurate and would be an inefficient way to evaluate a state’s true fiscal capacity to respond to a disaster. Regarding the other five proposed factors, several states in their comments raised questions about ambiguities in interpreting the factors or the feasibility and cost of gathering related data. For example, in regards to the factor on disaster impacted population, five states expressed concern that the data required for the disaster-impacted population factor would be a cost burden to the state or that the data would be inappropriate for evaluation. Additionally, two states said unemployment related to a disaster incident for the disaster-related unemployment factor would be hard to quantify in the first 30 days following a disaster. They stated that this was especially an issue given that states work to submit an IA disaster declaration request as soon as possible following a disaster. According to the Office of Management and Budget’s Office of Information and Regulatory Affairs website, the projected date for finalization of the proposed rule is September 2018; however, as of April 2018, FEMA officials stated that they were not certain whether that timeframe would be met. Until the proposed rule is finalized, we will not know the extent to which the various challenges FEMA regions and state officials raised in our interviews and in comments on the proposed rule will be addressed. FEMA has obligated over $8.6 billion nationwide in IA from calendar years 2008 through 2016, highlighting the importance of FEMA’s evaluation of states’ and tribes’ IA declaration requests. FEMA’s regional offices evaluate the request and make a regional recommendation through the Regional Administrator’s Validation and Recommendation, which documents information on all relevant IA regulatory factors. FEMA has developed the Regional Administrator’s Validation and Recommendation to ensure regions consistently obtain and document the information needed by FEMA to make a disaster declaration recommendation to the President based on the IA regulatory factors. However, FEMA’s regional offices do not consistently obtain and document information on all elements of the current IA regulatory factors. Because it is unclear why regions are not always documenting all of the elements related to these factors, evaluating the reasons why could help FEMA identify if any corrective steps are needed. Doing so could also help FEMA ensure it is meeting its stated goals in providing consistency in the evaluation process and in the types of factors it considers. We recommend that the Administrator of FEMA evaluate why regions are not completing the Regional Administrator’s Validation and Recommendations for each element of the current IA regulatory factors and take corrective steps, if necessary. We provided a draft of this report to DHS for its review and comment. DHS provided written comments, which are summarized below and reproduced in full in appendix V. DHS concurred with the recommendation and described planned actions to address it. In addition, DHS provided written technical comments, which we incorporated into the report as appropriate. DHS concurred with our recommendation that FEMA evaluate why regions are not completing the Regional Administrator’s Validation and Recommendations for each element of the IA regulatory factors and take corrective steps, if necessary. DHS stated that a FEMA working group consisting of headquarters stakeholders will draft survey questions for FEMA region officials to identify the common reasons why an element of an IA regulatory factor may not be addressed within a RVAR. According to DHS, the working group will also analyze, assess, and present the findings of the survey responses to FEMA senior leadership, and if needed, FEMA will develop and send a memorandum to the regions with additional guidance regarding the appropriate preparation of RVARs. DHS stated that the estimated completion date is in the fall of 2018. These actions, if implemented effectively, should address the intent of our recommendation. We will send copies of this report to the Secretary of Homeland Security, the FEMA Administrator, and the appropriate congressional committees. If you or your staff have any questions about this report, please contact me at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI. Table 9 provides the total number of Individual Assistance declaration requests made, declared, and denied, by region, state, and tribe for disaster declarations requested from calendar years 2008 through 2016. Table 10 provides Federal Emergency Management Agency’s (FEMA) Individual Assistance (IA) actual obligations for declarations made from calendar years 2008 through 2016 by state and type of disaster. As part of the Federal Emergency Management Agency’s (FEMA) declaration process, FEMA’s regional offices are to evaluate states’ or tribes’ declaration requests, including the IA declaration request, and make a recommendation called the Regional Administrator’s Validation and Recommendation (RVAR) and submit the RVAR to FEMA headquarters. In June 2012, FEMA headquarters issued a template for FEMA regional offices to use in developing the RVAR as identified in figure 3. Tables 11 through 16 provide information on each element of the 6 Individual Assistance (IA) regulatory factors documented in the Regional Administrator’s Validation and Recommendation (RVAR) from July 2012 through December 2016 by the Federal Emergency Management Agency region. In addition to the contact named above, Aditi Archer (Assistant Director), Su Jin Yon (Analyst-In-Charge), Hiwotte Amare, Eric Hauswirth, Susan Hsu, Jun S. (Joyce) Kang, Christopher Keisling, Heidi Nielson, Hadley Nobles, Anne Rhodes-Kline, and Jerome (Jerry) Sandau made significant contributions to this report.", "summary": "FEMA's IA program provides help to individuals to meet their immediate needs after a disaster, such as shelter and medical expenses. When a state, U.S. territory, or tribe requests IA assistance through a federal disaster declaration, FEMA evaluates the request against regulatory factors, such as concentration of damages, and provides a recommendation to the President, who makes a final declaration decision. GAO was asked to review FEMA's IA declaration process. This report examines (1) the number of IA declaration requests received, declared, and denied, and IA actual obligations from calendar years 2008 through 2016, (2) the extent to which FEMA accounts for the regulatory factors when evaluating IA requests, and (3) any challenges FEMA regions and select states reported on the declaration process and factors and any FEMA actions to revise them. GAO reviewed FEMA's policies, IA declaration requests and obligation data, and FEMA's RVARs from July 2012 through December 2016, the most recent years for which data were available. GAO also reviewed proposed rulemaking comments and interviewed FEMA officials from all 10 regions and 11 state emergency management offices selected based on declaration requests and other factors. From calendar years 2008 through 2016, the Department of Homeland Security's (DHS) Federal Emergency and Management Agency (FEMA) received 294 Individual Assistance (IA) declaration requests from states, U.S. territories, and tribes to help individuals meet their immediate needs after a disaster. Of these, the President declared 168 and denied 126 requests. Across the various types of IA declaration requests, severe storms (190) were the most common disaster type and drought (1) was among the least common. FEMA obligated about $8.6 billion in IA for disaster declarations during this period. GAO found that FEMA regions did not consistently obtain and document information on all elements of established IA regulatory factors when making IA recommendations to headquarters. Following a declaration request, a FEMA region is to prepare a Regional Administrator's Validation and Recommendation (RVAR)—a document designed to include data on each of the six IA regulatory factors for each declaration request as well as the regional administrator's recommendation. GAO reviewed all 81 RVARs from July 2012—the date FEMA began using the new RVAR template—through December 2016. GAO found that regions did not consistently obtain and document information for the elements required under the six regulatory factors (see table). For example, only 44 of the 81 RVARs documented all elements under the concentration of damage factor. By evaluating why regions are not completing all elements of each current IA regulatory factor, FEMA could identify whether any corrective steps are needed. Officials from the 10 FEMA regions and 11 states GAO interviewed, reported positive relationships with each other, but also cited various challenges with the IA declaration process and regulatory factors. For example, these officials told GAO that there are no established minimum thresholds for IA, making final determinations more subjective and the rationale behind denials unclear. However, as required by the Sandy Recovery Improvement Act of 2013, FEMA has taken steps to revise the IA factors by issuing a notice of proposed rulemaking. According to FEMA, the proposed rule aims to provide more objective criteria, clarify the threshold for eligibility, and speed up the IA declaration process. As of April 2018, the proposed rule was still under consideration. According to FEMA officials, they plan to finalize the rule in late 2018; therefore, it is too early to know the extent to which it will address these challenges. GAO recommends that FEMA evaluate why regions are not completing the RVARs for each element of the current IA regulatory factors and take corrective steps, if necessary. DHS concurred with the recommendation.", "document_type": "gao"}
{"report": "Following terrorist attacks against the U.S. embassy in Beirut, Lebanon, in 1983, State began an embassy construction program—known as the Inman program—to protect U.S. personnel. However, as we’ve previously reported, State completed only 24 of the 57 planned construction projects, in part due to poor planning, systemic weaknesses in program management, difficulties acquiring sites, schedule delays, cost increases, and subsequent funding limitations. Following the demise of the Inman program in the early 1990s, State initiated very few new embassy projects until after the two 1998 embassy bombings in Kenya and Tanzania. Following the bombings in Africa, the Secure Embassy Construction and Counterterrorism Act of 1999 required State to develop and report a list of diplomatic facilities scheduled for replacement based on their vulnerability to terrorist attack. One of the congressional findings in the Secure Embassy Construction and Counterterrorism Act of 1999 was that unless embassy vulnerabilities are addressed in a sustained and financially realistic manner, the lives and safety of U.S. employees in diplomatic facilities will continue to be at risk from further terrorist attacks. State subsequently initiated the CSCP to construct new embassies. The CSCP is administered by OBO, which in April 2018 had about 1,135 direct-hire civil service personnel, U.S. Foreign Service officers, and personal services contractors stationed in Washington, D.C., and overseas. The Secure Embassy Construction and Counterterrorism Act of 1999 calls for new diplomatic facilities to be sufficiently sized to ensure that all U.S. government personnel at a post are located on a single secure site and that those facilities are set back not less than 100 feet from the site’s perimeter boundary. Before constructing a new embassy, State must certify to Congress that, among other things, the facility’s design incorporates adequate measures for protecting classified information and activities as well as personnel working in the facilities. OBO contracts with architectural and engineering firms (design firms) to develop bridging or full designs meeting security and other project requirements. These design firms submit their designs for reviews by OBO and Diplomatic Security to ensure conformance with building code and security standards, respectively. Diplomatic Security, in consultation with the Office of the Director of National Intelligence, must certify that the design meets security standards prior to the start of construction. While this certification occurs during the design phase of a project, Diplomatic Security also has other roles in the process, such as participating in site selection, ensuring OBO contractors have necessary security clearances, and ensuring facilities are securely constructed. After passage of the Secure Embassy Construction and Counterterrorism Act of 1999, State determined that embassies at 180 posts—out of 260 posts at the time—needed to be replaced to meet security standards. State adjusted this milestone—to building 150 embassies by 2018—in 2005, when it worked with the Office of Management and Budget (OMB) to establish the Capital Security Cost-Sharing Program (cost-sharing), with a primary goal of accelerating the replacement of embassies. Under cost-sharing, nearly 30 U.S. agencies with a presence in U.S. embassies were to provide a total of $17.5 billion for constructing the 150 new embassies by 2018—12 years sooner than had been projected without cost sharing. In justifying its cost-sharing approach, State emphasized that, among other things, requiring agencies to pay for overseas staff would make them more likely to closely assess the need for each overseas position, thereby rightsizing overseas staffing levels. OBO sought to expedite construction and control CSCP costs through adoption of the SED and streamlined construction through a design-build delivery method. The SED was a set of documents providing prototypical plans for a medium-sized embassy including specifications and design criteria, and explaining how to adapt those to a particular site and project. The SED was not a complete design but rather a standardized template for the structural, spatial, and security requirements of a new embassy compound to guide a contractor’s final design. Compound elements described by the SED generally included the main office building; U.S. Marine security guards’ living quarters; a warehouse; a utility building; compound access control buildings and perimeter walls; and parking facilities. The SED also allowed for the standardization of building components such as security windows and doors. Figure 1 shows the prototypical facilities defined by the SED. OBO combined the SED with the design-build delivery method, which integrates completion of the design as well as all construction responsibilities into a single contract. Under this model, the design-build contractor is responsible for both design and construction and thus generally bears the risks, such as added cost, for any design problems because the contractor hires the design firm to bring the design to completion. Under the SED approach, OBO hired its own design firms beforehand to conduct project development activities such as planning surveys, site studies, and other analyses needed to inform the project’s design. OBO would utilize these design firms to develop a scope of work and provide the design-build contractor a concept or schematic design showing how OBO expected the office chancery and supporting embassy facilities to be arranged on the site using the SED prototypical design to include standard site and building plans, technical specifications, design criteria, and instructions for its adaptation for a particular project and contract requirements. The contractor’s design firm would then use the SED documentation to develop a 100-percent completed design adapted for a site at a particular post. Figure 2 provides an overview of the embassy construction process under OBO’s implementation of design- build utilizing the SED. In 2006, we reported that the SED approach and design-build delivery method had enabled OBO to make significant progress in completing new embassies and had helped to reduce the average time to complete projects to about 3 years (36.7 months). This was nearly 3 years faster than embassies built during the Inman era. However, while the SED approach enabled OBO to accelerate the construction of new embassies, some stakeholders raised concerns about the aesthetics, quality, location, and functionality of those facilities. Criticisms included that the SED embassies had a “fortress-like” appearance that detracted from their symbolic value in presenting American ideals of openness and innovation; that the emphasis on speed and cost control resulted in poorer-quality buildings and removal of functional elements such as warehouses; that the 10-acre lot specified by the SED required siting embassies too far from urban centers where foreign government offices are located; and that the standardized aspects of its design were difficult to adapt to unique site conditions and post needs. To address some of these criticisms, OBO began to use design-build with bridging (bridging) as a delivery method in 2008 with the first construction project awarded in 2009. Generally under this method, OBO first contracts with a design firm (the bridging architect) to develop a project- specific, partial design package (bridging design) that conveys State’s design vision and a higher level of detail for key design requirements. Such details that State might convey in a bridging design could include the selection of specific building systems (e.g., the types of structural foundation systems to be used for each building on the site) or post- specific security features (e.g., location, types, and heights of security walls and bollards to be used around and within the site). Unlike the SED, each bridging design is project-specific, customized, and separately executed by an outside design firm contracted by OBO. The extent of each bridging design varies by project but generally approximates an overall 35- to 50-percent completed design, according to OBO officials. OBO’s procedure is to then separately contract with a construction contractor (and its own design firm) to complete the design and build the project. Figure 3 provides an overview of the embassy construction process under bridging. Although customized, OBO’s bridging designs continued to use the SED as a starting point for several years after OBO adopted bridging in 2008. However, criticisms aimed at the underlying SED elements continued, for instance, that the standardized design sometimes hindered adaptation of designs in response to different climates, countries, or unique post functions. In 2011, OBO initiated the Excellence approach, which placed greater emphasis on custom designs for each project. OBO subsequently phased out the SED as the basis for embassy designs, and according to OBO officials, SED specifications, standards and guidance were incorporated into OBO’s Design Standards and Design Guide. According to OBO officials, by 2014, design firms hired by OBO to develop bridging designs no longer used the SED as a starting point. In addition, OBO shifted to greater use of the design-bid-build delivery method alongside bridging. Generally under design-bid-build, OBO first solicits and contracts with a design firm to develop a 100-percent design. Under this method, OBO then uses the completed design to solicit bids from prospective construction contractors. According to OBO documentation, OBO selects a project’s delivery method, either bridging or design-bid-build, based on an evaluation of a project’s local context, complexity, construction factors, and urgency. Figure 4 provides an overview of the embassy construction process under design-bid-build. Under both bridging and design-bid-build, OBO generally bears greater risk than it did under strict design-build in the SED approach. That is because if design errors impact construction, the contractor may seek additional costs and schedule relief from OBO for needed corrections and changes it attributes to problems with the design provided by the government. Additionally some stakeholders have expressed concern that the added design-work inherent to the Excellence approach may add to the cost to construct embassies and slow the rate of moving personnel into more secure facilities. However, OBO has maintained that greater design control under Excellence will improve embassies’ functionality, quality, operating costs, and their overall public impact in representing the United States. Although State has built 77 new embassies since 1999 and at the end of fiscal year 2017 had another 21 under construction, the CSCP’s project delivery pace has fallen short of State’s 2005 target of constructing 150 new embassies by 2018. This is due, in part, to unexpected building requirements and the effects of inflation. In 2012, recognizing the erosion of purchasing power as a result of inflation, the Benghazi Accountability Review Board (ARB) recommended State work with Congress to increase the CSCP’s annual funding level from $1.4 billion to approximately $2.2 billion in fiscal year 2015 and for up to 10 years thereafter. OBO plans to begin construction of 25 embassies in fiscal years 2018–2022 and nearly 50 more beyond fiscal year 2022, but it is unclear whether OBO can maintain its average pace of 5 new embassy contract awards per year—particularly as State has not defined the overall capital cost and potential timeframes needed to achieve this goal, nor does it currently expect to seek year-to-year adjustments for inflation. Although State has made progress in constructing more secure embassies, State’s CSCP will not achieve the target of constructing 150 new embassies by 2018, a milestone that the 2005 cost-sharing was intended to facilitate. From fiscal year 1999 through 2017, State completed 77 new embassies and had 21 under construction. In fiscal year 2017, State also forecast a potential need for 72 additional embassies beyond those completed or under construction. Of those 72, State planned to begin construction on 25 new embassies in fiscal years 2018 through 2022, at an estimated pace of 5 new starts per year. The remaining 47 locations were identified by State as candidates for new embassy compounds beyond 2022. Figure 5 shows the status of CSCP embassy projects as of the end of fiscal year 2017. Total CSCP funding from 1999 through 2017 reached approximately $24.2 billion (in nominal dollars). Figure 6 shows the cumulative progress in completing the 77 embassies along with year-to-year cumulative funding from fiscal year 1999 through fiscal year 2017. State’s CSCP will not achieve the 2005 target of constructing 150 new embassies by 2018. To achieve this target, State would have had to complete an average of about 10 embassies per year. Instead, on average, State has completed 5 new embassy compounds each year since cost-sharing was authorized in 2005. If State’s project delivery pace remains unchanged, it would take more than 15 years to complete the 72 new embassies identified in State’s CSCP planning schedule at the end of fiscal year 2017. The pace of CSCP has been affected by unexpected building requirements and inflation. Beyond the 77 completed embassies and the 21 under construction, the $24 billion for CSCP since 1999 has also funded additional building requirements that State had not originally envisioned. According to State, these unforeseen requirements included: 1. On-compound staff housing at some posts, such as Beirut; 2. New or reopened posts, such as Kabul, 3. Marine security guard quarters on some new and existing compounds, such as Monterrey, in response to a recommendation in the 2012 Benghazi ARB report and as State revised its policy governing the presence of U.S. Marines at some posts. 4. New security requirements at high threat posts—such as taller perimeter walls, guard towers, and unique security support spaces. 5. Office annexes; for example OBO is now building new annexes in Kampala, Uganda and Nairobi, Kenya, posts where new embassies were completed in 2001 and 2006 respectively. From 1999 through 2017 State completed 28 annex office buildings under the CSCP— such as for U.S. Agency for International Development—or acquired buildings and upgraded them for use as an embassy. Figure 7 shows completed annex projects along with embassy completions. OBO officials told us that unforeseen requirements continue to affect the CSCP. Over time, CSCP funding has also been subject to the effects of inflation. The 1999 ARB following the bombings of U.S. embassies in Tanzania and Kenya recommended that embassy construction and other security improvements be funded at $1.4 billion per year over 10 years. With the introduction of cost-sharing in 2005, State set an annual CSCP funding goal of $1.4 billion, as the 1999 ARB had recommended, as well as the goal of completing 150 new embassies by 2018 for a projected funding total of $17.5 billion. However, State officials indicated that when the program was established, no provision was made for potential inflation over the life of the program. Therefore, while CSCP funding generally increased from 2005 through 2010, OBO officials stated that CSCP funding gradually purchased less than anticipated due to the lack of an inflation adjustment. This absence of inflation as a built-in factor in program planning is in contrast to OBO’s cost estimates for individual new embassy projects. Those project-level cost projections account for inflation and recognize that the projects will typically take at least 3 years to build. If annual CSCP program-level funding is held constant as individual project costs generally increase over time, fewer projects can be funded in later years of the program resulting in a slower pace of project delivery. In 2012, recognizing the erosion of purchasing power as a result of inflation, the Benghazi ARB recommended that State work with Congress to restore the CSCP capacity to its earlier level by increasing its annual funding level to approximately $2.2 billion starting in fiscal year 2015 and for up to 10 years thereafter. Based on State data, that recommended funding level was not met in 2015, but was generally met in fiscal years 2016 and 2017 due to the provision of additional Overseas Contingency Operations funding. In general, according to OBO, such funding is used to support State requirements in high-threat locations, which, according to OBO, are subject to the highest rates of project cost change. State generally considers this funding to be non-enduring and supplemental to funding through State’s regular budgets. Figure 8 shows State funding data representing the total annual CSCP funding from fiscal year 1999 through 2017—including cost-sharing, supplemental, and Overseas Contingency Operations funding—compared with State’s 2005 CSCP funding goal ($1.4 billion annually) and the 2012 Benghazi ARB annual funding recommendation ($2.2 billion annually), proposed for implementation in fiscal year 2015. Lack of Reliable Data on the Number of Staff Moved into New Embassies The number of U.S. government staff moved into more secure facilities has been a reported performance measure for the Capital Security Construction Program (CSCP) since the time of the Standard Embassy Design approach. For example, the U.S. Department of State (State) reported moving over 30,000 people (out of more than 86,000) into more secure facilities from 2000 through 2014. We attempted to assess CSCP performance on this measure on a project-by-project basis but found it unreliable for the purpose of establishing how many staff have been moved into newly constructed facilities. State’s Bureau of Overseas Buildings Operations (OBO) officials explained that the “number of staff moved” metric was based on the projected desk and non-desk positions within each embassy construction contract. However, OBO never established a policy or procedure on how these data should be collected, managed, or validated. The data for this metric were informally tracked within OBO’s Office of Construction Management. As a result, information for this performance measure is inconsistent, precluding a progress assessment of the CSCP using this metric. For example, totals for some years included data for major renovation projects of existing buildings while other years’ data may have included acquired buildings purchased by State (and built by others). In 2017, we found State’s one strategic CSCP-related performance indicator—the relocation of staff into more secure and functional facilities—provides no performance assessment on the extent to which Excellence facilities are any more functional, sustainable, or effective in supporting U.S. diplomacy. We recommended State determine whether this measure is still appropriate or needs to be revised. According to OBO officials, this metric is being revisited as part of a broader evaluation of OBO’s performance measures. See GAO-17-296. Although the CSCP schedule for fiscal year 2017 identifies nearly 75 embassies still requiring replacement, the overall capital cost and likely time frame expected to achieve the program’s goal are unknown, as OBO has not made such estimates. According to OBO officials, State is not focused on replacing a set number of embassies within an estimated total capital investment cost (e.g., 150 embassies for $17.5 billion, as planned in 2005) or by a given end-date (e.g., 150 embassies by 2018, as planned in 2005). Rather, OBO’s approach is to request $2.2 billion annually in accordance with the Benghazi ARB’s recommendation. According to these officials, this approach allows agencies that contribute to cost- sharing to consistently plan for a predictable funding level, and OBO will work to complete as many projects as soon as possible within this annual funding level. Further, they noted that State does not intend to seek annual inflation adjustments for the CSCP. In general, according to OBO policy, the CSCP is guided by Diplomatic Security’s annual Security Environment Threat List of security rankings for posts, from which OBO develops a “Top 80” list of the 80 most at-risk posts needing a new embassy. OBO uses the Top 80 list to develop and adjust the CSCP schedule, which presents planned embassy awards for the current fiscal year and for each of the next 5 fiscal years. For example, the November 2016 CSCP schedule (current at the end of fiscal year 2017) listed the 5 posts slated for awards in fiscal year 2017. In addition, it listed the 25 posts slated for awards in fiscal years 2018 through 2022, grouped by the specific fiscal year when OBO anticipated being able to award the relevant construction contracts. The nearly 50 embassies planned for beyond fiscal year 2022 were broadly categorized in an “out-year” category in the November 2016 CSCP schedule. According to leading practices in capital decision-making we have previously identified, agencies’ long-term capital plans should provide insight into likely funding and other resources and time frames needed to achieve organizational mission goals. We also noted in our guide to leading practices that, while out-year cost estimates are preliminary, they help provide decision makers with an overall sense of funding needs and that such long-range planning assists in developing both current and future budgets. OBO’s fiscal year 2017 CSCP schedule does not identify estimated costs, either at the project or aggregate level. According to OBO officials, scope, cost, and size estimates are communicated on a project-specific basis to stakeholders through briefings and each fiscal year’s congressional notifications listing projects to be implemented in the coming years. According to these officials, the CSCP schedule is intended to be a flexible way to communicate a snapshot of OBO’s prioritization of posts to receive embassy awards over the next 5 fiscal years, emphasizing that the exact list can change. For example, a new embassy project might be advanced sooner than originally planned due to a change in State’s security or policy priorities. Conversely, a project may be moved out to a later fiscal year due to challenges that OBO believes may be posed by the host government or other challenges identified during or after site acquisition. Although the CSCP does track the projected timing of some specific projects, State lacks a strategic planning document that estimates longer term CSCP resource needs. For example, the CSCP schedule contains no estimated 5-year program cost for the next 25 embassies OBO plans to build, nor does it provide stakeholders an estimate or cost range for the total capital investment and feasible time frames needed to address the 47 embassies that OBO has identified for replacement beyond the next 5 years. Additionally, guidance from OMB indicates that when developing budget estimates agencies should consider the effect that economic or other changes can have on program levels beyond the budget year. OMB guidance further states that agencies should be prepared to discuss the impact that program levels and changes in methods of program delivery will have on program operations and administration. OMB guidance states that for discretionary programs, agencies may include an allowance for the full rate of anticipated inflation, less than the full rate, or no allowance for inflation. The guidance recognizes that agencies must make trade-offs between budget increases for inflation versus other increases for programmatic purposes. Given that it contains no cost information, the CSCP schedule is not meant to be a tool to forecast and convey to stakeholders the long-term effects of inflation on program capacity. Therefore, considering the 72 embassies yet to be replaced, past inflationary effects, and the CSCP’s pace thus far, it is unclear what pace OBO will be able to maintain without some level of inflation adjustment to its funding goal of $2.2 billion per year. Without information on the projected pace of construction and estimated effects of inflation, stakeholders’ may lack complete information to make fully-informed budget decisions. While cost growth occurred on a majority of completed embassy projects and durations averaged about 36 months, these were generally within budgeting and planning allowances. We could not assess cost and schedule performance of projects begun under the Excellence approach because none had been completed by 2017. OBO maintains that the greater upfront investment in more customized designs under this approach will yield long-term benefits in embassies’ functionality, quality, and operating costs, as well as in their appearance in representing the United States. While an assessment of those potential benefits cannot be made at this time, we did find examples of Excellence and Excellence-like projects illustrating how innovative designs can increase upfront project costs. While construction contract costs increased after award for most of the 22 completed projects we reviewed, the increases were generally less than contingency allowances, and most projects were completed within their contingency budgets. State reserves a contingency amount in its project budget—ranging from 5 to 10 percent of the contract value at award—to cover unforeseen project changes and cost increases. OBO’s overall project budgets also include funding for other nonconstruction costs and contracts, such as planning, design, and on-site project management and security. For the 22 completed embassy construction projects we reviewed, 16 (almost 75 percent) were finished within 10 percent or less of the original contract value at award, and 3 of these 16 projects finished under the original contract value at award. Six of the projects (over 25 percent) exceeded the original contract value at award by over 10 percent. For the 6 projects whose final costs were more than 10 percent over the original contract value at award, some of the cost increases were due to events unrelated to original design or construction issues. For example, in Khartoum, Sudan, OBO project documentation indicates that the contract increase was due, in part, to host government restrictions on the importation of needed construction materials and having to restart the project. In other instances, as discussed earlier, additional building requirements increased project costs. For example, OBO officials noted that a U.S. Agency for International Development office annex was added to the embassy project in Kyiv, Ukraine, and Marine security guard quarters were added to the projects in Monterrey, Mexico; Mbabane, Swaziland; and Vientiane, Laos. Table 1 shows the original construction contract value at award and the final or current contract value for the 22 completed projects as of the end of fiscal year 2017. Of these 22 projects, 16 were SEDs; four were “Excellence-like,” meaning they were transition projects awarded after OBO’s 2011 decision to institute Excellence but before OBO finished implementing Excellence in 2014; and 2 were not based on the SED template but predated the Excellence initiative. Contract value for some completed projects may change, in part due to outstanding requests for costs from the contractor or legal claims. Our cost assessment of the 22 completed projects included no Excellence projects, as none had been completed as of the end of fiscal year 2017. For the 21 ongoing construction projects that we reviewed, 14 (including 7 Excellence projects and 4 Excellence-like projects) had experienced some cost growth beyond the original contract value at award as of the end of fiscal year 2017. Because these were ongoing projects and 6 of the 21 had been awarded in fiscal year 2017 and therefore had not substantially progressed, we could not determine whether they would finish within their budget contingency, nor could we compare cost increases of Excellence projects—none of which had been completed— with cost increases of SED projects. See appendix II for the cost status of these ongoing projects as of the end of fiscal year 2017. OBO maintains that its greater upfront investment in unique designs under Excellence will yield long-term benefits in embassies’ functionality, quality, and operating costs, as well as their appearance in representing the United States. Critics of the Excellence program assert that aspects of unique designs, such as buildings’ shapes and layouts, construction materials, or the architectural products used, are often expensive to design, build, and maintain. For example, some Excellence or Excellence-like designs specify stylized, custom-built architectural facades that are to be installed on the buildings’ exteriors. These can include cantilevered roofs; customized windows; architectural screens; glass curtain-wall systems; or very specific stone, brick, or concrete work. Some critics have also raised concerns about some aspects of buildings’ interior architectural features. For example a project official reported to us that State could have saved nearly $950,000 had it utilized an aluminum handrail—rather than a bronze handrail—for one embassy’s main staircase. The bridging design called for all metal site furnishings and railings to be a bronze tone in color. The bridging designer specifically indicated the use of bronze color throughout the design was intended to relate to the local metal craft of the region. An OBO official we spoke with indicated that while he understood there might be some savings for changing the handrail to aluminum, he felt the designer’s intent in specifying the use of a bronze handrail was clear and was approved by OBO during the design review process, and thus he did not feel it would be appropriate to make a change. Figure 9 depicts the more custom and stylized Excellence exterior designs alongside more standardized SED projects. In reviewing our case study projects, we found instances of custom exteriors that had led to greater construction costs. For example, OBO project documentation shows the use of a customized glass exterior wall designed for the Jakarta, Indonesia, embassy significantly impacted cost and schedule after contract award, adding at least $18 million to the cost and 180 days to the schedule. According to project documentation as well as OBO and contractor officials, OBO’s decision to employ a unique glass curtain-wall system for that project and subsequent questions raised by Diplomatic Security about the design, led OBO to modify the contract to add (1) $2.2 million and 180 added days to explore alternative designs and conduct redesign work in order to obtain Diplomatic Security certification; (2) $13.3 million, which OBO told us was for a dedicated facility to be established in the United States to securely fabricate the glass curtain wall before secure shipment to the site; and (3) $3 million to have cleared American workers install portions of the wall. OBO had not previously employed such a system in a completed embassy project and could not provide us with documentation analyzing the risks of such a feature to cost and schedule—which might have included potential delays to get Diplomatic Security’s approval of the design—compared with conventional concrete construction. Figure 10 shows this glass curtain wall under construction. Additionally, on the Hyderabad, India, project, OBO project documentation shows the initial design of the unique exterior screen concerned OBO management, leading to more design development by the contract architect, further review by OBO’s design staff, and added cost. Senior management expressed concerns about the appearance of the screen, mainly that the screen was too traditional compared with the spirit of the design of the building and the rest of the campus and that the pattern of the screen needed more variation for daylight and views. To respond to this concern, OBO issued two contract modifications to OBO’s architect for additional design work for the exterior screen. OBO told us that subsequent design development for three alternatives for the screen contributed an additional design cost of about $750,000, raising the final bridging design cost to approximately $10.5 million. That figure excludes roughly $816,000 for support services during construction, of which OBO reports a minor portion was attributable to ensuring that the construction contractor achieved the design intent for the exterior screen. Figure 11 shows schematic design renderings of the approved screen design. In our 2016 survey of OBO staff, several staff indicated that unique Excellence project designs can impact costs. Table 2 provides examples of such comments. For the 22 completed embassies we reviewed, the average time to completion was just over 36 months, though with some distinctive outliers. To assess schedule, we compared embassy construction durations with a benchmark of 36 months. We used that planning allowance because, in the past, OBO has maintained that a SED would generally take no more than 36 months to construct and that construction durations would not be any different under Excellence. For the 22 completed construction projects, 14 (about 64 percent) were completed in 36 months or less, including one Excellence-like project. The remaining 8 projects (36 percent) were completed in over 36 months, including 4 SED projects and 3 Excellence-like projects. Construction durations can be affected by factors not controlled by the U.S. government, such as host government relations, adverse security conditions, or border/port closures. For example, one schedule outlier was due to a work stoppage and restart in Khartoum, Sudan, where the short schedule does not capture the construction activities performed under an earlier 2005 contract. Other events extending construction duration included, as referenced earlier, the addition of U.S. Marine security guard quarters to the projects in Monterrey, Mexico and Mbabane, Swaziland, as well as delays related to host government permitting issues in Bishkek, Kyrgyzstan, according to State project documentation. Figure 12 summarizes schedule performance on the basis of construction duration for these 22 completed embassy construction projects. Our schedule assessment of 22 completed projects included no Excellence projects, as none had been completed as of the end of fiscal year 2017. We did not assess the final schedule performance of the 21 construction projects ongoing at the end of fiscal year 2017 because there were at different stages of construction. As a result, it is too early to draw conclusions regarding schedule performance of individual Excellence projects compared with SED projects. See appendix II for the schedule status of these projects as of the end of fiscal year 2017. After shifting to the use of more customized designs under Excellence, it is unclear if OBO’s staffing levels, particularly in its Office of Design and Engineering (Design and Engineering), are sufficient to execute its full workload. Staffing workload challenges were cited by program stakeholders across the organization, but no strategic workforce analysis exists to fully assess OBO’s human capital capacity against the full range of its real property responsibilities, including the CSCP. With regard to project implementation, formal partnering between OBO and its construction contractors could help avoid adversarial relationships that inhibit swift resolution of issues. According to OBO officials, OBO’s workload and responsibilities exceed its available staff. In April 2018, OBO officials told us the bureau’s authorized federal staffing level—including both domestic and overseas positions—is 1,415 positions. However, according to OBO officials roughly 280 (about 20 percent) were vacant due to both attrition and State’s recent hiring freeze. OBO federal staff at that time consisted of approximately 1,135 people, including direct-hire civil service and Foreign Service staff, as well as personal services contractors (PSC) whom OBO defines as individuals who have direct employment contracts with State. In addition, OBO is supported by nearly 300 individuals who are employed by companies that provide those individuals to OBO as supplemental staff. Those 300 individuals are referred to by State as third-party contractors because their employment contracts are not with State but rather with their respective companies. Design and Engineering is one of the key offices supporting Excellence. According to OBO budget planning documents and the Managing Director of the directorate that includes Design and Engineering, this office has faced workload and staffing challenges for several years. Some OBO officials told us that the office’s need for more staff has been ongoing since 2014, which roughly corresponds with OBO’s full implementation of Excellence. In 2015, the staff within Design and Engineering conducted a workload and workforce review in preparation for the office’s annual, internal budget planning process. Based on that review, the Director of Design and Engineering briefed OBO’s Director and Deputy Director that some critical functions were not being performed or had been diminished, including quality design reviews (insufficient depth of review); advanced planning (master planning, feasibility studies); project analysis (scenario planning, life cycle analysis); and guidance to design firms (limited interactions). In the 2015 briefing, the Director of Design and Engineering proposed two courses of action to OBO’s Director and Deputy Director: (1) workload prioritization or (2) workforce increase. The first approach sought to identify critical workload responsibilities—such as new embassy construction—that the existing staff should prioritize over other responsibilities that may need to be addressed with additional staffing or outsourced to private industry. The second approach, increasing the workforce, proposed that OBO hire more Design and Engineering staff to support all the office’s responsibilities. According to a senior OBO official, OBO’s Deputy Director at the time determined the best course of action was to implement a workforce increase, and in 2016 he instructed Design and Engineering’s Director to plan to increase the office’s authorized staff from approximately 150 to 250 people over several years. However, OBO officials told us this decision was a goal at that time and did not reflect any formal staffing authorization by OBO or State; for that reason, it was not reflected in any OBO human capital staffing assessment or plan. In the interim, until Design and Engineering could get authority and funding for more federal direct-hire or PSC positions, OBO planned to make increased use of third-party contractors. Since 2015, direct-hire authorized staffing levels for this office generally have not increased. In April 2018, OBO officials indicated that Design and Engineering needed about 300 staff to meet the office’s workload responsibilities. Design and Engineering’s internal 2018 budget planning documents show that since fiscal year 2015, the office has had 154 authorized civil service and PSC positions. However, in April 2018 OBO reported to us that Design and Engineering had filled only 108 of the 154 authorized positions, amounting to a vacancy rate of roughly 30 percent. OBO also reported that Design and Engineering was using 31 temporary third-party contractors, for a total combined on-board federal and contractor staffing level of 139 positons. Design and Engineering’s internal fiscal year 2018 budget planning documents show that the office proposed to increase its authorized staff level from 154 positions to 304 positions by 2020, effectively increasing by 50 positions each fiscal year. According to senior OBO officials, requests for increased federal staffing for Design and Engineering and other OBO offices have generally not been approved since at least fiscal year 2015, in part, because of general budgeting and fiscal constraints. OBO officials indicated the denials of staffing requests were generally executive-level decisions made at different stages during the budget planning process within OBO, State, and OMB. In general, OBO officials characterized those decisions as common when agencies are under pressure to control program costs. Design and Engineering Announcements The following are examples of third-party contractor job announcements for positons intended to support the Office of Design and Engineering in the Bureau of Overseas Buildings Operations (OBO): Senior Architect – fills OBO “fluctuating skill needs and gaps” in architecture design, project planning, building code analysis, and construction design reviews; reviews plans, specification and technical reports; mentors more junior architects. As previously noted, Design and Engineering is utilizing private-sector companies to hire temporary third-party contractors in order to execute its workload and, in part, until OBO can receive authority to hire additional direct-hire staff. According to OBO officials, OBO in the past has primarily used third-party contractors to meet needs that were genuinely of a temporary nature, such as to conduct planning surveys and staff overseas projects during construction. More recently, however, OBO has begun to rely more on third-party contractors to provide key professional capabilities, as evidenced by some recent contractor hiring announcements for positons intended to support Design and Engineering (see sidebar). senior expert on interior design and space planning; reviews construction submittals; advises on contract bids, change orders, schedule extensions, cost increases; coordinates on planned embassy spaces with Diplomatic Security, the intelligence community, and OBO’s construction contractors. We previously reported that new embassies are state-of-art facilities that have unique security features and whose designs must be certified by State as meeting security standards prior to the start of construction. Design reviews to assess proposed project designs in accordance with State standards and building codes are a key responsibility of Design and Engineering. Such reviews are important to the success of a construction project because insufficient design reviews by agency staff can lead to design errors and omissions that can affect project cost and schedule. Federal Facilities Council Study on Design Oversight The Federal Facilities Council report indicated that to provide effective design oversight an agency’s interest is best served if the in-house staff can fulfill the functions of a “smart buyer,” whereby the agency retains in-house staff that understands the agency’s mission, its requirements, and customer needs. The council noted that if the agency does not have the staff capacity to operate as a smart buyer, an agency risks project schedule and cost overruns, as well as facilities that do not meet performance objectives. The Federal Facilities Council also reported that uncontrollable circumstances have resulted in nearly all agencies’ engineering functions being contracted to outside consultants at one time or another. As long as sufficient skills are retained in-house to meet the smart buyer approach, according to the council report, there does not appear to be any greater risk from contracting out a broader range of design review functions including construction document reviews and code compliance. However, complex projects that include unique and specialized features of high mission relevance, such as high- security facilities, were an exception cited by the council. When federal agencies are building such unique facilities, the council advised that they retain key expertise in- house as core competencies, with design review a primary in-house responsibility. quality, and performance. The council also concluded that effective design review processes result in more comprehensive and accurate design and construction documents that, in turn, lower project costs. (See sidebar for additional information on the council’s report.) Construction contractors we spoke with expressed concerns about the quality of OBO’s design reviews and capabilities to manage the amount of questions from construction contractors about OBO’s Excellence designs. Two contractors believe OBO is using more third-party contractors to perform design reviews than it did previously and that some may lack specialized knowledge of embassy standards and security measures. The two contractors said that this may lead to lack of design consistency and continuity across projects. One construction contractor also indicated OBO takes more time to resolve design issues because it typically will consult with OBO’s contracted Excellence design firm before answering a construction contractor’s design-related question or approving a design change that may arise during construction. In our 2016 survey, several OBO staff raised concerns regarding OBO’s capability to perform design oversight with existing staff. Table 3 lists some of those selected staff comments. OBO senior management stated that similar staffing challenges compared with workload also exist in OBO’s Construction, Facility, and Security Management directorate. According to OBO documentation the Office of Construction Management is authorized 111 direct hire Foreign Service Construction Engineers worldwide but as of March 2018, it had 86, amounting to about a 20 percent vacancy rate. Those direct-hire Foreign Service engineers typically serve overseas as Project Directors (PD) for an embassy construction project. Other Third-Party Contractor Job Announcements We found examples of third-party contractor job announcements intended to support the Bureau of Overseas Buildings Operations Office of Construction, Facility, and Security Management directorate: Construction Management Program Analyst – reports on projects’ problem areas for resolution; monitors projects’ financial progress; prepares change requests and contract modifications; documents scope, cost, or schedule changes; provides guidance and training to lower level analysts; ensures internal controls and data integrity. According to the Office of Construction Management’s 2018 internal budget planning documents, the office sought to covert 50 third-party contractors deployed overseas to direct-hire PSCs. Those positions— typically civil, electrical, or mechanical engineers—serve as on-site technical staff under the PD, to oversee construction activities and respond to construction contractors’ questions or proposed changes. Facility Manager – serves on an interim basis at posts lacking a facility manager; deals with unusual or emergency facility- related conditions that may impact embassy operations; oversees the day- to-day safe operation and maintenance of embassy facilities; manages post’s building maintenance staff; performs design reviews. Similarly, OBO’s Office of Facility Management reported to us that, for fiscal year 2018, it expected that it may be unable to fill 33 (about 15 percent) of its 224 authorized Foreign Service Facility Manager positions, at both newer and existing legacy embassies. Those positons serve as the single U.S. facilities officer overseeing primarily locally hired embassy staff that operate and maintain embassy building systems. As of March 2018, OBO reported it was trying to cover these positions through temporary staff assignments for 2 to 3 months. As with Design and Engineering, we found examples of positions within Construction, Facilities, and Security Management—including Facility Managers— where OBO was relying on third-party contractors to provide key professional capabilities (see sidebar). Physical Security Specialist – reviews design plans, especially for sensitive embassy spaces; oversees transit security plans for sensitive project materials; determines on-site construction security staffing needs; serves on interagency security committees; prepares responses to State’s Inspector General, GAO, and Congressional inquiries. Despite OBO-wide workload and staffing challenges, OBO cannot precisely quantify these challenges or their effects because it lacks a strategic workforce assessment of OBO-wide staffing levels and workload capacity needed to support the CSCP under Excellence. According to OBO, Excellence is a holistic effort to improve every aspect of OBO’s operations, including real estate acquisition, security methods and technologies, cost management, construction management, and facilities management. OBO’s “Guiding Principles for Excellence in Diplomatic Facilities” conveyed that delivering Excellence would be a comprehensive process that seeks to utilize the best methods, technologies, and staff abilities and that each ofﬁce, person, and action in OBO contributes to the realization of this goal. However, OBO’s 2011 decision memo approving the shift to Excellence did not identify possible effects to OBO-wide workload, staff levels, and personnel costs, including likely costs to hire either more federal staff or third-party contractors. In addition, the decision memo did not address whether the new design-centric program might affect the staffing needs to manage other OBO responsibilities, such as renovations and security upgrades to existing embassies. As we have previously reported, the use of bridging and design-bid-build under Excellence entails a time and cost investment in design on the project’s front-end. When two contracts are utilized by OBO—one for design and one for construction—additional administrative and programmatic effort is needed to develop, award, and manage multiple contracts. Diplomatic Security officials also reported to us that reviewing customized Excellence designs increased their workload. In 1999, OPM published a five-step model that suggests agencies should define their strategic direction, assess their current and future workforces, and develop and implement action plans for closing identified gaps in future workforce needs. Further, according to GAO human capital best practices, strategic workforce planning addresses two critical needs: (1) aligning an organization’s human capital program with its current and emerging mission and programmatic goals and (2) developing long-term strategies for acquiring, developing, and retaining staff to achieve programmatic goals. Without an OBO-wide analysis of workload capacity and existing staffing, State senior managers and key program stakeholders will lack essential information to make decisions about workload priorities, staffing resources, and budget needs pertaining to CSCP and OBO’s Excellence approach. Working collaboratively as a team to efficiently deliver new embassies has been a challenge for OBO and some of its construction contractors. OBO officials said some construction contractors selected to build new embassies have struggled to deliver projects, in part because they had less experience in terms of the number of embassies they had built, or were new to the embassy program. Construction contractors have to learn a great deal of information very quickly—to include State security standards, design specifications, and operating procedures—and many do not succeed, according to these OBO officials. Of the six contractors involved with our nine project case studies, four of the five that we spoke with relayed concerns about poor working relationships with some OBO on-site Project Directors (PD) and that OBO was a difficult business partner, similar to concerns raised about OBO that we have previously reported. Formal construction partnering (partnering) is a recognized construction industry best practice to foster improved collaboration and problem solving and continues to be utilized by major federal construction agencies. Contractor and OBO officials stressed the importance of the on-site relationship between the OBO PD and the contractor in successfully completing projects. According to State policy, OBO’s PDs are the Contracting Officer’s Representative at the site and have primary responsibility for overseeing the contractor. The PD serves as State’s principal technical contact for the construction contractor and reviews all change proposals. Per OBO guidance, the PD (under advisement with Design and Engineering) renders interpretations of the contract plans and specifications and acts as arbiter of any technical disputes with the contractor. In cases where the recommended proposal amount exceeds the PD’s dollar-value authority for changes, the PD makes a recommendation for action to State’s Contracting Officer in Washington, D.C. OBO and contractor officials indicated that OBO’s PDs are critical to the success of embassy projects and noted that while some PDs make an active effort to collaborate with contractors, other PDs do not. Our interviews with OBO and contractor officials reflected that PDs who do not collaborate well can have a challenging relationship with the contractor that makes it difficult to reach timely solutions to project and contract issues. In addition, contractor officials stated that strained relationships with some PDs may be further exacerbated because OBO headquarters often takes too long to make decisions—in support of their PDs in the field—on proposed changes and additional work that State is considering or that contractors propose as being needed. Three of the five contractors we spoke with cited such concerns about PDs and OBO headquarters as a long-standing or systemic issue. Officials from one contractor indicated that when PD-contractor disagreements arise and combine with delays by OBO headquarters, an issue that could be resolved at a lower cost or schedule impact can become a critical problem leading to greater cost and schedule impacts for the government, the contractor, or both. Senior OBO officials acknowledged differing styles and capabilities among OBO’s PDs, as well as the need to improve response times in OBO headquarters. With regard to PDs, senior OBO officials stated that some PDs’ working styles are more proactive in cooperatively seeking to resolve issues face-to-face and through meetings with the contractor’s on-site team; conversely, other PDs’ styles are more geared to corresponding with the contractor’s team through written communication and contractual correspondence. One of these officials stated that he did not believe the latter style was as effective, but that it is sometimes needed when contract issues cannot be solved by the two sides. Another OBO official stated that OBO needs to look beyond individuals’ technical engineering or architectural skills and experience and examine their “soft skills”—such as communication abilities, problem-solving skills, and how they work with others—to better assess who might excel when OBO assigns staff to projects. According to OBO officials, it can be very challenging to determine whether and to what degree a PD is reasonably enforcing the contract and doing their best to collaborate with the contractor to resolve project issues that arise. Regarding response times, senior OBO officials stated that OBO is working to improve turnaround on proposed changes during construction. However, they emphasized the necessity of PDs frequently having to go back to OBO headquarters to ensure an on-site change proposal is in accordance with OBO’s contracted designer’s intent as well as State’s design and security standards. In addition, they stated that lack of timely responses can sometimes be the fault of the contractor, particularly if the contractor is less experienced with embassy construction or new to the program and unfamiliar with OBO’s process requirements. OBO now allows for more time to resolve contractor requests for equitable adjustment that involve increases to contract cost or schedule than it had in the past. In 2008, OBO guidance called for State to acknowledge in writing contractors’ requests for equitable adjustments— due to cost or schedule changes—within 3 days and to seek to evaluate the merits of such requests and make final decisions within 55 days. In 2016, State changed its guidance to allow 15 days to acknowledge contractors’ requests for equitable adjustments and 90 days for State to make a final decision. OBO documentation indicates that the process can take even longer than 90 days if State determines that the contractor has not provided enough information for State to assess the merits of the request for additional time or cost. Two of the contractors we spoke with stated that excessive delays in responding to a request for an equitable adjustment can increase the likelihood of contractor-initiated litigation. With regard to changes initiated by State, contractors were also frustrated when OBO issues a request for proposal to a contractor—to provide a price and schedule for the prospective change—and then OBO does not make a timely decision as to whether it wants to implement the change. OBO officials said they are trying to shorten the time it takes them to make decisions concerning contractors’ requests for information, proposals for equitable adjustments to contract price or schedule, and OBO proposals to undertake additional work. In April 2018, OBO officials noted that they recently expanded the scope included in OBO’s generic statement of work for “construction phase services” that it requests from contracted design firms. The responsibilities added to the statement of work are an effort to utilize and leverage the design firms to provide more support to OBO’s PDs in the field, enabling the PDs to respond to OBO contractors more quickly. Three of our nine case-study projects (involving six contractors) had adversarial relationships between OBO and three of its contractors. In our discussions with both OBO and contractor officials, as well as a review of OBO and contractor documentation, we found that those relationships were characterized by poor on-site collaboration and claims of delays in acting on proposed changes that affected project efficiency. In all three cases, both parties took the position that it was the performance of the other party when dealing with challenges and changes that most impacted the project’s progress. The federal contractor performance evaluations for these projects also reflected the strained relationships between OBO and the contractors. Two of these situations involved contractors less experienced with the CSCP. In five of our nine case studies, OBO PDs and the contractor generally had cooperative relationships that responded effectively to project issues and resolved conflicts successfully. Four of these five projects involved the CSCP’s two long-standing contractors. The third contractor, who reported a positive contractual relationship with OBO on one of our project case studies, indicated it had very poor relationship with OBO on its only other CSCP project. Information on four of our case studies—two that had more adversarial relationships between State and the contractors and two that exhibited more cooperative relationships—is included in the text box, and appendix III contains more information on these projects and our other five construction case studies. Example Case-Study Relationships between Overseas Buildings Operations (OBO) and Its Contractors Bishkek, Kyrgyzstan: A poor working relationship between OBO and the contractor inhibited resolution of a variety of disagreements. These disagreements included responsibility for obtaining zoning approvals and building permits with the host government, and whether the contractor could remove a satellite dish in the construction zone. Issues regarding timeliness of decision-making by OBO headquarters and quality of contractor submissions were also raised on this project. Jeddah, Saudi Arabia: This project was challenged by errors and omissions in the design provided to the contractor, according to OBO and contractor officials. Both OBO and the contractor acknowledged that a difficult working relationship slowed efforts to deal with such challenges. Disagreement also arose regarding timely response to proposed changes; the contractor maintained that OBO headquarters was delaying work due to slow decision-making, while OBO maintained that the contractor failed to mitigate schedule delays for which the contractor was responsible. The Hague, Netherlands: Both OBO and the contractor said they had a good working relationship and indicated that OBO’s Project Director and his on-site project architect enabled OBO to more collaboratively and effectively react to technical inquiries from the contractor. Both OBO and the contractor noted that the two sides worked cooperatively to resolve environmental issues and permitting issues raised by the local government. Kyiv, Ukraine: Both OBO and the contractor observed that each side worked very cooperatively on-site and at the headquarters level to swiftly accommodate and mitigate the cost and schedule impact resulting from the addition of an office annex for the U.S. Agency for International Development. According to the Federal Facilities Council, facility acquisition traditionally has been an adversarial environment between facility owners and construction contractors. The council also indicated conflicting interests between the parties can result in poor communication, poor problem solving, and poor results. Further, the council has reported that when multiple organizations make a commitment to work cooperatively toward a common objective utilizing teambuilding techniques on building projects, the practice is called “partnering.” OBO does not utilize formal partnering, though State’s supplement to the Federal Acquisition Regulations System acknowledges that partnering may be used in the context of alternative dispute resolution. According to the State supplement, this partnering involves an agreement in principle to share the risks involved in completing a project, and to establish and promote a partnership environment. It notes that partnering itself is not a contractual agreement and it does not create any legally enforceable rights. Instead, partnering seeks to create a new cooperative attitude in completing government contracts. The three basic steps in partnering identified by State’s supplement are as follows: 1. Establish the new relationship through personal contact among the principals for the government and the contractor before the work begins. 2. Prepare a joint statement of goals establishing common objectives in specific detail for reaching the goals. 3. Identify specific dispute prevention processes designed to head off problems, evaluate performance, and promote cooperation. Both the General Services Administration (GSA) and the U.S. Army Corps of Engineers call for partnering as a preferred management process on all major projects as a cooperative approach with their contractors to resolve problems and reduce conflicts, litigation, and claims. For example, GSA recommends formal partnering for all construction projects developed by its Public Building Services in excess of $10 million in estimated construction costs. One GSA executive official we spoke with cited partnering as a best practice that can mitigate cost growth and schedule delays by providing a more collaborative process to reach fair and equitable decisions faster to the benefit of both the government and the contractors. The Corps of Engineers has recommended formal and professionally facilitated partnering as an integral element on designated “mega projects,” which generally are those costing in excess of $200 million, have schedules that exceed 2 years, or have national or international significance, among other considerations. The Corps of Engineers reports that partnering is an organized process that can remove organizational impediments to communication and is consistent with the government’s implicit duty to act in a fair and reasonable manner. As of the end of fiscal year 2017, there were five construction contractors building new embassies under the CSCP. For the 21 ongoing new embassy construction projects, 18 (approximately 85 percent) were under contract with 2 construction contractors who have historically received the majority (60 percent) of OBO construction contract awards since 1999. The 3 other projects were each being built by one of the contractors less experienced with embassy construction. Two of our case studies— Jeddah and Jakarta—included work begun by two earlier contractors that had been terminated by State, according to OBO officials. Further, the two long-standing OBO construction contractors were awarded 9 of the 10 new embassy construction projects in fiscal years 2016 and 2017. In our discussions with OBO officials, they recognized that they have had persistent challenges in bringing new contractors into the CSCP but retain an interest in expanding OBO’s contractor pool. Left unaddressed, some contractors’ frustrations with OBO projects may be a factor in shrinking State’s contractor pool. Three of the five contractors we spoke with (all less experienced with embassy construction) indicated they will not be pursuing future embassy projects because they believe State has not acted as a fair partner in overseeing its embassy construction projects. Examples of negative perceptions some of the contractors cited from their perspective included that State had not been fair in working with the contractors to resolve challenges such as design-related issues, security-related issues, government- directed changes, or unique issues posed by the countries in which the projects were located. Contractors said that such issues affected their and State’s costs and schedules. OBO officials acknowledged that OBO’s relationships with some contractors have posed challenges and saw both parties as bearing some responsibility. They also acknowledged that two long-standing OBO contractors continue to build most new embassies, and they expressed an interest in expanding OBO’s contractor pool. We reported similar collaboration concerns raised by OBO contractors in 2009 when we examined contractor participation in the embassy construction program and the decline in the number of contractors participating in the program. In 2009, 10 of 17 construction contractors rated State as a poor or fair business partner. Of the 17 construction contractors surveyed in 2009, 3 had received about 62 percent of OBO’s construction contract awards from 2001 through 2007. In general, many contractors at that time told us they were not making as much profit as anticipated and most contractors also expressed concerns about State’s management of the program and State’s on-site PDs. Executive officers from one of OBO’s two long-standing contractors stated that due to the firm’s experience with CSCP, it is able to carry out informal partnering with OBO to better address project challenges. This firm knows OBO’s requirements and processes, as well as who within OBO headquarters to call to discuss specific issues, if the firm believes that such issues are not being addressed in a timely manner by the PD or contracting officer. For example, this long-standing contractor said it was generally able to overcome a variety of project issues and disagreements in Pristina, Kosovo, through the firm’s knowledge of, and informal partnering relationship with, OBO headquarters. The OBO PD and contractor’s on-site project manager could not reach resolution on the cost or schedule impacts of a variety of issues including (1) the extent to which State’s approving the contractor’s local-hired construction workers was delayed, (2) the timing and responsibility for bringing permanent power to the site, and (3) the extent to which there were differing site conditions requiring the contractor to excavate unsuitable soils and existing foundations. In January 2018—after our September 2017 site visit to Pristina—this contractor’s headquarters office was able to resolve some issues with OBO and State’s Office of Acquisitions that otherwise had not been resolved by their on-site project manager and OBO’s PD. The firm’s executive officers stated that contractors with personnel less experienced with the CSCP—including with OBO and Diplomatic Security requirements and procedures—do not have this in-depth knowledge and may experience greater challenges on their first few CSCP projects as a result. They suggested that OBO should utilize more formal partnering to bring new contractors into the program. They also cited the need to have both formal and informal processes for elevating and resolving issues in order to provide accountability at all levels and ensure that issues are addressed in a timely manner. The contractor believes that formal partnering could lessen the learning curve for new firms, reduce the conflicts between OBO PDs and the contractors’ project managers on- site, and keep more firms in the program. Formal partnering, particularly with firms that have less experience with embassy construction, could help avoid adversarial working relationships between OBO and contractors that inhibit swift resolution of, or even exacerbate, challenges experienced on already-complex projects. Where more cooperative project relationships—informal partnering—occurred on our case-study projects, either on-site between OBO’s PD and the contractor or between OBO headquarters and the contractor, we found that this dynamic helped to more easily resolve challenges and facilitate project efficiency. In discussing the possible use of partnering on OBO projects, one senior OBO official reported that while OBO utilized formal partnering to a limited extent on some the CSCP’s early projects— Nairobi, Kenya; Tunis, Tunisia; and Conakry, Guinea—he commented that he did not think it was very valuable. In his view, it seemed like the contractors at that time were using the partnering agreement to claim that OBO was not partnering properly. However, other OBO officials stated that they understood the practice of partnering by some federal agencies has evolved since that time. OBO officials agreed that although OBO had not considered formal partnering recently, it could potentially be useful, particularly if tried on smaller projects with new contractors or those less experienced with embassy construction. They added that such piloting would have to be done judiciously to determine how it might best work. We note that two of those three early projects OBO identified as having used formal partnering included the current two long-standing contractors that have completed most of the CSCP embassy projects. In passing the Secure Embassy Construction and Counterterrorism Act of 1999, one of the congressional findings was that, unless embassy vulnerabilities are addressed in a sustained and financially realistic manner, the lives and safety of U.S. employees in diplomatic facilities will continue to be at risk from further terrorist attacks. State’s CSCP made steady progress through fiscal year 2017, completing 77 new embassies and starting construction on 21 more at a cost of just over $24 billion. However, State will not achieve its 2005 forecast for building 150 embassies by 2018 because progress has been hampered, in part, by unforeseen building requirements and inflation that were not originally factored into CSCP funding levels. These issues will affect State’s progress as it continues to replace embassies that do not meet security standards. Because State does not currently intend to seek annual inflationary adjustments for CSCP, although individual projects do address inflation to some extent, the CSCP’s pace of embassy production is likely to be reduced over time. As State continues to work with the Congress to chart the future course, priorities, and funding levels for the program, regular information on the effects of cost inflation would be helpful as stakeholders reassess the CSCP program’s funding level from year to year. Moreover, State plans to begin the construction of 25 new embassies within the next 5 years and has identified the need to replace nearly 50 additional embassies in later years. While the CSCP schedule identifies future embassy replacements, it does not address the projected cost and time needed to achieve the CSCP’s ultimate critical goal of replacing embassies that do not meet State’s security standards. Recognizing that precise estimates cannot be easily made for later years, even a notional long-term estimate of the CSCP’s overall capital funding investment and time frames, along with an assessment of risk factors such as inflation, would strengthen State’s ability to support and sustain its funding needs, encourage dialogue with congressional committees, and promote consensus by decision makers in the executive and legislative branches on funding levels and expectations for program progress. Additionally, State’s shift to the Excellence approach was predicated on the idea that customized designs would produce embassy compounds that are more innovative, functional, and sustainable than those built using the SED approach, and would also be at least as secure and more cost efficient to operate. It is too early to tell whether this greater upfront investment in design will yield cost and schedule benefits during construction of Excellence embassies or over their life cycle. While past embassies have generally been completed within expected cost and schedule allowances, given the number of embassies yet to be built to meet urgent security needs amid a constrained resource environment, it remains incumbent upon State to realistically assess its ability under Excellence to deliver embassies as efficiently as possible. By comprehensively evaluating its human capital needs against CSCP priorities and other workload demands, OBO can provide program stakeholders—including State, OMB, and Congress—the ability to make fully informed choices as to the capacity of OBO’s design and construction organization to support embassy production of these embassies in the near and longer term. Furthermore, formal partnering could provide OBO with a tool to enhance collaboration both on-site and between contractors and OBO headquarters. This could mitigate the unforeseen issues that arise on all of these challenging overseas projects, but which may be more complicated to resolve for Excellence projects because each one is unique. Piloting a partnering program, particularly with newer or less experienced construction firms could also provide one option to facilitate State’s long-standing goal of expanding its contractor base. We are making the following four recommendations to State: The Secretary of State should determine the estimated effects of cost inflation on planned CSCP embassy construction capacity and time frames and update this information for stakeholders on a regular basis, such as through the annual budgeting process. (Recommendation 1) The Secretary of State should provide an analysis for stakeholders identifying those embassies that still need to be replaced to meet State’s security standards and estimating total CSCP costs and projected time frames needed to complete those projects. (Recommendation 2) The Secretary of State should ensure that the Director of OBO conducts an OBO-wide workforce analysis to assess staffing levels and workload capacity needed to carry out the full range of OBO’s mission goals, to include the CSCP. Such an assessment could provide a basis for broader stakeholder discussion of OBO’s human capital needs and potential prioritization of activities. (Recommendation 3) The Secretary of State should ensure that the Director of OBO pilots formal construction partnering for the CSCP, particularly with construction firms that are new or less experienced with the program. (Recommendation 4) We provided a draft of this report to State for comment. State provided written comments that are reprinted in appendix IV. In its letter, State concurred with our four recommendations and described actions planned to address each of them. In addition, State made several observations, including that it has moved beyond Excellence to pursue several new initiatives that aim to lower project and long-term operations and maintenance costs. We acknowledge the continued evolution of State’s CSCP. However, our recommendations transcend the pros and cons of any particular delivery method and will be helpful to State, and stakeholders, as it works to improve the design and construction of new embassies. State also provided technical comments on the draft, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of State. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact either Brian M. Mazanec at (202) 512-5130 or at mazanecb@gao.gov or Lori Rectanus at (202) 512-2834 or at rectanusl@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report examines (1) the pace of the Department of State’s (State) Capital Security Construction Program (CSCP) in constructing new embassies, (2) the cost and schedule performance of State’s recent embassy construction projects, and (3) factors that have affected State’s ability to deliver construction projects efficiently. To conduct this review, we obtained information from agency planning, funding, and reporting documents and interviewed State officials within the Bureau of Overseas Buildings Operations (OBO); the Bureau of Diplomatic Security (Diplomatic Security); and the Office of Acquisitions Management. Within OBO, we spoke with officials from offices responsible for site acquisition, planning, project development, design and engineering, cost management, construction management, facility management, policy and program analysis, and financial management. We also interviewed officials from construction contractors that have constructed embassies for State. To examine the pace of the CSCP, we reviewed OBO project completion data for projects awarded from fiscal year 1999 (after the two embassy bombings in Africa) through the end of fiscal year 2017. We then compared these data against the goals of the program as reported in State documentation, such as past budget justifications and long-term planning reports. We also compared completion data against CSCP funding levels since fiscal year 1999, and further compared those funding levels with recommendations in the Accountability Review Board reports from 1999 and 2012 (following terrorist attacks against U.S. facilities). We also examined OBO’s CSCP schedule outlining embassies planned to begin construction through fiscal year 2022 and other embassies identified beyond that time frame. We further consulted GAO’s guide to leading practices in capital decision-making as well as budget guidance from the Office of Management and Budget (OMB). We also attempted to assess CSCP performance in moving U.S. government staff into secure facilities but found State’s data unreliable for this purpose. To examine the cost and schedule performance of State’s recent embassy construction projects, we selected projects awarded from fiscal year 2008 through 2017. We chose fiscal year 2008 because that year OBO modified its Standard Embassy Design (SED) delivery program to allow for more bridging design to better tailor the SEDs to specific sites. This time frame would also capture Excellence-like projects awarded between the introduction of Excellence in 2011 and the full implementation of Excellence in 2014, as well as pure Excellence projects awarded in 2014 and later. Of the embassy construction projects awarded since fiscal year 2008, we identified 22 completed projects and another 21 underway. To assess the cost performance of these projects, we used cost data drawn from the Federal Procurement Data System and back-checked against OBO-provided contract data, which we found to be sufficiently reliable for our purposes. We then compared any increases in cost from the contract value at award to OBO’s general cost contingency for unforeseen changes on embassy construction projects, which ranges from 5 to 10 percent. To assess schedule performance, we compared construction durations from contract documentation with a benchmark of 36 months. We used that benchmark because, in the past, OBO has maintained that a SED would generally take no more than 36 months to construct and that construction durations would not be any different under Excellence. This benchmark was further informed by past GAO reporting. We did not assess the cost or schedule performance of the 21 projects still ongoing at the end of fiscal year 2017. Because these were ongoing projects at different stages of construction, we could not determine whether they would finish within their budget contingency, nor could we assess their final schedule performance. Furthermore, because no pure Excellence projects had been completed by the end of fiscal year 2017, we could not compare cost increases or schedule performance of Excellence projects with SED projects. To examine factors that have affected State’s ability to deliver construction projects efficiently, we selected nine construction case studies out of our universe of projects awarded in fiscal year 2008 through fiscal year 2015, and funded through CSCP. Criteria for selection included projects with construction contract cost increases, actual or estimated, of more than 5 percent over the life of the contract projects, as well as projects whose construction duration exceeded, or was estimated to exceed, 36 months. We also sought to include as many different contractors, delivery types (e.g., design-bid-build), and construction approaches (e.g., Excellence) as possible. Our final nine construction case studies included projects in Kyiv, Ukraine; Monterrey, Mexico; Santo Domingo, Dominican Republic; Bishkek, Kyrgyzstan; Jakarta, Indonesia; Jeddah, Saudi Arabia; The Hague, Netherlands; Pristina, Kosovo; and Port Moresby, Papua New Guinea. Because many of OBO’s pure Excellence projects were more recently awarded, we also reviewed the design contracts for Hyderabad, India, and Beirut, Lebanon. For each case study, we examined Federal Procurement Data System data, OBO project data and documentation, as well as official contract documentation—including modifications that involved changes in cost or schedule. Additionally, for each of our case studies, OBO compiled information from its Office of Project Development and Coordination, Office of Construction Management, Office Cost Management, and Office of Financial Management into project narratives. Each narrative was then cleared by project managers, project directors, office directors, and managing directors of the affected directorates. In general, we attribute information from these narratives to OBO. We also interviewed relevant OBO and contractor officials involved with the projects, including on-site personnel from both completed and ongoing projects. In September 2017, we conducted fieldwork in Jeddah, Jakarta, The Hague, and Pristina to observe and discuss construction progress with on-site U.S. embassy and contractor officials. U.S. embassy officials we spoke with included those responsible for construction, facilities maintenance, post management, and security. To further explore issues arising from our case studies we obtained information from OBO planning, funding, and staffing documents and also interviewed State and contractor officials in Washington. We also reviewed the results of our 2016 survey of OBO staff. Specifically, we have included narrative responses from that survey commenting on issues we encountered during our audit work for this report. In some cases we edited responses for clarity or grammar. Views expressed in the survey may not be representative of all OBO staff views on given topics. We conducted this performance audit from April 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix contains contract values and schedule information for 21 embassy construction projects that were ongoing as of the end of fiscal year 2017. Table 4 shows contract values for these projects, while figure 13 illustrates schedule information. This appendix contains information on selected U.S. Department of State (State) Bureau of Overseas Buildings Operations (OBO) case-study projects included in our review. Nine studies focus on the construction phase of the projects, and two are design case studies. For each case study, we examined Federal Procurement Data System data, OBO project data and documentation, as well as official contract documentation—including modifications that involved changes in cost or schedule. We also interviewed relevant OBO and contractor officials involved with the projects, including on-site personnel from both completed and ongoing projects. For details on our selection of the projects and our case-study methodology, see appendix I. For the nine construction case studies, we include timelines showing dates for notices to proceed, the original estimated completion dates, and either (a) the actual substantial completion dates (for projects completed as of end of September 2017) or (b) the scheduled completion date (for ongoing projects as of the end of September 2017). The start and end points by which State measures the schedule performance of a project are, respectively, the date when State issues a notice to proceed and the date when it issues a notice of substantial completion. During the course of a project, State may grant schedule extensions for reasons such as (1) changes (i.e., change orders); (2) government-caused delays (e.g., delays in issuing a notice to proceed to the contractor); (3) differing site conditions than represented in the contract; or (4) excusable delays (e.g., for circumstances that could not reasonably be foreseen or avoided). Similarly, while the value of construction contracts increased for all of the construction case-study projects we reviewed, State typically reserves a contingency amount in its project budgets—ranging from 5 to 10 percent of the contract value at award—to cover unforeseen project changes and cost increases. OBO’s overall project budgets also include funding for other nonconstruction costs and contracts, such as planning, design, and on-site project management and security. We are not reporting overall project budgets. As of August 2018, the only ongoing case studies that State reported to us for which they notified Congress of the need to reprogram funding to cover additional costs were Jakarta and Jeddah. For each of the following case studies, OBO compiled information from its Office of Project Development and Coordination, Office of Construction Management, Office of Cost Management, and Office of Financial Management into project narratives. Each narrative was then cleared by project managers, project directors, office directors, and managing directors of the affected directorates. In our case studies, we generally attribute information from these narratives to OBO. For contract value at award and contract value as of the end of fiscal year 2017 we relied upon data from the Federal Procurement Data System. We used OBO narratives and project data and documentation as the basis for our description of the contract delivery type, the date of award, dates of issuance for notice to proceed and substantial completion, and original estimated completion date. The discussion in the following case studies of notable contract actions, such as modifications, requests for equitable adjustment, and terminations is based upon OBO project narratives and contract documentation, as well as statements by government and contractor officials. In some but not all cases, we had relevant contract documentation available to compare against OBO project data and documentation or what OBO officials told us. Table 5 lists the case-study projects described in this appendix, ordered by the fiscal years in which the construction or design contracts were awarded. State established the U.S. Embassy in Kyiv in 1991 upon the dissolution of the Soviet Union. According to OBO, State originally redeveloped and rehabilitated an existing leased facility, built in 1950, to serve as the chancery office building, while post consular services, public diplomacy and the Marine security guard quarters were in leased facilities off-site. OBO reported that while security improvements were made at these locations over the years, none of these buildings fully satisfied the Secure Embassy Construction and Counterterrorism Act of 1999 security standards, such as the 100-foot setback from the street. In September 2008, State purchased a 10-acre site to build a new embassy compound. A $209.9 million design-build contract for the new embassy was awarded in September 2008. The project was based on the Standard Embassy Design (SED). As of September 2017, the contract value was $238.6 million, an increase of $28.7 million or 13.7 percent. According to OBO, State issued a notice to proceed in March 2009, and the original estimated completion date was November 2011. Substantial completion was in September 2011, 2 months early. Figure 14 shows two views of the new embassy and the timeline for the original schedule compared with the final schedule. According to OBO, the most significant change to the contract was the addition of an annex for the U.S. Agency for International Development (USAID), at a cost of $28 million. OBO reports that State granted the contractor a 12-month extension for adding the annex; however, the project was completed 2 months ahead of the original estimated contract completion date. Both State and contractor officials observed that each side worked very cooperatively to mitigate cost and schedule effects of adding the USAID office annex. The other major cost driver was a $4.6 million contract modification to address utility issues. One State official reported that site utility and below grade infrastructure requirements were challenging given the cold climate. According to OBO, State had occupied the former U.S. consulate in Monterrey since 1969, and further, the facility did not meet security standards set by the Secure Embassy Construction and Counterterrorism Act of 1999. State documented shortcomings with the building’s air conditioning and electrical systems. OBO documentation indicated the former site also lacked the space to accommodate staff growth in U.S. agencies’ offices and the consulate’s functions. OBO reported that consular demand for services had increased significantly—from 12 to 65 consular windows—and the consulate overall had added desks for 60 U.S. staff and 132 locally engaged staff. In September 2009, State awarded a $101.9 million design-build contract for the new consulate based on a bridging design. The bridging design was based on the standard embassy design. As of September 2017, the contract value was about $125 million, an increase of $23.1 million or about 23 percent. According to OBO, State issued the notice to proceed for the project in April 2010 and the original estimated completion date was January 2013. Substantial completion occurred in May 2014, 16 months after the original estimated completion date. Figure 15 shows two views of the new consulate and the timeline for the original schedule compared with the final schedule. According to State, the scope of work in the original contract for the compound included a consulate office building, vehicle maintenance building, access control facilities, recreational facility, parking structure, mail screening facility, site perimeter barrier, and associated security features as well as off-site roadway construction and improvements. OBO documentation shows the primary cost and schedule increase on the project was due to the addition of Marine security guard quarters; that contract modification increased the value of the contract by $16.3 million and also extended the length of the contract by 337 days. OBO reported that another contract modification—adding a photovoltaic power system to the project—increased the contract value by $2.3 million. According to State, it built the former U.S. embassy in 1950 to accommodate 75 staff. Prior to the construction of the new embassy, the U.S. mission comprised 17 U.S. government agencies employing hundreds of people working in eight office buildings throughout the city. OBO reported that most of those buildings did not meet security setback standards that Congress established in 1999 or fire and life safety codes. According to OBO, in September 2010, State awarded a $148.8 million design-build contract for the new embassy based on a bridging design. The project was based on the SED. As of September 2017, the contract value was about $150.4 million, an increase of about 1 percent. According to OBO, State issued the notice to proceed for the project in January 2011 and the original estimated completion date was October 2013. Substantial completion occurred in May 2014, 7 months after the original estimated completion date. Figure 16 shows an architectural rendering and photograph of the new embassy office building, along with the timeline for the original schedule compared with the final schedule. Five contract modifications totaling about $1.6 million accounted for most of the cost increase. The largest modification totaled over $600,000, which OBO told us resulted from a need to increase switchgear capacity. According to OBO, in the several years since substantial completion, the contract has not been closed, and unexpended funds remain. As a result, the final contract value may change. OBO reported that the contractor had submitted one outstanding request for equitable adjustment for about $450,000. Further, on its side, the U.S. government is withholding around $7 million for liquidated damages, punch list deficiencies, and warranty items. According to OBO, State established the U.S. embassy in Bishkek in 1991 after the dissolution of the Soviet Union. Specifically, a pre- engineered factory-manufactured building was shipped to Bishkek and assembled on an 11-acre, U.S. government-owned site in 1996. OBO reported that by 2008, the U.S. diplomatic mission had outgrown the 1996 facility, and in 2009 it became clear that, in addition to new facilities, significant security upgrades were needed to meet current security standards. The new embassy project was to include a chancery (office annex), utility building, Marine security guard quarters, compound access control facilities, support buildings (warehouse and shops), and surface parking. A $116.8 million design-build with bridging contract for the new embassy was awarded in April 2011. The project was based on the SED. As of September 2017, the contract value was about $123.3 million, an increase of $6.5 million, or about 5.6 percent. According to OBO, State issued the notice to proceed for the project in July 2012, and the original estimated completion date was December 2014. Substantial completion occurred in March 2017, 27 months after the original estimated completion date. Figure 17 shows the 1996 chancery office building, the new chancery office building, and the timeline for the original schedule compared with the final schedule. A number of factors contributed to increases in contract cost and schedule for this project. For example, according to OBO, off-site electrical power upgrades required a $2 million contract modification for switchgear installation and building a redundant power line to a substation 3 kilometers away from the new embassy compound. OBO also reported that one contract modification extended the schedule by 37 days and added $3.4 million to the contract because State temporarily halted the contractor’s work in some areas of the building due to Bureau of Diplomatic Security (Diplomatic Security) requirements. According to State and contractor officials, challenges to the project included (1) a six- phase construction plan to accommodate building on an operational compound; (2) frequent staff changes (including four on-site OBO project directors, two OBO construction executives at headquarters, and many contractor staff changes) and poor relations between OBO and the contractor; and (3) disagreement regarding OBO and contractor roles and responsibilities (including, for example, responsibility for obtaining zoning permits). According to OBO, the U.S. government-owned chancery in the Indonesian government center in Jakarta was built in the 1950s, and its mechanical, electrical, and plumbing systems are outdated, inefficient, and expensive to operate. State decided to build a new, secure embassy on the current embassy site. When completed, the embassy compound will include a chancery, Marine security guard quarters, support facilities, preserved historic structures, community facilities, and parking. A $302 million design-build with bridging contract for the new embassy was awarded in September 2012. The project was guided by State’s Excellence in Diplomatic Facilities principles but was awarded before OBO fully implemented Excellence in 2014. As of September 2017, the contract value was $339 million, an increase of $37 million, or 12 percent. According to OBO, State issued a notice to proceed for the project in December 2012, and the original estimated completion date was December 2017. OBO reported to us that by September 2017 the scheduled completion date had been extended to February 2019, 14 months after the original estimated completion date. Figure 18 shows a model of the embassy compound, the new chancery office building under construction and the timeline for the original schedule compared with the schedule as of the end of September 2017. Before the current construction contract for the new embassy on the existing embassy compound, State separately contracted for the construction of temporary office buildings to relocate staff during construction. According to OBO, the work on the temporary office buildings fell behind the contracted schedule and would not be completed before the new embassy contractor’s arrival on-site. Consequently, State terminated the first contract for temporary buildings and awarded the remaining work to the current contractor. OBO encountered significant challenges due to its decision to employ a glass curtain-wall system for the new embassy’s chancery office building. OBO project documentation shows the use of the customized glass exterior wall designed for the embassy significantly impacted cost and schedule after contract award, adding at least $18 million to the cost and 180 days to the schedule. OBO’s decision to employ a unique glass curtain-wall system for this project and subsequent questions raised by Diplomatic Security about the design led OBO to modify the contract to add (1) $2.2 million and 180 days to explore alternative designs and conduct redesign work in order to obtain Diplomatic Security approval, (2) $13.3 million so that a dedicated facility could be established in the United States to securely fabricate the glass curtain wall before secure shipment to the site, and (3) $3 million to have cleared American workers install portions of the glass curtain wall. OBO had not previously employed such a system in a completed embassy project and could not provide us with documentation analyzing the risks of such a feature to cost and schedule—which might have included potential delays to get Diplomatic Security’s approval of the design—compared with conventional concrete construction. As of the end of September 2017, OBO reported that State and the contractor had agreed to extend substantial completion to February 2019 after settling the contractor’s request for equitable adjustment, which had claimed that five events delayed construction: (1) the late turnover of unimpeded access to the early site work; (2) the redesign of compound access facilities; (3) the redesign of portions of controlled areas of the building; (4) additional time for the certification of security requirements, specifically related to the curtain-wall system; and (5) design changes to the curtain-wall system itself. Post officials also expressed concerns that this new embassy compound was originally planned to accommodate only the U.S. embassy to Indonesia. Subsequently, State opened a permanent mission to the Association of Southeast Asian Nations in Jakarta to be collocated within the new embassy. Because of this and other staff growth, U.S. embassy officials told us that the new embassy will have little to no room for future growth. According to OBO, the current consulate built in 1952 served as the chancery before the U.S. embassy moved to Riyadh in 1984. In 2004 an attack on the consulate resulted in the deaths of five employees and wounded many more. The new Jeddah compound will include a consulate office building, staff housing, ambassador’s residence, consul general’s residence, Marine security guard quarters, and various supporting facilities. OBO reported that construction of the new consulate started under a design-build contract awarded in 2007, but the construction contractor was terminated-for-default in 2012, leaving State with a partially built project. In September 2012 State awarded a $100.5 million construction contract for the new compound to a second contractor. The project was based on the SED. As of September 2017, that second contract value was $131.3 million, an increase of $30.8 million, or 30.6 percent. According to OBO, State provided notice to proceed in October 2013 and the estimated completion date was October 2015. According to State documentation, this completion date was subsequently extended to February 2017. State and contractor officials told us that, at the end of September 2017, a modification was pending that would further extend the schedule to January 2018, 27 months after the original estimated completion date. Figure 19 shows the existing consulate, the new consulate office building under construction, and the timeline for the original schedule compared with the schedule as of the end of September 2017. According to OBO, State hired a design firm—previously a subcontractor of the first construction contractor—to finish the design so that contract bids could be solicited from new contractors to complete the project. In doing so, State effectively changed the project delivery method from design-build to design-bid-build, whereby it directly contracted the design firm to finish the construction documents and then contracted a construction firm to build the project. Both State and contractor officials reported to us that this project was consistently challenged by design errors and omissions. According to OBO, approximately $14 million of the nearly $31 million cost increase— and 131 calendar days—were due to issues with this project’s design. According to State and contractor officials, the project was generally completed in March of 2017, which both sides termed “virtually substantially complete.” However, they stated that significant issues with the consulate building’s cooling and fire suppression systems effectively prevented OBO from contractually accepting the project as complete and allowing consulate staff to move in. As of September 2017, State and the contractor could not provide a firm date for when they expected consulate staff to be able to occupy the new compound. Both OBO and contractor officials acknowledged that a difficult working relationship slowed efforts to deal with project challenges. For example, they stated the project had at least four different OBO project directors. One OBO official characterized the collaboration on the project by State, the contractor, and State’s designer as “having a lot of conflicts” and said that as problems with the project arose during construction, all parties “dug their heels in.” In September 2017, one official indicated the then temporary Project Director had improved the working relationship with post and the contractor and was doing his best to work through the current issues and delay. Disagreement also arose regarding timely response to proposed changes; the contractor maintained that OBO headquarters was delaying work due to slow decision-making, while OBO maintained that the contractor’s proposals did not meet requirements. The functionality of the completed compound may also be affected by several issues. According to post officials, after the February 2015 closure of the U.S. Embassy in Yemen, State relocated some of those staff to Jeddah, requiring the conversion of five newly built apartments into office space. Post officials also reported that the original plan for the staff apartments was predicated on the post remaining an unaccompanied duty assignment whereby U.S. staff may not bring family members. Those officials expressed concern that space would become limited because family members are now allowed to accompany Foreign Service Officers to Jeddah. An additional concern was that the consulate was originally intended to provide consular services only for U.S. citizens but was now authorized to issue nonimmigrant visas for Saudis seeking to travel to the United States, which post officials predicted would increase consular traffic flow beyond the new building’s intended volume. According to OBO, the previous U.S. embassy in The Hague was located on a downtown square opposite the Netherlands Parliament. Completed in 1959, the chancery sat directly adjacent to a major road and sidewalks and did not meet State security standards set by the Secure Embassy Construction and Counterterrorism Act of 1999. The new embassy compound is located within the municipality of Wassenaar, adjacent to The Hague. The compound includes a chancery office building, Marine security guard quarters, support buildings, and parking. According to OBO, the design phase included a lengthy site planning, landscape design, and architectural design period due to local ordinances and stringent permitting requirements. OBO reported that this design contract was awarded in November 2012, and the design was completed in July 2013. The project delivery method was design-bid- build. A $125 million construction contract for the new embassy was awarded in September 2013. As of September 2017, that contract value was $131.7 million, an increase of about $6.7 million, or approximately 5 percent. According to OBO, State issued a notice to proceed for the project in June 2014, and the estimated completion date was June 2017. In September 2017, OBO reported that it and the contractor had extended the contract completion date to July 2017. In addition, as of September 2017, OBO and the contractor were negotiating over further cost and schedule changes. Figure 20 shows a historical photo of the 1959 embassy, the new embassy under construction, and a timeline showing the original schedule compared with the schedule as of the end of September 2017. According to OBO, the official permit for construction was received in August 2013, with an effective date of September 2013. However, the permit was issued with a number of conditions that OBO reported took approximately 9 months for State to resolve and resulted in a delay of full notice to proceed until June 2014. Both OBO and the contractor said that the two sides worked cooperatively to resolve permitting issues raised by the local government. Based on OBO reporting, these issues contributed, in part, to over $1 million in cost modifications on the contract. Further, technical omissions that were not discovered during design review resulted in changes to sprinklers, fire alarms, security window treatments, and classified data interconnections. According to OBO, these late changes resulted in further requests for time extensions from the contractor. In addition, according to OBO, State did not plan for the colocation of one tenant agency onto the compound (8 people) and a second tenant agency increased its staffing by approximately 40 percent (19 people). Because of those staffing changes, post officials reported that there is no additional space for future growth in the new compound. According to OBO, State established this post in 1999 as a U.S. liaison office during the military intervention in Kosovo by North Atlantic Treaty Organization forces. When the U.S. government opened the post, OBO reported that it assembled a number of contiguous residential properties under short-term leases and closed the adjacent streets. State designated the post as an embassy in 2008. Figure 21 shows some of the existing houses that State converted for use as the embassy. In September 2014, State awarded a $158.4 million design-build contract for the new embassy under a bridging design. The new embassy is one of the first projects fully designed and constructed under the Excellence approach. As of September 2017, that contract value was $159.6 million, an increase of less than 1 percent. According to OBO, State issued a notice to proceed for the project in December 2014, and the original estimated completion date was October 2017. As of September 2017, completion was scheduled for January 2018, 3 months after the original estimated completion date). Figure 22 shows an architectural rendering of the new embassy, a photo of it under construction, and a timeline for the original schedule compared with the schedule as of the end of September 2017. According to OBO, the largest change in cost resulted from State adding additional security cameras to improve monitoring of the compound and its facilities. In a separate change, OBO also granted the contractor a schedule extension of 98 days to account for changes in security requirements at project startup and funds to include adjustments made by State to the locations of the recreation facility, pool, and other items relative to the perimeter security wall. As of September 2017 in our interviews with them, the OBO Project Director and contractor’s on-site Project Manager could not reach resolution on the cost or schedule impacts of a variety of issues. These included (1) the delay in State’s approving the contractor’s locally hired construction workers, (2) the timing of and responsibility for bringing permanent power to the site, and (3) site condition issues related to unsuitable soils and existing foundations. According to OBO, the current U.S. embassy is housed in a building constructed in 1970 in Port Moresby’s business district. The lease will expire in September 2020. Furthermore, the facility is overcrowded, functionally deficient, and does not meet the latest security standards. Also according to OBO, in 2009 the U.S. government acquired a 7.26- acre site for a new embassy compound through a long-term lease from the government of Papua New Guinea. State planned for the new embassy to be a standard secure mini-compound and awarded a construction contract in late 2011 with an estimated completion date in mid-2014. However, according to a State official, because the embassy requirements changed, State decided to terminate the contract for the convenience of the government. The project delivery method is design-bid-build. A $95 million construction contract for the new embassy was awarded in September 2015. As of September 2017, that contract value was $102.5 million, an increase of $7.5 million, or about 8 percent. According to OBO, State issued the notice to proceed for the project in March 2017, after a delay of about a year due to another prospective contractor disputing the contract award. As of September 2017, the estimated completion date remained unchanged at September 2019. Figure 23 shows an architectural rendering of the new embassy, an aerial view of the embassy under construction, and the timeline for the schedule as of the end of September 2017. According to OBO, in 2013, after the initial contractor had completed approximately 40 percent of the project, State changed the project scope: (1) Staffing was increased from 47 desks to 77 desks, which could not be accommodated in the standard secure mini-compound; (2) classified information processing was added as a new requirement; and (3) a Marine security guard detachment was assigned to post, requiring the addition of a residence for them. Due to these new requirements, according to a State official, State decided to terminate the contract for the convenience of the government. According to OBO, the embassy compound was redesigned under a design contract to accommodate the new project scope. The redesign contract lasted 14 months, from April 2014 to June 2015. OBO reported that when the first contractor stopped work on the standard secure mini- compound, the concrete structures for all buildings on the compound had been completed. The new design, finished in June 2015, added a four- story office tower next to the existing chancery structure, with additional general work areas, and new controlled access areas. The redesigned site also added a nine-bed Marine security guard quarters, enlarged the building for the warehouse and shops, and added upgraded community facilities. According to OBO, further cost increases could accrue because of damage to government-provided equipment left by the first contractor, which may need to be re-purchased. According to OBO, the embassy currently operates out of a nearly 18- acre compound in East Beirut consisting of a mixture of office and residential facilities that are both government-owned and leased. According to State, this site is severely cramped and does not meet current security standards. The new embassy site consists of just over 44 acres situated on a steep hilltop area near the existing U.S. embassy. State typically seeks to build new embassy compounds on 10 acres of land. OBO noted to us the new compound will include a chancery office building, staff residences, support buildings such as a warehouse and recreation facility, and Marine security guard quarters. Figure 24 shows architectural renderings of the new embassy. The design contract for this design-bid-build project was awarded in September 2014 for $39.6 million. Project documentation indicates the design process included the development of three initial concepts, which were reviewed by OBO’s Industry Advisory Group and OBO senior management. OBO reported a single design concept was selected in January 2015 for further development. The design firm then developed a schematic design (less than 35 percent design) that OBO indicated was approved by the OBO Director in March 2015. The design proceeded through design development (35 percent) and construction document development (60 percent and 90 percent); OBO reported to us the final construction documents were completed in April 2016. Following completion of the 100 percent design and subsequent contract solicitation activities, in December 2016 State awarded a $613.3 million construction contract to build the new embassy. As of September 2017, a notice to proceed for construction had just been issued. OBO reported that the 100 percent design was completed in April 2016 (19 months after contract award). OBO reports that final design cost by itself was $45.3 million, amounting to a $5.7 million, or about 14.5 percent, increase over the original design contract value. OBO documentation shows the increase in the cost for the project’s design was, in part, attributed to added design for temporary construction support facilities—to include both temporary office space and 40 secure housing units—that would be needed on-site by State’s project management team during the construction. However, the total contract cost as of the end of fiscal year 2017 was $58 million, about 46.5 percent more than the original contract value. This larger value includes approximately $13 million primarily for “Title II, construction phase services.” Through these services, the design firm provides technical support to OBO during construction to answer the construction contractor’s questions about the design and generally to support OBO’s review of the construction contractor’s material samples, drawings, building systems and product data, test and inspection reports, and any design changes or substitutions. State’s estimated construction costs increased during the project’s design from approximately $500 million to over $660 million due to what OBO reports were challenging site conditions that required the extensive use of retaining walls and engineered foundation systems. Additional perimeter security in the form of guard towers was also added. OBO indicated these scope changes required additional design and increased the construction cost estimate. Established in 2009, the U.S. consulate general in Hyderabad is the first new U.S. diplomatic post to open in India since India’s independence in 1947. According to OBO, in 2007 the U.S. government leased the current 4-acre consulate property—that was once used as a palace—for use as an interim consulate location. OBO indicated the new consulate will be built on a 12.3-acre site located in Hyderabad’s financial and high-tech districts. Further, the new compound will include a consulate office building, three compound access facilities, a support annex to include a warehouse, a recreation facility, and Marine security guard quarters. Figure 25 shows the existing interim consulate and an architectural rendering of the new consulate. State issued a task order for the design of the project in September 2014 with the intent that the project would be a design-bid-build project and that the design firm OBO tasked would prepare a 100 percent design. OBO indicted the construction contract for the project was planned to be awarded in fiscal year 2017. However, after beginning initial design, OBO determined that changing the delivery method from design-bid-build to design-build with bridging would allow for an earlier construction contract award in fiscal year 2016. With this change in the project delivery method, the design task order was modified such that OBO’s design firm would provide bridging documents—roughly a 35 percent design—rather than a 100 percent design. The bridging documents would then be used by the design-build construction contractor to complete the design and construct the project. The design firm that had been tasked by OBO to prepare the bridging documents would also (1) review and process design submittals from the design-build contractor, (2) answer any request for information about the bridging design intent, and (3) ensure the design intent represented by the bridging design was maintained throughout design development by the design-build contractor. According to OBO, the bridging design was completed in April 2016 (19 months after the initial contract task order). As noted earlier in this report, OBO project documentation shows the initial design of the building’s unique exterior screen concerned OBO management, leading to more design development by the contract architect, further review by OBO’s design staff, and added cost. OBO senior management expressed concerns about the look of the screen, mainly that the screen was too traditional compared with the spirit of the design of the building and the rest of the campus and that the pattern of the screen needed more variation for daylight and views. To respond to these concerns, OBO issued two contract modifications to OBO’s architect for additional design work for the exterior screen. According to OBO, subsequent design development for three alternatives for the screen contributed an additional design cost of about $750,000, raising the final bridging design cost to approximately $10.5 million. That amount does not include the roughly $816,000 for the design firm to provide additional support services during construction, of which OBO reports a minor portion is attributable to ensuring the construction contractor achieved the design intent for the exterior screen. According to OBO data, the design-build contract to complete the design and build the project was awarded in September 2016 at a value of $203 million. OBO also reported the design-build contractor received full notice to proceed with construction in March 2017. As of the end of September 2017, the project was still under construction. Brian M. Mazanec, (202) 512-5130 or mazanecb@gao.gov. Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov. In addition to the contacts named above, Leslie Holen (Assistant Director), Michael Armes (Assistant Director), David Hancock, John Bauckman, and Eugene Beye, made key contributions to this report. David Dayton, Justin Fisher, Alex Welsh, and Neil Doherty provided technical assistance.", "summary": "In 1998, terrorists bombed two U.S. embassies in East Africa, killing over 220 people and injuring more than 4,000 others. In 1999, State launched the CSCP with the primary goal of providing secure, safe, and functional workplaces, and OBO adopted a streamlined, standard design for all new embassies. In 2011, OBO shifted to the Excellence approach for new embassies, where greater use of custom designs is intended to improve embassies' functionality, quality, operating costs, and appearance. GAO was asked to review the performance of the CSCP. This report examines (1) the pace of the CSCP in constructing new embassies, (2) the cost and schedule performance of OBO's recent embassy construction projects, and (3) key factors that have affected State's ability to deliver construction projects efficiently. GAO analyzed information from State planning, funding, and reporting documents and interviewed State and contractor officials. As part of an assessment of nine construction case-study projects, selected for cost or schedule increases, GAO conducted four site visits to embassies under construction. The Department of State's (State) Bureau of Overseas Buildings Operations (OBO) has constructed new embassies at a slower pace than forecast due in part to unexpected building requirements and inflation. In 1999 State identified a need to replace 180 embassies. In 2005, with about 30 projects underway, State planned to replace the other 150 embassies by 2018. Since 1999, OBO has built 77 embassies under its Capital Security Construction Program (CSCP), at a total cost of about $24 billion as of fiscal year 2017. CSCP's pace has been affected by unexpected additional building requirements, such as office annexes and Marine quarters. Also, CSCP received only one program funding adjustment for inflation since 1999, and State does not intend to seek annual adjustments. Currently, OBO does not provide information on inflationary effects on CSCP or an estimated total capital investment or feasible time frames for the nearly 50 embassies identified for replacement beyond 2022. Lack of such information may affect stakeholders' ability to make informed budget decisions. While cost growth occurred on a majority of completed embassy projects and durations averaged about 36 months, these were generally within budgeting and planning allowances. GAO could not assess performance of Excellence projects because none had been completed as of the end of fiscal year 2017. Staffing workload and contractor collaboration have affected OBO's project delivery. Without an OBO-wide workforce analysis, it is unclear whether OBO's staffing is commensurate with its workload needs. OBO maintains that its office overseeing project design reviews is understaffed, adversely affecting some of its critical functions. Contractors also expressed concerns about the quality of design reviews, which may be affected by a staffing shortage and the use of temporary contractors. Also, OBO and contractor officials acknowledged weaknesses in collaboration, particularly with regard to contractors less experienced with embassy construction. Of the five contractors GAO spoke with, three said they are unlikely to pursue future projects because of issues working with OBO. Formal construction partnering—an industry best practice—between OBO and its contractors could help avoid adversarial relationships that inhibit swift resolution of issues. OBO's two long-standing contractors that have completed most of the CSCP embassy projects participated in early projects OBO identified as having used formal partnering. GAO recommends that State (1) provide information on the estimated effects of inflation on planned projects, (2) provide an analysis of estimated total costs and time frames to complete the CSCP, (3) conduct an OBO-wide workforce analysis, and (4) pilot formal construction partnering. State concurred with our recommendations and also conveyed it is now pursuing other initiatives beyond Excellence.", "document_type": "gao"}
{"report": "According to the President’s budget, the federal government plans to invest more than $96 billion for IT in fiscal year 2018—the largest amount ever. However, as we have previously reported, investments in federal IT too often result in failed projects that incur cost overruns and schedule slippages, while contributing little to the desired mission-related outcomes. For example: The Department of Veterans Affairs’ Scheduling Replacement Project was terminated in September 2009 after spending an estimated $127 million over 9 years. The tri-agency National Polar-orbiting Operational Environmental Satellite System was halted in February 2010 by the White House’s Office of Science and Technology Policy after the program spent 16 years and almost $5 billion. The Department of Homeland Security’s Secure Border Initiative Network program was ended in January 2011, after the department obligated more than $1 billion for the program. The Office of Personnel Management’s Retirement Systems Modernization program was canceled in February 2011, after the agency had spent approximately $231 million on its third attempt to automate the processing of federal employee retirement claims. The Department of Veterans Affairs’ Financial and Logistics Integrated Technology Enterprise program was intended to be delivered by 2014 at a total estimated cost of $609 million, but was terminated in October 2011. The Department of Defense’s Expeditionary Combat Support System was canceled in December 2012 after spending more than a billion dollars and failing to deploy within 5 years of initially obligating funds. Our past work found that these and other failed IT projects often suffered from a lack of disciplined and effective management, such as project planning, requirements definition, and program oversight and governance. In many instances, agencies had not consistently applied best practices that are critical to successfully acquiring IT. Such projects have also failed due to a lack of oversight and governance. Executive-level governance and oversight across the government has often been ineffective, specifically from chief information officers (CIO). For example, we have reported that some CIOs’ roles were limited because they did not have the authority to review and approve the entire agency IT portfolio. FITARA was intended to improve agencies’ acquisitions of IT and enable Congress to monitor agencies’ progress and hold them accountable for reducing duplication and achieving cost savings. The law includes specific requirements related to seven areas. Federal data center consolidation initiative (FDCCI). Agencies are required to provide OMB with a data center inventory, a strategy for consolidating and optimizing their data centers (to include planned cost savings), and quarterly updates on progress made. The law also requires OMB to develop a goal for how much is to be saved through this initiative, and provide annual reports on cost savings achieved. Enhanced transparency and improved risk management. OMB and covered agencies are to make detailed information on federal IT investments publicly available, and agency CIOs are to categorize their investments by level of risk. Additionally, in the case of major IT investments rated as high risk for 4 consecutive quarters, the law requires that the agency CIO and the investment’s program manager conduct a review aimed at identifying and addressing the causes of the risk. Agency CIO authority enhancements. CIOs at covered agencies are required to (1) approve the IT budget requests of their respective agencies, (2) certify that OMB’s incremental development guidance is being adequately implemented for IT investments, (3) review and approve contracts for IT, and (4) approve the appointment of other agency employees with the title of CIO. Portfolio review. Agencies are to annually review IT investment portfolios in order to, among other things, increase efficiency and effectiveness and identify potential waste and duplication. In establishing the process associated with such portfolio reviews, the law requires OMB to develop standardized performance metrics, to include cost savings, and to submit quarterly reports to Congress on cost savings. Expansion of training and use of IT acquisition cadres. Agencies are to update their acquisition human capital plans to address supporting the timely and effective acquisition of IT. In doing so, the law calls for agencies to consider, among other things, establishing IT acquisition cadres or developing agreements with other agencies that have such cadres. Government-wide software purchasing program. The General Services Administration is to develop a strategic sourcing initiative to enhance government-wide acquisition and management of software. In doing so, the law requires that, to the maximum extent practicable, the General Services Administration should allow for the purchase of a software license agreement that is available for use by all executive branch agencies as a single user. Maximizing the benefit of the Federal Strategic Sourcing Initiative. Federal agencies are required to compare their purchases of services and supplies to what is offered under the Federal Strategic Sourcing Initiative. OMB is also required to issue regulations related to the initiative. In June 2015, OMB released guidance describing how agencies are to implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls that will meet the law’s requirements, while providing agencies with flexibility to adapt to unique agency processes and requirements; clarify the CIO’s role and strengthen the relationship between agency CIOs and bureau CIOs; and strengthen CIO accountability for IT costs, schedules, performance, and security. The guidance identified several actions that agencies were to take to establish a basic set of roles and responsibilities (referred to as the common baseline) for CIOs and other senior agency officials, which were needed to implement the authorities described in the law. For example, agencies were required to conduct a self-assessment and submit a plan describing the changes they intended to make to ensure that common baseline responsibilities were implemented. Agencies were to submit their plans to OMB’s Office of E-Government and Information Technology by August 15, 2015, and make portions of the plans publicly available on agency websites no later than 30 days after OMB approval. As of November 2016, all agencies had made their plans publicly available. In addition, in August 2016, OMB released guidance intended to, among other things, define a framework for achieving the data center consolidation and optimization requirements of FITARA. The guidance includes requirements for agencies to: maintain complete inventories of all data center facilities owned, operated, or maintained by or on behalf of the agency; develop cost savings targets for fiscal years 2016 through 2018 and report any actual realized cost savings; and measure progress toward meeting optimization metrics on a quarterly basis. The guidance also directs agencies to develop a data center consolidation and optimization strategic plan that defines the agency’s data center strategy for fiscal years 2016, 2017, and 2018. This strategy is to include, among other things, a statement from the agency CIO indicating whether the agency has complied with all data center reporting requirements in FITARA. Further, the guidance indicates that OMB is to maintain a public dashboard that will display consolidation-related costs savings and optimization performance information for the agencies. In February 2015, we introduced a new government-wide high-risk area, Improving the Management of IT Acquisitions and Operations. This area highlighted several critical IT initiatives in need of additional congressional oversight, including (1) reviews of troubled projects; (2) efforts to increase the use of incremental development; (3) efforts to provide transparency relative to the cost, schedule, and risk levels for major IT investments; (4) reviews of agencies’ operational investments; (5) data center consolidation; and (6) efforts to streamline agencies’ portfolios of IT investments. We noted that implementation of these initiatives was inconsistent and more work remained to demonstrate progress in achieving IT acquisition and operation outcomes. Further, our February 2015 high-risk report stated that, beyond implementing FITARA, OMB and agencies needed to continue to implement our prior recommendations in order to improve their ability to effectively and efficiently invest in IT. Specifically, from fiscal years 2010 through 2015, we made 803 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations. These recommendations included many to improve the implementation of the aforementioned six critical IT initiatives and other government-wide, cross-cutting efforts. We stressed that OMB and agencies should demonstrate government-wide progress in the management of IT investments by, among other things, implementing at least 80 percent of our recommendations related to managing IT acquisitions and operations within 4 years. In February 2017, we issued an update to our high-risk series and reported that, while progress had been made in improving the management of IT acquisitions and operations, significant work still remained to be completed. For example, as of November 2017, OMB and agencies had fully implemented 452 (or about 56 percent) of the 803 recommendations. This was an increase of about 284 recommendations compared to the number of recommendations we reported as being fully implemented in 2015. Figure 1 summarizes the progress that OMB and agencies have made in addressing our recommendations as compared to the 80 percent target, as of November 2017. In addition, in fiscal year 2016, we made 202 new recommendations, thus further reinforcing the need for OMB and agencies to address the shortcomings in IT acquisitions and operations. Also, beyond addressing our prior recommendations, our 2017 high-risk update noted the importance of OMB and federal agencies continuing to expeditiously implement the requirements of FITARA. To further explore the challenges and opportunities to improve federal IT acquisitions and operations, we convened a forum on September 14, 2016, to explore challenges and opportunities for CIOs to improve federal IT acquisitions and operations—with the goal of better informing policymakers and government leadership. Forum participants, which included 13 current and former federal agency CIOs, members of Congress, and private sector IT executives, identified key actions related to seven topics: (1) strengthening FITARA, (2) improving CIO authorities, (3) budget formulation, (4) governance, (5) workforce, (6) operations, and (7) transition planning. A summary of the key actions, by topic area, identified during the forum is provided in figure 2. In addition, in January 2017, the Federal CIO Council concluded that differing levels of authority over IT-related investments and spending have led to inconsistencies in how IT is executed from agency to agency. According to the Council, for those agencies where the CIO has broad authority to manage all IT investments, great progress has been made to streamline and modernize the federal agency’s footprint. For the others, where agency CIOs are only able to control pieces of the total IT footprint, it has been harder to achieve improvements. The current administration has initiated additional efforts aimed at improving federal IT, including digital services. Specifically, in March 2017, the administration established the Office of American Innovation, which has a mission to, among other things, make recommendations to the President on policies and plans aimed at improving federal government operations and services and on modernizing federal IT. In doing so, the office is to consult with both OMB and the Office of Science and Technology Policy on policies and plans intended to improve government operations and services, improve the quality of life for Americans, and spur job creation. In May 2017, the administration also established the American Technology Council, which has a goal of helping to transform and modernize federal agency IT and how the federal government uses and delivers digital services. The President is the chairman of this council, and the Federal CIO and the United States Digital Service administrator are members. Congress has recognized the importance of agencies’ continued implementation of FITARA provisions, and has taken legislative action to extend selected provisions beyond their original dates of expiration. For example, Congress has passed legislation to: remove the expiration date for enhanced transparency and improved risk management provisions, which were set to expire in 2019; remove the expiration date for portfolio review, which was set to expire in 2019; and extend the expiration date for FDCCI from 2018 to 2020. In addition, Congress is considering legislation to ensure the availability of funding to help further agencies’ efforts to modernize IT. Specifically, recently proposed legislation calls for agencies to establish working capital funds for use in transitioning from legacy systems, as well as for addressing evolving threats to information security. The legislation also proposes the creation of a technology modernization fund within the Department of the Treasury, from which agencies could borrow money to retire and replace legacy systems as well as acquire or develop systems. Agencies have taken steps to improve the management of IT acquisitions and operations by implementing key FITARA initiatives. However, agencies would be better positioned to fully implement the law and, thus, realize billions in cost savings and additional management improvements, if they addressed the numerous recommendations we have made aimed at improving data center consolidation, increasing transparency via OMB’s IT Dashboard, implementing incremental development, and managing software licenses. One of the key initiatives to implement FITARA is data center consolidation. OMB established FDCCI in February 2010 to improve the efficiency, performance, and environmental footprint of federal data center activities, and the enactment of FITARA reinforced the initiative. However, in a series of reports that we issued from July 2011 through August 2017, we noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies’ data center consolidation plans, data center optimization, and OMB’s tracking and reporting on related cost savings. In these reports, we made a matter for Congressional consideration, and a total of 160 recommendations to OMB and 24 agencies to improve the execution and oversight of the initiative. Most agencies and OMB agreed with our recommendations or had no comments. As of November 2017, 84 of these recommendations remained open. For example, in May 2017, we reported that the 24 agencies participating in FDCCI collectively had made progress on their data center closure efforts. Specifically, as of August 2016, these agencies had identified a total of 9,995 data centers, of which they reported having closed 4,388, and having plans to close a total of 5,597 data centers through fiscal year 2019. Notably, the Departments of Agriculture, Defense, the Interior, and the Treasury accounted for 84 percent of the completed closures. In addition, that report noted that 18 of the 24 agencies had reported achieving about $2.3 billion collectively in cost savings and avoidances from their data center consolidation and optimization efforts from fiscal year 2012 through August 2016. The Departments of Commerce, Defense, Homeland Security, and the Treasury accounted for approximately $2.0 billion (or 87 percent) of the total. Further, 23 agencies reported about $656 million collectively in planned savings for fiscal years 2016 through 2018. This is about $3.3 billion less than the estimated $4.0 billion in planned savings for fiscal years 2016 through 2018 that agencies reported to us in November 2015. Figure 3 presents a comparison of the amounts of cost savings and avoidances reported by agencies to OMB and the amounts the agencies reported to us. As mentioned previously, FITARA required agencies to submit multi-year strategies to achieve the consolidation and optimization of their data centers no later than the end of fiscal year 2016. Among other things, this strategy was to include such information as data center consolidation and optimization metrics, and year-by-year calculations of investments and cost savings through October 1, 2018. Further, OMB’s August 2016 guidance on data center optimization contained additional information for how agencies are to implement the strategic plan requirements of FITARA, and stated that agencies were required to publicly post their strategic plans to their agency-owned digital strategy websites by September 30, 2016. As of April 2017, only 7 of the 23 agencies that submitted their strategic plans—the Departments of Agriculture, Education, Homeland Security, and Housing and Urban Development; the General Services Administration; the National Science Foundation; and the Office of Personnel Management—had addressed all five elements required by the OMB memorandum implementing FITARA. The remaining 16 agencies either partially met or did not meet the requirements. For example, most agencies partially met or did not meet the requirements to provide information related to data center closures and cost savings metrics. The Department of Defense did not submit a plan and was rated as not meeting any of the requirements. To better ensure that federal data center consolidation and optimization efforts improve governmental efficiency and achieve cost savings, in our May 2017 report, we recommended that 11 of the 24 agencies take action to ensure that the amounts of achieved data center cost savings and avoidances are consistent across all reporting mechanisms. We also recommended that 17 of the 24 agencies each take action to complete missing elements in their strategic plans and submit their plans to OMB in order to optimize their data centers and achieve cost savings. Twelve agencies agreed with our recommendations, 2 did not agree, and 10 agencies and OMB did not state whether they agreed or disagreed. More recently, in August 2017, we reported that agencies needed to address challenges in optimizing their data centers in order to achieve cost savings. Specifically, we noted that, according to the 24 agencies’ data center consolidation initiative strategic plans as of April 2017, most agencies were not planning to meet OMB’s optimization targets by the end of fiscal year 2018. Further, of the 24 agencies, 5—the Department of Commerce and the Environmental Protection Agency, National Science Foundation, Small Business Administration, and U.S. Agency for International Development—reported plans to fully meet their applicable targets by the end of fiscal year 2018; 13 reported plans to meet some, but not all, of the targets; 4 reported that they did not plan to meet any targets; and 2 did not have a basis to report planned optimization milestones because they do not report having any agency-owned data centers. Figure 4 summarizes agencies’ progress in meeting OMB’s optimization targets as of February 2017, and planned progress to be achieved by September 2017 and September 2018, as of April 2017. Figure 4: Agency-Reported Plans to Meet or Exceed the Office of Management and Budget’s (OMB) Data Center Optimization Targets FITARA required OMB to establish a data center optimization metric specific to measuring server efficiency, and required agencies to report on progress in meeting this metric. To effectively measure progress against this metric, OMB directed agencies to replace the manual collection and reporting of systems, software, and hardware inventory housed within agency-owned data centers with automated monitoring tools and to complete this effort no later than the end of fiscal year 2018. Agencies were required to report progress in implementing automated monitoring tools and server utilization averages at each data center as part of their quarterly data center inventory reporting to OMB. As of February 2017, 4 of the 22 agencies reporting agency-owned data centers in their inventory— the National Aeronautics and Space Administration, National Science Foundation, Social Security Administration, and U.S. Agency for International Development—reported that they had implemented automated monitoring tools at all of their data centers. Further, 10 reported that they had implemented automated monitoring tools at between 1 and 57 percent of their centers, and 8 had not yet begun to report the implementation of these tools. In total, the 22 agencies reported that automated tools were implemented at 123 (or about 3 percent) of the 4,528 total agency-owned data centers, while the remaining 4,405 (or about 97 percent) of these data centers were not reported as having these tools implemented. Figure 5 summarizes the number of agency-reported data centers with automated monitoring tools implemented, including the number of tiered and non-tiered centers. To address challenges in optimizing federal data centers, in our August 2017 report, we made recommendations to 18 agencies and OMB. Ten agencies agreed with our recommendations, three agencies partially agreed, and six (including OMB) did not state whether they agreed or disagreed. To facilitate transparency across the government in acquiring and managing IT investments, OMB established a public website—the IT Dashboard—to provide detailed information on major investments at 26 agencies, including ratings of their performance against cost and schedule targets. Among other things, agencies are to submit ratings from their CIOs, which, according to OMB’s instructions, should reflect the level of risk facing an investment relative to that investment’s ability to accomplish its goals. In this regard, FITARA includes a requirement for CIOs to categorize their major IT investment risks in accordance with OMB guidance. Over the past 6 years, we have issued a series of reports about the Dashboard that noted both significant steps OMB has taken to enhance the oversight, transparency, and accountability of federal IT investments by creating its Dashboard, as well as concerns about the accuracy and reliability of the data. In total, we have made 47 recommendations to OMB and federal agencies to help improve the accuracy and reliability of the information on the Dashboard and to increase its availability. Most agencies agreed with our recommendations or had no comments. As of November 2017, 25 recommendations remained open. In June 2016, we determined that 13 of the 15 agencies selected for in- depth review had not fully considered risks when rating their major investments on the Dashboard. Specifically, our assessments of risk for 95 investments at the 15 selected agencies matched the CIO ratings posted on the Dashboard 22 times, showed more risk 60 times, and showed less risk 13 times. Figure 6 summarizes how our assessments compared to the selected investments’ CIO ratings. Aside from the inherently judgmental nature of risk ratings, we identified three factors which contributed to differences between our assessments and the CIO ratings: Forty of the 95 CIO ratings were not updated during April 2015 (the month we conducted our review), which led to differences between our assessments and the CIOs’ ratings. This underscores the importance of frequent rating updates, which help to ensure that the information on the Dashboard is timely and accurately reflects recent changes to investment status. Three agencies’ rating processes spanned longer than 1 month. Longer processes mean that CIO ratings are based on older data, and may not reflect the current level of investment risk. Seven agencies’ rating processes did not focus on active risks. According to OMB’s guidance, CIO ratings should reflect the CIO’s assessment of the risk and the investment’s ability to accomplish its goals. CIO ratings that do no incorporate active risks increase the chance that ratings overstate the likelihood of investment success. As a result, we concluded that the associated risk rating processes used by the 15 agencies were generally understating the level of an investment’s risk, raising the likelihood that critical federal investments in IT are not receiving the appropriate levels of oversight. To better ensure that the Dashboard ratings more accurately reflect risk, we made 25 recommendations to 15 agencies to improve the quality and frequency of their CIO ratings. Twelve agencies generally agreed with or did not comment on the recommendations and three agencies disagreed, stating that their CIO ratings were adequate. However, we noted that weaknesses in these three agencies’ processes still existed and that we continued to believe our recommendations were appropriate. OMB has emphasized the need to deliver investments in smaller parts, or increments, in order to reduce risk, deliver capabilities more quickly, and facilitate the adoption of emerging technologies. In 2010, it called for agencies’ major investments to deliver functionality every 12 months and, since 2012, every 6 months. Subsequently, FITARA codified a requirement that agency CIOs certify that IT investments are adequately implementing incremental development, as defined in the capital planning guidance issued by OMB. Further, subsequent OMB guidance on the law’s implementation, issued in June 2015, directed agency CIOs to define processes and policies for their agencies which ensure that they certify that IT resources are adequately implementing incremental development. However, in May 2014, we reported that 66 of 89 selected investments at five major agencies did not plan to deliver capabilities in 6-month cycles, and less than half of these investments planned to deliver functionality in 12-month cycles. We also reported that only one of the five agencies had complete incremental development policies. Accordingly, we recommended that OMB clarify its guidance on incremental development and that the selected agencies update their associated policies to comply with OMB’s revised guidance (once made available), and consider the factors identified in our report when doing so. Four of the six agencies agreed with our recommendations or had no comments, one agency partially agreed, and the remaining agency disagreed with the recommendations. The agency that disagreed did not believe that its recommendations should be dependent upon OMB taking action to update guidance. In response, we noted that only one of the recommendations to that agency depended upon OMB action, and we maintained that the action was warranted and could be implemented. Subsequently, in August 2016, we reported that agencies had not fully implemented incremental development practices for their software development projects. Specifically, we noted that, as of August 31, 2015, 22 federal agencies had reported on the Dashboard that 300 of 469 active software development projects (approximately 64 percent) were planning to deliver usable functionality every 6 months for fiscal year 2016, as required by OMB guidance. The remaining 169 projects (or 36 percent) that were reported as not planning to deliver functionality every 6 months, agencies provided a variety of explanations for not achieving that goal. These included project complexity, the lack of an established project release schedule, or that the project was not a software development project. Further, in conducting an in-depth review of seven selected agencies’ software development projects, we determined that 45 percent of the projects delivered functionality every 6 months for fiscal year 2015 and 55 percent planned to do so in fiscal year 2016. However, significant differences existed between the delivery rates that the agencies reported to us and what they reported on the Dashboard. For example, for four agencies (the Departments of Commerce, Education, Health and Human Services, and Treasury), the percentage of delivery reported to us was at least 10 percentage points lower than what was reported on the Dashboard. These differences were due to (1) our identification of fewer software development projects than agencies reported on the Dashboard and (2) the fact that information reported to us was generally more current than the information reported on the Dashboard. We concluded that, by not having up-to-date information on the Dashboard about whether the project is a software development project and about the extent to which projects are delivering functionality, these seven agencies were at risk that OMB and key stakeholders may make decisions regarding the agencies’ investments without the most current and accurate information. As such, we recommended that the seven selected agencies review major IT investment project data reported on the Dashboard and update the information as appropriate, ensuring that these data are consistent across all reporting channels. Finally, while OMB has issued guidance requiring agency CIOs to certify that each major IT investment’s plan for the current year adequately implements incremental development, only three agencies (the Departments of Commerce, Homeland Security, and Transportation) had defined processes and policies intended to ensure that the CIOs certify that major IT investments are adequately implementing incremental development. Accordingly, we recommended that the remaining four agencies—the Departments of Defense, Education, Health and Human Services, and the Treasury—establish policies and processes for certifying that major IT investments adequately use incremental development. The Departments of Education and Health and Human Services agreed with our recommendation, while the Department of Defense disagreed and stated that its existing policies address the use of incremental development. However, we noted that the department’s policies did not comply with OMB’s guidance and that we continued to believe our recommendation was appropriate. The Department of the Treasury did not comment on its recommendation. More recently, in November 2017, we reported that agencies needed to improve their certification of incremental development. Specifically, agencies reported that 62 percent of major IT software development investments were certified by the agency CIO for implementing adequate incremental development in fiscal year 2017, as required by FITARA as of August 2016. Table 1 identifies the number of federal agency major IT software development investments certified for adequate incremental development, as reported on the IT Dashboard for fiscal year 2017. Officials from 21 of the 24 agencies in our review reported that challenges hindered their ability to implement incremental development, which included: (1) inefficient governance processes; (2) procurement delays; and (3) organizational changes associated with transitioning from a traditional software methodology that takes years to deliver a product, to incremental development, which delivers products in shorter time frames. Nevertheless, 21 agencies reported that the certification process was beneficial because they used the information from the process to assist with identifying investments that could more effectively use an incremental approach, and used lessons learned to improve the agencies’ incremental processes. In addition, as of August 2017, only 4 of the 24 agencies had clearly defined CIO incremental development certification policies and processes that contained descriptions of the role of the CIO in the process and how the CIO’s certification will be documented; and included definitions of incremental development and time frames for delivering functionality consistent with OMB guidance. Figure 7 summarizes our analysis of agencies’ policies for CIO certification of the adequate use of incremental development in IT investments. Lastly, we reported that OMB’s capital planning guidance for fiscal year 2018 (issued in June 2016) lacked clarity regarding how agencies were to address the requirement for certifying adequate incremental development. While the 2018 guidance stated that agency CIOs are to provide the certifications needed to demonstrate compliance with FITARA, the guidance did not include a specific reference to the provision requiring CIO certification of adequate incremental development. We noted that, as a result of this change, OMB placed the burden on agencies to know and understand how to demonstrate compliance with FITARA’s incremental development provision. Further, because of the lack of clarity in the guidance as to what agencies were to provide, OMB could not demonstrate how the fiscal year 2018 guidance ensured that agencies provided the certifications specifically called for in the law. Accordingly, in August 2017, OMB issued its fiscal year 2019 guidance, which addressed the weaknesses we identified in the previous fiscal year’s guidance. Specifically, the revised guidance requires agency CIOs to make an explicit statement regarding the extent to which the CIO is able to certify the use of incremental development, and to include a copy of that statement in the agency’s public congressional budget justification materials. As part of the statement, an agency CIO must also identify which specific bureaus or offices are using incremental development on all of their investments. In our November 2017 report, we made 19 recommendations to 17 agencies to improve reporting and certification of incremental development. Eleven agencies agreed with our recommendations, 1 partially agreed, and 5 did not state whether they agreed or disagreed. OMB disagreed with several of our conclusions, which we continued to believe were valid. In total, from May 2014 through November 2017, we have made 42 recommendations to OMB and agencies to improve their implementation of incremental development. As of November 2017, 34 of our recommendations remained open. Federal agencies engage in thousands of software licensing agreements annually. The objective of software license management is to manage, control, and protect an organization’s software assets. Effective management of these licenses can help avoid purchasing too many licenses, which can result in unused software, as well as too few licenses, which can result in noncompliance with license terms and cause the imposition of additional fees. As part of its PortfolioStat initiative, OMB has developed policy that addresses software licenses. This policy requires agencies to conduct an annual, agency-wide IT portfolio review to, among other things, reduce commodity IT spending. Such areas of spending could include software licenses. In May 2014, we reported on federal agencies’ management of software licenses and determined that better management was needed to achieve significant savings government-wide. In particular, 22 of the 24 major agencies did not have comprehensive license policies and only 2 had comprehensive license inventories. In addition, we identified five leading software license management practices, and the agencies’ implementation of these practices varied. As a result of agencies’ mixed management of software licensing, agencies’ oversight of software license spending was limited or lacking, thus potentially leading to missed savings. However, the potential savings could be significant considering that, in fiscal year 2012, 1 major federal agency reported saving approximately $181 million by consolidating its enterprise license agreements, even when its oversight process was ad hoc. Accordingly, we recommended that OMB issue needed guidance to agencies; we also made 135 recommendations to the 24 agencies to improve their policies and practices for managing licenses. Among other things, we recommended that the agencies regularly track and maintain a comprehensive inventory of software licenses and analyze the inventory to identify opportunities to reduce costs and better inform investment decision making. Most agencies generally agreed with the recommendations or had no comments. As of November 2017, 112 of the recommendations had not been implemented. Table 2 reflects the extent to which agencies implemented recommendations in these areas. In conclusion, with the enactment of FITARA, the federal government has an opportunity to save billions of dollars; improve the transparency and management of IT acquisitions and operations; and to strengthen the authority of CIOs to provide needed direction and oversight. The forum we held also recommended that CIOs be given more authority, and noted the important role played by the Federal CIO. Most agencies have taken steps to improve the management of IT acquisitions and operations by implementing key FITARA initiatives, including data center consolidation, efforts to increase transparency via OMB’s IT Dashboard, incremental development, and management of software licenses; and they have continued to address recommendations we have made over the past several years. However, additional improvements are needed, and further efforts by OMB and federal agencies to implement our previous recommendations would better position them to fully implement FITARA. To help ensure that these efforts succeed, OMB’s and agencies’ continued implementation of FITARA is essential. In addition, we will continue to monitor agencies’ implementation of our previous recommendations. Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Dave Powner, Director, Information Technology at (202) 512- 9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Kevin Walsh (Assistant Director), Chris Businsky, Rebecca Eyler, Meredith Raymond, and Bradley Roach (Analyst in Charge). This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The federal government plans to invest almost $96 billion on IT in fiscal year 2018. Historically, these investments have too often failed, incurred cost overruns and schedule slippages, or contributed little to mission-related outcomes. Accordingly, in December 2014, Congress enacted FITARA, aimed at improving agencies' acquisitions of IT. Further, in February 2015, GAO added improving the management of IT acquisitions and operations to its high-risk list. This statement summarizes agencies' progress in improving the management of IT acquisitions and operations. It is based on GAO's prior and recently published reports on (1) data center consolidation, (2) risk levels of major investments as reported on OMB's IT Dashboard, (3) implementation of incremental development practices, and (4) management of software licenses. The Office of Management and Budget (OMB) and federal agencies have taken steps to improve the management of information technology (IT) acquisitions and operations through a series of initiatives, and as of November 2017, had fully implemented about 56 percent of the approximately 800 related GAO recommendations made between fiscal years 2010 through 2015. However, important additional actions are needed. Consolidating data centers . OMB launched an initiative in 2010 to reduce data centers, which was reinforced by the Federal Information Technology Acquisition Reform Act (FITARA) in 2014. However, in a series of reports that GAO issued over the past 6 years, it noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies' data center consolidation plans, data center optimization, and OMB's tracking and reporting on related cost savings. These reports contained a matter for Congressional consideration, and a total of 160 recommendations to OMB and 24 agencies, to improve the execution and oversight of the initiative. Most agencies and OMB agreed with the recommendations or had no comments. As of November 2017, 84 of the recommendations remained open. Enhancing transparency . OMB's IT Dashboard provides information on major investments at federal agencies, including ratings from Chief Information Officers that should reflect the level of risk facing an investment. Over the past 6 years, GAO has issued a series of reports about the Dashboard that noted both significant steps OMB has taken to enhance the oversight, transparency, and accountability of federal IT investments by creating its Dashboard, as well as concerns about the accuracy and reliability of the data. In total, GAO has made 47 recommendations to OMB and federal agencies to help improve the accuracy and reliability of the information on the Dashboard and to increase its availability. Most agencies agreed with the recommendations or had no comments. As of November 2017, 25 of these recommendations remained open. Implementing incremental development . OMB has emphasized the need for agencies to deliver investments in smaller parts, or increments, in order to reduce risk and deliver capabilities more quickly. Since 2012, OMB has required investments to deliver functionality every 6 months. Further, GAO has issued reports highlighting additional actions needed by OMB and agencies to improve their implementation of incremental development. In these reports, GAO made 42 recommendations. Most agencies agreed or did not comment on the recommendations. As of November 2017, 34 of the recommendations remained open. Managing software licenses . Effective management of software licenses can help avoid purchasing too many licenses that result in unused software. In May 2014, GAO reported that better management of licenses was needed to achieve savings, and made 136 recommendations to improve such management. Most agencies generally agreed with the recommendations or had no comments. As of November 2017, 112 of the recommendations remained open. From fiscal years 2010 through 2015, GAO made about 800 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations, and included recommendations to improve the oversight and execution of the data center consolidation initiative, the accuracy and reliability of the Dashboard, incremental development policies, and software license management. Most agencies agreed with GAO's recommendations and had taken some actions or had no comments. In addition, from fiscal year 2016 to present, GAO has made more than 200 new recommendations in this area. GAO will continue to monitor agencies' implementation of these recommendations.", "document_type": "gao"}
{"report": "Marijuana refers to the dried leaves, flowers, stems, and seeds from the cannabis plant, which contains the psychoactive or mind-altering chemical delta-9-tetrahydrocannabinol (THC), as well as other related compounds. Marijuana is a controlled substance under federal law and is classified as a Schedule I drug—the most restrictive of categories of controlled substances by the federal government. The Controlled Substances Act of 1970, as amended, does not allow Schedule I drugs, including marijuana, to be dispensed with a prescription, and provides federal sanctions for the possession, manufacture, distribution, dispensing, or use of such drugs. However, as of July 2018, 32 states and the District of Columbia had passed voter initiatives or legislation legalizing marijuana for medical purposes under state or territorial law. Of these, nine states and the District of Columbia had also passed voter initiatives or legislation legalizing marijuana for recreational purposes under state or territorial law. In addition, another 15 states have laws only pertaining to the use of products containing cannabidiol, also known as CBD, one of the non- psychoactive ingredients in marijuana plants. Nonetheless, federal penalties remain, and some marijuana-related activity may also be illegal under state law, including in states that have legalized marijuana for medical or recreational purposes. Figure 1 shows a map of marijuana legalization under state or territorial law, as of July 2018. Marijuana is the only major illegal drug grown domestically, according to DEA. Individuals and larger organized groups, such as drug trafficking organizations, establish outdoor and indoor grow sites to cultivate marijuana. Outdoor grow sites can be located on privately-owned land, such as residential yards, farms, and timber lands, and publicly-owned land, such as national forests, as shown in Figure 2. Indoor grow sites can be located in residential houses and larger warehouses. Previously, we, along with the U.S. Department of Agriculture’s (USDA) Office of Inspector General (OIG) have reported on the environmental effects of illegal marijuana cultivation on federal lands. For example, in 2010, we reported that illegal marijuana cultivation on federal lands can involve, among other things, the application of pesticides, herbicides, fertilizers, and other chemicals, including chemicals that may be banned in the United States; removal of natural vegetation; diversion of water from streams; and deposits of large amounts of trash and human waste. In 2018, USDA’s OIG reported that trash and chemicals such as pesticides and fertilizers may remain at eradicated marijuana grow sites on national forest lands for multiple years, partly due to the cost of cleanup, which can reach as high as $100,000. Figure 3 shows examples of environmental effects of illegal marijuana cultivation on federal lands in California and Georgia. Marijuana eradication operations can encompass the following activities: seizure and destruction of marijuana plants, seizure and destruction of processed marijuana—which is smokeable marijuana in the drying process, loose, or packaged; confiscation of weapons and assets; and apprehension of individuals at the grow site. Additionally, operations may include the removal of trash and infrastructure, such as propane tanks and irrigation tubing, from outdoor grow sites during or after eradication operations to reduce the likelihood that growers will return. DEA established DCE/SP in 1981 to support participating state and local law enforcement agencies in their efforts to eradicate and suppress illegal, domestically-grown marijuana. Over the past three decades, DEA has provided support for marijuana eradication and suppression efforts through DCE/SP in all 50 states, Puerto Rico, Guam, and the U.S. Virgin Islands. In fiscal year 2018, DEA obligated DCE/SP funding to 125 participating agencies in 37 states. DEA’s Office of Operations Management, Investigative Support Section is responsible for the overall management and oversight of DCE/SP. Personnel from DEA’s field divisions and contractors are responsible for implementing DCE/SP in the field. Specifically, DEA field divisions assign a special agent to serve as DCE/SP coordinator for each state in its area of responsibility. DCE/SP coordinators are responsible for reviewing participating agencies’ annual strategic plans for DCE/SP, and approving certain purchase requests, among other things. DEA also contracts for analytical and administrative support for the program. The contract provides DEA with six personnel, referred to as regional contractors, whose primary duties include providing guidance to participating agencies on allowable program expenditures, and reviewing the information participating agencies report to DEA on their program expenditures and eradication and suppression activities. DEA’s implementation of DCE/SP is a multi-step process with activities performed by DEA and participating agencies during each step, as shown in Figure 4. Each year, DEA requests and receives funding for DCE/SP from DOJ’s Assets Forfeiture Fund. To participate in DCE/SP, a state or local law enforcement agency must apply and enter into a reimbursable funding agreement with DEA. Specifically, a participating agency must submit an annual strategic plan describing, among other things, how it intends to use DCE/SP funding to address the illegal domestic marijuana threat in its area of responsibility, and coordinate with other federal agencies, such as the Forest Service. DEA and the participating agency then sign a letter of agreement, whereby the participating agency agrees to eradicate and suppress illegal marijuana as part of DCE/SP, and DEA agrees to provide a specified amount of funding to the participating agency to defray the costs of those activities. This agreement also outlines program restrictions and requirements for participating agencies, which include only using DCE/SP funds to reimburse expenses that DEA has deemed allowable; obtaining approval from DEA prior to expending DCE/SP funds on certain items; submitting an expenditure report to DEA each quarter; and collecting and reporting to DEA information on its marijuana eradication and suppression activities. DEA obligated about $17.7 million annually on average to DCE/SP from 2015 through fiscal year 2018. As shown in Figure 5, the total amount of funding DEA obligated to DCE/SP decreased from $22 million in 2015 to $12.4 million in fiscal year 2017, and increased to $18 million in fiscal year 2018. During each year of the 4-year time frame we reviewed, DEA obligated most of the DCE/SP funds to support the marijuana eradication efforts of the participating agencies—for example, $14 million of the $18 million in fiscal year 2018 went to 125 participating agencies in 37 states, or approximately $378,000 on average per state. DEA obligated the remaining funds—for example, $4 million in fiscal year 2018—to pay for program support. This support includes payments for the following items: The DEA Aviation Division, which provided reconnaissance, surveillance, undercover operations, and marijuana eradication support to selected participating agencies, according to DEA documentation. The Aviation Division prioritized its support to participating agencies based upon their past eradication operations, the availability of aviation support provided by other participating agencies, and DCE/SP coordinators’ request for support. Equipment, travel, and training for DEA headquarters and field divisions to support eradication activities. Six regional contractors that provided administrative support to the program. Figure 5 also shows that in each year from 2015 through fiscal year 2018, about half of total DCE/SP funds went to participating agencies in five states. For example, in fiscal year 2018 DEA obligated 48 percent of these funds to participating agencies in California, Kentucky, Georgia, Texas, and Tennessee. Moreover, by magnitude, California, Kentucky, Georgia, and Tennessee were among the top five states in each of the 4 years we examined. DEA headquarters officials reported that they obligate funding to participating agencies based on various factors, including the agencies’ past performance, their level of matching investment in the program, and the approximate amount of illegal growing in an area. DEA headquarters officials noted that some marijuana grows may still be illegal under state and local law—even in those states that have legalized or regulated marijuana in some form under state or local law. As such, DEA has obligated funds to participating agencies in states with and without some form of marijuana legalization under state law. Participating state and local agencies have expended DCE/SP funds on a range of items, as described below. However, we calculated that two items— aviation support and overtime —accounted for a large majority of their expenditures in each of the 3 years we reviewed from 2015 through fiscal year 2017. For example, participating agencies expended 46 percent on overtime and 38 percent on aviation support in fiscal year 2017, as shown in Figure 6. Aviation Support. Participating agencies expended 43 percent ($17.0 million) of their DCE/SP funds to rent aircraft or purchase fuel for aviation support from 2015 through fiscal year 2017, according to DEA data. For example, officials from a participating state agency in California reported expending DCE/SP funds to contract for the use of helicopters for at least 90 days per year, which they use to support marijuana eradication efforts across the state. Officials from participating local agencies in California reported that aircraft support is critical to their marijuana eradication efforts because it allows them to conduct aerial surveillance to detect possible marijuana grow sites, transport personnel in and out of grow sites in remote areas, and remove large quantities of marijuana plants from grow sites, as shown in Figure 7. Overtime. Participating agencies expended 40 percent ($16.0 million) of their DCE/SP funds to pay employee overtime from 2015 through fiscal year 2017, according to DEA data. Officials from a participating agency in Nevada told us that marijuana eradication is labor-intensive—in some cases involving long hikes and camping in the mountains—which can result in overtime costs. In addition, officials from a participating agency in Michigan told us that they expend DCE/SP funds to reimburse members of state task force teams for overtime costs incurred during their participation in marijuana eradication operations, which generally involves 1- to 3-hour extensions of their regular shifts. Travel and per diem. Participating agencies expended 6 percent ($2.3 million) of their DCE/SP funds to pay travel and per diem costs from 2015 through fiscal year 2017, according to DEA data. For example, officials from a participating agency in Nevada reported that traveling to marijuana grow sites in remote areas may take up to 6 hours, which requires them to incur travel and per diem costs for overnight stays. In addition, DEA headquarters officials reported that officials from participating agencies who attend the DCE/SP national strategic meeting are permitted to expend DCE/SP funds to pay for travel and per diem expenses. According to DEA headquarters officials, federal, state, and local officials from across the country attend the strategic meeting to discuss trends and issues related to illegal marijuana cultivation, and DCE/SP’s priorities and goals. Supplies, clothing, and protective gear. Participating agencies expended 3 percent ($1.1 million) of their DCE/SP funds to purchase supplies, and another 2 percent ($0.8 million) to purchase clothing and protective gear from 2015 through fiscal year 2017, according to DEA data. For example, officials from a participating agency in Texas reported expending DCE/SP funds to purchase machetes for cutting marijuana plants; cameras for taking pictures or filming at eradication sites; backpacks and hydration bladders; Global Positioning System devices for navigation; first aid kits; gloves to protect personnel from pesticides, fertilizers, and other hazardous chemicals; and heavy-duty pants and shirts, as shown in Figure 7. Equipment. Participating agencies expended 3 percent ($1.0 million) of their DCE/SP funds to purchase equipment from 2015 through fiscal year 2017, according to DEA data. For example, officials from participating agencies in Georgia, Kentucky, and Texas told us that they have expended DCE/SP funds to purchase all-terrain vehicles, which they use to help access marijuana grow sites more quickly than on foot, and help them to navigate difficult terrain, including mountainous areas. Figure 7 includes a photo of an all-terrain vehicle purchased with DCE/SP funds. All other expenditures. Participating agencies expended 2 percent ($0.6 million) of their DCE/SP funds on training, and another 1 percent ($0.4 million) on miscellaneous commercial contracts from 2015 through fiscal year 2017. Participating agencies also expended less than 1 percent of their DCE/SP funds on both container and space rental ($0.2 million) and vehicle rental ($0.1 million) from 2015 through fiscal year 2017. Factors that affect how participating agencies expended funds. Officials from participating agencies we spoke with in six selected states—California, Georgia, Kentucky, Michigan, Nevada, and Texas—as well as DEA and Forest Service, provided perspectives on factors that affected how participating agencies expended DCE/SP funds to support their marijuana eradication efforts. State marijuana legalization. Officials we spoke with said that they expended DCE/SP funds to help eradicate marijuana grow sites not in compliance with their state and local laws. For example, in Georgia—where medical or recreational marijuana has not been legalized under state law—state officials reported that they strive to eradicate all marijuana grow sites. By comparison, state and local officials in California—where medical and recreational use of marijuana is legal under state law—said that all of the grow sites they eradicate are in violation of state and local laws. These grow sites include those on public lands such as national forests, and private land that had been trespassed upon. Marijuana eradication on national forests. DEA requires participating agencies to coordinate with Forest Service when conducting DCE/SP-funded eradication efforts on national forests. Officials from Forest Service and participating agencies we spoke with reported that they coordinate with one another when planning and conducting marijuana eradication on national forests—and that some of these efforts are funded by DCE/SP. For example, Forest Service officials in Kentucky reported that they participate in planning meetings with the state’s marijuana eradication task force. During the eradication season, Forest Service conducts aerial surveillance in helicopters funded by the state police using DCE/SP funds, and assists with eradication operations when available. As another example, officials in Georgia reported expending DCE/SP funds to conduct aerial surveillance to detect possible marijuana grow sites on national forests. Officials from some participating agencies we spoke with reported that they were able to expend DCE/SP funds to assist Forest Service with the removal of infrastructure such as sleeping bags and irrigation tubes at marijuana grow sites on national forests. For example, officials from a participating state agency in California reported that they assist with the removal of basic infrastructure and chemicals when feasible. However, Forest Service is responsible for the removal of infrastructure and subsequent environmental reclamation on national forests. DEA oversees participating agencies’ expenditure of DCE/SP funds in various ways to help ensure compliance with program requirements, including the following: Provides guidance. DEA provides participating agencies a copy of its DCE/SP Handbook which describes, among other things, information on allowable and non-allowable uses of DCE/SP funds. For example, the Handbook explains that participating agencies may expend DCE/SP funds to pay overtime costs of officers participating in eradication activities if the officers otherwise would be unable to participate, but may not expend DCE/SP funds to pay for employee benefits. In addition, participating agencies may expend DCE/SP funds on equipment, such as all-terrain vehicles and Global Positioning System devices, but not purchase body armor, firearms, or tasers. See Table 1 for additional information on allowable uses of DCE/SP funds. Pre-approves certain purchases. DEA pre-approves certain equipment purchases, and requires additional review procedures to pre-approve higher-cost items. According to DEA guidance and headquarters officials, participating agencies are required to submit a purchase request form to DEA for the purchase of all durable supplies, materials, and equipment. A participating agency must also attach supporting documentation along with the request form—including price quotes, a description of the items, and intended use. Purchases up to $2,500 are approved by the DCE/SP coordinator, while purchases greater than $2,500, or 10 percent or more of an agency’s obligated funds, also require approval from the DEA Special Agent in Charge in the applicable DEA field division, who then passes the request along to DEA headquarters officials for final approval. Conducts on-site observations. DEA headquarters officials told us that, as part of their oversight for fiscal year 2017, they conducted on-site observations of participating agencies in seven states at training events, eradication operations, and participating agencies’ facilities. DEA headquarters officials said that they selected the site visit locations based on participating agencies’ funding levels and input from DEA field officials, among other factors. According to these officials, site visits allowed DEA to observe participating agencies’ equipment and compare it with documentation on pre-approved equipment purchases and reported expenditures. DEA was unable to provide information about the location or results of site visits prior to fiscal year 2017 due to both a lack of documentation and recent personnel turnover. However, DEA began documenting the location and results of site visits for fiscal year 2017. According to officials, the site visits did not reveal instances of misuse of funds in fiscal year 2017. Officials noted that documenting site visits is an important practice that will help inform the program’s plans for future site visits, and could help DEA identify best practices for marijuana enforcement to share with participating agencies. In addition, some DCE/SP coordinators we spoke with said that on-site observations help them to oversee participating agencies’ expenditure of program funds in the field. For example, one DCE/SP coordinator said that he has daily on-site contact with participating agencies, and that although he had not observed any misuse of funds, his on-site presence would allow him to detect misuse if it were to occur. Reviews information on program expenditures. DEA’s DCE/SP Handbook requires participating agencies to submit cumulative quarterly expenditure reports specifying how much the agency expended in each of the allowable expense categories, such as overtime, aviation support, and equipment. DEA regional contractors are required to review quarterly expenditure reports, and sign and submit the reports to headquarters for further review. Headquarters officials told us that they may ask participating agencies to clarify reported expenditures, and DEA may withhold funding if necessary until any issues are resolved. DEA also requires participating agencies to provide supporting documentation, such as receipts, for certain expenses claimed in the end-of-year quarterly expenditure reports. Notwithstanding these efforts to oversee participating agencies’ expenditure of DCE/SP funds, DEA does not consistently collect supporting documentation from participating agencies regarding their reported DCE/SP expenditures. As noted above, participating agencies are required to submit a copy of a receipt or other supporting documentation for certain expense claimed in the end-of-year quarterly expenditure reports, and regional contractors are responsible for collecting this information. However, the DEA regional contractors we spoke with had differing understandings of DEA’s requirement regarding the collection of information on DCE/SP expenditures, and indicated to us that they are collecting varying levels of supporting documentation. For example, One regional contractor told us that DEA does not specify the completeness of supporting documentation that regional contractors are required to collect. Nonetheless, he still collects supporting documentation for all expenses, which in some cases may consist of 200 pages for a single quarterly expenditure report. Another regional contractor told us that he is required to collect quarterly expenditure reports, and participating agencies are required to maintain supporting documentation internally. He stated that the completeness of supporting documentation he collects varies by participating agency within his region. For example, one participating state agency in his region submits supporting documentation to DEA for pre-approved equipment purchases only, but maintains supporting documentation for other expenditures internally as required. In contrast, he explained, other participating agencies in his region provide supporting documentation for all expenditures, including aviation support and overtime. A third regional contractor said the only clear requirement DEA has regarding the collection of information on program expenditures is that regional contractors must collect supporting documentation for large equipment expenditures. However, he still collects supporting documentation for all expenditures, including overtime. A fourth regional contractor told us that he is only required to collect supporting documentation for equipment, material, supply, and clothing expenditures. Accordingly, he collects supporting documentation for these expenditures from all participating agencies in his region. Some participating agencies in his region provide supporting documentation for all their expenditures, including aviation support and overtime. Officials in headquarters told us that although they were not fully aware of these varying practices for collecting supporting documentation, they had confidence that participating agencies were maintaining documentation internally as required. Moreover, DEA headquarters officials told us that they expect regional contractors to collect supporting documentation for aviation support and overtime expenses when participating agencies submit their end-of-year quarterly expenditure report. However, it is our assessment that this expectation differs from DEA’s written requirement because the requirement does not include supporting documentation for overtime expenses. Based on the results of our audit work, DEA headquarters officials said that they had taken initial steps to address this issue. In particular, officials said that they plan to convene a working group to discuss a potential update to DEA’s requirements for the collection of supporting documentation after the eradication season in 2018. In addition, officials said they had met with regional contractors to discuss potential solutions to address this issue. However, DEA headquarters officials could not provide us with a plan for this effort. Standards for project management call for developing a plan with specific actions and time frames. By developing and implementing such a plan to ensure that regional contractors are implementing DEA’s requirement for collecting supporting documentation in the intended manner, DEA could have greater assurance that program funds are being expended appropriately. DEA collects information from participating agencies and DEA field officials on their marijuana eradication and suppression activities to help manage DCE/SP, such as the number of marijuana plants eradicated, pounds of processed marijuana seized, and number of arrests made. For example, according to DEA’s DCE/SP statistical reports, over 4 million illegal domestic marijuana plants, on average, were eradicated annually from 2015 through fiscal year 2017. Participating agencies are required to report information on their marijuana eradication and suppression activities to DEA. DEA also collects information on marijuana eradication and suppression activities its officials conduct in the field. For example, DEA field officials may unilaterally conduct eradication and suppression activities or provide support to other law enforcement agencies that do not receive program funding (nonparticipating agencies) on marijuana enforcement efforts, and report information on these activities. According to DEA documents and headquarters officials, DEA uses this information to help manage the program in a variety of ways. Specifically, DEA uses the information to develop and maintain a national assessment of illegal domestic marijuana cultivation; inform the scope and nature of program activities for future years; support the program’s funding request and determine funding levels for participating agencies; and assess performance on an agency-wide objective related to dismantling drug trafficking organizations. DEA also reports this information on DCE/SP’s public website. We found that participating agencies have practices for reporting information on some of their marijuana eradication and suppression activities that differ from DEA’s written guidance. Moreover, we found that stakeholders at all levels—participating agencies as well as DEA field and headquarters officials—had varying understandings of what participating agencies are required to report to DEA for DCE/SP. As a result, the information DEA collects is not fully reliable for the purpose of assessing program performance. According to DEA guidance, participating agencies are required to report information—such as the number of marijuana plants eradicated—only from eradication and suppression activities funded by DCE/SP. However, among the six states we contacted, officials from participating agencies in four states and a DCE/SP coordinator from a fifth state told us that they also include information on activities from nonparticipating agencies in the information reported to DEA. As a result of this broadening of information being reported, DEA does not have a fully accurate representation of the activities being performed by agencies receiving DCE/SP funding. Officials from these five states told us that they included this information to provide DEA with a more comprehensive assessment of the illegal domestic marijuana cultivation issue in their area. DEA headquarters officials were not aware of this reporting practice. Moreover, officials said that participating agencies should only report information resulting from their DCE/SP-funded operations, which may include results from support they provide to nonparticipating agencies. For example, if a participating agency provides support to a nonparticipating agency in the form of aircraft surveillance to help identify illegal grow sites, or additional officers to assist with an eradication operation, the participating agency should report the results from those activities to DEA. However, these expectations are not defined in DEA guidance. DEA guidance also states that participating agencies should make every effort to not report eradication and suppression information resulting from interdiction activities, which are not considered DCE/SP-funded operations. For example, marijuana seized by a participating agency during a routine traffic stop—a type of interdiction activity—should not be reported. However, we found that participating agencies had varying understandings of whether or not to report this information to DEA. As a result, information DEA collects from these officials is not consistent. Specifically, we identified three different practices that participating agencies followed to report eradication and suppression information resulting from routine traffic stops: report marijuana seized during routine traffic stops only if the marijuana can be linked back to a domestic source; report all marijuana seized during routine traffic stops irrespective of source; and do not report any marijuana seized during routine traffic stops. Further, we found that DEA field officials responsible for providing guidance to participating agencies had varying understandings of whether participating agencies should report information on marijuana seized during routine traffic stops to DEA. For example, two DCE/SP coordinators told us that information resulting from routine traffic stops should not be reported because DCE/SP is focused on the eradication of illegal marijuana grow sites. However, 3 of the 4 DEA regional contractors we spoke with said that participating agencies should report information resulting from routine traffic stops only if the marijuana seized can be tracked to a domestic source. DEA headquarters officials were not aware of these differing reporting practices and varying understandings. Headquarters officials told us that they expect participating agencies to report information on marijuana seized during routine traffic stops only if the marijuana can be linked to a domestic source. However, our assessment is that this expectation is not consistent with DEA’s written guidance. Officials explained that interdiction activities, such as routine traffic stops, are relevant to marijuana suppression, especially in light of recent changes in illegal marijuana cultivation and trafficking trends. For example, according to DEA officials, Kansas—a state without marijuana legalization—has recently experienced a decrease in the number of illegal outdoor marijuana grow sites in conjunction with an increase in the amount of illegal domestic marijuana being trafficked into the state from Colorado— a state with recreational and medical marijuana legalization. Standards for Internal Control in the Federal Government state that management should use quality information—including accurate and consistent information—to achieve the entity’s objectives. Federal standards for internal control also state that management should communicate the necessary quality information internally and externally to achieve the entity’s objectives. Based on the results of our audit work, DEA headquarters officials said that they had taken initial steps and have additional plans to update DEA’s written guidance. For example, officials told us that they plan to convene a working group to help address this issue after the eradication season in 2018. This working group will, according to officials, elicit input from DEA headquarters, regional contractors and DCE/SP coordinators in the field, as well as participating agencies. However, DEA headquarters officials could not provide us with any details or documentation of its initial steps and additional plans to address this issue. Clarifying the guidance and communicating it to participating agencies and DEA field officials—for example, by sharing the updated guidance with them, discussing reporting practices during its national strategic meeting, or including the guidance in DEA information systems—would help ensure the consistent application of the guidance, and as a result, improve the reliability of the information DEA collects. The improved information could help DEA assess program performance and manage the program more effectively. Although DEA collects and uses information on DCE/SP activities to help manage the program, it has not clearly documented all of its program goals and has not developed performance measures to assess whether the agency is making progress towards achieving its goals. We did not find explicitly-labeled program goals in the DCE/SP Handbook, DEA budget justification documents, and DEA’s webpage which we reviewed. However, we found the following four statements which appeared to reflect program goals: 1. halt the spread of marijuana cultivation in the United States; 2. eradicate marijuana that is illegally cultivated by a person or drug trafficking organization; 3. disrupt and dismantle drug trafficking organizations and deprive these organizations of significant revenue streams; and 4. deter the illegal cultivation of marijuana through arrest, prosecution, incarceration of cultivators and seizure of drug-derived assets, and by making cultivation untenable due to increased law enforcement activities. DEA headquarters officials confirmed to us that the statements above reflected the goals of the program. However, they also described the following additional goals that are not explicitly defined in agency or program documentation: maximize the number of law enforcement agencies that participate in improve safety during operations through increased access to training and eradication schools; and share information on illegal marijuana cultivation among law enforcement agencies. Headquarters officials explained that because they are still relatively new to the program—having arrived in 2016—they had not yet documented these goals. Officials said they plan to document the program goals in the future, but did not provide specific time frames for doing so. Standards for Internal Control in the Federal Government state that management should define objectives clearly to enable identification of risks and define risk tolerances. Moreover, objectives are to be specific and measurable so they can be understood at all levels of the entity and that performance towards achieving those objectives can be assessed. Further, DEA has not developed performance measures with baselines, measurable targets, and linkage to program goals—several important attributes we have previously identified that performance measures should include if they are to be effective in monitoring progress and determining how well programs are achieving their goals. Baselines enable decision makers to assess the program’s performance over time. Identifying and reporting deviations from the baseline as a program proceeds provides valuable oversight by identifying areas of program risk and their causes to decision makers. Measurable targets help decision makers conduct assessments of whether program goals were achieved. Lastly, linkages between an organization’s goals and performance measures create a line of sight so that everyone understands how program activities contribute to the organization’s goals. DEA headquarters officials agreed that developing baselines to monitor trends in program performance over time would be useful for program management. However, officials said that setting measurable targets would be challenging because of factors outside of DEA’s control that may affect eradication efforts, including extreme weather events and changes in illegal marijuana cultivation and trafficking trends. However, DEA currently has performance measures with measurable targets for some of its drug enforcement-related programs and activities. For example, DEA has a performance measure with a measurable target for its agency-wide objective related to dismantling drug trafficking organizations—maximizing the monetary value of currency, property, and drugs seized. This performance measure reflects the outcomes of multiple activities across DEA, including DCE/SP. Further, while we agree that developing drug enforcement-related performance measures with measurable targets may be difficult, targets can help DEA evaluate past performance and make informed decisions about future operations, including allocating resources or developing strategies for the purpose of maintaining or improving performance. GPRAMA directs agencies to develop and document goals, as well as performance measures to assess progress towards their goals. While those requirements are applicable to the department or agency level (e.g., DOJ), we have previously reported that they can serve as leading practices at other organizational levels, including the program, project, or activity level. Agencies can use performance measurement to make various types of management decisions to improve programs and results, such as developing strategies and allocating resources, including identifying problems and taking corrective action when appropriate. Clearly documenting all program goals and developing performance measures with baselines, measurable targets, and linkage to program goals could provide DEA with the information it needs to assess progress and make informed decisions about current and future operations. Despite states’ legalization of marijuana for medical or recreational purposes, illegal marijuana cultivation continues to occur. As the nation’s primary federal law enforcement agency for investigating and enforcing potential violations of controlled substance laws and regulations, DEA aims to halt the spread of illegal domestic marijuana cultivation. To accomplish this goal, DEA has provided financial assistance through DCE/SP to support participating state and local law enforcement agencies’ efforts to curb illegal domestic marijuana cultivation for almost four decades. These participating agencies have collectively eradicated several million illegal domestic marijuana plants annually in recent years. Nonetheless, DEA management can take further actions to improve its oversight of various aspects of the program. Specifically, by developing and implementing a plan with specific actions and time frames to ensure that DEA field staff are consistently implementing the agency’s requirements for collecting information on program expenditures, DEA will be better positioned to ensure that program funds are being expended appropriately. Additionally, by clarifying its guidance on the eradication and suppression activities participating agencies are required to report— and communicating the guidance to participating agencies and relevant DEA officials—DEA will have more reliable information to assess program performance and manage the program effectively. Finally, by clearly documenting program goals for DCE/SP and developing related performance measures with baselines, measurable targets, and linkage to those goals, DEA will be better able to assess the program’s performance over time and, if necessary, redirect resources to effective eradication and suppression efforts. Moving in this direction could help program investments achieve even greater results. We are making the following four recommendations to DEA: The DEA Administrator should develop and implement a plan with specific actions and time frames to ensure that regional contractors are implementing DEA’s requirement for collecting documentation supporting participating agencies’ DCE/SP program expenditures in the intended manner. (Recommendation 1) The DEA Administrator should clarify DCE/SP guidance on the eradication and suppression activities that participating agencies are required to report, and communicate it to participating agencies and DEA officials responsible for implementing DCE/SP. (Recommendation 2) The DEA Administrator should clearly document all DCE/SP program goals. (Recommendation 3) The DEA Administrator should develop DCE/SP performance measures with baselines, targets, and linkage to program goals. (Recommendation 4) We provided a draft of this report to DOJ, including DEA, and USDA for review and comment. In its comments, reproduced in appendix II, DEA concurred with our recommendations and described planned actions to address them. DEA also provided technical comments, which we incorporated as appropriate. USDA told us that they had no comments on the draft report. In response to our first recommendation that DEA develop and implement a plan with specific actions and time frames to ensure that regional contractors are implementing DEA's requirement for collecting documentation supporting participating agencies' DCE/SP program expenditures in the intended manner, DEA concurred and stated that it will take measures to ensure that contract personnel are documenting and reporting expenditures in accordance with policy. Furthermore, DEA reported plans to update its DCE/SP Handbook by the end of the second quarter of fiscal year 2019 to provide uniform policy guidance on this matter. These actions, if implemented as described, should address the intent of our recommendation. DEA also concurred with our second recommendation that DEA clarify DCE/SP guidance on the eradication and suppression activities that participating agencies are required to report, and communicate it to participating agencies and DEA officials responsible for implementing DCE/SP. In its response, DEA reported plans to update the DCE/SP Handbook by the end of the second quarter of fiscal year 2019 so that the handbook clearly articulates the requirements and methods for reporting eradication and suppression data. Furthermore, DEA reported plans to conduct site visits and conference calls in the third and fourth quarters of fiscal year 2019 to communicate the requirements. These actions, if implemented as described, should address the intent of our recommendation. DEA concurred with our third recommendation that DEA clearly document all DCE/SP program goals. In its response, DEA reported plans to amend and document program goals for fiscal year 2019 and ensure that they are explicitly included in the DCE/SP Handbook and budget submissions. These actions, if implemented as described, should address the intent of our recommendation. DEA concurred with our fourth recommendation that DEA develop DCE/SP performance measures with baselines, targets, and linkage to program goals. In its response, DEA stated that it had identified performance measures for DCE/SP and convened an ongoing working group of subject matter experts to select a subset of these performance measures in order to better inform DCE/SP processes and management decision-making. These actions, if implemented as described, should address the intent of our recommendation. We are sending copies of this report to the appropriate congressional committees, the Attorney General, the DEA Administrator and the Secretary of Agriculture, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. From 2015 through fiscal year 2018, the Drug Enforcement Administration (DEA) obligated about $56 million through its Domestic Cannabis Eradication/Suppression Program (DCE/SP) to state and local law enforcement agencies (participating agencies) in 43 states and the U.S. Virgin Islands to support their marijuana eradication and suppression activities. See table 2. In the table below, we also provide the status of marijuana legalization under state or territorial law, as of July 2018. Specifically, these categories include: recreational and medical legalization (R&M); medical legalization only (M); cannabidiol product access laws only (CBD); and no legalization (No). In addition to the contact named above, Brett Fallavollita (Assistant Director), David Bieler (Analyst-in-Charge), Matthew T. Lowney, Billy Commons, Pamela Davidson, Steve Gaty, Eric Hauswirth, Benjamin Licht, Kimberly McGatlin, and Adam Vogt made key contributions to this report.", "summary": "Marijuana is generally illegal under federal law. Nonetheless, an increasing number of states have legalized medical or recreational marijuana under state law. However, in these states, some marijuana-related activity may still be illegal under state law. Since 1981, DEA's DCE/SP has provided financial support to participating state and local agencies for their efforts to eradicate illegal marijuana. GAO was asked to review DEA's DCE/SP. This report examines (1) DCE/SP funding and expenditures in recent years, (2) how DEA ensures that participating agencies expend funds in accordance with program requirements, and (3) how DEA uses performance assessment to help manage DCE/SP. GAO analyzed DCE/SP guidance, and expenditure and performance information from 2015 through fiscal year 2017, and evaluated DEA's oversight and performance management efforts against internal control standards. GAO also interviewed officials from DEA, the U.S. Forest Service, and participating agencies in six states, which GAO selected to include varying levels of DCE/SP funding and numbers of marijuana grow sites eradicated in recent years. The Drug Enforcement Administration (DEA) obligated over $17 million annually on average from 2015 through 2018 to its Domestic Cannabis Eradication/ Suppression Program (DCE/SP)—which supports participating state and local law enforcement agencies' efforts to eradicate illegal marijuana. DEA obligated funds to participating agencies in states with and without marijuana legalization laws. Participating agencies expended the majority of funds on aviation support and overtime (see fig. below). Officials told GAO they expended funds to help eradicate marijuana that was not in compliance with state and local marijuana laws. For example, officials in California—a state with medical and recreational marijuana legalization laws—said that all of their eradication occurs on public lands such as national forests, or private land that had been trespassed upon. In total, agencies have eradicated several million plants annually in recent years. Participating Agencies' Top Domestic Cannabis Eradication/Suppression Program (DCE/SP) Expenditures in Recent Years DEA oversees participating agencies' compliance with program expenditure requirements in various ways, but does not consistently collect supporting documentation for expenditure reports. DEA field officials collect varying levels of documentation, and headquarters officials were not aware of these varying practices. DEA officials said they are now working to address this issue, but they have not developed a plan with specific actions and time frames for completion. By developing and implementing such a plan, DEA could have greater assurance that funds are being expended appropriately. DEA collects information on program activities to help manage DCE/SP, such as number of plants eradicated. However, participating agencies GAO spoke with have practices for reporting some program activities that differ from DEA's guidance due to varying interpretations of the guidance. As a result this information is neither fully accurate nor reliable for assessing program performance. Also, DEA has not clearly documented all of its program goals or developed performance measures to assess progress toward those goals. Improving the reliability of the information it collects, clearly documenting all program goals, and developing performance measures could provide DEA with the information it needs to manage the program more effectively. GAO is making four recommendations, including that DEA develop a plan to ensure the collection of consistent documentation of expenditures, clarify its guidance for reporting program activities, document all of its program goals, and develop performance measures. DEA concurred with the recommendations.", "document_type": "gao"}
{"report": "We reported in June 2017 that our analysis of EOIR’s annual immigration court system caseload—the number of open cases before the court during a single fiscal year—showed that it grew 44 percent from fiscal years 2006 through 2015 due to an increase in the case backlog, while case receipts remained steady and the immigration courts completed fewer cases. For the purpose of our analysis, the immigration courts’ annual caseload was comprised of three parts: (1) the number of new cases filed by DHS; (2) the number of other case receipts resulting from remands from the Board of Immigration Appeals and motions to reopen cases, reconsider prior decisions, or recalendar proceedings; and (3) the case backlog—the number of cases pending from previous years that remain open at the start of a new fiscal year. During this 10-year period, the immigration courts’ overall annual caseload grew from approximately 517,000 cases in fiscal year 2006 to about 747,000 cases in fiscal year 2015, as shown in figure 1. We further reported in June 2017 that, according to our analysis, total case receipts remained about the same in fiscal years 2006 and 2015 but fluctuated over the 10-year period, with new case receipts generally decreasing and other case receipts generally increasing. Over the same period, EOIR’s case backlog more than doubled. Specifically, immigration courts had a backlog of about 212,000 cases pending at the start of fiscal year 2006 and the median pending time for those cases was 198 days. By the beginning of fiscal year 2009, the case backlog declined slightly to 208,000 cases. From fiscal years 2010 through 2015, the case backlog grew an average of 38,000 cases per year. At the start of fiscal year 2015, immigration courts had a backlog of about 437,000 cases pending and the median pending time for those cases was 404 days. The increase in the immigration court case backlog occurred as immigration courts completed fewer cases annually. In particular, the number of immigration court cases completed annually declined by 31 percent from fiscal year 2006 to fiscal year 2015—from about 287,000 cases completed in fiscal year 2006 to about 199,000 completed in 2015. According to our analysis, while the number of cases completed annually declined, the number of immigration judges increased between fiscal year 2006 and fiscal year 2015. This resulted in a lower number of case completions per immigration judge at the end of the 10-year period. Additionally, we reported in June 2017 that initial immigration court case completion time increased more than fivefold between fiscal year 2006 and fiscal year 2015. Overall, the median initial completion time for cases increased from 43 days in fiscal year 2006 to 286 days in fiscal year 2015. However, case completion times varied by case type and detention status. For example, the median number of days to complete a removal case, which comprised 97 percent of EOIR’s caseload for this time period, increased by 700 percent from 42 days in fiscal year 2006 to 336 days in fiscal year 2015. However, the median length of time it took to complete a credible fear case, which comprised less than 1 percent of EOIR’s caseload during this period, took 5 days to complete in fiscal year 2006 as well as in fiscal year 2015. Initial case completion times for both detained and non-detained respondents more than quadrupled from fiscal year 2006 through fiscal year 2015. The median case completion time for non-detained cases, which comprised 79 percent of EOIR’s caseload from fiscal year 2006 to fiscal year 2015, grew more than fivefold from 96 days to 535 days during this period. Similarly, the median number of days to complete a detained case, which judges are to prioritize on their dockets, quadrupled over the 10-year period, increasing from 7 days in fiscal year 2006 to 28 days in fiscal year 2015. EOIR officials, immigration court staff, DHS attorneys, and other experts and stakeholders we interviewed provided various potential reasons why the case backlog may have increased and case completion times slowed in recent years. These reasons included: a lack of court personnel, such as immigration judges, legal clerks, and other support staff; insufficient funding to appropriately staff the immigration courts; a surge in new unaccompanied children cases, beginning in 2014, which may take longer to adjudicate than other types of cases; frequent use of continuances—temporary case adjournments until a different day or time—by immigration judges; and issues with the availability and quality of foreign language translation. We also reported in June 2017 that EOIR has faced long-standing management and operational challenges. In particular, we identified challenges related to EOIR’s workforce planning, hiring, and technology utilization, among other things. We recommended actions to improve EOIR’s management in these areas. EOIR generally concurred and has initiated actions to address our recommendations. However, EOIR needs to take additional steps to fully implement our recommendations to help strengthen the agency’s management and reduce the case backlog. Workforce planning. In June 2017, we reported that EOIR estimated staffing needs using an informal approach that did not account for long- term staffing needs, reflect EOIR’s performance goals, or account for differences in the complexity of court cases. For example, in developing its staffing estimate, EOIR did not calculate staffing needs beyond the next fiscal year or take into account resources needed to achieve the agency’s case completion goals, which establish target time frames in which immigration judges are to complete a specific percentage of certain types of cases. Furthermore, we found that, according to EOIR data, approximately 39 percent of all immigration judges were eligible to retire as of June 2017, but EOIR had not systematically accounted for these impending retirements in its staffing estimate. At the time of our review, EOIR had begun to take steps to account for long-term staffing needs, such as by initiating a workforce planning report and a study on the time it takes court staff to complete key activities. However, we found that these efforts did not align with key principles of strategic workforce planning that would help EOIR better address current and future staffing needs. EOIR officials also stated that the agency had begun to develop a strategic plan for fiscal years 2018 through 2023 that could address its human capital needs. We recommended that EOIR develop and implement a strategic workforce plan that addresses key principles of strategic workforce planning. EOIR agreed with our recommendation. In February 2018, EOIR officials told us that they had established a committee and working group to examine the agency’s workforce needs and would include workforce planning as a key component in EOIR’s forthcoming strategic plan. Specifically, EOIR officials stated that the agency had established the Immigration Court Staffing Committee in April 2017 to examine how to best leverage its existing judicial and court staff workload model to address its short- and long-term staffing needs, assess the critical skills and competencies needed to achieve future programmatic results, and develop strategies to address human capital gaps, among other things. In February 2018, EOIR officials stated that the agency replaced this committee, which had completed its work, with a smaller working group of human resource employees charged with addressing the agency’s strategic workforce planning. These are positive steps, but to fully address our recommendation, EOIR needs to continue to develop, and then implement a strategic workforce plan that: (1) addresses the agency’s short- and long-term staffing needs; (2) identifies the critical skills and competencies needed to achieve future programmatic results; and (3) includes strategies to address human capital gaps. Once this strategic workforce plan is completed, EOIR needs to monitor and evaluate the agency’s progress toward its human capital goals. Hiring. Additionally, in our June 2017 report, we found that EOIR did not have efficient practices for hiring new immigration judges, which has contributed to immigration judges being staffed below authorized levels and to staffing shortfalls. For example, in fiscal year 2016, EOIR received an appropriation supporting 374 immigration judge positions but had 289 judges on board at the end of the fiscal year. EOIR officials attributed these gaps to delays in the hiring process. Our analysis of EOIR hiring data supported their conclusion. Specifically, we found that from February 2014 through August 2016, EOIR took an average of 647 days to hire an immigration judge—more than 21 months. As a result, we recommended that EOIR (1) assess the immigration judge hiring process to identify opportunities for efficiency; (2) use the assessment results to develop a hiring strategy that targets short- and long-term human capital needs; and (3) implement any corrective actions related to the hiring process resulting from this assessment. In response to our report, EOIR stated that it concurred with our recommendation and was implementing a new hiring plan as announced by the Attorney General in April 2017 intended to streamline hiring. Among other things, EOIR stated that the new hiring plan sets clear deadlines for assessing applicants moving through different stages of the process and for making decisions on advancing applicants to the next stage, and allows for temporary appointments for selected judges pending full background investigations. In February 2018, EOIR indicated to us that it had begun to use the process outlined in its hiring plan to fill judge vacancies. The Attorney General also announced in April 2017 that the agency would commit to hire an additional 50 judges in 2018 and 75 additional judges in 2019. In January 2018, EOIR officials told us that the agency had a total of 330 immigration judges, an increase of 41 judges since September 2016. However, EOIR remained below its fiscal year 2017 authorized level of 384 immigration judges based on funding provided in fiscal years 2016 and 2017. Additionally, the Consolidated Appropriations Act, 2018 provided funding for EOIR to hire at least 100 additional immigration judge teams, including judges and supporting staff, with a goal of fielding 484 immigration judge teams nationwide by 2019. In September 2018, EOIR reported it had a total of 351 immigration judges and was continuing to hire additional judges. Hiring additional judges is a positive step; however, EOIR has not assessed its hiring process to identify opportunities for efficiency, and we found in our June 2017 report that EOIR was not aware of the factors most affecting its hiring process. For example, we reported that EOIR officials attributed the length of the hiring process to delays in the Federal Bureau of Investigation background check process, which is largely outside of EOIR’s control. However, our analysis found that while background checks accounted for an average of 41 days from fiscal year 2015 through August 2016, other processes within EOIR’s control accounted for a greater share of the total hiring time. For example, for the same period our analysis found that an average of 135 days elapsed between the date EOIR posted a vacancy announcement and the date EOIR officials began working to fill the vacancy. By assessing its hiring process, EOIR could better ensure that it is accurately and completely identifying opportunities for efficiency. To fully address our recommendation, EOIR will need to continue to improve its hiring process by (1) assessing the prior hiring process to identify opportunities for efficiency; (2) developing a hiring strategy targeting short- and long-term human capital needs; and (3) implementing corrective actions in response to the results of its assessment of the hiring process. Technology utilization. In June 2017 we also reported on EOIR’s technology utilization, including the agency’s oversight of the ongoing development of a comprehensive electronic-filing (e-filing) capability—a means of transmitting documents and other information to immigration courts through an electronic medium, rather than on paper. EOIR identified the implementation of an e-filing system as a goal in 2001, but had not, as of September 2018, fully implemented this system. In 2001, EOIR issued an executive staff briefing for an e-filing system that stated that only through a fully electronic case management and filing system would the agency be able to accomplish its goals. This briefing also cited several benefits of an e-filing system, including, among other things, reducing the data entry, filing, and other administrative tasks associated with processing paper case files; and providing the ability to file court documents from private home and office computers. As we reported in June 2017, EOIR initiated a comprehensive e-filing effort in 2016—the EOIR Court and Appeals System (ECAS)—for which EOIR had documented policies and procedures governing how its primary ECAS oversight body—the ECAS Executive Committee—would oversee ECAS through the development of a proposed ECAS solution. However, we found that EOIR had not yet designated an entity to oversee ECAS after selection of a proposed solution during critical stages of its development and implementation. We recommended that in order to help ensure EOIR meets its cost and schedule expectations for ECAS, the agency identify and establish the appropriate entity to oversee ECAS through full implementation. EOIR concurred and stated that it had selected and convened the EOIR Investment Review Board to serve as the ECAS oversight body with the EOIR Office of Information Technology directly responsible for the management of the ECAS program. EOIR officials told us in February 2018 that the board convened in October 2017 and January 2018 to discuss, among other things, the ECAS program. However, as we reported in June 2017, EOIR officials previously told us that the EOIR Investment Review Board was never intended to oversee ECAS implementation due to the detailed nature of this system’s implementation. As of September 2018, EOIR has not demonstrated its selection of, or how the EOIR Investment Review Board is to serve as the oversight body for ECAS. Additionally, we recommended in June 2017 EOIR develop and implement a plan that is consistent with best practices for overseeing ECAS to better position the agency to identify and address any risks and implement ECAS in accordance with its cost, schedule, and operational expectations. As of September 2018, EOIR has not indicated that it has developed such a plan. In November 2014 we reported that the number of foreign nationals who participated in the ATD program increased from 32,065 in fiscal year 2011 to 40,864 in fiscal year 2013 in part because of increases in either enrollments or the average length of time foreign nationals spent in one of the program’s components. For example, during this time period, the number of foreign nationals enrolled in the component of the program that was run by a contractor who maintained in-person contact with the foreign national and monitored the foreign national with either GPS equipment or a telephonic reporting system, increased by 60 percent. In addition, the average length of time foreign nationals spent in the other component of the program, which offered a lower level of supervision at a lower contract cost but still involved ICE monitoring of foreign nationals using either telephonic reporting or GPS equipment provided by a contractor, increased by 80 percent—from about 10 months to about 18 months. ICE officials stated that how long a foreign national is in the ATD program before receiving a final decision on his or her immigration proceedings depends on how quickly EOIR can process immigration cases. We also found in our November 2014 report that the average daily cost of the ATD program was $10.55 in fiscal year 2013, while the average daily cost of detention was $158. While our analyses showed that the average daily cost of the ATD program was significantly less than the average daily cost of detention, the length of immigration proceedings affected the cost-effectiveness of the ATD program to varying extents under different scenarios. As previously discussed, immigration judges are to prioritize detained cases, and our June 2017 report found that EOIR data showed that median case completion times for non-detained cases were greater than for detained cases. Accordingly, the length of immigration proceedings for foreign nationals in detention may be shorter than those in the ATD program. Specifically, in our November 2014 report, we conducted two analyses to estimate when the cost of keeping foreign nationals in the ATD program would have surpassed the cost of detaining a foreign national in a facility. Under our first analysis, we considered the average costs of ATD and detention and the average length of time foreign nationals in detention spent awaiting an immigration judge’s final decision. We found that the ATD program would have surpassed the cost of detention after a foreign national was in the program for 1,229 days in fiscal year 2013— significantly longer than the average length of time foreign nationals spent in the ATD program in that year (383 days). In our second analysis, we considered the average costs of ATD and detention and the average length of time foreign nationals spent in detention—regardless of whether they had received a final decision from an immigration judge—since some foreign nationals may not be in immigration proceedings or may not have reached their final hearing before ICE released them from detention. ICE reported that the average length of time that a foreign national was in detention in fiscal year 2013 was 29 days. Using this average, we calculated the average length of time foreign nationals could have stayed in the ATD program before they surpassed the cost of detention would have been 435 days in fiscal year 2013. We found in our November 2014 report that ICE established two program performance measures to assess the ATD program’s effectiveness in (1) ensuring foreign national compliance with court appearance requirements and (2) ensuring removals from the United States, but limitations in data collection hindered ICE’s ability to assess overall program performance. Compliance with court appearances. For the component of the ATD program managed by the contractor, data collected by the ATD contractor from fiscal years 2011 through 2013 showed that over 99 percent of foreign nationals with a scheduled court hearing appeared at their scheduled court hearings while participating in the ATD program. The court appearance rate dropped slightly to over 95 percent of foreign nationals with a scheduled final hearing appearing at their hearing. However, we reported that ICE did not collect similar court compliance data for foreign nationals in the component of the ATD program that ICE was responsible for managing—which accounted for 39 percent of the overall ATD program in fiscal year 2013. As a result, we recommended that ICE collect and report data on foreign national compliance with court appearance requirements for participants in this component of the ATD program. As of June 2017, ICE reported that the ATD contractor was collecting data on foreign nationals’ court appearance compliance for foreign nationals in both components of the ATD program, and at that time, was collecting data for approximately 88 percent of foreign nationals that were awaiting a hearing. ICE officials stated that they did not expect that 100 percent of foreign nationals in the ATD program would be tracked for court appearance compliance by the contractor because there may be instances where ICE has chosen to monitor a foreign national directly, rather than have the contractor track a foreign national’s compliance with court appearance requirements. Officials stated that ICE officers may decide to monitor a foreign national directly because they determined that it is in the government’s best interest, or it was fiscally responsible when a foreign national’s court date was far in the future and court tracking conducted by the contractor would be costly. In July 2017, ICE reported that they assessed whether ICE officers that directly monitor foreign nationals in the ATD program had reliable data to determine court appearance compliance and found no practical or appropriate way to obtain such data without devoting a significant amount of ICE’s limited resources. Although ICE is not collecting court appearance compliance data for all foreign nationals in both components of the ATD program, as of July 2017, it has met the intent of our recommendation by collecting and reporting on all available data on the majority of foreign nationals in both components of the ATD program. Removals from the United States. For this program performance measure, a removal is attributed to the ATD program if the foreign national (1) was enrolled in ATD for at least 1 day, and (2) was removed or had departed voluntarily from the United States in the same fiscal year, regardless of whether the foreign national was enrolled in ATD at the time the foreign national left the country. The ATD program met its goal for removals in fiscal years 2012 and 2013. For example, in fiscal year 2013, ICE reported 2,901 removals of foreign nationals in the ATD program—surpassing its goal of 2,899 removals. ATD program performance measures provide limited information about the foreign nationals who are terminated from the ATD program prior to receiving the final disposition of their immigration proceedings, or who were removed or voluntarily departed from the country. Specifically, ICE counts a foreign national who was terminated from the program and was subsequently removed from the United States toward the ATD removal performance measure as long as the foreign national was in the program during the same fiscal year he or she was removed from the country. However, foreign nationals who were terminated from the program do not count toward court appearance rates if they subsequently do not appear for court. ICE officials reported that it would be challenging to determine a foreign national’s compliance with the terms of his or her release after termination from the ATD program given insufficient resources and the size of the nondetained foreign national population. In accordance with ICE guidance, staff resources are instead directed toward apprehending and removing foreign nationals from the United States who are considered enforcement and removal priorities. Chairman Johnson, Ranking Member McCaskill, and Members of the Committee, this completes my prepared statement. I would be happy to respond to any questions you or the members of the committee may have. If you or your staff have any questions about this testimony, please contact Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Taylor Matheson (Assistant Director), Tracey Cross, Ashley Davis, Paul Hobart, Sasan J. “Jon” Najmi, and Michele Fejfar. Key contributors for the previous work on which this testimony is based are listed in each product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The Department of Justice's EOIR is responsible for conducting immigration court proceedings, appellate reviews, and administrative hearings to fairly, expeditiously, and uniformly administer and interpret U.S. immigration laws. The Department of Homeland Security's ICE manages the U.S. immigration detention system, which houses foreign nationals, including families, whose immigration cases are pending or who have been ordered removed from the country. ICE implemented the ATD program in 2004 to be a cost-effective alternative to detention that uses case management and electronic monitoring. This statement addresses (1) EOIR's caseload, including the backlog, and how EOIR manages immigration court operations, including hiring, workforce planning, and technology use; and (2) participation in and the cost of the ATD program and the extent to which ICE has measured the performance of the ATD program. This statement is based on two reports and a testimony GAO issued from November 2014 through April 2018, as well as actions agencies have taken, as of September 2018, to address resulting recommendations. For the previous reports and testimony, GAO analyzed EOIR and ICE data, reviewed documentation, and interviewed officials. In June 2017, GAO reported that the Executive Office for Immigration Review's (EOIR) immigration court case backlog—cases pending from previous years still open at the start of a new fiscal year—more than doubled from fiscal years 2006 through 2015 (see figure), primarily due to declining cases completed per year. GAO also reported in June 2017 that EOIR could take several actions to address management challenges related to hiring, workforce planning, and technology utilization, among other things. For example, EOIR did not have efficient practices for hiring immigration judges. EOIR data showed that on average from February 2014 through August 2016, EOIR took more than 21 months to hire a judge. GAO also found that EOIR was not aware of the factors most affecting the length of its hiring process. GAO recommended that EOIR assess its hiring process to identify efficiency opportunities. As of January 2018, EOIR had made progress in increasing its number of judges but remained below its fiscal year 2017 authorized level. To better ensure that it accurately and completely identifies opportunities for efficiency, EOIR needs to assess its hiring process. In November 2014, GAO reported that the number of aliens who participated in U.S. Immigration and Customs Enforcement's (ICE) Alternatives to Detention (ATD) program increased from 32,065 in fiscal year 2011 to 40,864 in fiscal year 2013. GAO also found that the average daily cost of the program—$10.55—was significantly less than the average daily cost of detention—$158—in fiscal year 2013. Additionally, ICE established two performance measures to assess the ATD program's effectiveness, but limitations in data collection hindered ICE's ability to assess program performance. GAO recommended that ICE collect and report on additional court appearance data to improve ATD program performance assessment, and ICE implemented the recommendation. GAO previously made recommendations to EOIR to improve its hiring process, among other things, and to ICE to improve ATD performance assessment. EOIR and ICE generally agreed and implemented or reported actions planned to address the recommendations.", "document_type": "gao"}
{"report": "In our September 2014 report, we found that DHS and GSA planning for the DHS headquarters consolidation did not fully conform with leading capital decision-making practices intended to help agencies effectively plan and procure assets. Specifically, we found that DHS and GSA had not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives that would help officials adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices. At that time, DHS and GSA officials reported that they had taken some initial actions that may facilitate consolidation planning in a manner consistent with leading practices. For example, DHS had an overall goal of reducing the square footage allotted per employee across the department in accordance with workplace standards, such as standards for telework and hoteling. As we reported in 2014, DHS and GSA officials acknowledged that new workplace standards could create a number of new development options to consider, as the new standards would allow for more staff to occupy the space at St. Elizabeths than previously anticipated. DHS and GSA officials also reported at that time that analyzing different leasing options could affect consolidation efforts. However, we found that the consolidation plans, which were finalized between 2006 and 2009, had not been updated to reflect these actions. In addition, we found in September 2014 that funding for the St. Elizabeths project had not aligned with what DHS and GSA initially planned. We reported that according to DHS and GSA officials, the funding gap between what DHS and GSA requested and what was received from fiscal years 2009 through 2014, was over $1.6 billion. According to these officials, this gap created cost escalations of over $1 billion and schedule delays of over 10 years relative to original estimates. We found in 2014 that these delays posed challenges for DHS in terms of its leasing portfolio. Specifically, DHS’s long-term leasing portfolio was developed based on the original expected completion date for St. Elizabeths development in 2016. In 2014, DHS and GSA reported that they had begun to work together to consider changes to the DHS headquarters consolidation plans, but they had not announced when new plans would be issued. Furthermore, because final documentation of agency deliberations or analyses had not yet been developed, it was unclear if any new plans would be informed by an updated comprehensive needs assessment and capability gap analysis as called for by leading capital decision-making practices. Therefore, in our September 2014 report we recommended that DHS and GSA conduct various assessments and analyses and use the results to inform updated DHS headquarters consolidation plans. DHS and GSA concurred with this recommendation and stated that their forthcoming draft St. Elizabeths Enhanced Consolidation Plan would contain these analyses. As of April 2018, however, the agencies had not submitted updated plan information to Congress that would either meet the requirements of the DHS Headquarters Consolidation Accountability Act or address our recommendation. According to DHS officials, the agencies prepared a comprehensive response to the Act, including updated analyses, but the information is no longer current and now needs to be revised and revalidated before it is submitted to Congress. Officials told us that the updated consolidation plans and analyses assumed that the project would receive more funding in fiscal years 2017 and 2018 than was appropriated. Further, officials told us that the current Administration is expected to provide input on the planned DHS component occupancies at the St. Elizabeths campus. We continue to believe that DHS and GSA attention to following leading capital decision-making practices—including having a consolidation plan that justifies future actions—is critical given the project’s multi-billion dollar cost and impact on departmental operations. In our September 2014 report, we found that DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths did not conform or only minimally or partially conformed with leading estimating practices, and were therefore unreliable. Furthermore, we found that in some areas, the cost and schedule estimates did not fully conform with GSA guidance relevant to developing estimates. In 2014, we found that DHS and GSA cost estimates for the headquarters consolidation project at St. Elizabeths did not reflect leading practices, which rendered the estimates unreliable. For example, we found that the 2013 cost estimate—the most recent available at the time of our 2014 report—did not include (1) a life-cycle cost analysis of the project, including the cost of repair, operations, and maintenance; (2) was not regularly updated to reflect significant changes to the program including actual costs; and (3) did not include an independent estimate to determine whether other estimating methods produce similar results. In addition, a sensitivity and a risk and uncertainty analysis had not been performed to assess the reasonableness of the cost estimate. We have previously reported that a reliable cost estimate is critical to the success of any program. Specifically, we have found that such an estimate provides the basis for informed investment decision making, realistic budget formulation and program resourcing, meaningful progress measurement, proactive course correction when warranted, and accountability for results. Accordingly, in 2014, we concluded that DHS and GSA would benefit from maintaining current and well-documented estimates of project costs at St. Elizabeths—even if project funding is not fully secured. In 2014, we also found that the 2008 and 2013 schedule estimates (the estimates available at the time of our review) did not include all activities for both the government and its contractors necessary to accomplish the project’s objectives and did not include schedule baseline documents to help measure performance as reflected in leading practices and GSA guidance. For the 2008 schedule estimate, we found that resources (such as labor, materials, and equipment) were not accounted for and a risk assessment had not been conducted to predict a level of confidence in the project’s completion date. In addition, we found the 2013 schedule estimate was unreliable because, among other things, it was incomplete in that it did not provide details needed to understand the sequence of events, including work to be performed in fiscal years 2014 and 2015. In 2014, we concluded that developing cost and schedule estimates consistent with leading practices could promote greater transparency and provide decision makers needed information about the St. Elizabeths project and the larger DHS headquarters consolidation effort. However, in commenting on our analysis of St. Elizabeths cost and schedule estimates, DHS and GSA officials said that it would be difficult or impossible to create reliable estimates that encompass the scope of the entire St. Elizabeths project. In response to our findings, officials said that given the complex, multiphase nature of the overall development effort, specific estimates are created for smaller individual projects, but not for the campus project as a whole. Therefore, in their view, leading estimating practices and GSA guidance cannot reasonably be applied to the high-level projections developed for the total cost and completion date of the entire St. Elizabeths project. GSA stated that the higher-level, milestone schedule currently being used to manage the program was more flexible than the detailed schedule we proposed, and had proven effective even with the highly variable funding provided for the project. However, our September 2014 review found this high-level schedule was not sufficiently defined to effectively manage the program. For example, our review showed that the schedule did not contain detailed schedule activities that included all government, contractor, and applicable subcontractor efforts. In our 2014 report, we recognized the challenges of developing reliable cost and schedule estimates for a large-scale, multiphase project like St. Elizabeths, particularly given its unstable funding history and agreed that incorporating cost- and schedule- estimating leading practices could involve additional costs. However, we also concluded that unless DHS and GSA invest in these practices, Congress risked making funding decisions and DHS and GSA management risked making resource allocation decisions without the benefit that a robust analysis of levels of risk, uncertainty, and confidence provides. Therefore, in our September 2014 report we recommended that DHS and GSA develop revised cost and schedule estimates for the remaining portions of the consolidation project in accordance with leading practices. DHS and GSA concurred with the recommendation. As of April 2018, however, the agencies had not submitted revised cost and schedule information to Congress that would either meet the requirements of the DHS Headquarters Consolidation Accountability Act or address our recommendation. GSA is leading efforts to revise the project’s cost and schedule estimates, and according to GSA officials, the revised figures will take into account leading cost- and schedule- estimation practices, including a risk assessment. We continue to believe that creating up-to-date, reliable cost and schedule estimates for DHS headquarters consolidation should be an integral part of DHS and GSA efforts to reassess the project. Without this information, it will be more difficult for agency officials and Members of Congress to make informed decisions regarding resource allocations and compare competing funding priorities. In our September 2014 report, we also found that DHS had not consistently applied its major acquisition guidance for reviewing and approving the headquarters consolidation project. Specifically, we found that DHS had guidelines in place to provide senior management the opportunity to review and approve its major projects, but DHS had not consistently applied these guidelines to its efforts to work with GSA to plan and implement headquarters consolidation. Part of the inconsistency was the result of DHS designating the headquarters consolidation project as a major acquisition in some years but not in others. For example, we found that in 2010 and 2011, DHS identified the headquarters consolidation project as a major acquisition and included the project on DHS’s Major Acquisitions Oversight List. Thus, the project was subject to the oversight and management policies and procedures established in DHS major acquisition guidance; however, the project did not comply with major acquisition requirements as outlined by DHS guidelines. For example, we found that the project had not produced any of the required key acquisition documents requiring department-level approval, such as life-cycle cost estimates and an acquisition program baseline, among others. As we reported in 2014, in 2012, the project as a whole was dropped from the list. Subsequently, in 2013 and 2014, DHS included the information technology (IT) acquisition portion of the project on the list, but not the entire project. DHS officials explained that they considered the St. Elizabeths project to be more of a GSA acquisition rather than a DHS acquisition because GSA owns the site and the majority of the building construction is funded through GSA appropriations. In our 2014 report, we recognized that GSA had responsibility for managing contracts associated with the headquarters consolidation project. However, we also noted that a variety of factors, including the overall cost, scope, and visibility of the project, as well as the overall importance of the project in the context of DHS’s mission, made the consolidation project a viable candidate for consideration as a major DHS acquisition. By not consistently applying this review process to headquarters consolidation, we concluded that DHS management risked losing insight into the progress of the St. Elizabeths project, as well as how the project fits in with its overall acquisitions portfolio. Thus, in our September 2014 report we recommended that the Secretary of Homeland Security designate the headquarters consolidation program a major acquisition and apply DHS acquisition policy requirements. DHS concurred with the recommendation. As of April 2018, DHS has made some progress implementing this recommendation. For example, on September 16, 2014, DHS issued an Acquisition Decision Memorandum designating the DHS-funded portions of the headquarters consolidation program as a Major Acquisition Program to be overseen by the departmental Acquisition Review Board (ARB). DHS also made progress implementing this recommendation by conducting and documenting an ARB of the program in November 2016. The ARB process provided DHS greater oversight of headquarters consolidation, and provided a forum for officials to consider a wide range of issues affecting consolidation efforts, such as funding and project scope. In addition, in January 2018, DHS officials reported that they were working to align headquarters consolidation program documentation to meet the spirit of DHS acquisition policy guidance. We will reassess the status of this recommendation after the consolidation plan and cost and schedule estimates are updated and submitted to Congress per the DHS Headquarters Consolidation Accountability Act. At that time, we believe there will be more certainty about the future direction of the project overall, and DHS’s funded portion in particular, and we will be better able to assess the level of DHS acquisitions oversight for the project. Chairman Perry, Ranking Member Correa, and Members of the Subcommittee, this concludes my prepared statement. I look forward to responding to any questions that you may have. If you or your staff members have any questions about this testimony, please contact Chris Currie, Director, Homeland Security and Justice Issues, at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement are John Mortin (Assistant Director), Karen Richey (Assistant Director), Juaná Collymore, Jennifer Leotta, Thomas Lombardi, David Lutter, and Erin O’Brien. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "DHS and GSA have been managing efforts to consolidate DHS executive leadership, operational management, and other personnel at one secure headquarters location rather than at multiple locations throughout the Washington, D.C., metropolitan area. The consolidation is to include the development of multi-billion dollar headquarters facilities at the St. Elizabeths campus in Washington, D.C. In September 2014, GAO issued a report entitled: Federal Real Property: DHS and GSA Need to Strengthen the Management of DHS Headquarters Consolidation (GAO-14-648). This statement summarizes the key findings and recommendations from this report, and provides a status update as of April 2018 on DHS and GSA implementation of GAO's recommendations. To complete the September 2014 report, GAO compared DHS and GSA capital planning efforts against applicable leading practices, interviewed officials, and reviewed cost and schedule estimates for the St. Elizabeths project. To assess subsequent DHS and GSA actions to implement GAO's September 2014 recommendations, GAO conducted periodic follow-up with agency officials. In its September 2014 report, GAO found that Department of Homeland Security (DHS) and General Services Administration (GSA) planning for the DHS headquarters consolidation at the St. Elizabeths campus in Washington, D.C. did not fully conform with leading capital decision-making practices intended to help agencies effectively plan and procure assets. Specifically, GAO found that DHS and GSA had not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives that would help officials adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices. GAO recommended that DHS and GSA conduct various assessments and analyses and use the results to inform updated DHS headquarters consolidation plans. The agencies concurred with this recommendation. In its September 2014 report, GAO also found that DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths did not conform or, only minimally or partially conformed, with leading estimating practices, and were therefore unreliable. Thus, GAO recommended that DHS and GSA develop revised cost and schedule estimates for the remaining portions of the consolidation project in accordance with leading practices, and the agencies concurred with this recommendation. The DHS Headquarters Consolidation Accountability Act of 2015, enacted in April 2016 would, according to the accompanying Senate committee report, ensure that DHS and GSA fully address the recommendations from GAO's September 2014 report and provide Congress the information needed to make sound decisions regarding the project. Among other things, the Act required DHS, in coordination with GSA, to submit information to Congress, including various assessments and updated cost and schedule estimates related to the DHS headquarters consolidation. As of April 2018, however, DHS and GSA had not submitted the information to Congress that would either meet the requirements of the Act or address GAO's recommendations. DHS and GSA officials cited funding instability as one challenge to updating consolidation plans and cost and schedule estimates. Among other things, GAO recommended in its September 2014 report that DHS and GSA develop revised DHS headquarters plans that reflect leading practices for capital decision making and also reliable cost and schedule estimates. DHS and GSA concurred with our recommendations.", "document_type": "gao"}
{"report": "The PAC has made progress in reforming the personnel security clearance process and implementing various security clearance reform initiatives. For example, the PAC has taken action on 73 percent of the recommendations of a February 2014 review conducted in the wake of the Washington Navy Yard shooting. Actions in response to these recommendations included ODNI and OPM jointly issuing Quality Assessment Standards in January 2015, which establish federal guidelines for assessing the quality of investigations. Additionally, ODNI developed the Quality Assessment Reporting Tool, through which agencies will report on the completeness of investigations. Similarly, the PAC reported quarterly on the status and progress of key initiatives, as part of the Insider Threat and Security Clearance Reform cross-agency priority goal. This reporting included the milestone due date and status for each initiative. According to PAC Program Management Office officials, although the data are no longer publicly reported, they have continued to track the status of these milestones internally, and identified almost half of the initiatives—16 of 33—as complete as of the third quarter of fiscal year 2017. Additionally, the PAC has issued three documents that serve as its updated strategic framework for the next 5 years. In July 2016, it issued its Strategic Intent for Fiscal Years 2017 through 2021, which identifies the overall vision, goals, and 5-year business direction to achieve an entrusted workforce. In October 2016, it issued an updated PAC Enterprise IT Strategy, which provides the technical direction to provide mission-capable and secure security, suitability, and credentialing IT systems. According to PAC program management officials, the third document—PAC Strategic Intent and Enterprise IT Strategy Implementation Plan—was distributed to executive branch agencies in February 2017. Further, we reported in December 2017 that PAC members noted additional progress in reforming the personnel security clearance process, such as the development of Security Executive Agent Directives, the identification of executive branch—wide IT shared service capabilities, and the standardization of adjudicative criteria. Although the PAC has reformed many parts of the personnel security clearance process, the implementation of certain key initiatives, including the full implementation of the 2012 Federal Investigative Standards and the development of government-wide performance measures for the quality of investigations, remain incomplete. The Federal Investigative Standards outline criteria for conducting background investigations to determine eligibility for a security clearance, and are intended to ensure cost-effective, timely, and efficient protection of national interests and to facilitate reciprocal recognition of the resulting investigations. However, the standards also changed the frequency of periodic reinvestigations for certain clearance holders and include continuous evaluation as a new requirement for certain clearance holders. Continuous evaluation is a key executive branch initiative to more frequently identify and assess security-relevant information, such as criminal activity, between periodic reinvestigations. Continuous evaluation is a process to review the background of an individual who has been determined to be eligible for access to classified information or to hold a sensitive position at any time during the period of eligibility. Continuous evaluation involves automated record checks conducted on a more frequent basis, whereas periodic reinvestigations are conducted less frequently and may include, among other things, subject and reference interviews. The types of records checked as part of continuous evaluation are the same as those checked for other personnel security purposes. Security-relevant information discovered in the course of continuous evaluation is to be investigated and adjudicated under the existing standards. Efforts to implement an executive branch continuous evaluation program go back to at least 2008, with a milestone for full implementation by the fourth quarter of fiscal year 2010. In November 2017, we reported that while ODNI has taken an initial step to implement continuous evaluation in a phased approach across the executive branch, it had not determined when the future phases of implementation will occur. We recommended, among other things, that the Director of National Intelligence develop an implementation plan. ODNI generally concurred with that recommendation. Regarding government-wide measures for the quality of background investigations, as noted earlier, ODNI and OPM issued the Quality Assessment Standards and ODNI issued the Quality Assessment Reporting Tool. The Quality Assessment Standards established federal guidelines for assessing the quality of investigations. The Quality Assessment Reporting Tool is a tool through which agencies will report on the completeness of investigations. However, measures for quality have not been developed, and it is unclear when this key effort will be completed. The original milestone for completing government-wide measures was fiscal year 2010, and no new milestone has been established. In our December 2017 report, we recommended that the Director of National Intelligence, in his capacity as the Security Executive Agent, and in coordination with the other PAC Principals, establish a milestone for the completion of government-wide performance measures for the quality of investigations. ODNI disagreed with the recommendation, stating that it is premature to establish such a milestone and that it will do so once the Quality Assessment Reporting Tool metrics have been fully analyzed. We continue to believe that setting a milestone, which takes into consideration the amount of time needed to analyze Quality Assessment Reporting Tool data, will help to ensure that the analysis of the data is completed, initial performance measures are developed, and agencies have a greater understanding of what they are being measured against. Our analysis of government-wide and agency-specific data shows a decline in the number of executive branch agencies meeting the timeliness objectives for processing clearances. While ODNI has taken steps to address timeliness challenges, it has not developed a government-wide approach to help agencies improve the timeliness of initial personnel security clearances. Additionally, the backlog of background investigations conducted by NBIB—the primary entity responsible for conducting background investigations—has steadily increased since 2014 and as of February 2018 exceeds 710,000 cases. NBIB personnel are attempting to decrease the backlog by making the background investigation process more effective and efficient and increasing investigator capacity. However, NBIB faces challenges in developing a plan to reduce the size of the investigation backlog to a manageable level. Our analysis showed that the percentage of executive branch agencies meeting timeliness objectives for investigations and adjudications decreased from fiscal years 2012 through 2016. The Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA) established an objective for each authorized adjudicative agency to make a determination on at least 90 percent of all applications for a personnel security clearance within an average of 60 days after the date of receipt of the completed application by an authorized investigative agency. The objective includes no longer than 40 days to complete the investigative phase and 20 days to complete the adjudicative phase. In assessing timeliness under these objectives, executive branch agencies exclude the slowest 10 percent and report on the average of the remaining 90 percent (referred to as the fastest 90 percent). As part of the Insider Threat and Security Clearance Reform cross- agency priority goal, the PAC reported quarterly on the average number of days to initiate, investigate, adjudicate, and complete the end-to-end process for initial secret and initial top secret cases and periodic reinvestigations for the executive branch as a whole from fiscal year 2014 through 2016. For fiscal year 2016, the PAC reported that the government-wide average for executive branch agencies did not meet the 40-day investigation objective for the fastest 90 percent of initial secret clearances for any quarter; the averages ranged from 92 days to 135 days; did not meet ODNI’s revised investigation objective for the fastest 90 percent of initial top secret clearances for any quarter; the averages ranged from 168 days to 208 days; did not meet the goal of conducting the investigative portion of periodic reinvestigations within 150 days for the fastest 90 percent of cases for any quarter; the averages ranged from 175 days to 192 days; and did not meet the goal of completing periodic reinvestigations—the end-to-end goal—within 195 days for any quarter of fiscal year 2016; the averages ranged from 209 days to 227 days. Our analysis of timeliness data for specific executive branch agencies showed that the percentage of agencies meeting established investigation and adjudication timeliness objectives for initial secret and top secret personnel security clearances and periodic reinvestigations decreased from fiscal year 2012 through 2016. We found that agencies with delegated authority to conduct their own investigations and those that use NBIB as their investigative provider experienced challenges in meeting established investigative timeliness objectives. Specifically, in fiscal year 2012, we found that 73 percent of the agencies, for which we obtained data, did not meet investigation and adjudication objectives for at least three of four quarters for initial secret clearances, 41 percent did not meet those objectives for initial top secret 16 percent did not meet the investigative goal for at least three of four quarters for the fastest 90 percent of periodic reinvestigations. By fiscal year 2016, the percentage of agencies that did not meet these same objectives had increased to 98 percent, 90 percent, and 82 percent, respectively. Furthermore, ODNI requests individual corrective action plans from agencies not meeting security clearance timeliness objectives. However, the executive branch has not developed a government-wide plan, with goals and interim milestones, to meet established timeliness objectives for initial security clearances that takes into consideration increased investigative requirements and other stated challenges. In our December 2017 report, we recommended that the Director of National Intelligence, as Security Executive Agent, develop a government-wide plan, including goals and interim milestones, to meet timeliness objectives for initial personnel security clearance investigations and adjudications. Although the DNI did not specifically comment on this recommendation, we continue to believe a government-wide plan would better position ODNI to identify and address any systemic government-wide issues. We also recommended that the Director of National Intelligence conduct an evidence-based review of the investigation and adjudication timeliness objectives and take action to adjust the objectives if appropriate. He did not agree with this recommendation and stated that it is premature to revise the existing timeliness goals until NBIB’s backlog is resolved. We continue to believe that our recommendation to conduct an evidence- based review, using relevant data, is valid. As we noted in our report, even agencies with delegated authority to conduct their own investigations are experiencing challenges meeting established timeliness objectives. We also noted that ODNI has not comprehensively revisited the investigation or adjudication timeliness objectives for initial security stemming from the implementation of the 2012 Federal Investigative Standards. The executive branch’s challenges in meeting investigation timeliness objectives for initial personnel security clearances and periodic reinvestigations have contributed to a significant backlog of background investigations at the primary entity responsible for conducting background investigations, NBIB. NBIB personnel are attempting to decrease the backlog by making the background investigation process more effective and efficient. To do so, NBIB conducted a business process reengineering effort that was intended to identify challenges in the process and their root causes. Specifically, NBIB officials cited efforts that have been implemented to reduce the number of personnel hours necessary to complete an investigation, such as centralizing interviews and using video-teleconferencing for overseas investigations (to decrease travel time), automated record checks, and focused writing (to make reports more succinct and less time-consuming to prepare). However, NBIB has not identified how the implementation of the business process reengineering effort will affect the backlog or the need for additional investigators in the future. In December 2017, we recommended that the Director of NBIB develop a plan, including goals and milestones, that includes a determination of the effect of the business process reengineering efforts on reducing the backlog to a “healthy” inventory of work, representing approximately 6 weeks of work. NBIB concurred with this recommendation. NBIB documentation shows that the backlog of pending investigations increased from about 190,000 in August 2014 to more than 710,000 as of February 2018, as shown in figure 1. NBIB’s Key Performance Indicators report states that a “healthy” inventory of work is around 180,000 pending investigations, representing approximately 6 weeks of work, and would allow NBIB to meet timeliness objectives. ODNI officials stated that several significant events contributed to agency challenges in meeting timeliness objectives over the past 5 fiscal years, including a government shutdown, the 2015 OPM data breach, a loss of OPM contractor support, and OPM’s review of the security of its IT systems, which resulted in the temporary suspension of the web-based platform used to complete and submit background investigation forms. In addition, executive branch agencies noted the increased investigative requirements stemming from the 2012 Federal Investigative Standards as a further challenge to meeting established timeliness objectives in the future. While NBIB has taken steps to increase its capacity to conduct background investigations by increasing its own investigator staff as well as awarding new contracts, in our December 2017 report we noted that NBIB officials have assessed four scenarios, from the status quo— assuming no additional contractor or federal investigator hires—to an aggressive contractor staffing plan beyond January 2018. The two scenarios that NBIB identified as most feasible would not result in a “healthy” inventory level until fiscal year 2022 at the earliest. In our December 2017 report, we recommended that the Director of NBIB establish goals for increasing total investigator capacity—federal employees and contractor personnel—in accordance with the plan for reducing the backlog of investigations, as noted above. NBIB concurred with this recommendation. We reported in November 2017 that the potential effects of continuous evaluation on executive branch agencies are unknown because future phases of the program and the effect on agency resources have not yet been determined. ODNI has not yet determined key aspects of its continuous evaluation program, which has limited the ability of executive branch agencies to plan for implementation in accordance with ODNI’s phased approach. For example, while ODNI has initiated the first phase of continuous evaluation in coordination with implementing executive branch agencies, it has not yet determined what the future phases of implementation will entail, or when they will occur. As we reported in November 2017, the uncertainty regarding the requirements and time frames for the future phases of the program has affected the ability of executive branch agencies to plan to implement continuous evaluation and estimate the associated costs. Although executive branch agencies have identified increased resources as a risk associated with implementing continuous evaluation, and ODNI has acknowledged that risk, ODNI, in coordination with the PAC, has not assessed the potential effects of continuous evaluation on an agency’s resources. Further, ODNI has not developed a plan, in consultation with implementing agencies, to address such effects, including modifying the scope or frequency of periodic reinvestigations or replacing periodic reinvestigations for certain clearance holders. Moreover, the potential effect of continuous evaluation on periodic reinvestigations is unknown. Executive branch agencies have expressed varying views about potential changes to the periodic reinvestigation model: DOD officials stated that with workload and funding issues, they see no alternative but to replace periodic reinvestigations for certain clearance holders with continuous evaluation, as the record checks conducted are the same for both processes. State Department officials expressed concerns that relevant information, such as state and local law-enforcement records that are not yet automated, would be missed if it did not conduct periodic reinvestigations. State Department officials, along with officials from the Departments of Justice and Homeland Security, stated it may be possible to change the frequency or scope of periodic reinvestigations at some point in the future. The Security Executive Agent Directive for continuous evaluation, issued since our report, clarified that continuous evaluation is intended to supplement but not replace periodic reinvestigations. In our November 2017 report, ODNI officials stated that ODNI is not opposed to further improving the security clearance process, and that once continuous evaluation is operational, it plans to determine the efficiencies and mitigation of risks associated with the approach. Specifically, these officials stated that once continuous evaluation is further implemented and ODNI has gathered sufficient data—which they estimated would take about a year from May 2017—they can perform analysis and research to determine whether any changes are needed to the periodic reinvestigation model. We recommended that the Director of National Intelligence assess the potential effects of continuous evaluation on agency resources and develop a plan, in consultation with implementing agencies, to address those effects, such as modifying the scope of periodic reinvestigations, changing the frequency of periodic reinvestigations, or replacing periodic reinvestigations for certain clearance holders. ODNI generally concurred with this recommendation. Finally, the National Defense Authorization Act for Fiscal Year 2018, enacted in December 2017, will have a significant impact on the personnel security clearance process. Among other things, the act authorized DOD to conduct its own background investigations and requires DOD to begin carrying out a related implementation plan by October 1, 2020. It also requires the Secretary of Defense, in consultation with the Director of OPM, to provide for a phased transition. These changes could potentially affect timeliness, the backlog, and other reform initiatives but the effect is unknown at this time. DOD’s investigations represent the majority of the background investigations conducted by NBIB. Chairman Burr, Vice Chairman Warner and Members of the committee, this concludes my prepared testimony. I look forward to answering any questions. If you or your staff have any questions about this testimony, please contact Brenda S. Farrell at (202) 512-3604 or at farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. GAO staff who made key contributions to this testimony are Kimberly Seay (Assistant Director), James Krustapentus, Michael Shaughnessy, and John Van Schaik. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The government-wide personnel security clearance process was designated as a high-risk area in January 2018 because it represents one of the highest management risks in government. This testimony focuses on, among other things, the extent to which executive branch agencies (1) made progress reforming the security clearance process, and (2) are meeting timeliness objectives and reducing NBIB's investigative backlog. GAO's statement is based on information from public versions of its reports issued in November 2017 on continuous evaluation of clearance holders and in December 2017 on clearance reform efforts. Information that ODNI and OPM deemed sensitive was omitted. For those reports, GAO reviewed Executive Orders and PAC strategic documents; obtained data from the Office of the Director of National Intelligence (ODNI) on the timeliness of initial clearances and periodic reinvestigations; and interviewed officials from ODNI, NBIB, and other agencies. Executive branch agencies have made progress reforming the security clearance process, but long-standing key initiatives remain incomplete. Progress includes the issuance of federal adjudicative guidelines and updated strategic documents to help sustain the reform effort. However, agencies still face challenges in implementing aspects of the 2012 Federal Investigative Standards—criteria for conducting background investigations—and in implementing a continuous evaluation program. In addition, while agencies have taken steps to establish government-wide performance measures for the quality of investigations, neither the Director of National Intelligence (DNI) nor the interagency Security, Suitability, and Credentialing Performance Accountability Council (PAC) have set a milestone for completing their establishment. GAO's analysis of timeliness data for specific executive branch agencies showed that the number of agencies meeting investigation and adjudication timeliness objectives for initial secret and top secret security clearances and periodic reinvestigations decreased from fiscal years 2012 through 2016. For example, while 73 percent of agencies did not meet timeliness objectives for initial clearances for three of four quarters in fiscal year 2012, 98 percent of agencies did not meet these objectives in fiscal year 2016. The DNI has not developed a government-wide plan, including goals and milestones, to help agencies improve timeliness. Agencies' challenges in meeting timeliness objectives have contributed to a significant backlog of background investigations at the agency that is responsible for conducting the majority of investigations, the National Background Investigations Bureau (NBIB). NBIB documentation shows that the backlog of pending investigations increased from about 190,000 in August 2014 to more than 710,000 as of February 2018, as shown below. NBIB leadership has not developed a plan to reduce the backlog to a manageable level. In November 2017 and December 2017, GAO made 12 recommendations to the DNI and the Director of NBIB, including setting a milestone for establishing measures for investigation quality, developing a plan to meet background investigation timeliness objectives, and developing a plan for reducing the backlog. NBIB concurred with the recommendations. The DNI concurred with some, but not all, of GAO's recommendations. GAO continues to believe they are valid.", "document_type": "gao"}
{"report": "States operate and administer several types of private school choice programs. This report focuses exclusively on vouchers and ESAs. Vouchers: These programs generally provide interested parents with funds for tuition at a participating private school. The first voucher program began in 1990. ESAs: These programs are typically designed to fund a broader set of educational expenses, such as online learning programs, private tutoring, or education therapies. The first ESA program began in 2011. The size of voucher and ESA programs varies widely (see fig. 1 and appendix II for more details). In school year 2016-17, student participation in individual programs ranged from fewer than 10 to more than 34,000, for a total of 181,624 students across all programs. States establish the eligibility criteria for students to participate in choice programs as well as any accountability requirements for participating private schools. As noted in our prior work, these requirements can vary considerably across states. Eligibility criteria: Almost all private school choice programs use a student’s disability status or family income as eligibility criteria (see table 1). Accountability mechanisms: For purposes of this report, we define accountability mechanisms as requirements that private school choice programs place on private schools as a condition for participation. These mechanisms act as minimum participation requirements for private schools (see fig. 2). See appendix II for more details on accountability mechanisms by program. IDEA Part B requires each state to ensure that a free appropriate public education (FAPE) is made available to all eligible children with disabilities. An eligible child with a disability in a public school setting, or placed in a private school by a public agency as a means of providing special education and related services, is entitled to FAPE. FAPE means special education and related services that (1) have been provided at public expense, under public supervision, and without charge; (2) meet the standards of the state educational agency, including the requirements of IDEA; (3) include an appropriate preschool, elementary school, or secondary school education in the state involved; and (4) are provided in conformity with an individualized education program (IEP). When a parent of a child with a disability chooses to enroll their child in a private elementary or secondary school, whether or not through a private school choice program, that child is considered a “parentally placed” private school child under IDEA. A school district’s obligations to parentally placed private school children with disabilities are not as extensive as those for children enrolled in public schools or for children with disabilities placed in a private school by a public agency, according to Education documents. Under IDEA, a child with a disability who is parentally placed in a private school does not have a right to FAPE, or an individual right to receive some or all of the special education and related services that the child would be entitled to receive if enrolled in a public school. However, parentally placed children must be included in the population whose needs are considered for services under IDEA’s “equitable services” provisions. See table 2 for a summary of key differences in rights under IDEA for children with disabilities in public school and private school. Education has two offices that can address questions and provide information related to parentally placed private school children with disabilities, including those in private school choice programs. Education’s Office of Special Education and Rehabilitative Services (OSERS) administers IDEA in all of its aspects. It also supports programs that help educate children and youth with disabilities, including developing and distributing evidence-based products, publications, and resources to help states, local school district personnel, and families improve results for children with disabilities. Education’s Office of Non-Public Education (ONPE) fosters maximum participation of nonpublic school students and teachers in federal education programs and initiatives. ONPE’s activities include providing parents with information regarding education options for their children, and providing technical assistance, workshops, and publications to states, school districts, private schools, and other education stakeholders. Most private school choice programs have academic accountability mechanisms, which can include requirements for participating private schools to administer tests, report testing results, obtain accreditation, and teach core subjects, according to our analysis of information from program documents and officials. (See fig. 3.) We found that testing is the most common academic accountability mechanism in private choice programs, and that programs design this requirement in different ways. Academic testing and reporting requirements can help the public compare the academic achievement of private school choice students with students in public schools. Two-thirds of private choice programs (18 of 27)—which represented 78 percent of all students participating in voucher and ESA programs in school year 2016-17—require private schools to test voucher or ESA students. Of the 18 programs that require testing, nine programs require participating schools to administer their state’s standardized test and six require schools to administer some type of norm-referenced test. See appendix II for more information on testing requirements by program. Private schools appeared to have mixed experiences implementing the testing requirements in private school choice programs. For example, officials from four of the six programs we examined in depth noted that most private schools in their programs did not experience challenges administering the testing requirements, and said that many private schools had testing practices in place before joining the programs. However, officials in two programs also said that some private schools were unfamiliar with or unequipped to administer standardized tests. Officials from several state and national private school choice organizations also told us that smaller private schools sometimes lack the staff and budgets to administer standardized tests. One-third (9 of 27) of programs require that schools publicly report test results, including three of the four largest voucher programs—Wisconsin’s Milwaukee Parental Choice Program, Indiana’s Choice Scholarship Program, and Ohio’s EdChoice Scholarship Program—which publicly report test results via online systems. However, in our interviews, officials from two voucher programs noted some private schools experienced challenges administering standardized tests or providing the program offices with data. For example, according to officials in one program, most private schools did not have systems for administering the state’s standardized tests electronically. Officials in another program also noted that protecting student privacy in small private schools can be challenging. Few of the 15 choice programs that are designed specifically for students with disabilities have accountability mechanisms related to special education and related services. For example, Arkansas’s Succeed Scholarship Program requires schools to meet accreditation requirements for providing services to severely disabled individuals. Mississippi’s Dyslexia Therapy Scholarship for Students with Dyslexia Program requires schools to provide a specific learning environment for dyslexia therapy; and Louisiana’s School Choice Program for Certain Students with Exceptionalities requires schools to provide special education services for at least 2 years prior to joining the program. Most private school choice programs have some administrative accountability mechanisms, and these varied across programs, according to our analysis of information from program documents and officials. Administrative accountability mechanisms include requirements that participating private schools employ teachers, paraprofessionals, and/or specialists who have minimum qualifications, conduct background checks on employees, comply with state and local health and safety standards, and comply with site visits by program officials. (See fig. 4.) Most programs (25 of 27) require participating private schools to comply with state and local health and safety standards. Eight of the 25 programs rely on other state agencies to oversee the safety of school facilities rather than impose separate health and safety requirements on participating schools. In addition, about half of all voucher and ESA programs (17 of 27)—including three of the largest programs, which represented 73 percent of all students participating in voucher and ESA programs in school year 2016-17—require participating private schools to conduct background checks on all employees, or all employees with direct and unsupervised contact with children. About two-thirds (19 of 27) of programs require participating private schools to employ teachers and other staff with specific qualifications or credentials. For example, 13 programs require teachers to have a degree and/or state teaching license. Other programs, such as Florida’s John M. McKay Scholarships for Students with Disabilities Program, require private schools to employ teachers with either a bachelor’s degree, three years of experience, or specific credentials or special skills, knowledge, or expertise to provide instruction in certain subjects. Similarly, about half (14 of 27) of programs require schools to hire paraprofessionals and/or specialists with specific qualifications or credentials. More than half (15 of 27) of programs require site visits to participating private schools, and program officials we interviewed described various ways of implementing this requirement. For example, officials in three programs told us they conduct site visits to verify information submitted by participating private schools. Officials in one program noted that site visits are routine for entities that receive state funds; officials coordinate with the school beforehand, meet with the principal and staff, and perform spot checks on student files. Some program officials told us they also monitor participating schools using risk-based school reviews, requesting graduation rates, or by requiring schools to meet an attendance rate benchmark. Although financial accountability mechanisms are the least common mechanisms used by private choice programs, more than half of programs had at least one such requirement. (See fig. 5.) Just over half (15 of 27) of programs require private schools to provide proof of fiscal soundness in order to participate. Most of these programs give private schools two options: schools must either submit proof they have been in operation for a specified length of time (ranging from 1 to 5 years) or provide a surety bond to the state to insure against any losses. For example, in Florida’s John M. McKay Scholarships for Students with Disabilities Program, schools must have been operating for at least 3 years or provide the Florida Department of Education with a surety bond or letter of credit equal to the amount of voucher funds the private school receives quarterly. Less than a third (8 of 27) of programs—which represented fewer than a quarter of all students participating in voucher and ESA programs in school year 2016-17—require participating schools to provide annual audits. Officials in two programs we examined in depth described concerns about the limited financial accountability provisions in their programs’ statutes. In one program with no financial accountability mechanisms, program officials said they would prefer to have the authority to remove private schools with financial issues from the program. Similarly, officials in the other program stated that they had some concerns about the financial stability of some of their participating schools but do not have authority to deny participation in the program based on financial criteria. In addition, all ESA programs, which generally provide funds directly to eligible individuals, have financial accountability mechanisms for parents. For example, Florida’s Gardiner Scholarship Program is administered by two organizations that review parents’ expenditures for compliance with program requirements and reimburse parents accordingly. Certain categories of purchases are pre-approved, but generally approvals are made on a case-by-case basis. In contrast, Arizona’s ESA program provides parents with a debit card for educational purchases. Parents are expected to use the debit card appropriately and retroactively submit itemized expense reports to the program each quarter. If program staff reviewing expenditures find any that do not meet statutory requirements, families are directed to reimburse the program. The six private choice programs we examined in depth took various approaches to monitoring participating schools’ compliance with their programs’ academic, administrative, and financial accountability requirements. Officials from several of these programs also described coordinating with accrediting agencies, other state departments, and independent auditors to help monitor private schools and ensure quality and safety. For example, officials in one program told us they received a number of complaints about a lack of adult supervision at a participating private school and asked local Child Protective Services to intervene. Program officials in two states said they use their state’s private school accreditation process to help enforce program accountability requirements because private schools must be accredited to participate. Programs often require participating schools to attest to meeting accountability requirements, although some program officials said they have limited resources to independently verify this information. For example, program officials in one state said they have limited resources to independently verify the information submitted by schools in their annual applications because processing voucher payments takes priority. Program officials in another state said financial constraints prevented them from visiting all of the schools that were flagged for not complying with program requirements last year. Finally, some program officials we spoke to told us that their states provide programs with limited authority to intervene with participating private schools when there are concerns. For example, officials in one program described being concerned that a particular school’s buildings were unsafe. However, they said that the choice program’s statute does not contain requirements related to the safety of participating schools, and the city must issue a safety notice before program staff could remove the school from the program. Almost all private school choice programs provide a directory of participating private schools for the public and prospective families, although the information included—and the way it is provided—varies. For example, 21 of 27 programs provide contact information, and 20 programs provide information on grades served. Far fewer programs provide information on school accreditation status (6 programs), student race and ethnicity data (5 programs), and graduation rates (4 programs). (See fig. 6.) Parents we interviewed had mixed responses about the information provided by private school choice programs and reported using other sources of information as well. Some parents mentioned using private choice program websites as key sources of information to identify and narrow their school choice options, while other parents said they wished that the programs would provide more information to help them consider potential schools. Parents also reported consulting family, friends, and other trusted community members or advisers and conducting internet searches when making school decisions. Along with directories, some private school choice programs provide additional guidance for parents on their websites. Just over one-third (10 of 27) of private school choice programs—serving 65 percent of students in choice programs—provide guidance to parents on how to choose a school. For example, the Ohio Department of Education Scholarship program office and Indiana Department of Education provide a checklist of questions parents might ask potential schools. These suggested questions include admission requirements, tuition and other costs, and discipline policies. We also found that one state—Florida—provides a link on its website to a federally-created decision tool on choosing schools. This tool, developed by Education, is designed to help families navigate the process of choosing a school, and includes questions that parents may want to ask as well as a discussion of school choice options. However, the document was last updated in 2007 and does not reference the Elementary and Secondary Education Act of 1965, as amended by the Every Student Succeeds Act. It also has few questions tailored to parents of students with disabilities or about special education/disability services and accommodations in educational settings. During the course of our review, Education officials said they were in the process of reviewing and determining whether to update existing guidance, including this document. As part of this review, Education officials said they plan to issue an updated version of the document in 2018 and may consider including additional questions for parents of students with disabilities. We found that only 3 of the 15 programs designed for students with disabilities provide guidance on their websites on making informed school choice decisions that is specifically tailored to these families. For example, Georgia’s guidance recommends families ask how a school will accommodate their child’s needs and Tennessee’s guidance advises parents to consider whether the school provides inclusive educational settings. Much like the private school choice programs in which they participate, private schools vary in the information they provide to the public and prospective families on their websites. In our review of a nationally representative sample of 344 websites of private schools participating in the 23 voucher programs operating as of January 2017, we found notable differences in the type and amount of information on the sites (see fig. 7). For example, we estimate that 85 percent of participating private schools describe their curriculum or teaching philosophy on their websites; 68 percent indicate how long the school has been in operation; 27 percent provide information on the number of students attending the school; and 13 percent provide information on student performance on standardized tests. (See fig. 7.) schools in voucher programs for students with disabilities mention students with disabilities or special education services anywhere on their websites. In addition, we estimate that no more than 21 percent of private schools participating in a voucher program specifically designed for students with disabilities provide certain types of special education/disability-related information on their websites that might be of interest to prospective families choosing a school for their student with a disability. (See fig. 8.) of disabilities schools served as well as the disability-related services schools offer. Parents described attempts to enroll their student with disabilities in multiple schools before finding one that would admit their child or that was the right fit for their child’s needs. Several parents described the process of finding the right school for their children as trial and error. Lack of information can result in parents discovering key information about a school only after enrolling their child. For example, a family who has a student currently enrolled in a private school choice program told us they wished they had known that they would be charged for some of the special education services the private school was providing to their child. One family told us they were surprised to learn that teachers providing special education services to their child were not trained to provide those services, and another parent described changing schools because they learned aspects of their child’s disability could not be accommodated only after enrolling their child in a school. When a parent moves a child with a disability from public school to a private school, the child’s rights under IDEA change. Specifically, when a child with a disability is enrolled in a private school by his or her parents or guardians (i.e., a parentally placed private school student), regardless of participation in a private school choice program, the child is no longer entitled to FAPE and other key rights and protections under IDEA. There is no requirement under IDEA or in Education’s regulations that parents be told about this change in rights to services when enrolling their children in private schools. Private school choice programs are not consistently providing information on changes in rights under IDEA when a child with a disability moves from public to private school, and some programs are providing incorrect information. Specifically, in our review of information provided by all 27 private school choice programs in operation as of January 2017, we found that 9 of the 27 programs did not provide any information about these changes in rights. Moreover, among the 15 programs specifically for students with disabilities, we found that 4 programs provided no information about changes in rights under IDEA when a child with a disability moves from public to private school. As shown in figure 9, these 4 programs enrolled the majority of students participating in disability choice programs in school year 2016-17 (73 percent). Another 5 of these programs—which enrolled 10 percent of students participating in disability choice programs in school year 2016-17—provided information that included inaccurate statements about rights under IDEA, as confirmed by Education officials. Some of these inaccuracies were related to IDEA’s “equitable services” provisions, under which parentally placed private school students with disabilities may be eligible to receive federally funded equitable services. Education officials reiterated that IDEA does not require states to provide notification about changes in disability rights when a parent moves a child from a public school to a private school. However, federal internal control standards state that agencies should provide quality information to external stakeholders. In addition, Education officials stated that, in the past, when the agency has been aware of cases where states are providing inconsistent or inaccurate information, the agency has worked with states to correct the information in order to avoid further dissemination of inaccurate information. Education does not require states or districts to notify parents of key changes in disability rights when a parent moves their child from public to private school, but the agency has recommended that states and districts notify parents of these changes. Specifically, in 2001, Education issued a document—which Education refers to as a policy letter—stating that “in order to avoid parental misunderstanding, the Department strongly recommends that the state and local educational agency notify parents who choose private school placement under [a private school choice program] that the students may retain certain rights under Section 504 and Title II of the ADA, although the student will not be entitled to a free appropriate public education under IDEA, while enrolled in the private school.” In addition, while Education has issued guidance documents explaining the obligations of states and school districts under IDEA to ensure the equitable participation of parentally placed private school children with disabilities, Education has not developed guidance or other documents that could serve as specific notification to parents of changes in IDEA rights when a parent moves a child with a disability from public to private school. When we asked Education officials about this issue, they reiterated that IDEA does not require such notification, and referred us to two publications by ONPE and OSERS regarding the equitable participation requirements in IDEA that apply to parentally placed private school children. The first is a 2011 ONPE document, titled The Individuals with Disabilities Education Act: Provisions Related to Children with Disabilities Enrolled by Their Parents in Private Schools. The second is a 2011 OSERS document, titled Questions and Answers on Serving Children with Disabilities Placed by Their Parents in Private Schools (revised April 2011). While these documents explain how children’s rights under IDEA are affected when parents place their child in a private school, they do not specifically address key IDEA rights and protections— such as discipline procedures and the least restrictive environment requirements—that do not apply when a student with a disability is moved from a public school to a private school by their parent. Further, these documents do not include the agency’s prior recommendation on parental notification, or provide sample language that stakeholders could use to notify parents of these changes in rights. Education also noted that under IDEA and its regulations, a notice of IDEA procedural safeguards must be provided to parents at least once a year and at other specified times, but also is not required to notify parents that if a child is parentally placed in a private school, the child is not entitled to FAPE and that these key rights and protections no longer apply. A wide variety of stakeholders, including officials from national school choice and disability organizations, private school choice programs, and Education told us that parents in private choice programs do not always understand that they will not have all of the same IDEA rights and protections when moving their children from public to private school. For example, some stakeholders said that confusion arises because parents are under the impression that since school choice programs are operated and funded by the state, and are often designed for students with disabilities, their children will have similar protections to those ensured to public school children under IDEA. Other stakeholders told us that because private schools sometimes request a copy of a student’s IEP, parents can mistakenly assume that the private school will provide the services and accommodations outlined in the document. Among the 17 families we interviewed, their views ranged from not being concerned about possible changes in rights—because they felt their students were not being served well in public schools—to echoing the stakeholder concerns described above. These 17 families also had differing understandings of the change in disability rights when enrolling their students in private school choice programs. For example, some families we interviewed said they were not aware that some of the disability services and therapies provided at private schools came at additional costs, because these services at public schools were provided free of charge. Parents of children with physical disabilities said they were surprised that some private schools, including schools for students with disabilities, were not accessible for children with physical disabilities. Education officials told us that IDEA does not provide it with statutory authority to require states and school districts to give parents notice that IDEA rights and protections—such as discipline procedures and least restrictive environment requirements—do not apply when a student with a disability is moved from public to private school by a parent. Absent a requirement that states notify parents about changes in key federal special education rights when a child is moved from public to private school by their parents, states may inconsistently provide information, contributing to confusion about the change in key federal disability rights and protections. In the past decade, school choice options, including private school choice programs, have expanded across the country, providing more education alternatives for students and families, and this trend is expected to continue. School choice places more responsibility and decision making in the hands of parents, increasing the importance of high quality information to help parents make informed decisions. As more than half of the current private school choice programs are designed specifically for students with disabilities, it is critical that parents have access to quality information about changes in special education rights when they are considering moving their child from public to private school. Although Education has strongly recommended that states and districts notify parents that IDEA rights change when they move their parentally placed child from public to private school, in 2016-17, more than 80 percent of students in private choice programs designed for students with disabilities were enrolled in a program that either provided no information about changes in IDEA rights or provided some inaccurate information about these changes. Absent a requirement in IDEA that states notify parents of such changes, states are unlikely to begin providing parents with consistent and accurate information about changes that affect some of our nation’s most vulnerable children. Congress should consider requiring that states notify parents/guardians of changes in students’ federal special education rights when a student with a disability is moved from public to private school by their parent. The Assistant Secretary for Special Education and Rehabilitative Services should review information provided by states related to changes in federal special education rights when a parent places a student with a disability in a private school and work with states to correct inaccurate information. We provided a draft of this report to Education for review and comment. Education’s comments are reproduced in appendix III. Education also provided technical comments, which we incorporated as appropriate. Education generally agreed with our recommendation to correct inaccurate information provided by states related to changes in federal special education rights when a parent places a student with a disability in a private school. During the course of our review, Education confirmed that five private school choice programs provided information that included inaccurate statements about rights under IDEA. However, Education stated that the department believes it is necessary to review the full documents containing information provided by states, so that it can determine the context in which the information was presented. We will coordinate with Education as appropriate to facilitate such a review. Reviewing and evaluating the information provided by states are important first steps. However, we continue to believe that it is critical that Education take the next step to work with states to correct any inaccurate information about the rights of students with disabilities under IDEA being provided by private school choice programs. Our draft report also included a recommendation for Education to require states to notify parents/guardians of changes in students’ federal special education rights, including that key IDEA rights and protections do not apply when a student with a disability is moved from public to private school by their parent. In response, Education stated that IDEA does not include statutory authority to require such notice, and suggested that the department instead encourage states to notify parents. However, as noted in our draft report, Education already strongly encourages states and school districts to provide such notice. Despite these efforts, we found that in 2016-17, more than 80 percent of students nationwide who are enrolled in private choice programs designed for students with disabilities were enrolled in a program that either provided no information about changes in IDEA rights, or provided some inaccurate information about these changes. We therefore continue to believe that states should be required, not merely encouraged, to notify parents/guardians about key changes in federal special education rights when a parent moves a child with a disability from public to private school. To this end, we have converted our recommendation into a Matter for Congressional Consideration to require such notice. In its comments, Education stated that the draft report title could be improved. Because, in the final report, we issued the Matter for Congressional Consideration discussed above, we have revised the title to reflect that federal actions are needed to ensure parents are notified about key changes in rights for students with disabilities. Education also inaccurately asserted that statements in the draft report about the availability of information for parents are based on limited reviews and small samples. As stated in the draft report, our findings about the information for parents are derived from two sources: private school choice programs and private schools participating in these programs. Our findings about information provided by private school choice programs are based on a comprehensive review of all 27 voucher and educational savings account programs operating in the United States during the 2016-17 school year. In addition, as noted in the draft report, we verified these findings with officials from each of these programs. Our findings about information participating private schools make available are based on a nationally representative, generalizable sample of websites from 344 private schools participating in voucher programs during the 2016-17school year. Finally, contrary to Education’s assessment that we based findings on a small sample of 17 families, as stated in the draft report, our discussion groups and interviews with these families provided illustrative examples of the types of information families used when making private school choice decisions. These illustrative examples were not the basis of any findings. We have clarified the language in the final report as appropriate. Further, Education commented that the draft report did not address factors that often lead parents to enroll their children in private schools in state choice programs. These factors were not addressed because they are beyond the scope of our objectives for this report. Finally, Education noted that parents may believe that educational benefits or services provided by private schools to their children with disabilities outweigh any rights conferred by IDEA or services provided by public schools. This is an important point, and this perspective was included in the draft Education reviewed. For example, in the draft Education reviewed, we stated that some families with whom we spoke were not concerned about any changes in rights because they felt their students were not being well served in public schools. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees and to the Department of Education. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) the academic, administrative, and financial accountability mechanisms in private school choice programs; (2) the information available to the public and prospective families on private school choice programs and participating private schools; and (3) how families of students with disabilities are informed about any changes in their rights under federal law when enrolling in private school choice programs, and how the U.S. Department of Education provides information to families about these rights. To obtain information for all three objectives, we reviewed relevant federal laws, regulations, and guidance. To determine key program characteristics, including accountability mechanisms these programs had in place and the type of information they provided publicly, we reviewed publically available documents from all 23 voucher programs and four education savings account (ESA) programs, referred to in this report as private school choice programs, operating in the United States as of January 2017 to obtain information about program design and requirements. We confirmed this information with each program. In addition, we reviewed documents and conducted interviews with program officials in six private school choice programs in five states (Arizona, Florida, Indiana, Ohio, and Wisconsin). We also interviewed officials from the U.S. Department of Education (Education) as well as national stakeholder groups and private school choice researchers, which we selected to obtain a range of perspectives on private school choice initiatives. To describe information that participating private schools make available to the public, we conducted a review of a nationally representative stratified random sample of 344 private schools participating in one of the voucher programs to identify information provided on school websites to parents and the public. To obtain information on how parents are informed about changes in their child’s rights under federal law, we reviewed Education guidance and policy documents on the Individuals with Disabilities Education Act (IDEA) and parentally placed private school students. To provide examples of how individual schools and programs make information available to the public and families, we also visited and interviewed officials at two private school choice programs, three private schools, and one school district in Florida. Additionally, we spoke with 17 families who had recently interacted with private school choice programs. We conducted this performance audit from August 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We defined “accountability mechanisms” as requirements that private school choice programs place on participating private schools. These requirements are intended to set minimum standards that private schools must meet to participate in the choice program. We compiled our list of mechanisms based on research conducted by national school choice organizations and other organizations, interviews with private school choice researchers, and our previous audit work. The list includes mechanisms likely to be used by multiple programs and is not meant to be exhaustive. We confirmed the appropriateness of our list of selected mechanisms during subsequent interviews with private school choice researchers and national stakeholder groups who confirmed that the mechanisms were common elements in program statutes, and/or standard mechanisms for establishing accountability in education. To identify the presence of each of the mechanisms in a choice program, we reviewed publicly available documents on the program’s website. We also reviewed documents linked to the program’s website. To confirm our assessment of each school choice program, we sent our analysis to the program’s administrators for verification. All programs responded and any changes are reflected in the report. We did not independently verify these requirements in state laws or regulations. To obtain a richer understanding of accountability and transparency decisions, and challenges facing private school choice programs, we selected a non-generalizable sample of six private school choice programs in five states (Arizona, Florida, Indiana, Ohio, and Wisconsin) for a more in-depth review. These selected programs collectively served the majority of voucher and ESA students in school year 2016-17. In total, these programs represented about two-thirds of all participating students. For the selected programs, we reviewed program documents, and conducted interviews with programs officials and school choice organizations. In addition, we conducted a site visit to Florida in March 2017. Florida has the second largest school voucher program (the John M. McKay Scholarships for Students with Disabilities Program), and the largest ESA program (the Gardiner Scholarship Program). Collectively the two programs served approximately one-fifth (22 percent) of voucher and ESA students nationwide in school year 2016-17. To gather information on all three objectives, we interviewed officials from program administration offices for both programs. To obtain schools’ perspective on all three objectives, we interviewed officials at three private schools that participate in both school choice programs, and officials at a public school district. To obtain information on how families of students with disabilities are informed about any changes in their rights under federal law when enrolling in private school choice programs and families’ understanding of these changes, we conducted a series of interviews with families of students with disabilities. To determine the extent to which participating private schools provided information to prospective families and the public, we reviewed websites from a nationally representative sample of 344 private schools eligible to participate in one of the 23 voucher programs in operation as of January 2017. We limited our review to voucher school programs because we were unable to determine the universe of schools participating in all of the four ESA programs operating at the time of our review. Our sampling frame consisted of all schools eligible for participation in a private school choice voucher program. To create the frame, we downloaded the most currently available list of eligible schools as of April 3, 2017, from each program’s website. We identified 4,011 schools eligible to participate in at least one of the private school choice voucher programs covered by this review. Ohio’s Jon Peterson Special Needs Scholarship Program and Autism Scholarship Program allow multiple types of providers to receive voucher funds. As such, the lists for these programs included public schools, private companies, individual specialists, chartered private schools, and unchartered private schools. A chartered private school is a private school that has been approved by Ohio’s State Board of Education, according to program officials. As program officials told us, chartering is Ohio’s version of state accreditation. Because chartered schools were the only readily identifiable type of provider included in the downloaded lists from the program’s website, we decided to limit our list to chartered private schools and drop other providers from our schools list. Because web addresses were not always included in programs’ lists of schools, we used information provided in the lists to conduct internet searches to locate school websites. This enabled us to produce an estimate on the number of participating schools without a website. In order to review comparable information across the sampled schools’ websites, we developed a standardized web-based data collection instrument which we used to examine each website for academic, administrative, and financial information and information related to students with disabilities. We used a combination of information from our audit work on identifying accountability mechanisms, Education guidance on choosing a school, and our interviews to develop the questions included in the data collection instrument. We reviewed all websites from April 19 through 27, 2017. An analyst recorded information in the data collection instrument. The information was then checked for completeness by another analyst. We then analyzed the information across schools. We stratified the population using two design variables—one for whether or not the school participated in programs with eligibility limited to students with disabilities, and one for whether or not the school participated in one of the largest four voucher programs. This resulted in four sampling strata. The resulting sample of 344 schools allowed us to make national estimates about the availability of school information by program type. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 6 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Confidence intervals are provided along with each sample estimate in the report. All website review results presented in the body of this report are generalizable to the estimated population except where otherwise noted. To obtain information from parents on both our second and third objectives, we conducted interviews with 17 families who had recent experiences with private school choice programs. We also created a short questionnaire that included questions on the type of information families want and use when making private school choice decisions for their children. The questionnaire also included questions on how families of students with disabilities are informed about any changes in their rights under federal law when enrolling in private school choice programs and their understanding of those changes. We worked with private school choice organizations and national stakeholder groups that directly communicate with parents to contact parents on our behalf to answer the questionnaire and be interviewed. The questionnaire was given to each parent we interviewed or who participated in each of the discussion groups conducted during our Florida site visit. Parents completing the questionnaire had at least one child with a disability and either participated or considered participating in a private school choice program designed for students with disabilities. In addition to the contact named above, Nagla’a El-Hodiri (Assistant Director), Alison Grantham (Analyst-in-Charge), Kelsey Burdick, Cheryl Jones, and Alex Squitieri made key contributions to this report. Also contributing to this report were Susan Aschoff, Carl Barden, James Bennett, Deborah Bland, Sarah Cornetto, Lawrence Malenich, Shelia McCoy, Tom Moscovitch, Kelly Rubin, Andrew Stavisky and Barbara Steel-Lowney.", "summary": "Growth of voucher and ESA programs has drawn attention to the ways states ensure accountability and transparency to the public and prospective parents. With over half of voucher and ESA programs specifically designed for students with disabilities, there is interest in the information parents receive about special education services and rights when enrolling in a choice program. GAO was asked to examine these topics in more depth. This report examines (1) academic, administrative, and financial accountability mechanisms in private choice programs; (2) information available to the public and families on private choice programs and participating schools; and (3) how parents of students with disabilities are informed about changes in rights when enrolling in private choice programs. GAO analyzed information from all voucher and ESA programs operating in January 2017 and interviewed officials from Education, national groups, and six of the largest private choice programs. GAO reviewed websites of a nationally representative sample of private voucher schools, and worked with private choice groups and national organizations to contact families that recently interacted with a choice program. GAO interviewed all 17 families that responded. States include different academic, administrative, and financial accountability mechanisms in their voucher and education savings account (ESA) programs—programs that use public funds for private school educational expenses (see figure). Of the 27 programs operating in January 2017, most had academic and administrative accountability mechanisms for participating schools, such as academic testing requirements (18 of 27) or health and safety requirements (25 of 27). In addition, 15 of 27 programs required schools to demonstrate financial soundness and 8 of 27 programs required annual financial audits. Almost all of the 27 private school choice program websites provide a directory of participating schools and some provide guidance on selecting schools. However, GAO estimates that no more than half of all schools participating in any type of voucher program mention students with disabilities anywhere on their websites, according to GAO's review of a nationally generalizable sample of websites of private schools in voucher programs. Further, GAO estimates that no more than 53 percent of private schools in voucher programs designed for students with disabilities provide disability-related information on their websites. GAO found private school choice programs inconsistently provide information on changes in rights and protections under the Individuals with Disabilities Education Act (IDEA) when parents move a child with a disability from public to private school. In 2001, the U.S. Department of Education (Education) strongly encouraged states and school districts to notify parents of these changes, but according to Education, IDEA does not provide it with statutory authority to require this notification. According to GAO's review of information provided by private school choice programs, and as confirmed by program officials, in school year 2016-17, 83 percent of students enrolled in a program designed specifically for students with disabilities were in a program that provided either no information about changes in IDEA rights or provided information that Education confirmed contained inaccuracies about these changes. Officials from national stakeholder groups, private choice programs, and Education told GAO that some parents do not understand that certain key IDEA rights and protections—such as discipline procedures and least restrictive environment requirements—change when parents move their child from public to private school. Ensuring that quality information is communicated consistently and accurately to parents can help address potential misunderstanding about changes in federal special education rights. Congress should consider requiring states to notify parents/guardians about changes in federal special education rights when a parent moves a child from public to private school. In addition, GAO recommends Education review and correct inaccurate IDEA-related information provided by states. Education generally agreed with our recommendation.", "document_type": "gao"}
{"report": "The RAD program was authorized by Congress and signed into law by the President in November 2011 under the Consolidated and Further Continuing Appropriations Act, 2012 with amendments in 2014, 2015, 2016, and 2017. The RAD program consists of two components. The first component of the RAD program—and the focus of our review— provides PHAs the opportunity to convert units subsidized under HUD’s public housing program and owned by the PHAs to properties with long- term (typically, 15–20 years) project-based voucher (PBV) or project- based rental assistance (PBRA) contracts. These are two forms of Section 8 rental assistance that tie the assistance to the unit to provide subsidized housing to low-income residents. In a RAD conversion, PHA- owned public housing properties can be owned by the PHA, transferred to new public or nonprofit owners, or transferred to private, for-profit owners when necessary to access LIHTC financing, if the PHA preserves its interest in the property in a HUD-approved manner. The second component of RAD converts privately owned properties with expiring subsidies under old rental assistance programs to PBV or PBRA in order to preserve affordability and encourage property rehabilitation. The goals of the RAD program include preserving the affordability of federally assisted rental properties and improving their physical and financial condition. Specifically, postconversion owners (PHAs, nonprofits, or for-profit entities) can leverage the subsidy payments under the newly converted contracts to raise capital through private debt and equity investments, or conventional private debt, to make improvements. The RAD program provides added flexibility for PHAs to access private and public funding sources to supplement public housing funding. These financing sources may include debt financing through public or private lenders; mortgage financing insured by FHA; PHA operating reserves; replacement housing factor funds; seller or take-back financing; deferred developer fees; equity investment generated by the availability of 4 percent and 9 percent LIHTC; or other private or philanthropic sources. PHAs also may pursue various options for their conversions, which often depend on property needs and available financing, including property rehabilitation or new construction. Additionally, PHAs may undertake conversion involving no property rehabilitation or new construction to meet certain financial goals or for future rehabilitation or new construction, as long as the PHA can demonstrate to HUD that the property does not need immediate rehabilitation and can be physically and financially maintained for the term of the Section 8 Housing Assistance Payment contract (HAP contract). The RAD authorizing legislation and RAD Notice also specify requirements for ownership and control of converted properties. That is, converted properties must have public or nonprofit ownership or control, with limited exceptions. The RAD authorizing legislation, RAD Notice, HAP contracts, and RAD Use Agreement also establish procedures to help ensure that public housing remains a public asset should challenges arise, such as default, bankruptcy, or foreclosure. Oversight of RAD conversion and properties is primarily divided among three HUD offices. The Office of Recapitalization is responsible for administering the conversion process but generally does not oversee converted properties. Before conversion, the Office of Public and Indian Housing oversees the properties. After conversion, oversight remains with Public and Indian Housing for properties that convert to PBV contracts and transfers to the Office of Multifamily Housing Programs for PBRA. The RAD program has been implemented and expanded in phases. Since its authorization, the RAD unit cap gradually increased from 60,000 units in 2011 to 225,000 units in May 2017. The RAD program is currently fully subscribed with all 225,000 units allocated. As of September 30, 2017, 689 conversions were closed that involved a total of 74,709 units (see fig. 1 for a breakdown by fiscal year). Additionally, 706 conversions involving 79,078 units were in the process of structuring conversion plans. The remaining conversions under the cap were allocated to specific properties and in the process of having commitments issued or reserved under multi-phase or portfolio awards, according to HUD officials. RAD conversions begin with the submission of an application by PHAs after which they are notified of selection. The PHA is then required to submit a financing plan within 180 days or a later deadline based on the nature of the financing proposed. A RAD conversion is considered closed when the HAP contract is signed and financial documents are executed. The properties are considered converted to Section 8 assisted housing on the effective date of the HAP, which is generally the first day of the following month. Once the RAD conversion is closed, the PHA or ownership entity can move forward with its submitted proposals or RAD-related rehabilitation or new construction and is responsible for complying with RAD requirements and associated contracts. In some cases, rehabilitation can take place in advance of conversion closing if public housing funds are being used. Most RAD conversions involved some type of construction. Our analysis of HUD data showed that as of September 30, 2017 417 of 689 closed conversions (61 percent) involved planned rehabilitation to the property, 86 (12 percent) new construction, and 186 (27 percent) no construction; and 361 of 706 active RAD conversions (51 percent) involved planned rehabilitation, 89 (13 percent) new construction, and 256 (36 percent) no construction. HUD officials stated that they approve conversions that involve no immediate planned rehabilitation or new construction as long as the property has no immediate needs to be addressed. Such conversions allow PHAs to better position themselves to access additional capital to address future rehabilitation or construction plans. Our review of 31 conversion files also showed that the scope of proposed physical changes varied among RAD conversions. For properties that included scope of work narratives, physical changes included renovations to mitigate hazardous materials, aesthetic renovations, code and accessibility compliance, and construction of new buildings, among other changes. Financing for RAD conversions involved multiple public and private sources, but many conversions used LIHTC. Our analysis of HUD data showed that as of September 30, 2017, 173 of 689 closed RAD conversions (25 percent) utilized 4 percent LIHTC, 99 (14 percent) utilized 9-percent LIHTC, and 416 (60 percent) did not use LIHTC. By dollar amount, major financing sources were 4 percent LIHTC at $2.4 billion; new first mortgages at $1.8 billion; and 9 percent LIHTC at $1.1 billion. Construction costs constituted the highest-dollar use of financing for RAD conversions, but not all conversions incurred construction costs, as discussed earlier. On average, construction costs per closed conversion were $6.4 million (ranging from no construction costs to $236 million) and nearly $60,000 per-unit converted to RAD. Construction costs represented the highest-dollar use of financing for closed RAD conversions at $4.4 billion followed by building and land acquisition costs, and developer fees. For more information on financing sources and uses, see appendix II. PHA officials and developers we interviewed cited various factors that influence financing sources needed for RAD conversions. For example, property needs assessments help establish the level of rehabilitation or new construction that would address the capital needs of the property. In turn, needs assessments can derive from physical assessment results and incorporate federal, state, or local compliance requirements. For instance, rehabilitation or construction would need to address the accessibility requirements of the Americans with Disabilities Act and local building codes, among other requirements. PHA officials and developers we interviewed also said they had to consider competition or access to financing for RAD conversions. For example, PHAs noted that tax credit applications and other financing had to be competitive. Some PHAs we interviewed also noted that while the 9 percent LIHTC provides more equity to finance low-income units (finances 70 percent of the costs of the units), there is more competition for the 9 percent LIHTC, while the 4 percent LIHTC can be automatically awarded for certain deals involving tax exempt bonds and federally subsidized projects. Thus, while some PHAs and developers might prefer to obtain 9 percent LIHTC, they often apply for 4 percent LIHTC to increase the chances of obtaining some tax credit equity. For example, one particular PHA that had used both 4 percent and 9 percent LIHTCs noted that in one transaction it had to compete against 74 applicants for 25 available awards of 9 percent credits. The RAD authorizing statute requires HUD to assess and publish findings regarding the amount of private capital leveraged as a result RAD conversions. A leverage ratio relates the dollars other sources provide to the dollars a program provides to an institution or a project. HUD uses various quantitative, qualitative, and processing and efficiency metrics to measure conversion outcomes. To meet the RAD statutory requirement, HUD published an overall RAD leverage ratio that has fluctuated between 19:1 and 9:1 since 2014. HUD’s most recent leverage ratio in fiscal year 2017 was 19:1, nearly double what the agency reported the prior year. We asked HUD officials why the leverage ratio nearly doubled between 2016 and 2017 and received conflicting information during the course of our audit. Initially, officials noted that the ratio was intended to replicate the methodology used by PD&R in its September 2016 report. Subsequently, the officials clarified that they did not follow PD&R’s methodology for categorizing financial source data. Specifically, officials did not review or make manual adjustments to the financial data PHAs entered in open source fields to ensure sources actually represented public, private, or other funding categories when calculating the leverage ratio. Finally, they noted that they disagreed with the methodology used in the PD&R September 2016 report and stated that there are various ways to calculate leverage. For the purposes of announcing the most recent leverage ratio in 2017, HUD officials decided that a leverage ratio comparing federally appropriated public housing resources would reflect the amount of financing leveraged had RAD not existed. We found, and officials from HUD acknowledged, three limitations to the RAD leverage calculation. First, HUD generally had data on funding sources and amounts a RAD conversion proposed to use (at the time of its application to HUD and at the time of closing of construction financing) rather than data after construction is completed on funding sources and amounts. HUD officials stated that they were reviewing final closing packages to confirm that the data reflect the latest reported information on sources and uses of funds for each conversion at closing. However, sources and uses of funds and amounts at the time the RAD conversion is closed may differ from amounts upon completion of construction. In October 2017, HUD implemented procedures to verify completion of planned construction activities and costs, which we discuss later in this report. Second, HUD’s leverage ratio, published in 2017, did not manually adjust funding source data to accurately account for all sources in calculating the leverage ratio for RAD. Specifically, HUD did not isolate funding sources that were federally appropriated, contributed by the PHA, or contributed by state or local municipalities to calculate leverage. For example, among approximately $2 billion from other financial sources, HUD included Moving to Work (MTW) funding (which may include public housing capital funds, public housing operating funds, and voucher funds) and tax credit equity as leveraged sources. However, these are not necessarily private sources, which we explain later in this report. As a result, HUD’s current calculation does not reflect the amount of private- sector leveraging. HUD calculated and published a RAD leverage ratio in May of 2017 using the following formula: Total leverage ratio = (total dollars from all sources – public housing dollars) To calculate the RAD leverage ratio, HUD uses some but not all financial source data it collects (see app. II for a list of data fields collected by HUD). For example, HUD mistakenly excluded data that capture private funds, reducing the amount of total sources in the numerator. HUD calculates “public housing dollars” by adding data that capture replacement factor funds, public housing operating reserve funds, and prior-year public housing capital funds. HUD considers tax credit equity, new first mortgages, and “other funding” data to be non-public housing dollars (see app. II for a list of fields in HUD’s calculation). PHAs enter a description and amount for other funding sources in “other funding” data fields (see app. II). For example, a PHA may enter a federal financial source in one of the open-entry “other funding” data fields, requiring a manual adjustment to properly account for the financial source. According to HUD, additional fields were included in mid-2016 to better differentiate certain sources such as from the HOME Investment Partnerships Program (HOME) and seller take-back financing. Prior to this point, these financial sources were placed into “other” fields, and the standard resource desk report had not been updated until mid-2017 to include all of these fields. Third, HUD does not categorize and report its leveraging by private and public sources. According to HUD officials, informative leverage methodologies could calculate the ratio based on the leveraging of public housing program funds, the leveraging of all federally appropriated funds, or the leveraging of PHA funds (i.e., sources in the transaction that have come from the PHA itself even if not federally appropriated through the public housing program), among other methodologies. The RAD authorizing statute requires HUD to assess and publish findings on the amount of private-sector leveraging. In addition, Standards for Internal Control in the Federal Government require agencies to communicate quality information with external parties, such as other government entities, to make informed decisions and evaluate the entity’s performance in achieving key objectives. HUD also does not use final (postcompletion) funding data in another metric of RAD leveraging. Specifically, in June 2017 HUD publicly reported that RAD “has leveraged more than $4 billion in capital investment in order to make critical repairs and improvements.” HUD calculates this figure by summing the construction costs—a subcomponent of total costs—with data from the time a conversion closes and not upon completion of construction. HUD officials we spoke with clarified that this metric solely reports construction investments and does not reflect any conclusion regarding private leverage of public funds. But, HUD publically characterized this measure in different ways, including as the amount of “public-private investment in distressed public housing,” the amount of “construction achieved under RAD,” and the amount of “new private and public funds leveraged by RAD.” HUD’s 2016 interim report calculated and published multiple leverage ratios, but chose to highlight a RAD leverage ratio that is consistent with ratios used for other HUD programs. However, the ratio does not specifically follow the prescribed ratio language in the authorizing statute because the report states that the ratio represents the amount of private and public external sources invested for every dollar invested by PHAs but the statutory language only discusses private-sector leveraging. Officials further noted that the statute does not require a particular methodology and HUD relies on PD&R—and its independent contractor— to determine the appropriate methodology for purposes of compliance with the statute. Lastly, the statute does not preclude the use of other leverage metrics for other purposes, such as using the ratio to measure the amount of nonpublic housing funds leveraged in RAD transactions that would not be available to the property absent RAD. As a result, HUD’s leverage metrics announced in May 2017 do not accurately reflect the amount of private-sector leveraging achieved through RAD, do include public funding as private sources, and inconsistently measured sources that were federally appropriated or contributed by PHAs, potentially under- or over-reporting the program’s performance. Additionally, in October 2017, HUD began implementing procedures to collect data after construction is completed and is not yet able to calculate a leverage metric using final (postcompletion) financial sources rather than the financial sources collected at closing. The lack of a consistent metric for private leveraging could also lead to inconsistent reporting of the leverage ratio, as has occurred in prior years. We recalculated RAD leverage ratios in a number of different ways, including to correct errors we identified during our review. For example, HUD’s 2016 interim report noted that data on closed transactions do not provide detailed description of “other sources,” requiring a crosswalk between applications and closed transactions to develop estimates for the allocation of “other sources” across financial source categories. Abbreviated descriptions are provided in the form of notes that are not always clear and consistent; therefore public housing sources may include federally appropriated sources, as well state, city, or county sources. Through our estimates, we found that the overall leverage ratio could range from 7.44:1 for a ratio recalculating HUD’s leverage ratio to 1.23:1 for a ratio estimating private-sector leveraging. Recalculation with HUD methodology and financial source recategorization. As discussed previously, HUD’s methodology does not account for all financial data collected by HUD and includes “other” funding sources erroneously considered as leveraged funds. Thus, we manually adjusted RAD funding source data and found that nearly $1.2 billion were erroneously considered leveraged funds because they are not private funds. For example, HUD included MTW funds; public housing operating reserves; public housing capital funds; replacement housing factor funds; other federal funds; other state, local, or county funds; and take-back financing funds as leveraged financial sources. For more information, see appendix II. We obtained documentation from HUD to replicate their methodology and recategorized financial sources that corrected errors in the data, and found that the RAD leverage ratio was less than half of HUD’s most recently publicly reported leverage ratio (19:1), approximately 7.44:1 (see app. II). Recalculation to exclude LIHTC and other federal sources. We previously reported that LIHTCs are considered a federal source because tax credit equity represents foregone federal tax revenue and, therefore, are a direct cost to the government. Accordingly, we recalculated the RAD leverage ratio by excluding all federal funding sources and obtained a ratio of approximately 1.43:1 (see app. II). Recalculation of private-sector leveraging. Lastly, the RAD authorizing statute requires HUD to assess and publish findings on the amount of private-sector leveraging, but HUD’s current calculation does not present the amount of private-sector leveraging and does not include all available data (for example, the “Other Private” funds collected by HUD). We estimated the amount of private-sector leveraging by grouping public housing sources, other public sources, and private sources, resulting in a leverage ratio of approximately 1.23:1 (see app. II). In October 2017, HUD implemented procedures to certify completion after developers finish RAD-approved rehabilitation or construction. Previously, HUD had a limited ability to monitor and evaluate final (postcompletion) physical and financial changes in RAD projects with existing data. According to HUD officials, HUD did not implement completion certification procedures before October 2017 because it had been addressing what it considered to be the highest risks first (such as clarifying requirements for RAD participants, resident safeguards, and other procedural and administrative requirements). HUD’s October 2017 completion certification procedures include instructions for owners to report final construction costs and documentation on completion of repairs or construction within 45 days of the completion date recorded in the RAD Conversion Commitment. More specifically, HUD requires owners to list a final construction cost amount—a subcomponent of total costs—in the RAD resource desk, describe variances from the approved construction cost amount in a comment box, and describe how increases in costs were addressed. Additionally, a third-party must certify that the repairs in the scope of work were completed by providing an attestation to HUD. However, HUD’s procedures do not require documentation from the owners to support the final total cost figures, which include not only construction costs but also building and land acquisition costs, and developer fees, among others as noted earlier in this report. These procedures also do not require a certification from owners on all financing sources and costs recorded in the RAD Conversion Commitment. Standards for Internal Control in the Federal Government require that management implement control activities through documented policies and procedures to provide reasonable assurance that the objectives of the agency will be achieved, and also communicate quality information with external parties to make informed decisions and evaluate the entity’s performance in achieving key objectives. While HUD now has certification completion procedures in place, this process provides the agency limited financial information from owners. As a result, HUD is unable to report metrics that reflect final (postcompletion) RAD financial outcomes after construction is completed. Furthermore, HUD is limited in its ability to effectively oversee conversion budget and cost variances, and expenditures that require HUD approval. Lastly, the RAD authorizing statute requires that the Secretary of HUD demonstrate the feasibility of the RAD conversion model to recapitalize and operate public housing properties under various situations and by leveraging other sources of funding to recapitalize properties. Without metrics that reflect the final (postcompletion) financial outcomes of RAD after construction is completed, HUD and congressional decisionmakers are unable to make informed decisions concerning the RAD program. HUD has not systematically tracked or analyzed household data on residents in RAD-converted units that are available from its public housing or Section 8 databases or from PHAs or other postconversion owners—the main sources of resident data for the RAD program. In addition, HUD has not yet developed monitoring procedures for all the resident safeguards in the RAD program. Finally, residents told us of some concerns about information they received on RAD conversions, communications opportunities, and the relocation process. HUD officials told us that the agency does not systematically track or analyze household-level data on residents in RAD-converted units across existing program databases (HUD maintains household data for the public housing and Section 8 rental assistance programs in two databases). In particular, HUD does not track changes in household characteristics before and after conversion, such as changes in rent, as well as relocations or displacement of individual households. However, according to HUD officials, their databases are not designed to track the impact of RAD conversion on residents and they are unable to electronically link household information submitted before RAD conversion to information submitted after conversion. Once a property is converted, the property and corresponding household information are removed from the public housing database. Owners of converted properties are to use software to manually enter household information into the databases for the Section 8 program when submitting tenant certifications and information for assistance payments. This procedure is the standard for administration of all project-based Section 8 properties. HUD officials stated that they have explored the possibility of transferring household data from one system to another at the time of a property’s conversion. While HUD has not systematically analyzed household information from its public housing and Section 8 databases, we were able to perform a limited analysis. We requested and received data from HUD on the households affected by RAD. Using the data provided that were current as of June 2017, we were able to identify about 26,000 households that lived in units that were converted to a PBV subsidy, but we were unable to identify the total number of households converted to a PBRA subsidy. Based on our analysis of 26,000 PBV households, we found about 2,700 (about 11 percent of) households were headed by an about 6,800 (about 26 percent of) households were headed by an individual with a disability; about 2,700 households (about 10 percent of) households were headed by an elderly person who also had a disability; over half (about 14,000 or 54 percent) of the households were headed by an individual identified as black; close to 11,000 households (about 41 percent) were identified as white; and about 1,000 households (about 4 percent) were identified as Asian. Close to 3,100 households (about 12 percent) were headed by an individual identified as Hispanic; about half (about 49 percent) of the PBV households were single- person households; the median annual income of PBV households both before and after RAD conversion was about $10,000; and about 5,300 (about 20 percent) of households were paying a flat rent rather than income-based rent before RAD conversion. However, the data on PBV households were not comprehensive. For example, while about 10,000 residents (about 57 percent) experienced a rent increase following RAD conversion under PBV, we could not determine if the rent increase was the result of an increase in resident income. We also could not determine changes in location among the PBV households following RAD conversion. Rather than relying on the public housing and Section 8 databases for tracking household information during conversion, HUD officials indicated that the agency will rely on locally maintained resident logs, which contain household information collected by property owners, as the starting point when HUD determines a compliance review is warranted. The logs will be the primary way the agency collects household information for compliance reviews under the RAD program, according to HUD officials. In November 2016, HUD issued a notice, which requires the PHA or other postconversion owner to maintain a log about every household at a converting project, including information on race and ethnicity, household size, and disability. The notice also requires owners to track residence status throughout the relocation process, including whether the resident has returned, moved elsewhere, was permanently relocated or evicted; relocation dates; and details on any temporary housing and moving assistance provided. Owners are required to make the information available to HUD upon request for audits and other purposes. According to HUD officials, the agency expects the information in the resident logs to be more robust than what they would collect through the public housing and Section 8 databases, which do not track residents while they are relocated. HUD officials stated that the agency plans to review selected resident logs as part of an ongoing limited compliance review of about 90 RAD conversion projects. HUD officials told us they are developing procedures for performing compliance reviews—such as developing a mechanism to review a sample of logs on a periodic basis—but they have not yet done so because they have been focusing on developing procedures for activities that present a high risk to the program as described in the following section. HUD has not established a time frame for developing these procedures. However, HUD officials indicated that they plan to select resident logs for review based on risk of noncompliance and do not plan to analyze program-wide information currently collected in the public housing and Section 8 databases for program monitoring. HUD officials also noted that that PD&R is planning to track a sample of residents through its evaluation of the program, which we previously mentioned. While HUD has decided to rely on resident logs because of the difficulty of tracking household information across its program databases, using resident logs to assess the effects of the RAD program on residents has limitations. While the resident logs would contain detailed household information, they were not required prior to November 2016 and may not contain information on households converted before that date (RAD conversions started in 2013). HUD’s public housing and Section 8 databases contain information on such households. Second, as previously mentioned, HUD plans to review resident logs only when there is a risk of noncompliance, but they collect household information in their databases on a rolling basis. Standards for Internal Control in the Federal Government require agencies to use quality information to achieve their objectives, and obtain and evaluate relevant and reliable data in a timely manner for use in effective monitoring. Without a comprehensive review of household information—one based on information in HUD data systems as well as resident logs—HUD cannot reasonably assess the effects of ongoing and completed RAD conversions on residents and compliance with resident safeguards, as discussed in the next section. HUD has not yet developed monitoring procedures for certain resident safeguards under the RAD program. RAD requirements include those intended to ensure that residents whose units are converted through RAD are informed about the conversion process; can continue to live in a converted property following RAD conversion; are afforded certain protections carried over from the public housing are afforded a phase-in of any rent increases under Section 8 program requirements. Currently, based on HUD notice requirements, PHAs must document compliance with three safeguards (PHA plan amendments, resident notification, and procedural rights) in their RAD application and other conversion paperwork. For example, PHAs must submit comprehensive written responses to resident comments received in connection with the required resident meetings with their RAD application. For one safeguard, PHAs are not required to report to HUD but must retain documentation of compliance to be made available to HUD as part of the monitoring for the program. For others, the HUD notice does not specify reporting and monitoring requirements. Based on our review of files for selected conversions, which we previously discussed, we found PHAs generally submitted documentation of their efforts to inform residents about RAD conversion, such as providing evidence to HUD of meetings with residents and written responses to resident questions as required. However, the specific documents for these requirements were not available from HUD in all cases. HUD’s review of amendments to PHA plans was documented in all but one of the conversions we reviewed. Documentation requirements for resident relocations have changed since RAD was introduced, which made the documentation more difficult to assess. HUD developed and started implementing procedures in October 2017 that require owners to certify and provide data supporting compliance with the resident right-to-return requirements. For example, owners must certify the number of residents who exercised their right to return to a converted property compared with the number of residents who did not return. HUD is also developing standard operating procedures to review each conversion for compliance with RAD relocation provisions. Specifically, the procedures would describe the review steps required at different stages of the conversion process, a process for identifying risks, and how to address instances of noncompliance with RAD requirements. Additionally, HUD noted that they have 2 compliance reviews under way including 1 involving a set of HUD requirements that affect relocations of more than 1 year and the limited compliance review of 90 projects that we previously described. HUD officials noted that they are developing additional guidance in other areas. First, HUD officials indicated that as part of an overall update of RAD standard operating procedures, they are developing additional protocols on resident notification and how residents’ comments are addressed through conversion planning. Second, the agency had not been consistently collecting required documentation on “house rules,” which describe the conditions and procedures for evicting residents and terminating assistance at RAD PBRA properties, so it has developed and implemented additional legal review procedures as part of the implementation of RAD resident eviction and grievance procedural rights requirements. According to HUD officials, they have been focusing primarily on right-to-return and relocation requirements because they represent areas of highest risk. HUD has not developed separate monitoring procedures for other resident safeguards—the phase-in of tenant rent increases, resident representation through tenant organizations, and choice mobility requirements. However, HUD officials told us that they plan to assess how administrative data can be used to monitor choice mobility as part of the planning for a separate PD&R evaluation of this safeguard. HUD officials also indicated that there are procedures for residents to report complaints to HUD if resident representation and organization requirements are not met. Standards for Internal Control in the Federal Government require agencies to implement control activities through documented policies and procedures to provide reasonable assurance that agency objectives will be achieved. These standards also require agencies to design procedures to achieve goals and objectives, and identify, analyze, and respond to risks related to achieving the defined objectives. Table 1 includes a description and information on implementation of resident safeguards that most directly affect residents’ experience with the conversion process and ability to live at the property following conversion. Appendix III describes these and other RAD resident safeguards. HUD officials indicated that the safeguards for the phase-in of tenant rent increases, resident representation, procedural rights, and choice mobility presented a lower risk than the right-to-return requirements, so they were a lower priority, and in some cases were addressed through general monitoring of the Section 8 program. For choice mobility options, HUD indicated that its data systems are not designed to track whether residents are able to exercise these options, such as tracking whether residents left a property to exercise choice mobility or for other reasons. All but two of the resident safeguards do not take effect until after a property has been converted and is part of the Section 8 program. For example, residents are only eligible to use vouchers through choice mobility after they have lived in the converted property for 1 or 2 years depending on the assistance contract involved (PBV or PBRA). Moreover, certain RAD safeguards are not typically available for Section 8 residents. For example, RAD establishes resident representation provisions and procedural rights that are more in line with public housing rather than Section 8 requirements. While HUD has indicated that the Section 8 program has experience administering different types of assistance contracts, RAD nonetheless creates separate requirements for certain provisions from the public housing and Section 8 programs. As previously mentioned, RAD conversions have been completed at an increasing pace in the last 5 years. However, because HUD has not yet developed separate monitoring procedures for certain requirements—the phase-in of tenant rent increases, resident representation through tenant organizations, and choice mobility requirements, many of which take effect after a conversion—and without using all available household data, the agency will not be able to reasonably ensure that these safeguards were implemented. Residents who participated in our focus groups expressed some concerns about information they received on RAD conversions, communications opportunities, and the relocation process. Residents indicated that they were notified about RAD conversion in a variety of ways. Residents in 5 of 14 focus groups found the information presented to them on RAD to be helpful. Residents in 7 of 14 focus groups indicated that the information they received was not helpful. Across these focus groups, a range of concerns was expressed, including that the information provided was not always clear or reflective of the final changes resulting from RAD conversion, and that the PHA and management were not always forthcoming with information about the RAD changes. Residents in some focus groups also indicated that they were not involved in the RAD conversion. Residents in 5 of 14 groups indicated that they were not given the opportunity to provide input into the RAD changes, while residents in 6 of 14 groups indicated that their concerns were not addressed and their suggestions were not incorporated. Residents also described problems with relocations. Some of the concerns expressed by resident focus groups on relocation related to the location of the temporary units (3 of 14 focus groups), the timing of relocation or amount of notice given (7 of 14 focus groups), and moving issues (such as items damaged during moves). Residents were asked to describe ways in which RAD conversion improved or harmed their living conditions. Residents in several focus groups indicated that RAD improved their living conditions, including both the condition (7 of 14 focus groups) and appearance of their units or the property in which they lived (6 of 14 focus groups). Some of the changes residents liked included the installation of new appliances, mold and pest removal, and safety and energy efficiency improvements. However, residents in several of the focus groups identified problems with their living conditions following RAD conversion. The problems residents identified included security concerns (10 of 14 focus groups); renovations that were of poor quality (6 of 14 focus groups); and other problems with the units (10 of 14 focus groups), such as pest problems; decreased amenities (8 of 14 focus groups), such as the removal of common areas or in-unit washing machines; and issues with property management (11 of 14 focus groups). For example, in several instances, residents stated that new managers or owners in place following RAD conversion were not responsive to their needs or concerns. During our site visits, residents described other experiences with RAD conversion. Residents in all of the groups identified being notified about RAD. Residents in 9 of 14 focus groups indicated that their rent was the same following RAD conversion. Residents in a few focus groups indicated that their rent had increased because of changes in their income or conversion from a flat rent. However, residents in a few focus groups experienced challenges in how their income was certified for the purpose of calculating rents, such as problems with requests for information (2 of 14 focus groups) and other issues with the process (4 of 14 focus groups). For example, residents reported having to provide the same paperwork multiple times. No instances in which residents were permanently involuntarily displaced were reported. One resident organization expressed concerns about fewer eviction protections and resident representation after RAD conversion. We spoke with 18 PHAs, some of which cited benefits as well as several challenges of RAD participation and some noted HUD responsiveness to their circumstances and concerns. According to many of the PHAs we spoke with, benefits of participating in the RAD program included reducing administrative requirements in Section 8 programs and opening avenues for additional sources of funding. In particular, many of the PHAs noted that RAD allowed them to access tax credit equity and other funding to complete the bulk of their repairs and renovations at once. Over half of the PHAs we spoke with also found HUD to be flexible and responsive to individual PHA circumstances. The majority of PHAs we spoke with indicated that remaining in the public housing program was not tenable because funding for the public housing program was not enough to meet their long-term capital needs. PHAs we contacted also noted several challenges of participating in RAD: financing constraints, timing challenges, and evolving requirements. Financing constraints. Some PHAs noted that program rent requirements can limit PHA participation in RAD. Each year, HUD calculates a contract rent—the total rent for a unit, including operating subsidy and resident contribution. PHAs must use the contract rent to calculate Section 8 subsidies for properties converting under RAD. According to HUD and several PHAs, contract rents for RAD-converted Section 8 units are lower than rents in traditional Section 8 assisted units, and are almost always lower than market-rate rents. Several PHAs and HUD officials have described the difficulty of converting units from the public housing program with this rent limitation. For example, when the cost of needed rehabilitation or construction is high, low allowable contract rents might not be sufficient to access appropriate capital for the conversion. In certain localities, PHAs have found solutions to augment rents and have used RAD flexibilities to allow them to convert and plan for operating expenses. For example, the PHA in Tacoma, Washington, used the Moving to Work program flexibilities to increase contract rents and housing officials in San Francisco used an allowable procedure to transfer RAD assistance from converted buildings to properties throughout its portfolio (each is a blend of traditional project-based vouchers with higher contract rents and RAD assistance). In Montgomery County, Maryland, the PHA similarly included RAD assistance in some mixed-finance properties that contain other high-rent subsidies and market-rate rents. Timing challenges. Some PHAs said they faced major challenges in coordinating RAD timelines with HUD, lenders, or other parties or with the requirements of the LIHTC process. HUD officials acknowledged that PHAs with more complex transactions, including those involved in the LIHTC process, struggle to implement their conversion plans within RAD time frames. HUD officials noted that because there is a statutory cap on the number of units that can be converted under RAD, they have established time frames to stay under the cap and ensure that PHAs that are planning to convert are ready to participate in the program. Additionally, according to HUD, it has made technical assistance available to all PHAs that receive a Commitment to enter into a Housing Assistance Payment contract during the RAD process to help ensure their readiness for RAD closing and to meet remaining conversion deadlines. On the other hand, some PHAs expressed concern to us about delays in the conversion process that put them at risk for missing state LIHTC deadlines. HUD officials described putting conversions on a fast-track on a case-by-case basis to meet LIHTC deadlines. For example, in one case a PHA relocated residents before closing and without HUD approval. HUD required the PHA to fund an escrow account until it was able to determine any payments that might need to be made to residents and any other necessary corrective action. This was done so that HUD could look into the issue while mitigating additional harm to the residents and continuing to move the PHA toward closing and aligned with tax credit application deadlines. The timing of conversion can also create gaps in the payment of Section 8 funds to PHAs. Section 8 funding should begin in January of the year following conversion. PHAs rely on annual public housing subsidies for the conversion year—public housing program funds are paid to PHAs annually and are not recaptured by HUD following RAD conversion. However, according to some PHAs we interviewed, Section 8 funding did not begin on time. For example, in Baltimore, Maryland, subsidy flow after conversion had not begun as of June of the following year. HUD officials told us inadequate guidance from HUD and confusion from PHAs regarding the necessary steps to request payment in a timely manner have been the major cause of the problems. HUD has tried to remedy delays and updated its notice to provide clearer guidance on the timing of subsidy flow around the time of conversion to Section 8. Moreover, HUD officials indicated that there has been confusion among PHAs on how to request funds, so HUD is currently revising and updating the guidance on steps PHAs must take to request payment under the PBRA program. HUD officials also indicated that it has begun monitoring whether new participants are taking the steps needed well before their first request for funding. Some PHAs we contacted also mentioned difficulty in coordinating with HUD on fulfilling internal RAD requirements and reviews. According to some, the different offices involved in RAD conversions within HUD were not well aligned and had different interpretations of the rules. For example, some RAD conversions require a civil rights review by HUD’s Office of Fair Housing and Equal Opportunity Office, including those transactions that require new construction or resident relocations. Some PHAs indicated that such reviews occurred too late in the conversion process even after other HUD offices had approved the conversion. HUD officials acknowledge that different HUD offices have different objectives in the RAD process. HUD officials indicated that the agency is trying to coordinate more effectively among these offices and streamline the conversion process as much as possible. Evolving requirements. While the majority of PHAs with which we spoke said that HUD provided clear, sufficient, and timely information, some PHAs noted that it also was challenging to adapt to evolving requirements. Some PHAs noted that as HUD identified problems in the early years of the program, it would change the guidance in response. For example, HUD officials explained that it had clarified fair housing review requirements in response to PHA concerns that the fair housing review occurred too late in the process and could affect successful conversion of projects. The most recent RAD notice (effective January 2017) is the third version since 2013 and revisions have involved substantial changes. For example, this notice provided PHAs with greater flexibilities on the funding sources they can use to raise initial contract rents and the ways they can demonstrate ownership and control of a converted property. In addition, HUD introduced a notice in November 2016 to strengthen resident protections. Some PHAs told us they found the pace or timing of the evolving requirements difficult to manage and also noted confusion about conversion instructions and guidance due to changing requirements. For example, one PHA indicated that the agency had problems reporting information into a new RAD data field in HUD’s Voucher Management System because there was no guidance at the time on how to complete this field. However, HUD has since included additional instructions in the user’s manual that became effective in April 2017. The Committee has included language to establish procedures that will ensure that public housing remains a public asset in the that event that the project experiences problems, such as default or foreclosure. In each RAD conversion, HUD and the property owner execute a use agreement, which specifies affordability and use restrictions for the property. The use agreement generally exists concurrently with the HAP contract, which is executed to govern the provision of either the PBRA or PBV subsidy for the unit. The use agreement must be recorded in a superior position to new or existing financing or other encumbrances on the converted property. Under a Section 8 HAP contract, residents pay 30 percent of adjusted household income. In the absence of the HAP contract, the use agreement is set up to control the amount paid: If the HAP contract is removed due to breach, noncompliance, or insufficiency of appropriations, under the use agreement new households in all units previously covered under the HAP contract must have incomes at or below 80 percent of the area median income for households of the size occupying an appropriately sized unit for their family size at the time of admission, and rents may not exceed 30 percent of 80 percent of area median income for the remainder of the term of the use agreement. For new residents at or below 80 percent of the area median income, under the use agreement the resident rent contribution without a HAP contract generally would be higher than that paid under a HAP contract, which is based on household income instead of the universally determined area median income. Although the use agreement maintains some level of affordability, the owner receives no subsidy under PBRA or PBV without a HAP contract and resident rent contribution is not tied to individual household income but rather based on a universal area income calculation (see fig. 3). According to HUD officials, other program requirements support the goal of long-term preservation: HAP contracts are executed for 20 years for PBRA or 15–20 years for PBV properties and compliance with all affordability requirements in the HAP and statute and regulation governing the PBRA and PBV programs must be maintained while the contract is in force. According to the authorizing statute, PHAs (for PBV contracts) and HUD (for PBRA contracts) shall offer and project owners shall accept a renewal contract at the expiration of the initial HAP contract and at each subsequent renewal. Each renewal contract will be subject to a RAD use agreement, governing the use of the property consistent with HUD requirements. According to the RAD notice, the project owner also is to establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The reserve account must be built up to and maintained at a level determined by HUD to be sufficient to meet projected requirements. According to HUD officials, during the conversion, HUD staff review each capital needs assessment to try to determine whether a property’s capital needs can be addressed over the forthcoming 20-year period. We reviewed 31 completed conversion files, the set of documentation required by HUD to enable a PHA to convert units from public housing to a Section 8 subsidy, and associated RAD contracts. In each file, key contractual protections appeared consistent with program requirements. Specifically, in all cases executed use agreements (which included requirements to limit residency eligibility to households making less than 80 percent of area median income) were included and not altered from the HUD template. In most files we reviewed, we found foreclosure riders were included and that they stated that use agreements would survive foreclosure, meaning that any new owners would take ownership subject to the agreements. Executed HAP contracts, requiring that residents’ contributions be set at 30 percent of adjusted household income, also were present in all files we reviewed. According to HUD officials, PHAs, and two housing groups we spoke with, provisions in the RAD use agreement to keep units affordable appear to be strong, with use and affordability protections designed to survive foreclosure, but the strength of provisions cannot yet be fully determined because the provisions have not yet been tested in foreclosure proceedings or in courts. According to HUD officials, as of October 2017 no RAD properties had entered foreclosure. The RAD authorizing statute requires that ownership be transferred to a capable public entity or, if not one, a capable entity as determined by HUD, or if necessary to fulfill LIHTC requirements for the property, to a HUD-approved for-profit entity (provided the PHA retained sufficient interest in the property). HUD also subjects any subsequent transfer of the property to HUD review and requires the successor ownership to meet these same requirements. As stated in the use agreement, a lien holder must give HUD notice prior to declaring a default and provide HUD concurrent notice with any written filing of foreclosure (providing that the foreclosure sale must not be sooner than 60 days after the notice), but the use agreement does not prohibit a lien holder from foreclosing on the lien or accepting a deed in lieu of foreclosure. The RAD use agreement, which is recorded superior to other liens and places use and affordability restrictions on the property, survives foreclosure. With or without a HAP contract in place, the lender or new owner must maintain the units for low- income households according to the terms of the use agreement. Therefore, according to HUD officials, the lender or new owner has an incentive to identify an appropriate owner and secure HUD approval to avoid a default under the HAP contract, which provides a Section 8 subsidy to the owner. That is, if no HAP contract were in place, the owner would collect only the tenant rent contribution (30 percent of 80 percent of area median income), rather than the tenant rent contribution plus the subsidy. HUD has discretion to enforce or waive certain use and affordability protections. According to the authorizing statute, in the case of foreclosure, bankruptcy, or termination and transfer of assistance for material violation or substantial default, the priority for ownership or control must be provided to a capable public entity, or, if no such entity can be found, to a capable entity as determined by the Secretary of HUD. Additionally, the statute allows the transfer of property to for-profit entities to facilitate the use of LIHTC financing, with requirements to maintain the PHA’s interest, which was discussed above. As of September 30, 2017, about 40 percent of RAD conversions involved LIHTC financing. According to the RAD notice, in the event of a default of a property’s use agreement or HAP contract, HUD may terminate the HAP contract and transfer assistance to another location to retain affordable units. HUD will determine the appropriate location and owner entity for the transferred assistance consistent with statutory goals and requirements for RAD. The RAD use agreement will remain in effect even in the case of abatement or termination of the HAP contract for the term the contract would have run, unless HUD agreed differently in writing. In this case, the RAD notice limits HUD discretion to terminate the use agreement to only cases involving a transfer of assistance to another property. HUD has not yet developed procedures to monitor RAD projects for risks to long-term affordability of units, including default or foreclosure. HUD officials described an ongoing effort to develop oversight procedures it would need to reasonably ensure compliance with RAD agreements and avoid risks to long-term affordability once conversions closed and units moved to Section 8 but, as previously discussed, the agency has not yet completed this effort or fully implemented a monitoring system. HUD officials told us they also planned to develop protocols to more closely monitor properties at risk of foreclosure, including developing indicators, procedures, roles, and responsibilities within HUD, but they have not finalized the design of procedures or fully implemented them. To develop protocols, HUD created an asset management working group in September 2016. The officials also stressed that no one can take possession of or foreclose on a property without HUD involvement and approval. For example, HUD officials said they expect few foreclosures among RAD-converted properties because lenders tend to communicate with the agency early so that it can become involved to prevent foreclosure. HUD officials pointed to a robust structure to oversee program properties in the PBRA program, but stated PBV property oversight continues to be developed by the Office of Public and Indian Housing. According to Standards for Internal Control in the Federal Government, agencies should design procedures to achieve goals and objectives, such as the preservation of unit affordability, and respond to risks, in this case the risk of default or foreclosure or noncompliance with program requirements. Additionally, management should identify, analyze, and respond to risks related to achieving its goals and objectives. According to HUD officials, the agency had not yet fully developed and implemented oversight procedures for postconversion monitoring because since 2012, the agency has focused on RAD start-up and review and oversight procedures for the conversion process. HUD officials also said that many projects would receive ongoing monitoring from other parties, which also could serve as a safeguard for unit affordability and help ensure the appropriate financial and physical condition of the property after RAD conversion. For example, just under half of all RAD properties use LIHTC financing as part of financing packages, which can also include local and state bonds. According to HUD officials, oversight by tax credit allocating agencies, investors, and lenders, while not alone sufficient, helps secure affordable units in a property for the long-term. However, tax credit allocating agencies, investors, and lenders are not signatories to the HAP contract or use agreement and have no formal role in reasonably ensuring that properties meet requirements exclusive to RAD. Although other entities may exercise some oversight of properties, by not developing and implementing procedures for ongoing oversight, HUD in its role as program administrator will not be able to reasonably ensure that properties adhere to requirements or meet basic program goals. Furthermore, without such monitoring HUD would be limited in its ability to identify and assist with properties at risk of foreclosure. RAD was created to demonstrate the feasibility of converting public housing units to other rental assistance programs to help preserve affordable rental units and address the significant backlog of capital needs in the public housing program. However, demonstrating the feasibility of RAD conversion is contingent on collecting and assessing quality information about the conversion projects. HUD has an opportunity to improve the demonstration’s metrics. For instance, implementing robust postclosing oversight and collecting information on financial outcomes upon completion of construction would not only improve HUD’s oversight capabilities but also allow it to report quality information. Moreover, limitations in HUD’s methodology for calculating leverage ratios for RAD may obscure the effect of funding sources used to help fund RAD conversions, potentially under- or over-reporting the program’s capital leveraging. By collecting comprehensive information on final (postcompletion) financing sources and costs and developing quality metrics, HUD would be better positioned to more accurately report the results of the demonstration program. Additionally, a focus on the conversion process itself (and less on its results), and limitations in HUD’s data have contributed to limited monitoring by HUD in other areas. Specifically, by not developing and implementing monitoring procedures to assess the effect of RAD on residents HUD cannot ensure compliance with resident safeguards. Further, HUD collects and maintains household data for the public housing and Section 8 programs, yet it does not systematically use this information to ensure that resident safeguards are in place. Finally, HUD could benefit from additional procedures to assess RAD properties for risks to long-term preservation to be able to respond to property default or foreclosure. We are making the following five recommendations to HUD: HUD’s Assistant Secretary for Housing should include provisions in its postclosing monitoring procedures to collect comprehensive high quality data on financial outcomes upon completion of construction, which could include requiring third-party certification of and collecting supporting documentation for all financing sources and costs. (Recommendation 1) HUD’s Assistant Secretary for Housing should improve the accuracy of RAD leverage metrics—such as better selecting inputs to the leverage ratio calculation and clearly identifying what the leverage ratio measures—and calculate a private-sector leverage ratio. (Recommendation 2) HUD’s Assistant Secretary for Housing should prioritize the development and implementation of monitoring procedures to ensure that resident safeguards are implemented. (Recommendation 3) HUD’s Assistant Secretary for Housing should determine how it can use available program-wide data from public housing and Section 8 databases, in addition to resident logs, for analysis of the use and enforcement of RAD resident protections. (Recommendation 4) HUD’s Assistant Secretary for Housing should prioritize the development and implementation of procedures to assess risks to the preservation of unit affordability. (Recommendation 5) We provided a draft of this report to HUD for comment. HUD provided written comments on the draft report, which are summarized below and reproduced in appendix IV. HUD also provided technical comments, which we incorporated as appropriate. In its comment letter, HUD stated that it agreed with our findings that HUD can improve metrics used to assess program impact and build on existing oversight structures. HUD described actions it intends to take to implement our recommendations to the extent possible and consistent with resource limitations. More specifically, HUD agreed with our first recommendation to ensure it collects comprehensive quality data on financial outcomes in its postclosing monitoring procedures (which could include supporting documentation for all financing sources and costs). HUD agreed it should routinely collect an updated list of funding sources and uses and related documentation when projects had cost overruns or other significant changes. HUD intends to review and revise, as appropriate, required postcompletion certifications. HUD added that in most cases, funding sources and uses do not materially change between closing and construction completion. HUD stated that securing the postclosing information in such cases might be of minimal benefit relative to the additional reporting burden. However, it is not clear how HUD would determine if projects had significant changes in costs or uses because HUD lacks postcompletion information that would show the magnitude of changes. In relation to reporting burden, HUD already has implemented procedures to collect limited financial information following the completion of construction in October 2017. We believe any additional reporting would not be disproportionate to the benefits of improving HUD's oversight capabilities through project completion and enhancing its reporting to more accurately reflect the results of the demonstration program. For our second recommendation to improve the accuracy of RAD leverage metrics and calculate a private-sector leverage ratio, HUD agreed that RAD leverage metrics can be improved. HUD will ensure that the private-sector leverage ratio required by statute is clearly identified and included in its RAD evaluation. HUD also intends to identify a small number of relevant leverage ratios with distinct methodologies and will routinely publish these ratios with clear identification and explanations. In relation to our finding of misidentified funding sources, HUD plans to re- examine its chart of accounts and review prior transaction records to address errors and properly classify transaction sources. In response to our third recommendation to prioritize the development and implementation of monitoring procedures for resident safeguards, HUD agreed that it is important to better document and expedite development and implementation of monitoring procedures. HUD also agreed that additional monitoring was needed to ensure the right of residents to request and move with a tenant-based voucher after a period of residency (choice-mobility). HUD noted that its Office of Policy Development and Research is seeking funding for additional research on RAD with a focus on the use and effect of choice-mobility options, which would inform HUD's monitoring efforts. Finally, while HUD said that we did not find the safeguards to be weak or inadequate, we did not perform an audit designed to assess the safeguards and therefore cannot opine on their adequacy. On the basis of our findings, we found that HUD’s implementation of these safeguards could be strengthened. Regarding our fourth recommendation that HUD determine how it can use available program-wide data and resident logs for analysis of RAD resident protections, HUD agreed to examine how it could use its existing data systems to further enhance its monitoring efforts. HUD added that the systems have limitations, so that the agency also uses other mechanisms to track and monitor implementation of resident protections. For our fifth recommendation to prioritize the development and implementation of procedures to assess risks to the preservation of unit affordability, HUD agreed that it is important to assess and mitigate risks to unit affordability. HUD stated that it employs robust underwriting standards prior to permitting conversion, and relies on existing procedures to conduct ongoing oversight of Project-Based Rental Assistance (PBRA) properties, which we discussed in the draft. However, as we noted, HUD has not yet developed procedures to more closely monitor RAD properties at risk of foreclosure, though it plans to establish indicators of foreclosure risk and oversight roles and responsibilities within HUD. HUD said that since the summer of 2017, it has been evaluating what additional oversight procedures might be needed for RAD Project-Based Voucher properties. HUD also described plans to augment its existing oversight procedures to preserve affordable units in the event of foreclosure by developing protocols in the following areas: transfer of property ownership to a capable entity, transfer of the rental assistance to another site, and protection of residents in the event a Housing Assistance Payment contract was terminated. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Housing and Urban Development and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are listed on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. This report examines aspects of the Department of Housing and Urban Development’s (HUD) Rental Assistance Demonstration (RAD) program. More specifically, this report addresses (1) HUD’s assessment of the physical and financial outcomes of RAD conversion to date; (2) how RAD conversions affected residents and what safeguards were in place to protect them, including while temporarily relocated and during conversion; (3) what challenges, if any, public housing agencies (PHA) faced in implementing RAD; and (4) the extent to which RAD provisions are designed to help preserve the long-term affordability of units. To address all four objectives, we analyzed agency documentation and interviewed officials from HUD. The documentation we reviewed included policies and procedures for RAD; manuals describing HUD data systems; draft policies and procedures for implementing postclosing oversight; and reports on RAD performance. We interviewed HUD headquarters officials from the Office of Recapitalization within the Office of Housing, which oversees the administration of RAD, and the Office of Policy Development and Research (PD&R). We also interviewed PHA officials and developers involved in RAD transactions, as well as selected experts and other stakeholders to obtain their perspectives on RAD. Additionally, we conducted a literature search to identify publications related to RAD. We visited a nonprobability sample of eight PHAs in Maricopa County, Arizona; Alameda County, California; Montgomery County, Maryland; and in the cities of San Francisco, California; Baltimore, Maryland; New Bern, North Carolina; El Paso, Texas; and Tacoma, Washington, to observe housing units before, during, or after renovation when possible as well as common areas that had planned or undergone renovation. We selected sites to include varying PHA sizes, RAD subsidy types, planned rehabilitation and resident relocation, numbers and sizes of RAD transactions, closing dates, constructions costs, and geographic locations across the United States. At each site, we conducted semistructured interviews with PHA officials and, when available, developers (5 sites). We also conducted one or two focus-group interviews with groups of 6– 15 residents who lived at the converted properties to obtain their perspectives and experiences. In each location, we asked the PHAs to invite residents to participate in the focus groups based on their availability. We also met with the Resident Advisory Board in each location that had one. For 7 of 8 site visits, we selected two RAD properties to conduct resident focus groups (in Alameda County, California we held one focus group). We conducted a content analysis based on resident focus group interviews to describe resident experiences and the RAD program’s effects on residents. Utilizing the selection criteria noted above, we conducted semistructured telephonic interviews with an additional nonprobability sample of 10 PHAs in Fresno, California; Fort Collins, Colorado; Dekalb County, Georgia; Chicago, Illinois; Ypsilanti, Michigan; Cuyahoga County, Ohio; Philadelphia; Pennsylvania; Spartanburg, South Carolina; McKinney, Texas; and Yakima, Washington. Because we selected a non-probability sample of PHAs to visit and interview, the information we obtained cannot be generalized more broadly to all PHAs. However, it provides context on RAD particularly on implementation challenges and perspectives on physical and financial impacts, long-term affordability, and resident protections. We also selected the following 11 individuals and organizations as experts and stakeholders: 1. Council of Large Public Housing Authorities 2. National Association of Housing and Redevelopment Officials 3. Center on Budget and Policy Priorities 4. Public Housing Authorities Directors Association 5. National Housing Law Project 6. Community Legal Services of Philadelphia 7. Maryland Legal Aid 8. Disability Rights Maryland 9. Jaime Alison Lee, Associate Professor of Law and Director, Community Development Clinic, University of Baltimore School of Law 10. Yumiko Aratani, Assistant Professor, Columbia University Mailman 11. University of California, Berkeley, Terner Center for Housing We interviewed experts and stakeholders on resident impacts and implementation challenges associated with RAD. The entities may not represent all views on these topics, but their views provide insights on RAD. To select these individuals and groups, we met with three major PHA associations and two resident advocacy groups, and asked for referrals for organizations or individuals with expertise in RAD. We also selected a nonprobability, random sample of 31 RAD conversion files to review. Utilizing HUD RAD Resource Desk data, we randomly selected 31 RAD files for properties that had closed conversion as of June 30, 2017 and that planned to incur construction costs. We used the files to help us determine physical changes to RAD conversions and the impacts of RAD on residents through, for example, relocation. We excluded RAD conversions with no construction costs from the random sample because they would not have physical changes and no resident relocation would occur before or during our review. To address our first objective on the physical and financial outcomes of RAD conversion to date and how HUD measured these outcomes, we first obtained and analyzed HUD data on RAD conversions since RAD’s authorization (from fiscal years 2013 through 2017). We assessed the reliability of these data by reviewing system documentation, interviewing knowledgeable officials about system controls, and conducting electronic testing. We determined that the data were sufficiently reliable for the purposes of describing rehabilitation and new construction in RAD projects and evaluating RAD leveraging metrics. We included in our analysis all RAD conversions that were active or closed. We used these data to determine the number of closed RAD conversions, associated financial sources and uses, subsidy types, and type of construction (rehabilitation, new construction, and no rehabilitation or new construction). In addition, during our interviews with PHAs and developers, we obtained their perspectives on potential contributing factors to financial decisions and type of construction pursued through RAD conversion. As noted earlier, we also reviewed 31 randomly selected files of converted properties with construction costs to describe property physical changes in RAD conversions. Furthermore, we reviewed HUD documents, such as HUD and PD&R evaluations, publications, and policies and procedures to gain additional context for how HUD measures RAD outcomes. We also interviewed HUD officials, including PD&R and Office of Recapitalization officials, on RAD data and metrics, as well as other performance monitoring activities. We further analyzed data from the HUD RAD Resource Desk to determine how these data support HUD’s metrics and performance monitoring activities. As previously mentioned, we determined that these HUD data were sufficiently reliable for the purposes of this report. Specifically, we assessed and calculated RAD leverage ratio and construction activity. We assessed HUD’s performance monitoring activities and reporting against the RAD authorizing statute, Standards for Internal Control in the Federal Government. To recalculate estimates of the RAD leverage metric, we obtained documentation from the Office of Recapitalization to review the methodology used to calculate their most recent leverage ratio. We aligned the methodology they provided with RAD Resource Desk Transaction Log data that was downloaded on August 7, 2017. We replicated HUD’s methodology and matched the data utilized with the descriptors from the Transaction Log. To isolate financial sources and manually adjust the “other source” data, we compiled matched descriptors and funding amounts and categorized each observation based on the funding source description, as a federal source, state/county/city source, or PHA source, among others. For additional information and results, see appendix II. To determine how RAD affected residents in converted units, we analyzed HUD public housing and Section 8 household data before and after conversion (demographic characteristics of residents and changes in rent, income, and location). Specifically, we examined data from 2013— when the first transactions closed—through June 30, 2017. HUD compiled and provided custom extracts of data on households in RAD- converted properties from the Inventory Management System/Public and Indian Housing Information Center (IMS/PIC) (public housing and Section 8 PBV) and Tenant Rental Assistance Certification System (Section 8 PBRA). We assessed the reliability of the data extracts provided by HUD by (1) performing electronic testing of required data elements, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data. We determined the data on PBV households were sufficiently reliable for the purposes of our reporting objectives, but that the data on PBRA households was not sufficiently reliable for purposes of describing some characteristics of RAD households. For example, in trying to determine participation in the RAD program by year, we received several thousand PBRA entries that preceded the establishment of the RAD program. Moreover, as we previously mentioned, the postconversion household data for PBRA conversions is in a separate data system, so some variables, such as those related to race, ethnicity, rent, and income, differ from the other household data for that program. Because of these limitations, the data for PBRA households were not reliable for purposes of comparing RAD household characteristics before and after conversion as we had intended. To describe safeguards for residents and help ascertain how HUD implemented protections, we reviewed legal protections and requirements in HUD notices, reviewed selected conversion files, and interviewed HUD officials about monitoring and compliance processes. Finally, as previously described, we held focus groups with residents to better understand any effects on their living conditions and quality of life. To determine challenges PHAs faced in implementing RAD, we reviewed HUD guidance and related documents for PHAs in the program. We also interviewed eight PHAs during our site visits and spoke with another 10 PHAs by telephone about the benefits and challenges of participating in the RAD program. To examine provisions designed to help preserve long-term affordability of units, we reviewed the RAD authorizing statute and amendments and HUD notices and interviewed HUD staff to verify our understanding of agency affordability protections. For a sample of 31 randomly selected properties, we examined templates for contractual agreements for RAD closings and analyzed closing documents and contracts to determine if agreements matched program requirements. We interviewed HUD staff and staff of 18 PHAs to obtain viewpoints on the potential strengths or weaknesses of preservation in the case of default or foreclosure. We conducted this performance audit from February 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Department of Housing and Urban Development’s (HUD) Office of Recapitalization collects financial sources and use data from Rental Assistance Demonstration (RAD) participants. Table 2 lists the financial source fields collected by HUD. Table 3 lists the financial cost fields collected by HUD. Table 4 provides additional financial source detail pertaining to HUD’s leverage ratio calculation. Table 5 and Table 6 show the total financial source amounts collected by HUD. Specifically, Table 5 shows total financial source amounts prior to recategorization, while Table 6 shows total financial source amounts after manual adjustments. Manual adjustments included isolating funding source observations in “other funding” fields 1-6 and incorporating them into existing fields, as appropriate. Table 7 replicates HUD’s methodology for calculating the RAD leverage metrics after manual adjustments in HUD data. See Table 4, above, to compare changes in each category. Table 8 recalculates the leverage ratio by deducting federal sources as leveraged sources. Table 9 recalculates the leverage ratio by deducting public sources as leveraged sources (compare to Table 8 above). The Rental Assistance Demonstration (RAD) program has numerous requirements intended to ensure residents whose units are converted through RAD receive certain protections. The following is a description of these safeguards and their reporting and monitoring requirements. The Government Accountability Office, the audit, evaluation, and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no cost is through GAO’s website (https://www.gao.gov). Each weekday afternoon, GAO posts on its website newly released reports, testimony, and correspondence. To have GAO e-mail you a list of newly posted products, go to https://www.gao.gov and select “E-mail Updates.” The price of each GAO publication reflects GAO’s actual cost of production and distribution and depends on the number of pages in the publication and whether the publication is printed in color or black and white. Pricing and ordering information is posted on GAO’s website, https://www.gao.gov/ordering.htm. Place orders by calling (202) 512-6000, toll free (866) 801-7077, or TDD (202) 512-2537. Orders may be paid for using American Express, Discover Card, MasterCard, Visa, check, or money order. Call for additional information. Connect with GAO on Facebook, Flickr, Twitter, and YouTube. Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. Visit GAO on the web at https://www.gao.gov. James-Christian Blockwood, Managing Director, spel@gao.gov, (202) 512-4707 U.S. Government Accountability Office, 441 G Street NW, Room 7814, Washington, DC 20548 Please Print on Recycled Paper. In addition to the individual named above, Paul Schmidt (Assistant Director), Julie Trinder-Clements (Analyst in Charge), Meghana Acharya, Enyinnaya David Aja, Alyssia Borsella, Juan J. Garcia, Ron La Due Lake, Amanda Miller, Marc Molino, Barbara Roesmann, Jessica Sandler, MaryLynn Sergent, Rachel Stoiko, and William Woods made major contributions to this report.", "summary": "HUD administers the Public Housing program, which provides federally assisted rental units to low-income households through PHAs. In 2010, HUD estimated its aging public housing stock had $25.6 billion in unmet capital needs. To help address these needs, the RAD program was authorized in fiscal year 2012. RAD allows PHAs to move (convert) properties in the public housing program to Section 8 rental assistance programs, and retain property ownership or transfer it to other entities. The conversion enables PHAs to access additional funding, including investor equity, generally not available for public housing properties. GAO was asked to review public housing conversions under RAD and any impact on residents. This report addresses, among other objectives, HUD's (1) assessment of conversion outcomes; (2) oversight of resident safeguards; and (3) provisions to help preserve the long-term affordability of units. GAO analyzed data on RAD conversions through fiscal year 2017; reviewed a sample of randomly selected, nongeneralizable RAD property files; and interviewed HUD officials, PHAs, developers, academics, and affected residents. The Department of Housing and Urban Development (HUD) put procedures in place to evaluate and monitor the impact of conversion of public housing properties under the Rental Assistance Demonstration (RAD) program. RAD's authorizing legislation requires HUD to assess and publish findings about the amount of private-sector leveraging. HUD uses a variety of metrics to measure conversion outcomes. But, the metric HUD uses to measure private-sector leveraging—the share of private versus public funding for construction or rehabilitation of assisted housing—has limitations. For example, HUD's leveraging ratio counts some public resources as leveraged private-sector investment and does not use final (post-completion) data. As a result, HUD's ability to accurately assess private-sector leveraging is limited. HUD does not systematically use its data systems to track effects of RAD conversions on resident households (such as changes in rent and income, or relocation) or monitor use of all resident safeguards. Rather, since 2016, HUD has required public housing agencies (PHA) or other post-conversion owners to maintain resident logs and collect such information. But the resident logs do not contain historical program information. HUD has not developed a process for systematically reviewing information from its data systems and resident logs on an ongoing basis. HUD has been developing procedures to monitor compliance with some resident safeguards—such as the right to return to a converted property—and begun a limited review of compliance with these safeguards. However, HUD has not yet developed a process for monitoring other safeguards—such as access to other housing voucher options. Federal internal control standards require agencies to use quality information to achieve objectives, and obtain and evaluate relevant and reliable data in a timely manner for use in effective monitoring. Without a comprehensive review of household information and procedures for fully monitoring all resident safeguards, HUD cannot fully assess the effects of RAD on residents. RAD authorizing legislation and the program's use agreements (contracts with property owners) contain provisions intended to help ensure the long-term availability of affordable units, but the provisions have not been tested in situations such as foreclosure. For example, use agreements between HUD and property owners specify affordability and use restrictions that according to the contract would survive a default or foreclosure. HUD officials stated that HUD intends to develop procedures to identify and respond to risks to long-term affordability, including default or foreclosure in RAD properties. However, HUD has not yet done so. According to federal internal control standards, agencies should identify, analyze, and respond to risks related to achieving goals and objectives. Procedures that address oversight of affordability requirements would better position HUD to help ensure RAD conversions comply with program requirements, detect potential foreclosure and other risks, and take corrective actions. GAO makes five recommendations to HUD intended to improve leveraging metrics, monitoring of the use and enforcement of resident safeguards, and compliance with RAD requirements. HUD agreed with our recommendations to improve metrics and build on existing oversight.", "document_type": "gao"}
{"report": "The primary source of federal funding for new fixed-guideway projects or extensions to existing fixed-guideway systems is FTA’s Capital Investment Grants program, which is a discretionary and competitive grant program funded through annual appropriations. The program is governed by statutory provisions, and funding is provided in the form of a construction grant agreement, which is subject to congressional appropriations. Projects that compete for funding through the Capital Investment Grants program are designed and implemented by project sponsors, which are usually local transit agencies. Prior to 2012, project sponsors typically applied for funding as either a New Starts or Small Starts project. New Starts projects are capital investments whose sponsors request $100 million or more in Capital Investment Grants funding or have an anticipated capital cost of $300 million or more. Small Starts projects are capital investments whose sponsors request less than $100 million in Capital Investment Grants funding and have an anticipated capital cost of less than $300 million. In 2012, Congress created a third category of eligible projects called Core Capacity projects. Unlike New Starts and Small Starts, for which the amount of funding project sponsors request and the anticipated capital cost of a project are key factors, Core Capacity projects are not defined by cost. Instead, Core Capacity projects are “corridor-based capital investments” in existing fixed-guideway systems that increase the capacity of a corridor by not less than 10 percent, in a corridor that is at or above capacity or is expected to be within 5 years. Examples of Core Capacity projects include capital investments to expand a transit system’s platforms and acquire real property, rights of way, or rail cars associated with corridor improvements increasing capacity. To enter the Capital Investment Grants program, project sponsors submit an application to FTA with information on the proposed project, such as a description of the transportation problem the project seeks to address, among other requirements. If accepted into the program, project sponsors must then follow a multi-step, multi-year development process outlined in statute during which FTA determines if the project is eligible for funding through the Capital Investment Grants program. The development process that project sponsors must follow varies depending on whether the project is a New Starts or Core Capacity project, or a Small Starts project. For example, New Starts and Core Capacity projects are required to complete a two-phase development process. During the first phase, called Project Development, project sponsors must complete an environmental review process outlined in the National Environmental Policy Act of 1969 and address other statutory requirements. Project sponsors must also provide FTA with sufficient information for FTA to evaluate and rate the project, among other FTA requirements. To complete the second phase, called Engineering, project sponsors must, among other requirements, develop a firm and reliable cost, scope, and schedule for their project and obtain all non-Capital Investment Grants program funding commitments. Small Starts projects complete a development process that is similar but consists of only one phase, called Project Development. During the development process, FTA is required to evaluate and rate projects using a number of statutory criteria designed to assess the merit of a project (i.e., project justification). For example, for Core Capacity projects, FTA is required to evaluate and rate a project against six criteria: (1) mobility improvements, (2) environmental benefits, (3) cost- effectiveness, (4) the congestion relief associated with the project, (5) the economic development effects associated with the project, and (6) the existing capacity needs of the corridor. FTA is also required to evaluate and rate the local financial commitment to a project, including evidence of stable and dependable financing sources, as well as the project sponsor’s ability to operate the project and continue to operate any related transit system. FTA’s ratings are “point-in-time” evaluations—meaning that they can change—as a project progresses through the development process. To receive funding, project sponsors must complete the development process outlined in statute and meet all statutory eligibility requirements. Projects must also address all FTA requirements, and FTA must recommend the project for funding to Congress. FTA’s recommendations are based on its evaluation and rating of the project using the criteria specified in statute, the availability of Capital Investment Grants program funds, and the readiness of the project, such as whether the project’s cost, scope, and schedule are advanced enough to be considered reliable. As mentioned earlier, the funding that projects receive is subject to congressional appropriations. As we previously reported, both MAP-21 and the FAST Act made numerous changes to the Capital Investment Grants program. For example, in addition to establishing Core Capacity projects as a new category of eligible projects, MAP-21 reduced the number of phases in the development process that projects in the Capital Investment Grants program must follow to be eligible for and receive funding. According to FTA officials, changes the FAST Act made to the program include raising the dollar threshold for eligibility for New Starts and Small Starts projects and increasing the number of projects that are eligible for funding by allowing joint public transportation and intercity-passenger-rail service to compete for funding. FTA has not addressed three of four outstanding statutory provisions concerning the Capital Investment Grants program. As shown in table 1, three of these provisions stem from MAP-21, which was enacted in 2012, and the fourth stems from the FAST Act, enacted in 2015. When we initiated our review, FTA officials told us FTA did not have immediate plans to address the outstanding statutory provisions due to the administration’s stated intent to phase out the Capital Investment Grants program. As mentioned earlier, in 2017 the President’s Fiscal Year 2018 budget first proposed phasing out the program, stating that future investments in new transit projects should be funded by the localities that use and benefit from those projects. Since then, FTA’s annual reports to Congress, which contain funding recommendations for the program, have reflected this direction. For example, FTA’s Fiscal Year 2018 report recommended that Congress only fund those projects that had already received a grant agreement through the program, and FTA’s Fiscal Year 2019 report stated that FTA neither requests nor recommends any funding for projects in the Capital Investment Grants program beyond those that have already received a grant agreement. However, as also mentioned earlier, in March 2018 the Consolidated Appropriations Act, 2018, provided the program with more than $2.6 billion, and also directed FTA to continue to administer the Capital Investment Grants program in accordance with the program’s procedural and substantive requirements. Following the enactment of the Consolidated Appropriations Act, 2018, FTA officials told us that they are reviewing the law and determining next steps. However, they did not indicate that they have any immediate plans to address those provisions. Moving forward, if FTA does not take steps to address the outstanding provisions, FTA runs the risk of violating federal law. During our review, FTA officials told us that other factors have also influenced FTA’s decisions. For example, FTA officials noted that since our last report, issuing regulations regarding the evaluation and rating process for Core Capacity projects was not identified as one of the Department’s regulatory priorities and, currently, FTA has no plans to issue such regulations. However, issuing regulations to address this provision is important. FTA’s policy guidance notes that aspects of the development process, such as the steps to get into and through the development process, were not subject to public outreach and are open to be discussed in future updates to the Major Capital Projects rule. While FTA officials emphasized that the agency’s policy guidance is intended to serve as a guide for running the program until such time that FTA initiates further rulemaking, FTA’s policy guidance also notes that further rulemaking is needed to fully implement the changes MAP-21 and the FAST Act made to the Capital Investment Grants program. Until FTA initiates this rulemaking, it is unclear when if at all, FTA might address most of these outstanding provisions. With respect to addressing the program of interrelated projects provisions, FTA officials reiterated their concerns, as we noted in our last report, that establishing an evaluation and rating process for a program of interrelated projects is difficult. As an example, FTA officials noted that as part of the New Starts, Small Starts, and Core Capacity evaluation process, FTA takes into account factors such as a corridor’s current ridership estimates and future ridership projections. According to FTA officials, evaluating and rating projects that encompass multiple corridors is challenging because it requires that FTA establish new measures and breakpoints—that is, thresholds for FTA’s ratings. Both FTA officials and the American Public Transportation Association representatives we spoke with told us that FTA has sought input from the transit industry in the past to help address these concerns. However, FTA officials also told us that addressing their concerns requires additional research and public outreach on FTA’s part and that undertaking that work has not been a priority of the Department of Transportation. Representatives from two of the sponsors we spoke with, as well as representatives of the American Public Transportation Association, told us that the transit industry is interested in seeing FTA implement the program of interrelated projects provisions and that doing so could help transit agencies deliver projects more efficiently. For example, according to one sponsor, implementing those provisions could help this sponsor purchase materials in bulk and reduce costs. Until FTA takes steps to address this provision, the federal government or project sponsors may be missing opportunities to deliver transit projects more efficiently. In the case of the FAST Act’s provision establishing a pilot program— called the “Expedited Project Delivery for Capital Investment Grants Pilot Program,” designed to create a fast-track approval process for projects that meet specific statutory criteria, such as having a maximum federal share of 25 percent—FTA published a notice in the Federal Register in 2016 stating that it would publish guidance describing the process project sponsors should follow to apply for consideration as a pilot project. However, at the time of our review, FTA had not provided sponsors with information that describes the process they should follow to apply for consideration as a pilot project. FTA officials told us that project sponsors have generally not expressed interest in participating in the program under the FAST Act, and most of the project sponsors that we spoke with agreed. Specifically, four of the six Core Capacity project sponsors told us that some FAST Act requirements, such as a requirement that projects in the program be supported in part by a public-private partnership, made participating in the program less attractive. According to two of the sponsors, private investors do not have an incentive to invest in public transit projects unless they can profit from their investment, but the FAST Act limits that opportunity by requiring that projects participating in the pilot program be operated and maintained by employees of an existing public transportation provider. Nonetheless, in February 2018, the President’s infrastructure plan recommended restructuring this program, with changes, to better achieve the goals of expediting project delivery. Among the changes recommended are allowing the pilot program to be available to all projects and not just on a pilot basis, and increasing the federal share from 25 to 50 percent. Taking steps to describe the steps project sponsors should follow to apply for consideration as a pilot project under this program could help FTA better understand whether further changes are needed. The statutory provision FTA has addressed relates to a MAP-21 provision directing FTA to use an expedited technical-capacity review process for certain experienced project sponsors. At the time of our 2016 report, FTA was in the process of finalizing the development of a tool to address this provision, and since then, FTA has implemented that tool. Specifically, the tool helps FTA staff determine the level of review required of project sponsors based on a number of risk factors, such as the complexity of a proposed project and the sponsor’s experience level. According to FTA, this tool helps FTA staff develop project-specific oversight plans that specify the resources FTA should devote when overseeing a particular project. Projects that FTA determines are at lower risk have fewer oversight resources allocated to them, and FTA officials told us that they have been using this tool on all projects in the program since mid-2017. Based on our review of FTA’s policy guidance, instructions for applying to the Capital Investment Grants program, and interviews with FTA officials and six Core Capacity project sponsors, we found that FTA has established a process to verify that proposed Core Capacity projects meet statutory requirements before recommending projects for funding. In addition, based on our review of documentation supporting FTA’s funding recommendations for the two Core Capacity projects with grant agreements as of June 2017, as well as interviews with FTA officials and both project sponsors, we found that FTA took steps to verify that the statutory requirements were met before recommending those two projects for full funding grant agreements. Representatives of the other four sponsors we spoke with also confirmed that FTA is taking steps to verify that their projects meet the statutory requirements. Such requirements include specific project eligibility and other requirements that projects must meet during the Project Development and Engineering phases of the development process. Project Eligibility: Under statute, Core Capacity projects must meet specific eligibility requirements. For example, along the lines previously noted, statutory provisions require that a Core Capacity project be a substantial corridor-based capital investment located in a corridor that is at or over capacity, or projected to be at or over capacity within the next 5 years. These projects must also increase the corridor’s capacity in the peak hour and direction of travel by not less than 10 percent. To verify that projects meet these requirements, project sponsors and FTA officials told us that FTA staff assisted project sponsors in refining their project’s corridor (see fig. 1), and reviewed information provided by the sponsors on such things as the corridor’s current ridership estimates; the type, configuration, and capacity of light- and heavy-rail cars; and the number of seats on commuter rail cars. FTA’s policy guidance outlines the criteria that FTA uses, criteria that FTA developed after consulting industry standards and reaching out to the transit industry. FTA officials emphasized that they apply these criteria consistently across projects when evaluating whether a project’s corridor is at capacity. As another example, under statute, Capital Investment Grant funding for Core Capacity projects may not be applied to “state of good repair” improvements to the transit system. “State of good repair” improvements include, among other things, the replacement or rehabilitation of existing rail cars, tracks, or communications equipment due to normal wear and tear or preventive maintenance. Core Capacity projects are likely to be intertwined with state of good repair improvements, however, and FTA staff work with project sponsors to identify which project costs within the project corridor are eligible to receive Core Capacity funding and which are related to maintaining a state of good repair. Project Development Phase: As with the project eligibility requirements discussed above, statutory provisions identify specific requirements that must be met during the Project Development phase, and we found that FTA has a process to verify that those requirements are met. For example, under statute, Core Capacity projects have 2 years after the day on which they enter into Project Development to complete the activities required to obtain a project rating by FTA. Completion of the Project Development phase is marked by the completion of the environmental review process required under the National Environmental Policy Act of 1969 and FTA’s assignment of a project rating. FTA’s policy guidance encourages project sponsors to perform whatever work they feel is necessary prior to requesting entry into Project Development to enable them to complete this phase within 2 years. According to both FTA officials and representatives from each of the six Core Capacity project sponsors, FTA staff work closely with project sponsors to assist them with preparations to enter Project Development, review their documentation, and complete this phase on time. Further, each of the six Core Capacity project sponsors we spoke with told us that FTA follows up with sponsors to ensure that all statutory and FTA requirements for the Project Development phase are met. For example, the project sponsors reported that FTA officials hold a variety of periodic (e.g., weekly, monthly, quarterly) meetings with project sponsors during which they discuss various aspects of the sponsor’s progress toward meeting the statutory requirements. Under statute, to assign a project rating, FTA must evaluate and rate Core Capacity projects against specific project justification criteria and local financial commitment criteria, as well as ensure that the project has satisfied the project eligibility and other statutory requirements, such as having been selected as the locally preferred alternative and adopted into the appropriate regional transportation plans. To obtain the information needed to make these evaluations, FTA provides project sponsors with reporting instructions and templates on its website specifying its documentation requirements. These instructions and templates allow for the standardized review of the project eligibility requirements previously discussed, as well as aspects of the project justification and local financial commitment criteria. Representatives of two of the six Core Capacity project sponsors described these instructions and templates as helpful, and said the templates enable them to gauge what their project’s potential rating might be. Representatives of four sponsors also reported that when completing the templates they are in frequent contact with FTA officials to help ensure they are appropriately providing all required information. FTA officials inform sponsors that the agency reviews completed templates along with other information to assign project ratings. Pursuant to statute, once FTA determines that a Core Capacity project meets the specified project eligibility requirements, assigns the project a rating, and determines that the environmental review process has been completed, among other requirements, the project is ready to enter the Engineering phase. Before advancing the project to Engineering, FTA requires project sponsors to provide proof that at least 30 percent of the non-Capital Investment Grants funding necessary to complete the project is committed, as well as a variety of other documentation, such as a 20- year financial plan; a detailed cost estimate; a detailed project management plan and project schedule; a preliminary safety hazard, threat, and vulnerability analysis; and a draft “before and after” study plan. Once a project sponsor indicates it is ready to advance its project to the Engineering phase, FTA assigns oversight contractors, who take a prominent role in overseeing the day-to-day management of the project in order to provide FTA with ongoing reports of the project sponsor’s financial and technical progress. Engineering Phase: Based on our review of documentation for the two Core Capacity projects that have received a grant agreement, we found that FTA also has a process to verify that the requirements specified in statute applicable to the Engineering phase are met before recommending a Core Capacity project for funding. Pursuant to statute, during the Engineering phase the project sponsor must continue to show the financial capability to complete the project and maintain and operate the future transit system with stable and dependable funding sources. FTA requires that project sponsors show increasing financial capacity during the first 3 years in this phase by providing proof of commitments for at least 50 percent of all non-Capital Investment Grants funding. Pursuant to statute, project sponsors must also continue to show the technical capability to complete the project. FTA requires that project sponsors show increasing technical capacity during this phase by making sufficient progress advancing the level of project design. According to representatives from the two Core Capacity projects that have received a grant agreement, FTA’s oversight contractors interact with project sponsors frequently throughout the Engineering phase, and are responsible for assisting FTA in determining whether sponsors have the technical and financial capacity to complete their projects. Both FTA officials and the two project sponsors reported that these oversight contractors review project documentation throughout the Engineering phase to verify that the sponsor meets FTA requirements to execute a grant agreement, and are otherwise acceptable for advancing a project. In reviewing documentation for the two Core Capacity projects that have received a grant agreement, we found these oversight contractors provided FTA with their comprehensive assessments of the project sponsor’s technical and financial capacity. FTA officials said they use these assessments when evaluating whether a project should be recommended for a grant agreement. For years, the Capital Investment Grants program has served as the primary source of federal financial assistance to new transit projects across the United States. During this review, however, the future of that program has been unclear, given the administration’s stated intent to phase out the program and FTA’s actions, which have reflected that direction. The Consolidated Appropriations Act, 2018, provided FTA with both the funding to continue awarding grants through the program and the direction to administer the program in accordance with the requirements specified in law. FTA stated that it is reviewing the law and determining next steps but did not indicate that it has specific plans or timeframes for addressing the three outstanding provisions discussed in this report. By not addressing those provisions, FTA runs the risk of failing to implement provisions of federal law, and the federal government or project sponsors may be missing opportunities to deliver transit projects more efficiently. We are making the following three recommendations to the Department of Transportation: The FTA Administrator should initiate a rulemaking regarding the evaluation and rating process for Core Capacity Improvement projects, consistent with statutory provisions. (Recommendation 1) The FTA Administrator should take steps, such as undertaking additional research or public outreach, to enable FTA to evaluate and rate projects in a program of interrelated projects, in a manner consistent with statutory provisions. (Recommendation 2) The FTA Administrator should take steps to describe the process project sponsors should follow to apply for consideration as a pilot project under the Expedited Project Delivery for Capital Investment Grants Pilot Program. (Recommendation 3) We provided a draft of this report to the Department of Transportation for review and comment. In its comments, which are reproduced in appendix II, the Department concurred with our recommendations. However, the Department also stated in its letter that our report did not adequately describe the steps FTA has completed to implement the statutory provisions discussed in this report. Further, the Department stated that FTA has demonstrated its intent to address the outstanding provisions. We agree with the Department that FTA has taken numerous actions toward addressing various statutory provisions of the Capital Investment Grants program, provisions contained in either MAP-21 or the FAST Act. As noted above in this report, we discussed many of those actions in our April 2016 review of the Capital Investment Grants program. At that time, we reported that FTA was making progress implementing MAP-21 and that FTA intended to take action over the next 2 years toward addressing the remaining provisions of MAP-21 and the new requirements of the FAST Act. However, as of this report, FTA has still not addressed all the provisions, and as the Department stated in its letter, FTA cannot specify when action will be taken to address the outstanding provisions. Accordingly, we believe that our assessment is an accurate reflection of FTA’s progress in addressing the outstanding statutory provisions of the Capital Investment Grants program as amended by MAP-21 and the FAST Act. We are sending copies of this report to interested congressional committees and the Secretary of the Department of Transportation. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions or would like to discuss this work, please contact me at (202) 512-2834 or GoldsteinM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: Core Capacity Improvement Projects Project description The Metropolitan Transportation Authority proposes to implement capacity improvements to the Canarsie L Line, which operates between South Brooklyn and Manhattan. Improvements include three new power substations and other upgrades necessary to increase capacity on the line. The Metropolitan Transportation Authority estimates that when the project is complete, capacity in the corridor will be increased 10 percent. The Dallas Area Rapid Transit is proposing to extend and modify platforms along two existing light rail lines to accommodate longer trains. The Dallas Area Rapid Transit estimates that when the project is complete, capacity in the corridor will be increased 12 percent. The Dallas Area Rapid Transit is proposing to implement a second light-rail alignment through the central business district of Dallas to supplement the existing alignment. The Dallas Area Rapid Transit estimates that when the project is complete, capacity in the corridor will be increased 100 percent. The Northern Indiana Commuter Transportation District is proposing to construct a second track and make additional improvements along a 26.6-mile segment of its South Shore commuter rail line between Gary and Michigan City. The Joint Powers Board (also known as Caltrain) is implementing capacity improvements that include upgrading and electrifying a 51-mile commuter rail line extending from San Francisco to San Jose. Caltrain estimates that when the project is complete, capacity in the corridor will be increased 11 percent. The New Jersey Transit Corporation, in cooperation with the Port Authority of New York and New Jersey, the Gateway Program Development Corporation, and Amtrak are proposing to replace an over 100-year-old drawbridge across the Hackensack River in Hudson County, New Jersey, with a new, two-track bridge, among other capacity improvements. The sponsors estimate that when the project is complete, capacity in the corridor will be increased 10 percent. The Chicago Transit Authority is implementing capacity improvements along a 5.6-mile corridor on the north side of Chicago. Improvements include the reconstruction of four stations, the installation of a new higher-capacity signal system, and the procurement of 32 new railcars. The Chicago Transit Authority estimates that when the project is complete, capacity in the corridor will be increased 15 percent. The Bay Area Rapid Transit District is proposing to implement capacity improvements between Oakland and Daly City in South San Francisco. Improvements include implementing communication-based train control equipment, the procurement of 252 rail cars, additional power substations, and the expansion of a maintenance facility. The Bay Area Rapid Transit District estimates that when the project is complete, capacity in the corridor will be increased 37 percent. In addition to the contact above, Brandon Haller (Assistant Director); Melissa Bodeau; Kelsey Burdick; Geoffrey Hamilton; Wesley A. Johnson; Elke Kolodinski; Malika Rice; and Elizabeth Wood made key contributions to this report.", "summary": "FTA's Capital Investment Grants program is the primary source of federal financial assistance to support transit projects that are locally planned, implemented, and operated. FTA evaluates and rates projects seeking funding through this program according to statutory criteria and recommends to Congress which projects to fund. The funding that project sponsors receive is subject to congressional appropriation. MAP-21 includes a provision for GAO to biennially review FTA's implementation of the Capital Investment Grants program. This report discusses: (1) FTA's progress in addressing statutory provisions contained in MAP-21 and the FAST Act and (2) how the evaluation and rating process FTA has established for Core Capacity Improvement projects enables FTA to verify that statutory requirements are met before recommending such projects for funding. GAO reviewed the relevant laws and FTA's guidance. GAO also interviewed FTA officials and six project sponsors, representing seven of the eight Core Capacity Improvement projects in the Capital Investment Grants program at the time of GAO's review. The Federal Transit Administration (FTA) has not addressed three statutory provisions concerning the Capital Investment Grants program contained in the Moving Ahead for Progress in the 21st Century Act (MAP-21) and the Fixing America's Surface Transportation Act (FAST Act). Specifically, FTA has not: issued regulations regarding the evaluation and rating process for Core Capacity Improvement projects, which are a category of eligible projects within the program; established a program of interrelated projects designed to allow for the simultaneous development of more than one transit project within the Capital Investment Grants program; or implemented a pilot program designed to create a fast-track approval process for transit projects that meet specific statutory criteria. Throughout this review, FTA officials told GAO they do not have immediate plans to address these three statutory provisions. Officials cited a proposal by the President to phase out the Capital Investment Grants program as one of the factors influencing this decision. However, in March the Consolidated Appropriations Act, 2018, provided the program with more than $2.6 billion and required FTA to continue to administer the program in accordance with the procedural and substantive requirements specified in statute. Subsequently, FTA officials told GAO that they are reviewing the Act and determining next steps. However FTA officials did not indicate that they intend to address these provisions. If FTA does not implement the outstanding provisions, FTA and project sponsors—that is, local transit agencies—may be missing opportunities to deliver transit projects more efficiently. Based on a review of FTA's policy guidance, on FTA's instructions for applying to the Capital Investment Grants program, and on other documentation supporting the two Core Capacity Improvement projects that FTA has recommended for funding as of June 2017, GAO found that FTA has established a process to verify that proposed Core Capacity Improvement projects meet statutory requirements before recommending projects for funding. Core Capacity Improvement projects are capital investments designed to increase the capacity of an existing transit system and must meet specific statutory requirements to be eligible for funding through the program. GAO found that prior to recommending a project for funding FTA works with project sponsors to verify that their proposed project includes elements that will increase transit system capacity versus maintaining the current system, that the required amount of local funding is committed to the project, and that sponsors have the technical and financial capacity to complete the project they are proposing, among other statutory requirements. FTA should initiate a rulemaking regarding the evaluation and rating process for Core Capacity Improvement projects and take steps to address two other statutory provisions. FTA agreed with the recommendations but disagreed with certain findings on which they are based. GAO believes these findings are valid, as discussed in this report.", "document_type": "gao"}
{"report": "In our September 2018 report on broadband access on tribal lands, we found that FCC collects broadband availability data from broadband providers, but its method for collecting the data does not accurately or completely capture broadband access—the ability to obtain service—on tribal lands. Specifically, FCC directs fixed broadband providers to submit a list of census blocks where service is available on their Form 477 filings. In the Form 477 instructions, FCC defines “available” as whether the provider does—or could, within a typical service interval or without an extraordinary commitment of resources—provide service to at least one end-user premises in a census block. Thus, in its annual reports and maps of fixed broadband service, FCC considers an entire block to be served if a provider reports that it does, or could offer, service to at least one household in the census block. As shown in figure 1, FCC’s definition of availability leads to overstatements of fixed broadband availability on tribal lands by: (1) counting an entire census block as served if only one location has broadband, and (2) allowing providers to report availability in blocks where they do not have any infrastructure connecting homes to their networks if the providers determine they could offer service to at least one household. FCC has noted that overstatements of availability can be particularly problematic in rural areas, where census blocks cover larger areas. According to FCC officials, FCC requires providers to report fixed broadband availability where they could provide service to: (1) ensure that it captures instances in which a provider has a network nearby but has not installed the last connection to the homes, and (2) identify where service is connected to homes, but homes have not subscribed. FCC officials also told us that FCC measures availability at the census block level because sub-census block data may be costly to collect. However, FCC acknowledged that by requiring a provider to report where it could provide service, it is not possible to tell whether the provider would be unable or unwilling to take on additional subscribers in a census block it lists as served. In addition, when reporting on broadband access in tribal lands, FCC uses the broadband availability data described above, and does not collect information on factors that FCC and tribal stakeholders have stated can affect broadband access. These factors include affordability, service quality, and service denials. By developing and implementing methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands, FCC would be better able to target federal broadband funding to tribal areas that need it the most. We recommended FCC develop and implement methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands. FCC agreed with this recommendation and stated that it is exploring methods to collect more granular broadband deployment data. As we reported in September 2018, FCC does not have a formal process to obtain input from tribes on the accuracy of the data and tribal stakeholders can face difficulties obtaining information from providers. FCC’s 2010 National Broadband Plan noted the need for the federal government to improve the quality of data regarding broadband on tribal lands and recommended that FCC work with tribes to ensure that any information collected is accurate and useful. Although the Plan also noted that tribal representatives should have the opportunity to review mapping data and offer supplemental data or corrections, FCC lacks a formal process to obtain tribal input on its broadband data. FCC officials told us that they address questions and concerns regarding providers’ coverage claims submitted to FCC’s Office of Native Affairs and Policy. However, about half of the tribal representatives we spoke to stated that they were not aware of the Form 477 data or corresponding maps, or raised concerns about a lack of outreach from FCC to inform tribes about the data. Most of the tribal stakeholders we interviewed told us that FCC should work more directly with tribes to obtain information from them to improve the accuracy of FCC’s broadband deployment data for tribal lands. These stakeholders identified several ways in which FCC could work with tribes on this issue, including onsite visits, increased outreach and technical training, and opportunities for tribes to collect their own data or submit feedback regarding the accuracy of FCC’s data. FCC’s National Broadband Plan also noted the importance of supporting tribal efforts to build technical expertise with respect to broadband issues. A few of the stakeholders we interviewed noted that tribes have faced difficulties when they attempt to challenge FCC’s broadband availability data. For example, in 2013, all of the tribal entities that challenged FCC’s data on mobile service availability were unsuccessful in increasing the number of eligible areas. A few tribal stakeholders provided varying reasons for this, one of which was the need for more technical expertise to help the tribes meet FCC’s requirements regarding the information needed to support a challenge. Because FCC lacks a formal process to obtain tribal input on its broadband data, FCC is missing an important source of information regarding areas in which the data may overstate broadband service on tribal lands. By establishing a process to obtain input from tribal governments on the accuracy of provider-submitted broadband data as recommended in the National Broadband Plan, FCC could help tribes develop and share locally-specific information on broadband access and improve FCC’s data for tribal lands. However, the success of such an effort may rely on the tribes’ knowledge of, and technical ability to participate in, the process. Thus, we recommended FCC develop a formal process to obtain tribal input on the accuracy of provider-submitted broadband data that includes outreach and technical assistance to help tribes participate in the process. FCC agreed with this recommendation and stated that it will work with stakeholders to explore options for implementing such a process. Finally, some tribes face challenges accessing data from providers. In 2011, FCC required that providers receiving funds to serve tribal lands meaningfully engage with the tribes and discuss broadband deployment planning. In 2012, FCC issued guidance on meeting this requirement and stated that the guidance would evolve over time based on the feedback of both tribal governments and broadband providers. However, FCC has taken limited steps to obtain such feedback and has not updated the guidance. About half of the tribal stakeholders we interviewed raised concerns about difficulties accessing information from providers regarding broadband deployment on their tribe’s lands (which providers may consider proprietary), and some providers told us that they attempt to engage with tribes, but the level of responsiveness they receive from tribes varies. Thus, we recommended, and FCC agreed, that FCC obtain feedback from tribal stakeholders and providers to determine whether it needs to clarify its tribal engagement guidance. In our September 2018 report on tribal partnerships, we found that partnership arrangements between tribes and other entities to increase broadband deployment on tribal lands are not widespread. Because of the greater costs associated with deploying broadband on unserved tribal lands that are generally rural, with possibly rugged terrain, there may be little to no private sector incentive to deploy broadband or enter into a partnership arrangement to do so. The partnership examples we identified were ones that obtained federal funding under past programs funded by the Recovery Act. Among these examples, tribes partnered with several different types of entities, including private providers, a community access network provider, an electric cooperative, a regional consortium, and tribally owned providers. We also reported in September 2018 that FCC and RUS are the primary sources of federal funding to deploy broadband infrastructure in rural and remote areas where the cost of providing service is high, including tribal lands. Based on our review of the funding provided by four federal programs targeted to increase deployment in unserved areas, very little has gone directly to tribes or to tribally owned broadband providers. Specifically, we found that from 2010 to 2017, less than 1 percent of FCC funding and about 14 percent of RUS funding went directly to tribes and tribally owned providers. Combined, FCC and RUS funding totaled $34.6 billion during that time period and tribes and tribally owned providers received $235 million, or about 0.7 percent. FCC’s 2010 National Broadband Plan stated that tribes needed substantially greater financial support than was available to them at the time and that accelerating tribal broadband deployment would require increased funding. Furthermore, the National Congress of American Indians expressed concerns that the needs for federally funded broadband projects are greater on tribal lands but tribes do not receive the appropriate share of federal funding aimed at increasing broadband deployment. Several of the tribes we visited told us they were trying to deploy broadband infrastructure or offer service because the private providers were not building out on their lands. Through our analysis, we found that from 2010 to 2017, 14 tribal entities received federal funding from FCC and RUS to increase broadband deployment (see fig. 2). The tribal officials, tribal associations, and tribally owned broadband providers we interviewed cited several barriers that tribes may face when seeking federal funding for broadband deployment. The two primary barriers these interviewees cited were (1) the statutory requirement for the eligible telecommunications carrier (ETC) designation and (2) grant application requirements. Regarding the statutory requirement for ETC designation, FCC officials told us there were 11 tribes that have providers designated as ETCs and therefore would be eligible to receive support from FCC’s Connect America Fund (CAF)—the largest source of federal funding for broadband deployment in unserved and underserved areas. Although FCC adopted rules in 2011 to create CAF and modernize the program so that it could support broadband capable networks, FCC officials told us that most ETCs are the telephone companies that were in existence when the Telecommunications Act of 1996 was enacted into law. According to FCC officials, FCC has explored whether it has authority to allow non-ETC providers to receive CAF support payments but determined that the statute is clear that only ETCs can receive program support. Between 2012 and 2017, FCC officials said FCC received nine ETC applications, four of which were from tribally owned providers. Of those four, only one tribally owned provider was designated as an ETC. According to representatives from a tribal association we contacted, FCC has provided ETCs with billions of dollars to deploy service to unserved areas, but FCC’s efforts have not always been successful in the hardest to reach areas, particularly tribal lands. The representatives stated that FCC’s competitive market approach does not work where competition cannot be supported and that there needs to be a different approach. Similarly, tribal officials from Idaho told us that although the provider in their area has received millions of dollars in CAF subsidies, it has not deployed broadband on the tribal lands. Other tribal officials from Idaho told us that although private providers received CAF subsidies to deploy broadband service to their reservation, the private providers told the tribe it would be years before they offer service on tribal lands. Additionally, the tribal officials, tribal associations, and tribally owned broadband providers we interviewed said tribes may face barriers completing federal grant applications to obtain funding for broadband deployment. For example, they said tribes face regulatory barriers in applying for RUS’s grant funding, including preparing existing and proposed network design, demonstrating financial sustainability of the broadband project within 5 years, and obtaining matching funds. The National Broadband Plan recommended that federal agencies facilitate tribal access to broadband funding opportunities. Furthermore, recognizing the need to reduce barriers to expand broadband deployment, the Broadband Opportunity Council, established in March 2015, issued a memorandum stating that federal agencies should use all available and appropriate authorities to identify and address regulatory barriers that may unduly impede either broadband deployment or the infrastructure to augment broadband deployment. However, according to RUS officials, RUS has not taken steps to identify or address the barriers tribes face when applying for RUS grant funding due to limited resources and multiple competing priorities for those resources. We recommended that RUS identify any regulatory barriers that may unduly impede efforts by tribes to obtain RUS grant funds for broadband deployment on tribal lands and implement any steps necessary to address the identified barriers. By doing so, RUS could help tribes obtain funding to expand broadband deployment on tribal lands. RUS neither agreed nor disagreed with this recommendation. Chairman Hoeven, Vice Chairman Udall, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have. If you or your staff have any questions about this testimony, please contact Mark Goldstein, Director, Physical Infrastructure Issues at (202) 512-2834 or GoldsteinM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Rose Almoguera, Katherine Blair, Keith Cunningham, Crystal Huggins, Sally Moino, and Tina Paek. Other staff who made contributions to the reports cited in this testimony are identified in the source product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in two GAO reports: Broadband Internet: FCC’s Data Overstate Access on Tribal Lands , ( GAO-18-630 ) and Tribal Broadband: Few Partnerships Exist and the Rural Utilities Service Needs to Identify and Address Any Funding Barriers Tribes Face ( GAO-18-682 ). Specifically, it addresses (1) the extent to which FCC’s approach to collecting broadband availability data accurately captures broadband access on tribal lands, (2) the extent to which FCC obtains tribal input on the data, (3) partnerships tribes have formed with entities to deploy broadband infrastructure on tribal lands, and (4) barriers tribes face in obtaining federal funding. For these reports, GAO analyzed FCC and RUS data, and interviewed agency officials as well as a non-generalizable sample of stakeholders representing tribes and broadband providers. The Federal Communications Commission’s (FCC) approach to collecting data on broadband availability causes it to overstate broadband access—the ability to obtain service—on tribal lands. In FCC’s approach, broadband is considered to be “available” for an entire census block if the provider could serve at least one location in the census block. FCC, tribal stakeholders, and providers have noted that this approach leads to overstatements of broadband availability. Because FCC uses these data to measure broadband access, it also overstates broadband access on tribal lands. By developing and implementing methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands, FCC would be better able to target federal broadband funding to tribal areas that need it the most. FCC does not have a formal process to obtain tribal input on the accuracy of provider-submitted broadband data. Most of the tribal stakeholders GAO interviewed stated FCC should work more directly with tribes to improve the accuracy of FCC’s data. Establishing a formal process to obtain input from tribal governments could help improve the accuracy of FCC’s broadband data for tribal lands. Tribes have formed partnerships with different types of entities to deploy broadband infrastructure on tribal lands, but such partnerships are not widespread. The partnerships GAO identified included private providers, a community access network provider, an electric cooperative, a regional consortium, and tribally owned broadband providers. GAO reviewed four federal programs to deploy broadband services and found that from 2010 to 2017, less than 1 percent of funding has gone directly to tribes or tribally owned providers. The tribal entities GAO contacted cited barriers to obtaining funds from the Rural Utilities Service (RUS) grant funding, such as preparing network design, demonstrating financial sustainability of the broadband project within 5 years, and obtaining matching funds required to apply for federal grants. However, according to RUS officials, RUS has not taken steps to identify or address the barriers tribes face when applying for RUS grant funding due to limited resources and multiple competing priorities for those resources. By identifying and addressing regulatory barriers that may impede tribal entities’ access to RUS funding, RUS could help tribes obtain funding to expand broadband deployment on tribal lands. In GAO-18-630 , GAO made three recommendations to FCC, two of which related to improving its collection of broadband data. In GAO-18-682 , GAO made one recommendation to RUS to address regulatory barriers. FCC agreed and RUS neither agreed nor disagreed and both agencies described actions planned to address the recommendations.", "document_type": "gao"}
{"report": "Information on consumers is exchanged through a consumer reporting process that includes consumers, CRAs, furnishers, and users of that information (see fig.1). Consumers are individuals whose information is collected and shared to make eligibility decisions, such as for credit, insurance, or employment. CRAs are companies that assemble or evaluate consumer information for the purpose of furnishing consumer reports to third parties who use the reports to determine consumer eligibility for employment, or products and services such as credit and insurance. Furnishers are entities such as banks or credit card companies that provide CRAs with consumer information, such as account openings, bill payments, or delinquency information. CRAs use this information, along with other information, including from public records such as bankruptcies, to compile consumer reports. Users are banks, credit card companies, employers, or other entities that use consumer reports to make eligibility decisions for individual consumers. Users vary in the specific information they request from CRAs and how they interpret the data. Some institutions, such as banks, may act as both furnishers and users. During the consumer reporting process, a consumer would not necessarily interact with the CRA; however, if the consumer discovered inaccurate information on their credit report as a result of, for example, being denied credit, the consumer could file a dispute with the CRA or the furnisher. Consumers may also request copies of their consumer reports from CRAs directly, and CRAs may provide consumers with disclosures about how their information is being shared. FTC and, most recently, CFPB, are the federal agencies primarily responsible for overseeing CRAs. FTC has authority to investigate most organizations that maintain consumer data and to bring enforcement actions for violations of statutes and regulations that concern the security of data and consumer information. CFPB, created in 2010 by the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), has enforcement authority over all CRAs for violations of certain consumer financial protection laws. In general, it also has the authority to issue regulations and guidance for those laws. CFPB has supervisory authority over larger market participants in the consumer reporting market. In 2012, CFPB defined larger market participant CRAs as those with more than $7 million in annual receipts from consumer reporting. CFPB’s supervision of these companies includes monitoring, inspecting, and examining them for compliance with the requirements of certain federal consumer financial laws and regulations. As discussed below, these laws include most provisions of the Fair Credit Reporting Act (FCRA); several provisions of the Gramm-Leach-Bliley Act (GLBA); and provisions of the Dodd-Frank Act concerning unfair, deceptive, or abusive acts or practices. Although there is no commonly agreed-upon definition of “data breach,” the term generally refers to an unauthorized or unintentional exposure, disclosure, or loss of sensitive information. This information can include personally identifiable information such as Social Security numbers, or financial information such as credit card numbers. A data breach can be inadvertent, such as from the loss of an electronic device; or deliberate, such as from the theft of a device. A breach can also occur as a result of a cyber-based attack by individuals or groups, including organizations’ own employees, foreign nationals, or terrorists. Data breaches have occurred at all types of organizations, including private, nonprofit, and federal and state entities. In the Equifax data breach, Equifax system administrators discovered on July 29, 2017, that intruders had gained unauthorized access via the Internet to a server housing the company’s online dispute portal. The breach compromised the personally identifiable information of at least 145.5 million individuals, and included names, addresses, and birth dates; and credit card, driver’s license, and Social Security numbers. Equifax’s investigation of the breach identified factors that led to the breach: software vulnerabilities, failure to detect malicious traffic, failure to isolate databases from each other, and inadequately limiting access to sensitive information such as usernames and passwords. Equifax’s public filings after the breach noted that the company took steps to improve security and notify individuals about the breach. Our August 2018 report provides more information on the breach and Equifax’s response. While data breaches do not always result in measurable harm, intruders may retain or resell stolen information to commit identity theft, which can include existing-account fraud and new-account fraud. In existing-account fraud, identity thieves use financial account identifiers, such as credit card or debit card numbers, to take over an individual’s existing accounts to make unauthorized charges or withdraw money. In new-account fraud, identity thieves use an individual’s identifying data, such as Social Security and driver’s license numbers, to open new financial accounts and incur charges and obtain credit in an individual’s name without that person’s knowledge. In addition, identity thieves may commit synthetic identity fraud, where they combine real and/or fictitious information to create identities with which they may defraud financial institutions, government agencies, or individuals. FCRA, enacted in 1970, is one of the primary federal laws governing the personal information that CRAs hold. It governs the accuracy of this information and gives consumers rights to view, correct, or opt out of the sharing or use of certain aspects of their personal information among affiliates. FCRA also applies to how CRAs can use and share the information. Accuracy of collected information. FCRA requires that when preparing a consumer report, CRAs follow reasonable procedures to assure “maximum possible accuracy” of the information concerning the individual about whom the report relates. Companies that furnish information to CRAs also must take steps regarding the accuracy of information they report, as required by FCRA and its implementing regulation, Regulation V. A 2012 CFPB report cited steps that nationwide CRAs take to help ensure that information they collect from furnishers is legitimate and accurate. The report notes that initial screening of furnishers generally includes an inspection of the companies’ physical headquarters, phone numbers, websites, business licenses, and company records such as annual reports. In addition, these CRAs may hire third-party investigation services to screen for illegal or unethical business practices. They may also conduct additional inspections in response to consumer complaints, variations in data reporting, or changes in a furnisher’s ownership. To conduct quality checks on data submitted by furnishers, CFPB reported that the nationwide CRAs check for blank fields or logical inconsistencies. Representatives of CRAs we spoke with provided examples of the quality assurance steps they take. For example, one representative told us that they look for violations of logical patterns, such as a loan going from 30 days past due to 90 days past due over the course of one month. CFPB reported that when inaccuracies are identified, the CRAs can reject the information. These steps may improve the quality of the information received from furnishers, but they cannot ensure the accuracy of such data. Use and sharing of information. FCRA permits CRAs to provide users with consumer reports only if the user has a “permissible purpose,” such as to process a credit application, screen a job applicant, or underwrite an insurance policy, subject to limitations where the credit or insurance transaction is not initiated by the consumer. FCRA also prohibits the use of a consumer report for any purpose other than that specified to the CRA when the user obtained the report. It also requires that CRAs take steps to validate the legitimacy of users and their requests for consumer report information and apply FCRA requirements to the sharing of information within their companies. Validating the legitimacy of users and their requests for consumer report information. Representatives of CRAs told us they take several steps to validate the legitimacy of users and their requests, including verifying credit transactions, periodically evaluating user agreements, and validating users’ identities. For example, representatives of one CRA said they sometimes conduct on-site visits to verify the existence of an entity and the business it conducts. In addition, they said they randomly select 6,000 to 8,000 consumer files each year and ask users associated with those files to show proof that the consumers engaged in the credit transactions contained in those files. However, several CRAs told us that these steps cannot guarantee that the users and requests are valid. For example, representatives of one CRA noted that once a user has the information, a CRA would find it difficult to prevent that user from retaining and reusing it for purposes other than the original permissible purpose. Applying FCRA requirements to sharing information internally. As amended by the Fair and Accurate Credit Transactions Act of 2003, FCRA limits the ability of affiliated companies to market products or services to consumers using shared consumer data. Affiliates may use consumer report information for product or service marketing only if they clearly and conspicuously disclose to the consumer that the information may be shared for such solicitations, the consumer is provided a simple method to opt out of such solicitations, and the consumer does not opt out. Representatives of CRAs told us that they apply the same FCRA protections when they share consumer reporting data among their departments or subsidiaries, which may use the data for other purposes. For example, one nationwide CRA said that one of its internal groups seeks to ensure that the company implements appropriate legal protections when it shares data for other uses within the company. Staff from state Attorneys General offices we spoke with told us that their states also have laws pertaining to consumer reporting, which have similar requirements to those in FCRA. In addition, they noted that while there is no federal data breach notification law, all 50 states have laws requiring companies to notify consumers in the event of a data breach. According to the National Conference of State Legislatures, those laws have varying requirements, such as the timing or method of notification, and who must be notified. Congress enacted GLBA in part to protect the privacy and security of nonpublic personal information that individuals provide to financial institutions. According to FTC staff, CRAs may be considered financial institutions under GLBA if they collect, maintain, and report on consumer information. As with FCRA, GLBA restricts financial institutions from sharing consumers’ private information, but GLBA restricts sharing with nonaffiliated third parties specifically, and those parties face similar restrictions in how they may further share or use the information. In addition, unlike FCRA, GLBA includes a provision directing FTC and certain federal regulators (not including CFPB) to establish standards specifically with respect to protection against any anticipated threats or hazards to the security of customer records. Specifically, under GLBA, these federal regulators are directed to establish appropriate standards for financial institutions under their jurisdiction to ensure the security and confidentiality of customer records and information; protect against any anticipated threats or hazards to the security or integrity of such records; and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer. To implement these standards for CRAs, and other entities that fall under its jurisdiction, FTC adopted its Safeguards Rule, which requires, among other things, that financial institutions have a written information security program, assess the risks to customer information, and evaluate and adjust the information security program in light of foreseeable risks. FTC staff told us that because GLBA applies to information about a consumer with a customer relationship with a financial institution, the Safeguards Rule may not apply in all cases where a CRA holds personal information on individuals. For example, they said that GLBA would more clearly apply if the consumer had purchased credit monitoring or other products or services directly from the CRA, or if the CRA obtained customer information from another financial institution, such as a bank. Representatives of the three nationwide CRAs told us that for purposes of protecting information, they do not distinguish between consumers with whom they have a direct customer relationship and those with whom they do not. CRAs we spoke with provided examples of how they protect consumer information and meet GLBA requirements to maintain administrative, technical, and physical safeguards. For example, with respect to administrative safeguards, representatives of one CRA said they enforce contractual requirements for data access and data security. Representatives of another CRA said that the technical safeguards they use include firewalls, anti-virus software, and malware protection. Examples of physical safeguards from another CRA included monitoring data centers by video and restricting access to secure data rooms. To address data protection more generally, representatives of CRAs we spoke with told us they routinely conduct internal audits of their data security systems, and that the financial institutions they work with frequently conduct audits of their risk management practices, including CRAs’ data security controls. Provisions related to unfair or deceptive acts or practices also may apply to CRAs’ protection of consumer data. Specifically, under FTC’s authority, section 5 of the Federal Trade Commission Act (FTC Act) prohibits “unfair or deceptive acts or practices” in or affecting commerce. In the context of privacy and security, these provisions require companies to truthfully represent practices to consumers. For example, FTC has found companies that alleged that they were following certain security protections, but did not in fact have such security features, to have engaged in unfair or deceptive practices. Similarly, the Dodd-Frank Act prohibits providers of consumer financial products or services from engaging in “unfair, deceptive, or abusive acts or practices,” and CFPB has authority to enforce and supervise for compliance with this provision. CFPB has alleged that claims to consumers that transactions are safe and secure while simultaneously lacking basic security practices can constitute unfair, deceptive, or abusive acts or practices. FTC and CFPB officials said that in the case of data breaches, they would examine each case individually to determine whether the institution violated these provisions in connection with the breach. Some states also have laws that protect consumer information, including laws that generally govern data security. For example, staff from the Massachusetts Attorney General’s office told us that their state has a data security law similar to FTC’s Safeguards Rule but with more specific requirements, including those for malware detection and firewalls. According to the National Consumer Law Center, all 50 states have consumer protection laws that prohibit unfair or deceptive practices. Staff from state Attorneys General offices told us that they can prosecute entities for potential violations of these provisions, including data breaches. They told us that following the Equifax breach, several states’ Attorneys General launched a joint investigation into whether Equifax violated state laws, including prohibitions of unfair or deceptive practices. According to staff from one state Attorney General office, as of February 2019, this investigation was ongoing. In addition, Equifax reported that individual states have also filed legal action or have ongoing investigations. For example, Massachusetts and West Virginia have filed civil enforcement actions against Equifax that seek various remedies, including civil penalties. FTC enforces compliance with consumer protection laws under authorities provided in FCRA, GLBA, and the FTC Act. FCRA authorizes FTC to enforce compliance for nearly all companies not supervised by either a federal banking regulator or certain other federal agencies. GLBA authorizes FTC to issue certain rules and enforce compliance for all nonbank financial institutions and other entities not under the jurisdiction of a federal banking regulator, the National Credit Union Administration, Securities and Exchange Commission, or state insurance regulators. The FTC Act authorizes FTC to investigate and take administrative and civil enforcement actions against companies under its jurisdiction that engage in unfair or deceptive acts or practices in or affecting commerce. According to FTC, in the last 10 years, it has brought 34 enforcement actions for FCRA violations, including 17 against CRAs. In addition, FTC said that it had taken a total of 66 actions against companies (not just in the last 10 years), including CRAs, that allegedly engaged in unfair or deceptive practices relating to data protection. If FTC has reason to believe that a company has violated laws under its jurisdiction, it may initiate an investigation to determine whether to take enforcement action. FTC staff said that in determining whether to take on a case related to privacy and data security matters, they consider factors such as the company’s size and the sensitivity of the data in the company’s network. For example, FTC may choose not to investigate a data breach of a small company that affects few people; however, it may investigate a potential data security violation of a large company, even without evidence of a breach. Under its statutory authority, FTC can ask or compel companies to produce documents, testimony, and other materials to assist in its investigations. In June 2018, FTC notified Equifax that it was considering legal action against the company as a result of its 2017 data breach, including seeking civil penalties. If FTC finds that a company violated consumer law, the agency may take several different actions depending on its legal authority and what it considers to be the most appropriate response. For example, FTC may, in administrative proceedings, issue cease-and-desist orders for unfair or deceptive acts or practices. Further, FTC generally may seek a range of remedies from the U.S. district courts, including injunctions, damages to compensate consumers for their actual losses, and disgorgement of ill- gotten funds. In limited circumstances, FTC also may seek civil money penalties, which are monetary fines imposed for a violation of a statute or regulation. Examples of FTC enforcement actions related to consumer reporting include: In May 2016, FTC settled with a furnisher that allegedly violated FCRA requirements to have adequate policies and procedures for reporting accurate credit information to CRAs. FTC alleged that a debt collector acting as a furnisher did not have a written policy regarding the accuracy and integrity of information it furnished, and in numerous instances failed to inform consumers about these outcomes. In 2011, FTC brought enforcement actions against three CRAs that merge, and then sell, information from the three nationwide CRAs. FTC alleged that these companies did not meet GLBA standards and violated unfair or deceptive practices prohibitions by not providing reasonable and appropriate security for consumers’ personal information. These violations included not developing and disseminating information security policies, and not addressing risks by, for example, evaluating the security of end users’ computer networks. In 2006, FTC settled with ChoicePoint—a CRA—and imposed a $10 million civil penalty for violations of FCRA stemming from a 2005 data breach. In 2009, FTC obtained an additional $275,000 in equitable monetary relief due to ChoicePoint’s violation of the order after an additional data breach occurred in 2008. As previously discussed, in some circumstances, FTC enforcement authority can include civil money penalties. This includes cases of knowing violations of FCRA. For example, in a 2014 settlement, FTC levied $525,000 in civil penalties against a CRA after alleging that the company did not comply with FCRA provisions to ensure the accurate and permissible use of its reports. FTC does not have civil penalty authority for initial violations of the FTC Act but may obtain civil penalties from companies for violations of FTC Act orders. FTC’s civil penalty authority does not extend to initial violations of GLBA’s privacy and safeguarding provisions, which require administrative, physical, and technical safeguards with an emphasis on protection against anticipated threats and unauthorized access to customer records. For violations of GLBA provisions, which are enforced pursuant to FTC Act authority, FTC may seek an injunction to stop a company from violating these provisions and may seek redress (damages to compensate consumers for losses) or disgorgement. However, determining the appropriate amount of consumer compensation requires FTC to identify the consumers affected and the amount of monetary harm they suffered. In cases involving security or privacy violations resulting from data breaches, assessing monetary harm can be difficult. Consumers may not be aware that their identities have been stolen as a result of a breach and or identity theft, and related harm may occur years in the future. In addition, it can be difficult to trace instances of identity theft to specific data breaches. According to FTC staff, these factors can make it difficult for the agency to identify which individuals were victimized as a result of a particular breach and to what extent they were harmed and then obtain related redress or disgorgement. Having civil penalty authority for GLBA provisions would allow FTC to fine a company for a violation such as a data breach without needing to prove the monetary harm to individual consumers. FTC staff told us and testified before Congress that civil penalties are often the most appropriate remedy for a data breach, and that such penalties serve as an effective deterrent in cases involving weak data privacy and security policies and practices. FTC staff noted that in the case of a data breach, each consumer record exposed could constitute a violation; as a result, a data breach that involved a large number of consumer records could result in substantial fines. Unlike FTC, other regulators have civil penalty authority to punish entities that violate provisions of GLBA. For example, the Office of the Comptroller of the Currency has said that it can enforce GLBA privacy and safeguard provisions with civil money penalties against any insured depository institution or institution-affiliated party subject to its supervision. In our 2009 report on modernizing the financial regulatory framework, we stated that financial regulators should have the authority to carry out and enforce their statutory missions. In the case of FTC, this includes having the tools necessary to meet its mission of protecting consumers from harm, including the harm caused by misuse of personal information, by having the range of authorities to punish entities for violations of the statutes and regulations the agency enforces. In 2006, we suggested that Congress consider providing FTC with civil penalty authority for its enforcement of GLBA’s privacy and safeguarding provisions. We noted that providing this authority would give FTC a practical enforcement tool to more effectively enforce provisions related to security of data and consumer information. Following the 2008 financial crisis, Congress introduced several bills related to data protection and identity theft, which included giving FTC civil penalty authority for its enforcement of GLBA. However, in the final adoption of these laws, Congress did not provide FTC with this authority. Since that time, data breaches at Equifax and other large organizations have highlighted the need to better protect sensitive personal information. Accordingly, we continue to believe FTC and consumers would benefit if FTC had such authority. CFPB enforces compliance with most provisions of FCRA; several provisions of GLBA; and the prohibition of unfair, deceptive, or abusive acts or practices under the Dodd-Frank Act. According to CFPB staff, CFPB cannot enforce data security standards under these statutory provisions or the FTC’s implementing rules because CFPB does not have authority to supervise for or enforce compliance with the GLBA’s safeguards provision or FCRA’s red flags or records disposal provisions. Since 2015, CFPB has had five public settlements with CRAs. Four of these settlements included alleged violations of FCRA and three included alleged violations of unfair, deceptive, or abusive practices provisions. For example, in March 2017, CFPB settled with Experian for $3 million in civil penalties for an alleged violation of FCRA and alleged deceptive acts or practices. Experian marketed to consumers an “educational credit score” that the company claimed lenders used to make credit decisions. CFPB alleged that lenders did not use these “educational credit scores” for this purpose, and that Experian violated FCRA’s implementing regulation by requiring consumers to view Experian advertisements before obtaining a free credit report. In December 2015, CFPB levied a fine of $8 million against another CRA—Clarity Services, Inc.—for obtaining consumer reports without a permissible purpose in violation of FCRA and failing to investigate consumer disputes. CFPB is also continuing its investigation of Equifax’s data breach. CFPB supervises the larger market participant CRAs (those with more than $7 million in annual receipts from consumer reporting, as defined by CFPB) and has the authority to examine these CRAs for compliance with federal consumer financial protection laws. From 2015 through 2017, CFPB examined several CRAs. Some of these examinations resulted in findings of deficiencies related to data accuracy and dispute processes, and follow-up examinations were conducted as necessary. As part of its supervisory role, CFPB also periodically monitors the nationwide CRAs by requesting information on their activities and identifying any changes in risk to consumers and the market. CFPB uses this information to learn of changes to a CRA’s compliance, personnel, issues raised by the CRA’s internal audits, or other developments that might affect CFPB’s strategy for supervising the CRA. CFPB has examined several larger market participant CRAs, but may not be identifying all CRAs that meet the $7 million threshold. CFPB staff told us that as of October 2018, they were tracking between 10 and 15 CRAs that might qualify as larger market participants (as defined by CFPB). CFPB staff told us that they believe the CRA market is highly concentrated and there were not likely to be many larger market participants beyond the 10 to 15 they are tracking. However, CFPB staff said that the 10 to 15 CRAs may not comprise the entirety of larger market participants because whether CRAs meet the threshold may vary from year to year and CFPB has limited data to determine whether CRAs meet the threshold. Specifically, CFPB staff said that identifying additional larger market participant CRAs can be challenging. For example, the Securities and Exchange Commission does not require nonpublicly traded CRAs to file financial and other information that CFPB could otherwise use to identify these CRAs, which are generally not widely known to the public. In addition, CFPB staff said they do not ask CRAs to provide their annual receipts, with the exception of the specific CRAs being considered for examination in a given year, because CFPB staff said calculating these receipts could create an additional cost to the companies. Our January 2009 report on reforming the U.S. financial regulatory structure noted that regulators should be able to identify institutions and products that pose risks to the financial system, and monitor similar institutions consistently. One method for identifying institutions for oversight, particularly where data are limited, is to require companies to register with the relevant regulator. For example, among other requirements, insured depository institutions must obtain a charter to operate, and money services businesses generally must register with the Financial Crimes Enforcement Network. Similarly, CFPB could identify CRAs that meet the larger market participant threshold by requiring such businesses to register with them, subject to a rulemaking process and cost-benefit analysis of the burden it could impose on the industry. Another method CFPB could use to identify CRAs and inform its oversight activities would be to leverage information collected by states. Stakeholders we spoke with cited New York and Maine as examples where CRAs are required to register with the state. Implementing strategies such as registration or leveraging existing information could be a cost-effective way for CFPB to identify all CRAs under its authority. Identifying additional sources of information on the population of larger market participant CRAs—including those that are lesser-known, possibly unknown to CFPB, and possibly in possession of large amounts of sensitive consumer information—could help ensure that CFPB has more comprehensive information for carrying out its supervisory responsibilities. To determine which product lines, institutions, and compliance issues to examine, CFPB determines the institutions (for example, banks, credit unions, non-bank mortgage servicers, and CRAs) and the consumer product lines that pose the greatest risk to consumers, and prioritizes these for examinations annually (see fig.2). CFPB segments the consumer product market into institution product lines, or specific institutions’ offerings of consumer product lines. CFPB then assesses each institution product line’s risk to consumers at the market level and institutional level. To assess risk at the market level, CFPB considers market size and other factors that contribute to market risk. Market size includes a consideration of a product’s market size relative to other consumer finance product markets. Other market risk factors include the potential risk to consumers from new or existing products offered in the market as well as emerging risks and trends in consumer financial products. For example, CFPB noted that a market may be considered higher risk if consumers cannot choose the provider of a financial product or service in that market, or if the transactions occur between two businesses rather than between a business and consumers. Because they do not face the same risk of losing customers as companies in other markets, companies in higher-risk markets may not have the same financial incentives to protect the interests of consumers. To assess risk at the institution level, CFPB considers an institution’s market share within a product line, as well as field and market intelligence. An institution’s market share correlates with the number of consumers who could be affected by that institution’s practices; therefore, CFPB generally places a higher priority on larger providers of products. Field and market intelligence includes quantitative and qualitative information on an institution’s operations for a given product line, including the strength of its compliance management systems, the number of regulatory actions directed at the institution, findings from prior CFPB examinations, information obtained from CFPB’s quarterly monitoring of institutions, public reports, and the number and severity of consumer complaints CFPB has received about the institution. Field and market intelligence can also include information about an institution’s fair lending practices and its ability to provide fair, equitable, and nondiscriminatory access to credit. Taking market and institutional considerations together, CFPB places institution product lines into tiers based on its determination of their relative risk to consumers. These risk tiers range from 1 to 5, with 1 being the lowest risk and 5 being the highest risk. Risk tiers then feed into CFPB’s development of its supervision strategy, which includes other information, including information from subject matter experts and recent legal and policy decisions that could affect examinations, and consultations with internal stakeholders. CFPB uses both the risk tiers and information from its supervision strategy to identify potential institutions for examination. Following this process, CFPB has regularly determined CRAs’ consumer reporting to be a high priority for examination since it began supervising them in 2012. After identifying institution product lines to examine, CFPB determines specific areas of compliance to assess. These determinations are made by considering sources such as consumer complaints, public filings and reports, and past examination findings related to the same or similar products or institutions. Most recently, CFPB examinations of CRA’s consumer reporting have focused on issues such as data accuracy, dispute processes, compliance management, and permissible purposes. Although CFPB’s examination prioritization incorporates several important factors and sources, the process does not routinely include assessments of data security risk, such as how institutions detect and respond to cyber threats. According to CFPB staff, the agency’s process for determining risk tiers incorporates the risk factors specifically cited in the Dodd-Frank Act, including those related to the size of a product market. The Act also states that CFPB should consider other factors it determines to be relevant; as such, CFPB staff noted that certain elements of data protection have been included in the scope of some of its past CRA examinations. For example, CFPB staff said that in assessing compliance with FCRA’s permissible purposes provision, the examination scope would include ensuring that data are not improperly shared. CFPB staff noted that the bureau cannot examine for compliance with or enforce the data security standards in provisions of GLBA and FCRA or FTC’s implementing rules, even at larger participant CRAs. After the Equifax breach, however, CFPB used its existing supervisory authority to develop internal guidelines for examining data security, and conduct some CRA data security examinations. CFPB staff said that they do not routinely consider data security risks during their examination prioritization process and have not reassessed the process to determine how to incorporate such risks going forward. The Dodd-Frank Act requires CFPB, when implementing its risk-based supervision program, to consider risks posed to consumers in the relevant product and geographic markets. In addition, federal internal control standards state that agencies should identify, analyze, and respond to risks related to achieving defined objectives. This can entail considering all significant internal and external factors to identify risks and their significance, including magnitude of impact, likelihood of occurrence, nature of the risk, and appropriate response. In light of the Equifax breach, as well as CFPB’s acknowledgment of the CRA market as a higher-risk market for consumers, it is important for CFPB to routinely consider factors that could inform the extent of CRA data security risk such as the number of consumers that could be affected by a data security incident and the nature of potential harm resulting from the loss or exposure of information. CFPB’s reliance primarily on consumer complaints, information from public filings, and information and findings from past examination for prioritizing examinations may not fully detect data security risks that CRAs pose. Data accuracy and dispute resolution feature prominently in consumer complaints, according to CFPB staff, because consumers mostly interact with CRAs in these contexts. But consumers likely did not know, for example, about Equifax’s data security challenges prior to its breach, so that vulnerability was not a focus of complaints. While the three nationwide CRAs acknowledged the risk of data breaches in recent public filings, other larger participant CRAs may not be publicly traded and therefore may not have public filings. Further, if CFPB’s past examinations have not addressed data security, the agency cannot use those past examination findings to target current risks. The Equifax breach demonstrated the vulnerability that CRAs may face with regard to data security. We have noted that advancements in technology, combined with the increasing sophistication of hackers and others with malicious intent, have increased the risk of sensitive personal information being exposed and compromised. We have also reported that rapid developments in new technologies will continue to pose new threats to security, privacy, and safety. In recent years, insured depository institutions—which, like CRAs, maintain large amounts of sensitive consumer data—have been subject to regular information technology examinations, which, according to one regulator, may include a cybersecurity component. Banking regulators have noted that unauthorized access to the information and systems that support these institutions can affect operations, pose risk to consumers through exposure of private information, and undermine consumer confidence. The risks may be similar for CRAs—companies that by definition also maintain extensive amounts of sensitive consumer information. By including routine consideration of data security risks into its process for prioritizing CRA examinations, CFPB can better ensure that its supervision of CRAs proactively detects such risks and helps prevent the further exposure or compromise of consumer information. FTC and CFPB provide educational information for consumers on ways to mitigate the risk of identity theft. For example, FTC has a dedicated website (IdentityTheft.gov) that allows consumers to report suspected identity theft to FTC and develop and implement a recovery plan. In addition, FTC offers businesses guidance on steps to take in the event of a data breach, including notification of relevant parties and a model notification letter. CFPB’s website offers consumers tips on how to protect their information and spot identity theft. CFPB also publishes a consumer guide that lists CRAs and their websites, and ways to obtain free credit reports. After a breach, FTC and CFPB publish information specific to that breach. For example, shortly after Equifax’s announcement of the breach, FTC published information on when the breach occurred, the types of data compromised, and links to additional information on Equifax’s website. Similarly, CFPB released three blog posts and several social media posts shortly after Equifax’s public announcement of the breach. These included information on ways that consumers could protect themselves in the wake of the breach and special protections and actions for service members. At any time, consumers can take actions to help mitigate identity theft risk. For example, consumers can implement a credit freeze free of charge, which can help prevent new-account fraud by restricting potential creditors from accessing the consumer’s credit report. Similarly, implementing a free fraud alert with a credit bureau can help prevent fraud because it requires a business to verify a consumer’s identity before issuing credit. Consumers also can monitor their credit report for suspicious activity, either through self-review or by using a free or paid credit monitoring service. FTC and others recommend that consumers regularly review their credit card and bank statements to detect fraudulent charges. Consumers whose data have been compromised in any data breach can file a complaint with FTC or CFPB. FTC has an online “complaint assistant,” and FTC staff told us they use consumer complaints to help inform their investigatory and enforcement activity. CFPB staff told us that they use consumer complaints to help prioritize examinations and inform enforcement activity. In the 6 months following Equifax’s announcement of its data breach, CFPB received more than 20,000 consumer complaints about the impact of the breach or Equifax’s response. However, consumers are limited in the direct actions they can take against a CRA in the event of a data breach, for two primary reasons. First, consumers generally cannot trace the source of the data used to commit identity theft to a particular breached entity. As a result, it can be difficult to link a breach by a CRA (or any other entity) to the harm a consumer suffers from a particular incidence of identity theft, which may make it challenging to prevail in a legal action. Second, unlike with many other products and services, consumers generally cannot exercise choice if they are dissatisfied with a CRA’s privacy or security practices. Specifically, consumers cannot choose which CRAs maintain information about them. In addition, consumers do not have a legal right to delete their records with CRAs, according to CFPB staff, and therefore cannot choose to remove themselves entirely from the CRA market. FTC and CFPB have noted that the level of consumer protection required can depend on the consumer’s ability to exercise choice in a marketplace. For example, when determining whether a practice constitutes an unfair practice, FTC considers whether the practice is one that consumers could choose to avoid. Similarly, according to CFPB staff, the consumer reporting market may pose higher risk to consumers because consumers cannot choose whether or which CRAs possess and sell their information. The 2017 data breach of Equifax highlighted the data security risks associated with CRAs. While companies in many industries have experienced data breaches, CRAs may present heightened risks because of the scope of sensitive information they possess and because consumers have very limited control over what information CRAs hold and how they protect it. These challenges underscore the importance of appropriate federal oversight of CRAs’ data security. While FTC has taken significant enforcement actions against CRAs that have violated federal privacy or data security laws, it is important that the agency have all of the appropriate enforcement options to fulfill its mission of protecting consumers. However, GLBA, one of the key laws governing the security of consumer information, does not provide FTC with civil penalty authority. The remedies that FTC does have available under GLBA—such as disgorgement and consumer redress—may be less practical enforcement tools for violations involving breaches of mass consumer data. Accordingly, providing FTC with civil penalty authority can enable it to more effectively or efficiently enforce GLBA’s privacy and safeguarding provisions. Although CFPB is responsible for overseeing larger market participant CRAs, it lacks the data to identify with certainty all the CRAs under its supervision, in part because the sources it is using, such as public filings, are not comprehensive. Using additional methods to obtain information, such as requiring larger market participant CRAs to register with the agency or leveraging state registration information, would help CFPB ensure it is tracking all CRAs under its supervision and is providing appropriate oversight. CFPB considers a number of market and institutional factors in prioritizing which CRAs to examine, but data security has not routinely been among these factors. Given the nature and amount of consumer information CRAs hold, as well as increasing threats from hackers and others with malicious intent, vulnerabilities in these companies’ data security can pose significant risk to a vast number of consumers. By ensuring that its process for determining the scope of CRA examinations routinely includes factors that would detect data security risks, CFPB can better ensure the effectiveness of its supervision and help prevent further exposure or compromise of consumer information. Congress should consider providing the Federal Trade Commission with civil penalty authority for the privacy and safeguarding provisions of the Gramm-Leach-Bliley Act to help ensure that the agency has the tools it needs to most effectively act against data privacy and security violations. (Matter for Consideration 1) We are making two recommendations to CFPB: The Director of CFPB should identify additional sources of information, such as through registering CRAs or leveraging state information, that would help ensure the agency is tracking all CRAs that meet the larger participant threshold. (Recommendation 1) The Director of CFPB should assess whether its process for prioritizing CRA examinations sufficiently incorporates the data security risks CRAs pose to consumers, and take any needed steps identified by the assessment to more sufficiently incorporate these risks. (Recommendation 2) We provided a draft of this report to CFPB, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, FTC, and the Office of the Comptroller of the Currency. All of the agencies provided technical edits, which we incorporated as appropriate. In addition, we received written comments from CFPB, which are reprinted in appendix II. CFPB neither agreed nor disagreed with our recommendations. Regarding our recommendation that it identify additional sources of information that would help ensure that it is tracking all CRAs that meet the larger market participant threshold, CFPB noted that it cannot require CRAs to register with the bureau without first undertaking a rulemaking. While we acknowledge the challenges of tracking larger participant CRAs, we maintain that CFPB should be able to identify and monitor them consistently. In its letter, CFPB stated that this may be feasible. The agency noted that, short of rulemaking, there may be cost-effective ways to better ensure that it is appropriately tracking larger participant CRAs and added that they intend to track these CRAs by exploring ways to leverage state registration information. These actions, if fully implemented, would meet the intent of our recommendation. With respect to the recommendation that CFPB assess whether its process for prioritizing CRA examinations sufficiently incorporates data security risks, CFPB said it will continue to evaluate risks to consumers, including data security risks, as part of its prioritization process. CFPB also said it will assess whether that process should incorporate data security risks CRAs pose to consumers. However, CFPB expressed concern with the scope of its statutory authority, such as its lack of authority to supervise for compliance with GLBA safeguard provisions. CFPB noted that we did not adequately consider or discuss its limited statutory authority in the area of data security. Specifically, CFPB stated that it does not have authority to supervise for, enforce compliance with, or write regulations implementing GLBA’s safeguards provisions or FCRA’s records disposal provision. In response, we added language in the report to clarify CFPB’s lack of certain authorities over these data security provisions. Nonetheless, as we discuss in the report, CFPB has conducted data security examinations of some CRAs under its existing authority, including its authority to assess compliance with the requirements of federal consumer financial law. We continue to believe that effective supervision of CRAs and the protection of consumer information require that CFPB consider data security risks in its prioritization of CRA examinations. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, CFPB, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, FTC, and the Office of the Comptroller of the Currency. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Michael Clements at (202) 512-8678 or clementsm@gao.gov, or Nick Marinos at (202) 512-9342 or marinosn@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Our objectives were to examine (1) the federal laws and regulations governing consumer reporting agencies’ (CRA) collection, use, and protection of consumer information; (2) measures the Federal Trade Commission (FTC) has taken to enforce CRA compliance with requirements to protect consumer information; (3) measures the Consumer Financial Protection Bureau(CFPB) has taken to ensure that CRAs protect consumer information; and (4) FTC’s and CFPB’s roles in assisting consumers following a data breach and actions consumers can take following a data breach of a CRA. To examine the laws governing CRAs, we identified the relevant laws, including the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, and statutes related to unfair or deceptive acts or practices. We reviewed these laws for their application to CRAs and their collection, use, and protection of consumer information. We interviewed representatives of relevant federal agencies, including CFPB and FTC, about these laws and regulations and how they apply to CRAs. We also reviewed documents from and interviewed federal banking regulators on their role in overseeing financial institutions’ management of third-party risk, including those of CRAs. We selected four states with existing or proposed information protection laws or regulations that vary from federal requirements (California, Illinois, Massachusetts, and New York); reviewed related documentation; and interviewed Attorneys General from these states about their enforcement of state laws. In addition, we interviewed and reviewed documentation from the three nationwide CRAs and interviewed three other CRAs that produce or compile consumer reporting information. We selected these CRAs because they are not sector-specific and hold information on a broad segment of the population. We conducted a site visit to Equifax’s Alpharetta, Georgia data center to learn more about steps the company takes to comply with relevant consumer protection laws. We also interviewed representatives of furnishers and users of CRA consumer information—the American Bankers Association, the Property Casualty Insurance Association of America, and the National Retail Federation—about their roles in the collection, use, and protection of consumer data, and steps their members take to comply with relevant laws. To assess FTC’s and CFPB’s measures to enforce information protection provisions and to ensure CRAs’ proper collection, use, and protection of consumer information, we reviewed agency documentation and interviewed agency officials on their oversight activities. We reviewed the types of enforcement actions available to FTC and CFPB for violations of laws related to consumer reporting, as well as specific enforcement actions these agencies have brought against CRAs, data furnishers, and users of consumer reports. We also interviewed agency staff about FTC enforcement actions against CRAs and how it determines when to pursue such actions. We reviewed CFPB documentation on the scope of its supervisory examinations of larger market participant CRAs since 2015, as well as findings from recent CRA examinations. In addition, we reviewed CFPB examination guidance for supervising these CRAs, including CFPB’s internal guidelines for conducting data security examinations. We also reviewed documents related to CFPB’s process for prioritizing which institutions and which product lines (specific product offerings) should receive supervisory examination, and we interviewed CFPB staff about this process. Finally, we interviewed representatives of industry, consumer, and privacy groups for their views on the supervision of CRAs. These included the three nationwide CRAs, three other CRAs, the Consumer Data Industry Association, National Consumer Law Center, Consumer Federation of America, Consumers Union, World Privacy Forum, ID Theft Resource Center, and Consumer Action. To assess FTC and CFPB roles in assisting consumers, and actions consumers can take following a data breach of a CRA, we reviewed the two agencies’ efforts to inform and educate consumers following breaches. Specifically, we reviewed consumer education materials on FTC’s and CFPB’s websites related to data breaches and identify theft in general, as well as specific information posted after the Equifax data breach. We also interviewed staff from these agencies about their roles in assisting consumers following a breach. To identify actions consumers can take following a data breach, we reviewed our prior related reports and spoke with representatives of the industry and consumer representatives noted above. We conducted this performance audit from November 2017 to February 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individuals named above, John de Ferrari and John Forrester (Assistant Directors); Winnie Tsen (Analyst-in-Charge), Bethany Benitez, Kavita Daitnarayan, Farrah Graham, Andrea Harvey, Thomas Johnson, Tovah Rom, Rachel Siegel, Jena Sinkfield, and Tina Torabi made key contributions to this report.", "summary": "CRAs collect, maintain, and sell to third parties large amounts of sensitive data about consumers, including Social Security numbers and credit card numbers. Businesses and other entities commonly use these data to determine eligibility for credit, employment, and insurance. In 2017, Equifax, one of the largest CRAs, experienced a breach that compromised the records of at least 145.5 million consumers. GAO was asked to examine issues related to federal oversight of CRAs. Among other things, this report discusses (1) measures FTC has taken to enforce CRA compliance with requirements to protect consumer information, (2) measures CFPB has taken to ensure CRA protection of consumer information, and (3) actions consumers can take after a breach. GAO reviewed relevant laws, documentation related to CRA examinations, and policies and practices of selected CRAs; and interviewed representatives of regulatory agencies, CRAs, consumer and industry groups, and Attorneys General from four states with consumer reporting requirements. Since 2008, the Federal Trade Commission (FTC) has settled 34 enforcement actions against various entities related to consumer reporting violations of the Fair Credit Reporting Act (FCRA), including 17 actions against consumer reporting agencies (CRA). Some of these settlements included civil penalties—fines for wrongdoing that do not require proof of harm—for FCRA violations or violations of consent orders. However, FTC does not have civil penalty authority for violations of requirements under the Gramm-Leach-Bliley Act (GLBA), which, unlike FCRA, includes a provision directing federal regulators and FTC to establish standards for financial institutions to protect against any anticipated threats or hazards to the security of customer records. To obtain monetary redress for these violations, FTC must identify affected consumers and any monetary harm they may have experienced. However, harm resulting from privacy and security violations can be difficult to measure and can occur years in the future, making it difficult to trace a particular harm to a specific breach. As a result, FTC lacks a practical enforcement tool for imposing civil money penalties that could help to deter companies, including CRAs, from violating data security provisions of GLBA and its implementing regulations. Since 2015, the Consumer Financial Protection Bureau (CFPB) has had five public settlements with CRAs. Four of these settlements included alleged violations of FCRA; and three included alleged violations of unfair, deceptive, or abusive practices provisions. CFPB is also responsible for supervising larger CRAs (those with more than $7 million in annual receipts from consumer reporting) but lacks the data needed to ensure identification of all CRAs that meet this threshold. Identifying additional sources of information on these CRAs, such as by requiring them to register with the agency through a rulemaking or leveraging state registration information, could help CFPB ensure that it can comprehensively carry out its supervisory responsibilities. According to CFPB staff, the bureau does not have authority to examine for or enforce the GLBA’s safeguards provisions. After the Equifax breach, however, CFPB used its existing supervisory authority to examine the data security of certain CRAs. CFPB’s process for prioritizing which CRAs to examine does not routinely include an assessment of companies’ data security risks, but doing so could help CFPB better detect such risks and prevent the further exposure or compromise of consumer information. If a CRA experiences a data breach, affected consumers can take actions to mitigate the risk of identity theft—such as implementing a fraud alert or credit freeze—and can file a complaint with FTC or CFPB. However, consumers are limited in the direct actions they can take against the CRA. Consumers generally cannot exercise choice in the consumer reporting market—such as by choosing which CRAs maintain their information—if they are dissatisfied with a CRA’s privacy or security practices. In addition, according to CFPB, consumers cannot remove themselves from the consumer reporting market entirely because they do not have a legal right to delete their records with CRAs. This limited control by consumers, coupled with the large amount and sensitive nature of the information CRAs possess, underscores the importance of appropriate federal oversight of CRAs’ data security. GAO recommends that Congress consider giving FTC civil penalty authority to enforce GLBA’s safeguarding provisions. GAO also recommends that CFPB (1) identify additional sources of information on larger CRAs, and (2) reassess its prioritization of examinations to address CRA data security. CFPB neither agreed nor disagreed with GAO’s recommendations.", "document_type": "gao"}
{"report": "NASA’s mission is to drive advances in science, technology, aeronautics, and space exploration, and contribute to education, innovation, our country’s economic vitality, and the stewardship of the Earth. To accomplish this mission, NASA establishes programs and projects that rely on complex instruments and spacecraft. NASA’s portfolio of major projects ranges from space satellites equipped with advanced sensors to study the Earth to a telescope intended to explore the universe to spacecraft to transport humans and cargo to and beyond low-Earth orbit. Some of NASA’s projects are expected to incorporate new and sophisticated technologies that must operate in harsh, distant environments. The life cycle for NASA space flight projects consists of two phases— formulation, which takes a project from concept to preliminary design, and implementation, which includes building, launching, and operating the system, among other activities. NASA further divides formulation and implementation into phase A through phase F. Major projects must get approval from senior NASA officials at key decision points before they can enter each new phase. Figure 1 depicts NASA’s life cycle for space flight projects. Formulation culminates in a review at key decision point C, known as project confirmation, where cost and schedule baselines are established and documented in a decision memorandum. To inform those baselines, each project with a life-cycle cost estimated to be greater than $250 million must also develop a joint cost and schedule confidence level (JCL). The JCL initiative, adopted in January 2009, is a point-in-time estimate that, among other things, includes all cost and schedule elements, incorporates and quantifies known risks, assesses the impacts of cost and schedule to date, and addresses available annual resources. NASA policy requires that projects be baselined and budgeted at the 70 percent confidence level. The agency baseline commitment established at key decision point C includes cost and schedule reserves held at the project—those within the project manager’s control—and NASA headquarters level. Cost reserves are for costs that are expected to be incurred—for instance, to address project risks—but are not yet allocated to a specific part of the project. Schedule reserves are extra time in project schedules that can be allocated to specific activities, elements, and major subsystems to mitigate delays or address unforeseen risks. NASA’s current portfolio of major space telescopes includes three projects—WFIRST, TESS, and JWST—that vary in cost, complexity, and phase of the acquisition life cycle. WFIRST, a project that entered the concept and technology development phase and established preliminary cost and schedule estimates in February 2016, is in the earliest stages of the acquisition life cycle. With preliminary cost estimates ranging from $3.2 billion to $3.8 billion, this project is an observatory designed to perform wide-field imaging and survey of the sky at near-infrared wavelengths to answer questions about the structure and evolution of the universe and to expand our knowledge of planets beyond our solar system. The current design includes a 2.4 meter telescope that was built and qualified for another federal agency over 10 years ago; the project is evaluating which components to reuse and which to modify, refurbish, or build new. TESS—a smaller project whose latest cost estimate is approximately $337 million—is targeted to launch in March 2018 and will be used to conduct the first extensive survey of the sky from space for transiting exoplanets. And finally, JWST, with a life-cycle cost estimate of $8.835 billion, is one of NASA’s most complex projects and top priorities. The telescope is designed to help understand the origin and destiny of the universe, the creation and evolution of the first stars and galaxies, and the formation of stars and planetary systems. With a 6.5-meter primary mirror, JWST is expected to operate at about 100 times the sensitivity of the Hubble Space Telescope. JWST’s science instruments are to detect very faint infrared sources and, as such, are required to operate at extremely cold temperatures. To help keep these instruments cold, a multi-layered tennis-court-sized sunshield is being developed to protect the mirrors and instruments from the sun’s heat. We have reported for several years on the JWST project, which has experienced significant cost increases and schedule delays. Prior to being approved for development, cost estimates for JWST ranged from $1 billion to $3.5 billion, with expected launch dates ranging from 2007 to 2011. Before 2011, early technical and management challenges, contractor performance issues, low levels of cost reserves, and poorly phased funding levels caused JWST to delay work after confirmation, which contributed to significant cost and schedule overruns, including launch delays. The Chair of the Senate Subcommittee on Commerce, Justice, Science, and Related Agencies requested from NASA an independent review of JWST in June 2010. In response, NASA commissioned the Independent Comprehensive Review Panel, which issued its report in October 2010. The panel concluded that JWST was executing well from a technical standpoint, but that the baseline cost estimate did not reflect the most probable cost with adequate reserves in each year of project execution, resulting in an unexecutable project. Following this review, Congress in November 2011 placed an $8 billion cap on the formulation and development costs for the project and NASA rebaselined JWST with a life-cycle cost estimate of $8.835 billion that included additional money for operations and a planned launch in October 2018. The new baseline represented a 78 percent increase to the project’s life-cycle cost from the original baseline and a launch date in October 2018, a delay of 52 months. The revised life-cycle cost estimate included a total of 13 months of funded schedule reserve. Our ongoing work indicates that these three projects are each making progress in line with their phase of the acquisition cycle, but also face challenges in execution. Some of these challenges are unique to the projects themselves and some are common among the projects in NASA’s portfolio. For example, when projects enter the integration and test phase, unforeseen challenges can arise and affect the cost and schedule for the project. Table 1 provides more details about the current acquisition phase, cost, and schedule status of NASA’s major space telescope projects based on our ongoing work. WFIRST. NASA’s preliminary cost and schedule estimates for the WFIRST project are currently under review as the project responds to findings in the WFIRST Independent External Technical/Management/Cost Review. This independent review was conducted to ensure the mission’s scope and required resources are well understood and executable. NASA initiated this review in April 2017 to address the National Academies’ concerns that WFIRST cost growth could endanger the balance of NASA’s astrophysics program and negatively affect other scientific priorities. The review found that the mission scope is understood, but not aligned with the resources provided and concluded that the mission is not executable without adjustments and/or additional resources. For example, the study team found that NASA’s current forecasted funding profile for the WFIRST project would require the project to slow down activities starting in fiscal year 2020, which would result in an increase in development cost and schedule. NASA agreed with the study team’s results and directed the project to reduce the cost and complexity of the design in order to maintain costs within the $3.2 billion cost target. The project is currently identifying potential ways to reduce the scope of planned activities (called “descopes”), assessing the science impact of those descopes, and then developing recommendations for the Astrophysics Division leadership. An example of a descope that may be considered is the requirement for WFIRST to be “star-shade ready,” which means the design must be compatible with a star-shade device that is positioned between it and the star being observed to block out starlight while allowing the light emitted by the planet through. TESS. The TESS project is currently holding cost and schedule reserves consistent with NASA center requirements, but there are no longer headquarters-held cost reserves to cover a delay if the project cannot launch as planned in March 2018. According to a project official, the project is holding 16 days of schedule reserve to its target March 2018 launch readiness date, which includes 6 days for the completion of integration and test, and 10 days for launch operations. The project previously used schedule reserves to accommodate the delayed delivery of its Ka-band transmitter, which is essential for TESS as it transmits the mission data back to Earth, due to continued performance and manufacturing issues. The two main risks to the March 2018 launch date are if: 1) SpaceX requires additional time past December 2017 for NASA’s Launch Services Program to certify that TESS can fly on its upgraded launch vehicle—certification is necessary because it will be the first time that NASA will use this version of the vehicle—and 2) any issues are identified during the remainder of environmental testing. The project is also conducting additional testing on its spare camera at temperatures seen in space to better understand expected camera performance on orbit. TESS will use four identical, wide field-of-view cameras to conduct the first extensive survey of the sky from space for transiting exoplanets. However, during thermal testing, the project found that the substance attaching the lenses to the camera barrel places pressure on the lenses and causes the cameras to be slightly out of focus. In June 2017, NASA directed the project to proceed with integrating the cameras—as they are expected to meet TESS’s top level science requirements even with the anomaly. At its most recent key decision review in August 2017, NASA reallocated $15 million of TESS’s headquarters-held reserves to the WFIRST project. While this had the effect of decreasing life cycle costs for TESS, it also increased risk as the project no longer has any additional headquarters-held cost reserves to cover a launch delay past March 2018. JWST. The JWST project continues to make progress towards launch, but the program is encountering technical challenges that require both time and money to fix and may lead to additional delays, beyond a delay recently announced. While the project has made much progress on hardware integration and testing over the past several months, it also used all of its remaining schedule reserves to address various technical issues, particularly on the spacecraft element. In September 2017, the JWST project requested from the European Space Agency—who will contribute the Ariane V launch vehicle—a launch window from March to June 2019, or 5 to 8 months later than the planned October 2018 launch readiness date, established in 2011. The project based this request on the results of a schedule risk assessment that incorporated inputs from the contractor on expected durations of ongoing spacecraft element integration work and other challenges that were expected to increase schedule. With the later launch window to June 2019, the project expected to have up to 4 months of new schedule reserves. However, shortly after requesting the revised launch window, the project learned from its contractor that up to another 3 months of schedule reserve use is likely, due to lessons learned from conducting deployment exercises of the sunshield, such as reach and access limitations on the flight hardware. As a result, and pending further examination of the schedule, the project now has approximately one month of schedule reserve to complete environmental testing of the spacecraft element and the final integration phase. The final integration phase is where the instruments and telescope will be integrated with the spacecraft and sunshield to form the completed observatory. As I previously noted, our work has shown the integration and test is the riskiest phase of development, where problems are most likely to be found and schedules slip. Given the risks associated with the integration and test work ahead, coupled with a level of schedule reserves that is currently well below the level stated in the procedural requirements issued by the NASA center responsible for managing JWST, additional delays to the project’s revised launch readiness date of June 2019 are likely. As a result, the funding available under the Congressional cost cap of $8 billion may be inadequate as the contractor will need to continue to retain higher workforce levels for longer than expected to prepare the mission for a delayed launch. As Congress, NASA, and the science community consider future telescope efforts, it will be exceedingly important to shape and manage new programs in a manner that minimizes cost overruns and schedule delays. This is particularly important for the largest programs as even small cost increases can have reverberating effects. NASA’s telescope and other science projects will always have inherent technical, design, and integration risks because they are complex, specialized, and often push the state of the art in space technology. But too often, our reports find that management and oversight problems—which can include poor planning, optimistic cost estimating, funding gaps, lax oversight, and poor contractor performance, among other issues—are the real drivers behind cost and schedule growth. To its credit, NASA has taken significant steps, partly in response to our past recommendations, to reduce acquisition risk from both a technical and management standpoint, including actions to enhance cost and schedule estimating, provide adequate levels of reserves to projects, establish better processes and metrics to monitor projects, and expand the use of earned value management to better monitor contractor performance. For example, in November 2012, we found that NASA employee skill sets available to analyze and implement earned value management vary widely from center to center, and we recommended that NASA conduct an earned value management skills gap analysis to identify areas requiring augmented capability across the agency, and, based on the results of the assessment, develop a workforce training plan to address any deficiencies. NASA concurred with this recommendation and developed an earned value management training plan in 2014 based on the results of an earned value management skills gap analysis that was conducted in 2013. Moreover, in recent years, we have found that many of the projects within the agency’s major project portfolio have improved their cost and schedule performance. Nevertheless, the extent to which NASA has adopted some of the following lessons learned within its portfolio of major projects is mixed, and NASA has an opportunity to strengthen its program management of major acquisitions, including its space telescopes, by doing so. Manage Cost and Schedule Performance for Large Projects to Limit Implications for Entire Portfolio. In 2013, following JWST’s cost increases and schedule growth, we found that though cost and schedule growth can occur on any project, increases associated with NASA’s most costly and complex missions can have cascading effects on the rest of the portfolio. For example, we found that the JWST cost growth would have reverberating effects on the portfolio for years to come and required the agency to identify $1.4 billion in additional resources over fiscal years 2012 through 2017, according to Science Mission Directorate officials. NASA identified approximately half of this required funding from the four science divisions within the Science Mission Directorate account. The majority of the cuts were related to future high priority missions, missions in the operations and sustainment phase, and research and analysis. In essence, NASA had to mortgage future high priority missions and research to address JWST’s additional resource needs. Similarly, the National Academy of Sciences has concluded in the past that it is important for NASA to have a clearly articulated and consistently applied method for prioritizing why and how its scarce fiscal resources are apportioned with respect to the science program in general and on a more granular level among component scientific disciplines. The academy noted that failure to do so could result in a loss of capacity, capability, and human resources in a number of scientific disciplines and technological areas that may take a generation or more to reconstitute once eliminated. NASA’s establishment of the WFIRST Independent External Technical/Management/Cost Review that I previously discussed is a step in the right direction to help ensure the Astrophysics Division incorporates this lesson learned. Establish Adequate Cost and Schedule Reserves to Address Risks. Twice in the history of the JWST program, independent reviewers found that the program’s planned cost reserves were inadequate. First, in April 2006, an Independent Review Team confirmed that the project’s technical content was complete and sound, but expressed concern over the project’s reserve funding, reporting that it was too low and phased in too late in the development lifecycle. The review team reported that for a project as complex as JWST, 25 to 30 percent total reserve funding was appropriate. The team cautioned that low reserve funding compromised the project’s ability to resolve issues, address risk areas, and accommodate unknown problems. As I previously mentioned, following additional cost increases and schedule threats, NASA commissioned the Independent Comprehensive Review Panel. In 2010, the panel again concluded JWST was executing well from a technical standpoint, but that the baseline cost estimate did not reflect the most probable cost with adequate reserves in each year of project execution, resulting in an unexecutable project. NASA heeded these lessons when it established a new baseline for JWST in 2011. For example, the revised schedule included more reserves than required by the procedural requirements issued by the NASA center responsible for managing JWST. We have found, however, that NASA has not applied this lesson learned to all of its large projects— most notably with its human spaceflight projects, including the Space Launch System, Orion Crew Capsule, and associated ground systems— and similar outcomes to the JWST project have started to emerge with these projects. We previously reported that all three of these programs were operating with limited cost reserves, which limited each program’s ability to address risks and unforeseen technical challenges. For example, we found in July 2016 that the Orion program planned to maintain very low levels of annual cost reserves until 2018. The lack of available cost reserves in the near term led to the program deferring work to address technical issues to stay within budget, and put the program’s future cost reserves at risk of being overwhelmed by deferred work. In April 2017, we also found that all three programs faced development challenges in completing work, and each had little to no schedule reserve remaining to the launch date—meaning they would have to complete all remaining work with minimal delay during the most challenging stage of development. We found that it was unlikely that the programs would achieve the planned launch readiness date and recommended that NASA reassess the date. NASA agreed with this recommendation and stated that it would establish a new launch readiness date. In November 2017, NASA announced that a review of the possible manufacturing and production schedule risks indicated a launch date of June 2020—a delay of 19 months—but the agency will manage to a December 2019 launch date because, according to NASA, they have put in mitigation strategies for those risks. We will follow-up on those mitigation strategies as part of future work on the human space exploration programs. Regularly and Consistently Update Project JCLs to Provide Realistic Estimates to Decision Makers. In 2009, NASA began requiring that programs and projects with estimated life-cycle costs greater than $250 million develop a JCL prior to project confirmation. This was a positive step for NASA to help ensure that cost and schedule estimates are realistic and projects are thoroughly planning for anticipated risks. This is because a JCL assigns a confidence level, or likelihood, of a project meeting its cost and schedule estimates. Our cost estimating best practices recommend that cost estimates should be updated to reflect changes to a program or be kept current as a program moves through milestones. As new risks emerge on a project, an updated cost and schedule risk analysis can provide realistic estimates to decision-makers, including the Congress. This is especially true for NASA’s largest projects as updated estimates may require the Congress to consider a variety of actions. However, there is no requirement for NASA projects to update their JCLs, and our prior work has found that projects—including JWST—do not regularly update cost risk analyses to take into account newly emerged risks. Our ongoing work indicates that of the 16 major projects currently in NASA’s portfolio that have developed JCL estimates, only 2 have reported updating their JCLs (other than required due to a rebaseline). For example, the Interior Exploration using Seismic Investigations, Geodesy, and Heat Transport Project (InSight), a Mars lander, updated its JCL after the project missed its committed launch date. As a result, the project was able to provide additional information to decision makers about the probability that it will meet its revised cost and schedule estimates. As a project reaches the later stages of development, especially integration and testing, the types of risks the project will face may change. An updated project JCL would provide both project and agency management with data on relevant risks that can guide the project decisions. For example, in December 2012, we recommended the JWST project update its JCL. NASA concurred with this recommendation; however, we recently closed the recommendation because NASA had not taken steps to implement it and the amount of time remaining before launch would not have allowed the benefit of implementing the recommendation to be realized. An updated JCL may have portended the current schedule delays, which could have been proactively addressed by the project. Enhance Oversight of Contractors to Improve Project Outcomes. In December 2012, we found that the JWST project had taken steps to enhance communications with and oversight of its contractors. According to project officials, the increased communication allowed them to better identify and manage project risks by having more visibility into contractors’ activities. The project reported that a great deal of communication existed across the project prior to the Independent Comprehensive Review Panel; however, additional improvements were made. For example, the project increased its presence at contractor facilities as necessary to provide assistance; this included assigning two engineers on a recurring basis at a Lockheed Martin facility to assist in solving problems with an instrument. The JWST project also assumed full responsibility for the mission system engineering functions from Northrop Grumman in March 2011. NASA and Northrop Grumman officials both said that NASA is better suited to perform these tasks. We continue to see instances in our ongoing work that highlight the importance of implementing this lesson learned from JWST. For example, we found in 2017 that the Space Network Ground Segment Sustainment project—a project that plans to develop and deliver a new ground system for one Space Network site that provides essential communications tracking services to NASA and non-NASA missions—exceeded its original cost baseline by at least $401.7 million and been delayed by 27 months. The project has attributed some of the cost overruns and schedule delays to the contractor’s incomplete understanding of its requirements, which led to poor contractor plans and late design changes. The project also took steps to assign a new NASA project manager, increase physical presence at the contractor facility, and have more staff focused on validation and verification activities. In summary, NASA continues to make progress developing its space telescopes to help understand the universe and our place in it. But much like other major projects that NASA is developing, there continues to be an opportunity for NASA to learn from JWST and other projects that have suffered from cost overruns and schedule delays. Key project management tools and prior GAO recommendations that I have highlighted here today, could help to better position these large, complex, and technically challenging efforts for a successful outcome. We look forward to continuing to work with NASA and this subcommittee in addressing these issues. Chairman Babin, Ranking Member Bera, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Cristina T. Chaplain, Director, Acquisition and Sourcing Management at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Molly Traci, Assistant Director; Richard Cederholm, Assistant Director; Carrie Rogers; Lisa Fisher; Laura Greifner; Erin Kennedy; and Jose Ramos. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Acquisition management has been a long-standing challenge at NASA, although GAO has reported on improvements the agency has made in recent years. Three space telescope projects are the key enablers for NASA to achieve its astrophysics' science goals, which include seeking to understand the universe. In its fiscal year 2018 budget request, NASA asked for about $697 million for these three projects, which represents over 50 percent of NASA's budget for its astrophysics' major projects. In total, these projects represent an expected investment of at least $12.4 billion. This statement reflects preliminary observations on (1) the current status and cost of NASA's major telescope projects and (2) lessons learned that can be applied to NASA's management of its telescope projects. This statement is based on ongoing work on JWST and ongoing work on the status of NASA's major projects. Both reports are planned to be published in Spring 2018. This statement is also based on past GAO reports on JWST and NASA's acquisitions of major projects, and NASA input. The National Aeronautics and Space Administration's (NASA) current portfolio of major space telescopes includes three projects that vary in cost, complexity, and phase of the acquisition life cycle. GAO's ongoing work indicates that these projects are each making progress in line with their phase of the acquisition cycle but also face some challenges. For example, the current launch date for the James Webb Space Telescope (JWST) project reflects a 57-60-month delay from the project's original schedule. GAO's preliminary observations indicate this project still has significant integration and testing to complete, with very little schedule reserve remaining to account for delays. Therefore, additional delays beyond the delay of up to 8 months recently announced are likely, and funding available under the $8 billion Congressional cost cap for formulation and development may be inadequate. There are a number of lessons learned from its acquisitions that NASA could consider to increase the likelihood of successful outcomes for its telescope projects, as well as for its larger portfolio of projects, such as its human spaceflight projects. For example, twice in the history of the JWST program, independent reviews found that the program was not holding adequate cost and schedule reserves. GAO has found that NASA has not applied this lesson learned to all of its large projects, and similar outcomes to JWST have started to emerge. For example, NASA did not incorporate this lesson with its human spaceflight programs. In July 2016 and April 2017, GAO found that these programs were holding inadequate levels of cost and schedule reserves to cover unexpected cost increases or delays. In April 2017, GAO recommended that NASA reassess the date of the programs' first test flight. NASA concurred and, in November 2017, announced a launch delay of up to 19 months. GAO is not making any recommendations in this statement, but has made recommendations in prior reports to strengthen NASA's acquisition management of its major projects. NASA has generally agreed with GAO's recommendations and taken steps to implement them.", "document_type": "gao"}
{"report": "This section provides information on water infrastructure in Indian country, federal programs that provide drinking water and wastewater infrastructure assistance to Indian tribes, and our prior work on interagency collaboration. The 573 federally recognized Indian tribes in the United States vary greatly in terms of their culture, language, population size, land base, location, and economic status. Many are located in remote and often environmentally challenging areas. According to the U.S. Census Bureau’s American Community Survey, in 2016, about 26 percent of American Indians and Alaska Natives were living below the poverty line, compared with 14 percent for the nation as a whole. According to EPA databases, tribes operate about 950 public drinking water systems and about 340 public wastewater systems. Drinking water systems often include groundwater wells, water treatment plants, and pipelines to deliver water to homes. A regulated, centralized wastewater system may include sewer lines, tanks, and wastewater treatment plants or lagoons, but small, rural communities are more likely to have decentralized wastewater systems, such as individual septic systems. Once centralized water or wastewater systems are constructed in Indian country, ownership is typically transferred to the tribe. A tribally owned utility, tribal government, or a separate entity operates and maintains the system on behalf of the tribe. Some tribal utilities charge user fees to help offset operations and maintenance costs, but other tribal utilities do not charge these fees because of users’ low income levels or for cultural reasons, according to IHS and tribal officials. According to EPA, thousands of Indian homes are not currently served by a regulated, centralized drinking water or wastewater system, due in part to the logistical and other challenges associated with Indian water systems that must serve widely dispersed populations in remote locations. Instead, as we reported in September 2017, homes that are not served by water systems may have private wells and septic systems, or they may be entirely unserved. According to EPA and IHS documents, some tribal members may haul drinking water from a regulated drinking water source. However, containers used to haul and store the water can introduce bacteria and other contaminants. Also, because the regulated water source in some communities may be many miles away, residents may haul drinking water from nearby unregulated water sources, such as streams or livestock wells. For homes without access to a wastewater disposal system, residents may use a privy, use honeybuckets, or discharge waste directly to the ground. According to researchers with the Centers for Disease Control and Prevention, restricted access to clean water for hand washing and hygiene, along with manually disposing of waste, exposes people— especially infants and the elderly—to higher rates of illness and hospitalization. We reported in January 2017 that such health concerns underscore the importance of quality health care—including preventative care, such as providing safe sanitation facilities—for American Indian and Alaska Native people. Further, according to IHS, American Indian and Alaska Native families living in homes with satisfactory environmental conditions, which include safe water and sewer systems, require appreciably fewer medical services and place fewer demands on primary health care delivery systems. Seven federal agencies administer a number of programs that provide assistance to tribes for drinking water and wastewater infrastructure projects. Each agency has its own programs and processes for providing this assistance, with some similarities. Tribes can apply to one or more federal programs for financial assistance. In some cases, federal agencies coordinate to jointly fund the same project if the project is too large for one agency to fund. In other cases, agencies may work together by separately funding different parts of a large project or different phases of a multi-year project. Of these agencies, IHS, EPA, and USDA administer drinking water and wastewater infrastructure programs that are specific to Indian tribes. IHS’s mission is to raise the physical, mental, social, and spiritual health of American Indians and Alaska Natives to the highest level. To fulfill this mission, IHS provides primary health care and disease prevention services. IHS’s Office of Environmental Health and Engineering’s Sanitation Facilities Construction program, established in 1959, contributes to IHS’s disease prevention efforts. This program provides technical and financial assistance to Indian tribes for the cooperative development and construction of drinking water and wastewater systems and support facilities. According to the Indian Health Care Amendments of 1988, it is the policy of the United States that all Indian communities and Indian homes, new and existing, be provided with safe and adequate water supply systems and sanitary wastewater disposal systems as soon as possible. IHS’s 12 regional offices, called Areas, are responsible for working with tribes when administering the Sanitation Facilities Construction program. The Indian Health Care Amendments of 1988 require that IHS report annually to Congress on the sanitation deficiency levels for Indian tribes and communities, including, among other things, the amount of funds necessary to raise all Indian tribes and communities to zero sanitation deficiency. The act identifies five deficiency levels, and IHS uses a deficiency level of 0 to represent the absence of a deficiency in its data systems (see table 1). To develop its annual report to Congress and identify sanitation deficiencies in Indian communities and homes, IHS maintains two data systems: (1) the Sanitation Deficiency System (SDS), which contains proposed drinking water and wastewater infrastructure projects to address identified sanitation deficiencies; and (2) the Home Inventory Tracking System (HITS), which contains home-specific information that complements the SDS’s project-specific information. According to IHS program documentation, the project descriptions in the SDS are to include information about the sanitation deficiency level that each project will address, the project’s estimated cost, and the number of Indian homes that the project will serve. According to IHS documents, HITS is to include information about each Indian home that may have a sanitation deficiency that is eligible to receive Sanitation Facilities Construction program assistance, including the home’s geographic location and deficiency level. Eligible homes can be located on or off reservations, but according to IHS officials, the agency typically does not collect information about Indian homes located in large urban areas. According to IHS program documentation, IHS uses information in HITS to track the status of and plan for the provision of sanitation facilities for Indian homes. To address tribes’ identified sanitation facility needs, IHS is authorized to construct essential sanitation facilities, including domestic and community water supplies and facilities, as well as wastewater disposal facilities for Indian homes, communities, and lands. Under the Sanitation Facilities Construction program, IHS administers two primary drinking water and wastewater infrastructure activities: one to address sanitation deficiencies in existing homes and communities based on needs identified in the SDS, and one to provide water infrastructure for newly constructed or recently renovated Indian homes—these needs are not included in the SDS. According to IHS policy, the agency selects projects to fund that address deficiencies in existing homes based on ranked project lists contained in the SDS, by area. According to IHS policy, the agency can manage sanitation projects on behalf of a tribe (direct service), or a tribe or tribal entity can elect to manage projects. According to this policy, to implement a project under direct service, a tribe formally requests IHS assistance, and IHS engineers typically develop projects to include in the SDS. When IHS selects the project to fund, the tribe decides whether it will complete the project design and manage the construction contract or have IHS engineers do so. EPA provides annual grants to states to help finance drinking water and wastewater infrastructure through its Drinking Water and Clean Water State Revolving Fund programs, respectively. EPA sets aside a certain percentage of the appropriations it receives for these programs to make grants directly to Indian tribes for drinking water and wastewater infrastructure. Nine EPA regions administer the Drinking Water Infrastructure Grants Tribal Set-Aside and the Clean Water Indian Set- Aside programs, while states administer the State Revolving Funds. Under the drinking water set-aside program, EPA funds projects for community water systems that serve tribal populations, as well as for non- profit, non-community water systems owned by a tribal government that serve a tribal population. Under the clean water set-aside program, EPA provides funding for the planning, design, and construction of wastewater treatment plant facilities that serve federally recognized Indian tribes, Alaska Native villages, and certain tribes in Oklahoma. According to EPA officials, tribes are among those eligible to receive loans from the states’ State Revolving Fund programs. In addition, EPA administers the separate Alaska Native Villages and Rural Community Water Grant program that awards grants to the State of Alaska to, among other things, improve sanitation in rural and Alaska Native villages. USDA’s Rural Utilities Service allocates a portion of its appropriation for rural water and wastewater disposal programs to make drinking water and wastewater infrastructure grants to Indian tribes; this is referred to as the Native American program. USDA administers the Native American program at the national level and works with tribes at the state office and local level to conduct outreach and assist with the application process, among other things. The Native American program provides grants for water and wastewater facilities and services to rural and low-income tribal communities “whose residents face significant health risks … due to the fact that a significant proportion of the community’s residents do not have access to, or are not served by, adequate affordable water supply systems or waste disposal facilities.” In addition, USDA administers the Rural Alaska Village Grant program, which provides grants to the State of Alaska for development and construction of water and wastewater systems that address dire sanitation conditions in rural or Alaska Native villages with 10,000 or fewer people. Tribes are also eligible to receive loans and grants for infrastructure investments from the agency’s Water and Waste Disposal Program, which is administered by USDA’s state offices. Tribes that are located close to the U.S.-Mexico border and that meet the definition of a colonia are eligible for assistance from USDA’s Colonias program, a water infrastructure grant program to serve state- designated, low-income, unincorporated areas along the border. Finally, USDA administers a grant program to provide technical assistance and training, and the agency makes pre-planning grants available to tribes, organizations that serve tribes, and other recipients through multiple programs to assist with the development of application components, such as preliminary engineering or environmental reports. Four additional agencies may provide drinking water or wastewater assistance to Indian tribes through other programs not specific to drinking water or wastewater or as authorized by statute: HUD. HUD administers the Indian Community Development Block Grant program, a set-aside from the agency’s Community Development Block Grant program that is specific to Indian tribes. Indian Community Development Block grants can be used for construction of public facilities, provision of public services, housing, and certain economic development projects, among other things. HUD also awards Indian Housing Block Grants to tribes for affordable housing activities, which may include the development and rehabilitation of utilities, necessary infrastructure, and utility services. Reclamation. As authorized by statute, Reclamation provides assistance for drinking water infrastructure in the 17 western states, including rural water supply projects for tribes. Some of the statutes that direct Reclamation to construct rural water supply projects for tribes are enacted Indian water rights settlements. In addition, until September 2016, Reclamation’s rural water supply program was authorized to conduct appraisal investigations and feasibility studies for proposed rural water supply projects, including those that serve Indian tribes, but the program was not authorized to construct rural water supply projects. Corps. As authorized by statute, the Corps may provide designated communities, counties, and states with design and construction assistance for drinking water and wastewater infrastructure. For example, Congress has authorized and made appropriations for the Corps to provide assistance to Indian tribes for water-related environmental infrastructure projects—including wastewater treatment facilities and water supply, storage, treatment, and distribution facilities—through the Corps’ Section 219 Environmental Infrastructure Program. EDA. EDA’s Public Works Program provides grants to economically distressed areas to, among other things, help rehabilitate, expand, and improve their public works facilities, including drinking water and wastewater facilities. The Economic Adjustment Assistance Program provides grants for, among other things, development of public facilities, including drinking water and wastewater facilities. EDA’s Planning Program provides grants to various entities, including tribes, to pay the costs of economic development planning, which can include planning for water infrastructure. As part of our body of work on interagency collaboration, our September 2012 report discussed a variety of mechanisms to implement interagency collaborative efforts and identified key features that all efforts benefit from. Mechanisms to implement interagency collaborative efforts include establishing interagency task forces or signing memorandums of understanding. Key features, many of which are related to practices to enhance and sustain collaboration identified in our previous work, fall into the following categories: outcomes and accountability, bridging organizational cultures, leadership, clarity of roles and responsibilities, participants, resources, and written guidance and agreements. IHS and EPA estimated costs for tribal water infrastructure needs, with IHS identifying at least $3.2 billion in estimated costs for infrastructure projects to address existing drinking water and wastewater infrastructure needs for fiscal year 2016 and EPA estimating the costs of future tribal drinking water infrastructure needs at an additional $2.4 billion over the following 20 years. However, IHS’s estimate of existing needs is likely too low because IHS has not identified all eligible Indian homes that may have existing sanitation deficiencies—drinking water or wastewater infrastructure needs—and some data in the system that IHS uses to track home-specific infrastructure needs are not accurate. In fiscal year 2016, IHS identified about $3.2 billion in estimated costs for projects to address existing tribal drinking water and wastewater infrastructure needs. This estimate represented more than 2,000 projects in the SDS to address 373 tribes’ existing drinking water and wastewater infrastructure needs. To develop these projects, IHS policy directs area staff to invite all federally recognized tribes to identify existing drinking water and wastewater infrastructure needs each year. IHS staff then work with interested tribes to develop projects, including cost estimates, to include in the SDS. In fiscal year 2016, projects to address deficiency levels 4 and 5—homes or communities that lack a safe drinking water supply or wastewater disposal system, or both—accounted for $1.6 billion, or about half, of the total estimated costs of tribal infrastructure needs in the SDS. More than 80 percent of the deficiency level 4 and 5 project costs were located in the IHS Alaska and Navajo areas. In addition, in fiscal year 2016, IHS determined that more than 60 percent of the total existing drinking water and wastewater infrastructure needs in the SDS were infeasible, mostly due to the significant costs associated with infeasible deficiency level 5 projects. EPA collects and reports data on the drinking water infrastructure needs of the nation’s public water systems, including the future needs of tribally owned or operated drinking water systems. Specifically, EPA is required to assess capital improvement needs of all eligible public water systems every 4 years, and EPA has conducted its Drinking Water Infrastructure Needs Survey and Assessment to obtain this information every 4 years from 1995 through 2015. EPA last reported in 2013 on the estimated costs of capital improvement projects needed to repair, replace, and upgrade existing tribal and other public drinking water systems over the following 20 years. In its 2013 report, EPA estimated the costs of future tribal drinking water needs of public systems at approximately $2.4 billion. EPA does not, and is not required to collect information about future tribal wastewater infrastructure needs. Other agencies that provide tribes with assistance for drinking water or wastewater infrastructure projects do not—and are not required to— systematically identify tribal drinking water or wastewater infrastructure needs. For example, USDA officials explained that tribes identify needs through the applications they submit to the agency’s programs. These officials stated that they also identify tribal needs through outreach to tribes and coordination with other agencies, such as IHS. In addition, HUD officials said that they do not collect information specifically about tribal water infrastructure needs because they rely on the tribes to propose or identify projects to meet any needs based on the tribes’ priorities. IHS area staff work with tribes each year to (1) identify Indian homes eligible for and in need of IHS drinking water or wastewater infrastructure assistance to include in IHS’s home-specific tracking system, HITS; and (2) develop projects aimed at correcting any identified sanitation deficiencies in these homes to include in the SDS. Through this process, IHS has entered information about hundreds of thousands of eligible Indian homes in HITS and developed thousands of projects in the SDS. According to agency documents, HITS is to include information about each Indian home that is eligible to be served by the Sanitation Facilities Construction program and that may have an existing sanitation deficiency. However, based on our review of IHS documentation and interviews with IHS officials, HITS does not contain all eligible Indian homes that may have existing sanitation deficiencies, and some data in the system are not accurate. According to IHS officials, as of February 2018, HITS contained information for about 406,000 Indian homes. However, according to IHS area officials, the system does not contain information about all Indian homes eligible to be served by the Sanitation Facilities Construction program. For example, Oklahoma City Area officials we interviewed estimated that, based on Census data and their professional experience, more than 100,000 Indian homes in their area may be eligible for IHS program assistance but are not included in the system, and an unknown number of those homes likely have existing drinking water and wastewater infrastructure needs. These officials, as well as tribal officials administering the Sanitation Facilities Construction program for their tribes in Oklahoma, said that the system does not contain all eligible Indian homes, in part because it is difficult to identify where tribal members are living since most of the communities in the state are a mixture of tribal and non-tribal residents and are not located on reservations. In addition, Portland Area officials stated that they believe the system is missing an unknown number of eligible Indian homes in their area because it is challenging to identify eligible homes that are in scattered locations away from tribal community facilities. In contrast, Navajo Area officials said they believe the system is more than 95 percent complete for their area, in part because the area aligns with the Navajo Nation’s lands. IHS headquarters officials stated that they do not expect HITS to capture all eligible Indian homes, in large part because some tribes have chosen to not provide such information to IHS for cultural or other reasons. These officials said they are focused on working collaboratively with tribes to identify homes that have existing deficiencies rather than all homes eligible for services but added that IHS areas are expected to identify such homes during the normal course of their work. IHS area officials and tribal officials we interviewed stated that identifying eligible Indian homes not located on reservations is resource intensive, and they do not have sufficient resources to locate these homes. IHS Oklahoma City Area officials said it would be helpful to find efficient ways to identify additional eligible homes that may have sanitation deficiencies. For example, these officials said they have started using EPA data to target communities with water systems that do not meet EPA’s water quality standards and identify eligible homes within those communities, but they have made limited progress with their existing resources. Standards for Internal Control in the Federal Government calls for management to use quality information to achieve the entity’s objectives; such information is appropriate, current, complete, accurate, accessible, and provided on a timely basis. We recognize that it would be resource intensive for IHS to locate every eligible Indian home to include in HITS, but because the system may not contain roughly 20 percent of eligible Indian homes, opportunities exist for IHS to identify in a targeted, efficient way additional homes with existing deficiencies to include in HITS. By implementing a targeted, resource-efficient method to identify additional eligible Indian homes that may have existing sanitation deficiencies to include in HITS, IHS could have better assurance that it has more complete information to help improve its estimate of the number of eligible Indian homes that may need sanitation facilities assistance. Deficiency levels for thousands of homes may not be accurately captured in HITS. IHS headquarters officials stated that, as of February 2018, of the roughly 406,000 total tribal homes in HITS, about 229,400 homes had a deficiency level of 0. Therefore, the remaining approximately 176,600 tribal homes had deficiency levels 1 through 5. HITS automatically assigns a deficiency level 0 to each home when IHS enters it into the system, and homes remain at a deficiency level 0 until IHS develops projects in the SDS to serve those homes. HITS does not provide IHS with the option of recording a home’s deficiency level as unassessed, so a deficiency level 0 could indicate that there is no deficiency or that the home has not yet been assessed to determine a deficiency. IHS area officials we interviewed stated that they were aware of homes with sanitation deficiencies that were not accurately reflected in HITS. For example, Phoenix Area staff said they knew of homes with a deficiency level 4 or 5 that had a deficiency level 0 in HITS because these homes were not yet included within the scope of an SDS project. Also, California Area officials estimated that they had not assessed deficiency levels for about 20,000 eligible homes in their area, and Oklahoma City Area officials said they had not assessed more than 100,000 homes in their area—these homes’ deficiency levels all appeared as deficiency level 0 in HITS, but their actual deficiencies were unknown. According to IHS officials, there are multiple ways to assess homes’ deficiency levels. For homes that are not connected to a public water system, such as homes with private wells, IHS staff may need to visit homes to identify any existing deficiencies, with permission of the tribe. For homes connected to a public water system, staff can assign the homes the deficiency level associated with the water system but may need to visit the community to assess the system’s overall deficiency level. IHS officials from the California and Oklahoma City areas said they did not have the staff resources to begin the process of identifying whether the deficiency level 0 homes in their areas had deficiencies and developing projects for the SDS to serve them. IHS headquarters officials stated that they have identified homes that the Sanitation Facilities Construction program has served since implementing HITS in 2015. For example, IHS officials stated that of the about 229,400 homes with a deficiency level 0 in HITS, they had determined that about 90,700 correctly show that deficiency level because they have been included in a project in the SDS since 2015. IHS had not included the remaining approximately 138,700 homes with a deficiency level 0 in a project in the SDS. Therefore, using HITS, IHS could not determine if these homes had (1) no deficiency, (2) a deficiency that IHS addressed prior to 2015, or (3) an unknown deficiency because the homes had not been assessed. IHS officials stated that in the future they will be able to use HITS to better track the agency’s service and project history at the individual home level. However, IHS officials did not explain what steps they would take to identify deficiencies for the approximately 138,700 homes in HITS that had not been included in an SDS project. Standards for Internal Control in the Federal Government calls for management to use quality information to achieve the entity’s objectives; such information is appropriate, current, complete, accurate, accessible, and provided on a timely basis. IHS officials said that improving the system’s accuracy would be beneficial. By implementing a mechanism to indicate in HITS whether each home with a deficiency level of 0 has been assessed, IHS could also have more efficient ways to take steps to address the deficiencies of the homes contained in HITS. In fiscal year 2016, federal agencies obligated approximately $370 million for tribal drinking water or wastewater infrastructure projects. The agencies with tribal-specific programs for drinking water and wastewater infrastructure—IHS, EPA, and USDA—funded some projects to address what they identified as the most severe sanitation deficiencies— communities and homes that do not have safe drinking water or wastewater disposal facilities. However, the agencies’ processes may not always prioritize projects that address the most severe sanitation deficiencies. In addition, during the course of our review, we identified issues with how USDA awarded grants under its Rural Alaska Village Grant program. In fiscal year 2016, federal agencies provided about $370 million to develop, construct, or repair tribal drinking water and wastewater infrastructure projects to address tribes’ needs. This amount represents about 11 percent of the more than $3 billion in total existing tribal drinking water and wastewater infrastructure needs that IHS identified in 2016. Appendix III contains additional detail about agency obligations for tribal drinking water and wastewater infrastructure projects for fiscal years 2012 through 2016. Federal agency obligations were used to address a variety of tribal drinking water and wastewater infrastructure needs. For example, IHS, EPA, USDA, and the State of Alaska provided approximately $15.9 million for multiple, phased projects to bring first-time, in-home piped drinking water and wastewater service to approximately 90 homes in the Native Village of Eek in Alaska (see fig. 1). The residents of Eek obtain their drinking water by hauling water from the village washeteria, a building that contains toilets, washing machines, and a spigot for purchasing water for use in the home. Most homes in the community do not have piped water or sewer service to kitchens or bathrooms, and residents use washbasins for handwashing and food preparation and honeybuckets for wastewater disposal. As of April 2017, construction was ongoing, and officials estimated that the entire community of about 300 people would be served by the fall of 2018. See appendix IV for other examples of tribal drinking water and wastewater infrastructure projects that we visited. In addition to providing financial assistance for projects to design or construct water infrastructure, federal programs provided grants for technical assistance and training for tribal utilities and staff. For example, in fiscal year 2016, USDA awarded a $130,000 grant from its Technical Assistance and Training program to one organization that works with tribes. USDA also awarded a contract to the National Rural Water Association for it to employ a network of technical consultants who can provide on-site technical assistance to eligible systems, including tribally operated systems experiencing day-to-day operational issues, among other challenges. Federal programs mostly did not provide financial assistance for routine operations and maintenance of installed community or individual infrastructure. Tribal officials we interviewed, however, said that paying for operations and maintenance is often the tribe’s biggest challenge once a system is constructed or upgraded. For example, officials from one tribe said that the tribe did not have sufficient resources to operate and maintain a newly constructed water treatment system. Tribal officials we interviewed stated that their members are often unable to afford the utility fees needed to support the water system. For private systems, officials from two tribes said some of their members have trouble maintaining new drinking water filtration and septic systems because, for example, the systems are technically complex and costly to maintain. Officials from another tribe said homeowners who have difficulty operating and maintaining a system may return to using an unsafe drinking water source they previously used, for example. According to IHS officials, the agency has been collaborating with EPA, USDA, and tribes to improve collection of information about the cause of some systems’ premature failure and to analyze best practices for operations and maintenance of tribal water systems. Agencies with tribal-specific programs for water infrastructure—IHS, EPA, and USDA—selected and funded projects that address the most severe sanitation deficiencies. Three of these agencies’ programs—IHS’s Sanitation Facilities Construction, EPA’s clean water set-aside, and USDA’s Native American program—documented in regulation or policy their goal of funding projects to address these needs. Specifically, according to IHS’s Sanitation Facilities Construction program policy, the program’s goal includes providing funding first and in greater degree to homes and communities with the greatest needs, that is, those that lack safe drinking water or wastewater disposal, or both. EPA’s clean water set-aside program policy states the program’s goal is to protect public health in Indian country by addressing the lack of access to sanitation facilities (i.e., deficiency levels 4 and 5 for IHS and EPA). Finally, under the applicable requirements and policy, USDA’s Native American program’s objective is to provide water and waste disposal facilities and services to low-income rural communities whose residents face significant health risks. The program’s goal includes funding the neediest projects, giving priority to areas that lack running water, flushing toilets, and modern sewage disposal systems. According to agency policy, IHS’s Sanitation Facilities Construction program and EPA’s clean water set-aside program prioritize and select projects to fund according to the projects’ rankings in each IHS area’s SDS list. To create the ranked lists, IHS staff assign scores to each project based on a set of eight scoring factors, each with a different number of points that may be assigned to a project (see table 2). USDA prioritizes and selects projects to fund from its Native American program using a different process than IHS and EPA. USDA’s process involves tribes, working with USDA state offices, submitting project grant applications to the headquarters office. USDA state offices score project applications before submitting them to the headquarters office. USDA policy directs the program to make funds available according to priority, and the agency accepts and evaluates applications and awards grants throughout the year. USDA officials said the program maintains a wait list for eligible applications received after all available funds have been obligated each year. According to USDA’s scoring sheet for the Native American program, the agency evaluates project applications based on a set of five scoring factors, each with a different number of points to award. These scoring factor categories include population, income, joint financing, and discretionary points that can be awarded at state offices and headquarters (see table 3). USDA officials said that they also take SDS deficiency levels into account when reviewing project applications, but that the statute authorizing the Native American program does not specifically reference IHS’s deficiency level definitions. Using their respective processes to prioritize and select projects for funding, IHS’s Sanitation Facilities Construction program, EPA’s clean water set-aside program, and USDA’s Native American program obligated a total of nearly $110 million in fiscal year 2016 for projects to meet a mixture of needs. For example, for approximately 190 projects from the SDS that IHS, EPA, and others funded in fiscal year 2016, about 40 percent were projects to address deficiency levels 2 and 3, and about 60 percent were projects to address deficiency levels 4 and 5. Further, in fiscal year 2016, USDA reported that its Native American program funded four projects that provided new drinking water and wastewater service to some tribal communities and funded nine projects that replaced, renovated, or expanded existing infrastructure. Based on our review of IHS and USDA documents, deficiency level 2 and 3 projects as well as replacement and renovation projects can address important water quality and other problems, but they generally do not address the most severe deficiencies or the most significant health risks. Based on our review of IHS and EPA documents and interviews with these agencies’ officials, we found that their process for prioritizing and selecting projects to fund from the SDS can discourage funding some deficiency level 4 and 5 projects, especially those with a relatively high cost per home. According to some IHS area officials we interviewed, applying IHS’s scoring factors and the points associated with each factor means that deficiency level 3 projects may score higher than—and therefore receive funding before—deficiency level 4 or 5 projects. For example, a project’s cost per home is a significant contributor to its score because IHS assigns as low as minus 20 points for projects that have a relatively high cost to implement per home. IHS officials said that, typically, deficiency level 3 projects replace existing community infrastructure and serve more homes, which makes those projects’ relative cost per home lower than deficiency level 4 and 5 projects. IHS headquarters officials explained that they developed the SDS scoring system in consultation with tribes so the system could balance the need to fund deficiency level 4 and 5 projects with the need to fund projects with lower deficiencies that address health needs and serve a larger number of homes. However, because deficiency level 4 and 5 projects may rank lower than some projects that address less severe deficiencies and rank too low to be funded in a given year, hundreds of feasible projects to address the most severe sanitation deficiencies have remained on SDS lists for 5 years or more, based on our review of these lists. As of the end of fiscal year 2016, many of these projects had not been selected for funding from IHS or EPA. IHS headquarters officials said that the agency is working to improve the extent to which it funds feasible projects to address the highest sanitation deficiencies. For example, these officials said that they are updating the 2003 Sanitation Facilities Construction program guidelines to incorporate subsequently issued guidance, and this update should also more directly align the guidelines with the program’s original focus—to prioritize service to Indian homes and communities that lack access to piped water and sewer systems. However, a senior IHS official said that changing the SDS scoring factors is not part of this effort because the current scoring factors balance a number of interests in addition to projects’ deficiency levels. The official said that higher deficiency level projects ranking lower than other projects on the SDS list in a given year does not mean that public health needs are going unaddressed. Yet, our analysis shows that projects to address the highest deficiency levels have remained in the SDS for many years. We recognize that IHS faces trade-offs when selecting tribal infrastructure projects to fund. By reassessing the point distribution across the SDS scoring factors as part of IHS’s program guidelines update, in light of trade-offs between funding projects that address the most severe sanitation deficiencies and projects that meet other needs, IHS may have better assurance that its projects address the most severe sanitation deficiencies in Indian communities. Regarding USDA’s Native American program, based on our review of agency documents and interviews with USDA officials, we found that the agency’s process for prioritizing and selecting projects may not provide USDA with reasonable assurance that it is selecting projects to fund that address the most severe sanitation deficiencies. Specifically, USDA’s scoring factors for its Native American program do not include a scoring factor category to evaluate the extent to which projects will address health risks that stem from tribes’ lack of drinking water and wastewater infrastructure. In contrast, USDA prioritizes projects to fund under its Colonias grant program using an additional scoring factor that awards points based on the extent to which a proposed project will address health risks stemming from lack of safe drinking water and wastewater disposal in a colonia. For example, USDA awards 50 points for projects in colonias where a lack of access to safe drinking water and wastewater disposal results in a significant health risk. We recommended in December 2009 that USDA take steps to better target its limited funds for the Colonias program, and USDA responded in part by creating the additional scoring factor for colonias to ensure that the neediest colonias receive funding. To prioritize Native American program applications that address significant health risks, USDA officials said they use discretionary points. However, according to program policy, USDA state office and headquarters officials may award discretionary points to meet other purposes that are not related to addressing health risks, such as encouraging projects with green infrastructure or promoting geographic diversity among grantees, or they may not award these points at all. As a result, USDA may not have reasonable assurance that it is consistently evaluating or funding project applications in a way that aligns with the Native American program’s goal. USDA policy states that both the Native American and Colonias programs are to prioritize areas that lack running water, flushing toilets, and modern sewage disposal systems. By implementing a scoring factor similar to the one in the Colonias program—that is, one that awards points for proposed projects that address health risks from a lack of access to safe drinking water and wastewater disposal—for the Native American program, USDA would have more assurance that it is evaluating project applications consistently and funding projects to address the most severe sanitation deficiencies in Indian communities, consistent with the program’s goal. During the course of reviewing funding for tribal drinking water and wastewater infrastructure projects, we encountered several issues with one of USDA’s tribal drinking water and wastewater infrastructure programs, the Rural Alaska Village Grant program. Specifically, section 306D of the Consolidated Farm and Rural Development Act authorizes USDA to make grants to the State of Alaska for the benefit of rural or Native villages to provide for the development and construction of drinking water and wastewater systems. According to USDA reports, these grants are used for projects that have provided, for example, rural Alaska Native residents with access to safe drinking water and flush toilets in their homes. From the program’s beginning in fiscal year 1997 through fiscal year 2016, USDA awarded 455 grants totaling more than $444 million to provide safe drinking water and wastewater disposal to thousands of Alaska Natives in remote communities. We found that from fiscal year 1997 through fiscal year 2016, USDA awarded 159 Rural Alaska Village grants totaling about $157 million to recipients not authorized by section 306D. These recipients were Alaska Native villages, municipalities, and the Alaska Native Tribal Health Consortium, which is the tribal organization that administers IHS’s Sanitation Facilities Construction program in Alaska. USDA’s appropriations acts for fiscal years 2012 through 2017, however, authorized USDA to provide Rural Alaska Village grants to the Consortium. Of the 159 grants, USDA awarded 127 grants (about $121 million) to municipalities and Alaska Native villages from 1997 through 2016, and it awarded 32 grants (about $36 million) to the Consortium in 2011 before first receiving authority to do so in fiscal year 2012. Based on our review of a list of USDA grant agreements, selected agreements, and according to agency officials, in 2011, USDA signed 32 such agreements with the Consortium and the communities on whose behalf the Consortium administered the grants. USDA officials stated that the agency made seven total obligations to the Consortium in 2011 for these grants. USDA officials stated that they did not agree that the agency had awarded Rural Alaska Village grants to ineligible entities because the program’s authorizing statute gives the State of Alaska control over the use of the grants, and the state concurred with USDA making some grants directly to other parties. For example, the USDA officials stated that a 2011 memorandum of agreement between USDA, the State of Alaska, IHS, and the Consortium was a vehicle for the state to direct a portion of the Rural Alaska Village grants to other parties. These officials stated that since the statute does not prevent the state from redirecting portions of the grant to other parties, it is not improper for USDA to enter into an agreement with the state to award the grants directly to other parties so that the state does not have to redirect them. In commenting on a draft of this report, USDA noted that the agency has awarded two grants to municipalities since signing the 2011 agreement. In addition, USDA officials said that they entered into the memorandum of agreement and began awarding grants to the Consortium in 2011 to address problems with the program’s administration, which resulted in projects that were delayed or halted. For example, USDA stated in a 2010 report that the State of Alaska had not adequately documented project costs and that USDA staff were concerned that the state had not applied the obligations it received from USDA to the intended communities. According to USDA officials, they have seen a significant improvement in the state’s grant administration and more timely delivery of projects since the 2011 agreement. In addition, the Rural Alaska Village Grant program manager said the agency awards grants directly to Native villages that have the capacity to administer them. In commenting on a draft of this report, USDA stated that the agency has made all grants to the Consortium pursuant to the 2011 memorandum of agreement. The State of Alaska can choose to make subgrants once it receives the Rural Alaska Village grant, but section 306D of the Consolidated Farm and Rural Development Act only authorizes USDA to award grants to the State of Alaska. Moreover, the 2011 memorandum of agreement cannot authorize USDA to award grants to recipients that are not authorized by statute. By ensuring that all Rural Alaska Village grants are awarded only to recipients identified as eligible in section 306D or USDA appropriations acts, USDA will have assurance that it is complying with the law. If USDA wants to award Rural Alaska Village grants to municipalities and Alaska Native villages, it should seek authority to do so, as it did to award such grants to the Consortium. In addition, the regulations governing the Rural Alaska Village Grant program identify rural or native villages in Alaska as eligible grant recipients. USDA officials explained that the agency amended the Rural Alaska Village Grant program regulations in 2015 to codify the 2011 memorandum of agreement. However, this regulation identifying rural and Alaska Native villages as eligible grant recipients expands USDA’s authority to award grants beyond the existing statutory authorities, which do not list rural or Alaska Native villages as eligible recipients. Until USDA amends the Rural Alaska Village Grant program regulations to be consistent with USDA’s authority, the agency’s regulations will continue to recognize recipients not authorized by statute. Most of the seven federal agencies that administer programs to provide drinking water and wastewater infrastructure assistance to Indian tribes have taken actions to collaborate at the national level, and the agencies have identified additional opportunities to collaborate. At the regional level, seven federal agencies we surveyed reported collaborating on a range of activities within six selected states—with some agencies frequently working together and others rarely collaborating—and the agencies identified opportunities to increase collaboration at the regional level to better serve tribes. Most of the seven federal agencies we reviewed have taken actions to collaborate at the national level and identified additional opportunities to collaborate that they have not yet taken. In our previous work, we found that achieving important national outcomes—such as providing access to safe drinking water and wastewater disposal—often requires coordinated and collaborative efforts of a number of programs spread across the federal government. For example, IHS, EPA, USDA, HUD, and Reclamation have formed a national tribal infrastructure task force to facilitate the agencies’ collaborative efforts when providing services, support, and technical assistance to tribes. The tribal infrastructure task force’s efforts reflect some of the key features that we have found all collaborative mechanisms benefit from in our previous work: Written guidance and agreements. We have previously reported that agencies that articulate their agreements in documents can strengthen their commitment to working collaboratively. The members of the tribal infrastructure task force first documented their agreement in a memorandum of understanding in 2007, the year the task force was created. The agencies updated the memorandum most recently in 2013, and they use the document to formally agree on the group’s common goal and purposes and to clarify and define roles and responsibilities. Having participating agencies document their agreements on how they will be collaborating, and continually updating and monitoring these agreements, are practices that are consistent with our prior work. Outcomes and accountability. In our previous work, we have reported on the importance of groups having clear goals. In its 2013 memorandum of understanding, the tribal infrastructure task force identified a common goal of improving access to safe drinking water and basic sanitation for American Indians and Alaska Natives. In the memorandum, the member agencies also agreed on the task force’s stated purposes, one of which is to enhance the efficient leveraging of funds. Leadership. We have found that identifying one agency as the leader of a collaborative group is often beneficial because it centralizes accountability and can speed decision making. EPA has served as the federal focal point for the task force; this has included hosting the task force’s website that serves as a common source for documents the group has produced. According to an official involved with the task force, EPA’s role has provided continuity in leadership. The task force’s efforts have yielded some specific results. For example, in 2013, tribal infrastructure task force members agreed to adopt a uniform preliminary engineering report template, a key supporting document that multiple agencies require in their project application and evaluation processes. Task force members created this template in part in response to our October 2012 recommendation that EPA and USDA develop such a document. According to agency officials we interviewed, the report template has been helpful for tribes since they no longer have to produce different versions of the same document when submitting multiple applications to different agencies. USDA officials said they have since worked with other agencies to develop an online version of the preliminary engineering report that is accessible to task force members and others to further improve collaboration. However, according to agency officials involved with the task force, there may be additional opportunities to improve the efficiency of their collaboration at the national level. For example, in 2011, a workgroup of the task force identified a series of 10 options to increase the efficiency of collaboration by streamlining their application processes. As of November 2017, according to agency officials, the task force had not acted on most of the options. One such option was for agencies to better align their different funding and application cycles where possible. Several tribal officials and representatives from a tribal organization we interviewed cited challenges with complying with the agencies’ different application requirements. For example, they said that doing so can be resource intensive and can make it difficult to obtain funds for one project. Other tribal officials we interviewed also identified ways that agencies could improve their collaboration that would benefit tribal applicants and that the task force did not identify in its 2011 report. For example, various tribal officials suggested that agencies standardize federal program application processes and coordinate their outreach to tribes to discuss agency programs and their requirements. According to an agency official involved with the task force, when the group considered which options from the 2011 report to implement, member agencies focused their efforts on implementing those that were most achievable given the agencies’ limited resources. Other officials also said that it would be worthwhile to reconsider some of the options identified in the report. As stated in the task force’s 2013 memorandum of understanding, one of its purposes is to enhance the member agencies’ efficient leveraging of funds. By reviewing the 2011 task force report and identifying and implementing additional actions to help increase their collaboration, the task force member agencies could improve their ability to leverage limited program funds. The regional offices of the seven federal agencies we surveyed collaborated with each other to varying extents in the six selected states (Alaska, Arizona, California, New York, Oklahoma, and South Dakota). In the 2013 memorandum of understanding, the tribal infrastructure task force member agencies—IHS, EPA, USDA, HUD, and Reclamation— agreed that they are expected to collaborate at the regional level to achieve a common goal of providing safe drinking water and basic sanitation for tribes. However, based on our review of agency survey responses, these agencies did not always collaborate in each of the six states. We measured agency collaboration in terms of the number of instances in which one agency regional office reported using a collaborative mechanism with another agency. These collaborative mechanisms include state- or project-level working groups, memorandums of understanding, and shared databases, among others. In responses to our survey, we found that the number of instances of agency regional offices reporting that they used one or more collaborative mechanism with other agencies varied across the six states. For example, the agencies’ regional offices collaborated the most in Alaska and the least in New York and Oklahoma. Figure 2 shows the percentage of instances where an agency reported using a collaborative mechanism with another agency when jointly working on tribal drinking water and wastewater activities in the six states, out of the total possible instances. Appendix II contains additional details about our survey and agency responses. In responses to our survey, certain agencies’ regional offices reported collaborating with each other in some states but not in other states. For example, EPA and USDA regional offices both reported working together in Alaska, Arizona, and California, but not in New York, Oklahoma, or South Dakota. IHS and HUD reported collaborating with each other in three states but not in the other states. Not all agencies work with tribes in every state. For example, Reclamation does not operate in Alaska or New York, so we did not survey the agency in those states. The Corps’ regional offices responded that they are not authorized to work on drinking water or wastewater infrastructure with tribes in two of the six states. In contrast, IHS and EPA regional offices reported collaborating with each other in all six states, the most of any agency pair. In their responses to our survey and in interviews, the seven federal agencies’ regional offices most frequently identified three key factors that limited how much they collaborated in the six states. Specifically: Incompatibility of agency policies and missions. Agencies’ regional offices reported that having incompatible policies or agency missions was a factor that had hindered their collaboration with other agencies. For example, IHS and HUD regional offices in four states reported that a restriction on IHS’s ability to serve new homes constructed with grants from HUD’s housing programs limited their collaboration. Several agencies’ regional offices reported that having compatible policies helped their collaboration. For example, IHS and USDA regional offices in Alaska responded that multiple agencies’ use of IHS’s SDS list as a common source for identifying potential projects to fund has helped collaboration. We previously found that adopting compatible policies and procedures is one way for agencies to establish means of operating across agency boundaries. Insufficient resources. An additional factor that hindered agencies’ collaboration was insufficient staff and financial resources. For example, HUD and IHS regional officials we interviewed in Arizona said that a state-level tribal infrastructure working group they were involved in became inactive in 2016, after the lead agency determined it was unable to continue dedicating staff resources to that role and none of the other agencies picked up the lead. In contrast, several IHS and EPA regional offices reported that the existence of standard interagency agreements that facilitate transferring EPA funds to IHS helped them collaborate and leverage funding for projects that each agency would not have funded on its own. Identifying and leveraging the resources needed to initiate or sustain a collaborative effort is a key consideration for implementing the interagency collaborative mechanisms we previously identified. Absence of personal relationships. Agencies’ regional offices also reported that the absence of relationships with staff from other agencies hindered their collaboration. In contrast, agencies’ regional offices reported that having good working relationships with staff from other agencies helped their collaboration. For example, USDA’s regional office and the State of Alaska reported that their strong relationships with each other and other agencies in Alaska helped their collaboration, and that these relationships were enhanced by agency staff’s frequent communication through regular meetings. We previously found that having positive working relationships can bridge organizational cultures and build trust. In their responses to the survey and in interviews, several agencies’ regional offices identified examples of inefficiencies that have occurred when they did not collaborate, including inefficient use of their limited resources. For example, officials from one EPA region we interviewed said that there have been years when EPA staff spent time developing a project only to learn that USDA had already funded the same project. The officials stated that this inefficiency could have been avoided if they had been communicating with their USDA counterparts about the projects that each agency was considering to fund. Also, in two states, EPA’s regional office reported that EPA and USDA may be missing opportunities to leverage funding for individual projects by not sharing information about projects. In all six states, nearly all of the federal agency regional offices responded that it would be beneficial to increase their collaboration. Specifically, more than 90 percent of the federal agency respondents identified at least one collaborative mechanism that would be beneficial for them to begin using with another agency. The specific mechanisms that the agencies identified appeared to relate to the amount of collaboration in which they had already engaged. For example, agency regional offices that reported not having collaborated with another agency most frequently said that it would be beneficial to begin having informal communications with their counterparts in other agencies and to start sharing project-specific documents such as preliminary engineering reports. Alternatively, agency regional offices that reported having collaborated with another agency most frequently responded that it would be beneficial to begin using a memorandum of understanding as an additional mechanism for collaborating where they had not already done so. In the tribal infrastructure task force’s 2013 memorandum of understanding, the member agencies—IHS, EPA, USDA, HUD, and Reclamation—agreed that they are expected to collaborate at the regional level to provide safe drinking water and basic sanitation for tribes and to more efficiently leverage program funds. By directing their regional offices to identify and pursue additional mechanisms to increase their collaboration, the task force member agencies would have better assurance that their regional offices are efficiently leveraging limited program funds and following through on the commitment to collaborate. Identifying and addressing drinking water and wastewater infrastructure needs in Indian country is a difficult undertaking. IHS dedicates a significant effort each year to working with tribes to identify their existing drinking water and wastewater infrastructure needs. However, one of IHS’s systems—HITS—may be missing tens of thousands of eligible Indian homes, an unknown number of which may have existing sanitation deficiencies. Additionally, some homes’ deficiency levels in HITS are inaccurate. By implementing a targeted, resource-efficient method to identify additional eligible Indian homes that may have existing sanitation deficiencies to include in HITS, IHS could have better assurance that it has more complete information to help improve its estimate of the number of eligible Indian homes that may need sanitation facilities assistance. Also, IHS officials said that improving the system’s accuracy would be beneficial. By implementing a mechanism to indicate in HITS whether each home with a deficiency level of 0 has been assessed, IHS could also have more efficient ways to take steps to address the deficiencies of the homes contained in HITS. IHS and USDA funded some projects to address the most severe sanitation deficiencies, but residents of many Indian homes remain without safe drinking water or wastewater disposal as the agencies also prioritized and funded projects that addressed other needs. We recognize that IHS faces trade-offs when selecting tribal infrastructure projects to fund. By reassessing the point distribution across the SDS scoring factors as part of IHS’s program guidelines update, in light of trade-offs between funding projects that address the most severe sanitation deficiencies and projects that meet other needs, IHS may have better assurance that its projects address the most severe sanitation deficiencies in Indian communities. Also, by USDA implementing a scoring factor similar to the one in its Colonias program—that is, one that awards points for proposed projects that address health risks from a lack of access to safe drinking water and wastewater disposal—for the Native American program, USDA would have more assurance that it is evaluating project applications consistently and funding projects to address the most severe sanitation deficiencies in Indian communities, consistent with the program’s goal. USDA has provided thousands of Alaska Natives with safe drinking water and wastewater infrastructure through its Rural Alaska Village Grant program. However, USDA awarded some grants to recipients not authorized by statute. By ensuring that all Rural Alaska Village grants are awarded only to recipients authorized by statute, USDA will have assurance that it is complying with the law. If USDA wants to award Rural Alaska Village grants to municipalities and Alaska Native villages, it should seek authority to do so as it did to award these grants to the Alaska Native Tribal Health Consortium. Also, until USDA amends the Rural Alaska Village Grant program regulations to be consistent with USDA’s authority, the agency’s regulations will continue to recognize recipients not authorized by statute. The five agencies that participate in the national tribal infrastructure task force have committed to working together at the national and regional levels to increase tribes’ access to safe drinking water and basic sanitation. In our previous work, we have found that achieving important national outcomes, such as providing access to safe drinking water and wastewater disposal, often requires collaborative efforts by a number of programs across the federal government. At the national level, the task force has not acted on most of the options it previously identified to improve member agencies’ collaboration. By reviewing the 2011 task force report and identifying and implementing additional actions to help increase their collaboration, the task force member agencies could improve their ability to leverage limited program funds. At the regional level, we found that the task force member agencies had not fulfilled their commitment to collaborate in all of the six states we reviewed. Responses to our survey also indicated that there is unrealized potential for the task force member agencies’ regional offices to increase the extent of their collaboration. By directing their regional offices to identify and pursue additional mechanisms to increase their collaboration, the task force member agencies would have better assurance that their regional offices are leveraging limited program funds and following through on their commitment to collaborate. We are making 16 recommendations—two to IHS to improve information in HITS; one each to IHS and USDA to review their project selection processes; two to USDA to address issues with its Rural Alaska Village Grant program; and two each to IHS, USDA, EPA, HUD, and Reclamation to increase collaboration at the national and regional levels. The Director of IHS should implement a targeted, resource-efficient method to identify additional eligible Indian homes that may have existing deficiencies to include in HITS. (Recommendation 1) The Director of IHS should implement a mechanism to indicate in HITS whether each home with a deficiency level of 0 has been assessed. (Recommendation 2) The Director of IHS should reassess the point distribution across the SDS scoring factors as part of its program guidelines update, in light of trade-offs between funding projects that address the most severe sanitation deficiencies and projects that meet other needs. (Recommendation 3) The Assistant to the Secretary of Agriculture for Rural Development should implement a scoring factor that awards points for proposed Native American program grant projects that address health risks from a lack of access to safe drinking water and wastewater disposal, as it does with the Colonias grant program. (Recommendation 4) The Assistant to the Secretary of Agriculture for Rural Development should ensure that all Rural Alaska Village grants are awarded only to recipients authorized by law or seek authority to award grants to municipalities and Alaska Native villages. (Recommendation 5) The Assistant to the Secretary of Agriculture for Rural Development should amend the Rural Alaska Village Grant program regulations so that they are consistent with USDA’s authority. (Recommendation 6) The Director of IHS, in cooperation with other members of the tribal infrastructure task force, should review the 2011 task force report and identify and implement additional actions to help increase the task force’s collaboration at the national level. (Recommendation 7) The Administrator of EPA, in cooperation with other members of the tribal infrastructure task force, should review the 2011 task force report and identify and implement additional actions to help increase the task force’s collaboration at the national level. (Recommendation 8) The Assistant to the Secretary of Agriculture for Rural Development, in cooperation with other members of the tribal infrastructure task force, should review the 2011 task force report and identify and implement additional actions to help increase the task force’s collaboration at the national level. (Recommendation 9) The Deputy Assistant Secretary of the Department of Housing and Urban Development’s Office of Native American Programs, in cooperation with other members of the tribal infrastructure task force, should review the 2011 task force report and identify and implement additional actions to help increase the task force’s collaboration at the national level. (Recommendation 10) The Commissioner of Reclamation, in cooperation with other members of the tribal infrastructure task force, should review the 2011 task force report and identify and implement additional actions to help increase the task force’s collaboration at the national level. (Recommendation 11) The Director of IHS, in cooperation with other members of the tribal infrastructure task force, should direct IHS area offices to identify and pursue additional mechanisms to increase their collaboration. (Recommendation 12) The Assistant to the Secretary of Agriculture for Rural Development, in cooperation with other members of the tribal infrastructure task force, should direct USDA state offices to identify and pursue additional mechanisms to increase their collaboration. (Recommendation 13) The Administrator of EPA, in cooperation with other members of the tribal infrastructure task force, should direct EPA regional offices to identify and pursue additional mechanisms to increase their collaboration. (Recommendation 14) The Deputy Assistant Secretary of the Department of Housing and Urban Development’s Office of Native American Programs, in cooperation with other members of the tribal infrastructure task force, should direct HUD regional offices to identify and pursue additional mechanisms to increase their collaboration. (Recommendation 15) The Commissioner of Reclamation, in cooperation with other members of the tribal infrastructure task force, should direct Reclamation regional offices to identify and pursue additional mechanisms to increase their collaboration. (Recommendation 16) We provided a draft of this report for review and comment to the Department of Health and Human Services (for IHS), HUD, the Department of the Interior (for Reclamation), EPA, USDA, the Department of Defense (for the Corps), and the Department of Commerce (for EDA). Of the five agencies to which we directed recommendations, three— Health and Human Services, HUD, and Interior—agreed with the recommendations directed to them. The fourth agency, EPA, agreed with one of the recommendations and agreed with the intent of the second recommendation but proposed revised language, as discussed below. The Acting Director of Grants Evaluation for HUD’s Office of Native American Programs provided comments by e-mail, and Health and Human Services, Interior, and EPA provided written comments that are reproduced in appendixes V, VI, and VII, respectively. The fifth agency to which we directed recommendations, USDA, disagreed with the two recommendations regarding the Rural Alaska Village Grant program and neither agreed nor disagreed with the other three recommendations directed to it, although the agency proposed alternative language for two of these recommendations in its written comments, reproduced in appendix VIII. Of the two agencies to which we did not direct recommendations, Defense provided a letter, reproduced in appendix IX, in which it indicated the agency had no comments on the report, and Commerce’s Audit Liaison stated in an e-mail that Commerce would not send a formal comment letter. In addition, Health and Human Services, USDA, and EDA (for Commerce) provided technical comments, which we incorporated in the report as appropriate. In its written comments, EPA requested that we revise the language of the recommendation that the members of the tribal infrastructure task force direct their regional, state, or area offices to identify and pursue additional mechanisms to increase their collaboration. EPA stated that it agreed with the intent of the recommendation but that it was concerned that, as worded, the recommendation may not achieve the intended goal. Instead, EPA stated that it can accomplish increased regional collaboration through multiple avenues and as such, provided revised language that would remove reference to its regional offices taking the recommended action. We encourage EPA to take advantage of increasing regional collaboration through all avenues it sees fit. However, because EPA’s regional offices are the entities that collaborate with other agencies in the various regions, we continue to believe it is important for these offices to participate in identifying and implementing the means for increasing collaboration in their respective regions. As a result, we did not modify the recommendation language in response to EPA’s comment. In its written comments, USDA stated it disagreed with our statements concerning the Rural Alaska Village Grant program and asked that we remove the two corresponding recommendations from our report. Specifically, USDA stated that our recommendations are unnecessary because the agency is operating within its authorities. USDA stated that it believes providing grants directly to parties other than the state— including Alaska Native villages and municipalities—under the 2011 memorandum of agreement is consistent with the purpose of section 306D of the Consolidated Farm and Rural Development Act and appropriations made for the program. As we state in the report, we agree that the State of Alaska can choose to make subgrants once it receives the Rural Alaska Village grant. We also state in the report that we did not see any evidence of grants being used for other than their intended purposes during the course of our review. However, the language of section 306D only authorizes USDA to award grants to the State of Alaska and not directly to other entities. Therefore, we believe that our recommendations are necessary. If USDA wants to make Rural Alaska Village grants to municipalities and Alaska Native villages, it should seek authority to do so as it did to award such grants to the Alaska Native Tribal Health Consortium. Regarding our fourth recommendation that USDA implement a scoring factor that awards points for proposed Native American program projects that address health risks, USDA stated that it would like clarification as to what form of scoring factor would be acceptable to address this recommendation. USDA stated that it would prefer to use its discretionary points under the program’s existing regulations to award additional points to give a higher priority to projects that address a lack of access to safe drinking water and wastewater disposal, and that the agency could implement this change at the start of fiscal year 2019 or sooner. In contrast, USDA stated that changing the program’s regulations to implement the scoring factor could take 18 months or longer. USDA also stated that this approach would only have a programmatic effect in fiscal years when demand for Native American program grant funds exceeds the available funding. Our intent for the recommendation as written is to provide USDA with the flexibility to best determine how to implement it. If USDA has determined that using its discretionary points under the program’s existing regulations gives greater priority to addressing health risks faced by Native American communities, and that such an approach is consistent with applicable law, such an approach could meet the intent of our recommendation. USDA also requested in its written comments that we modify the language of the ninth recommendation aimed at increasing collaboration at the national level by removing reference to increasing national collaboration and that we modify the thirteenth recommendation aimed at increasing regional collaboration by removing reference to the agency’s state offices and regional level collaboration. USDA did not provide a clear rationale for its requested change for either recommendation. We continue to believe that implementing these recommendations, as worded, would help improve collaboration at the national and regional levels. Therefore, we did not modify the language in response to USDA’s comments. In several places in its written comments, USDA stated that our draft either omitted information or contained inaccurate information and requested that we make modifications. Specifically, USDA stated that we omitted statutory language for the Native American program in a few places in the report. In response, we added additional language from and about the Native American program’s authorizing statute in several places. USDA also stated the report is missing information about the scope of some of its programs, including its Technical Assistance and Training program. In response, we added more information about this program, including obligations made to non-profit organizations that work on behalf of tribes. Further, USDA stated that we did not accurately characterize certain activities that USDA conducts under some of its programs, including identifying tribal needs and conducting operations and maintenance. In response, we modified language to reflect additional information about how USDA identifies tribal needs and to indicate that the Native American program is not authorized to fund operations and maintenance. Regarding the Rural Alaska Village Grant program, USDA stated that we did not accurately represent information shared by a USDA official and information about the number of grants made to the Consortium. We revised language attributed to the official and clarified information about the number of grants awarded based on additional information that USDA provided by e-mail after submitting its written comments. In other cases where USDA requested revisions to the draft in its written comments, we did not make suggested changes because they did not align with the scope of our review. Specifically, in addition to its Technical Assistance and Training program, USDA asked that we add information about tribal obligations under its Solid Waste Management program. Since federal agency efforts to fund solid waste management projects are outside the scope of this review, we did not make this revision. In addition, USDA requested that we limit our discussion of Rural Alaska Village Grant awards to fiscal year 2011 and forward. We did not make this change because USDA’s grants to municipalities and Native villages prior to 2011 are directly relevant to our findings and are within the scope of this review. Finally, USDA asked that we edit our description of the findings of a 2010 report to Congress by citing a different report instead. We did not make this change because the original report contained relevant information for our findings. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Agriculture, the Secretary of Commerce, the Secretary of Defense, the Secretary of Health and Human Services, the Secretary of Housing and Urban Development, the Secretary of the Interior, the Administrator of the Environmental Protection Agency, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Anne-Marie Fennell at (202) 512-3841 or fennella@gao.gov or J. Alfredo Gómez at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix X. The objectives of our review were to examine the extent to which the seven federal agencies, as applicable, (1) identified Indian tribes’ drinking water and wastewater infrastructure needs; (2) funded tribal drinking water and wastewater infrastructure projects, including projects to address the most severe sanitation deficiencies; and (3) collaborated to meet Indian tribes’ drinking water and wastewater infrastructure needs. To address these objectives, we reviewed our previous reports, other agency reports, and agency obligations to identify the federal agencies that provide financial or other assistance to Indian tribes for drinking water and wastewater infrastructure. We identified seven agencies, as shown in table 4. We identified the Indian Health Service (IHS), Environmental Protection Agency (EPA), and U.S. Department of Agriculture (USDA) as federal agencies that have drinking water and wastewater infrastructure programs specifically targeted to provide financial assistance for planning and construction to address Indian tribes’ needs. According to IHS documentation, such needs arise from a sanitation deficiency in existing drinking water or wastewater infrastructure (or lack thereof) that can negatively affect public health. In addition, the Department of Housing and Urban Development (HUD), the Department of the Interior’s Bureau of Reclamation, the Department of Commerce’s Economic Development Administration (EDA), and the U.S. Army Corps of Engineers administer programs that may assist tribes with drinking water and wastewater infrastructure planning and construction. The types of assistance these agencies provide vary by program, and each program has its own eligibility requirements and authorities. To determine the extent to which these federal agencies identified Indian tribes’ drinking water and wastewater infrastructure needs, we identified requirements for IHS and EPA to collect and report information on needs, but we did not identify such requirements for the other agencies. We reviewed IHS’s project-level tribal drinking water and wastewater infrastructure needs data from the Sanitation Deficiency System (SDS) for fiscal year 2016, the most recent year of data available at the time of our review. The SDS contains information about proposed drinking water and wastewater infrastructure projects, including each project’s estimated cost. IHS policy directs area staff to invite all federally recognized tribes to identify potential projects each year. Area staff then work with interested tribes to develop projects and enter project information into standard fields in the SDS. As of the end of fiscal year 2016, the SDS included more than 2,000 projects for 373 tribes. We also reviewed IHS’s most recent reports describing tribal drinking water and wastewater needs. In addition, we reviewed information about tribal public drinking water systems reported in EPA’s 2013 Drinking Water Infrastructure Needs Survey and Assessment report. EPA assesses and reports on the nation’s public water systems’ capital improvement needs every 4 years, including needs of tribally owned or operated drinking water systems. For its 2013 report, EPA assessed tribal water system needs by administering a survey to a statistical sample of 306 tribal water systems out of 956 identified tribal public drinking water systems. We assessed the reliability of SDS project-level needs data and information from EPA’s 2013 Drinking Water Infrastructure Needs Survey and Assessment report by reviewing our previous related work regarding the use of these data and documentation from IHS and EPA. We also interviewed IHS and EPA officials involved with identifying tribal water needs from headquarters and all 12 IHS areas and 9 EPA regions that administered the drinking water and clean water set-aside programs, discussing the data and any of its limitations. We tested the data for accuracy and completeness by identifying any duplicate, missing, or invalid records and cross-referencing with relevant datasets. We determined that IHS’s SDS project-level needs data and information from EPA’s 2013 report were sufficiently reliable to provide descriptive information on tribes’ needs for drinking water and wastewater infrastructure projects for this report. Further, we reviewed documentation on the Home Inventory Tracking System (HITS)—IHS’s database containing home-specific information that the agency also uses in administering the Sanitation Facilities Construction program. The information in HITS includes each home’s geographic location and individual sanitation deficiency, and IHS officials said in February 2018 that the system contained a total of 405,986 homes. We also interviewed IHS headquarters and area officials about this system’s contents, uses, and limitations, and we compared this information to the agency’s implementation plan and other documentation for HITS. We identified issues with the information contained in the system related to its completeness (whether it contains the correct number of homes in light of its purpose) and related to the accuracy of homes identified as having no deficiency, as we discuss in the report. These issues were sufficient for us to determine that the number of homes in the system was incomplete and that deficiency level information was not accurate for all homes in the system. As a result, we did not assess the reliability of other information in HITS that was not relevant to our review. We also interviewed officials from the other five agencies regarding any efforts to collect information on tribal drinking water and wastewater infrastructure needs. To determine the extent to which the agencies funded tribal drinking water and wastewater infrastructure projects, we analyzed data from the seven agencies administering programs that provide assistance to tribes for drinking water and wastewater infrastructure—IHS, EPA, USDA, HUD, Reclamation, EDA, and Corps. Specifically, we obtained and analyzed obligations data for drinking water and wastewater projects under programs that are specifically for or available to tribes. Generally, we reviewed each agency’s obligations data for fiscal years 2012 through 2016, the most recent 5 years of data available at the time of our review. Corps provided us with information on obligations for projects that involved tribal drinking water or wastewater infrastructure, but none of these obligations were in fiscal years 2012 through 2016. We assessed the reliability of the other agencies’ data by reviewing our previous related work regarding the use of these data and any available documentation from each agency; interviewing knowledgeable agency officials involved with collecting or analyzing these data; and testing data for accuracy and completeness by identifying any duplicate, missing, or invalid records. We present more details about each agency’s data, any limitations, and how we addressed those limitations below. On the basis of these efforts, we determined that the data obtained from these agencies were sufficiently reliable for our descriptive purposes unless otherwise noted below. IHS. IHS provided us with project-level obligations data from fiscal years 2012 through 2016 for tribal drinking water and wastewater infrastructure projects from its Project Data System. In reviewing these data, we found data reliability issues that posed challenges to accurately reporting IHS’s project obligations separate from other agencies’ contributions to projects, which IHS also tracks in the system. We determined that the project-level obligations data from the Project Data System were not sufficiently reliable for the purposes of this objective. However, we determined that using IHS’s information on allocations to areas for the same time frame would introduce fewer limitations to our reporting. IHS provided us with information from fiscal years 2012 through 2016 on allocations to each of its 12 areas by Sanitation Facilities Program activity (i.e., sanitation deficiencies, new housing, and emergency and special projects). IHS officials stated that the IHS Director of the Division of Sanitation Facilities Construction determines the area allocations amounts annually, and that IHS obligated all of its area allocations each fiscal year. IHS did not separate the area allocations information by drinking water, wastewater, or solid waste projects; therefore, we report total obligations with solid waste projects included. EPA. EPA provided us with project-level obligations data from fiscal years 2012 through 2016 from each of its three tribal-specific programs listed in table 4. EPA uses its Tribal Direct Implementation Nexus system to track project obligations for the Clean Water Indian Set-Aside and Drinking Water Infrastructure Grants Tribal Set-Aside programs, but the agency relies on the State of Alaska to provide similar project-level information for its Alaska Native Villages and Rural Community Water Grant program. In reviewing EPA’s data, we found several duplicate project records. We confirmed the issue with EPA officials and deleted those duplicate records to accurately aggregate EPA’s obligations by fiscal year for our report. USDA. USDA provided us with grant and loan obligations data from fiscal years 2012 through 2016 for all of its programs specifically for or available to tribes from its Community Program Application Processing system. First, we removed solid waste and landfill projects that were indicated as such in the project name. To determine the project obligations for programs specifically for tribes, we included all obligations from USDA’s Native American and Rural Alaska Village Grant programs. USDA also awarded grants and loans to tribes or non-profit organizations working on behalf of tribes from non-tribal specific programs such as from its Water and Waste Disposal program as well as the Section 306C Colonias, Emergency Community Water Assistance Grant, Predevelopment Planning Grants, Special Evaluation Assistance for Rural Communities and Households, and Technical Assistance and Training programs. To determine the project obligations for those programs, we included projects that had an applicant or customer type as a tribe or tribal entity (e.g., an organization working on behalf of a tribe or tribes such as tribal health consortia or tribal utility authorities) and projects that served a population of at least 50 percent tribal users. For these awards, we included the full amount of the award regardless of the percent of tribal users served. HUD. HUD provided us with project-level obligations data from fiscal years 2012 through 2016 for its Indian Community Development Block Grant program from its Performance Tracking Database. We worked with HUD officials to identify projects that included drinking water and wastewater infrastructure and to identify the amount of the obligations used for those purposes to determine HUD’s overall fiscal year project obligations for tribal water infrastructure. Reclamation. Reclamation provided us with project-level obligations data from fiscal years 2012 through 2016 for the tribal portions of authorized water system projects, including projects authorized by enacted Indian water rights settlements. For the Indian water rights settlement project obligations, Reclamation provided both mandatory and discretionary amounts. We included both rural water system projects and Indian water rights settlements projects in reporting Reclamation’s overall fiscal year obligations. EDA. EDA provided us with project-level obligations data from fiscal years 2012 through 2016 for tribal projects funded by its Public Works, Economic Adjustment Assistance, and Planning programs from its Operations Planning and Control System. To determine whether the EDA projects included drinking water or wastewater infrastructure, we reviewed each project’s description or scope of work for mention of a drinking water or wastewater infrastructure component. If we determined that the project included water infrastructure, we included the entire project’s obligation amount for each fiscal year we report. In addition, to determine the extent to which agencies’ funding addressed the most severe sanitation deficiencies, we identified programs that have documented goals in regulation and policy to fund projects that meet these needs, which the programs identify as the absence of safe drinking water or wastewater disposal facilities. These selected programs included IHS’s Sanitation Facilities Construction program, EPA’s clean water set- aside program, and USDA’s Native American program. For these programs, we compared the number of funded projects to address the most severe sanitation deficiencies with the number of funded projects that met other needs for fiscal year 2016. Specifically, for IHS and EPA, we calculated the percentage of projects for each deficiency level that the agencies and other entities selected to fund from the fiscal year 2016 SDS list. For USDA, we reviewed the list of Native American program project obligations in fiscal year 2016 and determined the number of projects where USDA reported the purpose as new, replacement, renovation, or expansion. We also reviewed documentation of the agencies’ project identification and selection methods to determine whether these methods aligned with stated goals. We interviewed IHS and EPA officials from headquarters and all area and regional offices that administer these programs, and USDA officials from headquarters and six state-level offices (see below for state selection information), regarding their administration of these programs. Additionally, we analyzed IHS’s data from the SDS from fiscal years 2005 through 2016 to identify projects that remained unfunded and that were in the SDS for more than 5 years. We did not review the extent to which EPA’s drinking water set- aside program addressed the most severe sanitation deficiencies because EPA regions implement the program using a variety of different processes. During the course of evaluating the extent to which federal agencies have provided funding for tribal drinking water and wastewater infrastructure projects, we identified issues with USDA’s Rural Alaska Village Grant program. We reviewed obligations data in light of the program’s authorizing statute, implementing regulations, and relevant provisions in USDA appropriations acts. USDA provided us with the Rural Alaska Village Grant program’s award amounts for fiscal years 1997 through 2016, and we determined whether the grant recipients were eligible or ineligible at the time of the award. We interviewed agency officials who manage the program and from USDA’s Office of the General Counsel. To determine the extent to which the federal agencies collaborated to meet tribal water needs, we reviewed documentation of national-level collaboration, including federal program and interagency documents, such as national-level memorandums of understanding and interagency agreements. We interviewed headquarters officials from the seven agencies about their interagency collaboration. We compared the agencies’ actions to the key features of interagency collaboration that we have previously identified. We reviewed agencies’ collaboration at the regional level by surveying the seven agencies about their joint actions on activities related to tribal drinking water and wastewater in six states— Alaska, Arizona, California, New York, Oklahoma, and South Dakota— and by conducting a network analysis using the survey responses. We selected agency regional offices within these six states as the unit of analysis because the federal agencies organize their field structures differently, with some using region, district, area, or state offices to work with tribes—we refer to all of these office types as regional offices. We selected the nonprobability sample of six states to include a large percentage of the number of federally recognized tribes, to obtain a range in the total federal obligations to tribes and identified needs of tribes in the SDS, and for geographic diversity. The sample of states is not generalizable, and the results of our work do not apply to all states where Indian tribes are located. However, reviewing federal agency collaboration in these states provides illustrative examples of interagency collaboration within the six selected states, which include about 70 percent of the 573 federally recognized tribes. We compared the agencies’ reported collaboration with a national-level memorandum of understanding that contained commitments for collaborating at the regional level. For a detailed description of our survey methodology and the analysis of our results, see appendix II. We also interviewed federal agency and State of Alaska officials to discuss the extent to which their drinking water and wastewater assistance programs collaborate with other agencies to meet tribal needs in the six selected states. We interviewed, either in person or by telephone, officials from the eight IHS areas, five EPA regions, and six USDA state offices that work with tribes and other agencies in the six states. We conducted site visits from February through April 2017 to three of the six states—Alaska, Arizona, and Oklahoma. During these visits, we met with tribal officials and staff and federal agency officials, and we visited tribal water infrastructure project sites. We selected these states for site visits based on geographic diversity and to obtain a range in the amount of tribal water infrastructure needs identified in the SDS. We met with or interviewed by telephone officials from 22 Indian tribes and representatives from 8 intertribal organizations that represent and work with tribes on water infrastructure issues to obtain their views about the water and wastewater infrastructure assistance that they receive from federal agencies. We judgmentally selected these tribes and organizations to obtain a range in their geographic locations and the amount and variety of federal drinking water and wastewater infrastructure assistance they have received. Our findings are not generalizable to all tribes but provide illustrative examples of input provided by tribal officials. We conducted this performance audit from August 2016 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix describes how we selected the sample and administered the survey, designed the survey questionnaire, and conducted the network analysis for our survey on interagency collaboration regarding tribal drinking water and wastewater infrastructure projects. To determine the extent to which the selected federal agencies have collaborated to meet tribal water needs, we surveyed officials at seven federal agencies: Indian Health Service (IHS), Environmental Protection Agency (EPA), U.S. Department of Agriculture (USDA), Department of Housing and Urban Development (HUD), Economic Development Administration (EDA), Bureau of Reclamation, and the U.S. Army Corps of Engineers. Specifically, we surveyed agency officials in six states: Alaska, Arizona, California, New York, Oklahoma, and South Dakota. Appendix I describes how we selected these agencies and states. The results of this survey are not generalizable beyond these agencies in these states. We reviewed maps of each agency’s regional or state offices and identified and confirmed the offices that work with tribes and other agencies in the six selected states. If one state included multiple regions from the same agency, we administered the survey to officials in all relevant regional offices. In addition, if one agency’s region covered more than one of the selected states, we administered a survey to the agency’s regional office for each state. The federal agencies and regional offices we included in our survey were: Corps divisions: Great Lakes & Ohio River, Northwestern, Pacific Ocean, South Pacific, Southwestern; EDA regions: Austin, Denver, Philadelphia, Seattle; EPA regions: 2, 6, 8, 9, 10 (Alaska Operations Office); HUD regions: Alaska, Eastern Woodlands, Northern Plains, Southern IHS areas: Alaska, California, Great Plains, Nashville, Navajo, Oklahoma City, Phoenix, Tucson; Reclamation regions: Great Plains, Lower Colorado, Mid-Pacific; and USDA state offices: Alaska, Arizona, California, New York, Oklahoma, South Dakota. In Alaska, we also included the Alaska Department of Environmental Conservation as a respondent because the state provides a 25 percent match for two federal water infrastructure programs. We did not include other state agencies because they do not provide a similar match. We also included the Alaska Native Tribal Health Consortium because it administers IHS’s Sanitation Facilities Construction program in Alaska. The practical difficulties of conducting any survey may introduce errors, commonly referred to as non-sampling errors. For example, respondents may have difficulty interpreting a question, they may have limited information to respond to a question, or officials from different agencies may have different recollections regarding the extent of collaboration on a particular project. We sought to minimize the impact of non-sampling error by conducting six pretests of the draft questionnaire with agency officials; five pretests were conducted by telephone and one pretest was conducted in person. We selected officials to cover a range of agencies and locations. During these pretests, we sought to determine whether (1) the questions were clear and unambiguous, (2) terminology was used correctly, (3) the questionnaire did not place an undue burden on agency officials, (4) the information could feasibly be obtained, and (5) the survey was comprehensive and unbiased. We modified the questionnaire in response to these pretests. To further minimize the impact of non- sampling error, we conducted a sensitivity analysis. We customized the questionnaire for each agency regional office so that we asked each office to respond about its collaboration only with the other agencies located in its state. We e-mailed these questionnaires to 46 respondents from May 15 through May 17, 2017, and conducted follow-up as necessary. We received a 100 percent response rate. In the survey, we asked each agency regional office whether it had jointly conducted activities related to tribal drinking water or wastewater projects during the past 3 years with each of the other agencies’ regional offices within the same state. If an agency regional office responded “yes,” we then provided a list of tribal drinking water and wastewater activities and asked the agency regional office if it had jointly conducted any of the listed activities related to tribal drinking water and wastewater infrastructure projects in collaboration with the other agency. The activities included: identifying infrastructure needs, communicating information to tribes about programs that fund projects, planning and designing proposed projects, evaluating proposed projects according to eligibility and scoring criteria, selecting projects to fund, constructing projects, providing technical assistance for operating and maintaining water infrastructure, and negotiating or implementing Indian water rights settlements. We developed the list of activities based on our initial interviews and pretests with agency officials. We next provided a list of collaborative mechanisms. For each of these collaborative mechanisms, we asked the agency regional office if it had used the mechanism when jointly conducting activities in collaboration with the other agency related to tribal drinking water and wastewater infrastructure projects within the same state during the past 3 years. The mechanisms included: state-, regional-, or project-level memorandum of understanding or agreement; interagency agreement to transfer funding; working group, task force, or committee; consulting on project selection; sharing project documents; geographic co-location; shared database or other data sharing; conferences or forums; informal or ad hoc communication; and personnel detailing or sharing. If the agency regional office responded that it had not used one of the listed mechanisms, we asked if it would be beneficial to use that mechanism to collaborate in the future. We identified the list of mechanisms based on our prior work on interagency collaboration and pretests with agency officials. We also asked the agency regional office what factors, if any, helped it to collaborate with the other agency on tribal drinking water and wastewater infrastructure projects in the state and what factors, if any, hindered it from collaborating with the other agency. For both questions, we asked the agency regional office to consider agency policies and procedures, available resources, leadership, personalities, presence of written agreements, and accountability measures. If an agency regional office responded “no” to the initial question of whether it had jointly conducted activities related to tribal drinking water or wastewater projects during the past 3 years with another agency’s regional office, we asked a shorter set of follow-up questions. We provided the list of collaborative mechanisms and asked if it would be beneficial for the agency regional office to use any of the listed mechanisms to collaborate with the other agency on activities related to tribal drinking water and wastewater infrastructure projects in the future in the state. We also asked the agency regional office to describe the factors, if any, that hindered its collaboration with the other agency. To quantify the extent of interagency collaboration during the past 3 years and the potential for future collaboration among the federal agencies we surveyed, we conducted a Network Analysis—a method of analyzing the patterns of interaction among multiple entities. Specifically, we aggregated the survey responses to our questions about drinking water and wastewater activities and collaborative mechanisms for each pair of agencies in all six states. We configured these aggregated data into networks representing the pattern of collaboration among the agencies. We then analyzed these networks to determine how extensively the agencies have collaborated and the extent to which additional future collaboration could be beneficial for them. We also analyzed these networks to assess how the pattern of collaboration varied by state. We describe the steps of our analysis and agency survey responses below. To quantify the extent of collaboration among the federal agencies across the six states during the past 3 years, we aggregated the responses to our survey by agency pair. The seven federal agencies form 21 possible agency pairs. For each agency pair, we combined the first agency’s responses regarding its collaboration with the second agency and the second agency’s responses regarding its collaboration with the first agency. We aggregated the agency pair responses in this way for each of the three measures of collaboration for all six states, specifically: Drinking water and wastewater activities. We calculated the total number of instances in which each agency in a pair reported having worked on an activity with the other agency in that pair during the past 3 years (see column 2 in table 5). We examined this measure to identify the pairs of agencies that collaborated most and least extensively. For example, IHS and EPA reported the highest number of instances of jointly conducting tribal drinking water and wastewater activities across the six states. In contrast, EDA and IHS reported no such instances of collaboration. Use of collaborative mechanisms. We calculated the total number of instances in which each agency in a pair reported having used a mechanism to collaborate with the other agency in that pair during the past 3 years (see column 3 in table 5). We examined this measure to identify the pairs of agencies that collaborated most and least extensively. The pattern of collaboration based on this measure is similar to the pattern based on drinking water and wastewater activities. For example, IHS and EPA also reported the highest number of instances of using specific collaborative mechanisms across the six states. Potential future collaboration. We calculated the total number of instances in which each agency in a pair reported that it would be beneficial to use a mechanism to collaborate with the other agency in that pair in the future (see column 4 in table 5). We compared this measure to the number of mechanisms the agency pairs reported having used during the past 3 years. Each of the agency pairs reported that it would be beneficial to use additional collaborative mechanisms in the future, including those pairs that had reported not collaborating. For example, the agency pairs of EDA-IHS and EDA- Reclamation both reported no instances of using a mechanism to collaborate with each other and both reported multiple instances in which use of a collaborative mechanism would be beneficial in the future. To quantify the potential to increase collaboration among the federal agencies, we configured the agency pair data into two networks. The first network represented recent collaboration among the agencies—the instances in which agencies reported having used a mechanism to collaborate during the past 3 years (based on column 3 in table 5). The second network represented potential future collaboration among the agencies (based on the sum of columns 3 and 4 in table 5). As such, it captures the instances in which agencies reported having used a mechanism to collaborate during the past 3 years plus the instances in which they reported it would be beneficial to use an additional mechanism in the future. Figure 3 shows a graphical illustration of these two networks. In this figure, the circles represent agencies and the lines represent collaboration between the agencies. Specifically, the darkness of the lines indicates the number of mechanisms used by the corresponding pair of agencies. The left side of figure 3 illustrates reported use of collaborative mechanisms during the past 3 years, and the right side of figure 3 illustrates potential future collaboration. The figure shows that overall collaboration would increase if the agencies began using the additional mechanisms that they reported would be beneficial. We quantified the difference between these networks in two ways. First, we calculated the increase in overall collaboration that would occur if agencies began using the additional mechanisms that they reported would be beneficial. Based on this calculation, the number of instances of agencies using collaborative mechanisms would approximately triple. Specifically, agencies reported 403 instances of having used a specific mechanism to collaborate with another agency—this number would increase to 1,249 if agencies began using all of the identified mechanisms that they reported would be beneficial. This difference is shown in figure 3, in which the right side of the figure (potential future collaboration) has a greater number of darker lines connecting the agencies compared with the left side of the figure (recent collaboration). Second, we measured how the relative amount of collaboration for each agency would change if the agencies began using additional mechanisms they reported would be beneficial. To do this, we aggregated the agency pair data for each of the agencies. For the network of recent collaboration, for example, we added (1) the number of instances that each agency reported using a collaborative mechanism with any of the other agencies and (2) the number of instances that any of the other agencies reported using a collaborative mechanism with the first agency. We performed a similar calculation using the agency pair data for the network of potential future collaboration. The analysis shows that the use of collaborative mechanisms during the past 3 years was primarily centered on three agencies (IHS, EPA, and USDA). If all of the agencies began using the additional mechanisms that they reported would be beneficial, however, collaboration would be distributed more evenly across the entire network of agencies. This difference is also shown in figure 3, in which agencies such as HUD, Reclamation, and Corps are connected to other agencies with dashed lines on the left side of the figure (representing less extensive recent collaboration), but with thick lines on the right side of the figure (representing more extensive potential future collaboration). To quantify the extent of variation in collaboration by state, we disaggregated the agency pair data reported in table 5 by each of the states for the three measures of collaboration we asked about in our survey. In particular, tables 6, 7, and 8 show the number of instances in which an agency reported collaborating on drinking water and wastewater infrastructure activities with another agency during the past 3 years (table 6), using collaborative mechanisms with another agency during the past 3 years (table 7), and collaborative mechanisms that would be beneficial to use with another agency in the future (table 8). The totals in the bottom rows of these tables show the extent of collaboration based on these measures by state. Specifically, tables 6 and 7 show that agencies worked together on activities and used collaborative mechanisms most extensively in Alaska and least extensively in New York and Oklahoma. Table 8 shows that agencies in New York and Oklahoma reported the greatest potential for using additional collaborative mechanisms. The totals in the far right columns of these tables show the extent of reported collaboration by activity (table 6), collaborative mechanism (table 7), and the extent of potential future collaboration by collaborative mechanism (table 8). Appendix III: Federal Agency Obligations for Tribal Drinking Water and Wastewater Infrastructure Projects, Fiscal Years 2012 through 2016 According to Environmental Protection Agency officials, obligations listed may not match annual appropriations because the agency may have de-obligated and re-obligated any unexpended obligations to other projects. We determined that the U.S. Department of Agriculture awarded a grant or loan from its non-tribal specific programs for a tribal drinking water or wastewater infrastructure project if the recipient was a tribe or tribal entity (for example, an organization working on behalf of a tribe or tribes such as tribal health consortia or tribal utility authorities) and if the project was to serve a population of at least 50 percent American Indian or Alaska Native. The Economic Development Administration obligated approximately $34,000 for one project in fiscal year 2012, which is not reflected in the table due to rounding. We determined that the Economic Development Administration awarded a grant for a tribal drinking water or wastewater infrastructure project if the project’s description or scope of work mentioned a drinking water or wastewater infrastructure component. Obligations are combined from three programs: Public Works, Economic Adjustment Assistance, and Planning. This appendix contains summaries and photographs of selected tribal drinking water and wastewater infrastructure projects we visited from February through April 2017 in Alaska, Arizona, and Oklahoma. The Native Village of Kivalina, located on a barrier island above the Arctic Circle, is one of approximately 30 communities in Alaska where residents do not have access to safe drinking water and wastewater disposal facilities in their homes. Kivalina, a community of 469 residents, has a community washeteria with washing machines, dryers, and drinking water available for purchase. Like many Alaska Native villages, the harsh winter climate, limited revenue, and isolation create challenges for installing and operating water infrastructure. Erosion due to diminishing sea ice and other factors threaten Kivalina, and the community is considering relocation. As such, infrastructure improvements are limited to small projects consisting of moveable, low-water use infrastructure to provide interim sanitation improvements. In 2015, the Alaska Native Tribal Health Consortium installed a pilot sanitation system in nine homes. This system is called the Portable Alternative Sanitation System and consists of a bathroom sink, rainwater catchment, in-home water treatment, and a separating toilet, where liquid waste is collected separate from solid waste. According to a Consortium report, the system is a low-cost alternative to traditional piped infrastructure. The total cost was $633,000 to design, install, and monitor the system, with the Indian Health Service (IHS) and the Consortium contributing to the project. The Consortium recommended expanding the pilot system to the rest of Kivalina, and a Consortium official said it is working with IHS to test the system in several homes in three other unserved communities in Alaska. As of 2015, more than 30 percent of the nearly 80 homes in the Hopi Village of Shungopavi did not have adequate wastewater disposal. The Sewer Line Q and Dump Stations construction project included installing a sewer main to connect nine homes to sewer service. Previously, some of these homes had discharged wastewater directly onto the ground, and one had a septic system. The project also involved installing three honeybucket dump stations in the village and connecting them to the existing sewer system so that an additional 19 homes could dispose of raw sewage in an environmentally safe manner. According to IHS officials, solid rock a few feet beneath the surface made it challenging and expensive to lay the sewer pipes. The total estimated cost was $666,000, with the Environmental Protection Agency (EPA), the Village of Shungopavi, and IHS contributing to the project. According to IHS officials, the project is expected to be fully constructed in 2018. The Cherokee Nation’s Oaks Wastewater Lagoons project serves an estimated 85 Indian-owned homes in the community of Oaks, Oklahoma. The project consisted of constructing three wastewater lagoons and a spray irrigation field. According to a tribal official, because the previous lagoons leaked into the adjacent creek, local residents who used the creek for swimming, fishing, and other traditional purposes were at high risk of coming in contact with lagoon leakage. The total cost of the project was an estimated $1.22 million, and the U.S. Department of Agriculture, EPA, IHS, the Department of Housing and Urban Development, and the Oklahoma Water Resources Board made contributions to the project. The Cherokee Nation completed the project in 2012 under the provisions of its self-governance compact with IHS. The Sasakwa Rural Water District is owned and operated by the Seminole Nation of Oklahoma and serves 61 households—about 60 percent of which are Indian homes, according to tribal officials. The Drinking Water Pump Station Replacement project involved drilling new wells and constructing a new pump station and treatment system. IHS constructed the original Sasakwa water treatment plant in 1972. According to an IHS project summary, the problems with the prior system included (1) recurring leaks in the water transmission line and distribution system and (2) deterioration of the pump and treatment building and equipment due to weather, vandalism, and poor water quality. The project cost approximately $700,000, with EPA funding the project. According to tribal officials, the replacement water treatment plant became operational in 2014. In addition to the contacts named above, Jeffery D. Malcolm (Assistant Director, in memoriam), Leslie Kaas Pollock (Analyst in Charge), Carolyn S. Blocker, Mark Braza, John Delicath, David Dornisch, Cynthia Grant, Susan Iott, Serena Lo, Elizabeth Luke, Micah McMillan, Jon Melhus, Jeanette Soares, Sara Sullivan, Kiki Theodoropoulos, and Sarah Veale made key contributions to this report.", "summary": "Tens of thousands of American Indians and Alaska Natives do not have safe drinking water or wastewater disposal in their home—referred to as needs arising from a sanitation deficiency—at a higher percentage than the general population, according to IHS. Among other things, IHS assesses homes, either individually or by reviewing public water systems, to determine any deficiencies. Seven agencies, including IHS, EPA, and USDA, have programs that provide drinking water and wastewater infrastructure assistance to Indian tribes. GAO was asked to review federal efforts to provide water infrastructure assistance to Indian tribes. This report examines, among other objectives, the extent to which selected federal agencies (1) identified tribes' drinking water and wastewater infrastructure needs and (2) funded tribal water infrastructure projects, including tribes' most severe sanitation deficiencies. GAO reviewed agency data on tribal needs, analyzed agency funding data for tribal water infrastructure projects, reviewed agency policy documents, and interviewed agency officials and officials from 22 tribes representing different geographic locations. Federal agencies have identified several billion dollars in existing and future tribal drinking water and wastewater infrastructure needs. Specifically, the Indian Health Service (IHS) worked with tribes to identify, in fiscal year 2016, an estimated $3.2 billion in water infrastructure projects to address existing sanitation deficiencies in Indian homes, and the Environmental Protection Agency (EPA) identified an additional $2.4 billion in future tribal drinking water infrastructure needs over the next 20 years. However, IHS could enhance the accuracy of its information about the water infrastructure needs of some Indian homes. In February 2018, the database that IHS uses to track Indian homes' sanitation deficiencies showed that about one-third of the homes (138,700) had no deficiency. However, because the database does not provide IHS with a way to record if a home's deficiency has been assessed, IHS could not determine whether these homes had no deficiency or if they had not yet been assessed to identify a deficiency. IHS officials stated that improving the database's accuracy would be beneficial. By implementing a way to indicate in its database whether these homes' deficiencies have been assessed, IHS could also more efficiently address any deficiencies in these homes. Federal agencies provided about $370 million for tribal drinking water and wastewater infrastructure projects in fiscal year 2016, including some projects to address what the agencies identified as the most severe sanitation deficiencies (i.e., communities that lack safe drinking water or wastewater disposal). IHS and U.S. Department of Agriculture (USDA) policies direct the agencies to fund tribal projects that address these deficiencies. However, agency scoring processes may not always prioritize the projects that address them: IHS assigns points to projects using eight scoring factors, including sanitation deficiency and cost. Based on GAO's review of IHS documents and interviews with agency officials, IHS's process for selecting projects can discourage funding some projects that address the most severe sanitation deficiencies, especially those with a relatively high cost per home. As a result, some projects to serve homes without water infrastructure can remain unfunded for many years. IHS officials said the scoring factors balance a number of interests, and the agency is looking to improve the extent to which it funds projects that address these deficiencies. USDA uses a different set of scoring factors to assign points when evaluating project applications for its tribal water program, including rural population and income levels. However, USDA does not have a scoring factor to assign points to a project based on whether it will serve homes that lack safe drinking water or wastewater disposal, as it does with another program with similar goals. Instead, USDA officials said they use discretionary points to score projects on this basis, but these points may not be awarded at all. As a result, USDA may not have reasonable assurance that it consistently evaluates project applications in a way that aligns with agency policy to fund projects that address the most severe sanitation deficiencies. By IHS reviewing and USDA updating their scoring processes, the agencies could have more assurance that the projects they fund address the most severe sanitation deficiencies in Indian communities. GAO is making 16 recommendations, including that (1) IHS develop a way to indicate in its database if homes' deficiencies have been assessed and (2) IHS and USDA review and update project scoring processes. IHS agreed with these recommendations, and USDA proposed an approach for addressing the recommendation on scoring, as discussed in the report.", "document_type": "gao"}
{"report": "DOD has reported that more than a decade of conflict, budget uncertainty, and reductions in force structure have degraded military readiness; in response, the department has made rebuilding the readiness of the military forces a priority. The 2018 National Defense Strategy emphasizes that restoring and retaining readiness across the entire spectrum of conflict is critical to success in the emerging security environment. Nevertheless, DOD reported readiness of the total military force remains low and has remained so since 2013. Our work has shown that Air Force readiness, in particular, has steadily declined due to a persistent demand for forces, a decline in equipment availability and experienced maintenance personnel, the effect of high deployment rates on units’ ability to conduct needed training, and a smaller inventory of aircraft. DOD has made department-wide progress in developing a plan to rebuild readiness of the military force. In August 2018, we reported that the Office of the Secretary of Defense has developed a Readiness Recovery Framework that the Department is using to guide the military services’ efforts and plans to regularly assess, validate, and monitor readiness recovery. According to officials, the Office of the Secretary of Defense and the military services are currently revising readiness goals and accompanying recovery strategies, metrics, and milestones to align with the 2018 National Defense Strategy and Defense Planning Guidance. However, additional work remains to ensure that the actions DOD is taking will ultimately achieve overall readiness goals. DOD’s readiness rebuilding efforts are occurring in a challenging context that requires the department to make difficult decisions regarding how best to address continuing operational demands while preparing for future challenges. An important aspect of this, across all of the military services, is determining an appropriate balance between maintaining and upgrading legacy weapon system platforms currently in operational use and procuring platforms able to overcome rapidly advancing future threats. Air Force leaders have stated that striking such a balance is exceptionally difficult. While each of the military services, including the Air Force, must grapple with these choices, senior leaders have called for immediate readiness rebuilding with particular focus on aviation. In a memorandum on September 17, 2018, the Secretary of Defense noted that DOD faces shortfalls in aviation squadrons across the force with the aviation inventory and supporting infrastructure suffering from systemic underperformance and unrealized capacity. In order to focus on meeting DOD’s most critical priorities first, the Secretary of Defense emphasized the need to rebuild readiness. As such, the Secretary directed the Air Force to achieve a minimum of 80 percent mission capable rates for fiscal year 2019 for the F-35, F-22, and F-16, while simultaneously reducing these platforms’ operating and maintenance costs every year starting in fiscal year 2019. Our prior work has identified management and readiness challenges in four interrelated areas—personnel, equipment, training, and organization and utilization, and we have made recommendations to help the Air Force address rebuilding the readiness of its existing fleet. The Air Force has reported that manpower shortfalls, particularly among skilled pilots and maintainers, are a primary challenge to rebuilding readiness. As we have previously reported, developing fighter pilots requires a significant investment of time and funding. According to Air Force officials, a fighter pilot requires approximately 5 years of training to be qualified to lead flights, at a cost of between about $3 million to $11 million depending on the specific type of aircraft. In April 2018, we reported that according to Air Force pilot staffing level and authorizations data for fiscal years 2006 through 2017, the Air Force had fewer fighter pilots than authorizations for 11 of those 12 years (see fig. 1). This gap grew from 192 fighter pilots (5 percent of authorizations) in fiscal year 2006, to 1,005 (27 percent) in fiscal year 2017. According to briefing documents prepared by the Air Force, this gap was concentrated among fighter pilots with fewer than 8 years of experience. The Air Force forecasted that the fighter pilot gap will persist over time, even as the Air Force takes steps to train more fighter pilots and improve retention. Air Force officials identified multiple factors that led to low numbers of fighter pilots. For example, the military services trained fewer fighter pilots than targeted over the last decade. In fiscal years 2007 through 2016, the Air Force trained 12 percent fewer new fighter pilots than the targeted amount. In our April 2018 report, we found that the military services had not reevaluated squadron requirements to reflect increased fighter pilot workload and the emergence of unmanned aerial systems. Fighter pilots and squadron leaders from each of the military services we interviewed at the time consistently told us that the fighter pilot occupation has significantly changed in recent years due to changes in fighter aircraft tactics and technology, additional training requirements, and the removal of administrative support positions from squadrons. Without updating squadron requirements to reflect this growing administrative burden on fighter pilots, the currently identified differences between fighter pilot numbers and authorizations may be understated. By contrast, without updating future fighter pilot requirements to take into account changing roles and missions—in particular the increasing role of unmanned aerial systems in combat operations—forecasted fighter pilot gaps may be overstated. In short, we concluded that reevaluating fighter pilot requirements is a key first step to help the military services, including the Air Force, clearly determine the magnitude of the gaps and target strategies to meet their personnel needs. In our April 2018 report, we recommended that the Air Force reevaluate fighter pilot squadron requirements to ensure it has the pilots necessary for all missions. DOD concurred with this recommendation. The Air Force is also trying to manage a shortage of aircraft maintainer personnel—both uniformed personnel and depot civilians. In September 2018, we found that the Air Force reported losing experienced maintainers, either to retirement or to other programs such as the F-35 Lightning II (F-35). For example, we reported that the Air Force’s C-17, which is a long-range, heavy logistics transport aircraft, requires depot modifications to keep it viable, but there was a shortage of depot maintainer personnel due to attrition, inability to retain skilled workers, and hiring freezes. The Air Force has several initiatives underway, including hiring additional maintainer personnel and temporarily transitioning active-duty maintenance units from some legacy aircraft. As of August 2018, the Air Force had requested an increased end strength of 8,000 personnel to fill critical personnel needs in maintenance and pilots. Officials stated that progress was being made in increasing end strength and hiring additional personnel, which should address these challenges. However, according to Air Force officials, it may take several years before newly hired maintainer personnel will have the training and experience they need to improve aircraft availability rates. We have work underway to examine the Air Force’s management of its aircraft maintainer workforce and DOD depot skill gaps and plan to report on these issues over the next 6 months. Air Force aircraft availability has been limited by challenges associated with aging aircraft, maintenance, and supply support. According to the Air Force, the average age of the fleet is 28 years. The average ages of the B-52 strategic bomber and the KC-135 tanker each exceed 50 years, and the Air Force expects to continue to use these aircraft for decades. The Air Force spends billions of dollars each year to sustain its fixed-wing aircraft fleet—comprised of both legacy and new aircraft—which needs expensive logistics support, including maintenance and repair, to meet its availability goals. We reported in September 2018 that from fiscal year 2011 through 2016, the Air Force generally did not meet aircraft availability goals while it continued to accrue increased maintenance costs. Figure 2 summarizes the sustainment challenges we reported that face selected Air Force aircraft. Sustainment challenges are not just an issue for older aircraft, but represent an enduring challenge for the Air Force. The F-35—which is intended to replace a variety of legacy fighter aircraft in the Air Force and more broadly represents the future of tactical aviation for DOD—has projected sustainment costs of over $1 trillion over a 60-year life cycle. In October 2017, we reported that DOD’s projected operating and support costs estimate for the F-35 rose by 24 percent from fiscal year 2012 to fiscal year 2016 and are not fully transparent to the military services. In October 2017, we also reported that the F-35 fleet faced sustainment challenges that pose risks to its ability to meet current and future warfighter readiness requirements. The Air Force planned to procure more than 1,700 F-35 aircraft and, as the largest participant in the F-35 program, its readiness could be disproportionately affected by the sustainment challenges facing this program. In particular, DOD’s capabilities to repair F-35 parts at military depots were 6 years behind schedule, which resulted in average part repair times of 172 days—twice that of the program’s objective. These repair backlogs have contributed to significant F-35 spare parts shortages—from January to August 7, 2017, F-35 aircraft were unable to fly 22 percent of the time because of parts shortages. As a result, the Air Force had generally not met its aircraft availability goals for its fielded F-35 aircraft (See fig. 3 for Air Force personnel performing maintenance on the F-35). Our work has shown that these challenges are largely the result of sustainment plans that do not fully include key requirements or timely and sufficient funding. In our October 2017 report, we recommended, among other things, that DOD revise sustainment plans to ensure that they include the key requirements and decision points needed to fully implement the F-35 sustainment strategy and align funding plans to meet those requirements. DOD concurred with this recommendation and DOD officials report that they are focusing actions and resources toward achieving key production, development and sustainment objectives by 2025. In addition, the conference report accompanying a bill for fiscal year 2019 defense appropriations directed a higher appropriation amount for the Air Force’s aircraft procurement than DOD requested in its budget. This appropriation may create more demand on the already strained sustainment enterprise for which DOD has not always provided timely funding (for example, funding for spare parts). The Air Force has identified the need to ensure a full-spectrum capable force that can successfully perform missions addressing a broad range of current and emerging threats; however, the Air Force has had difficulty training for full spectrum readiness. For more than a decade, the Air Force focused its training on supporting operations in the Middle East, including Iraq and Afghanistan. Commanders established training requirements that they deemed necessary to prepare aircrews to conduct missions in these locations—such as close air support-to-ground forces— limiting training for other missions. In September 2016, based on our analysis of data on the completion of annual training, we found that combat fighter squadrons were generally able to complete mission training requirements for ongoing contingency operations, but were unable to meet annual training requirements across the full range of missions. Wing and squadron commanders we interviewed at the time cited several common limitations related to the challenges discussed in this testimony that affected the ability of their squadrons to complete training across the full range of missions including the maintenance unit’s ability to provide adequate numbers of aircraft for training, adversary air tasking, and manpower shortfalls in the squadrons. We also reported in September 2016 that F-22 and F-35 squadrons faced training range limitations. F-22 squadron commanders told us that the airspace available limits their ability to train for their more complex missions, including offensive counter air and defensive counter air missions. Additionally, the commanders we interviewed at the time for squadrons flying F-22 and F-35 aircraft told us that limits in training range capabilities, such as threat replicators and targets, affected the training completed at smaller regional training ranges, as well as at larger training ranges such as the Utah Test and Training Range and the Nevada Test and Training Range. According to these officials, the training ranges lacked many of the more advanced threat replication systems that can challenge F-35 and F-22 capabilities and provide effective training across their full range of missions. The 2018 National Defense Strategy cites, as the department’s principal priority, the need to prepare for threats from advanced adversaries due to the magnitude of the threat they pose. Further, the Air Force reports that it will confront an increasingly complex security environment in the coming years that will demand a wider range of skill sets and different capabilities than are currently being employed. For example, aircrews may be called upon to conduct missions that require freedom of maneuver in highly-contested air spaces. However, in our September 2016 report, we found that the Air Force has used the same underlying assumptions to establish its annual training requirements from 2012 through 2016, which may not reflect current and emerging training needs. Specifically, the total annual live-fly training sorties by aircraft, the criteria for designating aircrews as experienced or inexperienced, and the mix between live and simulator training remained the same from 2012 through 2016. We concluded that without fully reassessing the assumptions underlying its training requirements, the Air Force could not be certain that its annual training plans are aligned with its stated goals to ensure a full-spectrum capable force that can successfully achieve missions across a broad range of current and emerging threats. We recommended that the Air Force reassess its annual training requirements and make any appropriate adjustments to its future training plans to ensure that its forces can accomplish a full range of missions. The Air Force has a number of efforts under way to study or address some of the factors that limit the ability of fighter squadrons to meet annual training requirements. The Air Force’s management of its limited force structure can also exacerbate some of the problems discussed above, as we found for the F-22 fleet. The F-22, widely regarded as the best air superiority fighter aircraft in the world, is an integral part of the U.S. military’s ability to defeat high-end adversaries (See fig. 4 for an image of the F-22). To meet its assigned air superiority responsibility, the Air Force is to provide the combatant commanders with both mission capable aircraft and pilots who are trained to fly those aircraft in the expected threat environments. However, in July 2018, we found that Air Force organization and utilization of its small fleet of F-22s has reduced its ability to provide these two elements, thereby further limiting this important capability. Specifically, we found that the Air Force’s organization of its small F-22 fleet has not maximized the availability of these 186 aircraft. Availability was constrained by maintenance challenges and unit organization. For example, maintaining the stealth coating on the outside of the F-22 aircraft was time consuming and significantly reduced the aircraft’s availability for missions. Maintenance availability challenges were exacerbated by the Air Force’s decision to organize the F-22 fleet into small units of 18 or 21 aircraft per squadron and one or two squadrons per wing. Traditional fighter wings have three squadrons per wing, with 24 aircraft in each squadron, which creates maintenance efficiencies because people, equipment, and parts can be shared, according to Air Force officials. Further, the Air Force organized F-22 squadrons to operate from a single location. However, it generally deployed only a part of a squadron, and the remaining part struggled to keep aircraft available for missions at home. Larger, traditional Air Force squadrons and deployable units provide a better balance of equipment and personnel, according to service officials. The Air Force had not reassessed the structure of its F-22 fleet since 2010 and may be foregoing opportunities to improve the availability of its small yet critical F-22 fleet, and better support combatant commander air superiority needs in high threat environments. Further, we found that the Air Force’s utilization of its F-22 fleet limited pilot opportunities to train for air superiority missions in high threat environments. To complete the annual training requirements for air superiority missions, F-22 pilots must train almost the entire year. However, F-22 pilots were not meeting their minimum yearly training requirements for air superiority missions, according to Air Force training reports and service officials. Moreover, using F-22s for exercises and operational missions that do not require the F-22’s unique capabilities interrupted pilot training and led to reduced proficiency. For example, F- 22 units were often directed to participate in partnership building exercises. However, during these exercises, F-22 pilots may be restricted from flying the F-22 the way they would fly it in combat—due to security concerns about exposing the F-22’s unique capabilities. These restrictions not only limited the value of the exercises, but also could result in pilots developing bad habits, according to Air Force officials. The Air Force also uses F-22s to support alert missions—that is, a mission that requires certain bases to have jets ready at all times to respond to threats from civil or military aviation. The alert mission does not require the advanced capabilities of the F-22, but we reported that because there are no other operational Air Force fighter squadrons based at the F-22 locations in Alaska and Hawaii, the alert mission fell on the F-22 units. Pilots and aircraft assigned to the alert mission could not be used for any other purposes, limiting opportunities for pilots to enhance air superiority skills. Unless the Air Force takes steps to assess and make necessary adjustments to the current organization and use of its F-22s, F-22 units are likely to continue to experience aircraft availability and pilot training rates that are below what they could be. As a result, the Air Force may incur increased risks in future operations in high threat areas. In July 2018, we recommended that the Air Force reassess its F-22 organizational structure and identify ways to increase F-22 pilot training opportunities for high-end missions to reduce risk to future operations. DOD concurred with both recommendations. In September 2018, the Secretary of the Air Force described the need to grow the number of Air Force squadrons from 312 to 386—a 24 percent increase—between fiscal years 2025 and 2030 in order to meet persistent operational demands and address the challenges identified in the National Defense Strategy. However, the details and costs of such growth are as yet unknown and will have to compete with other military services looking to increase their force structure and major defense capabilities that require recapitalization. For example, over the next three decades, the Navy plans to grow its fleet by nearly 25 percent—at an estimated cost of about $800 billion—and modernizing and maintaining the nation’s nuclear arsenal could cost $1.2 trillion over the same timeframe. All of these investments would need to be made amid a deteriorating national fiscal picture. Even if it grows, the Air Force will be dependent on the force of today for decades to come and will need to stay focused on rebuilding its readiness. Many of the Air Force’s fourth generation fighters will be part of the force structure for the next decade or more, and the Air Force plans to retain the F-22 aircraft until 2060. In addition, the Air Force proposed divesting the A-10 to make budgetary room for more modern aircraft. However, as we reported in August 2016, the Air Force did not fully examine the implications of this course of action and could not demonstrate how it would meet the multiple missions being performed by the aging A-10. Therefore, focusing on rebuilding the existing force will be crucial to positioning the Air Force for the future. While these challenges are particularly acute in the Air Force, the Air Force is not alone among the military services. Given persistently low readiness levels across the military, we have called for a comprehensive readiness rebuilding plan for the entire Department of Defense to guide rebuilding efforts, including setting clear goals and identifying resources required to meet those goals for all services, including the Air Force. In sum, as it plans for the future, the Air Force will need to balance the rebuilding of its existing force with its desire to grow and modernize. We have made a number of recommendations—with which the Air Force have generally concurred with but most have not yet been implemented— that provide a partial roadmap to address important readiness challenges. Implementing our recommendations to reevaluate fighter pilot squadron requirements, revise F-35 sustainment plans, reassess annual training requirements, and examine how the Air Force organizes and utilizes its F- 22 organizational structure are necessary steps to meet current and future needs and can assist the Air Force moving forward. In addition, sustained management attention and continued congressional oversight will be needed to ensure that the Air Force demonstrates progress in addressing its personnel, equipment, training, and organization and utilization challenges. Chairman Sullivan, Ranking Member Kaine, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. If you or your staff have questions about this testimony, please contact John Pendleton, Director, Defense Capabilities and Management at (202) 512-3489 or pendletonj@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Chris Watson, Assistant Director; Nick Cornelisse, Amie Lesser, Shari Nikoo, Michael Silver, Nicole Volchko, and Lillian Yob. Over the past three years, we issued several reports related to Air Force readiness that are cited in this statement. Table 1 summarizes the status of our key recommendations related to Air Force readiness since 2016; a total of 14 recommendations. The Department of Defense (DOD) has implemented 1 of these recommendations. For each of the reports, the specific recommendations and their implementation status are summarized in tables 2 through 7. Report numbers with a C or RC suffix are classified. Report numbers with a SU suffix are sensitive but unclassified. Classified and sensitive but unclassified reports are available to personnel with the proper clearances and need to know, upon request. Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need to Be Clarified. GAO-18-678. Washington, D.C.: September 10, 2018. Military Readiness: Air Force Plans to Replace Aging Personnel Recovery Helicopter Fleet. GAO-18-605. Washington, D.C.: August 16, 2018. Military Aviation Mishaps: DOD Needs to Improve Its Approach for Collecting and Analyzing Data to Manage Risks. GAO-18-586R. Washington, D.C.: August 15, 2018. Military Readiness: Update on DOD’s Progress in Developing a Readiness Rebuilding Plan. GAO-18-441RC. Washington, D.C.: August 10, 2018. (SECRET) Force Structure: F-22 Organization and Utilization Changes Could Improve Aircraft Availability and Pilot Training. GAO-18-190. Washington, D.C.: July 19, 2018. Military Personnel: Collecting Additional Data Could Enhance Pilot Retention Efforts. GAO-18-439. Washington, D.C.: June 21, 2018. Air Force Readiness: Changes to Readiness Reports Could Help Stakeholders Take More Informed Actions. GAO-18-65C. Washington, D.C.: June 18, 2018. (SECRET) Force Structure: Changes to F-22 Organization and Utilization Could Improve Aircraft Availability and Pilot Training. GAO-18-120C. Washington, D.C.: April 27, 2018. (SECRET//NOFORN) Military Readiness: Clear Policy and Reliable Data Would Help DOD Better Manage Service Members’ Time Away from Home. GAO-18-253. Washington, D.C.: April 25, 2018. Warfighter Support: DOD Needs to Share F-35 Operational Lessons Across the Military Services. GAO-18-464R. Washington, D.C.: April 25, 2018. Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need Clarification. GAO-18-146SU. Washington, D.C.: April 25, 2018. Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce Requirements. GAO-18-113. Washington, D.C.: April 11, 2018. Military Aircraft: F-35 Brings Increased Capabilities, but the Marine Corps Needs to Assess Challenges Associated with Operating in the Pacific. GAO-18-79C. Washington, D.C.: March 28, 2018. (SECRET) F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting Readiness and Cost Transparency. GAO-18-75. Washington, D.C.: October 26, 2017. Department of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017. Air Force Training: Further Analysis and Planning Needed to Improve Effectiveness. GAO-16-864. Washington, D.C.: September 19, 2016. Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-841. Washington, D.C.: September 7, 2016. Force Structure: Better Information Needed to Support Air Force A-10 and Other Future Divestment Decisions. GAO-16-816. Washington, D.C.: August 24, 2016. Air Force Training: Further Analysis and Planning Needed to Improve Effectiveness. GAO-16-635SU. Washington, D.C.: August 16, 2016. Force Structure: Better Information Needed to Support Air Force A-10 and Other Future Divestment Decisions. GAO-16-525C. Washington, D.C.: July 12, 2016. (SECRET//NOFORN) Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-534C. Washington, D.C.: June 30, 2016. (SECRET) Air Force: Service Faces Challenges to Rebuilding Readiness. GAO-16-482RC. Washington, D.C.: May 25, 2016. (SECRET) Force Structure: Performance Measures Needed to Better Implement the Recommendations of the National Commission on the Structure of the Air Force. GAO-16-405. Washington, D.C.: May 6, 2016. F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its Central Logistics System. GAO-16-439. Washington, D.C.: April 14, 2016. F-35 Sustainment: Need for Affordable Strategy, Greater Attention to Risks, and Improved Cost Estimates. GAO-14-778. Washington, D.C.: September 23, 2014. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The 2018 National Defense Strategy emphasizes that restoring and retaining readiness across the entire spectrum of conflict is critical to success in the emerging security environment. Air Force readiness has steadily declined primarily due to the persistent demand on a fleet that has aged and decreased in size since the 1990s. The Air Force is working to both rebuild the readiness of its forces and modernize its aging fleet to meet future threats. However, according to the Air Force, its readiness goals will take years to achieve as it continues to be challenged to rebuild readiness amid continued operational demands. This statement provides information on Air Force (1) readiness and management challenges including personnel, equipment, training, and organization and utilization, and (2) plans to grow and modernize its force in the context of readiness recovery across DOD. Also, GAO summarizes recommendations to address these challenges and actions taken by the Air Force. This statement is based on previously published work since 2016 related to Air Force readiness challenges, fighter pilot workforce requirements, weapon sustainment, aviation training, and force structure. GAO's prior work has highlighted that the Air Force faces management and readiness challenges in four interrelated areas: Personnel: The Air Force has reported that pilot and aircraft maintainer shortfalls are a key challenge to rebuilding readiness. GAO found in April 2018 that the Air Force had fewer fighter pilots than authorizations for 11 of 12 years, from fiscal years 2006 through 2017. Even as unmanned aerial systems had become more prevalent and fighter pilot workloads had increased, the Air Force had not reevaluated fighter squadron requirements. GAO recommended that the Air Force reevaluate fighter pilot squadron requirements to ensure it has the pilots necessary for all missions. Equipment: Air Force aircraft availability has been limited by challenges associated with aging aircraft, maintenance, and supply support. GAO reported in September 2018 that, from fiscal year 2011 through 2016, the Air Force generally did not meet availability goals for key aircraft. Further, in October 2017 GAO found F-35 availability was below service expectations and sustainment plans did not include key requirements. GAO recommended that DOD revise F-35 sustainment plans to include requirements and decision points needed to implement the F-35 sustainment strategy. Training: The Air Force has identified the need to ensure its forces can successfully achieve missions to address a broad range of current and emerging threats. However, GAO reported in September 2016 that Air Force combat fighter squadrons did not complete annual training requirements due to aircraft availability and training range limitations, and had used the same underlying assumptions for its annual training requirements from 2012 to 2016. GAO recommended that the Air Force reassess its annual training requirements to ensure its forces can accomplish a full range of missions. Organization and Utilization: Air Force management of its force structure can also exacerbate readiness challenges. GAO found in July 2018 that the Air Force's organization of its small F-22 fleet had not maximized aircraft availability, and that its utilization of F-22s reduced opportunities for pilots to train for missions in high-threat environments. GAO found that unless the Air Force assesses the organization and use of its F-22s, F-22 units are likely to continue to experience aircraft availability and pilot training rates that are below what they could be. GAO recommended that the Air Force reassess its F-22 organizational structure to reduce risk to future operations. Looking to the future, the Air Force will have to balance the rebuilding of its existing force with its desire to grow and modernize. To meet current and future demands, the Air Force has stated that it needs to have more squadrons. However, the costs of such growth are as yet unknown, and will have to compete with other military services looking to increase their force structure and recapitalize their forces. Even with growth, the Air Force would be dependent on the force of today for decades to come and will need to stay focused on rebuilding the readiness of existing forces. Addressing GAO's recommendations are necessary steps to meet current and future needs and can assist the Air Force moving forward. GAO has made 14 recommendations in prior unclassified work described in this statement. DOD generally concurred with most of them and has implemented 1. Continued attention to these recommendations can assist and guide the Air Force moving forward as it seeks to rebuild the readiness of its forces.", "document_type": "gao"}
{"report": "IPIA defines an improper payment as any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. It includes duplicate payments, any payment made to an ineligible recipient, any payment for an ineligible good or service, any payment for a good or service not received (except for such payments where authorized by law), and any payment that does not account for credit for applicable discounts. OMB M-15-02 also provides that when an agency’s review is unable to determine whether a payment was proper as a result of insufficient or lack of documentation, this payment must also be considered an improper payment. IPIA also defines the scope of payments subject to improper payment requirements. Specifically, a payment is any transfer or commitment for future transfer of federal funds—such as cash, securities, loans, loan guarantees, and insurance subsidies—to any nonfederal person or entity that is made by a federal agency, a federal contractor, a federal grantee, or a governmental or other organization administering a federal program or activity. Executive branch agencies are required to take various steps regarding improper payments under IPIA and as directed by OMB M-15-02. The steps include the following: 1. reviewing all programs and activities and identifying those that may be susceptible to significant improper payments (commonly referred to as a risk assessment), 2. developing improper payment estimates for those programs and activities that agency risk assessments, OMB, or statute identifies as being susceptible to significant improper payments, 3. analyzing the root causes of improper payments and developing corrective actions to reduce them, and 4. reporting on the results of addressing the foregoing requirements. Figure 1 illustrates these steps, as well as the major components of conducting an improper payment risk assessment. IPIA requires that agencies conduct improper payment risk assessments for all federal programs and activities at least once every 3 years and identify any program or activity that may be susceptible to significant improper payments. OMB guidance provides that programs that have been determined to be susceptible to significant improper payments and that are already reporting an estimate—or in the process of establishing an estimate—do not have to conduct additional improper payment risk assessments. IPIA defines “significant” improper payments as improper payments in the preceding fiscal year that may have exceeded either (1) 1.5 percent of program outlays and $10 million or (2) $100 million (regardless of the improper payment rate). OMB M-15-02 provides guidance for implementing the IPIA requirements and covers agencies’ responsibilities for improper payment risk assessments, estimation, and reporting. OMB M-15-02 also lists steps that agencies should take when conducting improper payment risk assessments. Agencies must institute a systematic method of reviewing all programs and activities to identify those that may be susceptible to significant improper payments, as defined by IPIA. According to OMB M-15-02, this systematic method could be a quantitative evaluation based on a statistical sample or a qualitative method (e.g., a risk-assessment questionnaire). Prior to fiscal year 2018, at a minimum, agencies were required to take into account nine risk factors—seven specified in IPIA and two in OMB guidance—that are likely to contribute to improper payments, regardless of which method was used by the agency (see table 1). In June 2018, OMB revised its guidance for improper payments in OMB Circular A-123, Appendix C, Requirements for Payment Integrity Improvement (OMB M-18-20). In the revised guidance, OMB no longer directs agencies to consider the two additional risk factors that were included in OMB M-15-02 in their risk assessments. Rather, OMB directs agencies to take into account those risk factors that are likely to contribute to a susceptibility of significant improper payments. The revised guidance also states that beginning in fiscal year 2020, agencies should use quantitative evaluations for programs or activities with outlays exceeding $5 billion. As specified in OMB M-18-20, the end goal of the systematic method of reviewing all programs, whether qualitative or quantitative, is to determine whether a program is susceptible to significant improper payments. Accordingly, OMB M-18-20 states that if a qualitative method is used, it must be designed to accurately determine whether the program is susceptible to significant improper payments. When conducting improper payment risk assessments, each federal agency, unless otherwise specified by OMB Circular A-11, after consultation with OMB, is generally authorized to determine the grouping of programs that most clearly identifies and reports improper payments for the agency. The five programs we reviewed serve a variety of purposes and are administered by various agencies across the federal government. HHS’s Head Start program was established in 1965 to deliver comprehensive educational, social, health, nutritional, and psychological services to low-income families and their children. These services include preschool education, family support, health screenings, and dental care. Head Start was originally aimed at 3- to 5-year-olds. The Head Start program makes grants directly to approximately 1,600 local organizations, including community action agencies, school systems, tribal governments and associations, and for-profit and nonprofit organizations. The Head Start program has several primary eligibility criteria to enroll in the program—including that the child’s family earns income below the federal poverty level; the child’s family is eligible for or, in the absence of child care, would potentially be eligible for public assistance; the child is in foster care; or the child is homeless. Head Start services are to be provided free of charge to eligible families. Prior to fiscal year 2013, HHS reported improper payment estimates for the Head Start program. However, as of fiscal year 2013, HHS, in consultation with its Office of Inspector General (OIG) and with approval from OMB, no longer reports annual improper payment estimates related to the program. According to HHS, Head Start’s fiscal year 2017 outlays were approximately $9.4 billion. Public debt is defined as Treasury-issued securities, primarily consisting of marketable Treasury securities (i.e., bills, notes, and bonds), and a smaller amount of nonmarketable securities, such as savings bonds and special securities issued to state and local governments. A portion is debt held by the public and a portion is debt held by federal government accounts. Debt held by the public represents federal debt held by investors outside of the federal government, including individuals, corporations, state or local governments, the Federal Reserve, and foreign governments. Types of securities held by the public include Treasury bills, notes, and bonds and State and Local Government Series securities. Debt held by the public primarily represents the amount the U.S. government has borrowed from the public to finance cumulative cash deficits. As of September 30, 2017, total debt held by the public was $14.7 trillion. Debt held by federal government accounts (intragovernmental holdings) represents balances of federal government accounts of certain federal agencies that are either authorized or required to invest excess receipts in Treasury securities. As of September 30, 2017, total debt held by federal government accounts was $5.6 trillion. Interest calculations on the public debt differ depending on the types of securities, their associated terms, and average interest rates. According to Treasury, total interest paid on public debt for fiscal year 2017 was approximately $294.8 billion. In February 2009, as part of a broader plan to stabilize the housing market and economy, Treasury established the Making Home Affordable Program to help struggling families avoid possible foreclosure. As part of this plan, Treasury announced a national modification program for first- lien mortgages, the Home Affordable Modification Program (HAMP). The program offered eligible homeowners who are at risk of foreclosure reduced monthly mortgage payments that are more affordable and sustainable over the long term. Homeowners who chose to participate in the program had to show (1) documented financial hardship and (2) an ability to make their monthly mortgage payments after a modification. HAMP works by encouraging participating mortgage servicers to modify mortgages so struggling homeowners can have lower monthly payments and avoid foreclosure. It has specific eligibility requirements for homeowners and includes strict guidelines for servicers. In December 2016, entrance into the Making Home Affordable program expired. However, payments for previously approved participants in HAMP will continue until approximately September 2023. According to Treasury, HAMP’s fiscal year 2017 outlays were approximately $4.1 billion. For improper payment risk assessment purposes, DOJ has five mission- aligned program groups. The Law Enforcement group is the largest in terms of annual outlays and consists of the following five components: 1. the Bureau of Alcohol, Tobacco, Firearms, and Explosives; 2. the Drug Enforcement Administration; 3. the Federal Bureau of Investigation; 4. Offices, Boards, and Divisions; and 5. the United States Marshals Service. According to DOJ, Law Enforcement’s fiscal year 2017 outlays were approximately $11.8 billion. The Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs were authorized by the 2014 Farm Bill to provide farmers with protection against adverse changes in market conditions. Although ARC and PLC are considered two separate programs, they are grouped as one program for the purposes of conducting improper payment risk assessments. The programs are managed by the Commodity Credit Corporation, whose activities are primarily administered by USDA’s Farm Service Agency. Within the ARC program, farmers have the choice of an individual-based option, known as ARC-Individual, or a county-based option, known as ARC-County. Both options provide revenue loss coverage to farmers when the legislative guarantee for a crop exceeds the actual year revenue. PLC program payments are issued to farmers when a crop’s “reference price,” as specified in the 2014 Farm Bill, is in excess of an average price, which is determined at the national level each year for the covered commodities. ARC/PLC statutes and regulations establish a series of eligibility criteria that farmers must meet in order to enroll in the programs. Among other things, to be eligible farmers must produce a certain quantity of at least 1 of the 21 covered commodities, actively engage in the farming process, meet income eligibility limits, and meet certain land conservation requirements. According to USDA, ARC/PLC’s fiscal year 2017 outlays were approximately $9.6 billion. In its fiscal year 2016 qualitative risk assessment, HHS assessed its Head Start program as at low risk of susceptibility to significant improper payments. However, HHS did not have sufficient documentation on how it developed its risk assessments, so we could not determine if the risk assessment process was designed to provide a reasonable basis for making risk determinations. Although HHS did take into account the nine risk factors, among other factors, HHS did not document or effectively demonstrate how each specific risk factor affected Head Start’s susceptibility to significant improper payments. HHS’s improper payment risk assessment template included the nine risk factors, among other factors, and described how the divisions should consider each risk factor. However, HHS did not document how the descriptors or individual risk factors relate to the program’s susceptibility to significant improper payments. Further, although HHS used a risk assessment template to assess each of the risk factors, which included space for the divisions to provide additional information regarding the risk determinations, the division responsible for the Head Start program did not always provide sufficient documentation or support for us to determine how it arrived at its risk determinations for each risk factor. For example, see the following: Eligibility determination: HHS considered the eligibility of initial Head Start payments that HHS made to the initial grantees—local organizations—as low risk. However, HHS did not consider the Head Start eligibility decisions that these organizations made at the subrecipient level—calling into question the reliability of HHS’s risk assessment. In the Head Start program, local organizations, not HHS, make the eligibility determinations for individuals to be enrolled in the program. In addition, local organizations, not HHS, are responsible for maintaining the documentation to substantiate the eligibility of enrollees. HHS did not consider the impact of these determinations in its improper payment risk assessment. Our analysis of improper payment estimates from paymentaccuracy.gov for fiscal years 2016 and 2017 indicates that the inability to authenticate eligibility is one of the largest root causes of improper payments. Audit findings: HHS assigned a low-risk rating for findings from oversight agencies. However, in the risk assessment, it identified nine audit reports that the OIG issued pertaining to Head Start agencies with findings on unallowable costs, enrollment, and misuse of grant funds. According to agency officials, these OIG reports contained findings related to costs and misuse of grant funds that are specific to particular grantees and may not be indicative of widespread programmatic issues. However, HHS did not document the rationale for this assessment. Program management report: HHS assigned a low-risk rating for findings related to program management reports. According to HHS’s Report to Congress on Head Start Monitoring for Fiscal Year 2015, “allowable and allocable costs” was the most commonly cited noncompliance issue in its fiscal reviews of grantees. Specifically, 8.8 percent of grantees included in a fiscal review were found to be noncompliant with regard to allowable and allocable costs. However, HHS did not document whether it considered the impact of noncompliance by grantees in its Head Start risk assessment. According to HHS officials, divisions were required to maintain supporting documentation for their risk assessments, although submission of the related documents along with the risk assessment was not mandatory. HHS officials stated that this policy was orally communicated to the divisions; however, it was not formally documented. Lack of a written policy for the divisions to maintain such information may have contributed to HHS’s inability to provide sufficient supporting documentation for its low risk determinations. HHS’s qualitative risk assessment for Head Start also did not document or effectively demonstrate how the total score for all risk factors led to a determination that the program was not susceptible to significant improper payments. Our analysis of HHS’s risk assessment showed that for several of its risk factors, HHS did not score those factors as low risk. For example, HHS assigned a high-risk rating for three of the nine risk factors: (1) permanency of the program, (2) volume of payments made through the program, and (3) complexity per transaction. HHS’s risk assessment did not document or support how it determined Head Start to overall be at low risk for susceptibility to significant improper payments given the high-risk ratings for certain risk factors. Without supporting documentation, HHS cannot demonstrate, and we cannot determine, if HHS’s low risk determination for Head Start was reasonable. Additionally, based on HHS’s risk assessment scoring template, a program could be considered “high risk” for all nine risk factors, but because of the assigned weight given to each of the nine risk factors, HHS’s final risk calculation would still not determine the program to be at high risk of susceptibility to significant improper payments. According to HHS officials, the agency has procedures to review the improper payment risk assessments that the individual divisions perform; however, these review procedures are not formally documented. HHS officials stated that while no risk assessment has identified all nine risk factors as high risk, if all nine risk factors were identified as high risk by a division, the agency would require supporting documentation from the division for review and could overrule the outcome calculated based on the risk assessment scoring template if necessary. Without documented procedures for this review process, HHS lacks assurance that this process, if applicable, would consistently take place. According to HHS, the fiscal year 2016 improper payment qualitative risk assessment template used for Head Start was designed to calculate an overall risk rating of low, medium, or high based on program management responses to each individual risk factor. However, HHS did not have documentation to demonstrate how it determined the weighting of the risk factors or how the numerical risk level ranges from the risk assessment template related to a program’s susceptibility to significant improper payments. Additionally, HHS did not have documentation demonstrating the basis for its determination that specific risk factors do or do not lead to susceptibility to significant improper payments. HHS officials stated that OMB does not have specific guidance on establishing weights for each risk factor or assigning numerical risk level ranges to determine overall susceptibility to significant improper payments. HHS officials also stated that HHS developed its own numerical risk level ranges based on experience and data from previous risk assessments. When asked for documentation to support its weighting of the various risk factors, HHS officials stated that they did not document this analysis. Without documenting the basis for the assigned weights, HHS cannot demonstrate, and we cannot determine, that its process for determining Head Start’s susceptibility to significant improper payments was reasonable. Federal internal control standards state that management should develop control activities to achieve objectives and respond to risks and implement control activities through policies. As part of these standards, management should clearly document internal controls and other significant events in a manner that allows the documentation to be readily available for examination. Additionally, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness. Further, federal internal control standards state that management should use quality information to achieve the entity’s objectives. As such, to reasonably determine if a program is susceptible to significant improper payments, agencies’ risk assessments would have a logical connection with, or bearing upon, the statutory definition of significant improper payments. Until HHS revises its risk assessment process to help ensure that it results in a reliable assessment, it will be uncertain whether Head Start may be susceptible to significant improper payments and therefore require an estimate of its improper payments. During our agency and program selection process, we found that HHS did not assess many of its programs and activities at least once during the 3- year period from fiscal years 2015 through 2017, as required by IPIA. Although HHS conducted improper payment risk assessments for a total of 71 programs and activities during the 3-year period, based on our analysis of HHS-provided outlay data, HHS did not conduct the required risk assessment for at least 140 programs. For example, HHS did not assess its Block Grants for Prevention and Treatment of Substance Abuse program that had outlays of approximately $1.8 billion in fiscal year 2016. According to HHS officials, HHS has limited resources, so it took a risk-based approach when selecting programs to include in its improper payment risk assessment process. Further, HHS officials stated that HHS was transitioning in fiscal year 2015 to a new risk assessment process. As such, HHS’s procedures directed its divisions to select one program per division for fiscal year 2015 and two programs per division for fiscal years 2016 and 2017. Federal internal control standards state that management should design control activities to achieve objectives and respond to risks and implement control activities through policies. Without properly designed control activities to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years, as required by IPIA, there is an increased risk that HHS may not identify all risk-susceptible programs and activities, resulting in incomplete improper payment estimates. In its fiscal year 2017 qualitative risk assessments, based on fiscal year 2016 outlay data, Treasury assessed its Interest on the Public Debt and HAMP as at low risk of susceptibility to significant improper payments. However, Treasury did not have sufficient documentation for how it developed its risk assessments, so we could not determine if the risk assessment process was designed to provide a reasonable basis for making risk determinations. Although Treasury did take into account the nine risk factors, among other factors, it did not document or effectively demonstrate how each specific risk factor affected the programs’ susceptibility to significant improper payments. Treasury’s risk assessment templates for these programs had 62 questions which required “Yes,” “No,” or “Not applicable” responses. Treasury did not document how each of the 62 questions related to each program’s susceptibility to significant improper payments. Further, the template did not require the bureaus responsible for the Interest on the Public Debt and HAMP risk assessments to provide documentation or support other than a check mark in response to these questions. Without descriptions of how to answer the questions or documentation to support the responses, we could not verify the reasonableness of the Interest on the Public Debt or HAMP improper payment risk assessments. For example, the Interest on the Public Debt program’s risk assessment questionnaire was completed for 11 different payment types under the program. For the TreasuryDirect payment type, Treasury answered “No” to the question, “Are there risks due to a high volume of payments for TreasuryDirect?” Treasury did not provide documentation or other support for how the agency determined that there was no risk for this question. Further, since the template lacked descriptors, it is unclear if responses related to the number of transactions or the dollar amount of transactions. In fiscal year 2016, TreasuryDirect payments totaled almost $300 billion, representing about 7.8 percent of all the federal government outlays. In contrast, Treasury answered “Yes” to this same question for the HAMP program, for which payments were about 1 percent (about $4 billion) of the total payments made by TreasuryDirect. Similarly, in the HAMP risk assessment questionnaire, Treasury answered “No” to the question, “Are payment or payment eligibility decisions made outside the agency?” However, under HAMP, financial institutions, not Treasury, determine whether borrowers are eligible for loan modification through the program. Treasury did not document why a “No” response was appropriate. Treasury’s risk assessments for Interest on the Public Debt and HAMP also did not document or effectively demonstrate how the total scores for all risk factors led to the determinations that the programs were not susceptible to significant improper payments. For example, in its risk assessment, Treasury’s responses indicated several improper payment risks for Interest on the Public Debt, including (1) complexity of administering the payment type, (2) unmitigated risks relying on contractors to perform critical agency operations, and (3) payments being made to incorrect payees or ineligible recipients. Further, based on total payments for the Interest on the Public Debt, Treasury would have to be over 99.97 percent accurate in its payments in order for the activity to not reach the $100 million threshold for significant improper payments. Treasury’s risk assessment did not document or support how it determined Interest on the Public Debt to be at low risk for susceptibility to significant improper payments considering these risks for improper payments. Similarly, Treasury’s responses in its risk assessment questionnaire indicated several improper payment risks for HAMP, including (1) an emphasis on expediting payments, (2) risks resulting from recent changes in agency operations and personnel, (3) complicated criteria for manually computing payments, and (4) a high volume of payments. Treasury’s risk assessment did not document or support how it determined HAMP to be at overall low risk for significant improper payments considering these risks for improper payments. Without supporting documentation, Treasury cannot demonstrate, and we cannot determine, if Treasury’s low risk determinations for Interest on the Public Debt and HAMP were reasonable. Additionally, based on our analysis of Treasury’s risk assessment template, a bureau could identify areas of risk related to each of the nine risk factors for a program, but because of the assigned weights given to each of the nine risk factors, Treasury’s final risk calculation would still not determine the program to be at high risk of susceptibility to significant improper payments. According to Treasury officials, Treasury provides general instructions on how to complete the risk assessment templates, but the bureaus are responsible for assessing the risks. In addition, according to Treasury, the fiscal year 2017 improper payment risk assessment template used for Interest on the Public Debt and HAMP was designed to calculate an overall risk rating of low, medium, or high based on bureau responses to each individual question. However, Treasury did not have documentation to demonstrate how it determined the weighting of the risk factors or the numerical risk level ranges from the template related to the programs’ susceptibility to significant improper payments. Additionally, Treasury did not have documentation demonstrating the basis for its determination that specific risk factors do or do not lead to susceptibility to significant improper payments. According to Treasury officials, Treasury considered the severity of the impact on the program’s improper payments when developing its weights for each question. However, Treasury officials stated that they did not have documentary support for this analysis. Without documenting the basis for the assigned weights, Treasury cannot demonstrate, and we cannot determine, that its process for determining its programs’ susceptibility to significant improper payments was reasonable. Federal internal control standards state that management should develop control activities to achieve objectives and respond to risks and implement control activities through policies. As part of these standards, management should clearly document internal controls and other significant events in a manner that allows the documentation to be readily available for examination. Additionally, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness. Further, federal internal control standards state that management should use quality information to achieve the entity’s objectives. As such, to reasonably determine if a program is susceptible to significant improper payments, agencies’ risk assessments would have a logical connection with, or bearing upon, the statutory definition of significant improper payments. Until Treasury revises its risk assessment process to help ensure that it results in reliable assessments, it will not be certain whether Interest on the Public Debt or HAMP may be susceptible to significant improper payments and therefore require an estimate of improper payments. In its fiscal year 2017 risk assessment, DOJ assessed its Law Enforcement program as at low risk of susceptibility to significant improper payments. However, DOJ did not have sufficient documentation for how it developed its risk assessments, so we could not determine if the risk assessment process was designed to provide a reasonable basis for making risk determinations. Although DOJ conducted a quantitative evaluation as part of its improper payment risk assessment for its Law Enforcement program, the evaluation did not reliably indicate the program’s susceptibility to significant improper payments. Specifically, our analysis of Law Enforcement’s improper payment risk assessment found that the quantitative evaluation’s baseline was largely based on the prior fiscal year’s improper payment amount identified through recovery activities, which may not reliably represent the estimated improper payment amount that the agency incurred. For example, improper payment recovery activities do not include underpayments. DOJ’s qualitative analysis on improper payments also did not document or effectively demonstrate whether the program may be susceptible to significant improper payments. Although DOJ’s risk assessment template did take into account the nine risk factors, among other factors, and descriptors of how the components should consider each risk factor, DOJ did not document or effectively demonstrate how each specific risk factor affected the program’s susceptibility to significant improper payments. Further, although DOJ used a risk assessment template to assess each of the risk factors, which included a voluntary comments section for each risk factor so that components can explain answers or justify the risk ratings, the components frequently left the comment sections blank. As such, DOJ did not always provide sufficient documentation or support for us to determine how the components arrived at their risk determinations for each risk factor. DOJ’s risk assessment for Law Enforcement also did not document or effectively demonstrate how the total score for all risk factors led to the determination that the program was not susceptible to significant improper payments. For example, in its risk assessment, DOJ’s Offices, Boards, and Divisions’ responses indicated risks for contract payments related to (1) changes in funding, authorities, practices, or procedures; (2) results of monitoring activities; (3) results of recapture audit activities; (4) volume and dollar amount of payments; (5) inherent risks; and (6) capability of personnel. DOJ’s risk assessment did not document or support how it determined Law Enforcement to be at low risk for susceptibility to significant improper payments given the identified risks for certain risk factors. Without supporting documentation, DOJ cannot demonstrate, and we cannot determine, if DOJ’s low risk determination for Law Enforcement was reasonable. Additionally, based on our analysis of DOJ’s risk assessment template, a component could identify areas of risk related to each of the nine risk factors, but because of the assigned weight given to each of the nine risk factors, DOJ’s final risk calculation would still not determine the program to be at high risk of susceptibility to significant improper payments. According to DOJ, the fiscal year 2017 improper payment qualitative risk assessment template used for Law Enforcement was designed to calculate an overall risk rating of low, medium, or high based on component responses to each individual risk factor. However, DOJ did not have documentation to demonstrate how it determined the weighting of the risk factors or the numerical risk level ranges from the template related to the program’s susceptibility to significant improper payments. Additionally, DOJ did not have documentation demonstrating the basis for its determination that specific risk factors do or do not lead to susceptibility to significant improper payments. Further, DOJ’s qualitative risk assessment template indicated that the overall risk determination does not relate to the program’s susceptibility to significant improper payments. For example, the template stated that “a risk rating of high risk for the purposes of this assessment does not mean that the payment type is susceptible to significant improper payments but may indicate that additional focus and testing should be placed on that payment type to better estimate the improper payment rate for the payment type.” DOJ officials stated that DOJ held internal discussions and considered the severity of the impact on the program’s improper payments when developing its weights for each risk factor. When asked for supporting documentation, DOJ officials stated that OMB guidance does not direct agencies to demonstrate how the weights for each risk factor or overall risk ratings relate to the definition of significant improper payments. However, without documenting the basis for the assigned weights, DOJ cannot demonstrate, and we cannot determine, that its process for determining Law Enforcement’s susceptibility to significant improper payments was reasonable. Federal internal control standards state that management should develop control activities to achieve objectives and respond to risks and implement control activities through policies. As part of these standards, management should clearly document internal controls and other significant events in a manner that allows the documentation to be readily available for examination. Additionally, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness. Further, although OMB does not direct agencies to demonstrate how the weights for each risk factor or overall ratings relate to the definition of significant improper payments, federal internal control standards state that management should use quality information to achieve the entity’s objectives. As such, to reasonably determine if a program is susceptible to significant improper payments, agencies’ risk assessments would have a logical connection with, or bearing upon, the statutory definition of significant improper payments. Until DOJ revises its risk assessment process to help ensure that it results in a reliable assessment, it will be uncertain whether Law Enforcement may be susceptible to significant improper payments and therefore require an estimate of improper payments. USDA’s fiscal year 2017 improper payment risk assessment for ARC/PLC consisted of a qualitative analysis and a quantitative evaluation. Both assessments determined that the program was not susceptible to significant improper payments. We found that the quantitative evaluation, based on statistical sampling, provided a reasonable basis for USDA’s determination that the program was at low risk for susceptibility to significant improper payments. Specifically, based on its statistical sample, USDA estimated that ARC/PLC’s improper payment rate was 0.73 percent of program outlays with an estimated improper payment amount of $38.6 million. As such, the analysis clearly demonstrated that ARC/PLC did not meet the statutory definition of significant improper payments under IPIA—estimated improper payments that may have exceeded either (1) 1.5 percent of program outlays and $10 million or (2) $100 million (regardless of the improper payment rate). Properly executed improper payment risk assessments are a cornerstone of government-wide efforts to estimate and reduce such payments. Although the qualitative risk assessments we reviewed for HHS, Treasury, and DOJ considered the nine risk factors required by IPIA or directed by OMB, none of them demonstrated how the factors affected a program’s susceptibility to significant improper payments. Additionally, despite the agencies identifying multiple factors as areas of risk in individual program risk assessments, each of the agencies’ overall determinations for the risk assessments we reviewed was “low risk,” and none of the agencies had documentation with which to explain the basis for their assessments. Revising their processes for conducting improper payment risk assessments, including preparing sufficient documentation to support the assessments, would better position HHS, Treasury, and DOJ to demonstrate the reliability of the assessments. Without properly designed risk assessments, the departments will continue to be uncertain whether improper payment estimates should be prepared for most programs we reviewed, potentially affecting the completeness of their improper payment estimates and hampering efforts to reduce improper payments. We are making the following four recommendations—two to HHS, one to Treasury, and one to DOJ: The Secretary of Health and Human Services should revise HHS’s process for conducting improper payment risk assessments for Head Start to help ensure that it results in a reliable assessment of whether the program is susceptible to significant improper payments. This should include preparing sufficient documentation to support its risk assessments. (Recommendation 1) The Secretary of Health and Human Services should revise HHS’s procedures for conducting improper payment risk assessments to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years, as required by IPIA. (Recommendation 2) The Secretary of the Treasury should revise Treasury’s processes for conducting improper payment risk assessments for Interest on the Public Debt and HAMP to help ensure that the processes result in reliable assessments of whether the programs are susceptible to significant improper payments. This should include preparing sufficient documentation to support its risk assessments. (Recommendation 3) The Attorney General should revise DOJ’s process for conducting improper payment risk assessments for Law Enforcement to help ensure that it results in a reliable assessment of whether the program is susceptible to significant improper payments. This should include preparing sufficient documentation to support DOJ’s risk assessments. (Recommendation 4) We provided a draft of this report for comment to OMB, HHS, DOJ, Treasury, and USDA. DOJ and HHS provided written comments, which are reproduced in appendixes II and III, respectively. OMB, HHS, and Treasury provided technical comments, which we incorporated as appropriate. Treasury’s Acting Director of its Risk and Control Group notified us by email that Treasury concurred with the report and recommendation. A USDA management analyst notified us by email that USDA had no comments on the report. In its written comments, HHS stated that it concurs with both recommendations and is committed to reducing improper payments in all of its programs. HHS also described actions it plans to take to address these recommendations, including (1) issuing a written policy directing divisions to maintain supporting documentation for risk assessments, (2) documenting the agency review procedures for risk assessments that the divisions perform and the rationale for assigning weights to the risk factors, and (3) developing an automated program identification process for monitoring and inclusion in risk assessments to help ensure that all programs and activities are reviewed. The actions described by HHS, if implemented effectively, would address our recommendations. In its written comments, DOJ stated that it disagreed with our conclusions and recommendation. DOJ explained that its risk assessment methodology includes a qualitative evaluation and a quantitative analysis, and that it considers the nine risk factors likely to contribute to improper payments. Additionally, DOJ provided an overview of its risk assessment tool and guidance and stated that its methodology includes all steps required by OMB. We acknowledged in the draft report that DOJ did take into account the nine risk factors, among others, as directed by OMB and provided an overview of DOJ’s risk assessment template and process. DOJ stated that it believes that some of our interpretations exceed the risk assessment requirements, and believes that its methodology complies with requirements and adequately demonstrates whether a program may be susceptible to significant improper payments. DOJ stated that the risk factor ratings summarized in its risk assessment provided a clear link of how the individual risk factor ratings support the overall assessed risk of significant improper payments. Further, DOJ stated that the risk assessment tool provides sufficient documentation for the formulas and logic for the risk rating conversions and weight-based summarization of risk factor scoring. We disagree that our interpretations exceed the risk assessment requirements, and we continue to believe that DOJ’s risk assessment did not adequately demonstrate whether a program is or is not susceptible to significant improper payments. We believe that while agencies are not specifically directed to demonstrate how the weights for each risk factor or overall ratings relate to the definition of significant improper payments, management should use quality information to achieve the entity’s objectives as stated in federal internal control standards. As such, to reasonably determine if a program is susceptible to significant improper payments, agencies should have documentation to support how their risk assessments provided a logical connection with, or bearing upon, the statutory definition of significant improper payments. DOJ did not provide sufficient support for how it determined the weighting of the risk factors or the numerical risk level ranges. Because DOJ did not have sufficient documentation for how it developed its risk assessment template, we could not determine if the risk assessment was designed to provide a reasonable basis for the risk determinations. DOJ stated that the report does not accurately portray DOJ’s risk assessment process. Specifically, DOJ stated that we incorrectly reported that DOJ’s quantitative evaluation did not include improper payments related to lack of documentation. Based on the information DOJ provided, we removed the lack of documentation example from our report. DOJ also stated that it was misleading to report that although DOJ’s risk assessment template included a voluntary comments section for each risk factor for components to explain answers or justify risk ratings, the comment sections were frequently left blank. DOJ stated that its components only need to provide a comment when they believe it is necessary to qualify their responses and that obvious answers do not need to be explained. However, as previously noted, DOJ did not provide sufficient documentation or support for us to determine how the components arrived at their risk determinations for each risk factor. Without such documentation, DOJ cannot demonstrate, and we cannot determine, whether DOJ’s assessment for each risk factor was reasonable. Further, DOJ stated that the Offices, Boards, and Divisions example was inaccurate and misleading. DOJ stated that the summary table in its risk assessment questionnaire documented that the risks identified were determined to be low risk and therefore supported the conclusions reached. DOJ also stated that its approach acknowledges that risks exist in every disbursement process and allows process owners to assess the level of risk that exists and determine whether a program may be susceptible to significant improper payments. We disagree that the Offices, Boards, and Divisions example is inaccurate or misleading. Although we recognize that DOJ’s summary table, or scoring template as referred to in the report, documented that the risks identified were determined to be low risk, we do not believe that it provided support for that determination. Specifically, the summary table was populated based on component responses and predetermined weights to calculate an overall risk rating of low, medium, or high; however, DOJ did not provide documentation to demonstrate how it determined the weights of the risk factors or the numerical risk level ranges involved in that calculation. Without documenting the basis for the assigned weights, DOJ cannot demonstrate, and we cannot determine, that its process for determining Law Enforcement’s susceptibility to significant improper payments was reasonable. We continue to believe that our recommendation to DOJ is valid to help ensure that DOJ’s risk assessment reliably results in determining whether Law Enforcement may be susceptible to significant improper payments. We are sending copies of this report to the appropriate congressional committees, the Director of the Office of Management and Budget, the Secretary of Agriculture, the Secretary of Health and Human Services, the Secretary of the Treasury, the Acting Attorney General, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines the extent to which certain federal agencies’ improper payment risk assessments for selected programs provided a reasonable basis for determining susceptibility to significant improper payments. To address our objective, we reviewed improper payment risk assessment requirements in the Improper Payments Information Act of 2002, as amended (IPIA), and the related guidance in Office of Management and Budget (OMB) Circular A-123, Appendix C, Requirements for Effective Estimation and Remediation of Improper Payments (OMB M-15-02). We analyzed this statute and guidance to identify key criteria that agencies must meet when conducting improper payment risk assessments. IPIA identifies seven risk factors and OMB guidance includes two additional risk factors that agencies must consider, at a minimum, in their improper payment risk assessments to determine susceptibility to significant improper payments. IPIA also directs agencies to conduct risk assessments for all programs and activities at least once every 3 years. We also reviewed relevant internal control standards to determine the relevant processes and procedures needed to help ensure that agencies conduct effective improper payment risk assessments to determine the susceptibility to significant improper payments. For this objective, we selected a nongeneralizable sample of 4 agencies and five programs to review. To select the agencies, we considered data for the 24 agencies subject to the Chief Financial Officers Act of 1990 (CFO Act). Specifically, we considered the timing of the agencies’ improper payment risk assessments, findings reported by the agencies’ inspectors general (IG), the number of programs and activities for which the agencies reported improper payment estimates for fiscal year 2017, the types of programs and activities that the agencies administered, and agency gross outlays in fiscal year 2017. To ensure we were including agencies that had most recently conducted improper payment risk assessments, we limited our selection to agencies that conducted improper payment risk assessments for any programs or activities in fiscal year 2017. In order to avoid duplicate efforts, we also eliminated agencies that reported IG findings related to risk assessments. We then selected a mix of agencies with and without improper payment estimates for fiscal year 2017, and ultimately selected 4 agencies based primarily on their fiscal year 2017 outlays for programs determined to be not susceptible to improper payments. Specifically, we selected one agency that did not report any improper payment estimates, one agency that reported a few improper payment estimates (for three or fewer programs or activities), and one agency that reported several improper payment estimates (for five or more programs or activities). We also selected one agency that administered eligibility-based programs in fiscal year 2017 because of the unique application and approval processes generally associated with eligibility determinations and their increased risk of improper payments. We then selected up to two programs or activities at each agency, for a total of five programs. To facilitate our program selection, we requested a listing of all programs and activities at the selected agencies that underwent a risk assessment in fiscal years 2015 through 2017 (the most recent 3-year period at the time of our review) along with the gross outlay amounts associated with these programs and activities. Through our selection process, we noted that the Department of Health and Human Services (HHS) did not assess at least 140 of its programs and activities in the 3-year period from fiscal years 2015 through 2017, and therefore our program selection for HHS was limited to approximately 70 programs or activities. To select programs, we considered outlay data, the timing of the most recent improper payment risk assessment conducted for each program or activity, and whether eligibility determinations were required for payments under each program or activity. Our selection was primarily based on the size of program and activity gross outlays reported for fiscal year 2017. We focused on outlays because the overall impact of any issues identified with an agency’s risk assessment process may be greater for programs and activities with higher gross outlays, as a higher volume of payments or higher payment amounts could potentially involve higher improper payments. Based on these data, we selected five programs for review. Our findings are limited to the five selected programs and cannot be generalized to all programs and activities at the 24 CFO Act agencies. The agencies and relevant programs selected for review are shown in table 3. We interviewed officials at the selected agencies on their processes for conducting improper payment risk assessments and reviewed documented policies and procedures. We obtained the most recent improper payment risk assessments that the agencies conducted on the selected programs during the latest 3-year period at the time of our review (fiscal years 2015 through 2017). We then analyzed those risk assessments against relevant IPIA requirements, OMB guidance, and internal control standards to determine whether the agencies had evaluated the appropriate risk factors for improper payments, appropriately considered those risk factors in their risk assessments, and provided a reasonable basis for the risk determination. For any agencies that did not adhere to the improper payment risk assessment requirements, lacked supporting documentation for their risk assessments, or did not provide a reasonable basis for the risk determinations, we interviewed appropriate agency officials to determine the reasons they did not. We also interviewed OMB staff regarding their roles in developing risk assessment guidance. We conducted this performance audit from December 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Matthew Valenta (Assistant Director), Stephanie Adams (Auditor in Charge), Marcia Carlsen, Pat Frey, Gina Hoover, Diana Lee, Zhen Li, and Charles Varga made key contributions to this report.", "summary": "Improper payments are a long-standing problem in the federal government, estimated at almost $141 billion for fiscal year 2017. Agencies are required to perform risk assessments to identify programs that may be susceptible to significant improper payments. GAO was asked to review federal agencies' improper payment risk assessments. This report examines the extent to which certain agencies' improper payment risk assessments for selected programs provided a reasonable basis for determining their susceptibility to significant improper payments. GAO analyzed the most recent risk assessments, from 2015 through 2017, for the following five programs: USDA's Agriculture Risk Coverage and Price Loss Coverage programs; HHS's Head Start; DOJ's Law Enforcement; and Treasury's Interest on the Public Debt and Home Affordable Modification Program. GAO selected these programs, focusing on programs that recently underwent a risk assessment and size of programs' gross outlays—which totaled about $330 billion in fiscal year 2017 for the five programs GAO selected. The Improper Payments Information Act of 2002, as amended (IPIA), defines “significant” improper payments as improper payments in the preceding fiscal year that may have exceeded either (1) 1.5 percent of program outlays and $10 million or (2) $100 million (regardless of the improper payment rate). GAO found that the Departments of Health and Human Services (HHS), the Treasury (Treasury), Justice (DOJ), and Agriculture (USDA) assessed the five programs GAO selected for review as at low risk for susceptibility to significant improper payments; however, HHS, Treasury, and DOJ lacked sufficient documentation to assess the extent to which their risk assessments provided a reasonable basis for their risk determinations. On the other hand, USDA's quantitative risk assessment of its program's susceptibility to significant improper payments provided a reasonable basis for its low-risk determination. Although HHS, Treasury, and DOJ considered, among other factors, the nine risk factors from IPIA and Office of Management and Budget guidance, they did not document or effectively demonstrate how these factors affected their programs' susceptibility to significant improper payments. These programs' risk assessments did not contain sufficient documentation to determine how the agencies arrived at their risk determinations for each risk factor, or how the total scores for all risk factors led to low-risk determinations. For example, HHS determined that its Head Start program was at high risk for several risk factors—including complexity per transaction and volume of payments—but did not document how these high-risk ratings informed its overall determination that Head Start was not susceptible to significant improper payments. Further, the agencies did not have documentation to demonstrate how they determined the weighting of each risk factor or the risk level ranges from the risk assessment templates as they relate to the programs' susceptibility to significant improper payments. For example, based on GAO's analysis of Treasury's risk assessment template, the agency could identify areas of risk related to each of the nine risk factors. But because of the assigned weights given to each risk factor, Treasury's final risk calculation would still not determine the program to be at high risk of susceptibility to significant improper payments. Without documenting the basis for the assigned weights, Treasury cannot demonstrate, and GAO cannot determine, that its process for determining its programs' susceptibility to significant improper payments was reasonable. Until HHS, Treasury, and DOJ revise their risk assessment processes to help ensure that they result in reliable assessments, they cannot be certain whether their programs are susceptible to significant improper payments and therefore whether they are required to estimate the amount of improper payments. GAO also found that HHS did not assess many of its programs and activities at least once during the 3-year period from fiscal years 2015 through 2017, as required by IPIA. Based on the analysis of HHS information, GAO identified at least 140 programs or activities that were not assessed during the 3-year period. When not all eligible programs are reviewed as required, there is an increased risk that the agency may not identify all risk-susceptible programs and activities, resulting in incomplete improper payment estimates. GAO recommends that Treasury, DOJ, and HHS revise their improper payment risk assessment processes, and that HHS revise its procedures to help ensure that all programs are assessed at least once every 3 years. In their responses, Treasury and HHS agreed with the recommendations, and DOJ disagreed with GAO's recommendation. GAO continues to believe that the recommendation is valid, as discussed in the report.", "document_type": "gao"}
{"report": "Historically, patient health information has been scattered across paper records kept by many different caregivers in many different locations, making it difficult for a clinician to access all of a patient’s health information at the time of care. Lacking access to these critical data, a clinician may be challenged in making the most informed decisions on treatment options, potentially putting the patient’s health at risk. The use of technology to electronically collect, store, retrieve, and transfer clinical, administrative, and financial health information has the potential to improve the quality and efficiency of health care. Electronic health records are particularly crucial for optimizing the health care provided to military personnel and veterans. While in active military status and later as veterans, many DOD and VA personnel, along with their family members, tend to be highly mobile and may have health records residing at multiple medical facilities within and outside the United States. VA and DOD operate separate electronic health record systems that they rely on to create and manage patient health information. In particular, VA currently uses its integrated medical information system—VistA—which was developed in-house by the department’s clinicians and IT personnel and has been in operation since the early 1980s. Over the last several decades, VistA has evolved into a technically complex system comprised of about 170 modules that support health care delivery at 170 VA Medical Centers and over 1,200 outpatient sites. In addition, customization of VistA, such as changes to the modules by the various medical facilities, has resulted in about 130 versions of the system—referred to as instances. For its part, DOD relies on its Armed Forces Health Longitudinal Technology Application (AHLTA), which comprises multiple legacy medical information systems that were developed from commercial software products and customized for specific uses. For example, the Composite Health Care System (CHCS), which was formerly DOD’s primary health information system, is used to capture information related to pharmacy, radiology, and laboratory order management. In addition, the department uses Essentris (also called the Clinical Information System), a commercial health information system customized to support inpatient treatment at military medical facilities. In July 2015, DOD awarded a contract for a new commercial electronic health record system to be developed by the Cerner Corporation. Known as MHS GENESIS, this system is intended to replace DOD’s existing AHLTA system. The transition to MHS GENESIS began in February 2017 and implementation is expected to be complete throughout the department in 2022. The sharing of health information among organizations is especially important because the health care system is highly fragmented, with care and services provided in multiple settings, such as physician offices and hospitals, that may not be able to coordinate patient medical care records. Thus, a means for sharing information among providers, such as between DOD’s and VA’s health care systems, is by achieving interoperability. The Office of the National Coordinator for Health IT, within the Department of Health and Human Services, has issued guidance, describing interoperability as: the ability of systems to exchange electronic health information and the ability to use the electronic health information that has been exchanged from other systems without special effort on the part of the user. Similarly, the National Defense Authorization Act for Fiscal Year 2014 defines interoperability, per its use in the provision governing VA’s and DOD’s electronic health records, as “the ability of different electronic health records systems or software to meaningfully exchange information in real time and provide useful results to one or more systems.” Thus, in these contexts, interoperability allows patients’ electronic health information to be available from provider to provider, regardless of where the information originated. Achieving interoperability depends on, among other things, the use of agreed-upon health data standards to ensure that information can be shared and used. If electronic health records conform to interoperability standards, they potentially can be created, managed, and consulted by authorized clinicians and staff across more than one health care organization, thus providing patients and their caregivers the information needed for optimal care. Information that is electronically exchanged from one provider to another must adhere to the same standards in order to be interpreted and used in electronic health records, thereby permitting interoperability. In the health IT field, standards may govern areas ranging from technical issues, such as file types and interchange systems, to content issues, such as medical terminology. On a national level, the Office of the National Coordinator has been assigned responsibility for identifying health data standards and technical specifications for electronic health record technology and overseeing the certification of this technology. In addition to exchanging the information, systems must be able to use the information that is exchanged. Thus, if used in a way that improves providers’ and patients’ access to critical information, electronic health record technology has the potential to improve the quality of care that patients receive and to reduce health care costs. For example, with interoperability, medical providers have the ability to query data from other sources while managing chronically ill patients, regardless of geography or the network on which the data reside. Since 1998, DOD and VA have relied on a patchwork of initiatives involving their health information systems to exchange information and increase electronic health record interoperability. These have included initiatives to share viewable data in existing (legacy) systems; link and share computable data between the departments’ updated health data repositories; develop a virtual lifetime electronic health record to enable private sector interoperability; implement IT capabilities for the first joint federal health care center; and jointly develop a single integrated system. Table 1 provides a brief description of the history of these various initiatives. In addition to the initiatives mentioned in table 1, DOD and VA previously responded to provisions in the National Defense Authorization Act for Fiscal Year 2008 directing the departments to jointly develop and implement fully interoperable electronic health record systems or capabilities in 2009. The act also called for the departments to set up the Interagency Program Office to be a single point of accountability for their efforts to implement these systems or capabilities by the September 30, 2009, deadline. The Interagency Program Office has been involved in the various approaches taken by VA and DOD to increase health information interoperability and modernize their respective electronic health record systems. These approaches have included development of the Virtual Lifetime Electronic Record (VLER) and a new, common integrated electronic health record (iEHR) system. However, although the Interagency Program Office has led efforts to identify data standards that are critical to interoperability between systems, the office has not been effectively positioned to be the single point of accountability as called for in the National Defense Authorization Act for Fiscal Year 2008. Moreover, the future role of the office with respect to VA’s current electronic health record modernization program is uncertain. Although VA and DOD took steps to set up the Interagency Program Office, the office was not positioned to be the single point of accountability for the departments’ efforts to achieve electronic health record interoperability by September 30, 2009. When we first reported in July 2008 on its establishment, VA and DOD’s efforts to set up the office were still in their early stages. Leadership positions in the office were not yet permanently filled, staffing was not complete, and facilities to house the office had not been designated. Further, the implementation plan for setting up the office was in draft and, although the plan included schedules and milestones, the dates for several activities (such as implementing a capability to share immunization records) had not yet been determined, even though all capabilities were to be achieved by September 2009. We concluded that without a fully established program office and a finalized implementation plan with set milestones, the departments could be challenged in meeting the required date for achieving interoperability. Accordingly, we recommended that the departments give priority to fully establishing the office by putting in place permanent leadership and staff, as well as finalizing the draft implementation plan. Both departments agreed with this recommendation. We later reported in January 2009 that VA and DOD had continued to take steps to set up the Interagency Program Office. For example, the departments had developed descriptions for key positions within the office. In addition, the departments had developed a document that depicted the Interagency Program Office’s organizational structure; they also had approved a program office charter to describe, among other things, the mission and functions of the office. However, we pointed out that VA and DOD had not yet fully executed their plan to set up the office. For example, among other activities, they had not filled key positions for the Director and Deputy Director, or for 22 of 30 other positions identified for the office. Our report stressed that, in the continued absence of a fully established Interagency Program Office, the departments would remain ineffectively positioned to assure that interoperable electronic health records and capabilities would be achieved by the required date. Thus, we recommended that the departments develop results-oriented performance goals and measures to be used as the basis for reporting interoperability progress. VA and DOD agreed with our recommendation. Nevertheless, in a subsequent July 2009 report, we noted that the Interagency Program Office was not effectively positioned to function as a single point of accountability for the implementation of fully interoperable electronic health record systems or capabilities between VA and DOD. While the departments had made progress in setting up the office by hiring additional staff, they continued to fill key leadership positions on an interim basis. Further, while the office had begun to demonstrate responsibilities outlined in its charter, it was not yet fulfilling key IT management responsibilities in the areas of performance measurement (as we previously recommended), project planning, and scheduling, which were essential to establishing the office as a single point of accountability for the departments’ interoperability efforts. Thus, we recommended that the departments improve the management of their interoperability efforts by developing a project plan and a complete and detailed integrated master schedule. VA and DOD stated that they agreed with this recommendation. In our January 2010 final report in response to the National Defense Authorization Act for Fiscal Year 2008, we noted that VA and DOD officials believed they had satisfied the act’s September 30, 2009, requirement for full interoperability by meeting specific interoperability- related objectives that the departments had established. These objectives included: refine social history data, share physical exam data, and demonstrate initial document scanning between the departments. Additionally, the departments had made progress in setting up their Interagency Program Office by hiring additional staff, including a permanent director. In addition, consistent with our recommendations in the three previously mentioned reports, the office had begun to demonstrate responsibilities outlined in its charter in the areas of scheduling, planning, and performance measurement. Nevertheless, the office’s efforts in these areas did not fully satisfy the recommendations and were incomplete. Specifically, the office did not have a schedule that included information about tasks, resource needs, or relationships between tasks associated with ongoing activities to increase interoperability. Also, key IT management responsibilities in the areas of planning and performance measurement remained incomplete. We reiterated that, by not having fulfilled key management responsibilities, as we had previously recommended, the Interagency Program Office continued to not be positioned to function as a single point of accountability for the delivery of the future interoperable capabilities that the departments were planning. Although the Interagency Program Office charter named the office as the single point of accountability for the initiative, the office did not have key plans to define and guide the effort. In April 2009, the President announced that VA and DOD would work together to define and build VLER to streamline the transition of electronic medical, benefits, and administrative information between the two departments. VLER was intended to enable access to all electronic records for service members as they transition from military to veteran status, and throughout their lives. Further, the initiative was to expand the departments’ health information sharing capabilities by enabling access to private sector health data. Shortly after the April 2009 announcement, VA, DOD, and the Interagency Program Office began working to define and plan for the VLER initiative. Further, the office was rechartered in September 2009 and named as the single point of accountability for the coordination and oversight of jointly approved IT projects, data, and information sharing activities, including VLER. In our February 2011 report on the departments’ efforts to address their common health IT needs, we noted that, among other things, the Interagency Program Office had not developed an approved integrated master schedule, master program plan, or performance metrics for the VLER initiative, as outlined in the office’s charter. We noted that if the departments did not address these issues, their ability to effectively deliver capabilities to support their joint health IT needs would be uncertain. Thus, we recommended that the Secretaries of VA and DOD strengthen their efforts to establish VLER by developing plans that would include scope definition, cost and schedule estimation, and project plan documentation and approval. Although the departments stated they agreed with this recommendation, they did not implement it. The Interagency Program Office was assigned responsibility for the development of an electronic health record system that VA and DOD were to share. However, the departments did not provide the office with control over the resources (i.e., funds and staff) it needed to facilitate effective collaboration. In March 2011, the Secretaries of VA and DOD committed the two departments to developing the iEHR system, and in May 2012 announced their goal of implementing it across the departments by 2017. To oversee this new effort, in October 2011, VA and DOD re-chartered the Interagency Program Office to give it increased authority, expanded responsibilities, and increased staffing levels for leading the integrated system effort. The new charter also gave the office responsibility for program planning and budgeting, acquisition and development, and implementation of clinical capabilities. However, in February 2013, the Secretaries of VA and DOD announced that they would not continue with their joint development of a single electronic health record system. In February 2014, we reported on the departments’ decision to abandon their plans for iEHR. Specifically, we reported that VA and DOD had not addressed management barriers to effective collaboration on their joint health IT efforts. For example, the Interagency Program Office was intended to better position the departments to collaborate, but the departments had not implemented the office in a manner consistent with effective collaboration. Specifically, the Interagency Program Office lacked effective control over essential resources such as funding and staffing. In addition, decisions by the departments had diffused responsibility for achieving integrated health records, potentially undermining the office’s intended role as the single point of accountability. We concluded that providing the Interagency Program Office with control over essential resources and clearer lines of authority would better position it for effective collaboration. Further, we recommended that VA and DOD better position the office to function as the single point of accountability for achieving interoperability between the departments’ electronic health record systems by ensuring that the office has authority (1) over dedicated resources (e.g., budget and staff), (2) to develop interagency processes, and (3) to make decisions over the departments’ interoperability efforts. Although VA and DOD stated that they agreed with this recommendation, they did not implement it. In light of the departments’ not having implemented a solution that allowed for seamless electronic sharing of medical health care data, the National Defense Authorization Act for Fiscal Year 2014 included requirements pertaining to the implementation, design, and planning for interoperability between VA and DOD’s separate electronic health record systems. Among other things, the departments were each directed to (1) ensure that all health care data contained in VA’s VistA and DOD’s AHLTA systems complied with national standards and were computable in real time by October 1, 2014, and (2) deploy modernized electronic health record software to support clinicians while ensuring full standards- based interoperability by December 31, 2016. In August 2015, we reported that VA and DOD, with guidance from the Interagency Program Office, had taken actions to increase interoperability between their electronic health record systems. Among other things, the departments had initiated work focused on near-term objectives, including standardizing their existing health data and making them viewable by both departments’ clinicians in an integrated format. The departments also developed longer-term plans to modernize their respective electronic health record systems. For its part, the Interagency Program Office issued guidance outlining the technical approach for achieving interoperability between the departments’ systems. However, even with the actions taken, VA and DOD did not certify by the October 1, 2014, deadline established in the National Defense Authorization Act for Fiscal Year 2014 for compliance with national data standards that all health care data in their systems complied with national standards and were computable in real time. We also reported that the departments’ system modernization plans identified a number of key activities to be implemented beyond December 31, 2016—the deadline established in the act for the two departments to deploy modernized electronic health record software to support clinicians while ensuring full standards-based interoperability. Specifically, DOD had issued plans and announced the contract award for acquiring a modernized system to include interoperability capabilities across military operations. VA had issued plans describing an incremental approach to modernizing its existing electronic health records system. These plans—if implemented as described—indicated that deployment of the new systems with interoperability capabilities would not be completed across the departments until after 2018. With regard to its role, the Interagency Program Office had taken steps to develop process metrics intended to monitor progress related to the data standardization and exchange of health information consistent with its responsibilities. For example, it had issued guidance that calls for tracking metrics, such as the percentage of data domains within the departments’ current health information systems that are mapped to national standards. However, the office had not yet specified outcome-oriented metrics and established related goals that are important to gauging the impact that interoperability capabilities have on improving health care services for shared patients. As a result, we recommended that VA and DOD, working with the Interagency Program Office, take actions to establish a time frame for identifying outcome-oriented metrics, define goals to provide a basis for assessing and reporting on the status of interoperability-related activities and the extent to which interoperability is being achieved by the departments’ modernized electronic health record systems, and update Interagency Program Office guidance to reflect the metrics and goals identified. Subsequently, we reported that VA and DOD had certified in April 2016 that all health care data in their systems complied with national standards and were computable in real time. However, VA acknowledged that it did not expect to complete a number of key activities related to its electronic health record system until sometime after the December 31, 2016, statutory deadline for deploying modernized electronic health record software with interoperability. Further, in following up on implementation of the recommendations in our August 2015 report, we found that VA, DOD, and the Interagency Program Office had addressed the recommendations in full by updating guidance to include goals and objectives and an approach to developing metrics that would improve the departments’ ability to report on the status of interoperability activities. In June 2017, the former VA Secretary announced a significant shift in the department’s approach to modernizing the department’s electronic health record system. Specifically, rather than continue to use VistA, the Secretary stated that the department planned to acquire the same Cerner electronic health record system that DOD has been acquiring. Accordingly, the department awarded a contract to Cerner in May 2018 for a maximum of $10 billion over 10 years. Cerner is to replace VistA with a commercial electronic health record system. This new system is to support a broad range of health care functions that include, for example, acute care, clinical decision support, dental care, and emergency medicine. When implemented, the new system will be expected to provide access to authoritative clinical data sources and become the authoritative source of clinical data to support improved health, patient safety, and quality of care provided by VA. Deployment of the new electronic health record system at three initial sites is planned for within 18 months of October 1, 2018, with a phased implementation of the remaining sites over the next decade. Each VA medical facility is expected to continue using VistA until the new system has been deployed at that location. As we testified in June 2018, VA has taken steps to establish a program management office and has drafted a structure for technology, functional, and joint governance of the electronic health record implementation. Specifically, in January 2018, the former VA Secretary established the Electronic Health Record Modernization (EHRM) program office that reports directly to the VA Deputy Secretary. Further, VA has drafted a memorandum that describes the role of governance bodies within VA, as well as governance intended to facilitate coordination between the department and DOD. According to EHRM program documentation, VA is in the process of establishing a Functional Governance Board, a Technical Governance Board, and a Governance Integration Board comprised of program officials intended to provide guidance and coordinate with DOD, as appropriate. Further, a joint governance structure between VA and DOD has been proposed that would be expected to leverage existing joint governance facilitated by the Interagency Program Office. Nevertheless, while VA’s plans for governance of the EHRM program provide a framework for high-level oversight for program decisions moving forward, EHRM officials have noted that the governance bodies will not be finalized until October 2018. Accordingly, the officials have not yet indicated what role, if any, the Interagency Program Office is to have in the governance process. The responsibilities of the Interagency Program Office have been intended to support the numerous approaches taken by VA and DOD to increase health information interoperability and modernize their respective electronic health record systems. Yet, while the office has led key efforts to identify data standards that are critical to interoperability between systems, the office has not been effectively positioned to be the single point of accountability originally described in the National Defense Authorization Act for Fiscal Year 2008. Further, the future role of the Interagency Program Office remains unclear despite the continuing need for VA and DOD to share the electronic health records of servicemembers and veterans. In particular, what role, if any, that the office is to have in VA’s acquisition of the same electronic health record system that DOD is currently acquiring is uncertain. We are making the following recommendation to VA: The Secretary of Veterans Affairs should ensure that the role and responsibilities of the Interagency Program Office are clearly defined within the governance plans for acquisition of the department’s new electronic health record system. (Recommendation 1) Chairman Banks, Ranking Member Lamb, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staffs have any questions about this testimony, please contact Carol C. Harris, Director, Information Technology Management Issues, at (202) 512-4456 or harrisc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony statement. GAO staff who made key contributions to this testimony are Mark Bird (Assistant Director), Jennifer Stavros-Turner (Analyst in Charge), Rebecca Eyler, Jacqueline Mai, Scott Pettis, and Charles Youman. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The National Defense Authorization Act for Fiscal Year 2008 included provisions that VA and DOD jointly develop and implement electronic health record systems or capabilities and accelerate the exchange of health care information. The act also required that these systems be compliant with applicable interoperability standards. Further, the act established a joint Interagency Program Office to act as a single point of accountability for the efforts, with the function of implementing, by September 30, 2009, electronic health record systems that allow for full interoperability. This testimony discusses GAO's previously reported findings on the establishment and evolution of the Interagency Program Office over the last decade. In developing this testimony, GAO summarized findings from its reports issued in 2008 through 2018, and information on the departments' actions in response to GAO's recommendations. Since its establishment in 2008, the Department of Defense (DOD) and Department of Veterans Affairs (VA) Interagency Program Office has been involved in various approaches to increase health information interoperability. However, the office has not been effectively positioned to function as the single point of accountability for the departments' electronic health record system interoperability efforts. For example, Between July 2008 and January 2010, GAO issued reports on VA's and DOD's efforts to set up the office, which highlighted steps the departments had taken, but also identified deficiencies, such as vacant leadership positions and a lack of necessary plans. GAO recommended that the departments improve management of their interoperability efforts by developing a project plan and results-oriented performance goals and measures. In April 2009, the Interagency Program Office was assigned responsibility for establishing a lifetime electronic record for servicemembers and veterans, called the Virtual Lifetime Electronic Record. GAO reported in February 2011 that, among other things, the office had not developed and approved an integrated master schedule, a master program plan, or performance metrics for the initiative, as outlined in the office's charter. Accordingly, GAO recommended that the departments correct these deficiencies to strengthen their efforts to establish the Virtual Lifetime Electronic Record. In March 2011, VA and DOD committed to jointly developing a new, common integrated electronic health record system and empowered the Interagency Program Office with increased authority, expanded responsibilities, and increased staffing levels for leading the integrated system effort. However, in February 2013, the departments abandoned their plan to develop the integrated system and stated that they would again pursue separate modernization efforts. In February 2014, GAO reported on this decision and recommended that VA and DOD take steps to better position the office to function as the single point of accountability for achieving interoperability between the departments' electronic health record systems. VA and DOD stated that they agreed with the above GAO recommendations. However, in several cases the departments' subsequent actions were incomplete and did not fully address all recommendations. In June 2017 VA announced that it planned to acquire the same electronic health record system that DOD has been acquiring. GAO testified in June 2018 that a governance structure had been proposed that would be expected to leverage existing joint governance facilitated by the Interagency Program Office. At that time, VA's program officials had stated that the department's governance plans for the new program were expected to be finalized in October 2018. However, the officials have not yet indicated what role, if any, the Interagency Program Office is to have in the governance process. Ensuring that the role and responsibilities of the office are clearly defined within these governance plans is essential to VA successfully acquiring and implementing the same system as DOD. GAO recommends that VA clearly define the role and responsibilities of the Interagency Program Office in the governance plans for acquisition of the department's new electronic health record syst", "document_type": "gao"}
{"report": "The federal-state UI program provides temporary cash benefits to eligible workers who lose their jobs through no fault of their own. Under this arrangement, states administer their own programs according to certain federal requirements and under the oversight of DOL’s Office of Unemployment Insurance. States have considerable flexibility to set benefit amounts and their duration, or the maximum period of time that the state pays benefits, and establish eligibility requirements. UI benefits are funded primarily through state payroll taxes on employers, and administrative costs are primarily funded through a federal payroll tax on employers. The states collect taxes that will be used to pay UI benefits, and the U.S. Department of the Treasury holds these funds in trust on behalf of the states in the Unemployment Trust Fund. DOL certifies for payment to the states administrative grants to operate their UI programs, which amounted to about $2.7 billion in fiscal year 2017. DOL is responsible for ensuring that state UI laws include certain provisions, which is a condition of the state receiving its UI administrative grant. Individuals typically claim their UI benefits by filing claims with their state UI agency online or by phone on a weekly or bi-weekly basis. In fiscal year 2017, the average weekly UI benefit was about $350, and claimants remained on the program for an average of 15 weeks, according to DOL data. Federal law establishes a work search requirement for UI eligibility, but the specific work search activities UI claimants are expected to conduct vary by state, according to a DOL report. To be eligible for unemployment benefits, individuals are generally required to actively search for work under federal law. The Middle Class Tax Relief and Job Creation Act of 2012 amended the Social Security Act to, among other things, require states to have work search requirements for UI claimants specified in their laws as a condition of eligibility for the states’ UI administrative grants. Specifically, states must have laws that require UI claimants to be “actively seeking work” as a condition of eligibility for unemployment compensation for any week. Because federal law does not specifically define actively seeking work, states have some discretion to establish a reasonable definition, according to DOL’s 2013 guidance to states. For example, a state can specify a minimum number of weekly contacts a claimant must have with potential employers. Acceptable work search activities might also include searching for jobs online, submitting job applications, visiting a job center, attending a networking event, or establishing a LinkedIn account, according to a DOL report. Depending on the state, UI claimants may be directed to register for work with their state’s Employment Service, which provides job search assistance, job placement assistance, and referrals to employers. In addition, in some cases UI claimants may be directed to participate in reemployment services at an American Job Center. In 2017, DOL provided $115 million in grants to states to provide Reemployment Services and Eligibility Assessments (RESEA). RESEA services include in-person reemployment services and eligibility assessments in American Job Centers for ex-service members and UI claimants determined to have a high likelihood of exhausting their UI benefits. RESEA-funded activities include developing an individual reemployment plan, providing labor market information, identifying job skills and prospects, and reviewing the claimant’s continued eligibility for UI benefits. DOL uses its Benefit Accuracy Measurement (BAM) system to determine the accuracy of UI benefit payments and estimate the amount and rate of improper payments. Under the BAM system, each state reviews a number of randomly selected cases on a weekly basis and reconstructs the UI claims process to assess the accuracy of the payments that were made. The state determines what the benefit payment should have been according to its laws and policies. States report the results of their BAM case reviews to DOL—including overpayments and underpayments—through an online data system. DOL uses the data to estimate improper payment rates by state, as well as to calculate a nationwide rate. State BAM audits involve reviews of existing records in the state’s UI claims information system as well as original fact-finding by the state BAM investigator. DOL requires states to use a standard claimant questionnaire when conducting BAM audits. The questionnaire includes numerous questions about the claimant’s circumstances—including their work search efforts—during the week under review. The questionnaire includes questions that could indicate that a claimant qualifies for an exemption from work search requirements, or made specific job contacts and the results of the job contacts, such as whether the claimant submitted an application and received a job offer. State BAM investigators are also expected to take steps to verify the information reported by the claimant by collecting documentation from claimants and contacting employers or other third parties. According to DOL’s 2016 BAM annual report and BAM procedures, state BAM investigators are to review a sufficient number of work search activities to determine whether the claimant has complied with the state’s minimum requirement for the number of weekly work search activities. The BAM program assigns one of three classifications to each of the work search activities reviewed: Acceptable – Documentation exists that the work search activity reported by the claimant, such as an employer contact, employment application, or other state approved work search activity, was made by the claimant and was acceptable according to the state’s law or policy. Unverifiable – The investigator was unable to establish sufficient information to make a judgment of whether the work search activity was either acceptable or unacceptable according to the state’s law or policy. Unacceptable – Written documentation exists that the work search activity reported by the claimant was not made at all by claimant, or was made but was unacceptable according to the state’s law or policy. According to DOL’s BAM annual report, work search activities classified as acceptable or unverifiable may be considered in calculating whether the claimant has satisfied the state’s required number of work search activities for purposes of BAM. If the state investigator finds that the claimant’s work search is unacceptable and does not meet the state’s requirements, he or she may determine the claimant was ineligible for benefits and establish an overpayment, depending on state law (see fig. 1). Currently, several states have formal warning policies and provide claimants warnings for the first instance of noncompliance with work search requirements, whereas states without these policies count these cases as overpayments, according to DOL. Since 2002, federal agencies have been required to identify and report improper payments. The leading reported cause of UI improper payments in fiscal year 2017 was overpayments to claimants who failed to meet work search requirements. DOL data show that states made an estimated $1.36 billion in overpayments to such claimants in fiscal year 2017. Other major reported causes of UI improper payments in fiscal year 2017 included payments made to individuals who continue to make claims even after returning to work (benefit year earnings) and payments made to claimants who were determined ineligible due to disqualifying job separations, such as quitting a job without good cause or being discharged for misconduct (separation issues). (See fig. 2. Table 8 in app. II provides greater detail.) According to DOL officials, many UI improper payments cannot be prevented given certain legal requirements that states pay claims in a timely manner and provide claimants with due process when the state finds an eligibility issue. Specifically, according to DOL, federal law requires that when an eligibility issue is detected, the claimant has a right to receive notice and provide the state information before being denied benefits. In addition, if an eligibility issue associated with work search, or any other matter, is detected but not resolved, the state is still required to pay for a claimed week no later than the week after an eligibility issue is detected, according to DOL. The time it takes to work through the necessary due process steps can prevent states from stopping the payment before it must be paid. Nationally, the estimated work search overpayment rate and the estimated amount of work search overpayments have risen in recent years. Specifically, in fiscal year 2013, approximately $1 billion in estimated work search overpayments were made to claimants who were not actively searching for work and, in fiscal year 2017, the amount increased to close to an estimated $1.36 billion (see fig. 3). The national work search overpayment rate for such claimants also increased during this time. (See table 9 in app. II for additional details.) According to DOL officials, some states implemented more stringent work search requirements, which may account for the recent trend. As work search requirements become more stringent, the opportunities for non- compliance and errors increase and thus higher improper payment rates, according to DOL officials. While the national work search overpayment rate was 4.5 percent in fiscal year 2017, state work search overpayment rates varied widely from an estimated 0 to 41 percent of the UI benefits that states paid in fiscal year 2017. (See table 10 in app. II for state-by- state estimates of work search overpayment rates and amounts.) States use various methods to recover overpayments to UI claimants, including setting up payment plans, off-setting UI benefits, or deducting refunds from federal or state income tax returns. Like all recovered UI overpayments, recoveries of work search overpayments must be deposited in the unemployment trust fund of the state that recovered the money and can be used only for the payment of UI benefits, according to DOL officials. National data are not available on the amount of work search overpayments that states have recovered because, although DOL collects recovery data from states, it does not require states to separate out work search overpayment recoveries from other types of recoveries in their reporting. Based on our analysis of DOL data, we found that certain state administrative practices, including investigating a higher percentage of claimant-reported work search activities and frequent use of formal warnings, were associated with lower reported state work search overpayment rates. However, DOL recently determined that federal law does not permit states to warn claimants the first time they failed to meet work search requirements (i.e., issue formal warnings) instead of establishing that an overpayment was made. Additionally, a higher percentage of claimants required to search for work is associated with higher reported state work search overpayment rates. One of the administrative practices significantly associated with lower work search overpayment estimates was investigations of claimants’ reported job contacts. Specifically, a higher percentage of cases with claimants whose contacts were investigated by the state UI agency as part of the state’s BAM audit was associated with a lower work search overpayment rate estimate. According to our analysis, for every 1 percentage point increase in the percentage of cases with claimants’ whose job contacts were investigated, there was a 0.072 percentage point decrease in the work search overpayment rate estimate. The extent to which states attempted to verify claimants’ reported job contacts through these investigations varied, according to our analysis of DOL data. Nationally, in fiscal year 2017, states investigated job contacts in about 80 percent of BAM cases where claimants were required to search for work. However, among the states, the proportion of cases in which job contacts were investigated was less than 50 percent in 5 states. (Table 11 in app. II shows the percentage of contacts that were investigated for each state.) Furthermore, states often were not able to verify the information claimants reported. Of the job contacts that were investigated, states reported that about 48 percent of the job contacts were acceptable, about 8 percent were unacceptable, and about 45 percent could not be verified (see fig. 5). Our analysis of BAM data for fiscal year 2017 also shows that for the overpayments that states were able to detect, that a large portion were found through investigating and verifying claimants’ work search contacts. Specifically, 47 percent of reported work search overpayments were found through this practice. Interviewing claimants about their work search was the next most common way states detected work search overpayments. States reported identifying 32 percent of work search overpayments in fiscal year 2017 using this practice. Although overpayments can be the result of actions taken by the claimant or the agency administering the program, states reported that most work search overpayments are associated with claimants. For example, claimants may provide inadequate or incorrect information needed by the UI agency to determine if the claimant met work search requirements. In fiscal year 2017, states attributed about 99 percent of overpayments at least partially to claimant action, while they attributed about 2 percent at least partially to administrative errors at the state agency. According to DOL data, 22 states issued formal warnings to one or more claimants at some point between fiscal year 2013 and fiscal year 2017 for failure to meet work search requirements instead of finding that the claimants were overpaid. Although the states that made use of these warnings varied over this period, the number of states issuing formal warnings has generally increased over time from 13 states issuing formal warnings in fiscal year 2013 to 19 states in fiscal year 2017. Overall, states that most frequently issued formal warnings had lower reported work search overpayment rates than states that did not issue formal warnings. However, their work search overpayment rates are lower because, under their state policies, they did not count an overpayment when they issued a formal warning. Our analysis indicates that states which issued formal warnings frequently—in 75 percent or more of cases involving work search errors— had estimated work search overpayment rates that were 3.5 percentage points lower, on average, than states that did not issue formal warnings. However, states that use formal warnings less frequently—in fewer than 75 percent of cases involving work search errors—reported work search overpayment rates that were between 3 and 4 percentage points higher than states that did not issue formal warnings. See appendix I for a detailed discussion of our econometric analysis. Table 1 shows the average work search overpayment rate estimates for each of these groups of states when formal warnings are not counted as overpayments, and the potential average work search overpayment rate when formal warnings are counted as overpayments. Excluding formal warnings, two of the groups—frequent and low users of formal warnings—had average work search overpayment rate estimates lower than the average for states that did not use formal warnings. However, when formal warnings are included in the overpayment rate, only low users of formal warnings have a work search overpayment rate estimate lower than the average for states that did not use formal warnings. GAO’s analysis of DOL data shows that in fiscal year 2017, estimated work search overpayments were nearly $1.4 billion, but potentially would have been an estimated $1.8 billion greater if states had not issued formal warnings and established overpayments. Our analysis further shows that if formal warning cases had been included in DOL’s calculation of the UI overpayment rates for fiscal year 2017, the nationwide UI overpayment rate would have increased by about 6 percentage points, from an estimated 12 percent to an estimated 18 percent. Moreover, these figures represent an increase from the fiscal year 2016 figures we presented in our previous report on states’ use of formal warnings related to work search requirements. At that time, we found the nationwide UI overpayment rate would have increased by about 5 percentage points from an estimated 11 percent to an estimated 16 percent with the inclusion of formal warning cases. The amount of UI payments made to claimants for weeks in which they received formal warnings in fiscal year 2016 was about $1.6 billion. Table 12 in appendix II shows how the estimated UI overpayment rate in each state issuing formal warnings in fiscal year 2017 may have increased if formal warnings were not used. State use of formal warnings has resulted in inconsistent reporting of work search overpayments, which affects DOL’s reported improper payment rate for the UI program. Specifically, states that issue formal warnings have not counted as overpayments cases in which claimants did not actively search for work and received a UI benefit payment. On the other hand, states that did not have formal warning policies counted such cases as overpayments, which are factored into DOL’s reported improper payments rate. The variation among states related to formal warning policies makes it difficult for DOL and others to understand the reasons behind states’ reported work search overpayments. DOL has determined and documented in its FY 2017 Agency Financial Report that the use of formal warnings is no longer allowed under the 2012 federal law, which generally requires UI claimants to actively seek work. DOL officials told us in July 2017 they would soon issue a letter to states to inform them that they are no longer permitted to use formal warnings when they determine that claimants failed to meet work search requirements. To date, DOL has not issued such a letter. In May 2018, DOL officials told us that they expect to issue the letter by the end of calendar year 2018. Federal internal control standards direct agency management to remediate identified internal control deficiencies on a timely basis. Federal internal controls standards also state that management should externally communicate the necessary quality information to achieve the entity’s objectives. Additionally, these standards state that agency management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. According to DOL officials, they began discussing the need for a potential discontinuation of formal warnings at conferences with states in the first half of 2017. However, we found that states continued to implement their formal warning policies, potentially resulting in an increase in the estimated amounts of overpayment dollars associated with formal warnings between fiscal year 2016 and 2017. Until DOL informs states of the need to discontinue the use of formal warnings through a letter or another mechanism, states will continue to be inconsistent in whether they count as overpayments cases in which claimants who failed to search for work in any week were provided benefits. Additionally, once DOL provides additional information to states on formal warnings, it should monitor states’ responses to help ensure that DOL achieves its desired results. Furthermore, having more consistent information on overpayments related to work search issues could help DOL assess how the program is working nationwide and whether further federal and state actions would be needed to address this leading source of reported improper payments in the UI program. DOL officials stated that the national work search overpayment rate is likely to increase in the future as states begin to eliminate their formal warning practices. Officials also stated that this may take some time as some states may need to amend laws or regulations in order to do so. State work search overpayment rate estimates were higher for states where a higher proportion of claimants were required to search for work. Based on our analysis, for every one percentage point increase in the fraction of cases with claimants required to search for work, there was a 0.084 percentage point increase in the work search overpayment rate estimate on average, all else being equal. Nationwide in fiscal year 2017, states reported that work searches have been required in 80 percent of cases, with requirements in individual states ranging from 38 to 100 percent of cases. Three states reported requiring fewer than 50 percent of claimants to perform work searches, while five states reported requiring more than 95 percent of their claimants to perform work searches. The most common reasons states exempted claimants from work searches were because claimants were “job-attached” (e.g. temporarily laid-off, recalled), or they had union deferrals because they were seeking employment through their union, according to DOL data. The map in figure 6 shows the range among all the states in the percentage of UI claimants required to search for work, according to our analysis of DOL data for fiscal year 2017. Selected states used multiple approaches to address work search overpayments, including online systems to facilitate the work search reporting and verification process, work search audits beyond the BAM audits, and messaging to inform claimants of their work search responsibilities. For example, three of six states in our review had online systems where claimants could report specific work search activities as part of filing their weekly claims, according to state officials (see table 2). Some of the approaches states used were specifically designed for UI claimants participating in state reemployment programs. State officials cited several benefits of the approaches they use to address work search overpayments. The online systems, work search audits, and messaging helped prompt work search activities and prevent work search overpayments in some cases, according to state officials. According to officials from the selected states that used them and a study on work search improper payments, online systems can facilitate the work search reporting and verification in several ways: Automatically documenting the claimants’ work search activities. Online reporting of work search activities can help prevent overpayments because their work search is documented in the online claims system, which means the claimant does not need to keep a work search log. In addition, online job search/training systems can be used to track the work search activities completed by claimants, making it easier for the state to verify that the work search was completed. For example, officials in Mississippi and Indiana told us they piloted an online system called NextJob and required RESEA program participants to conduct work search activities through the system. Mississippi officials reported that NextJob motivated claimants to conduct their job search and increased the speed of reemployment among these individuals. Similarly, New Jersey officials told us that UI claimants selected to participate in New Jersey’s RESEA program are required to use an online job search and training system called OnRamp, which, for example, allows job seekers to create or upload their resume on the website, search for jobs, access online training, and receive email alerts on potential job matches. In addition, officials in Nevada said that the online reporting system is beneficial because the work search activities are documented in the system and are more reliably retrieved if the claimant is selected for a BAM audit because few claimants maintain and retain their work search effort logs. Performing automated checks on data the claimants submit. The online claims systems can identify potentially duplicate job contacts and check whether the claimant reported the required number of job contacts. For example, Utah officials reported that if a claimant enters job contacts from another week, officials would follow up with the claimant by phone after it is flagged by their online system. If claimants report self-disqualifying information, such as an insufficient number of job contacts, the system can automatically put a hold on a claim until the issue is resolved. Facilitating communication with the claimant. Some states added messages to their online claims system that pop up if the claimant enters incorrect or insufficient information. For example, Mississippi officials stated that they used messaging to better inform claimants of their responsibilities and to encourage them to report accurate information. According to the officials, if claimants do not report the required number of work search activities in the online system, a questionnaire will pop up requesting that the claimants explain why they did not do so. The system requires the claimants to enter more information in order to submit their claims and to receive their benefit payments. Mississippi officials also stated that adding targeted messaging resulted in fewer denials of benefits due to claimant failure to meet work search requirements and also reduced the number of appeals related to this type of denial. Some state officials said that messaging encouraged accurate reporting. For example, Indiana officials told us that at the end of the online claim filing process, claimants receive a message notifying them of the state’s work search requirements and informing them that they are required to search for work to continue receiving benefits. In Utah, officials developed a video that covers claimants’ responsibilities, including work search requirements, which claimants must view before receiving their initial benefit payment, according to state officials. Officials in three of the states we reviewed reported using additional work search audits beyond BAM to help reinforce their state policies. Pennsylvania officials reported conducting 7,182 work search audits for RESEA program participants in 2016. As a result, officials reported that the state issued 1,300 warnings to claimants. The two other states— Mississippi and Utah—report that their random work search audits, coupled with their online systems, helped prevent work search overpayments as they are able to disqualify claims before the payment goes out. Mississippi and Utah officials also reported that they were also able to identify and recover some work search overpayments (see table 3). Despite implementing these approaches, state officials in five of the six states we contacted told us they face challenges with verifying work search activities. These officials stated that they have difficulty verifying work search activities as some claimants do not understand the work search requirements or do not keep accurate records of their work search activities, which makes it difficult for the state to confirm compliance with the state requirements. In addition, state officials also said that many employers do not keep records of job seekers’ inquiries or do not respond to state requests for information when they are trying to verify claimants’ work search activities. For example, Nevada officials said that work search contacts are often virtually unverifiable as many companies outsource their hiring processes to contractors who refer the job candidate for a job posting and keep the job application. Officials said these contractors also rarely respond to state inquiries about claimants’ job applications. As discussed later, DOL has provided states tools to help address this issue, such as a messaging toolkit to help states improve communications with claimants and employers. DOL uses UI performance data to monitor state progress in reducing the estimated improper payment rate, including data on overpayments to claimants who failed to meet work search requirements. To do so, DOL requires states to submit State Quality Service Plans, which serve as the performance reporting and grant application documents through which states receive administrative funding. The plans include a summary of state performance on various measures related to operating the UI program, including the improper payment rate, according to DOL documentation we reviewed. States with estimated improper payment rates of 10 percent or more are required to submit corrective action plans to DOL. For example, data from two of the six states we reviewed– Nevada and New Jersey–had estimated improper payment rates above 10 percent during DOL’s most recent planning cycle and developed corrective action plans. Nevada’s corrective action plan noted that the state expects their rate to decline due to their June 2017 implementation of online work search reporting as part of their UI claims system. New Jersey’s corrective action plan noted that the state plans to implement new online tools that will help them verify wage and employment information. DOL separately monitors each state’s estimated work search overpayment rate. In addition, all states, including those who estimated improper payment rates of less than 10 percent, are required to prepare a state-specific action plan that describes the root causes of improper payments and the state’s strategies to address them. According to agency officials, DOL reviews plans to monitor state performance and help states identify strategies to improve performance. Although DOL requires states with estimated improper payment rates of 10 percent or more to develop corrective action plans, according to DOL, the agency has limited options to require state UI agencies to take actions to respond to high improper payment rates. DOL officials told us that, beyond routine monitoring and providing states with technical assistance to help reduce their improper payments rate, their enforcement options are limited to withholding the state’s administrative funding or removing federal tax credit reductions, which is, in effect, a tax increase for the state’s employers. According to DOL officials, both are considered extraordinary sanctions that require significant due process. The agency has not withheld state administrative funding to address improper payments, according to DOL officials. DOL officials also told us that they are concerned about the effects on UI claimants if they were to withhold administrative funding. The administration’s fiscal year 2019 congressional budget justification includes a legislative proposal that would authorize the Secretary of Labor to require states to implement corrective action measures for poor state performance in the UI program, helping to reduce improper payments in states with the highest estimated rates. DOL has identified strategies to address the leading causes of UI improper payments—including work search issues—and provided states tools and funding to help implement them. For example: Pathway to Reemployment Framework. In 2016, DOL and the National Association of State Workforce Agencies published a framework that contained a broad menu of work search options that states could adopt to better reflect how individuals search for work, such as allowing use of online job search tools to count as an approved work search activity. The framework also includes suggestions for how states could document or verify claimants’ work search activities for eligibility purposes. Messaging toolkit. In 2012, DOL published a messaging toolkit designed in part to improve claimants’ understanding of work search requirements as a condition of eligibility for benefits. According to DOL, claimants who fully understand their responsibilities and the consequences of not fulfilling them may be more likely to complete the required work search activities, thereby reducing instances of claimants’ failing to search for work. DOL provided states supplemental funding to support improved messaging and tracked state implementation of the strategies. Online tool to record work search activities. In 2011, DOL provided supplemental funding to New York to develop an online work search record that could be replicated by other states. This tool is designed to reduce improper payments that result from inadequate documentation of work search activities. Claimants can use the tool to record their work search online when they file their UI claims. The work search record is automatically shared with state job centers, which in turn act to enhance claimants’ work search and connect claimants with jobs. New York used open source technologies when designing the tool in an effort to help more states replicate the product at a lower cost. UI Integrity Center. The DOL-funded UI Integrity Center of Excellence (UI Integrity Center) was established as a way to help states develop and share innovative strategies to prevent and detect UI improper payments, reduce fraud, and improve program integrity. For example, the UI Integrity Center funded a pilot project in 2016 to support a state in implementing an online tool that trains claimants on how to effectively search for jobs and allows claimants to use the tool to complete their work search activities. The UI Integrity Center also hosted national conferences in 2016 and 2018 that included presentations on state practices to address work search improper payments. Although DOL monitors states’ work search overpayment rate estimates and has provided assistance to help states address such overpayments, it has provided limited direction to states on the level of effort states must make to verify whether claimants are actively searching for work. Specifically, DOL’s BAM procedures direct states to investigate a sufficient number of work search contacts in its BAM sample of UI cases to determine if the claimants met the state’s work search requirement. However, DOL has not provided states any additional direction on what is considered “sufficient.” As previously mentioned, the extent to which states attempted to verify job contacts from claimants’ work searches varied across states. Some states reported to DOL that they did not investigate work search activities for a majority of their BAM cases even though work search was required and the claimant reported job contacts. Federal internal control standards state that agency management should externally communicate the necessary quality information to achieve its objectives, including addressing related risks. According to DOL officials, the agency plans to clarify its BAM procedures, to include providing more definitive instructions to states on work search verification requirements, after the agency issues its planned letter to states about discontinuing the use of formal warning policies. As of May 2018, the agency said it plans to issue the letter on formal warning policies by the end of calendar year 2018. However, as previously stated, it has been nearly a year since DOL initially told us they were planning to issue the letter to states. Effective monitoring of state compliance with the clarified work search verification requirements will also be important once DOL revises its BAM procedures. Federal internal control standards state that agency management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. Monitoring states’ responses could help ensure that DOL achieves its desired results. By providing clear direction to states about work search verification requirements and monitoring states’ implementation of these requirements, DOL would have greater assurance that states are complying with its requirements. The health of the UI program depends, in part, on the ability of states to control its benefit payments by accurately determining individuals’ eligibility. Improper payments, including overpayments, in the UI program have led to billions of federal and state funds being used inappropriately. Actively seeking work has generally been an eligibility requirement for individuals receiving unemployment benefits under federal law since 2012, but states have not consistently implemented the requirement for claimants in similar circumstances. States with formal warning policies reported lower work search overpayments not necessarily because they are better at ensuring claimants’ compliance with requirements, but because they are not counting cases where claimants receive formal warnings as overpayments. Furthermore, although DOL determined in 2017 that states are not permitted to issue formal warnings rather than reporting an overpayment, it has not officially told states to stop using warnings. Without providing states with this information and monitoring their response, states will continue to report inconsistent information on the extent of work search overpayments. State efforts to check whether claimants are meeting work search requirements also vary. Our evidence suggests that states making a greater effort to investigate work search activities tend to have lower overpayment rate estimates associated with this issue. However, some states are not investigating claimant-reported work search activities as part of their BAM audits despite DOL’s procedures directing them to do so. Until DOL provides clear direction to states about verifying work search and monitors state compliance, DOL has little assurance that states are complying with its requirements. We are making the following four recommendations to the Department of Labor: The Assistant Secretary of DOL’s Employment and Training Administration should provide states with information about its determination that the use of state formal warning policies is no longer permissible under federal law. (Recommendation 1) The Assistant Secretary of DOL’s Employment and Training Administration should monitor states’ efforts to discontinue the use of formal warning policies. (Recommendation 2) The Assistant Secretary of DOL’s Employment and Training Administration should clarify information on work search verification requirements in its revised Benefit Accuracy Measurement procedures. The revised procedures should include an explanation of what DOL considers to be sufficient verification of claimants’ work search activities. (Recommendation 3) The Assistant Secretary of DOL’s Employment and Training Administration should monitor states’ compliance with the clarified work search verification requirements. (Recommendation 4) We provided a draft of this report to the Department of Labor (DOL) for review and comment. In its written comments, reproduced in appendix IV, DOL agreed with all four of our recommendations and stated that it would take action to address them. DOL also provided technical comments, which we incorporated as appropriate. Additionally, we provided excerpts of the draft report to state UI officials in the selected six states we included in our review. We incorporated their technical comments as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Department of Labor, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at 202-512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. We used the Department of Labor’s (DOL) Unemployment Insurance Benefit Accuracy Measurement (BAM) data. The BAM program is designed to determine the accuracy of paid and denied claims for unemployment insurance (UI) in three major UI programs—state UI, Unemployment Compensation for Federal Employees (UCFE), and Unemployment Compensation for Ex-Servicemembers (UCX). The BAM data covers claimants in the 50 U.S. states, the District of Columbia, and Puerto Rico. Each week, state workforce agencies select random samples of paid and denied unemployment insurance claims (i.e., cases). State BAM investigators then audit these cases to determine whether the claimant was properly paid or was properly denied benefits in the week for which the claim was made (i.e., key week). The bases for determining whether paid and denied claims were accurate are federal and state law, regulations, and policy. We used BAM cases for paid claims for all UI programs and all states for fiscal years 2013 through 2017. The number of cases for each state is determined by DOL for each year. Cases are chosen randomly each week from the population of claims for that week. The normal weekly number of paid claims sampled in most states is 9, with a minimum of 6, for an annual sample of around 480 cases. For the 10 states with the smaller UI workloads, the normal weekly number of paid claims sampled is 7, with a minimum of 5, for an annual sample of around 360 cases. For each paid claim case, the BAM data include variables describing the claimant, as well as information on their UI benefit year, separation from their last job, monetary eligibility, benefit payment history, employment services registration and work search, and the outcome of the BAM investigation. For cases for which BAM auditors identify errors, the BAM data also include information on the errors. In 2016, work search issues, benefit year earnings, and separation issues were the most common causes of reported overpayments: Work search issues. These occur when the state finds that claimants did not actively search for work during the key week. Federal law generally requires people receiving unemployment compensation to be actively searching for work. States have discretion to establish requirements for what constitutes active work search, and these requirements vary by state. Benefit year earnings issues. These occur when claimants have earnings that exceed the threshold for UI eligibility in their state or when these earnings are not properly reported. Separation issues. These occur when claimants are ultimately determined to be ineligible for UI due to disqualifying job separations, such as quitting a job without good cause or being discharged for misconduct under the state UI law. Other causes of overpayments include incorrect reporting of wages used to calculate benefits, able and available to work issues, employment service registration issues, and other issues. For some cases, BAM investigators identify multiple errors with different causes. When this occurs, BAM investigators determine the overpayment amount associated with each cause. BAM sample data is weighted to make inferences about the population. In accordance with DOL’s method, we calculated the weight on each BAM sample case as (1) the number of unemployment compensation payments to claimants for the state and the week from which the BAM sample case was selected divided by, and (2) the number of completed BAM sample cases for that week, as long as there were two or more completed cases for the week. Because each state followed a probability procedure based on random selections to pick cases, the BAM sample is only one of a large number of samples that they might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of the BAM sample’s results using confidence intervals. For example, a 95 percent confidence interval is the interval that would contain the actual population value for 95 percent of the samples that could have been drawn. In some tables we provide the margin of error instead of the confidence interval, where the margin of error is the half-width of the confidence interval. Our analysis sample consists of cases with no missing or invalid values of variables used in our analysis that also have positive sample weights. Our analysis sample includes 98.1percent of all cases. In accordance with DOL’s method, the estimated overpayment rate is equal to the amount of UI benefits overpaid as a percentage of the total amount of UI benefits paid. The amount of UI benefits overpaid includes fraud, nonfraud recoverable, and nonfraud nonrecoverable overpayments; and overpayments from all causes and responsible parties. The amount overpaid excludes overpayments that DOL considers as technically proper. An overpayment may be considered technically proper by DOL under a finality rule, which generally means that too much time has passed between the decision to pay the claimant and the detection of the eligibility issue, or for some other reason. Our estimated work search overpayment rate is calculated using the same method as the official overpayment rate and is generally comparable to work search overpayment rates reported by DOL. More specifically, we used the BAM data to identify cases with overpayments and with overpayments due to work search, excluding formal warnings and other payments DOL considers to be technically proper. Next, we applied DOL’s proration algorithm to allocate overpayment amounts for each error associated with a case so that the total amount of overpayments from all errors does not exceed the key week amount paid. Then, we calculated the total overpayment amount and work search overpayment amount for cases with overpayments and work search overpayments, respectively. Finally, we tracked the key week amount paid for each case. To estimate the work search overpayment rate for each state and fiscal year, we calculated the weighted sum of work search overpayment amounts as a percentage of the weighted sum of amounts paid. Table 4 shows the estimated national work search overpayment rate, the average estimated state work search overpayment rate, and the median estimated state work search overpayment rate for each fiscal year. The national work search overpayment rate estimate has increased from 2.4 percent in 2013 to 4.5 percent in 2017. Over the same time period, the average state work search overpayment rate estimate has increased from 2.6 to 4.6 percent, and the median state work search overpayment rate estimate has increased from 1.4 percent to 2.7 percent. Most states’ work search overpayment rate estimates are less than 5 percent, but some states’ rates are more than 10 percent. To identify state practices and other factors that may be associated with state work search overpayment rates, we reviewed DOL documents describing the BAM program and summarizing key features of states’ UI programs, as well as research on factors associated with time claimants spend searching for employment. Based on our review, we identified factors that may be associated with work search overpayments that can be measured using variables in the BAM data: Exemptions from work search requirements. According to DOL, while federal law generally requires claimants to be actively seeking work, it does allow states to exempt claimants in some circumstances. For example, according to DOL, because states may not deny benefits to an individual in approved training, all states provide an exemption from the requirements to be able and available for work and conducting an active work search for any week the individual is in approved training. In addition, according to DOL, some states allow work search exemptions if the worker is union-attached and finds work through the union hall, or if a separation is classified as a temporary lay-off and there is a reasonable expectation that the worker will return to work soon. According to DOL, other state work search exemptions include that the worker has a specified start date for new employment, has jury duty, has a compelling personal reason, is in a labor dispute with the employer, is the victim of domestic violence, or labor market or other information indicates no suitable employment. It is possible for a case with a claimant who indicated he or she was not required to search for work to have a work search error if the claimant provided an invalid reason for being exempt from his or her state’s work search requirement. For example, the claimant may have said that he or she was a member of a union with a hiring hall and obtained employment through union referrals or that he or she had a definite recall date, and therefore, the work search requirement was waived. However, the BAM investigator’s verification with the union found that the claimant was not in good standing, or the investigator’s verification with the employer found that the claimant had no definite recall date. In such a situation, the claimant might be held ineligible for a failure to conduct an active work search because the exemption was invalid. Claimant response. According to DOL, the claimant interview anchors the BAM audit and is a major error detection point, and the claimant questionnaire is a required standard form. Claimants may provide information for the BAM audit either in person, over the phone, or via mail or some other method. Some claimants may not respond to the audit at all. For the period from 2013 to 2017, of the work search overpayments that BAM auditors detected in their BAM sample of cases, about 37 percent of cases were uncovered during the claimant interview. State investigation of job contacts. Claimants are asked to provide information about job contacts as evidence that they were actively searching for work as part of the required claimant questionnaire. In addition, even if the claimant does not respond to the BAM audit, job contacts may be available for BAM auditors to investigate if the state’s continued claim process captured the claimant’s work search information. BAM staff must investigate a sufficient number of contacts to establish whether the claimant has met the state’s work search requirement. For the period from 2013 to 2017, of the work search overpayments that BAM auditors detected in the BAM sample of cases, about 45 percent were uncovered by investigating claimant- provided job contacts. State use of formal warnings. If the BAM audit of a case determines that the claimant’s work search during the key week was not acceptable, the state might issue a formal warning to the claimant instead of finding that the claimant received a work search overpayment, and these cases are not included in the calculation of the work search overpayment rate for that state. Over the period from 2013 to 2017, of the BAM sample of cases for which work search errors were identified, state workforce agencies issued formal warnings for about 46 percent. Claimant demographic and other characteristics. Characteristics of claimants that are associated with the amount of time claimants spend searching for work include age, education, gender, length of time between initial claim and key week, and weekly benefit amount as a percentage of the normal weekly wage in the claimant’s industry. To the extent that they affect time spent searching for work, these characteristics may also be associated with the likelihood of claimants receiving a work search overpayment. Some factors that may be associated with work search overpayments cannot be measured using variables in the BAM data and, thus, are excluded from our analysis. Examples include: Minimum number of work search activities. According to DOL, the minimum number of work search activities required per week varies across states and can vary based on labor market conditions, which can, for example, produce different requirements in a rural area versus an urban area. However, some states do not specify a required number of work search activities and instead require that the number of work search activities be “reasonable,” according to a DOL report. Type of required employer contacts. According to DOL, some states allow claimants to search for part-time work as well as full-time work, while others do not. In addition, according to DOL, some states specify that participation in reemployment services counts as a contact, and some states require claimants to make at least one contact through the state online system. Frequency and method of reporting. According to DOL, some states require weekly claimant reporting of work search activities, while others require bi-weekly reporting. In addition, according to DOL, some states require claimants to report online as part of their continued claim, while others require claimants to keep a log of their work search activities. Our econometric model is the following: work search overpayment rates, = α + β∗work search requireds, + γ*n-person responses, + γ*telephone responses, + γ*mail, email, fax, or other responses, + δ*contacts investigateds, + φ + X’Θ + year indicators + ε, where s and y denote state and year, respectively, and the explanatory variables in the model are the following: Work search required is the estimated fraction of cases with claimants for whom work search is required, according to the BAM data. In-person response, telephone response, and mail, email, fax, or other response are the estimated fractions of cases with claimants who responded to the BAM audit in person, by telephone, or by mail, email, fax, or other method, respectively. Contacts investigated is the estimated fraction of cases for which BAM auditors investigated one or more job contacts. Low, moderate, and frequent formal warning use are binary indicator variables equal to 1 if the state issued a low, moderate, or high number of formal warnings in the fiscal year as a percentage of BAM cases with work search errors, respectively, and 0 otherwise. We defined low formal warning states as those that issued formal warnings for some but less than 25 percent of the cases with work search errors, moderate formal warning states as those that issued formal warnings for at least 25 percent but less than 75 percent of cases with work search errors, and high formal warning states as those that issued formal warnings for anywhere from 75 to 100 percent of cases with work search errors. The omitted group is states that issued no formal warnings during the fiscal year. X is a list of other characteristics of claimants that may be associated with work search, including the estimated distributions of cases across claimants’ age groups, education levels, gender, length of time between initial claim and key week, and weekly benefit amount as a percentage of the normal weekly wage for their occupation. ε is an error term. The parameters of interest in our econometric model are β, γ, γ, γ, δ, φ is an estimate of the change in the work search overpayment rate associated with a 1 percentage point increase in the fraction of cases with claimants who responded to the BAM audit in person, all else being equal. The parameters γ and γ are estimates of the change in the work search overpayment rate associated with a 1 percentage point increase in the fraction of cases with claimants who responded to the BAM audit by telephone and by mail, email, fax, or other method, respectively, all else being equal. The parameter δ is an estimate of the change in the work search overpayment rate associated with a 1 percentage point increase in the fraction of cases for which BAM auditors investigated one or more job contacts, all else being equal. The parameters φTable 5 shows descriptive statistics for the explanatory variables, other than formal warnings. Table 6 shows descriptive statistics for states’ use of formal warnings. Our analysis is subject to several limitations, and the results we discuss below should be interpreted with caution. No causality. Our econometric approach can establish correlations between state work search overpayment rate estimates and the factors we analyzed, but it cannot establish causal relationships. This limitation is especially important when it comes to interpreting the relationship between work search overpayment rate estimates and the fraction of cases for which BAM auditors investigated job contacts. BAM investigations can only detect work search overpayments, not prevent them, because BAM investigators are reviewing cases after the payment has already been made. Preventing work search overpayments is the only way to reduce the work search overpayment rates. Thus, the relationship between investigation of claimant- provided contacts and work search overpayment rates likely reflects not a causal relationship but an equilibrium relationship in which claimants who know that their job contacts will be investigated are more likely to search for work, all else being equal. Nongeneralizability. Our results do not generalize to other time periods with different labor market conditions, different rules and regulations about unemployment insurance, or other differences. Omitted variables. As discussed above, we have excluded from our models some state practices that may be associated with work search overpayments because those variables were not included in the BAM data. For example, we do not account for the fact that, according to DOL, some states require claimants to engage in more work search activities than other states, which could affect the likelihood that a claimant receives a work search overpayment. In addition, according to DOL, some states require claimants to report their work search activities in order to continue receiving benefits, which might prevent some work search overpayments from occurring. We have also likely excluded some relevant claimant characteristics as well. For example, total income for a claimant’s household and a claimant’s number of dependents may affect their work search efforts. However, variables describing a claimant’s household income and composition are not included in the BAM data and thus are omitted from our analysis. To the extent that these factors are correlated with the factors we included, our estimates of the relationships between work search overpayment rates and the included factors could be biased. Measurement error. Our variables may have been measured with error, which could bias our coefficient estimates. If the measurement error is random, our coefficient estimates would be biased down, but if the measurement error is systematic, then we cannot say whether our coefficient estimates would be biased down or up. Our baseline specification suggests that some state practices are associated with state work search overpayment rates estimates (see column 1 of table 7). We used the 10 percent level of significance as our threshold for statistical significance because we have a relatively small number of observations (259). State work search overpayment rate estimates were higher in states with more cases with claimants who were required to search for work. A 1 percentage point increase in the fraction of cases with claimants required to search for work was associated with a 0.084 percentage point increase in the work search overpayment rate estimates on average, all else being equal. Work search overpayment rate estimates were lower in states with more cases for which the BAM auditors investigated one or more job contacts. A one percentage point increase in the fraction of cases for which the BAM auditors investigated contacts was associated with a 0.072 percentage point reduction in the work search overpayment rate on average, all else being equal. Compared to states that did not issue any formal warnings, work search overpayment rate estimates were higher in states that made low or moderate use of formal warnings but lower in states that issued formal warnings frequently. Work search overpayment rate estimates in states that were low and moderate users of formal warnings were 3.9 and 3.1 percentage points higher on average than those in states that issued no formal warnings, all else being equal. Work search overpayment rate estimates in states that were frequent users of formal warnings were 3.5 percentage points lower on average than those in states that issued no formal warnings. Our state-level analysis also suggests that some characteristics of cases are not associated with state work search overpayment rate estimates, but others are. State work search overpayment rate estimates were not significantly associated with the distribution of cases by claimant age, gender, duration of unemployment benefits receipt, or key week amount as a percentage of the normal weekly wage in their occupation, or with the number of cases. However, state work search overpayment rate estimates were higher in states with more cases with claimants with some college or an associate’s degree relative to cases with claimants without a high school degree or GED. A one percentage point increase in the estimated fraction of cases with claimants with some college or an associates degree was associated with a 0.192 percentage point increase in estimated work search overpayment rates on average, all else being equal. To assess the sensitivity of our results, we estimated fractional response models with robust standard errors instead of clustered standard errors (see column (2) of table 7). We also estimated fractional response models that replaced the fractions of cases by claimant response method with the fraction of cases with claimants who responded to the BAM audit by all methods combined, with both types of standard errors. Finally, we estimated linear models, also with both types of standard errors. While the direction and magnitude of the relationship between estimated work search overpayment rates and the fraction of cases with claimants required to search for work was generally similar across specifications, it was not always statistically significant. The direction, magnitude, and statistical significance of the relationship between estimated work search overpayment rates and the fraction of cases for which BAM auditors investigated job contacts was generally similar across specifications, with the exception of the linear model with clustered standard errors, where it was not statistically significant. The directions, magnitudes, and statistical significance of the relationship between estimated work search overpayment rates and estimated state formal warning use were generally similar across specifications. This appendix contains several tables that show the underlying data used throughout this report, using the Department of Labor’s Benefit Accuracy Measurement (BAM) data for fiscal years 2013 through 2017. According to DOL, because the BAM data are based on a statistical survey, estimates produced from our analysis of the BAM data are subject to sampling and non-sampling errors. Sampling errors are errors that arise in a data collection process as a result of taking a sample from a population rather than using the whole population. Non-sampling errors are errors or biases that arise in a data collection process as a result of factors other than taking a sample, such as the timeliness of data collection, data entry errors, biased questions in fact-finding, biased decision-making, and inappropriate analysis and conclusions completed by state investigators or false or inaccurate information provided by survey respondents. We express our confidence in the precision of our results by reporting the margins of error associated with 95 percent confidence intervals. This is the interval that would contain the actual population value for 95 percent of the samples the respective agency could have drawn. In addition, it may be misleading to compare one state's work search overpayment rates with another state's rates. According to DOL, no two states' written laws, regulations, and policies specifying eligibility conditions are identical, and differences in these conditions influence the potential for error. The following tables and information are included in this appendix: Table 8: The estimated overpayment amounts for the Unemployment Insurance (UI) program by cause in fiscal year 2017 (also represented in fig. 2 in the letter portion). Table 9: The national work search overpayment rate estimates and dollar amounts for fiscal years 2013 through 2017 (also represented in fig. 3 in the letter portion). Table 10: The work search overpayment rates estimates and dollar amount of work search overpayments in each state in fiscal year 2017, excluding cases where formal warnings were given. Table 11: The percentage of cases in which claimants were required to search for work and the percentage of those cases in which job contacts were investigated in each state in fiscal year 2017. Table 12: For states that issued formal warnings in 2017, the UI overpayment rate estimates excluding and including cases in which formal warnings were issued, and the difference in the dollar amount of overpayments if formal warnings were not used. Work search requirements for Unemployment Insurance claimants vary by state. According to our review of program documents in our six selected states, the minimum number of work search activities required per week ranged from not specified to four. Three of the states limited the work search activities to applying for jobs or contacting employers in other ways and the three other states had broader definitions of what would qualify as a work search activity. See table 13 below for a summary of the work search requirements, confirmed by state officials, for the six states included in our review. Cindy Brown Barnes 202-512-7215 or brownbarnesc@gao.gov. In addition to the contact names above, Danielle Giese (Assistant Director), Cathy Roark (Analyst in Charge), Carl Barden, Rachel Beers, Deborah Bland, Beryl Davis, Holly Dye, Alex Galuten, Dana Hopings, Joel Marus, Phillip McIntyre, Sheila R. McCoy, Jean McSween, Courtney LaFountain, Stacy Spence, Almeta Spencer, Matt Valenta made significant contributions to this report.", "summary": "The UI program, which is overseen by DOL and administered by states, paid $30 billion to about 5.7 million individuals in 2017. Under federal law, to be eligible for benefits, individuals are generally required to actively search for work, but the specific work search requirements vary by state. Yet, states found that some benefits were overpaid to UI claimants who were ineligible because they were not meeting work search requirements. GAO was asked to review improper payments due to UI claimants' failure to actively search for work. Building on GAO's prior work ( GAO-18-133R ), this report examines (1) state administrative practices associated with work search overpayments; (2) selected states' approaches to address work search overpayments; and (3) DOL's oversight and support of states' efforts. GAO analyzed DOL data, including the results of state reviews of a representative random sample of UI payments made from fiscal years 2013 through 2017. GAO also reviewed UI information from six states selected for variation in work search requirements and overpayment rates, interviewed DOL and state officials, and reviewed relevant federal laws, regulations, and guidance. GAO's analysis of Department of Labor (DOL) data found that certain state administrative practices, such as reviewing a higher percentage of claimant-reported work search activities and frequent use of formal warnings, were associated with lower estimated work search overpayment rates for the Unemployment Insurance (UI) program. According to DOL data, 22 states were warning claimants after the first discovered occurrence of their failure to meet work search requirements (i.e., issuing formal warnings) rather than reporting that an overpayment was made, while the other states were reporting such cases as overpayments. In 2017, DOL determined that federal law does not permit states to use such policies. GAO's analysis of DOL data shows that in fiscal year 2017, estimated work search overpayments were nearly $1.4 billion (see fig.), but would have been an estimated $1.8 billion (+/-$0.2 billion) greater if states had not issued formal warnings and established overpayments. DOL officials told GAO in July 2017 that the agency would issue a letter to states informing them that federal law does not permit them to warn claimants instead of establishing an overpayment. To date, DOL has not issued the letter. Until DOL provides states with such notification, states may continue to report inconsistent information on overpayments. State officials GAO interviewed reported using multiple approaches to address work search overpayments, including using their online systems that automate collecting information on claimants' work search activities; conducting audits of claimants work search activities beyond those required; and sending automated messages to claimants regarding their work search requirements. Officials said that their approaches encouraged claimants to conduct a more active work search and prevented work search overpayments in some cases. DOL monitors states' work search overpayment rate estimates and has helped states address such overpayments, but lacks clear procedures for how states should verify claimants' work search activities. DOL directs states to verify a “sufficient” number of work search activities during their audits but has not provided information on what is considered sufficient. DOL data show that some states did not review claimants' work search activities for a majority of audited cases. DOL officials said that the agency plans to clarify its procedures after issuing a letter about formal warnings. By clarifying these procedures, DOL will have greater assurance that states are complying with verification requirements. GAO is making four recommendations to DOL, including that it provide states information about its determination that the use of state formal warning policies is no longer permissible and clarify its work search verification requirements. DOL agreed with GAO's recommendations and stated that it would take action to address them.", "document_type": "gao"}
{"report": "Generally, federal agencies have seven broadly applicable special payment authorities available government-wide under Title 5 of the United States Code (hereinafter “Title 5”)—listed below in table 1—for recruitment and retention. Table 1 describes each authority’s legal reference, purpose, payment ranges, and whether an agency must seek OPM approval prior to use. Federal agencies face mission-critical skills gaps that pose a risk to agencies’ ability to cost effectively serve the public and achieve results. Agencies can have skills gaps for different reasons. For example, skills gaps may arise in the form of: (1) staffing gaps, in which an agency has an insufficient number of individuals to complete its work; (2) competency gaps, in which an agency has individuals without the appropriate skills, abilities, or behaviors to successfully perform the work; or (3) both staffing and competency gaps. Mission-critical skills gaps may be broad— affecting several agencies—or may be specific to a given agency. We, and others including OPM and federal agencies, have identified and reported on mission-critical skills gap areas across the government and within specific agencies. In 2015, OPM and the CHCO Council worked with agencies to refine their inventory of government-wide and agency- specific skills gaps. They identified 6 government-wide and 48 agency- specific mission-critical skills gap areas for closure. The six government- wide areas identified were Cybersecurity; Acquisition; Human Resources; Auditing; Economics; and Science, Technology, Engineering, and Mathematics (STEM). Some of the agency-specific skills gaps included border patrol agents at the Department of Homeland Security and nurses at the Veterans Health Administration and the Department of Health and Human Services. Skills gaps played a contributing role in 15 of the 34 high-risk areas identified in our most recent report on government operations with greater vulnerabilities to fraud, waste, abuse, and mismanagement, or that are in need of transformation to address economy, efficiency, or effectiveness challenges. OPM is responsible for performing a number of functions to assist agencies in using the compensation flexibilities, including issuing regulations and, as necessary, providing approval authority, to ultimately help agencies build successful, high-performance organizations. OPM provides agencies with guidance and assistance on using special payment authorities via individual consults, memorandums, its website, training, and initiatives that focus on specific issues. OPM’s website has guidance on each special payment authority including references to regulations. For special payment authorities requiring OPM approval, OPM regulations provide agencies instruction concerning the information needed for OPM to review and decide whether to approve or deny requests. Although the information needs vary by authority, generally agencies are to submit information and evidence reflecting recruitment and retention challenges for the specific position(s), previous efforts to address the problem, and the basis for requested payment amounts. OPM is responsible for oversight of the federal government’s use of special payment authorities to ensure agencies are acting in accordance with applicable requirements. For example, as a part of its delegated examination audits and human resource management evaluations, OPM reviews selected samples of agency’s personnel actions to assess how well they complied with statutory and regulatory requirements. In cases where agencies used certain special payment authorities, OPM uses a checklist to guide its review of documents agencies must develop and maintain to justify their uses. OPM also is responsible for reporting to Congress on the federal government’s use of certain special payment authorities. Annually, OPM requests or receives data from agencies and reports to Congress on agency use of two authorities—critical position pay and the student loan repayment. The reports include information on the use of these authorities each calendar year—such as data showing how many received payments—and the total dollar or relative amounts of special payments. OPM was required to annually report to Congress on agencies’ use of the recruitment, relocation, and retention (3R) incentives in calendar years 2005-2009. The Chief Human Capital Officers Act of 2002 established the CHCO Council to advise and coordinate the activities of member agencies on such matters as the modernization of human resources systems, improved quality of human resources information, and legislation affecting human resources operations and organizations. The Director of OPM is the Chairperson of the CHCO Council, and the Deputy Director for Management in OMB is the Vice Chairperson. The council includes CHCOs of the executive departments and any other members designated by OPM. It serves to coordinate and collaborate on the development and implementation of federal human capital policies. For example, the CHCO Council manages the Human Resources University (HRU) website, which is a web-based platform to share knowledge, training, best practices, and resources across agencies. CHCO agencies used a range of special payment authorities to recruit and retain employees. Our analysis of CHCO agency data found that for six selected authorities, 20 or more agencies used each between fiscal years 2014-2016, as shown in figure 1. Seven agencies reported having used the critical position pay authority. We found that CHCO agencies reported using the seven authorities for a small number of federal employees overall. For example, in fiscal year 2016, less than 6 percent of the over 2 million federal employees at CHCO agencies received compensation under at least one of the seven special payment authorities, as shown in figure 2. Moreover, many agencies reported using most of these authorities for a limited number of employees each year. For example, of the 24 agencies that reported using superior qualifications and special needs pay setting—the authority reportedly used by the highest number of CHCO agencies—over half (13 agencies) reported using the authority for fewer than 100 employees per year. In addition, of the 23 agencies that reported using recruitment incentives in fiscal years 2014-2016, 11 agencies reported using the authority for 10 or fewer employees per year. As shown in table 2, agencies reported that more employees received compensation from the special rates authority, followed by use of retention incentives in fiscal years 2014-2016. Specifically, agencies reported using special rates for over 74,000 employees, of the over 2 million CHCO agency employees, in each of these fiscal years. On the other end of the spectrum, agencies reported using the critical position pay authority for fewer than 40 employees in each of these years. Special rates: Although CHCO agencies reported that more employees received special rates compensation than the other authorities in fiscal years 2014-2016, our analysis showed usage generally declined from between 2001- 2005, when over 139,000 employees received a special rate. An OPM official said that over time agencies have relied less on these special rates due to the introduction of locality pay. For example, in its 2005 annual review of special rates, OPM reported that 14 special rates schedules would be terminated because higher locality rates applied at all steps of each covered grade. Critical position pay: We found that the critical position pay authority was used for the lowest number of employees of these authorities each year in fiscal years 2014-2016. The authority’s lower use relative to the other authorities is to be expected to some extent because of the government-wide cap of 800 positions for this authority. Our analysis of CHCO agency questionnaire responses found that these agencies reported spending about $805 million total on 3R incentives and the student loan repayment authorities in fiscal years 2014-2016. In addition, we found that these agencies reported spending more on retention incentives than on the other three authorities in each of these years, as shown in figure 3. Specifically, over 40 percent (about $333 million) of this total reported spending was for retention incentives. In addition, the agency reported use of recruitment and relocation incentives increased in each year. Overall, recruitment and relocation incentives were about $174 million and $149 million, respectively, of the total approximately $805 million in reported spending between fiscal years 2014-2016. OPM officials stated that until recently agency spending on 3R incentives had been frozen, and many agencies had to limit their use of these incentives. Finally, agency reported use of the student loan repayment authority increased in each of these years and was approximately $148 million of the total approximately $805 in reported spending. All 26 CHCO agencies reported using special payment authorities to support mission-critical skills gap areas in fiscal years 2014-2016. We found that the number of CHCO agencies that used each of these authorities varied by skills gap area, as shown in table 3. For example, we found that superior qualifications and special needs pay setting was the authority used by the largest number of CHCO agencies in two of the five skills gap areas—STEM and Cybersecurity. We also found that 19 or more agencies reported using at least one authority to support four skills gap areas—STEM, Cybersecurity, Acquisitions, and Human Resources. Some CHCO agencies reported that certain skills gap areas were not mission critical for them. Specifically, 11 agencies reported that healthcare was not a skills gap area for them as compared to 2 or 3 agencies each for the other skills gap areas. STEM: Our analysis of the CHCO agency data found that, of the five skills gap areas, more agencies generally reported using the special payment authorities to support STEM occupations. Of the 21 agencies that reported using at least one authority to support the STEM area, we found that 18 agencies reported using the superior qualifications and special needs pay setting authority for these occupations in fiscal years 2014-2016. The Department of Agriculture (USDA), for example, reported that this authority had been a valuable tool in recruiting for critical STEM positions from a small and highly competitive Ph.D. applicant pool. The Department of the Treasury (Treasury) reported using special payment authorities generally to match private-sector salaries or to help mitigate disparities between private- and public-sector compensation for STEM occupations. Cybersecurity: Similarly, of the 21 agencies that reported using at least one authority to support the cybersecurity area, 16 reported using superior qualifications and special needs pay setting to support these positions in fiscal years 2014-2016, and 13 agencies reported using recruitment incentives. For example, the Small Business Administration reported that the superior qualifications and special needs pay setting authority has helped to attract top cybersecurity talent by narrowing the gap between public- and private-sector salaries. Acquisitions: Of the 20 agencies that reported using at least one authority to support the acquisitions area, 14 agencies reported using the student loan repayment authority, and 13 agencies reported using the superior qualifications and special needs pay setting authority for these positions. For example, the Department of Education reported using student loan repayments to help retain acquisitions employees, and in one instance, had retained an expert in multiple functional areas of government contracting. Other agency-identified skills gap areas: We also found that 20 of the 26 CHCO agencies reported using special payment authorities to varying degrees to help address other or agency-specific skills gap areas. For example, Treasury reported using recruitment incentives for auditors, while the Department of Homeland Security (DHS) reported using multiple authorities, including the 3R incentives for law enforcement positions in fiscal years 2014-2016. Our analysis of OPM’s Federal Student Loan Repayment Program Calendar Year 2015 Report on government-wide use found that agencies frequently used the student loan repayment authority for employees in mission-critical occupations (MCOs). Specifically, we found that for the five agencies that most frequently used student loan repayments that year—the Departments of Defense (DOD), Veterans Affairs (VA), Justice (DOJ), and State (State), and the Securities and Exchange Commission (SEC)—over 50 percent of the employees at each agency who received these benefits were in agency-specific MCOs. For example, SEC reported to OPM that approximately 72 percent of its student loan repayments were made to employees in MCOs such as accountants, attorneys, and securities compliance examiners. We also found that other agencies used the authority for employees in MCOs. For example, the Department of the Interior (Interior) reported to OPM that using the authority has been helpful in filling MCOs such as petroleum engineers, geophysicists, and biologists. Our analysis of OPM’s 2015 report also found that the 32 agencies that had used the authority that year did so for over 200 occupations. Overall, we found that agencies most frequently used student loan repayments for attorney-, engineer-, and contracting-related occupations, as shown in figure 4. Our review of OPM’s report to Congress on critical position pay in calendar year 2015 found that, as of calendar year 2015, all four positions that received the critical position pay authority were for director or other senior executive positions. For example, the positions of Administrator of the Transportation Security Administration and the Director of the National Institutes of Health received compensation under this authority in calendar year 2015. Since OPM’s 2015 report, OPM officials told us that they had approved 68 additional positions for the critical position pay authority for certain Medical Center Director positions at VA. According to data provided by VA in response to our questionnaire, the agency reported using its recently approved authority in fiscal year 2016 for 27 of these positions. CHCO agencies generally reported that special payment authorities positively affected areas of operation. More specifically, these agencies reported the authorities somewhat or very positively affected at least one of seven areas we identified in our questionnaire such as staff retention, ability to meet staffing needs, or ability to fill mission-critical positions (see appendix III for the results for the other special payment authorities). For example, the 19 agencies that reported using the special rates authority said it had somewhat or very positively impacted their ability to meet their staffing needs, and 17 reported the same for staff retention and achieving their missions (see table 4). CHCO agencies generally reported that special payment authorities somewhat or very positively affected their ability to fill mission critical positions. Agencies provided specific examples of the positive impact of special payment authorities and ways they responded to challenges using special payment authorities: Student loan repayment authority: The Department of Commerce reported that multiple components found this authority useful for competing with the private sector and for building a pipeline of top talent given that most of these employees were at the beginning of their careers. Relocation incentives: The Department of Energy reported using these incentives to relocate employees to meet emergency needs, including a shutdown of the Waste Isolation Plant Project in Carlsbad, New Mexico. Recruitment incentives: DOD reported that it would not have been able to effectively recruit individuals in several career fields, including engineering and nursing, without these incentives. Moreover, the Social Security Administration credited these incentives for its success in hiring experts from major corporations for cybersecurity and other program policy area positions. Retention incentives: The Environmental Protection Agency credited a retention incentive for successfully retaining a senior research scientist, thereby addressing a mission-critical skills gap and allowing the agency’s mission to continue uninterrupted and at significant savings. Moreover, State explained how using a retention incentive helped to address its Bureau of Medical Services’ severe staffing shortages due to uncompetitive base salaries. VA also stated that these incentives helped create a smooth transition of institutional knowledge to newer employees and facilitate continuity of operations. DHS responded to its need to attract and retain employees in information technology (IT) and cybersecurity by developing a unique retention incentive plan that focused on specialized certification for employees in these fields. The Department of Health and Human Services’ (HHS) Centers for Disease Control and Prevention (CDC) used retention incentives to retain employees that might have moved to the private sector. Superior qualifications and special needs pay: HHS’s CDC reported it has been successfully using this authority to attract IT specialists, an occupation series designated as “hard-to-fill.” HHS credited this authority with attracting highly qualified applicants who would otherwise have accepted higher starting salaries outside the federal government. USDA included use of this authority in its approach to addressing challenges recruiting and retaining employees in the remote oil boom Bakken region in North Dakota and Montana. Twenty-five of 26 CHCO agencies reported assessing the effectiveness of at least one special payment authority used in fiscal years 2014-2016. However, our analysis found in many cases agencies did not document their assessments. Moreover, agencies often did not assess the effectiveness of all authorities they used. For example, 4 agencies reported having no assessments for the majority of the special payment authorities they used, and 11 agencies reported not assessing at least one of the authorities they used. As seen in table 5, overall, CHCO agencies reported conducting informal effectiveness assessments more often than documenting assessments of their uses of special payment authorities. Our analysis of CHCO agency responses found the extent to which these agencies documented assessments of effectiveness varied by payment authority. For example, agencies reported most frequently documenting assessments for recruitment incentives and the student loan repayment authority. On the other hand, 3 of the 24 agencies using the superior qualifications and special needs pay setting authority reported documented assessments. For each of the authorities, a small number of agencies reported not assessing effectiveness at all. For instance, 5 of the 21 agencies using retention incentives did not assess their effectiveness. OPM said it did not document assessments of the effectiveness of the authorities the agency used for its own employees because meaningful analyses were not possible due to the few employees who received compensation under the authorities OPM used. CHCO agencies that reported documenting assessments identified the various impacts they assessed for the special payment authorities they used. More specifically, of the 10 CHCO agencies that reported having documented assessments, agencies most frequently reported evaluating the impact of these authorities on meeting staffing needs and on their effectiveness relative to other human capital flexibilities. This included DOD, which reported documenting assessments for five authorities— special rates, the 3Rs, and student loan repayments—on its operations. We requested copies of documented assessments from the 10 CHCO agencies that reported having them and 9 responded. Three of the nine responding agencies provided documents with information on authorities’ effectiveness, such as the impact on meeting staffing needs. Specifically, Interior provided documentation that showed the agency tracked workforce data, such as the number of vacancies and turnover rates related to using the 3Rs and special rates focused on oil and gas extraction. DOD and DHS included information on the student loan repayment authority in their annual reports to OPM, and credited student loan repayments with helping to retain highly qualified employees. Six of the nine responding agencies provided documentation that justified or reported on the use of special payment authorities rather than documentation that assessed the impacts that using authorities had on agency operations. For example, three of these six agencies provided examples of reviews or information addressing compliance with regulations relevant to the use of special payment authorities. Three other of these six agencies provided documents to justify and request approval to use 3R incentives, such as to show applicants’ qualifications or current employees’ performance appraisals. CHCO agencies reported that, among the six potential challenges we identified in our questionnaire, insufficient resources was the most common challenge they experienced in using special payment authorities. Most CHCO agencies reported they rarely or never experienced other challenges. With respect to insufficient resources, 13 of the 26 agencies said they regularly or always experienced this challenge (see figure 5). According to three of these agencies, budget constraints prevented them from using special payment authorities more frequently or limited their use to filling only the most critical vacancies. Four CHCO agencies said they regularly or always experienced challenges with burdensome documentation or complex approval process when using special pay authorities. We also sought feedback on certain agencies’ experiences with OPM’s approval processes for special payment authorities. Below are details of challenges that agencies provided. Interior stated that the department and its components were required to provide a significant amount of historical data to justify the need for special salary table, and that publicly-available data on market analyses and trends should drive the special pay rate process, thereby making it easier for agencies to submit requests and to adapt to current conditions. HHS reported that documenting special payment authorities was overly complicated for some of its divisions with smaller human resources (HR) staffs. The Department of Transportation (DOT) commented on the timeliness of OPM and OMB approvals for using the critical position pay authority. DOT said this delay–approximately 5 months–could have been a driving factor that negatively affected recruitment for a position, as other agencies could negotiate to offer the candidate higher salaries. Interior similarly cited a concern with approval process timeliness due to OPM’s limited staff and expertise coordinating between all the involved federal agencies with which it must deal. Interior suggested that when an agency must request pay flexibilities that can be approved by only OPM, OPM should train the agency’s HR staff and managers on the processes and materials needed to justify their requests, and should provide a clear understanding of timelines for approvals. However, multiple CHCO agencies reported only rarely or never experiencing documentation or process challenges. For example, Interior credited OPM with collaborating to establish special rates to address challenges in competing with the oil and gas industry for the talent needed to meet Interior’s mission. DOD and DOJ also conveyed positive views on OPM’s approval process, crediting it with expediting a waiver request for a group retention incentive limitation and use of special rates, respectively. CHCO agencies most frequently said training for agency managers is a change that would very likely or certainly improve the agency’s ability to effectively use special payment authorities (see figure 6). Conversely, about a quarter of responding agencies said legislative changes very likely or certainly would improve their ability to use special payment authorities. CHCO agencies provided examples of how potential changes would improve their ability to effectively use special pay authorities. VA responded that its central HR office was developing a pay authority toolkit to provide information on processes and procedures for using the authorities and related training for HR specialists and managers. According to VA, the toolkit, mandatory training, and regularly-scheduled refresher training were likely to increase staff’s knowledge and ease with using pay flexibilities to develop competitive compensation packages to help recruit and retain quality talent and fill critical positions. HHS also expressed concerns about the use of special payment authorities in the context of ongoing budget constraints. Specifically, HHS noted that budget restraints over the last several years have led to retirements and resignations among its more experienced HR staff. This resulted in a loss of institutional knowledge on complex pay and leave authorities, including those affecting special payments. HHS officials said the loss of experienced HR staff diminishes the agency’s internal capacity to train remaining staff. In addition, budgetary controls result in fewer resources for external training. Also, Interior commented that, for special payment authorities that can be approved by only OPM, OPM should provide training for their HR staff and managers responsible for using them. OPM has taken a number of steps to provide agencies with additional guidance and assistance on using special payment authorities. For example, in April 2015, OPM and the CHCO Council held a web-based, virtual human resources conference for agency officials which included a session on special payment authorities for recruitment and retention. Moreover, in January 2016, OPM issued a memorandum to agency CHCOs that stated that OPM recognized the 3Rs are essential pay flexibilities for agencies facing serious staffing challenges. The memorandum provided guidance on exceptions to spending limits on 3R incentives and OPM website links to related guidance on using the authorities. In August 2017, OPM posted a web-based training course for agency officials on special payment authorities and other flexibilities, including examples of their use and resources for additional information. OPM has also pursued initiatives that focus attention on addressing mission-critical skills gaps areas. As part of government-wide efforts to develop and strengthen the cybersecurity workforce, in November 2016, OPM issued a memorandum and guidance to CHCOs on strategic and cost-effective use of the various flexibilities agencies may employ to recruit and retain employees in cybersecurity positions. The guidance included checklists of steps agencies need to complete to use various special payment authorities, and described ways to combine use of special payment authorities, when appropriate, to make federal agencies more competitive in recruiting and retaining cybersecurity employees. OPM also formed Federal Agencies Skills Teams (FASTs) for occupations as an effort to help agencies address mission-critical skills gaps areas. As part of FASTs, OPM collected and reviewed information from agencies on the root causes of skills gaps and found that compensation levels play a role in skills gaps, in some cases. As of August 2016, OPM’s approach included a strategy to hold agencies accountable for closing skills gaps in their MCOs, and to monitor metrics and progress through fiscal year 2020. In January 2015, we reported that the measures agencies had in place limited OPM and the CHCO Council’s ability to track progress in closing skills gaps government- wide. Accordingly, we recommended that OPM strengthen the approach and methodology for addressing skills gaps by working with the CHCO Council to develop targets that are clear, measurable, and outcome oriented. OPM partially concurred with the recommendation. It is important to identify the necessary data and establish measures to track a program’s effectiveness, as well as establish a baseline to measure changes over time and assess the program in the future. We have reported that agencies can use these measurements to help them determine if a program is worth the investment, and to distinguish which of the available human capital flexibilities is better suited to address recruitment and retention needs. Standards for Internal Control in the Federal Government also state that management should obtain relevant data from reliable sources that can be used to effectively monitor programs. We have reported that understanding the relative effectiveness of various flexibilities can help identify any changes needed for agencies to more effectively use them. As we also recently reported, collecting and using data to assess the effectiveness of authorities would be a critical first step in making more strategic use of flexibilities to effectively meet hiring needs. OPM collects agency data on the use of special payment authorities via annual reporting on certain authorities and EHRI, but has not analyzed whether the payment authorities help agencies to improve recruitment and retention government-wide. Nor has OPM assessed trends and factors that can affect the use of these authorities. As required by statute, OPM annually collects data from agencies to report to Congress on the use of the student loan repayment and critical position pay authorities. Student loan repayment: OPM collects some information from agencies about their use of student loan repayment authority and invites agencies to provide details about their experiences in administering the authority, but has not conducted an analysis of the authority’s effectiveness for addressing recruitment and retention needs. As discussed previously, we analyzed the government-wide use of this authority by occupation and identified those occupations for which agencies most frequently used the authority (see figure 4). In addition, we used OPM’s 2015 report and information from its FASTs skills gap initiative to identify the use of this authority for MCOs. These are two examples of analyses that OPM could perform to help understand how agencies are using this authority. Critical position pay: OPM collects data on agency use of critical position pay from the agencies with existing OPM approval, but the information does not help OPM understand how the payment authority supports recruitment or retention. OPM collects data that it is required by statute to report to Congress such as who received the higher rate and the rate paid, but does not include information on the impact on recruitment and retention. OPM has stopped regularly collecting and analyzing data for the 3R incentives, except on the use of retention incentives for employees likely to leave for other federal agencies, and does not collect and analyze data for special rates, leaving a void for conducting government-wide analysis that would help determine whether special payment authorities help address agency recruitment and retention needs: 3R incentives: In a February 2010 memorandum to agency CHCOs on 3R incentives, OPM called for it and agencies to more actively manage the program and track data. OPM said that validated data would help OPM and agencies to understand the nature and trends of use of the incentives and better track incentives on an ongoing basis. OPM and agencies would also, if necessary, be better able to investigate any 3R data anomalies and take corrective actions. Based on its request to agencies in October 2011, OPM prepared a draft report on its analysis of agency-provided data and information on use of 3R incentives in calendar years 2010 and 2011, including what agencies reported as barriers to using the authorities and whether 3R improved recruitment and retention. However, OPM did not distribute the report or take action on it. Although OPM said it planned to conduct periodic reviews on an ongoing basis, since the 3R reporting requirement expired and OPM’s October 2011 agency data request, OPM does not regularly collect and review government- wide information on the level of use and potential barriers. Special rates: In conducting its annual review of special rates, each year OPM asks that agencies review their respective applicable special pay rate tables to determine whether the rates should be terminated, reduced, or increased. OPM considers requests to make changes based on the agency reviews, but according to OPM officials, in recent years, agencies have not identified any needed changes to special rates during that annual review process. Moreover, OPM has not used its EHRI data to better understand trends in the use of these authorities government-wide and how agencies are using them to address their recruitment and retention challenges. As an example, we analyzed EHRI data to describe government-wide use of selected authorities by occupational family in fiscal year 2014. From that analysis, we identified differences in use across various occupational families that could be helpful in understanding how agencies are using these authorities. For example, we found that the Medical, Hospital, Dental, and Public Health family was the top occupational family for four of the five authorities. See appendix IV for additional information. OPM also has not explored trends in agency use of the critical position pay authority. OPM has not pursued reasons why agencies have not requested approval for over 750 available slots or why agencies have used only 4 of the 36 authorized positions as of calendar year 2015. As part of an initiative to close skills gaps for the STEM workforce, in October 2014, the White House Office of Science and Technology Policy, OPM, and OMB identified the critical position pay authority as a potentially underused flexibility. However, according to the 2015 OPM report, OPM had authorized critical position pay for 36 positions in 10 agencies as of calendar year 2015. And, only four of those agencies reported using the critical position pay authority in 2015 for four current employees (see table 6). In July 2017, the Treasury Inspector General for Tax Administration (TIGTA) recommended that the Internal Revenue Service (IRS) pilot the use of critical position pay authority to recruit highly-qualified experts to lead IRS’s cybersecurity and related specialized functions. According to TIGTA, IRS would enhance its recruitment efforts by using the authority. OPM officials attribute low use of critical position pay to: (1) agencies’ views that the approval process is cumbersome; (2) management resistance or cultural issues based on views about pay inequity between employees, or employees receiving higher salaries than their managers; and (3) agencies using other compensation flexibilities that do not require prior OPM approval. OPM is not tracking government-wide data on the use of the range of special payment authorities to better understand whether or how various authorities improve recruitment and retention. OPM officials said the information they collect on special payment authorities depends on reporting requirements for the specific payment authority. For example, they said they collect information on assessing the effectiveness of student loan repayments because of the reporting requirements in the law. However, the reporting requirement does not include assessments to examine effectiveness or impediments to help OPM determine whether potential changes may be needed to address recruitment and retention challenges. Instead, OPM’s annual data request memorandums invite agencies to provide additional details on their experiences in administering the student loan repayments. OPM officials said they may sometimes perform ad hoc analyses of EHRI data on certain authorities but do not regularly analyze EHRI data on the use of the various authorities government-wide. For example, OPM officials said they have queried the EHRI database on the use of selected special payment authorities for cybersecurity employees and found the numbers of 3R incentives and agencies using them increased from fiscal year 2015 to 2016, while use of student loan repayments decreased during that period. However, OPM does not regularly conduct such analyses on this or other uses of special payment authorities to understand how they are used to address skills gaps. By not tracking and analyzing data on the use of special payment authorities, OPM and the CHCO Council do not have the information they need to help determine what potential changes may be needed, and have limited assurance that special payment authorities are helping agencies meet their needs and achieve recruitment and retention goals. Standards for Internal Control in the Federal Government requires that agency management design and implement control activities, which are the actions management puts in place through policies and procedures to achieve objectives and respond to risks. We have reported on OPM’s important leadership role and the CHCO Council’s support in assisting agencies with identifying and applying human capital flexibilities across the federal government. In its most recent strategic plan, OPM reported it would lead federal human capital management by partnering with its stakeholders—including federal agencies—to develop and implement effective and relevant human resources solutions to build an engaged, productive, and high-performing workforce and develop effective compensation packages, among other things. OPM also has acknowledged its leadership role in strategically promoting the effective use of at least one special payment authority—student loan repayment— and assisting agencies in the strategic use of this and other recruitment and retention tools as necessary to attract and retain a well-qualified federal workforce and support agency mission and program needs. We have also previously reported on the lack of awareness among federal managers about using flexibilities to address human capital challenges. In 2014, we reported that in a forum of CHCO Council agencies we convened, CHCOs said they wanted OPM to do more to raise awareness and assess the utility of tools and guidance it provides to agencies to address key human capital challenges. Accordingly, we recommended that OPM evaluate the communication strategy for and effectiveness of relevant tools, guidance, or leading practices created by OPM or the agencies to help ensure agencies are getting the guidance and tools that they need. OPM concurred with the recommendation. OPM does not provide guidance on assessing effectiveness of special payment authorities in the agency’s handbook on human capital flexibilities for any of the authorities we reviewed. For example, OPM does not offer examples of assessments to illustrate what data are needed and what methodologies are available for determining whether special payment authorities improve recruitment and retention. OPM has provided supplemental information on assessing effectiveness in some student loan repayment authority annual reports and provided links to those reports on its website, but has not done so for other payment authorities. OPM officials said that they believe agencies are in the best position to collect and analyze data to determine which special payment authorities are effective for addressing recruitment and retention needs at their agency. However, we found that CHCO agencies often did not document assessments for the special payment authorities they used. The documents agencies prepared were most often focused on justifying or reporting on use of authorities rather than on evaluating their effectiveness in improving recruitment and retention. As mentioned previously, documents addressed compliance with regulations and justifications that agencies prepared to request approval for using the authorities. Our review found examples of data and methodologies that agencies could use to help assess whether an authority helped improve recruitment and retention. For example, DOD used data from interviews with employees hired into its entry-level developmental trainee programs to gather feedback on student loan repayment. The feedback consistently indicated that the program was a major contributing factor in employees’ decisions to accept these positions. Also, Interior collected and monitored data on retention rates to assess the effectiveness of special rates in retaining its oil and gas workforce. State said that it conducted some informal assessments of its use of retention incentives but could add a question to its employee exit survey to collect data on how these incentives affect attrition. Some CHCO agency questionnaire responses included examples of other types of data or analyses that could be used to assess special payment authorities such as (1) the reduced level of resignations in a department that had experienced staffing shortages; (2) an increased rate of filling certain hard-to-fill positions; and (3) counts of the numbers of employees successfully recruited into mission-critical skills gap areas. OPM does not provide consistent information via tools and guidance to support effective use of special payment authorities. OPM’s website guidance for the student loan repayment authority provides agencies with tools including best practices, sample agency plans, and answers to frequently asked questions. However, its website guidance for superior qualifications and special needs pay setting authority, for example, only has fact sheets which generally restate and reference the related regulations. Table 7 summarizes the various types of tools and guidance information on the agency’s website about special payment authorities. In addition to the tools and guidance noted above, the student loan repayment website includes links to OPM annual reports which include details that could support agency use of this authority. In OPM’s annual requests for data on student loan repayments, OPM regularly invites agencies to submit information for these reports, including on these topics: establishing a business case, program impediments, and ways to improve the student loan repayment program. OPM’s guidance on using special pay authorities to address cybersecurity skills gaps illustrates how OPM provides useful information which could be applied in other mission-critical skills areas. In assisting agencies on ways to combine authorities to hire cybersecurity specialists, the guidance includes hypothetical scenarios where desirable job candidates have competing job offers or are currently employed, and provides example competitive compensation packages for entry-, mid-, and senior/expert-level employees. Such information could be useful for other government-wide or agency-identified mission-critical skills gaps or other positions where agencies face serious recruitment or retention challenges. OPM officials said they recognized tension between any effort to promote use of special payment authorities and OPM’s role of providing oversight of special payment authorities. OPM officials said the agency promotes the use of the authorities when agencies seek OPM’s help, rather than undertaking efforts to more broadly ensure agencies are fully aware of the potential benefits and innovative ways to use authorities. Further, OPM has not worked with the CHCO Council to gather and disseminate illustrative examples of data needed and methodologies to assess the effectiveness of the authorities. With guidance to assess effectiveness and consistent tools and guidance across the range of authorities, OPM and CHCO agencies could more fully support strategic use of special payment authorities to improve recruitment and retention across the federal government. Standards for Internal Control in the Federal Government require management to design and implement control activities through policies to achieve objectives and respond to risks. Documentation and periodic review of policies and procedures are important parts of the standards and are necessary to design, implement, and operate controls effectively. Documentation provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel. Documentation is also evidence that controls can be monitored and evaluated. As we previously reported, streamlining administrative processes is a key practice for effectively using human capital flexibilities. Since agency officials must view administrative processes as worth their time compared to the expected benefit to be gained, perceived burdens and slow approval processes could dissuade them from seeking approval to use special payment authorities that could address recruitment and retention needs. OPM regulations implementing the statutory provisions set forth the basic criteria for OPM approval of certain special payment authorities, but OPM does not have documented procedures to guide OPM staff in assessing agency requests for approval. For example, OPM does not have documented criteria to assess the sufficiency of the information to support the request, such as the soundness of the methodology or reliability of underlying data for calculating payment amounts, or the sufficiency of prior agency efforts to recruit and retain employees without having to resort to additional pay. OPM officials noted that the complexity and nature of recruitment and retention difficulties can vary significantly between agencies and the authority requested. To make decisions about an agency’s request for approval, OPM officials said they apply the criteria in law, regulations, and guidance posted on OPM’s website. Our analysis shows that, since January 2009, OPM generally took 4 to 6 months to make approval decisions on CHCO agency special rates and critical position pay requests. OPM officials said they have conversations with agency officials about their views on the process, but do not have procedures to systematically monitor or evaluate the process, such as to seek agency feedback on whether the approval processes are burdensome, complex, and a barrier to wider use. As noted earlier, we sought feedback on certain agencies’ experiences with OPM’s approval processes for special payment authorities. Although some had positive comments, others expressed concerns about the timeliness of the process, including that the length of the process may lead to missed opportunities to hire desirable candidates. The July 2017 Treasury Inspector General for Tax Administration (TIGTA) report also said that lengthy approval processes for using critical position pay is a reason for low overall use of the authority. If pursued by IRS, the approval process would include getting the request cleared internally, approved by the Secretary of the Treasury and then, in turn, by OPM and OMB. OPM has not established a time frame within which agencies could expect a decision from OPM and OMB. OPM officials estimated that it may take several weeks or up to several months to complete the approval process, according to TIGTA. As part of its recommendation to IRS, TIGTA recommended tracking in detail the time and effort to get the request for approval cleared internally and approved by the Secretary of the Treasury, OPM, and OMB. OPM officials said they do not have documented procedures with criteria for approving use of special payment authorities because the complexity and nature of the requests vary significantly between agencies and the authority requested. OPM officials noted that in reviewing applications they need to be able to take into account relevant and important variables necessary to make fact-specific and reasonable determinations to help an agency find the most appropriate solution to its staffing problems. They said there is no “one-size-fits-all” formula for approving or denying requests. However, without documented procedures for assessing requests for approval, OPM lacks a means to review and assure that approval processes achieve their objectives. Without such documents, OPM also increases the likelihood of inconsistent decisions to grant or decline approval for the use of special pay authorities. Moreover, it also increases the risk of losing organizational knowledge of the personnel with expertise in assessing requests. Additionally, by not periodically examining the procedures, OPM is not well-positioned to consider alternatives for streamlining the approval process. To deal with staffing challenges resulting from skills gaps, reduced budgets, and the upcoming wave of retirements, agencies have compensation tools at their disposal that can be coupled with other flexibilities to produce an attractive package for potential and current employees. CHCO agencies generally reported that special payment authorities positively contributed to areas such as employee retention, applicant quality, and ability to meet staffing needs, among others. OPM has acknowledged its leadership role in strategically promoting the effective use of at least one special payment authority—student loan repayment—and assisting agencies in strategic use of this and other human capital tools. However, OPM has not tracked or analyzed the government-wide data on agencies’ use of various special payment authorities to better understand whether or how various authorities improve recruitment and retention. By tracking and analyzing these data, OPM could have information it needs to determine what potential changes may be needed, and have better assurance that special payment authorities are helping agencies meet their needs and achieve recruitment and retention goals. Moreover, OPM has not been consistent in providing guidance on assessing effectiveness of the range of special payment authorities in attracting and retaining a well-qualified federal workforce to support agency mission and program needs. Few agencies are documenting assessments. OPM has not worked with the CHCO Council agencies to provide illustrative examples of data needed and methodologies to assess the effectiveness of the authorities. By providing guidance on assessing effectiveness of these authorities, OPM and CHCO agencies could be better positioned to know whether use of the authorities is improving recruitment and retention or what changes might be needed to improve their effectiveness. Agency officials may also perceive documentation and approval processes as time consuming or burdensome barriers to using compensation tools. Perceived delays or inefficiency in OPM’s approval processes could discourage agencies from seeking to use Title 5 special payment authorities that could address recruitment and retention challenges. OPM also had not documented procedures for assessing the sufficiency of the information agencies submit to request approval. By establishing documented procedures and periodically reviewing them, OPM would increase the likelihood of consistent decisions to grant or decline agency requests for approval to use these authorities. We are making the following three recommendations to OPM. The Director of OPM, together with the CHCO Council, should track government-wide data to establish a baseline and analyze the extent to which the seven Title 5 special payment authorities are effective in improving employee recruitment and retention, and determine what potential changes may be needed to improve the seven authorities’ effectiveness. (Recommendation 1) The Director of OPM, together with the CHCO Council, should provide guidance on assessing effectiveness and tools—such as best practices or frequently asked questions—for the range of Title 5 special payment authorities. (Recommendation 2) The Director of OPM should establish documented procedures to assess special payment authority requests requiring OPM approval and periodically review approval procedures to consider ways to streamline them. (Recommendation 3) We provided a draft of this report to OPM for review and comment. We also provided relevant draft report excerpts to CHCO agency officials for comment in cases where we more extensively reported an agency’s illustrative examples, or where an agency’s views were more significant in context of the report. OPM provided written comments, which are reproduced in appendix V and summarized below. Of our three recommendations, OPM concurred with one and partially concurred with the other two. OPM also outlined its planned steps to implement the recommendations. OPM and CHCO Council agency officials also provided technical comments, which we incorporated as appropriate. In response to our first recommendation, OPM partially concurred and outlined its plans to track data that cover a limited period to analyze agencies’ use of certain Title 5 special payment authorities. OPM said it planned to analyze both student loan repayment authority data by occupation for one calendar year (2016) and the most recently available data for five of the other six special payment authorities covered in this report. This includes use for government-wide mission-critical occupations. While these actions may provide some degree of insight into the extent to which and how agencies use some of the special pay authorities, examining only recent and available data will not support establishing a baseline to measure changes over time, tracking effectiveness, or determining any changes needed in future years. We made revisions to the recommendation to clarify the value of tracking data over time for the seven special payment authorities. OPM stated that tracking government-wide workforce data available to them will not provide a complete assessment of the effectiveness of the special payment authorities because agencies are in the best position to analyze such information. We agree that agencies have first-hand information on use of special payments. Agencies also have data that can inform discussions between OPM and the CHCO Council on potential strategies for a government-wide approach to enhance strategic use of these authorities to address mission-critical skill gaps. By working with the agencies through the CHCO Council, OPM is better positioned to track government-wide data to analyze the extent to which Title 5 special payment authorities improve employee recruitment and retention and determine what potential changes may be needed to improve authorities’ effectiveness. In response to our second recommendation, OPM concurred and outlined plans such as issuing guidance with examples of assessments to illustrate what data are needed and what methodologies are available for determining whether special payment authorities help improve recruitment and retention. We believe OPM could also assist agencies by providing tools or other guidance for the authorities that OPM does not approve—such as on establishing a business case, best practices, answers to frequently asked questions, or lessons learned—to help ensure consistent information is shared with agencies to support effective use for the range of Title 5 special payment authorities. OPM could also provide agencies with tools and guidance for other mission-critical skills areas similar to those shared for addressing cybersecurity skills gaps. Such tools and guidance could include hypothetical recruitment scenarios, checklists of required steps, and examples of competitive compensation packages. OPM stated it would work on any guidance that the CHCO Council identifies to improve use of special payment authorities. With consistent tools and guidance across the range of authorities, OPM and CHCO agencies can be positioned to fully support strategic use of special payment authorities to improve recruitment and retention across the federal government. In response to our third recommendation, OPM partially concurred and commented that there is no “one-size-fits-all” formula for approving or denying agency requests. It added that applying a rigid formula could result in unwarranted disapprovals. OPM also stated that it would document additional procedures to guide staff in evaluating agency requests and periodically review the procedures. We believe establishing documented procedures would guide staff in considering such complex factors such as the soundness of the methodology and the reliability of underlying data for calculating payments amounts. Documentation of policies and procedures is an important part of internal control standards. By documenting procedures to review requests, OPM will help ensure consistency in approval decisions and retain organizational knowledge of personnel with expertise in assessing requests. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 14 days from the report date. At that time, we will are send copies of this report to appropriate congressional committees, the Acting Director of OPM, and other interested parties. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2717 or jonesy@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report (1) describes what is known about how much Chief Human Capital Officer (CHCO) Council agencies used selected special payment authorities in fiscal years 2014-2016; (2) assesses the extent to which CHCO agencies evaluate the effectiveness of these authorities and identifies challenges, if any, the agencies reported facing in using the authorities to address mission-critical skills gap areas; and (3) evaluates how the Office of Personnel Management (OPM) has helped agencies address federal recruitment and retention needs. We limited our scope to the seven broadly available special payment authorities generally available government-wide under Title 5 of the United States Code to address federal agencies’ recruitment and retention issues: (1) special rates, (2) recruitment incentives, (3) relocation incentives, (4) retention incentives, (5) superior qualifications and special needs pay setting, (6) student loan repayments, and (7) critical position pay. To describe what is known about how much CHCO Council agencies used selected special payment authorities in fiscal years 2014-2016, we developed and administered a questionnaire to the 27 CHCO agencies to collect their fiscal years 2014-2016 data—to the extent available—on frequency of use, dollars spent, and whether they used the authorities to help address recruitment and retention needs in mission-critical skills gap areas. All 26 CHCO agencies that reported use of the authorities responded to our questionnaire. We asked agencies to not report information related to agency-specific or non-Title 5 authorities. In our report, we use the aggregate CHCO agency reported data by authority. Federal employees may receive compensation under more than one authority in a given fiscal year, and in these instances would be counted for each authority received. For example, an employee who received a recruitment incentive and student loan repayments in the same fiscal year would be counted once for each authority in that year. We did not verify the amounts agencies reported spending. In addition, we used CHCO reported data to determine the total use of these authorities and OPM Enterprise Human Resources Integration (EHRI) personnel data, which contains personnel action and workforce data for most federal civilian employees, to identify the approximate percentage of employees who received at least one of these seven authorities in fiscal year 2016. In calculating the percentage, we used CHCO agency reported data for the numerator and OPM EHRI data for the total number of federal employees at the 26 CHCO agencies—as of September 30, 2016—for the denominator. We also analyzed OPM EHRI personnel data for fiscal year 2014 to describe the government-wide use of certain authorities by occupational family. To do so, we calculated the number of unique employees who received a certain authority in each fiscal year. We included federal employees on permanent and nonpermanent appointments, and all work schedules (seasonal, nonseasonal, intermittent, and full-time and part- time). Individual employees who switched occupational families during a fiscal year could be counted more than once if they received a special payment authority under both occupational families. We primarily relied on the following EHRI data variables to describe agencies’ use of certain authorities: Special rates: We used the “pay rate determinant” to identify employees who were receiving a special rate as of the end of the applicable fiscal year, and then used the “special pay table identifier” to limit our analysis to special rates authorized under 5 U.S.C § 5305. OPM officials provided a list of all authorized Title 5 special rate tables active during the fiscal years included in our review. 3R incentives: We used the “legal authority” and “nature of action” codes to identify employees for whom 3R incentives were authorized during the fiscal year. Superior qualifications and special needs pay setting: We used the “pay rate determinant” and “nature of action” codes for new appointments to identify the number of employees who had received a superior qualifications and special needs pay setting authority during the fiscal year. We reviewed OPM documentation, including OPM’s Guide to Data Standards—the guidance document that describe data elements in EHRI—to identify the specific codes used to designate employees who had received these authorities. We also analyzed OPM calendar year 2015 reports—the most recently available at the time of our review—on the student loan repayment authority and the critical position pay authority to describe agencies’ use of these two authorities by occupation. For the student loan repayment authority, we calculated the top occupations series that received this authority government-wide. We aggregated the 18 engineering-related occupations into one engineering series. In addition, for the agencies that most frequently used the authority, we calculated the approximate percentage of occupations that received the authority that were identified as mission critical by these agencies as part of OPM’s and the CHCO Council’s initiative to close skills gaps. To assess the reliability of the CHCO agency reported data and OPM data, we compared frequencies from the various data sources by agency for fiscal year 2014 (the one year of available overlapping data); reviewed OPM documentation; and interviewed OPM officials. We determined that the data were sufficiently reliable to present agency use of special payment authorities over this time period. To assess the extent to which CHCO agencies evaluate the effectiveness of special payment authorities and to identify challenges they reported facing in using the authorities, in our questionnaire to agencies we asked about their views on the impacts of each authority used in fiscal years 2014-2016. We analyzed and summarized closed-ended question response data agencies reported on authorities’ impacts on agency operations, including the extent of positive or negative effects in areas such as employee retention, applicant quality, and ability to achieve the agency mission. We also asked whether and how they assessed each authority’s effectiveness. We summarized closed-ended question response data on whether agencies had done documented, informal, or no effectiveness assessments of authorities in impact areas such as agency mission, meeting staffing needs, or addressing mission-critical skills gap areas. We contacted the 10 agencies that reported having documented assessments for one or more authorities to request copies of them. Nine agencies provided requested documents. We analyzed the documents to determine the type of information they provided, including whether they had information on how use of the authority had been effective in the impacts the questionnaire asked about. To learn more about agencies views on authorities’ effectiveness, we also asked an open-ended question for agencies to provide examples of how authorities helped address mission-critical skills gaps. We reviewed the narratives agencies provided to identify and report examples appropriate to illustrate the various effects agencies reported. We also asked agencies about their views on any challenges they experienced in using special payment authorities and potential changes to operations or procedures to help improve effective use of authorities. We analyzed and summarized the closed-ended question response data agencies reported on how often they experienced certain challenges, including insufficient resources, management resistance, burdensome documentation, and complex approval process. For the two most common challenges agencies reported other than insufficient resources— burdensome documentation and the complex approval process—we followed up with the three agencies that reported regularly or always experiencing both challenges. Two agencies responded. We also asked an open-ended question for agencies to provide narrative examples of how they identified and responded to challenges in using these authorities. We analyzed the content of the narrative responses to identify and report examples appropriate to illustrate various challenges and responses to challenges agencies reported. To learn more about agencies’ experiences with OPM’s approval processes for special payment authorities, we analyzed OPM’s data on agency requests to use the special payment authorities that OPM approves. In addition to our CHCO agency questionnaire response follow- up, we contacted selected agencies that OPM data identified as having requested approval to use a special payment authority since 2009. We asked seven agencies to provide narrative of their views on such topics as what worked well, challenges experienced, and any suggestions for improving the process. To provide an opportunity to learn how approval processes could affect agency decisions to not seek such approvals, we included two agencies—EPA and HHS—that had not made such requests to ask for narrative explanations of why they had not sought such approvals. All agencies provided their views. We analyzed agencies’ narrative responses to illustrate examples of the experiences agencies reported. We also analyzed and summarized the closed-ended question response data agencies reported on how likely potential changes would improve use of special payment authorities. We followed up with five agencies that identified the three most common potential changes that would very likely or certainly improve their ability to effectively use special pay authorities— changes to training for agency managers, training for agency human resources employees, and OPM regulations. We asked them to provide narrative descriptions of changes they had in mind and how changes would improve their agency’s effective use of special payment authorities. Four agencies responded. We reviewed the narratives agencies provided to identify examples appropriate to illustrate the various views on potential changes agencies reported. To evaluate how OPM has helped agencies address federal recruitment and retention needs, we interviewed OPM officials and reviewed OPM’s procedures to collect and analyze data on agency use of special payment authorities, including through automated systems (EHRI) and information requests and reporting. We reviewed the procedures to assess whether OPM tracks data to assess the level and effective use of the payment authorities to improve recruitment and retention. We also reviewed and summarized the various ways OPM provides agencies information on special payment authorities, including through OPM’s memorandums, opm.gov website tools and guidance on each special payment authority, and guidance for using special payment authorities to address cybersecurity skills gaps. We compared the types of information and consistency of the various ways OPM provides information to promote the strategic use of special payment authorities to include supporting agency effectiveness assessments and increased awareness and strategic decision making on the use special payment authorities. We reviewed procedures to collect information on the use of critical position pay authority and a July 2017 Treasury Inspector General for Tax Administration report on the topic. We also interviewed OPM officials and reviewed available documents on OPM’s processes to review and approve agencies’ requests to use certain special payment authorities, and analyzed OPM data to determine the average months it took OPM to make approval decisions on CHCO agency requests received from January 2009 through January 2017. We compared OPM’s procedures for collecting, analyzing, and providing information on the effective, strategic use of special payment authorities, and its procedures for approving use of special payment authorities, to criteria identified in our related reports on federal human capital management and in Standards for Internal Control in the Federal Government, including standards that agency management design and implement controls and document procedures. We conducted this performance audit from September 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. 1. Mission critical skills gaps are one or more of the following and may impede the federal government from cost-effectively serving the public and achieving results: staffing gap in which an agency has an insufficient number of individuals to complete its work; and/or a competency gap in which an agency has individuals without the appropriate skills, abilities, or behaviors to successfully perform the work. Mission critical skills gaps may be identified broadly as affecting several agencies or may be specific to a given agency (such as mission-critical occupations agencies have identified to the Office of Personnel Management (OPM) for skills gap closure). 1. For the special pay authorities below, does your agency have agency- specific guidance (including documented policies or plans) on the use of the special pay authorities below? (Check all that apply) agency level(s) 2. In the last three fiscal years (2014-2016), how many federal employees in your agency received compensation under the following special pay authorities? (if none, enter zero) (FY 2014) (FY 2015) (FY 2016) 3. In Fiscal Years 2014-2016, what was your agency’s total spending (in dollars) for the following special pay authorities? 4. In the last three fiscal years (2014-2016), how often has your agency experienced the following challenges related to using special pay authorities? 5. In your opinion, how likely would changes in the following areas improve your agency’s ability to effectively utilize special pay authorities at your agency? Instructions: If your agency utilized during FY2014-2016, please complete this section, otherwise continue onto the next Section. 1. In Fiscal years 2014-2016, did your agency use to support the following mission critical skills gap areas? at my agency (not mission critical) Acquisitions (e.g. Contract Specialist) Healthcare Professionals (non-Title 38) 2. Does your agency assess the following to determine the effectiveness of using ? 3. In your opinion, how has the use of impacted the following? 1. In what ways have special pay authorities helped your agency to successfully address mission critical skills gaps? (Please provide at least one specific example) 2. In what ways has your agency identified and responded to challenges related to the use of special pay authorities? (Please provide at least one specific example) The following six tables present data on the responses reported by CHCO agencies on the impacts on selected areas of operation from using the following special payment authorities—superior qualifications, critical position pay, recruitment incentives, retention incentives, relocation incentives, and student loan repayment. Our analysis of OPM data found that, overall, agencies used five special payment authorities—special rates; superior qualifications and special needs pay setting; and the recruitment, relocation, and retention (3R) incentives—to varying extents for different occupational families. When we analyzed OPM data to identify the top five occupational families for each of these five special payment authorities, we found certain occupational families appeared among the top groups for multiple authorities (see those highlighted in table 14). Specifically, we found that two occupational families—(1) Medical, Hospital, Dental, and Public Health; and (2) Engineering and Architecture—were among the top five families for four and five of these special payment authorities, respectively. The Medical family was the top occupational family for four of the five authorities—superior qualifications and special needs pay setting, and the 3R incentives. Further, we found that certain occupational families were among the top five for one or two authorities but not for the other authorities. For example, the Information Technology and Copyright, Trademark, and Patent occupational families were among the top five families for special rates and superior qualifications and special needs pay setting, but not for the other three authorities. Yvonne D. Jones, Director, (202) 512-2717 or jonesy@gao.gov. In addition to the contact named above, Signora May, Assistant Director; Ronald W. Jones, Analyst-in-Charge; Melinda Cordero, Ann Czapiewski, Sara Daleski, Christopher Falcone, Karin Fangman, Kerstin Hudon, John Hussey, Steven Putansu, Alan Rozzi, and Albert Sim contributed to this report.", "summary": "Federal agencies can provide additional compensation by using seven broadly available special payment authorities to recruit and retain employees to address needed skills. Though special payments can help fill mission-critical skills gaps, agencies also face constrained budgets, which underscores the importance of cost-effective use of authorities. OPM and the CHCO Council play important roles in assuring effective federal human capital management. GAO was asked to examine agency use, challenges, and improvements needed, if any. This report 1) describes CHCO agencies' use of special payment authorities in fiscal years 2014-2016; 2) assesses to what extent CHCO agencies examined effectiveness; and 3) evaluates how OPM has helped agencies address recruitment and retention needs. GAO obtained information from CHCO agencies on use of authorities through a questionnaire. GAO also analyzed OPM personnel data and agency documents, and interviewed agency officials. Generally, federal agencies have seven broadly available government-wide special payment authorities to help address recruitment and retention challenges. Chief Human Capital Officer (CHCO) Council agencies reported using these authorities to varying degrees but overall for few employees in fiscal years 2014-2016. For example, in fiscal year 2016, less than 6 percent of the over 2 million CHCO agencies' employees received compensation from at least one of the authorities (see figure). The two most frequently used—special rates and retention incentives—were used for over 74,000 employees and over 13,000 employees, respectively, each year. The least-used—critical position pay—was used for as few as seven employees a year. CHCO agencies also reported using the range of authorities to help address skills gaps, particularly for science, technology, engineering, and mathematics occupations. CHCO Agency Employees Receiving Special Payments, Fiscal Year 2016 CHCO agencies reported that these authorities had positive impacts—such as on-staff retention and applicant quality—but had few documented effectiveness assessments. Nine of 10 agencies that reported having documented assessments provided them, but GAO found that only 3 had information on effectiveness, such as its impact on meeting staffing needs. The Office of Personnel Management (OPM) collects agency data on use but has not tracked data to analyze how much authorities help agencies improve recruitment and retention government-wide. OPM may be missing opportunities to promote strategic use by providing guidance and tools on assessing effectiveness. For example, OPM has not explored reasons for trends in use of critical position pay or consistently shared best practices and innovative ways to use authorities. Without tracking data and providing guidance to help agencies assess effectiveness, OPM will be unable to determine whether use of special payment authorities helps agencies to improve recruitment and retention. GAO is making three recommendations, including that OPM should work with the CHCO Council on tracking data and providing guidance and tools to assess effectiveness of authorities, among others. OPM concurred or partially concurred with all recommendations, and described planned steps to implement them.", "document_type": "gao"}
{"report": "The FAR establishes several types of source selection procedures, which include the tradeoff procedure on one end of the best value continuum and LPTA procedures on the other end. (see fig. 1). DOD may elect to use the LPTA procedure where the requirement is clearly defined and the risk of unsuccessful contract performance is minimal. In such cases, DOD has determined that cost or price should play a dominant role in the source selection. When using LPTA procedures, DOD specifies its minimum requirements in the solicitation. Firms submit their proposals and DOD determines which of the proposals meet or exceed those requirements, no tradeoffs between cost or price and non-cost factors (for example, technical capabilities or past performance) are permitted, and the award is made based on the lowest price technically acceptable proposal submitted to the government. Non- cost factors are rated on an acceptable or unacceptable basis. By contrast, DOD may elect to use tradeoff procedures in acquisitions where the requirement is less definitive, more development work is required, or the acquisition has a greater performance risk. In these instances, non-cost factors may play a dominant role in the source selection process. Tradeoffs between price and non-cost factors allow DOD to accept other than the lowest priced proposal. The FAR requires DOD to state in the solicitation whether all evaluation factors other than cost or price, when combined, are significantly more important than, approximately equal to, or significantly less important than cost or price. DOD’s March 2016 Source Selection guide offers additional guidance regarding the use of LPTA source selection procedures. The guidance is mandatory for acquisitions conducted as part of a major system acquisition program and all competitive FAR part 15 procurements with an estimated value over $10 million. The guidance states that LPTA procedures may be used in situations where there would not be any value on a product or service exceeding the required technical or performance requirements. The guidance also states that such situations may include acquisitions for well-defined, commercial, or non-complex products or services and where risk of unsuccessful contract performance is minimal, and when it has been determined there would be no need or value to pay more for higher performance. Section 813 of the fiscal year 2017 NDAA required that DOD revise the DFARS to require that LPTA procedures only be used in situations when the following six criteria are met. 1. DOD can clearly describe the minimum requirements in terms of performance objectives, measures, and standards that will be used to determine acceptability of offers; 2. DOD would realize no, or little, value from a proposal exceeding the solicitation’s minimum technical requirements; 3. The proposed technical approaches can be evaluated with little or no subjectivity as to the desirability of one versus the other; 4. There is a high degree of certainty that a review of technical proposals other than that of the lowest-price offeror would not identity factors that could provide other benefits to the government; 5. The contracting officer has included a justification for the use of LPTA procedures in the contract file; and 6. The lowest price reflects full life-cycle costs, including for operations and support. Section 813 also established that implementing revisions to the DFARS were to be completed within 120 days of enactment of the NDAA, but the revisions had not been put in place as of October 2017. DOD officials stated that the changes to the DFARS are currently in progress. In 2010 and 2014, we reported on DOD’s use of best value tradeoff source selection procedures. In 2010, we found that, for 60 of the 88 contracts reviewed, DOD used a tradeoff process and weighted non-cost factors as more important than price. In these cases, DOD was willing to pay more when a firm demonstrated it understood complex technical issues more thoroughly, could provide a needed good or service to meet deadlines, or had a proven track record in successfully delivering products or services of a similar nature. In addition, we determined that when making tradeoff decisions, DOD selected a lower priced proposal nearly as often as it selected a higher technically rated, but more costly, proposal. In so doing, DOD chose not to pay more than $800 million in proposed costs by selecting a lower priced offer over a higher technically rated offer in 18 contracts. The majority of solicitations where non-cost factors were equal to or less important than cost were for less complex requirements. DOD faced several challenges when using best value tradeoff procedures, including: the difficulties in developing meaningful evaluation factors, the additional time investment needed to conduct best value procurements, and the greater level of business judgment required of acquisition staff when compared to other acquisition approaches. To help DOD effectively employ the best value tradeoff process, we recommended that DOD develop training elements such as case studies that focus on reaching tradeoff decisions. DOD concurred and implemented the recommendation in August 2012. In 2014, we found that DOD had increased its use of LPTA procedures for new contracts with obligations over $25 million—using LPTA source selection procedures to award an estimated 36 percent of new fiscal year 2013 contracts compared to 26 percent in fiscal year 2009—and that officials’ decisions on which source selection method would be used was generally rooted in knowledge about the requirements and contractors. For contracts with obligations over $25 million, DOD used LPTA source selection procedures primarily to acquire commercial products such as fuel, and we identified relatively few uses of LPTA to acquire higher dollar services. For contracts with obligations over $1 million and under $25 million, DOD used LPTA procedures an estimated 45 percent of the time for a mix of products and services, including fuel, aircraft parts, computer equipment, construction-related services, engineering support services, and ship maintenance and repairs. We did not make recommendations to DOD in this report. The Army, Navy, and Air Force rarely used LPTA source selection procedures for IT and support services contracts valued at $10 million or more that were awarded in the first half of fiscal year 2017. Our analysis found that the three military departments awarded 781 new contracts valued at $10 million or more during this time frame. Of these 781 contracts, 133 contracts were awarded for IT and support services. However, only 9 of the 133 contracts used LPTA source selection procedures (see fig. 2). Table 1 provides information on the 7 contracts we reviewed that were awarded in the first half of fiscal year 2017 that used LPTA source selection procedures. As previously noted, we excluded 2 of the 9 contracts from further review due to bid protests. Contracting officials cited a number of factors that were considered when determining to use LPTA procedures in the 7 selected contracts we reviewed. For all of the contracts, officials determined that the government would not receive a benefit for paying more than the lowest price. For these contracts, contracting officials also stated that LPTA procedures were used, in part, because the requirements were well- defined, non-complex, or reoccurring. Additional details on the contracts follow. The Army awarded an IDIQ contract, with a one-year base period and four 1-year options, for support services in Afghanistan with an estimated ceiling value of $85,000,000. This is a reoccurring requirement to hire Afghan nationals to provide on-site construction management, engineering, and technical support services for reconstruction projects throughout Afghanistan. The acquisition plan states that Afghan nationals can more freely move about the country compared to U.S. personnel. Further, a contracting official stated that it was determined that no additional value would be gained by paying a premium for these services and that the lowest price was the best choice. In addition, to mitigate risk of poor performance, one requirement of the contract is to maintain a qualified workforce. Officials stated that approximately 90 percent of personnel performing on the previous contract are working on the current contract. The Air Force awarded three contracts for base operation support services—vehicle maintenance, airfield maintenance, fuel management, and traffic management—at an Air Force Reserve Base and two Air Reserve Stations. All of the contracts were awarded with a one-month orientation period, one-year base period, four 1-year options, and a final 6-month option, with total estimated values ranging from $24.7 million to $38.2 million. Acquisition plans for these requirements stated that the services were well defined. Additionally, contracting officials stated that there is at least a decade of past experience with these requirements, and, as a result, the requirements are well known. The Air Force awarded a contract for centralized mail sorting services in Germany. The contract consists of a 2-month phase-in period, a 2- month base period, four 1-year options, and one 8-month option, with a total estimated value of approximately $21.5 million. The acquisition plan for this requirement stated that a LPTA source selection procedure was chosen because the requirement was well-defined and not technically complex. For example, the acquisition plan noted that there was more than a decade of historical data that helped define and estimate the volume of mail that would need to be sorted. Contracting officials reiterated that LPTA was used since the service was well-defined, the risk of poor performance was low, and that it was determined that additional trade-offs would not provide an additional benefit to the taxpayer. The Army awarded an IDIQ contract to look for vulnerabilities in software code. The contract, which was set aside for small businesses, had a 5-year ordering period and an estimated ceiling value of $17.1 million. The contractor was required to perform a software review using several government approved code analysis tools and then characterize any potential vulnerabilities identified by the tools in terms of risk levels prescribed by established government cybersecurity standards. Army requirements officials stated that they determined there was no additional value to be gained from additional innovations in doing either task. Our review found some indication that the requirement, however, might not have been clearly understood by offerors. For example, the Army received 12 offers which ranged from $800,177 to $46,680,003. The contracting officer attributed the range of offers to the inexperience of some offerors with preparing proposals or misunderstanding this type of requirement, and the two lowest offers were determined to be technically unacceptable. The Navy awarded a contract to perform commercially available monthly telephone maintenance, which includes preventive and remedial maintenance on a specific brand of phone systems that Navy locations in California use. The contract consists of a one-year base period and two 1-year options, with an estimated total value of approximately $15.9 million. The acquisition plan stated that only certified authorized dealers could perform maintenance on these phones. A contracting official stated the requirement was well-defined and required the highest tier of maintenance options that could be offered, and, as a result, there was no tradeoff available. The highest tier requires that maintenance be available 24 hours a day, 7 days a week in multiple Navy locations, and that the contractor must respond to emergencies within 15 minutes during normal business hours. The contract also includes maintenance for all switches, inside wiring and any necessary relocation services, among other support requirements. 1. One contracting official determined that minimum performance requirements for the $15.9 million contract for monthly telephone maintenance services could be described using objective performance measures, and the contract documents showed the technical acceptability of offers was tied to the description of these requirements in the statement of work. In another example, documents related to the award of a $27.9 million Air Force contract for base operations services show performance objectives and standards set forth as evaluation factors. procedures may be used only when DOD would realize little or no value from a proposal that exceeds the solicitation’s minimum technical requirements. Our interviews with contracting officials and review of contract documents found that in each case, DOD officials assessed whether the department could receive value from a contract awarded on a tradeoff basis where the proposal exceeded the minimum technical requirements, and determined that there would be no additional value to be gained. 3. Most officials said they felt that it was possible to evaluate the proposals they received with little subjectivity, although they had not always explicitly made and documented this assessment. Officials for two contracts stated, for example, that the threshold question of technical acceptability for their contracts was whether the offering firms possessed certain licenses or accreditation to perform services on specific equipment or in specific locations. No subjectivity was involved in this assessment; therefore, they viewed the question of technical acceptability as essentially objective. However, because they were not required to document this assessment, contract documents did not provide evidence of an assessment of subjectivity. 4. Officials for most of the contracts we reviewed stated they had determined that a review of technical proposals other than that of the lowest-price offeror would not identity factors that could provide other benefits. In one case officials ultimately reviewed additional proposals, which is allowed under current DOD source selection guidance. DOD’s March 2016 source selection guidance does not require contracting officers to consider the fifth and sixth criteria listed in Section 813. Accordingly, we found that contracting officers did not always document justifications for choosing LPTA procedures and did not determine that the lowest price offered reflected full life-cycle costs. Specifically, we found that: 5. Although the files for all 7 contracts contained some record of the choice of LPTA source selection procedures, files for 3 of the 7 contracts simply stated that LPTA procedures would be used and did not include an explanation or justification for the choice. Only the documents for the four Air Force contracts included some explanation of the reasons for choosing LPTA source selection procedures. While not required by DOD source selection guidance when our selected contracts were approaching source selection, providing a justification for using LPTA is one of the criteria that Section 813 requires DOD to include among the revisions to the DFARS. 6. None of the officials for our selected contracts had confirmed that the lowest price offered reflected full life-cycle costs, which is one of the criteria that Section 813 requires DOD to include among the revisions to the DFARS. For the mail delivery, telephone maintenance, and base operations support contracts we reviewed, two contracting officials noted that full life-cycle costs were not applicable and a third stated that life-cycle costs cannot be determined for a service contract. As previously noted, all of the contracts in our review were for services, not for products. A Defense Procurement and Acquisition Policy official acknowledged that the application of the criterion could cause confusion and that DOD officials are considering this issue as part of efforts to revise the DFARS. As previously noted, DOD is currently developing the revisions to the DFARS that are contemplated by Section 813. DOD officials could not provide a specific timeframe for when the DFARS would be revised, noting that the revisions would need to be reviewed by the Office of Information and Regulatory Affairs at the Office of Management and Budget, and then released for public comment before the revisions could be finalized. We are not making any recommendations in this report. We provided a draft of this report to DOD for comment. DOD had no comments on the draft report. We are sending copies of this report to appropriate congressional committees and the Secretary of Defense. The report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the contact named above, the following staff members made key contributions to this report: Justin Jaynes (Assistant Director), Matthew T. Crosby, Lorraine Ettaro, Stephanie Gustafson, Julia Kennon, Victoria Klepacz, W. William Russell, Roxanna Sun, Ann Marie Udale, Khristi Wilkins, and Lauren Wright.", "summary": "DOD obligated about $300 billion through contracts for goods and services in fiscal year 2016. When awarding a contract competitively, DOD may use the LPTA source selection process to select the lowest-priced offer that is technically acceptable. In contrast, DOD may use the trade-off source selection process to award a higher-priced contract to a firm if the firm's offer provides greater benefit and it is worth paying the additional cost. The National Defense Authorization Act for Fiscal Year 2017 calls on DOD to avoid using the LPTA process for information technology, cybersecurity, and other knowledge-based professional support services. The Act also included a provision for GAO to report on DOD's use of LPTA procedures for contracts valued at more than $10 million. This report assesses the (1) extent to which DOD used LPTA procedures for certain services, and (2) factors that contracting officials considered when deciding to use LPTA procedures. GAO reviewed data from the Federal Procurement Data System-Next Generation to identify 781 contracts valued at $10 million or above awarded by the Army, Navy, and Air Force in the first half of fiscal year 2017, the most recent period for which data were available. GAO then selected 133 of these contracts for information technology and support services, which include services reflected in the Act. GAO identified that 9 contracts used LPTA procedures and reviewed 7 of these, including interviewing officials and reviewing contract documents. DOD had no comments on the draft report. During the first half of fiscal year 2017, the Army, Navy, and Air Force rarely used lowest price technically acceptable (LPTA) source selection procedures when awarding contracts valued at $10 million or more for the types of services identified by the National Defense Authorization Act, such as information technology services. Department of Defense (DOD) guidance states that LPTA procedures are typically for requirements that are well-defined, commercial, or non-complex products or services with a minimal risk of unsuccessful contract performance. The figure shows the military departments' limited use of LPTA procedures for contracts for selected services. For the 7 contracts that GAO reviewed, contracting officials determined that the government would not receive a benefit for paying more than the lowest price. Contracting officials also stated that LPTA was used, in part, because the requirements were well-defined, non-complex, or reoccurring. For example, the Navy used LPTA procedures to award a contract for commercially available monthly telephone maintenance services. In addition, the Air Force used LPTA procedures to award a contract for mail sorting and delivery. Section 813 of the fiscal year 2017 National Defense Authorization Act requires DOD to amend its regulations to require contracting officers to consider specific criteria when deciding to use LPTA procedures. DOD has not yet revised its regulations to implement Section 813. Nevertheless, for the 7 contracts GAO reviewed, contracting officials' considerations when choosing to use LPTA procedures were often consistent with most of these new criteria. DOD officials are currently developing the revisions to the Defense Federal Acquisition Regulation Supplement that are contemplated by Section 813.", "document_type": "gao"}
{"report": "Poverty can adversely affect academic and other outcomes in profound ways. Specifically, living in poverty is linked with negative conditions for children at home, in schools, and in neighborhoods and communities, and can include substandard housing, homelessness, inadequate nutrition and food insecurity, inadequate home-based child care, increased health care costs, and unsafe neighborhoods. Poverty has a particularly adverse effect on the academic outcomes of children that starts in early childhood and continues through the academic pipeline. Chronic stress associated with living in poverty has been shown to adversely affect children’s concentration and memory which may impact their ability to learn. Census data from 2014 show a relationship between the rate at which students dropped out (left school without obtaining a high school credential) and family income. The dropout rate of students from high- income families was 2.8 percent, while the dropout rate for individuals from low-income families was 11.6 percent. Our prior work describes how the nation’s schools have become increasingly comprised of students in poverty. In school year 2015-16, of the 12.5 million students in public high schools (schools with grades 9- 12), over 5 million (40 percent) attended schools where at least half of the students were experiencing poverty, as indicated by eligibility for free or reduced-priced lunch. Nearly 1.8 million (over 14 percent) attended schools where at least three-quarters of the students were experiencing poverty (see table 1). Our prior work has also discussed the association between poverty and race or ethnicity. High schools with a relatively large proportion of students in poverty also tend to have a higher proportion of minority students, students with disabilities, and English learners. The link between racial and ethnic minorities and poverty is long-standing, and studies have noted concerns about this segment of the population that falls at the intersection of poverty and minority status in schools and how this affects their access to quality education. Of the roughly 12.5 million students who were enrolled in public high schools during the 2015-16 school year, about 87 percent attended traditional public schools, according to Education data; the remaining students were enrolled at charters, magnets, and other types of public schools (see table 2). While not all students will decide to pursue college, those who do generally must prepare for and navigate the college admissions process while in high school. This process can involve multiple administrative and financial steps, according to information from Education and college advising organizations. (See figure 2 for more information on the college application and admissions process.) The Department of Education plays a role in helping students be prepared for college through initiatives in several of its offices. For example, Education’s Office of Postsecondary Education (OPE) administers several discretionary grant programs designed to increase college readiness among students from disadvantaged backgrounds, such as the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP). GEAR UP aims to increase the number of low- income students who are prepared to enter and succeed in postsecondary education. In 2016, OPE awarded approximately $323 million in grants through GEAR UP. In addition, Education’s Office of Elementary and Secondary Education (OESE) provides grants and technical assistance to states and districts to encourage advanced course opportunities and college and career readiness initiatives. OESE also oversees states’ and districts’ use of Title I, Part A funds under the Elementary and Secondary Education Act, as amended. These funds provide financial assistance to school districts and schools with high numbers or high percentages of children from low-income families to help ensure that all children meet challenging state academic standards, and can be used to provide additional courses and college readiness programs in schools. Finally, Education’s Office of Federal Student Aid (FSA) is responsible for managing the student financial assistance programs authorized under Title IV of the Higher Education Act of 1965. These programs provide grants, loans, and work-study funds to students attending college or career school. FSA also publishes guidance and other resources related to federal student aid and college costs. These resources are designed for students and parents who are navigating the college application and financial aid processes. (For more information on Education’s grant programs relevant to college readiness, see appendix II.) Education and the Department of Justice (Justice) promote equitable access to education resources as part of their missions in two key ways: (1) conducting investigations of discrimination complaints; (2) issuing guidance on ways to address potential disparities; and (3) providing technical assistance. Education and Justice are responsible for enforcing a number of civil rights laws that prohibit discrimination in public schools on the basis of race, sex, disability, color, and national origin. (For examples of cases resolved by Education and Justice related to access to college preparation resources, see appendix IV.) To enforce relevant civil rights laws, Education carries out complaint- driven and agency-initiated investigations, which are called compliance reviews and which target problems that Education has determined are particularly acute. For example, in a recent review, Education’s OCR reviewed whether Black students in a Virginia school district had the same access to educational opportunities as other students. OCR found a significant disparity between the numbers of Black and White high school students who take AP, advanced courses, and dual credit programs. These discrimination cases can be resolved through several means, including voluntary resolution, dismissal, or closure due to insufficient evidence. Education may also terminate federal funds if Education determines that a recipient is in violation of civil rights laws and the agency is unable to reach agreement with the parties involved. Justice has the authority to file suit in federal court to enforce the civil rights of students in public education. Specifically, Justice investigates discrimination in school resources based on complaints filed under federal civil rights laws and monitors and enforces open federal school desegregation orders where Justice is a party to the litigation. For example, in 2015 Justice entered into a court-approved agreement with a Louisiana city school board after finding that more college preparatory courses were offered in schools that predominantly serve White students than in schools that predominately serve Black students. This agreement required, among other things, that the district ensure that all students were given the opportunity to take all courses offered in the district. In addition to enforcement actions, Education and Justice help promote equitable access to education resources by issuing guidance and providing technical assistance. For example, in 2014, OCR issued guidance addressing equitable access to educational resources, in part, to address chronic and widespread racial disparities in access to rigorous courses, academic programs, and extracurricular activities which can hinder the education of students of color. In this guidance, OCR describes proactive ways to address potential disparities in academic and extracurricular programs that are differentiated based on academic rigor (e.g., gifted and talented or college preparatory programs) or content (e.g., business, music, art, or career and technical education programs). This guidance includes the following steps that states and school districts can take to help ensure equal access to educational resources: designating an employee to review policies governing how resources are distributed to and within schools; evaluating resource access across and within schools; notifying parents, students, and community members of avenues to raise concerns about resource access; and taking proactive steps to identify disparities in access to resources. Education also offers technical assistance, through various means, such as conducting webinars, sponsoring and presenting at conferences, and disseminating resource guides to schools and school districts. At a Glance: Student Access to College Preparation Courses and Admissions Expectations Poverty and Student Demographics Schools with the highest concentration of poor students were predominantly comprised of Black and Hispanic students. Access to more advanced math and science courses (e.g., calculus and physics) decreased as the level of school poverty increased. Larger high schools offered more advanced math and science courses than smaller schools, regardless of poverty level. Charter schools offered fewer advanced math and science courses than traditional and magnet schools, regardless of poverty level. Public 4-year colleges generally expect applicants to have completed three or four math and three or four science credits in high school, but we found that the percentage of schools offering these recommended courses decreased as poverty level increased. Our analysis of Education data for school year 2015-16 showed that high- poverty high schools were predominately comprised of Black and Hispanic students, while low -poverty schools had a higher proportion of White students. Specifically, roughly 80 percent of students attending high-poverty schools were either Black or Hispanic, but were less than 20 percent of students enrolled in low-poverty schools (see fig. 3). Our analysis of Education data for school year 2015-16 showed that students’ access to more advanced high school courses decreased as the level of school poverty increased. High-poverty schools represented 17 percent of all high schools in 2015-16. College Admissions Perspective Admissions officials from all four public, 4- year universities we interviewed reported that they look for students to take advanced coursework in high school in order to be more competitive applicants. Some college admissions officials and college advising organizations reported that students face academic difficulties when they get to college if they did not take advanced courses that help prepare for the rigor of college. A college admissions official we interviewed reported that over 90 percent of the university’s incoming freshmen took courses in high school that could earn college credit, such as Advanced Placement (AP), International Baccalaureate (IB), or dual enrollment courses. Across all poverty levels, almost all schools offered the basic math courses (algebra I and geometry); however, disparities in offering advanced math courses grew as school poverty level increased (see fig. 4). For calculus in particular, the percentage of schools offering the course decreased as school poverty level increased, with the gap between low- and high-poverty schools widening to nearly 35 percentage points (85 percent of low-poverty schools versus about 50 percent of high-poverty schools). Generally, a similar pattern emerged for science courses. Again, the majority of all schools, at least 90 percent across all poverty levels, offered biology; but for chemistry and physics, disparities grew as poverty increased. For example, almost 90 percent of low- poverty schools offered physics, with the percentage decreasing steadily to 62 percent for high-poverty schools. For courses that allow students to earn college credit and that can help make students more competitive applicants (see text box), our analysis showed a similar trend, with disparities that deepened as school poverty increased. For Advanced Placement (AP) courses overall, our analysis showed that the gap in courses offered was widest between the lowest and highest poverty schools—with over 80 percent of low-poverty schools offering at least one AP course compared to about 60 percent of high- poverty schools. We found a similar pattern for AP math and science courses. Among schools that offered any AP courses, nearly all low- poverty schools offered AP math compared to 75 percent of high-poverty schools, a nearly 20 percentage point gap (see fig. 5). Advanced Placement courses: Upon successful completion of the course and a standardized AP exam, a student may be qualified to receive college credit and/or placement into advanced college courses. International Baccalaureate courses: The International Baccalaureate (IB) courses are designed as an academically challenging and balanced program of education, with final examinations, that prepares students, usually aged 16 to 19, for success in college. Dual Enrollment/Credit programs: Dual enrollment/dual credit programs provide opportunities for high school students to take college-level courses offered by colleges, and earn concurrent credit toward a high school diploma and a college degree while still in high school. Across all poverty levels, larger public high schools offered more advanced math and science courses than smaller schools, according to our analysis of Education’s school year 2015-16 data. As illustrated in figure 7, this pattern held true for all math and science courses. In particular, among high-poverty schools, 90 percent of large schools offered calculus, compared to 54 percent and 11 percent of medium and small schools, respectively. Similarly, among high-poverty schools, over 90 percent of large schools offered physics compared to about two-thirds of medium and about a third of small schools. A similar pattern was evident for AP courses (see fig. 8). Among high- poverty schools, 97 percent of large schools offered AP courses compared to 68 percent of medium and 11 percent of small schools. Across all poverty levels, access to advanced courses differed by school type. We found that, in general, fewer charter schools, across all poverty levels, offered math, science, and AP courses, compared to traditional and magnet schools, according to our analysis of Education’s school year 2015-16 data (see fig. 9). Further, a higher percentage of magnet schools offered advanced courses (such as physics and AP courses), compared to traditional schools. We also analyzed alternative schools and special education schools. When analyzing Education’s data by school type, these schools had the lowest percentage of schools offering college preparatory courses. We focused our analyses in the body of the report on traditional, magnet, and charter schools, the school types with larger enrollments. Alternative and special education schools enroll fewer than 1.5 percent of high school students. See appendix V for full data tables, which include breakouts for alternative and special education schools. For AP courses, across all poverty levels, a lower percentage of charter schools offered these courses compared to traditional and magnet schools (see fig. 10). In particular, among high-poverty schools, 33 percent of charter schools offered any AP courses compared to 71 percent of traditional and 94 percent of magnet schools. We also analyzed high school course offerings based on whether schools were located in an urban, suburban, or rural location, but our regression model did not find a consistent association between school locale and course offerings. For example, a lower percentage of high-poverty schools in rural areas offered advanced math and science courses compared to high-poverty urban or suburban schools. However, a higher percentage of low-poverty rural schools offered advanced math and science courses than did low-poverty urban schools. For full results by school locale, see appendix V. Colleges often look for students to have completed multiple credits of a subject in high school, such as math or science; however, our analysis suggests that some high-poverty schools may not offer the math and science courses needed to meet basic admission expectations for public 4-year colleges. Based on our analysis of a generalizable sample of U.S. public 4-year college websites, an estimated 95 percent of colleges expected applicants to have completed three or four credits of math (see text box). Further, a majority of public 4-year colleges specifically recommended that applicants take algebra I, geometry, and algebra II. With respect to science an estimated 76 percent of colleges expected students to have completed three or four credits of science, with many specifically recommending biology, chemistry, or physics. (See fig. 11). Our analysis of Education data for school year 2015-16, however, found that the percentage of schools offering these recommended math and science courses decreased as poverty level increased. With respect to math courses, 7 percent of low-poverty schools did not offer the recommended math courses (at least algebra I, geometry, and algebra II), compared to 17 percent of high-poverty schools that did not offer these courses. Further, while 12 percent of low-poverty schools did not offer the recommended science courses (at least biology, chemistry, and physics), 41 percent of high-poverty schools did not. (See fig. 12). Odds of offering at least algebra I, geometry, and algebra II Generally, no statistically significant association. Odds of offering at least biology, chemistry, and physics Higher poverty schools were associated with lower odds of offering these courses compared to lower poverty schools. Odds of offering any AP courses Higher poverty schools were generally associated with lower odds of offering any AP courses, compared to lower poverty schools. Higher levels of Hispanic or Asian students were associated with lower odds of offering these courses. Higher levels of Black, Hispanic, or American Indian/Alaskan Native students were associated with lower odds of offering these courses. Generally, no statistically significant association. Smaller schools were associated with lower odds of offering these courses, compared to larger schools. Smaller schools are associated with lower odds of offering these courses, compared to larger schools. Smaller schools were associated with lower odds of offering AP courses, compared to larger schools. Alternative schools were associated with lower odds of offering these courses compared to traditional schools; however, the results were not statistically significant for other school types. Charter schools and alternative schools were associated with lower odds of offering these courses compared to traditional schools. Charter schools were associated with lower odds of offering any AP courses and magnet schools were associated with higher odds of offering any AP courses, compared to traditional schools. Across the three selected states, officials representing the 12 high- poverty schools we visited consistently reported that students confront multiple challenges to being prepared to attend college. They cited a range of academic roadblocks to college, including that students are behind academically before they get to high school; that the schools they attend lack rigorous courses, such as AP courses; and that students struggle to attain grade point averages (GPA) high enough for admission to some 4-year colleges. Officials explained that family challenges and obligations can compound the academic challenges and make navigating the college admissions and enrollment process difficult for their students. Students have not made sufficient academic progress to be admitted to college, according to officials we interviewed at 12 high-poverty schools (see fig. 13). Officials representing most of these schools (10 of 12) reported that their students were often academically behind. For example, at one urban and predominantly Black Wisconsin high school, officials said that 80 percent of 9th graders were performing below grade-level targets for reading and math, and at a Georgia high school where nearly all of the students were eligible for free or reduced-price lunch, officials said that over 30 percent of freshman students in school year 2016-17 had to repeat the 9th grade. Insufficient academic progress can be compounded by challenges high- poverty schools face in offering advanced coursework. For example, officials at five schools said they did not offer calculus; officials at three of these schools noted this was because most students typically did not take algebra I in middle school and, therefore, did not have the time to progress to calculus. Officials at a high school with over 900 students reported they did not offer calculus or AP math courses due to low student demand and that they must weigh the cost of providing a course with the number of students who would benefit. Two high-poverty high schools we visited that did not offer calculus courses were exploring offering the courses to students through videoconference. However, an official from one school district we interviewed said the district uses videoconference as a last resort because they have found students learn better with a teacher physically present allowing for more exchange of dialogue. In addition, the challenge of finding and retaining high-quality teachers can exacerbate the difficulties high-poverty schools face in offering advanced courses, according to state educational agency officials in two of the states we visited. Offering advanced courses is important to providing challenging opportunities for students and avoiding remedial coursework once in college, according to college and high school officials we interviewed. Officials we interviewed stressed that taking advanced courses provides students with challenging academic opportunities that help to prepare students for the rigor of college courses, whether they pass their AP exams or not. A representative of a college advising organization said that while it is possible to get into college without higher-level math courses, these courses often determine if a student needs remedial math in college. Officials from two college advising organizations said that when students are required to take remedial courses in college, it can have a detrimental effect. They said remedial courses generally cost money but do not provide credits towards graduation and can delay graduation, and sometimes can contribute to students leaving college without a degree. School officials for almost all the schools we visited (11 of 12) also said that students often had low GPAs and SAT or ACT scores, which made them less competitive applicants for admission or scholarships to 4-year colleges. For example, the average GPA for 11th grade students at three Wisconsin high schools we visited was below 2.0; officials at one school told us that last year’s valedictorian had a 3.0 GPA. Further, officials at multiple schools said students feared they would not do well on the ACTs or SATs; and one counselor said this means that many students did not even try. Low GPAs and college entrance exam scores may be a particularly acute roadblock to 4-year college in areas where the state university system has grown increasingly competitive due to high demand, according to a counselor at one predominantly Hispanic California high school who said the state system is looking for students with 4.0 GPAs. In addition to insufficient academic progress, a confluence of family, financial, and social-emotional challenges often confronts students in high-poverty schools, making it difficult for them to prepare for college, according to our interviews with school officials (see fig. 14). School and state education officials said that a range of stressors can compound the difficulties poor students face with learning and academic achievement. Officials at most of the schools (9 of 12) we visited and one state educational agency cited adverse conditions associated with poverty––such as hunger, homelessness, living in foster care, witnessing or experiencing violence or abuse—that made it hard for students to focus on school work. In one high school, officials reported that a school staff member handed out care packages to students every Friday to ensure students had something to eat on the weekend. Officials also reported that students demonstrated behavioral and emotional issues in their schools. Officials at one Wisconsin school said they have noticed a large increase in anxiety among students. This anxiety can be paralyzing for some students and, for others, can result in explosive and violent behavior that affects other students’ ability to learn, according to the school officials. Officials in 11 of the high-poverty schools we visited said that going to college often conflicts with a student’s need to help support their families or that the cost of college can be prohibitive. Some students provide an important source of income for their family or are the caregiver for family members, according to officials in nine schools. Family obligations can also affect students’ decisions about whether to take college preparation courses, according to one school administrator. For example, the principal of a California charter school said a high-performing student dropped an AP course because the demands from family were so great. In addition, officials in six schools said that the cost of college can deter low-income students. One of these officials reported that even with financial aid and scholarships, their students may not be able to cover even small gaps in funding. According to one high school counselor, the cost of going to college plus the practicalities of getting to and from school and figuring out how to pay for meals during breaks if dorms or the cafeteria are closed, are concerns for low-income students. Parents struggling with poverty may not expect their children to go to college, according to college advising officials and officials at most schools (10 of 12) we visited. For example, officials at one Georgia high school said that many students are aiming to be the first in the family to graduate high school (first generation high school graduates), and do not prioritize college. Similarly, at another school, officials said parents and students do not have the expectation of going to college because the parents had not been to college themselves. Students from high-poverty schools may continue to harbor low expectations upon admission to college because they feel they do not belong, according to a principal and a college advising official. In addition, first generation students usually do not have the family support and knowledge to feel confident in their abilities to navigate college life, as a college admissions official noted. School officials at one high school we visited said their students, who attend high school in a highly segregated area, have felt overwhelmed and intimidated trying to transition to a college with a predominately white student population. A variety of factors—from the availability of high school counselors to taking college entrance exams—can make the college admissions and enrollment processes difficult for students in high-poverty schools, according to school, college, and college advising organizations in the communities we visited (see fig. 15). College admission officials in two of the states we visited noted the importance of the high school counselor in navigating the college admissions process, such as taking students to college fairs and building relationships with colleges. However, counselors often face high caseloads and competing priorities, such as getting kids to graduate and handling emotional and social issues, according to multiple school officials and local college advising organizations. In one rural school we visited, one counselor handled the needs of about 400 students and was also the bus driver and occasional substitute nurse. Taking the SAT and ACT exams can also pose challenges for students. For example, according to administrators at one school, the cost of the exams may be a deterrent. At another high school, counselors noted that students may lack transportation to the test site and, at another school, officials said weekend jobs kept students from taking the tests. Applying for financial aid can also be challenging for students from high- poverty schools, according to school and college advising organization officials. At six of the schools we visited, officials said that sometimes parents are reluctant to report their income, because they are undocumented or because the process is unfamiliar. In addition, some school officials told us that even families with legal immigration status can be reluctant to submit personal information to government websites because they distrust how the information will be used. College advising officials we interviewed in two states said that complicated family financial situations, such as when a student cannot obtain income information from a parent, can also make the financial aid process difficult. In addition, officials from two college advising organizations said that financial aid award packages can be difficult to understand. For instance, they said that these packages may not clearly explain what amount the student is responsible for paying. Further, the aid letters may not indicate the additional cost associated with room and board, books, and transportation, according to one of these officials. Finally, even after a student has been admitted to college, they still may experience obstacles before classes begin, according to our interviews. Four officials reported that lack of college advisement over the summer after high school graduation has led to “summer melt,” when students do not attend college as planned. Officials from a college advising organization said that sometimes students missed a step in the enrollment process, such as paying deposits or tuition balances before the semester begins. Officials representing selected state educational agencies, school districts, and high-poverty schools we visited reported that they try to mitigate the barriers students in high-poverty schools face in being prepared to attend a 4-year college, despite resource challenges. Free access to college courses. Providing students with free access to college courses was one way some states and schools have been able to help students prepare for college. For example, Georgia’s dual enrollment program allows high school students to earn college credit for free while working on their high school diploma. The program covers tuition, mandatory fees, and books. Administrators at a Georgia high school reported that the program has allowed some students to earn an associate’s degree upon graduation from high school, helping to ease the cost burden of college. A charter school we visited in California partners with local colleges and covers tuition, text books, and transportation for college courses. The school principal said that the school does not offer calculus, but students can take it at a local community college and receive college credit. Outside supports for college advising. In Georgia, officials from a college advising organization reported helping with the college admission process in selected schools, including registering students to take the ACT or SAT, organizing college visits, helping students research colleges, and helping students and parents apply for financial aid. They also said they used text messages as a way to reach out to students and remind them to complete certain steps in the enrollment process. In addition, officials from half of the schools we visited (6 of 12) reported their schools had, or previously had, federal grants that supported college readiness activities for disadvantaged students. For example, one Wisconsin high school where most students are eligible for free or reduced-priced lunch (90 percent) and are Black (82 percent) or Hispanic (14 percent) had a GEAR UP grant that supported students in the classes of 2017 and 2018 since middle school, according to the school administrators. Strategies to exhibit a college-going culture. To help encourage students to consider college as a possibility, officials at some high-poverty schools we visited reported using strategies to exhibit a “college-going culture” within the school. For example, based on our site visit interviews and observations, schools displayed college banners; opened college and career counseling centers; provided incentives, such as prizes, to complete financial aid applications; and posted testing and scholarship information in prominent locations (see figs. 16 and 17). At one urban high school we visited in Georgia, teachers displayed their alma maters on their classroom doors and the school held “College Fridays” so students could learn about different colleges, according to school administrators. All-hands-on deck approach. One California school reported using an “all-hands-on-deck” approach to getting students through the college admission process. Teachers, counselors, and administrators work together to track and follow up with students to ensure they take the needed coursework and do not miss a step in the admissions process. Officials reported that school staff built personal connections with the students and with the community outside of the school to encourage buy- in surrounding the college application process. At a high school in Georgia where 100 percent of students were eligible for free or reduced- priced lunch, school officials said they also used an all-hands-on-deck approach to help students persevere through personal challenges they face, such as balancing work and school or dealing with trauma. The school provides a team of administrators and counselors for each grade level to better identify when a student may be struggling and help support students’ college preparation goals, according to school administrators. Alignment of graduation requirements and college admission requirements. Wisconsin officials reported that the state made changes to better align high school requirements with college and career readiness expectations, and universities’ expectations by increasing its math and science graduation requirements from two units to three units of each, starting with the 2017 graduating class. According to a 2014 analysis by the Education Commission of the States, 18 states have complete or partial alignment between state high school graduation requirements and statewide higher education minimum admission requirements. In addition, the University of California and the California State University systems have established a uniform minimum set of courses, known as A-G requirements, required for admission as a freshman. These courses, offered in California high schools and online schools, are designed to ensure students have attained a body of general knowledge for more advanced study, according to information from the University of California. Even though it is not a state requirement, one Georgia school district reported that it requires two units of foreign language because it is a requirement of the University System of Georgia. Free college admission tests. In two of the states we visited, officials reported that students may take select college entrance exams or preparatory exams during a school day free of charge. Georgia pays for all 10th graders in public schools to take the Preliminary SAT (PSAT). Wisconsin officials reported that the state requires and provides the funding for all 11th graders in the state to take the ACT. A school district in California we visited noted that it covers the cost of the PSAT for 9th, 10th, and 11th graders in the district, as well as the SAT for 11th graders. In addition, officials at several schools said they offer students free online test preparation tools. College initiatives to improve access and retention. Officials at colleges in all three states we visited reported having initiatives that helped increase admissions or ease the transition to college for low- income or first-generation students. For example, officials at the University of Georgia said the college guarantees admission to the valedictorian of every accredited high school in the state. Admissions officials said this helped students with fewer educational opportunities to be competitive for admissions. California State University (CSU)–Los Angeles, as well as other CSU campuses, has a program to help improve access and retention of low-income and educationally disadvantaged students. Under the program, the university accepts a limited number of students who do not meet regular admission criteria and provides academic, and in some cases financial, assistance to these students. The university also offers a 6-week “summer bridge” program for first generation students since they are most in danger of dropping out between high school graduation and the first day of college classes in the fall. At the University of Wisconsin-Milwaukee, an admissions official said the university develops transfer plans for students who start at a 2-year community college, to ease the transition to a 4-year college. We provided a draft of this report to the Departments of Education and Justice for review and comment. These agencies provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committee, the Secretary of Education, the Attorney General, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VIII. The objectives of this report were to (1) examine the extent to which high schools of different poverty levels offer courses to prepare students academically for college and (2) describe challenges that students in high-poverty schools face in being prepared to attend college. For our first objective, we analyzed federal data on college preparatory course offerings by school poverty level quartiles; and within these quartiles, we analyzed the demographic composition of students in those schools. We also analyzed course offerings of schools in each poverty quartile by school type, size, and locale. Further, we reviewed college admissions expectations for a generalizable random sample of public 4- year colleges and compared course offerings from schools in each poverty quartile to these expectations. Lastly, we conducted a regression analysis to explore whether and to what extent certain school-level characteristics were associated with higher rates of college preparatory course offerings. For our second objective, we visited selected high-poverty high schools in three states to provide illustrative examples of challenges students face in being prepared for college. In those states, we also interviewed officials from state educational agencies, school districts, college advising organizations, and public 4-year colleges. We focused on public 4-year colleges because these institutions offer a bachelor’s degree and are generally a more affordable 4-year option, compared to private colleges. The following sections contain detailed information about the scope and methodology for this report. To determine the extent to which schools offer courses to prepare students academically for college, we conducted statistical analyses using the U.S. Department of Education’s (Education) Civil Rights Data Collection (CRDC) and the Common Core of Data (CCD). Specifically, the CRDC is a biennial survey that is mandatory for every public school and district in the United States. Conducted by Education’s Office for Civil Rights (OCR), the survey collects data on the nation’s public schools (pre-K through 12th grade), including course offerings, student characteristics and enrollment, and disciplinary actions. The CRDC collected data from nearly every public school in the nation (approximately 17,000 school districts, 96,000 schools, and 51 million students in school year 2015-16). The course offering variables we used in our analysis are for those courses typically associated with and reported by high schools. As a result, our analysis only includes high schools that have all grades 9, 10, 11, and 12 (a total of 14,111 high schools). We thus excluded schools that had any grades K-8. Further, we excluded juvenile justice facilities—because the provision of educational offerings may function differently in those schools—and schools with fewer than 10 students. Our analysis was conducted using the public-use data file of the CRDC for school year 2015-16, the most recent data available at the time of our analysis. We matched schools in the CRDC for school year 2015-16 to schools in the CCD for school year 2015-16 to enable us to perform certain analyses based on variables that are unique to the different datasets, and excluded schools for which there was not a match. CRDC data are self-reported by districts and schools, and consequently there is potential for misreporting of information. Although our analyses of these data showed disparities, taken alone, these disparities do not establish whether unlawful discrimination has occurred. The 2015-16 CRDC survey collected data on several math and science courses that are considered by Education to be college-preparatory courses. The college-preparatory math courses included in the CRDC are: algebra I; geometry; algebra II; advanced mathematics; and calculus. The college preparatory science courses included in the CRDC are: biology; chemistry; and physics. The CRDC also collected data on a number of variables related to Advanced Placement (AP) course offerings as well as other course offerings that potentially offer students college credit. See table 4 for full definitions of key variables. To analyze course offerings by the poverty level of the school, we pulled in data on free or reduced-price lunch (FRPL) eligibility from the 2015- 2016 CCD, and matched it to our universe of 14,111 high schools in the 2015-16 CRDC, given that the CRDC does not collect FRPL eligibility data. The CCD is administered by Education’s National Center for Education Statistics (NCES), and annually collects nonfiscal data about all public schools in the nation. A student is generally eligible for free or reduced-price lunch based on federal income eligibility guidelines that are tied to the federal poverty level and size of the family. State educational agencies supply these data for their schools and school districts. We then sorted high schools into poverty quartiles based on the percentage of students eligible for free or reduced-price lunch as follows: schools with 0 to 24.9 percent of students that are FRPL eligible, which we call low-poverty schools; schools with 25 to 49.9 percent of students that are FRPL eligible; schools with 50 to 74.9 percent of students that are FRPL eligible; and schools with 75 to 100 percent of students that are FRPL eligible, which we call high-poverty schools (see table 5). The poverty thresholds and measure of poverty discussed here and throughout this report were commonly used in the literature and also aligned with how Education analyzed its data. Further, to understand which students attend schools in the different poverty quartiles, we analyzed student demographic composition for each group of schools. Beginning in the 2014-15 school year, the National School Lunch Program included a new provision for providing free meals to all students in the school, without needing to collect individual applications from students to determine eligibility. This provision—known as the Community Eligibility Provision (CEP)—was implemented to expand access to free meals to all students and decrease household and administrative burdens for participating schools. We assessed whether the CEP variable had the potential to make sorting schools into quartiles based on the percentage of students eligible for free or reduce-price lunch unreliable. Our analysis showed that the number of schools in each poverty quartile remained roughly the same as in prior years and thus, we concluded the reported FRPL data was reliable for our purposes. To analyze course offerings by the size of public school a student attended, we sorted the 14,111 high schools in our universe into three groups, based on the number of students enrolled in the school, according to the 2015-16 CRDC data (see table 6). We excluded schools with fewer than 10 students because (1) schools of this size likely do not have the resources or infrastructure to offer advanced courses and (2) to prevent minor fluctuations in the data from having large effects on our results. We grouped schools into one of three size categories based on the number of students enrolled. The Department of Education and the CRDC do not have classifications of schools by size, so we determined reasonable size categories based on our analysis of the data. To arrive at these categories, we looked at average number of advanced course offerings by school size strata in groupings of 100 students. This analysis led to three categories based on the distribution of the data: 1 to 200 students (small schools); 201 to 1000 students (medium schools); and 1,001 or more students (large schools). To analyze course offerings by the type of public school a student attended, we sorted the 14,111 schools in our universe into mutually exclusive categories using the self-reported school type variable in the CRDC. The CRDC allowed schools to self-identify as special education, magnet, charter, and alternative schools (see table 7). The categories of public schools in the CRDC were not mutually exclusive; that is, schools could select multiple school types to describe their schools, such as a charter school that was also an alternative school. To create mutually exclusive categories for analytical purposes, we applied the following criteria: Alternative school: all schools that selected “alternative” as the school type in the CRDC, even if they selected other types as well. Special education school: schools that selected “special education” as the school type in the CRDC, except those schools that also selected the alternative school type. Charter school: schools that selected “charter” as the school type, except those schools that also selected the alternative school type or the special education school type. Magnet school: schools that selected “magnet” as the school type, except those schools that also selected the alternative school type, the special education school type, or the charter school type. Traditional school: schools that did not select any other school type in the CRDC. Table 8 provides the breakdown of students and schools captured in the 2015-16 CRDC after applying these criteria. To analyze courses offerings by the locale of public school a student attended, we pulled in the school locale variable from the 2015-16 CCD and matched it to schools in the CRDC, which did not collect data on school locale. The locale variable in the CCD is primarily based on a school’s location relative to populous areas. The locale variable is divided into four main types: City, Suburb, Town, and Rural. For the purposes of our analyses, we combined the Town and Rural variables into one Town/Rural variable because they are defined similarly (see table 9). Table 10 provides the breakdown of students and schools captured in the 2015-16 CRDC after applying the GAO Categories above. We determined that the data we used from the CRDC and CCD were sufficiently reliable for the purposes of this report by reviewing technical documentation, conducting electronic testing, and interviewing officials from Education’s OCR and NCES. Past releases of the CRDC have subsequently been updated by Education to correct errors and omissions in the data. For our analysis of the 2015-16 CRDC, we used the data file that was publically available as of April 24, 2018. We conducted a generalized linear regression with a logistic regression model using the 2015-16 CRDC and CCD data to explore whether and to what extent certain school-level characteristics were associated with higher rates of college preparatory course offerings, while controlling for other factors. Such a model allowed us to test the association between the offering of college preparatory courses and school characteristics, including poverty, while holding other school characteristics constant (school type, school size, school locale, student demographics). Table 11 lists the variables we included in our regression model. We conducted a separate regression for each of the course offerings or sequence of offerings listed as an outcome variable. Our regression model used the same universe of 14,111 schools as our descriptive analysis of the CRDC data. Since the regression model is based on observations across all independent variables, and some variables had a small number of missing data points, our final model had 13,278 observations. All regression models are subject to limitations and for this model the limitations included: Data we analyzed were by school rather than student. Consequently, we were not able to describe the association between our independent variables and a student’s access to college preparatory courses, while controlling for characteristics of an individual student, such as sex, race or ethnicity, disability status, or grade level. Instead, the school-level nature of the CRDC data limited our description of the associations between school characteristics and course offerings to whether there was an increase, decrease, or no effect on course offerings for schools with a given characteristic, controlling for other characteristics of the entire school’s population, such as school type. Some variables that may be related to student access to advanced courses are not available in the data. For example, in this context, it could be that parent education level or household type (single- versus multiple-headed household) could be related to course access. Results of our analyses are associational and do not imply a causal relationship. Typically, a logistic regression model, which is a generalized linear regression model, is appropriate when the model assumption of normality is not appropriate, as is the case with a binary (yes/no) outcome. A logistic regression model provides an estimated odds ratio, where a value greater than one indicates a higher or positive association, in this case, between whether a course is offered and the independent variable of interest, such as being a charter school or having a higher percentage of Black students. An estimated odds ratio less than one indicates lower odds of offering a given college preparatory course when a factor is present. Given the limitations of our model as described above, we present the results of our regression model in tables 12, 13, and 14 by describing the direction of the associations, rather than the estimated odds of outcome variables. For categorical variables in these tables, we provided the comparison school characteristic in brackets. For example, the results in these tables should be interpreted as charter schools were significantly less likely than traditional schools to offer AP courses, because the association is negative. For continuous variables (i.e., those starting with “Percent”), the results in these tables should be interpreted as the likelihood of offering courses decreased, if the association was negative, as the percentage of students in the school with a given characteristic increased. For example, as the percentage of Black students increased, we found that the likelihood of offering the sequence of at least three science courses decreased. To determine which academic courses colleges expect applicants to take while in high school, we reviewed websites from a generalizable stratified random sample of 100 public 4-year colleges in the United States. The sample was selected from Education’s 2015-16 Integrated Postsecondary Education Data System (IPEDS), which contains data for colleges that participate in federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended. Our sampling frame consisted of all public 4-year degree granting colleges that participated in Title IV federal student aid programs, predominately award baccalaureate degrees, have full-time first-time undergraduate students, and that are located in a U.S. state or the District of Columbia, yielding a universe of 555 colleges. We stratified the sample by groupings colleges based on admission rates into four strata. We computed the sample size of 100 schools to achieve a precision of at least plus or minus 10 percentage points for an estimate of a population proportion at the 95 percent confidence level. We then proportionally allocated the sample size across the defined strata. This sample allowed us to make national estimates about the admission criteria for expected high school coursework at public 4-year colleges. To review comparable information across the sampled schools, we developed a standardized web-based data collection instrument that we used to examine the admission criteria for first-time freshman applicants posted on each college’s website. Specifically, we attempted to identify the minimum required or recommended units of math, science, social studies, English, Foreign Language, and Fine Arts courses applicants are expected to take in high school to be considered for admission to the college. For math and science courses, we also attempted to identify any specified courses the colleges provide to meet the required or recommended units for those subject. We also collected information on whether or not each college required students to submit SAT or ACT exam scores to be considered for admission. We reviewed websites from September 2017 through November 2017. One analyst recorded information in the data collection instrument. The information was then checked and verified by another analyst. We collected complete information for all 100 colleges in our sample. We then analyzed the information across colleges. We did not, as part of our review of college websites, assess whether the information provided on the website accurately reflected the current admission policies of the college. Instead, this review was intended to better understand the courses that colleges expect students to take in high school. To obtain information on the challenges students attending high-poverty high schools face in being prepared to attend public 4-year colleges, we selected three states—California, Georgia, and Wisconsin—and conducted site visits to four high schools in each of the states (for a total of 12 high schools). To select states for our site visits, we used the 2013- 14 CRDC data—the most recent available at the time of our selection—to sort states based on the percentage of their schools offering courses commonly associated with college readiness. We selected states that fell below the national average in percentage of schools offering Algebra II. We also considered states that were at or above the national average in percent of high-poverty schools offering two or fewer math and science courses. We also selected states providing us with a mix of state policies on college readiness and geographic diversity. Within each of the three states we used 2013-14 CRDC data to select high schools to visit that had greater than 75 percent of students eligible for free or reduced-price lunch (FRPL) and that offered a range of math and science courses. We also considered the number of AP courses offered by the school. As secondary criteria, we selected schools to achieve variation in school size, school type, and locale, to gather perspectives from officials in a diverse array of high-poverty schools. At each of the 12 schools, we interviewed the principal and other key leadership staff, and high school counselors. To supplement our site visits, we interviewed by phone state educational agency officials in each of the three states, as well as school district officials for most of the schools we visited. We interviewed officials from at least one local college advising organization in each of these states. In addition, we interviewed officials from at least one public 4-year university in each of the three states, for a total of four public 4-year universities. We selected universities that admit a high percent of in-state students, to attempt to talk to officials who were familiar with the high schools that we selected. These interviews provided us with information about what college admission officers view as challenges in admitting students from high poverty schools and the challenges students face in being successful in completing college. Because we selected the schools judgmentally, based on our criteria, the findings about the challenges these schools reported or the strategies they used to help students address those challenges cannot be generalized to all schools nationwide. In addition to interviews in our site visit states, we interviewed officials from the Education Commission of the States, National Association for College Admission Counseling, and the College Board. We also held interviews and reviewed documentation from the U.S. Departments of Education and Justice to gather information on their programs supporting access to college preparation opportunities. We also reviewed relevant literature, as appropriate. We conducted this performance audit from May 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. According to administrative data from the U.S. Department of Education (Education), the Office for Civil Rights (OCR) received over 480 civil rights cases related to college and career readiness and resource comparability from FY 2011 through 2017. Some of these cases were initiated by external complaints and other reviews were initiated by Education. In the selected cases described below Education found underrepresentation of minority students or English learners in advanced, honors, or Advanced Placement (AP) middle and high school courses or in other types of college preparatory programs. This selection of cases is not generalizable, and was selected for illustrative purposes only. Education Case 1: Equitable Access to Advanced Courses for Black Students in an Ohio School District. In a 2016 investigation, OCR identified a number of potential Title VI compliance concerns regarding equitable access to certain resources for Black students at some schools. Specifically, OCR found that students at three schools, including two predominantly Black high schools, did not have the opportunity to take advanced courses taught live at their schools and, therefore, could not engage in-person with the course instructors. According to OCR’s investigation, students participated remotely, watching the class through a video system. When the classes first started during the 2011-12 school year, the district staffed the distance classroom with paraprofessionals to assist the students. For that year, the district reported using technology to offer greater curriculum choices to its students through distance learning, especially when a sufficient number of students did not sign up for an advanced course at a specific school. After OCR notified the district of its concerns regarding this practice, the district placed teachers in these classrooms effective the 2014-15 school year. The district reported to Education that it was also pursuing efforts that would allow students to earn college credit, increase the number of courses, and improve the courses to provide high-level course choices for students. Before OCR concluded its investigation, district school officials voluntarily entered into a resolution agreement with Education, which committed the district to take certain actions, such as implementing programs designed to ensure that equally effective and qualified teachers are equitably distributed throughout the district and ensure Advanced Placement and other higher-level college preparatory courses are taught in the district’s predominantly Black high schools, and provide students the opportunity to engage in-person with course instructors. Education Case 2: Equitable Access to College Preparatory Programs for Black, Hispanic, and English Learner (EL) Students in a New York School District. In 2013, OCR investigated whether a New York school district discriminated against Black, Hispanic, and EL students by establishing and implementing policies and procedures that resulted in their exclusion from college and career ready programs and courses, such as honors courses and AP courses. OCR reviewed information that the district provided regarding its high school honors courses and analyzed data from the district that revealed that Black, Hispanic, and EL students were underrepresented to a statistically significant degree in high school honors courses and AP courses. OCR also reviewed information concerning the district’s gifted and talented program at the elementary and middle school levels and its advanced courses at the middle school level. Data provided by the district indicated that Black, Hispanic and EL students were underrepresented to a statistically significant degree in middle school advanced courses, as well as in some of the district’s enrichment programs. OCR noted that enrollment in these programs and courses could potentially have an effect on later enrollment in high school honors and AP courses. Before the conclusion of OCR’s investigation, the district voluntarily entered into a resolution agreement with Education. The agreement committed the district to take specific actions including hiring a consultant with expertise in addressing the underrepresentation of Black, Hispanic, and EL students in advanced and enrichment courses. According to the agreement, the consultant was to study the underrepresentation and make specific recommendations, as appropriate, for improving the district’s efforts to provide all students with equal access to and an equal opportunity to participate in its advanced courses and programs. Education Case 3: Representation of Black Students in Advanced Courses and Enrichment Programs in a New Jersey School District. In 2014, OCR determined that Black students in a New Jersey school district were underrepresented in high school AP courses. Specifically, OCR found that Black students comprised 51.5 percent of high school students in the district, but only 18.7 percent of students in AP courses in school year 2012-13. In addition, OCR determined that in middle schools, Black students were underrepresented in the district’s advanced math courses, as well as in the math enrichment programs at certain schools in the district. Before the conclusion of OCR’s investigation, the district voluntarily entered into a resolution agreement with Education. The agreement committed the district to take specific actions including hiring a consultant with expertise in addressing the underrepresentation of Black students in college and career preparatory courses. According to the agreement, the consultant was to study the underrepresentation and make recommendations, as appropriate, for improving the district’s efforts to provide all students with equal access to and an equal opportunity to participate in its advanced courses and programs. Education Case 4: College Preparation Opportunities for Black Students in a Virginia School District. In 2014, OCR investigated whether a Virginia school district discriminated against Black students by failing to provide them with the same resources and educational opportunities that it provided to White students to prepare them for postsecondary education or careers. As part of this review, OCR reviewed information regarding the district’s high school higher-level learning opportunities, including advanced courses, AP courses, and dual credit programs (where students enroll in courses at a local community college). In addition, OCR collected and reviewed information about other possible barriers to college and career readiness, including student discipline. OCR found a significant disparity between the numbers of Black and White high school students who take AP, advanced courses, and dual credit programs. Preliminary information provided by the district indicated disproportion in the representation of Black students in advanced math classes, gifted programs, and accelerated reading programs in elementary schools. When speaking with students about what they considered in determining whether to enroll in these courses, many students informed OCR that they took AP or advanced courses if they took advanced courses in middle school and elementary school. OCR also reviewed student discipline, particularly exclusionary disciplinary that removes students from the school setting, because, according to OCR, such removals can serve as a potential barrier to college and career readiness. Before OCR concluded its investigation, the district voluntarily entered into a resolution agreement with Education to resolve the case. The agreement committed the district to retain the services of a consultant with expertise in addressing the underrepresentation of Black students in gifted programs, elementary and middle school advanced courses, and high school AP and dual credit courses. The consultant’s role was to examine the root causes for underrepresentation and to make recommendations about what measures, if any, the district should take as part of its on-going efforts to provide all students with equal access to advanced courses and programs. According to the agreement, the consultant was to study the underrepresentation and make recommendations, as appropriate, for improving the district’s efforts to provide all students with equal access to and an equal opportunity to participate in its advanced courses and programs. Justice also investigates allegations of discrimination related to school resources in response to complaints filed under federal civil rights statutes and monitors and enforces open federal school desegregation orders where Justice is a party to the litigation. Justice sometimes partners with OCR on these cases. In September 2017, Justice officials stated that there were 172 open cases to which the agency was a party. The selected cases described below summarize Justice’s findings and the agreed upon remedies. This selection of cases is not generalizable, and was selected for illustrative purposes only. Justice Case 1: Equal Educational Opportunities in an Alabama School District. As part of an ongoing civil rights lawsuit against an Alabama school district, in 2015, the U.S. District Court for the Northern District of Alabama approved a consent order filed by Justice and the district to reconfigure school attendance zones, improve access to quality course offerings, and address racial discrimination in student discipline, among other areas. The proposed consent order required the district to provide equal educational opportunities to Black students by revising attendance zones and growing and strengthening magnet programs to improve diversity at many of its schools. It also required the district to expand access for Black students by taking a number of steps, including expanding access for Black students to college counseling and advance course offerings such as AP and International Baccalaureate (IB). It also required the district to expand access for Black students to pre- kindergarten, gifted programs, and academic afterschool programs. The district agreed to implement measures to promote faculty and administrator diversity and to ensure that all students are aware of and can equally participate in extracurricular activities. Justice Case 2: Equitable Access to Course Offerings in a Louisiana School District. As part of an ongoing civil rights lawsuit against a Louisiana School Board, in 2015, the U.S. District Court for the Western District of Louisiana approved a consent decree between Justice and the school board. This consent decree addressed district’s fulfillment of its desegregation obligations, terminating long-standing judicial supervision of the district in this matter. Prior to this consent decree, in 2010, the court directed the district to offer the same courses at every high school. However, 5 years later, the court found that a high school in the district, which predominantly served White students, offered 32 more courses, including college preparatory courses, than another high school, which predominantly served Black students. Similarly, across all schools in the district (elementary, middle, and high), the schools that were racially identifiable as White had far more gifted and talented course offerings than other schools. In the consent decree, the district agreed, among other things, to strive to have all courses listed in its course catalog taught at each high school. Further, if a course is ultimately not taught at a given school, students at that school would be given the opportunity to take the course at another school in the district. The district also agreed to provide free transportation, at the student’s request, and to adjust the student’s schedule and the scheduling and location of the course, as necessary, to facilitate the student’s attendance at the course. Justice Case 3: Access to College and Career Readiness Programs and Courses for American Indian Students in a New Mexico School District. In 2017, Justice and OCR resolved a compliance review of a New Mexico school district. The purpose of the review was to determine whether the district discriminated against American Indians by excluding them from college and career readiness programs and courses, such as gifted and talented, AP, and honors courses. Justice and OCR also evaluated whether the district discriminated against American Indian parents by not providing them with information surrounding the aforementioned programs and courses in a language they understand. District staff surveyed during this review recommended ways to address American Indian student underrepresentation in college and career readiness programs and courses. On February 14, 2017, the district entered into a resolution agreement with OCR and Justice, committing to take specific actions to ensure that it is providing an equal opportunity and equal access for all students to its advanced and higher level learning opportunities. The district agreed to several actions including reaching out to an equity assistance center or consultant for technical assistance in addressing the underrepresentation of American Indian students in the college and career readiness programs and courses and improving outreach to the American Indian community. This appendix contains several tables that show the underlying data used throughout this report, as well as additional analyses we conducted using the Department of Education’s Civil Rights Data Collection (CRDC) and Common Core of Data (CCD) for school year 2015-16. The following tables and information are included in this appendix: Table 17: High schools offering math and science courses, by school poverty level. Table 18: High schools offering math and science sequences, by school poverty level. Table 19: High schools offering Advanced Placement courses, International Baccalaureate program, and Dual Enrollment options, by school poverty level. Table 20: High schools offering different numbers of Advanced Placement courses, by school poverty level. Table 21: High schools offering math courses, by school size and poverty level. Table 22: High schools offering science courses, by school size and poverty level. Table 23: High schools offering math and science sequences, by school size and poverty level. Table 24: High schools offering Advanced Placement courses, International Baccalaureate program, and Dual Enrollment options, by school size and poverty level. Table 25: High schools offering math courses, by school type and poverty level. Table 26: High schools offering science courses, by school type and poverty level. Table 27: High schools offering math and science sequences, by school type and poverty level. Table 28: High schools offering Advanced Placement courses, International Baccalaureate program, and Dual Enrollment options, by school type and poverty level. Table 29: High schools offering math courses, by school locale and poverty level. Table 30: High schools offering science courses, by school locale and poverty level. Table 31: High schools offering math and science sequences, by school locale and poverty level. Table 32: High schools offering Advanced Placement courses, International Baccalaureate program, and Dual Enrollment options, by school locale and poverty level. As described in Appendix I, we reviewed websites from a nationally- representative sample of 100 public 4-year colleges in the United States to determine which academic courses colleges expect applicants to take while in high school. Our sampling frame consisted of all public 4-year degree granting colleges that participated in Title IV federal student aid programs, predominately award baccalaureate degrees, have full-time first-time undergraduate students, and that are located in a U.S. state or the District of Columbia, yielding a universe of 555 colleges. Based on our review, an estimated 88 percent of public 4-year colleges posted recommended or required high school coursework as admission criteria for applicants. Of the colleges that had coursework criteria posted on their websites, the results are shown in table 33 below. In addition to the contact named above, Sherri Doughty (Assistant Director), Cady Panetta (Analyst-in-Charge), James Ashley, James Bennett, David Dornisch, Holly Dye, Alison Grantham, Connor Kincaid, Grant Mallie, Benjamin Sinoff, Walter Vance, and Sonya Vartivarian made key contributions to this report. Also contributing were Deborah Bland, Aaron Karty, Sheila R. McCoy, and Margie Shields.", "summary": "Poverty can have a profound effect on academic outcomes and college readiness and students from low-income families are less likely to go to college. The low rates of degree attainment for low-income students raises questions about whether the students who wish to pursue higher education have access to courses that support their readiness for college. GAO was asked to review college preparatory course offerings in U.S. high schools. This report (1) examines the extent to which high schools of different poverty levels offer courses to prepare students academically for college, and (2) describes the challenges students in high-poverty schools face being prepared to attend college. GAO analyzed 2015-16 Education data on course offerings by school poverty level, type, and size, and developed a generalized linear regression model to explore whether certain school-level characteristics may be associated with course offerings; reviewed a generalizable sample of public 4-year college websites for course requirements for admission; and interviewed officials from Education and the Department of Justice. GAO also conducted site visits to 12 high-poverty high schools in 3 states selected to provide variation in course offerings, among other things. In this review, GAO focused on public 4-year colleges because they offer a bachelor's degree and are generally a more affordable 4-year option. Students in relatively poor and small schools had less access to high school courses that help prepare them for college, according to GAO's analysis of Department of Education (Education) data for school year 2015-16 (the most recent available). While most public high schools, regardless of poverty level, offered courses like algebra and biology, disparities in access were associated with school poverty level for more advanced courses like calculus, physics, and those that may allow students to earn college credit, like Advanced Placement (AP) courses (see figure). High-poverty schools were less likely to offer the math and science courses that most public 4-year colleges expect students to take in high school, according to GAO's analysis of college websites. GAO's regression analysis also showed that smaller schools and certain types of schools, like charter schools, are less likely to offer the college preparatory math or science courses that many colleges look for during the admissions process. Officials GAO interviewed in selected high-poverty high schools said their students can face a number of complex challenges in preparing for college. For instance, officials said that many students are academically behind when they enter high school and are unable to progress to more advanced courses. Further, high-poverty schools may not offer rigorous courses, such as AP courses, due to lack of resources or teaching staff. Students in high-poverty schools also face other stressors that can make going to college challenging. Officials at 9 of the 12 schools GAO visited cited the effects of poverty on their students, such as homelessness, hunger, and trauma, that make preparing for college difficult. School officials also said the steps involved in applying to and enrolling in college can be difficult to navigate for many students in high-poverty schools. Officials in selected schools reported efforts to address these challenges, such as offering free college courses and obtaining outside supports to assist with college advising.", "document_type": "gao"}
{"report": "NASA’s Commercial Crew Program is a multi-phased effort that began in 2010. Across the phases, NASA has engaged several companies, using both agreements and contract vehicles to develop and demonstrate crew transportation capabilities. As the program has passed through these phases, NASA has generally narrowed down the number of participants. The early phases of the program were under Space Act agreements, which is what NASA calls the agreements entered into pursuant to its other transaction authority. These types of agreements are generally not subject to the Federal Acquisition Regulation (FAR) and allow the government and its contractors greater flexibility in many areas. Under these Space Act agreements, NASA relied on the commercial companies to propose specifics related to their crew transportation systems, including their design, the capabilities they would provide, and the level of private investment. In these phases, NASA provided technical support and determined whether the contractors met certain technical milestones. In most cases, NASA also provided funding. For the final two phases of the program, NASA awarded FAR-based contracts. By using FAR-based contracts, NASA gained the ability to procure missions to the ISS, while continuing to provide technical expertise and funding to the contractors. NASA levied two sets of requirements on the contractors: the ISS program requirements, which must be met by all spacecraft visiting the ISS whether they carry cargo or crew; and the Commercial Crew Program requirements, which have a focus on system capabilities and safety rather than design. The program also established a verification closure notice process, in which the contractors submit data to NASA to verify they have met all the requirements to be certified. This certification must occur before contractors are allowed to fly initial crewed missions to the ISS. In September 2014, NASA awarded firm-fixed-price contracts to Boeing and SpaceX, valued at up to $4.2 billion and $2.6 billion, respectively, for the Commercial Crew Transportation Capability phase. Under a firm- fixed-price contract, the contractor must perform a specified amount of work for the price negotiated by the contractor and government. This is in contrast to a cost-reimbursement contract, in which the government generally agrees to pay the contractor’s allowable costs regardless of whether work is completed. During this phase, the contractors will complete development of crew transportation systems. Boeing’s spacecraft—CST-100 Starliner—is composed of a crew module and a service module. The crew module will carry the crew and cargo. It also includes communication systems, docking mechanisms, and return systems for Earth landing. The service module provides propulsion on-orbit and in abort scenarios as well as radiators for thermal control. SpaceX’s spacecraft—Dragon 2—is composed of a capsule, which we refer to as the crew module, and a trunk, which we refer to as the support module. The crew module is composed of a pressure section and a service section. This module will carry the crew and cargo. It also includes avionics, docking mechanisms, and return systems for a water landing. The support module includes solar arrays for on-orbit power and guidance fins for escape abort scenarios. Figure 1 shows the spacecraft and launch vehicles for Boeing and SpaceX’s crew transportation systems. The Commercial Crew Transportation Capability phase contracts include three types of services: Contract Line Item 001 encompasses the firm-fixed-price design, development, test, and evaluation work needed to support NASA’s certification of the contractor’s spacecraft, launch vehicle, and ground support systems. Contract Line Item 002 covers any service missions that NASA orders to transport astronauts to and from the ISS. Under this indefinite-delivery, indefinite-quantity line item, NASA has ordered six post-certification missions from each contractor. Each service mission is its own firm-fixed-price task order. NASA must certify the contractors’ systems before they can fly these missions. Contract Line Item 003 is an indefinite-delivery, indefinite-quantity line item for any special studies, tests, and analyses that NASA may request. These tasks do not include any work necessary to accomplish the requirements under contract line item 001 and 002. As of April 2018, NASA had funded studies worth approximately $30 million to Boeing, including approximately $27 million for additional testing of the parachute system. NASA had funded studies worth approximately $44 million to SpaceX, including approximately $34 million for additional testing of the parachute system. For each contractor, the maximum value of this contract line item is $150 million. NASA has made changes to the contracts that have increased their value. While the contracts are fixed-price, their values can increase if NASA adds work or otherwise changes requirements, among other means. As of April 2018, NASA requirement changes had increased the value of contract line item 001 for Boeing by approximately $191 million and for SpaceX by approximately $91 million. NASA divided the certification work under contract line item 001 into two acceptance events: the design certification review and the certification milestone. An acceptance event occurs when NASA approves a contractor’s designs and acknowledges that the contractor’s work is complete and meets the requirements of the contract. The first acceptance event—the design certification review—verifies the contractor’s crew transportation system’s capability to safely approach, dock, mate, and depart from the ISS, among other requirements. After the contractor has successfully completed all of its flight tests, as well as various other activities, the second acceptance event—the certification milestone—determines whether the crew transportation system meets the Commercial Crew Program’s requirements. Following this contract milestone is an agency certification review, which authorizes the use of a contractor’s system to transport NASA crew to and from the ISS. Figure 2 shows a notional path leading up to the agency certification review. The Commercial Crew Program’s certification plan outlines how the program will incrementally review required deliverables leading up to, and supporting, the agency certification review. For each review, the plan describes the information that the contractor and the program will present. At the agency certification review, which is chaired by the Associate Administrator of the Human Exploration and Operations Mission Directorate, the agency will review the program’s formal recommendation to certify the contractor’s crew transportation system. Program officials said that their goal is to develop and review certification evidence incrementally in order to reduce the risk that issues will be identified during the agency certification review. In our February 2017 report, we evaluated the progress made by the two contractors on the Commercial Crew Program and found the following: Both of the Commercial Crew Program’s contractors had made progress developing their crew transportation systems, but both also had aggressive development schedules that were increasingly under pressure. We reported that both Boeing and SpaceX had determined that they would not be able to meet their original 2017 certification dates, and both expected certification to be delayed until 2018. We found that the schedule pressures were amplified by NASA’s need to provide a viable crew transportation option because its contract with Russia’s space agency was to provide crew transportation to the ISS for six astronauts through 2018 with rescue and return through late spring 2019. Purchasing additional seats from Russia involves a contracting process that typically takes 3 years. Without a viable contingency option for ensuring uninterrupted access to the ISS in the event of further Commercial Crew delays, we concluded that NASA was at risk of not being able to maximize the return on its multibillion dollar investment in the space station. The Commercial Crew Program was using mechanisms laid out in its contracts to gain a high level of visibility into the contractors’ crew transportation systems, but maintaining that level of visibility through certification could add schedule pressures. We noted that, for example, due to NASA’s acquisition strategy for this program, its personnel were less involved in the testing, launching, and operation of the crew transportation system. While the program developed productive working relationships with both contractors, obtaining the level of visibility that the program required had also taken more time than the program or contractors had anticipated. Ultimately, we noted that the program had the responsibility for ensuring the safety of U.S. astronauts, and its contracts gave it deference to determine the level of visibility required to do so. We concluded that the program office could face difficult choices moving forward about how to maintain the level of visibility it feels it needs without adding to the program’s schedule pressures. In order to ensure that the United States had continued access to the ISS if the Commercial Crew Program’s contractors experienced additional schedule delays, we recommended in our February 2017 report that the NASA Administrator develop a contingency plan for maintaining a presence on the ISS beyond 2018, including options to purchase additional Russian Soyuz seats, and report to Congress on the results. NASA concurred with this recommendation, and in February 2017, NASA executed a contract modification that purchased two seats and included an option to purchase three additional crewmember seats from Boeing on the Russian Soyuz vehicle. These seats represent a contingency plan for U.S. access to the ISS through 2019. In April 2017, NASA informed the Congress of this action. Boeing and SpaceX continue to make progress developing their crew transportation systems, but both contractors have further delayed the certification milestone to early 2019. These changes have occurred as the contractors continue to work to aggressive schedules, and they have had to delay key events regularly. Further delays are likely as the Commercial Crew Program’s schedule risk analysis shows that the certification milestone is likely to further slip. In addition, as of mid-June 2018, NASA officials told us that these dates may change soon but that both contractors have not yet provided official updates to their schedules to NASA. NASA has not fully shared information with Congress regarding the risks of future schedule delays for the contractors and, as a result, Congress lacks insight into when the contractors will be certified. Also, there may be a gap in access to the ISS if the Commercial Crew Program experiences additional delays. While NASA has begun to discuss potential options, it currently does not have a contingency plan for how to ensure an uninterrupted presence on the ISS beyond 2019. Boeing and SpaceX have continued to make progress finalizing their designs and building hardware as they work toward their certification milestones. The contractors are manufacturing test articles to demonstrate system performance and flight spacecraft to support the uncrewed and crewed flight tests, which are expected to demonstrate the ability to meet contract requirements. As table 1 shows, these test articles and spacecraft vary in levels of completion. Some are built and undergoing testing while others are starting the manufacturing phase. Should any issues arise during integration and test or the flight tests, the contractors may have to complete rework on the spacecraft already under construction. While both contractors are making progress, the Commercial Crew Program is tracking risks that each contractor has to address through testing and other means as they work towards the certification milestone. As we have previously reported, these types of risks are inherent in NASA’s major acquisitions, which are highly complex, specialized, and often pushing the state of the art in space technology, but they could also delay the contractors’ progress if issues arise during testing. The Commercial Crew Program’s top programmatic risks identified for Boeing include challenges related to its abort system performance, parachutes, and launch vehicle. Abort System: Boeing is addressing a risk that its abort system, which it needs for human spaceflight certification, may not meet the program’s requirement to have sufficient control of the vehicle through an abort. In some abort scenarios, Boeing has found that the spacecraft may tumble, which could pose a threat to the crew’s safety. To validate the effectiveness of its abort system, Boeing has conducted extensive wind tunnel testing and plans to complete a pad abort test in July 2018. Parachute System: Boeing is also addressing a risk that during descent, a portion of the spacecraft’s forward heat shield may re- contact the spacecraft after it is jettisoned and damage the parachute system. Boeing’s analysis indicates the risk exists only if one of two parachutes that pull the forward heat shield away from the spacecraft does not deploy as expected, and that potential re-contact is non- detrimental. However, NASA’s independent analysis indicates that this may occur even if both parachutes deploy as expected. If the program determines this risk is unacceptable, Boeing would need to redesign the parachute system, which the program estimates could result in at least a 6-month delay. Launch Vehicle Data: One of the program’s top programmatic and safety concerns is that it may not have enough information from Boeing’s launch vehicle provider, United Launch Alliance, to assess whether the Atlas V launch vehicle prevents or controls cracking that could lead to catastrophic failures. NASA estimates that unfinished work in this area could take Boeing and the United Launch Alliance until the fourth quarter of 2018 to complete. Additionally, the first stage of the Atlas V is powered by the Russian built RD-180 engine, and, according to program and Boeing officials, access to its data is highly restricted by agreements between the U.S. and Russian governments. Since our last report, the Commercial Crew Program has lowered the risk that certification of the launch vehicle might not occur by negotiating steps to access necessary data, but work is still ongoing. The Commercial Crew Program’s top programmatic risks identified for SpaceX are in part related to ongoing design and development efforts related to its launch vehicle design, the Falcon 9 Block 5. Composite Overwrap Pressure Vessel: This Block 5 design includes SpaceX’s redesign of the composite overwrap pressure vessel, which is intended to contain a gas under high pressure. SpaceX officials stated the newly designed vessel aims to eliminate risks identified in the older design, which was involved in an anomaly that caused a mishap in September 2016. SpaceX plans to qualify the updated design for flight prior to the uncrewed flight test design certification review. Engine Turbine Cracking: The Block 5 design also includes design changes to address cracks in the turbine of its engine identified during development testing. NASA program officials told us that they had informed SpaceX that the cracks were an unacceptable risk for human spaceflight. SpaceX officials told us that they have made design changes to this Block 5 upgrade that did not result in any cracking during initial testing. However, this risk will not be closed until SpaceX successfully completes qualification testing in accordance with NASA’s standards without any cracks. As of March 2018, SpaceX had not yet completed this testing. Propellant Loading Procedures: Both the program and a NASA advisory group have raised SpaceX’s plan to fuel the launch vehicle after the astronauts are on board the spacecraft to be a potential safety risk. In the May 2018 meeting minutes, however, the Aerospace Safety Advisory Panel stated that with appropriate controls in place, this approach could be a viable option for the program to consider. SpaceX’s perspective is that this operation may be a lower risk to the crew because it reduces the crew exposure time while the launch vehicle is being loaded with propellant. To better understand the propellant loading procedures, the program and SpaceX agreed to demonstrate the loading process five times from the launch site in the final crew configuration prior to the crewed flight test. The five events include the uncrewed flight test and the in-flight abort test. Therefore, delays to those events would lead to delays to the agreed upon demonstrations, which could in turn delay the crewed flight test and certification milestone. Both contractors have notified NASA that their certification milestones have slipped to January 2019 for Boeing and February 2019 for SpaceX, but the Commercial Crew Program’s schedule risk analysis indicates more delays are likely. This analysis identifies a range for each contractor, with an earliest and latest possible completion date, as well as an average. In April 2018, the program’s schedule risk analysis found there was zero percent chance that either contractor would achieve its current proposed certification milestone. The analysis’s average certification date was December 2019 for Boeing and January 2020 for SpaceX. Figure 3 shows the original Boeing and SpaceX contract schedules and the current proposed schedule for five key events in each contract, as well as NASA’s schedule risk analysis for the certification milestone. Each month, the program updates its schedule risk analysis based on the contractors’ internal schedules as well as program officials’ perspectives and insight into specific technical risks. The Commercial Crew Program manager told us that differences between the contractors’ proposed schedules and the program’s schedule risk analysis include: The contractors are aggressive and use their schedule dates to motivate their teams, while NASA adds additional schedule margin for testing. Both contractors assume an efficiency factor in getting to the crewed flight test that NASA does not factor into its analysis. The program manager also told us that the program meets with each contractor monthly to discuss schedules and everyone agrees to the relationships between events in the schedule even if they disagree on the length of time required to complete events. The program manager added, however, that she relies on her prior experience to estimate schedule time frames as opposed to relying on the contractors’ schedules, which are often optimistic. Our analysis also shows that the contractors often delay their schedules. Both contractors have repeatedly stated that their schedules are aggressive and have set ambitious—rather than realistic—dates, only to frequently delay them. Since the current contracts were awarded in 2014, the Commercial Crew Program has held 13 quarterly reviews for each contractor. For the five key events identified above, Boeing has reported a delay at 7 of those quarterly reviews and SpaceX has reported a delay at 9 of them. In mid-June 2018, NASA officials told us that the dates for these key events may change soon. The information presented in Figure 3 above is based on first quarter calendar year 2018 data. NASA officials stated both contractors have not yet officially communicated new schedule dates to NASA as of the second quarter calendar year 2018. We found that both contractors have updated schedules that indicate delays are forthcoming for at least one key event, but NASA officials told us they lack confidence in those dates until they are officially communicated to NASA by the contractors. As a result, NASA is managing a multibillion dollar program without confidence in its schedule information as it approaches several big events, including uncrewed and crewed flight tests. The risk of future delays in the contractors’ schedules is critical information that NASA has not fully shared with Congress. Moreover, NASA has not yet developed a contingency plan to address the potential gaps that these delays could have on U.S. access to the ISS after 2019. Specifically, in the Explanatory Statement accompanying the fiscal year 2018 Consolidated and Further Continuing Appropriations Act, the House Appropriations Committee stated its expectation that NASA report quarterly to the Senate and House Committees on Appropriations on the status of the Commercial Crew Program contracts. Previously, members of Congress had asked for this information in order to ensure that Congress had adequate insight into this program. While NASA includes both contractors’ proposed schedules in its quarterly report to Congress, NASA does not include the results of its own schedule risk analysis. Given the frequency with which the contractors delay key events in their schedules, the program’s schedule risk assessment provides valuable insight into potential delays that NASA currently is not providing to Congress. In addition, as previously mentioned, NASA executed a contract modification that purchased two seats and included an option to purchase three additional crew member seats through Boeing for an undisclosed value and reported this action to Congress in April 2017. Ultimately, the option was exercised, and NASA purchased a total of five seats on four different Soyuz flights. Boeing obtained these seats through a separate settlement with the Russian firm RSC Energia, which manufactures the Soyuz. These seats were intended to serve as a contingency plan based on schedule information available at that time. However, subsequent delays, as well as the risk of future delays as discussed above, indicate that this contingency plan will likely no longer be sufficient. The earliest and latest possible completion dates for certification in NASA’s April 2018 schedule risk analysis indicate it is possible that neither contractor would be ready before August 2020, leaving a potential gap in access of at least 9 months. We calculated the potential gap based on the contractor certification milestone dates, but there could be some additional time required between that review and the first post-certification service mission to the ISS. As seen in figure 4, if the contractors can maintain their current proposed schedules for their respective certification milestones, a gap in access to the ISS is not expected. However, there would be a gap in access to the ISS if neither contractor has its certification milestone before November 2019, which is when NASA expects the final Russian Soyuz seat for a U.S. astronaut to return. Senior NASA officials told us that sustaining a U.S. presence on the ISS is essential to maintain and operate integral systems, without which the ISS cannot function. Given the importance of maintaining a U.S. presence on the ISS, NASA officials have stated they are working on options to address the potential gap in access. However, officials told us that planning for contingencies is difficult given the extensive international negotiations required for some options. Obtaining additional Soyuz seats seems unlikely, as the process for manufacturing the spacecraft and contracting for those seats typically takes 3 years—meaning additional seats would not be available before 2021. As a result, according to NASA’s Associate Administrator for Human Exploration and Operations, the options NASA is considering include: Refine the remaining Soyuz launch schedule to allow for a return in January 2020, as opposed to November 2019. This would provide 2 additional months of access to the ISS before the commercial crew flights need to start. Use the crewed flight tests as operational flights to transport U.S. astronauts to and from the ISS. In March 2018, NASA modified Boeing’s contract to allow NASA to add a third crew member and extend the length of the flight test, if NASA chooses to do so. This would have limited usefulness, however, in filling a potential gap in access to the ISS if the schedule for Boeing’s crewed flight test slips past the return date for the last Soyuz flight and SpaceX also continues to experience delays. NASA’s Associate Administrator for Human Exploration and Operations stated that he is “brainstorming” other options to ensure access to the ISS but does not have a formal plan. While options are not unlimited and decisions have to be made within the context of the current geopolitical environment, Congress stated in the NASA Authorization Act of 2005 that it is U.S. policy to possess the capability for human access to space on a continuous basis. In 2010, Congress further stated that one of the key objectives of the United States’ human spaceflight policy is to sustain the capability for long-duration presence in low-Earth orbit through full utilization of the ISS. If NASA does not develop options for ensuring access to the ISS in the event of further Commercial Crew delays, it will not be able to ensure that the U.S. policy goal and objective for the ISS will be met. The Commercial Crew Program relies on several contractual mechanisms to assess safety throughout the certification process, and those mechanisms are in varying stages of completion. The program itself, its contractors, and two of NASA’s independent review organizations have raised concerns about the program’s ability to assess and evaluate all of the deliverables in a timely manner. In addition, one of the key safety requirements levied by the program is loss of crew, which captures the probability of death or disability to a crew member. NASA does not have a consistent approach for how to incorporate key inputs to assess this metric, which means the agency as a whole may not clearly capture or document its risk tolerance with respect to loss of crew. Further, the program’s chief safety and mission assurance officer is dual hatted to serve simultaneously in a programmatic position as well as the program’s safety technical authority. This approach creates an environment of competing interests because it relies on the same individual to manage technical and safety aspects on behalf of the program while also serving as the independent oversight of those same areas. The contractors are required to provide several key deliverables to the Commercial Crew Program, which inform the agency certification review and help NASA determine the level of risk it is accepting with respect to safety of each spacecraft. As described below, these deliverables are in varying stages of completion and the program itself, its contractors, and two of NASA’s independent review organizations have raised concerns about the program’s ability to assess and evaluate all of the deliverables in a timely manner. Certification Data Package. Among other things, the certification data package includes a list of seven system safety assessments. For example, the certification data package includes a fault tolerance assessment, which describes the system’s ability to sustain a certain number of undesired events, such as software or operational anomalies. A human error analysis—one of the seven assessments in the data package—evaluates human errors to minimize their negative effects on the system. Boeing held its uncrewed flight test design certification review in December 2017 and submitted its certification data package for NASA approval. Boeing plans three more updates to this data package prior to the final certification milestone. SpaceX has begun to submit data and plans to submit its final certification data package as part of its crewed flight test design certification review, which is scheduled for September 2018. According to the program’s certification review plan, program officials will review and approve the contractors’ certification data packages, which will be used to inform the agency certification review. Phased Safety Review Process. A three-phased safety review process informs the program’s quality assurance activities, and it is intended to ensure that the contractors have identified all safety-critical hazards and implemented associated controls prior to the first crewed flight test. In phase one, the contractors identified risks in their designs and developed reports on potential hazards, the controls they put in place to mitigate them, and explanations for how the controls will mitigate the hazards. In phase two, which is nearing completion, the program reviews and approves the contractors’ hazard reports and develops strategies to verify and validate that the controls are effective. For example, if a control requires that an item be waterproofed, verification and validation strategies could include inspections and tests to confirm that the item is waterproof. As of April 2018, the program had yet to complete this phase, having approved 97 percent of Boeing’s phase two reports and 72 percent of SpaceX’s phase two reports. In phase three, the contractors will conduct the verification activities and submit the hazard reports to the program for approval. The program has begun phase three, including approving 19 percent of Boeing’s phase three reports. Program Requirements. While the program manager told us that all of the requirements contribute to the safety of the commercial systems, safety officials are required to approve a subset of these requirements. Examples of requirements approved by safety officials include the ability to leave the spacecraft in an emergency or to abort a launch. When a contractor is ready for NASA to verify that it has met a requirement, the contractor submits data for NASA to review through a verification closure notice. We define “safety-specific notices” as those requiring safety officials’ approval. As shown in table 2, as of March 2018, the program had approved 2 percent of Boeing’s safety-specific notices and 0 percent of SpaceX’s safety-specific notices. Testing. The program also requires testing to verify and validate the crew transportation system. Agency officials emphasized the importance of testing to safety, stating that testing reduces uncertainty about a system’s performance and can uncover unknown problems. As noted above, both contractors will be conducting an uncrewed and a crewed flight test prior to being certified. While a certain level of risk needs to be accepted to conduct human spaceflight, these flight tests help to mitigate this risk by validating the integrated performance of the hardware and software. Agency and program officials stated that the contractors’ flight tests are critical evidence to support certification of a safe and reliable system. As evidenced by the data above, the program still has a significant amount of work ahead with respect to approving certification packages and closing hazard reports and verification closure notices. We have previously found that the program’s workload was an emerging schedule risk, and the contractors have continued to express concern about program officials’ ability to process and approve certification paperwork in a timely manner. Workload has also been a concern for two of NASA’s independent review organizations. For example, the Aerospace Safety Advisory Panel noted in its January 2018 annual report that the sheer volume of work that remains for the program in terms of closing hazard reports and verification closure notices is significant. In addition, the program’s safety and mission assurance office identified the upcoming bow wave of work in a shrinking time period as a top risk to achieving certification. One mechanism the program put in place to assess the overall safety of each spacecraft—loss of crew—has been a focus of the Aerospace Safety Advisory Panel, Members of Congress, our prior work, and the program itself. Loss of crew captures the probability of death or permanent disability to one or more crew members. It has received a lot of attention, in part, because it has been a top risk for the program since 2015. Specifically, the program has been concerned that neither contractor would be able to meet the contract requirement of a 1 in 270 probability of incurring loss of crew. We identified two key concerns with how NASA is using the loss of crew metric: (1) inconsistent approaches to assess the loss of crew metric and (2) no identified plan to share lessons learned about using the loss of crew metric as a safety threshold. A loss of crew value is generated through a probabilistic safety analysis, which models scenarios that could result in the loss of crew using various inputs. According to the program’s analysis, the probability of on-orbit debris damaging the vehicle has the greatest effect on a loss of crew value. This probability is informed by an orbital debris (debris) model, which was updated in 2014, after the loss of crew requirement was established. The updated debris model makes it harder to meet a loss of crew value, in part, because the modeling environment where the contractors’ systems will operate has changed. For example, the updated model includes a larger span of orbit, greater range of debris sizes, and the addition of material density classifications, which were not included in the former model. Further, the probabilistic safety analysis may include operational mitigations, such as on-orbit inspections that would include using cameras on the ISS to visually survey the spacecraft for damage, which, according to officials, makes it easier to meet a loss of crew value. NASA describes the probabilistic safety analysis as a powerful tool that should be used as part of the overall risk management process to ensure the risk associated with development and operation of a system is understood, evaluated, managed, and mitigated. However, we found differences in the approaches that officials plan to use to assess loss of crew as well as in the loss of crew value being measured that could limit the usefulness of this tool. Agency Certification. The agency certification review for each contractor will include an assessment of whether its crew transportation system meets a loss of crew threshold of 1 in 150 for missions to the ISS, which is based on a May 2011 safety memo from the Office of Safety and Mission Assurance. A loss of crew value with a higher denominator, such as 1 in 270, is harder to meet than with a lower denominator, such as 1 in 150. According to the Chief of the Office of Safety and Mission Assurance, he will assess the 1 in 150 threshold using a probabilistic safety analysis that includes the updated debris model and operational mitigations, such as the on- orbit inspections cited above. Program Office. According to program officials, they will assess whether either contractor meets a 1 in 270 loss of crew value based on a probabilistic safety analysis using the former debris model (not the updated model) and not including operational mitigations. Contracting Officer. According to the contracting officer, each contractor’s loss of crew requirement is 1 in 270 without including operational mitigations. The contracting officer stated that SpaceX’s contract requirement uses the updated debris model in the probabilistic safety analysis, whereas Boeing’s contract requirement uses the former debris model in the probabilistic safety analysis. Program’s Chief Safety and Mission Assurance Officer. According to the program’s chief safety and mission assurance officer, he will conduct a probabilistic safety analysis using the updated debris model and will not include operational mitigations to assess whether each contractor meets a 1 in 200 loss of crew value. This loss of crew value stems from a program update that occurred after the initial contracts were signed. These different approaches are summarized in table 3 below. Agency policy requires human spaceflight programs to set a safety threshold, which NASA did for the Commercial Crew Program when it identified the 1 in 150 loss of crew threshold in the May 2011 safety memo. Subsequently, the program set more rigorous loss of crew values in contract and program documents. NASA also updated the debris model, which we previously noted makes it more difficult to meet a loss of crew value. As a result, NASA does not have a consistent approach for how to incorporate key inputs to the probabilistic safety analysis, including changes to the debris model. Instead, the risk tolerance that NASA is accepting with loss of crew varies based upon which entity is presenting the results of its probabilistic safety analysis. For example, it is possible that the program’s assessment will determine that neither contractor will meet the 1 in 270 contract requirement, but that the agency’s assessment will determine that the contractors meet the 1 in 150 agency certification value because that analysis will include operational mitigations. Or the program’s assessment could determine that Boeing meets the 1 in 270 contractual loss of crew requirement, but the agency’s assessment may determine that Boeing does not meet the 1 in 150 agency certification value because that analysis will use the updated debris model. Federal internal controls state that agency management should define objectives clearly to enable the identification of risks and define risk tolerances. Specifically, management should define risk tolerances in specific and measurable terms, so they are clearly stated and can be measured. In this case, because there will be multiple analyses conducted using different inputs, NASA risks not clearly capturing or documenting, in a coherent manner, its overall risk tolerance with respect to loss of crew before a final decision must be made on whether to certify either crew transportation system. Moreover, capturing the challenges and lessons learned from using the loss of crew metric is critical, particularly because agency officials told us that this is the first time this metric has been used as a safety threshold. Also, there are different viewpoints about the utility of the metric as a safety threshold across the agency. The program manager repeatedly told us that loss of crew is best used as a design tool. For example, program officials told us that both contractors incorporated additional orbital debris shielding into their designs to mitigate the orbital debris risk and improve their loss of crew values. In addition, the Aerospace Safety Advisory Panel reported in 2018 that loss of crew should not be viewed as an absolute measure of actual risk during operations. However, the May 2011 agency safety memo states that a breach of the loss of crew threshold would initiate a termination review of the Commercial Crew Program, which is a more strict application of the loss of crew metric. Both program and safety officials told us that, after the agency certification is complete and lessons learned are available to be compiled, sharing those lessons learned across NASA would be a good idea given the complexities associated with assessing the loss of crew metric. As of April 2018, however, agency officials said they did not have a plan for loss of crew knowledge-sharing. We have previously found that lessons learned provide a powerful method of sharing good ideas for improving work processes, facility or equipment design and operation, quality, safety, and cost-effectiveness. Further, according to NASA’s Knowledge Policy on Program and Projects, which is managed through the Office of the Chief Engineer, a principle of each center and mission directorate’s knowledge strategy is that knowledge is the cornerstone of NASA’s ability to achieve mission success. The policy acknowledges that NASA faces continuous challenges in using what it knows effectively. These challenges include, but are not limited to, enabling the identification and flow of knowledge across organizational boundaries; preserving knowledge at risk of being lost; and providing means for individuals, teams, and the organization to learn from experiences. If NASA does not capture lessons learned from the Commercial Crew Program on using the loss of crew requirement to set a program’s safety threshold and whether it met the agency’s intended goal, future programs will not be able to benefit from the knowledge gained from this multibillion dollar investment. NASA’s governance model prescribes a management structure that employs checks and balances among key organizations to ensure that decisions have the benefit of different points of view and are not made in isolation. As part of this structure, NASA established the technical authority process as a system of checks and balances to provide independent oversight of programs and projects in support of safety and mission success through the selection of specific individuals with delegated levels of authority. The technical authority process has been used in other parts of the government for acquisitions, including the Department of Defense and Department of Homeland Security. The Commercial Crew Program is organizationally connected to three technical authorities within NASA: the Office of the Chief Engineer technical authority, the Office of Chief Health and Medical technical authority, and the Office of Safety and Mission Assurance (safety) technical authority. The safety technical authority is responsible for ensuring from an independent standpoint that the program’s products and processes satisfy NASA’s safety, reliability, and mission assurance policies. The NASA safety technical authority has delegated authority through the Kennedy Space Center Director to the Chief Safety and Mission Assurance Officer for the Commercial Crew Program. We have previously reviewed how NASA has organized its technical authorities for its Exploration Systems Development organization—an organization that oversees the development of the Space Launch System, Orion crew capsule, and associated ground systems that have the goal of extending human presence beyond low-Earth orbit. In October 2017, we found that the Exploration Systems Development organization had established an organizational structure in which the technical authorities for engineering and safety and mission assurance were dual hatted simultaneously in programmatic positions. We found that having the same individual simultaneously fill both a technical authority role and a program role created an environment of competing interests, where the technical authority’s ability to impartially and objectively assess the programs while at the same time acting on behalf of the Exploration Systems Development organization in programmatic capacities may be subject to impairments. We found that this was in contrast to a recommendation from the Columbia Accident Investigation Board report—the result of an in-depth assessment of the technical and organizational causes of the 2003 Space Shuttle Columbia accident—for NASA to establish a technical authority to serve independently of the Space Shuttle program, so that employees would not feel hampered to bring forward safety concerns or disagreements with programmatic decisions. The board’s findings that led to this recommendation included a broken safety culture in which it was difficult for minority and dissenting opinions to percolate up through the hierarchy; dual center and programmatic roles vested in one person that had confused lines of authority, responsibility, and accountability and made the oversight process susceptible to conflicts of interest; and oversight personnel in positions within the program, increasing the risk that these staffs’ perspectives would be hindered by too much familiarity with the programs they were overseeing. In October 2017, we recommended that the division no longer dual hat two individuals who had both programmatic and technical authority responsibilities. As of April 2018, NASA had taken steps to separate the engineering technical authority position from the programmatic position, and NASA’s Chief of Safety and Mission Assurance said he planned to separate the safety position but had not yet completed that action. The Commercial Crew Program employs a similar structure to the Exploration Systems Development organization in that the safety technical authority is dual hatted simultaneously in a programmatic position as the Commercial Crew Program’s Safety and Mission Assurance Manager. According to the program’s safety technical authority, in his programmatic role for the program, he helps set priorities for safety issues, including how staff will be utilized to meet those priorities. In the technical authority role, he provides independent oversight in support of safety and mission success. In his dual-hatted role, this official will be responsible for endorsing the program’s certification recommendations in two different capacities: as the technical authority and as a program authority. As a result, this structure relies on the same individual to completely separate two roles—one to manage the Commercial Crew Program’s safety issues within programmatic cost and schedule constraints, and the other to assess the same issues in an independent oversight role. While the Commercial Crew Program may have an additional level of separation between the safety technical authority and the program’s involvement in the design of commercial systems due to its shared assurance model with the commercial providers, the Commercial Crew Program still maintains a structure where one individual simultaneously serves in both technical authority and programmatic roles. Figure 5 describes some of the conflicting roles and responsibilities of this official in his two different positions. During our review, officials cited several factors in support of a dual- hatted approach: The safety technical authority retains independence because his technical authority reporting path and performance reviews are not under the purview of the Commercial Crew Program chain of command. Due to the Commercial Crew Program’s shared assurance model with commercial providers, the program is operating in a quality assurance role that provides an additional level of separation between the safety technical authority and the program’s involvement in the design of commercial systems. For safety decisions involving cost and schedule where the individual who is dual hatted with both technical authority and programmatic responsibilities may feel conflicted, he stated that he would discuss these matters with his management to validate the logic behind his decision. There are cost and knowledge efficiencies gained from one individual serving in both programmatic and safety technical authority capacities. NASA’s Chief of Safety and Mission Assurance stated that he has great confidence in the individual currently serving in the dual hatted role for the Commercial Crew Program, but acknowledged there is inherent conflict even with the program’s shared assurance model. In December 2017, he stated that, based on our previous work and current discussions, he intends to decouple the programmatic and technical authority responsibilities for the Commercial Crew Program but had not done so as of April 2018. Federal internal control standards state that an agency should design control activities to achieve objectives and respond to risks, which includes segregation of key duties and responsibilities to reduce the risk of error, misuse, or fraud. By overlapping technical authority and programmatic responsibilities, NASA will continue to run the risk of creating an environment of competing interests for the Commercial Crew Program’s safety technical authority. NASA’s Commercial Crew Program is a multibillion dollar effort to facilitate the commercial development of a crew transportation system that can end the United States’ reliance on Russia to maintain an uninterrupted presence on the ISS. Boeing and SpaceX continue to make progress developing a capability to fly to the ISS, but both have continued to experience delays. Program analysis indicates risks of further delays in each contractor’s current schedule, but NASA has not provided that information to Congress in its routine briefings. Without this information, Congress does not know the full extent of potential delays to inform decision making. Additional delays could also disrupt U.S. access to the ISS. While NASA is working on potential solutions, there is no contingency plan in place to address this potential gap. Without a viable contingency plan, NASA puts at risk achievement of the U.S. goal and objective for the ISS. NASA must balance safety with acceptable risk for human spaceflight. As part of the certification process for each contractor’s spacecraft, NASA has developed one key safety metric, loss of crew. However, the complicated nature of this metric is further muddled by the inconsistent approaches being used across NASA about what inputs to be considered. As a result, there is no clear articulation of what level of risk NASA will accept with respect to this program. In addition, NASA does not have plans to capture lessons learned from how the Commercial Crew Program has used this metric to assess safety and is missing an opportunity to capture this knowledge for future human spaceflight programs. Finally, a space program’s management and oversight approach is an integral part of ensuring that human spaceflight is as safe and successful as possible. Independence of the program management and oversight functions is key to achieving the balance between safety and success. The Commercial Crew Program’s approach, however, burdens the safety technical authority with both programmatic and independent technical authority responsibilities. As a result, NASA has limited assurance that independence can be maintained as part of its institutional process to ensure safety and success. We are making the following five recommendations to NASA: The NASA Associate Administrator for Human Exploration and Operations should direct the Commercial Crew Program to include the results of its schedule risk analysis in its mandatory quarterly reports to Congress. (Recommendation 1) The NASA Administrator should develop and maintain a contingency plan for ensuring a presence on the ISS until a Commercial Crew Program contractor is certified. (Recommendation 2) The NASA Administrator should direct the Chief of Safety and Mission Assurance, the NASA Associate Administrator for Human Exploration and Operations, the Commercial Crew Program Manager, and the Commercial Crew Program Contracting Officer to collectively determine and document before the agency certification review how the agency will determine its risk tolerance level with respect to loss of crew. (Recommendation 3) After completing the agency certification review, NASA’s Chief Engineer and Chief of Safety and Mission Assurance, with support from the NASA Associate Administrator for Human Exploration and Operations and the Commercial Crew Program Manager, should document lessons learned related to loss of crew as a safety threshold for future crewed spaceflight missions, given the complexity of the metric. (Recommendation 4) The NASA Chief of Safety and Mission Assurance should restructure the technical authority within the Commercial Crew Program to ensure that the technical authority for the Office of Safety and Mission Assurance is no longer dual hatted with programmatic and independent technical authority responsibilities. (Recommendation 5) We provided a draft of this report to NASA for review and comment. NASA provided written comments that are reprinted in appendix II. In its response, NASA concurred with three of our recommendations, did not concur with one, and partially concurred with another. NASA concurred with our recommendation to develop and maintain a contingency plan to ensure a U.S. presence on the ISS and expects to take action to close this recommendation by the end of December 2018. NASA concurred with our recommendation to document lessons learned related to the loss of crew requirement and expects to take action to close this recommendation by the end of May 2019. NASA concurred with our recommendation to restructure the safety technical authority so that it is no longer dual hatted with programmatic and independent technical authority responsibilities. NASA expects to take action to close this recommendation by the end of August 2018. NASA did not concur with our recommendation that the Commercial Crew Program should include the results of its schedule risk analysis in its quarterly reports to Congress. NASA stated that it uses the contractors’ schedules as a baseline to provide qualitative statements in the NASA summary that accompanies each contractor’s quarterly reports to Congress. NASA believes that this approach is appropriate and is in accordance with the explanatory statement accompanying the Consolidated and Further Continuing Appropriations Act, 2015. NASA also stated that it will be working to ensure that the contractors’ schedules and the program’s internal assessments sync up as the program gets closer to launch. As a result, NASA explained that there will not be a requirement for a detailed NASA assessment, because the contractors’ schedule will either match NASA’s analysis or NASA will discuss its position as it has done in previous reports to Congress. We continue to believe the recommendation is valid because the program’s schedule risk analysis would provide Congress with valuable insight into potential delays, which are likely. Both contractors have repeatedly stated that their schedules are aggressive and that the dates are ambitious. As a result, we found that the contractors frequently delay dates for key events. For example, Boeing has delayed its certification milestone by 17 months and SpaceX by 22 months since the original schedules were established. The program’s recent schedule risk analysis indicates that more delays to certification are likely, but that information is not presented to Congress in NASA’s quarterly reports. Without this information, Congress does not know the full extent of potential delays to inform decision making. NASA partially concurred with our recommendation that the Chief of Safety and Mission Assurance, the NASA Associate Administrator for Human Exploration and Operations, the Commercial Crew Program Manager, and the Commercial Crew Program Contracting Officer should collectively determine and document how the agency will determine its risk tolerance level with respect to loss of crew before the agency certification review. In its response, NASA stated that it documented the agency’s risk tolerance level with respect to loss of crew for the program in its May 2011 safety memo. Further, NASA stated that it documented the requirement to limit risks to the loss of crew in a certification requirements document. NASA stated that ultimately the Commercial Crew Program is accountable for ensuring that the contractors’ systems meet the loss of crew value in this certification requirements document, which is a loss of crew value of 1 in 270. If a contractor’s system cannot meet that loss of crew value, or any other requirement, the program will request a waiver as part of the human rating certification process to ensure transparency. NASA acknowledged in its response that the existence of multiple documents defining residual risk requirements and an agency threshold for loss of crew can be confusing. NASA’s response, however, does not address our finding that it does not have a consistent approach for how to incorporate key inputs, including which debris model should be used or whether to include operational mitigations. NASA stated that it had taken action to address this recommendation; however, NASA did not outline any steps it took to resolve the concern that the risk tolerance for the loss of crew requirement depends on which entity is presenting the results of its analysis. We continue to believe that, before the agency certification review, the key parties must collectively determine how the agency will determine its risk tolerance with respect to loss of crew. We believe this approach will reduce confusion and increase transparency. We are sending copies of this report to NASA Administrator and interested congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202)512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. The objectives of our review were to assess (1) the extent to which the contractors have made progress towards meeting the National Aeronautics and Space Administration’s (NASA) certification requirements and NASA’s plans to help ensure continued access to the International Space Station (ISS); and (2) how NASA’s certification process addresses safety of the contractors’ crew transportation systems. To assess the contractors’ progress towards certification, we obtained and reviewed program and contractor documents, including monthly and quarterly updates from April 2017 through May 2018. We interviewed program and contractor officials to discuss the contractors’ recent progress, including upcoming events and any expected delays, and to understand technical risks, potential consequences, and planned mitigation activities. To identify total delays to date, we compared original contract schedules to Boeing and SpaceX’s calendar year 2018 first quarter proposed schedules, which are the most recent. Based on our review of program and contractor documents, we defined the contractors’ key events as: the uncrewed and crewed flight tests, the design certification reviews for each of those flights, and the certification milestone. We selected the two flight tests for each contractor as key events because they are intended to test key system capabilities, including the ability to launch, dock with the ISS, and return safely to Earth. We selected the design certification reviews because they verify the contractors’ crew transportation systems’ capability to safely approach, dock, mate, and depart from the ISS, among other requirements. We selected the certification milestone because it determines whether the crew transportation system meets the Commercial Crew Program’s requirements. To determine the extent to which contractors have delayed these key events over time, we analyzed the contractors’ schedule data from the 13 quarterly progress reports to date, from first quarter 2015 through first quarter calendar year 2018. We also obtained the results of the program’s April 2018 schedule risk analysis. We presented the schedule analysis range from the end of the month of the earliest possible completion date to the end of the month of the latest possible completion date. We reviewed the program’s Congressional requirements to report on cost, schedule, and technical status. Finally, to assess the potential effects of any certification delays on NASA’s access to ISS, we reviewed NASA’s contracts with Boeing and the Russian Federal Space Agency for transportation on the Soyuz vehicle. We interviewed officials from the ISS program and NASA’s Human Exploration and Operations Mission Directorate to determine if the agency had developed contingency plans to mitigate the effects of any certification delays on its access to the ISS. To assess how NASA’s certification process addresses safety of the contractors’ crew transportation systems, we reviewed agency safety policies, program plans, and contract documents to identify what safety assessments were required of the program, which safety factors would be considered in certification reviews, and when certification approval would be granted. We also interviewed program officials and the contractors about their safety policies and procedures as well as about the certification process. We identified the loss of crew requirements for the program and the contractors, and interviewed program and agency officials to determine how loss of crew would be assessed and considered throughout the certification process. To gain a broader understanding of the relative importance of loss of crew, we reviewed NASA safety policies, prior GAO reports, and annual reports from the Aerospace Safety Advisory Panel. To determine how the Orbital Debris Engineering Model (ORDEM) was updated and to assess differences between the former and updated models, we reviewed NASA documentation about the ORDEM 2000 and ORDEM 3.0 models and obtained information about the models from NASA’s Orbital Debris Program Office. To assess the program’s progress in closing requirements, including those requirements specifically related to safety, we reviewed program data for each contractor on contract requirements and closure status. We limited this analysis to requirements included in the CCT-REQ-1130 ISS Crew Transportation and Services Requirements Document because these requirements are verified by the Commercial Crew Program, whereas requirements contained within SSP 50808 ISS to Commercial Orbital Transportation Services Interface Requirements Document are managed by the ISS Transportation and Integration Office. We classified requirements as “safety-specific” when the program’s Office of Safety and Mission Assurance was listed as a verification closure notice signatory (i.e., approver). We then analyzed the program’s data to determine how many verification closure notices had been approved for all requirements and for the subset of safety-specific requirements. We reviewed program and agency documentation, such as organizational charts, program plans, and safety policies as well as interviewed program and agency officials, to determine the role of the safety and mission assurance technical authority in the program. We also reviewed the 2003 Columbia Accident Investigation Board’s Report’s findings and recommendations related to culture and organizational management of human spaceflight programs. We reviewed annual briefings and reports and met with representatives from two organizations that provide NASA with independent assessments of the program, the program’s standing review board and the Aerospace Safety Advisory Panel, to gain their perspectives on the contractor’s progress and how NASA addresses safety in its certification process. We also met with representatives from the National Transportation Safety Board and three experts with background on safety in human spaceflight in order to increase our contextual understanding of the role of safety in human spaceflight missions. We conducted this performance audit from April 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Cristina T. Chaplain, (202) 512-4841 or chaplainc@gao.gov. In addition to the contact named above, Molly Traci, Assistant Director; Kazue Chinen; Lorraine Ettaro; Lisa Fisher; Laura Greifner; Kurt Gurka; Miranda Riemer; Juli Steinhouse; Roxanna T. Sun; Hai Tran; Kristin Van Wychen; and Alyssa Weir made significant contributions to this report.", "summary": "In 2014, NASA awarded two firm-fixed-price contracts to Boeing and SpaceX, worth a combined total of up to $6.8 billion, to develop crew transportation systems and conduct initial missions to the ISS. In February 2017, GAO found that both contractors had made progress, but their schedules were under mounting pressure. The contractors were originally required to provide NASA all the evidence it needed to certify that their systems met its requirements by 2017. A House report accompanying H.R. 5393 included a provision for GAO to review the progress of NASA's human exploration programs. This report examines the Commercial Crew Program, including (1) the extent to which the contractors have made progress towards certification and (2) how NASA's certification process addresses safety of the contractors' crew transportation systems. GAO analyzed contracts, schedules, and other documentation and spoke with officials from NASA, the Commercial Crew Program, Boeing, SpaceX, and two of NASA's independent review bodies that provide oversight. Both of the Commercial Crew Program's contractors, Boeing and Space Exploration Technologies Corporation (SpaceX), are making progress finalizing designs and building hardware for their crew transportation systems, but both contractors continue to delay their certification milestone (see figure). Certification is the process that the National Aeronautics and Space Administration (NASA) will use to ensure that each contractor's system meets its requirements for human spaceflight for the Commercial Crew Program. Further delays are likely as the Commercial Crew Program's schedule risk analysis shows that the certification milestone is likely to slip. The analysis identifies a range for each contractor, with an earliest and latest possible completion date, as well as an average. The average certification date was December 2019 for Boeing and January 2020 for SpaceX, according to the program's April 2018 analysis. Since the Space Shuttle was retired in 2011, the United States has been relying on Russia to carry astronauts to and from the International Space Station (ISS). Additional delays could result in a gap in U.S. access to the space station as NASA has contracted for seats on the Russian Soyuz spacecraft only through November 2019. NASA is considering potential options, but it does not have a contingency plan for ensuring uninterrupted U.S. access. NASA's certification process addresses the safety of the contractors' crew transportation systems through several mechanisms, but there are factors that complicate the process. One of these factors is the loss of crew metric that was put in place to capture the probability of death or permanent disability to an astronaut. NASA has not identified a consistent approach for how to assess loss of crew. As a result, officials across NASA have multiple ways of assessing the metric that may yield different results. Consequently, the risk tolerance level that NASA is accepting with loss of crew varies based upon which entity is presenting the results of its assessment. Federal internal controls state that management should define risk tolerances so they are clear and measurable. Without a consistent approach for assessing the metric, the agency as a whole may not clearly capture or document its risk tolerance with respect to loss of crew. GAO is making five recommendations, including that NASA develop a contingency plan for ensuring a U.S. presence on the ISS and clarify how it will determine its risk tolerance for loss of crew. NASA concurred with three recommendations; partially concurred on the recommendation related to loss of crew; and non-concurred with a recommendation to report its schedule analysis to Congress. GAO believes these recommendations remain valid, as discussed in the report.", "document_type": "gao"}
{"report": "NIH, which had total budgetary resources of $32 billion in fiscal year 2016, is comprised of the Office of the Director and 27 institutes and centers that focus on specific diseases, particular organs, or stages in life, such as childhood or old age. As the central office at NIH, the Office of the Director establishes agency policy and is responsible for overseeing the institutes and centers to ensure that they operate in accordance with NIH’s policies. The institutes and centers accomplish their missions primarily through extramural research programs. Most extramural research funding is provided for investigator-initiated research projects for which researchers, through their institutions, submit applications in response to NIH announcements. In addition to these announcements, the institutes and centers may issue more narrowly scoped solicitations, through request for proposals, for research targeting specific areas. All extramural research project applications are to follow NIH’s process of peer review, which includes two sequential levels of review. The first level involves non-governmental experts assessing the scientific merit of the proposed applications and assigning them a priority score. The second level involves advisory councils at the institute or center associated with the grant application, that, in addition to scientific merit, consider the institutes’ and centers’ missions and strategic plan goals and public health needs. Advisory councils review grant applications and their scores, and, based on this review, make recommendations about which grant applications should be awarded funding. The director of each institute or center makes the final extramural funding decisions. NIH investigators also conduct research through NIH’s intramural research program. These efforts accounted for approximately 10 percent of NIH’s total budgetary resources of $32 billion in fiscal year 2016. NIH employs about 3,600 investigators working in its own laboratories and clinics. In addition, this research relies on another 6,000 investigators at various stages of research training who come to NIH for a few years to work as non-employee trainees, including about 2,500 who are postdoctoral fellows. According to NIH officials, intramural investigators are generally not allowed to apply for extramural or private grants, because their salaries are funded with the agency’s appropriations. The career path to become an independent extramural investigator generally consists of students completing graduate level education (i.e., research doctorate or clinical doctorate), postdoctoral research, or medical residency. When postdoctoral research is completed, the researcher will generally seek opportunities to become an investigator at a medical research center or as a faculty member at a university and begin the process of obtaining academic tenure—that is, a full-time, permanent faculty position. Once the postdoctoral researcher becomes a faculty member, he or she can generally begin applying for large NIH research project grants. Some researchers may become affiliated with other types of research institutions and also apply for grants. Investigators in medical research centers and university faculty are generally dependent on external funding to cover the cost of their research. Although biomedical investigators may be funded by other federal agencies—such as the National Science Foundation—and nonfederal sources, studies have shown that NIH is the most likely source of government funding for biomedical research. NIH’s research support for extramural investigators includes research project grants, fellowships, training grants, and career development grants. Some of the main funding mechanisms provided to institutions by NIH that fund investigators beginning their research careers include the following extramural grants: Large grants. NIH awards large renewable research project grants: R01 and R01-equivalent (R01e) grants. According to NIH, in fiscal year 2016, the average size of large grants was typically in excess of $460,000 total. R01and R01e grants are NIH’s most common type of grant, according to NIH. They are generally the largest type of grant available to investigators beginning their careers and, for purposes of this report, are therefore referred to as “large” grants. Large grants provide 3 to 5 years of financial support for discrete, specified research projects. According to NIH, it is generally expected that within that period a project can be completed, results published, and sufficient time will remain for the investigator to prepare a subsequent application for a renewal or new award before funding ends. Smaller grants. While some non-R01 equivalent (non-R01e) grants may match or exceed the amount of some R01e grants, they are generally of a lesser amount and, for purposes of this report, are therefore referred to as “smaller” grants. According to NIH, in fiscal year 2016, smaller grants were, on average, amounts that ranged from about $61,000 to about $1.1 million total. These grants provide limited funding for a relatively short period of time to support a variety of exploratory or developmental projects, including pilot or feasibility studies, collection of preliminary data, and secondary analysis of existing data. Career development grants. Also known as K-series grants, these grants are intended to provide mentored research opportunities and career enhancement experiences to support investigators or postdoctoral fellows at various stages of their research careers. NIH’s data show that in fiscal year 2016, career development grants were, on average, about $178,000 total. NIH generally classifies the career status of an extramural investigator based on whether the investigator has received a large NIH research grant. NIH considers early career investigators to be those who meet the definition of early stage and intermediate stage investigators. NIH also recognizes established and “other” investigators among those who apply for research grants. Table 1 lists NIH extramural investigators’ career stages and descriptions of these stages. According to NIH, it generally takes an early stage investigator up to 2 years to develop a successful application for a large grant and receive funding. Typically, investigators devote between 6 months to 1 year to write their first large NIH grant application. Most of these grants, with a funding period of over 3 years, require significant preliminary data to support the proposed hypothesis contained in the application. In addition, the median average time elapsed for applicants to learn whether they have been awarded a grant is 270 days, or 9 months. According to NIH, because most investigators beginning their careers do not receive large NIH research grants on their first attempt, these investigators might apply for smaller grants. They may also apply for career development grants that are intended to provide mentored research or training opportunities. According to research by the National Academies of Sciences, Engineering, and Medicine, and others, the biomedical research workforce is growing older at a rate that is disproportionate to the general American labor force. Some stakeholders in the scientific community have voiced concerns that large NIH research grants that can launch early career investigators are often being awarded to established investigators rather than early stage and intermediate stage investigators. For example, a recent National Academies report pointed out that between 1998 and 2003, the NIH budget grew from $13 billion to $27 billion, but the percentage of grants awarded to investigators who were in the early stages of their careers steadily declined. Many in the field have reported on the need to support investigators who are researching varied biomedical issues in order to maximize the number of new discoveries. Further, stakeholders within the scientific research community have reported on the uncertain path that investigators may encounter early in their careers and the prospect that they will ultimately pursue other career options. Several reports have found that certain racial and ethnic groups are underrepresented in the biomedical research workforce and in science. These reports have also provided data on gender workforce disparities. For example, a 2011 publication by the National Academies of Sciences, Engineering, and Medicine showed that, in 2006, underrepresented minorities made up about 29 percent of the U.S. population, but, in 2007, were awarded about 5 percent of science and engineering doctorates. Other studies have shown significant research funding disparities for investigators from underrepresented groups that apply to NIH for large research grants, such as R01 grants. In 2011, NIH funded a study that examined the association between grant recipients and the applicants’ race and ethnicity. The study found that R01 applicants that self-identified as African American were 13 percentage points less likely than white applicants to receive these grants. After controlling for other variables— including educational background, training, previous research grants, and publication record—African American applicants were 10 percentage points less likely to be awarded such a grant than a white applicant. Further, while women comprise about half of the postdoctoral graduates for the biological sciences in the United States, studies have shown a disparity in the number of female investigators in senior science research positions at universities. This disparity may result in a smaller number of female investigators among NIH grant applicants and may further contribute to their underrepresentation in certain facets of science. However, we previously reported that once female investigators apply for NIH grants, their likelihood of receiving NIH grants is the same as their male counterparts. Over the last 10 years, NIH has introduced programs and policies to support extramural investigators competing for their first large NIH research grant that leads to research independence. NIH developed certain programs to fund extramural researchers with the goal of stabilizing the biomedical research workforce. These targeted programs were intended to promote support for extramural investigators that had not yet received a large NIH research grant. The various programs include both large and smaller research grants, career development grants, and student loan repayments. Of particular note are the NIH Director’s New Innovator Award, which is intended to support investigators beginning their research careers with reviewer-determined highly novel research; and the Director’s Early Independence Award, which is intended to support reviewer-determined exceptional investigators who wish to pursue independent research directly, forgoing the traditional postdoctoral training period. In addition, the Pathway to Independence Award provides investigators beginning their research careers with a mentored research experience, which may lead to independent research positions. Some institutes and centers have established their own programs to support investigators beginning their research careers. For example, a subset of the National Institute of General Medical Sciences’ “Maximizing Investigators’ Research Award program” targets funding for laboratories led by an early stage investigator. In addition, the National Institute of Arthritis and Musculoskeletal and Skin Diseases’ “Supplements to Advance Research from Projects to Programs,” supports intermediate stage investigators by providing supplemental funding to existing research projects to encourage broader innovation and exploration of high-risk ideas. In addition, NIH’s LRP is designed to help recruit and retain highly qualified individuals into biomedical research careers. This program provides student loan repayments in return for a commitment to engage in NIH mission-relevant and certain statutorily-defined approved research. We examined the funding rates of early stage and intermediate stage extramural and intramural investigators who applied for both initial and renewal LRP payments. LRP payments to extramural investigators: The LRP funding rate (awardees/applicants) for extramural investigators applying for total (both initial and renewal) payments between fiscal years 2013 through 2017 was about 50 percent. During this period, 8,186 extramural investigators applied for initial LRP payments and 3,206 received them; 5,131 extramural investigators applied for renewal payments and 3,426 received them. Therefore, the funding rates were 39 percent for initial applicants and 67 percent for renewal applicants. Early stage and intermediate stage investigators had similar funding rates in receiving LRP payments during the 5-year period, though there was some variation each year. Early stage and intermediate stage investigators seeking initial LRP payments had funding rates of about 40 percent and 35 percent, respectively. Both of these categories of investigators seeking renewal LRP payments had a funding rate of 67 percent. LRP payments to intramural investigators: The LRP funding rate (awardees/applicants) for intramural investigators applying for total (both initial and renewal) LRP payments from fiscal years 2013 through 2017 was about 87 percent; 397 intramural investigators applied for both initial and renewal LRP payments, and NIH funded 345 of the applicants. The funding rate for applicants seeking initial LRP payments during this 5-year period was about 83 percent, whereas the funding rate for those applying to renewal LRP payments was 90 percent. NIH also implemented policies to improve opportunities for early and intermediate stage extramural investigators. For example, to address the concerns about established investigators receiving a disproportionate share of research funds, NIH established its Early Stage Investigator Priority Policy in 2008. The policy specified that early stage investigator status would be considered a factor when applications were being selected for award. Studies have shown that under the Early Stage Investigator Priority Policy, grants being awarded to early stage investigators stopped declining and remained flat for several years. They also showed that the field of biomedical research continued to be very competitive for early stage investigators. However, some have expressed concern that these accomplishments are not sufficient. For example, according to a recent report by the National Academies of Sciences, Engineering, and Medicine, a variety of steps have been taken over the years to address the challenges facing early and intermediate stage investigators, but these efforts have not resolved the underlying problems that make it difficult for them to establish their careers. More recently, the Cures Act required that NIH implement the NGRI, which the agency established in August 2017. NIH’s Office of the Director, which oversees the initiative and its implementation, directed the NIH institutes and centers to reprioritize large NIH research grant support for early stage and intermediate stage investigators. The policy’s stated goal for fiscal year 2017 was to increase the number of large NIH research grants provided to both early stage investigators and intermediate stage investigators by 200 grants each compared to the number that were awarded in fiscal year 2016. These 400 grants would redirect approximately $210 million from NIH’s base budget to support additional early career investigators in the first year of NGRI’s implementation. However, with only one month to implement the policy, NIH did not meet this goal. From fiscal year 2016 to fiscal year 2017, the number of large NIH research grants awarded increased by 57 for early stage investigators and decreased by 2 for intermediate stage investigators. Similarly, the goal to increase funding for the additional 400 grants was not met; funding increased by about $107 million during this period. Given that this initiative is in the early stages and its goals were set late in fiscal year 2017, it is too early to fully assess the impact of this effort. According to NIH officials, the agency is in the process of reevaluating which investigators should be the focus of the NGRI initiative and may revise the program to include investigators whose careers are more advanced. NIH officials stated that the NGRI policy’s intention to direct more research funding to early stage investigators will remain in place. However, NIH’s NGRI Working Group no longer designates intermediate stage investigators—or what it calls “early established investigators”—as a distinct group. NIH’s current definition—that of being within 10 years of receiving a first large NIH research grant as an early stage investigator— includes investigators who could have completed their graduate level education (i.e., research doctorate or clinical doctorate), postdoctoral research, or medical residency between 15 and 20 years ago. According to NIH officials, NIH’s working group is considering broadening this definition even further. It is concerned that intermediate stage investigators, facing increasing pressure to secure additional sources of research funding to prevent the closure of their laboratories if their first large NIH research grant is not renewed, could lose all NIH support and become likely to leave the biomedical research workforce. Therefore, the working group is considering a different approach for all established investigators, with a focus on all meritorious investigators (regardless of career stage) who are doing high quality research, yet are still at risk for losing all NIH funding. Specifically, NIH officials said the working group plans to reevaluate ways that it can provide additional, prioritized support to these investigators in order to further their career trajectories. The working group may recommend to NIH that the NGRI be expanded to also target support for certain investigators whose careers are in more advanced stages, rather than just those in the early stages of their careers. In addition, NIH has not yet implemented the expansion of its LRP as directed by the Cures Act. The Cures Act amended the LRP by increasing the eligible annual loan repayment amount from a maximum of $35,000 to a maximum of $50,000. The act also gave the NIH Director the discretion to amend the research categories that are eligible for intramural or extramural loan repayment based on emerging scientific priorities or workforce needs. The agency has established a working group to provide recommendations to the NIH Director regarding any suggested structural changes and associated timelines for implementation. NIH officials told us that they are awaiting recommendations from this working group on how to use the agency’s new authorities. They said that they expect to implement program changes to the LRP, as permitted by the Cures Act, by fiscal year 2020. Our analysis shows that intermediate stage investigators are more successful at competing for grants than early stage investigators. Our examination of the trends of NIH grant data showed that the applicant funding rates (awardees/applicants) for investigators who had previously received an initial large NIH research grant was greater than the applicant funding rates for investigators who had never received such a grant. We analyzed 5 years of grant data to determine an overall perspective of funding rates from fiscal years 2013 through 2017. We found that intermediate stage and established investigators—groups comprised of investigators who had already received their first large grant award—had greater applicant funding rates for all three grant types compared to early stage and other investigators. For example, we found that in fiscal year 2017, the most recent year for which data were available, intermediate stage investigators had funding rates that were comparable to those of established investigators. Investigators that had not yet been awarded their first large NIH research grant—early stage investigators and other investigators—were not as successful when competing for large NIH research grants, small grants, or career development grants. (See table 2.) We also found that over time—from fiscal years 2013 through 2017— intermediate stage investigators and established investigators had greater applicant funding rates for all three grant types compared to early stage and other investigators. Of the investigators that had not yet been awarded their first large NIH research grant, early stage investigators were more successful in competing for NIH grants than the other investigators that were outside of the 10-year period of having completed their graduate level education (i.e., research doctorate or clinical doctorate), postdoctoral research, or medical residency. For instance, we found that early stage investigator funding rates ranged from about 5 to 11 percentage points lower than intermediate stage or established investigators for each of the five fiscal years examined. Similarly, other investigator funding rates ranged from about 12 to 14 percentage points lower than intermediate stage or established investigators for each of the five fiscal years examined. (See fig. 1.) Finally, we found that during this 5-year period, two of the four extramural investigator groups were more likely to receive large, small, and career development grants than the other two groups. Specifically, investigators beginning their research careers—the early stage and intermediate stage investigators—were more likely to receive these grants. Although early stage investigators were more likely than intermediate stage investigators to apply for smaller research grants (about 4,500 applicants compared to about 2,000 applicants, respectively) and career development grants (about 2,000 applicants compared to about 50 applicants, respectively), intermediate stage investigators were still more successful in competing for these grants, as well as the large NIH research grants. For more information on the trends in the number of grants awarded to early stage and intermediate stage investigators, by award type, for fiscal years 2013 through 2017, see appendix I. Over the last 7 years, NIH established advisory groups and other programs to determine how best to support extramural and intramural investigators from underrepresented groups. NIH’s Working Group on Diversity in the Biomedical Research Workforce was established in response to the 2011 NIH study that examined the association between R01 grant recipients and the applicants’ race and ethnicity. NIH directed the group to provide recommendations to improve retention of underrepresented minorities, the disabled, and scientists from disadvantaged backgrounds. In June 2012, the working group issued 13 recommendations, which, we found that NIH uses as the foundation of some NIH-wide efforts to diversify the extramural and intramural biomedical research workforce. Other advisory groups that have examined or are currently examining related topics include the following: NIH Working Group on Women in Biomedical Careers was established in 2007 in response to a report from the National Academies of Sciences, Engineering, and Medicine on barriers women in biomedical science experience in advancing their careers. It produced a workshop and report in 2008 on best practices for sustaining the careers of women in biomedical research; Addressing Gender Inequality in the NIH Intramural Research Program Action Task Force was established in 2016 in response to data showing women are underrepresented in top NIH research positions. It produced recommendations in 2017 aimed at ensuring that female and male investigators have equal opportunities in the intramural research program at NIH, among other things; and African-American/Black R01 Funding Disparities Working Group was established in response to the 2011 NIH study that found a funding disparity between blacks and whites applying for R01 grants. This group analyzed data on the funding rates of applicants that self- identify as African American or black compared to other racial groups. NIH has acted on some of the advisory groups’ recommendations. For example, in response to recommendations made by the Diversity in the Biomedical Research Workforce advisory group, the agency hired a Chief Officer of Scientific Workforce Diversity in 2014; implemented the three- tiered Diversity Program Consortium, which includes the Building Infrastructure Leading to Diversity program, the National Research Mentoring Network, and the Coordination and Evaluation Center; and established a permanent advisory group on diversity. NIH also developed a “toolkit” that includes training modules to educate intramural investigator search committee members on biases that can lead to a less diverse workforce, among other things. In fiscal year 2017, NIH created an Equity Committee to address recommendations made by the Addressing Gender Inequality in the NIH Intramural Research Program Action Task Force to further examine concerns about parity between male and female intramural investigators and other diversity issues. Other NIH-wide policies and programs may also help to attract, retain, and develop investigators from underrepresented groups. The 24 NIH institutes and centers that fund research and the Office of the Director provide funds for its investigators, called research supplements, to recruit graduate students, postdoctoral fellows, and others from underrepresented racial and ethnic groups, as well as those with disabilities and from economically disadvantaged backgrounds. These funds provide graduate students, postdoctoral fellows, and others an opportunity to conduct research and be mentored by an investigator supported by the specific NIH institute or center or office. Some stakeholders we interviewed said that the agency’s LRP also may help to retain investigators from underrepresented groups, noting that the student loan debt for African American or black graduate students is higher than that of white graduate students. Physicians from a professional organization we interviewed said that the LRP helps to attract physician scientists from underrepresented groups into research careers. Physicians we interviewed stressed the importance of the LRP to attract physician scientists into research careers, because these scientists often have significant medical school debt. Our analysis of extramural LRP data showed that, in 2017, African Americans or black, non-Hispanics had a funding rate of about 34 percent for receiving an LRP payment. White, non-Hispanic applicants had a funding rate for receiving an LRP payment of about 52 percent. More recently, the National Academies of Sciences, Engineering, and Medicine recommended that NIH make the LRP available to all individuals pursuing biomedical physician-scientist researcher careers, regardless of their research area or clinical specialty. They also suggested NIH increase the monetary value of loan repayment to reflect the debt burden of current medical trainees. Some stakeholders said that NIH’s family friendly policies, such as reimbursement for child care expenses and parental leave, may also help address work-life balance issues for female investigators that may otherwise forego some research duties to care for young children. Additionally, many—at least 17 of 27—of NIH’s institutes and centers have established their own policies and programs to attract, retain, and develop investigators from underrepresented groups. For example, the National Cancer Institute initiated the Continuing Umbrella of Research Experiences program to provide training and career development opportunities to enhance and increase diversity in the cancer research workforce. This program offers research opportunities and development to future and current scientists from underrepresented groups from middle school students to investigators who have yet to achieve research independence. Although NIH has implemented numerous diversity-related efforts, our analysis of NIH research grant funding and intramural workforce data from fiscal years 2013 through 2017 shows that some disparities persist for investigators from underrepresented racial and ethnic groups, and for female investigators. Our analysis of NIH data shows that investigators from underrepresented racial and ethnic groups comprise a small percentage of applicants. For example, in fiscal year 2017, applicants from underrepresented racial groups—that is, American Indian or Alaskan Native, African American or black, and Native Hawaiians and Pacific Islanders—were 0.2 percent, 1.8 percent, and 0.1 percent, respectively, of all applicants for large NIH research grants. Applicants from underrepresented ethnic groups— Hispanics or Latinos— comprised 4.3 percent of the applicants for large NIH research grants. (See table 3.) In contrast, white applicants were about 64 percent of all applicants for large NIH grants in fiscal year 2017. Investigators from underrepresented racial and ethnic groups also comprise a smaller number of applicants than other groups for smaller NIH grants and career development grants. Among grant applicants from underrepresented racial groups, African American or black applicants were consistently the largest group represented. For example, in 2017, among underrepresented racial groups, African American or black applicants were named as investigators on about 88 percent of applications for large NIH research grants, about 89 percent of applications for smaller NIH grants, and about 92 percent of career development grant applications. Hispanics and Latinos were about 5 percent of applicants for smaller NIH grants and about 6 percent of applicants for career development grants in 2017. According to data published by the National Science Foundation in 2017, women represent slightly more than half of all doctorates in biological sciences. However, from 2013 through 2017, women represented less than one-quarter of all tenured NIH intramural investigators. For example, in 2017, 191, (23 percent) of NIH’s 822 intramural tenured investigators were women. In addition, in 2017, 79, (37 percent), of NIH’s 211 tenure-track intramural investigators were women. Further, in fiscal years 2013 through 2017, nearly one-third of all extramural investigators that applied for large grants were women. (See table 4.) Nearly one-third of all applicants for smaller research grants, and close to half of all applicants for NIH career development grants, were women. (See app. II for information on the number of smaller and career development grant applicants by racial and ethnic groups and gender.) Stakeholders from 8 of the 12 entities we interviewed suggested potential reasons why the number of NIH research grant applicants among underrepresented racial and ethnic groups and for women may be limited. Attrition of biomedical science doctoral students and early career investigators from these groups is one explanation. Some stakeholders said that, while in graduate school, students from these groups may be discouraged from pursuing a biomedical research career as a result of implicit bias that they encountered with their mentors. Some stakeholders said lower numbers among women investigators is the result of decisions of some to start a family in the early stages of their careers, and further noted the difficulty in re-entering the biomedical research workforce. In addition, some stakeholders said that students from underrepresented groups may lack exposure to a sufficiently rigorous education in mathematics or the sciences prior to entering college, resulting in the low numbers of biomedical researchers from these groups. Others said the low numbers of investigators from these groups makes studying this issue difficult due to a small sample size. Additional administrative demands placed on individuals who pursue careers as investigators also affect the number of applicants. For example, some stakeholders said that once investigators from an underrepresented group attain faculty positions— particularly if there are few faculty members from such groups—they are frequently tasked with additional administrative duties. We were told that, often, they are selected because they may be one of a handful of members of underrepresented groups at some institutions. Their additional duties include participation on institutional committees as well as mentoring, particularly undergraduate or graduate students from underrepresented groups. In addition, representatives of one stakeholder group said that some research faculty from underrepresented groups feel additional pressure to participate in such activities, because their absence would be more apparent and they worry that this may adversely affect them. Stakeholders also told us that additional duties are time consuming and leave less time to devote to applying for grant funding. They said that some biomedical graduate students from underrepresented groups decide to pursue other fields, because of the competing demands associated with being an academic, such as grant writing and teaching responsibilities. Our analysis of NIH data from fiscal years 2013 through 2017 also shows that the funding rate for applicants from underrepresented racial groups applying for large and small NIH grants lags behind that of white applicants. For example, in fiscal year 2017, the applicant funding rate for large grants was about 17 percent for underrepresented racial groups and about 24 percent for Hispanics and Latinos. The funding rate for white applicants was about 27 percent. (See fig.2.) Among underrepresented racial groups, African American or black applicants consistently had a lower funding rate for large and smaller grants than well represented groups during this period (see table 5). The applicant funding rate for career development grants for underrepresented racial groups increased from about 22 percent to about 32 percent from fiscal years 2013 to 2017, and, for Hispanic and Latino applicants, from about 30 percent to about 36 percent during the same period. The applicant funding rate was about 34 percent for white applicants throughout this period. The large grant funding rate for female investigators was slightly lower than male investigators. (See fig. 3.) When looking exclusively at R01 grants, as opposed to all large grants, research has shown that women are less likely to have their initial R01 grant renewed. Our analysis of R01 grant renewal funding showed that, in fiscal year 2017, the R01 grant renewal funding rate for female applicants was about 31 percent compared to about 38 percent for male applicants. (See fig 4.) According to research by NIH, some applicants that are unsuccessful in obtaining an initial R01 grant may have greater success if they reapply; however, some stakeholders we interviewed said women, and some underrepresented racial groups, are less likely to reapply for an initial R01 grant if they are unsuccessful with their first attempt. (See app. III for information on the applicant funding rates for smaller grants and career development grants by gender.) Many stakeholders attributed the underrepresented groups’ lower funding rates to two factors. First, many stakeholders cited a perceived implicit bias within the peer review process, which they said may affect the funding rates for investigators from underrepresented racial and ethnic groups. They stressed that, many times, peer reviewers approve grants for investigators from top tier institutions that they are familiar with and are reluctant to provide high scores to grant applications from other institutions. Some stakeholders advocated for anonymizing grant applications to some extent to address this issue. NIH’s Center for Scientific Review—the center responsible for organizing peer reviews for grants—is conducting a study that anonymizes certain large grant applications, and a training module on implicit bias is currently being offered to NIH peer reviewers. In addition, NIH’s African American/Black R01 Funding Disparities Working Group has conducted an analysis on the R01 funding disparities for African American or black applicants from fiscal years 2010 through 2015, and is currently pursuing several efforts to address its findings. Lower grant application priority scores and application resubmission rates among African American or black applicants were among their findings. The working group is also pursuing a randomized control trial to assess the effect of mentoring and coaching on R01 resubmissions and award rates. Second, some stakeholders told us that only a very small percentage of biomedical science professors at top tier research schools are from underrepresented racial or ethnic groups. Some stakeholders suggested that many investigators from underrepresented groups seeking grants are affiliated with institutions outside of the top tier that may lack the infrastructure, grant writing support, and mentoring opportunities, which could help ensure their success. As a consequence, many investigators from underrepresented groups are at a disadvantage compared to their peers at top tier institutions, according to the stakeholders we interviewed. Although NIH has taken steps to address concerns about the diversity of the biomedical research workforce, its accomplishments have not been fully evaluated. Positive comments from some stakeholders we interviewed included praise for the steps NIH has taken to diversify the biomedical research workforce, the value of the National Research Mentoring Network, and the research supplements and other training grants offered by NIH’s centers and institutes, which provide opportunities for students and postdoctoral fellows from underrepresented groups to work with established investigators. NIH’s support of conferences and programs, such as the Annual Biomedical Research Conference for Minority Students and the Institutional Research and Academic Career Development Award, was also well regarded by stakeholders. They also noted NIH’s commitment to diversity and willingness to investigate diversity issues through advisory groups, and commended the agency on working to address recommendations from the Working Group on Diversity in the Biomedical Research Workforce, including hiring a Chief Officer of Scientific Workforce Diversity. Some stakeholders were actively engaged in working with NIH on diversity issues. For example, some physicians from an organization we interviewed said they are working with the National Institutes on Minority Health and Health Disparities on issues related to research workforce diversity. Stakeholders, though, also offered less favorable views and characterized NIH’s efforts as stagnant, ineffective, or in need of better coordination. For example, some stakeholders suggested that for NIH’s National Research Mentoring Network, the matching of mentees to mentors could be improved or mentioned uncertainty about the program; questioned how often research supplements are utilized, or noted that better mentoring and follow-up after the postdoctoral fellow’s work is completed is warranted; reported that while their organizations initially collaborated with the scientific workforce diversity office, that office is not very active or communication eventually dissipated; expressed concern about NIH’s outreach to minority serving institutions and organizations, such as historically black colleges and universities, when it began creating programs like the Building Infrastructure Leading to Diversity program and the National Research Mentoring Network and for other efforts; and stressed that NIH should collaborate more with organizations that represent underrepresented groups, which have already implemented programs shown to be effective in engaging these communities in biomedical research. According to NIH officials, evaluations of various NIH efforts are ongoing and have not been completed. Some examples include the following: Data collection and analysis by the Diversity Program Consortium’s Coordination and Evaluation Center began in 2017, and is ongoing. In 2017, NIH’s Center for Scientific Review began conducting a study to anonymize R01 grant applications from African American or black and white applicants to detect potential reviewer bias during peer review. The results of this study are expected in 2019. An evaluation of the National Cancer Institute’s Continuing Umbrella of Research Experiences program, which provides training and career development opportunities to enhance diversity in the cancer research workforce, was submitted for publication in a scientific journal and is currently pending review. Some NIH institutes and centers have conducted evaluations of their specific diversity efforts. For example, in 2015, the National Institute of General Medical Sciences analyzed the research supplements provided to graduate students and postdoctoral fellows from underrepresented racial and ethnic groups between 1989 and 2006. The study found that about 65 percent of graduate students and postdoctoral fellows supported by the program entered research careers in academia, industry, and government research. About 41 percent of doctoral graduates and 45 percent of postdoctoral fellows supported by this program entered careers in academic research or teaching compared to about 43 percent of the U.S. doctoral degree workforce. In 2011, the National Institute on Aging evaluated its research supplement program and found that the NIH research grant applicant success rate of former participants from 2002 to 2010 was about 21 percent. The average research grant success rate for National Institute on Aging grants was about 18 percent during this same period. In 2016, NIH’s Chief Officer of Scientific Workforce Diversity established a 5-year strategic plan that describes the agency’s five workforce diversity goals and supporting objectives. The strategic plan includes goals and objectives that apply to both extramural and intramural investigators. During the course of our audit work, NIH updated this plan to describe progress made on each of its diversity goals, which are to: expand scientific workforce diversity as a field of inquiry, build and implement evidence related to diversity outcomes, understand the role of sociocultural factors in biomedical recruitment sustain nationwide workforce diversity with seamless career transitions, and promote the value of scientific workforce diversity. NIH officials provided us with performance measures that its scientific workforce diversity office will use to gauge the agency’s progress in achieving each of its five strategic plan’s goals. However, these items outline the particular areas that NIH plans to evaluate, rather than provide quantitative metrics, evaluation details, or time frames associated with any of the areas by which to evaluate progress in fulfilling the goals of the strategic plan. For example, for the first scientific workforce diversity goal “expand scientific workforce diversity as a field of inquiry” one of the performance measures is “number of publications stored in the scientific workforce diversity office’s online database.” Neither the strategic plan nor the additional documentation that NIH provided specifies a quantitative metric for the number of publications to be stored in its database and the time frame for doing so. Similarly, for the second scientific workforce diversity goal, to “build and implement evidence related to diversity outcomes” one of the performance measures identified by NIH is to compare the large grants awarded to African American or black scientists to those received by scientists who are white or from other racial and ethnic groups. However, there is no description in either the strategic plan or the additional documentation provided by NIH that indicates how and when these comparisons will be made, how the results of these comparisons will be assessed, and what will be considered as fulfilling this goal. All of the other areas or “performance measures” associated with each of the five goals also do not include such details or time frames. According to documentation provided by NIH its strategic plan does not explicitly list “specific metrics” because they will be defined within “the implementation phase of the plan.” However we are at the midpoint of the implementation of NIH’s 5-year plan, which covers the period of 2016 through 2020. As of May 2018, these specific metrics were not yet available. Without quantitative metrics, evaluation details, or time frames for assessing the agency’s performance against the five goals in its strategic plan, NIH will be unable to hold itself accountable for fulfilling its goals. This is inconsistent with best practices for strategic workforce planning, which call for agencies to monitor and evaluate their progress toward their human capital goals. These best practices also call for performance metrics to be specified at the outset to avoid a biased determination of what counts as “success” after the results are known. Further, this is inconsistent with federal internal control standards for monitoring, which require that an agency evaluate and document the results of ongoing monitoring to determine whether its management strategies are effectively supporting its objectives, or need corrective action. NIH’s establishment of goals and associated areas of future evaluation are positive steps, but absent specific measures by which to hold itself accountable, the agency will not have a basis to judge its success. NIH’s ability to fulfill its mission of advancing scientific knowledge and innovation to enhance health, lengthen life, and reduce illness and disability is dependent on its success in sustaining a thriving and diverse workforce. For decades, concerns have been raised by the biomedical research community about NIH’s ability to support investigators beginning their research careers. Similar concerns have been expressed regarding support for investigators from groups underrepresented in the sciences, including those from racial and ethnic groups and women. While the agency has taken many steps during this time, disparities in its research grant funding persist. NIH has conducted some evaluations of individual programs and activities, but these have been relatively narrow in focus and the results of many efforts are not yet available. More recently, NIH has taken positive steps such as by establishing the position of Chief Officer of Scientific Workforce Diversity, who in turn, created a strategic workforce diversity plan and related goals and identified areas of future evaluation. However, NIH does not have quantitative metrics, evaluation details, and time frames to assess its progress in meeting its strategic workforce diversity goals. Without these elements, NIH’s ability to assess how its diversity strategic plan goals are being achieved is hindered. Thus, NIH is missing an opportunity to better position itself to support underrepresented groups and address longstanding disparities. The NIH Director should develop quantitative metrics, evaluation details, and specific time frames to assess its current efforts to support investigators from underrepresented groups against its scientific workforce diversity strategic goals, and use the results of its assessment to guide any further actions. (Recommendation 1) We provided a draft of this report to HHS for comment. In its written comments, which are reproduced in appendix IV, HHS concurred with our recommendation and outlined the steps NIH is taking to implement it. Notably, for example, HHS indicated that NIH is establishing time frames to assess its progress in meeting its workforce diversity goals. HHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Health and Human Services. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or crossem@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Table 6 provides details on the number of grants awarded, number of awardees and award type for early stage and intermediate stage investigators from fiscal year 2013 through fiscal year 2017. Tables 7 through 10 provide details on the demographics of NIH grant applicants during fiscal years 2013 through 2017. Figures 5 and 6 provide details on the demographics of NIH grant applicants during fiscal years 2013 through 2017. In addition to the contact above, Geri Redican-Bigott (Assistant Director), Carolina Morgan (Analyst-in-Charge), Jackie Hamilton, Toni Harrison, and Drew Long made key contributions to this report. Muriel Brown, Giselle Hicks, and Hayden Huang also made contributions to this report.", "summary": "NIH's success depends on its ability to attract, retain, develop, and otherwise support biomedical investigators—including those employed in its intramural research program as well as those working in its extramural program at universities, academic health centers, and other research institutions. For decades, the agency has faced challenges in supporting early career investigators and those from underrepresented groups, including ethnic and racial minorities and women. The 21st Century Cures Act included provisions that NIH coordinate policies and programs to promote early research independence and enhance the diversity of the scientific workforce. The act also contained a provision that GAO examine NIH's efforts. GAO reviewed the actions NIH has taken to support (1) investigators beginning their biomedical careers; and (2) investigators from underrepresented groups and women. GAO analyzed NIH data from fiscal years 2013 through 2017 on grant funding for investigators by career phase and demographic status. GAO also reviewed relevant laws and NIH policies, programs, and initiatives, and interviewed NIH officials and stakeholders from the scientific research community. The National Institutes of Health (NIH), within the Department of Health and Human Services (HHS), plays a prominent role in the nation's biomedical research. While it employs investigators in its intramural research program, over 80 percent of its budget supports its extramural program, primarily through grant funding to investigators at other research institutions. Given this, NIH has a vested interest in supporting a robust national biomedical workforce, but the agency has acknowledged that the environment is highly competitive and many investigators find that it takes years to obtain the type and amount of funding that typically spurs research independence. GAO's analysis found that extramural investigators who had received at least one large NIH research grant during fiscal years 2013 through 2017 were more likely to receive such grants in subsequent application cycles than investigators who had not yet received such grants. In response to the 21st Century Cures Act, enacted in December 2016, NIH introduced an initiative to prioritize these grants for (1) early stage investigators, who are beginning their careers and have never received a large research grant, and (2) intermediate stage investigators, who are within 10 years of receiving their first large grant as an early stage investigator. However, it is too early to assess this new initiative, which was introduced in August 2017. NIH is currently considering revising the program to include investigators whose careers are more advanced. NIH implemented recommendations made by internal advisory bodies to support investigators from racial and ethnic groups considered by NIH to be underrepresented in biomedical research. GAO's analysis shows disparities for underrepresented racial and ethnic groups, and for female investigators, from 2013 through 2017. For example, in 2017, about 17 percent of investigators from underrepresented racial groups—African Americans, American Indians/Alaska Natives, and Native Hawaiian/Pacific Islanders combined—who applied for large grants received them. In contrast, about 24 percent of Hispanic or Latino applicants, an underrepresented ethnic group, received such grants. Asians and whites—well represented groups—were successful in receiving large grants about 24 and 27 percent of the time, respectively. Though women represent about half of all doctorates in biological science, GAO found that women investigators employed by NIH in its intramural program comprised about one-quarter of tenured investigators. NIH has taken positive steps such as establishing the position of Chief Officer of Scientific Workforce Diversity, who in turn created a strategic workforce diversity plan, which applies to both extramural and intramural investigators. The plan includes five broad goals for expanding and supporting these investigators. However, NIH has not developed quantitative metrics, evaluation details, or specific time frames by which it could measure the agency's progress against these goals. The Director of NIH should develop quantitative metrics, evaluation details, and time frames to assess NIH's efforts to diversify its scientific workforce against its diversity strategic plan goals, and take action as needed. HHS agreed with GAO's recommendation.", "document_type": "gao"}
{"report": "The federal government, states, colleges, students and their families all play important roles in financing higher education costs. Under Title IV of the Higher Education Act of 1965, as amended, the federal government offers students at all types of colleges financial assistance to help pay for their education, such as through the William D. Ford Federal Direct Loan (Federal Direct Loan), the Federal Pell Grant (Pell Grant), and the Federal Work-Study programs. Some of this aid is targeted toward students based on their financial need. For example, Education provided almost $27 billion in Pell Grants to low-income students in fiscal year 2017. States also provide funding to public colleges through state appropriations for operating expenses and grant programs that provide financial aid directly to students based on financial need, merit, or a combination of both. Despite the substantial federal expenditure in higher education, rising college costs have outpaced federal and state grant aid and, over time, have led to an increasing share of the cost being borne by students and their families. For example, over the past 30 years, the average in-state net price for a full-time undergraduate student at a public 4-year college—after taking into account all grant aid and education tax benefits—has nearly doubled, from about $8,000 in 1990-1991 to nearly $15,000 in 2017-2018. At public 2-year colleges, the net price for full-time students increased over the same time period from about $6,800 to $8,000. To plan for the cost of college, students and their families must consider the full cost of attendance, which includes not only tuition and fees, but also room and board and other miscellaneous expenses. The federal government requires colleges to estimate and distribute information on the full cost of attendance to prospective and enrolled students. The amount of need-based federal aid a student is eligible for is based, in part, upon the school’s estimated cost of attendance. National data show that, over the past several decades, an increasing percentage of students from low-income households are enrolling in college. According to NPSAS data, the percentage of all undergraduates who had a household income at or below 130 percent of the federal poverty line increased from 28 percent in 1996 to 39 percent in 2016. In addition, the percentage of college students receiving a Pell Grant has nearly doubled over roughly the same time period. For example, in 1999- 2000, approximately 23 percent of college students received a Pell Grant, and in 2016, this figure was about 40 percent. Some researchers have suggested that reductions in federal and state funding of higher education relative to the increasing cost of college have coupled with these student demographics to increase the share of college costs borne by students, which can reduce the amount students have to support their basic needs, such as food and housing. A traditional college student is generally considered to be someone who is enrolled in college full time immediately after graduating from high school, is financially dependent on his or her parents, and either does not work during the school year or works part time. However, these students represent a minority of students enrolled in college today. According to NPSAS data, about half of all undergraduate students enrolled in college in 2016 were considered financially independent from their parents. About 22 percent had dependent children themselves, and 14 percent were single parents. The average college student in 2016 was 26 years old and first enrolled at age 21. Sixty-four percent of college students in 2016 worked at least part time while enrolled, and a quarter worked full time. See figure 1 for the percentages of traditional and nontraditional students in 2016 and for Education’s list of traditional and nontraditional student characteristics. FNS oversees the states’ administration of SNAP, the main federal benefit program to address food insecurity for low-income households. In fiscal year 2017, the program provided benefits to about 42 million individuals in more than 20 million households. The purpose of the SNAP program is to safeguard the health and well-being of the nation’s population by providing a monthly cash benefit to raise the purchasing power and nutrition level of low-income households. FNS is responsible for establishing program regulations and ensuring that state officials administer SNAP in compliance with program rules. Officials in seven FNS regional offices assist officials from the FNS national office in this oversight work. FNS shares information and policy guidance with state SNAP agencies in part through its regional offices, the FNS website, and annual conferences. The states, or in some cases counties within a state, administer SNAP by determining whether households meet the program’s eligibility requirements, calculating monthly benefits for qualified households, issuing benefits to participants on an electronic benefits transfer card, and investigating and prosecuting recipient fraud. States are also allowed to establish some state-specific modifications in how they administer SNAP policy. Beyond SNAP, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) is another federal food assistance program available to eligible college students who are pregnant or postpartum. FNS also oversees the WIC program, which is administered by state and local agencies through approximately 10,000 clinic sites. SNAP eligibility is largely based on a household’s income and certain other characteristics. However, in 1980 federal law restricted college students who are enrolled at least half time from receiving SNAP benefits. This law generally prevents traditional college students—who may appear to have a low income while attending college but receive financial support from their parents—from receiving SNAP benefits. Federal law establishes several exemptions to this restriction so that college students who are enrolled at least half time and have a legitimate need can access SNAP. For example, assuming that they meet all other SNAP eligibility criteria, a full-time college student may be exempt from the college student restriction if they are: younger than age 18 or age 50 or older; a parent caring for a child under age 6; a parent caring for a child aged 6 to 11 who is unable to obtain childcare to attend school and work; a single parent caring for a child under 12 years old and enrolled full working a minimum of 20 hours per week at paid employment; participating in a state- or federally-financed work-study program; receiving Temporary Assistance for Needy Families (TANF) benefits; not physically or mentally fit (e.g., have a disability); or enrolled in certain programs for the purpose of employment and training. FNS officials told us that states have flexibility regarding which programs may qualify a student for the exemption pertaining to enrollment in certain programs for the purpose of employment and training. These programs must be operated by a state or local government, target low-income households, and increase participants’ employability. State SNAP agencies have discretion to determine which programs in their state qualify. These employment and training programs may be operated at community colleges, among other community partners. FNS officials said that in 2014 the agency expanded its focus on SNAP Employment & Training (E&T) program services, which are intended to help individuals in SNAP households acquire skills, training, and work experience that will increase their ability to obtain regular employment that will ultimately lead to greater self-sufficiency and reduce their reliance on SNAP. State agencies have flexibility in designing SNAP E&T program services, and FNS encourages states to enter into partnerships with established providers, including community colleges, to deliver SNAP E&T program services. For example, a SNAP recipient could train to become a Certified Nursing Assistant at a community college as part of a state’s SNAP E&T program. In addition to providing employment and training services, state SNAP E&T programs are required to provide participants with necessary supportive services, such as transportation, childcare, and textbooks. Our review of 31 studies provided some information regarding food insecurity among college students, but all of the studies have limitations and none provide estimates of food insecurity for this population in general. Estimates of food insecurity among college students included in the studies we reviewed ranged from 9 percent to well over 50 percent, with 22 of these of 31 studies estimating food insecurity rates of over 30 percent. These results reflect the studies’ different samples and methods, and the estimates from the studies included in our review are not generalizable to the college student population as a whole. None of these studies are based on a sufficiently large or diverse random sample of college students to constitute a representative study. The studies addressed the difficulty of sampling the college student population in different ways, including by extrapolating from household data, surveying students in a particular degree program or on a particular campus, or targeting particular, non-random sub-groups of the college student population. Most of the studies were also conducted on only one campus, although some studies gathered data from more than one campus. Despite the limitations, these studies as a whole help shed some light on the range of food insecurity that exists among some groups of college students. Of the 31 studies we reviewed, 2 used nationally representative household data sets, the Current Population Survey and the Survey of Income and Program Participation. The study that used the Current Population Survey data from 2011-2015 found that an estimated: 11 percent of households with a student in a 4-year college 14 percent of households with a student in vocational/technical education experienced food insecurity, and 17 percent of households with a student in a community college experienced food insecurity. These national household surveys assess the food security of households with a college student member, but they do not directly survey college students and only measure food security at the household, and not the individual, level. For example, these household data may not capture a college student’s food insecurity in situations where the student member of the household does not live at home for most of the year. The remaining 29 studies we reviewed collectively surveyed college students on approximately 200 campuses across multiple states, including two large state university systems, and produced a wide range of estimates of food insecurity. In most cases, the results can be characterized as applying only to the respondents of the survey. The 29 studies based on campus surveys provide a range of food insecurity rates among respondents, from 9 percent to over 50 percent. For example, a study first published in 2017 found that 15 percent of student respondents at one 4-year college experienced food insecurity, with an additional 16 percent of student respondents at that college estimated to be at-risk for food insecurity. Two recent surveys of college systems in California found that 40 percent of respondents from University of California campuses and 42 percent of respondents from California State University campuses experienced food insecurity. Estimates of food insecurity rates in the studies we reviewed tended to be higher at 2-year than at 4-year colleges. Four studies examined only 2- year college students and three of these studies estimated food insecurity rates among respondents at 2-year colleges to be 40 percent or higher. Three studies looked at both 2-year and 4-year colleges and estimated food insecurity to be higher among students at 2-year colleges. For example, a large, multi-college study conducted in 2017 found that during the 30 days preceding the survey, 42 percent of community college students who responded and 36 percent of students at 4-year colleges who responded indicated they were food insecure. Further, the two studies that used national household data sets found that households with community college and vocational education student members had higher food insecurity levels than households with students at 4-year colleges. We identified and analyzed the prevalence of risk factors associated with food insecurity among students through our review of peer-reviewed publications on food insecurity and through interviews with academic researchers, college officials, state and federal officials, and officials from relevant policy organizations. In the studies we reviewed and in our interviews with researchers, having a low income was consistently identified as a key risk factor for food insecurity. The other risk factors we included in our analysis are: being a first-generation college student, receiving SNAP, being a single parent, being disabled, being homeless or at risk of homelessness, and being a former foster youth. In our analysis, we focused on students with a household income at or below 130 percent of the federal poverty line, which represents 39 percent of all undergraduates. While having a low income is itself the most common risk factor for food insecurity among college students, our analysis found that the majority of low-income students also experience additional risk factors for food insecurity. The three most common risk factors for food insecurity among low-income students were being a first- generation college student; receiving SNAP (receiving SNAP can be considered a risk factor in that it may reduce, but not entirely eliminate, food insecurity); and being a single parent. Of the approximately 7.3 million low-income students, 31 percent were first-generation college students, 31 percent reported receiving SNAP, and 25 percent were single parents. The prevalence of risk factors among low-income students was lower at 4-year colleges compared to other colleges. For example, about 21 percent of low-income 4-year college students were single parents in 2016 compared to about 42 percent of low-income students in less than 2-year programs. Low-income individuals enrolled in less than 2-year programs had the highest prevalence for almost all risk factors (see table 1). Twenty-nine percent of all U.S. undergraduates had a low income and experienced at least one additional risk factor for food insecurity, according to our analysis of 2016 NPSAS data—14 percent had a low income and one other risk factor and 15 percent had a low income and two or more additional risk factors associated with food insecurity (see table 2). Risk factors associated with food insecurity are more prevalent among low-income students than among the general student population, with 75 percent of low-income students experiencing one or more additional risk factors. Students at 2-year colleges and those in less than 2-year programs were also more likely to have multiple risk factors. In our analysis of SNAP participation among students, we focused on low-income students with at least one additional risk factor for food insecurity because these students would likely meet the income threshold for SNAP eligibility and have an additional risk factor that could put them in need of food assistance. Our analysis of 2016 NPSAS data identified about 5.5 million low-income students with at least one additional risk factor for food insecurity and found that about 59 percent of these students (3.3 million) reported being enrolled at least half time and meeting a SNAP student eligibility exemption. About 1.8 million of these low-income students with an additional risk factor reported meeting a student exemption and also that they were not receiving SNAP benefits. In other words, among potentially SNAP eligible low-income students with at least one additional factor for food insecurity, 57 percent did not report participating in SNAP in 2016 (see fig. 2). About one-quarter of the 5.5 million low-income students with at least one additional risk factor for food insecurity did not meet any of the student exemptions we could identify in the NPSAS data and reported that they did not receive SNAP benefits. These students would likely be ineligible to participate in SNAP unless they begin meeting one of the student eligibility exemptions in the future, such as working 20 hours per week. The 14 selected colleges we contacted are addressing student food insecurity in three main ways: by educating faculty, staff, and students; by providing students free food and emergency assistance; and by centralizing and coordinating their student services and helping students apply for federal and state benefits. Officials at 9 of these colleges said that they viewed student food insecurity as part of students’ increasing inability to meet their basic needs as a result of the decreasing affordability of higher education or the high cost of living. This sentiment was echoed by selected students we spoke with during discussion groups (see text box). All of the colleges we contacted have implemented on-campus initiatives to combat students’ food insecurity with the goal of improving their student outcomes, such as retention, completion, and loan repayment rates. As one community college official told us: “We have come to realize that we can’t address retention and completion without addressing students’ basic needs.” See figure 3 for the range of initiatives the 14 colleges we contacted were taking to address food insecurity among college students on their campuses. Educating the campus community. Officials at several of the selected colleges told us that many administrators, faculty, staff, and students on their campus are unaware that students experience food insecurity, which hinders their college’s efforts to address the issue (see text box). At all 14 colleges we contacted, officials said they are educating their campus community about available resources, both on campus and off, to address student food insecurity. All of the 14 colleges we contacted also educate their students about the resources available to address food insecurity in a variety of ways, such as by providing information during student orientations, on flyers and pamphlets, or through social media and text messages. Eight of the 14 colleges we contacted hold trainings or distribute information to faculty and staff about the on-campus and community resources available to students. Nine of these colleges have created supplemental or for-credit courses on topics such as financial literacy or cooking and nutrition. For example, one college we visited runs a workshop for first-year students on writing a spending plan and a food budget. At several of the selected colleges, faculty members include blurbs about basic needs-related resources, such as campus food pantries, in their syllabi. Providing food and emergency financial assistance. All of the 14 colleges we contacted address student food insecurity by providing students free food and most provide students emergency financial assistance. Nationwide, the College and University Food Bank Alliance has reported that at least 656 colleges have or were developing food pantries as of September 2018. Each of the 14 colleges we contacted had a food pantry, with 7 having started their pantry in the past 5 years. According to college officials, individual faculty and staff members are often first to identify food insecurity as a campus concern and provide food to students. For example, officials at several of the colleges we contacted traced the origins of their college’s food pantry to a drawer of food a faculty or staff member kept in their office for students, or to a professor who brought jars of peanut butter or bagels for any student who wanted one. The college food pantries we visited varied in terms of their size and location, which can depend upon the space available on campus. For example, some pantries we visited consisted of only a couple of shelves of non-perishable items, while others spanned multiple rooms containing refrigerators and freezers. Directors at four of the selected food pantries said that student need was great enough to support expanding the food pantry, but that they had been unable to expand because space on campus is at a premium (see text box). Several pantries also had separate sections providing students personal health items and clothing and offered auxiliary services, such as information about cooking, food budgeting, or SNAP enrollment (see fig. 4 for pictures of some of the college food pantries at selected colleges). Officials at 11 of the selected colleges we contacted said that a major barrier they face is overcoming the stigma some students associate with accepting help for their basic needs, such as using the food pantry (see text box). Concern about this stigma led at least 3 of the colleges we contacted to place their food pantry in a less-public area of campus to address students’ privacy concerns. In contrast, 3 other colleges we contacted centrally located their food pantry to advertise its existence and normalize its use. One college president we spoke with said that “until normalized and pulled it to the center of campus, it was underutilized,” and stated that moving the food pantry to the center of campus quadrupled its use. Officials at 9 of the 14 colleges we contacted reported that their campus food pantry had seen an increased number of users over time as the student body became aware of this resource. One student we spoke with said that his college’s food pantry was his only source of food, while another estimated that the food pantry allowed him to save about $100 per month on food. Officials at 10 of the 14 selected colleges we contacted told us they partner with national organizations or campus dining services or both to try to respond to the needs of students who might be experiencing food insecurity. For instance, public colleges in California receive state funding to incentivize them to address student food insecurity in a variety of ways, including by establishing campus food pantries, providing information to students about SNAP benefits, and establishing meal point donation programs. Two California colleges we contacted were working with a national organization to set up a meal point donation program. One college in another state we visited included in their contract with their private dining services vendor funding for several initiatives, such as a campus-wide survey of student food insecurity, on-campus farmer’s markets, and a learning kitchen that teaches students hands-on cooking skills. Additionally, 2 of the colleges we contacted are working to have SNAP benefits accepted at campus markets. Beyond providing students with free food, officials at 12 of the 14 colleges we contacted said that their college makes emergency cash assistance available to students through small loans, grants, or grocery store or gas station gift cards. These emergency funds are intended to help students pay bills for one-time financial emergencies, such as buying groceries or paying for a car repair or a utility bill. One community college we visited directly ties this assistance to its retention efforts, providing a one-time amount of up to $500 for students judged to have sufficient need and who are likely to remain in school if the bill is paid. Centralizing and coordinating student services and access to benefits. Officials at many of the colleges we contacted told us they have centralized their student support and financial aid services, among others, and several have introduced a case management approach to better collaborate across departments and more efficiently and holistically address their students’ basic needs (see text box). Of the 14 colleges we contacted, 8 had centralized some or all of their student services. For example, one community college we visited has co-located many of its student services—including its financial aid, academic counseling, payroll, food pantry, veterans’ services, and women’s resource center, among others—around a central hub of the student union. Students visiting this central hub may be assigned a caseworker to connect them with the on- campus, community, state, and federal benefits for which they are eligible. Officials at a few of the colleges we contacted said that centrally locating student services also helped faculty and staff by providing a single point of contact to refer students. One official said that she tells faculty and peer mentors: “If you see a student in any kind of distress at all—mental health, hunger, homelessness, anything—send them to us.” She added that it is too much to ask faculty to figure out which office or official to send students to for specific concerns. Officials at 8 of the 14 colleges we contacted told us their campus has established a coordinated benefits access program or is actively screening students for potential eligibility for, and helping them enroll in, federal and state benefit programs like SNAP, WIC, Medicaid, and the Earned Income Tax Credit. For example, one community college we contacted had a staff member build a statistical model to analyze the college’s existing data on first-time students, such as data on students’ household income, demographics, and course enrollment, to identify students at risk of not returning to college and to provide these students, their professors, and their faculty advisors with information about on- campus resources. Officials at one college we visited told us the campus hosts weekly clinics with county SNAP eligibility analysts to screen students for SNAP eligibility and help them apply for benefits. At a community college system we visited, the administration told us they were working with the state SNAP agency to identify which students were receiving SNAP benefits and they plan to send targeted information on SNAP to those potentially eligible students not receiving benefits. Officials at three of the colleges we contacted said that their college was purchasing software that creates a centralized portal where faculty and staff can share information about a student’s situation with student support providers so they can better provide help. For example, at a college we visited that is using such software, officials said that a professor might note in the centralized portal that an at-risk student was either failing or not attending a class, and that student would be flagged in the portal to notify academic advisors, counselors, and other college staff who can direct the student to the on-campus resources they may need, such as the food pantry or help in completing a SNAP application. Federal grant aid is available to help low-income college students and their families pay for college, but for many students, the maximum amount of grant aid available to them does not cover all of the costs associated with attending college. Officials from many of the organizations we interviewed said that the federal Pell Grant Program for low-income college students was a major source of financial support for these students, but that it does not cover the full cost of college attendance for many students, and particularly for those at 4-year colleges or in areas with high costs of living. Most low-income students also work while attending college. Despite this, several college officials we interviewed told us that the gap between the amount of financial aid available and what it costs to attend college is continuing to grow. One financial aid director told us that students used to be able to pay for groceries or rent with some of their financial aid “refund” money (that is, financial aid funds refunded to a student after tuition, fees, and other school charges are paid, which can be used to pay for other education and living expenses); however, he said students rarely receive a refund any more. According to data from Education’s National Center for Education Statistics, the average Pell Grant used to cover more of the cost of college than it does today. For example, about 40 years ago— soon after the Pell Grant Program was established—the average award covered about 50 percent of the average cost of in-state tuition, fees, room, and board at public 2-year colleges, and 39 percent at public 4- year colleges. Today, the average Pell Grant award amount covers just 37 percent of these costs at public 2-year colleges, and 19 percent at public 4-year colleges. Federal Work-Study Program employment opportunities may be available to qualifying students, but several officials we interviewed noted that funding for this program is extremely limited, especially at community colleges where there are more students at risk of food insecurity. When grant funds and student earnings are insufficient to cover the full cost of college, students can take out federal student loans to make up the difference. Officials at a national association of community colleges and at a few colleges we visited told us that low-income students often use federal loans to help them pay for basic living expenses—such as food or rent. While these loans can be helpful for some students who need additional funds to support themselves while in college, officials at a few community colleges also cautioned that loans may not be the best choice for all students, and may worsen the financial position of already vulnerable students. For example, at one 4-year college we visited, the financial aid director said that many of their students have reached their maximum federal lifetime loan limit (see text box for an example). He also noted that graduates have, on average, $25,000 of student loan debt. He said his college has historically trained its students for public sector careers, e.g., teachers or counselors, and he worries that salaries in these professions will not allow graduates to repay this amount of student loans. Given the limitations of federal student aid funding, officials from several organizations we interviewed spoke about the importance of leveraging other federal benefits, such as food assistance programs, to help address the needs of college students experiencing food insecurity. According to research on the effect of SNAP benefits, these benefits can provide some help to students, although they may not completely eliminate their food insecurity. However, college students have limited access to several key federal food assistance programs that could help address some of their needs. For example, several college officials we spoke with noted that many low-income students received federally subsidized free or reduced price lunch while in elementary and secondary school, but a comparable program does not exist for college students, even though many face the same level of need. In addition, many college students are prohibited from receiving federal SNAP benefits because of restrictions on student eligibility. Several college officials told us that when students are unable to meet one of the student exemptions for SNAP benefits, they will try to connect them to community resources or to the on-campus food pantry, but a few characterized these as short-term solutions to their students’ problems. We also heard from officials at several colleges that students who are pregnant or postpartum may qualify for the WIC program, which provides food assistance to mothers with infants and young children; however, this program serves only a small minority of college students who may be experiencing food insecurity. About one-third of state SNAP agencies reported they were taking actions to inform college students about SNAP and help them access SNAP benefits. These state SNAP agencies reported assisting college students in various ways, including by developing guidance or training for state and college officials on student eligibility rules, by conducting outreach at local colleges, or by providing students with options to qualify for a SNAP student exemption by participating in employment and training services. Eleven state SNAP agencies reported clarifying policy on college student eligibility to SNAP staff who determine eligibility for benefits or providing training to third-party partners to increase awareness of students’ potential eligibility for SNAP. For example, in 2015 and 2017 California’s state SNAP agency issued policy letters to its county offices clarifying college student eligibility rules and expanding the list of college programs that qualify a student for an exemption under the employment and training provision. Minnesota’s state SNAP agency reported that it conducts technical assistance training on student eligibility issues for its caseworkers twice a year. State SNAP agencies also reported partnering with colleges to increase awareness of potential student SNAP eligibility or to reduce the burden of the application process for students. For example, Missouri’s state SNAP agency reported that it recently began a partnership with the state’s community college association to increase students’ awareness of their potential eligibility for SNAP. To reduce the burden students face in applying for SNAP benefits, Rhode Island’s state SNAP agency reported that its outreach partner holds regular “office hours” at state community college campuses to answer questions about SNAP, screen students for potential eligibility, and assist with application completion. Officials from California’s state SNAP agency stated that its county SNAP agencies periodically hold SNAP enrollment clinics on college campuses. At one time, a community college in California had a county SNAP staff member located on campus to assist their students with benefit applications. Finally, two of the states we visited partially fund their state higher education grants for low-income college students with some of their federal TANF block grant dollars. Because these grant recipients receive TANF benefits, they are eligible for the corresponding SNAP student exemption. For example, the California state SNAP agency issued guidance in February 2017 to all of its county offices to explain that this SNAP student exemption applies to any student who receives the state’s higher-education grant for low-income students. In Massachusetts, the state SNAP agency issued similar guidance in August 2017 to state SNAP staff who determine eligibility for benefits. Some state SNAP agencies are taking steps related to the exemption for students who are enrolled in certain employment and training programs, which can be offered at 2-year colleges and other community-based organizations. Seven states reported taking steps to designate specific programs at their community colleges to qualify as employment and training programs to make it easier for students and SNAP staff who determine eligibility for benefits to identify students who could meet this exemption. In these states, according to the SNAP agency, they have determined that certain programs at community colleges qualify enrolled students for one of the student SNAP exemptions because they are programs for low-income households, aimed at employment, and run by a state or local government. According to FNS, state SNAP agencies have the authority to decide which programs would qualify enrolled students for this exemption, and several states have identified qualifying programs at community colleges in their state. Students in these designated community college programs who attend at least half time and do not meet one of the other student exemptions can be eligible for SNAP under this provision if they meet all other eligibility criteria. In 2010, Massachusetts’ state SNAP agency began using a dedicated form that provides community college students in these state-designated employment and training programs support for their SNAP application. According to officials at the state SNAP agency, this form has helped to streamline the application process for both students and state SNAP agency staff who determine eligibility for benefits. Other states are developing opportunities for students to meet the employment and training exemption through partnerships with the states’ SNAP Employment & Training (E&T) programs. Twenty-four state SNAP agencies reported that they have implemented a third-party partnership with at least one community college to deliver SNAP E&T program services on campus. Under these state SNAP E&T program partnerships, the state SNAP agency works with community colleges to enroll SNAP recipients in programs that are designed to increase the employability of the participant. One FNS official told us that state SNAP E&T programs were an ideal way to provide college students who qualify for SNAP benefits with additional services and support, such as counseling or transportation assistance, and that they can help students persist in their community college program and ultimately improve their self-sufficiency. According to FNS, state agencies can enroll individuals in these SNAP E&T programs in one of two ways. A SNAP recipient may enroll in the designated community college training program affiliated with the state’s SNAP E&T program, which allows them to continue receiving SNAP benefits even if they attend the program more than half time. Or, the community college partner can refer individuals already enrolled at the college to the state SNAP agency to determine if they are eligible for state SNAP E&T program services—a process known as a “reverse referral.” In the case of a reverse referral, individuals who are enrolled in certain training programs and who are experiencing food insecurity may be able to qualify for a student exemption to receive SNAP, as well as additional services through state SNAP E&T programs. According to Washington’s state SNAP agency, SNAP E&T programs operate at all 34 community colleges in the state, and have served approximately 20,000 students each fiscal year since 2015. A senior program official at Washington’s state SNAP agency told us that the vast majority of incoming community college students in Washington are screened for potential eligibility and reverse referral into the state’s SNAP E&T program services. At 9 of the 14 colleges we contacted, some officials and students we spoke with indicated that they either did not know about or found it difficult to understand the SNAP student rules. For example, in a student discussion group at one community college, some students said they were uncertain about how SNAP student rules applied to them when they lived with their parents but received no financial support or food from them. Officials at another college told us that many students are not even aware of or do not realize that the SNAP student rules apply to them. In a student discussion group we held at another college, some students told us that they had been unaware that they may be eligible for SNAP until they spoke to someone at their college. Further, we found college officials may also have difficulty understanding SNAP student rules—for example, officials at one college said that they believed that college students are not eligible for SNAP. College officials can be an important source of information for students regarding SNAP, but this can create barriers to access if college officials do not have the correct information. For example, at one college we visited, two students said they were misinformed by officials at their college or their state SNAP agency about their potential eligibility for SNAP. Officials we met with at three colleges said that they would like information from FNS about college student eligibility rules so they can help educate and enroll students in SNAP, but FNS has not developed such targeted information to distribute to colleges and students. Officials at one college said they requested information from FNS to distribute to students, but the general SNAP eligibility brochure FNS provided did not reference college student eligibility requirements. A senior FNS official said developing printed materials expressly explaining the college student eligibility requirements is primarily a state agency responsibility, and that information about this topic was available on the FNS website. However, we found that the information specifically related to college student eligibility requirements on the FNS website was not easy to find. For example, the main webpage of FNS’s SNAP eligibility website lists the special circumstances under which certain specific populations may be SNAP eligible, but it does not include college students nor does it link to the webpage listing the student exemptions. Further, the webpage containing information on SNAP for college students restates the list of student exemptions from the regulations, using legal and technical language that is not always easy to understand. For example, the webpage states that students “may be able to get SNAP benefits if otherwise eligible, and they ‘get public assistance benefits under a Title IV-A program of the Social Security Act.’” Many college officials and students may not realize this refers to TANF benefits. In addition, the website does not list being “not physically or mentally fit” (e.g., having a disability) as one of the ways to qualify for a student exemption, nor does it provide information relevant to how students may qualify for an exemption because they are assigned to or placed in certain employment and training programs. A senior official from the FNS national office said that college student eligibility and the student exemptions were among the most complicated SNAP policies to explain and that they frequently receive questions from the general public about how the rules apply to certain students in certain situations. This official said that because the student SNAP rules are so difficult to navigate, FNS responds to these individual questions and circumstances as they arise, rather than developing materials that could apply broadly to every situation, and that state SNAP agencies are primarily responsible for assisting students. Officials at all four FNS regional offices we spoke with said materials explaining the student rules tailored to colleges and college students would prove useful to states and colleges in their regions. While developing clear written materials about a complicated policy is challenging, Standards for Internal Control in the Federal Government states that agencies should communicate key information to their internal and external stakeholders. Further, a core activity of the SNAP program is to work with its partners to ensure that those eligible for nutrition assistance can make informed decisions about applying for the program. The lack of clear and easily accessible information on student SNAP eligibility requirements can make it difficult for potentially eligible students to make informed choices about applying for SNAP, and for colleges to develop their own materials to help potentially eligible students apply for SNAP. As a result, students could miss opportunities to obtain the additional support they may need to stay in college and graduate. In addition, we found that some state SNAP agencies had limited information about approaches that they could take to help potentially eligible college students who may qualify for a student exemption. Specifically, officials at four of the five state SNAP agencies and at three of the four FNS regional offices that we spoke with said that it is not entirely clear to them under which circumstances college students may be eligible for a student exemption if they are enrolled in a qualifying employment and training program run by a community college. State SNAP agency officials in four of the five states, as well as officials in three of the four FNS regional offices, told us that they would like more information from FNS about how to implement the approach some state SNAP agencies are taking to help college students who may qualify for an employment and training exemption access SNAP. One state SNAP agency official said that she believes that the lack of guidance and leadership from FNS on this issue leaves many state SNAP agencies operating with uncertainty, and, as a result, many of them do not take any actions to identify those college students who may qualify for an employment and training exemption under SNAP rules. Several of the FNS regional office officials we interviewed agreed that the FNS national office was uniquely positioned to collect and share information about potential approaches that states are using to implement the student exemption for employment and training programs so that other states could also consider using such approaches to assist low- income college students who may qualify. Officials at one FNS regional office said that an FAQ-type document on college student eligibility scenarios would be helpful. At the same time, a few FNS regional office officials said that the national office is cautious about developing information for all states when each state’s SNAP program operates slightly differently. According to FNS national office officials, FNS issued the most recent document discussing general SNAP eligibility for students in August 2010. This document explained that certain employment and training services provided by a state or local government may qualify a student for a SNAP student exemption. In November 2016, six federal agencies including USDA (on behalf of FNS) released an interagency letter, Aligning Federal Supports and Program Delivery for College Access and Completion, that includes information from FNS related to general student eligibility for SNAP. However, neither of these documents included specific strategies or examples of approaches states have used or can use to help potentially eligible college students access SNAP benefits. Standards for Internal Control in the Federal Government states that agency management should internally communicate the necessary information to achieve the program’s objectives. In addition, part of the role of the FNS national office is to work with its partners, including its regional offices and the state SNAP agencies, to improve program administration and ensure access to benefits for eligible individuals. FNS officials told us FNS has several existing mechanisms for information sharing with the regional offices and the state SNAP agencies, including policy memos, webinars, and annual conferences. However, a senior FNS official told us that she was not aware of any plans to share additional information with state SNAP agencies or regional offices on this topic, noting that college students are a relatively small population compared to other SNAP recipients. As a result, state SNAP agencies may not be aware of approaches other states have used that they could take to assist college students experiencing food insecurity in accessing SNAP benefits, and FNS may not be fulfilling its role to ensure program access for college students who are eligible. In addition to noting how complicated the college student SNAP eligibility rules are, most state higher education and SNAP policy organization officials we interviewed remarked that the student exemptions can make it challenging for many students who are food insecure to obtain SNAP benefits that could help them succeed in college. Specifically, a few researchers and state higher education officials said the eligibility restrictions were instituted when college students were generally from higher-income households, whereas many students enrolled in college today are from low-income households. Several higher education officials and one researcher noted that when a student qualifies for a student exemption by working 20 hours a week, it can have a detrimental impact on college completion. For example, research has shown that full-time college students who work more than 15 hours a week or who reduce their college course load and attend part time in order to increase their work hours are less likely to complete their degree or educational program. At the same time, FNS officials and officials at one state SNAP agency stressed the importance of having proper controls in place to prevent certain students from improperly receiving benefits. A senior FNS official noted that the college student restrictions were established to prohibit traditional college students who are supported by their parents from receiving SNAP benefits. This official said that the student eligibility rules should ensure that middle-class and wealthy students do not access SNAP while attending college. Further, officials at a few organizations and one state SNAP agency we interviewed expressed support for some of the student exemptions, such as the exemption for college students who work 20 hours per week. The federal government invests billions of dollars annually in higher education through grants and loans to low-income students. Partially as a result of this investment, a college education is accessible to more low- income Americans than ever before. Despite this federal support, many low-income college students struggle to meet their basic needs, including obtaining the food that they need, and may drop out of college as a result. SNAP can be an important source of support for low-income students, although it may not completely ameliorate food insecurity. However, because the SNAP eligibility requirements for college students can be difficult for students and colleges to understand, students may be unaware of or misinformed about their potential eligibility for SNAP. FNS has not made information that clearly explains student SNAP eligibility requirements easily accessible to students and college officials and, as a result, students experiencing food insecurity may remain unaware that they could be eligible for SNAP. In addition, some states are exercising existing state flexibilities to help students experiencing food insecurity to access SNAP, but FNS does not actively share this information among state SNAP agencies. By collecting and sharing information on approaches taken by state SNAP agencies active in this area, FNS could potentially help state SNAP agencies identify ways to help eligible students who are experiencing food insecurity. Better supporting these students will also help the Department of Agriculture and the Department of Education meet their respective goals and make good use of the substantial federal investment in higher education while improving the health and nutrition of individuals experiencing food insecurity. We are making the following two recommendations to FNS: The Administrator of FNS should make information on their website regarding student SNAP eligibility requirements easier to understand and more accessible, as a resource for colleges and state SNAP agencies. (Recommendation 1) The Administrator of FNS should coordinate with its regional offices to collect and review information about existing SNAP flexibilities and examples of approaches state SNAP agencies are taking to assist eligible college students to access SNAP benefits, and share such information with state SNAP agencies. (Recommendation 2) We provided a draft of this report to the Department of Agriculture and the Department of Education for review and comment. The Department of Education provided technical comments, which we incorporated into the report as appropriate. On November 28, 2018, and December 7, 2018, the Directors of the FNS SNAP Program Development Division and Office of Employment and Training met with us to provide the agency’s comments orally. At the December 7, 2018 meeting, FNS officials told us they partially concur with our recommendations and believe that FNS has sufficient guidance in place for states to provide further information to colleges. However, the agency agrees with the intent of GAO’s recommendations and plans to review its existing guidance to determine if any improvements are warranted. We continue to believe that additional action is necessary to address our recommendations. While reviewing its existing information would be helpful, we believe that changes to FNS’s existing information are also needed to improve the clarity and accessibility of information about SNAP student eligibility requirements on FNS’s website, and that FNS needs to work with its regional offices to identify and share additional information about state approaches to assist eligible college students with access to SNAP benefits. In response to FNS officials’ comments, we also clarified both recommendations to focus more on actions that fall under the responsibility of the FNS National Office. FNS also provided technical comments, which we incorporated into the report as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretaries of Agriculture, Education, appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. This report examines (1) what is known about the extent of food insecurity among college students and their use of the Supplemental Nutrition Assistance Program (SNAP); (2) how selected colleges are addressing student food insecurity; and (3) the extent to which federal programs assist college students experiencing food insecurity. This appendix provides details of the data sources used to answer these questions, the analyses we conducted, and any limitations to our analysis. We used multiple methodologies to conduct this review. We conducted a review of academic studies based on original research to determine what is known about food insecurity among college students. We assessed the quality of these studies by evaluating their research methods and determined that the studies we included in our review were sufficiently reliable for our use. To describe the prevalence of risk factors for food insecurity among college students, we used data on student characteristics from the nationally representative National Postsecondary Student Aid Study (NPSAS). We assessed the reliability of NPSAS data by reviewing existing information about the data and the system that produced them and by interviewing agency officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purposes of describing the prevalence of risk factors for food insecurity among college students and students’ participation in SNAP. To understand how selected colleges address student food insecurity, we conducted four state site visits (California, Kentucky, Massachusetts, and Michigan) selected based on whether colleges and/or state government agencies were taking steps to address food insecurity among students, and geographic diversity, among other criteria. In each state, we visited public colleges and universities, where we met with college officials, students, and researchers. We also interviewed state higher education and SNAP officials, as well as experts from relevant policy organizations. To assess federal efforts, we identified federal programs that may assist college students in need of food, interviewed officials from Education and USDA, and reviewed relevant federal laws, regulations, and agency guidance and program documents, as well as federal internal controls standards applicable to these programs. To understand what is currently known about the extent of food insecurity among college students, we conducted an in-depth review of studies. Our preliminary search in Scopus identified a recent systematic literature review on food insecurity on college campuses. Upon reviewing the article’s scope and methodology, we chose to update rather than duplicate their efforts. We expanded the original search terms to include “higher education” and “postsecondary” among others, and searched two additional research databases (ProQuest and Scopus) in addition to the original list of sources (MEDLINE, PSYCHINFO, and Web of Science). We identified peer-reviewed journal articles and other published research through this search. Through news reports on food insecurity and interviews with researchers, we also identified studies published up to August 31, 2018 that may not have been included in our initial review. We included studies in our review if they met the following criteria: (1) were based on research conducted and published in the United States; (2) were published since 2007; and (3) contained original, direct estimates of food insecurity rates among college students. We identified a total of 35 studies that met these criteria and conducted an initial review to determine if the studies met generally accepted social science standards and were appropriate for our purpose to provide information on the prevalence of food insecurity among college students. We eliminated some studies if we determined that the methods were not appropriate or rigorous—specifically, we concluded that we could not report the results of four studies due to research design limitations. For instance, some studies did not fully disclose their methods, had small sample sizes, used data based on low survey response rates, or did not attempt to correct for or address potential biases in their methodology. For studies included in this report, we performed an initial in-depth review of the findings and methods, and a GAO methodologist performed a second review to confirm our reported analysis of the findings. As a result, we determined 31 studies to be of sufficient quality and we summarized the findings of these 31 studies in our report (see table 3). While these 31 studies are of sufficient quality to provide information on what is known about food insecurity among college students, the generalizability of their findings require significant caveats. Most of the survey results in these studies are not generalizable to a population larger than their sample size, meaning that the findings apply only to the respondents of the survey. None of the studies in our review conducted non-response bias analyses or attempted to address potential selection bias in the sample. Despite these limitations, the studies collectively offer assessments of food insecurity conducted on over 200 campuses in more than 30 states, at both 2- and 4-year schools, and all but three of the studies used adapted versions of the USDA food insecurity measure. We analyzed data from the Department of Education’s (Education) National Postsecondary Student Aid Study (NPSAS). Because no federal datasets contain food insecurity data specifically about college students, we chose to analyze NPSAS data for the prevalence of risk factors associated with food insecurity. Additionally, we used some summary statistics from frequencies presented in the 2016 NPSAS data codebook. NPSAS data contain nationally representative, detailed demographic and financial aid data for college students enrolled in less than 2-year, 2-year, 4-year, and graduate postsecondary programs. These data come from institutional records, government databases, and interviews with students. Because the NPSAS data are based on probability samples, estimates are calculated using the appropriate sample weights provided which reflect the sample design. Each of these samples follows a probability procedure based on random selection, and they represent only one of a large number of samples that could have been drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval. This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Unless otherwise noted, all percentage estimates from the NPSAS data analysis have 95 percent confidence intervals within plus or minus 5 percentage points of the percent estimate, and other numerical estimates have confidence intervals within plus or minus 5 percent of the estimate itself. We compared 95 percent confidence intervals to identify statistically significant differences between specific estimates and the comparison groups. The information provided in the NPSAS data, particularly those from the interview portion of the study, are self-reported and not all of the data are based on federal determinations or cross-verified with outside sources. For example, students self-report their disability status, their hours worked, and so on. Such self-reported data are subject to several sources of nonsampling error, including the inability to obtain information about all sample cases; difficulties of definition; differences in the interpretation of questions; respondents’ inability or unwillingness to provide correct information; and errors made in collecting, recording, coding, and processing data. These nonsampling errors can influence the accuracy of information presented in the report, although the magnitude of their effect is not known. Identification of Risk Factors for Food Insecurity In order to identify risk factors associated with food insecurity among college students, we reviewed published articles and reports on the topic of food insecurity and interviewed researchers, college and state officials, and officials at relevant policy organizations. We present the list of risk factors for food insecurity we considered in table 4. Not all of the risk factors we identified have a corresponding NPSAS variable. For example, NPSAS does not ask respondents about unmet medical needs or childhood food insecurity. Additionally some of the risk factors overlapped and were thus not included in our analysis. For example, the NPSAS dataset contains multiple variables pertaining to student and student household income, such as household income, financial aid, and receipt of public benefits. Many indicators of low-income status likely overlap (e.g., being eligible for a Pell Grant and receiving other financial aid), and many students who have one indicator will likely have others. Although this is not an exhaustive list of risk factors, individuals who experience one of the following seven characteristics may be at risk of food insecurity: being disabled, homeless or housing insecure, being a former foster youth, receiving SNAP benefits, being a single parent, and being the first-generation in a student’s family to attend college. Table 5 shows how we compared these risk factors with corresponding variables from the 2016 NPSAS data. Table 5. Selected Risk Factors and Corresponding Variables in the 2016 National Postsecondary Student Aid Study Data Set Description Indicates student has some type of disability or condition. Includes some students who were determined by a professional to be homeless (via the Free Application for Federal Student Aid or FAFSA), but predominantly measures student- determined “risk of homelessness.” This is not a direct measure of homelessness. Indicates student is an orphan, ward of court, emancipated minor, or in legal guardianship. Indicates whether any member of the student’s household received Food Stamp (SNAP) Benefits during the 2013 or 2014 calendar year. Identifies independent students who were single parents/caretakers during the 2015-2016 academic year. Indicates total 2014 income as a percentage of the federal poverty level thresholds for 2014. For our purposes, low income is defined as having a household income level at or below 130 percent of the federal poverty level. Indicates the highest level of education achieved by a parent, stepparent, or guardian of the student. Per previous Department of Education studies, we define first generation as college students whose parents’ maximum educational attainment was a high school diploma or less. Note that students who did not know their parent’s highest education were not counted as first generation students. The data are self-reported. The student may not be eligible for or receiving federal disability benefits. The data are reported by the student and their family on the FAFSA or during the student interview. National level, individual SNAP enrollment data are not available to verify this variable, as states provide aggregate statistics to FNS. Because our analysis does not include some of the risk factors for food insecurity listed in table 4, our findings may underestimate the number of college students who have a risk factor for food insecurity. For example, we heard in some of our interviews with researchers and in our discussions with students that being an undocumented or an international student was a risk factor for food insecurity. Such students are generally ineligible for federal financial aid and are restricted in the type of other federal aid they can receive. Undocumented students are also more likely than other students to be poor. However, NPSAS does not contain detailed data about undocumented or international students, so we could not include this risk factor for food insecurity in our analysis. The risk factors for food insecurity we included in our analysis may also be correlated with one another and can co-occur. For example, youth who were formerly in foster care are more likely than other youth to be low- income. Indeed, the prevalence of additional risk factors for food insecurity is higher among low-income than wealthier students. We did not analyze the extent to which some risk factors are more strongly associated with food insecurity than others or attempt to rank or weight the relative importance of risk factors. To calculate potential student SNAP eligibility, we first calculated the number of students who might qualify for SNAP based upon having a household income at or below 130 percent of the federal poverty line, which is the standard income requirement for households that do not include a member who is 60 years of age or older or disabled to qualify for SNAP benefits. Next, we analyzed NPSAS variables to identify those that corresponded with SNAP student eligibility rules. We deemed all students who met the income requirements, were enrolled in school at least half time, and met one of the student eligibility exemptions we were able to identify in the data as potentially eligible for SNAP. However, our analysis has limitations and does not precisely identify all students who are SNAP eligible. The 2016 NPSAS data set contains several variables that match up closely with certain student eligibility exemptions. For example, the exemptions related to age, having young dependents, working 20 hours per week, and receiving certain federal benefits have corresponding NPSAS variables (see table 6). For two of the exemptions, we used variables from the NPSAS data set that do not perfectly correspond to the statute but were the closest available proxies in the data. For the eligibility exemption that covers parents caring for a child 6-11 years old who are unable to obtain childcare to attend school and work, we identified students who have a child 6-11 years old and indicate they have no paid childcare. However, some individuals may have unpaid childcare, such as family members, and be able to work and attend school despite not having paid childcare, meaning they would not meet this SNAP student eligibility exemption. For the disability exemption, we used the NPSAS variable based on an interview question that asks students if they have a mental or physical disability. However, because of different definitions, the NPSAS disability variable may include students with disabilities who would not qualify for the SNAP student exemption related to disability. Specifically, to qualify for this SNAP student exemption, the student must not be “physically or mentally fit,”, while the NPSAS interview question asks students if they have some type of disability or condition, including a long-lasting condition such as serious difficulty hearing; blindness or serious difficulty seeing; difficulty concentrating, remembering or making decisions, a serious learning disability, depression, or Attention Deficit Hyperactivity Disorder; or serious difficulty walking or climbing stairs. As a result, we may overestimate the number of students who would qualify for the student exemption related to having a disability or caring for a child age 6-11. Lastly, NPSAS does not contain a variable to capture the student eligibility exemption related to enrollment in certain programs aimed at employment, such as the Workforce Innovation and Opportunity Act or Temporary Assistance for Needy Families employment and training programs. Therefore, we could not identify any students who met this eligibility exemption for SNAP and may have therefore underestimated the number of students who were potentially eligible for SNAP. Additionally, SNAP eligibility for college students depends not only on income and meeting a student exemption, but also on other determinations such as the level of the individual’s financial assets, including savings and any state policy waivers that may apply to the individual’s eligibility. Given that our analysis relied on self-reported information, and did not capture all aspects of student SNAP eligibility, we did not make any legal determinations about whether individuals were eligible for SNAP, and therefore our analysis can be characterized as providing only a rough estimate of those students who may potentially be eligible for SNAP benefits. To understand how selected colleges address student food insecurity, we conducted four state site visits (California, Kentucky, Massachusetts, and Michigan). We selected these states based on the following criteria: Mentioned in interviews with researchers or government officials as being a state that is: actively addressing college food insecurity, or has at least one public college that is taking action to address food insecurity among college students (number of mentions). School or state program on hunger or food insecurity featured in research papers or policy briefs (number of mentions). FNS data on food insecurity rates in the state, to indicate whether food insecurity among college students might also be a problem (rank by state). FNS data on SNAP enrollment and participation in the state, to indicate the level of SNAP usage in the state (rank by state). FNS information regarding the number of SNAP waivers a state has received, as a proxy for SNAP policy activity in the state (rank by state). We also sought geographic diversity in our site visit states. To achieve this, we created summary rank ordering of states based upon our criteria, then, from those states that ranked in the top 15, we selected one state from the Northeast, South, Midwest, and West census regions. Some of our criteria were purely qualitative in nature, such as information from interviews, research papers, and policy briefs regarding states and colleges with promising practices. Our site visit selection focused specifically on states and colleges with documented activity addressing college student food insecurity, and is therefore biased toward those that had taken action to address college student food insecurity. Our selection strategy did not capture situations where there was high food insecurity among students but the college or state was taking no action to address it, nor did we seek to identify or visit locations where food insecurity had not been identified as a problem. In addition to our site visits, we conducted interviews with officials from one college in Texas and one college in Ohio to learn about specific campus food insecurity initiatives in these states. In each site visit state, we visited several colleges that were taking action to address food insecurity among their student populations, selected based on recommendations from researchers and college officials. We also considered geographic proximity when selecting colleges to visit. Overall, we spoke with officials representing 14 2- and 4-year public colleges (12 in-person and 2 telephone interviews). In each of our site visit states, we visited at least one large public university and one community college. See table 7 for a list of the 2- and 4-year colleges we interviewed in each state. At colleges, we asked members of the leadership team, financial aid officers, student affairs administrators, and other staff members questions about how they recognize, measure, and address college student food insecurity. We also conducted discussion groups with students at seven colleges we visited and asked about their experiences with food insecurity and federal assistance programs, such as SNAP. Students were invited by college officials to participate in these meetings. In each state we visited, we also met with officials from the state agencies that administer SNAP and any state governmental agencies, such as those overseeing higher education or involved in addressing food insecurity among college students. Lastly, in each site visit state, we identified and interviewed staff members at policy organizations, such as legal policy institutes or hunger advocacy groups, involved in efforts to address food insecurity among college students. Assessing Federal Efforts to Address Food Insecurity We assessed the extent to which federal programs assist college students experiencing food insecurity by reviewing relevant federal laws, regulations, and agency guidance and program documents related to specific SNAP requirements for college students and we interviewed FNS national office officials, including representatives of the Divisions of SNAP Program Development, Employment and Training, and Retailer Policy. We also interviewed FNS regional office officials in four of the seven FNS regions about their experiences working with the FNS national office and with state SNAP agencies in their regions to address college student food insecurity and access to SNAP. We also sent an email to all 51 state SNAP agency directors (all 50 states plus the District of Columbia) to ask about any actions their state has taken to address college student food insecurity. We received responses from 50 of the 51 state SNAP agencies, for a 98 percent response rate. This email inquiry was conducted in March and April 2018 and may not include all state actions that have occurred since April 2018. We conducted in-depth interviews with officials at five state SNAP agencies and asked about any specific policies or actions their agencies have taken to address college student food insecurity or to assist potentially eligible college students to access SNAP. We conducted these interviews in person with state SNAP agencies during our four state site visits, and interviewed the Washington state SNAP agency by phone. We conducted this performance audit from July 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Michelle L. St. Pierre (Assistant Director), Nora Boretti (Analyst-In-Charge), Jessica K. Rider, and Stephen C. Yoder made significant contributions to this report. Also contributing to this report were Holly A. Dye, Barbara J. El Osta, Sarah C. Gilliland, Alison E. Grantham, Gina M. Hoover, Saida B. Hussain, Sheila R. McCoy, John W. Mingus Jr., Mimi Nguyen, Monica P. Savoy, Benjamin A. Sinoff, Almeta Spencer, Rachel R. Stoiko, Elaine L. Vaurio, and David A. Watsula.", "summary": "Increasing evidence indicates that some college students are experiencing food insecurity, which can negatively impact their academic success. However, college students are only eligible for SNAP in certain cases. Given the substantial federal investment in higher education and the risk posed if students do not complete their degrees, GAO was asked to review food insecurity among college students. This report examines (1) what is known about the extent of food insecurity among college students and their use of SNAP; (2) how selected colleges are addressing student food insecurity; and (3) the extent to which federal programs assist students experiencing food insecurity. GAO reviewed relevant federal laws and agency documents and studies on student food insecurity; analyzed 2016 federal student data (the most recent available), and visited four states, selected based on actions taken to address student food insecurity, geographic diversity, and other factors. GAO interviewed researchers; officials from Education, FNS national and regional offices; and officials at 14 colleges, including students at 8 of these colleges. GAO also emailed all state SNAP agencies about their efforts related to students. There is limited information about the national prevalence of food insecurity among college students. GAO reviewed 31 studies that identified a wide range of food insecurity rates among the students studied, but the studies did not provide national estimates. College students at risk of food insecurity may be eligible for benefits from the Food and Nutrition Service's (FNS) Supplemental Nutrition Assistance Program (SNAP). However, GAO's analysis of Department of Education (Education) data shows that almost 2 million at-risk students who were potentially eligible for SNAP did not report receiving benefits in 2016. According to GAO's analysis, having a low income is the most common risk factor for food insecurity among college students. Among low-income students, most have one additional risk factor associated with food insecurity, such as being a first-generation student or a single parent. The 14 selected colleges that GAO contacted were addressing student food insecurity in a number of ways. For example, all 14 were providing free food to students through on-campus food pantries, and most were offering emergency funds to help students pay for living expenses that might otherwise force them to choose between buying food or staying in school. Many of these colleges had centralized student services to better address their students' basic needs and provide other support, such as screening students for potential eligibility and helping them apply for federal benefit programs like SNAP. Federal student aid generally does not cover all college costs for low-income students, and college students may have limited access to federal food assistance programs such as SNAP because of program eligibility restrictions. Some state SNAP agencies reported that they are taking steps to help students access SNAP by conducting outreach to colleges and developing guidance. Nevertheless, at 9 of the 14 colleges GAO contacted, some college officials and students said that they were unfamiliar with or did not fully understand SNAP's student eligibility rules. Some college officials said that they would like information from FNS to better explain SNAP student rules, but FNS has not made such information easily accessible on its website. Further, college officials and state SNAP agencies noted that FNS does not share examples of actions taken by other states to help eligible students access SNAP. Clarification of SNAP student eligibility rules and enhanced information sharing about state efforts could help ensure that potentially eligible college students can access federal food assistance programs. GAO recommends that FNS (1) improve student eligibility information on its website and (2) share information on state SNAP agencies' approaches to help eligible students. FNS partially concurred, and plans to review its information. GAO continues to believe additional action is warranted, as discussed in the report.", "document_type": "gao"}
{"report": "According to NOAA documentation on domestic aquaculture production, shellfish aquaculture represents a large and growing segment of seafood production in the United States, with aquaculture operations present in all coastal regions of the United States (see table 1). The economic value of shellfish varies based on factors such as market, location, and species. For example, one species of clam, the geoduck—a large saltwater clam found in the Pacific Northwest—has sold for as much as $100 per pound in the Asian market, where it is valued as a luxury food. NOAA and scientific research have recognized the role that shellfish aquaculture can play in supporting healthy coastal ecosystems. For example, scientific research has shown that the filter feeding activity of oysters can help improve water clarity and quality by reducing concentrations of suspended materials such as algae. Additionally, research has demonstrated that oyster reefs can serve as natural breakwaters that may protect shorelines against damage from wind, waves, and flooding. In contrast, some effects of shellfish aquaculture are less well known or understood. For instance, there are knowledge gaps of the effects that aquaculture activities may have on submerged aquatic vegetation, according to NOAA reports. Geoduck clams are the world’s largest burrowing clam, generally weighing between 1 and 3 pounds, with a shell length that can exceed 7 inches. Geoducks can be found in the wild in the Pacific Northwest, and growers in Washington State have cultivated geoducks through aquaculture on a commercial scale since the 1990s. Washington State produced about 90 percent of farmed geoducks globally in 2013, according to a report by the University of Washington. In Asian markets, geoducks are sought-after in high-end seafood restaurants where they can be prepared for cooked or raw consumption. In general, commercial growers cultivate shellfish by two methods: on the bottom of coastal waters, or in the water column, which extends from the surface to the bottom of those waters. Commercial growers harvest oysters and clams grown on the bottom of waters by hand or by mechanical means such as dredging, raking, or other tilling activities. Commercial growers who cultivate shellfish within the water column generally grow them in racks or cages suspended in the water (see fig. 1). Growers use different methods of cultivation depending on the target commercial market, the environment for cultivation, and the need to protect the shellfish from predatory species such as fish or crabs. Shellfish aquaculture activities can be subject to various requirements at local, state, tribal, and federal government levels. For example, local authorities in the county, town, or other jurisdiction where shellfish activities are planned may require a shellfish grower to ensure compliance with local policies before commencing cultivation activities. In addition, some states have specific regulations that apply to shellfish aquaculture activities. These can include, for example, a certification that aquaculture activities meet state water quality standards, or a requirement that the activities are covered by an aquatic lease. Treaties grant certain tribes the rights to a portion of shellfish harvest in a particular area. At the federal level, a shellfish grower may need authorization from the Corps to undertake shellfish aquaculture activities. The Corps is responsible for ensuring compliance with Section 10 of the Rivers and Harbors Act of 1899, which requires authorization for structures in or work affecting navigable waters of the United States, or both, that could interfere with navigation. Structures used in shellfish aquaculture activities may include buoys, floats, racks, nets, and lines. The Corps is also responsible for ensuring compliance with section 404 of the Clean Water Act, which requires authorization for the discharge of dredged or fill material, or both, into waters of the United States. Shellfish aquaculture activities such as seeding, rearing, cultivating, transplanting, and harvesting shellfish may affect waters of the United States, and the Corps reviews these activities in accordance with applicable laws and regulations. Nineteen Corps districts have coastal waters within their geographic areas of responsibility and therefore may authorize shellfish aquaculture activities (see fig. 2). Under the direction of eight regional division offices and headquarters, the district offices are responsible for reviewing, authorizing, and ensuring appropriate levels of coordination for shellfish aquaculture activities in their districts. In authorizing shellfish activities, the Corps must implement various legal requirements, which may entail consulting or coordinating with other federal agencies, states, tribes, the public, and other parties. These legal requirements include: National Environmental Policy Act. Under the act, the Corps generally must evaluate the potential environmental effects of projects proposed for approval (e.g., by permit), such as shellfish aquaculture activities, by preparing either an environmental assessment or a more detailed environmental impact statement. Endangered Species Act. Under section 7 of this act, if a proposed Corps action may affect a listed species or designated critical habitat, formal consultation is required with the U.S. Fish and Wildlife Service or the National Marine Fisheries Service. The Corps may also undertake programmatic consultations with these agencies, which generally combine reviews for similar activities into one consultation. Magnuson-Stevens Fishery Conservation and Management Act. Under this law, the Corps must consult with the National Marine Fisheries Service if a proposed federal action may adversely affect essential fish habitat that a regional fisheries management council has identified. National Historic Preservation Act. Under section 106 of the act, the Corps must take into account the effects of shellfish aquaculture activities on historic properties and afford the Advisory Council on Historic Preservation a reasonable opportunity to comment on such activities. The Corps must also consult with the relevant state or tribal historic preservation officer, as appropriate. The Corps uses different types of general and individual permits to authorize a wide range of activities, including shellfish aquaculture activities, as shown in table 2. In some cases, if an entity’s shellfish aquaculture activities comply with the terms and conditions laid out in a general permit, then the entity may undertake the activities without written authorization from the Corps. In such instances, according to its permitting guidance, the Corps would consider those activities to be authorized under the specified general permit. In other cases, however, entities who wish to undertake shellfish aquaculture activities under a general permit may need to submit an application to the Corps for written authorization to conduct such activities. For example, some terms and conditions may require entities to notify the Corps if their proposed activities may affect areas inhabited by submerged aquatic vegetation or endangered species or their designated critical habitats. In such instances, entities must submit applications to the Corps with required information, including the location and technical information about the proposed activity. Based on Corps guidance, the agency then assesses the applicant’s proposed activities to determine whether they comply with all of the general permit’s terms and conditions. If the Corps verifies compliance, it issues a written authorization for the entity to undertake the proposed activities. In March 2007, the Corps developed a nationwide permit—Nationwide Permit 48—to help streamline the process for authorizing existing commercial shellfish aquaculture activities, effective for a 5-year period. In 2012, the Corps revised and reissued Nationwide Permit 48 to, among other things, authorize new activities and to clarify some reporting requirements. The Corps most recently reissued Nationwide Permit 48 in March 2017, which defined the activities that constitute new commercial aquaculture activities, among other revisions, and remains in effect until March 2022. Corps districts may also develop and use other types of programmatic and regional general permits to authorize shellfish aquaculture activities. Generally, entities that submit an application and receive authorization under a general permit need to resubmit their application upon expiration of their permit to re-seek authorization to continue their aquaculture activities. Based on our analysis of data from the Corps’ permitting database, we found that the Corps authorized most of the 3,751 shellfish aquaculture applications it received from 2012 through 2017 using various types of general and individual permits. Of the 19 Corps districts that have coastal waters within their geographic areas of responsibility, 17 Corps districts received shellfish aquaculture applications, with the Seattle District receiving the most applications and the New England District receiving the next highest amount (see table 3). The number of applications does not correspond to the level of shellfish activity in a particular district, however, as some activities may be authorized under a general permit without triggering the need for an entity to submit an application for Corps authorization, as previously noted. Of the 3,751 applications the Corps received from 2012 through 2017, the Corps authorized 3,281, or about 87 percent of the applications, according to our analysis of Corps data. Four applications (less than 1 percent) were denied, and the remaining 466 applications (about 12 percent) were withdrawn. Applications were denied or withdrawn for a variety of reasons. For example, Corps officials we interviewed said that the Corps would deny an application if the applicant was denied the necessary approvals from state or other relevant regulatory authorities. An application may have been withdrawn, according to the Corps officials, if the applicant decided to seek an individual rather than a general permit or did not provide sufficient information in its application for the Corps to determine that the applicant could meet the terms and conditions of the requested permit, among other reasons. According to Corps data, the applications the Corps authorized from 2012 through 2017 corresponded to 2,631 unique shellfish aquaculture projects. Almost half of these projects (49 percent) were located in the Seattle District, about 29 percent were located in the New England District, and the remaining 22 percent were spread across 15 other coastal districts. The majority of Corps districts (13 of 17) authorized shellfish aquaculture applications using Nationwide Permit 48, according to our analysis of Corps data. Specifically, nearly two-thirds of the applications (2,138 of 3,281) were authorized under Nationwide Permit 48, as shown in table 4. Four districts did not authorize activity under Nationwide Permit 48, but instead used a different type of general permit to authorize shellfish aquaculture activity. For example, the New England District, which includes the states of Connecticut, Rhode Island, and Maine, authorized shellfish activity using state-specific general permits. The majority of districts (13 of 17) also authorized shellfish activities under individual permits, but overall individual permits represented about 3 percent (85 of 3,281) of authorized activity. While many applications were authorized under Nationwide Permit 48, we found that Corps districts added conditions to this or other general permits to account for state or regional environmental or other relevant regulatory concerns. For example, two districts we reviewed—Norfolk and Seattle—generally used Nationwide Permit 48 to authorize shellfish aquaculture activities in their districts, but added conditions to the nationwide permit to address concerns specific to their regions as follows: In the Norfolk District, the Corps developed several regional conditions applicable to the Nationwide Permit 48 issued in March 2017. These regional conditions prohibit activity within submerged aquatic vegetation beds or saltmarshes and prohibit removing or damaging vegetation in these areas, among other things. Norfolk District officials said that these regional conditions align with requirements under Virginia state regulations. As long as shellfish aquaculture growers meet those requirements, according to these officials, then growers may conduct their projects without a state permit or submitting an application to the Corps for authorization. Because these growers do not submit applications to either the state of Virginia or the Corps for authorization for their activities, district officials said they do not know how much shellfish activity may be occurring under Nationwide Permit 48 in the district, but Virginia is among the largest shellfish producing states. In the Seattle District, the Corps also developed several regional conditions applicable to Nationwide Permit 48. For example, one regional condition prohibits harvesting clams using certain hydraulic harvesting equipment. Any entity seeking to undertake shellfish aquaculture activities in the Seattle District needs to submit an application to the Corps for authorization, district officials explained. According to the National Marine Fisheries Service, almost all locations for shellfish activity in Washington State are designated as critical habitat for one or more threatened or endangered species listed under the Endangered Species Act. The presence of listed species or their designated critical habitats is one trigger under nationwide permits, including Nationwide Permit 48, requiring entities to submit an application to the Corps for review and authorization for conducting those activities. In certain instances, Corps headquarters officials said that some districts may find that a nationwide permit, such as Nationwide Permit 48, does not address the activity or requirements in their districts. Corps officials said that in such cases a district may have a region-specific general permit that more closely follows state or local requirements. Two Corps districts we reviewed—New Orleans and Baltimore—generally used or have used regional permits to authorize shellfish aquaculture activities in their regions. Specifically, In the New Orleans District, when Nationwide Permit 48 was first issued in 2007, Corps officials said that the district was generally using a programmatic permit that incorporated existing Louisiana regulations on coastal development. The New Orleans District was generally using this programmatic permit to authorize shellfish aquaculture and other coastal activities in Louisiana. Among the conditions in the permit are prohibitions on structures with proximity to flood control and hurricane damage risk-reduction levees, and activities that would impact barrier islands, bird rookeries, and coral reefs—coastal areas of Louisiana that are regarded by the state as environmentally sensitive. As a result, district officials said they continue to use their programmatic permit to allow the state of Louisiana a lead role in regulating coastal activities. The Baltimore District used a regional permit to authorize shellfish aquaculture activities until August 2016. According to district officials, Maryland had few existing commercial shellfish aquaculture projects before 2010, and at that time the Corps restricted the use of Nationwide Permit 48 to existing shellfish aquaculture activities. Any new activities required an individual permit, which involved a more extensive review process. The state of Maryland began to promote shellfish aquaculture in 2010, and many new growers entered the industry, district officials said. In response, the Baltimore District created a regional permit for new shellfish aquaculture projects, which district officials said allowed for a more streamlined process than the process needed for an individual permit. The regional permit expired in August 2016; instead of updating it, the Baltimore District replaced it with Nationwide Permit 48. Nationwide Permit 48 issued in March 2012 and in March 2017 covers new as well as existing shellfish aquaculture activities, and district officials said that there was no longer a need to use their regional permit and could use the Nationwide Permit 48 upon expiration of the regional permit. Through our interviews with 15 permit applicants from the four districts we reviewed and with Corps district and headquarters officials, we found that applicants had mixed views on their experiences in seeking authorization for their various shellfish aquaculture activities. Overall, 10 of the 15 applicants across the four districts said they understood the application process. Several of these applicants said that their knowledge stemmed from previous experience seeking authorization from the Corps or from information provided by state or Corps officials. Similarly, 10 applicants from the four districts described the length of time the Corps took to authorize their activities as reasonable, with several applicants commenting that the Corps was efficient in reviewing and authorizing their application. For these applications, the length of time ranged from 1 day to about 4 months. In contrast, 11 permit applicants across the four districts cited facing one or more difficulties with various aspects of the application process. For example, 5 of the 15 applicants indicated they were unclear about what steps were involved in the application process such as the information they needed to submit as part of the application or how to meet the requirements outlined in the permit terms and conditions. One applicant in the Seattle District said it was difficult to know how to address a condition in Nationwide Permit 48 that restricts shellfish activity in areas adjacent to potential spawning habitat for certain species of forage fish. When seeking clarification from the Corps, he said Corps officials could not specify how far away from spawning habitat his project should be located. Seattle Corps District officials said the Corps has been reviewing how to consistently define adjacent spawning areas, among other requirements, but had not yet made a determination when this application was reviewed. Eight of the 15 permit applicants from three Corps districts expressed concern that they did not receive sufficient information about the status of their application after submitting it to the Corps for review. Two of these applicants said they contacted the Corps to get information on the status of their applications but that sometimes it was difficult to reach Corps officials. The applicants said their shellfish activities had time-sensitive needs and that not knowing the status or time frames associated with the permitting process was problematic. For example, one permit applicant in the New Orleans District said not knowing when permitted activity would be authorized jeopardized the ability to take advantage of the naturally occurring seasonal oyster spawn that was critical to the viability of the project. New Orleans District officials agreed that it may be difficult for applicants to quickly determine the status of their applications, as a phone call to the Corps is the only way to obtain such information. Officials from two districts we reviewed said their goal is to generally respond to inquiries within 2 days, but this is not always possible due to heavy workloads or staffing constraints. For example, in the New Orleans District, officials said the workload across their permitting program is high, with a typical project manager responsible for reviewing 35 to 40 permit applications at any one time. In addition, five permit applicants from three Corps districts said they believed that the amount of time it took for the Corps to authorize their shellfish aquaculture activities was unreasonable. For these applications, the length of time ranged from 18 days to about 8 months. One applicant from the Seattle District who waited about 8 months to receive authorization for the application in 2012 said that he continued his shellfish operations while waiting authorization, but was concerned that operating without the Corps’ authorization put his operations at risk from potential legal challenges. Officials in the Seattle District said they have seen an increase in applications for shellfish aquaculture authorizations over the last several years, which has significantly increased their workload and, in some cases, affected their ability to issue authorizations in a timely manner. Corps officials from headquarters and the four districts said it is generally their goal to authorize applications within 60 days, but limited staffing, heavy workloads, and the need to coordinate or consult with other federal, state, or tribal agencies may prevent them from doing so. Corps officials from the four selected districts have taken some steps to address difficulties applicants have experienced with understanding permit terms and conditions. For example, officials in the Seattle and Baltimore Districts have taken steps to help explain some permit terms and conditions. In Seattle, district officials said they have held quarterly meetings since 2015 for interested applicants and other stakeholders to address concerns or clarify certain Nationwide Permit 48 conditions. Seattle District officials said that attendees generally provided positive feedback about these quarterly meetings and that they plan to continue holding such meetings to discuss permit conditions or other issues that may arise. Similarly the Baltimore District has held aquaculture workshops on an as-needed basis for applicants and other stakeholders to clarify permit conditions. For example, in September 2016, the Baltimore District held a workshop to explain a permit condition intended to prevent endangered sea turtles from entanglements in aquaculture gear. One applicant we interviewed said this workshop was helpful and provided a better understanding of permit conditions. Officials from the Baltimore District said that they plan to conduct additional aquaculture workshops in 2019 and will invite representatives from the Maryland Department of Natural Resources to participate. The four Corps districts have also taken some steps to address difficulties applicants have experienced with the time it takes to authorize shellfish aquaculture activities. For example, in 2017, the Seattle District developed an approach to expedite its application process for the Nationwide Permit 48 issued in March 2017. Specifically, for those applicants who had previously been authorized under Nationwide Permit 48 in 2012 and who did not anticipate changes to their activities for the 2017 permitting cycle, district officials said they could base their review on previously submitted documentation from the applicants, allowing them to more quickly reauthorize those activities. The five permit applicants we interviewed from the Seattle District said that the Corps’ expedited process initiated in March 2017 improved the timeliness of receiving their authorizations. For instance, one applicant who waited about 8 months to receive his authorization in 2012 said the Corps issued his most recent authorization in 2017 in 2 months. In addition, Corps officials from across the four districts said they have taken steps to reduce the time needed to review applications through efforts to more efficiently conduct reviews under the Endangered Species Act. For example: Corps officials from the Baltimore and Norfolk Corps districts worked with the National Marine Fisheries Service in 2017 to develop a regional programmatic consultation to help streamline Endangered Species Act assessments of the potential impact that shellfish aquaculture activities may have on listed species or their designated critical habitats. Corps officials from the Baltimore District said the review process, developed in association with the programmatic consultation, decreased their review time from over 30 days to 1 to 2 days, which in turn has helped reduce the Corps’ time frames for issuing authorizations. In 2015, New Orleans District officials said they implemented a standardized process for evaluating applications for Endangered Species Act compliance. The district developed a standardized form, called the Standard Local Operating Procedure for Endangered Species in Louisiana, which district officials said helps to facilitate evaluations by allowing program managers to quickly assess whether or not an application requires further review and consultation and reducing the overall time to process shellfish aquaculture-related applications. Corps officials from the Seattle District worked with the National Marine Fisheries Service and U.S. Fish and Wildlife Service to develop a programmatic consultation, issued in 2016. The programmatic consultation identified methods for carrying out shellfish aquaculture activities that would avoid adverse environmental effects on listed species and their critical habitats, and reduce water quality impacts. Corps officials from the Seattle District said that this programmatic consultation has resulted in a more efficient review process for applicants seeking authorization under Nationwide Permit 48 by reducing the amount of time needed to assess whether an applicant’s proposed activities may have the potential to affect listed species or their critical habitats. To further improve the application process, Corps headquarters officials said that they are initiating training in fiscal year 2019 through online modules that will cover various aspects of permitting such as clarifying the necessary elements needed from entities in submitting an application. Also, in October 2018, Corps headquarters launched a community of practice on shellfish aquaculture permitting, which officials said will allow project managers and others with an interest in shellfish aquaculture to share lessons learned and to collaborate on relevant issues in the future. A Corp official said the Corps plans to hold quarterly meetings for the shellfish aquaculture permitting community of practice going forward. We provided a draft of this report to the Department of Defense for review and comment. The department provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Army, the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or FennellA@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. This report describes, for 2012 through 2017, (1) the number and outcomes of the applications the Corps received for shellfish aquaculture activities and the types of permits the Corps used to authorize such activities, and (2) the experiences of permit applicants in selected districts in seeking Corps authorization for their shellfish aquaculture activities. To conduct our work, we reviewed relevant federal laws, regulations, and Corps documents on permitting, and interviewed officials from Corps headquarters. We selected a non-generalizable sample of four Corps districts—Baltimore, New Orleans, Norfolk, and Seattle—for a closer examination of the nature of shellfish aquaculture activities and the types of permits used by districts to authorize such activity. We selected these districts based on several factors: Geographic region. We selected at least one district from each of the Pacific, Atlantic, and Gulf coasts to cover any differences in shellfish activity by geographic location. Commercial value of shellfish. The states in which the four districts reside—Washington (Seattle District); Maryland (Baltimore District); Virginia (Norfolk District); and Louisiana (New Orleans District)— account for more than 60 percent of the commercial shellfish sales in the United States as of 2013, the most recent data available as of December 2018. Type and level of permitting activity authorized by the Corps. We also chose districts to represent different types of general and individual permits the Corps districts used to authorize shellfish aquaculture as well as the level of permitting activity. The four districts received more than half of the shellfish aquaculture applications authorized by the Corps during 2012 through 2017. We conducted site visits from July 2017 to March 2018 to each of the four selected districts to observe aquaculture activities and learn about the types of permits the districts use to authorize shellfish aquaculture activities. We also interviewed stakeholders with a regulatory role in shellfish aquaculture and non-governmental organizations with an advocacy role, as follows: Federal Officials. We interviewed officials from three regional offices of the National Marine Fisheries Service and U.S. Fish and Wildlife Service to understand how they work with the four Corps districts on shellfish aquaculture permitting. We gained their perspectives on how they coordinate with the Corps to meet various legal requirements, such as those under the National Environmental Policy Act, Endangered Species Act, and Magnuson-Stevens Fishery Conservation and Management Act. State Officials. We interviewed state agency officials involved in permitting at the state level to learn about state permitting requirements and coordination undertaken with the Corps districts on various aspects of shellfish aquaculture permitting. Specifically, we interviewed officials from the Maryland Department of Natural Resources, Washington Department of Ecology, Virginia Marine Resources Commission, Louisiana Department of Natural Resources, and Louisiana Department of Wildlife and Fisheries. Non-governmental Officials. We also interviewed non-governmental organizations with an advocacy role related to shellfish aquaculture or conservation to gain their perspectives on the Corps’ permitting process. We interviewed officials from the Chesapeake Bay Foundation, The Nature Conservancy, Pacific Coast Shellfish Growers Association, East Coast Shellfish Growers Association, Oyster South, Center for Food Safety, the Coalition to Protect Puget Sound Habitat, the Coalition to Restore Coastal Louisiana, and the Coastal Protection and Restoration Authority of Louisiana. We selected these organizations because each had interacted with one or more of the four Corps districts we reviewed on shellfish aquaculture issues during the period of our review. The information we obtained from officials from the four districts and stakeholders is not generalizable to other Corps districts or stakeholders but illustrates the variation in Corps’ shellfish aquaculture permitting at the district-level. To examine the number, outcomes, and types of permits the Corps used to authorize shellfish aquaculture activity, we obtained and analyzed data from the Corps’ permitting database, the Operations and Maintenance Business Information Link Regulatory Module 2. Specifically, we analyzed nationwide data on shellfish aquaculture applications submitted to Corps district offices with a decision date from January 1, 2012, through October 26, 2017, which were the most recent data available at the time of our review. The information we analyzed from the database included applications for various types of shellfish aquaculture activities for which entities sought Corps authorization, including commercial operations, as well as shellfish aquaculture and oyster reef restoration activities. For all Corps districts, we analyzed the number of applications received, authorized, withdrawn, or denied, and under which type of permit an application was submitted to the Corps. We took steps to determine the reliability of the Corps’ data, including comparing the data to the administrative files for three to five randomly selected applications from the four districts we reviewed. We also reviewed agency guidance on data entry and interviewed agency officials knowledgeable about the Corps’ permitting data, including officials from the four districts and headquarters. Based on these steps, we found the data to be sufficiently reliable to provide nationwide and district-level summary information on applications, authorizations, and the types of permits the Corps used during the period of our review. To determine the experiences of permit applicants in selected districts in seeking Corps’ authorization for their shellfish aquaculture activities, we randomly selected 15 applications submitted by different applicants during the time period of our review to the four Corps districts in our review. We reviewed the materials included in the Corps’ administrative files to determine the nature of activities being proposed, documentation of any interactions between the Corps’ and the applicants throughout the review process, and the time frames for the review, among other things. We conducted semi-structured interviews with each of the applicants to gain their experience during the application process, including their perspectives on the steps involved in submitting an application, the times frames for receiving authorization, their understanding of permit terms and conditions, and the nature of any interactions with the Corps, among other things. We also conducted semi-structured interviews with the Corps managers responsible for reviewing these applications to obtain their perspectives about their review process for the selected applications. We then analyzed and categorized the interview responses based on common themes that we identified across the interviews. The information we obtained from the permit applicants and Corps officials we interviewed is not generalizable to other applicants, but illustrates the types of experiences permit applicants in the four districts have had in seeking authorization for their shellfish aquaculture activities. In addition, we also interviewed Corps officials in the four districts and headquarters and reviewed related documentation to identify any steps the Corps has taken to address difficulties raised by the permit applicants. We then requested and reviewed supporting documentation when officials identified examples of steps they have taken to help improve the application process. We conducted this performance audit from June 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Alyssa M. Hundrup (Assistant Director), Ginny Vanderlinde (Analyst in Charge), Justin Fisher, Melissa Greenaway, Rich Johnson, Ying Long, Danny Royer, Sheryl Stein, and Jina Yu made key contributions to this report. Mark Braza, Juan Garay, and Gina Hoover also made contributions to this report.", "summary": "Entities undertaking shellfish aquaculture activities (i.e., the breeding and harvesting of oysters, clams, and mussels) may need to submit an application to the Corps in certain circumstances for authorization to conduct these activities. The Corps authorizes such activities using various permits, as long as the activities comply with various environmental and other laws. GAO was asked to review the Corps' process for authorizing shellfish aquaculture activity in U.S. coastal waters. This report describes, for 2012 through 2017, (1) the number and outcomes of the applications the Corps received for shellfish aquaculture activities and the types of permits the Corps used to authorize such activities, and (2) the experiences of permit applicants in selected districts in seeking Corps' authorization for their shellfish aquaculture activities. GAO reviewed laws and permitting documents and analyzed data on the number, outcomes, and types of permits the Corps used for 2012 through 2017 from the Corps' permitting database and assessed its reliability. GAO also reviewed detailed information from a non-generalizable sample of 15 permit applications and interviewed the applicants and Corps officials from four Corps districts, selected to reflect variation in geographic location and shellfish activity; the information from the four districts is not generalizable to other Corps districts. The U.S. Army Corps of Engineers (Corps) authorized most (87 percent) of the 3,751 shellfish aquaculture applications it received from 2012 through 2017, according to Corps data. Of the 19 Corps districts that have coastal waters within their geographic areas of responsibility, 17 districts received and authorized applications. The majority of those districts (13 of 17) authorized applications using Nationwide Permit 48, a type of permit intended to streamline the authorization process for shellfish aquaculture activities. Additionally, districts may add conditions to nationwide permits or develop region-specific permits to address state or regional environmental concerns. Of the four districts GAO reviewed in detail, two districts added regional conditions applicable to Nationwide Permit 48, such as prohibiting shellfish activity within submerged aquatic vegetation beds or saltmarshes. The 15 permit applicants from the four districts GAO reviewed had mixed views on their experiences with seeking authorization for their shellfish aquaculture activities. For example, 10 applicants across the four districts described the length of time to authorize their activities—ranging from 1 day to about 4 months—as reasonable, with several applicants indicating the Corps was efficient in reviewing their applications. In contrast, five applicants from three Corps districts said that the amount of time it took for the Corps to authorize their shellfish aquaculture activities—ranging from 18 days to about 8 months—was unreasonable. Corps officials from the four districts indicated they have taken some steps to help reduce authorization review time. For example, the four districts took steps to more efficiently conduct reviews under the Endangered Species Act. This has in turn helped reduce the Corps' time frames for issuing authorizations, according to Corps officials GAO interviewed. For instance, officials from one district said their review time declined from over 30 days to 1 to 2 days as a result of the change in the review process.", "document_type": "gao"}
{"report": "Federal agencies implement specific elements of laws through regulations, which typically require or prohibit certain actions. Congresses and Presidents have required agencies to comply with multiple procedural and analytical requirements prior to issuing regulations. Administrative Procedure Act (APA). APA established the basic framework of administrative law governing federal agency action, including rulemaking. Before promulgating a regulation, agencies are generally required to publish a notice of proposed rulemaking (NPRM) in the Federal Register and take comments concerning the proposed rule. However, agencies may issue final rules without the use of an NPRM in certain cases, including when the agency determines for “good cause” that notice and comment procedures are “impracticable, unnecessary, or contrary to the public interest.” Further, Congress sometimes enacts laws that direct an agency to issue regulations without notice and comment. Regulatory Flexibility Act. RFA was enacted in response to concerns about the effect that federal regulations can have on small entities. RFA requires agencies to consider the impact of their regulations on small entities and to prepare regulatory flexibility analyses, unless the head of the agency certifies that the rule would not have a “significant economic impact upon a substantial number of small entities.” Paperwork Reduction Act. PRA was enacted to help minimize the burden that federal information collections (e.g., forms, surveys, or questionnaires) impose on the public, while maximizing their public benefit. PRA requires agencies to provide public notice, solicit comments, and request approval by OMB before imposing new information collection requirements. Unfunded Mandates Reform Act of 1995. UMRA was enacted to address concerns about federal statutes and regulations that require nonfederal parties to expend resources to achieve legislative goals without being provided funding to cover the costs. Among other things, UMRA generally requires federal agencies to prepare a written statement containing a “qualitative and quantitative assessment of the anticipated costs and benefits” for any rule that includes a federal mandate that may result in the expenditure of $100 million or more in any 1 year by state, local, and tribal governments in the aggregate, or by the private sector. Small Business Regulatory Enforcement Fairness Act. Under SBREFA, the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) are required to convene Small Business Review Panels (also known as SBREFA panels) for rulemaking efforts that are expected to have a significant economic impact on a substantial number of small entities. These panels are intended to seek direct input early in the rulemaking process from small entities that would be impacted by the rulemakings. Congressional Review Act. CRA was enacted to better ensure that Congress has an opportunity to review and possibly disapprove regulations, in certain cases, before they become effective. CRA established expedited procedures by which Congress may disapprove agencies’ regulations by introducing a resolution of disapproval that, if adopted by both Houses of Congress and signed by the President, can nullify an agency’s action. CRA states that an agency may not reissue the regulation in “substantially the same form,” as a regulation Congress disapproved. CRA requires us to provide Congress with a report on rules OMB’s Office of Information and Regulatory Affairs (OIRA) determines to be major rules, including our assessment of the issuing agency’s compliance with the procedural steps required by various acts and executive orders governing the rulemaking process. CRA’s definition of a major rule is similar to E.O. 12866’s definition of economically significant rules, and generally, economically significant regulations are classified for purposes of CRA as major rules and significant regulations are classified as nonmajor rules. CRA generally provides Congress time to review major rules before those rules take effect. Executive Orders and Relevant Guidance. In addition to the statutory requirements described above, executive agencies must also follow requirements Presidents have set in executive orders and related guidance: Role of OIRA: Under E.O. 12866, issued in 1993, OIRA reviews regulations deemed significant. The Administrator of OIRA is responsible for providing meaningful guidance and oversight with respect to regulatory planning and review to the extent permitted by law. Further, the order states that OIRA is to be the repository of expertise concerning regulatory issues. Role of agencies and assessment of costs and benefits: Among other things, under E.O. 12866 agencies are responsible for developing regulations and assuring that the regulations are consistent with applicable law. The order also requires agencies to prepare an agenda of all regulations under development or review. For economically significant regulations, E.O. 12866 requires agencies to provide to OIRA (unless prohibited by law) an assessment, including the underlying analysis, of the costs and benefits anticipated from the regulatory action and feasible alternatives. For significant regulations, E.O. 12866 requires agencies to provide to OIRA an assessment of the potential costs and benefits anticipated from the planned regulatory action. Circular A-4, published in 2003, provides guidance to agencies on how to conduct the required analysis and, among other things, directs agencies to estimate the costs and benefits of a regulation and “transfer” payments that may result from the regulation. Transfer regulations redistribute income from (usually) taxpayers to program beneficiaries (e.g., Medicare recipients), but generally do not result in economic benefits or costs. The three administrations published a higher number of economically significant and significant final regulations at the end of each President’s second term compared to the nontransition periods. (See figures 1 and 2.) The administrations published on average roughly 2.5 times more economically significant regulations during their transition periods than during nontransition periods. Our analysis also showed that within their transition periods (September 23 through January 20), the administrations of Presidents Clinton and Obama increased their rate of economically significant rulemaking following the elections held in 2000 and 2016 (between Election Day in November and January 20), while President Bush’s administration decreased the rate of economically significant rulemaking following the 2008 election. (See appendix II.) We found that the majority of economically significant regulations were published by a subset of agencies across the three administrations and between transition and nontransition periods. In particular, the Department of Health and Human Services (HHS) published one-third of the economically significant regulations we reviewed across all periods and was the most active agency in both transition and nontransition periods. (See table 1.) For example, the Centers for Medicare & Medicaid Services typically published regulations every calendar year describing reimbursement rates for medical providers serving Medicare patients. For significant regulations, HHS was the most active agency during both transition and nontransition periods. (See table 2.) However, significant rulemaking was less concentrated in a subset of agencies than was economically significant rulemaking. Specifically, five of the agencies that published the largest number of economically significant regulations accounted for between 65 and 70 percent of these regulations during both transition and nontransition periods, while the five agencies that published the largest number of significant regulations accounted for 42 percent of these regulations during both transition and nontransition periods. To provide perspective on the transparency of regulatory activity and the types of rulemaking procedures agencies used during transitions, we examined two indicators: 1) whether regulations were advertised in the previous spring’s Unified Agenda and 2) whether the final regulation was preceded by a proposed rule or NPRM: Prior Appearance in the Unified Agenda: The semi-annual Unified Agenda was established by E.O. 12866 and provides uniform reporting of data on those regulatory and deregulatory activities under development or review throughout the federal government. By including a planned regulation in the previous spring’s Unified Agenda, policy makers provided members of the public with several months of notice before a final regulation was published during any of the transition or nontransition periods. Notice of Proposed Rulemaking: The notice and comment process was established by the APA and gives the public an opportunity to provide information to agencies on the potential effects of a regulation or to suggest alternatives for agencies to consider before the agency publishes the final regulation. By publishing an NPRM, policy makers provided members of the public with an opportunity to influence the development of the regulation. Overall, we found that agencies more frequently provided advanced notice of regulations to the public during transition periods by announcing planned activities in the Unified Agenda and publishing NPRMs. A higher percentage of economically significant regulations appeared in the previous spring’s Unified Agenda during Presidents Bush’s and Obama’s transition periods compared to nontransition periods. (See figure 3.) President Clinton’s administration published a smaller percentage of regulations in the Unified Agenda during its transition period compared to its nontransition periods. This decrease is explained by the Department of the Interior (Interior) and HHS not entering four regulations they typically update each year into the spring 2000 Unified Agenda pertaining to migratory bird hunting and Medicare. For significant regulations, we estimate that a higher percentage of regulations published during Presidents Bush’s and Obama’s transition periods appeared in the previous spring’s Unified Agenda compared to President Clinton’s transition period. However, we found no statistical differences between the nontransition periods combined and any of the three transition periods. (See figure 4.) Across all three administrations, economically significant regulations published during transition periods were more often preceded by proposed regulations compared with those published during nontransition periods. (See figure 5.) We estimated that significant regulations published during Presidents Clinton’s and Bush’s transition periods were more often preceded by proposed regulations than significant regulations published during nontransition periods. However, we found no statistical differences between President Obama’s transition period and the other transition and nontransition periods. (See figure 6.) Regulatory Flexibility Act (RFA), Paperwork Reduction Act (PRA), and the Unfunded Mandates Reform Act of 1995 (UMRA): We found that 91 percent of economically significant regulations across all periods reviewed explained to the public the determinations the agencies made regarding these three procedural requirements. Further, there was little difference between transition and nontransition periods in whether agencies provided explanation of these three procedural requirements. For the regulations that did contain explanation, agencies indicated that more economically significant regulations published during transition periods than in nontransition periods: (1) would not have a significant impact on a substantial number of small entities (RFA), (2) contained information collection requirements on nonfederal entities (PRA), and (3) generally could impose federal mandates on nonfederal entities (UMRA). For significant regulations, we estimate that 64 percent across all periods reviewed provided explanation to the public of the determinations the agencies made regarding these three procedural requirements. More specific information about the determinations agencies reached is presented in appendix II. For economically significant and significant regulations that did not contain explanations of one or more of these procedural requirements, this does not necessarily indicate noncompliance by the agency. An agency may not need to address a particular procedural requirement if the substance of the rule or exceptions and thresholds in the requirement lead the agency to determine that a specific regulation did not trigger the requirement. For example, regulations that were significant but not economically significant under E.O. 12866 would not be expected to contain a federal mandate that would result in the expenditure of $100 million or more in any 1 year, so would not trigger the requirement for an UMRA written statement. Small Business Regulatory Enforcement Fairness Act (SBREFA): EPA and OSHA reported holding small business review panels for 16 economically significant regulations reviewed, and we confirmed that the proceedings of all but one of these panels had been documented on the Small Business Administration’s website. EPA also reported holding a small business review panel for one of the significant regulations we reviewed, and we confirmed that this proceeding also had been documented. CRA requires agencies to submit regulations to Congress and to us and to delay the effective date of certain regulations in order to provide Congress an opportunity to review and possibly disapprove of regulations before they become effective. We reviewed agencies’ compliance with the requirements to: (1) submit the regulation to Congress and to us, (2) provide the required delay between submission of the regulation to Congress and us and its effective date, and (3) provide the required delay between publication of the regulation and its effective date. See figure 7 for these requirements regarding delays in effective dates. Our analysis determined that 132 of the 527 economically significant regulations across all periods reviewed failed to meet at least one of the requirements described above, and none of these regulations included agencies claiming “good cause,” which would have allowed them to delay the effective date. (See figure 8.) We found that noncompliance for economically significant regulations was primarily associated with agencies’ failure to delay the effective date of their regulations, while the failure to submit regulations to Congress and us accounted for a smaller proportion of the deficiencies. Of the 132 noncompliant economically significant regulations: 95 did not provide the required delay between the submission of the regulation to Congress and us and the effective date. Further, agencies generally missed the deadline by more than 5 days (70 of 92 regulations). It is our practice to alert the relevant congressional committees when we observe this particular deficiency in our major rule reports. Further, we also reported to Congress in 2007 that there appeared to be a broader pattern of noncompliance with this requirement, noting: “A consistent difficulty in implementing CRA has been the failure of some agencies to delay the effective date of major rules for 60 days as required by CRA.” 74 did not provide the required delay between publication in the Federal Register and the effective date. Once again, agencies generally missed this deadline by more than 5 days (62 of 74 regulations). It is our practice to alert the relevant congressional committees when we observe this particular deficiency in our major rule reports. 10 had not been submitted to us as of November 13, 2017. Among the most active regulatory agencies for economically significant regulations, HHS and the Department of Transportation (Transportation) had higher rates of noncompliance than the government-wide percentages for both the transition and nontransition periods we reviewed. (See table 10 in appendix II.) However, noncompliance was not limited to HHS and Transportation; 17 of the 23 agencies that published economically significant regulations during the periods we reviewed had at least one noncompliant regulation. As noted previously, our sample of significant regulations was not designed to provide estimates concerning individual agencies’ noncompliance with CRA. In addition, we estimate that 15 percent of significant regulations published across all periods reviewed failed to meet at least one of the CRA requirements we reviewed. (See figure 9.) We did not identify any statistical differences in the noncompliance rate among the three transition periods and nontransition periods combined. For significant regulations, we developed estimates for the following CRA deficiencies: Regulations submitted after the stated effective date: An estimated 15 percent of significant regulations published during all periods reviewed were not submitted to Congress and us before the stated effective date as required. Significant regulations were generally nonmajor rules, which do not have a requirement to delay the effective date by 60 days. There were no statistical differences among the three transition periods and the nontransition periods regarding this deficiency. Regulations not submitted to us: An estimated 7 percent of significant regulations published during all periods reviewed had not been submitted to us as of November 17, 2017, with no statistical differences among the three transition periods and nontransition periods. Agencies’ noncompliance with CRA has the overall effect of making it more difficult for Congress to exercise its oversight role under CRA; however, the precise effects of noncompliance depend on the type of regulation and the specific deficiencies. CRA provides expedited procedures that make it easier to overturn a regulation compared to following the regular legislative process. For economically significant regulations, which are generally classified as major rules under CRA, failing to provide the required delay for congressional review means that Congress has a shorter amount of time to use these expedited procedures to disapprove the regulation before the agency potentially starts enforcement actions. Furthermore, in general, if a rule is not submitted to Congress as required by CRA, Congress cannot use these expedited procedures. Moreover, not submitting a rule to Congress can potentially create legal uncertainty for agencies and regulated parties because courts have differed on the impact of noncompliance with CRA on the enforceability of the regulation. OIRA staff noted that CRA states that agencies are responsible for complying with the act’s requirements, and E.O. 12866 states that agencies are responsible for adhering to applicable laws. However under E.O. 12866, OIRA is also responsible for oversight of agencies’ rulemaking, consistent with law, and reviews regulations before publication, which provides it an opportunity to identify and help agencies avoid potential noncompliance. OIRA staff asserted that they already take steps to check agencies’ compliance with CRA. However, we found that OIRA completed its E.O. 12866 reviews for 110 of the 132 noncompliant economically significant regulations within 90 days of the stated effective date. OIRA staff noted that they cannot monitor every action agencies take following their review of draft final regulations, such as the specific date a regulation is published in the Federal Register or whether an agency submits a copy of the regulation to Congress or us. However, because economically significant regulations are generally classified as major rules under CRA, this indicates that OIRA frequently completes its review in close proximity to the start of the 60-day period intended for congressional review, and in such cases the regulation is at high risk of noncompliance with CRA. This close proximity to the 60-day period provides an opportunity for OIRA to identify potentially noncompliant regulations before agencies publish them and work with agencies on actions that would avoid noncompliance. Our analysis identified such actions agencies could use to comply with CRA. For example, we found instances of agencies explaining to the public that CRA requires a 60-day review period for major rules and therefore identifying an effective date more than 2 months after publication in the Federal Register. In other instances, agencies stated that the regulation would take effect 60 days after publication in the Federal Register, which ensures compliance with CRA provided that the regulation is submitted to Congress and us on or before the day it is published. In other cases, agencies stated they had “good cause,” to not delay the effective delay, such as a statutory or judicial deadline or an emergency situation. Agencies anticipated that economically significant regulations published during transition periods were more likely to result in economic costs and benefits and generally less likely to result in “transfers” of income from taxpayers to program beneficiaries. To identify the types of economic effects that agencies anticipated, we placed the 527 economically significant regulations reviewed across all periods into one of four categories based on information agencies provided in the published regulation concerning the anticipated costs, benefits, or transfers resulting from a regulation: Expected economic costs, benefits, or both: For 197 of the 527 economically significant regulations (or 37 percent), agencies expected costs or benefits or both to result and made no mention of transfers. Our previous work has noted that regulations typically require a desired action or prohibit certain actions by regulated parties. Such requirements may impose costs on private-sector parties, such as businesses and individuals, and may also provide benefits to society as a whole. Examples we reviewed included EPA regulations limiting emissions from industrial facilities with the goal of improving air quality and Labor Department regulations intended to improve workplace safety. Transfers: For 184 of the 527 economically significant regulations (or 35 percent), agencies expected transfers to result from the regulation and made no mention of either costs or benefits. Examples we reviewed included HHS regulations stating how much Medicare will reimburse Medicare providers and Department of Agriculture regulations providing disaster assistance to farmers. While these payments increase the incomes of Medicare providers and farmers, Circular A-4 directs agencies to avoid misclassifying these transfers as economic costs or benefits because they do not change aggregate social welfare. Combination of economic costs, benefits, or transfers: For 108 of the 527 economically significant regulations (or 20 percent), agencies expected costs or benefits or both to occur and also expected transfers to occur. Examples we reviewed included regulations that expanded access to health insurance for tribal employees and established paid sick leave for federal contractors that were anticipated to result in both administrative costs and transfers. No economic analysis: The remaining 38 of the 527 economically significant regulations (or 7 percent) provided no economic analysis. Of these regulations, 22 were updates to migratory bird hunting regulations Interior published during Presidents Clinton’s Administration and President Bush’s first term. During the 2003-2004 nontransition period of President Bush’s Administration, Interior began providing a brief summary of the economic effects anticipated to result from hunting these birds. Comparing these reported effects between transition and nontransition periods, we found that agencies indicated that economically significant regulations published during transition periods were more likely to result in costs and benefits to society than those published during nontransition periods across all three administrations. (See figure 10.) In contrast, regulations involving only transfers became a smaller proportion of the economically significant regulations published during Presidents Bush’s and Obama’s transition periods. Regulations that involved various combinations of costs, benefits, and transfers became a larger proportion of regulations published during Presidents Bush and Obama’s transition periods and overall became a larger proportion of economically significant regulatory activity that occurred during President Obama’s transition period. Executive guidance encourages agencies to quantify and monetize expected costs and benefits to help decision makers understand the consequences of regulatory approaches. E.O. 12866 states that for economically significant regulations agencies should analyze costs and benefits to the extent feasible, and Circular A-4 encourages agencies, to the extent possible, to provide monetized estimates of these costs and benefits. For economically significant regulations, we found that agencies were more likely to monetize anticipated costs and transfers compared to benefits and were more likely to monetize anticipated costs during Presidents Clinton and Bush’s transition periods. (See figures 11-13.) For economically significant regulations, we also did additional analysis of the extent to which agencies anticipated the benefits would justify the costs and the extent to which net costs or benefits were calculated. (See appendix II.) In examining the extent to which agencies anticipated that costs, benefits, and transfers would result from significant regulations, we found that an estimated 57 percent across all periods reviewed provided information on the anticipated costs, benefits, transfers, or some combination of these, with no statistical differences among the three transition periods and the nontransition periods combined. An estimated 43 percent of significant regulations across all periods reviewed did not include any information on the anticipated costs, benefits, transfers, or some combination of these, with no statistical differences among the three transition periods and the nontransition periods combined. Although we confirmed that agencies published a larger number of regulations during transition periods than during the same months in nontransition periods, the variety of other indicators we examined generally suggest that there were few significant differences—other than their numbers—when comparing regulations published during the three transitions to each other and to those published during nontransition periods. Among the few exceptions, economically significant regulations published during the transition periods were more likely to have provided advanced notice to the public and more likely to result in private sector costs and potential benefits to society. However, agencies’ noncompliance with the requirements of CRA for economically significant regulations (major rules under CRA) grew worse over time. Under CRA, agencies must allow additional time for Congress to review these most impactful regulations before they take effect unless the agency claims good cause for not delaying the effective date. Our review did highlight a potential opportunity for OIRA to work with agencies to improve CRA compliance going forward. Specifically, OIRA staff have the unique opportunity to work with agencies before economically significant regulations and regulations deemed significant for other reasons are published in final form in the Federal Register. OIRA staff should use this opportunity to identify economically significant regulations whose planned effective dates appear at risk of not providing Congress with sufficient time to review the regulation. To do this, our analysis points to a simple “rule of thumb” OIRA reviewers could use. If an agency is planning to make an economically significant regulation effective in less than 3 months from the time OIRA is completing its review, OIRA staff should discuss with agency officials strategies for ensuring compliance with CRA. These could include delaying the planned effective date, stating in the submission to the Federal Register that the regulation will go into effect 60 days after publication and ensuring prompt submission to Congress and us, or discussing whether the agency has a reasonable basis to claim “good cause” for not delaying the effective date and ensuring that the use of “good cause” is clearly explained in the regulation. Ensuring that agencies consistently provide Congress with the required time to review, and possibly disapprove regulations, is important throughout a President’s term, and particularly following a presidential transition when Congress typically has a larger number of regulations to potentially review. We are making the following recommendation to the Director of OMB: The Director of OMB should ensure that OIRA’s staff, as part of the regulatory review process, examine the planned timeframes for implementing economically significant regulations or major rules and identify regulations that appear at potential risk of not complying with the Congressional Review Act’s delay requirements and then work with the agencies to ensure compliance with these requirements (Recommendation 1). We provided a draft of this report to the Director of OMB on January 18, 2018. In oral comments received on February 22, 2018, staff from OIRA and the Office of General Counsel discussed the findings, conclusions, and recommendation. OMB staff did not agree or disagree with our recommendation. However, they identified some concerns regarding the recommendation to improve agencies’ compliance with CRA. They noted that: (1) CRA states that agencies are responsible for complying with the act’s delay and submission requirements; (2) agencies determine when their regulations will take effect and when they submit the regulations to Congress and us, neither of which OMB has direct control over; and (3) where OMB does exercise authority—the regulatory review process under E.O. 12866—OIRA staff already take steps to check agencies’ compliance with CRA, and they do not see what more they could do to improve agencies’ compliance with the act. The staff also provided technical comments that were incorporated as appropriate. Regarding the first two concerns raised by OIRA staff, we believe our report sufficiently recognizes agencies’ responsibilities under CRA. Regarding the third concern, we disagree that OMB has done all that it can to improve compliance with CRA. As noted above, OMB staff asserted that they do take steps to check for CRA compliance, and these checks could provide a starting point for OMB to address our recommendation. However, our analysis raises questions about how effective these checks have been. OIRA completed its review for 110 of the 132 noncompliant economically significant regulations within 90 days of the stated effective date. This analysis points to a simple “rule of thumb” for OIRA reviewers to use. If a regulation has a planned effective date in less than 90 days, it is at high risk of noncompliance with CRA. Further, our report identifies three specific strategies OIRA staff could discuss with agency officials on how to comply with CRA. Thus, we believe that our report shows that OMB could do more to ensure CRA compliance and identifies specific ways OMB could help agencies accomplish this. We are sending copies of this report to the Director of OMB as well as appropriate congressional committees and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-6806 or krauseh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Section 5 of the Edward “Ted” Kaufman and Michael Leavitt Presidential Transitions Improvements Act of 2015 includes a provision for us to assess final significant regulatory actions promulgated by executive departments during specified presidential transition periods and to analyze and compare multiple characteristics of regulations issued during these transition periods to each other and to regulations issued during the same 120-day period (September 23 to January 20) in nontransition years since 1996. The transition periods identified in the act are those ending on January 20 in 2001, 2009, and 2017, which occurred at the end of the administrations of Presidents Clinton, Bush, and Obama. For purposes of this review, executive agencies are cabinet departments and other agencies that answer directly to the President and exclude the independent regulatory agencies. The definition of what the mandate refers to as a “covered regulation” is the same as the definition of a final significant regulatory action under Executive Order (E.O.) 12866. Under E.O. 12866, the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) reviews significant proposed and final regulatory actions from all federal agencies (other than independent regulatory agencies) before they are published in the Federal Register. The order defines significant regulatory actions as those that are likely to result in a regulation that may: 1. Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities (generally referred to as “economically significant” regulations); 2. Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; 3. Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or 4. Raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in the executive order. For each of the three transition periods, and among these transition periods and the same 120-day periods in the 18 nontransition periods, our objectives were to assess the extent to which there were variations in: 1. The number of regulations and other indicators related to the scope and transparency of these regulations; 2. Agencies’ reported compliance with procedural requirements for promulgating the regulations; and 3. The anticipated economic effects agencies reported would result from the regulations. In general, to address each of these objectives we reviewed the universe of all 527 final economically significant regulations published during the specified time periods and a generalizable stratified random sample of 358 final significant regulations from the population of the 1,633 final significant regulations published during those same periods. For economically significant regulations, we can provide precise statistics on the extent of a finding, because we reviewed the universe of final economically significant regulations. For significant regulations, our findings are based on a sample designed to achieve a 7 percent margin of error and 95 percent level of confidence for each stratum in the population of all covered significant regulations published in each transition period and, collectively, all nontransition periods. Our findings for the sample are not generalizable to the individual agencies that published those regulations. We divided the significant regulations into four strata depending on when the regulation was published: 1) the 2000- 2001 transition period; 2) the 2008-2009 transition period; 3) the 2016- 2017 transition period; and 4) all the nontransition periods consolidated into one stratum. We made two modifications to the data for each stratum before we selected our sample: 1) We added to the sampling frames additional significant regulations that we had become aware of during our review of economically significant regulations; and 2) we reviewed the sampling frames and filtered out duplicate entries. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (for example, plus or minus 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Table 3 summarizes the population and sample size by stratum for significant regulations. We primarily relied on the Reginfo.gov database on OMB’s regulatory reviews under E.O. 12866 to compile lists of final economically significant and significant regulations published during each of the transition and nontransition periods. As described in more detail below, we refined and supplemented the lists from the Reginfo.gov database with information from our database of rules submitted to us under the Congressional Review Act (CRA), and the Government Printing Office’s Federal Digital System database on the Federal Register. To test the reliability of these databases, we reviewed relevant documentation, interviewed knowledgeable agency officials, looked for missing data and outliers (for example, by identifying missing records or those included in error), traced a sample of entries to source documents, and conducted additional checks. We concluded that the data were sufficiently reliable for our purposes. Further for all objectives and for both economically significant and significant regulations, our primary source was the text of the published regulation. However, as described below, we did sometimes supplement that information with information from other publicly available sources. We downloaded copies of published regulations from the website maintained by the Government Printing Office, which securely controls content to ensure the integrity and authenticity of the Federal Register. We used a data collection instrument to collect standardized information about individual regulations as described below. We did not evaluate the agencies’ decisions regarding procedural requirements or their determinations regarding the effects of their rules. Instead, consistent with our practice in preparing major rule reports to Congress under CRA and prior reports on federal rulemaking, we are providing information about what the agencies published in the Federal Register. To assess the number of regulations and other variations related to the scope and transparency of these regulations, we first reviewed and refined our lists of economically significant and significant regulations published during each of the transition and nontransition periods. For economically significant regulations, we compared the initial lists compiled from Reginfo.gov against lists of major rules agencies had submitted to us under CRA to look for potential omissions. We then reviewed each of the published regulations to identify explanations agencies may have provided of a selected regulation’s classification as economically significant under E.O. 12866 to tally total numbers of economically significant regulations published during each of the time periods and the agencies publishing them. To identify economically significant regulations published annually, we looked for indications in the title or summary of the regulation and confirmed that these regulations appeared in multiple time periods reviewed. For significant regulations, we obtained data from Reginfo.gov concerning the number of regulations reportedly published and the agencies reported to have published them. We also reviewed the published regulations for explanations of the regulations’ classification under E.O. 12866. Our sample of significant regulations was not designed to make estimates for individual agencies, so we used data from Reginfo.gov instead. For both economically significant and significant final regulations, we compiled information on the rulemaking procedures used by agencies to determine whether the agencies had published a prior notice of proposed rulemaking (NPRM). We did this by looking for discussion of a proposed regulation in the published final regulation. As necessary, we supplemented that review with information from our major rule reports, if available, and data from Reginfo.gov concerning the rulemaking history. To describe the extent to which regulations had been advertised in the previous spring’s Unified Agenda, we searched for the regulation’s identification number(s) in the online database for the Unified Agenda. To assess the extent to which there were variations in agencies’ reported compliance with procedural requirements for promulgating the regulations, we reviewed the published text of the regulations and, for regulations that were also major rules, the major rule reports that we prepared for Congress under CRA. We reviewed agencies’ reported compliance with procedural requirements for promulgating regulations under five statutes—CRA, the Regulatory Flexibility Act (RFA), the Paperwork Reduction Act (PRA), the Unfunded Mandates Reform Act of 1995 (UMRA), and the Small Business Regulatory Enforcement Fairness Act (SBREFA)—including whether and, if so, how the agency addressed the requirement in the published regulation. To determine whether the Environmental Protection Agency and the Occupational Safety and Health Administration held the panels they were required to hold under SBREFA, we also reviewed the information on the Small Business Administration’s website summarizing these panels. We took multiple steps to identify noncompliance with CRA. We first determined whether every regulation had been submitted to us, and for regulations that had been submitted, we recorded the date we received it. We used the date a regulation had been submitted to us when assessing whether a regulation’s stated effective date was consistent with CRA requirements. We also reviewed whether agencies had claimed “good cause” for not delaying the effective date. For regulations not submitted to us or those regulations submitted to us after they should have been submitted, we conducted additional checks of the Congressional Record to see if we could find evidence that the agency had provided a copy of the regulation to either of the Houses of Congress in time for the regulation’s stated effective date to be consistent with CRA requirements. If we could find evidence that any of these requirements had been met, we removed the regulation from further consideration as potentially noncompliant. As such, our methodology was designed to identify instances of noncompliance. Our methodology does not allow us to conclude that the remaining regulations were fully compliant. In addition, it was beyond the scope of our review to evaluate the appropriateness of agencies claiming “good cause” for not providing the required delay. To assess the extent to which there were variations in agencies’ reported anticipated economic effects resulting from the regulations, we reviewed the published regulations to see whether they contained a section clearly identified as economic analysis or discussion of the analytical requirements concerning E.O. 12866. We used selected elements from OMB Circular A-4 to review the analyses included in the published regulations to identify expected costs, benefits, or transfers, and whether that information was provided in monetary, quantitative, or qualitative terms. To help identify regulations that involved transfers, we also reviewed the annual reports OMB prepares for Congress on the costs and benefits of federal regulations. OMB includes in these reports a list of transfer regulations and has used a consistent definition over time. We also looked for indication in the published regulation’s economic analysis that the regulation involved such topics as transfers, or federal payments to certain groups in society (for example, Medicare recipients), subsidies for certain economic activities, or user fees or royalties people pay the government to name several common examples. To determine the extent to which agencies discussed whether they expected that the benefits would justify the costs, we looked for “bottom line” or other concluding statements agencies may have provided in their economic analysis. We also looked, when relevant, for a discussion of what the net benefits or costs were expected to be. For transfer regulations that were economically significant, we examined the extent to which agencies quantified or monetized the expected transfers. If available, we used accounting statements agencies may have prepared summarizing the anticipated economic effects to help collect all of this information. We did not assess whether the agencies’ determinations regarding the benefits and costs were reasonable. In addition, we did not assess whether the agencies analyzed regulatory alternatives and uncertainty. We conducted this performance audit from May 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The figures and tables in this appendix provide more detailed information on the results of additional analyses we completed for this report related to each of our three objectives. For economically significant regulations, we provide precise statistics on the extent of a finding, because we reviewed the universe. For significant regulations, our findings are based on a sample and include the upper and lower bounds of confidence intervals for estimated values. In this section, we provide additional information from our analyses of: the extent to which economically significant regulations were published before or after the presidential elections in 2000, 2008, and 2016; the most active rulemaking agencies for economically significant and significant regulations among the three administrations’ transition and nontransition periods; the number of economically significant regulations for which agencies reported they were under a statutory or judicial deadline to promulgate the regulation; and the median length, in days, of Office of Information and Regulatory Affairs (OIRA) regulatory reviews under Executive Order (E.O.) 12866 for draft final economically significant and significant regulations during transition and nontransition periods. We reviewed the extent to which economically significant regulations were published before or after the presidential elections in 2000, 2008, and 2016 and found that Presidents Clinton and Obama’s administrations increased their rate of rulemaking following the election, while President Bush’s administration decreased its rate of rulemaking. (See figure 14.) We identified the most active rulemaking agencies for economically significant regulations among the three administrations’ transition and nontransition periods and did the same for significant regulations. (See tables 4-9.) Agencies can indicate on Reginfo.gov whether they are required by a statutory or judicial deadline to promulgate a regulation. We did additional analysis for economically significant regulations and found agencies were less likely to indicate they were under such a deadline during the three administrations’ transition periods compared to nontransition periods. Under E.O. 12866, agencies are expected to submit regulations deemed significant to OIRA for review. Nearly all regulations we reviewed had been reviewed by OIRA. For a small number of economically significant regulations (13 across all periods or approximately 2 percent of the economically significant population), we could not find evidence on Reginfo.gov that OIRA reviewed the regulation. However, the absence of evidence on Reginfo.gov does not necessarily mean that OIRA did not review those regulations and may instead indicate that the review dates were not entered into Reginfo.gov. Our review found that the median length of OIRA’s review increased for economically significant regulations during each transition. (See figure 15.) For significant regulations, there were no statistical differences among the three transition periods and compared to nontransition periods combined. (See figure 16.) In this section, we provide additional information from our analyses of: agencies’ determinations regarding their regulations under the Regulatory Flexibility Act (RFA); agencies’ determinations regarding their regulations under the Paperwork Reduction Act (PRA); agencies’ determinations regarding their regulations under the Unfunded Mandates Reform Act of 1995 (UMRA); and Congressional Review Act (CRA) noncompliance rates for the agencies publishing the largest number of regulations. We reviewed agencies’ discussions of three procedural requirements– RFA, PRA, and UMRA–for economically significant regulations. (Figures 17-19 summarize the determinations agencies reached.) We reviewed agencies’ discussions of three procedural requirements– RFA, PRA, and UMRA–for significant regulations. Figures 20-22 summarize the determinations agencies reached. We found the following statistical differences in comparing the determinations agencies reached for significant regulations: RFA: There were no statistical differences among the three transition periods and nontransition periods in the determination that regulations might have a significant economic impact on a substantial number of small entities. Regulations published during President Clinton’s transition period were less likely than regulations published during President Bush’s transition period and nontransition periods to determine that the regulation would not have a significant economic impact on a substantial number of small entities. There were no statistical differences between Presidents Clinton’s and Obama’s transition periods for this determination under RFA. We also found statistical differences in the remaining two categories–regulations not subject to RFA and those not discussing RFA. PRA: Significant regulations published during Presidents Obama’s and Clinton’s transition periods more frequently contained information collection requirements covered by PRA compared to nontransition periods. In addition, significant regulations published during President Clinton’s transition period more frequently contained information collections requirements compared to President Bush’s transition period. There were no other statistical differences in significant regulations containing information collection requirements. For the other categories, there were no statistical differences, except that significant regulations published during nontransition periods were less likely to discuss PRA than those published during President Obama’s transition period. UMRA: There were no statistical differences among the transition and nontransition periods in potential federal mandates covered by UMRA. We examined the CRA noncompliance rates for the agencies publishing the largest number of economically significant regulations. (See table 10). In this section, we provide additional information from our analyses of the extent to which: agencies indicated benefits justified costs for economically significant agencies estimated net costs or benefits for economically significant agencies anticipated costs, benefits, or transfers resulting from significant regulations. We examined additional indicators related to the economic analyses that E.O. 12866 and Circular A-4 encourage agencies to conduct when promulgating regulations. E.O. 12866 states that an agency should propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. We examined the extent to which agencies indicated that the anticipated benefits from economically significant regulations would justify their costs and found that agencies during Presidents Clinton’s and Obama’s transition periods were more likely to indicate that benefits justified costs compared to these administrations’ nontransition periods. (See figure 23.) During President Bush’s transition period, agencies were less likely to indicate that the anticipated benefits of the regulation would justify its anticipated costs. We did not extend this analysis to significant regulations because the examples were too limited to provide statistically reliable estimates for the three transition periods and nontransition periods combined. Monetizing both costs and benefits potentially allows an agency to calculate the net costs or benefits of a regulation and thus estimate how much better or worse off society will be as a result of the chosen regulatory approach. We found that agencies during Presidents Bush’s and Obama’s administrations, during both transition and nontransition periods, were more likely to calculate net costs or benefits than agencies during President Clinton’s transition and nontransition periods. (See figure 24.) We did not extend this analysis to significant regulations because the examples were too limited to provide statistically reliable estimates for the three transition periods and nontransition periods combined. For significant regulations that did identify anticipated costs, benefits, or transfers, we found the following statistical differences in comparing the three transition periods and nontransition periods combined as explained below and in figure 25: Economic Costs or Benefits or Both: For regulations falling into this category, the only statistical difference we found was that agencies were more likely during President Clinton’s transition period to identify anticipated economic costs or benefits or both compared to President Bush’s transition period. Transfers: For regulations falling into this category, the only statistical difference we found was that agencies were less likely during President Obama’s transition period to identify anticipated transfers compared to President Bush’s transition period and all three administrations’ nontransition periods combined. Both economic costs or benefits and transfers: For regulations falling into this category, the only statistical difference we found was that agencies were less likely during President Clinton’s transition period to indicate this compared to President Bush’s transition period. No economic analysis: An estimated 43 percent of significant regulations across all periods reviewed contained no economic analysis and there were no statistical differences among the three transition periods reviewed and the nontransition periods combined. In addition to the individual named above, Tim Bober (Assistant Director), Michael O’Neill (Analyst in Charge), Carl Barden, Tim Guinane, Krista Loose, Ned Malone, Alexander Ray, Cynthia Saunders, Christie Stassel, and Andrew J. Stephens made key contributions to this report. Donna Miller, John Hussey, Steven Flint, and Rob Letzler also contributed.", "summary": "The Presidential Transitions Improvements Act of 2015 includes a provision for GAO to assess multiple characteristics of final significant regulatory actions promulgated by executive departments during presidential transition periods (September 23 through January 20) at the end of Presidents Clinton, Bush, and Obama's administrations and compare them to each other and to regulations issued during the same 120-day period in nontransition years since 1996. Among other objectives, GAO assessed the extent to which there was variation in 1) the number of regulations, their scope, and other indicators; and 2) agencies' reported compliance with procedural requirements for promulgating the regulations. To address these objectives, GAO reviewed the text of the regulations published in the Federal Register , and reviewed the universe of all 527 economically significant final regulations (generally those with an annual effect of $100 million or more) published during the specified transition and nontransition periods and a generalizable stratified random sample of 358 of the 1,633 significant final regulations published during the same time periods. During transition periods at the end of presidential administrations, agencies published more final regulations and more frequently provided advanced notice to the public on those regulations compared to nontransition periods. The Clinton, Bush, and Obama administrations published on average roughly 2.5 times more economically significant regulations during transition periods than during nontransition periods. But agencies more often, relative to nontransition periods, provided the public an opportunity to influence the development of the transition-period regulations by providing advanced notice of their issuance and opportunities to comment on proposed regulations before they were finalized. In their published regulations, agencies reported that compliance with four of five procedural requirements was high during both transition and nontransition periods, but not with the Congressional Review Act (CRA). During all periods, agencies reported complying with requirements, such as the Regulatory Flexibility Act, for nearly all economically significant regulations and the majority of significant regulations. Agencies less often complied with one or more CRA requirements. (See figure.) Though agencies are responsible for complying with CRA, the Office of Management and Budget (OMB) is responsible for oversight of agencies' rulemaking, consistent with law, and reviews regulations before publication, which provides an opportunity to identify and help agencies avoid potential noncompliance. The most common CRA deficiency was agencies' failure to provide Congress the required time to review and possibly disapprove regulations, which GAO has also identified as a deficiency in previous work. Economically significant regulations for which OMB completed its review within 3 months before the planned effective date were at high risk of not complying with CRA, thus increasing the risk that agencies would not provide Congress with the required time for its reviews. Economically Significant Regulations Determined to be Noncompliant with the Congressional Review Act GAO recommends that OMB, as part of its regulatory review process, identify economically significant regulations at potential risk of not complying with CRA and work with agencies to ensure compliance. OMB staff did not agree or disagree with the recommendation.", "document_type": "gao"}
{"report": "The issue of who gets disciplined and why is complex. Studies we reviewed suggest that implicit bias—stereotypes or unconscious associations about people—on the part of teachers and staff may cause them to judge students’ behaviors differently based on the students’ race and sex. Teachers and staff sometimes have discretion to make case- by-case decisions about whether to discipline, and the form of discipline to impose in response to student behaviors, such as disobedience, defiance, and classroom disruption. Studies show that these decisions can result in certain groups of students being more harshly disciplined than others. Further, the studies found that the types of offenses that Black children were disciplined for were largely based on school officials’ interpretations of behavior. For example, one study found that Black girls were disproportionately disciplined for subjective interpretations of behaviors, such as disobedience and disruptive behavior. A separate study used eye-tracking technology to show that, among other things, teachers gazed longer at Black boys than other children when asked to look for challenging behavior based on video clips. The Department of Health and Human Services (HHS) reported that this research has highlighted implicit bias as a contributing factor in school discipline and may shed some light on the persistent disparities in expulsion and suspension practices, even though the study did not find that teacher gazes were indicative of how they would discipline students. Children’s behavior in school may be affected by health and social challenges outside the classroom that tend to be more acute for poor children, including minority children who experience higher rates of poverty. Research shows that experiencing trauma in childhood may lead to educational challenges, such as lower grades and more suspensions and expulsions; increased use of mental health services; and increased involvement with the child welfare and juvenile justice systems, according to HHS’s Substance Abuse and Mental Health Services Administration (SAMHSA). Further, a substantial share of children nationwide are estimated to have experienced at least one trauma, referred to as an adverse childhood experience (ACE), according to the National Survey of Children’s Health. Additionally, as we recently reported, there has been an increase in certain mental health issues within the school age population. For example, from 2005 to 2014, the suicide rate of youth ages 15 to 19 rose slightly, with older youth having a much higher rate of suicide than younger youth, and since 2007, the percentage of youth ages 12-17 experiencing a major depressive episode increased. About 50 million students were enrolled in K-12 public schools during the 2013-14 school year, according to the CRDC. About 90 percent of students attended traditional public schools; the remainder were enrolled at public charters, magnets, and other types of schools (see table 1). About half of all public school students were White and the other half fell into one of several minority groups, with Hispanic and Black students being the largest minority groups (see fig. 1). The number of boys and girls in public schools was almost evenly split. A larger percentage of boys were students with disabilities. Nearly half of all public school students went to schools where 50 percent or more of the students were low-income, and about a quarter went to schools where 75 percent or more of the students were low-income (see table 2). Discipline of students dropped between 2011-12 and 2013-14 over the six broad categories of discipline reported in Education’s CRDC, which were (1) out-of-school suspensions, (2) in-school suspensions, (3) referrals to law enforcement, (4) expulsions, (5) corporal punishment, and (6) school- related arrests. For example, in school year 2011-12 about 3.4 million (or 6.9 percent) of K-12 public school students were suspended out-of-school at least once, and in school year 2013-14 these suspensions fell to about 2.8 million (or 5.7 percent). Other disciplinary actions affected a much smaller portion of the student body—specifically, less than 0.5 percent of all K-12 public school students were expelled, referred to law enforcement, had a school-related arrest, or experienced corporal punishment in 2013-14, according to Education’s reported data. Education’s Office for Civil Rights and Justice’s Civil Rights Division are responsible for enforcing a number of civil rights laws, which protect students from discrimination on the basis of certain characteristics (see table 3). As part of their enforcement responsibilities, both agencies conduct investigations in response to complaints or reports of possible discrimination. Education also carries out agency-initiated investigations, which are called compliance reviews and which target problems that Education has determined are particularly acute. Education may also withhold federal funds if a recipient is determined to be in violation of the civil rights laws and the agency is unable to reach agreement with the parties involved. In addition, Justice has the authority to file suit in federal court to enforce the civil rights of students in public education. Education and Justice have also issued guidance to assist public schools in meeting their obligations under federal law to administer school discipline without unlawfully discriminating against students on the basis of race, color, or national origin. According to the guidance, public schools are prohibited by federal law from discriminating in the administration of student discipline based on protected characteristics. Further, Education and Justice have noted in their guidance that disciplinary policies and practices can result in unlawful discrimination based on race, for example, in two ways: first, if students are intentionally subject to different treatment on account of their race; and second, if a policy is neutral on its face but has a disproportionate and unjustified effect on students of a particular race, referred to as disparate impact. According to Education and Justice guidance, significant and unexplained racial disparities in student discipline give rise to concerns that schools may be engaging in racial discrimination that violates federal civil rights laws; however, data showing such disparities, taken alone, do not establish whether unlawful discrimination has occurred. Two significant, recently enacted laws include provisions related to school discipline: the Every Student Succeeds Act (ESSA) and the Child Care and Development Block Grant Act of 2014 (CCDBG Act of 2014). ESSA, enacted in December 2015, amended Title I program requirements to allow states’ accountability systems to use multiple indicators of success, which can include measures of school climate and safety. As we previously reported in 2017, some states were considering measures related to suspension rates or school attendance. Additionally, ESSA amended the Elementary and Secondary Education Act of 1965 to authorize the Student Support and Academic Enrichment Program, under which school districts may use grant funding to, among other things, design and implement a locally-tailored plan to reduce exclusionary discipline practices in elementary and secondary schools. These grants also allow the use of funding to expand access to school- based mental health services, including counseling. In addition, the CCDBG Act of 2014 allows states to use certain funds to support the training and professional development of child care workers through activities such as behavior management strategies and training that promote positive social and emotional development and reduce challenging behaviors, including reducing expulsions of young children for those behaviors. Black students, boys, and students with disabilities were disproportionately disciplined in K-12 public schools, according to our analysis of Education’s most recent CRDC data. This pattern of disproportionate discipline persisted regardless of the type of disciplinary action, level of school poverty, or type of public school these students attended. Across each disciplinary action, Black students, boys, and students with disabilities experienced disproportionate levels of discipline. Black students were particularly overrepresented among students who were suspended from school, received corporal punishment, or had a school- related arrest (see fig. 2). For example, Black students represented 15.5 percent of all public school students and accounted for 39 percent of students suspended from school, an overrepresentation of about 23 percentage points. Differences in discipline were particularly large between Black and White students. Although there were approximately 17.4 million more White students than Black students attending K-12 public schools in 2013-14, nearly 176,000 more Black students than White students were suspended from school that school year. See appendix IV, table 12 for additional data on the disciplinary experiences of different racial or ethnic groups. For example, American Indian and Alaska Native students had higher than average rates of receiving each of the six disciplinary actions. This pattern of disproportionate discipline affected both Black boys and Black girls—the only racial group for which both sexes were disproportionately disciplined across all six actions. For example, Black girls were suspended from school at higher rates than boys of multiple racial groups and every other racial group of girls (see fig. 3). Further, boys as a group were overrepresented, while girls were underrepresented among students disciplined across each action. Specifically, boys accounted for just over half of all public school students, but were at least two-thirds of students disciplined across each of the six actions, according to our analysis of Education’s school year 2013-14 data. Boys were particularly overrepresented among students who received corporal punishment, by about 27 percentage points (see fig. 4). These kinds of disparities presented as early as pre-school (see sidebar). Additional information about discipline for pre-school students is in appendix IV, table 17. Regardless of the level of school poverty, Black students, boys, and students with disabilities were suspended from school at disproportionately higher rates than their peers (see fig. 6). This was particularly acute for Black students in high-poverty schools, where they were overrepresented by nearly 25 percentage points in suspensions from school. This pattern persisted across all six disciplinary actions, as well. A similar pattern emerged for boys and students with disabilities. However, unlike Black students, boys and students with disabilities were particularly overrepresented among students suspended from low-poverty public schools (poverty less than 25 percent). Effect of School Poverty on Discipline GAO used a regression model to examine the independent effect of school poverty on discipline in school year 2013-14. The model showed that increases in the percentage of low-income students in a school were generally associated with significantly higher rates for each of the six disciplinary actions GAO reviewed (in-school and out-of-school suspensions, referrals to law enforcement, expulsions, corporal punishment, and school- related arrests). In these schools, boys and students with disabilities were overrepresented by approximately 24 and 20 percentage points, respectively. See appendix IV, table 14 for more information on discipline by the poverty level of the school. In addition, see sidebar for regression results that were relevant to poverty and school discipline. Full results from our regression model are in appendix I, table 10. Regardless of the type of public school a student attended—traditional, magnet, charter, alternative, or special education—Black students, boys, and students with disabilities were disciplined at disproportionately higher rates than their peers, with few exceptions (see fig. 7). For example, Black students were disproportionately suspended from all types of public schools, and this was particularly acute in charter schools. That is, although they represented about 29 percent of all students in charter schools, Black students accounted for more than 60 percent of the students suspended from charter schools (about 32 percentage points higher than their representation in those schools). Boys and students with disabilities were particularly overrepresented among students suspended from traditional public schools (roughly 19 and 14 percentage points, respectively, above their representation in traditional public schools). Effect of School Type on Discipline GAO used a regression model to examine the independent effect of attending different types of public schools on disciplinary outcomes. The model showed several significant associations between school type and the likelihood of receiving discipline. For example, attending an alternative school was associated with a significantly higher likelihood of being suspended (in-school or out-of-school), expelled, referred to law enforcement, or arrested for a school-related incident, compared to attending a traditional public school. The model also showed that students were significantly less likely to be suspended (in-school or out-of-school) if they attended a magnet, charter, or special education school as compared to a traditional public school. We found a few exceptions to the general pattern of Black students, boys, and students with disabilities receiving disproportionately high rates of discipline by school type. For example, Black students attending special education schools did not receive corporal punishment at disproportionate levels. See appendix IV, table 15 for additional information on discipline by the type of public school. In addition, see sidebar for regression results that were relevant to school type and school discipline. Full results from our regression model are in appendix I, table 10. We also found a regional component to discipline in public schools. For example, corporal punishment generally occurred in southern states. See appendix II for maps showing the rates of disciplinary actions by public school district. We spoke with school officials at five school districts about how they are addressing discipline, including challenges they face in responding to student conduct given the complex issues influencing student behavior. Several school officials noted a range of issues, including complex issues such as the effects of poverty, mental health issues, and family dysfunction, that they said contributed to behavior that leads to discipline (see fig. 8). For example, officials at a high-poverty Georgia high school said that their students have additional responsibilities, such as raising or watching siblings or working to support their family, which may cause students to be late to, or skip, class. This observation is consistent with our recent report on child well-being, which cited research showing that children in poverty are more likely to face academic and social challenges than their peers, and with our analysis of CRDC data, which showed that rates of chronic absenteeism (being absent 15 or more days in a school year), were higher in high-poverty schools. See appendix IV, table 19 for detailed data on chronic absenteeism. At one high school in Georgia, officials said that attendance issues were the reason for a majority of disciplinary actions at their school. They said that if students were repeatedly late to school or did not get to their next class within the set amount of time, students could amass enough infractions to warrant suspension from school. In contrast, an official at an elementary school in Georgia said that they usually do not discipline their students for being late to school, as they have found that it was often due to circumstances beyond the child’s control. According to several school officials, some groups such as homeless youth, American Indian, or Lesbian, Gay, Bisexual, Transgender, or Questioning (LGBTQ) students have had greater attendance problems than others. For example, education officials in California said that homeless and foster youth frequently miss school because of all the transitions and instability in their lives. In a school in Texas, officials also reported attendance issues with students who are homeless or in foster care because they lack transportation and clothing. Similarly, we previously reported that American Indian students face school attendance challenges, including access to reliable transportation. In addition, American Indian and Alaska Native students had the highest rates of chronic absenteeism in school year 2013-14, compared to students of other races, according to our analysis of CRDC data (see appendix IV). LGBTQ students are at a high risk of suicide and other emotional issues during adolescence, and often feel disconnected from their peers and families, according to county education officials in California. According to these officials, this can contribute to attendance problems. Officials in our five selected school districts also described what they perceived as a growing trend of behavioral challenges or provided examples related to mental health and trauma, such as increased anxieties, thoughts of and attempts at suicide, and depression among students. For example, state education officials in Georgia said they viewed a growing number of their students as being “trauma complex.” Officials at one school in Massachusetts said that they involve the mental health clinicians or social worker for additional support when students are dealing with traumatic experiences, depression, or are struggling to self- regulate. Further, officials at another school in Massachusetts said that many of their students have experienced trauma and this may lead to more aggressive behaviors at the elementary school level, and to more self-destructive behaviors at the middle school level. Specifically, these officials said that children who have experienced trauma may kick, bite, and punch others when they are younger and cut themselves or become suicidal when older. Similarly, officials at a school in Texas said that they have seen a growth in suicidal ideation and self-harm among the students. Some school officials also said that they felt ill-equipped or that schools lacked resources to deal with the increase in students with mental health issues and the associated behaviors. School officials in all five of the selected states also said that social media results in conflicts or related behavioral incidents among students, such as related bullying and arguments. Officials at a school in Georgia said that social media arguments can cause students who were not part of the original situation to be pulled in, creating classroom disruptions that end in discipline for a larger group. Moreover, officials in a North Dakota middle school said that disagreements on social media last for longer periods of time. They said that social media has also been used to facilitate the purchase of illegal drugs, which can result in students being arrested in school and expelled. Use of Corporal Punishment in School for Five Selected States California, Massachusetts, and North Dakota: Corporal punishment in schools is prohibited. Texas: If a school district adopts a policy to permit corporal punishment, school staff may use corporal punishment unless the student’s parent has provided a written, signed statement prohibiting it. None of the schools GAO visited used corporal punishment, according to officials. Georgia: Boards of education are authorized to determine policies related to corporal punishment, including allowing school staff, at their discretion, to administer corporal punishment in order to maintain discipline. However, none of the schools GAO visited used corporal punishment, according to officials. School district officials from three of the five selected districts we visited stated that officials at individual schools generally have a lot of discretion in determining what discipline a student receives. In several schools, officials said they often try other avenues first to address behavior, such as detention, alerting or having a discussion with the parent, or taking away certain privileges such as making the student eat lunch with the teacher instead of with their friends. However, for certain offenses, officials in most districts said that discipline was automatically more severe. Gun possession, for example, prompts an automatic expulsion at most of the school districts we visited. In another example, school district officials in Texas said drug-related incidents, physical assault of a teacher or student, or extreme sexual behaviors can result in a student being placed in an alternative school. School officials at one alternative school we visited stated that 80 to 90 percent of their students are there due to drug-related incidents. Officials in several of the school districts said their districts had School Resource Officers who only become involved in school disciplinary issues when requested by school administrators. In a Texas high school with over 3,800 students, a school official said School Resource Officers patrol school grounds, monitor gang activity, and may become involved when there are illegal drug issues. Officials also said that School Resource Officers sometimes provide trainings for students, parents, or school staff on subjects such as safety, good decision making, substance abuse, and peer pressure. Further, although corporal punishment was legal in two of the five states we visited (see sidebar), the school district officials with whom we spoke in those states said it was not used anymore in their districts. Our analysis of schools nationwide using school year 2013-14 data showed that corporal punishment tended to be most prevalent in southern states (see maps in appendix II). While there is no one-size-fits-all solution to addressing challenging student behavior, or to the evident disparities in discipline for certain student groups, officials in two school districts we visited told us they recognize the importance of finding alternatives to discipline that unnecessarily removes children from the learning environment. Some school officials said they have begun to specifically address disparities for certain student groups. Officials in all selected school districts reported they are implementing efforts to better address student behavior or reduce the use of exclusionary discipline. For example, officials in all school districts said that they are implementing alternative discipline models that emphasize preventing challenging student behavior and focus on supporting individuals and the school community, such as positive behavioral interventions and supports (PBIS), restorative justice practices, and social emotional learning (SEL) (see sidebar). For example, officials at a selected school district in Texas said they have implemented a classroom management model that uses positive behavior techniques. Texas state law allows schools to develop and implement positive behavior programs as disciplinary alternatives for very young students. This was also true in California, where state law specifically lists suggested alternatives to suspension, including restorative justice, a positive behavior support approach with tiered interventions, and enrollment in programs that teach positive social behavior or anger management. Examples of Alternatives to Discipline that Removes Students from the Classroom Positive Behavioral Interventions and Supports (PBIS): A school-wide framework that focuses on positive behavioral expectations. By teaching students what to do instead of what not to do, the school can focus on the preferred behaviors. All of the selected school districts used some form of positive behavioral intervention and supports. One school official told us that PBIS has significantly reduced their discipline referral numbers and provided teachers more tools to get behavior situations under control. Restorative Justice Practices: This approach focuses on repairing harm done to relationships and people. The aim is to teach students empathy and problem-solving skills that can help prevent inappropriate behavior in the future. For example, according to officials we interviewed at one school, their restorative practices help students take ownership of their actions and work collaboratively to restore relationships that may have been strained. Officials at another school said schools use mediation techniques as alternatives to suspensions. Social and Emotional Learning (SEL): SEL enhances students’ abilities to deal effectively and ethically with daily tasks and challenges. SEL integrates the following five core competencies: self-awareness, self- management, social awareness, relationship skills, and responsible decision making. At a school implementing this model, officials said that they are strengthening their SEL program to improve the whole child instead of treating discipline and mental and behavioral health separately. With regard to directly addressing disparities in school discipline, officials at one school district in California said they created a new leadership team for equity, culture, and support services, and developed a district- wide equity plan that includes mandatory training on implicit bias for principals. Officials from that district also said they had recently changed a policy to increase the consistency of discipline actions across the district’s schools. Similarly, officials at a school district in Massachusetts reported they were working to build awareness among school leadership to address racial bias and the achievement gap through multiyear trainings. Officials we spoke with at a school within that district said they conduct trainings for staff on implicit bias and other related issues to reduce school discipline disparities. As some of the schools and districts we visited have begun implementing alternative discipline models and efforts to reduce the use of exclusionary discipline in recent years, we heard from officials in two districts that there has been difficulty with implementation due to limited resources, staffing turnover, and resistance on the part of some parents. During our visits to schools, we observed classroom spaces that school officials used to manage student behavior, including through various alternative approaches to discipline (see fig. 9). Officials in two school districts said they are moving away from exclusionary discipline because it decreases the amount of academic instruction. Officials at one school district in Georgia said that the district had a history of overusing exclusionary discipline and they understood that schools cannot “suspend their way out of behavioral and discipline issues.” Officials at that district said they are currently rolling out PBIS to their schools, although progress has been slow. While they said discipline rates have decreased and they have received fewer parent and staff complaints, change is difficult because of limited resources, staff turnover, and some resistance to alternative discipline versus punitive discipline on the part of both some school staff and parents. State education officials in all five states said that changes to state law were made or considered related to school discipline in the past several years. For example, California officials said that state law now prohibits suspensions and expulsions for children in grades K-3 for willful defiance. For all ages suspensions may only be used when other means of correction fail to bring about proper conduct. Similarly, Massachusetts law requires that during a student meeting or a hearing to decide disciplinary consequences for a student, school administrators consider ways to re-engage students in the learning process and that expulsion only be used after other remedies and consequences have failed. Massachusetts also revised its state law effective July 2014 to require that schools provide educational services for expelled students. Georgia state law includes a preference for reassignment of disruptive students to alternative educational settings in lieu of suspending or expelling such students. In addition, most of the selected states plan to include school discipline or absenteeism as measures of school quality in their state ESSA Title I plans (see sidebar). According to administrative data from Education, the Office for Civil Rights (OCR) resolved over 2,500 K-12 school discipline cases between 2011 and summer 2017 through several means, including voluntary resolution (leading to agreed-upon actions and subsequent monitoring), dismissal, or closure due to insufficient evidence. These cases stemmed both from external complaints and reviews self-initiated by Education. When we analyzed a non-generalizable sample of resolved cases, we found that most of them focused on alleged racial discrimination or disability status. In the four cases we selected for more in-depth review, the school districts agreed to address discipline issues by, for example, designating a discipline supervisor, training staff, revising district policies, holding student listening sessions, and regularly reviewing data to identify disparities (see case descriptions below). Some of these remedies are designed to reduce exclusionary discipline or improve overall school climate, and others are more directly focused on addressing disparities in school discipline. For example, having school leadership regularly review data, particularly when disaggregated by race and other student characteristics, would increase awareness of disparities. Education Case 1: Race and Exclusionary Discipline in a Mississippi School District. OCR’s 2014 investigation of the Tupelo Public School District found that Black students were disproportionately disciplined in nearly all categories of offenses. These commonly included subjective behaviors like disruption, defiance, disobedience, and “other misbehavior as determined by the administration.” The consequences for “other misbehavior” in high school could be severe, ranging from detention to referral to an alternative school. Once at the alternative school, students were searched thoroughly each day upon entry, escorted by security officers when changing classes, and not allowed to carry purses or book bags. OCR concluded that the district’s discipline codes afforded administrators broad discretion, and found different treatment of Black students when looking at specific disciplinary records. For example, among several students who were disciplined for the first offense of using profanity, Black students were the only ones who were suspended from school, while White students received warnings and detention for substantially similar behavior. To address these issues, the district entered into a voluntary resolution agreement whereby it committed to taking specific actions to ensure that all students have an equal opportunity to learn in school. It agreed, among other things, to revise its student discipline policies, practices, and procedures to include clear and objective definitions of misconduct, eliminate vague and subjective offense categories, and describe criteria for selection within the range of possible penalties when imposing sanctions. The district also agreed to require that alternatives to suspension and other forms of exclusionary discipline be considered in all cases except where immediate safety of students or staff is threatened, and where the behavior in question is such that the disruption to the educational environment can only be remedied by removal, or where the student’s removal is a result of the district’s progressive discipline policy. Education Case 2: Disability and Restraint & Seclusion in a Non- Public California School. This 2016 OCR investigation focused on restraint and seclusion of a student with disabilities who was placed at the non-public school with which Oakland Unified School District contracted to provide the student with certain services, including developing and implementing behavior intervention plans. OCR found the use of prone restraint on this student to be severe, persistent, and pervasive: staff held the student face-down 92 times over a period of 11 months, with the longest duration of a single face-down restraint being 93 minutes. Examples of behaviors that led to the use of restraint included disruptive behavior, not following directions, pushing desks, and ripping up assignments. Staff said that the student wanted to be disciplined and understood prone restraint to be disciplinary. OCR determined that the district allowed the student to be treated differently for non-dangerous behavior on the basis of disability. The district entered into a resolution agreement, committing to resolve these issues by offering individual relief to the student—arranging for an evaluation of the student for adverse effects of the restraint and seclusion, with recommendations for addressing areas of harm—and implementing district-wide policy changes related to restraint and seclusion. The latter included establishing a protocol for responding to any contracted non-public schools’ reports of restraining or secluding district students, and providing training on positive interventions. Excerpt from Christian County, KY Case An African American 10th grader was assigned 1-day out-of-school suspension for skipping school. In comparison, a white 12th grader was assigned a conference with the principal for skipping school. The African American student had 19 previous disciplinary referrals, while the white student had 28 previous disciplinary referrals. Education reported that it would be difficult for the district to demonstrate how excluding a student from attending school in response to the student’s efforts to avoid school meets an important educational goal. Education Case 3: Race and Exclusionary Discipline in a Kentucky School District. In this 2014 case, OCR found that Christian County School District disciplined Black students more frequently or harshly than similarly situated White students. Specifically, Black students were more than 10 times more likely than White students to receive out-of-school suspension for disorderly conduct, and Black students were more likely to be assigned to an “Isolated Classroom Environment” when discipline was for a violation that afforded discretion. OCR also found that the district’s discipline code did not define 61 types of violations, including ones that involve interpretation, such as disorderly conduct, failure to follow directions, deliberate classroom disruption, and profanity. OCR found that administrators had wide discretion in determining the consequences for such actions, and noted that the discipline code allowed for virtually every type of sanction, including expulsion, for each type of violation. OCR also found inconsistencies in treatment of students in different racial groups when looking at individual records (see sidebar). Although district officials said they were aware of the higher rates of discipline for Black students, OCR found that there were no safeguards to ensure that discretion would be exercised in a nondiscriminatory manner. To resolve these issues, the district agreed to ensure as much as possible that misbehavior is addressed in a way that avoids exclusionary discipline, collaborate with experts on research-based strategies to prevent discrimination in discipline, and provide support services to decrease behavioral difficulties, among other things. Education Case 4: Race and Informal Removals in a California Charter School. In this 2015 case, OCR investigated whether Black students were disproportionately disciplined at a charter school which emphasizes Hmong culture and language. The complaint noted that the student’s parents had been asked to take him home on a few occasions because he was disruptive in class. School administrators confirmed the practice of “early dismissal” in response to misbehavior, but said they did not consider the dismissal to be disciplinary. Because the school did not maintain records of these removals, OCR was unable to determine if the student was subjected to discriminatory discipline. However, OCR noted that the practice of removing students from school for disciplinary reasons without appropriate recordkeeping and due process makes it almost impossible for the school to assess whether it is fully meeting its duty of ensuring nondiscrimination with respect to discipline. To resolve these issues, the school agreed, among other things, to revise its discipline policies, provide due process and alternatives to exclusionary discipline, and clearly prohibit the kinds of informal suspensions that OCR observed. Justice also investigates discrimination in school discipline based on complaints filed under federal civil rights statutes and as part of monitoring desegregation orders. Three recently-resolved cases investigated exclusionary discipline or restraint and seclusion for students of color and those with disabilities (see case descriptions below). Justice Case 1: Race and Exclusionary Discipline in an Arkansas School District. This Justice case, originally stemming from a desegregation order, focused on whether the Watson Chapel School District was discriminating against Black students in its administration of school discipline. Justice found that the district suspended and expelled Black students at significantly higher rates than White students, and that district policies and procedures were responsible for this difference. The parties signed a Consent Order in 2016, under which the school district agreed to implement positive interventions and supports, transition away from exclusionary discipline, revise the code of conduct to list specific levels of disciplinary infractions and consequences, prohibit corporal punishment, establish a memorandum of agreement with any law enforcement agency that supplies school resource officers, and provide training to staff. In addition, the district agreed to provide due process before students receive out-of-school suspensions, expulsions, or referrals to the alternative education program because of disruptive behavior. Justice Case 2: Race and Disability in a Maryland School District. Justice investigated complaints that discipline policies in the Wicomico County Public School District resulted in the discriminatory suspension of Black and Latino students and students with disabilities. After the investigation, Justice and the district negotiated and entered into a voluntary out-of-court settlement agreement in January 2017. The district agreed to hire a consultant to implement positive behavioral interventions and supports and restorative practices, revise the code of conduct to include objective definitions of behavioral infractions and incorporate alternatives to exclusionary discipline, establish clear guidelines for when law enforcement intervention is appropriate, and provide appropriate due process procedures. Justice Case 3: Race and Restraint & Seclusion in a Kentucky School District. This 2017 Justice case investigated whether Covington Independent Schools’ disciplinary practices, including the use of exclusionary discipline, restraint, and seclusion, discriminated on the basis of race, national origin, or disability. The parties agreed to negotiate a settlement agreement under which the district agreed to develop a process to regularly identify students who disproportionately had disciplinary referrals, with a focus on offenses that may be the result of unaddressed behavioral needs such as disruptive behavior or aggression, defiance, and being “beyond control.” The district also agreed to discontinue the use of “calm rooms” (where students are isolated during an episode of misbehavior) and prohibit the use of physical restraint except in the case of imminent danger that could not be addressed through de-escalation techniques. The district agreed to adopt an intervention procedure to meet the needs of students with disabilities who may need support beyond the standard discipline policies. In addition, if parents of students with disabilities were asked to come to the school to become involved in an ongoing instance of misbehavior, the district could no longer require the parent to take the student home unless the student had been assigned an out-of-school suspension or expulsion. Education and Justice collaborated on a “Rethink Discipline” campaign in 2014 to address what they viewed as widespread overuse of suspensions and expulsions. This awareness campaign included comprehensive guidance to help states and schools implement alternatives to exclusionary discipline, reduce discrimination, and identify root causes of disparities (see sidebar). The agencies have also collaborated to provide guidance encouraging school districts that use school resource officers to formalize partnerships with local law enforcement agencies and clarify that school resource officers should not administer discipline in schools. Education has also issued special guidance related to the discipline of students with disabilities, including an explanation of the requirement to provide appropriate strategies to address behavior in students’ individualized education programs (IEPs). This guidance stated that when a student with a disability is regularly sent home early from school for behavior reasons, it is likely that the child’s opportunity to make progress in the general education curriculum is significantly impeded (see sidebar). The guidance states that being sent home regularly in this way constitutes a disciplinary removal, which comes with statutory reporting obligations and other considerations. For further information on available federal guidance related to discipline in public schools, see appendix III. available could result in an inappropriately restrictive placement. demonstrates that disciplinary measures such as short-term removals from the current placement (e.g., suspension), or other exclusionary disciplinary measures that significantly impede the implementation of the individualized education program (IEP), generally do not help to reduce or eliminate reoccurrence of the misbehavior. Education and other federal entities have also awarded grants and established special initiatives related to student behavior and school discipline, many of which started around the same time as the federal Rethink Discipline campaign and were designed to be complementary. For example, Education awarded about $130 million from 2014-2016 to states and school districts through the School Climate Transformation Grant, which was established in 2014 to support districts taking steps to improve behavioral outcomes. According to Education, nearly 3,000 schools have worked to implement these behavioral support systems through the grant, and preliminary outcomes data have shown increased student attendance and fewer disciplinary referrals. In addition, Education awarded about $68 million for fiscal years 2015-2019 to over 20 school districts under Project Prevent—a grant to promote conflict resolution skills in students, particularly when they have been exposed to pervasive violence. According to the districts’ grant summary documents, these districts have experienced nearly 10,000 fewer violent behavioral incidents and have provided access to mental health services for over 5,000 students. Justice’s research arm, the National Institute of Justice, also started the Comprehensive School Safety Initiative in 2014 and has since provided about $84 million to fund nearly 40 research projects and interventions that address school discipline and safety, such as implementing restorative practices and studying the root causes of the school-to-prison pipeline. More recently, Education collaborated with HHS to fund the Pyramid Equity Project for early learning programs, which is designed to address implicit bias in school discipline, implement culturally responsive practices in addressing student behavior, and use data systems to understand equity issues. For ongoing technical assistance related to student behavior and school discipline, Education sponsors centers on supportive learning environments, improving student engagement and attendance, and implementing positive behavioral interventions and supports (PBIS). For example, the National Center on Safe Supportive Learning Environments provides information and resources on addressing school discipline, mental health, substance abuse, physical safety, student engagement, and other related issues. Justice funds a technical assistance center on school-justice partnerships that works to enhance collaboration among schools, mental and behavioral health specialists, and law enforcement officials. This center recently published a bulletin on the intersection of exclusionary school discipline and the juvenile justice system, which offers tips for judges who handle school-related cases and information on successful efforts to reduce the number of school-based referrals to law enforcement. For a list of other technical assistance centers related to student behavior or discipline, see appendix III. Lastly, to help identify discipline disparities among the nation’s schools, Education collects comprehensive data on school discipline every other year through the CRDC. The agency publicly releases highlights from these data through their “First Look” documents and in annual reports, which typically focus on a limited number of disciplinary actions (primarily suspensions) and student demographics (usually race and disability status). Education’s public analyses of school discipline data have not included school characteristics like poverty level or type of school. Education encourages districts and schools to disaggregate their data by various student demographics and examine it for disparities. In addition, Education’s Office of Special Education and Rehabilitative Services recently examined racial and ethnic disparities for students with disabilities using data collected under IDEA, Part B. This IDEA report provides the public with information on whether districts had significant disproportionality on the basis of race or ethnicity in the discipline of students with disabilities. We provided a draft of this report to the Departments of Education and Justice for review and comment. These agencies provided technical comments, which we incorporated as appropriate. We also provided selected draft excerpts relevant to officials we interviewed in state agencies, school districts, and school officials. We received technical comments from those officials in four of our five selected states, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Education, the Secretary of Health and Human Services, the Attorney General, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. The objectives of this report were to examine (1) the patterns in disciplinary actions among public schools, (2) the challenges selected school districts reported with student behavior and how they are approaching school discipline, and (3) the actions the Department of Education (Education) and the Department of Justice (Justice) have taken to identify and address any disparities or discrimination in school discipline. To conduct this work we (1) analyzed federal discipline data by student demographics and school characteristics; (2) visited five school districts to provide illustrative examples of approaches to school discipline; and (3) interviewed federal agency officials and reviewed agency documentation, federal laws, regulations and policies, selected state laws, and a selection of resolved school discipline cases. To inform all aspects of our work, we interviewed representatives from several nonfederal civil rights organizations and advocacy organizations that represent parents and families, individuals with disabilities, and people from specific racial or ethnic backgrounds, such as Hispanic, African-American, and American Indian communities. We also met with academic subject matter experts to discuss issues related to school discipline, including disparities in school discipline and initiatives intended to reduce exclusionary discipline. In addition, we reviewed two dozen articles containing research that had been published since 2010 to further understand the context of school discipline issues and programs. We evaluated the methods used in the research and eliminated the research if we felt the methods were not appropriate or rigorous. The following sections contain detailed information about the scope and methodology for this report. To determine the patterns in disciplinary actions among public schools, we used Education’s Civil Rights Data Collection (CRDC) to analyze discipline data from all public schools by student demographics (e.g., race, sex, disability) and school characteristics (e.g., school type, such as charter or magnet school). Our analyses of this data, taken alone, do not establish whether unlawful discrimination has occurred. The CRDC is a biennial survey that is mandatory for every public school and district in the United States. Conducted by Education’s Office for Civil Rights, the survey collects data on the nation’s public schools (pre-K through 12th grade), including disciplinary actions as well as student characteristics and enrollment, educational and course offerings, and school environment, such as incidents of bullying. CRDC data are self-reported by districts and schools, and consequently there is potential for misreporting of information. In school years 2011-12 and 2013-14, the CRDC collected data from nearly every public school in the nation (approximately 17,000 school districts, 96,000 schools, and 50 million students in school year 2013-14). Using the public-use data file of the CRDC, we focused our analysis primarily on data for school year 2013- 14, the most recent data available at the time of our analysis. We also compared disciplinary data from school years 2011-12 and 2013-14 to analyze how discipline may have changed over that period. The 2013-14 CRDC collected data on six broad types of disciplinary actions: (1) out-of-school suspensions, (2) in-school suspensions, (3) referrals to law enforcement, (4) expulsions, (5) corporal punishment, and (6) school-related arrests. The CRDC did not collect data on less severe forms of discipline, such as detentions, Saturday school, or removing privileges to engage in extracurricular activities, such as athletic teams or field trips. As shown in table 4, we combined related variables for out-of- school suspension and expulsion; we also provide a crosswalk of discipline variables used in this report and those captured in the CRDC. For each of the six disciplinary actions in our review, we examined discipline counts and rates both overall and disaggregated by student demographic characteristics. Specifically, we examined counts and rates for each disciplinary action by student sex (boy or girl), race or ethnicity (see table 5), disability status (students with or without disabilities), and English Language Learners. Using the CRDC, we also examined race and sex intersectionally, for example, disciplinary rates for Black boys or White girls. In order to analyze discipline counts and rates by the poverty level of the school, we pulled in data on free or reduced-price lunch eligibility from the 2013-14 Common Core of Data (CCD), and matched it to schools in the 2013-14 CRDC, which did not collect eligibility data. The CCD is administered by Education’s National Center for Education Statistics, and annually collects nonfiscal data about all public schools in the nation. A student is generally eligible for free or reduced-price lunch based on federal income eligibility guidelines that are tied to the federal poverty level and the size of the family. State education agencies supply these data for their schools and school districts. We then sorted schools into quartiles based on the percentage of students eligible for free or reduced-price lunch as follows: 0 to 25 percent, 25.1 to 49.9 percent, 50 to 74.9 percent, and 75 to 100 percent (see table 6). The poverty thresholds and measure of poverty discussed here and throughout this report were commonly used in the literature and also aligned with how Education analyzed its data. To analyze discipline counts and rates by the type of public school a student attended, we sorted schools into mutually exclusive categories and reviewed disciplinary data by student demographic information. The 2013-14 CRDC allowed schools to self-identify as special education, magnet, charter, and alternative schools (see table 7). The categories of public schools in the CRDC were not mutually exclusive; that is, schools could select multiple school types to describe their school, such as a charter school that was also an alternative school. To create mutually exclusive categories for analytical purposes, we applied the following criteria: Alternative school: all schools that selected “alternative” as the school type in the CRDC, even if they selected other types as well. Special education school: schools that selected “special education” as the school type in the CRDC, except those schools that also selected the alternative school type. Charter school: schools that selected “charter” as the school type in the CRDC, except those schools that also selected the alternative school type and/or the special education school type. Magnet school: schools that selected “magnet” as the school type in the CRDC, except those schools that also selected the alternative school type, the special education school type, and/or the charter school type. Traditional school: schools that did not select any other school type in the CRDC. Table 8 provides the breakdown of students and schools captured in the 2013-14 CRDC after applying these criteria. For each of our school discipline analyses, we also examined disparities in disciplinary rates by student demographics. Specifically, we compared each student groups’ representation among students disciplined to their representation in the overall student population. For example, if boys accounted for 50 percent of all K-12 public school students, but represented 75 percent of students that received a given disciplinary action, then boys would be overrepresented among students that received that type of discipline by 25 percentage points. We also compared disciplinary rates across student groups and similarly examined disparities based on school poverty level and school type for all students. We also analyzed CRDC data on discipline of pre-school students. The disciplinary data for pre-school students that was collected in the CRDC for school year 2013-14 was different than disciplinary data collected for K-12 students. Specifically, data on pre-school discipline was limited to out-of-school suspensions and expulsions. Findings from our analysis of pre-school discipline data are included where applicable in the report and additional data are provided in appendix IV, table 17. In addition to analyzing data on school discipline, we also analyzed data on chronic absenteeism, which was defined as students who were absent 15 or more days during the school year for any reason, which could include for suspensions and expulsions. The CRDC also collected data on instances in which students were restrained—both physically and mechanically—or secluded at school. Education has provided a resource document with principles to school districts that indicates restraint and seclusion should only be used in instances where a student’s “behavior poses imminent danger of serious physical harm to self or others,” and should never be used as punishment or discipline. However, multiple sources, including civil rights complaints filed with Education, news stories, and other reports have alleged that these practices have been used in response to student misbehavior, in particular for students with disabilities. We included data on chronic absenteeism and restraint and seclusion in our analyses, and present related findings in appendix IV, tables 18 and 19. We determined that the data we used from the CRDC and CCD were sufficiently reliable for the purposes of this report by reviewing technical documentation, conducting electronic testing, and interviewing officials from Education’s Office for Civil Rights and National Center for Education Statistics. For our analysis of the 2013-14 CRDC, we used the final data file that was publicly available as of June 2017 because it corrected errors in the original data previously submitted by several school districts. We conducted a generalized linear regression using the 2013-14 CRDC and CCD data to explore whether and to what extent certain school-level characteristics were associated with higher rates of each disciplinary action. Such a model allowed us to test the association between a given school characteristic and the percentage of students receiving a given disciplinary action, while holding other school characteristics constant. We selected different school characteristics (our independent variables) for the regression based on factors that Education’s Office for Civil Rights and other researchers have identified as potential drivers of school discipline rates (our dependent, or outcome variables). Table 9 lists the variables we included in our regression model. We conducted a separate regression for each of the six disciplinary actions listed as an outcome variable. We excluded some schools from our regression model. Specifically, we excluded schools that met one or more of the following criteria: Data were not available in both the CRDC and CCD data sets, and therefore we were unable to determine the percentage of students eligible for free or reduced-price lunch in these schools or whether these schools were located in rural, suburban, or urban areas. School was listed as “ungraded” in the CRDC because we could not determine if these schools offered grade 6 or above. School only offered pre-school because pre-school disciplinary data were reported separately and differently than K-12 disciplinary data in the CRDC. School identified as a juvenile justice facility in the CRDC. In the 2013-14 CRDC, schools could identify as a juvenile justice facility, and select one of the other school types in our analysis (i.e., traditional, magnet, charter, alternative, and special education schools). Due to this overlap, and because it is reasonable to expect discipline within a juvenile justice facility could function differently than discipline in other schools, we excluded these schools from our regression model. School had less than 10 students enrolled because in smaller schools minor fluctuations in the numbers of students receiving a given disciplinary action could have a large effect on disciplinary rates. In the 2013-14 data, these exclusions reduced the total number of public schools in our regression model from a universe of 95,507 public schools to 86,769 public schools. All regression models are subject to limitations and for this model the limitations included: Data we analyzed were by school rather than student. Consequently, we were not able to describe the association between our independent variables and a student’s rate of different disciplinary actions, while controlling for characteristics of an individual student, such as sex, race or ethnicity, disability status, or grade level. Instead, the school-level nature of the CRDC data limited our description of the associations between school characteristics and disciplinary rates to whether there was an increase, decrease, or no effect on disciplinary rates for schools with a given characteristic, controlling for other characteristics of the entire school’s population, such as percent of students who are boys or are Black. Some variables that may be related to student behavior and discipline are not available in the data. For example, in this context, it could be that parent education or household type (single- versus multiple- headed household) could be related to student behaviors, such as those that lead to receiving the six disciplinary actions we analyzed. Results of our analyses are associational and do not imply a causal relationship because, for example, CRDC data were not gathered by a randomized controlled trial, where students would be randomized to attend schools with certain characteristics. Typically, a generalized linear regression model provides an estimated incidence rate ratio, where a value greater than one indicates a higher or positive association, in this case, between the disciplinary outcome and the independent variable of interest, such as being a charter school or having a higher percentage of Black students. An estimated incidence rate ratio less than one indicates a lower incidence of a given disciplinary action when a factor is present. Given the limitations of our model as described above, we present the results of our regression model in table 10 by describing the direction of the associations, rather than an estimated rate (incidence) of disciplinary outcomes. For categorical variables in table 10, we provided the comparison school characteristic in brackets and italics. For example, the results in this table should be interpreted as students attending alternative schools were significantly more likely than students attending traditional schools to be suspended out of school. For continuous variables (i.e., those starting with “Percent”), the results in this table should be interpreted as the likelihood of receiving a given disciplinary action as the percentage of students in the school with a given characteristic increased. For example, as the percentage of students eligible for free or reduced- price lunch increased, we found that the likelihood of receiving each of the six disciplinary actions also increased. It should be noted that interactions (i.e., where we combine both race and sex variables) should be interpreted differently than other variables in table 10. Though an interaction may be “negative,” it does not necessarily imply that the group presented in the interaction was significantly less likely to receive the given disciplinary action because interactions are interpreted relative to the main effect of each variable in the interaction. For example, as shown in table 10, the interaction for percentage of Black boys was negative for out-of-school suspensions; however, the estimated incidence of out-of-school suspensions for a school with a higher than average percentage of Black students and a higher than average percentage of boys was positive. Since the contribution for an interaction coefficient is relative, in this example the contribution of the main effects outweighed that of the interaction, resulting in a positive effect altogether, despite the negative interaction. To obtain information on how selected school districts are addressing discipline issues, including any challenges they face in doing so, we selected five school districts to serve as illustrative examples. To select school districts, we used CRDC data to sort school districts into categories based on district size; the presence of disparities in out-of- school suspension rates for boys, Black students, or students with disabilities; and whether the out-of-school suspension rate was increasing or decreasing between the two most recent CRDC collections. With regard to size, we collapsed several categories that Education has previously used into three groupings, each with roughly one-third of all students attending public schools in school year 2013-14: Large School District: 25,000 or more students (34.7% of all students in 2013-14) Medium School District: 5,000 to 24,999 students (33.2% of all students in 2013-14) Small School District: Less than 5,000 students (32.1% of all students in 2013-14) Further, we focused on out-of-school suspensions for selection purposes because this disciplinary action was one of the most frequently reported disciplinary actions employed by schools in Education’s two most recent data collection efforts on the issue (2011-12 and 2013-14 CRDC). Moreover, out-of-school suspensions are an exclusionary disciplinary action; that is, they remove or exclude students from the usual instructional or learning environment. Selecting districts with a range of out-of-school suspension rate was intended to generate a mix of districts that commonly use exclusionary discipline, as well as those that may employ alternatives. For site selection, we used out-of-school suspension data in two ways. First, we excluded districts that did not have a disparity in out-of-school suspension rates for Black students, boys, or students with disabilities. Prior GAO work and Education’s data showed that these groups were particularly vulnerable to discipline disparities, and the purpose of this research objective was to understand district efforts to identify and address such disparities. Second, we grouped school districts by whether their out-of-school suspension rate increased or decreased between 2011-12 and 2013-14. Exploring school districts that changed in different ways over time was intended to help us identify successful efforts to reduce suspensions as well as challenges districts face in addressing disparate discipline. Using the above criteria, we grouped school districts into the following categories: Category 1 and 2: Large school district and out-of-school suspension rate that increased (or decreased) from 2011-12 to 2013-14 Category 3 and 4: Medium school district and out-of-school suspension rate that increased (or decreased) from 2011-12 to 2013- 14 Category 5 and 6: Small school district and out-of-school suspension rate that increased (or decreased) from 2011-12 to 2013-14. After sorting school districts into the above categories, we randomized the list within each category to improve the methodological rigor of selecting school districts. In addition, we applied a series of post-checks to our list of districts in each grouping to ensure we had appropriate variety to consider other key factors in school discipline. Specifically, we checked for variety in: types of public schools in the district, geographic diversity both in terms of region of the country and use of corporal punishment in the district, and use of restraint or seclusion in the district. To select specific districts, we started with the district in each category that was at the top of the randomized list and then applied the above post-checks. We then conducted outreach to district superintendents or their designees via telephone and email to obtain their agreement to participate in this review. When school districts were unresponsive to our outreach or unwilling to participate, we contacted additional districts that had similar characteristics in order to achieve variety in our final selections. This resulted in the selection of five schools districts, one each in California, Georgia, Massachusetts, North Dakota, and Texas (see table 11). We visited each district and interviewed district-level officials involved in school discipline and school climate initiatives. These officials included superintendents, assistant superintendents, program managers, and directors of applicable district departments (e.g., student support services and special education). We also reviewed district-level discipline data, school district discipline policies, and relevant state laws related to school discipline to better understand the local context in each selected district. In the five districts we visited, we also interviewed officials at a total of 19 schools. At each school, we typically met with principals and/or assistant principals, and in some instances, spoke with other personnel at the school, such as counselors, attendance coordinators, school resource officers (i.e., law enforcement officers), and teachers. In each district, we selected a variety of schools to visit based on grade level, school type, and disciplinary data. For each selected district, we also interviewed officials from the state educational agency that oversees that district to better understand the statewide context around discipline, such as state laws that may affect district disciplinary policies, statewide initiatives related to discipline, and state-level monitoring of district-level disciplinary actions. In California, we also met with the county office of education that oversees the district we selected because, in that state, counties have a primary role in the local school district accountability structure. Because we selected these school districts judgmentally, we cannot generalize the findings about these districts’ approaches to discipline, and the challenges they face, to all school districts and schools nationwide. To determine the extent to which, and in what ways, Education and Justice are identifying and addressing discipline disparities and discrimination, we interviewed agency officials at headquarters and regional offices, reviewed agency documentation and administrative data, reviewed federal laws and regulations, and reviewed a non-generalizable sample of seven recently resolved school discipline investigations undertaken by Education and Justice (which we refer to as cases). With both agencies, we interviewed officials about each agency’s responsibilities with respect to federal civil rights laws and regulations, as well as the actions the agencies took to enforce them. We also discussed each agency’s guidance, support to school districts on these issues (e.g., grants and technical assistance), and data collection activities. In addition, we collected and reviewed relevant agency procedures and guidance documents. We also requested and reviewed Education’s data on the number of civil rights complaints received and cases related to school discipline investigated from 2011 to August 2017 to better understand the scope of the agency’s efforts. Education provided these data from their internal database, where investigators categorized cases as being related to school discipline. We assessed the reliability of this source through discussion with knowledgeable officials and reviewing key documents and determined the data to be reliable for our purposes. To select resolved school discipline cases to review, we searched Education’s and Justice’s respective online repositories of resolved investigations and compliance reviews, as well as Education’s annual reports, to create a list of resolved cases related to school discipline. We then narrowed the list to cases resolved in approximately the past 3 years (from 2014 to May 2017) and excluded long-standing cases that were opened several decades ago to help ensure the information in the cases reflected recent policies and practices in each agency. We also excluded cases regarding institutions of higher education because they were outside the scope of this review. This resulted in a list of 12 relevant resolved cases—9 for Education and 3 for Justice. From this list, we selected 7 cases to review in depth to better understand Education’s and Justice’s investigatory processes and resolutions with regard to school discipline cases in pre-K through 12th grade, and to provide illustrative examples in our report. We selected 4 cases from Education that provided a mix of the type of alleged discrimination (e.g., race or disability) and type of discipline (e.g., suspension, expulsion, arrest, etc.). We selected all 3 relevant cases from Justice. For each case, we reviewed the type of investigation (complaint investigation or compliance review); the reason for the investigation; any applicable findings or recommendations; and the ultimate resolution of the investigation, such as a voluntary agreement with the school district or remedies to address findings. In all instances, we are presenting Education’s and Justice’s findings and do not reach any independent conclusions regarding the cases. We conducted this performance audit from November 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix contains maps showing rates of disciplinary actions by school district for each of the six disciplinary actions captured in the Department of Education’s Civil Rights Data Collection for school year 2013-14. Funded by Department of Education (Education): National Center on Safe Supportive Learning Environments: offers information and technical assistance focused on improving student supports and academic enrichment. This includes resources on using positive approaches to discipline, as well as promoting mental health for students and ensuring the safety and effectiveness of physical learning environments. https://safesupportivelearning.ed.gov/. National Student Attendance, Engagement, and Success Center: a center that disseminates evidence-based practices and facilitates communities of practice to help students attend school every day, be engaged in school, and succeed academically, so that they graduate high school prepared for college, career, and civic life. It offers webinars on identifying the root causes of chronic absence, linking school climate and exclusionary discipline to absenteeism, and improving attendance for vulnerable students. http://new.every1graduates.org/nsaesc/ National Technical Assistance Center for the Education of Neglected or Delinquent Children and Youth: provides technical assistance to state agencies with Title I, Part D programs and works to improve education services for children and youth who are neglected, delinquent, or at risk. This includes running the Supportive School Discipline Communities of Practice, which brings together education and justice leaders for knowledge-sharing events and offers webinars on discipline initiatives such as restorative practices. https://www.neglected-delinquent.org/ Positive Behavioral Interventions and Supports Technical Assistance Center: funded by Education’s Office of Special Education Programs, this center supports implementation of a multi- tiered approach to social, emotional and behavior support. In addition, it offers resources on cultural responsiveness, addressing discipline disproportionality, and interconnecting mental health with behavior support systems, among other issues. https://www.pbis.org/. Funded by Department of Health and Human Services (HHS): Center of Excellence for Infant and Early Childhood Mental Health Consultation: supports states, tribes, and communities in promoting mental health and school readiness. It provides training to leaders in early childhood education around mental health and school readiness issues. https://www.samhsa.gov/iecmhc Center for School Mental Health: works to strengthen policies and programs in school mental health to improve learning and promote success for youth. This center is supported in full by HHS’s Maternal and Child Health Bureau, Division of Child, Adolescent and Family Health Adolescent Health Branch in the Health Resources and Service Administration. http://csmh.umaryland.edu/ National Center for Trauma-Informed Care and Alternatives to Seclusion and Restraint: works to develop approaches to eliminate the use of seclusion, restraints, and other coercive practices and to further advance the knowledge base related to implementation of trauma-informed approaches. https://www.samhsa.gov/nctic National Child Traumatic Stress Network: works to improve access to care, treatment, and services for children and adolescents exposed to traumatic events. The group provides a comprehensive focus on childhood trauma by collaborating with the health, mental health, education, law enforcement, child welfare, juvenile justice, and military family service systems. http://nctsn.org/ National Resource Center for Mental Health Promotion and Youth Violence Prevention: offers resources and technical assistance to states, tribes, territories, and local communities to promote overall child wellness and prevent youth violence. http://www.healthysafechildren.org/ Now Is the Time Technical Assistance Center: provides national training and technical assistance to recipients of the Healthy Transitions (youth access to mental health) and Project Advancing Wellness and Resilience Education (AWARE) grants. https://www.samhsa.gov/nitt-ta/about-us Funded by Department of Justice (Justice): School-Justice Partnership National Resource Center: provides trainings and webinars, and partners with stakeholders in the law enforcement, juvenile justice, mental health, and public education arenas. The National Council of Juvenile and Family Court Judges operates this center. https://schooljusticepartnership.org/ Office of Juvenile Justice and Delinquency Prevention (OJJDP) This appendix contains several tables that show the underlying data used throughout this report, as well as additional analyses we conducted using the Department of Education’s Civil Rights Data Collection (CRDC) and Common Core of Data (CCD) for school year 2013-14. Our analyses of Education’s data, as reflected in these tables, taken alone, do not establish whether unlawful discrimination has occurred. The following tables and information are included in this appendix: Table 12: students who received disciplinary actions captured in the CRDC, disaggregated by student sex, race or ethnicity, and English Language Learner status. Table 13: students with or without disabilities who received disciplinary actions captured in the CRDC, disaggregated by student sex and race or ethnicity. Table 14: students who received disciplinary actions captured in the CRDC, disaggregated by the poverty level of the school and other student characteristics. Table 15: students who received disciplinary actions captured in the CRDC, disaggregated by the type of public school and other student characteristics. Table 16: students who received disciplinary actions captured in the CRDC, disaggregated by the grades offered in the school and other student characteristics. Table 17: pre-school students who were suspended from school, disaggregated by student sex and race or ethnicity, as well as the poverty level of school and the type of public school. Table 18: students who were restrained—mechanically or physically—or secluded, disaggregated by student sex, race or ethnicity, and disability status as well as the poverty level of school and the type of public school. Table 19: students who were chronically absent, disaggregated by student sex, race or ethnicity, and disability status, as well as the poverty level of school and the type of public school. Table 20: schools that reported having access to a school counselor or sworn law enforcement officer, disaggregated by the poverty level of school and the type of public school. Table 21: students disciplined for harassment or bullying, disaggregated by student sex, race or ethnicity, and disability status. In addition to the contact named above, Sherri Doughty (Assistant Director), Amy Moran Lowe (Analyst-in-Charge), James Bennett, Holly Dye, Aaron Karty, Jean McSween, John Mingus, James Rebbe, Sonya Vartivarian, and David Watsula made key contributions to this report. Also contributing were Johana Ayers, Deborah Bland, Irina Carnevale, Caitlin Croake, Vijay D’Souza, Gretta Goodwin, Gloria Hernandez-Saunders, Reginald Jones, DuEwa Kamara, John Karikari, Ted Leslie, Sheila R. McCoy, Brittni Milam, Cady Panetta, Moon Parks, Caroline Prado, Steven Putansu, Maria Santos, Margie K. Shields, Ruth Solomon, Alexandra Squitieri, and Barbara Steel-Lowney.", "summary": "Research has shown that students who experience discipline that removes them from the classroom are more likely to repeat a grade, drop out of school, and become involved in the juvenile justice system. Studies have shown this can result in decreased earning potential and added costs to society, such as incarceration and lost tax revenue. Education and Justice are responsible for enforcing federal civil rights laws that prohibit discrimination in the administration of discipline in public schools. GAO was asked to review the use of discipline in schools. To provide insight into these issues, this report examines (1) patterns in disciplinary actions among public schools, (2) challenges selected school districts reported with student behavior and how they are approaching school discipline, and (3) actions Education and Justice have taken to identify and address disparities or discrimination in school discipline. GAO analyzed discipline data from nearly all public schools for school year 2013-14 from Education's Civil Rights Data Collection; interviewed federal and state officials, as well as officials from a total of 5 districts and 19 schools in California, Georgia, Massachusetts, North Dakota, and Texas. We selected these districts based on disparities in suspensions for Black students, boys, or students with disabilities, and diversity in size and location. We also reviewed federal laws and a non-generalizable sample of seven recently resolved federal school discipline investigations (selected in part based on the type of alleged discrimination). We incorporated technical comments from the agencies as appropriate. Black students, boys, and students with disabilities were disproportionately disciplined (e.g., suspensions and expulsions) in K-12 public schools, according to GAO's analysis of Department of Education (Education) national civil rights data for school year 2013-14, the most recent available. These disparities were widespread and persisted regardless of the type of disciplinary action, level of school poverty, or type of public school attended. For example, Black students accounted for 15.5 percent of all public school students, but represented about 39 percent of students suspended from school—an overrepresentation of about 23 percentage points (see figure). Officials GAO interviewed in all five school districts in the five states GAO visited reported various challenges with addressing student behavior, and said they were considering new approaches to school discipline. They described a range of issues, some complex—such as the effects of poverty and mental health issues. For example, officials in four school districts described a growing trend of behavioral challenges related to mental health and trauma. While there is no one-size-fits-all solution for the issues that influence student behavior, officials from all five school districts GAO visited were implementing alternatives to disciplinary actions that remove children from the classroom, such as initiatives that promote positive behavioral expectations for students. Education and the Department of Justice (Justice) documented several actions taken to identify and address school discipline issues. For example, both agencies investigated cases alleging discrimination. Further, to help identify persistent disparities among the nation's schools, Education collects comprehensive data on school discipline every other year through its Civil Rights Data Collection effort.", "document_type": "gao"}
{"report": "Mortgages under RHS’s program can be used to build, acquire, and rehabilitate rental housing in rural areas and are generally 30-year loans with 50-year amortization periods and include subsidized interest rates as low as 1 percent. To help finance housing projects and keep rents affordable to low-income tenants, RHS offers rental assistance subsidies to some property owners, which cover the difference between the tenant’s contribution and a unit’s rent. The rental assistance program, authorized in 1974, provides the rental subsidies through agreements with property owners for an amount estimated to last for 1 year as required under the program’s appropriations acts. Eligible tenants pay no more than 30 percent of their income toward the rent, and RHS pays the balance to the property owner. Tenants must be low-income (incomes above 50 percent of area median income but not more than 80 percent of area median income) or very-low- income (with incomes not more than 50 percent of area median income) to be eligible for rental assistance. The agreements with the owners expire when the original dollar amount obligated is fully expended. Agreements specify that owners will receive payments on behalf of tenants in a designated number of units at the property. In addition, property owners must certify tenants’ incomes annually or when a tenant experiences a substantial change in income. Statutorily, rental assistance is tied to RHS loans for rural rental housing and is no longer provided to property owners once mortgages mature. The program supports five general types of rural rental housing projects— family; elderly (units may be occupied by an income-eligible household that includes a tenant or co-tenant who has a disability or is age 62 or older, or both); mixed (project has both family and elderly units); congregate housing (project may be occupied by income-eligible elderly households that need meals or other services); and group homes (may be occupied by income-eligible elderly persons or individuals with disabilities who share living space within a rental unit). Properties with RHS rental housing mortgages can exit the program in three ways—foreclosure, prepayment, and natural maturity of the mortgage. When an owner defaults on loan payments and the property is foreclosed, it may exit RHS’s program. Properties can also exit the program when loans mature naturally, meaning the loan is paid off as scheduled by the original loan term. Loans can also be prepaid, meaning payments are made ahead of schedule, which ends the loan term early. Only those loans made on or after December 15, 1989, are ineligible to prepay. As previously noted, once a property exits RHS’s program, owners are generally no longer required to provide housing for low- income tenants and properties are no longer eligible to receive rental assistance that is used to keep rents affordable for tenants. Some owners that are reaching the end of their RHS mortgage terms may wish to exit the program. Other owners may wish to remain in the program and continue renting to low-income tenants. RHS has offered tools and incentives to help owners stay in the program and preserve the affordability of rural rental housing. Some of these tools involve extending mortgage terms, which extends the availability of rental assistance to properties. RHS’s June 2017 data showed that the program had approximately 14,000 properties containing 427,000 rental units. Of these, approximately 12,000 properties (85 percent) and 282,000 units (66 percent) received rental assistance. According to RHS, the agency has not financed any new rental housing properties since 2011. Instead, RHS has generally used program funding to repair and rehabilitate existing program properties. RHS properties are geographically dispersed, but one-quarter of the RHS program, or about 3,500 properties, was concentrated in six states as of June 2017: Texas (670 properties); Missouri (609); North Carolina (595); Michigan (564); Illinois (534); and Minnesota (509) (see fig. 1). Appendix II provides data in table form for RHS properties, units, and units with rental assistance. RHS’s Multi-Family Housing Portfolio Management Division and the Multi- Family Preservation-Direct Loan Division administer USDA’s rural rental housing loan program. RHS’s national office also maintains the Automated Multi-Family Housing Accounting System (AMAS) and Multi- Family Information System (MFIS) databases, develops program policy, and oversees management of the program. RHS state offices administer the day-to-day operations of the rural rental housing program, including entering key mortgage and project information contained in hard copy mortgage closing documents into the AMAS and MFIS databases. In March 2016, RHS developed the Multi-Family Housing Property Preservation Tool (preservation tool), an electronic system designed to use data from AMAS and MFIS to estimate mortgage maturity and property exit dates and to calculate new dates that may result from RHS’s preservation efforts. Before introducing the preservation tool in 2016, RHS officials manually calculated exit dates for rural rental properties, a process that was subject to errors and inconsistencies due to properties with multiple mortgages and mortgages that could be prepaid. AMAS and MFIS track loan closing dates; loan amounts; interest rates; and property location, among other information, but were not designed to estimate property exit dates. According to RHS officials, the preservation tool and the underlying data it uses are publicly accessible via the Internet and are intended to improve program transparency and help support the agency’s preservation efforts. Users can search for the date a property began operating; total number of units; units receiving RHS rental assistance; mortgage amount and interest rate; mortgage prepayment eligibility; and property exit date estimates, among other information. The preservation tool enables RHS to look at trends in property exits across years and help determine when RHS will need to take preservation actions. As of April 2018, RHS had estimated property exit data available from 2017 to 2050, but not information on properties whose mortgages may mature in 2051 or beyond. RHS officials said that data will be released publically on its website when available. Our analysis of data used by the preservation tool showed that approximately 900 properties (6 percent of the program’s portfolio), including 20,000 units (5 percent), will have maturing mortgages and could exit the program between 2017 and 2027. Industry stakeholders said that low-income tenants living in these properties could face escalating rents or lose their housing altogether. In addition, over 13,000 properties (94 percent) and about 407,000 units (95 percent) are estimated to have mortgages that will mature between 2028 and 2050 (see fig. 2). Our analysis of RHS’s June 2017 data, the most recent data available, also showed that 35 percent of RHS’s rural rental properties (4,944 out of 14,075 properties) have mortgages that are eligible for prepayment and could exit the RHS program ahead of their original mortgage maturity date. This earlier exit could cause tenants to face rent increases or search for alternative affordable housing earlier than expected (see fig. 3). According to RHS, if an owner prepays and a property exits the RHS program, rental assistance is no longer available to assist that property’s tenants. Concerns about the loss of affordable units led Congress to enact legislation that precluded prepayment for loans made on or after December 15, 1989. For those properties that are eligible for prepayment, RHS officials said they cannot predict which owners might make this choice and the agency has not been collecting data on borrower’s prepayment choices. As a result, outreach to these owners is particularly important for possible preservation of affordable housing. Our review identified three internal control shortcomings that could impact the accuracy, completeness, and timeliness of RHS’s data on properties with maturing mortgages. First, RHS lacks sufficient controls to help ensure the accuracy of all loan information for each mortgage at the time of initial data entry because it only retroactively reviews a sample of loan document information entered into AMAS and MFIS. Although RHS staff reviews some loan information through the agency’s State Internal Review process, officials noted that the review of mortgage data entered into AMAS and MFIS only occurs for each field office at least once every 5 years and includes a step for staff to review and reconcile AMAS information with loan documents to help ensure the accuracy of RHS debt instruments. RHS officials added that they improved the guidance in October 2017 by adding specific data checks intended to help ensure that loan amount, interest rate, and amortization period information were correct. In addition, during our review of RHS’s rural rental housing loan documents, we identified mismatches between loan document information and the data in AMAS and MFIS used by the preservation tool. We found errors in the data on mortgage amounts, closing dates, and repayment periods in an estimated 3 percent to 5 percent of the properties in five states we examined. While the data we reviewed had limited errors, without appropriate internal controls, RHS cannot be assured that the data that is used by the preservation tool will be reliable in the future, and the mismatches suggest that RHS could improve how data are entered into AMAS and MFIS. According to RHS officials, these systems were not designed to estimate the expected maturity of rural rental housing mortgages. At the time of the systems’ development, officials said that it was not a priority to build in controls to ensure the accuracy of such estimates. RHS officials said that rural rental housing mortgages would not mature for many years after they were originated. As a result, RHS did not create controls intended to ensure the accuracy of data related to mortgage maturity and did not prioritize establishing a process to check that data. Federal internal control standards state that management is responsible for designing control activities for information systems and information processing objectives to support the completeness, accuracy, and validity of information processing. Without these controls, mortgage information used by the preservation tool to estimate property exit dates may be inaccurate and could affect the reliability of exit date estimates needed to identify properties for possible preservation. Second, RHS lacked controls to check the accuracy and completeness of underlying data used by the preservation tool. When we examined the underlying data the preservation tool uses to estimate property exit dates, we observed missing (blank) values for some property address; property state; borrower address; and management company name information. For example, borrower address and property address were missing for 588 and 141, respectively, of the roughly 14,000 properties. In addition, some properties in RHS’s data included estimated property exit dates but contained incomplete information (“N/A” designations) for key variables such as property name; property address; property state; number of units; and type of housing. Although RHS has been developing and implementing the preservation tool since 2016 and has made the preservation tool’s exit date estimates available on its website, the agency has not yet developed a control process to identify potential issues with its underlying data. As noted above, federal internal control standards require activities to help ensure the completeness, accuracy, and validity of program information. Without information that has been checked for accuracy, RHS might not be assembling the most complete and accurate information with which to estimate exit dates and begin possible preservation of rural rental housing for low-income tenants. In addition, RHS is missing an opportunity to improve data on properties with maturing mortgages and be better positioned to address those properties to protect low-income tenants. Third, the agency has not developed a regular, timely process for updating the preservation tool’s underlying data and exit date information. Since RHS developed the tool in March 2016, RHS updated the underlying data for September and December 2016 and June 2017 but not for 2018. RHS staff said the data were intended to be updated quarterly because information that affects exit date calculations changes as RHS preserves rural rental housing or properties exit the RHS program. However, RHS officials said that they have been unable to update the preservation tool quarterly due to staff attrition and competing program demands across RHS. Federal internal control standards require activities to help ensure the accuracy and validity of program information. For RHS’s information to be accurate and valid, it needs to be as current as possible for program management purposes. Since the mortgage maturity dates of properties are affected by RHS’s preservation options and the exit dates of properties can change over time as mortgages mature, it is critical for RHS to have accurate, complete, and timely rural rental housing information. Without controls to help ensure that RHS, industry stakeholders, and the public have the most recent data available, they might not have the most current information that could be used for estimating property exit dates and starting preservation. While RHS has taken steps to address properties with maturing mortgages, such as identifying various options and incentives intended to preserve the affordability of properties for low-income tenants, a majority of properties with maturing mortgages from 2014 to 2017 have exited RHS’s rural rental housing program. Moreover, RHS has not taken important steps to comprehensively plan and prepare for the much larger number of potential property exits in future years, such as developing goals and metrics to assess the effectiveness of its preservation efforts and analyzing risks to its ability to preserve properties. While taking these steps would help RHS’s preservation efforts, some tenants may still be at risk of losing rental assistance when mortgages mature because RHS cannot continue to provide rental assistance. RHS also cannot provide vouchers to tenants residing in properties whose mortgages have matured. In addition to developing the preservation tool as a first step in preserving properties with maturing mortgages, RHS officials said they commissioned two studies on the impacts of maturing mortgages to advance the agency’s understanding of key issues. Officials said they hoped the two studies would help the agency prepare for maturing mortgages. In September 2016, the Housing Assistance Council completed its first study for RHS, which identified the characteristics of RHS’s rural housing program and the impact that maturing mortgages may have on tenants and geographic regions. The report noted that understanding these characteristics and effects is important for planning and implementing strategies to preserve the properties. According to officials, the second study, which was under review by the agency as of December 2017, was intended to outline issues facing RHS’s multifamily housing program, such as the estimated $5.6 billion needed to rehabilitate properties program-wide, and possible policy solutions for addressing potential property exits. RHS has offered property owners several options to prevent property exits and preserve the access to and affordability of housing for low- income tenants (see fig. 4). Reamortization: Loan reamortization and a shortened reamortization process (known as “Re-Am Lite”) allow borrowers to repay outstanding loan balances over new, longer repayment periods. By extending the term of the loan, officials said that the agency can continue providing rental assistance to that property. Re-Am Lite does not require borrowers to have their properties appraised, which officials said can shorten the reamortization application process by 60 to 90 days. Deferral: Borrowers can defer repayment of direct loans for up to 20 years. This prevents property exits and preserves affordability for low- income tenants by continuing the payment of rental assistance to property owners. Loan deferrals can be offered under the Multi- Family Housing Preservation and Revitalization program. This 12- year-old demonstration program offers a combination of property rehabilitation funding and the opportunity for owners to reamortize or defer loan payments to help keep rents affordable. Officials said the program can also be used to attract new owners who wish to stay in the affordable housing program by offering a funding source for property rehabilitation. Prepayment Offer: If borrowers decline RHS’s options that extend loan terms (reamortization, Re-Am Lite, and deferral), but wish to remain in the RHS portfolio, the agency encourages property owners to submit a request to prepay their mortgage, if eligible to do so and if their mortgages are 12 or more months from maturity. After an owner submits a prepayment request, RHS is authorized to offer owners incentives to avert prepayment. These incentives include increased returns on investment to for-profit owners, additional rental assistance units, and equity loans. Prepayment: If borrowers decline RHS’s options, the agency encourages property owners to prepay their loans. While owners who prepay would no longer have rural rental housing loans with RHS or be eligible to receive rental assistance from the agency, prepayment of a loan allows RHS to provide vouchers to tenants affected by the loss of affordable housing. According to RHS data, only about 5,000 of the 14,000 properties within RHS’s multifamily housing program are eligible to prepay loans. Transfer: RHS has taken steps to facilitate the sale (transfer) of properties to new owners to prevent property exits. Officials described this as a key preservation tool because new RHS mortgage terms typically accompany the sale and allow for rental assistance to continue at properties where applicable. First, the agency established a more centralized and standardized transfer process based on input from developers, owners, and other stakeholders, which officials say reduced the average property transfer time from 156 to 112 days. Second, RHS maintains a spreadsheet available on the agency’s website, called the Preliminary Assessment Tool, which officials said streamlines and provides greater transparency to the property transfer process for potential buyers and sellers. The agency also hosted three conferences in 2016 designed to help find new buyers for RHS properties whose owners were seeking to sell their properties. Finally, in September 2016, RHS announced a 2-year pilot program to encourage nonprofit organizations to purchase rural rental properties with maturing mortgages, which could create new loan terms that would extend the repayment period and continue the properties’ affordability. Prior to the pilot, nonprofit owners were not required to make an initial equity contribution to projects and therefore could not earn any return on investment. Under the pilot, loan transfers to nonprofits would allow nonprofits to earn returns on their own resources initially invested in the property. Despite the preservation options and incentives identified by RHS, 61 percent (148 of 244) of the properties with mortgages that matured between January 2014 and December 2017 exited the agency’s rural rental housing program (see table 1). Some industry stakeholders said that options and incentives did not adequately or broadly appeal to property owners. They added that existing options and incentives would be used primarily by owners who have no other choice but to stay in the program. Stakeholders explained that owner choice might be limited because of the condition of their property or because their property is located in a market that would not accommodate the sale of a property or rent increases to market levels. Some stakeholders also said options that extend loan terms only offer a short-term solution to preservation challenges because mortgages cannot be extended indefinitely. RHS’s efforts lacked a number of important steps that would better position the agency to preserve properties. First, RHS lacked documented goals for preserving its program and has not created measures for tracking progress toward those goals. In the absence of documented goals, RHS national officials stated that the agency’s goal is to preserve all properties within its program that are needed to ensure sufficient affordable housing, though they acknowledged that current resource levels would preclude that possibility and that some owners may leave the program regardless of the options the agency offers. Second, RHS is not monitoring and assessing options and incentives it is providing in a way that would inform or improve the use of these options. While the agency can track preservation status—meaning whether a property is still within the program or not—through its preservation tool discussed above, it is not actively tracking preservation outcomes. RHS is also not systematically collecting data for monitoring purposes. RHS officials said agency databases contain variables that would show which options owners choose to use, but added that this information is not available in a single source. RHS is also not collecting information that would help them assess options. For example, the agency is not collecting information from property owners on what options and incentives appeal to them. This information would help the agency assess preservation options on how well they are being received by borrowers. Similarly, RHS is not monitoring the results of efforts to preserve properties, including information on how many properties were transferred as a result of its three buyers-sellers conferences. Finally, RHS has not fully analyzed or responded to the risks facing its rural rental housing program, such as the following: Owner behavior—RHS officials told us a key risk to preserving its rural rental housing program is that the agency cannot predict whether owners will choose to leave the program or stay. To help respond to this risk, the agency directed staff to notify owners 3 years in advance that their loan is maturing and that options are available for preserving the property within the program. While this window could provide RHS with the time to plan for property exits, RHS is not collecting information from owners on why they may choose to exit rather than stay in the affordable housing portfolio. The agency’s effort to predict owner behavior would be aided by collecting and analyzing data on how many owners choose to leave the program and why. Resource constraints—During a May 2017 conference, a senior RHS official highlighted the issue of agency resource constraints for addressing maturing mortgages, saying that the agency does not have the ability or the financial resources to preserve all of the properties that could leave the program once the loans mature. RHS has also acknowledged that, even at lower levels of about 80 maturing mortgages each year, the agency does not have the resources to provide all preservation options to every owner who wishes to use them. RHS has also not analyzed or planned for how it would prioritize the use of limited resources. RHS national office officials said there is some guidance that could be used by state offices to prioritize the use of resources, but this guidance was not specific to addressing maturing mortgages and was in the process of being updated to include information that could be used to help prioritize limited resources for preserving properties. That update is expected by January 2019. Management of maturing mortgages—RHS has not analyzed or responded to risks involving staff management of maturing mortgages. For example, the agency’s national office said that staff attrition and turnover in the national, state, and field offices that manage mortgages have resulted in fewer staff managing its program in general and that they were not sure what the effect of maturing mortgages would have on staff workloads. RHS staff in some of the states we visited expressed concern that workloads are already heavy and that any increase caused by maturing mortgages, including smaller numbers occurring now, might affect their ability to be responsive to program needs. Similarly, some state office staff expressed concerns that they were not trained for managing and responding to properties with maturing mortgages and needed additional guidance from the national office. RHS national office officials said that while the agency does not provide training specific to maturing mortgages, it does provide training on loan servicing, which includes the use of preservation options, and the national office conducts monthly conference calls that all state offices participate in, which have included maturing mortgages as a topic and which can be used to answer staff questions about maturing mortgages. Rehabilitation Costs—RHS has commissioned two studies on the risks that program-wide rehabilitation costs pose to its ability to preserve its program, but has not analyzed or planned for how it would address the estimated $5.6 billion needed to rehabilitate its aging portfolio of properties. Officials said that they have met with industry stakeholders and Congress about capital needs estimates, but no additional steps such as requesting additional funding were taken. Officials added that federal budget uncertainties caused by years of continuing resolutions and a sequestration have made planning for maturing mortgages and program-wide rehabilitation more difficult. However, RHS has been aware of growing rehabilitation needs since at least 2004, when the agency released a commissioned study that said capital needs program-wide would continue to increase and cost more if not addressed. Federal internal control standards call for agencies to define objectives in specific and measurable terms to enable management to identify, analyze, and respond to risks related to achieving those objectives. Specifically, these standards call for agencies to establish goals and performance measures for tracking progress toward achieving goals; establish activities that monitor performance and assess results so that appropriate action is taken; and identify, analyze, and respond to risks related to achieving their goals. RHS officials said that, as of December 2017, they had not taken steps to develop goals and measures, perform key monitoring and assessments, and analyze and respond to risks because the larger number of potential property exits is not expected to begin for another 10 years (2028). RHS officials said that they were using this time to see how their existing options and resources perform, and that the agency would make resource and other adjustments over time as they gained experience with preservation. However, as discussed above, mortgages have already begun to mature and the majority of properties with maturing mortgages between 2014 and 2017 exited the agency’s rural rental housing program. Some property owners may have chosen to exit the program regardless of additional actions or incentives. For example RHS officials noted that many of the property owners whose mortgages are currently maturing are nearing retirement or prefer market returns to RHS’s options and incentives. However, the percentage of exits (61 percent) suggests that RHS’s current planning efforts have not proven sufficient to prevent the majority of properties with mortgages that have matured from exiting its rural housing program. By not having taken the planning steps identified above, RHS is not well positioned to respond to properties that currently have maturing mortgages and require action, nor is the agency prepared for the future larger number of potential property exits that starts in 2028. In particular, without developing goals and measures, conducting sound monitoring and assessments of rural rental housing program developments, and analyzing and responding to risks, RHS may not have the key information, staff, tools, and resources in place to effectively preserve properties and prevent the financial hardship that increasing housing costs could cause rural low-income tenants or the loss of their housing altogether. RHS has options to extend loan terms in order to continue rental assistance at properties but cannot continue providing rental assistance to tenants once the loan is paid off and the property exits RHS’s affordable housing program. Some owners of properties with maturing mortgages may be open to continue offering rental assistance and agree to restrict the units to eligible low-income tenants after mortgage maturity. Further, some industry stakeholders cited that having the ability to extend existing rental assistance contracts after mortgage maturity would be useful in protecting tenants from rent increases or displacement. However, in some cases, property owners may not want to extend rental assistance contracts after mortgage maturity. Tenants living in these properties could be subject to rent increases or the risk of displacement. RHS lacks the authority to provide vouchers to tenants in these situations. Voucher assistance would allow RHS to provide assistance to the tenants to help pay for rent in their existing unit or at other rental housing in the private market without requiring the owner to serve low-income tenants exclusively. In 2016, legislation was introduced that would have allowed RHS to continue providing rental assistance to properties through new contracts with owners after their loans matured or to provide vouchers to tenants under different circumstances, including mortgage maturity. In exchange for accepting rental assistance payments on behalf of eligible tenants, the legislation would have required the property owners to enter into an agreement with RHS to ensure that the property remained subject to low- income use restrictions for an additional period of time. In cases where a new rental assistance contract is not possible, RHS would offer vouchers to tenants after mortgage maturity. The proposed legislation was introduced on April 12, 2016, but no further action on the bill was taken. In the past, Congress has taken legislative action to continue rental assistance to low-income tenants and protect them from the impact of terminated assistance. For example, beginning in fiscal year 2006, Congress has authorized RHS to provide vouchers to tenants affected by loan prepayments, which leads to the property owners’ exit of the RHS’s housing program. Tenants receiving vouchers after the prepayment of a loan could use them to remain in the property after it exits RHS’s program or to find other suitable housing in the private market. Congress has limited the amount that RHS paid in subsidies. The amount of a voucher is limited to the difference between the comparable fair market rent for the housing unit occupied by a tenant and the rent paid by the tenant on the date of prepayment or foreclosure. In addition, when the Department of Housing and Urban Development (HUD) faced a similar loss of affordable housing, Congress gave the department authority in 2011 to further protect tenants through the creation of the Rental Assistance Demonstration (RAD). Before the RAD program, HUD had limited authority to extend rental assistance at these properties when contracts expired or owners terminated contracts. However, this demonstration, among other things, allowed HUD to continue providing rental assistance to property owners after the original contracts expired. In 2014, we reported that the conversion of rental assistance should not have an effect on voucher program costs because HUD uses the same calculation for providing budget authority for the project-based vouchers converted under RAD as it does for calculating budget authority for tenant-protection vouchers. Without the authority to continue providing rental assistance or to provide vouchers to tenants at existing properties whose mortgages have matured, RHS is not well positioned to protect tenants from potential increased rents or displacement from their units. The agency could lose important sources of low-income housing, which for some communities may be the only source of affordable housing. Further, without the authority to offer vouchers to tenants living in units that received rental assistance at mortgage maturity, tenants may also face rent increases and not be able to afford their rents in properties where the owners choose not to extend their rental assistance contracts. Continued provision of rental assistance could be limited to units or tenants that were receiving rental assistance at mortgage maturity and would not represent an expansion of the number of units or tenants assisted. Furthermore, Congress could structure this to have no or limited budgetary impact, similar to what was done under HUD’s RAD program. For example, subsidies could be kept at a level that is similar to what was provided at mortgage maturity. RHS’s preservation tool is a positive first step to help the agency estimate property exit dates, alert stakeholders to properties with maturing mortgages, and begin to preserve their affordability. However, the lack of data controls for information on RHS rural rental properties raises concerns about data used by the preservation tool, especially as RHS applies preservation options that extend mortgages and result in new exit dates. The lack of controls for underlying data used by the preservation tool, and missing information on some properties, demonstrate that RHS has opportunities to improve rural housing program data as properties continue to have maturing mortgages. RHS has not been able to update the preservation tool’s data on a regular basis. Developing controls with clear guidance on the frequency and process for routinely updating data on RHS’s website could help ensure that preservation efforts are based on the most current information available. Regular updated information would also help ensure that industry and other stakeholders have the most recent information available on RHS’s rural rental housing program. While RHS has taken steps to better understand maturing mortgage challenges and preserve properties, RHS’s strategy to use the next several years to plan for the larger number of expected future maturations and test available preservation options does not address the significant number of mortgages that will mature before then. The agency has also not taken important planning steps required by federal internal control standards to establish goals and performance measures for tracking progress toward achieving goals; establish activities that monitor performance and assess results so that appropriate action is taken; and identify, analyze, and respond to risks related to achieving their goals. Actions to enhance the agency’s data and controls, and strengthen its comprehensive planning and program evaluation processes, would better position RHS to respond to maturing mortgages, preserve its rural rental housing program, and maintain affordable housing for low-income tenants. Further, the agency lacks the authority to continue rental assistance to properties with matured mortgages and is limited in its ability to issue vouchers to tenants affected by property exits. Even if the agency takes additional steps to plan for maturing mortgages or increases options and incentives for preserving housing, these limits to rental assistance and vouchers restrict RHS’s ability to protect tenants. These limits also effect RHS’s ability to meet the agency’s objective of providing decent, safe, and sanitary housing to low-income rural residents. Expanding RHS’s ability to protect existing tenants would give the agency tools that are available to other affordable rental housing programs, and could be implemented in a way to maintain, rather than increase, program size and costs. We are making the following matter for congressional consideration: For RHS properties whose mortgages have matured, Congress should consider granting RHS the authority to renew annual rental assistance payments to owners who wish to continue to receive them and provide vouchers to tenants living in rental assistance units in properties whose owners choose to no longer receive rental assistance. We are making the following five recommendations to RHS: The RHS Administrator should establish additional controls to check the accuracy of all loan information entered into RHS information technology systems, to help ensure complete, accurate, and reliable data for estimating rural rental housing property exit dates. (Recommendation 1) The RHS Administrator should establish a process to help ensure regular and frequent updates for the preservation tool and its underlying data. (Recommendation 2) The RHS Administrator should establish performance goals and measures for its rural rental housing preservation and rehabilitation efforts and report out these outcomes. (Recommendation 3) The RHS Administrator should monitor the results of rural rental housing preservation efforts and assess the degree to which those efforts yielded intended outcomes. (Recommendation 4) The RHS Administrator should identify, analyze, and respond to risks to achieving its preservation goals, including resource and staffing limitations. (Recommendation 5) We provided a draft of this report for review and comment to RHS and HUD. RHS provided technical comments, which we incorporated into the report, and stated that it agreed with all five of our recommendations but did not provide a formal agency comment letter. HUD stated that it had no comments on the draft. We are sending copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Secretary of Housing and Urban Development, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Our objectives were to examine the Rural Housing Service’s (RHS) efforts to (1) estimate the dates that properties may exit the rural rental housing program due to mortgage maturity, and (2) preserve the affordability of rural rental properties with maturing mortgages. To examine RHS’s efforts to estimate property exit dates, we analyzed RHS documentation and interviewed RHS officials about the data the agency uses to identify and preserve properties with maturing mortgages. To determine what steps RHS has taken to help ensure the accuracy and reliability of RHS’s Multi-Family Housing Property Preservation Tool (preservation tool), we reviewed documentation that included the preservation tool’s user guide, and the capabilities it offered the agency and the public. We also conducted interviews with RHS national and state office officials about the preservation tool and about how the agency’s Automated Multi-Family Housing Accounting System (AMAS) and the Multi-Family Housing Information System (MFIS) operate. AMAS contains data on loans and rental assistance contracts and MFIS tracks monthly loan and rental assistance payments and contains data on the location of RHS’s rural rental properties. Both systems provide data used by the preservation tool to calculate mortgage maturity and exit dates for rural rental housing properties. To determine how the preservation tool was built and the main information it uses to determine mortgage maturity and property exit dates, and the information it calculates for users, we interviewed the contractor hired by the agency to create and populate the preservation tool. To analyze the accuracy of AMAS and MFIS data used by the preservation tool to calculate mortgage maturity and property exit dates, we reviewed mortgage documents that RHS uses to populate those systems. We reviewed loan documents for a generalizable stratified random sample of 100 properties in five states—California; Illinois; Minnesota; Pennsylvania; and Virginia—to determine if loan information found within mortgage documents matched data contained in AMAS and MFIS for selected variables relevant to mortgage maturity and property exit date calculations. We stratified the population of 2,152 loan documents in the five states by state, number of loans per property, and age groups. We computed an initial sample size of 60 properties for a simple random sample to achieve an upper bound of no more than 5 percentage points, an expected error (inaccurate data field) rate of 0 percent, and a 95 percent confidence level. We then proportionally allocated the sample across the strata and increased sample sizes in stratum within each state so that we selected at least 10 properties with more than 1 loan and 10 properties older than 20 years old. States we visited were selected based on their geographic diversity, diversity (age and size of program) of rural rental housing properties, and their proximity to GAO offices. To select properties’ loan files for this review, we created a nongeneralizable sample of 20 properties in each of the five states. We also interviewed agency officials knowledgeable about the data— including officials from RHS, Rural Development’s Office of Operations and Management, and the U.S. Department of Agriculture’s (USDA) National Financial and Accounting Operations Center—about the processes used to populate these systems and any quality checks in place for ensuring that data were inputted completely and accurately, including any available documentation on these steps. We also interviewed RHS state office officials, who service loans, about the process for identifying errors in these systems and making corrections. To determine which rural rental housing properties were estimated to exit the RHS program and where these properties were located, we analyzed RHS’s raw data from June 2017 (the latest available RHS data). We analyzed the data to determine the number of properties, units, and rental assistance units with property exit dates by state and by year from 2017 to 2050. We also generated summary statistics on the number of properties that were eligible to prepay their mortgages. In assessing RHS’s data we also conducted checks on the data for outliers and missing information. Although we found a selected number of data anomalies that point to the need for better data controls, we determined the data we used were sufficiently reliable for purposes of describing the estimated number of properties that could exit the RHS program between 2017 and 2050. To better understand the calculations used by the preservation tool, we reviewed the logic or code it uses to calculate mortgage maturation dates. For this analysis, we used documentation on the program used to generate estimates and compared this documentation to the code to see if there were any operational differences. Additionally, we reviewed each of the functions within the logic and looked for inconsistencies in logic or deviations from financial convention that might cause incorrect predictions. To examine steps RHS has taken to preserve properties with maturing mortgages, we reviewed documents that listed options available for retaining properties with maturing mortgages. We gathered and analyzed documentation on any comprehensive planning efforts by RHS to address rural rental housing maturing mortgages, including documentation showing preservation goals and measures, and any assessments of RHS’s plans, efforts, or resources needed to address maturing mortgages. We also analyzed documentation and interviewed national and state RHS officials about any training and guidance that was being provided to staff on maturing mortgages. In addition, we interviewed RHS national and state officials about what tools, resources, and plans were in place for addressing maturing mortgages and their limits. Further, we asked about ongoing efforts to address maturing mortgages, including any plans to obtain additional resources for managing maturing mortgages now and in the future when a larger number of properties are expected to have loans mature. We reviewed and interviewed officials about studies commissioned by RHS on the effects of maturing mortgages on the rural affordable rental housing program and affected communities and on program-wide rehabilitation needs and cost estimates. We also assessed how the studies and reports were conducted for any flaws in their approaches and methodologies. To determine stakeholder perspectives on how RHS was managing maturing mortgages, we interviewed officials from a judgmental sample of rural housing industry organizations. We took multiple steps to identify these industry organizations. First, we met with an affordable housing organization with a national membership that represents owners; developers; housing advocates; and tenants. We asked this national organization to identify industry organizations that work with RHS. From that list, we focused on organizations that also had a multi-state or national focus. Second, during interviews with these organizations, we requested additional contacts. We interviewed organizations that were named during multiple interviews. This selection process allowed us to identify stakeholders that represented a diverse range of roles in the rural housing industry including: developers, borrower and tenant advocacy organizations, and organizations advocating for the retention or expansion of affordable housing. To determine how other agencies approached expiring rental assistance contracts and low-income housing preservation, we also interviewed Department of Housing and Urban Development officials. More specifically, we determined what key steps and best practices the department used to preserve its multifamily housing program properties, including properties with maturing mortgages, and what tools and resources were required for managing its housing program. We conducted this performance audit from May 2016 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Harry Medina (Assistant Director); Steve Ruszczyk (Analyst in Charge); Holly Hobbs; Enyinnaya David Aja; Jim Ashley; Stephen Brown; William Chatlos; DuEwa Kamara; John McGrail; Marc Molino; and Tovah Rom made key contributions to this report.", "summary": "Under its rural housing program, RHS provides mortgages and rental assistance to support affordable rental units for low-income tenants (see figure). When these mortgages reach the end of their terms (mature), property owners may exit the program; current law does not allow RHS to continue providing rental assistance when such exiting occurs. As a result, tenants in properties with mortgages that are maturing may face rent increases or lose their housing altogether. GAO was asked to examine how RHS is addressing the risks posed by maturing mortgages. This report examines RHS's efforts to (1) estimate rural housing property exit dates and (2) preserve the affordability of rural rental properties with maturing mortgages. GAO reviewed RHS mortgage loan data and preservation documents, and interviewed RHS officials and industry stakeholders. The U.S. Department of Agriculture's Rural Housing Service (RHS) implemented an automated tool to estimate when properties could exit the rural rental housing program, but RHS lacked sufficient controls to ensure the accuracy, completeness, and timeliness of those estimates. In 2016, RHS developed its Multi-Family Housing Property Preservation Tool to replace a manual process of estimating exit dates. RHS data suggest that a smaller number of properties could exit RHS's program in the near term, but between 2028 and 2050, over 90 percent of RHS's properties and units could exit the program (about 13,000 properties with 407,000 units). However, RHS lacked controls that would better ensure the accuracy and completeness of these estimated exit dates, such as the verification of key data input at mortgage origination. In addition, RHS had not established a regular process to update the preservation tool's underlying data due to staff turnover and data system challenges. Without these controls, RHS may lack assurance that is has reliable data for calculating exit dates and initiating preservation efforts. While RHS has taken actions to address properties with maturing mortgages, such as offering property owners options designed to prevent property exits, about 60 percent of properties with maturing mortgages exited the program between 2014 through 2017. The agency's planning efforts lacked key steps such as (1) establishing preservation goals, (2) developing metrics for evaluating preservation efforts, and (3) analyzing and responding to risks facing its portfolio such as resource limits and growing capital rehabilitation needs. Without taking these actions, RHS is not well positioned to preserve affordable housing in the near term or when much larger numbers of properties and units could exit the program starting in 2028. Although taking the steps above would help RHS's preservation efforts, some tenants may still be at risk of losing rental assistance when mortgages mature. Accordingly, allowing RHS to renew rental assistance after mortgage maturity could protect assisted low-income tenants from increased rents or displacement from their units. When the Department of Housing and Urban Development (HUD) faced a similar loss of affordable housing subsidies, Congress authorized the department in 2011 to continue providing rental assistance at properties after contracts expired. Congress should consider granting RHS authority to continue providing rental assistance to tenants in properties with maturing mortgages. GAO is also making five recommendations, including that RHS improve data quality and take steps to comprehensively plan for preserving properties with maturing mortgages. We provided a draft of this report for review and comment to RHS and HUD. RHS agreed with all five of GAO's recommendations.", "document_type": "gao"}
{"report": "FHWA and FTA fund and oversee highway and transit projects, respectively. FHWA funds highway projects through formula grants to state DOTs, provides technical expertise to state DOTs, and conducts oversight of highway projects through its division offices in each state. FTA funds a variety of transit programs through formula and competitive grants and conducts oversight of transit projects’ planning and design through 10 regional offices. Completing major highway and transit projects involves complex processes that depend on a wide range of stakeholders conducting many tasks. Project sponsors—the state DOTs and local transit agencies—are the entities that develop the environmental review documents to be approved by the federal agencies. Examples of highway projects that may undergo environmental review are bridge construction or roadway repaving, and examples of transit projects include extension of light rail lines or construction of passenger ferry facilities. Project sponsors that do not use federal funds for a project generally do not need to meet NEPA requirements, but may still need to satisfy state or local environmental review requirements. As we have previously reported, highway projects typically include four phases, and transit projects also follow similar processes. 1. Planning: Project sponsors assess the need for a project in relation to other potential transportation needs. 2. Preliminary design and environmental review: Project sponsors identify potential transportation solutions based on identified needs, the potential environmental and social effects of those solutions, a project’s cost, and construction location. They then analyze the effect, if any, of the project and potential alternatives on the environment. Based on the analysis as well as public input the preferred alternative is selected. 3. Final design and right-of-way acquisition: Project sponsors finalize design plans and, if necessary, acquire private real property for the project right-of-way and relocate any affected residents and businesses. 4. Construction: Project sponsors award construction contracts, oversee construction, and accept the completed project. In the preliminary design and environmental review phase, many activities are to be carried out by the project sponsor pursuant to NEPA and other federal laws. NEPA’s two principal purposes are to ensure (1) that an agency carefully considers detailed information concerning significant environmental impacts and (2) that environmental information is available to public officials and citizens before decisions are made and actions are taken. For highway and transit projects, the project sponsor is responsible for preparing documentation showing the extent of the project’s environmental impacts, in accordance with NEPA, and determining which of the three following documentation types is needed: An environmental impact statement (EIS), the most comprehensive of the three documentation types, is required for projects that have a significant effect on the environment. In broad terms, the lead federal agency, FHWA or FTA, starts the EIS process by publishing a notice of intent in the Federal Register. The lead agency then must engage in an open process—inviting the participation of affected government agencies, Indian tribes, the proponent of the action, and other interested persons—for determining the scope of issues to be addressed and for identifying the significant issues related to a proposed action. The lead agency then is to coordinate as appropriate with resource agencies, such as the U.S. Army Corps of Engineers or the Fish and Wildlife Service, solicit comments from the public on a draft EIS, incorporate comment responses as appropriate into a final EIS, and issue a record of decision. Project sponsors are to prepare environmental assessments when, among other things, it is not clear whether a project is expected to have significant environmental impacts. An environmental assessment is intended to be a concise document that, among other things, briefly provides sufficient evidence and analysis for determining whether to prepare an EIS. If the agency determines that there are no significant impacts from the proposed action, then the agency prepares a Finding of No Significant Impact that presents the reasons why the agency made that determination. If the agency determines the project may cause significant environmental impacts, it conducts an EIS. Categorical exclusions refer to projects that would not individually or cumulatively have a significant effect on the environment. These projects generally require no or limited environmental review or documentation under NEPA. Examples of highway projects that are generally processed as categorical exclusions include resurfacing roads, constructing bicycle lanes, installing noise barriers, and landscaping. While FHWA and FTA are the federal agencies responsible for ensuring NEPA compliance on highway and transit projects, if certain requirements are met, FHWA or FTA may assign a state and that state may assume federal NEPA authority. States assume this authority subject to the same procedural and substantive requirements as would apply to FHWA or FTA. Specifically, the NEPA Assignment Authority provision provides authority for FHWA to assign federal NEPA authority to states for approving an EIS, environmental assessment, or categorical exclusion. States must apply to FHWA or FTA, which reviews the state’s suitability to assume the authority based on meeting certain regulatory requirements and the state’s capability to assume the responsibility. States must enter into a written memorandum of understanding (MOU) and must, among other things, expressly consent to the jurisdiction of federal courts by waiving sovereign immunity for any responsibility assumed for NEPA. The MOU is for a term of not more than 5 years and is renewable. MOUs are unique to each state; however they all contain certain sections such as assignments of authority, acceptance of jurisdiction, and performance measures. For the first 4 years, FHWA is to conduct an annual audit to ensure compliance with the MOU, including compliance with all federal laws. After the fourth year, FHWA is to continue to monitor state compliance with the MOU, using a more limited review. In prior reports, we identified a number of factors that can affect the length of time required to complete transportation projects. For highway projects, we found that the large number of stakeholders and steps (which include environmental reviews) in the project delivery process, availability of funding, changing priorities, and public opposition can lead to longer project time frames. For transit projects, we found that local factors specific to each project determine the project development time frame, including the extent of community support and extent of local planning prior to approval of funding. We found that for 32 projects we reviewed, the environmental review process was tied with stakeholder coordination as the third most frequently cited factor by transit project sponsors contributing to the length of the project development process. We identified 34 project delivery provisions that apply to highway projects and 29 such provisions that apply to transit projects. These provisions are intended to streamline various aspects of the NEPA process, making it more efficient and timely. Most of the provisions apply to both types of projects. Based on our review, we grouped the provisions into four general categories: Accelerated NEPA Review, Administrative and Coordination Changes, NEPA Assignment, and Advance Planning (see table 1). See appendix III for the full list and a description of each project delivery provision we identified. The Accelerated NEPA Review category’s provisions generally establish certain conditions that permit projects, if the specific conditions are applicable, to exclude certain actions from a more detailed NEPA review. For instance, these provisions are primarily comprised of new categorical exclusions. Additionally, the Minor Impacts to Protected Public Land provision authorizes a historic site, parkland, or refuge to be used for a transportation project if that project is determined to have a de minimis impact on the environment. The Administrative and Coordination Changes category’s provisions are more process oriented. These provisions, for example: (1) establish time frames for parts of the NEPA review process, (2) encourage the use of planning documents and programmatic plans as well as a coordination plan for public and federal agency participation in the environmental review process, and (3) seek to avoid duplication in NEPA review documents. The NEPA Assignment category’s provisions authorize FHWA or FTA, as discussed above, to assign their NEPA authority to states. The first of the two provisions—the ‘NEPA Assignment Authority’ provision—authorizes FHWA or FTA to assign federal NEPA authority to states for reviewing EIS, environmental assessment, and some categorical exclusion reviews, so long as the categorical exclusion does not require an air-quality review that involves the Environmental Protection Agency. The second provision—the Categorical Exclusion Determination Authority provision— allows FHWA or FTA to assign limited NEPA authority to states to review categorical exclusions. This authority can apply to categorical exclusions with air-quality reviews, as well as all other categorical exclusions. The Advance Planning category’s provisions are not part of the agency’s environmental review process and are not applicable to transit projects. These provisions allow for certain activities in the highway project development cycle, such as land acquisition, to occur prior to NEPA approval. The three provisions in this category include the following: The Advance Design-Build Contracting provision permits a state to release requests for proposals and award design-build contracts prior to completing the NEPA process; however, a contractor may not proceed with final design or construction during the NEPA process. The Advance Acquisition of Real Property provision authorizes states to acquire real property interests, such as land, for a project before completion of the NEPA process. The 2-phase Contracts provision authorizes the awarding of contracts on a competitive basis for preconstruction services and preliminary project design before the completion of the NEPA process. Most of the project delivery provisions are optional, which we define to mean that the relevant entities (a federal agency or state or local transportation agency), can choose to use the provision if circumstances allow. For example, a state highway project within an existing operational right-of-way may have the option to use the categorical exclusion for projects within an existing operational right-of-way. Specifically, 22 of the 34 highway project delivery provisions and 17 of the 29 transit project delivery provisions are optional. By contrast, 12 provisions are requirements for both highway and transit projects, which we define to mean that federal agencies, or state or local transportation agencies that are subject to a provision must adhere to the requirements and obligations in the provision, if all the conditions for its use have been satisfied. Required provisions are primarily contained in the Administrative and Coordination Changes category. For example, for highway projects, the Programmatic Agreements for Efficient Environmental Review provision, enacted in 2012, requires FHWA to seek opportunities with states to enter into agreements that establish streamlined processes for handling routine projects, such as highway repair. Prior to 2012, FHWA actively encouraged programmatic agreements between state DOTs and FHWA division offices, but seeking opportunities to enter such agreements were not required. According to survey responses, 10 of the 17 optional provisions included in the survey—which primarily fall under the Accelerated NEPA Review category—were each used by 30 or more state DOTs (see fig. 1). Fifty state DOTs reported using the Minor Impacts to Protected Public Land provision—the most of any of the provisions. Some of the less widely used provisions—the 7 provisions reported to be used by 21 or fewer states—only apply to specific circumstances or highway projects that many state DOTs undertake less frequently. For example, the Categorical Exclusion for FHWA-funded Ferry Facility Rehabilitation or Reconstruction provision would only apply to states that operate ferry services, a circumstance that may explain its relatively low use. Also, for 3 of these 7 provisions, 10 or more states reported that they plan to use the provision in the future. For example, while 21 state DOTs used the Reduce Duplication by Eliminating Detailed Consideration of Alternative Actions provision, an additional 17 state DOTs reported that they plan to use it. All of the optional provisions were reported to be used by at least 14 state DOTs. Some states reported that they have not used certain provisions and have no plans to do so. Our survey served as a nationwide review of the use of the provisions and was not designed to determine why each state did or did not use each provision. However, our discussions with selected states and optional comments provided in the survey provided some additional insight into states’ use of the provisions. Officials at some state DOTs reported that they had not used certain categorical exclusions because other categorical exclusions could also apply to those projects. Specifically, officials in 4 state DOTs told us that they did not use 4 categorical exclusion provisions for this reason. For example, officials at the Colorado DOT said that the Categorical Exclusion for Geotechnical and Archeological Investigations provision has not been used in Colorado because other categorical exclusions were more applicable. Similarly, officials at the Oklahoma DOT said that they had not used the Categorical Exclusion for Projects within the Existing Operational Right-of-Way provision because most of those projects already qualify for a categorical exclusion under other criteria. For other provisions, such as the Categorical Exclusion for Multimodal Projects provision, some state DOTs, such as the Nebraska DOT, indicated that they do not conduct multimodal projects and have no plans to do so for the foreseeable future. For 11 of the 17 optional provisions included in our survey, a majority of state DOTs that indicated they used the provisions (users) reported that the provisions sped up project delivery (see fig. 2). Over 90 percent of users of the Minor Impacts to Protected Public Land provision reported that it sped up project delivery (46 out of 50 state DOTs using the provision). FHWA officials said that without the Minor Impacts to Protected Public Land provision, a state DOT would need to complete an environmental assessment to show that performing even a small project, such as adding a small bus stop on the periphery of a park, would not have significant effects on the environment. The Minor Impacts to Protected Public Land provision now allows a state DOT to complete transportation projects that have a minimal environmental effect on historic sites and parklands more quickly because the state DOT can bypass the environmental assessment process. In our survey and discussions with state DOTs, some officials noted how much time the provision can help them save. Officials at the Virginia DOT estimated that a 9-month to 1-year review could be cut to 2 to 4 months. An official at the Colorado DOT said that reviews that used to take 6 months now take 30 days. And officials at the Mississippi DOT said that they used the provision when adding turn lanes near parks and were able to bypass a review process that previously took 6 to 12 months. Other examples of sped-up project delivery provided by state DOTs include the following: Categorical Exclusion in Emergencies provision: Mississippi DOT officials said that this provision has been helpful, particularly given project delivery lessons learned since Hurricane Katrina. They said the provision allows the state DOT to use a categorical exclusion, which takes 6 to 8 months for some projects, in place of an environmental assessment, which can take 12 to 18 months and involves additional review steps such as providing evidence and analysis as to why a project does not require an EIS. Use of Federal Highway or Transit Funds to Support Agencies Participating in the Environmental Review Process provision: Arizona DOT officials said that the state DOT funds positions in the Army Corps of Engineers and the Fish and Wildlife Service that help lessen the time it takes for those agencies to provide comments on Arizona DOT project’s NEPA reviews. The officials estimated these positions reduce review time by about one month compared to when these agencies did not have Arizona DOT-funded positions. For the remaining six optional provisions, 41 to 58 percent of users reported that the provisions had no effect on project delivery. Based on discussions with selected state DOTs and comments included with survey responses, officials at some state DOTs reported that the provisions did not have any effect because the states had already developed similar processes, either through programmatic agreements with their FHWA division office or at their own initiative. As a result, the state DOTs did not realize any new time savings after the provisions were enacted in law. For example, for each of three provisions that allow for certain documentation to be eliminated for categorical exclusions, officials at seven state DOTs reported that they had already developed similar processes through programmatic agreements with their FHWA division office. Further, five state DOTs reported that the Early Coordination Activities in Environmental Review Process provision had no effect because they already had a similar coordination process in place. Some states used such a process at their own initiative and others in conjunction with their FHWA division office. Of the 12 required provisions—which fall into the Administrative and Coordination Change category—only the Programmatic Agreements for Efficient Environmental Review provision was reported by a majority of state DOTs (39) to have sped up project delivery (see fig. 3). For example, officials at the Mississippi DOT reported that a programmatic agreement with the FHWA division office can allow it to save 6 to 8 months when processing categorical exclusions for projects with minimal right-of-way acquisition. They explained that they no longer had to wait for the FHWA division office to process the categorical exclusion. As previously discussed, prior to 2012, FHWA actively encouraged, but did not require, programmatic agreements between state DOTs and FHWA division offices. In interviews and optional comments from the survey, officials reported that programmatic agreements, both those entered into before and after the enactment of the provision, had sped up project delivery. We did not determine the number of state DOTs that attributed the speed up in project delivery to the 2012 provision, as opposed to those who attributed it to the earlier programmatic agreements with their FHWA division offices. All of the required provisions reportedly sped up project delivery for at least 4 state DOTs. For 5 of the 12 provisions, between 10 and 18 states responded that the provisions sped up project delivery. For example, officials at the Ohio DOT estimated that the Combine Final Environmental Impact Statement and Record of Decision in Certain Cases provision saves them a minimum of 3 months. For the remaining 6 provisions, between 4 and 7 states reported that the provisions sped up project delivery, but each of these provisions also had at least 16 states that reported the provision had no effect on project delivery. Our survey served as a broad-based review of the effects of the provisions and was not designed to determine why each provision had the reported effects; however, some states provided voluntary comments in the survey. As with various optional provisions, some state DOT officials reported no effect because the state had already developed processes and practices that they said achieved what the provisions formalized, for example: Coordination Plan for Public and Agency Participation provision: In discussions and from optional comments, 4 state DOTs said that they already had a similar process in place. Officials at the Louisiana DOT stated that they performed a similar process prior to the ‘Coordination Plan for Public and Agency Participation’ provision’s enactment in law in an effort to coordinate with the public and other government agencies. 45-Day Limit to Identify Resource Agencies provision: In interviews and optional survey comments, officials at 2 state DOTs said that they already had a similar process in place to promptly identify stakeholder agencies. Issue Resolution Process provision: Wyoming DOT officials said that they had been performing a similar process prior to this provision’s enactment in law to ensure consensus among stakeholders. Some state DOTs reported that it was too early to determine the effects of several provisions, particularly more recently enacted provisions. For 5 of the 12 required provisions, more than one third of state DOTs (over 17 states) reported that it was too soon to judge the provisions’ effects. Four of these 5 provisions were enacted in the FAST Act in 2015. Consequently, state DOTs that used the provision had a short window of time to assess any potential effect on project delivery—particularly given that highway projects often take a number of years to complete. Also, while our survey did not ask state DOTs when they had most recently initiated an EIS, several state DOTs voluntarily noted that they had not done so since the FAST Act. Certain provisions apply only to projects undergoing an EIS; states that have not done an EIS since such provisions were enacted would not have had the opportunity to use the provision. One such provision is the 45-Day Limit to Identify Resource Agencies provision, for which 19 state DOTs reported that it was too early to judge the effects. For 5 of the 12 provisions, a relatively few state DOTs, between one and eight, reported that the provision had slowed down project delivery. Eight states reported that the Coordination Plan for Public and Agency Participation provision slowed down project delivery, the most for any provision. According to the Minnesota DOT, this provision slowed down project delivery because it formalized and required a specific coordination process in addition to those that had already been voluntarily occurring with relevant federal and state resource agencies. Formalizing this process resulted in resource agencies taking longer to provide responses to the Minnesota DOT. Other states similarly said that this provision’s additional formal processes slowed down project delivery. We defined required provisions to mean that federal agencies or state or local transportation agencies that are subject to the provision must adhere to requirements and obligations in the provision, if all the conditions for its use have been satisfied. States may not have had the opportunity to apply some of the required provisions that apply to them because they did not have exposure to the circumstances and conditions that would invoke this provision’s use. For example, a state would not be exposed to the 150-Day Statute of Limitations provision if it had not been subject to a lawsuit. Unlike the optional provisions, we did not ask states whether they elected to use the required provisions since state DOTs, if subject to the provision, must adhere to the requirements and obligations in the provision. Two of the three provisions from the Advance Planning category were used by a majority of the 10 state DOTs we interviewed, and most of the state DOTs that used each provision stated that it sped up project delivery. This use is illustrated more specifically: Advance Design-Build Contracting provision: 8 state DOTs used this provision, 5 of which reported it sped up highway project delivery. Advance Acquisition of Real Property provision: 6 state DOTs used this provision, 4 of which reported it sped up highway project delivery. 2-phase Contracts provision: 5 state DOTs used this provision, 4 of which reported it sped up highway project delivery. Some state DOT officials provided examples of how the provisions affected their project delivery. For example, California DOT officials said that the Advance Acquisition of Real Property provision saved them a few months on small projects, involving one or two parcels of land; for a large project involving hundreds of commercial and residential parcels, they estimated time savings of more than a year. Similarly, Illinois DOT officials said that the provision has yielded time savings of 6 months to a year in instances where the DOT needs to purchase residential property. More than two-thirds of the provisions designed to speed up transit project delivery were reportedly used by 11 selected transit agencies. We asked officials in selected transit agencies to report their use of 29 project delivery provisions applicable to transit agencies, 17 of which are optional and 12 of which are required. Of the 29 provisions, 6 were used by 4 or more selected transit agencies (see fig. 4). The most used optional provision, by 7 transit agencies, was the Minor Impacts to Protected Public Land provision described earlier followed by the Planning Documents Used in NEPA Review provision, used by 6 transit agencies. Some transit agencies told us that the provisions they used sped up project delivery. In addition, some provided estimated time savings. Chicago Transit Authority (CTA) officials told us that the Minor Impacts to Protected Public Land provision was extremely helpful for recent CTA projects involving historic properties. For example, CTA has implemented projects that involve track work at a station that is adjacent to a historic boulevard. They estimated that the Minor Impacts to Protected Public Land provision has reduced the time to complete documentation by several months. Similarly, a Tri-County Metropolitan Transportation District of Oregon official stated the Minor Impacts to Protected Public Land provision has been instrumental since in the past, the agency would have to stop the project if it affected a park land. Southeastern Pennsylvania Transportation Authority (SEPTA) officials told us that they used the Categorical Exclusion for Minor Rail Realignment provision one or two times within the past 2 years. SEPTA estimated the provision saved the agency several months in time savings per project. Officials stated that the provision allowed the SEPTA to use a categorical exclusion in place of an environment assessment. SEPTA officials also said they saved staff time and approximately $100,000 a year in consultant fees and agency staff resources by using the Categorical Exclusion for Preventative Maintenance to Culverts and Channels provision. Capital Metro officials in Austin, Texas, told us they used the Categorical Exclusion for Projects within the Existing Operational Right-of-Way provision for a rail right-of-way project. They estimated the provision helped save at least 4 to 6 months in project delivery because the agency was not required to do an environmental assessment. While some selected transit agencies reported using some provisions and added that this provision’s use helped speed up project delivery or lower costs, the effects of the provisions—whether they sped up project delivery or streamlined the NEPA review process—were not clear to a majority of the selected transit agencies. Because transit agencies in our review do not track NEPA reviews—including their start and end dates—they were not able to assess how project time frames or costs were affected by the provisions. Officials from several selected transit agencies told us that their understanding of the project delivery provisions’ effects was also limited by their reliance on engineering and environmental-planning consultants to prepare their NEPA documents. Officials from 4 of the 11 transit agencies told us that they rely on these consultants’ knowledge of the provisions to prepare their NEPA documents. Further, officials from 1 transit agency said they required the assistance of their consultants to respond to our requests for information. Nine of the 29 provisions were not used by any of the agencies, and no provision was used by more than 7 agencies. Our discussions with selected transit agency and FTA officials provided some insight into transit agencies’ use of the provisions, specifically: Limited transit projects needing EISs: Transit agencies that do not prepare EISs may have fewer opportunities to use some of the provisions. Following discussions with FTA officials, we examined the number of times transit agencies filed a notice of intent to prepare an EIS in the Federal Register from 2005 through 2016 as a proxy to identify those transit agencies that would likely use a number of the project delivery provisions. We found that 48 transit agencies (out of several hundreds of transit agencies) filed notices of intent from fiscal year 2005 through 2016 but that of the 48 transit agencies, 34 had filed a notice of intent only once during that time. In general, the vast majority of transit agencies have little recent experience preparing EIS documentation and using the provisions that are triggered by an EIS. For example, only one transit agency (Tri-County Metropolitan Transportation District of Oregon) had filed a notice of intent to prepare an EIS after the FAST Act was enacted in 2015. Duration of transit projects: Some instances where transit project delivery provisions were not used could be due to the number of years it takes to complete transit projects. According to FTA officials, where sponsors for highway projects may have new projects initiating and requiring NEPA reviews on a rolling basis, transit agencies operate differently. A transit agency may have a project that goes through a NEPA review and then begins construction of the project that can last a number of years. The transit agency may not have another project that requires an EIS for several years. For example, New York Metropolitan Transportation Authority (MTA), the largest transit agency by ridership in the country, completed its last EIS review in 2004 and has since been working on construction of that project, according to FTA officials. While MTA has been receiving FTA funds for construction, no additional project has undergone an EIS. Changing provisions and delayed guidance: Some transit agency officials told us that the changing provisions across the three enacted surface transportation authorization acts pose challenges to using the project delivery provisions. Understanding the changes in the project delivery provisions—for example, changes in categorical exclusions— included in SAFETEA-LU, MAP-21, and the FAST Act was challenging according to some selected transit agencies. Further, some transit agency officials stated that the lag time in receiving guidance from FTA on the changing provisions also posed challenges to using some of the provisions. DOT, specifically FHWA, has assigned its NEPA approval authority to six states, and other states are interested in this authority. Of the six states, California and Texas have completed some NEPA reviews and determined they have achieved time savings through state approval of NEPA documents rather than federal approval. However, we found the reported time savings to be questionable for several reasons, including challenges faced by California and Texas in establishing sound baselines for comparison. Despite this finding, the reported time-savings information is used by other states to seek out NEPA authority and in reporting to DOT and Congress. FHWA focuses its oversight of NEPA assignment states on ensuring these states have the processes in place to carry out FHWA’s NEPA responsibilities, according to a written agreement between each state and FHWA, and does not focus on determining whether states are achieving time savings. FHWA has assigned its NEPA authority to six states, enabling those state DOTs to assume FHWA’s authority and approve state-prepared NEPA documentation for highway projects, in lieu of seeking federal approval. California’s NEPA authority began in 2007, as the first state in the then- pilot program, and continued when the program was made permanent in 2012. Once eligibility expanded to all states, Texas became the second state to be assigned NEPA authority, in 2014, followed more recently by Ohio in 2015, Florida in 2016, and Utah and Alaska in 2017. The 2005 Conference Report accompanying SAFETEA-LU indicates that the NEPA Assignment Authority provision was created to achieve more efficient and timely environmental reviews, which are a key benefit sought by participating states. The report states that the NEPA assignment program was initially created as a pilot program to provide information to Congress and the public as to whether delegation of DOT’s environmental review responsibilities resulted in more efficient environmental reviews. In addition, in MAP-21, Congress declared that it is in the national interest to expedite the delivery of surface transportation projects by substantially reducing the average length of the environmental review process. State DOT officials from the five NEPA assignment states we reviewed cited anticipated time savings or greater efficiency in environmental review as a reason for taking on this authority. For example, Texas DOT officials said they expected to save time by eliminating FHWA approval processes that they described as time consuming. With NEPA authority, the state puts in place its own approval processes to carry out the federal government’s NEPA review responsibilities, and agrees to take on the risk of legal liability for decisions made in this capacity. Additional states have expressed interest and have taken steps to apply for NEPA authority. Officials from three state DOTs told us they plan to apply for NEPA authority, and one of these, the Arizona DOT, has taken the first step in the process and obtained the requisite changes in state law. In explaining the anticipated benefits of NEPA assignment to the state legislature, an Arizona DOT official cited time savings reported by California and Texas as a reason for taking on the application process. Time savings’ results had been shared by California and Texas DOT officials during a peer exchange event held by an association of state highway officials in 2015 for states that are in the early stages or are considering applying for NEPA authority. Also, the Texas DOT had testified before a congressional committee in 2015 and described the time savings for environmental assessment reviews under its NEPA authority and its role communicating this information to other states pursuing NEPA authority. The MOUs, signed with FHWA by each of the five states we reviewed, set out performance measures for comparing the time of completion for NEPA approvals before and after the assumption of NEPA responsibilities by the states. To calculate time savings, each state has established a baseline—of the time it took to complete NEPA review before it assumed NEPA authority—to compare to the time it takes to complete NEPA review after assuming NEPA authority. The baseline is to serve as a key reference point in determining the efficiency of state-led NEPA reviews. Thus far, the two states that have had NEPA authority long enough to report results are California and Texas, and only California has reported results for EISs. The California DOT reported that its EIS reviews now take about 6 years to approve, which it determined to be a 10-year improvement over the 16-year (15.9 years) baseline the state DOT established. For environmental assessment reviews, the California DOT reported completion times of about 3.5 years, which it determined to be a 1-year improvement over the established baseline. The Texas DOT has not started and completed an EIS review since assuming NEPA authority but reported that its environmental assessment reviews have taken about 1.5 years, compared to the baseline of almost 2.5 years. However, we found California and Texas DOTs’ reported time savings to be questionable due to the methods used to compare time frames and challenges associated with establishing baselines. First, there is an inherent weakness in comparing the NEPA review time frames before and after NEPA authority because the comparison does not isolate the effect of assuming NEPA authority on NEPA review time frames from other possible factors. As discussed earlier, we have previously found that such factors include the extent of public opposition to a project and changes in transportation priorities, among other factors. Further, according to a report from the American Association of State Highway and Transportation Officials, such a comparison does not include information to control for non-environmental factors that are important to project delivery time frames, including delay in completion of design work necessary to advance the environmental review and changes in project funding that put a project on hold. Moreover, neither California nor Texas DOTs’ time frame comparisons isolate the effects of NEPA assignment from other streamlining initiatives that may have helped accelerate delivery of projects, such as potential benefits realized from other project delivery provisions. Second, California and Texas have faced challenges creating appropriate baselines. States are responsible for determining how many and which projects to include in baseline calculations and adopting their own methodologies. While circumstances and conditions are different across states and states can be expected to have different experiences, California’s current 16-year EIS baseline is over double that of Texas’ EIS baseline. In 2012, we found that for the 32 projects in which FHWA was the lead agency and signed the EIS in fiscal year 2009, the average time to complete the process was about 7 years. According to information contained in California DOT reports to the state legislature from 2007 and 2009, California’s original baseline for EISs was comprised of 1 project that resulted in an EIS baseline of 2.5 years. In 2009 state DOT officials increased the number of EIS projects in order to achieve what they viewed as a more representative mix. This process increased California’s EIS baseline six-fold, which has been consistently used since that time. Specifically, California used the median of five projects that had review times of around 2.5 years, 6.2 years, 15.9 years, 16.6 years, and 17.3 years. These projects were selected because they were among the final EIS projects that were reviewed prior to California’s assuming NEPA authority. However, the EIS baseline may not be meaningful. First, it includes outlier projects, which are projects that take much longer than usual to complete. According to California DOT officials, this factor is a limitation to determining time savings because the outliers increased the EIS baseline and therefore makes subsequent time savings look greater than they are. Next, despite the increase in EIS projects included in the baseline, a 2016 California DOT report to the state legislature stated that this new EIS baseline may still not be meaningful because of the relatively small sample size, and therefore the inferences that can be made from EIS analysis on time savings are limited. The report caveats that “the EIS analysis should not be used as a major indicator of the effectiveness of NEPA assignment,” but still reports the EIS analysis results. However, California DOT uses the figure in determining and reporting time savings. For example, information available on the California DOT’s web site as of November 2017 presents these data and states that they are evidence of saving “significant time in reviewing and approving its NEPA documents since undertaking NEPA assignment.” Moreover, the California DOT’s reported median time frame of 6 years for EIS reviews only accounts for those projects that have both started and completed their environmental review since the state assumed NEPA authority. As only 10 years have passed since California assumed NEPA authority in 2007, all EIS reviews started and completed since 2007 automatically have shorter time frames than the 16-year baseline. Thus, it will be 2023 before any EIS reviews in California could equal the baseline, let alone exceed it, making any EIS review started after assumption of NEPA authority and completed before 2023 appear to demonstrate time savings. Texas DOT officials stated that they had challenges determining a baseline for environmental assessments because there is no nationally accepted standard definition of when an environmental assessment begins. Moreover, Texas DOT recently revised its environmental assessment baseline, reducing it from 3 years to 2.5 years and including projects over a 2-year period instead of a longer 3-year period due to uncertainties with quality of the older data, according to Texas DOT officials. Texas also included, then excluded three outliers from its revised baseline (reviews that took between 6 and 9 years to complete) because officials determined they were not representative of typical environmental assessment reviews. While improving project data to create more accurate baselines is beneficial, it also results in different time savings’ estimates over time and illustrates the challenges of constructing sound baselines. As previously discussed, states that are considering or have recently decided to assume NEPA assignment authority have relied, at least in part, on time savings reported by California and Texas. As additional NEPA assignment states begin calculating and reporting time savings as outlined in their MOUs with FHWA, the inherent weakness of a pre- and post-assignment baseline comparison, combined with challenges establishing sound baselines, creates the potential for questionable information about the program’s effects to be reported and relied upon by other states considering applying for NEPA assignment. Questionable information also negatively affects DOT’s and Congress’ ability to determine whether NEPA assignment is having its intended effect and resulting in more efficient environmental reviews. FHWA focuses its oversight of NEPA assignment states through audits and monitoring to ensure that states have the processes in place to carry out FHWA’s role in the NEPA process and that they comply with the MOU agreed to between FHWA and each of the NEPA assignment states. According to the MOUs, FHWA’s annual audits include evaluating the attainment of performance measures contained in each MOU. Each of the five MOUs contains four performance measures including: (1) documenting compliance with NEPA and other federal laws and regulations, (2) maintaining internal quality control and assurance measures for NEPA decisions including legal reviews, (3) fostering communication with other agencies and the general public, and (4) documenting efficiency and timeliness in the NEPA process by comparing the completion of NEPA documents and approvals before and after NEPA assignment. According to FHWA officials, the agency interprets evaluating the attainment of performance measures contained in the MOU as ensuring that the state has a process in place to assess attainment. For the efficiency and timeliness measures, FHWA does not use its audits to measure whether the state is achieving performance goals. FHWA only ensures that the state has a process in place to track the completion of NEPA documents and approvals before and after NEPA assignment, and that states follow the process, according to FHWA officials. For example, FHWA officials from the California division office stated that they did not assess the baseline methodology or assess its validity or accuracy. FHWA’s Texas division officials added that setting the baseline has not been an FHWA role. FHWA does not assess or collect information on states’ calculations of their time savings from NEPA assignment. FHWA officials stated that their focused approach on compliance and processes is consistent with the authority they have been granted and that it is not required by statute to measure environmental review efficiency and timeliness performance of participating states. Moreover, according to these officials, this authority limits their ability to request state information on issues related to, and otherwise assess, states’ performance measures, including time savings, specifically: According to an FHWA program document, FHWA is statutorily authorized to require the state to provide any information that FHWA reasonably considers necessary to ensure that the state is adequately carrying out the responsibilities assigned to the state. Further, a request for information is reasonable if it pertains to FHWA’s reviewing the performance of the state in assuming NEPA assignment responsibilities. However, FHWA officials told us they do not consider an assessment of efficiency and timeliness measures to be necessary to ensure that the state is adequately carrying out its responsibilities. Additionally, FHWA considers timeliness performance measures to be a state role. FHWA officials told us that the timeliness performance measures in the NEPA assignment MOUs were added by the states, not FHWA. For instance, California added a timeliness performance measure based on its state legislature’s reporting requirements. Each of the subsequent four NEPA assignment states we reviewed also included timeliness performance measures in their respective MOUs. However, the DOT Office of Inspector General reported in 2017 that while FHWA is not statutorily required to measure performance regarding the environmental review process for NEPA assignment states, the lack of data collection and tracking inhibits FHWA’s ability to measure the effectiveness of NEPA assignment in accelerating project delivery. The DOT Office of Inspector General recommended that FHWA develop and implement an oversight mechanism to periodically evaluate the performance of NEPA assignment states, which has not yet been implemented. While FHWA does not, according to officials, have the authority to assess states’ measurement of timeliness performance, FHWA has a role and the authority to provide guidance or technical assistance to states to help find solutions to particular problems and to ensure complete and quality information is provided to Congress, state DOTs, and the public to help make informed policy choices. Federal standards for internal control state that agencies should use quality information to determine the extent to which they are achieving their intended program outcomes. Characteristics of quality information include complete, appropriate, and accurate information that helps management make informed decisions and evaluate the entity’s performance in achieving strategic outcomes. FHWA’s mission to advance the federal-aid highway program is articulated in its national leadership strategic goal, which states that FHWA “leads in developing and advocating solutions to national transportation needs.” To carry out its mission, FHWA engages in a range of activities to assist state DOTs in guiding projects through construction to improve the highway system. Specifically, according to agency documents, FHWA provides technical assistance and training to state DOTs and works with states to identify issues and develop and advocate solutions. Its broad authority to offer guidance and technical assistance can include helping states develop sound program methodologies. Such assistance or guidance could also include sharing best practices and lessons learned on evaluation methodologies, including creation of baselines, and potentially result in better quality information to assess the results of NEPA assignment. Without quality information reported from NEPA assignment states on time savings, questionable information about the program effects may be relied upon by other states considering applying for NEPA authority, and may negatively impact DOT’s and Congress’ ability to determine whether NEPA assignment is having its intended effect and resulting in more efficient environmental reviews. FHWA officials stated that they advise NEPA assignment states on process improvements and technical assistance, but that no state has requested assistance developing evaluation methodologies or baselines. However, offering guidance or technical assistance on evaluation methodologies to measure time savings can help ensure that states are basing decisions to participate on reliable information and that, in turn, those NEPA assignment states can provide reliable information to FHWA and Congress to help assess whether NEPA assignment results in more efficient environmental reviews. A number of factors can affect the time it takes to complete highway and transit projects, including the NEPA review process. Congress has stated that it is in the national interest to expedite the delivery of surface transportation projects by substantially reducing the average length of the environmental review process, and has taken a number of steps in this direction, including allowing DOT to assign NEPA authority to the states. We found that the time savings results publicly shared by current NEPA assignment states have spurred interest among other states seeking NEPA authority. However, states are making program decisions—taking on risk and assuming federal authority—based on questionable information and reports of success. Given questions about participating states’ reported time savings, FHWA can help provide some assurance that the performance measures states develop and use to report out are based on sound methodologies. FHWA has the authority to issue program guidance and offer and provide technical assistance to help state DOTs find solutions to particular problems, including the development of sound evaluation methodologies. Without such assistance, states may continue to face difficulties establishing sound baselines. And without a sound baseline, the time savings states calculate—which may continue to be subsequently publicly reported—may be of questionable accuracy and value. And Congress, in turn, would not have reliable information on whether the assignment of NEPA authority to states is having its intended effect. The FHWA Administrator should offer and provide guidance or technical assistance to NEPA assignment states on developing evaluation methodologies, including baseline time frames and timeliness measures. (Recommendation 1) We provided a draft of this report to DOT for review and comment. DOT provided a written response (see app. VI), as well as technical comments, which we incorporated as appropriate. DOT partially concurred with our recommendation. Specifically, DOT stated that it would clarify environmental review start times and communicate this to all FHWA divisions and states. DOT also stated it would provide the NEPA assignment states with any new federal government-wide guidance developed on performance measures of environmental reviews. DOT also stated that it already provides technical assistance to NEPA assignment states in other areas and that FHWA is not required by statute to measure the environmental review efficiency and timeliness of NEPA assignment states. Further, DOT stated that focusing only on timeliness metrics for environmental reviews overlooks other significant benefits of NEPA assignment, such as state control over when and how to conduct environmental reviews, which according to DOT is one of the most significant factors that a state considers in deciding whether to request NEPA assignment authority. We are encouraged that DOT stated it would clarify environmental review start times. This step can improve the accuracy of environmental assessment review time frames, which is a part of developing sound baselines. In addition, while providing general guidance related to performance measures of environmental reviews would be helpful, we continue to believe that FHWA needs to provide further guidance or technical assistance to NEPA assignment states on developing sound evaluation methodologies. We recognize that FHWA has stated that it is not required by statute to measure environmental review efficiency; however, FHWA does have broad authority to offer guidance and technical assistance to help states develop sound program methodologies, including sharing practices and lessons learned on evaluation methodologies. As we reported, Congress indicated its interest in more efficient and timely environmental reviews when it created the NEPA assignment program. FHWA can help provide reasonable assurance that the performance measures states develop and use to report information are based on sound methodologies, which would in turn help provide Congress reliable information on whether the assignment of NEPA authority to states is having its intended effect. Further, while we acknowledge that other benefits of NEPA assignment may be important to states, all the NEPA assignment states we reviewed consistently identified time savings as a reason for taking on this authority. Offering guidance on evaluation methodologies to measure time savings can help FHWA ensure that additional states interested in NEPA authority for this reason are basing decisions to participate on reliable information. We are sending copies of this report to interested congressional committees, the Secretary of the Department of Transportation, and other interested parties. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. Based on 2009 data, we previously reported that 96 percent of environmental reviews are completed through categorical exclusions and a smaller number of highway projects undergo EISs and environmental assessments, 1 and 3 percent respectively. We have previously reported that government-wide data on the cost of NEPA reviews are not readily available because agencies do not routinely track the cost of completing NEPA reviews and there is no government-wide mechanism to do so. To comply with congressional reporting requirements, FHWA maintains the Project and Program Action Information (PAPAI) system, which is a monitoring database that tracks projects’ NEPA review progress at major milestones. FHWA developed PAPAI in 2013 in response to statutory reporting requirements on NEPA time frames. PAPAI tracks EIS and environmental assessment start and end dates, among other information, allowing FHWA to track the processing time for these reviews. FTA does not have a similar monitoring system that tracks NEPA reviews, but has developed a new grant management system, the Transit Award Management System (TrAMS), which FTA also uses to track EIS and environmental assessment start and end dates. However, FTA officials told us that TrAMS is still in the early phases of deployment and may contain incomplete information on NEPA time frames on transit projects. While some information is available on the number of NEPA reviews (i.e., NEPA review time frames) for highway projects, little to no information is known about the percentage breakdown of the three types of NEPA reviews that have been conducted for these projects and their associated costs. Number of NEPA Reviews: Some information is available regarding the number of EIS and environmental assessments; however, less is known about the number of categorical exclusions. In an October 2017 report to Congress, FHWA stated that 29 EISs were initiated since 2012, of which 3 EISs were completed and 26 EISs remain active. In its October 2013 report to Congress and consistent with MAP-21 reporting requirements, FHWA reported the number of EISs that state DOTs “initiated” from 2002 through 2012. In this report, FHWA stated that the number of EISs that initiated decreased over time. For example, FHWA reported that 38 EISs were initiated in fiscal year 2002 compared to 15 EISs that were initiated in 2012. Regarding the number of environmental assessments state DOTs conduct for highway projects, FHWA’s October 2017 report to Congress stated 232 environmental assessments were initiated since 2012, of which 103 environmental assessments were completed and 129 environmental assessments remain active. FHWA’s October 2013 report to Congress did not report on the number of environmental assessments. FHWA officials told us that prior to fiscal year 2013, FHWA division offices were not required to submit data on environmental assessments. While some information on categorical exclusions exists, the total number of categorical exclusions is unknown. FHWA does not actively track categorical exclusions because state DOTs process most categorical exclusions without involvement from FHWA, as allowed by established programmatic agreements. Percentage of NEPA Reviews by Type: The percentage breakdown of EIS, environmental assessments, and categorical exclusions conducted by state DOTs for federal-aid highway projects is largely unknown since FHWA has systematically collected numerical data only on EIS reviews and environmental assessments since fiscal year 2013. We previously reported that, FHWA estimated that approximately 96 percent of NEPA reviews were categorical exclusions, 3 percent were environmental assessments, and 1 percent were EISs. While the current percentage breakdown of NEPA reviews is not known, FHWA officials told us that categorical exclusions still constitute the vast majority of NEPA reviews for highway projects. Furthermore, highway projects requiring an EIS likely remain the smallest portion of all projects and are likely to be high-profile, complex, and expensive. Costs of NEPA Reviews: The costs of completing NEPA reviews are unknown according to officials we interviewed. Officials from FHWA and the National Association of Environmental Professionals believe that data on the cost of processing NEPA reviews do not exist and are not tracked. In our survey of state DOTs, we found that a majority (37 of the 52 state DOTs surveyed) do not collect cost data. For example, officials from Virginia DOT stated that they do not track NEPA costs and that compiling this information would be difficult and labor- intensive. Number and Percentage of NEPA Reviews: FTA has some data on the number of categorical exclusions that transit agencies process, but has just begun to collect data on the number of EIS reviews or environmental assessments. According to an August 2016 report, FTA reported that 24,426 categorical exclusions were processed for 6,804 projects between February 2013 and September 2015. However, the same report cited a number of limitations and challenges with the underlying data, and as a result, the data may not be accurate. FTA officials told us that its new internal grant management system, TrAMS, also has the capability to track EIS reviews and environment assessments, but they are in the early stages of collecting this information. Given that data on the number of NEPA reviews are either not available (EIS and environmental assessments) or potentially unreliable (categorical exclusions), data on the percentage of NEPA reviews are also not available. However, FTA officials believe that similar to highway projects, the most common type of NEPA reviews that transit agencies process are categorical exclusions. Costs of NEPA Reviews: FTA and transit agencies do not track costs of processing NEPA reviews for transit projects. According to FTA and our previously issued work, separating out the costs for NEPA reviews (versus “planning” costs or “preliminary design” costs) within the project delivery process would be difficult to determine. Our work focused on federal-aid highway and transit projects and the provisions included in the past three surface transportation reauthorizations that are intended to accelerate the delivery of such projects (i.e., project delivery provisions). In particular, this report: (1) identifies the provisions aimed at accelerating the delivery of highway and transit projects that were included in the last three surface transportation reauthorizations; (2) examines the extent to which the provisions were used by state departments of transportation (state DOT) and transit agencies and the provisions’ reported effects, if any, on accelerating the delivery of projects; and (3) evaluates the extent to which DOT has assigned National Environmental Policy Act of 1969 (NEPA) authority to states and the reported effects. In addition, in appendix I, we identify available information on the number and percentage of the different types of NEPA reviews, and costs of conducting NEPA reviews. To identify all relevant project delivery provisions, we reviewed language in the three most recent surface transportation reauthorizations and included those provisions with the goal to accelerate the delivery of federal-aid highway or transit projects. The three reauthorizations we reviewed are as follows: the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)—the seven project delivery provisions we used were derived from provisions we had previously identified from SAFETEA-LU, Title VI, on Transportation Planning and Project Delivery; the Moving Ahead for Progress in the 21st Century Act (MAP-21), Division A, Title 1, Subtitle C, entitled Acceleration of Project Delivery (Sections 1301 through 1323); and the Fixing America’s Surface Transportation Act (FAST Act), Division A, Title 1, Subtitle C, entitled Acceleration of Project Delivery (Sections 1301 through 1318). One provision (MAP-21 §1318(a)-(c)) included statutory language directing the Department of Transportation (DOT) to develop additional project delivery provisions through rulemaking. Accordingly, we reviewed the DOT regulations promulgated in response to that requirement (23 C.F.R. §§ 771.117(c)(24)-(30), 771.118(c)(14)-(16), 771.118(d)(7)-(8) and identified 12 additional project delivery provisions. We combined provisions that were modified in later statutory language and did not specify between different versions of the provisions, as this precision was not necessary for our purposes. For example, the 150-Day Statute of Limitations provision was created in SAFETEA-LU (section 6002) as a 180-day statute of limitations and amended in MAP-21 (section 1308) to 150 days, which is the version we used. We also grouped the provisions into categories for ease of understanding; determined if provisions were applicable to highway projects or transit projects, or both; and specified if provisions were required or optional, based on professional judgement and legal review. We define “required” provisions to mean that federal agencies or state or local transportation agencies that are subject to a provision must adhere to the requirements and obligations in the provision, if all the conditions for its use have been satisfied. We define “optional” provisions to mean that the relevant entity (a federal agency or state or local transportation agency) can choose to use the provision if circumstances allow. We met with officials from the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA) to confirm that we had a complete list of project delivery provisions for highway and transit projects. To determine states’ awareness, use, and perceived effects of the project delivery provisions on highway projects over the previous 5 years, we surveyed state DOTs within all 50 states, the District of Columbia, and Puerto Rico. We directed the survey to officials in state DOTs that oversee environmental compliance for highway projects under NEPA. Because these officials do not have responsibilities with respect to three Advance Planning category’s provisions that allow certain activities to occur prior to the completion of a NEPA review, we excluded these project delivery provisions from the survey. We also excluded two provisions from the survey that are related to DOT assignment of federal NEPA authority, because their use requires a written agreement between FHWA and state DOTs, and we addressed those provisions separately through interviews with states that have such written agreements in place. Our survey response rate was 100 percent. In order to ensure that respondents would interpret our questions as intended, prior to administering the survey, we conducted pretests with state DOTs in four states: Georgia, Ohio, Texas, and Washington. In each pretest, we conducted a session with state DOT officials during which the officials completed the survey and then provided feedback on the clarity of the questions. Based on the feedback, we refined some questions and restructured parts of the survey. After the four pretests were completed, we provided a draft copy of the survey to FHWA and the American Association of State Highway and Transportation Officials (AASHTO) for their review and comment. Both provided technical comments that we incorporated, as appropriate. Based on early interviews with highway project stakeholders and our pretests, we determined that the survey should be sent to environmental officials at the state DOTs. Additional information about our survey methodology includes the following: To determine whom we should send the pretest and survey to (i.e., the survey respondent), we used a list of environmental officials at the state DOTs compiled by AASHTO. We took steps, such as sending early notification e-mails, to help ensure that the list of respondents we created was accurate. We launched our survey on March 7, 2017. We sent e-mail reminders and telephoned survey respondents who had not completed the survey after two weeks, urging them to do so as soon as possible. We reviewed survey responses for omissions and analyzed the information provided. The survey and aggregated responses—with the exception of open-ended responses and information that would identify individual state DOTs—are provided in appendix IV. For each of the provisions included on the survey, we included references to legal citations in order to minimize confusion among provisions or versions of provisions. We provided space in the survey for respondents to provide optional comments for each individual provision and for each category of provisions. We analyzed these comments primarily for additional context and as a source of illustrative examples. Because all state DOTs were included in our survey, our analyses are not subject to sampling errors. However the practical difficulties of conducting any survey may introduce non-sampling errors. For example, differences in how a particular question is interpreted or the sources of information available to respondents can introduce errors into the survey results. We included steps both in the data collection and data analysis stages, including pretesting, to minimize such non- sampling errors. We also sent a draft of the questionnaire to FHWA and AASHTO for review and comment. We examined the survey results, reviewed survey responses during follow-up interviews with selected states, and performed computer analyses to identify inconsistencies and other indications of error and addressed such issues, where necessary. A second, independent analyst checked the accuracy of all computer analyses to minimize the likelihood of errors in data processing. Based on the survey results, we conducted follow-up interviews with officials from 10 state DOTs to discuss their views about the effects the project delivery provisions had on the duration of highway projects in their states in the past 5 years. We did not independently verify state DOT officials’ estimates of time savings. We selected state DOTs that reported a range of use and effects of the provisions; we also selected geographically diverse states. The 10 states we selected were Arizona, California, Colorado, Illinois, Maine, Minnesota, Mississippi, Texas, Virginia, and Wyoming. We also asked these state DOTs about their use and experiences with the three Advance Planning category’s provisions we excluded from the survey. These interviews are not generalizable to all states but provide additional context for responses. To determine transit agencies’ awareness, use, and views about the effects of the project delivery provisions applicable to transit, we selected a non-generalizable sample of 11 transit agencies, provided a “checklist” of the provisions to the officials regarding their awareness and use of the provisions, and interviewed officials at those agencies that oversee NEPA reviews for transit projects. We selected these agencies based primarily on the number of times they issued a notice of intent to prepare an EIS in the Federal Register from 2005 through 2016 to identify those transit agencies that may have experience preparing EISs or some another NEPA review and experience using transit project delivery provisions. While notices of intent to prepare an EIS do not always result in a transit agency’s conducting an actual EIS review, they indicate instances in which a transit agency plans to conduct an EIS review. Other factors, such as ridership and geographic location, were also considered to select the 11 transit agencies. We identified contacts for the transit agencies by calling the transit agencies’ Planning and Environmental Review departments and identifying individuals that had experience with environmental reviews and project delivery provisions. We interviewed officials at the following transit agencies: Capital Metro (Austin, Texas), Chicago Transit Authority, Houston Metropolitan Transit Authority, Los Angeles County Metropolitan Transportation Authority, Metropolitan Atlanta Rapid Transit Authority, Sacramento Regional Transit District, San Francisco Bay Area Water Emergency Transportation Authority, San Francisco Municipal Transportation Agency, Sound Transit (Seattle, Washington), Southeastern Pennsylvania Transportation Authority, and Tri-County Metropolitan Transportation District of Oregon. Similar to the survey we provided to state DOTs regarding highway projects, we provided the transit agencies with a “checklist” of the provisions in which the transit agency officials indicated whether they had heard of and used the provisions. To understand why the provisions may not be used by selected transit agencies, we also examined the frequency in which transit agencies filed a notice of intent to prepare an EIS in the Federal Register. After discussions with FTA, we used the number of times transit agencies filed a notice of intent to prepare an EIS as a proxy because agencies that have performed multiple EISs, which are typically complex in nature, are more likely to use the provisions and be able to offer insight. Transit agencies may also have experience using provisions related to categorical exclusions since transit agencies process their NEPA reviews more commonly using categorical exclusions. However, we did not examine the extent to which categorical exclusions are used by transit agencies as a proxy to identify agencies that have experience using the provisions in part because FTA’s current database, TrAMS, does not have comprehensive data on categorical exclusions. We discussed transit agency officials’ views about the effects of the provisions during our interviews. These interviews are not generalizable to all transit agencies but provide anecdotal information and context. To evaluate the extent that DOT has assigned NEPA authority to states and the effects states have reported from assuming NEPA authority, we identified states that have assumed NEPA authority based on information from FHWA: Alaska, California, Florida, Ohio, Texas, and Utah. We did not include Alaska in our review because that state did not assume NEPA authority until November 2017. For the five states we reviewed, we interviewed state DOT officials and reviewed relevant documentation including memorandums of understanding and analyses the state DOTs conducted on NEPA assignment authority, such as methodologies for calculating NEPA assignment time savings. We also surveyed the state DOTs that have not yet sought NEPA authority to assess their interest in assuming NEPA authority. In addition, we interviewed FHWA officials about procedures to oversee the performance of NEPA assignment states and interviewed FHWA division officials from those states. We compared FHWA’s procedures to oversee NEPA assignment states against standards for information and communication contained in Standards for Internal Control in the Federal Government. To determine available information on the number and percentage of the different NEPA reviews and costs of conducting NEPA reviews for highway and transit projects, we reviewed relevant publications, obtained documents and analyses from federal agencies, and interviewed federal officials and individuals from professional associations with expertise in conducting NEPA analyses. We also included a question on costs of conducting NEPA reviews in the survey we administered to state DOTs. For all objectives, we interviewed agency officials and stakeholders involved in highway and transit projects from FHWA and FTA headquarters and transportation industry and environmental organizations that are familiar with project delivery and environmental review. We conducted this performance audit from August 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides a copy of the survey sent to state departments of transportation in all 50 states, the District of Columbia, and Puerto Rico concerning their use of the project delivery provisions for highway projects. The appendix also includes the responses received for each of the provisions; it does not include information on non-responses, which resulted either from the survey’s skip patterns or from state officials voluntarily declining to respond. GAO also developed names for the provisions in the survey; we subsequently modified the names of several of the provisions for the text of our report to make them more intuitive for readers. The following list matches the provisions that have different names in our report than in the survey. Description Authorizes the lead agency of a multimodal project to apply categorical exclusions from the NEPA implementing regulations or procedures of a cooperating DOT operating administration. Designates the repair or reconstruction of any road, highway, or bridge that was damaged by an emergency as a categorical exclusion, subject to certain conditions. Designates a project within an operational right-of-way as a categorical exclusion, subject to certain conditions. Authorizes the designation of a categorical exclusion for projects receiving less than $5 million in federal funds, or less than 15 percent federal funds for a project under $30 million, subject to an annual inflation adjustment. For transit projects, designates bridge removal and bridge removal related activities, such as in-channel work, disposal of materials and debris as a categorical exclusion. For transit projects, designates preventative maintenance, including safety treatments, to culverts and channels within and adjacent to transportation right-of-way as a categorical exclusion. For transit projects, designates geotechnical and archeological investigations to provide information for preliminary design, environmental analyses, and permitting purposes as a categorical exclusion For transit projects, designates minor transportation facility realignment for rail safety reasons, such as improving vertical and horizontal alignment of railroad crossings, as a categorical exclusion. For transit projects, designates modernization or minor expansions of transit structures and facilities outside existing right-of-way, such as bridges, stations, or rail yards, as a categorical exclusion. Authorizes a historic site, park land, or refuge to be used for a transportation program or project if it is determined that “de minimis impact” would result. Bars claims seeking judicial review of a permit, license, or approval issued by a federal agency for projects unless they are filed within 150 days after publication of a notice in the Federal Register announcing the final agency action, unless a shorter time is specified in the federal law under which the judicial review is allowed. Description Authorizes the lead agency for a project to use planning products, such as planning decisions, analysis, or studies, in the environmental review process of the project. Requires that any federal agency responsible for environmental review to give substantial weight to a state or metropolitan programmatic mitigation plan, if one had been developed as part of the transportation planning process, when carrying out responsibilities under NEPA or other environmental law. Allows the lead agency of a project, in order to expedite decisions, to use an errata sheet attached to a final EIS, instead of rewriting it, if the comments are minor. Also, to the maximum extent practicable, combines the final EIS and record of decision in certain cases. Authorizes the operating administrations of DOT to adopt a draft EIS, EA, or final EIS of another operating administration without recirculating the document for public review if the proposed action is substantially the same as the project considered in the document to be adopted. Establishes a 45-day limit after the notice of intent date for a lead agency to identify other agencies to participate in the environmental review process on EIS projects. To the maximum extent practicable and consistent with federal law, requires lead agencies to develop a single NEPA document to satisfy the requirements for federal approval or other federal action, including permits. Creates several requirements at the start of a project’s Section 139 environmental review process, such as 1) establishing a 45-day deadline for DOT to provide a written response to the project sponsor on initiation of the environmental review process; 2) establishing a 45-day deadline for DOT to respond to a request for designation of a lead agency; and 3) requiring the development of a checklist by the lead agency to help identify natural, cultural, and historic resources, to identify agencies and improve interagency collaboration. Authorizes the lead agency to reduce duplication, by eliminating from detailed consideration an alternative proposed in an EIS if the alternative was already proposed in a planning process or state environmental review process, subject to certain conditions. Allows a state to use its federal funds to support a federal or state agency or Indian tribe participating in the environmental review process on activities that directly contribute to expediting and improving project planning and delivery. Description Establishes procedures to resolve issues between project sponsors and relevant resource agencies. At the request of a project sponsor or a governor of the state in which the project is located, requires DOT to provide additional technical assistance for a project where EIS review has taken 2 years, and establish a schedule for review completion within 4 years. Requires DOT to seek opportunities with states to enter into programmatic agreements to carry out environmental and other project reviews. Encourages early cooperation between DOT and other agencies, including states or local planning agencies, in the environmental review process to avoid delay and duplication, and suggests early coordination activities. Early coordination includes establishment of MOUs with states or local planning agencies. Limits the comments of participating agencies to subject matter areas within the special expertise or jurisdiction of the agency. Requires a coordination plan for public and agency participation in the Section 139 environmental review process within 90 days of a Notice of Intent or the initiation of an Environmental Assessment, including a schedule. Issues that are resolved by the lead agency with concurrence from stakeholders cannot be reconsidered unless there is significant new information or circumstances arise. Permits states or local transportation agencies to release requests for proposals and award design-build contracts prior to the completion of the NEPA process; however, it precludes a contractor from proceeding with final design or construction before completion of the NEPA process. Authorizes states to acquire real property interests for a project before completion of the NEPA process. Authorizes the awarding of contracts for the preconstruction services and preliminary design of a project using a competitive selection process before the completion of the NEPA process. In addition to the contact named above, Steve Cohen (Assistant Director); Brian Chung (Analyst-in-Charge); Rich Johnson; Delwen Jones; Hannah Laufe; Ethan Levy; Ned Malone; Josh Ormond; Tina Paek; Cheryl Peterson; and Joe Thompson made significant contributions to this report.", "summary": "Since 2005, over 30 provisions have been enacted in law to speed up the delivery of highway and transit projects, mainly by streamlining the NEPA review process. NEPA requires federal agencies to evaluate the potential environmental effects of proposed projects on the human environment. These project delivery provisions included new categorical exclusions to streamline the review process, and a provision allowing DOT to assign federal NEPA approval authority to states. Congress included provisions in statute for GAO to assess the use of these provisions and whether they have accelerated project delivery. This report examines: (1) which project delivery provisions were used by state DOTs and selected transit agencies and the reported effects, and (2) the extent to which DOT has assigned NEPA authority to states and the reported effects, among other objectives. GAO surveyed all state DOTs and interviewed federal and state DOT officials and 11 selected transit agencies GAO determined were likely to have been affected by the provisions, and analyzed information from NEPA assignment states. The Department of Transportation's (DOT) Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) are responsible for National Environmental Policy Act (NEPA) compliance on highway and transit projects. Project sponsors that receive federal funds, typically a state DOT or transit agency, develop documents necessary for NEPA compliance for FHWA and FTA to evaluate and approve. Project sponsors prepare an environmental impact statement (EIS) when a project will have a significant environmental impact, or an environmental assessment to determine if a project will have a significant impact. Projects that fit within a category of activities pre-determined to have no significant impact (such as repaving a road) can receive a categorical exclusion, and an EIS or environment assessment is generally not needed. GAO found: State DOTs and selected transit agencies reported using provisions enacted in law to speed up the delivery of highway and transit projects, and while state DOTs reported that a number of provisions they used sped up delivery of highway projects, the effects on transit projects were less clear. For example, according to GAO's survey responses, 10 of 17 provisions that mainly created new “categorical exclusions” were used by 30 or more state DOTs and generally sped up projects. The provision state DOTs and transit agencies most often reported using was one that authorizes parkland or a historic site to be used for a transportation project if that project has a minimal impact on the environment. A majority of the 11 transit agencies GAO reviewed were not clear whether provisions they used sped up project delivery because these agencies did not track how long it took projects to complete the NEPA process, among other reasons. DOT assigned NEPA authority to six states: Alaska, California, Florida, Ohio, Texas, and Utah. Under agreements with FHWA, state DOTs calculate time savings by comparing NEPA completion times before (the baseline) and after assuming the authority. Only California and Texas have reported results; California reported that it reduced EIS review time 10 years from a 16-year baseline. However, these reported time savings are questionable because the comparisons do not consider other factors, such as funding, that can affect timelines. In establishing baselines, both states have also faced challenges, such as how many and which projects to include. California reported to its legislature that its baseline may not be meaningful because of the relatively small sample of five projects, but nevertheless presents these data on its web site as evidence of “significant” time savings. FHWA does not review the states' timeliness measures and time savings estimates, but has broad authority to offer guidance and technical assistance, which can include helping states develop sound evaluation methodologies and baselines. FHWA officials stated that they provide general technical assistance, but that no state has requested help developing evaluation methodologies. Offering and providing such assistance could help ensure that states considering applying for NEPA assignment base their decisions on reliable information, and that FHWA and Congress have reliable information to assess whether NEPA assignment results in more efficient environmental reviews. FHWA should offer and provide guidance or technical assistance to NEPA assignment states on developing evaluation methodologies, including baseline time frames and timeliness measures. DOT partially concurred with the recommendation, saying it would clarify environmental review start times. GAO continues to believe further evaluation guidance is needed, as discussed in the report.", "document_type": "gao"}
{"report": "SRMs are the propulsion systems that propel various types of missiles and are also used in space launch activities, including the National Aeronautics and Space Administration’s (NASA) Space Shuttle program. Across the military departments, DOD has approximately 40 missile programs that currently use SRMs, including tactical programs such as the Army’s Guided Missile Launch Rocket System and the Navy and Air Force AIM-9X Sidewinder. As shown in figure 1, an SRM consists of a casing filled with solid propellant that, when ignited, expels hot gases through a nozzle to produce thrust. DOD describes the overall SRM components as being consistent among the missile types, although size and scale of propellant requirements vary. For example, tactical missiles use the smallest SRMs—ranging from about 3 inches up to 24 inches in diameter—and require between 3 and almost 1,600 pounds of propellant. Strategic missiles use large SRMs that exceed 40 inches, while missile defense systems utilize both small and large SRMs. Space launch SRMs can exceed 150 inches and can require more than a million pounds of propellant. In order to be used in a missile, the SRM and its components, such as the propellant ingredients or casing materials, are subject to testing to demonstrate that they meet DOD’s technical specifications and requirements. For instance, this testing can confirm that the construction of the SRM allows it to function at certain altitudes or in certain temperatures or environments required by the missile. The SRM is tested as a stand-alone item and as part of the overall missile system before production begins. By successfully completing testing, the missile becomes qualified, and the SRM and its components are deemed suitable to meet the missile’s specific requirements going forward. Any changes in the SRM or its components may require additional testing and, if the changes are significant or if there are multiple changes, may require the missile to be retested and thus, requalified—which DOD has noted is an expensive and time-consuming process that can take years and cost millions of dollars. DOD relies on a multi-tiered supply chain to provide the SRMs that are used for missile propulsion. Industry representatives we spoke to estimate the supply chain extends to more than 1,000 suppliers that provide the raw materials, components, and sub-systems needed to manufacture the SRM. The missile’s prime contractors are ultimately responsible for delivering the missiles and for selecting and managing the subcontractors that manufacture the SRM. The SRM manufacturers then subcontract with suppliers that provide the components and materials used to manufacture the SRM. Those suppliers might, in turn, work with another tier of suppliers to meet their needs. For example, an SRM manufacturer may obtain the materials needed for the casing from a first- tier supplier. The first-tier supplier may obtain the materials and components it needs from multiple second-tier suppliers, and so on. According to DOD reports, the SRM supplier base, including the sub-tier suppliers, is nearly identical across missile defense, tactical, and strategic missile systems that use SRMs. Figure 2 is an illustrative version of the SRM supply chain. Historically, the demand for SRMs was mostly driven by their use in solid rocket boosters for NASA space programs, such as the Space Shuttle program. DOD has reported that NASA’s retirement of the Space Shuttle program in 2011 had a negative impact on the SRM supply chain as it led to decreased demand for SRMs and the related raw materials and components. Similarly, we reported in August 2017 that the demand for solid rocket motor propellant had dropped by more than 75 percent, from 20 million pounds to 5 million pounds, since the end of the Space Shuttle program. DOD has reported that these changing market conditions have resulted in excess capacity, where production demand is less than what is optimal to sustain the suppliers. Thus, excess capacity keeps SRM manufacturers from being cost competitive, which can jeopardize the viability of the manufacturers as well as their sub-tier suppliers. MIBP, which is part of the Under Secretary of Defense for Acquisition, Technology, and Logistics, is DOD’s primary representative for issues affecting the defense industrial base. MIBP officials told us they conduct analyses of risks affecting defense supply chains and provide information to decision makers, including required annual reports to Congress. These reports cover a wide range of industrial capabilities for various types of systems, including missiles. For example, in fiscal year 2014, MIBP assessed the fragility and criticality risks facing missile production, by analyzing factors that would cause potential disruptions and would be difficult to replace if disrupted. This assessment identified solid rocket motors as one of the key risks. While individual program offices and military departments are generally responsible for identifying risks within their own areas, MIBP officials stated that they coordinate and share information with relevant stakeholders for issues that affect multiple programs within or across the military departments. MIBP’s coordination role, according to these officials, includes participating in or leading various coordinating bodies within DOD or other federal departments. For example, MIBP leads the Joint Industrial Base Working Group, which shares industrial base information across DOD agencies and military departments. In addition, MIBP co-leads the Critical Energetic Materials Working Group, a DOD- sponsored entity that focuses on ensuring the near- and long-term availability of energetic materials such as those used in SRMs, and suggesting risk mitigation strategies. MIBP officials told us that they also conduct an annual data collection effort among the military departments and other DOD agencies to identify defense industrial base areas of risk and to learn about ongoing issues across the industrial base. In addition, they noted that MIBP works closely with the Industrial Analysis Group within the Defense Contract Management Agency (DCMA), which conducts assessments to identify industrial base risks facing individual acquisition programs at various points in the program’s life cycle and makes recommendations to program offices to help sustain a resilient and innovative defense industrial base. Additionally, DOD officials we spoke to said weapon program-specific risks are communicated through the military departments and to MIBP, which tracks them and determines their implications for the industrial base. Over the last 20 years, the SRM industrial base has consolidated from six to two U.S. manufacturers—Aerojet Rocketdyne and Orbital ATK. Both manufacturers produce the small and large SRMs used in tactical and missile defense systems, and Orbital ATK also produces SRMs for strategic missiles. A senior MIBP official told us that current DOD needs require two SRM manufacturers, but there is not enough demand to keep three companies economically viable. In DOD’s industrial base reports to Congress, MIBP has reported that, while other industrial sectors are supported by commercial markets in addition to government needs, SRM manufacturers cater largely to the defense and space missions of the government and generally do not have a commercial base that can sustain production when the federal government’s demand fluctuates. As a result, similar to the impact of NASA’s Space Shuttle retirement on the SRM supplier base, trends or decisions made in a particular program area can have broader effects and potentially result in cost increases for other programs. For example, we found that a company that is supporting space launch has decided to source its SRMs from Orbital ATK instead of Aerojet Rocketdyne, which had previously produced the motors. This arrangement will take effect in 2019, and Aerojet Rocketdyne officials said that it is consolidating its facilities to reduce costs due to excess production capacity for these types of large SRMs. According to DOD, the resulting impact may affect costs in Aerojet Rocketdyne’s remaining business units, including those that provide the smaller SRMs used for tactical missiles. DOD says that these costs would likely be passed on to the missile systems programs. Additionally, if Aerojet Rocketdyne decides to exit the large SRM market altogether, the lack of competition is likely to result in increased costs for other DOD programs that use large SRMs. When there is limited demand, then a small supplier base can also be impacted by competition from foreign suppliers. Specifically, in the past several years, the two U.S. manufacturers have faced competition from a foreign supplier, Nammo Raufoss, and, more recently in 2017, a newly established U.S. corporation, Nammo Energetics Indian Head, Inc. (NEIH). These two new entrants are both ultimately wholly owned by the same Norwegian parent company and, according to an MIBP official, have the potential to take away market share from the two longstanding domestic SRM manufacturers. Figure 3 shows the industry trends among SRM manufacturers. Nammo Raufoss, the foreign SRM manufacturer, began providing SRMs for the AMRAAM program in 2012, after the U.S. SRM manufacturer had encountered production challenges. According to an MIBP official, no U.S. SRM manufacturer, including the supplier at the time, was offered the opportunity to design a new SRM, which would have solved the production issues. Further, according to the MIBP official, the Norwegian government contributed funding to this effort. Additional funding was provided by the prime contractor—Raytheon—and the program offices, to develop, test, and produce the new SRM for AMRAAM. Currently, Nammo Raufoss provides SRMs for two tactical missile programs used by DOD—Evolved Sea Sparrow Missile and AMRAAM. The programs for which Nammo Raufoss provides SRMs accounted for approximately 4 percent of the tactical missiles procured by DOD in fiscal year 2017, a slight increase over the 3 percent share since it first provided SRMs for the AMRAAM missiles in fiscal year 2012. The remaining missile programs use SRMs produced by Aerojet Rocketdyne and Orbital ATK. While the missile prime contractor found it viable to turn to a foreign source for the AMRAAM program, Congress and DOD have been concerned about the potential negative impacts the addition of a foreign supplier could have on a fragile domestic SRM industrial base. For example, the Senate Appropriations Committee recently noted concerns about reduced spending and the use of foreign suppliers. Similarly, even though DOD recognizes that access to global markets provides the necessary competitive pressures to incentivize U.S. suppliers to remain competitive and control costs, it has also noted that there needs to be a commitment to investing in the U.S. SRM industrial base to develop and produce critical technologies for the next generation of weapon systems. Further, by law, DOD must limit specific conventional ammunition procurements to sources within the industrial base if it determines such limitation is necessary to maintain a facility, producer, manufacturer, or other supplier available for furnishing an essential item of ammunition or ammunition component in cases of national emergency or to achieve industrial mobilization. According to MIBP officials, the current threat to the existing U.S. SRM manufacturer from a foreign supplier is not great enough to force it from the market. Therefore, it is difficult to restrict SRM procurements to the U.S. industrial base. Instead, an MIBP official told us they have raised concerns to DOD program offices and missile prime contractors about expanding the use of the Norwegian SRM supplier, Nammo Raufoss, as this potentially could have a negative impact on the near- or long-term survivability of U.S. manufacturers. Moreover, our review found that the newly established NEIH as a U.S. SRM manufacturer also creates competition within the existing domestic supplier base and also raises uncertainty for Aerojet Rocketdyne and Orbital ATK. Specifically, NEIH is in the early stages of establishing its production capabilities, which includes remodeling the manufacturing facility at Indian Head, over the next three years. Further, an MIBP official told us that MIBP plans to monitor the competitive landscape among the three companies, but as NEIH is a U.S. company, it is considered a part of the domestic industrial base and would not be subject to DOD restrictions on foreign suppliers. At this stage, it is too early to tell how, if at all, the newest competitor, whose product line is focused on small SRMs, will disrupt the business of the two long-standing U.S. SRM manufacturers that produce large and small SRMs. During our review, we found that the decreased demand for SRMs has resulted in a loss of suppliers in the supply chain, increasing the risk that key components and materials are only available from single sources. Should such components and materials become unavailable, production delays could result. MIBP’s industrial base reports to Congress and our discussions with industry representatives showed increased awareness of supply chain risks and steps taken to identify and mitigate risks before they affect SRM production, including coordination of efforts to address key chemicals needed for SRM propulsion. As decreased demand for SRMs has contributed to the consolidation of manufacturers, a main concern for DOD and industry is the impact of similar reductions among the manufacturers’ sub-tier suppliers. According to MIBP’s reports to Congress, relying on a decreased number of sub-tier suppliers exacerbates the risk that needed SRM materials become unexpectedly unavailable and disrupt missile production. MIBP emphasizes that in the current lower-production environment, sub-tier suppliers who are primarily supporting defense and space missions rather than commercial businesses, must determine how to remain viable or decide to exit the SRM market. SRMs contain few commercial off-the- shelf components and a great number of defense-unique components, which leads to an extensive reliance on sole-source suppliers. Further, DOD reported that the missiles that are powered by SRMs experience rapid production during times of conflict. While surge production can create additional business opportunities, it is greatly impacted by the availability of materials and components that comprise the SRM for the missile. Industry representatives told us that managing complex supply chains is a part of their business, but noted that there has been a great deal of consolidation among SRM suppliers in recent years. One SRM manufacturer estimated that the supply chain has dropped from approximately 5,000 sub-tier suppliers to about 1,000 suppliers over the last 20 years. As a result, manufacturers are heavily dependent on only one supplier for some of the raw materials and key components of the SRM. For example, manufacturers provided us with information showing that they rely on a single company for ignition components for most of the tactical missiles they produce. Single Source Supplier Issues for the Advanced Medium-Range Air-to-Air Missile (AMRAAM) A U.S. manufacturer experienced problems with the propellant mixture used in the AMRAAM solid rocket motor (SRM). The root cause was not discovered, but experts believe that variation in the raw material for a particular propellant ingredient resulted in the SRM functioning differently than intended. As a result, Raytheon, the prime missile contractor, stopped accepting the manufacturer’s SRMs in 2010 and AMRAAM production was disrupted for about 2 years. At the time, Raytheon had been working to qualify a second SRM supplier. According to DOD, the qualification process was accelerated to speed up production of the missiles that were needed to support military operations. AMRAAM production resumed approximately 2 years after the SRM issues occurred. These dependencies increase as they move into the lower tiers of the supply chain. Components can be available from one source for either of the following two instances: (1) only one sole source is available for the material, component, or chemical and no other alternative exists; or (2) other suppliers exist, but only one single source supplier has been qualified or chosen to produce the item. Either situation poses a risk of disrupting the supply of SRMs and ultimately, the production of the missile. DOD officials noted that, even if other suppliers exist, it can be costly and time-consuming for them to be qualified as alternative sources. For example, in its assessments, DCMA has stated that energetic materials—which are used in SRM propellants—are among the most expensive components to requalify. As there are approximately 25 to 30 ingredients in the typical SRM’s propellant, changes in any of the ingredients require that the propellant be retested for effectiveness. Further, disruptions among single source suppliers can take place for other reasons besides leaving the market. Production changes, such as altering manufacturing processes or even relocating production facilities, can affect the material or component produced in unexpected ways. In addition, there has been a long-standing concern that SRM manufacturers are dependent on a single source supplier for an SRM propellant ingredient—ammonium perchlorate—as only one U.S. company is certified to provide this ingredient. The House version of the Fiscal Year 2018 National Defense Authorization Act calls for DOD to study the future costs and availability of ammonium perchlorate. MIBP officials told us they have conducted extensive analysis of the issues for this critical component, including two studies conducted in 2016. Industry representatives from missile prime contractors and SRM manufacturers we spoke with said that managing their supply chain to ensure the availability of needed materials is a primary concern. Prime contractor representatives said that SRM subcontractors are generally expected to manage their suppliers and ensure that they suppliers can meet their contract requirements. However, the prime contractors said they are particularly involved when the risks relate to material availability. While losing a supplier is always a risk, they try to mitigate this through increased awareness of their supply chains and taking quick actions when risks are identified. To increase awareness, prime contractor representatives said they consider potential availability issues before contracts are awarded and include requirements that they be notified of these issues in their subcontracts, which the SRM manufacturers apply to their subcontract suppliers, in order to minimize surprises. One SRM manufacturer confirmed that it includes subcontract requirements for its own sub-tier suppliers to report any changes in the product, materials, or production location as soon as the change is known. In addition, both of the U.S. SRM manufacturers noted that they have staff dedicated to monitoring potential issues with supply chain availability. In one case, a manufacturer conducted a business continuity study that analyzed suppliers’ business plans for the next 5 years to identify potential problems. After issues—such as a financially fragile supplier—are identified, representatives said the key factor is the amount of time they have to mitigate the issue. In this respect, the U.S. SRM manufacturers we spoke with said their processes have improved in recent years and they receive more advanced notice when suppliers plan to exit the market, allowing them to take steps such as stockpiling supplies or making last buys while additional suppliers are identified. Taking such steps also allows time to more fully assess and take necessary steps—including qualifying a new supplier, if needed. MIBP officials told us that they coordinate regularly with industry and the affected DOD program offices to be informed of potential issues in the supply chains, but noted that it can be challenging to be aware of SRM suppliers beyond the initial tiers. However, the officials said that through their coordination efforts—which include participating in multiple working groups with the military departments and DOD components, as well as NASA and industry—they are aware of the SRM sub-tier suppliers that are at the greatest risk. For example, MIBP co-leads the Critical Energetic Materials Working Group to track availability issues with the chemicals that DOD relies on, including SRM propellant ingredients. Officials said that MIBP also works closely with DCMA, which conducts industrial base assessments that provide additional insights into contractors’ supply chains. Further, officials said that MIBP is in the early stages of developing a business analytics tool to help them better understand the interdependencies in the sub-tier supplier base. Their hope is to be able to proactively identify risks, rather than wait for program offices or DCMA to elevate concerns to MIBP. DOD officials and industry representatives identified cases in which actions were taken when essential materials—typically chemicals—were at risk of becoming unavailable. For example, MIBP coordinated with other DOD stakeholders and industry to mitigate risks in the cases summarized in table 1. Additionally, an official said that MIBP is conducting a munitions industrial base resiliency study in 2017 that addresses, among other issues, how DOD plans for risks in the missile sector, particularly those related to the loss of qualified suppliers, including for SRMs. In September 2017, we reported that DOD program offices have limited information from contractors that would help them to identify and proactively manage risks stemming from a single source of supply for missile systems, among other items. We recommended that DOD develop a mechanism to ensure that program offices, such as those for missile programs, obtain information from contractors on single sources of supply risks. DOD concurred with this recommendation and indicated that modifications to current contractual regulations and policy would be beneficial. In light of DOD’s planned actions in response to our previous recommendation, we are not making any additional recommendations at this time. MIBP’s annual industrial capabilities reports to Congress have consistently stated that the limited number of new missile development programs inhibits DOD’s ability to provide opportunities that maintain the workforce capabilities SRM manufacturers need to meet current and future national security objectives. These capabilities include engineering skills related to SRM concept designs, system development, and production, which are critical to meeting potential requirements for new SRM designs. With few new-start missile programs being initiated and decades-old programs having reached a steady state of design, SRM engineers are not typically engaged at the early stages of development and newer engineers have not fielded new SRM designs, thus creating a skills gap. According to reports from DOD, the lack of new programs for missiles has also limited opportunities to recruit and train the next generation of SRM scientists and engineers. The SRM manufacturers we spoke with also acknowledged experiencing attrition among workers with the requisite experience, as design experts are at or near eligibility for retirement. Industry representatives noted that engineers and chemists do not typically go to school to become SRM engineers, but must be trained by the SRM manufacturers. In a report to Congress, MIBP stated that one SRM manufacturer estimated that it can take up to 5 years to fully train SRM engineers or production workers. Key to this issue is the limited number of new missile programs or updates requiring new SRM designs, which would provide the workforce with development opportunities that DOD and industry find to be critical. Current research and development efforts are generally limited to updates or modifications for legacy missile programs, rather than for new missile programs. For example, the Joint Air-to-Ground Missile, a tactical missile program that officials said has started and stopped development several times since the late 1990s, had planned to incorporate a new SRM design. However, due to budget limitations and affordability concerns related to the SRM, the program opted to use a legacy SRM from the Hellfire missile, which has been in production since 1982. While the legacy SRM requires some modifications to change the casing material from steel to composite materials that are stable enough to withstand fire, mechanical shocks, and shrapnel, yet still burn correctly to propel the warhead and destroy the intended target, it does not involve the same level of skill as is needed to design new SRMs. Similarly, a DOD official said the AIM-9X program proposed designing a new SRM, but this plan was later abandoned due to concerns about the overall program costs. There are currently only two missile programs—Army’s Long Range Precision Fire missile and the Navy’s Advanced Anti-Radiation Guided Missile Extended Range—planning to use new solid rocket motor designs. Although these programs present opportunities for industry to develop SRM design skills, MIBP does not believe it will close the current skills gap. Further, MIBP officials said they have raised concerns that the use of foreign SRM suppliers results in fewer opportunities for domestic SRM manufacturers such as exercising their design skills. For example, MIBP noted that domestic engineers did not have the chance to design the new SRM used by AMRAAM. In its reports to Congress, MIBP has stated that the loss of design capabilities could result in costly delays and unanticipated expenses and impair DOD’s readiness to support existing systems and field new capabilities. One of the elements that heighten SRM criticality for missile systems is the long lead time for restarting production in the event of stoppage. Specifically, one MIBP report stated that SRM manufacturers estimated that it can take from 3 to 5 years to fully restart if there is some ongoing production, and up to 8 years if production has completely ceased. In addition, according to MIBP, restarting production processes would incur costs, including those associated with retraining engineers. MIBP also indicated that the loss of SRM capabilities could delay future development of missile programs by 5 to 10 years. MIBP has an effort underway intended to address these diminishing design skills. According to MIBP officials, in 2016 they awarded a 4-year risk mitigation project that will provide approximately $14 million to Orbital ATK and Aerojet Rocketdyne during the course of the project. The purposes of the project are to provide opportunities for the SRM manufacturers to develop new SRM design skills for less experienced engineers and mature advanced technologies. The engineers will incorporate technology into a new SRM as designed by each company. According to an official, MIBP provided general guidelines for the resulting SRM, but purposely did not provide strict specifications in an effort to allow engineers to identify their own solutions for a new motor design. We are not making recommendations in this report. We provided a draft of this report to DOD for comment. DOD reviewed the draft and offered technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in the appendix. Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition to the contact named above, Candice Wright (Assistant Director), Alyssia Borsella, Jennifer Dougherty, Leigh Ann Haydon, Emily Bond, Lorraine Ettaro, Kurt Gurka, and Roxanna Sun made key contributions to this report.", "summary": "DOD relies on a multi-tiered supply chain to provide SRMs, the propulsion systems behind the various missile systems that provide defense capabilities to meet U.S. national security objectives. The SRM industrial base includes manufacturers that turn to an extensive network of suppliers that provide the raw materials, components, and subsystems needed to build SRMs. DOD is responsible for developing a strategy for the national industrial base that ensures that defense contractors and their suppliers are capable of providing the goods and services needed to achieve national security objectives. GAO was asked to review the state of the U.S. industrial base for SRMs. This report addresses (1) SRM industry trends, (2) single source supplier risks, and (3) opportunities for SRM manufacturers' engineering workforce development. GAO analyzed DOD's annual industrial capabilities reports to Congress for fiscal years 2009 through 2016, which reflect DOD's most current information on SRM risks, and reviewed DOD budget data and information from missile prime contractors and SRM manufacturers. GAO also interviewed missile prime contractors, SRM manufacturer representatives, and officials from DOD and the military departments. Over the past two decades, the solid rocket motor (SRM) industrial base has undergone various changes including consolidation and recent expansion. Specifically, since 1995, the industry has consolidated from six U.S. manufacturers to two U.S. manufacturers. With regard to expansion, a foreign supplier entered the market in 2012, and in 2017, a U.S. firm, which is ultimately foreign-owned, was also established. According to the Department of Defense (DOD) while it supports competition, its current demand for SRMs can only sustain two manufacturers. Although at this stage it is too early to know how, or if, these new entrants will impact the economic viability of the more long-standing U.S. manufacturers. The consolidation in the SRM industrial base has also been accompanied by a decrease of suppliers throughout the supply chain. For example, one SRM manufacturer estimated a decrease in suppliers, from approximately 5,000 to 1,000, over the last 20 years. This increases the risk of production delays and disruptions in the event that key components and materials available from a single source become unavailable from that source. GAO found that DOD and industry are taking steps to identify and mitigate these risks, such as by establishing alternative sources and requiring advance notice when suppliers are considering exiting the market. In its annual industrial capabilities reports to Congress, DOD has consistently stated that the limited number of new missile development programs inhibits its ability to provide opportunities to help SRM manufacturers maintain their workforce capabilities. Specifically, with few new missile programs being initiated, engineers have had fewer opportunities to develop their engineering skills related to SRM concept designs, system development, and production, which are critical if SRM performance issues arise. However, in 2016, DOD funded a 4-year project to enhance engineering design skills for less experienced engineers working for the two U.S. manufacturers and help them develop advanced SRM technologies. GAO is not making recommendations at this time.", "document_type": "gao"}
{"report": "The Coast Guard has been responsible for carrying out the nation’s polar icebreaking missions since 1965—when it assumed primary responsibility for the nation’s polar icebreaking fleet. The Coast Guard’s responsibilities are outlined in various statutes, policies, and interagency agreements. A 2010 Coast Guard study identified gaps in the Coast Guard’s ability to support and conduct missions in the Arctic and Antarctic. As a result, in June 2013, the Coast Guard established the need for up to three heavy polar icebreakers and three medium icebreakers to adequately meet these Coast Guard mission demands. More recently, in November 2017, Coast Guard officials reiterated that they will be able to fulfill all mission requirements—which include support to agencies with Arctic responsibilities such as DOD, the National Science Foundation (NSF), Department of State, National Oceanic and Atmospheric Administration, and National Aeronautics and Space Administration—with a fleet of three heavy and three medium polar icebreakers. Coast Guard officials told us they are not currently assessing acquisition of the medium polar icebreakers because they are focusing on the HPIB acquisition and plan to assess the costs and benefits of acquiring medium polar icebreakers at a later time. The Coast Guard currently has two active polar icebreakers in its fleet— the Polar Star, a heavy icebreaker, and the Healy, a medium icebreaker. An additional Coast Guard heavy icebreaker, the Polar Sea, has been inactive since 2010 when it experienced a catastrophic engine failure. Commissioned in 1976, the Polar Star is the world’s most powerful active non-nuclear icebreaker. The less powerful Healy primarily supports Arctic research. Although the Healy is capable of carrying out a wide range of activities, it cannot operate independently in the ice conditions in the Antarctic or ensure timely access to some Arctic areas in the winter. See figure 1 for the Coast Guard’s active icebreakers. The Coast Guard has faced challenges in meeting the government’s icebreaking needs in recent years. For example, in June 2016, we found that when neither the Polar Sea nor the Polar Star was active in 2011 and 2012, the Coast Guard did not maintain assured, year-round access to both the Arctic and Antarctic, as the Healy cannot reach ice-covered areas with more than 4½ feet of ice. According to a January 2017 Coast Guard assessment, the Coast Guard does not plan to recommission the Polar Sea because it would not be cost-effective. According to Coast Guard planning documents, the Polar Star’s service life is estimated to end between fiscal years 2020 and 2023. This creates a potential heavy polar icebreaker capability gap of about 3 years, assuming the Polar Star’s service life ends in 2020 and the lead HPIB is delivered by the end of fiscal year 2023 as planned. If the lead ship is delivered later than planned in this scenario, the potential gap could be more than 3 years. As a result, according to a 2017 polar icebreaking bridging strategy, the Coast Guard is planning to recapitalize the Polar Star’s key systems starting in 2020 to extend the service life of the ship until the planned delivery of the second HPIB (see figure 2). In September 2017, we found that the Coast Guard’s $75 million cost estimate for the Polar Star life extension project may be unrealistic, in part because it was based on the assumption of continuing to use parts from the decommissioned Polar Sea, as has been done in previous maintenance events. Because of the finite number of parts available from the Polar Sea, the Coast Guard may have to acquire new parts for the Polar Star that could increase the $75 million estimate. As a result, we recommended that the Coast Guard complete a comprehensive cost estimate and follow cost estimating best practices before committing to the life extension project. The Coast Guard concurred with this recommendation. As of May 2018, Coast Guard officials told us they were still conducting ship engineering inspections on the Polar Star to determine the details of the work needed for the limited service life extension, which will then inform the development of a cost estimate. In January 2018, the Coast Guard completed its ship structures and machinery evaluation board report. Coast Guard officials told us that this report will help to determine the details of the work needed for the limited life extension. The January 2018 report estimated the remaining service life of the Polar Star as 5 years or less. In April 2018, the Coast Guard approved the Polar Star life extension project to establish requirements and evaluate the feasibility of alternatives that will achieve the requirements. Coast Guard officials stated they completed a notional cost estimate in April 2018 and plan to complete a detailed formal cost estimate by June 2020. The Coast Guard and the Navy established the IPO to collaborate and develop a management approach to acquire three HPIBs. Through the IPO, the Coast Guard planned to leverage the Navy’s shipbuilding expertise and pursue an accelerated acquisition schedule. A Coast Guard program manager heads the IPO, which includes embedded Navy officials who provide acquisition, contracting, engineering, cost- estimating, and executive support to the program. The IPO has responsibility for managing and executing the HPIB’s acquisition schedule, acquisition oversight reviews, budget and communications, and interagency coordination. In addition, the IPO coordinates with several key organizations within the Coast Guard and Navy that contribute to the HPIB program, including: Coast Guard Capabilities Directorate: This directorate is responsible for identifying and providing capabilities, competencies, and capacity and developing standards to meet Coast Guard mission requirements. The directorate sponsored the HPIB’s operational requirements document, which provides the key performance parameters the HPIB must meet—such as icebreaking, endurance, and interoperability thresholds and objectives. Ship design team: The ship design team includes Coast Guard and Navy technical experts that develop ship specifications based on the HPIB operational requirements document. The ship design team is under the supervision of a Coast Guard ship design manager, who provides all technical oversight for development of the HPIB design, including development of “indicative,” or concept, designs used to inform the ship’s specifications and the program’s lifecycle cost estimate. Generally, the purpose of an indicative design is to determine requirements feasibility, support cost estimating, and provide a starting point for trade studies. Naval Sea Systems Command (NAVSEA) Cost Engineering and Industrial Analysis Group (NAVSEA 05C): The group developed the HPIB lifecycle cost estimate, which informs the program’s cost baselines and affordability constraints. NAVSEA 05C developed the HPIB’s lifecycle cost estimate based on the ship design team’s indicative design and the technical assumptions outlined in the program cost estimating baseline document. NAVSEA Contracts Directorate (NAVSEA 02): This directorate includes the Navy contracting officer who released the HPIB detail design and construction contract’s solicitation in March 2018 and plans to award the contract under Navy authorities. The contracting officer performs contract management services and provides guidance to the IPO to help ensure the HPIB’s contract adheres to DOD and Navy contracting regulations and guidance. Figure 3 shows key organizations that support the HPIB program and their responsibilities prior to the award of the contract. Since establishing the IPO, the Coast Guard, DHS, and the Navy formalized agreements on their approach for the HPIB acquisition in three 2017 memorandums of agreements and understanding. These agreements define the Navy’s and Coast Guard’s roles in the HPIB acquisition with respect to funding responsibilities, acquisition oversight functions, and contracting and program management authorities, among other things. DHS, the Coast Guard, and the Navy have agreed to manage and oversee the HPIB program using DHS’s acquisition framework, as Coast Guard is a component within DHS. DHS’s acquisition policy establishes that a major acquisition program’s decision authority shall review the program at a series of predetermined acquisition decision events (ADE) to assess whether the major program is ready to proceed through the acquisition life-cycle phases (see figure 4). As we found in April 2018, the Coast Guard and the Navy will adhere to a tailored DHS acquisition framework for the HPIB program that supplements DHS ADE reviews with additional “gate” reviews adopted from the Navy’s acquisition processes. The DHS Under Secretary for Management retains final decision authority for the HPIB’s ADEs as the acquisition decision authority. The HPIB program achieved a combined ADE 2A/2B in February 2018, when DHS approved the program’s baselines and permitted the program to enter into the Obtain Phase of the DHS acquisition framework. The corresponding acquisition decision memorandum was signed in March 2018. The Coast Guard and the Navy plan to start detail design work for the HPIB in June 2019, once the detail design and construction contract is awarded. In Navy shipbuilding, detail design work can include outlining the steel structure of the ship; determining the routing of systems, such as electrical and piping, throughout the ship; and developing work instructions for constructing elements of the ship, such as installation drawings and material lists. The program’s ADE 2C, or the low-rate initial production decision, corresponds with the approval to start construction of the lead ship, which is planned to begin no later than June 2021. Key steps typically taken in the construction phase of a Navy ship include steel cutting and block fabrication, assembly and outfitting of blocks, keel laying and block erection, launch of the ship from dry dock, system testing and commissioning, sea trials, and delivery and acceptance (see appendix II for more detailed information on each shipbuilding phase). ADE 3, scheduled to be held no later than March 2026, authorizes the program to start follow-on test and evaluation. Figure 5 shows the HPIB’s acquisition framework, including ADE milestones and major program decision points, and how they relate to the shipbuilding phases. DHS acquisition policy establishes that the acquisition program baseline is the fundamental agreement between programs, component, and department-level officials establishing what will be delivered, how it will perform, when it will be delivered, and what it will cost. Specifically, the program baseline establishes a program’s schedule, costs, and key performance parameters, and covers the entire scope of the program’s lifecycle. The HPIB acquisition program baseline serves as an agreement between the Coast Guard and DHS that the Coast Guard will execute the acquisition within the bounds detailed in the document. The acquisition program baseline establishes objective (target) and threshold (maximum acceptable for cost, latest acceptable for schedule, and minimum acceptable for performance) baselines. Tables 1, 2, and 3 show selected cost, schedule, and performance baselines that DHS approved for the HPIB program at ADE 2A/2B in March 2018. After DHS approved the HPIB’s program baselines, the Navy released the solicitation for the program’s detail design and construction contract in March 2018. As revised, the solicitation requires offerors to submit their technical proposals in August 2018 and their price proposals in October 2018. The Navy plans to competitively award the HPIB detail design and construction contract to a single shipyard for all three ships in June 2019. The contract award would include design (advance planning and engineering) and long lead time materials, with separate options for detail design and construction of each of the three ships. The HPIB contract award and administration will follow DOD and Navy contracting regulations and policies, including the Defense Federal Acquisition Regulation Supplement. Although the Navy is planning to award the contract, the source selection authority is from the Coast Guard, with both Coast Guard and Navy personnel serving on the source selection evaluation board. Our prior work has found that successful programs start out with solid, executable business cases before setting program baselines and committing resources. For Coast Guard programs, such a business case would be expected at ADE 2A/2B. A sound business case requires balance between the concept selected to satisfy operator needs and the resources—technologies, design knowledge, funding, and time—needed to transform the concept into a product—or in the HPIB’s case, a ship. At the heart of a business case is a knowledge-based approach—we have found that successful shipbuilding programs build on attaining critical levels of knowledge at key points in the shipbuilding process before significant investments are made. We have previously found that key enablers of a good business case include firm, feasible requirements; plans for a stable design; mature technologies; reliable cost estimates; and realistic schedule targets. Without a sound business case, acquisition programs are at risk of breaching the cost, schedule, and performance baselines set when the program was initiated—in other words, experiencing cost growth, schedule delays, and reduced capabilities. In November 2016, we found that a particular challenge for Congress is the fact that committees must often consider requests to authorize and fund a new program well ahead of program initiation—the point at which key business case information would be presented. Given the time lag between budget requests and the decision to initiate a new acquisition program, Congress could be making critical funding decisions with limited information about the soundness of the program’s business case. Although the HPIB program has already proceeded through ADE 2A/2B and established acquisition program baselines, information about the soundness of the HPIB’s business case will be helpful for decision makers as the Coast Guard and the Navy request funding in preparation for the detail design and construction contract award in June 2019 and anticipated construction start by the end of June 2021—two points at which significant resource commitments will need to be made. The Coast Guard set the HPIB’s acquisition program baselines at ADE 2A/2B without conducting a preliminary design review to assess the design maturity of the ship or a technology readiness assessment to determine the maturity of key technologies. This approach meets DHS acquisition policy requirements but is contrary to our best practices (see figure 6). While the Coast Guard is committed to a stable design prior to the start of lead ship construction, it established baselines without clear knowledge of the ship design because it does not plan to assess design maturity until after the planned June 2019 award of the detail design and construction contract. In addition, without a technology readiness assessment, the Coast Guard does not have full insight into whether the technologies are mature, potentially underrepresenting technical risk and increasing design risk. As a result, the Coast Guard will be committing resources to the HPIB program without key elements of a sound business case, increasing the risk that the program will exceed its planned costs and schedule. To help inform the HPIB’s key performance parameters, specifications, and design considerations prior to setting the acquisition program baselines, the Coast Guard conducted design studies and partnered with Canada (with which the United States has an existing cooperative agreement) to gain knowledge on the HPIB’s design risks. For example: Starting in November 2016, the HPIB ship design team developed an indicative (or concept) design, which has undergone several revisions as more information became available, completing a fifth iteration in September 2017. To inform the HPIB indicative design, the ship design team told us they used design elements with validated characteristics, such as the hull form, from existing Coast Guard icebreakers, including the Polar Star, Polar Sea, Healy, and the Mackinaw (a Great Lakes icebreaker). Collectively, these icebreakers informed elements of the indicative design such as the size and producibility of the ship. The indicative design represents an icebreaker design that meets the threshold key performance parameter of breaking 6 feet of ice at a continuous speed of 3 knots rather than the objective parameter of 8 feet of ice at a continuous speed of 3 knots. Coast Guard officials stated that based on preliminary analysis, a design that meets the HPIB’s objective key performance parameters would be an entirely separate design and would be too costly to construct. Coast Guard officials told us that in addition to price, the shipbuilders’ HPIB proposals will be evaluated on design factors, including how much the potential design exceeds the threshold icebreaking performance parameters. In February 2017, the Coast Guard contracted with five shipbuilders, who teamed with icebreaker design firms, to conduct a series of iterative design studies. These studies examined major design cost drivers and technology risks for the HPIB program. Coast Guard officials stated the results of these studies helped inform and refine the ship’s specifications and provided them with a better understanding of the technology risks and schedule challenges. As of February 2018, each contract was valued at about $5.6 million. Under these contracts, each shipbuilder completed five detailed industry study iterations. For example, the shipbuilders analyzed various hull forms, propulsion systems, cold weather operations, space arrangements, and icebreaking enhancements. In April 2017, the Coast Guard completed an alternatives analysis study—an independent study required prior to ADE 2A that identifies the most efficient method of addressing an identified capability gap. The study examined various options, including whether existing foreign icebreakers could meet the Coast Guard’s HPIB performance requirements. The Coast Guard analyzed 18 domestic and foreign icebreaker designs against the HPIB’s key performance parameters and other requirements, such as seakeeping and habitability. The icebreaker designs included a variety of icebreakers in terms of propulsion power and size, such as nuclear-powered Russian icebreakers and polar research and supply vessels from Australia, Finland, and Germany. The alternatives analysis found that only a Russian nuclear-powered icebreaker and a design for a Canadian diesel-electric-powered icebreaker, which has yet to be constructed, passed initial screening for design maturity and performance requirements. Given a previous independent study analyzing the cost-effectiveness of nuclear- powered icebreakers, the Coast Guard deemed a nuclear-powered icebreaker design as infeasible. The alternatives analysis also noted that the Canadian design met icebreaking requirements. However, Coast Guard officials told us the Canadian design did not meet requirements such as habitability and military-oriented multi-mission tasks, but the design could potentially be modified to meet those needs. In addition, IPO officials stated the Canadian design was designed for science missions rather than military missions. The Canadian design was considered among some of the shipbuilders as a starting point in examining HPIB design risks. From May to August 2017, the Coast Guard tested two scale models of icebreakers at the Canadian National Research Council’s ice tank facility in Newfoundland. Coast Guard officials told us the testing helped to mitigate potential design risks with the hull form and propulsors—a mechanical device that generates thrust to provide propulsion for the ship. The Coast Guard tested the resistance, powering, and maneuvering of the model icebreakers’ hull form and propulsion to inform their indicative design and discovered that the ship’s maneuverability was a challenge during model testing. However, through model testing, the Coast Guard was able to validate general characteristics of its indicative design, including power needs and the hull form. In addition to model testing, Canadian Coast Guard officials told us that the U.S. Coast Guard has engaged with them in formal and informal exchanges regarding icebreaker acquisitions more generally. As a result of its indicative design, industry studies, and model testing efforts, the Coast Guard identified the integrated power plant, propulsors, and hull form as key design considerations for the HPIB. Because these design elements work together to ensure the HPIB can meet its icebreaking requirements, we determined that these are the HPIB’s main design risks (see figure 7). Although the Coast Guard undertook early efforts to identify design risks, it did not conduct a preliminary design review for the HPIB program prior to setting program acquisition baselines at ADE 2A/2B. These baselines inform DHS’s and Coast Guard’s decisions to commit resources. Our best practices for knowledge-based acquisitions state that before program baselines are set, programs should hold key systems engineering events, such as a preliminary design review, to help ensure that requirements are defined and feasible and that the proposed design can be met within cost, schedule, and other system constraints. Similarly, in November 2016, we found that establishing a preliminary design through early detailed systems engineering results in better program outcomes than doing so after program start. During the HPIB’s preliminary design review, the Coast Guard plans to verify that the contractor’s design meets the requirement of the ship specifications and is producible, and the schedule is achievable, among other activities. The Coast Guard has yet to conduct a preliminary design review for the HPIB program because DHS’s current acquisition policy does not require programs to do so until after ADE 2A/2B. The Coast Guard plans to hold the preliminary design review by December 2019, after the award of the detail design and construction contract. Holding a preliminary design review after ADE 2A/2B is consistent with DHS policy. However, in April 2017, we found that DHS’s sequencing of the preliminary design review is not consistent with our acquisition best practices, which state that programs should pursue a knowledge-based acquisition approach that ensures program needs are matched with available resources—such as technical and engineering knowledge, time, and funding—prior to setting baselines. In that report, we found that by initiating programs without a well-developed understanding of system needs through key engineering reviews such as the preliminary design review, DHS increases the likelihood that programs will change their user-defined key performance parameters, costs, or schedules after establishing their baselines. As a result, we recommended that DHS update its acquisition policy to require key technical reviews, including the preliminary design review, to be conducted prior to approving programs’ baselines. DHS concurred with this recommendation and stated that it planned to initiate a study to assess how to better align its processes for technical reviews and acquisition decisions. Upon completion of the study, DHS plans to update its acquisition policies, as appropriate. Instead of establishing the HPIB program’s acquisition program baselines after assessing the shipbuilder’s preliminary design, the Coast Guard established cost baselines based on a cost estimate that used the ship design team’s indicative design. Coast Guard officials told us that the selected shipbuilder will develop its own HPIB design as part of the detail design and construction contract, independent of the indicative design. The ship design team noted that the indicative design informed the ship’s specifications but is not meant to be an optimized design, does not represent a design solution, and will not be provided to the shipbuilders. Coast Guard officials stated that the shipbuilders that respond to the request for proposals will propose their own designs based on their production capabilities, which will drive where they will place components, such as bulkheads, within the design. As a result, the shipbuilder’s design will be different from the indicative design. By setting the HPIB’s acquisition program baselines prior to gaining knowledge on the shipbuilder’s design, the Coast Guard has established cost, schedule, and performance baselines without a stable or mature design. Although completing the preliminary design review after setting program baselines is consistent with DHS policy, this puts the Coast Guard at risk of breaching its established baselines and having to revise them later in the acquisition process, after a contract has been signed and significant resources have already been committed to the program. At that point, the program will be well underway and it will be too late for decision makers to make appropriate tradeoff decisions between requirements and resources without causing disruptions to the program. Consistent with DHS acquisition policy, DHS and the Coast Guard must monitor the HPIB program against the acquisition program baselines set at ADE 2A/2B; however, DHS acquisition policy does not require an official update to the baseline unless the program breaches its baselines or until the next major milestone, whichever occurs first. For the HPIB, the next milestone is ADE 2C, which is currently planned for no later than June 2021. ADE 2C corresponds to the approval of low-rate initial production and in the case of the HPIB, the start of construction for the lead ship. Evaluating the HPIB’s baselines at ADE 2C—immediately before the shipbuilder is authorized to start construction—is too late because the funding required for the construction phase likely would have already been requested and provided. On the other hand, evaluating the acquisition program baselines after the preliminary design review but before ADE 2C would help to ensure that the knowledge gained during the preliminary design review is used to inform the program baselines and business case for investing in the HPIBs before significant resource commitments are made. Although the Coast Guard set the acquisition program baselines prior to gaining knowledge on the feasibility of the selected shipbuilder’s design, it has expressed a commitment to having a stable design prior to the start of lead ship construction. In Navy shipbuilding, detail design typically encompasses three design phases: Basic design. Includes fixing the ship steel structure; routing all major distributive systems, including electricity, water, and other utilities; and ensuring the ship will meet the performance specifications. Functional design. Includes providing further iteration of the basic design, providing information on the exact position of piping and other outfitting in each block, and completing a 3D product model. Production design. Generating work instructions that show detailed system information and including guidance for subcontractors and suppliers, installation drawings, schedules, material lists, and lists of prefabricated materials and parts. Shipbuilding best practices we identified in 2009 found that design stability is achieved upon completion of the basic and functional designs. At this point of design stability, the shipbuilder has a clear understanding of the ship structure as well as how every system is set up and routed throughout the ship. Consistent with our best practices, prior to the start of construction on the lead ship, the Coast Guard will require the shipbuilder to complete basic and functional designs, develop a 3D model output, and provide at least 6 months of production information to support the start of construction. IPO officials have stated that they are committed to ensuring that the HPIB’s design is stable before construction of the lead ship begins, given the challenges prior Navy shipbuilding programs have experienced when construction proceeded before designs were completed. The Coast Guard intends on using what it refers to as proven technologies for the HPIB but has not conducted a technology readiness assessment to determine maturity of key technologies that drive performance of the ship prior to ADE 2A/2B, which is inconsistent with our best practices. A technology readiness assessment is a systematic, evidence-based process that evaluates the maturity of critical technologies—hardware and software technologies critical to the fulfillment of the key objectives of an acquisition program. This assessment does not eliminate technology risk but, when done well, can illuminate concerns and serve as a basis for realistic discussions on how to mitigate potential risks. According to our best practices, a technology readiness assessment should be conducted prior to program initiation. DHS systems engineering guidance also recommends conducting a technology readiness assessment before ADE 2A to help ensure that the program’s technologies are sufficiently mature by the start of the program. The Coast Guard intends on using what it has deemed “state-of-the- market” or “proven” technologies for the HPIB. DHS’s technical assessment of the HPIB noted that the February 2017 design studies resulted in industry producing designs that used commercially available, state-of-the-market, and proven technologies. From the studies and industry engagement, Coast Guard officials determined that the technologies required for the HPIB, such as the integrated power plant and azimuthing propulsors—thrusters that rotate up to 360 degrees and provide propulsion to the ship—are available commercially and do not need to be developed. Coast Guard officials further stated that the integrated power plant is the standard power plant used on domestic and foreign icebreakers. Coast Guard officials told us that similarly, market survey data on azimuthing propulsors shows that ice-qualified azimuthing propulsors in the power range have been used on foreign icebreakers. The Coast Guard has also communicated to industry through the request for proposals that the HPIB should have only proven technology and plans to have the shipbuilders provide information on the maturity of the technologies when they submit their proposals. As a result, Coast Guard officials stated the HPIB program does not have any critical technologies, as defined by DHS systems engineering guidance, and does not need to conduct a technology readiness assessment. However, according to DHS systems engineering guidance, a technology element is considered critical if the system being acquired depends on this technology to meet operational requirements, and if the technology or its application is new, novel, or in an area that poses major technological risk during detailed design or demonstration. The guidance further states that technologies can become critical if they need to be modified from prior successful use or expected to operate in an environment beyond their original demonstrated capability. Similarly, according to our best practices for assessing technology readiness, critical technologies are not just technologies that are new or novel. Technologies used on prior systems can also become critical if they are being used in a different form, fit, or function. Our technology readiness assessment guide notes that program officials sometimes disregard critical technologies when they have longstanding history, knowledge, or familiarity with them. The best practices guide cites examples of organizations not considering a technology critical if it has been determined to be mature, has already been fielded, or does not currently pose a risk to the program. Additionally, our guide notes that contractors may be overly optimistic about the maturity of critical technologies, especially prior to contract awards. According to our best practices guide, presuming a previously used technology as mature is problematic when the technologies are being reapplied to a different program or operational environment. As a result, based on our analysis of available Coast Guard information, we believe the HPIB’s planned integrated power plant and azimuthing propulsors should be considered critical technologies given their criticality in meeting key performance parameters, their use in a different environment from prior ships, and the extent to which they pose major cost risks (see table 4). Without conducting a technology readiness assessment, the Coast Guard does not have insight into how mature these critical technologies are. According to our best practices, evaluating critical technologies requires disciplined and repeatable steps and criteria to perform the assessment and make credible judgments about their maturity. The evaluation of each critical technology must be based on evidence such as data and test results. In addition, the team that assesses the technologies must be objective and ideally independent. Instead, the Coast Guard has relied on industry to provide information on the maturity of the HPIB’s technologies and uses terms such as “state-of-the-market” or “proven,” which do not translate into meaningful measures for systematically communicating the technology readiness, especially when discussing new applications of existing technologies. Additionally, even if the Coast Guard determines the maturity levels of the HPIB’s technologies through an objective and independent technology readiness assessment, the program’s planned level of maturity for the ship’s technologies falls short of our best practices. According to the HPIB’s systems engineering tailoring plan and request for proposals, the program intends on implementing only proven technologies that have been demonstrated in a relevant environment, commensurate with a technology readiness level (TRL) of 6. However, our best practices do not consider a technology to be mature until it has been demonstrated in an operational environment, commensurate with a TRL 7. Specifically, our best practices for shipbuilding recommend that programs should require critical technologies to be matured into actual prototypes and successfully demonstrated in an operational or a realistic environment (TRL 7) before a contract is awarded for the detail design of a new ship. DHS’s systems engineering guidance also states that critical technologies below TRL 7 should be identified as technical risks. By not conducting a technology readiness assessment and identifying, assessing, and maturing its critical technologies prior to setting the HPIB’s program baselines and prior to awarding the detail design contract, the Coast Guard is underrepresenting the program’s technical risks and understating its cost, schedule, and performance risks. Technology risks that manifest later could require the shipbuilder to redesign parts of the ship, which increases the risk of rework and schedule delays during the construction phase. The cost estimate and schedule that informed DHS’s decision to authorize the HPIB program do not reflect the full scope of the program’s risks. We found that while the Navy substantially adhered to a number of best practices when it developed the HPIB’s cost estimate, the estimate is not fully reliable, primarily because it does not reflect the full range of possible costs over the HPIB’s 30-year lifecycle. We also found the HPIB schedule was not informed by a realistic assessment of the work necessary to construct the ship. Rather, the schedule was driven by the potential gap in icebreaking capabilities once the Coast Guard’s only operating HPIB reaches the end of its service life. Reliable cost estimates and schedules are key elements of an executable business case, and are needed at the outset of programs—when competitive pressures to obtain funding for the program are high—to provide decision makers with insight into how risks affect a program’s ability to deliver within its cost and schedule goals. We found that the lifecycle cost estimate used to inform the HPIB program’s baselines substantially adheres to most cost estimating best practices; however, the estimate is not fully reliable. The cost estimate only partially met best practices for being credible primarily because it did not quantify the range of possible costs over the entire life of the program. We assessed the program’s lifecycle cost estimate, which was performed by NAVSEA 05C, against our best practices for cost estimating. For our reporting purposes, we collapsed 18 of our applicable best practices into the four general characteristics of a reliable cost estimate: comprehensive, well-documented, accurate, and credible. Figure 8 provides a summary of our assessment of the HPIB’s lifecycle cost estimate. Comprehensive. We found the HPIB cost estimate substantially met the best practices for being comprehensive. For example, the estimate includes government and contractor costs over the full lifecycle of all three ships and contains sufficient levels of detail in the program’s work breakdown structure—a hierarchical breakdown of the program into specific efforts, including system engineering and ship construction. The estimate also documents detailed ground rules and assumptions, such as the learning curve used to capture expected labor efficiencies for follow- on ships. However, we found that the costs for disposal of the three ships were not at a level of detail to ensure that all costs were considered and not all assumptions, particularly regarding operating and support costs, were varied to reflect the impact on cost should these assumptions change. Well-Documented. We also found the cost estimate substantially met the best practices for being well-documented. Specifically, the cost estimate’s documentation mostly captured the source data used as well as the primary methods, calculations, results, rationales, and assumptions used to generate each cost element. However, the documentation alone did not provide enough information for someone unfamiliar with the cost estimate to replicate what was done and arrive at the same results. For example, NAVSEA officials discussed and showed us how historical data from the analogous ships were used to create the estimate, but these specific sources were not found in the cost estimate documentation. Accurate. We found the estimate substantially met best practices for being accurate. In particular, the estimate was properly adjusted for inflation, and we did not find any mathematical errors in the estimate calculations we inspected. Officials stated that labor and material cost data from recent, analogous programs were used in the estimate. While the documentation does not discuss the reliability, age, or relevance of the cost data, NAVSEA officials provided us with additional information regarding those data characteristics. Additionally, officials provided documentation that demonstrated that they had updated the cost estimate several times in the last 2 years. Credible. We found the HPIB cost estimate partially met the best practices associated with being credible. A credible cost estimate should analyze the sensitivity of the program’s expected cost to changes among key cost-driving assumptions and risks. It should also quantify the cost impact of risks related to assumptions changing and variability in the underlying data used to create the cost estimate. Credible cost estimates should also be cross-checked internally and reconciled with an independent cost estimate that is performed by an outside group. These two best practices ensure that the estimate has been checked for any potential bias. Our review of the HPIB cost estimate determined it partially met the best practices for being credible due to the following: Exclusions of major costs from sensitivity analysis and risk and uncertainty analysis. The cost estimators conducted sensitivity analysis as well as risk and uncertainty analysis on only a small portion of the total lifecycle costs. For both the sensitivity analysis and risk and uncertainty analysis, we found that NAVSEA only modeled cost variation in the detail design and construction portion of the program and excluded from its analyses any risk impacts related to the remainder of the acquisition, operating and support, and disposal phases, which altogether comprise about 75 percent of the lifecycle cost. The cost estimate documents that the limited number of active icebreakers and available data prevented NAVSEA from identifying accurate risk bounds for the operating and support and disposal phases. Further, NAVSEA officials told us because they used historical data, including average maintenance costs from the Healy, they felt that their estimate was reasonable. However, similar to how NAVSEA consulted with the ship design team to establish high and low-end costs using analogous ships, NAVSEA could have used cost ranges in the historical data to develop risk bounds for the remaining costs in the acquisition, operations and support, and disposal phases. Without performing a sensitivity analysis on the entire life cycle cost of the three ships, it is not possible for NAVSEA to identify key elements affecting the overall cost estimate. Further, without performing a risk and uncertainty analysis on the entire life cycle cost of the three ships, it is not possible for NAVSEA to determine a level of confidence associated with the overall cost estimate. By not quantifying important risks, NAVSEA may have underestimated the range of possible costs for about three-quarters of the entire program. Lack of applied correlation in the risk and uncertainty analysis. In its independent assessment of the HPIB cost estimate, the DHS Cost Analysis Division similarly found that the results of the risk and uncertainty analysis may understate the range of possible cost outcomes for the HPIB. The DHS assessment noted that NAVSEA did not use applied correlation—which links costs for related items so that they rise and fall together during the analysis—in its cost model. According to a joint agency handbook on cost risk and uncertainty, applied correlation helps to ensure that cost estimates do not understate the possible variation in total program costs. Omitting applied correlation when assessing a cost estimate for risk can cause an understated range of possible program costs and create a false sense of confidence in the cost estimate. For example, absent applied correlation, the DHS assessment noted that the Navy calculated with a 99-percent level of confidence that the program will not exceed its threshold (maximum acceptable) acquisition cost. Navy officials explained that they will incorporate applied correlation in future updates to the cost estimate when better data are available. However, by applying correlation factors from the joint agency handbook to the same data that NAVSEA used, DHS’s Cost Analysis Division determined that NAVSEA overstated the likelihood of the program not exceeding its threshold acquisition cost. Cost estimate not fully reconciled with a comparable independent cost estimate. While the Naval Center for Cost Analysis performed an independent cost estimate of the HPIB program, the office used a different methodology from NAVSEA’s, and its estimate was based on an earlier version of the indicative ship design and associated technical baseline. NAVSEA officials told us that before the Coast Guard’s ship design team updated the indicative ship design and technical baseline, NAVSEA met twice with Naval Center for Cost Analysis to reconcile their results. However, NAVSEA officials told us that due to the speed at which the program was progressing, no reconciliation occurred after the ship design team finalized the indicative ship design. While we did not find any specific ground rules and assumptions that differed between the two estimates, some ship characteristics had changed, such as the weight estimates for propulsion and auxiliary systems, among others. The use of two different technical baselines creates differences in the two estimates and makes them less comparable to one another. For additional details on our assessment of the HPIB’s cost estimate against our 18 cost estimating best practices, see appendix III. By excluding the majority of the HPIB program’s lifecycle costs from the sensitivity analysis as well as the risk and uncertainty analysis, and reconciling the estimate with an independent cost estimate based on a different iteration of the ship design, the cost estimate does not provide a fully credible range of costs the program may incur. Moreover, the exclusion of applied correlation further provides a false sense of confidence that the program will not exceed its threshold cost. As a result, the estimate provides an overly optimistic assessment of the program’s vulnerability to cost growth should risks be realized or current assumptions change. This, in turn, may underestimate the lifecycle cost of the program and calls into question the cost baselines DHS approved and used to inform the HPIB’s budget request. Without a reliable cost estimate to inform the business case for the HPIB prior to award of the contract option for lead ship construction, Congress is at risk of committing to a course of action without a complete understanding of the program’s longer-term potential for cost growth. The Coast Guard set an optimistic schedule baseline for the HPIB based on operational need, but its approach does not reflect a robust analysis of what is realistic and feasible. According to DHS and Coast Guard acquisition guidance, the goal of ADE 2A/2B is, among other things, to ensure that the program’s schedule baseline is executable at an acceptable cost. Rather than building a schedule based on knowledge—including determining realistic schedule targets, analyzing how much time to include in the schedule to buffer against potential delays, and comprehensively assessing schedule risks—the Coast Guard used the estimated end date of the Polar Star’s service life as the primary driver to set the lead ship’s objective (or target) delivery date of September 2023 and threshold (latest acceptable) delivery date of March 2024. The Coast Guard and the Navy did not conduct a robust analysis to determine how realistic the 2.5- to 3-year construction cycle time is for the lead HPIB before setting the schedule baseline. Our best practices for developing project schedules state that, rather than meeting a particular completion date, estimating how long an activity takes should be based on the effort required to complete the activity and the resources available. Doing so ensures that activity durations and completion dates are realistic and supported by logic. The Coast Guard and the Navy validated the reasonableness of the 2.5- to 3-year construction time by comparing this duration to historical Navy ship construction data. Program officials told us that they used 211 Navy ships in their analysis and determined that the HPIB’s construction schedule was within historical norms given its weight. However, program officials told us they included both lead and follow-on ships in their analysis. As we have found in our prior Navy shipbuilding work, schedule delays tend to be amplified for lead ships in a class. Therefore, we believe the program’s analysis for the lead ship was overly optimistic. The Coast Guard also sought industry feedback to determine whether 2.5 to 3 years to build the lead HPIB was feasible. Design study information provided to the Coast Guard by several shipbuilders estimated that they would need between 2.5 to 3.5 years to build the lead ship. We determined that the Coast Guard used the more optimistic estimate of 2.5 years for the objective delivery date and 3 years for the threshold delivery date. Three years was also the time frame reflected in the request for proposals for the detail design and construction contract. The request for proposals lists December 2023 as the target delivery date for the lead ship, which is approximately 3 years from the objective construction start date. Further, we compared the HPIB’s planned construction schedule to the construction schedules of delivered lead ships for major Coast Guard and Navy shipbuilding programs active in the last 10 years as well as the Healy. We found that the HPIB’s lead ship construction cycle time of 2.5 to 3 years is optimistic, as only three of the ten ships in our analysis were constructed in 3 years or less. For the purposes of our analysis, we included information on each ship’s weight and classification, both of which can affect complexity and, therefore, construction times (see figure 9). The Coast Guard also did not conduct any analysis to identify a reasonable amount of margin to include in the program schedule baseline to account for any delays. Estimating and documenting schedule margin based on an analysis of schedule risks helps to ensure that a program’s baseline schedule is achievable despite delays that may unexpectedly arise. Program officials told us that the only margin included in the HPIB schedule is the 6 months between the objective and threshold dates—the maximum time between objective and threshold dates before DHS policy requires additional rationale and justification. According to the request for proposals, the winning shipbuilder will examine schedule risks while preparing an integrated schedule. In addition, Coast Guard officials told us that the current schedule will remain largely notional until the winning shipbuilder provides detailed updates to the schedule. Delays in project schedules, whether they are in the program’s control or not, should be expected. For example, in prior shipbuilding programs we have reviewed, we have found that delays have resulted from a number of issues, including redesign work to address issues discovered during pre-delivery testing, key system integration problems, and design quality issues. Delays outside of the program’s control such as funding instability, late material delivery, and bid protests have previously affected a program’s ability to meet schedule. Program officials told us these and other schedule risks are not accounted for in the HPIB schedule. Further, our analysis of 12 selected shipbuilding acquisition programs active in the last 10 years shows that the Navy and the Coast Guard have delayed delivery of all but one lead ship from their original planned delivery dates by more than 6 months, with delays occurring both before and after the start of construction. The delays in lead ship deliveries ranged from 9 months to 75 months. For the purposes of our analysis, we included the lead ships of major Coast Guard and Navy shipbuilding programs that have been active from 2008 to 2018. We excluded the Navy submarines and aircraft carriers from our analysis because we determined that their size and complexity did not make them reasonable comparisons to the HPIB (see figure 10). By supporting the lead ship construction time with overly optimistic analysis and by not conducting analysis to estimate a reasonable amount of margin, the Coast Guard’s HPIB schedule does not fully account for likely or unforeseen delays, which would help ensure that the planned delivery date for the lead ship is feasible. The Coast Guard has set the HPIB’s schedule baselines, including when all three ships are planned to achieve full operational capability, but has not yet identified risks for the program’s schedule that could occur after the start of lead ship construction, such as risks related to the construction schedule or concurrency between ship testing and construction of subsequent ships. According to the HPIB risk management plan, the program should formally track risks, which includes developing risk mitigation plans and reporting risks to DHS. Prior to setting its baselines, the Coast Guard formally tracked some schedule risks that affect the program’s ability to start construction on time, such as an aggressive schedule for releasing the request for proposals for the detail design and construction contract. IPO officials told us they retired that risk because the Navy released the request for proposals in March 2018. However, our analysis of the HPIB construction schedule and 6- month margin for delays found the program’s schedule was optimistic, thereby warranting additional risk tracking and management. The DHS Office of Systems Engineering also identified and recommended the Coast Guard track and take steps to mitigate HPIB’s schedule risks, including those related to concurrency. In its technical assessment, this office noted that the program plans to deliver the first two ships prior to completing initial operational testing and evaluation for the lead ship. The assessment further noted that construction on the third ship is planned to be nearly three-quarters finished prior to completing initial operational testing and evaluation. DHS’s Office of Systems Engineering found that this concurrency creates cost, schedule, and technical risk resulting from rework that may be necessary to address deficiencies found during initial testing. By not comprehensively and formally tracking risks to the HPIB schedule that occur after the start of lead ship construction, the program may not sufficiently identify and take timely risk management actions to address this key phase in the acquisition. By not conducting a robust analysis to inform whether the HPIB’s schedule baselines are feasible, the Coast Guard is not providing Congress with realistic dates of when the ships may be delivered before requesting funding for the construction of the lead ship. While the Coast Guard is planning a service life extension of the Polar Star starting in 2020, as noted above, the HPIB’s optimistic schedule may put the Polar Star at risk of needing to operate longer than planned. The HPIB schedule’s optimism also puts the Coast Guard at risk of not fully implementing a knowledge-based acquisition approach to meet its aggressive schedule goals. Our prior work on shipbuilding programs has shown that establishing optimistic program schedules based on insufficient knowledge can create pressure for programs to make sacrifices elsewhere. For example, we found that the Navy moved forward with construction with incomplete designs and when key equipment was not available when needed. Additionally, some Navy programs pushed technology development into the design phase or pushed design into the construction phase. These concurrencies often result in costly rework to accommodate changes to the design, further delays, or lower than promised levels of capability. According to the IPO, the HPIB’s anticipated detail design and construction contract may be funded by both Coast Guard and Navy appropriations, but how certain types of cost growth will be addressed between the Coast Guard and the Navy has not been fully documented. The HPIB’s acquisition strategy anticipates award of a contract that will have options, includes efforts aimed at mitigating cost risks, and acknowledges the use of foreign suppliers to provide components and design services as allowable under statute and regulation. Since 2013, the program has received $360 million in funding, which includes both Coast Guard and Navy appropriations. Moving forward, it is unclear how much Coast Guard and Navy funding will be used to fund the contract. The Coast Guard and the Navy have an agreement in place for funding issues, but the agreement does not fully address how they plan to address cost growth on the program. As part of the HPIB’s acquisition strategy, the Navy structured the detail design and construction of each of the ships as contract options in the March 2018 request for proposals. Specifically, the request for proposals structured the detail design and construction work into four distinct contract line items, all under a fixed-price incentive (firm-target) contract type. Generally, this contract type allows the government and shipbuilder to share cost savings and risk through a specified profit adjustment formula, also known as a share ratio; ties the shipbuilder’s ability to earn a profit to performance by decreasing the shipbuilder’s profit after costs reach the agreed upon target cost; and, subject to other contract terms, fixes the government’s maximum obligation to pay at a ceiling price. Table 5 provides information on the HPIB’s request for proposals as of May 2018. According to the request for proposals, in addition to potentially earning profit by controlling costs, the shipbuilder may also earn up to $34 million in incentives for achieving other programs goals, such as quality early delivery, reducing operations and sustainment costs, and production readiness. IPO officials stated that they based the incentives on prior Navy shipbuilding contract examples. However, in March 2017, we found that the Navy had not assessed the effectiveness of added incentives for the reviewed fixed-price incentive contracts in terms of improved contract outcomes across the applicable shipbuilding portfolio. As a result, we recommended that DOD direct the Navy to conduct a portfolio-wide assessment of the Navy’s use of additional incentives on fixed-price incentive contracts across its shipbuilding programs. DOD concurred with this recommendation, but the Navy has not yet taken steps to implement it. As part of the HPIB acquisition strategy, the IPO is striving to control costs on the detail design and construction contract through the following: A fixed-price incentive (firm-target) contract type. Because the shipbuilder’s profit is linked to performance, fixed-price incentive contracts provide an incentive for the shipbuilder to control cost. Most of the Navy’s proposed share ratios and ceiling prices for the detail design and construction work are consistent with DOD’s November 2010 Better Buying Power memo, which states a 50/50 share ratio and 120 percent ceiling price should be the norm, or starting point, for fixed-price incentive contracts. Full and open competition. The Navy plans to competitively award the HPIB’s detail design and construction contract. From market research and industry engagement, the IPO determined that there were multiple viable competitors. In March 2017, we found that competition helped to strengthen the Navy’s negotiating position with shipbuilders when setting contract terms, such as the share line and ceiling price for fixed-price incentive type contracts. Providing offerors the government’s estimated ship costs. The request for proposals does not set affordability caps but does include information on the government’s estimated cost for the ships, including $746 million for the lead ship’s advance planning, engineering, detail design, and construction, and an average ship price of $615 million across all three ships. Navy contracting officials explained that offers will not be disqualified from the source selection solely for being higher than the estimated costs. Instead, the estimated costs provide the offerors with cost bounds to help appropriately scope the capabilities. For example, IPO officials stated that they are striving to appropriately size the integrated power plant so that it is generating sufficient power to meet key performance parameters but not so much power that it drives up the cost. Inquiries on block buys and economic order of quantity purchases. The Navy gave offerors an opportunity to provide the estimated savings that the government could achieve if it were to take a “block buy” approach in purchasing the ships or purchasing supplies in economic order quantities. The Navy did not include a definition of “block buy” in the HPIB request for proposals synopsis. Based on our prior work, block buy contracting generally refers to special legislative authority that agencies seek on an acquisition-by-acquisition basis to purchase more than one year’s worth of requirements. The request for proposals synopsis stated a preference for submission of the estimated savings within 60 days of the release of the request for proposals, or by May 2018. As of June 2018, the Navy had not received any formal responses from industry on potential savings from block buys or economic order quantities. For the HPIB request for proposals, the Navy stated that any information on block buys or economic order of quantities would be optional and would not be used as part of the evaluation of proposals submitted by offerors. Our prior work on block buy contracting approaches for the Littoral Combat Ship and F-35 Joint Strike Fighter programs found that the terms and conditions of the contracts affect the extent to which the government achieves savings under a block buy approach. For example, the Littoral Combat Ship’s block buy contracts indicated that a failure to fully fund the purchase of a ship in a given year would make the contract subject to renegotiation. DOD has pointed to this as a risk that the contractors would demand higher prices if DOD deviated from the agreed to block buy plan. In its HPIB acquisition strategy, the IPO has also considered the use of foreign suppliers as allowable under the law. According to the February 2018 HPIB acquisition plan, the HPIB must be constructed in a U.S. shipyard given statutory restrictions, including restrictions on construction of Coast Guard vessels and major components in foreign shipyards unless authorized by the President. However, foreign suppliers will be permitted to provide components and design services to the extent applicable statutes and regulations allow. According to Coast Guard officials, foreign design firms have extensive expertise and knowledge to produce the design for HPIBs. As a result, the U.S. shipbuilders planning to submit proposals on the HPIB solicitation may partner with these foreign design firms when submitting proposals. Similarly, Coast Guard officials stated that the azimuthing propulsors that have the necessary power and ice classification for the HPIB are manufactured by foreign companies. Therefore, the selected shipbuilder may subcontract with these companies to acquire the propulsors. In addition, Navy contracting officials stated that the program did not need to obtain a waiver from the Buy American Act—which generally requires federal agencies to purchase domestic end products when supplies are acquired for use in the United States, and use domestic construction materials on contracts performed in the United States—for certain components. The Act includes exceptions, such as when the domestic end products or construction materials are unavailable in sufficient and reasonably available commercial quantities and of a satisfactory quality. From 2013 through 2018, the program has received $360 million in funding—$60 million in the Coast Guard’s Acquisition, Construction, and Improvement appropriations (hereafter referred to as Coast Guard funding) and $300 million in Navy’s Shipbuilding and Conversion, Navy advance procurement appropriations (hereafter referred to as Navy appropriations). In addition, according to Coast Guard officials, in fiscal year 2017, Coast Guard reprogrammed $30 million in fiscal year 2016 appropriations for the HPIB from another program (see figure 11). According to IPO and Navy contracting officials, the Navy plans to use $270 million of the $300 million in Navy appropriations to award the detail design and construction contract in fiscal year 2019, which would fund the advanced engineering, long lead time materials, and detail design work. Navy officials stated the remaining $30 million in Navy appropriations will be held in reserves for potential scope changes. Of the $60 million in Coast Guard funding, the IPO has used $41 million for program office costs and the February 2017 design study contracts, and plans to use the remaining $19 million for program office costs. Coast Guard officials stated that they used the $30 million in reprogrammed 2016 appropriations to fund the design studies, model testing, and Navy warfare center support. As the program prepares to award a contract worth billions of dollars if all the options are exercised, Congress, the Coast Guard, and the Navy face key funding considerations. These include the extent to which the program will be funded using Coast Guard and Navy appropriations in the future and whether each of the ships will be fully or incrementally funded. Navy contracting officials stated that by structuring the contract’s construction work as options, the contract has flexibility to accommodate any type of additional funding the program may receive. The National Defense Authorization Act for Fiscal Year 2018 authorized procurement of one Coast Guard heavy polar icebreaker vessel. The Navy did not request any funding in fiscal year 2019 for the HPIB, while Coast Guard requested $30 million. Subsequently, after discretionary budget caps were relaxed by Congress, the Administration’s fiscal year 2019 budget addendum requested an additional $720 million in fiscal year 2019 Coast Guard appropriations for the program. Although the Navy did not request fiscal year 2019 funding for the lead ship, and Navy officials told us they have no plans to budget for the HPIB program moving forward, Congress may still choose to appropriate funds for the HPIB to the Navy. For example, in fiscal years 2017 and 2018, the Navy did not request funding but received $150 million in appropriations each year for the HPIB (see figure 12). Additionally, the Coast Guard has been expressly authorized to use incremental funding for the HPIB. This authorization is reflected in the Coast Guard’s January 2018 affordability certification memo, submitted to DHS leadership. These memos are required to certify that a program’s funding levels are adequate and identify tradeoffs needed to address any funding gaps. However, as noted above, with the addition of the Administration’s fiscal year 2019 budget request addendum, the Coast Guard requested $750 million in full funding for the lead ship. The Navy has informed us that it plans to award the advance planning, design, engineering, long lead time material contract line item with its $270 million in appropriations. Navy officials also told us they are in the process of determining whether it needs to be authorized by Congress to use an incremental funding approach to fund the detail design and construction options if full funding is not received by the Navy. According to the Office of Management and Budget’s A-11 budget circular, full funding helps to ensure that all costs and benefits of an acquisition are fully taken into account at the time decisions are made to provide resources. The circular goes on to say that when full funding is not followed, without certainty if or when future funding will be available, the result is sometimes poor planning, higher acquisition costs, cancellation of major investments, or the loss of sunk costs. The circular, however, also notes that Congress may change the agency’s request for full funding to incremental funding to accommodate more projects in a year than would be allowed with full funding. Regardless of the funding strategy and which service funds the contract, the Coast Guard and the Navy do not have a clear agreement on how certain types of cost growth within the program will be addressed. The budgeting and financial management appendix of the July 2017 agreement between the Coast Guard and Navy for the HPIB notes that any cost overruns will be funded by the originating source of the appropriation and be the responsibility of the organization that receives the funding. However, the Coast Guard and the Navy have interpreted “cost overruns” differently in the context of the agreement. Coast Guard and Navy officials are in agreement that given the fixed- price incentive contract type, the government’s share of cost overruns between the target cost and ceiling price (based on the share ratio) will be the responsibility of the organization that provided the funding for the contract line item. Navy officials also noted that because the contract type is fixed-price incentive, any cost overruns above the ceiling price are generally the responsibility of the contractor, not the government. However, the Coast Guard and the Navy have not addressed in an agreement how they plan to handle any cost growth stemming from changes to the scope, terms, and conditions of the HPIB detail design and construction contract. For example, if the Coast Guard or the Navy revises the program’s requirements, this could increase the scope and value of the contract and result in additional contract costs. It is unclear in this instance, which organization is responsible for paying for the additional costs. Further, our 2005 work on Navy shipbuilding programs found that the most common causes of cost growth in these programs were related to design modifications, the need for additional and more costly materials, and changes in employee pay and benefits, some of which required changes in contract scope. IPO officials told us that unplanned changes to the program’s scope and any corresponding funding requests for unanticipated cost growth would require discussions and agreements with both Coast Guard and Navy leadership. Coast Guard and Navy officials stated that they are in the process of reviewing the July 2017 budget appendix of the agreement to clarify the definition of cost overruns and plan to finalize revisions no later than September 2018. Our prior work on implementing interagency collaborative mechanisms found that agencies that articulate their agreements in formal documents can strengthen their commitment to working collaboratively, which can help better overcome significant differences when they arise. Different interpretations or disagreements on financial responsibility between the Coast Guard and the Navy on cost growth for the HPIB program could result in funding instability for the program, which could affect the program’s ability to meet its cost and schedule goals. In the last several years, the Coast Guard and the Navy have made significant strides in their efforts to acquire heavy polar icebreakers. It has been over 40 years since the United States has recapitalized its aging heavy polar icebreaker fleet, and Congress has expressed the need for investment in the HPIB program to help ensure our continued presence in the polar regions. The Coast Guard and the Navy have taken steps to examine design risks and expressed commitment to design maturity before starting construction on the lead ship. However, the Coast Guard and the Navy did not take key steps to reduce risks on the HPIB program before setting the HPIB’s program baselines— namely, conducting a preliminary design review, conducting a technology readiness assessment, developing a fully reliable cost estimate, and conducting analysis to determine a realistic schedule and risks to that schedule. By setting the program’s baselines prior to obtaining sufficient knowledge in the design, technologies, cost, and schedule of the HPIB, DHS, the Coast Guard, and the Navy are not establishing a sound business case for investing in the HPIB nor putting the program in a position to succeed. There is risk that the program will cost more than the planned $9.8 billion and the lead ship will not be delivered by 2023 as planned. Further, without clear agreement between the Coast Guard and the Navy on which service will be responsible for any cost growth on the HPIB, the program is at further risk of not meeting its ambitious goals. In the current budget environment, it is imperative that the Coast Guard and the Navy obtain sufficient acquisition knowledge and put together a sound business case before asking Congress and taxpayers to commit significant resources to the HPIB program. We are making six recommendations total to the Coast Guard, DHS, and the Navy: The Commandant of the Coast Guard should direct the polar icebreaker program to conduct a technology readiness assessment in accordance with best practices for evaluating technology readiness, identify critical technologies, and develop a plan to mature any technologies not designated to be at least TRL 7 before detail design of the lead ship begins. (Recommendation 1) The Commandant of the Coast Guard, in collaboration with the Secretary of the Navy, should direct the polar icebreaker program and NAVSEA 05C to update the HPIB cost estimate in accordance with best practices for cost estimation, including (1) developing risk bounds for all phases of the program lifecycle, and on the basis of these risk bounds, conduct risk and uncertainty analysis, as well as sensitivity analysis, on all phases of the program lifecycle, and (2) reconciling the results with an updated independent cost estimate based on the same technical baseline before the option for construction of the lead ship is awarded. (Recommendation 2) The Commandant of the Coast Guard should direct the polar icebreaker program office to develop a program schedule in accordance with best practices for project schedules, including determining realistic durations of all shipbuilding activities and identifying and including a reasonable amount of margin in the schedule, to set realistic schedule goals for all three ships before the option for construction of the lead ship is awarded. (Recommendation 3) The Commandant of the Coast Guard should direct the polar icebreaker program office to analyze and determine appropriate schedule risks that could affect the program after construction of the lead ship begins to be included in its risk management plan and develop appropriate risk mitigation strategies. (Recommendation 4) The DHS Under Secretary for Management should require the Coast Guard to update the HPIB acquisition program baselines prior to authorizing lead ship construction, after completion of the preliminary design review, and after it has gained the requisite knowledge on its technologies, cost, and schedule, as recommended above. (Recommendation 5) The Commandant of the Coast Guard, in collaboration with the Secretary of the Navy, should update the financial management and budget execution appendix of the memorandum of agreement between the Coast Guard and the Navy to clarify and document agreement on how all cost growth on the HPIB program, including changes in scope, will be addressed between the Coast Guard and the Navy. (Recommendation 6) We provided a draft of this report to DHS and DOD for review and comment. In its comments, reproduced in appendix IV, DHS concurred with all six of our recommendations and identified actions it planned to take to address them. The Navy stated that it deferred to DHS and the Coast Guard on responding to our recommendations. DHS, the Coast Guard, and the Navy also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of Homeland Security, the Commandant of the Coast Guard, the Secretary of the Navy, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix V. This report examines (1) the extent to which the heavy polar icebreaker (HPIB) program has taken steps to develop mature designs and technologies consistent with best practices, (2) the extent to which the HPIB program has taken steps to set realistic cost and schedule estimates, and (3) the status of the HPIB program’s contracting efforts and funding considerations. To assess the extent to which the HPIB program has taken steps to develop mature designs and technologies consistent with GAO-identified best practices, we reviewed program performance and design requirements, including the program’s operational requirements documents, system specifications such as the power plant, propulsion system, and hull, and technical baseline; the program’s alternatives analysis study, tailored systems engineering plan, test and evaluation master plan, and model testing results; cooperative agreements with Canada related to the HPIB; excerpts from industry studies; and the March 2018 detail design and construction request for proposals and subsequent amendments. We also reviewed relevant Department of Homeland Security (DHS), Coast Guard, and Department of Defense (DOD) acquisition guidance and instructions. From these documents, we determined the program’s design and technology efforts and compared them to GAO’s various best practices, including using a knowledge-based approach to shipbuilding, knowledge-based approach to major acquisitions, and evaluating technology readiness. We also interviewed knowledgeable officials from the Coast Guard’s Capabilities Directorate, Research and Development Center, and Marine Transportation Systems Directorate; DHS’s Science and Technology Directorate’s Office of Systems Engineering; the Canadian Coast Guard; and the National Science Foundation. To assess the extent to which the HPIB program has taken steps to set realistic cost and schedule estimates, we determined the extent to which the estimates were consistent with best practices as identified in GAO’s Cost Estimating and Assessment and Schedule Assessment guides. To assess the cost estimate, we reviewed the HPIB’s January 2018 lifecycle cost estimate used to support the program’s initial cost baselines, Coast Guard and Navy documentation supporting the estimate, relevant program briefs to Coast Guard leadership, and HPIB program documentation containing cost, schedule, and risk information. We met with Naval Sea Systems Command (NAVSEA) officials responsible for developing the cost estimate to understand the processes used by the cost estimators, clarify information, and request additional documentation to support the estimate. Because we did not have direct access to the HPIB cost model, we observed portions of the model during a presentation and discussion with Navy cost estimators. We also reviewed the Naval Center for Cost Analysis’ September 2017 independent cost estimate for the HPIB program, the DHS Cost Analysis Division’s January 2018 independent cost assessment of the HPIB lifecycle cost estimate, and DHS Office of Systems Engineering’s January 2018 technical assessment of the HPIB program. We also conducted interviews with officials from the Naval Center for Cost Analysis, DHS Cost Analysis Division, and the DHS Office of Systems Engineering. To assess the program’s schedule, we compared the HPIB program’s schedule, including the program’s initial schedule baselines, delivery schedules from the HPIB’s request for proposals for the detail design and construction contract, and integrated master schedule, to selected GAO best practices for project schedules, including establishing the duration of activities, ensuring reasonable total buffer or margin, and conducting a schedule risk analysis. To specifically assess the HPIB lead ship’s 3- year construction schedule estimate, we reviewed the Coast Guard’s and the Navy’s analysis supporting the HPIB schedule. We did not assess the reliability of the historical ship construction data the Coast Guard and Navy used for this analysis. We also compared the HPIB lead ship’s 3- year construction schedule to historical construction cycle times of lead ships among a nongeneralizable sample of major Navy and Coast Guard shipbuilding programs. We selected programs that were active within the last 10 years and have completed construction of the lead ship. We also included the Coast Guard’s Healy medium polar icebreaker, even though it is not a recent shipbuilding program, because it is the most recent polar icebreaker to be built in the United States. We excluded the Coast Guard Fast Response Cutter, Navy submarines, and Navy aircraft carriers because we determined that their size and complexity did not make them reasonable comparisons to the HPIB for construction times. This resulted in an analysis of construction schedules for 10 shipbuilding programs. We obtained data on these programs’ construction schedules from program documentation, such as acquisition program baselines, Navy selected acquisition reports, and Navy and Coast Guard budget documentation. We selected only lead ships for comparison because we have found in our prior work that schedule delays are amplified for lead ships in a class. Lead ships are thus more comparable to the HPIB lead ship than follow- on ships. We reviewed ship displacement data from the Naval Vessel Registry and the Coast Guard to control for the size of the ships. To assess the reliability of Naval Vessel Registry data, we reviewed the Navy’s data collection and database maintenance documentation, cross- checked select data across Navy websites, and interviewed cognizant Navy officials regarding internal controls for the database. We determined the ship displacement data were reliable for our purposes. To assess the degree to which the 6-month schedule margin that the HPIB baseline affords the lead ship is in keeping with historical ship delivery delays, we reviewed Coast Guard, Navy, and DHS acquisition documentation from a nongeneralizable sample of major Navy and Coast Guard shipbuilding programs. We selected programs active within the last 10 years and analyzed changes in lead ship delivery dates. We excluded Navy submarines and aircraft carriers because we determined that their size and complexity did not make them reasonable comparisons to the HPIB for delivery delays. We included programs that have not yet delivered their lead ships. This resulted in an analysis of construction schedules for 12 shipbuilding programs. For delivered ships, we used the actual delivery date; for ships not yet delivered, such as the Offshore Patrol Cutter and DDG 1000, we used the most recent, planned delivery date in the program baseline. To determine the status of the HPIB program’s contracting efforts and funding considerations, we reviewed the program’s acquisition plan, March 2018 request for proposals and subsequent amendments, certification of funds memorandum, budget justifications, lifecycle cost estimate, and the Coast Guard’s fiscal year 2019 Capital Investment Plan. We also interviewed knowledgeable officials from the Coast Guard’s Office of Budget and Programs, NAVSEA Contracts Directorate, NAVSEA Comptroller Directorate, and the Office of the Assistant Secretary of Navy’s Financial Management and Comptroller. For all objectives, we reviewed relevant DHS and Coast Guard policies and interviewed knowledgeable officials from DHS, the Coast Guard’s and the Navy’s HPIB integrated program office, and ship design team. We conducted this performance audit from August 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. There are four primary phases in shipbuilding: pre-contracting activities and contract award, detail design and planning, construction, and post- delivery activities (see table 6). The GAO Cost Estimating and Assessment Guide (GAO-09-3SP) was used as criteria in this analysis. Using this guide, GAO cost experts assessed the heavy polar icebreaker (HPIB) program’s lifecycle cost estimate against measures consistently applied by cost-estimating organizations throughout the federal government and industry that are considered best practices for developing reliable cost estimates. For our reporting purposes, we grouped these best practices into four categories—or characteristics—associated with a reliable cost estimate: comprehensive, accurate, well documented, and credible. A cost estimate is considered reliable if the overall assessment ratings for each of the four characteristics are substantially or fully met. If any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable. After reviewing documentation the Navy submitted for its cost estimate, conducting interviews with the Navy’s cost estimators, and reviewing other relevant HPIB cost documents, we found the HPIB lifecycle cost estimate substantially met three and partially met one characteristic of reliable cost estimates. We determined the overall assessment rating by assigning each individual rating a number: Not Met = 1, Minimally Met = 2, Partially Met = 3, Substantially Met = 4, and Met = 5. Then, we took the average of the individual assessment ratings to determine the overall rating for each of the four characteristics. The resulting average becomes the Overall Assessment as follows: Not Met = 1.0 to 1.4, Minimally Met = 1.5 to 2.4, Partially Met = 2.5 to 3.4, Substantially Met = 3.5 to 4.4, and Met = 4.5 to 5.0. See table 7 for a high level summary of each best practice and the reasons for the overall scoring. In addition the contact named above, the following staff members made key contributions to this report: Rick Cederholm (Assistant Director), Claire Li (Analyst-in-Charge), Peter Anderson, Brian Bothwell, Juaná Collymore, Laurier Fish, Kristine Hassinger, Karen Richey, Miranda Riemer, Roxanna Sun, David Wishard, and Samuel Woo.", "summary": "To maintain heavy polar icebreaking capability, the Coast Guard and the Navy are collaborating to acquire up to three new heavy polar icebreakers through an integrated program office. The Navy plans to award a contract in 2019. GAO has found that before committing resources, successful acquisition programs begin with sound business cases, which include plans for a stable design, mature technologies, a reliable cost estimate, and a realistic schedule. Section 122 of the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to assess issues related to the acquisition of the icebreaker vessels. In addition, GAO was asked to review the heavy polar icebreaker program's acquisition risks. This report examines, among other objectives, the extent to which the program is facing risks to achieving its goals, particularly in the areas of design maturity, technology readiness, cost, and schedule. GAO reviewed Coast Guard and Navy program documents, analyzed Coast Guard and Navy data, and interviewed knowledgeable officials. The Coast Guard—a component of the Department of Homeland Security (DHS)—did not have a sound business case in March 2018, when it established the cost, schedule, and performance baselines for its heavy polar icebreaker acquisition program, because of risks in four key areas: Design. The Coast Guard set program baselines before conducting a preliminary design review, which puts the program at risk of having an unstable design, thereby increasing the program's cost and schedule risks. While setting baselines without a preliminary design review is consistent with DHS's current acquisition policy, it is inconsistent with acquisition best practices. Based on GAO's prior recommendation, DHS is currently evaluating its policy to better align technical reviews and acquisition decisions. Technology. The Coast Guard intends to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies prior to setting baselines. Coast Guard officials indicated such an assessment was not necessary because the technologies the program plans to employ have been proven on other icebreaker ships. However, according to best practices, such technologies can still pose risks when applied to a different program or operational environment, as in this case. Without such an assessment, the program's technical risk is underrepresented. Cost. The lifecycle cost estimate that informed the program's $9.8 billion cost baseline substantially met GAO's best practices for being comprehensive, well-documented, and accurate, but only partially met best practices for being credible. The cost estimate did not quantify the range of possible costs over the entire life of the program. As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program. Schedule. The Coast Guard's planned delivery dates were not informed by a realistic assessment of shipbuilding activities, but rather driven by the potential gap in icebreaking capabilities once the Coast Guard's only operating heavy polar icebreaker—the Polar Star —reaches the end of its service life (see figure). GAO's analysis of selected lead ships for other shipbuilding programs found the icebreaker program's estimated construction time of 3 years is optimistic. As a result, the Coast Guard is at risk of not delivering the icebreakers when promised and the potential gap in icebreaking capabilities could widen. GAO is making six recommendations to the Coast Guard, DHS, and the Navy. Among other things, GAO recommends that the program conduct a technology readiness assessment, re-evaluate its cost estimate and develop a schedule according to best practices, and update program baselines following a preliminary design review. DHS concurred with all six of GAO's recommendations.", "document_type": "gao"}
{"report": "Developed in response to HSPD-12, Personal Identity Verification (PIV) cards are a common authentication mechanism used across the federal government, and are a component of physical access control systems. PIV cards are used to securely identify federal government employees and contractor personnel seeking access to valuable and sensitive federal resources, including facilities and information systems. Also known as a “smart card,” a PIV card is similar in size to a credit card and contains information that is either printed on the outside or stored on the card’s integrated circuit chip (see fig. 1 below). PIV cards are required to be interoperable with all GSA-approved physical access control system equipment included on the Approved Products List, regardless of that equipment’s manufacturer. Likewise, GSA-approved physical access control system equipment is required to be interoperable with all PIV cards. Physical access control systems are used to manage access to controlled areas, such as a building or a room in a building. Physical access control products include devices such as card readers and the ID cards used to validate an individual’s authorization to enter a building (see fig.2 below). This report focuses on physical access and does not address logical (computer network) access. A physical access control system works as follows. When employees or contractors who are PIV cardholders attempt to enter a controlled area managed by a physical access control system, they will encounter the physical access control system at the “front end.” At this point, depending on the controlled area’s level of security, the cardholder will scan their PIV cards via a card reader, insert their PIV cards and enter personal identification numbers (PIN) via an input device such as a keypad, or insert their PIV cards, enter PINs, and provide biometric identification (such as a fingerprint) via an input device. After the cardholders present their identification information, the cardholders’ identification information from a PIV card’s integrated circuit chip is transmitted to the physical access control system’s “back end,” which consists of physical and logical access control systems and authorization data. At the back end, the physical access control system determines the validity of the cardholder’s access authorization. The cardholder will be able to access the area only if the authorization is valid. When deciding which access control mechanisms to implement, agencies must first understand the level of risk associated with the facility. The higher the risk level, the greater the need there is for agencies to implement a high-assurance-level access control system. Physical access control systems can be electronically connected in different ways, including within a given building or across an agency or department. The level of interoperability determines the level at which PIV cards and access authorization will be accepted. For example, a PIV card and corresponding access authorization may be accepted within a single building, across an agency, or potentially across the federal government. In this report, we describe a system in which a PIV card works in multiple physical access control systems as “interoperable”. In order to realize the full security benefit of PIV cards, physical access control systems must have a network connection that enables them to validate a given cardholder’s access credentials. Homeland Security Protection Directive-12: HSPD-12 is a 2004 presidential directive establishing the requirement for a mandatory, government-wide standard for secure and reliable forms of identification (PIV cards) issued by the federal government to its employees and contractors. It specified that the standard must include criteria authenticating employees’ identities and permissions at graduated levels of security, depending on the agency environment and the sensitivity of facilities and data accessed. Federal Information Processing Standards (FIPS) 201: The Department of Commerce’s NIST initially published the Federal Information Processing Standards (FIPS) 201 in 2005 to support HSPD- 12. The FIPS 201 standard established the PIV card as a common authentication mechanism across the federal government. FIPS 201 set standards for PIV systems in three areas: (1) identity proofing and registration, (2) card issuance and maintenance, and (3) protection of card applicants’ privacy. In addition, the standard provides technical specifications for the implementation and use of interoperable smart cards in physical access control systems. An update to FIPS 201 (called FIPS 201-2), was released in August 2013. Among other things, it made the collection of a facial image mandatory for PIV cards and changed the maximum lifespan of a card from 5 to 6 years. Approved Products List – The Approved Products List is a list of all physical access control system equipment that is compliant with FIPS identification standards. Agencies must acquire federally-approved products and services from this list in order to help ensure government- wide interoperability of physical access control systems. All products on the Approved Product List have gone through end-to-end testing and evaluation, as part of a complete physical access control system. Federal agencies are required to use the Approved Products List when purchasing physical access control system equipment. The Approved Products List is intended to provide assurance to federal agencies that listed vendors’ products comply with the various federal standards and requirements. HSPD-12 designates OMB as the lead entity with responsibility for ensuring that federal government departments and agencies implement this directive in a manner consistent with ongoing government-wide activities and existing OMB policies and guidance. GSA supports OMB by administering product testing through a contractor, managing the Approved Products List, and making the physical access control system’s products and services available to federal agencies via GSA’s Federal Acquisition Service. The Federal Acquisition Service manages a large portion of GSA’s Federal Supply Schedules program (GSA Schedule), which establish long-term government-wide contracts with commercial firms to provide federal agencies access to millions of commercial products and services at volume discount pricing. Further, GSA’s Office of Government-wide Policy (OGP) provides tools and support for identity, credential, and access management activities across the federal government, including for physical access control systems. GSA also has a government-wide landlord role through its Public Buildings Service and installs physical access control systems in many GSA-owned and leased buildings that it manages. The ISC is chaired by DHS and consists of 60 federal departments and agencies. ISC’s mission is to develop security standards, best practices, and guidelines for nonmilitary federal facilities in the United States. Each of the five selected agencies included in our report, or their home departments, is a member of the ISC. The ISC has the authority to convene working groups from its member agencies to produce documents, which are task-based and provide ISC’s members with a forum for information sharing to address a wide range of issues related to physical security at federal buildings. ISC also produces standards and best practices guidance for agencies to use when addressing security issues. For example, in December 2015 ISC released Best Practices for Planning and Managing Physical Security Resources: An Interagency Security Committee Guide. This document is intended to identify practices most beneficial for physical security programs, determine the extent to which federal agencies currently use these practices, and compile and circulate best practices agencies can use as a supplement to the ISC’s existing security standards. OMB and GSA have taken steps to help agencies procure and implement secure and interoperable GSA-approved physical access control systems across the federal government. For example, OMB has issued three guidance memorandums to clarify agency responsibility to use GSA’s Approved Products List. 1. In 2005, OMB designated GSA as the “executive agent for government-wide acquisitions of information technology” for the products and services required for physical access control and delineated agency responsibilities with regard to implementing HSPD- 12. Also, to ensure government-wide interoperability, all agencies must acquire products and services that are compliant with standards and included on the Approved Products List. 2. In 2006, OMB reiterated that agencies must purchase physical access control systems from GSA’s Approved Products List and that GSA will make approved products and services available through acquisition vehicles (Schedules) that are available to federal agencies. 3. In 2011 OMB issued a memo that cited DHS guidance that stated effective in fiscal year 2012 agencies must upgrade existing physical and logical access control systems to use PIV credentials prior to using relevant funds for other activities. The memorandum further stated that the upgrades must be in accordance with NIST standards. In addition, GSA, as the lead agency for government-wide acquisition of information technology, has undertaken a number of efforts to promote the implementation of GSA-approved physical access control systems: 1) Testing and evaluation: GSA administers and conducts testing and evaluation to develop an Approved Products List. Testing is performed by either third-party accredited testing labs or GSA- managed testing labs. GSA tests a variety of products and services including smart cards; physical access control systems; which include card readers and infrastructure for example; and integrators which provide or install access control services. According to GSA officials, GSA has fully tested all physical access control system equipment included on the Approved Products List and evaluated and approved the suitability of vendors and system integrators. GSA shares information about vendors, system integrators and Approved Products List equipment with federal agencies. 2) Guidance and support: GSA has taken several actions to improve guidance and facilitate the implementation of physical access control systems. First, GSA manages IDManagement.gov, which guides federal agencies through the process of identifying Approved Products List-compliant physical access control system equipment. Second, GSA established the U.S. Access program to enable federal civilian agencies to issue common HSPD-12 approved credentials to their employees and contractors. Finally, GSA developed a list of system integrators that can be used to install physical access control systems that have been approved for the Approved Products List. These integrators (there are 25 as of November 2018) are listed on the GSA’s IDManagement.gov website. 3) Information sharing: According to GSA officials, GSA responds to email questions from agencies about the Approved Products List, and GSA makes subject matter experts available to any agency representatives with questions. 4) Procurement support: According to GSA officials, GSA provides standard procurement language for agencies to include in statements of work before their requests for proposal go out for physical access control systems. However, according to officials, GSA has no control over whether agencies decide to include the language that it provides. Stakeholders including agencies and manufacturers that we interviewed generally considered the Approved Products List to have achieved its intent. For example, government and industry officials said that they believe the list provides assurance to government agencies that physical access control systems will work as intended and will help facilitate a more interoperable system government-wide, thereby enhancing security. Moreover, stakeholders we interviewed said they generally thought the associated costs and burdens of going through GSA’s testing and evaluation have been worth the effort. Without the Approved Products List, these stakeholders believe that the quality and interoperability of products would diminish. According to some stakeholders, prior to the current end-to-end testing of products, companies submitted products to the Approved Products List that either did not work as intended or were not compatible with other products. Stakeholders also commented on the improvements to the Approved Products List since GSA took over the certification testing, noting that use of manufacturer self-testing prior to 2012 was not successful. In addition, the cost to industry to do self-testing was high, according to vendors, and some companies did not do it well, according to GSA, EPA, and TSA officials. We found that neither OMB nor GSA currently collect data on agency efforts to implement physical access control system requirements, including use of the Approved Products List. This is significant because our interviews with physical access control systems’ manufacturers, integrators, and selected agencies indicate that government-wide implementation of physical access control systems may be limited and raises questions about government-wide progress. Officials from four of the five selected agencies we reviewed told us that, since 2013, when physical access control system end-to-end testing requirements began, they had only purchased GSA-approved physical access control system equipment for a limited number of their facilities. Moreover, they said that where purchasing occurred, it was sometimes for physical access control systems that required replacement because they were nearing the end of their useful life. For the five selected agencies, we found the following: General Services Administration: According to GSA officials, a limited number of GSA facilities have physical access control systems that fully adhere to the latest requirements. According to GSA officials, GSA has met federal physical access control system requirements for 70 out of approximately 340 of its non-courthouse buildings with another 90 being partially in line with requirements (e.g., PIV access credentials are used). The remaining facilities do not yet meet federal physical access control system requirements. GSA staff also told us that GSA administers the public spaces in approximately 360 courthouse buildings and is developing a security implementation plan for these spaces. GSA officials told us that GSA also administers about 8,000 leased buildings where the tenants in these spaces are generally responsible for setting up physical access control systems and GSA does not track this information. Environmental Protection Agency: According to EPA officials, none of EPA’s 72 facilities (including, for example, its headquarters building in the District of Columbia and 10 regional headquarters buildings) currently adhere to the latest physical access control system requirements. Specifically, EPA officials told us that the agency used GSA’s Approved Products List to purchase physical access control system equipment in the past. However, because requirements have changed over time, the 72 buildings where EPA is responsible for physical access control need to be upgraded to the latest requirements. To do so, EPA officials said they will procure these systems using the Approved Products List and prioritize implementation in the future to those facilities with the highest assessed risk. EPA officials said that in August 2013, changes to physical access control systems’ standards required the agency to purchase and install complete physical access control systems that GSA has tested end-to-end and that adhere to the latest requirements. EPA officials said they expect the end-to-end tested physical access control systems to lead to systems that are more secure and interoperable. Bureau of Prisons: The Bureau of Prisons has implemented Approved Products List-compliant physical access control system equipment in regional and central offices according to agency officials we interviewed. According to officials, the Bureau of Prisons purchased physical access control systems using the Approved Products List for its headquarters complex (three buildings) and six regional offices beginning in 2009 and made upgrades to this equipment in 2015 to adhere to federal physical access control system requirements at the time. However, Bureau of Prisons officials told us that the agency has not implemented physical access control systems at its institutions (prisons). Bureau of Prisons officials told us that physical security and screening procedures at prisons are more stringent than those that occur with typical building-access procedures as persons and belongings are scanned and searched. Physical access control system equipment at these prisons may in fact be problematic because, according to Bureau of Prisons officials, doors should not automatically be opened based on a PIV card without manual checks to ensure staff are not under duress or fraudulent access is being attempted. Bureau of Prisons officials said that at the prisons, identification credentials are first visually examined by prison personnel before access is granted, and all gates and points of entry are controlled by prison personnel. Transportation Security Administration: According to TSA officials, since 2013, 64 TSA facilities have implemented some physical access control system upgrades using products from the Approved Products List, while an additional 75 leased facilities have been upgraded by GSA. While the 139 facilities are not fully compliant, the only item missing to make these facilities compliant, according to TSA officials, is the capability for interoperable, secure identification checks among federal agencies. This would allow TSA’s physical access control systems to recognize revoked PIVs from any federal agency. TSA told us that it plans to roll out this capability in fiscal year 2019. Our review of TSA’s 2015 plan to meet the latest physical access control system requirements indicates that the agency is taking steps toward full compliance. TSA’s implementation plan was developed in response to DHS’s 2012 Modernization Strategy for Physical Access Control Systems, which provides guidance to DHS for implementing secure and compliant end-to-end physical access control systems from GSA’s Approved Products List. Over the next 5 years, TSA plans to spend about $73 million in physical access control system implementation with the bulk of these funds ($51 million) going toward the acquisition of new systems from the Approved Products List. United States Coast Guard: Coast Guard officials told us that none of the agency’s 1,400 facilities where it has security responsibilities fully adhere to the latest federal physical access control system requirements. However, 53 of these facilities have been prioritized for physical access control system implementation. In addition, since 2013, four Coast Guard locations have begun to implement GSA- approved physical access control systems using the Approved Products List. These locations are Jacksonville, FL; New York, NY; Corpus Christi, TX; and the Coast Guard’s Security Center in Chesapeake, VA. Decisions about physical access control system equipment are made on a facility-by-facility basis, according to Coast Guard officials. These officials said that due to the decentralized nature of Coast Guard’s decision-making process for physical access control systems, it is difficult to say where purchases have been made, and there is no systematic tracking. The Coast Guard does not have a formal plan for upgrading its physical access control systems, but Coast Guard officials told us that they continue to pursue opportunities to upgrade facilities with physical access control system equipment using the Approved Products List. For example, Coast Guard officials told us that they currently emphasize system upgrades for those systems that reach the end of their useful life or otherwise necessitate replacement. These five selected agencies are illustrative of the oversight difficulties that OMB faces because it does not have baseline information about agencies’ efforts to implement physical access control systems, including implementation of GSA-approved systems. This lack of information hampers OMB’s efforts to (1) meaningfully track and monitor agencies’ adherence to physical access control system requirements, or (2) provide an incentive for agencies to be more accountable with regard to where their physical access control systems stand in terms of their ability to prevent security breaches. Federal internal-control standards state that establishing a baseline is an internal control that can be used to perform monitoring activities. Baseline data allow organizations to identify and address performance issues and deficiencies. Establishing a baseline to understand the current status of physical access control system implementation could improve efforts to evaluate progress federal agencies are making and could also provide an incentive to agencies to further improve. Moreover, federal internal-control standards also direct agencies to hold organizations accountable for their assigned responsibilities. OMB staff said that OMB oversees physical access control systems’ requirements as part of its normal process of reviewing agencies’ budget submissions but does not conduct oversight outside of this process. This approach, however, does not allow OMB to identify or monitor the extent to which agencies are purchasing physical access control systems that meet the latest requirements or take action if agencies lag in this area. Selected federal agencies face cross-cutting, as well as agency-specific, challenges to acquiring and integrating physical access control system equipment, according to agency representatives and industry stakeholders we spoke to. These challenges include cost, confusion regarding GSA Schedule’s use, lack of trained agency officials, adapting legacy systems, and security concerns about integrating physical access control systems. Cost: Officials from most of the five selected agencies, from physical access control system manufacturers, and from integrators we interviewed told us that the cost of buying GSA-approved physical access control systems using the Approved Products List and installing them in adherence to federal physical access control system requirements is a challenge in the current budget environment. Agency representatives also told us they view the regulatory and OMB requirement to upgrade physical access control systems as a costly unfunded mandate that these agencies have difficulty meeting. For example, TSA officials estimate that TSA will need over $14 million per year to continue implementing GSA-approved physical access control systems using the Approved Products List in its 625 facilities, an expense for which the agency receives no additional funds. However, OMB staff told us that agencies have had 13 years in which to replace physical access control systems’ technology with products that meet federal requirements, and that the issue may be agencies’ training and planning, rather than cost. OMB staff told us that the expectation was, that over time, agencies would implement physical access control systems that used equipment that was exclusively from the APL and compliant with FIPS. Confusion regarding GSA Schedules: Officials from some of the five selected agencies and some stakeholders told us that there is some uncertainty in government and industry about which GSA contracting Schedule should be used to acquire GSA-approved physical access control system equipment and services. For example, some stakeholders are unsure which GSA Schedule they should use to provide their services. GSA Schedule 70 is generally used for information technology purchases. GSA Schedule 84 is generally used for physical security equipment purchases, including products such as security alarms and surveillance equipment. However, some stakeholders told us they found federal guidance unclear as to whether Schedule 70 or 84 should be used for GSA-approved physical access control system purchases. For example, some integrators told us that it was not always clear for what Schedule they should seek approval to be on to sell their services. Federal regulations and an OMB memo both mention Schedule 70 as being the appropriate Schedule for purchasing physical access control systems, but do not explicitly exclude the use of Schedule 84. Complicating matters, some stakeholders told us some companies are only approved for Schedule 84 because getting approved for both Schedules was time-consuming and costly, and not worth the effort given the lack of clarity regarding which Schedule is required. According to OMB staff, guidance is clear that Schedule 70 should be used to purchase physical access control equipment because this equipment is considered to be information technology. OMB staff explained that their memo on this subject was not intended to introduce ambiguity on the issue of what Schedule is appropriate for use, but to accommodate practices at the Department of Defense, which performs some of its own product testing separate from GSA’s testing program. According to GSA’s Office of Government-wide Policy (OGP), GSA is aware of the confusion among GSA’s federal customers regarding GSA Schedule use. To address this situation, GSA convened a “reverse industry” training event in September 2018, at which industry representatives provided feedback to GSA on the acquisition process and ways that it could be improved, including issues pertaining to acquisitions related to physical access control systems. According to federal officials, one point of emphasis by industry was that purchasing physical access control equipment from the Approved Products List was not sufficient for having a functioning physical access control system; system integration was also necessary. During this event, GSA officials took the position that both Schedule 70 and Schedule 84 could be used to purchase physical access control systems, but OMB staff maintain that Schedule 70 is preferred. OMB staff explained that Schedule 84 does not have the testing and evaluation requirements for PACS equipment on it that Schedule 70 does. According to OMB, this frustrates industry vendors that follow the Schedule 70 approval process because these vendors are spending time and money to get approved for Schedule 70, while others are still selling their equipment on Schedule 84 and skirting this process because GSA allows the sale of physical access control system equipment on both Schedules. Schedule 84 has historically been used for security hardware while Schedule 70 is used for information technology. Since physical access control systems are essentially information technology systems today, OMB believes that Schedule 70 should be used exclusively for physical access control system equipment. Adapting legacy systems: According to officials at most of the five selected agencies, most manufacturers, and all integrators we spoke to, integrating new physical access control systems’ equipment with existing legacy systems can be challenging. Some stakeholders told us that integrating new physical access control systems with old equipment is often more difficult and more costly than starting from scratch. As an illustration of this difficulty, TSA officials told us that integrating new physical access control system equipment with legacy systems has contributed to delays in the integration of TSA’s newly installed physical access control system equipment. Partly as a result, only one TSA region is currently integrated into DHS’ agency-wide network. Security concerns about integrating physical access control systems: Officials at two of the selected agencies and one system integrator we spoke to told us that some agency officials are reluctant to more fully integrate their physical access control systems. This reluctance is due to concern about a perceived increase in security risks resulting from more broadly networking physical access control systems’ equipment and access credentials like PIV cards. However, other federal officials told us that this concern is unfounded. According to these officials, integrating agencies’ physical access control systems will enhance security, increase government efficiency, reduce identity fraud, and protect personal privacy by electronically authenticating the validity of access credentials. Lack of trained agency officials: Stakeholders told us they believe that some federal agency officials have limited knowledge of physical access control system requirements. According to most physical access control systems’ manufacturers and integrators we spoke to, federal agencies’ contracting officers commonly lack sufficient understanding of federal physical access control system requirements. This insufficient understanding of physical access control system requirements may lead contracting officers to award contracts for the installation of physical access control systems to under-qualified integrators, which can lead to systems being improperly deployed or integrated. These experts said that this situation could lead to security vulnerabilities at these agencies and expensive future costs. OMB staff told us that it may be desirable to raise agencies’ awareness of federal physical access control system requirements, and a DHS official told us that this issue could be addressed by the training of program staff by GSA who support contracting officers. OMB staff and officials from ISC and GSA indicated that they are aware of some of the challenges described above, as well as the possibility that some may be more broadly present across the federal government. Staff said that OMB and GSA are working with ISC to develop a consolidated guidance document concerning federal identification credentials. However, OMB staff told us that this guidance is primarily intended to consolidate and replace existing guidance documents, and does not contain new information related to the challenges identified by the selected agencies or other stakeholders we spoke to. Best practices that we have previously identified indicate that an interagency mechanism, such as an interagency group led by component or program-level staff, can help federal agencies address policy and program challenges. The guidance of such an interagency group could help agencies to address the challenges that we identified and that are related to implementing physical access control systems. ISC, with its unique role in addressing interagency security issues, is well- positioned to assess how the physical security community can help to address the government-wide challenges with physical access control system implementation. For example, ISC is well-positioned to determine through its membership the extent to which the challenges we identified are present across the federal government. In addition, ISC may be able to harness recent interagency efforts, such as the interagency information sharing and collaboration that produced ISC’s guidance on planning and managing security resources, to develop guidance addressing agencies’ cost issues through the mechanisms that we have previously identified, such as leveraging resources. Further, working with GSA, ISC could help to resolve confusion about which Schedule is the appropriate contracting vehicle, to the extent that this lack of clarity persists. ISC may also be positioned to provide a venue for information sharing to allow agencies to address training needs, such as those related to technical challenges, associated with legacy equipment and establish compatible policies to address this challenge. Finally, ISC’s experience with interagency communication and collaboration could also facilitate agencies’ response to concerns about the benefits of interoperable physical access control systems, and could work to reach consensus on the matter. According to a senior ISC official, the ISC has updated its countermeasures standard to assist the physical security community to better understand the references and policies associated with procuring and installing physical access control systems. Additionally, an ISC official told GAO that the ISC has approved commissioning a working group to assess what additional guidance related to physical access control would be beneficial for to the federal physical security community. However, without a government- wide review of the challenges we have identified, those challenges will be difficult to overcome. If these issues are not addressed, the fully interoperable, physical access control system network envisioned post September 11, 2001, and the increased security and efficiency that it would entail, will be difficult to attain. OMB and GSA have taken various actions to help federal agencies implement GSA-approved physical access control systems. However, selected agencies have made limited progress, and have faced challenges that impede their progress. Lacking a baseline level of information on adherence to physical access control system requirements prevents OMB from gauging the level of progress being made by agencies. Likewise, an increased understanding of the extent and nature of the challenges that federal agencies may face as they implement physical access control systems may help enhance adherence to physical access control system requirements. This two-pronged approach, the establishment of a baseline and a better understanding of the challenges agencies face as they implement physical access control systems, could prove beneficial in achieving the vision of secure, interoperable systems across departments and agencies. We are making one recommendation to OMB, and one recommendation to DHS. The Director of OMB should determine a government-wide baseline level of progress in meeting physical access control system requirements, including implementation of GSA-approved systems, and should monitor progress in meeting these requirements. (Recommendation 1) The Secretary of Homeland Security should direct the ISC, in collaboration with member agencies, to assess the extent of, and develop strategies to address, government-wide challenges to implementing physical access control systems. (Recommendation 2) We provided a draft of this report to the Departments of Commerce, Justice, and Homeland Security, EPA, GSA, and OMB for their review and comment. DHS, GSA, and OMB provided technical comments, which we incorporated as appropriate. DHS provided written comments and concurred with our recommendation. DHS’s comments are reprinted in appendix II. OMB staff told us that they did not have a comment on our recommendation. The Departments of Commerce and Justice and EPA did not have any comments on our report. We will send copies of this report to the Ranking Member, Subcommittee on Oversight and Management Efficiency, Committee on Homeland Security, House of Representatives and the Secretaries of Commerce and Homeland Security, the Assistant Attorney General for the Department of Justice, the Administrator of the General Services Administration, the Director of the Office of Management and Budget, and the Acting Administrator of the Environmental Protection Agency. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were: (1) to assess the steps the Office of Management and Budget (OMB) and the General Services Administration (GSA) have taken to fulfill their government-wide responsibilities related to physical access control system implementation requirements and (2) to identify challenges selected federal agencies face in adhering to federal physical access control system requirements. To assess the steps OMB and GSA have taken to fulfill their government- wide efforts to implement Homeland Security Presidential Directive 12’s (HSPD-12) requirements, and to assess progress in these efforts, we interviewed OMB and GSA about their efforts to ensure that agencies meet the requirement to use GSA’s Approved Products List. We also asked them to provide data, if available, on agencies’ Approved Products List usage. We interviewed seven physical access control system manufacturers (AMAG, Gallagher Group, HID Global, Identiv, Lenel, Software House, and XTec), five integrators (contractors that install the equipment and connect it to agency networks with software) (Convergint Technologies, Chenega Corporation, MC Dean, Parsons, and Systems Engineering, Inc.), as well as other industry organizations—GSA Schedules Inc., the Secure Technology Alliance, and CertiPath— based on multiple recommendations from previous interviews. To identify illustrative examples of the progress that individual agencies have made in using the Approved Products List and implementing other HSPD-12 requirements, as well as the challenges that they have faced in doing so, we selected five executive branch agencies. These included (1) U.S. Coast Guard in the Department of Homeland Security (DHS); (2) Bureau of Prisons in the Department of Justice; (3) Transportation Security Agency in DHS; (4) Environmental Protection Agency (EPA); and (5) GSA. We interviewed officials from these agencies about the Approved Products List and collected data on agencies’ purchases of GSA-approved physical access control system equipment using the Approved Products List since 2013. Our criteria for agency selection included agencies with facilities (1) held by non-defense executive branch agencies; (2) located in the United States; (3) totaling 200 or more buildings; and, (4) that are geographically dispersed (having buildings in 10 or more states). We also gave consideration to agencies with large numbers of buildings (choosing four larger, one smaller) and selected at least two agencies with homeland security responsibilities. We limited our scope to non-defense agencies because we have ongoing work related to these issues at the Department of Defense. We also requested and reviewed documents concerning Approved Products List usage and physical access control systems’ deployment from each of these five selected agencies. Our use of the term stakeholders may include agencies, physical access control manufacturers, integrators, and knowledgeable organizations or officials. Results from our interviews with the selected agencies cannot be generalized. To identify the challenges most frequently cited by agencies, manufacturers, integrators, and other stakeholders, we conducted an analysis of our interviews, reviewed documents provided by agencies, and performed a literature review. In addition to considering the range of federal requirements related to physical access control, we considered relevant internal control standards from federal standards for internal-control in the areas of monitoring, enforcement, planning, and training and collaboration best practices identified in prior GAO work. Further, we reviewed other relevant documents including GAO reports, GSA documentation, OMB memorandums, National Institute of Standards and Technology standards, Interagency Security Committee guidance, a report from the DHS Office of the Inspector General, and additional federal guidance related to physical access control systems. We conducted this performance audit from October 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual name above, Dave Sausville (Assistant Director); Kieran McCarthy (Analyst in Charge); Adam Gomez; Cam Flores; Elizabeth Wood; Josh Ormond; and Melissa Bodeau made key contributions to this report.", "summary": "A 2004 federal directive and the related standard set forth a vision for using information technology to verify the identity of individuals accessing federal buildings. The vision calls for secure and reliable forms of identification that work in conjunction with access control systems. Interoperability of these systems across departments and agencies is part of the vision. OMB and GSA have government-wide responsibilities related to this effort. ISC provides guidance to non-military executive branch agencies on physical security issues. GAO was asked to examine PACS implementation efforts. This report discusses (1) steps OMB and GSA have taken to fulfill their government-wide responsibilities related to PACS and (2) challenges selected federal agencies face in meeting current requirements. For review, GAO analyzed documents from Commerce, GSA, ISC, and OMB. GAO selected five non-military agencies based on factors including number of buildings and geographic location. GAO reviewed relevant requirements and key practices. GAO also interviewed federal agency officials, PACS vendors, and knowledgeable industry officials. The Office of Management and Budget (OMB) and the General Services Administration (GSA) have taken steps to help agencies procure and implement secure, interoperable, GSA-approved “physical access control systems” (PACS) for federal buildings. PACS are systems for managing access to controlled areas within buildings. PACS include identification cards, card readers, and other technology that electronically confirm employees' and contractors' identities and validate their access to facilities (see figure). Steps taken include the following: OMB issued several memos to clarify agencies' responsibilities. For example, OMB issued a 2011 memo citing Department of Homeland Security (DHS) guidance that agencies must upgrade existing PACS to use identity credentials before using relevant funds for other activities. But, GAO found OMB's oversight efforts are hampered because it lacks baseline data on agencies' implementation of PACS. Without such data, OMB cannot meet its responsibility to ensure agencies adhere to PACS requirements or track progress in implementing federal PACS requirements and achieving the vision of secure, interoperable systems across agencies. GSA developed an Approved Products List that identifies products that meet federal requirements through a testing and evaluation program. Federal agencies are required to use the Approved Products List to procure PACS equipment. GSA also has provided procurement guidance to agencies through its identity management website. Officials from the five selected agencies that GAO reviewed identified a number of challenges relating to PACS implementation including cost, lack of clarity on how to procure equipment, and difficulty adding new PACS equipment to legacy systems. Officials from OMB, GSA, and industry not only confirmed that these challenges exist but also told GAO that they were most likely present across the federal government. The Interagency Security Committee (ISC), chaired by the DHS and consisting of 60 federal departments and agencies, has a mission to develop security standards for non-military agencies. In this capacity the ISC is well-positioned to determine the extent that PACS implementation challenges exist across its membership and to develop strategies to address them. An ISC official told GAO that the ISC has taken steps to do so including setting up a working group to assess what additional PACS guidance would be beneficial. GAO recommends (1) that OMB determine and regularly monitor a baseline level of progress on PACS implementation and (2) that ISC assess the extent of, and develop strategies to address, government-wide challenges to implementing PACS. OMB had no comment on the recommendation. DHS concurred with the recommendation to ISC.", "document_type": "gao"}
{"report": "The National Guard counterdrug program is part of DOD’s broader counterdrug mission, which focuses on supporting local, state, federal, and foreign government agencies in addressing the illegal drug trade and narcotics-related terrorism. The program was originally conceived as a reconnaissance support mission largely focused on marijuana eradication efforts. In 1977, the Hawaii National Guard became the first state National Guard to assist law enforcement agencies in counterdrug missions. Hawaii law enforcement officials sought Hawaii National Guard helicopter transport to support Operation Green Harvest, a marijuana eradication mission. By 1984, four additional states’ National Guards were supporting state law enforcement agencies with counterdrug efforts. That number grew to 32 states in 1988. However, this assistance was limited in scope and generally conducted as Guard units performed normal training activities, and costs associated with this assistance were paid for by the states. The National Defense Authorization Act, Fiscal Year 1989 tasked DOD with the mission to ensure the availability of military support to law enforcement agencies nationwide. This law established DOD as the single lead agency of the federal government for the detection and monitoring of aerial and maritime transit of illegal drugs into the United States, and it amplified the National Guard’s role as a support agency for state law enforcement in counterdrug support missions under the Governor of each state, territory, and the District of Columbia. By 1994, the program was in operation in 54 states and territories across the United States. As of fiscal year 2018, National Guard Bureau policy allows state counterdrug programs to perform 15 support activities grouped into five broad mission categories—(1) technical support (including linguist and translator, operational and investigative case and criminal analyst, and counterthreat finance support), (2) general support (including domestic cannabis suppression and eradication operations and transportation support), (3) reconnaissance and observation (including ground and aerial reconnaissance), (4) civil operations and coalition development, and (5) counterdrug training. The National Guard counterdrug program conducts activities under the authority of two titles in the United States Code—Title 32 and Title 10. Section 502 of title 32 allows a member of the National Guard to be ordered to full-time National Guard duty status under regulations prescribed by the Secretary of the Army or Secretary of the Air Force. In addition, Section 112 of title 32 authorizes personnel of the National Guard of a State, under regulations prescribed by the Secretary of Defense, to be ordered to perform full-time National Guard duty under section 502 for the purposes of carrying out drug interdiction and counterdrug activities in accordance with state plans. Section 112 also authorizes the Secretary of Defense to provide funds to support the approved drug interdiction and counter-drug activities plan of state governors. In addition, Title 10 allows the Secretary of the Army or Air Force to order a member of the National Guard, under the Secretary’s jurisdiction, to active duty with the consent of the member and the governor of that state. Under Section 284 of title 10, DOD provides support to a number of partners, such as federal agencies, in their counterdrug activities, at times using National Guard personnel on active duty. Table 1 provides a summary of the Title 32 and Title 10 authorities. To fund DOD’s counterdrug mission, Congress appropriates amounts to DOD’s Drug Interdiction and Counterdrug Activities, Defense account. The categories of activities funded by the account include: detection and monitoring; international support; intelligence, technology, and other; domestic support, which includes the National Guard counterdrug program; and drug demand reduction. Of all the activities, the domestic support activity, which includes the National Guard counterdrug program, receives the largest amount of funding from DOD’s Drug Interdiction and Counterdrug Activities account. In fiscal year 2018, Congress appropriated about $934.8 million to the Drug Interdiction and Counterdrug Activities, Defense account, of which about $261.4 million, or 28 percent, was appropriated for the National Guard counterdrug program. Figure 1 shows the program funding in DOD’s Drug Interdiction and Counterdrug Activities Account for fiscal year 2018. DOD’s budget request to the President for the National Guard counterdrug program was generally steady from fiscal year 2004 through fiscal year 2012, but was reduced significantly in fiscal year 2013. Since then, congressionally-directed increases have generally accounted for 50 percent or more of the program’s total funding, as shown in figure 2 below. In fiscal year 2018, the Senate Committee on Appropriations expressed concerns that DOD reduced overall funding for the National Guard counterdrug program from the fiscal year 2017 enacted levels and failed to include an individual budget line in its budget request for the National Guard counterdrug schools program. DOD’s budget request for fiscal year 2018 was about $116.4 million, while the final appropriation designated $261.4 million for the program—approximately a 125 percent increase. On July 31, 2002, the Deputy Secretary of Defense issued a memorandum that, among other things, assigned responsibility for DOD’s counternarcotics program to the Deputy Assistant Secretary of Defense for Counternarcotics. The responsibilities include developing and implementing DOD’s counternarcotics policy, conducting analyses, making recommendations, and issuing guidance regarding DOD’s counternarcotics plans and programs. In addition, the office is responsible for coordinating and monitoring DOD’s counternarcotics plans and programs to ensure adherence to this policy. Chief National Guard Bureau Instruction 3100.01A, National Guard Counterdrug Support, establishes policy and assigns responsibilities for the National Guard counterdrug program. The instruction assigns the Director of the National Guard Domestic Operations and Force Development as the proponent for the program. The Director’s responsibilities include publishing supporting documents for the instruction, verifying that the plans outlining each state’s proposed activities are consistent with annual instructions published by the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats and are processed efficiently and on-time, and conducting periodic evaluations of program operations at the state level. DOD’s 2011 Counternarcotics and Global Threats Strategy, the governing strategy for the National Guard counterdrug program, is outdated and does not reflect current drug threats outlined in more recent executive branch strategies. While the 2011 Counternarcotics and Global Threats Strategy shares common themes with the updated executive branch strategies, such as the importance of combatting transnational criminal organizations involved in drug trafficking, it has not been updated to reflect changes in the drug threats faced by the United States that are outlined by the more recent executive branch strategies. Table 2 provides details on national-level strategies that have been released since 2011. The Office of National Drug Control Policy released a new National Drug Control Strategy each year between 2011 and 2016. Each update discussed the threat posed by opioids, which the 2016 update labeled as the greatest drug threat facing the nation. The 2017 National Security Strategy also addressed opioids by emphasizing the need to dismantle transnational criminal organizations that feed the illicit opioid epidemic. However, DOD’s 2011 Counternarcotics and Global Threats Strategy does not address the domestic opioid epidemic. In addition, the 2016 National Southwest Border Counternarcotics Strategy states that the increased role of Mexican heroin manufacturers and traffickers is altering previously established trafficking patterns. While the 2011 Counternarcotics and Global Threats Strategy considers the illicit trafficking of cocaine from the Southwest border, it does not consider changes in the heroin threat. Further, because DOD’s Counternarcotics and Global Threats Strategy has not been updated, it does not take into consideration other strategies that have since been issued, such as the 2015 Caribbean Border Counternarcotics Strategy. According to officials from the National Guard Bureau, DOD’s 2011 counternarcotics strategy only addresses the National Guard counterdrug program in a limited capacity and therefore they are challenged to provide strategic direction to the state counterdrug programs. DOD’s 2011 Counternarcotics and Global Threats Strategy states that officials will ensure that the strategy remains consistent with and integrates key DOD and executive branch strategies, such as National Drug Control Strategy. It also states that, given the dynamic environment within which the challenges related to the flow and impact of illegal drugs exist, the strategy is meant to be a living document, to be modified regularly. However, officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats acknowledged that they have not regularly modified the strategy and that the security environment has changed. These officials stated that they have been in the process of developing an updated Counternarcotics and Global Threats Strategy with revised strategic goals and objectives since 2013, but the document has not been signed and released by the Secretary of Defense. DOD officials stated that after the 2018 National Defense Strategy was issued, they delayed the release of an updated Counternarcotics and Global Threats Strategy in order to ensure alignment between the two documents. However, according to DOD officials, the 2018 National Defense Strategy, which was issued in January 2018, did not address DOD counternarcotics efforts as they had anticipated, requiring them to reconsider their approach. Officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats stated that they now plan to issue a strategic framework, which would allow them to respond to changes in the security environment more quickly because updates to the framework would not require Secretary of Defense approval, as is the case with a DOD strategy. However, they stated that they are now waiting for the release of a new National Drug Control Strategy before issuing the framework. Officials with the Office of National Drug Control Policy stated that, while they have drafted a new National Drug Control Strategy, they have not committed to an issuance date and are waiting for their new director to be confirmed by the Senate before proceeding with reviewing and issuing the draft. However, a substantial amount of time has lapsed since DOD’s counternarcotics strategy was last issued—over 7 years— and there have been significant developments during that time in the nature of the drug threats facing the United States. DOD officials acknowledged that because the process to update its strategic framework requires less review than a full strategy, DOD could quickly update it, if necessary, to ensure that it aligns with a new National Drug Control Strategy once one is released. Without a DOD counternarcotics and global threats strategic framework that reflects DOD’s current strategic priorities and drug threats, the National Guard counterdrug program risks focusing activities and resources in areas that are less imperative to address than others and that do not counter current drug threats. The National Guard Bureau had guidance—National Guard Regulation 500-2—that prescribed policies, procedures, and responsibilities for the National Guard counterdrug program, but it was rescinded in September 2014 by Chief National Guard Bureau Instruction 3100.01 to conform with new National Guard publications guidance, according to National Guard Bureau officials. Chief National Guard Bureau Instruction 3100.01A, which replaced Chief National Guard Bureau Instruction 3100.01 in June 2015, establishes policies and assigns responsibilities for the National Guard counterdrug program, but it does not provide detailed procedures and processes that states can use to implement these policies. For example, National Guard Regulation 500-2 provided information on how states should operate and administer the National Guard counterdrug program, including how to perform counterdrug financial management, acquisition and logistics management, personnel and administration, records and reports, and operate the counterdrug schools. Chief National Guard Bureau Instruction 3100.01A does not provide these types of instructions. State counterdrug program officials we interviewed stated that without the detailed procedures and processes included in National Guard Regulation 500-2, they have no administrative guidance regarding hiring, retirement, budgeting, and planning for their counterdrug programs. Additionally, National Guard Bureau officials stated that they do not have procedures and processes instructing states on how to provide cross-state support. For example, there are currently no guidelines on how a state that can perform aerial reconnaissance activities could provide these resources to another state upon request. National Guard Bureau officials told us they should have guidelines to facilitate cross-state support. Table 3 provides an overview of National Guard Bureau publications. To help implement policy established by Chief National Guard Bureau instructions, the National Guard Bureau can issue more detailed guidance on the corresponding procedures and processes in the form of a Chief National Guard Bureau Manual. Additionally, Chief National Guard Bureau Instruction 3100.01A, National Guard Counterdrug Support, assigns the Director of National Guard Domestic Operations and Force Development the responsibility to publish supporting documents to implement the instruction and counterdrug program when required. However, the National Guard Bureau officials acknowledge that they have not issued a manual that provides detailed procedures and processes to implement National Guard counterdrug program policies since the prior operating guidance in the National Guard regulation was rescinded in September 2014. National Guard Bureau officials stated that they intended to publish a Chief National Guard Bureau Manual in September 2014, concurrent with Chief National Guard Bureau Instruction 3100.01, which would have provided additional operating guidance for administering and operating the counterdrug program. However, according to National Guard officials, issuance of the manual was delayed because of disagreements among National Guard Bureau officials about its content. Specifically, some National Guard Bureau officials stated that the draft manual was too focused on support for Title 10 activities and did not adequately address Title 32 support, which reflects the bulk of the activities conducted by the program. National Guard Bureau officials stated that they intended to re- issue National Guard Regulation 500-2 as interim guidance until they completed the Chief National Guard Bureau Manual; however, they have yet to do so because they have been focused on other efforts. National Guard Bureau officials stated that they have now worked with state counterdrug program officials to more adequately address Title 32 support activities and intend to publish a Chief National Guard Bureau Manual in June 2019. The draft manual is in the beginning of the review process. However, the National Guard Bureau will not have guidance to operate the counterdrug program until at least June 2019. Without interim guidance that provides detailed procedures and processes for the National Guard counterdrug program, such as reissuing National Guard Regulation 500-2, states will continue to be left without clear instructions on how to operate and administer the program, such as how and when to provide support across state lines and to interagency partners. The federal government has operated under a continuing resolution for 36 of the last 40 years. National Guard counterdrug program officials stated that they have experienced program disruptions during these periods. The disruptions described by the officials are similar to the problems that other programs experience during continuing resolutions. For example, National Guard Bureau officials stated that continuing resolutions have created challenges for the National Guard counterdrug program in fully obligating its funds. DOD data show that the program obligated 84 and 82 percent of total budget authority amounts in fiscal year 2011 and 2013 respectively, although the gap between total budget authority amounts and obligations has decreased since then. According to National Guard officials, the differences over the years between the amounts obligated and total budget authority amounts were partly due to the timing and amount of funding received by the program. Specifically, they stated that it is difficult to fully obligate funds when DOD provides them with a significant portion of their funding close to the end of the fiscal year. Remaining unobligated amounts are transferred back to DOD’s Drug Interdiction and Counterdrug Activities, Defense account. Figure 3 details the counterdrug program’s obligations from fiscal years 2010 through 2017. State counterdrug program officials stated that the timing of DOD’s distribution of funds also creates program execution challenges. For example, state counterdrug program officials stated that prior to fiscal year 2017, they began each year with a minimal number of personnel performing state drug interdiction and counterdrug activities until DOD provided more funding to the program after the enactment of the appropriation for the remainder of the fiscal year. Thereafter, state program officials stated that they increased the number of National Guard personnel supporting National Guard counterdrug program activities. However, state program officials said that after the appropriation expired at the end of each fiscal year, they were once again forced to reduce the number of personnel performing state drug interdiction and counterdrug activities until the enactment of another final appropriation was passed. Figure 4 provides a summary of the number of National Guard personnel performing state drug interdiction and counterdrug activities by month during fiscal years 2012 through 2017. According to state counterdrug program officials, the majority of funds provided after a final appropriation is passed fund temporary personnel and seasonal work, rather than analysis support activities deemed a priority for the National Guard counterdrug program by the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats. State counterdrug program officials stated that this is because they cannot hire, train, and integrate personnel on a full-time basis and that law enforcement agencies are looking more for long-term, rather than temporary support. State counterdrug officials told us that as a result of the funding uncertainty they experience significant fluctuations in the number of personnel performing state drug interdiction and counterdrug activities and that they are challenged in obtaining and retaining highly qualified National Guard personnel. Additionally, state counterdrug program officials stated that withdrawing National Guard personnel from partner organizations after appropriations expire can severely affect their operations and diminish trust between counterdrug programs and law enforcement partners. According to National Guard Bureau officials, the National Guard Bureau revised its process for funding the National Guard counterdrug program in fiscal year 2017 to try to mitigate the effects of DOD’s process for providing funds under continuing resolutions on the program. Specifically, the National Guard Bureau worked with the Army and Air National Guard budget execution offices to establish a process to expedite funding made available to the state-level counterdrug programs. Under the revised process, the Army and Air National Guard budget execution offices reprogram available amounts from other programmatic activities, such as funds for annual training, to the counterdrug program earlier in the fiscal year. According to Army and Air National Guard budget execution officials, amounts provided through reprogramming are based on a number of factors, including prior years’ appropriations for the program, execution levels, current-year appropriations and congressional directions, and an assessment of risk to the other activities. The National Guard Bureau and state counterdrug program officials stated that this revised funding process has helped mitigate challenges arising from uncertainty of when and how much funding would be provided to the states. For example, state counterdrug program officials said that in fiscal year 2017, the funding process enabled them to retain more personnel on orders and decrease the amount of funds that went unspent. The total number of personnel assigned to the National Guard counterdrug program at the beginning of fiscal year 2018 was approximately 2,250. Conversely, the program began fiscal year 2016 with approximately 1,350 personnel on orders. In addition, program officials stated that the process to provide funding earlier in the fiscal year helped them to obligate almost 97 percent of the total budget authority in fiscal year 2017, a higher percentage compared to many of the previous fiscal years. National Guard officials stated that while reprogramming amounts from other programmatic activities has helped to address the fiscal challenges of the National Guard counterdrug program, they cannot provide assurance that this funding process will continue from year to year. However, National Guard Bureau officials have assessed the risks and believe this is the best solution available for funding the program during a continuing resolution until the enactment of the final appropriation. DOD has established a process for development and review of the state plans—an annual plan of each state’s counterdrug activities—to ensure that state counterdrug program activities reflect DOD’s counternarcotics strategic priorities. However, since at least 2009 DOD has not met the statutory requirement to examine the adequacy of state plans prior to distributing funding to state counterdrug programs. To develop the state plans, counterdrug coordinators in each state counterdrug program use guidance in annual memorandums issued by DOD. According to the guidance, the plans should identify the state’s counterdrug priorities and how each state counterdrug program intends to obligate its available funds. Counterdrug coordinators then work with their state’s Adjutant General, Attorney General, and Governor, who each review and sign them, before the plans are sent to the National Guard Bureau for further review. Once the National Guard Bureau reviews the plans, they are forwarded to the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats. Officials from that office review the plans and make recommendations to the Secretary of Defense to approve or disapprove the plans. Based on these recommendations, the Secretary of Defense reviews the plans for adequacy, and when satisfied, signs a memorandum of agreement approving the plans. Figure 5 provides an outline of the process to approve state plans for their counterdrug activities. However, since at least 2009, DOD has provided funding to the state counterdrug programs prior to the Secretary of Defense approving states’ plans for their counterdrug activities, according to National Guard Bureau officials. This is inconsistent with section 112 of title 32 of the United States Code, which requires that before funds are provided to the Governor of a state for counterdrug activities and before members of the National Guard of that State are ordered to full-time National Guard duty, the Secretary of Defense must examine the adequacy of the plan submitted by the Governor. We found that that the delay in approval of states’ plans for their counterdrug activities has worsened since 2009, and in fiscal year 2018, approval took over 9 months (283 days) after funding was provided at the beginning of the fiscal year. Figure 6 provides information on the number of days between the beginning of the fiscal year, when states received funding, and when all plans were approved in fiscal years 2009 through 2018. Officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats and the National Guard Bureau stated that several factors have contributed to delays in the state plan approval process. First, officials stated that, prior to fiscal year 2016, the National Guard Bureau submitted state plans to the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats signed by the Division Chief of the National Guard counterdrug program, a colonel in the Army or the Air Force. However, in fiscal year 2016, officials from the Office of the Secretary of Defense found the Counterdrug Program Division Chief’s review and approval of the state plans to be insufficient because the approving official did not have the appropriate rank to approve state plans on behalf of the National Guard Bureau. As a result, officials from the National Guard Bureau elevated the level of approval within the National Guard Bureau to the National Guard Bureau Joint Staff Director of Domestic Operations and Force Development, a Major General in the Army National Guard or Air National Guard. Officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats stated that this resulted in an increase in the number of days that it took the National Guard Bureau to provide reviewed state plans. Officials stated that they are working to develop an updated timeline to address delays created by the approval process. Specifically, officials stated that they are working to submit the plans for review earlier in order to allow enough time to ensure that state plans are approved before funds are provided to state counterdrug programs. Second, officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats stated that their office required state plans to include information, such as narratives detailing states’ planned activities that were not critical to determining plans’ alignment with DOD priorities. In addition, officials stated that, over time, states had expanded the narratives in their plans, which increased the length of each submission. As a result of this required information, officials stated that the department’s review of state plans took longer than had the extra information not been included. Officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats stated they have reviewed the statutory requirements for the plans to identify which components are necessary and streamlined the format of the plans for use in fiscal year 2019. Third, officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats stated that in the past the Office of the Secretary of Defense would not accept state plans from the National Guard Bureau in batches, but instead insisted on receiving and reviewing them altogether, delaying the review process. These officials noted that they have since begun accepting state plans from National Guard Bureau in batches in order to speed up the approval process. On June 7, 2018, the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats issued a memorandum to the Chief of the National Guard Bureau that required all states and territories to submit their plans, through National Guard Bureau and the Joint Staff, to his office no later than August 31, 2018. According to officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats, the state plans were to detail fiscal year 2019 National Guard counterdrug program activities and provide the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats additional time to review state plans prior to the beginning of the fiscal year. However, in October 2018, officials from the National Guard Bureau and the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats told us that none of the fiscal year 2019 plans had been approved prior to the beginning of the fiscal year, and that DOD had provided state counterdrug programs with funding for fiscal year 2019. As of mid-November, officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats told us that 39 of the 54 state plans had been approved. DOD has not assessed why the steps it took to improve the state plan review process did not result in timely approval of the state plans. GAO’s Standards for Internal Control in the Federal Government note that management should monitor activities and evaluate the results of programmatic changes. Assessing the revised process for reviewing states’ plans would enable DOD to determine what additional actions are needed to ensure the plans are approved by the Secretary of Defense before funding is provided to state counterdrug programs, as statutorily required by section 112 of title 32. We found that the National Guard Bureau’s funding distribution process does not consider DOD’s strategic counternarcotics priorities. For example, while DOD’s 2011 Counternarcotics and Global Threats Strategy prioritizes efforts on the southwest and northern borders, the National Guard Bureau’s funding distribution process does not specifically account for this. Rather than taking into account established DOD counternarcotics priorities to inform funding distribution, the National Guard Bureau uses survey results and statistics on drugs from a number of national-level databases to develop a distribution percentage for each state within its threat-based resource model that reflects its relative drug threat. Each state’s threat-based resource model percentage is then applied to the funding transferred to the National Guard Bureau from the Drug Interdiction and Counterdrug Activities, Defense account and disbursed to the 54 state programs. For example, Arizona’s threat percentage was determined to be 6.25 percent based on existing drug threats; as a result, Arizona received about $11.8 million in funding for state plans in fiscal year 2018. National Guard Bureau officials stated that while the threat-based resource model’s variables and the data that feed the model relate to DOD strategic counternarcotics priorities, they do not adjust the process to reflect these priorities when distributing funding. When we asked National Guard Bureau officials why its funding distribution process does not consider DOD’s strategic counternarcotics priorities, National Guard Bureau officials stated that they were focused on identifying variables and data sources within the threat-based resource model to reflect relative drug threats and did not consider incorporating DOD’s strategic counternarcotics priorities as part of the funding distribution process. Our work on results-oriented management states that strategy should inform program activities and resourcing. In addition, the National Guard Bureau reported that the goal of the threat- based resource model is to prioritize the most pressing threats from a national perspective, informed by current national and DOD counternarcotics strategies. Both the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats and National Guard Bureau officials stated that incorporating DOD’s strategic counternarcotics priorities into the National Guard Bureau’s funding distribution process would help ensure that DOD priorities are resourced. National Guard Bureau officials stated that they are considering how to align the funding distribution process with DOD’s strategic counternarcotics priorities. They added that the next time they could make changes to their funding distribution process would be for use in fiscal year 2020. Until the National Guard Bureau incorporates DOD’s strategic counternarcotics priorities into the funding distribution process, the National Guard Bureau risks directing funding toward lower priority counterdrug activities at the expense of higher priority activities. The National Guard counterdrug program was established nearly 30 years ago to assist efforts of the Governors of the 50 states, District of Columbia, and three U.S. territories in addressing illicit drug production, trade, and consumption. The drug threats facing the nation are complex and continue to evolve over time, and efforts to combat those threats will require continued support from DOD, to include the National Guard counterdrug program. DOD lacks current strategy and guidance for the National Guard counterdrug program. Although DOD has a counternarcotics and global threats strategy from 2011, it is outdated and does not reflect current drug threats or changes in national-level strategies, which are critical for informing DOD’s strategic counternarcotics priorities. Issuing a strategic framework will ensure that DOD’s counterdrug priorities are aligned with the priorities of other agencies involved in counternarcotics efforts, provide direction for DOD’s counternarcotics activities, and ensure that the National Guard counterdrug program addresses current drug threats. Further, the National Guard Bureau guidance to operate and administer the program was rescinded and has not been replaced, leaving state counterdrug programs officials without clear instructions on how to operate and administer program activities. Issuing interim guidance would provide detailed processes and procedures that states could use to operate their counterdrug programs. Without current strategy or guidance for the National Guard counterdrug program, it will be difficult for the program to operate effectively. In addition, it is important to ensure that funding is distributed to the state- level programs in support of DOD’s strategic counternarcotics priorities. Although the Secretary of Defense is statutorily responsible for reviewing the adequacy of states’ plans prior to providing funds to the states, these reviews have not occurred before state counterdrug programs received funding. Also, the National Guard Bureau has not incorporated DOD’s strategic counternarcotics priorities into its funding distribution process, which is instead wholly reliant on survey responses and drug data. While these are important factors to consider when distributing funding, incorporating DOD strategic counternarcotics priorities into the National Guard Bureau’s funding distribution process would better inform such decisions. Until DOD’s process to approve state plans and the National Guard Bureau’s process to distribute funding are improved, DOD may not be able to ensure that resources are applied to its strategic counternarcotics priorities. Taken together these actions should improve the Department’s oversight of the National Guard counterdrug program and help ensure that the program uses resources effectively and achieves positive results. We are making five recommendations to DOD. The Secretary of Defense should ensure that the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats issues its counternarcotics and global threats strategic framework that incorporates relevant national-level strategies and reflects current drug threats, and update it, as appropriate, upon issuance of the new National Drug Control Strategy. (Recommendation 1) The Secretary of Defense should ensure that the Chief of the National Guard Bureau issues interim guidance that provides detailed procedures and processes on how to operate and administer the National Guard counterdrug program. (Recommendation 2) The Secretary of Defense should ensure that the Chief of the National Guard Bureau take steps to ensure it issues a manual to accompany Chief National Guard Bureau Instruction 3100.01A, National Guard Counterdrug Support, by June 2019. (Recommendation 3) The Secretary of Defense should ensure that the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats, in coordination with the Chief of the National Guard Bureau, assess the revised process for reviewing states’ plans for their counterdrug activities, and take actions based on the assessment to ensure the plans are approved by the Secretary of Defense before funding is provided to state counterdrug programs, as statutorily required. (Recommendation 4) The Secretary of Defense should ensure that the Chief of the National Guard Bureau incorporate the strategic counternarcotics priorities, to be outlined in DOD’s counternarcotics and global threats strategic framework, into the National Guard Bureau’s funding distribution process. (Recommendation 5) In written comments on a draft of this report, DOD concurred with all five of our recommendations and identified actions it plans to take to improve its oversight of the National Guard counterdrug program. DOD’s comments are reprinted in their entirety in appendix VI. DOD also provided technical comments on a draft of this report, which we incorporated as appropriate. For example, we adjusted the wording of our fifth recommendation, replacing threat-based resource model with funding distribution process, to reflect the department’s technical comment that it is unlikely that the National Guard Bureau would change the threat-based resource model, but rather add strategic priorities to the funding distribution process to meet the intent of our recommendation. We are sending copies of this report to appropriate congressional committees, the Acting Secretary of Defense, the Assistant Secretary of Defense for Special Operations/Low-Intensity Conflict, and the Chief of the National Guard Bureau. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VIII. Department of Defense (DOD) budgets for National Guard counterdrug program activities using 5 projects codes: 7403—State Plans—funds DOD support to U.S. State Governors in accordance with State requests in the form of drug interdiction and counter-drug activities plans submitted in accordance with 32 U.S.C. § 112(c). 7415—Counterdrug Schools—funds five National Guard Counterdrug Schools as authorized by §901 of the Office of National Drug Control Policy Reauthorization Act of 2006, as amended, and as identified in plans submitted by host State Governors to the Secretary of Defense in accordance with 32 U.S.C. § 112(c). 9301—Counterthreat Finance—funded reserve military pay and associated support costs for National Guard personnel in support of State, Federal, and Combatant Command efforts to identify, target, and disrupt illicit financial systems that enable drug trafficking, and when vital to U.S. national security interests—terrorism and transnational organized crime. 1295—Linguist and Data Analysis—funds DOD support for combatant command and interagency law enforcement efforts to detect and disrupt transnational criminal organizations’ operations using linguistic and analytical skills of National Guard personnel. 9498—Linguist Support—funds language transcription, translation, and data analysis support to the U.S. Department of Justice and Drug Enforcement Administration using Utah National Guard personnel. DOD’s budget request for the National Guard counterdrug program increased steadily from fiscal year 2004 through fiscal year 2012, peaking at just more than $205 million. However, in fiscal year 2013 DOD’s budget request for the program decreased substantially and continued to decline through fiscal year 2017. The decrease in requested funding amounts for the program is primarily in the State Plans and Counterdrug Schools project codes. In fiscal year 2018, the budget request for the program increased slightly and included additional funding amounts within the State Plans and Counterdrug Schools project codes. Table 4 provides a summary of DOD’s budget request for the National Guard counterdrug program, by project code, in fiscal years 2004 through 2018. Since at least 2004, Congress has directed increases above DOD’s budget request level for the activities of the National Guard counterdrug program. Congressionally-directed increases have been directed to the State Plans and Counterdrug Schools project codes. Beginning in fiscal year 2013, congressionally-directed increases have generally made up half or more of the total funding appropriated to the National Guard counterdrug program. Table 5 provides a summary of congressionally- directed increases for the National Guard counterdrug program, by project code, in fiscal years 2004 through 2018. According to DOD’s data, total budget authority for the National Guard counterdrug program varied from fiscal year 2010 through fiscal year 2017. Total budget authority may be above or below congressionally- enacted amounts because DOD can transfer or reprogram amounts into other authorized accounts and activities based on program requirements. Table 6 provides a summary of total budget authority for the National Guard counterdrug program, by project code, in fiscal years 2010 through 2017. According to DOD’s data, obligation amounts for the National Guard counterdrug program varied from fiscal year 2010 through fiscal year 2017. According to National Guard officials, variation was partly due to the timing and amount of allocations received by the program. Funds transferred from the Drug Interdiction and Counterdrug Activities, Defense account to various other DOD drug interdiction accounts or programs, including the National Guard program, can be transferred back to the account upon a determination that all or part of the funds are not necessary and remain unobligated. Once funds are returned to the Drug Interdiction and Counterdrug Activities, Defense account, they are available for transfer to other DOD counterdrug programs for obligation. Table 7 details the counterdrug program’s obligations from fiscal years 2010 through 2017. As of fiscal year 2018, National Guard Bureau policy allows state counterdrug programs to perform 15 approved support activities grouped into five broad mission categories. The five mission categories are technical support (including linguist and translator, operational and investigative case and criminal analyst, and counterthreat finance support), general support (including domestic cannabis suppression and eradication operations and transportation support), reconnaissance and observation (including ground and aerial reconnaissance), civil operations and coalition development, and counterdrug training. Of the 15 approved support activities, the investigative case and analyst support activity was the most frequently provided activity; it accounted for 42 percent of all support provided in fiscal years 2011 to 2014. Among all of the supported organizations from fiscal year 2011 to fiscal year 2014, law enforcement agencies received about 38 percent of all support provided by the National Guard counterdrug program. Table 8 lists the fiscal year 2018 approved state plan mission categories and support activities. After Congress appropriates amounts to the Drug Interdiction and Counterdrug Activities, Defense account, there are multiple steps performed by various organizations before counterdrug funds are provided to each individual state program. To begin the process to distribute funding, the Department of Defense (DOD) Counternarcotics and Global Threats program officials prepare and submit to the Office of the Under Secretary of Defense (Comptroller) a reprogramming action (DD1415-3), which details the allocation of funds by appropriation or budget activity account for each program they manage. DOD Comptroller officials review and approve the DD1415-3 and forward it to the Office of Management and Budget. Once approved by the Office of Management and Budget, the DOD Comptroller issues a funding authorization document to transfer funds to the military services appropriation accounts (such as military personnel or operation and maintenance). The military services then transfer funds to appropriation accounts managed by Army National Guard and Air National Guard, which, in turn, distribute the funds onto each state National Guard participating in the program. The National Guard Bureau’s Counterdrug Program office coordinates the process involving the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats, the Army and Air National Guard budget and financial management offices, and the individual state counterdrug programs. According to officials from the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats, the process to complete the DD1415-3 takes 3 full weeks and then an additional 8 weeks, on average, for the funding to become available for state counterdrug programs. Figure 7 outlines the process to fund the National Guard counterdrug program. The National Guard Bureau’s threat-based resource model has been used since fiscal year 2012 to help determine funding distribution percentages for the state counterdrug programs. Between fiscal years 2013 and 2015, National Guard Bureau officials stated that they determined planned funding amounts based on a combination of historical funding levels and threat-based resource model threat percentages. According to officials, beginning in fiscal year 2016, funding aligned more closely with threat-based resource model threat percentages. However, National Guard Bureau officials stated that funding distribution percentages from the threat-based resource model were deemed unusable in fiscal year 2017 due to concerns they had with the amount of reporting and the quality of the data that was reported. As a result, officials stated that the fiscal year 2016 threat-based resource model funding percentages were used to distribute fiscal year 2017 funding to state programs while National Guard Bureau officials revised the model for use in fiscal year 2018. Updates to the model included expanding the number of variables to better respond to changes in drug threats, adjusting the model so that it did not treat all drug seizure incidents and amounts equally, and increasing the number of data sources. Table 10 provides threat-based resource model percentages and table 11 funding amounts, by state, for fiscal years 2012 through 2018. In October 2015, GAO issued a report on the National Guard counterdrug program titled Drug Control: Additional Performance Information Is Needed to Oversee the National Guard’s State Counterdrug Program. In that report, we made two recommendations aimed at ensuring that resources are being efficiently applied to meet the National Guard counterdrug program’s objectives. Table 12 provides an update on the status of the recommendations from that report. In addition to the contact named above, Rich Geiger (Assistant Director), Joy Booth, Carol Henn, Jesse T. Jordan, Amie M. Lesser, Shari Nikoo, Tobin J. McMurdie, Carol D. Petersen, Clarice Ransom, Michael D. Silver, Alexandra L. Stewart, and Sarah B. Warmbein, made key contributions to this report.", "summary": "Since 1989, DOD has received billions of dollars to fund the National Guard's participation in a counterdrug program focused on domestic drug interdiction activities. DOD received $261 million for this program in fiscal year 2018. This program provides military support to assist state, local, and tribal law enforcement organizations with counterdrug activities and operates in 54 states and territories across the United States. Senate Report 115-125 included a provision for GAO to evaluate the National Guard counterdrug program. This report (1) evaluates the extent to which DOD has strategy and implementing guidance for the National Guard counterdrug program, and (2) assesses DOD's processes to approve states' counterdrug plans and distribute funding to the program, among other things. GAO reviewed DOD's counterdrug strategy and guidance; DOD funding and personnel data; and its processes to distribute funding. The Department of Defense (DOD) lacks current strategy and guidance to implement the National Guard counterdrug program. Although a number of key national-level strategies, such as the National Drug Control Strategy, have been updated since 2011 to address changing drug threats, GAO found that DOD's 2011 Counternarcotics and Global Threats Strategy has not been updated to reflect these changes. In addition, the National Guard lacks detailed procedures and processes for the states to implement the National Guard counterdrug program, such as how to conduct cross-state aerial reconnaissance. Without current strategy or guidance, it will be difficult for the National Guard to operate its counterdrug program effectively. DOD's processes to approve state counterdrug plans and distribute funding to the state-level counterdrug programs could be improved. Since at least 2009, DOD has provided funding to the states without first approving state plans for counterdrug activities, as required by statute. GAO found that the delay in approval of state counterdrug plans has worsened since fiscal year 2009; in fiscal year 2018, approval took over 9 months (283 days); see figure below. In 2018, DOD took some steps to address the timely review of state plans, but GAO found that those steps did not rectify the problem. GAO also found that the process used by the National Guard to distribute funding to the states within the program does not incorporate DOD's strategic counternarcotics priorities, such as the U.S. southwest and northern border areas. GAO's work on results-oriented management states that strategy should inform program activities and resourcing. Until National Guard's process to distribute funding to state counterdrug programs is improved, it risks directing funding toward lower priority counterdrug activities at the expense of higher priority activities. GAO is making a total of five recommendations, including, among others, that DOD issue a strategic framework that addresses current drug threats, the National Guard issue guidance with detailed procedures on how states should administer the program, DOD assess the revised process for approving state plans, and the National Guard incorporate DOD's strategic counternarcotics priorities into its funding distribution process. DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "International financial transactions, including the transfer of U.S. humanitarian assistance funds, rely on a system of correspondent banking relationships. State and USAID provide humanitarian assistance through funding awards to partners. Funds to U.S. partners are deposited into the partners’ bank accounts located in the United States. The partners are then responsible for transferring the funds to recipient countries for project implementation. These transfers typically involve the use of a correspondent, or intermediary, bank to transfer the funds from a U.S.-based account to an account held at the recipient country, where the funds are then used by in-country staff to implement the project. See appendix IV for more information on the State and USAID offices providing humanitarian assistance. According to research by the Bank for International Settlements, the number of correspondent banking relationships has declined over the past several years, especially for banks that are located in higher-risk jurisdictions (such as those subject to sanctions), have customers perceived as higher-risk, and who generate revenues insufficient to recover compliance costs. Further, the Financial Stability Board noted that a decline in the number of correspondent banking relationships could affect the ability to send and receive international payments and may drive some payment flows underground, with potential consequences on growth, financial inclusion, and the stability and integrity of the financial system. When performing overseas money transfers, U.S. banks and financial institutions must comply with the Bank Secrecy Act’s (BSA) anti-money laundering (AML) regulations and relevant regulations that implement U.S. sanctions. The BSA has established reporting, recordkeeping, and other AML requirements for financial institutions. BSA/AML regulations require that each bank tailor a compliance program that is specific to its own risks based on factors such as products and services offered, and customers and locations served. By complying with BSA/AML requirements, U.S. financial institutions assist government agencies in the detection and prevention of money laundering and terrorist financing by, among other things, maintaining compliance policies, conducting ongoing monitoring of customers and transactions, and reporting suspicious financial activity. In addition to BSA regulations established by Treasury, federal banking regulators have issued their own BSA regulations. These regulations require banks to establish and maintain a BSA compliance program that, among other things, identifies and reports suspicious activity. The banking regulators are also required to review banks’ compliance with BSA/AML requirements and regulations, and they generally do so every 12 to 18 months as a part of their routine safety and soundness examinations. Among other things, examiners review whether banks have an adequate system of internal controls to ensure ongoing compliance with BSA/AML regulations. The federal banking regulators may take enforcement actions using their prudential authorities for violations of BSA/AML requirements. They may also assess civil money penalties against financial institutions and individuals. Banks must also comply with relevant regulations that implement U.S. sanctions in certain countries. When the United States imposes sanctions on an entity or individual, it freezes assets subject to U.S. jurisdiction. All U.S. transactions with the entity or individual are prohibited, including transactions by banks and NPOs. When appropriate, Treasury’s Office of Foreign Assets Control (OFAC) may issue a general license authorizing the performance of certain categories of transactions, including funds transfers for the provision of humanitarian assistance. OFAC also issues specific licenses on a case-by-case basis under certain limited situations and conditions. Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, takes actions to help prevent financial crimes, and considers NPOs operating in conflict areas and other high risk zones as potentially vulnerable to such crimes. Treasury leads U.S. efforts to fight various financial crimes primarily through its Office of Terrorism and Financial Intelligence (TFI). TFI develops and implements U.S. government strategies to combat terrorist financing domestically and internationally, and develops and implements the National Money Laundering Strategy as well as other policies and programs to fight financial crimes. Relevant offices under TFI include: The Office of Terrorist Financing and Financial Crimes (TFFC). TFFC, the policy development and outreach office for TFI, works across all elements of the national security community – including the law enforcement, regulatory, policy, diplomatic, and intelligence communities – and with the private sector and foreign governments to identify and address the threats presented by all forms of illicit finance to the international financial system. The Office of Foreign Assets Control (OFAC). OFAC administers and enforces economic and financial sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, transnational criminal organizations, human rights abusers and corrupt actors, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States. The Financial Crimes Enforcement Network (FinCEN). FinCEN, among other duties, is responsible for administering the BSA, has authority for enforcing compliance with its requirements and implementing regulations, and also has the authority to enforce the BSA, including through civil money penalties. FinCEN issues regulations under the BSA and relies on the examination functions performed by other federal regulators, including federal banking regulators. FinCEN also collects, analyzes, and maintains the reports and information filed by financial institutions under BSA and makes those reports available to law enforcement and regulators. According to Treasury, organizations, including NPOs, implementing humanitarian assistance in high-risk areas may be vulnerable to exploitation by terrorist groups and their support networks. These terrorist groups and support networks may establish or abuse charities to raise and move funds, or provide other forms of support, that benefit the terrorist groups. As of May 2017, Treasury, through OFAC, had designated 67 charities, branches, and foreign terrorist organizations’ potential fundraising front organizations for violations of U.S. sanctions. For 7 of our 18 selected projects, State and USAID partners told us that they had experienced banking access challenges. Additionally, 15 of the 18 partners we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects over the previous 5 years. Most of the 18 partners we interviewed told us that they were able to mitigate these challenges through various actions or the challenges were not significant enough to affect project implementation. Nevertheless, a few partners noted that projects they were implementing were adversely affected by such challenges. For example, 1 of our 18 selected projects faced repeated delays as a result of banking access challenges. Additionally, 2 partners noted that they had to reduce the scope of implementation or suspend projects in their global humanitarian assistance portfolio because of banking access challenges. Furthermore, several partners and other NPOs told us that such challenges posed potential risks to project implementation. Lastly, a recent study found that more than two-thirds of all U.S.-based NPOs that work internationally experienced banking access challenges, but that few NPOs canceled programs as a result of those challenges. For our 18 selected U.S.-funded projects, 7 of the partners told us that they had experienced banking access challenges in implementing their projects, with the majority citing delays or denials of funds transfers. Specifically, 3 (of 5) partners in Somalia and 4 (of 7) partners in Syria told us that they had experienced banking access challenges related to the selected project. None of the partners implementing selected sample projects in Haiti or Kenya noted that they had experienced any banking access challenges. Denials of funds transfers to the destination country was the most frequently cited banking access challenge (experienced by 5 of the 7 projects), followed by delays of funds transfers (experienced by 3 of the 7 projects) (see fig. 2). Fifteen of the 18 partners that we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects implemented over the previous 5 years (see fig. 3). The most frequently cited challenges were funds transfer delays and denials. Twelve partners noted that they had experienced transfer delays, with 8 noting that the delays occurred occasionally and 6 noting that the delays lasted weeks or months. Most partners that noted experiencing delays told us that the delays were caused exclusively by intermediary banks. Eleven partners noted that they had experienced transfer denials, including 5 that told us the denials occurred occasionally. Five partners also noted that transfers were denied by intermediary banks. In addition, 2 partners noted that they had experienced challenges opening new bank accounts; 3, increased costs to transfer funds; 1, a bank-initiated account closure; and 2, other challenges. For more information on the types of banking access challenges that partners identified, including details on the duration of delays and the frequency of denials, see appendix V. Some partners that experienced banking access challenges told us that those challenges had adversely affected or posed a potential risk to implementation of projects. Of those partners experiencing challenges, 3 partners noted that banking access challenges had adversely affected a project’s implementation. Specifically, 1 partner that experienced challenges on one of our selected projects and 2 partners that experienced challenges on projects outside of our sample noted that the challenges they had experienced resulted in a project being adversely affected in some form, such as: Reduced scope of implementation. One partner told us that its project in the Democratic People’s Republic of Korea was scaled back significantly because of difficulty transferring funds to the country. Delays implementing a project. One partner told us that for one of our selected projects, in part because of banking access challenges, implementation of the project was delayed and required approval for two no-cost extensions from USAID. The partner noted that it had experienced recurring issues with funds transfers to Syria, including 3- to 6-week delays and frequent denials of transfers. Suspension of an in-progress project. One partner told us that an ongoing project it implemented in Syria (outside of our sample of projects) to deliver food assistance had been suspended for about a week because its funds transfers to the country were denied. While some projects were adversely affected, 6 of the 7 partners of our selected projects that noted experiencing banking access challenges told us that the challenges they had experienced did not adversely affect project implementation. Similarly, 12 of the 15 partners that noted experiencing banking access challenges on their global portfolio of humanitarian assistance told us that the challenges did not affect project implementation. Additionally, for both our selected projects and their global portfolio of humanitarian assistance projects, the challenges experienced were either not significant enough to affect project implementation, or were mitigated through various actions. For example, partners told us that they had mitigated challenges by: Maintaining a funding buffer. Partners may keep enough funding to operate a project for several weeks in order to mitigate delays and denials of funds transfers. For example, one partner noted that projects maintain approximately 4 weeks of operating funds on hand, which is enough to mitigate transfer delays that last up to 3 weeks. Using alternate methods to move funds. Partners may use alternate methods to move funds, such as using different intermediary banks or money transmitters, or by carrying cash. For example, one partner told us that when its U.S. bank stopped allowing funds transfers to Syria, the partner opened an account with a different bank. That partner also told us that because it was unable to reliably transfer funds to Syria, it regularly transfers funds to Lebanon—either to intermediaries or to the personal accounts of individuals involved in the projects—and manually moves the physical currency to Syria. Maintaining multiple bank accounts. Partners may maintain accounts with multiple banks in order to mitigate the risk of a bank-initiated account closure. For example, one partner told us that after a bank closed all of its accounts without warning or explanation, the partner opened accounts across three different banks in order to mitigate the effects of any individual bank closing its account. While most partners’ projects did not experience adverse effects as a result of banking access challenges, three USAID partners—as well as another NPO that we spoke with—told us that banking access challenges posed a potential risk to project implementation, such as: Potential for physical violence. One partner told us that, for one of our selected projects, there were concerns of violence if payments were halted because of funds transfer delays, while another partner told us that violence was a concern if it was unable to pay vendors on time. An NPO also told us that there was a potential for physical violence if local staff were not paid on time. Potential for insolvency of vendors. One partner told us that, for one of our selected projects, transfer delays prevented it from reimbursing a money transmitter it used to move funds to Somalia, which in turn caused that money transmitter to experience financial difficulties. The partner stated that the delays were almost significant enough to affect operations, though it was able to resolve the situation in time to prevent its vendor from becoming insolvent. Potential for project suspension. One partner told us that it provides advance funding for projects to account for delays, but at times transfer delays have come close to exhausting the advance funding. For example, the partner told us that it provided funding for projects 4 weeks in advance and experienced transfer delays averaging 3 weeks. In addition, an NPO told us that staff are sometimes not paid for several months because of such delays; thus, if transfer delays worsened or staff were unwilling to work without being paid, project implementation may be adversely affected. A recent study by Charity and Security Network on banking access for U.S. NPOs, which included NPOs that received U.S. government funds, found widespread banking challenges for U.S.-based NPOs. Data for a survey conducted as part of this study indicated that about two-thirds of the responding U.S.-based NPOs that work internationally experienced banking access challenges. The challenges included delays of wire transfers, unusual requests for documentation, and increased fees. Some NPOs also cited experiencing account closures and refusals to open accounts. About 15 percent of the NPOs that responded to the survey noted that they experienced these banking access challenges constantly or regularly, and about 3 percent of NPOs reported cancelling a project because of banking access challenges. Furthermore, transfers to all parts of the globe were affected, and the challenges were not limited to conflict zones. According to the report, NPOs with 500 or fewer staff were more likely to experience delayed wire transfers, fee increases, and account closures. Smaller organizations were more likely to receive unusual requests for documentation, according to the report. The smallest NPOs, those with 10 or fewer employees, reported experiencing more trouble opening accounts than larger organizations. According to the report, as a result of the challenges they experienced, NPOs were sometimes forced to move money through less transparent, less traceable, and less safe channels, such as carrying cash. As shown in table 1, survey data from the Charity and Security Network study indicated that there were only minor differences between NPOs receiving and not receiving U.S. government funding in terms of experiencing banking access challenges. For example, about 15 percent of responding NPOs, regardless of whether or not they received U.S. funds, noted experiencing banking access challenges regularly or constantly, with transfer delays the challenge most frequently cited by both groups. Additionally, about the same proportion of NPOs that received or did not receive U.S. funds reported that they rarely or never experienced banking access challenges. Both groups of NPOs also noted taking similar measures to deal with banking access challenges. USAID’s partners’ written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that noted experiencing banking access challenges were USAID projects. None of those 6 USAID partners reported on the banking access challenges they had experienced to USAID in their regular project reporting. USAID requires partners to report adverse effects to their projects, but 1 partner that faced delays on its project as a result of banking access challenges did not identify these challenges as the reason for delays in its reporting to USAID. We also reviewed over 1,300 USAID partner reports for fiscal years 2016 and 2017 from high-risk countries and found no explicit discussion of banking access challenges. USAID generally requires partners implementing humanitarian assistance projects to report challenges that affect project implementation. USAID, through the Office of U.S. Foreign Disaster Assistance (OFDA) and the Office of Food For Peace (FFP), provides humanitarian assistance and monitors the implementation of projects through various methods, including periodic performance reports. USAID’s reporting requirements, as well as the number of partners of selected projects that told us they had experienced banking access challenges, are as follows: USAID/OFDA. USAID/OFDA agreements for the selected projects we reviewed require the awardee to report via email (1) developments that have a significant effect on the activities supported by the agreement, and (2) problems, delays, or adverse conditions that materially impair the ability to meet the objectives of this agreement. The agreements also require Program Performance Reports that must address reasons why established goals were not met, the impact on the program objectives, and how the impact has been or will be addressed. Four of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/OFDA projects. USAID/FFP. USAID/FFP’s Fiscal Year 2017 Annual Program Statement for International Emergency Food Assistance requires partners to report, as part of their quarterly reporting, any challenges that the project has faced during the quarter and how they were resolved and discuss any potential challenges or delays that may affect the program’s ability to achieve its objectives. Each of the agreements—both for NPOs and for public international organizations—that we reviewed require the partner to notify USAID of any developments, problems, or delays that may have an adverse effect on the project. Two of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/FFP projects. Five of the 6 USAID partners of selected sample projects that noted experiencing banking access challenges told us those challenges did not adversely affect project implementation and therefore did not need to be reported. The sixth—a partner that noted its project was adversely affected by banking access challenges—did not include these challenges in its reporting to USAID, although the challenges met the reporting threshold of adversely affecting project implementation. While both USAID and the partner told us that the delays were communicated to USAID through emails and conversations with a designated USAID contact and in the justification for the no-cost extensions submitted to USAID, our review of the partner’s program performance reports to USAID and the no-cost extensions found no explicit discussion of banking access challenges. Our review of the over 1,300 publicly available USAID partner reports for fiscal years 2016 and 2017 from high-risk countries found no explicit discussion of banking access challenges. Overall, we identified 5 reports out of the over 1,300 that included some mention of challenges related to banking access. However, those reports lacked sufficient detail for us to determine the type, severity, or origin of the challenges. For example, one report stated that there are sometimes delays in the payment of salaries through foreign accounts, with no further details about the delays, while another report stated that subgrantees experienced delays in payments without identifying the reasons for these delays, which could include late reports, late verification, late processing, or banking issues. While most of the partners we interviewed noted that they did not report banking access challenges because the challenges did not adversely affect their projects, an NPO advocacy group and a large international NPO told us that NPOs may be reluctant to discuss or report banking access challenges publicly because of concern about being perceived as high-risk or unable to carry out their mission, and that any public mention of banking access challenges could adversely affect their ability to raise funds. Standards for Internal Control in the Federal Government require agencies to identify and respond to risks related to achieving their goals, and USAID currently has no other process for collecting information on banking access challenges affecting its partners. Without this information, USAID does not have a record of the frequency and prevalence of the challenges and may not be aware of the full extent of risks to achieving its humanitarian assistance objectives. Further, as mentioned previously, two USAID partners stated that their projects faced potential adverse effects from banking access challenges. Documenting the prevalence and frequency of banking access challenges experienced by USAID partners is important given the potential adverse effects that these challenges can have on project implementation. Both Treasury and State have taken actions to help address banking access challenges encountered by NPOs; however, USAID’s efforts to address these challenges have been limited by a lack of communication about them—both within the agency and with external entities. Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, has conducted meetings between charities, banks, and government officials to discuss banking access challenges and released guidance on sanctions and other related issues. State, as a provider of funding for humanitarian assistance, has issued guidance to its overseas posts on banking access challenges. In addition, both State and Treasury are involved in international efforts led by the World Bank and the Financial Action Task Force (FATF) to help address banking access challenges. Although USAID’s partners have experienced banking access challenges, USAID has had more limited engagement than State and Treasury with other agencies, international organizations, and NPOs on addressing such challenges—in part because of a lack of communication about them, both within the agency and with external entities. Treasury’s efforts to help address banking access challenges encountered by NPOs include holding roundtable meetings and issuing guidance and resources for charitable organizations. Treasury, in its role as a regulator of the banking system, serves as a nexus between the banks and the U.S. agencies providing humanitarian assistance. Treasury has organized several roundtable meetings with the charitable sector to facilitate a dialogue on banks’ expectations. These sessions brought together representatives from charities, banks, financial supervisors, and the U.S. government to discuss the factors that banks consider related to charity accounts and that examiners use in their review of banks’ procedures. Since 2013, Treasury’s Office of Terrorist Financing and Financial Crimes (TFFC) has dedicated three of these roundtable meetings specifically to banking access challenges affecting charities, as follows: December 17, 2013: This initial Treasury / TFFC working group meeting with charities included a discussion of terrorist financing risk mitigation guidance. There was also a discussion of banking access challenges, during which TFFC provided an overview of the NPO section of the manual used by bank examiners to conduct bank examinations and explained the bank examination process to the charities. March 21, 2014: This meeting focused on a discussion of access to financial services for charities. A Muslim-American charity delivered a presentation on how it has managed its banking relationships over the past several years. Several banks also delivered presentations to help charities better understand the factors that banks consider and the complex processes related to banking transactions and opening or maintaining bank accounts. November 12, 2015: This meeting included a stakeholder discussion of banking access challenges for charities, with charities, bankers, and regulators presenting each of their perspectives and discussing the challenges faced on all sides. In addition, in May 2015, Treasury, with the Department of Homeland Security, conducted a roundtable on banking access challenges with Syrian-American charities, U.S. regulators, and bankers. This event was focused on challenges affecting the Syrian-American charitable community and delivering humanitarian assistance to Syria during the worsening conflict. Treasury provided guidance related to OFAC’s general license 11a for U.S. charities to provide humanitarian assistance for Syria. Further, officials reported that Treasury also maintains contact with the charitable sector through various domestic and international events, and holds frequent meetings with members of the charitable sector in Washington, D.C. and around the United States. Treasury has also issued guidance and resources on its website for charities, including frequently asked questions and best practices. Treasury’s website provides information and resources for all stakeholders in four strategic areas—private sector outreach, coordinated oversight, targeted investigations, and international engagement. The guidance includes: voluntary best practices regarding anti-terrorist financing for charities, lists of frequently asked questions regarding sanctions and charities, list of charities that have been designated by OFAC for assisting or having ties to terrorist organizations, several international multilateral organization reports on banking access challenges and terrorist exploitation of charities, and OFAC guidance specifically related to the provision of humanitarian assistance. Lastly, Treasury has taken actions on derisking challenges more generally. According to Treasury officials, these more general actions focused on encouraging dialogue and making clear to financial institutions that they are expected to make individual risk-based decisions rather than wholesale, indiscriminate policies for entire sectors or classes of customers. Treasury officials noted that banks retain the flexibility to make business decisions such as which clients to accept, since banks are in the best position to know whether they are able to implement controls to manage the risk associated with any given client. These officials indicated that Treasury pursues market-driven solutions and cannot order banks to open or maintain accounts. The officials have stated that Treasury does not view the charitable sector as presenting a uniform or unacceptably high risk of money laundering, terrorist financing, or sanctions violations. However, charities delivering critical assistance in high-risk conflict zones have, in some cases, had terrorist organizations and their support networks exploit donations and operations to support terrorist activities. State has issued guidance to its staff overseas to help address banking access challenges encountered by NPOs and others and identified a focal point for banking access challenges within the agency. In July 2017, State issued internal guidance, through a document issued to all of its overseas embassies, regarding derisking. State, based on guidance from Treasury, developed guidance for all personnel that provides background on “de-risking” and related talking points, additional web-based resources, and an assessment framework tool to evaluate the current state of banking relationships in a given market. The guidance includes links to resources from Treasury, U.S. banking regulators, and various international organizations, such as the World Bank, International Monetary Fund, and FATF. The guidance is designed to give embassy staff some tools to work with host governments on these issues and to help identify countries and markets where further U.S. government engagement is necessary. In addition, State’s Office of Threat Finance Countermeasures serves as the main focal point for all banking access challenges brought to the attention of State. This office provides assistance to State’s embassies when banking-access-related issues are raised through the embassy to State headquarters. All embassy staff, as part of the guidance issued on derisking, have been instructed to direct all questions received on banking access issues to the Office of Threat Finance Countermeasures. In addition, this office is responsible for interfacing with Treasury on banking access issues and staff from this office have attended all of the relevant Treasury-hosted roundtable meetings focused on banking access challenges encountered by charities. The World Bank and FATF have several efforts underway—with participation from Treasury and State—to address banking access challenges for NPOs. The World Bank, in collaboration with the Association of Certified Anti-Money Laundering Specialists (ACAMS), is working with humanitarian organizations, banks, and U.S. regulators on the question of how humanitarian organizations can maintain access to the financial system. More specifically, the World Bank and ACAMS have launched three primary work streams focused on different aspects of banking access to improve NPOs’ understanding of what the financial institutions require and to improve the banks’ understanding of how NPOs operate. According to a World Bank official, the three workstreams are as follows: Work Stream 1: This work stream aims to ensure a better understanding of bank examiners of the NPO sector and to enable more risk differentiation on the part of those examiners when they conduct on-site supervision and examine bank client accounts. Work Stream 2: This work stream aims to help banks conduct due diligence on charities more easily through the use of technological tools, such as databases that contain key information on charities. Work Stream 3: This work stream aims to work with the regulatory bodies to help bank examiners change their perceptions of the risk potential of charities. In addition, the World Bank and ACAMS have organized roundtable meetings as part of the ongoing Stakeholder Dialogue on De-Risking. The objectives of a January 2017 meeting were to promote access of humanitarian organizations to financial services and to discuss practical measures to foster the relationship between NPOs and financial institutions, improve the regulatory and policy climate for financial access for NPOs, and build coalitions and create opportunities for sharing information and good due diligence practices. Officials from Treasury and State have been involved with the dialogues and various work streams. FATF, with participation from both Treasury and State, also has several efforts underway to help address banking access challenges, including revising its recommendations and issuing guidance. Derisking has been a stated FATF priority since October 2014. In June 2016, FATF revised its recommendation that pertains to how countries should review NPOs and its interpretive note to better reflect how to implement measures to protect NPOs from terrorist abuse, in line with the proper implementation of the risk-based approach. According to Treasury, this approach emphasizes that not all charities are considered high-risk. Specific changes included defining NPOs, removal of the words “particularly vulnerable” from previous language, and emphasis on a risk-based approach for evaluating NPOs. The FATF has also issued guidance and best practices to guide both financial institutions and regulators on how to properly implement the risk-based approach, in line with the revised FATF recommendations. Additionally, according to Treasury, the FATF updated a report analyzing the global terrorist threat to the charitable sector, gathering over 100 examples of terrorist abuse of charities to pinpoint which types of charities are considered higher-risk. This report and its findings were published in June 2014. USAID efforts to address banking access challenges have been limited, in part because of a lack of communication within the agency and with external entities about challenges faced by USAID’s partners. Within USAID, we found that information on banking access challenges faced by partners was not always communicated beyond staff directly overseeing the project. We found that the USAID staff who had direct responsibility for managing the project were generally aware of banking access challenges that affected project implementation, and had taken steps to help mitigate these challenges on a project-level basis. However, other relevant staff, such as USAID management and country-level headquarters staff, were not aware of these challenges. For example, partners in Syria and Somalia that we interviewed noted experiencing banking access challenges, but the USAID officials representing these countries in headquarters told us they were not aware of such challenges occurring recently. This situation may be, in part, because USAID has no designated office or process that focuses on communicating these issues throughout the agency to other relevant officials, including USAID management. Federal standards for internal control note that management should use quality information to achieve the entity’s objectives, and that entity management needs access to relevant and reliable communication related to internal as well as external events. If information on banking access challenges experienced by USAID partners is only reported to program-level staff and not communicated to a wider audience within the agency, then the agency as a whole may not fully recognize the overall risks posed by banking access challenges to USAID’s ability to achieve its objectives. Further, the agency may miss opportunities to assist other partners that might be experiencing similar issues based on lessons learned from previous experiences, if staff are not aware of the banking access challenges that have been experienced by its partners implementing other projects or working in other countries. USAID participation in interagency and partner efforts to address banking access challenges has been limited, in part because of a lack of communication with these external entities. According to Treasury officials, because there is no main focal point at USAID for banking access challenges, there is no consistency on who attends, or whether anyone attends, the Treasury-hosted roundtable meetings on banking access challenges from USAID. Further, an NPO trade association and other NPOs told us that it is difficult to find a person at USAID to engage with on banking access challenges. Lastly, a USAID/OFDA official stated that USAID has had limited engagement on issues related to banking access challenges. The OFDA official stated that once OFDA fully staffs its new Award, Audit, and Risk Management Team, it will be able to more fully engage on these issues. Federal standards for internal control state that management should communicate the necessary quality information both internally and externally to achieve the organization’s objectives. Without effective communication with partners and other government agencies about banking access challenges its partners face, USAID’s ability to effectively and consistently engage with these entities or contribute to efforts to help address these challenges is limited. The United States provides humanitarian assistance in countries that are often plagued by conflict, instability, or other issues that increase the risk of financial crimes. Some of these countries also face U.S. sanctions that are aimed at their governments or other actors that engage in terrorism or illicit activities. Additionally, to ensure that the U.S. financial system is not used for money laundering or financing terrorism, financial institutions such as banks are subject to various U.S. laws and regulations that require banks to conduct proper due diligence on entities, such as those transferring funds to high-risk countries. However, there is concern among some organizations that banks’ higher level of due diligence, especially for clients such as charitable organizations that provide humanitarian assistance in high-risk countries, may create undue difficulties, including delays, for these organizations. Charitable organizations and others believe that because the United States and a key multilateral organization previously labeled charitable organizations as high-risk, banks remain reluctant to serve these organizations even though a case-by-case assessment of risk is now recommended. As such, we found that the majority of implementing partners—many of which are charitable organizations—of U.S. government assistance that we interviewed had experienced some banking access challenges. Despite our findings and others’ findings on the prevalence of banking access challenges facing humanitarian assistance organizations, USAID’s current partner reporting does not capture information related to the potential risks of banking access challenges faced by its partners. Without collecting this information, USAID cannot help the partners mitigate banking access challenges. Additionally, if these challenges are not documented and shared throughout the agency, the prevalence of the challenges and potential risks cannot be fully assessed. Further, without communicating about banking access challenges faced by its partners throughout the agency and to others, the potential risk to agency objectives will not be known and USAID’s ability to engage with other agencies and organizations in helping to address these challenges is limited. We are making the following two recommendations to USAID: The Administrator of USAID should take steps to collect information on banking access challenges experienced by USAID’s implementing partners. (Recommendation 1) The Administrator of USAID should take steps to communicate information on banking access challenges faced by partners both within USAID and with external entities, such as other U.S. agencies and U.S. implementing partners. (Recommendation 2) We provided a draft of this report to State, USAID, and Treasury for comment. We received written comments from USAID that are reprinted in appendix VI. USAID concurred with our recommendations. Treasury provided technical comments, which we incorporated as appropriate. State told us that it had no comments on the draft report. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of the U.S. Agency for International Development, the Secretary of the Treasury, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. While the Department of State (State) and the U.S. Agency for International Development (USAID) have encountered some banking access challenges, such as closed accounts and delays in transferring funds, these challenges did not affect their operations for providing assistance to high-risk countries. To send funds overseas, State, through two U.S. disbursement offices managed by State’s Bureau of the Comptroller and Global Financial Services (CGFS), maintains foreign currency bank accounts in 172 countries. Funds are transferred from a Federal Reserve Bank to a U.S. dollar bank account maintained by State, after which the funds are directed through a correspondent bank or a foreign exchange broker to a foreign bank account maintained by State. A correspondent bank serves as the intermediary between the bank sending a transfer, in this case a U.S. dollar denominated bank account, and the bank issuing payment to the recipient, in this case the State-held account in the recipient country. Both the bank sending the transfer and the bank receiving the transfer hold an account at the correspondent bank, which is used for fund transfers, cash management, and other purposes. According to State, all State transfers overseas, as well as the majority of USAID payments overseas, are managed by CGFS, and in fiscal year 2017 CGFS’s two disbursement offices processed approximately 3 million payments through accounts managed by State in 172 countries. State officials told us that State encounters occasional banking access challenges, including short delays in funds transfers, denials of funds transfers to certain countries, and one bank-initiated account closure. State officials told us that they are able to mitigate the occasional banking access challenges that they encounter to ensure operations are not affected. For example: State’s transfers to countries sanctioned by the Office of Foreign Asset Control (OFAC) are occasionally flagged by intermediary banks. According to State, in fiscal year 2017 approximately one- tenth of one percent (0.1%) of payments were delayed because of OFAC sanctions. When this occurs, State receives questions on the details of those transfers. According to officials, this is an ongoing challenge, but State resolves such delays within 2 weeks—and typically within days—and there are no operational effects as a result of the delays. In some instances—including once in 2012, and once in 2018—an intermediary bank used by CGFS’s U.S. bank stopped processing transfers to a recipient bank in a specific country. According to State officials, in both cases State identified an alternative intermediary bank to transfer funds to the destination country. In both cases, there were no operational effects. In 2014, an intermediary bank used by CGFS’s U.S. bank ended its banking relationship with an OFAC-sanctioned country (Syria), and State was unable to move funds from its U.S.-dollar denominated accounts to that country. State, with the advice of the recipient bank in the OFAC-sanctioned country, identified an alternative intermediary bank that was able to move funds to that country using euro-denominated accounts. In 2014, a U.S. bank—at which State maintained an account and that State used to fund its operations in Brunei—notified State that it would be closing State’s account with 29 days’ notice. State worked with Treasury to identify an alternative bank that would be willing to maintain a State bank account. The operation was not affected. For this review, we selected four countries—Syria, Somalia, Haiti, and Kenya—that may have a higher risk of financial crimes because of conflict, instability, or other issues. We selected them based on factors including the level of humanitarian assistance they received from U.S. agencies, their inclusion on multiple financial-risk-related indices, and geographical diversity. Syria. Since 2011, Syria has been plagued by an ongoing multisided armed conflict fought primarily between the government of President Bashar al-Assad, along with its allies, and various forces opposing both the government and each other. Syria’s economy has deeply deteriorated amid the ongoing conflict, declining by more than 70 percent from 2010 to 2017. During 2017, the ongoing conflict and continued unrest and economic decline worsened the humanitarian crisis, necessitating high levels of international assistance, as more than 13 million people remained in need inside Syria and the number of registered Syrian refugees increased from 4.8 million to more than 5.4 million. Multiple terrorist groups operate inside Syria, raising the potential risk of terrorist financing. Additionally, according to a Central Intelligence Agency report, Syria is a transit point for opiates, hashish, and cocaine bound for regional and Western markets, and weak anti-money-laundering controls and bank privatization may leave it vulnerable to money laundering. The U.S. maintains a comprehensive Syria sanctions program. A general license in the Syria regulations authorizes nonprofit organizations to provide services, including financial services, to Syria in support of certain not-for-profit activities, such as activities to support humanitarian projects to meet basic human needs and support education in Syria. Organizations providing humanitarian assistance that is not authorized by the general license may apply for a specific license to engage in those transactions. The United States has provided approximately $3.3 billion in humanitarian assistance for Syria since 2012. Somalia. Since 1969, Somalia has endured political instability and civil conflict, and is the third-largest source of refugees, after Syria and Afghanistan. Somalia lacks effective national governance and maintains an informal economy largely based on livestock, money transfer companies, and telecommunications. In the absence of a formal banking sector, money transfer companies have sprung up throughout the country, handling up to $1.6 billion in remittances annually. According to a 2016 State report, Somalia remained a safe haven for terrorists who used their relative freedom of movement to obtain resources and funds, recruit fighters, and plan and mount operations within Somalia and neighboring countries. The United States maintains a targeted list-based Somalia sanctions program. Organizations providing humanitarian assistance may apply for a specific license to engage in transactions that otherwise would be prohibited by the Somalia sanctions regulations. The United States has provided approximately $1.2 billion in humanitarian assistance for Somalia since 2012. Haiti. Currently the poorest country in the western hemisphere, Haiti has experienced political instability for most of its history. Remittances are the primary source of foreign exchange, equivalent to more than a quarter of GDP, and nearly double the combined value of Haitian exports and foreign direct investment. In January 2010, a catastrophic earthquake killed an estimated 300,000 people and left close to 1.5 million people homeless. Hurricane Matthew, the fiercest Caribbean storm in nearly a decade, made landfall in Haiti on October 4, 2016, creating a new humanitarian emergency. An estimated 2.1 million people were affected by the category 4 storm, which caused extensive damage to crops, houses, livestock, and infrastructure across Haiti’s southern peninsula. Haiti is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report. According to USAID, the agency has provided $187.8 million in humanitarian assistance for Haiti since 2012. Kenya. Kenya is the economic, financial, and transport hub of East Africa. Since 2014, Kenya has been ranked as a lower middle income country because its per capita GDP crossed a World Bank threshold. Al-Shabaab aims to establish Islamic rule in Kenya’s northeastern border region and coast and carried out a spate of terrorist attacks in Kenya. Kenya is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report. The United States has provided approximately $807 million in humanitarian assistance for Kenya since 2012. This report examines (1) the extent to which implementing partners of the Department of State (State) and the U.S. Agency for International Development (USAID) experience banking access challenges that affect their implementation of humanitarian assistance projects, (2) USAID implementing partners’ reporting on banking access challenges, and (3) actions relevant U.S. agencies have taken to help address banking access challenges encountered by nonprofit organizations (NPO). In addition, we provide information on the extent to which State and USAID experience banking access challenges in providing assistance in high-risk countries in appendix I. To address these objectives, we examined U.S.-funded projects and their implementers in four high-risk countries—Syria, Somalia, Haiti, and Kenya. We selected these countries based on factors including the high level of humanitarian assistance they received from U.S. agencies, their higher propensity for the occurrence of financial crimes based on their inclusion on multiple financial-risk-related indices, and to obtain geographical diversity. More specifically, to identify our list of high-risk countries in terms of banking or financial risk, we used several indices including ones based on financial risk, money laundering risk, and counterterrorism-related risk. The indices we chose to use were State’s International Narcotics Control Strategy Report (2014- 2016) (Money Laundering Risks), the Department of the Treasury’s (Treasury) Office of Foreign Assets Control (OFAC) sanctions, the Organisation for Economic Co-operation and Development’s (OECD) Fragile State Index (2014-2016), the 2017 Financial Action Task Force (FATF) High Risk and Non- Cooperative Jurisdictions list, and the BASEL AML Index, 2017. We then identified 19 countries that appeared on at least two of the five lists and received at least $100 million in U.S. based humanitarian assistance from 2012 through 2017, based on data from the United Nations Office for the Coordination of Humanitarian Affair’s financial tracking system. We then applied the following primary selection criteria to select our four countries: whether they (1) appeared on at least three of the five identified lists and (2) have received at least $100 million in U.S. humanitarian assistance since 2012. Secondary considerations that informed our selection included whether a country had been identified as having banking access challenges by USAID, geographical diversity, and ensuring we had at least one country from each of the five indices we chose. The data we obtained for these four countries cannot be generalized beyond our selected projects and partners. For our first objective, to examine the extent to which implementing partners of State and USAID experienced banking access challenges that affected their implementation of humanitarian assistance projects, we conducted semi-structured interviews with 18 partners about (1) one of 18 specific projects we had selected in one of our high-risk countries and (2) their experiences implementing their global portfolio of humanitarian assistance projects over the previous 5 years. In order to determine our sample of partners, we selected a weighted, non-generalizable sample of 18 projects located in our four selected high-risk countries. We selected our projects from a list, provided by State and USAID, of 195 projects that were active as of the end of fiscal year 2017 in these countries. In making our selection of projects we made sure that our sample included a mix of projects from each country (7 projects for Syria, 5 for Somalia, 3 for Haiti, and 3 for Kenya), and a mix of State and USAID projects (3 State and 15 USAID). We selected those numbers for each country and each agency based on the number of projects in each country and the proportion of assistance provided. We selected one State project in each of the three countries where they were active. Once we had determined these parameters for our non-generalizable sample, we made the final selections of the projects at random, making sure that we did not select more than one project for any one partner. Several of the implementing partners in our sample operate in over 100 countries in every part of the world, while a few operate in 20 or fewer countries. Three of the partners are United Nations organizations. The implementing partners in our sample had fiscal year 2016 annual revenues ranging from $5.9 billion to just over $10 million. We conducted semi-structured interviews with each of the 18 implementing partners on potential banking access challenges, such as the ability to open and maintain new accounts and make transfers in a timely fashion, and the effect of those challenges on project implementation. Our interviews were separated into two distinct sets of questions—one on banking access challenges the implementing partner encountered on the selected project, and the other on any banking access challenges the implementing partner encountered in its global portfolio of humanitarian assistance projects over the previous 5 years (2013-2017). When discussing their global humanitarian assistance portfolios, the partners did not limit their responses to projects funded by U.S. government agencies, but instead considered projects funded by all of their donors. We did not ask the partners to quantify the number of projects they had implemented over the previous 5 years, nor did we ask them to quantify the number of projects in their global portfolio of humanitarian assistance for which they had experienced banking access challenges. Our interview followed a protocol that asked both closed and open-ended questions. For most banking access challenges, when interview respondents indicated that their project or organization had experienced a banking access challenge, we probed for details of the challenge, including whether the challenge had caused an adverse effect on the project, such as project delays or cancellations. After the interviews had been conducted, we content-coded some of the open- ended answers we received. Specifically, we developed codes on whether any challenges reported had adversely affected the projects, the extent and duration of delays in transferring funds, and the extent and frequency of denials of international fund transfers. Two analysts independently coded each interview. The analysts then compared their coding and reconciled any initial disagreements. We also reviewed relevant studies on banking access challenges for NPOs conducted by the World Bank and the Charity and Security Network (CSN). The study conducted by CSN included a survey that was designed to be generalizable to the population of all U.S. NPOs with activities outside the U.S., including providing humanitarian assistance. This survey received more than 300 responses, which constituted a reported response rate of about 38 percent. The researchers conducting the survey indicated that this response rate could be considered high for a public opinion telephone survey but low for a survey like the Census. The study determined the survey findings to be representative of the population with some qualifications, such as the fact that smaller organizations were more likely to complete the survey than larger organizations. The maximum margin of error was estimated to be 5.4 percent. More than 70 of the NPOs reported that they had received U.S. government funding. We requested and received some additional data analysis from the researchers who had conducted this survey. We examined the aggregate survey responses in detail and compared them to the responses we received to our semi-structured interview questions, which probed into similar aspects of financial access. We reviewed documentation and interviewed the officials responsible for the survey and determined that they had used a reasonable methodology to conduct the survey. We also interviewed several NPOs and NPO groups that were not part of our sample to obtain their views on banking access challenges affecting those delivering humanitarian assistance. For our second objective, to examine USAID implementing partners’ reporting on banking access challenges, we reviewed the fiscal year 2017 progress reports, including quarterly, semi-annual, and annual reports, that USAID provided for our selected projects to determine if banking access challenges the implementing partners told us about in the interviews had been reported in accordance with requirements in the individual award agreements. In total, we reviewed 26 reports from these partners. We also interviewed USAID agreement officers for the projects that stated they had experienced banking access challenges about implementing partners’ reporting of those banking access challenges. To obtain a broader context, we also reviewed over 1300 USAID implementing partner reports for fiscal years 2016 and 2017 from a wider selection of high-risk countries to determine the extent to which banking access challenges are being reported to USAID. To identify the relevant USAID progress reports, we searched USAID’s Development Experience Clearinghouse (DEC) for all periodic progress reports filed for fiscal years 2016 and 2017 by implementing partners working in selected 19 high-risk countries for instances of reporting on financial access challenges. Using these criteria, we identified 1,369 reports from fiscal years 2016-2017 from our selected 19 high-risk countries. The reports included annual reports, final contractor / grantee reports, final evaluation reports, and periodical and periodic reports (such as quarterly or semi-annual reports). The 1,369 reports constituted our universe of reports for which we used a textual analysis program to automatically scan and search for words and phrases that we identified in a lexicon of financial access terms. We developed this lexicon of financial access terms based on a review of relevant research, interviews with industry organizations, and a manual review of USAID progress reports. Using the lexicon, our textual analysis program identified all mentions of identified terms in the universe of reports. Next, two analysts independently reviewed the mentions identified through our textual analysis software program to determine whether the mentions actually constituted a reporting of a financial access challenge. The analysts then reconciled any differences in their reviews. For the purposes of this review, we considered a relevant financial access challenge to be any challenge encountered by the implementing partner in obtaining U.S. banking services, or in transferring funds from the United States to the destination country. We did not conduct a similar review of State partner reporting because we only had a sample of three State projects and one of the projects did not require direct written reporting to State. In addition, State does not have a central depository for partner reports that we could search, such as USAID’s DEC. For our third objective, to examine actions relevant U.S. agencies have taken to help address banking access challenges encountered by NPOs, we conducted interviews with and reviewed documentation from State, USAID, and Treasury on actions they have taken to help address these challenges. We also discussed U.S. agency involvement in efforts to help address these challenges with relevant organizations that represent NPOs. In addition, we reviewed relevant documentation published by the World Bank and the Financial Action Task Force on actions they have taken to help address banking access challenges encountered by NPOs, and interviewed relevant staff at the World Bank on efforts undertaken to address banking access challenges. To examine the extent to which State and USAID encountered banking access challenges in providing assistance in high-risk countries, we interviewed State officials responsible for conducting overseas transfers of funds for both State and USAID to determine if any banking access challenges exist that are specific to our case study countries as well as for U.S. assistance worldwide. We also interviewed State and USAID officials with responsibility for overseeing programs in our four selected countries to determine if they had seen any effects of banking access challenges. We focused primarily on these agencies’ ability to access banking services in the United States and on the transfer of funds to the ultimate destination. We conducted this performance audit from July 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The United States provides humanitarian assistance primarily through offices and bureaus within the Department of State (State) and the U.S. Agency for International Development (USAID). The primary humanitarian offices and bureau are: State’s Bureau of Population, Refugees, and Migration (PRM). PRM’s stated mission is to provide protection, ease suffering, and resolve the plight of persecuted and uprooted people around the world by providing life-sustaining assistance, working through multilateral systems to build global partnerships, promoting best practices in humanitarian response, and ensuring that humanitarian principles are integrated into U.S. foreign and national security policy. PRM does not operate refugee camps or give aid directly to refugees, but rather works with entities that operate these programs, including the United Nations, other international organizations, and nonprofit organizations. USAID’s Office of U.S. Foreign Disaster Assistance (OFDA). OFDA states that it helps countries prepare for, respond to, and recover from humanitarian crises. According to USAID, OFDA works with the international humanitarian community to give vulnerable populations resources to build resilience and strengthen their ability to respond to emergencies. Assistance includes provision of emergency relief supplies, establishing early warning systems, and training on search and rescue efforts, as well as programs to help victims of disasters recover. USAID’s Office of Food For Peace (FFP). FFP’s stated mission is to partner with others to reduce hunger and malnutrition, and help ensure that all individuals have adequate, safe, and nutritious food to support a healthy and productive life. According to FFP, it works to mobilize resources to predict, prevent, and respond to hunger overseas. FFP’s emergency activities include food assistance to help reduce suffering and support the early recovery of people affected by conflict and natural disaster emergencies. In addition to the individual named above, Mona Sehgal (Assistant Director), Michael Maslowski (Analyst in Charge), Ming Chen, Debbie Chung, Martin de Alteriis, Leia Dickerson, Mark Dowling, Erin Guinn- Villareal, Chris Keblitis, and Benjamin L. Sponholtz made key contributions to this report.", "summary": "Since 2012, the United States has provided approximately $36 billion in humanitarian assistance to save lives and alleviate human suffering. Much of this assistance is provided in areas plagued by conflict or other issues that increase the risk of financial crimes. The World Bank and others have reported that humanitarian assistance organizations face challenges in accessing banking services that could affect project implementation. GAO was asked to review the possible effects of decreased banking access for nonprofit organizations on the delivery of U.S. humanitarian assistance. In this report, GAO examines (1) the extent to which State and USAID partners experienced banking access challenges, (2) USAID partners' reporting on such challenges, and (3) actions U.S. agencies have taken to help address such challenges. GAO selected four high-risk countries—Syria, Somalia, Haiti, and Kenya—based on factors such as their inclusion in multiple financial risk-related indices, and selected a non-generalizable sample of 18 projects in those countries. GAO reviewed documentation and interviewed U.S. officials and the 18 partners for the selected projects. Implementing partners (partners) for 7 of 18 Department of State (State) and U.S. Agency for International Development (USAID) humanitarian assistance projects that GAO selected noted encountering banking access challenges, such as delays or denials in transferring funds overseas. Of those 7 projects, 1 partner told us that banking access challenges adversely affected its project and 2 additional partners told us that the challenges had the potential for adverse effects. Moreover, the majority of partners (15 out of 18) for the 18 projects noted experiencing banking access challenges on their global portfolio of projects over the previous 5 years. USAID's partners' written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that encountered challenges were USAID-funded. Of those 6 USAID projects, 5 partners told us that these challenges did not rise to the threshold of affecting project implementation that would necessitate reporting, and 1 did not report challenges although its project was adversely affected. Additionally, GAO's review of about 1,300 USAID partner reports found that the few instances where challenges were mentioned lacked sufficient detail for GAO to determine their type, severity, or origin. Without information on banking access challenges that pose potential risks to project implementation, USAID is not aware of the full extent of risks to achieving its objectives. The Department of the Treasury (Treasury) and State have taken various actions to help address banking access challenges encountered by nonprofit organizations (NPO), but USAID's efforts have been limited. Treasury's efforts have focused on engagement between NPOs and U.S. agencies, while State has issued guidance on the topic to its embassies and designated an office to focus on these issues. In contrast, USAID lacks a comparable office, and NPOs stated that it is difficult to find USAID staff to engage with on this topic. Further, GAO found that awareness of specific challenges was generally limited to USAID staff directly overseeing the project. Without communicating these challenges to relevant parties, USAID may not be aware of all risks to agency objectives and may not be able to effectively engage with external entities on efforts to address these challenges. GAO recommends that USAID should take steps to (1) collect information on banking access challenges experienced by USAID's partners and (2) communicate that information both within USAID and with external entities, such as other U.S. agencies and partners. USAID concurred with our recommendations.", "document_type": "gao"}
{"report": "GPRAMA significantly enhances GPRA, the centerpiece of a statutory framework that Congress put in place during the 1990s to help resolve longstanding performance and management problems in the federal government and provide greater accountability for results. Congress passed GPRAMA in 2010 to address a number of persistent federal performance challenges, including focusing attention on crosscutting issues and enhancing the use and usefulness of performance information. OMB and agencies are to establish various government-wide and agency-specific performance goals, in line with GPRAMA requirements or OMB guidance. These include the following: Cross-agency priority (CAP) goals: CAP goals are crosscutting and include outcome-oriented goals covering a limited number of policy areas as well as goals for management improvements needed across the government. OMB is to coordinate with agencies to establish CAP goals at least every 4 years. OMB is also required to coordinate with agencies to develop annual federal government performance plans to, among other things, define the level of performance to be achieved toward the CAP goals. Strategic objectives: A strategic objective is the outcome or impact the agency is intending to achieve through its various programs and initiatives. Agencies establish strategic objectives in their strategic plans and may update the objectives during the annual update of performance plans. Agency priority goals (APG): At the agency level, every 2 years, GPRAMA requires that the heads of certain agencies, in consultation with OMB, identify a subset of agency performance goals as APGs. These goals are to reflect the agencies’ highest priorities. They should be informed by the CAP goals as well as consultations with relevant congressional committees and other interested parties. In a schedule established by GPRAMA, OMB and agencies are to develop and publish new CAP goals, APGs, and strategic plans (with updated strategic objectives) in February 2018. GPRAMA and related OMB guidance require agencies to regularly assess their progress in achieving goals and objectives through performance reviews. Data-driven reviews: Agency leaders and managers are to use regular meetings, at least quarterly, to review data and drive progress toward key performance goals and other management-improvement priorities. For each APG, GPRAMA requires agency leaders to conduct reviews at least quarterly to assess progress toward the goal, determine the risk of the goal not being met, and develop strategies to improve performance. Similarly, the Director of OMB, with relevant parties, is to review progress toward each CAP goal. Strategic reviews: OMB guidance directs agency leaders to annually assess progress toward achieving each strategic objective using a broad range of evidence. GPRAMA establishes certain senior leadership positions and a council, as described below. Chief Operating Officer (COO): The deputy agency head, or equivalent, is designated COO, with overall responsibility for improving agency management and performance. Performance Improvement Officer (PIO): Agency heads are to designate a senior executive within the agency as the PIO. The PIO reports directly to the COO and assists the agency head and COO with various performance management activities. Goal leaders: Goal leaders are responsible for developing strategies to achieve goals, managing execution, and regularly reviewing performance. GPRAMA requires goal leaders for CAP goals and agency performance goals, including APGs. OMB guidance directs agencies to designate goal leaders for strategic objectives. Performance Improvement Council (PIC): The PIC is charged with assisting OMB to improve the performance of the federal government and achieve the CAP goals. The PIC is chaired by the Deputy Director for Management at OMB and includes agency PIOs from each of the 24 CFO Act agencies as well as other PIOs and individuals designated by the chair. Among its responsibilities, the PIC is to work to resolve government-wide or crosscutting performance issues, and facilitate the exchange among agencies of practices that have led to performance improvements within specific programs, agencies, or across agencies. GPRAMA includes several provisions related to providing the public and Congress with information, as described below. Performance.gov: GPRAMA calls for a single, government-wide performance website to communicate government-wide and agency performance information. Among other things, the website— implemented by OMB as Performance.gov—is to include (1) quarterly progress updates on CAP goals and APGs; (2) an inventory of all federal programs; and (3) agency strategic plans, annual performance plans, and annual performance reports. Reporting burden: GPRAMA establishes a process to reexamine the usefulness of certain existing congressional reporting requirements. Specifically, GPRAMA requires an annual review (including congressional consultation), based on OMB guidance, of agencies’ reporting requirements to Congress. Additionally, OMB is to include in the budget a list of plans and reports determined to be outdated or duplicative and may submit legislation to eliminate or consolidate such plans or reports. In early 2017, the administration announced several efforts that are intended to improve government performance. The 2018 Budget Blueprint states that the President’s Management Agenda will seek to improve the federal government’s effectiveness by using evidence-based approaches, balancing flexibility with accountability to better achieve results, improving mission support functions, and developing and monitoring critical performance measures. In addition, OMB issued several memoranda detailing the administration’s plans to improve government performance by reorganizing the government, reducing the federal workforce, and reducing federal agency burden. A number of these efforts, which are to leverage GPRAMA and our past work, have the potential to further progress in addressing key governance challenges. As part of reorganization efforts, OMB and agencies are developing government-wide and agency reform plans, respectively, that are to leverage various GPRAMA provisions. For example, an April 2017 memorandum states that OMB intends to monitor implementation of the reform plans using CAP goals, APGs, annual strategic reviews, and Performance.gov. The government-wide plan also is to include crosscutting reform proposals, such as merging agencies or programs that have similar missions. To that end, the memorandum states agencies should consider our reports, including our work on fragmentation, overlap, and duplication, as well as inspectors general reports. Many of the meaningful results that the federal government seeks to achieve, such as those related to ensuring public health, providing homeland security, and promoting economic development, require the coordinated efforts of more than one federal agency, level of government, or sector. For more than 2 decades, we have reported on agencies’ missed opportunities for improved collaboration through the effective implementation of GPRA and, more recently, GPRAMA. Our reports also have demonstrated that collaboration across agencies is critical to address issues of fragmentation, overlap, and duplication as well as many of the areas on our High-Risk List. Fragmentation, Overlap, and Duplication: Since 2011, our annual reports have identified 133 crosscutting areas that require the coordinated effort of more than one federal organization, level of government, or sector. For instance, for the area of federal grant awards, we found in January 2017 that the National Park Service (NPS), Fish and Wildlife Service, Food and Nutrition Service, and Centers for Disease Control and Prevention (CDC) had not established guidance and formal processes to ensure their grant-management staff review applications for potential duplication and overlap among grants in their agencies before awarding. We recommended that these agencies do so, and they agreed. As of August 2017, these agencies had taken several actions to address the recommendation. For example, the Department of the Interior (Interior) provided documentation showing that the Fish and Wildlife Service now requires discretionary grant applicants to provide a statement that addresses whether there is any overlap or duplication of proposed projects or activities to be funded by the grant. Fish and Wildlife also updated its guidance to grant awarding offices instructing them to perform a potential overlap and duplication review of all selected applicants prior to award. Our Action Tracker provides details on the status of actions from our annual reports. Within the 133 crosscutting areas, since 2011 we have identified 315 targeted actions where opportunities exist to better manage fragmentation, overlap, and duplication, including 29 new actions in our most recent report issued in April 2017. We found that the executive branch and Congress addressed 145 (46 percent) of the 315 actions. For example, in November 2014, we recommended that the U.S. Coast Guard and Consumer Product Safety Commission establish a formal approach to coordination (such as a memorandum of understanding) to facilitate information sharing; better leverage their resources; and address challenges, including those related to fragmentation and overlap that we identified. In response to this recommendation, the two agencies signed a formal policy document to govern their coordination in May 2015. This policy document outlined procedures for determining jurisdictional authority for recreational boat-associated equipment and marine safety items. Specifically, the procedures clarified that upon receiving notice of a possible defect, the agency receiving such notice shall determine whether the item properly falls within its jurisdiction, and if not, initiate discussions to determine the appropriate jurisdiction. These new procedures should help the agencies share information and leverage each other’s resources so they can better ensure that recreational boat-associated equipment and marine safety items are fully regulated. However, more work is needed on the remaining 170 actions (54 percent) that have not been fully addressed. For example, in July 2016, we reported that four federal agencies—the Departments of Defense, Education, Health and Human Services, and Justice—manage at least 10 efforts to collect data on sexual violence, which differ in target population, terminology, measurements, and methodology. We found that data collection efforts use 23 different terms to describe sexual violence. Data collection efforts also differed in how they categorized particular acts of sexual violence, the context in which data were collected, data sources, units of measurement, and time frames. We recommended that OMB convene an interagency forum to better manage fragmentation of efforts to collect sexual violence data. In commenting on that report, OMB stated it would consider implementing the action in the future but did not believe it was the most effective use of resources at that time, in part because the agencies were not far enough along in their research. In response, we stated that given the number of federal data collection efforts, the range of differences across them, and the potential for causing confusion, it would be beneficial for agencies to discuss these differences and determine whether they are, in fact, necessary. As of July 2017, OMB had not provided an update on the status of this recommendation. High-Risk List: Since the early 1990s, our high-risk program has focused attention on government operations with greater vulnerabilities to fraud, waste, abuse, and mismanagement or that are in need of transformation to address economy, efficiency, or effectiveness challenges. As of February 2017, there were 34 high-risk areas covering a wide range of issues including human capital management, modernizing the U.S. financial regulatory system, and ensuring the security of federal information systems and cyber critical infrastructure. Many of these high- risk areas require a coordinated response from more than one branch of government, agency, or sector. In the time between our 2015 and 2017 High-Risk Updates, many of these high-risk areas on our list demonstrated solid progress. During that period, 15 high-risk areas fully met at least one of the five criteria required for removal from the High-Risk List. In many cases, progress was possible through the joint efforts of Congress and leadership and staff in agencies. For example, Congress passed over a dozen laws following our 2015 High-Risk Update to help address high-risk issues. In addition, in 2017, we removed one high-risk area on managing terrorism-related information, because significant progress had been made to strengthen how intelligence on terrorism, homeland security, and law enforcement is shared among federal, state, local, tribal, international, and private sector partners. Despite this progress, continued oversight and attention is also warranted given the issue’s direct relevance to homeland security as well as the constant evolution of terrorist threats and changing technology. Our February 2017 High-Risk Update also highlighted a number of long- standing high-risk areas that require additional attention. We also added three new crosscutting areas to incorporate the management of federal programs that serve tribes and their members, the government’s environmental liabilities, and the 2020 decennial census. Based on our body of work on federal programs that serve tribes and their members, we concluded that federal agencies had (1) ineffectively administered Indian education and health care programs and (2) inefficiently fulfilled their responsibilities for managing the development of Indian energy resources. For example, we identified numerous challenges facing Interior’s Bureau of Indian Education (BIE) and Bureau of Indian Affairs, and the Department of Health and Human Services’ (HHS) Indian Health Service (IHS), in administering education and health care services. We concluded that these challenges put the health and safety of American Indians served by these programs at risk. In May 2017, we issued two additional reports on accountability for school construction and safety at schools funded by BIE. Although these agencies have taken some actions to address recommendations we made related to Indian programs, about 50 recommendations have yet to be fully resolved. We are monitoring federal efforts to address the unresolved recommendations. We also are reviewing IHS’s workforce, and tribal nations’ management and use of their energy resources. Many of the crosscutting areas highlighted by our annual reports on fragmentation, overlap, and duplication and designated as high-risk would benefit from enhanced collaboration among the federal agencies involved in them. GPRAMA establishes a framework aimed at taking a more crosscutting and integrated approach to focusing on results and improving government performance. Our survey results and past work demonstrate that agencies continue to face difficulties when working together on crosscutting issues, but also that implementing certain GPRAMA requirements can have a positive effect on collaboration. An item related to coordination in our survey of federal managers is statistically significantly lower in 2017, relative to our previous survey in 2013 and our initial survey in 1997. In 2017, an estimated 43 percent of managers agreed that they use information obtained from performance measurement to a great or very great extent when coordinating program efforts with internal or external organizations (compared to an estimated 50 percent in 2013 and an estimated 57 percent in 1997). Moreover, our past work has found that agencies face a variety of challenges when working across organizational boundaries to deliver programs and improve performance. For example, our work has found that interagency groups have, at times, encountered difficulty clarifying roles and responsibilities or developing shared outcomes and performance measures. In contrast, our past work demonstrates that implementing GPRAMA provisions can improve collaboration. For example, in May 2016, we found that OMB and the PIC updated the governance structure for CAP goals to include both agency-level and Executive Office of the President goal leaders and held regular, senior-level reviews on CAP goal progress. Moreover, CAP goal teams told us that the CAP goal designation increased leadership attention and improved interagency collaboration on their crosscutting issues. Furthermore, our prior work has found that priority goals and related data-driven reviews have also been used to help manage crosscutting issues and enhance collaboration. Various GPRAMA requirements are aimed at improving agencies’ coordination of efforts to address crosscutting issues. As with our 2013 survey, our 2017 survey continues to show that CAP goals, APGs, and related data-driven reviews—also called quarterly performance reviews (QPR)—are associated with reported higher levels of collaboration with internal and external stakeholders. For example, our 2017 survey data indicate that about half of federal managers (an estimated 54 percent) reported they were somewhat or very familiar with CAP goals. Among these individuals, those who viewed their programs as contributing to CAP goals to a great or very great extent (36 percent) were more likely to report collaborating outside their program to a great or very great extent to help achieve CAP goals (62 percent), as shown in figure 2. Our analysis shows a similar pattern exists for APGs and QPRs. Our past work also has highlighted ways in which OMB and agencies could better implement GPRAMA’s crosscutting provisions—many of which have been addressed. A continued focus on fully and effectively implementing these provisions will be important as OMB and agencies establish new CAP goals and APGs, and assess progress toward them through related QPRs. Cross-agency priority (CAP) goals: In May 2012 and June 2013, we found that OMB had not always identified relevant agencies and program activities as contributors to the initial set of CAP goals. OMB took actions in response to our recommendations to include relevant contributors. Our most recent review, in May 2016, found that all relevant contributors had been identified for a subsequent set of CAP goals. In that report, we also found that OMB and the PIC had improved implementation of the CAP goals, in part, by helping agencies build their capacity to contribute to implementing the goals. Appendix II summarizes our past recommendations related to GPRAMA and the actions agencies have taken to address them. Agency priority goals (APGs): In April 2013, we found that agencies did not fully explain the relationship between their APGs and crosscutting efforts. Identify contributors: Similar to OMB’s responsibilities with the CAP goals, agencies are to identify the various organizations and programs that contribute to each of their performance goals, including APGs. We found that agencies identified internal contributors for their APGs, but did not list external contributors in some cases. We recommended that the Director of OMB ensure that agencies adhere to OMB’s guidance for website updates by providing complete information about the organizations, program activities, regulations, tax expenditures, policies, and other activities—both within and external to the agency— that contribute to each APG. In response, in April 2015, OMB asked agencies to identify organizations, program activities, regulations, policies, tax expenditures, and other activities contributing to their 2014-2015 APGs. Based on an analysis of the final quarterly updates for those APGs, published in December 2015, we found that agencies made progress in identifying external organizations and programs for their APGs. Describe how agency goals contribute to CAP goals: Agencies generally did not identify how their APGs contributed to CAP goals. We recommended that OMB direct agencies to describe in their performance plans how the agency’s performance goals—including APGs—contribute to any of the CAP goals as required by GPRAMA. In response, in July 2013, OMB updated its guidance directing agencies to include a list of the CAP goals to which the agency contributes and explain the agency’s contribution to them in their strategic plans, performance plans, and performance reports. Data-driven reviews: For their data-driven reviews of agency priority goals, agencies are to include, as appropriate, relevant personnel within and outside the agency who contribute to the accomplishment of each goal. However, in February 2013, we found that most Performance Improvement Officers (PIO) we surveyed (16 of 24) indicated that there was little to no involvement in these reviews from external officials who contribute to achieving agency goals. We recommended that OMB and the PIC help agencies extend their QPRs to include, as relevant, representatives from outside organizations that contribute to achieving their APGs. OMB staff told us that they generally concurred with the recommendation, but believed it would not always be appropriate to regularly include external representatives in agencies’ data-driven reviews, which they considered to be internal management meetings. In a subsequent review, we found in July 2015 that PIOs at 21 of the 22 agencies we surveyed said that their data-driven reviews had a positive effect on collaboration among officials from different offices or programs within the agency. Despite the positive effects, most agency PIOs (17) indicated that there continued to be little to no involvement in the reviews from external officials who contribute to achieving agency goals. In May 2016, OMB and PIC staff reported that, in response to our earlier recommendation, they were working with agencies to identify examples where agencies included representatives from outside organizations in data-driven reviews, and to identify promising practices based on those experiences. PIC staff told us they would disseminate any promising practices identified through the PIC Internal Reviews Working Group and other venues. In August 2017, OMB staff told us they plan to hold a summit with agencies later in the year to discuss implementing various performance management requirements, which could include agencies highlighting experiences and promising practices related to involving external officials in their data-driven reviews. We continue to believe data- driven reviews should include any relevant contributors from outside organizations and will continue to monitor progress. Despite the important role priority goals and related reviews can play in addressing crosscutting issues and enhancing collaboration, OMB recently removed the priority status of the current sets of priority goals. According to OMB staff, removing the priority designation from CAP goals and APGs returned them to regular performance goals, which are not subject to quarterly data-driven reviews or updates on the results of those reviews on Performance.gov. In a June 2017 memorandum, OMB stated that CAP goals and APGs are intended to focus efforts toward achieving the priorities of current political leadership, and therefore reporting on the priority goals of the previous administration on Performance.gov was discontinued for the remainder of the period covered by the goals (through September 30, 2017, the end of fiscal year 2017). The memorandum further noted that agencies and teams working on those goals should continue working on the current goals where they align with the priorities of the current administration. Moreover, the memorandum states that agencies have flexibility in structuring their data-driven reviews, but they should continue such reviews focused on agency priorities. When asked about these actions, OMB staff told us that they believed they were working in line with the intentions of GPRAMA, which realigned the timing of goal setting with presidential terms, to better take into account changes in priorities. This is the first presidential transition since GPRAMA was enacted, and OMB staff told us they thought the act was unclear on how to handle priority goals during the changes in administrations and priorities. They stated that it was not practical to continue reporting on the priority goals of the prior administration as agencies worked to develop new strategic plans and priority goals for publication in February 2018. Hence, they told us OMB ended the current round of CAP goals and directed agencies to remove the priority designation from the APGs, returning them to regular performance goals. OMB staff further told us that although the guidance was published in a June 2017 memorandum, these decisions had been made and previously communicated to agencies during the transition in administrations. Therefore, reporting on the fiscal year 2014-2017 CAP goals, fiscal year 2016-2017 APGs, and related reviews stopped much earlier in the year, well before goal cycles were planned to be completed on September 30, 2017. OMB staff further stated that although the goals no longer had priority designations, work towards them largely continued in 2017. For example, one of the prior administration’s CAP goals was to modernize the federal permitting and review process for major infrastructure projects. OMB staff told us that they and agencies have continued many of the activities intended to achieve that goal, but they are no longer subject to quarterly data-driven reviews or updates on the results of these reviews on Performance.gov. Moreover, they expect most of this work will continue towards a new and refocused CAP goal on infrastructure permitting modernization. OMB staff reaffirmed to us their intentions to resume implementation of CAP goals, APGs, and related data-driven reviews when the new planning and reporting cycle begins in February 2018. This is in line with stated plans to leverage various GPRAMA provisions to track progress of proposed government-wide and agency-specific reforms, as outlined in OMB’s April 2017 memorandum on the reform plans. In addition, OMB’s July 2017 update to its guidance for implementing GPRAMA similarly focuses on continued implementation of the act. Additional aspects of GPRAMA implementation could similarly help improve the management of crosscutting issues. Strategic reviews: OMB’s 2012 guidance implementing GPRAMA established a process in which agencies, beginning in 2014, were to conduct leadership-driven, annual reviews of their progress toward achieving each strategic objective established in their strategic plans. As we found in July 2015, effectively implementing strategic reviews could help identify opportunities to reduce, eliminate, or better manage instances of fragmentation, overlap, and duplication. Under OMB’s guidance, agencies are to identify the various organizations, program activities, regulations, tax expenditures, policies, and other activities that contribute to each objective, both within and outside the agency. Where progress in achieving an objective is lagging, the reviews are intended to identify strategies for improvement, such as strengthening collaboration to better address crosscutting challenges, or using evidence to identify and implement more effective program designs. If successfully implemented in a way that is open, inclusive, and transparent—to Congress, delivery partners, and a full range of stakeholders—this approach could help decision makers assess the relative contributions of various programs to a given objective. Successful strategic reviews could also help decision makers identify and assess the interplay of public policy tools that are being used to ensure that those tools are effective and mutually reinforcing, and that results are being efficiently achieved. In July 2017, OMB released guidance which updated the status of the 2017 strategic reviews. Because agencies are currently developing new strategic goals and objectives, OMB stated that agencies may forego the reporting and categorization requirements for any current strategic objectives that an agency determines will be substantively different or no longer aligned with the current administration’s policy, legislative, regulatory, or budgetary priorities. In addition, OMB stated that while there will be no formal meetings between OMB and the agencies to discuss findings and related progress from the 2017 strategic reviews, it expects that agencies will continue to conduct strategic reviews or assess progress made toward strategic goals and objectives aligned with administration policy. Furthermore, OMB stated that during this transition year, updates of progress on agency strategic objectives will only be published in the agency’s annual performance report and will not be reported to Performance.gov. Full reporting through Performance.gov is to resume after new agency strategic plans are published in February 2018. Agencies are to include a progress update for strategic objectives as part of their progress update in their fiscal year 2017 annual performance reports. Agencies also must address next steps for performance improvement as part of their fiscal year 2019 annual performance plans. Program inventories: GPRAMA requires OMB to publish a list of all federal programs, along with related budget and performance information, on a central government-wide website. Such a list could help decision makers and the public fully understand what the federal government does, how it does it, and how well it is doing. An inventory of federal programs could also be a critical tool to help decision makers better identify and manage fragmentation, overlap, and duplication across the federal government. Agencies developed initial program inventories in May 2013, but since then have not updated or more fully implemented these inventories. In October 2014, we found several issues limited the completeness, comparability, and usefulness of the May 2013 program inventories. OMB and agencies did not take a systematic approach to developing comprehensive inventories. For example, OMB’s guidance in Circular No. A-11 presented five possible approaches agencies could take to define their programs and noted that agencies could use one or more of those approaches in doing so. We found that because the agencies used inconsistent approaches to define their programs, the comparability of programs was limited within agencies as well as government-wide. In addition, we found that the inventories had limited usefulness for decision making, as they did not consistently provide the program and related budget and performance information required by GPRAMA. Moreover, we found that agencies did not solicit feedback on their inventories from external stakeholders—which can include Congress, state and local governments, third party service providers, and the public. Doing so would have provided OMB and agencies an opportunity to ensure they were presenting useful information for stakeholder decision making. We concluded that the ability to tag and sort information about programs through a more dynamic, web-based presentation could make the inventory more useful. In October 2014, we made several recommendations to OMB to update relevant guidance to help develop a more coherent picture of all federal programs and to better ensure relevant information is useful for decision makers. For example, we recommended that OMB revise its guidance to direct agencies to consult with relevant congressional committees and stakeholders on their approach to defining and identifying programs when developing or updating their inventories. OMB staff generally agreed with these recommendations, but have not yet taken any actions to implement them. OMB’s guidance for the program inventory has largely remained unchanged since 2014, when OMB postponed further development of the program inventory and eliminated portions of the guidance. For example, the guidance no longer describes, or provides directions for agencies to meet, GPRAMA’s requirements for presenting related budget or performance information for each program. OMB decided to postpone implementing a planned May 2014 update to the program inventory in order to coordinate with the implementation of the public spending reporting required by the Digital Accountability and Transparency Act of 2014 (DATA Act). OMB subsequently stated that it would not begin implementing the program inventory until after the DATA Act was implemented in May 2017, despite requirements for regular updates to the program inventory to reflect current budget and performance information. The DATA Act is now being implemented, but OMB has postponed resuming the development of the program inventory. In July 2017, OMB staff told us that they are now considering how to align GPRAMA’s program inventory provisions with future implementation of the Program Management Improvement Accountability Act (PMIAA). This was reflected in OMB’s July 2017 update to its guidance, which states that OMB is working with agencies to determine the right strategy to merge the implementation of the DATA Act and PMIAA with GPRAMA’s program inventory requirements to the extent possible to avoid duplicating efforts. For example, PMIAA requires OMB to coordinate with agency Program Management Improvement Officers to conduct portfolio reviews of agency programs to assess the quality and effectiveness of program management. GPRAMA requires OMB to issue guidance for implementing the program inventory requirements, among other things. Moreover, federal internal control standards state that organizations should clearly define what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. As described above, OMB’s current guidance for the program inventory lacks some of those details—such as describing and providing direction to meet GPRAMA’s requirements for budget and performance information—in part because OMB is working with agencies to determine a strategy for implementation. Ensuring all GPRAMA requirements are covered and taking action on our past recommendations would help OMB improve its guidance to more fully implement the program inventory and improve its usefulness. To that end, in a report issued earlier this month, we identified a series of iterative steps that OMB could use in directing agencies to develop a useful inventory, as described in figure 3. A useful inventory would consist of all programs identified, information about each program, and the organizational structure of the programs. Our work showed that the principles and practices of information architecture—a discipline focused on organizing and structuring information—offer an approach for developing such an inventory to support a variety of uses, including increased transparency for federal programs. Such a systematic approach to planning, organizing, and developing the inventory that centers on maximizing the use and usefulness of information could help OMB ensure the inventory is implemented in line with GPRAMA requirements and meets the needs of decision makers and the public, among others. OMB’s guidance also lacks specific time frames, with associated milestones for resuming implementation of the program inventory requirements. As part of PMIAA’s requirements, OMB is to issue standards, policies, and guidelines for program and project management for agencies by December 2017. OMB staff told us that, within a year after that, they expect to issue further guidance on moving forward with resuming the program inventory. However, that general time frame was not reflected in the July 2017 update to OMB’s guidance. Providing specific time frames and associated milestones would bring the program inventory guidance in line with other portions of OMB’s guidance for implementing GPRAMA requirements, which contains a timeline of various performance planning and reporting requirements, including specific dates for meeting those requirements and related descriptions of required actions. For example, OMB’s July 2017 guidance identifies over 30 actions agencies should take between June 2017 and December 2018 to implement various GPRAMA provision. More specific time frames and milestones related to the program inventory requirements would help agencies prepare for resumed implementation by allowing them to know what actions they would be expected to take and by when. Moreover, publicly disclosing planned implementation time frames and associated milestones also would help ensure that external stakeholders are prepared to engage with agencies as they develop and update their program inventories. Effectively implementing various GPRAMA tools could help inform assessments of the performance of tax expenditures, which are reductions in tax liabilities that result from preferential provisions (figure 4). In fiscal year 2016, tax expenditures represented an estimated $1.4 trillion in forgone revenue, an amount greater than total discretionary spending that year. Despite the magnitude of these investments, our work has also shown that little has been done to determine how well specific tax expenditures work to achieve their stated purposes and how their benefits and costs compare to those of spending programs with similar goals. GPRAMA requires OMB to identify tax expenditures that contribute to the CAP goals. In addition, OMB guidance directs agencies to identify tax expenditures that contribute to their strategic objectives and APGs. However, our past work reviewing GPRAMA implementation found that OMB and agencies rarely identified tax expenditures as contributors to these goals. Fully implementing our recommendation to identify how tax expenditures contribute to various goals could help the federal government establish a process for evaluating the performance of tax expenditures. To that end, in May 2017, we provided the Director of OMB with three priority recommendations that require attention: Develop framework for reviewing performance: In June 1994, and again in September 2005, we recommended that OMB develop a framework for reviewing tax expenditure performance. We explained that the framework should (1) outline leadership responsibilities and coordination among agencies with related responsibilities, (2) set a review schedule, (3) identify review methods and ways to address the lack of credible tax expenditure performance information, and (4) identify resources needed for tax expenditure reviews. Since their initial efforts in 1997 and 1999 to outline a framework for evaluating tax expenditures and preliminary performance measures, OMB and the Department of the Treasury (Treasury) have ceased to make progress and retreated from setting a schedule for evaluating tax expenditures. Inventory tax expenditures: In October 2014, we found that OMB had not included tax expenditures in the federal program inventory, and therefore was missing an opportunity to increase the transparency of tax expenditures and the outcomes to which they contribute. We recommended that OMB should designate tax expenditures as a program type in relevant guidance, and develop, in coordination with the Secretary of the Treasury, a tax expenditure inventory that identifies each tax expenditure and provides a description of how the tax expenditure is defined, its purpose, and related budget and performance information. OMB staff said they neither agreed nor disagreed with these recommended actions. As noted earlier, OMB has not resumed updates to the program inventory. Therefore, OMB had not taken any actions in response to this recommendation, according to OMB staff as of July 2017. Identify contributions to agency goals: In July 2016, we found that agencies had made limited progress identifying tax expenditures’ contribution to agency goals, as directed by OMB guidance. As of January 2016, 7 of the 24 CFO Act agencies identified tax expenditures as contributing to their missions or goals. The 11 tax expenditure they identified—out of the 169 tax expenditures included in the President’s Budget for Fiscal Year 2017—represented approximately $31.9 billion of the $1.2 trillion in estimated forgone revenues for fiscal year 2015. (See figure 5.) To help address this issue, we recommended that OMB, in collaboration with the Department of the Treasury, work with agencies to identify which tax expenditures contribute to their agency goals, as appropriate. In particular, we recommended that they identify which specific tax expenditures contribute to specific strategic objectives and APGs. In July 2017, OMB staff said they had taken no actions to address the recommendation. Our July 2016 report also identified options for policymakers to further incorporate tax expenditures into federal budgeting processes, several of which options align with the recommendations discussed above. These options could help achieve various benefits, but we also reported that policymakers would need to consider challenges and tradeoffs in deciding whether or how to implement them. For example, one option was to require that all tax expenditures, or some subset of them, expire after a finite period. This option could result in greater oversight, requiring policymakers to explicitly decide whether to extend more or all tax expenditures. One consideration with this option is that it could lead to frequent changes in the tax code, such as from extended or expired tax expenditures, which can create uncertainty and make tax planning more difficult. Our previous work has shown that using performance information in decision making is essential to improving results. Performance information can be used across a range of management activities, such as setting priorities, allocating resources, or identifying problems to be addressed. However, our work continues to show that agencies can better use performance information in decision making, as shown in the example in the text box below. Department of Justice (DOJ) Could Better Analyze Performance Information to Reduce Backlog in Immigration Courts In June 2017, we found that the case backlog—cases pending from previous years that remain open at the start of a new fiscal year—at DOJ’s Executive Office for Immigration Review (EOIR) courts more than doubled from fiscal years 2006 through 2015. Stakeholders identified various factors that potentially contributed to the backlog, including continuances—temporary case adjournments until a different day or time. Our analysis of continuance records showed that the use of continuances increased by 23 percent from fiscal years 2006 through 2015. We found that EOIR collects continuance data but does not systematically assess them. Systematically analyzing the use of continuances could provide EOIR officials with valuable information about challenges the immigration courts may be experiencing, such as with operational issues like courtroom technology malfunctions, or areas that may merit additional guidance for immigration judges. Further, using this information to potentially address operational challenges could help that office meet its goals for completing cases in a timely manner. We recommended that the Director of EOIR systematically analyze immigration court continuance data to identify and address any operational challenges faced by courts or areas for additional guidance or training. EIOR agreed with this recommendation. EOIR stated that it supports conducting additional analysis of immigration court continuance data and recognizes that additional guidance or training regarding continuances may be beneficial to ensure that immigration judges use continuances appropriately in support of EOIR’s mission to adjudicate immigration cases in a careful and timely manner. We will monitor EOIR’s progress in taking these actions. Our 2017 survey of federal managers shows little change in their reported use of performance information. Using a set of survey questions, we previously developed an index that reflects the extent to which managers reported that their agencies used performance information for various management activities and decision making. The index suggests that government-wide use of performance information did not change significantly between 2013 and 2017, and it is statistically significantly lower relative to our 2007 survey, when we created the index. Figure 6 shows the questions included in the index and the government-wide results. In regard to individual survey items, in 2017 federal managers reported no changes or decreases in their use of performance information when compared to our last survey and when those survey items were first introduced. These results are generally consistent with our last few surveys. For example, in 2008 we found that there had been little change in federal managers’ reported use of performance information government-wide from 1997 to our 2007 survey. Citing those results, the Senate Committee on Homeland Security and Governmental Affairs report accompanying the bill that would become GPRAMA stated that agencies were not consistently using performance information to improve their management and results. The report further stated that provisions in GPRAMA are intended to address those findings and increase the use of performance information to improve performance and results. However, five items that were highlighted in our 2008 statement on the 2007 survey results generally show no improvement when compared to the 2017 results, as shown in figure 7. The one exception is for managers’ reported use of performance information to refine program performance measures. While this item was statistically significantly higher in 2013 relative to 2007—an estimated 46 percent to 53 percent—the 2017 result (43 percent) is a statistically significant decrease relative to 2013 and is not statistically different from the 2007 results. Another item, the use of performance information to adopt new program approaches or change work processes, also was statistically significantly lower in 2017 (47 percent) when compared to 2007 and 2013 (53 and 54 percent, respectively). This is of particular concern as agencies are developing their reform plans. Moreover, when compared to our 1997 survey, the 2017 results show four of the five items are statistically significantly lower, and the remaining item—allocating resources—has not changed. Similarly, we found there was no improvement in 2017 for more recent survey items on other uses of performance information compared to the years in which they were introduced, as shown in figure 8. Although one item, on the use of performance information to develop program strategy, was statistically significantly higher in 2013 relative to 2007 (an estimated 58 and 51 percent, respectively), the 2017 result (53 percent) does not represent a statistically significant change from either of those years. Another item, on the use of performance information to streamline programs to reduce duplicative activities, is statistically significantly lower relative to 2013, when it was introduced (from 44 to 33 percent in 2017). This is especially concerning because streamlining and reducing duplication are to be key parts of agencies’ reform plans. There is one area in the survey where we saw improvement: an estimated 46 percent of managers agreed to a great or very great extent that employees who report to them pay attention to their agency’s use of performance information in management decision making. That is statistically significantly higher relative to 2013 (40 percent), as well as when compared to when the item was introduced in 2007 (37 percent). For a new and related item in the 2017 survey that asked managers the amount of attention their employees pay to the use of performance information in decision making when compared to 3 years ago, we found an estimated 48 percent reported that employees pay about the same 33 percent reported that employees pay somewhat or a great deal more attention. In September 2005, we identified five practices that agencies can apply to enhance the use of performance information in their decision making and improve results: demonstrating management commitment; communicating performance information frequently and efficiently; improving the usefulness of performance information, such as by ensuring the accessibility of the information; developing the capacity to use performance information; and aligning agency-wide goals, objectives, and measures. Many of the requirements put in place by GPRAMA reinforce the importance of these practices. Our 2017 survey of federal managers includes a number of items related to these practices. However, the 2017 results suggest that managers have not effectively adopted them. In the following sections, we examine several of the practices to enhance the use of performance information and their related survey items further. In doing so, we also highlight a subset of six survey items related to these practices that, while separate from those in our use of performance information index, we found in September 2014 to have a statistically significant and positive relationship with it. The commitment of agency leaders to results-oriented management is critical to increased use of performance information for policy and program decisions. GPRAMA requires top leadership involvement in performance management, including leading data-driven performance reviews. However, we have previously reported that improvements are needed to strengthen leadership’s commitment to use performance information, as discussed in the text box below. Department of Defense Should Strengthen Leadership Responsibilities for Using Performance Information In January 2005, we designated the Department of Defense’s (DOD) approach to business transformation as high-risk because DOD had not taken the necessary steps to achieve and sustain business reform on a broad, strategic, department-wide, and integrated basis. In the February 2017 update to our High-Risk List, we found that DOD had taken some positive steps to improve its business transformation efforts.continuing to hold business function leaders accountable for diagnosing performance problems and identifying strategies for improvement, and leading regular DOD performance reviews regarding transformation goals and associated metrics and ensuring that business function leaders attend these reviews to facilitate problem solving. In July 2017, DOD officials told us that the department’s performance reviews have been put on hold until after the new Agency Strategic Plan is issued. We will review DOD’s updated Agency Strategic Plan when it is issued (expected in February 2018, as required by GPRAMA) to see if it addresses continuing to hold business function leaders accountable for diagnosing performance problems and identifying strategies for improvement. We will continue to monitor the status of these actions. GAO, High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.: Feb. 15, 2017). Results from our 2017 survey show no statistically significant difference relative to 2013 in managers’ perceptions of leaders’ and supervisors’ attention and commitment to the use of performance information. (See figure 9.) Three items are statistically significantly different from the years when they were introduced. Two items increased between 1997 and 2017: changes by management to my program(s) are based on results-oriented information (from an estimated 16 to 25 percent), and the individual I report to periodically reviews with me the outcomes of my program(s) (from 42 to 54 percent). For the third item, top leadership demonstrates a strong commitment to using performance information to guide decision making, results decreased from 49 percent in 2007 to 42 percent in 2017. New items in the 2017 survey show some improvement in management commitment to the use of performance information in decision making. An estimated 36 percent of federal managers reported that, when compared to 3 years ago, the individual they report to pays somewhat or a great deal more attention to the use of performance information in decision making, while 46 percent said they pay about the same amount of attention. Additionally, an estimated 21 percent of federal managers said that, when compared to 3 years ago, the head of their agency pays somewhat or a great deal more attention to the use of performance information in decision making, while 33 percent said they pay about the same amount of attention. Communicating performance information frequently and effectively throughout an agency can help to achieve the agency’s goals. GPRAMA includes requirements for communicating performance information, such as reporting progress updates for APGs at least quarterly. However, our prior work has found that some agencies could continue to improve in the communication of performance information, as illustrated by the example in the text box below. Department of Education (Education) Could Better Share Effective Practices across States in Grant Program Education awards 21st Century Community Learning Centers grants to states, which in turn competitively award funds to local organizations that use them to offer academic enrichment and other activities to improve students’ academic and behavioral outcomes. In April 2017, we found that states are experiencing substantial difficulty in sustaining their programs after 21st Century funding ends. We further found that Education was missing opportunities in its monitoring efforts to collect information on states’ strategies and practices for program sustainability—information that could be useful for sharing promising practices across states. We recommended that Education use the information it collects from its monitoring visits and ongoing interactions with states to share effective practices across states for sustaining their 21st Century programs once program funding ends. Education neither agreed nor disagreed with the recommendation but outlined steps it is taking to address it. We will continue to monitor progress on the implementation of this recommendation. There is no difference for two survey items on federal managers communicating performance information relative to 2013 or since those items were introduced in 2007. In 2017, we estimate that 44 percent of federal managers agreed to a great or very great extent that agency managers at their level effectively communicate performance information on a routine basis. In addition, 34 percent agreed to a great or very great extent that managers at their level use performance information to share effective program approaches with others. Our 2017 survey data also indicate that agencies may not be effectively communicating to their employees about contributions to CAP goals or progress toward achieving APGs. Of the estimated 54 percent of federal managers who indicated they were familiar with CAP goals, 23 percent reported that their agency has communicated to its employees on those goals to a great or very great extent. Of the 74 percent of federal managers who indicated familiarity with APGs, 44 percent reported that their agency has communicated on progress toward achieving those goals to great or very great extent. Our prior work has shown that agencies should consider users’ differing needs—for accessibility, accuracy, completeness, consistency, ease of use, timeliness, and validity, among others things—to ensure that performance information will be both useful and used. GPRAMA introduced several requirements that could help to address aspects of usefulness, such as requiring agencies to disclose more information about the accuracy and validity of their performance data and actions to address limitations to the data. However, agencies face challenges in ensuring their performance information is useful, with one instance from our past work described in the text box below. The Environmental Protection Agency (EPA) Could Improve Usefulness of Information in Planned Grantee Portal EPA monitors performance reports and program-specific data from grantees to ensure that grants achieve environmental and other program results. However, in July 2016, we found that EPA’s 2014 internal analysis of its grants management business processes identified improvements that, if implemented into EPA’s planned web-based portal, could improve the accessibility and usefulness of information in grantee performance reports for EPA, grantees, and other users. We recommended, among other actions, that EPA incorporate expanded search capability features, such as keyword searches, into its proposed web- based portal for collecting and accessing performance reports to improve their accessibility. EPA agreed with our recommendation but stated that it is a long- term initiative, subject to the agency’s budget process and replacement of its existing grants management system. As of May 2017, EPA officials said that they have not begun work on the web-based portal project, which is subject to the availability of funds. Federal managers generally responded similarly in 2017 on a variety of survey items related to usefulness, relative to earlier surveys. On a broadly worded item, less than half of managers agreed to a great or very great extent that agency managers at their level take steps to ensure that performance information is useful and appropriate. At an estimated 43 percent in 2017, this represents no statistically significant change compared to our last surveys in 2013 or 2007, when the item was introduced. Responses to four survey items indicate no changes in hindrances related to the usefulness of performance information. There is no statistically significant change in managers reporting hindrances compared to 1997 or 2013, as shown in figure 10. In addition, there was a statistically significant increase when compared to 2013 on only one of six items about managers’ views on the usefulness of performance information, as shown in figure 11. As the figure shows, approximately one-third to half of managers agreed to a great or very great extent on each item related to the usefulness of performance information. Although less than half of managers reported having sufficient information on validity of performance data used to make decisions, this represents a statistically significant increase to an estimated 42 percent in 2017 compared to 36 percent in 2013, and from 28 percent in 2000, when this item was introduced. This is a notable improvement because our September 2014 report found that the strongest driver of the use of performance information was whether federal managers had confidence in its validity. Our analysis suggests that easy access to performance information is related to the effective communication of performance information. Of the estimated 49 percent of federal managers in 2017 who agreed to a great or very great extent that performance information is easily accessible to managers at their level, 63 percent also agreed that agency managers at their level effectively communicate performance information on a routine basis to a great or very great extent. Conversely, of the 20 percent that agreed to a small or no extent that performance information is easily accessible to managers at their level, 12 percent also agreed that agency managers at their level effectively communicate performance information on a routine basis to a great or very great extent. Our prior work has shown that building capacity—including analytical tools and staff expertise—is critical to using performance information in a meaningful manner. GPRAMA lays out specific requirements that reinforce the importance of staff capacity to use performance information. GPRAMA directed the Office of Personnel Management (OPM) to take certain actions to support agency hiring and training of performance management staff. Specifically, by January 2012, OPM was to identify skills and competencies needed by government personnel for setting goals, evaluating programs, and analyzing and using performance information for improving government efficiency and effectiveness. By January 2013, OPM was to incorporate these skills and competencies into relevant position classifications and to work with each agency to incorporate the identified skills into employee training. In April 2013, we found that OPM had completed its work on the first two responsibilities and taken steps to work with agencies to incorporate performance management staff competencies into training. However, OPM did not assess competency gaps among agency performance management staff to inform its work. Without this information, OPM, working with the PIC, was not well-positioned to focus on the most- needed resources and help other agencies use them. We recommended that the Director of OPM, in coordination with the PIC and the Chief Learning Officer Council, work with agencies to take the following three actions: 1. Identify competency areas needing improvement within agencies. 2. Identify agency training that focuses on needed performance management competencies. 3. Share information about available agency training on competency areas needing improvement. In July 2017, PIC staff stated they have not focused on identifying competency areas because the competencies do not resonate strongly with the performance community. Instead, staff said they identified a need for introductory training on performance management, which they have developed and piloted. They said that they are not sure when they will implement the training, since the PIC is reviewing priorities with its new executive director. We continue to believe that identifying the competency areas would be useful, and will monitor the PIC’s efforts to identify and share training. The need for performance management training is further highlighted by our survey results. Our 2017 survey shows no statistically significant change in managers’ responses about the availability of training on various performance management activities relative to 2013, including the use of performance information to make decisions. However, the response to each of the six questions related to specific training is statistically significantly higher relative to the year in which it was introduced, as shown in figure 12. Similarly, in 2017 there was no statistically significant change on four survey items related to agencies’ analysis and evaluation tools and staff’s skills and competencies when compared to 2013 or when these items were introduced. We estimate that in 2017 29 percent of managers agreed to a great or very great extent that their agencies were investing in resources to improve the agencies’ capacity to use performance information; 28 percent of managers agreed to a great or very great extent that their agencies were investing the resources needed to ensure that performance data are of sufficient quality; 33 percent of managers reported that they agreed to a great or very great extent that their agencies have sufficient analytical tools for managers at their levels to collect, analyze, and use performance information; and 33 percent of managers reported that they agree to a great or very great extent that the programs they are involved with have sufficient staff with the knowledge and skills needed to analyze performance information. Performance reviews can serve as a strategy to bring leadership and other responsible parties together to review performance information and identify important opportunities to drive performance improvements. Our prior work has examined how different types of performance reviews—strategic reviews, data-driven reviews, and retrospective regulatory reviews—can contribute to agencies assessing progress toward desired results. Strategic reviews: As previously mentioned, in implementing GPRAMA, OMB established a review process in which agencies are to annually assess their progress in achieving each strategic objective in their strategic plans, known as strategic reviews. Given the long-term and complex nature of many outcomes, the strategic review should be informed by a variety of evidence regarding the implementation of strategies and their effectiveness in achieving outcomes. OMB’s guidance states that the strategic review process should consider multiple perspectives and sources of evidence to understand the progress made on each strategic objective. It further states that the results of these reviews should inform many of the decision-making processes at the agency, as well as decision making by the agency’s stakeholders, in areas such as long-term strategy, budget formulation, and risk management. In 2017, agencies are completing their fourth round of these reviews. Our prior work has identified ways in which agencies can effectively conduct these reviews and leverage the results that come from them. In July 2015, we identified seven practices federal agencies can employ to facilitate effective strategic reviews. (See sidebar.) In addition, earlier this month we reported on selected agencies’ experiences in implementing these reviews. Specifically, we found that (1) strategic reviews helped direct leadership attention to progress on strategic objectives, (2) agencies used existing management and performance processes to conduct the reviews, and (3) agencies refined their reviews by capturing lessons learned. Data-driven reviews: GPRAMA requires agencies to review progress toward APGs at least once a quarter. The Senate Committee on Homeland Security and Governmental Affairs report accompanying the bill that would become GPRAMA stated that this approach is aimed at increasing the use of performance information to improve performance and results. In February 2013, we identified nine leading practices to promote successful data-driven performance reviews in the federal government. (See sidebar.) In July 2015, we found that most of the 24 CFO Act agencies were conducting their reviews in line with GPRAMA requirements and our leading practices. Moreover, agencies reported that their data-driven performance reviews had positive effects on progress toward agency goals, collaboration between agency officials, the ability to hold officials accountable for progress, and efforts to improve the efficiency of operations. Our 2017 survey shows that federal managers remain largely unfamiliar with their agency’s data-driven performance reviews, also known as quarterly performance reviews (QPRs). An estimated 35 percent of managers reported familiarity with their agency’s QPRs. Survey results show that a greater percentage of Senior Executive Service (SES) managers than non-SES managers reported that they were familiar with QPRs. Approximately 50 percent of SES managers reported being somewhat or very familiar with QPRs; 34 percent of non-SES reported the same. However, for the estimated 35 percent of managers who reported familiarity with QPRs, the more they viewed their programs being subject to a QPR, the more likely they were to report their agency’s QPRs were driving results and conducted in line with our leading practices. Figure 13 shows several illustrative examples of these survey items. For example, of the estimated 48 percent of federal managers who reported their programs being subject to QPRs to a great or very great extent, 83 percent also reported their agencies use QPRs to identify problems or opportunities associated with agency performance goals. Conversely, for the 24 percent of managers who reported their programs were subject to QPRs to a small or no extent, 22 percent also reported the reviews were used for these purposes to a great or very great extent. Being subject to a QPR is also positively related to viewing QPRs as having led to similar meetings at lower levels. An estimated 62 percent of federal managers who reported being subject to QPRs to a great or very great extent also reported their agencies have similar meetings at lower levels to a great or very great extent. An estimated 16 percent of federal managers subject to QPRs to a small or no extent reported the same. Despite the reported benefits of and results achieved through QPRs, as found by our past work and survey data, these reviews are not necessarily widespread. GPRAMA requires agencies to conduct QPRs for APGs, which represent a small subset of goals—generally 2 to 8 priority goals at each designated agency, with approximately 100 total government-wide. Moreover, these required reviews are at the department (or major independent agency) level. These reasons may explain why most managers reported they were not familiar with the reviews. As was described previously, our 2017 survey data show that the reported use of performance information in decision making generally has not improved and in some cases is lower than it was 20 years ago. Survey data also show that managers generally have not reported increases in their employment of practices that further promote the use of performance information in decision making. This suggests that agencies could increase the use of performance information in decision making and the likelihood of achieving desired results by going beyond the specific GPRAMA requirements and expanding their use of data-driven performance reviews—in line with leading practices—to more broadly cover other agency-wide performance goals, as well as goals at lower levels within the agency. For example, such reviews at the program level could help inform the previously mentioned portfolio reviews required by the Program Management Improvement Accountability Act (PMIAA). We have already suggested expanding reviews to other performance goals. Our management agenda for the presidential and congressional transition includes a key action to expand the use of data-driven performance reviews to assess progress toward meeting agency performance goals. Our prior work has stated that although GPRAMA’s requirements apply at the agency-wide level, they can also serve as leading practices at other organizational levels, such as component agencies, offices, programs, and projects. In addition, federal internal control standards call for the design of appropriate control activities, such as top-level reviews of actual performance and reviews by management at the functional or activity level. The standards also recommend that management design control activities at the appropriate levels in the organizational structure. The July 2017 update to OMB’s guidance states that agency leaders, including various chief officer positions, are to conduct frequent data- driven reviews to drive improvements on various management functions. For example, the agency Chief Human Capital Officer is to conduct quarterly data-driven reviews (known as HRStat) to monitor the progress of human capital goals and measures contained in the human capital operating plan. Beyond these management areas, OMB’s guidance also states that agencies may expand quarterly progress reviews beyond APGs to include other goals and priorities. However, OMB’s guidance does not identify practices for agencies to expand the use of these reviews to other goals, such as other agency-wide performance goals or those at lower levels within the agency. As mentioned previously, one of the responsibilities of the Performance Improvement Council (PIC) is to facilitate the exchange among agencies of practices that have led to performance improvements within specific programs, agencies, or across agencies. By working with the PIC to identify and share among agencies practices to expand the use of data- driven reviews, OMB could help agencies increase the use of performance information in decision making and achieve results. Retrospective regulatory reviews: In retrospective reviews, agencies evaluate how existing regulations are working in practice and whether they are achieving expected outcomes. GPRAMA requires agencies to identify and assess how their various program activities and other activities, including regulations, contribute to APGs. However, in April 2014, we found that agencies reported mixed experiences linking retrospective analyses to APGs. We recommended that OMB strengthen these reviews by issuing guidance for agencies to take actions to ensure that contributions made by regulations toward achieving APGs are properly considered, and improve how retrospective regulatory reviews can be used to help inform assessments of progress toward these APGs. OMB staff agreed with this recommendation and stated that the agency was working on strategies to help facilitate agencies’ ability to use retrospective reviews to inform APGs. To that end, in April 2017, OMB issued guidance to agencies that, among other things, emphasized the importance of performance measures related to evaluating and improving the net benefits of their respective regulatory programs. OMB included explicit references to section 6 of Executive Order 13563, which directed agencies’ efforts to conduct retrospective regulatory reviews. Specifically, the updated guidance encourages agencies to establish and report “meaningful performance indicators and goals for the purpose of evaluating and improving the net benefits of their respective regulatory programs.” The guidance further states that agencies’ efforts to improve such net benefits may be conducted as part of developing agency strategic and performance plans and priority goals. In July 2017, OMB confirmed that the updated guidance was issued, in part, to address our April 2014 recommendation. For several years, OMB has encouraged agencies to expand their use of evidence—performance measures, program evaluation results, and other relevant data analytics and research studies—in budget, management, and policy decisions with the goal of improving government effectiveness. In particular, OMB has encouraged agencies to strengthen their program evaluations—systematic studies that use research methods to address specific questions about program performance. Evaluation is closely related to performance measurement and reporting. Evaluations can be designed to better isolate the causal impact of programs from other external economic or environmental conditions in order to assess a program’s effectiveness. Thus, an evaluation study can provide a valuable supplement to ongoing performance reporting by measuring results that are too difficult or expensive to assess annually, explaining the reasons why performance goals were not met, or assessing whether one approach is more effective than another. Despite the valuable insights and information that program evaluations can provide, we continue to find that most federal managers lack access to or awareness of such studies. Our 2017 survey shows that an estimated 40 percent of managers reported that an evaluation had been completed within the past 5 years of any program, operation, or project in which they were involved—comparable to the results in our 2013 survey, when questions about program evaluations were added. In recent years, OMB has encouraged agencies to explore evidence-based tools to strengthen agency and grantee evaluation capacity, consider the effectiveness of their programs, and foster innovation rooted in research and rigorous evaluation. During the past 2 years, we examined several of those tools, as described below. Pay for success: Also known as social impact bonds, pay for success is a contracting mechanism under which investors provide the capital the government uses to provide a social service. The government specifies performance outcomes in pay for success contracts and generally includes a requirement that a program’s impact be independently evaluated. The evaluators also are to regularly review performance data, while those managing and investing in a project focus on performance and accountability, as shown in the figure 14. In September 2015, we found that the federal government’s involvement in pay for success had been limited. In addition, a formal mechanism for federal agencies to collaborate on pay for success did not exist. We concluded that, given the evolving nature of pay for success, a mechanism for federal agencies to collaborate would increase access to leading practices. We therefore recommended that OMB establish a formal means for federal agencies to collaborate on pay for success. OMB concurred and, in February 2016, announced that it had developed the Pay for Success Interagency Learning Network with representatives from 10 federal agencies to share lessons, hone policy, and strengthen implementation. Tiered evidence grants: Tiered evidence grants seek to incorporate evidence of effectiveness into grant making. Federal agencies establish tiers of grant funding based on the level of evidence grantees provide on their approaches to deliver social, educational, health, or other services. (See figure 15.) Smaller awards are used to test new and innovative approaches, while larger awards are used to scale up approaches that have strong evidence of effectiveness. This creates incentives for grantees to use approaches supported by evidence and helps them build the capacity to conduct evaluations. In September 2016, we found that interagency collaboration had helped federal agencies that administer tiered evidence grants address challenges and share lessons learned. At that time, such collaborative efforts relied on informal networks. We recommended that OMB establish a formal means for agencies to collaborate on tiered evidence grants. OMB had no comment on the recommendation. In July 2017, OMB staff told us that they had established an interagency working group and other mechanisms to facilitate collaboration and disseminate information on tiered evidence grants. Performance partnerships: Performance partnerships allow federal agencies to provide grant recipients flexibility in how they use funding across two or more programs along with additional flexibilities. In exchange, the recipient commits to improve and assess progress toward agreed-upon outcomes. Figure 16 provides an overview of the performance partnership model. In April 2017, we examined two performance partnership initiatives authorized by Congress: the Environmental Protection Agency’s Performance Partnership Grants and the Performance Partnership Pilots for Disconnected Youth, which allows funding from multiple programs across multiple agencies to be combined into pilot programs serving disconnected youth. For the Performance Partnership Pilots for Disconnected Youth, we found that the agencies involved in the initiative had not fully identified the key financial and staff resources each agency would need to contribute over the lifetime of the initiative in line with leading practices for interagency collaboration. This was because agencies primarily had been focused on meeting near-term needs to support design and implementation. We also found that agencies had not developed criteria to help determine whether, how, and when to implement the flexibilities tested by the pilots in a broader context. (This is known as scalability.) Officials involved in the pilots told us it was too early in pilot implementation to determine such criteria. However, by not identifying these criteria while designing the pilots, they were risking not collecting needed data during pilot implementation. We recommended that OMB coordinate with federal agencies to identify (1) agency resource contributions needed for the lifetime of the pilots and (2) criteria and related data for assessing scalability. OMB neither agreed nor disagreed with these recommendations. We continue to monitor progress on these recommendations. In 2003, we identified nine key practices for effective performance management that collectively create a “line of sight” between individual performance and organizational success. (See sidebar on next page.) Our recent work and the results of our 2017 survey of federal managers highlight areas where agencies have made progress but could take additional action to better reflect several of these practices, thereby better instilling results-oriented cultures. Align individual performance expectations with organizational goals: Our 2003 report found that high-performing organizations use their performance management systems to help individuals see the connection between their daily activities and organizational goals. The executive branch has taken several steps to link individual and organizational results. For example, in October 2000, OPM issued guidance to link SES performance expectations with GPRA-required goals. In January 2012, OPM and OMB released a government-wide SES performance appraisal system that provided agencies with a standard framework to manage the performance of SES members. However, our work continues to identify areas for improvement. Goal leaders and deputy goal leaders are responsible for achieving APGs, but our July 2014 review found that the performance plans for a sample of goal and deputy goal leaders generally did not link their individual performance and the broader goal. We recommended that OMB ensure that those plans demonstrate a clear connection with APGs. OMB staff generally agreed with our recommendation. In July 2017, OMB staff stated that components of both OMB and OPM guidance support accountability for agency priority goals. Despite this, we continue to believe that ensuring an explicit connection in performance plans to APGs will improve accountability, and that additional action is needed to do so. In May 2016, we found that the Federal Emergency Management Agency (FEMA) had not aligned Federal Disaster Recovery Coordinators’ performance expectations with its organizational goals for implementing the National Disaster Recovery Framework. We concluded that without this linkage, FEMA could not evaluate how effectively the coordinators performed in implementing the framework. We recommended that FEMA align performance expectations consistent with leading practices. The Department of Homeland Security concurred with our recommendation. In July 2017, FEMA stated that it is preparing the Field Leader Manual, which will define the core competencies and duties of coordinators. We will continue to monitor FEMA’s actions to implement this recommendation. Our 2017 survey also shows that this linkage could be improved for other federal employees. An estimated 58 percent of federal managers reported using performance information to a great or very great extent in setting expectations for employees they manage or supervise. The 2017 responses do not represent a statistically significant change when compared to our last survey in 2013 (62 percent) or to 1997 (61 percent), the year this survey item was introduced. Address organizational priorities: Our prior work showed that, by requiring and tracking follow-up actions on performance gaps, high- performing organizations underscore the importance of holding individuals accountable for making progress on their priorities. Our past and 2017 surveys have identified differences in responses between SES and non-SES managers reporting being held accountable for results. For example, in 2017, our survey results indicate that there was a statistically significant difference between SES and non-SES managers reporting to a great or very great extent that they were held accountable for results of the programs for which they are responsible. However, our 2017 survey shows no change compared to our last survey in either SES or non-SES managers reporting they were held accountable for results. There are statistically significant increases when compared to 1997, when these survey items were introduced. For example, an estimated 79 percent of SES managers and 64 percent of non-SES managers reported being held accountable to a great or very great extent for results of the programs for which they are responsible in 2017. This does not represent a statistically significant change from our 2013 survey (80 percent and 67 percent, respectively), but it is statistically significantly higher than the 62 percent of SES managers and 54 percent of non-SES managers in 1997. (See figure 17.) Similarly, as shown in figure 18, an estimated 71 percent of SES managers reported being held accountable to a great or very great extent for accomplishing agency strategic goals in 2017. This represents no statistical change since 2013 (73 percent), but it is a statistically significant increase compared to when this item was introduced in 2003 (61 percent). Additionally, as figure 18 shows, a gap between being held accountable for strategic goals and having the decision-making authority needed to help accomplish those goals has nearly closed, due to an increase in the latter survey item. The estimated 69 percent of SES managers who reported having such authority to a great or very great extent in 2017 is a statistically significant increase relative to both 2013 (61 percent) and 1997 (51 percent). As noted earlier, GPRAMA requires goal leaders for CAP goals and APGs. Our past work has generally found that they are in place. GPRAMA also requires agencies to identify an agency official responsible for resolving major management challenges, which can help ensure accountability. (See sidebar.) However, in June 2016 we found that 17 of the 24 CFO Act agencies had not identified an agency official responsible for resolving each of their challenges, partly because OMB guidance was not clear that major management challenges should be identified in agency performance plans. We recommended that the 17 agencies identify such officials in their performance plans, and that OMB clarify its guidance. OMB revised its guidance accordingly in July 2016, and, as of July 2017, 7 of the 17 agencies had identified officials responsible for resolving major management challenges. Link pay to individual and organizational performance: High- performing organizations seek to create pay, incentive, and reward systems that clearly link employee knowledge, skills, and contributions to organizational results. Our work has found that agencies have made progress in this area. For example, in July 2013, we found that the Securities and Exchange Commission (SEC) lacked mechanisms to monitor how supervisors used its performance management system to recognize and reward performance. To help enhance the credibility of SEC’s performance management system, we recommended that it create mechanisms to monitor how supervisors use the performance management system. In a subsequent (December 2016) report, we found that, in response to our recommendation, SEC began monitoring how supervisors provide feedback, recognize and reward staff, and address poor performance. However, federal managers generally reported no change on three items related to recognizing and rewarding employee performance since our last survey in 2013 (figure 19). One of those items—managers agreeing to a great or very great extent that employees in their agency receive positive recognition for helping the agency to accomplish its strategic goals—had a statistically significant increase between 1997 and 2017 (from an estimated 26 percent to 46 percent). Make meaningful distinctions in performance: Effective performance management requires the organization’s leadership to meaningfully distinguish between acceptable and outstanding performance of individuals and to appropriately reward those who perform at the highest level. For example, in January 2015, we found disparities in performance ratings for SES among agencies. Across the 24 CFO Act agencies, the percent of SES rated at the highest level ranged from about 22 percent to 95 percent in fiscal year 2013. To help address these disparities, we recommended that the Director of OPM consider the need to refine the performance certifications guidelines addressing distinctions in performance. To address this recommendation, OPM informed us, in June 2015, that it had convened a cross-agency working group that developed a standard template for agencies to complete and post on a website to more transparently justify their SES ratings distributions. In May 2016, we found that about 74 percent of non-SES employees under a five-level appraisal system—the most commonly used system— were rated in the top two of five performance categories in 2013. We explored this issue further in our December 2016 review of human capital challenges at the Veterans Health Administration (VHA), which illustrates the importance of making meaningful distinctions in performance for non- SES employees. We found that in fiscal year 2014, about 73 percent of VHA employees were rated in the top two of five performance categories. This may have been due, in part, to a policy that did not require standards to be defined for each level of performance. We recommended that VHA ensure that meaningful distinctions are being made in employee performance ratings by reviewing and revising performance management policies consistent with leading practices, among other actions. The Department of Veterans Affairs partially concurred with our recommendation. In May 2017, the department stated that it had begun piloting a new performance management process and would analyze results at the end of fiscal year 2017. One key aspect of connecting daily operations to results is aligning program performance measures to agency-wide goals and objectives. However, in 2017, an estimated 50 percent of federal managers agreed to a great or very great extent that managers at their level took steps to create such an alignment. There has been no statistically significant change since this item was introduced in 2007. In addition, GPRAMA calls for agencies to develop a balanced set of performance measures, which reinforces the need for agencies to have a variety of measures across program areas. Our 2017 survey shows that managers have not reported any difference in the availability of performance measures for their programs when compared to the 2013 results. However, the 2017 result (an estimated 87 percent) represents a statistically significant increase when compared to 1997 (76 percent). When asked about the availability of certain types of performance measures, three of the five types (outcome, output, and efficiency) were statistically significantly higher in 2017 when compared to our initial 1997 survey. However, when comparing 2017 results to those in 2013, two of the five types (output and quality) showed a statistically significant decrease, and the other types did not change. These are illustrated in figure 20. Beyond the survey results, our work has found that some agencies had not developed or used outcome measures, but have taken steps to do so. Agencies have been responsible for measuring program outcomes since GPRA was enacted in 1993. The text box below describes two illustrative examples from our past work. Examples of Agencies That Did Not Develop or Use Outcome Measures Patient access to electronic health information: In March 2017, we found that the Department of Health and Human Services (HHS) had invested over $35 billion since 2009 to enhance patient access to electronic health information, among other things. HHS had not developed outcome measures to gauge the effectiveness of these efforts, which meant the department did not have information to determine whether the efforts were contributing to its overall goals. We recommended that HHS develop relevant outcome measures and HHS concurred. Safety interventions: According to the Federal Motor Carrier Safety Administration (FMCSA), between 2011 and 2015, over 4,000 people died in crashes involving motor carriers each year. GAO, Motor Carriers: Better Information Needed to Assess Effectiveness and Efficiency of Safety Interventions, GAO-17-49 (Washington, D.C.: Oct. 27, 2016). Further OMB actions could also help agencies make progress in measuring the performance of different program types. In our June 2013 report on initial GPRAMA implementation, we found that agencies experienced common issues in measuring the performance of various types of programs, such as contracts and grants. We recommended that OMB work with the PIC to develop a detailed approach to examine those difficulties. Although they took some actions, OMB and the PIC have not yet developed a comprehensive and detailed approach to address these issues. We concluded that, without such an approach, it would be difficult for the PIC and agencies to fully understand these measurement issues and develop a crosscutting approach to help address them. In August 2017, OMB staff stated that efforts related to the future implementation of the Program Management Improvement Accountability Act (PMIAA) could help address this recommendation. As highlighted in table 1, our work continues to show why it is important for OMB and the PIC to take actions to more fully address our recommendation. Congress has passed legislation to increase the transparency and accessibility of federal performance and financial data. For example, GPRAMA modernized agency reporting requirements to ensure that they make timely, relevant data available to inform decision making by Congress and agency officials as well as improve transparency for the public. Results of our 2017 survey, however, show the need for improvements in the public availability of agency performance information. An estimated 17 percent of managers reported that their agency’s performance information is easily accessible to the public to a great or very great extent, the same percentage as in 2013. Moreover, of the 87 percent of managers that reported there are performance measures for the programs they are involved in, 25 percent reported that they use information obtained from performance measurement when informing the public about how programs are performing to a great or very great extent. This is not statistically different from the 30 percent estimated in 2013. The DATA Act, enacted in 2014, built on previous transparency legislation by expanding what federal agencies are required to report regarding their spending. The act significantly increases the types of data that must be reported, requires government-wide data standards, and regular reviews of data quality to help improve the transparency and accountability of federal spending data. OMB provides websites and guidance to make agency performance and financial information available to the public; however, our prior work has identified a number of areas related to Performance.gov and the DATA Act where OMB action is needed to improve the transparency and accessibility of this information. Performance.gov: Since 2013, our work has identified a number of issues with Performance.gov, the website intended to serve as a central source of information on the federal government’s goals and performance. Over time, we have recommended that OMB take a number of specific actions to improve the website. For example, in June 2013, we found that the website offered an inconsistent user experience and presented accessibility and navigation challenges. To clarify the purpose of the website and enhance its usability, we recommended that OMB take steps to systematically collect customer input. In August 2016, we reported that OMB was not meeting all of the reporting requirements for Performance.gov, and did not have a plan to develop and improve the website. We recommended that OMB ensure that information presented on Performance.gov consistently complies with reporting requirements and develop a plan for the website that includes, among other things, a customer outreach plan. OMB agreed with these recommendations and, in July 2017, OMB staff informed us that they will be partnering with a vendor to redesign Performance.gov to improve the accessibility of information on the website. To inform this redesign, OMB staff said that they will consider our previous recommendations and plan to engage a wide group of stakeholders, including Congress, agency staff, and interested members of the public and outside organizations. OMB staff anticipated releasing updated agency reporting guidance in the fall of 2017 and the redesigned website in February 2018. Under GPRAMA, OMB is required to make available, through Performance.gov, quarterly updates on progress toward CAP goals and APGs. As described earlier, in June 2017 OMB announced that reporting to Performance.gov has been discontinued through the end of fiscal year 2017 as agencies develop new priority goals. However, Performance.gov does not state that it will not be updated, nor does it provide the location of the final progress updates for these goals. OMB’s guidance states that agencies should report the results of progress on their previous APGs in their annual performance reports for fiscal year 2017. Moreover, OMB staff told us that the existing updates on Performance.gov for CAP goals, last updated in December 2016, represent the final updates on those goals, although they are not labeled as such on the website. As a result, those interested in progress updates and reported results for the previous priority goals may not know where they will be able to find this information, limiting the transparency and accessibility of those results for decision makers and the public. DATA Act: The DATA Act requires federal agencies to disclose their spending and link this to program activities so that policymakers and the public can more effectively track federal spending. The act has the potential to improve the accuracy and transparency of federal spending information and increase its usefulness for government decision making and oversight. Since the DATA Act became law, OMB and Treasury have taken significant steps to make more complete and accurate federal spending data available. These have included standardizing data element definitions to make it easier to compare different federal agencies’ financial information, and issuing guidance to help agencies submit required data. In May 2017, federal agencies started to report data under the standardized definitions developed under the act. We have made a number of recommendations to address challenges that could affect the consistency and quality of the data. Addressing these recommendations could help ensure that financial data are provided to the public in a transparent and useful manner. For example, in January 2016, we found some standardized data element definitions were imprecise or ambiguous, which could result in inconsistent or potentially misleading reporting. We recommended that OMB provide agencies with additional guidance to address potential issues with the clarity, consistency, and quality of reported data. OMB released guidance in May and November 2016, but in April 2017 we found that additional guidance was needed to help agencies implement certain data definitions to produce data that would be consistent and comparable across agencies. We are in the process of examining the quality of the data that was submitted by agencies in May 2017 and was made available to the public on an early version of the USAspending.gov website. We expect to issue the results of this work in fall 2017. Our past work also identified a number of actions agencies need to take to make performance information more transparent. Increasing the accessibility of this information could enhance oversight and accountability of agency performance and results. CAP goals: In May 2016, we found that while selected CAP goal teams were working to develop performance measures to track progress, they were not consistently reporting on their efforts to develop these measures. We recommended that OMB report on Performance.gov the actions that CAP goal teams are taking to develop performance measures and quarterly targets to help ensure that measures are aligned with major activities, and ensure that it is possible to track teams’ progress toward establishing measures. While OMB agreed with this recommendation, it did not address it before reporting on the CAP goals was discontinued, as discussed earlier. Customer service standards: As we described earlier, in 2017, an estimated 48 percent of federal managers that indicated they have performance measures for the programs they are involved in also agreed to a great or very great extent that they have customer service performance measures. There has been no statistically significant change relative to our last survey in 2013, or the initial survey in 1997. Relatedly, in October 2014, we reviewed customer service standards at five federal agencies. Customer service standards inform customers about what they have a right to expect when they request services, and the standards should include goals for the quality and timeliness of a service an agency provides to its customers. They should also be easily available to the public so that customers know what to expect, when to expect it, and from whom. In our review of standards at five agencies, however, we found that only Customs and Border Protection had standards that were easily available to the public. We recommended the other four agencies—the United States Forest Service, Federal Student Aid, the National Park Service (NPS), and the Veterans Benefits Administration (VBA)—make their standards more easily accessible to the public. As of July 2017, only VBA had done so. Major management challenges: In June 2016, we found that 14 of the 24 CFO Act agencies did not describe their major management challenges in their performance plans, as required by GPRAMA. Furthermore, 22 of the 24 agencies reviewed did not report complete performance information for each of their major management challenges, including performance goals, milestones, indicators, and planned actions that they have developed to address such challenges. As a result, it was not always transparent what these agencies considered to be their major management challenges or how they planned to resolve these challenges. We recommended that the 22 agencies describe their major management challenges in their agency performance plans and include goals, measures, milestones, and information on planned actions and responsible officials. As of August 2017, 8 agencies—the U.S. Agency for International Development, Small Business Administration, Nuclear Regulatory Commission, OPM, National Aeronautics and Space Administration (NASA), and the Departments of Education, State, and Veterans Affairs—had fully implemented our recommendations; the other 14 agencies had not. Quality of performance information: In September 2015, we found that six selected agencies reported limited information on the actions they are taking to ensure the quality of their performance information for selected APGs, as required by GPRAMA. We recommended that all six of the agencies work with OMB to fully report this information. In response, the Department of Homeland Security and NASA described how they ensure reliable performance information is reported to external audiences. As of June 2017, the Departments of Agriculture, Defense, the Interior, and Labor had not yet taken actions to address this recommendation by providing more specific explanations of how they ensure reliable performance information is reported for their APGs. Unnecessary reports: GPRAMA requires that OMB guide an annual review of agencies’ plans and reports for Congress and include in the President’s budget a list of those plans and reports determined to be outdated or duplicative. However, in July 2017, we found that OMB did not implement the report review process on an annual basis, as required. We also found that OMB published the list of agency plans and reports on Performance.gov, rather than in the President’s annual budget, where they may be more visible and useful to congressional decision makers and others. Therefore, we recommended that OMB instruct agencies to identify outdated or duplicative reports on an annual basis and submit or reference the list of identified plans and reports with the President’s annual budget. OMB agreed with these recommendations. In July 2017, OMB stated it would include a list of report modification proposals in the President’s fiscal year 2019 budget as required by GPRAMA. For all of the unimplemented recommendations described above, we will continue to monitor agencies’ actions. In addition to providing access to performance and financial information, federal agencies can directly engage and collaborate with citizens, nonprofits, academic institutions, and other levels of government using open innovation strategies. Open innovation involves using various tools and approaches to harness the ideas, expertise, and resources of those outside an organization to address an issue or achieve specific goals. In October 2016, we found that in recent years agencies had frequently used five open innovation strategies—singularly or in combination—to collaborate with citizens and encourage their participation in agency initiatives. (See figure 21.) Our October 2016 report found that agencies can use these strategies for a variety of purposes. To develop new ideas, solutions to specific problems, or new products: For example, from April 2015 to November 2016, the Department of Energy held a prize competition to create more efficient devices that would double the energy captured from ocean waves. According to the competition’s website, the winning team achieved a five-fold improvement. To enhance collaboration and agency capacity by leveraging external resources, knowledge, and expertise: For example, every 2 years since 2009, the Federal Highway Administration has regularly engaged stakeholders to identify and implement innovative ideas that have measurably improved the execution of highway construction projects. To collect the perspectives and preferences of a broad group of citizens and external stakeholders: For example, the Food and Drug Administration used in-person and online dialogue to engage outside stakeholders in the development of an online platform designed to make key datasets easily accessible to the public. Subsequently, in June 2017, we found that OMB, the Office of Science and Technology Policy (OSTP), and the General Services Administration (GSA) developed resources to support the use of open innovation strategies by federal agencies. These resources included guidance, staff to assist agencies in implementing initiatives, and websites to improve access to relevant information. For example, GSA developed a step-by-step implementation guide, program management team, and website to help agency staff carry out prize competitions and challenges. Agencies have also developed their own resources, including guidance, staff positions, and websites, to reach specific audiences and to provide tailored support for open innovation strategies they use frequently. For example, NASA’s Solve website provides a central location for the public to find the agency’s challenges and citizen science projects, as well as links to relevant resources. We also evaluated key government-wide guidance for the five strategies listed above to determine the extent to which the guidance reflects leading practices for effectively implementing open innovation initiatives. We identified these practices in our October 2016 report. We found that the guidance for each strategy reflected these practices to differing extents, as shown in figure 22. We made 22 recommendations to GSA, OMB, and OSTP to enhance the guidance. GSA and OMB generally agreed with these recommendations and OSTP neither agreed nor disagreed. We will monitor their progress toward implementing these recommendations. GPRAMA provides important tools that can help decision makers better achieve results and address the federal government’s significant and long-standing governance challenges. Although OMB and agencies have made progress in improving implementation of the act over the years, our work has highlighted numerous opportunities for further improvements. In 2017, OMB removed the priority designation of CAP goals and APGs. For those goals, this action stopped related data-driven reviews and quarterly updates of progress on Performance.gov until new priority goals are published next year. What OMB considers to be the final results of CAP goals for fiscal years 2014 to 2017 already are on Performance.gov (although not labeled as such). In addition, agencies may report on their former APGs in their annual fiscal year 2017 performance reports. However, Performance.gov does not state that it will not be updated or provide the location of the final progress updates for these goals, limiting transparency and its value to the public. OMB has stated its plans to restart implementation of those provisions in February 2018, with the start of a new goal cycle. We believe it is critical for OMB to do so, given the important role those tools play in addressing key governance challenges and the results we have seen in better managing crosscutting areas and driving performance improvements across the government. In addition, OMB has postponed implementation of the federal program inventory. To date, the inventory has only been developed once, in 2013, despite requirements for regular updates to reflect current budget and performance information. OMB has given a variety of reasons for the delays over the past 4 years—most recently, to determine the right strategy to merge implementation of the DATA Act and PMIAA with GPRAMA’s program inventory requirements. Although OMB staff told us that they expect to issue guidance by the end of 2018 to resume implementation of the program inventory requirements, they have not provided more specific time frames and milestones related to the program inventory requirements. Doing so would help agencies prepare for resumed implementation. Moreover, publicly disclosing planned implementation time frames and associated milestones would help ensure that interested stakeholders, such as federal decision makers and the public, are prepared to engage with agencies as they develop and update their program inventories, which in turn could help ensure the inventories meet stakeholders’ needs. A well-developed inventory would provide key program, budget, and performance information in one place to help federal decision makers better understand the federal investment and results in given policy areas, and better identify and manage fragmentation, overlap, and duplication. Information architecture offers one approach to developing an inventory. As OMB determines a strategy for implementing the program inventory and develops its guidance, considering such a systematic approach to planning, organizing, and developing the inventory that centers on maximizing the use and usefulness of information could help it ensure the inventory meets GPRAMA requirements as well as the needs of decision makers and the public. Moreover, such an approach could also help OMB implement our past recommendations related to the program inventory, which are intended to ensure the inventory provides more complete information and is useful to various stakeholders. Our survey of federal managers continues to generally show no improvement in their reported use of performance information in decision making, nor in the employment of practices that can enhance such use. One area where our survey data and past work show promise is through the use of regular, leadership-driven reviews of performance data at agencies, especially when conducted in line with related leading practices. However, GPRAMA only requires these data-driven reviews for APGs, which represent a small subset of goals, both within individual agencies as well as across the government. This is probably why most federal managers were not familiar with the reviews. Identifying and sharing practices for expanding the use of those reviews—such as for additional agency-wide performance goals and at lower levels within agencies—could significantly enhance the use of performance information and drive to better and greater results. We are making the following four recommendations to OMB: The Director of OMB should update Performance.gov to explain that quarterly reporting on the fiscal year 2014 through 2017 CAP goals and fiscal year 2016 and 2017 APGs was suspended, and provide the location of final progress updates for these goals. (Recommendation 1) The Director of OMB should revise and publicly issue OMB guidance— through an update to its Circular No. A-11, a memorandum, or other means—to provide time frames and associated milestones for implementing the federal program inventory. (Recommendation 2) The Director of OMB should consider—as OMB determines its strategy for resumed implementation of the federal program inventory—using a systematic approach, such as the information architecture framework, to help ensure that GPRAMA requirements and our past recommendations for the inventory are addressed. (Recommendation 3) The Director of OMB should work with the Performance Improvement Council to identify and share among agencies practices for expanding the use of data-driven performance reviews beyond APGs, such as for other performance goals and at lower levels within agencies, that have led to performance improvements. (Recommendation 4) We provided a draft of this report to the Director of the Office of Management and Budget for review and comment. In comments provided orally and via email, OMB staff agreed with the recommendations in this report. OMB staff also asked us to (1) consider revising the draft title of the report, to better reflect progress in GPRAMA implementation, and (2) clarify our recommendations on issuing guidance for implementing the federal program inventory and expanding the use of data-driven performance reviews, by describing possible actions that could be taken to implement them. We agreed and made revisions accordingly. We are sending copies of this report to interested congressional committees, the Director of the Office of Management and Budget, and other interested parties. This report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or mihmj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix III. The GPRA Modernization Act (GPRAMA) includes a statutory provision for us to periodically evaluate implementation of the act. Since 2012, we have issued over 30 products in response to this provision; this is the third summary report. This report assesses how implementation of GPRAMA has affected the federal government’s progress in resolving key governance challenges in (1) addressing crosscutting issues, (2) ensuring performance information is useful and used in decision making, (3) aligning daily operations with results, and (4) building a more transparent and open government. We reviewed relevant statutory requirements, related Office of Management and Budget (OMB) guidance, and our recent work related to GPRAMA implementation and the four key governance challenges included in our reporting objectives. Specifically, since our last summary report in September 2015, we examined various aspects of GPRAMA implementation in 12 products that covered 35 agencies, including the 24 agencies covered under the Chief Financial Officers (CFO) Act of 1990, as amended (identified in table 2). We interviewed OMB and Performance Improvement Council staff to obtain (1) their perspectives on GPRAMA implementation and progress on the four governance challenges, and (2) updates on the status of our past recommendations. We also received updates from other agencies on the status of our past recommendations to them related to GPRAMA implementation. To supplement this review, we administered our periodic survey of federal managers on organizational performance and management issues from November 2016 through March 2017. This survey is comparable to five previous surveys we conducted in 1997, 2000, 2003, 2007, and 2013. We selected a stratified random sample of 4,395 people from a population of approximately 153,779 mid-level and upper-level civilian managers and supervisors working in the 24 executive branch agencies covered by the CFO Act, as shown in table 2. We obtained the sample from the Office of Personnel Management’s (OPM) Enterprise Human Resources Integration (EHRI) database as of September 30, 2015, which was the most recent fiscal year data available at the time. We used file designators indicating performance of managerial and supervisory functions. In reporting survey data, we use the term “government-wide” and the phrases “across the government” or “overall” to refer to the 24 CFO Act executive branch agencies. We use the terms “federal managers” and “managers” to collectively refer to both managers and supervisors. We designed the questionnaire to obtain the observations and perceptions of respondents on various aspects of results-oriented management topics. These topics include the presence and use of performance measures, any hindrances to measuring performance and using performance information, agency climate, and program evaluation use. To assess implementation of GPRAMA, the questionnaire included questions to collect respondents’ views on various provisions of GPRAMA, such as cross-agency priority goals, agency priority goals, and related quarterly performance reviews. Similar to the five previous surveys, the sample was stratified by agency and by whether the manager or supervisor was a member of the Senior Executive Service (SES). The management levels covered general schedule (GS) or equivalent schedules at levels comparable to GS-13 through GS-15 and career SES or equivalent. Stratifying the sample in this way ensured that the population from which we sampled covered at least 90 percent of all mid- to upper-level managers and supervisors at the departments and agencies we surveyed. Most of the items on the questionnaire were closed-ended, meaning that depending on the particular item, respondents could choose one or more response categories or rate the strength of their perception on a 5-point extent scale ranging from “no extent” to “very great extent.” On most items, respondents also had an option of choosing the response category “no basis to judge/not applicable.” A few items had other options, such as “yes,” “no,” or “do not know,” or a 3-point familiarity scale (“not familiar,” “somewhat familiar,” and “very familiar”). We asked many of the items on the questionnaire in our earlier surveys, though we introduced a number of new items in 2013, including the sections about GPRAMA and program evaluations. For 2017, we added a new question on use of performance information (question 12) and a new question on program evaluation (question 24). Before administering the survey, questions were reviewed by our staff, including subject matter experts, a survey specialist, and a research methodologist. We also conducted pretests of the new questions with federal managers in several of the 24 CFO Act agencies. We changed the wording of subquestions or added clarifying examples based on pretester feedback. To administer the survey, we e-mailed managers in the sample to notify them of the survey’s availability on our website and we included instructions on how to access and complete the survey. To follow up with managers in the sample who did not respond to the initial notice, we emailed or called multiple times to encourage survey participation or provide technical assistance, as appropriate. Similar to our last survey, we worked with OPM to obtain the names of the managers and supervisors in our sample, except for those within selected subcomponents whose names were withheld from the EHRI database. Since Foreign Service officials from the Department of State (State) are not in the EHRI database, we drew a sample for that group with the assistance from State. We worked with officials at the Department of Homeland Security (DHS) and the Department of the Treasury (Treasury) to gain access to these individuals to maintain continuity of the population of managers surveyed from previous years. The Department of Justice (DOJ) was concerned about providing identifying information (e.g., names, e-mail addresses, and phone numbers) of federal agents to us, so we administered the current survey to DOJ managers in our sample through DOJ officials. To identify the sample of managers whose names were withheld from the EHRI database, we provided DOJ with the last four digits of Social Security numbers, the subcomponent, duty location, and pay grade information. To ensure that DOJ managers received the same survey administration process as the rest of the managers in our sample to the extent possible, we provided DOJ with text for the survey activation and reminder e-mails similar to ones we emailed to managers at other agencies. DOJ administered the survey to these managers and emailed them one reminder to complete the survey. To help determine the reliability and accuracy of the EHRI data elements used to draw our sample of federal managers, we checked the data for reasonableness and the presence of any obvious or potential errors in accuracy and completeness and reviewed past analyses of the reliability of this database. For example, we identified cases where the managers’ names were withheld and contacted OPM to discuss this issue. We also checked the names of the managers in our selected sample provided by OPM with the applicable agency contacts to verify these managers were still employed with the agency. We noted discrepancies when they occurred and excluded them from our population of interest, as applicable. On the basis of these procedures, we believe the data we used from the EHRI database are sufficiently reliable for the purpose of the survey. Of the 4,395 managers selected for the 2017 survey, we found that 388 of the sampled managers had retired, separated, or otherwise left the agency or had some other reason that excluded them from the population of interest. These exclusions included managers that the agency could not locate, and therefore we were unable to request that they participate in the survey. We received usable questionnaires from 2,726 sample respondents, for a weighted response rate of about 67 percent of the remaining eligible sample. The weighted response rate across 23 of the 24 agencies ranged from 57 percent to 82 percent, while DOJ had a weighted response rate of 36 percent. See the supplemental material for each agency’s response rate. We conducted a nonresponse bias analysis using information from the survey and sampling frame as available. The analysis confirmed discrepancies in the tendency to respond to the survey related to agency and SES status. The analysis also revealed some differences in response propensity by age and GS level; however, the direction and magnitude of the differences on these factors were not consistent across agencies or strata. Our data may be subject to bias from unmeasured sources for which we cannot control. Results, and in particular estimates from agencies with low response rates such as DOJ, should be interpreted with caution because these estimates are associated with a higher level of uncertainty. The overall survey results are generalizable to the government-wide population of managers as described above. The responses of each eligible sample member who provided a usable questionnaire were weighted in the analyses to statistically account for all members of the population. All results are subject to some uncertainty or sampling error as well as nonsampling error, including the potential for nonresponse bias as noted above. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. The magnitude of sampling error will vary across the particular surveys, groups, or items being compared because we (1) used complex survey designs that differed in the underlying sample sizes, usable sample respondents, and associated variances of estimates, and (2) conducted different types of statistical analyses. For example, the 2000 and 2007 surveys were designed to produce agency-level estimates and had effective sample sizes of 2,510 and 2,943, respectively. However, the 1997 and 2003 surveys were designed to obtain government-wide estimates only, and their sample sizes were 905 and 503, respectively. Consequently, in some instances, a difference of a certain magnitude may be statistically significant. In other instances, depending on the nature of the comparison being made, a difference of equal or even greater magnitude may not achieve statistical significance. Because each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval. This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. The percentage estimates presented in this report based on our sample for the 2017 survey have 95 percent confidence intervals within plus or minus 5.5 percentage points of the estimate itself, unless otherwise noted. We also note in this report when we are 95 percent confident that changes from 1997 or 2013 relative to 2017 are statistically significant. Online supplemental material shows the questions asked on the survey along with the percentage estimates and associated 95 percent confidence intervals for each item for each agency and government-wide. In a few instances, we report estimates with larger margins of error because we deemed them reliable representations of given findings due to the statistical significance of larger differences between comparison groups. In all cases, we report the applicable margins of error. In addition to sampling errors, the practical difficulties of conducting any survey may also introduce other types of errors, commonly referred to as nonsampling errors. For example, difficulties in how a particular question is interpreted, in the sources of information available to respondents, or in how the data were entered into a database or analyzed can introduce unwanted variability into the survey results. With this survey, we took a number of steps to minimize these nonsampling errors. For example, our staff with subject matter expertise designed the questionnaire in collaboration with our survey specialists. As noted earlier, the new questions added to the survey were pretested to ensure they were relevant and clearly stated. When the data were analyzed, a second independent analyst on our staff verified the analysis programs to ensure the accuracy of the code and the appropriateness of the methods used for the computer-generated analysis. Since this was a web-based survey, respondents entered their answers directly into the electronic questionnaire, thereby eliminating the need to have the data keyed into a database, thus avoiding a source of data entry error. To supplement descriptive analysis of the survey questions, we generated an index to gauge government-wide use of performance information. The index, which was identical to one we reported in 2014, averaged manager’s responses to 11 questions deemed to relate to the concept of performance information use. The index runs from 1 (corresponding to an average value of “to no extent”) to 5 (corresponding to an average value of “to a very great extent”). We used Cronbach’s alpha to assess the internal consistency of the scale. Our government- wide index score weights each agency’s contribution equally, and provides a relative measure of the use of performance information over time rather than an absolute indicator of the government-wide level of use of performance information. We conducted this performance audit from January 2016 to September 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Office of Management and Budget (OMB) and agencies have taken some actions to address our recommendations related to implementation of the GPRA Modernization Act of 2010 (GPRAMA); however, the majority of recommendations remain open. Since GPRAMA was enacted in January 2011, we have made 100 recommendations in 18 reports to OMB and agencies aimed at improving the act’s implementation (table 3). Of those 100, OMB and the agencies have implemented 42 recommendations. Fifty-eight recommendations require additional action. Nearly half (47) of our recommendations are directed to OMB. For the 23 recommendations that OMB has implemented, many represent revisions to guidance to better reflect GPRAMA’s requirements or to enhance implementation. Many of the 24 recommendations to OMB that are not implemented deal with long-standing or complex challenges, on which OMB has taken limited action to date. Of those, we have designated 3 as priorities for OMB to address. Agencies have also taken some action on our recommendations, implementing 19 of the 53 recommendations we have made. The following tables present each of the 100 recommendations along with a summary of actions taken to address it. Tables 4 and 5 provide information about our recommendations to OMB that are implemented and not implemented, respectively. Tables 6 and 7 provide information about our recommendations to other agencies that are implemented and not implemented, respectively. In addition to the above contact, Benjamin T. Licht (Assistant Director) and Shannon Finnegan (Assistant Director) supervised this review and the development of the resulting report. Leah Q. Nash (Assistant Director), Elizabeth Fan (Analyst-in-Charge), and Adam Miles (Analyst-in- Charge) supervised the development and administration of the Federal Managers Survey and the resulting supplemental material. Peter Beck, Valerie Caracelli, Karin Fangman, Steven Flint, Robert Gebhart, Ricky Harrison Jr., John Hussey, Jill Lacey, Won Lee, Krista Loose, Meredith Moles, Anna Maria Ortiz, Steven Putansu, Alan Rozzi, Cindy Saunders, Stephanie Shipman, Shane Spencer, Andrew J. Stephens, and Brian Wanlass also made key contributions. Ann Czapiewski and Donna Miller developed the graphics for this report. John Ahern, Divya Bali, Jeff DeMarco, Alexandra Edwards, Ellen Grady, Jyoti Gupta, Erinn L. Sauer, and Katherine Wulff verified the information presented in this report. Managing for Results: Implementation of GPRA Modernization Act Has Yielded Mixed Progress in Addressing Pressing Governance Challenges. GAO-15-819. Washington, D.C.: September 30, 2015. Managing For Results: Executive Branch Should More Fully Implement the GPRA Modernization Act to Address Pressing Governance Challenges. GAO-13-518. Washington, D.C.: June 26, 2013. Supplemental Material for GAO-17-775: 2017 Survey of Federal Managers on Organizational Performance and Management Issues. GAO-17-776SP. Washington, D.C.: September 29, 2017. Program Evaluation: Annual Agency-wide Plans Could Enhance Leadership Support for Program Evaluations. GAO-17-743. Washington, D.C.: September 29, 2017. Managing for Results: Agencies’ Trends in the Use of Performance Information to Make Decisions. GAO-14-747. Washington, D.C.: September 26, 2014. Managing for Results: Executive Branch Should More Fully Implement the GPRA Modernization Act to Address Pressing Governance Challenges. GAO-13-518. Washington, D.C.: June 26, 2013. Managing for Results: 2013 Federal Managers Survey on Organizational Performance and Management Issues, an E-supplement to GAO-13-518. GAO-13-519SP. Washington, D.C.: June 26, 2013. Program Evaluation: Strategies to Facilitate Agencies’ Use of Evaluation in Program Management and Policy Making. GAO-13-570. Washington, D.C.: June 26, 2013. Government Performance: Lessons Learned for the Next Administration on Using Performance Information to Improve Results. GAO-08-1026T. Washington, D.C.: July 24, 2008. Government Performance: 2007 Federal Managers Survey on Performance and Management Issues, an E-supplement to GAO-08-1026T. GAO-08-1036SP. Washington, D.C.: July 24, 2008. Results-Oriented Government: GPRA Has Established a Solid Foundation for Achieving Greater Results. GAO-04-38. Washington, D.C.: March 10, 2004. Managing for Results: Federal Managers’ Views on Key Management Issues Vary Widely Across Agencies. GAO-01-592. Washington, D.C.: May 25, 2001. Managing for Results: Federal Managers’ Views Show Need for Ensuring Top Leadership Skills. GAO-01-127. Washington, D.C.: October 20, 2000. The Government Performance and Results Act: 1997 Governmentwide Implementation Will Be Uneven. GAO/GGD-97-109. Washington, D.C.: June 2, 1997. Federal Programs: Information Architecture Offers a Potential Approach for Inventory Development. GAO-17-739. Washington, D.C.: September 28, 2017. Managing for Results: Selected Agencies’ Experiences in Implementing Strategic Reviews. GAO-17-740R. Washington, D.C.: September 7, 2017. Federal Reports: OMB and Agencies Should More Fully Implement the Process to Streamline Reporting Requirements. GAO-17-616. Washington, D.C.: July 14, 2017. Open Innovation: Executive Branch Developed Resources to Support Implementation, but Guidance Could Better Reflect Leading Practices. GAO-17-507. Washington, D.C.: June 8, 2017. Performance Partnerships: Agencies Need to Better Identify Resource Contributions to Sustain Disconnected Youth Pilot Programs and Data to Assess Pilot Results. GAO-17-208. Washington, D.C.: April 18, 2017. Open Innovation: Practices to Engage Citizens and Effectively Implement Federal Initiatives. GAO-17-14. Washington, D.C.: October 13, 2016. Tiered Evidence Grants: Opportunities Exist to Share Lessons from Early Implementation and Inform Future Federal Efforts. GAO-16-818. Washington, D.C.: September 21, 2016. Performance.gov: Long-Term Strategy Needed to Improve Website Usability. GAO-16-693. Washington, D.C.: August 30, 2016. Tax Expenditures: Opportunities Exist to Use Budgeting and Agency Performance Processes to Increase Oversight. GAO-16-622. Washington, D.C.: July 7, 2016. Managing for Results: Agencies Need to Fully Identify and Report Major Management Challenges and Actions to Resolve them in their Agency Performance Plans. GAO-16-510. Washington, D.C.: June 15, 2016. Managing for Results: OMB Improved Implementation of Cross-Agency Priority Goals, But Could Be More Transparent About Measuring Progress. GAO-16-509. Washington, D.C.: May 20, 2016. Managing for Results: Greater Transparency Needed in Public Reporting on the Quality of Performance Information for Selected Agencies’ Priority Goals. GAO-15-788. Washington, D.C.: September 10, 2015. Pay for Success: Collaboration among Federal Agencies Would Be Helpful as Governments Explore New Financing Mechanisms. GAO-15-646. Washington, D.C.: September 9, 2015. Managing for Results: Practices for Effective Agency Strategic Reviews. GAO-15-602. Washington, D.C.: July 29, 2015. Managing for Results: Agencies Report Positive Effects of Data-Driven Reviews on Performance but Some Should Strengthen Practices. GAO-15-579. Washington, D.C.: July 7, 2015. Program Evaluation: Some Agencies Reported that Networking, Hiring, and Involving Program Staff Help Build Capacity. GAO-15-25. Washington, D.C.: November 13, 2014. Government Efficiency and Effectiveness: Inconsistent Definitions and Information Limit the Usefulness of Federal Program Inventories. GAO-15-83. Washington, D.C.: October 31, 2014. Managing for Results: Selected Agencies Need to Take Additional Efforts to Improve Customer Service. GAO-15-84. Washington, D.C.: October 24, 2014. Managing for Results: Enhanced Goal Leader Accountability and Collaboration Could Further Improve Agency Performance. GAO-14-639. Washington, D.C.: July 22, 2014. Managing for Results: OMB Should Strengthen Reviews of Cross-Agency Goals. GAO-14-526. Washington, D.C.: June 10, 2014. Managing for Results: Implementation Approaches Used to Enhance Collaboration in Interagency Groups. GAO-14-220. Washington, D.C.: February 14, 2014. Managing for Results: Leading Practices Should Guide the Continued Development of Performance.gov. GAO-13-517. Washington, D.C.: June 6, 2013. Managing for Results: Agencies Should More Fully Develop Priority Goals under the GPRA Modernization Act. GAO-13-174. Washington, D.C.: April 19, 2013. Managing for Results: Agencies Have Elevated Performance Management Roles, but Additional Training Is Needed. GAO-13-356. Washington, D.C.: April 16, 2013. Managing for Results: Data-Driven Performance Reviews Show Promise But Agencies Should Explore How to Involve Other Relevant Agencies. GAO-13-228. Washington, D.C.: February 27, 2013. Managing for Results: A Guide for Using the GPRA Modernization Act to Help Inform Congressional Decision Making. GAO-12-621SP. Washington, D.C.: June 15, 2012. Managing for Results: GAO’s Work Related to the Interim Crosscutting Priority Goals under the GPRA Modernization Act. GAO-12-620R. Washington, D.C.: May 31, 2012. Managing for Results: Opportunities for Congress to Address Government Performance Issues. GAO-12-215R. Washington, D.C.: December 9, 2011.", "summary": "Full implementation of GPRAMA could facilitate efforts to reform the federal government and make it more effective. GPRAMA includes a provision for GAO to review the act's implementation. This report assesses how GPRAMA implementation has affected the federal government's progress in resolving key governance challenges in (1) addressing cross-cutting issues, (2) ensuring performance information is useful and used, (3) aligning daily operations with results, and (4) building a more transparent and open government. To address these objectives, GAO reviewed statutory requirements, OMB guidance, and GAO's recent work related to GPRAMA implementation and the key governance challenges. GAO also interviewed OMB staff and surveyed a stratified random sample of 4,395 federal managers from 24 agencies on various performance and management topics. With a 67 percent response rate, the survey results are generalizable to the government-wide population of managers. The Office of Management and Budget (OMB) and agencies have made some progress in more fully implementing the GPRA Modernization Act (GPRAMA), but GAO's work and 2017 survey of federal managers highlight numerous areas where improvements are needed. Cross-cutting issues: Various GPRAMA provisions are aimed at addressing cross-cutting issues, such as cross-agency and agency priority goals and related data-driven reviews of progress towards those goals. To ensure alignment with the current administration's priorities, OMB's 2017 guidance removed the priority status of those goals, which stopped quarterly data-driven reviews and related public progress reports until new goals are published. OMB plans to resume implementation of these provisions in February 2018. GPRAMA also requires OMB and agencies to implement an inventory of federal programs, which could help decision makers better identify and manage fragmentation, overlap, and duplication. OMB and agencies implemented the inventory once, in May 2013. In October 2014, GAO found several issues limited the usefulness of that inventory. Since then, OMB has postponed updating the inventory, citing among other reasons the passage of subsequent laws. OMB has yet to develop a systematic approach for resuming implementation of the inventory and specific time frames for doing so. A systematic approach to developing the inventory could help ensure it provides useful information for decision makers and the public. Performance information: Survey results show federal managers generally reported no improvements in their use of performance information in decision making for various management activities, or practices that can enhance such use, since GAO's 2013 survey. For example, the use of performance information to streamline programs to reduce duplicative activities (an estimated 33 percent in 2017) is statistically significantly lower relative to 2013 (44 percent). In contrast, managers who were familiar with and whose programs were subject to quarterly data-driven reviews reported that those reviews were used to make progress toward agency priority goals. Identifying and sharing practices to expand the use of such reviews—for other performance goals and at lower levels within agencies—could lead to increased use of performance information. Daily operations: Agencies have made progress in developing results-oriented cultures but need to take additional actions. GAO's past work found that high-performing organizations use performance management systems to help individuals connect their daily activities to organizational goals. In 2017, about half of federal managers reported using performance information when setting expectations with employees (no change from GAO's last survey in 2013). Transparent and open government: GAO's past work identified a number of needed improvements to Performance.gov, the central government-wide website required by GPRAMA. The site is to provide quarterly updates on priority goals in effect through September 2017, but those updates stopped in December 2016. According to OMB, the existing information for cross-agency priority goals is the final update, and agencies should publish final updates on their priority goals in annual performance reports. Performance.gov does not provide users with this information, thereby limiting the transparency and accessibility of those results. In addition to following through on plans to resume implementation of key GPRAMA provisions, GAO recommends that OMB (1) consider a systematic approach to developing the program inventory, (2) revise guidance to provide specific time frames for inventory implementation, (3) identify and share practices for expanding the use of data-driven reviews, and (4) update Performance.gov to explain that reporting on priority goals was suspended and provide the location of final progress updates. OMB staff agreed with these recommendations.", "document_type": "gao"}
{"report": "According to OMB’s regulation implementing the PRA, “information” is broadly defined as any statement or estimate of fact or opinion, regardless of form or format, whether in numerical, graphic, or narrative form, and whether oral or maintained on paper, electronic, or other media. Federal agencies collect this information in various formats, such as forms and applications, recordkeeping information maintained by entities, and third-party disclosures (see figure 1). Agencies collect this information to ensure that the public is kept safe from harm, that qualified recipients receive benefits to which they are entitled, and that agencies otherwise fulfill their respective missions. For example, DOT requires commercial motor vehicle drivers to record information about the hours drivers spend operating their vehicles with the goal of improving operational safety and reducing crashes, injuries, and fatalities involving trucks or buses. USDA oversees SNAP, which provides food assistance to low-income individuals and families, and state agencies that administer the program must collect information from applicants in order to determine eligibility. HHS collects compliance information from entities and businesses to ensure that they are appropriately safeguarding individuals’ health information. While such information collection activities are important for the fulfillment of agency missions, they have the potential to impose significant burdens on individuals, businesses, and other entities. The PRA created the Office of Information and Regulatory Affairs (OIRA) within OMB to review and approve individual ICRs and oversee how agencies implement the PRA. OIRA provides agencies with instructions for preparing the supporting statements required for each ICR submitted for review. OIRA also provides agencies with guidance documents on specific information collection requirements, including how to conduct pre- testing on new or complex information collections, and how PRA applies to the use of social media. An integral part of an agency’s ICR submission is the estimated burden on the public associated with the collection—in terms of both time (i.e., burden hours) and costs (i.e., dollars spent). Under the PRA and OMB regulations, agencies are required to develop a specific, objectively supported estimate of the burden associated with each collection. OMB directs agencies to estimate burden hours and costs to respondents for each information collection as part of the ICR justification in the supporting statement. According to OMB staff, estimated costs to respondent should include the wage rate and any applicable employee fringe benefits, such as paid leave, insurance, and retirement contributions. The formulas shown in figure 2 illustrate the calculations generally used by agencies to determine burden hours and costs associated with the collections. ICRs are subject to multiple levels of review to ensure that they comply with the requirements of the PRA. Programs or components within an agency (e.g., bureaus) often perform an initial review. In addition, PRA requires that agencies have an independent review process, whereby agency staff who are independent of program responsibilities review the ICRs. During this review, staff evaluate the need for the information collection and the burden estimate, including whether the information collection minimizes burden on the public, among other things. Before an information collection is submitted by an agency to OMB for final review and approval, the independent reviewer must certify that the collection meets the standards that are set forth in the PRA. These standards include ensuring that the collection contains sufficient information to allow respondents to evaluate the estimated burden. Once an ICR has been submitted to OMB, OMB will then review it for compliance with procedural requirements of the PRA and OMB’s PRA regulations. OMB can approve an ICR without changes or request changes or additional information from the agency. OMB can approve a collection for up to 3 years at one time. If the agency wants to continue to collect the information after the approval period, it must submit another ICR to OMB for approval and provide the public with an opportunity to comment on the continuation of the collection. The PRA requires agencies to solicit public input on their ICRs as a means of validating their burden estimates. Agencies can engage the public in a variety of ways such as through a notice of proposed rulemaking (NPRM), a PRA 60-day notice published in the Federal Register, or other agency-specific mechanisms. Figure 3 shows the process that agencies generally use to engage the public, which involves a PRA 60-day notice published in the Federal Register. In some circumstances, an NPRM in the Federal Register can be used to solicit input on an information collection in lieu of the 60-day notice where an information collection is part of larger rulemaking. When estimating burden hours, USDA, HHS, DOT, and IRS used data and professional judgment to develop their estimates. The PRA requires that agencies develop an objectively supported burden hour estimate, but neither the act, nor OMB regulations, prescribe how agencies should develop these estimates. Among our four agencies, IRS was the only one to report gathering original data on public burden through surveys of individual taxpayers and businesses to help inform the estimates for its two largest ICRs. Each year, IRS surveys a representative sample of taxpayers who submitted completed tax returns, according to IRS officials. The surveys collect information on the actual time and cost that taxpayers invest in paperwork-related activities. For the U.S. Individual and Business Tax Return ICRs—the federal government’s two largest information collections—IRS used its Taxpayer Burden Model to combine original survey results with existing taxpayer data to estimate taxpayer burden in terms of both time and out-of-pocket costs. The survey results also help IRS forecast its burden hour estimates each year, taking into account changes in law, regulations, and technology. For the remaining six case study ICRs that we reviewed, USDA, HHS, and DOT used already existing data and information to estimate at least one burden hour element (i.e., number of respondents, frequency of responses, or average burden time per response), such as in the following examples: Historical data. To estimate the number of respondents for the SNAP ICR, USDA’s Food and Nutrition Service used historical program data on the number of applicants in previous years. Other internal agency data. To estimate the number of respondents, such as drivers and motor carriers, for the Hours of Service of Drivers Regulations ICR, DOT’s Federal Motor Carrier Safety Administration (FMCSA) used data from the 2014 Pocket Guide to Large Truck and Bus Statistics, according to agency officials. This publication compiles data from the Federal Highway Administration, the National Highway Traffic Safety Administration, and FMCSA’s Motor Carrier Management Information System, including data on the number of commercial motor vehicle drivers operating in the United States. Third-party data. To estimate the frequency of response for some of the third-party disclosures included in its Prescription Drug Labeling ICR, HHS’s Food and Drug Administration used data from a survey conducted by the National Association of Boards of Pharmacy, according to agency officials. The data included the number of drugs on the market and the percentage of drugs requiring medication guides. These data helped Food and Drug Administration staff estimate how often the pharmaceutical industry might need to comply with the information collection. Research studies. To help estimate the burden of applying for SNAP benefits, USDA’s Food and Nutrition Service relied, in part, on a program research study. Specifically, a 2004 Food Stamp Program Access Study estimated that applicants spend, on average, 2.2 hours travelling for face-to-face interviews during the application process. Food and Nutrition Service staff incorporated this information in its burden hour estimates to determine the average burden time per response for the SNAP ICR. In cases where data did not exist to inform burden hour estimates, such as for average burden time per response, the selected agencies relied on their professional judgment to develop estimates, informed in some instances by internal consultation or public input. For example, HHS’s Office for Civil Rights (OCR) did not have data for the average burden time per response for some Health Insurance Portability and Accountability Act (HIPAA) Privacy, Security, and Breach Notification Rules information collection activities. The information collection addresses HIPAA requirements related to the use, disclosure, and safeguarding of individually identifiable health information. According to HHS officials, some of the reporting or recordkeeping activities required by HIPAA may be conducted by security experts. To help estimate the average burden time for these particular activities, OCR officials stated that they consulted with internal HHS security experts to determine the time it might take a security expert to complete the applicable information collection activities. When available, public input helped some agencies refine their burden hour estimates. For example, as part of its Prescription Drug Labeling information collection, HHS’s Food and Drug Administration had originally estimated that it would take approximately 5 seconds for a pharmacist to provide a patient with a medication guide. During the 2001 renewal of the ICR, however, the agency received a comment from a distributor stating that such disclosure could take additional time, especially if the pharmacist did not already receive the medication guides and had to print them on-site, according to agency officials. After receiving this comment, agency officials considered that some distributions of medication guides to patients may take longer than others, and revised its previous estimate from 5 seconds to 3 minutes. In some cases, the four agencies did not estimate respondent time costs as a monetized dollar amount in their supporting statement, as required by OMB. Of the 200 ICRs reviewed (including the 8 largest ICRs), 76 ICRs did not include respondent time cost estimates. Specifically, of the 50 ICRs with the largest burden hours at each agency, we found agencies did not include total annual respondent time costs for IRS—all 50, including its 2 largest ICRs; DOT—19, including its 2 largest ICRs; HHS—5, including its second-largest ICR; and USDA—2 ICRs. OMB requires agencies to include estimated respondent time costs in the ICR supporting statements. Supporting statements provide the public with detail information about the burden estimates and underlying methodology used to calculate them, among other things. However, OMB reviewed and approved all 76 ICRs we identified that did not include these estimates. Agencies provided a variety of reasons for not including these estimates in the supporting documents. For example: According to IRS officials the model they used to generate burden estimates for all but their two largest information collection requests is unable to calculate respondent time costs. They told us that the model they used to generate burden estimates for their two largest collections—called the Taxpayer Burden Model— does calculate respondent time cost, but the IRS did not include this information in the supporting statement. According to IRS officials, OMB is aware of the old model’s limitation and told IRS its resources should be devoted to transitioning these collections to its Taxpayer Burden Model. IRS officials said that the agency plans, but has not developed a timeline, to use the Taxpayer Burden Model on future ICRs and to phase in use of the new model over a number of years, giving higher priority to tax forms that affect the most taxpayers. DOT officials stated that some respondent time costs were not included in ICR supporting statements because, based on their professional judgment, the information collection activities are incidental to routine business operations and therefore should not be included in respondent time cost estimates. While OMB’s guidance states that agencies should not include burden hour estimates for customary and usual business practices, the guidance also instructs agencies to estimate respondent time costs for any estimated burden hours included in the supporting statement. That is, any estimated burden hours should have a corresponding time cost for carrying out the information collection activities. DOT’s inclusion of burden hours in the supporting statement in these cases indicates that the information collection activities are not incidental to routine business operations, and that respondent time costs should have been provided based on OMB’s guidance. An HHS official told us that, in general, while costs are not ignored, they are also not considered high-impact information. USDA officials said that it did not include respondent time costs in the supporting statement in part because an ICR had been merged with another information collection, but stated the agency would include these costs in the ICR renewal’s supporting statement. Unless OMB takes action to ensure that agencies consistently follow its guidelines to include respondent time costs, agencies will likely continue to not meet the requirement and omit this information. The PRA requires that OMB establish and oversee standards and guidelines by which agencies are to estimate the burden to comply with a proposed collection of information. As part of its guidelines, OMB directs agencies to provide certain standard information in its supporting statements, including estimated respondent time costs. According to OMB staff, OMB reviews these supporting statements as part of its ICR review process and has the option of requesting changes from the agency prior to approving the ICR. However, OMB staff said that the process is decentralized with individual OMB desk officers responsible for managing their own review of ICRs. OMB reviewed and approved all 76 ICRs we identified that did not include these estimates. OMB officials told us that they will review the findings in this report to determine what response is needed. Monetized respondent time cost estimates will be particularly important if agencies can use reductions in paperwork to offset new regulations under Executive Order 13771. For ICRs with monetized respondent time costs, agencies were inconsistent in whether they included fringe benefits, such as paid leave, insurance, and retirement contributions. OMB’s instructions for submitting ICRs direct agencies to provide respondent time costs, but the instructions do not specify how to calculate such costs. Of the 119 ICRs we identified where employees might complete an information collection activity on behalf an employer, 35 applied fringe benefits to their respondent time cost estimates and 84 did not, as shown in table 2. Table 3 shows that including fringe benefits in respondent time cost estimates can have a significant effect on the total estimated respondent time costs for an information collection. Of the two ICRs with the largest burden hour estimates at USDA, the Mandatory Country of Origin Labeling of Covered Commodities ICR includes fringe benefits, while the SNAP ICR does not. The SNAP ICR’s respondent time cost for state employees would have been $118 million higher if it had applied the same fringe benefit estimate (33 percent of the wage rate) as the Mandatory Country of Origin Labeling ICR. While different types of respondents (e.g., state employees, farmers, or doctors) may not receive the same percentage of wages as fringe benefits, the exclusion of such benefits leads to an underestimate of respondent time costs. OMB has not provided agencies with any formal, final guidance for calculating respondent time costs or applying fringe benefits. The PRA requires the Director of OMB to develop standards and guidelines for information collections. Additionally, Standards for Internal Control in the Federal Government states that management should externally communicate the necessary quality information to external parties to achieve the entity’s objectives. OMB provided non-binding draft guidance on reviewing agency information collections in 1999 that states that any wage rates used to estimate respondent time costs should be “fully-loaded” to reflect the full cost of labor, including employee fringe benefits, such as paid leave, insurance, and retirement contributions. OMB staff told us that OMB continues to believe that using “fully-loaded” wage rates is important. Without formal, final guidance clearly communicating how agencies should apply fringe benefits to respondent time cost estimates, agencies may continue to calculate costs inconsistently. Agencies’ inconsistent application of fringe benefits could contribute to agencies underestimating the burden costs. Such underestimation could contribute to inconsistent implementation of Executive Order 13771. As previously stated, OMB guidance implementing the Executive Order states that agencies may offset the incremental costs of new regulations through the repeal or streamlining of mandatory information collection burdens. HHS officials said that they have considered potential information collection burden reductions as part of their efforts to comply with the order. While USDA and IRS officials said that the agencies were aware of the order, they did not yet have specific plans to reduce information collection burden for the purposes of the order. Without clear guidance about how to consistently estimate respondent time costs, Congress and the administration cannot effectively compare information collection cost savings for the public. While our selected agencies reported having multiple levels of independent review processes in place as part of the overall process for preparing ICR burden estimates, we found instances where USDA, HHS, and DOT did not detect math errors or inconsistencies. We found multiple calculation errors in the supporting statements at three of the four selected agencies—USDA, HHS, and DOT—that over- or underestimated burden hours and costs to varying degrees, sometimes by millions of hours or hundreds of millions of dollars. We also found inconsistencies among estimates in Reginfo.gov and supporting statements. Reginfo.gov provides summary information to the public on information collections, including information on the estimated time and cost burdens. Supporting statements provide the public with more detailed information on the underlying methodology used to estimate burden, among other things. The PRA requires that agencies establish a process independent of program responsibility to review each ICR before submission to OMB for approval, including a specific, objectively supported estimate of the burden. Agency officials reported that reviewers assessed the reasonableness of burden estimates by reviewing calculations, comparing current estimates to previously approved estimates, or reading the accompanying narrative in the supporting statement, which contains the assumptions used in calculating burden hours and costs. However, the agencies we reviewed did not adequately follow their own review processes, resulting in estimates that misrepresented the burden hours and costs of information collection activities, as described in the following examples. Department of Agriculture: We found math errors in the supporting statement of USDA’s second largest ICR based on estimated burden hours. Specifically, we found that USDA’s Agricultural Marketing Service did not follow its stated assumptions in calculating burden hours and respondent time costs for the Mandatory Country of Origin Labeling ICR, resulting in an overestimation of hours and an underestimation of costs. By using the incorrect number of respondents when calculating burden hours, the Agricultural Marketing Service overestimated the Mandatory Country of Origin Labeling ICR’s total burden by 171,444 hours. In addition, the agency did not consistently apply its stated assumptions (e.g., about the average burden time per response) in the development of respondent time cost estimates, resulting in underestimated costs presented to the public, as shown in table 4. For instance, the ICR contained two different maintenance recordkeeping costs: one described in the narrative and another in the summary tables in the supporting statement. Both underestimated recordkeeping costs. Our review found that, had the agency’s stated assumptions been consistently applied, the actual cost estimate would have been approximately $463.2 million, or $104.5 million higher than the largest maintenance recordkeeping cost estimate in the supporting statement. According to Agricultural Marketing Service officials, external pressure and accelerated timelines resulted in a less effective review of the ICR. Agency officials acknowledged that they did not follow review processes or adequately review the supporting statement. An official said that the agency will ensure that estimates for this ICR are corrected in the future. Department of Health and Human Services: We found both math errors in the supporting statements and inconsistencies between the supporting statements and Reginfo.gov for some of HHS’s 50 largest IRCs based on estimated burden hours. Specifically, HHS did not detect calculation errors in the supporting statements in 6 of 50 ICRs (none of which were the top two case study ICRs for HHS) that we reviewed, resulting in incorrect burden hour or cost estimates. For example, in a Centers for Medicare & Medicaid Services (CMS) ICR, we found that the agency correctly stated its assumptions in the supporting statement but, due to a math error that was not detected during the review process, incorrectly calculated the respondent time cost in the second year of the collection based on these assumptions. Because it did not detect this error, HHS underestimated respondent time costs by approximately $14.4 million or about 40 percent of the published total respondent time costs in the second year for that ICR, as shown in table 5. In another ICR, published in July 2013, CMS overestimated the public’s burden by approximately 12.8 million hours. Agency officials attributed the discrepancy to two significant math errors. Officials said that these math errors were resolved and the burden hours recalculated in a subsequent renewal of the information collection in 2017. According to HHS officials, ICRs go through multiple levels of review before HHS approves the ICR. Program offices conduct an initial review of ICRs before passing them on to the Office of the Chief Information Officer (OCIO), which then conducts a final review of ICRs before final submission to OMB, including a basic check of the math used in calculating burden hours. Additionally, in 19 of the 50 HHS ICRs we reviewed, including HHS’s largest ICR and the two CMS examples above, we identified discrepancies in reported burden hours between the supporting statements and Reginfo.gov (see table 6). For the public to evaluate the methodology used to develop the final burden estimate posted on Reginfo.gov, the two sources need to be consistent. Reasons for such discrepancies, according to HHS officials, included data entry errors, estimate changes made in supporting statements that were not reflected on Reginfo.gov, and calculation errors. We also found 14 instances where HHS did not include an ICR supporting statement on Reginfo.gov. Based on our findings, HHS examined the discrepancies in table 6, and in June 2018 reported that all of the issues that we identified had been corrected. CMS said that in general most of the issues identified can be attributed to human error due in part to staff shortages and tight ICR submission timelines. CMS said that it takes the errors very seriously and will continue to work to refine its internal review processes to improve the quality of its ICR submissions. HHS officials attributed some the discrepancies between the burden estimates found in the supporting statements and the estimates found on Reginfo.gov to instances when OMB works directly with program offices within the department on revisions to a burden estimate without involving OCIO. For example, according to HHS officials, in one instance shown in table 6, the supporting statement reported an initial estimate of 30,708 burden hours. Later, the estimate was revised based on input that OMB provided directly to the program office and was reported on Reginfo.gov as 12,845,827 burden hours. OCIO was not aware that the change had been made. Officials from HHS OCIO said the office is working to improve coordination and serve more as an intermediary between OMB and HHS components. Department of Transportation: We found, and DOT officials acknowledged, a calculation error in the supporting statement for the Inspection, Repair, and Maintenance ICR, DOT’s second largest ICR based on estimated burden hours. In the ICR’s supporting statement, DOT calculated its total annual burden hours by using an average burden time per response of 170 seconds for one information collection activity. However, DOT did not include 30 seconds for one of the inspection tasks that was stated in the calculation’s assumptions found in the supporting statement. Officials said that this error may have been an inadvertent miscalculation and identified 200 seconds as the accurate average burden time per response. As a result, DOT underestimated the ICR’s total annual burden by approximately 450,000 hours, nearly 4 percent of the reported total annual burden hours for the ICR (see table 7). As part of its review process, DOT uses a checklist for reviewing ICRs, which includes checking the math for burden hours and costs in supporting statements. An official acknowledged that, while DOT follows its review process, the agency missed this calculation error at multiple steps. The official said that the information collection had been active for a long period of time and that not detecting the error was not material in terms of PRA compliance. However, this example illustrates that a small error of 30 seconds per response can have a large impact on the overall burden hour and cost estimate. The DOT official said that it will correct the error in a revised ICR. In the examples above, both OMB and agencies reviewed and approved the ICRs—including some of the largest ICRs at each of the agencies— but did not detect or address the math errors in the supporting statements, inconsistencies between published estimates in supporting statements and Reginfo.gov, or missing supporting statements during the review process, allowing incorrect burden hour and cost estimates to be publicly released. The PRA requires OMB to provide directions and oversee the review and approval of collections of information and the reduction of the information collection burden. OMB reviews the ICRs to ensure they are consistent with applicable laws and policies related to information quality. According to OMB officials, OMB desk officers check the burden calculations for consistency and reasonableness. The desk officers also check that the estimates are properly and consistently calculated. This includes reviewing the burden calculations to ensure that they are mathematically accurate. When we asked OMB officials about the ICRs cited in this report where we detected mathematical errors, they told us that they will review these ICRs to determine what response is needed. Until agencies ensure that their review processes adequately detect errors and inconsistencies, the agencies cannot ensure that their burden estimates are reliable, may result in less confidence in agencies’ ability to accurately compute and report burden and as such, less confidence in agencies’ ability to effectively manage and minimize the burden they impose on the public. According to the Standards for Internal Control in the Federal Government, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives. Therefore, if agencies’ review processes do not detect errors or inconsistencies in supporting documents, then the public may have inaccurate or incomplete information on the burden imposed by an information collection. Additionally, without reliable burden estimates and complete information, Congress and the administration cannot ensure that agencies’ efforts to reduce burden to comply with Executive Order 13771 are effective. Agencies met the PRA requirement to post Federal Register notices and solicit public comments for all 200 information collections that we reviewed. They generally received few, if any, comments from the public in response. We found that 161 ICRs solicited comments through 60- day notices. Table 8 shows that while 35 of the 161 ICRs received comments (including 3 of the top 8 case study ICRs), only 10 received comments that were related to the burden estimates (including only one case study ICR), according to the ICR supporting statement and related documents. Based on our review of these 10 comments, 2 comments resulted in increases to agencies’ burden estimates while another 5 resulted in no burden estimate change, but allowed the agency to further explain the basis for its estimates, and provided increased transparency for the public. For example, as a result of feedback from a trade association, USDA revised its burden hour estimate for a particular component of the National Organic Program ICR from 1 hour to 10 hours. The trade association said it would take 10 to 60 hours to develop a label and get it approved. Because this estimate was not based on a formal survey, USDA did not use the upper range provided by the commenter but did acknowledge that it may have underestimated the burden, according to the ICR supporting statement. In the other example, DOT officials revised the overall burden for an ICR on drivers’ medical certificates from 9.8 million hours to 10.2 million hours based on a comment that called to their attention an incorrect assumption about the collection’s frequency. The agencies also made more transparent the specific sources used to determine the burden estimates for five of the ICRs in response to public comments. For example, one comment prompted HHS to provide additional details on the components of the burden hour estimate for the ICR and identify the relevant source data. Officials at DOT and HHS said that, in some cases, they rely on public input in response to the 60-day Federal Register notices to validate their burden estimates, and if they do not receive any comments, they do not make any changes to the ICRs. For example, according to DOT officials, FMCSA relies on public comments to suggest revisions to ICRs that are up for renewal. In cases where no one has submitted any comments on the burden estimate, DOT officials reported that they assume the burden hour estimate per respondent is accurate and do not change the estimate. Despite the value of public input, agencies’ Federal Register notices did not always contain a complete description of the elements that make up the burden estimates. As a result, the public may not have had enough information to comment on the reasonableness of the estimates. PRA and OMB regulations require that agencies solicit comments from the public both in the Federal Register and through other means, in part to evaluate the accuracy of the agency’s burden estimate, including the validity of the methodology and assumptions used to calculate the burden. Generally, three basic elements of the burden estimate formula in the Federal Register notices provide the public with sufficient information to review the burden estimates. As previously stated, these elements are: (1) the number of respondents, (2) the frequency of response, and (3) the average burden time per response. However, agencies do not consistently include all of these elements in the Federal Register notices. Figures 4 and 5 show two examples of 60-day Federal Register notices in which agencies provided varying levels of detail on the burden hour estimates. In figure 5, USDA has provided burden information in its SNAP information collection by using tables and a summary that provides the estimated number of respondents, the frequency of response (i.e., number of responses per respondent), and the average burden time per response. In addition to providing data on these three elements, USDA grouped burden estimates by activity and type of respondent. This made it possible for the public to be able to review and comment on the specific assumptions used to develop the estimated hours per response. In particular, the notice shows burden data for time spent on the application, recertification application, reports, and notices for both state agencies and households. Conversely, figure 5 shows an example where IRS has only provided the estimated total annual burden hours for the ICR without providing any of the elements used to calculate the estimated burden hours—the frequency of the information collection, the number of respondents, and the average burden time per response. A member of the public is more likely to be able to meaningfully comment on the average burden time per response (e.g., 19 minutes for a household to complete the initial SNAP application, as shown in figure 4) than an aggregate estimate (e.g., 284,599 total burden hours to complete a form used to report and summarize income from rents, royalties, partnerships, and other sources, as shown in figure 5). In 9 of the 10 instances in which USDA, HHS, and DOT received comments related to the burden estimates, the 60-day notices contained either all of these required elements or sufficient information to be able to calculate all of these elements. Agencies that do not consistently include these basic elements of the burden estimate reduce the likelihood that the public will be able to provide meaningful input to improve the accuracy of their burden estimates. For the two ICRs that resulted in a change in the burden estimate, USDA and DOT included detailed information for the burden time per response in their respective 60-day notices, which allowed the public to comment on these estimates. As shown in table 9, of the 200 ICRs that we reviewed, 25 did not contain enough information to allow the public to reasonably determine the frequency of response, number of respondents, or average burden time per response: 13 at IRS, 11 at DOT, and 1 at HHS. In general, if agencies do not provide sufficient data for the elements needed to evaluate burden estimates, they may not benefit from receiving well- informed comments to ensure more reliable estimates, or to provide an opportunity for greater transparency concerning their rationale for existing burden estimates. Our analysis found that 13 IRS ICRs (none of which were case study ICRs) did not have enough information on the frequency of the collection to allow the public to reasonably review the burden estimate and thereby provide meaningful input. IRS officials said that they did not always include data on the frequency of the collection because it might cause confusion for those instances where only a portion of the respondent population will respond to the collection more than once in a given year. Instead, IRS officials noted that their current policy is to include the estimated number of respondents, the estimated time per response, and the estimated total burden hours in each Federal Register notice for ICRs. In early 2017, IRS established a new position to review ICRs and ensure that the agency’s PRA policies are properly implemented. According to IRS, this has helped to ensure that IRS includes estimated number of respondents, the estimated time per response, and the estimated total burden hours in each Federal Register notice. However, if IRS does not also report on the frequency of the collection and the frequency cannot be calculated using the other elements, the public may not be able to fully evaluate the burden estimate. According to a DOT official, in some instances, program officials did not follow DOT’s prescribed templates for Federal Register notices, which direct officials to include the number of respondents, the frequency of response, and burden time per respondent to be able to calculate the total annual burden hours in each notice. According to the DOT official, in response to our findings, DOT’s Office of General Counsel is conducting an education campaign to reinforce the necessity of providing fully transparent information regarding ICR burden during all stages of the notice process. In addition, DOT did not always include the average burden time per response in its Federal Register notices, in part because DOT’s templates do not direct officials to provide this information. A DOT official said that the templates presume that the individual reading the notice will have sufficient information to calculate this element. However, we found that average burden time per response could not reasonably be calculated using the other information provided in 10 of the notices that we reviewed in part because one or more other elements of the burden estimate were missing. Average burden time per response is a key element for the public to be able to reasonably evaluate the burden. A DOT official said that DOT plans to update the template based on our findings. The agencies we reviewed did not always consult with the public on information collections beyond Federal Register notices, as required by the PRA and regulations. While the PRA requires consultation on every ICR, OMB guidance only recommends public consultation in general but does not direct agencies to consult beyond the publication of the notices. When they did consult with the public, agencies did not always use these consultations as an opportunity to explicitly ask about burden hour estimates. Of the 200 information collections we reviewed, 113 contained information in their supporting statements indicating that the agencies performed public consultations beyond the Federal Register notices (see table 10). Only 3 of the 8 case study ICRs that we reviewed indicated that the agencies performed public consultations beyond the Federal Register notices. In the 50 ICRs we reviewed, DOT provided information about public consultation in about one-quarter of its ICR supporting statements. A DOT official stated that DOT generally conducts outreach through the rulemaking process through discussions with stakeholders about the activities and fundamentals of the rule. Through this outreach process, rather than speaking explicitly about estimated burden hours, DOT and stakeholders discuss what the regulations require and whether those requirements are burdensome. According to the official, stakeholders will tell OMB if the burden estimate is incorrect. But DOT generally does not conduct additional outreach about burden estimates during ICR renewals, which occur at least every 3 years. HHS also provided information about public consultation in about one-third of its ICRs. Agencies’ public consultation beyond the publication of Federal Register notices include federal advisory committee meetings, board meetings, webinars, and periodic stakeholder meetings. In addition, the outreach targeted a wide range of stakeholders, including associations, individuals subject to the information collection, and industry representatives. OMB’s guidance directs agencies to include descriptions in ICR supporting statements of efforts to consult with the public about information collection burden. However, only 6 of these 113 ICR supporting statements—4 at USDA and 2 at DOT—indicated that public outreach was related to the burden hour estimates, despite OMB’s guidance. Agencies generally did not use public consultation beyond the publication of Federal Register notices to seek input on burden estimates. For example, USDA officials said that the Agricultural Marketing Service engages industry on a regular basis through meetings and seminars, but that it does not explicitly ask for feedback on the ICR burden hour or cost estimates and assume that industry representatives will raise any existing issues with the ICRs at these meetings. At HHS, Office for Civil Rights (OCR) officials stated that there are instances where they receive feedback during conferences or through communications initiated by the public or members of Congress. However, OCR officials let people bring up the subject of the accuracy of OCR’s burden hour estimates on their own. At DOT, for five of the six Federal Railroad Administration ICRs we reviewed that involved consultation with the Railroad Safety Advisory Committee, the supporting statements do not show evidence of discussions of the ICRs’ burden estimates during committee meetings, and the agency did not reference any comments on these estimates or summarize them in the supporting statements. At IRS, 40 of the 43 IRS ICR supporting statements that identified public consultation specifically highlighted periodic meetings to discuss tax laws and tax forms with representatives of professional associations in the fields of law and accounting. IRS officials said that they do not specifically raise the issue of burden hour estimates during these meetings, but only ask stakeholders for general comments. The lack of public consultation beyond Federal Register notices is due, in part, to a lack of guidance from OMB. In 2005, we recommended that OMB alter its current guidance to all federal agencies to direct agencies to consult with potential respondents beyond the publication of Federal Register notices. OMB disagreed with this recommendation, stating that it interprets publication in the Federal Register as the principal means of agency consultation with the public, with PRA notices on forms providing an opportunity for further public input. OMB staff told us in January 2018 that they still hold this view. Specifically, OMB staff said that additional consulting should occur for those ICRs where important information may be missed by the notice and comment period. In a June 2018 conversation, OMB staff acknowledged that public consultation could be particularly beneficial the first time that an ICR is renewed after the initial approval. At that point, the public will have had its first experiences responding to the information collection, which can inform its feedback to agencies. However, given the different types of changes that can occur over time that could affect burden estimates—such as changes in technology, the economy, and the original source data used to generate burden estimates—we continue to believe that it is important to actively consult with the public on each renewal, particularly given the low level of response that agencies receive in response to Federal Register notices for ICR renewals. In our 2005 report, agencies also expressed concerns that consultation for every ICR would not be a good use of agency resources. Officials stated that the greatest opportunity is at the rulemaking stage. However, as previously discussed, agencies have existing public outreach efforts whose broader use would not require significant additional time and resources. Without leveraging opportunities to engage in direct public consultation with the public for every ICR, agencies may miss opportunities to obtain additional comments on ICRs, which some agencies stated they rely on to check the accuracy of their estimates and in two cases have resulted in significant revisions. Further, emphasizing those elements of the burden estimate where quality data are limited and stakeholder experiences are most relevant (e.g., the time per response) could help agencies focus outreach on the most pertinent information. We maintain that the PRA requirement regarding public consultation in addition to the 60-day Federal Register notice is clear: both requirements are introduced together, with no distinction between them: agencies shall “provide 60-day notice in the Federal Register, and otherwise consult with members of the public and affected agencies concerning each proposed collection.” Based on our review of the four agencies, we believe that such consultation can be completed in an efficient and effective consultation manner using many of the outreach mechanisms currently in place. However, given OMB’s continued disagreement with our 2005 recommendation, congressional action may be needed to clarify the language in the PRA to more explicitly require federal agencies to consult with potential respondents on each information collection beyond the publication of Federal Register notices. One of the PRA’s key requirements is for agencies to produce estimates of the burden that information collections will impose on the public. This information is essential for agencies to appropriately balance the burden of these information collections with their public benefit and for properly measuring progress toward applicable burden reduction goals. The PRA provides two mechanisms to help ensure the quality of these estimates: a multi-layered independent review process and mandatory public consultation requirements. However, the errors, omissions, and other discrepancies that we found in agencies’ ICRs indicate these mechanisms are not operating as effectively as they could be. Independent review processes are only able to ensure an accurate and reliable estimate when agencies and OMB use them consistently to detect errors and correct them. However, we found that USDA, HHS, and DOT failed to adequately apply their own review processes, resulting errors and discrepancies between the supporting statement and Reginfo.gov. Similarly, OMB approved ICRs containing mathematical errors in the supporting statements and inconsistencies between the supporting statements and Reginfo.gov. If the agencies’ and OMB’s review processes do not detect mathematical errors and inconsistencies, then Congress and the public may have inaccurate or incomplete information on the estimated burden imposed by an information collection may result in less confidence in agencies’ abilities to accurately compute and report the burden and as such, less confidence in agencies’ ability to effectively manage and minimize the burden they impose on the public. As part of its review process, OMB also reviews ICRs for compliance with PRA and applicable regulations, and policies. However, OMB approved numerous ICRs without the required respondent time cost information. If OMB does not take action to ensure that agencies consistently follow its guidance to include respondent time costs, agencies will likely continue to and omit this information. In addition, OMB’s current formal guidance does not offer specific instructions on when and how to include fringe benefits like paid leave and retirement contributions in respondent time costs. Without clear guidance, agencies may continue to inconsistently estimate respondent time costs, which could potentially result in underestimated time costs at some agencies as well as inconsistent implementation of efforts to reduce regulatory burden. Public input, when available, often resulted in improvements in the quality of agencies’ burden estimates. However, the four agencies are missing opportunities to improve the quality of their estimates by not better leveraging existing public outreach efforts. While Federal Register notices provide the public with an opportunity to comment on the burden estimates, we found that DOT and IRS did not always provide sufficient information in their notices on the methodologies used to calculate the burden to allow the public to meaningfully comment on agencies’ burden estimates. At the same time, given the few comments that agencies receive in response to these notices, it is clear that Federal Register notices alone are not sufficient. We found that agencies are already actively engaging with stakeholders through a number of means, including federal advisory committee meetings, periodic stakeholder meetings, and webinars, but are not fully using these opportunities to explicitly seek input on their burden estimates. Emphasizing those elements of the burden estimate (e.g., average time per response) during these events could help the agencies target their outreach on the most pertinent information. IRS uses a methodically rigorous process to develop the initial burden estimates for the federal government’s two largest information collections—U.S. Individual and Business Tax Return ICRs. This process includes gathering detailed information from the public on the time and money spent on tax preparation through its taxpayer surveys. IRS plans to transition additional information collections to this more rigorous approach in the coming years. This could improve the quality of burden hour estimates and provide the cost estimates that IRS is currently lacking for other collections. IRS could also do more do consult with the public after the initial burden estimate has been developed. IRS reported that it already periodically meets with representatives from professional associations to discuss tax laws and tax forms. If IRS used these opportunities to explicitly seek input on the initial burden estimate, the agency could both obtain valuable feedback on burden estimates and comply with the consultation requirements in PRA. OMB could help ensure that agencies more consistently obtain valuable public input on each of their ICRs by providing guidance directing agencies to consult with the public beyond the Federal Register notices on every ICR, as required in the PRA and as we previously recommended. However, while we consider the PRA requirement regarding public consultation in addition to the 60-day Federal Register notice for each ICR to be clear, OMB continues to believe that additional consulting should occur for those ICRs where important information may be missed by the public notice and comment period. We maintain that agencies should comply with the additional consultation requirement in the PRA. We acknowledge OMB’s concerns that public consultation not overly be burdensome to agencies. However, we found that the agencies we reviewed have already identified efficient and effective mechanisms for gathering input from the public, such as through periodic stakeholder meetings and webinars. Given that OMB continues to disagree with our 2005 recommendation, congressional action to clarify the legal requirement may be required. We are making the following matter for congressional consideration: Congress should consider amending the Paperwork Reduction Act to more explicitly require federal agencies to consult with potential respondents on each information collection beyond the publication of Federal Register notices using efficient and effective consultation methods. (Matter for Consideration 1) We are making a total of 11 recommendations, including 2 to OMB; 2 each to the Departments of Agriculture and Health and Human Services; 3 to the Department of Transportation; and 2 to the Internal Revenue Service. The Director of OMB should ensure the consistent application of the requirement for respondent time costs, including clarifying instructions for when and how to include fringe benefits. (Recommendation 1) The Director of OMB should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 2) The Secretary of Agriculture should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 3) The Secretary of Agriculture should leverage existing consultation with stakeholders and the public to explicitly seek input on the burden imposed by information collections. (Recommendation 4) The Secretary of Health and Human Services should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 5) The Secretary of Health and Human Services should leverage existing consultation with stakeholders and the public to explicitly seek input on the estimated burden imposed by information collections. (Recommendation 6) The Secretary of Transportation should review the policies, procedures, and related control activities to ensure that the agency’s Paperwork Reduction Act review process is operating effectively. (Recommendation 7) The Secretary of Transportation should leverage existing consultation with stakeholders and the public to explicitly seek input on the estimated burden imposed by information collections. (Recommendation 8) The Secretary of Transportation should include enough information in Federal Register notices to allow the public to reasonably calculate or determine the number of respondents, the frequency of response, and the average burden time per response for each information collection activity. (Recommendation 9) The Commissioner of Internal Revenue should leverage existing consultation with stakeholders and the public to explicitly seek input on the estimated burden imposed by information collections. (Recommendation 10) The Commissioner of Internal Revenue should include enough information in Federal Register notices to allow the public to reasonably calculate or determine the number of respondents, the frequency of response, and the average burden time per response for each information collection activity. (Recommendation 11) We provided a draft of this report to the Director of OMB; the Secretaries of USDA, HHS, DOT; and the Commissioner of the IRS for comment, respectively. OMB did not provide written comments, and OMB staff informed us that OMB neither agreed nor disagreed with our recommendations to the agency. The Audit Liaison from the USDA’s Office of the Chief Information Officer informed us in an email that USDA concurs with our recommendations to the agency. HHS, DOT, and IRS provided written comments, which we have reprinted in appendixes II, III and IV. In its written comments, HHS and DOT concurred with our recommendations to the agencies. HHS said it intends to continually review PRA processes and procedures as well as closely monitor their implementation to further reduce human error. DOT stated that the agency has taken action to improve its PRA program, and reported that it issued a new Federal Register notice for its Inspection, Repair, and Maintenance ICR to address mathematical errors identified in this report. In its written comments, IRS also concurred with our recommendations to the agency. However, IRS stated that its existing PRA policies and procedures sufficiently address the PRA requirements. In response to our recommendation on leveraging existing consultation mechanisms to obtain public comments on ICR burdens, IRS noted its public participation process includes consultation with stakeholders. Specifically, IRS said that, as resources allow, it partners with industry and stakeholder groups to consult with taxpayers on tax product development and assess the burden experience in understanding the tax forms and complying with requirements to complete them. However, we believe that IRS could better leverage this stakeholder consultation. Our analysis of supporting statements and interviews with IRS officials indicates that IRS did not explicitly seek input on burden estimates for its largest collections during these consultations. Soliciting input through the published forms themselves provides additional opportunities to obtain valuable stakeholder input, but it is not a substitute for actively reaching out to stakeholders for input on its burden estimates prior to approval, which could be readily accomplished through the mechanisms IRS already has in place for stakeholder consultation. In response to our recommendation on providing the public with sufficient information in its public notices to allow the public to evaluate an ICR’s burden, IRS acknowledged that public notices issued before February 2017 may not have included all the elements needed by the public to be able to evaluate the burden estimates (number of respondents, frequency of response, and average burden time per response). However, according to IRS, the agency has since implemented a procedure to ensure that these elements are in the ICRs and that recent ICR public notices contain all three elements. If effectively implemented, these new procedures could help ensure that the public has the information it needs to review and provide input to on the specific assumptions used to develop the burden estimates. The public notices we reviewed for this report were all published prior to February 2017. When we spoke with IRS officials in February 2018, they said that their current policy is to include the estimated number of respondents, the estimated time per response, and the estimated total burden hours in each Federal Register notice for ICRs. IRS officials added that they did not always include data on the frequency of the collection because it might cause confusion for those instances where only a portion of the respondent population will respond to the collection more than once in a given year. Although IRS stated in its written comments that it had implemented new procedures to include all the necessary elements, we found some ICRs issued after February 2017 that do not contain the necessary elements, including frequency, to allow the public to evaluate the specific assumptions used to develop the burden estimates. We will follow-up with IRS to ensure that new ICR procedures fully address the issues we identified. OMB, USDA, HHS, and DOT also provided technical comments, which we incorporated as appropriate throughout our report. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Director of the Office of Management and Budget; the Secretaries of the Departments of Agriculture, Health and Human Services, and Transportation; and the Commissioner of the Internal Revenue Service, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact Tranchau (Kris) T. Nguyen at (202) 512-2660 or Nguyentt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix V. This report examines (1) how agencies estimate both the burden hours and costs of their information collections, and any limitations of their approaches, and (2) the extent to which agencies consult with and receive comments from the public on the collections’ estimated burden. To address both of these objectives, we reviewed Office of Management and Budget (OMB) data on federal information collection requests (ICR) available on Reginfo.gov as of April 7, 2017. To obtain more information about the ICR process at the agency level, we selected four agencies to serve as case studies. We identified the four agencies with the largest number of total annual estimated burden hours across the federal government based on the Reginfo.gov data. The selected agencies are the Internal Revenue Service (IRS)—which alone accounts for approximately 70 percent of the federal government’s total information collection burden hours—and the Departments of Health and Human Services (HHS), Agriculture (USDA), and Transportation (DOT). HHS represents 12 percent of the total burden hours in the federal government, while USDA and DOT each represent 2 percent of the federal information collections burden. The four selected agencies represent more than 85 percent of the total estimated burden hours across the federal government. For each of the four agencies, we selected the 50 largest ICRs based on total annual burden hours, for a total of 200 ICRs, to provide us with information about the agencies’ efforts to consult with the public and their approach for estimating burden hours, respondent time costs, and resource costs related to each ICR. As part of this analysis, we reviewed information about (1) burden hour and (2) cost estimates and public consultation from Reginfo.gov and the ICR supporting statement. To obtain a more detailed understanding of the methodologies, policies, and public outreach efforts related to estimating and reviewing the burden associated with each ICR, we selected the two ICRs with the largest burden hour estimates from each selected agency as case studies. The eight case study ICRs, shown in table 11, represent the majority of information collection burden at each agency and roughly 59 percent of the federal government’s total burden hours. We reviewed the supporting statements for each case study ICR to determine how the agencies calculated burden hours, respondent time costs, and respondent resource costs. We reviewed the Federal Register notices issued by the agencies to solicit comments from the general public on these ICRs, as well as the comments received in response to the 60-day notices. We reviewed the Paperwork Reduction Act and OMB guidance issued to assist agencies in developing and reviewing their information collections. We interviewed knowledgeable officials at the four selected agencies to obtain information on the methodologies used to estimate burden time and costs, the processes and policies for ICR review and submission, and public participation in providing comments about the burden estimates. In addition, we interviewed OMB staff to obtain information about its role in reviewing ICRs submitted by agencies, as well as its relationship with the selected agencies. To assess the reliability of Reginfo.gov data on burden hours and annualized costs for each ICR, we interviewed OMB staff and reviewed documentation of the Reginfo.gov website and the Regulatory Information Service Center/Office of Information and Regulatory Affairs Consolidated Information System (ROCIS), which is the system that agencies use to track information collection requests and that underlies information provided on Reginfo.gov. We compared the data from Reginfo.gov with the data found in the supporting statements. We interviewed agency officials and OMB staff about the discrepancies between these two information sources. We found that the Reginfo.gov data were sufficiently reliable for the purpose of selecting the case study agencies and ICRs subject to our review. We conducted this performance audit from January 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the above contact, Thomas J. McCabe (Assistant Director) and Joseph L. Santiago (Analyst-in-Charge) supervised the development of this report. Michael Bechetti, Tim Bober, Alyssia Borsella, Jaqueline Chapin, Steven Flint, Tim Guinane, Heather Krause, Ying Long, Sharon Miller, Ed Nannenhorn, Kayla Robinson, Robert Robinson, Cindy Saunders, Wesley Sholtes, and Chris Zakroff made major contributions to this report. Dawn Bidne, Jeffrey DeMarco, Jessica Nierenberg, and Laurel Plume verified the contents of this report.", "summary": "Federal agencies collect a wide variety of information to ensure the public is kept safe from harm, receives benefits to which they are entitled, and fulfill their missions. Such collections can also impose significant burdens on the public. The goal of the PRA is to minimize the burden of these collections and maximize their utility. To help accomplish this, the PRA requires agencies to estimate the burden, and consult with the public on these estimates. This report examines (1) how agencies estimate burden hours and costs of their collections, and any limitations of agencies' approaches; and (2) the extent to which agencies consult with the public on estimated burden. To address these objectives, GAO selected four agencies with the largest burden hour estimates, reviewed the 50 ICRs with the largest burden hour estimates at each agency, with a focus on the 2 largest ICRs at each as case studies, and interviewed agency officials and OMB staff. Agencies GAO reviewed—the Departments of Agriculture (USDA), Health and Human Services (HHS), and Transportation (DOT), and the Internal Revenue Service (IRS)—generally used existing data, such as historical data, to estimate the time, or “burden hours,” it takes for the public to complete an information collection request (ICR). IRS reported gathering original data on public burden through surveys of taxpayers to help estimate the burden for its two largest ICRs. When data were unavailable for one or more elements of the burden calculation (e.g., average time per response), agencies relied on professional judgment, informed in some instances by internal consultation with issue area experts. GAO found two limitations with the agencies' current approaches for estimating burden. First, 76 of 200 ICRs that GAO reviewed, including the 2 largest ICRs at IRS and DOT, did not translate burden hours into dollars, or estimated “respondent time costs.” Although the Office of Management and Budget (OMB) requires agencies to include these costs, it reviewed and approved all 76 ICRs. ICRs that included respondent time costs did not consistently include fringe benefits, such as insurance contributions, in part because of a lack of clear guidance from OMB. Inconsistencies in estimating respondent time costs could lead to inconsistent implementation of new requirements under Executive Order 13771 that agencies offset the incremental costs of new regulations with reductions in regulatory burden, including paperwork burden, elsewhere. Second, while all agencies and OMB reported having independent review processes in place, as required by the Paperwork Reduction Act (PRA), GAO found instances where 3 of the 4 selected agencies—USDA, HHS, and DOT—did not detect math errors through these review processes or inconsistencies among estimates provided on Reginfo.gov, and in the more detailed ICR supporting statements. For example, GAO found that one ICR underestimated burden by as much as $270 million, and another overestimated burden time by more than 12 million hours. Agencies acknowledged they followed their review processes but not detect the errors and inconsistencies. OMB also did not detect the errors and inconsistencies in its review of the ICRs. Until agencies ensure that their review processes detect errors or inconsistencies, the public may have less confidence in agencies' ability to effectively manage and minimize burden. While the agencies solicited public comments through the Federal Register , as required by the PRA, IRS and DOT did not always provide the level of information in the notices (e.g., the frequency of the collection) needed to allow the public to evaluate the burden estimates. Also, agencies did not always consult with the public beyond these notices, as required under the PRA. Of the 200 ICRs GAO reviewed, 113 contained information in their supporting statements indicating public consultation beyond the Federal Register notices. Only 6 of these 113 indicated that public outreach was related to the burden hour estimates. OMB could help ensure that agencies consistently obtain public input by directing agencies to consult with the public beyond the Federal Register notices on each ICR, as required in the PRA. However, OMB continues to believe that additional consulting should occur only for ICRs where important information may be missed by the public notice and comment period. Congressional action to clarify the PRA requirement may be needed. Congress should consider more explicitly requiring agencies to consult with the public beyond the Federal Register notices. GAO is also making 11 recommendations: 1 to OMB on ensuring consistent application of the requirement for estimating respondent time costs; 4 on reexamining processes for reviewing ICRs to OMB, USDA, HHS, and DOT; 2 on improving public notices to IRS and DOT; and 4 on better leveraging existing public consultation to USDA, HHS, DOT, and IRS. USDA, HHS, DOT, and IRS agreed with the recommendations. OMB staff did not agree or disagree.", "document_type": "gao"}
{"report": "Air Force aircraft maintainers are assigned to a specific maintenance specialty and, in some cases, also to a specific aircraft on which they are qualified to perform maintenance. As of April 2018, the Air Force had 37 enlisted maintenance specialties, each designated by an Air Force Specialty Code. See table 1 for examples of various Air Force maintenance specialties and examples of aircraft specific to those specialties, if applicable. According to officials, following basic training, most airmen assigned to the aircraft maintenance career field attend some portion of technical school at Sheppard Air Force Base in Texas. Depending on the maintenance specialty, some maintainers may continue their technical training at a second location. For example, maintainers specializing on the F-35 complete additional training at Eglin Air Force Base in Florida after completing initial courses at Sheppard Air Force Base. Maintainers spend anywhere from 23 to 133 academic days in technical school learning about aircraft maintenance fundamentals and their specific maintenance specialties through a mix of classroom instruction and hands-on training. Hands-on training is conducted on both partially- functioning components of aircraft—called “trainers”—that replicate tasks on working aircraft, and on ground instructional training aircraft. Figure 1 shows various training equipment used by maintainers during technical school. Air Force aircraft maintainers complete technical school as 3-levels, or apprentices. Maintainers are eligible to advance to the 5-level (journeyman) after completing additional coursework and a minimum of 12 months of on-the-job training. According to Air Force data, depending on the maintenance specialty, it takes an average of 1 to 2 years to advance to the 5-level. Maintainers are eligible to enter upgrade training to advance to the 7-level after being selected for the rank of Staff Sergeant. According to Air Force officials, the average time in service for promotion selection is 4.4 years. The 7-level is achieved by completing additional coursework, and completing a minimum of 12 months of on- the-job training. Depending on the maintenance specialty, it takes maintainers an average of 1 to 2 years after entering upgrade training to advance to the 7-level. Figure 2 shows an overview of the Air Force’s aircraft maintainer training process and skill-level advancement. Department of Defense (DOD) Directive 1100.4 states that staffing requirements are driven by workload and shall be established at the minimum levels necessary to accomplish mission and performance objectives. In addition, assigned missions shall be accomplished using the least costly mix of personnel (military, civilian, and contract) consistent with military requirements and other needs of DOD as prescribed in Title 10, United States Code. Air Force officials reported that they fill their requirements based on the number of those requirements that are funded—called authorized staffing levels—and the number of trained and qualified personnel available to be staffed to those positions. In this report, we refer to the number of maintainers available to fill authorized staffing levels as actual staffing levels. The Air Force uses the Logistics Composite Model to determine maintainer staffing requirements. The model is a statistical simulation that estimates monthly labor-hours and personnel required to accomplish direct maintenance tasks. According to an Air Force official, locations are staffed according to the worldwide average for each particular maintenance specialty. For example, if the crew chief maintenance specialty worldwide is staffed at 88 percent, the Air Force would staff each overseas Major Command at 88 percent and distribute those resources to ensure the bases are staffed at that worldwide average, followed by domestic locations. An Air Force official stated that there are a number of reasons why a particular location may be staffed below or over the worldwide average, such as early releases from tours. Maintainers in the commercial aviation industry are commonly employed by commercial air carriers, corporate flight departments, repair stations, or manufacturers of aircraft or aircraft components. Aircraft mechanics inspect, service, and repair aircraft bodies (airframe) and engines (power plant). Aircraft mechanics can earn a mechanic certificate from the Federal Aviation Administration with an airframe rating, power plant rating, or combined airframe and power plant rating, and are referred to as certificated mechanics. According to Federal Aviation Administration data, almost all certificated mechanics hold airframe and power plant ratings. Certification is not necessary to work as an aircraft mechanic; however, without it, a mechanic cannot approve an aircraft for return to service and must be supervised by a certificated mechanic. Certificated mechanics that hold airframe and power plant ratings generally earn a higher wage and are more desirable to employers than mechanics who are not certificated, according to the Bureau of Labor Statistics. For an applicant to be authorized to take the mechanics examination for the combined airframe and power plant rating, the applicant must either (1) complete a Federal Aviation Administration-certificated aviation maintenance technician school, and demonstrate and document relevant airframe and power plant work experience gained through on-the-job training, or (2) demonstrate and document work experience or some combination of work experience and education gained through the military working with airframes and engines. Since 2002, the Community College of the Air Force has administered the Federal Aviation Administration-approved Joint Services Aviation Maintenance Technician Certification Council (the Joint Services Council) program that, upon completion, confers a certificate of eligibility— equivalent to a training program diploma—to take the airframe and power plant exam. According to Community College of the Air Force officials, although the airframe and power plant certificate is not required for Air Force maintainer work, it does benefit maintainers’ potential career prospects. The Joint Services Council’s program is available to members of all services who have attained minimum requirements in aviation maintenance—typically after 3 years of experience in a related position— and includes three self-paced courses taken online in addition to on-the- job training. Additionally, the Air Force has established its Credentialing Opportunities On-Line program to help airmen find information on certifications and licenses related to their jobs. The program requires that the courses be accredited and be sought after within their industry or sector as a recognized, preferred, or required credential. The program also provides some funding assistance in obtaining airframe and power plant certificates. Since fiscal year 2016, the Air Force has taken steps to significantly reduce the gap between actual aircraft maintainer staffing levels and authorized levels, a gap which exceeded 4,000 maintainers in fiscal year 2015. However, gaps remain for experienced maintainers—those at the 5- and 7-levels who are most qualified to meet mission needs. The Air Force’s reserve component has also experienced aircraft maintainer staffing gaps over the past 8 fiscal years, although the Air National Guard’s gaps have been more consistent and significant than those of the Air Force Reserve Command. Since fiscal year 2016, the Air Force has taken steps to significantly reduce overall enlisted aircraft maintainer staffing gaps. According to our analysis of Air Force data, for all aircraft maintenance specialties combined, the Air Force reduced the gap between actual staffing levels and authorized levels from a peak of 4,016 maintainers (94 percent of authorized levels filled) in fiscal year 2015 to 745 maintainers (99 percent) in fiscal year 2017. In addition to a reduction in overall gaps, the number of maintenance specialties experiencing staffing gaps also decreased over this period. Specifically, while 12 maintenance specialties had actual staffing levels that were less than 90 percent of authorized levels in fiscal year 2015, only 4 did in fiscal year 2017. Additionally, in fiscal year 2017, actual staffing levels for 18 of the Air Force’s maintenance specialties met or exceeded authorized levels. While the Air Force had a surplus of 1,705 maintainers in fiscal year 2010 (103 percent of authorized levels filled), actual staffing levels decreased to 99 percent of authorized levels in fiscal year 2011, and continued to decrease through fiscal year 2015. Air Force officials attributed these staffing gaps to an increase in authorized positions—due to the acquisition of the F-35 and increased maintenance needs for legacy aircraft, such as the F-15, F-16, and B-52—and a decrease in actual staffing levels, due to a reduction in end-strength from fiscal years 2014 through 2015. These officials stated that the Air Force reduced its actual maintainer staffing levels through involuntary separations and reduced accessions due, in part, to the planned divestiture of the A-10 and other aircraft. However, these officials stated that the divestiture did not occur, which contributed to further staffing gaps. Since fiscal year 2016, the Air Force has taken a number of steps to reduce aircraft maintainer staffing gaps, such as increasing accessions and, beginning in fiscal year 2017, contracting out some maintenance positions. The Air Force also issued memorandums in August 2016 and September 2017 that restricted the ability of certain maintainers to retrain to a career field outside of aircraft maintenance. Additionally, from fiscal years 2016 through 2018, through the High Year of Tenure Extension Program, the Air Force extended the maximum number of years that maintainers in certain maintenance specialties could remain on active duty. According to October 2018 testimony, the Secretary of the Air Force stated that the Air Force planned to eliminate the overall maintainer staffing gap by December 2018. Air Force officials acknowledged that while staffing levels have started to improve since the reduction in end- strength, they anticipate that the Air Force will continue to experience maintainer staffing gaps off and on through fiscal year 2023, when the gap is projected to be about 500 maintainers, due, in part, to an increase in F-35 maintenance requirements. According to these officials, this estimate is based on recruitment cycles and retention trends, and could change if there are any programmatic changes, such as the addition or divestment of any aircraft types. Over the past 8 fiscal years, the Air Force has accepted some level of risk in deciding how much of its maintainer requirements to fund. For example, according to our analysis, from fiscal years 2010 through 2017, the Air Force authorized or funded 95 to 97 percent of its maintainer requirements across maintenance specialties—that is, about 1,800 to 3,900 requirements were not funded each year. According to DOD officials, across all Air Force specialties decisions have to be made about how to fund requirements, and it is not uncommon for authorized levels to fall below requirements. Figure 3 compares the Air Force’s active component aircraft maintainer staffing levels, authorized levels, and requirements for all maintenance specialties combined over the past 8 fiscal years. Air Force officials acknowledged that when taking into account increases in requirements—due in part to aging aircraft systems—maintainer staffing gaps have been higher than reported. Specifically, while the gap between actual and authorized staffing levels exceeded 4,000 maintainers in fiscal year 2015, when considering the number of requirements that were not funded, the gap was about 5,800 maintainers. Moreover, while maintainer requirements increased by about 1,200 between fiscal years 2015 and 2017, the number of authorized positions only increased by 120. Our analysis of Air Force data found that the Air Force has had staffing gaps of experienced aircraft maintainers—those at the 5- and 7-levels—in 7 of the past 8 fiscal years. While the Air Force’s actual maintainer staffing levels were 99 percent of authorized levels in fiscal year 2017, 3- level maintainers were the only skill level without a staffing gap. Specifically, in fiscal year 2017, the Air Force had a gap of 2,044 5-level maintainers (94 percent of authorized levels filled) and a gap of 439 7- level maintainers (97 percent). However, the Air Force had a surplus of 1,745 3-level maintainers (112 percent). Figure 4 compares, by skill level, actual aircraft maintainer staffing levels with authorized levels for all active component maintenance specialties combined over the past 8 fiscal years. In fiscal years 2015 and 2016, the Air Force had significant gaps of 3- level maintainers—3,536 and 2,401, respectively—due to a decrease in accessions as part of its reduction in end strength. Air Force officials stated that these previous staffing gaps of 3-level maintainers have contributed to the current staffing gap of 5-level maintainers, since maintainers who were at the 3-level in fiscal years 2015 and 2016 would have likely upgraded to the 5-level by fiscal year 2017. These officials stated that, similarly, the current staffing gap of 5-level maintainers is expected to contribute to an increase in the size of the 7-level maintainer staffing gap over the next few fiscal years. In fiscal year 2017, certain maintenance specialties and aircraft faced greater experience gaps than others. For example, the advanced fighter aircraft integrated avionics specialty had a gap of 140 7-level maintainers (70 percent of authorized levels filled) and a gap of 56 5-level maintainers—all specifically trained on the F-35 (78 percent). In contrast, the aerospace ground equipment specialty had a surplus of 28 7-level maintainers (104 percent). Table 2 shows authorized versus actual staffing levels for select active component maintenance specialties and aircraft, by skill level, in fiscal year 2017. Air Force officials stated that it is important to have a balance of maintainer experience levels, but noted that current experience imbalances cannot be corrected as quickly as overall staffing gaps because rebuilding experience takes time. As previously discussed, depending on the maintenance specialty, the average time to upgrade from a 3-level to a 5-level ranges from 1 to 2 years, and the average time to upgrade from a 5-level to a 7-level after entering upgrade training is 1 to 2 years. Air Force officials highlighted that there is no substitute for experience. Noting that new 3-level maintainers will initially lack the experience and proficiency needed to meet mission needs—and will require supervision to oversee their technical progression—the Air Force has taken steps to ensure that experienced maintainers are assigned to maintenance roles that will improve operational readiness and influence the growing workforce. Specifically, the Air Force Deputy Chief of Staff for Logistics, Engineering and Force Protection issued a memorandum in July 2016 to all of the Major Command Vice Commanders noting the importance of maximizing utilization of experienced maintenance personnel in mission generation and repair network jobs. Air Force officials stated that it is critical that experienced maintainers be in the field training the surplus of new 3-level maintainers and getting them the experience they need. In addition, beginning in fiscal year 2017, in order to retrain 600 experienced maintainers on the F-35, the Air Force contracted some aircraft maintenance for three legacy aircraft in certain locations. These maintenance contracts are to run from fiscal years 2017 through 2020. Over the past 8 fiscal years, the Air Force’s reserve component has also experienced aircraft maintainer staffing gaps; however, the Air National Guard’s gaps have been more consistent and significant than those of the Air Force Reserve Command. Figure 5 compares actual aircraft maintainer staffing levels with authorized levels for the Air National Guard and the Air Force Reserve Command over the past 8 fiscal years. According to our analysis, the Air National Guard has had consistent aircraft maintainer staffing gaps from fiscal years 2010 through 2017— ranging from 84 percent to 89 percent of authorized levels filled. In fiscal year 2017, the Air National Guard had a staffing gap of 3,219 maintainers (87 percent of authorized levels filled), which was primarily spread evenly across 5- and 7-level maintainers. The Air National Guard’s staffing gaps have remained despite a significant decrease in authorizations over this period. Specifically, the Air National Guard’s authorized positions decreased from 28,654 in fiscal year 2010, to 24,198 in fiscal year 2017. Air National Guard officials stated that the decrease in authorizations is a result of mission and aircraft changes—in particular, while the Guard has increased its use of unmanned aerial systems, it primarily relies on contract maintenance for those systems, reducing the need for Air Force maintainers. In comparison, the Air Force Reserve Command experienced smaller maintainer staffing gaps over the past 8 fiscal years. According to our analysis, the percent of authorized levels filled ranged from a low of 95 percent in fiscal year 2010 (a gap of 733 maintainers), to a high of 103 percent in fiscal year 2013 (a surplus of 514). In fiscal year 2017, the Air Force Reserve Command had an overall staffing gap of 374 maintainers (97 percent of authorized levels filled), which primarily consisted of 7-level maintainers. Specifically, in fiscal year 2017, the Air Force Reserve Command had a gap of 777 7-level maintainers (89 percent of authorized levels filled), and a surplus of 566 5-level maintainers (108 percent). Officials from both the Air National Guard and the Air Force Reserve Command stated that aircraft maintainer staffing levels differ by wing and location. For example, Air Force Reserve Command officials noted that maintainer requirements have recently increased at certain Air Force bases due to the arrival of fifth-generation fighter aircraft, and that while those locations are working to increase their maintainer staffing levels, they are currently below authorized levels. Air Force Reserve Command officials identified a strong economy with multiple civilian employment opportunities, disparities in active duty versus technician pay, and long hiring processes as factors affecting its full-time maintainer staffing levels. As a result, these officials noted that that they are looking at ways to improve maintainer retention. Air National Guard officials stated that any maintainer-specific recruitment or retention challenges would be identified and addressed at the local level and that, as a result, they were unable to describe challenges Air National Guard-wide. The Air Force has had challenges retaining experienced maintainers, with loss rates of 5-level maintainers increasing over the past 8 fiscal years. While the commercial aviation industry is experiencing similar staffing challenges, the effects of these challenges on the Air Force’s maintainer workforce are unknown. In addition, since fiscal year 2015, the Air Force has increased retention bonuses to improve retention among certain critical maintenance specialties, but the Air Force does not have retention goals or an overall strategy to help retain maintainers and sustain recent staffing level improvements. The Air Force monitors maintainer retention through loss rates—the percentage of maintainers who leave the career field or the Air Force during a given fiscal year for reasons such as separation or retirement— and reenlistment rates, according to Air Force officials. Our analysis of Air Force data found that overall enlisted aircraft maintainer loss rates have remained relatively stable over the past 8 fiscal years. Specifically, overall loss rates ranged from 9 to 10 percent—mirroring overall enlisted loss rates across the Air Force—with the exception of fiscal year 2014, when the loss rate was 13 percent due, in part, to reductions in end strength. Air Force officials stated that they need to retain more maintainers than in past fiscal years to help address experience gaps. However, gaps of experienced maintainers—those at the 5-level—have increased. Specifically, loss rates among 5-level maintainers increased from 9 percent in fiscal year 2010 to 12 percent in fiscal years 2016 and 2017. Loss rates of 7-level maintainers were 8 and 9 percent in fiscal years 2016 and 2017, respectively. Figure 6 compares, by skill level, active component maintainer loss rates with loss rates for all Air Force enlisted personnel over the past 8 fiscal years. While loss rates of 7-level maintainers were comparable to overall maintainer loss rates in fiscal years 2016 and 2017, Air Force officials expect those rates to increase over the next few fiscal years due to changes in reenlistment behaviors and the current staffing gap of 5-level maintainers. According to our analysis of Air Force data, overall reenlistment rates for aircraft maintainers have generally decreased since fiscal year 2010, from a peak rate of 82 percent in fiscal year 2011, to a low of 73.4 percent in fiscal year 2017—similar to reenlistment rates for all Air Force enlisted personnel. Over this period, reenlistment rates decreased most significantly for maintainers making their first reenlistment decision—from 70.5 percent in fiscal year 2010, to 58.3 percent in fiscal year 2017. Reenlistment rates at the second reenlistment decision point decreased as well—from 88 percent in fiscal year 2010, to 81.3 percent in fiscal year 2017. Table 3 provides reenlistment rates for active component aircraft maintainers over the past 8 fiscal years. In 2015 and 2017, the Air Force conducted aircraft maintenance retention surveys in order to identify areas of opportunity to improve career experiences, job satisfaction, and to understand retention drivers. Air Force officials stated that these surveys and reports are used as informational tools, but that they are researching methods to further dive into specific concerns. Maintainers who responded to the 2017 survey cited job stress, overall job satisfaction, and satisfaction with the career field as top factors influencing them to leave the Air Force. Survey respondents also stated that military benefits, the retirement program, and job security were the top reasons to remain in the Air Force. The survey also found that mid-tier enlisted personnel—Senior Airmen, Staff Sergeants, and Tech Sergeants—reported lower levels of satisfaction with leadership than did higher enlisted ranks. Participants in all five of our discussion groups with maintainers cited job dissatisfaction as a factor affecting their reenlistment decisions. Specifically, participants discussed the stress of the job, physical toll of the work, heavy workload, and undesirable working conditions. In addition, participants in all discussion groups noted challenges in providing on-the-job training to the large number of 3-level maintainers arriving at their squadrons due to staffing gaps of 5- and 7-level maintainers—who are needed to supervise that training. Participants stated that the lack of experienced maintainers has increased workloads and stress levels, which they stated may negatively affect reenlistment decisions. Some participants in all five discussion groups were interested in retraining into other specialties outside of aircraft maintenance as a way to continue their Air Force careers. However, as previously discussed, since 2016, the Air Force has placed certain restrictions on retraining to non-maintenance career fields in an effort to address maintainer staffing challenges. According to our analysis of Bureau of Labor Statistics data from 2012 through 2017, unemployment rate, employment, and wage earnings for the aircraft mechanic and service technician, and aerospace engineer occupations were consistent with the existence of hiring difficulties. While no single metric can be used to say whether a labor shortage exists, it is possible to look at certain “indicators” in conjunction with views of stakeholders. Specifically, we previously found that according to economic literature, if a job shortage were to exist, one would expect (1) a low unemployment rate signaling limited availability of workers in that profession, (2) increases in employment due to increases in demand for that occupation, and (3) increases in wages offered to draw people into that profession. Table 4 shows these specific indicators from 2012 to 2017, since we last reported, measured using the Bureau of Labor Statistics’ Current Population Survey. As table 4 indicates, the direction of all three of these indicators is consistent with difficulty in hiring of both aircraft mechanics and aerospace engineers. However, the indicators should be viewed with appropriate caveats. First, from 2012 to 2017, median wages for aerospace engineers and aircraft mechanics increased at a greater percentage than wages for all occupations, approximately 1.5 and 2.0 percent per year, respectively, compared to about 1 percent for all occupations. However, while median wages increased for aerospace engineers and aircraft mechanics during this entire period, it did not increase in every year, and it exhibited swings by as much as 13 percent. Second, from 2012 to 2017, employment for aerospace engineers and aircraft mechanics increased by approximately 1.3 and 1.2 percent per year, respectively. In comparison, for all occupations, employment increased by about 2 percent per year over this period. Finally, over this period, the average unemployment rate for aerospace engineers and aircraft mechanics was approximately 1.5 and 2.5 percent on average, respectively, compared to about 6 percent for all occupations. In addition, according to the Bureau of Labor Statistics Occupational Outlook Handbook, overall employment of aircraft and avionics equipment mechanics and technicians is projected to grow 5 percent from 2016 to 2026, about as fast as the average for all occupations. Job opportunities are expected to be good because there will be a need to replace those workers leaving the occupation. Industry stakeholders we spoke with anticipate similar growth in demand for labor, and cited ways companies were recruiting maintainers into the industry, such as raising wages, incorporating additional training, and paying maintainers during their airframe and power plant certificate coursework. The effects of the commercial aviation industry’s hiring difficulties on the Air Force’s maintainer workforce are unknown. Air Force officials stated that the Air Force has not assessed the effects, and that while some maintainers will leave the Air Force to work for the commercial aviation industry, they do not believe it is an overarching issue. However, Air National Guard and Air Force Reserve Command officials noted that a base’s location, in particular its proximity to commercial aviation industry opportunities, may affect its ability to recruit and retain maintainers. While the industry stakeholders we spoke with noted that military maintainers are attractive to the commercial aviation industry because of their previous training, work ethic, and discipline, they also noted challenges in recruiting military maintainers. Specifically, one stakeholder stated that many military maintainers require similar training for private sector positions as their non-military peers, citing to the specificity of training military maintainers receive compared to the broader approach taken by the commercial aviation sector. Only one study we identified through our literature search examined the potential effects of the commercial aviation industry—specifically the commercial airlines—on Air Force aircraft maintainer staffing levels. This study, published in 2016 by RAND and reviewing data from fiscal years 2004 through 2013, did not estimate the effect of any specific development in the commercial aviation industry on the Air Force. However, it identified several factors that suggest that the effects, if any, are likely to be limited. It found this based on four indicators: (1) the Air Force kept steady maintainer retention rates while the airline maintainer population fluctuated over the same period of time; (2) the Air Force offered competitive maintainer salaries compared with several airlines, making it unlikely that maintainers would separate or retire for better earnings potential alone; (3) few Air Force maintainers seemed to be pursuing airframe and power plant certification, which is often a prerequisite to employment in the airline industry; and (4) on average, there were considerably more qualified Air Force maintainers separating or retiring than projected airline maintenance jobs available. However, the report focused only on the commercial airlines. Air Force officials stated that they are more likely to experience outside recruitment of maintainers from defense contractors than from commercial airlines. Participants in four of our five discussion groups with maintainers cited better pay as a reason to transition from the Air Force to the commercial aviation industry. They also noted consistent schedules, 8-hour work days, and overtime pay as additional benefits. However, participants in all of our discussion groups also discussed an interest in careers outside of aircraft maintenance, such as police work, firefighting, cyber security, information technology, and real estate, among others. For maintainers who want to pursue a career in the commercial aviation industry upon separation or retirement from the Air Force, DOD has undertaken several actions to facilitate airframe and power plant certification of its servicemembers. For example, as previously discussed, since 2002 the Community College of the Air Force has administered the Federal Aviation Administration-approved Joint Services Council program that, upon completion, confers a certificate of eligibility to take the airframe and power plant exam. According to Community College of the Air Force data, in fiscal year 2017, there were 95 graduates from the Joint Services Council’s airframe and power plant preparation program. Table 5 shows the number of Air Force personnel that enrolled in and graduated from the Joint Services Council’s airframe and power plant program from fiscal years 2010 through 2017. Air Force officials noted a decrease in enrollments since fiscal year 2015 due to additional enrollment requirements, including completing initial coursework. From fiscal years 2015 through 2017, about 900 personnel used Air Force funding for airframe and power plant certificates through the Air Force Credentialing Opportunities On-Line program, which was established in fiscal year 2015. The Air Force has increased its use of retention bonuses since fiscal year 2015 to help retain critical maintenance specialties. Per DOD Instruction 1304.31, the secretary of a military department may use service retention bonuses to obtain the reenlistment or voluntary extension of an enlistment in exchange for a military service member’s agreement to serve for a specified period in at least one of the following categories: a designated military skill, career field, unit, or grade; or to meet some other condition of service. In fiscal year 2015, the Air Force awarded 1,590 bonuses to aircraft maintainers in certain specialties, totaling more than $60 million. Bonuses increased in fiscal year 2016—with 2,415 bonuses awarded at a total cost of more than $87 million. Bonuses decreased slightly in fiscal year 2017—with 1,797 bonuses awarded primarily to 5-level maintainers, at a total cost of over $65 million. Figure 7 shows the increases in the number and total costs of Air Force active component retention bonuses awarded to aircraft maintainers over the past 8 fiscal years. According to Air Force officials, retention bonuses remain a critical incentive for reenlistment. Participants in four of our five discussion groups with maintainers highlighted retention bonuses as a motivating factor to remain in the Air Force. Some participants stated that they were a major factor in their decision-making, while others were unsure of the availability or amount of bonuses, making it difficult to appropriately consider them in their decisions. Air Force officials have stated that they need to retain more maintainers than in past fiscal years to help address experience gaps, but the Air Force has not established retention goals for maintainers. Standards for Internal Control in the Federal Government states that management should establish and operate monitoring activities and evaluate the results. In addition, the Standards provide that, in reviewing actual performance, management tracks achievements and compares them to plans, goals, and objectives. While the Air Force has mechanisms to monitor the health of the maintenance career field, such as through loss and reenlistment rates, it has not developed annual retention goals for maintainers. As a result, the Air Force cannot identify how many 5-level and 7-level maintainers it needs to retain to support new 3-level maintainers in training and certification of flight line work. Given increases in losses of experienced maintainers and decreasing reenlistment rates, the Air Force faces challenges in managing the overall maintenance workforce, including ensuring that there are enough experienced maintainers to fulfill mission and training needs. Without annual retention goals—for both loss and reenlistment rates—the Air Force cannot assess how many maintainers it needs to retain each year, by skill level, to sustain recent staffing level improvements and, ultimately, to ensure the health of its maintenance workforce. The Air Force also lacks a retention strategy to focus its efforts in retaining maintainers. As previously discussed, the Air Force has conducted aircraft maintenance retention surveys to gauge the health of the workforce and identify opportunities to improve the career field, but Air Force officials have stated that these surveys are currently used only for informational purposes. In addition, while the Air Force offers retention bonuses for certain maintenance specialties—and has extended the maximum number of years maintainers in certain specialties can remain on active duty through the High Year of Tenure Extension Program— according to Air Force officials, it does not have a maintainer specific strategy or other initiatives (either monetary or non-monetary) that address the factors the Air Force has identified through its biennial surveys as negatively influencing maintainer retention. A key principle of strategic workforce planning is developing strategies that are tailored to address gaps in number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies. Without a retention strategy—including initiatives that are tailored to the specific needs and challenges of maintainers—the Air Force may be missing opportunities to retain experienced 5- and 7-level maintainers, who are needed to train the recent increase of new 3-level maintainers in the field. According to participants from our discussion groups with maintainers, increases in 3-level maintainers could negatively affect retention of experienced maintainers if this increase continues to affect their workloads. While the Air Force has some tools in place to monitor retention and identify factors affecting reenlistment decisions, such as its retention surveys, without a retention strategy to address concerns raised in these surveys, and goals against which to measure progress, it may not be able to sustain recent staffing level improvements or improve the overall health of the maintenance workforce as effectively. Over the past 8 fiscal years, the Air Force has consistently met overall aircraft maintainer technical school completion rate goals. However, after technical school, additional on-the-job training is required to produce a fully qualified maintainer. In addition, the Air Force reserve component’s programmed technical school completions have consistently exceeded actual completions over this period. Our analysis of Air Force data found that the Air Force consistently met technical school completion rate goals from fiscal years 2010 through 2017. According to Air Education and Training Command (AETC) officials, AETC established a maintainer technical school completion rate goal for the active component of 90 percent—that is, the number of actual technical school completions compared to the number of programmed or expected completions. According to AETC officials, the goal is not documented, but it has been in place since at least fiscal year 2010 and is intended to measure the health and well-being of the training program. In fiscal year 2017, the completion rate was 97 percent, with all but two maintenance specialties meeting their goals. According to AETC officials, there are a number of reasons a particular maintenance specialty may not meet its technical school completion rate goals, such as low technical school entry rates, security clearance delays, and challenging course topics. Figure 8 shows the Air Force’s active component technical school completion rates for all maintenance specialties combined over the past 8 fiscal years. In fiscal year 2017, approximately 9,600 active component maintainers completed technical school, an increase from about 7,200 and 5,700 in fiscal years 2016 and 2015, respectively. While increased technical school completions help to address overall aircraft maintainer staffing gaps, they cannot immediately resolve staffing imbalances across experience levels. Air Force officials noted that while they track the number of maintainers they are producing by technical school completions (the number of new 3-level maintainers), maintainers are not fully qualified for the job until they are 5-levels, which requires, as previously discussed, at least a year of on-the-job training, among other things. Technical school instructors agreed that while technical school is important for teaching basic concepts, on-the-job training is what produces a fully-qualified maintainer. AETC officials stated that the technical schools continue to have the capacity to meet completion rate goals even with the increase in students, but that they have experienced significant challenges in recent years receiving enough instructors in a timely manner—both civilian and military—and getting them qualified to teach. These officials stated that this is a result of issues with the formula that determines instructor staffing needs, the instructor staffing process for military personnel, and civilian hiring delays, among other things. According to AETC officials, they have been able to consistently meet completion rate goals despite these challenges by waiving some course requirements for multiple instructors (except when there are safety concerns), contracting some instruction, and assigning temporary duty personnel to serve as instructors. These officials noted that while those actions have allowed them to continue to meet their mission, they have also masked the severity of the instructor staffing challenges and increased existing instructors’ stress and workloads. This was confirmed by the technical school instructors with which we spoke. Additionally, AETC officials noted challenges with aging infrastructure and hangars, and in obtaining high fidelity, realistic aircraft and trainers. However, they did highlight a recent success in acquiring updated avionics trainers. Over the past few fiscal years, AETC has conducted annual field interviews with technical school graduates and graduate supervisors to evaluate the technical school training program. Specifically, AETC uses the interviews to gauge satisfaction with the graduates’ abilities to perform tasks required in the career field, and to identify areas to improve training quality or revise training standards. In the memorandum resulting from the fiscal year 2017 field interviews, AETC made a number of recommendations to improve maintainer technical school training, such as improving knowledge and task retention by increasing hands-on repetition and decreasing delays between technical school and a maintainer’s first assignment, reexamining aspects of the technical school training curriculum, and improving instruction related to maintenance forms and technical orders. The memorandum also noted that while there are initiatives that the technical schools can undertake to increase overall satisfaction, there are some disconnects between supervisor expectations in the field and the training program that should be resolved. Technical school instructors agreed that there is a disconnect between what students learn in technical school and what their supervisors in the field expect them to have learned in technical school versus on the job. The memorandum identified opportunities to clarify these expectations, such as workshops to identify training requirements. Over the past 8 fiscal years, the Air Force reserve component’s programmed technical school completions for aircraft maintainers have consistently exceeded actual completions. Specifically, according to our analysis, from fiscal years 2010 through 2017, the Air National Guard’s actual technical school completions, as compared to programmed completions, ranged from about 60 to 95 percent. Similarly, the Air Force Reserve Command’s completion rates ranged from about 50 to 85 percent. The highest completion rate for both was in fiscal year 2017. According to Air National Guard and Air Force Reserve Command officials, they do not have technical school completion rate goals like the active component since they also recruit prior servicemembers, as discussed below. Table 6 compares the Air Force reserve component’s programmed versus actual technical school completions over the past 8 fiscal years. According to an AETC official, it is common for the reserve component to have significantly more programmed completions than actual technical school completions in a given fiscal year. For example, this official stated that the Air National Guard and Air Force Reserve Command program their training spaces 2 to 3 years in advance and it can be difficult to anticipate training needs. Specifically, Air National Guard officials stated that the number of training spaces requested each year are to fill vacancies and that those vacancies are filled by both prior servicemembers (who may have already attended maintainer technical school and do not need to do so again) and non-prior servicemembers (who will need to attend technical school). An AETC official noted that the number of personnel that will fall into each category each year is difficult to anticipate. For example, according to Air Force Reserve Command officials, the number of non-prior service accessions has decreased over the past 8 fiscal years, accounting for about 33 percent of accessions in fiscal year 2017, a decrease from about 43 percent in fiscal year 2010. Air National Guard officials stated that if they do not program enough training spaces, it can be difficult to add spaces later. Air National Guard officials stated that they have been conservative in programming training spaces since fiscal year 2016—to minimize unfilled spaces—which, along with high maintainer turnover, is reflected in increased completion rates. Specifically, in fiscal year 2017, the Air National Guard programmed 1,528 completions and the number of actual completions was 1,418, amounting to a completion rate of 93 percent—its highest rate over the past 8 fiscal years. Air National Guard officials noted that the training spaces it did not fill over the past 2 fiscal years were generally due to last minute cancellations for health, family, or civilian employment issues. AETC officials stated that they can fill unused reserve component training spaces with active duty maintainers or students from international partners, which has provided AETC more flexibility to increase active duty maintainer training over the past few fiscal years. The Air Force has significantly reduced overall aircraft maintainer staffing gaps since fiscal year 2016, in part by increasing accessions. While the Air Force has consistently met its technical school completion rate goals for newly accessed aircraft maintainers, it continues to have staffing gaps of experienced maintainers—who are needed to supervise and provide on-the-job training to those new maintainers following technical school. Air Force officials have highlighted the need to retain more aircraft maintainers to help address experience gaps, but losses of experienced maintainers have increased since fiscal year 2010, and the Air Force expects losses to continue to increase for certain maintainers over the next few fiscal years. While the Air Force has increased its use of retention bonuses for some critical maintenance specialties, it does not have annual retention goals for aircraft maintainers or a maintainer- specific retention strategy to help it meet such goals and to sustain recent staffing level improvements. As a result, the Air Force may continue to face challenges in managing its largest enlisted career field and may miss opportunities to retain a sufficient number of experienced maintainers to meet mission needs. We are making the following two recommendations to DOD: The Secretary of the Air Force should develop annual retention goals for aircraft maintainers by skill level—for both loss and reenlistment rates—in alignment with authorized levels. (Recommendation 1) The Secretary of the Air Force should develop an aircraft maintainer retention strategy, including initiatives that are tailored to the specific needs and challenges of maintainers to help ensure that the Air Force can meet and retain required staffing levels. (Recommendation 2) In written comments on a draft of this report, the Air Force concurred with both of the recommendations. The Air Force also noted initial actions it has taken to develop an aircraft maintainer retention strategy. The Air Force’s comments are reprinted in appendix III. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Defense, and the Secretary of the Air Force. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions regarding this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix IV. To assess the extent to which the Air Force had aircraft maintainer staffing gaps, we compared staffing levels authorized by the Air Force for enlisted aircraft maintainers—for the active and reserve components— with the actual number of maintainers available to staff those positions for fiscal years 2010 through 2017. We selected this timeframe to capture staffing levels before and after the Air Force’s fiscal year 2014 reduction in end strength, and fiscal year 2017 was the most recent year for which complete data were available at the time of our review. Specifically, we analyzed the data to identify overall maintainer staffing gaps, as well as any gaps by maintenance specialty and skill level. In addition, we compared maintainer personnel requirements to authorized staffing levels—the number of those requirements that are funded—for the overall maintainer population, each maintenance specialty, and each skill level. To assess the reliability of the Air Force’s requirements, authorized staffing levels, and actual staffing levels (for both the active and reserve components), we reviewed related documentation; assessed the data for errors, omissions, and inconsistencies; and interviewed officials. We determined that the data were sufficiently reliable to describe the Air Force’s aircraft maintainer staffing levels and associated gaps from fiscal years 2010 through 2017. Additionally, we conducted interviews with relevant Air Force, Air National Guard, and Air Force Reserve Command officials to identify reasons for staffing challenges and actions the Air Force has taken to address them. To assess the extent to which the Air Force experienced attrition of aircraft maintainers, we calculated maintainer loss rates—the number of maintainers who leave the career field or the Air Force within the fiscal year (for reasons such as separation or retirement) over the number of maintainers at the start of the fiscal year—for fiscal years 2010 through 2017. We calculated loss rates for the overall maintainer population as well as by skill level and maintenance specialty for the active and reserve components. We also analyzed overall aircraft maintainer reenlistment rates—the number of maintainers reenlisting each fiscal year over the number of maintainers eligible to reenlist—for the active component for fiscal years 2010 through 2017. To assess the reliability of the Air Force’s maintainer loss and reenlistment rate data, we reviewed related documentation; assessed the data for errors, omissions, and inconsistencies; and interviewed officials. We determined that the data were sufficiently reliable to describe the Air Force’s aircraft maintainer loss and reenlistment rates from fiscal years 2010 through 2017. In addition, we reviewed the Air Force’s 2015 and 2017 aircraft maintainer retention survey analyses and conducted discussion groups with a non- generalizable sample of aircraft maintainers to obtain their views on factors affecting maintainer retention, on-the-job training capacity, and commercial aviation industry opportunities, among other things. We selected Tinker Air Force Base in Oklahoma and Eglin Air Force Base in Florida as the locations for these discussion groups based on geographic diversity, base size, and the types of aircraft maintained at each base. At each location, we moderated two to three discussion groups with aircraft maintainers for a total of five discussion groups ranging from between 3 and 12 maintainers per group. While these discussion groups allowed us to learn about many important aspects of the aircraft maintenance workforce from the perspective of aircraft maintainers, they were designed to provide anecdotal information and not results that would be representative of all the Air Force’s more than 100,000 aircraft maintainers as of fiscal year 2017. To review the state of the commercial labor market for aircraft mechanics and aerospace engineers, we analyzed data from the Department of Labor’s Bureau of Labor Statistics’ Current Population Survey on the unemployment rate, employment, and median weekly earnings from 2012 through 2017, in accordance with economic literature we reviewed for a prior report. These data can be used as indicators of whether labor market conditions are consistent with a shortage. We chose this period because we had previously reported on the data from 2000 through 2012, and 2017 was the most recent data at the time of our review. We reviewed documentation about the Bureau of Labor Statistics data and the systems that produced them, as well as our prior report that used the data. Based on prior testing of the data from these systems, we determined the data were sufficiently reliable for the purposes of our indicator analysis to provide context on the labor market. We also reviewed the Bureau of Labor Statistics’ Occupational Outlook for Aircraft and Avionics Equipment Mechanics and Technicians for 2016 to 2026 to determine anticipated future workforce trends. In addition, we conducted interviews with four commercial aviation industry stakeholders regarding any imbalances in demand and supply, and actions the industry is taking to address them. Specifically, we conducted interviews with officials from the Aeronautical Repair Station Association, the Aerospace Industries Association, Aerotek, and the General Aviation Manufacturers Association. We selected three of these organizations based on our previous work and one based on a recommendation from one of the three organizations. To determine what is known about the extent to which the commercial aviation industry affects the Air Force’s aircraft maintainer staffing levels, we conducted a literature search and review to identify relevant studies. Specifically, we conducted a literature search for studies published in books, reports, peer-reviewed journals, and dissertations since fiscal year 2010. We chose fiscal year 2010 as a starting point so that the scope of the search would match the timeframe for which we analyzed Air Force maintainer loss rates. We searched five databases, including ProQuest, Scopus, and EBSCO. Our search used Boolean search phrases, including variations of words such as aviation, maintenance, and retention. We identified and screened 49 studies using a multi-step process to gauge their relevance and evaluate their methodology. We excluded studies that did not specifically focus on our objective, military maintainers, or the U.S. commercial aviation industry. We retained 1 study after screening and reviewed its methodology, findings, and limitations. Three GAO staff (two analysts and an economist) were involved in the screening and a systematic review of the study, which was determined to be sufficiently relevant and methodologically rigorous. We also analyzed data on the number of Air Force personnel completing the Joint Services Aviation Maintenance Technician Certification Council (Joint Services Council) airframe and power plant certificate program from fiscal years 2010 through 2017, and the number of Air Force personnel receiving airframe and power plant certificate funding from the Community College of the Air Force’s Air Force Credentialing Opportunities On-line program from fiscal years 2015 through 2017. We selected this timeframe because the Air Force’s airframe and power plant funding program began in fiscal year 2015, and fiscal year 2017 was the most recent data available at the time of our review. To assess the reliability of the Air Force’s airframe and power plant certificate program data, we interviewed officials. We determined that the data were sufficiently reliable to describe the number of Air Force personnel completing the Joint Services Council’s airframe and power plant certificate program from fiscal years 2010 through 2017 and the number of personnel receiving funding from fiscal years 2015 through 2017. To assess the extent to which the Air Force has taken steps to help retain maintainers, we analyzed the number and total costs of selective retention bonuses (retention bonuses) that the Air Force awarded, by maintenance specialty and skill level, from fiscal years 2010 through 2017 for the active and reserve components. We normalized the cost data to constant fiscal year 2017 data. To assess the reliability of the Air Force’s retention bonus data, we reviewed related documentation; assessed the data for errors, omissions, and inconsistencies; and interviewed officials. We determined that the data were sufficiently reliable to describe the number and total costs of the Air Force’s aircraft maintainer retention bonuses from fiscal years 2010 through 2017. In addition, we conducted interviews with relevant Air Force officials regarding retention goals and monetary and non-monetary incentives to improve maintainer retention, and Department of Defense officials regarding retention bonuses. We compared this information to Standards for Internal Control in the Federal Government related to monitoring activities and key principles of strategic workforce planning that we have identified in our prior work, such as developing strategies that are tailored to address gaps in numbers of people, skills, and competencies. To assess the extent to which the Air Force met its annual technical school completion rate goals for aircraft maintainers, we calculated technical school completion rates—the number of aircraft maintainers completing technical school compared to the number of programmed or expected completions—for the overall maintainer population and each maintenance specialty for the active component, for fiscal years 2010 through 2017. We compared those completion rates to the Air Education and Training Command (AETC) established active component completion rate goal. For the Air National Guard and Air Force Reserve Command, we compared programmed completions to actual completions to determine the extent to which they met their technical school training needs. To assess the reliability of the technical school completion data (for both the active and reserve components), we assessed the data for errors, omissions, and inconsistencies, and interviewed officials. We determined that the data were sufficiently reliable to describe the Air Force’s aircraft maintainer technical school completion rates from fiscal years 2010 through 2017, rounded to the nearest hundreds up to fiscal year 2013, and more-precisely from fiscal years 2014 and beyond. In addition, we observed maintainer technical school training—both classroom-based and hands-on—as well as training equipment at Sheppard Air Force Base in Texas and Eglin Air Force Base in Florida. We selected these locations because they are two of the primary locations where aircraft maintainer technical school training occurs. Specifically, according to Air Force officials, the majority of aircraft maintainers receive at least a portion of their technical school training at Sheppard Air Force Base, and all F-35-specific maintainer training occurs at Eglin Air Force Base. Additionally, as part of our previously discussed non-generalizable sample of discussion groups with aircraft maintainers, we obtained maintainers’ perspectives on technical school and on-the-job training. We also reviewed training policies as well as other documentation, such as Career Field Education and Training Plans and training evaluations. Finally, we conducted interviews with technical school instructors and supervisors about the maintainer training process as well as AETC, Air National Guard, and Air Force Reserve Command officials about training challenges and programmed training needs. We conducted this performance audit from April 2018 to February 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. According to Air National Guard and Air Force Reserve Command officials, they monitor retention of aircraft maintainers through loss rates— the number of maintainers who leave the career field or the Air Force within the fiscal year, over the number of maintainers at the start of the fiscal year—and have used selective retention bonuses (retention bonuses) and taken other actions to improve retention. According to our analysis of Air National Guard data, aircraft maintainer loss rates have fluctuated over the past 8 fiscal years. For example, loss rates increased significantly for all maintenance specialties and skill levels combined, from 12 percent in fiscal year 2010, to 36 percent and 30 percent in fiscal years 2012 and 2013, respectively. While Air National Guard maintainer loss rates decreased from fiscal years 2014 through 2017, they remained higher than fiscal year 2010 rates. Table 7 provides loss rates for Air National Guard aircraft maintainers over the past 8 fiscal years. Air National Guard officials stated that maintainer loss rates are often location dependent, and that retention bonuses are the primary tool used to improve retention. According to these officials, while the Air National Guard looks at nationwide staffing when determining which occupational specialties are eligible for bonuses, some locations may have more critical needs than others. The number of retention bonuses that the Air National Guard has awarded to aircraft maintainers has decreased over the past 8 fiscal years, while the total cost has increased. Specifically, in fiscal year 2010, the Air National Guard awarded 1,587 retention bonuses at a total cost of $4,580,295. However, in fiscal year 2017, the Air National Guard awarded 653 retention bonuses at a total cost of $5,373,000. Over the past 8 fiscal years, the majority of its retention bonuses were awarded to 7-level maintainers. The Air Force Reserve Command’s aircraft maintainer loss rates over the past 8 fiscal years have ranged from 10 to 13 percent. In addition, the loss rates of 5- and 7-level maintainers have been similar to the loss rates of all skill levels combined over this period. Similar to the Air National Guard, Air Force Reserve Command officials stated that maintainer staffing challenges and loss rates are partly location dependent, though they also cited opportunities and higher pay in the civilian labor market; high operations tempo; lack of career growth, opportunities, and flexibility; and pay disparities with the active component as factors affecting retention. Table 8 provides loss rates for Air Force Reserve Command aircraft maintainers over the past 8 fiscal years. The Air Force Reserve Command has also used retention bonuses to help improve retention. Specifically, over the past 8 fiscal years, the Air Force Reserve Command has increased the number of retention bonuses awarded and their total costs. For example, in fiscal year 2012, the Air Force Reserve Command awarded 15 retention bonuses totaling $242,593. In fiscal year 2015, it increased to 572 bonuses awarded totaling $8,913,229. In fiscal year 2017, the Air Force Reserve Command awarded 317 retention bonuses at a total cost of $4,550,000. According to Air Force Reserve Command officials, the Air Force Reserve Command has taken a number of steps to help improve technician retention, such as paid permanent change of station and student loan repayment. These officials stated that they are also currently working to improve career path options and medical benefits for technicians. Further, Air Force Reserve Command officials highlighted Human Capital Management 2.0 as an effort focused on balancing the human capital supply and demand across the Air Force Reserve Command, including improving recruitment and retention. In addition to the contacts named above, Lori Atkinson (Assistant Director), Benjamin Bolitzer, Molly Callaghan, Timothy Carr, Christopher Curran, Matthew Dobratz, Amie Lesser, Grant Mallie, Mike Silver, Carter Stevens, and Lillian M. Yob made significant contributions to this report. DOD Depot Workforce: Services Need to Assess the Effectiveness of Their Initiatives to Maintain Critical Skills. GAO-19-51. Washington, D.C.: December 14, 2018. Air Force Readiness: Actions Needed to Rebuild Readiness and Prepare for the Future. GAO-19-120T. Washington, D.C.: October 10, 2018. Military Aviation Mishaps: DOD Needs to Improve Its Approach for Collecting and Analyzing Data to Manage Risks. GAO-18-586R. Washington, D.C.: August 15, 2018. Military Personnel: Collecting Additional Data Could Enhance Pilot Retention Efforts. GAO-18-439. Washington, D.C.: June 21, 2018. Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce Requirements. GAO-18-113. Washington, D.C.: April 11, 2018. Department of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017. Military Compensation: Additional Actions Are Needed to Better Manage Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.: February 3, 2017. Unmanned Aerial Systems: Air Force and Army Should Improve Strategic Human Capital Planning for Pilot Workforces. GAO-17-53. Washington, D.C.: January 31, 2017. Air Force Training: Further Analysis and Planning Needed to Improve Effectiveness. GAO-16-864. Washington, D.C.: September 19, 2016. Unmanned Aerial Systems: Further Actions Needed to Fully Address Air Force and Army Pilot Workforce Challenges. GAO-16-527T. Washington, D.C.: March 16, 2016. Unmanned Aerial Systems: Actions Needed to Improve DOD Pilot Training. GAO-15-461. Washington, D.C.: May 14, 2015. Air Force: Actions Needed to Strengthen Management of Unmanned Aerial System Pilots. GAO-14-316. Washington, D.C.: April 10, 2014. Aviation Workforce: Current and Future Availability of Airline Pilots. GAO-14-232. Washington, D.C.: February 28, 2014. Aviation Workforce: Current and Future Availability of Aviation Engineering and Maintenance Professionals. GAO-14-237. Washington, D.C.: February 28, 2014. Military Cash Incentives: DOD Should Coordinate and Monitor Its Efforts to Achieve Cost-Effective Bonuses and Special Pays. GAO-11-631. Washington, D.C.: June 21, 2011.", "summary": "Air Force aircraft maintainers are responsible for ensuring that the Air Force's aircraft are operationally ready and safe for its aviators—duties critical to successfully executing its national security mission. With more than 100,000 maintainers across the Air Force's active and reserve components, according to Air Force officials, aircraft maintenance is the Air Force's largest enlisted career field—accounting for about a quarter of its active duty enlisted personnel. The conference report accompanying the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the adequacy of the Air Force's aircraft maintainer workforce. This report assesses the extent to which, from fiscal years 2010 through 2017, the Air Force (1) had aircraft maintainer staffing gaps, (2) experienced attrition of maintainers and took steps to help retain maintainers, and (3) met its annual technical school completion rate goals for maintainers. GAO analyzed aircraft maintainer staffing levels, loss and reenlistment rates, and technical school completion rates from fiscal years 2010-2017, the most recent data available; conducted five non-generalizable discussion groups with maintainers; and interviewed aviation industry, Department of Defense, and Air Force officials. The Air Force has reduced overall aircraft maintainer staffing gaps, but continues to have a gap of experienced maintainers. The Air Force reduced the overall gap between actual maintainer staffing levels and authorized levels from 4,016 maintainers (out of 66,439 authorized active component positions) in fiscal year 2015, to 745 in fiscal year 2017 (out of 66,559 positions). However, in 7 of the last 8 fiscal years, the Air Force had staffing gaps of experienced maintainers—those who are most qualified to meet mission needs and are needed to train new maintainers. Maintainers complete technical school as 3-levels and initially lack the experience and proficiency needed to meet mission needs. Following years of on-the-job training, among other things, maintainers upgrade to the 5- and 7-levels. In fiscal year 2017, the Air Force had gaps of more than 2,000 5-level and 400 7-level maintainers, and a surplus of over 1,700 3-levels. Air Force officials anticipate that staffing gaps will continue off and on through fiscal year 2023. Over the past 8 fiscal years, the Air Force has increasingly lost experienced aircraft maintainers, and it does not have goals and a strategy to help retain maintainers. While overall maintainer loss rates have remained generally stable, loss rates of 5-levels increased from 9 percent in fiscal year 2010 to 12 percent in fiscal years 2016 and 2017 (see figure). Air Force officials expect 7-level loss rates to also increase. Air Force officials stated that they need to retain more maintainers to help address experience gaps, but the Air Force has not developed annual retention goals for maintainers. In addition, while the Air Force has increased its use of retention bonuses since fiscal year 2015, according to Air Force officials, it does not have a strategy to improve retention. Without goals to measure progress and a retention strategy to guide efforts, the Air Force could face further challenges in managing its maintenance workforce, including ensuring there are enough experienced maintainers to meet mission needs. The Air Force consistently met technical school completion rate goals for aircraft maintainers from fiscal years 2010 through 2017. In fiscal year 2017, about 9,600 active component maintainers completed technical school, an increase from about 5,700 in fiscal year 2015. This increase in completions has helped to address overall staffing gaps, but cannot immediately resolve experience imbalances, due to the time and training needed to reach the 5- and 7- levels. GAO recommends that the Air Force develop annual retention goals and a retention strategy for aircraft maintainers. The Air Force concurred with both recommendations.", "document_type": "gao"}
{"report": "DOJ and its components, as well as the judiciary, play important roles in requesting and collecting restitution. DOJ and select components: Prosecutors in DOJ’s Criminal Division and the Criminal Divisions of the 94 USAOs are responsible for overseeing criminal matters, including identifying and notifying victims, determining their losses as part of a case investigation, prosecuting cases and negotiating the terms of plea agreements, of which restitution may be a part. Within DOJ’s Criminal Division, the Money Laundering and Asset Recovery Section manages DOJ’s Asset Forfeiture Program. As previously stated, FLUs within each USAO undertake activities to collect restitution from offenders in their district. Additionally, all USAOs have asset forfeiture staff responsible for forfeiting property seized by law enforcement agencies because the property was used in criminal activities or purchased with the proceeds of criminal activities. According to EOUSA guidance, coordination between the FLU and Asset Forfeiture units is highly encouraged to use forfeited assets as a means to collect on unpaid restitution debts. DOJ requires each USAO to have its own policies and procedures related to debt collection efforts but allows them discretion in developing these policies and procedures to ensure that they are appropriate for local conditions. DOJ also requires USAOs to have policies and procedures to make early, effective, and coordinated asset investigations and recovery a routine part of every case involving victims but allows USAOs to specify these policies and procedures. DOJ’s EOUSA provides USAOs with management assistance, guidance, training, and administrative support. Among other activities, EOUSA provides management assistance to USAOs by administering internal evaluations for each USAO, which are intended to provide on-site management support for that office. Further, EOUSA provides guidance to enhance offices’ efforts to request and collect restitution. Judiciary: Within the judiciary, the 94 federal district courts order restitution, receipt restitution payments, and disburse restitution to victims. Within the federal district where the offender was convicted, a probation officer prepares the presentence investigation report (PSR) for the court, which includes information on the victim’s losses and an offender’s financial information. Probation officers may obtain this information from DOJ, which has the statutory responsibility for the enforcement and collection of criminal debt. The court uses the PSR, among other things, to determine whether to order restitution. If an offender is released to the community by the court and placed on supervision, probation officers are responsible for ensuring the offender abides by the terms of release, including paying any restitution owed to victims. The Clerk of each District Court is responsible for the receipt of restitution from offenders and for disbursing payments to victims. The Judicial Conference is the national policy-making body for the federal courts. The Conference operates through a network of committees created to address and advise courts on a wide variety of subjects such as information technology, personnel, probation and pretrial services, space and facilities, security, judicial salaries and benefits, budget, defender services, court administration, and rules of practice and procedure. The Judicial Conference has taken policy positions on restitution-related issues and has supported legislative proposals to improve the restitution process. AOUSC is the agency within the judiciary that provides a broad range of legislative, legal, financial, technology, management, administrative, and program support services to federal courts. AOUSC is responsible for carrying out Judicial Conference policies and a primary responsibility of AOUSC is to provide staff support and counsel to the Judicial Conference and its committees. USSC is an independent agency within the judiciary which, among other activities, establishes and promulgates detailed sentencing guidelines that judges are to consider in sentencing offenders convicted of federal crimes, including guidelines on when and how to order restitution. Additionally, each district court is required to submit to USSC a report of each offender’s sentence that includes, among other information, details on the offenses for which the offender was convicted; the sentence imposed on the offender; and if the judge departed from the sentencing guidelines, information on reasons why. USSC maintains a database containing sentencing data on federal offenders convicted of felonies or serious misdemeanors, analyzes it and publishes these data on an annual basis. USSC is also statutorily required to annually report to Congress its analysis of sentencing-related documents, including an accounting of districts USSC believes have not submitted appropriate information to the commission, among other things. During the course of a federal criminal investigation, federal prosecutors identify and notify victims, as well as determine their losses in conjunction with the federal agents investigating the case. If a defendant pleads guilty or is found guilty at trial, the prosecutor has the burden of proving the victims’ losses in court. To facilitate this, a Victim-Witness coordinator within the USAO responsible for the case provides victims the opportunity to explain their losses in detail, usually through a Victim Impact Statement. This information is then to be provided to a federal probation officer who uses it to begin a PSR. To develop the PSR, probation officers use information provided by the USAO and may contact victims and verify the loss amounts. Additionally, probation officers will investigate an offender’s economic circumstances— such as if the offender has a job, any assets or any dependents. If a judge determines that restitution is to be ordered, the judge must order restitution for the full amount of a victim’s losses for offenses without consideration of the economic circumstances of the defendant. Judges may decline to order restitution in certain instances, for example, where restitution is discretionary, or in certain cases where the number of identifiable victims makes restitution impracticable or the complexity of calculating restitution would unduly prolong the sentencing process. If the court does not order restitution, or orders only partial restitution, the judge must provide the reason, and judges usually do so in a written Statement of Reasons document. Figure 1 provides an overview of the federal restitution process. Upon imposition of a restitution debt by the court, FLU staff use two mechanisms to determine the collectability of the debt and what collection actions to take. First, FLU staff classify the debt into one of four categories to determine the extent to which the FLU will pursue enforcement actions to collect upon the debt. FLUs classify debts from a Priority Code 1 debt (indicating that FLUs will make collection of this debt the highest priority) to a Priority Code 4 debt (indicating that FLUs will make collection of this debt the lowest priority). Second, FLUs may suspend collection action on criminal debts, regardless of their categorization, under certain circumstances if they determine the debts are uncollectible. FLU staff may also determine that debts are permanently uncollectible and categorize them as Priority Code 4 debts. If a debtor does not provide payment, FLU staff then use various enforcement actions to collect the restitution debt. These can include, among other actions, filing liens against an offender’s property, coordinating with asset forfeiture staff to use forfeited assets to pay the restitution debt, and garnishing wages an offender may earn. Victims can be compensated for losses with the proceeds of forfeited assets through DOJ’s Asset Forfeiture Program and in accordance with law and regulation. Federal regulations provide that the proceeds from forfeited assets are first used to cover program costs associated with forfeiture-related activities and next to pay valid owners, lien-holders, and federal financial regulatory agencies. Forfeited assets can then be distributed to other victims of crime as compensation for their losses if their loss is a direct result of the commission of the offense underlying forfeiture or a related offense. Any remaining funds from the forfeited asset may be placed into official use, distributed to foreign governments, state or local law enforcement agencies as part of the equitable sharing program to enhance cooperation with federal investigations. When victims are eligible for compensation using forfeited assets, DOJ employs two processes: restoration and remission. The restoration process involves the USAO staff requesting funds on behalf of a victim when there is both an order of forfeiture and an order of restitution. Under the restoration process, USAO staff request DOJ’s Money Laundering and Asset Recovery Section to use the forfeited asset to pay a restitution debt. If DOJ approves the request for restoration, the funds from the forfeited property are then transferred to the Clerk of the Court who disburses this money to the victim. The remission process requires a victim of a crime to directly petition DOJ to receive funds from the forfeited property. According to officials in DOJ’s Criminal Division, the courts may not order restitution on behalf of victims who suffered a specific actual loss as a direct result of a crime for a variety of reasons, and therefore the remission process serves as a complement to the restoration process to ensure victims are made whole. For example, these officials stated that, among other reasons, the courts may not order restitution if a defendant dies prior to sentencing or if the case is one in which a court is not required to, and does not, order restitution, but the victim has suffered eligible losses. EOUSA and USAO officials in all six of the offices with whom we spoke told us that prosecutors document requests for restitution in their case files and that their offices employ other internal controls, such as the use of templates and forms, throughout the prosecution process to ensure that prosecutors request restitution as appropriate. EOUSA officials told us that although the agency does not track this information, they believed all USAOs generally document requests for restitution in their offices’ case files. Further, USAO officials in all six offices told us that prosecutors document requests for the court to order restitution in their case files by including this information in a written memorandum. To support prosecutors in documenting this information, all six offices we selected provide prosecutors with a prosecution memorandum template. Of the six templates we reviewed, four explicitly include a section for prosecutors to indicate whether victims have been identified and the extent of any victim losses. In addition to these templates, four of six USAOs we selected had forms that prosecutors could use to identify whether cases have victims and their need for restitution when drafting criminal charging documents. Moreover, officials from two of the six USAOs told us their offices use this form as an internal control to ensure prosecutors have identified all victims and considered their need for restitution, if applicable. All six offices we selected also provided prosecutors templates for drafting plea agreements, and templates we reviewed from all six USAOs included language requesting the offender pay restitution, if applicable. However, prosecutors are not required to use plea agreement templates, nor are they required to request restitution as part of a plea agreement. USAO officials from one office stated that including this language in the plea agreement template served to remind prosecutors of their requirement to consider requesting restitution as stated in the U.S. Attorney’s Manual. Select USAO officials also described various forms of management oversight to ensure prosecutors request restitution as appropriate. Specifically, four USAOs we selected require supervisory review of the form that prosecutors fill out when drafting criminal charging documents, which includes information on victims. Additionally, officials in all six USAOs told us that they require supervisory review of plea agreements for every case. For example, officials from two USAOs told us their office requires the Criminal Chief, the supervisor of all criminal cases, to approve documents in the plea agreement, which may include requests for restitution. Federal courts sent information on sentencing decisions to USSC and USSC had information on restitution decisions for 95 percent of all offenders from fiscal years 2014 through 2016. According to our analysis of USSC data, 214,578 federal offenders were sentenced from fiscal years 2014 through 2016 and restitution was ordered for 33,158 of those offenders, or 15 percent. Collectively, courts ordered these offenders to pay $33.9 billion in restitution during this period. Courts did not order restitution for the remaining 181,420 offenders, or 85 percent. Table 1 shows the number of federal offenders sentenced and ordered to pay restitution for fiscal years 2014 through 2016, as well as the total amount of restitution ordered by the courts. The majority of federal offenders were sentenced for immigration or drug- related offenses, and USAO officials in all six offices we selected told us that these types of offenses do not typically have victims with actual losses. For example, from fiscal years 2014 through 2016, USSC data showed that 131,088 offenders, 61 percent of offenders sentenced, were sentenced for immigration or drug-related offenses and courts ordered 999 (or less than 1 percent) of these offenders to pay restitution. USSC data show that courts ordered restitution more often for offenders sentenced for other offenses, such as fraud. For example, courts sentenced 21,551 offenders for fraud offenses from fiscal years 2014 through 2016, and courts ordered restitution for 15,902 of these offenders, or 74 percent. Table 2 shows the number of offenders sentenced and the number ordered to pay restitution by offenses for which restitution was most often and least often ordered by courts from fiscal years 2014 through 2016. The percentage of federal offenders ordered to pay restitution varied across federal court districts; from 2 percent of offenders in one district to 42 percent in another district. USAO officials we interviewed stated that some of this variation may be due to the types of offenses prosecuted within different districts. For example, officials from one USAO stated that their office, which had a high volume of immigration–related offenders, had few cases in which restitution was applicable. Our analysis of USSC data showed that from fiscal year 2014 through fiscal year 2016 and across all districts, districts with a higher than average rate of immigration-related offenders had lower than average rates of restitution ordered. Conversely, districts with above-average rates of offenders convicted of financial offenses such as fraud, embezzlement, money laundering, tax offenses, counterfeiting or bribery had higher than average rates of restitution ordered, as shown in table 3. Judges indicated on documents sent to USSC that restitution was not applicable and thus did not order it for most offenders sentenced from fiscal years 2014 through 2016—167,230 offenders—or 78 percent of all offenders sentenced during this time period. Our analysis of sentencing information for the remaining offenders found that courts ordered restitution at a higher rate as compared to all offenders. Specifically, after excluding offenders for whom restitution was not applicable and were not ordered to pay it, we found that courts ordered restitution for 70 percent of the remaining 47,348 offenders. EOUSA and USAO officials told us that in cases where there are identifiable victims, restitution may not be ordered for other reasons. EOUSA officials told us that restitution may not be ordered for several reasons, such as when victims provide no proof of their losses or when victims recover compensation through other means, such as through civil proceedings. Further, officials from one USAO told us that victims must provide documentation of their losses for restitution and, if victims are not able to provide this documentation, courts may decline to order restitution. Also, in certain cases, courts are not required to order restitution—such as when there is no identifiable victim or, on the other hand, when the number of identifiable victims is so large as to make restitution impractical, among other reasons. Additionally, the court might not order, or order only partial restitution for other reasons, such as when the value of property the defendant returned to the victim was deducted from the restitution award or because the victim received compensation from insurance. If a court does not order restitution, or orders partial restitution, it is required to provide the reason for its decision and to provide that reason to USSC, but our analysis showed USSC did not always have these data. Specifically, from fiscal years 2014 through 2016, we found that restitution was not ordered—and no reason was documented in USSC data for that decision—for 9,848 offenders (5 percent of the 214,578 offenders sentenced during this time period). Information on offenders’ sentences, including restitution, assists USSC in its continuous reexamination of its guidelines and policy statements and ensures that various sentencing practices are achieving their stated purposes. Further, Standards for Internal Control in the Federal Government state that management should evaluate issues identified through monitoring activities or reported by personnel to determine whether any of the issues rise to the level of an internal control deficiency. In response to our questions about the missing information on reasons why restitution was not ordered, AOUSC and USSC officials stated that they were unaware of the missing information or why it was missing. Judiciary officials stated that because various entities within the judiciary participate in the process of collecting and recording information on reasons restitution was not ordered, they did not know which entities could take action to improve USSC data. However, as previously discussed, if the court does not order restitution, or orders only partial restitution, the judge must provide the reason, and judges usually do so in a written Statement of Reasons form. The Judicial Conference, along with USSC, has developed guidance to help judges fill out the Statement of Reasons form and AOUSC supports the Judicial Conference in carrying out its policies. Further, courts must provide USSC the written Statement of Reasons form for sentences imposed. USSC is also responsible for collecting, analyzing, and distributing information on federal sentences provided by each district court, including information related to orders for restitution. However, judicial officials, including from the entities listed above, agreed that further studying the missing data may inform the judiciary of the cause of the missing data, as well as any efforts needed to improve USSC information. Courts are required to provide reasons for not ordering restitution and to provide this information to USSC so that the agency can analyze and report on sentencing data. Determining why USSC data are incomplete could help inform the judiciary whether the issue rises to the level of an internal control deficiency and whether additional action can be taken to improve the transparency of sentencing decisions. Doing so could help the judiciary ensure reasons for not ordering restitution are provided consistently in all cases and potentially improve data provided to USSC, in turn supporting its mission to promote transparency in sentencing decisions. Our analysis of DOJ data showed that DOJ collected $2.95 billion in restitution debt from fiscal years 2014 through 2016, half of which was collected on debts imposed during this period. The extent of collections across the 94 USAOs ranged from a high of $848 million in one USAO to a low of $1.2 million in another USAO. The median amount collected for USAOs was $10.7 million. DOJ was more successful at collecting restitution on newer debts—debts imposed from fiscal years 2014 through 2016. Of the $2.95 billion in restitution debt collected, about half was collected from new debts imposed by courts during this time period. Specifically, DOJ collected $1.5 billion (4 percent), of the $34 billion ordered from fiscal years 2014 through 2016. The remaining half of the debt collected during this time frame was collected from debts imposed between fiscal year 1988 and fiscal year 2014. New debts—imposed in fiscal years 2014 through 2016—were also more likely to be fully paid during this time period compared to all debts. Specifically, from fiscal years 2014 through 2016, DOJ collected the full amount of restitution on 4,003 of the 24,950 debts imposed during this time, 16 percent. However, across all debts, including debts imposed prior to fiscal year 2014, DOJ collected the full amount of restitution ordered on only 5 percent of debts. Across all restitution debts, DOJ collected at least some of the debt for one-third of debts and did not collect any restitution on the remaining two-thirds. More than 60 percent of the restitution DOJ collected in fiscal years 2014 through 2016 was owed to non-federal victims ($1.8 billion), including individuals, corporations and state and local governments. An additional 37 percent of restitution was collected on behalf of federal agencies that were victims of crimes. One percent of restitution collected was community restitution, which is restitution collected for drug offenses that otherwise have no victims and which is disbursed to state victim assistance agencies and state agencies dedicated to the reduction of substance abuse, as shown in table 4. AOUSC officials noted that some collected restitution is not disbursed to non-federal victims due to a lack of accurate contact information for these victims. Specifically, according to AOUSC, as of June 2017, courts had more than $132 million in restitution due to 113,260 victims that could not be disbursed because of a lack of accurate contact information for these victims. DOJ is required to provide courts with victim contact information, and victims are to notify DOJ if their contact information changes. However, AOUSC and USAO officials told us that this notification by victims may not always occur. For example, officials in one USAO told us that due to the length of court proceedings, victims may move without notifying the court prior to the disbursement of restitution and, as a result, the court is unable to disburse restitution to those victims. According to our analysis of DOJ data, at the end of fiscal year 2016, $110 billion in restitution was outstanding and USAOs had identified $100 billion of that debt as uncollectible, as shown in figure 2. USAOs may identify debts as uncollectible and suspend collection actions on a debt for a variety of reasons, including that the offender has no, or only a nominal, ability to pay the debt. Probation officials, EOUSA officials, and officials from five of six USAOs we interviewed stated that most outstanding restitution debt is identified as uncollectible and collection action is suspended because many offenders have little ability to pay the debt—a conclusion supported by USSC data. For example, according to USSC data, 95 percent of offenders ordered to pay restitution from fiscal years 2014 through 2016 received a waiver from paying a court-ordered fine, indicating their inability to pay. While courts are allowed to take an offender’s economic circumstances into consideration when issuing fines, they generally may not do so when ordering restitution. As a result, EOUSA and federal probation officials with whom we spoke stated that offenders ordered to pay restitution often do not have an ability to do so and therefore a large amount of restitution orders is uncollectible. Through various guidance documents, DOJ has identified and recommended numerous practices for DOJ prosecutors and FLU staff to use throughout the restitution process to help ensure full and timely restitution for victims. USAO officials in all six offices with whom we spoke stated that, based on their experience, these practices were generally effective. Specifically, DOJ and EOUSA officials identified practices for prosecutors and FLU staff to use when requesting restitution, facilitating court orders for restitution, and collecting restitution and documented these practices in several guidance manuals. Officials we interviewed from all six USAOs stated they were generally satisfied with the guidance from EOUSA and that they thought most of DOJ’s recommended practices were effective when requesting restitution, facilitating court orders for restitution, and collecting restitution. Requesting restitution. Officials we interviewed from three USAOs identified coordination between prosecutors and case investigators prior to sentencing to identify victims and their losses as an important practice for requesting restitution. USAO officials from three of the six offices stated that gathering detailed information on an offender’s financial resources, which include assets that could be forfeited and used to pay a restitution debt, was a very effective practice related to requesting restitution. Facilitating court orders of restitution. Although the courts, and not prosecutors, are responsible for ordering restitution, DOJ guidance identifies several practices that prosecutors can use to facilitate orders of restitution that may increase the likelihood of full and timely restitution for victims. Officials from three of six USAOs stated that the most effective practice related to ordering restitution was ensuring courts ordered restitution as due and payable immediately. Specifically, when offenders cannot pay restitution in an immediate lump-sum payment, the courts must specify a payment schedule through which the offender will pay restitution based on the offender’s ability to pay. In these cases, USAO officials stated that it is effective for prosecutors to ensure the restitution order specifies that restitution is due and payable immediately. According to an EOUSA official, this permits the agency to immediately pursue all collection remedies allowed by law whenever the debtor has or subsequently obtains the ability to pay. Collecting restitution. Officials from all six USAOs stated that using the Treasury Offset Program (TOP), a program that allows for the reduction or withholding of a debtor’s federal benefits, such as a tax refund, was one of the most effective practices for collecting restitution. Specifically, officials in one USAO told us that TOP requires minimal effort for FLU staff and can result in a high amount of collections. As an example, officials from two USAOs told us their respective offices each recovered more than $500,000 dollars in restitution debt in fiscal year 2016 through TOP. Officials from three of the six offices also identified using wage garnishment as an effective practice for collecting restitution. Across all parts of the restitution process, USAO officials we spoke with also consistently identified DOJ recommended practices related to internal and external communication and collaboration as effective for improving the restitution process. Specifically, the officials identified collaboration between various units in the USAO as an effective practice to ensuring restitution for victims. For example, USAO officials in two of the six offices highlighted coordination between Victim-Witness coordinators and prosecutors to help identify victims and quantify their losses as effective to assisting in the request for restitution. Additionally, USAO officials in all six offices stated that strong coordination between FLU personnel and criminal prosecutors to identify an offender’s financial resources and available assets was an effective practice to help ensure FLU staff could collect restitution using those resources or assets. USAO officials from five of six offices identified external communication between FLU and the federal probation office as an effective practice. Specifically, officials from these USAOs stated that FLUs coordinating with probation officers during the offender’s supervision period to enforce restitution terms was an effective practice for collecting restitution. Additionally, according to EOUSA guidance, FLU staff can use outreach and training with other partners such as the probation office to facilitate information sharing on restitution collection issues and officials from five of six USAOs told us that FLUs conducting training and outreach is a very effective practice. In addition, probation officials we interviewed in each of the six federal judicial districts we selected stated that ongoing communication between USAO staff and probation officers is effective to ensuring victims are identified and receive full and timely restitution. Probation officials from one court district emphasized the importance of a good working relationship with the USAO, stating that the probation office and USAO are better able to ensure victims and their losses are accurately identified and defendants’ ability to pay is adequately addressed when working collaboratively. A probation official from another office said that probation officers regularly coordinated with the USAO’s FLU, and this coordination was particularly important on cases involving complex financial crimes, where the offender has a complicated financial portfolio. Further, probation officials from five of six probation offices also stated that attending training conducted by the FLU is a very effective practice. EOUSA and selected USAO officials told us that while these practices may be useful in some circumstances, they may not be effective or applicable in all cases or in all districts. Specifically, practices DOJ recommends may be effective when offenders have the ability to pay restitution but are simply unwilling to do so; however, USAO officials in five of six offices stated that these practices cannot mitigate the fact that many offenders lack the ability to pay restitution because they lack assets and income. Additionally, while EOUSA guidance recommends that FLU staff contact co-defendants or victims for information on the whereabouts or assets of offenders who owe restitution, officials from three USAOs told us this was not effective. According to one official, although co- defendants are sometimes eager to share information, the information is usually unreliable. USAO officials also identified some recommended practices as not applicable to their district. For example, EOUSA recommends that FLU units request Asset Investigation assistance from EOUSA for complex cases involving large amounts of valuable assets. However, USAO officials in a small, rural district with whom we spoke stated that the types of cases their office prosecutes tend not to be the type of financial cases that warranted use of this resource. DOJ has identified improving debt collection—including court-ordered restitution—as a major management initiative in its 2014-2018 Strategic Plan. However, it does not have any measures or goals in place to assess its performance in meeting this initiative or meet requirements that it evaluate its performance in seeking and recovering restitution as required by statute. In 2001, we recommended that DOJ adequately measure its criminal debt collection performance against established goals to help improve collections and stem the growth in uncollected criminal debt. DOJ concurred with this recommendation, and as of fiscal year 2003, annually assessed each district based on established collection goals for that district. However, as of September 2017, DOJ no longer evaluates each district based on established goals. EOUSA officials stated that DOJ no longer uses these performance goals and that the agency did not maintain records for when or why it stopped. EOUSA officials stated that while the agency does not have any measures or goals to assess USAOs’ performance in improving debt collection, including the collection of federal restitution, they are working with DOJ’s Justice Management Division to develop a suite of analytical tools to monitor the collection of debt across all offices. According to DOJ, some of these analytical tools have been implemented and additional tools will be implemented by March 2018. EOUSA officials stated that these tools will help the agency determine which cases are most likely to result in significant collections and the types and timing of enforcement actions that generate maximum debt recovery results. EOUSA officials further stated the analytical tools will allow the agency to compare districts’ efforts based on a variety of factors (e.g., caseload, staff size, and enforcement actions). These analytical tools may provide EOUSA with valuable insight into the present condition of the collection of restitution across USAOs, but they will not provide DOJ with a baseline performance standard that could be used to indicate if USAOs’ efforts to collect restitution debts are having a measurable impact in meeting DOJ’s objective of improving debt collection. Additionally, EOUSA conducts evaluations of each USAO every 4 years, which include a review of FLU operations, but EOUSA officials stated that these reviews do not include oversight of the collection of restitution. Among other aspects of USAO operations, these internal evaluations review the extent to which each FLU is complying with statutory and DOJ requirements related to debt collection, has sufficient program resources, and adequately manages its caseload. However, DOJ and EOUSA officials told us that it did not plan to use these internal evaluations to meet the Justice for All Reauthorization Act of 2016 requirement to evaluate each USAO on its performance in seeking and recovering restitution for victims. Specifically, the officials stated that these internal evaluations are not an appropriate mechanism to meet the law’s requirements because the internal evaluations do not specifically review the seeking and recovery of restitution for victims. According to DOJ officials responsible for the internal evaluation program, these evaluations are largely intended to provide onsite management assistance and analysis of how the USAO allocates its administrative and legal personnel resources rather than the office’s efficacy in collecting restitution. Consistent with requirements outlined in the Government Performance and Results Act Modernization Act of 2010 (GPRAMA), performance measurement is the ongoing monitoring and reporting of program accomplishments—particularly towards pre-established, objective and quantifiable goals—and agencies are to establish performance measures to assess progress towards those goals. While GPRAMA is applicable to the department or agency level, performance measures and goals are important management tools at all levels of an agency, including the program, project, or activity level. Agencies can use performance measurement to make various types of management decisions to improve programs and results, such as developing strategies and allocating resources, including identifying problems and taking corrective action when appropriate. Further, the Justice for All Reauthorization Act of 2016 requires DOJ to evaluate each USAO in its performance in recovering restitution for victims. DOJ and EOUSA officials told us that DOJ does not require USAOs to establish performance measures or goals to assess their progress in improving the collection of restitution. DOJ and EOUSA officials also told us that each USAO could develop performance goals but that they were unaware of the extent to which USAOs did so, and further, they do not track the extent to which USAOs met performance goals. Additionally, these officials stated that because each USAO faces different constraints in its ability to collect restitution, establishing a uniform and consistent performance measure and goal would be challenging. EOUSA officials noted that some USAOs may have more resources, such as more FLU staff or specialized asset investigators, available to pursue collections as compared to other offices and therefore offices with fewer resources could have difficulty meeting a performance goal. Further, EOUSA and USAO officials stated that the extent to which DOJ can collect on a debt is heavily influenced by factors outside of the agency’s control, such as an offender’s ability to pay. USAOs could use information provided by performance measures and goals—such as an office’s ability to meet a performance goal—to make managerial decisions to help address these constraints, such as by increasing the allocation of staff resources. Further, to avoid comparing USAOs to a nationally set performance goal that does not account for specific constraints faced by each office, DOJ could—as it did in fiscal year 2003—require each USAO to establish its own objective, quantitative collection goals based on historical, district-specific collection statistics. Finally, as previously discussed, each USAO already accounts for external factors that affect the collectability of a debt, such as an offender’s ability to pay, by suspending collection action on debts it identifies as uncollectible. Therefore, any performance measures and goals developed could be based solely on debts that the USAO already has determined to be collectible. Stakeholders we interviewed—including officials from one USAO, probation officials in two districts, and officials with DOJ’s Office of Crime Victims—noted that receiving restitution is both emotionally and financially important to victims. Specifically, officials from one USAO and one probation office noted that while many victims may never receive the full amount of restitution ordered, receiving even a minimal amount of restitution is a symbolic victory and that it is important for victims to know the government is making efforts to collect restitution on their behalf. The legislative history of the MVRA echoes these sentiments, providing that even nominal restitution payments have benefits for the victim of crime, and that orders of restitution are largely worthless without enforcement. Yet, according to our analysis, $10 billion of restitution debt DOJ identified as collectible remained outstanding at the end of fiscal year 2016. Further, the extent to which USAOs collected restitution varied widely— from a high of one USAO district collecting nearly 350 percent of all collectible debt in fiscal years 2014 through 2016 to a low of one district collecting less than one percent of collectible debt in the same period. Without performance measures, including the establishment of goals, DOJ cannot assess if this variation is due to factors outside the control of USAOs or due to management deficiencies that require corrective action. Developing performance measures and goals for each USAO related to the collection of restitution would allow DOJ to assess its progress in achieving its major management initiative in improving debt collection— including debts owed to victims as court-ordered restitution. Doing so would also better position DOJ to meet the requirements of the Justice for All Reauthorization Act of 2016 to evaluate offices in their performance in recovering restitution on behalf of victims and to use performance information to improve the practices of offices as needed. Although asset forfeiture and restitution are separate parts of a criminal sentence, DOJ guidance states that using forfeited assets to benefit victims is a way that DOJ can help ensure eligible victims of crime are compensated for their losses. Further, DOJ regulations and policy require that eligible victims receive compensation from forfeited assets before certain other uses, such as official use or equitable sharing. However, while DOJ tracks the amount of compensation provided to victims through forfeited assets, it does not have assurances that forfeited assets are being used to compensate victims to the greatest extent possible. According to DOJ information, the agency made payments of about $595 million to eligible victims other than owners of the property from the Assets Forfeiture Fund from fiscal years 2014 through 2016, or 15 percent of $3.9 billion in paid expenditures during this period, as shown in table 5. As table 5 shows, DOJ can account for cases in which forfeited assets were used to compensate eligible victims who were not owners or lienholders. However, DOJ does not have information on the overall universe of victims who could have been eligible to receive compensation from forfeited assets. Further, it does not have insight into any reasons why funds from forfeited assets were not used for these victims. Specifically, DOJ officials stated that the department collects information on whether victims have been identified in cases associated with forfeited assets, and if restitution is anticipated in these cases, but it does not track the extent to which these victims were ultimately compensated using forfeited assets. Further, DOJ also does not collect information on reasons why victims were not compensated using funds from forfeited assets. While DOJ is required to use forfeited assets to compensate victims before using those assets for certain other purposes, the agency is unable to provide assurances that it is always doing so because it does not have information on the overall universe of victims or reasons why victims were not compensated using forfeited assets. As a result, DOJ does not have a basis to know whether the $595 million provided to victims from fiscal years 2014 through 2016 is the maximum amount of compensation the agency could have provided to victims using forfeited assets. Full use of forfeited assets for victim compensation has long been, and continues to be, a goal of DOJ. In 2005, an interagency task force—led by DOJ and including the Department of Treasury, Office of Management and Budget and AOUSC—developed a strategic plan to improve the collection of criminal debt. Among other goals included in its strategic plan, the task force stated a goal of examining how asset seizure and forfeiture procedures can be used to maximize recoveries for victims. More recently, DOJ reported in its 2014-2018 Strategic Plan that it would make every effort to recover full and fair restitution for victims using the federal forfeiture statutes to preserve and recover criminal proceeds. Specifically, DOJ stated that using federal forfeiture statutes to recover full and fair restitution for victims is one part of its strategy to protect the rights of the American people and enforce the rule of law. Finally, DOJ officials told us they considered providing compensation to victims as one goal of the Asset Forfeiture Program and EOUSA stated in guidance that asset forfeiture is the most widely available and effective tool to seize assets for restitution purposes. Standards for Internal Control in the Federal Government call on federal managers to design control activities to achieve the agency’s objectives. These controls can include using quality information to make informed decisions, evaluate the entity’s performance in achieving key objectives, and address risks. DOJ officials told us that they do not track the extent to which victims were not compensated using forfeited assets because USAO staff are not required to request that these assets be used for victim compensation. DOJ officials explained that staff are required to indicate in the agency’s forfeited asset database, the Consolidated Asset Tracking System, if victims exist in cases associated with forfeited assets and if restitution is anticipated in these cases. However, these officials stated that staff are not required to then compensate these victims using the forfeited assets or to indicate why these assets were not used for this purpose. DOJ officials told us that decisions to compensate victims using forfeited assets are best left to the judgment of the USAO staff familiar with the case, such as the prosecuting attorney or asset forfeiture staff. DOJ officials pointed to informal communication and coordination among prosecutors, the FLU, and the Asset Forfeiture unit in each USAO as a means to provide compensation to victims as appropriate. However, communication and coordination among these groups has been a challenge for USAOs, as the DOJ Inspector General found in a June 2015 review of DOJ’s debt collection program. Similarly, during our current review, EOUSA and USAO officials we spoke with identified communication and coordination as an area for improvement. EOUSA officials told us that while they thought that FLU staff and Asset Forfeiture unit staff were collaborating more frequently to use forfeited assets to collect restitution debts since the issuance of the DOJ Inspector General’s report, the extent of collaboration between these two units still varied across USAOs. Further, officials we talked to in two USAOs and one probation office noted that USAO staff could improve their use of forfeited assets for restitution payments. For example, officials in one probation office noted that it was their practice to identify forfeited assets that could be used for compensation in the PSR because they had observed that USAO staff were frequently not applying such assets to victim compensation. While DOJ may allow USAO staff to use discretion when requesting restoration or alerting victims to assets available for compensation, increasing the agency’s understanding of the extent to which assets could have been—but were not—used for victim compensation, and the reasons for those decisions, does not affect that discretion. There are legitimate reasons why victims might not be compensated using forfeited assets; for example, the assets may have other owners or lienholders that must be compensated prior to victims, or offenders may have other means by which to pay victims restitution. However, there are also instances where victims may have not received compensation through forfeited assets as a result of unintentional circumstances. For example, according to DOJ’s Asset Forfeiture Manual, forfeiture actions can proceed faster than the parallel criminal case. Consequently, assets might be equitably shared, placed into official use, or remitted to victims who file petitions long before restitution is ordered, and therefore would not be available for other victims who wait for restitution to be ordered after an offender is sentenced. To avoid this outcome, DOJ recommends that USAOs coordinate to ensure the retention of property for victim compensation. However, although DOJ officials responsible for leading DOJ’s asset forfeiture efforts highlighted the need for expedient coordination when USAO staff are considering using forfeited assets to compensate victims, they stated this may not always occur. As a result, otherwise eligible victims may not always be compensated through forfeited assets. By gathering information about the extent to which assets were used for victim compensation—including when they were not used and reasons why not—DOJ could have a better understanding of potential instances where victims could be, but are not, receiving compensation through forfeited funds and could take steps to address them accordingly. Options for gathering such information could include doing a one-time retrospective study of forfeited assets with victims or anticipated restitution to determine the extent that assets were used for victim compensation, or creating a tracking mechanism through its forfeited assets database, or another system. Gathering information on the extent to which forfeited assets were used for victim compensation, including when not used and reasons why not, could position DOJ to take action to increase the use of these assets for victim compensation if warranted. These actions could include providing funds for increased asset forfeiture staff in USAOs, providing additional training or changing policies or procedures for using forfeited assets to compensate victims. Fully and systematically understanding the extent to which issues, such as a lack of coordination within USAOs, result in victims not being compensated using forfeited assets would give DOJ a basis upon which to develop improvements to the Asset Forfeiture Program. Such information would also provide DOJ and staff at all USAOs with information to evaluate its performance in achieving one of the goals of the Asset Forfeiture Program and taking action to meet the agency goal of protecting the rights of the American people—including the right to full and fair restitution for victims. Restitution serves the criminal justice goal of holding offenders accountable and, to the extent possible, restoring victims of federal crimes to their prior position had the crime not occurred. Many victims are unlikely to receive any meaningful portion of court-ordered restitution owed to them because of offenders’ inability to pay these debts. However, the fact that restitution is difficult to collect does not negate the important responsibilities of the judiciary and DOJ to properly manage and oversee all aspects of the restitution process. By law, courts are to state why they did not order restitution and provide that information to USSC. While this information was collected and recorded in USSC data for most offenders, we found that this information was missing for thousands of offenders. It is important for the judiciary to ensure that this information is consistently collected and recorded to assist USSC in its continuous re-examination of its guidelines and policy statements and ensure that various sentencing practices are achieving their stated purposes. The judiciary could support USSC in this endeavor by determining why this information is missing. Results from this study could help inform the judiciary whether this issue rises to the level of an internal control deficiency and whether additional action can be taken to improve the transparency of sentencing decisions. While DOJ has delegated collection activities for restitution to USAOs, it could provide better oversight to ensure it is making reasonable efforts to collect restitution and meeting its responsibility to victims. USAOs have identified a significant portion of outstanding restitution debt as uncollectible, but they have also identified $10 billion of outstanding restitution debt that could be collected. Developing and implementing performance measures and goals for each USAO would allow DOJ to gauge USAOs’ success in collecting this restitution and, by extension, the department’s success in achieving its major management initiative to increase the collection of debt. Further, DOJ could use performance information to improve the practices of offices in seeking and recovering restitution, consistent with a requirement in the Justice for All Reauthorization Act of 2016. Finally, DOJ could gain greater visibility into the use of forfeited assets to compensate victims by gathering information on cases in which victims have been identified and restitution is anticipated but forfeited assets are not used, and any reasons why. Doing so would better position DOJ to take action to increase the use of forfeited assets to compensate eligible victims if warranted and to provide assurance that it is maximizing the use of asset forfeiture in satisfying restitution debts, one of the agency’s most effective mechanisms for satisfying restitution. We are making three recommendations, including one to the judiciary and two to DOJ. Specifically: Judiciary officials, including AOUSC, USSC, and the Judicial Conference, should determine why USSC data on the reasons restitution was not ordered are incomplete. Additionally, if warranted based on this information, judiciary officials should take action to ensure USSC data records include all required information for orders of restitution. (Recommendation 1) To improve oversight of the collection of restitution we recommend that the Attorney General: Develop and implement performance measures and goals for each USAO related to the collection of restitution, and measure progress towards meeting those goals. (Recommendation 2) In cases where forfeited assets were not used to compensate victims, gather information on reasons why forfeited assets were not used for victims. If warranted based on this information, take action to increase the use of forfeited assets to compensate eligible victims. (Recommendation 3) We provided a draft of this report for review and comment to DOJ, the Judicial Conference of the United States, AOUSC, USSC, and the Federal Judicial Center. DOJ concurred with our recommendations and provided technical comments, which we incorporated as appropriate. AOUSC provided written comments, which are reproduced in appendix III. In its written comments, AOUSC noted that it would work with the USSC to address our recommendation. We are sending copies of this report to the appropriate congressional committees and the Attorney General, the Judicial Conference of the United States, the Directors of AOUSC, the Staff Director of USSC, the Federal Judicial Center and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you and your staff have any questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions are listed in appendix IV. According to our analysis of data from the U.S. Sentencing Commission (USSC), 214,578 federal offenders were sentenced from fiscal years 2014 through 2016. Table 6 shows the number of offenders sentenced and the number and percentage of offenders ordered to pay restitution for each primary offense of conviction in fiscal years 2014 through 2016. The Department of Justice (DOJ) has identified and recommended numerous practices for federal prosecutors and Financial Litigation Unit (FLU) staff to use throughout the restitution process through various guidance documents. We conducted semi-structured interviews with officials from six U.S. Attorneys’ Offices (USAO) to obtain their views on the restitution process and the extent to which they believed DOJ- recommended restitution practices related to the restitution process were effective. In particular, we spoke with USAO officials from the District of Connecticut; the Southern District of California; the District of New Jersey; the Southern District of Ohio; the District of South Dakota; and the District of Wyoming. Tables 7 through 9 show the results of our semi-structured interviews. In particular, table 7 shows practices related to requesting restitution and the extent to which USAO officials found these practices effective. Table 8 shows practices related to facilitating orders of restitution and the extent to which USAO officials found these practices effective. Table 9 shows practices related to collecting restitution and the extent to which USAO officials found these practices effective. Each table also indicates practices that officials we interviewed considered as most important or effective for helping ensure victims receive full and timely restitution. In addition to the contact named above, Chris Ferencik (Assistant Director); Kathleen Donovan (Analyst-in-Charge); Enyinnaya David Aja; David Alexander; Lacinda Ayers; Carla Brown; Emily Hutz; Janet Temko- Blinder; and Adam Vogt, made key contributions to this report.", "summary": "One of the goals of federal criminal restitution is to restore victims of federal crimes to the position they occupied before the crime was committed by providing compensation. Various entities within the federal government are involved in the process of requesting, ordering, and collecting restitution for crime victims, including DOJ and the judiciary. The Justice for All Reauthorization Act of 2016 includes a provision for GAO to review the federal criminal restitution process for fiscal years 2014 through 2016. This report addresses, among other things: (1) the extent to which information is available on restitution requested by DOJ and ordered by courts; (2) the amount of restitution debt DOJ collected and the amount that remains outstanding; and, (3) the extent to which DOJ has conducted oversight on the collection of restitution. GAO analyzed laws, policies and procedures as well as USSC data on restitution orders and DOJ data on restitution collected from fiscal years 2014 through 2016. GAO also selected a non-generalizable sample of six federal judicial districts based on restitution collections and spoke with USAO officials and federal probation officers. Officials from selected U.S. Attorney's Offices (USAO) stated that they document requests for restitution in case files and employ other internal controls, such as the use of templates and forms, throughout the prosecution process to ensure that prosecutors request restitution as appropriate. GAO's analysis of U.S. Sentencing Commission (USSC) data—an agency within the judiciary—showed that information on restitution orders was available for 95 percent of all offenders sentenced from fiscal years 2014 through 2016. Specifically, 214,578 federal offenders were sentenced during this time period and restitution was ordered for 33,158, or 15 percent, of those offenders. Collectively, courts ordered these offenders to pay $33.9 billion in restitution. Most federal offenders sentenced during these years were sentenced for immigration or drug-related offenses. In interviews, USAO officials stated that these offenses do not typically have victims requiring restitution. GAO found that data on reasons why restitution was not ordered were incomplete for 5 percent of all offenders sentenced from fiscal years 2014 through 2016. Determining why data on restitution orders are incomplete may inform the judiciary of the cause of the incomplete data and any efforts needed to improve USSC data. GAO's analysis of Department of Justice (DOJ) data showed that USAOs collected $2.95 billion in restitution debt in fiscal years 2014 through 2016, see figure below. However, at the end of fiscal year 2016, $110 billion in previously ordered restitution remained outstanding, and USAOs identified $100 billion of that outstanding debt as uncollectible due to offenders' inability to pay. DOJ identified improving debt collection—including restitution—as a major management initiative in its 2014-2018 Strategic Plan. While DOJ is developing analytical tools to monitor the collection of restitution, it has not established performance measures or goals. Performance measures and goals would allow DOJ to gauge USAOs' success in collecting restitution and, by extension, the department's success in achieving a major management initiative. GAO is making three recommendations. GAO is making one to the judiciary to determine why data on restitution orders are incomplete. GAO is making two recommendations to DOJ, including one to implement performance measures and goals for the collection of restitution. The judiciary and DOJ concurred with the recommendations.", "document_type": "gao"}
{"report": "Headquartered in Washington, D.C., the Corps has eight regional divisions and 38 districts that carry out its domestic civil works’ program (see fig. 1). Corps headquarters primarily develops policies based on administration guidance; plans the direction of the organization; and approves projects to recommend for inclusion in the President’s annual budget request to Congress. The divisions approve projects for submission to headquarters and coordinate projects within their districts, while the districts plan and implement the projects. The Corps’ construction appropriations account has three main business lines— aquatic ecosystem restoration, flood risk management, and navigation— that correspond to the three primary missions of its civil works program. Some projects may be multipurpose and fit into more than one business line within the program. For fiscal years 2008 through 2017, the President’s budgets requested about $4.78 billion per year, on average, in discretionary funding for the Corps’ civil works program to plan, construct, operate, and maintain a wide range of water resources projects (see fig. 2). Of this total, the budget requested an average of about $1.39 billion total per year for construction projects in the aquatic ecosystem restoration, flood risk management, and navigation business lines. The total construction amounts in Corps budget documents include funding for the hydropower business line; hydropower funding is represented in the other discretionary funding in this figure. We excluded those funding amounts from our business line totals, in part because these projects are now mainly funded through the operations and maintenance account. They represented less than 4 percent of the construction account requests from fiscal years 2008 through 2017. Discretionary funding refers to the level of budget authority, outlays, or other budgetary resources (other than those for mandatory programs) that is provided in, and controlled by, appropriation acts. For fiscal years 2008 through 2017, the President’s budget requests for the Corps included 164 construction projects located in 31 states, the District of Columbia, and Puerto Rico. The five states for which the most funds were requested in this period were: Florida, with $2.4 billion requested for 15 construction projects, Illinois, with $2.3 billion requested for 15 construction projects, California, with $1.6 billion requested for 24 construction projects, Washington, with $924 million requested for 9 construction projects, Kentucky, with $646 million requested for 6 construction projects. The projects in these five states accounted for 61 percent of the $12.9 billion that the President requested for Corps construction projects in these years. Figure 3 shows the total number of construction projects and funds included in the President’s budget requests for fiscal years 2008 through 2017, by state, within the Corps’ three main business lines— aquatic ecosystem restoration, flood risk management, and navigation. See appendix I for the number of construction projects and funds requested for each fiscal year during this period, by state. See appendix II for a list of the names of construction projects, locations, business lines, and funds requested per year during this period. For fiscal years 2015 through 2017, the Corps provided us with detailed data for the construction projects included in the President’s budget requests. This information included latitudinal and longitudinal coordinates to locate projects within states and divisions, as well as business-line-specific data. A total of 71 projects were included in the budget requests for these business lines during this period. Construction projects included in the President’s budget requests for the Corps’ three main business lines for fiscal years 2015 through 2017 were geographically distributed in 26 states and Puerto Rico. According to our analysis of Corps budget data, most of the projects were near either water sources or Corps-constructed water infrastructure. Figure 4, which is an interactive map, identifies the locations and describes budget data for each construction project (see interactive instructions). See appendix III for a list of these construction projects by Corps division, state, business line, and funds requested for each fiscal year. Corps headquarters officials said that the Corps does not specifically use geographic locations to select construction projects to recommend for inclusion in the President’s budget requests. However, Corps officials explained that geographic characteristics, such as population, might have affected how they considered including construction projects within specific business lines. For example, Corps officials within the flood risk management business line may have considered a construction project located in a population center that could be severely impacted by a flooding event to be a higher priority over other projects in less populated areas. For fiscal years 2015 through 2017, the Corps requested more than $3 billion for the 71 construction projects that fell within the three main business lines: Aquatic ecosystem restoration. The President’s budget requested $618 million for 15 Corps construction projects in the aquatic ecosystem restoration business line, which were located in California, Florida, Georgia, Illinois, Louisiana, Maryland, Minnesota, Oregon, and Washington. According to the Corps budget guidance, these projects were located in areas of federal significance that have some degree of habitat scarcity, connectivity, and special-status species, among other characteristics. Moreover, according to the Corps budget guidance, construction projects in this business line emphasize the restoration of nationally or regionally significant habitats where the solution primarily involves modifying the hydrology and geomorphology. For example, the goals of the South Florida Ecosystem Restoration program—a collection of several projects— includes improving the health of over 2.4 million acres of the south Florida ecosystem (including Everglades National Park), enhancing water supply, and maintaining flood mitigation, according to a Corps document and Corps officials. According to a Corps document, since 2000, the Corps has invested a total of $2.4 billion in the program including other initiatives, such as the Comprehensive Everglades Restoration Plan and Central and Southern Florida. Flood risk management. The President’s budget requested $1.33 billion for 33 Corps construction projects in the flood risk management business line, which were located in California, Florida, Illinois, Kansas, Kentucky, Massachusetts, Missouri, New Jersey, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, and West Virginia. According to the Corps’ budget guidance and strategic plan, these projects are located in areas that may experience riverine and coastal flooding, and they are to provide water supply storage. For example, the Bluestone Lake project, in West Virginia, is to address deficiencies that could lead to a breach of a dam built by the Corps in the 1940s. According to the Corps, the dam’s spillway cannot discharge enough water without substantially increasing the potential for a breach of the dam. According to the Corps, a breach could cause catastrophic flooding along the largest river valleys in West Virginia, including locations of major manufacturing and chemical industries, and put 165,000 lives at risk. The Corps started the project in 1998, and plans to award the next phase of the project in 2022. A draft supplementary study has been completed to identify a plan to address this additional deficiency, according to the Corps. The Corps is planning for a 10-year construction period, with an estimated cost of $575 million, according to a Corps document and a headquarters official. Navigation. The President’s budget requested $908 million for 20 Corps construction projects in the navigation business line, which were located in coastal, inland, and intracoastal navigation systems in California, Georgia, Illinois, Louisiana, Missouri, New Jersey, New York, Ohio, Oregon, South Carolina, Texas, Virginia, Washington, and Wisconsin. According to Corps’ budget guidance, these projects are intended to provide safe, reliable, cost-effective and environmentally sustainable waterborne transportation systems for the movement of commercial goods. For example, the Corps’ Olmsted Locks and Dam project is located on the Ohio River, which connects to the Tennessee, Cumberland, and Mississippi rivers and is considered critical for commercial navigation. According to the Corps, the project consists of two 110-foot by 1,200-foot locks, which are located adjacent to the Illinois bank, and a dam comprising of five tainter gates, which control the amount of water that flows downstream. According to a Corps document, over the last several years, approximately 80 million tons of bulk commodities (for example, coal, grain, rock, and sand) per year, on average, have passed through navigation structures that are part of the project. The Corps estimates that this project has been under construction for nearly 30 years. According to Corps documents and headquarters officials, the project became operational as of September 2018, with a total estimated cost of $3 billion by the time of project completion. To prioritize construction projects to recommend for inclusion in the President’s budget requests for fiscal years 2008 through 2017, the Corps used a process involving the three levels of its organization—districts, divisions, and headquarters. To begin the process, Corps district officials divided projects into work packages—increments of work that can be considered for inclusion in the budget. According to Corps policy guidance for budget development (budget guidance), these work packages should contribute to the overall project and be executed without being dependent on the funding of additional work packages. According to a district official, district officials then assigned one of six priority levels to indicate the order in which work packages for the same project should be completed for that fiscal year. Priority levels are categories used to differentiate work packages within the same project. Corps budget guidance instructed district officials to assign priority levels based on criteria including whether a project is new or continuing and where a work package falls within a project’s overall work plan. Corps budget guidance also instructed officials to group work packages either by business line or appropriations account, depending on the fiscal year, based on the budget guidance for that fiscal year. Corps districts, divisions, and headquarters consecutively ranked the work packages, as shown in figure 5. In doing so, they established criteria specific to the business line for each project. Corps budget guidance provided instructions on which criteria to use for each business line to determine rankings in a particular year. The ranking criteria in the guidance—such as the rate of economic return, populations at risk, or the environmental impact—varied nearly every year from fiscal years 2008 to 2017 for two of the three main business lines: flood risk management and navigation (see appendix IV for the criteria used, by business line and fiscal year). Corps officials said they routinely revised the criteria while developing the annual budget guidance, for reasons such as addressing changes in the policy guidance from the Assistant Secretary of the Army for Civil Works or OMB, or improving the ranking process. Corps officials we interviewed noted that although each level used the same criteria to rank work packages, the districts, divisions and headquarters had different focuses and increasing numbers of work packages to rank and compare. Specifically, officials at each level considered the overall needs of their respective jurisdictions when making ranking decisions: districts had a local focus; divisions had a regional or watershed focus; and headquarters had a national focus. The number of work packages to be ranked increased at each level according to Corps officials: districts ranked local work packages; divisions re-ranked work packages from four to seven districts; and headquarters re-ranked work packages from all of the divisions nationwide. After ranking all work packages within their respective jurisdictions by business line or appropriations account, officials from all three levels entered the rankings into the database for use in the budget review process. According to information from the Civil Works Integrated Funding Database, the Corps ranked more than 25,000 work packages for the fiscal year 2017 budget recommendation. According to one headquarters official, Corps officials in the Program Development Branch at headquarters facilitated discussions among business line and account managers to develop the final rankings of all work packages. As part of this process, headquarters officials noted that business line managers compared work packages with different characteristics across business lines or accounts. According to Corps budget guidance and headquarters officials, business line managers and account managers are instructed to consider two key factors when determining their final rankings each fiscal year. Specifically, those managers are instructed to give top priority to work packages that significantly impact the risk to human life posed by potential disasters. In addition, the managers are to prioritize work packages that address a legal requirement to mitigate potential negative effects caused by construction, such as adverse environmental effects. Using the final rankings, Corps headquarters officials said they developed the final budget recommendations for each fiscal year, including a recommended funding amount for each project, with input from various levels of the organization. More specifically, to determine the budget recommendations, Corps headquarters officials obtained feedback from district commanders, generals, directors, and the Chief of Engineers. In fiscal year 2017, the Corps used its final rankings to determine recommended funding amounts for 89 construction projects, each of which included one or more work packages; ultimately, these projects comprised about 298 work packages. Once the Corps headquarters officials developed these recommendations, they briefed the Assistant Secretary of the Army for Civil Works on their recommendations. An official from the Assistant Secretary’s office said they reviewed the Corps recommendations and compared them with the Assistant Secretary’s priorities, after which they developed the final recommendations to send to OMB for review and potential inclusion in the President’s budget requests. According to a Corps official, 34 percent of construction projects included in the fiscal year 2017 President’s budget request received funding. We provided a draft of this report for review and comment to the Department of Defense. The department told us they had no comments on the draft report. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Table 1 lists the 164 construction projects and funds requested, by state, within the U.S. Army Corps of Engineers’ (Corps) three main business lines—aquatic ecosystem restoration, flood risk management, and navigation—for fiscal years 2008 through 2017. Table 2 lists the names and locations of the 164 construction projects the U.S. Army Corps of Engineers (Corps) identified as included in the President’s budget requests for its three main business lines for fiscal years 2008 through 2017. The Corps’ three main business lines are aquatic ecosystem restoration, flood risk management, and navigation. Table 3 lists the names of the 71 construction projects, their locations, and the agency divisions that manage them, as shown in interactive figure 4 of this report, and includes the figure’s rollover information. The U.S. Army Corps of Engineers (Corps) identified these projects as included in the President’s budget requests for its three main business lines for fiscal years 2015 through 2017. The Corps’ three main business lines are aquatic ecosystem restoration, flood risk management, and navigation. Table 4 lists the criteria included in the U.S. Army Corps of Engineers’ (Corps) annual budget guidance for its three main business lines for fiscal years 2008 through 2017. The Corps’ three main business lines are aquatic ecosystem restoration, flood risk management, and navigation. Anne-Marie Fennell, (202) 512-3841 or fennella@gao.gov. In addition to the contact named above, Vondalee R. Hunt (Assistant Director), Leah E. English, Kerstin Hudon, Susan Malone, and Cynthia Norris made significant contributions to this report. Important contributions were also made by Melinda Cordero, Justin Fisher, Juan Garay, Patricia Moye, and Danny Royer. Army Corps of Engineers: Factors Contributing to Cost Increases and Schedule Delays in the Olmsted Locks and Dam Project. GAO-17-147. Washington, D.C.: February 16, 2017. Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 2014. Army Corps of Engineers: The Corps Needs to Take Steps to Identify All Projects and Studies Eligible for Deauthorization. GAO-14-699. Washington, D.C.: August 21, 2014. Army Corps of Engineers: Cost Increases in Flood Control Projects and Improving Communication with Nonfederal Sponsors. GAO-14-35. Washington, D.C.: December 20, 2013. Army Corps of Engineers: Budget Formulation Process Emphasizes Agencywide Priorities, but Transparency of Budget Presentation Could be Improved. GAO-10-453. Washington, D.C.: April 2, 2010. A Glossary of Terms Used in the Federal Budget Process. GAO-05- 734SP. Washington, D.C.: September 2005.", "summary": "Through its civil works program, the Corps plans, designs, constructs, operates, and maintains a range of water resources projects for purposes such as aquatic ecosystem restoration, flood risk management, and navigation. To support these projects, the Corps requests funding through the annual budget and appropriation process. For fiscal year 2017, the President's budget requested $4.6 billion for Corps' water resources projects, of which about $1 billion was for construction projects. GAO was asked to review budget requests for construction projects under the Corps' civil works program, including the geographic distribution of those projects. This report examines for fiscal years 2008 through 2017 (1) the geographic distribution of the construction projects included in the President's budget requests for the Corps, and (2) how the Corps prioritized such projects for inclusion in the President's budget requests. GAO summarized available budget data for fiscal years 2008 through 2017; reviewed the Corps' budget guidance and documents; mapped locations for construction projects in budget requests for years when sufficient information was available; and interviewed Corps headquarters and division officials. For fiscal years 2008 through 2017, construction projects included in the President's budget requests to Congress for the U.S. Army Corps of Engineers (Corps) were geographically distributed in 31 states, the District of Columbia, and Puerto Rico. During this 10-year period, the President requested over $12.9 billion for 164 construction projects included in the Corps' three main missions—aquatic ecosystem restoration, flood risk management, and navigation. The Corps provided GAO with detailed information on the location of construction projects included in the budget requests for the 3 most recent fiscal years at the time of its review—2015 through 2017. These projects, shown in the figure below, spanned 26 states and Puerto Rico. They were typically located near sources of water or Corps-constructed water infrastructure. To prioritize construction projects to include in the President's budget requests for fiscal years 2008 through 2017, the Corps used a process involving each of its three organizational levels—districts, divisions, and headquarters. Districts divided projects into work packages and assigned 1 of 6 priority levels to indicate the order in which work packages from the same project should be completed. Districts grouped these work packages by business line or appropriations account based on the Corps' budget guidance for the fiscal year and then ranked them. Then Corps divisions and headquarters ranked the work packages. To assign rankings, Corps officials applied criteria specific to the business line of each project. These criteria often varied by fiscal year to address changes to policy guidance. Across the organization, Corps officials ranked more than 25,000 packages for fiscal year 2017. After assigning rankings, headquarters developed final budget recommendations to submit to the Assistant Secretary of the Army for Civil Works, who in turn provided the recommendations to the Office of Management and Budget for review and potential inclusion in the President's budget requests. GAO is not making recommendations in this report. The Department of Defense stated that they had no comments on the draft report.", "document_type": "gao"}
{"report": "The federal government uses grants to address national priorities—such as substance use prevention, treatment, and recovery—through nonfederal parties, including state and local governments, federally recognized tribes, educational institutions, and nonprofit organizations. While there is variation among different grant program goals and grant types, most federal grants follow a common life cycle that includes an award, implementation, and closeout stage for administering the grants. During the award stage, the federal awarding agency enters into an agreement with the grantee stipulating the terms and conditions for the use of grant funds including the period that funds are available for the grantee’s use. During the implementation stage, the grantee carries out the requirements of the agreement and requests payments, while the awarding agency monitors the grantee and approves or denies payments. The grantee and the awarding agency close the grant once the grantee has completed all the work associated with a grant agreement, the grant period of performance end date (or grant expiration date) has arrived, or both. Federal grant programs may fund various types of grants, including discretionary grants, formula grants, and cooperative agreements. Discretionary grants are generally awarded on a competitive basis for specified projects that meet eligibility and program requirements. Formula grants are noncompetitive awards based on a predetermined formula, typically established in statute, and are provided to eligible applicants that meet specified criteria outlined by statute or regulation, such as a state. A cooperative agreement is a type of federal financial assistance similar to a grant, except the federal government is more substantially involved with the implementation. Substance use prevention programs and services (which we refer to collectively as “prevention services” in this report) are designed to prevent or delay the early use of substances and stop the progression from use to problematic use or to a substance use disorder. Prevention services generally focus on reducing a variety of risk factors and promoting a broad range of protective factors through various activities that include, for example, setting policies that reduce the availability of substances in a community, teaching adolescents how to resist negative social influences, and communicating the harms of substances such as the nonmedical use of prescription opioids and marijuana through media campaigns. In addition, prevention services can be targeted at all members of a given population without regard for risk factors, such as all adolescents, or to particular subgroups of individuals or families, such as those who are at increased risk of substance use due to their exposure to risk factors. Targeted audiences for such services may include families living in poverty or children of substance-using parents. When substance use progresses to a point that it is clinically diagnosed as causing significant impairments in health and social functioning, it is characterized as a substance use disorder. Treatment services for substance use disorders are designed to enable an individual to reduce or discontinue substance use and to address health problems, and typically include behavioral therapy. Behavioral therapies use various techniques to modify an individual’s behaviors and improve coping skills, such as incentives and reinforcements to reward individuals who reduce their substance use. For opioid use disorders, treatment may involve combining behavioral therapy with medications—an approach commonly referred to as medication-assisted treatment. Some of these treatment services may be paid for by private insurers, public health coverage programs, nonprofit organizations, or consumers (out-of-pocket), but federal grant programs and various state and local programs also provide funding for these services. Substance use recovery services are designed to help engage and support individuals with substance use disorders in treatment and provide ongoing support after treatment. There are a variety of recovery services such as peer recovery coaching, which involves the use of coaches— peers who identify as being in recovery and use their knowledge and experience to inform their work—to help individuals who are transitioning out of treatment to connect with community services and address barriers that may hinder the recovery process. Other examples include recovery housing, which provides a substance-free environment and support from fellow recovering residents, and recovery high schools, which help students recovering from substance use disorders focus on academic learning. Some recovery services may be paid for through various sources, including Medicaid programs in certain states, some private insurers, and federal grant programs. In addition, some recovery services may be offered by member-led, voluntary associations that charge no fees, such as 12-step groups. We identified 12 federal grant programs within three of the four agencies in our review that funded substance use prevention, treatment, and recovery services in fiscal year 2017 and targeted adolescents’ and young adults’ use of illicit substances. Eight of these programs focused on prevention, and all 8 remain active in fiscal year 2018. The 8 grant programs have varying purposes and were administered by two entities within HHS—SAMHSA or IHS—or by ONDCP. For example, the Drug- Free Communities Support Program is funded and directed by ONDCP to support community coalitions in preventing and reducing substance abuse among youth aged 18 and younger. As another example, the Strategic Prevention Framework for Prescription Drugs program, administered by SAMHSA, is designed to raise awareness about the dangers of sharing prescription medications such as opioids, and to promote collaboration between states and pharmaceutical and medical communities to understand the risks of overprescribing to youth (aged 12 to 17) and adults (aged 18 and older). In addition, this program is intended to provide prevention activities and education to schools, communities, and parents. In total, the 8 grant programs targeting the prevention of substance use among adolescents and young adults had 1,146 active grantees in fiscal year 2017. The Drug-Free Communities Support Program had the largest number of active grantees—713 community coalitions—and the other 7 programs had a combined total of 434 that included states and federally recognized tribes. The total number of active grantees in fiscal year 2017 includes those that received a single- or multi-year award in fiscal year 2017, as well as those that received a multi-year award in fiscal year 2016 for a project that was ongoing in fiscal year 2017. Grantees were awarded a total amount of about $266 million in fiscal year 2017, with SAMHSA’s Strategic Prevention Framework-Partnerships for Success program providing the largest amount of funding (about $95 million). (See table 1.) All 8 prevention grant programs had ongoing or planned evaluations to assess the effectiveness of their grantees in accomplishing a variety of program goals, according to agency officials. For example, ONDCP is overseeing the ongoing evaluation of the Drug-Free Communities Support Program through semi-annual progress reports and through the collection of data, such as data on past 30-day substance use, from coalitions that received awards. A recent evaluation of this program found that coalitions included about 19,000 community members who were targeting prevention services to about 20 percent of the population in the United States (including 2.5 million middle school and 3.5 million high school youth) in fiscal year 2015. In addition, this evaluation found that middle and high school youth in communities with a coalition reported a significant decrease in the past 30-day use of marijuana, prescription drugs, alcohol, and tobacco, from 2002 to 2016. However, at the same time, the perceptions of the risk of marijuana use decreased significantly among high school youth in communities with community coalitions, according to the evaluation. As another example, IHS’s planned evaluation of the Methamphetamine and Suicide Prevention Initiative- Generation Indigenous grant program will focus on measures such as the types of services that grantees implemented to prevent methamphetamine use and promote positive development among American Indian and Alaska Native youth, according to agency officials. For the other 6 prevention grant programs, planned evaluations will examine the extent to which reductions in substance use are observed over time among the grantees’ targeted adolescents or young adults. Of the 12 federal grant programs targeting adolescents’ and young adults’ use of illicit substances, we identified 4 that focused on the provision of substance use treatment and recovery services and had active grantees in fiscal year 2017. Two of the 4 programs ended at the close of fiscal year 2017 and the other 2 remained active in fiscal year 2018. The 4 programs had different purposes and were administered by OJJDP or SAMHSA, within DOJ and HHS, respectively. For example, the Cooperative Agreements for Adolescent and Transitional Aged Youth Treatment Implementation, administered by SAMHSA, is still active, and intends to increase the capacity of states to provide treatment and recovery services to adolescents (aged 12 to 18) and transitional-aged youth (aged 16 to 25) that have substance use disorders or co-occurring substance use disorders and mental disorders. This program aims to increase states’ capacity by increasing the number of qualified treatment providers. The other 3 grant programs were designed to improve different aspects of the existing juvenile drug treatment courts, which DOJ defines as a court calendar or docket that provides specialized treatment and services for youth with substance use or co-occurring mental health disorders. As an example, the Fiscal Year 2017 Juvenile Drug Treatment Court Program, which is still active and administered by OJJDP, aims to deliver services that are consistent with DOJ’s Juvenile Drug Treatment Court Guidelines—a set of best practices for effective juvenile drug treatment courts. In total, the 4 grant programs that targeted substance use treatment and recovery services among adolescents and young adults had 57 active grantees in fiscal year 2017. SAMHSA’s Cooperative Agreements for Adolescent and Transitional Aged Youth Treatment Implementation had the largest number of active grantees (36), which included state substance abuse agencies and federally recognized tribes. The three juvenile drug treatment court programs had a total of 21 active grantees that included, for example, county juvenile drug treatment courts and a state judicial department. The total number of active grantees in fiscal year 2017 included those that received a single- or multi-year award in fiscal year 2017 as well as active grantees that received multi-year awards in prior years. In total, active grantees from 2 of the 4 programs were awarded about $23 million in fiscal year 2017. (See table 2.) Two of the 4 treatment and recovery grant programs had ongoing or planned evaluations to assess the effectiveness of their grantees in accomplishing a variety of program goals, according to agency officials. SAMHSA officials told us that its ongoing evaluation of the Cooperative Agreements for Adolescent and Transitional Aged Youth Treatment Implementation is assessing the types of treatment services provided to adolescents and young adults as well as the extent to which they abstained from substance use. Officials added that the evaluation is examining grantees’ efforts to expand the qualified workforce of treatment providers for adolescents and young adults. A recent evaluation that was completed for this program found that most grantees provided training to treatment providers on evidence-based treatment services and other topics, and about one-third of grantees identified additional training needs such as training on co-occurring disorders and trauma-informed services. This evaluation also found a decrease in substance use among adolescents and young adults who received treatment services after 6 months and that enhanced provider training was associated with this decrease. OJJDP’s Fiscal Year 2017 Juvenile Drug Treatment Court Program includes a planned evaluation of the impact of the DOJ juvenile drug treatment court guidelines on participant outcomes. That is, OJJDP plans to compare the outcomes of participants in courts aligned with the guidelines to participants in other court programs that will serve as “comparison courts.” OJJDP officials told us that the evaluation plans to assess youth outcomes such as recidivism in substance use, quality of relationships with parents and peers, and mental wellbeing. OJJDP officials stated that while they are not evaluating their fiscal year 2015 and 2014 juvenile drug treatment court grant programs, grantees must report on various performance measures related to substance use to assist DOJ with fulfilling its responsibilities under the Government Performance and Results Act of 1993 and the GPRA Modernization Act of 2010. For example, grantees must report on a semiannual basis the number of drug and alcohol tests performed on juveniles and the number of positive tests recorded. Other federal grant programs beyond the 12 we identified provide funds for substance use prevention, treatment, and recovery services across age groups but do not specifically target adolescents and young adults. The Substance Abuse Prevention and Treatment Block Grant is the largest of such grant programs that fund prevention, treatment, and recovery services across age groups. SAMHSA, which administers this grant, awarded a total of $1.8 billion in fiscal year 2017 to grantees which included states, the District of Columbia, territories, and one federally recognized tribe. The amount of awards that states receive is based on a formula that takes into account a grantee’s: population at risk of substance abuse; relative costs of providing prevention and treatment services; and relative ability to pay for prevention and treatment services. States have some flexibility in determining how to use their Substance Abuse Prevention and Treatment Block Grant funds, and our analysis shows variation in the extent to which grantees used these funds to provide prevention, treatment, and recovery services to adolescents and young adults in 2014, the most recent year for which data were available. For prevention services that target individuals, such as those delivered to middle school students in the classroom, the percentage of persons served that grantees could identify as being adolescents and young adults ranged from 0.1 percent (Oklahoma) to 100 percent (American Samoa and United States Virgin Islands). However, most of the grantees reported percentages that fell in the range of 23 to 61 percent. For prevention services that target populations rather than individuals, such as media campaigns, grantees similarly reported that the percentage of adolescents and young adults served ranged from 0.1 percent (Indiana) to 100 percent (United States Virgin Islands). However, most of the grantees reported percentages that fell in the range of 18 to 46 percent. For treatment and recovery services, grantees reported that the percentage of all persons served who were adolescents and young adults ranged from 8 percent (District of Columbia) to 100 percent (Red Lake Band of Chippewa Indians). However, most of the grantees reported percentages that fell in the range of 17 to 26 percent. (See app. I for the percentages of persons served that were adolescents and young adults, by grantee.) In addition to the Substance Abuse Prevention and Treatment Block Grant, other federal grant programs provide funds for prevention, treatment, and recovery services across age groups, but do not specifically target adolescents and young adults. For example, the State Targeted Response to the Opioid Crisis grant program, administered by SAMHSA, aims to help states and others reduce the number of opioid overdose related deaths by providing funds for prevention, treatment, and recovery services for opioid use disorders. In fiscal year 2017, SAMHSA awarded about $485 million in grants to 50 states, the District of Columbia, and 6 territories through this program. As another example, the Targeted Capacity Expansion: Medication Assisted Treatment – Prescription Drug and Opioid Addiction grant program, also administered by SAMHSA, provides funding to states to expand access to medication- assisted treatment services as well as recovery services among individuals with opioid use disorders. In fiscal year 2017 SAMHSA awarded $31 million in additional grants to 6 states through this program. Our analysis found that HHS’s NIDA had 186 active grant-funded research projects focused on illicit substance use prevention, treatment, or recovery among adolescents and young adults in October and November 2017, and most of these projects addressed substance use prevention. Specifically, 126 research projects, or about 68 percent of NIDA’s ongoing research projects for this population, involved research related to preventing the use of illicit substances, such as the use of marijuana or nonmedical use of opioids and other prescription drugs. The remaining 60 projects, or about 32 percent, involved research related to treatment for or recovery from the use of illicit substances among adolescents and young adults, or a combination of categories (e.g., substance use prevention, treatment, and recovery). Among the categories of research projects, the fewest involved research exclusively about recovery (4 out of 186 projects, or about 2 percent), as shown in table 3. Our analysis also found that about 12 percent of the ongoing projects (22 of 186) involved the use of brain imaging in research on prevention, treatment, or recovery. In total, of the 186 research projects that were active in October and November 2017, 135 received $61.3 million in grants from NIDA in fiscal year 2017. NIDA did not provide awards in fiscal year 2017 for the remaining 51 projects that were active in October and November 2017. The following examples illustrate the types of research activities funded by the prevention, treatment, and recovery grants identified in our review: Prevention research projects. One research project involved testing whether a parenting intervention is associated with lower substance use and other high-risk behaviors among adolescents in the long term, including how such outcomes relate to genetic risk factors. The project’s participants included 731 adolescents to be assessed over multiple years. The project planned to collect DNA; observations of family interaction; parent, youth, and teacher reports regarding adolescents’ conduct; and assessments of their peer environments. Treatment research projects. One research project involved testing the effectiveness of the use of the medication naltrexone (extended release), compared to the use of buprenorphine in treating adolescents and young adults with opioid use disorders. The project’s participants included 340 adolescents and young adults and the project planned to provide counseling to the participants during the course of the study. The project planned to assess a variety of outcomes after 3 and 6 months, including the number of days participants were in treatment, participants’ use of opioids as well as other drug and alcohol use, and the cost- effectiveness of the treatment. Recovery research projects. One research project involved testing the effectiveness of a smartphone application to deliver recovery services to adolescents after they received treatment for a substance use disorder, compared to a control group of adolescents that received recovery services via traditional methods. Examples of recovery services delivered with a smartphone application include participating in online recovery group discussions and receiving motivational messages. The project’s participants included 400 adolescents to be assessed over a 9-month period. The project planned to collect a variety of information, such as how frequently participants used the smartphone application, how long they abstained from substance use, and their quality of life. In fiscal year 2017, NIDA and nine other entities within HHS provided grant funding for a large study—the Adolescent Brain Cognitive Development study—designed to examine the effects of substance use and other factors on development of the adolescent brain. This study was established as a result of the collaboration of several federal agencies that determined such a study was needed because of gaps in knowledge about how substance use and other factors affect brain development. This study is a longitudinal study that plans to collect data from a sample of about 11,000 children across the country for 10 years, beginning when they are 9 or 10 years old. Twenty-one research sites across the country were selected to collect information from children about their brain development, genetics, substance use, mental health, physical health, environment, and other measures. In addition, this study is funding a data analysis and informatics center to develop the procedures for data collection, create and maintain a common database pooling data from all of the research sites, and conduct data analysis. According to NIDA officials, data from the Adolescent Brain Cognitive Development study will be made available to researchers for future use through a data archive. In fiscal year 2017, 15 federal grants provided funding for this study, of which NIDA contributed $18.1 million. Stakeholders that we interviewed identified various gaps in services, and among the most frequently cited were a lack of available recovery services and treatment providers for adolescents and young adults with substance use disorders. They also identified gaps in substance use prevention services such as a lack of prevention services tailored for certain subgroups within these ages. In general, officials from the agencies in our review agreed that these gaps exist, and described actions the agencies are taking that may help address them. Stakeholders that we interviewed commonly identified gaps in research concerning adolescent-specific substance use treatment approaches, as well as in recovery services for both adolescents and young adults. They also identified other gaps, such as a lack of knowledge about how to effectively communicate to adolescents and young adults the harms of substance use. Officials from HHS’s NIDA agreed that such gaps in research exist. Gaps in substance use research related to adolescents and young adults. Stakeholders commonly identified the following gaps in research: Substance use disorder treatment with adolescents. Four of the stakeholders we interviewed identified gaps in adolescent- specific substance use disorder treatment research. Officials from one research organization said that it can be challenging to recruit a sufficient number of adolescents with a substance use disorder to participate in research studies focused on substance use treatment, both because fewer adolescents have such disorders compared to adults, and because adolescents—or potentially their parents—may be in denial about the need for treatment. These officials further stated that having too few funding announcements that focus on adolescent-specific research contributes to the gaps in research in this area, because it is easier for researchers to simply work with adults when announcements do not specify an age group of interest. An official from another research organization said there is also a gap in knowledge about how to deliver treatment services to adolescents in ways that are developmentally appropriate. The official stated that adolescents who receive treatment services generally are less likely to complete substance use disorder treatment, and, as a result, additional research is needed to identify how to engage and retain adolescents in a developmentally appropriate way. The official explained that adolescents often do not believe they need treatment and are not certain they want to stop using substances. Recovery services. Three of the stakeholders we interviewed identified gaps in recovery service research for adolescents and young adults. Officials from one advocacy and education organization said there has been little research conducted to determine the types of recovery services that are most effective for adolescents in preventing relapse. Officials from one research organization said that it would be beneficial to develop a variety of recovery services, since services are likely to vary in effectiveness for different groups of adolescents and young adults. Translating research into practice. Three of the stakeholders we interviewed identified gaps in knowledge about how to translate evidence-based services from research into sustainable, real world practices. For example, an official from one research organization explained that translating evidence-based treatment services from research into real world settings can be difficult for a variety of reasons—such as, because services that are grant- funded may have components that are impractical to implement or are not reimbursable. The official said one example of such an impractical component would be having an expert observer periodically rate the fidelity of providers’ implementation of the service—a component that makes sense when testing the efficacy of the service under the grant, but which can be disruptive to workflow and may not be reimbursable by insurers once the grant ends. Officials from another research organization similarly commented that more research is needed to identify which components of services make them effective. Communicating harms of substance use. Officials from two of the three research organizations identified a gap in knowledge about how to effectively communicate the harms of substance use to adolescents and young adults. They stated that it is particularly difficult to effectively communicate the harms of cannabis to adolescents and young adults. One official explained that societal changes in attitudes towards cannabis have made it more difficult to convince adolescents of both its harm and of the need for treatment when its use develops into a substance use disorder. Federal response to gaps in research. Officials from NIDA agreed that these gaps in research exist and explained that while additional research is needed to address them, the process by which NIDA funds research through grants ultimately relies on researchers to submit proposals for consideration. While NIDA officials stated that researchers can submit proposals for research projects addressing adolescent or young adult substance use prevention, treatment, or recovery under general funding announcements for grants, NIDA also had eight funding announcements (as of May 2018) that either focused on these age groups or included them as a population of interest, three of which were new as of fiscal year 2018. We provided a draft of this report to HHS, DOJ, ONDCP, and Education for comment. HHS, DOJ, and ONDCP provided technical comments, which we incorporated as appropriate. Education did not have comments on our draft. We are sending copies of this report to the appropriate congressional committees; the Secretaries of the Departments of Health and Human Services, Justice, and Education; the Director of the Office of National Drug Control Policy; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Table 4 shows the percentage of persons who were provided services with Substance Abuse Prevention and Treatment Block Grant funds in 2014, and who were also identified by grantees as being adolescents or young adults. Percentages are listed for two broad types of substance use prevention services (individual and population-based), as well as substance use disorder treatment and recovery services. Substance Abuse Prevention and Treatment Block Grant grantees include states, territories, and one federally recognized tribe. In addition to the contact named above, Gerardine Brennan, Assistant Director; Pamela Dooley, Analyst-in-Charge; Spencer Barr; and Brandon Nakawaki made key contributions to this report. Also contributing were Kaitlin Farquharson, Derry Henrick, and Laurie Pachter.", "summary": "According to the Surgeon General, adolescence and young adulthood are critical at-risk periods for illicit substance use, and such use can harm the developing brain. Congress included a provision in law for GAO to review how federal agencies, through grants, are addressing substance use prevention, treatment, and recovery among adolescents and young adults. Related to prevention, treatment, and recovery targeting adolescents (aged 12 to 17) and young adults (aged 18 to 25), this report describes (1) grant programs to provide services; (2) NIDA grant-funded research, and (3) gaps stakeholders identified in related services or research. GAO selected four agencies to review—HHS, ONDCP, DOJ, and Education—the key agencies that fund grant programs for services for adolescents and young adults. GAO analyzed documents on grant programs and on research funded by NIDA. GAO interviewed officials from the four agencies and 20 stakeholder groups (including advocacy and education, and research organizations, as well as a non-generalizable selection of state substance abuse, education, and judicial agencies in four states) about gaps in services or research and agency efforts to help address them. States were selected for variation in geography and overdose rates. HHS, DOJ, and ONDCP provided technical comments on a draft of this report, which GAO incorporated as appropriate. GAO identified 12 federal grant programs within three federal agencies that funded substance use prevention, treatment, and recovery services in fiscal year 2017 and targeted adolescents' and young adults' use of illicit substances such as marijuana and nonmedical use of prescription opioids. The three agencies included the Department of Health and Human Services (HHS), the Office of National Drug Control Policy (ONDCP), and the Department of Justice (DOJ). While the Department of Education (Education) has grant programs that can fund prevention services for adolescents, they do not specifically target such services. Eight programs targeted substance use prevention. In total, they had 1,146 active grantees in fiscal year 2017 and provided about $266 million in awards that year. Four programs targeted treatment and recovery services. In total, they had 57 active grantees in fiscal year 2017. Two of the 4 grant programs awarded about $23 million in funding in that year (the other two awarded funding in prior years). In addition, other grant programs beyond these 12 also fund substance use prevention, treatment, and recovery services across age groups, but are not specifically targeted to adolescents and young adults. HHS's National Institute on Drug Abuse (NIDA)—the agency that is the primary funder of research on illicit substance use—also had 186 active grant-funded research projects focused on substance use prevention, treatment, and recovery among adolescents and young adults as of October and November 2017. Most of these research projects—126—were examining prevention, 45 were examining treatment, 4 were examining recovery, and 11 were examining a combination of research categories. In total, these 186 research projects received about $61 million from NIDA in fiscal year 2017. Most of the 20 stakeholders GAO interviewed identified gaps in services for adolescents and young adults, including insufficient access to recovery services and a shortage of treatment providers, and described financial and other reasons that likely contribute to these gaps. Federal agency officials GAO interviewed agreed that these gaps exist, and described grant programs and other efforts to help address them, such as a grant program that HHS established in 2018 to expand recovery services for these age groups. Stakeholders also identified gaps in research, such as too few treatment studies with adolescent participants, and described reasons for these gaps, including too few federal grants focused on adolescent research. NIDA officials agreed that these gaps exist, and stated that NIDA had eight grant opportunities (as of May 2018) that focused on these age groups or included them as a population of interest, three of which were new in 2018.", "document_type": "gao"}
{"report": "While its core mission of protecting federal facilities has remained constant as FPS moved from one agency to another, its responsibilities have changed. While in GSA’s PBS, FPS was responsible for protecting GSA held-or–leased facilities, providing both physical security and law enforcement services. To protect buildings, FPS officers developed physical security risk assessments, installed security equipment, and oversaw contract guard services. As a part of its law enforcement services, among other duties, FPS officers enforced laws and regulations aimed at protecting federal facilities and the persons in such facilities and conducted criminal investigations. Following the September 11, 2001 attacks, the Homeland Security Act of 2002 was enacted; it created DHS and moved FPS from GSA to the new department, effective in March of 2003. Within DHS at ICE, FPS’s responsibilities grew beyond solely protecting GSA buildings to include homeland security activities such as implementing homeland security directives and providing law enforcement, security, and emergency-response services during natural disasters and special events. In 2009, DHS proposed transferring FPS from ICE to NPPD. In explaining the proposed transfer in DHS’s fiscal year 2010 budget justification to Congress, DHS noted that this move would allow ICE to focus on its law enforcement mission of protecting the American people by targeting the people, money, and materials that support terrorist and criminal activities relating to our nation’s borders. DHS noted that FPS should reside within NPPD given that both agencies had responsibilities for implementing the National Infrastructure Protection Plan. DHS further noted that FPS would be able to gain synergy by working alongside NPPD’s Office of Infrastructure Protection and that having FPS and the Office of Infrastructure Protection in the same organization would further solidify NPPD as DHS’s lead for critical infrastructure protection. The fiscal year 2010 DHS appropriations act, which was signed into law on October 28, 2009, funded FPS under NPPD via revenue and collections of security fees. While in NPPD, FPS continued to lead physical security and law enforcement services at GSA-held or GSA-leased facilities and continued its efforts in homeland security activities. Throughout FPS’s different organizational placements in DHS, we have reported that FPS faces persistent challenges meeting its mission to protect facilities. In 2003, we designated federal real-property management as a high-risk area, in part, because of physical security challenges at federal facilities, such as the need for a risk-based approach to determining the level of security required. In 2011, we reported on FPS’s challenges in transferring mission support functions when transitioning from ICE into NPPD. While FPS has been in NPPD, we also reported on challenges FPS faced, such as in performing risk assessments, managing and overseeing contract guards, collaborating with GSA and the Marshals on facility security, and funding its operations. We made recommendations to help address these challenges, and FPS has made progress in addressing some of these recommendations. For example, FPS (1) developed a Modified Infrastructure Survey Tool to help it more effectively perform risk assessments, (2) coordinated with GSA and other agencies to reduce unnecessary duplication in risk assessments, (3) implemented new procedures to better manage and oversee contract guards, and (4) as of September 2018, established a formal agreement with GSA on roles and responsibilities related to facility protection. However, as we discuss later in this report, challenges related to other aspects of overseeing contract guards, collaborating with GSA and Marshals, and funding persist. In November 2018, legislation was enacted that could result in FPS moving for a third time, although the location has not been determined. This legislation—which reorganizes NPPD to an organization that has a greater statutory focus on managing cyber risks—requires the Secretary of Homeland Security to, within 90 days after the completion of our review, determine the appropriate placement for FPS within DHS and begin transfer of FPS to that entity. If the Secretary determines that DHS is not an appropriate placement for FPS, the Secretary would be required to submit to the Director of OMB and Congress an explanation for the reasons of such a determination—including, among other things, how DHS considered the results of our current review—and a recommendation on the appropriate placement of FPS within the executive branch of the federal government. When DHS was established, we identified organizational and accountability criteria for the department. From this prior work, we identified key criteria that are relevant to assessing potential placement options for FPS, as shown in table 2. In addition, other practices provide valuable insights for agency officials to consider when evaluating or implementing a reorganization or transformation. For example, we have previously reported (1) on key practices and questions for organizational transformations, mergers and consolidations, and agency reform efforts and (2) on best practices for the analyses of alternatives. We reported that organizational transformations, such as a change in organizational placement, can take many years to fully implement, can result in reduced productivity and morale in the short-term, and may require up-front investments. Therefore, we found that these practices and questions offer valuable insights for agency officials to consider when evaluating or implementing a reorganization or transformation. For example, in May 2012, we reported that a key practice in organizational change is for agency officials to identify and agree on the specific goals of the change—that is, what the agency expects to achieve by making the change—or the problems a change will solve. In July 2003, we reported that implementing a large-scale organizational transformation requires the concerted efforts of both leadership and employees to accomplish new organizational goals. In October 2015, we identified best practices for analyzing alternatives, such as defining criteria to assess alternatives, identifying a range of alternatives to assess, and analyzing the benefits and trade-offs of each alternative. We found that none of the selected agencies met all the organizational placement criteria; thus, any of the organizational placement options could result in both benefits and trade-offs. Officials from FPS and some of the selected agencies as well as representatives from other stakeholders we interviewed (e.g., an association of federal law enforcement officers, a union representing FPS employees, and others) provided us with examples of how those benefits and trade-offs might affect FPS. In instances where selected agencies met organizational placement criteria (that is, in instances where selected agencies were similar to FPS), FPS could experience benefits. See table 3 for a summary of how selected agencies met and did not meet key organizational placement criteria, and appendix II and III for additional details. For example, for the mission, goals, and objectives criterion, DHS, NPPD, and Secret Service could provide benefits to FPS because, like FPS, their mission or goal statements as noted in their strategic plans include an explicit focus on the protection of infrastructure or specific facilities. Also, GSA has a statutory facility protection mission. Our prior work found that placing an agency into an organization that has a similar mission may help ensure that the agency’s mission receives adequate funding, attention, visibility, and support. For the responsibilities criterion, DHS, CBP, Secret Service, Justice, and the Marshals could provide benefits to FPS, because all of these agencies, like FPS, perform both physical security and law enforcement activities. In the past, FPS faced challenges ensuring that both these activities were prioritized, according to FPS officials. Officials explained that a parent agency that is able to focus on both activities could help ensure equal and adequate attention in both areas. While there are similarities in responsibilities between FPS and these agencies, there are differences in the extent to which and for what purpose these agencies perform the responsibilities, some of which we discuss following table 3. Because none of the agencies met all criteria, placing FPS in any of the selected agencies would require trade-offs. For example: While placing FPS in DHS, NPPD, or the Secret Service may provide FPS benefits in areas related to mission, responsibilities, and information sharing, there could be some adverse effect on FPS’s law enforcement operations or other activities. Specifically, as discussed above, placement in DHS, NPPD, or the Secret Service could provide FPS benefits because these agencies have similar missions and facility protection responsibilities, and have access to and share information related to national homeland security that FPS needs to carry out its mission. However, NPPD, for example, does not perform law enforcement activities. Therefore, according to FPS officials, FPS’s law enforcement activities may not continue to receive full attention. Further, keeping FPS in NPPD may not address some of the challenges related to culture, such as morale issues that, according to an official from the association of law enforcement officers, stem in part from FPS not being placed in a law enforcement organization. If placed in the Secret Service, this agency may not have the administrative capacity to handle the additional FPS human capital workload. Secret Service officials told us that they have a staffing shortage, which is exacerbated by the time it takes to vet applicants and process new staff through background checks and security clearances. As another example, FPS’s placement in GSA or Marshals could enhance coordination among these agencies, but there could be some adverse effect on FPS’s ability to carry out its mission or responsibilities. Specifically, GSA and Marshals could be appropriate choices as these agencies currently coordinate with FPS on facility protection. For GSA’s held or leased facilities, FPS is primarily responsible for protecting federal employees and visitors in those facilities while GSA, as the federal government’s landlord, performs some physical security activities, such as funding and repairing security fixtures. At federal courthouses, FPS is the primary federal agency responsible for patrolling and protecting the perimeter while Marshals is responsible for the security of the federal judiciary and as such provides for security inside the building. However, we have found challenges FPS has faced in coordinating with these agencies. In December 2015, for example, we found that FPS and GSA had not agreed on a common outcome related to facility protection or the roles and responsibilities to accomplish their missions. Further, in September 2011, we reported that FPS and Marshals faced challenges related to coordination, such as in the implementation of roles and responsibilities and the use or participation in existing collaboration mechanisms. In September 2018, NPPD and GSA signed a memorandum of agreement that, among other things, describes FPS’s and GSA’s roles and responsibilities, and FPS, Marshals, and other agencies involved in protecting courthouses (i.e., GSA and the Administrative Office of the U.S. Courts) are working to finalize a separate agreement for courthouse security. As these agreements are implemented, coordination between these agencies should improve as we have previously reported that establishing clear roles and responsibilities, in agreements or through other mechanisms, contribute to effective coordination. In addition, Marshals may be a good placement option for FPS since both agencies perform physical security and law enforcement activities, and because both agencies use a large number of contract guards. However, because FPS does not share mission and goals with Marshals, it may be less equipped to prioritize FPS’s activities in the law enforcement and physical security areas. Justice and Marshals officials said that, in their view, Marshals is different from FPS because Justice and Marshals perform limited physical security activities and have an extensive law enforcement mission, while the opposite is the case for FPS. Further, Marshals officials said that FPS’s and Marshal’s law enforcement activities support different purposes—with Marshals supporting a violent-crime reduction mission and FPS supporting a facility protection mission. As a result, Marshals officials said that FPS’s facility protection mission may not receive full attention. Regarding contract guards, Marshal’s guard force is smaller, performs different activities, and has different requirements compared to FPS’s guard force. Regarding GSA, while GSA performs some physical security activities, it does not perform law enforcement, which is a critical part of FPS’s responsibilities and, according to some stakeholders we interviewed, a key aspect of FPS’s culture. GSA also does not have the same access to information related to national homeland security as FPS currently has, and therefore, FPS’s access to this information could be affected, according to officials. Finally, various placement options could help FPS address some of its long-standing challenges such as in overseeing contract guards, collaborating with GSA and the Marshals, and funding. However, these placements could also affect whether FPS’s needs are prioritized. For example, placing FPS in GSA or the Marshals may further help address coordination challenges. Additionally, placing FPS in GSA could address challenges FPS faces with funding. If placed in GSA, GSA and FPS could consider whether to use the Federal Buildings Fund for security projects related to facility management, such as installing cameras. OMB staff said that there are limitations with the Federal Buildings Fund, such as the amount of funding available for security projects. Further, the adverse effect of placing FPS in either GSA or the Marshals is that Marshals does not share mission and goals with FPS and that GSA does not have law enforcement responsibilities; therefore, these agencies may not prioritize FPS’s needs. For additional information on how the various agencies met each criterion, see appendixes II and III. When managing an agency or considering an organizational change, such as that of FPS’s placement within or outside of DHS, our prior work has stated that an agency can benefit from periodically evaluating its organizational structure, identifying what a change is expected to achieve, and analyzing alternatives. Specifically, Standards for Internal Control in the Federal Government states that agency management should establish an organizational structure to achieve the agency’s objectives. According to the Standards, an effective management practice for attaining this outcome includes periodically evaluating the organizational structure to ensure that it meets its objectives and has adapted to changes. We have also reported that a key practice in organizational change is to identify and agree on what a change is expected to achieve or the problems the change will solve. The process of defining such expected outcomes can help decision makers reach a shared understanding of what challenges need to be addressed. Furthermore, we have reported on best practices for analyzing alternatives to help ensure that agencies select the option that best meets their needs. These practices can be applied to a wide range of activities or programs in which an alternative must be selected from a set of possible options. The practices include assessing the current environment to provide a basis for comparison with other alternatives and identifying and assessing benefits and trade-offs of each alternative. However, DHS has not taken key steps to fully assess potential placement options. Specifically, DHS has not assessed the organizational structure of FPS, such as its placement in NPPD, even though both have evolved since FPS was placed in NPPD in 2010. For example, NPPD has increased its focus on protecting the nation’s cyber infrastructure as threats in this area have grown, and its funding for this purpose has increased. In light of these changes, in 2015 and 2016, DHS proposed that NPPD restructure itself to increase its focus on cybersecurity. However, the proposals did not include an assessment of FPS’s organizational placement. The November 2018 legislation gave NPPD a greater statutory focus on cyber risk and may result in additional changes to the organization’s activities. Additionally, while in NPPD, FPS also has been increasingly engaged in providing law enforcement for homeland security, with the establishment of a rapid protection force of that can respond to heightened threat situations. Given these changes, without an assessment, DHS cannot be certain that FPS is currently placed in an agency that enables FPS to meet its mission. Additionally, because DHS did not analyze FPS’s current placement in NPPD, it does not have a benchmark for comparison to other agencies. Without such an analysis, it is unclear whether FPS needed to be moved from NPPD. On one hand, FPS made progress while placed in NPPD in addressing many of our recommendations, and some stakeholders we spoke with (officials from DHS and NPPD) said that FPS was in the right place in NPPD. For example, a DHS official stated that from a resource perspective there was no good reason to move FPS out of NPPD as the official had not seen a business case to do so. Additionally, an NPPD official stated that mission alignment and an opportunity to influence the national facility-security policy were compelling reasons for FPS to stay in NPPD. Further, NPPD officials said that FPS was meeting its mission and objectives. On the other hand, FPS continued to experience challenges in carrying out its mission in NPPD—such as in overseeing contract guards, collaborating with GSA and the Marshals, and having adequate funding— such that questions have been raised as to whether placing FPS in NPPD was successful. DHS has recently initiated an effort to evaluate FPS’s placement, but it lacks several of the elements for a successful evaluation. Specifically, in August 2018, DHS, NPPD, and FPS established a working group with a draft charter with the objective of making a recommendation to the Secretary of Homeland Security on the organizational placement of FPS within DHS. The working group’s evaluation criteria for FPS placement consist of mission, command and control, resources, implementation schedule, and workforce and culture. While establishing this group and identifying criteria are positive steps in assessing FPS’s placement, the group’s planned activities are limited in several ways. For example, while the charter is a draft, it does not indicate that the working group will describe what changing FPS’s placement is expected to achieve. This factor is particularly important given that each placement option has its benefits and trade-offs and that stakeholders’ opinions of the options varied. Changing FPS’s placement could include: addressing one or more of the key criteria previously discussed in this addressing some or all of the challenges that persist, such as in collaboration or contract guard oversight; or a combination of both. Further, the draft charter does not indicate that the working group will evaluate agencies outside of DHS or incorporate best practices for analyzing alternatives, such as evaluating FPS’s current placement in NPPD and the benefits and trade-offs of placement options. Without conforming to the best practices, DHS will not have assurance that the working group recommends the alternative that best meets mission needs. DHS’s current approach to evaluating FPS’s placement limits DHS’s ability to reliably assess the merits of placement options supported by GSA and FPS. GSA officials said GSA would take FPS and moving FPS back to GSA could benefit tenants in federal facilities, strengthen security support, and reduce redundancies because both agencies have federal facility protection responsibilities. Further, according to GSA, if consolidated under GSA, FPS could become more efficient, better manage costs, and leverage acquisition processes by making use of GSA’s existing services. FPS officials stated that they prefer FPS to be a standalone entity that reports directly to DHS leadership. According to FPS, being a standalone agency in DHS would establish the protection of federal facilities as a critical mission of DHS and provide FPS with the direct support of DHS leadership. Further, according to FPS officials, having this support would better enable them to carry out their mission. However, neither GSA nor FPS has conducted analyses to support their preferences, and DHS is not planning to look at options outside of DHS at this time. As a result, DHS cannot fully assess FPS’s or GSA’s positions. Once DHS identifies what it expects to achieve by moving FPS, in line with key practices for organizational change, and establishes an evaluation approach that reflects best practices for an analysis of alternatives, it will be in a position to best assess benefits and trade-offs previously discussed. In absence of these steps, DHS may not be positioning itself to make an informed decision as to what organization best supports FPS. Over the past 15 years, FPS has been located in three different agencies (GSA, ICE, and NPPD), and there continues to be disagreement about whether it is currently in the best place to achieve its objectives. Further, agency and stakeholder opinions vary about where and whether FPS should move. DHS has established a working group to evaluate placement options for FPS. However, the working group’s planned activities do not include key steps to fully assess potential placement options. Specifically, while the group’s charter is a draft, it does not state whether it plans to assess FPS’s current placement in NPPD, what DHS expects to achieve by changing FPS’s placement, or effective placement options for relocating FPS. These steps would help DHS address legislation enacted in November 2018 requiring the review of placement options for FPS—including how DHS considered the results of our review. Regardless of the legislation, DHS cannot have a complete discussion that leads to an informed decision on FPS’s placement without taking these steps. Identifying the expected outcomes of changing FPS’s placement and performing analyses are critical because organizational change can take many years to fully implement, can result in reduced productivity and morale in the short-term, and may require up-front investments. Without determining what it expects to achieve by moving FPS and conducting an evaluation using appropriate criteria, DHS may not be well-positioned to identify an organization that best supports FPS. We are making the following two recommendations to the Secretary of Homeland Security: The Secretary of Homeland Security—in consultation with NPPD and FPS—should identify the specific goals of a change in FPS’s placement— that is, what DHS expects to achieve by moving FPS to another agency. (Recommendation 1) The Secretary of Homeland Security—in consultation with NPPD, FPS, and other agencies as relevant—should fully evaluate placement options for FPS based on what DHS expects to achieve by changing FPS’s placement, an assessment of FPS’s current placement, and other best practices such as an analysis of alternatives assessing the benefits and trade-offs discussed in this report. (Recommendation 2) We provided a draft of this product to DHS, GSA, Justice, and OMB for comment. In its comments, reproduced in appendix IV, DHS concurred with our recommendations and outlined steps it plans to take to address them. DHS also provided technical comments, which we incorporated as appropriate. GSA, Justice, and OMB only provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Administrator of General Services, the Attorney General, the Director of OMB, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact me at (202) 512-2834 or RectanusL@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. To address our objectives, we reviewed our prior work related to organizational transformation, where we identified organizational and accountability criteria that Congress should consider when determining which agencies to include or exclude from the newly created DHS. The criteria are relevant to our review of FPS’s organizational placement as Congress considers whether to include or exclude FPS in various agencies within and outside DHS. We selected a subset of the criteria that are the most relevant to FPS’s organizational placement to include in our review. For each criterion, we also identified elements (i.e., characteristics) that are specific to FPS based upon our review of FPS documents and our prior work on topics related to the criteria, and our discussions with federal officials with experience in facility security, the Federal Law Enforcement Officers Association, and a former high-ranking official in NPPD with knowledge of FPS. To identify challenges facing FPS, we reviewed our past work and the status of our prior recommendations, and interviewed stakeholders and agency officials. We reviewed pertinent proposed and enacted legislation related to DHS’s reauthorization and FPS. We reviewed Standards for Internal Control in the Federal Government for relevant management responsibilities. And, we reviewed our prior reports on key practices and questions for organizational change and best practices for an analysis of alternatives process. We used practices identified in these reports as well as internal controls to assess the steps DHS has taken to assess placement options for FPS. We applied the key criteria to eight selected agencies in DHS, GSA, and the Department of Justice (Justice) that we determined could be potential organizational placement options for FPS, as shown in table 4. We selected three of our eight placement options (CBP, ICE, and Secret Service) based upon our review of the most recently available data from the Department of Justice on the number of federal law enforcement officers. We selected these three agencies because they employed the largest number of law enforcement officers within DHS. Our selection of agencies with federal law enforcement officers is relevant because FPS employs such officers. We selected three options (GSA, NPPD, and a standalone entity in DHS) because FPS was previously organizationally placed within GSA, is currently placed in NPPD, and because of FPS’s preference to be a standalone entity reporting directly to the Deputy Secretary of DHS. We selected our remaining two options (a standalone entity within Justice and the Marshals) because the duties of the Marshals include law enforcement and protection of federal courthouses and because legislation proposed during our review would have, if enacted, instructed the Secretary of Homeland Security to recommend the appropriate placement of FPS within the executive branch of the federal government. We also identified DHS’s Office of the Chief Security Officer as an office within DHS that has the facility security responsibility for managing contract guards at DHS’s former headquarters at the Nebraska Avenue Complex in Washington, D. C. We determined that this security office is a policy office within DHS’s Management Directorate with its primary mission being the security of DHS employees and a focus on expanding internal security policy. For the purposes of our review, we did not include OCSO as a potential placement option for FPS because the security office does not have a large number of law enforcement officers, plans to divest operational security responsibilities, and was not a previous, current or FPS desired placement. Our exclusion of OCSO does not preclude DHS from assessing OCSO as a placement option for FPS. We reviewed documentation and interviewed officials from FPS and the selected agencies to identify similarities, differences, and other considerations with regard to each of the key criteria. For the first four key criteria—(1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; and (4) information sharing and coordination—we determined that a selected agency met the criteria if the agency or its subcomponents have any similarities to FPS. For the last criterion— mission support—we determined that a selected agency met the criterion if the agency or its subcomponents have mission support similar to FPS or could provide mission support that FPS needs. Although we used the key criteria to assess eight agencies we selected, the criteria can be used to assess any potential placement option for FPS. We also reviewed documentation and conducted interviews with stakeholders including: representatives from the Federal Law Enforcement Officers Association; representatives from the American Federation of Government Employees Local 918 (the union that represents NPPD employees— including FPS); representatives from two unions that represent a large number of Protective Security Officers (i.e., contract guards), the United Government Security Officers of America and Security and Security, Police and Fire Professionals Association of America; representatives from the National Association of Security Companies (an association of contract guard companies); officials from agencies that coordinate with or use FPS for facility the Department of Justice for law enforcement coordination and the Internal Revenue Service and the Social Security Administration as large users of FPS facility protection; staff from the Office of Management and Budget; and officials from DHS’s Interagency Security Committee, which develops the security standards for non-military federal facilities. We also obtained views from a former high-ranking official in NPPD with knowledge of FPS. Additionally, we obtained views from officials, staff, and representatives from FPS, the selected agencies and stakeholders on the alignment between FPS and the agencies as well as on the potential placement options. The results of these interviews are non- generalizable to all of FPS’s stakeholders but provide useful examples of considerations related to various placement options. We conducted this performance audit from June 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Based on our prior work related to organizational transformation, we identified five key criteria to consider when assessing placement options for FPS: (1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; (4) information sharing and coordination; and (5) mission support. For each criterion, we identified elements that are specific to FPS. We identified these elements from documentation and interviews from federal officials with experience in facility security, the Federal Law Enforcement Officers Association, a former high-ranking official in NPPD with knowledge of FPS, and our review of prior work on topics related to the criteria. We compared selected agencies that could be placement options to FPS in each of the elements—see tables below. The selected agencies are the Department of Homeland Security (DHS), U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), National Protection and Programs Directorate (NPPD), United States Secret Service (Secret Service), General Services Administration (GSA), Department of Justice (Justice), and the U.S. Marshals Service (Marshals). We assumed that FPS would be a standalone entity in DHS, GSA, and Justice. For elements in the first four criteria—(1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; and (4) information sharing and coordination—a “yes” in the table means that any function of the selected agency or its subcomponents have similarities to FPS. For elements in the last criterion—mission support—a “yes” means that any function of the selected agencies or its subcomponents have mission support similar to FPS or could provide mission support that FPS needs. For all criteria, the “yes” designation does not account for the magnitude of the effort or activities performed by each of the selected agencies. We identified five key organizational placement criteria that are relevant to consider when assessing FPS’s placement: (1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; (4) information sharing and coordination; and (5) mission support. We evaluated whether selected agencies that could be placement options for FPS met the key organizational placement criteria. The selected agencies are the Department of Homeland Security (DHS); U.S. Customs and Border Protection (CBP); U.S. Immigration and Customs Enforcement (ICE); National Protection and Programs Directorate (NPPD); United States Secret Service (Secret Service); General Services Administration (GSA); Department of Justice (Justice); and the U.S. Marshals Service (Marshals). We assumed that FPS would be a standalone entity in DHS, GSA, and Justice. For the first four criteria—(1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; and (4) information sharing and coordination—we determined that a selected agency met the criteria if the agency or its subcomponents have similarities to FPS in relevant elements identified in appendix II. We determined that a selected agency met the mission support criterion if the agency or its subcomponents have similarities to FPS or could provide FPS needed mission support in relevant elements. FPS’s mission focuses on the protection of federal facilities and the people working in and visiting those facilities. In table 10 and subsequent paragraphs, we describe how selected agencies met the mission, goals, and objectives criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion. DHS, NPPD, and Secret Service are similar to FPS in that their mission statements or goals as stated in their strategic plans include an explicit focus on the protection of infrastructure or specific facilities. GSA has a statutory facility protection mission. Our prior work found that placing an agency into an organization that has a similar mission may help ensure that the agency’s mission receives adequate funding, attention, visibility, and support. One of DHS’s goals—as noted in its strategic plan covering fiscal years 2014 to 2018—is to reduce risk to the nation’s critical infrastructure. In addition, NPPD’s mission is to lead the national effort to protect and enhance the resilience of the nation’s physical and cyber infrastructure. To carry out this mission, NPPD coordinates efforts to protect infrastructure in 16 critical infrastructure sectors, including a government facilities sector. Further, the Secret Service’s mission is to ensure, among other things, the security of the United States President, Vice President, and other individuals. The Secret Service’s Uniformed Division protects locations necessary for accomplishing its mission of protecting these individuals. Per statute, GSA is responsible for the operation, maintenance, and protection of buildings and grounds occupied by the federal government and under the jurisdiction, custody, and control of GSA. While DHS, NPPD, Secret Service, and GSA may be good placement options for FPS given their similarities in mission or goals (i.e., focus on infrastructure or facility protection), stakeholders we interviewed identified some key areas of consideration that may have a bearing on how well FPS would fit in NPPD, Secret Service, and GSA. NPPD: FPS and NPPD officials expressed concerns about the fit between the two agencies given differences in how they perform their infrastructure protection missions. Specifically, FPS has employees who directly protect federal facilities, while NPPD’s physical infrastructure protection efforts provide guidance and resources to federal, state, and local governments, and private sector companies so that they can protect their facilities. Furthermore, officials from FPS, NPPD, the union representing FPS officials, an association representing federal law enforcement officers, and a former high- ranking official in NPPD said that a difference between the two agencies is that FPS performs law enforcement activities to carry out its protection mission while NPPD does not. Secret Service: Officials from FPS and Secret Service said that placing FPS in the Secret Service could present challenges because the two agencies’ missions have some fundamental differences—FPS focuses on protecting federal facilities and Secret Service focuses on protecting individuals such as the United States President and Vice President. Furthermore, another difference is that the scope of facilities that the Secret Service protects is smaller and narrower than FPS, according to FPS and Secret Service officials. FPS protects about 9,000 facilities throughout the United States, while Secret Service’s Uniformed Division—which is responsible for protecting facilities—protects a limited number of facilities in the National Capital Region (e.g., the White House, the Vice President’s residence). FPS officials said that another consideration between the two agencies is that FPS’s mission of protecting federal facilities would get lost in Secret Service’s mission of protecting the President of the United States and other key individuals. GSA: Stakeholders provided differing views on how well FPS would fit in GSA. An official from CBP and officials from Justice said that FPS should be placed in GSA because FPS focuses on GSA-held or- leased facilities. Furthermore, GSA officials stated FPS and GSA could merge as both have the authority to protect federal facilities, and there is an intuitive relationship between GSA’s focus on the management and operations of federal facilities and FPS’s mission of the security of federal facilities. Conversely, officials from FPS, staff from OMB, and officials of an association that represents security companies, said that FPS should not move to back to GSA. These officials and staff said that FPS should not move to GSA because, among other reasons, the two agencies have different missions: GSA focuses on federal real estate and some physical security activities not homeland security or law enforcement. CBP, ICE, Justice, and Marshals do not have mission statements or goals that focus explicitly on infrastructure or facility protection. Nonetheless, as we discuss in the next section of this report, CBP, Justice, and Marshals have some facility protection responsibilities. In addition, FPS and the selected agencies share few or no operational objectives. DHS, ICE and NPPD share one or two operational objectives with FPS—DHS shares objectives that focuses on mitigating risks and responding to incidents, ICE shares one that focuses on intelligence gathering, and NPPD shares one that focuses on facility assessments. FPS, Justice, and Marshals have a few similar operational objectives. The three agencies have objectives that focus on the integration and use of intelligence information. FPS and Marshals also have similar objectives that focus on facility assessments, mitigating risks, and on rapidly responding to emergencies and incidents. To carry out its facility protection mission at about 9,000 federal facilities, FPS performs physical security as well as law enforcement activities. As a part of its physical security activities, FPS conducts facility security assessments, identifies countermeasures (e.g., equipment and contract guards) best suited to secure a facility, and oversees contract guards. As a part of its law enforcement activities, FPS proactively patrols facilities, responds to incidents, and conducts criminal investigations, among other things. FPS also provides additional operational law enforcement support, at the direction of the Secretary of Homeland Security, to address emerging threats and homeland security incidents. According to FPS officials, previous placements have focused on physical security or law enforcement, but not both. For example, FPS officials told us that because of ICE’s focus on law enforcement, FPS’s physical security activities took a backseat to ICE’s law enforcement mission. Similarly, according to FPS officials, NPPD has not prioritized FPS’s law enforcement activities because NPPD does not have a focus on law enforcement. One of FPS’s most critical activities is overseeing about 13,500 contract guards who are posted at federal facilities and are responsible for controlling access to facilities, responding to emergency situations involving facility safety and security, and performing other duties. FPS is responsible for overseeing these guards to ensure, among other things, that they are performing their assigned duties and have the necessary training and certifications. We have reported on challenges FPS faces in overseeing contract guards. For example, in August 2012, we reported that FPS faced challenges ensuring that contract guards have the necessary training and certifications. We found that although FPS verifies contractor-reported guard certification and training information by conducting monthly audits, FPS does not independently verify the contractor’s information. In table 11 and subsequent paragraphs, we describe how selected agencies met the “responsibilities” criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion. Like FPS, DHS, the selected agencies in DHS (except ICE), GSA, Justice, and Marshals have responsibilities for federal facility protection. As discussed above, DHS, NPPD, and the Secret Service have mission or goal statements that explicitly address infrastructure or facility protection. CBP’s, GSA’s, Justice’s, and Marshals’ mission or goal statements do not explicitly state a focus on infrastructure or facility protection, but these agencies have some facility protection responsibilities to help achieve their missions. For example, GSA has some protection responsibilities for about 8,700 GSA-held or GSA-leased facilities in support of its mission of managing the federal real estate portfolio. GSA conducts repairs that affect the operation of building security equipment and develops policy and requirements for the building security used in the design and construction of GSA buildings. Marshals have security responsibilities at federal courthouses in support of its mission to protect, defend, and enforce the nation’s justice system. Stakeholders we interviewed identified some areas of consideration that may have a bearing on how well FPS would fit in agencies that have facility protection responsibilities: Officials from FPS and Marshals questioned how FPS would meld with agencies that protect facilities on a smaller scale. CBP, Justice, and Marshals perform facility protection at a smaller number of facilities as compared to FPS and GSA: CBP has facility protection responsibilities at about 1,200 border patrol stations, ports of entry, and other facilities; Justice (excluding Marshals) at 36 facilities; and Marshals at about 430 facilities with a judicial presence, while FPS and GSA have protection responsibilities at about 9,000 and 8,700 facilities, respectively. Justice and Marshals officials said that there are some differences between their agencies and FPS’s facility protection responsibilities. Specifically, these officials said that unlike FPS, Justice and Marshals have limited responsibilities for facility protection, and in the case of Marshals, this responsibility is related to the protection of the federal judiciary. FPS most closely aligns with DHS, CBP, Secret Service, Justice, and Marshals because these agencies perform both physical security and law enforcement activities. However, as discussed in the paragraph below, there are differences in the extent to which and for what purpose these agencies perform these activities. The remaining agencies perform either physical security (NPPD, GSA) or law enforcement activities (ICE), but not both. While DHS, CBP, Secret Service, Justice, and Marshals align with FPS with regard to the two types of activities it performs, there are differences in how these agencies perform these activities because these agencies’ activities and missions differ from FPS. For example, Justice and Marshals officials explained that in their view, Justice and Marshals are different from FPS because Justice and Marshals perform limited physical security activities and have extensive law enforcement missions, whereas FPS has a limited law enforcement mission and an extensive facility protection mission. Further, Marshals officials said that FPS’s and Marshal’s law enforcement activities support different purposes—with Marshals supporting a violent-crime reduction mission and FPS supporting a facility protection mission. As a result, Marshals officials said that FPS’s facility protection mission may not receive full attention. Further while FPS performs law enforcement activities relevant to federal facility protection, the Secret Service performs law enforcement relevant to protecting key individuals, such as the President. Furthermore, although GSA does not perform law enforcement activities, GSA officials said that if FPS moved to GSA, its leadership would provide FPS organizational support that would enable both FPS’s law enforcement and physical security activities. FPS officials stated that if FPS moved outside of DHS, the Secretary of Homeland Security—who is responsible for protecting the nation—may lose protection responsibilities for federal facilities as well as the ability to use FPS for law enforcement support when needed for homeland security. Like FPS, Marshals also employs a large number of contract guards for facility protection. The remaining agencies (DHS, CBP, ICE, NPPD, Secret Service, GSA, and Justice) use FPS’s contract guards, procure a limited number of guards or use their own federal officers for facility protection, according to officials from these agencies. Similar to FPS, Marshals also performs compliance reviews of training and certification information maintained by its contractors, and Marshals officials explained that these reviews are performed periodically. Staff from OMB and an association of security companies said that Marshals may be a good fit for FPS because Marshals, like FPS, uses a contract guard force. We have previously reported that a consideration of moving one agency into another is whether the move can help improve the efficiency and effectiveness of agency missions by, among other things, addressing gaps. In this regard, one consideration is whether FPS could leverage the Marshals’ oversight of its own contract guards to address its ongoing challenges in this area. However, differences between FPS’s and Marshals’ contract guard programs exist. For example, Marshals’ guard force is smaller than FPS’s with about 4,400 guards and the day-to-day duties of FPS’s contract guards are different from Marshals’ contract guards. Both FPS’s and Marshals’ contract guards control access to facilities. However, Marshals contract guards also provide security for the judicial process, such as providing armed escort services to judges, jurors, and other court personnel and providing security in a courtroom during hearings. Furthermore, some requirements between the two guard forces vary. For example, Marshals has more stringent requirements for contract guards in the areas of education and law enforcement experience. While there are many areas relevant to organizational culture, law enforcement is a key aspect of FPS’s organizational culture, according to officials from an association of security companies and a former high- ranking official in NPPD. One area that has affected FPS’s culture, particularly morale, according to an official from the association of law enforcement officers, is that FPS’s criminal investigators receive federal law enforcement officer retirement benefits, while its inspectors—who also perform some law enforcement and who form the majority of FPS’s workforce—do not. In table 12 and subsequent paragraphs, we describe how selected agencies met the organizational culture criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion. DHS, nearly all the selected agencies in DHS, and Justice have cultures similar to FPS because they are all law enforcement agencies, but NPPD and GSA do not. An official from an association of federal law enforcement officers said moving FPS to a law enforcement agency may improve FPS’s employee satisfaction. Specifically, this official explained that one advantage of moving FPS to a law enforcement agency is that it could mean that FPS inspectors could be reclassified into positions that would receive federal law enforcement officer retirement benefits, leading to improved employee satisfaction and retention. FPS officials said that Justice’s long-standing culture that is focused on law enforcement is something that FPS sees as one of Justice’s advantages. Although FPS and some of the selected agencies are similar in that their cultures focus on law enforcement, there are differences among their cultures. For example, FPS officials questioned how their agency would meld with the Secret Service since it has long history, and Marshals officials said that FPS and the Marshals do not have comparable legacies. The Secret Service and Marshals have been around for about 150 and 230 years, respectively, while FPS has a 47-year history. In addition, FPS and the law enforcement agencies may have different hiring practices, which can influence the culture of the workforce. Secret Service, for example, requires that all its employees hold a top-secret security clearance. This level of clearance is not required for all of FPS’s employees, according to an FPS official. If FPS moved to Secret Service, Secret Service officials stated that there may be a need to create different workforce categories due to differences in the hiring requirements, a situation that may affect FPS’s and the Secret Service’s employee morale. Regarding information sharing, in 2016, DHS designated a division within FPS as a Component Intelligence Program (CIP). CIPs are organizations in DHS that collect, gather, process, analyze, produce, or disseminate information related to national homeland security. According to FPS officials, FPS’s participation in meetings held by the CIPs is important because it provides FPS more visibility on the threats that other DHS agencies have identified and actions they plan to take. Further, FPS shares information obtained in CIP meetings with federal agencies across the United States to support emergency preparedness, security, and employee safety. Additionally, as a CIP, FPS has an opportunity to provide input on the national homeland-security information that the Secretary of Homeland Security receives. Finally, FPS has greater access to information than it might otherwise receive without the CIP designation. FPS officials said that FPS’s designation as a CIP was a “game changer” for FPS’s abilities to identify and share information on emerging threats. FPS officials explained that FPS’s placement could influence whether FPS continues to have direct access to information related to national homeland security that it needs to carry out its mission. Regarding coordination, FPS currently coordinates with both GSA and Marshals to fulfill its facility protection mission; however, we have reported on challenges FPS has faced in coordinating with these agencies. FPS’s coordination with GSA: FPS and GSA share responsibility for protecting federal facilities. FPS is primarily responsible for protecting federal employees and visitors in federal facilities held or leased by GSA. GSA serves as the federal government’s landlord and, in this role, performs some physical security activities such as funding and repairing security fixtures. In December 2015, we found that FPS and GSA had not agreed on a common outcome related to facility protection or the roles and responsibilities to accomplish their missions. FPS’s coordination with Marshals: FPS coordinates with Marshals to protect about 430 federal courthouses. At courthouses held or leased by GSA, FPS is the primary federal agency responsible for patrolling and protecting the perimeter of the facilities and for enforcing federal laws and regulations in those facilities. Marshals has primary responsibility for the security of the federal judiciary, including the safe conduct of court proceedings and the security of federal judges, court personnel, jurors, and the visiting public. In September 2011, we reported that FPS, Marshals, and other agencies involved in protecting courthouses (i.e., GSA and the Administrative Office of the U.S. Courts) faced challenges related to coordination, such as in the implementation of roles and responsibilities and the use or participation in existing collaboration mechanisms. In table 13 and subsequent paragraphs, we describe how selected agencies that met the information sharing and coordination criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion. Like FPS, all of the selected agencies except GSA have access to and can share information related to national homeland security, and these agencies could share that same information with FPS. Specifically, like FPS, the selected agencies in DHS are CIPs or participate in other groups that have access to and can share information related to national homeland security. Justice and Marshals have access to homeland security information through the Federal Bureau of Investigation and participate in separate groups where national homeland security information is shared, including the Joint Terrorism Task Force and the National Counterterrorism Center. While selected agencies in DHS and Justice are similar to FPS in the area of information sharing, there are some differences and challenges that decision makers would need to consider before placing FPS in these agencies. For example, FPS and the selected agencies in DHS and Justice require different types of information to meet respective mission needs. In previous organizational placements, FPS has faced challenges with information sharing. For example, FPS officials told us that when FPS was part of ICE, they relied on ICE to provide them with information, which slowed down FPS’s ability to react to information specific to facility protection. This may not be an issue if FPS continues to have direct access to information as a CIP. While GSA does not have access to national homeland security information, GSA has access to and shares information pertinent to the security of government facilities through, among other sources, participation in the government facilities sector of the Government Coordinating Council and Interagency Security Committee. Officials from FPS, an association of security companies, and a former high-ranking official in NPPD—said if FPS moved to GSA, FPS could lose direct access to critical information that is necessary for it to accomplish its mission. Furthermore, staff from OMB said FPS’s participation in DHS’s homeland security groups has given the agency some level of credibility. Thus, if FPS moved to an agency that does not have access to national homeland security information, such as GSA, there may be resistance from DHS agencies and others in sharing information with FPS, according to the OMB staff. If FPS moved to Justice or Marshals, FPS officials said that they would be able to continue to access and share homeland security information through Justice’s information sharing community. Thus, a move to either of these two agencies would not have as great an impact to their access to homeland security information as a move to GSA would, according to FPS officials. Based on the coordination challenges we found in our prior work, FPS and GSA or Marshals may continue to disagree on roles and responsibilities if FPS is placed in these agencies. However, in September 2018, NPPD and GSA signed a memorandum of agreement that, among other things, describes FPS’s and GSA’s roles and responsibilities, and FPS, Marshals, GSA, and the Administrative Office of the U.S. Courts are working to finalize a separate agreement for courthouse security. Accordingly, coordination between these agencies should improve with the implementation of these agreements as we have previously reported that establishing clear roles and responsibilities, in agreements or through other mechanisms, contribute to effective coordination. Moving one agency into another does not necessarily mean that the two agencies will coordinate better. As discussed earlier in this report, FPS moved from ICE to NPPD so that FPS could gain synergy with NPPD’s Office of Infrastructure Protection, which is responsible for coordinating infrastructure protection across government and the private sector. According to OMB staff we interviewed, this synergy has not happened in part because NPPD and FPS missions are self-contained—with FPS focused on federal facility infrastructure and the Office of Infrastructure Protection focused on other types of infrastructure, including privately owned infrastructure. DHS, CBP, ICE, NPPD, and Secret Service do not have joint responsibilities for coordinating facility protection because these agencies rely on FPS to provide security services or provide their own security services. FPS officials told us that over the course of its previous organizational placements, FPS’s mission support capabilities have matured and that it is now able to provide its own mission support in most areas. For example, FPS owns and uses many of the key operational and business- related information technology (IT) systems and applications it needs to carry out its mission. Despite the maturation of FPS’s in-house mission support activities, FPS still receives some mission support services from other agencies in DHS, such as human capital and some aspects of information technology. FPS would need mission support in these areas if it changed its organizational placement. Separately, FPS has faced challenges in the area of financial management, and changing FPS’s placement could help address those challenges. Finally, FPS offers its own training courses and has access to DHS’s Federal Law Enforcement Training Centers (FLETC), and therefore it does not need mission support from a parent agency in this area. In table 14 and subsequent paragraphs, we describe how selected agencies met the mission support criterion—that is, the selected agencies that had mission support that FPS needs—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion. Among the agencies we reviewed, GSA has the infrastructure to support FPS in its funding approach. FPS officials told us that one of the key challenges they experienced in ICE was that ICE did not have institutional knowledge on FPS’s funding approach, particularly FPS’s fee structure, and FPS experienced changes in fees that were not aligned to what was needed to cover its efforts. FPS funds its operations by collecting security fees from federal agencies that use FPS for facility protection. GSA is well positioned to support FPS’s funding approach because it is the only agency we reviewed that also collects monies from multiple federal agencies to support some of its operations. According to documentation we reviewed and interviews with officials from selected agencies, we found that among the remaining agencies, some do not collect fees (NPPD, Secret Service) and others collect fees to support operations, but not from other federal agencies (DHS, CBP, ICE, Justice, Marshals). Further, based on our review of FPS’s fiscal year 2019 budget request to Congress and our past work, we found that FPS faces challenges in generating enough revenue to cover its operational costs. If placed in GSA, GSA and FPS could consider whether to use the Federal Buildings Fund for security projects related to facility management, such as installing cameras. OMB staff said that there are limitations with the Federal Buildings Fund, such as the amount of funding available for security projects. Further, OMB staff said that finding cost-effective ways for FPS to carry out its operations will help the agency address its funding challenges. Any of the selected agencies could provide FPS needed human capital support. FPS performs some human capital activities, such as estimating the number of staff it needs to perform its mission but does not have delegated examining authority that allows it to fill competitive civil service jobs. NPPD—FPS’s current parent agency—has this authority and is responsible for recruiting, hiring, and performing other human capital services on behalf of FPS. All the selected agencies we reviewed have delegated examining authority. Thus, any one of these agencies could provide human capital services on behalf of FPS. Officials from three of the selected agencies—ICE, the Secret Service, and Marshals—said that they already face challenges with hiring enough staff to fulfill their own missions or may not have the administrative capacity to handle an additional human capital workload for FPS. For example, officials from the Secret Service and Marshals said they have staffing shortages, which negatively affects their ability to fulfil their missions. The shortage is exacerbated by the time it takes to vet applicants and process new staff through background checks and security clearances, according to the officials. Marshals officials said absorbing FPS would not help the agency address the staffing shortage because FPS employees perform a different mission, including a different law enforcement mission, which require different skill sets, training, etc. Further, Marshals officials said that given the time it takes to vet its own applicants and process its own staff, it lacks the administrative capacity to take on a new agency. Finally, Justice officials said that if FPS moved into Marshals, FPS staff would require ongoing human resources support for such things as performance management, payroll, personnel action processing, and benefits counseling. They said that Marshals is not staffed to assume the full human capital services required of another agency. Separately, an official from ICE said that the agency’s human capital office is currently undergoing a major realignment of service functions and that given FPS’s large workforce, ICE would not have the administrative capacity to take on the additional human capital workload for FPS. NPPD may experience some gaps in providing some human capital functions if FPS moved out of NPPD. According to NPPD, FPS provides NPPD 23 staff positions to help NPPD carry out its human capital activities. If FPS moved out of NPPD, NPPD staff said that 15 of the positions could be realigned back to FPS. The remaining 8 positions, which perform major functions including processing pay and managing information technology systems for human capital needs, would need to remain in NPPD if they are not replaced by NPPD. According to NPPD officials, the human capital teams that perform these functions are already understaffed and the skillsets for these functions are not plentiful in the workforce. Thus, if NPPD were unable to retain these positions, NPPD officials said that there may be significant gaps, such as in processing pay. FPS’s operational and business-related IT systems and applications would not be greatly affected by a change in FPS’s organizational placement because FPS owns many of the systems and applications it needs to carry out its mission. For example, FPS owns a system to help agency officials conduct and track facility security assessments and another system to track law enforcement activities (e.g., tracking investigative cases and incidents). If FPS’s placement changed, the agency could take its systems with it, though there may be some transition or integration costs, according to FPS officials. FPS uses some IT systems or applications that it does not own and that would need some consideration if FPS changed its organizational placement, particularly if FPS moved outside DHS. For example, FPS uses ICE’s system for managing financial transactions and ICE’s IT network. If FPS moved outside of DHS, resources would be needed to remove FPS from this ICE system and network, according to FPS officials. GSA and Justice have financial management systems that FPS could use. Marshals do not have its own financial management but uses Justice’s system. According to Justice and Marshals officials, Justice’s financial management system is currently not configured to support the collection of fees that support operations. Any changes to the configuration of Justice’s financial management system, such as the inclusion of FPS’s fee-based collections, would require the approval of Justice and possibly other Justice components that use the system. If FPS stayed within DHS, including as a standalone entity within DHS, it could potentially continue to use ICE’s system or use CBP or the Secret Service’s systems. DHS, CBP, ICE, Secret Service, Justice, and Marshals provide law enforcement training, but FPS would not need access to such training if placed in these agencies because FPS provides its own training on topics related to facility protection. For example, FPS provides training to its inspectors on physical security activities, such as identifying countermeasures needed at facilities. FPS officials said that there would be no efficiency gained in merging FPS and these agencies’ training programs because FPS performs activities that most other law enforcement agencies do not perform. NPPD and GSA do not perform law enforcement activities and therefore do not have law enforcement training programs. If moved to either of these two agencies, FPS could continue to use its own training courses. Furthermore, CBP, ICE, Secret Service, and Marshals are Federal Law Enforcement Training Centers (FLETC) Partner Organizations, meaning that they have access to training provided at FLETC training facilities. FPS is also currently designated as a FLETC Partner Organization and therefore would not need to rely on these agencies to obtain this designation. All Partner Organizations, regardless of whether they are DHS agencies or not, share the same equal privileges at FLETC, including priority scheduling for basic and advanced law enforcement training. Nonetheless, Justice and Marshals officials explained that their FLETC training curriculum, planning, and structure are vastly different than other Partner Organizations due to the differing mission sets. NPPD and GSA are not FLETC Partner Organizations. According to FLETC officials, however, because FPS is currently a FLETC Partner Organization, it would continue to have access to FLETC while in NPPD or GSA. In addition to the contact named above, Amelia Bates Shachoy (Assistant Director); Roshni Davé (Analyst-in-Charge); Ben Atwater; Jazzmin Cooper; George Depaoli; Adam Gomez; Geoffrey Hamilton; Malika Rice; Amy Rosewarne; Kelly Rubin; Sarah Veale; and Amelia Michelle Weathers made key contributions to this report.", "summary": "FPS, within DHS's NPPD, conducts physical security and law enforcement activities for about 9,000 federal facilities and the millions of employees or visitors who work in or visit these facilities. FPS moved from GSA to DHS's ICE in 2003 and to NPPD in 2009. GAO has reported that FPS faced challenges in each location. Legislation enacted in November 2018 requires DHS to review placement options for FPS and could result in FPS moving again within DHS or to another executive branch agency. GAO was asked to review issues related to organizational placement options for FPS. This report examines (1) the potential effects of FPS's placement in selected agencies and (2) steps DHS has taken to assess placement options for FPS. GAO identified five key organizational placement criteria based on prior work and identified eight agencies as potential placement options. The agencies were selected because they have the largest number of law enforcement officers or perform physical security, among other reasons. GAO reviewed documentation and interviewed officials from FPS, selected agencies, and key stakeholders. GAO compared agencies to FPS to determine if they meet the organizational placement criteria. An agency meets the criteria if it has similarities to FPS. In considering organizational placement options for the Department of Homeland Security's (DHS) Federal Protective Service (FPS), GAO found that none of the eight agencies GAO selected met all the key organizational placement criteria; thus, any of the organizational placement options could result in both benefits and trade-offs. For example, keeping FPS in DHS's National Protection and Programs Directorate (NPPD) could provide FPS some benefits because FPS and NPPD have missions that include the protection of infrastructure or specific facilities, facility protection responsibilities, and access to and sharing of information related to national homeland security. However, unlike FPS, NPPD does not perform both physical security and law enforcement activities, which is a potential trade-off. In another example, the General Services Administration (GSA) and the United States Marshals Service (Marshals) could provide benefits because they currently coordinate with FPS on facility protection. However, Marshals does not have a mission or goals that explicitly focus on the protection of infrastructure or facilities and GSA does not perform law enforcement, which are potential trade-offs. DHS has not taken key steps to fully assess potential placement options. Specifically, DHS has not assessed the organizational structure of FPS, such as its placement in NPPD, even though FPS and NPPD have evolved since FPS was placed in NPPD in 2010. Standards for Internal Control state that agency management should establish an organizational structure to achieve the agency's objectives and that an effective management practice for attaining this outcome includes periodically evaluating the structure to ensure that it has adapted to changes. Additionally, because DHS did not analyze FPS's current placement in NPPD, DHS does not have a benchmark for comparison to other agencies. DHS recently established a working group to assess the placement of FPS. However, the group's planned activities are limited in several ways. For example, the group's draft charter does not indicate that the working group will describe what DHS expects to achieve by changing FPS's placement. Further, the draft charter does not indicate that the working group will evaluate the benefits and trade-offs of placement options. GAO has previously identified these and other steps as key to successful organizational change or analysis of alternatives. These steps would help DHS address the 2018 legislation to review placement options for FPS—including, how DHS considered the results of GAO's review. Regardless of the legislation, DHS may not be positioning itself to make an informed decision as to what organization best supports FPS. DHS should identify the expectations for changing FPS's placement and take steps to fully evaluate placement options. DHS concurred with the recommendations and outlined steps it plans to take to address them.", "document_type": "gao"}
{"report": "VA’s process for deciding veterans’ eligibility for disability compensation begins when a veteran submits a claim to VA. The veteran submits his or her claim to one of VBA’s 56 regional offices, where staff members assist the veteran by gathering additional evidence, such as military and medical records, that is needed to evaluate the claim. Based on this evidence, VBA decides whether the veteran is entitled to compensation and, if so, how much. A veteran dissatisfied with the initial claim decision can generally appeal within 1 year from the date of the notification letter sent by VBA. Under the current appeals process (now referred to by VA as the legacy process), an appeal begins with the veteran filing a Notice of Disagreement. VBA then re-examines the case and generally issues a Statement of the Case that represents its decision. A veteran dissatisfied with VBA’s decision can file an appeal with the Board. In filing that appeal, the veteran can indicate whether a Board hearing is desired. Before the Board reviews the appeal, VBA prepares the file and certifies it as ready for Board review. If the veteran requests a hearing to present new evidence or arguments, the Board will hold a hearing by videoconference or at a local VBA regional office. The Board’s members, also known as Veterans Law Judges, review the evidence and either issue a decision to grant or deny the veteran’s appeal or refer (or remand) the appeal back to VBA for further work. The 2017 Act made changes to VA’s legacy appeals process that will generally take effect no earlier than February 2019, which is approximately 18 months from the date of enactment. According to its appeals plan, VA intends to implement the Act by replacing the current appeals process with a process offering veterans who are dissatisfied with VBA’s decision on their claim one of five options: two of those options afford the veteran an opportunity for an additional review of VBA’s decision within VBA, and the other three options afford them the opportunity to bypass additional VBA review and appeal directly to the Board. Under the new appeals process, the two VBA options will be: 1. Request higher-level review: The veteran asks VBA to review its initial decision based on the same evidence but with a higher-level official reviewing and issuing a new decision. 2. File supplemental claim: The veteran provides additional evidence and files a supplemental claim with VBA for a new decision on the claim. The three Board options will be: 3. Request Board review of existing record: The veteran appeals to the Board and asks it to review only the existing record without a hearing. 4. Request Board review of additional evidence, without a hearing. 5. Request Board review of additional evidence, with a hearing. The Act also requires VA to submit to the appropriate committees of Congress and GAO, within 90 days of the date of enactment, a comprehensive plan for (1) processing appeals under the legacy process until there are no more to process, (2) implementing the new appeals process, (3) processing of claims under the new appeals process in a timely manner, and (4) monitoring implementation of the new appeals process. In addition to these four broad elements, the Act lists 18 elements required to be included in the plan that relate to, among other things: staffing, IT, and other resources required to implement the plan; estimated timelines for hiring and training VA employees; and a description of risks associated with each element of the plan. The Act also includes a provision for GAO to assess the plan within 90 days after VA submits it. The Act also requires VA to provide progress reports to the appropriate committees of Congress and GAO at least once every 90 days (starting after VA submits its plan), until the date the Act’s legal changes to the appeals process generally go into effect and then at least once every 180 days after this date for 7 years. The Act also authorized VA to carry out a program to test any assumptions relied upon in developing its comprehensive plan and test the feasibility and advisability of any facet of the new appeals process. In its appeals plan, VA reported its decision to pilot test two of the five new options by allowing veterans with pending appeals in the legacy process (known as legacy appeals) to elect the VBA higher-level review or VBA supplemental claim options beginning in November 2017. This program, which VA refers to as RAMP, is intended to reduce legacy appeals by providing veterans with a chance for early resolution of their claims within VBA while the Board focuses on reducing its inventory of legacy appeals, according to VA. Participation in RAMP is voluntary, but veterans must withdraw their pending legacy appeal to participate, according to VA. Veterans dissatisfied with their RAMP decisions must wait until VA fully implements the new appeals process (in February 2019 at the earliest) before pursuing an appeal with the Board under the new process, according to VA officials. VA’s appeals plan addresses 17 of the Act’s 22 required elements, partially addresses 4 related to monitoring implementation and workforce planning, and does not address 1 element related to identifying total resources. For example, VA’s appeals plan addresses the required elements related to, among others, identifying legal authorities for hiring and removing employees, estimating timelines for hiring and training employees, and outlining the outreach VA expects to conduct. For the elements in the Act that VA’s appeals plan partially addresses or does not address, see table 1. For a detailed list of the 22 required elements in the Act, see appendix I. When we provided VA with our preliminary assessment, VA officials said they disagreed and that their appeals plan addresses all 22 of the required elements. In general, they said that data are not available, and VA cannot yet forecast the information required by the Act until aspects of the new appeals process are tested or implemented. However, in discussing our assessment at a January 2018 House Committee on Veterans’ Affairs hearing, the Deputy Secretary of Veterans Affairs stated that the agency agreed with our assessment and will work with us to address these gaps in VA’s appeals plan. Until VA’s appeals plan has complete information on all 22 of the required elements, Congress does not have the information it needs to fully conduct oversight of the plan and the agency’s efforts to implement and administer the new process while addressing legacy appeals. VA also needs information on resources, among other areas, to certify that the agency is prepared to carry out timely processing of appeals under the new and legacy appeals process. Further, as discussed below, addressing required elements through a more comprehensive plan and underlying analysis is consistent with sound planning practices and would better position VA to implement the new appeals process while attending to legacy appeals. For example, such an appeals plan would provide for carefully monitoring the new and legacy appeals processes against balanced goals and metrics, and clearly articulates resources, milestones and other information needed for effective program management. VA’s appeals plan reflects certain sound planning practices, such as convening a working group on performance tracking; however, the plan could benefit from including important details related to three key planning areas: 1. articulating a balanced set of goals and related measures to monitor and assess the performance of the new appeals process, in conjunction with the legacy process; 2. developing a high-quality and reliable implementation schedule to manage key steps and activities of the project; and 3. assessing key risks in a comprehensive manner, including respective mitigation strategies, articulating clear criteria and an assessment plan for RAMP, and more fully testing or analyzing all appeals options. VA’s appeals plan reflects steps taken to track performance, but it could improve its planning practices related to monitoring and assessing performance on a range of key dimensions of success. Sound planning practices suggest that agencies develop overall goals tied to meaningful and balanced performance measures. These measures include a mix of outcome, output, and efficiency measures to ensure that an organization’s priorities—as well as government-wide priorities such as quality, timeliness, and cost of service—are addressed. VA’s appeals plan reports that the agency convened a working group to design a process for tracking timeliness of both the legacy appeals and appeals within the new process. In supporting documentation that we requested, VA officials stated they are also determining the best way to measure veterans’ satisfaction with the new appeals process. VA’s appeals plan and supporting documentation also identify timeliness goals for the two VBA-only options and one of the three Board options. Nevertheless, its appeals plan does not articulate a set of goals and measures that cover all aspects of its new appeals process, such as accuracy of decisions and cost. The plan also does not provide details on the metrics the agency will develop, how it will assess if the new appeals process is an improvement over the legacy appeals process, and how it will monitor the allocation of resources between legacy and new appeals claims. More specifically: VA’s reported timeliness measures are incomplete: VA’s appeals plan outlines timeliness goals for the two VBA options (average processing time of 125 days) and for the Board option that does not include new evidence or a hearing (average processing time of 365 days). However, VA’s plan does not establish timeliness goals for the other two Board options: Board review of additional evidence without a hearing and Board review of additional evidence with a hearing. In commenting on our findings, while VA officials indicated they expect the new process to be more efficient than the legacy process (and, therefore, more timely), they also said data to inform goal setting for all Board options will not be available until VA fully implements these options. Establishing timeliness goals for all options would provide a more complete picture of VA’s vision for the new appeals process, and help VA to develop concrete, objective, and observable performance measures to show progress in achieving that vision, as well as inform resource estimates. VA’s reported measures lack adequate balance: Other than including certain timeliness goals, VA’s appeals plan does not articulate additional aspects of performance important for managing appeals, such as accuracy of decisions, veteran satisfaction with the process, or cost. We previously reported that VA officials said they wanted to also use veteran survey results, wait times, and inventories as sources of information to measure progress under the new appeals process. Further, VA’s fiscal year 2018 annual performance plan includes an overall customer satisfaction score for veterans’ benefits. However, these and other potential measures of success are not specified in VA’s appeals plan for monitoring the new appeals process as compared with legacy appeals. By not articulating a set of comprehensive and balanced goals and measures in its appeals plan, VA could be inadvertently creating skewed incentives by focusing on one area of program performance to the detriment of other areas (e.g., processing claims quickly but inaccurately). In commenting on our findings, VA officials recognized the need to develop additional goals and measures. They indicated, for example, that they are developing and testing whether the existing quality assurance goal—92 percent accuracy—is appropriate for the new process. According to VA officials, once they have developed these other goals and measures, VA will communicate this information as part of the required progress reports to the appropriate committees of Congress and GAO. Moreover, at a January 2018 House Committee on Veterans’ Affairs hearing, the Deputy Secretary of Veterans Affairs acknowledged that their performance goals and measures are not yet complete and indicated that the agency will address these gaps in measuring performance. VA’s plan does not reflect how it will establish baseline data: VA’s approach for evaluating the efficiency and effectiveness of the implementation of the new appeals process falls short of sound practices for using baseline data to assess performance. Our prior work has demonstrated that by developing and tracking a performance baseline for all measures, including those that demonstrate the effectiveness of a program, agencies can better evaluate progress made and whether or not goals are being achieved. However, VA’s appeals plan did not provide important details about what aspects of the new appeals process’ performance will be compared to what aspects of the legacy process’ performance. In particular, section 5 of the Act lists a number of metrics VA is required to report periodically, including some that could be used as baseline measures. For example, VA is required to periodically publish on its website the average time that elapsed between the filing of an initial claim and the final resolution of the claim, for legacy appeals as well as appeals under the new system, which is consistent with our prior recommendation. However, VA’s appeals plan does not explain how or when the agency would collect and use these or other data about the legacy and new processes’ performance—such as accuracy, veteran satisfaction, and cost—to assess their relative performance. As we had previously reported, VA’s business case for reform in some instances relied on unproven assumptions and limited analyses of its legacy process to identify root causes of performance problems. Specifically, VA determined that the open-ended nature of its legacy appeals process, whereby a veteran can submit additional evidence numerous times at any point, can cause additional cycles of re- adjudication, a process VA refers to as “churning.” According to VA, this re-adjudication can occur multiple times and can add years to the time needed to reach a final decision on an appeal. Without fully articulating a plan for collecting and using baseline and trend data, VA cannot determine the extent to which the new appeals process, which also allows for multiple appeal opportunities, will achieve final resolution of veterans’ appeals sooner, on average, than the legacy process. In commenting on our assessment, VA indicated that it is working toward capturing the metrics listed in section 5 of the Act. VA officials also noted that reporting on the new appeals process will require IT system functionality that currently does not exist, but stated that efforts are underway to add this functionality. VA’s plan does not explain how the agency will monitor processing of legacy versus new appeals: In addition, VA’s appeals plan does not fully articulate how the agency will monitor whether resources are being appropriately devoted to both the new and legacy appeals process and how it will track both sets of workloads. An appeals plan that does not specifically articulate how VA will manage the two processes in parallel exposes the agency to risk that veterans with appeals in the legacy process may experience significant delays or otherwise poor results relative to those in the new appeals process or vice versa. In commenting on our findings, VA officials noted that VA was not required under section 3 of the Act to provide a description of its plans to capture metrics listed in section 5. Even if not required by the Act, developing an approach for carefully monitoring the management of new and legacy appeals would help VA track progress being made and achievement of goals. Until VA establishes complete and balanced goals and measures, identifies baseline data, and develops a plan for monitoring and assessing both the new and legacy processes, VA runs the risk of promoting skewed behaviors, or not fully understanding whether the new process is an improvement or whether veterans with appeals in the legacy process are experiencing poor results. VA’s appeals plan reflects certain aspects of sound planning practices related to managing the implementation of process change; however, other key components are not addressed. Sound planning practices for implementing process change suggest establishing a transition team. Consistent with such practices, VA’s appeals plan states that the agency convened an agency-wide governance structure to coordinate implementation of its new appeals process; it is comprised of senior-level employees with authority to make necessary decisions to keep the project on track. VA’s appeals plan also includes a copy of a master schedule. In its plan, VA asserts that the master schedule reflects timelines, interim goals and milestones, reporting requirements, and established deadlines, and that it will be used to guide implementation. VA’s appeals plan also reports that VA is consulting with project management professionals, who are using the master schedule, among other tools, to monitor implementation. In addition, VA made progress addressing some of the issues we previously identified by developing steps and timetables for updating training in anticipation of implementing the new appeals process. However, VA’s master schedule for implementing reform is missing elements of a high-quality and reliable implementation schedule for key activities. We have previously reported that having a well-planned schedule is a fundamental management tool. Generally recognized sound practices from the Project Management Institute (PMI) and GAO call for organizations to employ an integrated and reliable master schedule that defines when work activities will occur, who will complete the work, how long they will take, how they are related to one another, and the constraints affecting the start and completion of work elements, as well as whether resources will be available when they are needed. Such a project management schedule not only provides a road map for systematic project execution, but also provides the means by which to gauge progress, identify and address potential problems, and promote accountability. The master schedule VA provided in its appeals plan should have included other sound practices for project management related to a reliable schedule. Specifically: Key activities and their duration are not included: VA’s master schedule does not capture specific Board-related activities, such as efforts to develop metrics, and the schedule and other project plans we reviewed do not go beyond February 2019. For example, the schedule does not indicate the period of time when VA expects to no longer be processing legacy appeals. Also, VA’s master schedule submitted with its November 2017 appeals plan did not include the Rapid Appeals Modernization Program (RAMP) activities, even though this pilot test is occurring at the same time VA is preparing for full implementation of appeals options at VBA and the Board. However, VA’s updated schedule that accompanied its comments on our draft report was updated to include RAMP. When all key and necessary activities are not included, it raises questions about whether all activities are scheduled in the correct order, resources are properly allocated, or the estimated completion dates are reliable. In addition, if the schedule does not fully and accurately reflect VA’s efforts, it will not serve as an appropriate basis for analysis and may result in unreliable completion dates and delays. Sequencing and linkages among activities are not identified: For the high-level activities VA’s appeals plan identifies, VA’s master schedule does not indicate whether there were sequencing or linkages among them, which is not consistent with sound scheduling practices. Sequencing and linkages would show, for example, if any of these activities or sub-activities must finish prior to the start of other activities, or the amount of time an activity could be delayed before the delay affects VA’s estimated implementation date. For example, VA cannot train new employees until after it hires them. The activities VA identifies also do not appear supported by lower- level project schedules. Specifically, when we requested documentation to support VA’s high-level summary of activities and milestones, VA officials did not provide intermediate or more detailed schedules that reflected these practices. In particular, VA’s appeals plan lacks a complete schedule for IT modifications that clearly defines what is to be achieved and the time frames for achievement. We previously recommended that VA develop a schedule for IT updates that explicitly addresses when and how process reform will be integrated into new systems and when these systems will be ready to support the new appeals process at its onset. For example, VA’s appeals plan references several required IT modifications that do not appear in its master schedule. Schedules that are defined at too high a level may disguise risk that is inherent in lower-level activities. Interim goals are not reflected: VA officials stated that they have interim goals and milestones, though VA’s appeals plan and supporting documentation generally do not include this information. Sound planning and redesign practices suggest closely monitoring implementation and developing project goals that include a mix of intermediate goals to be met at various stages. We previously made a recommendation that VA develop a more robust plan for closely monitoring implementation of process reform, including metrics and interim goals to help track progress, evaluate efficiency and effectiveness, and identify trouble spots—all of which are consistent with sound planning practices. Without interim goals and milestones, VA lacks information to support sequencing of activities and to track and ensure accountability for steady progress. Resources are not assigned to all identified activities: The high- level summary schedule that VA provided us also lacks details regarding the assignment of resources for all activities. Specifically, while the plan identifies workgroups responsible for coordinating elements in the plan, such as regulations, training, and outreach, the schedule does not assign resources to the 40 listed activities. As discussed previously, VA’s appeals plan also does not provide information on the total resources required for this reform effort. Assigning resources to the listed activities, as well as providing other information, could provide a better indication of the estimated total resources required to implement the new appeals process and address legacy appeals. In commenting on our findings, VA officials stated that the agency is developing lower-level project schedules for key activities—such as RAMP and IT requirements—and will provide these schedules as part of the required progress reports to the appropriate committees of Congress and GAO. VA officials also noted that future updates will include additional dependencies and risks, which VBA and the Board are still developing. Further, in discussing our findings at a January 2018 House Committee on Veterans’ Affairs hearing, the Deputy Secretary of Veterans Affairs reiterated VA’s commitment to developing more robust project plans, particularly for IT. Until VA has a robust integrated master schedule, supported by detailed project plans that adhere to sound practices, VA’s appeals plan does not provide reasonable assurance that decision makers have the essential program management information needed for this complex and important effort. VA’s appeals plan includes an assessment of risks involved in implementing the new appeals system, but could more comprehensively reflect key risks posed by such a significant reform effort. VA’s appeals plan and supplemental materials include a “risk register” that describes risks associated with many elements of its plan, and the remaining level of risk after its planned response to these risks. VA’s appeals plan also states that senior leaders will receive regular updates of risks and mitigation strategies. However, because VA has not yet articulated a balanced set of performance goals and measures in its appeals plan, it is hindered in its ability to identify and assess risks. Federal internal control standards state, and our previous work at VA and other agencies demonstrates, that establishing clear performance goals and objectives is a necessary pre-condition to effectively assessing risk. Having, for example, more complete timeliness goals, and goals and measures reflecting other areas of performance, would allow VA to better identify and target risks associated with managing two processes in parallel, including the potential that veterans with appeals in the legacy process may experience significant delays relative to those in the new appeals process. Importantly, VA is missing an opportunity to fully benefit from RAMP by not testing and assessing other aspects of the new appeals process. The Act authorizes VA to test the feasibility and advisability of any facet of the new appeals process, and VA is taking a positive step to mitigate some risks by testing the two review options available within VBA (review of a claim by a higher-level official based on the same evidence and review of a supplemental claim with additional evidence) through RAMP. In November 2017, VA began RAMP by inviting 500 veterans whose appeals have been pending the longest to participate. According to VA officials, VA plans to continue offering RAMP to additional eligible veterans with pending legacy appeals each month until January 2019—a month before VA anticipates fully implementing the new appeals system. However, as designed, RAMP does not include features—consistent with a well-developed and documented pilot test program—that would provide VA with an opportunity to evaluate fully the soundness of new processes and practices on a smaller scale. Specifically: VA’s plan does not clearly define success criteria for RAMP: VA’s appeals plan states that the agency will collect certain data from RAMP, such as the rate at which eligible veterans opt into the process, timeliness of claims processing, and individual employee productivity. VA also established an overall average processing time goal of 125 days for the two VBA options; however, the plan and supporting documentation did not clearly articulate whether RAMP reviews are expected to meet this timeliness goal. The plan also did not identify other success criteria for RAMP or the types of results expected before fully implementing the new appeals process. For example, VA’s plan does not articulate the expected number and type of subsequent appeals to the Board that result from RAMP. In commenting on our findings, VA noted that its intent in implementing RAMP was to collect data and test aspects of the new process, and that RAMP was not an initiative in and of itself. However, developing performance measures and data gathering procedures and defining success criteria for a pilot test before proceeding to full implementation are sound practices for process redesign and pilot testing. In addition, because RAMP was not included in VA’s risk assessment, we asked VA if it had identified any risks or mitigation strategies specific to RAMP. In its supplemental materials, VA stated that the greatest risk to RAMP is a low participation rate among eligible veterans with legacy claims. VA also indicated that it would need 10 percent of eligible veterans to opt into RAMP to yield meaningful results. However, this threshold is not articulated in VA’s appeals plan as an explicit success criterion or objective. According to data provided by VA, as of January 22, 2018, 238 veterans opted in. Of veterans with pending claims in RAMP, two-thirds chose the higher-level review option. VA also reported that 47 RAMP decisions have been made so far. As of yet, no appeals of RAMP decisions have been filed. VA’s plan does not articulate how it will assess RAMP before proceeding with full implementation: Although VA’s appeals plan describes a “close-out” phase in which VA intends to assess the results of RAMP, it does not detail the conditions that would have to be met (or not met) to trigger changes. For example, VA’s plan does not explain when or how it might respond to low opt-in rates for RAMP—other than stating it will increase outreach to eligible veterans—or to unexpectedly high appeal rates to the Board resulting from RAMP decisions. Sound redesign and change management practices both suggest that pilot tests be rigorously monitored and evaluated, and that further roll-out occur only after an agency’s transition team takes any needed corrective action and determines that the new process is achieving previously identified success criteria. Without fully articulating its plan for deciding how and when to roll out changes more broadly, it is not clear whether VA would be prepared to fully implement a new appeals process that achieves its aim of better serving veterans. RAMP does not test all aspects of the new appeals process: RAMP provides an opportunity to learn about experiences at VBA under the new system, such as the rate at which eligible veterans choose those options and the resources that will be required to process their appeals. However, RAMP was not designed to test how many veterans would choose to appeal directly to the Board and, therefore, it will not provide comparable information on the Board appeals options. Sound workforce planning practices suggest that agencies identify the total resources needed to manage the risk of implementing new processes and conduct scenario planning to determine those needs. In addition, although we previously recommended VA conduct additional sensitivity analyses to inform projections of future appeals inventories, VA’s appeals plan does not reflect VA’s use or intended use of sensitivity analyses when projecting staffing needs for new appeals options at the Board. In commenting on our findings, VA officials said they do not plan to conduct additional sensitivity analyses to project future workloads until they have more information from RAMP to inform their assumptions. As a result, VA will lack data on scenarios in which veterans may overwhelmingly choose options available at the Board over those at VBA when the appeals plan is fully implemented. This presents a risk that VA’s early production projections and initial resource allocations may not be properly balanced between the Board and VBA. This, in turn, may result in an unexpectedly large number of appeals pending with the Board, and corresponding lengthy average wait and decision times for some, if not all, Board options. Having information on the number of veterans who are likely to appeal to the Board is particularly critical, given that similar efforts to create additional review options at VBA did not achieve their goals of reducing the percentage of appeals that continue on to the Board. In 2001, VA established the Decision Review Officer (DRO) process—in which senior staff have the authority to overturn an initial disability claim decision without any new evidence—to resolve more appeals at the regional level and avoid long waits at the Board. However, we reported in 2011 that, although the DRO process helped some veterans get additional benefits at the regional office level, it did not accomplish the program’s primary goal of reducing the percentage of appeals continuing on to the Board. In responding to our findings, VA officials reiterated their plans to increase outreach in the event of low opt-in rates for RAMP and indicated they recently began to send follow-up RAMP invitation letters. With respect to assessing all appeals options, VA officials stated that, while no legal bar prevents testing of the Board options, the Board is focused on reducing its inventory of pending appeals while RAMP provides early resolution of appeals within the new VBA-only options. Officials conceded that this approach means they cannot collect data on the rate at which veterans opt to appeal directly to the Board (e.g., bypassing additional VBA review) until the new process is fully implemented. However, they noted that they can collect some data on the rate at which veterans whose appeals go through RAMP file subsequent appeals to the Board, even though the Board will not begin processing those appeals until full implementation. At a January 2018 House Committee on Veterans’ Affairs hearing, the Deputy Secretary of Veterans Affairs stated that given our assessment, VA will adjust its approach to identify and mitigate risks associated with implementing all of the appeals options, including those at the Board. Until VA pursues an approach that identifies and mitigates significant risks associated with implementing a new process, VA is taking a chance that untested aspects will not perform as desired. The Act provides VA authority to pilot aspects of the process and flexibility on the timing of implementing the new process, which could allow some additional time for VA to carefully measure performance under RAMP and determine whether any corrective actions are necessary. If VA does not take full advantage of this authority, it risks moving forward without knowing whether the new appeals process improves experiences for veterans, and potentially implementing a process that is more expensive or results in longer wait times than originally anticipated. In implementing appeals reform after the enactment of the Veterans Appeals Improvement and Modernization Act of 2017, VA is undertaking a complex endeavor that has the potential to affect the lives of hundreds of thousands of veterans with service-connected disabilities. Such an endeavor demands a commensurate level of planning to be successful. While the Act required VA to submit its plan within 90 days of enactment, VA had proposed and began to plan for appeals reform much earlier, and had our March 2017 recommendations to guide its planning efforts from a foundation of sound practices. VA’s November 2017 appeals plan is a positive step forward. Certain elements of the plan—such as establishing an agency-wide governance structure to oversee implementation and testing aspects of reform prior to full implementation—are notable gains since our March 2017 report. At the same time, the plan partially addresses or does not address five of the required elements called for by the Act, such as delineating the total resources required by VBA and the Board to implement and administer the new appeals process and address legacy appeals. The plan also is not fully responsive to our past recommendations and does not reflect a number of sound planning practices that are essential for gauging progress, establishing accountability, and linking resources to results. One such key practice is articulating a desired “end state”—a vision for what successful implementation would look like for the new appeals process as well as the wind-down of the legacy process, such as accurate and timely processing of appeals while ensuring veteran satisfaction. Without establishing a complete and balanced set of goals and related performance measures to achieve this end state, and monitoring and assessing progress along the way, VA risks falling short of its overarching objective—to improve timeliness of appeals decisions for veterans overall. By not fully articulating how it plans to monitor workloads and devote resources to both the new and legacy processes, VA runs the risk of disadvantaging veterans with legacy appeals relative to those in the new process, or vice versa. Just as important is establishing a robust integrated master schedule— rather than a high-level timeline—that is built upon and clearly reflects extensive detailed planning and includes all activities necessary to execute the program and interdependencies between these activities. Without such a road map, VA’s appeals plan does not provide reasonable assurance that decision makers have the essential information needed to manage this complex and important program. We are encouraged that VA has taken some steps toward assessing risks, including establishing a risk register and implementing RAMP to collect information on the two VBA appeals options. However, unless VA assesses risks against a balanced set of goals and measures, VA may not be fully aware of risks that may impede successful implementation of appeals reform. Further, although VA will undoubtedly learn from the RAMP experience, it may not learn all that it should from its efforts without (1) establishing clear criteria for what success looks like (or the circumstances that would cause VA to consider making course corrections), and (2) building in time to take stock of the lessons learned before moving to full implementation. VA’s plan places a lot of weight on RAMP to, among other efforts, mitigate risk and generate estimates of the resources needed for successful implementation after fiscal year 2018, even though RAMP does not fully test options for appealing to the Board that will be available to veterans after full implementation. Unless VA addresses key risks associated with fully implementing appeals reform—by either testing or conducting sensitivity analyses for all five appeals options, to better understand potential workloads at the Board—VA runs the risk of fully implementing the process without knowing if it is improving the process for veterans. We are making the following four recommendations to VA: The Secretary of Veterans Affairs should address all of the required elements in the Act in VA’s appeals plan to Congress—including delineating resources required for all VBA and Board appeals options— using sensitivity analyses and RAMP results, where appropriate and needed. (Recommendation 1) The Secretary of Veterans Affairs should clearly articulate in VA’s appeals plan how VA will monitor and assess the new appeals process compared to the legacy process, including specifying a balanced set of goals and measures—such as timeliness goals for all VBA appeals options and Board dockets, and measures of accuracy, veteran satisfaction, and cost—and related baseline data. (Recommendation 2) The Secretary of Veterans Affairs should augment the master schedule for VA’s appeals plan to reflect all activities—such as modifications to IT systems—as well as assigned responsibilities, interdependencies, start and end dates for key activities for each workgroup, and resources, to establish accountability and reduce overall risk of implementation failures. (Recommendation 3) The Secretary of Veterans Affairs should ensure that the appeals plan more fully addresses risk associated with appeals reform—for example, by assessing risks against a balanced set of goals and measures, articulating success criteria and an assessment plan for RAMP, and testing or conducting sensitivity analyses of all appeals options—prior to fully implementing the new appeals process. (Recommendation 4) We provided a draft of this report to the Department of Veterans Affairs (VA) for comment. In its comments, reproduced in appendix II, VA outlined its planned actions to address the recommendations. VA clarified in a subsequent communication that the agency agreed with all our recommendations. VA did not provide technical comments. With respect to our first recommendation that VA address all the required elements in the Act in VA’s appeals plan (including delineating total resources), VA stated that both VBA and the Board will use existing resources to implement the new appeals process. VA also stated it plans to take additional steps to determine resource requirements for addressing workloads under both the legacy and new appeals process. For VBA, VA stated that it will continue to rely on RAMP to project resource requirements, while acknowledging the need to augment its analysis of RAMP data by adopting additional strategies to project resource requirements. VA did not describe these strategies, but stated that it will share them with Congress and GAO in the near future. Meanwhile, VA noted that its 2019 budget request includes 605 additional FTEs for VBA to process appeals, but did not indicate how it developed this budget request. For the Board, VA stated that it plans to develop better predictions regarding resource allocations among dockets by leveraging project management and other support within the agency. We will continue to monitor VA’s efforts to delineate needed resources, including how it uses the results of pilot tests and prediction analysis. With respect to our second recommendation to articulate how it will monitor and assess the new appeals process compared to the legacy process, VA stated that it is working to develop a complete and balanced set of measures for the new appeals process, and timeliness goals for all appeals options. Further, VA indicated it will track performance for Board appeal options using an existing process. We are encouraged by VA’s proposed actions, which will provide a more complete picture of VA’s vision for the new appeals process. However, VA does not detail whether or how the agency will develop a baseline or compare performance of the new appeals process to the legacy process. Until VA develops a baseline and a plan for monitoring and assessing both the new and legacy processes—using a complete and balanced set of goals and measures— VA risks not fully understanding whether the new process is an improvement. With respect to our third recommendation to augment its master implementation schedule to manage the project, VA provided an updated schedule with additional key activities and responsibilities, such as RAMP. Moreover, VA restated its plans to use an agency-wide governance structure to coordinate and track implementation of its new appeals process. We are encouraged by VA’s efforts to develop a more detailed implementation schedule. However, the updated schedule VA provided does not include major activities, such as integrated IT system testing, and completion dates for major activities, for example, adding functionality to VA’s primary claims processing system. In addition, VA provided an updated calendar for six major IT activities through the end of calendar year 2018. However, we continue to believe that VA will need to develop a longer term schedule that projects when processes will be integrated into new systems and when new systems will be ready to support the new appeals process. The schedule also does not indicate whether activities are interrelated, such that a delay in one activity could affect other activities and thereby affect VA’s estimated implementation date. This sound planning practice is especially important because VA stated the agency is concurrently executing many of the activities. With respect of our fourth recommendation to more fully assess risks associated with appeals reform prior to its full implementation, VA stated that it will assess risks against a balanced set of goals it plans to select. Moreover, using its existing risk management process, VA stated it has identified additional risks and mitigation strategies after submitting its November 2017 plan. For example, VA states that it is addressing the continued low opt-in rate for RAMP, which is testing the new VBA-only options. VA is also acknowledging that delays in the development of IT required to implement the appeals process may prevent the agency from certifying readiness in January 2019. Importantly, VA states that the Board is exploring the development of a pilot program to identify needs and concerns related to full implementation—including all Board appeals options—and to make predictions about timeliness and productivity under the new appeals process. However, VA did not define success criteria for its current pilot test, RAMP, or clearly articulate how the agency will assess results of either RAMP or a new test of Board appeals options before proceeding to full implementation. Implementing our recommendation in a complete and timely manner is important because it would improve VA’s ability to identify and mitigate significant risks associated with implementing a new process. We will continue to monitor the status of VA’s actions to address our recommendations and how they are implemented, to help ensure that VA is undertaking a level of planning appropriate to implementing a complex endeavor, and thereby improving VA’s chance of success. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Elizabeth Curda at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who contributed to this report are listed in appendix III. To assess the extent to which VA’s appeals plan addresses the required elements in the Veterans Appeals Improvement and Modernization Act of 2017 (Act), we first identified and developed a checklist reflecting each required element for VA’s appeals plan (including sub-parts) under section 3(a) and (b) of the Act. To compare the required elements and their sub-parts against VA’s appeals plan and supplemental materials provided by VA, we developed decision rules for determining whether VA’s appeals plan addressed, partially addressed, or did not address each required element (see table 2). Specifically, we concluded that VA’s plan addressed (or partially addressed) a required element if the plan included information related to all (or some) subparts of the requirement. We focused on the plan as presented, rather than auditing the information VA relied on in developing the plan. For example, the Act’s section 3(b)(10) required VA’s plan to include a description of the modifications to the information technology (IT) systems required to carry out the new appeals system, including cost estimates and a timeline. We concluded that VA’s plan addressed all sub-parts of this element because it provided a description of required IT modifications, a reference to costs included in the Appeals Modernization IT budget, and a timeline. However, our determination that VA addressed this element should not be construed to necessarily mean that VA fully identified or described all IT requirements, or provided complete estimated costs and timelines associated with those requirements, or that the information in VA’s appeals plan comported with sound planning practices. This type of assessment was outside the scope of this objective. Elizabeth H. Curda, (202) 512-7215 or curdae@gao.gov. In addition to the contact above, the following staff members made significant contributions to this report: Michele Grgich (Assistant Director), James Whitcomb (Analyst in Charge), and Rachael Chamberlin. In addition, key support was provided by Susan Aschoff, Mark Bird, David Chrisinger, Daniel Concepcion, Clifton Douglas, Alex Galuten, Nisha Hazra, Melissa Jaynes, Benjamin Licht, Patricia McClure, Sheila McCoy, Lorin Obler, Gloria Proa, Almeta Spencer, James Sweetman, Walter Vance, and Greg Whitney.", "summary": "VA's disability compensation program pays cash benefits to veterans with disabilities connected to their military service. In recent years, the number of appeals of VA's benefit decisions has been rising. For decisions made on appeal in fiscal year 2017, veterans waited an average of 3 years for resolution by either VBA or the Board, and 7 years for resolution by the Board. The Veterans Appeals Improvement and Modernization Act of 2017 makes changes to VA's current (legacy) appeals process, giving veterans new options to have their claims further reviewed by VBA or appeal directly to the Board. The Act requires VA to submit to Congress and GAO a plan for implementing a new appeals process, and includes a provision for GAO to assess VA's plan. This report examines the extent to which VA's plan (1) addresses the required elements in the Act, and (2) reflects sound planning practices identified in prior GAO work. GAO reviewed and assessed VA's appeals plan and related documents against sound planning practices, and solicited VA's views on its assessments. The Department of Veterans Affairs' (VA) plan for implementing a new disability appeals process while attending to appeals in the current process addresses most, but not all, elements required by the Veterans Appeals Improvement and Modernization Act of 2017 (Act). VA's appeals plan addresses 17 of 22 required elements, partially addresses 4, and does not address 1. For example, not addressed is the required element to include the resources needed by the Veterans Benefits Administration (VBA) and the Board of Veterans' Appeals (Board) to implement the new appeals process and address legacy appeals under the current process. VA needs this information to certify, as specified under the Act, that it has sufficient resources to implement appeals reform and make timely appeals decisions under the new and legacy processes. VA's appeals plan reflects certain sound planning practices, but it could benefit from including important details in several key planning areas: Performance measurement : VA's plan reflects steps taken to track performance, but could articulate a more complete and balanced set of goals and measures for monitoring and assessing performance on a range of dimensions of success. Specifically, the plan reports that VA is developing a process to track timeliness of the new and legacy processes. However, contrary to sound planning practices, the plan does not include timeliness goals for all five appeals options available to veterans, does not include goals or measures for additional aspects of performance (such as accuracy or cost), and does not explain how VA will monitor or assess the new process compared to the legacy process. Unless VA clearly articulates a complete and balanced set of goals and measures, it could inadvertently incentivize staff to focus on certain aspects of appeals performance over others or fail to improve overall service to veterans. Project management : VA's plan includes a master schedule for implementing the new appeals plan. However, this schedule falls short of other sound practices for guiding implementation and establishing accountability, such as articulating interim goals and needed resources for, and interdependencies among, activities. Unless VA augments its master schedule to include all key activities and reflect sound practices, VA may be unable to provide reasonable assurance that it has the essential program management information needed for this complex and important effort. Risk assessment : VA has taken steps to assess and mitigate some risks related to appeals reform by, for example, pilot testing two of the five appeals options through its Rapid Appeals Modernization Program (RAMP). However, as designed, RAMP does not include key features of a well-developed and documented pilot test. For example, VA has not articulated how it will assess RAMP before proceeding with full implementation. In addition, RAMP is not pilot testing three options and, as a result, VA will not have data on the extent to which veterans will appeal directly to the Board when given the option. Unless VA identifies and mitigates key risks associated with implementing a new process, VA is taking a chance that untested aspects will not perform as desired. GAO recommends that VA (1) fully address all legally required elements in its appeals plan, (2) articulate how it will monitor and assess the new appeals process as compared to the legacy process, (3) augment its master schedule for implementation, and (4) address risk more fully. VA agreed with GAO's recommendations and outlined its planned actions to address them.", "document_type": "gao"}
{"report": "The Kissell Amendment applies to contracts entered into by DHS as of August 16, 2009, and, according to the Congressional Record, would require DHS to purchase uniforms made in the United States. According to the Congressional Record, the amendment was intended to extend some of the provisions found in the Berry Amendment to DHS. The Berry Amendment generally restricts the Department of Defense’s (DOD) procurement of textiles, among other items, to those produced within the United States. Pursuant to the Kissell Amendment, subject to exceptions, funds appropriated, or otherwise available to DHS, may not be used to procure certain textile items directly related to the national security interests of the United States if the item is not grown, reprocessed, reused, or produced in the United States. The Kissell Amendment specifies categories and types of textiles including items such as clothing, tents, tarpaulins, covers, and protective equipment, as well as the fibers used for fabrics such as cotton and other natural and synthetic fabrics. We refer to these textile items that are directly related to the national security interests of the United States as “Kissell-covered items.” The Kissell Amendment also has multiple exceptions to the procurement restriction, including: Small Purchases Exception – procurements under the simplified acquisition threshold (currently set at $150,000). Availability Exception – satisfactory quality and sufficient quantity of any Kissell-covered item cannot be procured when needed at U.S. market prices. Procurements Outside the United States – procurements by vessels in foreign waters or emergency procurements outside the United States. De Minimis Exception – DHS may accept delivery of a Kissell-covered item if it contains non-compliant (i.e., foreign) fibers as long as the total value of those fibers does not exceed 10 percent of the total purchase price of the item. In addition to the exceptions noted above, the Kissell Amendment also states that the Amendment shall be applied in a manner consistent with U.S. obligations under international agreements. As a result, purchases of Kissell-covered items, including uniforms and body armor, by DHS and its components must be procured consistent with U.S. obligations under relevant U.S. trade agreements. These agreements include the World Trade Organization (WTO) Government Procurement Agreement (GPA) and 14 bilateral or regional free trade agreements (FTAs) with 20 countries. These agreements generally require each party’s goods and services to be given treatment comparable to what is given to domestic goods and services in certain government procurements. The United States implements these obligations through the Trade Agreements Act of 1979 (TAA) and subpart 25.4 of the Federal Acquisition Regulation (FAR). According to DHS and its components, officials apply the Kissell Amendment by following the TAA as implemented in FAR subpart 25.4. As a result, when an international trade agreement applies to a DHS procurement of a Kissell-covered item, the Kissell Amendment does not restrict DHS’s purchasing of textile items from that foreign source, regardless of the item’s relationship to the national security interests of the United States. The Buy American Act (BAA) can also apply to DHS procurements. The BAA restricts the U.S. government from purchasing nondomestic end products, unless an exception applies. Examples of exceptions include: Where the cost of the domestic end product would be unreasonable. Where sufficient commercial quantities of domestic end products of a satisfactory quality are not reasonably available. In acquisitions covered by the WTO GPA or FTAs, USTR has waived the Buy American statute and other discriminatory provisions for eligible products. The BAA could apply to procurements of certain textile items valued below the $150,000 simplified acquisition threshold, to which the Kissell Amendment does not apply. The applicability of the act to a particular procurement depends on a number of factors such as the existence of a waiver or whether an exception applies. DHS and its components procure textiles and fabrics for numerous purposes, including clothing and equipping its officers and employees. From October 2009 through June 2017, of DHS’s more than $105 billion in obligations for procurements, $774 million, or less than one percent, was for textile products, according to FPDS-NG. The majority of textiles and fabrics procured by DHS components are for uniforms and body armor. In particular, of the $774 million, DHS obligated $516 million (or 67 percent) to procure uniforms and body armor for DHS personnel (see fig. 1). In August 2009, DHS updated its procurement regulations, the HSAR, to incorporate the Kissell Amendment restriction on the procurement of textiles from foreign sources; since then DHS inserted language incorporating the restriction into the 11 uniform and body armor contracts we reviewed. The HSAR establishes standardized DHS policies for all procurement activities within the department; according to DHS officials, all DHS components are to follow these policies. Pursuant to the Kissell Amendment, the restriction on the procurement of textiles became effective for DHS on August 16, 2009. One day later, DHS published an interim rule with a request for comments from the public that amended relevant HSAR sections to reflect the statutory change limiting the procurement of products containing textiles from sources outside the United States (i.e., the Kissell Amendment). On June 9, 2010, after receiving comments from the public, DHS adopted the amendments issued under the interim rule as final and without change. The amended sections detail the restriction on procurements of foreign textiles. They also provide a list of the types of textile items included in the restriction (i.e., yarn, wool, cotton), the exceptions noted in the Kissell Amendment, and provide detail on the specific application of trade agreements. Under the regulations, unless an exception applies, a specific clause shall be inserted in solicitations and contract actions detailing the requirement to use domestic goods for any procurement of a Kissell-covered item. Some components within DHS issued additional, supplemental guidance to the HSAR, while other components determined that additional guidance would be duplicative, according to officials. For example, Transportation Security Administration’s (TSA) Internal Guidance and Procedure Memorandum, updated in June 2016, provides additional guidance to contracting officers at TSA on the procurement of textiles. This guidance specifically states that for certain textile products, TSA’s contracting officers can only evaluate and/or accept offers from specified countries. Other components determined that additional guidance was not needed because the HSAR adequately covers the requirements of the Kissell Amendment for their purposes. For example, U.S. Secret Service officials stated that, for any procurement of textiles, they insert the required language from the HSAR into the request for proposals in case an item could be considered directly related to U.S. national security interests and thereby subject to the Kissell Amendment restriction. DHS officials stated that contracts for the procurement of uniforms and body armor are their only contracts for textile-related products that are directly related to national security interests. See figure 2 for examples of DHS uniforms and body armor. According to DHS officials, other textile or apparel procurements, such as curtains for DHS offices, would likely not be subject to the foreign procurement restriction under the Kissell Amendment because they are not directly related to national security interests. DHS components can also procure textiles through the Federal Supply Schedules (FSS) program. When ordering from these contracts, DHS contracting officers would make the determination of whether or not the purchase is directly related to national security interests and therefore subject to the Kissell Amendment restriction, according to DHS officials. DHS officials also explained that if the purchase under the FSS program contract is subject to the Kissell Amendment, the contracting officer would be responsible for inserting the required language from the HSAR into the delivery order. All 11 of the contracts we reviewed for uniforms and body armor entered into by a DHS component since August 2009 included language regarding the restriction of the Kissell Amendment. Many of DHS’s components that buy uniforms, including TSA and U.S. Customs and Border Protection (CBP), were already under contract with a vendor to supply uniforms when the Kissell Amendment took effect in August 2009. The Kissell Amendment specified that it applied to contracts entered into by DHS 180 days after the enactment of the American Recovery and Reinvestment Act of 2009. Therefore, DHS and its components did not apply the Kissell restriction to contracts signed before August 16, 2009. Several components separately signed contracts with uniform vendors after prior contracts expired and the Kissell restriction was in effect. For example, in February 2010, TSA signed a contract for uniforms with a vendor that included language restricting the foreign procurement of those uniforms per the Kissell Amendment. In 2012, DHS decided to enter into a single, department-wide contract for the procurement of uniforms for all of its components. While that contract was being developed, several components signed additional contracts for uniforms with vendors to ensure a continuous supply of uniform items for their officers. This included a “bridge” contract between TSA and a vendor in February 2013, which also included language referencing the Kissell Amendment and language restricting the foreign procurement of those uniforms. In September 2014, DHS entered into its current 5-year, department-wide uniforms contract that provides eight DHS components with uniform clothing items. One vendor holds this uniforms contract. DHS employs multiple procedures, according to officials, in an effort to ensure that the restriction on the procurement of foreign textiles from the Kissell Amendment was and is properly applied, including (1) a standardized procurement contract review process; (2) a requirement for all DHS components to use established department-wide contracts; (3) verification procedures to ensure the stated country of origin is correct; and (4) trainings on foreign procurement restrictions. First, the DHS official review process for all procurements helps ensure that the Kissell restriction is applied, if appropriate, to contracts for textiles and apparel, according to officials. Specifically, each procurement goes through a standardized review process that includes several levels of acquisition supervisors and DHS legal counsel, depending on the estimated dollar amount of the procurement. The DHS Acquisition Manual requires this review and approval process, which is designed to ensure compliance with all relevant federal acquisition laws, regulations, policies, and procedures. Through this process, officials evaluate the proposed contract for a number of restrictions, such as the appropriate use of a small business set-aside or a sole-source contract, which must also be reviewed by supervisors and legal departments before contract approval. According to DHS officials, while the applicability of the Kissell Amendment is part of the standard review process, there is no separate review for whether the foreign procurement restriction should be applied to the procurement. Officials also stated that the small number of contracting officers handling these textile procurements are aware of the requirements. Second, DHS now uses department-wide contracts for uniforms and body armor rather than each component entering into its own contracts for those items. Establishing and using these department-wide contracts increases efficiencies and reduces duplication in the department’s procurement processes, according to DHS documentation. According to agency officials, the establishment of a department-wide uniforms contract for use by all DHS components reduces opportunities for mistakes, including the possibility of a contracting officer issuing a contract that does not include the required restriction for a Kissell-covered item. Third, the department relies on the vendor to verify that the item is in compliance with all applicable restrictions. It is not the responsibility of the agency or department to verify the country of origin of an item procured through a contract. According to the FAR, the contracting officer may rely on the vendor’s certification of the country of origin for an end product when evaluating a foreign offer. DHS officials told us that, for each contract, the vendor is responsible for certifying the country of origin and notifying DHS if a uniform item from a previously approved country is no longer available and a replacement must be located. According to representatives from the current uniforms vendor, both its manufacturing facilities and its subcontractors have measures and internal controls in place to ensure that all items under the current uniforms contract are sourced from designated countries. Furthermore, if an item is being misrepresented, or not from the reported country of origin, other vendors in the industry could report such suspected violations to DHS and the department would investigate possible false claims. According to DHS officials, no reports have been made against the vendor for the current uniforms contract. In addition, CBP’s Textiles and Trade Agreements Division is responsible for the Textile Production Verification Team Program. Under this program, CBP deploys teams of personnel drawn from many DHS components to FTA partner countries to visit manufacturers of textiles imported into the United States. These teams review textile production and verify compliance with the terms of the FTA. CBP provided information that showed it had made numerous verification visits to factories used by DHS’s uniform vendor since October 2011. However, CBP officials said they did not know the degree to which the vendor’s imports from these factories were used to fulfill the DHS uniform contract. Fourth, DHS provided training in 2009 and in 2017 to contracting personnel who conduct textile and apparel procurements subject to the Kissell Amendment and other Buy American-like provisions to ensure that the requirements are applied appropriately. The Kissell Amendment required that the Secretary of DHS ensure that each member of DHS’s acquisition workforce “who participates personally and substantially in the acquisition of textiles on a regular basis receives training during fiscal year 2009 on the requirements” of the Kissell Amendment and the regulations implementing the amendment. The amendment further states that any training program developed after August 2009 include comprehensive information on the Kissell Amendment restriction. According to officials, appropriate DHS contracting personnel were trained on the requirements of the Kissell Amendment through a presentation to DHS’s Acquisition Policy Board in July 2009. DHS officials, however, were unable to identify the number of personnel present during this meeting or the materials associated with this training. According to DHS officials, no further training on Kissell requirements was conducted until June and July 2017, when DHS officials conducted two webinars that included approximately 570 DHS acquisition professionals on the requirements of the Kissell Amendment and its implications under the President’s Buy American and Hire American Executive Order from April 2017. Our review on the implementation of the Kissell Amendment, as well as the President’s new actions to increase opportunities for government agencies to buy American and hire American, precipitated the trainings, stated DHS officials. We observed the July 2017 training, at the invitation of DHS, and confirmed that the materials and topics covered included Kissell Amendment requirements. In practice, the Kissell Amendment affects DHS textile purchases in a limited manner due to multiple factors. For most DHS components, these factors limit the effect of the Kissell Amendment restriction to certain foreign textile procurements directly related to U.S. national security interests that fall between $150,000 and $191,000. Specifically, from October 2009 to June 2017, only 14 DHS-awarded textile contracts, excluding TSA, fell within this range, according to FPDS-NG data. TSA textile procurements, unlike most DHS components, are excluded from the coverage of most U.S. international agreements. Therefore, the Kissell Amendment restricts TSA’s procurement of certain foreign textiles above $150,000 from all but three foreign countries. According to DHS officials, the current contracts to which the Kissell Amendment applies are department-wide contracts for uniforms and body armor. As of June 2017, under the current uniforms contract, 58 percent of the value of ordered uniform items by DHS came from foreign sources. In addition, DHS officials stated that the current body armor contracts source all textile items from the United States. The number of DHS’s textile procurements that could be affected by the Kissell Amendment restriction is limited by multiple factors. The Kissell Amendment restriction applies only to those textile items that are directly related to national security interests for procurements above the $150,000 simplified acquisition threshold, and must be applied in a manner consistent with U.S. obligations under international agreements. In practice, this limits the number of procurements that could be affected by the amendment’s restriction to those of Kissell-covered items between the current simplified acquisition threshold and the current WTO GPA threshold of $191,000, a $41,000 range, for most DHS components. Furthermore, statutory and regulatory provisions generally require that government agencies acquire U.S.-made or designated country end products and services for procurements covered by the WTO GPA. For most of DHS, the procurement of certain textiles is covered by the WTO GPA. Therefore, due to these regulations, most DHS components are limited in their textile procurements at or above $191,000 to the United States or designated countries, regardless of the Kissell Amendment. However, the number of TSA contracts that could be affected by the Kissell Amendment restriction is potentially greater since procurement of textiles by TSA is not subject to statutory and regulatory provisions that affect the rest of DHS’s procurement of textiles. U.S. obligations under international agreements, as implemented by the TAA and FAR, require that offers of eligible products receive equal consideration with domestic offers. The FAR additionally specifies that agencies, “in acquisitions covered by the WTO GPA, acquire only U.S.- made or designated country end products unless offers for such end products are either not received or are insufficient to fulfill the requirements.” To be a U.S. procurement covered by the WTO GPA, the procurement must (1) be performed by a covered government entity; (2) be for a covered item; and (3) be at or above the WTO GPA threshold, which is currently $191,000. Other international trade agreements have their own thresholds currently ranging from $25,000 to $191,000. Figure 3 outlines the various key procurement thresholds that may affect the designated and non-designated countries from which DHS could source textiles with respect to the Kissell Amendment. Most of these dollar thresholds are subject to revision approximately every 2 years. Due to the multiple factors that affect DHS’s textile procurements, most of DHS’s components may source eligible textiles from up to 128 designated countries outside the United States in procurements at or above $191,000 (see fig. 4). This is because most DHS components’ textile procurements are considered covered items under the WTO GPA. Therefore, most DHS components’ foreign textile procurements that either meet or exceed the current $191,000 threshold are restricted to designated countries regardless of the Kissell Amendment, due to the FAR. These designated countries include WTO GPA countries, Free Trade Agreement countries, least developed countries, and Caribbean Basin countries. As noted above, multiple factors influence DHS’s procurement of textiles and the number of contracts that could be affected by the Kissell Amendment restriction. Based on our analysis of contract data from FPDS-NG, from October 2009 to June 2017, DHS awarded 111 textile contracts above the simplified acquisition threshold. Of the 111 contracts, only 14 DHS textile contracts, excluding TSA, were valued between the simplified acquisition threshold and $191,000, the current threshold for coverage under the WTO GPA. In part, because FPDS-NG does not designate whether or not a contract is directly related to the national security interests of the United States, we could not determine whether these contracts were subject to the provisions of the Kissell Amendment. According to DHS officials, the only current contracts considered directly related to U.S. national security and therefore subject to the Kissell Amendment are for uniforms and body armor. The Kissell Amendment includes additional language regarding the use of any availability exception and states that any availability exception issued by DHS shall be publically posted on a government procurement internet site within 7 days of the contract. However, according to agency officials, since the passage of the Kissell Amendment, DHS has not issued any waivers for availability exceptions and has therefore been limited to procuring certain textile items from the United States and designated countries identified in the FAR. The Kissell Amendment restriction affects TSA textile procurements differently than other DHS components. As implemented, the Kissell Amendment restricts TSA’s procurement of certain textiles above $150,000 to the United States, Canada, Mexico, and Chile. TSA’s procurement of textiles is different because it is not included in the U.S. coverage schedules of the WTO GPA and all U.S. free trade agreements, with the exception of the North American Free Trade Agreement and the U.S.-Chile Free Trade Agreement. According to USTR officials, some of TSA’s security functions were originally held by the Federal Aviation Administration (FAA), which is not subject to the FAR. Furthermore, TSA was also not subject to the FAR prior to 2008, until Congress passed legislation removing the requirement that TSA procurements be subject to the acquisition management system established by the administrator of the FAA. Those circumstances resulted in TSA’s exclusion from the WTO GPA for textiles and most other international trade agreements, according to USTR officials. Figure 5 illustrates when the Kissell Amendment could affect TSA procurements and the applicability of international trade agreements. Based on our analysis of FPDS-NG data, from October 2009 to June 2017, TSA entered into 13 textile contracts above the simplified acquisition threshold. From October 2014 to June 2017, 58 percent of the value of uniform items ordered by DHS came from outside the United States. In September 2014, DHS entered into its current department-wide uniforms contract, the largest value textile contract since the passage of the Kissell Amendment in 2009. In the request for proposals, DHS included a clause detailing the Kissell restriction on the purchase of foreign items in the uniforms contract documentation. As implemented, when combined with the purchasing restriction in the TAA, the clause in the Kissell Amendment that states the act shall be applied consistent with U.S. obligations under international agreements allows the uniforms contract vendor to source items from up to 128 designated countries. In the request for proposal for the current uniforms contract, DHS components included a list of over 900 uniform items including shirts, pants, shoes, and insignias. The vendor that was awarded the contract then reported the cost and expected country of origin for each item, which DHS approved. Table 1 shows the estimated cost and quantity of items estimated to be procured under the contract for components that primarily have a national security function. After the uniform contract was entered into by DHS in September 2014, DHS components began ordering uniform items under the contract. In addition to more than 900 types of uniform items that were agreed upon at the initiation of the contract, DHS components issued contract modifications to add or remove uniform items from the approved list. Common types of items expected to be ordered included uniform shirts, pants, socks, and shoes that met DHS component specifications. From October 2014 to June 2017, $164.6 million in uniform items was ordered by DHS components that primarily have a national security function. Of that amount, 58 percent, or $96 million, in uniform items ordered by DHS came from a reported 12 countries outside the United States. The remaining 42 percent, or $69 million, in uniform items was reported as originating in the United States. By value, Mexico, the largest source of uniform items from outside of the United States, accounted for 30 percent of the ordered uniform items. In addition, 8 percent of the value of uniform items was sourced from least developed countries, including Cambodia (5 percent) and Bangladesh (2 percent). Figure 6 illustrates the percentage value of DHS procurement of uniform items by reported country of origin for the current contract by components that primarily have a national security function. Based on our analysis of the vendor’s ordering data, the majority of the value of uniform items ordered by all five components were sourced from outside the United States. In addition, a larger value of the uniform items ordered by three of the five components were sourced from Mexico than from any other country, including the United States. Table 2 shows the total value of the uniform ordering data for the five DHS components that primarily have a national security function under the current uniforms contract. From October 2014 through June 2017, CBP ordered approximately $101.1 million in uniform items under the contract, and TSA ordered approximately $53.5 million. CBP and TSA accounted for the majority of the dollar value of uniform orders from October 2014 through June 2017, representing 94 percent of the value of uniform items ordered by DHS components that primarily have a national security function under the contract. Specifically, 32 percent of the value of TSA ordered uniform items were from the United States, with the other 68 percent sourced from Mexico. As mentioned above, the Kissell Amendment, as implemented, restricts TSA’s foreign procurement of certain textiles above $150,000 to Canada, Mexico, and Chile. According to DHS officials and representatives of the current uniforms vendor, both the price of the uniform items and the time it would take to find appropriate U.S. sources could potentially increase if current statutory and trade agreements requirements changed and DHS was required to source all of its uniform items from the United States. According to the FAR, it is the responsibility of agencies to obtain the best value for the U.S. government. According to DHS officials, the best value may be sourced from foreign countries, especially when the country is a party to an international trade agreement with the United States. DHS officials and representatives of the vendor stated that it would be possible to source most of the items in the current uniforms contract from the United States. However, representatives of the vendor speculated that sourcing only from the United States could result in a 50 to 150 percent price increase for items that are currently sourced from foreign countries. Therefore, DHS costs could increase for over half of the uniform items currently procured from foreign sources. Additionally, DHS officials stated that the domestic availability of some items, such as footwear, is limited and that it could take approximately 2 years to find U.S. suppliers for all items currently procured from foreign sources. The second largest current textile contract is the department-wide contract for body armor. Effective November 1, 2016, the department- wide contract for body armor is not to exceed $93.8 million. As of June 2017, DHS had obligated $6.8 million under these body armor contracts. DHS did not provide GAO documentary evidence that the body armor is produced in the United States. However, according to DHS officials, textile items under the current body armor contracts are produced in the United States. According to DHS officials, to verify that materials are produced in the United States, DHS visited the site where these materials are produced and assembled in the United States. In addition, the contract contains specific language restricting the vendor from procuring items that are not in compliance with the Kissell Amendment. We provided a draft of this report for review and comment to DHS and USTR. DHS did not provide written comments on the draft report but provided a number of technical comments that we incorporated as appropriate. USTR did not provide written or technical comments to the draft report. We are sending copies of this report to the appropriate congressional committees, to the Secretary of Homeland Security, the U.S. Trade Representative, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. A Senate Report accompanying Senate Bill 1619, a bill related to the Consolidated Appropriations Act, 2016, includes a provision for us to review the Department of Homeland Security’s (DHS) implementation and compliance with the Kissell Amendment, as well as the effectiveness of the policy. This report examines the extent to which (1) DHS has incorporated the Kissell Amendment into its procurement policies and procedures and (2) the Kissell Amendment affects DHS’s procurement of textiles. To address these objectives, we reviewed relevant laws and policies, such as Section 604 of the American Recovery and Reinvestment Act of 2009 (the “Kissell Amendment”), the Trade Agreements Act of 1979 (TAA) as amended, the Federal Acquisition Regulations (FAR), Homeland Security Acquisition Regulations (HSAR), and the DHS Acquisition Manual, as well as select U.S. free trade agreements. We interviewed officials from DHS and the office of the U.S. Trade Representative (USTR). We also interviewed officials from the U.S. textile and apparel industry, including the National Council of Textile Organizations and the American Apparel and Footwear Association. Finally, we spoke with officials from the vendor for DHS’s current department-wide uniforms contract, VF Imagewear. To determine the extent to which DHS incorporated the Kissell Amendment into its procurement policies and procedures, we reviewed relevant DHS documents and policies, including the HSAR, interim and final rules on the implementation of the Kissell Amendment, and component-level procurement guidance. We also interviewed officials from DHS’s Office of the Chief Procurement Officer and from the components in DHS that have their own contracting authority, including U.S. Customs and Border Protection (CBP), Federal Emergency Management Agency (FEMA), U.S. Immigration and Customs Enforcement (ICE), Transportation Security Administration (TSA), U.S. Coast Guard, and U.S. Secret Service. To analyze whether or not language indicating the restriction on the procurement of foreign textiles from the Kissell Amendment was included in DHS and component level contracts, we reviewed contract files for 11 available uniforms and body armor contracts entered into since August 16, 2009, the date the Kissell Amendment became effective. We reviewed contract files from DHS uniform and body armor contracts because these are the only DHS textile contracts that are directly related to U.S. national security and therefore subject to the Kissell Amendment, according to DHS officials. We identified these uniforms and body armor contracts through reviews of Federal Procurement Data System–Next Generation (FPDS-NG) data for DHS and components contracts in groups 83 and 84 since August 16, 2009, and through discussions with CBP, DHS, and TSA officials. We were not, however, able to review every uniforms contract all DHS components have entered into since August 16, 2009, because, for example, some of the contract files were no longer available, consistent with federal document retention policies, according to DHS officials. The results of our reviews of selected contracts are not generalizable to all DHS textile contracts entered into since August 16, 2009. To determine the extent to which the Kissell Amendment affects DHS’s procurement of textiles, we reviewed relevant government regulations and laws, U.S. international agreements, DHS contract files, and ordering data for the largest textile contract since the effective date of the Kissell Amendment. We reviewed the FAR to evaluate which international agreements are applicable to DHS textile procurements, the thresholds for each international trade agreement, and the countries from which DHS may procure certain textiles. We reviewed the U.S. central government coverage schedule of the World Trade Organization (WTO) Government Procurement Agreement (GPA) to determine which procurements by DHS component are covered by the WTO GPA and therefore subject to the purchasing restriction in the TAA, as implemented in the FAR. To identify the dollar range for textile contracts that could be affected by the Kissell Amendment, we reviewed the Kissell Amendment and the relevant provisions of the FAR. We also interviewed USTR officials and DHS officials from the Office of the Chief Procurement Officer, CBP, and TSA to understand how international trade agreements affect DHS’s textile procurement under the Kissell Amendment. We reviewed award and obligation data from the FPDS-NG to identify the number of textile contracts awarded by DHS components and delivery orders through the General Services Administration’s Federal Supply Schedules program above the simplified acquisition threshold and those that could be affected by the Kissell Amendment. To assess the reliability of procurement data from FPDS-NG, we reviewed relevant documentation and performed verification through electronic testing. We determined the data to be sufficiently reliable for the purposes of this report. To evaluate DHS’s procurement of uniform items from the United States versus foreign sources, we reviewed the ordering estimates, which were provided as an attachment to DHS’s request for proposals for the current uniforms contract, and ordering data provided by the vendor for the current uniforms contract. The current uniform and body armor contracts are the only two active contracts to which the Kissell Amendment applies, according to DHS officials. For the purposes of ordering data and estimates, we did not review previous contracts. In addition, since all body armor items are sourced from the United States, we focused our ordering analysis on the current uniforms contract. Because we did not evaluate ordering data for previous DHS uniforms contracts, these values cannot be extrapolated to all DHS uniforms contracts. To calculate the ordering estimates for the current uniforms contract, we analyzed data created by DHS and the uniform vendor during the development phase of the contract. To focus on the DHS components that primarily have a national security function under the current uniforms contract, we analyzed ordering estimates to identify the number of uniform items that DHS components reported as being directly related to national security. Under the current uniforms contract estimates, CBP, ICE, National Protection and Programs Directorate (NPPD), TSA, and U.S. Secret Service are the five DHS components that reported the majority of uniform items as being directly related to national security. As a result, we included these five DHS components in our analysis of the ordering estimates under the current uniforms contract. We did not include FEMA or Federal Law Enforcement Training Center (FLETC) in our analysis because FEMA did not list any uniform items as related to national security and FLETC identified only one item out of 88 as related to national security. We also did not include ordering estimates from the Food and Drug Administration, which is a party to the contract but is not a DHS component. In addition, the U.S. Coast Guard did not provide ordering estimates since it was not included in the original proposal for the current uniforms contract. For each of the identified DHS components that reported the majority of uniform items as directly related to national security, we analyzed the estimated data based on description, the estimated quantity, the unit price, and the country of origin. While we did not analyze the value of any contract modifications that added or removed uniform items from the contract, we did review select modifications and found that contract modifications were generally consistent with the original contract estimates for that non-generalizable sample. To obtain insights into the countries of origin in the modifications, we reviewed a small, non- generalizable sample of 10 modifications. We concluded that the breakdown between domestic and foreign sourced items for the items added through the modifications was generally consistent with the breakdown between domestic and foreign sourced items in the original contracts’ estimates. To determine the reasonableness of the processes by which DHS and its vendors generated these estimates, we interviewed knowledgeable officials, reviewed documents submitted by the vendor, and performed data reliability testing. DHS officials told us that they had provided the contractor with detailed lists of the textile items it required, and the vendor reported that they determined the prices and countries of origin based on prevailing market conditions. DHS officials then reviewed the estimates provided by the vendor and approved the items, price, and country of origin under the contract. DHS officials and the vendor informed us that because these estimates reflected market conditions when the contract was signed, actual purchases of items might be from countries other than those listed in the contract, depending on changes in those conditions and availability of the items. We determined these estimates were sufficiently reliable to represent DHS’s intended purchases of textile products by country of origin under this contract. To analyze the orders of uniform items, we relied on ordering data provided by the vendor for the current uniform contract. We reviewed uniform ordering data for the five DHS components that reported the majority of uniform items as being directly related to national security: CBP, ICE, NPPD, TSA, and the U.S. Secret Service. The uniform ordering data included items ordered by individual DHS employees through an allowance system and by DHS components through bulk orders. We did not include the U.S. Coast Guard in our analysis since it primarily orders U.S.-made uniform items through the Department of Defense’s Defense Logistics Agency, according to Coast Guard officials. We analyzed the value of uniform items procured from the United States and foreign sources based on the reported country of origin and component from October 2014 to June 2017. To assess the reliability of the ordering data provided by the vendor, we reviewed the data for inconsistencies. We clarified with the vendor the relevant data sets for our analysis and any discrepancies we identified in the data. DHS relies on the vendor to provide the countries of origin, and it was beyond the scope of this engagement for us to verify the vendor provided country of origin. We determined that the ordering data were sufficiently reliable for the purposes of comparing orders to estimates by countries of origin for uniforms under the contract, and presenting details about purchases from the United States versus other countries of origin. The result of our analysis is limited to the current department-wide uniforms contract with DHS and cannot be extrapolated to other DHS textile contracts. For the body armor contracts, we relied on FPDS-NG data for the obligations under the current and previous contracts. We also interviewed DHS officials who identified the country of origin of the items purchased under the current body armor contracts; it was beyond the scope of this engagement to verify the agency-provided country of origin. To assess the reliability of the obligations data from FPDS-NG, we reviewed relevant documentation performed verification through electronic testing. We determined the data to be sufficiently reliable for the purposes of this report. We conducted this performance audit from January 2017 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual mentioned above, Adam Cowles (Assistant Director), Christopher J. Mulkins (Analyst-in-Charge), Martin Wilson, Lynn Cothern, Martin de Alteriis, Neil Doherty, Grace Lui, and Julia Kennon made key contributions to this report.", "summary": "The U.S. textile industry sustained significant losses when textile production fell from $71 billion in 2006 to $46 billion in 2009, according to the U.S. Bureau of Economic Analysis. As a part of the American Recovery and Reinvestment Act of 2009, Congress passed the Kissell Amendment, which placed a restriction on DHS's procurement of certain textiles from foreign sources. DHS has applied this restriction to uniforms and body armor. The amendment was intended to increase opportunities for American textile and apparel manufacturers, according to the Senate Committee on Appropriations. The Senate report that accompanied Senate Bill 1619, a bill related to the Consolidated Appropriations Act, 2016, includes a provision for GAO to review DHS's implementation of the Kissell Amendment and its effectiveness. This report addresses the extent to which (1) DHS has incorporated the Kissell Amendment into its procurement policies and procedures and (2) the Kissell Amendment affects DHS's procurement of textiles. To perform this work, GAO analyzed DHS policies and procedures, procurement obligations data, textile contract files, and vendor ordering data from DHS's current uniforms contract. GAO also interviewed DHS and U.S. Trade Representative officials and private sector representatives, including the vendor for the current DHS uniforms contract. GAO received technical comments from DHS, which GAO incorporated as appropriate. The U.S. Department of Homeland Security (DHS) has updated its policies and procedures to incorporate a restriction on its procurement of certain textiles as specified in the “Kissell Amendment.” In August 2009, DHS amended its procurement policies to reflect the Kissell Amendment restriction and describe the limitations on DHS's procurement of specified textiles from sources outside the United States. All 11 contracts GAO reviewed for uniforms and body armor entered into by a DHS component since August 2009 included language regarding the Kissell Amendment restriction. In addition, according to officials, DHS has several procedures to ensure that contracting officers adhere to the requirements of the Kissell Amendment. These include a required acquisition review process; a requirement for all DHS components to use department-wide contracts; verification procedures; and training for contracting personnel on the Kissell Amendment restriction. In practice, the Kissell Amendment restriction affects a limited number of procurements due to multiple factors and has not fully restricted DHS from purchasing textiles from foreign sources. The restriction applies only to certain textile purchases directly related to U.S. national security interests above the simplified acquisition threshold of $150,000, and must be applied consistent with U.S. obligations under international agreements. For most of DHS, this restriction limits only procurements that fall between $150,000 and $191,000, the World Trade Organization Government Procurement Agreement threshold. However, because procurements by the Transportation Security Administration (TSA) of textiles are excluded from most international agreements, the Kissell Amendment prevents TSA's purchasing of certain textiles above $150,000 from all but three foreign countries. In September 2014, DHS signed a uniforms contract, the largest procurement covered by the Kissell Amendment. Under this contract, DHS has ordered 58 percent of the $164.6 million in uniform items from foreign sources through June 2017 (see figure).", "document_type": "gao"}
{"report": "Our report noted that IRS has established organizational structures essential to supporting its taxpayer authentication efforts. Specifically, IRS created an Identity Assurance Office (IAO) in 2015 to work with stakeholders across IRS to review and assess the agency’s various authentication programs and efforts. In 2016, IAO led an effort that identified over 100 interactions between IRS and taxpayers that require authentication and categorized these interactions based on potential risks to the agency and taxpayers. Further, in December 2016, IAO released its Roadmap for developing a modern and secure authentication environment for all taxpayers regardless of how they interact with IRS— online, over the telephone, in person, or via correspondence. We also found that IRS is working to address its authentication challenges by collaborating with industry members and state partners via the Security Summit. The Security Summit was established in 2015 as an ongoing effort between industry experts from tax software companies, paid preparers, financial institutions, and states to improve information sharing and fraud detection and to address common IDT challenges. The Security Summit’s authentication workgroup leads several initiatives aimed at verifying the authenticity of the taxpayer and the tax return at the time of filing. One initiative involves analyzing data elements—such as trusted customer requirements and other characteristics of the return— that are collected during the tax return preparation and electronic filing process. In addition, in 2016 the authentication workgroup recommended improved account password standards to help protect taxpayers’ accounts from being taken over by criminals. Overall, we found that officials—representing IRS, industry, and states— expressed positive views about the level of commitment and cooperation guiding the group’s authentication efforts. Officials with whom we spoke stated that they are dedicated to continuing to address authentication issues collaboratively because they have a mutual interest in improving authentication to reduce tax refund fraud. In its Roadmap, IRS outlined six core authentication objectives, 10 high- level strategic efforts, and 14 foundational initiatives to help it address authentication challenges and identify opportunities for future investment. While we found that IRS has made progress on some efforts identified in its Roadmap, it has not prioritized the initiatives supporting its strategy nor identified the resources required to complete them, consistent with program management leading practices. For example, one of IRS’s foundational initiatives is to send event-driven notifications to taxpayers, such as when they file a return or request a tax transcript. Such notifications could help IRS and taxpayers detect potentially fraudulent activity at the earliest stage and help improve authentication of tax returns. The Roadmap identifies seven supporting activities for this foundational initiative. One is to provide taxpayers with greater control over their online accounts. Another supporting activity is to determine methods for sending notifications to taxpayers about activity on their account. However, IRS has not identified the resources required to complete these activities, and the Roadmap notes that six of the seven activities will take between 6 months to 3 years to complete. In December 2017, IRS officials stated that they had developed business requirements for the foundational initiative to give taxpayers greater control over their online accounts. However, IRS has not identified funding for the initiative’s other supporting activities—such as developing requirements to send push notifications to taxpayers—and implementation will depend on the availability of future resources. In December 2017, IRS officials stated that each of the strategic efforts and foundational initiatives identified in the Roadmap are a high priority, and they are working to address them concurrently while balancing the availability of resources against the greatest threats to the tax environment. As noted in our report, we recognize that a strategy is necessarily high-level and that IRS must remain flexible and use available resources to respond to unexpected threats. Identifying resources and prioritizing activities in its Roadmap will help IRS clarify tradeoffs between costs, benefits, and risks and aid in decision making. Further, such efforts may also help IRS establish clearer timelines and better respond to unexpected events. As such, we recommended that IRS estimate the resources (i.e., financial and human) required for the foundational initiatives and supporting activities identified in its Roadmap and prioritize its foundational initiatives. IRS agreed with our recommendations and is currently working to finalize its overall authentication approach. Given the widespread availability of personally identifiable information that fraudsters can use to perpetrate tax fraud, it is essential for IRS to further strengthen taxpayer authentication to stay ahead of fraudsters’ schemes. In our report, we identified two additional areas that IRS must address to better position the agency and protect taxpayers against future threats. First, we found that IRS has taken preliminary steps to implement NIST’s June 2017 guidance for secure online authentication, however it had not yet established detailed plans, including timelines, milestone dates, and resource needs to fully implement it. Among other things, NIST’s new guidance directs agencies to assess the risk for each component of identity assurance—identity proofing, authentication, and federation— rather than conducting a single risk assessment for the entire process. According to NIST officials, this approach gives agencies flexibility in choosing technical solutions; aligns with existing, standards-based market offerings; is modular and cost-effective; and enhances individual privacy. In short, following NIST’s new guidance will help provide IRS with better risk-based assurance that the person trying to access IRS’s online services is who they claim to be. As noted in our report, IRS has taken preliminary steps to implement the new NIST guidance. These efforts include forming a task force to guide IRS’s implementation of NIST guidance and working with the Security Summit to develop an implementation framework for state and industry partners. IRS has also begun analyzing gaps between IRS’s current authentication procedures and the new guidance. In addition, in December 2017, IRS implemented a more secure online authentication option consistent with the new guidance through its mobile application, IRS2Go. After taxpayers link their IRS online account with the mobile app, they can use it to generate a security code to log into their account. This option provides taxpayers with an alternative to receiving the security code via a text message, which NIST considers to be less secure. We recommended that IRS develop a plan—including a timeline, milestone dates, and resources needed—for implementing changes to its online authentication programs consistent with new NIST guidance, and also implement these improvements. IRS agreed with our recommendations, but noted that its ability to complete these efforts will depend on the availability of resources. Second, we found that IRS lacks a comprehensive, repeatable process to identify and evaluate potential new authentication technologies and approaches. Our discussions with representatives from industry and financial institutions and with government officials indicate that there is no single, ideal online authentication solution that will solve IRS’s challenges related to IDT refund fraud. These representatives advocate an approach to authentication that relies on multiple strategies and sources of information, while giving taxpayers options for further protecting their information. We identified several authentication options in our report that IRS could consider, including the following: Possession-based authentication. This type of authentication offers users a convenient, added layer of security when used as a second factor for accessing websites or systems that would otherwise rely on a username and password for single-factor authentication. For example, as noted in our report, according to an industry official, authentication using a trusted device or “security key” based on Universal Second Factor standards complies with NIST’s new guidance for digital authentication. While IRS is not likely to provide the devices to taxpayers, it could enable its systems to accept these trusted devices as authenticators for taxpayers who elect to use them. Working with trusted partners. IRS could partner with organizations it trusts that are accessible to taxpayers and enable the partners to identity-proof and authenticate taxpayers. Trusted partners could include tax preparers, financial institutions, or other federal or state agencies. In the course of our work, IRS officials stated that they had been exploring such options with both the Social Security Administration and the U.S. Postal Service; however, at the time of our report, the agencies had not yet made decisions about next steps. Expanding existing IRS services to further protect taxpayers. IRS could expand the functionality of its online account to further protect taxpayers from IDT refund fraud. For example, IRS could develop additional functionality that allows the taxpayer to designate a bank account or a preference for a paper check for receiving a tax refund. If a fraudster filed a return with different information, the return would be automatically rejected. IRS officials told us the agency continually researches new identity assurance processes and technologies and has talked with other agencies, industry groups, and vendors to better understand how particular technology solutions could apply to IRS’s environment. However, during the course of our work, IRS could not provide us evidence of a repeatable, comprehensive process to identify and evaluate available authentication technologies and services. Such a process could compare options for in-house authentication solutions with off-the-shelf solutions based on estimates of cost, schedule, and benefits, as applicable. To this end, we recommended that IRS develop a process to identify and evaluate alternative options for improving taxpayer authentication, including technologies in use by industry, states, or other trusted partners; and based on this approach, include and prioritize these options, as appropriate, in its Roadmap. IRS agreed with these recommendations, but did not provide additional details on how it plans to address them. In conclusion, IRS’s authentication environment is one component of a broad, complex information technology infrastructure, and we have previously reported on the many challenges the agency faces as it modernizes its tax systems. Taxpayer authentication has become more difficult with the wide availability of personally identifiable information and fraudsters’ ability to develop more complex and sophisticated methods to commit fraud undetected. Addressing the issues we describe above could better position IRS to identify and mitigate vulnerabilities in its authentication efforts and better protect taxpayers and the Treasury. Chairman Jenkins, Ranking Member Lewis, and members of the Subcommittee, this concludes my prepared remarks. I look forward to answering any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact James R. McTigue, Jr. at (202) 512-9110 or mctiguej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this testimony include Neil Pinney, Assistant Director; Heather A. Collins, Analyst-in-Charge; Dawn Bidne; and Bryan Sakakeeny. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's June 2018 report, entitled Identity Theft: IRS Needs to Strengthen Taxpayer Authentication Efforts ( GAO-18-418 ). The Internal Revenue Service (IRS) has identified over 100 interactions requiring taxpayer authentication based on potential risks to IRS and individuals. IRS authenticates millions of taxpayers each year via telephone, online, in person, and correspondence to ensure that it is interacting with legitimate taxpayers. IRS's estimated costs to authenticate taxpayers vary by channel. IRS has made progress on monitoring and improving authentication, including developing an authentication strategy with high-level strategic efforts. However, it has not prioritized the initiatives supporting its strategy nor identified the resources required to complete them, consistent with program management leading practices. Doing so would help IRS clarify relationships between its authentication efforts and articulate resource needs relative to expected benefits. Further, while IRS regularly assesses risks to and monitors its online authentication applications, it has not established equally rigorous internal controls for its telephone, in-person, and correspondence channels, including mechanisms to collect reliable, useful data to monitor authentication outcomes. As a result, IRS may not identify current or emerging threats to the tax system. IRS can further strengthen authentication to stay ahead of fraudsters. While IRS has taken preliminary steps to implement National Institute of Standards and Technology's (NIST) new guidance for secure digital authentication, it does not have clear plans and timelines to fully implement it by June 2018, as required by the Office of Management and Budget. As a result, IRS may not be positioned to address its most vulnerable authentication areas in a timely manner. Further, IRS lacks a comprehensive process to evaluate potential new authentication technologies. Industry representatives, financial institutions, and government officials told GAO that the best authentication approach relies on multiple strategies and sources of information, while giving taxpayers options for actively protecting their identity. Evaluating alternatives for taxpayer authentication will help IRS avoid missing opportunities for improving authentication.", "document_type": "gao"}
{"report": "The Capital Financing Program provides loans to eligible HBCUs for the repair, renovation, construction, or acquisition of capital projects or to refinance existing capital debt. Several offices at Education are involved in administering the program, including the Office of Postsecondary Education and the budget office, with one official responsible for overall program management. Education contracts with a designated bonding authority to manage the program’s operations. The authorizing legislation also establishes the HBCU Capital Financing Advisory Board (Advisory Board) to provide advice to Education and its designated bonding authority on implementing the program. (See table 1.) The loan process for an HBCU to participate in the Capital Financing Program consists of multiple steps. HBCUs must first complete a preliminary application with the designated bonding authority that includes information such as enrollment, financial data—including a description of existing debt—and proposed capital projects. The designated bonding authority reviews this information to assess the ability of an HBCU to take on debt and determine whether the college should formally complete an application. The application includes more detailed financial information, such as audited financial statements, as well as capital improvement plans and assessments. To be approved for the loan, an HBCU must satisfy certain credit criteria and have qualified projects. Upon reviewing the college’s application, designated bonding authority representatives may visit the HBCU and will recommend to Education whether the college should receive a Capital Financing Program loan. If Education agrees and approves the loan, it goes through a closing process during which certain terms and conditions of the loan may be negotiated. (See table 2.) The Capital Financing Program’s statute caps total outstanding loans at $1.1 billion, but since fiscal year 2012, Congress has annually passed appropriation bills allowing Education to lend above that amount. As of November 2017, Education has lent over $2 billion in total with $1.8 billion outstanding. In 2005, Hurricanes Katrina and Rita struck New Orleans and surrounding areas, resulting in significant damage to four HBCUs in the Gulf Coast region: Dillard University, Southern University at New Orleans, Xavier University of Louisiana, and Tougaloo College. The Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006 (Emergency Act) was enacted in June 2006, in part to assist these colleges in their recovery efforts. The Emergency Act amended certain provisions of the Capital Financing Program for these colleges. For example, the Emergency Act included provisions such as a lower interest rate and lower fees for cost of issuance (both set at one percent or less), elimination of the escrow requirement, and deferment of both principal and interest payments for a 3-year period. Despite these more generous loan provisions, these four HBCUs experienced challenges repaying these loans due to difficulties they faced rebuilding their enrollment and finances to the levels before the hurricanes. In 2011, federal law authorized Education to further modify the terms and conditions of the Capital Financing Program loans made to these four HBCUs under the Emergency Act. To assist these four colleges, Education used this authority to modify Emergency Act loan terms in the following ways: Payment forbearance: The HBCUs were granted a 5-year forbearance on their loan payments starting in 2013. During the forbearance period, the colleges were not responsible for making payments toward the principal, interest, or associated fees, but interest and fees continued to accrue during that time. At the end of the forbearance period, the colleges would be responsible for the outstanding principal, accrued interest, and fees. Expense-based repayment: After the forbearance period, colleges would pay the lesser of an amount based on a percentage of each college’s operating expenses or the reamortized payment schedule. Debt adjustment: Any unpaid loan amounts at the original loan maturity date—June 1, 2037—would be forgiven. The HBCUs would not be held responsible for any unpaid balances as of that date. In February 2018, before the end of the forbearance period, Congress passed the Bipartisan Budget Act of 2018 which authorized the Secretary of Education to forgive any outstanding balance owed by these HBCUs. In March 2018, Education forgave these colleges’ loans, eliminating over $300 million of outstanding debt. Education also administers the Strengthening HBCU Program to eligible HBCUs. These grants can be used for a number of purposes, including physical infrastructure, financial management, academic resources, and endowment-building. The program is non-competitive and Education awards funds on a 5-year cycle through formula-based grants. In 2017, Education awarded 98 new grants totaling about $245 million. Municipal bonds are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects. Municipal borrowers can also issue bonds on behalf of private entities such as private colleges, or those colleges can issue their own debt that would not be tax exempt. To issue a bond, entities are typically rated by a credit rating agency. This rating indicates the credit quality of the bonds and likelihood of default. The entity may hire municipal advisors and is required to have an underwriter to prepare and sell the bonds to investors. Entities are provided the funding up front to finance the project and then pay the principal, interest, and any fees to investors until the bond matures, often up to 30 years. Almost all the HBCUs responding to our survey (70 of 79) reported that, on average, 46 percent of their building space needed to be repaired or replaced. For example, of the 35 public HBCUs that responded to our survey question on building condition, 8 reported more than three- quarters of their building space is in need of repair or replacement. Like all institutions of higher education, HBCUs are facing increasing capital project needs due to aging campus facilities, according to higher education organization officials and facilities experts. HBCUs’ planning documents we reviewed also support our survey findings around capital project needs. For example, consultants hired by one public HBCU found that a quarter of its buildings were in poor condition with the potential for demolition, according to the college’s master plan. Severe weather was also cited as a challenge by officials at another public HBCU we visited where nearly all their building space had been damaged, requiring them to shut down portions of their functional buildings, construct new buildings, and build flood walls. According to officials from this college, however, damages remain unaddressed in part due to a lack of funding (see fig. 1) Through our survey, site visits, and review of master plans, we identified three main reasons for capital project needs: a backlog of deferred maintenance, HBCUs’ efforts to modernize campuses to be more competitive, and historical building requirements. A majority of HBCUs responding to a survey question on planned capital projects over the next 5 to 10 years reported plans to prioritize repairing or replacing academic buildings or residence halls (see fig.2). Half of HBCUs that responded to our survey question on their current deferred maintenance backlog (24 of 48)—repairs that were not performed when they should have been—reported a backlog of $19 million or more. In addition, 30 HBCUs reported in our survey that their deferred maintenance backlog had increased in the last 3 years (2015 through 2017), and 7 HBCUs reported their backlog decreased. Public HBCUs, on average, reported deferred maintenance backlogs of $67 million and private HBCUs of $17 million. To better understand deferred maintenance, colleges hire consultants to conduct facilities condition assessments. For example, consultants conducted a facility condition assessment to understand a public HBCU’s deferred maintenance backlog, among other things, and found the backlog was $9.7 million for various repair or replacement projects ranging from repairing HVAC systems to needing a new roof for an administrative building. A higher education association reported deferred maintenance can erode safe physical conditions, financial health, and the morale of an institution. Officials from most HBCUs we interviewed (11 of 15) said they attempt to prioritize their deferred maintenance but that financial emergencies or funding constraints prevent them from doing so. For example, officials at an HBCU we visited said that the main pipes that feed into three residence halls and their student center burst, and this unplanned capital project cost the college nearly $1 million. This HBCU had to borrow funding from its operating budget, which took away from funds that could have been used to address planned deferred maintenance projects. Officials from all 15 HBCUs we interviewed said that student interests in updated residence halls or academic programs require modern building spaces in order for a college to remain competitive. Officials from several HBCUs we interviewed (7 of 15) said residence halls on their campuses are outdated or in need of repairs (see fig. 3). For example, officials at one HBCU we visited said some of their residence halls were built in the 1960s and 1970s and the concrete block construction only allowed minimal changes. Officials at some HBCUs (3 of 15) said students’ interest in living on-campus increased their need for housing. Officials at one HBCU said student enrollment impacts their capital project planning and that they have plans to repair residence halls and to build new housing facilities as enrollment increases, but have not yet identified funding. One HBCU’s master plan cited anticipated growth in its student population between 2014 and 2024 will continue to impact capital project needs, including a need for additional buildings for academics and student services. Officials from several HBCUs we interviewed (5 of 15) also reported building new facilities to remain competitive in certain academic fields. For example, officials from one HBCU reported investments in building new facilities and repairing existing buildings to better accommodate Science, Technology, Engineering and Mathematics (STEM) majors (see fig. 4). Most HBCUs responding to our survey (42 of 79) reported having buildings designated as historic, making up, on average 11 percent of their building space. Many of those HBCUs indicated historical building needs are significant or often take priority. According to officials from two HBCUs we visited and another we interviewed, historical buildings require maintenance that can be expensive, especially for buildings designated as historic by the National Register of Historic Places. Further, the Department of the Interior reported in 2018 that HBCUs have historic building rehabilitation needs and these colleges lack the resources to repair them. For instance, a 2016 master plan for a public HBCU shows that a historic building constructed in 1916, which serves as a residence hall and has only been updated once in 1971, needs over $6 million in repairs to better accommodate students. An official at another HBCU we visited also said that the prohibitive cost of repairing the campus’ historic building has made it non-functional. This historic building had previously been used as a residence hall (see fig. 5). HBCUs primarily rely on a few sources of funding to address capital project needs, such as state grants and appropriations for public HBCUs and private giving and tuition and fees for private HBCUs, according to HBCUs responding to our survey and our interviews. Officials from almost half of the HBCUs we interviewed (7 of 15) said relying on a few funding sources can affect a college’s ability to fund capital projects. Education officials and several stakeholders also said this reliance can put the HBCUs at a financial disadvantage when seeking additional external funding, such as from the bond market. Diversity of revenues is a key metric when determining a college’s credit rating, which uses a college’s financial profile to assess its ability to pay its financial obligations. Colleges with lower credit ratings, for example, may face challenges accessing the bond market, or pay more to issue a bond, according to several stakeholders. Using IPEDS data from the 2015-16 school year, we found that HBCUs may face challenges with revenue diversity because a large proportion of their revenue is from government funding (federal, state, and local) and tuition and fees. A college’s wealth, such as the size of its endowment, can also affect a college’s credit rating, according to officials from two credit rating agencies. Officials from a higher education association and a foundation noted that many HBCUs have small endowments and as a result may face challenges accessing financing. Our analysis of IPEDs data shows that HBCUs’ median endowments are about half the size of similar non-HBCUs (see table 3). Not all HBCUs face these challenges, however. According to a representative of one higher education facilities association, some more affluent private HBCUs have more diversified revenue streams and have successfully raised funds from private giving and public-private partnerships to address their capital project needs. Nevertheless, many HBCUs face continued challenges securing external funding. Public HBCUs generally rely on state funding—such as annual appropriations for repairs or one-time grants for new construction—to address their capital project needs; however, those funds are often insufficient to meet their needs, according to some stakeholders and HBCU officials. A majority of public HBCUs (28 of 41) reported using state grants and appropriations to address capital project funding, according to survey responses (see fig.6). Officials from most public HBCUs we interviewed (5 of 6), however, said state appropriations are often limited to academic or administrative buildings, and colleges are responsible for financing and maintaining other projects and building spaces, such as residence halls or student centers. Furthermore, officials from all public HBCUs we interviewed (6 of 6) reported that state funds are often not sufficient to adequately address both routine repairs and their deferred maintenance backlog. Declines in state funding for higher education in recent years have also introduced financial uncertainty, particularly for HBCUs, according to officials from half of the public HBCUs and many stakeholders we spoke with. For example, officials at one public HBCU we visited said that as a result of cuts in the state’s capital budget, the college does not have enough funding to address emergency or deferred maintenance needs and they are running a deficit. Officials from one credit rating agency said that because public HBCUs rely more on state funding than their public non-HBCU counterparts, they are potentially more vulnerable than other colleges. Over half of public HBCUs in our survey (22 of 38) reported that they used state-issued bonds to address their capital project funding for the last 5 years. Officials from most public HBCUs we interviewed (4 of 6) said the state or university system often issues general obligation bonds on behalf of the state and disperses funding to colleges to finance large scale capital projects. For example, one state issued a $2 billion bond for the 16 colleges in its university system and provided one of its public HBCUs with $30 million for a new college of business. Similar to state appropriations, officials from some public HBCUs noted that state-issued bonds are also typically restricted to academic or administrative buildings rather than residence halls or student centers. Officials from 12 public HBCUs also reported in our survey issuing bonds themselves to finance capital projects. Officials from most public HBCUs we interviewed (4 of 6) said colleges issue bonds, with their state system’s permission, to finance capital projects when state funding is limited or if the projects are for non- academic buildings. For example, one public HBCU issued a $90 million bond to fund a new student center. More than half of private HBCUs reported using alumni and private giving or revenue from tuition and fees to address their capital needs (see fig 7). However, private HBCUs may face challenges using these sources to address their capital needs due to competing priorities for these revenue streams and difficulty raising additional funds from these sources, according to HBCUs and stakeholders we interviewed. Officials from most private HBCUs we interviewed (7 of 9) said they use some funding from alumni and private gifts for small capital projects, but that donors do not usually contribute to larger projects or help address deferred maintenance or repairs. While a majority of private HBCUs responding to our survey (21 of 37) reported using alumni and private giving to address their capital project needs, this funding source only accounted for 10 percent of their overall capital project funding. Several stakeholders we interviewed (4 of 10) said that some private HBCUs do not have robust fundraising offices and may face challenges raising additional funding from alumni or other private sources. A majority of surveyed private HBCUs (20 of 37) reported using tuition and fees to address their capital project needs over the last 5 years. Education officials and officials from 5 of 9 private HBCUs said relying on tuition and fees to address capital project needs—in addition to other expenses such as operations and academics—can strain a college’s finances. Many officials from private HBCUs we interviewed (6 of 9) told us that because they are so tuition-dependent, drops in enrollment make it difficult to maintain their facilities or repay capital debt. Officials from one higher education association noted that some HBCUs face constraints raising additional tuition revenue needed to cover capital projects and other expenses because they are generally smaller colleges: more than half of private HBCUs have less than 1,000 students. Private HBCUs also have lower tuition compared to similar private non-HBCUs, according to our analysis of IPEDS data. Additionally, two stakeholders told us HBCUs may face challenges raising tuition and fee revenue, in part, because the student population at HBCUs tends to be more low income and relies more heavily on federal student aid. Based on our analysis of IPEDS data, for example, a higher proportion of students at private HBCUs received Pell Grants in the 2015-16 school year compared to similar private non-HBCUs—77 percent and 43 percent, respectively. A majority of HBCUs responding to our survey (49 of 77) reported using federal grants to finance capital projects, and most indicated using Education’s Strengthening HBCU Program. We analyzed the program’s 2016 annual reports, the most recent data available at the time of our review, and found that more than three-quarters of HBCUs that received grants in 2016 (79 of 98) used the funds to address capital project needs. Our analysis found that HBCUs in the Strengthening HBCU Program used an average of 22 percent of their funding from this source for capital projects in 2016. According to our analysis of the annual reports, 15 of the 98 HBCUs in the program reported that the grant helped decrease the number of instructional facilities with deferred maintenance backlogs. Officials we interviewed from one HBCU said they used grants from the Strengthening HBCU Program to address some of their deferred maintenance backlog and to renovate classrooms to better meet students’ academic needs. For example, they said the grant funded capital projects that support its physics and chemistry programs (see fig. 8). In another instance, a private HBCU reported using the program’s funds to support technological updates and modernize classrooms. Such updates could help with student recruitment and, ultimately, help increase student enrollment. Fewer than half of HBCUs, or 46 of the 99 HBCUs that are eligible, have used the HBCU Capital Financing Program to fund capital projects, according to Education data. HBCUs have borrowed over $2 billion, with private HBCUs representing about two-thirds of the loan volume (see fig. 9). After 2007, Education saw an increase in the number of loans made and the amount borrowed by HBCUs due in part to the program’s expansion to help colleges affected by Hurricanes Katrina and Rita in 2005 and Education’s efforts to improve outreach. Education tracks how Capital Financing Program funds are used, which can fall into three broad categories: refinancing, deferred maintenance and repair, and building replacement. According to our analysis of Education data, since 1996, rather than use these loans for new capital projects, participants have used the program most frequently to refinance outstanding debt (see fig. 10). For instance, one public HBCU used a portion of a $36.6 million Capital Financing Program loan to refinance outstanding debt, which saved the college about $9 million. In addition to refinancing, program participants used the remaining funds to address deferred maintenance and repair or to replace buildings. For example, the most frequent type of project funded through the program was building or renovating residence halls, according to Education data. A private HBCU responded in our survey that it used the program to refinance outstanding debt for student housing and to help construct a new student center. HBCUs responding to our survey and HBCU officials we interviewed reported using the Capital Financing Program because of its low interest rate. Survey respondents most frequently cited the program’s low interest rate as a reason for participating (33 of 37), as did officials from HBCUs we interviewed that use the program (10 of 11). According to Education and designated bonding authority officials, the program provides HBCUs with rates they might not receive in the private market. For example, program loans used for refinancing from 2012 through 2016 had a median true interest cost—the interest rate plus fees charged to the college—of 3.15 percent. While officials from three state university systems noted their HBCUs can issue bonds with other colleges in their system to receive a more competitive interest rate, this option is not available to all HBCUs. According to officials at the designated bonding authority, HBCUs may lack high credit ratings, and the Capital Financing Program allows these colleges to access lending at rates comparable to highly rated colleges. Survey respondents also frequently cited the opportunity to refinance existing, more expensive capital debt and lack of access to other funding options as reasons for participating in the Capital Financing Program. Specifically, over two-thirds of survey respondents (24 of 35) cited the opportunity to refinance existing debt. According to officials from Education and the designated bonding authority, HBCUs can see substantial savings using the program. Data provided by the designated bonding authority showed that HBCUs that refinanced debt in the program from 2012 through 2016 saved a median of 14 percent of the overall loan cost. One survey respondent, for example, reported that as a result of the savings generated by refinancing existing bonds the college was able to purchase a residence hall. Almost half of the participating HBCUs that responded to the survey question on why they used the program (15 of 32) reported that they did not have access to other funding. Officials from one organization representing almost three- quarters of the private HBCUs told us this program is particularly important for small private HBCUs that have limited resources and for private HBCUs that do not have access to state funding and may not have the capacity to issue bonds. Officials from most public HBCUs we interviewed (4 of 6) also noted that because states do not typically fund buildings such as residence halls or student centers, the Capital Financing Program can help address that funding gap. Education and its designated bonding authority have taken some steps to increase awareness of the Capital Financing Program, but some HBCUs and university system officials reported in our survey and interviews that they were unaware of the 26-year-old program. Officials from Education and its designated bonding authority said they attend a range of conferences and events in the HBCU and higher education communities to increase awareness of the program, such as conferences with higher education business officers and an annual national HBCU conference. A senior Education official said, when possible, Education visits individual public and private non-participating HBCUs that may be good candidates for the program based on their credit. In addition, a senior designated bonding authority official said designated bonding authority staff visits every HBCU that applies or expresses interest in the program. However, about a quarter of non-participating HBCUs that responded to our survey said they were unaware of the program. Officials we interviewed at one state university system also reported they had not heard of the program. HBCUs and state university systems may be unaware of the Capital Financing Program because Education does not target its outreach in two key ways. Lack of outreach and communication with state university systems: Stakeholders we interviewed and a senior Education official said Education does not reach out to nor communicate program information directly with state university systems, which oversee groups of public universities—both HBCUs and non-HBCUs— supported by an individual state, even though public colleges accounted for half of all HBCUs in 2016. A senior Education official told us Education staff does not reach out to state university systems because program loans are made directly to individual HBCUs. Nonetheless, according to officials at three state university systems, these systems generally play a role in coordinating colleges’ capital budget requests, and their awareness of the Capital Financing Program could help Education in its efforts to increase participation among public HBCUs. For example, officials at one state university system told us they are always interested in learning about low-cost ways to help their colleges with capital projects, and they would be interested to learn more about how the Capital Financing Program could help their public HBCUs. In addition, one surveyed public HBCU that was unaware of the program suggested Education work with state university system offices, as they are the ones responsible for facilitating and approving colleges’ capital funds. Officials at the state university system for this HBCU also said they were unaware of the program. Lack of formal outreach plan to address HBCU leadership changes: When possible, Education officials said they reach out to HBCUs as new presidents or chief financial officers come on board. However, Education officials said they do not track this particular type of outreach. In 2016, about three-quarters of HBCUs experienced a change in at least one key leadership position, according to our analysis of Education reports, and several stakeholders we talked to cited the frequency of leadership change as a challenge. Given the frequency of changes in key leadership positions at HBCUs, consistent outreach to this group is particularly important. This lack of program awareness among individual HBCUs and state university systems can hinder participation. Since our 2006 report on the Capital Financing Program, participation has increased from 14 to 46 HBCUs, but the total remains at fewer than half of all HBCUs. While the program is only available for capital financing of projects that meet specific criteria, it serves as a potentially important resource for HBCUs that continue to face challenges diversifying their funding sources to meet capital project needs. The Consolidated Appropriations Act, enacted in March 2018, requires Education to create and execute an outreach plan to work with states and the Capital Financing Advisory Board to improve outreach to states and help additional public HBCUs participate in the program. Taking steps, such as reaching out directly to officials in facilities departments at state university systems, could help to address several of the issues we have identified in this report related to communication with state university systems. Federal internal control standards state that management should communicate information needed to achieve an agency’s objectives to key external stakeholders. As Education develops its outreach plan it is important that the agency also ensure that officials at individual HBCUs, who engage in capital planning—presidents, chief financial officers, and facilities managers, are aware of the program. Indeed, over half of non-participating HBCUs (23 of 34) responded in our survey that improved communication from Education was “moderately” or “extremely” important to increase program participation. In addition to working with the Capital Financing Advisory Board—which includes representatives of public and private HBCU organizations—to reach out to state university systems, Education could also further leverage the resources of its designated bonding authority. While the designated bonding authority reaches out to some prospective program participants, it could help Education further ensure that program information reaches all HBCUs. Without these efforts as part of the agency’s outreach plan, HBCUs eligible for the Capital Financing Program—the institutions that the program is designed to serve—may remain unaware of the program and miss opportunities to access low-cost capital financing. Some public HBCUs report being prohibited from participating in the Capital Financing Program by state law or policy because of certain program features, and Education has taken limited steps to coordinate with states to address those issues. According to our analysis of survey responses and interviews, about one-third of non-participating public HBCUs across four states (13 of 37) report being unable to use the program due to at least one federal requirement placed on the college, which conflicts with state law, policy, or practice. These features include requirements for pooling escrow funds, collateral, and lending directly to HBCUs (see table 4). Education has taken steps to address public HBCUs’ concerns with the escrow requirement, but not the other state-level provisions that create challenges. In 2006, GAO recommended that Education consider alternatives to the escrow pool requirement, and Education submitted a legislative proposal to Congress, most recently in 2017, to require fees instead. However, Education has not systematically coordinated with states to address other laws or policies that create challenges or to identify potential solutions to help more public HBCUs participate in the program. For example, based on one college’s interpretation of state law, officials from Education and the designated bonding authority told us HBCUs in that state could not participate because of the state’s requirement that such loans be issued to a third-party. However, state university system officials in this state told us this requirement may not prohibit participation. They said a clearer explanation of the benefits and obligations of the program from Education would be helpful to determine whether the state’s HBCUs could participate. Officials at an HBCU in another state with restrictions suggested that Education work with the states to help states develop regulations that do not hinder access to the program. Officials from the university system in that state said they would be open to working with Education to find a way to allow their HBCUs to participate. Some state university systems and colleges have successfully developed solutions that could also be helpful for states whose laws or policies create similar challenges. For example, officials we spoke with from one state university system said a state statute was recently changed after an HBCU’s application to the program had to be withdrawn because of a state law prohibiting using tuition revenue as collateral. Those changes were enacted in early 2018, and state university system officials said they are moving forward on HBCU participation in the program. Our prior work highlights the importance of coordinating among key stakeholders to achieve results. Education’s strategic plan prioritizes supporting educational institutions and increasing college access, and coordinating with external stakeholders such as state university systems to achieve those goals. While Education is aware that many public HBCUs face state-level restrictions on participating in the Capital Financing Program, a senior Education official said the Capital Financing Program does not provide support to states whose laws or policies create such challenges. Education officials said they work with colleges on a case-by-case basis, and only work directly with state university systems when invited to by the interested HBCU. However, officials from one university system noted that it would be helpful for Education to keep both the college and the system informed of the program given the system office’s level of involvement in capital financing decisions. Officials we interviewed from three of the four public HBCUs in states with laws or policies that create these challenges said they are interested in participating in the Capital Financing Program. One HBCU official said given the low interest rate, his HBCU would refinance all its existing capital debt into the program if given the opportunity. As Education develops an outreach plan, it will be important for the plan to include coordination with key stakeholders such as state university systems to address state-level challenges to participation and share potential solutions and leverage the designated bonding authority and Advisory Board in that effort. The number of loan defaults in the Capital Financing Program and the number of HBCUs having difficulty making timely loan payments have increased recently, but Education has not fully assessed the potential use of loan modifications to assist such HBCUs. For example, two HBCUs defaulted on their Capital Financing Program loans in the last 2 years, and 29 percent of loan payments were delinquent in 2017. HBCU officials we interviewed reported that financial challenges stemming from two events—the 2008 economic recession and a recent change to federal student financial aid—have decreased enrollment at some HBCUs and affected HBCUs’ ability to repay their loans on time. For example, officials from two private HBCUs told us that they experienced declining enrollment as a result of the 2008 recession. In addition, changes made in 2011 to the Parent PLUS loan program—a program used by parents to help pay for their student’s tuition—resulted in increased denials of these loan applications, according to Education and officials from several HBCUs. As a result, some students could no longer afford to attend college, and the loss of tuition revenue created additional financial hardship for the colleges, according to officials from several HBCUs and an HBCU organization official. Education issued new regulations in 2014 that revised the Parent PLUS loan criteria, enabling more families to qualify for these loans. However, HBCUs had already lost significant amounts of tuition revenue as a result of the 2011 changes, according to Education officials. HBCUs and stakeholders have called for loan modifications to potentially assist colleges in financial distress and help them avoid defaulting on their Capital Financing Program loans. According to key stakeholders and officials from eight HBCUs, there is a need for the program to have ways to assist HBCUs facing financial difficulties. For example, officials from four HBCUs we interviewed and four additional HBCUs we surveyed suggested additional program flexibility, such as forgiving, reducing, or temporarily suspending loan payments, could be helpful for some colleges. Stakeholders also suggested that loan deferment—allowing colleges to postpone payments without penalty—or other flexible payment options could help some colleges facing financial hardship. The Consolidated Appropriations Act, enacted in March 2018, appropriated $10 million for Education to defer participating HBCUs’ Capital Financing Program loans to assist colleges experiencing financial difficulties. Under this provision, loans can be deferred for up to 6 years for participating HBCUs demonstrating financial need and meeting certain conditions. These funds are available for Education to authorize loan deferments until the end of fiscal year 2018. Little is known, however, about how loan modifications would affect participating HBCUs or the program. According to a senior Education official, the agency assessed the potential for loan deferment in 2010 and estimated that it would cost the federal government about $150 million annually. However, neither the program office nor Education’s budget office, which is responsible for estimating the costs of policy changes, were able to provide any information on how Education arrived at this estimate. Furthermore, Education has not assessed whether several other types of loan modifications identified by stakeholders, or those used for HBCUs impacted by Hurricanes Katrina and Rita, could be beneficial to other participating HBCUs that are having trouble making timely loan payments. Federal internal control standards state that agency management should plan for significant external events, analyze its effects on achieving program goals, and appropriately respond to those events. While Education and its designated bonding authority review each applicant’s credit and ability to take on a Capital Financing Program loan, this review reflects an HBCU’s current financial health at the time of its application. Given that Capital Financing Program loans can be up to 30 years, major external changes such as an economic recession are possible over the life of the loan. Such events may affect an HBCU’s ability to make timely loan payments and may increase the potential of an HBCU to default on its Capital Financing Program loan. According to Education’s fiscal year 2019 budget request, the HBCU portfolio is experiencing greater financial stress as evidenced by an increase in loan delinquencies, and the federal government is at risk of incurring additional costs to manage the program. Analyzing the effects of deferring loans and other types of loan modifications on program participation and on program costs could help Education determine how best to assist participating HBCUs experiencing financial difficulties while minimizing the federal government’s costs. However, a senior Education official said the agency does not plan to analyze (1) whether loan modifications could be helpful to program participants; or (2) the effect offering these modifications could have on the cost of the program. According to Education officials, modifications to the terms of Capital Financing Program loans cannot occur without statutory change. Nonetheless, Education is responsible for providing advice to Congress about what additional steps might be taken to improve the operation and implementation of the program. Conducting analyses on the effect of loan modifications, including recently authorized deferments, to help colleges avoid default and successfully participate in the program, and on the potential costs absorbed by Education of delayed or reduced payments, would enable Education to fulfill this responsibility. HBCUs play a vital role in providing higher education opportunities for African-Americans. However, HBCUs continue to face challenges in securing financing to undertake needed capital projects. As a result, these colleges may be unable to make the campus improvements necessary to attract and retain students, potentially jeopardizing their long-term sustainability. Education’s Capital Financing Program is intended to be a key funding source for HBCUs’ capital needs, yet fewer than half of these colleges participate in the program. As Education develops its statutorily mandated outreach plan, it will be important for the plan to address the outreach issues we have identified. Increasing outreach to individual HBCUs will encourage more college participation in the Capital Financing Program. Similarly, coordination with state university systems to address state-level provisions that create challenges and share potential solutions can increase public HBCU participation in the program. Education can leverage the resources not only of the Advisory Board, but also of the designated bonding authority, in these outreach efforts. If Education does not include these activities in its outreach plan, many of the HBCUs the program is intended to serve may continue to be unaware of the program or unable to participate in it. Some HBCUs have faced declining enrollment as a result of changing economic conditions and recent changes in federal student aid policy. At the same time, the number of defaults and delinquencies has increased in the Capital Financing Program, potentially increasing the federal government’s responsibility for these losses. In addition, stakeholders have called for additional loan modifications for colleges in financial distress. The Consolidated Appropriations Act, enacted in March 2018, authorized Education to offer loan deferments to financially struggling HBCUs. As Education begins offering these loan deferments, it is important that Education analyze the effects of these deferments and other prior loan modifications, such as those given to certain HBCUs affected by Hurricanes Katrina and Rita, to ensure that they are having the intended effect. Analyzing the potential benefits of loan modifications to all participating HBCUs against the potential risks to the program, such as increased program costs, could further help policymakers enhance the overall effectiveness of the Capital Financing Program. This will be especially important as Education implements its required outreach plan, which may increase program participation. We are making the following two recommendations to Education: As Education develops the required HBCU Capital Financing Program outreach plan, the Executive Director of the program should include in the plan (1) ways to increase outreach to individual HBCUs so that HBCU officials are informed of the program; (2) steps to coordinate directly with state university systems to specifically address state-level challenges to participation and share potential solutions to increase public HBCU participation; and (3) ways to further leverage the designated bonding authority in its efforts. (Recommendation 1) The Executive Director of the HBCU Capital Financing Program should lead an agency effort to analyze various Capital Financing Program loan modifications, including the effects of the loan deferments authorized in the 2018 Consolidated Appropriations Act as well as other potential modifications, to assess the potential benefits to HBCUs participating in the program, the potential cost of these options to the government, and their effect on the program’s overall financial stability. (Recommendation 2) We provided a draft of this report to Education for review and comment. Education’s comments are reproduced in appendix V. In response to our recommendation on actions that Education should include in its required outreach plan, Education identified steps it plans to take to address each of the three components we recommended. First, to increase outreach to individual HBCUs, Education stated it will send letters to presidents and chancellors of eligible HBCUs that are not yet participating, in addition to existing activities. Second, Education stated that it plans to use methods similar to those currently used to reach out to public HBCUs, depending on resources, to coordinate directly with state university systems. Third, Education noted it plans to explore ways to leverage the designated bonding authority to do so. Education also stated that an HBCU’s ability to use the program depends on its financial strength, and government resources alone will not ensure financial strength among struggling institutions. We agree; however, it is important to make HBCUs aware of the resources available to them, particularly a federal program that was created to help address HBCUs’ capital financing challenges. With regard to our second recommendation on analyzing the potential benefits and costs of offering loan modifications, Education partially agreed with the recommendation. Education commented that it disagreed with the recommendation to the extent that it suggests a modification of loan terms. Our recommendation does not endorse providing loan modifications to colleges. Rather, our recommendation is focused on analyzing the costs and benefits of modifications authorized by law, as well as other potential modifications. Education noted it will continue to analyze loan modifications and develop cost estimates. As we note in the report, however, Education was not able to provide evidence of analysis it conducted on potential loan modifications. We continue to believe that analysis of costs and benefits is needed to determine whether additional loan modifications are necessary or beneficial for the program. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Education, appropriate congressional committees, and other interested parties. In addition, the report will be made available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. We examined (1) Historically Black Colleges and Universities’ (HBCUs) capital project needs; (2) funding sources HBCUs use to address their capital project needs; and (3) the extent to which the Department of Education (Education) helps HBCUs access and successfully participate in the HBCU Capital Financing Program (Capital Financing Program). In addition to the methodologies discussed below, we reviewed relevant federal laws, regulations, and guidance on the Capital Financing Program and Strengthening HBCU Program. To determine the extent to which Education helps HBCUs access and successfully participate in the Capital Financing Program, we reviewed documentation on program performance and administration and Education documentation from selected HBCUs affected by Hurricanes Katrina and Rita that received loan modifications in 2013. We assessed Education’s communication to states and HBCUs against federal internal control standards on communicating quality information to key stakeholders. We reviewed Education’s coordination efforts against best practices for coordinating with relevant stakeholders and reviewed Education’s strategic plan which prioritizes coordinating with external stakeholders to achieve its goals of supporting educational institutions and increasing college access. We also assessed Education’s actions to help HBCUs experiencing financial challenges successfully participate in the program against federal internal control standards, which state that agency management should communicate key information needed to achieve its objectives and plan for significant changes, including economic changes, analyze the effects of such plans, and respond appropriately. To address all three objectives, we conducted a web-based survey of accredited HBCUs in the United States (including the U.S. Virgin Islands) in June through August 2017. To identify the list of HBCUs, we ran a query using Education’s Integrated Postsecondary Education Data System (IPEDS) for colleges that were designated as an HBCU in IPEDS and participated in Title IV, and were therefore accredited. IPEDS uses Section 322(a) of the Higher Education Act of 1965, as amended to define an HBCU as “any historically Black college or university that was established prior to 1964, whose principal mission was, and is, the education of Black Americans, and that is accredited by a nationally recognized accrediting agency or association determined by the Secretary of Education to be a reliable authority as to the quality of training offered or is, according to such an agency or association, making reasonable progress toward accreditation.” Additionally, any branch campus of a southern institution of higher education that prior to September 30, 1986, received a Strengthening HBCUs Grant and was formally recognized by the National Center for Education Statistics as a Historically Black College or University is also considered an eligible institution. All 101 colleges identified as HBCUs in IPEDS were also identified as participating in Title IV. We addressed our survey to senior leadership—presidents and chief financial officers—at HBCUs because capital planning and financing generally fall under their purview. We obtained a list of contact information for presidents and chief financial officers from Education for some participating HBCUs. In cases where contact information was not available, current, or correct, we identified appropriate contact information by reviewing HBCUs’ websites or by following up with the president’s office. Our survey included questions on capital project needs (i.e., repair or replacement) and plans, funding sources HBCUs use to address those needs, and HBCU experiences with Education’s Capital Financing Program and Strengthening HBCU Program. We also asked HBCU officials to provide a copy of their master plans to supplement their survey responses, and we reviewed those plans. To enhance data quality and to minimize nonsampling errors, we employed recognized survey design practices in the development of the survey and in the collection, process, and analysis of the survey data. To develop our survey questions, we interviewed Education officials, HBCU administrators, higher education facilities experts, and HBCU organization officers. Additionally, we pretested the survey with five HBCUs, over the phone, to standardize survey language and to reduce variability in responses that should be qualitatively the same. In some cases, we used the results of our pretests to change the wording of questions or added clarifying examples based on feedback. We chose the five pretest HBCUs to include representation across the major subgroups of responding HBCUs: private non-profits (private) and public HBCUs, 2-years and 4- years, and participants and non-participants of the Capital Financing Program. We also reviewed examples of master plans and facility assessment guides from higher education associations to help frame our survey questions. For example, we reviewed public and private HBCU capital plans to understand the type of information they collect, methodologies for assessing their capital project needs, and how they prioritize their needs. Furthermore, we consulted higher education facilities associations’ definitions on key terms and facility indicators. Facilities experts from a higher education association indicated that master plans can change over time depending on an HBCU’s emerging capital project needs and funding availability. To increase the survey response rate, we implemented an outreach plan to engage key HBCU officials. When we completed the final survey questions and format, we sent an email announcement of the survey in June 2017 to key HBCU officials—presidents, chief financial officers, Strengthening HBCU Program coordinators, and facilities managers. They were notified that the survey was available online and were given unique usernames and passwords. To reduce nonresponse, we followed up by email and by phone with HBCUs that had not responded to the survey to encourage them to complete it. We received responses from 79 of 101 HBCUs—38 of 51 private and 41 of 50 public HBCUs, achieving a 78 percent response rate. As this was not designed as a sample survey, we make no claims about the generalizability of the results. However, 79 HBCUs captures a substantial portion of the HBCU population. We received master plans from 20 HBCUs. We reviewed the data for missing or ambiguous responses and followed up with HBCUs when necessary to clarify their responses. In some cases, we updated responses after following up with the survey respondent. For example, as a part of our reliability check, we followed up with HBCUs whose answers were extreme outliers on reporting dollar values for their deferred maintenance. In three cases, separate from deferred maintenance, HBCUs corrected their answers, and we updated the survey results accordingly. To analyze the survey, we calculated descriptive statistics and reviewed open-ended responses to identify themes. We also reviewed select HBCUs’ master plans to supplement survey responses. We analyzed Capital Financing Program loan data from Education and the designated bonding authority to better understand participation in the program. Specifically, we reviewed data from 1996 to 2017, which included participating HBCUs with sector information (public and private); loans each HBCU received; original loan amount; and status of each loan (paid off or in progress). We used the data to determine the total number of participating HBCUs by sector and total value of loans provided. Additionally, we gathered information from Education’s Capital Financing Program website to understand how HBCUs used their loans from 1996 to 2016. The website includes information on the purpose of each loan. Based on the wording of the purpose, we developed the following categories: refinance, deferred maintenance, repair and renovation, alteration, and new construction. For the purpose of reporting, we combined deferred maintenance, repair, renovation, and alteration into a deferred maintenance and repair category. For instances where HBCUs listed a similar or related purpose, we used professional judgement to categorize it. The categorization was conducted by one analyst then independently confirmed by a second analyst. Based on our review of Education’s data, review of loan contracts, and interviews with relevant Education and designated bonding authority officials, we found the HBCU Capital Financing participation data to be sufficiently reliable for the purpose of describing participation and use of the program. To provide context on challenges HBCUs face financing capital projects identified through interviews with officials from Education, HBCUs, HBCU organizations, other stakeholders, and through our survey, we analyzed data from IPEDS from the 2015-16 school year, the most recent data available at the time of our review. We assessed the reliability of the data by reviewing related documentation and interviewing officials responsible for maintaining data in the system, and found the data to be reliable for our purposes. We examined HBCUs’ institutional, student, and financial characteristics and compared those characteristics with a matched set of similar non-HBCUs. These characteristics include information on the colleges’ charges for tuition and fees; the percentage of students who receive financial aid overall, and Pell Grants specifically; information on key revenue streams such as tuition and fees, private grants and contracts, and government funding; and data on the college’s endowment. Colleges report financial information to IPEDS, such as revenue, using different accounting standards: public colleges generally use standards issued by the Governmental Accounting Standards Board, and private colleges use standards issued by the Financial Accounting Standards Board. Due to variation in how colleges report some revenue data under these two different accounting standards, we excluded one public HBCU from our analysis that used standards issued by the Financial Accounting Standards Board and analyzed 100 HBCUs. Under 1,000; 1,000-4,999; 5,000-9,999; 10,000- 19,999; 20,000 and above Public 4-year; public 2-year; private 4-year; private 2- year Any degree prior to a 4-year Bachelor’s degree; a 4- year Bachelor’s degree; any degree following a 4-year Bachelor’s degree HBCU state or Census division States with HBCUs or Census divisions (Pacific, Mountain, West North Central, East North Central, Middle Atlantic, New England, South Atlantic, East South Central, and West South Central) Using a multi-stage approach to create matched sets of HBCUs and non- HBCUs, we first identified non-HBCUs that matched the HBCU using the institution’s size, sector, and highest degree offered. We then constrained the set of non-HBCUs to those within the same state as respective HBCUs. Each matched set may contain multiple HBCUs and/or multiple non-HBCUs. If none of the non-HBCUs identified using institution size, sector, and highest degree offered lied within the same state as the HBCUs, we used Census-based divisions to create the matched set of HBCUs and non-HBCUs. Table 5 summarizes the number of institutions within each matched set. Seventy-three of the 100 HBCUs were matched using state, while 27 were matched using Census-based divisions. We conducted this matched analysis because an unmatched analysis of the 100 HBCUs and all 3,529 non-HBCUs is potentially vulnerable to spurious differences in outcomes between HBCUs and non-HBCUs that arise from an imbalance of key factors underlying these two types of institutions. For example, public 2-year institutions make up a smaller proportion of HBCUs compared to non-HBCUs (10 and 28.6 percent, respectively), while public 4-year institutions make up a larger proportion of HBCUs compared to non-HBCUs (39 and 19.6 percent, respectively). This imbalance could lead to differences in outcomes arising from characteristics inherent in the type of institution, not a comparison of HBCUs to non-HBCUs. Matching HBCUs to non-HBCUs would lead to a similar underlying distribution of key factors, which improves the comparability of HBCUs and non-HBCUs. We used the matched sets to compare HBCUs to non-HBCUs on student financial aid and financial outcomes. For each of these variables and across the matched sets, we estimated descriptive statistics (mean, median, range) for HBCUs and non-HBCUs. However, in order to compare HBCUs to non-HBCUs, we accounted for similarities within each matched set. The varying number of HBCUs and non-HBCUs within each matched set required an analysis which is, in principle, an extension of a paired t-test. In this analysis, differences and correlations within each matched set are accounted for when estimating the overall difference between HBCUs and non-HBCUs. More specifically, we performed a linear mixed effects model with the basic form: yij ~ βijHBCUij + bijClusterij + σij, for the jth institution in the ith cluster bik ~ N(0, η), for the kth institution in the ith cluster where y is the outcome variable of interest; β is the parameter of interest, the fixed-effect coefficient that quantifies the overall difference between HBCUs and non-HBCUs; σ is the residual error that is not accounted for by HBCU status or clusters; b is the random-effect coefficient that accounts for correlations within clusters and quantifies the different effects of the k institutions within each cluster set (i.e., the k HBCU and non-HBCU institutions are nested within each cluster set); and b estimates the separate and distinct effects for each cluster set and is assumed to have a multivariate normal distribution, with a variance of η. The p-value estimated was used to assess whether there was a statistically significant difference between HBCUs and non-HBCUs for the outcome variables of interest. We stratified the matched sample by public and private education sector and used the model above to obtain estimates specific for public and private colleges. This education sector specific analysis was not further stratified by 2- and 4-year college types due to small sample sizes. In order to further explore differences with public and private colleges, we expanded the model above as such: yij ~ βijHBCUij + γijSectorij + εijHBCUij*Sectorij + bijClusterij + σij, for the jth institution in the ith cluster Where the parameters described above remain the same and γ is the difference between public and private colleges, after adjusting for being an HBCU and ε is the difference within difference, assessing whether the HBCU–non-HBCU difference within public colleges is different from the HBCU–non-HBCU difference within private colleges. Wilcoxon Test for Clustered Data The linear mixed effects model above assumes that data are normally distributed (i.e., follow a bell-shaped curve). In order to assess whether these assumptions hold, we performed a Wilcoxon test that is extended for clustered data. The Wilcoxon test ranks values and is free of distributional assumptions, and assumes that all data are independent (i.e., not correlated). Overall consistency between tests of significance from the linear mixed effects model and Wilcoxon tests indicates that model assumptions hold. To describe the extent to which HBCUs used the Strengthening HBCU Program to finance capital projects, we analyzed annual reports submitted by participating HBCUs for the 2016 grant year. Participating HBCUs submit annual performance reports which include information on how the funds were used and the amount spent on each activity, among other information. The reports also include information on whether the HBCUs experienced leadership turnover in that reporting year. Because colleges submit a report for each type of Strengthening HBCU funding they receive or to carry over funding from the previous year, each college could have submitted up to three reports in 2016. In total, we reviewed 236 reports for 98 grant recipients. We also used these reports to identify leadership turnover at HBCUs. To address all three objectives, we conducted over 40 interviews with HBCU stakeholders and colleges to learn about HBCU capital project needs (i.e., repair, renovation, and new construction of buildings); challenges HBCUs face accessing and securing funding, particularly through Education’s Capital Financing Program; and steps Education has taken, if any, to help HBCUs better access and successfully participate in their programs. We conducted the following interviews: Education: We interviewed senior officials at Education to learn more about HBCUs’ access to and successful participation in the Capital Financing Program and participation in the Strengthening HBCU Program. Designated Bonding Authority: We interviewed officials at the designated bonding authority, with whom Education contracts to help administer the Capital Financing Program, to learn more about HBCUs’ access to and successful participation in the Capital Financing Program. HBCU officials: We interviewed senior officials such as presidents, chief financial officers, and facilities managers from 15 HBCUs to learn more about the state of their capital project needs and challenges they face accessing and securing funding, particularly though the Capital Financing Program and Strengthening HBCU Program. We selected HBCUs that included different sectors (public and private), varying enrollments and state locations, and a mix of participation in the Capital Financing Program. State university system officials: We interviewed officials from four state university systems in states where public HBCUs did not participate and that were identified by Education as having state-level challenges accessing the program (North Carolina, Florida, Georgia, and Mississippi). HBCU organizations: We interviewed officials at the United Negro College Fund, which represents private HBCUs; and the Thurgood Marshall College Fund, which represents public and publically supported HBCUs. Both organizations are members of Education’s Capital Financing Program Advisory Board. We consulted with officials from both organizations on different mechanisms that could help borrowers successfully participate in the Capital Financing Program. Higher education facilities experts: We interviewed higher education facilities experts at the National Association of College and University Business Officers, APPA: Leadership in Educational Facilities, and Sightlines—a higher education facilities consultant—to learn about industry best practices in identifying and addressing capital project needs and what differences, if any, exist for capital funding between HBCUs and non-HBCUs. Financial experts: We interviewed officials at Moody’s, Standard & Poor’s (S&P), the Municipal Securities Rulemaking Board (MSRB), and a financial consulting group to learn more about the municipal bond market, how colleges are rated, and how access and successful participation in the market differs between HBCUs and non-HBCUs. Other stakeholders: We interviewed other stakeholders, such as the Association of Public and Land Grant Universities (APLU), which represent HBCU public land-grant universities; the Kresge Foundation, which has provided HBCUs with funding for capital projects; and researchers at the University of Pennsylvania’s Center for Minority Serving Institutions and the authors of a study on HBCU participation in the bond market, “What’s in a (school) name? Racial discrimination in higher education bond markets.” We visited nine HBCUs across three states—Alabama, Louisiana, and North Carolina—to interview senior HBCU officials to learn about their capital project needs, to tour their facilities, and to learn more about the benefits and challenges the HBCUs faced in accessing funding and participating in Education’s two key programs. We selected our nine site visit HBCUs to obtain a mix of sector (public and private), enrollment size, participation in Education’s programs, and the existence of state-level laws or policies that have created challenges to participating in the Capital Financing Program. We also chose to visit Louisiana to learn more about the loans HBCUs received after Hurricanes Katrina and Rita and the colleges’ recovery efforts. During our site visits, we met with senior leadership—presidents, chief financial officers, facilities managers, Strengthening HBCU grant coordinators—because they generally make decisions on capital project planning. While we did not inspect or evaluate the state of these colleges’ buildings, HBCU officials explained in detail the capital project needs. In particular, we toured campuses to better understand their capital project needs and the extent to which Education’s two key programs have helped address those needs. We received responses from 79 of 101 Historically Black Colleges and Universities (HBCUs): 38 of 51 private non-profit (private) and 41 of 50 public HBCUs. By survey design, not all respondents reported information for each question. As a result, the denominator (number of survey respondents for a particular question) may change. This appendix presents selected survey responses from HBCUs and calculations made by GAO based on selected responses as a snapshot of capital project needs for HBCUs. Survey respondents reported information on their institution’s real property portfolio, historical building space, and the condition of their building space. Survey respondents provided information on their deferred maintenance backlogs—repair put off to a later date. The Federal Accounting Standards Advisory Board defines deferred maintenance as maintenance that was not performed when it should have been or was scheduled to be and which was put off or delayed for a future period. Activities include preventive maintenance; replacement of parts, systems, or components; and other activities needed to preserve or maintain the asset. Maintenance and repairs exclude activities directed towards expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, its current use. Survey respondents provided information on their documented top 5 capital project needs over the next 10 years. Survey respondents provided information on the type of capital project (e.g., repairs, renovations and alterations, new buildings or facilities) and purpose of the project (e.g., academic, administrative, athletics, etc.). Survey respondents provided information on funding sources they use to address their capital project needs and the percentage of funding from that source. Survey respondents provided information on their participation in the HBCU Capital Financing Program. We asked these respondents questions about the type of projects the program funds, reasons for pursuing this funding, and challenges they face in participating in the program. Survey respondents provided information on their participation in the Strengthening HBCU Program. We asked about why they participate and how the program supports capital project needs. Appendix III: Select Institutional, Student, and Financial Data on Historically Black Colleges and Universities (HBCUs) Using a multi-stage matching technique, we created a matched set of non-HBCUs for comparison purposes. Using data from the Department of Education’s Integrated Postsecondary Education Data System (IPEDS) for the 2015-16 school year, the most recent data available, we matched accredited HBCUs and non-HBCUs on four key characteristics: sector (i.e., public or private non-profit (private)), highest degree offered, size (enrollment), and location. For each of the 100 HBCUs, we established respective matched sets that included a total of 382 non-HBCUs. For more information about our methodology, see appendix I. Appendix IV: Location of Historically Black Colleges and Universities (HBCUs) and Their Sector (Public and Private Non-profit) In addition to the contact named above, individuals making key contributions to this report were Nyree Ryder Tee, Assistant Director; Rachel Beers, Analyst-in-Charge; Grace Cho; Kris Nguyen; and Manuel Antonio Valverde. In addition, key support was provided by Michael Armes, Susan Aschoff, Allison Bawden, Deborah Bland, Marcia Carlsen, Gina Hoover, DuEwa Kamara, John Karikari, Risto Laboski, Eunice LaLanne, Won Lee, Sheila McCoy, Jean McSween, Jeffrey G. Miller, John Mingus, Mimi Nguyen, Anna Maria Ortiz, Christopher Ross, Benjamin Sinoff, and Karen Tremba.", "summary": "HBCUs play a prominent role in our nation's higher education system. For example, about one-third of African-Americans receiving a doctorate in science, technology, engineering, or mathematics received undergraduate degrees from HBCUs. To help HBCUs facing challenges accessing funding for capital projects, in 1992, federal law created the HBCU Capital Financing Program, administered by Education, to provide HBCUs with access to low-cost loans. GAO was asked to review the program. This report examines HBCUs' capital project needs and their funding sources, and Education's efforts to help HBCUs access and participate in the HBCU Capital Financing Program. GAO surveyed all 101 accredited HBCUs and 79 responded, representing a substantial, but nongeneralizable, portion of HBCUs. GAO analyzed the most recent program participation data (1996-2017) and finance data (2015-16 school year); reviewed available HBCU master plans; visited nine HBCUs of different sizes and sectors (public and private); and interviewed Education officials and other stakeholders. Historically Black Colleges and Universities (HBCUs), stakeholders, and planning documents identified extensive and diverse capital project needs at HBCUs and GAO found HBCUs rely on a few funding sources—such as state appropriations and tuition and fees—to address those needs. HBCUs responding to GAO's survey reported that 46 percent of their building space, on average, needs repair or replacement. Based on a review of master plans—which assess the condition of HBCU facilities—and visits to nine HBCUs, GAO identified significant capital project needs in the areas of deferred maintenance, facilities modernization, and preservation of historic buildings. The Department of Education's (Education) HBCU Capital Financing Program has provided access to needed funding for some HBCUs and has helped modernize their facilities to improve student recruitment. However, fewer than half of HBCUs have used the program, according to Education data, which was specifically designed to help them address capital project needs (see figure). Education has undertaken several efforts to help HBCUs access and participate in the HBCU Capital Financing Program. For example, Education conducts outreach through attending conferences. However, some HBCUs in GAO's survey and interviews were unaware of the program. Moreover, public HBCUs in four states reported facing participation challenges due to state laws or policies that conflict with program requirements. For example, participants are required to provide collateral, but public HBCUs in two states reported they cannot use state property for that purpose. In March 2018, a federal law was enacted requiring Education to develop an outreach plan to improve program participation. An outreach plan that includes direct outreach to individual HBCUs and states to help address these issues could help increase participation. Without direct outreach, HBCUs may continue to face participation challenges. In addition, two HBCUs recently defaulted on their program loans and 29 percent of loan payments were delinquent in 2017. Education modified a few loans in 2013 and was recently authorized to offer loan deferment, but has no plans to analyze the potential benefits to HBCUs and the program's cost of offering such modifications in the future. Until Education conducts such analyses, policymakers will lack key information on potential options to assist HBCUs. GAO recommends Education (1) include direct outreach to individual HBCUs and steps to address participation challenges for some public HBCUs in its outreach plan, and (2) analyze the potential benefits and costs of offering loan modifications in the program. Education outlined plans to address the first recommendation, and partially agreed with the second. GAO continues to believe both recommendations are warranted.", "document_type": "gao"}
{"report": "Health care practitioners prescribe opioid medications to treat pain and sometimes for other health problems, such as severe coughing. Opioid medications are available as immediate or extended release and in different forms, such as a pill, liquid, or a patch worn on the skin. Opioids slow down some processes of the body, such as breathing and heartbeat, by binding with certain receptors in the body. Over time, the body becomes tolerant to opioids, which means that larger doses of opioid medications are needed to achieve the same effect. People may use opioids in a manner other than as prescribed—that is, they can be misused. Because opioids are highly addictive substances, they can pose serious risks when they are misused, which can lead to addiction and death. Symptoms of an opioid use disorder include a strong desire for opioids, the inability to control or reduce use, and continued use despite interference with major obligations or social functioning. Another concern associated with prescribed opioids is the potential for diversion for illegal purposes, such as nonmedical use or financial gain. Research has shown that MAT—which combines behavioral therapy and the use of certain medications (methadone, buprenorphine, and naltrexone)—can be more effective in reducing opioid use and increasing retention (i.e., reducing dropouts) compared to abstinence based treatment—that is when patients are treated without medication. Three medications are currently approved by FDA for use in MAT for opioid use disorders—methadone, buprenorphine, and naltrexone. Methadone: Methadone is a full opioid agonist, meaning it binds to and activates opioid receptors to help prevent withdrawal symptoms and reduce drug cravings. It has a long history of use for the treatment of opioid dependence in adults. Methadone suppresses withdrawal symptoms during detoxification therapy, which involves stabilizing patients who are addicted to opioids by withdrawing them in a controlled manner. Methadone also controls the craving for opioids during maintenance therapy, which is ongoing therapy meant to prevent relapse and increase treatment retention. Methadone can be administered to patients as an oral solution or in tablet form. Buprenorphine: Buprenorphine is a partial opioid agonist, meaning it binds to opioid receptors and activates them, but not to the same degree as full opioid agonists. It reduces or eliminates opioid withdrawal symptoms, including drug cravings. It can be used for detoxification treatment and maintenance therapy. It is available for MAT for opioid use disorder in tablet form for sublingual (under the tongue) administration, in film form for sublingual or buccal (inside the cheek) administration, and as a subdermal (under the skin) implant. Naltrexone: Naltrexone is an opioid antagonist, meaning it binds to opioid receptors but does not activate them. It is used for relapse prevention following complete detoxification from opioids. Naltrexone prevents opioid drugs from binding to and activating opioid receptors, thus blocking the euphoria the user would normally feel. It also results in withdrawal symptoms if recent opioid use has occurred. It can be taken daily in an oral tablet form or as a once-monthly injection given in a doctor’s office. Two of the three medications used to treat opioid use disorders— methadone and buprenorphine—are drugs that carry a potential for misuse. Under the Controlled Substances Act (CSA), treatment involving these medications can take place in certain authorized settings: as part of federally regulated OTPs or in other settings, such as a physician’s office, within certain restrictions. OTPs. OTPs provide MAT, including methadone and buprenorphine, for people diagnosed with an opioid use disorder. Methadone may generally only be administered or dispensed within an OTP, as prescriptions for methadone cannot be issued when used for opioid use disorder treatment. Buprenorphine may be administered or dispensed within an OTP, or may also be prescribed by a qualifying practitioner who has received a waiver from SAMHSA. Naltrexone is not a controlled substance and can be used in OTPs and other settings. Office-Based and Other Settings. Under a Drug Addiction Treatment Act of 2000 (DATA 2000) waiver, practitioners may prescribe buprenorphine to up to 30 patients in the first year of their waiver, 100 patients in the second year, and up to 275 patients in the third year. Practitioners at the 275-patient level must meet additional qualifications and requirements. Naltrexone does not have similar restrictions. HHS has implemented five key efforts from 2015 through August 2017 that focus on expanding access to MAT for opioid use disorders. Four of these are grant programs, including programs focused on health centers or primary care practices in rural areas. Targeted Capacity Expansion: Medication Assisted Treatment – Prescription Drug and Opioid Addiction (MAT-PDOA). This grant program is administered by SAMHSA and provides funding to states to increase their capacity to provide MAT and recovery support services to individuals with opioid use disorders. Grant recipients are expected to identify a minimum of two high-risk communities within the state and partner with local government or community- based organizations to address the MAT-related treatment needs in these communities. Among other things, recipients are to use outreach and other engagement activities to increase participation in and access to MAT for diverse populations at risk for opioid use disorders. In August 2015, SAMHSA awarded 3-year grants to 11 states, under which each of the states will receive up to $1 million in each grant year. In September 2016, SAMHSA awarded 11 additional 3-year grants to other states. Total funding is expected to be up to $66 million for all 22 grants. SAMHSA announced the availability of up to 5 additional 3-year grants for fiscal year 2017. Applications for these grants of up to $2 million per year were due in July 2017 and as of August 2017 they had not been awarded. Substance Abuse Service Expansion Supplement to Health Centers. This grant program is administered by HRSA and provides funds for existing health centers to improve and expand their delivery of substance abuse services, including services with a specific focus on MAT for opioid use disorders in underserved populations. Health centers that receive these grants are required to increase the number of patients with health center-funded access to MAT for opioid use or for other substance abuse disorders treatment by adding at least one full-time substance abuse provider and supporting new or enhanced existing substance abuse services. HRSA awarded 2-year grants in March 2016 to 271 health centers. According to HRSA documents, total funding could be up to $200 million for all grants over 2 years. HRSA announced the availability of another set of grants to health centers for fiscal year 2017. Applications for these grants were due in July 2017, and as of August 2017 they had not been awarded. Increasing Access to Medication-Assisted Treatment in Rural Primary Care Practices. This grant program is administered by AHRQ and funds demonstration research projects that aim to expand access to MAT for opioid use disorders in primary care practices in rural areas of the United States. Grant recipients are expected to recruit and engage primary care providers and their practices, provide training, and support physicians and their practices in initiating treatment. The program also identifies and tests strategies for overcoming the challenges associated with implementing MAT in primary care settings and creates training and other resources for implementing MAT. AHRQ awarded these 3-year grants of up to $1 million per year to four recipients—the recipients are teams of state health departments, academic health centers, local community organizations, physicians, and others—with project start dates of September 30, 2016. According to AHRQ documents, total funding is expected to be up to $12 million for the four grants over 3 years. State Targeted Response to the Opioid Crisis Grants (Opioid STR). This grant program is administered by SAMHSA and provides funding to states and others to increase access to treatment services for opioid use disorders, including MAT; reduce unmet treatment needs; and reduce opioid overdose deaths. Grant recipients are expected to implement or expand access to evidence-based practices, particularly the use of MAT, and to report on the number of people who receive opioid use disorder treatment, the number of providers implementing MAT, and the number of providers trained to use MAT. SAMHSA awarded 2-year grants starting in May 2017 to 50 states, the District of Columbia, four U.S. territories and the free associated states of Micronesia and Palau. According to SAMHSA documents, total funding could be up to $970 million for all grants over 2 years. Figure 1 displays the implementation timeframes, the number of grants, and funding levels for the four HHS grant programs related to MAT. As the figure shows, some of these awards were made in fiscal year 2015, while others were made as recently as May 2017. As of August 2017, these efforts were ongoing. In addition to these four grant programs, HHS’s fifth key effort increases treatment capacity by expanding the waivers that practitioners may receive to prescribe buprenorphine. Specifically, SAMHSA issued a regulation that became effective August 8, 2016 increasing the number of patients that eligible practitioners can treat with buprenorphine outside of an OTP (e.g., in an office-based setting). Previously, qualified practitioners could request approval to treat up to 30 patients at a time, and after 1 year the limit could increase to 100 patients at a time upon SAMHSA approval. The new regulation expanded access to MAT by allowing eligible practitioners who have had waivers to prescribe buprenorphine to 100 patients for at least 1 year to request approval to treat up to 275 patients thereafter. Similarly, SAMHSA has implemented provisions of the Comprehensive Addiction and Recovery Act of 2016 (CARA) that expanded the types of practitioners who can receive a waiver to prescribe buprenorphine in an office-based setting to include qualifying nurse practitioners and physician assistants. CARA generally requires that these nurse practitioners and physician assistants complete 24 hours of training to be eligible for a waiver. According to HHS documents, as of early 2017, nurse practitioners and physician assistants who have completed this training could request a waiver from SAMHSA to treat up to 30 patients at a time. In addition to its five key efforts focused specifically on expanding access to MAT for opioid use disorders, HHS has other efforts with broader focuses, such as treating multiple types of substance abuse. While these efforts are not specifically focused on expanding access to MAT for opioid use disorders, they may result in expanded access to MAT. For example, CMS has approved section 1115 Medicaid demonstration projects to allow states to undertake comprehensive reforms of their delivery of substance abuse services, including provisions to enhance the use of MAT for opioid use disorders. In July 2015, CMS issued a state Medicaid Director letter informing states that they may seek approval of section 1115 demonstrations to undertake comprehensive substance use service reforms. According to CMS, all participating states are using the demonstration authority to develop a full continuum of care for individuals with substance abuse disorders, including coverage of short-term residential treatment services not otherwise covered by Medicaid. In addition, FDA has programs to help expedite development and to provide for faster review of marketing applications for certain drugs. According to FDA, it has conducted expedited reviews of Suboxone (buprenorphine and naloxone sublingual film), Vivitrol (extended release naltrexone injection) and Probuphine (buprenorphine subdermal implant). According to some federal officials and other stakeholders that we interviewed, as part of efforts to expand access to MAT for opioid use disorder, steps are being taken to prevent the possibility that the MAT medications could, in some cases, be diverted for illicit use, misuse, or for purposes not intended by a prescriber. For example, OTPs and practitioners who request and receive a waiver to prescribe buprenorphine to treat up to 275 patients outside of an OTP setting are required under federal regulations to maintain a diversion control plan. In addition, the MAT-PDOA grant program explicitly requires grant recipients to implement a diversion control plan, though the other grant programs do not have similar additional requirements. (See appendix I for an overview of the diversion control plan requirements for OTPs and the practitioners who prescribe buprenorphine outside of an OTP.) The 2016 Surgeon General’s report on Alcohol, Drugs, and Health noted that decades of research have shown that the benefits of MAT greatly outweigh the risks associated with diversion, and that withholding these medications greatly increases the risk of relapse to illicit opioid use and overdose death. HHS officials told us that as of August 2017, the department is in the process of finalizing its approach for evaluating the implementation of its agencies’ collective efforts to address the opioid epidemic that were undertaken as part of the HHS Opioid Initiative and will continue under the new administration’s Opioid Strategy. HHS officials provided a draft of the evaluation’s schedule. According to the officials, the evaluation will include, but not be limited to, efforts to expand access to MAT. In September 2016, HHS awarded a 2-year contract to Research Triangle Institute International (RTI) to evaluate HHS agencies’ collective efforts. HHS officials told us that they are still working with RTI to finalize the evaluation approach given new leadership priorities. Specifically, in April 2017, the new Secretary of HHS announced a revised strategy for addressing the opioid epidemic that will continue to address access to MAT for opioid use disorders but also include additional priority areas. According to HHS officials, to be responsive to the new priorities, the evaluation will focus initially on whether HHS’s efforts have been implemented as intended, and officials expect the evaluation to also provide information on any challenges HHS has faced in implementing these efforts. According to HHS officials, while the evaluation of MAT expansion efforts will use information from several sources, they have not yet determined exactly which information will be used or how it will be used. This information may include, for example, results from a separate, planned evaluation of one of the grant programs, Opioid STR, as well as other information HHS agencies collect as part of their ongoing monitoring efforts for each of their individual MAT grant programs. While the reporting requirements vary across the four MAT grant programs, the grantees provide HHS with information related to expanding access to MAT. Specifically, Targeted Capacity Expansion: Medication Assisted Treatment – Prescription Drug and Opioid Addiction (MAT-PDOA): Every 6 months, grant recipients are expected to submit progress reports to SAMHSA on the planned and actual number of patients treated, as well as information on other performance measures. Increasing Access to Medication-Assisted Treatment in Rural Primary Care Practices: Grant recipients are expected to submit quarterly progress reports to AHRQ with various information, such as information on the number of physicians who have been certified to prescribe buprenorphine and the number of primary care practices successfully initiating the delivery of MAT services as a result of the grant project. Substance Abuse Service Expansion Supplement to Health Centers: Health centers that received these grants were expected to submit quarterly progress reports to HRSA through the second quarter of 2017 on the number of physicians who have obtained a DATA 2000 waiver and the number of patients who received MAT from these physicians. Health centers must now report these data elements in their annual performance reporting along with information on the number of certified nurse practitioners and physician assistants who have received a DATA 2000 waiver. State Targeted Response to the Opioid Crisis Grants (Opioid STR): Every 6 months, grant recipients are expected to submit progress reports to SAMHSA on the number of individuals who receive opioid use disorder treatment, the number who receive opioid use disorder recovery services, and the number of providers implementing MAT, among other measures. While HHS’s evaluation will focus on whether HHS’s efforts have been implemented as intended, officials told us that in the future an evaluation may also focus on the effectiveness of these efforts, including the effectiveness of efforts to expand access to MAT. Doing so would be consistent with federal standards for internal control, which call for agencies to evaluate results. HHS has some of the information that could be used in a future evaluation of the effectiveness of its efforts to expand access to MAT. In particular, an HHS document describing the department’s fiscal year 2016 – 2017 goals identifies expanding MAT access as an important strategy for the success of HHS’s longer-term goal of reducing opioid use disorders and opioid overdoses. In addition, HHS has identified three potential ways to measure access to MAT: the number of prescriptions for MAT medications, the treatment capacity of practitioners who are authorized to prescribe buprenorphine for opioid use disorders through a DATA 2000 waiver, and the treatment capacity of OTPs certified to administer methadone and other medications. In addition, HHS has data that could be useful for tracking progress in these areas (see table 1). However, HHS has not adopted specific performance measures with targets specifying the magnitude of the increases HHS hopes to achieve through its efforts to expand access to MAT, and by when. For example, HHS has not established a long-term target specifying the percentage increase in the number of prescriptions for buprenorphine HHS would like to achieve, which would help to show whether efforts by HHS and others are resulting in sufficient progress in increasing prescriptions for this MAT medication. HHS has also not chosen a specific method of measuring treatment capacity or established targets associated with it, which would help to show whether a sufficient number of providers are becoming available to evaluate and treat patients who may benefit from MAT. Without specifying these performance measures and associated targets, HHS will not have an effective means to determine whether its efforts are helping to expand access to MAT. The lack of such performance measures with associated targets is inconsistent with federal internal control standards that specify that management should define objectives and evaluate results. According to these standards, using performance information such as performance measures can help agencies monitor results and determine progress in meeting program goals. In the context of HHS’s efforts to expand access to MAT, establishing appropriate performance measures with associated targets would allow HHS to determine whether its efforts are making sufficient progress or whether they need to be improved. Gauging this progress is particularly important, given the large nationwide MAT treatment gap identified in 2015 between the total number of individuals who could benefit from MAT and the limited number who can access it based on provider availability. This gap was estimated at nearly 1 million people as of 2012, and according to HHS officials and other stakeholders, lack of providers continues to be a challenge. Until HHS establishes performance measures with associated targets for the factors related to access to MAT, the department will be unable to evaluate its progress expanding access to MAT for opioid use disorders. In addition, as of August 2017, HHS has not finalized its approach for the planned evaluation activities, including timeframes. ASPE officials said that timeframes for a finalized evaluation approach had not been established because they were still working with RTI to finalize the evaluation approach given the new leadership priorities. When we spoke with the officials, they provided us with a draft evaluation schedule that covered the contract period ending September 2018. As of October 2017, HHS had not provided a finalized evaluation approach or schedule. Federal internal controls call for management to establish and operate monitoring activities and evaluate results. Without an implementation timeframe for the evaluation’s activities, HHS increases the risk that its evaluation of its agencies’ efforts will not be completed as expeditiously as possible, including an evaluation of HHS’s efforts to expand access to MAT. Officials from selected state health departments and behavioral health agencies, private health insurers, and national associations reported using several different efforts to help expand patients’ access to MAT for opioid use disorders. All of the stakeholders we interviewed reported conducting outreach efforts to communicate information about the importance of MAT and how to access it, or providing training to educate providers on prescribing MAT medications. Efforts by states. State health officials we spoke to described several planned or ongoing efforts to expand access to MAT, some of which are supported by federal funding, including federal grant programs. Officials from all five selected states told us that they are offering outreach to and training for providers to help expand access to MAT. For example, several state officials told us that they are promoting training to (1) encourage physicians to obtain authorization (DATA 2000 waivers) to prescribe buprenorphine and (2) encourage physicians with waivers to treat patients up to their patient limit or to request a higher patient limit. According to the stakeholders, all five selected states have implemented or are planning to implement a health care delivery model or approach that will expand access to MAT. Specifically, these models or approaches focus on integrating the use of MAT into primary care settings. For example, health officials from three states described use of a hub-and-spoke model. This model generally involves centralized intake and initial management of patients at a “hub” (e.g., an OTP) and then connecting these patients to community providers at “spokes” (e.g., primary care clinics) for ongoing care, with ongoing support provided by the hub as needed. Additionally, officials from two states described offering remote MAT-related consultations through telehealth that connects patients in rural areas with addiction specialists. According to a 2017 Healthcare Fraud Prevention and Partnership whitepaper, telehealth expands the reach of the addiction professional workforce and the existing pool of MAT providers, and it supports remote forms of behavioral therapy to make trained professionals more accessible to those in underserved or isolated communities. Officials from three states described focusing their MAT expansion efforts in various settings, such as in the criminal justice setting and emergency room departments. State health officials from four of the five states told us that programs in their states are using peer specialists (individuals who have successfully recovered from substance abuse disorders) in emergency rooms and other settings to engage with addicted patients and refer them to addiction specialists or behavioral health counselors. Officials from the selected states said that some of these and other efforts are funded through federal sources, such as MAT expansion grants awarded by SAMHSA, or with state funds to the extent they are available. Efforts by private health insurers. Officials from private health insurers reported that they are expanding access to MAT through outreach or training for providers and through the following three efforts: Eliminating the need for prior authorization to prescribe MAT medications. Officials from three insurers reported removing prior authorization requirements for MAT medications, thereby making it easier for patients to access needed MAT medications more readily, rather than undergoing a waiting period for approval to receive the medications. Other private health insurers told us that they continue to require prior authorization, intended for safety reasons and to reduce drug misuse, and officials from one insurer told us that they will allow a patient to access a limited amount of MAT medications for a period of 24 to 72 hours while making a determination about the appropriate treatment services for the patient. Modifying health benefit coverage. Officials from one private health insurance plan told us that the company is redesigning the benefit coverage for methadone and has removed member copays. This effort is intended to make MAT medications more affordable and allow members who are not able to use buprenorphine to have an alternative, such as methadone, that is not cost-prohibitive. Incentivizing providers and health insurance plan members to use MAT. Officials from four private health insurance plans described plans to offer incentives to providers or patients to use MAT. For example, officials from three health plans stated that they are offering alternative payment models or paying higher rates to providers that offer MAT, and another private health insurer is offering incentives to its members who are enrolled in behavioral health programs that provide access to MAT. Efforts by national associations. Officials we interviewed from the national associations—including the American Society of Addiction Medicine, the National Governors Association, and the Association of State and Territorial Health Officials—told us that they are helping to expand access to MAT through outreach and training for their members and by developing tools and resource guides for their members. An official from one association told us that it shares federal grant announcements, including those that are focused on expanding access to MAT, with its members. Officials from another association said it provides training to providers on how to appropriately prescribe MAT medications. In addition, officials from one association told us that they developed an opioid-related road map that identifies examples of strategies—including MAT—that state policymakers can use in their ongoing efforts to address the opioid epidemic. Examples of strategies include reducing the stigma associated with MAT through educating the public and potential providers. Another strategy in the road map is changing payment policies to expand access to MAT services, such as ensuring that Medicaid and other state health programs adequately cover all MAT medications and behavioral interventions and encouraging or requiring commercial health plans to adopt similar policies. HHS funds grant programs and has taken other steps to expand access to MAT, which has been shown to be effective in reducing the prevalence of opioid use disorders and with them, the likelihood of drug overdoses. HHS’s Opioid Initiative began in 2015, and the grants that support it are ongoing, so it is likely too early to determine how effective HHS’s efforts have been in expanding access to MAT and in meeting HHS’s other priorities related to addressing the opioid epidemic. According to HHS, access to MAT can be measured in terms of the number of prescriptions for MAT and by the treatment capacities of OTPs and practitioners who are authorized to prescribe buprenorphine. Our review suggests, however, that HHS may not be ready to perform this evaluation. While HHS told us that it may evaluate the effectiveness of its efforts in the future, the department has not established performance measures with targets that would specify the results that HHS hopes to achieve through its efforts, and by when. Furthermore, HHS has not established timeframes for the activities that will make up its planned evaluation of whether HHS’s efforts have been implemented as intended. Without performance measures with targets and evaluation timeframes, HHS increases the risk that the evaluation will not be completed in a timely manner or that HHS will not know whether its MAT- related efforts are successful or whether new approaches are needed. The evaluation is particularly important, given the hundreds of millions of dollars HHS has invested in its MAT-related grant programs. We are making the following two recommendations to HHS. The Assistant Secretary for Planning and Evaluation should establish performance measures with targets related to expanding access to MAT for opioid use disorders. (Recommendation 1) The Assistant Secretary for Planning and Evaluation should establish timeframes in its evaluation approach that specify when its evaluation of efforts to expand access to MAT will be implemented and completed. (Recommendation 2) We provided a draft of this report to HHS for review, and HHS provided written comments, which are reprinted in appendix II. HHS also provided technical comments, which we incorporated as appropriate. In its written comments, HHS concurred with both of our recommendations. Specifically, for our first recommendation to establish performance measures with targets related to expanding access to MAT for opioid use disorders, HHS stated that developing such measures is appropriate and that the department will continue to work to develop robust performance measures, including measures related to MAT, as part of its overall Opioid Strategy, which includes the department’s most recent efforts to address the opioid epidemic. For our second recommendation to establish timeframes in its evaluation approach that specify when its evaluation of efforts to expand access to MAT will be implemented and completed, HHS agreed that timeframes are important to any evaluation. HHS noted that its evaluation is being conducted under a 2-year contract that is scheduled to end in September 2018. HHS has also provided us with a draft evaluation schedule. We clarified in our report, however, that HHS has not yet provided a finalized approach for the planned evaluation or a finalized schedule establishing timeframes for the activities that will make up the evaluation. Until it finalizes its evaluation approach and establishes related timeframes, HHS increases the risk that it will not complete its planned evaluation by September 2018. We are sending copies of this report to the HHS, and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-7114 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix III. According to the Department of Health and Human Services, a diversion control plan is a set of documented procedures intended to reduce the possibility that controlled substances will be transferred or used illicitly. Opioid treatment programs (OTPs) and practitioners who prescribe buprenorphine at the highest patient level through a Drug Addiction Treatment Act of 2000 (DATA 2000) waiver are required to have these plans. OTPs are programs that may administer or dispense medication- assisted treatment (MAT) for people diagnosed with an opioid use disorder, including the use of methadone and buprenorphine. In addition, under a DATA 2000 waiver, practitioners may prescribe buprenorphine for patients, up to a 30-, 100-, or 275 patient limit. An OTP must maintain a current diversion control plan that contains specific measures to reduce the possibility of diversion of controlled substances from legitimate treatment use. Per federal guidelines, the goal of the diversion control plan is to reduce the scope and significance of diversion and its impact on communities. The guidelines state that each OTP’s diversion control plan should make every effort to balance diversion control against the therapeutic needs of the individual patient. They also state that diversion control plans should address at least four general areas of concern: program environment, dosing and take-home medication, prevention of multiple program enrollment, and prescription medication misuse. The guidelines include details about each of these areas: Program environment: Diversion in the program environment can be deterred and detected by regular surveillance and the monitoring of areas in and around the program, where opportunities for diversion may exist. A visible human presence at a program’s location gives community members the opportunity to approach staff with concerns and communicates the program’s commitment to assuring a safe environment and a positive impact on the surrounding community. Dosing and take-home medication: In the area of dosing and take- home medication, diversion control encompasses careful control of inventory, attentive patient dosing, and close supervision of take- home medication. Observing a patient take his or her dose and having each of them drink and speak after dosing are fundamental components of diversion control. Take-home dosing should be provided with careful attention to regulatory compliance and the therapeutic benefit and safety these regulations are meant to promote. Prevention of multiple program enrollment: Reasonable measures should be taken to prevent patients from enrolling in treatment provided by more than one clinic or individual practitioner. An OTP, after obtaining patient consent, may contact other OTPs within a reasonable geographic distance (100 miles) to verify that a patient is not enrolled in another OTP. Misuse of prescription medication: The misuse of prescription medication has become an area of great concern nationally and impacts diversion control planning at OTPs. All OTP physicians and other healthcare providers, as permitted, should register to use their respective state’s prescription drug monitoring program (PDMP) and query it for each newly admitted patient prior to initiating dosing. The PDMP should be checked periodically (for example, quarterly) through the course of each individual’s treatment and, in particular, before ordering take-home doses as well as at other important clinical decision points. SAMHSA’s best-practice guidelines for using buprenorphine for treating opioid use disorders include multiple references to diversion, including monitoring for diversion, storage of this medication to minimize diversion, and use of formulations that may be less likely to be diverted. Specifically, the best practices state that, when possible, practitioners should use the combination buprenorphine/naloxone product, which increases safety and decreases the likelihood of diversion and misuse. Further, physicians who request and receive a waiver to prescribe buprenorphine to treat up to 275 patients outside of an OTP are required to have a diversion control plan. According to an HHS official, as of July 13, 2017, roughly 3,330 of the over 39,000 practitioners with a waiver had a 275-patient limit waiver. The majority of these practitioners, just over 27,000, have a 30-patient limit. According to SAMHSA guidance, the diversion plan should contain specific measures to reduce the possibility of diversion of buprenorphine from legitimate treatment use and should assign specific responsibilities of the medical and administrative staff of the practice setting for carrying out these measures. Further, the guidance states that the plan should address how: the environment at the practice setting can prevent onsite diversion; to prevent diversion with regard to dosing and take-home medication; and to prevent patients from receiving a prescription from more than one practitioner and later diverting some of the prescribed medication. Elizabeth H. Curda, Director, (202) 512-7114 or curdae@gao.gov. In addition to the contact name above, Will Simerl, Assistant Director; Natalie Herzog, Analyst-in-Charge; La Sherri Bush; and Emily Wilson made key contributions to this report. Also contributing were Muriel Brown, Krister Friday, Sandra George, and Christina Ritchie.", "summary": "The misuse of prescription opioid pain relievers and illicit opioids, such as heroin, has contributed to increases in overdose deaths. According to the most recent Centers for Disease Control and Prevention data, in 2015 over 52,000 people died of drug overdose deaths, and about 63 percent of them involved an opioid. For those who are addicted to or misuse opioids, MAT has been shown to be an effective treatment. GAO was asked to review HHS and other efforts related to MAT for opioid use disorders. This report (1) describes HHS's key efforts to expand access to MAT, (2) examines HHS's evaluation, if any, of its efforts to expand access to MAT, and (3) describes efforts by selected stakeholders (states, private health insurers, and national associations) to expand access to MAT. GAO gathered information from HHS officials as well as a non-generalizable selection of 15 stakeholders selected based on their MAT expansion activities, among other factors. GAO also assessed HHS's evaluation plans using internal control standards for defining objectives and evaluating results. In an effort to reduce the prevalence of opioid misuse and the fatalities associated with it, the Department of Health and Human Services (HHS) established a goal to expand access to medication-assisted treatment (MAT). MAT is an approach that combines behavioral therapy and the use of certain medications, such as methadone and buprenorphine. HHS has implemented five key efforts since 2015 that focus on expanding access to MAT for opioid use disorders—four grant programs that focus on expanding access to MAT in various settings (including rural primary care practices and health centers) and regulatory changes that expand treatment capacity by increasing patient limits for buprenorphine prescribers and allowing nurse practitioners and physician assistants to prescribe buprenorphine. Some of the grant awards were made in 2015, while others were made as recently as May 2017. (See figure.) As of August 2017, efforts under all the grant programs were ongoing. Grant recipients can use funding to undertake a range of activities, such as hiring and training providers and supporting treatments involving MAT. In addition, certain providers and grant recipients are required to develop plans for preventing MAT medications from being diverted for nonmedical purposes. HHS officials told GAO that as of August 2017, the department was in the process of finalizing its plans to evaluate its efforts to address the opioid epidemic. In September 2016, HHS awarded a contract to conduct the evaluation. HHS officials told GAO that they are still working with the contractor to finalize the evaluation approach and that it will focus on whether HHS's efforts to address the opioid epidemic have been implemented as intended. HHS officials said that in the future, HHS may also evaluate whether, or to what extent, its efforts have been effective in expanding access to MAT, in addition to evaluating implementation. While HHS has some of the information that could be used in a future evaluation of the effectiveness of its efforts to expand access to MAT, it has not adopted specific performance measures with targets specifying the magnitude of the increases HHS hopes to achieve through its efforts to expand access to MAT, and by when. For example, HHS has not established a long-term target specifying the percentage increase in the number of prescriptions for buprenorphine HHS would like to achieve, which would help to show whether efforts by HHS and others are resulting in a sufficient number of prescriptions for MAT medications. HHS has also not chosen a specific method of measuring treatment capacity or established targets associated with it, which would help determine whether a sufficient number of providers are becoming available to evaluate and treat patients who may benefit from MAT. Without specifying these performance measures and associated targets, HHS will not have an effective means to determine whether its efforts are helping to expand access to MAT or whether new approaches are needed. Gauging this progress is particularly important given the large gap identified nationwide between the total number of individuals who could benefit from MAT and the limited number who can currently access it based on provider availability. In addition, GAO also found that as of August 2017, HHS had not finalized its approach for its planned evaluation activities, including timeframes. Without timeframes for the evaluation's activities, HHS increases the risk that the evaluation will not be completed as expeditiously as possible. In addition to HHS efforts to expand access to MAT, officials from selected states, private health insurers, and national associations reported using several efforts to expand patients' access to MAT for opioid use disorders. For example, several stakeholders provided GAO with the following examples of their efforts: States. State health officials from all five selected states have implemented or are planning approaches that focus on integrating the use of MAT into primary care, such as by providing services for centralized intake and initial management of patients or through telehealth that connects patients in rural areas with addiction specialists in a different location. Private health insurers. Three private health insurers reported removing prior authorization requirements for MAT medications so patients can avoid a waiting period before receiving the medications. National associations. Officials told GAO that they are conducting outreach and training for their members and developing tools and resource guides. For example, one association developed a road map with strategies that state policymakers can use to address the opioid epidemic, including strategies for reducing the stigma associated with MAT through educating the public and potential providers. GAO recommends that HHS take two actions: (1) establish performance measures with targets related to expanding access to MAT, and (2) establish timeframes for its evaluation of its efforts to expand access to MAT. HHS concurred with both recommendations.", "document_type": "gao"}
{"report": "The drug industry encompasses a variety of companies involved in the research, development, distribution, and payment for chemically synthesized and biologic drugs. For the purpose of our review, the drug industry includes pharmaceutical companies that traditionally concentrate on developing or manufacturing drugs derived from chemicals and biotechnology companies that develop or manufacture biologics—more complex drugs derived from living cells. The federal government plays a role in various aspects of the drug supply chain as well. To market drugs in the United States, drug companies must apply and receive approval from the FDA that their drugs are safe and effective. The federal government also supports R&D for new drugs, such as through grants by the National Institutes of Health (NIH), NSF, and other agencies, and through tax incentives administered by the IRS. In addition, mergers and acquisitions affecting the drug industry are subject to review by the federal government to ensure compliance with applicable antitrust laws. The process of bringing a new drug to the market is long and costly and involves multiple public and private entities that fund and perform R&D. (See fig. 1.) For a new drug, the entire drug discovery, development, and review process can take up to 15 years, often accompanied by high costs. The process consists of several main stages: Basic research: This is research aimed at acquiring new knowledge or understanding without immediate commercial application or use. Basic research is often federally funded and conducted to better understand the workings of disease, which increases the potential of discovering and developing innovative drugs. Drug discovery: This is undertaken by numerous researchers from drug companies, academia, and government searching for and identifying promising chemical entities, or chemical and biological compounds, capable of curing or treating diseases. Preclinical testing: During preclinical testing, compounds are tested in laboratories and in animals to predict whether a drug is likely to be safe and effective in humans. If the compound is found to be promising, a drug company may decide to test it as a new drug on humans and it proceeds to the clinical trials stage. Before doing so, the company must submit to FDA and have in effect an investigational new drug application that summarizes the data that have been collected on the compound and outlines plans for the clinical trials. Clinical trials: Clinical trials test potential drugs in human volunteers to determine if they should be approved for wider use in the general population. An investigational new drug typically goes through three phases of clinical trials before it is submitted to FDA for marketing approval. Clinical trials proceed through Phases I, II, and III, beginning with testing in a small group of healthy volunteers and then moving on to testing in larger groups of patients whom the drug is intended to treat to assess the compound’s effectiveness, rate of adverse events, and uses in combination with other drugs. FDA Review and Approval: To market a drug in the United States, drug companies submit their research in a new drug application (NDA) or biologic license application (BLA) to FDA, which then reviews and approves the drug for marketing if it is shown to be safe and effective for its intended use. An NDA is an application to market a new chemically synthesized drug—either an innovative drug or a variation of a previously marketed drug. A BLA is an application for a license to market a new biological product (complex drugs derived from living organisms). Companies may also submit a supplement to an already approved NDA or BLA—known as an efficacy supplement—to propose changes to the way an approved drug is marketed or used, such as adding or modifying an indication or claim, revising the dose or dose regimen, providing a new route of administration, or changing the marketing status from prescription to over-the-counter use. For the purposes of its review, FDA classifies certain NDAs as new molecular entities—products that contain active chemical substances that have not been approved by FDA previously—and certain BLAs as new therapeutic biologics. FDA generally considers drugs approved either as new molecular entities or new therapeutic biologics to be “novel” drugs—products that are often innovative and serve previously unmet medical needs or otherwise significantly help to advance patient care and public health. Post-approval: After FDA has approved a drug for marketing, the drug company may begin marketing and large-scale manufacturing of the drug. FDA also continuously monitors the safety of the drug which includes, amongst other activities, oversight of postmarket clinical studies that it can require or request companies to complete (known as phase IV clinical trials). Drug companies may also undertake these studies independently to identify modifications to the drug such as new delivery mechanisms or additional indications for use. The company may then submit a new application or supplement application with new clinical data to FDA to market the modification as a new drug, or market it for the new use. Patents and market exclusivity periods are two ways brand-name drug companies may recoup their R&D investments by limiting competition for specified periods of time. Typically, early in the R&D process, companies developing a new brand-name drug apply for a patent on the active ingredient and may additionally apply for patents on other aspects of the drug, such as the method of use, from the U.S. Patent and Trademark Office. Once a patent is granted, other drug companies are excluded from making, using, or selling the patented aspect of the drug during the term of the patent, which generally expires after 20 years from filing. In addition, federal law authorizes certain periods of exclusive marketing rights, or market exclusivity, for new FDA-approved drugs, during which time FDA generally cannot approve a similar competing version of the drug for marketing. These exclusivities are independent of the rights granted under patent and can relate to chemical entities never approved before by FDA (5 years of exclusivity); new biologics (12 years); approval of a supplement for a new condition or use or other change to a previously approved chemically synthesized drug based on new clinical studies (3 years); and orphan drugs—drugs designated to treat rare diseases or conditions (7 years); among others. Patent protection and market exclusivity are independent of one another and can run concurrently or not. When brand-name drug products’ patents expire and exclusivity periods end, similar versions of the drug product that have been approved by FDA may enter the market. These are referred to as generics for chemically synthesized drugs and biosimilars for biologics. The Drug Price Competition and Patent Term Restoration Act of 1984—commonly known as the Hatch-Waxman Amendments—facilitated earlier, and less costly, market entry of generic drugs. A generic drug must generally be demonstrated to be equivalent to the brand-name drug product in active ingredient, dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use. For biologics, the Biologics Price Competition and Innovation Act of 2009 provided an abbreviated pathway for companies to obtain approval of “biosimilar” and “interchangeable” biological products. A biosimilar must be demonstrated to be highly similar to an already approved biological product and to have no clinically meaningful differences in terms of safety and effectiveness from the reference product. See table 1 for a description of drug application types. In addition to incentivizing drug development through patent and market exclusivity, the federal government supports new drug research both directly, through grants from—and intramural research by—agencies such as NIH and indirectly through tax incentives for companies that develop new drugs. Specifically, the Internal Revenue Code includes incentives for research-related spending in three ways: through two income tax credits—the credit for clinical testing expenses for certain drugs for rare diseases (known as the orphan drug credit) and the credit for increasing research activities (known as the research credit)—and through special methods for treatment and reporting of research and experimental expenditures, including current-year deduction to arrive at net income. In general, the credit incentives are available to companies with qualified research spending in the United States. Companies include businesses organized as corporations or non-corporate businesses such as partnerships. These provisions are described below: Orphan drug credit: Companies may claim the orphan drug credit for half the “qualified clinical testing expenses” for drugs intended to treat rare diseases. Expenditures that give rise to the orphan drug credit may include expenses related to testing outside the United States. A company may claim foreign clinical testing expenses if there is an insufficient testing population in the United States to test the safety and efficacy of the drug. The orphan drug credit is nonrefundable; that is, while the credit can be used to reduce a company’s income tax liability generally, the credit cannot be used to generate a refund if the business has no tax liability or fully used if the credit would reduce tax liability below zero. The credit is also a component of and subject to the limitations of the general business credit. Research credit: Companies may claim a research credit for qualified research expenditures they undertake in a given year that exceed a threshold or base amount. This incremental design of the credit is intended to create an incentive for companies to do more research than they otherwise would. Qualified research expenses are certain expenses for qualified research incurred by the taxpayer during the taxable year in carrying on a trade or business. Qualified research is research that is undertaken for the purpose of discovering information that is technological in nature and the application of which is intended to be useful in the development of a new or improved business component of the taxpayer. In general, substantially all the activities that constitute a process of experimentation relating to new or improved functions, performance, or reliability or quality are qualified research. The rate of credit can be 14 or 20 percent. Like the orphan drug credit, the research credit is nonrefundable and is a component of, and subject to, the limitations of the general business credit. Deductions of qualified research expenses: If elected, the tax code allows businesses to currently deduct “research or experimental expenditures” from gross income in the tax year they are incurred rather than depreciate (or amortize) the assets the R&D created over time. Research and experimental expenditures include all costs incident to research, including research conducted outside the United States. Since “qualified research expenses” and “qualified clinical testing expenses” are a particular subset of research and experimental expenditures, expenditures that can give rise to either the research or orphan drug tax credits can be deducted in the year that they occur. However, these deductions must be reduced by the amount of tax credits claimed in order to prevent expenses from both generating a tax credit and being deducted from income. The distribution of, and payment for, prescription drugs involve interactions and negotiated transactions among multiple commercial entities along the supply chain from the drug manufacturer to the consumer (see fig. 2). Brand-name and generic drug manufacturers typically sell their drugs to drug wholesalers, who in turn sell the drugs to retail pharmacies or to health care providers (such as hospitals, clinics, and physicians). Pharmacies or providers dispense or administer prescription drugs to consumers. Most consumers purchasing drugs pay a portion of the drug’s price in the form of a copayment or coinsurance, with the specifics of this cost sharing dictated by the consumers’ insurance plan. Insurance plans often use pharmacy benefit managers (PBMs) to help them manage their prescription drug benefits, including negotiating prices with manufacturers, processing claims, and negotiating with retail pharmacies to assemble networks where the beneficiaries can fill prescriptions. PBMs negotiate with manufacturers for rebates on behalf of the insurance plan based on market share, volume, and formulary placement. PBMs also contract with pharmacies; contract terms and conditions may include specifics about negotiated reimbursement rates (how much the pharmacy will be paid for dispensed drugs) and payment terms. Health care providers may also negotiate with insurers for the drugs they administer. The price that payers, PBMs, and ultimately consumers pay for prescription drugs depends in part on the amount of competition and the purchasers’ negotiating power. The negotiating power is influenced by the ability to choose from competing drugs and the volume of drug purchased. According to economic experts, the usual mechanisms that enforce market discipline may not work in the same way in the health care market as they do in other markets. In most markets—automobiles, for example—consumers are expected to be conscious of the price of goods. If a company raises the price of its goods, consumers would likely purchase fewer goods, causing the company’s revenues to decline. However, in the health care market, the purchase of goods and services is largely influenced by health care providers, who may not be well- informed about, or incentivized to consider, the prices involved. In the case of drugs, some experts argue that marketing and advertising may further distort provider decision making. In addition, if the patients’ medical bills are largely paid by insurance plans (other than copayment or coinsurance costs), then patients’ demand may not be significantly influenced by changes in price to the extent that it might be in other markets where the consumers see and pay the bill themselves. Certain payment policies may also limit the negotiating power of insurers. For example, Medicare Part D is required to cover all drugs in six protected classes, which some experts argue reduces the negotiating power of its contractors (known as plan sponsors). In addition, some brand-name drug companies are providing coupons to consumers to mitigate patient drug costs when a company’s drugs are not covered by payer formularies or require higher patient costs than preferred drugs. Some research and experts we interviewed have noted that this practice erodes the negotiating power of insurers and the cost management utility of formularies, which may result in lower prices for the patient using the coupon but higher prices overall. In addition, patients and providers in many cases may not have clear information about the benefit relative to cost of one drug over another drug or treatment. Experts have said that consolidation as a result of mergers and acquisitions is one of multiple factors that could influence competition. Fewer companies producing and marketing drugs can lead to greater market dominance by certain companies and less competition. The Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) enforce federal antitrust laws that prohibit activities, such as price fixing and mergers and acquisitions where the effect may be substantially to lessen competition or tend to create a monopoly. Drug companies are subject to these antitrust laws. Companies are required to notify FTC and DOJ of certain pending mergers, also known as the premerger notification program. As part of its premerger review process, these agencies can approve mergers contingent on company divestiture of assets, including those related to products in development—a process known as a negotiated merger remedy. These agreements are subject to public notice and comment and result in an enforceable order. The goal of a merger remedy is to preserve or restore competition in the relevant markets. Although FTC and DOJ each have authority and responsibilities under the antitrust laws, FTC typically examines proposed drug industry mergers. In addition, FTC has authority to investigate and take action against unfair methods of competition in or affecting commerce, as well as mergers and acquisitions that may substantially lessen competition or tend to create a monopoly, including in the drug industry. Among the worldwide drug companies included in the data we reviewed, reported pharmaceutical and biotechnology revenues and profit margins for most companies grew from 2006 through 2015. The number of mergers and acquisitions among companies in the industry generally held steady from 2006 through 2015, but merger and acquisition deal values increased. Market concentration varied by the specific market level considered. Industry experts we interviewed noted that market pressures have driven structural changes in the industry. According to the data we reviewed, between 2006 and 2015 estimated aggregate worldwide pharmaceutical and biotechnology sales revenue for drug companies grew from $534 billion to $775 billion in real 2015 dollars (about 45 percent), with most of the growth occurring between 2006 and 2011. The largest 25 of these companies (by 2015 pharmaceutical and biotechnology revenue) saw their aggregate sales revenue increase from $448 billion in 2006 to $569 billion in 2015, or about 27 percent. Aggregate sales revenue for all other drug companies in our data grew more sharply, from $86 billion in 2006 to $206 billion in 2015—an increase of about 140 percent (see fig. 3). Drug companies’ average profit margins also grew from 2006 to 2015, though the trends differed for the largest 25 companies compared to the remaining companies in our data. Overall, about 67 percent of companies saw their profit margins increase between 2006 and 2015. While there was some fluctuation over time, the average profit margin was 17.1 percent in 2015 for all drug companies; profit margins were higher for the largest 25 companies (20.1 percent in 2015) than for all others (8.6 percent in 2015; see fig. 4). To better place large drug companies’ profit margins into context, we conducted a similar examination of profit margins for large companies in other industries, specifically software companies and the largest 500 companies (by 2015 total worldwide revenue as reported in Bloomberg) representing a wide range of industries. We included the software industry separately because, like the drug industry, it has been cited as having high R&D investment and low production and distribution costs, though caution should be taken in making this comparison. Among the largest 25 software companies (by 2015 software revenue), the average profit margin began at 21.7 percent in 2006 and remained relatively stable through 2014, before decreasing to 13.4 percent in 2015 (see fig. 5). As a broader comparison, the average profit margin among the largest 500 companies was consistently lower than the average among the largest 25 drug companies and software companies. Among the largest 500 companies, the average profit margin decreased from 8.9 percent in 2006 to 6.7 percent in 2015. The annual number of mergers and acquisitions involving drug companies generally held steady between 2006 and 2015, with some fluctuations in intervening years, based on our review of Bloomberg data. Overall, the number of transactions generally held steady, with 312 in 2006 and 302 transactions in 2015 (see fig. 6). The number of mergers and acquisitions involving one of the largest 25 companies (by 2015 pharmaceutical and biotechnology revenue) increased from 29 transactions in 2006 to 61 transactions in 2015. In contrast, the number of transactions in our data for the smaller drug companies decreased from 283 transactions in 2006 to 241 transactions in 2015. See appendix II for additional information on merger and acquisition activity of 10 large companies in the drug industry as of 2014. While the number of transactions generally held steady between 2006 and 2015, the total value of transactions completed over this period fluctuated considerably. These fluctuations were driven by a small number of high value transactions, which tended to occur among the largest 25 companies (see fig. 7). For example, in 2009, there were three transactions each valued above $20 billion in real dollars, all of which were conducted by companies in the largest 25: Pfizer Inc. acquired Wyeth LLC for about $71 billion, Merck & Co Inc. acquired Schering-Plough Corp. for about $56 billion, Roche Holding AG acquired Genentech Inc. for about $48 billion. In 2015, about half of the total merger and acquisition transaction value came from five transactions each valued over $10 billion in real dollars, including one very large transaction by Allergan for about $72 billion. The other four transactions also involved companies among the largest 25. Much as the total value of mergers and acquisitions fluctuated considerably from year to year, median disclosed transaction values generally increased between 2006 and 2015, with considerable fluctuation among years. For the overall drug industry, the share of total sales accounted for by the 10 largest companies—a measure of concentration—declined between 2007 and 2014, the years for which public data were available from QuintilesIMS. The largest 10 companies (by 2014 pharmaceutical revenue) had 48.9 percent of the drug industry’s sales revenue in 2007; by 2014, their share of the industry sales revenue declined to 38.2 percent. Concentration, which can be measured by share of sales, provides a basic indication of the competitiveness of companies in an industry or specified market level within an industry. Competition in the drug industry generally is examined at the level where products are viewed as substitutes, according to FTC officials. Substitutes can be products that are the same molecular entity or, in some cases, different molecular entities that treat the same condition. At levels narrower than the entire industry, such as drugs within the same therapeutic class or of the same molecular entity (levels that are more relevant to competition), concentration in shares of sales can be higher than in the overall industry. For example, EvaluatePharma reported that the three largest companies in the anti-diabetics market accounted for 67.5 percent of the sales in that market in 2014. Similarly, the three largest companies in the anti-rheumatics market accounted for 56.8 percent of the sales in that market in 2014, and the three largest companies in the anti-virals market accounted for 72.4 percent of the sales in that market, with the leading anti-viral manufacturer accounting for over half (52.8 percent) of worldwide anti-viral sales. Concentration can also vary for drugs of the same molecular entity, as some generic drugs may have different numbers of manufacturers than others. For example, as of 2017, 14 companies have approved ANDAs for lisinopril, a drug for hypertension—that is, 14 companies have generic versions of the drug approved for manufacture. By comparison, only one company has an approved ANDA for efavirenz, a drug used to treat HIV infection. Greater numbers of generic manufacturers generally reduce concentration, as generic manufacturers compete with one another in addition to brand-name manufacturers. More broadly, one recent study found that of the novel drugs approved in tablet or capsule formulation since the 1984 Hatch-Waxman Act and eligible for generic competition, more than one-third had three or fewer generic approvals. Experts we interviewed noted that market pressures such as rising R&D costs, fewer drugs in the R&D pipeline, and the growth in sales of generic drugs have driven various structural changes in the drug industry, such as in the types of acquisitions being sought. Not all companies respond to those pressures in identical ways. For example, some experts said that some companies that traditionally manufactured brand-name drugs are expanding into the manufacturing of generic drugs. These brand-name companies may acquire a generics manufacturer to adjust the portfolio of drugs they manufacture or gain access to a generics business. Similarly, some traditionally generic manufacturers are expanding into brand-name manufacturing to acquire product lines with more generous profit margins. For both brand-name and generic manufacturers, expanding the size of their drug portfolio may improve their bargaining position with PBMs, according to two economists we interviewed. Experts also said that traditionally large companies are increasingly relying on mergers and acquisitions to obtain access to new research and are conducting less of their own research in-house. In addition, experts told us that investment in the development of traditional chemically synthesized drugs has produced increasingly lower financial returns, resulting in some traditional pharmaceutical companies turning to invest more in the development of more complicated and costly biologics. Many experts highlighted the proliferation of biotechnology companies as large pharmaceutical companies seek to acquire promising new research developments. Many experts told us that market pressures have also driven some drug companies to move towards specialization in certain therapeutic areas, including through mergers and acquisitions. As one example, GlaxoSmithKline acquired most of Novartis’s vaccine business in 2015, bolstering its own line of vaccines and helping to raise its share of sales of the worldwide vaccine market. Simultaneously, Novartis acquired GlaxoSmithKline’s oncology business, enabling both companies to shed one line of business and focus on the newly acquired therapeutic areas. Experts again noted that one reason companies may be specializing through mergers and acquisitions is because of the increasing cost of R&D—acquiring promising new or developed research or product lines helps companies mitigate R&D investment risk. Acquiring existing lines of business from competitors within a therapeutic area may also help a company increase its presence in a particular therapeutic area. Another widely cited factor influencing structural changes in U.S. industries—including the drug industry—involves tax-influenced mergers, called corporate inversions. An inversion is a type of merger where a U.S. corporation merges with or acquires a company located in a foreign jurisdiction—often a lower-tax country—and reorganizes so the resulting parent corporation is located in the foreign country. This can reduce a corporation’s overall tax liability—often by reducing its U.S. tax liability. While taxes are one of many factors that may influence trends in mergers and acquisitions as discussed above, the incentive for drug companies to reduce tax burdens through inversions can be significant. In 2016, the Treasury Department issued new regulations to curb inversions. Pharmaceutical company-reported R&D spending grew slightly from 2008 through 2014, while federally funded spending decreased slightly over the period. Industry spending focused on drug development rather than earlier-stage research, whereas direct federal spending, such as through NIH grants, funded a greater amount of basic research. Claims for the orphan drug credit, one of several federal tax incentives encouraging drug development, increased sharply from 2005 through 2014. Biologics and orphan drugs accounted for an increasing share of new drug approvals from 2005 through 2016. Studies we reviewed and experts we interviewed suggested that potential revenues, costs, and policy incentives influenced brand-name drug company R&D investment decisions. Our analysis of industry survey data from NSF indicate that worldwide R&D spending by U.S.-owned pharmaceutical companies and U.S.-based R&D by foreign companies increased slightly (8 percent) in real dollars from $82 billion in 2008 to $89 billion in 2014, the years for which comparable data were available (see fig. 8). According to NSF survey data, the share of this spending that pharmaceutical companies paid others to perform also increased over the period. Estimates of worldwide R&D expenditures as a percentage share of total worldwide sales averaged 13 percent and ranged from 11.5 to 14.2 percent over the period 2008 to 2014. This amount, according to estimates from QuintilesIMS, is larger than the 7.6 percent of total pharmaceutical sales revenue that the industry spent on marketing and promotion in 2014; however, due to differences in the different sources’ methodology and data, publicly reported figures are not necessarily comparable. The NSF Business Research, Development, and Innovation Survey data indicated worldwide R&D spending for respondent biotechnology companies was $9.2 billion in 2009, dropped to $2.7 billion in 2010, rose to $6.7 billion in 2011, then decreased to $1.7 billion in 2013, the years for which worldwide data were available. The percentage of biotechnology company-reported R&D to worldwide biotechnology sales ranged widely from 43 percent in 2011 to 7 percent in 2013. Pharmaceutical companies reported spending a greater share of sales on R&D than comparably large, R&D-intensive industries and all aggregated manufacturing and non-manufacturing industries, according to comparable Business Research, Development, and Innovation Survey data (see table 2). For example, in 2014, self-reported R&D expenditures as a percentage of total sales were higher for pharmaceutical companies than for other comparably large, R&D-intensive sectors such as semiconductor and other electronic components, software publishers, and computer system design services. Direct federal spending for biomedical research, primarily funded through NIH, decreased 3.8 percent in real dollars from $27 billion in fiscal year 2008 to $26 billion in fiscal year 2014, after a peak of $32 billion in 2010, according to our analysis of federal survey data from NSF. NIH was the primary federal source for biomedical research and accounted for $26 billion of spending in 2008 and $25 billion in 2014. According to federal officials we interviewed, other agencies that fund biomedical research that could be relevant to drug R&D were the Department of Defense and the NSF. In addition, state and local governments, foundations, charities, and venture capital also funded biomedical R&D, according to studies and experts we interviewed. Estimates of this spending are much smaller than those for industry and federal agencies. In 2015, National Health Expenditure estimates show that state and local governments spent $6.7 billion on research and non-industry private funders spent $5.3 billion. Pharmaceutical company spending from 2008 through 2014 focused on drug development, while federal spending focused on earlier-stage basic research. For example, in 2014 pharmaceutical companies reported allocating 13 percent of total reported domestic R&D spending on basic research, 21 percent on applied research, and 66 percent on development (see fig. 9). By comparison, federal spending consistently funded a greater amount of basic research, according to our analysis of data from NSF’s Survey of Federal Funds for Research and Development. Studies show that basic research often supplies the innovation upon which the industry develops drugs. For example, as shown in figure 10 below, NIH obligated 54 percent, or $13.6 billion of its total $25 billion of drug related spending, for basic research in fiscal year 2014. This is more than twice as much as the $6.3 billion that NSF data show pharmaceutical companies reported spending domestically for basic research that year. NIH also funded applied research that includes more targeted research and activities aimed at translating basic research into new treatments for patients. For example, NIH supports clinical research through the National Center for Advancing Translational Sciences and several other NIH Institutes and Centers. This includes supporting pre-clinical and early-stage clinical trials; promoting and initiating collaborations and partnerships among industry, academia, and other stakeholder communities, such as patient advocacy groups, to address research barriers; and facilitating data sharing, according to agency officials. In accordance with the definition of “development” provided by NSF for the Survey of Federal Funds for Research and Development, NIH classifies R&D activities as “research.” Therefore, NIH does not report any of its activities as strictly drug development, according to agency officials. Studies and experts we interviewed suggested that the relative roles of R&D funders and performers are evolving. For example, some experts noted that there is less distinction between public and private investment in R&D than in the past because publicly funded research institutions, such as universities, are frequently involved in financial relationships with industry for commercial development. Some industry experts also noted NIH’s role in fostering these collaborations. As previously noted, there has been a proliferation of smaller, biotechnology-focused companies and greater use of acquisition and licensing agreements by larger, traditional pharmaceutical and biotechnology companies to build their earlier-stage product pipelines rather than conducting early research in-house. Experts suggested that this trend is a response to the increasing complexity and cost of R&D concurrent with the advent of biotechnology and waves of patent and exclusivity expirations for large companies. In addition, traditional pharmaceutical companies also performed less R&D internally than in the past, according to NSF data. Worldwide R&D spending paid for and performed by pharmaceutical companies decreased in real dollars from $61.7 billion in 2008 to $58.2 billion in 2014 and as a share of total worldwide R&D spending. Conversely, the share of the worldwide pharmaceutical R&D spending that was paid for by the company and performed by others, such as through purchased R&D services, increased from 25 percent in 2008 to 35 percent in 2014. Similar to the R&D spending trend identified above from the NSF data, various IRS tax data consistently indicate that drug R&D activities did not change significantly—with the exception of the orphan drug credit, which over time increased sharply. Inflation-adjusted claims by all industries for the orphan drug credit increased five-fold between 2005 and 2014, from about $280 million to about $1.5 billion (see fig 11). Claims for the other tax credit that incentivizes drug development—the research credit—were more stable than the orphan drug credit between 2005 and 2014. As shown below in figure 12, IRS estimates of research credit claims for pharmaceutical-related corporations reached a high of $1.5 billion in 2007, but then fell to about $1.2 billion in 2014, a level close to the beginning of the period. This may be due in part to the fact that we were not able to obtain a specific estimate for the research credits claimed by biotechnology companies. By comparison, research credit claims grew for all industries over the period, particularly from 2012 to 2014. According to IRS data, between 2005 and 2014 the pharmaceutical manufacturing industry spent, on average, about $22.5 billion per year (in real dollars) in qualified research spending that factored into the calculation of the research credit (see fig. 13). Spending peaked in 2007 at $25.5 billion and then generally declined from 2007 to 2014. This amount of spending—reported on tax returns as meeting the requirements of qualified research spending as noted above—is less than half of the research spending reported by NSF’s Business Research, Development, and Innovation Survey data. These research spending differences can reflect both differences in the definitions of research spending in each data source and in the specific industry definitions used in the different data sources. The ability of companies to deduct research expenditures in the year they are incurred simplifies tax accounting for research spending and reduces the after-tax cost of research investments. The amount of research spending deducted by large pharmaceutical corporations that submitted an IRS form M-3 has been largely consistent between 2010 and 2013, the years for which data were available (see table 3). Specifically, research expenditure deductions in real dollars increased to $30.7 billion in 2013 after a low over the period of $24.9 billion in 2012. The table also shows that the amounts shown as research expense on the financial statements of the same corporations were slightly higher than the amount deducted on tax returns in each year. The number of approvals for drugs FDA considered novel drugs increased from 20 in 2005 to 45 in 2015 but declined to 22 approvals in 2016, according to FDA data and reports (see fig. 14). Novel drugs accounted for between 8 and 18 percent of all drug approvals each year and averaged 13 percent over the period. The remaining majority of drug approvals each year included those not considered novel because they had chemical substances that were previously approved by FDA or were modifications to existing drugs. Biologics and orphan drugs each represented an increasing share of all drug approvals from 2005 through 2016. As shown in figure 15, biologics grew from 8 percent of all drug approvals in 2005 to 17 percent in 2016. Biologics also represented an increasing share of the subset of all approvals that were considered novel drugs—from 10 percent of novel drugs approved in 2005 to 32 percent in 2016. Orphan-designated drugs as a share of all drug approvals grew even more dramatically from 5 percent of all drug approvals in 2005 to 21 percent in 2016 (see fig.15). Orphan drugs as a share of novel drug approvals ranged from 22 percent in 2007 to 42 percent in 2015. We also examined drug approval trends by product category. The product categories that led the largest number of drug approvals fluctuated over time, but oncology drugs were among the most frequently approved in all but 2 years from 2005 through 2016. Of the 263 drugs approved by FDA in 2016, the most common product categories were oncology (55 approvals) and metabolism and endocrinology (38 approvals). For the 22 novel drug approvals in 2016, the most common product categories were oncology (5 approvals) and neurology (4 approvals). Studies and industry experts we interviewed, including economists and industry association officials, suggested several drivers for drug company R&D investment decisions. These investment choices were influenced by revenue, cost, and regulatory and other policy incentives: Potential revenues: High revenue potential, typically associated with a large potential number of patients or the potential for high drug prices, is an important incentive for R&D investment, according to experts and some research. Studies show that potential market size, measured by revenue, is a determinant of R&D investment and market entry for both brand-name and generic drug companies. Companies also seek to maximize potential revenues by investing in the development of drugs that can command high prices, and drugs that address unmet medical needs or differentiate them from competitors. This includes investment in drugs for niche markets that may have limited competition, such as orphan drugs. Experts also noted that some companies invest to extend patent protection or exclusivity periods for existing drugs as a means to extend revenue generation by delaying or limiting the effect of generic competition— sometimes referred to as “evergreening” or “patent hopping.” Cost reduction: Drug development costs, particularly for novel drugs, are increasing and companies have sought various ways to reduce their costs or limit risk. Experts we interviewed suggested that drug companies have attempted to reduce costs by focusing on drugs for which clinical trials are perceived to be less costly, drugs perceived as more likely to receive FDA approval, modifications to existing drugs rather than the development of novel drugs, outsourcing of clinical trials, and acquisition of R&D projects already underway. Policy incentives: Often regulatory and other policy incentives influence potential revenues and risks and, in turn, R&D investment, according to experts. For example, exclusivity periods and patent protection, expedited review programs, and tax incentives were cited as influencing R&D investment. The supply of new science from federally funded research may also influence company investment decisions. Expectations about payer reimbursement could also influence potential pricing and investment decisions, according to some experts. For example, one expert noted that payers typically do not resist high prices for oncology drugs. These drivers may also explain the observed brand-name drug approval trends for biologics, orphan drugs, and drugs for certain disease areas. For example: Biologics: Some experts noted that recent technological advances have spurred opportunity and investment in new biologics. The longer period of FDA market exclusivity for biologics relative to traditional chemically synthesized drugs may also be attractive to drug developers. In addition, there are currently few biosimilar drugs available to compete for market share once BLA exclusivity expires. Though FDA had approved seven biosimilars for marketing between 2010—the year the approval pathway for biosimilar biological products was established—and September 2017, and was reviewing additional applications, some experts suggest that the added cost and difficulty in developing biosimilars may hinder entry of biologics’ competitors relative to the entry seen for traditional generics. Orphan drugs: In addition to the exclusivity and orphan drug credit incentives to develop orphan drugs, an industry expert we interviewed also suggested that it is easier to get FDA approval for orphan drugs, and another suggested that it is less costly to develop them. In addition, orphan drugs can often garner high prices compared to non- orphan drugs, according to an industry report. Disease areas: Certain drug classes or disease areas, such as drugs for oncology or multiple sclerosis drugs, can garner higher prices and, in turn, more R&D investment because they often have fewer competitors, are often administered by providers who are insensitive to price, or are perceived as particularly life-saving, according to some experts we interviewed. In addition, some experts suggested that NIH investment in oncology research and gains in personalized medicine have resulted in many more research opportunities in which companies can invest. For example, many new oncology drugs are approved for treatment of tumors with specific genetic markers, and research suggests these drugs are more likely to succeed in clinical trials and face a less-elastic demand curve that, in turn, can facilitate higher pricing. According to several experts we interviewed, a company’s R&D focus on fewer therapeutic areas of more profitable drugs or niche markets may come at the expense of drug development in less lucrative disease areas—those that affect many patients but in which drugs are more costly to bring to market or have existing generic competition—for example, cardiovascular disease. According to a study of drug development pipeline data, the number of new drugs in all phases of clinical development to treat cardiovascular disease, a leading cause of death in the United States, declined from 1990 to 2012, whereas the number of new cancer drugs increased over the period. Research we examined in our literature review suggests that the level of competition in a relevant market influences drug prices. Competition also matters for innovation. Certain empirical economic studies suggest that mergers among brand-name drug companies can negatively impact companies’ innovation post-merger. The relationship between competition and drug price is well documented in the drug industry, and industry experts and available research point out that competition dynamics differ for brand-name and generic drugs. Brand name companies producing drugs under patent or exclusivity protection have monopoly pricing power unless alternative drugs that treat the same condition are available. For brand-name products that face competition from such therapeutic alternatives, companies compete on price, differentiation from competitors, or both. We and others have reported that brand-name drug companies consider the availability and price of therapeutic alternatives along with potential market size, the perceived value of the drug relative to competitors, and other factors when determining the price for a new drug. Conversely, generic drugs compete on price with the brand-name or other generic manufacturers of the same drug. As we have reported, and as experts we have interviewed agreed, generic drug companies compete primarily on price. Based on our literature review, we did not identify any empirical studies that examined the impact of drug industry concentration changes from mergers and acquisitions on drug prices post-merger. However, empirical studies we reviewed suggest that less competition—that is, a more highly concentrated market—is associated with higher drug prices, particularly for generic drugs. The following summarizes studies we reviewed on the effect of generic and brand-name competition: Generic competition: Most notably, once brand-name drugs lose patent and marketing exclusivity and generic versions of drugs enter the market, drug prices fall and continue to decline as additional generic manufacturers enter. The price moderating effect of generic competition is well documented by FDA, FTC, the IMS Institute for Healthcare Information, and other research. FDA found that for drugs sold from 1999 through 2004, the first generic competitor reduced the drug price only slightly lower than the brand-name on average, but the second generic competitor reduced the drug price by nearly half. For drugs that attracted nine or more generic manufacturers, the average generic price fell 80 percent or more. The IMS Institute for Healthcare Information reported similar findings in 2016 based on its review of generics that entered the market between 2002 and 2014. The introduction of generics reduced the price of those drugs by 51 percent in the first year and 57 percent in the second year with price reductions driven, in part, by the increasing number of competitors. In addition, a 2017 study of 1,120 drugs available as generics between 2008 and 2013 determined that drugs with less market competition, measured by higher concentration, had higher price increases over the period compared to drugs in the cohort with the lowest concentration. Brand-name competition: For brand-name drugs, studies show that the presence of therapeutic alternatives in the market reduces the launch price—the price the company sets for a new drug. For example, an often-cited 1998 study of launch prices for 130 new molecular entities showed that a greater number of brand-name therapeutic alternatives was associated with substantially lower launch prices for new brand-name drugs compared to their predecessors. More recently, there are examples of therapeutic alternatives creating market pressure on, and thus reducing prices of, brand-name drugs, such as multiple brand-name hepatitis C therapies that became available between 2013 and 2014. Research has also found that some brand-name drug companies are able to maintain or even raise prices for their drugs—despite competition from therapeutic or generic alternatives—for various reasons, such as product differentiation or brand loyalty stemming from marketing or prescribing patterns. For example, brand-name companies may actually increase prices for some of their drugs to capture the price-insensitive segment of the market. Research also suggests that the extent of price reductions resulting from the entry of generic drugs into a market can differ by the characteristics of the drug and may be less dramatic for biosimilar drugs than traditional generic drugs. For example, the 2016 IMS report noted that price reductions under these circumstances occurred faster for oral drugs than for injectable drugs, which often attract fewer generic competitors. Another 2017 study examining the state of generic competition found that injectables and drugs with other formulations, such as topical or inhaled drugs, were more likely than oral drugs to have only one or two manufacturers. Certain literature we reviewed and experts we interviewed suggested that biosimilars will moderate prices for biologic drugs, but not to the same extent as traditional generics do because they are more costly to manufacture and may be less consistently substituted for the brand-name drug; however, more time and research will be needed to understand the effects given the small number of biosimilars on the market. Competition is also relevant to innovation, according to economic studies we examined. As noted, brand-name drug companies compete to develop new products and differentiate their products from therapeutic alternatives. The analysis of how competition affects innovation is a fact- specific process. There is empirical evidence suggesting that, in certain circumstances the incentive to invest in R&D could be enhanced with more competitors. For example, a 2014 study examining multiple manufacturing and non-manufacturing industries demonstrated a positive relationship between competition and innovation (measured by patents), productivity, and R&D expenditures. While drug innovation comes from multiple sources and increasingly from smaller innovative biotechnology companies, the industry relies on large drug companies to invest in the expensive clinical trials needed to develop and bring new innovations to market. We also identified several merger retrospective studies. These studies suggest that there are varied impacts of drug company merger and acquisition on innovation, including both inputs (e.g., R&D spending) and outputs (e.g., patents and new drug approvals). A 2009 study of 27 large, brand-name drug company mergers found that the mergers had a statistically significant negative impact on company R&D spending and patent issuance in the third year post- merger compared to non-merging companies. The authors concluded that the findings contradict the idea that mergers deliver advances in innovation that could outweigh possible anticompetitive risks. A 2007 study of 165 large mergers between 1988 and 2000 suggested that large companies sought to merge in response to patent expiration or product pipeline gaps, and small companies sought to merge as a response to financial trouble. When controlling for companies’ propensity to merge, small merging companies— defined as companies valued less than $1 billion—grew more slowly in R&D spending, sales, and R&D employees post-merger compared to similar non-merging companies. However, the study did not find these effects to last beyond one year and did not find differences in these growth rates between large merging companies and non- merging companies. Overall, the authors concluded that while merger in the drug industry is a response to being in trouble for both large and small companies, there is no evidence that it is a solution. Another 2009 study examined the number of approvals for new molecular entities—innovative drugs—as a means to examine outputs rather than only R&D spending. The study suggests that while mergers and acquisitions may help small companies, they are not an effective way for larger companies to increase output of new molecular entities. For example, for a sample of 30 mergers and acquisitions with 10 years of data before and after the merger, the study found that for large companies the number of new molecular entities did not increase and may actually have declined slightly following merger or acquisition. Smaller companies, however, experienced an increase in new molecular entities after merger or acquisition. Other studies suggest mergers and acquisitions may have a positive impact on innovation using certain measures. For example, a 2006 study of 160 acquisitions involving drug companies between 1994 and 2001 estimated that companies with declining R&D pipeline and sales were more likely to engage in acquisition and that outsourcing R&D through acquisitions was a successful strategy to stabilize declines in drug R&D pipelines. This study estimated that 71 percent of acquiring companies either maintained or improved the health of their research pipelines after merger. We provided a draft of this report to the Department of Health and Human Services, FTC, IRS, and NSF for review. These agencies provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, relevant agencies, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact John E. Dicken at (202) 512-7114 or DickenJ@gao.gov or Oliver Richard at (202) 512-8424 or RichardO@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix III. This appendix provides further details on our scope and methodology in addressing each of our three reporting objectives, which are to describe: (1) how the financial performance and structure of the drug industry have changed over time; and (2) how reported research and development spending and new drug approvals have changed; and (3) what is known about the potential effects of consolidation on drug prices and new drug development. In addition, the appendix describes how we selected officials to interview and the steps we took to assure the reliability of the data we analyzed. To describe reported pharmaceutical and biotechnology sales revenue and profit margins, we used the Bloomberg Terminal to identify pharmaceutical and biotechnology companies that were still active as of the time of our review. Bloomberg uses a proprietary hierarchical classification system (the Bloomberg Industry Classification System) to categorize companies into different primary industries. We used the Bloomberg Terminal’s company classification browser to obtain an initial set of companies that currently have reported pharmaceutical or biotechnology revenue. We restricted the drug companies in our review to those that were categorized under the “Pharmaceutical & Biotechnology” Bloomberg Industry Classification System (BICS) level 2 category, which indicated that Bloomberg characterizes the company as being primarily a pharmaceutical or biotechnology company. Using this list, we downloaded each company’s reported pharmaceutical and biotechnology sales revenue, total sales revenue, profit margin, return on assets, and return on equity for each company’s fiscal years 2006 through 2015, which were the most current data available. To provide a comparison, we followed the same procedure to obtain data for software companies over the same period. We selected software companies as a comparison because they have high research and development (R&D) and low manufacturing costs similar to drug companies. Sales revenues were adjusted to reflect real 2015 U.S. dollars using the gross domestic product price index. When examining sales revenues, profit margins, return on assets, and return on equity, analyses were limited to the subset of companies with complete data over the 10-year period for the variables included in the analysis. We did not have a count of how many companies might have existed throughout the review period, but which had no data available on any of the variables we examined. Profit margin, return on assets, and return on equity were each weighted by the company’s industry-specific sales revenue (pharmaceutical and biotechnology or software) prior to averages being computed. To identify the “largest 25” companies for analyses, we first restricted data to companies that had data for the variables being examined for 2006 through 2015, then identified the 25 drug companies with the largest pharmaceutical and biotechnology revenue in 2015. This provided a consistent cohort of large companies to examine longitudinally for each analysis. We also examined profit margins for the largest 500 companies by total worldwide 2015 sales revenue. We obtained a list of the largest 500 companies in 2015 from the Bloomberg Terminal that were still active during our review. Using this list, we downloaded each company’s BICS level 2 category; total sales revenue; pharmaceutical, biotechnology, and software revenues; and profit margins for each company for fiscal years 2006 through 2015. We removed any companies primarily classified by Bloomberg under one of those industries since we had analyzed these separately. For the remaining companies in our largest 500, we subtracted any reported pharmaceutical, biotechnology, and software revenues from their total sales revenues since some companies may have reported such revenues despite not being classified primarily as one of these types of companies. We then weighted each of the remaining companies’ profit margins by their remaining total sales revenue prior to calculating an average. This weighting differed slightly from the industry- specific sales weighting used in the earlier analyses of drug and software companies’ profit margins. For the software industry, the Congressional Budget Office only indicated that it had high R&D and low manufacturing costs similar to drug industry; it did not suggest the same for other lines of business that software companies might additionally be involved in. Because we had no reason to isolate industry-specific revenues for our remaining largest 500 companies, we weighted their profit margins by their total sales revenues. As with the prior profit margin analyses, analysis of the largest 500 sales weighted profit margins were limited to companies with data available for each of company fiscal years 2006 through 2015. For analyses of mergers and acquisitions, we again relied on data from the Bloomberg Terminal. We restricted our search to mergers and acquisitions that were completed from January 1, 2006, to December 31, 2015, and which featured a drug company on both sides of the transaction (e.g., as the acquirer and as the acquired company in the case of acquisition of a full company). The “largest 25” companies were determined by their 2015 pharmaceutical and biotechnology sales revenue only—because not every company could be expected to have a merger or acquisition transaction in every year, we did not make this a requirement to be included in the merger and acquisition analyses. We used what Bloomberg reported to be the completed transaction values in our analyses, and we adjusted the values to consistently reflect real 2015 dollars. Many companies were not included in analyses due to incomplete data, therefore the results of our analyses of these data do not reflect the entire industry. Bloomberg obtains much of its information from public filings, which provide companies considerable leeway in deciding what to report and how. For mergers and acquisitions, approximately 40 to 50 percent of the completed transactions in Bloomberg’s data between 2006 and 2015 did not have disclosed transaction values. Bloomberg officials told us that transaction values are often missing for private companies. To examine overall industry concentration we used pharmaceutical industry and company-specific sales data from QuintilesIMS from 2007 through 2014, the years for which data were publicly available. We also examined publicly available industry reports and generic drug approvals data for discussion of concentration across different therapeutic areas. Our findings on industry concentration and the variation of concentration across therapeutic classes is limited to these examples. To examine how reported R&D spending changed over time, we analyzed data from the Business Research, Development and Innovation Survey maintained by the National Science Foundation’s (NSF) National Center for Science and Engineering Statistics for years 2008 through 2014, the most recent years for which data were consistently available. The Business Research, Development and Innovation Survey data are collected annually from a probability sample of for-profit companies with a U.S. presence, which are classified in select manufacturing and nonmanufacturing industries based on their North American Industry Classification System (NAICS) code. We analyzed aggregate company- reported worldwide R&D expenditures and worldwide sales for respondent companies designated with NAICS code 3254 for pharmaceuticals and medicines. We also examined pharmaceutical company-reported domestic R&D expenditures by character of work— basic research, applied research, or development—as defined by NSF as well worldwide and domestic R&D expenditure by performer (whether R&D was paid for and performed by the company, or paid for by the company to be performed by others). We also examined worldwide expenditures and sales for companies designated as biotechnology research and development companies (NAICS 541711); however estimates were not available for 2008 or 2014 and were less reliable in the years between. We therefore reported biotechnology expenditures and sales separately from pharmaceutical companies and limited the majority of our analysis to pharmaceutical companies. For comparison, we also examined worldwide R&D expenditure and sales for comparably large industries with high R&D intensity as well as all manufacturing and all non-manufacturing industries. All spending and sales data were adjusted to real 2015 U.S. dollars using the gross domestic product price index. We also examined the Business Research, Development and Innovation Survey sample selection and sampling error information for each year of the survey. Finally, we compared worldwide and domestic R&D expenditure and sales trends to spending and sales reported by Pharmaceutical Research and Manufacturers of America (PhRMA)—a national trade association. To examine federal spending trends, we analyzed publicly available data from NSF’s National Center for Science and Engineering Statistics’ Survey of Federal Funds for Research and Development on obligations for research in biomedical related fields made by federal agencies identified as funding drug-related research between fiscal years 2008 and 2014, years consistent with available industry data from NSF’s Business Research, Development, and Innovation Survey. Data represent federal agency obligations for basic and applied research in the fields of biological sciences, medical sciences, and other life sciences as reported by federal agencies. Obligations were adjusted to real fiscal year 2015 U.S. dollars using the gross domestic product price index. We identified agencies that fund drug-related research based on interviews with officials from the National Institutes of Health (NIH), NSF, and other industry experts. The Survey of Federal Funds for Research and Development is a census of federal agencies that conduct R&D, and provides data on obligations by agency and field of science rather than by specific industry or use. Our estimates of federal spending may be imprecise because the data preclude us from pinpointing spending specific to drug R&D projects, and because the type of research that federal agencies typically fund often has an impact on many different research areas that may not be specific to drugs. We also reviewed budget documents from NIH and reviewed select studies for spending estimates by non-federal or industry sources. In addition, we obtained estimates of R&D spending by state and local governments and non-industry private funders for 2015 from National Health Expenditure account estimates. These estimates include spending for all biomedical research by these categories and thus also likely overestimate spending specific to drug development. To identify tax provisions that provide incentives for drug research and development, we reviewed reports by the Joint Committee on Taxation and the Congressional Research Service. We obtained and analyzed aggregate tax return data from the Internal Revenue Service (IRS) Statistics of Income division for the orphan drug credit and research credit claimed by relevant industries and all returns (all industries) for years 2005 to 2014, the latest ten years for which data were available. Specifically, we analyzed claims from companies with IRS Principle Business Activity codes for pharmaceutical manufacturing, drug wholesalers, and scientific research. IRS’s industry codes are based on NAICS definitions, and corporations are instructed to report the industry code for which it derives the highest percentage of its total receipts. These data are reviewed by Statistics of Income division staff for accuracy. The scientific research industry category includes corporations conducting biotechnology research and development, but also includes firms conducting research in nanotechnology and physical, engineering, and life sciences. As a result, we chose not to report research credits claimed by corporations in the broader scientific research industry category as being related to drug development, but we do report orphan drug credits claimed by corporations in this industry category. We also obtained and examined reported qualified research expenses for pharmaceutical manufacturing companies for years 2005 to 2014. IRS’ Statistics of Income division produces estimates based on a representative stratified sample of corporate returns. IRS provided additional information on the corporations that reported claiming the orphan drug and research credits; in both cases a high percentage of the claims came from large corporations that are included in the stratified sample with certainty. As a result, we concluded that the estimated credit totals are reliable given that the estimates are largely based on returns that were certain to be included in the sample. The amount of research and orphan drug credits claimed represents claims rather than amounts utilized due to limitations of the general business credit. Reported estimates therefore may reflect the upper bounds of what was utilized from claimed amounts. IRS also provided additional data on total deductions claimed for qualified research expenditures and amounts reported on financial statements from Form M-3, for 2010 to 2013. These data were limited to large corporations that filed form M-3, which is required for corporations with $10 million or more of assets. All claims were adjusted to 2015 U.S. dollars using the gross domestic product price index. To examine trends in new drug approvals, we obtained and analyzed data from the Food and Drug Administration (FDA) for new drug applications (NDA) and biologic license applications (BLA) and NDA- and BLA-efficacy supplements approved by the FDA’s Center for Drug Evaluation and Research between 2005 and 2016, the most recent ten years of available data at the time of our review. We determined which drugs FDA considered novel drugs by reviewing publicly available reports and resolving any discrepancies with agency officials. We analyzed these data to determine the type of drugs FDA approved, such as the product category and whether the drug was designated an orphan drug. Finally, we interviewed agency and industry experts and reviewed relevant academic, government, and industry literature on R&D investment trends and reasons for such trends. To determine what is known about the impact of drug industry consolidation on drug price and drug development, we reviewed studies obtained from a literature search. To identify relevant publications, we used a number of bibliographic databases, including ProQuest, Scopus, PubMed, National Technical Information Service, Lexis, Social Science Research Network, and the National Bureau of Economic Research. We reviewed the following document types: scholarly peer reviewed material, government reports, working papers, and policy research organization publications published by a U.S. publication from 2005 forward. We concluded our searches in August 2017. To the resulting list of publications, we added articles identified in our own background research and articles suggested by industry experts, including certain heavily cited papers published prior to 2005. From the revised list, we selected publications that empirically evaluated the effect of drug industry consolidation (mergers and acquisitions) on drug price or innovation (new drug development or R&D spending). We also selected publications that included empirical analyses of drug industry or subindustry concentration or competition and drug price or drug development. Finally, we reviewed the data sources and methodology used to support the assertions of each publication and included those that met our methodological criteria. See the bibliography at the end of this report for the 22 publications included in our review. To inform our understanding of the drug industry for all three objectives including structural changes that have taken place, reasons for consolidation trends, drivers of drug company R&D investment trends, and any impacts of consolidation on drug price or innovation, we interviewed drug industry experts including three drug trade associations, four advocacy organizations, two financial ratings agencies, and officials from the FDA, IRS, NSF, Federal Trade Commission (FTC), and NIH. We selected these experts to obtain a variety of industry perspectives. We also interviewed seven academic economic experts about economic factors influencing consolidation and other structural changes, R&D investments, and potential consolidation impacts. We selected these economic experts based on citations in our literature review and suggestions from FDA and FTC officials. To ensure that the data used to produce this report were sufficiently reliable, we took several steps. We performed data reliability checks on the data we obtained from the Bloomberg Terminal, such as comparing select companies’ financial data to company annual reports, checking for outliers, and discussing reliability issues with Bloomberg representatives. We did not independently verify the accuracy or completeness of the information reported by the companies. We verified the reliability of NSF’s Business Research, Development and Innovation Survey data used in this report by reviewing relevant documentation, including relative standard errors for specific measures, and by interviewing agency officials who were knowledgeable with the data. We also interviewed knowledgeable NSF officials regarding the reliability of reported Federal Funds for Research and Development survey data and compared reported obligations to NIH budget documents. To verify the reliability of aggregate tax return information, we reviewed relative standard errors for reported measures and interviewed knowledgeable agency officials. We verified the reliability of FDA-provided information by cross-referencing it against other published FDA sources and by interviewing knowledgeable agency officials. After taking these steps, we determined the data were sufficiently reliable for the purposes of our reporting objectives. We conducted this performance audit from April 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings based on our audit objectives. The following table reflects mergers and acquisition transactions from 2006 through 2015 for 10 large drug companies, as measured by their 2014 pharmaceutical and biotechnology revenue. Transactions reflect those reported in Bloomberg that were completed from January 1, 2006, through December 31, 2015, and had values of at least $500 million in real 2015 dollars. In addition to the contact named above, Robert Copeland, Assistant Director; Yesook Merrill, Assistant Director; Rebecca Abela, Analyst-in- Charge; Reed Meyer; Brandon Nakawaki; Edward Nannenhorn; Laurie Pachter; and Matthew Rabe made key contributions to this report. Also contributing were George Bogart, Muriel Brown, Sandra George, Sarah Gilliland, and Giselle Hicks. We reviewed literature to identify what is known about the impact of drug industry consolidation on drug price and drug development. We included publications that empirically evaluated the effect of drug industry consolidation (mergers and acquisitions) on drug price, of which we did not identify any publications. We also reviewed publications that included empirical analyses of the impact of concentration or competition on drug price. Berndt, Ernst R., and Murray L. Aitken, Brand Loyalty, Generic Entry and Price Competition in Pharmaceuticals in the Quarter Century after the 1984 Waxman-Hatch Legislation, National Bureau of Economic Research Working Paper 16431 (October 2010). Berndt, Ernst R., and Rena M. Conti, Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007, National Bureau of Economic Research Working Paper 20016 (March 2014). Berndt, Ernst R., Rena M. Conti, and Stephen J. Murphy, The Landscape of US Generic Prescription Drug Markets, 2004-2016, National Bureau of Economic Research Working Paper 23640 (July 2017). Dave, Chintan V., Aaron S. Kesselheim, Erin R. Fox, Peihua Qiu, and Abraham Hartzema. “High Generic Drug Prices and Market Competition: A Retrospective Cohort Study.” Annals of Internal Medicine, vol. 167, no. 3 (2017): 145-151. Department of Health and Human Services. U.S. Food and Drug Administration. “Generic Competition and Drug Prices.” 2015. Accessed July 31, 2017. https://www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsa ndTobacco/CDER/ucm129385.htm Grabowski, Henry G., David B. Ridley, and Kevin A. Schulman. “Entry and Competition in Generic Biologics.” Managerial and Decision Economics, vol. 28, no. 4/5 (2007): 439-451. Iacocca, Kathleen, James Sawhill, and Yao Zhao. “Why Brand Drugs Priced Higher Than Generic Equivalents.” International Journal of Pharmaceutical and Healthcare Marketing, vol. 9, no. 1 (2015): 3-19. IMS Institute for Healthcare Informatics. Price Declines After Branded Medicines Lose Exclusivity in the U.S. (Parsippany, N.J.: IMS Institute for Healthcare Informatics, 2016). Lu, Z. John, and William S. Comanor. “Strategic Pricing of New Pharmaceuticals.” The Review of Economics and Statistics, vol. 80, no. 1 (1998): 108-118. Olson, Luke M., and Brett W. Wendling, Working Paper No. 317: The Effect of Generic Drug Competition on Generic Drug Prices During the Hatch-Waxman 180-Day Exclusivity Period, Bureau of Economics, Federal Trade Commission (Washington, D.C.: April 2013). Regan, Tracy L. “Generic Entry, Price Competition, and Market Segmentation in the Prescription Drug Market.” International Journal of Industrial Organization, vol. 26, no. 4 (2008): 930-948. Richard, Oliver, and Larry Van Horn. “Persistence in Prescriptions of Branded Drugs.” International Journal of Industrial Organization, vol. 22, no. 4 (2004): 523-540. Tenn, Steven, and Brett W. Wendling. “Entry Threats and Pricing in the Generic Drug Industry.” The Review of Economics and Statistics, vol. 96, no. 2 (2014): 214-228. We also reviewed publications that empirically evaluated the effect of drug industry consolidation on innovation—including new drug development or R&D spending—as well as publications on the impact of concentration or competition on innovation. Banerjee, Tannista, and Arnab Nayak. “Comparing Domestic and Cross- Border Mergers and Acquisitions in the Pharmaceutical Industry.” Atlantic Economic Journal, vol. 43, no. 4 (2015): 489-499. Comanor, William S., and F.M. Scherer. “Mergers and Innovation in the Pharmaceutical Industry.” Journal of Health Economics, vol. 32 (2013): 106– 113. Danzon, Patricia M., Andrew Epstein, and Sean Nicholson. “Mergers and Acquisitions in the Pharmaceutical and Biotech Industries.” Managerial and Decision Economics, vol. 28, no. 4/5 (2007): 307-328. Higgins, Matthew J., and Daniel Rodriguez. “The Outsourcing of R&D Through Acquisitions in the Pharmaceutical Industry.” Journal of Financial Economics, vol. 80 (2006): 351-383. Getz, Kenneth A., Rachael Zuckerman, Joseph A. DiMasi, and Kenneth I. Kaitin. “Drug Development Portfolio and Spending Practices After Mergers and Acquisitions.” Drug Information Journal, vol. 43, no. 4 (2009): 493-500. Grabowski, Henry, and Margaret Kyle. “Mergers and Alliances in Pharmaceuticals: Effects on Innovation and R&D Productivity,” in The Economics of Corporate Governance and Mergers. Northampton, M.A.: Edward Elgar Publishing, Inc., 2008. Munos, Bernard. “Lessons from 60 Years of Pharmaceutical Innovation.” Nature Reviews Drug Discovery, vol. 8 (2009): 959-968. Ornaghi, Carmine. “Mergers and Innovation in Big Pharma.” International Journal of Industrial Organization, vol. 27, no. 1 (2009): 70-79. Thakor, Richard T., and Andrew W. Lo. Competition and R&D Financing Decisions: Theory and Evidence from the Biopharmaceutical Industry, National Bureau of Economic Research Working Paper 20903 (September 2015). Investigational New Drugs: FDA Has Taken Steps to Improve the Expanded Access Program but Should Further Clarify How Adverse Events Data Are Used. GAO-17-564. Washington, D.C.: July 11, 2017. Generic Drug User Fees: Application Review Times Declined, but FDA Should Develop a Plan for Administering Its Unobligated User Fees. GAO-17-452. Washington, D.C.: May 25, 2017. Physician-Administered Drugs: Comparison of Payer Payment Methodologies. GAO-16-780R. Washington, D.C.: August 1, 2016. Generic Drugs Under Medicare: Part D Generic Drug Prices Declined Overall, but Some Had Extraordinary Price Increases. GAO-16-706. Washington, D.C.: August 12, 2016. Medicare Part B: Data on Coupon Discounts Needed to Evaluate Methodology for Setting Drug Payment Rates. GAO-16-643. Washington, D.C.: July 27, 2016. Drug Shortages: Certain Factors Are Strongly Associated with This Persistent Public Health Challenge. GAO-16-595. Washington, D.C.: July 7, 2016. Medicare Part B: CMS Should Take Additional Steps to Verify Accuracy of Data Used to Set Payment Rates for Drugs. GAO-16-594. Washington, D.C.: July 1, 2016. Corporate Income Tax: Most Large Profitable U.S. Corporations Paid Tax but Effective Tax Rates Differed Significantly from the Statutory Rate. GAO-16-363. Washington, D.C.: March 17, 2016. Drug Safety: FDA Expedites Many Applications, But Data for Postapproval Oversight Need Improvement. GAO-16-192. Washington, D.C.: December 15, 2015. Medicare Part B: Expenditures for New Drugs Concentrated among a Few Drugs, and Most Were Costly for Beneficiaries. GAO-16-12. Washington, D.C.: October 23, 2015. Prescription Drugs: Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices. GAO-14-578. Washington, D.C.: June 30, 2014. Drug Shortages: Public Health Threat Continues, Despite Efforts to Help Ensure Product Availability. GAO-14-194. Washington, D.C.: February 10, 2014. Corporate Tax Expenditures: Evaluations of Tax Deferrals and Graduated Tax Rates. GAO-13-789. Washington, D.C.: September 16, 2013. Prescription Drugs: Comparison of DOD and VA Direct Purchase Prices. GAO-13-358. Washington, D.C.: April 19, 2013. Medicare Part D Coverage Gap: Discount Program Effects and Brand- Name Drug Price Trends. GAO-12-914. Washington, D.C.: September 28, 2012. International Taxation: Information on Foreign-Owned but Essentially U.S.-Based Corporate Groups Is Limited. GAO-12-794. Washington, D.C.: July 16, 2012. Prescription Drugs: FDA Has Met Performance Goals for Reviewing Applications. GAO-12-500. Washington, D.C.: March 30, 2012. Drug Pricing: Research on Savings from Generic Drug Use. GAO-12-371R. Washington, D.C.: January 31, 2012. Prescription Drugs: Trends in Usual and Customary Prices for Commonly Used Drugs. GAO-11-306R. Washington, D.C.: February 10, 2011. Brand-Name Prescription Drug Pricing: Lack of Therapeutically Equivalent Drugs and Limited Competition May Contribute to Extraordinary Price Increases. GAO-10-201. Washington, D.C.: December 22, 2009. Tax Policy: The Research Tax Credit’s Design and Administration Can Be Improved. GAO-10-136. Washington, D.C.: November 6, 2009. Prescription Drugs: Improvements Needed in FDA’s Oversight of Direct- to-Consumer Advertising. GAO-07-54. Washington, D.C.: November 16, 2006. New Drug Development: Science, Business, Regulatory, and Intellectual Property Issues Cited as Hampering Drug Development Efforts. GAO-07-49. Washington, D.C.: November 17, 2006.", "summary": "Retail prescription drug expenditures were estimated to account for about 12 percent of total personal health care service spending in the United States in 2015, up from about 7 percent through the 1990s. Much of this growth was driven by use of expensive brand-name drugs, but price increases have been reported for some generic drugs as well. Prior GAO reports have identified multiple reasons for drug price increases, including limited competition. Experts have questioned whether consolidation among drug companies could reduce competition and R&D investment in new drugs. GAO was asked to examine changes in the drug industry. This report describes: (1) how the financial performance and structure of the industry have changed over time, (2) how reported R&D spending and new drug approvals have changed, and (3) what is known about the potential effects of consolidation on drug prices and new drug development. GAO analyzed Bloomberg drug industry financial data for 2006 through 2015, and examined select publicly available estimates of company market shares for 2014 and market shares for certain therapeutic classes for 2016. GAO also analyzed estimates of company self-reported R&D spending and federal funding for biomedical R&D data, aggregate tax credit claims data, and drug approval data for the same approximate time period. All data were the most current available. In addition, GAO also reviewed published research and interviewed federal agency officials, economists, and representatives from industry and advocacy groups. GAO's analysis of revenue, profit margin, and merger and acquisition deals within the worldwide drug industry from 2006 through 2015 identified key trends: Estimated pharmaceutical and biotechnology sales revenue increased from $534 billion to $775 billion in 2015 dollars. About 67 percent of all drug companies saw an increase in their annual average profit margins from 2006 to 2015. Among the largest 25 companies, annual average profit margin fluctuated between 15 and 20 percent. For comparison, the annual average profit margin across non-drug companies among the largest 500 globally fluctuated between 4 and 9 percent. The number of reported mergers and acquisitions generally held steady during this period, but the median disclosed deal value increased. The largest 10 companies had about 38 percent of the drug industry's sales revenue in 2014. However, concentration was higher for narrower markets, such as for certain drugs in the same therapeutic class. In addition, experts noted that market pressures such as rising research and development (R&D) costs, fewer drugs in development, and competition from generic drugs, have driven structural changes in the industry such as increased use of acquisition by large drug companies to obtain access to new research. From 2008 through 2014, worldwide company-reported R&D spending, most of which went to drug development (rather than research), increased slightly from $82 billion to $89 billion in 2015 dollars. During the same period, federal spending, which funded a greater amount of basic research relative to industry, remained stable at around $28 billion. In addition to grants, several federal tax provisions provided incentives for industry R&D spending, including the orphan drug credit, available for companies developing drugs intended to treat rare diseases, which increased more than five-fold from 2005 through 2014. Pertaining to drug approvals, the total number of new drugs approved for marketing in the United States fluctuated between 2005 and 2016, ranging from 179 to 263 drug approvals annually. Novel drugs—innovative products that serve previously unmet medical need or help advance patient care—accounted for about 13 percent of all approvals each year. Biologics—drugs derived from living rather than chemical sources—and orphan drugs accounted for growing shares of drug approvals, reflecting market and policy incentives to invest in these areas, according to experts GAO interviewed. Research GAO reviewed indicates that fewer competitors in the drug industry are associated with higher prices, particularly for generic drugs. Research also suggests that drug company mergers can have varied impacts on innovation as measured by R&D spending, patent approvals, and drug approvals. Certain merger retrospective studies have found a negative impact on innovation. The Department of Health and Human Services, Federal Trade Commission, Internal Revenue Service, and National Science Foundation provided technical comments on a draft of this report, which we incorporated as appropriate.", "document_type": "gao"}
{"report": "This section describes (1) electricity grid functions, operations, and planning; (2) energy storage operational characteristics, technologies, and deployment; and (3) the electricity regulatory framework. The electricity grid involves four distinct functions: generation, electricity transmission, electricity distribution, and grid operations (see fig. 1). Electricity is generated at power plants by burning fossil fuels; through nuclear fission; or by harnessing renewable sources such as wind, solar, geothermal, or hydropower. Once electricity is generated, it is sent through the electricity grid, which consists of high-voltage, high-capacity transmission systems, to areas where it is transformed to a lower voltage and sent through the local distribution system for use by residential and other customers. Throughout this process, a grid operator, such as a local utility, must constantly balance the generation and consumption of electricity. To do so, grid operators monitor electricity consumption from a centralized location using information systems, and send minute-by- minute signals to power plants to adjust their output to match changes in the demand for electricity. As we previously reported, continuously balancing the generation and consumption of electricity can be challenging for grid operators because customers may use sharply different amounts of electricity over the course of a day and throughout the year. For example, in many areas, customer demand for electricity rises throughout the day and reaches its highest point—or peak demand—in late afternoon or early evening. Throughout the day, grid operators direct power plants to adjust their output to match changes in demand for electricity. Grid operators typically first use electricity produced by baseload power plants that are the least expensive to operate, then progressively increase the supply of electricity generated by power plants that are more expensive to operate as needed to match increases in electricity demand. As a result, providing electricity to meet peak demand is generally more expensive than during other parts of the day, because to do so, grid operators use power plants that are more expensive to operate. Peak periods are generally short and account for only a few hours per day and, overall, a small percentage of the hours during a year, but can significantly contribute to the overall costs of serving customers. Grid operators conduct planning to assess the adequacy of existing grid infrastructure, identify capacity needs, and evaluate the cost and effectiveness of potential solutions to address these needs. As we previously reported, to ensure that grid infrastructure has sufficient capacity to meet future peak demand, grid operators typically develop forecasts of future electricity demand based on historical information about customer electricity use combined with assumptions about how customer demand will change in the future based on population growth, economic conditions, and other factors. Utilities deal with uncertainty partly by producing a range of forecasts based on demographic and economic factors, and by maintaining excess generating capacity, known as reserves. Models help utilities choose the least-cost combination of generating resources to meet demand. If demand forecasts are too high or low, a utility could end up with more or less generating capacity than it needs to serve its customers reliably, or it could end up with a mix of generating capacity that is not cost effective. These outcomes can affect electricity rates as well as the utility’s financial situation. To meet demand for electricity, utilities can construct new plants, upgrade existing plants, purchase power from others, build new transmission and distribution lines, and provide incentives to customers to reduce and shift their demand for electricity through energy efficiency or demand-response programs. In addition, utilities may use time-based pricing—prices that vary throughout the day and year to reflect the costs of serving consumers—to encourage consumers to lower their electricity use at times of high prices or shift their use to times of the day when prices are lower, which can lower their electricity bills. Energy storage includes a number of different technologies that have the ability to store energy for use at a later time. Energy storage systems can be designed with a range of technologies, such as pumped hydro, compressed air, batteries, and flywheels, according to DOE. Each technology has its own performance characteristics that make it more suitable for certain grid services than for others. Specifically, compressed air and pumped hydro are capable of discharge times—the length of time that a storage device can discharge electricity—in tens of hours and have large capacities that can reach 1,000 megawatts (MW). According to DOE and CRS, storage projects involving these types of technologies generally have unique siting requirements, including specific geographical features, or long construction times. In contrast, other storage technologies such as batteries and flywheels are smaller in terms of capacity and have shorter discharge times, ranging from a few seconds to several hours, and these technologies can generally be built without specific geographical features at the site. These energy storage systems are comprised of storage technologies and other system components such as inverters, wiring, temperature regulation, and other equipment. According to DOE’s Global Energy Storage Database, about 24 gigawatts (GW) of grid-connected energy storage were in operation in the United States and about 2 GW of storage capacity was under development as of March 20, 2018. Pumped hydro comprises about 93 percent of this storage capacity in operation. Many of the operational pumped hydro systems in the United States were commissioned during the 1960s through the 1980s; the most recent became operational in 2012. See figure 2 for information about the proportion of energy storage capacity in operation or under development in the United States that comes from certain types of technology. While pumped hydro comprises the majority of energy storage in operation, batteries are driving the recent growth in energy storage. Since 2013, the capacity of utility-scale (1 MW or greater) battery deployments grew by 283 percent (from about 185 MW to about 709 MW), though such utility-scale batteries comprised about 0.07 percent of utility-scale generating capacity on the U.S. electric grid, according to data from the Energy Information Administration. See figure 3 for information on the capacity of utility-scale battery installations each year from 2003 through 2017. Figure 4 shows how grid-connected storage of all technology types was distributed nationwide as of March 20, 2018, according to DOE’s Global Energy Storage Database. Responsibility for regulating the electricity industry is divided between the states and the federal government. Most electricity customers are served by electric utilities on the retail level that are regulated by the states, generally through state public utility commissions or equivalent organizations. As the primary regulator of electricity on the retail level, state public utility commissions have a variety of responsibilities, such as approving utility investments in generation and distribution assets, the rates retail customers pay, and how those rates are set. Before electricity is sold to retail customers, it may be bought, sold, and traded in wholesale electricity markets that the federal government oversees through FERC. FERC is responsible for overseeing regional transmission organizations’ (RTO) development and operation of markets to ensure that wholesale electric rates are “just and reasonable” and not “unduly discriminatory or preferential.” To do so, FERC reviews and approves RTO market rules and monitors the competitiveness of RTO markets. Figure 5 indicates the location of major RTOs that have developed in certain regions of the United States. RTOs serve as grid operators by managing regional networks of electric transmission lines and also operate wholesale electricity markets to buy and sell services needed to maintain a reliable grid. These markets include capacity markets—auctions through which owners of power plants can be compensated for agreeing to make their plants available to provide electricity at a specified time in the future—designed to incentivize the building and retention of enough generation and other resources to meet future power demands; energy markets for scheduling which power plants will generate electricity throughout the day to maintain the balance of electricity generation and consumption, and at what prices; and ancillary services markets, which are designed to maintain electric reliability and ensure that supply and demand remain in balance from moment to moment so that grid operators can deliver electricity within technical standards, such as at the right voltage and frequency. RTOs are responsible for developing and implementing market rules, approved by FERC, that provide the framework for the design and operation of wholesale electricity markets. RTO market operations encompass multiple services that are needed to provide reliable and economically efficient electric service to customers. Each of these services has its own parameters and pricing. The RTOs use markets to determine the providers and prices for many of these services. In regions of the country without RTOs, electric utilities generally serve in the role of grid operator. In these regions, the local utility often integrates the delivery of electricity services—energy to maintain the balance of electricity generation and consumption, capacity to meet demand, and a range of ancillary services. Utilities in these regions may build and operate power plants to provide electricity to serve their retail customers. These utilities may also buy electricity from other power plant owners. Energy storage can be used in various ways to enhance the reliability, resilience, and efficiency of grid operations, according to studies we reviewed and stakeholders we interviewed. Storage can be deployed throughout the electricity system and act as a generation, transmission, distribution, or customer-sited asset to provide various services, address operational challenges and needs, and potentially reduce costs. For example, storage can help grid operators address supply disruptions, relieve transmission congestion during periods of high demand, defer the need for transmission or distribution system upgrades, and provide backup power during a power outage. Figure 6 illustrates examples of potential applications across the electricity grid. Energy storage can support the reliability of grid operations by helping grid operators respond to fluctuations in electricity supply resulting from the variability of renewable energy resources, such as solar or wind, or disruptions to the grid, such as the loss of a transmission line or a generating unit. Specifically, according to some studies we reviewed, the fast-ramping nature of some storage technologies that can change generation output quickly—within a few seconds or minutes—makes them suitable for addressing short-term changes in variable energy generation resources (referred to as variable resources) such as when the sun sets and output from solar resources quickly declines. Moreover, storage can provide ancillary services needed to maintain system reliability and support the transmission of electricity. Specifically, according to some studies we reviewed, storage can provide frequency regulation services—which entail moment-to-moment reconciliation of the difference between supply and demand—to maintain the stability of the system. The services that storage provides can be performed by traditional assets but because certain storage technologies are fast- ramping they can be better-suited to provide certain services, according to several studies we reviewed and stakeholders we interviewed. Systems with a large portion of generating capacity from variable resources can face reliability challenges because the intermittent nature of these sources can cause fluctuations in voltage and frequency, according to some studies we reviewed. Grid operators are adopting storage to support increasing use of renewable energy and address the associated challenges. For example, in 2017, San Diego Gas & Electric deployed a 30 MW energy storage facility at its Escondido substation to help improve regional reliability and support greater amounts of renewable energy in the region’s energy supply (see fig. 7). According to San Diego Gas & Electric, the Escondido storage facility is helping to enhance grid reliability and increase the use of renewable energy; the facility is capable of the equivalent of serving 20,000 customers over a period of 4 hours. Similarly, in 2017, according to Tucson Electric Power documents, the utility installed two 10 MW battery storage projects to support its ability to achieve long-term renewable energy goals without compromising the reliability of service. According to representatives from the utility, the projects provide frequency control and voltage support and the deployment shortened the reaction time to system disruptions and supported the utility’s compliance with reliability standards in its role as balancing authority. Storage can also provide services that support resilience by helping the grid adapt to changing conditions and potentially disruptive events and, if a disruptive event occurs, to rapidly recover, according to several studies we reviewed and stakeholders we interviewed. Specifically, in the event of an outage during which power sources or power lines become unavailable, storage can respond quickly to provide backup power or black start services—the provision of the power necessary to restore a generation plant when power from the grid is unavailable during a major outage. In addition, storage can also support microgrids—systems that can connect and disconnect from the grid depending on operating conditions—that could maintain power for a small area independent of the grid. For example, in 2015 a Vermont utility installed a 4 MW energy storage system in conjunction with a 2.5 MW solar project at a school that serves as an emergency shelter. In case of grid failure or an extended emergency, the facility can separate from the rest of the grid and operate independently. In addition, in 2016 in Massachusetts, the Sterling Municipal Light Department installed a storage system that can isolate from the main grid in the event of a power outage and provide emergency backup power to the Sterling police station and dispatch center, a facility providing first responder services. In the event of an outage, the 2 MW storage system could provide the police station with up to 12 days of power, according to the utility. Storage also has the potential to improve efficiency of grid operations and help reduce operating costs, according to studies we reviewed and stakeholders we spoke with. For example, storage has the potential to reduce costs by capturing energy generated during low-cost periods to be used to meet demand later during more expensive periods, according to studies we reviewed. Specifically, energy time-shift, also referred to as arbitrage, involves utilities purchasing inexpensive electric energy, available during periods when prices or system marginal costs are low, to charge the storage system so that the stored energy can be used or sold at a later time when the price or costs are high. In addition, storage can help make the capacity of variable resources more consistent by storing electricity during periods of high generation, such as a sunny afternoon, and releasing it later during periods of high demand, such as the early evening. Moreover, storage can provide similar energy time-shift by storing excess energy production from renewable sources, which could otherwise be curtailed. Storage also has the potential to reduce costs by avoiding or delaying investments in infrastructure. Specifically, storage may be used to reduce the capacity demands on existing generation, transmission, and distribution infrastructure. As a result, according to many studies and stakeholders we interviewed, utilities may be able to avoid or delay investments in generation, transmission, and distribution infrastructure that would otherwise be necessary to maintain adequate supply. For example, in 2017, a utility that serves customers in Massachusetts announced plans to install a 6 MW energy storage system with an 8-hour duration alongside a new diesel generator on Nantucket Island to provide backup power and postpone the need to construct a costly submarine transmission cable to bring electricity from the mainland to meet anticipated growth in electricity demand. In some cases, an investment in a storage system could be a more cost-effective way to manage peak demand, and in such cases, utilities could reduce the need for operation of peaking resources or investment in new peaking resources, such as a natural gas plant. Additionally, according to many studies we reviewed and stakeholders we interviewed, storage can help customers reduce demand charges. Demand charges are fees included on electricity bills in many parts of the country to cover the cost of ensuring that sufficient generation and transmission resources are available to serve customers during periods of peak demand. Energy storage provides an opportunity for potential savings by helping a customer to manage their peak demand. Using storage can also allow some utilities to avoid charges that they might incur when purchasing wholesale electricity to serve their customers during a system’s peak demand; this could allow them to pass savings on to their customers in the form of lower rates. For example, although the Sterling, Massachusetts, Municipal Light Department installed its storage system to provide emergency backup power, the primary benefits of the project since its installation have resulted from using it to reduce peak demand which has reduced the utility’s transmission charges, and, in turn, has allowed it to reduce rates paid by its customers, according to utility representatives. Studies we reviewed and stakeholders we interviewed identified a variety of factors that affect energy storage deployment. These factors include industry and technology readiness, safety concerns and stringency of siting requirements, increasing use of renewable resources, the cost- competitiveness of storage and challenges with quantifying the value of storage, and the regulatory environment. Grid operators and utilities have limited experience with storage and face technical challenges integrating storage into existing systems, according to studies we reviewed and stakeholders we spoke with. For example, according to some studies and stakeholders, grid operators may not have experience planning for the integration and operation of storage and they may not consider it as an option. The models that grid operators typically use to help make decisions about investments in generation, transmission and distribution infrastructure are based on traditional resources with better-understood capabilities. Moreover, storage can be more challenging to integrate than other resources, such as solar, because it changes its function in the system from charging—consuming electricity— to discharging—generating electricity, according to some stakeholders. Because storage must provide power when called upon but also must be recharged from another resource at a later time, tools that planners rely on must keep an accurate accounting of the amount of energy stored and available to supply power to meet demand. According to one stakeholder, installation of storage requires grid operators to develop operating requirements and identify control and mitigation strategies for proper coordination with larger grid operations. In addition, existing utility systems may not be designed to incorporate storage and may require customization to integrate storage, according to several stakeholders. Industry and technical challenges affecting deployment of storage include uncertainty about the performance of certain storage technologies over time and in various operating conditions. Energy storage systems generally are expected to last for a decade or more, but the actual degradation of battery storage under various conditions is still largely unknown, according to some studies we reviewed and stakeholders we spoke with. The electric utility industry has historically been slow to adopt new technologies and, unless new storage technologies prove highly reliable, utilities may be slow to deploy these assets, according to several studies we reviewed and stakeholders we spoke with. Although the adoption of storage has been increasing, safety codes and standards for storage are still under development, and questions have been raised about safety risks and how to mitigate those risks, according to studies we reviewed and stakeholders we interviewed. Efforts are under way to ensure that safety codes and standards address energy storage systems, but these types of standards tend to lag behind the development of storage technologies, according to some studies and stakeholders. Until existing codes and standards are updated, or new ones are developed and adopted, entities seeking to deploy energy storage or needing to verify a storage system’s safety may face challenges with applying existing codes and standards, according to some studies we reviewed. In addition, concerns about the operational safety of large storage systems as a fire hazard can be a barrier to their deployment in urban areas or in proximity to other grid resources such as substations, and local entities such as fire departments may not allow the deployment of storage on certain sites. Moreover, local jurisdictions and emergency responders, along with storage system installers, insurers, and others may not have a complete understanding of the hazards associated with storage and best approaches to addressing these hazards, such as the appropriate fire protection measures, according to some studies and stakeholders. In addition, local entities’ review of energy storage systems, for example, can add additional time to the permitting process, given that these entities may not be familiar with storage systems and potential safety concerns, according to some studies. On the other hand, in some locations siting requirements may be less stringent for some types of energy storage projects than for other resources such as a large power plant that must comply with more stringent environmental requirements, according to some studies and stakeholders. In some cases, according to some studies, the permitting process may be simpler for storage projects and construction timelines considerably shortened for a variety of reasons, including that energy storage systems do not need to complete modifications to comply with air quality standards because they do not produce emissions. In addition, certain storage projects require a much smaller footprint than conventional power plants, whereas building new power plants or transmission lines can involve large land requirements. As mentioned previously, storage can help address reliability issues associated with the variability of renewable energy generation resources making them attractive to grid operators. Consequently, the increased use of solar and other renewable energy resources has in turn encouraged the installation of storage, according to some studies we reviewed and stakeholders we interviewed. According to the Energy Information Administration, utility-scale solar installations grew at an average rate of 72 percent per year between 2010 and 2016, faster than any other generating technologies. Moreover, increasing use of these resources is expected to continue, which could drive the adoption of storage deployment in the future, according to some studies we reviewed and stakeholders we spoke with. The Energy Information Administration estimated in January 2018 that nearly half of the approximately 25 GW of new utility-scale electric generating capacity added to the grid in 2017 used renewable technologies, particularly wind and solar. Moreover, according to some studies and stakeholders, states with aggressive renewable portfolio standards—such as Hawaii, which aims to achieve 100 percent renewable sources by 2045—will need to adopt storage resources to meet those goals. In addition, California’s renewables portfolio standard includes targets of 33 percent by 2020 and 50 percent by 2030. According to some stakeholders and documents we reviewed, California is experiencing excess solar and wind generation and curtailment at certain times of the day and year and, as the state moves toward a target of 50 percent renewables, storage could help address these challenges. According to some stakeholders we spoke with, long-duration technologies will support greater integration of renewable energy on the grid. As mentioned previously, pumped hydro and compressed air energy storage can provide long duration storage, and other technologies, including flow and lithium ion batteries, have the potential to provide for long duration storage, according to some studies we reviewed and stakeholders we spoke with. Grid operators’ decisions to invest in energy storage must consider both costs and benefits. While the cost of some technologies has fallen in recent years, the cost of storage systems—including all the system components, installation, and integration costs—is still high when compared to more traditional resources available to electric utilities, according to many studies we reviewed and stakeholders we spoke with. On the other hand, the adoption of storage for certain purposes, such as supporting increased use of renewable resources or providing backup power, includes potential benefits such as reducing greenhouse gas and other harmful emissions, or enhancing the resilience of the grid. While the cost of lithium-ion batteries has declined in recent years, the storage device is one component of a storage system, and estimates of the device’s share of the total cost of an energy storage system range from about 25 percent to 50 percent of the total costs, according to studies we reviewed. According to some stakeholders, the cost of the system components and other costs to integrate storage with the grid can be substantial and are not declining as quickly as the cost of storage devices. In addition to the cost of the storage device, other system component costs include power conversion electronics, software, and monitoring and control systems, among others, that are essential to maintain the health and safety of the entire system, according to some studies. Moreover, valuing investments in energy storage must consider both the cost and benefits, but assessing the potential benefits and costs of storage can prove challenging, according to several studies we reviewed and stakeholders we spoke with. These challenges identified in these studies and by these stakeholders include the following: Quantifying benefits. Benefits can be difficult to quantify, as they depend on the application, location, and ability to capture multiple benefits. Specifically, the compensation for services that storage can provide reflects local market conditions, and these vary across regions. In addition, the value of certain storage applications can be harder to quantify than for others. For example, if a utility is considering deployment of storage in order to defer an investment in a transmission and distribution infrastructure upgrade, then determining the value of the storage asset involves analyzing the avoided cost of that investment, which is quantifiable. However, it is more difficult to quantify the value of less tangible benefits of storage, such as improvements to operational flexibility and grid resilience, which are not monetized and therefore are difficult to quantify. Life expectancy. For certain storage technologies, much is still unknown about their useful life, which depends on the number of charge and discharge cycles, among other things. Reliable estimates of the expected life of an asset are necessary for accurately estimating lifecycle costs and benefits. Given the fact that battery technologies are evolving, the lack of data makes it more challenging for utilities to estimate expected costs and benefits to justify their investment expense. Limited information on cost. Sufficient information on the cost of storage systems is not readily available, limiting utilities’ ability to include storage in modeling and investment decisions, according to some stakeholders. Energy storage price and cost data vary among sources because of aggregation to protect proprietary interests, which unit is chosen to present price and cost data, and limited information about how projects operate. Specifically, information on the operational conditions, specifications, and performance of energy storage systems is difficult to obtain. In addition, according to some studies we reviewed, uncertainty exists about the future cost outlook and pace of technological maturity. The regulatory environment can pose barriers to the deployment of energy storage. Specifically, market rules and regulations do not always clearly address whether entities may own and operate storage assets and how, if at all, the cost of investments in storage assets can be recovered, according to several studies we reviewed and stakeholders we interviewed. In addition, each RTO establishes the rules in a different way, and their implementation of reforms to accommodate storage varies, according to studies and documents we reviewed and stakeholders we spoke with. According to a FERC document, under current market rules, resource bidding parameters—the physical and operational constraints that a resource identifies when submitting offers to sell services in electricity markets—vary greatly among the RTOs. Moreover, state regulators and RTOs may be slow to change their policies and rules to address energy storage, and delays in such changes hinder deployment, according to some studies we reviewed. In RTO regions, some states do not allow utilities to own generation assets, and when storage is classified as a generation asset, an electric utility can be prevented from owning storage. Moreover, when market rules do not clearly define what type of asset they consider storage to be, this can make it difficult to determine whether storage can participate in the market or to receive compensation, making storage in that market financially unviable, according to some studies and stakeholders. One RTO, the California Independent System Operator (ISO), has established participation models to accommodate resources, such as storage, that are operationally unique. In addition, uncertainty exists about the ability of storage project owners to recover costs of storage used for multiple applications, according to documents and studies we reviewed and stakeholders we spoke with. Moreover, the variation in rules and regulations across regions makes it difficult for energy storage project developers to navigate different potential markets because each has its own characteristics, stakeholders, regulations, and market designs, according to some stakeholders. Storage project developers must keep abreast of the activities of multiple regulatory agencies and the variation by region makes potential revenue streams difficult to predict. In addition, according to one study we reviewed, the inconsistency of rules adds a level of complexity for project developers that want to deploy storage resources across multiple markets because they must conduct separate analyses to determine the regulatory outlook, market requirements, and profit potential in each region. Federal and state policymakers have used a variety of policies and other efforts to encourage the deployment of storage and address market barriers. For example, DOE has undertaken various efforts in response to several challenges to the deployment of storage, but funding to continue these efforts is uncertain. In addition, FERC has taken steps to address market barriers to storage deployment in wholesale markets but the final impact of these steps depends on implementation by RTOs. Moreover, the Department of the Treasury and the Internal Revenue Service (IRS) are considering changes that could clarify the eligibility of energy storage for a tax credit. Lastly, state policies and other efforts aim to encourage the deployment of energy storage or to address market barriers; these include establishing mandates and targets for storage adoption, revising interconnection rules and planning requirements, and offering financial incentives and funding. According to documents we reviewed, DOE has undertaken various efforts in response to the challenges to deploying energy storage identified in a 2013 report, including challenges concerning the safety and reliability of such storage, its acceptance by industry, the regulatory environment, and cost-competitiveness. Efforts to Address Safety and Reliability Challenges. In 2017, DOE developed, through its Pacific Northwest National Laboratory (PNNL) and Sandia National Laboratories, the DOE safety roadmap, which established a goal to foster confidence in the safety and reliability of energy storage systems. The roadmap built on previous efforts including an Energy Storage Safety Forum that Sandia held in 2017 for stakeholders to share information and identify future needs. The objectives of the roadmap include research and development, codes and standards, and collaborative resources with a focus on electrical safety, fire and smoke hazard detection and mitigation, health and environmental hazards, natural and man-made disasters, ventilation and thermal management, and system controls. The roadmap aims to cover the development of energy storage systems through their decommissioning or refurbishment and includes design, installation, commissioning, operation and maintenance, repair, decommissioning, and reuse. DOE has also supported efforts to develop and deploy energy storage safety codes with industry groups, according to documents we reviewed. For example, DOE established working groups focused on safety and standards, including the Energy Storage Systems Safety Working Group, which aims to facilitate the timely development and deployment of safe energy storage systems by implementing the DOE safety roadmap through collaboration with stakeholders. In addition, as part of these efforts, a DOE working group on codes, standards, and regulations monitors the development of standards and model codes and provides input to those activities. Additionally, DOE coordinates with industry-led and international code-setting agencies such as the National Fire Protection Association and the International Code Council, as well as companies that conduct testing. In addition, PNNL published several resources including an inventory of codes and standards, an overview of the development and deployment of codes and standards, and a compliance guide. The compliance guide prepared by PNNL and Sandia, which includes safety codes and standards, aims to facilitate the timely deployment of storage systems and assist with documenting compliance with current safety- related codes and standards and verifying compliance with codes and standards. Efforts to Support Industry Acceptance. DOE has provided technical assistance and funded demonstration projects to help utilities and other entities install, procure, and evaluate storage projects, according to documents we reviewed. For example, DOE provided funding and technical support in the deployment of a storage project at an emergency shelter in Vermont that can separate from the rest of the grid and operate independently in case of an emergency. DOE also supported the development of documentation and tools to assist utilities in the design, deployment, and operation of energy storage systems including valuation models, procurement guidelines, commissioning procedures, and data acquisition guidelines. In addition, Sandia published guidance to provide information for municipalities on the elements that should be included in a solicitation for procurement and installation of an energy storage project and a handbook to provide information and tools to guide investors’ evaluations of energy storage opportunities. DOE has a proposal under way for a study to gather pricing information for energy storage technologies that will be used as part of future updates to the handbook. DOE also held a financial summit in June 2017 to provide information to the financial community on solicitations and contracts. In addition, to evaluate storage projects, DOE and the Washington Department of Commerce established a memorandum of understanding to have PNNL characterize and analyze the technical and economic attributes of storage projects. DOE also supports new deployments through funding, including the Grid Modernization Laboratory Consortium awards aimed at integrating conventional and renewable sources with energy storage. Provide Technical Assistance to Regulators. According to documents we reviewed, DOE has hosted workshops and provided technical assistance for several state public utility commissions and other entities aimed at providing them with information on storage technology development, project procurement, and valuation. In addition, in 2012 Sandia developed guidance for state regulatory authorities and planning personnel to provide information about opportunities for energy storage to play a greater role in the electricity grid. Research and Development to Improve Cost-Competitiveness. DOE’s Energy Storage Program’s research and development activities focus on improving materials and system factors that affect the cost, efficiency, and capacity of certain energy storage technologies, including flow batteries. DOE’s fiscal year 2018 budget request includes a performance goal to improve the cost- benefit ratio of storage to compete with current peak generation resources and, by 2020, increase to 5 percent the commercial use of grid-scale storage to buffer renewables. A DOE advisory committee in 2016 conducted an assessment of DOE’s energy storage-related research, development, and deployment programs that produced 15 recommendations. The recommendations included, among others, improving the visibility of DOE’s efforts; addressing the need for storage models and studies of market impediments; and providing additional funding and resources for energy storage research, development, and deployment programs. While DOE has undertaken a range of efforts over the past several years to address challenges to deployment, future funding of these efforts is uncertain. In 2017, DOE allocated $31 million to work on energy storage within its Office of Electricity Delivery and Energy Reliability. DOE’s fiscal year 2018 budget request proposed reducing this funding by about 74 percent, to $8 million, and proposed eliminating, among other efforts, work related to engagements with states, utilities, and storage providers for conducting tests and trials; engagements with state and federal regulatory officials on efforts to understand regional market barriers to deployment; validation of system performance and analysis of regional use cases; support to states and regional entities for the procurement, commissioning, and analysis of deployed systems; the development of enhanced tools and data for sharing with industry for the development and use of grid-scale batteries; and participation in both industry-led and international codes and standards development. Because fiscal year funding through March was provided under continuing resolutions, energy storage funding remained on par with fiscal year 2017 levels for the first half of the fiscal year, and the Consolidated Appropriations Act, 2018, increased funding for energy storage to $41 million. However, DOE’s fiscal year 2019 budget request again proposes reducing the funding for energy storage work to $8 million. According to DOE’s fiscal year 2019 budget request, DOE plans to focus on accelerating the development of new materials and technologies that can lead to improvements in the cost and performance of utility-scale energy storage systems and accelerate the adoption of energy storage systems into the grid infrastructure. FERC has taken several steps to address market barriers to energy storage deployment, but the impact of these efforts will depend on implementation by RTOs. In March 2018, FERC published a final rule that aims to address barriers to integrating storage into organized wholesale markets. The rule requires that RTOs establish participation models consisting of market rules that recognize the physical and operational characteristics of electric storage resources to facilitate their participation in the RTO markets. In prior years, FERC issued several orders that also aimed to address barriers to storage participation in organized wholesale electric markets. For example, FERC Order 792—issued in 2013—revised the definition of a small generating facility in the pro forma Small Generator Interconnection Agreement—which establishes the terms and conditions for interconnection of resources no larger than 20 MW—to specifically include energy storage devices. In addition, FERC Order 755—issued in 2011—required RTOs to compensate frequency regulation resources in a manner that acknowledges the performance of faster-ramping resources, such as batteries and flywheels. Additionally, in May 2018, FERC published a final rule that revised the definition of a generating facility in the pro forma Large Generator Interconnection Procedures and pro forma Large Generator Interconnection Agreement—which establishes the terms and conditions for interconnection of resources larger than 20 MW—to explicitly include electric storage resources. FERC also published guidance in February 2017 on the ability of electric storage resources to provide transmission or grid support services at cost-based rates, while providing other electric storage services, such as power sales, at market-based rates. According to some studies we reviewed and stakeholders we spoke with, FERC orders have helped alleviate some of the barriers to storage participation in wholesale markets, but the impact of these orders depends on RTO implementation. Moreover, RTO implementation of FERC’s requirement to establish participation models to accommodate storage may not occur until the end of 2019 or later. Figure 8 shows the timeline of key FERC efforts that aim to address market barriers to the deployment of storage and time frames for implementation from November 2016 through 2019. According to FERC’s final rule, RTO implementation of the requirement to establish participation models could take 21 months from the publication of the final rule. RTOs will need to develop the participation models, obtain input through their stakeholder review processes, and may need to update modeling and dispatch software. Treasury and the IRS are considering changes that could clarify the eligibility of energy storage for a business tax credit under section 48 of the Internal Revenue Code, according to IRS documents. Currently, customers who install storage systems may be eligible for this tax credit when they use the storage system to store energy from renewable energy systems more than 75 percent of the time; however, at this time there is no federal tax incentive for stand-alone storage. Since 2011, the IRS has issued some written determinations that the storage portion of a renewable energy system would be eligible for the credit. However, only the specific taxpayer addressed by a determination can rely on it as precedent. In October 2015, Treasury and IRS solicited comments from the public on how to define certain types of property that qualify for this tax credit, including whether property such as storage devices may also be considered energy property. According to IRS documents, comments filed in response requested revisions to the tax credit that include, among other things, providing a technology-neutral definition of energy storage property, providing a specific list of types of energy storage property that qualify for the credit, and determining that storage is eligible for the credit on a stand-alone basis. According to some stakeholders we interviewed, the requirement for storage to be paired with renewable energy to obtain the tax credit is limiting because there are other potential applications and benefits storage can provide to the grid that are unrelated to renewable energy integration. Additionally, one stakeholder we spoke with said that regions with relatively small renewable energy resource capacities are unable to receive federal support for energy storage, even though it may benefit their grid. Through interviews with stakeholders and our review of documents, we identified examples of state policies and other efforts that have encouraged the deployment of energy storage or aim to address market barriers. Appendix I includes a detailed list of state policies and other efforts encouraging deployment of energy storage we identified. In summary, these policies and other efforts include: Mandates and Targets. Several states have established or proposed mandates or targets that require or encourage electric utilities to procure a specific amount of energy storage capacity. States have taken a range of approaches to implementing these mandates and targets. For example: The California Public Utilities Commission requires investor-owned utilities to collectively procure 1.3 GW of energy storage by 2020. Oregon is in the process of implementing a requirement for certain utilities serving more than 25,000 retail customers to procure energy storage systems with at least 5 megawatt hours of energy storage capacity by January 1, 2020. The Massachusetts Department of Energy Resources adopted a 200 megawatt-hour energy storage target for electric distribution companies to collectively meet by January 2020. In November 2017, New York State enacted legislation requiring the state public service commission to adopt an energy storage target. In January 2018, the Governor of New York announced an energy storage goal of 1.5 GW by 2025. A number of other states are also considering the adoption of targets for storage capacity in the state. Mandates and targets that require or encourage utilities to procure energy storage can help create certainty in the market for energy storage by assuring that there is a demand for storage, according to some stakeholders we interviewed. Additionally, according to one document we reviewed, mandates and targets may impact deployment by encouraging the development of model regulatory frameworks that serve as examples to other states. States with storage mandates and targets may also serve as case studies to demonstrate the impact of energy storage deployment on a large scale and provide the industry with operational experience, examples of how to best integrate storage, and opportunities to evaluate storage. Changes to Interconnection Rules. Some states have changed or are considering changes to interconnection rules to account for energy storage. States are taking a number of approaches to revising interconnection rules. For example: In 2015, Hawaii’s Public Utility Commission made changes to interconnection standards and energy policies to provide for the interconnection of energy storage to the grid. The Arizona Corporation Commission is developing statewide interconnection rules for distributed generation. Draft rules include interconnection requirements for energy storage systems and Commission officials told us that stakeholders are debating the scope and nature of those requirements. Planning. Some states allow for the inclusion of energy storage in integrated resource and transmission planning processes; grid operators and utilities undertake these planning processes to ensure that the grid infrastructure has sufficient capacity and grid operators are able to meet future power demands. For example: The New Mexico Public Utility Commission’s integrated resource planning rules require investor-owned utilities to evaluate all feasible energy resources as part of their resource planning process. When the Commission’s integrated resource planning rules were originally implemented, energy storage was not commercially feasible; however, the state commission recently amended these rules to include energy storage as a resource in planning. The Oregon Public Utility Commission directed Portland General Electric to address energy storage in its future integrated resource plans. Washington’s Utilities and Transportation Commission directs utilities to demonstrate that, when considering a new resource acquisition, their analysis should include an evaluation of the costs and benefits of a storage alternative. The Commission also directs utilities procuring resources to issue requests for proposals that are technology neutral, allowing energy storage to bid. Several states are also incorporating storage into broader energy planning efforts, including conducting research to identify the benefits of and opportunities for storage in the state. For example: North Carolina passed legislation directing the North Carolina Policy Collaboratory, at the University of North Carolina, to conduct a study on energy storage to address how and if storage may benefit consumers, the feasibility of storage in the state, and policy recommendations. Massachusetts has also undertaken a number of efforts including launching the Energy Storage Initiative, an initiative administered by the Massachusetts Department of Energy Resources and the Massachusetts Clean Energy Center to facilitate the deployment of storage and provide environmental and ratepayer benefits. As part of this initiative the 2016 State of Charge report was released and, among other things, identified barriers to energy storage adoption in the state and made recommendations to increase deployment of storage, setting a target of 600 MW of energy storage capacity by 2025. Financial Incentives and Funding. Several states offer financial incentives including tax credits, tax exemptions, and rebate programs that encourage the deployment of residential, commercial and industrial energy storage systems by offsetting costs. For example: California’s Self Generation Incentive Program—designed to help reduce emissions, demand, and customer electricity costs—provides rebates to support existing, new, and emerging distributed energy resources installed on the customer’s side of the utility meter. This program is open to many different technologies, but according to the California Public Utilities Commission, the largest share of funding is allotted for energy storage projects. In 2017, Maryland established a state tax credit for a percentage of certain installed costs of energy storage systems on residential and commercial property. Legislation has also been proposed in New York that would create a state tax credit for residential energy storage systems equal to 25 percent of costs up to $7,000. A number of states offer funding for energy storage pilot and demonstration projects. For example: Massachusetts launched a $20 million grant program to pilot energy storage use cases to increase deployment of storage. The Washington Clean Energy Fund supports demonstration projects, including projects at utilities working with the Pacific Northwest National Laboratory to support understanding approaches to integrate and optimize storage control systems and development of a framework for evaluating the technical and financial benefits of storage. In addition to the efforts described above, we found that several states have proposed or undertaken a range of other efforts that may encourage the deployment of energy storage or address market barriers. For example, the Arizona Corporation Commission required two electric utilities to develop residential battery storage programs in order to lower customers’ energy use during peak demand. In addition, Maryland’s Public Service Commission initiated a grid modernization rulemaking that, among other things, will define residential energy storage, determine a classification for storage in the Commission’s rules, and create criteria to evaluate storage investments. Similarly, state legislation directs Oregon’s Public Utility Commission to create a framework for utilities to use when conducting storage evaluations. Moreover, the California Public Utility Commission has approved rules that increase the ways for energy storage systems to obtain revenue for multiple uses, or grid services, for example, from frequency regulation, capacity, or other services. We provided a draft of this report to DOE, FERC, and IRS for review and comment. In its comments, reproduced in appendix II, FERC generally agreed with our findings. DOE and FERC provided technical comments which we incorporated as appropriate. IRS did not provide written or technical comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, the Chairman of FERC, the Commissioner of IRS, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix III. Through interviews with stakeholders and our review of documents, we identified examples of policies and other efforts that have encouraged the deployment of energy storage or aim to address market barriers, including the establishment of mandates and targets for storage adoption, the revision of interconnection rules and planning requirements, financial incentives, and funding. Table 1 describes examples of a range of state policies and other efforts that may encourage the deployment of energy storage. Frank Rusco, (202) 512-3841 or ruscof@gao.gov. In addition to the contact named above, Karla Springer (Assistant Director), Antoinette Capaccio, Janice Ceperich (Analyst-in-Charge), Philip Farah, Kristen Farole, Paul Kazemersky, and Daniel Kojetin made key contributions to this report. Also contributing to this report were Tara Congdon, R. Scott Fletcher, Cindy Gilbert, and Dan C. Royer.", "summary": "Power plants' electricity output must be matched continuously with demand, which varies depending on the time of day and year. To maintain a reliable supply of electricity, operators of the electricity grid—a complex network of power plants and power lines managed by utility companies and other operators—take steps to ensure power plants are available to generate electricity when needed. Increasingly, renewable sources of energy, such as solar and wind, are being integrated into the grid. Energy storage allows for electricity to be stored and used later when it is needed and could change the operating capabilities of the electricity grid. Batteries and other energy storage technologies can store energy in one form—such as chemical, mechanical, or thermal energy—and transform that energy to generate electrical power at a later time. GAO was asked to provide information on the role of energy storage in grid operations. This report describes (1) how energy storage can be used to enhance grid operations and performance; (2) factors that affect the deployment of energy storage for grid operations; and (3) federal and state policies and other efforts that address the deployment of energy storage. GAO reviewed studies published from 2012 through 2017; and interviewed 41 stakeholders, including officials from government agencies and representatives of industry and other groups based on their knowledge of energy storage and grid operations. Energy storage can be used in various ways to enhance the reliability, resilience, and efficiency of grid operations, according to studies GAO reviewed and stakeholders GAO interviewed. Such storage can be deployed throughout the electricity system and act as a generation, transmission, distribution, or customer-sited asset to provide various services, address operational challenges and needs, and potentially reduce costs, as shown in the figure below. For example, storage can help grid operators address supply disruptions and the variability of renewable energy resources, such as solar and wind; relieve transmission congestion; defer the need for transmission or distribution system upgrades; and provide backup power during a power outage. Examples of Potential Storage Applications on the Electricity Grid Various factors affect energy storage deployment. These include industry and technology readiness, safety concerns and stringency of siting requirements, increasing use of renewable resources, cost-competitiveness of storage and challenges with quantifying the value of storage, and the regulatory environment, according to studies GAO reviewed and stakeholders GAO interviewed. For example, industry and technical challenges include uncertainty about the performance of certain technologies over time and in various operating conditions. Federal and state policymakers have used various policies and other efforts to encourage the deployment of storage and address market barriers. For example, the Department of Energy has undertaken various efforts, including research and development focused on improving factors that affect the cost and capacity of certain storage technologies. In addition, the Federal Energy Regulatory Commission has issued proposed and final rules to address market barriers to storage deployment in wholesale markets. Lastly, state policies and other efforts that aim to encourage the deployment of storage or to address market barriers include establishing mandates and targets for storage adoption, revising planning requirements, and offering financial incentives and funding.", "document_type": "gao"}
{"report": "Several U.S. agencies have roles and responsibilities related to the screening and vetting of NIV applicants, as shown in table 1. Key Visa Adjudication Process Terms Validity period: The length of time during which a nonimmigrant visa (NIV) is valid for use by a foreign national seeking to travel to a U.S. port of entry and apply for admission into the United States. Entries: The number of applications for admission into the country permitted under a single NIV. Reciprocity arrangements: An understanding or arrangement between the U.S. government and another country on the length of time visas issued by either or both nations are valid for admission. There are many NIVs, and for the purposes of this report, we have placed the majority of NIVs into one of seven groups, as shown in table 2. The validity period and number of entries varies depending on (1) the particular NIV and (2) reciprocity arrangement with an individual’s country of nationality, among other factors. For example, a foreign national of one country may be issued a tourist visa valid for 1 year that allows for a single U.S. entry, while a foreign national of another country may be issued a tourist visa valid for 5 years and that permits multiple entries. However, the authorized period of stay—that is, the amount of time that the nonimmigrant is permitted to remain in the United States after being admitted—has no relation to the validity period. For more information on the various NIVs, see appendix I. State is generally responsible for the adjudication of NIV applications, and manages the NIV application process, including the consular officer corps and its functions at more than 220 visa-issuing posts overseas. Depending on various factors, such as the particular NIV sought, the applicant’s background, and visa demand, State officials noted that the length of the visa adjudication process can vary from a single day to months. This screening and vetting process for determining who will be issued or refused a visa contains several steps, as shown in figure 1: Petitions. Prior to State’s adjudication process, some NIVs require applicants to first obtain an approved petition from U.S. Citizenship and Immigration Services (USCIS), as shown in table 3. For example, applicants seeking an employment-based NIV or a U.S. citizen’s foreign national fiancé(e) seeking U.S. entry to conclude a valid marriage, must obtain an approved petition from USCIS prior to applying for their NIV. The petitioner (i.e., a U.S. citizen, organization or business entity) completes the petition on behalf of the applicant (i.e., the beneficiary), and the petition would be submitted to a U.S.-based USCIS service center for adjudication. USCIS Background Checks. As part of the adjudication process for visas requiring a USCIS-approved petition before the NIV application is submitted to State, USCIS conducts background checks on U.S.- based petitioners and foreign beneficiaries. For example, petitioner and beneficiary information is screened against TECS—DHS’s principal law enforcement and antiterrorism database that includes enforcement, inspection, and operational records. Further, for U.S. citizens petitioning for a K-1 visa on behalf of their fiancé(e), an FBI fingerprint check may also be required of the U.S. citizen petitioner. If the background checks identify a potential match to derogatory information, the background check unit at the USCIS service center that received the petition is to conduct further research to confirm the match, such as running checks against other government systems and collaborating with other government agencies. If all background check hits have been resolved and documented, and there is no reason not to proceed, USCIS will adjudicate the petition. In fiscal year 2017, USCIS reported that it received about 640,000 petitions for NIVs, and approved over 550,000. NIV Application. After having obtained USCIS approval of the NIV petition, as applicable, the foreign national begins the consular process by completing an online NIV application, known as a DS-160. Upon submitting an application, the applicant can schedule an interview at a post overseas and pays the processing fee. Key Visa Adjudication Process Terms Inadmissible: Individuals are inadmissible to the United States if they fall within the classes of foreign nationals defined as such under the Immigration and Nationality Act (INA), as amended, Pub. L. No. 82-414, tit. II, ch. 2, § 212(a), 66 Stat. 163, 182-87 (1952) (classified, as amended, at 8 U.S.C. § 1182(a)), such as foreign nationals who have engaged in terrorist or criminal activities or previously violated U.S. immigration law. If a visa applicant is found inadmissible, and has not obtained a waiver from the Department of Homeland Security, the applicant would be statutorily ineligible for a visa. Ineligible: An individual is ineligible for a visa if it appears to the Department of State consular officer, based on the application or supporting documentation, that the applicant is not qualified to receive a visa under any provision of law. If the consular officer decides that an applicant is ineligible for visa issuance, the refusal may be based on statutory grounds of inadmissibility under INA § 212(a), or may be due to the individual’s failure to otherwise satisfy the applicable eligibility requirements for the particular visa, as defined in the INA. For example, a consular officer may refuse a J-1 exchange visitor visa to an applicant coming to the United States to perform services as a member of the medical profession if the applicant does not either demonstrate competency in oral and written English or hold a degree from an accredited school of medicine, as required of such visa applicants under INA § 212(j). eligibility concerns related to visa applicants. Prior to adjudicating the visa application, consular officers must review all such security check results. Some applicants are not subjected to all of the security checks depending on certain characteristics, such as age and visa category. For example, State does not generally require that fingerprints be collected for applicants who are either under 14 years old or over 79 years old, or for foreign government officials seeking certain visas. As needed, some applicants undergo an interagency review process called a security advisory opinion (SAO), which is a multi-agency, U.S-based review process for certain NIV applicants. For example, SAOs are mandatory in cases of certain security check hits, a foreign national’s background, or a foreign national’s intention while in the United States. In addition, consular officers have the discretion to request an SAO for any visa applicant. Through the SAO process, consular officers send additional information on applicants to U.S.- based agencies, who review that information against their holdings. Department of State data indicate that consular officers made over 180,000 requests for SAOs for NIV applicants in fiscal year 2017. Adjudication. If the consular officer determines that the applicant is eligible for the visa on the basis of the application, supporting documentation, and other relevant information such as statements made in an interview, he or she will take the applicant’s passport for final processing, but the visa cannot be printed until all security checks have been returned and reviewed. If the consular officer determines that the applicant is inadmissible to the United States or otherwise ineligible under the applicable visa eligibility criteria, he or she informs the applicant that the visa has been refused, and identifies the provision(s) of law under which the visa was refused. Recurrent vetting. In March 2010, shortly after the December 2009 attempted bombing by a foreign national traveling to the United States on a valid visa, CBP began vetting individuals with NIVs on a recurrent basis. This program has led State to revoke visas after they have been issued when information was later discovered that rendered the individual inadmissible to the United States or otherwise ineligible for the visa. In addition, CBP analysts may take other actions as needed after identifying new derogatory information, such as recommending that the airline deny boarding to the traveler because the traveler is likely to be deemed inadmissible upon arrival in the United States (known as a no-board recommendation) or making a referral to ICE, which may seek to remove the individual if already within the United States. According to NCTC, KFE also conducts recurrent vetting of NIV holders against emerging threat information. The total number of NIV applications that consular officers adjudicated annually (or, NIV adjudications) peaked at about 13.4 million in fiscal year 2016, which was an increase of approximately 30 percent since fiscal year 2012. In fiscal year 2017, NIV adjudications decreased by about 880,000 adjudications, or about 7 percent. Figure 2 shows the number of applications adjudicated each year from fiscal year 2012 through 2017. Appendix II includes additional data on NIV adjudications related to this and the other figures in this report. Annual Monthly Trends. State data from fiscal years 2012 through 2016 indicate that NIV adjudications generally followed an annual cycle, ebbing during certain months during the fiscal year; however, adjudications in fiscal year 2017 departed slightly from this trend. Specifically, from fiscal years 2012 through 2016, the number of NIV adjudications typically peaked in the summer months. State officials noted that the summer peak is generally due to international students who are applying for their visas for the coming academic year. However, in fiscal year 2017, the summer months did not experience a similar increase from previous months, departing from the trend over the previous five fiscal years, according to State data. Instead, NIV adjudications peaked in December of fiscal year 2017. State officials attributed some of the decline in fiscal year 2017 to a decrease in Chinese NIV applicants, which we discuss later in this report. Figure 3 shows monthly NIV adjudications for fiscal years 2012 through 2017. State data on NIV applications adjudicated from fiscal years 2012 through 2017 indicate that the number of adjudications by visa group, applicant’s country of nationality, and location of adjudication were generally consistent, with some exceptions. Visa Group. From fiscal years 2012 through 2017, about 80 percent of NIV adjudications were for tourist and business visitors as shown in figure 4. The next largest groups were visas for students and exchange visitors and temporary workers, which accounted for an average of 9 percent and 6 percent, respectively, of all adjudications during this time period. Although adjudications for visas in some categories increased, others decreased over time. For example, as shown in figure 5, NIV adjudications for temporary workers increased by approximately 50 percent from fiscal years 2012 through 2017 (592,000 to 885,000). During the same time period, adjudications for tourist and business visitors also increased by approximately 20 percent overall (from 8.18 million to 9.97 million), but decreased from fiscal years 2016 to 2017. However, NIV adjudications for student and exchange visitor visas decreased by about 2 percent from fiscal years 2012 through 2017 (1.01 million to 993,000) overall, but experienced a peak in fiscal year 2015 of 1.2 million. Appendix I includes additional information on NIV adjudication by visa group from fiscal years 2012 through 2017. State officials identified reasons to explain these trends: Temporary Workers. Although there was an increase in adjudications across all types of temporary worker visas, the largest percentage increase was for H-2A visas, which are for foreign workers seeking to perform agricultural services of a temporary or seasonal nature. Specifically, adjudications of H-2A visas increased by 140 percent from fiscal years 2012 to 2017 (from about 71,000 to 170,000). State officials noted that H-2A visas are not numerically limited by statute. Further, State officials stated that they believe U.S. employers are increasingly less likely to hire workers without lawful status and are petitioning for lawfully admitted workers, which in part led to an increase in H-2A visa demand. Tourist and Business Visitors. State officials partly attributed the overall changes to tourist and business visitor visas to the extension of the validity period of such visas for Chinese nationals, which represented the largest single country of nationality for tourist and business visitor visas in fiscal year 2017 (17.7 percent). In November 2014, the United States and the People’s Republic of China reciprocally increased the validity periods of multiple-entry tourist and business visitor visas issued to each other’s citizens for up to 10 years. The change in policy was intended to support improved trade, investment, and business by facilitating travel between the two countries. According to State officials, extending validity periods can create an initial increase in demand for such visas, followed by a period of stabilization or even decline as NIV holders would be required to apply for renewal less frequently. According to State officials, in early fiscal year 2015, the increase in the validity period to 10 years for such visas created a spike in Chinese demand in fiscal year 2015, and by fiscal year 2016, the initial demand for these visas had been met and Chinese economic growth was simultaneously slowing, resulting in fewer adjudications for such visas in fiscal year 2017. State data for this time period indicate that the number of adjudications for tourist and business visitor visas for Chinese nationals increased from 1.58 million in fiscal year 2014 to 2.54 million in fiscal year 2015, followed by a decline to 2.34 million in fiscal year 2016 and 1.76 million in fiscal year 2017. Student and Exchange Visitors. Similar to tourist and business visitors, State officials partly attributed the overall changes in student and exchange visitor visa adjudications to the extension of the validity period of such visas for Chinese nationals, which represented the largest single country of nationality for student and exchange visitor visas in fiscal year 2017 (19 percent). In November 2014, the United States extended the validity period of the F visa for academic students from 1 year to 5 years. State officials noted that similar to tourist and business visitor visas, there was an initial surge in Chinese F-visa applicants due to the new 5-year F-visa validity period that began in fiscal year 2015, but the number dropped subsequently because Chinese students with such 5-year visas no longer needed to apply as frequently for F visas. State data for this time period indicate that the number of visa adjudications for F visas for Chinese nationals increased from about 267,000 in fiscal year 2014 to 301,000 in fiscal year 2015, followed by a decline of 172,000 in fiscal year 2016 and 134,000 in fiscal year 2017. Applicant’s Country of Nationality. In fiscal year 2017, more than half of all NIV adjudications were for applicants of six countries of nationality: China (2.02 million, or 16 percent), Mexico (1.75 million, or 14 percent), India (1.28 million, or 10 percent), Brazil (670,000, or 5 percent), Colombia (460,000, or 4 percent), and Argentina (370,000, or 3 percent), as shown in figure 6. Location of Adjudication. State data indicate that the geographic distribution of NIV adjudications across visa-issuing posts worldwide remained relatively consistent from fiscal years 2012 through 2017. NIV adjudications from visa-issuing posts in the Western Hemisphere comprised the largest proportion worldwide during this time period; however, this proportion decreased from 48.8 percent in fiscal year 2012 to 41.7 percent in fiscal year 2017. During the same time period, the proportion of NIV adjudications at visa-issuing posts in other regions increased slightly. For example, the percentage of NIV adjudications from posts in Africa increased from 3.8 percent to 5.5 percent, and the percentage of adjudications from posts in South and Central Asia increased from 7.9 percent to 11.2 percent from fiscal years 2012 through 2017. Figure 7 provides the proportion of NIV adjudications at visa- issuing posts from each region from fiscal years 2012 through 2017. The percentage of NIVs refused—known as the refusal rate—increased from fiscal years 2012 through 2016, and was about the same in fiscal year 2017 as the previous year. As shown in figure 8, the NIV refusal rate rose from about 14 percent in fiscal year 2012 to about 22 percent in fiscal year 2016, and remained about the same in fiscal year 2017; averaging about 18 percent over the time period. As a result, the total number of NIVs issued peaked in fiscal year 2015 at about 10.89 million, before falling in fiscal years 2016 and 2017 to 10.38 million and 9.68 million, respectively. The NIV refusal rate can fluctuate from year to year due to many factors. For example, according to State officials, removing a large, highly- qualified set of travelers from the NIV applicant population can drive up the statistical refusal rate. State officials also noted that when a country joins the Visa Waiver Program or a visa for certain nationalities increase from 1-year to 10-year visa validity periods, these individuals no longer apply for visas and affect the overall refusal rate. Further, State officials noted that changes in political and economic conditions in individual countries can affect visa eligibility, which in turn affects the overall refusal rate. State officials noted that the degree to which an applicant might seek to travel to the United States unlawfully is directly related to political, economic, and social conditions in their countries. For example, if global or regional economic conditions deteriorate, more applicants may have an incentive to come to the United States illegally by, for example, obtaining a NIV with the intent to unlawfully stay for a particular time period or purpose other than as permitted by their visa, which then would increase the number of NIV applications that consular officers are refusing. From fiscal years 2012 through 2017, the refusal rate varied by visa group. The highest refusal rate was for tourists and business visitors, which rose from about 15 percent in fiscal year 2012 to over 25 percent in fiscal year 2017, as shown in figure 9. Other visa categories, such as foreign officials and employees, transit and crewmembers, and fiancé(e)s and spouses, had refusal rates below 5 percent during this time period. State officials noted that because different visa categories have different eligibility and documentary requirements, they have different refusal rates. For example, F, J, and H visas require documentation of eligibility for student, exchange, or employment status, respectively. According to State data, while the majority of NIV refusals from fiscal years 2012 through 2017 were a result of consular officers finding the applicants ineligible, a relatively small number of refusals were due to terrorism and other security-related concerns. NIV applicants can be refused a visa on a number of grounds of inadmissibility or other ineligibility under U.S. immigration law and State policy. For the purposes of this report, we have grouped most of these grounds for refusal into one of seven categories, as shown in table 4. State data indicate the more than 90 percent of NIVs refused each year from fiscal years 2012 through 2017 were based on the consular officers’ determination that the applicants were ineligible nonimmigrants—in other words, the consular officers believed that the applicant was an intending immigrant seeking to stay permanently in the United States, which would generally violate NIV conditions, or that the applicant otherwise failed to demonstrate eligibility for the particular visa he or she was seeking. For example, an applicant applying for a student visa could be refused as an ineligible nonimmigrant for failure to demonstrate possession of sufficient funds to cover his or her educational expenses as required. Similarly, an applicant could be refused as an ineligible nonimmigrant for indicating to the consular officer an intention to obtain a student visa to engage in unsanctioned activities while in the United States, such as full-time employment instead of pursuing an approved course of study. According to State data, the second most common reason for refusal during this time period was inadequate documentation, which accounted for approximately 5 percent of refusals each year. In such cases, a consular officer determined that the application failed to include necessary documentation for the consular officer to ascertain whether the applicant was eligible to receive a visa at that time. If, for example, the applicant provides sufficient additional information in support of the application, a consular officer may subsequently issue the visa, as appropriate. Our analysis of State data indicates that relatively few applicants— approximately 0.05 percent—were refused for terrorism and other security-related reasons from fiscal years 2012 through 2017. Security- related reasons can include applicants who have engaged in genocide, espionage, or torture, among other grounds. Terrorism-related grounds of inadmissibility include when an applicant has engaged in or incited terrorist activity, is a member of a terrorist organization, or is the child or spouse of a foreign national who has been found inadmissible based on terrorist activity occurring within the last five years, among other reasons. As shown in figure 10, in fiscal year 2017, State data indicate that 1,256 refusals (or 0.05 percent) were based on terrorism and other security-related concerns, of which 357 refusals were specifically for terrorism-related reasons. In calendar year 2017, the President issued two executive orders and a presidential proclamation that required, among other actions, visa entry restrictions for nationals of certain countries of concern, a review of information needed for visa adjudication, and changes to visa (including NIV) screening and vetting protocols and procedures (see timeline in figure 11). Initially, the President issued Executive Order 13769, Protecting the Nation from Foreign Terrorist Entry Into the United States (EO-1), in January 2017. In March 2017, the President revoked and replaced EO-1 with the issuance of Executive Order 13780 (EO-2), which had the same title as EO-1. Among other things, EO-2 suspended entry of certain foreign nationals for a 90 day period, subject to exceptions and waivers. It further directed federal agencies—including DHS, State, DOJ and ODNI—to review information needs from foreign governments for visa adjudication and develop uniform screening and vetting standards for U.S. entities to follow when adjudicating immigration benefits, including NIVs. In September 2017, as a result of the reviews undertaken pursuant to EO-2, the President issued Presidential Proclamation 9645, Enhancing Vetting Capabilities and Processes for Detecting Attempted Entry into the United States by Terrorists or Other Public-Safety Threats (Proclamation), which imposes certain conditional restrictions and limitations on the entry of nationals of eight countries—Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela and Yemen—into the United States for an indefinite period. These restrictions are to remain in effect until the Secretaries of Homeland Security and State determine that a country provides sufficient information for the United States to assess adequately whether its nationals pose a security or safety threat. Challenges to both EOs and the Proclamation have affected their implementation and, while EO-2’s entry restrictions have expired, the visa entry restrictions outlined in the Proclamation continue to be fully implemented as of June 2018, consistent with the U.S. Supreme Court’s June 26, 2018, decision, which held that the President may lawfully establish nationality-based entry restrictions under the INA, and that Proclamation 9645 itself “is squarely within the scope of Presidential authority.” A more detailed listing of the executive actions and related challenges to those actions brought in the federal courts can be found in appendix III. Our analysis of State data indicates, out of the nearly 2.8 million NIV applications refused in fiscal year 2017, 1,338 were refused due to visa entry restrictions implemented in accordance with the executive actions. To implement the entry restrictions, in March 2017, State directed its consular officers to continue to accept all NIV applications and determine whether the applicant was otherwise eligible for a visa without regard to the applicable EO or Proclamation. If the applicant was ineligible for the visa on grounds unrelated to the executive action, such as having prior immigration violations, the applicant was to be refused on those grounds. If the applicant was otherwise eligible for the visa, but fell within the scope of the nationality-specific visa restrictions implemented pursuant to the applicable EO or Proclamation and was not eligible for a waiver or exception, the consular officer was to refuse the visa and enter a refusal code into State’s NIV database indicating that the applicant was refused solely due to the executive actions. More than 90 percent of the NIV applications refused in fiscal year 2017 pursuant to an executive action were for tourist and business visitor visas, and more than 5 percent were for students and exchange visitors. State data also indicate that the number of applications adjudicated for nationals of the 7 countries identified in EO-1—Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen—decreased by 22 percent in fiscal year 2017, as compared to a 7 percent general decrease in NIV adjudications worldwide that year. For example, as shown in table 5, the decrease in adjudications from fiscal years 2016 to 2017 for nationals of the 7 countries identified in EO-1 ranged from around 12 percent to more than 40 percent. As directed by the executive actions, DHS, State, DOJ, and ODNI took several steps to enhance NIV screening and vetting processes given their responsibilities for implementing the presidential actions. Among other things, the responsibilities included: (1) a review of information needed for visa adjudication; (2) the development of uniform screening standards for immigration programs; and (3) implementation of enhanced visa screening and vetting protocols and procedures. Review of information needed for visa adjudication. In accordance with EO-2, DHS conducted a worldwide review, in consultation with State and ODNI, to identify additional information needed from foreign countries to determine that an individual is not a security or public-safety threat when adjudicating an application for a visa, admission, or other immigration benefit. According to State officials, an interagency working group composed of State, DHS, ODNI, and National Security Council staff was formed to conduct the review. To conduct this review, DHS developed a set of criteria for information sharing in support of immigration screening and vetting, as shown by table 6. According to DHS officials, to develop these criteria, DHS, in coordination with other agencies, identified current standards and best practices for information collection and sharing under various categories of visas to create a core list of information needed from foreign governments in the visa adjudication process. For example, State sent an information request to all U.S. posts overseas requesting information on host nations’ information sharing practices, according to State officials. To assess the extent to which countries were meeting the newly established criteria, DHS officials stated that they used various information sources to preliminarily develop a list of countries that were or were not meeting the standards for adequate information sharing. For example, DHS officials stated that they reviewed information from INTERPOL on a country’s frequency of reporting lost and stolen passport information, consulted with ODNI for information on which countries are terrorist safe havens, and worked with State to obtain information that State officials at post may have on host nations’ information sharing practices. According to the Proclamation, based on DHS assessments of each country, DHS reported to the President on July 9, 2017, that 47 countries were “inadequate” or “at risk” of not meeting the standards. DHS officials identified several reasons that a country may have been assessed as “inadequate” with regard to the criteria. For example, some countries may have been willing to provide information, but lacked the capacity to do so. Or, some countries may not have been willing to provide certain information, or simply did not currently have diplomatic relations with the U.S. government. As was required by EO-2, State engaged with foreign governments on their respective performance based on these criteria for a 50-day period. In July 2017, State directed its posts to inform their respective host governments of the new information sharing criteria and request that host governments provide the required information or develop a plan to do so. Posts were directed to then engage more intensively with countries DHS’s report preliminarily deemed “inadequate” or “at risk”. Each post was to submit an assessment of mitigating factors or specific interests that should be considered in the deliberations regarding any travel restrictions for nationals of those countries. DHS officials stated that they reviewed the additional information host nations provided to State and then reevaluated the initial classifications to determine if any countries remained “inadequate.” On September 15, 2017, in accordance with EO-2, DHS submitted to the President a list of countries recommended for inclusion in a presidential proclamation that would prohibit certain categories of foreign nationals of such countries from entering the United States. The countries listed were Chad, Iran, Libya, North Korea, Syria, Venezuela, and Yemen— which were assessed as “inadequate,” and Somalia, which was identified as a terrorist safe haven. The Presidential Proclamation indefinitely suspended entry into the United States of certain nonimmigrants from the listed countries (see table 7) and directed DHS, in consultation with State, to devise a process to assess whether the entry restrictions should be continued, modified or terminated. In September 2017, State issued additional guidance to posts on implementation of the Presidential Proclamation. As of July 2018, State continues to accept and process the NIV applications of foreign nationals from the eight countries covered by the Proclamation. Such applicants are to be interviewed, according to State guidance, and consular officers are to determine if the applicant is otherwise eligible for the visa, meets any of the proclamation’s exceptions, or qualifies for a waiver. Development of uniform screening standards for U.S. immigration benefit programs. Consistent with EO-2, State, DHS, DOJ, and ODNI developed a uniform baseline for screening and vetting standards and procedures by the U.S. government. According to State officials, an interagency working group comprised of State, DHS, DOJ, and ODNI staff is implementing these requirements. Based on its review of existing screening and vetting processes, DHS officials stated that the working group established uniform standards for (1) applications, (2) interviews, and (3) security system checks (i.e., biographic and biometric). Regarding applications, DHS officials stated that the group identified data elements against which applicants are to be screened and vetted. In February 2018, DHS Office of Policy officials stated that they had taken steps to create more consistency across U.S. government forms that collect information used for screening and vetting purposes, such as State’s DS-160 NIV application as well as 12 DHS forms. For example, officials stated that they anticipate issuing Federal Register notices announcing the intended changes to such forms. Regarding interviews, DHS officials stated that the working group established a requirement for all applicants seeking an immigration benefit, including NIV applicants, to undergo a baseline uniform national security and public safety interview. DHS officials stated that the working group modeled its interview baseline on elements of the refugee screening interview. To help implement this standard, DHS officials stated that the department is offering more training courses in enhanced communications (i.e. detecting deception and eliciting responses) and making such courses accessible to other U.S. government entities and U.S. officials overseas. Regarding security checks, the working group identified certain checks that should be conducted for all applicants seeking an immigration benefit, including NIV applicants. For example, DHS officials stated that the working group concluded that all applicants for U.S. immigration benefits should be screened against DHS’s TECS, among other federal databases. In February 2018, DHS Office of Policy officials stated that they were also exploring the extent to which current screening and vetting technologies can be expanded. For example, technology that is being used to screen applicants for counterterrorism concerns can potentially be modified to screen applicants for other concerns such as public safety or participation in transnational organized crime. However, these officials noted such changes to technology can take a long time. DHS officials stated that each department and agency is responsible for implementing the uniform standards for their relevant immigration programs. For example, with regard to maintaining information electronically, State officials stated that for nonimmigrant and immigrant visas, as of May 2018, they collected most, but not all, of the application data elements. In addition to executive actions taken in calendar year 2017, the President issued National Security Presidential Memorandum 9 on February 6, 2018, which directed DHS, in coordination with State, DOJ, and ODNI, to establish a National Vetting Center to optimize the use of federal government information in support of the national vetting enterprise. This memorandum stated that the U.S. government must develop an integrated approach to the use of intelligence and other data, across national security components, in order to improve how departments and agencies coordinate and use information to identify individuals presenting a threat to national security, border security, homeland security, or public safety. The center is to be overseen and guided by a National Vetting Governance Board, consisting of six senior executives designated by DHS, DOJ, ODNI, State, the Central Intelligence Agency, and the Department of Defense. Further, within 180 days of the issuance of the memorandum, these six departments and agencies, in coordination with the Office of Management and Budget, are to jointly submit to the President for approval an implementation plan for the center, addressing, among other things, the initial scope of the center’s vetting activities; the roles and responsibilities of agencies participating in the center; a resourcing strategy for the center; and a projected schedule to reach both initial and full operational capability. On February 14, 2018, the Secretary of Homeland Security selected an official to serve as the Director of the National Vetting Center and delegated the center’s authorities to CBP. DHS Office of Policy officials stated in February 2018 that the center is intended to serve as the focal point of the larger screening and vetting enterprise, and will coordinate policy and set priorities. The center will use the uniform baselines for screening and vetting standards and procedures established per EO-2 to set short- and long-term priorities to improve screening and vetting across the U.S. government. Further, these officials stated screening and vetting activities will continue to be implemented by the entities that are currently implementing such efforts, but roles and responsibilities for screening and vetting for immigration benefits may be modified in the future based on the work of the center. According to DHS Office of Policy officials, efforts to implement National Security Presidential Memorandum 9, such as the development of an implementation plan, are ongoing as of June 2018. Implementation of new visa screening and vetting protocols and procedures. In response to the EOs and a March 2017 presidential memorandum issued the same day as EO-2, State has taken several actions to implement new visa screening and vetting protocols and procedures. For example, State sought and received emergency approval from the Office of Management and Budget in May 2017 to develop a new form, the DS-5535. The form collects additional information from a subset of visa applicants to more rigorously evaluate applicants for visa ineligibilities, including those related to national security and terrorism. The new information requested includes the applicant’s travel history over the prior 15 years, all phone numbers used over the prior 15 years, and all email addresses and social media handles used in the last 5 years. State estimated that, across all posts, the groups requiring additional vetting represented about 70,500 individuals per year. We provided a draft of the sensitive version of this report to DHS, DOJ, State, and ODNI. DHS, DOJ, and State provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until seven days from the report date. At that time, we will send copies of this report to the Secretaries of Homeland Security and State, the Attorney General, and the Director of National Intelligence. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777or GamblerR@gao.gov. Key contributors to this report are listed in appendix IV. There are many nonimmigrant visas (NIV), which are issued to foreign nationals such as tourists, business visitors, and students seeking temporary admission into the United States. For the purposes of this report, we placed the majority of NIVs into one of seven groups. In the following enclosures, we provide a descriptive overview of each group on the basis of our analysis of the Department of State’s (State) fiscal years 2012 through 2017 NIV data. Each enclosure also contains the following: Description of the group. In this section, we provide a narrative description of the group, as well as a table of the specific NIVs that comprise the group. Characteristics of the applicants. In this section, we provide the number of annual NIV adjudications for fiscal years 2012 through 2017, the specific NIVs adjudicated in fiscal year 2017 within the group, the regions to which applicants applied for these NIVs in fiscal year 2017, and the top five nationalities that applied for NIVs in the group in fiscal year 2017. Issuances. In this section, we provide the number of NIVs issued within this group for fiscal years 2012 through 2017. Refusals. In this section, we provide the refusal rate for the entire NIV group for fiscal years 2012 through 2017. For the NIVs that were refused in fiscal year 2017 for this group, we also provide the top ground for refusal. NIV applicants can be refused a visa on a number of grounds of inadmissibility or other ineligibility under U.S. immigration law and State policy. However, across all visa groups, the top categories were either ineligible nonimmigrant or inadequate documentation: Ineligible nonimmigrant. For most NIV categories, the applicant is presumed to be an intending immigrant until the applicant establishes to the satisfaction of the consular officer that he or she is entitled to a nonimmigrant status. An applicant may be refused under this provision if, among other things, the consular officer determines the applicant lacks sufficient ties to his or her home country, or intends to abandon foreign residence; that evidence otherwise indicates an intent to immigrate to the United States permanently; or that the applicant is likely to violate the terms of the visa after being admitted. Inadequate documentation. The consular officer determined that the application is not in compliance with the INA because, for example, it lacks necessary documentation to allow the consular officer to determine visa eligibility. In such cases, the applicant would not be found eligible for the visa unless and until satisfactory documentation is provided to the consular officer or after the completion of administrative processing, such as security advisory opinions. Visa types (FY 2017) (9,968,157 adjudications) Region in which applicant applied (FY 2017) (9,968,157 adjudications) percent from fiscal years 2012 through 2015, and declined by about 13 percent from fiscal years 2015 to 2017. ● The refusal rate for tourist and business visitor visas generally increased each year from fiscal year 2012 through fiscal year 2017. ● The vast majority of refusals in fiscal year 2017 were due to the applicant’s inability to overcome the presumption of his or her intent to immigrate or meet the visa’s eligibility criteria. Issued visas, fiscal years 2012 through 2017 (in thousands) Visa refusal rates, fiscal years 2012 through 2017 (percentage) Visa types (FY 2017) (992,855 adjudications) Region in which applicant applied (FY 2017) (992,855 adjudications) ● The refusal rate for student and exchange visitor issuances decreased each year from fiscal years 2015 through 2017. visas peaked in fiscal year 2016, and slightly declined in fiscal year 2017. ● The vast majority of refusals in fiscal year 2017 were due to the applicant’s inability to overcome the presumption of his or her intent to immigrate or meet the visa’s eligibility criteria. Issued visas, fiscal years 2012 through 2017 (in thousands) Visa refusal rates, fiscal years 2012 through 2017 (percentage) Visa types (FY 2017) (884,667 adjudications) 19% 10% 16% Region in which applicant applied (FY 2017) (884,667 adjudications) ● Generally, the refusal rates for temporary worker years 2012 through 2017. visas decreased from fiscal years 2012 through 2017. ● Department of State officials noted, for example, that H-2A visas are not numerically limited by statute. They also stated that they believe U.S. employers are increasingly less likely to hire workers without lawful status and are petitioning for lawfully admitted workers. ● In fiscal year 2017, temporary worker visas were most frequently refused because the applicant did not provide adequate documentation to the consular officer. Issued visas, fiscal years 2012 through 2017 (in thousands) Visa refusal rates, fiscal years 2012 through 2017 (percentage) Visa types (FY 2017) (330,117 adjudications) Region in which applicant applied (FY 2017) (330,117 adjudications) ● The refusal rates for transit and crewmember visas about 8 percent from fiscal years 2012 through 2017 (from about 295,000 to 320,000). varied over the period of fiscal years 2012 through 2017. ● Specifically, issued C-1/D visas increased over the ● The majority of refusals in fiscal year 2017 were same time period, but the number of issued visas for the remaining visa types in this category have decreased. due to the applicant’s inability to overcome the presumption of his or her intent to immigrate or meet the visa’s eligibility criteria. Issued visas, fiscal years 2012 through 2017 (in thousands) Visa refusal rates, fiscal years 2012 through 2017 (percentage) Visa types (FY 2017) (166,187 adjudications) Region in which applicant applied (FY 2017) (166,187 adjudications) ● The refusal rates for foreign official and employee visas remained under 4 percent. ● In fiscal year 2017, foreign official and employee visas were most frequently refused because the applicant did not provide adequate documentation to the consular officer. Issued visas, fiscal years 2012 through 2017 (in thousands) Visa refusal rates, fiscal years 2012 through 2017 (percentage) Visa types (FY 2017) (68,580 adjudications) Region in which applicant applied (FY 2017) (68,580 adjudications) ● Generally, refusal rates for treaty trader and investor increased over the period of fiscal years 2012 through 2017. visas increased slightly over the period of fiscal years 2012 through 2017. ● Issuances for E-3 visas nearly doubled from fiscal ● The majority of refusals in fiscal year 2017 were year 2012 through 2017, but comprise a small percentage of this category overall. due to the applicant’s inability to overcome the presumption of their intent to immigrate or meet the visa’s eligibility criteria. Issued visas, fiscal years 2012 through 2017 (in thousands) Issued visas, fiscal years 2012 through 2017 (in thousands) Visa refusal rates, fiscal years 2012 through 2017 (percentage) Visa types (FY 2017) (40,533 adjudications) Region in which applicant applied (FY 2017) (40,533 adjudications) ● Refusal rates for fiancé(e) and spouse visas were fluctuated over the period of fiscal years 2012 through 2017, but increased overall during this time period. relatively low during the period of fiscal years 2012 through 2017. ● Most refusals in fiscal year 2017 were due to inadequate documentation from the visa applicant, potentially indicating that such applications failed to include necessary documentation for the consular officer to ascertain whether the applicant was eligible to receive a visa at that time. Issued visas, fiscal years 2012 through 2017 (in thousands) Visa refusal rates, fiscal years 2012 through 2017 (percentage) Nonimmigrant visas (NIV) are issued to foreign nationals such as tourists, business visitors, and students seeking temporary admission into the United States. The Department of State (State) is generally responsible for the adjudication of NIV applications, and manages the application process, including the consular officer corps and its functions at more than 220 U.S. embassies and consulates (i.e., visa-issuing posts) overseas. Depending on various factors, such as the particular NIV sought, the applicant’s background, and visa demand, State officials noted that the length of the visa adjudication process can vary from a single day to months. This appendix provides descriptive statistics of NIV adjudications, issuances, and refusals for fiscal years 2012 through 2017. Specific details are shown in table 8 below. State data from fiscal years 2012 through 2016 indicate that NIV adjudications generally followed an annual cycle, ebbing during certain months during the fiscal year; however, adjudications in fiscal year 2017 departed slightly from this trend. Specifically, from fiscal years 2012 through 2016, the number of NIV adjudications typically reached its highest peak in the summer months, as shown in table 9. For example, State officials noted that a summer peak is generally due to international students who are applying for their visas for the coming academic year. There are many NIVs, and for the purposes of this report, we have placed the majority of NIVs into one of seven groups. Table 10 includes the annual NIV adjudications, issuances, and refusal rates, for each visa group for fiscal years 2012 through 2017. NIV applicants seeking to travel to the United States represent many different nationalities, but the countries of nationality with the most NIV adjudications have remained relatively consistent in recent years. Table 11 provides the top 25 countries of nationality for NIV adjudications for fiscal years 2012 through 2017. NIV applicants can apply for their NIVs at more than 220 visa-issuing U.S. posts overseas. Table 12 describes the regions to which NIV applicants applied from fiscal years 2012 through 2017. NIV applicants can be refused a visa on a number of grounds of inadmissibility or other ineligibility under U.S. immigration law and State policy. For the purposes of this report, we have grouped most of these grounds for refusal into one of seven categories, and group the remaining into a miscellaneous category, as shown in table 13. From January through October 2017, the administration took various executive actions establishing nationality-based entry restrictions for certain categories of foreign nationals from designated countries. This appendix supplements information included in this report to provide a more comprehensive presentation of changes to U.S. immigration policy affecting nonimmigrant and immigrant entry into the United States, and outlines the legal standards applied, and precedent developed and relied upon, by federal courts in resolving challenges to the executive actions. In particular, it describes relevant aspects of the executive actions specifically addressed in this report—Executive Orders 13769 and 13780, both titled Protecting the Nation from Foreign Terrorist Entry into the United States, and Presidential Proclamation 9645, Enhancing Vetting Capabilities and Processes for Detecting Attempted Entry into the United States by Terrorists or Other Public-Safety Threats—that imposed visa entry restrictions on certain countries’ nationals and included provisions addressing NIV screening and vetting, as well as other executive actions on immigration issued by the current administration. Furthermore, this appendix provides a detailed account of the interrelated challenges to these executive actions brought in the federal courts through June 2018. In summary, on March 6, 2017, the President issued Executive Order (EO) 13780, Protecting the Nation from Foreign Terrorist Entry Into the United States, which instituted visa and refugee entry restrictions, and an accompanying memorandum addressed to the Secretaries of State and Homeland Security and the Attorney General, calling for heightened screening and vetting of visa applications and other immigration benefits. EO 13780 stated that it is U.S. policy to improve the screening and vetting protocols and procedures associated with the visa-issuance process and U.S. Refugee Admissions Program (USRAP). Enforcement of sections 2(c) and 6(a) of EO 13780 which established visa entry restrictions for nationals of six countries of particular concern—Iran, Libya, Somalia, Sudan, Syria, and Yemen—for a 90-day period, and suspended all refugee admissions for 120 days, was enjoined by federal district court orders issued in March 2017. On appeal, the U.S. Courts of Appeals for the Fourth and Ninth Circuits generally upheld these decisions. Upon review by the U.S. Supreme Court in June 2017, the injunction was partially lifted except with respect to foreign nationals who have bona fide ties to the United States Implementation of EO 13780 commenced on June 29, 2017. On September 24, 2017, pursuant to section 2(e) of EO 13780, the President issued Presidential Proclamation 9645, Enhancing Vetting Capabilities and Processes for Detecting Attempted Entry Into the United States by Terrorists or Other Public-Safety Threats. This proclamation restricts entry into the United States of certain categories of foreign nationals from eight countries—Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela, and Yemen—for an indefinite period. Preliminary injunctions issued by the U.S. District Courts for the Districts of Maryland (Maryland federal district court) and Hawaii (Hawaii federal district court) in October 2017 prohibited implementation of these visa entry restrictions except with respect to North Korean and Venezuelan nationals. On December 4, 2017, the U.S. Supreme Court issued two orders staying these district court injunctions; and on January 19, 2018, the Supreme Court granted the government’s petition for review of the December 22, 2017, decision of the Ninth Circuit, which partially affirmed the Hawaii federal district court’s preliminary injunction. As of June 2018, these latest visa entry restrictions continue to be fully implemented consistent with the Supreme Court’s June 26, 2018, decision, which held that the President may lawfully establish nationality-based entry restrictions, and that Proclamation 9645 itself “is squarely within the scope of Presidential authority.” The following sections describe these executive actions and related litigation in greater detail. On January 27, 2017, the President issued EO 13769, Protecting the Nation from Foreign Terrorist Entry Into the United States, which directed a review of information needs for adjudicating visas and other immigration benefits to confirm individuals seeking such benefits are who they claim to be, and are not security or public-safety threats. To temporarily reduce investigative burdens during the review period, the EO suspended U.S. entry for nationals of seven countries of particular concern—Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen. In addition, EO 13769 put USRAP on hold for 120 days and indefinitely barred admission of Syrian refugees. Shortly after its issuance, however, the EO faced numerous legal challenges in federal courts across the country involving various constitutional and statutory issues such as detainee applications for writs of habeas corpus, alleged religious or nationality-based discrimination, and the extent of the EO’s applicability to certain categories of foreign nationals, including U.S. lawful permanent residents (LPR) and dual nationals holding passports issued by a listed country as well as another nation not subject to visa entry restrictions. On February 3, 2017, the Washington federal district court entered a nationwide temporary restraining order (TRO) prohibiting enforcement of the EO’s entry restrictions. In rejecting the government’s argument that a TRO only cover the particular states at issue, the court reasoned that partial implementation would “undermine the constitutional imperative of ‘a uniform Rule of Naturalization’ and Congress’s instruction that the ‘immigration laws of the United States should be enforced vigorously and uniformly.’” On February 9, 2017, the Ninth Circuit affirmed the nationwide injunction, thereby denying the government’s emergency motion for a stay of the Washington federal district court’s TRO pending appeal, because the government did not show a likelihood of success on the merits of its appeal, or that failure to enter a stay would cause irreparable injury. On March 6, 2017, however, the President issued EO 13780, which revoked and replaced EO 13769, and established revised restrictions on entry for nationals of the same countries of particular concern, except Iraq. On March 6, 2017, the President signed EO 13780, Protecting the Nation from Foreign Terrorist Entry Into the United States, which revoked and replaced EO 13769 and put in place revised visa and refugee entry restrictions, and issued an accompanying memorandum calling for heightened screening and vetting of visa applications and other immigration benefits. In general, sections 2(c) and 6(a) of EO 13780 barred visa travel for nationals of six designated countries—Iran, Libya, Somalia, Sudan, Syria, and Yemen—for 90 days, and all refugee admission for 120 days. On March 15, 2017, sections 2 and 6 of the EO were enjoined on statutory grounds (i.e., based on potential violation of U.S. immigration law) pursuant to the order of the Hawaii federal district court granting the plaintiffs’ motion for a TRO. On March 16, 2017, the Maryland federal district court issued a preliminary injunction barring implementation of visa entry restrictions on a nationwide basis with respect to nationals of the six listed countries. On May 25, 2017, the Fourth Circuit affirmed the Maryland federal district court’s injunction on constitutional grounds (i.e., based on potential violation of the Establishment Clause of the First Amendment to the U.S. Constitution). On June 12, 2017, the Ninth Circuit generally affirmed the Hawaii federal district court’s ruling, but vacated the district court’s order to the extent it enjoined internal review procedures not burdening individuals outside the Executive Branch, therefore permitting the administration to conduct the internal reviews of visa information needs as directed in the EO. On June 14, 2017, the President issued a memorandum to the Secretaries of State and Homeland Security, Attorney General, and Director of National Intelligence, directing that sections 2 and 6 of EO 13780 were to be implemented 72 hours after all applicable injunctions are lifted or stayed. On June 26, 2017, the Supreme Court granted, in part, the government’s application to stay the March 15 and 16 injunctions of the Hawaii and Maryland federal district courts, as generally upheld on May 25 and June 12 by the Fourth and Ninth Circuits. The Court explained that the administration may enforce visa and refugee travel restrictions under sections 2 and 6 except with respect to an individual who can “credibly claim a bona fide relationship with a person or entity in the United States.” In the case of a visa or refugee applicant who is the relative of a person in the United States, such foreign national would be exempt from entry restrictions provided the family connection with their U.S. relative meets the “close familial relationship” standard. The Court further explained that a qualifying relationship with a U.S. entity would have to be formal, documented, and formed in the ordinary course, and not for the purpose of evading EO 13780. On June 29, 2017, the day that implementation of EO 13780 began, the State Department issued guidance providing that a close familial relationship exists for the parents, spouse, children, adult sons or daughters, sons and daughters-in-law, and siblings of a person in the United States, but not for such person’s grandparents, grandchildren, uncles, aunts, nephews, nieces, sisters-in-law, brothers-in-law or other relatives. The State of Hawaii filed a motion with the Hawaii federal district court seeking, among other things, a declaration that the partial injunction in place after the Supreme Court’s ruling prohibited application of travel restrictions to fiancés, grandparents, grandchildren, brothers and sisters in-law, aunts, uncles, nieces, nephews, and cousins of persons in the United States. On July 13, 2017, the Hawaii federal district court ruled, among other things, that section 2 of the EO, generally barring travel to the United States for nationals of certain countries, does not apply to the grandparents, grandchildren, brothers and sisters in-law, aunts, uncles, nieces, nephews and cousins of persons in the United States, who were initially excluded from the administration’s interpretation of “close family.” The government appealed this decision to the Supreme Court. On July 19, 2017, the Supreme Court denied the government’s motion seeking further clarification of its June 26 ruling, stayed the Hawaii federal district court’s order to the extent it included refugees covered by a formal assurance from a U.S.-based resettlement agency within the scope of the preliminary injunction, pending appeal to the Ninth Circuit, and left unchanged the district court’s broader formulation of exempt “close family.” On September 7, 2017, the Ninth Circuit upheld the Hawaii federal district court’s definition of close family members who are not to be subjected to travel restrictions, and rejected the government’s argument that refugees who had undergone a stringent review process and been approved by U.S.-based resettlement agencies lack a bona fide relationship to the United States, thus allowing admission of such refugees. On September 11, 2017, the Supreme Court temporarily enjoined aspects of the Hawaii federal district court’s holding that would permit admission of certain refugees with formal assurances from a U.S. resettlement entity. The next day, on September 12, 2017, the Supreme Court indefinitely stayed the Ninth Circuit’s September 7 ruling with respect to refugees covered by a formal assurance, thereby permitting the administration to suspend entry of such refugees. On September 24, 2017, pursuant to section 2(e) of EO 13780, the President issued Presidential Proclamation 9645, Enhancing Vetting Capabilities and Processes for Detecting Attempted Entry Into the United States by Terrorists or Other Public Safety Threats, which expanded the scope and duration of visa entry restrictions from six to eight countries, and from a 90-day to an indefinite period for the listed countries. On September 25, 2017, in light of the September 24 proclamation, the Supreme Court directed the parties to file briefs addressing whether, or to what extent, the cases before it regarding EO 13780 are moot. On October 10, 2017, after receiving the parties’ supplemental briefs, the Supreme Court decided that because section 2(c) of EO 13780 expired on September 24, there was no live case or controversy; and without expressing a view on the merits, the Court vacated and remanded the Maryland case to the Fourth Circuit with instructions to dismiss as moot the challenge to EO 13780. On October 24, 2017, consistent with its October 10 ruling, the Supreme Court also vacated and remanded the Hawaii case related to EO 13780 to the Ninth Circuit with instructions to dismiss it as moot. Consequently, after challenges to EO 13780 visa and refugee entry restrictions, as curtailed by the Supreme Court’s ruling of June 26, 2017, were rendered moot, litigation continued with respect to the President’s proclamation of September 24, 2017. On September 24, 2017, pursuant to section 2(e) of EO 13780, the President issued Presidential Proclamation 9645 (the Proclamation), Enhancing Vetting Capabilities and Processes for Detecting Attempted Entry Into the United States by Terrorists or Other Public-Safety Threats, which imposes certain conditional restrictions and limitations on entry into the United States of nationals of eight countries—Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela, and Yemen—for an indefinite period. According to the Proclamation, travel restrictions are tailored to each nation’s information sharing and identity management deficiencies based on standard immigration screening and vetting criteria established by the Secretary of Homeland Security, and are to remain in effect until such time as the Secretaries of Homeland Security and State determine that a country provides sufficient information for the United States to assess adequately whether its nationals pose a security or safety threat. On October 17, 2017, the Hawaii federal district court issued a TRO, on statutory grounds, enjoining on a nationwide basis the implementation and enforcement of travel restrictions provided for under the Proclamation, except with respect to North Korean or Venezuelan nationals. On the same day, the Maryland federal district court granted in part plaintiffs’ motion for preliminary injunction, primarily on constitutional grounds, thereby prohibiting implementation of visa entry restrictions nationwide, except for nationals of North Korea and Venezuela as well as other covered foreign nationals who lack a credible claim of a bona fide relationship with a person or entity in the United States. On October 20, 2017, the Hawaii federal district court converted its October 17 TRO into a preliminary injunction, thereby continuing the nationwide prohibition on enforcement or implementation of the suspension on entry for nationals of Chad, Iran, Libya, Somalia, Syria, and Yemen. The district court did not stay its ruling or hold it in abeyance should an appeal be filed in the Ninth Circuit. On November 13, 2017, the Ninth Circuit granted, in part, the government’s request for an emergency stay of the Hawaii federal district court’s preliminary injunction, thereby allowing visa entry restrictions to go into effect with respect to the nationals of Chad, Iran, Libya, Somalia, Syria, and Yemen. However, consistent with the Supreme Court’s June 2017 ruling, the court ordered that those with a bone fide relationship to a person or entity in the United States not be subject to such travel restrictions. On November 20, 2017, the government petitioned the Supreme Court for a stay of the preliminary injunction issued by the Hawaii federal district court, pending consideration and disposition of the government’s appeal from that injunction to the Ninth Circuit and, if that court affirms the injunction, pending filing and disposition of a petition for a writ of certiorari and any further proceedings in the Supreme Court. On November 28, 2017, plaintiffs in the challenge to the Proclamation arising out of Hawaii asked that the Supreme Court deny the government’s request to lift the partial injunction left in place by the Ninth Circuit. On the same day, plaintiffs in the case arising out of Maryland requested that the Supreme Court not grant a stay of the federal district court’s preliminary injunction. In both cases, plaintiffs assert that the more expansive visa entry restrictions violate U.S. immigration law; additionally, for the Maryland case, plaintiffs argue that such restrictions are unconstitutional as a form of discrimination based on national origin. On December 4, 2017, the Supreme Court issued two orders staying the Maryland and Hawaii federal district courts’ orders of October 17 and 20 that preliminarily enjoined implementation of the Proclamation, pending decisions of the Ninth and Fourth Circuits in the government’s appeals, and of the Supreme Court regarding a petition for a writ of certiorari (if sought). As a result, the Proclamation’s visa entry restrictions were permitted to go into full effect unless and until they are either enjoined by the courts of appeals and a writ of certiorari is not sought thereafter, or the Supreme Court either denies a petition for certiorari (thereby resulting in termination of the Supreme Court’s stay order) or grants such petition followed by a final injunction prohibiting current or future implementation of the Proclamation’s restrictions. The Supreme Court further noted its expectation that the courts of appeals will render decisions “with appropriate dispatch,” in light of both courts having decided to consider their respective cases on an expedited basis. On December 8, 2017, the Department of State announced that it began fully implementing the Proclamation, as permitted by the Supreme Court, at the opening of business at U.S. embassies and consulates overseas. On December 22, 2017, the Ninth Circuit affirmed in part and vacated in part the Hawaii federal district court’s October 20 order enjoining enforcement of visa entry restrictions under the Proclamation, while limiting the preliminary injunction’s scope to foreign nationals who have a bona fide relationship with a person or entity in the United States. Without reaching plaintiffs’ constitutional claims, the court of appeals concluded that the Proclamation exceeded the scope of authority delegated to the President by Congress under the Immigration and Nationality Act (INA), in particular, sections 202(a)(1)(A) (immigrant visa nondiscrimination) and 212(f) (presidential suspension of, or imposition of restrictions on, alien entry), by deviating from statutory text, legislative history and prior executive practice; not including the requisite finding that entry of certain foreign nationals would be detrimental to U.S. interests; and contravening the INA’s prohibition on nationality-based discrimination in the issuance of immigrant visas. However, the court stayed its decision, given that the Supreme Court’s December 4 order lifted the federal district courts’ injunctions pending not only review by the courts of appeals, but also “disposition of the Government’s petition for a writ of certiorari, if such writ is sought.” On January 5, 2018, the government filed a petition for a writ of certiorari seeking review of the December 22, 2017, judgment of the Ninth Circuit which left in place the Hawaii federal district court injunction of the Proclamation’s visa entry restrictions for individuals with bona fide ties to the United States. On January 19, 2018, the Supreme Court granted the government’s certiorari petition and will therefore consider, and issue an opinion on the merits of, the Ninth Circuit’s decision. On February 15, 2018, the Fourth Circuit affirmed the preliminary injunction granted by the Maryland federal district court on constitutional grounds, but stayed its decision pending the outcome of the Ninth Circuit case before the Supreme Court. The court of appeals found that “laintiffs offer undisputed evidence that the President has openly and often expressed his desire” to bar the entry of Muslims into the United States. Therefore, the court concluded that, in light of the President’s official statements, the Proclamation likely violates the Establishment Clause as it “fails to demonstrate a primarily secular purpose,” and also goes against the basic principle that government is not to act with religious animus. On February 23, 2018, Fourth Circuit challengers filed a petition for a writ of certiorari seeking for the Supreme Court to consolidate their case with the Court’s ongoing review of the Ninth Circuit decision. These petitioners requested that the Court additionally consider their argument that the preliminary injunction should not have been limited to individuals with a bona fide relationship to a person or entity in the United States. On February 26, 2018, the Supreme Court granted Fourth Circuit petitioners’ motion to expedite consideration of their certiorari petition. On April 10, 2018, the President issued a proclamation announcing that because Chad has improved its identity-management and information sharing practices sufficiently to meet U.S. baseline security standards, nationals of Chad will again be able to receive visas for travel to the United States. On June 26, 2018, the Supreme Court held that the President lawfully exercised the broad discretion granted to him under INA § 212(f) (presidential suspension of, or imposition of restrictions on, alien entry), by issuing Proclamation No. 9645, which established nationality-based visa entry restrictions applicable to categories of foreign nationals from eight (now seven) countries for an indefinite period. In addition, while three individual plaintiffs had standing to bring an Establishment Clause challenge to entry restrictions prohibiting their relatives from coming to the United States, the Court found the Proclamation to be legitimate on its face as a way to prevent entry of certain foreign nationals where the government determines there is insufficient information for visa vetting. As a result of the Supreme Court’s June 26, 2018, decision, which held that the establishment of nationality-based entry restrictions is a lawful exercise of the President’s broad discretion in matters of immigration and national security, the visa entry restrictions imposed on categories of foreign nationals from certain countries pursuant to Presidential Proclamation 9645 continue to be fully implemented , as they have been since the Supreme Court’s December 4, 2017, orders staying the lower courts’ injunctions. On October 24, 2017, the same day the 120-day suspension of refugee admissions under EO 13780 expired, the President signed EO 13815, Resuming the United States Refugee Admissions program With Enhanced Vetting Capabilities, which resumed USRAP and directed that special measures be applied to certain categories of refugees posing potential threats to the security and welfare of the United States. On December 23, 2017, the Washington federal district court issued a nationwide preliminary injunction on aspects of EO 13815 (and its accompanying memorandum), thus prohibiting the administration from: (1) temporarily suspending admission of refugees from 11 previously identified countries of concern, and reallocating resources from the processing of their applications during the 90-day review period (except for those lacking a bona fide relationship with a person or entity in the United States); and (2) indefinitely barring admission of, and application processing for, all following-to-join refugees. On January 5, 2018, the Washington federal district court denied the government’s motion for reconsideration of the court’s December 23, 2017, order temporarily halting enforcement of refugee entry restrictions that were to be implemented as part of the resumption of USRAP under the EO. Specifically, the government “ask the court to ‘modify its preliminary injunction to exclude from coverage refugee applicants who seek to establish a on the sole ground that they have received a formal assurance from a resettlement agency.’” In denying the government’s motion for reconsideration, the court relied on the September 7, 2017, decision of the Ninth Circuit which, among other things, rejected the notion that refugees with formal assurances from U.S.-based resettlement agencies do not meet the Supreme Court’s bona fide relationship standard. The court treated this Ninth Circuit ruling as binding precedent given that the Supreme Court’s indefinite stay of September 12 neither vacated the Ninth Circuit’s decision, nor provided any underlying reason(s) that would allow another court to discern its rationale. On January 9, 2018, the Washington federal district court also denied the government’s emergency motion for a stay of the court’s December 23, 2017, preliminary injunction, pending appeal to the Ninth Circuit. On January 31, 2018, DHS announced additional security measures to prevent exploitation of USRAP. Specifically, these security measures include additional screening for certain nationals of high-risk countries, a more risk-based approach to administering USRAP, and a periodic review and update of the refugee high-risk countries list and selection criteria. Therefore, as of June 2018, while the administration has announced additional security measures to strengthen the integrity of USRAP, the Washington federal district court’s December 23, 2017, preliminary injunction of EO 13815 continues to: (1) prohibit implementation of the temporary suspension of admission, and reallocation of resources from processing applications, of refugees from 11 previously identified countries of concern; and (2) forbid enforcement of the indefinite bar on entry of following-to-join refugees. In addition to the contact named above, Kathryn Bernet (Assistant Director), Colleen Corcoran, Eric Hauswirth, Thomas Lombardi, Amanda Miller, Sasan J. “Jon” Najmi, Erin O’Brien, Garrett Riba, and Dina Shorafa made significant contributions to this report.", "summary": "Previous attempted and successful terrorist attacks against the United States have raised questions about the security of the U.S. government's process for adjudicating NIVs, which are issued to foreign nationals, such as tourists, business visitors, and students, seeking temporary admission into the United States. For example, the December 2015 shootings in San Bernardino, California, led to concerns about NIV screening and vetting processes because one of the attackers was admitted into the United States under a NIV. In 2017, the President issued executive actions directing agencies to improve visa screening and vetting, and establishing nationality-based visa entry restrictions, which the Supreme Court upheld in June 2018. GAO was asked to review NIV screening and vetting. This report examines (1) outcomes and characteristics of adjudicated NIV applications from fiscal years 2012 through 2017, and (2) key changes made to the NIV adjudication process in response to executive actions taken in 2017. GAO analyzed State NIV adjudication data for fiscal years 2012 through 2017, the most recent and complete data available. GAO visited seven consular posts selected based on visa workload and other factors. GAO reviewed relevant executive orders and proclamations, and documents related to implementing these actions. This is a public version of a sensitive report issued in June 2018. Information that DHS, State, and the Office of the Director of National Intelligence deemed sensitive has been removed. The total number of nonimmigrant visa (NIV) applications that Department of State (State) consular officers adjudicated annually peaked at about 13.4 million in fiscal year 2016, and decreased by about 880,000 adjudications in fiscal year 2017. NIV adjudications varied by visa group, country of nationality, and refusal reason: Visa group. From fiscal years 2012 through 2017, about 80 percent of NIV adjudications were for tourists and business visitors. During this time, adjudications for temporary workers increased by about 50 percent and decreased for students and exchange visitors by about 2 percent. Country of nationality. In fiscal year 2017, more than half of all NIV adjudications were for applicants of six countries of nationality: China (2.02 million, or 16 percent), Mexico (1.75 million, or 14 percent), India (1.28 million, or 10 percent), Brazil (670,000, or 5 percent), Colombia (460,000, or 4 percent), and Argentina (370,000, or 3 percent). Refusal reason. State data indicate that over this time period, 18 percent of adjudicated applications were refused; more than 90 percent were because the applicant did not qualify for the visa sought, and a small percentage (0.05 percent) were due to terrorism and security-related concerns. In 2017, two executive orders and a proclamation issued by the President required, among other actions, visa entry restrictions for nationals of certain listed countries of concern, the development of uniform baseline screening and vetting standards, and changes to NIV screening and vetting procedures. GAO's analysis of State data indicates that, out of the nearly 2.8 million NIV applications refused in fiscal year 2017, 1,338 applications were refused due to visa entry restrictions implemented per the executive actions. State, the Department of Homeland Security (DHS), and others developed standards for screening and vetting by the U.S. government for all immigration benefits, such as for the requirement for applicants to undergo certain security checks. Further, State sought and received emergency approval from the Office of Management and Budget in May 2017 to develop a new form to collect additional information from some visa applicants, such as email addresses and social media handles.", "document_type": "gao"}
{"report": "DOD has established 10 cross-functional teams that OCMO officials consider responsive to section 911, and these teams are in various stages of implementation. The Secretary of Defense established a cross- functional team to manage the transfer of background investigations for DOD personnel security clearances from the Office of Personnel Management to DOD. This team is required to report directly to the Secretary. In addition, the Deputy Secretary of Defense established 9 additional cross-functional teams to implement reform initiatives for improving DOD’s business operations. These teams report to the CMO. In August 2017, the Secretary of Defense issued a memorandum authorizing its first cross-functional team in response to section 911 to address challenges with personnel vetting and background investigation programs. The memorandum notes that a backlog of background investigations affects DOD’s mission readiness, critical programs, and operations. According to the memorandum, this cross-functional team will conduct a full review of current personnel vetting processes to identify a redesigned process for DOD’s security, suitability and fitness, and credential vetting. The cross-functional team’s objectives are to develop options and recommendations to mitigate shortcomings, ensure necessary resourcing, and transform the personnel vetting enterprise. The Office of the Under Secretary of Defense for Intelligence and the Defense Security Service are leading the efforts to establish the team. Since we last reported on DOD’s efforts to establish the team, DOD has taken some steps, such as assigning some team members, but has not completed other key steps to staff and establish a direction for the team. In February 2018, we reported that DOD had selected an interim leader for the team. As of May 2018, this person, a non-Senior Executive Service individual from the Defense Security Service, was still serving as the interim leader. Section 911 requires DOD to assign a senior qualified and experienced individual as the leader of the team. According to Office of the Under Secretary of Defense for Intelligence officials, the department plans to seek nominations from DOD components for a permanent leader from the Senior Executive Service, but does not have a specific timeframe for doing so. DOD also assigned seven full-time personnel to the team, who are now co-located, in accordance with requirements under section 911. These personnel are from the Army, Defense Civilian Personnel Advisory Service, DOD Consolidated Adjudications Facility, OCMO, Office of the Under Secretary of Defense for Intelligence, and MITRE Corporation. Office of the Under Secretary of Defense for Intelligence officials estimated that the team may have 20 members when it is fully staffed, but they did not have an estimate of when DOD will assign the remaining team members. In addition, the Office of the Under Secretary of Defense for Intelligence has established priorities for the cross-functional team. For example, the team is required to prepare a project plan incorporating all key components for a DOD enterprise vetting mission—including key milestones, specific objectives, performance metrics, a resourcing plan, and an action plan for tracking key initiatives—which are key steps for establishing the team’s direction. According to Office of the Under Secretary of Defense for Intelligence officials, as of May 2018, the interim leader was outlining a project plan. Filling key leadership and staff positions will be important for ensuring that the team has the knowledge and expertise from components across the department to effectively develop and implement the plan. The Deputy Secretary of Defense has established 9 additional cross- functional teams since October 2017 to implement reform initiatives intended to improve the quality and productivity of the department’s business operations, including moving toward more use of enterprise services. According to the memoranda appointing the team leaders, these teams support the Secretary of Defense’s focus on creating a more lethal and effective force by allowing the department to reallocate resources from business operations to readiness and to recapitalization of the combat force. OCMO officials stated that they consider these teams to be responsive to section 911 of the NDAA for Fiscal Year 2017. Section 911 requires DOD to assign senior qualified and experienced individuals to lead the teams, and the Deputy Secretary of Defense generally appointed senior DOD officials as leaders. Seven leaders were appointed in October 2017, one in November 2017, and one in January 2018. According to OCMO officials, these leaders report to the CMO. As of May 2018, the size of the teams ranged from 5 to 12 members; OCMO officials stated that the size of the teams can vary based on the knowledge and expertise the team needs to implement its initiatives. The teams include representatives from the military departments, functional organizations relevant to the reform topic, and external experts. According to OCMO officials, the team leaders chose their team members from candidates proposed by the military departments and functional organizations. In addition, the members may be assigned on a full-time or part-time basis, and all of the teams have co-located space. Figure 1 provides additional details on the structure of these 9 teams. OCMO officials stated that these 9 teams are in various stages of implementing their initiatives. For example, the Human Resources team was the most recent team to be established, and OCMO officials stated the team is in the process of finalizing the identification and beginning the implementation of its reform initiatives. Other teams, such as the Financial Management and Information Technology and Business Systems teams, have identified and are in the process of implementing initiatives related to their reform areas. DOD established the Reform Management Group to identify opportunities for reform and provide support to these 9 cross-functional teams. Chaired by the Deputy Secretary of Defense and facilitated by the CMO and Director of Cost Assessment and Program Evaluation, the Reform Management Group provides oversight and guidance, makes decisions on team recommendations, and monitors the teams’ progress, according to OCMO officials. These officials also told us that the Reform Management Group holds weekly meetings to discuss the status of the reform teams’ efforts and provides monthly comprehensive reports on these efforts to the Secretary of Defense. OCMO has drafted an organizational strategy, but DOD has not issued the strategy, which section 911 required to be completed by September 1, 2017. OCMO officials told us that they have not completed the strategy because they want to align it with the National Defense Strategy, which was issued in January 2018, and the National Defense Business Operations Plan, which was issued in May 2018. OCMO officials told us that, once the organizational strategy is reviewed internally to align with the National Defense Strategy and the National Defense Business Operations Plan, the CMO plans to coordinate the review and approval of the strategy across components within the department. We previously recommended, and DOD concurred, that the CMO should obtain input on the development of the strategy from key stakeholders, such as the military departments and defense agencies. The officials estimated that DOD components would have about 2 to 3 weeks to provide input on the strategy and that the strategy could be issued as early as July 2018. We found that, consistent with our recent recommendations, a revised version of the draft organizational strategy addresses the requirements in section 911, including outlining steps for advancing a collaborative culture within the department. In February 2018, we found that the August 2017 version of the draft organizational strategy that we reviewed addressed the two required elements under section 911, but did not outline how it would achieve several future outcomes that advance a collaborative culture within the department, as required by the NDAA. We recommended, and DOD concurred, that the CMO should revise the organizational strategy to outline how it would achieve these outcomes and, in doing so, should consider our nine leading practices on mergers and organizational transformations. Based on our review of a February 2018 version of the draft organizational strategy, we found that OCMO officials have taken steps to address our recommendation, including identifying potential action steps for the department that align with each of the nine leading practices. For example, consistent with the leading practice for establishing a coherent mission and integrated strategic goals to guide the transformation, OCMO officials revised the draft strategy to propose that the CMO, in coordination with stakeholders, could develop an implementation plan with detailed initiatives for increasing collaboration and information sharing across the department. According to the draft strategy, this plan could include goals and milestones for these initiatives, and the CMO could report periodically on the achievement of the goals. Further, consistent with the leading practice to involve employees to obtain their ideas and gain their ownership for the transformation, OCMO officials proposed that a representative from OCMO could chair an action officer- level governance body to plan and share performance information related to this effort. According to the draft strategy, this governance body would solicit feedback about the related changes, propose changes to new policies and procedures based on the feedback, and manage the implementation and tracking of the established goals. Issuing the organizational strategy—in accordance with section 911 and our prior recommendation—will better position DOD to advance a collaborative culture. DOD has not fulfilled three related requirements of section 911 to guide the implementation of its cross-functional teams, namely to (1) provide training to cross-functional team members and their supervisors, (2) issue guidance on cross-functional teams, and (3) provide training to presidential appointees. OCMO officials stated that they plan to send the guidance and training curricula to the Secretary of Defense for review and approval after the organizational strategy is issued. Table 1 shows the three requirements of section 911, the due dates, and the status of DOD actions, if any, as of May 2018. As of May 2018, OCMO had developed a draft training curriculum for cross-functional team members and their supervisors, but had not provided the required training. In February 2018, we reported that the draft training curriculum addressed all requirements in section 911. OCMO officials stated that after the Secretary of Defense reviews and approves the training curriculum, which will occur after the organizational strategy is issued, they will provide training to the members of the cross- functional team on personnel vetting for background investigations and to the 9 teams implementing reform initiatives. OCMO has also drafted guidance on cross-functional teams, but DOD has not issued the guidance and did not meet the statutorily-required date of September 30, 2017. Section 911 requires the guidance to address areas such as the decision-making authority of the teams and key practices that senior leaders should follow with regard to leadership, organizational practice, collaboration, and the functioning of cross- functional teams. In February 2018, we reported that OCMO had developed draft guidance for cross-functional teams that addressed six of seven statutorily-required elements and incorporated five of eight leading practices for effective cross-functional teams that we identified in prior work. We recommended, and DOD concurred, that the CMO should fully address all requirements in section 911 and incorporate these leading practices into the guidance. DOD has taken steps to address our recommendation. For example, consistent with the practice for open and regular communication, OCMO revised the guidance to state that the cross-functional team leaders and OCMO will encourage and facilitate continuous communication and information sharing. According to the revised guidance, the team leaders and OCMO will accomplish this through co-location of team members, management practices by cross- functional team leaders that promote a unified team culture and trust, and use of collaborative information technology tools maintained by OCMO. However, as of May 2018, DOD had not issued the guidance. As we reported in February 2018, without initial guidance that fully addresses the required statutory elements in section 911 and incorporates our leading practices, DOD’s cross-functional teams may not be able to consistently and effectively pursue the Secretary of Defense’s strategic objectives or further promote a collaborative culture within the department. OCMO has developed a draft training curriculum for individuals filling presidentially-appointed, Senate-confirmed positions in the Office of the Secretary of Defense. However, as of May 2018, DOD had filled 26 of 36 such positions, and none had received the training or been granted a training waiver. Further, section 911 requires these individuals to complete the training within 3 months of their appointment, but 22 have been in their positions longer than 3 months, as shown in figure 2. In February 2018, we reported that the draft curriculum addressed only one of the four required elements in section 911. Specifically, we found that the draft curriculum addressed the required statutory element for training on the operation of cross-functional teams, but did not incorporate the required statutory elements for leadership, modern organizational practice, or collaboration. We recommended, and DOD concurred, that the CMO should either (1) provide training that includes all of the required elements in section 911 or (2) develop criteria for obtaining a waiver and have the Secretary of Defense request such a waiver from the President for these required elements if the individual possesses—through training and experience—the skill and knowledge otherwise to be provided through a course of instruction. Once the training curriculum is reviewed and approved by the Secretary of Defense, which will occur after the organizational strategy is issued, OCMO officials plan to provide the training on the operation of cross-functional teams to the presidential appointees. These officials stated that DOD plans to develop criteria for presidential appointees who are eligible for a waiver from the training on leadership, modern organizational practice, and collaboration, and to recommend that the Secretary of Defense approve these waivers. Until DOD finalizes actions on this recommendation, the department may have difficulty advancing a collaborative culture, as top leadership commitment is a key practice for a successful organizational transformation. We are not making recommendations in this report. We provided a draft of this report to DOD for review and comment. DOD concurred with our report. In addition, DOD provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and DOD’s Chief Management Officer. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017 included a provision for us—every 6 months after the date of enactment on December 23, 2016, through December 31, 2019—to submit to the defense committees a report setting forth a comprehensive assessment of the actions that DOD has taken pursuant to section 911 during each 6-month period and cumulatively since the NDAA’s enactment. We issued our first report in June 2017, and did not make recommendations. We issued our second report in February 2018, and made four recommendations to improve DOD’s implementation of section 911. Table 2 identifies the two prior GAO reports on DOD’s implementation of section 911 and the status of the four recommendations from our February 2018 report. Section 911 of the National Defense Authorization Act for Fiscal Year 2017 requires the Secretary of Defense to take several actions. Table 3 summarizes some of these requirements, the due date, and the date completed, if applicable, as of May 2018. In addition to the contact named above, Margaret Best (Assistant Director), Tracy Barnes, Arkelga Braxton, William Carpluk, Adelle Dantzler, Michael Holland, William Lamping, Amie Lesser, Ned Malone, Judy McCloskey, Sheila Miller, Richard Powelson, Terry Richardson, Ron Schwenn, Jared Sippel, Sarah Veale, and Tina Won Sherman made key contributions to this report.", "summary": "DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for FY 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives that span multiple functional boundaries and would benefit from the use of cross-functional teams. Additionally, DOD is to establish cross-functional teams to support this strategy, issue guidance on these teams, and provide training to team members and civilian leaders in the Office of the Secretary of Defense. The NDAA also included a provision for GAO to periodically assess DOD's actions in response to section 911. This is GAO's third report on the implementation of section 911. It assesses the status of DOD's efforts to (1) establish cross-functional teams, (2) issue an organizational strategy, and (3) issue guidance on cross-functional teams and provide training to team members and Office of the Secretary of Defense leaders. GAO reviewed documentation on DOD's implementation of its cross-functional teams and DOD's draft organizational strategy, draft guidance on establishing cross-functional teams, and draft training curricula. GAO also interviewed DOD officials on efforts to implement section 911. GAO is not making new recommendations in this report. DOD concurred and is taking actions to address GAO's previous recommendations on DOD's implementation of section 911. DOD also concurred with the findings in a draft of this report. The Department of Defense (DOD) has implemented some statutory requirements in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, enacted in December 2016, to address organizational challenges. However, senior leadership has not implemented several requirements intended to support cross-functional teams and promote department-wide collaboration (see table). DOD has established 10 cross-functional teams, which are in various stages of implementation. Specifically, DOD is in the early stages of establishing one cross-functional team to address the backlog of the department's personnel security clearance background investigations and has assigned an interim leader and seven members to this team. In addition, DOD established 9 cross-functional teams to implement reform initiatives intended to improve the efficiency of the department's business operations. DOD generally appointed senior department officials to lead these teams, and the size of the teams, as of May 2018, ranged from 5 to 12 members. DOD has drafted, but not issued, an organizational strategy. DOD officials stated that they have not completed the strategy because they want to align it with two department-wide strategy documents—the National Defense Strategy, which was issued in January 2018, and the National Defense Business Operations Plan, which was issued in May 2018. DOD also has not fulfilled three statutory requirements related to guidance and training for cross-functional teams and civilian leaders in the Office of the Secretary of Defense. Specifically, DOD has not (1) provided training to cross-functional team members, (2) issued guidance on cross-functional teams, or (3) provided training to presidential appointees in the Office of the Secretary of Defense. DOD officials stated that they plan to send the guidance and training curricula to the Secretary of Defense for review and approval after DOD issues the organizational strategy. Fully implementing these requirements and GAO's prior recommendations related to the organizational strategy, guidance, and training, will better position DOD to effectively implement its cross-functional teams and advance a collaborative culture as required by the NDAA.", "document_type": "gao"}
{"report": "Within CBP’s three operational components—OFO, Border Patrol, and AMO—there are five categories of law enforcement officer positions, each with different job requirements and responsibilities. First, OFO’s CBP officers conduct immigration and customs inspections at ports of entry to prevent the illicit entry of travelers, cargo, merchandise, and other items. Second, Border Patrol agents are responsible for securing the U.S. border between ports of entry and responding to cross-border threats. Third, AMO has three categories of law enforcement officers—Air Interdiction Agents, Aviation Enforcement Agents, and Marine Interdiction Agents—who interdict and disrupt threats to the United States in the air and maritime environments at and beyond the border. For more information on CBP’s law enforcement officer positions, see figure 1. In recent years, CBP has not been able to attain statutorily-established minimum staffing levels for its Border Patrol agent positions or meet its staffing targets for other law enforcement officer positions. Figure 2 shows the difference between CBP’s onboard staffing levels and its authorized staffing levels from fiscal years 2013 through 2017. CBP’s law enforcement applicants undergo a lengthy and rigorous hiring process that includes nearly a dozen steps, including a background investigation, medical examination, physical fitness test, and polygraph examination. Several of these steps can be done concurrently—for example, CBP can begin the background investigation while the candidate completes the physical fitness test and medical examination process steps. Figure 3 depicts the hiring process for Border Patrol agent and CBP officer positions. CBP is able to use financial incentives and other compensation-based human capital flexibilities to help recruit and retain qualified law enforcement personnel. According to OPM, federal agencies have broad discretionary authority to provide additional compensation in certain circumstances to support workforce needs and address human capital challenges, including through the use of financial incentives such as recruitment, relocation, and retention incentives. Table 1 below provides an overview of these incentives. In addition to these incentives, CBP can also offer other compensation- based human capital flexibilities to employees. For example, with OPM approval, CBP may establish a special salary rate, or a higher rate of pay for employees, either nationwide or in a specific geographic area where CBP’s recruitment or retention efforts are, or would likely become, significantly handicapped without those higher rates. CBP officials stated they established the National Frontline Recruitment Command (NFRC)—a formal task force housed within CBP’s Office of Human Resources Management (HRM)—in February 2016. The NFRC is charged with, among other things, developing recruitment strategies, providing strategic guidance, and managing recruitment efforts across all three operational components. CBP officials stated that, prior to the creation of the NFRC, the recruitment and hiring of law enforcement officers was done at the component level and there was no integrated CBP-wide approach to coordinate efforts and address challenges. Based on our literature search, we identified leading practices that may be applicable to federal law enforcement agencies in recruiting, hiring, and retaining law enforcement personnel. Having a centralized entity or office in charge of developing recruitment strategies and overseeing recruitment activities is consistent with leading practices we identified for recruiting for law enforcement positions specifically. All three other selected law enforcement agencies we reviewed also had recruitment strategies that outlined their respective agencies’ recruitment roles and responsibilities, while two had a centralized entity in charge of recruitment. In particular, officials from both ICE and the Secret Service stated they have a central office in charge of recruitment efforts while BOP officials told us that recruitment for Correctional Officers is mainly handled at the local prison level. The NFRC is responsible for setting CBP’s strategic recruitment goals and overseeing agency-wide recruitment initiatives. For example, CBP officials are finalizing the Frontline Hiring and Recruiting FY 18 to FY 24 Strategy & Implementation Plan, which outlines specific initiatives designed to increase the number and quality of applicants applying for law enforcement officer positions. The strategy describes ways CBP can target its recruitment efforts more effectively and develop brand identities for each component to provide the foundation for a comprehensive marketing strategy. In addition to setting strategic initiatives, the NFRC manages the recruitment budget and allocates recruitment funding for CBP and the operational components. For example, NFRC officials stated that the NFRC funds CBP-wide recruitment initiatives such as Special Emphasis Recruitment Teams—teams of specially trained recruiters from each component who attend events specific to different demographic groups such as females or veterans. The NFRC also funds other initiatives such as strategic partnerships with major businesses, which allow CBP to advertise and recruit at their events. For example, CBP previously participated in strategic partnerships with the Big 10 and Big XII athletic conferences, and in 2016 and 2017, the NFRC spent $500,000 for a strategic partnership with the Spartan Race program, which allowed CBP and its components to advertise, set up recruitment booths, and sign up applicants at events. NFRC officials told us they ended their partnership with the Spartan Race in December 2017 and are evaluating options for future strategic partnerships. The NFRC also allocates funding for both joint recruitment events—those attended by two or three components—and single-component events attended by one operational component. For example, NFRC officials stated that career and job fairs provide opportunities for CBP to leverage its resources and attract potential applicants to all three components. At these events, applicants can talk to uniformed recruiters to learn more about their respective career paths. NFRC officials stated that in addition to CBP-wide efforts, the NFRC manages and allocates recruitment funding for each operational component to cover the cost of recruitment events or other initiatives that meet the specific needs of that component. For example, AMO officials stated that they use NFRC funding to attend events such as helicopter shows where there is a higher potential to attract qualified pilots. As shown in table 2, CBP’s recruitment budget allocated by the NFRC almost doubled from approximately $6.4 million in fiscal year 2015 to more than $12.7 million in fiscal year 2017. The budget allocated by the NFRC specific to the operational components—while a small percentage of CBP’s overall recruitment budget—increased during this time frame as well. For example, Border Patrol’s recruitment budget increased from approximately $433,000 in fiscal year 2015 to more than $1 million in fiscal year 2017, while OFO’s budget increased from approximately $116,000 to nearly $525,000. In addition to recruitment funding managed by the NFRC, components may use additional funding from their own budgets that is not allocated or managed by the NFRC to fund recruitment initiatives. For example, two of the three components funded their own strategic partnerships. Border Patrol officials stated they spent $1.5 million on a strategic partnership with the Professional Bull Riders Association which allowed them to target specific applicants who fit Border Patrol’s applicant profile. This partnership provided Border Patrol with the opportunity to advertise and recruit at more than 70 events over the course of 18 months. Likewise, OFO officials told us they spent $15,000 to be the sole sponsor of the 2018 National Police Week race in Washington, D.C., which includes a recruitment booth, a logo on the official T-shirt, and a prominent speaker at the start of the race. AMO officials stated that while they generally do not use their own funding to pay for strategic partnerships, they do partner with the University of North Dakota, which has a large flight school, where they give presentations in classrooms and recruit on campus. CBP has increased its emphasis on recruitment and increased the number of recruitment events it has participated in since fiscal year 2015. Specifically, CBP more than tripled the total number of recruitment events it participated in, from 905 events in fiscal year 2015 to roughly 3,000 in both fiscal years 2016 and 2017 (see fig. 4). CBP components generally attend two different types of recruitment events—outreach events designed to promote CBP’s brand and events such as job and career fairs designed to actively cultivate potential applicants. For example, AMO officials stated their attendance at the 2018 Border Security Expo technology trade fair was an outreach event designed to promote the component at a high-visibility event despite the low likelihood of directly reaching qualified applicants, such as pilots. AMO officials also stated they participate in the HELISUCCESS career fair at the annual Heli-Expo trade show where individuals from across the helicopter industry gather to attend seminars and interact with recruiters. They noted that this event provides a great opportunity to recruit qualified applicants who have a license to fly helicopters. While CBP increased its participation in recruitment events from fiscal years 2015 through 2017, officials across all three components told us the NFRC canceled a number of events during the first half of fiscal year 2018 because of a lack of certainty regarding the agency’s budget while functioning under continuing resolutions, which extended fiscal year 2017 funding until the enactment of the Consolidated Appropriations Act, 2018, in March 2018. Additionally, CBP officials stated that the agency was responsible for providing humanitarian support for multiple hurricanes during this time frame which put a strain on CBP’s resources. Overall, these officials explained that the NFRC canceled 36 percent of all recruitment events during the first half of fiscal year 2018 until the enactment of the Consolidated Appropriations Act, 2018. They stated that during this period, they focused on attending free local events and online events such as webinars, but noted that the lack of consistent year-to- year funding for recruitment activities directly affected their ability to attend recruitment events and thus to recruit qualified personnel. To attend recruitment events and promote their brand, CBP components utilize their own law enforcement personnel to act as recruiters. As shown in table 3, as of March 2018, CBP had 1,663 recruiters across the three components, which included 57 full-time and 1,606 part-time recruiters. CBP officials stated that most recruiters do not conduct recruitment activities on a full-time basis and recruitment is considered a collateral responsibility in addition to regular duties. In addition, officials stated these recruiters must be approved by their component leadership and funding for their positions comes from the components’ budgets. In July 2017, CBP implemented a 5-day standardized training program for all component recruiters focused on effective public speaking and engagement tactics as well as specific, in-depth information on each operational component and the CBP hiring process. CBP officials stated that a goal of this training, among other things, is to ensure that recruiters provide standardized, accurate information to all potential applicants. As of April 2018, 636 recruiters had completed the training, according to CBP officials, and the agency plans to train 1,300 recruiters by the end of fiscal year 2018. In addition to establishing the NFRC and increasing participation in recruitment events, CBP has increased its use of recruitment incentives from fiscal years 2015 through 2017 to help staff hard-to-fill locations. A recruitment incentive may be paid to a newly-appointed employee if an agency determines that a position is likely to be difficult to fill in the absence of such an incentive. From fiscal years 2015 through 2017, OFO increased the number of recruitment incentives it paid to CBP officers from 9 incentives in 2 locations at a total cost of about $77,600 to 446 incentives across 18 locations at a cost of approximately $4.3 million. AMO and Border Patrol did not use recruitment incentives from fiscal years 2015 through 2017 (see fig. 5). OFO officials told us that recruitment incentives have been effective in filling staffing shortages at hard-to-fill locations. For example, they noted that since they began offering recruitment incentives in fiscal year 2015, 14 of the 18 locations where these incentives are used have not experienced a decrease in staffing levels as of February 2018. Additionally, OFO officials told us that in larger ports-of-entry—such as San Ysidro, California, where staffing levels have consistently remained below authorized targets—staffing levels have increased by up to 15 percent. AMO officials stated while they did not use recruitment incentives from fiscal years 2015 through 2017, as of April 2018 they are using them to fill remote locations in the Caribbean. Specifically, AMO paid two recruitment incentives for Air Interdiction Agents and two for Marine Interdiction Agents at locations in Puerto Rico and the U.S. Virgin Islands. AMO officials stated that they began using these incentives to staff hard- to-fill locations because of a nationwide shortage of pilots as well as increased competition with commercial airlines. However, as AMO has only recently started using these incentives, it is too early to gauge whether it will be effective in increasing staffing levels at these hard-to-fill locations. Border Patrol officials stated the main reason they do not use recruitment incentives is that in the past these incentives created resentment among current employees that did not receive extra pay to do the same job in the same location. Additionally, these officials told us that job announcements for Border Patrol agent positions do not specify particular duty locations, but represent a general announcement that can be used to fill numerous duty locations, as necessary. As a result of its efforts, CBP has experienced an increase in the number of applications it received for law enforcement officer positions across all three operational components from fiscal years 2013 through 2017. For example, with the exception of fiscal year 2014, applications for Border Patrol agent positions increased every year from roughly 27,000 applications in fiscal year 2013 to more than 91,000 applications in fiscal year 2017. Further, during the same period, applications for CBP officer positions increased from approximately 22,500 to more than 85,000, and applications for AMO’s law enforcement officer positions increased from roughly 2,000 to more than 5,800 (see fig. 6). In November 2017, CBP signed a contract with a total potential period of 5 years at a not-to-exceed value of $297 million with Accenture Federal Services, LLC, to help the agency recruit and hire the 5,000 Border Patrol agents called for in Executive Order 13767 as well as an additional 2,000 CBP officers and 500 AMO personnel. Under this performance-based contract, Accenture will be responsible for enhancing CBP’s recruitment efforts and managing the hiring process for those applicants it recruits. The contract includes a base year and four 1-year option periods which CBP may exercise at its discretion for a total potential period of 5 years. The $297 million represents the maximum amount CBP may obligate on the contract during the potential 5-year period. CBP obligated $43 million on the Accenture contract in November 2017 for startup costs, security- related services, and for the hiring of 440 CBP officers, 150 Border Patrol agents, and 23 AMO law enforcement officers. Under the terms of the contract, CBP will pay the contractor a set dollar amount for each law enforcement officer hired. For example, in the first year of the contract, CBP has agreed to pay Accenture approximately $40,000 for each Border Patrol agent hired with 80 percent paid when a candidate receives an official job offer and the remaining 20 percent paid upon the candidate’s entry-on-duty date. The Accenture contract is intended to enhance CBP’s recruitment efforts by improving its marketing strategy and utilizing new ways to capture and analyze data to better inform recruitment efforts, according to CBP officials. For example, HRM officials stated that, in February 2018, Accenture began its digital marketing campaign and started posting electronic ads to target potential applicants for CBP’s law enforcement positions. In addition, Accenture is using advertisements, e-mail blasts, and other strategic marketing tools to specifically target various categories of potential applicants, such as women, veterans, minorities, and current law enforcement officers. CBP officials told us that they are not concerned about Accenture’s recruiting efforts encroaching on the agency’s current applicant pool as Accenture’s activities will largely target populations that CBP has not historically pursued. They also stated that for populations that CBP does target (e.g., veterans and women), the agency expects to benefit from Accenture’s recruitment efforts by increasing the number of applicants from these populations to all job announcements for CBP positions. Further, they noted that if Accenture’s tactics are successful, there is nothing prohibiting the agency from replicating such tactics to garner more applicants. CBP officials also stated that Accenture plans to provide opportunities to better enhance the agency’s data analytics on its recruitment efforts. For example, Accenture is using recruitment data and software to identify potential candidates and increase traffic to websites where these individuals can submit applications. CBP officials told us they would benefit from these and other insights that Accenture’s data analytics will provide as CBP can evaluate the contractor’s recruitment efforts and initiatives and, based upon Accenture’s success, incorporate them into CBP’s own efforts. While these efforts seem promising, it is too early to determine whether these initiatives will help increase the number and quality of applicants for CBP’s law enforcement officer positions. Since fiscal year 2015, CBP’s performance in two key metrics that it uses to assess the efficiency and effectiveness of its hiring process for law enforcement officer positions has generally improved. Specifically, CBP reduced its time-to-hire and increased its overall applicant pass rates for all three components. Time-to-Hire. CBP’s average time-to-hire metric calculates the average number of calendar days that elapsed between the closing date of a job announcement and an applicant’s entry-on-duty date. CBP’s time-to-hire for all law enforcement officer positions decreased from fiscal years 2015 through 2017. Specifically, during this period, the time-to-hire for CBP officers decreased by 78 days (20 percent) to an average of 318 days for fiscal year 2017. For AMO Air and Marine Interdiction Agents, CBP’s time-to-hire decreased by 103 days (28 percent) to an average of 262 days for fiscal year 2017. The agency’s time-to-hire for Border Patrol agents was the longest at 628 days in fiscal year 2015. As discussed earlier, Border Patrol officials stated that there were no job announcements for Border Patrol agent positions in fiscal year 2014; therefore, many of the agents hired in fiscal year 2015 had applied in fiscal year 2013, accounting for this protracted time-to-hire. Even so, from fiscal year 2016 to 2017, CBP’s time-to-hire for Border Patrol agents decreased by 32 days (11 percent) to an average of 274 days for fiscal year 2017 (see table 4). We also compared CBP’s time-to-hire with that of the Secret Service because its hiring process for law enforcement officers is the most similar to CBP’s. Specifically, the Secret Service’s hiring process comprises roughly the same number of hiring steps and also includes a polygraph examination—one of the more challenging and time-consuming steps in the process—as well as a written assessment, background investigation, medical examination, and interview. We found that CBP’s time-to-hire for its law enforcement positions was shorter than the Secret Service’s in fiscal years 2016 and 2017. For example, in fiscal year 2017, CBP’s time-to-hire for CBP officers and Border Patrol agents was 73 days and 117 days shorter, respectively, than the Secret Service’s. Further, CBP’s time-to-hire for AMO’s law enforcement positions was shorter than the Secret Service’s in every fiscal year from 2015 through 2017. Overall Applicant Pass Rates. CBP’s overall applicant pass rate metric calculates the estimated percentage of applicants who successfully complete the hiring process and enter on duty. CBP data indicate that overall applicant pass rates more than doubled for CBP officer and Border Patrol agent positions from fiscal years 2016 to 2017 (see table 5). CBP officials told us that higher overall applicant pass rates paired with recent increases in the number of applications received by the agency are starting to result in an increase in the number of law enforcement officers hired as applicants complete CBP’s hiring process and officially enter on duty. As shown in table 6, CBP data indicate that more law enforcement officers entered on duty in the first half of fiscal year 2018 than entered on duty in the first half of fiscal year 2017. Specifically, the total number of CBP officers and Border Patrol agents that entered on duty in the first half of fiscal year 2018 increased by roughly 50 percent and 83 percent, respectively, when compared to the same period of the prior fiscal year. Further, the total number of AMO law enforcement officers that entered on duty in the first half of fiscal year 2018 more than doubled from the same period of fiscal year 2017. CBP officials noted that they hope to consistently maintain this trend of increased hires to offset attrition and attain target staffing levels. For example, although 328 Border Patrol agents entered on duty in the first half of fiscal year 2018, 404 agents departed Border Patrol during this same period, resulting in a net loss of 76 agents. Likewise, in the first half of fiscal year 2018, a total of 449 CBP officers entered on duty while 488 officers departed OFO, resulting in a net loss of 39 officers. These data indicate that CBP continues to face challenges in retaining qualified law enforcement personnel and attaining target staffing levels for these positions. We discuss this issue later in this report. CBP has made efforts to improve its hiring process by revising certain aspects of the process and piloting two key hiring initiatives—Hiring Hub events and the Applicant Care program. According to agency officials, these efforts to streamline and improve CBP’s overall hiring process have collectively resulted in the decreased time-to-hire and increased overall applicant pass rates discussed above. In addition to these efforts, CBP’s contract with Accenture is designed to provide surge hiring capacity to help supplement the agency’s efforts to meet its staffing goals, according to agency officials. Hiring Process Revisions. CBP has implemented changes aimed at streamlining its hiring process for law enforcement officers and made adjustments to specific hiring steps. For example, among other changes, CBP took the following steps: In fiscal year 2015, CBP replaced its paper-based fingerprinting process with an electronic format, reducing the costs and effort required to physically process and mail paper fingerprinting cards. In fiscal year 2016, CBP increased the frequency of its job announcements on USAJOBS.gov to solicit applications on a continuous basis instead of only posting announcements for set periods of time. In addition, DHS was directed by statute to enhance its efforts to recruit members of the Armed Forces to serve as CBP officers through identifying shared activities and opportunities for reciprocity related to steps in hiring so as to minimize the time required to hire qualified applicants. In March 2017, CBP was granted the authority to waive the polygraph examination for veterans who meet certain criteria, including those who hold a current, active top-secret/sensitive-compartmented- information clearance. In April 2017, CBP received OPM approval to use direct-hire authority for law enforcement positions, which allows CBP to expedite the typical hiring process by eliminating competitive rating and ranking procedures and veterans’ preference. As of March 31, 2018, 77 CBP officers and 107 Border Patrol agents had entered on duty through this authority, but HRM officials told us that more applicants continue to progress through CBP’s hiring pipeline. CBP has also made revisions to specific steps in its hiring process, including the application, entrance examination, physical fitness test, and polygraph examination, among others. For example, in May 2014, CBP incorporated questions into its electronic application that are designed to automatically disqualify applicants who, based on their responses, could not pass CBP’s background investigation. Specifically, applicants that provide a disqualifying response to any of these questions would not be able to submit an application, thereby saving CBP the effort and resources associated with processing nonviable applicants. Further, in fiscal year 2016, CBP reordered its hiring process to place the entrance examination as the first step directly after an applicant submitted an application. Prior to this change, CBP conducted qualification reviews on applicants to ensure they met position requirements before inviting them to take the entrance exam. According to CBP officials, this updated process provided applicants with the opportunity to obtain a realistic preview of the job they were applying for earlier in the hiring process. These officials explained that this helps to ensure that only those applicants who are committed to completing the hiring process and entering on duty at CBP continue through the hiring pipeline, which may help to address high applicant discontinue rates (e.g., roughly half of all eligible applicants in fiscal year 2015 did not take the exam). According to CBP documentation, this revision also created efficiencies as the agency no longer has to spend time and resources on completing qualification reviews for applicants who either did not show up to take the exam or failed the exam itself. CBP data show recent improvements in both the pass rates for the entrance examination process step as well as its average duration—the average amount of time it took applicants to complete this step. Specifically, from fiscal years 2016 to 2017, pass rates increased by about 40 percent for both CBP officer and Border Patrol agent candidates, and the average duration shortened from 17 days to 13 days for CBP officer candidates and from 19 days to 12 days for Border Patrol agent applicants. CBP officials told us they are also exploring options to allow applicants to complete the entrance examination remotely— eliminating the need for candidates to travel to physical testing sites and potentially further reducing the amount of time spent completing this step. In fiscal year 2016, the physical fitness test process step was amended for all law enforcement officer applicants to provide those who fail another chance to complete this requirement, according to CBP officials. Further, in fiscal year 2017, CBP eliminated the second physical fitness test— which had been the last process step in CBP’s hiring process—for CBP officer, Border Patrol agent, and AMO applicants. In addition to shortening the overall process, officials told us this change provided the small percentage of applicants that passed every other hiring process step with an opportunity to demonstrate they meet CBP’s physical ability standards during basic training. CBP has also made several changes to its polygraph examination process step, which has consistently had the lowest pass rate of any step in its hiring process. For example, among other things, CBP has increased the number of polygraph examiners available to administer the test, according to agency officials, and is piloting a new type of polygraph exam—the Test for Espionage, Sabotage, and Corruption. According to CBP officials, the new examination focuses on identifying serious crimes and is sufficiently rigorous to ensure that only qualified applicants are able to pass. Preliminary data from CBP’s pilot show that this new exam has demonstrated higher pass rates when compared with CBP’s traditional polygraph exam while also taking less time, on average, per test to complete. In addition, in response to recommendations made by the DHS OIG in August 2017, CBP implemented a policy requiring polygraph examiners to take steps to terminate an ongoing examination if disqualifying information is obtained from an applicant during the exam. Further, CBP officials told us they are continuing to work on developing and deploying a presecurity interview to identify unsuitable applicants prior to spending resources on conducting the polygraph examination. While it remains too early to tell if these efforts will result in improvements to the polygraph examination step, available CBP data indicate mixed results. Specifically, while the average duration to complete this step decreased for all law enforcement officer positions from fiscal years 2015 through 2017, pass rates also declined slightly over this same period (see table 7). Hiring Hub Events. In August 2015, CBP piloted its first Hiring Hub event where applicants could complete the structured interview and polygraph examination in one location over the course of several days. In fiscal year 2016, CBP expanded its use of these events, holding additional Hiring Hubs in New York, New York; San Diego, California; and Laredo, Texas; among other locations. The use of consolidated hiring events is consistent with a leading practice we identified in hiring for law enforcement officer positions, and officials at both ICE and the Secret Service stated their agencies are using similar events to process applicants. Although CBP could not provide specific data on its Hiring Hub events, CBP officials stated that the use of these events reduced the agency’s time-to-hire by consolidating hiring process steps that traditionally took applicants weeks to complete into just a few days— effectively enhancing the applicant experience and helping to reduce the number of individuals that drop out of the hiring process. Despite attributing a reduction in the agency’s time-to-hire to the Hiring Hubs, CBP discontinued their use in fiscal year 2017 because of their high costs, according to CBP officials. Specifically, CBP officials told us the agency spent $878,000 and $426,000 in fiscal years 2016 and 2017, respectively, which included renting physical space for the Hiring Hub events and funding the travel expenses of CBP employees sent to staff them. However, CBP officials told us that the best practices and process improvements CBP learned from these events have been incorporated into the agency’s new expedited hiring model, which has been used to process all CBP law enforcement applicants since April 2017. According to CBP officials, this model utilizes existing CBP facilities where applicants can complete the structured interview and polygraph examination near where they live while also providing CBP with cost savings by avoiding the need to rent physical office space. Applicant Care. In fiscal year 2017, CBP supplemented its traditional applicant outreach efforts by piloting the Applicant Care program across all three components. This program is intended to pair viable applicants with a trained recruiter who can answer questions and provide individuals with guidance and support throughout the lengthy hiring process. Formally pairing trained recruiters with applicants is a leading practice we identified in hiring for law enforcement positions, and of the three other selected agencies we reviewed, the Secret Service also had a similar program, according to Secret Service officials. According to CBP data, 806 applicants across all three operational components have participated in the Applicant Care pilot program and, as of May 2018, 28 of these have entered on duty at CBP. CBP officials in OFO, AMO, and HRM told us that the Applicant Care program had been useful in providing an effective way to communicate with applicants. According to a senior AMO official, AMO has fully incorporated the program into its hiring efforts and has paired every applicant since June 2017 with an AMO recruiter. Specifically, this official told us the program has been beneficial by keeping candidates engaged and steadily progressing through the process. HRM officials concurred, stating that the Applicant Care program has been successful in reducing the number of individuals that fail to complete CBP’s lengthy hiring process. According to CBP officials, the Applicant Care program also helps to reduce CBP’s time-to-hire since recruiters can actively encourage candidates to promptly progress through aspects of the hiring process that applicants are responsible for completing, such as the submission of OPM’s Standard Form 86 (SF- 86). CBP officials told us that the agency is collecting data to evaluate the effectiveness of the Applicant Care pilot, including the average time-to- hire and overall pass rates of participating applicants. However, since the pilot is ongoing and some applicants continue to progress through CBP’s hiring pipeline, information on the program’s effectiveness remains preliminary. CBP officials also told us that scaling the Applicant Care initiative to include all applicants may present a challenge, especially given the recent increase in the number of law enforcement applications CBP has received. For example, a senior AMO official noted that, as of January 2018, 10 AMO recruiters were managing a total of about 200 applicants as part of the program, and that more recruiters would be needed to reduce employee workload to a more manageable level. Further, Border Patrol officials said that scaling the initiative to include the tens of thousands of individuals that annually apply for Border Patrol agent positions will be challenging as recruiters do not have the capacity to directly communicate with each one. Accenture Contract. According to CBP officials, the Accenture contract is intended to enhance the agency’s ability to achieve its primary goal— hiring law enforcement officers to meet target staffing levels—by augmenting CBP’s current hiring infrastructure and pursuing new and innovative hiring initiatives. HRM officials told us that Accenture will establish its own hiring infrastructure where Accenture personnel will administer most of the hiring process steps to those applicants it recruits. Specifically, the contractor is responsible for implementing the same hiring process steps and maintaining CBP’s standards to ensure that all applicants recruited by Accenture meet those standards. According to HRM officials, Accenture’s efforts are expected to provide CBP with surge hiring capacity without affecting CBP’s current hiring infrastructure, which will continue to function throughout the contract’s duration. According to CBP officials, Accenture began processing an initial trial group of random applicants in May 2018 to ensure that the contractor is able to process candidates through its hiring pipeline as required by the contract. CBP officials also told us that Accenture has the flexibility to pursue novel hiring tactics and pilot initiatives that CBP may not have considered or been able to undertake. For example, Accenture plans to pilot innovative ways to reduce the time-to-hire, including by streamlining steps in the hiring process, which could help to improve CBP’s overall process and generate increased hires for law enforcement positions. Further, because the contractor will only be paid for individuals that receive final job offers and enter on duty—and not for implementing these new methods and initiatives—CBP does not bear the financial risk if such initiatives prove not to be cost-effective. On the other hand, if hiring methods piloted by Accenture are successful in reducing CBP’s time-to-hire and generating increased law enforcement officer hires, CBP can incorporate these methods into its own process. As of March 2018, some key issues were still being negotiated between CBP and the contractor. For example, while HRM officials told us that the main metric used to assess Accenture’s effectiveness will be the total number of hires the contractor produces, they were still working to finalize other key metrics for evaluating the contractor’s effectiveness as well as an oversight plan to ensure the contractor operates according to agency requirements. In addition, a senior HRM official told us that the costs associated with hiring a law enforcement officer are generally the same regardless of whether an applicant is processed by Accenture or CBP. Specifically, CBP officials explained that the requirements to hire a law enforcement officer are rigorous and include administering entrance examinations, background investigations, physical fitness and medical tests, and polygraph examinations, among other process steps. CBP officials stated that the costs associated with conducting these process steps for all applicants—and not just the small percentage who successfully complete the hiring process and enter on duty at CBP—are incurred whether the process is administered by Accenture or CBP. As a result, these officials explained that CBP is most focused on processing as many qualified candidates as possible to increase law enforcement officer staffing levels. As Accenture’s hiring infrastructure will not become fully operational until June 2018, it is too early to evaluate whether the contractor will be able to efficiently and effectively provide the surge hiring capacity CBP needs to achieve its staffing goals. While CBP has reduced its time-to-hire and made efforts to improve its hiring process for law enforcement officers, CBP officials have noted that the hiring process remains lengthy, which they said directly affected the agency’s ability to recruit and hire for law enforcement positions. CBP officials also stated that their ability to further improve CBP’s time-to-hire and increase law enforcement hires is affected by hiring process steps that can be challenging and time-consuming for applicants to complete as well as CBP’s reliance on applicants to promptly complete certain aspects of the process. As noted above, in fiscal year 2017, it took an average of 274 days for Border Patrol agent applicants and more than 300 days for CBP officer applicants to complete all hiring steps and enter on duty. According to a leading practice we identified in hiring for such positions, agencies should ensure that the hiring process is not protracted or onerous for applicants. While OPM’s time-to-hire target for federal agencies is 80 days, officials at CBP, ICE, and the Secret Service told us that such a target is not feasible for law enforcement positions given the rigor and complexity of the hiring process. Further, according to CBP officials, the agency’s multistep hiring process for its law enforcement officer positions is intentionally rigorous and involves extensive applicant screening to ensure that only qualified candidates meet the technical, physical, and suitability requirements for employment at CBP. Even so, CBP officials across several components told us that the agency’s time-to-hire was too long and directly affected the component’s ability to recruit and hire for law enforcement positions. For example, OFO officials told us that the longer the hiring process takes to complete, the more likely it is that an applicant will drop out. Further, qualified applicants may also decide to apply for employment at a competing law enforcement agency such as ICE that may have a less rigorous process than CBP’s, according to CBP officials. One factor that affects CBP’s ability to efficiently process and onboard law enforcement officers are specific hiring process steps that are time- consuming and challenging for candidates to complete. For example, CBP officials across all three operational components and HRM cited the polygraph examination as a significant bottleneck within CBP’s hiring process. In addition to having the lowest pass rate of any step in CBP’s process, as noted above, the polygraph examination also took CBP officer and Border Patrol agent applicants, on average, the longest amount of time to complete in fiscal year 2017—74 days and 94 days, respectively. Further, Border Patrol and HRM officials both told us that these already lengthy time frames may increase further because of the growing number of applicants for CBP’s law enforcement positions. In addition, CBP’s background investigation and medical examination process steps as well as the SF-86 submission and preemployment complete hiring phases had the five longest average durations for law enforcement applicants in fiscal year 2017. For example, on average, it took CBP law enforcement officer applicants across all three components 55 days or more to complete the medical examination and more than 60 days to complete the background investigation. For more information on the average durations of these selected aspects of CBP’s hiring process, see table 8. Another factor that affects CBP’s ability to reduce its time-to-hire is CBP’s reliance on applicants to complete certain aspects of the hiring process in a timely manner. While the agency has taken steps to mitigate this issue—most notably through its Applicant Care program and the Accenture contract—its ability to ensure that applicants quickly complete those aspects of the hiring process they are responsible for remains limited. For example, as discussed above, applicants are responsible for completing their own SF-86, and CBP officials noted that applicants often take weeks to accurately complete and submit this form. Further, one senior HRM official told us that each time a mistake is identified in this paperwork, applicants receive an additional 5 days to fix the error, which adds up over time. CBP data indicate that while the average duration for this process step has decreased since fiscal year 2015, it continues to take more than 45 days for the average applicant to complete, as noted in table 8 above. As this completed paperwork is required to begin the background investigation and, according to CBP officials, schedule a structured interview, this inherently affects CBP’s ability to reduce its time-to-hire. Further, for the medical examination process step, applicants are responsible for, among other things, scheduling the examination itself and providing pertinent documentation, such as any medical waivers required to pass the exam. According to a senior HRM official, as of February 2018, CBP had to conduct follow-up outreach to roughly 65 percent of applicants during this process step to obtain the information required to complete this step. From fiscal years 2013 through 2017, CBP’s annual rates of attrition varied across its five law enforcement officer positions. Specifically, OFO’s annual attrition rates for the CBP officer position were consistent at roughly 3 percent, while rates for Border Patrol agent and AMO’s Marine Interdiction Agent positions were below 5 percent in 4 out of the 5 fiscal years we reviewed. When we compared CBP’s annual attrition rates for these positions to those of the other selected law enforcement agencies, we found that CBP’s attrition rates were similar to ICE’s annual attrition rates for its law enforcement positions and generally lower than those of the Secret Service and BOP. Annual attrition rates for AMO’s aviation positions were higher, ranging from 5.0 percent to 9.2 percent for the Air Interdiction Agent position and 7.8 percent to 11.1 percent for the Aviation Enforcement Agent position. Even so, in the last 3 fiscal years, attrition rates for these positions have generally remained lower than those of the Secret Service and BOP (see table 9). In addition, from fiscal years 2013 through 2017, CBP’s ability to hire more law enforcement officers than it lost varied across positions. Specifically, CBP consistently hired more CBP officers and Aviation Enforcement Agents than it lost. Further, while CBP generally maintained its staffing levels for Marine Interdiction Agents, the agency consistently lost more Border Patrol agents and Air Interdiction Agents than it hired. Even so, onboard staffing levels for all five of CBP’s law enforcement officer positions have consistently remained below authorized staffing levels. OFO. With the exception of fiscal year 2016, CBP hired more CBP officers than it lost each fiscal year. Specifically, from fiscal years 2013 through 2017, CBP hired an average of 978 CBP officers and lost an average of 719 officers each year, resulting in an average annual gain of 258 CBP officers and an increase in its overall staffing level of nearly 1,300 officers over this 5-year period. However, as OFO’s staffing targets for CBP officers also increased each year during this period, OFO remained below its authorized levels from fiscal years 2014 through 2017. In fact, OFO ended fiscal year 2017 more than 1,100 CBP officers below its annual staffing target (see fig. 7). Border Patrol. From fiscal years 2013 through 2017, CBP hired an average of 522 Border Patrol agents and lost an average of 890 agents each year, resulting in an average annual loss of 368 Border Patrol agents over this 5-year period. Therefore, despite having an annual attrition rate that mostly remained below 5 percent, Border Patrol was not able to replace departing Border Patrol agents with new hires from fiscal years 2014 through 2017. As a result, staffing levels for Border Patrol agents decreased by 1,838 total agents over our review period and the gap between Border Patrol’s onboard staffing levels and its congressionally-mandated minimum staffing floor has expanded each year from fiscal years 2014 through 2017. Border Patrol ended fiscal year 2017 with 19,437 agents—nearly 2,000 agents below its fiscal year 2016 statutorily-established minimum and 7,000 below the staffing target established in response to Executive Order 13767 (see fig. 8). AMO. From fiscal years 2013 through 2017, CBP (1) gained Aviation Enforcement Agent staff, (2) generally maintained staffing levels for its Marine Interdiction Agent position, and (3) consistently lost Air Interdiction Agent staff. First, despite the Aviation Enforcement Agent position generally having CBP’s highest annual attrition rates, CBP hired more Aviation Enforcement Agents than it lost each fiscal year and increased its overall staffing level by 79 positions during our review period. Even so, AMO staffing levels for these positions remained below its authorized targets in 4 out of the 5 fiscal years we reviewed. Second, AMO staffing levels for the Marine Interdiction Agent position remained level as AMO lost a net total of 3 Marine Interdiction Agents from fiscal years 2013 through 2017. Nevertheless, onboard staffing levels for these positions remained below the annual authorized levels in 4 of the 5 fiscal years we reviewed. Third, on average, CBP hired 25 Air Interdiction Agents and lost 52 agents each fiscal year, resulting in an average annual loss of 27 agents and a net decrease of 136 positions between fiscal years 2013 and 2017. Further, even though the authorized staffing targets for these positions decreased every year since fiscal year 2013, AMO’s onboard Air Interdiction Agent staffing levels remained below authorized levels in 4 of the 5 fiscal years we reviewed (see fig. 9). CBP has acknowledged that improving its retention of qualified law enforcement personnel is critical in addressing staffing shortfalls, but officials identified difficulties in retaining key law enforcement staff as a result of geographically remote and hard-to-fill duty locations. CBP officials across all three operational components and HRM cited location—and specifically employees’ inability to relocate to posts in more desirable locations—as a primary challenge facing the agency in retaining qualified personnel. Border Patrol officials explained that duty stations in certain remote locations present retention challenges due to quality-of-life factors—for example, agents may not want to live with their families in an area without a hospital, with low-performing schools, or with relatively long commutes from their homes to their duty station. Border Patrol’s difficulty in retaining law enforcement staff in such locations is exacerbated by competition with other federal, state, and local law enforcement organizations for qualified personnel. According to Border Patrol officials, other agencies are often able to offer more desirable duty locations—such as major cities—and, in some cases, higher compensation. CBP data indicate that Border Patrol agents consistently leave the component for employment with other law enforcement agencies, including OFO as well as other DHS components such as ICE. For example, while retirements accounted for more than half of annual CBP officer losses from fiscal years 2013 through 2017, they accounted for less than a quarter of annual Border Patrol agent losses, indicating that the majority of these agents are not retiring but are generally leaving to pursue other employment. Further, according to CBP data, the number of Border Patrol agents departing for employment at other federal agencies increased steadily from 75 agents in fiscal year 2013 to 348 agents in fiscal year 2017—or nearly 40 percent of all Border Patrol agent losses in that fiscal year (see fig. 10). Further, of the 113 Border Patrol agents who departed CBP for other federal agencies during the first half of fiscal year 2018, 72 agents (64 percent) went to ICE. Border Patrol officials told us that working a standard day shift at ICE in a controlled indoor environment located in a major metropolitan area for similar or even lower salaries presents an attractive career alternative for Border Patrol agents who often work night shifts in extreme weather in geographically remote locations. The President of the National Border Patrol Council also cited this challenge, stating that unless Border Patrol agents have a strong incentive to remain in remote, undesirable locations—such as higher compensation when compared with other law enforcement agencies—they are likely to leave the agency for similar positions located in more desirable locations. While OFO officials told us the component did not face an across-the- board challenge in retaining CBP officers, they have had difficulty retaining officers in certain hard-to-fill locations that may be geographically remote or unattractive for families, such as Nogales, Arizona, and San Ysidro, California. As a result, CBP officer staffing levels in these locations have consistently remained below authorized targets. For example, OFO ended fiscal year 2017 approximately 300 positions below its authorized staffing level in both its Tucson, Arizona, field office, which includes the port of Nogales, and its San Diego, California, field office, which includes the port of San Ysidro. See figure 11 for more information on the OFO field offices with the four largest gaps between onboard and authorized staffing levels for CBP officer positions from fiscal years 2015 through 2017. OFO officials stated that CBP officers regularly leave posts in remote or hard-to-fill locations to transfer to similar positions in more desirable locations, both internally within OFO as well as at other law enforcement agencies. In addition, officials from the National Treasury Employees Union, which represents CBP officers, told us that excessive overtime and stressful employment conditions—including forced temporary duty travel—also contributed to CBP officers leaving the agency for positions at other law enforcement entities. CBP data indicate that the number of CBP officers who left CBP for employment at other federal agencies increased from 33 in fiscal year 2013 to 108 in fiscal year 2017—or 15 percent of all CBP officer losses in that fiscal year. Likewise, of the 66 CBP officers who departed CBP for other federal agencies during the first half of fiscal year 2018, 34 officers (52 percent) went to ICE. AMO has also had difficulty retaining its law enforcement personnel—and particularly its Air Interdiction Agent staff—in hard-to-fill locations, such as Aguadilla, Puerto Rico, and Laredo, Texas. However, given the unique qualifications and competencies required for the Air Interdiction Agent position, AMO does not compete with other law enforcement organizations. Instead, AMO officials told us they compete with the commercial airline industry for qualified pilots. Specifically, they stated that this competition is exacerbated by a nationwide shortage of pilots. In addition, AMO officials explained that there is a perception among applicants that commercial airlines are able to offer pilots more desirable locations and higher compensation. However, they told us that AMO generally provided pilots with higher starting salaries than many regional airlines as well as most career options available to helicopter pilots. All three CBP operational components have taken steps to retain qualified law enforcement personnel by offering opportunities for employees to relocate to more desirable locations and pursuing the use of financial incentives, special salary rates, and other payments and allowances. Relocation Opportunities. Border Patrol, OFO, and AMO have formal programs providing law enforcement officers with opportunities to relocate. For example, in fiscal year 2017, Border Patrol implemented its Operational Mobility Program and received initial funding to relocate about 500 Border Patrol agents to new locations based on the component’s staffing needs. According to Border Patrol officials, retaining current employees is a top focus for leadership at the component and this program provides Border Patrol agents with opportunities for a paid relocation to a more desirable location at a lower cost to CBP than an official permanent change of station transfer. As of April 2018, Border Patrol officials told us that 322 Border Patrol agents had accepted reassignment opportunities through the program so far and the component hopes to continue receiving funding to provide these opportunities. Likewise, OFO’s National Reassignment Opportunity Bulletin provides CBP officers with opportunities to voluntarily relocate to new ports of entry at their own expense. CBP officers are able to submit reassignment requests multiple times throughout the year and selections are made based on OFO’s staffing needs as well as employees’ seniority and other eligibility requirements. According to OFO officials, the program has been in place since February 2012, and OFO data indicate a recent increase in reassignments from 122 participating CBP officers in calendar year 2016 to 202 officers in 2017. Further, these officials noted that CBP officers are also able to relocate to new duty stations through partner swaps—when two employees assigned to different duty locations agree to switch—and hardship reassignments—for example, when a CBP officer must relocate because a spouse has been transferred to a new location for work. Also, AMO personnel who are non-bargaining unit employees and have served for at least 3 years in their current location are eligible for noncompetitive paid relocations. AMO officials told us that opportunities for relocations are posted every few months in which eligible personnel can apply for transfers to specific duty locations based on the needs of the operational component. Financial Incentives and Other Payments and Allowances. CBP’s three operational components have also recently taken steps to supplement employees’ salaries through the use of human capital flexibilities—such as retention and relocation incentives and special salary rates—as well as other payments and allowances. CBP’s goal in pursuing these human capital flexibilities is to retain current employees— especially in remote or hard-to-fill locations—who are likely to internally relocate within CBP to more desirable duty locations or depart the agency for similar positions at other law enforcement organizations or commercial airlines. Supplementing the salaries of its employees is consistent with a leading practice we identified in retaining qualified law enforcement personnel—specifically, agencies should ensure they are offering pay and compensation comparable with other law enforcement agencies. Further, two of the three other selected law enforcement agencies we reviewed regularly used retention incentives and other human capital flexibilities to help retain qualified law enforcement personnel in cases where filling the position would be difficult or recruitment costs would be high. However, we found that from fiscal years 2013 through 2017, CBP’s use of such financial incentives and other payments was limited as the agency paid a total of 4 retention incentives and 13 relocation incentives, and implemented 1 special salary rate for all positions during this 5-year period. From fiscal year 2013 through 2017, Border Patrol did not offer retention incentives to agents and paid 2 relocation incentives to transfer Border Patrol agents to Artesia, New Mexico, and Washington, D.C., at a cost of roughly $78,000. However, in fiscal year 2018, Border Patrol increased its use of relocation incentives to facilitate the transfer of agents to duty stations along the southwest border that are less desirable due to the remoteness of the location and lack of basic amenities and infrastructure. Specifically, as of April 2018, 67 Border Patrol agents had received such incentives to relocate to duty stations in Ajo, Arizona; Calexico, California; and the Big Bend region in Texas; among others. While Border Patrol did not offer retention incentives during our review period, it submitted a formal request to CBP leadership in February 2018 for a 10 percent across-the-board retention incentive for all Border Patrol agents at the GS-13 level and below, which represents the majority of the component’s frontline workforce. According to Border Patrol documentation, these incentives, if implemented, could help reduce Border Patrol’s attrition rate—which has consistently outpaced its hiring rate—by helping retain agents who may have otherwise left Border Patrol for similar positions in OFO, ICE, or other law enforcement agencies. According to HRM officials, as of April 2018, CBP leadership was evaluating Border Patrol’s group retention incentive request, including the costs associated with implementing this 10 percent across-the-board incentive. In addition, as the incentive would benefit Border Patrol agents in all of the component’s duty locations, the extent to which this effort would be effective in targeting agent attrition in the remote locations that represent CBP’s largest staffing challenges remains to be seen. In addition, as of May 2018, CBP was planning to submit a request to OPM for a $10 per day remote duty location allowance for Border Patrol agents staffed to 17 geographically remote stations. These stations meet OPM’s definition of “remote worksites” and have quality-of-life conditions that are substantially below the standard at most other CBP duty locations. According to the agency, this allowance could help to address the attrition of Border Patrol agents at these duty stations. However, like its group retention incentive request, it is not yet known whether this proposal will be approved. From fiscal years 2013 through 2017, OFO paid a total of 4 retention incentives at a cost of $149,000 to retain CBP officers in Tucson, Arizona; Detroit, Michigan; Carbury, North Dakota; and Laredo, Texas. Further, OFO paid 7 relocation incentives at a cost of approximately $160,000 to relocate personnel to the hard-to-fill ports of Alcan and Nome, Alaska; Coburn Gore, Maine; and Detroit, Michigan. One OFO official told us OFO did not regularly use retention incentives because its relatively low annual attrition rates make it difficult to propose a persuasive business case to CBP leadership that such incentives are necessary. Further, another OFO official explained that OFO’s strategy is focused on using recruitment incentives to staff hard-to-fill locations with new employees. As discussed above, OFO officials told us this strategy has been effective in retaining CBP officers in most of the hard-to-fill locations where recruitment incentives have been used since fiscal year 2015. In addition to relocation and retention incentives, OFO received OPM approval in fiscal year 2017 to implement a special salary rate for CBP officers staffed to the hard-to-fill location of Portal, North Dakota—a port that consistently experienced CBP officer losses of more than 10 percent each year. Specifically, this special salary rate supplements CBP officers’ base salaries up to 40 percent and, according to OFO officials as of February 2018, there had not been any CBP officer departures from the port since this rate was implemented in June 2017. OFO officials stated that while recruitment incentives can bring applicants to hard-to-fill locations, special salary rates may be able to retain them for longer periods. However, while OFO officials have cited the effectiveness of this special salary rate in retaining personnel, this rate only applies to one hard-to-fill location and does not address OFO’s ongoing staffing challenges in other chronically understaffed locations. According to OFO officials, the component is considering requesting additional special salary rates for such locations where attaining authorized staffing levels has proved difficult, but these officials noted that such discussions are in the preliminary stage due to the extensive effort and amount of time required to pursue this option. Specifically, these officials told us that requesting OPM approval for a special salary rate in Portal, North Dakota, was an onerous and extensive process that took CBP and OPM more than 2 years to complete from start to finish. From fiscal years 2013 through 2017, AMO did not offer retention incentives to law enforcement personnel and paid a total of 4 relocation incentives to transfer three Air Interdiction Agents and one Marine Interdiction Agent to Puerto Rico at a cost of approximately $84,000. However, AMO has taken steps to pursue additional human capital flexibilities to address its difficulty in retaining Air Interdiction Agents, including a group retention incentive and a special salary rate. Specifically, in September 2017, AMO submitted an official request to HRM for a 10 percent group retention incentive for Air Interdiction Agents staffed to duty locations in Yuma and Sierra Vista, Arizona; Grand Forks, North Dakota; Laredo, Alpine, and McAllen, Texas; and Aguadilla, Puerto Rico. According to the request, the incentive is intended to help AMO retain qualified pilots in these hard-to-fill locations by raising their salaries to be more competitive with commercial airlines. HRM officials told us in March 2018 they were working with AMO and CBP’s Office of Finance to assess the proposal’s cost. In addition, as of April 2018, AMO was in the process of drafting a special salary rate request for all Air Interdiction Agents from GS-11 through GS- 13 at all AMO locations. HRM officials confirmed they were working with AMO officials on this request, including evaluating whether AMO meets OPM’s criteria. HRM officials told us that OPM’s criteria for approving the use of special salary rates represent a high bar and AMO will have to present a strong business case that demonstrates a regular pattern of component-wide Air Interdiction Agent losses. CBP does not have a systematic process for capturing and analyzing information on law enforcement officers who are leaving, such as an exit interview or survey. As a result, the agency does not have important information it could use to help inform future retention efforts. CBP officials across all three components confirmed that they do not systematically conduct formal exit interviews to collect data on departing employees. Officials from OFO and AMO told us that departing law enforcement officers receive the DHS exit survey and therefore have the option to provide these data. However, while CBP officials explained that DHS provides the survey response data to CBP on a quarterly basis, AMO officials told us that this information was of limited value due to low response rates. Further, when we requested these data, CBP was unable to provide the survey response data—or the percentage of departing employees who had completed the survey—citing a technical reporting error in DHS’s system. In addition, according to CBP officials, in August 2017, DHS communicated that it no longer required CBP (or DHS’s other components) to use the DHS exit survey. In the third quarter of fiscal year 2017, Border Patrol implemented its own exit survey, which includes questions gauging departing employees’ reasons for leaving, length of service, and, if applicable, what organization they are departing for, among other questions. While such questions should provide CBP with useful data on the factors affecting Border Patrol agent departures, Border Patrol officials told us that the response rate was 9 percent as of January 2018. When we asked these officials about the steps they were taking to improve this response rate, they replied that individual Border Patrol sectors were responsible for disseminating these surveys and the headquarters officials were unsure of the extent to which sector-level officials were sending the surveys to departing employees. To ensure the surveys were being sent, a senior Border Patrol headquarters official explained that sector-level officials have been told to copy him on all e-mails disseminating the survey. According to CBP officials, in April 2018, the agency launched an initiative to develop a CBP-wide exit survey. The agency plans to develop customized questions for the survey, conduct a pilot of the survey in July 2018, and integrate the survey into CBP’s off-boarding process by the beginning of fiscal year 2019. While CBP provided us with these project milestone dates, the agency did not provide any documentation describing key aspects of the initiative, such as whether CBP will develop a strategy focused on encouraging departing employees to complete the survey to foster higher response rates. Further, CBP did not provide any information on how the agency planned to analyze and use data collected by the exit survey to inform its efforts to retain qualified law enforcement personnel. Two of the other selected law enforcement agencies we reviewed—BOP and the Secret Service—use exit surveys to collect a wide range of information on departing employees, while ICE is currently developing its own survey. For example, similar to Border Patrol’s exit survey, BOP’s uses a mix of multiple-choice and open-ended questions to assess reasons for departures as well as employee attitudes toward compensation, work-life balance and other working conditions, and supervisors. Further, both BOP’s and the Secret Service’s surveys inquire about actions the agencies could have taken that would have prevented the employee’s departure. CBP officials said that management is generally aware of the factors that influence law enforcement officer departures, including the main reason— they want to relocate to more desirable locations. Specifically, Border Patrol officials stated that managers have anecdotal knowledge through informal conversations or meetings at the local level with departing Border Patrol agents, and OFO officials stated that when a CBP officer leaves, there is a general understanding among their colleagues as to the reasons for their departure. In contrast to OFO and Border Patrol officials, AMO officials stated that because of the low participation rates on the DHS survey, the component does not have enough data to understand and address the factors that influence employees’ decisions to leave. Standards for Internal Control in the Federal Government state that management should obtain relevant data from reliable sources and process these data into quality information to make informed decisions in achieving key objectives. Taking steps to ensure that the agency’s operational components are systematically collecting and analyzing complete and accurate information on all departing law enforcement officers—including the factors that influenced their decision to separate— would better position CBP to understand its retention challenges and take appropriate action to address them. CBP has made progress in improving its recruitment, hiring, and retention of law enforcement officers, including increasing the total number of applications it receives for these positions and reducing the amount of time it takes to hire applicants. Further, CBP has taken steps to address its primary challenge in retaining qualified law enforcement officers by offering opportunities for these personnel to relocate and pursuing the use of financial incentives and other payments to supplement employee salaries. Even so, retaining law enforcement officers in hard-to-fill locations continues to be challenging for CBP. Although CBP management may be aware of the primary reason law enforcement personnel leave the agency, CBP does not have a systematic process in place across its three operational components to capture and analyze information on these departures, such as an exit interview or survey. Taking steps to ensure that the agency’s operational components are systematically capturing and analyzing a wide range of information on all departing law enforcement officers and the factors that influenced their decisions to leave would better position CBP to understand its retention challenges and take appropriate action to address them. The Commissioner of CBP should ensure that its operational components systematically collect and analyze data on departing law enforcement officers and use this information to inform retention efforts. (Recommendation 1) We provided a draft of this product to DHS for review and comment. DHS provided written comments, which are noted below and reproduced in full in appendix I, and technical comments, which we incorporated as appropriate. We also provided the draft report to the Federal Bureau of Prisons for review and comment, which indicated via e-mail that it did not have any comments on the draft report. DHS concurred with our recommendation and described the actions it plans to take in response. Specifically, DHS stated that CBP is taking steps to develop an agency-wide exit survey to collect information on departing law enforcement officers for implementation in fiscal year 2019. DHS also stated that CBP is working to develop a mass communications plan to facilitate the completion of the survey by exiting employees to ensure an effective response rate. Systematically capturing and analyzing quality information on departing law enforcement officers will help CBP to understand its retention challenges. To fully address the intent of our recommendation, CBP will also need to use this information to address its retention challenges and inform its overall retention efforts. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Adam Hoffman (Assistant Director), Bryan Bourgault, Eric Hauswirth, Tyler Kent, Amanda Miller, Sasan J. “Jon” Najmi, Leslie Sarapu, Michael Steinberg, and Adam Vogt made key contributions to this report.", "summary": "CBP is responsible for securing U.S. borders and employs nearly 45,000 law enforcement officers across its three operational components at and between U.S. ports of entry, in the air and maritime environment, and at certain overseas locations. In recent years, CBP has not attained target staffing levels for its law enforcement positions, citing high attrition rates in some locations, a protracted hiring process, and competition from other law enforcement agencies. GAO was asked to review CBP's efforts to recruit, hire, and retain law enforcement personnel. This report examines CBP's efforts to (1) recruit qualified law enforcement officers, (2) more efficiently hire law enforcement applicants, and (3) retain law enforcement officers. GAO analyzed CBP data on recruitment, hiring, and retention from FY 2013 through 2017, as well as selected data for the first two quarters of FY 2018. GAO also reviewed CBP strategies and the recent contract it awarded to augment its recruiting and hiring activities and interviewed officials from CBP and three other selected law enforcement agencies. U.S. Customs and Border Protection (CBP) increased its emphasis on recruitment by establishing a central recruitment office and increasing its participation in recruitment events, among other things. As a result, the number of applications it received for law enforcement positions across its operational components—the Office of Field Operations, U.S. Border Patrol, and Air and Marine Operations—from fiscal years (FY) 2013 through 2017 more than tripled. Also, in November 2017, CBP hired a contractor to more effectively target potential applicants and better utilize data to enhance CBP's recruitment efforts. However, it is too early to gauge whether the contractor will be effective in helping CBP to achieve its goal to recruit and hire more law enforcement officers. CBP improved its hiring process as demonstrated by two key metrics—reducing its time-to-hire and increasing the percentage of applicants that are hired. As shown in the table, CBP's time-to-hire has decreased since FY 2015. CBP officials stated these improvements, paired with increases in applications, have resulted in more hires. For example, the number of Border Patrol agents hired in the first half of FY 2018 increased by about 83 percent when compared to the same period for FY 2017. However, the hiring process remains lengthy—for example, in FY 2017 it took more than 300 days, on average, for CBP officer applicants to complete the process. Certain factors contribute to the lengthy time-to-hire, including process steps that can be challenging and time-consuming for applicants to complete—such as the polygraph exam—as well as CBP's reliance on applicants to promptly complete certain aspects of the process—such as submitting their background investigation form. CBP enhanced its efforts to address retention challenges. However, staffing levels for law enforcement positions consistently remained below target levels. For example, CBP ended FY 2017 more than 1,100 CBP officers below its target staffing level. Officials cited employees' inability to relocate to more desirable locations as a key retention challenge. CBP has offered some relocation opportunities to law enforcement personnel and has recently pursued the use of financial incentives and other payments to supplement salaries, especially for those staffed to remote or hard-to-fill locations. However, CBP does not have a formal process for capturing information on all departing employees, such as an exit survey. Ensuring that operational components are systematically collecting and analyzing such information would better position CBP to understand its retention challenges and take appropriate action to address them. GAO recommends that CBP systematically collect and analyze data on departing law enforcement officers and use this information to inform retention efforts. DHS concurred with this recommendation.", "document_type": "gao"}
{"report": "As of June 30, 2017, the UN had carried out 71 peacekeeping operations since 1948, and had 16 active UN peacekeeping operations worldwide. Eight of these UN peacekeeping operations were in sub-Saharan Africa (see fig. 1). In their earliest days, UN peacekeeping operations were primarily military in nature and limited to monitoring cease-fire agreements and stabilizing situations on the ground while political efforts were being made to resolve conflicts. Today, in response to increasingly complex situations in which conflicts may be internal, involve many parties, and include civilians as deliberate targets, UN peacekeeping operations are more commonly “multidimensional”—deploying civilian and police personnel in addition to military personnel. Multidimensional peacekeeping operations seek to create a secure and stable environment while working with national authorities and actors to make sure the peace agreement or political process is implemented. According to the UN, multidimensional peacekeeping operations are designed to protect civilians and often assist in the disarmament, demobilization and reintegration of former combatants; support the organization of elections; protect and promote human rights; and assist in restoring the rule of law. Figure 2 shows examples of UN peacekeepers serving in different capacities as part of MINUSCA in Bangui, CAR. Each UN peacekeeping operation, including its mandated size and tasks, is authorized through a UN Security Council resolution. The operation’s budget and resources are subject to General Assembly approval. The UN’s approved budget for global peacekeeping operations in UN fiscal year 2017 was about $7.9 billion. Individual operation budgets ranged from about $36 million for the peacekeeping operation in Kosovo to more than $1.2 billion for the peacekeeping operation in the Democratic Republic of the Congo (see table 1). The UN reported in June 2017 that it maintained 95,544 uniformed peacekeepers, 5,004 international civilians, 10,149 local civilians, and 1,597 UN volunteers in support of its operations around the world. According to UN documents, civilian peacekeeping personnel are generally recruited to peacekeeping operations as individuals, while police and military personnel are volunteered by member states to participate as part of their country’s contribution to UN peacekeeping operations. The United States is the largest financial contributor to UN peacekeeping operations. From fiscal years 2014 to 2017, the United States contributed an average of about $2.1 billion per year to these operations. The UN General Assembly sets the assessment levels for UN member contributions to peacekeeping operations every 3 years. The United States’ assessment has averaged about 28.5 percent of the UN peacekeeping budget; however, Congress has authorized payment with appropriated funds at about 27 percent for U.S. fiscal years 2014 through 2016, and 25 percent for U.S. fiscal year 2017. In April 2014, UN Security Council Resolution 2149 established MINUSCA following escalating sectarian violence in CAR that resulted in the destruction of state institutions, thousands of deaths, and 2.5 million people—more than half of CAR’s entire population—in need of humanitarian aid, according to a UN report. The conflict also resulted in 174,000 people being internally displaced and over 400,000 fleeing to neighboring countries, according to the UN report. MINUSCA’s tasks include protecting civilians, given the security, humanitarian, human rights, and political crisis in CAR; supporting the implementation of the transition process, including efforts to extend state authority and preserve territorial integrity; facilitating the delivery of humanitarian assistance and promoting and protecting human rights; supporting justice and the rule of law; and facilitating the disarmament, demobilization, reintegration, and repatriation processes. On November 15, 2017, UN Security Council Resolution 2387 (2017) extended MINUSCA’s mandate for a fourth time, through November 15, 2018. MINUSCA’s approved personnel levels for UN fiscal year 2017 comprised 10,750 military personnel, 400 individual police officers, and 1,680 formed police unit personnel, as well as 790 international civilian and 696 national civilian personnel, 238 UN volunteers, and 40 government- provided personnel, according to a UN Secretary-General report. Table 2 shows average annual personnel deployment for MINUSCA and the number of authorized positions for the first 3 full fiscal years of the operation. Based on data and other input from the UN, DOD, and State, we estimate that it would cost the United States more than twice as much as it would cost the UN to implement a hypothetical operation comparable to MINUSCA, the ongoing UN operation in the Central African Republic (CAR). In addition, the estimated cost of a U.S. operation in CAR far exceeds U.S. contributions to MINUSCA. Based on an estimate we developed in conjunction with DOD and State officials, a hypothetical, comparable U.S. operation would likely cost nearly $5.7 billion, more than twice as much as MINUSCA, the ongoing UN operation in CAR. Our comparison covers the time from which MINUSCA was established in April 2014 through the end of UN fiscal year 2017, which ended on June 30, 2017—a total of 3 years and 3 months, the first 39 months of MINUSCA. Over this time period, UN costs for MINUSCA totaled approximately $2.4 billion. Using roughly the same basic parameters for MINUSCA, including similar deployment levels of military and civilian personnel over the same time period, in consultation with DOD and State officials, we estimate that a comparable, hypothetical U.S. operation would likely cost nearly $5.7 billion, more than twice the UN cost for MINUSCA (see table 3 for a detailed comparison of estimated U.S. costs and actual UN costs). This estimate does not include, among other things, the cost for State diplomatic security and office space for civilian staff, the inclusion of which could further increase the total estimated U.S. cost for such an operation. During the same time period, from April 10, 2014 through June 30, 2017, the United States contributed approximately $700 million to the UN to support MINUSCA. Therefore, the estimated cost of a U.S. operation (nearly $5.7 billion) would be almost eight times greater than the United States’ contribution to MINUSCA. See figure 3 for a comparison of these costs with the U.S. estimate. Various factors contribute to the differences in costs between actual UN expenditures for MINUSCA from April 10, 2014 through June 30, 2017— the first 39 months of MINUSCA—and a hypothetical, comparable U.S. operation over the same time period, including disparities in the cost of sourcing and transporting equipment and supplies, staffing and compensating military and police personnel, and maintaining facilities and communications and intelligence systems. These disparities reflect operational, structural, and doctrinal differences in the way the United States likely would undertake a hypothetical, comparable operation, should such an operation be deemed in the U.S. national interest. High U.S. costs to source and transport supplies and equipment to the Central African Republic (CAR) contribute to the difference between our cost estimate for the hypothetical U.S. peacekeeping operation and the UN’s actual costs for MINUSCA. In the hypothetical U.S. operation, based on input from DOD and IDA officials and the output of the IDA cost estimating tool, the United States would fly in most of its consumable supplies from outside CAR. Specifically, materials such as water, ice, food, and other subsistence items would be airlifted into CAR from Italy, a supply location validated as reasonable by DOD and IDA officials given its proximity to the operation and because MINUSCA relies on a UN global service center there, one of two such UN centers in Europe. The estimated U.S. cost of airlifting water alone over the 39-month time period for the hypothetical operation would total nearly $700 million. The United States would still deploy its equipment and personnel to CAR from the United States, at a cost of nearly $600 million. Transportation of equipment and supplies within CAR would cost an additional estimated $316 million. In contrast, the UN does not fly in water or consumables on the same scale as the United States would in the hypothetical operation. Instead, the UN relies on some in-country or local infrastructure and consumables. Military and formed police unit equipment is provided by the troop- and police-contributing countries. The UN reimburses these countries for equipment at set rates. The UN cost of reimbursing countries for deploying their equipment to CAR likely would be less than the amount the United States would spend on airlifting the equipment to CAR alone. For example, the UN cost of freight, deployment, and country reimbursements for military and formed police equipment was approximately $229 million over a 2-year period (July 2014 through June 2016), while in the hypothetical operation the U.S. cost of deploying equipment alone would be over $382 million, which is about $154 million more than the UN cost over a similar 2-year period (September 2014 through August 2016). The United States would staff and compensate its military and police personnel differently than the UN, leading to differences between the estimated U.S. costs and actual UN costs. While neither the hypothetical U.S. cost estimate nor UN expenditures include the cost of salaries for active duty personnel or troops contributed by other countries, respectively, the United States would bear the additional cost of salaries for the share of personnel drawn from military reserves. According to DOD officials, 10 percent of infantry unit personnel would have been reservist personnel in a hypothetical, comparable U.S. operation, based on the average ratio of active to reserve personnel deployed by the United States in fiscal years 2015 through 2017, roughly the same time period as the first 39 months of MINUSCA. As a result, the total estimated cost of the hypothetical U.S. operation reflects the additional U.S. expense of paying full salaries and hardship duty pay for U.S. reservist military personnel. The estimate also includes the incremental costs the United States would incur for deploying active duty military personnel, including hardship duty pay that is not incurred when those personnel are in the United States. For military troops deployed to MINUSCA, the UN pays a standard troop cost reimbursement to the troop-contributing countries, which is intended also to cover incremental expenses but not the cost of troops’ salaries. U.S. costs for civilian police also are significantly higher than UN costs. The United States would pay over $167 million for U.S. civilian police for the duration of the hypothetical operation, while the UN spent $41 million on its individual police officers over the same time frame. The U.S. estimate includes the cost of police salaries and the additional costs of deployment, whereas UN costs for deploying individual police officers do not include salaries, which are borne by the police-contributing countries. Higher U.S. standards for certain aspects of the hypothetical peacekeeping operation in CAR would contribute to costs that exceed those of MINUSCA. Facilities. The higher estimated U.S. costs reflect higher U.S. standards for facilities, according to State officials. The U.S. cost estimate includes more than $1.1 billion for facilities and related costs, which include facility maintenance, food service, laundry, management and administration, and residential leases for civilian personnel. In contrast, the actual UN cost for facilities as part of MINUSCA totaled $292 million over the same time period. Communications and intelligence systems. The United States incurs costs associated with meeting U.S. intelligence standards that are not part of UN operations, which lack comparable intelligence capabilities. The U.S. cost estimate includes $140 million for the cost of Command, Control, Communications, Computers, and Intelligence Systems, which represents additional operational costs to meet higher U.S. standards for U.S. communications and intelligence capabilities. Medical capability. Higher U.S. standards for medical care and medical evacuation capability as compared to the UN are another factor that would contribute to higher U.S. medical costs for a hypothetical operation, according to DOD and State officials. Some UN hospitals may not meet U.S. minimum standards for medical care, according to DOD officials. Although medical costs do not constitute a significant portion of the U.S. cost estimate, estimated U.S. medical costs ($132 million) greatly exceed actual UN medical costs ($8 million) over the same time period. UN and U.S. peacekeeping operations have various relative strengths, according to U.S. and UN officials we met with. Relative strengths of UN peacekeeping operations include international and local acceptance, access to global expertise, and the ability to leverage assistance from multilateral donors and development banks, according to these officials. Relative strengths of U.S. peacekeeping operations would include faster deployment and superior command and control, logistics, intelligence, and counterterrorism capabilities, according to U.S. and UN officials. According to U.S. and UN officials, UN peacekeeping operations benefit from greater international and local acceptance, access to global expertise, and the ability to leverage assistance from multilateral donors and development banks. UN peacekeeping operations also provide indirect benefits to the military capacity of participating countries. International and local acceptance. As a multilateral organization, the UN benefits from greater international and local acceptance for its peacekeeping operations, according to State, DOD, and UN officials. These officials noted that the UN’s multinational character contributes to a reputation for local impartiality. Conversely, the United States acting alone may not be viewed as impartial and could face challenges gaining or maintaining international or local support for peacekeeping operations, according to State and DOD officials. Global expertise. UN officials noted that the UN has unmatched convening power and access to expertise and experience from across the globe to implement the objectives of multidimensional peacekeeping operations. The UN is able to bring in people with subject matter expertise, native language skills, and knowledge of local customs to work for these operations, according to U.S. and UN officials. Leveraging multilateral assistance. U.S. officials told us that the UN is better able to leverage assistance from multilateral donors and multilateral development banks to expand the scope of assistance provided in support of the goals of peacekeeping operations. For example, according to a UN report, MINUSCA is partnering with the UN Development Fund to provide capacity building related to elections, police, courts, and prisons. The report also noted that the UN, European Union, and World Bank supported the Central African Republic government in developing a “National Recovery and Peacebuilding Plan” while harmonizing humanitarian and development funding to ensure complementarity with the UN peacekeeping operation. Developing international military capacity. U.S. officials told us that UN peacekeeping operations provide an indirect benefit of helping to professionalize the military units from many developing countries that contribute troops to the UN. We have previously reported that building military capacity of foreign partners to address security-related threats is an important goal of U.S. national security strategy and foreign policy. According to U.S. and UN officials, the relative strengths of U.S. peacekeeping operations would be faster deployment and superior command and control, logistics, intelligence, and counterterrorism capabilities. Deployment speed. State, DOD, and UN officials highlighted the United States’ ability to deploy troops and police to peacekeeping operations more quickly than the UN. Unlike the U.S. military, which can draw from a ready pool of military personnel, the UN must seek troops from UN member states, which takes time. UN officials told us that the UN faces a shortage of both troops and UN police, which slows deployment. Further, a 2015 report by the UN High-level Panel on Peacekeeping stated that the UN “has struggled to get sufficient forces on the ground quickly enough and relies on under-resourced uniformed capabilities.” The report also stated that aviation, medical, and engineering specialists, among others, are difficult to mobilize in advance of infantry units. Command and control. State, DOD, and UN officials told us that U.S. operations would enable the U.S. military to have direct command and control, whereas UN operations, which are inherently multinational, face challenges with command and control over troops from several different countries. The UN High-level Panel report noted that UN peacekeeping operations’ weak command and control is a well-known constraint that limits the type of operations the UN can undertake. Logistics support. U.S. and UN officials told us that U.S. operations have superior logistics systems. U.S. procurement likely would be faster than UN procurement, which lacks a standing supply chain and, therefore, relies on third-party vendors, according to UN officials. In addition, the UN High Level Panel report stated that UN peacekeeping operations’ logistics systems and structures in the field are under severe strain, which can limit the mobility of these operations. Intelligence capability. U.S. and UN officials agreed that U.S. operations would involve superior intelligence capability. The UN only recently established an intelligence policy—in May 2017—having recognized that some peacekeeping operations had been deployed in fragile political and security environments with asymmetrical and complex threats. However, UN officials acknowledged that the scope of UN intelligence capability remains limited. Counterterrorism capability. DOD officials told us that a U.S. peacekeeping operation would have the capability to include a counterterrorism component and would not be constrained in the use of force, if needed, in response to terrorist threats. UN peacekeeping operations, on the other hand, lack the capabilities and specialized military preparation to engage in counterterrorism operations, according to the UN High-level Panel report. The UN report stated that counterterrorism should be undertaken by the host government, a capable regional force, or an ad hoc coalition authorized by the UN Security Council. According to the UN report, UN peacekeeping operations may engage in proactive and preemptive use of force to protect civilians and UN personnel from threats; however, offensive force to degrade, neutralize or defeat an opponent is a fundamentally different type of posture that should be authorized by the Security Council only under limited and exceptional circumstances. We provided a draft of this report to DOD, State, and the UN for review and comment. DOD provided a letter, reproduced in appendix II, which stated that it had no comments. State did not provide comments. The UN provided technical comments, which we incorporated into our report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Defense and State, and the Secretary- General of the United Nations. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix III. The objectives of this report were to (1) compare the reported costs of a specific United Nations (UN) peacekeeping operation to the estimated costs of a hypothetical, comparable operation implemented by the United States; (2) identify factors that affect cost differences; and (3) identify stakeholder views on the relative strengths of UN and U.S. peacekeeping operations. To compare the reported costs of a specific UN peacekeeping operation to the estimated costs of a hypothetical, comparable operation implemented by the United States, we selected the UN Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA) as a case study. We compared the reported UN expenditures for MINUSCA, which included both military and civilian components, with estimated costs for a hypothetical U.S. operation with a similar level of military and civilian personnel. Our comparison covers a total of 3 years and 3 months—from MINUSCA’s establishment in April 2014 through June 30, 2017, the end of UN fiscal year 2017. We selected MINUSCA because it is in sub-Saharan Africa, where most UN peacekeeping operations established since 2003 have taken place, and has a typical scope and budget compared to other UN peacekeeping operations in sub-Saharan Africa, according to U.S. and UN officials. In addition, MINUSCA is one of the most recent UN peacekeeping operations; thus, initial expenditures for the operation are relatively current. Because the results of our cost comparison are based on a single case study, they cannot be generalized to all UN peacekeeping operations. To determine the UN’s costs for MINUSCA, we analyzed UN budget and expenditure data covering the initial start-up period (April 2014 to June 2014) and the first 3 UN fiscal years (July 1, 2014 to June 30, 2017). We spoke with officials of the UN Departments of Peacekeeping Operations, Field Support, and Management at UN Headquarters in New York, New York, to better understand the characteristics of MINUSCA and the different costs affecting MINUSCA’s budget and expenditures. We assessed UN expenditure data through discussions with cognizant UN officials and a review of external audits of UN budgetary information and found them sufficiently reliable for our purposes. We also analyzed data on U.S. contributions to UN peacekeeping operations for fiscal years 2014 through 2017 from the Department of State’s (State) Bureau of International Organization Affairs to determine total U.S. contributions to MINUSCA, and UN peacekeeping operations overall. To estimate the costs of a hypothetical, comparable operation implemented by the United States, we developed a hypothetical scenario for a U.S. operation based on the MINUSCA budget and supporting documents, assuming deployment of the same number of military, civilian, and police personnel in the Central African Republic (CAR) over the same time period (April 2014 through June 2017). To estimate the military portion of the operation, we interviewed Department of Defense (DOD) officials and staff at the Institute for Defense Analyses (IDA), a DOD-sponsored non-profit corporation involved in developing cost estimates for U.S. contingency operations. The Office of the Undersecretary of Defense-Comptroller and IDA generated a cost estimate for the military components included in the hypothetical operation using the Contingency Operations Support Tool (cost estimating tool). DOD uses this tool to develop cost estimates for all military contingency operations. The cost estimate included only the incremental costs of the operation—those directly attributable to the operation that would not be incurred if the operation did not take place. For example, the estimate produced by the cost estimating tool did not include the direct salaries of active duty personnel as those costs would be incurred by the United States regardless of a possible decision to undertake the hypothetical operation. We assessed the cost estimating tool’s applicability to developing a hypothetical cost estimate for the purposes of this report through discussions with DOD and IDA officials, and compared the tool to the accurate and comprehensive characteristics of a high-quality cost estimate, as described in the GAO Cost Estimating and Assessment Guide. While we found the DOD cost estimating tool generated a sufficiently reliable cost estimate for a hypothetical U.S. peacekeeping operation, we did not assess the overall reliability of the tool or its capability to generate accurate or comprehensive estimates for future U.S. operations. To generate our estimate of U.S. military costs using the DOD’s estimating tool, we used UN military deployment numbers as a baseline for the scale of a hypothetical, comparable U.S. peacekeeping operation, while using unit sizes and rotations in deployment that were considered appropriate for the U.S. military, according to DOD and IDA officials. We based the hypothetical U.S. operation, and hence the cost estimate, on the following assumptions, which correspond approximately with MINUSCA’s actual UN personnel deployments: Theater of operation: Central African Republic (CAR) Type of operation: military contingency Operation time frame: April 10, 2014 through June 30, 2017 Military contingents: as of June 30, 2017, 11,495 total personnel Infantry: 10 units of 630-785 personnel per unit, approximately 90 percent active duty / 10 percent reserves Communication / signals: 1 unit, 124 personnel per unit Engineering: 4 units, 200 personnel per unit Military police: 1 unit, 120 personnel per unit Formed police units (military police): 12 units, 140 personnel per Hospital / medical: 1 level III hospital, 248 beds, 495 personnel Helicopter units: 2 UH-60 C3 units, 1 MH-60M Assault attack helicopter unit, 100 personnel per unit Quick reaction force: 1 unit, 160 personnel per unit Special forces: 1 tactical civilian affairs unit, 1 Marine special operations intelligence unit, 160 personnel per unit Unmanned aerial vehicle: 1 unit, 84 personnel Transportation: 1 heavy transport unit, 120 personnel per unit Operational tempo: 1.0 for all phases of operation and units, except aviation units (set at 1.5) Deployment schedule and phasing: phased deployment, including 14 days for predeployment (e.g., training), 5 days for deployment, 180 days for active duty unit sustainment and 270 days for reserve unit sustainment, 5 days for redeployment, and 0 days for reconstitution Housing: contractor-provided semi-permanent housing Transportation: personnel and equipment transported by airlift from the United States (primarily Fort Hood, Texas), material (such as water, food, and other consumables) transported by airlift from Italy We obtained input on the operational design for the military portion of the cost estimate from DOD officials in the Joint Chiefs of Staff, the Office of the Undersecretary of Defense-Policy, and the Office of the Undersecretary of Defense-Comptroller, and IDA officials. However, the military portions of the scenario and their corresponding cost estimate have some limitations. As a result of rounding for some units, U.S. military personnel numbers do not exactly match the MINUSCA deployment levels. In addition, based on input from DOD officials, we attempted to select military units that would provide an essential function per U.S. common practices while keeping the overall personnel deployment level as close as possible to MINUSCA’s deployment level. An actual U.S. military plan may differ significantly from the UN plan as a result of differences between U.S. and UN military operations, structure, doctrine, and circumstances at the time of the operation. To estimate U.S. civilian costs, we matched the number of U.S. civilian police and personnel to the number serving in MINUSCA. We then estimated the costs of deploying these U.S. civilian personnel in CAR for the same time period as MINUSCA. We did not attempt to determine how the U.S. government would actually implement civilian components of a peacekeeping operation in CAR. To estimate U.S. civilian police costs, we met with State’s Bureau of International Narcotics and Law Enforcement Affairs (INL) to identify State’s costs for civilian police contractors providing police training and technical assistance in sub-Saharan Africa. Based on INL’s input we assumed that the base salary of civilian police would be grade 13, step 5 on the Office of Personnel Management’s general schedule salary tables for federal employees. In addition to the average base salary, we identified other costs—with input from INL—including, among others, personal equipment, travel from the United States, and State’s published allowances specific to CAR for local cost of living, post hardship differential, danger pay, and living quarters. We applied the average cost per officer to the average number of UN civilian police officers deployed in MINUSCA. To estimate U.S. civilian personnel costs, we met with State’s Bureau of Budget and Planning to identify the costs of State Foreign Service officers and locally employed staff, based on the number of UN international and national civilian staff deployed to MINUSCA, respectively. We matched the number of State Foreign Service officers for the U.S. cost estimate to the number of UN international staff in MINUSCA, with input from State to align the grade levels. The estimated costs for Foreign Service officers include average salaries based on State’s Foreign Service salary tables and State’s allowances specific to CAR, including local cost of living, post hardship differential, and danger pay. We also met with State Bureau of Budget and Planning officials to estimate other costs for Foreign Service officers, which we included in our cost estimate, including post assignment travel, administrative support costs, residential furnishings, and residential guards, among others, but we did not assess the reliability of these additional costs provided by State. In addition, State’s Bureau of Overseas Buildings Operations provided the actual costs of residential leases for Foreign Service officers in CAR in fiscal year 2017, which we used to estimate the cost of housing Foreign Service officers in CAR. We also matched the number of State locally employed staff to the number of UN national staff deployed to MINUSCA and added their average salaries and other costs in CAR based on data provided by State’s Bureau of the Comptroller and Global Financial Services. While MINUSCA’s expenditures also included costs for sending an annual average of up to about 200 UN volunteers to CAR, State officials told us that the United States generally would not send volunteers through its assistance efforts to a high-risk post, such as CAR. Therefore, we did not include any costs related to volunteers in the cost estimate. We also did not include costs related to host-government-provided personnel serving in MINUSCA. In addition, UN expenditures included about $7 million for “quick-impact projects” to support local government infrastructure and civil society initiatives. We did not include comparable costs for quick-impact projects in our U.S. cost estimate because we did not have a basis for matching these costs. To identify factors that affect cost differences between MINUSCA and a hypothetical, comparable operation implemented by the United States, we reviewed the U.S. cost estimate generated in conjunction with DOD, IDA, and State officials, and identified significant areas of cost for the United States and the assumptions incorporated in the estimate or factors specified by U.S. officials that drive those costs. We compared the U.S. cost estimate, including these significant areas of cost, to UN costs to identify differences. We interviewed U.S. and UN officials regarding U.S. and UN standards and policies that explain differences between MINUSCA costs and the estimated costs of a U.S. operation. To identify stakeholder views on the relative strengths of UN and U.S. peacekeeping operations, we reviewed UN reports on peacekeeping operations and interviewed UN, DOD, and State officials. In addition, we reviewed GAO’s 2006 report comparing the costs as well as the strengths of a UN peacekeeping operation in Haiti with those of a hypothetical U.S. operation. We conducted our review from February 2017 through February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Drew Lindsey (Assistant Director), Howard Cott, Juan Pablo Avila-Tournut, Debbie Chung, Martin de Alteriis, Neil Doherty, Jennifer Leotta, Caitlin Mitchell, Elizabeth Repko, and Alex Welsh made significant contributions to this report.", "summary": "To promote international peace and security, the UN had 16 ongoing peacekeeping operations worldwide as of June 30, 2017, with a total budget of almost $8 billion in UN fiscal year 2017 and contributions of over 100,000 military, police, and civilian personnel from more than 120 countries. The United States is the largest financial contributor to UN peacekeeping operations, providing an average of about 28 percent of total funding annually. The Department of State Authorities Act, Fiscal Year 2017, includes a provision for GAO to compare the costs, strengths, and limitations of UN and U.S. peacekeeping operations. This report (1) compares the reported costs of a specific UN operation to the estimated costs of a hypothetical, comparable operation implemented by the United States; (2) identifies factors that affect cost differences; and (3) identifies stakeholder views on the relative strengths of UN and U.S. peacekeeping operations. GAO worked with the UN, DOD, and State to generate a cost estimate of a hypothetical U.S.-led operation in the Central African Republic comparable to MINUSCA. GAO developed this estimate using DOD's cost estimating tool for contingency operations and State data on civilian costs, assuming a U.S. operation using roughly the same levels of military and civilian personnel as MINUSCA. The cost estimate should not be construed as suggesting that the United States would likely implement such an operation in the Central African Republic or that it would implement such an operation in the same way. GAO is making no recommendations. Based on United Nations (UN) and Departments of Defense (DOD) and State (State) data, GAO estimates that it would cost the United States more than twice as much as it would cost the UN to implement a hypothetical operation comparable to the UN Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA). MINUSCA cost the UN approximately $2.4 billion for the first 39 months of the operation. GAO estimates that a hypothetical U.S. peacekeeping operation in the Central African Republic of roughly the same size and duration would cost nearly $5.7 billion—almost eight times more than the $700 million the United States contributed to MINUSCA over the same time period. Various factors affect differences between the actual cost of MINUSCA and the estimated cost of a hypothetical, comparable U.S. operation in the Central African Republic. The United States and the UN would source and transport some supplies and equipment differently, affecting the cost of both operations; for example, the United States would airlift water into the Central African Republic, while the UN does not do so to the same extent. The United States also would incur the cost of civilian police and military reservist salaries, while the UN does not pay any troop or police salaries. Finally, some higher standards for facilities, intelligence, and medical services increase the U.S. cost estimate relative to UN costs for similar operational elements. UN and U.S. peacekeeping operations have various relative strengths, according to U.S. and UN officials. These officials said that, because the UN is a multilateral organization, UN peacekeeping operations have international acceptance and are more likely to be viewed as impartial. Officials also said that the UN enjoys global access to expertise and experience, and can leverage assistance from multilateral donors and development banks. Relative strengths of a U.S. peacekeeping operation would include faster deployment and superior command and control, logistics, intelligence, and counterterrorism capability, according to U.S. and UN officials.", "document_type": "gao"}
{"report": "In Federal courts, civil actions, such as lawsuits, begin with the filing of a complaint with the court. On or after filing a complaint, a plaintiff obtains a summons to the defendant from the court. The summons, among other things, names the court and the parties, states the time within which the defendant must appear before the court to defend against the complaint, and notifies the defendant that a failure to appear and defend will result in a default judgment against the defendant for the relief demanded in the complaint. Plaintiffs are responsible for providing defendants both the summons and a copy of the complaint. This procedure, known as service of process, gives parties formal notice of the initiation of court proceedings. In the event of a default judgment against a foreign state in which the defendant has not responded to a summons or complaint and the court has ruled in favor of the plaintiff, FSIA requires that service of a copy of the judgment be completed. The FSIA prescribes a sequential process for completing service on foreign governments that plaintiffs must follow before requesting that State complete service through the diplomatic channel. Federal regulations require State to complete service “promptly” although neither the regulations nor State guidance further define the term. Pursuant to these regulations, where there are no diplomatic or consular relations between the United States and the defendant foreign government or where the United States has suspended diplomatic or consular operations, service may be accomplished pursuant to the arrangement the United States has with a friendly government known as a protecting power arrangement. The protecting power arrangement specifies the consular services that the friendly government will provide in assisting the United States. As of November 2018, the United States had protecting power arrangements with the governments of the Czech Republic, France, Sweden, and Switzerland. Each of the arrangements with the Czech Republic and Switzerland contains a provision for service respectively on Syria and Iran. Based on our analysis of State and U.S. court data, from 2007 through 2017, State received 289 service requests to 33 countries. Iran alone accounted for over 60 percent of all service requests, followed by Syria with about 7 percent, and Sudan with about 5 percent. Because Switzerland and the Czech Republic serve as protecting powers for the United States in Iran and Syria, respectively, about two-thirds of all service requests were accounted for by the U.S. Embassies in Bern and Prague. Figure 1 shows the breakdown of FSIA service requests by defendant country from 2007 through 2017. Over the last 2 years, 2016 and 2017, State completed 31 and 48 cases respectively. The 48 cases represent the highest number of cases in any year for the 11-year period we reviewed (see App. II for further data on State’s provision of service since 2007.) Service requests to State were made through at least 31 federal, state, and county courts. The vast majority of service requests were made through federal district courts. One court—the U.S. District Court for the District of Columbia—was the venue for 73 percent of all completed service requests, followed by 8 percent for the U.S. District Court for the Southern District of New York and 3 percent for the U.S. District Court for the Southern District of Florida. According to some plaintiffs’ attorneys with whom we spoke, the U.S. District Court for the District of Columbia has jurisdiction over most cases involving victims of state-sponsored terrorism. Figure 2 provides information on the service requests completed from 2007 through 2017 based on the court used to make the request. According to plaintiffs’ attorneys, victims of state-sponsored terrorism who have obtained judgments against a foreign state generally seek compensation in two ways: (1) by attaching and directly seizing assets of that state pursuant to the FSIA and other applicable provisions of law and (2) from a temporary special fund called the U.S. Victims of State Sponsored Terrorism Fund (Fund). The Fund was established by Congress in 2015 with about $1 billion in appropriations. Congress established the Fund for a period of 10 years ending in 2026 and mandated that certain forfeiture proceeds, penalties, and fines be deposited into the Fund if paid to the United States after the Fund’s establishment. The Fund can provide compensation to those, who (1) have secured final judgments in a U.S. district court against a state sponsor of terrorism for a claim arising from an act of international terrorism for which the state was not found immune from the FSIA, (2) were held hostage at the U.S. Embassy in Tehran, Iran from November 1979 to January 1981, or (3) are the personal representatives of the estate of a deceased individual in one of these two categories. Victims must file appropriate documentation with the Fund, and be found to qualify. Compensation for victims is calculated on a pro-rata basis on the amount of available funds for each distribution, and is subject to certain statutory caps. The first payments from the Fund were authorized in December 2016; the second distribution is scheduled for authorization in January 2019. After 2019, eligible claims will be paid annually out of available funds, until all eligible amounts have been paid in full or the Fund terminates in 2026. State completes service through four stages involving the courts, the Department of State, U.S. embassies, and foreign ministries through a process that took about 5 months to complete on average for the period 2007 through 2017. State’s OCS/L within the Bureau of Consular Affairs administers the diplomatic service provisions of the FSIA. Figure 3 summarizes how State completes service in countries where a protecting power assists in the completion of service under the FSIA. The steps involved are numerous and require action by litigants, courts, and the State Department, but can be summarized in four stages: 1. Preparing and submitting a request for service to State. Plaintiffs’ attorneys compile and submit the required documentation to the relevant clerk of court, who transmits the package to State. This documentation must include two copies of the complaint, summons and a notice of suit, together with a translation of each into the official language of the foreign state, or where a plaintiff has obtained a default judgment against a foreign state, translated copies of that default judgment and a notice of default judgment, as well as a cashier’s check made out to the appropriate U.S. embassy for the applicable fee. 2. Receiving and processing the request at State. OCS/L receives the package from the clerk of the court where the suit was filed, verifies that the package is complete and the check is written for the proper fee amount, works with plaintiff’s attorney or the clerk of court to resolve any errors or issues with the package, prepares language for the diplomatic note and instructions for the embassy staff, and circulates the diplomatic note and instructions for clearances from relevant Department of State offices. OCS/L sends, via diplomatic pouch, this package to the appropriate embassy depending on the defendant. In cases involving the assistance of a protecting power for the United States to serve documents under the FSIA, OCS/L sends the package via diplomatic pouch to the U.S. embassy in the country that serves as the protecting power for U.S. interests in the defendant country. In the case of suits against the government of Syria, for example, the protecting power is the Czech Republic. In cases involving countries where the United States has diplomatic relations and an embassy the package goes to the U.S. embassy in the defendant country. 3. Receiving and processing a request at U.S. embassies and working with protecting powers. At the U.S. embassy, an American consular officer prepares a diplomatic note in accordance with OCS/L guidance that is added to the package and sends the package to the Ministry of Foreign Affairs. In cases involving the assistance of a protecting power for the United States to serve documents under the FSIA, the Ministry of Foreign Affairs prepares instructions for the consular officer at the foreign interest section of the embassy in the defendant country and sends him the package. A consular officer in the U.S. interest section of the protecting power’s embassy in the defendant country prepares a diplomatic note to add to the package and delivers the package, or arranges for its delivery, to the Ministry of Foreign Affairs of the defendant country. 4. Notifying the court that service has been completed. Once service has been completed, the package is sent back to OCS/L for delivery to the clerk of court. In the instance of protecting power assistance, the package will include certifications from the foreign interest section of the protecting power that process was served on a specific date as well as other certifications by the protecting power’s Ministry of Foreign Affairs and the U.S. embassy. Our analysis of State and court data shows that for the 229 service requests that we analyzed, the average (mean) time for State to complete the requests over the past 11 years was about 158 days—or about 5 months. About 50 percent of the service requests took State between 90 and 179 days to complete, and about 28 percent took 180 days or more. Seven requests took longer than 1 year. The longest request took 695 days to complete. Figure 4 shows the completion times of service requests measured in the number of days taken for 2007 to 2017, by 30- day intervals. Our analysis shows the most time-consuming stage to complete service was the period in Washington, D.C. in which State Headquarters completes document review and clearance, as shown in table 1. Although neither the FSIA, State’s implementing regulations, nor federal rules of civil procedure establish a time limit for State to complete service, the length of time State takes to complete service can affect plaintiffs’ compensation. According to plaintiffs’ attorneys we interviewed, State’s taking a long time to complete service could adversely affect victims’ ability to gain compensation for two reasons. First, slow service can lengthen the time it takes to obtain a final judgment against a foreign government, thereby delaying plaintiffs’ ability to meet the requirements necessary to satisfy judgments through asset seizures or to apply for compensation from the U.S. Victims of State Sponsored Terrorism Fund. For efforts to collect judgments through asset seizures, plaintiffs’ attorneys explained that the first plaintiff to successfully make such a claim is awarded the entire asset. Thus they are competing to be first in making such claims. Second, slow service can also reduce the total award that claimants receive from the Victims Fund. For example, slow service could result in plaintiffs being unable to provide the required documentation before the deadline of a particular round of distributions for the Fund. The deadline for the 2019 distribution was September 14, 2018. The Fund’s procedures allow victims to apply for compensation after a court has issued a default judgment that includes compensation against the defendant government in their case and following their transmittal of a request for service of the default judgment through State. Of the 10 firms that submitted requests for service to State that we interviewed, 6 expressed concern that slow service could adversely affect their clients’ compensation from the Fund for one of the reasons described. Three of the firms also cited ongoing cases where compensation could be adversely affected if they are unable to obtain a default judgment and apply for service through State by the deadline established by the Fund for the next round of distribution. According to Fund officials the Fund has allocated approximately $1.095 billion for second-round payments. The Special Master will authorize second-round payments on a pro rata basis to claimants with eligible claims by January 1, 2019. OCS/L did not maintain complete and accurate records of the status of service requests completed during calendar years 2007 through 2017. State’s record-keeping guidance stresses the importance of creating and preserving records so that documentation of an office’s activities is complete and accurate. To document and manage State’s completion of service, OCS/L officials rely primarily on two forms of documentation. The first type of documentation or record is a “case tracker” spreadsheet that OCS/L uses to document the status of service requests (cases). The second type of record OCS/L relies on is case files which include various documents related to the completion of service. We analyzed the case tracker that OCS/L provided to us in November 2017. We determined that it did not contain complete and accurate data about the service requests from 2006 through 2016 because it did not contain any fields documenting the start of the process at State—for example, the date when the court sent the request to OCS/L or the date when OCS/L received the request. Without this, OCS/L lacked any data about when it first received and began working on a request. In addition, OCS/L lacked data about the status of any service request during the initial document review and clearance stage of the process, which as previously discussed, is the most time consuming stage. In response to our request for additional data to use in analyzing the timeliness of State’s service completions, in December 2017, OCS/L provided us with an updated tracker containing three fields not in the previous tracker. The three fields were designed to capture the start of the process, but were often blank. For example, 82 percent of the cases did not contain the date when OCS/L received the request from the court. By contrast, our analysis of both the November 2017 and December 2017 case trackers showed that OCS/L almost always recorded the “end dates” in the process when service was completed and when OCS/L notified the court that service had been completed. We also reviewed the 59 case files OCS/L provided for the 2015 and 2016 service completions and determined that OCS/L did not consistently keep copies of several critical documents. We chose these years because OCS/L officials said that providing case files for the entire period under review would present a significant logistical challenge and the case files for the prior years were less complete. As table 2 summarizes, all but three files contained a copy of the memorandum providing instructions to the embassy and language for the diplomatic notes. Nine case files were missing a copy of the diplomatic note. There were also 16 case files missing the certification that service was completed on a specific date. These two documents are critical to demonstrating that service has been completed. There were also 47 case files lacking a signed copy of the notification to the court. None of the 59 case files we reviewed included a copy of an email required by State guidance providing key information on the completion of service. The Foreign Affairs Manual requires embassies to send OCS/L an email documenting when documents required for service were received by the embassy, when those documents were transmitted to a foreign ministry, and the date an executed request was sent to OCS/L for relay to a court (including invoice, registry, and pouch numbers by which the documents were returned to State headquarters), but none of the files we reviewed contained this documentation. Table 2 summarizes the results of our review of the case files. In discussing why their case tracker and case files are incomplete and sometimes inaccurate, OCS/L officials noted that State’s agency-wide record-keeping guidance does not prescribe what kind of records they must keep for service requests. Federal internal control standards state that management should implement control activities through policies such as through day-to-day procedures or guidance. Additionally, these standards state that management should design controls to achieve objectives and respond to risks. These controls could, for example, document significant events in a manner that allows the documentation to be readily available for examination or require edit checks during information processing. Further these control activities should ensure that documentation and records are properly managed and maintained. In September 2018, after reviewing our analysis, State officials said that as a matter of practice they had begun digitally scanning service documents, but still did not have a standard list of documents to be maintained in case files. They also acknowledged that the level of completeness of the “case tracker” and case files varied depending on the individual maintaining the files. Additionally, in June 2018 State launched a new case tracker using a database management application. According to OCS/L officials, the new tracker will facilitate the recording and updating of key milestone information. The new tracker allows for including some information not documented in the previous case tracker spreadsheet. However, it does not capture the date the court sent the request to OCS/L. According to OCS/L officials and our analysis, the time between when the court sent the request to OCS/L and OCS/L receives the request can vary significantly. In nine instances, it took from about 3 weeks to over a year for the service request to travel from the court to OCS/L. OCS/L officials explained the new tracker does not capture the date when the court sent the package because they believe the key information they need to use in analyzing and managing the program begins at the point where OCS/L receives the package and not before. However, without capturing this data, OCS/L will not be able to determine the extent to which service requests are delayed in CA’s mailroom before being delivered to OCS/L—one of the four key stages of the process for completing service. Further, without guidance that specifies the information OCS/L must maintain in the case tracker and case files, State officials will continue to lack complete and accurate information. OCS/L does not continuously monitor service requests to determine their progress in moving through the four stages. State’s guidance stresses the importance of continuous monitoring to achieve office, bureau, and agency-wide goals and objectives. Among other things, the Foreign Affairs Manual states that monitoring data can help determine if implementation is on time or if any timely corrections or adjustments may be needed to improve efficiency or effectiveness. Additionally, federal standards for internal control state that management should establish monitoring activities, evaluate the results, and remediate any deficiencies. OCS/L officials indicated that they have not continuously monitored service requests because they are not required to do so. OCS/L has no specific guidance requiring monitoring of the status of service requests during any stage of the service completion process and, as of October 2018, State had not established performance standards or timeframes for completing service of process and associated tasks, as discussed later in the report. Based on our analysis of data and a sample of requests, we found that OCS/L’s lack of monitoring meant that State missed opportunities to ensure the timely processing of some requests, particularly during the document review and clearance stage. To identify the factors that affect the amount of time that State takes to process service requests, we analyzed a non-generalizable sample of 16 requests that we selected to ensure we obtained detailed information on cases that took above the average amount of time, below the average amount of time, and about the average amount of time to complete. We discussed the circumstances of each of the 16 requests with OCS/L and embassy officials, as well as with plaintiff’s attorneys. We identified several reasons that cases took longer than average to complete: Two cases took longer than average to complete because of staff turnover in the relevant Department of State offices in Washington, D.C. One case took longer than average to complete when an OCS/L contractor in Washington, D.C. failed to promptly distribute the packages received by mail. In that instance, it took OCS/L 323 days to clear and send the service request to the embassy after having received the request from the court. One case took longer than average to complete when a State official at an embassy in Africa forgot to complete the service request. The request was completed only after the official’s successor arrived and noticed that the service request had not been completed. In this instance, service took 563 days to complete, of which 475 days were spent at the embassy. One case took longer than average to complete because a State official overseas misplaced two boxes of supporting documents that accompanied the service request. According to plaintiff’s attorneys, only after they called to ask about its status did OCS/L contact the embassy to determine why the necessary documents had not been delivered to the defendant state. Two cases took longer than average to complete because State officials failed to notice that the protecting power had not recorded the date of service completion on the diplomatic note for two service requests. In one case, the missing date was noticed by the plaintiffs’ attorneys only after OCS/L had notified the court that service had been completed. Once alerted to the error by plaintiffs’ attorneys, OCS/L took prompt action by requesting an amended diplomatic note from the protecting power’s Ministry of Foreign Affairs, but it took 2 additional months to obtain the document. OCS/L’s lack of monitoring also contributed to a loss of revenue. Based on our analysis of available data and records kept by the U.S. Embassy Bern we determined that the time it took OCS/L to review and clear service requests led to OCS/L’s waiving the fees because checks for payment of services had expired by the time they reached the U.S. Embassy in Bern. In one such instance, OCS/L took 131 days to send the request to Bern. OCS/L directed consular officials to proceed with the provision of service without receiving payment. Our analysis showed that this occurred in approximately 27 percent of all available service requests handled by Bern in 2016 and 2017. The amount of revenue lost was approximately $57,000. In June 2018, OCS/L officials developed a new manual that provides a written description of the roles and responsibilities of various officials in OCS/L in completing service requests. However, the manual does not require periodic monitoring of the time spent completing service by embassies. Without monitoring by OCS/L, State cannot ensure timely processing of service requests or prevent losses in revenue. OCS/L officials said that they had not conducted any analysis that might identify the opportunities to improve their performance. State’s guidance in the Foreign Affairs Manual stresses the importance of assessing what is and is not working well in a program. However, OCS/L officials told us that they had not conducted an assessment because they did not have good data and documentation to use in assessing what was and was not working well in their completion of service. OCS/L officials provided several reasons for some cases taking longer than average in the process, in addition to those previously discussed, but these reasons were not informed by data. These included: (1) incomplete packages provided by plaintiffs’ attorneys; (2) the time it takes to deliver diplomatic pouches to embassies, which can vary by post; (3) delays due to some foreign governments’ avoidance or delay in accepting meetings with consular staff; and (4) consular officials’ level of familiarity with service requirements as well as heavy consular workloads. Our analysis of available data showed that the document review and clearance stage in Washington, D.C. took longer than the other stages. However, we were unable to determine the extent to which the longer time taken in Washington, D.C. was due to documentation that was missing from the package that was sent by plaintiffs’ attorneys because OCS/L only recorded a handful of cases where this occurred and did not record the date when OCS/L first received the service request or the date it determined the request was complete and free of errors. Moreover, while OCS/L officials attributed most of the time it took to complete the process to the time it takes to deliver documents overseas, our analysis showed that most of the time spent processing requests was consumed by OCS/L in the document review and clearance stage in Washington, D.C. Without periodically analyzing data on service requests, as called for in the Foreign Affairs Manual, OCS/L will not have a sound basis for determining the causes for delays in completing service and how to make improvements to eliminate those delays and reduce service completion times. In September 2018, OCS/L officials told us that they planned to begin using data to, among other things, measure current and past FSIA workload and performance and identify areas for improvement. However, they could not provide details or documentation of this effort. Consular Affairs has not established performance standards for the full process used to complete service requests. Consular Affairs officials said they have not established performance measures for the full process because they do not have good data to do so. When we began our review, Consular Affairs did not have any time frames for completing service requests. However, in June 2018, OCS/L issued a new manual that includes timeframes for certain steps of completing service within OCS/L. For example, the manual states that once OCS/L has received a service request package, the package must be reviewed within 2 business days to determine whether it contains any errors, omissions, or other issues that must be resolved. The manual also states that if OCS/L does not get clearance to send the package to the embassy within 2 weeks, then a senior OCS/L official must be notified for further action. However, the manual does not specify a deadline for staff to contact the plaintiff’s attorney to correct any problems with the package, such as missing documents, nor does the manual establish an overall timeframe for State to complete the document reviews and clearances in Washington, D.C. and U.S. embassies. GAO’s prior work has demonstrated the importance of setting performance standards that can be used across a range of management functions to improve results. In addition, federal internal control standards state that management should design control activities—such as setting of performance standards—to achieve objectives. Setting performance standards, among other things, can provide managers with crucial information on which to base their organizational and management decisions. Consular Affairs has established performance standards for some of its other activities. For example, in fiscal year 2017 Consular Affairs established performance standards for processing passport applications within published timeframes and ensuring that visa applicants were interviewed within a 3-week period. For fiscal years 2018 and 2019, among other goals, the Bureau established a performance standard of 100 percent to activate appropriate consular crises response tools, such as travel warnings and security and emergency messages, within 6 hours after notification of a crisis event. Without performance standards for completing service requests, Consular Affairs and OCS/L managers are limited in their ability to monitor performance and perform effective program management and oversight. Plaintiffs suing foreign states in courts of the United States including some victims of state-sponsored terrorism, sometimes rely on State to promptly serve legal documents to foreign countries to receive compensation for their losses. We found that the process of serving legal documents to foreign countries takes an average of 5 months, but that some cases take considerably longer. In analyzing cases from 2007 through 2017, we identified multiple opportunities to improve the management and oversight of the process. Despite State’s recent steps to improve how it completes service, additional actions could help to ensure that service is completed in a timely manner. For example, guidance that specifies information that OCS/L must maintain in its case tracker and case files would help ensure that State has complete and accurate information on service requests. By having better record- keeping and more accurate and complete data, State will be able to monitor its progress in completing service requests and develop performance standards to measure timeliness. Additionally, periodically analyzing the data could help identify ways to improve timeliness. We are making the following five recommendations to the Department of State: The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to update guidance to specify the data to be recorded in the service request case tracker. The required data should include key dates for all four stages of the process for completing service, such as the date the court sent the request to OCS/L. (Recommendation 1) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to update its record-keeping guidance for service requests to include a standard list of documents to maintain in service request case files. (Recommendation 2) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to monitor the status of service requests. (Recommendation 3) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs requires OCS/L to periodically analyze its data on service requests to identify the causes of any delays in State’s completion of service and take corrective actions as appropriate. (Recommendation 4) The Secretary of State should ensure that the Assistant Secretary of State for Consular Affairs establishes performance standards for completing service, including timeframes for completing the various processes at State and at U.S. embassies. (Recommendation 5) We provided a draft of this report to State, the Department of Justice (Justice), and the Administrative Office of the U.S. Courts for review and comment. We received written comments from State that are reprinted in appendix III. In its comments, State concurred with all five of our recommendations and identified actions it planned to take to address them. Justice and the Administrative Office of the U.S. Courts told us that they had no formal comments on the draft report. State, Justice, and the Administrative Office of the U.S. Courts also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Deputy Attorney General, and the Director of the Administrative Office of the U.S. Courts. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any further questions about this report, please contact me at (202) 512-6881 or BairJ@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. In this report, we examine (1) how the Department of State (State) completes service under the Foreign Sovereign Immunities Act (FSIA) and how long it takes to perform this function and (2) whether State has implemented key controls in record-keeping, monitoring, analysis and performance management for completing service requests. To describe how State completes service, we obtained and reviewed State and embassy documentation such as regulations, official guidance, and case files. We also met with officials of State’s Bureau of Consular Affairs. Consular Affair’s Directorate of Overseas Citizens Services/Office of the Legal Affairs (OCS/L) is responsible for managing State’s completion of service. Based on discussions with OCS/L and documentation, we mapped how OCS/L manages the process in Washington, D.C and confirmed the process that we mapped with State officials. We met with officials from State’s Diplomatic Pouch and Mail Office, who described how they put together and track diplomatic pouches from State to embassies overseas. Because the role of consular and other officials at embassies overseas in completing service to defendant foreign governments is crucial, we also met with consular and other officials at the U.S. Embassies in Berlin, Germany; Bern, Switzerland; and Prague, Czech Republic. We selected these embassies based on (1) the number of service requests each handled, and (2) the method each uses to complete service. The U.S. Embassies in Bern and Prague ranked first and second on the list of embassies managing service requests, while the U.S. Embassy in Berlin ranked fourth. In the Czech Republic, we met with officials of the Czech Ministry of Foreign Affairs, who described how they receive and complete service requests from the U.S. Embassy in Prague. Similarly, the Swiss Ministry of Foreign Affairs provided us with a detailed description of how it receives and completes service on the Iranian government. We cannot generalize our findings from these two countries to any other countries, and note that the majority of the other countries received five or fewer requests for the 11 years we reviewed. To describe the process used by courts and attorneys that represent plaintiffs filing lawsuits against foreign governments under FSIA to request service from State, we met with court officials and plaintiffs’ attorneys. Using a spreadsheet that State provided us in December 2017, we identified the top four federal courts that requested service from State from 2007 to 2017 (the most recent full year available) and met with officials from three of these courts. We based our description of the procedure followed by court officials and attorneys say they follow at the United States District Court for the District of Columbia because about three-fourths of all service requests were made through that court. Using a spreadsheet that State had provided, we also identified and met with 10 firms that had requested service from State. The firms that we met with had a mix of experience requesting service from State. Some firms had extensive experience and others had little experience requesting service from State. We cannot generalize the responses to these firms to all firms that requested service from State. To determine the length of time it took for State to complete service from 2007 through 2017, in December 2017 we obtained a spreadsheet that OCS/L developed. This spreadsheet documents various milestones in the completion of service requests made during this period—for example, when the court sent the request to OCS/L, when OCS/L received the request, when OCS/L sent the request to the appropriate embassy, and when OCS/L notified the court that service had been completed. Because OCS/L officials provided data that was not complete, we developed an improved spreadsheet, using the spreadsheet we received in December 2017 as our starting point and improving the spreadsheet through the use of supplemental data. To develop the improved spreadsheet, we first identified requests for service, based on our examination of the original spreadsheet, which appeared to have not been completed or were not related to FSIA service. We requested clarification from State about whether we should keep those requests in our improved spreadsheet, and where appropriate, removed some service requests. We then checked the remaining requests in the original spreadsheet against court data obtained from the Lexis-Nexis database Courtlink. After completing this process, we once again asked OCS/L officials for clarification about certain service requests and incorporated their feedback. In June 2018, State provided us with a copy of a new case tracker that OCS/L officials had created. We incorporated data from 2017 into our improved spreadsheet and once again checked the service requests in our improved spreadsheet against court records. After making the appropriate modifications, we had 289 requests for service between 2007 and 2017. We processed the data in our improved spreadsheet using data analysis software. We estimated, among other things, the mean and median lengths of time it took for State to complete service from 2007 through 2017, as well as for the three of the four key stages of the process for which State is fully responsible. We estimated the time elapsed as the difference in calendar days between the key dates that were available, for example, between the date State notified the court that service was completed and the date the court had sent to OCS/L the request for service. The three stages for which we were able to estimate timeliness were (1) the days between the date State received the request from the court and the date OCS/L sent the request to the appropriate U.S. embassy overseas and, (2) the days between the date OCS/L had sent the request to the embassy and the date when service was completed overseas and, and (3) the days between the date that service had been completed by the embassy or protecting power and the date when OCS/L notified the court that service was completed. The time taken for these stages includes the times for a number of activities that we could not precisely estimate, such as the time it took for the court’s request to reach OCS/L and the time taken for service documentation to be sent via diplomatic pouch to and from the appropriate embassy. We used the date the court sent its request to OCS/L as our start date because that was the most complete start date data among the three options available. We restricted our analysis to those cases for which State had completed service. One limitation that we had to address in our analysis was the lack of certain key dates in OCS/L’s spreadsheet for some of the requests. In particular, while the date we used as the start date (which was the date on which the court sent its request for service to OCS/L) had the most complete data of the three possible start dates, the data were missing for 59 of the 289 requests for service that we were able to document. We calculated overall time elapsed for the document review and clearance stage using that date, but then had to do some sensitivity analysis to check that the missing dates were not skewing our results. To perform the sensitivity analysis, we identified those instances when the date the court sent its request to OCS/L was missing, but an alternative start date, either the date of the request letter, or the date when OCS recorded receiving the request, was present. We were able to identify 40 instances where this happened for the 59 missing cases. Our calculations using estimations of the missing “court sent to OCS/L” dates indicated that the results we present would likely have changed minimally if we could have included them. In addition, we conducted further analysis of the characteristics of the 17 service requests that had no start date of any kind and found that these were generally similar to ones for which we had start dates. However because these simulations indicated that there would be minor changes, we present qualified rounded numbers in the main body of the report. We also used the improved spreadsheet to extract other information, and calculate timeliness by the years for which the requests were made, the courts making requests for service, the countries for service, and the date of service requested. In addition, we estimated the time elapsed for service for each case for which we had data and generated a list of service requests sorted from the ones that took the longest to those that took the least amount of time to complete. To determine whether State has implemented key controls in record- keeping, monitoring, analysis, and performance management for completing service requests, we met with OCS/L officials in Washington, D.C. to discuss how they manage the process, as well as with consular officials from the U.S. Embassies in Berlin, Bern, and Prague. We also examined the 59 service request case files for requests received in 2015 and 2016. This sample is not generalizable to all requests for service between 2007 and 2017. We determined to what extent these files were missing key documents, such as a signed copy of the notification letter or the diplomatic note. We also reviewed the December 2017 spreadsheet that we had obtained from State to determine to what extent the spreadsheet contained missing data as well as a November 2017 spreadsheet. As discussed earlier, because OCS/L officials did not provide complete data, we created a separate improved spreadsheet using court data. We analyzed the data in the improved spreadsheet we created to determine where bottlenecks were occurring. We also used the improved spreadsheet to help identify and review 16 service requests in more depth with OCS/L officials. We selected these 16 service requests to include: 6 requests that took well above the average number of days to complete, 5 that took about the average amount of time to complete, and 5 that took below the average amount of time to complete. We met with OCS/L and consular officials, as well as plaintiffs’ attorneys to discuss events related to the 16 requests we had identified for review. We obtained documentation from the U.S. Embassies in Bern and Prague for the actions taken in providing service, the controls implemented, and the records of transactions that they maintained. We met with officials from three principal courts that request service, as well as officials of the U.S. Victims of State Sponsored Terrorism Fund (Fund) to discuss how service could affect the progress of court cases and the compensation awarded. Finally, we assessed State’s implementation of key controls against applicable laws, including the FSIA and Government Performance and Results Act of 1993, as well as State guidance and federal internal control standards. To determine the reliability of the data used in the report, we manually checked State’s December 2017 spreadsheet as well as the improved spreadsheet that we developed for logical and other errors—for example, for dates that seemed out of order. We also performed electronic checks on the improved spreadsheet to identify logical and other errors. Where appropriate, we made adjustments to the improved spreadsheet. Based on the results obtained, we determined that the improved spreadsheet that we developed is sufficiently reliable for our use, though we note the limitations in terms of the start dates, which required us to conduct sensitivity analyses, as described earlier in this OSM, to increase our confidence in the overall estimates for timeliness and for the document review and clearance stage of the process (stage 2). As noted above, we are rounding our estimates to reflect this limitation and qualifying them as approximations. We conducted this performance audit from September 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We identified a total of 289 verified requests for service from 2007 to 2017. Verified requests are those that remained after we compiled the lists the State Department provided, scrubbed them for duplicates and instances when the requests were subsequently withdrawn, and checked the data against court records in the Court Link database. Figure 5 shows how those cases were distributed by year over this period. The average number of days State took to complete service varied notably by year from 2007 to 2017, as Figure 6 demonstrates. The average (mean) ranged from 77 days in 2011 to 206 days in 2008. We can also see variation in the most recent years. The mean in 2015 was 130 days while in 2016 it was 205 days. We also found that cases for European and Eurasian countries, such as Switzerland and Germany, had much lower means and medians than those sent through protecting powers to Iran and Syria. While the averages for Iran and Syria were 158 and 215 days respectively, the cases for Germany, Switzerland, the Holy See, Russia, and Poland all had averages of 106 days or less. In table 3 we provide information on the length of time it took to complete service requests by country. We looked more broadly at country type, and created three groups, one for the two countries where the State Department has to rely on the protecting powers for service, namely Iran and Syria, another group for the European and Eurasian nations, and another group for all remaining countries. Service completion was fastest for the European nations. This information by country groupings is presented in table 4. In addition to the contact named above, Kim Frankena (Assistant Director), Claude Adrien, José M Peña III, Martin De Alteriis, Candace Caruthers, Mark Dowling, Chris Keblitis, Aldo Salerno and Hannah Heidrich made key contributions to this report. Travis Cady and Jeff Isaacs provided technical assistance.", "summary": "While foreign states generally cannot be sued in a U.S. court, under FSIA, parties can sue governments for certain crimes such as injury or death from an act of terrorism, if certain factors are present. State is required by statute to serve notice of such suits or default judgments when other means for effecting service are not available, and charges plaintiffs a fee of $2,275 to complete this task. Plaintiffs in such cases may also qualify for compensation from a fund that Congress established called the U.S. Victims of State Sponsored Terrorism Fund. In this report, GAO examines (1) how State completes this service and the length of time it takes to complete requests, and (2) whether State has implemented key controls for executing service requests promptly. GAO reviewed State regulations, guidance, case files, and data from 2007 through 2017; and interviewed State officials in Washington, D.C., the Czech Republic, Germany, and Switzerland, which handle the vast majority of cases. GAO assessed State's controls against federal internal control standards. The Department of State (State) notifies sovereign defendants of court proceedings under the Foreign Sovereign Immunities Act (FSIA) in a four stage process that has taken on average about 5 months to complete. State headquarters has overall responsibility for delivering legal documents but U.S. embassies and foreign governments play key roles as well. From 2007 through 2017, State completed 229 requests for delivery of legal documents in an average of about 5 months, but about 28 percent of the requests took longer than 6 months and 7 requests took more than a year. Slow delivery could adversely affect a plaintiff's ability to obtain compensation from a special victims' fund that Congress set up in 2015. State's guidance and federal internal control standards require controls such as accurate and complete record-keeping, continuous monitoring, and analysis of data; however, GAO found that State lacks several key controls to manage its delivery of legal documents. First, State's records are incomplete. For example, for 82 percent of the cases, State had no information about when it received court requests. Second, State did not monitor the progress of cases, resulting in slow service. This slow service led State to waive fees of about $57,000 because checks had expired. Third, State did not analyze case data to identify factors contributing to slow service, or establish timeframes for completing service. As a result, managers lack a sound basis for making decisions on how to improve timeliness. In June 2018, State took some actions based on GAO's review to improve its performance, including preparing step-by-step guidance and developing a new record-keeping system, but further actions could fill the gaps that have impaired program performance. GAO is making five recommendations to State, including that it update its record-keeping guidance to ensure its records are accurate and complete, monitor the progress of requests, periodically analyze data to identify causes of slow service and take corrective actions, and establish timeframes for completing service. State concurred with all five of GAO's recommendations and identified actions it plans to take to address them.", "document_type": "gao"}
{"report": "GSA maintains custody and control of real property for many civilian federal agencies and has a large portfolio of federally owned and leased properties that GSA rents to its federal agency customers. It is responsible for approximately 1,600 federally owned buildings, and the agency generally provides operations and maintenance services for building systems—such as heating, cooling, and lighting systems—used in building operations. According to GSA officials, their federally owned smart buildings are managed by a GSA building manager who oversees a private operations and maintenance services contractor. According to GSA officials, the agency began implementing what would become its smart buildings program around 2005 in response to numerous federal policies aimed at improving federal building energy and environmental management. These officials told us that the smart buildings program includes two key technologies: advanced utility meters and a computer software program known as “GSAlink.” According to GSA officials, outfitting buildings with these technologies allows for more precise monitoring of energy use and equipment operations in these buildings, and was initially based on the use of advanced utility meters to meet federal mandates. Later, this concept was expanded to include use of analytics, through GSAlink, aimed at reducing energy consumption and increasing the efficiency of operations and maintenance activities. According to GSA officials, GSA’s smart buildings use these technologies to connect and monitor multiple pieces of building equipment, such as heating and air conditioning system components. Further, according to these officials, the program is intended to achieve efficiencies in energy use and in operations and maintenance activities while also providing a comfortable workplace potentially conducive to improved tenant productivity. As GSAlink and advanced meters are Internet-connected, GSA officials told us that they implemented protections that are intended to help mitigate potential cyberattacks, including using firewalls. Advanced Utility Meters: In response to energy reduction and advanced metering requirements established in the Energy Policy Act of 2005—as well as subsequent amendments and an Executive Order—GSA began installing advanced meters in its federally owned buildings starting around 2005. Internet-connected advanced utility meters measure utility use in real-time, which GSA officials told us allows GSA’s building managers to identify opportunities to reduce energy use or anomalies that contribute to energy waste. For example, GSA officials said that advanced utility meters can be used to monitor energy consumption patterns and detect lights or other building systems being used after normal business hours. According to a senior GSA official, GSA currently has 675 advanced meters installed in the agency’s approximately 1,600 federally owned buildings. GSAlink: GSA officials told us that GSAlink is a computer software program that collects and analyzes data from advanced meters— including gas, electric, and water meters—and from a facility’s “building automation system” and uses this information to alert building staff to potential problems. Further, GSA officials said that GSAlink allows them to identify building problems that occur over time that may not be readily observable through the building automation system, which generally presents information to building personnel on how a building system is operating in real-time, not over a longer time frame. For example, GSA officials told us that GSAlink can collect data on the temperature and pressure of chilled water that is being circulated through a building’s cooling system and identify equipment that is operating outside of normal parameters or normal business hours when a building automation system may not be actively monitored. If GSAlink detects a potential issue, GSA officials told us the software creates a record so that building maintenance staff can investigate and remedy that issue. GSA building managers as well as GSA staff at the regional and national levels told us they can log in to GSAlink to check on the status of building system issues. According to GSA officials, the contract for GSAlink was awarded in 2012 and GSAlink is currently in use in 81 buildings, with at least one GSAlink- equipped building in each of GSA’s 11 regions. A senior GSA official told us that eighty of these buildings are also equipped with advanced meters. Further, in September 2017, this official told us that GSA contracted to equip 4 additional buildings with GSAlink. According to GSA officials, GSA generally plans to limit installation of GSAlink in additional buildings until more is learned about using the technology in the buildings in which it is currently installed. Figure 1 illustrates an example of a GSA smart building that includes advanced meters, GSAlink, and the building systems monitored by these technologies. According to GSA officials, the approximate cost of equipping a building with smart building technologies ranged from between about $48,000 to $155,000. This includes costs for installing: advanced utility meters (approximately $25,000 to $55,000), and GSAlink (approximately $23,000 to $100,000). The cost of installing GSAlink depends on the condition of the building automation system to which GSAlink is connected as well as the number of individual building components (e.g., chilled water pumps, cooling tower fans, thermostats) to be monitored by GSAlink. GSA officials anticipate that advances in system architecture and reduced software licensing costs will lower the cost of future installations. For example, a senior GSA official told us in October 2017 that the cost to install GSAlink in four additional buildings—the most recent buildings in which GSAlink was installed—ranged between $23,000 and $25,000. In addition, GSA is undertaking a broader effort to upgrade building automation systems in its buildings to enable these systems and connected applications, such as GSAlink, to operate on GSA’s protected information technology network. According to GSA officials, GSA can only install GSAlink in buildings whose building automation system operates on GSA’s protected network. To date, GSA has upgraded building automation systems to operate on the agency’s protected network in approximately 400 buildings. GSA officials told us that the cost of these upgrades has varied by building and depends on several factors, including the size of the building, the complexity or condition of its building automation system, and its age. According to GSA officials, upgrading building automation system components to enable them to operate on the protected network has cost approximately $90,000 per building, on average. However, in some cases, these costs can be much higher; integrating older systems in larger buildings has cost up to $3 million, according to GSA officials. Further, according to GSA officials, accurately calculating smart building implementation costs can be difficult because GSA typically installs key technologies—that is, advanced meters and GSAlink—and makes upgrades necessary to install GSAlink in selected buildings incrementally, sometimes as part of other capital improvement projects. For example, the American Recovery and Reinvestment Act of 2009 and annual appropriations have provided funding to GSA for energy and conservation measures, including the purchase and installation of advanced meters. GSA officials we interviewed at the central office, regional, and individual building levels identified perceived operational benefits from implementing the smart buildings program, including that it (1) enables them to identify problems with building equipment or system operations more quickly and more thoroughly and (2) allows for their greater oversight of operations and maintenance services contractors relative to other GSA buildings. For example, according to GSA regional staff we spoke to, both advanced meters and GSAlink could detect if the cooling system was operating when tenants were not occupying the building, thereby allowing the building managers to adjust operations to avoid unneeded energy use and wear on the cooling system equipment. Regarding contractor oversight, GSA building managers stated that GSAlink allows the agency to better monitor operations and maintenance contractors’ performance, potentially yielding a better-run building with lower operations and maintenance costs. For example, GSA officials described how the analytic capability of GSAlink might allow building managers to precisely identify and address a problem with a building before that problem is noticed by tenants. This may result in, for example, a reduction in the number of maintenance service requests from tenants and contribute to lower building operating costs. In addition, GSA officials told us that GSAlink allows GSA building managers to confirm the information operations and maintenance services contractors present to them on the status of issues identified by GSAlink. Further, according to these officials, GSAlink allows building managers to monitor contractor compliance with GSA’s requirement that contractors address building issues identified by GSAlink within 30 days, thereby giving GSA officials closer oversight of contractor performance. GSA has taken some steps in the past to quantify the benefits associated with the smart buildings program. While those efforts have identified benefits, they have had some limitations. For example, in 2009—after having begun installing advanced meters but before installing GSAlink— GSA attempted to forecast benefits of the smart buildings program by commissioning a business case analysis. The business case concluded that GSA’s energy and operating costs could be reduced by a smart buildings program and that such a program would pay for itself in 1.7 years based on combined energy and operational savings. However, this business case’s estimates of the program’s benefits have limited usefulness for evaluating the current program because this study took place before the program was fully implemented and did not account for constraints affecting building operations. For example, a senior GSA official told us that GSA’s operations and maintenance service contracts are generally for multiple years at a fixed price, calling into question whether operational cost savings can be realized to achieve payback within the time frame estimated by the study. In addition, GSA’s service contractor developed an application within GSAlink that automatically estimates the costs that would be avoided by addressing each type of fault that GSAlink identifies. According to GSA officials, these estimates are imprecise and do not reflect actual avoided costs, which thereby precludes their use in quantifying program benefits. However, according to these officials, these estimates can be used to compare the relative benefits expected to be achieved by addressing identified faults and to prioritize maintenance and repair actions. GSA officials told us that they took steps in June 2017 to improve the accuracy of avoided cost estimates produced by this application, for example, by enabling adjustments to account for differences in weather conditions and building size, and plan to continue their efforts to adjust and refine this tool. In a separate study in October 2016, GSA—in collaboration with researchers at Carnegie Mellon University—analyzed the energy use changes associated with both capital upgrades and operational initiatives, including the use of smart building technologies. Capital upgrades include actions such as installing new energy-efficient building systems and equipment, whereas operational initiatives include, among other things, changes to building operations based on the analysis of advanced meter and GSAlink data. While the researchers concluded that the use of advanced meter and GSAlink data led to reductions in energy use, the researchers found that GSA’s utility consumption records were incomplete and that GSA records of capital upgrades often do not include key details, such as project start or completion dates, to indicate when GSA would have received the benefit derived from the capital project. This lack of complete data adds to the difficulty of estimating the reduced energy consumption attributable to specific factors, including use of advanced meters and GSAlink. We have previously found that results-oriented organizations set performance goals to clearly define desired program outcomes and develop performance measures that are clearly linked to the performance goals. Program goals communicate what results the agency seeks and allow agencies to assess or demonstrate the degree to which those desired results are achieved. Performance measures also show the progress the agency is making toward achieving program goals. We have previously reported that performance measurement gives managers crucial information to identify gaps in program performance and plan any needed improvements. GSA has not documented the smart buildings program’s goals, contrary to leading practices we identified in our prior work, which call for program goals to clearly define desired program outcomes. GSA officials verbally described to us broad goals for the smart buildings program: (1) reducing energy consumption, (2) generating operations and maintenance cost savings, and (3) creating a comfortable work environment conducive to improved tenant productivity. However, GSA has not documented these goals—for example, in the agency’s performance plan or in other program documents. GSA officials could not provide a reason for why the agency has not documented the smart buildings program’s goals. Further, because GSA has not clearly defined its verbally expressed goals, it cannot demonstrate progress in achieving them. This lack of clearly defined goals is contrary to federal internal control standards, which state that agency management should define objectives in measurable terms so that performance toward those objectives can be assessed. GSA could potentially measure progress toward its stated smart buildings program goals of reducing energy consumption and generating operations and maintenance cost savings, if data were available to do so, as these goals seek to identify changes in quantifiable outcomes, specifically energy use and cost savings. However, GSA officials said that the agency cannot measure progress toward the stated goal of improving tenant productivity and comfort because of the subjective nature of individual tenant preferences, such as for office temperatures. This subjectivity is consistent with statements from the industry stakeholders we spoke with, who also said that identifying the existence of a causal relationship between a building’s environment and the productivity of its inhabitants is challenging. For example, an industry stakeholder we spoke to told us that different building occupants have different temperature or ventilation preferences and may accordingly be the most productive at different ambient temperatures, making it challenging to determine a building’s optimal temperature. Without documented, clearly defined goals, it will be challenging for GSA to determine what type of evaluative information it will need to monitor the progress of the smart buildings program. In addition, contrary to the leading practices we have identified in our previous work, GSA has not developed performance measures for the smart buildings program. According to these leading practices, performance measures allow for an assessment of progress toward achieving goals by including concrete, objective, and observable ways to measure the program’s performance and compare this with the program’s expected results. Further, federal internal control standards call for federal program managers to use quality information to achieve that program’s objectives and make informed decisions. However, GSA lacks quality information that can be used to measure program performance. As discussed in the previous section, GSA’s efforts to quantify the smart buildings program’s benefits, including energy reductions and cost savings, have been limited because GSA has had difficulty in compiling data that would allow it to do so. For example, GSAlink’s calculation of avoided costs estimated to be achieved by addressing identified faults is useful for prioritizing maintenance actions but not for measuring program performance because, according to GSA officials, the estimates lack precision and relation to actual costs. In addition, GSA’s October 2016 study on energy use reductions attributable to the program faced problems owing to incomplete records on utility consumption and capital upgrades. While we recognize that determining what data can be collected in a cost-effective manner and can be used to measure the performance of the smart buildings program may be difficult, without such data and measures, GSA lacks the ability to determine the program’s progress and make informed decisions about its current and future operations. GSA faces cybersecurity challenges to its buildings, but is taking steps intended to mitigate these challenges. According to GSA officials, advanced meters and GSAlink operate in conjunction with Internet- connected building automation systems on the protected GSA information technology network. GSA regional staff and industry stakeholders we interviewed stated that cybersecurity presents challenges to those operating smart building technologies, including GSA. Specifically, because these building automation systems are connected to the Internet, they provide a potential pathway for cyberattacks on GSA’s network. According to our prior work, this connectivity could compromise security, hamper GSA’s ability to carry out its mission, or cause physical harm to GSA’s facilities or their occupants. GSA has taken several actions that are intended to help mitigate cybersecurity challenges to its buildings, including those that affect the smart buildings program: GSA has instituted policies and procedures addressing cybersecurity threats and known vulnerabilities in its building systems. In December 2015, GSA published an information technology security policy, defining the roles and responsibilities of GSA staff and establishing controls to ensure compliance with federal regulations, laws, and GSA directives. For example, this policy defines the role of the Federal Government Authorizing Official whose responsibilities include ensuring that monthly operating system scans, database scans, and web application scans are performed and that all vulnerabilities identified are resolved. According to a GSA senior official, under GSA’s Building Monitoring and Controls Program, which provides the infrastructure support needed to connect a building to GSA’s network, GSA is taking steps to mitigate the effects of potential external cyberattacks by moving building automation systems of GSA-controlled buildings away from public networks to GSA’s secured network. GSA officials told us that there are currently approximately 400 federally owned buildings on GSA’s secured network, which includes the 81 buildings equipped with GSAlink. According to GSA officials, a building automation system must be on GSA’s secured network before GSAlink can be installed. According to GSA officials, GSA also performs regular assessments to validate that GSAlink system controls comply with relevant statutes, such as the Federal Information Security Management Act of 2002, National Institute of Standards and Technology security standards, and GSA policies and procedures. In December 2014, we reported on GSA’s efforts to address cyber risks in federal buildings in compliance with relevant statute and guidance, finding that GSA had not conducted security control assessments for all of its systems in about 1,500 federally owned facilities. We recommended that GSA assess its building control systems in a manner fully consistent with federal law and related implementation guidelines. GSA has since implemented this recommendation. According to GSA documentation and officials, GSA conducts regular vulnerability scanning of the equipment and systems involved in the smart buildings program. For example, according to GSA regional staff, a recent vulnerability in the GSA system that manages maintenance requests was identified by GSA central office and was remedied through a software upgrade. GSA faces smart building technology implementation challenges related to the limited technological proficiency of or lack of buy-in from some GSA building managers and operations and maintenance services contractors, but the agency is taking steps that are intended to engage these stakeholders and ensure they are learning to use the smart buildings program’s technologies. GSA regional staff acknowledge that there can be inconsistencies among building managers and operations and maintenance services contractors in terms of their familiarity and comfort with using computers and computer-based analytical tools. According to GSA officials, GSAlink proficiency and adoption varies by building and as such, some buildings may obtain greater benefits from the system than others. A lack of proficiency among building managers in smart building technologies not only affects GSA, but is also an industry-wide concern, according to industry stakeholders we interviewed. Industry stakeholders we interviewed stated that operations and maintenance services contractors are generally not well trained on smart building operations or the differences between managing a smart building and managing a traditional building. GSA regional staff and GSAlink’s support contractor we interviewed also identified operations and maintenance services contractors’ limited buy-in to the smart buildings technologies as a challenge affecting implementation of the program. According to GSA officials, this limited buy-in to the smart buildings technologies could potentially lead to loss of support for the program among operations and maintenance services contractors, posing a risk to the program’s successful implementation. GSA officials, regional staff, and GSAlink’s support contractor acknowledge it is important to demonstrate how GSAlink, for example, can make the operations and maintenance services contractors’ jobs easier. According to GSA officials, if GSAlink can help a building’s systems operate more efficiently, that improvement should result in less unscheduled maintenance and fewer work orders for the contractor. Additionally, industry stakeholders we interviewed suggested that operations and maintenance services contractors do not currently have a stake in whether a smart buildings program is successful. According to those we interviewed, GSA has taken several actions that are intended to help address these challenges: GSA officials and regional staff told us that GSA provided initial training to building managers and operations and maintenance services contractors when GSAlink was first installed. According to GSA officials, refresher training is available online through recorded training sessions. Additionally, GSA regional staff told us that knowledgeable GSA staff provide training to newly hired staff as needed. GSAlink’s support contractor staff told us that they lead regularly scheduled teleconferences with each smart building’s staff either monthly or quarterly depending on each building’s needs. At these meetings, the support contractor remotely accesses GSAlink data for a particular building to discuss the status of GSAlink notifications of building system issues and recommend adjustments to building equipment or systems to ensure optimal operations. GSA regional staff we spoke with stated that this meeting serves as a form of training and helps educate participants on how to use GSAlink. To ensure that building personnel are using smart buildings technologies, GSA officials told us that GSA’s central office monitors a key performance indicator requiring GSA building managers and operations and maintenance services contractors to address all GSAlink notifications of building system issues within 30 days. According to GSA officials, GSA central office and regional staff also have the ability to remotely monitor advanced meter and GSAlink data for individual buildings. According to a senior GSA official, new operations and maintenance services contracts will expressly require contractors to use smart building technologies as part of their efforts to optimally operate GSA buildings. According to GSA officials, the agency’s smart buildings program is intended to allow its staff and contractors to more efficiently manage energy consumption and operations and maintenance actions aimed at promoting cost-efficient operation of building systems and creating a comfortable work environment for tenants in GSA’s buildings. Given GSA’s recent decision to expand the use of GSAlink technology, it is important that the agency be able to determine whether use of the technology achieves these intended results. However, without documented, clearly defined goals, performance measures linked to those goals, and quality information to measure progress, GSA is limited in its ability to make informed decisions about the smart buildings program’s current or future operations as it develops plans to enlarge the program to serve a greater proportion of its buildings portfolio. As a result, GSA risks continuing to expend resources on a program that the agency cannot demonstrate is meeting its intended objectives. We are making the following two recommendations to GSA: The Administrator of the General Services Administration should establish clearly defined goals and related performance measures for the smart buildings program. (Recommendation 1) The Administrator of the General Services Administration should identify and develop data that can be used to measure progress in achieving the smart buildings program’s goals. (Recommendation 2) We provided a draft of this report to GSA for comment. In its written comments, reproduced in appendix II, GSA stated that it concurred with our recommendations and is developing a plan to address them. In addition, GSA clarified that the agency has been upgrading building automation systems across its buildings inventory for a variety of reasons, to include providing needed safeguards to comply with GSA’s information technology security protocols. GSA also provided information on the methodology used and results reported in its October 2016 study on energy savings realized from combined investments in advanced metering and GSAlink. We are sending copies of this report to the appropriate congressional committees and the Administrator of the General Services Administration. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov. In addition to the contact named above, Michael Armes (Assistant Director); Daniel Paepke (Analyst in Charge); Edward Alexander, Jr.; Jenny Chanley; John de Ferrari; Peter Haderlein; Geoffrey Hamilton; Thomas Johnson; Nick Marinos; Malika Rice; Stephen Schluth; Elaine Vaurio; Jack Wang; Michelle Weathers; and Dave Wise made key contributions to this report.", "summary": "To help comply with federal policies aimed at improving federal building energy and environmental management, GSA has implemented a smart buildings program nationwide in federally owned buildings under its custody and control. Two key technologies included in the program are Internet-connected advanced utility meters and an analytical software application, GSAlink, which alerts staff to potential building system problems, such as equipment operating outside of normal hours. GAO was asked to review GSA's smart buildings program. This report examines: (1) what is known about the costs and benefits of the program, (2) the extent to which GSA has developed performance goals and measures to help it manage the performance of the program, and (3) any challenges GSA faces in implementing the technologies used in the program and GSA's actions to mitigate those challenges. GAO reviewed relevant GSA documentation, interviewed officials at GSA's central and regional offices, and visited a sample of GSA smart buildings in San Francisco, California, and Washington, D.C. that were selected based on the high concentration of GSA smart buildings located in each city. Limited quantified information exists on the costs and benefits of the General Services Administration's (GSA) smart buildings program's key technologies. GSA officials stated that the approximate cost of equipping a building with these technologies ranged between about $48,000 to $155,000. However, they stated that accurately calculating installation costs is challenging because GSA typically installs these technologies in selected buildings incrementally and sometimes as part of other capital improvement projects. Additionally, GSA officials identified perceived operational benefits of the smart buildings program's key technologies, including that these technologies enable officials to more precisely identify building system problems and more closely monitor contractors. However, existing data on the smart buildings program are of limited usefulness in quantifying the program's benefits. For example, according to GSA officials, while data from an application within GSAlink that estimates avoided costs from addressing each fault that GSAlink identifies are useful for prioritizing maintenance actions, the imprecise estimates preclude their use as a measure of actual avoided costs in quantifying program benefits. GSA does not have documented, clearly defined goals for the smart buildings program, nor has GSA developed performance measures that would allow it to assess the program's progress. These omissions are contrary to leading practices of results-oriented organizations identified in previous GAO work. GSA officials verbally described broad goals for the smart buildings program to GAO, but the agency has not documented these goals. Further, because GSA has not clearly defined its verbally expressed goals, it cannot demonstrate progress in achieving them. For example, GSA officials said that the agency cannot measure progress for the stated goal of improving tenant productivity and comfort because of the subjective nature of individual tenant preferences, such as for office temperatures. Additionally, GSA has not developed performance measures to assess the program, and GSA's lack of data that can be used to quantify benefits of the program impedes its ability to measure the success of the program. Without clearly defined goals, related performance measures, and data that can be used to measure its progress, GSA is limited in its ability to make informed decisions about the smart buildings program. GSA faces challenges in implementing the smart buildings program and has taken steps to mitigate these challenges. Since smart building technologies are Internet-connected, they are potentially vulnerable to cyberattacks that could compromise security or cause harm to facilities or their occupants. GSA has taken actions intended to mitigate cybersecurity challenges, such as instituting policies to address threats and known vulnerabilities and moving Internet-connected building systems to GSA's secured network. Separately, according to GSA officials, GSA faces implementation challenges related to the limited technological proficiency of some GSA building managers and contractors or lack of buy-in from them. GSA is taking actions intended to address these challenges. For example, it has provided training to staff and contractors, and its central office monitors the extent to which staff address problems detected by the smart buildings program's key technologies. GAO recommends that GSA establish clearly defined performance goals and related performance measures for the smart buildings program, and identify and develop data to measure progress. GSA concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The Coast Guard is required to develop, establish, maintain, and operate rescue facilities for the promotion of safety and may aid distressed persons, and protect and save property in waters subject to the jurisdiction of the United States. To carry out its responsibilities, the Coast Guard maintains a search and rescue system on the Atlantic, Pacific, and Gulf coasts; the Great Lakes; and other inland lakes and waterways. This system consists of about 190 boat stations, 183 of which are located in the contiguous United States. The Coast Guard also operates aircraft from 24 air stations and four air facilities. As of August 2017, these stations and facilities operated about 700 boats and about 200 aircraft. In fiscal year 2016, the Coast Guard reported that its SAR operations saved 5,174 lives and protected more than $63 million in property from loss. The Coast Guard’s boat stations, air stations, and air facilities are subject to laws which require the Coast Guard to maintain specific minimum capabilities—such as a requirement to maintain at least one vessel at each station that is fully capable of operating within the prevailing weather and marine conditions in that station’s area of responsibility. In addition to maintaining capabilities requirements, if the Coast Guard reevaluates its station location needs and intends to close a boat station, air station, or air facility, it also must follow a statutorily defined process, which includes making a determination that adequate SAR coverage will remain in place. To close an air facility, the Coast Guard must also submit a proposal to close the facility to Congress in the President’s annual budget and notify members of Congress who represent the impacted communities, as well as certain committees. The Coast Guard’s field structure is divided into two Area Commands, Atlantic and Pacific, within which are nine Districts consisting of 37 Sectors and the stations within them (see figure 1). Stations are traditionally associated with search and rescue but they may perform the full range of Coast Guard missions. Coast Guard personnel live and work at or near their stations so they can rapidly respond to emergencies as they arise. This model facilitates the Coast Guard’s search and rescue response resource planning standard. Under this SAR standard, Coast Guard plans for its units with SAR responsibilities to arrive on the scene of a case within 2 hours of receiving a distress call. Stations vary in their mission mix and pace of operations (i.e., operational tempo) by geographic region or District, and by season. For example, Coast Guard boat stations in D7 (Florida, Puerto Rico, South Carolina, and the Caribbean) commonly conduct migrant interdiction operations, whereas boat stations located along the Great Lakes (D9) rarely conduct this mission. In some locations, SAR cases may be more common during the summer boating season than in the winter. Stations in D9 have a shorter boating season than stations in D7. According to Coast Guard officials, while D7 has more total SAR cases than D9, cases in D9 are concentrated in a shorter time period than in D7 (i.e., shorter boating season). Boat stations also vary widely in size and function. For example, Station New York in New York City has an authorized strength of 88 personnel, whereas Station Frankfort in Frankfort, Michigan, has an authorized strength of 15 personnel. Both stations perform SAR and other missions, but Station New York also conducts a high level of homeland security missions, while Station Frankfort provides ice rescue capability during the winter. Additionally, the Coast Guard operates 18 seasonal boat stations called “Stations (Small),” which are detached subunits of larger parent stations; the Coast Guard generally operates these during the summer boating season. When the Coast Guard receives notification of a distressed mariner, a search and rescue mission coordinator evaluates the case and assigns assets, such as boats or aircraft, to respond. Cases may involve multiple assets depending on the complexity of the case, such as the need to locate a mariner whose position is only generally known or to operate in severe weather conditions. Figure 2 depicts the general steps for conducting a SAR case. The Coast Guard uses several different types of assets to carry out its search and rescue and other missions. These assets include boats, rotary wing aircraft (helicopters), fixed wing aircraft (planes), and cutters (including patrol boats and ships). Additional details regarding some of these assets, including boat speeds, are described in appendix II. Over time, the need for Coast Guard stations at particular locations has changed due to changes in Coast Guard asset capabilities, boating activity, boating equipment, safety technology, and the capabilities of other search and rescue service providers, such as private towing firms. However, the Coast Guard’s decisions to close or reduce operations at boat stations based on changing conditions or budget reductions have been sensitive. We previously reported that these sensitivities were based on the perception that reducing operations or closing stations would reduce the agency’s ability to save lives and property. In 1990, we reported that the Coast Guard’s attempts to close stations in 1988 were not successful because the Coast Guard did not have policies or procedures for what criteria should be used or how the criteria should be applied, and because the Coast Guard applied its evaluation criteria to a limited universe—only 34 stations instead of all stations. We also found that the Coast Guard did not adequately address how closing stations would impact the Coast Guard’s effectiveness in saving lives or performing other missions. In 1994, we reported that the Coast Guard had created a new process for determining the need for boat station changes. We also found that the new process included detailed criteria to evaluate the appropriate need for stations, such as boating and economic trends and the availability of alternative SAR resources. The Coast Guard then unsuccessfully attempted to close stations in 1995 using this process, and again in 2008, efforts which we describe later in this report. In 2010, federal law required that we identify programs, agencies, offices, and initiatives with duplicative goals and activities within departments and government-wide, and report annually. The annual reports describe areas in which we have found evidence of fragmentation, overlap, or duplication among federal programs and have resulted in $136 billion in financial benefits for the federal government. Figure 3 outlines the definitions we have used since 2011 in our work to address fragmentation, overlap and duplication. The Coast Guard has a sound process for analyzing the need for boat stations that is consistent with GAO’s Program Evaluation guidance, which calls for choosing well-regarded criteria against which to make comparisons in order to achieve strong, defensible conclusions. The primary criteria Coast Guard subject matter experts established, consistent with statutory requirements that the Coast Guard make a determination that adequate SAR coverage would remain in place, were (1) a minimum threshold of overlapping SAR coverage had to be maintained and (2) the Coast Guard’s ability to meet its nationwide 2-hour SAR response standard had to be maintained. By applying these criteria, the Coast Guard’s process identified overlapping search and rescue coverage where three or more stations can respond to a single SAR case within 2 hours, and unnecessary duplication where stations could be closed without negatively impacting the Coast Guard’s ability to meet mission requirements, such as its 2-hour SAR response standard. In June 2012, the Coast Guard established a Station Optimization Process Charter that called for the Coast Guard to develop a defendable process with criteria for analyzing stations for potential closure. The charter stated and Coast Guard officials confirmed that the process was developed to ensure that closure recommendations would be based on solid justifications for stations selected, and would stand up to rigorous scrutiny. The charter called for (1) the process to be data driven; (2) criteria to be applied consistently; (3) consideration of previous GAO recommendations on assessing stations for closure; and (4) adherence to statutory requirements to conduct outreach to affected communities. The Coast Guard then established a working group of subject matter experts who developed a Station Optimization Process with nine analytical steps. The Station Optimization Process included criteria for analyzing the need for boat stations based on data analysis, consistent application of criteria, and legal requirements. Figure 4 shows the Station Optimization Process and its nine steps. In April 2013, the Coast Guard initiated its 9-step Station Optimization Process to analyze its boat stations, and the results identified 18 stations that could be closed because they provide overlapping and unnecessarily duplicative SAR coverage. The Coast Guard hired a contractor to carry out the analysis and identify potential cost savings from permanent closures of such stations. Although focused on SAR coverage, the process also included consideration of all Coast Guard missions carried out at these stations. The contractor followed the 9-step process, with certain steps conducted by the Coast Guard––such as step 1, which analyzed the system and identified overlapping SAR coverage––and developed and ranked different closure options to maximize cost savings. Coast Guard officials provided additional district input on unique characteristics of certain stations to further refine the closure options. The final study identified 18 stations for closure that it estimated would achieve cost savings without impeding the Coast Guard’s ability to meet its SAR response standard and carry out its other missions. We discuss this further later in this report. The Coast Guard considers some overlap or redundancy to be necessary, to account for such things as operational challenges, boat maintenance downtime, personnel training requirements, and the need for surge capacity to respond to certain incidents. Therefore, the Coast Guard directed the contractor to analyze areas with triple or greater station coverage as its baseline for analyzing whether stations were unnecessarily duplicative. Based on the Coast Guard’s review of this coverage, it determined that the greatest extent of overlapping coverage existed in Districts 1, 5, and 9, and directed the contractor to focus on stations in those areas. Figure 5 shows the extent of overlapping Coast Guard boat station SAR coverage as of September 2013 that was used for the contractor study and is still accurate as of May 2017. It shows for Districts 1, 5, and 9, up to quadruple or greater SAR coverage provided by boat stations with overlapping response capabilities. According to the Coast Guard, in an attempt to be conservative in maintaining SAR coverage, the optimization process did not consider the use of Coast Guard air assets such as helicopters—an additional layer of coverage— nor did it consider the availability of some local agencies that respond to SAR cases, such as police departments and emergency responders. Therefore, overlapping coverage depicted in figure 5 excludes air asset responses and any responses or assistance provided by state and local agencies. The extent of coverage in 2017 was the same as the Coast Guard’s 2013 contractor study reported. We determined that the actions taken to complete the station optimization process are sound, consistent with our Program Evaluation guidance which calls for, among other things, evaluating programs based on well- regarded criteria to achieve strong, defensible conclusions. In addition to using the 2-hour response standard as a criterion, the optimization steps identified actions to systematically analyze quantitative measures using a documented ranking system to remove critical stations from consideration for closure. For example, step 4 of the process evaluated the number of security boardings conducted by selected stations, among other metrics, and removed certain stations for consideration from closure based on a systematic application of criteria related to other mission responsibilities. Further, as described in table 1, the process began with consideration of all boat stations in the contiguous United States, included steps to ensure that data were reliable and appropriate, clearly identified limitations of the analysis, and conducted simulations to assess how well the Coast Guard would be prepared to carry out its responsibilities under different closure alternatives, such as whether a station closure reduces or changes the Coast Guard’s ability to meet its response standard—all actions included in our Program Evaluation guidance. Table 1 provides details of actions taken by the contractor and the Coast Guard to complete the 9-step station optimization process. Consistent with the 9-step optimization process and to validate the closure scenario results, the contractor and Coast Guard Headquarters obtained regional input from district officials to gain context about the stations under consideration for closure such as unique rescue characteristics that were not quantifiable. Coast Guard officials within Districts 1, 5, and 9 generally supported the contractor recommendations to close some stations, with a few exceptions. For example, District 1’s input stated that one station recommended for closure by the contractor analysis had a unique surf rescue capability that was not available at adjacent or other nearby stations and thus this station did not provide unnecessarily duplicative SAR coverage since no nearby station could provide this capability. Thus, District 1 recommended that the station remain open. Given this input, the contractor removed this station from consideration for closure. In another example, District 5 officials reported that closure of one of its stations would increase response times from adjacent stations due to the presence of shoaling and barrier island conditions that could not be accounted for in the quantitative modeling. Therefore, the contractor eliminated that station from consideration for closure and recommended an alternative station for closure. This process of obtaining regional input and validation from district officials was carried out such that if a station identified for closure would negatively impact critical missions, it was removed from closure consideration. This additional district input resulted in a final contractor study that recommended station closures that would achieve the greatest cost saving without negatively impacting the Coast Guard’s ability to meet mission requirements. In addition to identifying stations with unique characteristics that warranted keeping them open, additional district input also confirmed contractor recommendations that some stations should be permanently closed. For example, District 5’s input concurred with the closure of six stations, including one where officials we interviewed on site confirmed its steadily diminishing SAR caseload. Our analysis of Coast Guard data validated this station’s low workload showing an average of seven single- boat response SAR cases annually from fiscal years 2010 through 2016. We also found that this station had been recommended for closure in the past. In another example, District 9 input sought an additional, seasonal closure of one station that the contractor analysis did not evaluate for permanent closure due to one criterion applied by the process. District 9’s input provided additional context for this station, saying that seasonal closure was preferable to taking no action because there was significant response redundancy in this region. Moreover, the district input noted that the acquisition of modern boats has increased the range and reduced the response time of many stations. District input also noted that improvements in public education and awareness of safe boating practices, technology and availability of communications equipment, and the increase in non-Coast Guard response resources has resulted in a steady and dramatic decline in the stations’ SAR workloads. Our analysis of all Coast Guard single-boat response data for cases within the contiguous United States for fiscal years 2010 through 2016 confirmed this decline, showing an annual average of 46 cases per station in 2010 to an annual average of 39 cases per station in 2016, a decline of about 15 percent. Appendix IV provides details from our analysis of the number of single-boat response SAR cases conducted by selected stations. In 2014, the Coast Guard contracted for an analysis of selected air stations and air facilities that identified overlap and unnecessary duplication but it did not comprehensively review all air stations and air facilities. Specifically, the criteria-based analysis reviewed search and rescue capabilities, operational case data, and other mission requirements, and determined that certain air facilities provided overlapping search and rescue coverage, some of which was unnecessarily duplicative. Coast Guard officials said they used the results of this analysis to support proposed closures of air facilities in Newport, Oregon, and Charleston, South Carolina, in the President’s Fiscal Year 2014 Budget. Subsequent appropriations for fiscal year 2014 also did not include funding for the operation of the two air facilities. However, shortly before their planned closure date, the Coast Guard encountered strong opposition to the closures at the local, state, and Congressional levels, and did not close them. As with boat stations, the Coast Guard considers some overlapping coverage among air stations and air facilities desirable to mitigate potential risks such as those posed by asset maintenance downtime, limitations in the number of qualified personnel, restrictive weather conditions, or case complexity. Coast Guard officials stated that the 2014 analysis considered many factors to address potential impacts of the closure of the Newport and Charleston air facilities. For example, the Coast Guard used modeling tools to determine the operational impact of altering facility locations and the availability of aviation assets. Coast Guard officials told us they also conducted outreach to the affected communities and their political representatives in advance of the proposed closure date, as required by law. Further, Coast Guard officials explained that the fiscal outlook at the time (e.g., sequestration) required changes to optimize assets, and their proposal accomplished this without sacrificing operational capability because the response time of neighboring SAR units would remain within the Coast Guard’s SAR standards. The 2014 analysis also determined that the majority of SAR cases involving these two facilities occurred close to shore, with boat responses generally arriving on scene and conducting the search and rescue instead of air assets. Circles in figure 6 represent air asset response capabilities nationwide, as of August 2017, with darker shades reflecting greater overlapping coverage. In 2014 and 2016, two laws were enacted that required the Coast Guard to keep the air facilities open for a specific period of time, and established a number of requirements the Coast Guard is required to follow if it proposes closing or terminating operations at its air facilities. Thus, the two air facilities remained open. As of May 2017, Coast Guard officials told us they have no plan to close air facilities or air stations, nor do they plan to develop a process to comprehensively review air stations or facilities to optimize their locations because previous attempts to close stations or facilities have been prohibited by law or subject to certain requirements. However, the Coast Guard has responsibility for evaluating the need for its air stations and air facilities to ensure that it is using resources as effectively and efficiently as possible. The Coast Guard’s station optimization charter calls for a defendable (i.e., sound) and data- driven analysis of boat stations that meets statutory requirements. This charter could be a template for establishing a parallel process for comprehensively analyzing the need for its air stations and air facilities. GAO’s Program Evaluation guidance calls for evaluating programs based on well-regarded criteria to achieve strong, defensible conclusions. Program evaluations can also provide accountability for the use of public resources (e.g., to determine the “value added” by the expenditure of those resources), such as whether scarce resources are being spent on unnecessarily duplicative air facilities. Having a sound and reproducible process for comprehensively analyzing the need for air stations and air facilities will better position the Coast Guard to make decisions to enhance the efficiency of its operations and more effectively allocate its resources. These actions will also better inform Congress as to the status of the Coast Guard’s resource needs and the efficiency of its operations. The 2013 analysis of Coast Guard stations identified unnecessary duplication and recommended certain stations for potential closure; however, as of August 2017 the Coast Guard had not closed any stations, nor developed a plan with time frames for closing stations. In their input to the station optimization process, Coast Guard officials in affected districts supported recommended station closures to achieve operational improvements, and Coast Guard leadership continues to believe the study results are valid. Implementing station closures could also result in costs savings. The need to close some Coast Guard stations that provide unnecessarily duplicative SAR coverage to efficiently respond to changed circumstances such as improved technology is not a new issue. Coast Guard officials reported, and our prior work has shown, that the Coast Guard has attempted to permanently or seasonally close stations at least eight times since 1973. However, closing unneeded stations has historically been difficult due to public concern about the effect of closures on local communities and other factors. In some cases over the years, Congress has intervened and enacted federal laws that have affected Coast Guard’s proposed closures. For example, in 1988 the Department of Transportation and Related Agencies Appropriations Act, 1989, required the Coast Guard to reopen boat stations 1 year after they had been closed, and at the same time provided that GAO was to evaluate the methods behind the Coast Guard decision. Responding to this provision in 1990, we reported that the Coast Guard’s 1988 closure decisions were based on flawed methods, incomplete analysis, and incomplete data. The Coast Guard subsequently updated its process and by 1994 we reported that that it was using a reasonable approach to recommend stations for closure. Despite the improved Coast Guard process, no stations have been closed since 1988. Coast Guard officials reported that Congress continues to oversee and manage the closure of stations, such as by establishing new requirements in the Coast Guard Authorization Act of 1996, which must be met to change any boat stations, after the Coast Guard attempted to close 23 stations in 1995. Similarly, after the Coast Guard attempted to close two air facilities in 2014, legislation was passed in 2014 and 2016 that prohibited Coast Guard air facility closures until January 2016 and 2018, respectively. Figure 7 provides a timeline of Coast Guard station change proposals or actions, including at least eight Coast Guard attempts to close stations between 1973 and 2014. The figure also includes statutory requirements established in 1989, 1996, 2014, and 2016, and two data-driven analyses and studies with recommendations to address unnecessary duplication, among other information. Past Coast Guard efforts to analyze and close stations have frequently identified the same stations as candidates for closure. For example, prior to the 2013 contractor study, at least two Coast Guard districts conducted their own station analyses to identify opportunities to improve their stations’ operations. These analyses also recommended permanent and seasonal closures of some stations. Specifically, in 2010, Coast Guard District 9 began conducting a data-driven analysis of its stations to optimize its boat forces. District 9 officials told us they initiated the analysis due to budget constraints, the challenges they had in fully staffing their stations, and their awareness of overlapping SAR coverage within the district. District 9’s analysis reviewed more than 16,000 SAR cases over a 5-year period (2008–2012) to understand and quantify potential response inefficiencies. According to Coast Guard officials, their analysis determined that overall SAR caseload in District 9 was extremely high in the summer months, but there was little or no SAR caseload for some stations during the winter, a factor which also affected training proficiency as personnel were not able to respond to enough cases to maintain required qualifications. Based on the results of this analysis, in December 2012, District 9 requested approval to permanently close five stations and seasonally close three stations to achieve more effective operations and improve maritime safety in the Great Lakes region. According to Coast Guard district officials, these recommended closures provided no calculated savings to taxpayers because they involved movement of personnel positions and assets to other stations, not their elimination. Instead, the recommendations showed an effort to improve operational efficiency and conserve Coast Guard resources. Furthermore, among those stations in Districts 1, 5, and 9 recommended for permanent closure in 2013, at least five—Ashtabula, Ohio; Frankfort, Michigan; Harbor Beach, Michigan; Shark River, New Jersey; and Block Island, Rhode Island—were also recommended for closure between 1985 and 1988. When we compared the 2012 recommendations from the District 9 analysis, the 2013 contractor analysis recommendations that used the 9- step Station Optimization Process, and additional 2013 district input, we found similar results among the various analyses with respect to which stations should be permanently or seasonally closed. Based on our review of documentation and interviews with District 9 officials, as well as our comparison of the results of the District 9 analysis with the results of the contractor analysis, the 2013 recommendations are affirmed by the District 9 analysis. We provide a comparison of selected recommendations and Coast Guard Headquarters’ tentatively planned actions in table 2. Input from District 9, which had the greatest number of affected stations in the 2013 analysis, supported recommended changes and stated that “the existing unnecessary redundancies, unsustainable complexities, and unacceptable resource gaps negatively affected mission execution in the Great Lakes, where staffing shortfalls exist.” District 9’s input further stated that in some regions, four stations could respond to SAR cases within the Coast Guard’s SAR standard, and that while some redundancy is merited, these areas demonstrate redundancy that is operationally unnecessary, inefficient, and detrimental to the training needs of station personnel. Our interview with officials at one affected station confirmed some of the complexities facing the region. For example, officials told us that because one station recommended for seasonal closure does not operate a boat capable of offshore SAR responses, adjacent stations are already directed to respond to certain offshore SAR cases in that station’s area of responsibility to meet the Coast Guard’s 2-hour SAR standard. Officials we interviewed from each of the seven stations we visited in District 9 noted their station’s high SAR caseload concentration during the summer months and the low or nonexistent SAR caseload during the winter. For example, officials from two stations that the Coast Guard would like to seasonally close during the winter told us that their stations had not responded to an ice rescue in more than 7 years. Officials we interviewed at one station recommended for permanent closure noted that commercial boating traffic and the local population have been declining for many years, that the station was not busy during the winter season, and that the station had not conducted an ice rescue since 2002. In 2017, the Coast Guard affirmed that its leadership believed that the results of the 2013 study remained valid as station workloads have remained relatively consistent. Headquarters officials also told us that the 2013 study criteria and subsequent recommendations for permanent closures were conservative because of previous unsuccessful attempts to close stations, and to meet statutory requirements to maintain a certain level of SAR coverage. They also told us that the analysis did not consider additional layers of response even though these layers could provide some additional SAR response backup for Coast Guard stations. For example, the contractor’s analyses of boat stations did not consider SAR support provided by Coast Guard aviation assets, which generally provide an additional layer of SAR coverage for boat stations. Moreover, district officials told us that aviation assets in District 9 were recently realigned to provide even greater response capability, including longer range helicopters with de-icing capability to improve winter response capability. The contractor analysis also did not take into account the potential SAR capabilities of commercial towing operators and local first responders which can also provide another layer of coverage to assist Coast Guard stations with SAR coverage. For example, officials from each of the seven stations we visited in District 9 told us that they coordinate with other entities, such as commercial towing operators, who can conduct responses for non-life-threatening incidents, such as providing fuel to or towing disabled boats in their station’s area of responsibility. Officials from one station also told us that the local fire department has performed ice rescues in the past, because people who require ice rescues tend to dial 911 first rather than call the Coast Guard, and thus local emergency responders are able to respond faster than the Coast Guard. Officials from another station told us that the local sheriff has two response boats, and that the Coast Guard coordinates with local government and responders. Station closures could also achieve cost savings in addition to the aforementioned efficiency improvements. For example, based on our analysis of the contractor study, if its recommendations to permanently close the 18 stations from D1, D5, and D9 were implemented, and personnel and boat assets were moved or reduced in accordance with the study recommendations, the study reported that these closures could achieve potential cost savings of about $290 million over 20 years. In addition, land disposition estimates were excluded from the study, which could result in one-time proceeds from the sale of the land on which the stations are sited, if the land value exceeded remediation costs. In addition to lost opportunities to improve operational efficiency and effectiveness because stations were not closed previously, some of these stations have also fallen into physical disrepair and will require funding for repairs if the stations remain open, even if they are only operated seasonally. For example, officials at one station we visited showed us a boat dock that was improperly installed and thus was subsequently damaged by waves and will need to be repaired or replaced. At this same station, officials informed us that the furnace system requires daily, manual adjustments to address temperature fluctuations that could cause damage to the station. One official also told us that this station’s building structure is too big and costly, and its condition too poor, to be worth keeping. Therefore, even if this station were seasonally closed, as currently recommended—despite the analysis results suggesting permanent closure—the station will continue to require personnel to be at the station on a daily basis year round. Another station, which multiple studies recommended for permanent closure because of unnecessary duplication and a caseload insufficient to sustain the training requirements of personnel stationed there, was rebuilt as a result of extensive damage from Hurricane Sandy. According to Coast Guard budget data, more than $2.3 million was expended to restore this station as of March 2017 using funds appropriated by the supplemental appropriations act enacted in response to Hurricane Sandy. Given the extent of overlapping SAR coverage identified by the Coast Guard’s analyses and its attempts to address unnecessary duplication, we considered the stations’ levels of overlapping coverage in the context of the definitions we use for identifying overlap and duplication. Figure 8 depicts the extent of the Coast Guard’s overlapping boat and air station SAR coverage, with darker shading representing greater overlapping coverage, some of which the Coast Guard determined to be unnecessarily duplicative. Boat station coverage is represented by shading while aviation coverage is shown by the largest circle sizes. In April 2016, the Coast Guard completed statutory requirements associated with closing eight stations in District 9 by conducting outreach to regional and local communities that would be affected by seasonal closures. The Coast Guard held these meetings to explain why it was necessary to optimize station locations and reallocate personnel from closed stations to their adjacent stations; address overlapping SAR coverage; and seasonally close unnecessarily duplicative stations. Coast Guard officials from one station told us they held a public meeting with the local fire department, police, and commercial towing operators to describe planned changes for seasonal operations at the station, despite this station having been recommended for permanent closure by studies and district input. According to Coast Guard officials, while some local responders in the District 9 area expressed some concerns, they understood the need for change. In addition, according to headquarters officials, the Coast Guard has also completed outreach efforts with members of Congress who represent these communities. They further stated that they plan to follow the same outreach process when they finalize decisions about whether to permanently or seasonally close stations in Districts 1 and 5. The Coast Guard has not taken action to implement the results of its analyses which recommended closures even though it has completed requirements to pursue station closures in District 9. Officials stated that the Coast Guard has not implemented the results of its sound process because past station closure efforts have been met with resistance from affected communities. As a result, Coast Guard leadership decided to pursue a more cautious approach by maintaining seasonal daily operations rather than closing stations outright as recommended in multiple analyses. Standards for Internal Control in the Federal Government state that agencies should have policies and procedures for ensuring that findings of audits or other reviews, such as the Coast Guard’s 2013 station optimization study, are promptly resolved. The guidance further states that managers are to (1) correct identified deficiencies, (2) produce improvements, or (3) demonstrate that the findings and recommendations do not warrant management action. Coast Guard officials stated they recognize that their planned actions do not fully match the identified recommendations, but given historical challenges with closing stations, seasonal closures are preferable to taking no action. In March 2017, Coast Guard officials told us they intended to begin the process for seasonal closures of stations in District 9 at the end of the 2017 boating season while actions in Districts 1 and 5 are pending as the Coast Guard has not finalized its decisions about these stations. The Project Management Institute’s Standard for Program Management describes, among other things, how resource planning, goals, and milestones are good practices that can enhance management for most programs. By executing decisions to close stations based on the results of its analyses and developing a plan with milestones to execute actions it has identified to address unnecessary duplication, the Coast Guard will be better positioned to follow through with both permanent and seasonal closures of unnecessary stations, can improve its operational and training proficiency by consolidating the remaining stations’ workloads to allow for sufficient training, and may realize cost savings. The Coast Guard’s 2013 analysis, based on a sound, data-driven process that applied established criteria—its 2-hour SAR response standard— supports permanently closing some boat stations. Nevertheless, Coast Guard officials do not intend to follow the recommendations to permanently close the stations the study recommended, due, in part, to views expressed by community representatives. The Coast Guard’s 2014 air station and air facilities study also supported closing two air facilities and was criteria-based, but was not comprehensive. An optimization process similar to that applied to boat stations could make a better case for closing selected air stations and air facilities, if it is methodologically sound. The need to close Coast Guard stations that provide unnecessary duplication of SAR coverage, in response to changing circumstances, is not a new issue. Closing unneeded stations has historically been difficult, but with improvements in technology, severely decreased workloads, and continuing budget constraints, the importance of reevaluating the operations of these stations is even greater. In addition to lost opportunities to improve operational efficiency and effectiveness that would be gained by closing unnecessary stations, some of these stations have fallen into physical disrepair and will require funding for repairs if they remain open. Given these factors, Coast Guard action is clearly warranted. We are recommending the following three actions to the Coast Guard: The Commandant of the Coast Guard should establish and follow a sound air station optimization process similar to its process for analyzing boat stations to allow it to comprehensively analyze its need for air stations and air facilities and determine what changes may be needed. (Recommendation 1) The Commandant of the Coast Guard should establish a plan with target dates and milestones for closing boat stations that it has determined, through its 9-step process and subsequent analysis, provide overlapping search and rescue coverage and are unnecessarily duplicative. (Recommendation 2) The Commandant of the Coast Guard should take action to close the stations identified according to its plan and target dates. (Recommendation 3) We provided a draft of this report to DHS for review and comment. In its comments, reproduced in appendix V, DHS concurred with our recommendations. DHS, through the Coast Guard, also provided technical comments, which we incorporated as appropriate. DHS concurred with our first recommendation that the Coast Guard establish and follow a sound air station optimization process similar to its process for analyzing boat stations so it may comprehensively analyze its air station and air facility needs. DHS further stated that the Coast Guard would utilize its fiscal year 2020 Planning, Programming, Budget, and Execution cycle to identify efficiencies in air station optimization using best practices employed in its boat station optimization efforts. DHS expects this effort to be completed in September 2019. DHS concurred with our second recommendation that the Coast Guard establish a plan with target dates and milestones for closing boat stations that it has determined provide overlapping search and rescue coverage and are unnecessarily duplicative. DHS stated that Coast Guard headquarters and appropriate district commands will continue to analyze operational coverage across the nation through the 9-step optimization process and recommend closures or seasonalization (e.g., seasonal closures) of boat stations to eliminate unnecessary duplication and overlap in search and rescue coverage. The Coast Guard’s internal analysis is expected to be completed in September 2020. DHS concurred with our third recommendation that the Coast Guard take action to close the identified stations according to its plan and target dates, stating that Coast Guard headquarters personnel and appropriate district commands will continue to analyze closing or seasonalizing operations at boat stations identified according to its plan and target dates. DHS further stated that it must complete implementation of the second recommendation before beginning to implement the third and that the estimated completion date for the third recommendation was to be determined. Given the robustness of the Coast Guard’s review process and the clear results showing unnecessary duplication among some boat stations, in addition to other valid analyses completed in previous years supporting the closure of unneeded boat stations, the Coast Guard should move forward with minimal delay to implement this third recommendation, once the plan as outlined in the second recommendation is completed. We will continue to monitor the Coast Guard’s actions to close unnecessarily duplicative stations in a timely manner through our annual report on duplication, overlap, and fragmentation in the federal government. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. To identify the extent to which the U.S. Coast Guard (Coast Guard) has a sound process for analyzing the need for its boat stations, we reviewed laws, policies, and procedures related to its search and rescue (SAR) mission. We reviewed Coast Guard documentation of processes it used to analyze the need for boat stations, reviewed resource and budget factors, and analyzed station activity levels. We also reviewed prior GAO reports on the Coast Guard’s resource allocation process and its previous attempts to close stations. To verify and validate the Coast Guard’s specific analytical process used to determine overlapping coverage, we obtained and analyzed the Coast Guard’s analytical assumptions, including the operational parameters of the assets assigned to the stations (e.g., boat speeds), and station locations. This analysis also allowed us to verify the soundness of the Coast Guard’s model used to identify overlap. We then independently recreated and visually depicted overlapping SAR coverage provided by the stations, based on Coast Guard data, assumptions, and documentation, and compared it with SAR case data by geographic area. We then analyzed Coast Guard data on single boat SAR responses (sorties) by station for fiscal years 2010 through 2016, the most recent data available at the time of our review. We visited a nongeneralizable sample of 12 stations we selected from within districts where the Coast Guard had identified overlap, and interviewed officials to identify local policies, station characteristics, local coordination with emergency responders and federal agencies, and local input to the Coast Guard’s process for assessing station needs and implementing changes to the locations of stations, if any. Additionally, we interviewed Coast Guard officials, including field and headquarters personnel, to determine the extent to which the Coast Guard had assessed maritime activity trends and leveraged resources from outside entities, such as local first responders, federal agencies, and private industry. We also interviewed Coast Guard officials to obtain information on the extent to which the Coast Guard used findings and recommendations from selected studies, strategies, and plans in its analyses of the need for its boat stations. To assess the reliability of Coast Guard SAR data, we interviewed knowledgeable officials, reviewed documentation, and electronically tested the data for obvious errors and anomalies. We interviewed Coast Guard officials to discuss the reliability issues we identified, such as the inability to attribute multi-boat SAR case responses to individual stations, as well as inconsistent data related to the types of boats used to conduct SAR cases. Regarding attributing multi-boat responses to individual stations, Coast Guard officials told us that some cases involve multiple boats and that the outcome of a SAR case may not be attributable to an individual station. Regarding boat assets used to conduct SAR cases, in February 2017, officials informed us that in 2015 the Coast Guard implemented changes to its Marine Information for Safety and Law Enforcement (MISLE) system and added around 500 controls, such as built-in data entry checks, to prevent potential data entry errors. Officials told us that this change could have caused some inconsistences in how the data is captured, but that the implementation of the changes includes testing and ongoing actions to resolve the issues. We determined that the data were sufficiently reliable for the purposes of this report to demonstrate selected station caseloads in our report. We compared Coast Guard actions to evaluate stations against criteria established in GAO’s Designing Evaluations guidance, which call for adhering to established evaluation design practices in order to achieve reliable results, the Coast Guard’s SAR response standard, and statutory requirements to conduct public outreach. To identify the extent to which the Coast Guard has a sound process to analyze the need for its air stations and air facilities, we reviewed laws, policies, and procedures related to its SAR mission. We reviewed Coast Guard documentation of processes it used to analyze the need for selected air facilities in 2014. We obtained and analyzed Coast Guard assumptions and station locations for determining overlapping SAR coverage in 2014 and used a mapping program to visually depict overlapping coverage provided by aviation assets, based on Coast Guard data, assumptions, and documentation. Additionally, we interviewed Coast Guard officials to obtain information on the extent to which the Coast Guard used findings and recommendations from selected studies, strategies, and plans in its analyses of the need for and locations of its air stations. We compared Coast Guard actions to evaluate air stations and air facilities against criteria established in GAO’s Designing Evaluations guidance which calls for adhering to established evaluation design practices in order to achieve reliable results, to determine if the Coast Guard’s methodological steps were sound. To determine the extent to which the Coast Guard has taken actions to implement the results of its analyses of its need for boat and air stations, we analyzed Coast Guard documents and reports to identify proposals put forth by the Coast Guard for permanently or seasonally closing stations it has identified as overlapping and unnecessary. We analyzed these proposed actions to determine whether proposed plans or decisions regarding stations aligned with the results of the Coast Guard analyses. Specifically, we reviewed the study reports, memoranda detailing district input on the results of the 2013 contractor study and their verification of the stations the study identified as unnecessarily duplicative, and compared the recommended closures from the various studies to determine if the outcomes were consistent. We also compared Coast Guard actions against its response standards and statutory requirements to conduct public outreach. Finally, we reviewed documents and information on these proposals and compared them against criteria in Standards for Internal Control in the Federal Government, and leading practices identified in the Project Management Institute’s Standard for Program Management. We conducted this performance audit from July 2016 through October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The U.S. Coast Guard (Coast Guard) uses several different types of assets to carry out its missions, including search and rescue. Coast Guard assets include boats, rotary wing aircraft (helicopters), fixed wing aircraft (planes), and cutters (including patrol boats and ships). The Coast Guard’s primary boat station search and rescue (SAR) assets are its boats, which it uses to conduct searches near shore and on inland waterways, such as harbors and bays that are too shallow for its larger cutters to access. Different boats have different capabilities (see table 3). For example, 47-foot motor life boats are slower than other boats, but can operate in heavy weather and up to 50 nautical miles offshore. The Coast Guard operates two types of aircraft: rotary wing (helicopters) and fixed wing (airplanes). Rotary wing aircraft operate from air stations, air facilities, cutters equipped with flight decks, and other locations that can support flight operations. The Coast Guard uses its rotary wing aircraft for search and rescue in coastal waters, among other mission uses. Rotary wing aircraft can hover and are equipped with hoists, which can allow rescue of distressed individuals from the water. Fixed wing aircraft operate from Coast Guard air stations, air facilities, and airports, and are used to conduct over-water searches and other missions. Coast Guard cutters are ships 65 foot or longer. They operate under the control of District or Area commands. According to the Coast Guard, cutters are suitable for conducting extended search and rescue operations because of their high endurance, communications systems, and ability to operate in heavier weather than other assets. Cutters carry boats that can directly rescue mariners in distress. Cutters with flight decks can serve as launch platforms for helicopters, which can help with SAR operations. The Coast Guard generally allocates boats to stations based on the needs and conditions of those stations. The Coast Guard also has other types of boats in its inventory that are used for a variety of missions that may include SAR missions. Table 3 provides details of selected boats used for search and rescue. Figures 9 through 12 show the extent of search and rescue coverage by U.S. Coast Guard (Coast Guard) boat stations in the contiguous United States and selected Coast Guard districts reported in September 2013. The extent of coverage in 2017 was the same as the Coast Guard’s 2013 contractor study reported. Table 4 provides details of selected U.S. Coast Guard (Coast Guard) stations recommended for permanent or seasonal closure and the search and rescue (SAR) caseloads they reported for fiscal years 2010 through 2016, as well as estimated fiscal year 2015 annual operating costs. Our analysis of Coast Guard SAR single-boat response case data from fiscal years 2010 through 2016 found that the 18 stations recommended for closure reported an average of about 15 single-boat SAR responses annually, compared to an annual average of about 41 single-boat responses for all boat stations. These numbers are based on station reported data in the Coast Guard’s Marine Information for Safety and Law Enforcement (MISLE) case management system, and only include cases in which a single boat was launched to conduct a SAR mission. Some SAR missions result in multiple stations launching due to factors such as close proximity of stations, case complexity such as weather conditions, or other factors such as boat availability or training. Including multilaunch cases could result in double counting of SAR cases and therefore these cases were excluded from our analysis. Due to flexibility in how Coast Guard stations report SAR responses, some seasonal stations, which are detached subunits of larger parent stations, report the number of cases to which they respond in combination with the parent station. Because we could not disaggregate this information, we do not report on individual cases from these stations. Table 5 provides details of selected stations recommended for permanent or seasonal closure and the SAR caseloads they reported during the winter months, for fiscal years 2010 through 2016. In addition to the contact above, Dawn Hoff (Assistant Director), Andrew Curry (Analyst-in-Charge), Chuck Bausell, Dorian Dunbar, Michele Fejfar, Peter Haderlein, Eric Hauswirth, Tracey King, John Mingus, Claire Peachey, and Christine San all made key contributions to this report.", "summary": "The Coast Guard, within the Department of Homeland Security (DHS), is charged with preventing loss of life, injury, and property damage in the maritime environment through its SAR mission. It maintains over 200 stations with various assets, such as boats and helicopters (depending on the station), along U.S. coasts and inland waterways to carry out this mission, as well as its other missions such as maritime security. Resource limitations and changes to operations require the Coast Guard to periodically reexamine the need for these stations. GAO was asked to review these efforts. This report addresses, among other objectives, the extent to which the Coast Guard has (1) a sound process for analyzing the need for its boat stations and (2) taken actions to implement its boat station process results. GAO reviewed Coast Guard laws, standards, and guidance; analyzed Coast Guard data on station locations and SAR coverage; and analyzed the process and criteria used to evaluate its station needs and compared it with established evaluation design practices and internal control standards. GAO also interviewed Coast Guard officials. GAO found that the U.S. Coast Guard has a sound process for analyzing its boat stations that includes clear and specific steps for analyzing the need for stations using terms that can be readily defined and measured. In 2013, following this process, the Coast Guard and its contractor identified 18 unnecessarily duplicative boat stations with overlapping coverage that could be permanently closed without negatively affecting the Coast Guard's ability to meet its 2-hour search and rescue (SAR) response standard and other mission requirements. The process was designed to ensure the Coast Guard met or exceeded requirements to maintain SAR coverage and to account for such factors as boat downtime and surge capacity to respond to certain incidents. Further, the boat station analysis did not consider potential SAR responses by the Coast Guard's air stations and facilities, which can provide additional overlapping coverage. Coast Guard officials said that the closures would, among other things, help improve operations by consolidating boat station caseloads to help ensure personnel were active enough to maintain training requirements. In 2017, the Coast Guard affirmed that its leadership believes the 2013 study remains valid, but so far the agency has not taken actions to implement the closures identified by its sound process. Instead, the Coast Guard is recommending conversion of some year-round stations to seasonal stations that would operate during the summer. Coast Guard officials stated that seasonal closures are preferable to no action, given its limited resources, the significant overlapping SAR coverage, and potential to improve operations. However, permanently closing unnecessarily duplicative stations may better position the Coast Guard to improve its operations. It could also achieve up to $290 million in cost savings over 20 years, if stations were permanently closed. GAO is making three recommendations, including one recommendation that the Coast Guard close unnecessarily duplicative stations that its analysis identified. DHS concurred with the recommendations and stated it plans to act to eliminate unnecessary duplication.", "document_type": "gao"}
{"report": "The Inspector General Act of 1978, as amended, provides that the IG may receive and investigate complaints or information from an employee concerning the possible existence of an activity constituting a violation of law, rules or regulations; gross mismanagement; gross waste of funds; abuse of authority; or a substantial and specific danger to public health or safety. Violation of the law may also include a violation of a provision of criminal law, including the Uniform Code of Military Justice, which is codified in Title 10 of the United States Code. Whistleblowers are protected from reprisal as a result of making a protected disclosure through various statutes, regulations, and presidential policy covering different DOD personnel groups. Table 1 summarizes the statutory and policy authorities covering DOD personnel, along with selected protected disclosures and prohibited personnel actions—which are two required elements of the test for determining whether there was reprisal against a complainant for whistleblowing. A protected disclosure is a disclosure of wrongdoing by a whistleblower to a party that is an eligible recipient of that disclosure, while prohibited personnel actions include those actions that are taken or threatened in response to a protected disclosure, such as termination, reassignment, or a significant change in duties, responsibilities, or working conditions. DODIG and the military service IGs share responsibility for investigating misconduct and whistleblower reprisal complaints. Allegations of misconduct and other whistleblower complaints, including those involving senior officials, may be investigated by DODIG or a military service IG depending on the nature of the allegation or the DOD employees involved. Responsibilities for investigating whistleblower reprisal complaints differ according to DOD personnel type. Specifically, DODIG is responsible for investigating and overseeing DOD component investigations of complaints alleging reprisal against certain DOD civilian employees, and for investigating complaints alleging reprisal against DOD contractor, subcontractor, grantee, and subgrantee employees. For complaints alleging reprisal against a military servicemember, DODIG has the authority to either investigate the complaint or refer it to a military service IG for action. Most reprisal cases involving military servicemembers are investigated by the military services IGs, with DODIG oversight. In order to carry out its responsibilities, DODIG has established several directorates to facilitate the handling and investigation of misconduct and reprisal complaints. Figure 1 provides a high-level depiction of the DODIG and military service IG processes for handling reprisal, senior official misconduct, and internal DODIG employee complaints, along with the basic roles of the DODIG directorates. Whistleblowers confidentiality protections are codified in federal law. The Inspector General Act of 1978, as amended, restricts DODIG and military service IGs from disclosing a whistleblower’s identity without the consent of the whistleblower unless the IG determines that such disclosure is unavoidable during the course of the investigation. For example, if a complaint includes information that poses a personal or public safety concern, disclosing the identity of the complainant may be unavoidable. Additionally, the Privacy Act of 1974 prohibits the disclosure of records on any person to another agency without the consent of the person the record relates to, but allows for the disclosure of an employee’s identity if the purpose is for routine use—that is, a use that is disclosed for a purpose compatible with the purpose for which it was collected. For example, referring an allegation from an IG hotline to an appropriate investigative unit would be considered routine use. The Federal Information Security Modernization Act of 2014 is intended to provide a comprehensive framework for ensuring the effectiveness of information security controls over information resources that support federal operations. The law requires each agency to develop, document, and implement an agency-wide information security program to provide risk-based protections for the information and information systems that support the operations and assets of the agency. The law also requires agencies to comply with NIST standards and the Office of Management and Budget requires agencies to comply with NIST guidelines for protecting federal IT systems. Among other things, NIST defines how agencies should determine the security category of their information and information systems based on the potential impact or magnitude of harm that could occur should there be a loss in the confidentiality, integrity, or availability of the information or information system. NIST also prescribes an array of activities associated with the selection, implementation, and assessment of IT security controls—and the authorization to operate federal IT systems and other products. DOD Instruction 8510.01, Risk Management Framework for DOD Information Technology, established a risk management framework for DOD information technology that is consistent with the principles established in NIST Special Publication 800-37. This framework includes requirements and procedures for identifying, implementing, assessing, and managing security controls. CIGIE’s Quality Standards for Investigations and Quality Standards for Federal Offices of Inspectors General collectively provide a set of overarching principles that IGs should adhere to in conducting their operations. They also provide a framework for conducting high-quality investigations through the definition of general and qualitative standards. General standards, among other things, address the qualifications of investigators, independence, and the concept of due professional care and confidentiality protections throughout the course of an investigation. Qualitative standards focus on the establishment of policies, procedures, and instructions for confidentially handling and processing complaints, along with investigative planning, execution, reporting, and information management. The CIGIE Integrity Committee receives, reviews, and refers for investigation allegations of wrongdoing made against Inspectors General, designated staff members of an IG, and the Special Counsel and Deputy Special Counsel of the Office of Special Counsel. Each Inspector General, including the DODIG, is required to submit a list of designated staff members to the CIGIE Integrity Committee Chairperson annually. DODIG met some but not all internal timeliness goals for fiscal year 2018 related to the intake and referral of whistleblower allegations, as well as the oversight of DOD component investigations. DODIG also did not meet internal goals related to the timeliness of senior official misconduct investigations or internal and statutory goals related to the timeliness of reprisal investigations. Intake is the initial process to determine whether a complaint contains a prima facie allegation of whistleblower reprisal or a credible allegation of misconduct by senior officials. Oversight reviews are conducted by the DODIG whistleblower reprisal and senior official investigations directorates to ensure the quality of DOD component investigations. DODIG officials cited several reasons for not meeting timeliness goals, including a backlog of cases and a lengthy report review process. Further, DODIG officials noted that the number of whistleblower reprisal cases increased from 1,013 to 2,002 (98 percent) over the past 5 years, while an internal DODIG fiscal year 2018 performance report cited other reasons for not meeting timeliness goals, including the assumption of responsibility for all sexual assault victim reprisal cases by the whistleblower reprisal investigations unit, the number of high-priority senior official cases concurrently open, and the increasing scope and complexity of investigations. DODIG met its fiscal year 2018 timeliness goals for civilian and contractor case intakes and senior official misconduct oversight reviews goals, but did not meet goals related to the average days of senior official misconduct and military reprisal intakes, and the average days for reprisal oversight reviews (see figure 2). In fiscal year 2018, DODIG resolved and closed 631 senior official misconduct cases during the intake review process and it performed intake reviews for 1,032 whistleblower reprisal cases. It also conducted oversight reviews for 157 senior official misconduct cases and 995 reprisal cases. By comparison, DODIG met its fiscal year 2017 targets related to the percentage of intakes and oversight reviews meeting timeliness goals, but it did not meet its goals for the average days of reprisal and senior official misconduct intakes. DODIG did not meet internal or statutory timeliness goals related to the percentage or average days for senior official or reprisal investigations (see figure 3). DODIG closed 73 investigations in fiscal year 2018, including 13 senior official misconduct cases and 60 military, contractor, and civilian reprisal cases. Overall, about 85 percent of all investigations did not meet the timeliness goal. DODIG similarly did not meet its investigation timeliness goals for senior official misconduct and reprisal investigations in fiscal year 2017. However, DODIG officials noted that the record closure of 60 reprisal investigations in fiscal year 2018 was a significant improvement over the 37 closed in fiscal year 2017, and DODIG data showed that the average age of closed and open investigations peaked in April 2018 and June 2018, respectively, and that both were lower as of January 1, 2019. Additionally, DODIG officials stated that they expected to eliminate the case backlog and reach a sustainable state of timeliness during fiscal year 2019. In fiscal year 2018, the DOD Hotline referred 3,872 cases to other entities for inquiry, and it performed oversight of 945 completion reports from DOD components. As shown in figure 4, the DOD Hotline met its timeliness goals, except for the percentage of referrals meeting the goal for priority 1 complaints. Comparatively, in fiscal year 2017, the DOD Hotline did not meet timeliness goals for the average days or percentage of referrals, but did meet its goal for completion reports. Quality goals can enhance the ability of organizations to provide reasonable assurance that they are exercising appropriate safeguards for federal programs, as demonstrated by our prior work. DODIG generally met its fiscal year 2018 internal quality goals related to the thoroughness and completeness of senior official misconduct and whistleblower reprisal investigations, as well as the completeness and accuracy of information in DOD Hotline referrals. DODIG’s internal quality goals for senior official misconduct and reprisal investigations pertain to the thoroughness of required case-file documentation and the integrity and completeness of data in its case management system. Criteria for assessing these goals include whether or not key documentation of the investigation—such as the incoming complaints and required notifications—are present in the proper folders in the case file, and whether start, end, or milestone dates have been recorded in the case management system. Criteria for assessing the completeness and accuracy of information in DOD Hotline referrals include checks on whether whistleblower consent is accurately documented and whether correspondence is addressed to the correct recipient. According to DOD Hotline officials, a weighted checklist was created in June 2018 that has greater focus on those criteria associated with protecting confidentiality. In fiscal year 2018, DODIG reported that it conducted quality reviews for 59 whistleblower reprisal cases and 13 senior official misconduct cases. DODIG further reported conducting reviews related to the quality of DOD component investigations for 80 whistleblower reprisal cases and 80 senior official misconduct cases, while the Hotline reviewed the thoroughness of 1,954 referrals. As shown in table 2, DODIG either met or partially met its quality goals except for the data integrity and completeness goal for senior official investigations and the documentation goal for senior official oversight reviews. While we have reported DODIG’s performance against its quality measures, we recommended in September 2017 that DODIG develop quality performance measures and enhance then-existing timeliness measures to reflect key attributes of successful performance measures, and DODIG concurred. In November 2018, DODIG officials stated that DODIG is currently using the quality measures it had in place prior to fiscal year 2017, and noted that DODIG had developed DOD-wide quality performance measures for 2018 that measure the thoroughness of military service investigations. As a result, we continue to believe that our 2017 recommendation is valid in that DODIG’s performance measures should reflect key attributes of successful performance measures. Military service IGs generally did not meet internal and statutory timeliness goals related to the notification of receipt of allegations of reprisal and misconduct, intake reviews, or senior official misconduct and reprisal investigations. Military service IG officials provided several reasons for not meeting the internal and statutory timeliness goals for notifications, intake reviews, and investigations. Specifically, officials cited an increasing number of complaints; the increasing complexity of complaints, such as those that include multiple allegations and subjects; staffing challenges, such as training related to the rotation of military staff; and the use of reservists, who only work part-time. In addition, a senior official from one military service IG noted that service IGs should be provided greater latitude in dismissing complaints without DODIG review and approval, such as for reprisal complaints where there is no protected communication or personnel action. The military service IGs did not meet fiscal year 2018 timeliness goals for notifying DODIG of allegation receipts, or conducting intake reviews for reprisal cases (see figure 5). In fiscal year 2018, the military service IGs sent 141 senior official misconduct notifications and 876 reprisal notifications to DODIG, and performed 618 reprisal intake reviews. The military service IGs did not meet statutory or internal timeliness goals for senior official misconduct and whistleblower reprisal investigations, with exception of the Marine Corps IG—which met its goal for senior official misconduct investigations (see figure 6). In fiscal year 2018, the military service IGs closed 424 investigations, including 347 reprisal investigations, and 77 senior official misconduct investigations. Military service IGs met fiscal year 2018 quality goals established by DODIG related to the thoroughness of investigations conducted by the service IGs. Specifically, 89 percent of DODIG’s thoroughness criteria were met in the 93 senior official misconduct investigations conducted by the military service IGs and other DOD components, exceeding the 81 percent goal established by DODIG. Similarly, 85 percent of DODIG’s thoroughness criteria were met in the 310 whistleblower reprisal investigations conducted by the military service IGs and other DOD components, exceeding the 81 percent goal established by DODIG. DODIG has established six criteria for assessing the thoroughness of senior official investigations, including whether all allegations were addressed, whether the complainant and subject were interviewed, and whether relevant documents were obtained. DODIG has seven criteria for assessing the thoroughness of reprisal investigations, including whether protected communications and personnel actions were identified, and whether the report of investigation was approved. The Army, the Air Force, and the Marine Corps IGs also met internal quality goals for fiscal year 2018 related to the percentage of cases returned by DODIG for rework due to quality issues. Specifically, Army IG officials stated that they met their goal of having no more than 5 percent of the investigations they submitted to DODIG for review returned by DODIG due to quality issues, and Air Force IG officials stated that they met their goals of obtaining DODIG concurrence on all of the senior official investigations they submitted for review, and having no more than 5 percent of reprisal investigations returned for rework. Similarly, the Marine Corps IG achieved its goal of having no investigations returned for rework, according to a senior Marine Corps IG official. The Naval IG did not provide us with any internal quality goals. Aside from the quality goals, DODIG also conducted quality assurance reviews for the Air Force (2017), Army (2018), and Naval (2016) IGs, in which the quality of a sample of case files was examined. The reviews concluded that the military service IGs reviewed were generally complying with internal regulations and CIGIE standards for quality. In addition, in accordance with recommendations made in the quality assurance reviews, each of the service IGs reviewed by DODIG has developed or plans to develop checklists to help ensure that all required documentation is present in their case files, according to service IG officials and documentation. DODIG and the military service IGs have implemented and planned various initiatives to improve the timeliness of their processing of senior official misconduct and reprisal complaints. Table 3 shows examples of recent DODIG and military service IG initiatives. While these initiatives are positive steps, given that the performance of some measures is far below the goals, additional efforts could be made to improve performance against unmet timeliness goals—including those pertaining to senior official misconduct investigations conducted by the military service IGs, military service IG notifications made to DODIG, and military service IG intake reviews for reprisal cases. Additionally, DODIG and some of the military service IGs do not agree on the timeframes prescribed by DOD policy for military service IGs to notify DODIG of the receipt of a complaint, thereby complicating achievement of these goals. For example, officials from the Air Force IG stated that they notify DODIG of the receipt of misconduct allegations only after making a credibility determination, instead of within the five working days of receipt prescribed by DOD policy for senior official allegations. Similarly, Marine Corps IG officials stated that senior official allegations should be reported to DODIG within five days of a credibility determination. Standards for Internal Control in the Federal Government state that management should complete and document corrective actions to remediate internal control deficiencies in a timely manner. Expanding initiatives to target unmet goals related to military service senior official investigations, notifications, and intakes could provide DODIG and the military service IGs a more comprehensive approach to improving timeliness and better position the IGs to improve upon the timeliness goals prescribed by DOD policy. In addition, resolving disagreements related to notification timeliness could improve the military service IGs’ ability to achieve those goals. Further, additional initiatives could provide greater assurance to potential whistleblowers that their cases will be handled expeditiously. DODIG has established policies and procedures to implement key statutory requirements and CIGIE standards for protecting the confidentiality of whistleblowers from the receipt of a whistleblower complaint through its investigation. The Inspector General Act of 1978, as amended, states that the Inspectors General shall not, without consent from the employee, disclose the identity of an employee who reports misconduct or provides information, unless the Inspector General determines that such disclosure is unavoidable during the course of the investigation. Further, CIGIE’s Quality Standards for Investigations states that policies, procedures and instructions for handling and processing complaints should be in place to ensure that basic information is recorded, held confidential, and tracked to final resolution. Table 4 shows examples of key confidentiality protections included in DOD Hotline and senior official misconduct and whistleblower reprisal investigation policies. DODIG officials stated that they routinely emphasize the importance of protecting whistleblower confidentiality and that confidentiality policies and procedures are addressed through internal training, staff meetings, and on-the-job instruction. Further, 69 of 86 (80 percent) DODIG respondents to our survey reported believing that the guidance they received on protecting confidentiality is sufficient to maintain the confidentiality of individuals involved in IG investigations, citing many of the processes identified in table 4 above as examples of guidance they have received. The DODIG Office of Professional Responsibility’s investigations manual on handling misconduct complaints against internal DODIG employees requires that complainant information be strictly controlled in order to protect the integrity of the investigative process and to avoid potential harm to the privacy and reputation of the employee. This guidance also includes some steps to protect whistleblower information such as redacting substantiated reports of investigation to be provided to investigation subjects. As previously noted, DOD Hotline guidance also includes steps to protect the confidentiality of internal DODIG whistleblowers. However, the Office of Professional Responsibility guidance does not include several key steps and procedures that some DODIG officials reported taking to protect whistleblower confidentiality, such as excluding complainant information from notifications sent to subjects and not identifying complainants during interviews with case subjects. In addition, DODIG’s Office of General Counsel does not have documented procedures for controlling access to cases involving designated DODIG staff members subject to review by the CIGIE Integrity Committee. DODIG designated staff members include the Principal Deputy Inspector General, Deputy Inspectors General, General Counsel, and Senior Advisor to the Inspector General, among other staff members. Guidance on handling complaints alleging internal DODIG misconduct is also outdated and does not reflect recent organizational changes. In particular, the Office of Professional Responsibility’s investigations manual does not reflect its updated roles and responsibilities since splitting from the Quality Assurance and Standards directorate in October 2016, and certain chapters do not recognize that it now reports directly to the Inspector General. Further, sections of the manual have been revised at different points in time and do not align with the office’s current functions. For example, the section covering the office’s organization, mission, and authorities has not been updated since July 2009. Similarly, the section detailing investigation policies and procedures has not been updated since November 2012. Some of the DODIG employees we surveyed reported concern that DODIG’s process for reporting employee misconduct and resolving internal complaints may not protect whistleblower confidentiality. For example, 14 (16 percent) survey respondents reported believing that DODIG’s internal process for reporting misconduct did not protect DODIG employee confidentiality or only protected it slightly. Also, 36 (42 percent) survey respondents reported not knowing whether or not DODIG’s internal process for reporting misconduct protects confidentiality, and 36 (42 percent) reported believing that it protects confidentiality somewhat or very well. Additionally, 14 of 86 (16 percent) and 9 of 86 (10 percent) employees surveyed reported having considered but ultimately choosing not to resolve an issue through the Office of the Ombuds—which may receive some internal misconduct complaints—or report misconduct through DODIG’s internal process on or after October 1, 2016, respectively, because they feared that their confidentiality could be compromised. Table 5 shows the distribution of these responses. Survey respondents identified some concerns related to the confidentiality, objectivity, and independence of DODIG’s internal process for reporting misconduct and suggested some related improvements. For example, although it has separated from the Quality Assurance and Standards directorate, the Office of Professional Responsibility continues to share office space with the directorate and hold complainant and witness interviews in the shared space. Also, it was suggested that an online form could be used so that internal complaints are routed directly to the Office of Professional Responsibility instead of through the DOD Hotline. DODIG officials told us that there are record-keeping and performance measure-related bases for continuing to use the DOD Hotline to receive complaints of internal misconduct, but that they would carefully evaluate the suggestion. CIGIE Quality Standards for Federal Offices of Inspector General state that IGs should establish and follow policies and procedures for receiving and reviewing allegations and ensure that whistleblower identities are not disclosed without consent, unless the IG determines that such disclosure is unavoidable during the course of the investigation. CIGIE Quality Standards for Investigations also state that policies and procedures should be revised regularly to align with current laws and regulations. DODIG officials told us in November 2018 that the Office of Professional Responsibility investigations manual is in the process of being updated but were unable to provide a timetable for the completion of these updates, and stated that all of the provisions—including the confidentiality protections—are subject to changes and updates. In addition, in January 2019 DODIG officials noted, after discussion with GAO, that they intended to implement guidance for making referrals to the CIGIE Integrity Committee. Until DODIG develops guidance that incorporates procedures to protect confidentiality and documents how to maintain whistleblower confidentiality throughout the CIGIE referral process, it will lack reasonable assurance that its process for investigating internal misconduct allegations can fully protect the confidentiality of whistleblowers. Military service IG guidance identifies confidentiality as a core tenet of handling and investigating whistleblower complaints. For example, military service IG guidance states that consent should generally be obtained from complainants before each military service IG can share a complainant’s identity with officials who will investigate the allegations, and provides that complaints may be redacted or summarized to omit personally identifiable information—such as when consent is not given or for other purposes. In addition, military service IG guidance state that a complainant’s identity may only be disclosed without consent when an authorized official has determined that such disclosure is unavoidable in order to investigate an allegation. Aside from these shared provisions, each of the military service IGs’ guidance includes additional precautions aimed at protecting whistleblower confidentiality. For example, Air Force Instruction 90-301 instructs Hotline personnel to coordinate communication between the complainant and investigator if a complainant does not give consent to disclose his or her identity. In addition, Army and Marine Corps IG guidance stipulate that whistleblowers will be notified if it becomes necessary to disclose their identity without their consent, and Naval IG guidance requires investigators to inform complainants that although the use of their testimony may be necessary under administrative action procedures, their identity will be released as a witness, not a complainant, to safeguard their identity. While all military service IGs acknowledge the need to preserve confidentiality, we found gaps in confidentiality protections in Air Force, Naval, and Marine Corps IG guidance, but not Army IG guidance. For example, we found that Air Force, Naval, and Marine Corps IG guidance did not include requirements outlined in DOD Instruction 7050.01 related to the specific conditions under which information disclosures may be made without complainant consent. According to DOD Instruction 7050.01, these include circumstances when a complainant has made it known outside IG channels that he or she submitted the complaint, there is an emergency situation or health or safety issue, or the allegation is being transferred outside of DOD to another IG. Air Force, Naval, and Marine Corps IG guidance predate DOD Instruction 7050.01, updated in October 2017, and reference an older instruction that omits this disclosure guidance. Additionally, DODIG’s 2016 and 2017 quality assurance reviews of the Naval IG and Air Force IG concluded that confidentiality protections could be improved. Specifically, DODIG found that the Air Force IG did not have written procedures for handling and restricting IG employee access to complaints against individuals with access to the Air Force IG’s whistleblower database, including both IG employees and contractors that support the database. In addition, DODIG found that the Naval IG Hotline program instruction needed to be updated and that it did not have a hotline standard operating procedure with guidance to redact complainant identities before releasing investigation reports to installation commanders or other military officials. Air Force, Naval, and Marine Corps IG officials stated that they are currently in the process of updating their guidance to better incorporate confidentiality protections. For example, Naval IG officials told us that the Naval IG is updating its Hotline instruction, which will provide guidance to obtain consent from complainants prior to releasing investigation reports to installation commanders or other military officials, or redact the complainant’s name. According to Naval IG officials, the updated instruction should be finalized in the first quarter of fiscal year 2019. CIGIE Quality Standards for Federal Offices of Inspector General state that IGs should establish and follow policies and procedures for receiving and reviewing allegations and ensure that whistleblower identities are not disclosed without consent, unless the IG determines that such disclosure is unavoidable during the course of the investigation. Further, CIGIE Quality Standards for Investigations state that policies and procedures should be revised regularly to align with current laws and regulations, and that confidentiality should be considered throughout an investigation, to include drafting reports, validating contents, and submitting the final report. Without updated policies and procedures that fully implement confidentiality standards for complaint handling and investigation, the Air Force IG, the Naval IG, and the Marine Corps IG may not be able to ensure the consistent implementation of confidentiality protections within their offices. DODIG and military service IGs do not experience significant challenges in accessing sensitive or classified information necessary to handle whistleblower complaints, according to cognizant IG officials. Such information includes documentary evidence or witness statements. Similarly, 79 of 86 (92 percent) DODIG respondents to our survey reported that they are generally able to access all types of unclassified information necessary to perform the duties of their position, while 82 of 86 (95 percent) respondents stated that they are either able to access classified information as necessary or do not require access to classified information. DODIG and the military service IGs have also taken steps to safeguard physical and electronic classified whistleblower information in accordance with DOD policy, which requires that DOD components establish a system of technical, physical, and personnel controls to ensure access to classified information is limited to authorized persons. Cases including classified information constituted a small percentage of cases closed by DODIG and the military service IGs in fiscal year 2017, with the percentage of those closed by DODIG directorates—including the DOD Hotline and the whistleblower reprisal and senior official investigations— ranging from 0.2 percent to 0.5 percent, according to DODIG officials. Officials from each of the military service IGs reported closing no classified cases in fiscal year 2017. In addition, DODIG and military service IG officials reported having an adequate number of staff with clearances at the requisite levels (e.g., SECRET) to handle classified case information, along with processes for physically and electronically storing and accessing information at different classification levels. DODIG and most military service IGs are following DOD’s IT risk management process, which involves the assessment of and authorization to operate IT used to manage DOD information—including sensitive but unclassified whistleblower information. The Naval IG has not authorized its case management system in accordance with DOD policy, which implements NIST and Office of Management and Budget federal IT security guidelines related to IT systems and applications, including those used by the IGs. However, it is taking steps to do so. DODIG and the Naval IG use IT systems to manage sensitive whistleblower information, while the Air Force, Army, and Marine Corps IGs use IT applications—which are not subject to the full IT risk management authorization process, as discussed below. DODIG has followed the DOD IT risk management process by authorizing the Defense Case Activity Tracking System (D-CATS)—its whistleblower case management system—to operate in accordance with DOD policy and federal IT security guidelines. DOD’s risk management process requires that IT systems be authorized to operate using a multistep process that entails the identification, implementation, and assessment of system security controls, along with the corresponding development and approval of a system security plan, security assessment report, and plan of action and milestones. The process requires systems to be reassessed and reauthorized every 3 years in order to ensure the continued effectiveness of security controls, and allows for ongoing authorizations through a system-level strategy for the continuous monitoring of security controls employed within or inherited by the system. The strategy should include a plan for annually assessing a subset of system security controls. DOD policy states that component heads may only operate systems with a current authorization to operate, and that authorization termination dates must be enforced. DODIG last authorized D-CATS to operate in May 2017, determining that overall system security risk was acceptable based on a review of the system security plan, security assessment report, and plan of action and milestones. Our review of DODIG’s system authorization documents also found that they addressed key, required content elements. For example, the system security plan specified the security controls intended to be in place based on the system’s risk classification, and the security assessment report documented findings of compliance and the methods used by the assessor to evaluate security controls when implementing DODIG’s continuous monitoring strategy. Additionally, the plan of action and milestones identified tasks needed to mitigate identified vulnerabilities along with resources and milestones to accomplish the tasks. However, as of December 2018, the Naval IG had not authorized its case management system in accordance with the DOD risk management process, and the system remained in operation. The Naval IG was issued an interim authorization to operate its case management system in March 2017 by the Commander, U.S. Fleet Cyber Command. The interim authorization—which expired in January 2018—required the Naval IG to transition from the department’s prior IT risk management process to the current process by the time of its expiration, noting that the overall risk of the system was high due to incomplete testing. Subsequently, in June 2018, the Naval IG requested and was eventually granted, in September 2018, a conditional authorization to continue operating the case management system through October 2018. In early December 2018, the Naval IG requested another conditional authorization to operate the case management system until September 2019. According to Naval IG officials, the conditional authorization is needed because the whistleblower case management system’s host environment is not expected to attain its authorization until September 2019. As a result, the Naval IG was taking steps beyond the conditional authorization request to manage IT security risks as it works towards compliance with the new DOD risk management process. For example, Naval IG officials stated that new leadership was put in place to oversee the case management system; that a senior system administrator would be hired to help maintain IT security; and that the case management system was undergoing regular scans to assess security risks, with any resultant issues being remediated. NIST guidelines state that organizations should design and prioritize activities to mitigate security risks, and that alternative strategies may be needed when an organization cannot apply controls to adequately reduce or mitigate risk. As noted, the Naval IG’s case management system was not authorized as of December 2018 and it was not yet able to transition to the current DOD risk management process. However, if completed, the actions planned and underway—including the conditional authorization and security scans—should help to mitigate system security risks and provide greater assurance that existing system security controls safeguard sensitive whistleblower information. The IGs of the Air Force, the Army, and the Marine Corps are following DOD’s IT risk management procedures for their primary case management applications, which are not subject to the full IT risk management authorization process. According to DOD Instruction 8510.01, Risk Management Framework (RMF) for DOD Information Technology (IT), DOD IT such as applications must be securely configured in accordance with applicable DOD policies, and application security controls must undergo special assessment of their functional and security-related capabilities and deficiencies. The results of such assessments are to be documented within an application-level security assessment report and reviewed by a security manager to ensure that the product does not introduce vulnerabilities into its host system. We found that while the Army, Air Force, and Marine Corps IGs have not produced the required application-level security assessment reports for their primary applications, they have met the intent of these requirements through other actions. Specifically, we noted that the Air Force and Army IGs’ primary case management applications reside in host systems that were authorized to operate under the risk management process within the last 3 years, and that the assessments associated with the host system authorizations included a review of application-level security controls, according to IG officials. Similarly, the Marine Corps IG’s case management application was exempted from assessment by its authorizing official because it was determined that the application did not introduce additional risk into its authorized host system. As previously discussed, DODIG has taken steps to restrict employee access to whistleblower information, such as by restricting access to cases in which a complainant has not consented to releasing his or her identity. DOD Hotline also applies additional restrictions to all cases involving internal misconduct referrals to the Office of Professional Responsibility and CIGIE Integrity Committee, and it has the capability to further restrict records, according to DODIG officials. Beyond restricting records, the case management system also includes user roles, which govern users’ view of information. However, employees at the three DODIG directorates that are principally responsible for handling whistleblower information are generally able to access sensitive whistleblower information belonging to other directorates in both the Defense Case Activity Tracking System (D-CATS)–DODIG’s whistleblower case management system—and an associated document repository, that is not necessary to accomplish assigned tasks. NIST Special Publication 800-53, Security and Privacy Controls for Federal Information Systems and Organizations, states that organizations should employ the core security principle of least privilege, which allows only authorized access for users that is necessary to accomplish assigned tasks in accordance with organizational missions and business functions. DODIG employees in the DOD Hotline, senior official investigations directorate, and whistleblower reprisal investigations directorate are able to access whistleblower information belonging to other DODIG directorates in both D-CATS and its associated document management repository because DODIG has not developed sufficient system controls needed to restrict access across the three directorates. For example, a DODIG employee in either the senior officials or reprisal investigations directorates can access Hotline records in D-CATS that the employee does not have a need to access, with the exception of cases specifically restricted by the DOD Hotline to prevent unauthorized access. According to an August 2018 internal DODIG memo, the lack of controls to restrict access to information across the three directorates has been known since the system was established in 2012. DODIG plans to establish controls to restrict access among the DODIG directorates in a new enterprise system (D-CATSe), which will eventually replace D-CATS and the case management systems used by the military service IGs. D-CATSe is intended to provide a common case activity tracking system capable of supporting mandatory reporting requirements and collecting, storing, and exchanging IG records related to complaints and administrative investigations throughout a complaint’s lifecycle. According to DODIG officials, D-CATSe will restrict access both within and among user IGs, including the DODIG directorates and military service IGs, each of which may have unique access requirements based on their different types of user groups. According to DODIG officials, this will be accomplished through the establishment of unique business units at different organizational levels, teams, and user roles, which will collectively determine what information a user can access. However, as shown in figure 7 below, the incremental release schedule for D-CATSe has been delayed, and the IGs are not expected to fully transition to the new system until fiscal year 2021. NIST guidelines state that organizations should design and prioritize activities to mitigate security risks, and that alternative strategies (such as plans) may be needed when an organization cannot apply controls to adequately reduce or mitigate risk. Further, NIST guidelines state that addressing assurance-related controls during system development can help organizations obtain sufficiently trustworthy information systems and components that are more reliable and less likely to fail. However, DODIG does not plan to take other actions to address the lack of cross- directorate controls before the advent of the enterprise system. Additionally, while DODIG is designing such controls and plans for each system release to provide a requirements basis for subsequent releases, it has not developed an assurance plan for testing controls, according to DODIG officials, or fully defined the system requirements needed to implement these controls and ensure it has achieved least privilege both within and across the user IGs. Without considering interim actions to address the lack of D-CATS cross-directorate access controls, DODIG may be unable to sufficiently mitigate security risks while D-CATSe is developed. Also, without developing a plan with assurance controls for achieving least privilege in D-CATSe, DODIG may be unable to ensure the confidentiality and integrity of sensitive whistleblower information during its implementation. Separate from the lack of cross-directorate controls, DODIG has identified multiple instances in which sensitive but unclassified whistleblower information in the DODIG Administrative Investigations directorate whistleblower case management system and document repository was accessible to DODIG personnel who did not have a need to know this information. These instances involve DOD Hotline records that are specifically restricted to protect complainants requesting confidentiality, along with records belonging to DODIG’s Office of Professional Responsibility—which handles internal DODIG misconduct complaints. Table 6 shows examples of recent instances in which DODIG determined that sensitive whistleblower records were accessible to DODIG personnel without a need to know. According to DODIG officials, as of January 2019, there were no known instances of anyone without a need to know actually accessing these records. These officials also stated that corrective action had been taken for each instance in table 6, including by blocking access to information while the underlying issues were resolved; that at no time was information available to the public; and that the instances did not result in any disclosure outside of DODIG. NIST guidelines state that the need for certain user privileges may change over time, necessitating the periodic review of assigned user privileges in order to determine if the rationale for assigning such privileges remains valid. DODIG has determined that its user access issues are broadly attributable to system administration and application problems, including permission changes resulting from system updates. To address such issues, DODIG has taken several remedial actions and identified additional recommended steps, including: reconciling user accounts and validating permissions related to restricted records; reviewing policies related to protecting complainant confidentiality and conducting awareness training with personnel, as appropriate; and developing enhanced user management procedures and internal controls related to establishing user accounts, reconciling current user permissions, and controlling access to restricted records. In addition, in October 2018, DODIG instituted a process whereby user privileges associated with its case management system and document repository will be reviewed, validated, and corrected, if necessary, on a quarterly basis. If fully implemented, this process, along with the proposed actions, should help ensure that assigned user privileges are periodically validated and aligned with business needs. However, DODIG’s process does not include steps to test document repository permissions after case management system updates, which were determined by DODIG to be the cause of some permission issues. Without including such steps in its process, DODIG lacks assurance that system permissions will align with business needs on an ongoing basis, and therefore may not be able to appropriately control user accounts to prevent unauthorized access by system users. The military service IGs’ case management systems and applications incorporate IT controls, such as authenticated user accounts and unique permissions, to protect certain whistleblower information. However, service IG systems and applications do not fully restrict employee access to sensitive whistleblower information only to information that is necessary to accomplish assigned tasks. As previously discussed, NIST guidelines state that organizations should only provide authorized access to users which is necessary to accomplish assigned tasks in accordance with organizational missions and business functions. As shown in Table 7, DODIG’s quality assurance reviews and our work identified issues related to IG employee access restrictions. At the time of our review, the military service IGs had not taken steps to fully address the identified access issues. Specifically, Air Force officials stated that they did not plan to address the application access issues because they did not have funding to continue developing their existing application prior to transitioning to D-CATSe, although they would explore whether solutions were possible within current fiscal constraints during the next system maintenance evaluation. Similarly, Army IG officials stated that while the Army IG had resources to further develop its existing case management application, they had elected to not use those resources to remedy the identified access issue in light of the future arrival of D-CATSe. In addition, Naval IG officials reported taking action to restrict senor official investigations, but did not provide information to us on actions taken to address DODIG’s recommendation to restrict cases involving internal Naval IG personnel. Finally, Marine Corps IG officials stated that access restrictions would be implemented as part of an application redesign scheduled to be complete by the end of 2018. However, these officials also noted that they have not identified the root of the access problem or developed a plan to ensure that needed access restrictions are implemented and functioning properly, raising questions as to whether the redesign will fully restrict access on a continuing basis. As mentioned previously, the Marine Corps’ case management application is also exempt from testing under the DOD IT risk management process, and therefore is not subject to routine security assurance testing. Federal Standards for Internal Control state that management should analyze and respond to risks, and evaluate and remediate internal control deficiencies on a timely basis, including those related to audit findings. Further, NIST guidelines state that organizations should design and prioritize activities to mitigate security risks, and that alternative strategies, such as plans, may be needed when an organization cannot apply controls to adequately reduce or mitigate risk. These guidelines also encourage organizations to obtain assurance-related evidence on an ongoing basis in order to maintain the trustworthiness of information systems. As previously discussed, D-CATSe is being implemented incrementally, with releases for the Naval IG and the Air Force and Army IGs not scheduled to occur until fiscal years 2020 and 2021, respectively. By considering actions prior to the advent of D-CATSe, the Air Force, Army, and Naval IGs could mitigate existing risks to whistleblower confidentiality by reducing the potential for unauthorized employee access of whistleblower records. Also, by developing a plan to ensure that access restrictions function properly, the Marine Corps IG could better ensure the confidentiality and integrity of sensitive whistleblower information in its redesigned case management application on a continuing basis. Potential violations of whistleblower confidentiality may be reported to DODIG, the service IGs, the Office of Special Counsel, or CIGIE. IGs identified some substantiated violations of whistleblower confidentiality between fiscal years 2013 and 2018. Specifically, DODIG identified 8 substantiated violations of whistleblower confidentiality between fiscal years 2013 and 2018, representing approximately .01 percent of the 95,613 contacts handled by DODIG during that timeframe, according to DODIG officials. Army IG identified 6 substantiated violations of whistleblower confidentiality between these years. These violations include the improper release of IG information, disclosures made to individuals who do not have a need to know, and unauthorized access to whistleblower records by IG personnel. DODIG officials noted that in some instances, violations were determined not to result from employee misconduct because the complainant’s identify was disclosed unwittingly. According to DODIG and Army IG officials, disciplinary or corrective action was taken in all but one of the 14 substantiated violations because the DODIG employee involved resigned prior to action being taken. Officials from the Air Force, Naval, and Marine Corps IGs stated that they were unaware of any substantiated incidences of confidentiality violations between fiscal years 2013 and 2018 and that they were unable to specifically track such incidents in their case management systems. Similarly, CIGIE Integrity Committee and Office of Special Counsel officials stated that they were unaware of and do not specifically track confidentiality violations, and we did not identify any confidentiality violations in the fiscal year 2013-2018 data they provided to us that involved DODIG employees. Respondents to our survey of DODIG employees separately reported potential violations of whistleblower confidentiality. Specifically, 15 of the 86 respondents (about 17 percent) reported being aware of at least one instance since June 1, 2017, where the identity of a complainant or source was avoidably disclosed by a DODIG employee to an organization or individual without a need to know, and nine of these 15 were aware of more than one instance. These responses are not intended to be a count of separate instances because respondents may have recalled the same instance(s), including one or more of the 8 substantiated violations reported to us by DODIG. The most common avoidable disclosure described by survey respondents involved distributing whistleblower materials to the wrong official or agency. Survey respondents reported that in such instances corrective action included recalling the complaint and deleting the erroneously sent record, or, in some cases, sending a complaint to DODIG’s Office of Professional Responsibility for the investigation of possible misconduct. While the number of known violations is small, IT access issues related to the case management systems and applications used by DODIG and the military service IGs create the potential for additional violations of whistleblower confidentiality. As previously discussed, issues such as the absence of cross-directorate access controls within DODIG’s case management system and the ability for non-Air Force IG users of the Air Force IG case management system to view IG case information allow for the improper access of sensitive whistleblower information. Recognizing this potential, a senior DODIG official noted concern regarding the possible extent of confidentiality violations stemming from these and the other access issues previously discussed in this report. Additionally, DODIG requested that the Defense Criminal Investigative Service investigate the April 2018 incident involving 946 case folders to determine who accessed the identified records. Without steps to address these ongoing IT access issues, the potential for additional violations of whistleblower confidentiality will persist. DODIG closed 129 misconduct and reprisal cases in fiscal years 2013 through 2017 with complaints involving a civilian DOD Presidential appointee with Senate confirmation (PAS) subject. Of the 129 cases closed, DODIG dismissed without investigation 125 cases and investigated the remaining four. Figure 8 shows the number of cases closed in each fiscal year, by case disposition. Our review of the 125 case files for dismissed misconduct and reprisal cases found that key documentation and data needed to demonstrate compliance with significant aspects of the case-handling process were generally present. Key documentation and data for dismissed cases include the case open and close dates, the incoming complaint, disposition of the case, and the dismissal approval and rationale. CIGIE standards state that the degree to which an organization efficiently achieves its goals is affected by the quality and relevance of information that is collected, stored, retrieved, and analyzed, and that the results of investigative activities should be accurately and completely documented in the case file. Examples of data and documentation consistently present. Our review of 125 case files for dismissed cases closed in fiscal years 2013 through 2017 found that key documentation and data were generally present. For example: 100 percent of the cases we reviewed included the incoming complaint. Approximately 99 percent of the dismissed misconduct cases included a dismissal rationale that aligned with dismissal criteria in DODIG policy. 100 percent of the dismissed reprisal cases that involved a closure letter informing the complainant of case dismissal listed a rationale for dismissal in the closure letter. 100 percent of the dismissed reprisal cases that did not involve a closure letter to the complainant had a rationale for dismissal elsewhere in the case file. Approximately 99 percent of dismissed misconduct cases included a required entry recording the intake disposition. Documents or data that were not material. Our review of case files for dismissed cases closed in fiscal years 2013 through 2017 found that some other documentation or data that are needed to demonstrate compliance with DODIG policy were missing. The deficiencies we found were not material to case outcomes. For example, approximately 77 percent of dismissed misconduct cases did not include a recording of case dismissal approval by IG supervisory staff. However, DODIG officials told us that the presence of the required entry recording the intake disposition indicated that the case dismissal had been approved by the appropriate authority. Similarly, approximately 55 percent of dismissed misconduct cases did not include a notification letter to the appropriate military service IG in the case file. DODIG officials stated that while there is guidance to send these letters, it is not a required practice. DODIG reported most credible allegations concerning civilian DOD PAS officials to the Secretary of Defense as required. DODIG also reported some investigation results involving these officials to Congress prior to the enactment of the Inspector General Empowerment Act of 2016, which required the reporting of results of substantiated investigations involving DOD senior officials. DODIG investigated four of the 129 cases closed in fiscal years 2013 through 2017, with two of those investigations leading to substantiated allegations of misconduct. DODIG generally met DOD requirements to report credible allegations of misconduct against civilian DOD PAS officials to the Secretary of Defense. DOD Directive 5505.06 requires that DODIG notify the Secretary of Defense of all credible allegations or investigations involving presidential appointees and others of significance, including Senate- confirmed civilian officials. We found documentary evidence that DODIG notified the Secretary of credible allegations in three of the four misconduct and reprisal investigations closed from fiscal years 2013 through 2017, and the secretary of a military service was notified in the fourth case. In addition, DODIG officials stated that the Principal Deputy IG provides the Secretary of Defense periodic updates on current investigations and other periodic updates of incoming allegations, as necessary and appropriate. Separately, the Inspector General Empowerment Act of 2016 requires that DODIG report in its semiannual reports to Congress on all substantiated allegations of misconduct involving senior officials. Prior to 2016, there was no requirement to notify Congress of substantiated allegations of misconduct involving senior officials. We found evidence that DODIG communicated investigation results to Congress in two of the four civilian DOD PAS official investigations closed between fiscal years 2013 and 2017, but not in the other two because it was not required. For one investigated case, a report of investigation was provided to Congress upon request, and for another investigation, which had a substantiated allegation, the results of the investigation were published in narrative detail in a semi-annual report to Congress. DODIG now reports in its semi-annual reports to Congress summary results of substantiated and unsubstantiated cases closed during the corresponding period, but it has not closed any civilian DOD PAS official allegations since the statutory requirement to report to Congress on all substantiated cases was established. Maintaining a program that instills trust and confidence for potential whistleblowers to come forward is critical to minimizing fraud, waste, abuse, and personnel misconduct in the federal government. Important components of a credible whistleblower program are timeliness of case processing and safeguarding confidentiality to the maximum extent possible. It is encouraging that DODIG and the service IGs have met some key goals and have policies that address whistleblower confidentiality. In addition, DODIG generally met key documentation and data requirements for the 125 cases dismissed by DODIG involving civilian DOD PAS officials, and reported most credible allegations, as required. However, the IGs face challenges in addressing unmet timeliness goals and updating guidance to ensure full alignment with current confidentiality requirements. By pursuing more targeted, collective efforts with additional initiatives aimed at improving performance against unmet timeliness goals, the IGs can better assure current and potential whistleblowers that their complaints will be processed expeditiously. Additionally, without formal guidance documenting procedures for protecting the confidentiality of whistleblowers reporting potential internal DODIG employee misconduct, those employees lack assurance that DODIG can fully protect their identities. Similarly, without updated policies and procedures, the Air Force, Naval, and Marine Corps IGs may not be able to fully ensure whistleblower confidentiality in their organizations. The integrity of a whistleblower program also extends to ensuring that sensitive information in IT systems remains secure and inaccessible by employees without a need to know. The IGs have existing controls for safeguarding whistleblower information, but additional efforts are warranted. Specifically, without further steps—such as considering interim actions to mitigate the lack of cross-directorate access controls, developing a plan, along with the military service IGs for achieving least privilege in the future enterprise case management system, and enhancing the process for periodically validating user privileges—DODIG may not be able to ensure that access controls in its existing and future case management systems align with business needs on an ongoing basis. Similarly, without considering actions to further restrict IG employee access in existing IT, the Air Force, Army, and Naval IGs may be unable to mitigate ongoing risks to whistleblower confidentiality. Finally, without a plan for ensuring that access restrictions in its redesigned case management system function properly, the Marine Corps IG may be unable to fully ensure whistleblower confidentiality. We are making a total of 12 recommendations to DOD. Specifically: The DOD Inspector General should coordinate with the IGs of the military services to take additional actions to improve performance against unmet timeliness goals. This includes steps to improve performance of senior official misconduct investigations and military service reprisal intakes, and to resolve disagreement on notifications. (Recommendation 1) The DOD Inspector General should issue formal guidance documenting procedures for protecting the confidentiality of whistleblowers throughout its internal misconduct investigation process. (Recommendation 2) The Air Force Inspector General should establish procedures to fully reflect and implement DOD policy on the protection of whistleblower confidentiality. (Recommendation 3) The Marine Corps Inspector General should establish procedures to fully reflect and implement DOD policy on the protection of whistleblower confidentiality. (Recommendation 4) The Naval Inspector General should establish procedures to fully reflect and implement DOD policy on the protection of whistleblower confidentiality. (Recommendation 5) The DOD Inspector General should consider interim actions as the whistleblower enterprise case management system is being developed to help ensure that access to sensitive whistleblower information in the current case management system and associated document repository is limited to information that is necessary to accomplish assigned tasks. (Recommendation 6) The DOD Inspector General should coordinate with the IGs of the military services to develop a plan to fully restrict case access in the future whistleblower enterprise case management system so that user access is limited to information necessary to accomplish assigned tasks in accordance with organizational missions and business functions. (Recommendation 7) The DOD Inspector General should enhance its process for periodically reviewing whistleblower case management system and document repository user privileges by including steps to ensure that such privileges remain valid after system updates, as appropriate. (Recommendation 8) The Air Force Inspector General should consider interim actions as the whistleblower enterprise case management system is being developed to help ensure that access for users of existing applications is limited to information that is necessary to accomplish assigned tasks in accordance with organizational missions and business functions. (Recommendation 9) The Army Inspector General should consider interim actions as the whistleblower enterprise case management system is being developed to help ensure that access for users of existing applications is limited to information that is necessary to accomplish assigned tasks in accordance with organizational missions and business functions. (Recommendation 10) The Marine Corps Inspector General should develop a plan to ensure that its redesigned whistleblower case management application restricts user access to information based on what is needed to accomplish assigned tasks in accordance with organizational missions and business functions. (Recommendation 11) The Naval Inspector General should consider interim actions as the whistleblower enterprise case management system is being developed to help ensure that access for users of existing applications is limited to information that is necessary to accomplish assigned tasks in accordance with organizational missions and business functions. (Recommendation 12) We provided a draft of this report to DODIG and the military service IGs for review and comment. In written comments, DODIG and the military service IGs concurred with each of our 12 recommendations. Comments from DODIG and the Air Force, Army, and Marine Corps IGs are reproduced in appendix V; the Naval IG concurred in an email. These IGs also provided technical comments, which we have incorporated as appropriate. In its comments, DODIG stated that it will seek to implement the recommendations. In addition to highlighting recent and planned improvements, DODIG provided additional comments on some of the report’s findings and statements. In particular, DODIG noted that the report understated its improvements in timeliness, such as by stating that DODIG did not meet timeliness goals related to average days of senior official and military reprisal intakes, and average days for reprisal oversight reviews. Citing figure 2, DODIG further stated that it met its timeliness goals in more than 60 percent of all senior official and reprisal intake cases, including 87 percent of senior official oversight review cases, and that it met its 15-day goal in more than 70 percent of senior official intakes. We agree that DODIG achieved these percentages and present the associated data in figure 2. However, as described in the report, and shown in figure 2, DODIG did not meet its goals for the average days of senior official misconduct and military reprisal intakes, and the average days for reprisal oversight reviews. Nonetheless, it is encouraging that DODIG has taken and planned actions to improve timeliness as its caseload has increased, including by increasing its staff by about 29 percent since fiscal year 2016, during which time it reported that its caseload similarly increased by about 26 percent. DODIG also noted that the report presented some information in a manner that could create an incomplete impression of the agency’s commitment to protecting whistleblower confidentiality. Specifically, DOD stated that the report’s presentation of survey data related to DODIG employee concerns about internal DODIG processes may give a misleading impression because of the focus on the small number of respondents who had a negative impression. In particular, DODIG noted that more than 80 percent of respondents either believed that DODIG’s internal process for reporting misconduct protected confidentiality somewhat or very well, or did not know if it did so. However, a positive perspective cannot be inferred from the respondents that reported not knowing whether or not DODIG’s internal process protects confidentiality (42 percent). Also, it should be recognized that the respondents that held negative views on DODIG’s process for reporting internal misconduct (16 percent) accounted for a substantial proportion of respondents (28 percent) that held either positive or negative views on this issue. Importantly, these and other survey information presented in the report also provide valuable information on the degree to which DODIG employees have confidence in the integrity of these important internal processes, and, as mentioned, align with other information obtained during our review. As such, this information may help to inform DODIG’s efforts in addressing our recommendation to issue formal guidance documenting procedures for protecting the confidentiality of whistleblowers throughout its internal misconduct process, along with any future efforts to instill employee confidence in internal misconduct reporting mechanisms. DODIG also noted that portions of the report addressing restrictions on DODIG employee access to sensitive whistleblower records need further context, stating specifically that no DODIG employees outside of the Administrative Investigations directorate, Office of Professional Responsibility, and Office of General Counsel had access to any of the records, and that there was no evidence that any person without a need to know accessed any such records. However, information provided to us by DODIG does not show that accessibility was limited in all instances to employees within one of those DODIG offices. Also, the ability of any employee to access records that were specifically restricted to protect complainant identities or internal records belonging to the Office of Professional Responsibility is problematic given the increased sensitivity of such records. Further, while DODIG did not identify instances in which anyone without a need to know accessed the records, DODIG did not provide evidence that all cases of improper access were thoroughly investigated, as we state in our report, and the instances included in the report are examples and not inclusive of all instances of improper access identified by the DODIG. Nevertheless, it is positive that DODIG has reported taking corrective action to address instances of improper accessibility. It is also encouraging that DODIG plans to implement our recommendations, as the potential for unauthorized access will persist until it establishes cross-directorate controls in the case management system and enhances its processes for periodically reviewing user privileges for its whistleblower case management system and document repository. All of the military service IGs concurred with the recommendations directed to them. The Air Force and the Army IGs also provided comments on some of the report findings. In particular, the Air Force IG noted in relation to our third recommendation that language in Air Force Instruction 90-301, updated in December 2018, is essentially the same as 5 U.S.C. Appendix § 7, and that this language precludes Air Force officials at any level from waiving the requirement to inform complainants and employees of the requirement to not disclose their identities without their consent, unless the Inspector General determines such disclosure to be unavoidable. However, as stated in our report, Air Force guidance did not include requirements outlined in DOD Instruction 7050.01 related to the specific conditions under which information disclosures may be made without complainant consent. These include circumstances wherein a complainant has made it known outside IG channels that he or she submitted the complaint, there is an emergency situation or health or safety issue, or the allegation is being transferred outside of DOD to another IG. As a result, we continue to believe that without updated policies and procedures that fully implement confidentiality standards, the Air Force IG may not be able to ensure the consistent implementation of confidentiality protections. Separately, in relation to IG employee access of information, the Army IG stated that the processes it has in place provide judicious access and control of whistleblower information to achieve an appropriate balance between efficient operations and minimized risk. As stated in our report, DODIG’s 2018 quality assurance review of the Army IG found that the Army IG’s application did not restrict personnel without a need to know from accessing allegations involving Army IG personnel, contrasting with NIST guidelines, which predicate user access on the need to accomplish assigned tasks. Army IG officials acknowledged this issue, but stated that the Army IG had elected to not use existing resources to further develop its case management application in light of the enterprise system being developed by DODIG. As a result, we continue to believe that by considering actions prior to the advent of the enterprise system—which is not expected to be released to the Army IG until fiscal year 2021—the Army IG could mitigate risks to whistleblower confidentiality by reducing the potential for unauthorized IG employee access of whistleblower records. We are sending copies of this report to congressional committees; the Acting Secretary of Defense; the Department of Defense Principal Deputy Inspector General performing the duties of the Inspector General; the Inspectors General of the Air Force, the Army, the Navy, and the Marine Corps; the Office of Special Counsel; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. To determine the extent to which the Department of Defense Office of Inspector General (DODIG) and the military service offices of inspector general (IG) met and took steps to achieve key fiscal year 2018 timeliness and quality goals related to the handling of whistleblower complaints, we reviewed performance documentation and interviewed officials on DODIG and military service IG timeliness and quality goals, performance measures, and associated performance data for fiscal year 2018, along with ongoing and planned efforts to improve performance. We also reviewed fiscal year 2017 performance data for comparison purposes. We selected data from this period because they constituted the most complete and recent performance data available. Using the data, we assessed the extent to which DODIG and the military service IGs met timeliness and quality goals defined by statute and internal IG policy. Specifically, we assessed the timeliness of DOD Hotline referrals and completion reports against its internal goals, along with DODIG senior official misconduct and whistleblower reprisal intakes, investigations, and oversight reviews against internal and statutory goals. We also assessed the timeliness of military service IG senior official and reprisal notifications, intakes, and investigations against DOD and statutory goals, and reviewed the results of DODIG quality assessments for DOD Hotline referrals, military service investigations, and DODIG senior official and whistleblower reprisal investigations. We assessed the reliability of DODIG and military service IG data by administering questionnaires, interviewing cognizant officials, and reviewing case management system documentation and quality assurance procedures. We also compared select electronic data to fiscal years 2013 through 2017 case file documentation associated with our review of case files to determine whether dates had been properly recorded in the system. We determined that these data were sufficiently reliable for our purposes. To identify factors affecting timeliness and quality, we interviewed IG officials and reviewed relevant documentation including strategic plans, briefing materials, and semiannual reports to Congress. We also compared DODIG and military service IG completed and planned efforts to improve timeliness and quality against Council of the Inspectors General on Integrity and Efficiency (CIGIE) standards for federal IGs related to establishing performance plans with goals and performance measures, and Standards for Internal Control in the Federal Government related to assessing performance and improving performance. To determine the extent to which DODIG and the military service IGs have established processes to protect the confidentiality of whistleblowers, we assessed DOD and military service IG policies and procedures for handling whistleblower allegations against DOD policy, CIGIE standards for federal IGs, and statutory protections related to safeguarding whistleblower confidentiality. We also reviewed the results of DODIG’s quality assurance reviews of the Air Force (2017), Army (2018), and Naval (2016) IGs. We performed a web-based survey of the entire population of 108 DODIG Administrative Investigations directorate employees directly involved with the handling of whistleblower cases to ascertain whether, in their view, confidentiality processes are being implemented in accordance with guidance and standards, identify potential confidentiality violations, and to gather perceptions on the integrity of the internal process for reporting misconduct, among other things. We removed four employees from our initial population of 112 employees because two employees left DODIG prior to the initiation of our survey and two employees were new to the organization and therefore likely not familiar with the issues covered by the survey. To conduct the survey, we developed 27 questions covering (1) access to and protection of sensitive and classified whistleblower information; (2) confidentiality guidance, safeguards and identity disclosures; (3) resolving internal conflict through DODIG’s Office of the Ombuds; and (4) reporting misconduct through the internal DODIG process for DODIG employees to report misconduct. A survey specialist helped to develop these questions, and another survey specialist provided independent feedback on the questions to ensure that content necessary to understand the questions was included and that the questions could be answered accurately and completely. To minimize errors that might occur from respondents interpreting our questions differently than we intended, we pretested our survey with seven DODIG employees to ensure the clarity and reasonableness of the questions. During the pretests, conducted in person and by phone, DODIG employees read the instructions and each question out loud and told us whether (1) the instructions and questions were clear and unambiguous, (2) the terms we used were accurate, and (3) they could offer a potential solution to any problems identified. We also asked them for a mock answer to ensure that the questions were understood as intended. We noted any potential problems identified by the reviewers and through the pretests and modified the questionnaire based on the feedback received. A full listing of survey questions is provided in appendix IV. We conducted the survey between June 14, 2018, and July 6, 2018. To maximize our response rate, we sent reminder emails and contacted non- respondents by telephone to encourage them to complete the survey. In total, we received responses from 86 DODIG employees, achieving a response rate of 80 percent. Although not required, we assessed the potential for non-response bias by analyzing differences in the percent of DODIG employees per directorate and job position (e.g., investigator) that responded to our survey and the percent of potential DODIG respondents in each directorate and position. We found no meaningful differences between respondents and our population of potential respondents, indicating no evidence for non-response bias. Also, we took steps in the development of the survey, data collection, and data analysis to minimize nonsampling errors and help ensure the accuracy of the answers that were obtained. For example, a social-science survey specialist helped to design the questionnaire, in collaboration with analysts having subject- matter expertise. Then, as noted earlier, the draft questionnaire was pretested to ensure that questions were relevant, clearly stated, and easy to comprehend, and it was also reviewed by another specialist with expertise in survey development. We calculated the frequency of responses to our closed-ended survey questions and performed content analysis on the open-ended questions to identify common themes from across the responses and to determine their frequencies. The quantitative analysis was performed by one analyst and independently reviewed by another analyst. For the qualitative analysis, a standard coding scheme was developed to identify common themes and determine their frequencies. We also used professional judgment to identify other themes that were determined to be important based on our review of case files, discussions with DODIG management, and review of guidance and relevant standards. To determine the extent to which DODIG and the military service IGs are able to access and safeguard classified and sensitive information necessary to handle whistleblower complaints, we reviewed documentation and interviewed officials on the extent to which DODIG and the military service IGs have developed, implemented, and assessed key information technology (IT) security controls, and authorized the systems and applications used to process, store, and transmit sensitive whistleblower information per requirements and standards prescribed by DOD, the Office of Management and Budget, and the National Institute of Standards and Technology. Collectively, these documents delineate an array of documentary and procedural requirements related to the assessment of IT security controls and the authorization to operate IT systems and applications. We also reviewed plans and interviewed cognizant officials on the development and implementation of the Defense Case Activity Tracking System enterprise (D-CATSe)—DOD’s future system for managing whistleblower information across DODIG and the military service IGs, and reviewed DODIG’s quality assurance reviews of the Air Force (2017), Army (2018), and Naval IGs (2016). Separately, we reviewed data and information on the number and percentage of DODIG and military service IG classified cases closed in fiscal year 2017, the number and allocation of DODIG and military service IG staff possessing security clearances, and the processes and procedures for storing and accessing classified information within DODIG and the military service IGs against DOD policy related to establishing controls to ensure access to classified information is limited to authorized persons. We assessed the reliability of classified case data by administering questionnaires to cognizant officials, and determined the data were sufficiently reliable for the purpose of reporting the number of classified cases closed in fiscal year 2017. To determine the extent of substantiated and potential confidentiality violations and retaliatory investigations involving DODIG employees, we obtained and analyzed available fiscal year 2013 through 2018 data on known or perceived violations of confidentiality standards and retaliatory investigations from DODIG and the military service IGs. We selected data covering this period of time because they constituted the most recent and reliable data available, and because DODIG officials told us that data prior to fiscal year 2013 were unreliable. We also reviewed fiscal year 2013–2018 complaint data from the Office of Special Counsel and the CIGIE Integrity Committee in order to identify possible violations of confidentiality standards or retaliatory investigations. We assessed the reliability of DODIG and service IG data by administering questionnaires, interviewing cognizant officials, and reviewing the methods used to query IG case management systems for this information. We determined the data to be sufficiently reliable for the limited purpose of identifying potential confidentiality violations and retaliatory investigations. To evaluate the extent to which select misconduct and reprisal cases involving civilian DOD Presidential appointee with Senate confirmation (PAS) officials met key documentation and reporting requirements, we reviewed all 125 administrative misconduct and reprisal cases involving Senate-confirmed civilian official subjects that were dismissed by DODIG in fiscal years 2013 through 2017. We chose to review cases from this period because they constituted the most recent and complete data in DODIG’s case management system and would therefore most accurately reflect the extent to which the majority of DODIG’s cases included required documentation. Also, DODIG officials informed us that information on cases prior to the implementation of the current case management system in fiscal year 2013 were both incomplete and unreliable. During the course of our review, we removed five out-of-scope cases from the original population of 130 cases, reducing the number of cases in our population from 130 to 125. Four cases were removed because the related allegations were investigated, and one case was removed because it was a record used to track an investigation occurring at a military service IG. Table 8 shows the distribution per fiscal year of closed misconduct and reprisal cases involving civilian DOD PAS subjects by the result of the case. To conduct the case-file review, we developed and used a data collection instrument to guide our review regarding general case characteristics and the presence of information and documentation required by DOD policies and CIGIE best practices. Core elements of this instrument were shared with DODIG officials to ensure the instrument aligned with the policies and practices in place when the cases were dismissed. These core elements represented individual documents and data elements. We incorporated DODIG’s feedback into our instrument before commencing the file review. Examples of elements in our review that represent key data in DODIG’s database or constitute documentation of key steps of the case-handling process include the following: case open date, case close date, disposition of the matter at intake, dismissal rationale. To validate the data collection instrument and ensure consistency in its application, we developed and followed standard procedures to review a test sample of 11 case files that were selected from each stratum of cases (e.g., misconduct) to ensure that each case type was tested at least once. In reviewing the sample, we adjusted the relevant case file elements for each case based on its type and circumstances and captured responses in our data collection instrument accordingly. To help ensure the accuracy of the information we collected, one analyst reviewed each casefile and coded for the presence of required information using the data collection instrument, and another analyst reviewed the first analyst’s work. In the event that disagreement between the two analysts occurred, the analysts discussed and resolved the disagreement by identifying and reviewing supporting database information or documentation, and obtaining the input of a third analyst, if necessary, until a final resolution was made. We reviewed all cases dismissed during this period; for this reason, the results of this analysis do not have a sampling error. To identify other characteristics of DODIG cases involving civilian DOD PAS officials, we also analyzed fiscal years 2013-2017 case data to determine the number of cases closed by fiscal year, case types, case dispositions, source organizations, and the frequency and type of alleged misconduct. Separately, we also reviewed documentation from DODIG on civilian DOD PAS official allegations and investigation results reported to the Secretary of Defense and Congress since fiscal year 2013. In addressing our objectives, we met with officials from the organizations identified in table 9. We conducted this performance audit from October 2016 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. While this audit was initiated in October 2016, work was suspended from December 2016 until September 2017 due to other engagement work. This appendix provides additional examples of Department of Defense Office of Inspector General (DODIG) timeliness improvement initiatives. According to DODIG officials, recent steps to improve the timeliness of whistleblower reprisal and senior official misconduct intakes, investigations, and oversight reviews include: Transferring the intake of most military reprisal complaints to the DODIG oversight branch for increased consistency. Changing the intake metric from 30 to 45 days for non-military reprisal cases to allow for more robust intakes. Not requiring a clarification interview when a written reprisal complaint is clear. Requesting documents from the employer at the intake stage in contractor reprisal cases. Interviewing subjects early in the investigation, when appropriate. Conducting investigative travel only when doing so would save time or for other compelling reasons. Otherwise, most interviews are conducted by phone or video teleconference and information is requested in opening letters for investigations to facilitate early receipt of documentary evidence. Using summary reports of investigation to facilitate timelier report- writing and review. DODIG issued 24 summary reports in fiscal year 2018, starting in May, for simple, non-substantiated investigations. Eliminating the requirement to conduct peer reviews of the reprisal reports of investigation, except at supervisors’ discretion. Using standardized complaint notification and determination forms across DOD to formalize the processing of complaints received by component and service IGs. Implementing a more robust intake process for senior official misconduct investigations, which includes complaint clarifications and more investigative work. According to DODIG officials, most of the complaints reviewed during this new process would have otherwise been investigated by DODIG or the military service IGs, with a negative impact on the overall timeliness of investigations. Authorizing the military service IGs to close and simultaneously notify the DODIG reprisal investigations directorate of actions taken for complaints relating to uncooperative complainants, untimely complaints, and withdrawn complaints. This has increased notification rates and decreased processing time, according to DODIG officials. This appendix provides information on the characteristics of closed and dismissed misconduct and reprisal cases involving civilian DOD Presidential appointee with Senate confirmation (PAS) officials based on our analysis of fiscal year 2013 through fiscal year 2017 case data from the Department of Defense Office of Inspector General (DODIG) case- management system and our review of dismissed cases. DODIG closed 129 cases from October 1, 2012, through September 30, 2017, of which 125 were dismissed. Of the 125 dismissed cases, 117 were misconduct cases and eight were reprisal cases. DODIG dismissed 125 civilian DOD PAS official misconduct and reprisal cases. The largest number of cases—40 (32 percent)—were submitted by defense agency employees. Employees from the Navy submitted the next highest number of complaints, with 31 (25 percent), followed by the Army, which accounted for 26 (21 percent) of the complaints. Figure 9 shows the percentage of dismissed cases closed from fiscal years 2013 through 2017, by organizational source. Our review of the 125 dismissed civilian DOD PAS official cases closed by DODIG from fiscal years 2013 through 2017 showed that the majority of cases were closed in 30 days or less. Specifically, approximately 81 percent of the cases were closed in 30 days or less, and 58 percent of the cases were closed in 10 days or less. Table 10 groups the cases dismissed in each fiscal year from fiscal years 2013 through 2017 by the number of days to close. We reviewed data on the number and type of allegations made against civilian DOD PAS officials in the 117 closed misconduct cases from fiscal years 2013 through 2017. In total, there were 152 allegations across the 117 closed cases. Allegations are grouped into 13 broad categories and 38 sub-allegation categories. From fiscal years 2013 through 2017, we found that the greatest proportion of allegations, at 47 percent, were personal misconduct and ethical violations. Personnel matters—at 14 percent—and “other”—an indeterminate category at 12 percent—were the next two largest in proportion of allegations. Figure 10 provides the percentages of allegations in closed misconduct cases from fiscal years 2013 through 2017. GAO administered the survey questions shown in this appendix to learn more about DODIG processes related to the access and protection of whistleblower records, and the avenues available to DODIG employees to resolve conflict and report alleged misconduct themselves. The survey was divided into four sections: information access and protection, confidentiality, resolving internal conflict, and reporting misconduct. Survey questions without response options were open-ended. This appendix accurately shows the content of the web-based survey but the format of the questions and responses options have been changed for readability in this report. For more information about our methodology for designing and administering the survey, see appendix I. 1. How long have you worked in Administrative Investigations (AI)? Please consider your full tenure across all AI directorates (DOD Hotline, Investigations of Senior Officials, and Whistleblower Reprisal Investigations) if you have worked in more than one directorate. (Response options provided: radio buttons labeled “Less than 1 year,” “1 year or more but less than 5 years,” “5 years or more but less than 10 years,” and “10 years or more.”) SECTION I: Information Access and Protection 2. Formal training (in-person/w eb-based) Informal training (staff meetings/briefings) Please describe any other guidance you have received . ii. Do you believe the guidance identified above is sufficient or insufficient in specifying requirements for properly securing whistleblower records in your directorate? Select only one \u0000 Sufficient  SKIP to Question 4 Insufficient  Continue to 1 below \u0000 Not sure  SKIP to Question 4 1. Why do you believe the guidance is insufficient? SKIP to iii. Would guidance that specifies access restrictions and security controls for handling whistleblower records be helpful? (Response options provided: radio button labeled “yes” and “no.”) 1. Please explain why guidance would or would not be helpful. 4. Are you aware of any controls in place to restrict access to D-CATS records to only DODIG employees (either within or outside your directorate) with a need to know? Select only one \u0000 Yes  Continue to i \u0000 No  SKIP to Question 5 I’m not sure  SKIP to Question 5 i. Please describe the control(s) in place to restrict access to D- CATS records. 5. During your tenure at DODIG, have you or other DODIG employees (either within or outside your directorate) been able to access records in D-CATS without a need to know? This applies to potential access to records, regardless of whether anyone actually accessed records or not. \u0000 Yes  Continue to i \u0000 No  SKIP to Question 6 I don’t know  SKIP to Question 6 i. Which DODIG directorate’s records have you or other DODIG employees been able to access without a need to know? (Response options provided: checkboxes labeled “DOD Hotline,” “Investigations of Senior Officials,” “Whistleblower Reprisal Investigations,” and “Office of Professional Responsibility.”) ii. Are you aware of any actions taken to address the ability of DODIG employees to access records without a need to know? Examples of actions taken include a policy or procedure change, additional guidance, or other actions taken. \u0000 Yes  Continue to 1 below \u0000 No  SKIP to 2 below 1. Please describe the action(s) taken. 2. What improvements, if any, could be made to address the ability of DODIG employees to access records without a need to know? 6. Do you believe protections are sufficient or insufficient to ensure only DODIG employees with a need to know can access records in D- CATS? Select only one \u0000 Sufficient  Continue to i \u0000 Not sure  SKIP to Question 7 i. Why do you believe the protections are sufficient or insufficient? 7. Are you able to access classified information when needed to perform the duties required of your position? Select only one \u0000 Yes  SKIP to Question 8 \u0000 No  Continue to i I do not require access to classified information to perform the duties of my position  SKIP to Question 8 i. Formal training (in-person/w eb- based) Informal training (staff meetings/briefings) Please describe any other guidance you have received. Formal training (in-person/w eb- based) Informal training (staff meetings/briefings) Please describe any other guidance you have received. ii. Do you believe the guidance identified above is sufficient or insufficient in specifying how to determine whether disclosing the identity of a complainant or source (e.g., witness) is unavoidable? \u0000 Sufficient  SKIP to 2 below Insufficient  Continue to 1 below \u0000 Not sure  SKIP to 2 below 1. Why do you believe the guidance is insufficient? 2. What improvements, if any, do you think could be made to guidance specifying how to determine whether disclosing the identity of a complainant or source (e.g., witness) is unavoidable? (After answering, SKIP to Question 12) iii. Would guidance that specifies how to determine whether disclosing the identity of a complainant or source (e.g., witness) is unavoidable be helpful? (Response options provided: radio buttons labeled “yes” and “no.”) 1. Please explain why guidance would or would not be helpful. 12. To your knowledge, is there one or more official(s) who is responsible for determining whether disclosing the identity of a complainant or source (e.g., witness) is unavoidable? \u0000 Yes  Continue to i \u0000 No  SKIP to Question 13 I don’t know  SKIP to Question 13 i. Who is responsible for determining whether disclosing the identity of a complainant or source (e.g., witness) is unavoidable? 13. While working in AI, have you ever encountered a situation where disclosing the identity of a complainant or source (e.g., witness) was unavoidable? \u0000 Yes  Continue to i \u0000 No  SKIP to Question 14 i. Please describe the general circumstance(s) and the steps you took to verify that the circumstance(s) required disclosing the identity of a complainant or source (e.g., witness). Please do not provide individual names related to the actors involved. 14. Between June 1, 2017, and today, are you aware — either by experiencing firsthand or directly observing actions of another person – of an instance where the identity of a complainant or source (e.g., witness) was disclosed by a DODIG employee to an organization or individual without a need to know (i.e., an avoidable disclosure)? Please check only one below. \u0000 No, I am not aware of any avoidable disclosures  SKIP to \u0000 Yes, I am aware of one or more avoidable disclosure(s)  Continue to i i. How many avoidable disclosures are you aware of between June 1, 2017, and today? For example, if the identity of a complainant was revealed to one person who did not have a need to know, please consider that event as one instance. Similarly, if the identity of a source was revealed separately to two different people who did not have a need to know, please consider those events as two instances. ii. Please describe any actions taken in response to the avoidable disclosure(s) you are aware of between June 1, 2017, and today. Examples of actions taken include but may not be limited to retracting/recalling a referred complaint, a change to policy, procedure or guidance, and notifying the complainant or source, among other actions. 15. What improvements, if any, could be made to prevent avoidable disclosures from happening in the future? 16. Please describe any best practices that you follow to help prevent avoidable disclosures. SECTION III: Resolving Internal Conflict 17. Have you ever contacted the DODIG Office of the Ombuds or participated in a DODIG Office of the Ombuds activity in order to address conflict among DODIG employees? Examples of DODIG Office of the Ombuds activities include but are not limited to providing confidential advice for resolving conflict among peers and supervisors and participating in an Ombuds-led mediation among DODIG employees. \u0000 Yes  Continue to i \u0000 No, but I know about the DODIG Office of the Ombuds  I do not know about the DODIG Office of the Ombuds  SKIP to the next section i. Do you believe the DODIG Office of the Ombuds provided or is providing sufficient or insufficient assistance to address the conflict(s) for which you contacted the Ombuds or participated in an Ombuds activity? \u0000 Sufficient  Continue to 1 Insufficient  Continue to 1 \u0000 Too soon to tell  Continue to 1 1. Please describe, in general terms, your latest experience working with the DODIG Office of the Ombuds. Please do not provide the names of individuals involved with your experience. 18. Have you ever considered reaching out to the DODIG Office of the Ombuds, but ultimately chose not to? \u0000 Yes  Continue to i \u0000 No  SKIP to the next section i. How much, if at all, did each of the following contribute to your decision not to utilize DODIG Office of the Ombuds services? Select one in each row. Resolved the issue through another avenue Not sure how to initiate contact w ith the Ombuds Concern about length of process Concern about objectivity or conflict of interest w ithin the Office of the Ombuds Fear that confidentiality w ould be compromised Fear of retaliation or reprisal from w ithin DODIG Please describe any other factor(s) that contributed to your decision not to utilize DODIG Office of the Ombuds services. SECTION IV: Reporting Misconduct 19. As a DODIG employee, have you ever personally reported misconduct against another DODIG employee through DODIG’s internal process for investigating alleged misconduct? For the purposes of this survey, “misconduct” refers to (1) a violation of a provision of criminal law, (2) a violation of a recognized standard, such as a federal or DOD regulation, or (3) a matter of concern involving DOD leadership that could reasonably be expected to be of significance to DODIG. \u0000 Yes  Continue to i \u0000 No  SKIP to iii i. Did you report misconduct on or before September 30, 2016? \u0000 Yes  Continue to 1 below \u0000 No  SKIP to ii 1. Do you believe your report(s) of misconduct on or before September 30, 2016 were investigated in a fair and objective manner? (Response options provided: radio buttons labeled “yes” and “no.”) a. Please describe your general experience(s) in reporting misconduct against a DODIG employee on or before September 30, 2016, including why you do or do not believe your report(s) of misconduct were investigated in a fair and objective manner. Please do not provide the names of individuals related to the misconduct you reported. ii. Did you report misconduct on or after October 1, 2016? \u0000 Yes  Continue to 1 below \u0000 No  SKIP to Question 20 1. Do you believe your report(s) of misconduct on or after October 1, 2016 were investigated in a fair and objective manner? (Response options provided: radio buttons labeled “yes,” “no,” and “too early to have an opinion”) a. Please describe your general experience(s) in reporting misconduct against a DODIG employee on or after October 1, 2016, including why you do or do not believe your report(s) of misconduct were investigated in a fair and objective manner. Please do not provide the names of individuals related to the misconduct you reported. iii. Do you know how to report misconduct against another DODIG employee through DODIG’s internal process? (Response options provided: radio buttons labeled “yes” and “no.”) 20. Thinking about the time period on or before September 30, 2016, did you ever consider reporting misconduct against a DODIG employee through DODIG’s internal process, but ultimately choose not to? \u0000 Yes  Continue to i \u0000 No  SKIP to Question 21 i. How much, if at all, did each of the following contribute to your decision not to report incident(s) of misconduct on or before September 30, 2016? Select one in each row. Resolved the issue through another avenue Not sure how to report misconduct Concern about length of process Concern about objectivity or conflict of interest w ithin DODIG’s internal process to report misconduct Fear that confidentiality w ould be compromised Fear of retaliation or reprisal from w ithin DODIG Please describe any other factor(s) that contributed to your decision not to report incidents of misconduct on or before September 30, 2016. 21. Thinking about the time period on or after October 1, 2016, did you ever consider reporting misconduct against a DODIG employee through DODIG’s internal process, but ultimately choose not to? \u0000 Yes  Continue to i below \u0000 No  SKIP to Question 22 i. How much, if at all, did each of the following contribute to your decision not to report incident(s) of misconduct on or after October 1, 2016? Select one in each row. Resolved the issue through another avenue Not sure how to report misconduct Concern about length of process Concern about objectivity or conflict of interest w ithin DODIG’s internal process to report misconduct Fear that confidentiality w ould be compromised Fear of retaliation or reprisal from w ithin DODIG Please describe any other factor(s) that contributed to your decision not to report incidents of misconduct on or after October 1, 2016. 22. How well, if at all, do you believe DODIG’s internal process for reporting misconduct protects the confidentiality of DODIG employees? (Response options provided: radio buttons labeled “Not at all,” “Slightly,” “Somewhat,” “Very well,” and “I don’t know.”) 23. What improvements, if any, do you think could be made to DODIG’s internal process for reporting misconduct to protect the confidentiality of DODIG employees? 24. How well, if at all, do you believe DODIG’s internal process handles misconduct allegations against DODIG employees? This includes activities associated with both assessing incoming complaints and subsequently investigating them, as appropriate. (Response options provided: radio buttons labeled “Not at all,” “Slightly,” “Somewhat,” “Very well,” and “I don’t know.”) 25. What factors contribute to your opinion about DODIG’s internal process for handling misconduct allegations against DODIG employees? 26. What improvements, if any, do you think could be made to DODIG’s internal process to improve the handling of misconduct allegations? 27. If you would like to comment on any of the topics covered by this survey, or anything else that you feel might be relevant to our review on the DOD whistleblower program, please do so below. In addition to the contact named above, Alissa Czyz (Assistant Director),Tracy Barnes, Amy Bush, Nicole Collier, Ryan D’Amore, Chad Hinsch, Linda Keefer, Kevin Keith, Amie Lesser, Serena Lo, Michael Silver, and Lillian Yob made key contributions to this report. Office of Special Counsel: Actions Needed to Improve Processing of Prohibited Personnel Practice and Whistleblower Disclosure Cases. GAO-18-400. Washington, D.C.: June 14, 2018. NASA Contractor Whistleblowers: Steps Taken to Implement Program but Improvements to Timeliness and Guidance Needed. GAO-18-262. Washington, D.C.: March 8, 2018. Whistleblower Protection: Opportunities Exist for DOD to Improve the Timeliness and Quality of Civilian and Contractor Reprisal Investigations. GAO-17-506. Washington, D.C.: September 29, 2017. Contractor Whistleblower Protections Pilot Program: Improvements Needed to Ensure Effective Implementation. GAO-17-227. Washington, D.C.: March 2, 2017. Whistleblower Protection: Additional Actions Would Improve Recording and Reporting of Appeals Data. GAO-17-110. Washington, D.C.: November 28, 2016. Whistleblower Protection: DOD Has Improved Oversight for Reprisal Investigations but Can Take Additional Actions to Standardize Process and Reporting. GAO-16-860T. Washington, D.C.: September 7, 2016. Department of Energy: Whistleblower Protections Need Strengthening. GAO-16-618. Washington, D.C.: July 11, 2016. Whistleblower Protection: DOD Needs to Enhance Oversight of Military Whistleblower Reprisal Investigations. GAO-15-477. Washington, D.C.: May 7, 2015. Whistleblower Protection: Additional Actions Needed to Improve DOJ’s Handling of FBI Retaliation Complaints. GAO-15-112. Washington, D.C.: January 23, 2015. Whistleblower Protection Program: Opportunities Exist for OSHA and DOT to Strengthen Collaborative Mechanisms. GAO-14-286. Washington, D.C.: March 19, 2014. Whistleblower Protection: Actions Needed to Improve DOD’s Military Whistleblower Reprisal Program. GAO-12-362. Washington, D.C.: February 22, 2012.", "summary": "Safeguarding confidentiality to the maximum extent possible is essential for encouraging whistleblowers to report wrongdoing without fear of reprisal. In fiscal year 2018, DODIG received over 12,000 contacts from potential whistleblowers related to fraud, waste, abuse, employee misconduct, or other violations. The National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to review the integrity of DOD's whistleblower program. This report assesses the extent to which DODIG and the military service IGs (1) met and took steps to achieve key fiscal year 2018 timeliness and quality goals, (2) established processes to protect whistleblower confidentiality, and (3) are able to safeguard sensitive information necessary to handle whistleblower complaints. It also evaluates (4) the extent to which select cases involving certain senior DOD civilian officials met key requirements. GAO assessed fiscal year 2018 IG performance data, surveyed all 108 DODIG employees who directly handle whistleblower complaints, reviewed IT security controls, and analyzed all 125 cases involving civilian DOD Presidential appointees with Senate confirmation dismissed by DODIG in fiscal years 2013-2017. The Department of Defense Office of Inspector General (DODIG) and military service offices of inspector general (IG) met some but not all fiscal year 2018 timeliness and quality goals for handling whistleblower complaints. For example, DODIG met its goals related to referring complaints to the appropriate agency within a certain number of days. All IGs also generally met goals related to the quality of investigations. However, about 85 percent of DODIG reprisal and senior official misconduct investigations exceeded statutory and internal timeliness goals. Further, military service IGs did not meet most goals for handling cases within prescribed timeframes. For example, the service IGs averaged between 17 and 84 days to notify DODIG of their receipt of whistleblower reprisal allegations, exceeding the 10-day goal. The IGs have various initiatives underway to improve timeliness, such as a Naval IG program to reduce timeframes for initial credibility determinations. However, additional actions could provide a more targeted approach to improving performance against unmet timeliness goals—such as for senior official misconduct investigations—and better assure whistleblowers that their cases will be handled expeditiously. DODIG and the military service IGs have policies to protect whistleblower confidentiality, but some gaps exist. For example, DODIG guidance for protecting whistleblowers who report internal DODIG misconduct does not specify key steps investigators should take to protect confidentiality, such as not identifying complainants during interviews with case subjects. Also, Air Force, Naval, and Marine Corps IG guidance does not specify when whistleblower identities can be disclosed without consent. Without updated guidance, the IGs cannot ensure the consistent implementation of confidentiality protections. The IGs have taken steps to safeguard whistleblower information in their information technology (IT) systems and applications, such as by restricting access to case information through unique user permissions and by taking actions to follow DOD's IT risk management process. However, between 2016 and 2018, employees in all of the IGs have been able to access sensitive whistleblower information without a need to know. For example, DODIG determined that numerous restricted whistleblower records in its document repository were accessible to DODIG personnel without a need to know. Similarly, the Air Force IG's application did not restrict users from other DOD components from viewing Air Force IG case descriptions and complainant identities, while the Army IG's application and the Naval IG's system did not restrict personnel within those IGs from viewing allegations or investigations involving other personnel within those IGs. Additionally, employees in Marine Corps IG offices were able to see whistleblower cases assigned to other IG offices without a need to know. While some actions have been taken to address these issues, additional steps are needed to restrict access to case information in order to mitigate ongoing risks to whistleblower confidentiality. DODIG generally met key documentation requirements for the 125 cases it dismissed without investigation involving civilian DOD Presidential appointees with Senate confirmation. GAO is making 12 recommendations, including that the IGs take additional actions to improve timeliness, develop additional procedures to protect whistleblower confidentiality, and take steps to further limit IG employee access to sensitive whistleblower information. DOD concurred with all of the recommendations.", "document_type": "gao"}
{"report": "Cybersecurity issues can vary widely across different types of systems, so weapon systems cybersecurity challenges may be very different than those of some IT systems. Despite variation across systems, cybersecurity can be described using common terminology, such as the key terms below used by the National Research Council. Key Concept Security Controls are safeguards or countermeasures to protect the confidentiality, integrity, and availability of a system and its information. For example, a firewall is a common control to allow or block traffic based on a set of rules. Because it is impossible to define a rule for every scenario, attackers look for ways to access a system that are not covered by the rules. For example, a firewall may block traffic from a specific country, but attackers may make it appear that they are in a country that is not blocked. They may use tools to avoid the firewall, such as embedding malicious software in an e-mail and waiting for a user to open it and inadvertently install the code. A cyber vulnerability is a weakness in a system that could be exploited to gain access or otherwise affect the system’s confidentiality, integrity, and availability. A cybersecurity threat is anything that can exploit a vulnerability to harm a system, either intentionally or by accident. Cybersecurity risk is a function of the threat (intent and capabilities), vulnerabilities (inherent or introduced), and consequences (fixable or fatal). Although some weapon systems are purely IT systems, most—such as aircraft, missiles, and ships—are what the National Institute of Standards and Technology (NIST) and sometimes DOD refer to as “cyber-physical systems.” NIST defines these systems as “co-engineered interacting networks of physical and computational components.” These cyber systems can affect the physical world so the consequences of a cyber attack may be greater than those of attacks on other types of systems. For example, an attack on a weapon system could have physical consequences that may even result in loss of life. Nevertheless, weapon systems share many of the same cyber vulnerabilities as other types of automated information systems. Weapon systems are large, complex, systems of systems that have a wide variety of shapes and sizes, with varying functionality. Despite obvious differences in form, function, and complexity, weapon systems and other types of systems are similar in some important, if not obvious, ways. For example, DOD reports state that many weapon systems rely on commercial and open source software and are subject to any cyber vulnerabilities that come with them. Weapon systems also rely on firewalls and other common security controls to prevent cyberattacks. Weapon system security controls can also be exploited or bypassed if the system is not properly configured. Finally, weapon systems are operated by people—a significant source of cybersecurity vulnerability for any system. One common way to discuss cybersecurity is through the activities necessary to defend (or attack) a system. System developers and operators take steps to protect the system from cyber attacks, while attackers attempt to defeat those protections as depicted in figure 1. The cyber attack sequence is also referred to as a cyber kill chain or cyber attack lifecycle. There are multiple models for understanding cyber attacks, each with their own terminology and sequence of steps. The attack sequence below is simpler, but generally consistent with existing cybersecurity models. We identified the defend sequence below based on the steps included in cybersecurity test reports that we reviewed. Example: Importance of Patching in a Timely Manner In the 2017 Equifax cyber attack, personal data for over 145 million people were exposed. Attackers took advantage of a vulnerability in a commonly used web application to access Equifax’s credit reporting system. A patch for the vulnerability was available in March, but Equifax had not applied it by the time of the attack—in mid- May. A cyber attacker looks for ways to get around security controls in order to obtain full or partial control of the system. An attacker typically starts by learning as much as possible about the system—potentially through cyber reconnaissance—to identify vulnerabilities in the system. The more attackers know about the system, the more options they have when designing an attack. An attacker may identify a previously unknown vulnerability that the system owner is unaware of. Or the attacker could look for system components that had not applied known security updates—also called “patches.” Developers of commercial components usually publicly announce any security patches and, ironically, provide a roadmap for an attacker to attack a system or component. An attack may not happen all at once—an attacker may find the easiest way to gain initial access and then look for ways to expand their access until they reach their ultimate goal. Even once they achieve full access to a system, an attacker may wait for an opportune time to attack the confidentiality, integrity, or availability of a system. Types of attacks are described in appendix II. The system owner wants to prevent, or at least limit, attempts to adversely affect the confidentiality, integrity, or availability of the system. The owner implements security controls such as firewalls, role-based access controls, and encryption to reduce the number of potential attack points. Many controls need to be designed into the system early in the development cycle. Ideally, the controls are designed to work together and there may be layers of controls that an attacker would have to defeat in order to gain control of the system—referred to as “defense in depth.” Key Concepts Role-based access entails allowing users to only access information and features necessary to carry out their job. Encryption is a way of transforming information so that only authorized users are able to read it. Protecting a system also includes administrative processes, such as requiring users to regularly change their passwords and applying patches on a regular schedule—referred to as cyber hygiene. However, no system can be completely secure, so system owners must also constantly monitor their systems for suspicious activity. Logging is a common system feature that automatically records system activity. Unusual patterns such as numerous failed log-in attempts from a remote location could indicate that an unauthorized person is trying to gain access to the system. Once such a cyber activity is detected, the system owner needs to take steps to end the attack and restore any system capabilities that were degraded as a result of the attacker’s actions. We reported in 2015 that federal and contractor systems face an evolving array of cyber-based threats, including criminals, hackers, adversarial nations, and terrorists. Threats can range from relatively unskilled “script kiddies” who only use existing computer scripts or code to hack into computers, to well-resourced and highly skilled advanced threats who not only have sophisticated hacking skills, but also normally gather detailed knowledge of the systems they attack. Table 1 provides brief descriptions of the terminology DOD uses to categorize threats. Weapons systems are developed, acquired, and deployed within the defense acquisition system, a system of statutes and regulations. Subject to control of the DOD, the Army, Air Force, Navy, and Marine Corps by law have authority to “organize, train, and equip” their services. Their decisions regarding what to develop and how best to do so are informed by documents and deliberations under DOD’s requirements and acquisition processes respectively. Early in the acquisition lifecycle, the requirements process identifies what capabilities are needed and evaluates options to best meet those needs. The acquisition process is a gated review process that assesses programs against established review criteria, such as the program’s cost, schedule, performance, and whether the weapon system is ready to move forward in the acquisition process. Numerous military-service entities are involved in these processes. Key enterprise-level organizations include the Joint Staff and Office of the Secretary of Defense organizations, such as the Office of the Under Secretary of Defense (Acquisition and Sustainment), Office of the Under Secretary of Defense (Research and Engineering), and the Director of Operational Test and Evaluation (DOT&E). Example: Increased Reliance on Software In the 2015 JEEP Cherokee cyber attack, researchers remotely took physical control of a JEEP, including shutting off the engine and controlling the brakes. In 2016, we reported that electronic systems control multiple passenger vehicle functions and that vehicles include multiple interfaces that leave them vulnerable to cyber attacks. Researchers studied a JEEP to understand its systems, including the characteristics of its software code and its \"CAN Bus,\" which connects to units that control core vehicle functions. They remotely accessed an Internet-connected component and used it as an initial entry point to access the vehicle's CAN Bus, which then allowed them to control many of the JEEP’s functions. Just as many DOD organizations are responsible for weapon systems acquisitions, many have responsibilities related to cybersecurity during the acquisition process. For example, program offices are responsible for planning and implementing cybersecurity measures for the system under development. Authorizing officials are responsible for overseeing programs’ adherence to security controls and for authorizing a system’s entry into operations based on the system having an acceptable level of cyber risk. At key decision points, the Office of the Under Secretary of Defense (Research and Engineering) is responsible for advising the Secretary of Defense and providing independent technical risk assessments that address a variety of topics, including the system’s cybersecurity posture. Military test organizations conduct cybersecurity assessments of weapon systems. DOT&E oversees those tests and is funding research on the cybersecurity of some weapon system components that pose particular cybersecurity challenges. Organizations that are traditionally associated with cybersecurity, such as NSA and Cyber Command, support some aspects of weapon systems cybersecurity. However, they are not responsible for reviewing the designs of most weapon systems to identify potential vulnerabilities, although NSA officials said that they will provide advice to acquisition programs if asked to do so. More information about these roles and responsibilities is included in appendix III. Multiple factors contribute to the current state of DOD weapon systems cybersecurity, including: the increasingly computerized and networked nature of DOD weapons, DOD’s past failure to prioritize weapon systems cybersecurity, and DOD’s nascent understanding of how best to develop more cyber secure weapon systems. Specifically, DOD weapon systems are more software and IT dependent and more networked than ever before. This has transformed weapon capabilities and is a fundamental enabler of the United States’ modern military capabilities. Yet this change has come at a cost. More weapon components can now be attacked using cyber capabilities. Furthermore, networks can be used as a pathway to attack other systems. We and others have warned of these risks for decades. Nevertheless, until recently, DOD did not prioritize cybersecurity in weapon systems acquisitions. In part because DOD historically focused on the cybersecurity of its networks but not weapon systems themselves, DOD is in the early stage of trying to understand how to apply cybersecurity to weapon systems. Several DOD officials explained that it will take some time, and possibly some missteps, for the department to learn what works and does not work with respect to weapon systems cybersecurity. DOD’s weapon systems are increasingly dependent on software and IT to achieve their intended performance. The amount of software in today’s weapon systems is growing exponentially and is embedded in numerous technologically complex subsystems, which include hardware and a variety of IT components, as depicted in figure 2. Nearly all weapon system functions are enabled by computers—ranging from basic life support functions, such as maintaining stable oxygen levels in aircraft, to intercepting incoming missiles. DOD has actively sought ways to introduce this automation into weapon systems. For example, we have reported that for decades, the Navy has sought to reduce ship crew size based, in part, on the assumption that some manual tasks could be automated and fewer people would be needed to operate a ship. Yet this growing dependence on software and IT comes at a price. It significantly expands weapons’ attack surfaces. According to DOT&E, any exchange of information is a potential access point for an adversary. Even “air gapped” systems that do not directly connect to the Internet for security reasons could potentially be accessed by other means, such as USB devices and compact discs. Weapon systems have a wide variety of interfaces, some of which are not obvious, that could be used as pathways for adversaries to access the systems, as is shown in figure 3. DOD systems are also more connected than ever before, which can introduce vulnerabilities and make systems more difficult to defend. According to the DSB, nearly every conceivable component in DOD is networked. Weapon systems connect to DOD’s extensive set of networks—called the DOD Information Network—and sometimes to external networks, such as those of defense contractors. Technology systems, logistics, personnel, and other business-related systems sometimes connect to the same networks as weapon systems. Furthermore, some weapon systems may not connect directly to a network, but connect to other systems, such as electrical systems, that may connect directly to the public Internet, as is depicted in figure 4. These connections help facilitate information exchanges that benefit weapon systems and their operators in many ways—such as command and control of the weapons, communications, and battlespace awareness. If attackers can access one of those systems, they may be able to reach any of the others through the connecting networks. Many officials we met with stated that including weapon systems on the same networks with less protected systems puts those weapon systems at risk. Furthermore, the networks themselves are vulnerable. DOT&E found that some networks were not survivable in a cyber-contested environment and the DSB reported in 2013 that “the adversary is in our networks.” Further complicating matters, weapon systems are dependent on external systems, such as positioning and navigation systems and command and control systems in order to carry out their missions—and their missions can be compromised by attacks on those other systems. A successful attack on one of the systems the weapon depends on can potentially limit the weapon’s effectiveness, prevent it from achieving its mission, or even cause physical damage and loss of life. We and other organizations have identified risks associated with increased reliance on software and networking since at least the early 1990s, as is shown in table 2. Nevertheless, DOD has only recently begun prioritizing weapon systems cybersecurity. Instead, for many years, DOD focused cybersecurity efforts on protecting networks and traditional IT systems, such as accounting systems, rather than weapons. Experts we interviewed as well as officials from program offices, the Office of the Secretary of Defense, and some military test organizations explained that, until around 2014, there was a general lack of emphasis on cybersecurity throughout the weapon systems acquisition process. Others have reported similar findings. For example, the DSB reported in 2013 that although DOD had taken great care to secure the use and operation of the hardware of its weapon systems, it had not devoted the same level of resources and attention to IT systems that support and operate those weapons and critical IT capabilities embedded within the weapon systems. The National Research Council reported in 2014 that much broader and more systematic attention to cybersecurity was needed in the acquisition process and that the Navy was in the “crawl” stage of a “crawl-walk-run” journey. Similarly, the Navy reported in 2015 that there was a lack of attention to cybersecurity in the acquisition process and platform IT systems were not engineered with cybersecurity as a key component. In the past, consideration of cybersecurity was not a focus of the key processes governing the development of weapon systems. It was not a focus of key acquisition and requirements policies nor was it a focus of key documents that inform decision-making. For example, until a few years ago, DOD’s main requirements policy did not call for programs to factor cyber survivability into their key performance parameters. Key performance parameters are the most important system capabilities, called “requirements,” that must be met when developing weapon systems. They are established early on in an acquisition program and drive system design decisions. They are also used as a benchmark to measure program performance and are reviewed during acquisition decisions and other oversight processes. Because cybersecurity key performance parameters were not required, Joint Staff officials and some program officials said that many current weapon systems had no high- level cybersecurity requirements when they began, which in turn limited emphasis on cybersecurity during weapon system design, development, and oversight. In addition, Joint Staff officials said that, historically, cybersecurity was not a factor in analyses of alternatives. This analysis is an important early step in acquiring a new weapon system and informs decisions about the relative effectiveness, costs, and risks of potential systems that could be developed. By not considering cybersecurity in these analyses, decisions about which system to develop were made without consideration of whether one proposed system might be more inherently vulnerable from a cyber perspective than others. Programs’ lack of cybersecurity requirements may have also contributed to challenges with incorporating cybersecurity into weapon systems testing. Specifically, DOT&E and service test agencies said that prior to around 2014, program offices tried to avoid undergoing cybersecurity assessments because they did not have cybersecurity requirements and therefore thought they should not be evaluated. Furthermore, test officials said that many within DOD did not believe cybersecurity applied to weapon systems. As a result, fewer cybersecurity assessments were conducted at that time in comparison to recent years. By not incorporating cybersecurity into key aspects of the requirements and acquisition processes, DOD missed an opportunity to give cybersecurity a more prominent role in key acquisition decisions. Numerous officials we met with said that this failure to address weapon systems cybersecurity sooner will have long-lasting effects on the department. Due to this lack of focus on weapon systems cybersecurity, DOD likely has an entire generation of systems that were designed and built without adequately considering cybersecurity. Bolting on cybersecurity late in the development cycle or after a system has been deployed is more difficult and costly than designing it in from the beginning. Not only is the security of those systems and their missions at risk, the older systems may put newer systems in jeopardy. Specifically, if DOD is able to make its newer systems more secure, but connects them to older systems, this puts the newer systems at risk. Furthermore, even if they are not connected, if the newer systems depend on the older systems to help fulfill their missions, those missions may be at risk. DOD is still determining how best to address weapon systems cybersecurity given weapon systems’ different and particularly challenging cybersecurity needs. Although there are similarities between weapon systems and traditional IT systems, DOD has acknowledged that it may not be appropriate to apply the same cybersecurity approach to weapon systems as traditional IT systems. RAND reported and several program officials we met with stated that DOD’s security controls were developed with IT systems, and not weapon systems, in mind. DOD policies and guidance acknowledge that tailoring may be warranted, but they do not yet specify how the approaches to the security controls should differ. Key Concept Industrial control system is a general term that encompasses several types of control systems including supervisory control and data acquisition systems, distributed control systems, and programmable logic controllers. Industrial control systems monitor or control other systems and processes and may be used to automate tasks such as opening and closing valves. DOD is still in the process of determining how to make weapon system components with particular cyber vulnerabilities as secure as possible. For example, many weapon systems use industrial control systems to monitor and control equipment, and like computers, they include software. Many weapon systems use such systems to carry out essential functions. For example, a ship may use industrial control systems to control engines and fire suppression systems. According to NIST, industrial control systems were originally designed for use in trusted environments, so many did not incorporate security controls. Government and industry reports state that attacks on these systems are increasing. However, DOD officials said that program offices may not know which industrial control systems are embedded in their weapons or what the security implications of using them are. Over the past few years, DOD has begun funding work to improve its understanding of how to best secure these systems. In addition, Office of the Secretary of Defense officials informed us that, in response to section 1650 of the National Defense Authorization Act for Fiscal Year 2017, they are working to better understand the dependency of industrial control systems on mission impact, including other key infrastructure nodes that could be vulnerable to a cyber attack and have significant impact to mission accomplishment. Key Concept Vulnerability chaining is when attackers take advantage of multiple vulnerabilities— which could be low or moderate risk in isolation—to perform a more significant attack on a system. Several weapon system-specific factors make it important to tailor cybersecurity approaches, but also make cybersecurity difficult. Because weapon systems can be very large, complex, systems of systems with many interdependencies, updating one component of a system can impact other components. A patch or software enhancement that causes problems in an email system is inconvenient, whereas one that affects an aircraft or missile system could be catastrophic. Officials from one program we met with said they are supposed to apply patches within 21 days of when they are released, but fully testing a patch can take months due to the complexity of the system. Even when patches have been tested, applying the patches may take additional time. Further, weapon systems are often dispersed or deployed throughout the world. Some deployed systems may only be patched or receive software enhancements when they return to specific locations. Although there are valid reasons for delaying or forgoing weapon systems patches, this means some weapon systems are operating, possibly for extended periods, with known vulnerabilities. Exacerbating matters, some program offices may also not yet have a solid understanding of the cybersecurity implications of their systems’ designs, including their systems’ connectivity. This situation makes it difficult to secure the system. Experts and officials from some test organizations we met with stated that programs have generally not understood the multitude of ways that information flows in and out of their systems, although this may be improving. Several program officials we met with felt that weapon systems were more secure than other types of systems and noted that they typically did not have direct connections to the Internet. In fact, weapon systems have more potential avenues of attack than may be apparent, such as radio communications receivers and radar receivers. Furthermore, the National Research Council reported in 2014 that individual warfare domains do not fully grasp risks within their own domain, let alone those that can be introduced through other domains. For example, if a space system is connected to a land system—even indirectly—an attacker may be able to move from one to the other or limit the operations of one by attacking the other. We found that from 2012 to 2017, DOD testers routinely found mission- critical cyber vulnerabilities in nearly all weapon systems that were under development. Using relatively simple tools and techniques, testers were able to take control of these systems and largely operate undetected. In some cases, system operators were unable to effectively respond to the hacks. Furthermore, DOD does not know the full scale of its weapon system vulnerabilities because, for a number of reasons, tests were limited in scope and sophistication. Nearly all major acquisition programs that were operationally tested between 2012 and 2017 had mission-critical cyber vulnerabilities that adversaries could compromise. DOT&E’s 2017 annual report stated that tests consistently discovered mission-critical vulnerabilities in acquisition programs, echoing a similar finding by the DSB in 2013 about DOD IT systems and networks. Cybersecurity test reports that we reviewed showed that test teams were able to gain unauthorized access and take full or partial control of these weapon systems in a short amount of time using relatively simple tools and techniques. We saw widespread examples of weaknesses in each of the four security objectives that cybersecurity tests normally examine: protect, detect, respond, and recover. Key Concepts An insider is a user who is authorized to use a system (e.g., has a username and password) and has physical access to all or parts of a system. A near-sider is an unauthorized user who has physical access to all or part of a system. For example, someone taking a tour of a Navy ship would be a near-sider. A remote user is not authorized to use the system and does not have physical access to the system. Test teams were able to defeat weapon systems cybersecurity controls meant to keep adversaries from gaining unauthorized access to the systems. In one case, it took a two-person test team just one hour to gain initial access to a weapon system and one day to gain full control of the system they were testing. Some programs fared better than others. For example, one assessment found that the weapon system satisfactorily prevented unauthorized access by remote users, but not insiders and near-siders. Once they gained initial access, test teams were often able to move throughout a system, escalating their privileges until they had taken full or partial control of a system. In one case, the test team took control of the operators’ terminals. They could see, in real-time, what the operators were seeing on their screens and could manipulate the system. They were able to disrupt the system and observe how the operators responded. Another test team reported that they caused a pop-up message to appear on users’ terminals instructing them to insert two quarters to continue operating. Multiple test teams reported that they were able to copy, change, or delete system data including one team that downloaded 100 gigabytes, approximately 142 compact discs, of data. Example: Poor Password Management The 2016 cyber attack on Dyn, a company that serves as a key intermediary in directing Internet traffic, disabled websites, such as Twitter, Netflix, and CNN and brought down the Internet in some regions. The attack used malware to search the Internet for unsecured devices, such as those that used factory- default usernames and passwords, and then used those devices to send junk traffic to online targets until they could not function. The test reports indicated that test teams used nascent to moderate tools and techniques to disrupt or access and take control of weapon systems. For example, in some cases, simply scanning a system caused parts of the system to shut down. One test had to be stopped due to safety concerns after the test team scanned the system. This is a basic technique that most attackers would use and requires little knowledge or expertise. Poor password management was a common problem in the test reports we reviewed. One test report indicated that the test team was able to guess an administrator password in nine seconds. Multiple weapon systems used commercial or open source software, but did not change the default password when the software was installed, which allowed test teams to look up the password on the Internet and gain administrator privileges for that software. Multiple test teams reported using free, publicly available information or software downloaded from the Internet to avoid or defeat weapon system security controls. Test reports we reviewed make it clear that simply having cybersecurity controls does not mean a system is secure. How the controls are implemented can significantly affect cybersecurity. For example, one test report we reviewed indicated that the system had implemented role- based access control, but internal system communications were unencrypted. Because the system’s internal communications were unencrypted, a regular user could read an administrator’s username and password and use those credentials to gain greater access to the system and the ability to affect the confidentiality, integrity, or availability of the system. Programs Had Not Addressed Some Previously Identified Vulnerabilities Program offices were aware of some of the weapon system vulnerabilities that test teams exploited because they had been identified in previous cybersecurity assessments. For example, one test report indicated that only 1 of 20 cyber vulnerabilities identified in a previous assessment had been corrected. The test team exploited the same vulnerabilities to gain control of the system. When asked why vulnerabilities had not been addressed, program officials said they had identified a solution, but for some reason it had not been implemented. They attributed it to contractor error. Another test report indicated that the test team exploited 10 vulnerabilities that had been identified in previous assessments. Example: Poor Detection In the 2014 Office of Personnel Management (OPM) cyber attack, attackers exfiltrated personnel files of 4.2 million government employees, security clearance background information on 21 million individuals, and fingerprint data of 5.6 million of these individuals. Attackers used a contractor’s OPM credentials to log into the OPM system, installed malware, and created a backdoor to the network. These attackers were in OPM’s networks for at least 14 months. Over 2,000 pieces of malware were later identified on OPM devices. detection. One test team emulated a denial of service attack by rebooting the system, ensuring the system could not carry out its mission for a short period of time. Operators reported that they did not suspect a cyber attack because unexplained crashes were normal for the system. Another test report indicated that the intrusion detection system correctly identified test team activity, but did not improve users’ awareness of test team activities because it was always “red.” Warnings were so common that operators were desensitized to them. A common way to detect cyber activity is to review logs of system activity looking for unusual occurrences. Multiple test reports indicated that test team activity was documented in system logs, but operators did not review them. One test report noted that the system had no documented procedures for reviewing logs. Multiple test reports indicated that operators did not effectively respond to test team activities. In multiple tests, operators did not respond because, as noted above, they were simply unaware of the test team activities. In some cases, however, operators were unable to effectively respond even when they identified or were notified that the test team had carried out an attack. One test report indicated that operators identified test team intrusion attempts and took steps to block the test team from accessing the system. However, the test team was able to easily circumvent the steps the operators took. In another case, the test team was able to compromise a weapon system and the operators needed outside assistance to restore the system. DOD does not know the full extent of its weapon systems cyber vulnerabilities due to limitations on tests that have been conducted. Cybersecurity assessments do not identify all vulnerabilities of the systems that are tested. This is, in part, because cybersecurity assessments do not reflect the full range of threats that weapon systems may face in operation. Test teams reported that they portray realistic threats and environments. However, the nature of tests imposes limitations on testers that do not apply to potential adversaries. For example, DOD officials said that most cybersecurity assessments are conducted over a few days to a few weeks. One test report indicated that the cybersecurity assessment was cut short due to external factors so the test team only had 41 hours to work with the system. In contrast, DOD officials we spoke to said that a determined adversary could spend months or years targeting our systems. Further, because test teams have a limited amount of time with a system, they look for the easiest or most effective way to gain access, according to DOD officials we met with and test reports we reviewed. They do not identify all of the vulnerabilities that an adversary could exploit. DOT&E noted that longer-term tests generally identify more cyber vulnerabilities than shorter tests. DOD officials we spoke to said that the department has increased the amount of long-term assessments it conducts in recent years. Weapon systems cybersecurity assessments may also be limited in the types of attacks that are portrayed so entire categories of vulnerabilities are not currently addressed in some cyber assessments. The test reports we reviewed tended to portray nascent to moderate threats and generally did not target special components like industrial control systems and non-Internet enabled devices which our adversaries could target. Similarly, counterfeit parts pose cybersecurity risks to weapon systems, but were not within the scope of the cybersecurity tests that we reviewed. System-specific limitations can also affect test results. Officials from one service test agency noted that in at least one case, they could not fully assess a system’s cybersecurity because portions of the system’s networks and data were proprietary. The system utilized the contractor’s corporate networks, which the test team was not allowed to attack. In several tests, a weapon system’s connections to external systems were either limited or had to be simulated. One test report we reviewed noted that the test team was not allowed to use classified networks to attack a weapon system due to security concerns. Another test was conducted in a lab environment so the test team had to simulate external communications. Although there are practical reasons for limiting the duration and scope of cybersecurity assessments, these limitations mean that DOD may not fully understand the extent of weapon system cyber vulnerabilities, as is reflected in figure 5. Many program officials we met with indicated that their systems were secure, including some with programs that had not had a cybersecurity assessment. Some systems have not yet undergone testing either because they are not far enough along in the acquisition process, because they were fielded prior to DOD’s emphasis on penetration testing, or out of concern that cybersecurity tests would interfere with operations. Systems that have not been tested are not necessarily more or less secure than systems that have been assessed. DOD does not know the extent to which these systems have cyber vulnerabilities. Program officials cited the security controls they applied as the basis for their belief that their systems were secure. For example, officials from a DOD agency we met with expressed confidence in the cybersecurity of their systems, but could not point to test results to support their beliefs. Instead, they identified a list of security controls they had implemented. However, security controls must be properly designed and implemented in order to be effective. As we noted earlier, test teams routinely found and defeated poorly implemented security controls. Officials we spoke to stated that controls are necessary, but not sufficient, and penetration test results—rather than compliance documentation—are better indicators of a system’s security. For programs that have had cybersecurity assessments, some program officials we met with questioned the validity of the results because of concerns about the realism of the assessments. For example, officials from one program noted that the testers were given more system information and access than an adversary would have. Officials from another program noted that testers asked for detailed information about the system’s design. These officials stated that cyber assessments were unrealistic if they relied on the program office to identify problem areas for the test team. However, test organizations and NSA officials we met with dismissed these observations, noting that adversaries are not subject to the types of limitations imposed on test teams, such as time constraints and limited funding—and this information and access are granted to testers to more closely simulate moderate to advanced threats. Over the past few years, DOD has taken several major steps to improve weapon systems cybersecurity. DOD issued and updated numerous policies and guidance to improve the department’s development of cyber resilient systems. These include improvements such as specifying that cybersecurity policies apply to weapon systems and requiring more focus on cybersecurity throughout a weapon system’s acquisition life cycle. DOD and Congress have also begun promising initiatives to help DOD improve its understanding of its weapon systems cyber vulnerabilities and take steps to mitigate their risks. However, DOD faces barriers that may limit its ability to achieve desired improvements. For example, DOD is struggling to hire and retain cybersecurity personnel, who are essential to implementing these changes. In addition, DOD faces barriers to information sharing, which hinder its ability to share vulnerability and threat information within and across programs. To improve the state of weapon systems cybersecurity, it is essential that DOD sustain its momentum in developing and implementing key initiatives. Since 2014, DOD has issued or updated at least 15 department-wide policies, guidance documents, and memorandums intended to promote more cyber secure weapon systems, some of which are highlighted in table 3. One of the more significant changes is that DOD’s existing cybersecurity policies now explicitly apply to weapon systems. DOD officials said the department has had cybersecurity policies in place for decades, but applied them to weapon systems only in the past few years. For example, DOD’s Risk Management Framework (RMF) is similar to its predecessor—DOD’s Information Assurance Certification and Accreditation Process—which called for application of an extensive series of controls to protect DOD networks and information systems. However, RMF applies these controls more widely to weapon systems cybersecurity. Another important change is that, in recognition that systems cannot be 100 percent secure, DOD has begun to emphasize cyber resiliency in some of its policies. The idea behind cyber resiliency is to identify and protect key elements of a system to ensure that they can continue to operate, possibly with limited capabilities, during a cyber attack. This entails designing in features such as durability, redundancy, and added protections for certain components. Lastly, key policies that govern the requirements and acquisition processes now address cybersecurity. These changes have the potential to bring greater attention to cybersecurity in weapon systems acquisitions. Rather than being treated as distinct from the acquisition process, cybersecurity is to be integrated into key acquisition activities, such as requirements development, technology maturation, and testing. Examples of this, as called for in various policies, include the following: Requirements. Identify cybersecurity requirements and how the information flows into, out of, and through the systems. This helps identify the system’s attack surface and informs the system’s design and cybersecurity controls. Cybersecurity should become part of the requirements trade space. Technology maturation. Focus early prototyping in part on buying down cybersecurity risks prior to system development. Cybersecurity controls should be applied and assessed during prototyping to evaluate cyber risks and inform down-selection and adjustment of requirements. Department of Defense, DOD Program Manager’s Guidebook for Cybersecurity (Sept. 2015). Developmental testing. Test the cybersecurity of weapon systems as they are developed, including integration of larger subsystems and, ultimately, the entire system. Perform cybersecurity assessments in representative operating environments during developmental testing. Operational testing. Conduct operational cybersecurity testing of weapon systems to include other systems that exchange information with the system under test (system-of-systems to include the network environment), end users, administrators, and cyber defenders. Reflect representative cyber threats. These extensive changes to policies and guidance, which adopt a similar risk-based framework to that already generally in place government-wide, appear to be a step in the right direction to increase the department’s emphasis on weapon systems cybersecurity. However, they are also relatively new for DOD, so it is too early to assess whether they are resulting in improved weapon systems cybersecurity. For example, changes to the requirements process apply primarily to new programs so it could be many years before systems that have gone through the new process undergo operational testing and are fielded. Section 1647 of the National Defense Authorization Act for Fiscal Year 2016 requires the Secretary of Defense to evaluate the cyber vulnerabilities of each DOD weapon system by the end of 2019 and develop strategies to mitigate risks stemming from those vulnerabilities. In response to this direction and The DOD Cyber Strategy, which also calls for DOD to assess and initiate improvements to the cybersecurity of current and future weapons systems, DOD is taking steps to improve its understanding of its weapon systems’ vulnerabilities, determine how to mitigate risks from those vulnerabilities, and inform future development of more secure systems. The Office of the Under Secretary of Defense (Acquisition and Sustainment) is leading this initiative in collaboration with military test organizations. DOD is compiling existing vulnerability information and conducting some new tests to provide information about the cybersecurity posture of individual systems, concentrating mostly on fielded systems. These assessments are important, in part because some of those systems did not undergo cybersecurity testing prior to fielding and DOD does not have a permanent process in place to periodically assess the cybersecurity of fielded systems. Furthermore, vulnerabilities and risks can change after fielding as system software becomes obsolete. As part of this initiative, for two mission areas, the Office of the Under Secretary of Defense (Acquisition and Sustainment) has been trying to incorporate cybersecurity into large scale military exercises to take a more integrated look at impacts of vulnerabilities across systems. The goal is to understand how vulnerabilities in some systems may affect DOD’s ability to achieve its mission and to identify what other options are available to complete a mission if certain capabilities were disabled or degraded. This work is also important, but for different reasons. DOD’s developmental and operational tests focus primarily on vulnerabilities in individual systems rather than across broader mission areas. However, as previously discussed, attackers do not necessarily limit themselves to one system and may move from one system to others. Furthermore, DOD has not previously had a process in place to examine how cyber attacks on one system could affect entire missions. Taken together, the system-specific and mission-focused activities could help DOD develop a more comprehensive understanding of its cybersecurity posture—the overall strength of its cybersecurity. Officials working on these assessments plan to use what they learn to help inform the acquisition of future weapon systems. Specifically, they plan to share lessons with DOD test organizations, the Office of the Chief Information Officer, Office of the Under Secretary of Defense (Research and Engineering), and others in the Office of the Under Secretary of Defense (Acquisition and Sustainment). Similarly, the military services have established weapon system cybersecurity-focused offices to improve their cybersecurity posture, which are described briefly in table 4. Although all of these activities promise to help DOD improve its cybersecurity posture over time, they are also relatively new for DOD. They will need sustained momentum to achieve changes over the lifecycle of acquisition programs, so it is too early to tell if they will be successful over the long term. According to multiple agency officials and our analysis of policy and guidance changes since 2014, DOD leadership has become more aware of cybersecurity issues over the past several years and has driven many of these cybersecurity activities. However, our prior work has found sustained leadership support of DOD initiatives to be key to maintaining their momentum. We also reported that there is risk that DOD will not fully implement some tasks it has begun to improve weapon systems cybersecurity if leadership does not continue to monitor their progress. For example, we reported in 2017 that DOD’s Principal Cyber Advisor closed out the task on assessing weapon systems called for under The DOD Cyber Strategy. We recommended that the Cyber Advisor modify criteria for closing tasks to reflect whether tasks have been implemented and re-evaluate tasks that have been previously determined to be completed. DOD faces barriers that will challenge its ability to develop more cyber resilient weapon systems and make it more difficult for DOD’s recent policy changes and new initiatives to be as effective as possible. DOD struggles to hire and retain cybersecurity personnel, particularly those with weapon systems cybersecurity expertise. Our prior work has shown that maintaining a cybersecurity workforce is a challenge government-wide and that this issue has been a high-priority across the government for years. Program officials from a majority of the programs and test organizations we met with said they have difficulty hiring and retaining people with the right expertise, due to issues such as a shortage of qualified personnel and private sector competition. Test officials said that once their staff members have gained experience in DOD, they tend to leave for the private sector, where they can command much higher salaries. According to a 2014 RAND study, personnel at the high end of the capability scale, who are able to detect the presence of advanced threats, or finding the hidden vulnerabilities in software and systems, can be compensated above $200,000 to $250,000 a year, which greatly exceeds DOD’s pay scale. Even when cybersecurity positions are filled, it may not necessarily be with the right expertise. Officials from some program offices said that general cybersecurity expertise is not the same as weapon systems cybersecurity expertise. For example, officials said that professional IT certifications are not the same as systems security engineering expertise, which is essential to designing cyber-resilient systems. According to various program officials, weapon systems cybersecurity is a specialized area. Cybersecurity subject matter experts require knowledge of (1) DOD’s acquisition process; (2) technical knowledge of the specific weapon system—such as radar or aircraft, and (3) cybersecurity knowledge. However, it is difficult to hire and maintain a workforce with the needed knowledge due to its highly specialized nature. Without this expertise, it will be difficult for programs to effectively implement cybersecurity policies and guidance. For example, the RMF allows programs to determine which controls are most appropriate to apply, but a knowledgeable workforce is necessary for making such decisions. DOD has various efforts underway to recruit and develop the skills of DOD’s cybersecurity workforce, according to several DOD officials. For example, the services are aiming to recruit cybersecurity analysts by using internships and engaging in partnerships with secondary schools and universities. In addition, the services are developing and offering courses to grow expertise within their existing acquisition workforce. DOD is determining how to share specialized expertise related to weapon systems cybersecurity. Specific efforts related to this include the Cyber Developmental Test Cross Service Working Group that meets quarterly and invites industry expertise to present cutting edge techniques as well as a “capture the flag” competition, which will now be offered to other services as well. In addition, Navy Systems Commands employees participate in periodic regional cyber competitions to hone knowledge learned in classroom environments and use training funds to pursue additional or higher degrees and cyber certificate programs. Officials from many of the offices we interviewed, as well as the National Research Council, DSB, and RAND have expressed concerns about barriers to information sharing. It is difficult to find the correct balance between protecting information, so that it is not accessible to potential adversaries, and sharing it, so that DOD has an informed workforce. For example, classification is important because it protects information about vulnerabilities, and in some cases, intelligence methods. Access to information about vulnerabilities makes it easier for potential adversaries to attack DOD systems. Similarly, limiting the distribution of classified information to those who have the need to know is likewise important because it reduces the likelihood that internal and external threats will access it. Although DOD officials explained that there is no DOD-wide cybersecurity classification guidance, Air Force guidance and DOD officials indicated that vulnerabilities in fielded systems are typically classified as at least Top Secret or Top Secret/Sensitive Compartmented Information, and details of threats are more restricted. This high level of classification for weapon systems cyber vulnerabilities and threats helps protect sensitive information, but it makes it difficult for DOD to share information about aspects of weapon systems cybersecurity with cybersecurity personnel across DOD. For example, some experts told us that flawed designs can still be found in new systems if their designers were not aware that they resulted in vulnerabilities in other systems. More generally, because they are not sharing vulnerability and threat information across programs, programs are unaware of their full risk exposure and DOD may have less insight into vulnerabilities across its weapon systems portfolio. Officials from most organizations we spoke to, including NSA, acknowledged challenges with sharing information across all levels within DOD. Examples of these challenges are listed in table 5. Although limitations to information sharing can lead to inefficiencies and other challenges, DOD has so far opted to favor protection of information—perhaps because the stakes are so high if it does not. As we mentioned previously, one of the reasons potential adversaries collect information on weapon systems is because the better they understand a weapon system, and especially what vulnerabilities it may have, the more options they have to attack it. Reports over the years about cyber espionage attacks on defense contractors show that concerns about protecting sensitive information are warranted. We provided a draft of this report to DOD for review and comment. DOD provided technical comments, which we incorporated where appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; and the Secretaries of the Army, Navy, and Air Force. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at 202-512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. To identify factors that contribute to the current state of Department of Defense (DOD) weapon systems cybersecurity, we reviewed reports published from 1991 to the present on software, information technology, networking, and weapon systems from the National Research Council, the Defense Science Board, GAO, DOD’s Director of Operational Test and Evaluation, DOD’s Joint Chiefs of Staff, and the RAND Corporation. To inform our discussion of networking, we also reviewed concepts of operations for selected systems of systems. To determine the extent to which DOD focused on cybersecurity in weapon system acquisitions, we analyzed selected information assurance, acquisition, requirements, and testing policies and guidance. For this and all other objectives, we conducted interviews with or obtained written responses from the following organizations: Office of the Secretary of Defense organizations: Office of the Director, Operational Test and Evaluation; Office of the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation; Office of the Chief Information Officer including the Defense Information Systems Agency; Office of the Chairman of the Joint Chiefs of Staff; Office of the Under Secretary of Defense (Acquisition and Sustainment); and Office of the Under Secretary of Defense (Research and Engineering). Military service test organizations: Air Force Operational Test and Evaluation Center, Army Operational Test and Evaluation Command, Navy’s Commander Operational Test and Evaluation Force, and Marine Corps Operational Test and Evaluation Activity. Selected program offices reflecting a purposeful sample of nine major defense acquisition program offices. We identified a variety of program offices to represent each service, multiple domains, and programs that are extensively connected to other weapons systems. We are not listing the names of these offices for sensitivity reasons. Other key DOD organizations with cybersecurity responsibilities: the National Security Agency, Defense Information Systems Agency, and U.S. Cyber Command. Selected organizations with cybersecurity expertise, referred to as “experts” in the report: Carnegie Melon’s Software Engineering Institute, the MITRE Corporation, the RAND Corporation, Pacific Northwest National Laboratory, Sandia National Laboratory, and Renaissance Strategic Advisors. We selected these based on their research or roles advising DOD on weapon systems cybersecurity- related topics. To identify vulnerabilities in weapon systems under development, we reviewed cyber assessment reports of selected weapon systems conducted between 2012 and 2017. We selected at least one program from each service as well as different types of weapon systems (e.g., aircraft vs ships vs communication systems). To gain further insights into assessment findings and understand their limitations, we interviewed officials from the Office of the Secretary of Defense and military test service organizations. We discussed the cybersecurity of individual programs, implementation of controls, and assessment findings with program offices. We also interviewed officials from several organizations with cybersecurity expertise to discuss weapon system vulnerabilities and test limitations. Vulnerabilities for specific weapon systems are classified, so we have not identified the programs covered in these test reports. The examples we cite are unique to each weapon system and are not applicable to all weapon systems. Furthermore, cybersecurity assessment findings are as of a specific date so vulnerabilities identified during system development may no longer exist when the system is fielded. To determine the steps DOD is taking to develop more cyber resilient weapon systems, we analyzed key DOD information assurance/cybersecurity, acquisition, requirements, and testing policies and guidance that have been updated since 2014 to better address weapon systems cybersecurity. We selected 2014 because DOD began revising several policies at that time. These include DOD’s Risk Management Framework, Department of Defense Instruction 8500.01, Cybersecurity; the Department of Defense Instruction 5000.2, Operation of the Defense Acquisition System; DOD Program Manager’s Guidebook for Integrating the Cybersecurity Risk Management Framework into the System Acquisition Lifecycle; the Joint Capabilities Integration and Development System Manual; the Cyber Survivability Endorsement Implementation Guide; and the DOD Cybersecurity Test and Evaluation Guidebook. To identify barriers DOD faces in developing cyber resilient systems and implementing updated cybersecurity policies and guidance, we interviewed Office of the Secretary of Defense, military service test organizations, selected program offices, other DOD organizations, experts, and operators. We took additional precautions to avoid revealing sensitive information. We illustrated some concepts using notional depictions. In some cases, we were deliberately vague and excluded details from examples to avoid identifying specific weapon systems. We also presented examples of publicly known attacks in sidebars to illustrate how poor cybersecurity can enable cyber attacks. DOD conducted a security review of the report and approved it for public release. The Department of Defense (DOD) is responsible for defending the U.S. homeland and interests from attack, including those that occur in cyberspace and has developed capabilities for cyber operations. In order to achieve this objective, the department must be able to defend its own networks, systems, and information from cyber attack. To establish a cybersecurity program to protect and defend DOD information and information technology, DOD has assigned some of its components and senior officials with a variety of cybersecurity responsibilities, some of which are described below. Cristina T. Chaplain (202) 512-4841 or chaplainc@gao.gov. In addition to the contact named above, Raj Chitikila (Assistant Director), Brandon Booth, Laura Greifner, L.T. Holliday, Katherine Pfeiffer, James Tallon, Jacqueline Wade, and Robin Wilson made key contributions to this report. Assistance was also provided by Tommy Baril, Nabajyoti Barkakati, Mark Canter, Virginia Chanley, Kurt Gurka, Joseph Kirschbaum, Jeff Knott, Duc Ngo, and Gregory Wilshusen.", "summary": "DOD plans to spend about $1.66 trillion to develop its current portfolio of major weapon systems. Potential adversaries have developed advanced cyber-espionage and cyber-attack capabilities that target DOD systems. Cybersecurity—the process of protecting information and information systems—can reduce the likelihood that attackers are able to access our systems and limit the damage if they do. GAO was asked to review the state of DOD weapon systems cybersecurity. This report addresses (1) factors that contribute to the current state of DOD weapon systems' cybersecurity, (2) vulnerabilities in weapons that are under development, and (3) steps DOD is taking to develop more cyber resilient weapon systems. To do this work, GAO analyzed weapon systems cybersecurity test reports, policies, and guidance. GAO interviewed officials from key defense organizations with weapon systems cybersecurity responsibilities as well as program officials from a non-generalizable sample of nine major defense acquisition program offices. The Department of Defense (DOD) faces mounting challenges in protecting its weapon systems from increasingly sophisticated cyber threats. This state is due to the computerized nature of weapon systems; DOD's late start in prioritizing weapon systems cybersecurity; and DOD's nascent understanding of how to develop more secure weapon systems. DOD weapon systems are more software dependent and more networked than ever before (see figure). Automation and connectivity are fundamental enablers of DOD's modern military capabilities. However, they make weapon systems more vulnerable to cyber attacks. Although GAO and others have warned of cyber risks for decades, until recently, DOD did not prioritize weapon systems cybersecurity. Finally, DOD is still determining how best to address weapon systems cybersecurity. In operational testing, DOD routinely found mission-critical cyber vulnerabilities in systems that were under development, yet program officials GAO met with believed their systems were secure and discounted some test results as unrealistic. Using relatively simple tools and techniques, testers were able to take control of systems and largely operate undetected, due in part to basic issues such as poor password management and unencrypted communications. In addition, vulnerabilities that DOD is aware of likely represent a fraction of total vulnerabilities due to testing limitations. For example, not all programs have been tested and tests do not reflect the full range of threats. DOD has recently taken several steps to improve weapon systems cybersecurity, including issuing and revising policies and guidance to better incorporate cybersecurity considerations. DOD, as directed by Congress, has also begun initiatives to better understand and address cyber vulnerabilities. However, DOD faces barriers that could limit the effectiveness of these steps, such as cybersecurity workforce challenges and difficulties sharing information and lessons about vulnerabilities. To address these challenges and improve the state of weapon systems cybersecurity, it is essential that DOD sustain its momentum in developing and implementing key initiatives. GAO plans to continue evaluating key aspects of DOD's weapon systems cybersecurity efforts. GAO is not making any recommendations at this time. GAO will continue to evaluate this issue.", "document_type": "gao"}
{"report": "ODNI estimates that, as of October 1, 2015, approximately 4.2 million government and contractor employees were eligible to hold a security clearance. Personnel security clearances are required for access to certain national security information. National security information may be classified at one of three levels: confidential, secret, or top secret. The level of classification denotes the degree of protection required for information and the amount of damage that unauthorized disclosure could reasonably be expected to cause to national security. Specifically, unauthorized disclosure could reasonably be expected to cause (1) “damage,” in the case of confidential information; (2) “serious damage,” in the case of secret information; and (3) “exceptionally grave damage,” in the case of top secret information. According to the Office of Personnel Management (OPM) Federal Investigations Notice 16-02, tier 3 investigations are required for eligibility for access to secret and confidential information, or for noncritical sensitive positions, or “L” access. OPM Federal Investigations Notice 16-07 indicates that tier 5 investigations are required for eligibility for access to top secret or sensitive compartmented information, or for critical sensitive or special sensitive positions, or “Q” access. Once an executive branch agency determines that a position requires a certain level of access to classified information, the employee in that position completes a questionnaire for national security positions, which the requesting agency sends to an investigative service provider. NBIB— the bureau within OPM with responsibility for conducting personnel background investigations—conducts background investigations for most of the federal government; however, some agencies have authority delegated to them to conduct their own investigations. The investigative service provider then conducts a background investigation and submits an investigative report to the requesting agency. Adjudicators from the requesting agency use the information from the investigative report to determine whether to grant or deny the employee eligibility for a security clearance by considering guidelines in 13 specific areas that address (1) conduct that could raise security concerns and (2) factors that could allay those security concerns and permit granting a clearance. Individuals granted security clearances are investigated periodically—for as long as they remain in a position requiring access to classified information—to ensure their continued eligibility. The 2012 Federal Investigative Standards changed the frequency of periodic reinvestigations for certain clearance holders. According to Executive Order 13467, as amended, continuous evaluation is a vetting process to review the background of an individual who has been determined to be eligible for access to classified information or to hold a sensitive position at any time during the period of eligibility. Continuous evaluation is intended to fill the gap that exists between periodic reinvestigations in which issues relevant to an individual’s continued eligibility for a security clearance may go unreported or unknown. For example, while the Federal Investigative Standards have allowed for periodic reinvestigations to be conducted at any time following the completion of the previous investigation or reinvestigation, agencies have not been required to conduct them more frequently than every 5 years, at most, depending on the clearance level and investigative standards in effect. Like periodic reinvestigations, the purpose of continuous evaluation is to assist agencies in evaluating an individual’s continued eligibility for access to classified information. Continuous evaluation involves automated record checks conducted on a more frequent basis, whereas periodic reinvestigations are conducted less frequently and may include, among other things, subject and reference interviews. The types of records checked as part of continuous evaluation are the same as those checked for other personnel security purposes. Security-relevant information discovered in the course of continuous evaluation is to be investigated and adjudicated under the existing standards. According to ODNI, implementation of continuous evaluation will not alter clearance holders’ existing rights or responsibilities and it will incorporate protections for privacy and civil liberties. The enactment of the Intelligence Reform and Terrorism Prevention Act of 2004 initiated a reform effort including goals and requirements for improving the personnel security clearance process government-wide. In June 2008, Executive Order 13467 established the PAC as the government-wide governance structure responsible for driving the implementation of and overseeing security and suitability reform efforts. The PAC presently has four principal members: the Deputy Director for Management of OMB; the Director of National Intelligence, who is the Security Executive Agent; the Director of OPM, who is the Suitability Executive Agent; and the Under Secretary of Defense for Intelligence. The Executive Order also designated the Deputy Director for Management of OMB as the chair of the PAC. Among other things, the PAC is to work with agencies to implement continuous performance improvement programs, policies, and procedures; establish annual goals and progress metrics; and prepare annual reports on results. It is also to develop and continuously reevaluate and revise outcome-based metrics that measure the quality, efficiency, and effectiveness of the vetting enterprise. In April 2014, the PAC established the Program Management Office to implement security clearance reforms. This office includes subject-matter experts with knowledge of personnel security clearances and suitability determinations from OMB, ODNI, OPM, DOD, the Department of Homeland Security, the Department of Justice, the Department of the Treasury, and the Federal Bureau of Investigation. In March 2014, OMB established Insider Threat and Security Clearance Reform as a government-wide, cross-agency priority goal to improve interagency coordination and implementation within the area of personnel security clearances. Through this goal, the PAC and executive-branch agencies are to work to improve oversight to ensure that investigations and adjudications meet government-wide quality standards. Included among the goal’s key milestones are implementing a continuous evaluation policy for the executive branch that regularly assesses trusted insiders who have been granted, or are eligible for, access to classified national security information, and overseeing the establishment of continuous evaluation capabilities. ODNI is identified as the lead agency for achieving both of these milestones. In addition, continuous evaluation is identified as a key initiative in the PAC’s strategic framework for fiscal years 2017 through 2021 as part of an effort to modernize the vetting process. While the PAC is responsible for driving the implementation of and overseeing the overall government-wide reform effort, individual agencies are responsible for various aspects of the effort. For example, as the Security Executive Agent, ODNI is responsible for developing and issuing uniform and consistent policies and procedures to ensure the effective, efficient, timely, and secure completion of investigations, polygraphs, and adjudications relating to determinations of eligibility for access to classified information or eligibility to hold a sensitive position. In addition, Executive Order 12968, as amended, indicates that ODNI is responsible for setting the standards for continuous evaluation of those individuals who have access to classified information. According to ODNI, under these Executive Orders, it has responsibility for and oversight of continuous evaluation, as it is an investigative activity that supports eligibility determinations. As such, ODNI established a program office within the National Counterintelligence and Security Center to, among other things, establish policy, guidance, and standards for the implementation of continuous evaluation across the executive branch. DOD has been piloting aspects of continuous evaluation for more than a decade—with pilot tests of automated record checks conducted as early as 2002. Specifically, PERSEREC has conducted several studies dating back to 2001 that have informed and evaluated DOD’s continuous evaluation pilots, including the utility of and costs associated with various data sources. These studies have focused on the technical capability to conduct automated record checks from over 40 government and commercial databases, the value and utility of automated record checks in tier 5 investigations, and investigative alternatives to the traditional periodic reinvestigation, among other things. The studies have also included recommendations to further improve DOD’s continuous evaluation program, as well as areas for future research. PERSEREC noted that it undertook these studies to identify ways to make the personnel security system more efficient, fair, and effective. According to PERSEREC, starting in 2004 with the formation of the government-wide security clearance reform effort, it began to plan for a broader application of its research beyond the department. Using this body of knowledge, DOD has incrementally improved its automated record check capabilities and therefore its ability to implement a continuous evaluation program, which it did in 2014 at the recommendation of the Secretary of Defense. Specifically, following the September 2013 shooting at the Washington Navy Yard, the Secretary of Defense directed concurrent internal and independent reviews to identify and recommend actions to address any gaps or deficiencies in DOD programs, policies, and procedures regarding, among other things, the granting and renewing of security clearances for department and contractor personnel. In March 2014, the Secretary of Defense identified four key recommendations based on the findings and recommendations from those reviews. One of those recommendations was to implement continuous evaluation to provide automated record checks of personnel with access to DOD facilities or classified information. In addition, DOD Instruction 5200.02, which was also issued in March 2014, states that all personnel in national security positions shall be subject to continuous evaluation. Consistent with the recommendation and the DOD Instruction, the department implemented a continuous evaluation pilot in October 2014, the details of which are discussed later in the report. In October 2016, ODNI took an initial step to implement continuous evaluation across the executive branch in a phased approach, but as of May 2017, it had not yet formalized the program in policy. The seven agencies we spoke with have been limited in their abilities to plan for the implementation of continuous evaluation, including developing estimated costs, in accordance with ODNI’s phased approach. This is due, in part, to the fact that ODNI has not yet determined key aspects of the program, such as when the future phases of implementation will occur or what they will entail, and none of the agencies has completed implementation plans. Further, ODNI lacks plans for monitoring and measuring the performance of continuous evaluation across the executive branch. ODNI has taken an initial step to implement continuous evaluation across all executive branch agencies in a phased approach, but it has not yet formalized the program in policy. Specifically, in October 2016, ODNI initiated the first phase of continuous evaluation and outlined requirements for this phase in interim guidance distributed to implementing agencies in December 2016. For the first phase of implementation, executive branch agencies are to conduct certain continuous evaluation record checks against a portion of their national security population. Specific details of the requirements were omitted from this report because the information is sensitive. According to OPM Federal Investigations Notice 17-03, the first phase of continuous evaluation is to be implemented by the end of fiscal year 2017. These checks are conducted in addition to any initial investigations or periodic reinvestigations occurring in fiscal year 2017. ODNI provided agencies with prioritization guidance to help them select individuals for continuous evaluation. Nearly 80 executive branch agencies are subject to the requirements for this first phase of implementation. ODNI has taken steps to establish the executive branch-wide continuous evaluation program in coordination with key stakeholders. For example, in June 2013, ODNI established a Continuous Evaluation Working Group— consisting of 12 core voting member agencies—as a mechanism to effectively coordinate continuous evaluation implementation among executive branch departments and agencies. According to the group’s charter, it meets on at least a quarterly basis and is responsible for coordinating the development of continuous evaluation standards, policies, and procedures, among other things. Since January 2015, ODNI has also issued interim guidance to executive branch agencies that are subject to its continuous evaluation requirements informing them about the purpose of continuous evaluation and providing them with some details of the program. Further, to inform the establishment of the executive branch-wide program, ODNI itself began a 1-year continuous evaluation pilot in September 2016, according to ODNI officials. Specific details of ODNI’s pilot were omitted from this report because the information is sensitive. In addition to developing standards for continuous evaluation and its oversight role, ODNI is also developing a system that agencies can use to conduct continuous evaluation. According to ODNI, its system is under development and will be available to all executive branch agencies with a full suite of continuous evaluation data sources. Agencies may opt to: (1) use ODNI’s system, (2) develop their own technical solution, (3) partner with another agency to fulfill their continuous evaluation requirements, or (4) some combination of the above options. ODNI asked agencies in December 2016 to provide a preliminary determination as to how they will satisfy future automated records checks requirements to allow ODNI’s continuous evaluation program to adequately plan for system enrollee volume and data usage. Specific details regarding the response of executive branch agencies to this request were omitted from this report because the information is sensitive. Some executive branch agencies stated the following: Department of Justice and State officials stated that they plan to use ODNI’s system once its development is complete; DOD officials stated that they plan to use their own internal system that they are developing to conduct continuous evaluation, but that they may use ODNI’s system to conduct certain checks; and Department of Homeland Security officials noted that they plan to use a combination of existing internal agency systems and ODNI’s system. Standards for Internal Control in the Federal Government states that management should externally communicate the necessary information to achieve an entity’s objectives. Effective information and communication are vital for enabling an entity to achieve its objectives, which can be accomplished through written guidance. While ODNI has provided some details of the program to implementing executive branch agencies through interim guidance, it has not yet formalized the continuous evaluation program through a Security Executive Agent Directive. Specifically, in May 2017, ODNI officials stated that ODNI had not yet issued a Security Executive Agent Directive for continuous evaluation, but that a draft directive was undergoing interagency coordination. ODNI officials stated that the directive will contain a definition of continuous evaluation that is consistent with, but expands upon, the definition contained in the relevant Executive Order. These officials stated that the expanded definition will help to clarify continuous evaluation and ensure that agencies have a common understanding of the program. In addition, ODNI officials stated that they have developed draft implementation guidelines, which they plan to issue after the directive is finalized. ODNI officials stated that the interim guidance will remain in effect until the Security Executive Agent Directive or follow-on interim guidance is issued. DOD’s continuous evaluation program—which it began in October 2014, in advance of implementation of continuous evaluation executive branch- wide by ODNI—identified, in a requirements document for its continuous evaluation IT system, that the most important gap in the development of the department’s program was the lack of a national or DOD-level policy. Specifically, the requirements document notes the lack of a policy that fully describes the continuous evaluation process or purpose, or the end uses of data. The requirements document further notes that there are multiple definitions of continuous evaluation and, due to the lack of policy, there is not a common lexicon of terms used in the continuous evaluation program, thereby creating an additional gap. While ODNI reports that the policy is under review, it has not prioritized the implementation of continuous evaluation and, as a result, has missed numerous milestones in issuing the policy since 2014. Specifically, the original Insider Threat and Security Clearance Reform cross-agency priority goal milestone for ODNI to issue a continuous evaluation policy was July 2014. This milestone was not attained, and it was adjusted to September 2016, a milestone that was also missed. The current milestone for issuing the policy is October 2017. Additionally, ODNI has missed other milestones for implementing a continuous evaluation program, as discussed later in the report. Furthermore, ODNI has initiated the first phase of continuous evaluation without a government-wide issued policy or an expanded definition of continuous evaluation. As a result, agencies may develop inconsistent approaches to implementing continuous evaluation. For example, DOD officials stated that DOD has developed its own path for continuous evaluation from ODNI’s limited guidance and that in the absence of a government-wide policy, DOD is developing its own internal guidance. As a result, the approach to continuous evaluation taken by DOD—the executive branch agency with the majority of security clearance holders— may differ from that of other executive branch agencies once fully implemented. Ultimately, such inconsistent approaches to continuous evaluation could affect reciprocity among agencies—another key objective of government-wide security clearance reform efforts. Without issuing a Security Executive Agent Directive in advance of the next phase of implementation—the timeframe for which ODNI has not yet determined—that includes, among other things, an expanded definition of continuous evaluation, agencies may develop inconsistent approaches to continuous evaluation, resulting in an uneven and perhaps ineffective implementation across the federal government. ODNI has not yet determined key aspects of its continuous evaluation program, which has limited the ability of executive branch agencies to plan for implementation in accordance with ODNI’s phased approach. For example, while ODNI has initiated the first phase of continuous evaluation in coordination with implementing executive branch agencies, it has not yet determined what the future phases of implementation will entail, or when they will occur. Specifically, ODNI officials stated that they have not set any further timeframes for implementing continuous evaluation or determined agency requirements for future phases. Moreover, the timeframes for the implementation of continuous evaluation across the executive branch have been extended over time. For example, the original milestone set by the government-wide reform effort for implementing continuous evaluation was the 4th quarter of fiscal year 2010, and it was not attained. The PAC subsequently set an Insider Threat and Security Clearance Reform cross-agency priority goal milestone for developing an initial continuous evaluation capability for the most sensitive top secret clearance holders by September 2014—which was extended to December 2014—and a milestone for implementing the capability for additional clearance holders by December 2016. These milestones were also missed. As of May 2017, continuous evaluation had not yet been fully implemented, and ODNI had not set a milestone for when it would occur. Although ODNI is one of the goal leaders for the Insider Threat and Security Clearance Reform cross-agency priority goal, a senior ODNI official stated that the milestones were arbitrarily set, and that implementing continuous evaluation has proven to be challenging as a result of several technical and legal issues that need to be resolved. Further, ODNI officials highlighted the complexities associated with developing a whole-of-government continuous evaluation program and noted that a number of challenges have come to light as they have been developing the program, which have contributed to missed milestones. However, ODNI has not prioritized the setting of internal milestones for the future phases of implementation that it considers to be reasonable. ODNI officials stated that because continuous evaluation is a new initiative, no realistic timeline for full implementation will be set until the initial results of implementation are analyzed and technical capabilities have matured. Further, they stated that although they are unable to develop a timeline for full implementation at this time, they are actively working to implement the program. In addition, as previously discussed, ODNI’s milestone for issuing a continuous evaluation policy has also been adjusted over time. Figure 1 shows the adjusted executive branch milestones for issuing a continuous evaluation policy and implementing a continuous evaluation program, including developing a technical capability. The uncertainty regarding the requirements and timeframes for the future phases of the program has affected the ability of executive branch agencies to plan to implement continuous evaluation and estimate the associated costs. First, although OPM Federal Investigations Notice 17- 03 notes that the first phase of continuous evaluation is to be implemented by the end of fiscal year 2017, none of the seven executive branch agencies we spoke with has completed an agency-specific implementation plan. While some agencies, such as DOD and State— both of which have established continuous evaluation programs in advance of implementation across the executive branch—have developed concepts of operations or standard operating procedures for continuous evaluation, all seven agencies we spoke with stated that they are waiting for additional information from ODNI before completing their implementation plans. Department of Homeland Security officials stated that they are waiting for ODNI to define and schedule the future phases of implementation and to finish developing its continuous evaluation IT system, because there could be unknown policy implications that would affect the Department’s planning efforts. In August 2017, ODNI officials described plans to distribute information to executive branch agencies regarding continuous evaluation requirements for fiscal year 2018. Specific details of these plans were omitted from this report because the information is sensitive. Second, six of the seven agencies we spoke with noted challenges associated with estimating the costs of implementation. For example, while the Federal Bureau of Investigation has developed some cost estimates for implementing continuous evaluation, officials noted that it is challenging to estimate the full costs of the program until they receive additional information from ODNI, such as the requirements for future phases of implementation, as well as information about record check, technology, and personnel requirements. DOD officials stated that the number of individuals enrolled in continuous evaluation directly relates to the amount of agency resources required, for example, to validate, respond to, and adjudicate alerts. Two agencies we spoke with stated that they had not yet taken any steps to estimate costs because they are waiting for additional information from ODNI. In August 2017, ODNI officials stated that they plan to leverage an upcoming OMB budget data request, administered through the PAC, to obtain agency funding estimates for expenses related to conducting continuous evaluation from fiscal years 2017 through 2019. We have previously identified weaknesses associated with estimating the costs of personnel security clearance reform. Specifically, in April 2015 we found, among other things, that long-term costs of implementing the 2012 Federal Investigative Standards—including the implementation of continuous evaluation—were not addressed in personnel security clearance background investigation reform planning documentation. Further, we found that OMB did not have current and detailed cost- estimate information from executive-branch agencies, because it did not begin to solicit the information from the agencies until almost 2 years after the updated standards were approved. As such, we recommended in April 2015, among other things, that the Deputy Director for Management of OMB, in the capacity as Chair of the PAC, develop long-term funding estimates for changes to the federal government’s investigation practices resulting from the implementation of the standards, including but not limited to costs related to: (1) information technology adjustments to enable government-wide data sharing; (2) implementation of continuous evaluation of clearance holders; and (3) additional personnel resources for twice-as-frequent reinvestigations. OMB concurred with the recommendation. However, as of October 2017, this recommendation remained open. We continue to believe that this recommendation is valid and should be implemented. In addition, the seven executive branch agencies we spoke with identified other areas related to agency expectations for which they need information from ODNI. For example, officials from the Department of Justice; the Bureau of Alcohol, Tobacco, Firearms, and Explosives; and the Federal Bureau of Investigation stated that while they would like to use ODNI’s IT system to conduct all or at least some of the record checks that will be required, they will need to develop an interface with ODNI’s system to do so. However, these officials stated that they were unaware of ODNI’s technical requirements for that interface. These officials further stated that without information related to the technical requirements, they are unable to sufficiently plan or budget for continuous evaluation. ODNI officials stated that although ODNI’s IT system remains under development, information on technical interface requirements is available to all stakeholders and that they meet with agencies to discuss agency- specific IT requirements. According to ODNI, several executive branch agencies have expressed an interest in using ODNI’s IT system to conduct at least some, if not all, of the checks that will be required once continuous evaluation is fully implemented. ODNI officials acknowledged that agencies will need to develop an interface to use the system, and that agencies will be responsible for the associated costs. The Project Management Institute’s Guide to the Project Management Body of Knowledge (PMBOK® Guide) provides guidelines for managing individual projects, including developing a project management plan—in advance of executing the project—that describes how the project will be executed, monitored, and controlled. The plan should include, among other things, project schedules and stakeholder roles and responsibilities. The guide notes that updates may be made to the project management plan as changes may occur as the project progresses. ODNI officials managing the continuous evaluation program stated that they have not developed a project management plan for the implementation of continuous evaluation, to include an implementation schedule, because they are still in the planning stage. However, ODNI has already started to implement the program. Without a plan that, among other things, identifies reasonable milestones for the future phases of implementation, ODNI does not have a schedule against which it can track its progress or to which it is accountable. Further, without a plan for implementing continuous evaluation executive branch-wide that includes a schedule and agency requirements for future implementation phases, full implementation—which has been delayed for almost 7 years—may be further delayed. While a phased approach to implementation provides agencies time to adapt their personnel security clearance programs to changing requirements, without an implementation plan outlining ODNI’s expectations of agencies’ roles and responsibilities, agencies are unable to sufficiently plan for the implementation of continuous evaluation, including identifying required resources and estimating potential costs. Further, without clearly defining expectations for agencies—including information such as the planned requirements for future phases of implementation—continuous evaluation may not be fully implemented across the executive branch. Incomplete implementation could potentially prevent the federal government from identifying security-relevant information in a timely manner, thereby exposing it to further national security risks, such as unauthorized disclosures of classified information. Limited planning, both by ODNI and at the agency level, ultimately puts the success of the continuous evaluation program—a key aspect of the security clearance reform effort—at risk. ODNI lacks a plan to monitor and measure the performance of continuous evaluation across executive branch agencies. Specifically, ODNI officials stated that ODNI has not developed a plan to monitor or assess the performance of continuous evaluation across the executive branch, including for the first phase of implementation, which is underway. ODNI officials stated that, ideally, agencies will report that they have met the fiscal year 2017 requirements for the first phase of implementation, and that ODNI will follow up with agencies that do not report. The officials added that, in the long term, ODNI would like to incorporate continuous evaluation into its Security Executive Agent National Assessment Program, through which it conducts oversight of the security clearance process at executive branch agencies, but that continuous evaluation is not currently included in the oversight program. As previously discussed, according to Executive Order 13467, ODNI, as the Security Executive Agent, is to direct the oversight of investigations, reinvestigations, adjudications, and, as applicable, polygraphs for individuals’ eligibility for access to classified information, or eligibility to hold a sensitive position made by any agency. Similarly, Executive Order 12968, as amended, indicates that ODNI is responsible for determining standards for continuous evaluation. According to ODNI, its authorities under the Executive Orders include responsibility for and oversight of continuous evaluation as it is an investigative activity that supports eligibility determinations. Standards for Internal Control in the Federal Government emphasizes the importance of assessing performance over time, noting that ongoing monitoring should be built into operations, performed continually, and responsive to change. The PMBOK® Guide also states that project management includes monitoring and controlling work to meet performance objectives. Without developing a plan to monitor continuous evaluation—including assessing continuous evaluation at various phases of implementation— ODNI cannot ensure that continuous evaluation is being conducted consistently across the executive branch, and it may experience challenges in identifying any needed modifications to the program. Further, ODNI cannot ensure that continuous evaluation is effectively meeting its critical purpose of filling the information gap between investigative cycles to identify risks to national security. Additionally, we reported in 2012 that federal agencies engaging in large projects can use performance measures to determine how well they are achieving their goals and to identify any areas for improvement. Reporting on these measures can help key decision makers within agencies, as well as stakeholders, to obtain feedback for improving both policy and operational effectiveness. Moreover, performance measures need to provide managers and other stakeholders with timely, action- oriented information in a format that helps them make decisions that improve program performance. Throughout our body of work on leading performance management practices we have identified several attributes of successful performance measures, which include, among other things, measures that are clear, quantifiable, and objective, and that are linked to measurable goals. However, ODNI has not developed and distributed to executive branch agencies performance measures to assess the effectiveness of continuous evaluation once it is implemented executive branch-wide. ODNI officials stated that they would like to collect metrics in order to determine the potential effects of continuous evaluation, in particular on agency resources. Although these officials stated that they have had some discussions with DOD about the types of metrics it might want to collect, such as the number of false positives and the resources required to address the workload, ODNI has not prioritized the development of performance measures. In February 2017, ODNI officials stated that they had not developed—or distributed to DOD or other agencies conducting continuous evaluation—any performance measures for continuous evaluation. These officials stated that once continuous evaluation has matured, ODNI plans to identify appropriate measures and determine a mechanism to collect and analyze them. In August 2017, ODNI officials stated that they had developed a draft list of metrics for fiscal year 2017. Once the metrics are finalized, these officials stated that they would issue guidance to agencies requesting them to report these metrics to ODNI. However, since ODNI initiated the first phase of continuous evaluation in October 2016, without developing and distributing performance measures to executive branch agencies, it is unclear whether agencies are positioned to collect and report the information to ODNI for fiscal year 2017. Developing performance measures before the program fully matures could help it to identify potential program modifications needed prior to the next phase of implementation, as well as prior to full implementation. Further, without developing clear, quantifiable, and objective performance measures that are linked to measurable goals for agencies to track, and without determining a process and schedule for agencies to regularly report those measures, ODNI cannot ensure that the first phase of the program it has already initiated is effective or achieving similar results at all agencies, which could ultimately affect reciprocity. DOD and State have designed, piloted, and evaluated continuous evaluation, although their respective approaches have varied in scope, size, and duration—with DOD’s pilot involving the most record checks, the largest population, and the longest duration. As previously discussed, DOD’s efforts to design, pilot, and evaluate continuous evaluation have been ongoing for more than a decade, and they pre-date efforts at ODNI to develop and implement an executive branch-wide continuous evaluation program. According to ODNI officials, as of February 2017, DOD and State were the only agencies, other than ODNI, that had piloted continuous evaluation. ODNI officials stated that DOD and State’s pilots were conducted at the discretion of those agencies, and that while ODNI did not oversee them, the results of the pilots have helped inform ODNI’s development of an executive branch-wide program. These pilots were ongoing prior to ODNI’s December 2016 interim guidance outlining the fiscal year 2017 continuous evaluation requirements for executive branch agencies, and as a result, both DOD and State have taken different approaches to developing their programs. In October 2014, consistent with the Secretary of Defense’s March 2014 recommendation to implement continuous evaluation and DOD Instruction 5200.02, DOD initiated a continuous evaluation pilot that included approximately 100,000 military, civilian, and contractor clearance holders, using a limited set of trusted commercial and government data sources. DOD has conducted this pilot in a phased approach, increasing the number of cleared individuals enrolled over time, in accordance with enrollment milestones set as part of the Insider Threat and Security Clearance Reform cross-agency priority goal. Specifically, the department expanded enrollment to 225,000 DOD clearance holders in December 2015 and 500,000 in December 2016, and it plans to increase the enrolled population to 1 million by the end of calendar year 2017. The department has also set an internal goal to enroll all clearance holders department-wide by the end of fiscal year 2021. DOD has developed its own continuous evaluation IT system—which is called Mirador, and is separate from the IT system that ODNI is developing—to conduct automated record checks of commercial and government data sources on the enrolled population, with the goal of near real-time identification of adverse information to be considered in the evaluation of an individual’s continued eligibility for access to classified information. DOD officials developing the system stated that while they are currently using Mirador to conduct automated record checks for continuous evaluation, the system remains under development, and they are integrating additional data sources and user requirements as those are identified. As of February 2017, the department had implemented seven data sources in Mirador, which provide information about suspicious financial and criminal activity, among other things. Another nine sources were undergoing testing or were otherwise in progress. The department expects Mirador to reach initial operating capacity in fiscal year 2018. DOD officials stated that aspects of Mirador are still manual, such as enrolling individuals, but that they plan to take steps to automate them. DOD officials stated that, depending on the data source, they run record checks on enrolled individuals daily, monthly, quarterly, or annually. According to DOD officials, if a record check results in an alert, such as for criminal activity, Mirador forwards the alert to DOD’s continuous evaluation validation cell—within the Defense Security Service, which manages the department’s continuous evaluation program—to ensure that: (1) the alert applies to the correct individual; (2) the issue was not previously known; and (3) the issue is adjudicatively relevant. DOD officials stated that if an analyst determines that an alert is valid— meaning that all three of the above statements are believed to be true— then the analyst generates a report and forwards it to the individual’s designated security manager. Alerts are prioritized for analyst review according to business rules designed around the severity of the alert, and according to DOD officials, all alerts are reviewed by a supervisor following an analyst’s initial determination. The officials stated that currently, if additional investigative work is required based on the alert, the results of that investigation are forwarded to an adjudicator to make a determination as to whether the alert affects the individual’s continued eligibility for a security clearance. The officials added that the due process safeguards in place for periodic reinvestigations are also in place for continuous evaluation. Figure 2 provides an overview of DOD’s continuous evaluation process. DOD has collected and analyzed metrics on the results of its current pilot. For example, according to DOD data, as of February 2017, continuous evaluation had identified 12,400 alerts. Of those alerts, 2,064—pertaining to 1,816 individuals—were determined to be valid, meaning that they were adjudicatively relevant and not previously known. According to DOD, action has been completed on 1,307 of those cases. Specifically, 859 cases were closed with a favorable decision, but context was added to the individuals’ records; in 375 cases the subject separated and/or no longer needed access; and 62 cases involved a clearance revocation, condition, or warning. For DOD’s secret-eligible population, continuous evaluation helped to identify risk, on average, 6 years 7 months sooner than the traditional 10-year periodic reinvestigation model, and 1 year 5 months earlier for the top secret-eligible population, which is to be reinvestigated every 5 years. DOD officials stated that these metrics are presently tracked manually by the Consolidated Adjudications Facility, and they identified a need to automate the process, going forward. In addition, DOD officials stated that they have shared the results of the pilot and lessons learned with ODNI through the Continuous Evaluation Working Group. For example, DOD identified lessons learned related to identifying the right data sources, eliminating duplicate alerts, the frequency of record checks, methods for achieving identity resolution, and the need for operational access to reporting data. Most recently, DOD issued Department of Defense Manual 5200.02 in April 2017, which includes continuous evaluation among the responsibilities and procedures of the DOD Personnel Security Program. State began its continuous evaluation pilot in January 2015 to evaluate the coverage and reliability of public records information, using a public records service provider. Specifically, it compared information received from public record checks, such as criminal and financial activity, against information contained in personnel security files for approximately 8,600 personnel. State found, among other things, that while public records can provide coverage beyond the traditional scope of investigations, the quality of the information varies, and not all jurisdictions participate. State continued its pilot in 2016 and expanded the enrolled population to include its entire tier 5 population. Additionally, the focus of the pilot shifted from evaluating the usefulness of public records information to evaluating the alerts received. State officials stated that the results of the public record checks are reviewed by the department’s continuous evaluation team, which determines whether the information is new, accurate, and relevant, and if so, whether it needs further review and investigation. These officials stated that because State has authority to conduct its own investigations, it is easy to conduct investigative follow- up. According to officials, minor issues, such as traffic violations, are added to personnel files for consideration during the individual’s next periodic reinvestigation. According to State officials, as of March 2017, they had not revoked any clearances as a result of the identification of derogatory information through continuous evaluation. As of April 2017, State had invested approximately $2.4 million in its continuous evaluation pilot for contract costs and personnel to administer the program, and, according to State officials, ODNI provided approximately one-third of that funding. State officials stated that because ODNI provided funding, State has voluntarily shared some lessons learned with ODNI, although it was not tasked to do so. Some details of State’s pilot were omitted because the information is sensitive. The number of executive branch agencies meeting established timeliness goals for completing periodic reinvestigations decreased from fiscal years 2012 through 2016. Additionally, while executive branch agencies have already initiated the first phase of continuous evaluation, the potential effects of continuous evaluation on periodic reinvestigations and agency resources are unknown, as they have not been assessed. Our analysis of timeliness data for specific executive branch agencies showed that the percent of agencies meeting timeliness goals decreased from fiscal year 2012 through 2016. As part of the Insider Threat and Security Clearance Reform cross-agency priority goal, since the second quarter of fiscal year 2014, the PAC has reported quarterly on agency timeliness. Among other things, the PAC reports on the average number of days taken, for the executive branch as a whole, to complete the end- to-end process for periodic reinvestigations, as compared with the following goals for the fastest 90 percent of periodic reinvestigations: 15 days to initiate a case, 150 days to conduct the investigation, and 30 days to adjudicate—totaling 195 days to complete the end-to-end processing of the periodic reinvestigation. For fiscal year 2016, the PAC reported that the executive branch as a whole: did not meet the goal of conducting the investigative portion of periodic reinvestigations within 150 days for the fastest 90 percent of cases for any quarter. The average number of days ranged from 175 days to 192 days. did not meet the goal of completing periodic reinvestigations—the end-to-end goal—within 195 days for any quarter of fiscal year 2016. The average ranged from 209 days to 227 days. Our analysis of timeliness data for specific executive branch agencies showed that the percent of agencies that reported meeting timeliness goals decreased from fiscal year 2012 through 2016. Specifically, while 84 percent of the executive branch agencies met the 150-day investigative goal for at least three of four quarters for the fastest 90 percent of periodic reinvestigations in fiscal year 2012, only 18 percent of the agencies met the investigative goal in fiscal year 2016. while 84 percent of the executive branch agencies met the end-to-end processing goal of 195 days for at least three of four quarters for the fastest 90 percent of periodic reinvestigations in fiscal year 2012, only 22 percent of the agencies completed their fastest 90 percent of periodic reinvestigations within 195 days for at least three of four quarters in fiscal year 2016. Of the agencies we reviewed, we found that agencies which use NBIB as their investigative service provider and agencies with delegated authority to conduct their own investigations both experienced challenges in meeting established timeliness goals for periodic reinvestigations in fiscal years 2015 and 2016. For example, 50 percent of the agencies with delegated authority completed investigations for at least three of four quarters for the fastest 90 percent of periodic reinvestigations within 150 days in fiscal year 2015, and 44 percent of agencies with delegated authority met the timeliness goal in fiscal year 2016. Of the executive branch agencies for which we obtained timeliness data from ODNI and which use NBIB as their investigative service provider, NBIB completed the investigative portion within 150 days for 0 percent of the agencies in fiscal year 2015, and completed it within that timeframe for 6 percent of the agencies in fiscal year 2016 for at least three of four quarters for the fastest 90 percent of reinvestigations. Of the executive branch agencies we reviewed, 67 percent met the adjudication timeliness goal of 30 days in fiscal year 2016 for at least three of four quarters for the fastest 90 percent of reinvestigations. Specific details on the timeliness of individual executive branch agencies’ periodic reinvestigations were omitted from this report because the information is sensitive. According to NBIB officials, as of June 2017, NBIB’s investigation backlog totaled approximately 673,000 cases—about 183,000 of which were periodic reinvestigations for both tier 3 and tier 5 clearances. NBIB cited the September 2014 decision to not exercise the option of one of its investigative fieldwork contracts—which led to a loss in capacity and an increase in the program’s contract costs—and difficulties attracting and retaining investigative resources as two main challenges to timeliness. NBIB officials stated that they are taking steps to address the backlog for background investigations, including periodic reinvestigations. These steps include hiring additional federal and contract investigators, implementing a number of workload management initiatives, and conducting a business process reengineering review to identify potential process efficiencies. Additionally, executive branch agencies noted the increased requirements stemming from the 2012 Federal Investigative Standards, such as continuous evaluation and more frequent periodic reinvestigations for certain clearance holders, as additional challenges to meeting timeliness goals. In 2008, the Joint Security and Suitability Reform Team issued Security and Suitability Process Reform, a report to the President that, among other things, includes OMB-issued interim government-wide processing goals for security clearances for calendar year 2008. The calendar year 2008 government-wide goal for the fastest 90 percent of periodic reinvestigations is the same as the goal currently in place: 195 days to complete the end-to-end processing of the periodic reinvestigation. The report states that OMB issued the interim goal to assist agencies in projecting workload and resource requirements. However, the timeliness goals on which the PAC currently reports for periodic reinvestigations are the same as those identified by OMB as interim goals for calendar year 2008. Unlike initial investigations, for which timeliness objectives are established by statute, the 195-day goal for the end-to-end timeliness of periodic reinvestigations was an interim goal set by OMB for calendar year 2008. The 2008 report to the President does not detail how the goals were developed or what data, if any, were used to establish them. ODNI officials initially stated that they did not know how the 195-day goal was developed or where it was documented, and did not know whether subsequent, finalized goals were ever established, but they later provided a copy of the 2008 report. A senior NBIB official stated that OMB’s interim calendar year 2008 timeliness goals were developed based on the average timeliness of the fastest 90 percent of periodic reinvestigations at that time. Since the establishment of OMB’s interim goals, the executive branch has measured periodic reinvestigation timeliness against those goals, and it has not conducted an evidence-based review to ensure that 195 days— and the associated goals of the different phases of periodic reinvestigations—are realistic goals for periodic reinvestigations. Standards for Internal Control in the Federal Government states that management evaluates and, if necessary, revises defined objectives so that they are consistent with requirements and expectations. Without conducting an evidence-based review of the goals, the executive branch will continue to compare the timeliness of its periodic reinvestigations against goals that it established almost a decade ago and that may no longer be appropriate. Further, without ensuring that 195 days, along with the associated goals of the different phases of periodic reinvestigations, are appropriate goals, agencies may not be adequately planning for the amount of time and resources actually required to conduct periodic reinvestigations, and, as a result, they may experience further timeliness delays. Moreover, if an agency does not plan for sufficient time to conduct periodic reinvestigations, it may allow individuals to retain access to sensitive documents when it has not yet confirmed those individuals’ continued eligibility, which could have potential repercussions for national security. The potential effects of continuous evaluation on periodic reinvestigations, such as possible changes to their frequency or scope, remain unknown. In addition, the executive branch’s plans for replacing periodic reinvestigations with continuous evaluation have evolved over time. For example, the 2008 Security and Suitability Process Reform report to the President outlined plans to replace the periodic reinvestigation model with continuous evaluation, conducting continuous evaluation annually or at least once every 5 years, depending on an individual’s security clearance level. The report identified a June 2009 milestone to develop an implementation plan to transition from periodic reinvestigations to continuous evaluation, and as previously discussed, an estimated operational date of the fourth quarter of fiscal year 2010 (see figure 1). The purpose of the change was to reveal security-relevant information earlier and to provide increased scrutiny on populations that could potentially represent risk to the government because they already have access to classified information. However, ODNI documentation states that continuous evaluation supplements and enhances, but does not replace, established personnel security processes. Executive branch agencies have expressed varying views about potential changes to the periodic reinvestigation model. For example, DOD officials stated that with workload and funding issues, they see no alternative but to replace periodic reinvestigations for certain clearance holders with continuous evaluation, as the record checks conducted are the same for both processes. In addition, DOD officials stated that they believe continuous evaluation will not only result in the more timely identification of security-relevant information, but will also help to change individuals’ behaviors—for example, that individuals will be more likely to self-report such information once they are enrolled in the program. DOD officials also noted that if changes are not made to the periodic reinvestigation process, the investigation backlog will persist, because continuous evaluation alerts will continue to add to the investigative workload. In addition, in September 2016, PERSEREC issued a report on a study it conducted on the effectiveness, timeliness, and cost of various automated record checks-based investigative strategies as compared with traditional periodic reinvestigations. The analysis found that some of the automated record checks strategies were effective, improved the timeliness of issue detection, and lowered costs. However, DOD officials noted that because ODNI is the Security Executive Agent, it must approve the change to the investigative process. These officials stated that they hope to influence this change by demonstrating the effectiveness of continuous evaluation at DOD. Additionally, NBIB officials stated that continuous evaluation will increase their workload and costs, since it is an additional layer to the personnel security clearance process. Accordingly, they hope that ODNI will identify efficiencies that can be made to the process. Further, PAC Program Management Office officials stated that there may be changes to the periodic reinvestigation model in the future, but that any changes to the model will be determined by data and will be made under the authority of ODNI and OPM as the Security Executive Agent and the Suitability Executive Agent, respectively. Other agencies, such as State, do not share DOD’s view. For example, State officials stated that although a reduction in costs would result from replacing periodic reinvestigations with continuous evaluation, they have concerns that relevant information, such as state and local law enforcement records that are not yet automated, would be missed if they did not conduct periodic reinvestigations. Similarly, officials from the Department of Justice and the Department of Homeland Security stated that they do not intend to replace periodic reinvestigations, and that continuous evaluation is to be a supplement to the personnel security clearance process. However, officials from all three of these agencies stated that it may be possible to change the frequency or scope of periodic reinvestigations at some point in the future. ODNI officials stated that, at this time, they have no intention of replacing periodic reinvestigations with continuous evaluation, and that the Security Executive Agent Directive for continuous evaluation, once issued, will clarify that continuous evaluation is intended to supplement and not replace periodic reinvestigations. In May 2017, ODNI officials stated that ODNI is not opposed to further improving the security clearance process, and that once continuous evaluation is operational, it plans to determine the efficiencies and mitigation of risks associated with the approach. Specifically, these officials stated that once continuous evaluation is further implemented and ODNI has gathered sufficient data—which they estimated would take about a year from May 2017—they can perform analysis and research to determine whether any changes are needed to the periodic reinvestigation model. While executive branch agencies have different views about potential changes to the periodic reinvestigation process, officials from five of the seven executive branch agencies we spoke with identified the potential expenditure of increased resources, such as workload and costs, as a risk associated with the implementation of continuous evaluation. Specifically, all five agencies stated that continuous evaluation will increase their workloads—and therefore costs—if no other changes are made to the personnel security process. For example, DOD officials noted that adjudicator workloads will increase as new investigative leads—identified through continuous evaluation—require adjudication. Senior DOD officials stated that DOD cannot afford to conduct both continuous evaluation and periodic reinvestigations. Specifically, DOD estimates that implementing the 2012 Federal Investigative Standards requirement to conduct more frequent periodic reinvestigations for certain clearance holders will cost approximately $1.8 billion for fiscal years 2018 through 2022. In addition, State officials stated that they anticipate that continuous evaluation will increase their personnel security workload because alerts will have to be validated, and potentially investigated, and then adjudicated. Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to risks related to achieving defined objectives. Risk assessment is the identification and analysis of risks related to achieving defined objectives to form a basis for designing risk responses. In addition, the PMBOK® Guide states that entities should perform a quantitative risk analysis to numerically analyze the effect of identified risks on overall project objectives. The key benefit of this process is that it produces quantitative risk information to support decision-making in order to reduce project uncertainty. Although executive branch agencies have identified increased resources as a risk associated with implementing continuous evaluation, and ODNI has acknowledged that risk, ODNI, in coordination with the PAC, has not assessed the potential effects of continuous evaluation on an agency’s resources. Further, ODNI has not developed a plan, in consultation with implementing agencies, to address such effects, to include modifying the scope or frequency of periodic reinvestigations or replacing periodic reinvestigations for certain clearance holders. While ODNI is implementing continuous evaluation in a phased approach, having a plan in place to address the increased workload once continuous evaluation is fully implemented is critical to ensuring the sustainability and effectiveness of executive branch agencies’ personnel security programs. Further, without assessing the potential impacts on agency resources and developing a plan to address them—once ODNI has further defined the program—implementing continuous evaluation could further increase the periodic reinvestigation backlog and agency costs. With delays in determining continued eligibility, executive branch agencies are assuming greater risk, which runs counter to the purpose of continuous evaluation. Continuous evaluation has been a key and long-standing initiative of security clearance reform efforts, intended to assist agencies in the timely identification of security-relevant information that may affect an individual’s continued eligibility for access to classified information. However, ODNI has not demonstrated the leadership necessary to make continuous evaluation a priority. Accordingly, the program’s implementation has been delayed for almost 7 years. Although ODNI has taken an initial step to implement it in a phased approach, it has not yet formalized the program in policy or provided an expanded definition of continuous evaluation to implementing agencies. In addition, ODNI has not yet determined key aspects of the program, including future phases of implementation and agency requirements. Key executive branch agencies have deemed information about the future phases necessary to plan for the implementation of continuous evaluation and to estimate potential costs. The absence of this information has limited their ability to prepare for the next phases of implementation. This could further delay the full implementation of continuous evaluation executive branch-wide and result in inconsistencies among agencies’ approaches. Specifically, in the absence of ODNI policy and comprehensive guidance, DOD and State continue to develop their current continuous evaluation programs. The ultimate effects of such inconsistencies could negatively affect reciprocity—another key government-wide security clearance reform effort. Although ODNI is to have oversight of continuous evaluation, it has not incorporated it into its oversight program or developed a plan to ensure that agencies implement it. Without a Security Executive Agent Directive for continuous evaluation that provides an expanded definition of continuous evaluation and relevant terms to help ensure consistent use; a plan for implementing continuous evaluation across the executive branch, that includes future phases of implementation and expectations for agencies; and a plan for monitoring program performance throughout the implementation process, as well as performance measures by which to track and report progress, ODNI is not well-positioned to ensure the success and effectiveness of the continuous evaluation initiative. Further, ODNI does not know whether it is meeting the critical purpose of filling the information gap between investigative cycles to identify risks to national security. Executive branch timeliness in completing periodic reinvestigations has declined over the past five years. Further, the executive branch does not know whether the timeliness goals—set nearly a decade ago—are still relevant and appropriate, given changes to the personnel security clearance process. Without conducting an evidence-based review to ensure that goals for the timely completion of periodic reinvestigations are appropriate, executive branch agencies may not be planning sufficient time and resources to complete periodic reinvestigations and therefore may be challenged to ensure the continued eligibility of the entire national security workforce. Finally, executive branch agencies have identified increased resources, such as workload and costs, as a challenge to implementing continuous evaluation. However, the executive branch has not determined the potential expected effects of continuous evaluation on periodic reinvestigations, and agencies have varying views about what, if any, additional changes should be made to the personnel security clearance process. Without an assessment of the potential effects of continuous evaluation and a plan to address those effects—once ODNI has further defined the program—agencies may not be able to effectively integrate continuous evaluation into their personnel security clearance programs, which in turn could lead to further delays in the clearance process. We are making the following six recommendations to ODNI: The Director of National Intelligence should issue a Security Executive Agent Directive for continuous evaluation to formalize the program, which includes, among other things, an expanded definition of continuous evaluation in advance of the next phase of implementation. (Recommendation 1) The Director of National Intelligence should, in coordination with the Continuous Evaluation Working Group, develop an implementation plan for continuous evaluation across the executive branch that includes a schedule with timeframes and expectations for agencies, such as the requirements (e.g., the size of the enrolled population in continuous evaluation) for future phases of implementation. (Recommendation 2) The Director of National Intelligence should develop a plan for monitoring continuous evaluation performance, to include assessing continuous evaluation at various phases of implementation. (Recommendation 3) The Director of National Intelligence should develop performance measures for continuous evaluation that agencies must track and determine a process and schedule for agencies to regularly report those measures to ODNI. At minimum, these performance measures should be clear, quantifiable, objective, and linked to measurable goals. (Recommendation 4) The Director of National Intelligence should, in coordination with the Deputy Director for Management of the Office of Management and Budget in the capacity as Chair of the Security, Suitability, and Credentialing Performance Accountability Council, conduct an evidence-based review of the timeliness goal of 195 days for completing the fastest 90 percent of periodic reinvestigations and the associated goals for the different phases of periodic reinvestigations, and adjust the goal if appropriate, taking into consideration available resources, the additional workload of continuous evaluation, and the risks associated with individuals retaining access to classified information without determining their continued eligibility. (Recommendation 5) The Director of National Intelligence should, once ODNI has further defined the continuous evaluation program, to include issuing a Security Executive Agent Directive and developing an implementation plan, in coordination with the Deputy Director for Management of the Office of Management and Budget in the capacity as Chair of the Security, Suitability, and Credentialing Performance Accountability Council, assess the potential effects of continuous evaluation on agency resources and develop a plan, in consultation with implementing agencies, to address those effects, such as modifying the scope of periodic reinvestigations, changing the frequency of periodic reinvestigations, or replacing periodic reinvestigations for certain clearance holders. (Recommendation 6) We provided a draft of this report to ODNI, DOD, OMB, State, NBIB, the Department of Justice, and the Department of Homeland Security for review and comment. Written comments from ODNI are reprinted in their entirety in appendix I. DOD, OMB, NBIB, and the Department of Homeland Security did not provide comments. ODNI, State, and the Department of Justice provided technical comments, which we incorporated in the report as appropriate. In its written comments, ODNI stated that it generally concurred, with comments, with our six recommendations. However, ODNI stated that it did not concur with aspects of our overall conclusions and provided observations in four specific areas. We continue to believe that our conclusions are valid, as discussed below. First, ODNI disagreed with our conclusion that it has not demonstrated the leadership necessary to make continuous evaluation a priority. ODNI noted that it has taken recent actions to better prioritize the implementation of continuous evaluation. While these recent steps are positive and may help position ODNI for success, historically ODNI has not demonstrated the leadership necessary to make the implementation of a continuous evaluation program a priority. Specifically, while ODNI refers to continuous evaluation as a new initiative, the original milestone for implementing the program was the fourth quarter of fiscal year 2010, which was not attained. Since then, as discussed in the report, a number of revised milestones for implementing the program have been missed. For example, the PAC, of which ODNI is a principal member, subsequently set a milestone for developing an initial continuous evaluation capability for other clearance holders by September 2014— which was extended to December 2014—and a milestone for implementing the capability for other clearance holders by December 2016. These milestones were also missed. As of August 2017, continuous evaluation has not yet been fully implemented, and ODNI has not set a milestone for when full implementation would occur. As such, we recommended specific actions that are needed to better position ODNI for success, including issuing a Security Executive Agent Directive for continuous evaluation, developing plans for implementing the program and monitoring its performance, and developing performance measures. Second, ODNI disagreed with our conclusion that it has not yet determined key aspects of the continuous evaluation program, including future phases of implementation and agency requirements. ODNI stated that the Security Executive Agent Directive for continuous evaluation is undergoing interagency coordination and that it has provided executive branch agencies with interim guidance until that process is completed, which we acknowledge in the report. While ODNI has provided interim guidance for continuous evaluation, it only details the requirements for fiscal year 2017 and not for the future phases of implementation. In August 2017, after receiving a draft of our report, ODNI officials stated that they planned to provide additional guidance to agencies clarifying that the requirements for fiscal year 2018 will be the same as those for fiscal year 2017. While this correspondence, once issued, will help agencies with their immediate program planning, ODNI officials stated that they have not yet determined the requirements for fiscal year 2019 or beyond, which limits agencies’ abilities to plan beyond the next fiscal year for the future phases of implementation. Additionally, ODNI stated that the technical development milestones of the Continuous Evaluation System it is developing are well-established, tracked, and shared with stakeholders. As discussed in the report, according to ODNI officials, they have established technical milestones for the development of ODNI’s Continuous Evaluation System. While this is an important step in implementing the program, ODNI has not developed similar programmatic milestones for the overall implementation of the program, such as when future phases of implementation will occur, to include full implementation. As discussed in the report, this has limited the ability of executive branch agencies to plan for implementation in accordance with ODNI’s phased approach. As a result, full implementation—which has been delayed for almost 7 years—may be further delayed. Third, ODNI did not agree with our conclusion that although it is to have oversight of continuous evaluation, it has not incorporated it into its oversight program or developed a plan to ensure agencies implement it. In its response, ODNI identified its intention to take certain actions and future mechanisms that could position it to monitor continuous evaluation. Specifically, ODNI stated that continuous evaluation metrics will be collected and analyzed when the initial phase of continuous evaluation implementation ends on September 30, 2017. Additionally, ODNI stated that it will leverage a pending OMB budget data request and that its Security Executive Agent National Assessments Program will be responsible for analysis and oversight of agency implementation and operation of continuous evaluation. However, as we note in the report, ODNI has not developed and distributed plans to monitor or assess the performance of continuous evaluation across the executive branch, including for the first phase of implementation. As we note in our report, ODNI officials stated that ODNI did not oversee the pilots that were conducted by DOD and State, as they were performed at the discretion of those agencies. State officials noted that while they have shared lessons learned on their continuous evaluation pilot, they were not tasked to do so. While ODNI stated in its written comments that it has specific expertise in researching, measuring, analyzing, and monitoring personnel security performance across the executive branch, it has not yet demonstrated these actions with regard to continuous evaluation. For example, DOD—the executive branch agency with the majority of security clearance holders—has conducted research on continuous evaluation since 2001, piloted its program since October 2014, and plans to increase the number of personnel enrolled in the program to 1 million by the end of calendar year 2017. However, ODNI, in the capacity as the Security Executive Agent, has not overseen DOD’s pilot. Moreover, as discussed in the report, as of August 2017—10 months into fiscal year 2017—ODNI has not yet developed and distributed to executive branch agencies continuous evaluation performance measures. At the end of our review, in August 2017, ODNI officials stated that they have developed a draft list of metrics for continuous evaluation for fiscal year 2017 and that once the metrics are finalized, they will issue guidance to executive branch agencies requesting them to report these metrics to ODNI. While metrics can help to establish a baseline and inform aspects of a program’s status—and ODNI’s development of draft metrics is a positive step—performance measures are linked to a goal and inform how well an agency is doing against that goal. As ODNI has not developed and distributed performance measures that are clear, quantifiable, and objective, and that are linked to measurable goals prior to initiating, or earlier in the first phase of implementation, executive branch agencies may not be positioned to collect and report these metrics at the end of the fiscal year. Additionally, as discussed in the report, according to ODNI officials, while they would like to incorporate continuous evaluation into their Security Executive Agent National Assessments Program, it is not currently part of the program. While ODNI has identified steps that could position it to monitor continuous evaluation in the future, it has not yet implemented mechanisms to monitor and measure program performance. Fourth, ODNI did not agree with our conclusions that it is not well- positioned to ensure the success and effectiveness of the continuous evaluation initiative, and that it does not know if it is meeting the critical purpose of filling the information gap between investigative cycles to identify risks to national security. However, in its written comments, ODNI stated that successful implementation of continuous evaluation across the executive branch requires formal Security Executive Agent policy guidance, implementation and technical guidance and milestones, performance measures, and a monitoring program, which we recommended in the report. ODNI states that it is well-postured to achieve these goals, and refers to its intention to apply Security Executive Agent National Assessments Program best practices as a mechanism to use to monitor and ensure compliance. Although this action could be a step in better positioning ODNI as continuous evaluation implementation further proceeds, as noted above and in our report, ODNI has not yet finalized, distributed, and implemented these and other actions to ensure that it is currently positioned to ensure success, even while it has initiated the first phase of continuous evaluation implementation. As noted in our report, although ODNI has taken steps to implement continuous evaluation in a phased approach, executive branch efforts to implement continuous evaluation have been a long-standing component of overall security clearance reform. The actions ODNI intends to take as it further implements continuous evaluation, as well as the mechanisms it identified, may better position it and the implementing agencies for success. However, given the challenges that the executive branch has faced in implementing continuous evaluation thus far and the continued delays it has faced, without a fully defined program in place, we believe that our conclusions remain valid. Finally, in its written comments, ODNI suggested a revision to our sixth recommendation. Specifically, ODNI suggested adding an explicit timeframe for completing the action. We believe that ODNI is best positioned to set an appropriate timeframe for completion based on its familiarity with the progress of the program and, as such, did not incorporate this change in our report. We agree with ODNI that establishing such a timeframe is a positive step. We are sending copies of this report to the appropriate congressional committees, the Director of National Intelligence, the Secretary of Defense, the Director of OMB, the Secretary of State, the Secretary of Homeland Security, the Director of OPM, the Director of NBIB, the Attorney General, the Director of the Federal Bureau of Intelligence, and the Director of the Bureau of Alcohol, Tobacco, Firearms, and Explosives. In addition, this report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your members of your staff have any questions regarding this report, please contact me at (202) 512-3604 or farrellb@gao.gov. GAO staff who made significant contributions to this report are listed in appendix II. In addition to the contact named above, Kimberly C. Seay (Assistant Director), Chris Businsky, Molly Callaghan, Jenny Chanley, Dawn Godfrey, Saida Hussain, James Krustapentus, Michael Shaughnessy, Rachel R. Stoiko, John Van Schaik, Cheryl Weissman, and Jina Yu made significant contributions to this report. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Personnel Security Clearances: Funding Estimates and Government- Wide Metrics Are Needed to Implement Long-Standing Reform Efforts. GAO-15-179SU. Washington, D.C.: April 23, 2015. Personnel Security Clearances: Additional Guidance and Oversight Needed at DHS and DOD to Ensure Consistent Application of Revocation Process. GAO-14-640. Washington, D.C.: September 8, 2014. Personnel Security Clearances: Actions Needed to Ensure Quality of Background Investigations and Resulting Decisions. GAO-14-138T. Washington, D.C.: February 11, 2014. Personnel Security Clearances: Opportunities Exist to Improve Quality Throughout the Process. GAO-14-186T. Washington, D.C.: November 13, 2013. Personnel Security Clearances: Full Development and Implementation of Metrics Needed to Measure Quality of Process. GAO-14-157T. Washington, D.C.: October 31, 2013. Personnel Security Clearances: Further Actions Needed to Improve the Process and Realize Efficiencies. GAO-13-728T. Washington, D.C.: June 20, 2013. Managing for Results: Agencies Should More Fully Develop Priority Goals under the GPRA Modernization Act. GAO-13-174. Washington, D.C.: April 19, 2013. Security Clearances: Agencies Need Clearly Defined Policy for Determining Civilian Position Requirements. GAO-12-800. Washington, D.C.: July 12, 2012. Personnel Security Clearances: Continuing Leadership and Attention Can Enhance Momentum Gained from Reform Effort. GAO-12-815T. Washington, D.C.: June 21, 2012. 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. Washington, D.C.: February 28, 2012. Background Investigations: Office of Personnel Management Needs to Improve Transparency of Its Pricing and Seek Cost Savings. GAO-12-197. Washington, D.C.: February 28, 2012. GAO’s 2011 High-Risk Series: An Update. GAO-11-394T. Washington, D.C.: February 17, 2011. High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 16, 2011. Personnel Security Clearances: Overall Progress Has Been Made to Reform the Governmentwide Security Clearance Process. GAO-11-232T. Washington, D.C.: December 1, 2010. Personnel Security Clearances: Progress Has Been Made to Improve Timeliness but Continued Oversight Is Needed to Sustain Momentum. GAO-11-65. Washington, D.C.: November 19, 2010. DOD Personnel Clearances: Preliminary Observations on DOD’s Progress on Addressing Timeliness and Quality Issues. GAO-11-185T. Washington, D.C.: November 16, 2010. Personnel Security Clearances: An Outcome-Focused Strategy and Comprehensive Reporting of Timeliness and Quality Would Provide Greater Visibility over the Clearance Process. GAO-10-117T. Washington, D.C.: October 1, 2009. Personnel Security Clearances: Progress Has Been Made to Reduce Delays but Further Actions Are Needed to Enhance Quality and Sustain Reform Efforts. GAO-09-684T. Washington, D.C.: September 15, 2009. Personnel Security Clearances: An Outcome-Focused Strategy Is Needed to Guide Implementation of the Reformed Clearance Process. GAO-09-488. Washington, D.C.: May 19, 2009. DOD Personnel Clearances: Comprehensive Timeliness Reporting, Complete Clearance Documentation, and Quality Measures Are Needed to Further Improve the Clearance Process. GAO-09-400. Washington, D.C.: May 19, 2009. High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 2009. Personnel Security Clearances: Preliminary Observations on Joint Reform Efforts to Improve the Governmentwide Clearance Eligibility Process. GAO-08-1050T. Washington, D.C.: July 30, 2008. Personnel Clearances: Key Factors for Reforming the Security Clearance Process. GAO-08-776T. Washington, D.C.: May 22, 2008. Employee Security: Implementation of Identification Cards and DOD’s Personnel Security Clearance Program Need Improvement. GAO-08-551T. Washington, D.C.: April 9, 2008. Personnel Clearances: Key Factors to Consider in Efforts to Reform Security Clearance Processes. GAO-08-352T. Washington, D.C.: February 27, 2008. DOD Personnel Clearances: DOD Faces Multiple Challenges in Its Efforts to Improve Clearance Processes for Industry Personnel. GAO-08-470T. Washington, D.C.: February 13, 2008. DOD Personnel Clearances: Improved Annual Reporting Would Enable More Informed Congressional Oversight. GAO-08-350. Washington, D.C.: February 13, 2008. DOD Personnel Clearances: Delays and Inadequate Documentation Found for Industry Personnel. GAO-07-842T. Washington, D.C.: May 17, 2007. High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 2007. DOD Personnel Clearances: Additional OMB Actions Are Needed to Improve the Security Clearance Process. GAO-06-1070. Washington, D.C.: September 28, 2006. DOD Personnel Clearances: Some Progress Has Been Made but Hurdles Remain to Overcome the Challenges That Led to GAO’s High-Risk Designation. GAO-05-842T. Washington, D.C.: June 28, 2005. High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 2005.", "summary": "Continuous evaluation is a key executive branch initiative to more frequently identify and assess security-relevant information, such as criminal activity. Implementing a continuous evaluation program has been a long-standing goal, with implementation milestones as early as 2010 and DOD pilots dating back to the early 2000's. GAO was asked to review efforts to implement continuous evaluation. This report assesses the extent to which (1) ODNI has implemented an executive branch-wide program and developed plans to monitor and measure its performance; (2) DOD and other agencies have designed, piloted, and evaluated continuous evaluation and (3) agencies completed timely periodic reinvestigations from fiscal years 2012-2016, and the potential effects of continuous evaluation on reinvestigations. GAO reviewed documentation, analyzed timeliness data, and interviewed officials from ODNI and other agencies. This is a public version of a sensitive report that is being issued concurrently. Information that ODNI and State deemed sensitive has been omitted. In October 2016, the Office of the Director of National Intelligence (ODNI) took an initial step to implement continuous evaluation—a process to review the background of clearance holders and individuals in sensitive positions at any time during the eligibility period—across the executive branch, but it has not yet determined key aspects of the program, and it lacks plans for implementing, monitoring, and measuring program performance. For the first phase, agencies are to conduct certain continuous evaluation record checks against a portion of their national security population by the end of fiscal year 2017. However, ODNI has not formalized its policy on what continuous evaluation encompasses, determined what the future phases will entail or when they will occur, or developed an implementation plan. According to all seven agencies GAO interviewed, this uncertainty has affected their ability to plan for the program and estimate its costs. Without a continuous evaluation policy and a fully developed plan, full implementation—which has been delayed since 2010—may be further delayed. Moreover, ODNI lacks a plan to monitor and measure program performance, including for the first phase, which is underway. Without developing such a plan, ODNI cannot ensure that the program is being implemented consistently across the executive branch or that it is effectively identifying risks to national security. The Department of Defense (DOD) and the Department of State (State) have designed, piloted, and evaluated continuous evaluation. Their approaches have varied in scope, size, and duration, as they pre-date ODNI's efforts to implement continuous evaluation executive branch-wide. DOD's pilot involves the most record checks and the largest population. DOD had 500,000 employees enrolled in December 2016, and it plans to enroll 1 million by the end of calendar year 2017 and all clearance holders by the end of fiscal year 2021. Executive branch agencies meeting established timeliness goals for completing periodic reinvestigations decreased from fiscal years 2012 through 2016, and the potential effects of continuous evaluation, including on reinvestigations and resources, are unknown. While 84 percent of the executive branch agencies reviewed by GAO reported meeting the executive branch's 195-day timeliness goal for at least three of four quarters in fiscal year 2012, only 22 percent did so in fiscal year 2016. Also, a 2008 report outlined a plan to replace reinvestigations with continuous evaluation, but ODNI documentation indicates that this is no longer the intent. While agencies expressed varying views about changes to reinvestigations—such as modifying their scope—officials from five agencies stated that the continuous evaluation program will increase their workloads and costs if no other changes are made to the requirements. DOD officials said they cannot afford to conduct both continuous evaluation and reinvestigations, as DOD estimates that more frequent reinvestigations for certain clearance holders will cost $1.8 billion for fiscal years 2018 through 2022. Although agencies have identified increased resources as a risk of the program, ODNI has not assessed the program's potential effects on agency resources. Without assessing the potential effects once ODNI has further defined the program, implementing continuous evaluation could lead to further delays and backlogs in reinvestigations, and could increase agency costs. GAO is making six recommendations, including that ODNI formalize its policy on continuous evaluation, develop an implementation plan as well as a plan to monitor and measure program performance, and assess the potential effects of continuous evaluation on agency resources. ODNI concurred with the recommendations, but disagreed with aspects of GAO's conclusions. GAO continues to believe the conclusions are valid, as discussed in the report.", "document_type": "gao"}
{"report": "HUD established DEC in 1998 to consolidate enforcement activities of PIH, CPD, the Office of Fair Housing and Equal Opportunity (for non-civil rights violations), and MFH into one new organization. The HUD 2020 management reform plan envisioned that DEC would take enforcement action against: (1) public housing agencies that do not pass annual assessments; (2) owners of private, HUD-assisted housing that do not pass physical or financial audit inspections; and (3) local and state governments and non-profit organizations that do not comply with the requirements of grants they received from CPD and the Office of Fair Housing and Equal Opportunity (for non-civil rights violations). In addition, as part of the plan, HUD created the Real Estate Assessment Center (REAC) to help monitor public housing and HUD-insured multifamily housing projects by providing independent assessments of the physical quality and financial condition of public housing and multifamily developments. DEC’s current mission is to provide independent oversight of the administration of HUD programs and its external partners. According to HUD, DEC’s primary goal is to bring owners to full compliance so that there is no compromise in the quality of HUD-assisted housing. In instances where owners do not bring properties up to standard, and where physical and financial deficiencies persist, DEC can take appropriate enforcement action. This includes administrative sanctions, such as civil money penalties, suspension or debarment, as well as possible referral to HUD OIG when criminal activity is suspected, or to the Department of Justice for civil action. DEC also conducts more targeted oversight reviews for some program offices. These reviews are intended to provide program offices with an independent means to analyze and evaluate the efficiency or vulnerability of their programs and operations. DEC has staff in HUD headquarters and five field offices. In general, headquarters staff develops policy and coordinates the reviews of the referrals DEC receives from the HUD program offices while field office staff conducts the reviews. DEC works primarily with MFH and conducts more targeted oversight reviews for PIH and CPD. (See Appendix II for a breakdown of DEC referrals by program office and the state where the property is located.) These program offices have staff in headquarters and field offices, which are organized into 10 regions. There is at least one field office or regional office in each state, and the number of field offices varies by region. PIH further combines these regions into six networks. These program offices oversee different areas within HUD: MFH oversees the Federal Housing Administration’s multifamily mortgage insurance on loan originations, manages HUD’s portfolio of multifamily housing, provides rental assistance, and helps preserve affordable housing. Additionally, MFH administers project-based rental assistance, supportive housing for the elderly, and programs for persons with disabilities. Collectively, the properties MFH oversees provided affordable rental housing to more than 1.2 million low- income households in 2017. PIH helps low-income families through a number of programs. PIH provides assistance to state and local public housing agencies that generally own and administer units for eligible tenants. The Housing Choice Voucher program provides tenant-based rental assistance that eligible individuals and families can use to rent houses or apartments in the private housing market. Native American programs provide block grants and loan guarantees to tribal entities for housing development and assistance. PIH is supporting 2.2 million vouchers and 1.1 million public housing units in 2018. CPD provides financial and technical assistance to states and localities through the Community Development Block Grant and HOME Investment Partnerships programs—the federal government’s largest block grant programs for community development and affordable housing production, respectively. CPD also leads a number of HUD’s efforts to combat homelessness. Additionally, Congress appropriated about $36 billion in new Community Development Block Grant-Disaster Recovery funds in fiscal years 2017 and 2018 to states and local governments that experienced major disasters in 2015, 2016 and 2017. CPD oversaw more than 37,000 grants in 2017. DEC uses an internal database to manage the referrals it receives from HUD program offices. DEC’s system is designed to capture various data, including the date DEC received the referral, name of the property owner or grantee being referred, cause of the referral, status of the referral, final action to close the referral, and corrections made related to the referral, among other things. DEC and the three HUD program offices we examined have agreements in place that generally describe the process the offices follow to make referrals to DEC and the responsibilities of the parties. However, two of the three program offices (PIH and CPD) do not provide their staff with specific guidance for making referrals, and the target number of referrals these two offices have established to send to DEC does not address the risk of noncompliance. MFH makes automatic and elective referrals to DEC based on specific thresholds for program noncompliance defined in its agreement with DEC. MFH properties are automatically referred to DEC if: (1) the property scores below a certain threshold on a REAC physical inspection; (2) the owner fails to submit audited financial statements to HUD within 60 days following the end of the owner’s fiscal year; or (3) REAC’s automated compliance review of the property’s financial statements identifies unauthorized uses of project funds greater than an agreed-to threshold (see figure 1). MFH also may make an elective referral to DEC based in part on specific situations of program noncompliance defined in their agreement, such as the failure to comply with program regulations or use agreements. MFH officials told us that they make these referrals on a case-by-case basis if they believe that DEC’s expertise could help resolve the concerns. In addition, MFH officials distributed a 2017 DEC notice that clarified the procedures for making an elective referral to DEC. Whereas automatic referrals are system-generated, MFH can use its discretion whether to make an elective referral to DEC. From fiscal years 2014 through 2017, the total number of referrals DEC received on MFH properties increased by 23 percent. However, as seen in figure 2, the composition of those referrals varied. Referrals related to failure to submit timely financial statements increased by about 59 percent, while referrals related to other instances of financial noncompliance decreased by about 6 percent. Referrals for physical noncompliance, while relatively few overall, increased by 113 percent. MFH officials told us that the increase in referrals for failure to file timely financial statements was due, in part, to new program participants from 2011 to 2013 who did not understand the requirements. In addition, according to MFH officials, MFH changed certain thresholds of financial noncompliance from automatic to elective referrals in 2013, which officials believe resulted in fewer referrals for those types of financial noncompliance. MFH officials also noted that the increase in physical noncompliance referrals in fiscal year 2016 likely resulted from the informal encouragement given to field offices to make more elective referrals. In addition, during this period HUD’s inspection process came under additional scrutiny due to concerns about a multifamily property in Florida. The property had received a passing REAC inspection score in August 2015 but city code inspectors subsequently found multiple and serious deficiencies. The case attracted attention from the media and Congress and culminated in a Senate hearing in September 2016. Subsequently HUD reviewed the integrity of the REAC inspection and DEC referral processes. DEC officials told us that one reason there are fewer referrals for physical noncompliance compared to financial noncompliance is that a relatively small number of properties reach the threshold for an automatic referral based on physical noncompliance (inspection score less than or equal to 30 out of 100). According to HUD data, REAC conducted approximately 8,700 physical inspections in 2017. Of these inspections, our analysis of DEC data showed that DEC received 64 referrals (0.7 percent of the inspections conducted) for physical noncompliance. PIH and CPD do not provide specific guidance to staff on when a referral should be made to DEC. This stands in contrast to MFH, whose agreement with DEC includes a more detailed discussion of what problems should result in a risk-based referral. PIH. A PIH official told us that they periodically send an email to field offices requesting potential candidates for referrals to DEC, and that the email cites factors that might warrant such referrals—such as potential violations of statute, regulation, or agreement. However, beyond that, there is no guidance to help field staff decide when to make a referral. In addition, PIH does not provide direction to field offices on how to use the results of their quarterly risk assessment to identify high-risk PHAs for potential DEC referrals. According to PIH officials, PIH has not issued more detailed guidance because it did not want to be too prescriptive in telling field office staff when to refer a public housing agency to DEC, as a DEC referral may not always be appropriate. CPD. An official from a CPD field office told us that they may refer a grantee to DEC for an oversight review—for example, if they identify a complex financial issue requiring an in-depth financial investigation beyond the capacity of the field office. However, beyond that, neither DEC nor CPD have developed guidance to help field offices determine when to refer a grantee to DEC. In addition, CPD does not provide direction to field offices on how to use the results of their risk-based assessment of grantees to identify potential DEC referrals. CPD officials told us that they do not provide guidance because they believe that their current approach where field offices make referrals to DEC on a case-by- case basis is better and more effective. As shown in figure 3, in recent years, the number of referrals has declined slightly for PIH and varied for CPD. DEC has agreed with PIH and CPD on a target number of elective referrals they should aim to make to DEC each fiscal year. However, neither program office met their targets for referrals to DEC in fiscal years 2016 and 2017: PIH made 25 and 12 referrals, respectively, but had an annual target of 40, while CPD referred 6 each year but had a target of 10. A number of factors may help explain the decline in referrals and failure to meet targets. For example, PIH officials told us that a new requirement that PIH field offices make every attempt to satisfy oversight review recommendations may have resulted in hesitation to make referrals among some field staff. However, the lack of formal guidance for field staff may also play a role in the number of referrals made. According to officials from two CPD field offices, many field offices do not understand the role of DEC or the assistance it can provide, and officials from one field office told us that providing formal guidance would be helpful in this regard. Our analysis found that half of the CPD field offices had not made a referral to DEC during the previous two fiscal years and, according to PIH officials, the number of PIH referrals varied for reasons not related to noncompliance risks. The 2016 HUD OIG report noted that when program field offices requested DEC services, they did so largely because of personal relationships and trust between DEC and some field office managers, an observation reiterated by officials from one field office we interviewed. According to the Office of Management and Budget, a ‘‘guidance document’’ is an agency statement of general applicability and future effect, other than a regulatory action, that sets forth a policy on a statutory, regulatory or technical issue or an interpretation of a statutory or regulatory issue. The office notes that guidance documents, used properly, can channel the discretion of agency employees, increase efficiency, and enhance fairness by ensuring equal treatment of similarly situated parties. In addition, federal internal control standards state that agencies should design control activities to achieve objectives and respond to risks, such as by documenting the responsibilities for these activities through policies and procedures. Because two of the program offices (PIH and CPD) we examined have not developed specific guidance for making referrals for oversight reviews, these offices cannot ensure that field staff are identifying and making referrals on a well- supported, risk-based, and consistent basis, and this may limit DEC’s effectiveness in fulfilling its mission of providing independent oversight of HUD’s programs. Such additional guidance could include information on how the field offices should incorporate the results from their risk assessments, more detailed criteria on when the field office should make a referral, and examples of potential noncompliance that could be referred. The target number of referrals for two program offices, PIH and CPD, appears to have been selected somewhat arbitrarily, rather than based on the risks to the programs. As noted earlier, DEC, PIH and CPD have agreed to set targets annually for the number of elective referrals they will make. PIH’s quarterly target of 10 public housing agency referrals represents less than 2 percent of the total number of agencies PIH designates as very high-risk and high risk each quarter. In addition, CPD’s target of 10 referrals per year represents about .03 percent of the grantees overseen by CPD and about 1 percent of the grantees monitored by CPD each year. However, PIH and CPD officials could not explain the basis for selecting these targets, nor is it clear how these targets are related to the overall risk these program offices face. Both program offices’ agreements with DEC state that they will review the agreements each year. PIH officials said this review typically has included a general discussion of the appropriate number of referrals to set as the target. DEC officials told us that future reviews will take a more risk-based approach to selecting that number, but they could not tell us when this would occur. In addition, according to a HUD official, program offices such as CPD are reviewing their processes for managing risk, which could impact the target number of referrals to DEC needed for them to adequately manage their risk. According to federal internal control standards, management should identify, analyze, and respond to risks related to achieving the defined objectives, and management should design control activities in response to the entity’s objectives and risks to achieve an effective internal control system. Without a target number of referrals based on the risks to the programs, PIH and CPD offices cannot be confident that DEC resources are being used most efficiently to address the risks of noncompliance by housing agencies and grantees. While DEC currently tracks some measures related to its performance, its performance measurement system is lacking in key respects that limit DEC’s ability to fully assess its performance. DEC’s performance measures include the number of work assignments completed, reduction in number of aged referrals (2 or more years old), and the number of families impacted by its enforcement activities. DEC officials told us that they also track other measures, such as the dollar amounts of recoveries, and the numbers of suspensions and debarments. These measures are contextual indicators—measures intended to provide a broader perspective on the conditions that may influence an agency’s ability to achieve its performance goals. As shown in table 1, HUD data shows that for these contextual indicators DEC has recovered millions of dollars in inappropriately used HUD program funds and suspended or debarred some individuals. HUD data shows that DEC generally exceeded its targets for the performance measures. Federal internal control standards state that agency management should define objectives in measurable terms so that performance toward those objectives can be assessed. Consistent with those standards, we identified several challenges with DEC’s system of performance measurement. DEC’s performance measures do not include outcome measures, which track the results of products and services. Instead, the performance measures track outputs, which are the direct products and services delivered by a program. Prior work and guidance that we have issued stress that performance measurement should evaluate outcomes related to program activities to judge program effectiveness. Previously, DEC tracked some outcome measures, such as the increase in the percentage of residents living in acceptable insured or assisted multifamily housing as a result of civil or administrative enforcement actions. However, DEC no longer tracks those measures, and officials were unable to explain why they stopped tracking them. Similarly, the 2014 agreement between DEC and PIH included examples of outcome measures for program offices– such as financial performance improvements and early detection or prevention of fraud—but these measures are not in the current agreement. Measuring outcomes can help assess a program’s activities and operations, identify areas that need improvement, and ensure accountability for results. DEC officials told us that outcome measurement is challenging because it can be difficult to establish a direct correlation with DEC’s work. We attempted to independently examine the outcome of DEC’s work. Specifically, we tried to measure the extent to which referrals to DEC resulted in suspensions or debarments of multifamily owners, but, in general, DEC’s data did not readily allow for this type of assessment. Outcome measures such as timeliness and monetary outcomes can still be used to capture essential program information and help assess program effectiveness. By not measuring and reporting on outcomes, DEC cannot fully assess the effectiveness or impact of its activities, or determine where improvement is needed. DEC does not track the status of its recommendations. DEC’s oversight reviews sometimes result in recommendations to program offices to ensure program compliance with regulatory and policy requirements; streamline operations; improve customer service; and reduce program vulnerabilities to fraud, waste, abuse, or mismanagement. According to PIH and CPD’s agreements, the program offices will make every attempt to satisfy the recommendations, but the program offices are not required to implement them. However, according to DEC officials, DEC does not gather information on the status of its recommendations or assess program offices’ progress in implementing them. OGC officials told us that they were concerned about the burden that would be placed on program staff for providing such information, but PIH and CPD officials told us it would not require much additional work. We have previously reported that successful performance measures demonstrate results and provide useful information for decision makers. Without tracking the status of its recommendations and the extent to which program offices are implementing its recommendations, DEC is limited in its ability to assess its effectiveness in improving program operations, such as better program compliance. DEC does not have a performance measure to assess the timeliness of its reviews for the referrals it receives. DEC does not measure how much time it takes to complete a referral from MFH, PIH, or CPD. DEC’s guidance and its agreements with CPD and PIH state that DEC will complete oversight reviews and issue a final report to program offices within 90 business days of the referral. These reviews are intended to be completed within this timeframe so that CPD and PIH program offices will have prompt feedback to address any areas of concern. According to HUD officials, DEC tracks the timeliness of its oversight work. However, DEC has not created a performance measure to track the extent that it is meeting its goals. In addition, DEC has no target timeframe for MFH referrals because, according to DEC officials, these referrals require varying strategies for fact gathering, analysis, and determining a course of action. Our analysis of HUD data showed that from fiscal years 2014-2017, DEC took an average of 168 days to complete its review after receiving a referral from MFH for failure to file financial statements, and an average of 254 days to complete its review for referrals related to financial noncompliance. We have previously reported that one attribute of a successful performance measure was whether the measure covered a government-wide priority, such as timeliness. Because it does not have a measure related to its timeliness in completing its reviews nor report on that information, DEC cannot ensure accountability or evaluate its efficiency for completing the reviews. DEC did not consistently record two pieces of information that could be relevant in assessing its performance—date of referral and corrective action taken. We analyzed an internal spreadsheet DEC uses to track the referrals it received from CPD and PIH to conduct oversight reviews of grantees and housing agencies. DEC did not record the date that the referral was assigned a DEC lead analyst (the point DEC begins tracking the referrals) or the date DEC signed the final report for 36 percent of the CPD referrals and 20 percent of the PIH referrals DEC completed from fiscal years 2015-2017. Consequently, we could not reliably evaluate DEC’s average timeframes for completing an oversight review referral. In addition, DEC did not consistently record information on the corrective actions taken by DEC or MFH following a DEC review. DEC’s MFH referral-tracking database includes an “Outcomes” module with a “Corrections Made” field where DEC analysts can choose a description of the corrections made as a result of the review by either MFH or by the owner of the property, such as filing an annual financial statement. However, based on our review of this database, DEC analysts are not regularly using the “Corrections Made” field. According to DEC officials, the inconsistent recording of dates and corrective actions was likely due to human error. This may suggest the lack of a process or controls to ensure accurate and complete recording of this information. Federal internal control standards state that an agency’s managers should use quality information, such as the accurate and timely recording of transactions, to achieve the agency’s objectives and manage risk. Without such controls, DEC will continue to have unreliable data to measure its timeliness in completing reviews and will not be able to reliably track the status of its recommendations to MFH and hold that office accountable for their implementation. Information technology challenges have affected the ability of DEC to achieve its mission. Although DEC has experienced staffing declines over time, there is disagreement about the extent to which these declines have impacted DEC’s ability to achieve its mission. Further, disagreement exists over DEC’s placement within HUD and the impact on DEC’s ability to achieve its mission. DEC has experienced various information technology challenges that have affected its ability to achieve its mission. For example, the system does not allow DEC to easily determine the basis for a financial referral it receives from REAC on MFH properties. Instead, according to HUD, to determine the issues that triggered the referral, DEC staff must review each property’s financial statements—a labor-intensive process. In addition, DEC’s information technology system is designed to share information among staff but not to analyze or track information. Its referral data are stored in databases that generally cover one fiscal year each, according to OGC officials, which makes it challenging to identify trends. Further, DEC officials told us that the system has experienced continuing outages and breaks in service. HUD has acknowledged that DEC needs more robust information technology to carry out its enforcement and tracking functions. The HUD Enforcement Management System is part of the department’s efforts to streamline, consolidate, and automate its enforcement business processes. According to HUD, the system will consolidate six enforcement-related systems into one and automate the monitoring and compliance review processes for several offices within HUD. Officials said this will help DEC manage its workflow and reviews and enable it to more easily track the focus of a review and any monetary findings. OGC officials noted that the department implemented the first phase of the HUD Enforcement Management System in December 2015, initially focusing on HUD’s Office of Fair Housing. However, HUD’s development contract expired in March 2017. Due to funding constraints, as of June 2018, HUD had not awarded a new contract that would incorporate DEC, and such funding is not expected to be allocated until at least fiscal year 2020, according to OGC officials. Although DEC has experienced staffing declines over time, disagreement exists within HUD about the impact of these staffing declines on DEC’s ability to achieve its mission. DEC’s staff level in fiscal year 2017 (an estimated 95 full-time equivalents) represented its lowest staff level since fiscal year 1999. HUD OIG reported in 2016 that limits on DEC resources resulted in lost opportunities to improve program effectiveness and strengthen conditions that discouraged waste, fraud, and abuse. The report also noted that these limits had prevented DEC from extending comprehensive enforcement activities to all program offices, which had reduced its effectiveness. OIG’s report further noted that DEC said it would need additional staff to perform financial analysis and enforcement if DEC were to expand its efforts with PIH and CPD. OIG recommended that OGC provide DEC with the resources and support to strengthen enforcement across HUD programs. HUD disagreed with the OIG’s conclusion that staffing declines limited DEC’s ability to achieve its mission. HUD noted that DEC’s decrease in workload over time mitigated the effect of reduced staffing. In addition, HUD said that despite its reduced resources, DEC had succeeded in preventing some individuals from participating in MFH programs through suspension or debarment, and in encouraging compliance. HUD stated that DEC had sufficient staffing to handle MFH referrals under current protocols and serve as HUD’s troubleshooter by conducting oversight reviews for CPD and PIH. As of August 2018, HUD had not provided the department’s status of actions taken or planned related to OIG’s recommendation to the OIG. Disagreement also exists regarding the placement of DEC within HUD. At its creation in 1998, DEC was located within HUD’s Office of the Deputy Secretary, but in 2002 it was moved to OGC. HUD OIG and DEC officials have stated that DEC’s placement within OGC limits DEC’s ability to achieve its mission. OIG reported in its 2016 report that DEC’s initial placement within the Deputy Secretary’s office provided DEC with independent enforcement authority. In addition, DEC officials told us that DEC’s initial placement highlighted HUD’s commitment to enforcement and that its current placement limits its authority to oversee program areas and hold them accountable for corrections. In a December 2017 internal paper, DEC proposed returning to the Deputy Secretary’s office. It noted that DEC’s oversight of programmatic operations began to decline in 2016, and that PIH referrals to DEC through December 2017 represented less than one-half of the goal of one percent of PIH’s inventory. DEC’s paper also noted that a return to the Deputy Secretary’s office would highlight HUD’s responsibility to develop and maintain effective internal controls, independent of the program areas. Finally, DEC stated that its placement within the Deputy Secretary’s office would provide an opportunity to consolidate the department’s enterprise risk management functions. According to HUD officials, as of August 2018, the department had no plans to move DEC and did not request funding for such a move in HUD’s fiscal year 2019 budget. In response to the 2016 OIG report, HUD stated that DEC’s current location within OGC had not affected DEC’s ability to make referrals for enforcement or initiate suspension or debarment actions. HUD added that placing DEC within OGC achieved significant efficiencies by consolidating DEC’s administrative, information technology, and legal functions without affecting the ability of either office to carry out its mission. OGC officials told us that DEC’s current placement within OGC is similar to the Federal Bureau of Investigation’s placement within the Department of Justice. They also noted that DEC’s enforcement and compliance analysts and attorneys coordinate enforcement activities and that DEC field office directors routinely seek legal advice from OGC attorneys. According to OGC, returning DEC to the Deputy Secretary’s office would have adverse effects on the administrative efficiencies achieved. It is unclear whether DEC’s placement within OGC has adversely affected DEC’s ability to fulfill its mission. We asked DEC staff for documentation that would support a move to the Deputy Secretary’s office, but the information we received did not provide specific examples of how DEC’s current placement limited its ability to achieve its mission. Furthermore, as part of their 2017 paper discussing a proposed relocation, DEC officials did not identify how DEC’s placement in OGC adversely impacted it. Other factors besides DEC’s current location may explain why DEC may not be utilized more effectively. For example, we previously identified findings related to the lack of guidance that might contribute to program offices’ underutilization of DEC. In addition, as we note above, the absence of guidance on when program offices should make referrals may limit DEC’s ability to assess its enforcement efforts. These findings generally are independent of DEC’s organizational location. DEC has recovered millions of dollars in inappropriately used HUD program funds, suspended or debarred some individuals, and helped strengthen program offices’ monitoring efforts. However, our review identified opportunities for DEC to better achieve its mission and assess its impact: Guidance. PIH and CPD field office staff use their discretion in deciding which cases to refer to DEC, but these decisions do not appear to always be based on well-supported assessments of risk. Without specific guidance to help staff direct their decision making, DEC and the program offices cannot ensure that referrals are made using a consistent and risk-based approach, limiting DEC’s effectiveness in fulfilling its mission of providing independent oversight of HUD’s programs. Target number of referrals. The target number of referrals that PIH and CPD aim to make to DEC has not been chosen based on a risk- based process and it is not clear how these targets related to the programs’ overall risks. Without a determination of appropriate risk- based target numbers, PIH and CPD cannot ensure that they are using DEC resources efficiently to address the risks of noncompliance by housing agencies and grantees. Performance measurement. Although DEC reports on some aspects of its performance, it lacks measures that assess outcomes rather than outputs and does not report on the timeliness of its reviews or track program offices’ implementation of its recommendations. Without improvements in its performance measurement, it will be difficult for DEC to fully assess and demonstrate its effectiveness, ensure accountability, and identify and prioritize potential improvements. Data recording. Controls to ensure that analysts consistently record referral dates and corrective actions taken would give DEC more reliable data with which to assess its timeliness and the impact of its enforcement activities. We are making the following eight recommendations to HUD: The Director of the Departmental Enforcement Center and the Assistant Secretary for Community Planning and Development should develop written guidance for CPD’s field offices to use when determining whether to make a referral to the Departmental Enforcement Center. (Recommendation 1) The Director of the Departmental Enforcement Center and the Assistant Secretary for Public and Indian Housing should develop written guidance for PIH’s field offices to use when determining whether to make a referral to the Departmental Enforcement Center. (Recommendation 2) The Director of the Departmental Enforcement Center and the Assistant Secretary for Community Planning and Development should develop targets for the number of referrals that CPD should make to DEC that are based on program risk. (Recommendation 3) The Director of the Departmental Enforcement Center and the Assistant Secretary for Public and Indian Housing should develop targets for the number of referrals that PIH should make to DEC that are based on program risk. (Recommendation 4) The Director of the Departmental Enforcement Center should develop and implement performance measures that assess the outcomes, or desired results, of its enforcement activities. (Recommendation 5) The Director of the Departmental Enforcement Center should develop and implement performance measures of its timeliness in completing oversight reviews. (Recommendation 6) The Director of the Departmental Enforcement Center should track the implementation of the recommendations that it makes to program offices as a result of its oversight reviews. (Recommendation 7) The Director of the Departmental Enforcement Center should develop controls to ensure that analysts consistently and reliably record dates related to referral activity, corrective action taken, and other key information used to determine DEC’s impact. (Recommendation 8) We provided a draft of this report to HUD for review and comment. HUD provided written comments that are reprinted in appendix III. HUD disagreed with three of the eight recommendations and agreed with the other five. In its general comments, HUD indicated that it planned to use DEC to address the most egregious violators of HUD’s programs. HUD also anticipated assessing the current agreements between DEC and HUD program offices and, where appropriate, revising those agreements to incorporate current agency goals and priorities, among other things. HUD further noted that DEC’s work would continue to be a part of HUD’s agency-wide risk and fraud management mitigation activities. HUD disagreed with the third and fourth recommendations that DEC should work with CPD and PIH to develop targets for the number of referrals that the program offices should make to DEC that are based on program risk. In its written comments, HUD said that developing “targets” for the number of referrals made to DEC could potentially be inconsistent with the methodology of basing referrals on program risk and that a single measure of risk-based referrals would be a more effective strategy. As discussed in the report, the current target numbers of referrals for the program offices to make to DEC appear to have been selected somewhat arbitrarily and the officials could not explain the basis for selecting these targets. By identifying a target number of referrals based on the anticipated need for DEC reviews, the program offices can more efficiently plan the use of their resources. Setting the targets will also allow DEC and the program offices to better assess whether they are achieving their goals and objectives, and may encourage program offices to refer entities to DEC. HUD also disagreed with our sixth recommendation that DEC should develop and implement performance measures that measure its timeliness in completing reviews, noting that DEC has tracked the timeliness of its oversight work since 2014. However, as we discuss in the report, DEC has not included performance measures related to the timeliness of its reviews, which is separate from tracking the information. We revised the language in the final report to note that DEC tracks this information, but has not created a related performance measure. HUD agreed with our remaining five recommendations and provided information about planned steps to implement them. HUD noted in its response to our first and second recommendations that CPD and PIH would establish parameters for when a referral will be made to DEC. With respect to our fifth recommendation, HUD stated that DEC would work with relevant offices in fiscal year 2019 to develop performance measures that assess outcomes of enforcement activities and would consult with federal enforcement agencies to understand how they measure outcomes. In response to our seventh recommendation, HUD stated that DEC would make improvements to its information system to track the implementation of the oversight review recommendations. Finally, HUD noted that it anticipates incorporating quality control components into DEC’s data collection efforts to ensure that dates, corrective actions taken, and other key information are captured consistently and reliably to address our eighth recommendation. We are sending copies of this report to the appropriate congressional committees and the Secretary of Housing and Urban Development. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or GarciaDiazD@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in Appendix IV. Our objectives were to examine (1) the processes that selected Department of Housing and Urban Development (HUD) program offices have in place to make referrals to the Departmental Enforcement Center (DEC), (2) how DEC assesses its performance, and (3) challenges that may affect the ability of DEC to achieve its mission. We focused our review on DEC and three HUD program offices: Community Planning and Development (CPD), Multifamily Housing (MFH), and Public and Indian Housing (PIH). Collectively, these three program offices accounted for 73 percent of the total referrals DEC received from fiscal years 2014 through 2017 (6,724 of the 9,258 total referrals). To address the first objective, we reviewed DEC’s formal agreements with CPD, MFH, and PIH to determine the roles and responsibilities of the parties, any criteria for making referrals, and any goals on number of reviews. In addition, we reviewed guidance developed by program offices for monitoring multifamily properties, public housing agencies, and grantees to determine what, if any, criteria existed for making referrals to DEC. We also observed demonstrations of the system DEC uses to manage referrals and the risk assessment tool PIH uses in its reviews of public housing agencies. We compared the guidance and the processes for determining the role DEC should play against federal internal control standards. We analyzed data from DEC’s system for managing referrals from program offices (extracted as of March 2018) and a spreadsheet DEC maintains to track referrals from CPD and PIH (as of March 2018). We used the data extract to compute the number and type of referrals DEC received from the program offices from fiscal years 2014 through 2017. We interviewed DEC and program office staff about the number of referrals that program offices made during this time period. To assess the reliability of the data, we performed various tests—including searching for missing data and dates, and checking for completeness of the data. We concluded that the data from DEC were sufficiently reliable for purposes of describing general trends. We interviewed DEC and program office officials at HUD headquarters to discuss how program offices make referrals to DEC and any guidance or training DEC or program offices provide regarding the referral process. We also conducted interviews with staff in each of HUD’s six PIH networks and in CPD field offices in Atlanta, Georgia; Denver, Colorado; Fort Worth, Texas; and Los Angeles, California. We selected the Fort Worth and Los Angeles CPD field offices because they had made referrals to DEC between fiscal years 2016 and 2017, and selected Atlanta and Denver because they had not. To address the second objective, we reviewed the current and previous performance measures used by DEC. We compared DEC’s practices against federal internal control standards and against practices GAO has previously identified as being associated with agencies that were successful in measuring their performance. We used the data extract discussed above to compute the average number of days DEC took to complete referrals on multifamily properties and the extent that information was not recorded. We also interviewed DEC and OGC officials regarding the performance information DEC collects and reports. To address the third objective, we reviewed prior reports from GAO and from the HUD Office of Inspector General that identified and discussed challenges DEC faces in achieving its mission. We also reviewed internal HUD documents related to these challenges, including plans for a new information technology system, historical staff levels, and a proposal DEC officials created to relocate DEC back to the Deputy Secretary’s Office. We also interviewed officials from various HUD headquarters and field offices, HUD’s Office of Inspector General, and DEC about challenges DEC may face in achieving its mission. We conducted this performance audit from July 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. From fiscal year 2014 through 2017, the Department of Housing and Urban Development’s Departmental Enforcement Center received about 8,000 referrals from the agency’s program offices. Table 3 provides details on the number of referrals by program and state from fiscal years 2014 through 2017. In addition to the contact named above, GAO staff who made key contributions to this report include Marshall Hamlett (Assistant Director), Daniel Newman (Analyst-in-Charge), William R. Chatlos, Laura Gibbons, John McGrail, Marc Molino, and Tovah Rom.", "summary": "HUD established DEC in 1998 to consolidate enforcement functions. In fiscal year 2017, DEC received about 2,800 referrals from program offices for oversight of and enforcement actions against property owners, public housing agencies, and state and local grantees that do not comply with requirements. The Joint Explanatory Statement accompanying the Consolidated Appropriations Act, 2017, included a provision for GAO to assess DEC's effectiveness addressing noncompliance. GAO examined (1) the processes selected program offices have in place to make referrals, (2) how DEC assesses its performance, and (3) challenges that may affect the ability of DEC to achieve its mission. GAO reviewed agreements and referral data between DEC and three of the nine HUD program offices that made referrals to DEC from fiscal years 2014 to 2017 (accounting for 73 percent of the total referrals during that period), and interviewed HUD staff in headquarters and field offices. The three program offices of the Department of Housing and Urban Development (HUD) that GAO examined have a process in place for referring cases of potential noncompliance to the Departmental Enforcement Center (DEC), but two of the offices do not provide their staff with specific guidance on when to make referrals. The Office of Multifamily Housing makes referrals to DEC based on defined thresholds for noncompliance, such as for properties that do not pass physical inspections. In contrast, the Offices of Public and Indian Housing (PIH) and Community Planning and Development (CPD) have broad guidelines but not specific thresholds for when to refer an entity to DEC. These two offices do not provide field staff with specific guidance to help determine which housing agencies or grantees to refer to DEC for possible enforcement action. As a result, the offices cannot ensure that decisions on whether to make referrals are made on a well-supported and consistent basis, potentially limiting DEC's effectiveness in fulfilling its mission of providing independent oversight of HUD's programs. In addition, PIH and CPD have targets for how many annual referrals the program office will make to DEC, but the targets are not based on program risk. According to federal internal control standards, management should identify, analyze, and respond to risks related to achieving the defined objectives. Without a target number of referrals based on program risk, PIH and CPD cannot be confident that the number of cases referred to DEC is appropriate and that DEC resources are being used efficiently. DEC tracks some performance measures, but it largely measures outputs, such as number of work assignments completed, rather than outcomes, such as financial performance improvements resulting from its work, that would help assess the impact of its activities. DEC also does not track the status of recommendations it makes to program offices or measure indicators of its timeliness in completing its reviews for the referrals it receives. In addition, GAO found that DEC staff did not consistently record two key data elements (including the corrective action taken) in the spreadsheet used to track referrals. Improving DEC's performance measurement system and data recording would be consistent with federal internal control standards and allow DEC to better assess its effectiveness, ensure accountability, and identify potential improvements. DEC has experienced various information technology challenges that have affected its ability to carry out its mission. For example, DEC's current system is not designed to allow staff to easily determine the basis for certain referrals or identify and analyze trends in referrals over multiple years. In addition, DEC has experienced continuing outages and breaks in service. HUD has developed plans for a replacement system, but funding constraints have delayed the implementation of the new system. DEC staff also noted that the organizational location of DEC within the Office of General Counsel was a challenge to carrying out its mission because it limited DEC's ability to hold program offices accountable for corrections. HUD disagreed and also stated that the department has no plans to relocate DEC. Based on GAO's review, other factors, such as the lack of guidance for making referrals (discussed above), may better explain why DEC may not be utilized more effectively. GAO is making eight recommendations to HUD related to DEC, including for staff guidance on when to make referrals; targets for the number of DEC referrals based on program risk; outcome measures to track performance; and controls to ensure consistent data recording. HUD agreed with five of the eight recommendations, noting that setting referral targets was inconsistent with basing them on program risk. GAO maintains that setting referral targets can help ensure that program offices make referrals to DEC.", "document_type": "gao"}
{"report": "Older adults may receive federal housing assistance through a number of programs, but only a few programs specifically target older households. To be eligible for those programs, the head of household or spouse must be 62 or older. HUD has two programs specifically targeted to older households—the Supportive Housing for the Elderly (Section 202) program for renters and the Home Equity Conversion Mortgage program for homeowners. HUD’s Section 202 program is the only program that provides supportive housing targeted to very low-income older adults. Supportive housing is defined as non-institutionalized housing that connects residents with the services they need to live independently, such as in-home care, meal delivery, and transportation. Until fiscal year 2012, the Section 202 program funded the development of new units. The Home Equity Conversion Mortgage program, administered by the Federal Housing Administration (FHA), a component of HUD, allows older homeowners to access FHA-insured mortgages to convert some of the equity in their homes into monthly streams of income or lines of credit (reverse mortgage). In addition to being at least 62 years old, borrowers must occupy the property as a principal residence, and any existing lien on the property must be small enough to be paid off at settlement. In a reverse mortgage, the loan balance increases and home equity decreases over time. As the borrower receives payments from the lender, the lender adds the principal and interest to the loan balance, reducing the homeowner’s equity. The homeowner remains responsible for paying insurance and property taxes. The Rural Housing Service has one homeownership program that specifically serves households aged 62 and older. The Section 504 Rural Home Repair and Rehabilitation Grant program finances the removal of health and safety hazards or remodels dwellings to make them accessible for disabled household members. According to USDA officials, grants often are made in conjunction with Section 504 loans that have a 1 percent interest rate. HUD has rental assistance programs that do not target, but serve a significant number of older households. According to HUD officials, HUD’s primary rental assistance programs, including the Housing Choice Voucher, Public Housing, and Project-Based Section 8 programs, serve nearly 1.5 million such households. In addition, FHA’s Section 221(d)(3) and Section 221(d)(4) Multifamily Rental Housing for Moderate-Income Families provide mortgage insurance to finance multifamily properties, some of which may be designated for the elderly. The HOME Investment Partnerships Program provides formula grants to states and localities that communities use to fund a range of activities including building, purchasing, and rehabilitating affordable housing for rent or homeownership or providing direct rental assistance to low-income households. HUD Public Housing Designated for Older Households Local public housing agencies can apply to HUD for approval to designate public housing developments (or portions of developments, such as buildings or floors) for occupancy only by elderly families, by disabled families, or both. HUD refers to this as “designated public housing”. 42 U.S.C. § 1437e. However, HUD officials stated that HUD had fewer than 40,000 units of designated public housing and the majority of elderly persons were not assisted through such housing. Similarly, the Rural Housing Service administers a number of homeownership and rental programs not targeted to older rural households, but that can serve them. They include the Section 502 Rural Direct Home Loan; Section 502 Home Loan Guarantee; Section 504 Rural Housing Repair and Rehabilitation Loan; and the Section 521 Rural Rental Assistance programs. The Section 521 program provides rental subsidies to low-income, elderly, or disabled households living in properties funded by the Section 515 Rural Rental Housing program and others. Finally, the Low-Income Housing Tax Credit, established under the Tax Reform Act of 1986 and administered by the Internal Revenue Service, is the largest source of federal assistance for developing affordable rental housing for low-income households, including elderly households, and as of 2017, had financed about 2.9 million rental units. It provides tax credits to encourage private-equity investment in affordable housing development. Worst-Case Needs for Rental Housing HUD tracks older adults in its biennial Worst Case Housing Needs report. HUD defines households with worst-case needs as very low-income renters who do not receive government housing assistance and paid more than half of their income for rent, lived in severely inadequate conditions, or both. The latest report (2017) indicated that severe housing problems were on the rise among unassisted renter households in 2015. This included older renters, for whom the number and proportion of households with worst-case needs increased from 2013, by 382,000 and 2.6 percentage points, respectively. In 2015, 1.85 million such households experienced worst-case housing needs, including unaffordable rents. The report noted that low- income older households that rely on fixed incomes rather than wages may be less likely to benefit from economic recovery trends that raised incomes for others in recent years. In recent years, HUD and USDA have lost subsidized housing stock. Losses can happen under several scenarios, including when federal rental assistance contracts expire, federally subsidized mortgages reach maturity or are paid off and owners convert the units to market-rate rentals, or units fall into disrepair. In its fiscal year 2014–2018 strategic plan, HUD reported that its public housing stock faced a capital needs backlog, estimated at $26 billion, which would be difficult to meet given federal fiscal constraints. The decreasing supply of adequate affordable housing may affect older low-income renters (see sidebar), who were well represented in HUD- and USDA-assisted housing. In addition to losing housing stock, HUD and USDA have programs that previously added to the supply of affordable housing but no longer do so. One example is HUD’s Section 202 program, which specifically serves very low-income older adults. Except for $10 million in its fiscal year 2017 appropriation that could contribute to capital advances, since fiscal year 2012, the program has primarily funded contract renewals for existing rental assistance and for service coordinators. According to USDA officials, the Section 515 program (direct loans for multifamily housing) had no funds for new construction. They told us that Section 515 funds almost exclusively were being used for unit rehabilitation, and that only the Section 538 loan guarantee program was funding new construction. According to USDA officials, many of the rehabilitated Section 515 properties are described in loan applications as properties serving the elderly, as are some newly constructed properties funded by the Section 538 program. Federal and other entities have reported on a lack of integration among housing and health programs and services and the benefits of closing gaps. In 2002, the congressionally mandated Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century reported that a lack of integration between housing and health care for older adults resulted in inefficiencies, noting that the basis was partly historical differences in policies, funding systems, and regulatory structures. The Commission found that, with few exceptions, older adults obtained their housing from one source and health care and supportive services from a different source. In July 2015, the White House Conference on Aging highlighted the importance of collaboration across sectors and the need to better integrate housing, transportation, health care, and long-term services and supports to encourage healthy aging. It noted that opportunities existed to leverage approaches taken by states and localities to consider how best to serve older adults. In 2016, the Bipartisan Policy Center’s Health and Housing Task Force reported that bridging the current policy gap between housing and health had the potential to provide a number of benefits, including improving health outcomes for older adults, reducing costs incurred by the health care system, and enabling many older adults to age in their own homes and communities. Senior leadership in HUD’s Office of Policy Development and Research recently amplified the discussion about housing and health, noting that the Housing Act of 1937 recognized the linkage between the two. That office also has observed that efforts to better link housing and health services hold promise to improve the ability of older adults to safely, comfortably, and more affordably age in place. Collaborations that were focused on coordinating housing and health services for older adults involved HUD and HHS. While these collaborations demonstrated some leading practices we identified, they did not include USDA (a relevant participant) and did not define common outcomes for these efforts. USDA has collaborated with HUD on two efforts related to housing, and with HUD and HHS on one effort that addressed both housing and health services, although these efforts were not focused specifically on older adults. Officials at HUD and USDA told us that they primarily collaborated on administrative initiatives through the Rental Policy Working Group. For example, in 2016, HUD, USDA, and the Department of the Treasury entered into a memorandum of understanding to formalize the activities of the Rental Policy Working Group, such as reducing duplicative physical unit inspections at properties assisted by one or more of the agencies. While older renter households may benefit from administrative improvements made through the Rental Policy Working Group, its efforts were not intended to focus on any particular household type served by HUD and USDA. Under a 1991 memorandum of understanding, HUD and USDA also are required to coordinate where both agencies’ rental programs could overlap in serving rural families. In 2016, USDA started participating in interagency training intended to help coordinate the provision of home and community-based services and supports to vulnerable populations, including older adults. The training was initiated by HHS, and since 2011, HHS and HUD have conducted it for program staff as part of their efforts to strengthen cross-agency collaboration. In 2017, the 1-day training session focused on housing as a platform for improving the quality of life of persons with disabilities, older adults, and other at-risk populations. USDA participated in a discussion on housing and health collaboration between federal, state, local, and community partners. Representatives of both HUD and HHS said that USDA’s increased participation had been positive. HUD officials also told us that in 2018, the agenda for the 1-day training would focus on housing and health supports for older and disabled persons living in rural areas. Additionally, in 2016, HUD and USDA began coordinating on developing topics for HUD’s research agenda. Specifically, HUD’s Office of Policy Development and Research develops a research agenda with input from external stakeholders, and both HUD and USDA officials told us of efforts to develop rural housing topics for inclusion in HUD’s research. HUD Policy Development and Research officials stated that HUD conducted extensive research in rural areas and was interested in coordinating more with USDA, though this research has not been specific to older adult issues. In response to HUD’s outreach, USDA submitted topics to HUD, some of which were incorporated into HUD’s 2017 research agenda update. They include the relationship between housing, food, and health and the impact of home equity loss on rural homeowners, particularly those who are aging. HUD and HHS have undertaken multiple collaborative efforts that link data on housing and health services and often have focused on older adults. The Support and Services at Home demonstration was launched in 2011 to connect older residents of affordable housing properties with home and community-based supportive services and promote health care coordination. The latest evaluation report was published in January 2016 and described the program’s ongoing implementation and impact from 2011 through 2014. It found lower rates of growth in Medicare expenditures among program participants than among a comparison group. As of August 2017, HUD representatives told us that the departments were still collaborating on evaluating the demonstration. Data sharing between HUD and HHS on another demonstration program—the Supportive Services Demonstration for Elderly Households in HUD-Assisted Multifamily Housing—began in 2014. Like the Support and Services at Home demonstration, the Supportive Services Demonstration is intended to test aging-in-place models that show potential for delaying or avoiding the need for nursing home care. HUD has been conducting a 4-year, two-part evaluation, which includes an evaluation of the implementation process and an impact evaluation that will match Medicare claims data from HHS’s Centers for Medicare and Medicaid Services and HUD administrative data. HUD and HHS completed a pilot of the data match in 2014, and HUD has submitted two semi-annual reports to Congress on program implementation, the latest in May 2017. HUD officials stated that in October 2017, HUD secured a contract to conduct a full evaluation of the Supportive Services Demonstration, as described above. According to the officials, the demonstration implementation team conducted an in-person, 2-day training event for care coordination teams in November 2017. The National Center for Health Statistics at the Centers for Disease Control and Prevention, also a component of HHS, in 2014 began to link national health survey participant data to HUD administrative data covering HUD’s largest housing assistance programs through 2014. The data linkage is intended to help those agencies and other federal entities and researchers complete independent projects for statistical and research purposes. The first linkage included two household surveys (National Health Interview Survey and National Health and Nutrition Examination Survey) that covered 1999–2012 and it was completed in July 2016. HUD officials told us that HUD and HHS were working on the second data linkage project. HHS confirmed that the second linkage was underway as of February 2018, with an expected completion date of summer 2018. It will add survey years 2013–2016 and administrative data years through 2016. While the project was not focused specifically on older adults, it could include a significant proportion of older adults living in non-institutionalized settings who receive housing assistance from HUD. HHS’s Office of the Assistant Secretary for Planning and Evaluation and HUD completed a study on health care utilization among HUD- assisted older adults in 12 jurisdictions, and published a final report in August 2016. The study, which began in 2009, explored the feasibility of matching administrative data from HUD and HHS’s Centers for Medicare and Medicaid Services to determine if doing so could help track housing and health outcomes, and reliably support future research and policy analysis. More specifically, it linked HUD individual tenant-level data to Medicare and Medicaid beneficiary enrollment, payment, and claims data. In the 2016 report, HHS and HUD found that, controlling for previously identified factors, HUD- assisted dual Medicare-Medicaid beneficiaries were less likely to use some Medicare-covered services such as acute hospital stays, but more likely to use Medicaid-covered home and community-based supportive services. According to the report, the study demonstrated that linking the agencies’ data could inform decisions about future program investment. We found that the collaborative efforts between HUD and HHS (pilot programs and data sharing related to older adults) demonstrated some but not all relevant leading practices we previously identified for effective interagency collaboration. As we reported in 2012, interagency collaborative mechanisms can be enhanced by leading practices, including written guidance and documenting agreements on how the participating agencies will be collaborating, clarifying roles and responsibilities, leveraging resources (such as funding and staffing), including all relevant participants, and clearly defining outcomes. HUD and HHS established interagency agreements or memorandums of understanding for collaborative efforts that focused on or included older adults. For example, HUD and HHS entered into a memorandum of understanding for the National Center for Health Statistics data linkage effort and had contracts for the Support and Services at Home demonstration and other collaborations. Our leading collaboration practices state that agencies articulating their agreements in formal documents can strengthen their commitment to working collaboratively, as long as they are continually updated and monitored. The roles and responsibilities of agencies participating in a collaborative effort may be defined in a number of ways, including through laws, policies, memorandums of understanding, or other requirements. Clarity of roles and responsibilities allows participating agencies to understand and agree on accountability for the joint effort, and a process for making and enforcing decisions. In accordance with their memorandum of understanding, HUD and HHS had clear roles and responsibilities for the National Center for Health Statistics data linkage effort. For example, the agreement documented specific data that HUD was to provide to the National Center for Health Statistics and how the latter would attempt to link HUD’s data to its survey participant data. It also specified both agencies’ roles in data access, storage, and disposition. Collaborating agencies should identify human, information technology, physical, and financial resources needed to initiate or sustain their collaborative effort. And it is important that the agencies leverage sufficient resources to accomplish their objectives. HUD’s and HHS’s written agreements generally included a description of how they would leverage each agency’s resources, including staffing, funding, and data. For the Support and Services at Home demonstration, HUD provided resources to help evaluate the program model, while HHS funded a wellness nurse who worked with a service coordinator to perform such tasks as assessing residents’ needs; identifying and coordinating service delivery; monitoring receipt and follow-through of services; and building and sustaining partnerships with providers. HUD and HHS, including their component agencies and offices, were the main participants in these collaborative efforts. HUD officials stated that USDA was not included because these collaborative efforts were pilots originally intended to better understand the health of households assisted by HUD. But no current plan exists to include USDA in such collaborative efforts in the future. As these collaborative efforts mature, USDA, which provides assistance to low-income older adults in rural areas, may benefit from inclusion. Effective collaborative efforts benefit from having participants with the necessary knowledge, skills, and abilities to contribute to the outcomes of the collaboration. Officials at HUD and HHS said they were open to greater collaboration with USDA in the future. And while HUD has a presence in rural communities, USDA’s participation would allow the Rural Housing Service to provide input on and help address challenges that may be unique to rural older adults. By not including USDA in future collaborative efforts on older adult housing and health services, HUD and HHS may miss opportunities to identify and respond to the changing needs of some older adults living in federally assisted housing—such as by drawing on the experience and resources of the Rural Housing Service in serving rural populations. In addition, USDA may miss opportunities to benefit from lessons learned or programmatic improvements that HUD and HHS might undertake as a result of their collaborations. Although HUD and HHS have established specific objectives for their various evaluations and data-sharing initiatives, they have not defined common outcomes for these collaborative efforts. For example, while some of these efforts were expected to explore the housing and health relationship and inform more evidence-based program decisions, the agencies have not defined common outcomes for their interagency efforts as a whole. We reported that collaborating entities should determine whether they have clearly defined short-term and long-term outcomes, can track their progress, and whether they each have collaboration- related performance standards against which to evaluate individual performance. Such common outcomes could include both quantitative and qualitative information. For example, a set of measures against which to track and monitor their collaborations (including demonstrations, data matching, and studies) might include the extent to which hospital stays were reduced, as noted for the Support and Services at Home and Supportive Services demonstrations, or program costs saved. Monitoring and reporting such measures would provide greater transparency to agency and congressional decision makers about how these collaborative efforts have resulted in potential cost savings and other benefits across agency lines. A more long-term common outcome could include developing proposals for programmatic improvements that would leverage the lessons learned from the collaborative efforts. Senior leadership at HUD has said that HUD considers the nexus of housing and health to be a priority for future work, and that federal agencies needed to continue finding ways to move beyond their programmatic scope to engage in more comprehensive, cross-cutting efforts. The official pointed to data-matching efforts with HHS as low-cost initiatives that could enhance HUD’s knowledge about the health status of assisted households and potentially inform cost-saving policies. Because many of their collaborative efforts began in the last 5 years and some remain ongoing, HUD and HHS may not have prioritized developing common outcomes that relate both to older adult housing and health services. In contrast, HUD and HHS have developed broader goals that relate to how they serve older adults.However, without defined common outcomes to help guide ongoing and future efforts, HUD and HHS (and potentially USDA) lack measures against which to monitor, evaluate, and report the results of their collaborative efforts. Federal agencies, particularly HUD and HHS, have found opportunities to collaborate in meaningful ways on services provided to older adults. But collaborative federal efforts to address the housing needs of older adults and tie into health services would benefit from consistent USDA involvement and from defining common outcomes. Greater USDA participation would result in a better nationwide assessment of the housing and health needs of older Americans who live in all federally assisted housing and leverage USDA’s expertise and resources in serving rural populations. Outcome information would help the agencies articulate to stakeholders and Congress the results the collaborations achieved; activities, strategies, or areas on which to focus in the future; and how scarce federal resources were leveraged and managed. We are making a total of three recommendations (one recommendation each to HUD, HHS, and USDA): The Secretary of Housing and Urban Development should work with HHS and USDA’s Rural Development to define common outcomes and identify opportunities to include USDA in future collaborative efforts on older adult housing and health services. (Recommendation 1) The Secretary of Health and Human Services should work with HUD and USDA’s Rural Development to define common outcomes and identify opportunities to include USDA in future collaborative efforts on older adult housing and health services. (Recommendation 2) The Assistant to the Secretary for Rural Development should work with HUD and HHS to define common outcomes and identify opportunities to include USDA in future collaborative efforts on older adult housing and health services. (Recommendation 3) We provided a draft of this report for review and comment to HHS, HUD, and USDA. HHS and HUD provided written comments that are reproduced in appendixes I and II, respectively. USDA provided technical comments, which we incorporated as appropriate. All three agencies concurred with our recommendations. The Deputy Administrator of Multifamily Housing Programs provided USDA’s concurrence in an e-mail dated April 11, 2018. In its comment letter, HUD stated that our recommendation to include an additional agency in housing and health demonstrations is consistent with direction provided by the Senate Committee on Appropriations in fiscal year 2016. The committee directed HUD to partner with other federal agencies to pursue a service coordination demonstration in non- metropolitan areas. HUD noted that the committee advised it not to delay existing demonstration efforts while a non-metropolitan component was being designed. HUD also stated that it convened an expert panel to better understand challenges to service coordination for low-income older adults in rural areas, and summarized the findings in a report. HUD said further action on the panel report was contingent on funding availability and direction from appropriations committees. HUD stated that, in regard to our recommendation that additional federal agencies might benefit from data-linkage projects similar to its project with the National Center for Health Statistics, it would be pleased to offer assistance, guidance, and insights to other agencies. Our recommendation is that HUD work with HHS and USDA’s Rural Development to define common outcomes and identify opportunities to include USDA in future collaborative efforts on older adult housing and health services. This would include data sharing, service demonstrations, research, and other collaborations. Ongoing housing and health collaborations among HUD, HHS, and USDA would benefit from greater USDA involvement, which also would serve to enhance assessments of the housing and health needs of older Americans in federally assisted housing. We are sending copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Secretary of Health and Human Services, the Secretary of Housing and Urban Development, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In addition to the contact named above, Paul Schmidt (Assistant Director), Bernice Benta-Jackson (Analyst in Charge), Abigail Brown, Stephen Brown, William Chatlos, Charles Culverwell, Kirsten Lauber, John McGrail, Marc Molino, Dae Park, Nadine Garrick Raidbard, Barbara Roesmann, Joseph Silvestri, and Jeff Tessin made key contributions to this report.", "summary": "According to the Census Bureau, by 2030, about 1 in 5 Americans will be 65 and older. This aging of the population presents challenges and opportunities for policymakers and service providers in helping ensure that the older population's needs—including housing and health services—are met. Federal agencies with programs that provide housing assistance to low-income older households include HUD and USDA. Several HHS programs provide those households with health services. This report assesses the extent to which the three agencies collaborated to address the housing and health service needs of older adults living in federally assisted housing. GAO compared agency efforts to leading collaboration practices it has identified (including written agreements; roles and responsibilities; leveraged resources; relevant participants; and defined outcomes) and interviewed HUD, HHS, and USDA officials. The Departments of Housing and Urban Development (HUD) and Health and Human Services (HHS) have collaborated on older adult housing and health issues, but these efforts did not fully demonstrate leading practices GAO identified for effective collaboration. The HUD-HHS efforts demonstrated some leading practices. For example, the agencies have written agreements for data-sharing projects and have leveraged resources to conduct research on older adults. The Department of Agriculture (USDA) was not included in the efforts although it provides housing assistance to older rural households. GAO identified the inclusion of all relevant participants as a leading practice. According to HUD, the efforts were intended to explore the health of HUD-assisted households. However, by not including USDA in future collaborations, HUD and HHS may miss opportunities to leverage expertise and USDA may not be able to benefit from any resulting insights and improvements. The HUD-HHS collaborative efforts also did not define common outcomes, another leading practice GAO identified, likely because their collaboration is relatively new. Without common outcomes (for instance, focused on recipient impact or cost savings), the agencies lack measures against which to monitor, evaluate, and report the results of any collaborations. Future collaborations would benefit from consistent USDA involvement. And by defining common outcomes, the agencies would help inform Congress and stakeholders of results achieved and strategies or areas on which to focus. GAO is making three recommendations (one each to HUD, HHS, and USDA). They focus on including USDA in collaborations on older adult housing and health services and defining outcomes for the efforts. The three agencies concurred with GAO's recommendations. HUD stated that it had begun examining challenges relating to services for low-income rural older adults.", "document_type": "gao"}
{"report": "Colombia is the world’s largest producer of cocaine and also continues to be a source of heroin and marijuana. After declining most years since 2000, coca cultivation and cocaine production increased again in Colombia beginning in 2013, hitting record highs in 2017 (see fig. 1). Much of the cocaine produced in Colombia is consumed in the United States. According to the Drug Enforcement Administration’s (DEA) Cocaine Signature Program, over 90 percent of cocaine found in the continental United States is of Colombian origin. In 2017, the DEA reported that cocaine use in the United States was increasing concurrent with production increases in Colombia. Although the United States continues to be the primary market for Colombian cocaine, Colombian drug traffickers are also expanding into other markets around the world, according to DEA and Office of National Drug Control Policy (ONDCP) reporting. U.S., Colombian, and UN officials; as well as third-party researchers, have cited a variety of reasons for the increases in coca cultivation and cocaine production in Colombia, including: the Colombian government’s decision to end aerial eradication of coca crops in October 2015; prior to the end of aerial spraying, coca growers’ movement to areas off limits to aerial spraying and other countermeasures employed by growers; the Colombian government’s desire to avoid social protests in coca- growing regions controlled by the FARC during peace negotiations; the FARC’s drive to induce farmers to plant additional coca in areas under their control in anticipation that the Colombian government would provide subsidies for farmers to switch from coca to licit crops after the conclusion of the peace agreement; declining Colombian and U.S. funding for counternarcotics efforts; decreases in the price of gold, which diminished criminal organizations’ revenues from illegal gold mining and led to a redirection of resources back to cocaine production to make up losses; and increased demand for cocaine in the United States and other parts of the world. Colombia has historically been one of Latin America’s more enduring democracies and successful economies. However, Colombia has also faced more than 50 years of internal conflict and has long been a leading drug producing and trafficking nation. See figure 2 for a map showing Colombia’s geographic location relative to the United States. For several decades, Colombia has struggled with a multi-sided conflict, involving both left-wing guerilla groups and right-wing paramilitary groups (see sidebar for background information on Colombia). Since its start, the conflict has resulted in at least 220,000 deaths and the displacement of more than 5 million Colombians, according to the Congressional Research Service. The FARC, a Marxist insurgent organization formed in 1964, was the largest of the left-wing groups. At its peak, the FARC had an estimated 16,000 to 20,000 fighters, according to the Congressional Research Service. In an effort to unseat the Colombian government, the FARC, along with the second largest left-wing guerilla group in Colombia, the National Liberation Army (known by its Spanish acronym ELN), undertook a widespread campaign of murder, kidnapping, extortion, and other human rights violations, according to various sources. Over time, the two groups also became increasingly involved in drug trafficking to fund their operations. (slightly less than twice the size of Texas) In response to the violence caused by the FARC and the ELN, a number of wealthy Colombians, including drug traffickers, began to hire armed paramilitary groups for protection during the 1980s. According to DOD officials, initially these groups were formed legally as self-defense groups; however, they turned to crime and drug trafficking over time. Many of these groups subsequently united under an umbrella organization called the United-Self Defense Forces of Colombia (known by the Spanish acronym AUC). According to reporting from various U.S. government and third-party sources, the AUC murdered individuals suspected of supporting the FARC and ELN and engaged in direct combat with these groups. From 2003 through 2006, the AUC formally dissolved after negotiating a peace agreement with the administration of former Colombian President Álvaro Uribe. However, some former AUC members did not demobilize and instead joined criminal groups (known as criminal bands, or Bacrim) that continue to be involved in drug trafficking today, according to reporting from various U.S. government and third-party sources. Throughout the 1980s and early 1990s, Peru and Bolivia were the leading global producers of cocaine but enforcement efforts in those two countries increasingly pushed cocaine production into Colombia. By the late 1990s Colombia had emerged as the leading source of cocaine in the world. Over time the landscape of drug trafficking in Colombia has changed. In the 1980s and early 1990s, major drug trafficking organizations such as the Medellín and Cali cartels controlled cocaine trafficking in Colombia. These cartels were vertically integrated organizations with a clearly defined leadership that controlled all aspects of cocaine production and distribution in their respective geographic areas. By the late 1990s, however, Colombian authorities, with the support of the United States, had largely succeeded in dismantling these two cartels. Over time, drug trafficking in Colombia fragmented and is now generally characterized by more loosely organized networks that are less integrated and have less well-defined leadership structures. Major organizations currently involved in drug trafficking include the Clan del Golfo, the largest of the Bacrim; FARC dissident groups that have not accepted the peace agreement; and the ELN. In August 2016, the Colombian government and the FARC reached a peace agreement ending more than five decades of conflict. The peace agreement was the culmination of four years of formal negotiations. In October 2016, however, Colombian voters narrowly defeated a referendum on whether to accept the peace agreement. After the voters rejected the agreement, the Colombian government and the FARC worked to make certain revisions and signed a second accord. The Colombian Congress then approved the revised agreement in November 2016. The Colombian government has estimated that it will cost $43 billion to implement the peace agreement over 15 years but State has estimated that the cost will be between $80 billion and $100 billion. The peace agreement included agreements on six major topics: land and rural development, the FARC’s political participation after disarmament, illicit crops and drug trafficking, victims’ reparations and transitional justice, the demobilization and disarmament of the FARC and a bilateral cease-fire, and verification to enact the programs outlined in the final accord. The agreement on illicit crops and drug trafficking addresses a range of issues related to coca eradication and crop substitution, public health and drug consumption, and drug production and trafficking. As part of the agreement, the FARC committed to work to help resolve the problem of illegal drugs in the country and to end any involvement in the illegal drug business. Among other things, the Colombian government pledged to prioritize voluntary drug-crop substitution programs over forced eradication, and where forced eradication was necessary, to prioritize manual removal over aerial spraying. Other portions of the peace agreement also relate to counternarcotics efforts. For example, the section on land and rural development discusses benefits for farmers who undertake substitution of illicit crops. Colombian authorities and the FARC have completed several actions called for under the peace agreement but progress on implementation has been uneven. Since the finalization of the peace agreement in November 2016, over 7,000 FARC members have disarmed and surrendered almost 9,000 weapons, about 1.7 million rounds of ammunition, and about 42 tons of explosive material, according to State reporting. The Colombian Congress has also passed implementing legislation, including a bill establishing the Special Jurisdiction for Peace to support transitional justice efforts. However, a significant number of FARC members have refused to demobilize and key FARC leaders have been accused of violating the peace agreement through continued involvement in the drug trade and other illegal activities. According to State reporting, the FARC has also failed to offer information on drug trafficking routes, contacts, and financing, as it had committed to do under the accord. The peace agreement continues to be controversial in Colombia with many Colombians believing that it does not do enough to hold the FARC accountable for the violence and crimes that it committed. Colombian President Iván Duque, who assumed control of the government in August 2018, has stated his intention to revise some elements of the agreement. Currently, the Colombian government is also engaged in peace negotiations with the ELN that were formally launched in February 2017. Although the talks continue, the negotiations have experienced several setbacks. For example, the two parties had agreed to a temporary ceasefire that lasted from September 4, 2017, to January 9, 2018, but they did not reach an agreement to extend the ceasefire and the ELN launched a number of attacks shortly thereafter, including a police station bombing in the city of Barranquilla that killed 7 police officers and injured more than 40. Colombia and the United States have a longstanding partnership on counternarcotics efforts. Since the early 1970s, the U.S. government has provided assistance to the Colombian government to support its efforts to combat illicit drug production and trafficking activities. However, by the late 1990s, Colombia had become the world’s leading producer of cocaine and a major source of heroin used in the United States. In response, the Colombian government, with U.S. support, launched Plan Colombia in 1999 with the goals of (1) reducing the production of illicit drugs and (2) improving security in the country by reclaiming areas of the country held by illegal groups. U.S. assistance to Colombia over the years has focused on three key approaches for reducing the supply of illegal drugs produced in the country and trafficked to the United States: eradication, interdiction, and alternative development. Eradication. Eradication seeks to reduce coca cultivation by destroying coca plants through either the aerial spraying of herbicides on the crops, or the manual spraying of herbicides or uprooting of the plants by personnel on the ground. Interdiction. Interdiction seeks to disrupt or dismantle drug trafficking organizations by investigating the operations of drug traffickers; seizing drugs and their precursors, cash, and other assets; destroying processing facilities; blocking air, sea, and land drug trafficking routes; and arresting and prosecuting drug traffickers. Alternative development. Alternative development seeks to discourage involvement in the drug trade by providing people with viable, legal livelihoods through training, technical assistance, and other support; as well as by working with the private sector, civil society, and the Colombian authorities to create the necessary conditions in communities for legal economies to develop. Under the general guidance of the White House’s ONDCP and the leadership of State at the country-level, a number of U.S. agencies have a role in supporting counternarcotics efforts in these three key areas. ONDCP is, among other things, responsible for developing the National Drug Control Strategy and coordinating the implementation of this strategy. It does not implement any counternarcotics programs in Colombia. State is the lead agency responsible for setting U.S. counternarcotics policy in Colombia, consistent with the overall direction provided by the National Drug Control Strategy. The ambassador at Embassy Bogotá has ultimate authority over all U.S. agencies operating in the country. State is the agency primarily responsible for supporting eradication efforts in Colombia. A number of agencies are responsible for supporting various aspects of interdiction efforts in Colombia, including: State; DOD; DOJ’s Criminal Division, DEA, and Federal Bureau of Investigation (FBI); and DHS’s Immigration and Customs Enforcement (ICE), Customs and Border Protection (CBP), and U.S. Coast Guard. USAID is the agency primarily responsible for supporting alternative development efforts in Colombia. The U.S. government provided about $5 billion in foreign assistance for Colombia in fiscal years 2008 through 2017. State and USAID provide foreign assistance to Colombia for a range of programs and activities that extend beyond counternarcotics efforts. State and USAID provide this assistance to Colombia through several accounts. State funds the largest share of its programs in Colombia through the International Narcotics Control and Law Enforcement account. It also provides funding to Colombia through the Foreign Military Financing; International Military Education and Training; and Nonproliferation, Anti-terrorism, Demining, and Related Programs accounts. USAID implements its programs in Colombia using funding from the Economic Support Fund account. DOD provides counternarcotics funding to Colombia through its Central Transfer Account. Figures 3 and 4 show U.S. assistance to Colombia in fiscal years 2008 through 2017. The U.S. government’s efforts in Colombia are part of its broader efforts to combat drug trafficking throughout the Western Hemisphere, including in other partner countries and in the “transit zone,” which is the area from South America through the Caribbean Sea and the eastern Pacific Ocean used to transport illicit drugs to the United States. In addition, the U.S. government combats the illegal drug problem through a range of domestic law enforcement efforts and programs designed to reduce illicit drug use. These various efforts are not addressed in this report. The Obama administration supported the peace process in Colombia and announced a new initiative in February 2016, known as Peace Colombia. Peace Colombia was designed to establish a new framework for cooperation between the two countries and refocus U.S. assistance to support peace agreement implementation. The administration called for an initial $450 million in funding for Peace Colombia in fiscal year 2017. Under Peace Colombia, U.S. assistance was to be focused in three areas: consolidating and expanding progress on security and counternarcotics while reintegrating the FARC into society; expanding the Colombian state’s presence and institutions to strengthen the rule of law and rural economies, especially in former conflict areas; and promoting justice and other essential services for conflict victims. More recently, the Trump administration has raised questions about Colombia’s commitment to meeting its counternarcotics obligations. As required by law, the Trump administration in September 2017 issued a memorandum documenting the annual presidential determination on countries that are major drug transit or illicit drug producing countries. As in years past, the memorandum identified Colombia as one of these countries. The memorandum also stated that the administration had seriously considered designating Colombia as a country that had demonstrably failed to adhere to its obligations under international counternarcotics agreements due to the extraordinary growth of coca cultivation and cocaine production over the past three years. According to the memorandum, the administration ultimately decided not to take this step because of the close partnership between the U.S. government and the Colombian National Police and Armed Forces. However, the memorandum underscored that the administration would keep the designation as an option and expected Colombia to make significant progress in reducing coca cultivation and cocaine production. As part of the U.S.-Colombia High Level Dialogue in March 2018, the U.S. and Colombian governments pledged to expand counternarcotics cooperation over the next 5 years with the goal of reducing Colombia’s estimated coca cultivation and cocaine production by 50 percent by the end of 2023. U.S. agencies have conducted ongoing performance monitoring of various counternarcotics activities in Colombia, but State, DOD, DHS, and DOJ have not conducted evaluations of U.S. eradication and interdiction programs. Performance monitoring is the ongoing review and reporting of program accomplishments, particularly progress toward pre-established goals. It is typically conducted by program or agency management. Performance monitoring focuses on whether a program has achieved its objectives, expressed as measurable performance standards. In contrast, program evaluations are individual systematic studies conducted periodically or on an ad hoc basis to assess how well a program is working. They are often conducted by experts, either from inside or outside the agency, who are not working on the program. Program evaluations typically examine a broader range of information on program performance and its context than is feasible to monitor on an ongoing basis. U.S. agencies have conducted a range of performance monitoring efforts to assess their counternarcotics activities in Colombia. While some monitoring is performed through interagency mechanisms, most monitoring is done at the individual agency level. Interagency monitoring mechanisms include ONDCP reports, such as its annual Budget and Performance Summary and its annual National Drug Control Strategy Performance Reporting System Report, and Embassy Bogotá’s annual Performance Plan and Reports. ONDCP’s Budget and Performance Summaries and Performance Reporting System Reports are not Colombia-specific and discuss a range of domestic and international counternarcotics efforts. These reports, however, generally provide some limited performance information related to Colombia. For example, ONDCP’s Budget and Performance Summaries include information, by agency, on their counternarcotics budget requests as well as some selected performance reporting. As part of these documents, State and USAID have reported data on certain performance metrics specific to Colombia, such as the number of hectares of drug crops eradicated in U.S. government-assisted areas of Colombia and the number of rural households benefitting from U.S. government interventions in Colombia. In addition, the reports contain narrative related to the results of counternarcotics activities in Colombia. At the country level, Embassy Bogotá’s annual Performance Plan and Report provides information on the embassy’s progress in meeting its goals and objectives, including those related to counternarcotics. As part of these reports, the embassy provides data on results for the fiscal year, relative to established targets, for a range of counternarcotics performance metrics. These Performance Plan and Reports primarily focus on State and USAID activities, rather than describing the results of all U.S. agencies’ activities in Colombia. At the agency level, State, USAID, DOD, DOJ, and DHS and their components have, to varying degrees, conducted performance monitoring of their counternarcotics activities in Colombia. Examples of key performance monitoring activities, by agency, are described below: State: State, with input from other U.S. agencies involved in counternarcotics efforts, produces its annual International Narcotics Control Strategy Report, which is global in scope, but includes specific country reports, including on Colombia. These reports describe key steps that Colombia has taken over the year to combat drug trafficking and how U.S. assistance has supported these efforts. In addition, State’s Bureau of International Narcotics and Law Enforcement Affairs (INL) has developed a Colombia country plan for 2017 through 2021 that presents results data for a number of counternarcotics-related indicators, such as the percent of coca hectares eradicated against Colombia’s national goals and the number of hours flown by the Colombian National Police in support of counternarcotics and other related missions. The INL country plan also establishes performance targets for future years. State/INL implementing partners are also responsible for producing periodic reports that describe their progress in meeting pre-established performance targets for their projects. USAID: USAID has developed a Colombia-specific information system, the Monitoring and Evaluation Clearinghouse (Monitor), that provides the agency with information about the status and progress of all USAID alternative development projects in Colombia. For example, Monitor tracks metrics such as the number of hectares of licit crops supported by USAID, the number of beneficiaries from improved infrastructure services, and the number of households who have obtained documented property rights as a result of USAID assistance. USAID implementing partners are also responsible for producing periodic reports that describe their progress in meeting pre- established performance targets for their projects. DOD: U.S. Southern Command (SOUTHCOM) completes annual Program Objective Memorandums (POM) related to each of its program areas as part of the DOD budget process. Each POM is tied to a particular project code. For example, SOUTHCOM has a project code for counternarcotics support in South America and a project code for the Regional Helicopter Training Center in Colombia. As part of each POM, SOUTHCOM reports on the activities supported under the project code and reports on results relative to pre-established performance targets. Examples of metrics tracked in the POMs include the rate of operational readiness of Colombian maritime patrol aircraft and the hours a day the Colombian Air Force was able to provide video surveillance to support operations. DOJ: DEA has developed its annual Threat Enforcement Planning Process, which guides the agency’s operational strategy and serves as a means of monitoring performance. Under this three-stage process, DEA offices, including the one in Colombia, first identify threats within their area of responsibility that link to agency-wide threats that DEA has established. The offices then develop mitigation/enforcement plans for each identified threat, and, subsequently, produce impact statements that summarize the outcomes and results related to each mitigation/enforcement plan. For example, the impact statements describe key arrests that have been made and major seizure operations. In addition, the FBI office in Colombia produces an annual summary of statistics to monitor the accomplishments of the Colombian vetted unit that it supports, including the number of arrests, the amount of drugs seized, and the commercial value of assets seized. DHS: ICE and CBP stated that they do not conduct performance monitoring activities specific to Colombia. Coast Guard officials stated that the Coast Guard compiles information that it provides to its Colombian counterparts on a recurring basis, including data on the number of Colombian-flagged ship interdictions it has completed and the number of Colombian nationals apprehended. All three agencies contribute to DHS annual performance reports. These annual reports include some performance information related to DHS counternarcotics efforts more broadly, such as ICE’s work combatting transnational criminal organizations that may operate in Colombia. State, USAID, DOD, DOJ, and DHS use a range of metrics to assist them in both formally and informally monitoring the performance of eradication, interdiction, and alternative development efforts in Colombia. These agencies produce some of these data, while in other cases they use data from other sources including implementing partners, the Colombian government, and the UN. Examples of key metrics include: Eradication: hectares of coca cultivated, hectares of coca eradicated, and coca replanting rates. Interdiction: amounts of cocaine seized, the number of cocaine processing laboratories destroyed, the number of drug trafficking organizations disrupted or dismantled, and the number of drug trafficking suspects extradited to the United States. Alternative Development: the number of households involved in coca cultivation, increases in the value of sales of legal products in areas involved in narcotics production, the number of households receiving land titles as a result of U.S. assistance, and the value of agricultural and rural loans generated through U.S. assistance. State, USAID, DEA, and DOD have undertaken efforts to further strengthen their performance monitoring efforts in recent years. For example, in September 2017, State/INL signed a new monitoring and evaluation contract for the Western Hemisphere which is designed to strengthen its existing performance measures and identify new metrics to better assess performance. According to a State official, the contractor is currently working with both State officials in Washington D.C. and at embassies in the Western Hemisphere to, among other things, develop a list of performance measures that link to INL’s goals for the region and that involve data that can be feasibly and consistently collected across the countries in the region. USAID officials noted that recently USAID has been collecting data on contextual indicators and developing baseline studies to help inform new alternative development programs it is implementing in Colombia. According to USAID officials, these baseline studies have collected information related to productivity, exports, income, multidimensional poverty, citizen security, social capital, and trust in institutions. In addition, as noted above, DEA established its new Threat Enforcement Planning Process in fiscal year 2017. According to DEA, this process is designed to, among other things, allow the agency to move beyond basic output measures and better assess how its offices, including the office in Colombia, are doing in combatting priority threats within their area of responsibility. Finally, according to a DOD official, DOD’s Office of Counternarcotics and Global Threats is developing guidance for assessing the counternarcotics programs it supports around the world to help the office’s leadership make better informed decisions about how to best use DOD’s limited counternarcotics resources. Although performance metrics are useful for monitoring progress and can help inform evaluations of effectiveness, they are generally not intended to assess effectiveness directly. For example, U.S. agencies track data on the amount of cocaine seized in Colombia, but a number of U.S. officials noted that it is unclear to what extent increases in cocaine seizures in recent years are due to the increased effectiveness of interdiction efforts or more cocaine being present in Colombia to seize. As another example, some agencies track data on the number of Colombian officials receiving counternarcotics training through their programs, but these data are not designed to capture what, if any, improvements in counternarcotics outcomes are achieved as a result of that training. USAID has completed independent evaluations of several of its alternative development programs. However, other agencies have not formally evaluated the long-term effectiveness of their eradication or interdiction activities. Alternative Development: Since 2008, USAID has conducted a number of formal, independent evaluations of its alternative development programs in Colombia. Some of these evaluations have examined USAID’s alternative development efforts more broadly, while others have focused on the effectiveness of specific programs such as USAID’s Consolidation and Enhanced Livelihood Initiative, More Investment in Sustainable Alternative Development, and Areas for Municipal-Level Alternative Development programs. Many of these evaluations were done through a 5-year monitoring and evaluation contract that USAID awarded to Management Systems International in May 2013. Eradication and Interdiction: State, DOD, DEA, FBI, ICE, CBP, and the U.S. Coast Guard all reported that they had not conducted any formal, systematic evaluations to assess the effectiveness of U.S.-supported eradication and interdiction efforts in Colombia since 2008. State documents indicate that State was considering an evaluation of its counternarcotics activities in Colombia as early as 2015; however, State officials noted that these plans were delayed due to competing priorities. State reported that it now plans to award a contract in 2019 for an evaluation of its counternarcotics activities. According to State officials, a scope of work for the evaluation has not been completed, so the details of the planned evaluation have not yet been decided, including whether the evaluation would assess activities in the long term and which activities it would include. State’s November 2017 evaluation policy highlights the importance of evaluations in achieving U.S. foreign policy outcomes and ensuring accountability. The policy establishes a requirement that all large programs, such as State’s counternarcotics program in Colombia, be evaluated at least once in the program’s lifetime, or once every 5 years for ongoing programs. According to State officials, evaluations can be challenging to design and potentially entail significant investments of resources and time; however, State’s evaluation policy reaffirms the importance and feasibility of conducting evaluations, including impact evaluations. Without evaluations of U.S.-supported eradication and interdiction efforts in Colombia, U.S. agencies do not have complete information regarding the long-term effectiveness of these efforts in reducing coca cultivation and the cocaine supply. As the lead agency responsible for setting U.S. counternarcotics policy in Colombia, State is best positioned to lead an evaluation of U.S.-supported eradication and interdiction efforts in the country. However, such an evaluation would benefit from the involvement and expertise of other U.S. agencies engaged in counternarcotics activities in Colombia. State’s evaluation policy encourages such evaluations that are undertaken collaboratively with other U.S. agencies. The U.S. counternarcotics approach in Colombia has historically entailed a combination of eradication, interdiction, and alternative development programs. Although the U.S. government implements a wide range of counternarcotics efforts in Colombia and can point to various results for these activities, State and other U.S. agencies have no systematic way to determine whether the current combination of activities is the most effective approach to achieve U.S. goals. According to DEA officials, measuring the effectiveness of overall U.S.-counternarcotics efforts in Colombia has been particularly challenging in recent years due to historical, transformational events which have taken place in that country. Various U.S. officials acknowledged that the substantial increases in coca cultivation and cocaine production as well as the other significant changes that have occurred in Colombia in recent years, including the end of aerial eradication, the conclusion of the peace agreement with the FARC, and decreases in Colombian and U.S. counternarcotics budgets, necessitate that the U.S. government review its approach to counternarcotics efforts and consider adjustments to reflect these developments. In addition, the U.S. government’s approach is affected by Colombia’s counternarcotics priorities and key initiatives, which continue to evolve. For example, in September 2015, Colombia announced a new counternarcotics strategy which specified three priority areas: rural development programs to reduce drug cultivation; law enforcement efforts to dismantle drug trafficking organizations; and public health approaches to reduce domestic drug consumption. Colombia has also launched an initiative to establish Strategic Operational Centers (known by the Spanish acronym CEO) in key regions of the country. These CEOs are designed to bring together the Colombian military, police, and civilian agencies to focus on a whole-of-government approach to improving security, establishing a state presence, and fighting drug trafficking in these areas. The Colombian government has now launched CEOs in three areas—Tumaco, San José del Guaviare, and Caucasia—and plans to open a fourth, in Cúcuta, later in 2018 (see fig. 5). It is also considering adding a fifth CEO in the Caquetá/Putumayo region. In addition, the Colombian government, with support from the U.S. embassy, launched the Antioquia Free from Coca initiative in December 2017. The initiative seeks to bring together the Colombian national government, local governments in Antioquia, the armed forces, the private sector, and the U.S. government to create a new model for development and counternarcotics in the Antioquia region. State has reported that the U.S. government plans to shift substantial resources to the initiative. Various U.S. officials stated that finding an appropriate combination of eradication, interdiction, and alternative development assistance is critical to achieve the U.S. objective of reducing cocaine production and trafficking in Colombia in this new context. To find this combination, U.S. officials stated that there are a range of considerations to weigh. For example, U.S. officials stated that they must consider to what extent to prioritize pursuing short-term reductions in coca cultivation and cocaine supplies versus longer-term efforts to address the underlying causes of the drug problem in Colombia, such as the widespread lack of legal economic opportunities in rural areas of the country. In addition, U.S. officials and documents from various agencies noted that counternarcotics efforts must be properly sequenced and coordinated to be effective. DEA analysis, for example, found that farmers are unlikely to permanently abandon coca farming without sustained and concurrent eradication and alternative development. Although U.S. officials noted the importance of finding an appropriate combination of eradication, interdiction, and alternative development assistance, they acknowledged that they have not undertaken a comprehensive review of their counternarcotics approach in Colombia that considers the benefits and limitations of these efforts to determine whether the U.S government’s current combination of activities is the most effective approach to achieve U.S. counternarcotics goals. Officials from State and other agencies noted that such reviews are challenging to do systematically and noted that they must generally rely on imperfect metrics, such as the amount of coca being cultivated, to determine if their counternarcotics approach is working. In addition, most U.S. efforts at measuring performance and evaluating results are focused at the individual agency level, rather than designed to determine what combination of U.S. counternarcotics activities will best achieve U.S. objectives of reducing the cocaine supply. Federal internal control standards state that agency management should use quality information to achieve the entity’s objectives. Among other things, the standards note agency management should use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. Without a comprehensive review of the U.S. counternarcotics approach in Colombia that considers the combination of eradication, interdiction, and alternative development efforts, the U.S. government lacks important information on how to most effectively combat drug trafficking in a changing environment in Colombia. To undertake such a review, the U.S. government might determine the need to collect additional information and conduct further evaluations of its counternarcotics programs, but it could also potentially use a range of existing information on what is known about the effectiveness of eradication, interdiction, and alternative development programs. State, as the lead agency at the embassy in Colombia, would be best positioned to guide an interagency effort to undertake such a review. State’s INL has supported Colombian aerial and manual eradication efforts over time, but these efforts have declined after the Government of Colombia’s decision to end aerial eradication and several years of limited or no funding for manual eradication driven by decreased Colombian government demand for this assistance, according to State officials. Despite these declines, officials from several U.S. agencies reported eradication should be a vital component of U.S. counternarcotics efforts in Colombia. Nevertheless, U.S. officials and the studies and experts in our review identified a number of factors which may reduce the effectiveness of eradication as a supply reduction approach, including the strategies coca growers use to mitigate the effects of eradication and potential adverse effects it may have on Colombian citizens. Additionally, third- party research suggests that eradication efforts do not substantially affect the long-term supply of cocaine and are potentially costly. INL has provided financial assistance and operational support for Colombian eradication efforts in three key areas: aerial eradication, manual eradication, and aviation support. Overall eradication efforts, however, have declined over time and the Colombian government stopped aerial eradication altogether in 2015. Aerial Eradication: Until 2015, INL directed the largest portion of its eradication assistance toward the Colombian National Police aerial eradication program. The program’s goal was to reduce coca cultivation and harvests by spraying coca fields with glyphosate. INL helped fund, plan, and operate the aerial eradication program. It provided the pilots, planning, aircraft, logistics, maintenance, and fuel to operate the program’s two spray bases. Funding for the aerial eradication program declined over time from $66.2 million in fiscal year 2008 to $12.7 million in fiscal year 2014. From October 2013 to October 2014, aerial eradication was temporarily suspended by the U.S. Embassy in Bogotá after two pilots were shot down during eradication operations. In May 2015, the Colombian government stopped the aerial eradication program amid concerns that glyphosate had a negative impact on public health. Cessation of aerial spraying took effect in October 2015. Manual Eradication: According to State officials, U.S. assistance shifted from aerial to manual eradication after the 2015 ban on aerial spraying. Manual eradication involves using mobile eradication teams, which are transported into coca fields to manually remove and destroy coca plants (see fig. 6). These teams are made up of Colombian police and military personnel, as well as civilian contractors, according to INL officials. Initially manual eradication was used in concert with aerial spraying in an effort to combat replanting in areas already subjected to aerial spraying, but with the ban on aerial spraying, manual eradication became a stand-alone approach. INL provides a variety of support for manual eradication teams including operational support and equipment, such as demining and brush cutters. Additionally, INL helps identify and fund the development of new technologies that might improve the effectiveness of manual eradication, such as armored ground spraying vehicles which protect manual eradicators from the danger of improvised explosive devices and landmines. INL funding for manual eradication varied during fiscal years 2008 through 2016, ranging from four fiscal years where INL provided no funding to a high of $9.5 million in fiscal year 2014. INL funding for manual eradication increased substantially in fiscal year 2017 to $26 million. According to State, decreases in the budget for manual eradication were driven by reduced Colombian government demand for this assistance. INL Aviation Support: INL has also provided aviation support to the Colombian National Police and the Colombian Army to assist counternarcotics efforts. According to INL, these aviation programs provide critical assistance for a number of counternarcotics efforts such as eradication, but also for interdiction, and security operations. Because Colombia is a vast country with rugged terrain, many rivers, and poor roads, State officials indicated air mobility is critical for effective counternarcotics operations. Colombian National Police (CNP): INL provides logistical, operational, maintenance, safety, and training assistance to the CNP’s aviation brigade in support of its counternarcotics operations. The CNP aviation program costs roughly one-third of INL’s Colombia budget, averaging about $55 million annually in fiscal years 2008 through 2017. Under this program INL helped the CNP procure its air fleet. Currently, the INL aviation program supports a total of 56 CNP aircraft, of which 52 are owned by the U.S. government (see fig. 7). Additionally, INL’s aviation program provides assistance for the CNP to build maintenance facilities, develop training plans, implement safety programs, and procure equipment, such as flight recorders and communications gear. As of 2018, INL also plans to provide $21 million over 4 years for the CNP’s aerial imagery collection and data analysis system, which Colombian authorities use to map coca fields and plan eradication missions. Colombian Army: INL provided aviation support for the Colombian Army prior to Colombia’s takeover of the army aviation program in 2012—a process known as nationalization. INL provided the Colombian Army’s aviation program nearly $150 million from fiscal years 2008 through 2011. According to INL, this support contributed significantly to the Colombian Army’s aerial eradication efforts as well as efforts to dismantle armed drug trafficking organizations, such as the FARC and ELN. In 2008, the Colombian government began to nationalize 62 aircraft from INL and, in 2012, assumed full responsibility for their maintenance and operations. U.S. and UN officials as well as third-party studies we reviewed identified a number of factors that reduced the effectiveness of eradication efforts at an operational level. We previously reported that U.S. funded counternarcotics efforts, which focused on aerial spraying, did not achieve Plan Colombia’s overarching goal to reduce the cultivation, production, and distribution of cocaine by 50 percent, in part because coca farmers responded with a series of effective countermeasures. Separately, State also indicated that aerial eradication was becoming less effective prior to the end of the spraying program in 2015. Similarly, U.S. and UN officials noted factors that had a negative impact on the effectiveness of manual eradication efforts. Crop displacement: U.S. officials, UN reports, and third-party researchers have noted that eradication has caused coca cultivation to move, or be displaced, to smaller plots and areas “off-limits” to aerial spraying, such as national parks, territories near international borders, and protected indigenous and Afro-Colombian areas, thus diminishing its impact on supply reduction. According to INL, at the beginning of the 2000s plots of 10 or more hectares were commonplace, easy to identify, and spray, but by 2016, the average plot size was less than a hectare, making aerial spraying more difficult. In addition, coca cultivation in areas off-limits to aerial spraying, such as national parks, border areas, and indigenous and Afro-Colombian areas, has increased substantially. According to one State cable, in 2014 over 70 percent of the nationwide cultivation increases in cultivation occurred in these areas. The Congressional Research Service reported that cultivation increased in these areas by 50 percent between 2014 and 2015. Likewise, a UN report noted that between 2015 and 2016, coca cultivation had increased by 32 percent in indigenous areas, by 45 percent in Afro-Colombian areas, and by 27 percent in national parks. According to the UN report, these areas account for only .04 percent of Colombia’s national territory but are the source of 32 percent of the nation’s coca cultivation. Four of the studies in our literature review also concluded that eradication led to crop displacement. One study indicated that the displacement of coca cultivation tends to disproportionately affect vulnerable populations by concentrating crime in the areas where these populations tend to live. The study concluded that coca cultivation has increased in some of the most socially and environmentally vulnerable areas of Colombia, including disadvantaged rural communities and has tended to further marginalize those Afro-Colombian communities that experienced dramatic increases in coca cultivation. Countermeasures: Coca growers and drug traffickers can employ countermeasures, such as using mines and improvised explosive devices, which create serious risks for manual eradication teams. For example, 4 manual eradicators were killed and 39 wounded during manual eradication operations in 2017, according to one State cable. Likewise, aerial spraying operations were also targeted by attacks. For example, in 2013 two pilots were shot down while conducting aerial eradication operations. This attack led to a temporary halt in aerial spraying operations. One State cable reported that from 1996 to October 2015 at least five spray aircraft were downed by hostile fire, resulting in the deaths of four pilots. Replanting, pruning, and other mitigation efforts: Coca growers have developed techniques, including replanting and pruning, which can mitigate damage to coca plants and reduce the effectiveness of eradication efforts. According to a 2017 UN report, 80 percent of the coca fields detected in 2016 had previously been subjected to aerial or manual eradication efforts. One DEA report confirmed that 25 percent of coca growers in the region they studied in 2008 had replanted their crops after spraying. Colombian government data showed that from 2014 through 2016 areas subjected to manual eradication were replanted between 25 and 37 percent of the time. In addition, coca growers can prune bushes immediately after spraying to help counter the effects of glyphosate and allow the plants to yield fresh leaves that may be harvested. According to data provided by State, from 2006 through 2012 areas subjected to aerial spraying were reconstituted—replanted or pruned—on average about 56 percent of the time. Growers may also intersperse coca plants alongside licit agricultural crops because aerial eradication efforts tend to be focused on large coca fields and attempt to avoid licit crops. Coca growers’ economic incentives: According to a DEA study, in 2007, nearly 60 percent of coca growers were ready to abandon coca farming. Likewise, a 2009 DEA study stated that sustained aerial eradication efforts, lasting 5 to 8 years, would force coca growers to give up coca farming. DEA noted that the Putumayo region, which it used as a model in the study, was “nearing a tipping point” in which coca cultivation would be abandoned after aerial eradication caused 60-80 percent losses in coca fields. However, aerial eradication efforts were sustained at or above 100,000 hectares from 2002 to 2012 before decreasing and eventually ending altogether in 2015. By 2016, coca cultivation had increased substantially and DEA data showed that only 5 percent of growers were ready to abandon coca. Similarly, a UN coca cultivation survey found that the number of households involved in the coca trade increased steadily from roughly 60,000 in 2008 to over 100,000 in 2016. DEA officials we interviewed agreed that it now appears that coca growers do not “abandon” coca farming during periods of sustained eradication, but rather they temporarily stop farming coca until it is economically advantageous to resume. State officials noted that they anticipate increases in eradication levels under President Duque and expect that increased eradication may alter coca farmers’ analysis of the benefits and risks of growing coca. One expert we interviewed was skeptical that eradication could ever raise the economic costs of growing coca high enough to dissuade farmers from growing coca because they find it easy to grow and are very responsive to price changes. The expert stated that the revenues from growing coca are often significantly higher than the costs of growing the plant. Given such high potential profits, there is typically an economic incentive to grow the crop. A number of other factors may also undermine the viability of eradication as a supply reduction strategy more broadly: Protests against eradication: According to a 2017 State cable, rural protestors use blockading tactics at eradication sites to disrupt manual eradication efforts. This cable reported that protesters blocked 428 manual eradication operations in 2016, and 152 operations in 2017. In addition, these protests against manual eradication efforts have led to violent confrontations between local populations and Colombian security forces. One such confrontation in Nariño—Colombia’s top coca-producing region—led to the deaths of a number of civilian protesters. Destruction of licit agriculture: Local civil society organizations in Colombia maintain that glyphosate spraying drifts with the wind and kills legal crops near eradicated areas, negatively affecting local populations. State maintains that its eradication programs had a minimal impact on licit crops; however, those whose licit crops had been harmed as a result of aerial spraying were eligible for compensation. According to State, from 2001 through the end of the aerial spraying program in October 2015, Colombians registered nearly 18,000 complaints of accidental spraying of licit crops. Of these complaints, State noted that only 3 percent were found to have merit and were therefore eligible for compensation. Debate over adverse health effects: The debate over the purported negative health effects of glyphosate has made aerial spraying efforts in Colombia controversial. In March 2015, the World Health Organization’s International Agency for Research on Cancer identified glyphosate as “probably” able to cause cancer in humans. However, two U.S. agencies dispute these findings. From 2002 through 2011, State formally certified to Congress that the glyphosate spraying program posed no unreasonable health risks to humans. The Environmental Protection Agency has also generally concluded that glyphosate exposure from aerial eradication in Colombia has not been linked to adverse health effects. Several other studies we reviewed discussed the potential health effects of glyphosate. International disputes: In 2013, Ecuador and Colombia agreed to a settlement to a case Ecuador filed in 2008 before the International Court of Justice in The Hague seeking a prohibition of the use of herbicides in aerial eradication near the Colombia-Ecuador border as well as indemnification for claimed damages associated with Colombia’s eradication program. Ecuador received $15 million in compensation from Colombia for alleged health and environmental harms and Colombia agreed to a 10 kilometer exclusion zone on the border with Ecuador in which it would not conduct aerial spraying. Third-party research we reviewed suggests that eradication efforts do not have a substantial long-term effect on coca cultivation and cocaine supply and are potentially costly. Eight studies in our literature review had key findings on the effectiveness of eradication efforts in Colombia. All eight studies raised questions regarding the effectiveness of eradication as a strategy to substantially reduce coca cultivation and the cocaine supply. Five studies also generally concluded it is a potentially costly supply reduction approach. Five studies found that eradication has only a small effect on reducing coca cultivation, but the estimates for reductions varied by study. For example, one study found that a 1 percent increase in the risk of eradication decreases coca cultivation by roughly .44 hectares. Another study estimated that a 1 percent increase in the risk of eradication would decrease the total area in Colombia under cultivation by .66 percent. Likewise, a third study found that as a result of displacement, the supply reduction effects of spraying were so small that an additional 33 hectares must be sprayed every year in order to reduce coca cultivation by 1 hectare. Three other studies concluded eradication efforts had no net effect on reducing the coca or cocaine supplies, or have led to increased coca cultivation. For example, one of these studies reported that a 1 percent increase in eradication actually increases the amount of land under coca cultivation by 1 percent as growers try to compensate for losses. The author noted that municipal level data on eradication and coca cultivation trends was broadly compatible with their findings. In addition, the author presented data from 2006 through 2012 which indicated a 38 percent decrease in eradication levels as well as a 38 percent decrease in coca cultivation. Another study concluded that the effects of eradication were nullified by coca growers’ ability to rapidly relocate their operations to other areas. Several of the studies we reviewed examined aspects of the costliness of eradication efforts, but relied on cost data that were either limited or we were unable to substantiate. Three studies generally concluded that eradication is costly in absolute terms, while two others suggested that eradication appears to be more costly than other alternative counternarcotics efforts. For example, one study suggested removing 1 kilogram of cocaine from retails markets through eradication would cost the United States roughly $940,000. Another study estimated that an additional $100,000 spent on eradication would reduce coca cultivation in Colombia by 1.5 percent. U.S. agencies have provided a variety of support for Colombian interdiction efforts, including capacity building and operational support. These efforts resulted in the seizures of a substantial amount of cocaine and precursor chemicals and disrupted drug trafficking organizations by arresting these organizations’ leadership and seizing valuable assets. However, the long-term effects of these efforts are unclear due to continued increases in cocaine production and the emergence of new drug traffickers. U.S. and Colombian officials identified a number of ways to improve the effectiveness of interdiction. A limited number of third-party studies on interdiction suggest mixed findings but indicate interdiction may be more effective than eradication because it targets drug trafficking at a more costly point in the production and distribution process. Building Partner Capacity: U.S. agencies provided a range of assistance that has improved Colombian authorities’ capacity to conduct interdiction efforts. U.S. and Colombian officials noted that because of these efforts, Colombian security services were able to provide counternarcotics training and support to other countries in the region. Key examples of U.S. efforts to build partner capacity included: Counternarcotics forces: U.S. agencies provided a broad range of assistance to improve the effectiveness of Colombian counternarcotics forces. For example, INL funded the creation and training of the Colombian Army’s counternarcotics brigades—military units responsible for seizing cocaine, destroying cocaine processing labs, and securing eradication sites. In addition, DOD and INL provided training and expertise to the Colombian National Police’s Junglas unit, which is a highly-trained special operations unit used to detect and destroy cocaine labs and capture high value drug traffickers. INL funded the construction of the Colombian National Police training facility where security services from Colombia and neighboring countries receive counternarcotics-related training. Likewise, DOD provided a broad array of programs designed to improve the operational capabilities of Colombian security forces. For instance, the agency’s Regional Pilot Training School helps provide helicopters, training, and certification for up to 50 Colombian and 24 international pilots annually. According to DOD, the goal of this program is to increase the Colombian capacity to rapidly deploy to remote areas of the country to conduct counternarcotics operations. Equipment procurement and maintenance: U.S. agencies provided assistance to procure and maintain equipment for their Colombian counterparts. The largest such effort is INL’s Aviation Program, which procured and maintained a fleet of aircraft for the Colombian National Police. The aviation program allows the police to conduct interdiction operations in areas of the country which are difficult to access, according to INL officials. INL also procured and maintained other equipment, including communications equipment and night vision goggles. In addition, DOD provided equipment to vetted Colombian security forces with counter-narcotics missions, including patrol boats; protective gear; and specialized navigation, communications, and surveillance equipment. Judicial support: For over 20 years DOJ’s Office of Overseas Prosecutorial Development Assistance and Training (OPDAT) has provided a range of assistance to help reform the Colombian judicial system and improve its ability to prosecute crimes. According to OPDAT officials, this assistance is critical for the successful prosecution of drug cases. The office assisted with prosecutor training, case-based mentoring, case efficiency, litigation skills, and plea bargaining. Likewise, DOJ’s International Criminal Investigative Training Assistance Program (ICITAP) provided training, including curriculum development, seminars, and on-the-job training, to improve the Colombian government’s ability to conduct criminal investigations and develop forensics capabilities according to agency officials. ICITAP’s training efforts in Colombia focused, in part, on reforming Colombia’s legal framework as well as fostering cooperation and organizational development between the country’s judicial and law enforcement agencies. Investigative support: A number of U.S. agencies worked closely with Colombian vetted units, to support these agencies’ missions abroad. For example, DEA provided funding, training, and vetting for Colombian Sensitive Investigative Units (SIUs). According to DEA officials, DEA conducted bilateral counternarcotics and money laundering investigations with these Colombian vetted units. Similarly, the FBI and ICE both work with Colombian vetted units and provide investigative support for counternarcotics investigations. For example, the FBI worked closely with its vetted unit in Colombia to investigate transnational criminal organizations. FBI officials told us that these cases were almost exclusively related to drug trafficking organizations in Colombia. Operational Support: U.S. agencies also provided operational support for Colombian interdiction operations. Key examples of U.S. operational support include: Targeting, extraditions, and prosecutions: A number of U.S. offices supported the targeting, extradition, and prosecution of Colombian drug traffickers. For example, DOJ’s Organized Crime Drug Enforcement Task Forces (OCDETF) developed the Consolidated Priority Organization Target (CPOT) list in order to identify and target the leaders of major drug trafficking organizations. Likewise, the FBI targets drug trafficking leadership as well as facilitators—those who support drug traffickers financially or politically—by investigating money laundering and corruption cases according to agency officials. In addition, DOJ officials partnered with the Colombian government to extradite drug traffickers to the U.S. for trial. According to the DEA officials, extradition is one of the most effective investigative tools against drug trafficking in Colombia. The DEA officials noted that the vast majority of persons charged and extradited to the United States from Colombia have been convicted. Additionally, an FBI official stated that the extradition of high level drug traffickers has the potential to degrade the operational ability of their organizations because these extradited leaders may cooperate with U.S. courts to get reduced sentences. This cooperation can then create leads for new cases and provide new information and witnesses for active cases, further undermining the operations of criminal organizations. Detection and monitoring: Several U.S. agencies supported Colombian interdiction efforts by assisting with detecting and monitoring of drug trafficking operations. For example: According to DEA, during bilateral investigations the agency and its Colombian counterparts utilized a number of investigative tools to detect and monitor drug trafficking networks and money laundering organizations with the ultimate goal of prosecution in Colombia and the United States. DEA stated that information gleaned from these efforts is shared and used to coordinate maritime interdiction operations that can lead to additional evidence for prosecution. One DEA official stated that these detection and monitoring efforts yield more leads than U.S. and Colombian security forces have the resources to interdict. Beginning in 2003, INL supported the CNP’s Air Bridge Denial program. This program was developed to help improve the Colombian government’s ability to detect and intercept airplanes smuggling drugs into and out of Colombia. In 2003, Colombia documented 60 to 70 flights per month transporting drugs into and out of the country. Today, Colombia reports detecting no more than two or three flights per year, according to State. The program, including all aircraft, hangars, equipment, and facilities was nationalized in January 2010. Following nationalization, INL’s Air Bridge Denial budget decreased from roughly $20 million in 2004 to $1 million in 2012 and, at present, INL no longer funds the program. DOD also provided intelligence, surveillance, and reconnaissance (ISR) in support of interdiction operations. According to officials the agency uses its ScanEagle unmanned aerial vehicles to help Colombian security forces track maritime vessels moving drugs on Colombia’s Pacific coast. For example, DOD provided various task forces, which include Colombian police, army, navy, marines, and coast guard units, with ISR support via ScanEagle systems, including imaging and video to support interdiction efforts along the Pacific coast of Colombia, according to DOD officials. U.S., UN, and Colombian monitoring data indicate that interdiction disrupts drug trafficking operations by seizing large amounts of cocaine, precursor chemicals, and other assets used by drug trafficking organizations. According to UN data, the amount of cocaine seized in Colombia increased from about 198 metric tons in 2008 to an estimated 435 metric tons in 2017 (see fig. 9). These totals accounted for an estimated 42 percent and 32 percent of the cocaine produced in those years, respectively. From 2008 through 2017 the total financial impact of cocaine seizures on drug trafficking organizations exceeded $4 billion. Several factors may explain these increases in the amount of cocaine seized. Several U.S. officials noted that increases in cocaine production means there is more cocaine to be seized in transit, while another official stated that seizure increases without corresponding increases in resources indicate that interdiction efforts may be becoming increasingly effective over time. In addition, interdiction efforts have led to the destruction of numerous drug processing facilities. From 2008 through 2017, nearly 30,000 coca paste and cocaine processing laboratories were destroyed, according to Colombian data. Since 2008, Colombian security forces have also seized over 30 million gallons of the liquid precursor chemicals necessary for the production of cocaine, as well as 8,087 vehicles, 1,083 boats, 18 airplane, 65,778 firearms, over 13 million rounds of ammunition, and 34,800 pieces of communications equipment associated with drug trafficking operations, according to Colombian government data. In addition, since 2008, ICE estimates that Colombian authorities have seized over $35 million in bulk cash and hundreds of millions of dollars in drug related contraband at Colombian ports. U.S. supported interdiction efforts have contributed to the disruption and dismantling of a number of drug trafficking organizations and the arrest and extradition of high value drug trafficking suspects on the CPOT and priority target organization (PTO) lists (see table 1). For example, as part of an “Operation Agamemnon II” that sought to disrupt and dismantle the Clan del Golfo, Colombian forces killed the group’s second-in- command, Roberto Vargas Gutierrez in August 2017; captured its third-in- command, Luis Orlando Padierna Pena in November 2017; and killed or captured many other senior and mid-level leaders. Likewise, in April 2017, Colombian forces arrested Edison Washington Prado Álava in Tumaco and seized $25 million in cash. Prado Álava, known as the “Pablo Escobar of Ecuador,” had issued death threats against police, prosecutors, and judges in both Ecuador and Colombia. In February 2018, with the cooperation of Colombian authorities, Prado Álava was extradited to the United States, where he is facing prosecution. From fiscal years 2008 through 2017, OCDETF reported that Colombian forces arrested 31 Colombians, disrupted 273 Colombian organizations and dismantled 94 others linked to the CPOT list. From calendar years 2008 through 2017, DEA reported that U.S. and Colombian authorities had also disrupted 83 PTOs and dismantled 201 others, including an estimated 5,444 PTO-related arrests. DEA officials stated that nearly all of these extraditions were for drug related crimes and these individuals were all “high value” targets. However, the long-term effect of these efforts is unclear. While seizures remove roughly 40 percent of the total cocaine supply each year on average, increases in cocaine production mean that the net supply of cocaine destined for the United States has increased despite the substantial amount of cocaine seized. U.S. officials also stated that while arrests and extraditions remove drug trafficking leaders, which may temporarily degrade the operational capabilities of drug trafficking organizations, the lucrative nature of the cocaine market ensures that others will replace these individuals. U.S. and Colombian sources identified several other challenges that may impact the effectiveness of interdiction efforts. One FBI official stated that as investigative efforts fragment drug trafficking organizations, it becomes more challenging to target organizations and dismantle their command and control structures. One of the studies we reviewed suggested that as these organizations are dismantled, local populations may be affected by pronounced cycles of violence as competing armed groups vie for control of drug trafficking operations in areas formerly under the control of an established criminal organization which has been dismantled. Sources also stated that extraditions may become less of a deterrent to drug traffickers over time as they and their legal counsels become more familiar with the U.S. judicial system and are able to effectively plead to lesser charges and get lighter sentences. U.S. and Colombian officials identified a number of ways to improve interdiction efforts and increase the effectiveness of these operations: Maritime/riverine boat program: State and DOD have already provided assistance to strengthen Colombia’s maritime and riverine interdiction capabilities, but INL officials noted that they were exploring options to provide further support for riverine interdiction efforts given the significance of Colombia’s waterways in drug trafficking. A number of U.S. and Colombian officials, including officials from INL, the Colombian Navy, and the U.S. and Colombian Coast Guards, stated that an enhanced “boat program,” similar to INL’s aviation program, would improve the country’s ability to interdict cocaine shipments traveling along Colombian maritime routes. Officials noted that features of such a program should include the procurement, supply, and maintenance of boats capable of tracking down the “go fast” boats used by traffickers. These vessels cost $1 million each, and provide a significant return on investment, according to Colombian authorities. One such boat, for example, was able to interdict 12 tons of cocaine (valued at $60 million) in 1 year in Tumaco, Colombian officials stated. Port of entry/container interdiction operations: DHS officials from ICE and CBP have supported Colombian efforts to seize drugs and other contraband at air and sea ports of entry. However, one ICE official stated that container smuggling is the “Achilles’ heel” of cocaine interdiction efforts in Colombia. According to this official, Colombian ports vary in their willingness to cooperate with U.S. agencies in order to combat drug smuggling. For example, the official stated that one port provides a lot of information to ICE and CBP officials because it participates in CBP’s Container Security Initiative, while another port is known for corruption and smuggling. This official believes that hundreds of tons of cocaine leave via containers carrying licit merchandise and reported that, for example, one interdiction operation targeting the port in Cartagena had resulted in the seizure of 35 tons of cocaine since 2015. According to ICE officials, assigning more personnel to Colombian air and seaports would greatly increase seizures of cocaine and contraband. Drug trafficking organization funding/finance: A number of U.S. and Colombian sources suggested that interdiction efforts can be improved by targeting drug trafficking organizations’ assets and revenues. Because money is at the top of the value chain, disrupting cash flow before it can return to drug traffickers would have a significant impact on their ability to profit from criminal activities and continue to fund their operations, according to several U.S. and Colombian sources. One expert we spoke to indicated that interdiction efforts could be improved by targeting money laundering, bulk cash shipments, and contraband smuggling. According to one FBI official, drug trafficking organizations cannot operate without financing, and as a result it is important to focus on money laundering cases. Similarly, one ICE official described bulk cash shipments and money laundering as the “fuel” that drives drug trafficking and believes it is critical to devote more resources in this area. DEA stated that in addition to its bilateral investigations with Colombia, the agency also conducts simultaneous money laundering investigations often resulting in seizures of assets and bulk cash. However, INL officials stated that Colombian asset forfeiture laws have made it difficult for authorities to seize and liquidate the assets of drug traffickers. In 2017, revisions to these laws were passed making it easier for Colombian officials to liquidate these assets and use these resources to fund further counternarcotics efforts; however, State noted that the revised asset forfeiture process still faces several challenges including the limited number of judges and long periods of time needed to adjudicate these cases. Regional maritime interdiction operations: U.S. and Colombian officials suggested that sustaining regional maritime interdiction operations between the U.S., Colombia, and other nations in the transit zone can significantly disrupt drug trafficking operations if maintained long term. For example, beginning in March 2017, the U.S. and Colombian navies—along with maritime authorities from Panama, Costa Rica, Mexico, Honduras, Ecuador, Guatemala, and Nicaragua—conducted Operation Orion, a series of coordinated maritime interdiction operations targeting different areas of the transit zone. One of these operations, conducted jointly by Colombia and Panama, seized 2.5 tons of cocaine in 1 month and led to 20 arrests. U.S. Coast Guard officials stated that Operation Orion was a successful, short-term example of how regionally coordinated operations can improve the effectiveness of maritime interdiction and believe that continuous operations of this type would dramatically improve the effectiveness of interdiction efforts overall. U.S. Coast Guard officials also noted that these types of coordination efforts among Colombia and other countries in the region are an important step toward self-sufficiency and away from a reliance on U.S. funding and law enforcement support for maritime operations. However, these officials noted that there are currently not enough resources devoted to interdiction to sustain these types of partnerships in the long term. Colombian Navy officials agreed that countries in the region need to devote more resources to sustain these types of regional efforts. However, these officials also noted that Colombia has taken some steps, such as developing permanent information sharing agreements with regional partners, to develop these types of relationships. Third-party research we reviewed had limited findings related to interdiction. While seven of the studies in our literature review discussed aspects of interdiction efforts, four studies had findings related to the effect of these efforts on the cocaine supply. These four studies had mixed findings about the overall effectiveness of interdiction efforts. One study we reviewed found that an increased emphasis on interdiction efforts in Colombia, beginning in 2006, had achieved a substantial reduction in the net supply of cocaine. Another study indicated that increases in the costs to produce cocaine were mainly due to the interdiction of precursor chemicals such as gasoline. However, two other studies concluded that increased cocaine seizures did not have a substantial impact on either the price or the overall supply of cocaine, which has steadily increased since 2013. Several of the seven studies we reviewed suggested that interdiction is more effective or more cost-effective than eradication efforts. Two studies indicated that interdiction policies had a greater impact on the cocaine supply than eradication policies. For example, one study showed that the destruction of cocaine processing labs has a greater impact on cocaine prices than aerial or manual eradication efforts. Two other studies concluded that interdiction was more cost effective than eradication efforts. For example, one study indicated that the cost of removing 1 kilogram of cocaine from retail markets in the United States was $175,000 if resources were devoted to interdiction and $940,000 if resources were devoted to eradication. However, this study relied on cost estimates that were either limited or we were unable to substantiate. A number of the studies in our literature review and experts we interviewed stated that counternarcotics resources should primarily be devoted to interdiction efforts instead of eradication efforts because they target drug traffickers at the top of the “value chain”. According to these studies and experts, counternarcotics actions are more costly to drug traffickers at this stage of the drug trafficking process. For example, two studies indicated that the destruction of cocaine processing labs is the most effective counternarcotics effort. One study stated that the destruction of these labs is an effective interdiction strategy because these labs add significant value to the final product, cocaine lost at this stage is not easily replaced, and the destruction of labs reduces demand for coca leaves and coca cultivation. This study indicated that for every lab destroyed, coca cultivation decreases by 3 hectares as demand for the leaves falls. Another study indicated that the number of processing laboratories destroyed accounts for 75 percent of the price fluctuation of cocaine. U.S.-supported alternative development programs in Colombia have attained some positive outcomes. USAID evaluations and monitoring data show that alternative development programs have achieved a number of positive results in increasing opportunities to participate in the legal economy in Colombia, but have also faced issues that reduced their effectiveness. U.S. and Colombian officials stated that alternative development programs are important to a long-term counternarcotics strategy, but noted a number of implementation challenges. Third-party research suggests that alternative development has the potential to reduce coca cultivation if properly implemented. USAID’s alternative development programs in Colombia provide support in a number of key areas, including programs that are intended to: assist in the development of value chains for agricultural products, such as cacao and coffee, or the development of licit businesses; support land formalization efforts, including the issuance of land titles and the development of Colombia’s national registry of land ownership (known as a cadaster); increase access to rural finance; strengthen producer associations (see fig. 10); leverage private sector investment to support rural development; provide needed infrastructure to strengthen communities and support legal economies including roads, schools, electricity, and sanitation; and support civil society organizations and strengthen governance, including efforts to build social capital and increase the presence of the Colombian government in areas affected by conflict. According to USAID, over time, it has broadened the focus of its alternative development efforts to move beyond crop substitution programs and to instead work to transform underdeveloped regions within Colombia and address the underlying issues that drive the economics and culture of drug trafficking. USAID noted that it has also sought to prioritize particular geographic regions, rather than seeking to implement programs throughout the whole country. Table 2 lists examples of alternative development programs that USAID has funded in Colombia over the past 10 years. USAID, State, and Colombian officials noted that this broader, more comprehensive focus for alternative development is necessary in order to create the conditions that would be conducive for legal alternatives to coca cultivation to be viable in many parts of Colombia. For example, Colombia faces substantial deficiencies in its road network. Without improvements in the road network, many Colombians in rural areas do not have a feasible way of transporting legal crops to markets or accessing basic services. Significant numbers of Colombian farmers also do not possess title to their land, which, among other things, limits their ability to access credit and reduces their incentives to make longer-term investments in legal crops such as cacao, which take years to mature. We reviewed seven independent evaluations that USAID has commissioned since 2008. These evaluations reported that USAID alternative development programs have achieved a range of positive results. For example, a 2016 midterm impact evaluation of USAID’s Consolidation and Enhanced Livelihood Initiative found that, among other things, an increased number of program beneficiaries reported that their economic situation was good or very good compared to the baseline at the beginning of the project. In addition, the evaluation found that program beneficiaries’ sales of supported products had increased significantly and had far exceeded USAID targets. A 2014 post- implementation evaluation of two USAID programs (1) More Investment in Sustainable Alternative Development and (2) Areas for Municipal-Level Alternative Development found positive outcomes for some beneficiaries, including success in helping producer associations get their products to market. However, the evaluations also reported that USAID alternative development programs did not achieve all intended goals and faced certain implementation issues including problems with project design, program funding not being sustained for adequate periods, and a lack of consistent support from the Colombian government, which was a partner in these programs. For example, an April 2009 evaluation of USAID alternative development efforts under Plan Colombia reported, among other things, that many marketable crops in Colombia, such as cacao or coffee, take several years to grow before they are ready to harvest and produce income for farmers. Thus, farmers need income support during this period as they transition from dependence on coca to legal crops, but, according to the evaluation, USAID and the Colombian government frequently did not provide sufficient income to cover food costs or other expenses, making farmers highly vulnerable to resume coca cultivation. An April 2011 evaluation of USAID’s Integrated Governance Response program reported that some funded projects were at a standstill due to the delays by the Colombian local and regional governments in fulfilling their commitments. USAID, for example, had funded the construction of a cold-storage facility to assist milk producers in one region, but the facility had not been provided with electricity because the municipal government had not sent a building inspector to approve its construction. A February 2017 review of alternative development in Colombia reported that a number of alternative development efforts may require longer time horizons than allowed by most USAID contracts or cooperative agreements. In addition to these evaluations, other USAID assessments have reported that alternative development programs have achieved some positive results. For example, data from USAID’s Monitor system report that USAID projects related to “Inclusive Rural Economic Growth” exceeded their targets for 23 of 44 performance indicators for which results were reported for fiscal year 2017. Similarly, for fiscal year 2017, USAID reported that it exceeded its targets for six of nine performance indicators related to inclusive rural growth that were tracked in Embassy Bogotá’s Performance Plan and Report (see table 3). An internal USAID analysis also noted that the agency had been able to increase the ratio of legal crops grown relative to coca in areas where it had funded programs to increase opportunities for such crops. Specifically, USAID reported that in 14 departments where it had funded such programs, the ratio of illegal to USAID-supported legal crops under cultivation had decreased from 302:1 hectares to 13:1 hectares from 2011 to 2016. USAID noted different factors that resulted in three of the nine targets not being met. For example, USAID stated that the target for households with formalized land was not met because the Colombian government eliminated the agency previously responsible for land formalization in December 2015 and created two new agencies in its place. According to USAID, these new agencies did not begin operations until March 2017, which delayed USAID’s work with the Colombian government on the project and created uncertainty about the Colombian government’s land policy and administration. Data reported by UNODC also provides certain information related to the effectiveness of alternative development efforts in Colombia. UNODC, for example, collects and reports data on the number of households involved in coca production as part of its annual illicit crop cultivation surveys. These data show that the number of households in Colombia involved in coca cultivation increased from 59,328 to 106,900 between 2008 and 2016 (an increase of 80 percent). Such data indicate that any gains achieved in encouraging Colombians to switch from illegal to legal livelihoods through alternative development programs have been outweighed by other factors driving increased involvement in coca cultivation. U.S. and Colombian officials stated that alternative development, and the creation of viable opportunities for Colombians to get access to public services and participate in the legal economy, is important to solving the drug problem in Colombia. However, these officials acknowledged that comprehensive alternative development is a long-term approach that requires significant investment. They also pointed out that large portions of rural Colombia have been marginalized for decades and that the Colombian government will need to make substantial, sustained investments in rural areas to establish the necessary conditions for legal economies to develop. According to USAID officials, USAID data indicate that the regions where USAID has intervened have fared better than the areas where it has not, but the scope and scale of its interventions have not been significant enough to counteract overall coca cultivation and cocaine production trends in the country. U.S. government analysis and officials noted that there are also powerful economic disincentives for farmers to shift from the cultivation of coca to legal crops such as coffee or cacao. According to State analysis, while prices per kilo of cacao and coffee are higher than coca, lower investment costs, more frequent harvests, higher yields per hectare, minimal field maintenance costs, and negligible transportation costs, make growing coca the more profitable economic choice in most parts of Colombia. For example, in the Nariño region, State found that growing coca can be up to 14 times more profitable per hectare than cacao, factoring in all costs. DEA analysis has found that average annual profit accrued by Colombian farmers from a hectare of coca increased by more than 120 percent from 2012 to 2016. In addition, DEA analysis has found that as profitability has increased, the number of coca farmers wanting to stop growing coca has declined substantially. According to USAID documents and officials, a number of other factors have also affected USAID’s ability to effectively support alternative development efforts in Colombia, including Colombian policy and legal restrictions, insecure and inaccessible locations, coordination challenges with the Colombian government, the diversity of needs within Colombian communities, and Colombia’s current alternative development focus and U.S. legal restrictions. Colombian policy and legal restrictions. USAID has been limited in its ability to implement alternative development programs in a number of coca cultivating areas due to policy and legal restrictions. For example, according to USAID evaluations and officials, under the Colombian government’s previous “zero coca” policy, it was prohibited from providing any assistance in an area until it was proved that all coca in the area had been eradicated. As a result, USAID was unable to provide assistance for coca growers to switch to and remain in legal livelihoods. In addition, approximately 8 to 10 percent of coca is grown in national parks, where, according to USAID, under Colombian law, it may not implement any development projects. Insecure and inaccessible locations. USAID has been limited in its ability to provide assistance in some key coca growing areas of the country due to security concerns and the remote nature of the locations. According to USAID, the Colombian government has at times prohibited it from operating in “red zones” where there was active, armed conflict. USAID stated that it has also chosen not to fund programs in some regions because it is too dangerous for the agency’s implementing partners to safely operate. In addition, USAID noted that some of the areas with the highest concentration of coca are largely inaccessible, making it challenging to implement assistance programs, since many of them have no roads and can only be reached by boat or by foot. Coordination challenges with the Colombian government. According to USAID officials, USAID has also faced challenges because of the lack of consistent, coordinated support from the Colombian government and difficulties getting Colombian agencies to work together. For example, after the Colombian government announced the National Consolidation Plan in 2009, USAID focused its assistance in 40 of the 58 municipalities that the Colombian government had selected for consolidation. Despite evidence of progress being made in these areas, by 2013 the Colombian government had begun to reduce its support for the policy, according to USAID. USAID stated that impediments to the successful continuation of the plan included, among other things, a lack of political support, disorganization at the top levels of the Colombian government, changes to and the politicization of the Colombian government’s administrative entity leading the effort, and challenges executing national budgets flexibly and efficiently at the local level. As a result, USAID stated that it was forced to adapt its efforts in the later years of the plan to focus on working with local partners rather than the national government. Diversity of needs within Colombian communities. USAID has faced challenges designing appropriate alternative development programs given the diversity of communities within Colombia that have differing needs in terms of alternative development support. For example, there are a wide range of microclimates throughout Colombia which can make it challenging to replicate the same types of technical assistance for farming of legal crops in different parts of the country. USAID noted that it works to tailor its alternative development programming to specific regions. For example, USAID reported that it worked to tailor its assistance to meet the needs of an indigenous community in Northern Cauca. USAID was seeking to improve access to finance in the community; however, due to communal ownership of land, the community could not use land as collateral for loans, according to USAID. Thus, USAID stated that it tailored its assistance by setting up a revolving fund managed and administered by the community itself to expand financing for local businesses. U.S. and Colombian officials noted the need for additional information on various communities to know how to best design programs that would work in the different areas. Colombia’s current alternative development focus and U.S. legal restrictions. According to USAID, its efforts to support alternative development in Colombia have also been challenged by the Colombian government’s current program focus. According to USAID, State, and Colombian officials, a central part of the Colombian government’s counternarcotics strategy under the peace accord is to implement a voluntary eradication and crop substitution program. Under the program, in exchange for voluntarily eradicating their coca crops, farmers receive cash assistance and technical support to help them transition to the cultivation of legal crops. However, according to USAID, the Colombian government is implementing the program in conjunction with the FARC. As a result, USAID officials stated that the U.S. government’s ability to support the program is restricted because the FARC is still designated as a Foreign Terrorist Organization. USAID and State officials also pointed out a range of implementation problems with the program and stated that the plan has had little to no impact on the current coca cultivation trends in Colombia. For example, USAID officials noted that the payment of stipends to farmers has begun before the eradication of their coca has been required or verified. As of April 2018, the Colombian government had signed up approximately 50,000 families for the program, according to State reporting. However, State reported that the Colombian government has publicly acknowledged that the program is lagging in achieving its intended results and was forced to reduce its targets under the program from 50,000 to 22,000 hectares in 2017. Independent research and non-governmental experts we spoke to generally suggested that alternative development programs have the potential to strengthen legal economic activity and encourage communities to shift away from coca cultivation, if properly implemented. Ten studies in our literature review discussed alternative development. Of these 10 studies, 3 included original research that found evidence regarding the potential effectiveness of alternative development programs in Colombia. One study we reviewed found that social investment in infrastructure and human capital could be an effective and complimentary strategy for controlling illegal crops. The study found that $5.55 spent in social investment per inhabitant in a given municipality prevented the cultivation of a new hectare of coca. A different study, looking at land titling efforts in Colombia, found that the formalization of one additional hectare of land for small landholders within a given municipality resulted in a decrease of approximately 1.4 hectares of land allocated to coca cultivation within that municipality. An additional study found that implementing community planning models that involved citizen participation could be effective in encouraging the adoption of alternative development projects and the substitution of legal crops in place of coca. Several other studies did not include original research on the effectiveness of alternative development programs, but made recommendations to increase the emphasis placed on such efforts based on the authors’ review of existing evidence. For example, one review of existing research recommended that policies aimed at reducing illicit crop cultivation should be centered upon alternative livelihood programs. The study noted that the Colombian government should consider expanding and improving a successful alternative development program it had previously implemented in the Macarena region of Colombia. Some studies and experts, however, raised issues about the implementation of alternative development programs and noted potential limitations in their effectiveness. For example, one study that assessed the effectiveness of alternative development found that because coca cultivation is unlikely to change as a result of increases in perceived risk and relative profit, alternative development was likely to have only small effects on coca cultivation levels. Another study noted that alternative development programs have tended to be located far from areas where coca crops have been grown. Thus, the study recommends pursuing more comprehensive counternarcotics efforts in areas affected by coca cultivation. An additional study cited the success of one regional alternative development program, but noted that many alternative development programs in Colombia have faced implementation problems. One expert we interviewed stated that alternative development can work in particular parts of Colombia, yet such efforts were likely not viable in some key coca growing regions, where there is little infrastructure to market legal crops. Thus, the expert stated it is crucial to target where alternative development programs are implemented. Since the launch of Plan Colombia almost 20 years ago, the U.S. and Colombian governments have partnered closely to combat drug trafficking through a mix of eradication, interdiction, and alternative development efforts. Since then, violence in Colombia has decreased and the successful negotiation of a peace agreement with the FARC brought an end to that 50-year conflict. However, increasing cocaine production levels in the past 4 years and the continued existence of a range of violent criminal groups underscore the ongoing threat of narcotics trafficking for Colombia. As the U.S. government seeks to support Colombia in this new phase of its fight against drug trafficking, U.S. agencies should consider what combination of eradication, interdiction, and alternative development activities will help to best achieve their counternarcotics goals. There is a range of available information that can help provide U.S. agencies with insight into the effectiveness of their eradication, interdiction, and alternative development activities. However, to date, State and other U.S. agencies involved in eradication and interdiction activities in Colombia have not evaluated these efforts to determine their long-term effectiveness in reducing the cocaine supply. In addition, State has not undertaken a comprehensive review of the U.S. government’s counternarcotics approach in Colombia. Such a review would help State to systematically consider the relative benefits and limitations of the U.S. government’s eradication, interdiction, and alternative development activities. With this information, State would be well positioned to ensure that it and other U.S. agencies are prioritizing limited resources and pursuing the combination of counternarcotics activities with the greatest likelihood of achieving long-term success in the fight against drug trafficking in Colombia. We are making two recommendations to State: The Secretary of State should, in consultation with other U.S. agencies involved in counternarcotics efforts in Colombia, conduct an evaluation of the long-term effectiveness of eradication and interdiction in reducing the cocaine supply. (Recommendation 1) The Secretary of State should, in consultation with other U.S. agencies involved in counternarcotics efforts in Colombia, undertake a comprehensive review of the U.S. counternarcotics approach in Colombia and identify what changes, if any, should be made to the types and combination of U.S. activities, taking into consideration how the relative benefits and limitations between eradication, interdiction, and alternative development may impact the effectiveness of these efforts. (Recommendation 2) We provided a draft of the report to DHS, DOD, DOJ, State, and USAID for review and comment. DHS, DOJ, and State provided technical comments, which we incorporated as appropriate. State and USAID also provided written comments, which are reproduced in appendix III and IV, respectively. In its written comments, State noted that it agreed in general with our recommendations, but suggested that our first recommendation be broadened to encompass an evaluation of the effectiveness of whole- of-government counternarcotics efforts, rather than focusing on eradication and interdiction specifically. We respect State’s argument in favor of broadening the scope of our first recommendation, but we chose not to revise our recommendation based on this rationale. We believe that an evaluation focusing specifically on the long-term effectiveness of eradication and interdiction in reducing the cocaine supply would provide State with important information on two key components of the approach that has characterized U.S. counternarcotics efforts in Colombia for decades but have not been evaluated to date. Such an evaluation would be consistent with analyses already undertaken for alternative development, and would contribute to a better understanding of the strengths and weaknesses of each of these three key efforts. In addition, our second recommendation to State addresses the need for a broader, comprehensive review of the overall U.S. counternarcotics approach, which would expectedly take into account eradication, interdiction, and alternative development, as well as other U.S. efforts to combat drug- related criminal activities. If State opts to pursue a broader evaluation of all U.S. counternarcotics efforts in Colombia, we would consider this responsive to our first recommendation as long as the evaluation includes a meaningful assessment of the effectiveness of eradication and interdiction efforts. Additionally, as part of its comments, State highlighted the importance of a whole-of-government approach to counternarcotics in Colombia that employs a range of efforts that are implemented in a coordinated manner. Consequently, State noted that any review of the individual components of the U.S. counternarcotics strategy will present an incomplete picture and State expressed concern that we had considered eradication, interdiction, and alternative development in isolation. In the report, we note that the U.S. government’s counternarcotics approach in Colombia has long called for a mix of eradication, interdiction, and alternative development efforts and we highlight the fact that U.S. officials believe that finding the appropriate combination of these efforts is critical to achieving the U.S. government’s counternarcotics objectives in Colombia. Thus, while we present more in-depth analyses of eradication, interdiction, and alternative development, we begin our discussion with an overall description of U.S. efforts in Colombia more generally, covering the role of various U.S. agencies in these efforts, the nature of overall collaboration with Colombia, and the events that shaped the current situation. Finally, in its comments, State said that we had failed to consider relevant information on eradication that had been published by various sources. In developing our findings in this report, we reviewed available U.S. government, Colombian government, and United Nations data and analysis on eradication, as well as third-party research, and we sought to accurately present this range of information in a balanced manner. Accordingly, we have made relevant modifications to our narrative to further describe information in UN studies related to the results of eradication efforts in Colombia. In its comments, USAID stated that it concurred with our recommendation that State lead a comprehensive review of the U.S. counternarcotics approach in Colombia. USAID noted that it believes such a review could help identify what changes, if any, are necessary to make to the types and combination of U.S. activities, while taking into consideration how the relative benefits and limitations of eradication, interdiction, and alternative development could affect the effectiveness of these efforts. We are sending copies of this report to the appropriate congressional committees and the Secretaries of Defense, Homeland Security, and State, as well as the Attorney General and the USAID Administrator. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix V. This report examines (1) to what extent the U.S. government has assessed the effectiveness of its counternarcotics efforts in Colombia, (2) what is known about the effectiveness of U.S. government-supported eradication programs in Colombia over the last 10 years, (3) what is known about the effectiveness of U.S. government-supported interdiction programs in Colombia over the last 10 years, and (4) what is known about the effectiveness of U.S. government-supported alternative development programs in Colombia over the last 10 years. To assess to what extent the U.S. government has assessed the effectiveness of its counternarcotics efforts in Colombia, we analyzed Department of Homeland Security (DHS), Department of Defense (DOD), Department of Justice (DOJ), Department of State (State), and U.S. Agency for International Development (USAID) data and documentation that describe U.S-supported counternarcotics efforts since 2008, including available performance monitoring data and evaluations that the agencies use to assess the effectiveness of their counternarcotics activities in Colombia. In doing so, we reviewed performance reporting that the agencies conduct through interagency mechanisms including the Office of National Drug Control Policy’s (ONDCP) annual National Drug Control Strategy Performance Reporting System report and Budget and Performance Summary report, as well Embassy Bogotá’s annual Performance Plan and Report. In addition, we reviewed agency-level performance monitoring data and related reports produced by DHS, DOD, DOJ, State, and USAID, as well as their relevant component agencies and offices. For example, we reviewed State’s annual International Narcotics Control Strategy Report, performance data from USAID’s Monitoring and Evaluation Clearinghouse information system, U.S. Southern Command annual program management reviews, DEA/Colombia impact statements produced through its Threat Enforcement Planning Process, and annual DHS performance reports. We also reviewed evaluations that USAID had conducted of its alternative development programs in Colombia. To identify relevant USAID evaluations, we consulted USAID officials and conducted a search of USAID’s Development Experience Clearinghouse, which is USAID’s online, publicly available repository of program documentation. In evaluating to what extent the U.S. government has assessed the effectiveness of its counternarcotics efforts in Colombia, we compared State’s actions to its evaluation policy. In addition, we compared U.S. agencies’ actions to applicable federal internal control standards. To determine what is known about the effectiveness of U.S. government supported eradication, interdiction, and alternative development programs, we analyzed DHS, DOD, DOJ, State and USAID data and documentation related to counternarcotics efforts in Colombia. As part of our work, we also analyzed data from the United Nations Office on Drugs and Crime’s (UNODC) annual surveys of territories in Colombia affected by illicit crops, which documented coca cultivation and cocaine drug productions trends, as well as counternarcotics efforts. In addition, we analyzed Colombian government data and other reporting describing counternarcotics efforts. These U.S. government, United Nations, and Colombian government data included a range of metrics. For eradication programs, we reviewed metrics including estimated coca cultivation levels, eradication levels, coca plant productivity levels, coca replanting rates, and the territorial distribution of coca cultivation. For interdiction, we reviewed metrics including estimated cocaine production levels; the levels of seizures of cocaine, precursor chemicals, and drug trafficking organization assets; the number of drug trafficking organizations disrupted or dismantled; and the number of drug trafficking organization members arrested and extradited. For alternative development programs, we reviewed metrics including the number of households involved in coca cultivation, the amounts of coca cultivated relative to legal crops in areas receiving U.S. government support, increases in the value of sales of legal products in areas involved in narcotics production, the number of households receiving land titles as a result of U.S. assistance, and the value of agricultural and rural loans generated through U.S. assistance. To assess these data, we reviewed available documentation, and interviewed cognizant U.S. officials. In addition, we were able to compare different sources in some instances, specifically the U.S. government and the UN estimates of coca cultivation and cocaine production in Colombia. We noted several limitations to these data. For example, the coca cultivation and production figures are estimates, and while both the U.S. government and UN have procedures to verify their estimates, there were differences between the two sources in terms of the levels of production and cultivation reported due to differences in their estimating methodologies. For example, one challenge to estimating the hectares of coca eradicated is that crop fields can be eradicated multiple times in 1 year, which means that the total number of hectares eradicated can exceed the total number of hectares cultivated in some years. Likewise we noted that kilograms of cocaine seized in Colombia may be the result of a variety of actions, and can be influenced by the volume of cocaine production, as well as the actions of law enforcement officials. We determined that the U.S. government, United Nations, and Colombian government data were sufficiently reliable to present general trends from 2008 through 2017. Further, we reviewed agency documentation from State, USAID, DOD, and DEA in order to identify plans, reviews, strategies, and assessments related to counternarcotics efforts in Colombia. For example, we reviewed State’s annual International Narcotics Control Strategy Reports, Embassy Bogotá’s annual Performance Plan and Reports, DOD U.S. Southern Command performance management reviews, and DEA’s Threat Enforcement Planning Process assessment. In addition, we reviewed seven evaluations that USAID had commissioned of its alternative development programs in Colombia and identified relevant findings from these evaluations regarding the effectiveness of alternative development efforts in Colombia. Some of these evaluations related to specific alternative development programs, while others evaluated USAID’s alternative development efforts in Colombia more broadly. It was beyond the scope of this engagement to assess the quality of these evaluations. We also reviewed USAID performance data in its Monitor system and in Embassy Bogotá’s annual Performance Plan and Report and compared USAID’s results to the targets it had established. We did not perform an assessment of the underlying metrics that USAID used, as our purpose was to compare actuals to targets. To gather further information regarding what is known about the effectiveness of U.S. government supported eradication, interdiction, and alternative development programs, we interviewed U.S. officials that have responsibility for and insights into U.S.-supported counternarcotics efforts in Colombia from: DHS, including Immigration and Customs Enforcement and the U.S. Coast Guard; DOD, including the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats and U.S. Southern Command; DOJ, including the Criminal Division, the Drug Enforcement Administration, and the Federal Bureau of Investigation; State, including the Bureau of International Narcotics and Law Enforcement Affairs and the Bureau of Western Hemisphere Affairs; and USAID’s Bureau for Latin America and the Caribbean. In addition, we conducted fieldwork in Colombia in March 2018. During our fieldwork, we interviewed U.S. officials from DHS, DOD, DOJ, State, and USAID involved in counternarcotics activities at Embassy Bogotá. In addition, we interviewed various officials from Colombian security and civilian agencies and from the UNODC. We also visited the headquarters of the Colombian National Police Air Service’s headquarters in Guaymaral (near Bogotá) and the Colombian National Police’s International School for the Use of Police Force for Peace (near Ibagué). Finally, as part of our fieldwork, we visited Tumaco in southwest Colombia. Tumaco is the municipality with the highest levels of coca cultivation in Colombia and is also the most significant hub for the trafficking of cocaine out of the country. In Tumaco, we visited the Colombian government’s Strategic Operation Center, observed a manual eradication operation, and met with a number of USAID alternative development program beneficiaries. The information on foreign law in this report is not the product of GAO’s original analysis, but is derived from interviews and secondary sources. Finally, to help validate and supplement U.S. government findings regarding the effectiveness of its counternarcotics programs, we conducted a literature review to determine the extent to which relevant non-U.S. government studies either validated or reached different conclusions than the U.S. government’s findings regarding the effectiveness of U.S.-supported counternarcotics programs in Colombia. To conduct this review, we developed a list of search terms related to eradication, interdiction, and alternative development in Colombia. Then, working with a GAO research librarian, we conducted a search using selected bibliographic databases, including Scopus and SciELO. We conducted searches for materials in both English and Spanish. The searches resulted in the identification of an initial list of 261 English- language articles and 45 Spanish-language articles. The team then conducted a process to narrow down the initial search results to a priority list of studies. In order to narrow down the results, we considered a variety of factors including the relevance of the study to our research questions, the extent to which the study focused on Colombia or was more global in nature, whether the study had been published in 2008 or later, and whether the study included original research. To validate our priority list of studies, we shared our results with a non-U.S. government expert who had studied counternarcotics efforts in Colombia to see if there were further studies that we should include. We added one additional study based upon his review. In total, we selected 23 studies to include in our literature review and to analyze in greater depth for this report. Within our literature review, we identified a relatively small number of authors that had conducted research relevant to our work, in particular, studies related to interdiction efforts in Colombia. As a result, there are several authors who have more than 1 study included within the list of 23 studies we selected. For each of the 23 studies we selected, we completed a data collection instrument to, among other things, identify the study’s key findings and recommendations and to make a high-level assessment that the study was of sufficient quality to include in our review. We ensured that our selection included studies issued or published in 2008 or later. During our review, we noted that several studies analyzed data from slightly earlier time periods. In addition, we noted that some studies analyzed data for particular regions or settings within Colombia. While this does not affect the quality of the studies, it does raise the possibility that their findings might not fully apply to the current situation in Colombia. As part of our work, we also conducted interviews with a nongeneralizable sample of three non-U.S. government experts to gather further information regarding what is known about the effectiveness of U.S. counternarcotics programs. In selecting these experts, we sought to choose people with different types of experiences studying and working on counternarcotics efforts in Colombia, in order to get a range of perspectives about these efforts. We conducted this performance audit from September 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This bibliography contains citations for the 23 studies we reviewed regarding the effectiveness of Colombian counternarcotics efforts. Beltrán, S. “La Institucionalidad Rural en Colombia: Reflexiones para Su Análisis y Fortalecimiento.” Mundo Agrario, vol. 17, no. 53 (2016). Camacho, A., and D. Mejía. “The Health Consequences of Aerial Spraying Illicit Crops: The Case of Colombia.” Journal of Health Economics, vol. 54 (2017): 147-160. Ceron, C., I. De los Rios-Carmenado, and S. Fernández. “Illicit Crops Substitution and Rural Prosperity in Armed Conflict Areas: A Conceptual Proposal Based on the Working With People Model in Colombia.” Land Use Policy, vol. 72 (2018): 201-2014. Davalos, E. “New Answers to an Old Problem: Social Investment and Coca Crops in Colombia.” International Journal of Drug Policy, vol. 31 (2016): 121-130. Fisher, D., and A. Meitus. “Uprooting or Sowing Violence?: Coca Eradication and Guerrilla Violence in Colombia.” Studies in Conflict & Terrorism, vol. 40, no. 9 (2017): 790-807. Ibanez, M., and F. Carlsson. “A Survey-Based Choice Experiment on Coca Cultivation.” Journal of Development Economics, vol. 93 (2010): 249-263. Ibanez, M., and S. Klasen. “Is the War on Drugs Working? Examining the Colombian Case Using Micro Data.” The Journal of Development Studies, vol. 53, no. 10 (2017): 1650-1662. Ince, M., “Filling the FARC-Shaped Void.” The RUSI Journal, vol. 158, no. 5 (2013): 26-34. Jonsson, M., E. Brennan, and C. O’Hara. “Financing War or Facilitating Peace? The Impact of Rebel Drug Trafficking on Peace Negotiations in Colombia and Myanmar.” Studies in Conflict & Terrorism, vol. 39, no. 6 (2016): 542-559. López, L., J. Castro, and A. España. “Los Efectos Globo en los Cultivos de Coca en la Región Andina (1990-2009).” Apuntes del CENES, vol. 35, no. 61 (2016): 207-236. McDermott, J., “La Nueva Generación de Narcotraficantes Colombianos post-FARC: ‘Los Invisibles’.” InSight Crime (2018). Mejía, D., “Plan Colombia: An Analysis of Effectiveness and Costs.” The Brookings Institution (2015). Mejía, D., and P. Restrepo. “The Economics of the War on Illegal Drug Production and Trafficking.” Journal of Economic Behavior and Organization, vol. 126 (2016): 255-275. Mejía, D., P. Restrepo, and S. Rozo. “On the Effects of Enforcement on Illegal Markets: Evidence from a Quasi-experiment in Colombia.” World Bank Group (2015). Muñoz-Mora, J.C., S. Tobón, and J. d’Anjou. “The Role of Land Property Rights in the War on Illicit Crops: Evidence from Colombia.” World Development, vol. 103 (2018): 268-283. Quintero, S., and I. Posada. “Estrategias Políticas para el Tratamiento de las Drogas Ilegales en Colombia.” Revista Facultad Nacional de Salud Pública, vol. 31, no. 3 (2013): 373-380. Reyes, L., “Estimating the Causal Effect of Forced Eradication on Coca Cultivation in Colombian Municipalities.” World Development, vol. 61 (2014): 70-84. Rincón-Ruiz, A., H. Correa, D. Léon, and S. Williams. “Coca Cultivation and Crop Eradication in Colombia: The Challenges of Integrating Rural Reality into Effective Anti-Drug Policy.” International Journal of Drug Policy, vol. 33 (2016): 56-65. Rincón-Ruiz, A., U. Pascual, and S. Flantua. “Examining Spatially Varying Relationships between Coca Crops and Associated Factors in Colombia, Using Geographically Weight Regression.” Applied Geography, vol. 37 (2013): 23-33. Sánchez, M., “Cultivos Ilícitos y Confianza Institucional en Colombia.” Politica y Gobierno, vol. 21, no. 1 (2014): 95-126. Sandoval, L., A. Lopez, and C. Cárdenas. “Determinantes y Caracteristicas de la Oferta de Cocaina en Colombia (1989–2006).” Revista Facultad de Ciencias Económicas: Investigación y Reflexión, vol. 17, no. 2 (2009): 199-208. Seatzu, F., “‘If Ya Wanna End War and Stuff, You Gotta Sing Loud’—A Survey of the Provisional Agreement between FARC and Colombia on Illicit Drugs.” Araucaria. Revista Iberoamericana de Filosofia, Política y Humanidades y Humanidades, vol. 18, no. 36 (2016): 373-389. Thoumi, F., “Políticas Antidrogas y La Necesidad de Enfrentar las Vulnerabilidades de Colombia.” Análisis Politico, no. 67 (2009): 60-82. In addition to the contact named above, Juan Gobel (Assistant Director), Ryan Vaughan (Analyst-in-Charge), Owen Starlin, Pedro Almoguera, Martin De Alteriis, Leia Dickerson, Neil Doherty, Mark Dowling, Dawn Locke, and Aldo Salerno made key contributions to this report.", "summary": "Colombia is the world's leading producer of cocaine, with production levels more than tripling from 2013 through 2017 (see figure). The U.S. and Colombian governments have been longstanding partners in the fight against drug trafficking. Since the launch of Plan Colombia in 1999, the U.S. government has invested over $10 billion in counternarcotics efforts in Colombia. This assistance has supported a range of eradication, interdiction, and alternative development programs. GAO was asked to review U.S. counternarcotics assistance to Colombia. This report examines (1) to what extent the U.S. government has assessed the effectiveness of its counternarcotics efforts in Colombia and (2) what is known about the effectiveness of U.S.-supported eradication, interdiction, and alternative development programs in Colombia. GAO reviewed data and documentation from U.S. agencies, performed a literature review of relevant research on counternarcotics efforts in Colombia, conducted fieldwork in Colombia, and interviewed U.S. and Colombian officials. U.S. agencies that provide counternarcotics assistance to Colombia conduct performance monitoring of their activities, such as by tracking the hectares of coca fields eradicated and the amount of cocaine seized, but have not consistently evaluated the effectiveness of their activities in reducing the cocaine supply. The U.S. Agency for International Development (USAID) has evaluated some of its alternative development programs, but the Department of State (State), which has lead responsibility for U.S. counternarcotics efforts, has not evaluated the effectiveness of its eradication and interdiction activities, as called for by its evaluation policies. Additionally, State has not conducted a comprehensive review of the U.S. counternarcotics approach, which relies on a combination of eradication, interdiction, and alternative development. Without information about the relative benefits and limitations of these activities, the U.S. government lacks key information to determine the most effective combination of counternarcotics activities. GAO's review of U.S. agency performance monitoring data and third-party research offers some information about the relative effectiveness of eradication, interdiction, and alternative development activities. For example, available evidence indicates that U.S.-supported eradication efforts in Colombia may not be an effective long-term approach to reduce the cocaine supply, due in part to coca growers responding to eradication by moving coca crops to national parks and other areas off limits to eradication. Agency data show that U.S.-supported interdiction efforts in Colombia seized hundreds of tons of cocaine and arrested thousands of drug traffickers, yet the net cocaine supply has increased and third-party studies have mixed findings on the long-term effectiveness of interdiction efforts. USAID evaluations indicate that alternative development programs in Colombia have provided legal economic opportunities to some rural populations previously involved in illicit crop production. However, USAID as well as third-party research suggests that alternative development requires significant and sustained investment and some programs have had design and sustainability challenges. GAO recommends that State, in consultation with relevant agencies, (1) evaluate the effectiveness of eradication and interdiction in reducing the cocaine supply in Colombia and (2) undertake a comprehensive review of the U.S. counternarcotics approach in Colombia that considers the relative benefits and limitations between eradication, interdiction, and alternative development efforts. State generally concurred with the recommendations.", "document_type": "gao"}
{"report": "The MHS has a dual mission of maintaining the skills of the medical force and providing health care and beneficiary medical care in its MTFs in the United States and overseas. It accomplishes this in part by providing (1) operational medical care via deployable health care platforms in an operational environment, such as forward surgical teams and combat support hospitals, and (2) beneficiary medical care in its MTFs in the United States and around the world. DOD’s total workforce supporting this dual mission comprises three main components: military personnel (including active and reserve personnel), federal civilian personnel, and private sector contractor personnel. Active duty medical personnel simultaneously support operational medical care and the delivery of beneficiary health care to patients across the globe. Reserve component medical personnel generally provide health care to deployed military personnel, but may also provide personnel to support MTFs when active duty personnel are deployed or otherwise unavailable. Federal civilians and contractors generally provide beneficiary care within MTFs. Figure 1 shows the number of the active and reserve components of the military, federal civilians, and estimated contractor full-time equivalents (FTEs) that comprised DOD’s total medical workforce in fiscal year 2017. DOD has established four levels of operational medical care provided to servicemembers and other eligible persons. The levels of care extend from the forward edge of the battle area to the United States, with each level providing progressively more intensive treatment. Level 4 care facilities are MTFs that also provide beneficiary medical care. In addition to the four levels of medical care, en-route care to transport patients is also provided via casualty evacuation, medical evacuation, and/or aeromedical evacuation from the point of patient injury, illness, or wounding. Figure 2 illustrates the different levels of care. The four levels of care are: Level 1—First responder care. This level provides immediate medical care and stabilization in preparation for evacuation to the next level, and treatment of common acute minor illnesses. Care can be provided by the wounded soldiers, medics or corpsmen, or battalion aid stations. Level 2—Forward resuscitative care. This level provides advanced emergency medical treatment as close to the point of injury as possible to attain stabilization of the patient. In addition, it can provide postsurgical inpatient services, such as critical care nursing and temporary holding. Examples of level 2 units include forward surgical teams, shock trauma platoons, area support medical companies, and combat stress control units. Level 3—Theater hospital care. This level provides the most advanced medical care available in Iraq and Afghanistan. Level 3 facilities provide significant preventative and curative health care. Examples include Army combat support hospitals, Air Force theater hospitals, and Navy expeditionary medical facilities. Level 4—U.S. and overseas definitive care. This level provides the full range of preventative, curative, acute, convalescent, restorative and rehabilitative care. Examples of level 4 facilities include MTFs such as Brooke Army Medical Center at Joint Base San Antonio, Texas and Naval Medical Center Portsmouth at Portsmouth, Virginia. DOD’s MHS workforce provides beneficiary medical care to 9.4 million eligible individuals, including active duty personnel and their dependents (i.e., spouse, children), medically eligible Reserve and National Guard personnel and their dependents, and retirees and their dependents and survivors. Located in the United States and around the world and ranging from small clinics to major hospitals, these facilities serve as training platforms for active duty medical personnel to maintain their skills and play a key role in the military departments’ Graduate Medical Education programs for training medical professionals. In addition to the direct provision of health care in its own hospitals and clinics, DOD maintains its TRICARE purchased care system that is used to augment the direct care system when needed. Through regional contracts, TRICARE administers the purchased care system, which comprises a civilian network of hospitals and providers. Retirees who qualify for care under Department of Veterans Affairs’ rules may also be eligible to receive health care within the Veterans Health Administration system of hospitals and clinics. DOD’s management of its workforce is governed by several workforce management statutes of title 10 of the United States Code, including: Section 129a directs the Secretary of Defense to establish policies and procedures for determining the most appropriate and cost- efficient mix of military, civilian, and contracted services to perform the mission of the department. Section 2463 directs the Under Secretary of Defense for Personnel and Readiness to devise and implement guidelines and procedures to ensure that consideration is given to using, on a regular basis, DOD civilian employees to perform new functions and functions performed by contractors that could be performed by DOD civilian employees. Section 2461 directs that no DOD function performed by civilian employees may be converted, in whole or in part, to performance by a contractor unless the conversion is based on the results of a public– private competition that formally compares the cost of performance by civilian employees with the cost of contractors, among other considerations. There is currently a government-wide moratorium on performing such public-private competitions. DOD’s total workforce management policy generally emphasizes the need for agencies to utilize the least costly mix of personnel while ensuring the workforce is sufficiently sized, and comprised of the appropriate mix of personnel to carry out the mission of DOD. The departments use DOD guidance to assess the use of military, federal civilian, and contractor personnel, which includes the consideration of two key factors: (1) the risk to the military mission, and (2) the cost of the workforce. To help assess risk, the departments determine what work should be performed by military, federal civilian, or contractor personnel. For example, work that is inherently governmental must be performed only by military or civilian personnel, while work that is commercial in nature could be performed by any personnel type. To make this determination, DOD Instruction 1100.22 directs components to: use the manpower mix criteria outlined in the instruction to identify inherently governmental and commercial activities; and review the annual inventory of commercial and inherently governmental activities. In addition, DOD and the departments have established policies and procedures to assess the costs and benefits of different workforce mix options. DOD Instruction 1100.22 directs components to conduct a cost comparison of personnel when considering outsourcing new requirements that are not required to be performed by government personnel, or when considering in-sourcing functions that are currently performed by private sector contractors. Several officials have responsibility for governing DOD’s management of its total workforce, including The Under Secretary of Defense for Personnel and Readiness (USD(P&R)). This official has overall responsibility for issuing guidance on total workforce management to be used by the DOD components, providing guidance on manpower levels of the components, and developing manpower mix criteria and other information to be used by the components to determine their workforce mix. The Under Secretary of Defense (Comptroller). This official is responsible for ensuring that the budget for DOD is consistent with the total workforce management policies and procedures. The Secretaries of the military departments and heads of the defense agencies. These officials have overall responsibility for the requirements determination, planning, programming, and budgeting execution for total workforce management policies and procedures, as well as having numerous responsibilities related to total workforce management as detailed in DOD guidance. The Assistant Secretary of Defense for Health Affairs (ASD(HA)). This official serves as the principal advisor for all DOD health related policies, programs, and activities. The ASD(HA) has the authority to: develop policies, conduct analyses, provide advice, and make recommendations to the USD(P&R), the Secretary of Defense, and others; issue guidance; and provide oversight to the DOD Components on matters pertaining to the MHS. Further, the ASD(HA) prepares and submits a DOD unified medical program budget which includes, among other things, the defense health program budget to provide resources for the DOD MHS. The Director of the Defense Health Agency (DHA). This official, among other things, manages the execution of policies issued by the ASD(HA) and manages and executes the Defense Health Program appropriation, which partially funds the MHS. The National Defense Authorization Act for Fiscal Year 2017 directed the transfer of administrative responsibility for MTFs from the military departments to the DHA. Specifically, the Director of the DHA shall be responsible for the administration of each MTF, including budgetary matters, information technology, health care administration and management, administrative policy and procedure, military medical construction, and any other matters the Secretary of Defense determines appropriate. Since 2016, DHA’s responsibilities in the administration of MTFs have been further articulated in DOD memoranda and in statute. In 2018, DOD directed that the DHA shall be responsible for: (1) the planning, programming, budgeting, and execution processes for the MTFs; (2) clinical and health delivery services in each MTF; and (3) for these services, the hiring and management of federal civilians and contract staffing. Further, in 2018, Congress amended the law to specify that at each MTF, the Director of the DHA has the authority to determine total workforce requirements, direct joint manning, and address personnel staffing shortages, among other things. Also in December 2016, Congress enacted legislation that allows the prohibition of converting military medical and dental positions to federal civilian positions, which had been in place since 2008, to be lifted. This change is contingent upon DOD satisfying a reporting requirement on the size and composition of its operational medical force. Specifically, Congress directed DOD to report on the process established to define the military medical and dental requirements necessary to meet operational medical force readiness requirements, and provide a list of those military medical and dental requirements. The military departments each have their own process to determine their operational medical personnel requirements. After determining the number of medical personnel needed to support operational needs, the military departments generally consider only military personnel when conducting their planning processes to meet these requirements, and have not formally assessed the extent to which federal civilians and contractor personnel could be utilized. Further, the departments do not generally consider the full cost of active and reserve component medical personnel when determining their balance of active and reserve component medical personnel, and they have not developed such information to use in their assessment of active and reserve balance. Each military department has its own process to plan for operational medical personnel requirements. The departments’ operational medical personnel requirements are based on their analysis of DOD’s Defense Planning Guidance and Defense Planning Scenarios. Specifically, possible casualty streams are estimated based on the scenarios, and the required medical support is determined in conjunction with department- specific medical planning factors, such as rotation policy, the population at risk, and evacuation policy, among others. Each military department incorporates these factors to estimate the number of medical personnel needed. The Army integrates medical planning into its general process for estimating all operational requirements, whereas the Navy and Air Force have separate, medical-specific processes. The following represents an overview of each military department’s approach: Army. The Army uses its Total Army Analysis model to determine the number and type of support units across the Army, including medical forces, which will be needed to support the Army’s combat forces in operational settings. Navy. The Navy uses a medical-specific model, called the Medical Manpower All Corps Requirements Estimator, to estimate its total medical personnel readiness requirements. The Navy readiness mission is to support all Navy and Marine Corps operational missions, including operational operations (such as hospital ships and expeditionary medical facilities) and day-to-day operations (such as ships, submarines, and Special Forces). Air Force. The Air Force uses a medical-specific sizing model named the Critical Operational Readiness Requirements tool to project its minimum military personnel requirements. This tool identifies the number of military medical personnel needed to meet requirements, including requirements for en-route casualty support, theater hospitals, and critical care air transport teams. According to military department officials, the decision to apportion medical personnel requirements among the active and reserve components is based on an assessment of risk across a range of factors. In a 2013 DOD report issued in response to section 1080A of the National Defense Authorization Act for Fiscal Year 2012. DOD noted that there are several important factors in active component and reserve component mix decisions, including, among others, the timing, duration, and skills required for anticipated missions. Moreover, the report notes that active components are best suited for unpredictable and frequent deployments, dealing with complex operational environments, and unexpected contingencies and the reserve components are best suited for predictable and infrequent deployments. As noted in the report, active component personnel typically mobilize and deploy to theater the fastest. The sum of these considerations results in a different mix of active and reserve component medical personnel within each military department. Specifically, reserve personnel (as a percentage of the total workforce) varied by military department in fiscal year 2017, with reservists representing 41 percent of medical personnel of the Army, 17 percent of the Navy, and 34 percent of the Air Force, as shown in figure 3. The military departments have not assessed the extent to which federal civilians and contractor personnel can be used to meet identified operational medical personnel requirements. Specifically, after the military departments have determined their operational medical personnel requirements, they generally have designated all such positions as “military-essential” (i.e., the activity must be performed by a military servicemember) and have not formally assessed the extent to which civilians or contractors could be utilized to fill these positions, according to officials. Army, Navy, and Air Force officials stated that they have historically relied on active and reserve component military personnel when planning for operational medical requirements, with a few exceptions. For example, according to Navy officials, the few federal civilians that are planned to fill operational medical requirements are technical representatives who do not travel on ships for extended periods of time. In interviews, military department officials cited key reasons for not incorporating federal civilians and contractors into their planning for operational medical care. Specifically, officials said they did not believe that federal civilians or contractors were viable workforce alternatives to military servicemembers for operational medical care roles and functions due to the unique nature of such assignments (e.g. providing medical care in a deployed setting). Moreover, officials noted that federal civilians and contractors supporting operational medical requirements are generally considered to be a temporary solution. Officials also expressed concern regarding their military department’s ability to identify and recruit federal civilians and contractors for such positions. Officials stated that while there is currently no guidance outlining the potential role of federal civilians and contractors providing medical care in operational settings, they noted that DOD workforce mix guidance includes a provision that highlights the military-essential nature of medical personnel embedded in non-medical units engaged in hostile action. However, this instruction does not otherwise address the role of federal civilians and contractors in providing medical care, including whether they can serve in medical- specific operational platforms, such as combat support hospitals providing level 3 care. To ensure that its federal civilian employees will deploy to combat zones and perform operational roles such as critical combat support functions in theater, DOD established the emergency-essential civilian program in 1985. Under this program, DOD designates as “emergency-essential” those federal civilian employees whose positions are required to ensure the success of combat operations or the availability of combat-essential systems. DOD’s emergency-essential workforce is now governed under the Expeditionary Civilian Workforce program. DOD can deploy emergency-essential federal civilian employees either on a voluntary or involuntary basis to accomplish the DOD mission. In certain DOD functional communities, federal civilians and contractors play a critical role in combat support roles. For example, as we previously reported, DOD relies on the federal civilian personnel it deploys to support a range of essential missions, including logistics support and maintenance, intelligence collection, criminal investigations, and weapons system acquisition and maintenance. Further, as we have previously reported, DOD has long used contractors to provide supplies and services to deployed forces. Since the early 1990s, much of this support has come from logistics support contracts—contracts that are awarded prior to the beginning of contingencies and are available to support the troops as needed. Although they are generally not a part of the military departments’ planning processes, and there is no guidance dedicated to delineating the role of federal civilians and contractors in providing care in deployed operational settings according to officials, these personnel have deployed within the past 5 years. Based on our analysis of DOD federal civilian deployment data—for fiscal years 2013 through 2017—about 120 DOD federal civilians, including nurses, physicians, and technicians, were deployed to provide medical services. U.S. Central Command officials stated that they have used federal civilians minimally, and U.S. Africa Command officials stated they have not used federal civilians. In addition, based on our analysis of DOD contractor deployment data for deployments from fiscal years 2013 through 2017, there were more than 1,900 deployed contractors providing medical services. U.S. Central Command officials told us that they have not used contractors to provide care to military personnel. Officials noted that the deployed contractors were not contracted by DOD for purposes of providing medical care and instead provided medical care to other contractors as they were part of a larger contract for other services, such as security services or logistics support. U.S. Africa Command officials told us that they have used contractors to provide medical care to support casualty evacuation and personnel recovery requirements, which includes providing medical care to military personnel and other eligible persons. Officials with the Joint Staff Surgeon’s Office and the Surgeon’s offices at U.S. Central Command and U.S. Africa Command agreed with the possibility of using federal civilians and contractors for certain operational medical personnel requirements. Specifically, officials stated that federal civilians and contractors likely represent an acceptable workforce alternative if they are medically ready to deploy and appropriately trained for the unique environment at a fixed facility in theater, such as a level 3 fixed expeditionary medical facility or theater hospital. While agreeing that the use of federal civilians and contractors for certain operational medical personnel requirements may be acceptable, officials also expressed concerns with this approach. A senior official with the U.S. Central Command Surgeon’s office noted concerns regarding the pre- deployment training provided to contractors. Specifically, the official stressed the importance of such training to operating effectively in the unique operational environment of a deployed medical team and that such training is only required to be completed by military personnel and DOD expeditionary civilians. U.S. Africa Command officials expressed concerns regarding challenges in obtaining clinical privileging rights (i.e., the right for a physician to perform specific health care services) for contractors supporting small teams in an operational setting. Further, OASD(HA) officials noted that a key factor to determining if federal civilians or contractors should be used to provide operational medical care is whether or not using those workforces would achieve any cost savings. Moreover, officials with the Defense Civilian Personnel Advisory Service noted that they have had limited success with using DOD’s Expeditionary Civilian Workforce program for the provision of medical administrative support and medical advising functions. A senior official from the U.S. Central Command Surgeon’s office noted this was due to relatively few qualified federal civilians within the program with medical skills. Defense Civilian Personnel Advisory Service officials noted that the fiscal year 2019 force pool that defines the number and types of federal civilian requirements needed for the program included 7 medical related positions and none of these were for medical care; 1 was administrative and 6 were medical advisors. Defense Civilian Personnel Advisory Service officials stated that the DHA has a responsibility to build 1 or 2 of the medical advisor positions in the force pool into their planning as a continuing requirement, and noted that DHA has made some recent progress with 1 medical advisor scheduled to deploy in fiscal year 2019. While there may be challenges with utilizing federal civilian personnel to fulfill operational medical requirements, DOD also faces challenges with regard to military personnel. In 2018, we reported that DOD has experienced gaps between its military physician authorizations (i.e., funded positions) and end strengths (i.e., number of physicians), and that it did not have targeted and coordinated strategies to address key physician shortages. DOD has issued several documents to guide total workforce and personnel planning. DOD Directive 1100.4 states that authorities should consider all available sources when determining workforce mix, including federal civilians and contractors. Moreover, DOD’s 2017 Workforce Rationalization Plan recognizes DOD’s federal civilians as an essential enabler of its mission capabilities and operational readiness and noted that there are numerous opportunities for the military departments, combatant commands, and others to make well-reasoned adjustments to workforce mix. Further, DOD’s National Defense Business Operations Plan for Fiscal Years 2018 to 2022 states that workforce rationalization strategies include, among other things, reassessing military manpower allocations for military essentiality, determining whether workload requires deployments and whether traditional military performance is necessary, and identifying functions and positions that are commercial in nature that may be appropriately or efficiently delivered via private sector support. Federal civilians and contractors are not incorporated into the military departments’ planning to meet operational medical requirements because DOD has not performed an assessment of the suitability of federal civilian or contractor personnel to provide operational medical care. Such an assessment could assist in developing policy for use by medical planners in determining when, where, and how federal civilians or contractors may serve in operational roles. For example, an assessment may include what level(s) of care would be appropriate for federal civilians and contractors to support, if any, and factors to take into consideration in making such decisions, such as exposure to danger and cost. By conducting such an assessment and incorporating the results into relevant policies, DOD can have greater certainty that it is planning for the most appropriate and cost-effective mix of personnel to meet the mission, and, depending on the outcome of the assessment, more options to meet its operational medical personnel requirements. The military departments’ planning to meet DOD’s operational personnel requirements generally do not consider the full cost of active and reserve component personnel when determining the balance of active and reserve component medical forces. Officials from Army and Navy medical headquarters stated that cost generally does not inform their decisions about the balance of active and reserve personnel. Army officials noted they consider cost of a unit when making tradeoffs within the reserve component; however, cost was not cited by Army officials as a factor when determining between the active and reserve components. Navy officials noted that while it uses certain cost information when preparing the President’s budget submission, cost is not explicitly considered when determining the balance of the active and reserve components. The Air Force is the only military department that has performed an assessment of the cost effectiveness of using active or reserve component medical personnel, although it had some limitations and did not impact the Air Force’s active and reserve component mix decisions. Army, Navy, and Air Force officials cited other key factors which they consider in determining the balance of active and reserve component personnel, such as the availability of forces to deploy quickly, length of time needed in theater, capability needed, and frequency of deployments. Moreover, the military departments have not developed full cost information of medical personnel to use in their assessment of active and reserve balance. Army and Navy officials stated that they do not maintain full cost information on its active component and reserve component medical personnel. Navy provided programming cost for the reserve component but these rates were averages across the reserve component and not specific to medical. The Air Force’s 2016 High Velocity Analysis attempted to assess the cost of active and reserve medical personnel and identify potential efficiencies within its medical workforce. However, this study was limited because it did not include the full cost of active and reserve component medical personnel. Specifically, the Air Force analysis considered only compensation and did not consider other benefits, such as medical education costs, and used average pay for officers and enlisted personnel regardless of the specialty or skill level. However, the full costs for certain medical personnel, such as officers, are generally higher than average military pay, as they are eligible for a significant number of special pays and benefits, such as graduate medical education and training. In fiscal year 2017, DOD obligated $788 million for special pays for active duty medical personnel, representing approximately 24 percent of the $3.3 billion obligated for all special pays across DOD, and $707 million for medical education. While the Air Force had full cost data for active component personnel, according to officials, they did not include it in their analysis because they did not have comparable cost data for the reserve component. Reserve medical personnel, when not mobilized, receive a fraction of what active duty personnel receive, and typically do not encumber significant education and training costs as reserve medical personnel generally are recruited as fully trained medical professionals. We have previously reported that when the reserve forces can successfully meet deployment and operational requirements, individual reserve-component units are generally less costly than similar active- component units. However, the full cost of medical personnel can vary based on a number of factors. Specifically, more than one reserve- component unit may be needed to achieve the same output as a single active-component unit. For example, the Army has a policy that states reserve-component physicians, dentists, and nurse anesthetists shall not be deployed for longer than 90 days. Thus, the Army would need to deploy four different reserve component physicians for successive 90-day rotations to fill a single 1-year active component requirement. Therefore, in some cases, using reserve units to achieve the same operational capacity over time may be more costly than using active units. However, the lack of full cost information on active and reserve component medical personnel is a barrier to an analytical-based determination on the balance between active and reserve component medical personnel. In 2013, we reported limitations with the DOD-wide software tool developed by Cost Assessment and Program Evaluation—the Full Cost of Manpower—which, among other things, is used to identify the full cost of active duty military personnel. Specifically, we reported that this tool has certain limitations for determining cost for certain cost elements. For example, instead of determining training cost by specialty, it estimates such costs by dividing total funding for such cost estimates by the number of military personnel. We recommended, among other things, that DOD, in order to improve its estimates and comparisons of the full cost of its workforces, develop guidance for cost elements that users have identified as challenging to calculate, such as general and administrative, overhead, advertising and recruiting, and training. DOD partially concurred with this recommendation but has not implemented this recommendation. We continue to believe that developing such costs is needed, especially for the medical community since training and education costs can be higher than in other communities. Moreover, in that report we also found that DOD did not include Reserve and National Guard personnel in their methodology for estimating and comparing the full cost to the taxpayer of work performed. We recommended DOD, among other things, develop business rules for estimating the full cost of National Guard and Reserve personnel. DOD partially concurred with this recommendation but has not implemented the recommendation and noted that a cost estimating function for reserve component personnel would be more complex than for active component and DOD federal civilian cost estimates. While we agree that developing cost estimates for the reserve component could be more complex, we continue to believe it is advisable for DOD to implement our recommendation. In a 2013 DOD report, DOD identified the cost of unit manning, training, and equipping as one of five factors that play a key role in decisions concerning the mix of active and reserve component forces. According to the report, cost is often outweighed by other factors when making active component and reserve component mix decisions, but should always be considered in active component and reserve component mix decisions. Further, DOD policy states that workforce decisions must be made with an awareness of the full costs of personnel to DOD and more broadly to the federal government, and highlights that the full cost of active duty personnel extends beyond cash compensation, and also includes other costs such as education and training. The military departments do not assess the full cost of personnel when determining the balance of active and reserve component medical forces because there is no DOD requirement to do so. Although DOD guidance states that cost is one of several factors that should be considered in active and reserve component balance decisions, the military departments have not conducted assessments of the full cost of active and reserve component personnel to inform their decisionmaking. Further, DOD and the military departments are unable to conduct any such assessments because they have not developed full cost information for active and reserve component medical personnel. Without developing full cost information for active and reserve component medical personnel and using that information in its determinations regarding the correct balance of such personnel, decision makers will not have complete information to make cost-effective choices about the balance of active and reserve component medical personnel. The military departments have taken actions, such as establishing policies and procedures, to aid the execution of the appropriate workforce mix for providing beneficiary health care within MTFs. However, the military departments face challenges in executing their plans in several areas, including lengthy hiring and contracting processes and uncompetitive salaries and compensation. Further, the transfer of administrative responsibility for MTFs from the military departments to the DHA may present challenges to the management of the military medical personnel. The military departments manage the workforce within their MTFs by using various policies and procedures to determine their workforce needs and help assess the risks, costs, and benefits of using military, federal civilian, and contractor personnel to carry out their missions. Currently, each military department is responsible for determining its MTF personnel requirements: that is, the number of personnel needed to operate its MTFs based on predicted demand for health care from their military and beneficiary populations. To determine MTF personnel requirements, the military departments use their respective suite of manpower models or standards based on a number of factors, including historical medical workload information and the size of population eligible for care. According to Army and Navy medical command officials, the Army and Navy suites of models respectively include at least 36 and 46 medical specialties, and generally express historical medical workload in relative value units, a metric of the level of professional time, skill, training and intensity to provide a given clinical service. In contrast, according to Air Force medical agency officials, the Air Force suite of standards includes 11 medical specialties and expresses workload in patient encounters. According to military department officials, when considering how to meet their MTF personnel requirements given available resources, the number of military personnel is fixed and must be preserved since the operational medical personnel requirements support the readiness mission. The military departments therefore prioritize the distribution of military personnel across MTFs, and then consider how to fill the remaining authorizations with federal civilian personnel or by contracting medical services as appropriate. To make these decisions, the military departments utilize DOD workforce guidance, which requires a balance of risk and cost, but states that risk mitigation shall take precedence over cost-related concerns when necessary. DOD total workforce policies and procedures are outlined in: (1) DOD Directive 1100.4, which establishes guidance for total workforce management; and (2) DOD Instruction 1100.22, which outlines policies and procedures for determining the appropriate mix of personnel. In 2018, we reported that a DOD study found that the cost of federal civilian and contractor full-time equivalents varied by organization, location, and function being performed. According to Army, Navy, and Air Force officials, any changes to funded positions are made through formal processes and require an evaluation of the cost of the personnel options and the approval of the military departments’ respective medical commands or agencies. The military departments’ collective decisions determine their workforce mix. Figure 4 shows the number and percentage of each personnel type that provided or supported care in DOD-owned and operated MTFs for fiscal year 2017, in the United States and overseas. The military departments face challenges to implementing their workforce mix of military, federal civilian, and contractor personnel. Our review, including interviews with military department officials responsible for medical personnel management and with the senior leadership of six MTFs, highlighted, as discussed below, the following distinct challenges: (1) the length of federal civilian hiring and contracting process, (2) uncompetitive federal civilian salaries and contractor compensation, and (3) FTE targets and hiring freezes. Federal civilian hiring process. Senior officials at each of the six MTFs we spoke with stated the federal civilian hiring process, including its length and restrictions imposed by statute or policy, impedes their ability to hire desirable federal civilian candidates. Officials primarily attributed delays to the extended time for human resources offices to post a position and to process and refer applicants for interviews. For federal civilian personnel in DOD medical locations in fiscal year 2018, DOD officials reported an average hiring time of: 121 days for the Army, 157 days for the Navy, and 134 days for the Air Force. Legal restrictions can also extend the hiring process and hinder hiring desirable federal civilian candidates. For example, senior officials at five of six MTFs cited a statute requiring a 180-day waiting period before retired military personnel can be hired as DOD federal civilians and noted valuable candidates with military-specific subject matter expertise will instead seek employment in the private sector. Senior officials from one Air Force MTF stated they successfully submitted waivers to bypass the 180-day waiting period, but senior officials from one Army and one Navy MTF stated that the waiver process often takes as long as the waiting period. Senior officials from each of the six MTFs stated that hiring authorities, such as direct or expedited hiring authority, can help address challenges, but officials at four of six MTFs also expressed concerns about the adequacy of such flexibilities. Direct-hire authority allows agencies to fill occupations that have a severe candidate shortage or a critical hiring need, and is meant to expedite hiring. DOD designated a number of health care occupations as shortage category positions or critical need occupations in accordance with this expedited hiring authority. In 2017, DOD reported that it used expedited hiring authority in approximately 30 percent of hiring actions for its medical employees. Officials from one Navy MTF stated they have direct hiring authority, but their human resources office extends the process by requiring that the position be announced within the last 90 days, or else be re-announced, before they can utilize it. Army officials from one MTF stated interest in expanding the list of medical specialties granted direct hiring authority. Air Force officials from one MTF stated direct hire authority can help obtain qualified candidates, but does not necessarily shorten the hiring process. Challenges in the federal hiring process are a longstanding issue. In 2003, we reported on the need to improve executive agencies’ hiring process, with the majority of federal agencies included in our review reporting that it takes too long to hire quality employees. Our 2016 review of the extent to which federal hiring authorities were meeting agency needs found that the Office of Personnel Management (OPM) and other agencies do not know if the authorities are meeting their intended purposes. In 2018, we reported that DOD’s review of selected sites, including two MTFs, found: varying use of hiring authorities, management unfamiliarity with all available authorities, and a belief among managers that expanded use of some authorities is needed to produce more quality hires. Finally, our 2018 review of DOD laboratories’ use of hiring authorities found that officials used hiring authorities, but identified challenges such as delays in processing the personnel action and the overall length of the hiring process. Contracting process. Senior officials at five of six MTFs stated there are challenges in obtaining contractor services, including the process time before personnel are available to perform work and restrictions imposed by statute. Senior officials from two Air Force MTFs stated that after the contract is awarded, contractors may have up to 60 days to present a candidate; officials from one MTF stated if the MTF rejects the candidate, then the vendor has another 30 to 60 days to find a candidate. According to officials at one Air Force MTF, at times they have to consider whether to accept a subpar candidate or leave a position vacant. Further, senior Air Force officials stated that controls on contract spending limit their flexibility in hiring. To help fill temporary contract positions, which are less attractive to candidates, officials stated the Air Force pays higher rates to the vendor that include the salaries of the personnel and vendor’s overhead costs. In 2018, we reported that DOD’s negotiated price of a contract includes direct costs, such as labor and non-labor costs, and indirect costs, such as overhead, and service contractor profit. Senior officials from the two Army MTFs stated that the moratorium on public- private competitions is a challenge because they cannot outsource federal civilian functions to contracted services when there are shortages of military or federal civilian personnel, even when it is the optimal choice. For example, according to officials, contractors cannot perform the functions of a civilian position when a civilian position is vacated. Federal civilian employee salaries. Senior officials at each of the six MTFs stated it is a challenge to fill federal civilian medical positions because of lower salaries compared to the private sector. In 2017, DOD reported difficulty hiring and retaining health care workers due to competition from the private sector, among other things. We have previously reported challenges related to the ability to provide competitive salaries for some DOD health care providers. Specifically, in 2015 we reported that officials from all three military departments stated their inability to create compensation packages for federal civilian mental health providers to compete with the private sector affected their recruiting and retention of providers. In 2018, we noted similar concerns in recruiting military physicians. Senior officials from each of the six MTFs we spoke with stated that the ability to utilize hiring flexibilities, such as special salary rates, helps mitigate this challenge, but at four of six MTFs also expressed concerns about their adequacy. To provide higher pay for some occupations, OPM may establish a higher salary rate for an occupation or group of occupations in one or more geographic areas to address existing or likely significant handicaps in recruiting or retaining well-qualified employees. Senior officials from four of six MTFs stated special salary rates are helpful but not sufficient. Officials at one Navy MTF noted that two primary care providers left within the last year for better pay in the private sector, negatively affecting access to care. Officials at one Army MTF noted that the application for special salary rates can take 2 years or more, and therefore may not address short-term hiring needs. Further, officials from one Navy MTF stated they continue to face difficulty hiring for positions allowed special salary rates, such as pharmacist and registered nurse positions. Our 2017 review of federal agency use of special payment authorities approved by OPM—such as special salary rates—found that agencies reported that access to authorities had positive effects—such as on staff retention and applicant quality—but had few documented effectiveness assessments. DOD is also authorized to offer DOD health care personnel a number of salary rates established for Veterans Health Administration (VHA) personnel. For example, DOD established a civilian physicians and dentists pay plan using this authority. However, officials stated concerns about the rates’ usefulness. Senior officials from one Air Force hospital noted that although the VHA salary levels are higher than the General Schedule levels that DOD typically offers, they may not be competitive with the private sector. Moreover, senior officials from one Army MTF expressed an interest in accessing VHA salary rates for additional occupations because Army personnel often leave to work at a nearby Veterans Affairs hospital for higher pay. In 2017, we reported on VHA physician recruitment and retention strategies and officials from the six VA medical centers in our review stated that physician salaries were often below those offered by local private sector, academic, and some state government employers. Contractor compensation. Senior officials from five of six MTFs stated private sector contractor vendors face the same challenges as the government regarding uncompetitive salaries. As a result, some contracts have low fill rates or go unfilled. For example, senior officials at one Navy MTF said one of its vendors has not been able to fill a clinical pharmacy position for more than a year. Additionally, senior officials at the other Navy MTF we spoke with stated that a vendor was not meeting its local needs because the fill rate at their MTF is lower than the average fill rate across all Navy MTFs, which is what the vendor is required to meet. Further, senior officials at two of six MTFs—one Navy and one Air Force—stated some of their vendors have attempted to fill positions by sending multiple providers on a part-time basis to fill the equivalent of one full-time position; they noted the part-time assignments are undesirable and can affect the quality of care. Federal civilian FTE targets. Headquarters officials from each of the military departments stated that federal civilian FTE targets are a barrier to effective workforce mix management because they reduce flexibility in utilizing the most efficient personnel type to accomplish the beneficiary mission of the MHS. From fiscal years 2012 to 2017, OSD guidance directed the military departments to manage to a federal civilian FTE target. These targets were intended to prevent an increase in the size of the federal civilian workforce, even when federal civilians’ performance of work is most cost-effective. For example, Air Force headquarters officials stated that due to the federal civilian FTE target, they generally default to hiring contractor personnel when new personnel needs arise. Further, Air Force headquarters officials stated they have not pursued in-sourcing of some contracted functions even though such actions might result in cost savings. The federal civilian FTE targets had varying effects on the operations of the six MTF’s we spoke with. Senior officials at two of six MTFs—one Navy and one Air Force—stated that they have not been adversely affected by the federal civilian FTE targets because the relatively high number of vacancies in their funded federal civilian positions means that they never exceed their target. Conversely, officials at one Air Force MTF stated they have considered hiring additional private sector contractor services when they reach their allowed federal civilian FTEs. During the course of our review, DOD issued its National Defense Business Operations Plan for Fiscal Years 2018 to 2022, which states that it would discontinue the use of federal civilian FTE targets because they acted as artificial and arbitrary constraints on the workforce, and encouraged the military departments to utilize hiring flexibilities to identify the most appropriate and economical personnel type to achieve their mission. In 2002 we reported that federal hiring policies should, among other things, avoid arbitrary full-time equivalent or other arbitrary numerical goals. Federal civilian hiring freezes. Senior officials at five of six MTFs stated that federal civilian hiring freezes adversely affect MTF operations. As part of planning for sequestration in fiscal year 2013, DOD imposed hiring freezes on federal civilian personnel. Further, there was a federal civilian hiring freeze from January 2017 to April 2017. Senior officials from three of six MTFs reported that hiring freezes lower morale and elongate the already lengthy hiring process, even when they are granted waivers to continue to hire. Further, senior officials from one Army MTF stated hiring freezes limit their ability to shape their workforce, and often result in higher costs when they increase the size of their contracted workforce in accordance with their needs. We reported in 2018 that defense laboratory officials we surveyed identified government-wide hiring freezes as a challenge to hiring candidates, stating that candidates accepted other offers due to delays created by the freeze and that hiring efforts continue to be adversely affected even after a freeze is lifted. These three key hiring challenges limit the military departments’ ability to strategically consider the advantages of converting one source of support to another, and limit their ability to hire the appropriate personnel type or for contract vendors to fill positions. According to senior MTF officials, these key hiring challenges and low fill rates in some areas can result in personnel gaps that can adversely affect the operations of MTFs. When personnel gaps arise, officials stated, military personnel often must work additional hours or must be borrowed from other facilities. Senior officials from one Navy MTF cited the example of a cost of about $16,000 in travel expenses for the temporary transfer of an active duty nurse stationed in Japan to work for a MTF in the United States for 3 months because the MTF was not able to fill the position by other means. Additionally, senior officials from one Air Force MTF noted that morale of its military staff is negatively affected by extra hours and additional responsibilities placed on them to ensure continued operations. Further, officials stated that personnel gaps can negatively affect care. Due to concerns about patient safety, MTFs may decide to discontinue some services at MTFs. Senior officials from five of six MTFs reported discontinuing some services as a result of these challenges and referred patients to the TRICARE network or to Veterans Affairs facilities. Referring patients to the private sector can have secondary effects on MTF operations, such as on hospital accreditations. Senior officials from one Navy MTF noted that in the past fiscal year they had to refer patients to private sector care after two hematology-oncology physicians resigned, which may affect their hematology-oncology program’s accreditation. Senior officials at the other Navy MTF stated that in the last fiscal year they could not meet the minimum staffing standards for labor and delivery staff and therefore sent patients to the TRICARE network. They noted they are also having difficulty filling key administrative positions related to quality control of laboratory services and are concerned about maintaining their pathology program accreditation. Senior officials from MTFs reported varying fill rates for military and civilian personnel, and for the contractor personnel provided by private sector vendors. However, officials from the MTFs we spoke with stated that fill rates may not illustrate the availability of personnel. For example, officials stated that authorizations for military personnel are counted as filled even when a servicemember is deployed and therefore not working at the MTF. In addition, MTF officials stated that any on-board civilians without corresponding authorizations inflate the civilian fill rate, resulting in a fill rate of greater than 100 percent. In addition, DOD officials noted that DOD pays for contracted services and does not directly employ contractor personnel. Therefore, the fill rate for contractors represents either the number of authorized FTEs in the individual contract or positions filled by contactors noted on the MTF’s force planning document, which could also result in fill rates of greater than 100 percent, even as other positions remain unfilled. The MTFs that we spoke with reported the following fill rates: Two Navy MTFs. The fill rates for military personnel, federal civilian personnel, and funded positions designated for contracted services were 79 percent, 81 percent, and 94 percent, respectively, at one Navy MTF and 93 percent, 53 percent, and 62 percent, respectively, at the other MTF. Two Air Force MTFs. The fill rates for military personnel, federal civilian personnel, and funded positions designated for contracted services were 98 percent, 86 percent, and 91 percent, respectively at one Air Force MTF and 94 percent, 74 percent, and 90 percent, respectively at the other MTF. Two Army MTFs. The fill rates for military personnel, federal civilian personnel, and funded positions designated for contracted services were 91 percent, 118 percent, and 87 percent, respectively at one Army MTF. At the other MTF, the fill rate for military personnel fill rate was 94 percent and for federal civilian personnel was 107 percent, but the MTF officials did not provide fill rate information for positions designated for contracted services because there are no corresponding authorizations on their force planning document. DOD has been taking some steps to attempt to address these key hiring challenges. Specifically, DOD’s 2016 Strategic Workforce Plan included steps DOD was taking to address personnel gaps, such as a targeted recruitment program for critical skills, including 27 harder-to-fill medical occupations. In 2018, DOD published a Human Capital Operating Plan which states that it replaces the previously required Strategic Workforce Plan, but DOD does not yet have a plan of action specific to the medical professions. Further, DOD officials stated that components are encouraged to consider developing their own human capital operating plans. With regard to contracting, in response to a requirement in the National Defense Authorization Act for Fiscal Year 2017, DOD issued a status report in January 2018 on the development of its acquisition strategy for health care services at MTFs. The report notes that contracting for health care services is fragmented, and the report outlines DOD’s plan to move toward a single contract vehicle for health care services and to establish metrics for the strategy, such as measurement of contract fill rates. While these steps represent efforts to address these challenges, responsibility for management of the federal civilian and contractor workforces within the MHS will soon see significant changes. Specifically, in December 2016, Congress directed the transfer of administrative responsibility for MTFs from the military departments to the DHA. Further, Congress amended the law in 2018 to specify that the transfer should be completed by September 30, 2021. The law also states that at each MTF, the Director of the DHA has the authority to determine total workforce requirements, direct joint manning, and address personnel staffing shortages, among other things. Although the DHA will soon begin to assume these responsibilities and the challenges associated with them, a senior OASD(HA) official responsible for human capital issues stated that the DHA currently has no strategic total workforce plan, or similar document, to help ensure execution of an appropriate workforce mix at its MTFs. According to GAO’s key questions to assess agency reform efforts, strategic workforce planning should precede any staff realignments or downsizing, so that changed staff levels do not inadvertently produce skills gaps or other adverse effects that could result in increased use of overtime and contracting. GAO’s key principles for effective strategic workforce planning and applicable federal regulations have shown that addressing a critical human capital challenge—such as closing or reducing personnel gaps—requires tailored human capital strategies and tools and metrics by which to monitor and evaluate progress toward reducing gaps. Although many hiring challenges are longstanding government-wide issues, GAO’s model of strategic human capital management states that agencies need not wait for comprehensive civil service reform to modernize their human capital approaches. In addition, according to OPM’s standards for strategic workforce planning, human capital strategies should be integrated with acquisition plans, among other things, such as DOD’s acquisition strategy for health care services at MTFs. As the DHA finalizes its plans for assuming administrative control of MTFs, senior leaders may find that they face the same challenges reported by the military departments in executing an appropriate workforce mix. DHA could mitigate these challenges to executing the appropriate workforce mix in the MTFs by engaging in strategic workforce planning, including tailored human capital strategies, tools, and metrics by which to monitor and evaluate progress toward reducing gaps, and integrating this planning with DOD’s acquisition strategy for health care services at MTFs. The planned transfer of administrative responsibility for MTFs from the military departments to the DHA may present challenges to DOD’s management of military personnel. Specifically, the military departments and DHA have not determined how military personnel will meet both the operational and beneficiary missions of the MHS after the transfer of administrative responsibility for MTFs to the DHA. Historically, each military department has been responsible for managing its military personnel to ensure it meets its operational mission and appropriately staffs its MTFs, and the challenge of balancing these missions was the responsibility of each respective military department. However, the transfer of administrative responsibility for MTFs to the DHA will separate these missions—the operational mission will be the responsibility of the military departments, and the beneficiary mission will be the responsibility of the DHA, with military personnel used to support both missions. The plan for transfer of administrative responsibility for MTFs to the DHA states that the military departments will retain ultimate control over military personnel, who will work within the MTFs on a day-to-day basis to maintain their readiness to provide operational medical care, while the DHA will eventually assume responsibility for federal civilian and contractor personnel and all other aspects of MTF management. DOD officials stated that the planned transfer will allow the military departments to focus their attention on readiness to provide operational medical care, while the DHA will focus its attention on efficient management of beneficiary health care operations. As a result of this separation of missions, challenges in the management of military personnel could be exacerbated by transfer of responsibility for achieving these missions to separate organizations in the following three ways. First, DHA and the military departments have not clearly identified how they will manage the assignment of military personnel to MTFs. The implementation plan for transfer of administrative responsibility for MTFs to the DHA states that the departments will continue to be responsible for assignment of military personnel to MTFs. However, DOD’s stated desire to place greater emphasis on the readiness mission may affect current MTF staffing practices. For example, military department officials told us that it is common practice to assign military personnel to locations that face challenges in hiring federal civilian and contractor medical personnel to maintain access to medical care in these locations. However, the transfer implementation plan states that the departments will provide military personnel to the MTFs only to the extent that the MTFs can provide sufficient workload to maintain providers’ military medical Knowledge, Skills, and Abilities (KSAs). KSAs are a metric for military operational readiness that DOD has not yet finalized. Officials responsible for planning the transfer of administrative responsibility for MTFs to the DHA stated that the emphasis on fulfilling KSAs in the future may result in concentrating military providers in larger MTFs, which can provide opportunities for providers to fulfill KSAs. However, this change could create a disadvantage for smaller facilities, which may not be able to provide military providers with as much practice and already face challenges in hiring federal civilian and contractor personnel. Second, DHA and the military departments have not clearly identified how they will mitigate the effect of deployments of military medical personnel on MTF operations. When medical personnel are deployed out of MTFs to provide operational care, their absence can create a gap or reduction in capability at the affected MTF, according to military department officials. The military departments, prior to the transfer, manage deployments and are responsible for ensuring appropriate staffing at the MTFs in the absence of deployed personnel. Officials at all six of the MTFs we visited cited challenges with mitigating the effect of deployments on MTF operations. DOD has stated that after the transition, there will be no barriers to the military departments’ access to personnel for deployment, and has highlighted options for addressing staffing gaps, such as using borrowed military personnel, contractors, or referral to the TRICARE network. However, officials at all six of the MTFs we spoke with stated that contracting for medical services was not sufficiently timely or effective, and officials at one MTF noted that referral to the TRICARE network was difficult in their area. According to officials within the MTFs of the National Capital Region, which is directly managed by the DHA and not the military departments, management of deployments and their adverse effect on hospital staffing has been a challenge. For example, officials cited a period in the summer of 2017 when, due to overlapping deployments across military departments, 8 of 9 general surgeons at Fort Belvoir Community Hospital in Virginia were simultaneously deployed, and patients had to be referred to private providers within the TRICARE network or sent to Walter Reed National Military Medical Center in Maryland. Although the military departments and the DHA have executed a Memorandum of Agreement concerning coordination for service personnel to fill scheduled deployments, this does not always prevent gaps in medical specialties. For example, officials noted that requests for volunteer deployments are not always vetted through NCR management. Further, addressing these gaps can be challenging. Specifically, officials cited difficulties in successfully contracting for medical services and reported that requests for backfill support from the reserve components has associated costs and is difficult to execute. Third, DHA and the military departments have not clearly identified how they will manage changes to the size or composition of the active duty medical workforce that affect workforce balance within MTFs. Since 2008, the military departments have been prohibited from converting medical positions designated for military personnel to positions that can be filled by federal civilians—even when such conversions would result in cost savings. Air Force headquarters officials noted that they have identified more than 4,000 medical positions to review for possible conversion to achieve cost savings, particularly in medical specialties with excess military personnel, such as family practice and pharmacy. Air Force officials previously identified 4,724 positions for conversion beginning in fiscal year 2005, of which 1,449 were completed before the prohibition was enacted. The Army planned to convert 4,340 military positions from fiscal year 2006 through fiscal year 2011, of which 1,459 were completed before the prohibition was enacted. The Army restored 165 of planned conversions for fiscal year 2007, and reversed, or offset the remaining through growth in the active duty medical force after the prohibition was enacted. The National Defense Authorization Act for Fiscal Year 2017 allows for the prohibition on such conversions to be lifted after DOD submits a report that defines the military medical and dental requirements necessary to meet operational medical force readiness requirements, and lists the positions necessary to meet such requirements. However, decisions on conversions taken by the departments could affect MTF operations. Specifically, existing challenges with hiring federal civilian personnel could create challenges with military-to-civilian conversions. For example, DOD has stated that during the previous round of military to federal civilian conversions, changes in local market conditions affected the ability of the military departments to fill converted positions with civilians in a timely fashion. Medical headquarters officials the Army stated that they currently have no intention to use conversions if the prohibition is lifted; Navy officials stated they currently do not plan to use conversions since their military personnel requirements exceed their authorizations. Senior officials from one Navy MTF we spoke with stated that if conversions occurred, recruitment and retention challenges related to hiring federal civilian employees would need to be addressed to ensure such positions are filled. In addition, military department policies can affect workforce balance within MTFs. Specifically, in its modeling for operational medical personnel requirements, the Air Force includes a preference for uniformed personnel to receive primary care from uniformed medical personnel. Officials told us that this approach, known as the Critical Home Station, is because Air Force leadership believes that performance of this function by military personnel provides for increased accountability for medical readiness. For example, senior officials from one Air Force MTF stated they believe the policy is important for the Air Force to maintain access to information about health factors that could render a servicemember not medically qualified to deploy. Air Force medical headquarters officials estimate that the policy results in 2,000 positons reserved for military personnel that could be designated for federal civilian or contractor performance. Leading practices for results-oriented government state that cooperating federal agencies need to sustain and enhance their collaboration in several ways, including the development of policies and procedures to operate across agency boundaries and agreement on their respective roles and responsibilities. However, planning for the transition by the DHA and the military departments has not yet included development of policies and procedures for management of military personnel and agreement on specific roles and responsibilities for the military departments and the DHA in this process. The MHS process for collaborating across agency boundaries, known as MHS Governance, emphasizes collaborative work in the management of the MHS. This forum could provide an opportunity for the military departments and the DHA to develop policies and procedures for management of military personnel and agree on specific roles and responsibilities for the military departments and the DHA in this process. Until DHA and the military departments develop such policies and procedures and agrees on roles and responsibilities, the MHS may continue to face a number of challenges related to the transfer of administrative responsibility for MTFs to the DHA. Given the size of the MHS, its central importance to the success of DOD’s mission, and its cost, having the right mix of military, federal civilian, and contractor personnel providing medical care within MTFs and in deployed operational settings should be a key priority for DOD leadership. While the military departments have policies and procedures in place to assess medical workforce mix in both settings, the shortcomings we have highlighted present barriers to achieving an appropriate workforce mix. Recently, such as in the 2018 National Defense Business Operations Plan, DOD has emphasized the need to reassess who can most efficiently perform all aspects of DOD’s mission. However, the military departments’ planning processes for operational medical personnel requirements continue to rely solely on military personnel, despite the use of federal civilians and contractors in operational settings, and the military departments have not developed full information on the cost of their medical forces and incorporated such information into decision-making processes about the mix of active and reserve component personnel. Similarly, the transfer of administrative responsibility for MTFs to the DHA represents an opportunity to reassess workforce mix at the MTFs. However, long-standing challenges in the management of federal civilian and contractor personnel, coupled with challenges related to the management of medical personnel after the transfer, could overshadow and cast doubt on the success of that reform. Without addressing the concerns we have highlighted, DOD may miss the opportunity presented by current transformation efforts in the MHS to ensure it has in place the most cost-effective mix of personnel in its workforce to accomplish its medical mission. We are making five recommendations to the Department of Defense. The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with the military departments, perform an assessment of the suitability of federal civilian and contractor personnel to provide operational medical care and incorporate the results of the assessment into relevant policies, if warranted. (Recommendation 1) The Secretary of Defense should ensure that the Under Secretary of Defense for Personnel and Readiness require consideration of cost when making determinations regarding the mix of active and reserve component medical personnel. (Recommendation 2) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in collaboration with the Director of Cost Assessment and Program Evaluation and the military departments, develop full cost information for active and reserve component medical personnel, and the military departments use that information in its determinations regarding the mix of active and reserve component medical personnel. (Recommendation 3) The Secretary of Defense should ensure that the Director of the Defense Health Agency develop a strategic total workforce plan which includes, among other things: (1) tailored human capital strategies, tools, and metrics by which to monitor and evaluate progress toward reducing personnel gaps, and; (2) integration of human capital strategies with acquisition plans, such as DOD’s acquisition strategy for health care services at DOD’s military treatment facilities. (Recommendation 4) The Secretary of Defense and the Secretaries of the Army, the Navy, and the Air Force, respectively, should ensure that accompanying the transfer of administrative responsibility for military treatment facilities to the Defense Health Agency, that the Defense Health Agency and the military departments develop policies and procedures for management of military personnel, including agreement on specific roles and responsibilities for the military departments and the Defense Health Agency in this process. (Recommendation 5) In written comments on a draft of this report, DOD concurred with our five recommendations concerning additional assessments needed to better ensure an efficient MHS total workforce. DOD’s comments are reprinted in appendix II. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense for Personnel and Readiness, the Assistant Secretary of Defense for Health Affairs, the Director of Cost Assessment and Program Evaluation, the Director of the Defense Health Agency, and the Secretaries of the Army, the Navy, and the Air Force. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions regarding this report, please contact me at (202) 512-3604 or farrellB@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. To address the extent to which the military departments’ planning process for operational medical personnel requirements have assessed the mix of federal civilian, contractor, active and reserve medical personnel (i.e. workforce mix), we compared the military departments’ efforts in planning for operational medical personnel requirements to the Department of Defense (DOD) and department-level policies and guidance on workforce mix determination and identifying the full cost of its military medical personnel. DOD Directive 1100.4 states that authorities should consider all available sources when determining workforce mix. DOD Instruction 1100.22 directs the steps that workforce planning authorities must take in planning for personnel requirements and emphasizes consideration of all potential workforce sources and an accurate understanding of personnel costs. We also reviewed related DOD documentation on identifying military essential positons and the use of alternative workforces. Specifically, DOD’s National Defense Business Operations Plan for fiscal years 2018 through 2022 states that workforce rationalization strategies include, among other things, reassessing military manpower allocations for military essentiality and identifying functions and positions that are commercial in nature that may be appropriately or efficiently delivered via private sector support. Moreover, DOD’s 2017 Workforce Rationalization Plan recognizes DOD’s civilians as an essential enabler of its mission capabilities and operational readiness and noted that there are numerous opportunities for the military departments, combatant commands, and others to make well-reasoned adjustments to workforce mix. To determine the extent to which federal civilians and contractors were deployed to provide medical care we reviewed federal civilian and contractor deployment data from fiscal years 2013 through 2017. We analyzed data for this timeframe to enable us to identify deployments over the last 5 years, and fiscal year 2017 was the most recent full fiscal year of available data at the time of our review. To assess the reliability of these data, we electronically tested the data to identify obvious problems with completeness or accuracy and interviewed knowledgeable agency officials about the data. We found the data to be limited in that the deployment data may not be sufficiently reliable for identifying the universe of deployments. However, we found the data to be sufficiently reliable for the purposes of reporting that federal civilians and contractors have been deployed to provide medical care. Further, we interviewed officials from the Office of the Under Secretary of Defense for Personnel and Readiness (USD(P&R)), Office of the Assistant Secretary of Defense for Health Affairs (OASD(HA)), Defense Civilian Personnel Advisory Service, the military departments, and selected combatant commands to identify considerations and any challenges of using different personnel categories as workforce alternatives for meeting operational medical requirements. To determine the appropriate use of the active and reserve components for DOD’s operational medical personnel military requirements, we compared the military departments’ efforts in assessing their active and reserve balance to DOD and department-level policies and guidance. Specifically, in a 2013 DOD report issued in response to section 1080A of the National Defense Authorization Act for Fiscal Year 2012, DOD established five factors that play a key role in active and reserve component balance decisions, including the cost of unit manning, training, and equipping. According to the report, cost is often outweighed by other factors when making active component and reserve component mix decisions, but should always be considered in active component and reserve component mix decisions. DOD Instruction 7041.04 has guidance for military departments to use to identify the full cost of their active component, federal civilian, and contractor workforces. Moreover, we interviewed officials from the military departments to discuss: (1) how they determine their operational medical requirements and if they identified the full cost of active and reserve component medical personnel, and (2) the use of the active and reserve components for operational requirements and any efforts to assess the balance of active and reserve component medical personnel. To determine the mix of active and reserve component medical personnel, we analyzed authorization data from the Health Manpower and Personnel Data System for fiscal year 2017. We analyzed data for fiscal year 2017 because this was the most recent year of available data at the time of our review. To assess the reliability of these data, we electronically tested the data to identify obvious problems with completeness or accuracy and interviewed knowledgeable agency officials about the data. We found the data to be sufficiently reliable for reporting on the allocation of authorizations for active and reserve component medical personnel. To address how the military departments determine the most appropriate workforce mix at military treatment facilities (MTFs) and any challenges in executing an appropriate workforce mix, we reviewed DOD and department-level policies and guidance on workforce mix determination. We also reviewed the military departments’ efforts in planning, staffing, and filling MTF requirements. We spoke with knowledgeable officials from the Office of the USD(P&R), OASD(HA), DHA, and the military departments and requested documentation related to how they oversee or implement legal or policy requirements, such as DOD Instruction 1100.22’s manpower mix criteria, and the annual inventory of inherently governmental and commercial activity. To determine the proportion of reported military, federal civilian, and contractor personnel providing or supporting care in MTFs, we obtained budgetary data for fiscal year 2017, which was the most recent full fiscal year of available data at the time of our review. To assess the reliability of these data, we compared them to the information reported in the fiscal year 2017 Defense Health Program justification estimates published in February 2018 to identify key differences and interviewed knowledgeable agency officials about the data. We found the data to be sufficiently reliable for the purposes of describing workforce mix of military, federal civilian, and contractor personnel within MTFs. To understand how policies and procedures to determine and execute an appropriate workforce mix are implemented at MTFs, we interviewed military department medical command or agency officials responsible for implementing DOD total force policy. To better understand policy and procedure implementation at MTFs we selected six MTFs - two each from the Army, Navy, and Air Force - to allow a cross-section of views concerning the management of the military departments’ workforce mix at the MTFs and hiring conditions in different types of labor markets. The two MTFs from each military department were selected based on consideration of average daily patient load and MTF bed size, which we obtained from the Defense Health Agency. For each MTF, we interviewed officials responsible for the leadership and management of MTF personnel and operations and requested and reviewed relevant documentation. We reviewed their responses, which highlighted some challenges related to achieving an appropriate workforce mix, and DOD’s plans for addressing these challenges. We compared these to GAO’s key questions to assess agency reform efforts, which note that strategic workforce planning should precede any staff realignments or downsizing, and GAO’s key principles for effective strategic workforce planning, which state that addressing a critical human capital challenge—such as closing or reducing personnel gaps—requires tailored human capital strategies and tools and metrics by which to monitor and evaluate progress toward reducing gaps. We also reviewed these plans in light of OPM’s standards for strategic workforce planning, which note that human capital strategies should be integrated with acquisition plans, among other things, such as DOD’s acquisition strategy for health care services at MTFs. Finally, we requested from officials at each MTF information on personnel inventory and authorizations to understand their ability to fill military and civilian positions, and the contract vendors’ ability to fill positions designated for contracted services. We also reviewed how the planned transfer of administrative responsibility for MTFs from the military departments to the DHA might affect DOD management of military personnel within the MHS. To identify (1) responsibilities of the military departments that may be transferred to the DHA, and (2) challenges that may continue under the new organizational structure, we reviewed relevant documentation and interviewed knowledgeable officials. To understand potential challenges related to the assignment of military personnel to MTFs, we interviewed military department officials responsible for the assignment of military personnel. To identify how deployments affect MTF operations, if at all, we interviewed officials responsible for the leadership and management of MTF personnel and operations. Lastly, to understand how the military departments manage the size and composition of the active duty medical workforce, we requested documentation related to the development of operational personnel requirements and interviewed knowledgeable officials. We also reviewed previous efforts to alter the size or composition of the active duty medical workforce, such as military to civilian conversions. We compared DOD’s efforts to plan for these challenges to leading practices for results-oriented government, which state that cooperating federal agencies need to sustain and enhance their collaboration in several ways, including the development of policies and procedures to operate across agency boundaries and agreement on their respective roles and responsibilities. We conducted this performance audit from September 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Lori Atkinson, Assistant Director; Tracy Barnes; Alexandra Gonzalez; Adam Howell-Smith; Kirsten Leikem; Amie Lesser; Richard Powelson; Clarice Ransom; Stephanie Santoso; Amber Sinclair, and John Van Schaik; made key contributions to this report. Military Personnel: Additional Actions Needed to Address Gaps in Military Physician Specialties. GAO-18-77. Washington, D.C.: February 28, 2018. Defense Health Reform: Steps Taken to Plan the Transfer of the Administration of the Military Treatment Facilities to the Defense Health Agency, but Work Remains to Finalize the Plan. GAO-17-791R. Washington, D.C.: September 29, 2017. Defense Health Care Reform: DOD Needs Further Analysis of the Size, Readiness, and Efficiency of the Medical Force. GAO-16-820. Washington, D.C.: September 21, 2016. Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce. GAO-13-470. Washington, D.C.: May 29, 2013. Military Personnel: DOD Addressing Challenges in Iraq and Afghanistan but Opportunities Exist to Enhance the Planning Process for Army Medical Personnel Requirements. GAO-11-163. Washington, D.C.: February 10, 2011. Military Personnel: Enhanced Collaboration and Process Improvements Needed for Determining Military Treatment Facility Medical Personnel Requirements. GAO-10-696. Washington, D.C.: July 29, 2010. Military Personnel: Status of Accession, Retention, and End Strength for Military Medical Officers and Preliminary Observations Regarding Accession and Retention Challenges. GAO-09-469R. Washington, D.C.: April 16, 2009.", "summary": "The MHS includes more than 241,000 active duty, reserve, federal civilian, and contractor personnel who provide (1) operational medical care in support of war and other contingencies and (2) beneficiary medical care within DOD's hospitals and clinics. The Senate Report 115-125 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 contained a provision for GAO to review how DOD determines its mix of military, federal civilian, and contractor personnel. This report examines the military departments' planning processes for determining (1) operational medical personnel requirements, including an assessment of the mix of federal civilian, contractor, and active and reserve medical personnel; and (2) the most appropriate workforce mix at MTFs and any challenges in executing their desired workforce mix. GAO compared MHS staffing practices with DOD policy, and analyzed fiscal year 2017 budgetary data to determine the proportion of military, federal civilian, and contractor personnel. GAO also interviewed senior leaders at six MTFs. The military departments each have their own processes to determine their operational medical personnel requirements; however, their planning processes to meet those requirements do not consider the use of all medical personnel or the full cost of military personnel. Specifically: The Department of Defense (DOD) has not assessed the suitability of federal civilians and contractors to meet operational medical personnel requirements. Federal civilians and contractors play key roles in supporting essential missions, i.e. providing operational assistance via combat support. Military department officials expressed a preference for using military personnel and cited possible difficulties in securing federal civilian and contractor interest in such positions. An assessment of the suitability of federal civilians and contractors could provide options for meeting operational medical personnel requirements. When determining the balance of active and reserve component medical personnel, the military departments' processes generally do not consider full personnel costs, including education and benefits. Specifically, officials stated that the Army and the Navy do not consider personnel costs in their assessment of the appropriate balance between active and reserve personnel, and the Air Force's analysis had some limitations. DOD policy states that workforce decisions must be made with an awareness of the full costs. Further, in a 2013 report, DOD identified the cost of unit manning, training, and equipping as one of five factors that play a key role in decisions concerning the mix of active and reserve component forces. By developing full cost information for active and reserve component medical personnel, DOD can better ensure an appropriate and cost-effective mix of personnel. The military departments have taken actions, such as establishing policies and procedures, to assess the appropriate workforce mix for beneficiary care within Military Treatment Facilities (MTFs), but challenges remain. The military departments distribute military personnel across the MTFs and then use policies and procedures to consider risks, costs, and benefits to determine how to fill the remaining positions with federal civilians and contractors. However, a number of challenges, including lengthy hiring and contracting processes and federal civilian hiring freezes affect DOD's ability to use federal civilians and contractors. For example, senior officials at each of the six MTFs that GAO spoke with cited challenges with the federal civilian hiring process, and five of six MTFs cited challenges with the contracting process. As a result, senior officials from five of six MTFs reported discontinuing some services and referring patients to DOD's TRICARE network of private sector providers or Veterans Affairs facilities. The Military Health System (MHS) is also preparing for the phased transfer of administrative responsibility for MTFs to the Defense Health Agency (DHA), including management of the MTF workforce. According to GAO's report on agency reform efforts, strategic workforce planning should precede any staff realignments or downsizing. However, according to a senior official, the DHA has not developed a strategic workforce plan. Without developing such a plan, the DHA may continue to face the same challenges experienced by the military departments in executing an appropriate and efficient workforce mix at its MTFs. GAO recommends that DOD, among other things, (1) assess the suitability of federal civilians and contractors to provide operational medical care; (2) develop full cost information for active and reserve component medical personnel; and (3) develop a strategic total workforce plan for the DHA to help ensure execution of an appropriate workforce mix at its MTFs. In commenting on a draft of this report, DOD concurred with each of GAO's recommendations.", "document_type": "gao"}
{"report": "Our October 2017 report found that CMS provided guidance to Medicare Part D plan sponsors on how they should monitor opioid overutilization problems among Part D beneficiaries. The agency included this guidance in its annual letters to plan sponsors, known as call letters; it also provided a supplemental memo to plan sponsors in 2012. Among other things, these guidance documents instructed plan sponsors to implement a retrospective drug utilization review (DUR) system to monitor beneficiary utilization starting in 2013. As part of the DUR systems, CMS required plan sponsors to have methods to identify beneficiaries who were potentially overusing specific drugs or groups of drugs, including opioids. Also in 2013, CMS created the Overutilization Monitoring System (OMS), which outlined criteria to identify beneficiaries with high-risk use of opioids, and to oversee sponsors’ compliance with CMS’s opioid overutilization policy. Plan sponsors may use the OMS criteria for their DUR systems, but they had some flexibility to develop their own targeting criteria within CMS guidance. At the time of our review, the OMS considered beneficiaries to be at a high risk of opioid overuse when they met all three of the following criteria: 1. received a total daily MED greater than 120 mg for 90 consecutive 2. received opioid prescriptions from four or more health care providers in the previous 12 months, and 3. received opioids from four or more pharmacies in the previous 12 months. The criteria excluded beneficiaries with a cancer diagnosis and those in hospice care, for whom higher doses of opioids may be appropriate. We found that through the OMS, CMS generated quarterly reports that list beneficiaries who met all of the criteria and who were identified as high- risk, and then distributed the reports to the plan sponsors. Plan sponsors were expected to review the list of identified beneficiaries, determine appropriate action, and then respond to CMS with information on their actions within 30 days. According to CMS officials, the agency also expected plan sponsors to share any information with CMS on beneficiaries that they identified through their own DUR systems. We found that some actions plan sponsors may take included the following: Case management. Case management may include an attempt to improve coordination issues, and often involves provider outreach, whereby the plan sponsor will contact the providers associated with the beneficiary to let them know that the beneficiary is receiving high levels of opioids and may be at risk of harm. Beneficiary-specific point-of-sale (POS) edits. Beneficiary-specific POS edits are restrictions that limit these beneficiaries to certain opioids and amounts. Pharmacists receive a message when a beneficiary attempts to fill a prescription that exceeds the limit in place for that beneficiary. Formulary-level POS edits. These edits alert providers who may not have been aware that their patients are receiving high levels of opioids from other doctors. Referrals for investigation. According to the six plan sponsors we interviewed, the referrals can be made to CMS’s National Benefit Integrity Medicare Drug Integrity Contractor (NBI MEDIC), which was responsible for identifying and investigating potential Part D fraud, waste, and abuse, or to the plan sponsor’s own internal investigative unit, if they have one. After investigating a particular case, they may refer the case to the HHS-OIG or a law enforcement agency, according to CMS, NBI MEDIC, and one plan sponsor. Based on CMS’s use of the OMS and the actions taken by plan sponsors, CMS reported a 61 percent decrease from calendar years 2011 through 2016 in the number of beneficiaries meeting the OMS criteria of high risk—from 29,404 to 11,594 beneficiaries—which agency officials considered an indication of success toward its goal of decreasing opioid use disorder. In addition, we found that CMS relied on separate patient safety measures developed and maintained by the Pharmacy Quality Alliance to assess how well Part D plan sponsors were monitoring beneficiaries and taking appropriate actions. In 2016, CMS started tracking plan sponsors’ performance on three patient safety measures that were directly related to opioids. The three measures were similar to the OMS criteria in that they identified beneficiaries with high dosages of opioids (120 mg MED), beneficiaries that use opioids from multiple providers and pharmacies, and beneficiaries that do both. However, one difference between these approaches was that the patient safety measures separately identified beneficiaries who fulfill each criterion individually. Our October 2017 report also found that CMS tracked the total number of beneficiaries who met all three OMS criteria as part of its opioid overutilization oversight across the Part D program. However, the agency did not have comparable information on most beneficiaries who receive high doses of opioids—regardless of the number of providers and pharmacies used—and who therefore may be at risk for harm, according to CDC’s 2016 guidelines. These guidelines noted that long-term use of high doses of opioids—those above a MED of 90 mg per day—are associated with significant risk of harm and should be avoided if possible. Based on the CDC guidelines, outreach to Part D plan sponsors, and CMS analyses of Part D data, CMS has revised its current OMS criteria to include more at-risk beneficiaries beginning in 2018. The new OMS criteria define a high user as an individual having an average daily MED greater than 90 mg for any duration; receiving opioids from four or more providers and four or more pharmacies, or from six or more providers regardless of the number of pharmacies, for the prior 6 months. Based on 2015 data, CMS found that 33,223 beneficiaries would have met these revised criteria. While the revised criteria would help identify beneficiaries who CMS determined are at the highest risk of opioid misuse and therefore may need case management by plan sponsors, they did not provide information on the total number of Part D beneficiaries who may be at risk of harm. In developing the revised criteria, CMS conducted a one-time analysis that estimated there were 727,016 beneficiaries with an average MED of 90 mg or more, for any length of time during a 6 month measurement period in 2015, regardless of the number of providers or pharmacies used. According to the CDC guidelines, these beneficiaries may be at risk of harm from opioids, and therefore tracking the total number of these beneficiaries over time could help CMS to determine whether it is making progress toward meeting the goals specified in its Opioid Misuse Strategy to reduce the risk of opioid use disorders, overdoses, inappropriate prescribing, and drug diversion. However, CMS officials told us that the agency did not keep track of the total number of these beneficiaries, and did not have plans to do so as part of OMS. (See fig. 1.) We also found that in 2016, CMS began to gather information from its patient safety measures on the number of beneficiaries who use more than 120 mg MED of opioids for 90 days or longer, regardless of the number of providers and pharmacies. The patient safety measures identified 285,119 such beneficiaries—counted as member-years—in 2016. However, this information did not include all at-risk beneficiaries, because the threshold was more lenient than indicated in CDC guidelines and CMS’s new OMS criteria. Because neither the OMS criteria nor the patient safety measures included all beneficiaries potentially at risk of harm from high opioid doses, we recommended that CMS should gather information over time on the total number of beneficiaries who receive high opioid morphine equivalent doses regardless of the number of pharmacies or providers, as part of assessing progress over time in reaching the agency’s goals related to reducing opioid use. HHS concurred with our recommendation. Our October 2017 report found that CMS oversees providers who prescribe opioids to Medicare Part D beneficiaries through its contractor, NBI MEDIC, and the Part D plan sponsors. NBI MEDIC’s data analyses to identify outlier providers. CMS required NBI MEDIC to identify providers who prescribe high amounts of Schedule II drugs, which include but are not limited to opioids. Using prescription drug data, NBI MEDIC conducted a peer comparison of providers’ prescribing practices to identify outlier providers—the highest prescribers of Schedule II drugs—and reported the results to CMS. NBI MEDIC’s other projects. NBI MEDIC gathered and analyzed data on Medicare Part C and Part D, including projects using the Predictive Learning Analytics Tracking Outcome (PLATO) system. According to NBI MEDIC officials, these PLATO projects sought to identify potential fraud by examining data on provider behaviors. NBI MEDIC’s investigations to identify fraud, waste, and abuse. NBI MEDIC officials conducted investigations to assist CMS in identifying cases of potential fraud, waste, and abuse among providers for Medicare Part C and Part D. The investigations were prompted by complaints from plan sponsors; suspected fraud, waste, or abuse reported to NBI MEDIC’s call center; NBI MEDIC’s analysis of outlier providers; or from one of its other data analysis projects. NBI MEDIC’s referrals. After identifying providers engaged in potential fraudulent overprescribing, NBI MEDIC officials said they may refer cases to law enforcement agencies or the HHS-OIG for further investigation and potential prosecution. Plan sponsors’ monitoring of providers. CMS required all plan sponsors to adopt and implement an effective compliance program, which must include measures to prevent, detect, and correct Part C or Part D program noncompliance, as well as fraud, waste, and abuse. CMS’s guidance focused broadly on prescription drugs, and did not specifically address opioids. Our report concluded that although these efforts provided valuable information, CMS lacked information necessary to adequately oversee opioid prescribing. CMS’s oversight actions focused broadly on Schedule II drugs rather than specifically on opioids. For example, NBI MEDIC’s analyses to identify outlier providers did not indicate the extent to which they may be overprescribing opioids specifically. According to CMS officials, they directed NBI MEDIC to focus on Schedule II drugs, because these drugs have a high potential for abuse, whether they are opioids or other drugs. However, without specifically identifying opioids in these analyses—or an alternate source of data—CMS lacked data on providers who prescribe high amounts of opioids, and therefore cannot assess progress toward meeting its goals related to reducing opioid use, which would be consistent with federal internal control standards. Federal internal control standards require agencies to conduct monitoring activities and to use quality information to achieve objectives and address risks. As a result, we recommended that CMS require NBI MEDIC to gather separate data on providers who prescribe high amounts of opioids. This would allow CMS to better identify those providers who are inappropriately and potentially fraudulently overprescribing opioids. HHS agreed, and in April 2018 reported that it is working with NBI MEDIC to separately identify outlier prescribers of opioids. In addition, our 2017 report found that CMS also lacked key information necessary for oversight of opioid prescribing, because it did not require plan sponsors to report to NBI MEDIC or CMS cases of fraud, waste, and abuse; cases of overprescribing; or any actions taken against providers. Plan sponsors collected information on cases of fraud, waste, and abuse, and could choose to report this information to NBI MEDIC or CMS. While CMS receives information from plan sponsors who voluntarily reported their actions, it did not know the full extent to which plan sponsors had identified providers who prescribed high amounts of opioids, or the full extent to which sponsors had taken action to reduce overprescribing. We concluded that without this information, it was difficult for CMS to assess progress in this area, which would be consistent with federal internal control standards. In our report, we recommended that CMS require plan sponsors to report on investigations and other actions taken related to providers who prescribe high amounts of opioids. HHS did not concur with this recommendation. HHS noted that plan sponsors have the responsibility to detect and prevent fraud, waste, and abuse, and that CMS reviews cases when it conducts audits. HHS also stated that it seeks to balance requirements on plan sponsors when considering new regulatory requirements. However, without complete reporting—such as reporting from all plan sponsors on the actions they take to reduce overprescribing—we believe that CMS is missing key information that could help assess progress in this area. Due to the importance of this information for achieving the agency’s goals, we continue to believe that CMS should require plan sponsors to report on the actions they take to reduce overprescribing. In conclusion, a large number of Medicare Part D beneficiaries use potentially harmful levels of prescription opioids, and reducing the inappropriate prescribing of these drugs has been a key part of CMS’s strategy to decrease the risk of opioid use disorder, overdoses, and deaths. Despite working to identify and decrease egregious opioid use behavior—such as doctor shopping—among Medicare Part D beneficiaries, CMS lacked the necessary information to effectively determine the full number of beneficiaries at risk of harm, as well as other information that could help CMS assess whether its efforts to reduce opioid overprescribing are effective. It is important that health care providers help patients to receive appropriate pain treatment, including opioids, based on the consideration of benefits and risks. Access to information on the risks that Medicare patients face from inappropriate or poorly monitored prescriptions, as well as information on providers who may be inappropriately prescribing opioids, could help CMS as it works to improve care. Chairman Toomey, Ranking Member Stabenow, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff members have any questions concerning this testimony, please contact me at (202) 512-7114 or DeniganMacauleyM@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Will Simerl (Assistant Director) and Carolyn Feis Korman (Analyst-in-Charge). Also contributing were Amy Andresen, George Bogart, Andrew Furillo, Drew Long, and Vikki Porter. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Misuse of prescription opioids can lead to overdose and death. Medicare and Medicaid, two of the nation's largest health care programs, provide prescription drug coverage that can include opioids. GAO and others have reported on inappropriate activities and risks associated with these prescriptions. This statement is based on GAO's October 2017 report (GAO-18-15) and discusses (1) CMS oversight of Medicare beneficiaries who receive opioid prescriptions under Part D, and (2) CMS oversight of providers who prescribe opioids to Medicare Part D beneficiaries. For the October 2017 report, GAO reviewed CMS opioid utilization and prescriber data, CMS guidance for plan sponsors, and CMS's strategy to prevent opioid misuse. GAO also interviewed CMS officials, the six largest Part D plan sponsors, and 12 national associations selected to represent insurance plans, pharmacy benefit managers, physicians, patients, and regulatory and law enforcement authorities. In October 2017, GAO found that the Centers for Medicare & Medicaid Services (CMS) provided guidance on the monitoring of Medicare beneficiaries who received opioid prescriptions to plan sponsors—private organizations that implement the Medicare drug benefit, Part D—but it lacked information on most beneficiaries at risk of harm from opioid use. Specifically, GAO found that CMS provided guidance to plan sponsors on how they should monitor opioid overutilization among Medicare Part D beneficiaries, and required them to implement drug utilization review systems that use criteria similar to CMS's. Prior to 2018, the agency's criteria focused on beneficiaries who did all the following: (1) received prescriptions of high doses of opioids, (2) received prescriptions from four or more providers, and (3) filled prescriptions at four or more pharmacies. According to CMS, this approach focused actions on beneficiaries the agency determined to have the highest risk of harm. For 2018, CMS revised the criteria to include more at-risk beneficiaries. CMS's criteria, including recent revisions, did not provide sufficient information about the larger population of potentially at-risk beneficiaries. CMS estimated that, in 2015, 727,016 beneficiaries would have received high doses of opioids regardless of the number of providers or pharmacies, but only 33,223 would have met its revised criteria. In 2016, CMS began to collect information on some of these beneficiaries using a higher dosage threshold for opioid use. However, based on Centers for Disease Control and Prevention guidelines, CMS's approach also missed some who could be at risk of harm. As a result, CMS had limited information to assess progress against the goals of the Medicare and Medicaid programs' Opioid Misuse Strategy, which includes activities to reduce risk of harm to beneficiaries. CMS provided oversight on prescribing of drugs at high risk of abuse through a variety of projects, but did not analyze data specifically on opioids. According to CMS officials, CMS and plan sponsors identified providers who prescribed large amounts of drugs with a high risk of abuse, and those suspected of fraud or abuse may be referred to law enforcement. However, GAO found that CMS did not identify providers who may be inappropriately prescribing large amounts of opioids separately from other drugs, and did not require plan sponsors to report actions they take when they identified such providers. As a result, CMS lacked information that it could use to assess how opioid prescribing patterns are changing over time, and whether its efforts to reduce harm are effective. In the October 2017 report, GAO made three recommendations that CMS (1) gather information on the full number of at-risk beneficiaries receiving high doses of opioids, (2) identify providers who prescribe high amounts of opioids, and (3) require plan sponsors to report to CMS on actions related to providers who inappropriately prescribe opioids. HHS concurred with the first two recommendations, but not with the third. GAO continues to believe the recommendation is valid, as discussed in the report and in this statement.", "document_type": "gao"}
{"report": "MDA is responsible for developing a number of systems, known as elements, with the purpose of defending against ballistic missile attacks. MDA’s mission is to combine these elements into an integrated system- of-systems, known as the Ballistic Missile Defense System. Specifically, the goal of the BMDS is to combine the abilities of two or more elements to achieve objectives that would not have been possible for any individual element. These emergent abilities are known as “integrated capabilities” or “BMDS-level capabilities.” Table 1 provides a list and description of elements included in our review. When MDA was established in 2002, it was granted exceptional flexibilities to set requirements and manage the acquisition of the BMDS—developed as a single program—that allow MDA to expedite the fielding of assets and integrated ballistic missile defense capabilities. These flexibilities allow MDA to diverge from DOD’s traditional acquisition life cycle and defer the application of acquisition policies and laws designed to facilitate oversight and accountability until a mature capability is ready to be handed over to a military service for production and operation. Some of the laws and policies include such things as: obtaining the approval of a higher-level acquisition executive before making changes to an approved baseline, reporting certain increases in unit cost measured from the original or current baseline, obtaining an independent life-cycle cost estimate prior to beginning system development and/or production and deployment, and regularly providing detailed program status information to Congress, including specific costs, in Selected Acquisition Reports. In response to concerns related to MDA’s flexibilities, Congress and DOD have taken a number of actions. For example, Congress enacted legislation in 2008 requiring MDA to establish cost, schedule, and performance baselines—starting points against which to measure progress—for each element that has entered the equivalent of system development or is being produced or acquired for operational fielding. MDA reported its newly established baselines to Congress for the first time in its June 2010 BMDS Accountability Report. Since that time, Congress has provided more detailed requirements for the content of these baselines. Additionally, to enhance oversight of the information provided in the BMDS Accountability Report, MDA continues to incorporate suggestions and recommendations from us. However, not all of our recommendations have been fully implemented. Because MDA is not a military service, it does not abide by the same policies that the services use for delivering capabilities. Instead, a process exists whereby MDA declares an asset or capability ready for delivery for potential operational use. During this process, MDA communicates the capabilities and limitations of its delivery, and provides evidence supporting these assertions. Representatives from the receiving military service or combatant command then have the ability to assess this evidence and decide whether to accept the new capability. Because the military services conduct minimal missile defense testing of their own, this process is one of the only ways to convey vital performance information. The accuracy of this information is especially important as it informs training materials, doctrine, and deployment decisions. Typically, MDA makes capability deliveries through approved changes to its Operational Capacity Baseline (OCB). Proposed changes to the baseline are coordinated with the warfighter, including the affected combatant commands. Subsequently, the combatant commands assess these element capabilities to determine whether to accept them. This process is used for the vast majority of deliveries, including relatively minor ones such as software patches and updates. In recent years, MDA has declared major capabilities ready for delivery through a process that culminates in the issuance of a Technical Capability Declaration (TCD). According to MDA officials, the primary purpose of a TCD is to allow MDA’s senior management to manage the delivery of integrated, BMDS-level capabilities that require more than one element to function; however, TCDs have also been issued in response to mandates from the President. Though MDA has flexibilities in managing the acquisition process, it must follow the same contracting regulations that apply to DOD, including the Federal Acquisition Regulation and the Department of Defense Federal Acquisition Regulation Supplement (DFARS). We reviewed MDA’s use of a particular type of contract action that authorizes a contractor to begin work before contract terms, specifications, or price have been agreed upon. These “undefinitized contract actions” are permitted by the DFARS, with certain limitations. Undefinitized contract actions are generally used when negotiation of a definitive contract action is not possible in sufficient time to meet the government’s requirements and the government’s interest demands that the contractor be given a binding commitment so that contract performance can begin immediately. Under the DFARS, undefinitized contract actions must include a specific “not-to-exceed” price. Once the action’s terms, specifications, and price have been agreed upon or determined, a process known as definitization, the contract action converts to a “definitive” contract. Under the DFARS, undefinitized contract actions must contain definitization schedules that provide for definitization by the earlier of (1) 180 days after issuance or (2) the date on which the amount of funds obligated under the action is more than 50 percent of the not-to-exceed price. Once the government has received a qualifying proposal from the contractor, however, the government can extend the undefinitized period another 180 days. Similarly, the government may obligate up to 75 percent of the not-to-exceed price, if the contractor submits the qualifying proposal before 50 percent of the not-to-exceed price has been obligated. The amount of funds obligated should be consistent with the contractor’s requirements for the undefinitized period. Figure 1 shows the expected time frame and amount the government should spend within a specified period. The BMDS is a system of systems that cannot be completely assessed using intercept flight tests that are operationally representative because of the system’s scope and complexity and safety constraints. Consequently, MDA, independent DOD testing organizations, and the warfighter must rely heavily on representations of the integrated BMDS called models and simulations in ground testing, rather than live tests, to test the operational performance of the whole BMDS against attacks with more threats represented. In ground testing, each BMDS element is represented by a model and connected to a computer framework. During ground test execution, a model of threat ballistic missiles is applied to the framework and stimulates the modeled representations of BMDS elements to react. The resulting simulation models a BMDS engagement. Figure 1 illustrates the BMDS ground test sequence. To ensure that BMDS models and simulations accurately represent the real-world operational BMDS capabilities and that the limitations of the model are understood, they are verified, validated, and accredited. The verification, validation, and accreditation process is designed to identify and gather evidence needed to certify that the model and its associated data used in ground testing are acceptable for operational testing. No model is completely representative of the real world so the verification, validation, and accreditation process is used to assess the extent to which it reflects the operational performance of the BMDS in the real world, and how any modeling deficiencies impacted ground test results. Any modeling limitations identified in the verification, validation, and accreditation process restrict the extent to which ground test data can be used for BMDS assessment. For example, limitations in modeled sensor tracking of the threat restrict the extent to which tracking data can be relied on for interpreting operational real-world performance. Figure 2 illustrates the verification, validation, and accreditation process. The BMDS Operational Test Agency (OTA) is responsible for analyzing the verification and validation data for the models used in operational BMDS tests and provides accreditation recommendations to the Commanding General, Army Test and Evaluation Command, an independent accreditation authority for operational testing. In this role, the BMDS OTA develops accreditation criteria and assesses if the model can be used for operational assessments against these criteria. The BMDS OTA is also responsible for analyzing the extent to which the threat model, once it is applied to the ground testing framework, can be traced back to the threat model that MDA developed and the intelligence community’s description of the threat. In fiscal year 2017, MDA made some progress delivering assets, including BMDS-level capabilities and conducting tests. However, MDA did not meet many of its goals as expressed in the Ballistic Missile Defense System Accountability Report for fiscal year 2017, its integrated master test plan, and master integration plan. Specifically, MDA continued to deliver interceptors for three elements and successfully conducted its first test against an intercontinental ballistic missile target. In addition, MDA announced the delivery of one package of integrated BMDS-level capabilities through a technical capability declaration (TCD), which had been delayed from the previous year, and planned to complete the delivery of another set of capabilities by March 2018. MDA, however, did not complete its goals for delivering assets, specifically for the THAAD interceptors or conducting planned testing for Aegis BMD. We also identified several deficiencies in MDA’s processes for communicating progress in delivering integrated capabilities. MDA made progress delivering assets against its backlogs from fiscal year 2016, while its test program achieved several notable milestones. MDA also delivered several new integrated capabilities, though not always on time and often with reduced content compared to what was planned to be delivered. In addition, not all deliveries and testing objectives were met, and MDA made a number of changes, additions, and deletions to its test and capability delivery schedule during the year. Elements: While BMDS elements made progress delivering assets, including some that were delayed from fiscal year 2016, MDA did not meet all of its asset delivery goals as planned. For a summary of MDA’s major asset deliveries for fiscal year 2017, see table 2 below. Both the Aegis Standard Missile-3 (SM-3) Block IB and Ground-based Midcourse Defense (GMD) programs succeeded in achieving their asset delivery goals for the fiscal year, although both included acceptance of assets delayed from prior fiscal years. Specifically, due to quality issues and design problems discovered during testing, production on the Aegis SM-3 Block IB interceptor was temporarily halted in fiscal year 2016, and as a result MDA fell short of its deliveries for that year by 15 interceptors. To make up for this, MDA rolled over an additional 15 interceptor deliveries into fiscal year 2017, for a total delivery of 55 interceptors. In addition, MDA achieved its goal of delivering 44 ground-based interceptors by the end of calendar year 2017. However, some programs that achieved their milestones continued to employ high-risk approaches to acquisition, which we have recommended MDA reduce in previous reports. In addition, MDA maintains an ambitious schedule for key programs, such as for GMD’s Redesigned Kill Vehicle program. For more information regarding specific programs, see appendixes II through X. Other MDA elements missed asset delivery milestones. The Command, Control, Battle Management, and Communications (C2BMC) software spiral (or version) 8.2-1 was previously due to be delivered in October 2017, but was delayed again from its new date of December 2017 to second quarter of 2018. This spiral will play an important role in several tests of integrated capabilities, such as FTM-29, which was executed in January 2018. The Terminal High Altitude Area Defense (THAAD) program’s delivery of interceptor Lot 6 was scheduled to be delivered by the end of June 2017, but has since been delayed to the second quarter of 2018. THAAD officials stated this delay was due to a component production issue as well as the addition of 12 additional interceptors to the fiscal year 2017 procurement. Additionally, the Army and MDA have reached an impasse regarding the transfer of the THAAD program from MDA to the Army. MDA and the Army have been directed by the Deputy Secretary of Defense to develop a memorandum of agreement that would guide the transfer of the THAAD and AN/TPY-2 programs to the Army, and the National Defense Authorization Act for fiscal year 2018 requires the Secretary of Defense to transfer the acquisition authority of all missile defense programs that have received full-rate production authority, which includes THAAD, to the military departments not later than the date the President’s fiscal year 2021 budget is submitted. The Army, however, has identified a $10.1 billion requirements gap, and the Secretary of the Army issued a memo that he would non-concur with the transfer of the THAAD program in its current state. There is currently no plan or timeline to resolve the issue. We will continue to follow this issue in our future work. Finally, additional delays to the construction of the Aegis Ashore facility in Poland resulted in significant schedule compression, reducing the time allotted for installation and checkout activities from 16.5 months to 9.5 months. MDA initially maintained that the site would be delivered on schedule, but early in fiscal year 2018 the agency announced that the site would not be delivered until at least December 2019. Integrated BMDS Capability Increments: MDA also encountered challenges delivering packages of integrated capabilities, which it refers to as “increments.” Increment deliveries signify delivery of integrated BMDS-level capabilities, which are designed to significantly improve effectiveness and efficiency of the BMDS over its constituent elements working independently. MDA planned to deliver two increments in 2017, but both were delayed, and some constituent capabilities were removed and are planned to be delivered in future increments. For instance, MDA was late in delivering Increment 3, known as “Discrimination Improvements for Homeland Defense – Near Term.” We previously reported on schedule slips to this increment from its initial September 2016 delivery date to December 2016. However, program documentation indicates that MDA encountered further challenges in fiscal year 2017 that required an additional delay to March 2017. According to MDA officials, this most recent delay was driven by additional time needed to analyze testing results. However, we found that GMD had experienced development delays for some software upgrades leading up to assessment and integration activities. Moreover, MDA’s Increment 4, known as “Enhanced Homeland Defense,” was not completed in December 2017 as planned, because a C2BMC and a key GMD upgrade initially planned to support four BMDS-level capabilities intended for this increment would not be available until the second quarter of fiscal year 2018. MDA officials told us that they will rely on the current GMD software version, which lacks some key improvements, until this upgrade is delivered. Additionally, MDA significantly reduced the content of its BMDS cyberdefense capability planned for Increment 4. MDA documentation originally planned to deliver this capability with 10 elements and, prior to testing, the BMDS OTA declared four elements to be priorities. Of these four, MDA has conducted the assessment for only three. The remaining BMDS elements will deliver cyberdefense capabilities in future increment deliveries. MDA’s plans for delivery of future capabilities continue to be volatile. For example, plans for Increment 6 in fiscal year 2021, which will include delivering a new radar and kill vehicle for GMD, now require its capabilities to be broken up into three sub-increments delivered across several years, some as late as 2023, with multiple new capabilities added and several others deferred to Increment 7. Many of these delays continue to postpone achievement of BMDS integration, needed to improve performance against realistic attacks with multiple ballistic missiles. Most recently, MDA again delayed a capability designed to improve automated coordination between regional BMD shooters—that is, Aegis BMD, THAAD, and Patriot. While initially planned for delivery in 2015 with Increment 2, in fiscal year 2017, the capability was further delayed, from 2020 to 2023. In addition, a further integration capability that would centralize and automate command decisions across the BMDS will not be available until December 2025. See figure 3 for more information on how capabilities have been delayed within and across increments. Testing: MDA successfully completed most of its planned tests in fiscal year 2017 and achieved several notable milestones, though MDA continued to add, alter, delete, or delay parts of its test schedule throughout the year. Within the elements included in this report, MDA had nine tests in its fiscal year 2017 test plan, of which it conducted six as planned. MDA also added three additional tests to its plan over the course of the year. A summary of these tests can be found in table 3. Many of these tests are notable firsts for MDA, though others indicate continuing challenges. FTG-15 was a success, in which a Ground-Based Interceptor with a Configuration-2 booster and a CE-II Block I Exo-atmospheric Kill Vehicle intercepted for the first time an intercontinental ballistic missile with threat representative characteristics. In addition, this was the first use of the new booster avionics and upgrades to the software. The success of this test was necessary to deliver Increment 4’s requirements for Enhanced Homeland Defense. However, Department of Defense operational testing officials stated that the complexity and objectives of the test had been scaled back from what MDA originally planned. SFTM-01 was a success, in which an Aegis BMD SM-3 Block IIA missile intercepted a medium-range ballistic missile target. This was the first intercept test for the Aegis BMD SM-3 Block IIA. SFTM-02 was a failure, as the Aegis BMD SM-3 Block IIA interceptor failed to intercept its medium-range ballistic missile target. MDA officials stated that the interceptor acted “as designed” during the test, and the Navy is considering whether changes to its tactics, techniques, and procedures may be warranted. MDA officials maintained that this developmental test existed in part for risk- reduction ahead of fiscal year 2018’s FTM-29, in which the Aegis BMD SM-3 Block IIA would have to intercept an intermediate-range ballistic missile for the first time. Despite the failure, MDA has chosen not to reschedule and has instead re-assigned SFTM-02’s objectives to FTM-29. FTT-18 was a success, in which a THAAD battery intercepted an intermediate-range ballistic missile target. This test was originally planned for several years ago, as part of the 2015 delivery of Increment 2, and has been delayed in part due to issues with range availability. This is the first demonstration of THAAD against an intermediate-range ballistic missile target despite a THAAD battery having been delivered to Guam for this mission in 2013. FET-01, previously known as FTT-15, was a success, demonstrating THAAD’s ability to intercept a target in the endo-atmospheric stage of flight. MDA re-classified the test a “Flight Experiment” midway through fiscal year 2017 to reflect its more observational and experimental nature. The test objectives for FET-01 have changed several times, and while the final iteration of test objectives did not include intercept as an objective, an intercept against a medium-range ballistic missile target was achieved nonetheless. When MDA declares a capability ready for delivery to warfighters, it communicates the capabilities and limitations of the delivered asset. This information is critical for allowing warfighters to make informed decisions about whether to accept the capability, how to prepare for its deployment, and how to plan for its use. Typically this process occurs through the Operational Capacity Baseline (OCB) change process, which is structured around the delivery of new capabilities to individual elements. Alternately, as noted above, when MDA declares a key integrated, BMDS-level capability ready for delivery, it does so through a process which culminates in the issuance of a Technical Capability Declaration (TCD). The TCD is a memorandum signed by the Director, MDA and is usually reserved for significant new capabilities such as: those mandated by the President; or delivery of integrated BMDS-level capabilities that require more than one element to function. This last category of capabilities is especially important as, according MDA’s charter, the BMDS is intended to be an integrated and interoperable system. Integration is important in order to counter the larger-scale and more complex attacks that are likely to occur during a conflict. We have reported since 2014 that MDA has taken steps to improve the management and reporting of integrated capabilities, and to increase the level of BMDS integration. While MDA has recently made some progress in the area of integrated capabilities, the majority of MDA’s capability deliveries continue to be made at the element level. Until recently, MDA has done little to document the requirements and process for issuing a TCD, resulting in an inconsistent and, at times, ad- hoc process. We found inconsistencies in MDA’s decisions regarding which integrated, BMDS-level capabilities MDA would deliver through a TCD, and which it would not. For example, since 2015, the agency planned to deliver 14 integrated, BMDS-level capabilities, but delivered only 7 through the TCD process. According to MDA’s prior capability delivery documents, several of these excluded capabilities were intended to be part of the formal TCD delivery during the planning stage, but were dropped at some later point. According to MDA officials, those deliveries were made when all their constituent elements were delivered via the OCB process. MDA officials acknowledged that distinctions between requirements for element-level deliveries and BMDS-level capabilities were not readily apparent in their policy and took steps in fiscal year 2017 to do so. MDA issued a memorandum on Technical Capability Declaration Planning and Definitions in June 2017 to help distinguish element-level OCB deliveries and deliveries of integrated BMDS capabilities that would occur via TCD. This document established several definitions and requirements such as assigning responsibilities, establishing lines of authority, and defining some requirements that are not found in the other guidance document that MDA uses to govern TCD. The June 2017 memorandum also identified which capabilities through 2023 that MDA will deliver via a TCD, and identified some ways to add a new capability to the list of those receiving a TCD. While MDA’s new policy represents a substantial improvement in the management of the TCD process, it does not address several important problems with the TCD process. Specifically, although MDA has identified capabilities that it plans to deliver using a TCD, it does not identify any criteria or reasoning that guided this determination. It also does not explain the criteria MDA will apply to future capabilities under consideration for a TCD, leaving open the possibility of the same inconsistent application MDA has used in the past. Moreover, the capabilities it identified for a TCD are only a subset of all planned integrated, BMDS-level capabilities. Consequently, only some integrated capabilities are currently planned to be delivered to the warfighter with comprehensive information about their performance and limitations at the BMDS level. Unless MDA requires that all integrated capabilities are delivered via the TCD process, as the BMDS becomes more integrated, military services and other decision makers will have reduced insight into the capabilities and limitations of the BMDS as a whole. MDA’s June 2017 policy also establishes some processes governing the requirements for, and development of, test plans in support of a TCD, but it does not address some of the most problematic aspects of this process to date. Specifically, the new policy requires convening an Assessment Requirements Review board to develop a baseline for a planned TCD, determine what capabilities will be included, and identify what test plans will be necessary to generate the “body of evidence” that MDA will provide in support of the TCD’s assertions regarding capabilities and limitations. However, we found that Assessment Requirements Reviews can be held shortly before the planned delivery date—which affords no opportunity to build the test plan around the requirements identified in the review. MDA held Assessment Requirement Reviews in preparation for two of the previous three TCDs. The timing of these reviews in relation to the date of the TCD’s issuance suggests that they had little influence on MDA’s actual test plans. MDA officials stated that an Assessment Requirement Review is ideally held 18 months to 2 years prior to the issuance of the related TCD. However, we found that, for recently issued TCDs, the reviews were held much closer to the beginning of testing and the planned TCD delivery. For example, for the TCD issued in December 2017 that delivered 44 ground-based interceptors, MDA held this review less than 8 weeks in advance. Figure 4 depicts the timeline of the Assessment Requirements Review as compared to the start of testing for the TCD and the TCD delivery date. Because these reviews identify requirements that must be tested, the Assessment Requirements Review would ideally inform MDA’s test plans so that each component of the integrated capability could be adequately tested by the planned delivery date. But because the policy does not give exact requirements, process, and key milestones necessary to issue a TCD, MDA is able to hold an Assessment Requirements Review that merely acknowledges the results of tests already completed. These practices are consistent with our prior findings on MDA, which identified a lack of a management framework for delivering integrated capabilities, and showed that the lack of this framework resulted in concurrency, fragmentation of development activities, and delays for some originally planned capabilities. According to DOD’s guidance on acquisition and testing, a program’s test and evaluation strategy should begin with a review of requirements so that management can devise a test and evaluation strategy that generates the knowledge necessary to inform the acquisition and operational decisions of a program. Holding the Assessment Requirement Review so close to the planned delivery date affords no opportunity to build the test plan around the requirements identified in the review, and instead only ratifies the results of a test plan that was not necessarily developed with these requirements in mind. Undefinitized contract actions are authorized when the negotiation of a definitive contract is not possible in sufficient time to meet the government’s requirements and government interests demand that the contractor be given a binding commitment so that contract performance can begin immediately, and are subject to certain limitations. Our analysis of MDA contracting from fiscal year 2013 to fiscal year 2017 shows that the combined not-to-exceed price of all undefinitized contract actions entered in a given year, and the average time it takes to definitize undefinitized contract actions, have increased. GAO has reported that while this type of contract action may be necessary under certain circumstances, it is considered risky in part because the government may incur unnecessary costs if requirements change before the contract is definitized. Though MDA reports on its contracting activities in its annual BMDS Accountability Report, its reporting on details unique to undefinitized contract actions is often inconsistent or even absent. MDA’s Acquisition Management Instruction 5013.02-INS states that undefinitized contract actions will be used only on “an extremely limited basis” and only when negotiating contract terms before the contractor begins work is not feasible, such as when delay “would adversely impact mission accomplishment.” Our prior work, as well as that of the DOD inspector general, has found that this type of contract action is considered risky in part because the government may incur unnecessary costs if requirements change before the contract is definitized. Under undefinitized contract actions, substantial funds may be obligated before essential questions of contract scope and system design have been settled. Over the past 5 years, the average length of the undefinitized period and not-to-exceed price for MDA’s undefinitized contract actions have increased. Since 2013, MDA has entered into 11 undefinitized contract actions as shown in table 4. MDA’s use of undefinitized contract actions has fluctuated between one and five instances per year. The combined not-to-exceed price of all such contract actions entered into each year has increased, however, from $2.5 million in fiscal year 2013 to $1.4 billion in fiscal year 2017 as shown in figure 5. The average time to definitize these contract actions has steadily increased as well, from 78 days in fiscal year 2013, to over 600 days in fiscal year 2016 (see figure 6). Two undefinitized contracts were awarded in fiscal year 2017 and both exceeded 180 days without definitization. The value of MDA’s undefinitized contract actions entered into in a given year, as measured by their combined not-to-exceed prices, has risen significantly. The length of the undefinitized period has also risen on average. Together, these figures show that MDA may be initiating contractor work with incomplete knowledge of the requirements or costs involved. With regard to the increasing duration of the undefinitized period, MDA contracting officials told us that when they do not achieve definitization within 180 days, it is often because the contractor’s proposal is not adequately supported by a sound estimate, and negotiation past 180 days is necessary to achieve a fair and reasonable price. They added that the task of making this determination is made more complicated by the highly developmental nature of the work that MDA often conducts. For example, the 2015 undefinitized contract action for Aegis BMD SM-3 Block IIA test interceptors remained undefinitized for 629 days. According to MDA officials, this delay was due in part to the difficulty of accurately estimating costs on a highly developmental project. MDA officials reported having to develop a substantial knowledge base and consult closely with other DOD entities that would have insight into the costs of similar projects, after the undefinitized contract action was entered into. Using an undefinitized contract action in this case, however, was not without risk to the government. MDA made major financial commitments to a program before it fully understood the requirements or the costs. To mitigate the risks related to these contract actions, MDA’s Instruction requires all undefinitized contract actions to be supported by a determination and findings that articulates the requirement to begin performance prior to a negotiated agreement, the not-to-exceed price and the definitization schedule. The DFARS and MDA instruction require all undefinitized contract actions to be approved by the Director, MDA. MDA officials told us that they interpret the MDA Instruction to require that the Director, MDA, sign determination and findings documents in support of undefinitized contract actions. In addition, MDA contracting officials stated that to further mitigate the risks related to undefinitized contract actions, they, as a matter of practice, strive to obligate only the minimum amount of funding necessary to achieve definitization. Officials indicated that doing so limits the cost risk for the government, and forces programs to think carefully about what work needs to be done prior to definitization and its likely costs. While the Director, MDA is required to sign the determination and findings document, in one instance, this document specifically authorized the program to amend the requirements and not-to-exceed price without further formal approval from the Director, MDA. This specific undefinitized contract action was the largest MDA has entered into since fiscal year 2013. MDA entered into the undefinitized contract action in May 2017, authorizing the design, development, and initial production of the GMD program’s Redesigned Kill Vehicle (RKV), with a not-to-exceed price of $1.088 billion. This undefinitized contract action will allow MDA to continue with the RKV program despite significant cost, schedule, and performance risks, some of which the determination and findings document for the RKV undefinitized contract action acknowledged. When MDA released its acquisition strategy for the RKV in 2015, it predicted the phase covered by this contract action would cost approximately $800 million, covering initial testing and production of up to eight RKVs for initial fielding. Officials stated that the current contract action, with a not-to-exceed price of $1.088 billion, is for only four interceptors, although since it is undefinitized, that is subject to change. If the RKV program definitizes this contract action according to its schedule in May 2018, after 12 months, this will result in the definitization of the contract action with less than a year remaining before the program’s critical design review. In other words, the government will have agreed on contract terms, including costs, after much of the design work and related costs have been incurred. As of February 2018, MDA reports obligating $324 million, or 30 percent of the not-to-exceed price, to this undefinitized contract action. This is in excess of the $244 million planned for the undefinitized period at the time of award. As part of MDA’s annual BMDS Accountability Report, MDA reports on its planned performance and schedule for the coming fiscal year across several baselines, one of which is dedicated to contracting performance. MDA provides these baselines in response to statutory requirements. By establishing these baselines and then reporting any deviations in cost, schedule, or performance as a program proceeds, the BMDS Accountability Report provides information for oversight by identifying areas of program risk and their causes to decision makers. Baselines also help ensure that the full financial commitment is considered before embarking on major development efforts. These reports contain some information on undefinitized contracts. However, the information is often inconsistently presented and distributed throughout the report. Information specific to undefinitized contract actions is often absent, such as the following: the definitization schedule (that is, the expected time frame for finalizing contract terms); the amount of funds obligated to the action for the undefinitized period; or any changes to the above that have occurred since award of the action. As a result, decision makers in Congress have limited insight into how MDA is handling the risks that come with undefinitized contract actions, or how the programs enacting these contracts are performing. For example, these reports do not typically disclose how much has been obligated under an undefinitized contract action, or if this amount has increased since the contract was awarded. They do not report if the not-to-exceed value has been revised, or if the current definitization schedule adheres to the schedule determined at the time of award. Despite taking steps to improve the realism of the models it uses for ground testing, MDA continues to face challenges with its models. As a result, decision makers lack key information about BMDS performance, which could lead to miscalculations about how best to employ the BMDS and where to focus future capability development and investment. Specifically, MDA continues to encounter challenges with ensuring that its models and simulations are accredited for operational testing when they are used to test BMDS capabilities, resulting in uncertain performance outcomes in assessments supporting BMDS deliveries. Additionally, accreditation status and modeling limitations for these assessments are not communicated to most decision makers in Congress and some in the DOD and executive branch, limiting their insight into the data limitations underlying their decisions to make investments in and employ the BMDS. Finally, MDA’s assessment of the resources needed to validate and accredit its current models does not match requested funding for this effort. Since MDA cannot conduct enough system-level flight testing of the entire BMDS to completely assess BMDS performance, BMDS decision makers within MDA, DOD, Congress, and the executive branch use information from model-based ground tests to evaluate the operational effectiveness of the BMDS. The results from these model-based operational tests inform many acquisition and operational decisions, including: capability delivery, asset fielding, and interceptor inventory. Model-based testing also informs the warfighter’s tactics, techniques, and procedures to maximize BMDS effectiveness such as how many interceptors they will fire at a threat; and the capability gap analysis, the basis for warfighter requests for new capabilities. Recognizing the importance of models and simulations, MDA has taken steps to improve its ability to provide realistic modeled representations of the integrated BMDS necessary to assess operational performance. For instance: In 2009, MDA adjusted its test baseline, known as the Integrated Master Test Plan, and refocused its testing on collecting data needed for model development and accreditation. In 2016, MDA developed an update to a framework that is used to integrate the modeled representations of BMDS elements for assessments, and in 2017 continued an effort to develop digital end- to-end models and simulations to increase modeling capabilities and to expand the scope of BMDS assessments in the future. In 2017, MDA increased its collaboration with BMDS OTA to prioritize modeling needs and to address them. Despite these steps, MDA continues to deliver assets and capabilities using models that have not been accredited. In April 2016 and May 2017, we found that MDA had delivered EPAA Phase 2 capabilities in December 2015 using models that have not been accredited to support the delivery. MDA continued this practice by delivering two sets of BMDS-level capabilities since 2015, relying on operational tests conducted with models that were not accredited for use in such an assessment. The next delivery, expected at the end of the second quarter of fiscal year 2018, has also been tested using mostly unaccredited models. Relying on models that are not accredited for operational assessment increases the risk that modeling errors are not discovered, and a single undetected modeling error can distort the assessment results for the entire BMDS. DOD’s acquisition instruction requires that models and simulations used in operational assessments be verified, validated, and accredited. Although, as noted above, MDA is generally exempt from DOD acquisition policies, its own modeling and simulation policy requires that models and simulations used in operational assessments be verified, validated, and accredited for that use. Moreover, experts at DOD, MDA, and other institutions we interviewed agree that models should be verified, validated, and accredited to ensure that decisions based on models are informed by the correct data, and that the limitations of that data are understood. Additionally, according to DOD officials, defense acquisition programs that follow DOD acquisition regulations verify, validate, and accredit their models before operational assessments. However, our analysis indicates that the accreditation of many MDA models for operational assessment is, in most cases, not completed in time to support testing. In fact, many of them are not complete even after a capability has been delivered. Additionally, BMDS OTA officials said that models that are not accredited before delivery are not generally accredited later on. Figure 7 shows the percentage of accredited models that were used in the operational assessment of each BMDS capability delivery in 2015 through 2017. BMDS models are not accredited for operational assessment in large part for three reasons: (1) MDA does not provide sufficient evidence to the BMDS OTA for accreditation, (2) some models do not accurately represent BMDS performance in the real world, and (3) the threat model used to stimulate the test cannot be traced to the original intelligence community assessment. These challenges affect assessments across the entire BMDS engagement, from detection and processing of the threat to the intercept. While modeling uncertainty in any one of these areas affects uncertainty for the BMDS as a whole, factored together this uncertainty is magnified. Lack of Data: In some cases, MDA did not provide the BMDS OTA data needed to accredit the models used in operational ground testing, even though it is a signatory to the BMDS OTA’s accreditation plan. This plan identifies the data needed to achieve accreditation and directs that these data should be provided at least 60 days prior to official operational ground testing. MDA officials noted that the BMDS OTA recently changed its data requirements for accreditation and that they were unable to meet the new requirements in time to inform the capability deliveries shown above. However, we have found that MDA has encountered similar challenges since 2009. In fact, according to BMDS OTA officials, MDA has never completely provided the needed data on time and often missed numerous subsequent deadlines. In many cases, MDA failed to deliver the required data even after it tested and delivered its capabilities, and in some instances the data MDA provided did not meet the BMDS OTA’s requirements. As we have previously reported, disruptions to MDA’s testing program—such as flight test failures and delays—reduce the amount of real-world data that is available to accredit models. We also found that MDA proceeded with model-based ground tests and capability deliveries without leveraging the knowledge it planned to obtain from these tests. For example, in 2016 and 2017, we found that MDA delivered the European Phased Adaptive Approach Phase 2, even though key models, such as the model for Aegis Ashore, were unaccredited. Additionally, in other instances, MDA lacks technical data and other model information that is needed for accreditation, especially for models representing older systems. In 2017, as noted above, MDA and the BMDS OTA increased their collaboration to improve model accreditation status and, in 2017, co- developed a list of prioritized modeling deficiencies. Additionally, MDA is making progress in gathering and providing model data for operational assessment accreditation. MDA officials reported that based on this increasing collaboration, they expect that more models will be accredited in 2018. It is unlikely, however, that all models will achieve accreditation prior to the upcoming December 2018 delivery of the European Phased Adaptive Approach Phase 3. Modeling Deficiencies: Another reason that some models are not accredited for operational use is that certain models contain deficiencies, such as optimistic representations of BMDS performance and simplistic representations of BMDS environments. In these cases, while MDA initially supplied BMDS OTA with the relevant data, the model’s performance failed to meet the criteria for accreditation. Subsequently, MDA did not provide supporting rationale to explain these failures, or to explain how the modeling issues skewed the overall performance results. For example, in 2016, the BMDS OTA compared modeled sensor tracking data used in recent ground tests to real-world sensor tracking data and found that the models representing some radars performed better than the real-world radar. These modeling deficiencies can affect other BMDS elements that rely on sensor data and can artificially inflate BMDS performance. In one case, Aegis BMD’s launch-on-remote capabilities were over-estimated. As a result, the BMDS OTA could not accredit the models, and thus verify that ground test results that support Aegis’s launch-on-remote capability and other tested capabilities are credible and reliable. MDA is working to address this issue and it is too early to assess progress. Additionally, some models used in operational assessments are overly simplistic. For example, modeled representations of the battle scene in moments after intercept do not display the resulting complex scene that is caused by the large quantity of missile and interceptor debris. This deficiency limits insight into how the BMDS will perform during realistic ballistic missile attacks that could require follow-on interceptors to be launched, and how the BMDS will determine that the incoming threats have been destroyed. According to BMDS OTA and MDA officials, MDA’s efforts to develop digital models can help in this area, by providing more processing power and great scalability for engagement complexity; however, the capability is not expected to be mature until 2021 or later. Threat Models Cannot Be Traced Back to Underlying Threat Assessments: The value of ground test-generated data is dependent on the quality of the threat model that stimulates the test. However, the BMDS OTA has never been able to accredit threat models before operational testing, and in some cases, after testing. As is the case with other models, in some cases, the BMDS OTA does not receive data needed to accredit the models from MDA in a timely manner. Additionally, the BMDS OTA cannot trace the threat model used in ground testing to the threat model that MDA developed based on the intelligence community’s threat assessment. For example, according to BMDS OTA officials, during a past ground test event, a model representing a BMDS element rejected the intended threat model and instead ran its own internal threat model. As a result, the test did not reflect real world conditions where the entire BMDS would be exposed to the same threat stimulus. BMDS OTA officials said that MDA’s ground test architecture is not designed to generate the data needed to confirm that all elements are reacting to the same model during ground testing, meaning that unbeknownst to testers, other BMDS elements could also reject the approved threat model during testing. These deficiencies introduce ambiguity into the test results including the extent to which the BMDS operated as an integrated system of systems against a common threat set. BMDS OTA officials said that MDA is currently working on a pathfinder activity to help understand and rectify the traceability issue. Although the warfighter and other decision makers inside DOD, Congress, and the executive branch rely on models to provide information about BMDS effectiveness, MDA’s capability delivery documentation does not include information about the quality of modeling data. Specifically, MDA’s TCD memos and OCB change packages, which describe technical capabilities delivered to the warfighter and their limitations, do not discuss the extent to which the models used to assess the new capability are verified, validated, and accredited for assessment, or how ground test results were affected by model limitations. As a result, decision makers do not have complete information about the validity of the capability assertions in these documents and how much confidence should be placed in reported BMDS performance. According to Standards for Internal Control in the Federal Government, decision makers need access to reliable and timely information to make operational decisions. Additionally, according to DOT&E guidance, in cases where models and simulations cannot be validated and accredited, any modeling results should be caveated with a clear explanation of which areas of performance assessment could be affected by the lack of accreditation. Lack of such information could lead to miscalculations about how best to employ the BMDS or uninformed decisions about where to focus future capability development and investment. While the BMDS OTA has recently begun to brief some combatant commands on how modeling limitations impact the warfighters’ understanding of delivered capabilities, these briefings are not readily available to other stakeholders and decision makers, such as cognizant congressional committees or others in DOD and the executive branch. In its report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017, the House Armed Services Committee requested that MDA brief the House and Senate Armed Services Committees on the accreditation status of models used in testing indicating that congressional decision makers benefit from such information. Including information about model accreditation and limitations in TCD and OCB packages would ensure decision makers in DOD, Congress, and the executive branch have the same necessary information to inform their decisions. Moving forward, the Director, MDA will have to make difficult decisions on balancing funding priorities, including the need to adequately fund the validation and accreditation of models. MDA has started to make progress validating and accrediting existing models using DOT&E and OTA recommended criteria. However, MDA’s assessment of the resources needed to validate and accredit its current models and simulations does not match funding levels it requested for this effort. MDA determined that it needs an additional $99 million for fiscal years 2017- 2022 to accredit BMDS models and simulations. MDA requested $395.7 million from 2017-2022 to meet modeling and simulation needs. Figure 8 shows MDA’s fiscal year 2018 funding request for model development and the additional funding, over the 5 year period, that would be required to verify, validate, and accredit its models. Additionally, funding is not requested for the verification, validation, and accreditation of some models used in BMDS assessments because MDA officials said that they do not have written agreements with the military services that operate these elements defining funding and technical requirements for this purpose. Specifically, while the Army and the Air Force develop and accredit models to support their missions for the Patriot, the Space-based Infrared System, and the BMDS communication systems, these models have to be modified to accurately represent their BMDS roles for BMDS operational assessments. While MDA does fund the development of the Space-based Infrared System and BMDS communication models for use in BMDS assessment, it does not fund the verification, validation, and accreditation of these models or the Patriot model. Additionally, MDA officials report that it currently has no written agreements with the Army or the Air Force to define funding and technical requirements for these models for BMDS assessment. Because these requirements are not formally agreed upon and communicated between MDA and the Services, the verification, validation, and accreditation of these models is often unfunded, further complicating MDA’s and the BMDS OTA’s verification, validation, and accreditation analyses. Standards for Internal Control in the Federal Government states that organizations should assign responsibility and delegate authority to achieve their objectives. Additionally, in our prior work we found that all acquisitions efforts should have well defined roles and responsibilities for all stakeholders. Although MDA and the BMDS OTA were able to accredit the Space-based Infrared System and BMDS communications models in 2017, future upgrades to these BMDS elements will require verification, validation, and accreditation to ensure that they continue to accurately reflect the real-world system. Moreover, DOD and Congress have instructed the transfer of missile defense programs that have received full-rate production authority, which would include THAAD and Aegis BMD, to the military services for operations, which may increase the scope of this issue. Even though these systems will no longer be under MDA management, they will still be part of the BMDS and, like the Space-based Infrared System and Patriot, will require model updates to reflect changes to the tactical systems. However, as noted above, there are currently no agreements between MDA and the services to fund these modeling requirements, increasing the risk that model upgrades will not be implemented, thus preventing their verification, validation and accreditation for operational testing. If MDA and the services do not agree to the technical and funding requirements for models of elements used in BMDS testing but operated by the services before the elements are transferred, disagreements will likely continue to impede the verification, validation, and accreditation of those models, decreasing confidence in test results and understanding of how the real-world BMDS will operate. MDA continues to make mixed progress in delivering assets and integrated capabilities. Moreover, its processes for communicating the extent and limitations of these capabilities can be improved. While MDA met several significant milestones in fiscal year 2017, MDA failed to deliver either of its two most recent packages of integrated capabilities on time, and its plans for future capabilities, even in the near term, continue to be characterized by a high degree of fluidity. MDA has recently taken steps to document in policy its processes for communicating the extent and limitations of deliveries of integrated capabilities. However, these policies still do not clearly specify the exact requirements, process, and key milestones needed to complete some capability deliveries. Moreover, they do not require that all integrated BMDS capabilities are delivered using a process that describes their performance and limitations at the level of the BMDS, rather than at the element level, increasing the risk of delivered capabilities not being communicated properly to their end users: the warfighter. In addition, while no contracting strategy can be completely risk-free, trends in the not-to-exceed prices and duration of MDA’s undefinitized contract actions indicate a troubling pattern. Making major commitments to large developmental programs before important questions of scope and price have been determined exposes the government to increasing amounts of risk. MDA’s inconsistent and incomplete reporting on its use of undefinitized contract actions makes it even more difficult for Congress and decision makers to exercise oversight and track these risks. Finally, deficiencies and limitations in the models used to support operational testing of the BMDS, including the lack of accreditation, provides decision makers with some flawed information about BMDS performance. Because flight tests cannot provide complete information on BMDS performance, it is important that ground tests can be relied upon to provide accurate and representative data. This flawed information could lead to miscalculations about how best to employ the BMDS and uninformed decisions about where to focus future capability development and investment. If steps are not taken to improve BMDS models and to communicate their status and limitations clearly to decision makers, there is a risk that the BMDS will not perform as expected when needed to defend the United States at home, its regional allies, and deployed forces. We are making the following six recommendations to the Under Secretary of Defense for Research and Engineering: The Under Secretary of Defense for Research and Engineering should ensure that the Director, MDA, takes the following actions: The Director, MDA should revise MDA policies to require that all integrated capabilities—capabilities that require integration of two or more elements—be included in a Technical Capability Declaration. (Recommendation 1) The Director, MDA should clarify, in written policy, the exact requirements, process, and key milestones necessary to issue a Technical Capability Declaration, including a requirement that the Assessment Requirements Review be held in such a time frame that it can provide meaningful input to MDA’s test plans. (Recommendation 2) The Director, MDA should include information on current undefinitized contract actions in the BMDS Accountability Report, including the not-to- exceed price, the definitization schedule, the amount of funds obligated for the undefinitized period, and any changes since the contract action was entered into. (Recommendation 3) The Director, MDA should ensure that models used for operational tests are validated and accredited for such assessments. To help achieve this, MDA should provide the BMDS Operational Test Agency all evidence previously agreed to and needed to accredit models before ground testing events, as specified in the BMDS OTA accreditation plan. (Recommendation 4) The Director, MDA should include in capability delivery packages, such as the Technical Capability Declaration memos and Operational Capability Baseline change packages, the following: a. The verification, validation, and accreditation status of the models used in operational ground tests; and b. Modeling and simulation limitations that affect operational ground test results. (Recommendation 5) The Director, MDA and the Secretaries of the Armed Services responsible for operating BMDS elements should develop written agreements as soon as feasible for modeling and simulations technical and funding requirements for any BMDS elements that are service- operated but represented in BMDS performance assessments. (Recommendation 6) DOD provided written comments on a draft of this report. DOD’s comments are reprinted in Appendix I and summarized below. DOD and MDA also provided technical comments which were incorporated as appropriate. In its response, DOD concurred with five out of six of our recommendations, and partially concurred with one. In addition, DOD recommends the closure of five recommendations. However, we believe that it is premature to close out four of the five recommendations until all of its planned actions are fully implemented. For the remaining recommendation, we agree with DOD and will undertake the steps to close out the recommendation. DOD partially concurred with our first recommendation to revise MDA policy to require all integrated capabilities—capabilities requiring the integration of two or more elements— be declared and delivered via the Technical Capability Declaration (TCD) process. While DOD agreed with the intent of this recommendation, DOD stated that the Director, MDA will determine which major integrated capabilities should be delivered via the TCD process. The Department also noted that the agency developed a list of such capabilities that it will update annually. These actions are an improvement over the current process, but they do not meet the full intent of our recommendation. Specifically, the list of future TCDs that MDA produced is not inclusive of all future integrated capabilities. In addition, MDA’s policy does not articulate definitive standards for identifying capabilities requiring a TCD and leaves this decision to the discretion of the Director, MDA. As we’ve identified in this report, some capabilities have been deleted from or added to planned TCDs without explanation. The new policy leaves open the possibility of continued inconsistent application of the TCD process. This poses the risk that not all integrated capabilities will be delivered to warfighters with comprehensive information about their performance and limitations at the BMDS level. We continue to believe that in order for the agency to meet the full intent of our recommendation, it should establish in policy a clear, definitive standard for which capabilities require a TCD for delivery. In addition, DOD recommends the closure of the first two recommendations to (1) revise MDA’s policies to require that all integrated capabilities be included in a TCD; and (2) clarify the exact requirements, process, and key milestones necessary to issue a TCD as it contends that its new Policy Memorandum 90 meets the intent of our recommendation. This memorandum is dated March 28, 2018 and was provided to us on May 8, 2018. As such, we have not had an opportunity to fully assess the memorandum and the process laid out in it. However, as noted above, this new Policy Memorandum 90 leaves open the possibility of continued inconsistent application of the TCD process. This poses the risk that not all integrated capabilities will be delivered to warfighters with comprehensive information about their performance and limitations at the BMDS level. In order for the agency to meet the full intent of our recommendation, MDA should establish in policy a clear, definitive standard for which capabilities require a TCD for delivery. In addition, DOD writes that the same Policy Memorandum 90 satisfies the second recommendation to clarify the exact requirements, process, and key milestones necessary to issue a TCD. We believe it necessary to wait until MDA delivers a TCD in accordance with the new parameters set out in the memorandum before this recommendation can be closed. For the third recommendation to include information on current undefinitized contract actions in the BMDS Accountability Report, DOD states that the BMDS Accountability Report for 2018, approved by the Director, MDA on March 9, 2018 provides the information necessary for closure. We concur with this assessment will take the necessary steps to close this recommendation. In responding to our fourth recommendation requiring the Director, MDA to ensure that models used for operational tests are validated and accredited for such assessments, DOD states that MDA is actively working with the BMDS Operational Test Agency (BMDS OTA) to resolve any issues associated with, and the reporting of, modeling limitations. However, as we found in this report, according to BMDS OTA officials, MDA has never completely provided the needed data on time and often missed numerous subsequent deadlines to support the validation and verification of its models from BMDS OTA. Consequently, we believe it is premature to close out the fourth recommendation, but we will continue to track MDA’s progress and timeliness in providing the evidence previously agreed to and needed to accredit models before ground testing events. In responding to our fifth recommendation to include the verification, validation and accreditation status used in operational ground tests in capability delivery packages, such as TCDs and Operational Capability Baseline change packets, DOD states that MDA has made significant progress over the last year in achieving the BMDS OTA accreditation of MDA’s models and simulations. In addition, it states that the addition of MDA policy will ensure the verification, validation and accreditation status of each model will be discussed and assessed by the Operational Capability Baseline Working Group for each capability delivery package. We agree that MDA has made significant progress over the last year, however, we believe it premature to close out the recommendation until BMDS OTA can ensure that the status of the models used, as stated in our recommendation, are included in subsequent capability delivery packages such as the Technical Capability Declaration memos and Operational Capability Baseline change packages. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Undersecretary of Defense for Research and Engineering, and to the Director, MDA. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XI. Aegis Ballistic Missile Defense is the naval component of the Missile Defense Agency’s (MDA) Ballistic Missile Defense System. It consists of the Aegis Ballistic Missile Defense Weapon System (AWS), including a radar and Standard Missile-3 (SM-3) interceptors. MDA is developing the Aegis BMD weapons system in versions called spirals that expand on preceding capabilities. Deliveries of the spirals are planned to support MDA’s capabilities for Regional and Homeland defense. Specifically, MDA delivered Aegis BMD 5.0 Capability Upgrade (5.0CU) in fiscal year 2016 for the European Phase Adaptive Approach (EPAA) Phase 2, but had not verified its full capability before delivery. In fiscal year 2017, the program delivered Aegis BMD 4.1 on ships with legacy hardware in order to provide similar ballistic missile defense capabilities to those of Aegis BMD 5.0 CU. MDA plans to deliver additional upgrades for such ships in 2019 and 2023. Additionally, the program is developing Aegis BMD 5.1 with upgrades for EPAA Phase 3, planned for December 2018. The Aegis BMD program also plans to deliver additional upgrades in 2023, called Aegis BMD 6.0, capitalizing on Navy’s upgrades to the Aegis radar. For specifics on Aegis Ashore and the Aegis BMD SM-3 interceptors, see appendixes III, IV and V, respectively. Table 5 provides key fiscal year 2017 AWS program facts. MDA resolved software challenges and testing delays for Aegis BMD 5.0 CU and delivered Aegis BMD 4.1, expanding the number of ships with EPAA Phase 2 missile defense capabilities. While MDA delivered initial Aegis BMD capabilities for EPAA Phase 2 with AWS 4.0.2 prior to the December 2015 Technical Capability Delivery (TCD), planned capabilities would not be available until the subsequent versions—Aegis BMD 5.0CU and 4.1—completed development and fielding. However, both encountered technical challenges and schedule slips, as well as testing delays. In fiscal year 2017, MDA continued work on Aegis BMD 5.0 CU and 4.1 and overcame some of these challenges. Specifically: Aegis BMD 5.0 CU: MDA completed Aegis BMD 5.0 CU certification late in fiscal year 2017, resolving prior technical challenges and testing delays. Specifically, MDA implemented fixes to significant defects that were in the software at the time of initial delivery. Additionally, in December 2016 and August 2017, MDA flight tested fleet and ship self-defense capability against medium-range ballistic missiles in terminal phase of flight –a capability initially planned for December 2015. Aegis BMD 4.1: MDA also delivered Aegis BMD 4.1 in August 2017, after multiple schedule slips. While initially scheduled for delivery in support of the EPAA Phase 2 TCD, the spiral was first delayed to the middle of fiscal year 2016 due to technical and cost challenges. Subsequently, activities for Aegis BMD 4.1 were suspended in 2016 to reassess the program and delivery was delayed to September 2019, to align it with a related Navy effort. In fiscal year 2017, MDA resumed activities for Aegis BMD 4.1, and certified the delivery of ballistic missile defense capabilities in August 2017. These ballistic missile defense capabilities are currently being integrated with the Navy’s larger Aegis combat system, into a single computer program called Aegis Baseline 5.4, which is still scheduled for delivery in September 2019. According to MDA’s program management documentation, Aegis BMD 5.1 is on track for delivery in support of EPAA Phase 3 in December 2018, as the program overcame or reduced key risks. For example, despite a lack of schedule margin, the program met a key software development milestone in June 2017, and delivered it for system-level ground tests, which will assess integrated BMDS capabilities for EPAA Phase 3. It also met all objectives in a fiscal year 2017 flight test. Additionally, the program reduced the ongoing programmatic risk to Aegis BMD 5.1 that could affect its interoperability with other elements. However, testing to demonstrate the risk has been resolved is not yet complete. According to the Aegis BMD program management documentation, upgrades to the Aegis communication management system, which are managed by the Navy, lag behind MDA’s Aegis BMD 5.1 development schedule. The lag in development could result in integration challenges between these upgrades, and could impact Aegis integration with other BMD elements, including the capability to intercept threats entirely on tracks from forward based radars – called Engage on Remote. In fiscal year 2017, MDA and the Navy took steps to mitigate this risk. However, MDA has yet to demonstrate the fixes in a flight test. Moreover, MDA documentation indicates that if issues are discovered, they could impact the Aegis BMD 5.1 mission and could result in interoperability restrictions against Aegis BMD 5.1. Lastly, Engage on Remote could also be affected if development challenges with C2BMC, which forwards threat track data from forward based sensors to Aegis BMD, are not mitigated. For more information on the C2BMC element, see Appendix VI. In fiscal year 2017, MDA continued to develop Aegis BMD capabilities that are expected to be deployed in 2023. Specifically, MDA continued developing and maturing capabilities for an effort it started at the end of fiscal year 2016 called Aegis BMD 6.0. Aegis BMD 6.0 is planned to provide capabilities against more threat types, larger raids, better discrimination, and improved communication with its interceptors. Additionally, it takes advantage of the Navy’s effort to replace the Aegis SPY-1 radar with a more capable SPY-6, and to overhaul the entire Aegis combat system. While it is early in development, MDA has begun identifying knowledge gaps that could diminish planned capabilities and took initial steps to address disconnects between Navy’s effort and its own. According to program management documentation, MDA plans to develop an Aegis BMD 6.0 acquisition baseline late in fiscal year 2018. The acquisition baseline is expected to detail Aegis BMD 6.0 planned capabilities, its schedule, and cost. MDA is also planning additional upgrades to Aegis BMD 4.1, called Aegis BMD 4.2. Specifically, MDA plans to collaborate with the Navy to integrate and field refurbished and upgraded SPY-1 Antennas onto legacy ships. This modification improves radar sensitivity resulting in improved tracking capabilities and is planned for delivery in fiscal year 2023. MDA plans to begin developing and maturing technologies for this upgrade in fiscal year 2019, and baseline the effort at the end of fiscal year 2020. Aegis Ashore is a land-based, or ashore, version of the ship-based Aegis Ballistic Missile Defense (BMD). Aegis Ashore is designed to track and intercept ballistic missiles in the middle of their flight using Aegis BMD Standard Missile-3 (SM-3) interceptors. Key components include a vertical launching system, interceptors, and an enclosure, called a deckhouse, that contains the SPY-1 radar and command and control system. DOD deployed an Aegis Ashore test facility in Hawaii in April 2014. The test facility has been used to flight test Aegis Ashore, and in some cases, Aegis BMD SM-3 interceptors. MDA deployed its first operational site in Romania in fiscal year 2016 as part of the European Phased Adaptive Approach (EPAA) Phase 2, and is currently constructing a second site in Poland for delivery in 2018 as part of EPAA Phase 3. Both operational sites are intended to provide additional coverage for the defense of Europe. Aegis Ashore will share many components with the sea-based Aegis BMD and will use future versions of the Aegis weapon system currently in development, including the Aegis BMD SM-3 Block IIA interceptor. The Missile Defense Agency (MDA) plans to equip Aegis Ashore with a modified version of the Aegis weapon system software that will share many components with the sea-based Aegis BMD. For further details on the Aegis Weapon System and Aegis BMD interceptors, see appendixes II, IV, and V. Table 6 provides key fiscal year 2017 Aegis Ashore program facts. Construction of the Aegis Ashore site in Poland has not overcome an initial delay that was largely due to contractor performance issues. MDA and the Army Corps of Engineers, which manages military construction at the site, took a number of measures to mitigate or reverse these delays, including working to modify the Army Corps of Engineers’ contract to permit joint occupancy of the site for a longer duration, and for the contractor to provide more granular project data to the Army Corps of Engineers. Also, the contractor has moved key personnel on site, and added a second shift. Program officials stated that they have withheld some award fees from the contractor over these issues. Program documentation states the contractor continues to be late in submitting documentation needed to move forward. If this and other issues are not corrected, it will increase the risk of further schedule slips. To make up for these delays, MDA introduced increasing levels of concurrency into its schedule, and shortened key phases of the delivery process. MDA has reduced the time allotted for Installation and Checkout activities from 16.5 months to 6.5 months. These activities would occur concurrently with the final phases of construction at the site. For example, installation of the deckhouse at the Poland site was scheduled for the end of the fourth quarter, fiscal year 2017, but was delayed to the end of the first quarter, fiscal year 2018. Despite this, installation and checkout activities still began in the fourth quarter of fiscal year 2017. The Navy’s systems testing procedures, which are needed prior to operational acceptance of the site, will have occurred mostly concurrently with the final stages of MDA’s construction and installation work on the site. MDA maintained through all of fiscal year 2017 that the site would be ready for delivery in December 2018 as scheduled. Program documentation noted that further program concurrency presented risks not only to the Aegis Ashore program, but to multiple elements relying on timely delivery of the site, up to and including the scheduled EPAA Phase 3 declaration. Early in fiscal year 2018, MDA announced that construction of the Poland site would not be completed until at least December 2019. Both Aegis Ashore sites in Europe have faced continuing challenges in several areas. For example, attrition problems have complicated efforts to keep the Poland site’s construction on schedule. These problems led to several persistent vacancies in important positions during the fiscal year. At one point in fiscal year 2017, the program lacked a full-time onsite program manager or dedicated government safety engineer, as well as other important positions. These roles had been, up to that point, filled by deputies in an acting capacity or were divided among others. MDA officials have also pointed to morale problems at the Poland site, where conditions for sailors are relatively austere. The Romania site has required more post-delivery support from MDA than was originally planned, largely due to quality and design issues in several areas. This post-construction wrap-up work was accounted for in MDA’s plans, but was originally planned to be complete by late fiscal year 2016. However, MDA has continued to provide warranty-like support in areas such as water supply, seismic-activity certification, and compatible electrical systems. Program officials stated that many of these issues arose from having to adapt Aegis systems to Romanian infrastructure, which in some cases proved to be a more complicated task than expected. Despite the issues encountered, the Romania site has remained operational throughout all of this work. The Aegis BMD Standard Missile-3 (SM-3) Block IB is a ship- and shore- based missile defense system interceptor designed to intercept short- to intermediate-range ballistic missiles during the middle stage of their flight. The Aegis BMD SM-3 interceptor has multiple versions in development or production: the SM-3 Blocks IA, IB, and IIA. Compared to the Aegis BMD SM-3 Block IA, the Block IB features an enhanced target seeker for increased discrimination, an advanced signal processor for engagement coordination, an improved throttleable divert and attitude control system for adjusting its course, and increased range. The Aegis BMD SM-3 Block IB interceptor is linked with the Aegis Ballistic Missile Defense (BMD) Weapons System and Aegis Ashore. For additional information about the Aegis Weapon Systems, see Appendix II and for Aegis Ashore, see appendix III. Recent technical and production problems have continually delayed a decision to authorize full production of the Aegis BMD SM-3 Block IB due to reliability concerns. Since fiscal year 2015, Aegis BMD SM-3 Block IB production has been delayed by several technical issues. In response to a GAO recommendation, program officials in 2015 delayed the decision to enter full-rate production until they could implement further testing and design changes. In fiscal year 2016, two failures during testing forced a suspension of interceptor deliveries, causing the program to miss its delivery target for the year. Table 7 provides key fiscal year 2017 Aegis BMD SM-3 Block IB program facts. The Aegis BMD SM-3 Block IB experienced two failures in fiscal year 2016, the investigation of which forced a temporary suspension of interceptor deliveries. As a result, MDA delivered only 33 interceptors out of a planned 47 for the year. MDA added the remaining interceptors to its planned delivery for fiscal year 2017, resulting in a target of 54 interceptors. The program successfully delivered 55 interceptors over the course of the year, and thus made up for the existing backlog. The program tracked two technical risks during fiscal year 2017, one of which it succeeded in removing, and another which will not be implemented into the production process until the third quarter of fiscal year 2018. According to MDA officials, the program successfully managed the transition of the production of the system’s Throttleable Divert and Attitude Control System to a new facility without experiencing significant delays or quality issues. In the other case, a component that was implicated in a previous test failure is currently undergoing a redesign. Program officials stated that they plan to have the new design certified by the second quarter of fiscal year 2018, and incorporated into the production line by the end of the third quarter. As we reported last year, problems testing a redesigned third-stage rocket motor on the Aegis BMD SM-3 Block IB forced the program to postpone its planned full production decision until the second quarter of fiscal year 2017, and successive delays have ensued. Though the tests validating the redesign were successful, the Undersecretary of Defense for Acquisition, Technology, and Logistics issued an Acquisition Decision Memorandum in February 2017 requesting an additional flight test in fiscal year 2017 as well as supporting analyses from the Director, Operational Test and Evaluation and the office of Cost Assessment and Program Evaluation. The memorandum issued these requirements in support of a planned full production decision in the first quarter of fiscal year 2018. Full-rate production for the Aegis BMD SM-3 Block IB was initially scheduled for fourth quarter, fiscal year 2012. MDA had one Aegis BMD SM-3 IB flight test scheduled for fiscal year 2017 at that time (FTM-24), and added another (FTM-26) in response to the Acquisition Decision Memorandum’s requirement, but neither were held as scheduled. MDA delayed FTM-24 to fiscal year 2020, in order to first analyze the new target missile’s performance to ensure it would work within the parameters of the test. While FTM-24’s delay was due to its very specific test design, its timing in fiscal year 2017 would have afforded additional information about the reliability of the interceptor that will not now be available before the full production decision. MDA deleted FTM-26 several months after adding it, and moved its objectives to coincide with NATO’s Formidable Shield – 17 naval exercises which took place in early fiscal year 2018 (wherein the system did achieve a successful intercept). As a result of the delay in conducting a test for production-readiness, the program is currently planning on a production decision in second quarter, fiscal year 2018. The Aegis Ballistic Missile Defense (BMD) Standard Missile-3 (SM-3) interceptor has multiple versions in development or production: the Aegis BMD SM-3 Blocks IA, IB, and IIA. The latest version, the Aegis BMD SM- 3 Block IIA interceptor, provides increased speed and range, more sensitive seeker technology, and an advanced kinetic warhead than previous versions. It is expected to defend against short-, medium-, and intermediate-range ballistic missiles. Additionally, most of the Aegis BMD SM-3 Block IIA components will differ from other the prior versions, and therefore requires new technology to be developed specifically for it. For additional information on the Aegis BMD SM-3 Block IB interceptor, see appendix IV. Initiated in 2006 as a cooperative development program with Japan, the Aegis BMD SM-3 Block IIA program was added as a capability to support the European Phased Adaptive Approach (EPAA) Phase 3 architecture to defend against longer-range threats. The Aegis BMD SM-3 Block IIA interceptor is planned to be fielded with Aegis Weapons System 5.1. For additional information on Aegis Weapons System, see appendix II. Table 8 provides key fiscal year 2017 Aegis BMD SM-3 Block IIA program facts. The first intercept flight test using the Aegis BMD SM-3 Block IIA interceptor, SFTM-01, was conducted in February 2017. It was originally scheduled for fiscal year 2016, but was delayed to evaluate technical issues discovered during previous tests. During this test, the Aegis BMD SM-3 Block IIA interceptor successfully engaged a medium-range ballistic missile (MRBM) target. The next intercept flight test, SFTM-02, occurred 4 months later, in June 2017. However, the interceptor failed to reach its MRBM target during this test. MDA convened a failure review board to identify the cause of the failure, and concluded that the failure was not attributable to a fault in the design or performance of the interceptor itself. The Navy is currently considering changes to its tactics, techniques, and procedures to address the findings from the failure review board. Two prior non-intercept tests using the Aegis BMD SM-3 Block IIA interceptor, although considered successful, showed potential design issues with the missile’s guidance system, which steers the interceptor to the target. Consequently, the program decided to develop a replacement component. The redesigned component passed initial acceptance testing and the program plans to employ it during FTM-29, which is scheduled for the second quarter of fiscal year 2018. The program continues to experience unit cost growth due to several factors, including decreases in the total amount being procured and increases in shipping costs. According to MDA officials, shipping costs grew because MDA underestimated the cost to ship missile components manufactured in Japan to the US on US-flagged ships. MDA officials stated that they did not adequately account for these costs when establishing the original baseline cost. Since 2014 the program’s unit cost has increased by almost 60 percent, from $24 million in fiscal year 2014 to $39 million in fiscal year 2017. Program officials stated that they do not expect either of these issues to lead to further cost growth in the future. The Aegis BMD SM-3 Block IIA program has limited schedule margin to address any issues prior to operational testing to meet the EPAA Phase 3 declaration by the first quarter of fiscal year 2019. For the EPAA Phase 3 declaration, the Aegis BMD SM-3 Block IIA interceptor must demonstrate the ability to intercept an intermediate-range ballistic missile (IRBM) target using remote sensor data. The program has one flight test, FTM-29, prior to its operational flight test. This test was originally scheduled for the first quarter of fiscal year 2018, but was delayed to the second quarter, and the launch site for the test was moved to the land-based Aegis Ashore facility in Hawaii. Adapting the Aegis BMD SM-3 Block IIA interceptor for a land-based test delayed this test further, from the first quarter to the second quarter of fiscal year 2018. Despite these delays, the dates for the operational test of the Aegis BMD SM-3 Block IIA—FTO-03 E1—and the EPAA Phase 3 declaration remain unchanged: the third quarter of fiscal year 2018 and first quarter of fiscal year 2019, respectively. That leaves the program approximately 3 to 5 months to resolve any issues discovered during FTM-29, prior to the operational test, which is needed to support the EPAA Phase 3 declaration. In addition, FTM-29 will be the Aegis BMD SM-3 Block IIA interceptor’s first test against an IRBM, first test of its ability to engage a target using remote sensor data, and the first test with to incorporate the new missile guidance system component incorporated. As a result of the complex test environment and limited time between tests, any significant failure during FTM-29 could lead to a delay in the EPAA Phase 3 declaration. Appendix VI: Command, Control, Battle Management, and Communications (C2BMC) C2BMC is a global system of hardware—workstations, servers, and network equipment—and software that integrates all missile defense elements of the Ballistic Missile Defense System (BMDS). Specifically, it allows users to plan operations, see the battle develop, and manage BMDS sensors. As the integrator, C2BMC enables the defense of a larger area than the individual BMDS elements operating independently and against more missiles simultaneously, thereby potentially conserving interceptor inventory. MDA is developing C2BMC in spirals, or software and hardware upgrades designed to improve various aspects of the integrated BMDS performance. MDA fielded Spiral 6.4 in 2011 and plans to complete the fielding of Spiral 8.2-1 by March 2018. The program is working on efforts for additional capabilities in the future. Table 9 provides an overview of C2BMC spiral development and table 10 provides key fiscal year 2017 C2BMC program facts. At the beginning of 2017, MDA completed the Spiral 6.4 assessment, which was designed to enable capabilities for Increment 3, Near Term Discrimination Improvements for Homeland Defense. The spiral performed nominally during testing, providing discrimination tasking from a forward-positioned radar for long-range threats, multiple-radar discrimination tasking of a threat, and several fixes related to sequencing and timing of messages. These tests provided performance data, which informed MDA’s Technical Capability Delivery for Increment 3 in March 2017. Despite this success, however, the spiral continues to have cyber vulnerabilities that place the BMDS operations in certain geographic areas at risk. For example, Spiral 6.4 has been in use since 2011, and its operating system (Windows XP) as well as other supporting software products will remain in the field well past their end of life cycle and support by vendors. According to program documentation, upgrading these systems before they are replaced by subsequent spirals is cost prohibitive, but program documentation does not indicate the cost. While MDA is in the process of fielding Spiral 8.2-1 to replace Spiral 6.4 in the Strategic, Northern and Pacific Commands by March 2018, Spiral 6.4 will remain operational at the European and Central Commands until the delivery of Spiral 8.2-3 in early fiscal year 2019. According to fiscal year 2017 MDA program reviews, the likelihood that critical cyber vulnerabilities are discovered is low for the remaining two years, and, according to MDA, no fielded system has been exploited to date. However, known vulnerabilities have been exploited in lab experiments. Moreover, MDA program documentation from fiscal year 2017 acknowledges that new security deficiencies could still be discovered, and if those or known deficiencies are exploited, mission capabilities like BMD planning, radar control, track reporting, and situational awareness may be significantly degraded. MDA collaborated with Combatant Commands to monitor and minimize the risks. In fiscal year 2017, MDA mitigated developmental risks necessary to complete the development and testing of C2BMC Spiral 8.2-1 in fiscal year 2018. Spiral 8.2-1—planned to support Enhanced Homeland Defense capabilities—was initially planned for delivery by December 2017, but, according to MDA officials, the delivery was delayed to allow additional time for assessment of results from BMD system-level ground test campaign called Ground Test (GT)-07a. Prior to GT-07a, the program identified risks that could affect interoperability with other elements and threat tracking, but, according to recent program documentation, MDA implemented fixes to many of them before the testing began. At the time of our assessment, MDA’s analysis was ongoing. However, MDA plans to complete its fielding by March 2018. MDA has begun testing Spiral 8.2-3, which is planned for fielding throughout fiscal year 2019, but it continues to face technical challenges and cost risk. This spiral is to replace Spiral 8.2-1 at the Strategic, Northern and Pacific Command, and Spiral 6.4 at European and Central Commands. According to MDA, the spiral is designed to enable a five-fold increase in the size of area that can be defended by the BMDS, and is an integral part of EPAA Phase 3. However, the program continues to track a prior risk and identified a new risk to an element level C2BMC capability needed for EPAA Phase 3 called Engage on Remote. Specifically, program documentation indicates that processing of data about threat missile flight paths, known as threat tracks, has issues that could reduce the likelihood of the successful engagements utilizing Aegis Ballistic Missile Defense in Engage on Remote scenarios. C2BMC has faced similar challenges with threat tracking capabilities for prior spirals, which required delays certain aspects of integration with Aegis BMD until fixes were implemented. MDA is implementing fixes to these issues in Spiral 8.2-3, which once fielded should resolve these integration issues, but it still needs to assess them in the ongoing test campaign for EPAA Phase 3. Since 2016, MDA Spiral 8.2-3 costs have increased by about 20 percent, from $68 million to $82 million. According to MDA documentation, the increase is due to several factors, including higher than expected costs for architecture and system engineering, as well as testing and integration requirements, and additional requirements for cybersecurity, which increased algorithm complexity required for Engage on Remote. MDA officials stated that some of the cost increases for cybersecurity were driven by DOD-wide cyber requirements, implemented in March 2014. Further cost increases, according to MDA, were driven by a warfighter request for geographic redundancy. While the original concept for 8.2-3 had the suites for Central and European Command at each location, MDA met the warfighter request by installing the suites at different locations so that losing a single node would not result in the loss of all capability for the warfighter. According to the C2BMC program, implementation of this requirement cost about $6.4 million. MDA identified element requirements for Spiral 8.2-5, which is planned for delivery in fiscal year 2021. This Spiral will integrate the Long Range Discriminating Radar and provide additional BMDS-level planning, track processing, and battle management capabilities. While MDA currently plans to hold the Preliminary Design Review by March 2018 and may report its acquisition baseline for the first time in the subsequent BMDS Accountability Report, program management documentation has already identified two specific challenges: Program documentation indicates that the Northern Command has concerns about performance issues associated with threat track processing, called System Track, for GMD engagements. While this is a key C2BMC function, track processing has been a challenge for other spirals supporting prior and upcoming regional and homeland defense capabilities. MDA is currently working with stakeholders to address this issue. The program also identified disconnects between LRDR, GMD and C2BMC, which are driving up element development and test costs, and delayed some capabilities initially planned to be delivered along with the LRDR. MDA developed a mitigation plan and established a working group to coordinate with stakeholders to address these issues. Appendix VII: Ground-based Midcourse Defense (GMD) The GMD system is a missile defense interceptor system designed to defend the United States against a limited intermediate and intercontinental ballistic missile attack from countries such as North Korea and Iran. To counter such threats to the homeland, GMD, in conjunction with a network of ground-, sea-, and space-based sensors, launches interceptors from missile fields based in Fort Greely, Alaska and Vandenberg Air Force Base, California. After launching from in-ground silos, the interceptor boosts towards the incoming enemy missile and releases an Exoatmospheric Kill Vehicle (EKV) to find and destroy the threat. GMD also has ground support and fire control systems that the warfighter relies upon to operate the system. Since the program’s initiation in 1996, DOD has spent over $45 billion developing, operating, and maintaining the GMD system, including: fielding ground station assets and a fleet of 44 interceptors; upgrading, redesigning, refurbishing, and retrofitting the system; successfully performing 5 out of 9 intercept tests and 3 out of 3 non-intercept tests; and developing Multi Object Kill Vehicle technology. Three of the intercept tests failed because of problems with the EKV while one of the tests failed because of a target failure, which is not associated with the GMD system. MDA has efforts ongoing to address concerns with the existing fleet of interceptors and increase protection to the U.S. homeland. In March 2013, the Secretary of Defense directed MDA to increase the number of fielded GMD interceptors from 30 to 44 by the end of 2017. To achieve this fielding goal, MDA performed a limited redesign of the CE-II, called the CE-II Block I, to fix known issues, address obsolescence, and improve producibility and cost. MDA also performed an extensive upgrade to the boost vehicle to improve reliability and address obsolescence issues. Although the CE-II Block I will address some concerns with the CE-II design, MDA determined a more complete redesign of the CE-II was needed. MDA subsequently developed an acquisition strategy and began developing the new kill vehicle, called the Redesigned Kill Vehicle (RKV). The RKV is intended to be more reliable, producible, testable, and cost effective. Table 11 provides key fiscal year 2017 GMD program facts. Fiscal year 2017 was a seminal year for the GMD program, as it achieved a number of major accomplishments. Over the past several years, the GMD program developed the newest interceptor version equipped with the CE-II Block I EKV and C2 boost vehicle. The program conducted its first successful flight test of this interceptor in May 2017 when it successfully intercepted a target representative of an intercontinental ballistic missile—another first for the GMD system. MDA proceeded to produce and field eight of these new interceptors and complete the refurbishment of Missile Field 1 in Fort Greely, Alaska, enabling the program to meet its directive from the Secretary of Defense to field 44 interceptors by the end of 2017. The program also fielded a software upgrade to the fire control segment of the GMD ground station, which included some improvements for battle management and discrimination. In addition, the program completed a preliminary design review for the RKV in March 2017. The program was able to execute all of these activities while also maintaining 24/7 availability of the system to the warfighter during a heightened period of North Korean missile testing. In total, the GMD program’s total cost has increased to over $67 billion and that total is likely to continue to increase as MDA defines future capability increments. In March 2013, we reported the total cost of the GMD program was estimated to be approximately $41 billion. Since that time, MDA defined new capability increments that included major GMD initiatives, such as the RKV and Multi Object Kill Vehicle efforts, which increased the program’s total cost. GMD is now the fourth most expensive DOD weapon system among a portfolio of 78 major defense acquisition programs, totaling approximately $1.5 trillion. As seen in table 12 below, only the F-35 and two naval programs are projected to cost more than the GMD system, demonstrating the department’s level of resources committed to defending the U.S. homeland against a long range ballistic missile attack. In November 2017, the President submitted to Congress an amendment to the fiscal year 2018 budget request for DOD to, among other things, increase current missile defense capacity, expand the sensor network, and accelerate technology development efforts. According to MDA, the request for additional funds was in direct response to recent demonstrations of advanced and accelerated capabilities by North Korea. MDA’s justification materials for the budget amendment includes an addition $774 million for GMD to build a new, 20-silo missile field at Fort Greely, begin procuring four additional interceptors, continue booster development, accelerate RKV development, and to add a non-intercept target to an initial RKV flight test. In total, MDA now plans to spend over $14 billion on GMD over the next six years with 64 total interceptors fielded by 2023. The new direction of the GMD program reflects a decision by the Director, MDA to set aside a strategy approved in 2016 by the prior Director for the government to take on the role of system integrator. Since the late 1990s, Boeing has been the GMD prime contractor, performing the role of system integrator. In 2011, Boeing competitively won a follow-on GMD development and sustainment contract that runs through December 2018. According to MDA, the government serving as the system integrator provides several benefits, such as eliminating organizational conflicts of interest issues—where industry tests and delivers assets based on requirements it wrote—and providing an unbiased assessment of system performance. However, a subsequent review team identified gaps and risks with implementing the strategy and the agency determined that transitioning to the new strategy at a time of heightened threat activity created unacceptable levels of risk for defending the U.S. homeland. On January 31, 2018, MDA awarded a sole-source contract modification to Boeing to extend the current development and sustainment contract. The contract modification has a total value of $6.56 billion and includes the accelerated delivery of a new 20-silo missile field, development of a new boost vehicle and the RKV, procurement of 20 new interceptors, and ground system upgrades. MDA faced a difficult choice, as both options included advantages and disadvantages. Under the prior approved strategy, MDA expected to achieve cost savings through competition. According to MDA, the sole- sourced labor rates for new development efforts under the recently modified development and sustainment contract have proven to be significantly higher than originally planned. In addition, MDA stated that the contract modification process is also often very lengthy, making it difficult for the agency to respond to the rapidly changing threat environment. MDA also stated that the lack of competition makes it challenging for the government to achieve favorable contract outcomes. Conversely, the government taking on the role of system integrator would make it responsible for managing multiple contracts. MDA plans to implement measures to mitigate some of the current challenges with extending the development and sustainment contract and ultimately provide the GMD program with a level of continuity during the current period of heightened threat activity. In October 2017, MDA informed the Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)) that it had revised the RKV acquisition plan that was previously established in 2015 and approved by the USD(AT&L). This revision, in response to the advancement of the North Korean missile threat, accelerates the RKV’s development by concurrently performing development and production and reducing the number of necessary flight tests. MDA removed the previously-established alignment between flight tests and production decisions, which enables the program to begin production well before the system’s design is stabilized. In addition, MDA now plans to contract for production, on a sole source basis with the current GMD prime contractor, rather than through a full and open competition. According to MDA, the acceleration plan does not change the content of the RKV’s development plan and the program will continue to execute the same engineering processes including hardware qualifications essential to delivering the RKV. However, MDA’s revision of the RKV acquisition plan is more likely to prolong the effort rather than accelerate it. Our prior best practice work has shown that finding a balance between resources available (i.e., time and funding) and needed operational attributes (i.e., reliability and effectiveness) and obtaining buy-in from across the department is essential for program success. Although some risk may be necessary, programs that rely on heightened levels of concurrent development and production, starting production before stabilizing the design, and other risky practices greatly increase the likelihood a program will fail to deliver reliable, effective capabilities in an accelerated manner. The revised RKV plan no longer includes some of the key best practices, such as alignment between testing and production decisions included in the 2015 RKV plan. In addition, MDA has already experienced development delays and was operating on the threshold schedule of the prior acquisition plan, with no additional margin for delays. Moreover, MDA did not vet the revised plan in a similar manner to that of the 2015 RKV acquisition plan, which Congress required to be subject to approval by the USD(AT&L) and include rigorous elements for systems engineering, design, integration, development, testing and evaluation. The revised plan is also inconsistent with the acquisition best practice to “fly before you buy”, as MDA will begin production based on the results of design reviews rather than flight testing. In May 2017, we recommended that the Secretary of Defense require the Director of DOD’s Office of Cost Assessment and Program Evaluation (CAPE) perform a comprehensive review of the RKV acquisition strategy and provide any recommendations to the Secretary of Defense that the Director deems necessary and appropriate to obtain CAPE’s concurrence for the RKV program’s acquisition strategy. DOD did not concur with our recommendation, stating that CAPE and other organizations had previously reviewed the strategy prior to USD(AT&L)’s approval. As we noted in our report, CAPE raised serious concerns about the plan and expected MDA would encounter development delays. MDA justified the prior RKV plan, in part, so that it could begin urgently replacing the less reliable CE-Is as expeditiously as possible, which were fielded between 2004 and 2007. Under the newly accelerated plan, MDA does not plan to begin replacing the CE-I interceptors until after it has fielded the additional 20 RKV-equipped GBIs in 2024. However, GBIs only have an initial service life of 20 years and MDA previously decided not to make any upgrades to the CE-I because of initial plans to begin replacing them with RKVs in 2020. We continue to believe that DOD should implement our recommendation in order to ensure that MDA’s plans for the RKV are viable and meet the needs of the warfighter. A family of satellite-, sea-, and land-based radars provides worldwide sensor coverage to enable the Ballistic Missile Defense System (BMDS) to effectively detect and track threat missiles through all phases of their trajectory. Land-based BMDS sensors include the Army/Navy Transportable Radar Surveillance and Control Mode-2 (AN/TPY-2), Upgraded Early Warning Radars (UEWR), and the future Long Range Discrimination Radar (LRDR). Figure 16 below illustrates the locations of select BMDS sensors world-wide. AN/TPY-2 is a transportable X-band high resolution radar that is capable of tracking all classes of ballistic missiles. AN/TPY-2 in the forward-based mode is capable of detecting and tracking missiles in all stages of flight to support Aegis BMD and GMD engagements and provides threat missile data to C2BMC. AN/TPY-2 in the terminal mode can track missiles in the later stages of flight to support THAAD engagements. Five AN/TPY-2 radars for use in forward-based mode are deployed to support regional defense: two in U.S. European Command, two in U.S. Pacific Command, and one in U.S. Central Command. Two AN/TPY-2 radars for use in terminal mode is also deployed to U.S. Pacific Command. UEWR are U.S. Air Force early warning radars that are upgraded and integrated into the BMDS to provide sensor coverage for critical early warning, tracking, object classification, and cueing data. Upgraded Early Warning Radars are located in Beale, California; Fylingdales, United Kingdom; and Thule, Greenland. MDA awarded a contract to upgrade the early warning radars in Clear, Alaska and at Cape Cod, Massachusetts, and both of these assets are approaching their operational acceptance for use in the BMDS. The upgrades to the Clear and Cape Cod Early Warning Radar sites are joint MDA / Air Force projects. Both organizations are contributing funding to these sites. LRDR is being designed as an S-band radar intended to address the need for persistent, precision tracking and discrimination capability in the Pacific sensor architecture. MDA anticipates the addition of LRDR will optimize the employment of the Ground-based Midcourse Defense (GMD) interceptors and address evolving threats. The radar will be located at Clear Air Force Station, Alaska with initial operational capability planned for 2020. Table 13 provides key fiscal year 2017 Sensors program facts. To address future requirements and as part of its spiral development process, AN/TPY-2 transitioned from its Increment 2 software development phase to its Configuration 3 software development phase. The transition results in Configuration 3 subsuming all unfinished Increment 2 content including 44 percent of development costs ($60 million), 31 percent of productions costs ($61 million), 88 percent of operations and support costs ($2,281 million), and 100 percent of disposal costs ($30 million). Four Knowledge Points and Technical Performance Metrics for the program were also carried over from Increment 2. New capabilities were also added in Configuration 3 including electronic protection and discrimination improvements. Additionally, the Conditional Materiel Release of software upgrade CX 2.1.0 was delayed from the first quarter of fiscal year 2017 to the first quarter of fiscal year 2018. To mitigate this delay, MDA executed an Urgent Software Release for CX 2.1.1 to support the fielding of Command, Control and Battle Management (C2BMC) S6.4-3 in December 2016. The UEWR is executing a concurrent development approach to improve UEWR Object Classification (OC), Data Processor/Signal Processor (DP/SP), and Bias Correction capabilities, and to certify the UEWR Clear and Cape Cod sites for use in the BMDS. Because of this concurrent development, a delay in the Beale UEWR’s operational acceptance for the OC and DP/SP program has had cascading effects on the same upgrades for the Clear, Cape Cod, and Fylingdales UEWRs in addition to the BMDS Certification for the Clear UEWR, delaying the use of these key radar capabilities. These delays are shown in figure 17 below: The delay in Beale’s Operational Acceptance was due in part to the following: The contractor, Raytheon, delivered unacceptable UEWR technical orders that required rework. Development and operational testing supporting the operational acceptance were delayed because the operators required remediation of all emergency operational maintenance issues found on the operational UEWRs. Some UEWR software required fixes to address deficiencies. Other programs were competing for test time on needed equipment. The delay in operational acceptance will affect the delivery of Bias Correction for the Clear and Cape Cod UEWRs in addition to the delivery of and Data Processor/ Signal Processor improvements to support the missile defense mission of Beale, Clear, Cape Cod, and Fylingdales UEWRs. It has also delayed the BMDS Certification of the Clear UEWR. Because the program currently has sufficient schedule margin before the Cape Cod BMDS Certification, the delays have not yet affected the missile defense mission for that radar. The program office is working with Raytheon on a recovery plan to address the Technical Order issues and other issues that arose from the developmental and operational testing conducted in July 2017. We have previously reported that concurrent development increases program risk for cost and schedule delays caused by redesigns and retrofits needed after testing has occurred. In fiscal year 2017, MDA made progress towards stabilizing LRDR’s design, by completing a preliminary design review in March 2017 and a critical design review in September 2017. The program also began production of long lead radar electronic components and awarded a military construction contract for the Mission Control Facility. However, the program has experienced challenges integrating multiple facilities- related projects, which require synchronization between MDA, the U.S. Air Force, the U.S. Army Corps of Engineers, and contractors. For example, in fiscal year 2017, the LRDR program began demolishing a decommissioned, Cold War-era radar, which sits on the planned LRDR site at Clear Air Force Station. The program discovered that the radar’s foundation and surrounding soil contained steel and concrete coated with polychlorinated biphenyl (PCB), which was a common industrial material used at the time of the radar’s construction in the late 1950s. PCBs do not readily break down once in the environment and have been demonstrated to cause a variety of adverse health effects. In April 2017, the U.S. Army Corps of Engineers modified its contract for the removal of the PCB- contaminated foundation and soil and plans to complete excavation and removal by early fiscal year 2018. Demolition is now expected to be completed in 2019 and the additional costs for these complications are not covered under the program’s resource baseline. In June 2017, the LRDR program initiated a power study with the commercial power supplier for the LRDR radar. The program expects to complete the study on LRDR’s power demands on the commercial electrical grid, as well as assess updated U.S. Northern Command concept of operations to determine the extent, if any, of system capabilities, limitations, and mitigations. During the LRDR critical design review, MDA officials stated that U.S. Air Force informed the agency that it required 24/7 availability of the radar if it is to become operational. According to MDA officials, the current LRDR design, with its reliance on commercial power and limited back-up generators, would not provide that capability. MDA officials stated the program plans to increase the number of back-up generators, which may increase the military construction costs and annual operational expense of the radar. A November 2016 study of LRDR’s power system performed for MDA by a contractor indicated that agreements with the commercial power provider place limitations on the warfighter’s ability to operate the radar without consulting the commercial power provider in advance and that emergency activation of the radar could result in other commercial power provider customers having their power supply temporarily switched off if the generators were not brought online in time. The LRDR program has also encountered design challenges with the radar’s circuit card assemblies, as the planned design included the use of pure tin parts, which are susceptible to corrosion. Lockheed Martin, the prime contractor for the LRDR program, plans to replace some of the pure tin parts with parts that have a lead-based finish, as available. The program does not anticipate there to be enough of these parts available and estimated that redesigning the pure tin parts would result in an approximate 9-month delay. For those parts that cannot be readily replaced, Lockheed Martin plans to use corrosion mitigation techniques, such as applying conformal coating to the circuit card assemblies and applying lead solder. Although MDA maintains that these mitigation techniques will ensure corrosion-free operations, government and industry studies show that such mitigations reduce, but do not eliminate the risk, Lockheed Martin is conducting on-site inspections and providing additional information on the historical use of pure tin parts in similar systems and anticipates being able to clear the unmitigated, pure tin parts through the MDA’s Parts, Materials, and Processes control board. The Missile Defense Agency’s (MDA) Targets and Countermeasures procures missiles to serve as targets during the developmental and operational testing of independent or integrated ballistic missile defense system (BMDS) elements. Specifically, this program supplies MDA with short-, medium-, intermediate-, and intercontinental-range targets to test, verify, and validate the BMDS elements’ performance in threat relevant environments. As targets are solely test assets, they are not operationally fielded. The number of targets that the program supplies vary based on each element’s requirements and testing schedule. While some targets have been used for years, others have been recently added or are now being developed to more closely represent current and future threats. The quality and availability of these targets is instrumental to the execution of MDA’s flight test schedule. Table 14 provides key fiscal year 2017 Targets and Countermeasure program facts. Despite challenges MDA has previously experienced using new targets during intercept flight tests, in fiscal year 2017, the program successfully flew the first intercontinental ballistic missile (ICBM) range target to support a critical intercept test for the GMD element. The GMD element provides the warfighter capability to engage and destroy intermediate- and intercontinental-range ballistic missile threats for the protection of the United States. In March 2013, the Secretary of Defense announced plans to increase the number of deployed GMD interceptors called Ground- based interceptors (GBI) from 30 to 44 by the end of 2017. To do this, a test—FTG-15—was needed to collect data on the GBI’s new booster design and demonstrate its performance against a target at the ICBM threat range before completing this mandated fielding goal. The successful flight of the ICBM target, the GBI’s performance against the target, and other information gathered during this test will provide the warfighter with a better understanding of the GBI’s capabilities and limitations. For further details on the GMD element, see appendix VII. The Targets and Countermeasures program is planning to contract for up to 12 additional medium range ballistic missile (MRBM) T1/T2 targets despite cost growth, schedule delays, and the lack of demonstrated performance. In fiscal year 2014, the program competitively awarded the initial contract for 6 MRBM T1/T2 targets with an option for an additional 12, for a total of 18. According to program officials, the contract was structured with a fixed price for the target and incentives to ensure successful execution during testing. However, the contractor has been underperforming since the award. First, this target’s costs have continued to significantly increase as some MDA officials originally warned. One of MDA’s reasons for selecting the current MRBM T1/T2 contractor was because it offered a lower price. However, some officials within MDA objected to this award due to the near certainty that the contractor would overrun costs. Since then, both MDA and Defense Contract Management Agency (DCMA) officials have acknowledged that the contractor did not adequately account for the costs associated with this target. Consequently, this target’s costs have been volatile, and despite changes and rebaselines, the contractor has been unable to meet projections. In fiscal year 2017, the program conducted another review to address significant cost growth and set new projections, and despite a relatively steady period of performance against these new projections, DCMA officials believe that this contractor will continue to have increasing costs. In addition, the first delivery of this target has been delayed almost five years beyond the original plan primarily due to contractor performance issues. There was an initial delay because the contract was awarded later than planned due to an investigation of an unsubstantiated procurement integrity allegation. However, since then, contractor performance issues have further delayed the first target delivery, necessitating several substitute targets for tests in the interim. Finally, since the program will not fly the first target in a test until the second quarter of fiscal year 2019, the target’s performance has yet to be demonstrated. Hence, buying an additional 12 targets without confirmation of the target’s performance is a significant risk for the program, as even one failure would delay all future tests with this target, and ultimately, the entire test program. Appendix X: Terminal High Altitude Area Defense (THAAD) THAAD is a rapidly-deployable ground-based system able to defend against short-, medium-, and intermediate- range ballistic missile attacks during the middle and end stages of a missile’s flight. THAAD is organized as a battery that consists of interceptors, launchers, an Army Navy / Transportable Surveillance (AN/TPY-2) radar, a fire control and communications system, and other support equipment. The first two batteries were originally conditionally accepted by the Army for operational use. Since then, THAAD received urgent materiel release approval from the Commanding General of the United States Army Aviation and Missile Command to enable an earlier delivery of equipment for THAAD batteries one through six for operational use to meet the Army’s request to support urgent warfighter needs. The MDA plans to continue THAAD production through fiscal year 2024, for a total of 7 batteries, 503 interceptors, and 7 radars. MDA has two THAAD acquisition efforts—THAAD 1.0 and THAAD 2.0. THAAD 1.0 is for the production of the batteries, interceptors, and supporting hardware and provides the warfighter with initial integrated defense against short- and medium-range threats in one region. Appendix X: Terminal High Altitude Area Defense (THAAD) THAAD 2.0 is primarily software enhancements that expand THAAD’s ability to defend against threats in multiple regions and at different ranges, and adds debris mitigation and other upgrades. Table 15 provides key fiscal year 2017 THAAD program facts. THAAD successfully completed two tests. In FTT-18 (previously scheduled for fiscal year 2015), THAAD successfully intercepted an Intermediate Range Ballistic Missile (IRBM)-representative target, demonstrating THAAD’s capability against IRBM threats. THAAD has been deployed to Guam since 2013 to defend against IRBM threats, but this is the first time it has demonstrated that capability in a flight test. According to program officials, for the second planned flight test originally named FTT-15, MDA changed the name to Flight Experiment THAAD (FET)-01 to more accurately reflect the experimental purpose of the test. However, an intercept was formerly a primary test objective in FTT-15, but this objective was removed before the test name was changed to FET-01. In FET-01, although not a primary objective, THAAD did complete an intercept of a medium-range ballistic missile target with countermeasures. Despite the intercept, the test revealed significant operational limitations. THAAD delayed the delivery of several key hardware and software deliveries that will impact warfighter capabilities. Figure 20 shows the delayed hardware and software deliveries. Appendix X: Terminal High Altitude Area Defense (THAAD) Appendix X: Terminal High Altitude Area Defense (THAAD) interceptors due to a production issue that had cascading schedule effects on interceptor production and delivery. In May 2017, we found that THAAD interceptor production was halted due to a parts quality issue discovered when a connector in the interceptor failed multiple testing iterations. Upon investigation, the contractor learned that one of its sub-contractors changed the manufacturing process on the connector without informing Lockheed Martin. According to program officials, Lockheed Martin halted interceptor delivery but continued interceptor production. The connector was redesigned and incorporated into 20 interceptors, which again failed testing before being deployed. After a second redesign the connector passed testing and interceptor delivery resumed in April 2017. As of December 2017, there were 16 interceptors that had been produced but not yet fitted with the redesigned connector. Program officials report that the delay should result in about 2 months of delivery delays of the last interceptor lot currently under contract. According to program officials, to prevent similar problems from occurring again, the government revised the Parts Materials and Processes Control plan to provide improved guidance and clarity related to parts selection and change control; added additional criteria to annual audits to enhance review of supplier parts management, materials, and processes; and tightened controls on suppliers to report any significant changes. Appendix X: Terminal High Altitude Area Defense (THAAD) THAAD, that would be the Army) not later than the date the President’s fiscal year 2021 budget is submitted. However, in a memo from the Secretary of the Army, the Army said that it would non-concur with a transfer of the THAAD program in its current state because it cannot meet the Army’s global mission requirements. To meet global mission requirements for the THAAD mission, the Army requires about $10.1 billion of additional hardware, life-cycle sustainment funding, and AN/TPY-2 upgrades. MDA is willing to transfer to the Army the THAAD program of record as is. An official from the Army said that this impasse has existed before, but that the recent reprioritization of the THAAD mission contributed to it. For further details on the AN/TPY-2 program, see appendix VIII. Table 16 below shows the difference between the THAAD program of record and the Army’s requirements. Appendix X: Terminal High Altitude Area Defense (THAAD) MDA’s requirements and warfighter requirements exist and can lead to situations such as this impasse. Consequently, we recommended that the Secretary of Defense require MDA to develop a plan to transition operational requirements analysis currently performed within MDA’s Achievable Capabilities List to the U.S. Combatant Commanders, with U.S. Strategic Command as the lead entity and, in the interim, require MDA to obtain their concurrence of the Achievable Capabilities List prior to its release. The Department of Defense (DOD) did not agree with our recommendation. However, as evidenced by the discrepancy between the Army’s and MDA’s requirements for the THAAD and AN/TPY-2 program, the difference between MDA’s requirements and those of the warfighter will continue to present substantial problems to DOD in executing the missile defense mission, and we continue to believe that our recommendation should be implemented. In addition to the contact named above, LaTonya Miller, Assistant Director; Matthew Ambrose; Kristine Hassinger; Helena Johnson; Joe Kirschbaum; Wiktor Niewiadomski; Steven Stern; Brian Tittle; Hai V. Tran; Alyssa Weir; Tonya Woodbury; and Robin Wilson made key contributions to this report. Missile Defense: Some Progress Delivering Capabilities, but Challenges with Testing Transparency and Requirements Development Need to Be Addressed. GAO-17-381. Washington, D.C.: May 2017. Missile Defense: Opportunities Exist to Reduce Acquisition Risk and Improve Reporting on System Capabilities. Washington, D.C.: Mar. 2015. Missile Defense: Mixed Progress in Achieving Acquisition Goals and Improving Accountability. GAO-14-351. Washington, D.C.: Apr. 2014. Missile Defense: Opportunity to Refocus on Strengthening Acquisition Management. GAO-13-432. Washington, D.C.: Apr. 2013. Missile Defense: Opportunity Exists to Strengthen Acquisitions by Reducing Concurrency. GAO-12-486. Washington, D.C.: Apr. 2012. Missile Defense: Actions Needed to Improve Transparency and Accountability. GAO-11-372. Washington, D.C.: Mar. 2011. Defense Acquisitions: Missile Defense Transition Provides Opportunity to Strengthen Acquisition Approach. GAO-10-311. Washington, D.C.: Feb. 2010 Defense Acquisitions: Production and Fielding of Missile Defense Components Continue with Less Testing and Validation Than Planned. GAO-09-338. Washington, D.C.: Mar. 2009 Defense Acquisitions: Progress Made in Fielding Missile Defense, but Program is Short of Meeting Goals. GAO-08-448. Washington, D.C.: Mar. 2008 Defense Acquisitions: Missile Defense Acquisitions Strategy Generates Results but Delivers Less at a Higher Cost. GAO-07-387. Washington, D.C.: Mar. 2007 Defense Acquisitions: Missile Defense Agency Fields Initial Capability but Falls Short of Original Goals. GAO-06-327. Washington, D.C.: Mar. 2006. Defense Acquisitions: Status of Ballistic Missile Defense Program in 2004. GAO-05-243. Washington, D.C.: Mar. 2005 Missile Defense: Actions Are Needed to Enhance Testing and Accountability. GAO-04-409. Washington, D.C.: Apr. 2004.", "summary": "Since 2002, MDA has been developing a Ballistic Missile Defense System that can identify and intercept enemy threats. MDA has received approximately $132 billion and is planning to spend an additional $47.8 billion through fiscal year 2022 to continue its efforts. The National Defense Authorization Act for Fiscal Year 2012 included a provision that GAO annually assess and report on the extent to which MDA has achieved its acquisition goals and objectives. This report addresses (1) the progress MDA made in achieving fiscal year 2017 goals; (2) the extent to which MDA uses contracting vehicles known as undefinitized contract actions; and (3) the extent to which models provide credible information about the system's operational performance. To do this work, GAO reviewed planned fiscal year 2017 baselines and other documentation and assessed them against baseline reviews and GAO's acquisition best practices guides. In addition, GAO interviewed relevant officials. In fiscal year 2017, the Missile Defense Agency (MDA) made mixed progress in achieving its delivery and testing goals. MDA continued to deliver assets to the military services. However, system-level integrated capabilities, such as some discrimination and integrated cyber defense improvements, were delayed and delivered with performance limitations. Several programs achieved notable firsts, including the first intercept of an Intercontinental Ballistic Missile. However, one program experienced a failure, and other tests were delayed or deleted. Moreover, GAO found challenges in MDA's processes for communicating the extent and limitations of integrated capabilities when they are delivered. As a result, warfighters do not have full insight into the capabilities MDA delivers. GAO found that the average length of the undefinitized period and the not-to-exceed price of MDA's undefinitized contract actions, which authorize contractors to begin work before an agreement on terms, specifications, or price have been agreed upon, have increased over the past 5 years. While MDA policy permits use of undefinitized contracts on a limited basis, GAO and others have found that they can place unnecessary cost risks on the government. MDA does not completely assess BMDS performance using traditional flight tests. Instead, MDA relies on models, some of which produce data with limited credibility. According to Department of Defense and MDA policy, models used to operationally assess weapons systems must be accredited to ensure they reflect the real-world system. In addition, using unaccredited models increases the risk that test results could be distorted, and leaves decision makers without key information on how the system will perform. While MDA has taken steps to improve its models, it has used many models in system operational ground tests that were not certified for that use (see figure). Additionally, MDA does not communicate model limitations to some decision makers. Percentage of Accredited Models Used in Operational Assessments of Ballistic Missile Defense System Capability Deliveries, 2015 through 2017 GAO is making six recommendations to, among other things, improve the way MDA communicates capability deliveries; better report information about MDA's use of undefinitized contract actions; and address the challenges MDA has encountered with certifying its test models and communicating limitations of those models. DOD partially concurred with the first recommendation and concurred with the other five. GAO continues to believe the recommendations are valid as discussed in the report.", "document_type": "gao"}
{"report": "The scope of SSA’s operations and responsibilities is vast. One of SSA’s key responsibilities is to provide financial benefits to eligible individuals through three benefit programs: Old-Age and Survivors Insurance (OASI)—provides retirement benefits to older individuals and their families and to survivors of deceased workers. Disability Insurance (DI)—provides benefits to eligible individuals who have qualifying disabilities, and their eligible family members. Supplemental Security Income (SSI)—provides income for aged, blind, or disabled individuals with limited income and resources. In support of its mission, SSA maintains workers’ earnings information and in fiscal year 2017 posted over 279 million earnings items to workers’ records. SSA also determines if claimants are eligible for benefits, completing 10 million claims and more than 680,000 hearings decisions in fiscal year 2017. SSA also maintains birth and death records and issues Social Security Numbers. In fiscal year 2017, SSA issued almost 17 million new and replacement Social Security cards. Beyond administering its programs and core missions, SSA provides key administrative support to the Medicare program, partners with the Department of Homeland Security in verifying employment eligibility for new hires, and assists with the administration of other programs, such as the Supplemental Nutrition Assistance Program and programs administered by the Railroad Retirement Board. SSA’s workforce is large, as is its physical footprint. About 62,000 federal employees and 15,000 state employees administer SSA programs in about 1,500 facilities nationwide. These facilities include regional offices, more than 1,200 field offices, teleservice centers, processing centers, hearings offices, the Appeals Council offices, and SSA’s headquarters in Baltimore, Maryland. Customers can access SSA services in-person at an SSA field office; by phone with field office staff or through a National 800 number; or online. In 2018, SSA reported that, each day, about 170,000 people visit and 250,000 call one of its field offices for various reasons, such as to file claims, ask questions, or update their information. SSA also reported that its national 800 number handles over 30 million calls each year. Complex eligibility rules and multiple handoffs and potential layers of review make SSA’s disability programs complicated and costly to administer. Program complexity arguably has made it challenging for SSA to make significant advances in efficiently managing high disability workloads, ensuring timely and consistent disability decisions, preventing benefit overpayments, and mitigating fraud risks. Our recent work highlighted some of the challenges SSA faces in making disability decisions that are timely, consistent and based on current concepts of disability, while also preventing and deterring fraud and ensuring that only beneficiaries who are entitled to benefits receive them. These findings underscore the need for SSA leadership to approach these challenges strategically and follow through with rigorous plans in order to achieve significant improvements in its disability programs. In recent years, SSA made noteworthy strides in reducing its backlog of initial disability claims, but delays in deciding disability appeals continue to worsen. SSA has reduced the number of pending claims each fiscal year since 2010—from about 842,000 in fiscal year 2010 to about 523,000 in fiscal year 2017. However, the number of appealed claims pending at the end of 2017 was approximately 1.1 million compared to about 700,000 in fiscal year 2010, and the average time needed to complete appeals increased from 426 days to 605 days during that same time. In our 2017 High Risk Update, we reported that SSA had taken some steps to address its growing appeals backlog, such as hiring additional administrative law judges (ALJ). SSA also published a plan in 2016 to improve appeals timeliness that called for further hiring, improving business processes, sharing workloads across offices, and making better use of IT resources, such as increasing the number of video hearings. However, SSA’s Office of Inspector General (OIG) found that many of the initiatives in SSA’s plan duplicated past efforts that had met with limited success. SSA also noted that some efforts, such as additional hiring, will depend on resource availability. We also reported that SSA is still developing plans to implement its broad vision for service delivery, Vision 2025, which addresses SSA’s capacity to provide timely initial claims and appeals decisions. To address its appeals backlog and position itself to effectively provide timely disability decisions at all levels, SSA leadership will need to continue to operationalize Vision 2025, plan and implement systems support for initial claims, and implement and monitor the success of its appeals initiatives. While SSA has made significant progress in updating the outdated occupational and medical criteria it uses to make disability eligibility decisions, some of these efforts are multi-year and will require the continued focus of top leadership. Most significantly, SSA has made strides updating a decades old Dictionary of Occupational Titles with a new Occupational Information System (OIS), which contains occupational data to make disability determinations. SSA expects to have OIS in place by 2020, and currently plans to update OIS information every 5 years thereafter. Regarding the medical criteria used to make disability decisions, we reported in our 2017 high risk update that SSA had published final rules for nearly all of the 14 body systems for adults and was on track to update criteria for all body systems every 3 to 5 years. While SSA has addressed all our recommendations in this area, other opportunities exist for updating aspects of SSA’s disability decision process. For example, SSA officials have acknowledged that the vocational rules it uses to determine eligibility may no longer accurately reflect the nature and scope of work available in the national economy and stated that the agency is conducting a review to determine if changes to vocational factors are necessary. Agency leadership will play a key role in ensuring SSA pursues these opportunities to further modernize its criteria and devotes appropriate resources to continuously updating its occupational and medical criteria on a timely basis. Our recent work analyzed variation in the rate that different ALJs grant disability benefits when claimants appeal an earlier denial, and found that SSA’s efforts to monitor the consistency of appeal hearing decisions are incomplete. In 2017 after analyzing data on hearings decisions, we estimated that the allowance (approval) rate could vary by as much as 46 percentage points between different judges with respect to a typical claim. SSA conducts various reviews to monitor the accuracy and consistency of ALJ decisions, but SSA has not systematically evaluated whether its reviews are effective. SSA has also struggled to sustain all of its quality review efforts, in part, because SSA reassigned staff to help expedite claims decisions. We also reported on shortcomings in SSA’s Compassionate Allowance initiative (CAL)—which fast tracks disability claims for severe medical conditions that are most likely to be approved— that could prevent claims from being consistently and accurately identified for expedited processing. These shortcomings include lacking a systematic approach and clear criteria for designating medical conditions for inclusion in CAL. With about one in three beneficiaries being granted benefits at SSA’s appeals hearing level, it remains crucial that SSA leadership commit to ensuring appeal applications receive fair and consistent treatment, including assessing persistent and unexplained variations in ALJ allowance rates. Ensuring oversight and scrutiny of SSA’s CAL initiative is also essential to avoid potential equity issues with regards to SSA’s most vulnerable claimants. Benefit overpayments represent avoidable losses to the DI trust fund and, for the individual who may have incurred an overpayment despite conscientiously reporting wages, a financial hardship when required to repay and a disincentive to pursue work. In fiscal year 2015, the most recent year for which we have data, SSA identified $1.2 billion in new overpayments in its DI program, and had $6.3 billion in total overpayment debt outstanding. In 2015, we reported that the SSA process for beneficiaries to report earnings (and consequently inform whether they remain eligible for DI benefits) had a number of weaknesses, including staff not following established procedures, limited oversight, and a lack of automated reporting options for beneficiaries, such as an automated telephone system or smart phone app. SSA has made progress expanding electronic work reporting, but these efforts will not eliminate vulnerabilities caused by SSA’s multi-faceted processes for receiving and handling work reports, and will require additional management focus to shore up internal controls and avoid unnecessary overpayments. Once overpayments do occur, SSA will endeavor to recover those overpayments. However, we recently found that the collection of overpayment debts warrants more attention than SSA has demonstrated to date. In 2016, we reported that SSA’s largest source of debt recovery is withholding a portion of beneficiaries’ monthly benefits payments. However, we found that amounts withheld may not consistently reflect individuals’ ability to pay, and that many repayment plans could take decades to complete. We recommended SSA improve oversight and pursue additional debt recovery options—recommendations that SSA has yet to implement. Absent clear policies and oversight procedures for establishing and reviewing withholding plans—SSA’s main tool for recovering overpayments—SSA cannot be sure that beneficiaries are repaying debts in appropriate amounts within appropriate time frames. Further, by not implementing additional debt collection tools that would speed up repayment, which can extend past the beneficiaries’ lifetimes and is diminished in value by inflation, SSA is missing opportunities to restore debts owed to the DI trust fund. Although the extent of fraud in SSA’s benefit programs is unknown, high- profile cases—such as one case reported by SSA’s OIG involving 70 individuals and $14 million in fraudulent benefits—underscore the importance of continued vigilance on the part of SSA leadership in managing fraud risks to prevent fraud. We reported in 2017 that SSA established a new office responsible for coordinating antifraud programs across the agency, and had taken steps to gather information on some fraud risks. However, we also found that SSA had not fully assessed its fraud risks, had not developed an overall antifraud strategy to align its efforts with those risks, and did not have a complete set of metrics to determine whether its antifraud efforts are effective. SSA has already taken action on one of our recommendations by producing a fraud risk assessment, which we will evaluate, and has stated its intent to take action on our other recommendations. Nevertheless, leadership will be essential for developing and implementing an antifraud strategy aligned with the risk assessment and ensuring that SSA’s efforts to prevent and detect fraud are effective, thereby helping to safeguard the integrity of its programs and its delivery of benefits to only eligible individuals. With one of the largest physical footprints of any federal agency, and in light of rising facility costs, SSA may be able to achieve efficiencies by reducing the size of its footprint and pursuing additional, cost effective service delivery options. However, as we reported in 2013, rightsizing SSA’s physical infrastructure can be complex, politically charged, and costly; expanding service delivery options is also challenging due to the complexity of SSA’s disability programs and the varying needs of SSA’s customers. Our recent review of SSA’s plans to reconfigure its physical footprint and expand how it delivers services confirmed a number of challenges SSA must navigate. It also highlighted the importance of approaching these challenges strategically and systematically, through strong leadership that guides robust planning, data collection, and assessment efforts. In our 2017 work, we identified several challenges that could hinder SSA’s ability to readily reconfigure its footprint, align it with evolving needs and potentially achieve desirable cost savings. For example, we found that despite progress reducing its square footage and the number of occupied buildings, SSA’s inflation-adjusted rental costs have remained steady. SSA’s ability to further reduce or enlarge its physical space is constrained by rental markets, and by union and community concerns. According to SSA officials, high rents, limited building stock and complicated federal leasing processes present difficulties and community needs and union concerns may further complicate relocating offices. We also found that, even though SSA is expanding its remote delivery of services—online and through new technologies—overall demand for field office services has not decreased, although demand varied greatly across SSA’s offices. Expansion of online service—such as the SSI application, which became available online in 2017—present opportunities for SSA to further reduce or reconfigure its physical footprint. However SSA may miss those opportunities because we found that SSA had not fully integrated its strategic planning and facility planning, despite leading practices that indicate facility plans should align with an agency’s strategic goals and objectives. We recommended that SSA develop a long-term facility plan that explicitly links to its strategic goals for service delivery, and includes a strategy for consolidating or downsizing field offices in light of increasing use of and geographic variation in remote service delivery. SSA agreed with our recommendation, and has since formed a Space Acquisition Review Board to consider space reductions in light of operational changes. SSA executive leadership will remain an important factor in ensuring a concerted effort to align the agency’s physical footprint with its vision for future service delivery. Our recent work also found that while the complexity of SSA’s programs can make it challenging for customers to use online services, the agency lacked data to identify and address challenges with online applications. The online disability applications in particular can be confusing and challenging for customers to complete, according to many SSA managers and staff we interviewed. Applications that are submitted online often require follow-up contacts with applicants to obtain missing information, according to SSA front-line staff. However, while SSA has taken steps to make its online services more user-friendly, such as adding a click-to-chat function for customers who run into problems, the agency does not routinely collect data on the reasons for staff follow-ups with online applicants. Such data are critical to SSA’s efforts to further improve its online applications and ultimately allow SSA to shift more of its business online and further reconfigure its physical footprint. SSA would also benefit from establishing performance goals to help it determine whether new service delivery options are succeeding. To help address access challenges such as limited broadband internet in some rural areas, SSA has rolled out self-service personal computers in field offices, icons to link to SSA services on computers in public libraries and video services accessed from senior centers. SSA also recently completed a trial of customer service kiosks in seven SSA offices and third-party locations. SSA staff in field offices reported some positive impacts from these initiatives in terms of extending remote access to certain populations, but also cited challenges, such as with customers’ varying ability to use self-service computers. While SSA collects some data on usage, it has not developed performance targets or goals that could help it assess these initiatives’ success or identify problems. We recommended that SSA develop a cost-effective approach to identifying the most common issues with online benefit claims, and develop performance goals and collect performance data for alternate service delivery approaches. SSA agreed with our recommendations, and has since reported taking steps to implement them. As SSA continues to expand its service delivery options, the agency’s leadership will need to encourage data driven approaches to ensure high quality and effective alternative service delivery. In 2016, we reported that SSA faces challenges with IT planning and management, based on over a decade of prior work that identified weaknesses in system development practices, IT governance, requirements management, strategic planning, and other aspects of IT. For example, in 2012, a GAO review reported that SSA did not have an updated IT strategic plan to guide its efforts and its enterprise architecture lacked important content that would have allowed the agency to more effectively plan its IT investments. In addition, SSA and others have reported substantial difficulty in the agency’s ability to implement its Disability Case Processing System—intended to replace 54 disparate systems used by state Disability Determination Services—citing software quality and poor system performance as issues. Consequently, in June 2016, the initiative was placed on the Office of Management and Budget’s (OMB) government-wide list of 10 high-priority programs requiring attention. In February 2018, the SSA OIG completed an assessment of an independent contractor’s analysis of options for the system. The SSA OIG concluded that several factors that limited the analysis supporting the contractor’s recommendation for SSA to continue investing in a new, custom-build version of the Disability Case Processing System. Because OMB is no longer identifying high-priority programs, in November 2017, we recommended OMB resume identifying these programs. We also recommended OMB ensure that the Federal Chief Information Officer is directly involved in overseeing these high-priority programs as past experience has shown that this oversight could improve accountability and achieve positive results. OMB neither agreed nor disagreed with our recommendations, and has not indicated whether it will take action on these recommendations. Beyond the challenges identified in these previous reports, GAO’s May 2016 report on federal agencies’ IT legacy systems highlighted the increasing costs that agencies, including SSA, may face as they continue to operate and maintain at-risk legacy systems. We identified SSA’s investment in IT infrastructure operations and maintenance as being among the 10 largest expenditures of federal agencies in fiscal year 2015. Further, we pointed out that legacy systems may become increasingly expensive as agencies have to deal with issues such as obsolete parts and unsupported hardware and software, and potentially have to pay a premium to hire staff or engage contractors with the knowledge to maintain outdated systems. For example, SSA reported re- hiring retired employees to maintain its systems that include many programs written in Common Business Oriented Language (COBOL). We highlighted a group of systems for determining retirement benefits eligibility and amounts which were over 30 years old, with some written in COBOL. We also noted that the agency had ongoing efforts to modernize the systems but was experiencing cost and schedule challenges due to the complexity of the legacy systems. We recommended that the agency identify and plan to modernize or replace legacy systems, in accordance with forthcoming OMB guidance. SSA agreed, and reported that it is finalizing its Information Technology Modernization Plan. To its credit, SSA has made progress in consolidating and optimizing its data centers. Specifically, in August 2017, we reported that, as of February 2017, SSA was one of only two agencies that had met three of the five data optimization targets established by OMB pursuant to provisions referred to as the Federal Information Technology Acquisition Reform Act. Meeting these targets increases SSA’s ability to improve its operational efficiency and achieve cost savings. In conclusion, many of the challenges facing SSA today are neither new nor fleeting because they are inherent in the complexity and massive size of SSA’s programs and the scope of broad demographic and societal changes over time. Our past work has pointed to the need for rigorous solutions to these complex problems, such as strategic planning, evaluation efforts, measuring for impact, and leveraging data—solutions that invariably require leadership attention and sustained focus. Chairman Johnson, Ranking Member Larson, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you or other members of the Subcommittee may have. If you or your staff have any questions about this testimony, please contact Elizabeth Curda, Director, Education Workforce and Income Security Issues, at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony statement. GAO staff who made key contributions to this statement are Michele Grgich (Assistant Director), Daniel Concepcion (Analyst-in-Charge), Susan Aschoff, Alex Galuten, Jean McSween, Sheila McCoy, Lorin Obler, Sabine Paul, Almeta Spencer, and Erin McLaughlin Villas. Appendix I: GAO Letter to SSA on Priority Recommendations to Implement This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "SSA provides vital benefits and services that affect the lives of many Americans. In fiscal year 2017, it paid out nearly $1 trillion in retirement and disability benefits to 67 million beneficiaries, and an average of 420,000 people call or visit one of its 1,200 field offices each day. However, SSA has struggled to manage its disability workloads, maintain program integrity, and modernize its service delivery and information technology systems. GAO has issued a number of reports on these challenges, and placed SSA's disability programs on GAO's High Risk List, in part due to challenges with workloads and claims processing. GAO was asked to testify on challenges facing SSA. This statement summarizes ongoing SSA challenges described in SSA's strategic plan and past GAO work in three areas: 1) managing disability workloads and ensuring program integrity; 2) modernizing physical infrastructure and service delivery methods; and 3) modernizing information technology. Although GAO is not making recommendations in this statement, our prior work included recommendations to help SSA address these challenges, many of which SSA has agreed with and initiated actions on. SSA provided technical comments on a draft of this statement, which we incorporated, as appropriate. GAO's prior work and Social Security Administration's (SSA) strategic plan for fiscal years 2018-2022 highlight significant demographic and technological challenges facing the agency. For example, SSA's workloads are increasing due to 80 million baby boomers entering their disability-prone and retirement years, and institutional knowledge and leadership at SSA will be depleted due to an expected 21,000 employees retiring by the end of fiscal year 2022. GAO's prior work has identified related management challenges and opportunities for SSA to further modernize and improve its disability programs, service delivery, and information technology (IT) systems. Managing disability workloads and program integrity. SSA has long struggled to process disability claims and, more recently, appeals of denied claims, in a timely manner. Consistent with our 2013 recommendation, SSA produced a broad vision for improving service delivery, including ensuring prompt and accurate disability decisions. However, SSA is still developing concrete plans to implement its vision. Although SSA has initiatives underway to improve appeals backlogs, GAO reported that some of SSA's appeals initiatives are either contingent on additional funding or have met with limited success when tried in the past. GAO's prior work also identified other challenges related to SSA's disability programs, and actions SSA could take, for example, to modernize disability criteria, prevent and recover overpayments, and manage fraud risks. Modernizing physical infrastructure and service delivery. Advances in technology have the potential to change how and where SSA delivers its services. For example, individuals can now apply for some disability benefits online rather than in person. However, GAO found that SSA did not have readily available data on problems customers had with online applications or why staff support was needed. Additionally, the agency had not established performance goals to determine whether new service delivery options, such as off-site kiosks, are succeeding. In addition, we found that SSA has not developed a long-term plan for its building space that, among other things, includes a strategy for downsizing offices to better reflect changes in service delivery. We recommended SSA improve building plans and do more to assess and monitor service delivery, with which SSA agreed. Modernizing information technology. SSA's legacy IT systems are increasingly difficult and expensive to maintain and GAO identified SSA's needed investment in infrastructure operations and maintenance as among the 10 largest expenditures at federal agencies in fiscal year 2015. GAO recommended SSA identify and plan to modernize or replace legacy systems, in accordance with forthcoming Office of Management and Budget guidance. SSA agreed, and reported that it is finalizing its Information Technology Modernization Plan. Continuing focus by SSA leadership is critical to addressing these broad and long-term challenges and effectively delivering benefits and services to the many Americans who depend on SSA programs.", "document_type": "gao"}
{"report": "Federal agencies and our nation’s critical infrastructures—such as energy, transportation systems, communications, and financial services— are dependent on computerized (cyber) information systems and electronic data to carry out operations and to process, maintain, and report essential information. The information systems and networks that support federal operations are highly complex and dynamic, technologically diverse, and often geographically dispersed. This complexity increases the difficulty in identifying, managing, and protecting the myriad of operating systems, applications, and devices comprising the systems and networks. A resilient, well-trained, and dedicated cybersecurity workforce is essential to protecting federal IT systems. Nevertheless, OMB and our prior reports have pointed out that the federal government and private industry face a persistent shortage of cybersecurity and IT professionals to implement and oversee information security protections to combat cyber threats. As we noted in our prior report, the RAND Corporation and the Partnership for Public Service have reported on a nationwide shortage of cybersecurity experts in the federal government. According to these reports, the existing shortage of cybersecurity professionals makes securing the nation’s networks more challenging and may leave federal IT systems vulnerable to malicious attacks. The persistent shortage of cyber-related workers has given rise to the identification and assessment of the federal cybersecurity workforce across agencies so that efforts to increase the number of those workers can be applied in the most efficient and accurate manner. NIST coordinates the National Initiative for Cybersecurity Education (NICE) partnership among government, academia, and the private sector. The initiative’s goal is to improve cybersecurity education, awareness, training, and workforce development in an effort to increase the number of skilled cybersecurity professionals. In August 2017, NIST revised and published the NICE Cybersecurity Workforce Framework (framework). The framework’s purpose is to help the federal government better understand the breadth of cybersecurity work by describing IT, cybersecurity, and cyber-related work roles associated with the categories and specialty areas that make up cybersecurity work. The framework organizes IT, cybersecurity, and cyber-related job functions into categories, representing high-level groupings of cybersecurity functions; and into specialty areas, representing areas of concentrated work or functions. Figure 1 identifies the seven categories and the 33 specialty areas in the NICE framework. In addition to categories and specialty areas, the NICE framework introduced the concept of work roles. Work roles provide a more detailed description of the roles and responsibilities of IT, cybersecurity, and cyber-related job functions than do the category and specialty area components of the framework. The framework defines one or more work roles within each specialty area. For example, as depicted in figure 2, the framework defines 11 work roles within the seven specialty areas of the “Securely Provision” category. In total, the framework defines 52 work roles across the 33 specialty areas. The NICE framework work roles include, among others, the Technical Support Specialist, IT Project Manager, and Software Developer. The framework identifies these IT, cybersecurity, and cyber-related work roles as essential functions. For example, a Technical Support Specialist may have a role in identifying the occurrence of a cybersecurity event, an IT Project Manager may need to manage cybersecurity risk to systems, and a Software Developer may need to implement appropriate cybersecurity safeguards. In October 2017, OPM updated the federal cybersecurity coding structure to incorporate the work roles identified in the NICE framework. The coding structure assigned a unique 3-digit cybersecurity code to each work role, which supplanted the prior coding structure’s 2-digit codes. According to OPM, the coding of federal positions with these specific 3- digit work role codes is intended to enhance agencies’ ability to identify critical IT, cybersecurity, and cyber-related workforce needs, recruit and hire employees with needed skills, and provide appropriate training and development opportunities to cybersecurity employees. Appendix II provides a summary of the IT, cybersecurity, and cyber-related work roles and corresponding OPM codes. In 2015, Congress and the President enacted the Federal Cybersecurity Workforce Assessment Act, which required OPM, NIST, and other federal agencies to undertake a number of cybersecurity workforce-planning activities. The act required these agencies to complete the activities within specified time frames. We addressed the first six activities in our prior report we issued in June 2018, and addressed the subsequent activities 7 through 10 in this report. Among the required cybersecurity workforce-planning activities are the following 10 that we selected for our review. 1. OPM, in coordination with NIST, was to develop a cybersecurity coding structure that aligns with the work roles identified in the NICE Cybersecurity Workforce Framework. (Due June 2016) 2. OPM was to establish procedures to implement a cybersecurity coding structure to identify all federal civilian positions that require the performance of IT, cybersecurity, or other cyber-related functions. (Due September 2016) 3. OPM was to submit a report to Congress on the progress that agencies made in identifying and assigning codes to their positions that perform IT, cybersecurity, or cyber-related functions. (Due June 2016) 4. Each federal agency was to submit a report to Congress on its baseline assessment and on the extent to which its employees who perform IT, cybersecurity, or cyber-related functions held certifications. (Due December 2016) 5. Each federal agency was to establish procedures to identify all filled and vacant IT, cybersecurity, or cyber-related positions and assign the appropriate code to each position. (Due April 2017 for civilian positions) 6. The Department of Defense (DOD) was to establish procedures to implement the cybersecurity coding structure to identify all federal noncivilian (i.e., military) positions. (Due June 2017) 7. Each agency was to complete the assignment of work role codes to its filled and vacant positions that perform IT, cybersecurity, or cyber- related functions. (Due April 2018 for civilian positions) 8. OPM was to identify critical needs across federal agencies and submit a progress report to Congress on the identification of critical needs. (Due December 2017) 9. OPM was to provide federal agencies with timely guidance for identifying IT, cybersecurity, or cyber-related work roles of critical need, including work roles with acute and emerging skill shortages. (The act did not specify a due date for this requirement). 10. Federal agencies were to identify their IT, cybersecurity, or cyber- related work roles of critical need in the workforce and submit a report describing these needs to OPM. (Due April 2019) In June 2018, we reported on federal agencies’ implementation of the first six of the 10 selected activities required by the Federal Cybersecurity Workforce Assessment Act. Specifically, we reported that, in November 2016, OPM, in coordination with NIST, had issued a cybersecurity coding structure that aligned with the NICE framework work roles (activity 1). Also, these two agencies developed procedures for assigning codes to federal civilian IT, cybersecurity, or cyber-related positions in January 2017 (activity 2). We noted that OPM had issued the cybersecurity coding structure and procedures later than the act’s deadlines because it was working with NIST to align the structure and procedures with the draft version of the NICE Cybersecurity Workforce Framework, which NIST issued later than planned. Regarding activity 3, we noted that OPM had submitted a report to Congress in July 2016 on the agencies’ progress in implementing the act’s required activities, as well as OPM’s efforts to develop a coding structure and government-wide coding procedures. We also reported that 21 of the 24 agencies had submitted baseline assessment reports identifying the extent to which their IT, cybersecurity, or cyber-related employees held professional certifications (activity 4). However, the three other agencies had not submitted such reports. In addition, four agencies did not include all reportable information in their reports, such as the extent to which personnel without certifications were ready to obtain them, or strategies for mitigating any gaps, as required by the act. We made 10 recommendations to these seven agencies to develop and submit baseline assessment reports, including all reportable information, to the congressional committees. As of February 2019, none of the seven agencies had implemented any of the 10 recommendations relating to the baseline assessment reports. Further, we reported that 23 of the 24 agencies had established procedures for assigning the appropriate work role codes to civilian positions that perform IT, cybersecurity, or cyber-related functions (activities 5 and 6 above), as required by the act. One agency had not established such procedures. Further, of the 23 agencies that had established procedures, 6 agencies did not address one or more of seven activities required by OPM in their procedures. For example, the agencies’ procedures did not include activities to review all filled and vacant positions and annotate reviewed position descriptions with the appropriate work role code. In addition, DOD had not established procedures for identifying and assigning work role codes to noncivilian (i.e., military) positions. Our June 2018 report included 20 recommendations to eight agencies to establish or update their procedures to fully address the required activities in OPM’s guidance. Subsequent to the report, the eight agencies implemented the 20 recommendations related to establishing or improving agencies’ coding procedures to address the required OPM activities. Specifically: The Department of Energy (Energy) established coding procedures that addressed the seven OPM required activities. The Department of Education (Education), Department of Labor (Labor), NASA, National Science Foundation (NSF), Nuclear Regulatory Commission (NRC), and United States Agency for International Development (USAID) revised their procedures to ensure that the procedures addressed OPM’s required activities. DOD established a consolidated government-wide and internal procedure for identifying and assigning work role codes to noncivilian (i.e., military) positions. Table 1 summarizes the status of agencies’ implementation of the first six selected activities required by the act as of October 2018. We initially reported on the status of these activities in our June 2018 report. Regarding the selected activity for agencies to complete the assignment of work role codes to filled and vacant positions that perform IT, cybersecurity, or cyber-related functions (activity 7) as set forth in the Federal Cybersecurity Workforce Assessment Act of 2015, the 24 agencies had generally assigned work roles code to their positions. However, several agencies had not completed assigning codes to their vacant positions. In addition, most agencies had likely miscategorized the work roles of many positions. For example, in these instances, the agencies had assigned a code designated for positions that do not perform IT, cybersecurity, or cyber-related functions to positions that most likely perform these functions. As indicated in table 2, federal agencies’ efforts to assign work role codes to filled and vacant positions that performed IT, cybersecurity, or cyber- related functions were ongoing as of October 2018. To assist agencies with meeting their requirements under the Federal Cybersecurity Workforce Assessment Act of 2015, OPM issued guidance that directed agencies to identify filled and vacant positions with IT, cybersecurity, or cyber-related functions and assign work role codes to those positions using the Federal Cybersecurity Coding Structure by April 2018. As previously mentioned, this coding structure designates a unique 3-digit code for each work role defined in the NICE framework. According to OPM’s guidance, agencies could assign up to three work role codes to each position, and should assign the code of “000” only to positions that did not perform IT, cybersecurity, or cyber-related functions. The 24 agencies generally had assigned work role codes to their filled workforce positions that performed IT, cybersecurity, or cyber-related functions. Specifically, 22 of the agencies responded to our questionnaire that, as of April 2018, they had completed assigning work role codes to those filled positions. In addition, data from the OPM Enterprise Human Resources Integration system showed that, as of May 2018, the 24 agencies had collectively assigned work role codes or a “000” code to over 99 percent of the filled positions in their entire workforce. In addition, 18 of the 24 agencies reported they had identified and assigned codes to their vacant IT, cybersecurity, or cyber-related positions by April 2018. However, the remaining six agencies reported that they were not able to identify or assign codes to all of their vacant positions. For example, four agencies—DOD, EPA, GSA, and NASA— responded to our questionnaire that they did not identify and assign codes to vacant IT, cybersecurity, or cyber-related positions. DOD reported that, while some components assigned codes to vacant positions, the department did not have an enterprise-wide capability to assign codes to vacant positions and had not modified the systems to enable the use of the 3-digit work role codes for vacant positions due to time and funding constraints. EPA reported that it had assigned codes to vacant positions in April 2018, but it did not have a process for assigning codes to newly created vacant positions. GSA human resources officials said that they assigned codes to vacant positions that had been authorized and funded. However, they did not code unfunded vacant positions because they did not anticipate filling them. Agency officials noted that they, instead, tracked unfunded vacant positions through staffing plans. NASA human resources and Office of the Chief Information Officer officials said the agency did not identify and code vacant positions because they did not track vacant positions. Further, the remaining two agencies—Energy and Justice— stated that they could not provide data regarding the number of vacant IT, cybersecurity, or cyber-related positions that had been identified and coded. For example, Justice said that information on vacant positions was not available through its human resources system, and that it would need to send a data call to components to obtain information on the number of vacancies with an assigned work role code. However, according to management division officials, the department would need additional time to collect this information. OPM stated that it plans to issue additional guidance for tracking IT, cybersecurity, and cyber-related vacancies by January 2019. OPM officials said that agencies have focused on the assignment of codes to filled positions and that tracking vacancies is challenging because agencies vary in the way they track vacancies. By not completing their efforts to identify and code their vacant IT, cybersecurity, and cyber-related positions, the six agencies lack important information about the state of their workforces. As a result, these agencies may be limited in their ability to identify work roles of critical need and improve workforce planning. The Federal Cybersecurity Workforce Assessment Act of 2015 required agencies to assign the appropriate work role codes to each position with cybersecurity, cyber-related, and IT functions, as defined in the NICE framework. In addition, OPM guidance required agencies to assign work role codes using the Federal Cybersecurity Coding Structure. As previously mentioned, according to OPM’s guidance, agencies could assign up to three work role codes to each position. Agencies were to assign a code of “000” only to positions that did not perform IT, cybersecurity, or cyber-related functions. Further, the Standards for Internal Control in the Federal Government states that agencies should obtain relevant data from reliable sources that are complete and consistent. However, the 24 agencies had likely miscategorized the work roles of many positions. For example, the 24 agencies routinely assigned work role codes to positions that were likely inconsistent with the positions’ functions. Specifically, at least 22 of the 24 agencies assigned the code “000”, which is designated for positions not performing IT, cybersecurity, or cyber-related functions, to many positions that most likely performed these functions. For example, OPM’s Enterprise Human Resources Integration data from May 2018 showed that 22 of the 24 agencies had assigned the “000” code to between 5 and 86 percent of their positions in the 2210 IT management occupational series. These positions are most likely to perform IT, cybersecurity, or cyber-related functions, as defined by the NICE framework. OPM and agency officials told us that they would expect agencies to assign a NICE work role code to these positions, with a few exceptions, such as in cases where a position’s duties did not align with a NICE work role code. Table 3 identifies the number and percentage of the 2210 IT management positions that were assigned a “000” code by each of the 24 agencies, according to OPM’s Enterprise Human Resources Integration data, as of May 2018. Collectively, the agencies assigned a “000” code to about 15,779 positions, or about 19 percent of the agencies’ 2210 IT management positions. Agencies identified varying reasons for why they assigned the “000” code to positions that most likely performed IT, cybersecurity, or cyber-related functions. For example, Agency human resources and IT officials from 10 agencies said that they may have assigned the “000” code in error (DOD, Education, Energy, Justice, State, Department of Veterans Affairs (VA), NRC, OPM, Small Business Administration (SBA), Social Security Administration (SSA)). Agency human resources and IT officials from 13 agencies said they had not completed the process to validate the accuracy of their codes (Department of Agriculture (Agriculture), Education, Department of Health and Human Services (HHS), DHS, Department of Housing and Urban Development (HUD), Justice, Treasury, VA, EPA, GSA, NRC, SBA, SSA). Agency human resources and IT officials from seven agencies said that they assigned the “000” code to positions that did not perform cybersecurity duties for a certain percentage of their time (Commerce, Justice, Labor, Transportation, Treasury, GSA, and NASA). Agency human resources and IT officials from 12 agencies said that OPM’s guidance was not clear on whether the 2210 IT management positions should be assigned a work role code and not be assigned the “000” code (Agriculture, Energy, DHS, HUD, Interior, Labor, State, VA, EPA, GSA, NASA, and SSA). Agency human resources and IT officials from three agencies stated that they assigned the “000” code to IT positions when their positions did not align with any of the work roles described in the NICE framework (Interior, Treasury, and NRC). However, the work roles and duties described in the agencies’ position descriptions for the 2210 IT management positions that we reviewed aligned with the work roles defined in the NICE framework. For example, in examining the position descriptions that NRC officials said did not align to work roles in the NICE framework, we were able to match duties described in the position descriptions to work role tasks in the framework and identify potential work role codes for those positions. Additionally, Treasury officials said that positions in the area of cryptographic key management did not align with the NICE framework; however, these positions would likely align with the Communications Security Manager (i.e., NICE code 723) work role, which covers cryptographic key management. By assigning work role codes that are inconsistent with the IT, cybersecurity, and cyber-related functions performed by positions, the agencies in our review are diminishing the reliability of the information they will need to identify their workforce roles of critical need. Similar to the work role data reported in OPM’s Enterprise Human Resources Integration system, the six agencies that we selected for additional review had assigned work role codes to positions in their human resources systems that were not consistent with the duties described in their corresponding position descriptions. Of 120 randomly selected 2210 IT management positions that we reviewed at the six agencies, 63 were assigned work role codes that were inconsistent with the duties described in their position descriptions. DHS assigned a Network Operational Specialist code (NICE code 441) to a position with duties associated with a Cyber Instructional Curriculum Developer (NICE code 751). State assigned a Cyber Legal Advisor (NICE code 731) code to a position with duties associated with a Program Manager (NICE code 801). Table 4 summarizes the consistency of work role coding in comparison to corresponding position description text for the random sample of positions for the six selected agencies. The six agencies had also assigned different work role codes for positions that had identical position titles and similar functions described in corresponding position descriptions for 46 of 72 positions that we reviewed. For example, State had two positions associated with a position description that described duties associated with the IT Program Auditor (NICE code 805). Although State assigned the “805” work role code to one position, it assigned the “000” code to the other position. DOD had two positions associated with a position description that described duties associated with the Information Systems Security Manager work role (NICE code 722). However, DOD assigned the “000” code to one position and assigned an invalid 2-digit code to the other position. The six agencies provided multiple reasons for why they had assigned codes that were not consistent with the work roles and duties described in their corresponding position descriptions: DOD officials from the Office of the Chief Information Officer cited the large number of positions that perform IT, cybersecurity, or cyber- related functions and the lack of one-to-one mapping of the NICE framework work roles to positions as impediments. DHS human resources officials said that position descriptions may not have been consistent with coding because the assignment of the work role codes could be based on specific tasks that are described in separate documents (e.g., job analyses or employee performance plans) outside of the position descriptions. Information Resource Management officials at State said that their system did not require all IT positions to have a work role code. However, according to the officials, they had plans to create and release a business rule in September 2018 to reduce data errors and require the 2210 IT management positions series to have a work role code. EPA officials in the Office of Environmental Information and the Office of Human Resources stated that the first-line supervisor made the final determination of each position’s work role code. Officials stated that first-line supervisors may have assigned different codes for similar positions because they interpreted OPM guidance and work roles differently. GSA human resources officials said they assigned “000” to IT positions because they needed clarification and further interpretive guidance from OPM. According to the officials, once GSA received the guidance, the agency planned to conduct a review of IT positions coded “000.” In addition, GSA had assigned the code “000” if the position description did not include 25 percent or more of cybersecurity functions. According to NASA officials from the Offices of the Chief Human Capital Officer and Chief Information Officer, the agency miscoded a few positions due to an administrative error that has since been corrected. In addition, NASA officials said that they assigned the “000” code to positions that did not perform cybersecurity duties for a certain percentage of time (e.g., 25 percent or more of the time). Agencies did not provide further evidence that the positions we evaluated as inconsistently coded were accurate. Moreover, in reviewing 87 position descriptions provided by the six agencies—DOD, DHS, State, EPA, GSA, and NASA—in no case did we find the assignment of the “000” work role code to be consistent with the duties described. By assigning work role codes that are inconsistent with the IT, cybersecurity, and cyber-related functions performed by positions, the agencies in our review are diminishing the reliability of the information they will need to identify their workforce roles of critical need. As of November 2018, OPM and the 24 agencies had taken steps to address the three selected activities that the Federal Cybersecurity Workforce Assessment Act of 2015 required to identify IT, cybersecurity, and cyber-related work roles of critical need. Specifically, OPM had reported on agencies’ progress in identifying critical needs (activity 8) and had provided agencies with guidance for identifying IT, cybersecurity, and cyber-related work roles of critical need (activity 9). In addition, the 24 agencies had submitted preliminary reports of their identified critical needs to OPM, but their efforts to identify critical needs were ongoing (activity 10). Table 5 presents the status of the agencies’ efforts to identify work roles of critical need, as of November 2018. Further, appendix III summarizes the status of implementation of each of the 10 selected activities required by the act. The Federal Cybersecurity Workforce Assessment Act of 2015 required OPM, in consultation with DHS, to identify critical needs for the IT, cybersecurity, or cyber-related workforce across federal agencies and submit a progress report to Congress on the identification of IT, cybersecurity, or cyber-related work roles of critical need by December 2017. The act also required OPM to provide timely guidance for identifying IT, cybersecurity, or cyber-related work roles of critical need, and including current acute and emerging skill shortages. In December 2017, OPM, in consultation with DHS, reported on the progress of federal agencies’ identification of IT, cybersecurity, and cyber- related work roles of critical need to Congress. In the report, OPM could not identify critical needs across all federal agencies because agencies were still in the process of assigning work role codes and identifying their critical needs. As such, OPM reported that agencies were working toward accurately completing their coding efforts by April 2018, as a foundation for assessing the workforce and identifying needed cybersecurity skills. OPM stated in the report that it would begin to identify and report IT, cybersecurity, and cyber-related work roles of critical need following the agencies’ completion of their assessments and coding of the workforce. Further, in April 2018, OPM issued a memorandum to federal agencies’ chief human capital officers that provided guidance on identifying IT, cybersecurity, and cyber-related work roles. Specifically, this guidance required agencies to report their greatest skill shortages, analyze the root cause of the shortages, and provide action plans with targets and measures for mitigating the critical skill shortages. In addition, in June 2018, to ensure that agencies were on track to meet the requirements outlined in the act to submit their critical needs by April 2019, OPM required agencies to provide a preliminary report on work roles of critical need and root causes by August 31, 2018. OPM provided agencies with a template to collect critical information such as critical needs and root causes. OPM guidance stated that these data would provide the Congress with a government-wide perspective of critical needs and insight into how to allocate future resources. The act required agencies to identify IT, cybersecurity, or cyber-related work roles of critical need and submit a report to OPM substantiating these critical need designations by April 2019. OPM also required agencies to submit a preliminary report, which included agencies’ identified work roles of critical need and the associated root causes, by August 31, 2018. The 24 agencies have begun to identify critical needs and submitted a preliminary report of critical needs to OPM. Seventeen agencies submitted their report by the August 31, 2018 deadline, and seven submitted their report after the deadline in September 2018. Most agencies’ reports included the required critical needs and root causes. Specifically, Twenty-four agencies’ reports documented work roles of critical need. Twenty-two agencies’ reports included the root cause of the critical needs identified. Table 6 shows the status of the 24 agencies’ submissions of preliminary reports on cybersecurity work roles of critical need as of November 2018. The preliminary reports of critical needs for the 24 agencies showed that, as of November 2018, IT project managers, information systems security managers, and systems security analysts are among the top identified work roles of critical need at these agencies. Twelve agencies reported each of these work roles as a critical need. Agencies’ preliminary reports should provide a basis for agencies to develop strategies to address shortages and skill gaps in their IT, cybersecurity, and cyber-related workforces. For additional information on the top 12 reported work roles of critical need, see appendix IV. As required by the Federal Cybersecurity Workforce Assessment Act of 2015, the 24 agencies had generally categorized their workforce positions that have IT, cybersecurity, or cyber-related functions; however, agencies did not ensure the work role coding was reliable. For example, six of the 24 agencies had not completed assigning codes to their vacant positions. In addition, 22 of the agencies had assigned a code designated for positions not performing IT, cybersecurity, or cyber-related functions to about 19 percent of filled IT management positions. Further, six selected agencies—DOD, DHS, State, EPA, GSA, and NASA—had assigned work role codes to positions in their human resources systems that were not consistent with the duties described in the corresponding position descriptions. Until agencies accurately categorize their positions, the agencies may not have reliable information to form a basis for effectively examining their cybersecurity workforce, improving workforce planning, and identifying their workforce roles of critical need. Although OPM met its deadlines for reporting to congressional committees on agencies’ progress in identifying critical needs, the progress report did not identify critical needs across all federal agencies because agencies were still in the process of assigning work role codes and identifying their critical needs. In addition, OPM has since provided agencies with guidance that should assist them in their efforts to identify critical needs by April 2019. Further, all of the 24 agencies have submitted preliminary reports identifying work roles of critical need to OPM. These efforts should assist these agencies in moving forward to develop strategies to address shortages and skill gaps in their IT, cybersecurity, and cyber-related workforces. We are making a total of 28 recommendations to 22 agencies to take steps to complete the appropriate assignment of codes to their positions performing IT, cybersecurity, or cyber-related functions, in accordance with the requirements of the Federal Cybersecurity Workforce Assessment Act of 2015. Specifically: The Secretary of Agriculture should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 1) The Secretary of Commerce should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 2) The Secretary of Defense should complete the identification and coding of vacant positions in the department performing IT, cybersecurity, or cyber-related functions. (Recommendation 3) The Secretary of Defense should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series, assign the appropriate NICE framework work role codes, and assess the accuracy of position descriptions. (Recommendation 4) The Secretary of Education should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 5) The Secretary of Energy should complete the identification and coding of vacant positions in the department performing IT, cybersecurity, or cyber- related functions. (Recommendation 6) The Secretary of Energy should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 7) The Secretary of Health and Human Services should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 8) The Secretary of Homeland Security should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series, assign the appropriate NICE framework work role codes, and assess the accuracy of position descriptions. (Recommendation 9) The Secretary of Housing and Urban Development should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 10) The Secretary of Interior should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 11) The Attorney General should complete the identification and coding of vacant positions in the Department of Justice performing IT, cybersecurity, or cyber-related functions in the Department of Justice. (Recommendation 12) The Attorney General should take steps to review the assignment of the “000” code to any positions in the Department of Justice in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 13) The Secretary of Labor should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 14) The Secretary of State should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series, assign the appropriate NICE framework work role codes, and assess the accuracy of position descriptions. (Recommendation 15) The Secretary of Transportation should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 16) The Secretary of Treasury should take steps to review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 17) The Secretary of Veterans Affairs should take steps review the assignment of the “000” code to any positions in the department in the 2210 IT management occupational series and assign the appropriate NICE work role codes. (Recommendation 18) The Administrator of the Environmental Protection Agency should complete the identification and coding of vacant positions in the agency performing IT, cybersecurity, or cyber-related functions. (Recommendation 19) The Administrator of the Environmental Protection Agency should take steps to review the assignment of the “000” code to any positions in the agency in the 2210 IT management occupational series, assign the appropriate NICE framework work role codes, and assess the accuracy of position descriptions. (Recommendation 20) The Administrator of the General Services Administration should complete the identification and coding of vacant positions at GSA performing IT, cybersecurity, or cyber-related functions. (Recommendation 21) The Administrator of the General Services Administration should take steps to review the assignment of the “000” code to any positions at GSA in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes, and assess the accuracy of position descriptions. (Recommendation 22) The Administrator of the National Aeronautics and Space Administration should complete the identification and coding of vacant positions at NASA performing IT, cybersecurity, or cyber-related functions. (Recommendation 23) The Administrator of the National Aeronautics and Space Administration should take steps to review the assignment of the “000” code to any positions at NASA in the 2210 IT management occupational series, assign the appropriate NICE framework work role codes, and assess the accuracy of position descriptions. (Recommendation 24) The Chairman of the Nuclear Regulatory Commission should take steps to review the assignment of the “000” code to any positions at NRC in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 25) The Director of the Office of Personnel Management should take steps to review the assignment of the “000” code to any positions at OPM in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 26) The Administrator of the Small Business Administration should take steps to review the assignment of the “000” code to any positions at SBA in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 27) The Commissioner of the Social Security Administration should take steps to review the assignment of the “000” code to any positions at SSA in the 2210 IT management occupational series and assign the appropriate NICE framework work role codes. (Recommendation 28) We provided a draft of this report to the 24 CFO Act agencies and OMB for their review and comment. Of the 22 agencies to which we made recommendations, 20 agencies stated that they agreed with the recommendations directed to them; one agency partially agreed with the recommendation; and one agency agreed with one recommendation but did not agree with one recommendation. In addition, of the two agencies to which we did not make recommendations, one agency acknowledged its review of the report but did not otherwise provide comments; the other agency provided technical comments, which we incorporated into the report as appropriate. We also received technical comments from three of the agencies to which we made recommendations, and incorporated them into the report as appropriate. Further, OMB responded that it had no comments on the report. The following 20 agencies agreed with the recommendations in our report: In comments provided via email on February 19, 2019, the Director of Strategic Planning, Policy, E-government and Audits in Agriculture’s Office of the Chief Information Officer stated that the department concurred with the recommendation in our report. In written comments (reprinted in appendix V), Commerce agreed with our recommendation and stated that it would ensure the proper coding of 2210 IT management occupational series positions with the appropriate NICE framework work role codes. In written comments (reprinted in appendix VI), DOD concurred with our two recommendations. With regard to our recommendation that it complete the identification and coding of vacant positions performing IT, cybersecurity, or cyber-related functions, the department stated that its longer-term initiative is to code positions, including vacant positions, in DOD’s manpower requirements systems to provide true gap analysis capabilities. Regarding our recommendation that it review the assignment of “000” codes, the department stated that it would continue efforts to remediate erroneously coded positions. In written comments (reprinted in appendix VII), Education concurred with our recommendation. The department stated that its Office of Human Resources would continue to review the 2210 IT positions and ensure the assignment of appropriate work role codes. In written comments (reprinted in appendix VIII), Energy concurred with our two recommendations. Regarding our recommendation that it complete the identification and coding of vacant IT, cybersecurity, and cyber-related positions, the department stated that it had instituted procedures to review and code vacant positions. Regarding our recommendation that it review the assignment of “000” codes, the department said that it had ensured that all 2210 IT management positions were assigned the appropriate work role codes by April 2018. However, our review of the May 2018 data from OPM’s Enterprise Human Resources Integration System found that Energy had assigned the “000” code to about 16 percent of its 2210 IT management positions. Further, along with its comments on the draft report, in January 2019, the department provided a report indicating that Energy had not assigned the “000” work role code to its positions in the 2210 IT management occupation series. We plan to take follow- up steps to verify the completeness of the department’s actions. In addition to the aforementioned comments, Energy provided technical comments, which we have incorporated into this report, as appropriate. In written comments (reprint in appendix IX), HHS concurred with our recommendation and outlined steps to identify, review, and make necessary corrections to its 2210 IT management positions that were coded as “000.” In written comments (reprinted in appendix X), DHS concurred with our recommendation. The department stated that personnel in its Office of the Chief Human Capital Officer had established processes for periodically reviewing cybersecurity workforce coding data and for collaborating with components to ensure positions with significant responsibilities associated with the NICE framework—including 2210 positions—were properly coded. Nevertheless, DHS expressed concern with our finding that it had miscategorized the work roles for some positions. The department stated that its position descriptions are often written in a generalized format, and are static, baseline, point-in-time documents. The department added that, several positions may align with the same position description, yet have specific duties and content captured in other human capital documents such as employee performance plans. Thus, some positions may have the same position description yet require different cybersecurity codes. While we agree that position descriptions do not detail every possible activity, according to OPM, the position descriptions should document the major duties and responsibilities of a position. However, we found that DHS did not always assign codes consistent with major duties and responsibilities described in the position descriptions. For example, the department assigned a Network Operational Specialist code to a position with major duties associated with a Cyber Instructional Curriculum Developer. The department did not provide evidence that the positions we evaluated as inconsistently coded were accurately coded. If work role codes are not consistent with position descriptions, DHS may not have reliable information to form a basis for effectively examining its cybersecurity workforce, improving workforce planning, and identifying its workforce roles of critical need. The department also provided technical comments, which we have incorporated into this report as appropriate. In comments provided via email on February 14, 2019, an audit liaison officer in HUD’s Office of the Chief Human Capital Officer stated that the department agreed with our recommendation. In written comments (reprinted in appendix XI), Interior concurred with our recommendation and stated that it had taken steps to change the designation of the “000” code for the remaining personnel in the 2210 IT management occupational series. In comments provided via email on February 4, 2019, an audit liaison specialist in Justice’s Management Division stated that the department concurred with the two recommendations. In written comments (reprinted in appendix XII), Labor concurred with our recommendation and stated that it had taken steps to review and code the department’s 2210 IT positions using the NICE framework. In written comments (reprinted in appendix XIII), State concurred with our recommendation. The department said that it will conduct a comprehensive review of its 2210 positions and include instructions to change the coding of any such positions that have been assigned a “000” code. In addition, the department stated that it had created a new business rule in its human resources system to ensure that 2210 positions are assigned a primary work role code. In comments provided via email on December 20, 2018, an audit relations analyst in Transportation’s Office of the Secretary stated via email that the department concurred with our findings and recommendation. In written comments (reprinted in appendix XIV), VA concurred with our recommendation and stated that the department had begun conducting a review of its cyber coding. In written comments (reprinted in appendix XV), EPA concurred with our two recommendations to the agency. With regard to our recommendation that it complete the identification and coding of vacant positions performing IT cybersecurity or cyber-related functions, EPA stated that it would update its standard operating procedures to include the requirement to code vacant positions during the position classification process. Nevertheless, while including this requirement in the procedures is an important step, it is imperative that the agency implement the procedures to ensure that its vacant positions are assigned appropriate work role codes. With regard to our recommendation that the agency review the assignment of the “000” code to its 2210 IT management occupation series, EPA stated that it would review all such positions and assign the appropriate NICE framework codes to any positions that were erroneously coded with the non-IT work role code. In comments provided via email on January 31, 2019, the Director of the Human Capital Policy and Programs Division stated that GSA agreed with our two recommendations. Also, in written comments (reprinted in appendix XVI), GSA stated that, once it completes the ongoing transition to a position-based human resources system, it will explore options to include vacant positions in its new system. In addition, GSA stated that it had completed an initial review of cyber codes and indicated that it would update all coding by March 2019. In written comments (reprinted in appendix XVII), NRC agreed with the findings in our draft report and said it had taken actions to address our recommendation by assigning appropriate work role codes to IT management positions previously assigned a “000” code. In written comments (reprinted in appendix XVIII), OPM concurred with our recommendation to the agency. OPM stated that its human resources and subject matter experts plan to assess the assignment of “000” codes to personnel in the 2210 IT management occupation series to help ensure accurate coding and appropriate application of the NICE framework work role codes. In written comments (reprinted in appendix XIX), SBA concurred with our recommendation. The agency stated that its Office of the Chief Information Officer, Office of Human Resources Solutions, and appropriate program offices would review the assignment of the “000” code to any 2210 IT management occupation series positions and assign the appropriate NICE framework role codes. The agency also provided technical comments, which we have incorporated into this report as appropriate. In written comments (reprinted in appendix XX), SSA agreed with our recommendation and stated that it had taken steps to complete the assignment of codes to the remaining 2210 IT management positions. In addition, one agency partially agreed with the recommendations in our report. In comments provided via email on February 15, 2019, the Acting Director for Treasury’s Office of Human Capital Strategic Management stated that the department partially concurred with our recommendation that it review the assignment of “000” codes. According to the Acting Director, the Deputy Assistant Secretary for Human Resources and Chief Human Capital Officer had issued guidance to all Treasury Bureaus to validate the coding of 2210 IT management positions. However, Treasury did not agree with our finding that positions in the area of cryptographic key management could be aligned to the NICE framework work role code for the Communications Security Manager. The official stated that the cryptographic key management functions did not completely align with any of the NICE framework work roles. We acknowledge that there may be positions that do not completely align with work roles described in the NICE framework. However, according to OPM, the framework currently covers a broad array of functions that describe the majority of IT, cybersecurity, and cyber-related work. As noted in our report, OPM officials told us that they would expect agencies to assign a NICE work role code to 2210 IT management positions, with a few exceptions, such as in cases where a position’s duties did not align with a NICE work role code. As such, we maintain that Treasury likely miscategorized over 1,300 IT management positions by assigning a “000” code to them, designating those positions as not performing IT, cybersecurity, or cyber-related work and, thus, should review these positions and assign the appropriate work role codes. Further, one agency did not agree with one of the two recommendations directed to it. Specifically, in written comments (reproduced in appendix XXI) NASA stated that it concurred with our recommendation to review the assignment of “000” codes to 2210 IT management positions. In this regard, the agency stated that it would complete a review of the assignment of “000” codes to 2210 IT management positions and assign the appropriate NICE framework work role codes. NASA did not concur with our other recommendation to complete the identification and coding of vacant positions performing IT, cybersecurity, or cyber-related functions. The agency stated that it had met the intention of the recommendation with existing NASA processes that assign a code at the time a vacancy is identified. However, the agency’s workforce planning process is decentralized and the agency previously noted that it did not track vacancies. We maintain that the Federal Cybersecurity Workforce Assessment Act requires agencies to identify and code vacant positions and that NASA could compile necessary information from components to identify and code vacant IT, cybersecurity, and cyber-related positions. These efforts would provide important information about vacant IT, cybersecurity, and cyber-related positions across the agency to enhance NASA’s workforce planning. Thus, we continue to believe that our recommendation is warranted. In addition, of the two agencies to which we did not make recommendations, one agency—USAID—provided a letter (reprinted in appendix XXII) acknowledging its review of the report and the other agency—NSF—provided technical comments, which we have incorporated into the report as appropriate. We are sending copies of this report to interested congressional committees, the Director of the Office of Management and Budget, the secretaries and agency heads of the departments and agencies addressed in this report, and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you have any questions regarding this report, please contact me at (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix XXIII. Our objectives were to (1) determine the extent to which federal agencies have assigned work role codes to positions performing information technology (IT), cybersecurity, or cyber-related functions, and (2) describe the steps federal agencies took to identify work roles of critical need. The scope of our review included the 24 major departments and agencies covered by the Chief Financial Officers (CFO) Act of 1990. To address our objectives, we reviewed the provisions of the Federal Cybersecurity Workforce Assessment Act of 2015 and assessed the workforce planning actions taken by the Office of Personnel Management (OPM) and the other 23 CFO Act agencies against the selected four activities required by the act. To evaluate the four selected activities of the act and objectives 1 and 2, we reviewed the National Initiative for Cybersecurity Education (NICE) Cybersecurity Workforce Framework and OPM’s cybersecurity coding structure and guidance. The guidance provided information on how agencies should identify and assign work role codes to IT, cybersecurity, and cyber-related positions. We also designed and administered a questionnaire to each of the 24 agencies regarding their efforts to identify and assign work role codes to IT, cybersecurity, or cyber-related positions, and identify work roles of critical need. In developing the questionnaire, we took steps to ensure the accuracy and reliability of responses. We pre-tested the questionnaire with OPM and the Department of Homeland Security (DHS) officials to ensure that the questions were clear, comprehensive, and unbiased, and to minimize the burden the questionnaire placed on respondents. We also asked the chief information officer and the chief human capital officer of each agency to certify that they reviewed and validated the responses to the questionnaires. We administered the questionnaire between June and October 2018. We received completed questionnaires from each of the 24 agencies, for a response rate of 100 percent. We examined the questionnaire results and performed computer analyses to identify missing data, inconsistencies, and other indications of error, and addressed such issues as necessary, including through follow-up communications with the 24 agencies. We reviewed and analyzed the agencies’ responses to the questionnaire in comparison to the act’s requirements and OPM’s and NICE’s guidance. We also obtained, reviewed, and analyzed supporting documentation of questionnaire responses, such as reports of cybersecurity employment code data, to assess whether agencies assigned work role codes in accordance with the activities in OPM’s coding guidance, by April 2018. Further, to analyze how federal agencies assigned work role codes to positions performing IT, cybersecurity, or cyber-related functions, we obtained IT, cybersecurity, or cyber-related workforce coding data for the 24 agencies from OPM’s Enterprise Human Resources Integration system. To assess the reliability of coding data from OPM’s system, we reviewed these data to determine its completeness, and asked officials responsible for entering and reviewing the work role coding data a series of questions about the accuracy and reliability of the data. In addition, we examined the Enterprise Human Resources Integration IT, cybersecurity, or cyber-related coding data to determine the number of positions the 24 agencies had assigned the “000” code to positions in the 2210 IT management occupational series as of May 2018. We reviewed positions from the 2210 IT management occupational series because those positions are likely to perform IT, cybersecurity, or cyber-related functions. In the report, we note some challenges with the reliability of these data and are careful to present our data in line with these limitations. We then identified a subset of the 24 agencies and performed an additional review of these agencies’ work role coding efforts. We selected these agencies based on their total cybersecurity spending for fiscal year 2016, as reported by the Office of Management and Budget (OMB) in its Federal Information Security Modernization Act annual report. We sorted the 24 agencies’ IT cybersecurity spending from highest to lowest and then divided them into three equal groups of high, medium, and low. We then selected the top two agencies from each group. Based on these factors, we selected six agencies: the (1) Department of Defense (DOD), (2) DHS, (3) Department of State (State), (4) National Aeronautics and Space Administration (NASA), (5) Environmental Protection Agency (EPA), and (6) General Services Administration (GSA).We performed an additional review of the agencies’ work role coding efforts. We did this by evaluating the six selected agencies’ coding processes against their established procedures and OPM requirements. We also obtained and reviewed coding data that included the assigned work role codes for civilian employees from each agency’s human resources system. To assess the reliability of coding data from the selected six agencies’ systems, we reviewed related documentation such as the agencies’ coding procedures, processing guides, personnel bulletins, and system screen shots. We also conducted electronic testing for missing data, duplicate data, or obvious errors. In addition, we asked officials responsible for entering and reviewing the work role coding data a series of questions about the accuracy and reliability of the data. For any anomalies in the data, we followed up with the six selected agencies’ offices of the chief information officer and chief human capital officer to either understand or correct those anomalies. Further, we assessed the reliability of data in terms of the extent to which codes were completely assigned and reasonably accurate. In the report, we note some challenges with the reliability of these data and are careful to present our data in line with these limitations. We randomly selected a sample of 20 positions from each of the six selected agencies (120 total positions) within the 2210 IT management occupational series. We reviewed positions from the IT management 2210 series because those positions are likely to perform IT, cybersecurity, or cyber-related functions. For the selected positions, we requested position descriptions and reviewed whether the position work role codes in the coding data were consistent with the corresponding position description text. We also selected a second nonstatistical sample of 12 positions for each of the six agencies (72 total positions) from the 2210 IT management occupational series based on pairs of positions that had identical position titles, occupational series, and sub-agencies, but for which the agencies had assigned different work role codes for the positions. An analyst reviewed the work role coding data and compared them to the duties described by the position descriptions to determine whether they were consistent with the position duties. A second analyst verified whether or not the position’s work role code was consistent with the position description. A third analyst adjudicated cases in which the first and second analysts’ evaluations did not match. Lastly, to evaluate agencies’ actions to address the last three activities of the act related to the identification of cybersecurity work roles of critical need, we obtained, reviewed, and analyzed OPM’s guidance for identifying critical needs and its progress report to Congress by comparing it to the act’s requirements. We reviewed agencies’ responses to our questionnaire regarding whether they had developed methodologies or project plans for identifying critical needs. We also reviewed any available documentation on the 24 agencies’ progress in identifying critical needs, such as project plans, timelines, and preliminary reports. In addition, OPM required agencies to submit a preliminary report on work roles of critical need by August 31, 2018. We obtained copies of the preliminary reports from the 24 agencies. We evaluated agencies’ efforts to meet the deadline, as well as for meeting OPM’s requirements for documenting work roles of critical need and determining root causes of those needs. To supplement our analysis, we interviewed agency officials from human resources and chief information officer offices at the 24 agencies regarding their progress in coding and identifying cybersecurity work roles of critical need. We conducted this performance audit from February 2018 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Tammi Kalugdan (Assistant Director), Merry Woo (Analyst-in-Charge), Carlos (Steven) Aguilar, Alexander Anderegg, Christina Bixby, Carl Barden, Chris Businsky, Virginia Chanley, Cynthia Grant, Paris Hawkins, Lee Hinga, James (Andrew) Howard, Assia Khadri, David Plocher, Steven Putansu, and Priscilla Smith made significant contributions to this report.", "summary": "A key component of mitigating and responding to cyber threats is having a qualified, well-trained cybersecurity workforce. The act requires OPM and federal agencies to take several actions related to cybersecurity workforce planning. These actions include categorizing all IT, cybersecurity, and cyber-related positions using OPM personnel codes for specific work roles, and identifying critical staffing needs. The act contains a provision for GAO to analyze and monitor agencies' workforce planning. GAO's objectives were to (1) determine the extent to which federal agencies have assigned work roles for positions performing IT, cybersecurity, or cyber-related functions and (2) describe the steps federal agencies took to identify work roles of critical need. GAO administered a questionnaire to 24 agencies, analyzed coding data from personnel systems, and examined preliminary reports on critical needs. GAO selected six of the 24 agencies based on cybersecurity spending levels to determine the accuracy of codes assigned to a random sample of IT positions. GAO also interviewed relevant OPM and agency officials. The 24 reviewed federal agencies generally assigned work roles to filled and vacant positions that performed information technology (IT), cybersecurity, or cyber-related functions as required by the Federal Cybersecurity Workforce Assessment Act of 2015 (the act). However, six of the 24 agencies reported that they had not completed assigning the associated work role codes to their vacant positions, although they were required to do so by April 2018. In addition, most agencies had likely miscategorized the work roles of many positions. Specifically, 22 of the 24 agencies assigned a “non-IT” work role code to 15,779 (about 19 percent) of their IT positions within the 2210 occupational series. Further, the six agencies that GAO selected for additional review had assigned work role codes that were not consistent with the work roles and duties described in corresponding position descriptions for 63 of 120 positions within the 2210 occupational series that GAO examined (see figure). Human resource and IT officials from the 24 agencies generally reported that they had not completely or accurately categorized work roles for IT positions within the 2210 occupational series, in part, because they may have assigned the associated codes in error or had not completed validating the accuracy of the assigned codes. By assigning work roles that are inconsistent with the IT, cybersecurity, and cyber-related positions, the agencies are diminishing the reliability of the information they need to improve workforce planning. The act also required agencies to identify work roles of critical need by April 2019. To aid agencies with identifying their critical needs, the Office of Personnel Management (OPM) developed guidance and required agencies to provide a preliminary report by August 2018. The 24 agencies have begun to identify critical needs and submitted a preliminary report to OPM that identified information systems security manager, IT project manager, and systems security analyst as the top three work roles of critical need. Nevertheless, until agencies accurately categorize their positions, their ability to effectively identify critical staffing needs will be impaired. GAO is making 28 recommendations to 22 agencies to review and assign the appropriate codes to their IT, cybersecurity, and cyber-related positions. Of the 22 agencies to which GAO made recommendations, 20 agreed with the recommendations, one partially agreed, and one did not agree with one of two recommendations. GAO continues to believe that all of the recommendations are warranted.", "document_type": "gao"}
{"report": "In fall 2015, almost 20 million students were enrolled in over 4,500 2- and 4-year postsecondary institutions, according to IPEDS data. Postsecondary institutions vary in terms of their funding, the length and type of programs offered, and instructional mission, among other characteristics. Public institutions, which include state universities and community colleges, are traditionally supported by federal, state, and local funds, in addition to revenue from tuition and fees. Private, not-for- profit schools are owned and operated by independent or religious organizations, and their net earnings do not benefit any shareholder or individual. Tuition and fees as well as other revenue sources primarily support these schools. For-profit institutions are privately owned and earnings can benefit shareholders or individuals. Two-year institutions often provide career-oriented programs at the certificate and associate’s degree levels. Four-year institutions tend to have a broad range of instructional programs at the undergraduate level leading to bachelor’s degrees. Many 4-year institutions also offer master’s or doctorate level programs, and some 4-year institutions have a research focus. The landscape of postsecondary institutions has changed over the past 20 years, particularly with respect to for-profit institutions. The number of public institutions remained relatively constant and the number of private institutions declined slightly; however, the number of for-profit institutions more than tripled between 1995 and 2011 before declining slightly to 2015 levels (see fig. 1). IPEDS and CPS both provide data on postsecondary faculty. IPEDS data can provide information on positions filled by different types of faculty across postsecondary education or by types of institutions (see sidebar for how we categorize institutions using IPEDS data). In terms of faculty types, IPEDS distinguishes between tenure-track and contingent positions and also has data on graduate assistants, though we cannot determine whether these graduate teaching assistants are the instructors of record for courses or are instead providing classroom support (e.g., grading, leading discussions, and lab setup). Because IPEDS counts positions, any faculty who teach at more than one institution are counted multiple times—for each position they fill. CPS counts the number of actual workers in a given occupation and, in terms of faculty, provides data on how many individuals are employed as postsecondary teachers in colleges and universities nationwide. CPS does not differentiate faculty by type of institution or by tenure status. For example, CPS cannot identify full-time contingent faculty separately from full-time tenure-track faculty. According to IPEDS data, from 1995 to 2011, the percentage of postsecondary instructional positions filled by contingent faculty increased from 57.6 to 71.6 percent. During this period the number of instructional faculty positions at all institutions nationwide grew by over 60 percent— though most of this growth was among positions held by contingent faculty. More specifically, the number of positions held by full-time and part-time non-tenure-track faculty—which we define as contingent—both doubled during this period, while the number of positions held by full-time tenure-track faculty grew by about 10 percent (see table 1). In addition to full- and part-time contingent faculty, some graduate assistants may also teach courses. During the same period, the number of graduate teaching assistant positions grew by 63.8 percent. Some of the increase in the percentage of contingent faculty positions is due to the growth of the for-profit sector and growth among 2-year institutions, which as a whole rely primarily on contingent faculty. For example, the number of positions nationwide across for-profit institutions in 2011 was almost 9 times as many as in 1995. However, the shift towards contingent faculty positions was clear even among only 4-year public and private institutions (see fig. 2). Contingent faculty currently fill most instructional positions nationwide, though these numbers cannot be compared to historical data. According to 2015 IPEDS data, contingent faculty fill 69.5 percent of the 1,444,774 postsecondary instructional positions across all institutions nationwide, including about 61.4 percent of instructional positions at 4-year institutions, 83.5 percent at 2-year institutions, and 99.7 percent at for- profit institutions (see fig. 3). As noted previously, aggregated IPEDS data count faculty who teach at multiple institutions multiple times; therefore, there are likely more contingent faculty positions than there are contingent faculty workers. Although it is unknown how many faculty hold jobs at multiple institutions, this is likely to be more prevalent among faculty filling part-time positions. To illustrate, according to CPS data— which counts individuals—an estimated 31.7 percent (+/- 4.1) of individuals employed as postsecondary teachers in colleges and universities worked part-time in 2015. In contrast, according to IPEDS data, part-time faculty held about 50.0 percent of instructional positions. Though the majority of instructional faculty positions across institutions are contingent, employment stability among these positions may vary widely. Many of these contingent positions may have some job stability, depending on contract specifics. For example, about a quarter of contingent positions across all institutions have full-time, annual, multi- year, or potentially pseudo-tenure contracts (see fig. 3). Some of these positions may expire at the end of a set term or have no option for renewal—potentially requiring a new application process—while others may be relatively long-term with continuously repeating contracts. For example, officials at one North Dakota institution we visited described their non-tenure-track positions as “tenure light” because full-time faculty receive 1-year contracts for their first 4 years and then, after a successful promotion review, receive continuous 3-year contracts that can be terminated only for adequate cause, such as gross professional misconduct. In contrast to these more stable contingent positions, more than half of the contingent positions across all institutions nationwide are part-time and have less-than-annual contracts or lack faculty status— which we define as being among the least stable (see fig. 3). For some of the faculty filling these positions, this employment may be their sole source of income. Similar to contingent workers in the broader labor force, as we reported previously, these faculty may face volatility and uncertainty in their economic circumstances. Other faculty in these positions may have employment or sources of income outside of teaching. For example, some part-time instructors are employed full-time in their fields and teach on the side as subject-matter experts or to stay connected with their local university community. Examples of Part-Time Faculty Situations from Faculty Discussion Groups at Selected Institutions Two part-time faculty members at an institution in Ohio said they had jobs outside of teaching and said they teach on the side because they love it, rather than relying on it for subsistence. One part-time faculty member at an institution in Georgia said that she was retired, but teaches courses to keep a foot in the education world while also enjoying free time in retirement. One younger part-time faculty member at an institution in North Dakota stated that she teaches on a semester-to-semester contract and that this was her primary employment. While it is unknown how many faculty rely on their instructional positions as their primary employment, nationally representative data from the Current Population Survey (CPS) and Survey of Doctorate Recipients (SDR) provide some limited information that suggests many part-time faculty prefer working part-time. The CPS data show that an estimated 46.2 percent (+/- 6.3) of part-time faculty reported wanting to work part- time, while only 10.0 percent (+/- 5.1) reported working part-time because they could only find a part-time job or because of seasonal or temporary fluctuations in the availability of employment. Similarly, SDR data on doctorate-holding instructional faculty in STEM (science, technology, engineering, and math), health, and social sciences fields show that most part-time contingent faculty report wanting to work part-time, though among those who reported wanting a full-time job, most reported not being able to find one (see table 2). According to IPEDS data, different types of postsecondary institutions rely more heavily on different segments of the instructional workforce. As shown in figure 4, many 4-year institutions employ tenure-track, full-time contingent, and part-time contingent positions—though the balance varies. Far fewer 2-year institutions and very few for-profit institutions have tenure-track positions. Part-time and short-term positions are substantially more prevalent at these institutions. For example, part-time contingent positions make up 67.9 percent and 80.5 percent of instructional positions at 2-year and for-profit institutions, respectively, as compared to 39.8 percent at 4-year institutions. Beyond institution type, reliance on different types of faculty positions also varies by institutional characteristics, such as size and highest degree offered. For example, across 4-year institutions with more than 10,000 students, 43.1 percent of positions are tenure-track, as compared to 30.6 percent across institutions with fewer than 5,000 students. Similarly, a higher percentage of instructional positions are tenure-track across 4-year institutions that offer doctorate degrees, compared to those institutions that do not offer doctorate degrees (see fig. 5). Contingent faculty fill more than half of instructional positions at 2- or 4- year public institutions in the three selected states (see fig. 6). Two-year public institutions in North Dakota and Ohio were especially reliant on contingent faculty, where they fill about 72 and 84 percent of instructional positions, respectively (see sidebar for our definition of instructional faculty in the state data, as compared to our other data analyses). We examined several different demographic characteristics of contingent faculty including gender, race, educational attainment, and age. According to 2015 IPEDS data, instructional positions nationwide are divided roughly evenly between the sexes, but women fill fewer tenure- track positions and more contingent positions than men do. As shown in figure 7, across all institutions, women hold a substantially lower proportion of full-time tenured positions (38.4 percent) than men do, though women fill 48.9 percent of full-time positions that are on a tenure track but not yet tenured, and that are generally more recent hires. Across all institutions, women also hold a slightly greater proportion of contingent positions (about 53 percent). This imbalance in representation, in part, reflects the higher concentration of women at 2-year and for-profit institutions, where they fill 54.3 and 55.9 percent of positions, respectively. These institutions generally rely more heavily on contingent faculty positions than do 4-year institutions. White (non-Hispanic) faculty fill almost three-quarters of instructional positions across all institutions nationwide. This racial/ethnic representation is relatively consistent across full-time tenure-track, full- time contingent, and part-time positions. Though filling 27.6 percent of positions across all institutions, racial and ethnic minorities have slightly greater representation at institutions in large cities (33.2 percent) and at for-profit institutions (38.4 percent). Our analysis of state data suggests that across 4-year public institutions in North Dakota and Ohio, lower proportions of individuals in contingent positions have a graduate or doctoral degree (see fig. 8). While the differences between tenure-track and contingent faculty are substantial, possible explanations include variation in degree requirements by discipline or individual circumstances, such as having professional experience in the field. Across public institutions in all three selected states, and excluding positions held by instructional graduate students, most positions held by the youngest faculty are contingent, and the most common positions held by the oldest faculty are part-time contingent. More specifically, most positions held by individuals under age 40 are contingent—60.2 percent in Georgia, 66.9 percent in North Dakota, and 74.5 percent in Ohio (excluding instructional graduate assistants). This suggests that newer graduates may be more likely to be hired into contingent rather than tenure-track positions. In addition, the most common positions held by faculty ages 70 and older are part-time contingent positions—51.0 percent in Georgia, 45.5 percent in North Dakota, and 59.4 percent in Ohio (excluding instructional graduate assistants). This suggests that a segment of the part-time contingent workforce may consist of retirees or workers who are approaching retirement. According to administrators we interviewed, institutions utilize full-time contingent faculty for different purposes, which may involve responsibilities beyond teaching. Administrators said full-time contingent faculty are hired primarily to teach and generally have larger course loads than tenure-track faculty who may teach fewer courses per semester due to significant research responsibilities. However, they also noted that— similar to tenure-track faculty—many full-time contingent faculty carry out additional responsibilities. For example, some full-time contingent faculty may perform service, conduct research, advise students, serve as department chairs, or manage student recruitment efforts for their programs. Many other full-time contingent faculty serve as instructors or lecturers whose sole responsibility is to teach. For example, administrators from one institution explained that they employ professional instructors who teach four courses per semester and have no service or research responsibilities. In addition, some full-time contingent faculty are hired because they have certain professional qualifications or experience. For example, one institution we visited employed academic professionals who may teach one or two courses per year while carrying out administrative, marketing, mentoring, or other duties. While full-time contingent faculty may have a variety of responsibilities, administrators stated that part-time contingent faculty generally focus on teaching, though they also may fulfill different purposes. In some cases, part-time contingent faculty serve as expert practitioners who teach specific subject matter. For example, administrators from one institution said that they hire part-time contingent faculty to teach instrumental music courses because teaching each instrument requires specialized expertise, and there may not be enough students learning any single instrument to warrant a full-time position. In other cases, part-time contingent faculty teach general education courses, such as Introduction to English Composition, which most students are required to take. In addition, while some part-time contingent faculty may have full-time jobs outside of academia, others may be working toward long-term careers as tenure-track professors, according to administrators. Administrators from some institutions also told us that they hire part-time contingent faculty help to manage lab courses (e.g., setting up laboratory equipment, assisting students) or to serve as mentors to students in specific programs (e.g., theological studies). University and college administrators we interviewed identified a number of financial and institutional considerations as well as faculty and student needs that affect their decisions regarding faculty makeup (see fig. 9). Administrators stated that utilizing contingent faculty allows for flexibility in managing various financial considerations, including the following: Budget uncertainty: Administrators from several public institutions explained that utilizing contingent faculty helps them manage uncertainty regarding the level of public funding they may receive. Administrators have the option not to renew contracts of contingent faculty if they experience a decrease in their funding, whereas institutions commit to retain tenure-track faculty until they retire. In addition, administrators from several public institutions noted that, as a result of decreased state funding, they have become more reliant on tuition to meet their budget needs. They told us that hiring contingent faculty to focus on teaching rather than research allows the institution to offer more classes and serve additional students, which in turn, generates more tuition revenue. Compensation costs: Administrators stated that, in general, they cannot employ tenure-track faculty for all courses because they can be more expensive to employ than contingent faculty. In addition to the long-term commitment associated with tenure, other costs may include spending to support research conducted by tenure-track faculty (e.g., investment in specialized labs or equipment). Legal or grant program requirements: Some administrators said that legal or grant program requirements affect their decisions regarding the utilization of contingent faculty. For example, administrators from several institutions told us that they had reduced teaching loads for part-time faculty because the Patient Protection and Affordable Care Act (PPACA) requires certain employers to provide health insurance for employees working 30 hours or more per week. Administrators from another institution stated that they utilized in-house faculty and hired additional contingent faculty to staff a federal grant program aimed at providing training for inmates at correctional facilities because—after receiving notification that they had been awarded the grant—they had approximately 2 months to staff 160 course sections. In addition, since they did not know whether the grant would be renewed, they did not know whether they would be able to retain those faculty at the end of the program. Administrators said that utilizing contingent faculty also allows flexibility to meet different institutional needs. Examples of institutional considerations cited by administrators include the following: Enrollment: By utilizing contingent faculty, institutions have more flexibility to meet course demand if there is a surge in enrollment or to downsize if there is a drop in enrollment, according to administrators. For example, administrators from one 2-year institution noted that enrollment generally increases when the economy is weak and decreases when the economy is strong. These administrators also said that their enrollment fluctuates greatly with changes in the economy and that, in their experience, prospective students are more likely to choose 4-year institutions rather than 2-year institutions when the economy is strong. In addition, when offering a course, administrators said part-time faculty may teach that course during a trial period while administrators decide whether to offer the course long term. Location and market demand: Some administrators stated that they offer contingent faculty positions in response to market conditions. For example, administrators from institutions located in small towns or rural areas said they rely on local professionals to teach certain courses on a part-time basis, in part, because of challenges finding qualified faculty and having fewer students enrolled at remote sites. Some administrators also said contingent faculty positions offer certain advantages that help them recruit high quality instructors. For example, administrators from one university noted that their institution offers stable, full-time employment to recent graduates looking to gain experience before applying for tenure-track positions at other institutions. Specialized experience: Contingent faculty may bring professional expertise to certain courses. For example, administrators from several institutions stated that their programs for health professionals rely on contingent faculty working in their field to teach clinical courses so that students may gain experience at an established medical practice. Administrators said that hiring practitioners from local industry as part- time instructors is an effective way to support specialized courses that have a limited number of sections. Administrators from one institution also noted that practitioners may have the qualifications needed to meet accreditation requirements for certain programs and departments (e.g., professional and technical programs). Balancing priorities: Administrators said that utilizing a combination of tenure-track and contingent faculty helps their institutions fulfill both teaching and research missions and accommodate the hiring needs of different programs and departments. For example, administrators from one institution noted that the additional revenue from increased course offerings—staffed by part-time contingent faculty—allows them to invest more money in research programs for tenure-track faculty. Administrators from two institutions explained that hiring part-time contingent faculty in a given department allows them to reallocate resources as needed, for example, to hire full-time contingent or tenure-track positions in another department. In addition, while contingent faculty may help fulfill accreditation requirements for certain programs, administrators from several institutions also stated that their accrediting bodies require a balance of contingent and tenure-track faculty, or alternatively, full-time and part-time contingent faculty. For example, administrators from one 4-year institution told us that part-time faculty may teach no more than 25 percent of student credit hours within their business school. As part of faculty utilization decisions, administrators said that they consider the personal and professional needs of faculty. Examples of faculty needs cited by administrators include the following: Flexibility: Administrators told us that they offer part-time positions, in part, because many qualified candidates want to work part-time for professional, family, or other reasons. For example, administrators at one institution said that part-time contingent faculty positions allow expert-practitioners to continue working full-time in their field while pursuing an interest in teaching. Alternatively, for those teaching as full-time contingent faculty, in some cases, their position may offer a more predictable schedule or other benefits compared to their professional field. Course loads: Administrators at some institutions said they prioritize the professional needs of existing full-time faculty before hiring part- time faculty by ensuring that full-time faculty have enough courses to meet their required teaching loads. Career paths: Some institutions have established mechanisms to support long-term career paths for full-time contingent faculty. For example, administrators from one institution stated that full-time contingent faculty may qualify for multi-year contracts that can be terminated only for adequate cause, such as gross professional misconduct. Administrators from several institutions said that they offer the full set of professorial ranks (i.e., Assistant Professor, Associate Professor, and Professor) to some full-time contingent faculty positions in order to provide opportunities for advancement. Administrators stated that having a combination of tenure-track and contingent faculty—or full-time and part-time contingent faculty at institutions without tenure—is necessary to meet different student needs. Examples of student needs cited by administrators include the following: Learning opportunities: Administrators stated that different types of faculty may offer different opportunities to students. For example, administrators told us that tenure-track faculty may provide research and academic networking opportunities whereas contingent faculty may not have the same opportunities to develop professional networks or conduct research in their field. Some administrators also said that the academic freedom associated with tenure or having faculty who conduct research in their field may be beneficial to students. Nonetheless, administrators from several institutions emphasized that contingent faculty were equally qualified to teach and that their positions allowed them to focus on teaching. Administrators also noted that contingent faculty may bring professional expertise and real-world experiences to the classroom. In addition to courses that require specialized experience, administrators from one institution said they also value the outside experience that contingent faculty bring to general education courses. As an example, they stated that part-time contingent faculty with experience from other jobs or professions may be able to relate to the real-world needs of their students because the majority of students will seek employment outside of academia. Community: Administrators said that, regardless of tenure status, they depend on having full-time faculty to help create a sense of community. They discussed informal ways that faculty support their campus community. For example, some administrators noted that full- time faculty contribute by mentoring students and participating in activities on campus. In contrast, part-time faculty are not able to spend as much time on campus because they often have other jobs or commitments, according to administrators. National data on contingent faculty pay rates are not available, but data from two states show that contingent faculty are paid less per course. IPEDS data cannot be used to determine faculty pay rates because salary data are not collected for part-time faculty nor are they collected at the individual faculty level, and CPS data do not differentiate between full- time tenure-track and full-time contingent faculty. Given the limitations of national data, we used data from two states to compare annual earnings across different types of faculty. The differences in median annual earnings shown in table 5 provide some insight into the generally lower overall compensation of contingent faculty, though these data are not generalizable. Further, particularly for part-time faculty who may be paid on a piecemeal or per-course basis, this measure does not provide information about whether compensation differences are due to lower pay rates or less work performed (e.g., courses taught or hours worked). Thus, we use the state data to calculate and examine comparable pay rates per course for all faculty types. Private organizations have attempted to collect data specifically on pay-per-course rates for part-time faculty, though efforts have been limited. On a per-course basis, we found that contingent faculty at public institutions in two states are paid less per course taught, on average, than full-time tenure-track faculty, though the extent of differences varies depending on contingent faculty group and pay measure. We conducted regression analyses of total pay per course and instructional pay per course, which provide two different perspectives on faculty compensation (see sidebar for explanations of these approaches and see appendix I for details on our methods). These analyses controlled for other factors that may affect earnings, such as employing institution, discipline, highest degree earned, and demographics. As shown in table 6, in terms of total pay per course, we found the following: Part-time contingent faculty in both states are paid about 75 percent less per course regardless of whether the population includes all faculty or is limited to “primarily teaching” faculty. The primarily teaching group excludes faculty who primarily hold other roles unrelated to instruction (e.g., administrators and research faculty). Full-time contingent faculty are paid about 35 percent less per course in North Dakota and about 40 percent less per course in Ohio, among primarily teaching faculty—differences are larger in Ohio if all faculty are included. Instructional graduate assistants earn more per course than part-time faculty (though still less than full-time tenure-track faculty). However, compensation for these groups is fundamentally different because instructional graduate assistants generally receive a stipend, similar to an annual salary, rather than being paid by the course like many part- time faculty. In addition, graduate assistantships may be awarded for academic merit or recruitment, and could also be considered as compensation for a graduate assistant’s work as a student. Disparities in instructional pay per course—which measures pay for equivalent work (see sidebar above)—are smaller for all contingent faculty groups than those for total pay per course. As shown in table 7, we found the following: Part-time contingent faculty in both states are paid about 60 percent less per course regardless of whether the population includes all faculty or is limited to primarily teaching faculty. Among primarily teaching faculty in both states, full-time contingent faculty are paid about 10 percent less per course than full-time tenure- track faculty. As with total pay, the instructional pay disparity for full-time contingent faculty in Ohio is larger if all faculty are included. However, when all faculty are included in North Dakota, the pay difference between full- time contingent and full-time tenure-track faculty is not significant at the 95 percent confidence level. Consistent with our other findings, when we analyzed national data from the 2013 Survey of Doctorate Recipients (SDR), we also found that contingent faculty in sciences fields earned less annually than full-time tenure-track faculty. Full-time contingent faculty earned 22 percent less than full-time tenure-track faculty, on average, and part-time contingent faculty earned 70 percent less, among instructional, doctorate-holding faculty in STEM, health, and social sciences fields. Unlike our analyses of state data, the SDR analysis cannot account for differences in the number of courses taught, and thus the results represent the combined effects of lower pay rates and smaller workloads, to the extent either exists. Data from North Dakota and Georgia, as well as national data covering different populations, suggest that relatively few part-time contingent faculty receive health or retirement benefits from their employment though full-time contingent faculty may. Although not generalizable, data from North Dakota and Georgia include data on actual benefits provided to faculty by institutions, as opposed to self-reported rates of coverage found in national survey data. Relatively few part-time contingent faculty and instructional graduate assistants in the North Dakota and Georgia data receive retirement, health, and life insurance benefits from their employment. For example, in Georgia and North Dakota, about 98 percent or more of individuals in full-time tenure-track and full-time contingent positions receive work-provided retirement benefits, compared to 19.4 and 9.3 percent, respectively, of those in part-time contingent positions (see table 8). An even smaller percentage of instructional graduate assistants in both states receive any of these benefits from their employment; however, instructional graduate assistants are students, so the terms of their employment may be different than traditional full-time and part-time employees. Similarly, our analysis of SDR and CPS data show that relatively few part- time contingent faculty nationwide receive retirement benefits from their employment. According to the 2013 SDR data, among instructional, doctorate-holding faculty in STEM, health, and social sciences fields, an estimated 48.4 percent (+/- 4.2) of part-time contingent faculty report having access to “a retirement plan to which employer contributed,” compared to the vast majority of full-time tenure-track and full-time contingent faculty. According to CPS data covering employment in 2015, an estimated 16.6 percent (+/- 6.1) of part-time faculty report participating in a work-provided retirement plan, as compared to 60.8 percent (+/- 4.7) of full-time faculty. While comparing health insurance coverage is complicated because workers may be covered by other family members’ plans, in both the SDR and CPS data, smaller proportions of part-time faculty had health insurance through their own employment. According to the 2013 SDR data, only 39.4 percent (+/- 4.6) of part-time contingent faculty had access to “health insurance that was at least partially paid by employer” compared to almost all full-time tenure-track and full-time contingent faculty. Similarly, in the CPS data, much smaller percentages of part- time faculty than full-time faculty report having health insurance through their own employment (see table 9). In addition to the lower pay and access to benefits experienced by some contingent faculty, among a national sample of instructional, doctorate- holding faculty in STEM, health, and social sciences fields, contingent faculty were less satisfied with their job security and career prospects. Based on our analysis of 2013 SDR data, the vast majority of all instructional faculty, including contingent faculty, stated that they are very or somewhat satisfied with their employment overall. However, compared to full-time tenure-track faculty, more contingent faculty reported some level of dissatisfaction (see fig. 10). While most faculty reported satisfaction with their employment, at least a third of both full- and part- time contingent faculty stated that they are dissatisfied with their job security and opportunities for career advancement. For example, an estimated 55.1 percent (+/- 4.5) of part-time contingent faculty reported some level of dissatisfaction with opportunities for advancement (see fig. 10), and the proportion who said they were very dissatisfied—26.1 percent (+/- 3.8)—is around 5 times greater than for full-time tenure-track faculty. Contingent faculty at selected institutions said their work offers certain advantages, including those allowing them to balance professional and personal responsibilities, develop skills, or work with students. Part-time contingent faculty in some discussion groups said they choose to work part-time because it gives them needed flexibility to balance teaching with working full-time or to meet family needs, such as childcare or caring for sick parents. As stated previously, our analysis of nationally representative 2013 SDR data showed that, among a sample of instructional faculty with doctorate degrees in STEM, health, and social sciences fields, many faculty preferred to work part-time for reasons including family responsibilities or holding another job. In terms of developing skills, one instructional graduate assistant told us that having teaching experience gives her an advantage in the job market. In addition, in both full- and part-time discussion groups, some contingent faculty told us they primarily want to teach, and their roles allow them to do that rather than having to conduct research or take on other responsibilities. In some discussion groups, contingent faculty said they are committed to teaching because they find it rewarding to interact with students. Insight from a Full-Time Contingent Faculty Member about Connecting with Students “I have yet to meet a contingent faculty member that does not say that student contact is extremely important to them…We’re excellent teachers. We’re interested in teaching. We are interested in being with students.” Contingent faculty in some of our discussion groups expressed concerns about contractual issues. In particular, they cited concerns regarding contract length, untimely contract renewals, or insufficient notice about their class schedules. Full- and part-time contingent faculty said short- term contracts—annual or semester-to-semester contracts—produce anxiety about job stability because of uncertainty about whether contracts will be renewed. Part-time faculty who teach at multiple institutions additionally said that short-term contracts hinder their ability to form lasting relationships with institutions or students. In some discussion groups, full- and part-time contingent faculty said untimely contract renewals can make it difficult to find another position if a contract is not renewed. For example, a full-time contingent faculty member said she received notification in August that her contract was not being renewed for the fall semester, at which point she could not find another position elsewhere for that semester. Part-time contingent faculty told us that notices about the status of their class schedules are also sometimes untimely. One full-time contingent faculty member said that, when he worked part-time, he sometimes did not know, until the first night of class, that a course he was scheduled to teach had been given to a full-time faculty member instead. While some contingent faculty expressed concerns about contract lengths and renewals, some contingent faculty said they do not have concerns in this area. Faculty members in some part-time discussion groups told us teaching is not their primary source of income or they are retired, so they are not concerned about job security and contract renewals. Insight from a Full-Time Contingent Faculty Member “The lack of long term job security/stability that results from short term contracts is my biggest concern. I find it insulting when comments like “great work, we’re committed to you” are coupled with actions like one year contracts when I have been in this position for 15 years. It does not make me feel valued.” Contingent faculty we spoke with identified insufficient compensation as a disadvantage of their employment (see table 10). Full-time and part-time contingent faculty in some discussion groups said they must supplement their teaching income to cover their living expenses. For example, one full-time contingent faculty member said he does consulting work, bookkeeping, and product reviews to increase his income because his teaching salary is not adequate. In addition, some part-time faculty said they teach at several institutions to make ends meet financially and some instructional graduate assistants also said they take on extra work to cover living expenses. Union officials at the national level said their members have expressed similar concerns. Specifically, Service Employees International Union (SEIU) officials told us some contingent faculty members qualify for public assistance due to the low level of compensation they receive. Insight from Part-Time Contingent Faculty Member Teaching at Multiple Institutions “Society at large, I think, associates the college professor with a rather well paid and stable career. And I think most of us who worked in this field know that is anything but the case.” Some contingent faculty in both full- and part-time discussion groups said they are not paid for all of their job requirements or are undercompensated given their qualifications. Full- and part-time contingent faculty and graduate student instructors said they are required to assume extra responsibilities at no additional pay. For example, a faculty member in a full-time discussion group told us she was given additional duties of advising 15 students and attending meetings, neither of which was included in her contract. Both full- and part-time faculty in some discussion groups said their pay is not commensurate with their academic credentials. One full-time faculty member told us an administrator with a doctorate who works in the local school district near her institution is paid double her salary. Similarly, a part-time faculty member told us her salary is less than $20 an hour, a rate she considers as too low for a professional with a doctorate. Contingent faculty in some discussion groups said they would like to move into a tenure-track or full-time position, but face barriers doing so, and union officials expressed similar views. For example, one full-time contingent faculty member told us teaching 6 to 10 classes per year does not allow her time to conduct the research needed to be competitive for a tenure-track position. In some discussion groups, both full- and part-time faculty said that they perceive that their colleagues sometimes view them as less capable because they are not tenure-track faculty. As a result, these faculty may not be considered for tenure-track positions when they become available. A part-time contingent faculty member who teaches at multiple institutions noted that availability of full-time positions may be limited because many institutions hire only part-time faculty. Union officials from the American Association of University Professors (AAUP) and SEIU also cited the decline in the availability of tenure-track positions as a barrier regarding career advancement for contingent faculty. Insight from a Part-Time Contingent Faculty Member Who Teaches at Multiple Institutions “It wasn’t that long ago that once you went to work for a college as an adjunct and you were there a certain number of years, there was a real expectation that you would be offered a full-time position or at least you would move to an annual contract so you only had to worry once a year. That’s disappearing. More and more colleges are moving away from that. Also, a lot of colleges are moving away from full-time positions.” Contingent faculty in some discussion groups expressed concerns that they do not have a voice in institutional decision-making because they cannot serve on some department or university-level committees or vote on particular issues. They explained that sometimes a school’s policy prohibits their service or relevant policy is not clearly articulated. For example, a full-time contingent faculty member told us that contingent faculty members at her institution cannot participate on governance committees, which she said leaves administrators free to ignore the concerns of contingent faculty. Insight from a Full-Time Contingent Faculty Member “We have no voice. We have no say. We have no governance. We don’t have any of that. And yet, we all—every one of us around here earned the same degree, worked the same amount. So there is huge inequality between choosing to focus on research primarily, and therefore, getting this basic job guarantee until die and choosing to focus on teaching, not having that , even though in many other ways we are equivalent.” Contingent faculty in some discussion groups also told us they are reluctant to voice their views because they do not have job protections. For example, a full-time contingent faculty member in one discussion group told us she would feel more comfortable speaking up if she had a continuing contract rather than her current annual contract. An official from the National Center for the Study of Collective Bargaining in Higher Education and the Professions said that an issue for contingent faculty broadly is whether they are protected by due process. He said it can be unclear for contingent faculty whether they can be terminated without due process consideration when, for example, a student complains about the content of a faculty member’s lecture. Despite concerns about opportunities for institutional involvement, contingent faculty told us they preferred to use informal mechanisms to raise issues with the administration and had mixed views about the value of unions. Several full- and part-time faculty members said they are comfortable approaching their department chairperson or even university administrators to ask questions or express concerns. In terms of unions, some faculty in both full-time and part-time discussion groups said they were opposed to unions based on prior experiences or not wanting to pay dues. In contrast, some faculty said they thought a union could be beneficial by helping with certain issues, such as compensation and working conditions. Union officials told us there has been greater interest in recent years from contingent faculty—including graduate assistants—in learning about faculty unionization or in organizing into unions. However, one union official noted that it can be challenging for part-time faculty to form a union because they may move from one institution to another. Examples of Academic Associations’ Efforts to Focus on Contingent Worker Issues The American Political Science Association (APSA): Convened a committee in 2016 on the status of contingent faculty in the profession to expand ways to support contingent faculty members. The committee sponsored a roundtable at the APSA Annual Meeting in August 2017 to examine a range of topics related to contingent faculty, including promotion paths, fairness within the profession, and the role of unionization. The American Sociological Association (ASA): Formed a task force on contingent faculty in November 2015 to examine the implications of the recent growth of contingent employment among sociologists. The task force’s interim report, issued in August 2017, includes recommendations to ASA and universities, for improving contingent faculty working conditions. The Modern Language Association: (MLA) Convened a committee that will work through June 2019 to examine issues that affect contingent faculty, including salary and benefits, workplace issues and conditions of employment, demographics, participation in departmental and institutional governance, academic freedom, and professional development. The committee plans to identify effective policies and practices related to contingent faculty. The American Institute of Physics (AIP): Conducted a survey of individual faculty in 2016 that included questions on school climate and culture. As of February 2017, AIP was in the early stages of analyzing the survey response rates and results. Contingent faculty in some discussion groups also described a lack of institutional support in areas that can affect faculty teaching duties, such as access to information systems or office space. For example, a part- time faculty member told us her access to institutional email and the online grading system was terminated too soon because her contract ended a few days before she gave final examinations. Part-time faculty and faculty teaching at multiple institutions also raised concerns that they sometimes lack appropriate office space to ensure student privacy. Union officials we spoke with also said contingent faculty nationwide commonly cite these areas of limited institutional support as concerns. Some discipline-specific academic associations have also begun to focus on issues related to contingent faculty (see sidebar). Insight from a Part-Time Contingent Faculty Member Who Teaches at Multiple Institutions “The office space problem is a big problem. Either one doesn’t have any office space or it’s a jointly shared office space, a very large space with lots of people in it. It is very difficult to have kind of close conversations with students. I think it brings up some Family Educational Rights and Privacy Act (FERPA) problems, anonymity problems as well.” We provided a draft of this report to Education, NSF, and experts on contingent faculty issues or the data used in this report for their review and comment. Education did not have any comments. NSF and expert reviewers provided technical comments, which we incorporated, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, to the Secretary of Education and the Director of the National Science Foundation, and to other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The objectives of this review were to determine (1) what is known about the makeup and utilization of the postsecondary instructional workforce; (2) the roles different types of faculty fill at selected institutions and the factors administrators consider when determining their faculty makeup; (3) what is known about how economic circumstances compare across different faculty types; and (4) what contingent faculty members report as advantages and disadvantages of their work. To address objectives 2 and 4, we interviewed administrators and contingent faculty members during site visits at selected institutions in three states—Georgia, North Dakota, and Ohio. In each state, we visited one 4-year public institution, one 4-year private (non-profit) institution, and one 2-year public institution (see table 11). We selected institutions in these states, in part, to provide context for our analysis of faculty and course data that we obtained from their postsecondary data systems (see Section 1 of this appendix for more information). In addition to data availability, we considered size and geographic location as part of our state selection process. When selecting institutions within each state, we considered factors such as the size of the instructional faculty workforce, the percentage of contingent faculty, and whether the institution is located in an urban, suburban, or rural area. In our interviews with administrators—chief academic officers, vice presidents, or deans, among others—we asked about the roles different types of instructional faculty fill and the factors administrators consider when determining their institution’s faculty makeup. In addition to administrators at the institutions above, we also interviewed administrators from one large online-based for-profit institution, which we selected primarily based on size of the institution. In total, we interviewed administrators from 10 institutions. The findings from these interviews are not generalizable. At each institution, we held discussion groups with full-time and part-time contingent faculty and graduate student instructors, where applicable. University administrators solicited participants for the discussion groups on our behalf. During these discussion groups, we asked contingent faculty broad, open-ended questions about the advantages and disadvantages of their work and about their working conditions. Participants were invited to complete a written questionnaire to provide demographic information about themselves. Among the 109 contingent faculty members who completed our questionnaire, the average age of full- and part-time contingent faculty we met with was 53. Graduate student instructors were younger, with an average age of 30. Contingent faculty we interviewed came from a range of disciplines, including English, music, engineering, and the health professions. The vast majority of full- and part-time contingent faculty indicated that they held a master’s or doctorate degree. At the institutions we visited in Georgia, North Dakota, and Ohio, the majority of part-time faculty worked at one institution. To ensure we collected a broad range of perspectives, we conducted two additional discussion groups with contingent faculty who taught at multiple institutions. In total, we conducted 21 discussion groups with contingent faculty. Finally, we conducted additional interviews to obtain background and context for our work. We met with individuals knowledgeable about issues related to postsecondary faculty and unions representing postsecondary faculty, including the American Association of University Professors and the Service Employees International Union. For all questions, we also reviewed relevant federal laws and regulations. The remainder of this appendix provides detailed information about the data and quantitative analysis methods we used in our review, as follows: Section 1: Key data sources Section 2: Quantitative analysis methods used to address the makeup, utilization, and economic circumstances of postsecondary instructional faculty (objectives 1 and 3) Section 3: Pay-per-course regression analysis methods (objective 3) Section 4: Annual earnings regression analysis methods (objective 3) To address our objectives, we used data from multiple sources (see table 12). To gain an understanding of and provide context for the relevant faculty data that we analyzed, we interviewed officials from federal, state, and non-governmental agencies who collect and maintain the respective datasets, including the Department of Education (Education), Labor, National Science Foundation, North Dakota University System (NDUS), Ohio Department of Higher Education (ODHE), University System of Georgia (USG), and American Academy of Arts & Sciences (AAAS). The Integrated Postsecondary Education Data System (IPEDS) and the state administrative data represent the entire populations they cover, and while the Current Population Survey (CPS), the Survey of Doctorate Recipients (SDR), and the Humanities Departmental Survey (HDS) are sample survey data, when weighted, they also represent the populations they cover. Because the sample surveys followed a probability procedure based on random selections, each respective sample is only one of a large number of samples that might have been drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as the margin of error (i.e. the half width of the 95 percent confidence interval—for example, +/- 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples that could have been drawn. Throughout our analyses, for estimates from survey data we reported the applicable margins of error. In some cases, the confidence intervals around our estimates were asymmetrical; however, we presented the maximum half-width for simplicity and for a consistent and conservative representation of the sampling error associated with our estimates. Our analyses of CPS and SDR survey data are weighted analyses using sample design information, replicate weights, and survey analysis software to get the proper sample survey estimates and margins of error. Additional details about the datasets follow. IPEDS is a system of interrelated surveys conducted annually by Education’s National Center for Education Statistics (NCES). IPEDS gathers information from every college, university, and technical and vocational institution that participates in federal student financial aid programs, as well as other institutions that report data voluntarily. In 2015, more than 7,500 institutions reported data to IPEDS. IPEDS collects data in the following 12 areas: institutional characteristics; completions; 12-month enrollment; fall enrollment; graduation rates; 200% graduation rates; student financial aid; outcome measures; admissions; human resources; finance; and academic libraries. As of the 2005 IPEDS data collection, information on faculty and staff are collected as part of the human resources survey component, and include information on faculty demographics and types of positions, among other things. We used IPEDS data from 1995, 1999, 2003, 2007, 2011, and 2015. We utilized IPEDS as our primary data source because we are able to identify a universe of postsecondary institutions and also because the data allow us to distinguish between tenure-track and contingent positions. The CPS is sponsored jointly by the Census Bureau and the Department of Labor’s Bureau of Labor Statistics. It is the source of official government statistics on employment and unemployment in the United States. The basic monthly survey is used to collect information on employment, such as employment status, occupation, and industry, as well as demographic information, among other things. The survey is based on a sample of the civilian, non-institutionalized population of the United States. Using a multistage stratified sample design, about 54,000 households are interviewed monthly based on area of residence to represent the country as a whole and individual states; the total sample also includes additional households that are not interviewed for various reasons, such as not being reachable. In addition to these interviewed and non-interviewed households from the basic CPS monthly sample, the ASEC includes additional households; the total sample size for the 2016 ASEC was almost 100,000 households. The ASEC provides supplemental data on work experience, income components, such as earnings from employment, and noncash benefits, such as health insurance coverage, among other things. Data on employment and income refer to the preceding calendar year, although demographic data refer to the time of the survey. This report used data from the March 2016 ASEC, which refers to employment and income during calendar year 2015. SDR is a biennial survey conducted by the National Science Foundation’s (NSF) National Center for Science and Engineering Statistics (NCSES) that provides demographic and career history information about individuals with a research doctoral degree in a science, technology, engineering, and math (STEM), health, or social sciences field from a U.S. academic institution. The survey follows a large sample of individuals throughout their careers from the year they received their doctoral degree until age 75, plus a sample of new doctoral recipients added in each cycle. The survey includes questions regarding occupation (including discipline area for postsecondary faculty), earnings, job satisfaction, faculty tenure status, and faculty rank, among other topics. While some data from the survey are released publicly, other data are restricted from public use—including data on tenure and rank— in order to protect the anonymity of survey respondents. This report used data from the 2013 SDR, which refers to employment in February 2013. We obtained the publicly available data and a few additional restricted-use variables that NCSES recoded for our use. The data from Georgia, North Dakota, and Ohio contained variables on faculty characteristics, earnings and benefits, and courses taught. We developed data requests through discussions with officials in each state. The data from USG covered all 4-year public institutions in Georgia identified in our IPEDS universe and included course and enrollment data from an academic database merged with faculty and earnings data from USG’s Human Resources Data Mart. The Georgia data also included information on the percentage of individual faculty members’ roles comprised of instruction, research, and other responsibilities. The course and enrollment data covered academic year 2015-16—courses taught during fall term 2015, spring term 2016, and summer term 2016. Most faculty data are from fall 2015. For some faculty who were not in the fall 2015 data file because they started teaching in spring 2016, for instance, USG matched fall 2016 faculty data to the course data. Earnings data covered calendar year 2015 and included earnings year-to-date through November. The data from NDUS officials covered all non-tribal 4-year and 2-year public institutions in North Dakota identified in our IPEDS universe and included course and enrollment data, as well as faculty and earnings data. All of the data covered academic year 2015-16—courses taught and earnings during fall term 2015, spring term 2016, and summer term 2016. The data included common unique identifiers that allowed us to merge extracts we received according to faculty ID and institution. The data were downloaded by NDUS officials from a centralized data system into which the North Dakota institutions report their data directly. The data from ODHE covered all 4-year public institutions and most 2- year institutions in Ohio identified in our IPEDS universe and included: (1) course and enrollment data, (2) faculty data, and (3) faculty earnings data. All of the data were from ODHE’s Higher Education Information (HEI) system, a comprehensive relational database that includes student enrollment, course, financial aid, personnel, finance, and other data submitted by Ohio’s colleges and universities. The course and enrollment data covered academic year 2014-15—courses taught during summer term 2014, fall term 2014, and spring term 2015. Faculty and earnings data covered fiscal year 2015 (i.e., July 2014 through June 2015). The HDS is a collaborative effort to collect and analyze information from humanities departments across a number of academic fields. The HDS is sponsored by AAAS, and national humanities organizations and disciplinary associations, such as the Modern Language Association and the American Historical Association, helped develop the HDS. The survey collects a variety of information for each humanities field, including data on the number and types of faculty and students taught by faculty type. The survey has been administered twice, covering academic years 2007- 08 and 2012-13. In both instances, the Statistical Research Center of the American Institute of Physics administered the surveys to a nationally representative stratified sample of humanities departments in four-year colleges and universities that existed in 2007-08 and was updated for new disciplines in 2012-13. The 2012-13 survey included 2,127 departments in its sample across 13 humanities fields, and its overall response rate was 71 percent. Information about faculty referred to employment levels as of fall 2012. We identified several other discipline-specific academic associations that have collected or are currently collecting data on faculty makeup in their departments, including contingent faculty. However, we did not compare the results of other department surveys to the HDS because the response rates in other surveys were too low to be considered generalizable or because any observable differences in faculty composition could be attributed to differences in survey methodology or timeframe covered. For each of the datasets described above, we conducted a data reliability assessment of variables included in our analyses. We reviewed technical documentation and related publications and websites with information about the data. We spoke with the appropriate officials at each agency or organization to review our plans for analyses, as well as to resolve any questions about the data and any known limitations. We also conducted electronic testing, as applicable, to check for logical consistency, missing data, and consistency with data reported in technical documentation. We determined that the variables we used from the data we reviewed were sufficiently reliable for the purposes of this report. This section discusses the quantitative analysis methods (not including regression analyses) we used to address the makeup, utilization, and economic circumstances of the postsecondary instructional workforce. We used federal data from CPS, IPEDS, and SDR, state data from Georgia, North Dakota, and Ohio, and non-governmental data from HDS for these analyses. In each of the analyses that follow, our population of analysis was postsecondary instructional faculty. However, our definition of instructional faculty varied depending on the data source, as different sources provide different information regarding instructional responsibilities. For example, IPEDS indicates whether an individual’s responsibilities are primarily instructional whereas the state data indicates whether an individual teaches a course. For each set of analyses, we explain what definition of instructional faculty we used. Within our population of instructional faculty, we defined as contingent faculty any full-time or part-time faculty who do not have tenure or are not on the tenure track. To analyze whether and how the size of the contingent faculty workforce has changed over time, we used IPEDS data to identify instructional staff nationwide by type of institution in 1995, 1999, 2003, 2007, 2011, and 2015, which is the most recently available year of data. The five historical snapshots used data from the fall staff surveys to examine counts of faculty and any trends in postsecondary education during the period 1995-2011. The 2015 snapshot used data from the “employees by assigned position” survey to examine current counts of faculty by position type and used data from the fall staff survey to examine counts of faculty by gender and race. We could not compare the historical and current snapshots of faculty counts due to a significant change in 2012-13 to how IPEDS defines instructional staff. Prior to this change, instructional staff included those “whose primary responsibility is instruction, research, and/or public service” combined in a single category. After the change, instructional staff included only those whose responsibilities are primarily instructional or those “for whom it is not possible to differentiate between instruction or teaching, research, and public service because each of these functions is an integral component of his/her regular assignment.” As a result, data on instructional faculty collected since 2012 is not comparable to data collected prior to 2012. For each of these years of faculty data, we merged information from the IPEDS institutional characteristics file and focused our analyses on a universe of institutions that fit as close as possible to the following definition: Active, Title IV, degree-granting 2-year and 4-year primarily postsecondary institutions that are generally open to the public, have at least 15 full-time equivalent staff, and reported at least 1 instructional staff member or graduate teaching assistant. The number of postsecondary institutions can change from year to year due to new schools opening or existing schools closing or consolidating with other schools, as well as due to changes in how schools elect to report data to IPEDS. Not all of the same variables were available in the 1999 and 1995 IPEDS institutional characteristics files. As a result, for the 1999 data, we used different variables that also identified institutions that fit this definition. For the 1995 data, we approximated this definition by identifying institutions that offered at least an associate’s degree or higher and that were active institutions eligible for student financial aid (to approximate Title IV institutions). For the historical snapshots, we identified counts of faculty by institution type (i.e., control: public, private, for-profit; and level: 2-year, 4-year). We categorized faculty according to the following position types: full-time tenure-track (both tenured and non-tenured but on a tenure track); part-time; and graduate teaching assistant. The historical IPEDS data (from the fall staff surveys) do not break out part-time tenure-track from part-time contingent. For the 2015 snapshot, we identified counts of faculty by institution type, as well as by other institutional characteristics, such as size and the highest degree offered by the institution. We categorized faculty according the following position types: full-time tenure-track (both tenured and non-tenured but on a tenure track); part-time tenure-track (both tenured and non-tenured but on a tenure part-time contingent; and graduate teaching assistant. We also identified contingent faculty positions by their contract types: non-faculty status. We used the 2015 IPEDS fall staff survey data to identify faculty by gender and race/ethnicity group. For full-time faculty, we were able to examine the full spectrum of tenure-track versus contingent with various contracts. However, because these data were from the 2015 IPEDS fall staff survey, the data do not break out part-time tenure-track from part- time contingent. The IPEDS race/ethnicity categories we analyzed were: Black or African American Other or unknown (includes the IPEDS race/ethnicity categories: American Indian or Alaska Native; Native Hawaiian or other Pacific Islander; two or more races; and race/ethnicity unknown) White (non-Hispanic) Aggregated IPEDS data represent the universe of postsecondary instructional faculty positions, rather than a mutually exclusive count of unique instructional faculty members. IPEDS data are reported at the institution level, and so for any given institution the counts they report represent both the number of faculty at the institution and the number of positions they fill. However, because faculty who teach at more than one institution are counted and reported by each institution, when faculty counts are aggregated across multiple institutions, these faculty are counted multiple times—for each position they fill. As a result, aggregated counts based on IPEDS data represent the universe of unique instructional faculty positions, rather than the universe of unique faculty workers. We used CPS data from the March 2016 ASEC to estimate the numbers of workers employed as postsecondary teachers in colleges and universities nationwide during calendar year 2015. We categorized as postsecondary instructional faculty any worker whose employment was in both the “postsecondary teachers” occupation (census code 2200) and the “colleges and universities, including junior colleges” industry (Census code 7870). We also determined whether a worker was employed full- time (35 hours or more) or part-time (less than 35 hours) using another variable in the ASEC. Among other differences with IPEDS data (see discussion of IPEDS above), CPS data capture the number of workers rather than the number of positions in postsecondary education and counts each worker once even if they work at multiple institutions. In addition, because CPS represents the entire labor force, the data include workers at postsecondary institutions that we may have excluded from our IPEDS analyses (e.g., non-degree-granting institutions). We utilized CPS data to provide context for the total number of postsecondary teachers and to estimate the proportions of the instructional workforce represented by full- time and part-time faculty. However, analysis of CPS data was not a primary component of our report because the data cannot differentiate workers by institution or by tenure status. As a result, the estimated population of full-time faculty includes both tenure-track and contingent faculty. Because CPS identifies workers as opposed to positions (which might yield a lower count than the IPEDS data) and includes workers at postsecondary institutions that we excluded from our IPEDS analyses (which might yield a higher count than the IPEDS data), the count of workers in the CPS data and the count of positions in the IPEDS data are not directly comparable. We also examined the reasons part-time faculty reported they worked part-time. We focused our analysis on 3 groups of part-time faculty: (1) those who reported wanting to work part-time; (2) those who reported they could only find a part-time job; and (3) those who reported seasonal or temporary fluctuations in the availability of employment (i.e., “slack work”)—we combined the latter two groups because they are both related to economic circumstances. To analyze the economic circumstances of contingent faculty, we used CPS data to estimate the median earnings of full-time and part-time faculty, as well as their receipt of work-provided retirement and health benefits. Our analysis of median earnings used ASEC data on the self- reported amount earned from a worker’s employer before deductions. In examining benefits, we used the term “work-provided” rather than “employer-sponsored” because the ASEC survey questions ask about benefits offered by a worker’s employer or union. For our analysis of access to work-provided retirement plans, we counted a worker as having a work-provided retirement plan if they responded “yes” to both of the following questions from the ASEC: (1) “Other than Social Security, did the employer or union that worked for have a pension or other type of retirement plan for any of the employees?” and (2) “Was included in that plan?” We also estimated the percentages of full- time and part-time faculty who were covered by any private health insurance plan; were covered by private health insurance in their own name; or had a work-provided health insurance plan. Those individuals without insurance could have received insurance coverage through a family member or other means. To compare—at the national level—the compensation and employment experiences of contingent faculty and tenure-track faculty, we used 2013 SDR data to identify different faculty types and examined the extent to which there were differences in earnings, benefits, and job satisfaction. SDR data only include doctorate holders in STEM, health, and social sciences fields, and thus our estimates cannot be generalized to non- doctorate holders or to fields outside of STEM, health, and social sciences fields. For that reason, we did not present faculty population size estimates using SDR data. We created our analysis population of instructional faculty based on responses to questions regarding work activities and institution type. Using these variables, we classified as instructional faculty any respondents who said that their “primary or secondary work activity is teaching,” and whose institution type was a 2-year college; 4-year college or university; medical school; or university-affiliated research institute. This resulted in an analysis population of 7,232 instructional faculty respondents; however, our analyses are weighted analyses that generalize to the population. Within our analysis population, we identified faculty types based on tenure status (i.e., tenured/on the tenure track or not on the tenure track) and whether respondents said they worked 36 hours or more per week or less than that (i.e., full-time versus part-time). We categorized graduate assistants separately, though we chose not to present estimated percentages for graduate assistants. Given that SDR is a survey of doctorate holders, it may be that graduate assistants in the SDR data are—for example—working toward another doctoral degree or have remained at their degree-granting institution in a postdoctoral position. In either case, we believe the working arrangements and economic circumstances of these individuals may be unique from those of most other graduate assistants. Without more detailed information, the data do not allow us to determine the exact nature of graduate assistant positions in the SDR data or explain how they compare to other types of positions. We also chose not to present estimated percentages for part- time tenure-track faculty given that they represented a small proportion of our analysis population. To analyze the economic circumstances of contingent faculty, we used SDR data to calculate median annual earnings by faculty type, as well as data on the availability of work-provided benefits. We calculated median earnings using data on basic annual salary from the respondent’s principal job. We analyzed data on the following types of benefits: health insurance, pension or retirement plans, profit-sharing plans, and paid vacation/sick/personal days. Respondents were asked whether each type of benefit was available to them regardless of whether they chose to take the benefits. To analyze the employment experiences of contingent faculty, we used SDR data on job satisfaction, reasons for working part-time, and attendance of professional meetings. To examine job satisfaction, we used data on satisfaction with overall employment, job security, opportunities for advancement, salary, and benefits, from which we estimated the percentage of faculty who were satisfied, somewhat dissatisfied, or very dissatisfied by faculty type. Our analysis of part-time work first included whether a respondent who reported working part-time said they wanted to work full-time. Secondly, among those who wanted—and who did not want—to work full-time, we calculated the percentage who said they worked part-time (1) for family reasons, (2) because a full-time job was not available, (3) because they did not need/want full-time work, and (4) because they were a student, had an illness, or held another job. Respondents could indicate more than one reason for working part-time. We also analyzed a variable on attendance of professional meetings to calculate the percentage of faculty, by faculty type, who reported attending professional association meetings or conferences during the past 12 months. The SDR data included other variables that identify a respondent’s academic position, such as research faculty, administrators, adjuncts, and others. We analyzed these variables to determine whether to use them to categorize faculty, but found that they were not the most appropriate for our purposes. However, we observed that these variables may have implications on the economic circumstances of different types of faculty and so used them as control variables in two of our regression models on annual earnings. For example, we analyzed earnings of instructional faculty who said they were “adjunct” faculty or administrators. Among full-time and part-time contingent faculty, estimated median annual earnings decreased when we included only faculty who said that they were adjunct faculty (see table 13). However, the data do not allow us to explain how or whether the positions for faculty who identified as adjuncts are different compared to the positions of those who did not identify as adjuncts, and, based on our team’s interviews with administrators, different institutions and individuals apply different meanings to the term “adjunct.” As may be expected, among full-time tenure-track and full-time contingent faculty, estimated median annual earnings increased when we limited the population to only those faculty who said they were administrators (see table 13). We used consistent methods to analyze data from Georgia, North Dakota, and Ohio on faculty workforce makeup and utilization, though we analyzed the data from each state separately. In addition, while each state dataset was structured slightly differently, used different variable names, and contained some unique elements or ways of capturing information about faculty or courses, we restructured and compiled the information to provide consistency across the states. In the state data, we identified instructional faculty as any individual who taught a course during the given academic year. This definition includes a variety of staff (e.g., deans, administrators, coaches, research faculty, and postdocs) who fill about 2-10 percent of positions, depending on institution type and state. In addition, instructional graduate assistants— who are listed in the state data as instructors of record—fill about 8 to 15 percent of positions at 4-year institutions in the three states. Each state’s data were ultimately structured as a set of unique faculty- institution pair observations—where faculty were listed once, by their employing institution. Each faculty-institution pair observation had variables describing the faculty member’s and institution’s characteristics, as well as counts of courses, students, and student credit hours taught by the faculty member at that institution (including by academic term and by course characteristics). For all three state datasets, we coded and grouped certain faculty characteristics variables, including academic rank, age group, race/ethnicity, sex, and tenure status, to ensure consistency across states. For example, in coding tenure status, we consistently categorized faculty as “non-tenure-track” if they were identified in the source data as not in a tenure-track position, as having been denied tenure, as being in some other status, or as being in a position for which tenure was not applicable. Some faculty characteristics variables were structured differently in each of the three states and thus required unique methods of recoding, though we applied consistent approaches and logic in each case (see table 14). We also identified each individual’s academic discipline based on information provided in each state’s data about their department. Faculty members’ departments in the Georgia and Ohio data are identified by their standardized Classification of Instructional Programs (CIP) code. The North Dakota data did not include the CIP code for faculty members’ departments and department names in the North Dakota data were not consistent across institutions. Thus, we coded North Dakota departments by matching them manually to corresponding CIP codes. After manually assigning CIP codes to faculty in the North Dakota data, we identified the highest level 2-digit CIP code for each faculty member in all three state datasets. However, because the 2-digit CIP code identifies over 40 fields of study, we grouped these by academic discipline for our analyses. To group departments, we used a crosswalk provided by Ohio that listed CIP codes according to 12 possible disciplines they were most closely associated with. Although the Department of Education’s CIP coding system does not include a commonly accepted list of disciplines, we determined that Ohio’s convention was reasonable and we applied the coding consistently across all three states to identify the academic discipline of each individual. The North Dakota data included multiple observations for some faculty members within a single institution and term. This occurred for a variety of reasons, such as a faculty member holding two positions at the same institution (e.g., both a coach and an instructor, or half time as an instructional graduate assistant and half time as a research graduate assistant). To compile a consistently structured dataset of unique faculty- institution pair observations, we implemented the following sequential process to select and eliminate duplicate faculty observations. We confirmed with North Dakota officials that our approach and methods were appropriate. For faculty with multiple observations, we dropped any observations where (1) no earnings were listed in any term or earnings were only listed for the summer term but the faculty member taught no courses at the given institution in the summer; or (2) the work responsibilities associated with the faculty observation were not directly related to teaching (e.g., graduate assistant research or grading, management, administration, research, or coaching) and a different observation for that faculty member at the same institution had teaching duties listed. We dropped these duplicate observations because there was a more appropriate observation to be used for the given faculty member at the given institution with earnings information and an associated instructional position. For the remaining faculty with multiple observations, we sequentially kept one observation as the primary faculty position based on hierarchical logic we developed. For example, we dropped any additional observations with an employee status other than “active” or a position identified as “temporary.” As appropriate, we either aggregated hours worked and earnings across the multiple observations before dropping the duplicate observations or we took the hours worked and earnings values from the observation identified as primary. Course data from all three states included each unique course section taught over the academic year by institution, term, and faculty instructor. We analyzed course sections for which there was an instructor identified and enough information about that faculty member to categorize them by faculty type (e.g., full-time tenure-track versus part-time contingent, etc.). For all three states, we aggregated these data by course type and other information to the level of the unique faculty-institution pair. For example, a single faculty member at a single institution may have taught 10 course sections, all at the undergraduate level and spread across the year—4 in fall term, 4 in spring term, and 2 in summer term. Courses are listed in the state data at both the course number level (e.g., Biology 101) and the course section level (e.g., Biology 101, Sections A, B, and C). Our analyses generally examined unique course sections by faculty member (e.g., two separate sections of Biology 101 are considered as two courses), as that is a more accurate depiction of faculty workload. Thus, for consistency and clarity throughout our report, we use the term “courses” to refer to our analyses of course sections. In a few special circumstances, we counted courses at the course number level instead of the course section level to minimize potential bias in our work (see additional information below). The course data included information about courses that we systematically coded and grouped to ensure consistency across the three states. For example, each state identified the academic level of each course. The Georgia and North Dakota data identified courses along a spectrum—generally developmental, freshman, sophomore, junior, senior, or graduate. The Ohio data had a different classification series: Developmental: All courses which are below college level General Studies: All courses which are general, introductory, or core Technical: Only those courses which are part of an associate degree program of technical education and are within the technical portion of a curriculum Baccalaureate: All courses which are specialized within a discipline Master’s / Doctoral / Professional – All graduate courses of various To categorize undergraduate course levels consistently across the states, we identified courses as (1) undergraduate lower if they were at the freshman, sophomore, general, or technical levels; or (2) undergraduate upper if they were at the junior, senior, or baccalaureate levels. Developmental and graduate courses were identified consistently in each state’s data. We made a number of decisions about how to categorize and count courses consistently across institutions and states. For example, we dropped cancelled courses or courses with no student enrollment. We also excluded from our primary analyses courses that would likely be student-led or student-initiated and thus could be considered atypical courses. We excluded these courses to minimize the potential bias of inflating the percentage of courses taught and deflating the earnings per course of one faculty type relative to another. After reviewing course types and titles, as well as associated student enrollment numbers and credit hours, we identified courses that met this definition and categorized them as atypical. Among the courses we identified as student-led or student-initiated were: Art or musical exhibitions, performances, or recitals Independent, supervised, dissertation, or thesis research Internships, fieldwork, practicums, cooperative experiences Varsity athletics These atypical courses made up close to a quarter of all courses across 4-year institutions in the three states and less than 10 percent of courses at 2-year institutions. As expected, and due to many being independent or single-student enrollment courses, they generally represented much smaller proportions of student credit hours across all institutions. Across 4-year public institutions in all 3 states, tenure-track faculty taught close to 75 percent or more of these courses. We also accounted for cross-listed courses and multiple lab sections to more accurately capture faculty workloads. Some courses in the Georgia and North Dakota data were cross-listed in multiple departments with different course acronyms for each department. For example, the course “Intro Robotics Research” taught by a single faculty member at one institution was listed three times under different department acronyms, with several students enrolled under each listing. Course sections listed multiple times due to being cross-listed would artificially inflate counts of courses taught, as these cross-listings actually represent only one course section. To avoid inappropriately counting them as separate courses, we counted cross-listed courses by using their course numbers (and also their course name in North Dakota) without the course acronyms attached. Thus, when we aggregated counts of courses by faculty- institution pair, term, and course type, these cross-listed courses were counted as one course and numbers of students and student credit hours were aggregated in association with the course. Due to inconsistencies in how lab sections were organized in the data, we aggregated labs by their course number (within a faculty-institution pair and term). For example, some lab sections were listed as 4-credit courses that appeared to have the lecture and lab components combined in a single listing, while others had a 3-credit lecture course listed and multiple sections of a 1-credit lab. To be as consistent across states as possible and to minimize the potential bias of inflating the percentage of courses taught and deflating the earnings per course of one faculty type relative to another, we combined lab sections into a single course count. To do so, we identified the lab sections within a particular course number, instructor, institution, and term and then flagged the first lab section for counting. Thus, similar to the cross-listed courses, when we aggregated counts of courses by faculty-institution pair, term, and course type, these lab sections were counted as one course and enrollment numbers aggregated in association with the course. For outlier faculty who taught especially large numbers of course sections, we counted their courses taught at the course number level (e.g., Biology 101) instead of the course section level (e.g., section 1 of Biology 101). After compiling the data and producing preliminary counts of course sections taught, some faculty in all three states emerged as outliers—teaching large numbers of course sections in a given term, in some cases, more than 50, for example. Though the data do not provide exact reasons for the large numbers of course sections taught, these outliers may have a number of possible explanations that could vary by state and institution. Among other effects, these outlier observations could artificially inflate the percentage of courses taught and deflate the earnings per course of one faculty type relative to another. To mitigate these effects, we counted courses taught for these outlier faculty at the course number level—where they are clearly distinct—instead of the course section level—where it is less clear why there are multiple sections. For example, Biology 101 is clearly a different course than Biology 201 or Chemistry 101 (regardless of section number), whereas section A of Biology 101 could actually be combined with section B and they are just listed separately for other reasons. We did not set a maximum number of courses that an individual could teach (i.e., individual faculty could still be listed as teaching large numbers of courses if they were associated with large counts at the course number level). We counted course numbers for outlier faculty because their large numbers of course sections listed suggested the possibility of a data anomaly; for all others (non-outlier faculty), we counted course sections. We set our outlier threshold as 15 course sections taught over the academic year based on an examination of the range of course sections taught by faculty in the three states’ data and conversations with administrators during our site visits. According to preliminary counts of course sections taught after excluding atypical courses, more than 95 percent of faculty in each state taught 15 course sections or fewer over the entire academic year. In addition, during our site visits, the largest number of course sections taught per term that administrators identified was 6, which could reasonably result in 15 course sections over the year (6 in fall term, 6 in spring term, and 3 in summer term—half the amount due to the condensed format). To analyze faculty makeup and utilization by institution, we merged information about institutional characteristics from IPEDS onto our state datasets. We analyzed faculty makeup, including counts and percentages of faculty positions by type of position and faculty characteristics (e.g., age, education, and academic discipline), by the following faculty categories (based, in part, on faculty tenure and work statuses): We sometimes analyzed full-time and part-time contingent faculty and instructional graduate assistants combined as “contingent faculty” and full-time and part-time tenure-track combined as “tenure-track faculty.” Unlike our analyses of IPEDS data, we included instructional graduate assistants in our combined contingent faculty group because they were listed as teachers of record for courses in the state data. We analyzed administrators/management as a separate group because these individuals represent a non-traditional class of faculty. For example, administrators may not have tenure-track status due to their management roles, but are in positions that may not be appropriate to be considered “contingent” (e.g., a dean might not be a tenure-track faculty member, but neither are they a contingent faculty member). We analyzed educational attainment of faculty by calculating the percentage of faculty with graduate or doctoral degrees by faculty type and institution type in in North Dakota and Ohio. Table 15 shows the total number of instructional faculty positions by institution type in each state, as well as selected faculty demographics. We analyzed faculty utilization by aggregating counts of courses, students, and student credit hours taught by each faculty category above, and by term and type of course, and by calculating percentages taught out of the entire population and certain subgroups. As a first step in this process, we aggregated counts of courses, students, and student credit hours for each faculty-institution pair by term and type of course. As a result, each faculty-institution pair had count variables that listed, for example, how many courses and students they taught in fall term at the undergraduate upper level. The Georgia and Ohio data listed courses multiple times if multiple faculty share the instructional responsibility. To ensure course sections were not double-counted, we counted them in fractional terms based on how many instructors were listed; for example, if a course section was listed twice—with two faculty members having equal responsibility for the course—we counted each faculty member as teaching half of that course. We also used this fractional count to pro-rate or assign responsibility for students and student credit hours. We calculated this fractional count slightly differently for the Georgia and the Ohio data: Georgia: The Georgia data provided a teaching responsibility percentage for each faculty member associated with a course section. For example, a course section that was listed 3 times (for 3 different faculty with responsibility) might be split evenly 1/3-1/3-1/3 or might be split as 50-30-20 percent responsibility to each of the three faculty members. Thus, we used this individually provided fractional value. Ohio: The Ohio data did not provide a teaching responsibility percentage for each faculty member associated with a course section. Thus, we assigned equal responsibility (as the simplest assumption) to all staff listed for a course. After aggregating counts to the faculty-institution pair level, we further aggregated counts to the faculty category and institution type level. Our analyses focused on counts and percentages of courses and student credit hours by these faculty categories. Table 16 shows the total number of courses taught by institution and faculty types in each state. We also analyzed economic circumstances by examining median annual earnings and receipt of work-provided retirement, health insurance, and life insurance benefits by faculty type. We calculated an annual earnings amount for each faculty member and then analyzed median earnings by faculty type. For benefits, we identified whether individual faculty received a given benefit during the year, and then calculated the percentage of each faculty type receiving those benefits. We were unable to analyze benefits in this way for faculty in Ohio. See table 14 above for additional details about our earnings and benefits calculations by state. To estimate population percentages by faculty type and discipline in humanities departments at 4-year institutions, we used HDS data that were published in a technical report sponsored by AAAS. Our population of instructional faculty included faculty in humanities departments at 4-year institutions. The sample was stratified by discipline and degree level of courses taught (i.e., bachelor’s, master’s, and doctoral degree courses). We were unable to access the data with the sample design information (i.e. sampling weights and stratification identifiers) necessary to calculate margins of errors that took into account the sample design features. To allow us to estimate margins of error for the estimates presented in the report, AAAS provided information on the number of respondents associated with each response category since the survey had unit and item nonresponse. We incorporated this information into a simple random sampling formula, which we adjusted for the design effect due to unequal weighting that resulted from stratification within departments (e.g., differences in the extent to which departments may offer bachelor’s, master’s, and doctoral degree courses). This section discusses the regression analysis methods we used to analyze and compare pay-per-course rates across different types of faculty at public institutions in North Dakota and Ohio. We used data from the three states to conduct multivariate regression analyses that examined rates of compensation across faculty types. Data from North Dakota and Ohio allowed us to link faculty members’ pay over the course of an academic year with the number of courses they taught to calculate pay-per-course rates that are comparable across faculty types. Data from Georgia did not allow us to do this because the earnings data from Georgia is for a calendar year that did not align with the course data for the academic year. However, we used Georgia’s data to develop assumptions about faculty work activities (see below for more details). The state data we used to analyze pay-per-course rates covered courses taught and earnings from fall 2015 through summer 2016 for North Dakota, and summer 2014 through spring 2015 for Ohio. The faculty populations included in our regression analyses of the North Dakota and Ohio data begin with the same population of instructional faculty analyzed elsewhere in our work—any individual who teaches a course at a 4-year or 2-year public institution in the state. However, due to some faculty observations missing information for independent variables, as well as the specifications of some of our models that focused on subgroups within the data, the number of faculty observations in our regression analyses differed slightly from those in our other analyses. In assessing the association between faculty type (e.g., contingent faculty) and pay per course, we focused on three primary populations: (1) all faculty; (2) primarily teaching faculty; and (3) primarily teaching faculty at 4-year institutions. The primarily teaching faculty group excludes faculty who primarily hold other roles unrelated to instruction (e.g., administrators and research faculty). We also examined a population limited to 4-year institutions because their pay and faculty utilization structures may differ substantively from 2-year institutions. North Dakota: Compared to the 3,608 faculty observations with complete faculty and course identification data across North Dakota public institutions that we analyze for workforce makeup and utilization, the number of observations included in our regression analysis population is reduced to 3,486 due to our dropping of cases where total earnings was less than one dollar or missing, or where the number of in-scope courses taught was zero (more information below under discussion of dependent variables). After introducing the full range of independent variables in our complete model with all faculty at all institutions, our population is reduced to 3,485 due to one faculty member being omitted due to missing data. When we limit the population to primarily teaching faculty at all institutions, there are 3,404 observations, and when we only include 4-year institutions, there are 2,876 observations. Ohio: Compared to the 34,461 faculty observations with complete faculty and course identification data across Ohio public institutions that we analyze for workforce makeup and utilization, the number of observations included in our regression analysis population is reduced to 30,672 due to our dropping of cases where total earnings was less than one dollar or missing, or where the number of in-scope courses taught was zero (more information below under discussion of dependent variables). After introducing the full range of independent variables in our complete model with all faculty at all institutions, our population is reduced to 30,656 due to 16 faculty members missing data for covariates. When we limit the population to primarily teaching faculty at all institutions, there are 28,811 observations, and when we only include 4-year institutions, there are 21,482 observations. As explained earlier in the report, we examined instructional pay per course as a way to isolate the earnings for comparable work across faculty types—for example, those who only teach (salaried or paid by the course) versus those who have other responsibilities beyond teaching. Institutions do not generally structure compensation by types of work activities, though some faculty have work responsibility expectations associated with their positions; for example, a full time tenure-track assistant professor may have work responsibly expectations of 60 percent instructional, 30 percent research, and 10 percent other service to the institution. If this faculty member earns $80,000 per year and teaches 8 courses over the course of the year, her total pay per course, which ignores time spent on research and other activities, would be $80,000/8 = $10,000 per course. However, prorating the earnings to those for instructional work activities only, the instructional pay per course would be ($80,000*0.6)/8 = $6,000. We assessed each regression model based on the outcomes of total pay per course and instructional pay per course, where earnings were prorated for instructional time. Because information about faculty work activity was unavailable in the North Dakota and Ohio data, but was available in the Georgia data, we used empirical data that we received on four of the Georgia 4-year public institutions to identify work activity percentages by faculty type. We then assigned those percentages to similar faculty in North Dakota and Ohio. We identified the median instructional work activity percentages for the faculty in Georgia’s 4-year public institutions within profiles based on a combination of faculty characteristics including faculty category (e.g., full- time tenure-track, full-time non-tenure-track, part-time non-tenure-track, etc.), job category (e.g. administration/management, teaching faculty, research/other faculty, etc.), and when applicable, rank (e.g. full professor, assistant professor, instructor/lecturer, etc.). We then applied the median instructional work activity percentage from the Georgia data by these profile groups to faculty at 4-year institutions in the North Dakota and Ohio data with the same profile. For faculty in the job categories of administrators/management staff, instructional graduate assistants, coaches, and postdocs, the median instructional work activity percentage in those groups overall was sufficiently explanatory. For the remaining two job category groups of instructional faculty and research/other faculty, we used median work activity percentages by faculty category (e.g., full- time tenure-track) and rank (e.g., full professor). If a faculty member did not have a rank identified in the data, we used the median work activity percentage for the faculty category overall (see table 17). Because the data on work responsibilities pertained to public 4-year institutions in the Georgia data, we did not prorate faculty at 2-year institutions accordingly. Because 2-year institutions generally do not have a research mission, we coded all faculty at 2-year institutions as 100 percent instructional, except for administrators/management staff. We prorated administrators/management staff according to the same method as at 4- year institutions due to their likely having substantial non-teaching responsibilities. Faculty earnings in the North Dakota and Ohio data were multiplied by the relevant median instructional work activity percentage in order to adjust pay to reflect instructional work activity, resulting in an “instructional pay” amount. The majority of adjustments—prorating of earnings to account for non-instructional activities—were applied to faculty in the full-time tenure-track group, who were most likely to have other work responsibilities. Some adjustment to earnings also occurred in the full- and part-time contingent groups, as well as for faculty who had a job type that indicated substantial administrative and management roles. No prorating occurred for instructional graduate assistants. We conducted regressions using the following dependent variables: a) Log (total pay per course) – In our analysis of the North Dakota and Ohio data, we used the natural logarithm of the total pay per course, which is defined as the total annual earnings (i.e., total pay) divided by the total courses taught within that year. b) Log (instructional pay per course) – In our analysis of the North Dakota and Ohio data, we also used the natural logarithm of the instructional pay per course, which is defined as total annual earnings adjusted to reflect instructional work activity (i.e., instructional pay) divided by the total courses taught within that year. We excluded cases from our analysis if they were missing values for either total annual earnings or total courses taught within that same year because these variables were the primary components of pay per course. We dropped cases where total earnings were less than one dollar or missing (19 observations in North Dakota and 2,869 observations in Ohio) or the number of courses taught was zero (103 observations in North Dakota and 920 observations in Ohio) since division by zero is undefined, and our population is intended to reflect any individual who actually teaches a course at 4-year and 2-year public institutions in the state. We then divided pay (total or instructional) by the number of courses taught to obtain the pay-per-course value. We use the log of total and instructional pay per course for the dependent variables in a linear model reflecting both the assumption that the underlying distribution is closer to the log normal than normal, and also to present results in terms of percentage changes in pay per course. In the Ohio data, because we use fractional counts for courses when multiple faculty are listed as having responsibility for the course, 3,453 faculty in the analysis population teach less than 1 course. For those faculty, we round all course counts that are less than 1 up to 1 to avoid dividing faculty earnings by a fractional course count (between 0 and 1), which would result in an inaccurate and substantially large pay-per- course value. The primary independent variable of interest in our analysis was faculty type. We categorized faculty into five types: full-time tenure-track, full-time contingent, part-time tenure-track, part-time contingent, and graduate assistant. Our main interest was comparing contingent faculty and graduate assistants to full-time tenure-track faculty. We controlled for the part-time tenure-track group, but due to the small size of this population (at most, 35 faculty in North Dakota and 274 faculty in Ohio), we did not substantively examine these estimates. All regression models set the base group for faculty type as full-time tenure-track. We included in our regression models additional independent variables as controls for faculty and institution characteristics. Faculty characteristics include sex, race, age, age squared (to account for the potential non- linear relationship between earnings and age), highest degree earned, and academic discipline. Other faculty characteristics we controlled for in our models included whether a faculty member had grant funds (North Dakota only), whether a faculty member taught summer courses, and indicators identifying non-traditional faculty roles, such as administrators/management or coaches. We also included fixed effects for institutions to control for differences between institutions, especially in terms of pay due to factors such as size, sector, and research/graduate component, among other things. We also examined rank of faculty (e.g. associate professor, assistant professor, instructor/lecturer, etc.), but excluded it from our complete models due to collinearity with the faculty type variable. Tables 18 and 19 (below) shows the coefficients and standard errors from each of our final pay-per-course regression models, as well as for the unadjusted model that included only the primary independent variable of interest (total pay-per-course results at the top and instructional pay-per- course results below). For our categorical variables, estimated coefficients are relative to the excluded (reference) category. For example, since the reference category for our main independent variable, faculty type, was full-time tenure-track, the estimated coefficients for other categories of this variable are always relative to this excluded reference category, holding all other variables in the model constant. Thus, in model 2 for North Dakota, the coefficient for full-time contingent faculty is 0.682. This can be interpreted as full-time contingent faculty pay per course is 0.682 that of full-time tenure-track faculty (i.e., full-time contingent faculty are paid 68.2 percent what full-time tenure-track are, per course), holding all other variables in the model constant. Because the dependent variables in the earnings models are the natural logarithms of earnings, subtracting one from the presented coefficients on categorical variables can be interpreted as the percentage change in the dependent variable associated with a change in the categorical variable, relative to the reference category, holding all other variables constant. In this same example, full-time contingent faculty are paid an estimated 31.8 percent less than full-time tenure-track faculty, because 0.682 – 1 = -0.318, or 31.8 percent less. The North Dakota and Ohio data used in the regression analyses include a small number of faculty (1.1 and 0.5 percent of observations, respectively) who are listed as teacher of record for more than 15 courses over the year, which may represent unusually high workloads or data anomalies. In addition, some faculty have small or large pay-per-course values when compared to the overall distribution. To preserve the integrity of the data, we did not exclude these observations from the analyses. However, we tested our models with and without these observations to assess the effect on our substantive regression results. In order to assess the effect of faculty with a large workload, we conducted regression models 3 and 4 (in tables 18 and 19 above) limited to faculty who taught 15 or fewer courses over the year. In order to assess the effect of faculty with the outermost values of the dependent variable pay per course, we conducted the same regression models limited to faculty whose pay per course was within the middle 98 percent of pay-per-course values (i.e., we trimmed the bottom and top 1 percent of observations). In both of these sensitivity analyses, we found substantively similar results. We also ran our regression models on a more refined population that only included primarily teaching faculty at 4-year institutions (faculty at 4-year institutions represent most of our analysis population). As shown in table 18 above, in terms of total pay per course, full-time contingent faculty in North Dakota and Ohio are paid about 40 and 43 percent less per course, respectively, than full-time tenure-track faculty—compared to 35 and 40 percent less per course, respectively, when both 4-year and 2-year institutions are included. This slightly larger pay-per-course disparity as compared to the population overall may be, in part, because pay and utilization of full-time faculty vary somewhat by institution type (e.g., at 4- year institutions, pay is generally higher but less flat, and some full-time tenure-track faculty teach fewer courses due to their more extensive research responsibilities). This section discusses the regression analysis methods we used to analyze and compare annual earnings among different types of faculty using national 2013 SDR data on doctorate-holding faculty in the STEM, health, and social sciences fields. We conducted regressions using the following dependent variable: Log (annual salary)—the natural logarithm of annual salary, defined as the basic annual salary from the respondent’s principal job. The primary independent variable of interest in our analysis was faculty type. We categorized faculty into five types: full-time tenure-track, full-time contingent, part-time tenure-track, part-time contingent, and graduate assistant. Our main interest was comparing contingent faculty to full-time tenure-track faculty. Though we controlled for the part-time tenure-track and graduate assistant groups, we did not substantively examine these estimates. All regression models set the reference group for faculty type as full-time tenure-track. We included in our regression models additional independent variables as controls for faculty and institution characteristics. Faculty characteristics included sex, race, age, age squared, number of weeks worked per year, and academic discipline. Other faculty characteristics we controlled for included the year of highest degree earned—which we used as proxy for general experience—and whether a respondent indicated that they were an administrator. We also included institution type (e.g., 4-year college or university, 2-year college or university). After introducing the full range of independent variables in our complete model, our analysis sample was reduced from 7,232 faculty respondents to 7,226 due to 6 faculty respondents being omitted due to missing data. We examined faculty rank (e.g. professoriate, instructor/lecturer) and academic position variables for “adjunct” faculty and postdocs, but we excluded these variables from our complete model, as we determined they did not have meaningful information for the purpose of our analyses. In our complete model, full-time and part-time contingent faculty earned 22 percent less and 70 percent less, respectively, than full-time tenure- track faculty annually (see table 20). Across our preliminary models (not shown below) and complete model, the coefficients related to our main independent variable remained relatively constant, ranging from 0.76 to 0.86 for full-time contingent faculty and 0.26 to 0.43 for part-time contingent faculty, expressed as proportion of full-time tenure-track faculty earnings. In addition to the contact named above, Nagla’a El-Hodiri (Assistant Director), Nisha R. Hazra (Analyst-in-charge), Sandra Baxter, Justin Gordinas, Michael Kniss, and Alexandra Squitieri made key contributions to this report. Also contributing significantly to this report were Melinda Cordero, Grant Mallie, Jean McSween, Moon Parks, and Sonya Vartivarian. Key support was provided by James Ashley, James Bennett, Grace Cho, Jessica Orr, James Rebbe, Almeta Spencer, and Elaine Vaurio.", "summary": "Contingent faculty play a large role in postsecondary education but may not have the same job protections as tenured or tenure-track faculty. In 2015, GAO reported that contingent workers—those in temporary, contract, or other non-standard employment arrangements—earn less, are less likely to have work-provided benefits, and are more likely to experience job instability than standard workers. GAO was asked to examine issues related to contingent faculty. This report examines (1) what is known about the makeup and utilization of the postsecondary instructional workforce; (2) the roles different types of faculty fill at selected institutions and the factors administrators consider when determining faculty makeup; (3) what is known about how economic circumstances compare across different faculty types; and (4) what contingent faculty members report as advantages and disadvantages of their work. GAO analyzed data from nationally representative sources and from public institutions in three states—Georgia, North Dakota, and Ohio. GAO selected these states based primarily on data availability. GAO interviewed administrators from 9 postsecondary institutions in these states and one large for-profit institution. GAO selected institutions based on factors such as institution size and percent of contingent faculty. GAO also conducted 21 discussion groups with contingent faculty. The Department of Education did not have comments on this report. The National Science Foundation provided technical comments, which we incorporated, as appropriate. According to 2015 Department of Education data, contingent faculty—those employed outside of the tenure track—made up about 70 percent of postsecondary instructional positions nationwide, though this varied by type of institution. In addition, data from three selected states show that contingent faculty teach about 45 to 54 percent of all courses at 4-year public institutions, and higher proportions at 2-year public institutions. In terms of job stability, some full-time contingent positions with annual or longer contracts may be relatively stable while part-time positions with short-term contracts may be among the least stable, though it is unknown whether faculty in these positions have other employment. In contrast, tenure-track positions are often viewed as having a high degree of job security that is somewhat unique to postsecondary education. Administrators GAO interviewed at selected postsecondary institutions said full-time contingent faculty generally carry heavy teaching loads, and some also take on additional responsibilities, such as conducting research or advising students. However, administrators stated that part-time contingent faculty generally focus solely on teaching. As shown in the figure below, administrators also described factors they consider in determining their institution's faculty makeup. GAO examined recent data from North Dakota and Ohio public institutions and found that, among faculty who primarily teach—which excludes individuals such as administrators or researchers—part-time and full-time contingent faculty were paid about 75 percent and 40 percent less per course, respectively, compared to full-time tenure-track faculty. This comparison includes earnings for all of their responsibilities, including teaching and any other duties. However, when estimating faculty earnings for teaching duties only, pay disparities decreased to about 60 percent and 10 percent less per course for these contingent faculty, respectively. In addition, state and national data also showed that relatively few part-time contingent faculty received work-provided health or retirement benefits. In discussion groups with GAO, contingent faculty cited advantages such as the flexibility to balance professional and personal responsibilities, skill development, or working with students, and described disadvantages that included uncertainty due to short-term contracts, untimely contract renewals, and pay—including a lack of compensation for some of their work. Other concerns they cited included limited career advancement opportunities, not having a voice in institutional decision-making, and not having certain types of institutional support.", "document_type": "gao"}
{"report": "Although the federal government has undertaken numerous initiatives to better manage the billions of dollars that federal agencies annually invest in IT, these investments too frequently fail or incur cost overruns and schedule slippages, while contributing little to mission-related outcomes. We have previously reported that the federal government has spent billions of dollars on failed IT investments. These investments often suffered from a lack of disciplined and effective management, such as project planning, requirements definition, and program oversight and governance. As a result of these failures, we added Improving the Management of IT Acquisitions and Operations to our biennial high-risk list in 2015. With its enactment in 2014, FITARA was also intended to improve agencies’ acquisitions of IT and facilitate Congress’ efforts to monitor agencies’ progress and hold them accountable for reducing duplication and achieving cost savings. The act included specific provisions related to seven areas, including the five areas selected for our review: CIO authority enhancements—Covered agencies’ CIOs are required to (1) approve the IT budget requests of their respective agencies, (2) certify that agencies’ IT investments are adequately implementing OMB’s incremental development guidance, (3) review and approve contracts for IT, and (4) approve the appointment of other agency employees with the title of CIO (e.g., component agency CIOs). Enhanced transparency and improved risk management in IT investments—OMB and covered agencies are to make detailed information on federal IT investments publicly available, and department-level CIOs are to categorize their major IT investments by risk. Additionally, in the case of major investments rated as high risk for 4 consecutive quarters, the act required that the department- level CIO and the investment’s program manager conduct a review aimed at identifying and addressing the causes of the risk. Portfolio review—OMB and the CIOs of covered agencies are to implement a process to assist agencies in reviewing their portfolios of IT investments. This review process is intended to, among other things, identify or develop opportunities to consolidate the acquisition and management of IT services; identify potential duplication, waste, and cost savings; develop a multi-year strategy to identify and reduce duplication and waste within the agencies’ portfolios, including component agency investments, and to identify projected cost savings resulting from such a strategy. Federal data center consolidation initiative—Agencies are required to provide OMB with a data center inventory, a strategy for consolidating and optimizing the data centers (to include planned cost savings), and quarterly updates on progress made. The act also requires OMB to develop a goal for how much is to be saved through this initiative, and provide annual reports on cost savings achieved. Government-wide software purchasing program—GSA is to develop a strategic sourcing initiative to enhance government-wide acquisition and management of software. In doing so, the law states that, to the maximum extent practicable, GSA should allow for the purchase of a software license agreement that is available for use by all executive branch agencies as a single user. We have issued a number of reports that have identified actions that OMB and federal agencies needed to take to improve their implementation of the FITARA provisions. In reporting on incremental software development in November 2017, we noted that department-level CIOs certified only 62 percent of major IT software development investments as implementing adequate incremental development in fiscal year 2017. Officials from 21 of the 24 agencies in our review reported that challenges had hindered their CIOs’ ability to implement incremental development. These challenges included: (1) inefficient governance processes; (2) procurement delays; and (3) organizational changes associated with transitioning from a traditional software methodology that takes years to deliver a product, to incremental development, which delivers products in shorter time frames. We made recommendations to department-level CIOs to improve reporting accuracy and update or establish certification policies. As of February 2019, agencies had taken steps to address eight of the 19 recommendations. Additionally, our August 2018 report on department-level CIOs noted that none of the 24 agencies had policies that fully addressed the role of their CIOs consistent with federal laws and guidance, including FITARA. In addition, the majority of the agencies had not fully addressed the roles of their CIOs for any of six key areas that we identified. Although officials from most agencies stated that their CIOs were implementing the responsibilities even when not addressed in policy, the 24 CIOs acknowledged in a survey that they were not always very effective in implementing all of their responsibilities. Further, the shortcomings in agencies’ policies were attributable, at least in part, to incomplete guidance from OMB. We noted that, until OMB improved its guidance to clearly address all CIO responsibilities, and agencies fully addressed the role of CIOs in their policies, CIOs would be limited in effectively managing IT and addressing long-standing management challenges. We made 27 recommendations for agencies to improve the effectiveness of CIOs’ implementation of their responsibilities. Most agencies agreed with the recommendations and described actions they planned to take to address them. Enhanced transparency and improved risk management In June 2016, we reported on rating the risk of IT investments and noted that agencies underreported the risk of almost two-thirds of the investments their CIOs reviewed. All 17 selected agencies incorporated at least two of OMB’s factors into their risk rating processes and nine used all of the factors, interpreted differently, less often than on a monthly basis. Our assessments generally showed more risk than the associated CIO ratings. We also issued a series of reports about the IT Dashboard that noted concerns about the accuracy and reliability of the data on the Dashboard. In total, we have made 25 recommendations to OMB and federal agencies to help improve the accuracy and reliability of the information on the Dashboard and to increase its availability. Most agencies agreed with the recommendations or had no comments. As of February 2019, 11 of these recommendations remained open. In April 2015, we reported on actions needed by 26 federal agencies to ensure portfolio savings were realized and tracked. We noted that these agencies had decreased their planned PortfolioStat savings by at least 68 percent from what they reported to us in 2013. Specifically, while the agencies initially had planned to save at least $5.8 billion between fiscal years 2013 and 2015, these estimates were decreased to approximately $2 billion. We made recommendations to OMB and the Department of Defense aimed at improving the reporting of achieved savings, documenting how savings are reinvested, and establishing time frames for PortfolioStat action items. As of February 2019, OMB had addressed one of the five recommendations. Our September 2016 report on application inventories noted that most of the 24 agencies in the review fully met at least three of the four practices we identified to determine if agencies had complete software application inventories. Additionally, six of the agencies relied on their investment management processes and, in some cases, supplemental processes to rationalize their applications to varying degrees. However, five of the six agencies acknowledged that their processes did not always allow for collecting or reviewing the information needed to effectively rationalize all their applications. We made recommendations that 20 agencies improve their inventories and five of the agencies take actions to improve their processes to rationalize their applications more completely. Agencies had addressed four of the 25 recommendations as of February 2019. Federal data center consolidation initiative We have reported annually on agencies’ efforts to meet FITARA requirements related to the federal data center consolidation initiative. For example, in March 2016 we reported that, as of November 2015, the 24 agencies participating in the initiative had identified a total of 10,584 data centers, of which they reported closing 3,125 through fiscal year 2015. In total, 19 of the 24 agencies reported achieving an estimated $2.8 billion in cost savings and avoidances from fiscal years 2011 to 2015. We recommended that 10 agencies take action to address challenges in establishing, and to complete, planned data center cost savings and avoidance targets. We also recommended that 22 agencies take action to improve optimization progress, including addressing any identified challenges. As of February 2019, agencies had addressed 14 of our 32 recommendations. Our May 2018 report on data center consolidation noted mixed progress toward achieving OMB’s goals for closing data centers by September 2018. Over half of the agencies reported that they had either already met, or planned to meet, all of their OMB-assigned goals by the deadline. This was expected to result in the closure of 7,221 of the 12,062 centers that agencies reported in August 2017. However, four agencies reported that they did not have plans to meet all of their assigned goals and two agencies were working with OMB to establish revised targets. No new recommendations were made to agencies in this report because agencies had yet to fully address our previous recommendations. In May 2014, we reported on 24 federal agencies’ management of software licenses and the potential for achieving significant savings government-wide. Specifically, we found that OMB and the vast majority of the 24 agencies reviewed did not have adequate policies for managing software licenses. We also reported that federal agencies were not adequately managing their software licenses because they generally did not follow leading practices in this area. Consequently, we could not accurately describe the most widely used software applications across the government, including the extent to which they were over and under purchased. We recommended that the 24 agencies improve their policies and practices for managing licenses. Most agencies generally agreed with the recommendations or had no comments. We then reported in September 2014 that the 24 agencies had either provided a plan to address most of the recommendations we made to them, partially disagreed with the report’s prior findings, or did not provide information on their efforts to address the recommendations. As of February 2019, the agencies had addressed 109 of the 136 recommendations. The nine selected agencies identified a total of 12 practices that helped them to successfully implement the FITARA provisions considered in our review. Among the practices, a number of the agencies identified four that were overarching—that is, the practices were not unique to a specific provision, but, instead, better positioned agencies to implement the five provisions selected for our review. In addition, agencies identified one practice that helped ensure effective implementation of CIO one practice that helped ensure enhanced transparency and improved one practice that ensured effective portfolio review, four practices that facilitated data center consolidation, and one practice that facilitated software purchasing. Figure 1 identifies the 12 practices that the nine agencies used to effectively implement the selected FITARA provisions. In addition, the narrative following the figure provides details on how these agencies implemented the provisions and realized associated IT management improvements or cost savings. Four of the nine agencies that we reviewed—Commerce, HHS, NASA, and USDA—identified one or more overarching practices that have been vital to their efforts in implementing FITARA: obtain support from senior leadership, treat the implementation of FITARA as a program, establish FITARA performance measures for component agencies, appoint an executive accountable for FITARA implementation in each component agency. As a result of implementing these practices, each of the agencies was better positioned to implement FITARA. Obtain support from senior leadership Three of the agencies—USDA, NASA, and Commerce—emphasized that the support of senior leadership was essential to implementing requirements in FITARA. This support was demonstrated, for example, by senior officials highlighting the act’s importance during key executive-level meetings and in their key memorandums and other communications to the agencies’ workforce. We have previously reported that having senior leadership support is critical to the success of major programs. According to USDA’s Director of FITARA Operations, the agency made a decision to raise the topic of FITARA implementation at each monthly executive leadership meeting that is attended by the Deputy Secretary, Chief Operating Officer, and Assistant Secretary for Administration, in order to keep attention focused on the act’s implementation. In addition, the agency’s October 2016, Concept of Operations for The Oversight, Management, and Operations of FITARA document, which is the primary document used by the agency to assist with the implementation and execution of the act, was signed by the Deputy Secretary, CIO, and Deputy CIO. The officials reported that obtaining support from senior leadership had helped ensure buy-in to changes resulting from implementing provisions of the act. NASA officials also highlighted senior leadership support as being essential to their actions to implement FITARA. For example, the NASA Deputy Administrator and Associate Administrator for Mission Support signed and distributed a memorandum in August 2010 that emphasized the agency’s commitment to the data center consolidation effort. The memorandum stated that Mission Directorate Associate Administrators and Center Directors shall direct their staff to cooperate fully and openly with NASA’s data center consolidation plan. An official in the Office of the CIO stated that the memorandum was evidence of the support the agency had from senior leadership to close data centers. Further, a Commerce official stated that FITARA implementation activities at the agency have had support from agency leadership, including the Deputy Secretary and the CIO. For example, according to the official, the Deputy Secretary provided each of the component agency FITARA sponsors with a signed memorandum asking for assistance from the components. This action resulted in increased cooperation throughout the agency when components were asked to respond to FITARA-related requests for information. Treat implementation of FITARA as a program Commerce and USDA reported that treating FITARA implementation as if it were an IT program was important to implementing the requirements of the act. The two agencies demonstrated this practice by assigning staff to manage implementation of FITARA and regularly discussing implementation of the act at meetings with senior-level officials. According to a Commerce lessons learned document, the agency has managed FITARA like a program by reporting regularly on its implementation status to internal agency stakeholders. In addition, the agency has assigned a program manager to assist with implementation of the act and to track progress on implementing the act’s provisions. As a result, Commerce officials reported that the importance of FITARA has been regularly discussed throughout the agency in bi-weekly meetings within the Office of the Secretary. These meetings led to an increased sense of cooperation between different disciplines (e.g., IT, budget, acquisition, legal, and human resources) and reduced the impression that FITARA was solely focused on the department-level CIO office. Further, USDA created the position of Executive Director for FITARA Operations within the department-level CIO office. This position has responsibility for, among other things, establishing the processes and procedures to bring the agency into compliance with the act and IT management controls that meet the FITARA requirements. The Director stated that treating the implementation of FITARA as if it were an IT program has led the agency to develop key documentation that has assisted in the implementation of the act, including its Concept of Operations for the Oversight, Management, and Operations of FITARA and Data Center Closure Process. Establish FITARA performance measures for component agencies HHS established internal FITARA performance measures for its component agencies that officials believe have led to increased effectiveness in implementing the act. Specifically, the agency undertook an effort to increase its FITARA scorecard grades—called “A by May”— with a goal to attain an ‘A’ on the May 2018 FITARA 6.0 scorecard. As part of this effort, HHS created its own internal scorecard for each of its component agencies that mirrored the agency’s FITARA scorecard. According to an HHS lessons learned document, aligning the FITARA metrics to component agency performance resulted in greater transparency between the department-level CIO and component agency CIOs. The effort to establish internal performance measures received support from senior agency leadership. Specifically, it was endorsed by the Assistant Secretary for Administration and the Principal Deputy for Administration, which agency officials believed was a key factor in the effort’s success. HHS officials also reported that their internal scorecard was helpful because it let component agencies know how well they were doing relative to each other. The officials also believed that establishing FITARA performance measures led to increased cooperation and communication between component agencies and the department-level CIO office. For example, the increased cooperation allowed HHS to more easily collect data required to update the House Committee on Oversight and Government Reform’s FITARA scorecard. At the December 2018 House Committee on Oversight and Government Reform hearing on FITARA, the HHS Acting CIO attributed the agency’s increased scorecard grade—from a ‘D’ on the initial November 2015 scorecard to a ‘B+’ on the December 2018 scorecard—to the “A by May” initiative. According to this official, the measurement of component agencies’ performance had elevated the importance of meeting FITARA objectives and paved the way for agency-wide participation in improvement efforts. Appoint an executive accountable for FITARA implementation in each component agency According to a Commerce memorandum, the Assistant Secretary for Administration asked each component agency to identify a FITARA executive sponsor. The sponsors were assigned responsibility for gathering the necessary information on component agencies’ efforts to implement FITARA and for alerting the agency’s CIO of any issues that needed to be addressed. Once the sponsors were identified, the Commerce Deputy Secretary sent a letter to each sponsor, asking them to help ensure cooperation between their component agencies and the department’s CIO office. A Commerce official reported that having a sponsor in component agencies with responsibility for providing the information needed to report on FITARA results to the department’s CIO office had increased component agencies’ responsiveness to information requests and improved cooperation throughout the agency. Commerce and DHS developed policies to explain how the specific authorities that FITARA provided to the agency CIO are to be carried out. The agencies identified the policies as essential to their ability to implement the CIO authority enhancements provision in FITARA. Commerce officials stated, for example, that their agency established a policy to ensure that the CIO certified major IT investments as adequately implementing incremental development. Specifically, Commerce’s capital planning guidance required component agency CIOs or other accountable officials within the component agencies to certify the adequate implementation of incremental development for these investments. Commerce’s guidance described the role of the CIO in the certification process and how the CIOs’ certification should be documented. The guidance also included definitions of incremental development and time frames for delivering functionality. Officials in Commerce’s Office of the CIO reported that the certification policies assisted them in overseeing the management of IT investments and ensuring the use of incremental development throughout the agency, as called for by FITARA. Also, Commerce changed its personnel policy to require the department- level CIO to approve all senior level IT positions, which addressed the FITARA requirement for the CIO to approve the appointment of other staff with the title of CIO (e.g., component agency CIOs). Specifically, in February 2016, Commerce developed a new human capital policy to give its department-level CIO input into the hiring of all senior level IT positions, including component CIOs. As a result, a Commerce official reported that the policy ensures that the CIOs’ authority has been enhanced to include significant involvement in the hiring of IT leaders throughout the agency. For its part, DHS established a policy to ensure that the department-level CIO certified major IT investments as adequately implementing incremental development. Specifically, DHS’s technical investment review guidance states that the CIO is to conduct a review of each investment using an investment review checklist that includes information provided by project managers as to whether the investments have used incremental development adequately. The CIO is to certify whether the project is implementing incremental delivery at least every 6 months and is to document this certification in the checklist. As a result, officials in DHS’s Office of the CIO said that they can now use information from the incremental certification checklist to improve incremental development processes and to make corrections to projects that were not adequately implementing incremental development. Three agencies—Commerce, DHS, and USDA—identified one practice that was key to their effective implementation of the enhanced transparency and improved risk management provision of FITARA. The practice is to implement a risk rating process for IT investments that incorporates risks (e.g., funding cuts or staffing changes). Commerce’s Office of the CIO implemented a process where this office reviewed at least the top three risks for each investment, verified that these risks were specific to the investment and were appropriately managed and mitigated, and verified that the risk register was updated regularly. In addition, DHS implemented a process that included a review of investment risks, ensured that the risks were current, and that risk mitigation plans were in place. Also, in November 2017, USDA updated its risk rating process to incorporate risks. Specifically, it updated its risk management scoring criteria to include an evaluation of the management and risk exposure scores of risks. The actions that Commerce, DHS, and USDA took to incorporate reviews of risks into their risk rating processes better positioned the agencies to provide more detailed and accurate information on their IT investments to the public. Four of the agencies—GSA, Justice, DHS, and USAID—identified performing application rationalization activities as vital to their effective implementation of the portfolio review provision of FITARA. Application rationalization activities can include establishing a software application inventory, collecting information on each application, or evaluating an agency’s portfolio of IT investments to make decisions on applications (e.g., retire, replace, or eliminate). We have previously reported that the principles of application rationalization are consistent with those used to manage investment portfolios. GSA and Justice performed application rationalization by engaging in efforts to establish complete and regularly updated application inventories. To do so, component agencies specified basic application attributes in their inventories (e.g., application name, description, owner, and function supported), and regularly updated the inventories. As we have previously reported, by having an application inventory that is complete and regularly updated, agencies such as GSA and Justice are better positioned to realize cost savings and efficiencies through activities such as consolidating redundant applications. For its part, DHS utilized application rationalization to identify duplicate investments and consolidate systems. Part of the effort included the regular assessment of programs against criteria such as the program’s cost, schedule, and performance relative to established targets. According to the agency, this resulted in the consolidation of site services, including help desk operations. DHS reported that this consolidation resulted in savings that cumulatively accrued to $202 million by fiscal year 2015. In addition, as an application rationalization activity, USAID reviewed its portfolio of IT investments in order to identify systems to potentially retire or decommission—a requirement of the portfolio review provision of FITARA. Specifically, the agency developed an information system decommissioning plan to retire old systems. The plan described USAID’s three-step approach to decommissioning systems: (1) identifying decommissioning candidates, (2) conducting system reviews and decommissioning decisions and (3) decommissioning planning and execution. As a result of this approach to implementing the portfolio review provision of FITARA, the agency reported in its Information Systems Decommissioning Plan that it has decommissioned 78 old systems and identified additional systems to decommission in future years. Agency officials reported that USAID achieved cost savings of almost $10 million since 2016 as a result of decommissioning systems. GSA, Justice, NASA, USAID, and USDA identified four practices that were essential to their effective implementation of the data center consolidation provision of FITARA and resulted in agencies realizing cost savings or other IT management improvements: conduct site visits to all data centers, transition to a virtual or cloud-based environment, incentivize component agencies to accelerate the pace of data center consolidation, and utilize data centers with excess capacity. Agencies’ actions to implement these practices have led to the retirement of older systems, increased cost savings and future cost avoidance, and a reduction in the number of data centers. In addition, as a result of applying these practices, the agencies were better able to make progress in consolidating and optimizing data centers. Conduct site visits to all data centers USDA and Justice conducted site visits to all of their data centers to more effectively address the data center provision of FITARA. Both agencies stated that the site visits had allowed them to more thoroughly document the inventory of applications and IT hardware in each of the data centers and to validate progress made toward closing data centers. USDA officials stated that conducting site visits to their data centers played a pivotal role in the successful implementation of data center consolidation by providing more direct communication with data center staff to address concerns and issues that staff had about consolidation of the centers. Additionally, agency officials reported that they were able to obtain more detailed information necessary to meet the FITARA requirements for reporting to OMB on USDA’s data center inventory and progress made on data center closures as a result of conducting site visits. Further, Justice officials stated that site visits conducted by staff in the CIO’s office that were responsible for data center consolidation played a key role in the closure of many of the agency’s data centers. Specifically, the officials said that conducting site visits in person showed data center staff that data center consolidation was a priority for the agency. The officials added that the site visits also showed data center staff that they were valued as partners in the consolidation effort. Transition to a virtual or cloud-based environment USDA, GSA, NASA, and USAID have taken actions to transition to a virtual or cloud-based environment as a way to effectively implement the data center consolidation provision of the act. The agencies’ actions consisted of moving data from agency-owned data centers to cloud- based environments, which helped the agencies make progress toward meeting the cost savings and data center optimization requirements of FITARA. USDA officials reported that the agency has been successful in having its components use cloud technology to reduce the number of data centers. For example, the USDA Forest Service developed a migration strategy to move all of the Forest Service production systems and applications from its data centers to USDA’s Enterprise Data Center and Cloud Infrastructure as a Service located at the National Information Technology Center in Kansas City, Missouri. As a result of moving its production systems and applications, the Forest Service increased virtualization, resolved many long-term security vulnerabilities, and reduced the number of duplicative and stand-alone applications by 70 percent. The Forest Service reported that it had identified cost savings of up to $6.1 million annually as a result of these efforts. In addition, GSA developed a data center consolidation strategy which included migrating services from agency-owned data centers to more flexible and optimized cloud computing environments, shared service and co-location centers, and more optimized data centers within their own inventory. For example, the agency migrated numerous systems to provisioned services via cloud computing services. GSA officials reported that their agency has encouraged virtualization and cloud computing as preferred options above new physical implementations. The agency also continues to migrate away from hardware-dependent operating systems and to utilize, build upon, and mature its enterprise service virtualization platform offerings and capabilities. As a result of these actions, the agency has been able to more effectively retire older systems in order to shift them to newer, virtualized technologies. NASA officials stated that their agency is transitioning to a cloud-based environment to close its data centers. For example, NASA moved all of the data from the Earth Observing System to a new commercial cloud- based model that hosts all the data in one location. The Earth Observing System was designed over a decade ago and its data were held at different partner locations based on science discipline (e.g., land, oceans, and atmosphere) and provided data that were used by the public in various capacities. The agency funded data center hardware at each of the locations and transported data between the locations, as necessary, to create integrated data products. According to NASA officials, transitioning to a cloud-based environment has resulted in easier access to NASA data by the public, elimination of recurring capital investments in data center hardware, and improved IT security. USAID reported that it saved money and increased efficiency by consolidating all of its data centers into a single data center in 2012 and then transitioning its single data center to a cloud-based environment. USAID completed the migration of its data center to the cloud in June 2018. According to the agency, moving to the cloud is expected to result in $36 million in future cost avoidance for the agency. Incentivize component agencies to accelerate the pace of data center consolidation Data center consolidation activities can be costly, requiring agencies to use resources to, for example, analyze the need for IT equipment (e.g., servers, processors, networking, and other hardware) and to move such equipment between locations. Our May 2018 report on the results of agencies’ efforts to consolidate data centers noted mixed progress toward achieving OMB’s goals for closing data centers. Justice incentivized a component agency to accelerate its participation in data center consolidation by providing supplemental funding for costs associated with consolidation. For example, the agency’s CIO office provided funding for a component agency to offset the cost to move servers and data center equipment to another location. Justice officials noted that the agency has seen increased cooperation from component agencies as a result of offering supplemental funding to participate in its data center consolidation effort. Utilize data centers with excess capacity A part of GSA’s strategy for consolidating data centers was to move existing data to other government data centers that had the capacity to store its data. To do so, GSA established shared service agreements with the Environmental Protection Agency’s National Computer Center and NASA’s Stennis Space Center data centers. As a result of moving its data to other government data centers with excess capacity, GSA was able to consolidate numerous data centers, resulting in increased efficiency and cost savings. USDA, VA, GSA, NASA, and USAID identified the practice of centralizing the management of software licenses as essential to their effective implementation of the software purchasing provision of FITARA. These five agencies did this by, for example, establishing a software management team, creating contracts with vendors to centrally manage licenses, and establishing governance processes for software license management. USDA employed a centralized software license management approach by establishing a Category Management Team. This team was responsible for the oversight of all software license enterprise agreements, which included collecting, reviewing, consolidating, and reporting on all software procurements. The agency also created Enterprise IT Category Management guidance that supported the central oversight authority for managing enterprise software license agreements. Further, according to USDA officials, management has been supportive in ensuring that all organizations and components join existing enterprise contracts that are already in place. USDA’s actions to centralize the management of its software licenses have led to effective agency-wide decisions regarding software purchases that the agency reported have yielded cost savings. For example, the agency identified instances where multiple software contracts at different price points among component agencies could be consolidated into one contract at the lowest price. This resulted in reducing the cost per license for a software product from $250 to $15.75, saving the agency approximately $85,000 between 2016 and 2017, according to USDA documentation. VA established an Enterprise Software License Management Team to centralize the management of its efforts to purchase software. According to officials in VA’s Office of Information and Technology, this team consisted of knowledgeable staff that had experience with software management and development, and was familiar with software that was deployed across the entire agency. These officials also stated that the Enterprise Software License Management Team conducted weekly meetings with GSA to discuss software licensing and category management to ensure they were aware of other opportunities for cost savings. VA also established an Enterprise Software Asset Management Technical Working Group that was formed to define and document a framework that employed a centralized software license management approach. By centralizing the management of its software licenses, VA has been able to make effective agency-wide decisions regarding the purchase of software products and reported that it has realized cost savings. Specifically, VA provided documentation showing that it had implemented a solution to analyze agency-wide software license data, including usage and costs. The agency identified approximately $65 million in cost savings between 2017 and 2020 due to analyzing one of their software licenses. We previously reported that GSA and USAID had centralized the management of their software licenses. We reported that GSA’s server- based and enterprise-wide licenses were managed centrally, whereas non-enterprise-wide workstation software licenses were generally managed regionally. GSA also issued a policy that established procedures for the management of all software licenses, including analyzing software licenses to identify opportunities for consolidation. Centralizing the management of its purchase of software licenses has led GSA to make effective agency-wide decisions regarding its software licenses and avoid future costs, according to agency documentation. For example, in fiscal year 2015, the agency consolidated licenses for one of its software products, saving the agency over $400,000 and avoiding over $3 million in future costs. For its part, USAID had a contract in place with a vendor for centrally managing licenses for all of its operating units. Further, according to officials within USAID’s Office of the CIO, the agency established a governance process to manage the introduction of new software. As part of this governance process, USAID’s Software and Hardware Approval Request Panel was responsible for reviewing requests to procure new software. USAID’s actions on centralizing the management of its software licenses have led to effective agency-wide decisions regarding software purchases that the agency reported have yielded cost savings. For example, USAID identified opportunities to reduce costs on its software licenses through consolidation or elimination of software. This resulted in the agency reporting a cumulative savings from fiscal year 2016 to fiscal year 2018 of over $2.5 million on software licenses. NASA issued a software license management policy that included the roles and responsibilities for central management of the agency’s software licenses. In addition, in May 2017, NASA’s Administrator issued a memorandum requiring component agencies to use the agency’s Enterprise License Management Team to manage software licenses. By employing a centralized software license management approach, NASA made effective agency-wide decisions on software licenses which the agency reported led to cost avoidance. For example, the agency increased the number of software agreements managed by its enterprise license management team from 24 to 42 in fiscal year 2014, and analyzed its software license data to identify opportunities to reduce costs and make better informed investments moving forward. As a result, NASA reported that it realized cost avoidance of approximately $224 million from fiscal years 2014 through 2018. In summary, as a result of applying the practices identified in this review, the selected agencies were better positioned to implement FITARA provisions and realized IT management improvements and cost savings. We requested comments on a draft of this report from each of the nine agencies included in our review, as well as from OMB. In response, one agency—USAID—provided written comments, which are reprinted in appendix I. Another agency—DHS—provided technical comments, which we incorporated in the report, as appropriate. The other 7 agencies and OMB did not provide comments on the draft report. In its comments, USAID described actions that it had taken to enhance the authority of its CIO. Specifically, the agency stated that it had proposed that the CIO report directly to the Administrator and had notified the congressional committees of jurisdiction about this intended action. Further, USAID stated that, as of April 2019, the Administrator would be expected to approve revisions to internal policy to clarify and strengthen the authority of the CIO in line with FITARA and our report. We are sending copies of this report to the appropriate congressional committees, the heads of the Departments of Agriculture, Commerce, Health and Human Services, Homeland Security, Justice, and Veterans Affairs; the General Services Administration; the National Aeronautics and Space Administration; the U.S. Agency for International Development; the Director of the Office of Management and Budget; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. Carol C. Harris, (202) 512-4456 or harriscc@gao.gov. In addition to the contact named above, Dave Powner (Director), Mark Bird (Assistant Director), Eric Trout (Analyst-in-Charge), Justin Booth, Chris Businsky, Quintin Dorsey, Rebecca Eyler, Dave Hinchman, Valerie Hopkins, Kaelin Kuhn, Sabine Paul, Monica Perez-Nelson, Meredith Raymond, Bradley Roach, Andrew Stavisky, Niti Tandon, Christy Tyson, Adam Vodraska, Kevin Walsh, Jessica Waselkow, and Eric Winter made key contributions to this report.", "summary": "Congress has long recognized that IT has the potential to enable federal agencies to accomplish their missions more quickly, effectively, and economically. However, fully exploiting this potential has presented challenges to covered agencies, and the federal government's management of IT has produced mixed results. As part of its effort to reform the government-wide management of IT, in December 2014 Congress enacted FITARA. The law included specific requirements related to enhancing Chief Information Officers' (CIO) authorities, improving the risk management of IT investments, reviewing agencies' portfolio of IT investments, consolidating federal data centers, and purchasing software licenses. GAO has reported numerous times on agencies' effectiveness in implementing the provisions of the law and highlighted agencies that have had success in implementing selected provisions. In this report, GAO identifies practices that agencies have used to effectively implement FITARA. GAO selected five provisions of FITARA to review: (1) CIO authority enhancements; (2) enhanced transparency and improved risk management; (3) portfolio review; (4) data center consolidation; and (5) software purchasing. GAO then selected nine agencies that had success in implementing at least one of the five provisions. GAO compiled practices where at least one agency was better positioned to implement a provision or realized an IT management improvement or cost savings. Nine selected agencies (the Departments of Agriculture, Commerce, Health and Human Services, Homeland Security, Justice, and Veterans Affairs; the Agency for International Development; the National Aeronautics and Space Administration; and the General Services Administration) identified 12 practices that helped them to effectively implement one or more Federal Information Technology Acquisition Reform Act provisions (commonly referred to as FITARA). The following figure identifies the 12 practices, including the four overarching ones, considered vital to implementing all provisions. By applying the overarching practices, covered agencies were better positioned to implement FITARA. In addition, by implementing the practices relative to the five FITARA provisions GAO selected, covered agencies realized information technology (IT) management improvements, such as decommissioning old systems and cost savings.", "document_type": "gao"}
{"report": "Federal statutes and a number of executive orders reflect the federal government’s policy to encourage the participation of small businesses, including those owned and controlled by socially and economically disadvantaged individuals, in federal contracting. One key statute is the Small Business Act, which established SBA and directed it to aid, counsel, assist, and protect the interests of small business concerns, among other things. The Small Business Act, as amended over the years, as well as executive orders, emphasize the government’s policies on contracting with SDBs and businesses owned by women and minorities. The Small Business Act sets a minimum government-wide goal for small business participation of not less than 23 percent of the total value of all prime contracts for each fiscal year and makes SBA responsible for reporting annually to the President and Congress on agencies’ progress in meeting this goal, and making this information available on a public website. SBA reported that the federal government reached this goal for the fifth consecutive year in fiscal year 2017, awarding about 24 percent of total federal contract dollars to small businesses. SBA also negotiates specific goals with agencies to ensure the government-wide goal is met. Each agency’s progress toward meeting its goals is generally based on the percentage of obligations on contracts with small businesses. The three categories of businesses we examined for this report are small disadvantaged, minority-owned, and women-owned. Small disadvantaged business. Because SBA’s 8(a) business development program and SDB criteria are similar, in this report we use the term “small disadvantaged business” or “SDB” to refer to both categories of businesses. Section 8(a) of the Small Business Act established the 8(a) business development program, which authorizes the SBA to enter into contracts with other agencies and award subcontracts for performing those contracts to firms eligible for program participation. To be certified under the 8(a) program, a business must, in general, satisfy requirements for size, be at least 51 percent unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are U.S. citizens, and demonstrate potential for success. Similar to the 8(a) program, SDBs are defined as those that are primarily owned and controlled by one or more socially and economically disadvantaged individuals, though there are some differences in criteria for the 8(a) program and SDB classification. For example, businesses in the 8(a) program must demonstrate the potential for success and business principals must demonstrate good character, but the requirements to demonstrate these do not apply to SDB classification. A business’s self-identification as SDB in the federal government’s System for Award Management does not automatically lead to acceptance into SBA’s 8(a) business development program. Minority-owned business. Businesses of all sizes that are at least 51 percent owned by one or more members of a minority group may self- identify as minority-owned businesses in the federal government’s System for Award Management. Minority-owned businesses are further broken down into businesses owned by Asian-Pacific-, Subcontinent- Asian-, Black-, Hispanic-, Native-Americans, and other. Women-owned business. Businesses of all sizes that are at least 51 percent owned by one or more women and whose management and daily business operations are controlled by one or more women may self- identify as a women-owned business in the System for Award Management. These three categories of specified businesses overlap. For example, an SDB may be women-owned and therefore be counted in FPDS-NG as both an SDB and a women-owned business. To avoid double-counting when presenting consolidated data, we counted obligations and businesses classified under more than one category only once. As we have previously reported, there are several types of activities that are supported by federal advertising contracts. Table 1 provides descriptions and examples of some of these activities. Over the past 5 fiscal years (2013 through 2017), federal agencies have obligated on average about $870 million annually for advertising contracts, with about 13 percent (approximately $114 million annually) of these obligations going to specified businesses. This share of advertising contract obligations going to these businesses over fiscal years 2013 through 2017 was consistent with the share of total federal contracting obligations going to these businesses (also on average 13 percent over this period). Advertising contract obligations to specified businesses and the number of these businesses receiving advertising contract obligations have both generally increased over fiscal years 2013 through 2017. The amount of advertising contract obligations going to these businesses nearly doubled from fiscal year 2013 to 2017 (from $75 million to $147 million) and also increased as a percent of total advertising contract obligations (from 9 percent of these obligations to 16 percent). Specified businesses also represented an increasing share of businesses receiving advertising contract obligations, from 30 percent (194 businesses) in fiscal year 2013 to 39 percent (250 businesses) in fiscal year 2017. Figure 1 shows advertising contract obligations to specified businesses and the number of these businesses receiving these obligations over fiscal years 2013 through 2017. In the 5 years from fiscal year 2013 through 2017, a relatively small number of specified businesses received a relatively large amount of federal advertising contract obligations. For example, the top five businesses received about 40 percent of annual advertising contract obligations to specified businesses over the 5-year period. Consistent with findings from our previous work, obligations were also concentrated among a relatively small number of contracts. Figure 2 shows the distribution of advertising contract obligations among specified businesses, with amounts going to the five largest businesses (in terms of advertising contract obligations received) and all others. Federal advertising contract obligations to all three categories of specified businesses generally increased between fiscal years 2013 and 2017, although some years showed decreases. (The amount going to women- owned businesses declined between fiscal years 2014 and 2015 and the amounts going to minority-owned businesses and SDBs declined between fiscal years 2016 and 2017.) The most notable increase over the 5-year timeframe, both in dollars and percentage terms, was in the women-owned category, which increased by $56 million, or 93 percent. Figure 3 shows the amounts obligated to each specified business category, and to the three categories combined. Table 2 in appendix II shows the amounts obligated to each specified business category, in dollars and as a percentage of federal advertising contract obligations, in each of the 5 years. SBA officials we interviewed told us that a program they started in 2011, the Women-Owned Small Business Federal Contracting Program, may have accounted for some of the increase in contracting rates with women- owned businesses over the past 5 years. This is because the program aims to help women-owned small businesses have an equal opportunity to participate in federal contracting and to assist agencies in achieving their goals for contracting with women-owned small businesses. The program generally allows women-owned small businesses to compete for set-aside contracts or receive sole source awards in industries where these businesses are underrepresented or substantially underrepresented. Changes in advertising contract obligations to specified businesses were in some cases associated with a small number of contracts. For example, the $29 million increase in advertising contract obligations to women- owned businesses between fiscal years 2016 and 2017 was due in large part to two contracts with an advertising agency with combined obligations of about $22 million in fiscal year 2017. In addition, two contracts that had each been classified under both the SDB and minority- owned categories contributed to the decrease in these two categories between fiscal years 2016 and 2017. Obligations to these two contracts declined by about $16 million over this period, a substantial portion of the overall declines in these two categories. (Obligations to SDBs declined by about $23 million; those to minority-owned businesses declined by about $21 million.) Although obligations to the SDB and minority-owned categories decreased from fiscal year 2016 to 2017, the numbers of these businesses receiving advertising contract obligations both increased. The number of SDBs receiving these obligations went from 123 to 134; the number of minority-owned businesses went from 95 to 98. Federal agencies are also required to set-aside procurements exclusively for small businesses or businesses in the 8(a) program under certain circumstances, and specific authorities exist to allow award of a contract on a sole source basis to a business in the 8(a) program. However, these authorities were in place prior to fiscal year 2013 and therefore, according to SBA officials, it is unlikely they would have caused a change in contracting activity over the past 5 years. As mentioned above, businesses may be classified as more than one category, and thus there is overlap in obligations and contracts among specified business categories. For example, about one-quarter ($147 million) of the $570 million in advertising contract obligations directed to specified businesses over the 5-year period went to businesses classified under all three categories. Figure 4 shows the amount of advertising contract obligations going to each business category and combination of categories. Among the different types of minority-owned businesses, those classified as being owned by Hispanic-Americans received the most obligations (just over half) from federal advertising contracts over fiscal years 2013 through 2017. Figure 5 shows the breakdown of amounts obligated over these fiscal years to minority-owned businesses. As with the other specified business categories, advertising obligations to specific minority groups were concentrated among a relatively small number of businesses. For example, advertising contract obligations to one particular Native-American-owned business—for graphic design, print, and other communications services—represented 34 percent of all obligations to Native-American-owned businesses. See table 3 in appendix II for additional details on each business category’s contracts. The departments of Defense (DOD), Homeland Security (DHS), and Health and Human Service (HHS) were responsible for 73 percent of the $570 million of federal advertising contract obligations that went to specified businesses over fiscal years 2013 through 2017. Thirty four other agencies were responsible for the remaining 27 percent of these obligations. Figure 6 shows the breakdown of total federal advertising contract obligations, with the amount of obligations going to specified businesses, and amounts obligated by DOD, HHS, DHS, and all other agencies. For each of the 5 years we reviewed, DOD, HHS, and DHS were consistently the top three agencies in terms of the amount of advertising contract obligations they directed to specified businesses. Additionally, all three generally increased the amounts they obligated to these businesses. For example, in fiscal year 2013, these three agencies obligated over 60 percent of all federal advertising contract obligations to specified businesses; in 2017 they accounted for more than 80 percent of these obligations. Figure 7 shows breakdowns of these and all other agencies’ advertising contract obligations to specified businesses. Much of the increase in these obligations from year to year is associated with increases in obligations by DOD, DHS, and HHS. For example, advertising contract obligations to these businesses increased by about $37 million between fiscal years 2015 and 2016, with these three agencies responsible for about $22 million, or 60 percent, of the increase. DOD, DHS, and HHS are also among the agencies that obligated the most to advertising contracts overall. Together they obligated about $3.4 billion for these types of contracts over the 5-year period, which represents 79 percent of the federal government’s obligations. DOD obligated the most—over $2.6 billion—to advertising contracts over the 5- year period, which accounted for over 60 percent of these obligations over fiscal years 2013 through 2017. Table 4 in appendix II provides more details on the agencies that obligated the most overall for advertising contracts and those that directed the most to specified businesses. In our prior report on advertising contract obligations going to small disadvantaged and minority-owned businesses, we highlighted annual obligations data for five agencies. As an update to that analysis, we examined annual advertising contract obligations to the five agencies that obligated the most on advertising contracts over the past 5 years – DOD, DHS, HHS, and the departments of Transportation (DOT) and Veterans Affairs (VA). Figure 8 illustrates these agencies’ advertising contract obligations and the percent going to specified businesses in each year. As shown in the figure above, top-spending agencies’ obligations to specified businesses fluctuated over fiscal years 2013 through 2017. DOD. DOD’s obligations to specified businesses increased for most of the fiscal years over the 5-year period, regardless of whether its total advertising obligations increased or decreased. For example, in fiscal year 2016, DOD’s total advertising obligations declined by over $100 million; however, its obligations to specified business categories increased. In fiscal year 2017, DOD obligated the most of any agency to specified businesses. HHS. Similarly, HHS, which obligated approximately $151 million to specified businesses, the most of any agency over the 5-year period, also increased its obligations to those businesses regardless of its overall advertising obligations from year to year. For example, from fiscal years 2016 to 2017 HHS’ advertising contract obligations to specified businesses increased from $35 to $37 million, even though they declined as a percentage of its overall advertising contract obligations, going from 65 percent to 57 percent. DOT. DOT generally increased its total advertising obligations during the 5-year period from approximately $46 million in 2013 to $57 million in 2017. However, during this time DOT’s obligations to specified businesses generally decreased, from approximately $1.8 million in 2013 to approximately $560,000 in fiscal year 2017. DHS. DHS generally increased its total advertising obligations each year of the 5-year period and generally increased its obligations to specified businesses. DHS obligated the third largest amount of money (behind HHS and DOD) to these businesses from fiscal years 2013 through 2017. VA. VA has generally decreased its total advertising obligations from approximately $63 million in fiscal year 2013 to approximately $15 million in fiscal year 2017, and its obligations to specified businesses, from approximately $8 million in fiscal year 2013 to approximately $1.3 million in fiscal year 2017. Table 5 in appendix II shows the 20 agencies that have obligated the most for advertising contracts over fiscal years 2013 through 2017 and the amounts they directed to specified businesses. In several cases agencies directed more than half of their advertising contract obligations to specified businesses, though these agencies in general obligated less to advertising contracts than top-spending agencies. Ten agencies with advertising contract obligations of at least $1 million over fiscal years 2013 through 2017, such as the departments of Justice and Energy, directed at least half of their obligations to specified businesses. With the exception of DHS, which obligated about $200 million for advertising contracts over the 5-year period, these agencies all obligated less than $25 million for advertising contracts over this timeframe. In contrast, DOD directed a relatively small share (5 percent) of its advertising contract obligations to specified businesses, making it 29th out of 37 agencies when ranked according to the percentage of advertising contract obligations going to these businesses. However, because the department obligated a large amount for advertising contracts ($2.6 billion over the 5-year period), it ranked second in terms of the amount obligated to specified businesses. Some agencies directed all or nearly all of their advertising contract obligations to specified businesses, but because these agencies’ advertising contract obligations were relatively low, the amounts they directed to these businesses were also relatively low. For example, the Nuclear Regulatory Commission directed all of its federal advertising contract obligations—totaling approximately $1 million—to specified businesses from fiscal years 2013 through 2017. Additionally, the National Aeronautics and Space Administration directed 98 percent of its approximately $21 million in advertising contract obligations to these businesses from 2013 through 2017. Table 6 in appendix II shows the top 20 agencies in terms of share of advertising contract obligations going to these businesses. We provided a draft of this report to the SBA Administrator for comment. SBA provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, SBA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or nguyentt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to identify and analyze (1) the amount federal agencies have obligated on advertising contracts over the 5 most recent fiscal years (2013 through 2017) and the amount going to small disadvantaged businesses (SDB) and those owned by minorities and women; and (2) the agencies that have directed the most advertising contract obligations to these businesses and how this has changed over time. To address both objectives, we analyzed data from the Federal Procurement Data System-Next Generation (FPDS-NG) database for fiscal years 2013 through 2017. This database captures information on the federal government’s contract awards and obligations and includes data for most federal contract actions that have an estimated value of more than $3,500. We reviewed obligations data for contracts coded under the “support – management: advertising” or “support – management: public relations” product service codes. For reporting purposes, we refer to these two contract types collectively as “advertising contracts.” Every contract action reported in FPDS-NG is categorized by a product service code to indicate what was purchased. Additionally, contracts reported in FPDS-NG are categorized by a North American Industry Classification System (NAICS) code, which indicates the industry within which the product or service falls. For purposes of this report, we used the product service codes mentioned above to identify advertising contracts because product service codes are assigned at the individual contract or order level. The Small Business Administration (SBA) uses NAICS codes to identify the predominant service or supply on a contract. NAICS codes are an integral element of size standards and the determination whether the business receiving the contract award is a small business. In addition to analyzing FPDS-NG data, we interviewed SBA officials responsible for assessing government-wide and agency contracting with small and other business categories about their perspectives on trends in federal contracting. We assessed the reliability of these data by considering known strengths and weaknesses of FPDS-NG data, based on our past work and looking for obvious errors and inconsistencies in the data we used for our analysis. We also interviewed SBA officials, who use FPDS-NG data in assessing federal contracting, about the database’s reliability. Based on these steps, we concluded that the data were sufficiently reliable for our purposes. We focused our analysis of FPDS-NG data on those advertising contracts categorized as being awarded to (1) SDBs, 8(a) businesses, or both; (2) business owned by minorities and/ or (3) businesses owned by women. SDBs, minority-owned, and women-owned businesses may self-identify in the government’s System for Award Management as these types of businesses. For purposes of this report, we refer to the three categories of businesses we examined as “specified businesses.” Criteria for certification as an 8(a) business are similar to those for SDB classification, including that businesses be primarily owned by a person or people who are socially and economically disadvantaged. In addition, 8(a) businesses must also demonstrate the potential for success and business principals must demonstrate good character. Because of these similarities, for analysis and reporting purposes we combined 8(a) businesses and SDBs into one group, which we refer to in this report as “small disadvantaged businesses” or “SDBs.” We interviewed SBA officials to obtain their perspectives on the changes, but did not attempt to identify root causes for changes over the past 5 years, as it was beyond our scope. We analyzed FPDS-NG data at the government-wide level to identify overall trends in obligations for advertising contracts and the amounts going to specified business categories. We focused on the amount of advertising contract obligations going to these business categories individually and combined, and examined how these amounts had changed over the past 5 fiscal years. Within the minority-owned business category, we also analyzed the amounts of obligations going to businesses owned by Asian-Pacific-, Subcontinent-Asian-, Black-, Hispanic-, and Native-Americans, and “other minority” owned businesses. Businesses self-identify as these categories in the federal government’s System for Award Management. We also examined data on the number of contracts and businesses receiving obligations through advertising contracts. There is overlap among the three specified business categories—SDBs and those owned by minorities and women. For example, a business may be classified as both an SDB and a women-owned business. We accounted for this overlap when calculating and presenting data on the amount of advertising contract obligations going to the three business categories combined so that we did not double or triple count obligations. We also analyzed FPDS-NG data on specific agencies’ obligations for advertising contract obligations and the amounts they obligated to specified businesses. We used these data to identify the agencies that ranked highest (in dollars and as a percentage of total advertising contract obligations) in advertising contract obligations to specified businesses. We also examined how agency obligations to these businesses have changed over the past 5 years. We conducted this performance audit from October 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 2 shows the amounts of advertising contract obligations that went to specified businesses over fiscal years 2013 through 2017. As shown, the amounts directed to these business categories generally increased both in dollars and as a percentage of total advertising obligations. Specified business categories each received at least $300 million in obligations over fiscal years 2013 through 2017. There were variations in the number of businesses receiving obligations and the concentration of obligations among contractors. Table 3 provides additional details on these characteristics. Table 4 below shows the agencies that obligated the most for advertising contracts overall, and those that obligated the most through these contracts to specified businesses. Specified businesses are those classified as small disadvantaged businesses (including those that self-identify as small disadvantaged businesses and those that are certified by SBA for the 8(a) business development program); minority-owned businesses; and women-owned businesses. Minority-owned businesses include those categorized as being owned by Asian-Pacific-, Sub-continent-Asian-, Black-, Hispanic-, and Native-Americans, as well as “other minorities.” Table 5 shows the 20 agencies that obligated the most for federal advertising contracts over fiscal years 2013 through 2017, with the percentages of these obligations going to specified businesses. Specified businesses are those classified as small disadvantaged businesses (including those that self-identify as small disadvantaged businesses, and those that are certified by SBA for the 8(a) business development program); minority-owned businesses; and women-owned businesses. Minority-owned businesses include those categorized as being owned by Asian-Pacific-, Sub-continent-Asian-, Black-, Hispanic-, and Native-Americans, as well as “other minorities.” Table 6 shows the 20 agencies that directed the greatest share of these obligations to specified businesses. Other GAO staff who made contributions to this report include Carol Henn (Assistant Director); Ann Marie Cortez; Jenny Chanley; Kristine Hassinger; Julia Kennon; Kathleen Padulchick; and Erik Shive.", "summary": "The federal government spends close to $1 billion annually for advertising activities that, among other things, inform the public about programs and services. The government seeks to provide procurement opportunities for these services to businesses such as SDBs and those owned by minorities and women. SDBs are those primarily owned by one or more socially and economically disadvantaged individuals. GAO was asked to analyze federal advertising obligations to these types of businesses. This report discusses (1) the amount federal agencies have obligated towards advertising contracts over the most recent 5 fiscal years (2013 through 2017) and the amount going to SDBs and businesses owned by minorities and women; and (2) the agencies that have directed the most advertising contract obligations to these businesses and how this has changed over time. GAO analyzed data on advertising contracts from the Federal Procurement Data System – Next Generation database for fiscal years 2013 through 2017. GAO also interviewed Small Business Administration officials. The Small Business Administration provided technical comments on this report, which GAO incorporated as appropriate. Federal advertising contract obligations to small disadvantaged businesses (SDB) and businesses of all sizes owned by minorities and women (specified businesses) generally increased from fiscal years 2013 through 2017, and constituted 13 percent of all advertising obligations over this period. This figure is consistent with the percentage of all federal contract obligations to these businesses over this period. Overall, advertising contract obligations to all three categories of businesses increased between fiscal years 2013 and 2017, as shown in the figure below. Within the minority-owned business category, which includes businesses owned by Asian-Pacific-, Subcontinent-Asian-, Black-, Hispanic-, and Native-Americans, over half of the obligations went to those owned by Hispanic-Americans. Three agencies—the departments of Defense (DOD), Health and Human Services, and Homeland Security—were responsible for nearly three-quarters of advertising contract obligations to the three categories of businesses from fiscal years 2013 through 2017. These agencies were associated with much of the increase in these obligations to specified businesses over the 5-year period. Although some agencies obligated higher shares of their advertising contract obligations to these businesses, they generally obligated fewer dollars than DOD and the two other agencies. For example, the National Aeronautics and Space Administration directed 98 percent of its obligations to these businesses, but the agency's total advertising contract obligations were $21 million over the 5-year period. DOD obligated $2.6 billion for these contracts over the same period.", "document_type": "gao"}
{"report": "In 1975, an executive order established CFIUS to monitor the impact of and coordinate U.S. policy on foreign investment in the United States. In 1988, Congress enacted the Exon-Florio amendment adding section 721 to the Defense Production Act of 1950. The amendment authorized the President to investigate the impact of certain foreign acquisitions of U.S. companies on national security and to suspend or prohibit acquisitions that might threaten to impair national security. FINSA further amended the Defense Production Act, established CFIUS as it currently exists, and guides the committee. One of the purposes of FINSA’s enactment was to ensure national security while promoting foreign investment and the creation of U.S. jobs. CFIUS reviews transactions involving a large variety of countries and industry sectors to determine if such transactions pose a threat to national security and whether the transactions should be allowed to proceed (for more information on the characteristics of transactions reviewed by CFIUS, see app. II). FINSA does not formally define national security, but provides a number of factors for CFIUS and the President to consider in determining whether a transaction poses a risk. These factors include the potential national security-related effects on U.S. critical technologies and whether the transaction could result in the control of a U.S. business by a foreign government. CFIUS also may consider other factors that it finds appropriate in determining whether a transaction poses a national security risk (for a full list of factors, see app. III). Under FINSA, CFIUS is chaired by the Secretary of the Treasury and includes voting members from the Departments of Commerce, Defense, Energy, Homeland Security, Justice, and State; and the Offices of the U.S. Trade Representative, and Science and Technology Policy. In addition, the Office of the Director of National Intelligence (ODNI) and the Department of Labor (DOL) are nonvoting ex officio members. Various other White House offices also observe and, as appropriate, participate in CFIUS activities (see fig. 1). CFIUS may also solicit perspectives and expertise from nonmember agencies, such as the Department of Agriculture, designating them as members for purposes of the review of particular transactions, as appropriate, which can include negotiating or imposing mitigation measures or referring the transaction to the President for decision. The committee, which meets weekly at a staff level, generally has three core functions: (1) review transactions that have been submitted to the committee and take action as necessary to address any national security concerns; (2) monitor and enforce compliance with mitigation measures; and (3) identify transactions of concern that have not been notified to CFIUS for review. The Secretary of the Treasury, as the chair of CFIUS, is responsible for a number of tasks. According to Department of the Treasury (Treasury) officials, these tasks, including coordinating operations of the committee, facilitating information collection from parties to a transaction, reviewing and sharing data on mergers and acquisitions with member agencies, and managing CFIUS timeframes, are carried out by Treasury employees specifically staffed to support CFIUS. Treasury also communicates on the committee’s behalf with the parties, members of Congress, and the general public. When necessary, Treasury is responsible for delivering the committee’s recommendation that the President should suspend or prohibit a transaction. In examining covered transactions, CFIUS members seek to identify and address, as appropriate, any national security concerns that arise as a result of the transaction. According to the FINSA amendment, a “covered” transaction is defined as any merger, acquisition, or takeover by or with any foreign person that could result in foreign control of any person engaged in interstate commerce in the United States. CFIUS reviews “notices” that have been submitted—or notified—to the committee by parties to transactions. Notices to CFIUS contain information about the nature of the transaction and the parties involved. According to guidance on the Treasury website, with limited exceptions, a transaction receives “safe harbor” when CFIUS has completed its review and determines that the transaction may proceed. According to Treasury officials, safe harbor provides the parties to the transaction some certainty that CFIUS and the President will not subject the transaction to review again. FINSA does not require that parties notify CFIUS of a transaction; however, CFIUS may choose to initiate a review of any covered transaction. Transactions that have not been notified to CFIUS for review are known as “non-notified transactions.” According to member agency officials, Treasury and several other member agencies have processes for identifying non-notified transactions for CFIUS to potentially review. For instance, Treasury staff compile data on mergers and acquisitions and distribute information about potential non-notified transactions to member agencies for review. In addition, according to member agency officials, in 2010, the Federal Bureau of Investigation (FBI) began a working group, now called Project Iceberg, which is responsible for identifying and understanding counterintelligence threats posed by foreign investments that have not been notified to CFIUS. The working group holds monthly meetings that intelligence agencies as well as CFIUS member agencies are invited to attend. In the absence of voluntary reporting by the parties involved or independent discovery of the transaction, it is possible that CFIUS may not review a covered transaction that could pose a risk to national security. Based on information including FINSA and regulations, the CFIUS process for reviewing transactions that have been notified to the committee comprises up to four stages: pre-notice consultation, national security review, national security investigation, and presidential action. CFIUS reviews each transaction individually, with a focus on the aspects of the transaction that could pose a risk. For each transaction reviewed, the committee identifies agencies with relevant expertise to act as co-lead with Treasury to guide the transaction through the CFIUS process. CFIUS reviews are confidential and protected from public disclosure. A CFIUS review could be concluded when CFIUS members reach consensus about whether the transaction should be allowed to proceed, including on the basis of mitigation, if necessary, or when the parties withdraw their notice, whether for commercial reasons or in light of CFIUS’s national security concerns. Absent one of these conclusions to a CFIUS review, the committee may send the transaction to the President, with a recommendation that the President suspend or prohibit it. See figure 2 for an overview of the steps that comprise the CFIUS process for reviewing selected transactions. Before a transaction is reviewed by CFIUS, Treasury may conduct a pre- notice consultation with parties to a notified transaction. Upon request, Treasury and other agencies meet with the parties, provide informal guidance on the CFIUS review process, and may review early drafts of the notice. Once the parties have developed the final draft, they submit it to the committee for review. When Treasury, with input from member agencies, determines that the notice of the transaction is complete, the official CFIUS review of the transaction commences. CFIUS conducts a national security review of each notified transaction, which includes determining whether it is a covered transaction and developing a national security threat assessment. The national security review lasts up to 30 days and begins the day after Treasury determines the filing is complete and circulates the filing to CFIUS member agencies. At the beginning of the national security review, CFIUS identifies co-lead agencies. According to Treasury officials, typically within the first 10 to 12 days of the national security review, CFIUS develops a “covered transaction analysis,” which determines whether the transaction is a covered transaction according to FINSA. According to Treasury officials, there typically is consensus among voting members on whether the transaction is a covered transaction. During the national security review, CFIUS also assesses whether there is credible evidence that the foreign party in control of that U.S. business might take action to impair the national security of the United States as well as whether the covered transaction is a foreign government-controlled transaction. Concurrently, ODNI develops a national security threat assessment, with input and support from the intelligence community, to be completed during the first 20 days of the national security review. If CFIUS finds that the covered transaction does not present national security risks or that other provisions of law provide adequate and appropriate authority to address the risks, CFIUS may end its review. If CFIUS chooses to conclude its review at this point, CFIUS is to advise the parties in writing that the transaction has been cleared and allowed to proceed. According to information provided by Treasury, CFIUS has historically concluded action on the majority of transactions during or at the end of the 30-day national security review. The committee’s determination must be certified to specified members of Congress after the review is completed. However, if at the end of the national security review, CFIUS has not yet determined that there are no unresolved national security concerns and the committee requires additional time, CFIUS may proceed to a national security investigation, which must be completed within 45 days. If, during the 45-day national security investigation, CFIUS identifies an unresolved national security concern, it works with the parties to mitigate, if appropriate, any national security risks that may exist. If an agency identifies an unresolved national security concern, the agency develops an analysis of the potential risks posed by the covered transaction and includes recommendation for action, such as mitigation measures or referral to the President, and shares this analysis with other members of the committee. Mitigation measures may include ensuring that only authorized persons have access to certain technologies, information, or facilities, or providing the U.S. government the right to review certain business decisions and to object if the decisions raise national security concerns. According to Treasury officials, CFIUS member agencies aim for mitigation that would be effective, can be monitored, and would be enforceable. If there is a difference of opinion among CFIUS member agencies about the level or type of mitigation that should be utilized, CFIUS agencies discuss the matters to reach consensus. In some cases, parties may choose to withdraw and resubmit the notice. If CFIUS has determined that national security concerns cannot be mitigated, according to Treasury officials, CFIUS typically advises the parties that the committee will refer the matter to the President for decision. According to Treasury officials, parties have the opportunity to withdraw and resubmit the notice if they need additional time to discuss CFIUS’s concerns or to present additional information or mitigation proposals for CFIUS’s consideration. Sometimes parties choose to withdraw and abandon the transaction if, for instance, CFIUS proposes mitigation measures that the parties choose not to accept. Parties may also abandon the transaction for commercial reasons unrelated to the CFIUS review. If parties choose to withdraw and resubmit a transaction, the national security review begins again, and the committee has another 75 days to complete the review of the transaction. If CFIUS obtains consensus from committee members that there are no unresolved national security concerns or the national security concerns have been mitigated, the national security investigation ends, and the covered transaction receives safe harbor. Treasury and the co-lead agency send written certification to specified members of Congress that there are no unresolved national security concerns. However, if the committee concludes that a proposed foreign investment threatens to impair the U.S. national security and the threat cannot be mitigated, CFIUS will elevate the notice to the President for determination and CFIUS may recommend that the President suspend or prohibit the transaction. According to Treasury officials, parties may also withdraw their notice at this point rather than have the President decide whether to block the transaction. If, at the end of the national security investigation, CFIUS elevates a transaction to the President for determination, the President has 15 days from the completed investigation to decide to prohibit or suspend the acquisition, or to take no action. Only four transactions reviewed by CFIUS have been the subject of a presidential prohibition since the committee was established in 1975. CFIUS has experienced an increase in workload in recent years, but Treasury, as CFIUS lead, has not coordinated member agency efforts to better understand staffing levels needed to complete core committee functions. According to CFIUS member agency officials, the volume of transactions notified to the committee and the complexity of CFIUS reviews in terms of technology, transaction structure, and national security concerns have increased substantially from 2011 through 2016, while CFIUS staffing levels have experienced a modest increase during the same time period. Member agency officials stated that CFIUS is able to review all transactions that have been voluntarily notified to the committee. However, many stakeholders, including most member agency officials and several external experts, expressed concerns that CFIUS member agencies were limited in their ability to complete other CFIUS functions, such as identifying non-notified transactions. In addition, agency officials were unsure if they would have sufficient staff if the CFIUS workload were to continue to increase. Standards for Internal Control in the Federal Government states that management should establish the organizational structure necessary to achieve its objectives and periodically evaluate this structure. Treasury has not coordinated member agency efforts to better understand the staffing levels needed to complete the current and future workload associated with core functions of the committee. Despite figures decreasing in one year, overall, the number of covered transactions that CFIUS reported it reviewed increased from 111 transactions in 2011 to 172 transactions in 2016, or almost 55 percent (see table 1). In 2017, CFIUS reviewed 238 transactions, according to Treasury officials. According to member agency officials, the increased volume of covered transactions resulted in increased work for all CFIUS members, no matter which agency is the co-lead, because each member agency must review each transaction notified to the committee. The number of reported covered transactions requiring national security investigations almost doubled during this same period, increasing from 40 transactions in 2011 to 79 transactions in 2016. Treasury officials told us that they estimated that the total number of transactions that proceeded to national security investigations was greater in 2017 than it was in 2016. They said that the increase in the number of covered transactions that require a national security investigation is another indication that the committee’s workload has increased. One Treasury official noted that the number of times that parties withdraw and resubmit transactions can increase the workload of the committee as it must review the transaction each time it is submitted. Additionally, the number of reported covered transactions that include mitigation measures has increased. Each year, CFIUS places mitigation measures on a relatively small number of covered transactions. For example, according to Treasury officials, 18 (roughly 10 percent) of 172 transactions the committee reviewed in 2016 resulted in mitigation measures. According to member agency officials, mitigation measures rarely expire; thus, the number of these measures increases over time, as does the accompanying workload for co-lead agencies tasked with overseeing the measures. Officials from CFIUS member agencies stated that the complexity of CFIUS reviews in terms of technology, transaction structure, and national security concerns has increased in recent years. They said that additional time and staff have been required to address this rise in complexity and to complete these reviews. For instance, one member agency official told us that reviews of transactions from parties whose companies use new and emerging technologies, such as artificial intelligence and robotics, typically require input from agency subject matter experts to help the committee understand how, if at all, the acquisition of these technologies by foreign parties could create national security concerns. According to member agency officials, the amount of time and number of staff needed to review a transaction can fluctuate greatly based on, among other things, the technology involved. One agency official said that 6 of their employees, on average, are involved in reviewing a less complex transaction, but up to 15 employees may be necessary to complete the review if the technology involved is more complicated. The number of agency staff involved can increase further if senior level management is required to participate in the review. This official also stated that most of the transactions reviewed in the past were from sectors that agency officials were familiar with and involved more predictable issues, but recently, transactions more frequently involved complex technology, which required additional expertise. Officials from another member agency stated that a majority of their staff involved in reviewing transactions do not have CFIUS as a primary duty and that their agency has reallocated resources to address the increased case load. One Treasury official stated that one case was so complex that it required one staff member to dedicate all of their time to its review, and the other responsibilities of this employee had to be shifted to other members of the staff. Additionally, according to member agency officials, reviews of transactions involving technologies the government frequently uses have increased, requiring additional time and staff to understand how this technology affects various agencies. For instance, member agency officials said that reviewing transactions involving semiconductors, which are commonly used in an array of products used by the government, typically requires additional time and staff because CFIUS member agencies must understand, among other things, how the approval of a transaction could affect systems across government agencies. According to CFIUS member agency officials, the structures of the transactions the committee reviews have also become more complex, requiring more time and staff to assess. For example, business arrangements—such as complex corporate arrangements, joint ventures, loan arrangements, nondisclosure agreements, and memoranda of understanding—may require the work of additional staff. Treasury officials also stated that these arrangements can make it more difficult to determine whether the transaction is covered by CFIUS authorities, as there may be commercial relationships that affect the parties’ decision- making. According to Treasury officials, such arrangements can also increase the complexity of the national security review, as they may create additional “indirect threats” that must also be analyzed. Member agency officials explained that it has become more challenging to identify the ultimate beneficial owners—the persons who ultimately own and control a company—due to the structure of the transaction. According to Treasury officials, in certain countries, it can be difficult to distinguish between control by a private entity and control by a state entity due to the various relationships created by the transaction structure. In these cases, CFIUS often requires additional information from the parties in such transactions before the national security review can begin. Member agency officials stated that they had been encountering these arrangements more frequently, and additional time and staff had been required to examine the national security implications of these transactions. Finally, the nature of the national security concerns the committee considers has expanded beyond the traditional threats, requiring more time and staff to assess them, according to member agency officials. National security concerns include traditional ones, such as threats to U.S. critical infrastructure. Emerging concerns include the possibility of a foreign entity obtaining access to personally identifiable information that, if disclosed, could be exploited for purposes that have national security consequences or the proximity of property to areas considered sensitive by the U.S. government. According to agency officials, the number of staff assigned to CFIUS activities has not kept pace with the increase in covered transactions reviewed by CFIUS. According to one Treasury official, the more an agency is required to act as co-lead, the more time and staff are needed of the agency. After Treasury, which acts as co-lead on every review, the Departments of Defense (DOD), Energy (DOE), and Homeland Security (DHS) acted as co-lead on the largest number of CFIUS reviews in 2016 (see table 2). According to information provided by member agency officials, CFIUS saw a modest increase in staff assigned to CFIUS activities since 2011, with Treasury, DOD, DOE, DHS, and State adding a few staff, while staffing levels did not rise at the other member agencies. The total number of staff assigned to CFIUS activities increased from 82 in 2011 to 91 in 2016, an increase of 11 percent. During that same period, covered transactions reviewed by CFIUS increased from 111 transactions in 2011 to 172 transactions in 2016, an increase of almost 55 percent (see fig. 3). Member agency officials stated that the number of staff assigned to work on CFIUS activities may fluctuate throughout the year based on the committee’s work. For example, as previously discussed, CFIUS member agencies may rely on experts with other responsibilities throughout each agency to provide assistance with the review as the need arises. For instance, in fiscal year 2016, DOE had four staff dedicated to CFIUS, but one DOE official said he reaches out to relevant subject matter experts, who have other responsibilities, to provide input on transactions within their area of expertise. Treasury officials stated that staff have been able to review the number of transactions that have been voluntarily notified to CFIUS to date. One Treasury official said that, despite the increase in the number of transactions reviewed by CFIUS, the committee has almost always provided a determination to the parties within the timeframes required as to whether the covered transaction should be allowed to proceed or blocked by the President. Further, Treasury officials stated that despite staff constraints, CFIUS has, as needed, appropriately mitigated the national security concerns for the transactions the committee has approved. However, several member agency officials and external experts expressed concerns that, due to staff constraints, CFIUS member agencies were limited in their ability to complete other CFIUS functions, such as monitoring mitigation measures and identifying non-notified transactions. First, the time and staff necessary to monitor mitigation measures varies. For instance, according to one member agency official, some mitigation measures require daily monitoring from officials, while other mitigation measures require only the review of an annual report submitted by parties to the transaction. Several member agency officials acknowledged that they have fewer staff than they would like to devote to monitoring mitigation measures. Second, these member agency officials also said that they are not able to devote the amount of time they would like to the task of identifying non- notified transactions. CFIUS member agencies review data on mergers and acquisitions to identify non-notified transactions of concern, those that have not been notified to CFIUS for review. In recent years, according to agency officials, CFIUS has seen an increase in the number of non-notified transactions CFIUS could potentially review. One official indicated that in 2016, their agency examined 2,683 potential non-notified transactions, an increase of roughly 38 percent from 2014. Member agency officials stated that because non-notified transactions are frequently reviewed after the acquisition has been completed, the process of mitigating potential national security concerns of non-notified transactions can be difficult. Several member agency officials suggested that they would like to devote more time to examining non-notified transactions, but staff constraints limit the amount of time agencies can spend conducting this task. Several member agency officials said that they do not know if current staffing levels would be able to address a further increase in CFIUS workload. Treasury officials noted that the volume of transactions reviewed by CFIUS will likely continue to increase. Moreover, congressional bills have been introduced that, if enacted, would alter the CFIUS process. As discussed later in this report, agency officials stated that some of these potential changes would likely further increase CFIUS workload. According to several CFIUS member agency officials, if the CFIUS workload were to increase, additional staff would likely be necessary to complete committee functions, such as identifying non- notified transactions and monitoring mitigation measures. Officials from two member agencies also expressed concerns about their ability to review transactions that have been notified to the committee if the volume of CFIUS notices increased. According to Treasury officials, CFIUS does not have a centralized budget, and Treasury does not have authority to determine CFIUS staffing levels at committee member agencies. Treasury officials stated that they have taken steps, in coordination with the Office of Management and Budget (OMB), to collect data from the member agencies on current staffing levels expended on CFIUS core functions but have not established timeframes for this data collection. Standards for Internal Control in the Federal Government states that management should establish the organizational structure necessary to achieve its objectives and periodically evaluate this structure. Treasury officials stated that they have conducted an assessment of Treasury’s staffing needs and have encouraged other agencies to do the same. However, Treasury, as CFIUS lead, has not coordinated member agencies’ efforts to better understand the staffing levels needed to address the current and future CFIUS workload associated with core committee functions, such as identifying and reviewing non-notified transactions. Without this information, CFIUS may be limited in its ability to fulfill its objectives and address threats to the national security of the United States. Officials from CFIUS member agencies (voting and nonvoting) and selected nonmember participant agencies, as well as external experts, expressed a range of views on the potential benefits and drawbacks to possible changes to CFIUS. In our interviews with them, these stakeholders discussed a variety of possible changes to CFIUS that we organized into three categories: (1) altering the structure of CFIUS, (2) redefining which merger and acquisition transactions should be considered for CFIUS review, and (3) expanding the list of factors CFIUS considers as it evaluates the impacts of a foreign transaction on national security. For the most part, CFIUS member agencies and nonmember participant agencies stated that the existing structure is working effectively and described drawbacks to potential changes, such as changing membership or voting rights. Perspectives among agency officials and external experts varied on the potential effects of redefining which transactions should be considered for review, such as requiring CFIUS to review all covered transactions. Agency officials and external experts described a range of potential effects of expanding the list of factors CFIUS considers. They generally stated that including a net economic benefit test in the review, for example, would not be beneficial. Many officials and external experts agreed that one potential drawback of many of the possible changes is a likely increase to the CFIUS workload, generating concerns about the committee’s capacity to complete its core functions. In general, officials from member and nonmember agencies participating in CFIUS were satisfied with the structure of the committee. Possible changes, which would affect the way CFIUS is organized and does its work, include changes to the chairmanship of CFIUS, changes to the voting membership of CFIUS (adding new voting members and giving voting rights to current nonvoting members), and changes to the timeframes under which CFIUS works. However, for the most part, CFIUS member agencies and nonmember participant agencies reported that the existing structure works effectively. See tables 3, 4, 5, and 6 for details on the perspectives expressed on these changes. Member agency officials and external experts offered a range of views about the effects of changes to the types of transactions reviewed by CFIUS. Possible changes, which would affect which merger and acquisition transactions would be considered for CFIUS review, include changes to the definition of a covered transaction and changing the voluntary notification process to make review of all or some covered transactions mandatory. Stakeholders we spoke with identified benefits and drawbacks to each of these changes. Many stakeholders agreed that one potential drawback of these possible changes is a likely increase to the CFIUS workload. See tables 7, 8, and 9 for details on the perspectives expressed. Member agency officials and external experts were generally satisfied with the list of factors CFIUS currently considers when it reviews foreign transactions and offered a variety of opinions on the effects of changes to them. Possible changes include expanding the statutory national security factors to be considered and introducing an economic impact assessment. Stakeholders we spoke with identified benefits and drawbacks to each of these changes. See tables 10 and 11 for details on the perspectives expressed. The United States maintains an open investment climate that recognizes the benefits of foreign investment to its economy. CFIUS reviews certain foreign acquisitions, mergers, or takeovers of U.S. businesses to determine the effect of the transaction on the national security of the United States. The increased number of covered transactions notified to CFIUS and the complexity of these cases compared with the modest increase in the number of people assigned to reviewing them have, according to member agency officials, taxed the staff of CFIUS member agencies. Member agency officials and external experts have expressed particular concern that CFIUS member agencies were limited in their ability to complete core functions, such as identifying non-notified transactions and monitoring mitigation measures. At the same time, congressional bills have been introduced proposing changes to FINSA that could increase the committee’s workload. Officials from Treasury and other member agencies are aware of pressures on their CFIUS staff given the current workload and have expressed concerns about possible workload increases. Treasury and OMB have begun to collect information from agencies on their current CFIUS staffing levels. This is a crucial first step that could facilitate a better understanding for both the committee and Congress of the current staffing levels across the committee’s organizational structure. However, Treasury, as CFIUS lead, has not coordinated member agency efforts to assess the current and future staffing levels needed to complete the committee’s core functions. Without attaining an understanding of the staffing levels needed to address the current and future CFIUS workload, particularly if legislative changes to CFIUS’s authorities further expand its workload, CFIUS may be limited in its ability to fulfill its objectives and address threats to the national security of the United States. The Secretary of the Treasury, as the chair of CFIUS, and working with member agencies, should coordinate member agencies’ efforts to better understand the staffing levels needed to address the current and projected CFIUS workload associated with core committee functions. (Recommendation 1) We provided a draft of this report for review and comment to the Departments of Agriculture, Commerce, Defense, Energy, Health and Human Services, Homeland Security, Justice, Labor, State, and the Treasury as well as the Offices of the U.S. Trade Representative, Science and Technology Policy, and the Director of National Intelligence, and the Federal Communications Commission. We also provided a draft to the Office of Management and Budget. Treasury provided written comments, which are reproduced in appendix V. In its comments, Treasury stated that it is working with OMB to determine current resource levels across the CFIUS member agencies and has encouraged agencies to assess their staffing needs. Treasury also stated that it generally concurred with the draft report’s recommendation to “conduct an assessment to better understand staffing levels needed to address the current and projected CFIUS workload.” However, Treasury noted that CFIUS does not have a centralized budget, and Treasury does not have the authority over CFIUS staffing levels at member agencies. We acknowledge Treasury’s points and, therefore, we modified the report and clarified the recommendation to focus on Treasury’s coordination role, since, as we note in the report, Treasury is responsible for coordinating the operations of the committee and communicating on the committee’s behalf with the parties, members of Congress, and the general public. Treasury stated in an email that the clarifications to the recommendation address the point raised in its comment letter. USDA also provided written comments, reproduced in appendix VI. In its comments, USDA stated that it generally agreed with the findings in GAO’s draft report. The letter further noted that USDA is satisfied with Treasury’s willingness to include USDA in cases related to food and agriculture and is comfortable continuing to work as a non-voting member of CFIUS. The Departments of Commerce, Homeland Security, State, Treasury, and the Offices of the U.S. Trade Representative and Science and Technology Policy provided written technical comments, which we incorporated as appropriate. The Departments of Defense, Energy, Health and Human Services, Justice, Labor, the Office of the Director of National Intelligence, and the Federal Communications Commission indicated via email that they did not have comments. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Departments of Agriculture, Commerce, Defense, Energy, Health and Human Services, Homeland Security, Justice, Labor, State, and the Treasury as well as the Offices of the U.S. Trade Representative, Science and Technology Policy, and the Director of National Intelligence, and the Federal Communications Commission. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact Kimberly Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov or Marie A. Mak at (202) 512-2527 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. This report (1) examines changes in the Committee on Foreign Investment in the United States’ (CFIUS) workload and staffing from 2011 through 2016, and (2) provides information on stakeholder views on potential changes to CFIUS. To address these objectives, we reviewed relevant laws, executive orders, and regulations. We interviewed officials from each CFIUS voting member agency, including the Departments of Commerce, Defense, Energy, Homeland Security, Justice, State, and the Treasury as well as the Offices of the U.S. Trade Representative and Science and Technology Policy. We also interviewed officials from the two nonvoting ex officio members, the Office of the Director of National Intelligence and the Department of Labor. In addition, we interviewed officials from nonmember agencies that have CFIUS case-related expertise, including the Departments of Agriculture and Health and Human Services, and the Federal Communications Commission. To examine the changes in CFIUS workload and staffing levels over the past 5 years, we analyzed information on workload and staffing levels at the voting member agencies from 2011 through 2016, the most recent information available at the time of our review. We also reviewed the 2014 and 2015 CFIUS annual reports. In addition, we interviewed officials from the nine CFIUS voting member agencies about their workload and staffing levels; any changes in the volume, types, and complexity of transactions reviewed by CFIUS; and their ability to complete the core functions of the committee. We requested information from the 9 CFIUS voting member agencies on the number of staff assigned to CFIUS more than 50 percent of their time. To collect information on stakeholder views on potential changes to CFIUS, we conducted individual semi-structured interviews with selected stakeholders, which consisted of officials from the nine CFIUS voting member agencies, the two ex officio nonvoting member agencies, and three selected nonmember agencies that have CFIUS case-related expertise, as well as with external experts. To identify external experts, we asked stakeholders to recommend other stakeholders we should speak with (i.e., snowball sampling). From our list of potential stakeholders, we selected 16 external experts, including former government officials, lawyers who represent parties with transactions notified to CFIUS, and representatives from industry associations and think tanks. In our interviews, we collected views and information on the challenges that CFIUS faces, options for addressing the challenges, and the possible benefits and drawbacks of these options. The information obtained from these stakeholders cannot be generalized across all stakeholders; however, these stakeholders provided insights into the possible effects of implementing certain changes to CFIUS. We conducted this performance audit from December 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Characteristics of Transactions Reviewed by the Committee on Foreign Investment in the United States (CFIUS) CFIUS reviews covered transactions from a large variety of industries, but the largest number of transactions reviewed come from the manufacturing sector. In 2016, the manufacturing sector represented approximately 42 percent of the 172 covered transactions reviewed by CFIUS and, in recent years, the number of transactions reviewed from that sector has increased from 49 transactions in 2011 to approximately 72 transactions in 2016. Computer and electronic transactions, such as those by companies that produce semiconductor technology, accounted for approximately 32 of the 72 covered transactions from the manufacturing sector that CFIUS reviewed in 2016. For instance, in 2016, CFIUS reviewed the potential acquisition of Aixtron, a Germany-based semiconductor firm with assets in the United States, by the Chinese firm Fujian Grand Chip Investment Fund. That year, the President chose to prohibit the acquisition of the U.S. business of Aixtron upon determining that the foreign purchasers might take action that threatens to impair the national security of the United States in exercising control of the U.S. business of Aixtron. Treasury, as the chair of CFIUS, stated in a press release that the national security risks posed by the transaction related to, among other things, a Chinese firm obtaining the company’s body of knowledge and experience. Transactions from the manufacturing sector involve a variety of other industries, including textiles, chemicals, and food manufacturing. For example, in 2013, according to a report from the U.S.-China Economic and Security Review Commission, CFIUS reviewed the acquisition of Smithfield Foods Inc., for $7.1 billion, by China’s Shuanghui International Holdings Ltd. A letter submitted by members of the Senate Agriculture Committee raised concerns that the transaction posed a threat to the nation’s food security; however, according to Security and Exchange Commission filings, CFIUS ultimately completed its investigation and cleared the transaction to proceed. Acquisitions by Chinese-owned companies accounted for the largest number of covered transactions reviewed by CFIUS from 2014 through 2016. According to CFIUS, the number of covered transactions the committee reviewed from China has increased substantially in recent years, from 10 transactions in 2011 to 67 in 2016. In previous years, companies from the United Kingdom were party to the largest share of covered transactions submitted for CFIUS review; however, from 2013 through 2015, parties from the United Kingdom and Canada submitted the second and third largest number of notices. Forty-four percent of all covered transactions reviewed by the committee during this time period involved companies from China, the United Kingdom, or Canada. Appendix III: Factors to Determine Whether Submitted Transactions Pose a National Security Risk The potential effects of the transaction on the domestic production needed for projected national defense requirements. The potential effects of the transaction on the capability and capacity of domestic industries to meet national defense requirements, including the availability of human resources, products, technology, materials, and other supplies. The potential effects of a foreign person’s control of domestic industries and commercial activity on the capability and capacity of the United States to meet the requirements of national security. The potential effects of the transaction on U.S. international technological leadership in areas affecting U.S. national security. The potential national security-related effects on U.S. critical technologies. The potential effects on the long-term projection of U.S. requirements for sources of energy and other critical resources and material. The potential national security-related effects of the transaction on U.S. critical infrastructure, including critical physical infrastructure such as major energy assets. The potential effects of the transaction on the sales of military goods, equipment, or technology to countries that present concerns related to terrorism; missile proliferation; chemical, biological, or nuclear weapons proliferation; or regional military threats. The potential that the transaction presents for transshipment or diversion of technologies with military applications, including the relevant country’s export control system. Whether the transaction could result in the control of a U.S. business by a foreign government or by an entity controlled by or acting on behalf of a foreign government. The relevant foreign country’s record of adherence to nonproliferation control regimes and record of cooperating with U.S. counterterrorism efforts. Other factors that the President or the committee may determine to be appropriate, generally or in connection with a specific review or investigation. Department of the Treasury (Chair) Kimberly M. Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov. Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition to the contacts named above, Christine Broderick (Assistant Director), Christina Werth (Analyst-in-Charge), Anthony Costulas, Scott Purdy, Kendal Robinson, Lynn Cothern, Grace Lui, Justin Fisher, and Neil Doherty contributed to this report.", "summary": "The United States economy has historically been the largest recipient of foreign direct investment in the world—receiving $373 billion in 2016, according to U.S. government statistics. Ensuring that these foreign investments do not harm national security can be a challenge. CFIUS is an interagency group that reviews transactions under its authority—certain foreign acquisitions or mergers of U.S. businesses—to determine their effects on U.S. national security, while maintaining an open investment climate. If CFIUS identifies concerns, it may work with parties to the transaction to mitigate them. In rare cases, CFIUS may recommend that the President block or suspend a transaction. GAO was asked to review the CFIUS process and possible changes to that process. This report (1) examines changes in CFIUS's workload and staffing from 2011 through 2016, and (2) provides information on stakeholder views on potential changes to CFIUS. GAO analyzed CFIUS information on staffing levels and transactions reviewed, and interviewed officials from member agencies, selected nonmember agencies that have CFIUS-related expertise, and knowledgeable external experts, such as think tanks. states that management should establish the organizational structure necessary to achieve its objectives and periodically evaluate this structure. Treasury—the agency that leads CFIUS— has not coordinated member agencies' efforts to better understand the staffing levels needed to address the current and future workload associated with core functions of the committee. Without this information, CFIUS may be limited in its ability to fulfill its objectives and address national security concerns. Officials from CFIUS member agencies and selected nonmember agencies, as well as external experts, expressed a range of views on the potential benefits and drawbacks to possible changes to CFIUS. GAO organized the possible changes into three categories: (1) altering the structure of CFIUS, (2) redefining which transactions should be considered for CFIUS review, and (3) expanding the factors CFIUS considers when evaluating the impacts of a foreign transaction on national security. Agency officials were generally satisfied with CFIUS' structure, such as the committee's chair and membership. Views among officials and experts varied on redefining which transactions should be considered for review, such as requiring CFIUS to review all transactions covered by its authority regardless of notification. Officials and experts generally did not support expanding the list of national security factors CFIUS considers, such as by adding a net economic benefit test. Agency officials and experts agreed that one trade-off related to some possible changes is a likely increase to the CFIUS workload, which they noted is already straining agencies' staff resources. Treasury, as CFIUS lead, should coordinate member agencies' efforts to better understand the staffing levels needed to address the current and projected CFIUS workload associated with core committee functions. Treasury concurred.", "document_type": "gao"}
{"report": "SSA’s mission is to deliver Social Security services that meet the changing needs of the public. The Social Security Act and amendments established three programs that the agency administers: Old-Age and Survivors Insurance provides monthly retirement and survivors benefits to retired and disabled workers, their spouses and their children, and the survivors of insured workers who have died. SSA has estimated that, in fiscal year 2019, $892 billion in old-age and survivors insurance benefits are expected to be paid to a monthly average of approximately 54 million beneficiaries. Disability Insurance provides monthly benefits to disabled workers and their spouses and children. The agency estimates that, in fiscal year 2019, a total of approximately $149 billion in disability insurance benefits will be paid to a monthly average of about 10 million eligible workers. Supplemental Security Income is a needs-based program financed from general tax revenues that provides benefits to aged adults, blind or disabled adults, and children with limited income and resources. For fiscal year 2019, SSA estimates that nearly $59 billion in federal benefits and state supplementary payments will be made to a monthly average of approximately 8 million recipients. SSA relies heavily on its IT resources to support the administration of its programs and related activities. For example, its systems are used to handle millions of transactions on the agency’s website, maintain records for the millions of beneficiaries and recipients of its programs, and evaluate evidence and make determinations of eligibility for benefits. According to the agency’s most recent Information Resources Strategic Plan, its systems supported the processing of an average daily volume of about 185 million individual transactions in fiscal year 2015. SSA’s Office of the Deputy Commissioner for Systems is responsible for developing, overseeing, and maintaining the agency’s IT systems. Comprised of approximately 3,800 staff, the office is headed by the Deputy Commissioner, who also serves as the agency’s CIO. SSA has long been challenged in its management of IT. As a result, we have previously issued a number of reports highlighting various weaknesses in the agency’s system development practices, governance, requirements management, and strategic planning, among other areas. Collectively, our reports stressed the need for the agency to strengthen its IT management controls. In 2016, we reported that SSA’s acting commissioner had stated that the agency’s aging IT infrastructure was not sustainable because it was increasingly difficult and expensive to maintain. Accordingly, the agency requested $132 million in its fiscal year 2019 budget to modernize its IT environment. As reflected in the budget, these modernization efforts are expected to include projects such as updating database designs by converting them to relational databases, eliminating the use of outdated code, and upgrading infrastructure. Among the agency’s priority IT spending initiatives in the budget is its Disability Case Processing System, which has been under development since December 2010. This system is intended to replace the 52 disparate Disability Determination Services’ component systems and associated processes with a modern, common case processing system. According to SSA, the new system is to modernize the entire claims process, including case processing, correspondence, and workload management. However, SSA has reported substantial difficulty in the agency’s ability to carry out this initiative, citing software quality and poor system performance as issues. Consequently, in June 2016, the Office of Management and Budget (OMB) placed the initiative on its government- wide list of 10 high-priority programs requiring attention. As previously mentioned, Congress enacted federal IT acquisition reform legislation (commonly referred to as FITARA) in December 2014. This legislation was intended to improve agencies’ acquisitions of IT and enable Congress to monitor agencies’ progress and hold them accountable for reducing duplication and achieving cost savings. It includes specific requirements related to seven areas: (1) agency CIO authority enhancements, (2) federal data center consolidation initiative, (3) enhanced transparency and improved risk management, (4) portfolio review, (5) IT acquisition cadres, (6) government-wide software purchasing program, and (7) the Federal Strategic Sourcing Initiative. In June 2015, OMB released guidance describing how agencies are to implement FITARA. The guidance identifies a number of actions that agencies are to take to establish a basic set of roles and responsibilities (referred to as the common baseline) for CIOs and other senior agency officials and, thus, to implement the authorities described in the law. More recently, on May 15, 2018, the President signed Executive Order 13833, Enhancing the Effectiveness of Agency Chief Information Officers. Among other things, this executive order is intended to better position agencies to modernize their technology, execute IT programs more efficiently, and reduce cybersecurity risks. The order pertains to 22 of the 24 Chief Financial Officers Act agencies; the Department of Defense and the Nuclear Regulatory Commission are exempt. For the covered agencies, including SSA, the executive order strengthens the role of the CIO by, among other things, requiring the CIO to report directly to the agency head; to serve as the agency head’s primary IT strategic advisor; and to have a significant role in all management, governance, and oversight processes related to IT. In addition, one of the cybersecurity requirements directs agencies to ensure that the CIO works closely with an integrated team of senior executives, including those with expertise in IT, security, and privacy, to implement appropriate risk management measures. In June 2018, we issued a report that examined the cybersecurity workforce of the government. We noted that most of the 24 agencies we examined had developed baseline assessments to identify cybersecurity personnel within their agencies that held certifications, but the results were potentially unreliable. However, SSA’s baseline was found to be reliable because it addressed all of the reportable information, such as the extent to which personnel without professional certifications were ready to obtain them or strategies for mitigating any gaps. Further, we found that most of the 24 agencies had established procedures to assign cybersecurity codes to positions, including SSA. We also have ongoing work at SSA, including reviewing its cybersecurity workforce; standardized approach to security assessment, authorization, and continuous monitoring; cybersecurity strategy; and intrusion detection and prevention capabilities. From July 2011 through January 2018, we issued a number of reports that addressed specific weaknesses in SSA’s management of IT acquisitions and operations and in the role of its CIO. These reports included 15 recommendations aimed at improving the agency’s efforts with regard to data center consolidation, incremental development, IT acquisitions, and software licenses. We also made a recommendation to SSA to address weaknesses related to the role of the CIO in key management areas. SSA has taken steps to improve its management of IT acquisitions and operations by addressing 14 of the 15 recommendations that we previously directed to the agency regarding data center consolidation, incremental development, IT acquisitions, and software licenses. Data center consolidation. OMB established the Federal Data Center Consolidation Initiative in February 2010 to improve the efficiency, performance, and environmental footprint of federal data center activities. The enactment of FITARA in 2014 codified and expanded the initiative. In addition, pursuant to FITARA, in August 2016, the Federal CIO issued a memorandum that announced the Data Center Optimization Initiative as a successor effort to the Federal Data Center Consolidation Initiative. Further, in August 2016, OMB released guidance which established the Data Center Optimization Initiative and included instructions on how to implement the date center consolidation and optimization provisions of FITARA. Among other things, the guidance required agencies to consolidate inefficient infrastructure, optimize existing facilities, improve their security posture, and achieve cost savings. In addition, the guidance directed agencies to develop a data center consolidation and optimization strategic plan that defines the agency’s data center strategy for fiscal years 2016, 2017, and 2018. This strategy is to include, among other things, a statement from the agency CIO indicating whether the agency has complied with all data center reporting requirements in FITARA. Further, the guidance indicates that OMB is to maintain a public dashboard to display consolidation-related cost savings and optimization performance information for the agencies. In a series of reports that we issued from July 2011 through August 2017, we noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in agencies’ data center consolidation plans and data center optimization efforts. Specifically with regard to SSA, in 2011, we reported that the agency had an incomplete consolidation plan and inventory of IT assets. In 2016, we reported that SSA did not meet any of the seven applicable data center optimization targets, as required by OMB. In addition, in 2017, we reported that the agency had an incomplete data center optimization plan. We stressed that until SSA completed these required activities, it might not be able to consolidate data centers, as required, and realize expected savings. We made a total of four recommendations to SSA in our 2011, 2016, and 2017 reports to help improve the agency’s reporting of data center-related cost savings and to achieve data center optimization targets. As of September 2018, SSA had implemented all four recommendations. Consequently, the agency is better positioned to improve the efficiency of its data centers and achieve cost savings. In addition, we reported in May 2018 that the agencies participating in the Data Center Optimization Initiative had communicated mixed progress toward achieving OMB’s goals for closing data centers by September 2018. With regard to SSA, we noted that the agency had not yet achieved its planned savings but that its data centers were among the most optimized that we reviewed. In particular, while SSA reported that it planned to save $1.08 million on its data center initiative from 2016 through 2018, it had not achieved any of those savings. However, the agency reported having met the goal of closing 25 percent of its tiered data centers. Further, SSA reported the most progress among the 22 applicable agencies in meeting OMB’s data center optimization targets. Specifically, SSA reported that it had met four of the five targets. (One other agency reported that it had met three targets, 6 agencies reported having met either one or two targets, and 14 agencies reported meeting none of the targets). Consequently, we did not make any additional recommendations to SSA in our May 2018 report. We also have ongoing work involving SSA related to agencies’ progress on closing data center and achieving optimization targets. Incremental development. OMB has emphasized the need to deliver investments in smaller parts, or increments, in order to reduce risk, deliver capabilities more quickly, and facilitate the adoption of emerging technologies. In 2010, it called for agencies’ major investments to deliver functionality every 12 months and, since 2012, every 6 months. Subsequently, FITARA codified a requirement that covered agency CIOs certify that IT investments are adequately implementing incremental development, as defined in the capital planning guidance issued by OMB. Further, subsequent OMB guidance on the law’s implementation, issued in June 2015, directed agency CIOs to define processes and policies for their agencies to ensure that they certify that IT resources are adequately implementing incremental development. In November 2017, we reported that 21 agencies, including SSA, needed to improve their certification of incremental development. We pointed out that, as of August 2016, agencies had reported that 103 of 166 major IT software development investments (62 percent) were certified by the agency CIO for implementing adequate incremental development in fiscal year 2017, as required by FITARA. With regard to SSA, we noted that only 3 of the agency’s 10 investments primarily in development had been certified by the agency CIO as using adequate incremental development, as required by FITARA. In addition, we noted that SSA’s incremental development certification policy did not describe the CIO’s role in the certification process or how CIO certification would be documented. However, accurate agency CIO certification of the use of adequate incremental development for major IT investments is critical to ensuring that agencies are making the best effort possible to create IT systems that add value while reducing the risks associated with low-value and wasteful investments. As a result of these findings, we recommended that SSA ensure that its CIO (1) reports major IT investment information related to incremental development accurately, in accordance with OMB guidance; and (2) updates the agency’s policy and processes for the certification of incremental development and confirm that the policy includes a description of how the CIO certification will be documented. SSA agreed with our recommendations and implemented both of them. Thus, the agency should be better positioned to realize the benefits of incremental development practices, such as reducing investment risk, delivering capabilities more rapidly, and permitting easier adoption of emerging technologies. IT acquisitions. FITARA includes a provision to enhance covered agency CIOs’ authority through, among other things, requiring agency heads to ensure that CIOs review and approve IT contracts. OMB’s FITARA implementation guidance expanded upon this aspect of the legislation in a number of ways. Specifically, according to the guidance, CIOs may review and approve IT acquisition strategies and plans, rather than individual IT contracts, and CIOs can designate other agency officials to act as their representatives. In January 2018, we reported that most of the CIOs at 22 selected agencies, including SSA, were not adequately involved in reviewing and approving billions of dollars of IT acquisitions. In particular, we found that SSA’s process to identify IT acquisitions for CIO review did not involve the acquisition office, as required by OMB. In addition, we noted that SSA had a CIO review and approval process in place that fully satisfied the requirements set forth in OMB’s guidance. However, while SSA provided evidence of the CIO’s review of most of the IT contracts we examined, the agency had not ensured that the CIO or a designee reviewed and approved each IT acquisition plan or strategy. Specifically, of 10 randomly selected IT contracts that we examined at SSA, 7 acquisitions associated with those contracts had been reviewed and approved, as required by OMB. We pointed out that, until SSA ensured that its CIO or designee reviewed and approved all IT acquisitions, the agency would have limited visibility and input into its planned IT expenditures and would not be effectively positioned to benefit from the increased authority that FITARA’s contract approval provision is intended to provide. Further, the agency could miss an opportunity to strengthen the CIO’s authority and the oversight of IT acquisitions—thus, increasing the potential to award IT contracts that are duplicative, wasteful, or poorly conceived. Accordingly, we made three recommendations to SSA to address these weaknesses. As of September 2018, the agency had made progress by implementing two of the recommendations: to ensure that (1) the acquisition office is involved in identifying IT acquisitions and (2) the CIO or designee reviews and approves IT acquisitions according to OMB guidance. By taking these actions, SSA should be better positioned to properly identify and provide oversight of IT acquisitions. However, SSA has not yet implemented our third recommendation that it issue guidance to assist in the identification of IT acquisitions. SSA stated that, in September 2017, it updated its policy for acquisition plan approval to address this recommendation; however, upon review of this policy, we did not find guidance for identifying IT acquisitions. Without the proper identification of IT acquisitions, SSA’s CIO cannot effectively provide oversight of these acquisitions. Software licenses. Federal agencies engage in thousands of software licensing agreements annually. The objective of software license management is to manage, control, and protect an organization’s software assets. Effective management of these licenses can help avoid purchasing too many licenses, which can result in unused software, as well as too few licenses, which can result in noncompliance with license terms and cause the imposition of additional fees. As part of its PortfolioStat initiative, OMB has developed policy that addresses software licenses. This policy requires agencies to conduct an annual, agency-wide IT portfolio review to, among other things, reduce commodity IT spending. Such areas of spending could include software licenses. In May 2014, we reported on federal agencies’ management of software licenses and determined that better management was needed to achieve significant savings government-wide. Of the 24 agencies we reviewed, SSA was 1 of 22 that lacked comprehensive policies that incorporated leading practices. In particular, SSA’s policy partially met four of the leading practices and did not meet one. Further, we noted that SSA was among 22 of the 24 selected agencies that had not established comprehensive software license inventories—a leading practice that would help the agencies to adequately manage their software licenses. As such, we made six recommendations to SSA to improve its policies and practices for managing software licenses. These included recommendations that the agency develop a comprehensive policy for the management of software licenses and establish a comprehensive inventory of software licenses. SSA agreed with the recommendations and, as of September 2018, had implemented all six of them. As a result, the agency should be better positioned to manage its software licenses and identify opportunities for reducing software license costs. While SSA has taken steps that improved its IT management in the areas of data center consolidation, incremental development, IT acquisitions, and software licenses, we reported in August 2018 that the agency had not fully addressed the role of the CIO in its policies. As previously mentioned, FITARA and the President Executive Order 13833, among other laws and guidance, outline the roles and responsibilities for agency CIOs in an attempt to improve the government’s performance in IT and related information management functions. Within these laws and guidance, we identified IT management responsibilities assigned to CIOs in six key IT areas: Leadership and accountability. CIOs are responsible and accountable for the effective implementation of IT management responsibilities. For example, CIOs are to report directly to the agency head or that official’s deputy and designate a senior agency information security officer. Strategic planning. CIOs are required to lead the strategic planning for all IT management functions. An example of a CIO requirement related to the strategic planning area is measuring how well IT supports agency programs and reporting annually on the progress in achieving the goals. IT workforce. CIOs are to assess agency IT workforce needs and develop strategies and plans for meeting those needs. For example, CIOs are responsible for annually assessing the extent to which agency personnel meet IT management knowledge and skill requirements, developing strategies to address deficiencies, and reporting to the head of the agency on the progress made in improving these capabilities. IT budgeting. CIOs are responsible for the processes for all annual and multi-year IT planning, programming, and budgeting decisions. For example, CIOs are to have a significant role in IT planning, programming, and budgeting decisions. IT investment management. CIOs are to manage, evaluate, and assess how well the agency is managing its IT resources. In particular, CIOs are required to improve the management of the agency’s IT through portfolio review. Information security. CIOs are to establish, implement, and ensure compliance with an agency-wide information security program. For example, CIOs are required to develop and maintain an agency-wide security program, policies, procedures, and control techniques. In our August 2018 report, we noted that SSA, along with 23 other agencies, did not have policies that fully addressed the role of the CIO in these six key areas, consistent with the laws and guidance. To its credit, SSA had fully addressed the role of the CIO in the IT leadership and accountability area. In particular, the agency’s policies addressed the requirements that the CIO report directly to the agency head, assume responsibility and accountability for IT investments, and designate a senior agency information security officer. However, the policies did not fully address the role of the CIO in the other five areas (i.e., strategic planning, workforce, budgeting, investment management, and information security). For example, the agency’s policies did not address the IT workforce area at all, including the requirements that the CIO annually assess the extent to which agency personnel meet IT management knowledge and skill requirements, develop strategies to address deficiencies, and report to the head of the agency on the progress made in improving these capabilities. Further, SSA’s policies minimally addressed the requirements for IT strategic planning. Specifically, while the agency’s policies required the CIO to establish goals for improving agency operations through IT, the policies did not require the CIO to measure how well IT supports agency programs and report annually on the progress in achieving the goals. Table 1 summarizes the extent to which SSA’s policies addressed the role of its CIO, as reflected in our August 2018 report. As a result of these findings, we made a recommendation to SSA to address the weaknesses in its policies with regard to the remaining five key management areas. In response, the agency agreed with our recommendation and, subsequently, stated that it planned to do so by the end of September 2018. Following through to ensure that the identified weaknesses are addressed in its policies will be essential to helping SSA overcome its longstanding IT management challenges. In conclusion, effective IT management is critical to the performance of SSA’s mission. Toward this end, the agency has taken steps to improve its management of IT acquisitions and operations by implementing 14 of the 15 recommendations we made from 2011 through 2018 to improve its IT management. Nevertheless, SSA would be better positioned to effectively address longstanding IT management challenges by ensuring that it has policies in place that fully address the role and responsibilities of its CIO in the five key management areas, as we previously recommended. Chairman Johnson, Ranking Member Larson, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have. If you or your staffs have any questions about this testimony, please contact Carol C. Harris at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony statement. GAO staff who made key contributions to this statement are Kevin Walsh (Assistant Director), Jessica Waselkow (Analyst in Charge), and Rebecca Eyler. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "SSA delivers services that touch the lives of almost every American, and relies heavily on IT resources to do so. Its systems support a range of activities, such as processing Disability Insurance payments, to calculating and withholding Medicare premiums, and issuing Social Security numbers and cards. For fiscal year 2018, the agency planned to spend approximately $1.6 billion on IT. GAO has previously reported that federal IT projects have often failed, in part, due to a lack of oversight and governance. Given the challenges that federal agencies, including SSA, have encountered in managing IT acquisitions, Congress and the administration have taken steps to improve federal IT, including enacting federal IT acquisition reform legislation and issuing related guidance. This statement summarizes GAO's previously reported findings regarding SSA's management of IT acquisitions and operations. In developing this testimony, GAO summarized findings from its reports issued in 2011 through 2018, and information on SSA's actions in response to GAO's recommendations. The Social Security Administration (SSA) has improved its management of information technology (IT) acquisitions and operations by addressing 14 of the 15 recommendations that GAO has made to the agency. For example, Incremental development . The Office of Management and Budget (OMB) has emphasized the need for agencies to deliver IT investments in smaller increments to reduce risk and deliver capabilities more quickly. In November 2017, GAO reported that agencies, including SSA, needed to improve their certification of incremental development. As a result, GAO recommended that SSA's CIO (1) report incremental development information accurately, and (2) update its incremental development policy and processes. SSA implemented both recommendations. Software licenses . Effective management of software licenses can help avoid purchasing too many licenses that result in unused software. In May 2014, GAO reported that most agencies, including SSA, lacked comprehensive software license policies. As a result, GAO made six recommendations to SSA, to include developing a comprehensive software licenses policy and inventory. SSA implemented all six recommendations. However, SSA's IT management policies have not fully addressed the role of its CIO. Various laws and related guidance assign IT management responsibilities to CIOs in six key areas. In August 2018, GAO reported that SSA had fully addressed the role of the CIO in one of the six areas (see table). Specifically, SSA's policies fully addressed the CIO's role in the IT leadership and accountability area by requiring the CIO to report directly to the agency head, among other things. In contrast, SSA's policies did not address or minimally addressed the IT workforce and IT strategic planning areas. For example, SSA's policies did not include requirements for the CIO to annually assess the extent to which personnel meet IT management skill requirements or to measure how well IT supports agency programs. GAO recommended that SSA address the weaknesses in the remaining five key areas. SSA agreed with GAO's recommendation and stated that the agency plans to implement the recommendation by the end of this month. GAO has made 15 recommendations to SSA to improve its management of IT acquisitions and operations from 2011 through 2018, and 1 recommendation to improve its CIO policies. While SSA has implemented nearly all of them, it would be better positioned to overcome longstanding IT management challenges when it addresses the CIO's role in its policies.", "document_type": "gao"}
{"report": "Recognizing the federal government’s role as a major supplier of data, the 2018 President’s Management Agenda announced the creation of a Federal Data Strategy. According to the agenda, this strategy promises to leverage data as a strategic asset to grow the economy, increase the effectiveness of the federal government, facilitate oversight, and promote transparency. It proposes improving data dissemination by making data available more quickly and in more useful formats, maximizing nonsensitive data shared with the public, and enabling external users to access and use government data for commercial and other public purposes. The Federal Data Strategy builds on existing policy governing the federal government’s websites and data. In 2016, OMB memorandum M-17-06, Policies for Federal Agency Public Websites and Digital Services, established policy for the federal government’s online information resources, such as the need to ensure that information is searchable and to inform users about information quality issues. In addition, in 2013, OMB memorandum M-13-13, Open Data Policy—Managing Information as an Asset, established an information management framework to promote interoperability and openness at each stage of the information life cycle. These efforts are consistent with the international Open Government Partnership, which aims to make governments more inclusive, responsive, and accountable. Seventy-five countries have committed to the Open Government Partnership by endorsing the Open Government Declaration. In doing so, these countries have committed to increasing the availability of information about government activities, supporting public participation in government, and using new technologies for openness and accountability, among other things. Enacted in 2006, FFATA requires agencies to report information on federal awards—such as contracts, grants, and loans. In 2014, the DATA Act expanded on FFATA by establishing new requirements intended to allow policymakers and the public to more effectively track federal spending, including: Reporting additional data. Agencies are required to report additional financial data from different points in the spending life cycle. Setting government-wide standards. OMB and Treasury are responsible for establishing government-wide financial data standards for any federal funds made available to or expended by federal agencies. These standards define and describe the data elements that agencies must report. Reporting consistently. Agencies reporting financial information are required to comply with the standards established by OMB and Treasury so that information can be compared across the government. Improving data access. The data must be made available in machine-readable and open formats, to be downloaded in bulk, and— to the extent practicable—for automated processing. The DATA Act required agencies to begin reporting data in accordance with the data standards issued by Treasury and OMB within three years of its enactment, and required that those data be displayed on USAspending.gov or a successor system. USAspending.gov has been the platform to provide federal spending information to the public since 2007 (see figure 1). In May 2017, Treasury released a new website, Beta.USAspending.gov, where it began to publish information submitted under the DATA Act. In March 2018, this new website assumed the USAspending.gov web address and Treasury retired the old version of USAspending.gov. Data on USAspending.gov come from a variety of sources, including files that agencies began submitting quarterly for DATA Act reporting in May 2017. When agencies submit quarterly data, Treasury’s DATA Act Broker ingests the data and validates certain information before the data are published on the website. Agency Senior Accountable Officials certify that the agency’s submission is valid and reliable. In addition to agencies’ quarterly DATA Act reporting files, USAspending.gov includes data from government-wide systems. Government-wide procurement data on the website are updated daily, while government-wide financial assistance data are updated biweekly. The new USAspending.gov also includes older award data that had been available on the prior version of the website. In November 2017, we issued our first report on data quality as required by the DATA Act. We found issues with the completeness and accuracy of the data that agencies submitted for the second quarter of fiscal year 2017 as well as the use of data elements. For example: Of the 78 agencies that submitted data on time, 13 submitted the data file intended to link budgetary and award information without providing any data in the file. Between 56 and 75 percent of the newly-required budgetary records were fully consistent with agency sources, but only between 0 and 1 percent of award records (such as grants, contracts, and loans) were fully consistent. Agencies differed in how they interpreted and applied OMB’s definitions for two data elements—Primary Place of Performance and Award Description—raising concerns regarding data consistency and comparability. These two award data elements are particularly important to achieving the transparency goals envisioned by FFATA because they provide the public with information on where the federal government spends money and what it spends it on, respectively. We also found issues with the presentation of the data on Beta.USAspending.gov, including fragmented or incomplete search results and insufficient disclosure of data limitations. Among other things, we recommended that Treasury disclose known data quality issues and limitations on the new USAspending.gov website. We provide an update on actions Treasury has taken to address this recommendation later in this report. We identified five key practices that managers of open government data programs can consider to help ensure the transparent presentation of their data. We also identified key actions for implementing each key practice. We identified these key practices and key actions by systematically evaluating and synthesizing information from literature on open data as well as interviews with open data experts and good governance groups. These key practices and key actions are listed in table 1. These key practices and actions are intended to be used in tandem with requirements for federal government websites and open data programs, such as relevant laws and OMB guidance. They are not intended to replace or supersede any applicable requirements. When considering an individual open government data program, some key practices and actions may be more relevant than others because the purpose and characteristics of open government data programs may vary. In addition, while this report focuses on the presentation of open government data, open data practitioners should also consider other elements—including data quality and data governance—to ensure that the public has access to high-quality information. To promote transparency, we found that open data should be freely and equally available to users without restrictions. As such, we identified two key actions for providing free and unrestricted data (see figure 2). Make government data open by default, while protecting sensitive or restricted information. Making government data open by default ensures that the data are equally open to all types of users; in contrast, when government information is available by request, it may favor citizens with greater information about and access to government institutions. In addition, some open data practitioners we spoke with said that providing open data can minimize the burden of responding to information requests. For example, according to Connecticut officials, before the state’s open spending data website was launched, payroll data were the most frequently requested information under the state’s Freedom of Information Act (FOIA). Officials said that providing open payroll data on the website significantly reduced FOIA requests, which allowed state officials to spend time and resources on other activities. However, not all government information is appropriate to publish. Some datasets may contain sensitive information such as personally identifiable information, information that is classified or similarly not subject to disclosure, or intellectual property. Other legal restrictions may also prohibit the disclosure of certain information. In some cases the information in an individual dataset may not pose a risk of identifying sensitive information, but may pose such a risk when combined with other available information. For that reason, when considering whether or not information may be disclosed, OMB M-13-13 requires agencies to determine whether it may be combined with existing publically available data to identify an individual or otherwise pose a security concern. In such situations, agencies must conduct a risk-based privacy analysis to determine whether the information can be made publicly available that accounts for the nature of the information, the availability of other information, and the technology in place that could facilitate the process of identification. As an example of how open data practitioners can balance these types of considerations, Montgomery County, Maryland, applies safeguards such as a review by internal departments. Additionally, if Department officials request a secondary fact-specific review, the Office of the County Attorney will review the information to further ensure that protected information is not published. In some cases, sensitive information is removed from a dataset prior to publication. For example, according to county officials, the names of housing assistance recipients are removed from spending data to protect resident privacy. Users can see nonsensitive aspects of these data, such as the amount spent, with identifying details removed. Do not charge users for access to the data. Providing data for free can help ensure equitable access to users independent of their ability to pay. Lowering barriers, such as cost, increases the value of open data, as more users are able to access it. Open government data only create value to the extent that they are used. With that in mind, we identified three key actions for engaging with users (see figure 3). Identify data users and their needs. By identifying who is using the data and what content or features are important to them, data providers can better prioritize their efforts to present information to data consumers. Open data experts we spoke with emphasized that data providers should engage with users both inside and outside of government, including groups that may typically have less access to government institutions. For example, to further New York City’s Open Data for All vision to provide open data for people from all walks of life and all five of the city’s boroughs, Columbia University students conducted user research on behalf of the city to better understand the extent to which community organizations use open data and what barriers they face, according to the capstone report for this project. By surveying and interviewing these organizations, the students learned that users found the city’s data portal interface difficult to use. In response, the city worked with users to design and test a new, more streamlined portal. Solicit and be responsive to user feedback. Soliciting and being responsive to user feedback—both when the website is being developed and on an ongoing basis—can help ensure that the website meets users’ needs. Feedback can also surface issues with the functionality of the website and the quality of the data, thus enabling the data provider to make corrections when needed. User feedback mechanisms vary and can include online comment forms, forums, and discussion boards, as well as in-person public forums. Open data experts we spoke with said it is particularly helpful to list the contact information for a responsible official on the website in case users have questions about the data. In addition, timely response to feedback encourages engagement by assuring users that their voices have been heard. Monitoring how the public is using the data can also help practitioners determine which content and features are most useful. Web analytics can show how the data are being used, such as by identifying commonly-used search terms and datasets, and showing trends over time. Web Analytics Web analytics is the collection, reporting, and analysis of website data, such as the number of users who visit the website. According to a city official, Los Angeles uses web analytics to measure how frequently its datasets are accessed. Web analytics data showed that some datasets were often accessed on certain dates or in conjunction with current events, while other datasets were rarely used. City officials use this information to adjust how data are presented on the website, which has increased overall use of the city’s data. For example, the city created data visualizations and links to data—including its City Revenue and City Budget Expenditures datasets—to accompany the release of its Comprehensive Annual Financial Report. Reach out to potential users to encourage data use. Actively engaging potential users can provide an opportunity to educate them on how the data can be appropriately used and encourage innovation. Data trainings can provide potential users with important context and information, which can include teaching users how the data can be used. Resources such as how-to guides can also encourage data use. For example, as shown on the website, New York City’s open data portal includes a “How To” page with a step-by-step guide to help users get started with open data, and directs them toward additional resources such as data dictionaries. We previously found that open data collaboration and prize competitions or challenges are two strategies that agencies can use to harness the ideas, expertise, and resources of those outside of their organization. Agencies engage in open data collaboration by mobilizing participants to use their open data in innovative ways, such as sharing, exploring, and analyzing publicly-available datasets; using the data to conduct research; designing data visualizations; or creating web and mobile applications and websites that help people access and use the data. In addition, agencies use prize competitions or challenges for help solving a problem or reaching a specific goal by asking members of the public to submit potential solutions. The agency then evaluates these proposals and provides a monetary or nonmonetary award to selected winners. New York City encourages the use of its open data using these strategies by hosting data literacy trainings, hackathons, and contests. For example, in the spring of 2018 the city hosted a contest to recognize projects that effectively use its open data and showcase the diversity of potential uses, according to city officials and contest documentation. Winning projects were posted to a gallery on the city’s open data website. As shown on the city’s open data website, one winner—a project called “Plan(t)wise”— predicts various tree species’ likelihood of survival in locations throughout the city based on tree census data, and recommends which type of tree to plant at a given address. Data are most useful when they are provided in formats that allow them to be analyzed in a variety of ways. We identified four key actions for providing data in useful formats (see figure 4). Provide users with detailed and disaggregated data. Data are most useful when they are provided in as much granularity as possible. For example, Ohio’s online checkbook allows users to view detailed, disaggregated data in a user-friendly checkbook format, as shown on the website (see figure 5). The representation of the expenditure is displayed as a check, and includes the vendor’s name and address, the amount paid, payment date, check number, and contact information for the appropriate state office. Provide machine-readable data that can be downloaded in bulk and in selected subsets. Providing data in machine-readable formats makes them easier to process and analyze, which is particularly important for large datasets. For example, Kansas City officials said the city has been working to convert information from the PDF format to machine-readable formats such as CSV because PDF documents are challenging for the city to update and for users to navigate. In one instance, officials said that converting the city’s list of vehicles for sale in its tow lot from PDF to CSV format allowed the city to update the data more frequently so that users can see what vehicles are for sale at any given time. Making data available to download in bulk allows users who need the full dataset to easily access it rather than retrieving information record-by- record. If the full dataset is large, allowing users to download selected subsets can make it easier for them to work with only the data they need. Data can also be provided to users through an Application Programming Interface (API), which allows users to connect directly with the dataset by enabling machine-to-machine communication. APIs can be particularly useful for large, frequently updated, or highly complex datasets because they offer users flexibility to obtain the data they need. In addition, developers can use APIs to build applications based on the data. Non-Proprietary File Formats File formats describe what type of information a file contains, as well as how that information is stored and structured. Some file formats are proprietary, meaning that they can only be opened by specific commercial software applications. In contrast, non-proprietary formats are publicly available and can be used by all software developers. Examples of non-proprietary file formats include: CSV, which stores tabular data; RDF, which stores metadata; TXT, which stores unformatted text; and XML, which stores both the format and content of data. Provide data downloads in a non-proprietary format. To ensure broad and equitable access, data downloads should be available in formats that do not require specific commercial software to access, and therefore do not exclude users who do not have access to such software. Non- proprietary data formats include, but are not limited to, CSV, RDF, TXT, and XML. For example, Kansas City, Missouri’s, open data portal allows users to export spatial data in an open format that does not require proprietary mapping software, according to city officials and the city’s open data portal website. Open data experts we spoke with said that practitioners should consult stakeholders when determining which format is appropriate for a given program, and that the appropriate format may change over time as technology advances. Make the data interoperable with other datasets. Making data interoperable with other datasets can make them more useful because users may want to create new opportunities for analysis by linking datasets together. This can be done by standardizing the way that the data are reported. For example, using standard definitions for the specific items included in a set of data—known as data elements—can promote consistency with other datasets. Additionally, documentation such as data dictionaries can help ensure that definitions are clear and avoid misunderstandings. To promote interoperability between datasets that use geographic information, Kansas City uses standard land parcel identification numbers across departments. This allows different datasets that contain location information to be used in combination. For example, officials said that the city is linking different datasets that use those identification numbers— including building code violation data, 311 calls, and dangerous buildings data, among others—to build a model to prioritize code enforcement inspections. Providing information about a dataset allows users to determine whether it is suitable for their intended purpose, and make informed decisions about whether and how to use it. With that in mind, we identified four key actions for fully describing the data (see figure 6). Disclose known data quality issues and limitations. Disclosing data quality issues and limitations helps users make informed decisions about whether and how to use the data. Disclosure of data quality issues and limitations can include descriptions of the completeness, timeliness, and accuracy of the data, such as an explanation of why certain data may not be disseminated. For example, we observed that Connecticut’s “OpenCheckbook” website includes an “About” page explaining that some information is excluded to protect privacy, or because it is not processed through the state’s financial system, such as the state’s Airport Authority, jury duty payments, and unclaimed property. Disclose data sources and timeliness. Disclosing where the data come from and how frequently they are updated provides context that helps users judge their quality and determine whether they can be appropriately used for the intended purpose. Without this information, users may view, download, or use data without full knowledge of the extent to which they are timely, complete, or accurate, and therefore could inadvertently draw inaccurate conclusions from the data. Metadata Metadata provide descriptive information about a dataset in a structured, machine- readable format. They describe aspects of the dataset—such as the source of the data and when it was last updated—in clearly delineated fields. Clearly label data and provide accompanying metadata. In addition, data should be clearly labeled and accompanied by structured metadata so that users can easily find information about the dataset. Metadata describe the characteristics of data in clearly defined, machine-readable fields, which can include attributes such as the date the data were created or modified, or the license used, among other things. Structuring metadata in clearly defined fields makes it possible for search tools to filter and match content pertaining to those fields. As shown in figure 7, Kansas City’s budget data are accompanied by metadata showing when they were last updated, the source of the data, and the name and contact link for the dataset owner, among other things. Publish data under an open license and communicate licensing information to users. Documentation for a dataset should also specify what license applies to the data because a data license provides users with information about how they may use the data, including whether there are any restrictions, such as copyrights. An open license indicates that there are few to no restrictions on how the data may be used. An open license can encourage innovation, for example, by assuring users that they are permitted to use the data to develop commercial applications. To realize these benefits, licensing information should be clearly communicated to users, ideally in machine-readable and human- readable formats. As shown in figure 7, metadata can be used to communicate licensing information in a clear and structured way. Including licensing information in metadata can help ensure that it is machine readable—which makes it easier to process and analyze—as well as help users discover the licensing information and compare it across datasets. Data discovery is facilitated by presenting the data in a way that enables users to easily explore them. We identified five key actions for facilitating data discovery for all users (see figure 8). Provide an interface that enables intuitive navigation and ensures that the most important information is made visible. To facilitate data discovery for all users, practitioners of open government data should ensure that the data are provided on a website that is simple and intuitive so that users can easily navigate it to find the information they need. Obtaining user feedback and conducting usability testing can help practitioners assess whether the website is easy to use, and identify any aspects that do not work well for users. In addition, websites designed to work on mobile devices, as well as mobile applications such as Ohio’s “OhioCheckbook” app (see figure 9), can allow users to access data on a variety of devices, according to the state’s website and our observations. Provide users with appropriate interpretations of the data, such as visualizations or summaries. Summaries and visualizations can help users explore data. For example, our review of Montgomery County, Maryland’s, “spendingMontgomery” website found that the website provides summary data of the top five services, vendors, and expense categories with the greatest amount of spending, as well as a chart of annual spending along with historical averages, as shown in figure 10. This summary information provides a starting point for users, who can then navigate through the website to access more granular data. Ensure that the website’s content is written in plain language. The content of an open data website should also be written in a way that is clear and direct, using plain language. Using commonly understood terms rather than technical jargon can help users understand the information provided. For example, to use well-understood terms when communicating budget information, Kansas City officials told us they participated in plain language training and applied that knowledge to the city’s open budget data website. In addition, we found that in cases where it is necessary to use technical language, providing a glossary that defines key terms can help make the information understandable to users. Provide a search function that is optimized for easy and efficient use. Open data websites should also include a search function that is optimized for easy and efficient use so that users can find information that is relevant to them. For example, Connecticut officials said that the search function on the state’s open spending data website is designed so that users do not need to be familiar with the state government’s structure or terminology to find meaningful results. When a user enters a search term, the search bar will return a list of items that include this term and a description of what they are. For example, when we typed “Education” into the search bar, the website suggested Department of Education spending, bilingual education programs, and a vendor called Family Life Education. In addition, Connecticut officials told us that they track the most commonly-used search terms—such as “housing” and “voter turnout”—on the state’s open data portal, and test them to verify that the information is discoverable. Similarly, Ohio’s online checkbook includes a “Popular Searches” tool that provides presaved searches that allow users to see expenditures for a variety of categories—such as travel, roads and highways, or parks—by clicking a single button. In addition, officials told us that if a user’s search returns a large volume of results, a pop-up appears prompting the user to narrow their search, which could help them focus on more relevant information. Use central data repositories and catalogues to help users easily find the data they are looking for. Central data repositories and catalogues—also known as data portals—are websites that provide a “one-stop shop” for users to access a variety of datasets. These websites host the data directly, link to other websites where users can access the data, or a combination of the two. They typically provide descriptions of the datasets, as well as structured metadata, to help users find data suitable for their purpose. New York City’s open data portal also includes a number of tools to help users find datasets, including a search function as well as lists of new datasets, popular datasets, and datasets by category, as shown in figure 11. We found that USAspending.gov aligns with the key practices of providing free and unrestricted data and engaging with users. However, Treasury does not fully describe the data and two data elements required by law are not searchable. In addition, Treasury lacks a process to ensure all pages on the website are secure, consistent with federal requirements. Spending data are open by default and sensitive information is protected. The Federal Funding Accountability and Transparency Act of 2006 (FFATA) requires the website displaying the data that agencies must provide to be accessible to the public at no cost. In response to requirements in FFATA, as amended by the Digital Accountability and Transparency Act of 2014 (DATA Act), in May 2014, OMB and Treasury developed standard definitions for data elements for agencies to report, and Treasury displays these open data on USAspending.gov. Agencies should not report classified or protected information, such as personally identifiable information (PII). However, they are required to aggregate some awards containing PII at the county or state level if they are unable to report spending at the individual level. All data are available for free. Treasury has made all of the data on USAspending.gov available to users at no cost, as required by the DATA Act and FFATA. During the course of our work, we found that users could only download the complete database after registering for an account with the database host—Amazon Web Services. Further, we also found that users would incur a charge when attempting to download the entire database. Treasury officials said they intended for the data to be available for free and were unaware that users were being charged to access the data. In response to our inquiries on this issue, in July 2018, Treasury resolved this issue and provided an option for users to download the entire database for free without creating an account. Treasury identifies data users and their needs through user research. Treasury researches users to understand their needs when working with USAspending data. Treasury has developed profiles for eight types of users ranging from data consumers like “Citizen” or “Journalist” (see figure 12) to budget analysts or chief financial officers. These profiles are part of Treasury’s user-centered design process in which officials told us they learn from users, make changes to the website, and test whether those changes make the website more useful and intuitive to users. Treasury obtains and responds to user feedback. Treasury officials told us that they track user feedback, which informs improvements they make to the website. We previously found that Treasury has a variety of user feedback mechanisms, including a community forum, one-on-one interviews, and a “contact us” link that allows users to provide feedback by email. As of July 2017, Treasury officials said they had interviewed more than 130 users, such as citizens, funding recipients, and federal agency officials, regarding USAspending.gov website features. They have since conducted 20 additional interviews about the user experience and received feedback from another 130 users about the Data Lab, a related website that offers visual interpretations of the spending data. Treasury has also conducted “intercept” interviews where interviewers go to a location with large groups of people and request feedback about the website from random individuals. For example, figure 13 shows a Treasury contractor interviewing a visitor about an early version of USAspending.gov at the U.S. Capitol Visitor Center. Treasury officials said they respond to user feedback about USAspending.gov on two websites. They respond directly to user comments on the USAspending.gov Community website, where users can share feedback and find answers to frequently asked questions. Treasury officials told us they also track users’ issues as “stories” on an open development platform called JIRA, which is their primary way of documenting website development decisions and tracking potential improvements to the website. For example, Treasury added new functionality to the Application Programming Interface (API) based on user feedback from agencies. Officials said this feature allowed some agencies to more efficiently manage their quarterly DATA Act submissions. Treasury announces updates to the API and other changes to the website via an email newsletter. Treasury reaches out to potential users to encourage data use. Treasury educates the public about the use of the spending data on USAspending.gov and the Data Lab through how-to guides and outreach activities. For example, the website offers an “API Guide” for users seeking to utilize computer programs to request and receive the data, and the Data Lab features an “Analyst Guide” that answers questions about using the data. Treasury officials told us that they have directly engaged with various audiences about USAspending.gov. For example, they have engaged with the Syracuse University Maxwell School of Government to map the use of federal funds in New York State. In April 2017, we observed Treasury’s participation in a hackathon where participants developed ways to use federal spending data, including using the spending data to evaluate block grant formulas and track the economic impact of stimulus money. Treasury officials said they have held information sessions with Congress, federal agencies, and nongovernment organizations. USAspending.gov provides users with detailed and disaggregated data. As shown in figure 14, an award summary page on the website displays information on specific awards, including the awarding agency, recipient, award amount, description, and location. These pages also include transaction histories so that spending can be tracked over time. As of October 2018, we found that USAspending.gov listed more than 53 million pages of prime awards representing more than $33 trillion in obligated funds between fiscal year 2008 and 2018. Data are machine readable and can be downloaded in bulk and in selected subsets, but Treasury lacks a process to fully ensure security. As shown in figure 15, USAspending.gov provides six ways for users to download the data, including subsets of the data or the complete database. An API is also available, which enables machine-to-machine communication that allows real-time updates. During the course of our review, we found that some of the data download web addresses did not point to a government domain and were unsecured. OMB guidance requires that federal web pages be hosted on a .gov domain and be encrypted by the secure HTTPS protocol. In response to our inquiries on this issue, Treasury updated USAspending.gov in October 2018 so that the web pages for the database download and agency submission files use the secure HTTPS protocol and are on a government domain. As a result, the users requesting this information from USAspending.gov now have better assurance of the integrity of the data requested, the privacy of their connection to USAspending.gov, and that the website they are using is a trusted government domain. Treasury officials said they take steps to ensure they meet federal information security requirements, but had not noticed that the web pages were unsecured or on a nongovernment domain. According to Treasury officials, the agency has a process for the team developing a website to vet whether proposed pages are secured and hosted properly, but they acknowledged unintended gaps in how the process was applied in this case, which caused some pages to be omitted. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Control activities are the policies, procedures, techniques, and mechanisms that enforce management’s directives to achieve the entity’s objectives and address related risks. Until the gaps in Treasury’s information security process are addressed, the agency does not have assurance that any new pages that may be added to USAspending.gov will conform to federal information security requirements. In response to our inquiries, Treasury provided documentation showing that the agency is in the process of addressing the issue to prevent future unintended gaps. The agency has taken initial steps to revise its process to ensure that all pages on USAspending.gov are secured and hosted properly. We will continue to monitor Treasury’s efforts to develop and implement this new process. Downloads are available in standard, non-proprietary formats. Downloads of search results, agency files, and subsets of the USAspending.gov database are available in file formats that can be opened using common office software, including CSV and XML files. Spending data are potentially interoperable with other datasets. The data in the USAspending.gov database are organized according to a government-wide standard which can potentially support interoperability with related government datasets. The DATA Act Information Model Schema (DAIMS) provides standardized definitions for federal spending information, including 57 data standards that federal agencies are required to report for DATA Act implementation. These standards come with technical specifications describing the format and structure of each data element, which are intended to facilitate consistent data reporting across the federal government, and allow for interoperability between agencies’ data submissions. According to Treasury’s DAIMS Architecture document, DAIMS could eventually support interoperability between USAspending.gov and related nonfederal datasets such as state, local, and international spending data. For example, state governments could make their data interoperable with the federal spending data on USAspending.gov by developing their own data standards and definitions aligned with DAIMS as appropriate. In addition, the DAIMS Architecture document specifies that future DAIMS content could include federal receipt and financing balances with accounts and sources, as well as performance measures and outcomes linked to federal grants, awards, or other financial assistance. Website still does not completely disclose data quality issues. Treasury has improved the disclosure of data quality issues and limitations, but other issues have not yet been described to users. In November 2017, we found that the website did not sufficiently disclose known limitations affecting data quality. We recommended that Treasury disclose known data quality issues and limitations. Treasury agreed with the recommendation and took the following steps to disclose limitations: By May 2018, Treasury had added a “Learn More” box to the website with information about the data, including an explanation that the Department of Defense reports its data later than other agencies. In June 2018, Treasury added information on unreported spending to the Spending Explorer tool that visualizes federal spending, clarifying that information reported on the website does not capture the totality of federal spending. Treasury explains to users that data might not be reported when an agency reports incomplete data, has a submission deadline extension, is not required to submit certain data elements, and for accounts that are not reported to Treasury. While the steps Treasury has taken are positive, they do not fully address our recommendation. This is because one purpose of the DATA Act is to allow users to track federal spending more effectively by linking specific awards to financial budgetary information. However, we found that award data do not appear in the Spending Explorer for combinations of certain agencies and program activities. For example, as figure 16 shows, there are “no associated awards” for the program activity “Vaccines for Children” within the Department of Health and Human Services account for Medicaid grants to states. However, the account page for this program elsewhere on USAspending.gov shows approximately $3.6 billion in obligations and various associated awards for the first three quarters of fiscal year 2018.There is no context for a user to understand whether this information is required for this federal account, missing, or searchable elsewhere on the website. Treasury officials informed us of a number of data limitations that could cause spending data and award data to be disconnected in the Spending Explorer, but these issues are not disclosed on the website. According to Treasury officials, agencies might not currently report certain data fields as some fields are optional, there are inconsistencies between several agency data systems, and some agencies have not been able to link financial and award data. As a result, the Spending Explorer does not consistently provide a clear and complete presentation of federal spending, and because Treasury does not disclose these limitations, it could limit the ability of taxpayers and policy makers to fully track federal spending with this tool. More broadly, we have raised concerns that USAspending.gov does not sufficiently disclose other, broader government-wide data quality issues. For example, we found in November 2017 that only between 0 to 1 percent of awards were fully consistent with agency records. While the consistency of individual data elements varied, our prior report found inconsistencies with agency records in at least 41 percent of the data for Award Description, Current Total Value of Award, and Primary Place of Performance Address from the second quarter of Fiscal Year 2017. Website discloses data sources and timeliness. The “About” page and “Frequently Asked Questions” describe data sources, data quality, and legal requirements. There is also a diagram on the “About” page showing how the data go from agencies to the database for USAspending.gov, and the frequency with which the data are updated, which is a useful way to visualize how the types of award data are updated either daily, bi- monthly, or every quarter. Website labels some data, but lacks structured metadata. Treasury labels some of the data on USAspending.gov in tables and data visualizations, and describes it in narrative form. The website also includes data dictionaries that provide definitions for the data elements. However, the website lacks structured, machine-readable metadata. OMB guidance requires agencies to use metadata to describe their datasets so that all users can understand and process open data. Agencies must consult with the best practices from Project Open Data, OMB’s online repository of tools and schema, to help agencies meet the requirements of its open data policy. According to Project Open Data, metadata are structured information that describe, explain, locate, or otherwise make it easier to retrieve, use, or manage datasets like that displayed on USAspending.gov. This guidance also indicates that making metadata machine readable greatly increases their utility. Treasury officials said the types of information found in metadata are already available in a number of separate documents on Treasury’s Fiscal Service web page. Treasury officials told us that they decided not to provide structured metadata on USAspending.gov because it is more efficient to provide external links to other websites. Further, Treasury officials asserted that providing metadata on those websites is sufficient to comply with OMB guidance. However, the information found on these various websites does not align with best practices outlined in Project Open Data, or the key action to clearly label data and provide accompanying metadata, because it is not provided in a single place on USAspending.gov as structured metadata in a machine-readable format. Without easy access to information that fully describes the data, it may be difficult or time consuming for users of USAspending.gov to find the information available on other websites, and determine whether or how to use the data for their purposes. Website lacks complete licensing information. While the website describes restrictions on the use of proprietary contract data from Dun & Bradstreet Inc.’s Data Universal Numbering System (DUNS), it does not include general licensing information for the rest of the data. The website includes a link to a notice specifying the “Limitation on Permissible Use of Dun & Bradstreet, Inc. Data.” According to Treasury officials, most data on USAspending.gov are in the public domain, but we found that the website does not clearly indicate which data are openly available to use without restrictions. OMB M-13-13 specifies that federal agencies “must apply open licenses, in consultation with the best practices found in Project Open Data, to information as it is collected or created so that if data are made public there are no restrictions on copying, publishing, distributing, transmitting, adapting, or otherwise using the information for non-commercial or for commercial purposes.” According to OMB staff, agencies should include licenses in metadata so that this information is machine readable. If data access is limited, this should also be prominently featured in the metadata. In addition, Project Open Data specifies that licensing information should be provided in metadata. Treasury officials said that the agency is evaluating options and approaches for including open data licensing information on the website, consistent with OMB M-13-13. In addition, Treasury officials said they had only received one question from users about licensing. However, not displaying licensing information for the majority of data elements on the website is not consistent with the key action to publish data under an open license and communicate licensing information to users. Without licensing information for all of the data, users will likely be unable to determine what license, if any, applies to USAspending.gov, and it will be unclear to the public whether there are any restrictions to reusing data that they can download from the website. Website includes a user interface to assist navigation. USAspending.gov’s top menu gives users various ways to explore, search, download, and understand the most important information. The menu links to the Spending Explorer, Award Search, Profiles, Download Center, and Glossary. There is also “featured content” on the home page guiding users to the Data Lab, and other new features such as a download option for Federal Account data and recipient profile pages for any entity that has received federal money in the form of contracts, grants, loans, or other financial assistance. Interactive visualizations enable exploration. Search results can be visualized by prime award or subaward aggregated in a table, in a chart showing awards over time, in a map showing the geographic distribution of awards (see figure 17 for an example of social security insurance results mapped by congressional district), or in a bar chart showing the top 10 awards by category. The visualizations show how spending has increased over time, the regional concentration of spending, and a list of the top recipients. We found that the Spending Explorer provides a simple, graphical interface that allows users to navigate spending data by budget function, agency, and object class. It gives users the option to drill down from these three high-level categories to specific program activities, federal accounts, recipients, or awards. It displays the total amount obligated for the selected category, and a breakdown of the amounts in dollars and as a percentage of the total. The Data Lab is a separate website linked to USAspending.gov that offers users visual interpretations of the spending data. Treasury officials said the “Contract Explorer Sunburst” is a popular Data Lab visualization. As shown in figure 18, it provides users an interactive overview of about $500 billion in federal contract data organized as a set of concentric circles starting from the funding agency (inner ring) to the recipients (outer ring). Treasury officials noted that analyses and visualizations in the Data Lab are updated with varying frequency because it can be a challenge to continually update some of the visualizations. The website includes a glossary that provides plain language definitions of terms that describe the spending data. To help users understand the data on USASpending.gov, the website provides a “Glossary” sidebar that is available on every page of the website, and provides users both “plain language” and official definitions of financial terms that are used on the website, as shown in figure 19. According to the key practices we identified, using commonly understood terms rather than technical jargon can help users understand the information provided. A variety of search tools are available, but program source and city are not searchable. We found that the website features a variety of search tools to help users find and interpret the data. Users can search the data using generic keyword search and advanced search filters. These features allow users to explore and quickly obtain large volumes of award results. For example, we found that searching by funding agency returns all spending by that particular federal agency and by award. However, we tested the search functionality of the website and found that two data elements required to be searchable by FFATA, as amended by the DATA Act, were not: (1) program source (Treasury Account Symbol (TAS)) and (2) city. Our search testing of a nongeneralizable, random sample of awards for data elements required by FFATA successfully found most of the data elements, but we were unable to search for program source (TAS) or city. TAS and city data can be downloaded and are displayed on award web pages, but we were not able to search for them using either the advanced or keyword search pages. Treasury officials said they did not include functionality to search for these two required data elements on the new website because users searching by these data elements on the Beta version of the website had received confusing results. This is due in part to the fact that agency submissions with these data elements used different standards before and after the DATA Act. Instead, according to our review of the website, users can access TAS and city information using the website’s navigation features, which officials said meets the spirit of the FFATA requirement. However, simply displaying TAS or city information only on award or federal account pages does not meet the FFATA requirement that users be able to search for this information. Users currently have to click on a specific award or federal account page, and scroll through the web page to find the relevant section that shows city or TAS information. If federal agencies and Congress are not able to search for TAS, they cannot easily connect detailed information on financial transactions to federal accounts for management or oversight purposes. In addition, users looking for geographic information related to recipients or federal programs cannot easily search USAspending.gov by city. Government data catalogues and repositories link to USAspending.gov. Treasury facilitates discovery of the DATA Act data by linking to USAspending.gov from centralized data repositories and catalogues. Information and links to USAspending.gov can be found on DATA.gov, which is a data catalogue for a variety of U.S. government datasets. Treasury maintains a web page on GitHub, a public online collaboration website, designed to share information about its process in meeting the requirements of the DATA Act, including information and links to USAspending.gov. Associated pages on this GitHub site serve as a data repository for the computer code behind the central data submission platform for the DATA Act, called the Data Act Broker, the API for USAspending.gov, and the USAspending.gov website itself. USAspending.gov is a major open government data program with the potential to be a model for transparently reporting government data—if Treasury takes additional steps to further align it with the five key practices and associated key actions for open data in addition to DATA Act requirements. USAspending.gov has already followed several key actions such as providing the data on the website for free, engaging the public online and in person, providing detailed and disaggregated data for download, and making interactive tools so users can interpret and visualize the data. Treasury has also made progress in disclosing limitations of the data, although it has not fully addressed our prior recommendation to do more to make users fully aware of issues that affect its quality. However, Treasury has not fully aligned USAspending.gov with some key practices or federal website standards, and has not fully implemented the search functionality required by FFATA, as amended by the DATA Act. As a result, users may not be able to find the information they need, and may not have confidence in the integrity of the data. Treasury updated USAspending.gov in October 2018 so that the web pages for the database download and agency submission files available at that time used the secure HTTPS protocol and a government domain. However, without an effective control process in place, Treasury does not have assurance that any new pages that may be added to USAspending.gov will conform to certain federal information security requirements. Furthermore, without easy access to structured metadata, it may be difficult or time consuming for users of USAspending.gov to find the information they need to determine whether or how to use the data. Similarly, the lack of an explicit open license might discourage some users from using the data to develop innovative commercial products. Users are also not able to easily search award information by program source or city, as required by FFATA, which could limit their ability to find and use these data to inform future decision making. We are making a total of five recommendations to Treasury. Specifically: The Secretary of the Treasury should establish a process to ensure all pages on the USAspending.gov website use the secure HTTPS protocol, consistent with OMB requirements. (Recommendation 1) The Secretary of the Treasury should establish a process to ensure all content on USAspending.gov is available from a government domain, consistent with OMB requirements. (Recommendation 2) The Secretary of the Treasury should fully comply with OMB’s requirements by providing metadata in a single location that are easy to find on the USAspending.gov website. (Recommendation 3) The Secretary of the Treasury should fully comply with OMB’s requirements by communicating licensing information on USAspending.gov. (Recommendation 4) The Secretary of the Treasury should ensure that users can easily search for awards by city and program source (TAS), consistent with FFATA requirements. (Recommendation 5) We provided a draft of this report to the Secretary of the Treasury, the Director of OMB, and the Administrator of GSA for review and comment. Treasury provided written responses, which are summarized below and reproduced in appendix II. Treasury and OMB also provided technical comments, which we incorporated as appropriate. GSA responded that the agency had no comments on the report. In its written response, Treasury highlighted areas where USAspending.gov aligned with the key practices that we identified for transparently reporting government data, such as engaging users and providing the data in useful formats. Treasury agreed with our recommendations. Treasury stated that the agency has already taken steps to address our first two recommendations, to establish processes to ensure that all pages on USAspending.gov use the secure HTTPS protocol and to ensure that all content on the website is available from a government domain. Treasury provided us with documentation of a revised process that is intended to address these issues. We revised the report to acknowledge that Treasury has taken these steps. We will continue to monitor Treasury’s efforts to develop and implement this new process and update the status of our recommendations accordingly. We also provided excerpts of the draft report to Connecticut; Kansas City, Missouri; Los Angeles, California; Montgomery County, Maryland; New York City, New York; and Ohio. Los Angeles, Montgomery County, New York City, and Ohio provided technical comments, which we incorporated as appropriate. Connecticut and Kansas City officials responded that they had no comments. We are sending copies of this report to the Secretary of the Treasury, the Director of OMB, and the Administrator of the General Services Administration, as well as interested congressional committees and other interested parties. This report will be available at no charge on our website at https://www.gao.gov. If you or your staff has any questions about this report, please contact Triana McNeil 202-512-6806 or McNeilT@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix III. The Digital Accountability and Transparency Act of 2014 (DATA Act) includes a provision for us to review implementation of the act. Over the last 4 years, we have issued 13 reports assessing various aspects of DATA Act implementation. This report builds on our body of work on the DATA Act and (1) identifies key practices for transparently reporting government data on a centralized website, and (2) evaluates the extent to which the new USAspending.gov is consistent with these key practices, as well as existing standards for federal websites. To identify key practices for transparently reporting open government data on a centralized website, we conducted a literature review and interviewed experts on open data and representatives of good governance groups. We also identified illustrative examples by interviewing open data practitioners from state and local governments. Literature review. To conduct the literature review, we first identified relevant publications using a number of bibliographic databases, including ProQuest, the Organisation for Economic Co-Operation and Development’s (OECD) iLibrary, the National Technical Information Service, and the Public Affairs Information Service. We reviewed articles that focused on open data programs and practices in OECD countries, including scholarly peer-reviewed articles, working papers, conference papers, and reports by policy research organizations, nonprofit organizations, and associations. We conducted our search in March 2017 and subsequently added relevant articles identified during our background research. To systematically review these articles, one analyst reviewed each article to identify relevant themes. A second analyst then reviewed the documentation to verify categorization decisions. Then, both analysts met to resolve any discrepancies. We evaluated and synthesized the categorized information to identify commonly-reported key practices for transparently reporting open government data. Interviews with experts. We selected open data and good governance experts based on recommendations made by other experts, frequent citations in others’ work, and recent contributions to the field. We also selected experts that represent a variety of sectors and backgrounds (such as government, academia, and nonprofit organizations). We obtained the views of the following individuals and organizations: Andrew Stott, former United Kingdom Director for Transparency and Center for Open Data Enterprise, Code for America, Dr. Anneke Zuiderwijk-van Eijk, Delft University of Technology, General Services Administration (GSA), Global Initiative for Fiscal Transparency, Governance Laboratory of New York University, IBM Center for the Business of Government, Johns Hopkins University Center for Government Excellence, Project on Government Oversight, Results for America, U.S. Public Interest Research Group, What Works Cities, and World Bank. We first had open-ended conversations with experts to obtain their views on what key practices exist for transparently reporting open government data. After developing an initial list of key practices, we then conducted a second round of interviews with experts to finalize the list. We shared a draft of the key practices with the Department of the Treasury (Treasury), the Office of Management and Budget (OMB), and GSA. Illustrative examples. To obtain illustrative examples showing how those key practices can be implemented, we selected open data practitioners from six selected state and local governments: Kansas City, Missouri; Los Angeles, California; Montgomery County, Maryland; New York City, New York; and Ohio. We selected these practitioners because they were identified in our literature search and by the experts we spoke with as having well- regarded open data websites. We also selected practitioners that have websites with both a general open data portal and visualizations showing budget or spending data. We also selected practitioners that represent different locations and levels of government, including cities, counties, and states. We reviewed these practitioners’ open data websites and related documentation, and interviewed cognizant state and local government officials. To assess the extent to which USAspending.gov is consistent with the key practices and selected standards for federal websites, we reviewed the website, reviewed agency documents, observed Treasury’s participation in a hackathon, and interviewed OMB staff and Treasury officials. Specifically, we analyzed the USAspending.gov website to determine how it aligned with the key practices and the extent to which data elements were searchable as required by the Federal Funding Accountability and Transparency Act of 2006 (FFATA). We also assessed USAspending.gov against criteria for federal websites and open data programs, including OMB M-17-06, Policies for Federal Agency Public Websites and Digital Services, and OMB M-13-13, Open Data Policy— Managing Information as an Asset. To evaluate the extent to which the USAspending.gov search functionality complies with FFATA requirements, as amended by the DATA Act, we randomly selected a nongeneralizable sample of 30 awards (consisting of 15 contracts and 15 financial assistance awards) downloaded from USAspending.gov for fiscal year 2017. We identified the required FFATA data elements from these awards, searched for these elements on USAspending.gov in July 2018, recorded whether each search successfully resulted in a matching award, and observed any other issues that occurred during testing. Finally, we interviewed Treasury officials to corroborate our observations on search functionality and other aspects of the website, and discussed any planned improvements to the website. We also interviewed GSA officials and OMB staff to clarify policies and procedures for federal websites. We conducted this performance audit from February 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Thomas J. McCabe, Assistant Director, and Laurel Plume, Analyst-in-Charge, supervised the development of this report. Colenn Berracasa, Samuel Gaffigan, and Parke Nicholson made major contributions to this report. Also contributing to this report in their areas of expertise were Michael Bechetti, Steven Campbell, Mark Canter, Jenny Chanley, Jacqueline Chapin, Peter Del Toro, Nancy Donovan, Kathleen Drennan, Sarah Gilliland, Sarah Kaczmarek, Michael LaForge, Paula M. Rascona, Andrew J. Stephens, and James Sweetman, Jr. DATA Act: Reported Quality of Agencies’ Spending Data Reviewed by OIGs Varied Because of Government-wide and Agency Issues. GAO-18-546. Washington, D.C.: July 23, 2018. DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness and Accuracy of Spending Data and Disclose Limitations. GAO-18-138. Washington, D.C.: November 8, 2017. Open Innovation: Executive Branch Developed Resources to Support Implementation, but Guidance Could Better Reflect Leading Practices. GAO-17-507. Washington, D.C.: June 8, 2017. DATA Act: As Reporting Deadline Nears, Challenges Remain That Will Affect Data Quality. GAO-17-496. Washington, D.C.: April 28, 2017. DATA Act: Office of Inspector General Reports Help Identify Agencies’ Implementation Challenges. GAO-17-460. Washington, D.C.: April 26, 2017. DATA Act: Implementation Progresses but Challenges Remain. GAO-17-282T. Washington, D.C.: December 8, 2016. DATA Act: OMB and Treasury Have Issued Additional Guidance and Have Improved Pilot Design but Implementation Challenges Remain. GAO-17-156. Washington, D.C.: December 8, 2016. Open Innovation: Practices to Engage Citizens and Effectively Implement Federal Initiatives. GAO-17-14. Washington, D.C.: October 13, 2016. DATA Act: Initial Observations on Technical Implementation. GAO-16-824R. Washington, D.C.: August 3, 2016. DATA Act: Improvements Needed in Reviewing Agency Implementation Plans and Monitoring Progress. GAO-16-698. Washington, D.C.: July 29, 2016. DATA Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet Goal of Reducing Recipient Reporting Burden. GAO-16-438. Washington, D.C.: April 19, 2016. DATA Act: Progress Made but Significant Challenges Must Be Addressed to Ensure Full and Effective Implementation. GAO-16-556T. Washington, D.C.: April 19, 2016. DATA Act: Data Standards Established, but More Complete and Timely Guidance Is Needed to Ensure Effective Implementation. GAO-16-261. Washington, D.C.: January 29, 2016. DATA Act: Progress Made in Initial Implementation but Challenges Must be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July 29, 2015. Federal Data Transparency: Effective Implementation of the DATA Act Would Help Address Government-wide Management Challenges and Improve Oversight. GAO-15-241T. Washington, D.C.: December 3, 2014. Government Efficiency and Effectiveness: Inconsistent Definitions and Information Limit the Usefulness of Federal Program Inventories. GAO-15-83. Washington, D.C.: October 31, 2014. Data Transparency: Oversight Needed to Address Underreporting and Inconsistencies on Federal Award Website. GAO-14-476. Washington, D.C.: June 30, 2014. Federal Data Transparency: Opportunities Remain to Incorporate Lessons Learned as Availability of Spending Data Increases. GAO-13-758. Washington, D.C.: September 12, 2013. Government Transparency: Efforts to Improve Information on Federal Spending. GAO-12-913T. Washington, D.C.: July 18, 2012. Electronic Government: Implementation of the Federal Funding Accountability and Transparency Act of 2006. GAO-10-365. Washington, D.C.: March 12, 2010.", "summary": "Open data can foster accountability and public trust by providing citizens with information on government activities and their outcomes. It can also promote private sector innovation. The DATA Act requires that the federal government collect and present open data on roughly $4 trillion in annual federal spending. The DATA Act also includes a provision requiring GAO to review its implementation. This report (1) identifies key practices for transparently reporting government data; and (2) evaluates the extent to which USAspending.gov is consistent with those key practices and other requirements. GAO developed the key practices by systematically evaluating and synthesizing information from literature on open data, as well as interviews with open data experts and good governance groups. GAO used these key practices as well as existing federal website standards and applicable laws to evaluate USAspending.gov. GAO identified five key practices for transparently reporting government data, as well as actions to implement each practice. These key practices and actions can assist managers of open government data programs in the transparent presentation of their data. Open data are information that can be freely used, modified, or shared by anyone for any purpose. USAspending.gov aligns with several key practices. However, the Department of the Treasury (Treasury) has not fully aligned the website with all of the key practices, the requirements of the Federal Funding Accountability and Transparency Act of 2006 (FFATA), and Office of Management and Budget (OMB) guidance (see table.) FFATA, as amended by the Digital Accountability and Transparency Act of 2014 (DATA Act), directed Treasury to develop and manage USAspending.gov to provide detailed information on federal spending. GAO is making five recommendations including that Treasury (1) establish a process to ensure that additions to USAspending.gov meet security requirements, (2) provide structured metadata and licensing information on the website, and (3) ensure that users can search for awards by city and program source as required by law. Treasury agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "EM’s cleanup sites and areas of cleanup work, EM’s status as a program, the history of EM’s requirements for operations activities, and key EM offices and DOE oversight bodies for EM’s cleanup work. EM has a headquarters office and 16 sites at which the agency oversees cleanup work. Figure 1 shows the EM sites where cleanup work remains. EM divides its cleanup work into six work areas. These areas, described below, sometimes include both operations activities and capital asset projects: 1. spent nuclear fuel stabilization and disposition, including safe shipping, receipt, storage, and disposition of spent nuclear fuel and heavy water; 2. nuclear materials stabilization and disposition, including the management, disposition, safe surveillance, and maintenance of nuclear materials; 3. radioactive liquid waste stabilization and disposition, including treatment, management, and permanent disposal of radioactive liquid waste stored in storage tanks; 4. nuclear facility decontamination and decommissioning, including the deactivation, decontamination, and decommissioning of EM-owned nuclear, radioactive, and industrial buildings and structures; 5. solid waste stabilization and disposition, including receipt, treatment, storage, and disposal of legacy and newly generated low-level waste, mixed low-level waste, transuranic waste, hazardous waste, and sanitary waste; and 6. soil and water remediation, including cleanup of waste regulated under the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation, and Liability Act. EM refers to itself as a program, and EM’s organization and mission fit PMI’s definition of a program. According to PMI, programs include multiple program components, such as sub-programs (in EM’s case, each cleanup site is a sub-program) and projects (in EM’s case, the cleanup work at each site), which are interrelated and managed in a coordinated way to obtain benefits not available from managing them individually. According to PMI officials, organizations often use the terms “program” and “project” interchangeably, but the two terms have different meanings and apply to different levels of management. Programs are a means of executing a strategy and achieving organizational goals and objectives. A program may continue indefinitely. In contrast, a project is a temporary endeavor undertaken to create a unique product, service, or result. Projects are executed to improve the efficient implementation of a program. The relationship between a program and a project is illustrated in figure 2 below. In June 2009, EM developed the category of work that EM calls operations activities to differentiate this work from capital asset projects. Until then, EM managed all of its cleanup work as projects under Order 413.3B. EM documentation from that time explained that EM decided to differentiate its cleanup work so that it could quickly make use of an infusion of $6 billion for EM under the American Recovery and Reinvestment Act of 2009 (Recovery Act). EM officials stated that EM could not use the funds quickly at that time if the work had to follow the project management requirements in Order 413.3B. In 2010, shortly after the initiation of the Recovery Act work, EM decided to make the approach of managing part of its work as operations activities permanent. EM officials could not provide any documentation from the time supporting this decision, which was not consistent with EM findings from 2009. In particular, according to EM documentation from 2009, executing all cleanup work under Order 413.3B had served EM well in defining and controlling the technical scope, project and life-cycle costs, completion dates, and risks of its cleanup work, and had helped EM improve its overall performance and become more efficient. EM began managing operations activities based on a memorandum developed by EM leadership. In 2012, EM developed the operations activities protocol, which superseded the 2010 memorandum for managing operations activities. This protocol stated that although operations activities are not subject to DOE’s Order 413.3B requirements, EM will apply the appropriate project management principles from this order using a “graded approach.” We reviewed the 2012 operations activities protocol in October 2012 and found that it contained less stringent requirements for operation activities than Order 413.3B for capital asset projects. We also found that EM did not have a clear classification policy that set out under what conditions EM should consider particular cleanup work to be an operations activity or a capital asset project. In the absence of such a policy, EM classified as operations activities certain cleanup work that DOE’s Office of Project Management considered to be capital asset projects. We recommended that EM provide DOE’s Office of Project Management with information on EM’s classification decisions. In 2012, DOE agreed with our recommendation, and EM officials stated in August 2018 that they are developing guidance. In July 2017, EM developed a cleanup policy that applies to both operations activities and capital asset projects. For managing capital asset projects, this policy supplements Order 413.3B. For managing operations activities, this policy supersedes the 2012 operations activities protocol. The 2017 cleanup policy states that EM will apply DOE’s project management principles described in Order 413.3B to its operations activities in a tailored way. At the time of our review, EM had developed 11 standard operating policies and procedures that are associated with the 2017 cleanup policy and that provide guidance on areas such as program performance reporting, assessing contractors’ performance against contract requirements, and what officials have approval authority at major steps in the contract process. However, according to EM officials, the standard operating policies and procedures are not requirements. The EM program is executed by two main components: EM headquarters, which serves as the program manager for the EM program, and 16 cleanup sites, which serve as sub-programs. The following EM headquarters and site officials are key to managing and overseeing EM’s operations activities, according to the 2017 cleanup policy: The Assistant Secretary for Environmental Management serves as the head of EM and is responsible for the execution of EM’s mission. In December 2017, the Assistant Secretary for EM began reporting to the DOE Undersecretary of Science, who in turn reports to the DOE Deputy Secretary of Energy. The Assistant Secretary for Environmental Management, among other things, provides leadership and develops mission strategies, policy, and guidance for the EM cleanup program. The Principal Deputy Assistant Secretary for Environmental Management serves as the EM management official responsible for operations, including coordination, oversight, and leadership on scope, cost, and schedule elements. Under the 2017 cleanup policy, this official has approval authority for contracts equal to or greater than $200 million. This official is also responsible for conducting periodic contract reviews for contracts with a total estimated cost equal to or greater than $200 million. The Associate Principal Deputy Assistant Secretary for Field Operations provides leadership and develops mission strategies, policy, and guidance for site operations. This official is responsible for, among other things, meeting monthly with each site individually to discuss the status of cleanup work there. The EM Deputy Assistant Secretary for Acquisition and Project Management is responsible for providing independent oversight and reports to the Associate Principal Deputy Assistant Secretary for Corporate Services. Under the 2017 cleanup policy, this official is responsible for programmatic peer reviews that review cleanup activities at each site. This official is also responsible for the implementation of Order 413.3B and review of capital asset projects. At each of the 16 cleanup sites, the EM site manager is responsible and accountable for management and integration of all EM site-level activities. Under the 2017 cleanup policy, site managers have approval authority over contracts under $200 million. The site manager is also required to conduct periodic contract reviews for contracts with a total estimated cost of less than $200 million. Outside of EM, two DOE bodies play a role in the oversight of EM’s capital asset projects, but not of operations activities: DOE’s Office of Project Management has served as DOE’s enterprise project management organization since July 2015, when the Secretary of Energy gave it this responsibility as part of an initiative to improve DOE’s program and project management. As such, DOE states that this office—as an enterprise project management organization—is responsible for providing leadership and assistance in developing and implementing DOE-wide policies, procedures, programs, and management systems pertaining to project management, as well as for independently monitoring, assessing, and reporting on project execution performance. Officials from this office are experts in project management, especially as it relates to capital asset projects, and oversee the implementation of DOE’s Order 413.3B. This office also validates project performance baselines— scope, cost, and schedule—for the department’s capital asset projects, including EM’s. The Project Management Risk Committee reviews and provides advice on capital asset projects with a total project cost of $100 million or more. The Risk Committee’s purpose is to assess the risks associated with projects across DOE and advise DOE senior leaders on project management, including on cost, schedule, and technical issues. The committee includes nine senior DOE officials from across the department, including top project management officials from the National Nuclear Security Administration, the Office of Science, and EM. DOE’s EM program manages most of its cleanup work as operations activities, posing cost and schedule risks. These risks stem from EM’s management of such work using less stringent requirements than for capital asset projects even though EM spends billions of dollars annually on operations activities. Site managers have the discretion to classify cleanup work as operations activities, even if the work has characteristics of capital asset projects, because DOE and EM have not established requirements for classifying EM’s cleanup work. In addition, EM has not addressed concerns raised by DOE project management experts that some operations activities should be classified as capital asset projects. EM manages its cleanup work under different requirements, depending on whether it classifies the work as a capital asset project or an operations activity, with operations activities having less stringent requirements. EM currently manages most of its work as operations activities. EM’s work is divided into 77 operations activities and 20 capital asset projects. In the fiscal year 2019 budget, operations activities accounted for 77 percent of EM’s approximately $7.2 billion budget— about $5.5 billion—while capital asset projects accounted for 18 percent of EM’s budget—about $1.3 billion. Figure 3 illustrates how EM classified and funded its work during fiscal year 2019. For capital asset projects, EM manages the work in accordance with the requirements in DOE’s Order 413.3B, which is DOE’s project management order. This order contains numerous, detailed requirements that describe the steps and project management best practices to follow throughout the life of a project. The DOE Secretary strengthened this order in May 2016 by adding more stringent requirements, based in part on our prior recommendations. Examples of the requirements included in this order include:  A capital asset project with a total project cost over $50 million must undergo rigorous reviews outside the project’s management line. Different types of reviews are to be conducted by an independent body within the program for capital asset projects over $50 million, DOE’s Office of Project Management and the Project Management Risk Committee for capital asset projects over $100 million, and the Energy Systems Acquisition Advisory Board for capital asset projects over $750 million. Review and approval are to be received from the Under Secretary for capital asset projects over $100 million, and the Deputy Secretary for capital asset projects over $750 million. A capital asset project must complete its original scope of work within 110 percent of the original cost baseline to be considered successful. The program must conduct a root cause analysis to determine the underlying contributing causes of cost overruns, schedule delays, and performance shortcomings, if the program, the project manager or independent oversight offices realize a capital asset project can no longer meet its established scope, cost or schedule baseline. Contingency to cover potential risks that might appear during the life of a project must be included as part of the total project cost estimate included in the performance baseline. All cost and schedule estimates developed during the life of the project must follow GAO best practices. For operations activities, EM follows the requirements in its 2017 cleanup policy, which has fewer, less detailed, and less stringent requirements than Order 413.3B. For example, in contrast to the more stringent requirements in Order 413.3B, under EM’s 2017 cleanup policy: The highest level of review an operations activity must receive is by EM’s top management for contracts equal to or greater than $200 million. For an operations activity to be considered successful, it must be completed within 110 percent of the current cost and scope baseline—not the original baseline established at the beginning of cleanup work. There is no requirement to conduct a root cause analysis for operations activities. EM does not fund contingency for operations activities. Cost and schedule estimates made before EM authorizes execution of a contract are to follow GAO best practices, but the policy does not include a requirement to follow best practices for cost estimates developed during contract execution. Figure 4 below illustrates how operations activities are managed under less stringent requirements than capital asset projects. EM project management officials in charge of developing the 2017 cleanup policy stated that EM intentionally wrote this policy at a high level because EM planned to develop standard operating policies and procedures that would establish more detailed steps to implement the policy. As noted earlier, these standard operating policies and procedures provide guidance but are not requirements. Neither DOE nor EM has a policy on how to classify cleanup work as either operations activities or capital asset projects. According to DOE Office of Project Management officials, DOE does not have a department- wide policy on how to classify cleanup work. Instead, these officials stated that DOE’s general management approach is to let its individual programs, such as EM, decide how to classify their work. EM officials explained that EM allows each site manager to determine independently how to classify cleanup work because according to EM’s 2017 cleanup policy, the site manager is responsible and accountable for the planning and execution of all site-level activities. DOE project management experts on the Project Management Risk Committee and in DOE’s Office of Project Management have raised concerns related to EM’s 2017 cleanup policy and the classification of cleanup work since 2015. These officials have stated that some current operations activities should be classified as capital asset projects. Specifically: In November 2015, EM approached DOE’s Project Management Risk Committee with a proposal for a new cleanup policy, which later became EM’s 2017 cleanup policy. In comments on the proposal, the committee’s members expressed concerns that the proposed policy did not address how EM would classify cleanup work, noting that if programs or sites get to decide on what is a capital asset project and what is not—which in turn drives the level of DOE oversight—then this approach was not an appropriate governance model. The committee’s members also questioned why EM chose not to use the already available requirements in Order 413.3B. EM did not respond to the committee’s concerns. Instead, according to the committee’s meeting minutes, the DOE Undersecretary for Management and Performance, who at the time oversaw EM, informed the committee in November 2015 that EM was proceeding with drafting its new cleanup policy. In late 2016, DOE’s Office of Project Management officials drafted an appendix to Order 413.3B that sought to define operations activities and capital asset projects. Under the classification proposal in the draft appendix, some of the work now classified as operations activities would have become capital asset projects and subject to more stringent requirements. For example, under the appendix, the cleanup of radioactive liquid waste tanks and solid waste exhumation and disposition would have been designated as capital asset projects. However, EM officials informed officials from the DOE Office of Project Management that EM would continue to develop its own policy, which it issued in July 2017. This 2017 cleanup policy did not reclassify any of the operations activities that, in the opinion of DOE’s Office of Project Management, should be capital asset projects. Officials from DOE’s Office of Project Management we interviewed said that continuing to classify and manage most of EM’s cleanup work as operations activities poses significant risks to DOE. According to these officials, managing the work this way poses cost and schedule risks for the following reasons, among others: Because the review of operations activities is conducted entirely within EM, DOE does not have information on how EM manages operations activities and cannot hold EM accountable for cost- effective and timely completion of this cleanup work, which represents a $5.5 billion investment by taxpayers in operations activities in fiscal year 2019 (see fig. 3). Operations activities are not required to go through a thorough upfront planning process to determine the scope of work to be completed. Therefore, these activities are more subject to scope creep, cost overruns, and schedule delays, which can detract from EM’s credibility with Congress and other stakeholders. Because EM does not set aside contingency funds to cover risks for its operations activities—a project management best practice and requirement under Order 413.3B—if risks are realized, EM must either reduce or delay scope to later years, which increases costs, causes schedule delays, and undermines EM’s ability to budget for activities across the EM program. Officials from DOE’s Office of Project Management stated that EM did not respond to their concerns that EM’s approach to classification of cleanup work poses unwarranted cost and schedule risks. Officials in EM told us they view the role of DOE’s Office of Project Management and the Project Management Risk Committee as limited to reviewing Order 413.3B requirements and overseeing capital asset projects. However, since July 2015, DOE’s Office of Project Management has served as DOE’s enterprise project management organization, with department-wide responsibilities for overseeing project management. As previously noted, DOE states that this office is responsible for, among other things, independently monitoring, assessing, and reporting on project execution performance. Therefore, review of classification of cleanup work that constitutes projects is within the scope of the office’s responsibilities. Until EM works together with DOE’s Office of Project management to (1) establish requirements for classifying cleanup work as capital asset projects or operations activities and (2) assess EM’s ongoing operations activities to determine if they should be reclassified as capital asset projects based on the newly established requirements, the department may incur more project management risk of cost increases and schedule delays than it should for hundreds of billions of dollars of remaining work. EM’s 2017 cleanup policy, which governs the EM program and its operations activities, does not follow most selected leading practices for program and project management. More specifically, EM’s 2017 cleanup policy does not follow any of 9 selected program management leading practices related to scope, cost, schedule performance, and independent reviews. Further, EM’s 2017 cleanup policy follows 3 of 12 selected project management leading practices related to these areas; it does not follow the remaining 9. Figure 5 shows the percentage of selected program and project management leading practices that DOE’s Office of Environmental Management’s 2017 cleanup policy follows. EM’s 2017 cleanup policy does not follow (i.e., does not meet, minimally meets, or partially meets) the nine leading practices for program management related to scope, cost, schedule performance, and independent reviews that we selected based on PMI’s standards. More specifically, the policy partially met two of the leading practices, minimally met four others, and did not meet three, as discussed below: Having a program management plan and a roadmap that are updated regularly. (Minimally meets.) EM’s policy does not require an overarching program management plan or strategic plan that encompasses the work at all sites. The policy does require that each site maintain a life-cycle baseline based on the scope, cost, and schedule of work, which are components of a program management plan. However, the requirement is specific to each site and not the entire EM program. Having a reliable, integrated, comprehensive life-cycle cost estimate that is updated on a regular basis. (Partially meets.) EM’s policy requires an integrated life-cycle cost estimate for the entire EM program but does not state that the cost estimate must be reliable or updated on a regular basis. Having a reliable, integrated master schedule that is updated on a regular basis. (Does not meet.) EM’s policy does not require an integrated master schedule at the program level. Measuring performance against both a program’s life-cycle cost and integrated master schedule baselines. (Does not meet.) EM’s policy does not require that EM track and monitor all high-level program components against a program’s life-cycle cost and integrated master schedule baselines for the entire EM program. Completing performance reporting and analysis in a way that provides a clear picture of program performance. (Minimally meets.) EM’s policy requires performance reporting to the EM headquarters management level, but it does not require that performance information be analyzed to give a clear picture of program performance. Having a lessons learned database. (Partially meets.) EM’s policy requires that EM collect and disseminate lessons learned, but the policy does not specify a framework, such as a database, for how the lessons learned should be collected and shared. Conducting program risk management throughout the life of the program. (Does not meet.) EM’s policy does not require EM to conduct risk management throughout the life of the program. Monitoring and controlling the program, including conducting root cause analyses and developing corrective action plans. (Minimally meets.) EM’s policy does not have any requirements related to monitoring and controlling activities at a program level when there is evidence that the program’s cost or schedule baseline will not be met. It does require some monitoring and controlling activities at the site level. Having an independent oversight body that conducts periodic reviews of the progress of the program in delivering its expected benefits. (Minimally meets.) EM’s policy does not require any independent entity outside EM to review the performance of the EM program as a whole in delivering its expected benefits. The policy requires EM’s Office of Project Management to conduct a periodic Programmatic Peer Review of cleanup work at each site, but this review is not independent of EM. EM officials stated that even though EM’s policy does not follow these program management leading practices, EM officials may take some actions that address these leading practices. For example, to address the leading practice of having a lessons learned database, EM officials explained that EM’s Office of Project Management generates and distributes across EM a monthly lessons-learned bulletin on a topic of its choosing, and these lessons learned are uploaded on a site accessible to everyone within EM. They also explained that officials across EM could enter lessons learned in a DOE-wide lessons-learned database managed by DOE’s Office of Environment, Health, Safety, and Security. In addition, to address the leading practice of monitoring and controlling the program, including conducting root cause analyses and developing corrective action plans, the new Assistant Secretary for Environmental Management requested the development of a root cause analysis and a corrective action plan for the EM program in August 2018. To address the Assistant Secretary’s request, EM officials stated that in November 2018 they identified nine improvement areas for the EM program, for which they are developing corrective measures. However, when we reviewed the actions EM officials cited they took to address the selected leading practices, we found that they fell short of following leading practices. For example, the lessons learned listed in the bulletins we reviewed were related only to capital asset projects, and the database cited by EM officials is not used often by EM; it contains a total of six entries on EM-related issues from 2005 to 2017. In addition, EM officials stated they do not apply key practices that can be used to identify and apply lessons learned. Further, EM officials in charge of developing a root cause analysis and a corrective action plan stated that EM does not have a process for doing so and that EM has not prepared such an analysis or plan since 2011. They also stated that EM does not intend to publish this document and that EM will not develop a root cause analysis to show the problems these corrective measures are supposed to address. The selected leading practices help ensure that a program achieves its goals and intended benefits and that it optimizes scope, cost, and schedule performance, and independent review of performance. Without documenting such leading practices in policy, EM officials may not be aware of expectations to carry them out and may not do so consistently. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control in management directives, administrative policies, or operating manuals. Furthermore, these standards state that management periodically reviews policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. Until EM reviews and revises its cleanup policy to include program management leading practices related to scope, cost, schedule performance, and independent review, the EM program is at risk of continued uncontrolled changes to the program’s scope, exceeding its cost estimate and schedule, failing to meet its programmatic goals, and increasing DOE’s environmental liabilities. EM’s 2017 cleanup policy, which applies to operations activities, follows (i.e., substantially or fully meets) 3 and does not follow (i.e., does not meet, minimally meets, or partially meets) 9 of the 12 leading practices for project management related to scope, cost, schedule performance, and independent reviews that we selected based on PMI’s standards. Specifically, the policy follows these three selected leading practices: Establishing a performance baseline and tracking it from the beginning to the end of the project. (Substantially meets.) EM’s policy requires that a contractor must establish a cost baseline and complete key performance measures within 110 percent of the approved, current cost baseline. The policy also requires that managers in charge of the work be responsible for successfully executing work within the approved performance baseline. Conducting monitoring and controlling activities to measure performance at regular intervals. (Fully meets.) EM’s policy requires periodic project reviews from various levels, from the federal cleanup director in charge of the operations activity and site manager, all the way to EM senior leadership. Using an EVM system that is independently certified and continuously monitored to assess project performance. (Substantially meets.) EM’s policy requires the implementation at the contract level of a work control system, either an EVM system or an approved alternative. EM guidance suggests that the EVM system be surveilled regularly, although EM does not require the EVM system to be independently certified. The policy did not follow the other 9 selected project management leading practices; specifically, it partially met 5, while the remaining 4 were minimally or not met, as explained below: Establishing a project execution plan with policies and procedures to manage and control project planning. (Does not meet.) EM’s policy does not require a plan to establish policies and procedures to manage and control project planning. Clearly and completely defining the scope of a project so that its performance can be measured. (Partially meets.) EM’s policy requires that the scope be defined for a segment—typically a 5- to 10- year contract—at the beginning of the work. However, EM’s policy also states that the segment’s scope may be reduced to free up funding to cover risks. When risks occur and the scope is reduced, the segment’s performance may not be accurately and fully measured. Developing a cost estimate using GAO best practices. (Partially meets.) EM’s policy requires that EM follow our best practices for cost estimating prior to starting the execution of a segment. However, once the contractor begins executing the segment, the policy does not require EM to follow our best practices, even when independent cost estimates are developed during a baseline change process. Developing and maintaining an integrated master schedule using GAO best practices. (Minimally meets.) EM’s policy requires that the contract specify the schedule for the segment, which could be an input to an overall integrated master schedule for that segment. The policy does not require that an integrated master schedule be developed and maintained in accordance with GAO best practices. Conducting risk assessments throughout the life cycle of the project; prioritizing risks in a risk register; developing risk mitigation strategies; and determining the appropriate amount of contingency. (Minimally meets.) EM’s policy does not require a risk management plan for projects. In addition, the policy states that EM will not fund contingency to cover risks that may occur for operations activities. Capturing lessons learned throughout the continuum of a project in a database and disseminating them among projects. (Partially meets.) EM’s policy requires the EM Deputy Assistant Secretary for Acquisition and Project Management to collect and disseminate lessons learned, but the policy does not specify that this process should be done throughout the continuum of a project or that lessons learned should be disseminated among operations activities. Developing a root cause analysis and corrective action plan to identify and address the underlying causes of cost overruns, schedule delays, and performance shortcomings when a cost or schedule overrun occurs. (Does not meet.) The policy does not contain any information on the steps that EM will take, such as developing a root cause analysis and corrective action plan, once management becomes aware that a cost or schedule overrun is probable for an operations activity. Conducting a variety of independent reviews throughout the life of a project, including at key decision points, and on multiple aspects of the project, such as the mission need, cost, earned- value management system, and baseline review. (Partially meets.) EM’s policy requires reviews of segments conducted or organized by EM’s Office of Project Management. However, there are no requirements for any independent reviews conducted by DOE offices or other entities outside EM. Establishing project-reporting systems/databases to provide a clear picture of project performance to management and to keep the contractor accountable. (Partially meets.) EM’s policy established a requirement that performance information be reported in the Integrated Planning, Accountability, and Budgeting System database for each operations activity. However, EM’s policy does not address how this performance information will provide a clear picture of performance and how it will be used to keep the contractor accountable. Our findings on the inclusion of project management leading practices in EM’s 2017 cleanup policy are consistent with concerns raised by DOE’s Project Management Risk Committee. According to meeting minutes from December 2015, the committee expressed concerns that EM’s proposed cleanup policy (adopted in July 2017) appeared to run counter to the Secretary’s initiative to apply best practices to oversight of project management. In committee meeting minutes from November 2015, the committee expressed concern with the level of rigor that would be applied to independent cost analysis, project reviews, general oversight, and risk mitigation under the new cleanup policy. According to PMI, effective project management is key to implementing an organization’s strategy, and has a dramatic impact on the bottom line; organizations that invest in proven project management practices—such as these selected leading practices—continue to experience greater success than their underperforming counterparts. In addition, under federal standards for internal control, management periodically reviews policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. Until EM reviews and revises its policy to include project management leading practices related to scope, cost, and schedule performance, and independent reviews, EM’s operations activities are at risk of scope creep or uncontrolled changes to scope, exceeding their initial budget and schedule, and failing to meet their goals. EM uses three tools to measure the overall performance of operations activities, but these tools do not provide a clear picture of overall performance. These tools are earned value management, performance metrics, and milestones, according to EM documentation and officials. However, EM has not followed best practices for its contractors’ EVM systems; EM’s performance metrics do not link performance to cost; and EM postpones milestones when they are at risk of missing them and does not consistently track or report those milestone changes over time. Figure 6 summarizes our findings on these three performance measures and how they affect EM’s ability to effectively manage the cleanup effort. To measure the overall performance of its operations activities, EM relies primarily on EVM data, supplemented by program-wide performance metrics and cleanup milestones, according to EM documentation and officials. EVM is a management tool used to measure the value of work accomplished in a given period and compare it with the planned value of work scheduled for the same period and with the actual cost of the work accomplished. EVM data can alert project managers to potential problems sooner than expenditures alone can. The use of EVM as a management tool is considered a best practice for conducting cost and schedule performance analysis for projects. EM’s 2017 cleanup policy requires that contractors use an EVM system or an approved alternative for monitoring and controlling work at the contract level. We reviewed all 20 EM contracts covering operations activities and found that EM requires its contractors to maintain EVM systems for 17 of all 20 contracts. EM paid contractors for maintaining these systems and providing EVM reports to EM. For example, EM has paid one contractor $1 million annually to maintain its EVM system, and EM has paid contractors anywhere from $10,000 to $235,000 annually to receive their EVM reports, according to EM responses to our information request. EVM by itself may not be sufficient to measure the progress of operations activities, according to EM’s 2012 operations activities protocol. The second tool EM uses to measure performance is performance metrics. EM developed 17 program-wide performance metrics for its cleanup work. The goal of these metrics is to measure progress toward completing the scope of work for the contract and the entire life of an operations activity. EM headquarters collects information from the sites monthly to measure how each activity has performed against a goal set at the beginning of each year. Examples of EM’s performance metrics include the number of cleanup sites being eliminated, the cubic meters of transuranic waste being disposed of, the number of containers of high-level waste packaged for final disposition, and the number of closed radioactive liquid waste tanks. The EM cleanup sites set targets for these metrics annually. According to EM officials, many operations activities have one or more of these performance metrics associated with them, but some do not. Appendix II contains the full list of EM’s performance metrics. The third tool EM uses to measure performance are cleanup milestones. Cleanup milestones represent deadlines for various cleanup-related activities derived from agreements DOE enters into with its regulators, including the Environmental Protection Agency and states. There are many different types of milestones, including enforceable and planning milestones. Generally, an enforceable milestone has a fixed, mandatory due date that is subject to the availability of appropriated funds while a planning milestone is not enforceable and usually represents a placeholder for shorter term work. EM collects program-wide performance information from the three performance measures tools in a centralized database known as the Integrated Planning, Accountability, and Budgeting System. These performance data are used by EM to manage its program and to provide information to DOE management, Congress, and other stakeholders. According to DOE’s Office of Inspector General and EM officials, this database was developed as a program management tool to provide information to EM headquarters officials, to ensure effective overall program performance; DOE’s Chief Financial Officer, for inclusion in DOE-wide reports; Congress and taxpayers, to identify the remaining environmental cleanup liability and to provide transparency regarding contractor performance; and stakeholders, to make sure the work reported is accurate, timely, complete, and in accordance with agreements. EM relies on contractors’ EVM systems to measure the performance of its contractors’ operations activities, but EM has not followed (i.e., has not met, has minimally met, or has partially met) best practices to ensure that these systems are (1) comprehensive, (2) provide reliable data, and (3) are used by EM leadership for decision-making—which are the three characteristics of a reliable EVM system. Moreover, EM has allowed the contractors to categorize a large portion of their work in a way that limits the usefulness of the EVM data. Our analysis of EM contractors’ EVM systems for operations activities found that EM has not followed (i.e., has not met, has minimally met, or has partially met) best practices, as discussed below. As a result, EM has not ensured that these systems are: (1) comprehensive, (2) provide reliable data, and (3) used by EM leadership for decision-making—which are the three characteristics of a reliable EVM system. (See app. III for more specific information on EM’s performance on each best practice considered and app. IV for information on how each contract followed each best practice.) Comprehensive: Best practices to ensure EVM systems are comprehensive are: (1) requiring the contractor’s EVM systems be certified to meet guidelines established by the Earned Value Management Systems EIA-748-D Intent Guide; (2) conducting an integrated baseline review to ensure that all work is accurately captured in the performance measurement baseline; and (3) performing regular surveillance to ensure the contractors continue to maintain their EVM systems in a way to meet the EIA-748-D guidelines. We found that 17 out of 20 contractors’ EVM systems were certified to be compliant with the EIA-748-D guidelines, but of these 17, 4 contractors had self-certified their EVM systems. However, only about half of the EVM systems met the best practices for conducting integrated baseline reviews and performing ongoing surveillance. Among those, many of the reviews were not rigorous enough to ensure that the performance measurement baseline captured all of the work. In November 2017, EM issued a standard operating policy and procedure, which suggests that EVM systems be surveilled regularly. However, we discovered that EM officials were not performing thorough surveillance reviews to ensure that EVM systems were in alignment with the EIA-748-D guidelines and that the data being reported by the EVM systems were reliable. Provide reliable data: Best practices to ensure that the contractors’ EVM systems provide reliable data are (1) the EVM data do not contain any anomalies and (2) estimates at completion— the expected total cost of completing all work based on the contractor’s performance to date—are realistic. The EVM data for contracts covering operations activities contained numerous, unexplained anomalies in all the months we reviewed, including missing or negative values for some of the completed work to date. Negative values should occur rarely, if ever, in EVM reporting because they imply the undoing of previously scheduled or performed work. In addition, we found problems with the estimate at completion listed in all 20 contractors’ EVM systems. More specifically, we found (1) many instances where the actual costs exceeded the estimates at completion even though there was still a lot of work remaining; (2) several occasions where the estimates at completion were less than half of the original budget at the beginning of the project; and (3) several contractors reported estimates at completion of zero dollars when their original budgets were for hundreds of millions of dollars. These problems indicated that the EVM systems were not being updated in a timely manner or were not well monitored since the estimate at completion values were too optimistic and highly unlikely. Used by EM leadership for decision-making. Best practices to ensure that the data from the contractors’ EVM systems are used by EM leadership for decision-making are: (1) reviewing EVM data, including cost and schedule variances, on a regular basis; (2) ensuring that EM management use EVM data to develop corrective action plans; and (3) ensuring that the performance measurement baseline is updated to reflect changes. We reviewed monthly reports EM sites present to EM headquarters management for review. We found that none of the sites adequately reported EVM variances to EM headquarters management; they were all missing some EVM information such as trend data or the estimate at completion. In addition, many of the sites’ monthly reports did not include corrective action plans for addressing variances, if any, between planned and actual performance. We also reviewed monthly reports that the EM Office of Project Management started to present to EM headquarters senior leadership in October 2017, and found that these reports included most of the EVM indicators for all 15 contracts on which EM Office of Project Management reported. However, EM Office of Project Management officials stated that they have only started suggesting corrective action to EM headquarters senior leadership since early 2018; it is too soon to tell how EM headquarters senior leadership is using this information to determine which contracts need the most attention and which corrective actions management will develop and take. Moreover, this monthly report uses unreliable EVM data, as we found in the prior characteristic. Finally, regarding the third best practice, EM provided evidence that 17 out of 20 contractors had a formal process in place for updating the budget baseline. However, the extent to which contractors followed their processes was questionable given the problems we found with the estimates at completion, as discussed in the prior characteristic. Even though EM requires most of its contractors for operations activities to maintain EVM systems and pays them for doing so, EM’s 2017 policy generally does not require that EVM systems be maintained and used in a way that follow EVM best practices. Until EM updates its cleanup policy to require that EVM systems be maintained and used in a way that follow EVM best practices, EM leadership may not have access to reliable performance data to make informed decisions in managing its cleanup work and to provide to Congress and other stakeholders on billions of dollars’ worth of cleanup work every year. Compounding the limitations with the EVM systems currently in place, EM has categorized a large portion of its work in a way that limits the usefulness of the EVM data. Specifically, a sizable amount of the work is categorized as level of effort for all 14 contracts for which we could identify the percentage of the level-of-effort work (in dollars). Work that is categorized as level of effort does not have defined deliverables or physical products. Progress for level-of-effort work is measured by the passage of time, but is not measured against a scheduled amount, so no schedule variance occurs. The effectiveness of EVM systems, which are designed to measure performance against cost and schedule targets, will be limited if there is a high amount of level-of-effort work, according to our best practices. Thus, according to best practices, categorizing work as level of effort should be minimized to the extent possible if EVM is being used to measure performance, and contracts with level-of-effort work over 15 percent should be subject to additional scrutiny. As shown in figure 7 below, the range for EM’s contracts on operations activities is between 36 and 83 percent. (We used letters for each contract, rather than identifying the site or contractor). According to EM officials, at least half of the level-of-effort work conducted under the cleanup contracts consists of recurring activities necessary to maintain the sites, which EM refers to as “minimum safety” work. According to EM officials, examples of such work include physical security, health and radiation protection and services, or critical facility and infrastructure maintenance for safe conditions. These officials said that minimum safety work makes up 30 to 60 percent of individual sites’ budgets, for a total of at least $2.7 billion, or 42 percent, of EM’s $6.4 billion fiscal year 2018 budget. The Assistant Secretary for EM noted in September 2018 that much of DOE’s environmental cost liability has to do with the management of the minimum safety work. The Assistant Secretary also noted that significant potential cost savings could result from reducing minimum safety work and planned to start an initiative in fiscal year 2019 to examine how EM can reduce this work. EM officials agreed that some of the contractor’s work currently categorized as level of effort could in fact be measured discretely. According to an ANSI guideline, only work not measurable or for which measurement is impractical may be categorized as level of effort. EM officials we interviewed stated that EM relies on its contractors to categorize work as discrete or as level of effort, and EM approves these decisions during the integrated baseline review. According to EM officials, there is no EM policy or guidance on what circumstances justify categorizing work as level of effort. Federal standards for internal controls state that management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control in management directives, administrative policies, or operating manuals. Until EM develops a policy that ensures that work is categorized as level of effort only in appropriate, specified circumstances, such as when work is not measurable or when measurement is impractical, it may not have reliable performance data to help it achieve its objective of reducing risks and costs associated with billions of dollars’ worth of cleanup work every year. We found that EM’s 17 performance metrics for its cleanup work measure the scope of work accomplished in a specific year but do not link that work to the cost of completing it. For example, EM reported in the Integrated Planning, Accountability, and Budgeting System database eliminating 72,000 gallons of radioactive liquid waste out of a target of 342,000 gallons for fiscal year 2017 at the Savannah River Site, and disposing of 1,734 cubic meters of low-level waste out of a target of 360 cubic meters at the Idaho site. However, in neither case did EM indicate how much that work cost to accomplish. According to officials from DOE’s Office of Project Management, the scope of work accomplished is not a good indicator of performance by itself because it does not allow the project manager to know whether EM received good value from the contractor. In contrast, EVM systems allow managers to measure the value of work accomplished in a given period. As discussed above, EM collects EVM data, but EM’s performance metrics do not link to the EVM data. According to federal standards for internal control, management should use quality information to achieve an entity’s objectives and the quality information must be complete, among other things. In EM’s case, its objective, as stated in its mission, includes completing its cleanup work in a way that reduces associated risks and costs. By integrating reliable EVM data into EM’s performance metrics for operations activities, EM could provide a clearer picture of performance and better indicate whether EM is achieving its objective of reducing risks and costs. With regard to cleanup milestones, we found in February 2019 that EM has hundreds of milestones, but the exact number cannot be determined because of inconsistencies in tracking and defining milestones between sites and EM headquarters, and sites have the discretion to send updated milestone data to EM headquarters when they choose. As a result, some sites track milestones differently than EM headquarters does. We also found that EM does not consistently define or track met, missed, or postponed cleanup-related milestones at selected sites, and EM’s milestone reporting to Congress is inconsistent. EM sites renegotiate milestone dates with their regulators before they are missed, and EM does not track the history of these changes. This is because once milestones are changed, sites are not required to maintain or track the original milestone dates. As a result, the new milestones become the new agreed-upon time frame, essentially resetting the deadline. Further, in its report to Congress on enforceable milestones’ status, EM reports the most recently renegotiated milestone dates with no indication of whether or how often those milestones have been missed or postponed. Thus, the EM program is unable to use milestone data to provide a clear, reliable picture of its performance. Furthermore, EM officials at headquarters and selected sites said they had not conducted root cause analyses on missed or postponed milestones. Thus, EM cannot address systemic problems and consider them when renegotiating milestones with regulators. In addition, without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones. As a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work and likely increasing cleanup costs. In this same report, we recommended, among other things, that EM should establish a standard definition of milestones across the cleanup sites, track changes to the milestones, report annually to Congress on the status of its milestones, and conduct root cause analyses of performance shortcomings that lead to missed or postponed milestones. DOE’s EM program has the challenging mission of safely cleaning up radioactive waste, spent nuclear fuel, and environmental contamination from 50 years of federal nuclear weapons production and energy research, while working to reduce associated risks and costs within the established regulatory framework. Since its mission began in 1989, EM has spent more than $164 billion on its cleanup work, and it faces future cleanup costs of more than $377 billion—the federal government’s single largest environmental liability. To improve management of projects undertaken within the department, including EM, DOE established its Office of Project Management and strengthened project management requirements in Order 413.3B for managing capital asset projects. However, since 2009, when EM created a new category of cleanup work called operations activities, EM has opted not to apply DOE’s project management requirements to almost 80 percent of its cleanup work. From fiscal years 2011 to 2018, EM’s environmental liability increased by about $214 billion. DOE’s Office of Project Management officials have raised concerns about how EM classifies this work. Until EM works together with DOE’s Office of Project management (1) to establish requirements for classifying cleanup work as capital asset projects or operations activities and (2) to assess EM’s ongoing operations activities to determine if they should be reclassified as capital asset projects based on the newly established requirements, the department may incur more project management risk of cost increases and schedule delays than it should for hundreds of billions of dollars of remaining work. In July 2017, EM released a new cleanup policy containing requirements for managing its program and its operations activities, but this policy does not follow most of the selected program and project management leading practices we identified related to management of scope, cost, and schedule performance, and independent review of performance. Until EM reviews and revises its cleanup policy to include program and project management leading practices related to scope, cost, schedule performance, and independent reviews, the EM program is at risk of uncontrolled changes to scope, exceeding its cost estimates and schedule, failing to meet its goals, and increasing DOE’s environmental liabilities. The new Assistant Secretary for the Office of Environmental Management has acknowledged the importance of improving EM’s performance in addressing the department’s large and growing environmental liabilities. However, the three tools that EM uses to measure its overall program performance and contractors’ performance on operations activities— earned value management, performance metrics, and cleanup milestones—do not provide a clear, reliable picture of performance for EM leadership, Congress, and other stakeholders. In particular, EM’s EVM systems for operations activities are not comprehensive, do not provide reliable data, and are not used by EM leadership to measure overall performance of the EM program. Furthermore, a large portion of the work performed by contractors is categorized as level of effort, limiting the usefulness of the EVM data. In addition, EM’s performance metrics are not linked to the costs of the work performed. Until EM updates its cleanup policy to require that EVM systems be maintained and used in a way that follows EVM best practices, EM leadership may not have access to reliable performance data to make informed decisions in managing its cleanup work and to provide to Congress and other stakeholders on billions of dollars’ worth of cleanup work every year. Moreover, until EM develops a policy that ensures that work is categorized as level of effort only in appropriate, specified circumstances, such as when work is not measurable or when measurement is impractical, it may not have reliable performance data to help it achieve its objective of reducing risks and costs associated with billions of dollars’ worth of cleanup work every year. Finally, by integrating reliable EVM data into EM’s performance metrics for operations activities, EM could provide a clearer picture of performance and better indicate whether EM is achieving its objective of reducing risks and costs. We are making the following seven recommendations to DOE: The Secretary of Energy should direct the Director of the Office of Project Management and the Assistant Secretary of the Office of Environmental Management to work together to establish requirements for classifying cleanup work as capital asset projects or operations activities. (Recommendation 1) The Secretary of Energy should direct the Director of the Office of Project Management and the Assistant Secretary of the Office of Environmental Management to work together to asses EM’s ongoing operations activities to determine if they should be reclassified as capital asset projects based on the newly established requirements. (Recommendation 2) The Secretary of Energy should direct the Assistant Secretary of the Office of Environmental Management to review and revise EM’s 2017 cleanup policy to include program management leading practices related to scope, cost, schedule performance, and independent reviews. (Recommendation 3) The Secretary of Energy should direct the Assistant Secretary of the Office of Environmental Management to review and revise EM’s 2017 cleanup policy to include project management leading practices related to scope, cost, schedule performance, and independent reviews. (Recommendation 4) The Secretary of Energy should direct the Assistant Secretary of the Office of Environmental Management to update its cleanup policy to require that EVM systems be maintained and used in a way that follows EVM best practices. (Recommendation 5) The Secretary of Energy should direct the Assistant Secretary of the Office of Environmental Management to develop a policy to ensure that work is categorized as level of effort only in appropriate, specified circumstances, such as when work is not measurable or when measurement is impractical. (Recommendation 6) The Secretary of Energy should direct the Assistant Secretary of the Office of Environmental Management to integrate EVM data into EM’s performance metrics for operations activities. (Recommendation 7) We provided DOE with a draft of this report for its review and comment. In its written comments, reproduced in appendix V, DOE generally agreed with the findings in the report and its recommendations and described actions that it intends to take in response to our recommendations. More specifically, of the seven recommendations, DOE concurred with four and partially concurred with three. DOE partially concurred with our recommendations that the Director of the Office of Project Management and the Assistant Secretary for the Office of Environmental Management (EM) work together to (1) establish requirements for classifying cleanup work as capital asset projects or operations activities, and (2) assess EM’s ongoing operations activities to determine if they should be reclassified as capital asset projects based on the newly established requirements. DOE stated that the department commits (1) to reviewing its methodology for categorizing work and revising it, as appropriate, as well as (2) to determining the appropriate application of any revisions to the work classification methodology to new and existing work. DOE also stated that the Assistant Secretary for EM is ultimately responsible for the proper classification of work and will consult with the Office of Project Management. We appreciate DOE’s commitment to addressing these two recommendations. As we stated in our report, in July 2015, the Secretary of Energy gave DOE’s Office of Project Management responsibility to serve as DOE’s enterprise project management organization. As such, DOE states that this office is responsible for providing leadership and assistance in developing and implementing DOE-wide policies, procedures, programs, and management systems pertaining to project management, as well as for independently monitoring, assessing, and reporting on project execution performance. Officials from this office are experts in project management, especially as it relates to capital asset projects. Given (1) the high-risk posed by EM’s cleanup work and the high environmental liability, which may continue to grow; (2) the difference in the stringency of requirements between managing and overseeing operations activities and capital asset projects; and (3) the concerns raised by DOE top project management experts that some current operations activities should be classified as capital asset projects, we encourage the Secretary to direct EM not only to consult with DOE’s Office of Project Management but to take advantage of the office’s role and expertise and direct EM to work with this office to come to an agreement about proper classification requirements and classification of current and future cleanup work. It is in DOE’s interest to ensure its cleanup work is classified and managed appropriately, regardless of which office is ultimately responsible for the proper classification of work. DOE concurred with our recommendations to review and revise EM’s 2017 cleanup policy to include program and project management leading practices related to scope, cost, schedule performance, and independent reviews and to require that EVM systems be maintained and used in a way that follows EVM best practices. DOE also concurred with our recommendation to develop a policy to ensure that work is categorized as level of effort only in appropriate, specified circumstances, such as when work is not measurable or when measurement is impractical. DOE also partially concurred with our recommendation to integrate EVM data into EM’s performance metrics for operations activities. For all these recommendations, DOE stated that EM is already in the process of reviewing the EM cleanup policy for necessary updates, revisions, and modifications. DOE further stated that EM will consider and incorporate changes relative to these recommendations, as appropriate, during this process, and EM will also consider any necessary changes to related guidance or policies and procedures. DOE also provided technical comments, which we incorporated in our report as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 14 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VI. Our report examined: (1) how the EM program manages its cleanup work, (2) the extent to which EM’s cleanup policy follows selected program and project management leading practices, and (3) how EM measures the overall performance of its operations activities. To examine how the EM program manages its cleanup work, we reviewed various DOE documents, including DOE’s Order 413.3B, EM’s 2012 operations activities protocol, EM’s 2017 cleanup policy, standard operating policies and procedures associated with this cleanup policy, EM’s mission and functions document, EM’s draft 45-day review documentation, meeting minutes from the Project Management Risk Committee, draft appendix to Order 413.3B developed by DOE’s Office of Project Management, and documents received from cleanup sites. We also interviewed DOE officials from the Office of Project Management and members of the Project Management Risk Committee, and EM officials from headquarters, such as the Associate Principal Deputy Assistant Secretary for Field Operations, the Deputy Assistant Secretary for Acquisition and Project Management, officials from EM’s Office of Project Management, Office of Budget and Planning, Office of Program Planning, officials in charge of managing the Integrated Planning, Accountability, and Budgeting System database that collects monthly performance information from the sites, and officials from 5 of EM’s 16 cleanup sites. (We contacted all sites and interviewed 5 sites over the phone that responded to our request for an interview.) We then decided to conduct site visits. We visited two of these sites—Savannah River and Idaho— because they are among the sites with the highest number of operations activities and the most diverse types of and highest-cost cleanup work remaining. Our findings from these 5 sites are not generalizable to all EM sites, but they help explain the delineation of roles between the site managers and EM headquarters in managing and classifying cleanup work. We also attended an EM internal training session in which EM headquarters officials introduced the 2017 cleanup policy to officials at the Hanford site and attended EM cleanup public conferences. Moreover, we reviewed the role of DOE’s Office of Project Management in EM’s cleanup work. More specifically, we examined whether this office played a role in the development of EM’s 2017 cleanup policy and classification of EM’s cleanup work, consistent with its designation as DOE’s enterprise project management organization. To assess the reliability of EM’s fiscal year 2019 budget data, we requested information about EM’s Financial Integration System module of the Integrated Planning, Accountability, and Budgeting System database, from which these data were provided. Based on the responses from officials in charge of this database, we determined the data to be sufficiently reliable for our purposes. To examine the extent to which EM’s cleanup policy follows selected program and project management leading practices, we selected two sets of criteria for program and project management leading practices using leading practices from the Project Management Institute, which are generally recognized as the top leading practices for program and project management. To select program management leading practices, we first reviewed the Project Management Institute’s The Standard for Program Management—Third Edition (2013). We identified 9 program management leading practices based on PMI’s standards related to a program’s management of scope, cost, schedule performance, and independent review of performance. To select project management leading practices, we first identified 12 project management leading practices listed in DOE’s Order 413.3B related to a project’s management of scope, cost, schedule performance, and independent review of performance. We then compared these 12 project management leading practices to PMI’s A Guide to the Project Management Body of Knowledge–Fifth Edition, which includes PMI’s standards for project management, to make sure these leading practices align with PMI’s standards for project management. To select these leading practices, (1) two GAO analysts separately examined the PMI and DOE documentation, then, (2) a GAO specialist independent of the team producing this report reviewed the leading practices we selected. All three GAO staff agreed on these selected leading practices. To validate our selection of program and project management leading practices, we shared these selected leading practices with PMI representatives and incorporated their feedback, as appropriate. PMI representatives agreed with the program and project management leading practices that we selected. We then compared EM’s 2017 cleanup policy and the 11 associated standard operating policies and procedures developed by EM by the time of our analysis (by May 2018) with the 9 program management and 12 project management leading practices we selected. We included these standard operating policies and procedures in our analysis because EM officials stated that EM intentionally wrote this policy at a high level because EM planned to develop standard operating policies and procedures that would establish more detailed steps to implement the policy. We analyzed the extent to which the policy and the 11 standard operating policies and procedures follow these leading practices. We also interviewed EM headquarters and site officials to learn more about the 2017 cleanup policy. We used a 5-point scoring system to determine the extent to which EM’s cleanup policy follows selected program and project management leading practices. We used the following 5-point scoring system: “fully met” means that complete evidence was provided that satisfied the leading practice; “substantially met” means that evidence was provided that satisfied a large portion of the leading practice; “partially met” means that evidence was provided that satisfied about half of the leading practice; “minimally met” means that evidence was provided that satisfied a small portion of the leading practice; and “did not meet” means that no evidence was provided that satisfied the leading practice. If the score for each leading practice was “fully met” or “substantially met,” we concluded that EM’s cleanup policy and its associated standard operating policies and procedures followed the leading practice. In contrast, if the score was “partially met,” “minimally met,” or “not met,” we concluded that EM’s policy did not follow the leading practice. To determine this score, two GAO analysts separately examined EM’s policy document and then agreed on a final score for each of the leading practices. To examine how EM measures the performance of its operations activities, we analyzed EM’s use of the three measures of performance that EM policy identified: earned value management (EVM); performance metrics; and cleanup milestones. To evaluate EM’s EVM systems, we compared EM’s use of EVM with 8 of the 10 best practices for earned value management found in our Cost Estimating and Assessment Guide, which draws best practices from federal cost-estimating organizations and industry. Specifically, we reviewed the use of EVM systems in the 21 contracts EM uses to execute its operations activities and compared this review’s results with EVM best practices. To gather this information, we submitted a data collection instrument to all 16 sites to ascertain whether or not they follow these best practices for each contract containing operations activities. We also requested documentation, such as EVM system certification information or surveillance reports, supporting their answers. We relied mainly on the sites’ responses but, when available, also reviewed the documentation we received to check the sites’ answers for accuracy and completeness. To determine whether information on EVM is reported to EM senior leadership, we also reviewed (1) monthly progress reports EM sites presented to EM headquarters management that ranged from April 2017 to April 2018 depending on the site and (2) monthly reports that EM Office of Project Management presents to EM headquarters senior leadership; specifically the April 2018 Cleanup Program Monthly Performance and the EM Segment Activity Portfolio Summary, or “Quad Chart,” reports, which were the most recent reports available at the time of this analysis. In addition, as part of our analysis, we analyzed EM headquarters’ EVM data on operations activities from October 2016 through September 2017 (the most recent data available at the time of our review) to determine whether or not the EVM data were reliable. We checked for data anomalies, such as missing or negative values for each of those months. We also reviewed DOE and EM documents—such as monthly progress reports submitted by the 16 sites to EM headquarters for review or the monthly reviews prepared by an EM headquarters office for senior management—to see what EVM data senior management used for decision-making. To provide a score for our analysis, we used the following 5-point scoring system to score the answer for each contract for each best practice: “fully met” means that complete evidence was provided that satisfied the best practice; “substantially met” means that evidence was provided that satisfied a large portion of the best practice; “partially met” means that evidence was provided that satisfied about half of the best practice; “minimally met” means that evidence was provided that satisfied a small portion of the best practice; and, “did not meet” means that no evidence was provided that satisfied the best practice. For each best practice, we color-coded the assessment at the contract level. Contracts that fully met or substantially met the criteria were coded green, those that partially met the criteria were coded yellow, and those that did not or minimally meet the criteria were coded red. We then assigned a score for each color: 1 for red, 3 for yellow, and 5 for green. We determined the overall score for each best practice by taking the average across the 20 contracts we reviewed. After scoring each best practice individually, we then used these scores to develop an average score for the three EVM characteristics: whether EM has ensured that these EVM systems are (1) comprehensive, (2) provide reliable data, and (3) are used by EM leadership for decision-making. To examine EM’s use of performance metrics data, we reviewed annual performance metrics collected by EM headquarters for every operations activity from 2010 to 2017. We chose this period because 2010 is the time when EM started classifying work as operations activities while 2017 was the most recent available data at the time of our analysis. We reviewed relevant documentation, and interviewed agency officials knowledgeable about those data, among other things. Specifically, we interviewed DOE and EM officials at headquarters and from the five cleanup sites (including in-person interviews at the Savannah River and Idaho sites). We also reviewed our prior work in GAO-19-207 related to EM’s cleanup agreements and milestones. We conducted this performance audit from April 2017 to February 2019, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: EM’s Program-wide Performance Metrics Presented to Congress, as of the end of Fiscal Year 2017 The information in this table is from DOE’s fiscal year 2019 budget request, which was the most recent request presented to Congress. DOE, Department of Energy: FY 2019 Congressional Budget Request for Environmental Management, DOE/CF-0142, Vol. 5 (Washington, D.C.: March 2018). GAO assessment of individual best practice Substantially met. Seventeen out of 20 contracts we reviewed had a certified EVM system, of which 4 self- certified. EM officials reported that the remaining three contracts were not certified or were not required to be certified. Partially met. Thirteen out of the 20 contracts we reviewed had conducted or planned to conduct an integrated baseline review to ensure that the performance measurement baseline provides reliable cost and schedule data for managing the program and projecting accurate estimates at completion. However, many of these reviews were not rigorous enough to ensure that the performance measurement baseline captured all of the work. Not assessed. Partially met. Eleven out of the 20 contracts fully met this best practice, and contractors performed self- assessments or conducted annual reviews for 5 additional contracts. However, EM field and headquarters officials were not performing thorough reviews to check whether the EVM systems were in alignment with the EIA-748-D guidelines to ensure that the data being reported by the systems were reliable. Partially met. The EVM data for operations activities contracts contained numerous, unexplained anomalies in all the months we reviewed—including missing or negative values for some of the completed work to date. Having anomalies in the EVM data occurring each month can cause potential distortions resulting in inaccurate projections of estimates at completion. Not assessed. Does EM’s use of EVM systems follow characteristic? GAO assessment of individual best practice Minimally met. We found problems with the estimate at completion in all of the 20 contracts we analyzed. For example, we found instances where the estimates at completion were either (1) less than half the original budget, (2) higher than expected, or 3) zero when the original budget was for hundreds of millions of dollars. These problems indicated that the EVM systems were not being updated in a timely manner or were not well monitored since the estimate at completion values were too optimistic and highly unlikely. Partially met. We reviewed two sources of information on earned value management reporting to EM senior leadership for this best practice. 1) When reviewing the monthly reports EM sites present to EM headquarters management, we found that none of the sites adequately reported EVM data. 2) When reviewing the new monthly report format that EM’s Office of Project Management presents to EM headquarters senior leadership since October 2017, we found that EM reported on the performance of 15 out of the 20 contracts. We found that these reports included most of EVM indicators for all 15 contracts on which EM Office of Project Management reported. However, this monthly report uses unreliable EVM data, as we found in the prior characteristic. Partially met. We reviewed two sources of information on earned value management reporting to EM senior leadership for this best practice. 1) When reviewing the monthly reports EM sites present to EM headquarters management, we found that they contained corrective action plans for only 3 contracts. 2) When reviewing the new monthly reports that EM’s Office of Project Management present to EM headquarters senior leadership since October 2017, EM Office of Project Management officials stated that they have only started suggesting corrective action to EM headquarters senior leadership since early 2018; it is too soon to tell how EM headquarters senior leadership is using this information to determine which contracts need the most attention and which corrective actions management will develop and take. Substantially met. EM provided evidence that 17 out of 20 contractors had a formal process in place for updating the budget baseline. However, the extent to which contractors followed their processes was questionable given the problems we found with the estimates at completion, as discussed in the prior characteristic above. Not reviewed Assessment for each best practice: Not met—provided no evidence that satisfies any of the best practice; Minimally met—provided evidence that satisfies a small portion of the best practice; Partially met—provided evidence that satisfies about half of the best practice; Substantially met—provided evidence that satisfies a large portion of the best practice; and Met – provided complete evidence that satisfies the entire best practice. We determined the overall score for each best practice by taking the average across the 20 contracts we reviewed. We did not evaluate the following two best practices: (1) the schedule reflects the work breakdown structure, the logical sequencing of activities, and the necessary resources and (2) EVM data are consistent among various reporting formats. We excluded these two best practices because we examined the use of EVM by contractors at a higher program level and did not conduct in-depth analysis of each contractor’s EVM system. EM uses 21 contracts for its operations activities. We reviewed the use of EVM systems in 20 of these contracts because one contract (contract K) is a fixed price contract, which does not require the use of EVM. In addition to the contact named above, Nico Sloss (Assistant Director), Cristian Ion (Analyst in Charge), Nathan Anderson, Margot Bolon, Jenny Chow, Jennifer Echard, Juan Garay, Cindy Gilbert, Katherine Nicole Laubacher, Cynthia Norris, Karen Richey, Dan C. Royer, Kiki Theodoropoulos, and David Wishard made key contributions to this report.", "summary": "EM's mission is to complete the cleanup of nuclear waste at 16 DOE sites and to work to reduce risks and costs within its established regulatory framework. In December 2018, DOE reported that it faced an estimated $494 billion in future environmental cleanup costs—a liability that roughly tripled during the previous 20 years. GAO was asked to examine EM's operations activities. This report examines, among other objectives, (1) how EM manages its cleanup work and (2) the extent to which EM's cleanup policy follows selected leading practices for program and project management. To do this work, GAO reviewed agency documents and interviewed DOE project management experts and EM officials. GAO compared EM's policy with selected leading practices endorsed by the Project Management Institute for program and project management related to scope, cost, schedule, and independent review. The Department of Energy's (DOE) Office of Environmental Management (EM) manages most of its cleanup of nuclear waste (77 percent of its fiscal year 2019 budget) under a category that EM refers to as operations activities, using less stringent requirements than a category of work, known as capital asset projects. (See figure) Capital asset projects—which involve the acquisition of land and other assets, including through environmental remediation—must undergo a series of reviews by independent experts and DOE's senior leadership. In contrast, operations activities are not reviewed outside of EM. EM's policy defines operations activities as reoccurring facility or environmental operations, as well as activities that are project-like, with defined start and end dates. EM cleanup site managers have discretion on how to classify cleanup work because DOE and EM have not established classification requirements. Since 2015, experts in DOE's Office of Project Management have raised concerns that some operations activities should be classified as capital asset projects, and that managing them under less stringent requirements poses cost and schedule risks. For example, the experts stated the cleanup of tanks of radioactive liquid waste should be designated as capital asset projects. However, these experts also stated that EM did not respond to their concerns, even though the office has department-wide responsibilities for overseeing project management. Until EM works with DOE's Office of Project Management to establish requirements for classifying cleanup work, the department may incur more cost and schedule risks than it should. EM's cleanup policy does not follow any of 9 selected program management leading practices or 9 of 12 selected project management leading practices. For example, EM's 2017 cleanup policy does not follow the program management leading practice of conducting risk management throughout the life of a program or the project management leading practice of requiring independent reviews of operations activities. These leading practices help ensure that a program optimizes scope, cost, and schedule performance and that it achieves its goals and intended benefits. Until EM revises its cleanup policy to follow leading practices, EM's operations activities are at risk of uncontrolled changes to scope, exceeding initial budget and schedule, and failing to meet their original goals. GAO is making seven recommendations, including that EM (1) establish cleanup work classification requirements and (2) revise its cleanup policy to follow program and project management leading practices. DOE generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Since 2001, the United States has made a commitment to building Afghanistan’s security and governance in order to prevent the country from once again becoming a sanctuary for terrorists. To achieve its security objectives, the United States currently has two missions in Afghanistan: a counterterrorism mission that it leads and the NATO-led Resolute Support train, advise, and assist mission, which it participates in with other coalition nations. The objective of Resolute Support, according to DOD reporting, is to establish self-sustaining Afghan security ministries and forces that work together to maintain security in Afghanistan. The United States is conducting these missions within a challenging security environment that has deteriorated since the January 2015 transition to Afghan-led security. The United Nations reported nearly 24,000 security incidents in Afghanistan in 2017—the most ever recorded—and, despite a slight decrease in the overall number of security incidents in early 2018, the United Nations noted significant security challenges, including a spike in high-casualty attacks in urban areas and coordinated attacks by the insurgency on ANDSF checkpoints. DOD provides both personnel and funding to support its efforts in Afghanistan. DOD documents indicate that the United States contributes more troops to Resolute Support than any other coalition nation. As of May 2018, the United States was contributing 54 percent of Resolute Support military personnel, according to DOD reporting. Of the approximately 14,000 U.S. military personnel in Afghanistan as of June 2018, about 8,500 were assigned to Resolute Support to train, advise, and assist the ANDSF, according to DOD reporting. For fiscal year 2018, Congress appropriated about $4.67 billion for the Afghanistan Security Forces Fund—the primary mechanism of U.S. financial support for manning, training, and equipping the ANDSF. Other international donors provided about $800 million, and the Afghan government committed to providing about $500 million, according to DOD reporting. Under Resolute Support and the International Security Assistance Force mission that preceded it, CSTC-A is the DOD organization responsible for (1) overseeing efforts to equip and train the ANA and ANP; (2) validating requirements, including equipment requirements; (3) validating existing supply levels; (4) submitting requests to DOD components to contract for procurement of materiel for the ANDSF; and (5) ensuring that the Afghan government appropriately uses and accounts for U.S. funds provided as direct contributions from the Afghanistan Security Forces Fund. OSD-P is responsible for developing policy on and conducting oversight of the bilateral security relationship with Afghanistan focused on efforts to develop the Afghan security ministries and their forces. In August 2017, we reported that the United States had spent almost $18 billion on equipment and transportation for the ANDSF from fiscal years 2005 through April 2017, representing the second-largest expenditure category from the Afghanistan Security Forces Fund. In that report, we identified six types of key equipment the United States funded for the ANDSF in fiscal years 2003 through 2016, including approximately: 600,000 weapons, such as rifles, machine guns, grenade launchers, shotguns, and pistols; 163,000 tactical and nontactical radios, such as handheld radios and 76,000 vehicles, such as Humvees, trucks, recovery vehicles, and mine resistant ambush protected vehicles; 30,000 equipment items for detecting and disposing of explosives, such as bomb disposal robots and mine detectors; 16,000 equipment items for intelligence, surveillance, and reconnaissance, such as unmanned surveillance drones and night vision devices; and 208 aircraft, such as helicopters, light attack aircraft, and cargo airplanes. The Ministry of Defense oversees the ANA, and the Ministry of the Interior oversees the ANP. According to DOD reporting, the authorized force level for the ANDSF, excluding civilians, as of June 2018 was 352,000: 227,374 for the Ministry of Defense and 124,626 for the Ministry of Interior. The ANA includes the ANA corps, Afghan Air Force, Special Mission Wing, ANA Special Operations Command, and Ktah Khas (counterterrorism forces). The ANP includes the Afghan Uniformed Police, Afghan Anti-Crime Police, Afghan Border Police, Public Security Police, Counter Narcotics Police of Afghanistan, and General Command of Police Special Units. The ANA Special Mission Wing, Ktah Khas, ANA Special Operations Command, and ANP General Command of Police Special Units are collectively referred to as the Afghan Special Security Forces. In this report, we refer to the Afghan Air Force and the Afghan Special Security Forces as specialized forces, and the other components of the ANDSF as conventional forces. According to DOD reporting, the combined authorized force level for the specialized forces as of June 2018 was approximately 34,500, or about 10 percent of the ANDSF’s total authorized force level of 352,000, compared with the conventional forces, which make up about 74 percent of the total authorized force level for the ANDSF. Figure 1 shows the ANDSF’s organization. U.S. and coalition advisors from Resolute Support focus on capacity building at the Ministry of Defense, Ministry of Interior, and ANDSF regional headquarters, according to DOD reporting. Ministerial advisors are located at Resolute Support headquarters in Kabul. At the ministerial level, advisors provide assistance to improve institutional capabilities, focusing on several functional areas. Table 1 summarizes the indicators of effectiveness that ministerial advisors are to use to measure ministerial progress in developing functioning systems that can effectively execute each of the functional areas. Regional Resolute Support advisors from seven advising centers located throughout Afghanistan provide support to nearby ANA corps and ANP zone headquarters personnel, according to DOD reporting. Some advisors are embedded with their ANDSF counterparts, providing a continuous coalition presence, while others provide less frequent support, based on proximity to and capability of their ANDSF counterparts. Regional advisors are to track ANDSF capability development by assessing the progress of the ANA corps and ANP zone headquarters based on five capability pillars (see table 2). DOD and other Resolute Support advisors are to document the results of these assessments each quarter in an ANDSF Assessment Report. According to DOD reporting, in addition to ministerial and regional advising, two tactical-level advisory commands provide continuous support for the ANDSF’s specialized forces: Train, Advise, and Assist Command–Air (TAAC-Air) advises the Afghan Air Force down to the unit level, and NATO Special Operations Component Command–Afghanistan (NSOCC-A) primarily provides tactical-level special operations advising for the Afghan Special Security Forces. TAAC-Air and NSOCC-A assess capabilities at the headquarters level based on the five capability pillars described above in table 2, and these assessments are included in the quarterly ANDSF Assessment Report. Figure 2 shows the levels of advising each Resolute Support advisory command type provides for the ANDSF conventional forces and specialized forces. Since Resolute Support began, the ANDSF have improved some capabilities related to the functional areas and capability pillars described above, but face several capability gaps that leave them reliant on coalition assistance, according to publicly available DOD reporting. DOD defines capability as the ability to execute a given task. A capability gap is the inability to execute a specified course of action, such as an ANDSF functional area or a capability pillar (see tables 1 and 2 above). According to DOD guidance, a gap may occur because forces lack a materiel or non-materiel capability, lack proficiency or sufficiency in a capability, or need to replace an existing capability solution to prevent a future gap from occurring. According to DOD reporting on the Afghan security ministries, ANA corps, and ANP zones, the ANDSF generally have improved in some capability areas since Resolute Support began, with some components performing better than others. For example, DOD has reported that the Afghan ministries have improved in operational planning, strategic communications, and coordination between the Ministry of Interior and Ministry of Defense at the national level. In general, the ANA is more capable than the ANP, according to DOD reporting. According to DOD officials and SIGAR reporting, this is due, in part, to the ANA having more coalition advisors and monitoring than the ANP. DOD officials also noted that the Ministry of Interior, which oversees the ANP, and Afghanistan’s justice system are both underdeveloped, hindering the effectiveness of the ANP. Corruption, understaffing, and training shortfalls have also contributed to the ANP’s underdevelopment, according to DOD and SIGAR reporting. The Afghan Special Security Forces are the most capable within the ANDSF and can conduct the majority of their operations independently without coalition enablers, according to DOD reporting. DOD and SIGAR reports have attributed the Afghan Special Security Forces’ relative proficiency to factors such as low attrition rates, longer training, and close partnership with coalition forces. The Afghan Air Force is becoming increasingly capable, and can independently plan for and perform some operational tasks, such as armed overwatch and aerial escort missions, according to DOD reporting. However, DOD has reported that the ANDSF generally continue to need support in several key areas. For example, as of December 2017, DOD reported several ministerial capability gaps, including force management; logistics; and analyzing and integrating intelligence, surveillance, and reconnaissance information. DOD also reported that, as of December 2017, the ANA and ANP continued to have capability gaps in several key areas, such as weapons and equipment sustainment and integrating fire from aerial and ground forces. The ANDSF rely on support from contractors and coalition forces to mitigate capability gaps in these key areas. For some capability areas, such as aircraft and vehicle maintenance and logistics, the ANDSF is not expected to be self- sufficient until at least 2023, according to DOD reporting. According to DOD officials and SIGAR reporting, coalition and contractor support helps mitigate ANDSF capability gaps in the immediate term but may make it challenging to assess the ANDSF’s capabilities and gaps independent of such support. For example, vehicle and aircraft maintenance contractors are responsible for sustaining specific operational readiness rates for the equipment they service. While this helps ensure that ANDSF personnel have working equipment to accomplish their mission, thereby closing an immediate capability gap, it may mask the ANDSF’s underlying capabilities and potentially prolong reliance on such support, according to DOD officials and SIGAR reporting. DOD and the ANDSF have begun implementing plans and initiatives that aim to strengthen ANDSF capabilities. These include the following, among others: ANDSF Roadmap. In 2017, the Afghan government began implementing the ANDSF Roadmap—a series of developmental initiatives that seek to strengthen the ANDSF and increase security and governance in Afghanistan, according to DOD reporting. The Roadmap is structured to span 4 years, but DOD has reported that its full implementation will likely take longer than that. According to DOD reporting, the Roadmap aims to improve four key elements: (1) fighting capabilities; (2) leadership development; (3) unity of command and effort; and (4) counter-corruption efforts. Under the Roadmap’s initiative to increase the ANDSF’s fighting capabilities, DOD and the ANDSF have begun implementing plans to increase the size of the specialized forces. Specifically, DOD reports that the ANDSF plans to nearly double the size of the Afghan Special Security Forces by 2020 as an effort to bolster the ANDSF’s offensive reach and effectiveness. The Afghan Special Security Forces are to become the ANDSF’s primary offensive force, the conventional ANA forces are to focus on consolidating gains and holding key terrain and infrastructure, and the conventional ANP forces are to focus on community policing efforts. In addition, to provide additional aerial fire and airlift capabilities, the ANDSF began implementing an aviation modernization plan in 2017. The aim is to increase personnel strength and the size of the Afghan Air Force and Special Mission Wing fleets by 2023. Enhanced vehicle maintenance efforts. To help improve the ANDSF’s vehicle maintenance abilities, DOD awarded a National Maintenance Strategy Ground Vehicle Support contract, which, according to DOD officials, became fully operational in December 2017. The National Maintenance Strategy Ground Vehicle Support contract consolidated five separate vehicle maintenance and training contracts into a single contract and contains provisions for building the capacity of ANDSF and Afghan contractors to incrementally take control of vehicle maintenance over a 5-year period. Additional U.S. military personnel. As part of the South Asia strategy, the United States committed 3,500 additional military personnel to increase support to its missions in Afghanistan. According to DOD reporting, most of the additional personnel will support the Resolute Support mission, providing more advising and combat enabler support to the ANDSF. Additionally, in March 2018, the United States began deploying a Security Force Assistance Brigade—a new type of unit made up of U.S. Army personnel with expertise in training foreign militaries—to Afghanistan. The Security Force Assistance Brigade will advise conventional and specialized forces at and below the corps and zone levels and will accompany and support ANA conventional forces at the battalion level in ground operations as needed, according to DOD and SIGAR reporting. DOD collects some reliable information about the operation and maintenance abilities of ANDSF specialized forces, in part because advisors are embedded at the tactical level with the specialized forces, according to DOD officials. Specifically, U.S. and coalition forces advise specialized forces at the tactical level under Resolute Support because building ANDSF aviation and special operations abilities are considered particularly important, according to DOD reporting. DOD officials told us that since U.S. and coalition forces are embedded at the tactical level for specialized forces, they can monitor, assess, and report on tactical abilities, including the ability to operate and maintain equipment. Our analysis of information provided by DOD about the Afghan Air Force’s ability to operate and maintain MD-530 helicopters illustrates that DOD has some detailed information about specialized forces. TAAC-Air advisors help train Afghan pilots and maintainers and collect information on their tactical abilities. For example, TAAC-Air advisors track the percentage of maintenance performed by Afghan Air Force maintainers and aircraft operational readiness rates, according to DOD officials. According to DOD reporting and officials, as of December 2017, the Afghan Air Force could independently conduct MD-530 helicopter operations for short intervals without contractor support but relied on contractors to perform the majority of maintenance and sustainment activities. See appendix II for more information on the Afghan Air Force’s ability to operate and maintain MD-530 helicopters. U.S. and coalition forces perform high-level assessments of the ANDSF conventional forces’ capabilities at the corps and zone levels but do not assess their tactical abilities, such as the ability to operate and maintain equipment, according to DOD officials. For example, U.S. and coalition forces assess the ANA and ANP conventional forces in quarterly ANDSF Assessment Reports, but these reports are at the corps and zone headquarters levels, and are not meant to provide an evaluation of the entire ANDSF, according to DOD reporting. DOD officials stated that other U.S.- and coalition-produced reports and assessments, such as DOD’s semiannual Section 1225 reports to Congress, semiannual periodic mission reviews, and annual Afghanistan Plans of Record, provide some information on the ANDSF’s high-level capabilities. However, according to DOD officials, these reports do not routinely assess the conventional forces’ ability to operate and maintain equipment. According to DOD officials, DOD does not assess conventional forces’ tactical abilities because advisors have had little or no direct contact with conventional units below the corps and zone levels, and thus do not collect such information on conventional forces. Specifically, under Resolute Support, U.S. and coalition forces have not embedded with the conventional forces below the corps and zone levels except in limited circumstances. Since U.S. and coalition forces do not collect firsthand information on the conventional units’ tactical abilities, they rely on those units’ self-reporting for information on ANDSF abilities below the corps and zone levels, which, according to DOD officials, may be unreliable. ANDSF reporting is not verified by U.S. officials and can be unreliable in its consistency, comprehensiveness, and credibility, according to DOD officials and SIGAR. For example, the ANDSF produce a monthly tracker on vehicle availability, maintenance backlog, repair times, and personnel productivity, but DOD officials told us that the trackers are of questionable accuracy. Our analysis of information provided by DOD about the ANDSF’s ability to operate and maintain tactical and nontactical radios illustrates the limited amount of information DOD has on ANDSF conventional forces’ tactical abilities. Specifically, DOD officials could not say how well ANDSF personnel on the front lines operate radios in the field and had only limited information on the ANDSF’s ability to maintain radios. For example, the officials noted that the ANA conventional forces can perform some unit-level radio repairs but that complex ANA radio maintenance and all ANP radio maintenance is conducted by contractors. DOD officials at Resolute Support headquarters told us that they provide ministerial- level advising on how to manage ANDSF radio systems and do not provide tactical advising or inventory control for radios. See appendix III for more information on the ANDSF’s ability to operate and maintain radios. Our analysis of information provided by DOD about the ANDSF’s ability to operate and maintain Mobile Strike Force Vehicles (MSFV) highlights the limited amount of information DOD has on ANDSF conventional forces’ tactical abilities compared with specialized forces. DOD officials were able to provide operation and maintenance information for MSFVs that had transferred to the specialized forces as of January 2018 but were unable to provide operation and maintenance information for any other MSFVs. The ANDSF began transferring one of the ANDSF’s two MSFV brigades from the conventional to specialized forces in August 2017, according to DOD officials. As part of this transfer, NSOCC-A advisors—who provide tactical-level advising for the Afghan Special Security Forces—assumed oversight for the first brigade from Resolute Support headquarters advisors. DOD officials stated that the ANDSF’s ability to operate and maintain MSFVs in this brigade prior to the transfer was unknown, as neither Resolute Support headquarters nor the ANA had assessed this. The operation and maintenance abilities of the second brigade, which is still in the conventional forces, remains unknown. DOD officials at NSOCC-A were able to provide information such as inventory and mission capability rates for the MSFVs that had transferred, but only for the short period of time the vehicles had been under the control of the specialized forces. DOD officials told us that NSOCC-A plans to collect more information on the specialized forces’ ability to operate and maintain MSFVs as they are transferred. See appendix IV for more information on the ANDSF’s ability to operate and maintain MSFVs. In the absence of embedded advisors at the tactical level, DOD has not implemented alternative approaches to collect reliable information about the conventional forces’ ability to operate and maintain equipment. Federal internal control standards state that U.S. agencies should obtain and process reliable information to evaluate performance in achieving key objectives and assessing risks. DOD officials acknowledged that some of the plans described above that DOD and the ANDSF have begun implementing to address capability gaps may provide opportunities for DOD to collect more reliable information on the conventional forces’ ability to operate and maintain U.S.-purchased equipment. For example, the National Maintenance Strategy Ground Vehicle Support contract requires that contractors regularly report the total work orders received, work in progress, and completed maintenance work performed by ANDSF personnel as well as vehicle availability rates, which may be more reliable than the ANDSF’s monthly report on vehicle availability. In addition, the Security Force Assistance Brigade may be able to collect and report on the tactical abilities of units they advise and accompany on missions since they are being deployed at or below the corps and zone levels. However, as of June 2018, DOD officials had not decided which, if any, of these options to pursue. Without reliable information on the equipment operation and maintenance abilities of ANDSF conventional forces, which represent nearly 75 percent of the ANDSF, DOD may be unable to fully evaluate the success of its train, advise, assist, and equip efforts in Afghanistan. The United States invested nearly $84 billion in Afghan security in the 17- year period spanning fiscal years 2002 through 2018, but DOD continues to face challenges to developing a self-sustaining ANDSF. While DOD has reported the ANDSF have improved in several capability areas, they continue to face critical capability gaps, impeding their ability to maintain security and stability in Afghanistan independent of U.S. and coalition forces. Moreover, DOD lacks reliable information about the degree to which conventional forces—which make up about three-quarters of the ANDSF—are able to operate and maintain U.S.-purchased equipment. This limits DOD’s ability to fully evaluate the success of its train, advise, assist, and equip efforts in Afghanistan. The Secretary of Defense should develop and, as appropriate, implement options for collecting reliable information on the ANDSF conventional forces’ ability to operate and maintain U.S.-purchased equipment. (Recommendation 1) We provided a draft of this report to DOD and State for comment. DOD declined to provide written comments specifically on this public version of the report, but DOD’s comments on the sensitive version of this report are reprinted in appendix V. The sensitive version of this report included two recommendations, which DOD cited in its comments on the draft of the sensitive report. One of those recommendations related to information that DOD deemed to be sensitive and that must be protected from public disclosure. Therefore, we have omitted that recommendation from DOD’s comment letter in appendix V. This omission did not have a material effect on the substance of DOD’s comments. In its comments, DOD concurred with the recommendation we made in this version of the report and stated it will take steps to implement it. DOD also provided technical comments, which we incorporated as appropriate. The Department of State had no comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Secretary of State. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report please contact me at (202) 512-7114 or farbj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. House Report 114-537 associated with the National Defense Authorization Act for Fiscal Year 2017 included a provision for us to review the Afghan National Defense and Security Forces’ (ANDSF) capability and capacity to operate and sustain U.S.-purchased weapon systems and equipment. This report is a public version of a sensitive report that we issued on September 20, 2018. Our September report included three objectives, including one on the extent to which DOD considers ANDSF input and meets their needs when identifying equipment requirements. DOD deemed the information related to that objective to be sensitive, which must be protected from public disclosure. Consequently, we removed that objective and a related recommendation from this public report. This version includes information on the other two objectives: (1) what has been reported about ANDSF capabilities and capability gaps and (2) the extent to which DOD has information about the ANDSF’s ability to operate and maintain U.S.-purchased equipment. Although the information provided in this report is more limited, the report uses the same methodology for the two objectives as the sensitive report. To identify what has been reported about ANDSF capabilities and capability gaps, we reviewed North Atlantic Treaty Organization (NATO) and DOD documents and reports, such as DOD’s semiannual Section 1225 reports to Congress, produced after the start of the NATO-led Resolute Support mission on January 1, 2015. To determine what steps DOD and NATO have taken to try to address gaps, we reviewed reports the Center for Naval Analyses produced for DOD, as well as DOD and NATO documents and reports produced after January 1, 2015, and reports from GAO, the Special Inspector General for Afghanistan Reconstruction (SIGAR), and the DOD Inspector General. We also interviewed Center for Naval Analyses representatives and DOD officials in the United States and Afghanistan, including DOD officials at the Combined Security Transition Command–Afghanistan (CSTC-A) and in the Office of the Undersecretary of Defense for Policy (OSD-P) who helped create the DOD reporting we reviewed. To determine the extent to which DOD has information about the ANDSF’s ability to operate and maintain U.S.-purchased equipment, we reviewed DOD documents and reports and interviewed DOD officials in the United States and Afghanistan, including DOD officials who advise the ANDSF. We also reviewed federal internal control standards to determine what responsibilities agencies have specifically related to information collection. To provide illustrative examples of information DOD has about the ANDSF’s ability to operate and maintain U.S.- purchased equipment and what that information indicates about the ANDSF’s abilities and challenges, we interviewed and analyzed written responses from DOD officials, including DOD officials who provide procurement and lifecycle management for some ANDSF aircraft and vehicles, about three equipment types—MD-530 helicopters, Mobile Strike Force Vehicles (MSFV), and radios. We selected these three equipment types from a list that we developed, for an August 2017 report, of key ANDSF equipment the United States purchased from fiscal years 2003 through 2016. We made our selections after reviewing DOD documentation and interviewing DOD officials regarding a number of considerations, such as (1) how critical the equipment is to the ANDSF’s ability to achieve its mission; (2) which ANDSF component uses the equipment (i.e., Afghan National Police, Afghan National Army, or both); (3) whether DOD intends to continue procuring the equipment for the ANDSF; and (4) whether the equipment had been in use at least 5 years. We collected detailed information about the ANDSF’s ability to operate and maintain MD-530 helicopters, MSFVs, and radios, as well as other key statistics DOD provided about the equipment, such as inventory, average lifespan, average cost, role, and training. This information was based mainly on DOD responses collected from January 2018 to February 2018 as well as DOD documents and reports produced after January 1, 2015. The total amount of MD-530s and radios authorized for procurement was based on DOD data that we collected for our August 2017 report on key ANDSF equipment the United States purchased in fiscal years 2003 through 2016, which we supplemented with additional data DOD provided on U.S.-purchased equipment from October 1, 2016, through December, 31, 2017. The performance audit upon which this report is based was conducted from August 2016 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate, evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with DOD from September 2018 to October 2018 to prepare this public version of the original sensitive report for public release. This public version was also prepared in accordance with those standards. Manufacturer: MD Helicopters, Inc. U.S. Program Management Office: U.S. Army, Non-Standard Rotary Wing Aircraft Project Management Office Program Advising: Train Advise Assist Command–Air (TAAC-Air) The United States originally procured 6 unarmed MD-530s for the AAF for rotary wing training in 2011. In 2014, the United States purchased 12 armed MD-530s and began retrofitting the 5 remaining trainer helicopters with armament for operational missions to address a close air attack gap. MD- 530s were chosen to fill the gap over other aircraft, in part because they could be delivered relatively quickly as the AAF awaited A-29 light attack aircraft that were experiencing procurement delays, according to Department of Defense (DOD) officials. The United States procured additional MD-530s in 2015, 2016, and 2017 because of the aircraft’s positive impact on the battlefield, according to DOD officials (see fig. 3). Key Statistics Variants: All can be armed with .50-cal machine gun pods and/or 2.75 inch rocket pods. Total Authorized for Procurement: 60 as of December 31, 2017 Inventory: 25 as of January 2018 (30 are scheduled for delivery; attrition of 5 due to crashes and enemy fire) Average Lifespan: Absent mishaps, and with good maintenance, there is no defined lifespan limit for MD-530s, according to DOD officials. National Army and Afghan National Police, depending on the mission, in all but one region of Afghanistan, which is supported by other aircraft. MD-530s are typically tasked two at a time for missions, according to DOD officials. An MD-530 crew consists of a pilot and co-pilot, according to DOD. Average cost: $6.3 million per aircraft, including all electronic devices, weapons management systems, and weapons (excluding ordnance), according to DOD officials. o Division of labor is based on the individual crew members' capabilities, with one pilot handling navigation and communication while the other identifies targets and operates the weapon systems. Army pilot advisors at Kandahar Air Field, according to DOD officials. o MD-530 pilot training takes about 3 years (see fig. 4). 1. The GAO report number cited in DOD’s letter refers to a draft of the sensitive version of this report, which we issued on September 20, 2018. Prior to issuing that version, we changed its report number to GAO-18- 662SU to reflect its sensitive nature. That version of this report included two recommendations. The second recommendation has been omitted from DOD’s letter in this public version because it was related to information that DOD deemed to be sensitive. In addition to the contact named above, Joyee Dasgupta (Assistant Director), Kara Marshall, Katherine Forsyth, and Bridgette Savino made key contributions to this report. The team also benefitted from the expert advice and assistance of David Dayton, Neil Doherty, Justin Fisher, Ashley Alley, Cary Russell, Marie Mak, James Reynolds, Sally Williamson, Ji Byun, and J. Kristopher Keener.", "summary": "Developing independently capable ANDSF is a key component of U.S. and coalition efforts to create sustainable security and stability in Afghanistan under the North Atlantic Treaty Organization (NATO)-led Resolute Support mission. The United States is the largest contributor of funding and personnel to Resolute Support, providing and maintaining ANDSF equipment, along with training, advising, and assistance to help the ANDSF effectively use and sustain the equipment in the future. House Report 114-537 included a provision for GAO to review the ANDSF's capability and capacity to operate and sustain U.S.-purchased weapon systems and equipment. This report addresses (1) what has been reported about ANDSF capabilities and capability gaps and (2) the extent to which DOD has information about the ANDSF's ability to operate and maintain U.S.-purchased equipment. To conduct this work, GAO analyzed DOD and NATO reports and documents, examined three critical equipment types, and interviewed DOD officials in the United States and Afghanistan. This is a public version of a sensitive report issued in September 2018. Information that DOD deemed sensitive has been omitted. Since the Resolute Support mission began in 2015, the Afghan National Defense and Security Forces (ANDSF) have improved some fundamental capabilities, such as high-level operational planning, but continue to rely on U.S. and coalition support to fill several key capability gaps, according to Department of Defense (DOD) reporting. DOD has initiatives to address some ANDSF capability gaps, such as a country-wide vehicle maintenance and training effort, but DOD reports it does not expect the ANDSF to develop and sustain independent capabilities in some areas, such as logistics, for several years. While DOD has firsthand information on the abilities of the Afghan Air Force and Special Security Forces to operate and maintain U.S.-purchased equipment, it has little reliable information on the equipment proficiency of conventional ANDSF units. U.S. and coalition advisors are embedded at the tactical level for the Air Force and Special Security Forces, enabling DOD to directly assess those forces' abilities. However, the advisors have little direct contact with conventional ANDSF units on the front lines. As a result, DOD relies on those units' self-assessments of tactical abilities, which, according to DOD officials, can be unreliable. GAO's analysis of three critical equipment types illustrated the varying degrees of DOD's information (see figure above). For example, DOD provided detailed information about the Air Force's ability to operate and maintain MD-530 helicopters and the Special Security Forces' ability to operate and maintain Mobile Strike Force Vehicles; however, DOD had limited information about how conventional forces operate and maintain radios and Mobile Strike Force Vehicles. DOD's lack of reliable information on conventional forces' equipment operations and maintenance abilities adds to the uncertainty and risk in assessing the progress of DOD efforts in Afghanistan. GAO recommends that DOD develop options for collecting reliable information on conventional ANDSF units' ability to operate and maintain U.S.-purchased equipment. DOD concurred with this recommendation.", "document_type": "gao"}
{"report": "DOD defines software maintenance and software sustainment synonymously, to comprise any activities or actions that change the software baseline, as well as modifications or upgrades that add capability or functionality. For example, software sustainment activities involve the correction of software errors after the software is released and adaptations to enable interfacing with changing environments. The four categories of software sustainment actions are defined in figure 1 below. A software sustainment activity can be categorized in multiple areas. For example, an Army command is modifying software to incorporate Windows 10. This action may be described as corrective in that it addresses errors in previous versions of Windows; perfective in that it upgrades the software to support new capabilities and functionality provided by Windows 10; adaptive in that it can accommodate changes to firmware and hardware environments; and preventive in that it improves reliability. Sustaining software is normally different from sustaining hardware. For example, when hardware breaks, technicians can remove the broken part—such as tread on a tracked vehicle— and install a working part. In contrast, sustaining software typically requires writing, testing, and deploying lines of code. Software provides critical functionality to nearly every hardware system that DOD uses: surface (for example, mobile network systems); air (for example, secure communications arrays in aircraft); sea (for example, submarine guidance systems); missile (for example, targeting systems); ordnance (for example, Common Remotely Operated Weapon Station); and space (for example, positioning software), as shown in figure 2. Further, a weapon system may comprise numerous software systems, each supporting different components of the system. Hundreds, or even thousands, of software systems can be embedded in a single weapon system. Interoperability and integration within the weapon system as a whole constitute key software considerations for the overall weapon system’s sustainability. For example, the military departments include system-of-systems and family-of-systems considerations. These considerations are defined as a set or arrangement of systems that results when independent systems are integrated within a larger system that delivers unique capabilities. Missions are performed by a system-of- systems arrangement of the platforms and systems that deliver the mission capability. Decisions affecting the software on a weapon system are made throughout the acquisition life-cycle. The life-cycle is outlined in DOD Instruction 5000.02, Operation of the Defense Acquisition System. This instruction includes four basic and two hybrid models that serve as examples of defense program structures. The hybrid models combine models, such as a weapon system development that includes significant software development. The instruction also includes phases and milestones to oversee and manage acquisition programs, including major weapon systems. It outlines considerations affecting software sustainment for each milestone, including, for example, the following: Milestone A: The understanding of the technical, cost, and schedule risks of acquiring the materiel solution; the determination of core requirements; and the development of an intellectual property strategy, to include technical data and computer software deliverables. For example, for incrementally deployed software- intensive programs, the preliminary scope of limited deployment is determined for evaluation prior to a full deployment decision for each capability increment. Milestone B: A standard series of design reviews performed prior to converging on a final design for production. For example, for a hybrid acquisition program such as the combination of a major weapon system’s basic structural hardware development with a simultaneous software-intensive development, criteria establishing maturity for the development of software functional capability are to be identified. Milestone C: The point at which a program or increment of capability is reviewed for entrance into the production and deployment phase or for limited deployment. For example, a general criterion applied during review would be to have a mature software capability consistent with the software development schedule. Figure 3 depicts the milestones and decision points that inform a typical acquisition program. Decisions affecting the software of a weapon system are made throughout the acquisition life- cycle and involve stakeholders across a number of domains. For example, DOD officials are involved in software development, architecture and design, engineering, coding, integration and testing, cost estimation and collection, and intellectual property. Many decisions affecting software sustainment, such as software data rights decisions, typically occur in one of the phases prior to operations and support. Decisions made in the early phases may have long-term effects on a weapon system’s sustainability, especially for systems that endure beyond their originally intended design life. Software sustainment decisions are often revisited during the operations and support phase, as hardware breaks or needs to be replaced, a new capability or requirement is added, or a modification is made due to feedback received after a weapon system is fielded. DOD conducts software sustainment at a variety of depot-level maintenance locations. DOD and military policy refer to these locations variously as DOD depot-level software sustainment activities, Software Engineering Centers, Software Support Activities, and Life-Cycle Software Engineering Centers. For purposes of this report, we will refer to these facilities as DOD software centers. Section 2460 of title 10 of the United States Code defines depot-level maintenance and repair. This term includes all aspects of software maintenance classified by DOD as of July 1, 1995, as depot-level maintenance and repair—regardless of the source of funds for the maintenance or repair, or of the location at which the maintenance or repair is performed. DOD maintains many weapon systems (such as aircraft and ships) and equipment (such as radar) at the depot level because the systems are too complex to maintain exclusively at the unit, or organizational, level. Section 2464 of title10 of the United States Code requires DOD to maintain a core depot-level maintenance and repair capability that is government-owned and -operated. Maintaining this capability provides a ready and controlled source of technical competence and resources to enable effective and timely response to mobilizations, contingencies, or other emergencies. Additionally, DOD must assign these government- owned and -operated facilities (the depots) sufficient workload to ensure cost efficiency and technical competence during peacetime, while preserving the surge capacity and reconstitution capabilities necessary to fully support the strategic and contingency plans prepared by the Chairman of the Joint Chiefs of Staff. The term “data rights” in the DOD context typically refers to the license rights that the department acquires in two types of deliverables: technical data and computer software. These rights are addressed in law, in the Defense Federal Acquisition Regulation Supplement (DFARS), and in DOD guidance. These data rights are defined as follows: Technical data: recorded information, regardless of the form or method of recording, of a scientific or technical nature (including computer software documentation). Computer software: computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, and related material that would enable the software to be reproduced, recreated, or recompiled. Computer software documentation: owner’s manuals, user’s manuals, installation instructions, operating instructions, and other similar items, regardless of how this documentation is stored, that will explain the capabilities of the computer software or provide instructions for using the software. DOD has policies and organizations in place within weapon system management and depot maintenance to manage the sustainment of operational system software. We found that DOD has policies for managing the life-cycle of weapon systems, including sustainment; and that DOD policy on depot maintenance and cost also considers weapon system software issues. Several organizations, including the Under Secretary of Defense for Acquisition and Sustainment and DOD software centers, play key roles in overseeing and managing software sustainment. Software sustainment activities are conducted at numerous facilities, including military department software centers, weapon system program management offices, government laboratories or software integration laboratories, and contractor facilities. Additionally, while DOD has defined software sustainment and software maintenance activities synonymously, and it defines these functions as part of depot maintenance, we determined that the Navy categorizes and reports software sustainment differently. DOD has published a directive and an instruction to guide the military departments in life-cycle management of major weapon systems, including considerations relating to software and weapon system sustainability. First, DOD’s acquisition publications provide DOD-wide policy and assign responsibilities to OSD and the military departments for executing weapon system development, production, and sustainment. For example, weapon system software considerations, including cost and access to technical data (for example, product specifications) and computer software (for example, source code), are to be included in required documentation, such as the Life-Cycle Sustainment Plan and the Systems Engineering Plan. Regulatory and reporting requirements differ depending on a system’s cost and acquisition category. These policies are in accordance with statute directing the Secretary of Defense to issue and maintain comprehensive guidance on life-cycle management. Second, DOD includes weapon system software considerations in its instruction regarding depot maintenance core capabilities. DOD-wide policy assigns responsibilities to OSD and the military departments for the performance of DOD core depot-level maintenance, including software. DOD policy states that maintenance tasks are performed to restore safety and reliability when deterioration has occurred. These tasks help to ensure military readiness, including mobilization and surge capabilities, to support national defense strategic and contingency requirements. Additionally, DOD policy states that, for inherently governmental and core capability requirements, maintenance programs are to use organic—or DOD personnel, rather than contractors—in accordance with the law. These DOD policies accord with the statute directing the Secretary of Defense to maintain a core depot-level maintenance and repair capability to ensure technical competence in peacetime while preserving the surge capacity necessary to fully support strategic and contingency needs. Third, DOD includes weapon system software considerations in its cost policy and manuals. These policies assign responsibilities for estimation of costs and collection of costs (including operations and support costs). They also prescribe cost data reporting and software resource data reporting requirements. Several DOD organizations establish policies and procedures for weapon system software sustainment. First, the Under Secretary of Defense for Research and Engineering and the Under Secretary of Defense for Acquisition and Sustainment play key roles in the establishment and maintenance of policy and procedures for software sustainment. For example: Research and Engineering: This office establishes policy and oversees research, system engineering, and developmental test processes, especially during formative stages of programs. It also supports the Joint Federated Assurance Center, a cross-DOD working group with a mission to develop, maintain, and offer software and hardware vulnerability detection, analysis, and remediation capabilities. Acquisition and Sustainment: This office establishes policy and manages acquisition and sustainment of major weapon systems. In April 2018 the Under Secretary appointed the first special assistant for software acquisition to advise and assist in addressing software challenges. According to officials, the special assistant will, among other responsibilities, oversee the development of software development policies and standards across DOD practices, and will advise leadership on best practices in software sustainment and data rights issues. Second, the Deputy Assistant Secretary of Defense for Materiel Readiness, under the Assistant Secretary of Defense (Sustainment), establishes policy for and manages DOD depot-level maintenance, including software sustainment. Third, the Office of Cost Assessment and Program Evaluation analyzes resource allocation and cost estimation, and provides independent analytic advice on, among other things, the cost-effectiveness of defense systems. Figure 4 highlights select organizations that establish and maintain software sustainment policy and procedures. Software sustainment is conducted either at DOD software centers— which include military department software centers, weapon system program management offices, government laboratories, and software integration laboratories—or at contractor facilities. The specifics of how the software sustainment is conducted vary by weapon system, in accordance with what the program manager negotiates with the DOD software center or contractor. At DOD software centers, software is developed, tested, and distributed by government staff, contractor staff, or both to maintain operational capability, correct faults, improve performance, and adapt the software to environmental changes. Activities range from small fixes for software errors to large releases that provide weapon systems with new capabilities or address cybersecurity vulnerabilities. The DOD software centers sustain a range of different systems. For example, U.S. Army Communications and Electronic Command’s Software Engineering Center sustains software for Army communications systems; and the U. S. Army Aviation and Missile Research Development and Engineering Center sustains software for missiles, space, and aviation; The Oklahoma City Air Logistics Complex’s 76th Software Maintenance Group at Tinker Air Force Base provides DOD with capabilities in operational flight programs, mission planning systems, space systems, ground-based radar, weapons support, mission support, jet engine test, training and simulation systems, and diagnostics and repair; and Space and Naval Warfare Systems Center Pacific supports and maintains Naval systems in the areas of command and control, communications, computers, and intelligence, surveillance, and reconnaissance, as well as cyber and space. This work is necessary to maintain and upgrade weapon system software and to meet immediate military operational needs. During our review, officials at DOD software centers provided additional examples of software sustainment activities they conduct on a wide variety of weapon systems. Appendix II provides these additional examples. DOD has defined software sustainment and software maintenance activities synonymously, and it defines these functions as part of depot maintenance and the core logistics process. The Departments of the Army and the Air Force categorize and report software sustainment as part of depot maintenance and the core logistics process. Specifically, the Army and the Air Force have policies that categorize and report software sustainment as part of their core logistics requirements, in accordance with DOD instruction. Contrary to DOD policy, the Department of the Navy does not categorize and report software sustainment as part of depot maintenance Specifically, Navy officials said that the Navy views software sustainment as an engineering function, not a depot maintenance function. They said that Navy policy reflects the Navy’s view of software sustainment as a continuous engineering process that occurs throughout a weapon system’s life-cycle, rather than a discrete set of activities categorized as depot maintenance. These officials stated that while the Navy believes software sustainment to be critical to maintaining its weapon systems, it also believes that managing software sustainment as part of depot maintenance is not the most effective approach for the Navy. In particular, Navy officials expressed several concerns about how reporting and categorizing software sustainment as part of depot maintenance could affect their activities. For example, Navy officials noted that this shift would require software engineering to be reported as depot maintenance, which in turn would require the Navy to carry out a greater portion of the work at Navy depots using DOD’s workforce. Navy officials stated that, in their opinion, the Navy does not have the capacity to conduct this level of effort with the current DOD workforce within the Navy depot structure, and that the Navy’s ability to develop adequate capacity in its DOD software engineering workforce in the future is uncertain. They also stated that shifting this capacity away from private industry to the DOD software engineering workforce could create instability in the management of current and future Navy programs, and would be inconsistent with the Navy’s efforts to broaden private-sector software engineering capability and capacity. We also found that the Department of the Navy does not categorize and report software sustainment as part of its core logistics requirements, in accordance with DOD policy. DOD Instruction 4151.20, Depot Maintenance Core Capabilities Determination Process, assigns responsibilities and prescribes procedures to identify required core capabilities for depot maintenance and the associated workloads needed to sustain those capabilities. It is DOD policy that the core capability requirements determination process underpins the establishment and retention of a broad set of public-sector depot maintenance capabilities necessary for DOD, and that the required core capabilities and depot maintenance workloads necessary to sustain those capabilities will be calculated by military services and then aggregated to determine the overall DOD core requirements. As such, DOD requires the military services to use a computational methodology to identify their essential core capability requirements and their planned workload to support this core maintenance capability. The Navy’s differing approach to categorizing and reporting software sustainment has created challenges for DOD-wide reporting on core logistics capabilities. DOD is required by law to submit a Biennial Core Report to Congress that identifies core logistics capabilities—and DOD has included software sustainment—at depots, and the workload required to maintain those capabilities. The Army and the Air Force included direct labor hours and estimated sustainment costs for DOD depot-level software sustainment in the 2018 DOD Biennial Core Report. However, while the Navy conducted software sustainment activities, it did not consider these activities to be part of depot maintenance or a core logistics capability, as previously discussed. As a result, the Navy reported no direct labor hours or estimated cost of sustaining its software workload for inclusion in the 2018 DOD Biennial Core Report, as shown in table 1. OSD accepted the Navy’s core report submission for the 2018 DOD Biennial Core Report. The Department of the Navy’s position that software sustainment is not part of depot maintenance is contrary to DOD Instruction 4151.20, which specifically includes software sustainment as part of depot maintenance. Without the Department of the Navy’s categorizing and reporting of its software sustainment costs, in accordance with DOD policy on the Depot Maintenance Core Capabilities Determination Process, DOD and Congress are not fully informed of the magnitude and cost of core software sustainment capability requirements for the Navy. Accordingly, DOD is impeded in its efforts to plan for a ready and controlled source of technical competence, and to budget resources in peacetime while preserving the surge capabilities necessary to fully support strategic and contingency needs. DOD’s ability to track weapon system software sustainment costs is impeded by limitations in the collection of software data by both the Office of Cost Assessment and Program Evaluation and the military departments. CAPE oversees the primary cost data collection systems: the Cost and Software Data Reporting system and the military departments’ Visibility and Management of Operating and Support Costs system. Further, CAPE has limitations in its cost and software data reporting system for data collected from DOD software centers. We also found that the military departments collect incomplete data on software sustainment costs in their VAMOSC systems. CAPE collects software sustainment cost data from contractors on certain major weapon systems through its CSDR system. According to CAPE’s CSDR manual, this system serves as the primary repository of contractor costs for use in most DOD resource analysis efforts, including cost database development, applied cost-estimating, cost research, program reviews, analysis of alternatives, and life-cycle cost estimates. Data from the two principal components of the CSDR system–contractor cost data reporting and software resources data reporting systems—can be used in managing software sustainment costs. Data in the CSDR system may also be used to prepare acquisition and life-cycle cost estimates for weapon system milestone reviews, as well as to estimate and project software sustainment costs. We identified limitations, however, in CAPE’s CSDR system. First, the system has historically not collected information from contractors for weapon system acquisition programs whose spending levels did not reach the major defense acquisition program threshold. Although collecting this information was not a requirement in the past, in 2016 Congress directed DOD to begin to collect additional information necessary to facilitate cost estimation and comparison across acquisition programs, including costs from programs with eventual total expenditures greater than $100 million. In February 2018, as part of its overall efforts to make data collection more robust, CAPE issued a memo stating that the Army, Navy, and Air Force proposed pilot programs to collect contractor cost data from 26 weapon system programs whose spending levels were below the major defense acquisition program threshold. CAPE plans to use the results of these pilot programs to inform future efforts to improve information-gathering on, and visibility into, the actual expenditures for lower-dollar programs. Additionally, CAPE plans to update its cost- collection policies and manual, if necessary, upon completion of the pilot programs. Because the department is in the midst of these pilot programs and has outlined next steps to be taken upon their completion, we are not making a recommendation about this matter at this time. Second, CAPE’s CSDR system does not collect any weapon system cost or software data from DOD software centers. Prior to 2017, CAPE required only contractors—and not DOD software centers—supporting major defense acquisition programs to report software sustainment costs into the CSDR system. However, in January 2017 CAPE recognized that the lack of cost and software data from government-executed elements of acquisition and sustainment programs was impeding accurate compilation of total program costs. Accordingly, it issued a memorandum to the military departments directing that cost and software data efforts on major defense acquisition programs should also be collected and submitted into the CSDR system by government-performed efforts, which include DOD software centers. Also, the Standards for Internal Control in the Federal Government states that management should use quality information to achieve an entity’s objectives, and that management should obtain data from reliable internal and external sources in a timely manner based on the identified information requirements for effective monitoring. According to a CAPE official, as of September 2018, CAPE had not received any inputs into the CSDR system for DOD-performed software sustainment efforts. CAPE officials told us that compliance with this requirement in the memorandum has been very low, and they attributed this to the absence of an implementation plan. The official said that CAPE is currently in the early stages of evaluating cost data systems—that is, CSDR and the military departments’ VAMOSC systems—to determine which is the more effective for use in collecting and submitting cost and software data from DOD software centers. The official acknowledged that after completing this evaluation of the systems, CAPE will develop an implementation plan. However, CAPE is still in the early stages of completing its evaluation. Having a robust implementation plan with time frames for key milestones will be important to executing and monitoring CAPE’s actions to improve the reporting of software sustainment costs. Without cost and software data from the DOD software centers, CAPE is challenged in its ability to accurately compile total program costs for program managers, cost estimators, and Congress, among other information recipients. According to the CAPE cost estimating guide, the software sustainment element excludes the costs of new development or major redesigns that provide new capabilities. However, if the costs of new development or major redesigns that provide new capabilities cannot be isolated, these costs will be considered as part of software sustainment and should be so noted in the estimate documentation. defines cost elements that cover the range of weapon system operating and support costs, including software sustainment. CAPE’s cost guide defines the software sustainment cost element as the labor, material, and overhead costs incurred after deployment to maintain, modify, and integrate software. According to the CAPE cost estimating guide, the software sustainment element excludes the costs of new development or major redesigns that provide new capabilities. However, if the costs of new development or major redesigns that provide new capabilities cannot be isolated, these costs will be considered as part of software sustainment and should be so noted in the estimate documentation. major commands. Therefore, in order to include software sustainment costs for all shipboard systems in the VAMOSC system, Navy officials must manually collect these cost data. This official explained that since the Navy collects these costs manually, officials focus their efforts on the most expensive and most populous shipboard systems. According to the official, they intend to address the Navy VAMOSC system’s incomplete software sustainment data issue by expanding their manual data collection efforts to include additional Navy systems. According to DOD policy, CAPE’s executive oversight responsibilities include annually reviewing the services’ VAMOSC systems to address data accessibility, completeness, timeliness, accuracy, and compliance with CAPE guidance. CAPE formed a VAMOSC task force in partnership with the service cost-analysis agencies and the Product Support Division in the office of the Assistant Secretary of Defense for Sustainment. The task force is aware of gaps in the military departments’ reporting of software sustainment costs within their VAMOSC systems, particularly within the Army and the Navy, and it has included data completeness in the scope of its efforts. However, closing data gaps is not one of the specific purposes of the task force; these purposes include (1) discussing integration of operating and support cost collection across the department and (2) clearly defining the technical differences across the military services’ VAMOSC systems. The task force is concerned with multiple cost-reporting issues. We recognize that the task force can enable DOD to improve the completeness of its software sustainment cost reporting. Further, systematic and institutionalized cost data collection by each military department is important to support credible cost estimates of current and future programs. However, without CAPE taking steps to prioritize obtaining complete information on operating and support costs for software sustainment, it cannot provide reliable life-cycle cost estimates to DOD acquisition or maintenance officials—or Congress— to assist with current and future years funding decisions. DOD continuously makes decisions about securing data rights, both early and throughout the life-cycle of a weapon system (see sidebar). DOD may obtain data rights, including access to technical data and computer software related to weapon systems, for a variety of reasons. For example, as we have previously reported, data rights may be obtained to help control costs and maintain flexibility in future acquisition and sustainment of systems and subsystems, including maintenance and upgrade of weapon system software. DOD officials we spoke with emphasized that there is no one-size-fits-all approach. Further, obtaining data rights for software sustainment constitutes only one of many competing priorities that must be considered along with cost, schedule, and performance in the acquisition of weapon systems. technical data or computer software, to be delivered under a contract. DOD officials told us that this was due to cost and proprietary reasons— that is, the contractor retains ownership of the intellectual property, such as the source code. DOD strives to balance the cost of purchasing the rights against the extent of data rights it expects it will need to maintain and support the system for years into the future. For example, DOD obtains data rights for the following reasons: To support its ability to evaluate weapon system design in order to sustain weapon system software. Computer software: computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, and related material that would enable the software to be reproduced, recreated, or recompiled. owner's manuals, user's manuals, installation instructions, operating instructions, and other similar items, regardless of how this documentation is stored, that will explain the capabilities of the computer software or provide instructions for using the software. upgrades and sustainment activities to achieve cost savings. Re- competing requires complete technical data packages that enable the manufacture of data equipment from specification. During the operating and support phase of a weapon system, DOD may need to reconsider its previous decisions about the extent of data rights it previously acquired. DOD officials we spoke with emphasized that there are situations in which the data rights needed may not be known until years into sustainment. A senior-level DOD official told us that it would be useful if data rights could have a pre-negotiated price and be an option as part of the initial contract. Such an option would give the government the right, but not the obligation, to purchase the data rights at the pre- negotiated price if needed, in the future. DOD has faced challenges in securing the necessary data rights to sustain weapon system software. Specifically, having either partial or incomplete data, or unclear data rights, or both can impede the government’s ability to support the weapon system as intended. For example, our recent work on the F-35 Joint Strike Fighter Program found that DOD has not defined all of the technical data it needs from the prime contractor, and at what cost, to enable competition of future sustainment contracts. Officials at DOD software centers told us that they take steps to mitigate challenges posed by having either partial or incomplete data, or unclear data rights, or both for decades-old weapon systems and new acquisitions. For decades-old weapon systems, officials at some DOD software centers stated that they use public-private partnerships to bridge gaps for systems that lack access to the necessary data rights. For example, an Air Force official at Robins Air Force Base told us that the C- 5 software sustainment workload has been successful due to a public- private partnership involving the C-5 System Program Office, the 402nd Software Maintenance Group, and the contractor. As part of this partnership, a C-5 software integrated laboratory was established at Robins Air Force Base for DOD personnel to perform software sustainment activities, including deficiency report investigations and testing. In doing so, the 402nd Software Maintenance Group supports $8.4 million in annual C-5 software sustainment requirements. Officials at DOD software centers further explained that they have the expertise to optimize software that is transferred from a contractor to a DOD software center or to reverse-engineer software for weapon systems, if needed. In some cases, for example, a contractor may decide that it is no longer profitable or advantageous to continue performing the software sustainment; the activities can then be transferred to a DOD software center. Air Force officials at the 402nd Software Maintenance Group stated that on many occasions they have worked to take over software from a contractor without any transition period. In 2013 this DOD software center assumed sustainment responsibility from a contractor without any transition period for a radar system on the F-15 aircraft in order to maintain and upgrade its software. After assuming sustainment responsibility, according to an Air Force official, this DOD software center corrected latent defects and added new capabilities to adapt the radar to a changing threat environment. According to the official, this occurred because the contractor shifted focus to newer radar systems. Further, the contractor priced the support for the older radar system above what the Air Combat Command had budgeted for the updates. Officials at some DOD software centers told us that if they have the source code but do not have the computer software documentation— such as manuals or instructions—they may need to reverse-engineer the software. For example, engineers at U.S. Army Research, Development and Engineering Command, Armament Research, Development, and Engineering Center (ARDEC) reverse-engineered a key software function, as shown in figure 5 below. For newer acquisitions, DOD has increased the consideration it affords to the potential needs for access to and delivery of data. For example, Air Force officials said that because of past issues with data rights on legacy systems, they had launched an initiative to ensure that program offices use standardized contract clauses (for example, DFARS software data rights) and contract delivery requirements (for example, models, drawings, associated lists, and specifications) for data rights. To illustrate this, an Air Force official told us that the HH60W Combat Rescue Helicopter program committed early in the life-cycle to securing the necessary data rights for a DOD software center in the 402nd Software Maintenance Group to perform the software sustainment activities. The official told us that the Statement of Work requests that the contractor provide the DOD software center with the source code and full technical data package, to include a complete software-supporting documentation package. Provisions in the fiscal years 2016 and 2018 National Defense Authorization acts (NDAA) directed the Secretary of Defense to commission studies related to DOD intellectual property, establish an intellectual property policy, and establish a cadre of intellectual property experts. In response, DOD is in the early stages of developing intellectual property policy and establishing a cadre of intellectual property experts. Also, DOD has commissioned studies to review its access to intellectual property for DOD weapon systems, including necessary data rights. However, the department has missed some required reporting time frames, and it has not yet reported to congressional defense committees on the studies’ findings and recommendations. In the fiscal year 2018 NDAA, Congress directed the Secretary of Defense, through the Under Secretary of Defense for Acquisition and Sustainment, to (1) develop policy on the acquisition or licensing of intellectual property; and (2) establish a cadre of intellectual property experts to help support the acquisition workforce on intellectual property matters, including acquiring or licensing intellectual property. The law did not include a time frame for completion. The department is in the early stages of addressing these statutory provisions. According to the law, the policy is intended to enable DOD-wide coordination and consistency in strategies for acquiring or licensing intellectual property; to help ensure that program managers are aware of DOD’s rights and consider and use best practices early in the acquisition process; and to encourage customized intellectual property strategies based on the unique characteristics for each system. The cadre of experts is intended to ensure a consistent, strategic, and knowledgeable approach to acquiring or licensing intellectual property by providing expert advice, assistance, and resources to the acquisition workforce on intellectual property matters. While the department is in the early stages of addressing these statutory provisions, senior-level DOD officials have acknowledged a delay in these efforts, primarily due to the department’s recent reorganization. DOD officials stated that the details concerning organizational structure, roles, responsibilities, and realignment of resources had to be finalized in order for the newly formed organizations to implement these provisions. Regarding the intellectual property policy, a senior-level DOD official told us that the Office of Strategy and Design, within the Office of the Secretary of Defense, will facilitate the collaboration of stakeholders to assist in developing the intellectual policy, which the Assistant Secretary of Defense (Acquisition) will then issue and oversee. Senior-level DOD officials spoke with us regarding the complexity of developing this intellectual property policy, as it spans the weapon system life-cycle, including research, development, acquisition, and operating and support considerations. Regarding the intellectual property cadre, a senior-level DOD official told us that the Assistant Secretary of Defense (Acquisition) may house the cadre. As of August 2018 the department had not yet specified details on the potential size or scope of the intellectual property cadre, nor a time frame to guide implementation. Although not required by law, development of a robust implementation plan with time frames for key milestones could help DOD to execute and monitor its actions. In the fiscal year 2016 NDAA Congress directed DOD to establish a Government-Industry Advisory Panel to review technical data rights, and to submit its final report and recommendations to the Secretary of Defense not later than September 30, 2016. The panel, comprising members from both the public and private sectors, was to review defense regulations on technical data and proprietary restrictions to ensure, among other things, that DOD does not pay more than once for the same work, and that contractors are appropriately recompensed for innovation and invention, among several other considerations. The law also directs that the Secretary of Defense submit comments or recommendations to congressional defense committees not later than 60 days after receiving the report. DOD established the panel, as legislatively required. As of November 2018 the panel had submitted its report to DOD but not to Congress. Panel members acknowledged that the panel is late in reporting to the congressional defense committees, and they attributed the lateness to the complexity of the task. Panel members told us that obtaining consensus between DOD and industry has been difficult, in part because of competing interests. For example, panel members discussed balancing DOD’s needed ability to upgrade and support weapon systems—which is difficult to forecast 30 to 40 years into the future—with industry’s need for a fair return on its intellectual property investments. In November 2018 the panel submitted the report to the Under Secretary of Defense for Acquisition and Sustainment. The report includes 19 recommendations for legislative, regulatory, and policy changes that, according to the panel chairman, recognize and seek to balance the equities of both government and industry. As of November 21, 2018, the panel had not yet transmitted the report to Congress, but the panel Chairman stated that it planned to do so before the end of the month. In the fiscal year 2016 NDAA, Congress directed DOD to contract with an independent entity to review DOD regulations, practices, and sustainment requirements related to government access to and use of intellectual property rights of private-sector firms. The law also directs the Secretary of Defense to submit a report to the congressional defense committees on the findings of the independent entity, along with a description of any actions the Secretary proposed in order to revise and clarify laws, or actions the Secretary may take to revise or clarify regulations, related to intellectual property rights. In response, DOD contracted with the Institute for Defense Analyses to review the intellectual property for weapon system sustainment. In May 2017 the Institute released its report on access to intellectual property for weapon system sustainment. The report made six recommendations, including that DOD establish or expand existing organizational capabilities within the DOD components (with OSD support) to provide expertise in the acquisition of intellectual property data and rights to program managers throughout their programs’ life-cycles, as well as to other staff involved in weapon system acquisition. However, DOD has not yet submitted its report to the congressional defense committees on the study’s findings and recommendations, though it was required to do so by March 1, 2016. OSD officials acknowledged that they are late in reporting to congressional defense committees on the study’s findings and recommendations. They attributed the delay to their intent of awaiting the findings and recommendations on technical data rights, if any, of the Government-Industry Advisory Panel, as discussed above. DOD informed the congressional defense committees twice—most recently in January 2018—that the department would consider the recommendations of the Institute for Defense Analyses and those of the Panel collectively, and would provide its recommendations in a single report after receiving the Panel’s report. In this January 2018 update, DOD noted that the Panel expected to complete its report by March 2018. However, the Panel did not complete its report—for which DOD was waiting before responding to the Institute’s study—until November 2018. DOD’s report to Congress on any actions it might take in response to the study’s findings and recommendations could provide insight into whether laws or regulations related to intellectual property rights need to be revised or clarified. Software is essential to the capabilities and operations of a vast range of military systems, including tactical and combat vehicles, aircraft, ships, submarines, and strategic missiles. DOD has policies and organizations within weapon system management and depot maintenance to manage operational system software sustainment. DOD has defined software sustainment and software maintenance activities synonymously, and the department includes software maintenance as part of depot maintenance core capabilities. However, the Department of the Navy does not categorize or report software sustainment as part of depot maintenance. Without the Department of the Navy’s categorizing and reporting of its software sustainment costs, in accordance with DOD policy on the Depot Maintenance Core Capabilities Determination Process, DOD and Congress are not fully informed of the magnitude and cost of core software sustainment capability requirements. As such, DOD is impeded in its efforts to plan for a ready and controlled source of technical competence and to budget resources in peacetime while preserving the surge capabilities necessary to fully support strategic and contingency needs. Limitations exist in DOD’s cost and software data reporting system with regard to its obtaining cost data from DOD software centers, as well as in the military departments’ operating and support cost systems. These limitations impede DOD’s tracking of weapon system software sustainment costs. Without cost and software data from the DOD software centers as well as complete information on the military departments’ operating and support costs for software sustainment, CAPE is challenged in its ability to accurately compile total program costs for program managers, cost estimators, and Congress, among other information recipients. Lastly, while DOD makes decisions about securing data rights both early and throughout the life-cycle of a weapon system, the department faces challenges in balancing the cost of purchasing the rights against the extent of data rights it expects it will need over the life of the system. DOD has begun taking actions to address these challenges. For example, DOD has commissioned several studies, at congressional direction, to examine DOD’s access to and use of intellectual property, including technical data rights and proprietary restrictions. However, Congress has yet to receive two of those studies. Reporting on the findings and recommendations, as well as on any actions DOD may take in response to both studies, would provide insight and would highlight timely issues with technical data rights to keep Congress and DOD informed of government and industry concerns and enable them to use that knowledge in their decision making on weapon systems that may be in operation for decades to come. We are making five recommendations to the Department of Defense— one to the Secretary of the Navy and four to the Secretary of Defense. We recommend that the Secretary of the Navy categorize and report the Navy’s software sustainment costs, in accordance with DOD policy on the Depot Maintenance Core Capabilities Determination Process. We recommend that the Secretary of Defense ensure that the Director for Cost Assessment and Program Evaluation complete its evaluation and select the most effective system to obtain cost and software data from DOD software centers, and develop an implementation plan that includes time frames for key milestones to execute and monitor the centers’ submission of required data. We recommend that the Secretary of Defense ensure that the Director for Cost Assessment and Program Evaluation takes steps to prioritize the respective military departments’ obtaining and reporting of complete operating and support costs for software sustainment through its VAMOSC systems. We recommend that the Secretary of Defense develop an implementation plan with time frames for key milestones for establishing a cadre of intellectual property experts. We recommend that the Secretary of Defense submit a report, as required by law, to Congress about the study on access to intellectual property for weapon system sustainment conducted by the Institute for Defense Analyses, along with a description of any actions that the Secretary proposes, or may take, to revise or clarify regulations related to intellectual property rights. We provided a draft of this report to the Department of Defense for review and comment. DOD provided written comments, which are reprinted in appendix III. In its comments, DOD concurred with our recommendations and stated it has actions underway or plans to take actions in response to all five of our recommendations. We are sending copies of this report to the appropriate congressional committees and the Acting Secretary of Defense. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines the extent to which (1) DOD has policies and organizations in place to manage the sustainment of operational system software for weapon systems; (2) DOD and the military departments track costs to sustain weapon system software; and (3) DOD has addressed challenges securing necessary data rights to sustain weapon system software. Our scope included software sustainment of operational weapon systems. For objective one, we reviewed DOD policies and organizations in place to manage the sustainment of operational system software for weapon systems. This included DOD Directive 5000.01 and DOD Instruction 5000.02, which establish acquisition program policies; and DOD Directive 4151.18 and DOD Instruction 4151.20, which outline requirements for DOD materiel maintenance and DOD programs’ core capabilities. We reviewed statutory requirements, including 10 United States Code § 2337, which requires the Secretary of Defense to issue and maintain comprehensive guidance on life-cycle management and the development and implementation of product support strategies for major weapon systems. We compared the processes used by DOD and the military departments against those outlined in DOD policy and statute, and against software sustainment activities performed at several DOD software centers. We identified the roles and responsibilities for conducting software sustainment activities among personnel at each level of DOD bureaucracy. We also interviewed officials from the Office of the Secretary of Defense (OSD) and the military departments regarding the department’s guidance and the processes used to collect the data for DOD’s Biennial Core Report. As in our previous reviews of DOD’s biennial core reports, we did not assess the reliability of the underlying data provided by the military services for the 2018 DOD Biennial Core Report. However, we determined that the data were sufficiently reliable for the purpose of determining whether the military services had reported costs of workloads in 2012—2018. We interviewed officials from the Office of the Secretary of Defense (OSD), including within the Office of the Under Secretary of Defense for Research and Engineering and the Office of the Under Secretary of Defense for Acquisition and Sustainment. Using a semi-structured questionnaire, we also interviewed officials from each of the military department headquarters—U.S. Army G4, Air Force Acquisition office, and the Assistant Secretary of the Navy for Research, Development, and Acquisition—to understand policies and organizations in place to manage the sustainment of operational system software for major weapon systems. We also interviewed industry officials, such as from the Center for Strategic and Budgetary Assessments and the Software Engineering Institute at Carnegie Mellon University. We conducted interviews using a semi-structured questionnaire with officials at select DOD depot-level software sustainment activities, also referred to as DOD software centers for the purposes of this report. We used DOD’s Fiscal Year 2016 Maintenance Fact Book to select 11 of 20 DOD depot-level software sustainment activities based on several criteria, including (1) military department, (2) weapon system type, (3) geographical location, and (4) random selection. Although this sample is not generalizable to the population of DOD depot-level software centers, the use of a random sample of software centers helped mitigate any potential selection bias, and the interviews provided valuable information on those sites selected. The officials we interviewed at DOD software centers included a variety of engineers and others who perform software sustainment activities for weapon system software on several DOD weapon systems, including air and sea platforms, targeting systems, and communications systems, among others. We interviewed these officials to gain an understanding of policies and procedures they follow to guide their software sustainment activities, how they are organized, and the activities they undertake to sustain the software. For objective two, we reviewed DOD policy and military department guidance regarding software sustainment cost reporting requirements, including Department of Defense Manual 5000.04, Cost and Software Data Reporting Manual, and applicable financial management regulations. We reviewed the Office of Cost Assessment and Program Evaluation (CAPE) Reports to Congress for Fiscal Years 2016 and 2017 to learn about steps that CAPE is taking to address challenges. We interviewed officials at the DOD software centers responsible for weapon system software on several DOD weapon systems to gain an understanding of how they track cost data. We also interviewed officials from OSD, including officials from CAPE, and officials from the three cost analysis agencies responsible for collecting operating and support costs for the military departments’ Visibility and Management of Operating and Support Costs (VAMOSC) data collection systems. These agencies include Office of the Assistant Secretary of the Army for Cost and Economics, the Air Force Cost Analysis Agency, and the Naval Center for Cost Analysis. For objective three, we reviewed statutes governing DOD intellectual property, including technical data rights, computer software, and computer software documentation. These statutes included, for example, 10 U.S.C. §2320, “Rights in Technical Data,” and 10 U.S.C. §2321, “Validation of Proprietary Data Restrictions.” Both of these statutes are implemented, in part, by the Federal Acquisition Regulation and the Defense Federal Acquisition Regulation Supplement (DFARS), which we also reviewed. Specifically, we reviewed DFARS Subpart 227.71, “Rights in Technical Data,” and DFARS Subpart 227.72, “Rights in Computer Software and Computer Software Documentation.” Both include sections that address DOD definitions of technical data; computer software; and computer software documentation, policy, acquisition, licensure, and delivery rights, among other items. We also reviewed DOD policy and guidance, including DOD 5010.12-M, Procedures for the Acquisition and Management of Technical Data. We reviewed the Defense Acquisition Guidebook, which addresses the acquisition and maintenance of technical data rights to sustain and upgrade software on major weapon systems. We also reviewed guidance put forth on intellectual property strategies, including a checklist arranged by contract phase for key intellectual property management activities and considerations. We interviewed officials from OSD, including from the Office of General Counsel and the Office of Strategic Design, as well as officials from the military department headquarters, to gain an understanding of the necessary technical rights to sustain weapon system software, the reasons that technical data rights are needed, and challenges faced by the department. We interviewed officials at the DOD software centers covering a variety of DOD weapon systems to gain an understanding of what technical data rights they need for their respective weapon systems, and the ways in which they manage issues they may encounter in which contractors own the technical data. We analyzed select weapon systems for which DOD had complete data and rights, as well as weapon systems for which DOD had partial or incomplete data rights, and the actions DOD took for sustainment, such as public-private partnerships. We also interviewed members of the Government-Industry Panel examining technical data rights and proprietary data restrictions to gain an understanding of necessary data rights for sustaining weapon systems coupled with proprietary concerns from industry. Finally, we reviewed statutory provisions in the fiscal years 2016 and 2018 National Defense Authorization acts, which directed the Secretary of Defense to commission studies related to DOD intellectual property, and we interviewed officials to understand DOD’s status on the provisions. Table 2 lists the offices that we visited or contacted during our review. In addition to the contact listed above, Sally Newman (Assistant Director), Laura Czohara (Analyst-in-Charge), Steven Bagley, Steven Boyles, Vincent Buquicchio, Amie Lesser, Janine Prybyla, Andrew Stavisky, and Cheryl Weissman made key contributions to this report. GAO- F-35 Joint Strike Fighter: Development is Nearly Complete, but Deficiencies Found in Testing Need to Be Resolved, GAO-18-321 (Washington, D.C.: June 5, 2018). GAO- F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting Readiness and Cost Transparency, GAO-18-75 (Washington, D.C.: Oct. 26, 2017). GAO, Military Acquisitions: DOD Is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644 (Washington, D.C.: July 2017). GAO- F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its Central Logistics System, GAO-16-439, (Washington, D.C., Apr. 14, 2016). GAO- F-35 Joint Strike Fighter: Preliminary Observations on Program Progress, GAO-16-489T (Washington, D.C.: Mar. 23, 2016). GAO, Defense Contracting: Early Attention in the Acquisition Process Needed to Enhance Competition, GAO-14-395 (Washington, D.C.: May 5, 2014). GAO- F-35 Joint Strike Fighter: Problems Completing Software Testing May Hinder Delivery of Expected Warfighting Capabilities, GAO-14-322 (Washington, D.C.: Mar. 24, 2014). GAO- F-35 Joint Strike Fighter: Program Has Improved in Some Areas, but Affordability Challenges and Other Risks Remain, GAO-13-500T (Washington, D.C.: Apr. 17, 2013). GAO, Defense Acquisition: DOD Should Clarify Requirements for Assessing and Documenting Technical-Data Needs, GAO-11-469 (Washington, D.C.: May 11, 2011). GAO, Federal Contracting: Opportunities Exist to Increase Competition and Assess Reasons When Only One Offer Is Received, GAO-10-833 (Washington, D.C.: July 26, 2010). GAO, Weapons Acquisition: DOD Should Strengthen Policies for Assessing Technical Data Needs to Support Weapon Systems, GAO-06-839 (Washington, D.C.: July 14, 2006). GAO, Defense Management: Opportunities to Enhance the Implementation of Performance-Based Logistics, GAO-04-715 (Washington, D.C.: Aug. 16, 2004). GAO, Defense Logistics: Opportunities to Improve the Army’s and the Navy’s Decision-making Process for Weapons Systems Support, GAO-02-306 (Washington, D.C.: Feb. 28, 2002). GAO, Defense Logistics: Air Force Lacks Data to Assess Contractor Logistics Support Approaches, GAO-01-618 (Washington, D.C.: Sept. 7, 2001). GAO, Test and Evaluation: DOD Has Been Slow in Improving Testing of Software Intensive Systems, GAO/ NSIAD-93-198 (Washington, D.C.: September 1993). GAO, Mission Critical Systems, Defense Attempting to Address Major Software Challenges, GAO/IMTEC-93-13 (Washington, D.C.: December 1992). GAO, Risk and Control of the Software Maintenance Process (Washington, D.C.: January 1987). GAO, Federal Agencies’ Maintenance of Computer Programs: Expensive and Undermanaged, AFMD-81-25 (Washington, D.C., Feb. 26, 1981).", "summary": "Software is integral to the operation and functionality of DOD equipment, platforms, and weapon systems, including tactical and combat vehicles, aircraft, ships, submarines, and strategic missiles. DOD estimates that software sustainment funding will total at least $15 billion over the next 5 fiscal years. DOD carries out software sustainment at various locations, where DOD uses its maintenance capabilities to maintain, overhaul, and repair its military weapon systems. GAO was asked to review several issues relating to the sustainment of operational system software for DOD weapon systems. This report examines, among other things, the extent to which (1) DOD has policies and organizations in place to manage the sustainment of operational system software for weapon systems; and (2) DOD and the military departments track costs to sustain weapon system software. GAO reviewed DOD policies and procedures and interviewed cognizant officials from select DOD software centers, among others, who perform weapon system software sustainment activities. The Department of Defense (DOD) has policies and organizations to manage the sustainment of operational system software. DOD policy defines software sustainment and software maintenance activities synonymously, to comprise any activities or actions that change the software baseline, as well as modifications or upgrades that add capability or functionality. One example of such an action is the Air Force's modifying the security software on the B-52 bomber to better protect against attempted system penetration. The figure below defines the four categories of software sustainment actions. DOD policies on life-cycle management of weapon systems address software sustainment, and several DOD organizations—including DOD software centers—play key roles in overseeing and managing software sustainment. DOD policy includes software maintenance as part of core logistics, and it requires the military departments to report biennially to Congress on their estimated workloads to sustain core logistics capabilities, including estimated costs of these workloads. However, while the Army and Air Force categorize and report software sustainment as part of core logistics, the Navy does not. Without the Navy's categorizing and reporting its software sustainment costs, DOD and Congress are not fully informed of the magnitude and cost of core software sustainment capability requirements. This impedes DOD's efforts to plan for a ready and controlled source of technical competence, and to budget resources in peacetime while preserving necessary surge capabilities. DOD's ability to track weapon system software sustainment costs is impeded by limitations in its collection of software cost data. First, GAO found that the Office of Cost Assessment and Program Evaluation's (CAPE) Cost and Software Data Reporting system did not collect weapon system cost data from DOD software centers. Recognizing this, CAPE directed in January 2017 that cost and software data efforts on major acquisition programs should begin to be collected from government organizations, including DOD software centers. However, CAPE acknowledges that it lacks an implementation plan to execute and monitor the requirement for these centers to submit cost and software data. Second, GAO also found that the military departments' operating and support cost systems have incomplete software sustainment cost data. DOD policy requires the military departments to collect and maintain actual operating and support costs, including software sustainment costs. Without CAPE's taking steps to prioritize obtaining complete information on operating and support costs for software sustainment, CAPE is challenged in its ability to accurately compile total program costs or provide reliable life-cycle cost estimates to DOD and Congress. GAO is making five recommendations, including that (1) the Navy categorize and report its software sustainment costs in accordance with DOD policy; and (2) CAPE improve the collection of weapon system software cost data. DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "According to the National Inventory of Dams, as of January 2016 there are approximately 90,500 dams in the United States and about 2.5 percent of these (approximately 2,100 dams) are associated with hydropower projects. Hydropower projects are owned and operated by both non-federal entities—such as private utility companies, municipalities, and state government agencies—or federal government agencies—primarily the U.S. Army Corps of Engineers (the Corps) and the Bureau of Reclamation. Collectively, these dams associated with hydropower projects account for about 8 percent of the total electric generating capacity in the United States. Hydropower projects generally consist of one or more dams and other key components associated with hydroelectric power generation and water storage, and are uniquely designed to accommodate watersheds, geology, and other natural conditions present at the time of construction. These components include both those that allow operators to adjust reservoir water levels, such as spillways and gates, as well as those that produce and distribute electricity, such as transmission lines and powerhouses, among others. (See fig. 1.) The Federal Power Act provides for FERC’s regulatory jurisdiction over a portfolio of about 1,000 non-federal hydropower projects comprising over 2,500 dams. While FERC does not construct, own, or operate dams, it licenses and provides oversight of non-federal hydropower projects to promote their safe operation. Licensees are responsible for the safety and liability of dams, pursuant to the Federal Power Act, and for their continuous upkeep and repair using sound and prudent engineering practices. FERC officials in each of the agency’s five regional offices work directly with licensees to help ensure these projects comply with licenses and meet federal guidelines for dam safety. In addition, stakeholder groups such as the Association of State Dam Safety Officials can assist licensees in staying current on federal and state dam laws and regulations, dam operations and maintenance practices, and emergency action planning, among other things. FERC’s regulations, supplemented by its Operating Manual and Engineering Guidelines, establish a framework for its dam safety oversight approach. FERC’s Operating Manual provides guidelines for the FERC staff performing inspections that are aimed at ensuring that structures are safe, are being properly maintained, and are being operated safely. FERC’s Engineering Guidelines provides FERC staff and licensees with procedures and criteria for the review and analysis of license applications, project modification proposals, technical studies, and dam designs. For example, one chapter presents guidelines for FERC staff to use to determine the appropriateness and level of geotechnical investigations and studies for dams. The Engineering Guidelines states that every dam is unique and that safety analysis of each dam require that engineers apply technical judgement based on their professional experience. As part of FERC’s safety oversight approach, it assigns a hazard classification to each dam in accordance with federal guidelines that consider the potential human or economic consequences of the dam’s failure. The hazard classification does not indicate the structural integrity of the dam itself, but rather the probable effects if a failure should occur. Depending on the hazard classification, the extent of and the frequency of safety oversight activities can vary. Low hazard dams are those where failure —an uncontrolled release of water from a water-retaining structure—would result in no probable loss of human life but could cause low economic and/or environmental losses. Significant hazard dams are those dams where failure would result in no probable loss of human life, but could cause economic loss, environmental damage, or other losses. High hazard dams are those dams where failure would probably cause loss of human life. FERC has designed a multi-layered oversight approach that involves both independent and coordinated actions with dam owners and independent consultants. Key elements of this approach include ensuring licensees have a safety program in place, conducting regular safety inspections, reviewing technical analyses, and analyzing safety as a part of project relicensing. (See fig. 2.) Licensee’s dam safety program. According to FERC guidance, licensees have the most important role in ensuring dam safety through continuous visual surveillance and ongoing monitoring to evaluate the health of the structure. Beyond this expectation for continuous oversight, FERC requires licensees of high and significant hazard dams to have an Owner’s Dam Safety Program. FERC dam safety inspection. The dam safety inspection, also called operation inspection, is a regularly-scheduled inspection conducted by a FERC regional office project engineer primarily addressing dam and public safety. FERC’s Operating Manual establishes the frequency that a FERC engineer conducts dam safety inspections. Independent consultant inspection and potential failure mode analysis. FERC requires licensees to hire a FERC-approved independent consulting engineer to inspect and evaluate high hazard dams and certain types of dams above a certain height or size and submit a report detailing the findings. Additionally, FERC requires the licensee of a high or significant hazard dam to conduct a potential failure mode analysis. A potential failure mode analysis is an exercise to identify and assess all potential failure modes under normal operating water levels and under extreme conditions caused by floods, earthquakes, and other events. FERC relicensing of projects. FERC issues hydropower licenses for the construction of new hydropower projects, and reissues licenses for existing projects when licenses expire. Licensees may submit applications for a new license for the continued operation of existing projects as part of a process known as relicensing. During relicensing, in addition to the power and development purposes for which FERC issues licenses, FERC must evaluate safety, environmental, recreational, cultural, and resource development among other factors when evaluating projects, according to its guidance. In addition, FERC requires licensees to conduct various engineering studies related to dam performance in accordance with FERC safety requirements. Required engineering studies focus on dam performance as affected by hydrology, seismicity, and dam stability. Licensees may also produce engineering studies, such as a focused spillway assessment, for their own operations or at the request of FERC. We found, based on our analysis of the 42 dam safety inspections we reviewed, that FERC staff generally conducted and collected information from these inspections consistent with guidance in its Operating Manual. According to FERC’s Operating Manual, staff’s approach to conducting these inspections and collecting information is to include preparing for the inspection by reviewing documents, conducting a field inspection of the dam and associated project components, and discussing inspection findings with licensees and with FERC supervisors. Preparation for inspection: We found that FERC staff generally met document review requirements in preparation for safety inspections of the 42 dams we reviewed. (See table 1.) According to the Operating Manual, FERC staff are to review safety-related information contained in documents such as potential failure mode analyses and hazard potential classifications. For example, we found that staff documented their review of the most recent independent consultant inspection report and potential failure mode analysis for each of the 16 high hazard dams we reviewed. FERC staff told us that they generally used checklists when preparing for these inspections. For example, some of the staff told us they tailor the checklist included in the Operating Manual, based on the dam’s type, characteristics, and hazard classification. Additionally, for each of the dams in our sample, staff stated that they prepared for the inspection by reviewing prior inspection reports and recommendations. Field inspection: We found that FERC staff generally met requirements for reviewing project components and documenting their findings from field inspections of the 42 dams we reviewed. (See table 2.) According to the Operating Manual, FERC staff are to conduct visual inspections of the dam, typically alongside the licensee, to assess the dam and project components by observing their condition and identifying any safety deficiency or maintenance requirement. Also during the inspection, FERC staff are to compare current conditions of the dam and project components to those described in prior inspection reports, and as applicable, collect information on the licensee’s progress towards resolving deficiencies and maintenance issues that can affect safety. To assess safety, FERC staff we interviewed stated that they primarily rely on their engineering judgment. Inspection findings: According to our interviews with FERC staff from selected projects, we found that staff generally followed FERC guidance in discussing inspection findings with licensees and supervisors prior to preparing inspection reports to document their findings. According to the Operating Manual, following the dam safety inspection, FERC staff are to discuss the inspection with the licensee, giving direction on how to address any findings. Additionally, upon returning to the office, staff are to discuss inspection findings with their supervisors who may suggest additional actions. FERC staff are then to develop a dam safety inspection report that documents observations and conclusions from their pre-inspection preparation and their field inspection and identifies follow-up actions for the licensee. We found that FERC staff prepared inspection reports to document findings from the 42 dam safety inspections we reviewed. In response to inspection findings, FERC requires licensees to submit a plan and schedule to remediate any deficiency, actions that FERC staff then reviews, approves, and monitors until the licensees have addressed the deficiency. While we found that FERC staff conducted inspections and collected inspection findings consistently in the files we reviewed, FERC’s approach to recording information varies across its regions, thus limiting the usefulness of the information. FERC’s approach to recording inspection information relies on multiple systems to record inspection information and affords broad discretion to its staff on how to characterize findings, such as whether to track inspection findings as maintenance issues or as safety deficiencies. As related to systems for recording inspection information, FERC staff use the Data and Management System (DAMS), the Office of Energy Projects-IT (OEP-IT) system, as well as spreadsheets. In particular, according to FERC staff: Four out of FERC’s five regional offices use DAMS—which is primarily a workload tracking tool—to track plans and schedules associated with safety investigations and modifications as well as inspection follow-up items. FERC staff stated that since the inspection information in DAMS is recorded as narrative text in a data field instead of as discrete categories, sorting or analysis of the information is difficult. One regional office uses OEP-IT to track safety deficiencies while the system is more widely used across FERC to track licensees’ compliance with the terms and conditions of their licenses. Three out of FERC’s five regional offices also use spreadsheets and other tools that are not integrated with DAMS or OEP-IT to track inspection information and licensee progress toward resolving safety deficiencies. FERC staff said that use of these different systems to record deficiencies identified during inspections limits their ability to analyze safety information. For example, according to FERC officials, OEP-IT was not designed to track safety deficiency information and is not compatible with DAMS for use in tracking information on a national level. Furthermore, because spreadsheets and other tools are specific to the regional office in which they are used, FERC staff does not use the information they contain for agency-wide analysis. Concerning decisions on how to characterize inspection findings, FERC staff relies on professional judgment, informed by their experience and the Engineering Guidelines, to determine whether to track inspection findings as a safety deficiency or as a maintenance item, according to FERC officials. With input from their supervisors, FERC staff also determines what information to record and how to track the status of the inspection finding. For example, staff assigned to a dam at a FERC- licensed project in New Hampshire observed concrete deterioration on several parts of the dam and its spillway and asked the licensee to monitor all concrete surfaces, making repairs as necessary. According to staff we interviewed, regional staff and supervisors decided not to identify this as a deficiency to be tracked in DAMS because concrete deterioration is normal and to be expected in consideration of the area’s harsh winter weather. In contrast, staff assigned to a dam at a FERC- licensed project in Minnesota observed concrete deterioration on several parts of the project, including the piers and the powerhouse walls, and entered the safety item in DAMS as requiring repair by the licensee. FERC officials stated they are comfortable with the use of professional judgement to classify and address inspection findings because it is important to allow for consideration of the characteristics unique to each situation and how they affect safety. FERC’s approach to recording inspection information is inconsistent because FERC has not provided standard language and procedures about how staff should record and track deficiencies including which system to use. Federal standards for internal control state that agencies should design an entity’s information system and related control activities to achieve objectives and control risks. In practice, this means that an agency would design control activities—such as policies and procedures—over the information technology infrastructure to support the completeness, accuracy, and validity of information processing by information technology. FERC officials acknowledged that there are inconsistent approaches in where and how staff record safety deficiency information, approaches that limit the information’s usefulness as an input to its oversight. While the agency has not developed guidance, officials stated that FERC plans to take steps to improve the consistency of recorded information by replacing the OEP-IT system with a new system, tentatively scheduled for September 2018, that will have a specific function to track dam safety requirements. However, this new system will not replace the functions of DAMS, which FERC will continue to use to store inspection information. The two will exist as parallel systems with the eventual goal of the two systems’ sharing information. By developing standard language and procedures to standardize the recording of information collected during inspections, FERC officials could help ensure that the information shared across these systems is comparable, steps that would allow FERC to identify the extent of and characteristics associated with common safety deficiencies across its entire portfolio of regulated dams. Moreover, with a consistent approach to recording information from individual dam safety inspections, FERC will be positioned to proactively identify comparable safety deficiencies across its portfolio and to tailor its inspections towards evaluating them. While FERC uses inspection information to monitor a licensee’s efforts to address a safety deficiency for an individual dam, FERC has not analyzed information collected from its dam safety inspections to evaluate safety risks across the entire regulated portfolio of dams. For example, FERC has not reviewed inspection information to identify common deficiencies among certain types of dams. Federal standards for internal control state that agencies should identify, analyze, and respond to risks related to their objectives. These standards note that one method for management to identify risks is the consideration of deficiencies identified through audits and other assessments. Dam safety inspections are an example of such an assessment. As part of such an approach, the agency analyzes risks to estimate their significance, which provides a basis for responding to the risk through specific actions. Furthermore, in our previous work on federal facilities, we have identified that an advanced use of risk management involving the ability to gauge risk across a portfolio of facilities could allow stakeholders to comprehensively identify and prioritize risks at a national level and direct resources toward alleviating them. FERC officials stated that they have not conducted a portfolio-wide analysis in part due to the inconsistency of recorded inspection data and because such an evaluation has not been a priority compared to inspecting individual dams. According to officials, the FERC headquarters office collects and reviews information semi-annually from each of its five regional offices on the progress of outstanding dam investigations and modifications in those regions. FERC’s review is designed to monitor the status of investigations on each individual dam but does not analyze risks across the portfolio of dams at the regional or national level. For example, officials from the New York Regional Office stated they do not perform trend analysis across the regional portfolio of dams under their authority, but they compile year-to-year data for each separate dam to show any progression or changes from previous data collected from individual dams. A portfolio-wide analysis could help FERC proactively identify safety risks and prioritize them at a national level. FERC officials stated that a proactive analysis of its portfolio could be useful to determining how to focus its inspections to alleviate safety risks, but it was not an action that FERC had taken to date. The benefits of a proactive analysis, for example, could be similar to those FERC derived from the analysis it conducted in reaction to the Oroville Dam incident. To conduct this analysis, FERC required 184 project licensees, identified by FERC regional offices as having spillways similar to the failed spillway at the Oroville Dam, to assess the spillways’ safety and capacity. According to FERC officials, these assessments identified 27 dam spillways with varying degrees of safety concerns. They stated that FERC’s spillway assessment initiative was a success because they were able to target a specific subgroup of dams within the portfolio and identify these safety concerns at 27 dam spillways. FERC officials stated that they are working with the dam licensees to address these safety concerns. A similar and proactive approach based on analysis of common deficiencies across the portfolio of dams under FERC’s authority could also help to identify any safety risks that may not have been targeted during the inspections of individual dams and prior to a safety incident. As directed by FERC, licensees and their consultants develop and review, or update, various engineering studies related to dam performance to help ensure their dams meet FERC requirements and remain safe. FERC regulations and guidelines describe the types and frequency of studies and analyses required based on dams’ hazard classifications. For all high hazard and some significant hazard dams, existing studies are to be reviewed by each licensee’s consultants every 5 years, as part of the independent consultant inspection and accompanying potential failure mode analysis. According to FERC officials, for those significant hazard dams that do not require an independent consultant inspection and for low hazard dams, FERC’s regulations and guidelines do not require any studies, but in practice FERC directs many licensees to conduct them. FERC also may request engineering studies in response to dam safety incidents at other projects, or engage a board of consultants to oversee the completion of a study. For example, as previously noted, following the Oroville Dam incident in 2017, FERC requested a special assessment of all dams with spillways similar to the failed spillway at the Oroville Dam. To develop these studies, all six of the consultants we interviewed stated that they follow guidelines provided by FERC and other dam safety agencies. Specifically, they stated that they use FERC’s Engineering Guidelines, which provide engineering principles to guide the development and review of engineering studies. In recognition of the unique characteristics of each dam, including its construction, geography, and applicable loading conditions, the Guidelines provides consultants with flexibility to apply engineering judgment, and as a result, the approach that licensees and their consultants use and the focus of their reviews of engineering studies may vary across regions or projects. For example, one independent consultant we interviewed noted that seismicity studies are not highlighted during the independent consultant inspections for projects in the Upper Midwest in comparison to projects in other areas of the country because the region is not seismically active, but that inspections do look closely at ice loads during the winter months. To create these studies, we found that licensees and their consultants generally use data from other federal agencies and rely on available modeling tools developed by federal agencies and the private sector to evaluate dam performance. For example, many of the engineering studies we reviewed rely on data from the National Weather Service and the National Oceanic and Atmospheric Administration to estimate precipitation patterns and the U.S. Geological Survey to estimate seismic activity. In addition, licensees and their consultants use modeling tools and simulations, such as those developed by the Corps to estimate hydrology, to develop engineering studies. FERC staff noted that the engineering studies developed by licensees and their consultants generally focus on the analysis of extreme events, such as earthquakes and floods. In reference to extreme events, FERC staff said that both actual past events and likely future events are considered in determining their magnitude. FERC staff noted the probable maximum flood—the flood that would be expected to result from the most extreme combination of reasonably possible meteorological and hydrological conditions—as an example of a dam design criterion that is based on application of analysis of extreme events. In describing the efficacy of probable maximum flood calculations, FERC officials stated that they had not observed a flood that exceeded the probable maximum flood calculated for any dam and noted that their Engineering Guidelines provides a conservative approach to estimating the probable maximum flood and other extreme events. FERC officials stated that requiring a conservative approach to estimating extreme events helps to mitigate the substantial uncertainty associated with these events, including in consideration of emerging data estimating the effects of climate change on extreme weather events. Once developed, engineering studies we reviewed often remained in effect for a number of years, until FERC or the licensee and its consultant determined an update was required. For example, we found that the hydrology studies were 20 years or older for 17 of the 42 dams in our review, including for 9 of the 16 high hazard dams in our sample. FERC’s Engineering Guidelines states that studies should be updated as appropriate. For example, FERC’s Engineering Guidelines on hydrology studies state that previously accepted flood studies are not required to be reevaluated unless it is determined that a re-analysis is warranted. The Guidelines notes that FERC or the consultant may consider reanalyzing the study for several reasons, including if they identify (1) significant errors in the original study; (2) new data that may significantly alter previous study results; or (3) significant changes in the conditions of the drainage basin. FERC staff and consultants we interviewed stated that age alone is not a primary criterion to update or replace studies and that studies should be updated as needed depending on several factors including age, new or additional data, and professional judgment. Consultants we interviewed identified some limitations that can affect their ability to develop engineering studies for a dam. For example, they noted that some dams may lack original design information, used prior to construction of the dam, which includes the assumptions and calculations used to determine the type and size of dam, the amount of water storage capacity, and information on the pre-construction site geology and earthquake potential. FERC officials estimated that for a large percentage of the dams they relicense, the original information is no longer available. For example, according to the report from the independent forensic team investigating the Oroville Dam incident and as previously noted, some design drawings and construction records for the dam’s spillway could not be located and some other documents that were available were not included in the most recent independent consultant inspection report submitted to FERC. To overcome the lack of original design information, FERC told us that licensees and their consultants may use teams of experts, advanced data collection techniques, and other modern methods, where feasible, to assess the dam’s ability to perform given current environmental conditions. In cases where design or other engineering information is incomplete, consultants stated that they generally recommend the licensee conduct additional studies based on the risk presented by the missing information but also noted that the financial resources of a licensee may affect its willingness and ability to conduct additional studies. However, FERC officials stated that FERC staff are ultimately responsible for making decisions on whether additional engineering studies are needed to evaluate a dam’s performance. FERC has established policies and procedures that use formal guidance, and permit the use of professional judgment, to evaluate and review engineering studies of dam performance submitted by licensees and their consultants. FERC officials in both the headquarters and regional offices emphasized that their role as the regulator is to review and validate engineering studies developed by the licensee and their consultants. FERC generally does not develop engineering studies as officials noted that dam safety, including the development of engineering studies, is primarily the licensee’s responsibility. To carry out their responsibility to ensure public safety, FERC staff stated they use procedures and criteria in the FERC Engineering Guidelines to review engineering studies and apply professional judgment to leverage their specialized knowledge, skills, and abilities to support their determinations of dam safety. FERC’s Engineering Guidelines provides a framework for the review of engineering studies, though the Guidelines recognizes that each dam is unique and allows for flexibility and exemptions in their use. Moreover, the Guidelines notes that analysis of data is useful when evaluating a dam’s performance, but should not be used as a substitute for judgment based on experience and common sense. Because FERC’s Engineering Guidelines allows for the application of professional judgment, the methods used to review these studies vary depending on the staff, the region, and individual dam characteristics. For example, FERC staff said that when they review consultants’ assumptions, methods, calculations and conclusions, in some cases they may decide to conduct a sensitivity analysis if—based on the staff’s judgment—they need to take additional steps to validate or confirm factors of safety for the project. FERC officials also stated that staff may conduct their own independent analyses, as appropriate, such as evaluating a major structural change to the dam or validating submitted studies. For example, as part of its 2016 review of the Union Valley Dam in California, FERC staff validated the submitted hydrology study by independently calculating key inputs, such as precipitation rates and peak floods, to evaluate the dam’s performance and verify the spillway’s reported capacity. In addition, FERC has established various controls to help ensure the quality of its review, including using a risk-based review process, assigning multiple staff to review the studies, and rotating staff responsibilities over time. We have previously found in our reporting on other regulatory agencies that practices such as rotating staff in key decision-making roles, and including at least two supervisory staff when conducting oversight reviews help reduce threats to independence and regulatory capture. Risk-based review process. FERC’s review approach is risk-based, as the frequency of staff’s review of these studies is based on the hazard classification of the dam as well as professional judgment. FERC relies on three primary engineering studies (hydrology, seismicity, and stability), and others as appropriate, which form the basis for determining if a dam is safe. In addition, FERC requires licensees to hire a FERC-approved independent consulting engineer at least every 5 years to inspect and evaluate high hazard and other applicable dams and submit a report detailing the findings as part of the independent consultant inspection process. In general, for the dams we reviewed, we found that FERC staff reviewed engineering studies for dams subject to independent consultant inspections (which are typically high or significant hazard dams) more frequently than those engineering studies associated with dams for which FERC does not require an independent consultant inspection (typically low hazard dams). For example, we found FERC staff had reviewed the most recent hydrology studies for all 22 high and significant hazard dams in our sample subject to independent consultant inspections within the last 6 years and documented their analysis. According to FERC officials, for dams not subject to an independent consultant inspection, FERC staff review engineering studies on an as needed basis, depending on whether the underlying assumptions and information from the previous studies are still relevant. For example, for the 20 dams in our study not subject to an independent consultant inspection, we found that most (15) of these studies were reviewed by FERC within the past 10 years, usually during the project’s relicensing. Multiple levels of supervisory review. As part of FERC’s quality control and internal oversight process, multiple FERC staff are to review the studies produced by the licensee and its consultant, with the number of successive reviews proportional to the complexity or importance of the study, according to FERC officials. FERC’s Operating Manual establishes the general procedure for the review of engineering studies. To begin the review process, the staff assigned to a dam is to review the engineering study and prepares an internal memo on its findings; that memo is then to be reviewed for accuracy and completeness by both a regional office Branch Chief, and the Regional Engineer. If necessary, Washington, D.C., headquarters office staff are to review and approve the final memo. Upon completion of review, FERC staff are to provide a letter to the licensee indicating any particular areas where additional information is needed or where more studies are needed to evaluate the dam’s performance. According to FERC officials, each level of review adds successive quality control steps performed by experienced staff. We have previously found in reporting on other regulatory agencies that additional levels of review increases transparency and accountability and diminishes the risk of regulatory capture. Rotation of FERC staff responsibilities. As part of an internal quality control program to help minimize the risk of missing important safety- related items, FERC officials told us they rotate staff assignments and responsibilities approximately every 3 to 4 years. According to FERC officials, this practice decreases the chance that a deficiency would be missed over time due to differences in areas of engineering expertise between or among staff. We have previously found in our reporting on other regulatory agencies that strategies such as more frequently rotating staff in key roles can help reduce the risk to supervisory independence and regulatory capture. Some FERC regional offices have developed practices to further enhance their review of these studies. For example, the New York Regional Office established a subject matter expert team that helps review dams with unusually complex hydrology issues. This team was created, in part, because FERC staff noted that some of the hydrology studies conducted in the 1990s and 2000s were not as thorough as they would have wanted, and warranted a re-examination. Currently, the New York Regional Office is reviewing the hydrology analysis associated with 12 dam break studies to determine if the hydrology data used in developing these studies were as rigorously developed and validated. According to the FERC staff in this office, utilizing a team of subject matter experts has reduced Regional Office review time and improved the hydrology studies’ accuracy. FERC staff in the New York Regional Office also told us that they are working with other regional offices on setting up similar technical teams. For example, FERC staff in the New York Regional Office have been working with the Portland Regional Office to set up a similar team. FERC procedures require the use of engineering studies at key points over the dam’s licensing period to inform components of its safety oversight approach, including during the potential failure mode analyses of individual dams as well as during relicensing. Potential failure mode analysis. The potential failure mode analysis is to occur during the recurring independent consultant inspection and is conducted by the licensee’s independent consultant along with other key dam safety stakeholders. As previously explained, the analysis incorporates the engineering studies and identifies events that could cause a dam to potentially fail. During the potential failure mode analysis, FERC, the licensee, the consultant, and other key dam safety stakeholders are to refer to the engineering studies to establish environmental conditions that inform dam failure scenarios, the risks associated with these failures, and their consequences for an individual dam. Further, according to a FERC white paper on risk analysis, FERC is beginning to use information related to potential failure modes as inputs to an analysis tool that quantifies risks at each dam. With this information, FERC expects to make relative risk estimates of dams within its inventory and establish priorities for further study or remediation of risks at individual dams, according to the white paper. Relicensing. During relicensing, FERC staff are to review the engineering studies as well as information such as historical hydrological data and extreme weather events, which also inform their safety evaluation of the licensee’s application. FERC officials also stated that as a result of their relicensing review, they might alter the articles of the new license before it is issued should their reviews indicate that environmental conditions affecting the dam’s safety have changed. We found that FERC generally met its requirement to evaluate dam safety during the relicensing process for the 42 dams we reviewed. During the relicensing process, we found that for the dams we reviewed, FERC staff review safety information such as the past reports, inspections, and studies conducted by FERC, the licensee, and independent consultants and determine whether or not a dam owner operated and maintained its dam safely. According to FERC staff, the safety review for relicensing is generally a summary of prior safety and inspection information, rather than an analysis of new safety information, unless the licensee proposes a change to the operation or structure. FERC’s review during relicensing for the high hazard and significant hazard dams we reviewed was generally consistent with its guidance and safety memo template, though the extent of its review of low hazard dams varied. (See fig. 3.) For example, for the 22 high and significant hazard dams we reviewed, the safety relicensing memos followed the template and nearly all included summaries of hydrology studies, stability analyses, prior FERC inspections, and applicable independent consultant reports. For the 20 low hazard dams, FERC staff noted that some requirements in the template are not applicable or have been exempted and therefore were not reviewed during relicensing. While low hazard dams were more inconsistently reviewed during relicensing, FERC staff also noted that there has been a recent emphasis to more closely review, replace, or conduct engineering studies, such as the stability study, for low hazard dams during relicensing. Moreover, FERC staff told us that the safety risks associated with these dams are minimal, as the failure of a low hazard dam, by definition, does not pose a threat to human life or economic activity. According to FERC staff, if a licensee proposed altering the dam or its operations in any way as part of its application for a new license, FERC staff would review the proposed change and may recommend adding articles to the new license prior to its issuance to ensure dam safety. FERC officials noted that, as part of their review, any structural or operational changes proposed by the licensee during relicensing are reviewed by FERC. These officials also noted that FERC generally recommends modifications to the licensees’ proposed changes prior to their approval and inclusion in the new license. However, FERC officials noted that, in some cases, additional information is needed prior to approving the structural or operational change to ensure there are no risks posed by the changes. In those instances, FERC may recommend that articles be added to the new license, that require the licensee to conduct additional engineering studies of the issue and submit them to FERC for review and approval. For example, during the relicensing of the Otter Creek project in Vermont in 2014, the licensee proposed changes to the project’s operation resulting from construction. As a result, FERC’s staff recommended adding a number of articles to the license, including that the licensee conduct studies to evaluate the effect of the change on safety and to ensure safety during construction. During relicensing, third parties—such as environmental organizations, nearby residents and communities, and other federal agencies, such as the U.S. Fish and Wildlife Service—may provide input on various topics related to the project, including safety. However, FERC officials said that very few third parties file studies or comments related to dam safety during relicensing. FERC’s template and guidance do not specifically require the consideration of such analyses as part of its safety review, and we did not identify any safety studies submitted by third parties for dams or reviewed by FERC in our sample. According to FERC officials, when stakeholders submit comments during relicensing, the comments tend to focus on environmental aspects of the project, such as adding passages for fish migration. Further, FERC is not required under the Federal Power Act to respond to any comments, including those related to dam safety, from third parties, according to FERC officials. However, according to FERC officials, courts have held that the Administrative Procedure Act precludes an agency from arbitrarily and capriciously ignoring issues raised in comments. Furthermore, these officials stated that if a court determines that FERC did not sufficiently address issues raised during the relicensing process, its orders are subject to being reversed and remanded by applicable United States courts of appeals. Moreover, FERC officials noted that the information needed to develop third party safety studies, such as the dam design drawings and engineering studies, are property of the licensee, rather than FERC. In addition, this information may not be readily available to third parties or the public if FERC designates it as critical energy infrastructure information, which would preclude its release to the general public. FERC staff we interviewed stated that there have been no instances where the Commission denied a new license to a licensee as a result of its safety review during relicensing. FERC staff stated that given the frequency of other inspections, including the FERC staff inspections, and independent consultant inspections, it is unlikely staff would find a previously unknown major safety issue during relicensing. FERC staff told us that rather than deny a license for safety deficiencies, FERC will keep a dam owner under the terms of a FERC license to better ensure the licensee remedies existing safety deficiencies. Specifically, FERC staff noted that under a license, FERC can ensure dam safety by (1) closely monitoring the deficiency’s remediation progress through its inspection program, (2) adding license terms in the new license tailored to the specific safety deficiency, and (3), as necessary, pursuing compliance and enforcement actions, such as civil penalties or stop work orders, to enforce the terms and conditions of the license. For example, prior to and during the relicensing of a FERC-licensed project in Wisconsin in 2014, FERC’s review identified that the spillway capacity was inadequate. While the project was relicensed in 2017 without changes to the spillway, FERC officials stated that they have been overseeing the plans and studies of the remediation of the spillway through their ongoing inspection program. However, if an imminent safety threat is identified during the relicensing review, FERC officials stated that they will order that the licensee take actions to remedy the issue immediately. Moreover, FERC officials noted that, if necessary, a license can be revoked for failure to comply with the terms of its license. FERC designed a multi-layered safety approach—which uses inspections, studies, and other assessments of individual dams—to reduce exposure to safety risks. However, as the spillway failure at the Oroville Dam project in 2017 demonstrated, it is not possible to eliminate all uncertainties and risks. As part of a continuing effort to ensure dam safety at licensed projects, FERC could complement its approach to evaluating the safety of individual dams by enhancing its capability to assess and identify the risks across its portfolio of licensed dams. Specifically, while FERC has collected and stored a substantial amount of information from its individual dam safety inspections, FERC’s approach to recording this information is inconsistent due to a lack of standard language and procedures. By clarifying its approach to the recording of information collected during inspections, FERC officials could help ensure that the information recorded is comparable when shared across its regions. Moreover, the absence of standard language and procedures to consistently record inspection information impedes a broader, portfolio- wide analysis of the extent of and characteristics associated with common safety deficiencies identified during FERC inspections. While FERC has not yet conducted such an analysis, a proactive assessment of common safety inspection deficiencies across FERC’s portfolio of licensed dams— similar to its identification of dam spillways with safety concerns following the Oroville Dam incident—could help FERC and its licensees identify safety risks prior to a safety incident and to develop approaches to mitigate those risks. We are making the following two recommendations to FERC: FERC should provide standard language and procedures to its staff on how to record information collected during inspections, including how and where to record information about safety deficiencies, in order to facilitate analysis of safety deficiencies across FERC’s portfolio of regulated dams. (Recommendation 1) FERC should use information from its inspections to assess safety risks across its portfolio of regulated dams to identify and prioritize safety risks at a national level. (Recommendation 2) We provided a draft of this report to FERC for review and comment. In its comments on the draft report, FERC said it generally agreed with the draft report’s findings and found the recommendations to be constructive. FERC said that it would direct staff to develop appropriate next steps to implement GAO’s recommendations. These comments are reproduced in appendix IV. In addition, FERC provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Chairman of FERC and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at 202-512-2834 or vonaha@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. FERC seeks to ensure licensees’ compliance with FERC regulations and license requirements, including remediating safety deficiencies, by using a mix of preventative strategies to help identify situations before they become problems and reactive strategies such as issuing penalties. As part of its efforts, FERC published a compliance handbook in 2015 that provides an overall guide to compliance and enforcement of a variety of license requirements, including dam safety. The handbook includes instructions for implementing FERC rules, regulations, policies, and programs designed to ensure effective compliance with license conditions, which include dam safety, to protect and enhance beneficial public uses of waterways. FERC developed a range of enforcement actions, that include holding workshops to encourage compliance and issuing guidance, that increase in severity depending on the non- compliance issue. (See fig. 4.) More broadly, FERC’s guidance directs officials to determine enforcement actions and time frames for those actions on a case-by-case basis, depending on the characteristics of the specific compliance issue. According to FERC officials, many of these safety compliance discussions are handled informally. In addition, their compliance approach emphasizes activities that assist, rather than force, licensees to achieve compliance, according to its guidance. These activities include facilitating open lines of communication with licensees, participating in technical workshops, and publishing brochures and guidance documents, among other efforts. Also, according to these officials, FERC works with licensees to provide guidance and warnings of possible non-compliance matters, in order to avoid usage of any enforcement tools, if possible. According to FERC officials, any safety issues that endanger the public will result in immediate penalty or removal of the dam from power generation, but this action is not lightly taken. Additionally, the length of time between when a safety deficiency is identified and is resolved varies substantially depending on the specific project. As stated earlier in this report, FERC works with licensees to determine a plan and schedule for investigating safety issues and making any needed modifications. However, FERC officials stated that the majority of safety compliance issues are resolved within a month. However, FERC officials stated that if a licensee repeatedly does not take steps to address a compliance issue, FERC will explore enforcement actions through a formal process. According to officials, FERC’s enforcement options are based on authorities provided under the Federal Power Act and such options are flexible because of the variation in hazards, consequences, and dams. According to FERC officials, to ensure compliance with safety regulations, if a settlement cannot be reached, FERC may, among other things, issue an order to show cause, issue civil penalties in the form of fines to licensees, impose stop work or cease power generation orders, revoke licenses, and seek injunctions in federal court. Nevertheless, FERC officials stated that there is no specific requirement for how quickly the compliance issues or deficiencies should be resolved and that some issues can take years to resolve. For example, in 2004, the current licensee of a hydroelectric project operating in Edenville, Michigan, acquired the project, which was found by FERC to be in a state of non-compliance at that time. FERC staff made numerous attempts to work with the licensee to resolve the compliance issues. However, they were unable to resolve these issues and as a result issued a cease generation order in 2017, followed in 2018 by a license revocation order. In practice, FERC’s use of these enforcement tools to resolve safety issues has been fairly limited, particularly in comparison to other license compliance issues, according to FERC officials. Since 2013, FERC has issued one civil penalty for a safety-related hydropower violation and has issued compliance orders on eight other projects for safety-related reasons, including orders to cease generation on three projects. For the 14 projects and 42 dams we reviewed, FERC licensees and their consultants used a variety of tools to develop engineering studies of dam performance (see table 3). These tools included programs and modeling tools developed by government agencies, such as the U.S. Army Corps of Engineers (the Corps), as well as commercially available modeling tools. FERC officials stated that they also used a number of the same tools used by its licensees and consultants. Similarly, for the 14 projects and 42 dams we reviewed, FERC licensees and their consultants used a variety of datasets to develop engineering studies of dam performance (see table 4). These datasets included data maintained and updated by various government agencies, including the United States Geological Survey and National Oceanic and Atmospheric Administration. FERC officials stated that they also used a number of the same datasets used by its licensees and consultants. This report assesses: (1) how FERC collects information from its dam safety inspections and the extent to which FERC analyzes it; (2) how FERC evaluates engineering studies of dam performance to analyze safety, and (3) the extent to which FERC reviews dam safety information during relicensing and the information FERC considers. This report also includes information on FERC actions to ensure licensee compliance with license requirements related to dam safety (app. I) and selected models and data sets used to develop and evaluate engineering studies of dam performance (app. II). For each of the objectives, we reviewed laws, regulations, FERC guidance, templates, and other documentation pertaining to FERC’s evaluation of dam safety. In addition, we reviewed an independent forensic team’s assessment of the causes of the Oroville Dam incident, including the report’s analysis of FERC’s approach to ensuring safety at the project, to understand any limitations of FERC’s approach identified by the report. We also reviewed dam safety documentation, including dam performance studies, FERC memorandums, the most recent completed inspection report, and other information, from a non-probability sample of 14 projects encompassing 42 dams relicensed from fiscal years 2014 through 2017. (See table 5.) We selected these projects and dams to include ones that were geographically dispersed, had varying potential risks associated with their potential failure, and had differences in the length of their relicensing process. We developed a data collection instrument to collect information from the dam safety documentation and analyzed data from the sample to evaluate the extent to which FERC followed its dam safety guidance across the selected projects. To develop the data collection instrument, we reviewed and incorporated FERC oversight requirements from its regulations, guidance, and templates. We conducted three pre-tests of the instrument, and revised the instrument after each pre-test. To ensure consistency and accuracy in the collection of this information, for each dam in the sample, one analyst conducted an initial review of the dam safety documentation; a second analyst reviewed the information independently; and the two analysts reconciled any differences. Following our review of the information from the dam safety documentation, we conducted semi-structured interviews with FERC engineering staff associated with each of the 14 projects and 42 dams to obtain information about FERC’s inspections, review of dam performance studies, and analysis of safety during the relicensing of these projects. Our interviews with these FERC staff provided insight into FERC’s dam safety oversight approach and are not generalizable to all projects. We also interviewed FERC officials responsible for dam safety about dam safety practices. In addition, to review how FERC collects information from its dam safety inspections and the extent to which FERC analyzes it, we also reviewed inspection data from FERC’s information management systems from fiscal years 2014 through 2017. To assess the reliability of these data, we reviewed guidance and interviewed FERC officials. We determined that the data were sufficiently reliable for our purposes. We compared FERC’s approach to collecting, recording and using safety information to federal internal control standards for the design of information systems and related control activities. We also reviewed our prior work on portfolio- level risk management. To evaluate how FERC evaluates engineering studies of dam performance to analyze dam safety, we reviewed FERC policies and guidance. We interviewed six independent consultants having experience inspecting and analyzing FERC-regulated dams to understand how engineering studies of dam performance are developed. We selected consultants who had submitted an inspection report to FERC recently (between December 2017 and February 2018) based on the geographic location of the project they reviewed and experience conducting these inspections, and the number of reports submitted to FERC over this time period. (See table 6.) Our interviews with these consultants provided insight into FERC’s approach to conducting and reviewing studies and are not generalizable to all projects or consultants. To evaluate the extent to which FERC reviews dam safety information during relicensing and the information it considers, we reviewed templates developed by FERC to assess safety during the relicensing and analyzed the extent to which staff followed guidance in these templates for the 14 projects and 42 dams in our sample. We also interviewed stakeholders, including the National Hydropower Association and Friends of the River to obtain general perspectives on FERC’s relicensing approach. Our interviews with these stakeholders provided insight into FERC’s approach to relicensing, and these views are not generalizable across all stakeholders. To review actions to ensure licensee compliance with license requirements related to dam safety, we reviewed FERC’s guidance related to compliance and enforcement and interviewed FERC officials responsible for implementation of the guidance. To review information on models and datasets used to develop and evaluate engineering studies of dam performance, we reviewed dam safety documentation associated with the projects in our sample (described previously), reviewed FERC documentation, and interviewed FERC officials. We conducted this performance audit from July 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Andrew Von Ah, (202) 512-2834 or vonaha@gao.gov. In addition to the contact named above, Mike Armes (Assistant Director); Matt Voit (Analyst-in-Charge); David Blanding; Brian Chung; Geoff Hamilton; Vondalee Hunt; Rich Johnson; Jon Melhus; Monique Nasrallah; Madhav Panwar; Malika Rice; Sandra Sokol; and Michelle Weathers made key contributions to this report.", "summary": "In February 2017, components of California's Oroville Dam failed, leading to the evacuation of nearly 200,000 nearby residents. FERC is the federal regulator of the Oroville Dam and over 2,500 other dams associated with nonfederal hydropower projects nationwide. FERC issues and renews licenses—which can last up to 50 years—to dam operators and promotes safe dam operation by conducting safety inspections and reviewing technical engineering studies, among other actions. GAO was asked to review FERC's approach to overseeing dam safety. This report examines: (1) how FERC collects information from its dam safety inspections and the extent of its analysis, and (2) how FERC evaluates engineering studies of dam performance to analyze safety, among other objectives. GAO analyzed documentation on a non-generalizable sample of 42 dams associated with projects relicensed from fiscal years 2014 through 2017, selected based on geography and hazard classifications, among other factors. GAO also reviewed FERC regulations and documents; and interviewed FERC staff associated with the selected projects and technical consultants, selected based on the frequency and timing of their reviews. The Federal Energy Regulatory Commission's (FERC) staff generally followed established guidance in collecting safety information from dam inspections for the dams GAO reviewed, but FERC has not used this information to analyze dam safety portfolio-wide. For these 42 dams, GAO found that FERC staff generally followed guidance in collecting safety information during inspections of individual dams and key structures associated with those dams. (See figure.) However, FERC lacks standard procedures that specify how and where staff should record safety deficiencies identified. As a result, FERC staff use multiple systems to record inspection findings, thereby creating information that cannot be easily analyzed. Further, while FERC officials said inspections help oversee individual dam's safety, FERC has not analyzed this information to identify any safety risks across its portfolio. GAO's prior work has highlighted the importance of evaluating risks across a portfolio. FERC officials stated that they have not conducted portfolio-wide analyses because officials prioritize the individual dam inspections and response to urgent dam safety incidents. However, following the Oroville incident, a FERC-led initiative to examine dam structures comparable to those at Oroville identified 27 dam spillways with varying degrees of safety concerns, on which FERC officials stated they are working with dam licensees to address. A similar and proactive portfolio-wide approach, based on analysis of common inspection deficiencies across the portfolio of dams under FERC's authority, could help FERC identify safety risks prior to a safety incident. Guidelines recognize that each dam is unique and allow for flexibility and exemptions in its use. FERC staff use the studies to inform other components of their safety approach, including the analysis of dam failure scenarios and their review of safety to determine whether to renew a license. GAO recommends that FERC: (1) develop standard procedures for recording information collected as part of its inspections, and (2) use inspection information to assess safety risks across FERC's portfolio of dams. FERC agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "The DRC is a vast, mineral-rich nation with an estimated population of about 83 million people and an area that is roughly one-quarter the size of the United States, according to the United Nations. Figure 1 shows the DRC’s provinces and adjoining countries. Since gaining its independence from Belgium in 1960, the DRC has undergone political upheaval and armed conflict. From 1998 to 2003, the DRC and eight other African countries were involved in what has become known as “Africa’s World War,” which resulted in a death toll of an estimated 5 million people in the DRC, according to the U.S. Department of State (State). The eastern DRC has continued to be plagued by violence, often perpetrated against civilians by illegal armed groups and some members of the Congolese national military. Notably, in 2012, an illegal armed group occupied the city of Goma and other cities in the eastern DRC and clashed with the Congolese national army. During this time, the United Nations reported numerous cases of sexual violence against civilians, including women and children, which were perpetrated by armed groups and some members of the Congolese national military. In 2017, the United Nations reported that serious violations of human rights remain widespread in the DRC, including continued acts of sexual violence by government security forces as well as nonstate armed groups. Various industries, particularly manufacturing industries, use the four conflict minerals specifically named in the Dodd-Frank Act—tin, tungsten, tantalum, and gold—in a wide variety of products. For example, tin is used to solder metal pieces and is also found in food packaging, steel coatings on automobile parts, and some plastics. Tungsten is used in automobile manufacturing, drill bits and cutting tools, and other industrial manufacturing tools and is the primary component of filaments in incandescent light bulbs. Most tantalum is used to manufacture capacitors that enable energy storage in electronic products such as cell phones and computers or to produce alloy additives used in turbines in jet engines. Gold is held as bullion by central bank reserves and used in making jewelry and also in the electronics industry, for example, to manufacture cell phones and laptops. In August 2012, SEC adopted its conflict minerals disclosure rule in response to Section 1502(b) of the Dodd-Frank Act. The act required that SEC promulgate disclosure and reporting regulations regarding the use of conflict minerals originating from the DRC and covered countries. In the summary section of the adopting release for the rule, SEC noted that to accomplish the goal of helping to end the human rights abuses in the DRC caused by the conflict, Congress chose to use the Dodd-Frank Act’s disclosure requirements to bring greater public awareness of the sources of companies’ conflict minerals and to promote the exercise of due diligence on conflict mineral supply chains. The SEC disclosure rule addresses the four conflict minerals named in the Dodd-Frank Act from the DRC and covered countries. The rule outlines a process for companies to follow, as applicable, to comply with the rule (see app. II). The process broadly requires a company to 1. determine whether it manufactures, or contracts to be manufactured, products with “necessary” conflict minerals; 2. conduct a reasonable country-of-origin inquiry (RCOI) concerning the origin of those conflict minerals; and 3. exercise due diligence, if appropriate, to determine the source and chain of custody of those conflict minerals, adhering to a nationally or internationally recognized due diligence framework, if such a framework is available for these necessary conflict minerals. If companies choose to disclose that their products are “DRC conflict free,” the SEC disclosure rule requires companies to obtain an independent private-sector audit (IPSA). Our review of companies’ conflict minerals disclosures filed with the SEC in 2017 found that, in general, they were similar to disclosures filed in the prior 2 years. In 2017, a similar number of companies filed conflict minerals disclosures as in 2015 and 2016. Based on our review of a generalizable sample, we found that almost all companies that filed conflict minerals disclosures in 2017 reported performing inquiries about their conflict minerals’ country of origin, similar to the results we previously reported for 2016 and 2015. In their 2017 disclosure reports, many companies described actions they took to improve data collection processes, and most companies indicated challenges in determining the country of origin. Our review of company filings found that almost all companies required to conduct due diligence, as a result of their country- of-origin inquires, reported performing it. SEC issued revised guidance in April 2017, indicating that the SEC’s Division of Corporation Finance would not recommend enforcement action if companies did not report on specified due diligence disclosure requirements. In 2017, 1,165 companies filed conflict minerals disclosures—almost as many companies as filed in 2016 and 2015 (1,230 and 1,281 respectively). Our analysis of a generalizable sample of filings found that an estimated 90 percent of the companies that filed in 2017 were domestic and an estimated 10 percent were foreign companies, similar to the domestic-to-foreign ratio we found in 2016 and 2015. While not all companies reported the minerals used, of those that disclosed this information, an estimated 69 percent reported using tin, 54 percent reported using tantalum, 59 percent reported using tungsten, and 63 percent reported using gold, figures that are similar to the percentages reported in 2016. Our analysis of a generalizable sample of 2017 filings found that, as in 2016 and 2015, almost all companies that filed conflict minerals disclosures indicated that they performed country-of-origin inquiries. Specifically, an estimated 100 percent of the companies reported that they performed such an inquiry, similar to the percentages that we estimated reported doing so in 2016 and 2015. As a result of the inquiries they conducted, an estimated 53 percent of companies reported in 2017 whether the conflict minerals in their products came from covered countries—similar to the estimate of 49 percent in 2016 and in 2015 but significantly higher than the estimate of 30 percent in 2014 (see fig. 2). In the filings we reviewed, many companies indicated they had taken actions to improve their data collection processes, such as gathering missing information about their supply chains and working with suppliers to encourage conflict-free sourcing. In interviews, representatives of selected companies that filed conflict minerals disclosures in 2017 and other industry participants noted that (1) awareness among suppliers about the use of conflict minerals had continued to increase and (2) the process for collecting data on supply chains had become more routine and standardized. However, as in prior years, our review of filings found that most companies reported challenges in determining the country of origin of conflict minerals, in part due to lack of access to suppliers and complex supply chains involving many suppliers and processing facilities. Our review of company filings found that almost all companies that were required, as a result of their country-of-origin inquires, to conduct due diligence on the source and chain of custody of the conflict minerals in their products reported doing so. In 2017, an estimated 96 percent reported conducting due diligence, compared with 96 and 97 percent in 2016 and 2015 respectively. An estimated 87 percent of companies in 2017 reported using a due diligence framework prescribed by the Organization for Economic Co-operation and Development (OECD) guidance for conducting due diligence on the source and chain of custody of the conflict minerals in their products. That result is comparable to an estimated 92 percent that we reported in 2016 and an estimated 95 percent that we reported in 2015. The remaining 13 percent of the companies that reported conducting due diligence in 2017 did not specify a framework for their due diligence activities. After conducting due diligence, an estimated 37 percent of the companies reported in 2017 that they were able to determine that their conflict minerals came from covered countries or from scrap or recycled sources, compared with an estimated 39 and 23 percent in 2016 and 2015, respectively. An estimated 47 percent of the companies in 2017 reported that they could not definitively confirm the source of the conflict minerals in their products, compared with an estimated 55 and 67 percent in 2016 and 2015, respectively. However, as in previous years, almost all of the companies that reported conducting due diligence in 2017 reported that they could not determine whether the conflict minerals financed or benefited armed groups. Four companies in our sample reported determining that the minerals in their products did not finance or benefit armed groups in covered countries, and declared some products “DRC- conflict free.” Three of these companies included the required independent private-sector audit (IPSA) report, and one company did not include an IPSA report. Overall, a total of 16 companies filed an IPSA report in 2017, compared with 19 in 2016. In April 2017, the SEC’s Division of Corporation Finance issued revised guidance indicating that it would not recommend enforcement action to the Commission if companies did not report on specified due diligence disclosure requirements. The SEC disclosure rule requires companies, if applicable, to report on their due diligence in a conflict minerals report (see app. II for additional detail on the disclosure requirements). SEC’s Division of Corporation Finance staff told us that they received inquiries from a small number of companies about the filing process for 2017. In response to these inquiries, these staff noted that they advised companies that the companies had the flexibility to determine whether or not to report on their due diligence and to report their country-of-origin inquiry findings in either the Form SD or in a conflict minerals report. However, the Division of Corporation Finance staff also told us that, regardless of the division’s revised guidance, the SEC could still initiate enforcement action if companies do not report on their due diligence, as required by the SEC disclosure rule. In our sample, three companies cited the updated guidance and other statements issued by the SEC in their filings as a rationale for not reporting on due diligence activities. In interviews, representatives of some companies and other industry participants told us that even though the revised guidance and other statements made by the SEC raised some uncertainty about the filing process, generally, companies plan to continue to report similar conflict minerals disclosure information. We identified two new population-based surveys since our last report related to sexual violence in Burundi and Uganda published in 2018; the most recent information for eastern DRC and Rwanda is from 2016. We also identified some new case-file data on sexual violence in the DRC; however, as we reported previously, case-file data on sexual violence are not suitable for estimating an overall rate of sexual violence. We identified two new population-based surveys related to sexual violence that were conducted in Uganda and Burundi in 2016 and 2017, respectively, and whose results were published in 2018. The Uganda Demographic and Health Survey was conducted from June to December 2016 by the Uganda Bureau of Statistics with technical assistance from ICF International. The survey estimated that 12.7 percent of women nationwide, ages 15-49, reported they had experienced sexual violence in the 12-month period preceding the survey, while 21.9 percent reported they had experienced sexual violence at some point in their lifetime. In addition, 4 percent of men nationwide, ages 15-49, reported they had experienced sexual violence in the 12-month period preceding the survey, while 8.3 percent reported they had experienced sexual violence at some point in their lifetime. The Burundi Demographic and Health Survey was conducted from October of 2016 to March of 2017 by the Burundi Institute of Statistics and Economic Studies with technical assistance from ICF International. The survey estimated that 12.7 percent of women nationwide, ages 15- 49, reported they had experienced sexual violence in the 12-month period preceding the survey, while 23.1 percent reported they had experienced sexual violence at some point in their lifetime. In addition, 1.9 percent of men nationwide, ages 15-49, reported they had experienced sexual violence in the 12-month period preceding the survey, while 6.1 percent reported they had experienced sexual violence at some point in their lifetime. The most recent information on the rate of sexual violence for eastern DRC and Rwanda is from 2016 and is discussed in our previous reports. Figure 3 shows the publication dates for the population-based surveys with data on rates of sexual violence in the eastern DRC, Rwanda, Uganda, and Burundi that have been published since 2007. State and United Nations entities have provided additional case-file information about instances of sexual violence in the DRC and adjoining countries. State’s annual country reports on human rights practices provided the following case-file data pertaining to sexual violence in the DRC and Burundi: DRC. In 2017, the UN documented 267 adult victims and 171 child victims, including two boys, of sexual violence in conflict. This violence was perpetrated by illegal armed groups as well as state security forces and civilians and was concentrated in North Kivu Province and in the Kasai region, according to State. Burundi. One government organization—Humara Center— responsible for investigating cases of sexual violence and rape received 197 cases of sexual and gender-based violence through early December 2017, according to State. Observers stated many women were reluctant to report rape, in part due to fear of reprisal, according to State. In addition, UN entities reported the following case-file data about sexual violence in the DRC: DRC. In 2017, the United Nations Organization Stabilization Mission in the DRC verified 195 cases of conflict-related sexual violence, with illegal armed groups responsible for 80 percent of the cases and DRC security forces responsible for the remaining 20 percent. United Nations officials we interviewed raised concerns about a resurgence of sexual violence in certain regions in the DRC due to a variety of factors, including political instability arising from the government’s postponement of the presidential election originally scheduled to take place in November 2016. We provided a draft of this report to the SEC, State, and the U.S. Agency for International Development for comment. SEC provided technical comments, which we incorporated as appropriate. State and USAID did not provide comments. We are sending copies of this report to appropriate congressional committees and to the Chairman of the Securities and Exchange Commission, the Secretary of State, and the Administrator of the U.S. Agency for International Development. The report is also available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In this report, we provide information about (1) companies’ disclosures filed with the U.S. Securities and Exchange Commission (SEC) in 2017 compared with disclosures filed in the prior 2 years and (2) the rate of sexual violence in the eastern Democratic Republic of the Congo and neighboring countries published in 2017 and early 2018. To examine the fourth annual company disclosures filed with the SEC in 2017 in response to the SEC disclosure rule, we downloaded the specialized disclosure reports (Form SD) and conflict minerals reports (CMR) from SEC’s publically available Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database in September 2017. We downloaded 1,165 filings identified as Form SDs and the CMRs included in EDGAR. To review the completeness and accuracy of the EDGAR database, we reviewed relevant documentation, interviewed knowledgeable SEC officials, and reviewed prior GAO reports on internal controls related to SEC’s financial systems. We determined that the EDGAR database was sufficiently reliable for identifying the universe of SD filings. We reviewed the conflict minerals section of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the requirements of the SEC disclosure rule to develop a data collection instrument (DCI) that guided our analysis of Form SDs and CMRs that contain the information disclosed by the filing companies. Our DCI was not a compliance review of the Form SDs and CMRs. The questions were written in both yes-no and multiple-choice formats. An analyst reviewed the Form SDs and CMRs and recorded responses to the DCI for all of the companies in the sample. A second analyst also reviewed the Form SDs and CMRs and verified the responses recorded by the first analyst. Analysts met to discuss and resolve any discrepancies. We randomly sampled 100 Form SDs from a population of 1,165 to create estimates generalizable to the population of all companies that filed. All estimates based on our sample have a margin of error of plus or minus 10 percentage points or less at the 95-percent confidence level. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95-percent confidence interval. This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. We also attended an industry conference on conflict minerals and spoke with company representatives to provide additional perspective. To address our second objective, we identified and assessed any information on sexual violence in the eastern DRC and the three adjoining countries—Rwanda, Uganda, and Burundi—that had been published or otherwise had become available in 2017 and early 2018. We discussed the collection of sexual violence–related data in the DRC and adjoining countries, including population-based survey data and case-file data, during interviews with U.S. Department of State and U.S. Agency for International Development officials and with representatives of nongovernmental organizations and researchers whom we interviewed for our prior review of sexual violence rates in the eastern DRC and adjoining countries. We also interviewed officials from the United Nations Population Fund and the United Nations Special Representative of the Secretary-General in New York on Sexual Violence in Conflict. In addition, we conducted Internet searches to identify new academic articles containing any additional information on sexual violence published in 2017 and early 2018. We conducted this performance audit from September 2017 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The U.S. Securities and Exchange Commission (SEC) conflict minerals disclosure rule requires certain companies to file a specialized disclosure report, known as the Form SD, if the company manufactures, or contracts to have manufactured, a product or products containing conflict minerals that are necessary to the functionality or the production of those products. The rule also requires each company, as applicable, to provide a description of the measures the company took to exercise due diligence in determining the source and chain of custody of the conflict minerals, the facilities used to process them, their country of origin, and the efforts made to determine the mine or location of origin with the greatest possible specificity. Form SD provides general instructions for filing conflict minerals disclosures and specifies the information that companies must provide. Companies were required to file under the rule for the first time by June 2, 2014, and annually thereafter on May 31. Figure 4 shows the SEC’s flowchart summarizing the conflict minerals disclosure rule. In addition to the individual named above, Godwin Agbara (Assistant Director), Farahnaaz Khakoo-Mausel (Analyst-in-Charge), Diana Blumenfeld, Andrew Kurtzman, Justin Fisher, Grace Lui, David Dayton, Christopher Keblitis, and Michael McAtee made key contributions to this report. Conflict Minerals: Information on Artisanal Mined Gold and Efforts to Encourage Responsible Sourcing in the Democratic Republic of the Congo. GAO-17-733. Washington, D.C.: August 23, 2017. SEC Conflict Minerals Rule: 2017 Review of Company Disclosures in Response to the U.S. Securities and Exchange Commission Rule. GAO-17-517R. Washington, D.C.: April 26, 2017. Conflict Minerals: Insights from Company Disclosures and Agency Actions. GAO-17-544T. Washington, D.C.: April 5, 2017. SEC Conflict Minerals Rule: Companies Face Continuing Challenges in Determining Whether Their Conflict Minerals Benefit Armed Groups. GAO-16-805. Washington, D.C.: August 25, 2016. SEC Conflict Minerals Rule: Insights from Companies’ Initial Disclosures and State and USAID Actions in the Democratic Republic of the Congo Region. GAO-16-200T. Washington, D.C.: November 17, 2015. SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies Were Unable to Determine the Source of Their Conflict Minerals. GAO-15-561. Washington, D.C.: August 18, 2015. Conflict Minerals: Stakeholder Options for Responsible Sourcing Are Expanding, but More Information on Smelters Is Needed. GAO-14-575. Washington, D.C.: June 26, 2014. SEC Conflict Minerals Rule: Information on Responsible Sourcing and Companies Affected. GAO-13-689. Washington D.C.: July 18, 2013. Conflict Minerals Disclosure Rule: SEC’s Actions and Stakeholder- Developed Initiatives. GAO-12-763. Washington, D.C.: July 16, 2012. The Democratic Republic of Congo: Information on the Rate of Sexual Violence in War-Torn Eastern DRC and Adjoining Countries. GAO-11-702. Washington, D.C.: July 13, 2011. The Democratic Republic of the Congo: U.S. Agencies Should Take Further Actions to Contribute to the Effective Regulation and Control of the Minerals Trade in Eastern Democratic Republic of the Congo. GAO-10-1030. Washington, D.C.: September 30, 2010.", "summary": "Over the past decade, the United States and the international community have sought to improve security in the DRC. In the eastern DRC, armed groups have committed severe human rights abuses, including sexual violence, and reportedly profit from the exploitation of “conflict minerals”— in particular, tin, tungsten, tantalum, and gold, according to the United Nations. Congress included a provision in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that, among other things, required the SEC to promulgate regulations regarding the use of conflict minerals from the DRC and adjoining countries. The SEC adopted these regulations in 2012. The act also included a provision for GAO to annually assess the SEC regulations' effectiveness in promoting peace and security and report on the rate of sexual violence in the DRC and adjoining countries. In this report, GAO provides information about (1) companies' conflict minerals disclosures filed with the SEC in 2017 compared with disclosures filed in the prior 2 years and (2) the rate of sexual violence in the eastern DRC and adjoining countries published in 2017 and early 2018. GAO analyzed a generalizable random sample of SEC filings and interviewed relevant officials. GAO reviewed U.S., United Nations, and international organizations' reports; interviewed DRC officials, and other stakeholders; and conducted fieldwork in New York at the United Nations headquarters. GAO is not making any recommendations. GAO's review of companies' conflict minerals disclosures filed with the U.S. Securities and Exchange Commission (SEC) in 2017 found that, in general, they were similar to disclosures filed in the prior 2 years. In 2017, 1,165 companies filed conflict minerals disclosures—about the same as in 2016 and 2015. Percentages of companies reporting country-of-origin inquiries in 2017 were also similar to the percentages from those 2 prior years. As a result of the inquiries they conducted, an estimated 53 percent of companies reported in 2017 whether the conflict minerals in their products came from the Democratic Republic of the Congo (DRC) and adjoining countries—similar to the estimated 49 percent in 2016 and 2015 but significantly higher than the estimate of 30 percent in 2014 (see figure). In their 2017 disclosure reports, many companies described actions they took to improve data collection processes, and most companies indicated some challenges in determining the country of origin. Similar to the prior 2 years, almost all companies required to conduct due diligence, as a result of their country-of-origin inquiries, reported doing so. After conducting due diligence to determine the source and chain of custody of any conflict minerals used, an estimated 37 percent of these companies reported in 2017 that they were able to determine that their conflict minerals came from covered countries or from scrap or recycled sources, compared with 39 and 23 percent in 2016 and 2015, respectively. Four companies in GAO's sample declared their products “DRC conflict-free,” and of those, three included the required Independent Private Sector Audit report (IPSA), and one did not. In 2017, 16 companies filed an IPSA; 19 did so in 2016. GAO found information on the rate of sexual violence in the 2017 Uganda and Burundi Demographic and Health Surveys. For Uganda, 22 percent of women and 9 percent of men reported they had experienced sexual violence at least once in their lifetime. For Burundi, 23 percent of women and 6 percent of men reported they had experienced sexual violence at least once in their lifetime. The most recent information on the rate of sexual violence for eastern DRC and Rwanda is from 2016 and is discussed in our previous GAO reports.", "document_type": "gao"}
{"report": "Justice Management Division (JMD) JMD provides the Federal Bureau of Prisons senior management with guidance as it relates to Department of Justice (DOJ) policy for all matters pertaining to organization, management, and administration, including the use of human capital flexibilities such as retention incentives. BOP is responsible for incarcerating all federal offenders sentenced to prison. To carry out its mission, BOP, under the oversight of DOJ’s JMD, manages the human resource operations of its institutions, including the use of retention incentives. BOP administers, monitors, and oversees retention incentives through its Central Office, regional offices, and institutions. Central Office. The Central Office serves as BOP’s headquarters and provides oversight of BOP operations and program areas. Within the Central Office is BOP’s Human Resource Management Division (HRMD) which is responsible for developing, implementing and administering human resource policies and programs, including the use of retention incentives that meet OPM and DOJ requirements. In addition, the Central Office’s Program Review Division (PRD) is responsible for assessing BOP programs, including human resources, to ensure that they are managed and operated effectively. Regional offices. BOP has six regional offices that cover the Mid- Atlantic, North Central, Northeast, South Central, Southeast, and Western regions of the United States. These offices, each led by a regional director, oversee the operations of the 122 federal institutions within their respective geographic regions of the country. According to BOP officials, regional office staff also provide local level oversight of institutions’ human capital programs, such as retention incentives, among other things. Institutions. BOP institutions are managed by a warden and other officials, including an executive assistant and associate warden who generally provide overall direction and, in part, administer the institution’s human capital policies, including policies on retention incentives. Correctional services staff represent the largest segment of each institution’s workforce and are responsible for the correctional treatment, custody, and supervision of inmates. Non-correctional services staff include, among others, those employees assigned to non-correctional services management, facility operations, and the health services unit. Workers in health services and psychology services are responsible for providing inmates with medical, dental, and mental health services and include, for example, dentists, pharmacists, physicians, nurses, psychologists, and drug treatment specialists. The Federal Employees Pay Comparability Act of 1990 first authorized OPM to allow federal agencies to give incentives, including retention incentives, to employees. The Federal Workforce Flexibility Act of 2004 provided federal agencies increased flexibilities regarding these incentives. For example, individual retention incentives that were capped at 25 percent of an employee’s basic pay rate could be increased up to 50 percent in cases of critical agency need with OPM’s approval. Generally, under OPM regulations, an agency is authorized to pay a retention incentive to employees. This happens when the agency determines that the unusually high or unique qualifications of the employee or a special need of the agency for the employee’s services makes it essential to retain the employee and that the employee would be likely to leave federal service in the absence of an incentive. In addition, OPM requires agencies to develop plans for using retention incentives outlining, in part, the required documentation for justifying the retention incentive and any criteria for determining the amount of incentive and the length of the service period. Generally, agencies must require that employees sign a written service agreement that outlines the terms of the service such as the employee’s agreement to remain a certain length of time with the agency. Additionally, according to OPM regulations, to qualify for a retention incentive, each employee must have a performance rating of at least “fully successful” or an agency’s equivalent performance rating. BOP funds the majority of its retention incentives through its Salaries and Expenses appropriation account which represented almost 93 percent of BOP’s budget in FY 2016. According to BOP officials, BOP’s Central Office allocates funding from the Salaries and Expenses account to the regional offices. These regional offices then determine how to allocate their budget among various salary and expense activities, including retention incentives. HRMD delegates retention incentive determinations to each institution. In accordance with OPM requirements and BOP’s October 2016 Program Statement on Compensation, the wardens make retention incentive requests based on documented evidence that the employee possesses unusually high or unique qualifications or meets a special need of the agency and has a performance rating of at least “successful or its equivalent.” These incentives are calculated as a percentage of the employee’s basic pay and are disbursed in installments to the employee each pay period. In addition to retention incentives, BOP has authority to provide other compensation-based human capital flexibilities to employees, in certain circumstances. The following summarizes some of the compensation- based human capital flexibilities that BOP uses in addition to retention incentives, to retain and recruit staff: Recruitment and relocation incentives. BOP pays recruitment incentives to new hires and relocation incentives to current employees who elect to move to a different geographic area, when a position is likely to be difficult to fill in the absence of an incentive. Student loan repayments. Using this authority, BOP may repay federally-insured student loans to attract job candidates or retain current employees. Special salary rates. With OPM approval, BOP may establish higher rates of pay for an occupation or group of occupations nationwide or in a local area when it finds the government’s recruitment or retention efforts are, or would likely become, significantly handicapped without those higher rates. Physicians and dental comparability allowances. Comparability allowances may be paid to certain eligible physicians or dental professionals who enter into service agreements. These allowances are paid only to categories of physicians and dentists for which the agency is experiencing recruitment and retention problems and are fixed at the minimum amounts necessary to deal with such problems. BOP retention incentive expenditures generally increased from $10.7 million in fiscal year 2012 to $14.0 million in fiscal year 2016. Additionally, as illustrated in table 1, the number of employees who received retention incentives increased each year from 2,024 employees in fiscal year 2012 to 2,460 employees in fiscal year 2016. In general, BOP employees who received retention incentives received the incentive for more than one year. For example, from fiscal year 2012 through fiscal year 2016, a total of 3,382 BOP employees received retention incentive payments. Of those, 82 percent (2,766 of 3,382) received retention incentive payments for at least 2 years and 39 percent received retention incentives all 5 years, as shown in figure 1. From fiscal years 2012 through 2016, BOP spent more than 97 percent of its total retention incentive expenditures on employees at four California institutions and for medical professionals nationwide. BOP’s total retention incentive expenditures for the four California institutions and medical professionals nationwide in fiscal year 2016 are provided in figure 2. Four California Institutions. The California institutions—United States Penitentiary (USP) Atwater, Federal Correctional Institution (FCI) Herlong, FCI Mendota, and Federal Correctional Complex (FCC) Victorville—constituted the largest portion of BOP’s total retention incentive expenditures, and the level of their expenditures remained relatively steady from fiscal year 2012 through 2016. BOP provides group retention incentives for staff at the General Schedule (GS) grades level 12 and below and those in the Federal Wage System at three institutions—USP Atwater, FCI Herlong, and FCC Victorville. BOP also provides individual retention incentives to its employees at GS grades level 12 and below and in the Federal Wage System at FCI Mendota. As shown in figure 3, our analysis of BOP data found that from fiscal years 2012 through 2016, these four California institutions had the largest percentage of retention incentive expenditures across institutions as well as the largest percentage of employees who received retention incentives. Additionally, the four California institutions’ retention incentive expenditures remained relatively steady—around $8.1 to $8.2 million during the 5-year period—even though the overall number of employees who received the incentives generally increased. BOP officials told us that these California institutions’ retention incentive expenditures remained relatively steady in spite of an overall increase in the number of employees receiving incentives, in part, because in fiscal year 2013 BOP reduced the retention incentive rate—the percentage of an employee’s basic pay that determines the employee’s retention incentive— by 3 percent at the four California institutions. BOP officials reported using retention incentives primarily at these four institutions to supplement correctional officers’ salaries and compensate for the gap between BOP’s and other institutions’ salaries. Specifically, officials told us that these four California institutions were consistently understaffed as a result of their lower salaries in comparison to salaries offered at California state and local prisons and at other BOP institutions in California metropolitan areas. The Department of Labor’s Bureau of Labor Statistics reports that the average salary for correctional officers in California in 2016 was $70,020. For the same year, the annual average salary for BOP correctional officers at these four institutions was $50,859. To bring these four California institutions’ salaries in line with those offered by state, local, and other BOP institutions in California metropolitan areas, BOP officials told us that they first use recruitment incentives to attract and hire staff and then provide retention incentives to employees with a performance rating of at least “successful.” Medical Professionals. From fiscal years 2012 through 2016, BOP retention incentive expenditures for medical professionals increased by an average of approximately 21 percent per year. Our analysis showed that most recently—for fiscal years 2015 and 2016—BOP retention incentive expenditures for medical professionals accounted for the largest portion of BOP’s total retention incentive expenditures across the various occupation groups and was primarily responsible for the overall increase in BOP’s total retention incentive expenditures from fiscal year 2012 through fiscal year 2016. For example, in fiscal year 2016, BOP spent approximately 42 percent of total retention incentives expenditures for medical professionals ($5.8 million), 27 percent on correctional officers ($3.8 million), and the remaining 31 percent on employees in other occupations. In total, BOP retention incentive expenditures for medical professionals increased from approximately $2.7 million in fiscal year 2012 to $5.8 million in fiscal year 2016, as shown in figure 4. The increase accounted for 92 percent of BOP’s total increase in retention incentive expenditures during the five-year period. In comparison, BOP’s retention incentive expenditures for correctional officers and all other occupations remained relatively steady from fiscal year 2012 through fiscal year 2016, increasing by an average of approximately 1 percent per year. According to our analysis, the increase in retention incentive expenditures for medical professionals during the five years is partially explained by the increase in the number of institutions providing retention incentives to medical professionals. Specifically, from fiscal years 2012 through 2016, the number of institutions providing retention incentives to medical professionals increased from 53 institutions with 341 employees in medical occupations receiving retention incentives to 84 institutions providing retention incentives to a total of 646 employees in medical occupations. According to BOP officials, BOP primarily uses retention incentives for medical professionals in an effort to retain these employees by supplementing BOP salaries which are generally lower than salaries offered to medical professionals in the private sector. Officials told us that BOP has designated medical professional positions as hard-to-fill and, therefore, BOP retaining these professionals in a correctional setting requires the use of a variety of incentives, including retention incentives, in order to increase pay. BOP has a number of internal controls in place to ensure that retention incentive applications meet BOP and other requirements. BOP officials told us that these controls are part of a multilayered application and review process that begins at the institution and culminates at BOP’s Central Office. Our review of a random sample of 40 application packet case files for retention incentives awarded from fiscal year 2014 through fiscal year 2016 found that they all generally incorporated the internal controls described by officials. The key controls in this process include: Application review at the institution and regional levels. According to BOP officials, the retention incentive application process begins with an institution’s human resources office, whose staff complete a retention incentive application on behalf of an employee. The institution’s human resources office verifies that the information in the application justifies a retention incentive and that funds are available to pay the incentive. Although it is not required, BOP officials said that they use a retention incentive application checklist to help institutions ensure that retention incentive applications are complete. The institution’s human resources office then submits the completed application packet, which includes supporting documentation, to the warden for review. Next, the application packet is forwarded to the respective BOP regional director who also reviews it for accuracy and completeness. The regional director then adds an approval statement and forwards the packet to the Central Office for final review and approval. Of the 40 randomly selected application packet case files that we reviewed, 36 included a retention incentive checklist used by the institutions and all contained information to justify the retention incentive as well as a statement of the regional director’s approval. Central Office’s final application approval. BOP policy requires that all retention incentive applications undergo two levels of review in BOP’s Central Office: first by the Human Resource Management Division’s (HRMD) Staffing and Employee Relations Section (SERS) and next by HRMD’s Personnel Director, for final review and approval. According to BOP officials, during the review process there is ongoing communication between the various entities to ensure that applications are complete and accurate; for example, if SERS finds an error in the application or requests additional information, SERS returns the application to the regional or institutional level for correction and re-review. All of the 40 BOP application packet case files that we reviewed included approvals by HRMD’s Personnel Director or an authorized official, as required by BOP policy. Annual review and re-certification to continue retention incentives. According to BOP policy, on an annual basis, institutions’ human resources offices are required to review employees’ retention incentives to determine whether the incentive is still warranted. Payment of a retention incentive may be recertified and continued as long as the conditions giving rise to the original determination to pay the incentive still exist and funds are available. For each retention incentive, an institution’s human resources office must determine whether to continue, adjust, or terminate the incentive within one year of the initial or most recent approval. If the human resources office decides to continue the retention incentive, the institution’s warden must again submit a retention incentive application. Applications to continue the retention incentive proceed through the same review and approval process as initial applications. Of the 40 application files that we reviewed, 29 were continuations and 8 were initial requests for a retention incentive. According to BOP officials, after the initial approval of a retention incentive, an institution’s human resources office has primary responsibility for the monitoring of retention incentive payments. According to officials, institutions use a variety of internal controls to monitor the expiration, continuation, or termination of retention incentives, for example: Monitoring expiration dates. BOP officials stated that institutions’ human resources offices monitor retention incentives in order to identify incentives that are approaching their expiration date and need to be terminated or renewed. For example, according to BOP officials from USP Atwater, FCC Butner and FCI Phoenix, staff from their institutions’ human resources offices may generate a retention incentive activity report and cross reference this report with their locally generated tracking sheets. This process helps identify retention incentives approaching their expiration dates so that the human resources offices can submit a request for continuation before the incentive expires. Using automated reminders to prompt file review. BOP officials stated that institutions use automated reminders to alert human resources staff to check the records of retention incentive recipients for human resources-related events such as promotions or relocations that could affect the continuation of a retention incentive. Following a checklist of steps for relocation processes. BOP officials told us that in April 2016 they instituted a checklist that outlines steps that an institution’s human resources staff must take when employees relocate to a different institution. Based on our review of this checklist, one step on the sheet prompts human resources staff to review the employee’s retention incentive. According to BOP policy, when an employee receiving a retention incentive transfers to another location, the human resources office where the employee was receiving the retention incentive is responsible for submitting a request to terminate the incentive. The termination must be effective the last day of the pay period that the employee occupies the position. Submitting forgiveness waivers. BOP officials told us that institutions submit forgiveness waivers if a request to continue a retention incentive is not submitted and approved prior to the retention incentive expiring. BOP officials said that a forgiveness waiver is considered an acknowledgement of an administrative error and is a late submission of a retention incentive renewal that was still warranted. The waiver is not a request to forgive an overpayment since the employee was still considered to be eligible for the retention incentive. Of the 40 retention incentive applications that we reviewed, 5 applications included forgiveness waivers to excuse the tardiness of the filing and request continuations of the retention incentive. According to BOP officials, BOP conducts periodic audits and reviews of its human capital activities and related internal controls, to ensure that retention incentives are being used appropriately. The following offices conduct various audits and reviews involving BOP’s retention incentives: BOP’s Program Review Division (PRD) audits regional and institutional human resources functions. PRD audits BOP’s regional and institutional human resources offices to ensure that they are in compliance with BOP policies and procedures. According to BOP officials, as part of the audit process, PRD audits retention incentives to ensure that they have the proper approvals and are justified. PRD audits each institution’s human resources office at least every three years. During these audits, PRD generates retention incentive activity reports (the same reports that institutions run when monitoring for expiration dates), to check the accuracy of retention incentive programs under review. Following each audit, PRD issues a final report with findings to the institution and to the staff operating the program area under audit. Institutions respond to the report with corrective actions that the institution will take to address the findings. When the institution has resolved all corrective actions from the audit, the audit is closed. Additionally, each quarter, PRD provides HRMD with a report that summarizes its quarterly audit findings. According to BOP officials, HRMD uses these reports to identify any agency-wide trends that need to be addressed. Our review of BOP data showed that between fiscal years 2012 and 2016, PRD conducted nearly 200 audits. For example, in the fourth quarter of fiscal year 2016, PRD audited five institutions’ and regional offices’ human resource management functions. During these audits, PRD identified nine deficiencies, one of which pertained to retention incentives. Specifically, it found that one audited institution did not terminate an employee’s retention incentive after the employee had relocated to another institution. To correct the deficiency, the institution cancelled the retention incentive which discontinued future disbursements. According to BOP officials, a bill was generated to recoup the overpayment from the employee. BOP institutions conduct annual operation reviews of internal functions, such as human resources. BOP officials told us that each institution conducts annual operational reviews of various internal functions, such as human resources. According to BOP’s Program Review Guidelines for Human Resource Servicing Offices, during these reviews, institutions are required to review supporting documentation for staff currently receiving an incentive to determine if the incentives are still warranted. If the initial request for the retention incentive was made over the preceding 12 months, institutions are also required to ensure that it was approved. According to BOP officials, the results of these reviews are reported to PRD through the Central Office. DOJ’s Justice Management Division (JMD) audits BOP’s human resources programs. According to BOP officials, JMD conducts audits of component-level human resources programs to determine whether BOP’s systems are compliant with DOJ policy and aligned with DOJ’s Human Capital Strategic Plan. JMD’s most recent audit of BOP’s human resources programs that included a review of BOP’s retention incentives occurred in September 2010 at BOP’s Human Resource Service Center in Grand Prairie, Texas. JMD found that in some cases BOP granted retention incentives prior to the signing of service agreements. JMD also found that BOP lacked documentation to authorize a group retention incentive for employees at its Victorville, California institution. BOP’s written response to the findings stated that JMD incorrectly applied the service agreement requirement, as service agreements were not warranted in the specific case that it identified. Additionally, BOP stated that the documents JMD identified as missing from the case files in question were kept in separate files and not required to be part of the retention incentive application. JMD agreed with BOP’s responses and in January 2013, JMD closed out the audit’s findings noting that these responses satisfied all required corrective actions. While BOP takes a number of steps to determine current workforce needs and how to fill those needs, BOP does not strategically plan for how retention incentives can be used to meet long-term human capital goals. BOP officials stated that planning for human capital needs is conducted at institutions during quarterly workforce utilization meetings or manpower salary meetings. During these meetings, executive staff at the institution discuss the current state of the institution’s workforce. According to the BOP officials, while considering attrition, hiring, and turnover rates, the executive staff decide strategies they will employ to attract and retain employees for their current needs. While officials we spoke with at four institutions have discussed retention incentives at their workforce utilization meetings, details about the content of these discussions ranged. According to these officials and our review of meeting minutes from the four institutions, discussions about retention incentives respond to each institution’s short-term staffing situation rather than address future staffing needs based on an overall strategic human capital plan. For example: USP Atwater officials told us that they review the current turnover rate, budget, projected vacancies, and use of retention incentives at annual budget development meetings. Meeting minutes reflected the following on retention incentives: “retention … still necessary to retain staff and hard-to-fill positions.” FCC Butner is a medical facility that offers retention incentives to all medical officers (all types of doctors) and nurses (practitioners, registered, etc.) at the institution. According to Butner officials, during workforce utilization meetings, Butner officials discuss recruitment and staffing trends for the institution and plans for how to address any staffing challenges. Meeting minutes we reviewed did not indicate specific discussions about the use of retention incentives. FCC Pollock executive staff discuss current institutional salary expenditures and projections and the status of vacant positions at workforce utilization meetings. While meeting minutes we reviewed indicated discussions about projected expenditures for incentive awards, the minutes did not differentiate between retention incentive awards, and other incentive awards such as recruitment or relocation incentive awards. FCI Phoenix officials stated that in their workforce utilization meetings, executive staff discuss salary projections and vacancy statuses. Meeting minutes we reviewed did not indicate specific discussions about the use of retention incentives. BOP decisions about retention incentives are currently not tied to any strategic human capital plan for how to use human capital flexibilities— such as retention incentives—to address their ongoing challenge of retaining staff in hard-to-fill positions. According to officials, retention incentives are awarded on an as-needed basis, determined by an institution’s warden, if funds are available. According to key principles for effective strategic human capital planning, such planning is an important component of an agency’s effort to develop long-term strategies for acquiring, developing, and retaining staff needed for an agency to achieve its goals. Specifically, senior leaders should be involved in developing, communicating, and implementing strategic human capital plans. Within an agency’s strategic human capital plan, the human capital policies, practices, and programs—for example, an agency’s retention incentive program—should clearly link to the human capital and program goals of the organization. By not having a strategic human capital plan that clearly establishes strategies that will be used to achieve specific human capital goals, BOP cannot ensure that its institutions are strategically managing their workforces in a manner that meets the agency’s human capital needs. In August 2017, BOP officials told us that they began drafting a strategic human capital operating plan that will include strategic objectives, action plans, performance objectives and measures, and evaluation/reporting requirements. Officials stated that the plan will also include planning regarding the use of human capital flexibilities, such as retention incentives. BOP officials told us that they anticipate that the strategic human capital operating plan will be a supplement to their workforce utilization meetings and that an agency-wide plan will provide a set of strategies for all institutions to consider. However, BOP could not provide documentation of the project beginning or whether it would include a strategic approach specific to retention incentives. Including retention incentives in BOP’s strategic human capital operating plan would create a roadmap for the agency and the institutions to use to move from being reactive in their current workforce needs—for example, awarding retention incentives on an ad hoc basis when funds are available—to being strategic in how retention incentives are used and to ensure that these and other flexibilities help the agency achieve its long-term workforce goals. From fiscal year 2012 through fiscal year 2016, BOP spent more than $59 million on retention incentives but has not established any measures to evaluate their effectiveness. According to officials, BOP has not evaluated the effectiveness of its use of retention incentives because BOP officials consider a retention incentive successful if an employee does not leave the agency. However, BOP also uses other human capital flexibilities along with retention incentives to help retain staff. For example, BOP uses physician and dental comparability allowances—additional pay to a physician or dentist who enters into an agreement for a specified period of service—to help retain these medical personnel. According to officials, it would otherwise be difficult to compete with private sector salaries without the use of all available incentives. However, BOP has not studied whether or how retention incentives have contributed to employees’ retention in relation to other incentives such as physician and dental comparability allowances. According to our work on strategic human capital management and OPM’s guidance, it is crucial for organizations to evaluate the success of their human capital strategies, such as the use of retention incentives. In measuring the performance of these strategies and their contribution to key programmatic results, agencies can make adjustments, if necessary. For example, agencies can use evaluation results to make targeted investments in certain human capital strategies—such as the use of retention incentives—creating a cycle of strategic workforce management, where evaluation informs planning, planning dictates strategies, and strategies are evaluated for effectiveness. While BOP uses retention incentives to address critical skills gaps—such as with medical professionals—evaluating the effectiveness of retention incentives would help BOP determine whether and how retention incentives, as well as other human capital flexibilities, contribute to an employee’s continued employment at BOP or if adjustments to BOP retention strategies must be made for improved results. BOP officials agreed that evaluating the effectiveness of retention incentives would help them be more strategic about their human capital needs and spending on incentives. By including and implementing such an evaluation in its upcoming strategic human capital operating plan, BOP could better determine if it is making maximum use of its funds to retain the necessary qualified personnel or if changes must be made to most effectively retain its staff. As the largest employer within DOJ with some staff working in remote locations and undesirable conditions, BOP relies on a number of available flexibilities, including retention incentives, to help retain its employees. However, BOP currently lacks a strategic approach for using and evaluating retention incentives to address human capital goals. Given BOP’s ongoing staffing challenges, for example, retaining staff in hard-to- fill medical positions, developing a plan that includes a thoughtful blueprint for using retention incentives could help BOP better anticipate and address staffing needs. Moreover, evaluating its use of retention incentives could help BOP determine whether these incentives are effective or whether adjustments are needed to better retain its employees. By using evaluation results to inform planning, and planning to inform how retention incentives are used, BOP would be better positioned to achieve its long-term human capital goals and address its critical staffing needs. We are making two recommendations to BOP: 1. The Director of BOP should include in the forthcoming strategic human capital operating plan, 1) human capital goals and 2) strategies on how human capital flexibilities—including retention incentives—will be used to meet these goals. (Recommendation 1) 2. The Director of BOP should evaluate the effectiveness of BOP’s use of retention incentives to help determine whether the incentives have helped BOP achieve its human capital goals or if adjustments in retention incentives are needed. (Recommendation 2) We requested comments on a draft of this report from DOJ. In an email received November 15, 2017, the DOJ liaison stated that DOJ concurred with our recommendations. The Department did not provide official written comments to include in our report, but did provide written technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Attorney General and the Director of BOP. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in Appendix III. This report examines (1) how BOP has used its authority to pay retention incentives; (2) what internal controls are in place for the use of retention incentives; and (3) the extent to which BOP plans for and evaluates the use of retention incentives. To determine how BOP has used its authority to pay retention incentives, we reviewed BOP’s July 2012 report on its use of recruitment, relocation, and retention (3R) incentives. We then obtained underlying retention incentive expenditure data from DOJ’s Justice Management Division because it serves as the focal point for performance and financial information for all Department of Justice components and employees, including BOP. In particular, we obtained employee-level retention incentive payroll data for fiscal years 2012 through 2016. We selected this time period because it includes the most recent five complete fiscal years for which data were available and because we believe five years is sufficient time to identify trends in BOP’s retention incentive expenditures. We analyzed and aggregated the employee-level data by institution, occupation, and employee grade level. To identify trends, we compared per fiscal year expenditures across the various categories of occupations and locations across the five years. Additionally, we categorized institutions by BOP region, institutions that use group retention incentives, and institutions that use individual retention incentives. We also categorized occupations as medical professionals, correctional officers, and all other occupations and compared aggregate retention incentive expenditures for the different groups. Using information from BOP’s website and testimonial evidence from BOP officials on its health care system, for the purposes of this report, we defined medical professionals as BOP employees in occupations that provide medical, dental, and mental health care services and who do not solely provide these services in an administrative function. For the purposes of our analyses, medical professionals are dentists, dental assistants and hygienists, diagnostic radiological technologists, health aid and technicians, medical doctors (including psychiatrists), medical technologists, nurses, pharmacists, pharmacy technicians, physician assistants, and practical nurses and psychologists. To assess the employee-level retention incentive payroll data’s reliability, we obtained and analyzed documentation on systems’ capabilities and data control, interviewed data users and managers responsible for maintaining data, conducted checks for completeness and logical consistency, and compared the employee-level data to aggregated institution-level retention incentive expenditure data from BOP’s Financial Management Information System. We found the employee-level data to be sufficiently reliable for the purpose of this report. Additionally for this objective, we reviewed documents such as the DOJ’s Financial Management Information System Sub-Object Classification Code Guide and the Office of Personnel Management (OPM) Handbook of Occupational Groups and Families to respectively identify the system codes used to track retention incentives expenditures and to identify the names for each occupational series code in the datasets. We also interviewed BOP Human Resource Management headquarters officials to obtain information on the primary purposes for BOP’s use of retention incentives and their views on identified retention incentive expenditures trends. We also interviewed U.S. Department of Health and Human Services’ (HHS) Public Health Service (PHS) officials to better understand how BOP and PHS manage costs, including retention incentive expenditures, for PHS staff assigned to BOP. BOP partners with PHS to acquire medical staff to provide medical care for BOP’s inmate population. BOP reimburses PHS for the costs of compensation and benefits—including retention incentive payments, if applicable—for PHS staff assigned to BOP. PHS has final approval authority for retention incentives paid to PHS staff assigned to BOP facilities. Furthermore, we obtained aggregated retention incentive expenditure data from PHS on the total amount of funds BOP reimbursed PHS for fiscal years 2012 through 2016. For the reliability of PHS’s data, we reviewed the system’s data fields to check that the appropriate fields were used to provide data and interviewed data users and managers to discuss how expenditures are recorded and maintained. We found the PHS data to be sufficiently reliable for the purpose of this report. To identify and describe the internal controls that BOP has in place related to retention incentives, we obtained and analyzed documentation regarding BOP requirements and guidance for the use of retention incentives. We also interviewed officials from BOP’s Central Office who are responsible for the administration, management, and oversight of BOP’s human capital management systems, including retention incentives. We focused on the management and administrative controls used by BOP to review, approve, re-certify, and monitor retention incentives. Additionally, we interviewed the warden and human capital officers at 4 of the 122 institutions to obtain illustrative examples regarding the internal controls in place at these institutions to ensure the proper disbursement of retention incentives. We interviewed BOP officials at Federal Correctional Complex Pollock in Pollock, LA; Federal Correctional Complex Butner in Butner, NC; United States Penitentiary, Atwater in Atwater, CA and Federal Correctional Institution Phoenix, in Phoenix, AZ. These institutions were selected to ensure variation in the number and types of employees receiving retention incentives, BOP region, and security-level. Although the information we obtained from the interviews with officials at these four institutions cannot be generalized to other BOP institutions, these interviews provided important insights and perspectives about the use of retention incentives at BOP institutions. We also reviewed a non-generalizable random sample of 40 retention incentive application packet case files to determine the extent to which these files contained documentation on the internal control activities in place to monitor the application, approval, and funds disbursement processes of BOP’s retention incentive program. To identify our sample, we used employee-level expenditure data to randomly select 40 application files from the universe of BOP employees who received retention incentives from fiscal years 2014 through 2016. Each application file was reviewed by two GAO analysts who each assessed the extent to which each application contained the appropriate justification, approval signatures, and other documentation such as an application checklist and whether the application was an initial or continuation application. To determine the extent to which BOP plans for and evaluates the use of retention incentives, we interviewed BOP officials regarding their experiences with retention incentives, how they use retention incentives to strategically manage their workforce needs, how the agency evaluates the effectiveness of retention incentives, and how retention incentives contribute to BOP’s broader human capital goals. We then compared these efforts to our work on strategic human capital planning, specifically in terms of planning for and evaluating the use of human capital flexibilities. Additionally, we interviewed the warden and human capital officers at four BOP institutions mentioned above to obtain illustrative examples of how workforce planning occurs at these institutions. We also reviewed the DOJ’s Office of Inspector General Report 16-02 “Review of the Federal Bureau of Prisons’ Medical Staffing Challenges” (March 2016) and our past work to better understand the challenges that BOP faces in retaining medical professionals and other staff. Table 2 provides the Bureau of Prisons’ (BOP) fiscal year 2016 retention incentive expenditures by various occupations and groups of occupations, such as medical professionals, correctional officers, and other occupations. A range of occupations are reflected in the table primarily as a result of four California institutions—United States Penitentiary (USP) Atwater, Federal Correctional Institution (FCI) Herlong, FCI Mendota, and Federal Correctional Complex Victorville—providing retention incentives to all employees at General Schedule grades level 12 and below and those in the Federal Wage System. In addition to the contact named above, Dawn Locke (Assistant Director) and Meghan Squires (Analyst-in-Charge) managed the work. Also, David Alexander, Renee Caputo, Willie Commons III, Jamarla Edwards, Robert Goldenkoff, Chelsa Gurkin, Eric Hauswirth, Janice Latimer, Lerone Reid, Rachel Stoiko, and Adam Vogt made significant contributions to this report.", "summary": "BOP is the largest employer within DOJ and is responsible for the care and custody of an inmate population of about 186,000. BOP has faced challenges retaining staff at correctional facilities, although it has used retention incentives, along with other human capital flexibilities. GAO was asked to review BOP's use of retention incentives. This report addresses: (1) how BOP used its authority to pay retention incentives; (2) internal controls BOP has in place for the use of retention incentives; and (3) the extent to which BOP plans for and evaluates the use of retention incentives. GAO obtained employee-level retention incentive expenditure data from DOJ's Justice Management Division for fiscal years 2012 through 2016. GAO also reviewed agency documentation, such as policy statements and 40 randomly selected retention incentive application packet case files from fiscal years 2014 through 2016. GAO also interviewed officials from BOP's Central Office and four correctional facilities that use retention incentives, selected to reflect variation in the number and types of employees receiving retention incentives, BOP regions, and BOP institution security levels. From fiscal years 2012 to 2016, the Department of Justice's (DOJ) Federal Bureau of Prisons' (BOP) total retention incentive expenditures generally increased from $10.7 to $14.0 million and the number of employees receiving retention incentives increased from 2,024 to 2,460. During those five years, BOP spent more than 97 percent of its total retention incentive expenditures on employees at four BOP institutions in California and for medical professionals nationwide. Further, total retention incentive expenditures for medical professionals increased by an average of 21 percent per year (see figure). According to BOP officials, BOP uses retention incentives, for example, to supplement BOP's medical professionals' salaries which are generally lower than private sector salaries. BOP has a variety of internal controls in place throughout the retention incentive process that help ensure retention incentive applications and approvals meet requirements. For example, each application goes through multiple levels of review to verify its accuracy and completeness. BOP takes steps to determine workforce needs and how to fill those needs, but has not strategically planned for and evaluated its use of retention incentives. According to BOP, planning for human capital needs is conducted at institutions during quarterly meetings, but discussions about these incentives respond to short-term staffing situations rather than proactively addressing future staffing needs. Including human capital goals and strategies in BOP's human capital plan would create a roadmap so the agency could move from being reactive to its current workforce needs to being strategic in trying to achieve its long-term workforce goals. Additionally BOP has not evaluated the effectiveness of its use of retention incentives in retaining staff. As a result, BOP does not know whether retention incentives have contributed to employees' retention in relation to other incentives used by BOP. Consistent with key principles for strategic human capital planning, planning for and evaluating the use of retention incentives could help BOP better determine if these incentives are an efficient and effective means by which to retain staff. GAO recommends that BOP (1) include human capital goals and how retention incentives will be used to achieve these goals in its human capital plan; and (2) evaluate the use of retention incentives. BOP concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The DEA, within the Department of Justice, is responsible for ensuring the availability of controlled substances for legitimate uses while preventing their diversion through its administration and enforcement of the Controlled Substances Act and its implementing regulations. Under the Controlled Substances Act, all persons or entities that manufacture, distribute, or dispense controlled substances are required to register with DEA, unless specifically exempted. DEA regulates these entities to limit diversion and prevent abuse. For example, DEA regulates pharmaceutical companies that manufacture controlled substances, health care providers who prescribe them to patients, and pharmacies that dispense them. In October 2010, the Disposal Act amended the Controlled Substances Act to allow the public to deliver unused controlled substances to an entity authorized by DEA to dispose of the substances. DEA was given responsibility for promulgating the implementing regulations, and the Disposal Act stipulated that the regulations should prevent diversion of controlled substances while also taking into consideration public health and safety, ease and cost of implementation, and participation by various communities. In addition to disposal bins, DEA’s regulations describe two other options for the public to transfer controlled substances for the purpose of disposal: mail-back programs and take-back events. Law enforcement agencies may use all three methods of drug disposal without the need for authorization by DEA. The Disposal Act stipulates that the regulations cannot require an entity to participate in or establish any of the disposal options. To participate as authorized collectors of unused prescription drugs, eligible entities—retail pharmacies, hospitals/clinics with an on-site pharmacy, narcotic treatment programs, reverse distributors, distributors, and drug manufacturers that are already authorized by DEA to handle controlled substances—must modify their DEA registration. According to DEA officials, such modification is free and simple to do. Eligible retail pharmacies or hospitals/clinics that become authorized collectors are able to install and maintain disposal bins in long-term care facilities in addition to their own location. DEA’s website contains a public search feature to identify authorized collectors located near a specific zip code or address. Authorized collectors must install, manage, and maintain the disposal bins following DEA regulations. For example, under DEA’s regulations for maintaining the disposal bins, the disposal bin must be securely fastened to a permanent structure, securely locked, substantially constructed with a permanent outer container and removable inner liner, and have a small opening that allows contents to be added but not removed; the bin must also prominently display a sign indicating which types of substances are acceptable; users must dispose the unused prescriptions into the collection receptacle themselves without handing them to staff at the pharmacy; the disposal bin must typically be located in an area where an employee is present and near where controlled substances are stored, and the bin must be made inaccessible to the public when an employee is not present; the inner liner of the disposal bin must meet certain requirements, including being waterproof, tamper-evident, tear-resistant, opaque, and having the size and identification number clearly labeled; and the installation and removal of inner liners must be performed under the supervision of at least two employees of the authorized collector. DEA regulations also require that all controlled substances collected in the disposal bin’s inner liners must be destroyed in compliance with applicable federal, state, and local laws and rendered non-retrievable. According to DEA regulations, non-retrievable means that the physical and chemical conditions of the controlled substance must be permanently altered, thereby rendering the controlled substance unavailable and unusable for all practical purposes. Authorized collectors are permitted to destroy the inner liner on their premises if they have the capacity to do so. If not, the inner liners can be transported to a separate location to be destroyed. Typically, in this case, an authorized collector contracts with a reverse distributor to periodically remove, transport, and destroy the inner liners. DEA regulations require that two reverse distributor employees transport the inner liners directly to the disposal location without any unnecessary stops or stops of an extended duration. Authorized collectors must document certain information, including inner liner identification numbers and the dates that each liner is installed, removed, and transferred for destruction. The authorized collectors must maintain these records for 2 years. Figure 1 summarizes the steps involved in the collection of unused prescription drugs. About 3 percent of pharmacies and other eligible entities have voluntarily chosen to become DEA-authorized collectors of unused prescription drugs, according to DEA data. As of April 2017, 2,233 of the 89,550 (2.49 percent) of eligible entities—which are already authorized by DEA to handle controlled substances—had registered to use disposal bins to collect unused prescription drugs. Most of the authorized collectors— about 81 percent—were pharmacies, followed by hospitals or clinics. (See table 1). Narcotic treatment programs, reverse distributors, and distributors made up approximately 1 percent of the authorized collectors. We also found that participation rates varied by state, though in most states relatively few of the eligible entities had registered with DEA to become authorized collectors of unused prescription drugs. In 44 states, less than 5 percent of the eligible entities had registered. (See figure 2 and appendix I for more information on the participation rates of authorized collectors in each state). As of April 2017, Connecticut, Missouri, and Maine had the lowest participation rates, with 0.11, 0.22, and 0.70 percent, respectively. In contrast, North Dakota had the highest participation rate, with 32.0 percent of its pharmacies and other eligible entities registered to be authorized collectors. The state with next highest participation rate was Alaska, with 8.96 percent. In North Dakota, the state’s Board of Pharmacy provides funding for authorized collectors to purchase and maintain the disposal bins. According to a board official, the board decided to fund these activities to increase participation rates and plans to continue its funding indefinitely using revenue generated from prescription drug licensing fees it collects. In addition, our analysis shows that about 82 percent of all authorized collectors were located in urban areas as of April 2017. However, when comparing the entities registered to be authorized collectors with the total number of eligible entities, we found that a larger percentage of the eligible entities in rural areas became authorized collectors compared with those in urban areas (see table 2). The data we obtained on the number of eligible and participating authorized collectors and their locations are the only available DEA data on the use of disposal bins to collect unused prescription drugs. According to DEA officials, the agency does not collect any other information on the use of disposal bins, such as the extent to which the bins are used, or the amount and types of prescription drugs deposited into the bins. For example, to minimize the risk of diversion, DEA regulations do not allow authorized collectors to open and inspect the inner liners of the disposal bins, so information on their contents cannot be collected. According to DEA officials, the agency is not responsible for collecting information on the amount and types of prescription drugs destroyed through the disposal bins. DEA officials told us that the agency views its responsibility solely as giving pharmacies and other eligible entities the opportunity to become authorized collectors. Though we do not have information on the extent to which individuals use DEA’s prescription drug disposal bins, we were able to estimate that as of April 2017, about half of the country’s population lived less than 5 miles away from a pharmacy or other DEA-authorized entity offering a prescription disposal bin. In 21 states, at least 50 percent of the state’s population lived within 5 miles of a prescription disposal bin. (See figure 3). While close to half of the nation’s population lived less than 5 miles from a disposal bin as of April 2017, the availability of nearby disposal bins varied significantly for people depending on whether they lived in an urban or a rural area. Specifically, about 52 percent of the population in urban areas lived less than 5 miles away from a disposal bin, compared to about 13 percent of the population in rural areas. Furthermore, about 44 percent of the population in rural areas lived even further away—more than 30 miles away from a disposal bin. An exception to this is North Dakota, where about 86 percent of its urban population and about 64 percent of its rural population lived within 5 miles of a disposal bin. According to officials from the 11 stakeholder organizations we interviewed—which represent authorized collectors and long-term care facilities—several factors may explain why relatively few pharmacies and other eligible entities have chosen to become authorized collectors of unused prescription drugs. These factors include the associated costs of participating, uncertainty over proper implementation, and participation in other, similar efforts for disposing of unused prescription drugs. Costs: Stakeholders said that the costs associated with purchasing, installing, and managing the disposal bins is a factor that explains the relatively low rate of participation. One stakeholder told us that many eligible entities may decide that the benefit of participating does not outweigh the costs associated with doing so. Specifically, stakeholders told us that the major costs associated with participating include the one-time cost of purchasing and installing a disposal bin; the ongoing costs to train personnel to manage the bins; and the cost of contracting with a reverse distributor to periodically dispose of the bin’s inner liner and contents. Stakeholders gave varying examples of the specific costs associated with these investments. For example, one stakeholder estimated the yearly costs of maintaining a disposal bin ranged from $500 to $600 per location; another stakeholder said that the cost is thousands of dollars per location per year, but did not provide a specific estimate. These stakeholders added that costs can increase if the disposal bins fill more quickly and need to be emptied more often than expected. For their part, officials from the reverse distributor stakeholders we interviewed cited incinerating hazardous waste, the availability of incinerators, and the cost of personnel as factors that increase the cost of their services for authorized collectors. One reverse distributor stakeholder told us that there are not many incinerators available, requiring them to travel long distances to incinerate collected waste. The other reverse distributor stakeholder added that DEA’s requirement that a second employee be present during the transportation and disposal increases the cost of their services. While some stakeholders speculated that costs are a reason for low participation, a few stakeholders told us that the benefits are worth the costs. In fact, two stakeholders we spoke with told us that the benefit to the communities was so important that they decided to provide funding to retail pharmacies, alleviating an individual pharmacy’s concern about the cost of installing and maintaining the disposal bins. We found that as of April 2017, over a quarter of the 2,233 authorized collectors using disposal bins received external funding to pay for the costs associated with installing and maintaining the disposal bins. In addition, stakeholders told us that some localities have enacted laws known as extended producer responsibility ordinances, which require that pharmaceutical manufacturers pay for certain costs associated with drug disposal. When asked about the costs associated with operating disposal bins, DEA officials told us that addressing cost issues with eligible participants falls outside of their responsibilities. Uncertainty: Stakeholders also told us that uncertainty regarding how to comply with aspects of DEA’s regulations for prescription drug disposal bins affected their decisions to participate. One stakeholder added that many eligible entities decide not to participate because uncertainties over participation requirements could result in inadvertent non-compliance with DEA’s regulations. As an example of their uncertainty over some of the requirements governing the disposal bins, officials from both of the reverse distributor stakeholders we interviewed cited DEA’s non-retrievable standard for destruction of the inner liners of the bins. DEA requires that the method of destruction be sufficient to render all controlled substances non- retrievable, meaning that the physical and chemical conditions of the controlled substances must be permanently altered and unusable in order to prevent diversion for illicit purposes. Both reverse distributor stakeholders told us that they are uncertain about whether certain disposal methods meet this standard, and they said that the agency has not provided further guidance on how reverse distributors can meet this requirement. DEA officials told us that the agency responds to questions about whether a specific method of destruction meets the non-retrievable standard by telling the registrant to test the remnants after destruction, to see if any components of the controlled substance are still present. In its summary of the regulations implementing the Disposal Act, DEA stated that in order to allow for the development of various methods of destruction, the agency did not require a specific method of destruction as long as the desired result is achieved. However, DEA officials stated that to their knowledge, incineration is the only method known to meet the non-retrievable standard to date, but the officials hoped other methods will be developed in the future. When asked about the guidance they provide to authorized collectors of unused prescription drugs or those eligible to become authorized collectors, DEA officials told us that they post frequently-asked questions on their website, routinely answer questions from participants and others, and give training presentations at conferences that include information on the disposal bins. In our prior work, we found problems with DEA’s communication and guidance to stakeholders. In 2015, we recommended that DEA identify and implement cost-effective means for communicating regularly with pharmacies and other entities authorized to handle controlled substances. DEA agreed with the recommendation, and officials told us that, starting in August 2017, these entities can subscribe to DEA’s website to receive notifications when it is updated with new guidance. Stakeholders also noted that some DEA requirements related to disposal bins may conflict with other state and federal requirements governing the transportation and disposal of hazardous waste, which includes some controlled substances. For example, the two reverse distributor stakeholders told us that some incinerator permits issued by states require that hazardous waste be examined before incineration; however, DEA requirements do not allow the contents of the liners to be examined, even at the time of incineration. To address the incinerator permit requirements, one reverse distributor told us that they use the Environmental Protection Agency’s hazardous waste household exemption, which treats the liners as household waste and thereby allows incinerator facilities to destroy the liners without examining the contents or violating their state permit. In addition, some stakeholders raised concerns that DEA’s regulations may conflict with other federal regulations. For instance, one stakeholder noted that they recently learned that transporting the disposal bin’s inner liners could violate Department of Transportation regulations. DEA officials told us that they were aware of this, explaining that the conflict was between DEA’s requirement that controlled substances be transported in liners and the Department of Transportation’s requirement that this type of waste be transported in sturdy containers. According to DEA officials, this conflict has been resolved by the Department of Transportation allowing reverse distributors to place the liners inside sturdy containers kept on trucks. Participation in or Availability of Similar Efforts: Stakeholders said that some pharmacies and other eligible entities were already participating in other, similar efforts that allow for the safe disposal of controlled substances, and therefore they did not want to invest additional resources into participating as authorized collectors using disposal bins. For example, the Centers for Medicare & Medicaid Services has an established process that long-term care facilities use to dispose of their unused controlled substances. As a result, all of the long-term care stakeholders told us that long-term care facilities may choose not to partner with pharmacies interested in placing disposal bins within their facilities because it adds significant cost and effort without any additional benefit. Furthermore, pharmacy stakeholders noted that because of the availability of other prescription drug collection efforts in their communities, they did not think that maintaining a disposal bin at their locations was needed. For example, two of the stakeholders explained that local law enforcement precincts already had a similar type of disposal bin in place to collect unused prescription drugs. DEA officials told us that they were aware of other options for the public and entities such as long-term care facilities that are not registered as authorized collectors to dispose of controlled substances. The officials also indicated that the availability of disposal options at law enforcement agencies contributes to the low participation rates among pharmacies as authorized collectors of unused prescription drugs. We provided a draft of this report to the Department of Justice for comment. DEA, part of the Department of Justice, provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Attorney General of the United States and the Administrator of DEA. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact name above, Elizabeth H. Curda (Director), Will Simerl (Assistant Director), Kathryn Richter (Analyst-In-Charge), Nick Bartine, Giselle Hicks, Jessica Lin, and Emily Wilson made key contributions to this report. Also contributing were Muriel Brown and Krister Friday.", "summary": "In 2015, 3.8 million Americans reported misusing prescription drugs within the last month, and deaths from prescription opioids have more than quadrupled since 1999. About half of the people who reported misusing prescription drugs in 2015 received them from a friend or relative. One way to help prevent this kind of diversion and potential misuse is by providing secure and convenient ways to dispose of unused, unneeded, or expired prescription medications. The Secure and Responsible Drug Disposal Act of 2010 authorizes pharmacies and other entities already authorized by DEA to handle controlled substances to also collect unused prescription drugs for disposal. In 2014, DEA finalized regulations for the implementation of the Act, establishing a voluntary process for eligible entities to become authorized collectors of unused prescription drugs using disposal bins. GAO was asked to review participation among authorized collectors that maintain disposal bins. In this report GAO describes (1) participation rates among entities eligible to collect unused prescription drugs and (2) factors that affect participation. GAO analyzed the most currently available DEA data from April 2017 on entities eligible to participate and those participating as authorized collectors. GAO also conducted interviews with DEA officials and a nongeneralizable sample of 11 stakeholder organizations selected to illustrate different types of authorized collectors and long-term care facilities. GAO is not making any recommendations. DEA provided technical comments, which GAO incorporated as appropriate. GAO found that about 3 percent of pharmacies and other entities eligible to collect unused prescription drugs for disposal have volunteered to do so. The Drug Enforcement Administration (DEA) authorizes these entities to dispose of unused drugs to help reduce their potential misuse. Analysis of DEA data shows that as of April 2017, 2,233 of the 89,550 (2.49 percent) eligible entities—that is, certain entities already authorized by DEA to handle controlled substances—had registered with DEA to use disposal bins to collect unused prescription drugs. Most—about 81 percent—of the authorized collectors were pharmacies, followed by hospitals or clinics. GAO also found that participation rates varied by state, though in 44 states less than 5 percent of the state's pharmacies and other eligible entities had registered to become authorized collectors. Stakeholders cited several factors that may explain why relatively few pharmacies and other eligible entities have registered with DEA as authorized collectors of unused drugs. Most notably, stakeholders representing authorized collectors told GAO that because participation is voluntary, the cost associated with maintaining a disposal bin—which includes purchasing and installing the bin according to DEA requirements and paying for the destruction of its contents—is an important factor to weigh against potential benefits. DEA noted that availability of disposal by law enforcement agencies also contributes to low participation.", "document_type": "gao"}
{"report": "Analysis of DNA evidence from crime scenes can help law enforcement link offenders or victims to crime scenes. After crimes occur, law enforcement submits physical evidence from crime scenes, victims, and suspects (hereafter referred to as “crime scene evidence”) to labs for analysis. Labs then perform “DNA analysis,” which, as used in this statement, refers to (1) biology screening (locating, screening, identifying, and characterizing blood and other biological stains and substances); and/or (2) DNA testing (identifying and comparing DNA profiles in biological samples). In order to compare the victim’s or offender’s DNA profile to the recovered crime scene DNA, the lab will need to have known biological samples available. Thus, samples are generally collected from victims and may also be collected from others—such as suspects, crime scene personnel, first responders, and consensual sexual partners (in cases of sexual assault). Matching DNA profiles from unknown potential offenders to existing DNA profiles can help law enforcement develop investigative leads. If a case has no suspects to compare the DNA evidence to, the DNA profile of the unknown potential offender can be entered in the Federal Bureau of Investigation’s (FBI) Combined DNA Index System (CODIS), where it can be compared to existing DNA profiles at the local, state, or national level. Labs can then compare unknown potential offender profiles to other profiles already in CODIS, including: 1. Profiles generated from evidence taken from other crime scenes and connected to other unknown potential offenders. 2. Profiles generated from samples taken from known convicted offenders, arrestees, and others as required by law (hereafter “offender samples”). According to DOJ, the federal government, all 50 states, the District of Columbia, and Puerto Rico have laws requiring the collection of DNA samples from individuals convicted of certain crimes; in addition, the federal government, over half of the states, and the District of Columbia have laws authorizing the collection of DNA from individuals arrested for certain crimes. When an unknown potential offender’s profile matches another profile within CODIS, a “hit” or investigative lead may be developed and shared with law enforcement, as shown in figure 1 below. Only federal, state, or local government labs that meet the FBI’s Quality Assurance Standards can participate in CODIS. As of January 1, 2018 there were 201 labs that participated in CODIS in the U.S. Of these, 143 performed just forensic casework DNA analysis, 4 performed just offender sample DNA analysis, and 54 performed both. According to the FBI, as of May 2018, the national level of CODIS contained over 16 million profiles generated from offender samples and over 850,000 profiles generated from crime scene evidence. Also, the FBI reported that as of May 2018, CODIS had produced over 422,000 hits that aided more than 406,000 investigations. The CEBR grant program is administered by the National Institute of Justice (NIJ), a component within OJP. NIJ, the research arm of DOJ, is responsible for evaluating programs and policies that respond to crime, and providing and administering awards for DNA analysis and forensic activities, among other criminal justice activities. The CEBR grant program is funded by an appropriation “for a DNA analysis and capacity enhancement program and for other local, State, and Federal forensic activities.” The broad appropriations language enables NIJ to allocate funding for a variety of forensic programs at funding levels established by the agency; however, congressional reports accompanying the appropriation have directed that OJP make funding for DNA analysis and capacity enhancement a priority. CEBR awards can be used to enhance capacity and reduce backlogs at government labs that analyze crime scene DNA evidence and/or process offender DNA samples. NIJ defines a “backlogged” request for analysis of crime scene evidence as a request that has not been completed within 30 days of receipt in the laboratory. CEBR is a formula grant program that dates back to 2004. Grant awards are made non-competitively to states and units of local government based on a formula set by DOJ that allocates certain amounts to each state. This formula takes into account each state’s population and associated crime, and guarantees a minimum amount for eligible applicants from each state. CEBR has broad participation from states and local jurisdictions. For instance, in 2017 OJP awarded $61 million in CEBR grants to 131 grantees in 49 states, the District of Columbia, and Puerto Rico. Our preliminary analysis of CEBR grant program data show that the backlog of requests for crime scene DNA analysis has increased by 77 percent from 2011 through 2016, and that demand for such DNA analysis has outpaced laboratory capacity. In our review, we identified numerous factors that have contributed to an increased demand for DNA analysis beyond laboratories’ capacities, including scientific advancements in DNA analysis technology and state laws requiring testing of certain DNA evidence. We found that, among CEBR grantees, the reported aggregated backlog of requests for crime scene DNA analysis has increased by 77 percent from 2011 through 2016. As part of the grant application process, NIJ requires applicants for CEBR grants to provide data from all labs in their jurisdiction, even if certain labs will not be using CEBR funds. NIJ does this to assist in understanding nationwide trends in DNA analysis backlogs. The reported growth in the aggregate backlog among CEBR grantees is the result of labs receiving more requests than they were able to complete over time, as shown in the figure below. Although reported aggregate trends show an increase in the backlog among CEBR grantees, the data also reveal that this increase is not uniform across all labs. For example, among the 118 grantees for which we had data from 2011 through 2016, 30 grantees (25 percent) reported an overall decrease in the backlog. In addition, data from CEBR grantees show differences in the average time it takes to process requests (turnaround time) among grantees. Stakeholders also stated, and NIJ has reported, that labs generally have shorter average turnaround times for requests associated with violent crimes than for requests associated with non-violent crimes—because labs generally prioritize requests associated with violent crimes. For our ongoing review, we continue to analyze CEBR data and data from other sources pertaining to this issue. Based on a review of a selection of studies and discussions with DNA evidence stakeholders, we identified the following factors that are reported to have contributed to an increased demand for crime scene DNA analysis beyond laboratories’ capacities. As a result, these factors are believed to have helped contribute to increased backlogs: Recent scientific advancements have increased the quality of DNA analysis by allowing lab analysts to obtain DNA profiles from smaller amounts of biological evidence. This has increased the amount of evidence that is eligible to be analyzed and, as a result, has increased the demand for DNA testing. One DNA evidence stakeholder was able to produce preliminary data demonstrating that, as a general trend, labs that decreased their turnaround time saw corresponding increases in requests from law enforcement. Other DNA stakeholders, including NIJ, made similar observations. Increased awareness among law enforcement and the public Increased awareness among law enforcement officers of the value of DNA analysis in solving current and older cases has led to law enforcement agencies submitting more DNA evidence to labs for analysis. Further, NIJ and other stakeholder officials we interviewed stated that the volume of DNA profiles in CODIS has increased significantly over recent years. This, in turn, increased the usefulness of DNA evidence in testing suspect DNA profiles against a well-populated database of existing offenders. This usefulness has increased awareness among law enforcement personnel of CODIS, which contributes to increased demand for DNA analysis, thereby contributing to the backlog. Additionally, when deciding whether to submit DNA evidence for analysis, law enforcement and prosecutors may consider jurors’ expectations that DNA analysis is presented. Recent legislation requiring Sexual Assault Kit (SAK) analysis State legislation requiring SAK analysis has caused an increase in demand for DNA analysis. As of July 2018, we identified at least 25 states that have enacted laws requiring law enforcement to submit for testing SAKs that come into law enforcement possession. Eleven of these states also required the submission for testing of previously untested SAKs. Twenty-one of these laws were passed in 2014 or later. In addition to the factors that have contributed to increased demand, resource challenges and constraints on lab capacity are reported to have helped contribute to crime scene evidence backlogs. State and local labs generally receive appropriations from state or local governments and are subject to local funding priorities. Federal grants can help, but even combined federal and jurisdictional funding may not increase lab capacity enough to keep up with increases in demand. Additionally, these labs report facing lengthy hiring and training processes for forensic analysts, and often lose staff to private or federal labs which may offer higher pay, further limiting lab capacity for completing analysis. DOJ’s NIJ has not defined CEBR program-wide goals in clear, specific, and measurable terms. We identified statements in NIJ and CEBR program documentation that communicated program-wide goals, but the documentation did not consistently identify the same goals or cite the same number of goals. For example, a stated goal of improving the quality of DNA testing was included in only 2 of 4 NIJ documents we reviewed. In addition, NIJ officials verbally clarified that the CEBR program has two goals, (1) to increase laboratory capacity for DNA analysis, and (2) to reduce backlogs of DNA evidence awaiting analysis. These differences can be seen across goal statements outlined in various NIJ sources as shown in table 1 below. NIJ officials acknowledged that they do not have documentation that further defines the goals of the program in clear, specific, and measurable terms. These goals are specified as increasing laboratory capacity for DNA analysis and reducing backlogs of DNA evidence awaiting analysis. Officials provided an explanation as to what the goals mean. Specifically, officials stated that: Increasing lab capacity refers to increasing samples analyzed, reducing processing times, and increasing the number of DNA profiles uploaded into CODIS—all while either maintaining or increasing the quality of DNA analysis at labs. Reducing backlogs refers to reducing the number of backlogged requests awaiting analysis by more than the number of requests that become backlogged during the same timeframe. Officials stated that although they believe the goal of reducing the crime scene evidence backlog is unachievable in the foreseeable future, they have kept it as a program goal because each year it is included in the appropriation language that supports the program. However, these clarifications and definitions are not available in CEBR documentation, which is an indication that NIJ may not be using clear, specific, and measurable goals to guide program development or assess progress. We continue to evaluate CEBR program goals and we are in the process of evaluating related CEBR performance measures as part of our ongoing work. Our preliminary results show that OJP has controls to implement federal requirements associated with conflicts of interest and some controls related to lobbying that apply to both OJP CEBR grant administrators as well as recipients of grant funding; however, OJP has not fully established all appropriate controls related to lobbying. We found that OJP has established controls to implement federal conflicts of interest requirements that apply to OJP employees administering CEBR grants and CEBR grantees. For example, federal law prohibits government employees from participating personally and substantially in particular government matters, such as the administration of federal grants, which could affect their financial interests. We found that OJP has established an agency-wide ethics program and uses tools such as the DOJ Ethics Handbook and annual financial disclosure reports, among others, to help employees and their supervisors to determine whether they have potential conflicts of interest. See table 2 below for a list of the federal conflicts of interest requirements we identified, as well as our preliminary assessment of related OJP controls to ensure that the requirements are met. We found that OJP has established some controls related to lobbying but has not fully established controls needed to meet applicable requirements. Specifically, federal law sets forth several requirements related to lobbying “certification” and “disclosure.” Lobbying certification refers to agreeing not to use appropriated funds to lobby, and lobbying disclosure refers to disclosing lobbying activities with respect to the covered federal action paid for with nonappropriated funds. Federal regulation requires recipients of all federal awards over $100,000 to file certification documents and disclosure forms (if applicable) with the next tier above, and to forward those same forms from the tier below if they issue subawards for $100,000 or more. In the case of CEBR grants, tiers include OJP, grantees, subgrantees, contractors under grantees and subgrantees, and subcontractors. Subawards include subgrants, contracts under grants or subgrants, and subcontracts. We found that OJP had established controls to obtain lobbying certification documents and disclosure forms from grantees, but had not fully established controls to ensure grantees obtain these documents from tiers below them, see table 3 below. OJP has established mechanisms to ensure it obtains lobbying certification documents and disclosure forms from grantees. Specifically, according to OJP, it requires that grant applicants electronically agree to the certification document during the application process; if applicants do not agree to it, they cannot move on in the process. OJP also requires that applicants submit the lobbying disclosure form as part of the grant application process. Upon submission, a grant manager reviews the form for completeness and content and checks a box in an application review checklist. However, OJP has only partially established a mechanism to ensure that, for subawards over $100,000 (1) CEBR grantees obtain certification documents and disclosure forms, as applicable, from tiers below them, and (2) disclosure forms are forwarded from tier to tier until received by OJP. Specifically, OJP requires grant applicants to agree to the certification document set forth in regulation. This certification document, in turn, lists certification and disclosure requirements, and states that, “The undersigned shall require that the language of this certification be included in the award documents for all subawards at all tiers (including subgrants, contracts under grants and cooperative agreements, and subcontracts) and that all subrecipients shall certify and disclose accordingly.” However, the certification document does not state in clear terms what the specific requirements of the regulation are or how they are to be carried out. OJP attorneys responsible for overseeing their implementation were not aware of specific requirements in the regulation. For example, they were not aware that disclosure forms were required to be forwarded from tier to tier until received by OJP. Additionally, 3 of 4 CEBR grantees we spoke with were not aware of one or more of these requirements. Lastly, we found that OJP does not provide guidance to grantees to ensure they understand the requirements nor does OJP follow-up with grantees to ensure they are implementing them. The statute requires that federal agencies “take such actions as are necessary to ensure that the are vigorously implemented and enforced in agency.” As part of our ongoing work, we will continue to monitor and assess OJP’s compliance with statute and regulations related to grantee, subgrantee, and contractor lobbying disclosure requirements and make recommendations, as appropriate. Chairman Grassley, Ranking Member Feinstein, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff members have any questions about this testimony, please contact Gretta L. Goodwin, Director, Homeland Security and Justice at (202) 512-8777 or GoodwinG@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this testimony included Dawn Locke (Assistant Director), Adrian Pavia (Analyst-in-Charge), Stephanie Heiken, Jeff Jensen, Chuck Bausell, Daniel Bibeault, Pamela Davidson, Eric Hauswirth, Benjamin Licht, Samuel Portnow, Christine San, Rebecca Shea, Janet Temko-Blinder, and Khristi Wilkins. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Many state and local crime labs have backlogs of requests for DNA analysis of crime scene evidence, as reported by grantees participating in DOJ's CEBR grant program. These backlogs can include sexual assault kits. Since 2011, DOJ's Office of Justice Programs—the primary grant-making arm of DOJ—has awarded nearly $500 million to states and local jurisdictions through the CEBR grant program to help reduce DNA evidence awaiting analysis at crime labs. There have been concerns that these backlogs of unanalyzed evidence have enabled serial offenders to reoffend or have delayed justice. This statement is based on preliminary observations and analyses from GAO's ongoing review of (1) the level of crime scene DNA evidence backlogs among CEBR grantees and the factors that contribute to such backlogs; (2) the extent to which DOJ has clearly defined goals for CEBR; and (3) the extent to which OJP has controls for CEBR related to federal conflicts of interest and lobbying requirements. To develop these preliminary findings, GAO reviewed CEBR grantee data from 2011-2016 (the latest data available) and studies relevant to the DNA backlog, visited selected labs, and interviewed DOJ officials, among others. GAO's preliminary analysis found that, among the Department of Justice's (DOJ) DNA Capacity Enhancement and Backlog Reduction Program (CEBR) grantees (state and local entities with forensic crime labs), the reported aggregated backlog of crime scene DNA analysis requests has increased by 77 percent from 2011-2016. The growth in this reported aggregate backlog is the result of labs receiving more requests than they were able to complete, although they were receiving and completing more requests, as shown in the figure below. GAO's preliminary analysis also found that the National Institute of Justice (NIJ)—the component within DOJ's Office of Justice Programs (OJP) that is responsible for administering CEBR grants—has not defined CEBR program-wide goals in clear, specific, and measurable terms. Additionally, GAO's ongoing work identified statements in NIJ and CEBR program documentation that communicated program-wide goals, but the documentation did not consistently identify the same goals or cite the same number of goals. GAO continues to evaluate CEBR program goals and is in the process of evaluating related CEBR performance measures as part of its ongoing work. GAO's preliminary analysis found that OJP has some controls to implement federal requirements associated with conflicts of interest and lobbying that apply to both OJP CEBR grant administrators as well as recipients of CEBR grant funding, but OJP has not fully established all appropriate controls related to lobbying. GAO is not making recommendations in this testimony but will consider them, as appropriate, as it finalizes its work.", "document_type": "gao"}
{"report": "The life cycle for NASA space flight projects consists of two phases— formulation, which takes a project from concept to preliminary design, and implementation, which includes building, launching, and operating the system, among other activities. NASA further divides formulation and implementation into phases, phase A through phase F. Major projects must get approval from senior NASA officials at key decision points before they can enter each new phase. Formulation culminates in a review at key decision point C, known as project confirmation, where cost and schedule baselines are established and documented in a decision memorandum. Figure 1 depicts NASA’s life cycle for space flight projects. At the time of our review in May 2018, NASA had a portfolio of 26 major projects (see table 1). See appendix I for a brief description of each project. NASA acquisition management is an area that we monitor on our high- risk list. Our high-risk series is a biennial report that keeps focused attention on government operations with greater vulnerabilities to fraud, waste, abuse, and mismanagement or that are in need of transformation to address economy, efficiency, or effectiveness challenges. In 1990, we first designated the area as high risk because there was little emphasis on end results, product performance, and cost control; the acquisition process itself was cumbersome and time-consuming; and NASA found itself procuring expensive hardware that did not work properly. For example, in April 1990, NASA deployed the $1.5 billion Hubble Space Telescope and soon after, the agency discovered that the primary mirror had been manufactured in the wrong shape, severely degrading some of the telescope’s scientific capabilities. Subsequently, we and other organizations, including the National Academy of Sciences and NASA’s Office of the Inspector General, found that NASA’s cost estimates were overly optimistic. Our reviews also found that NASA continued to experience significant cost and schedule growth due, in part, to not having a disciplined cost estimating process. In 1992, we reviewed the cost and schedule performance of 29 NASA programs and found that 25 of those programs experienced cost growth that ranged from 14 to 426 percent above their initial estimates. Further, the median estimate change for all programs was an increase of 77 percent. General reasons that NASA provided for the cost growth included insufficient definition studies, program and funding instability, overly optimistic assumptions by program officials, and unrealistic contractor estimates. The more specific reasons for the cost growth we found included program redesigns, technical complexities, budget constraints, and incomplete cost estimates. In 2004, we reviewed the cost and schedule performance of 27 NASA programs and found that 17 of the programs experienced cost growth. Cost growth for 10 of the 17 programs was over 25 percent. We found that considerable change in NASA’s program cost estimates—both increases and decreases—indicated that NASA lacked a clear understanding of how much its programs cost and how long they will take to achieve their objectives. Further, we found that NASA’s basic cost-estimating processes—an important tool for managing programs—lacked the discipline needed to ensure that program estimates are reasonable. In more recent years we have found that NASA’s leadership was focused on improving acquisition outcomes and had taken some steps to improve its management. In 2006, NASA established a management review process to enable NASA’s senior management to more effectively monitor a project’s performance, including cost, schedule, and cross-cutting technical and nontechnical issues. In 2009, NASA began requiring that NASA major programs and projects develop a joint cost and schedule confidence level (JCL) prior to project confirmation in order to ensure that cost and schedule estimates were realistic and projects thoroughly planned for anticipated risks. The JCL is a point-in-time estimate that, among other things, includes all cost and schedule elements, incorporates and quantifies known risks, assesses the impacts of cost and schedule to date, and addresses available annual resources. NASA policy generally requires that projects be baselined and budgeted at the 70 percent confidence level. In 2012, the agency established metrics to more consistently measure a project’s design progress and, in 2014, we found that most major projects in the portfolio were tracking and reporting those metrics. In addition, experts with whom we met confirmed that NASA’s metrics are valid measures to assess design maturity in space systems. Since 2015, we have observed a positive trend of higher numbers of projects maturing technologies prior to preliminary design review. Demonstrating that technologies will work as intended in a relevant environment serves as a fundamental element of a sound business case, and projects falling short of this standard often experience subsequent technical problems. Our best practices work has shown that maturing technologies prior to preliminary design review can minimize risks for projects entering development, which lowers the risk of subsequent cost growth and schedule delays. We believe that many of these steps NASA has taken contributed to the largely positive trend of cost and schedule performance for NASA’s portfolio of major projects between 2013 and 2017. In our May 2017 assessment of major projects, we found that out of 16 projects in development, 5 experienced cost growth and 4 experienced schedule delays over their development cost and schedule baselines. Both of these measures were at or near the lowest levels we have reported since we began our annual assessments in 2009. However, we also found in our February 2017 high risk update that NASA needed to do more with respect to anticipating and mitigating risks— especially with regard to large programs, estimating and forecasting costs for its largest projects, and implementing management tools. We highlighted several actions that would be critical to improving NASA’s acquisition outcomes, including the following: Ensuring that NASA conducted adequate and ongoing assessments of risks for larger programs because the impacts of any potential miscalculations will be felt across NASA’s portfolio. Ensuring that NASA understood long-term human exploration program costs. While the three major human exploration programs— Orion, SLS, and the Exploration Ground Systems (EGS)—have been baselined, none of the three programs has a baseline that covers activities beyond the second planned flight. Long-term estimates, which could be revised as potential mission paths are narrowed and selected, would provide decision makers with a more informed understanding of costs and schedules associated with potential agency development paths. Ensuring that program offices regularly and consistently updated their JCL across the portfolio. As a project reaches the later stages of development, especially integration and testing, its risk posture may change. An updated project JCL would provide both project and agency management with data on relevant risks that can guide project decisions. Ensuring that NASA continued its efforts to build capacity in areas such as cost and schedule estimating and measuring contractor performance. Further, in our 2016 and 2017 assessments of major projects, we found that while the cost and schedule performance of NASA’s portfolio was improving, a number of large, complex projects were in or would soon be entering the integration and test phase—the phase in development that often reveals unforeseen challenges that can lead to cost and schedule growth. In May 2017, projects in this phase included all three human spaceflight programs and the James Webb Space Telescope (JWST). Subsequently, we found that these programs experienced delays during this phase of development. For example, in December 2017, NASA announced a 13- to 19-month delay for the first integrated mission of Orion, SLS, and EGS. This mission is referred to as Exploration Mission 1 (EM-1) and will not have crew. In addition, in December 2017, we found that the JWST project continued to make progress towards launch, but the program was encountering technical challenges that required both time and money to fix and may lead to additional delays. Subsequently, the JWST project delayed its launch readiness date by at least 19 months from October 2018 to May 2020. The cost and schedule performance of NASA’s portfolio of major projects deteriorated between May 2017 and May 2018, but the extent of cost growth is unknown. NASA lacks a current cost estimate for its Orion crew capsule—one of the largest programs in the portfolio—but expects the program will exceed its cost baseline when NASA updates the program’s life-cycle cost estimate. Because the Orion program accounts for about 22 percent of all development costs, even a small percentage of cost growth for the Orion program could significantly affect portfolio cost performance. The known negative cost and schedule performance is largely driven by the cost and schedule growth of four projects—SLS, EGS, Space Network Ground Segment Sustainment (SGSS) and Mars 2020—that experienced technical problems compounded by programmatic challenges. Together, these projects experienced $638 million in cost growth and 59 months in aggregate schedule delays. Two projects—JWST and ICESat-2—experienced schedule delays due to technical challenges identified during integration and test. Another 3 projects—NASA Indian Space Research Organisation Synthetic Aperture Radar (NISAR), ICON, and GRACE-FO—experienced cost growth or delays largely due to factors outside of the projects’ control, such as launch vehicle delays. The average launch delay increased from 7 months in our May 2017 report to 12 months in our May 2018 report—the highest schedule delay we have reported to date. We were not able to determine the extent of portfolio cost growth this year because NASA does not have a current cost estimate for the Orion program—one of the largest programs in its portfolio—and officials expect the cost to increase. As of June 2017, the Orion program’s development cost was about $6.6 billion; based on that estimate, it accounts for 22 percent of the portfolio’s estimated $30.1 billion of development costs. As a result, a small percentage of cost growth for the Orion program could significantly affect cost performance. Even without including Orion cost growth, the overall development cost growth for the portfolio of 17 development projects increased to 18.8 percent, up from 15.6 percent in 2017 (see figure 2). Senior-level NASA officials told us they expect that the Human Exploration and Operations Mission Directorate and the Orion program will complete an updated life-cycle cost estimate in June 2018. This would be approximately 10 months after the program raised to senior-level officials’ attention that the program expects cost growth over its cost baseline during an August 2017 briefing concerning potential cost increases related to the launch delay for EM-1. In early June 2018, NASA officials said that they had not yet completed the updated life-cycle cost estimate. In our May 2018 report, we found that 7 of 17 NASA major projects had stayed within cost and schedule estimates since our 2017 annual assessment of major projects, but 9 projects experienced cost growth or schedule delays and cost growth is expected for the Orion program. Table 2 provides data on the cost and schedule performance between our May 2017 and 2018 reports for the 17 major projects in development that have cost and schedule baselines. The deteriorating cost and schedule performance of the portfolio in 2018 is the result of four projects—SLS, EGS, SGSS, and Mars 2020—addressing technical challenges that were compounded by risky programmatic decisions; two projects—JWST and ICESat-2—experiencing delays due to technical challenges identified during integration and test; and three projects—NISAR, ICON, and GRACE-FO—experiencing cost growth or delays largely due to factors outside of the projects’ control. We elaborate on these three scenarios below. Technical challenges compounded by risky programmatic decisions. Together, SLS, EGS, SGSS, and Mars 2020 experienced $638 million in cost growth and 59 months in aggregate schedule delays due to technical problems that were compounded by programmatic challenges since our May 2017 report. The SLS and EGS programs experienced cost growth and schedule delays associated with EM-1, their first combined mission along with the Orion program. We have found for several years that the human spaceflight programs—Orion, SLS, and EGS—are making progress maturing designs and building hardware, but also are experiencing some significant engineering and manufacturing challenges. For example, the SLS program ran into numerous challenges completing the welding of its core stage element in 2017. The program stopped welding on the core stage for months to identify and resolve low weld strength in the liquid oxygen and liquid hydrogen tanks due to low weld strength measurements found in the liquid oxygen tanks caused by a program and contractor decision to change the weld tool configuration during fabrication. The EGS program also experienced technical challenges, including with the design and installation of the ground support equipment and the 10 umbilicals that connect SLS and Orion to the Mobile Launcher—which supports the assembly, testing, and servicing of SLS and provides the platform on which SLS and Orion will launch. Finally, although the Orion program has not yet reported cost growth, it also experienced technical challenges. These challenges included software and hardware delays, and at least 14 months of delays with the European Service Module—which provides air, water, power, and propulsion to Orion during in-space flight—since the element’s critical design review in June 2016. In April 2017, we found that, according to program officials, the delays with the service module were largely due to NASA, the European Space Agency, and the European Space Agency contractor underestimating the time and effort necessary to address design issues for the first production service module and the availability of parts from suppliers and subcontractors. NASA expects the Orion program to experience cost growth over its cost baseline to the second combined mission, Exploration Mission 2 (EM-2). However, the extent of the growth is unknown because, as noted above, NASA is currently revising the program’s life-cycle cost estimate. Technical challenges such as these are not unusual for large-scale programs, especially human exploration programs that are inherently complex and difficult. However, we have found that NASA has made programmatic decisions—including establishing low cost and schedule reserves, managing to aggressive schedules, and not following best practices for earned value management or creating reliable cost and schedule baselines—that have compounded the technical challenges (see table 3). As a result, the three human spaceflight programs have been at risk of cost and schedule growth since NASA approved their baselines. In December 2017, NASA announced the new internal launch readiness date for EM-1 is now December 2019, and has allocated 6 months of schedule reserve available to extend the date to June 2020 for possible manufacturing and production schedule risks. This represents a delay of 13-19 months for EM-1. It is too soon to know if NASA has addressed the programmatic challenges identified above. We will continue to follow up through future reviews. Similarly, the SGSS project experienced new cost growth of $59.5 million and delayed its completion by 21 months. Project officials attributed the cost growth and delays to the contractor’s incomplete understanding of its requirements, which led to poor contractor plans and late design changes. But project management has been a challenge as well. The project has historically struggled to manage contractor performance and has faced both contractor and project staffing shortfalls, as we found in our prior reports starting in 2013. For example, NASA managers noted concerns with contractor plans and staffing estimates in 2013 during project confirmation. In March 2015, we found that the project was being rebaselined due to the contractor’s poor cost and schedule performance and in order to conform with limitations that NASA placed on the funding available to the contractor in fiscal years 2014 and 2015. The contractor was also operating with a limited number of staff at that time. In May 2017, we found that the project continued to experience contractor performance problems and had experienced cost growth and schedule delays over the 2015 rebaseline even as the project decreased its scope. In addition, the project experienced staff shortfalls in key areas, such as systems engineering and business management. The Mars 2020 project experienced $12.9 million in development cost growth, but no schedule delays. The cost growth was primarily due to technical challenges on a technology demonstration instrument and higher than anticipated integration costs for an entry, descent, and landing instrument. Both instruments are funded by the Human Exploration and Operations and Space Technology Mission Directorates. NASA officials attributed the cost growth of the technology demonstration instrument—which is designed to convert carbon dioxide to oxygen—to the complexity of the technology development for the effort. At the project’s preliminary design review in February 2016, a critical technology for the technology demonstration instrument did not meet the recommended level of maturity, which we have found can increase risk for systems entering product development. The project had matured the technology to this recommended level by its critical design review in February 2017. However, as a result of the focus on maturing this particular technology, other components of the instrument fell behind the planned schedule. Project costs for Mars 2020 also increased for an entry, descent, and landing instrument, due, in part, to cost increases for integration and to add additional staff to the instrument team to maintain schedule. Finally, the Radiation Budget Instrument project would have likely exceeded its cost baseline if NASA had not decided to cancel the project in January 2018. According to NASA’s cancellation memorandum, the project was canceled because of continued cost growth, technical issues, and poor contractor performance. In 2017, we found that the project was working to an aggressive schedule, and the prime contractor continued to experience cost overruns even after NASA added a deputy project manager and increased site visits and meetings with the contractor. Subsequently, the project—which was developing an instrument to be hosted on a National Oceanic and Atmospheric Administration satellite— determined that it would not be able to meet its delivery date for integration with the satellite without requiring additional funding in excess of the project’s cost baseline if other technical issues arose. In its cancellation memorandum, NASA stated continuing to fund the project from within the Earth Science Division budget would slow other important activities. Technical challenges identified during integration and test. The JWST and ICESat-2 projects experienced technical challenges during integration and test that delayed their schedules. Both projects were previously rebaselined before entering system-level integration and testing, and the current schedule delays are beyond the new schedules that NASA set for the projects in 2011 for JWST and in 2014 for ICESat- 2. The JWST project delayed its launch readiness date by at least 19 months from October 2018 to May 2020. NASA announced two delays for the project since our portfolio-wide review in May 2017. First, as we found in February 2018, the project delayed its launch readiness date by up to 8 months primarily due to the integration of the various spacecraft elements taking longer than expected. Specifically, execution of spacecraft integration and test tasks, due to complexity of work and cautious handling given the sensitivity of flight hardware, was slower than planned. In addition, before the delay, the project used all of its schedule reserves to its prior launch readiness date. This was the result of various contractor workmanship errors, particularly with respect to the spacecraft propulsion systems, as well as the resolution of various technical issues, including a test anomaly on the telescope and sunshield hardware challenges. Second, in March 2018, NASA announced that it had delayed the project’s launch readiness date by an additional 11 months to approximately May 2020 and planned to establish an external independent review board to analyze the project’s organizational and technical issues to inform a more specific launch time frame. The announcement also stated that after a new launch date is established, NASA would provide a new cost estimate that may exceed the $8 billion congressional cost cap that was established in 2011. NASA plans to finalize the project’s cost and schedule estimate by the end of June 2018. Because the additional delays were announced while a draft of our May 2018 report was with NASA for comment, we plan to follow up on the reasons for the additional delays and the results of the analysis in a future review. In our prior assessments of JWST, we have made recommendations with regard to improving cost and schedule estimating, updating risk assessments, and strengthening management oversight. NASA has generally agreed and taken steps to implement a number of our recommendations. For example, in December 2015, we recommended that the JWST project require contractors to identify, explain, and document anomalies in contractor-delivered monthly earned value management reports. NASA concurred with this recommendation and, in February 2016, directed the contractors to implement the actions stated in the recommendation. However, NASA did not implement some recommendations, which if implemented, may have provided insight into the challenges it now faces. For example, in December 2012, we recommended the JWST project update its JCL. Although NASA concurred with this recommendation, it did not take steps to implement it. An updated JCL may have portended the current schedule delays, which could have been proactively addressed by the project. The ICESat-2 project delayed its launch readiness date by 4 months from June to October 2018 due to technical issues with its only instrument, the Advanced Topographic Laser Altimeter System. A key part in the instrument’s lasers failed during instrument environmental testing, which delayed the project’s system integration review—the start of system-level integration and test. The manufacturer determined the primary cause of the anomaly was a flaw in the design of the mount that ensures a component of the optical module remains in a specific, precise position. The spare flight laser encountered the same problem during earlier testing, which indicated a systemic problem. The project redesigned and repaired the lasers and is proceeding through integration and test. External factors. External factors—including responding to requests for additional data collection and delays due to launch-vehicle related issues—contributed to cost increases or schedule delays for the NISAR, ICON, and GRACE-FO projects. The NISAR project experienced cost growth as the result of an increase in the scope of data collection in response to additional data needs being identified by an interagency working group. The additional data include soil moisture and natural hazard data that would be of value for other federal agencies and the science community. NASA officials said the additional funding for development would be used to upgrade the ground stations so that they can receive the additional data at a higher downlink data rate and volume. The ICON project missed its committed launch readiness date because of an accident involving its launch vehicle. In January 2017, two of the Pegasus launch vehicle’s three stages were involved in a transport accident. The stages were subsequently returned to the launch vehicle contractor facility for inspection and testing, and no damage was found. The project had been on track to launch early. Subsequently, in September 2017, an anomaly found in testing of the launch vehicle bolt cutter assemblies resulted in additional delays. NASA had planned to launch ICON in mid-June 2018, but recently announced a delay after off-nominal data was observed from the rocket during transit to the launch site. NASA announced a new launch date would be determined at a later date. The GRACE-FO project delayed its launch readiness date from February to May 2018 due to issues with its planned launch vehicle and launch site. The launch vehicle is the responsibility of NASA’s partner on the project—German Research Centre for Geosciences (GFZ). GRACE-FO had planned to launch at a Russian launch site. In February 2016, GFZ reported that it was notified by the Russian Federal Space Agency that the Dnepr launch vehicle was no longer available for GRACE-FO. GFZ, in June 2016, arranged to launch the two GRACE-FO spacecraft, along with commercial satellites, on a SpaceX Falcon 9. On May 22, 2018, GRACE-FO launched from Vandenberg Air Force Base in California. In addition, the Commercial Crew Program also experienced delays, which are not included above because the program does not have a schedule baseline. Since the award of the current Commercial Crew contracts in September 2014, the program, Boeing, SpaceX, and multiple independent review bodies have all identified the contractors’ delivery schedules as aggressive. In February 2017, we found that Boeing and SpaceX had determined that neither could meet their original 2017 dates for NASA to certify their systems for human spaceflight. In January 2018, we found that both contractors had notified NASA that final certification dates have slipped again and are now in the first quarter of calendar year 2019. The Commercial Crew Program’s schedule analysis indicates that certification may be further delayed to December 2019 for SpaceX and February 2020 for Boeing. The composition of the portfolio in the coming years is expected to include large and complex projects, putting NASA at risk of continued cost increases and schedule delays. Specifically, NASA plans to have complex projects enter the development portfolio in the next few years as it holds confirmation reviews and set cost and schedule baselines. This includes the Europa Clipper project and potentially the Wide-Field Infrared Survey Telescope (WFIRST) project. In February 2018, the President’s 2019 Budget Request proposed canceling the WFIRST project due to the project’s significant costs and higher priorities in the agency. However, the project may continue if funding is received. Together, preliminary estimates indicate that these two projects could cost as much as $7.8 billion. In addition, NASA expects to begin other large, complex projects like the Lunar Orbital Platform-Gateway— currently being discussed as a space station or outpost in lunar orbit— and a Europa Lander project in the coming years. A December 2017 space policy directive also instructed NASA to return astronauts to the moon for long-term exploration and to pursue human exploration of Mars and the broader solar system. To its credit, NASA recently took steps to put a process in place to control the costs of two projects while in formulation, which may prove useful if properly executed. The Europa Clipper project implemented a process whereby cost growth threats would be offset by descoping instruments in whole or in part. For example, if an instrument exceeds its development cost by 20 percent, the project would propose a descope option to NASA that brings instrument cost below that threshold. NASA had not descoped any instruments as of our May 2018 report. The WFIRST project is responding to findings from an independent review that was conducted to ensure the mission’s scope and required resources are well understood and executable. The review found that the mission scope is understood, but not aligned with the resources provided and concluded that the mission is not executable without adjustments and/or additional resources. For example, the study team found that NASA’s current forecasted funding profile for the WFIRST project would require the project to slow down activities starting in fiscal year 2020, which would result in an increase in development cost and schedule. NASA agreed with the study team’s results and directed the project to reduce the cost and complexity of the design in order to maintain costs within the $3.2 billion preliminary cost target. But even with these efforts, NASA’s cost and schedule performance may be further tested in upcoming years as some expensive, complex projects linger in the portfolio longer than expected. As previously discussed, the Orion program expects cost growth and faces other schedule and technical risks as it moves through the integration and test phase for EM-1 into at least 2019 and then through 2023 for EM-2. As of August 2017, NASA officials expected that new hardware and addressing development challenges would be the factors contributing to increased cost for the program. For example, there was a cost impact when the program moved from a single-piece, or monolithic, heatshield design to one that employs blocks in order to improve its structural strength. Program officials said they are also assessing schedule delays for EM-2, and noted that the EM-2 launch date depends on the outcome of the EM-1 launch date. The SLS and EGS programs continue to face cost, schedule, and technical risks as they move through the integration and test phase into at least 2019. For example, SLS will have to complete a “green run” test which requires multiple first-time efforts. Specifically, the test is the culmination of the development effort and includes the core stage integration with its four main engines, fully fueling with cryogenic hydrogen and oxygen, and then firing all four engines for about 500 seconds. NASA currently has no schedule reserve to its target December 2019 launch readiness date for two key areas in the core stage schedule. First, there is no reserve between the end of core stage production and the delivery of the core stage to the test facility. Second, there is no reserve between the end of the testing and delivery to Kennedy Space Center for final integration and testing prior to launch. As previously discussed, the JWST project is at risk of exceeding its congressional cost cap, and faces schedule risks as it completes its remaining integration and test work. These activities have taken considerably longer than planned due to a variety of challenges, including reach and access limitations on the flight hardware. Additionally, the project faces significant work ahead. For example, the project must complete integration of spacecraft element hardware and conduct deployment and environmental tests of the integrated sunshield and spacecraft. Further, it must integrate the telescope element with the spacecraft element to form the JWST observatory, and complete another set of challenging environmental tests on the full integrated observatory. At the same time, the project will need to mitigate dozens of remaining hardware and software risks to acceptable levels and address the project’s many potential single point failures to the extent possible. The SGSS project expects to experience additional cost growth through the final acceptance review because the full scope of the effort has not been included in the cost. NASA only approved its new cost estimate through the initial operational readiness review, currently planned for September 2019. A project official said NASA headquarters asked the project to determine if there are ways to reduce the cost between the operational readiness review and the final acceptance review. NASA plans to conduct an independent review of the project in mid-2018 to inform a decision on whether to continue the project past the operational readiness review. If NASA decides to continue the project past this review, additional cost growth is expected for SGSS when NASA revisits project costs through future budget cycles. In closing, NASA continues to make improvements to the acquisition management of its portfolio of major projects. However, the deterioration of the cost and schedule performance of NASA’s portfolio this year and the likelihood of additional cost growth and schedule delays demonstrate the need for NASA to continue to take actions to further reduce acquisition risk as we and others have recommended. Continuing to improve cost and schedule estimating tools and practices—such as by providing projects with sufficient cost and schedule reserves to address risks and unforeseen technical challenges and ensuring that program offices regularly and consistently update their JCLs across the portfolio— could help to better position NASA for improved outcomes. We look forward to continuing to work with NASA and this subcommittee in addressing these issues. Chairman Babin, Ranking Member Bera, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Cristina T. Chaplain, Director, Contracting and National Security Acquisitions at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Molly Traci, Assistant Director; Laura Greifner; Erin Kennedy; Miranda Riemer; Roxanna T. Sun; and Alyssa Weir. Appendix I: Descriptions of National Aeronautics and Space Administration Major Projects Reviewed in GAO’s 2018 Assessment Project description The Commercial Crew Program facilitates and oversees the development of safe, reliable, and cost-effective crew transportation systems by commercial companies to carry NASA astronauts to and from the International Space Station. The program is a multi-phase effort that started in 2010. During the current phase, the program is working with two contractors— Boeing and SpaceX—that will design, develop, test, and operate the crew transportation systems. Once NASA determines the systems meet its standards for human spaceflight—a process called certification—the companies will fly up to six crewed missions to the space station. The DART project plans to travel to the near-Earth asteroid Didymos, a binary system, and impact the smaller of the two bodies. NASA will assess the deflection result of the impact for potential future use on other potentially hazardous near-Earth objects. The project responds to near-Earth object guidance by the Office of Science and Technology Policy to better understand our impact mitigation posture, and to recommendations by the National Research Council Committee to conduct a test of a kinetic impactor. The DART mission is part of the Asteroid Impact and Deflection Assessment, which is an international collaboration with the European Space Agency. The Europa Clipper mission aims to investigate whether the Jupiter moon could harbor conditions suitable for life. The project plans to launch a spacecraft in the 2020s, place it in orbit around Jupiter, and conduct a series of investigatory flybys of Europa. The mission’s planned objectives include characterizing Europa’s ice shell and any subsurface water, analyzing the composition and chemistry of its surface and ionosphere, understanding the formation of its surface features, and surveying sites for a potential landed mission. The EGS program is modernizing and upgrading infrastructure at the Kennedy Space Center and developing software needed to integrate, process, and launch the Space Launch System (SLS) and Orion Multi-Purpose Crew Vehicle (Orion). The EGS program consists of several major construction and facilities projects including the Mobile Launcher, Crawler Transporter, Vehicle Assembly Building, and launch pad, all of which need to be complete before the first uncrewed exploration mission using the SLS and Orion vehicles. The GRACE-FO mission will continue and expand upon the 2002 GRACE mission, which ended science operations in October 2017. The system, which consists of two spacecraft working together to obtain scientific measurements, will provide high-resolution models of Earth’s gravity field and insight into water movement on and beneath the Earth’s surface for up to 5 years. These models will provide rates of ground water depletion and polar ice melt and enable improved planning for droughts and floods. GRACE-FO is a collaborative effort with the German Research Centre for Geosciences. The ICESat-2 mission is a follow-on mission to ICESat that will measure changes in polar ice-sheet mass and elevation. The measurements will provide researchers a better understanding of the mechanisms that drive polar ice changes and their effect on global sea level. ICESat-2’s upgraded laser instrument will allow the satellite to make more frequent measurements and provide better elevation estimates over certain types of terrain than ICESat. InSight is a Mars lander with two primary objectives. It is intended to further understanding of the formation and evolution of terrestrial planets by determining Mars’s size, its composition, and the physical state of the core; the thickness of the crust; and the composition and structure of the mantle, as well as the thermal state of the interior. It will also determine the present level of tectonic activity and the meteorite impact rate on Mars. InSight is based on the Phoenix lander design. Phoenix successfully landed on Mars in 2008. Project description The ICON observatory will orbit Earth to explore its ionosphere—the boundary region between Earth and space where ionized plasma and neutral gas collide and react. Its four instruments will make direct measurements and use remote sensing to further researchers’ understanding of Earth’s upper atmosphere, the Earth-Sun connection, and the ways in which Earth weather drives space weather. JWST is a large, infrared-optimized space telescope designed to help understand the origin and destiny of the universe, the creation and evolution of the first stars and galaxies, and the formation of stars and planetary systems. It will also help further the search for Earth-like planets. JWST will have a large primary mirror composed of 18 smaller mirrors and a sunshield the size of a tennis court. Both the mirror and sunshield are folded for launch and open once JWST is in space. JWST will reside in an orbit about 1 million miles from the Earth. Landsat 9 is the next satellite in the Landsat series Program, which provides a continuous space-based record of land surface observations to study, predict, and understand the consequences of land surface dynamics, such as deforestation. The program is a collaborative, joint mission between NASA and the U.S. Geological Survey. The Landsat data archive constitutes the longest continuous moderate-resolution record of the global land surface as viewed from space and is used by many fields, such as agriculture, mapping, forestry, and geology. LCRD is a technology demonstration mission with the goal of advancing optical communication technology for use in deep space and near-Earth systems. LCRD will demonstrate bidirectional laser communications between a satellite and ground stations, develop operational procedures, and transfer the technology to industry for future use on commercial and government satellites. NASA anticipates using the technology as a next generation Earth relay as well as to support near-Earth and deep space science, such as the International Space Station and human spaceflight missions. The project is a mission partner and will be a payload on a U.S. Air Force Space Test Program satellite. Low Boom Flight Demonstrator (LBFD) LBFD is a flight demonstration project planned to demonstrate that noise from supersonic flight—sonic boom—can be reduced to acceptable levels, allowing for eventual commercial use of overland supersonic flight paths. Plans include multiple flights beyond fiscal year 2022 to gather community responses to the flights and to create a database to support development of international noise rules for supersonic flight. Lucy will be the first mission to investigate the Trojans, which are a population of never- explored asteroids orbiting in tandem with Jupiter. The project aims to understand the formation and evolution of planetary systems by conducting flybys of these remnants of giant planet formation. The Lucy spacecraft will first encounter a main belt asteroid—located between the orbits of Mars and Jupiter—and then will travel to the outer solar system where the spacecraft will encounter six Trojans over an 11-year mission. The mission’s planned measurements include asteroid surface color and composition, interior composition, and surface geology. Mars 2020 is part of the Mars Exploration Program, which seeks to further understand whether Mars was, is, or can be a habitable planet. Its rover and science instruments will explore Mars and conduct geological assessments, search for signs of ancient life, determine potential environmental habitability, and prepare soil and rock samples for potential future return to Earth. The rover will include a technology demonstration instrument designed to convert carbon dioxide into oxygen. Mars 2020 is based heavily on the Mars Science Laboratory, or Curiosity, which landed on Mars in 2012 and remains in operation. Project description NISAR is a joint project between NASA and Indian Space Research Organisation (ISRO) that will study the solid Earth, ice masses, and ecosystems. It aims to address questions related to global environmental change, Earth’s carbon cycle, and natural hazards, such as earthquakes and volcanoes. The project will include the first dual frequency synthetic aperture radar instrument, which will use advanced radar imaging to construct large-scale data sets of the Earth’s movements. NISAR represents the first major aerospace science partnership between NASA and ISRO. Orion is being developed to transport and support astronauts beyond low-Earth orbit, including traveling to Mars or an asteroid. The Orion program is continuing to advance development of the human safety features, designs, and systems started under the Constellation program, which was canceled in 2010. Orion is planned to launch atop NASA’s Space Launch System. The current design of Orion consists of a crew module, service module, and launch abort system. PSP will be the first NASA mission to visit a star. Using the gravity of Venus, the spacecraft will orbit the Sun 24 times and gather information to increase knowledge about the solar wind, including its origin, acceleration, and how it is heated. PSP instruments will observe the generation and flow of solar winds from very close range and sample and take measurements of the Sun’s outer atmosphere, where solar particles are energized. To achieve its mission, parts of the spacecraft must be able to withstand temperatures exceeding 2,500 degrees Fahrenheit and endure blasts of extreme radiation. The project was formerly named Solar Probe Plus, or SPP, and was renamed in May 2017. PACE is a polar-orbiting mission that will use advanced global remote sensing instruments to improve scientists’ understanding of ocean biology, biogeochemistry, ecology, aerosols, and cloud properties. PACE will extend climate-related observations begun under earlier NASA missions, which will enable researchers to study long-term trends on Earth’s oceans and atmosphere, and ocean-atmosphere interactions. PACE will also enable assessments of air and coastal water quality, such as the locations of harmful algae blooms. Psyche will be the first mission to visit a metal asteroid and aims to understand a previously unexplored component of the early building blocks of planets: iron cores. The project plans to orbit the Psyche asteroid to determine if it is a planetary core, characterize its topography, assess the elemental composition, and determine the relative ages of its surface regions. RBI is a scanning radiometer that NASA planned to launch on the National Oceanic and Atmospheric Administration’s (NOAA) Joint Polar Satellite System 2. RBI’s planned mission was to support global climate monitoring by continuing measurements of the Earth’s reflected sunlight and emitted thermal radiation made by NASA and NOAA satellites over the past 30 years. This data was intended to represent one of two key sets of measurements needed to determine whether the Earth is warming or cooling. The Restore-L project will demonstrate the capability to refuel on-orbit satellites for eventual use by commercial entities. Specifically, Restore-L plans to autonomously rendezvous with, inspect, capture, refuel, adjust the orbit of, safely release, and depart from the U.S. Geological Survey’s Landsat 7 satellite. Landsat 7 can extend operations if successfully refueled, but it is planned for retirement if the technology demonstration is unsuccessful. SLS is intended to be NASA’s first human-rated heavy-lift launch vehicle since the Saturn V was developed for the Apollo program. SLS is planned to launch NASA’s Orion spacecraft and other systems on missions between the Earth and Moon and to enable deep space missions, including Mars. NASA is designing SLS to provide an initial lift capacity of 70 metric tons to low-Earth orbit, and be evolvable to 130 metric tons, enabling deep space missions. The 70-metric-ton capability will include a core stage, powered by four RS-25 engines, and two five-segment boosters. The 130-metric-ton capability will use a new upper stage and evolved boosters. Project description The SGSS project plans to develop and deliver a new ground system for one Space Network site. The Space Network provides essential communications and tracking services to NASA and non-NASA missions. Existing systems, based on 1980s technology, are increasingly obsolete and unsustainable. The new ground system will include updated systems, software, and equipment that will allow the Space Network to continue to provide critical communications services for the next several decades. The Space Network is managed by the Space Communication and Navigation program. The SWOT mission will use its wide-swath radar altimetry technology to take repeated high- resolution measurements of the world’s oceans and freshwater bodies to develop a global survey. This survey will make it possible to estimate water discharge into rivers more accurately, and help improve flood prediction. It will also provide global measurements of ocean surface topography and variations in ocean currents, which will help improve weather and climate predictions. SWOT is a joint project between NASA and the French Space Agency—the Centre National d’Etudes Spatiales. TESS will use four identical, wide field-of-view cameras to conduct the first extensive survey of the sky from space for transiting exoplanets—or planets in other solar systems. The mission’s goal is to discover these exoplanets during transit, the time when the planet’s orbit carries it in front of its star as viewed from Earth. The project plans to discover rocky and potentially habitable Earth-sized and super-Earth planets orbiting nearby bright stars for further evaluation through ground- and space-based observations by other missions, such as JWST. WFIRST is an observatory designed to perform wide-field imaging and survey of the near- infrared sky to answer questions about the structure and evolution of the universe, and expand our knowledge of planets beyond our solar system. The project will use a telescope that was originally built and qualified by another federal agency. The project plans to launch WFIRST in the mid-2020s to an orbit about 1 million miles from the Earth. The project is also planning a guest observer program, in which the project may provide observation time to academic and other institutions. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "GAO designated NASA's acquisition management as a high-risk area in 1990 after a history of persistent cost growth and schedule slippage in many of NASA's major projects. In more recent years, GAO found that NASA had taken some steps to improve its management, and, in May 2017, GAO found that projects were continuing a generally positive trend of limiting cost and schedule growth. But at the same time, GAO noted that many of these projects, including some of the most expensive ones, were approaching the phase in their life cycles when cost and schedule growth is most likely. This statement summarizes GAO's 2018 findings from its 10th annual snapshot of how well NASA is planning and executing its major acquisition projects, and describes (1) the cost and schedule performance of NASA's portfolio of major projects and (2) the extent to which NASA faces risks for further cost increases and schedule delays. To conduct its review for the 2018 report, GAO-18-280SP , GAO analyzed cost, schedule, and other data for NASA's 26 major projects, each with a life-cycle cost of over $250 million; reviewed monthly project status reports; and interviewed NASA officials. The cost and schedule performance of the National Aeronautics and Space Administration's (NASA) portfolio of major projects has deteriorated, but the extent of cost performance deterioration is unknown. NASA expects cost growth for the Orion crew capsule—one of the largest projects in the portfolio—but does not have a current cost estimate. In addition, the average launch delay for the portfolio was 12 months, the highest delay GAO has reported in its 10 years of assessing major NASA projects (see figure below). The deterioration in portfolio performance was the result of 9 of the 17 projects in development experiencing cost or schedule growth. Four projects encountered technical issues that were compounded by risky program management decisions. For example, the Space Launch System and Exploration Ground Systems programs are large-scale, technically complex human spaceflight programs, and NASA managed them to aggressive schedules and with insufficient levels of cost and schedule reserves. This made it more difficult for the programs to operate within their committed baseline cost and schedule estimates. Two projects ran into technical challenges that resulted in delays in the integration and test phase. For example, in December 2017, GAO found that the James Webb Space Telescope project encountered delays primarily due to the integration of the various spacecraft elements taking longer than expected, as well as the need to resolve technical issues during testing. GAO has previously found that integration and testing is when projects are most at risk of incurring cost and schedule growth. Three projects experienced cost growth or schedule delays due to factors outside of the projects' control, such as delays related to their launch vehicles. NASA continues to face increased risk of cost and schedule growth in future years due to new, large and complex projects that will enter the portfolio and expensive projects remaining in the portfolio longer than expected. GAO is not making any new recommendations in this statement. GAO has made recommendations in prior reports to strengthen NASA's acquisition management of its major projects. NASA generally agreed with these recommendations, but has not fully addressed some of them. GAO continues to believe they should be fully addressed.", "document_type": "gao"}
{"report": "In fiscal year 2016, DOD identified about 2.2 million nonenrolled TRICARE beneficiaries who fell into four categories: (1) retired servicemembers and their dependents, (2) inactive guard/reserve servicemembers and their dependents, (3) dependents of active duty, or of guard/reserve on active duty status, and (4) other beneficiaries, such as dependent survivors of deceased servicemembers. Retired servicemembers and their dependents made up the majority of nonenrolled beneficiaries at the end of fiscal year 2016 (approximately 60 percent). (See fig. 1.) Prior to January 1, 2018, TRICARE provided benefits through three basic options for its non-Medicare-eligible beneficiary population—TRICARE Prime, Standard, and Extra. These options varied by enrollment requirements, choices in civilian and military treatment facility providers, and the amount beneficiaries must contribute toward the cost of their care. (See table 1.) The NDAA 2017 made specific changes to the TRICARE program that became effective on January 1, 2018. These changes included terminating the TRICARE Standard and Extra options, establishing a new option called TRICARE Select, and ensuring that 85 percent of TRICARE Select beneficiaries are covered by the network of civilian providers. TRICARE Select has similar benefits to TRICARE Standard and Extra for obtaining care from nonnetwork and network providers, but unlike these options, TRICARE Select requires enrollment. Under TRICARE, DOD uses managed care support contractors to develop networks of civilian providers to serve all TRICARE beneficiaries in PSAs, which are typically within an approximate 40-mile radius of a military outpatient or inpatient treatment facility or Base Realignment and Closure sites. Although some network providers may be located in non- PSAs, contractors are not required to develop networks in these areas. Previously, contractors had the option of developing additional PSAs (and civilian provider networks) in areas that were not located near military treatment facilities or Base Realignment and Closure sites. However, on October 1, 2013, DOD eliminated these additional PSAs, referred to in the survey analyses as “former PSAs,” and as a result, the managed care support contractors were no longer required to develop and maintain networks of civilian providers in these areas. In fiscal year 2016, approximately 65 percent of the 2.2 million nonenrolled beneficiaries that were eligible for TRICARE Standard and Extra (1.47 million) lived in PSAs. Of the remaining nonenrolled beneficiaries (775,000), about 19 percent lived in former PSAs and about 16 percent lived in non-PSAs. (See fig. 2.) Nonenrolled beneficiaries who live in former PSAs and non-PSAs may still have access to network providers, even though contractors are not required to develop networks in these areas. About 57 percent of these beneficiaries (445,000) filed at least one TRICARE claim with a network civilian provider during fiscal year 2016. The NDAA 2008 directed DOD to survey nonenrolled beneficiaries and civilian providers in at least 20 PSAs in each of four fiscal years, 2008 through 2011, as well as 20 non-PSAs. To do this, DOD divided the country into 80 distinct PSAs and 80 distinct non-PSAs and surveyed 20 PSAs and 20 non-PSAs each year. At the end of the 4-year period, each year’s survey results were combined and weighted to develop estimates of access to health care, including mental health care, at the service area, state, and national levels. Additionally, the NDAA 2008 required DOD to consult with representatives of TRICARE beneficiaries and providers of health care, including mental health care, to identify locations where nonenrolled beneficiaries have experienced significant access-to-care problems and to survey both beneficiaries and health care providers, including mental health care providers, in these areas. Based on these consultations, DOD designated certain Hospital Service Areas (HSA) to include in its beneficiary and provider surveys. DOD used a similar methodology for determining its locations in the 2012- 2015 surveys. However, as a result of DOD’s changes to PSAs on October 1, 2013, 28 of the 80 non-PSAs surveyed were former PSAs. DOD also surveyed both nonenrolled beneficiaries and civilian providers in a total of 30 HSAs. As a result, DOD collectively surveyed 190 geographic locations over the 4-year period. Furthermore, we previously reported that DOD’s implementation of its 2008-2011 nonenrolled beneficiary and civilian provider surveys generally addressed the requirements outlined in the NDAA 2008. DOD made several minor revisions to the methodologies of the 2012-2015 surveys, but we determined that none of those changes altered DOD’s compliance with the NDAA 2008, as amended. Nonenrolled beneficiary survey results over time. Nationwide, a lower percentage of nonenrolled beneficiaries reported that they experienced problems finding any type of provider in the 2012-2015 survey (29 percent) when compared to the prior 2008-2011 survey (31 percent). Specifically, fewer nonenrolled beneficiaries reported that they experienced problems finding a primary care provider than in the prior survey (22 percent in 2012-2015 compared to 25 percent in 2008-2011). However, there was no significant statistical difference over time in the percentage of beneficiaries who reported experiencing problems finding a specialty care or mental health care provider. (See fig. 3.) Nonenrolled beneficiary survey results by type of location. Nonenrolled beneficiaries in non-PSAs reported experiencing fewer problems finding primary and specialty providers than those in PSAs, which is similar to what we reported for the prior survey. For example, about 20 percent of beneficiaries in non-PSAs reported that they had problems finding specialty care providers compared to 24 percent in PSAs. Regarding beneficiaries in former PSAs, the only statistically significant difference among the three provider types was for problems finding a primary care provider. Specifically, fewer (about 19 percent) nonenrolled beneficiaries in non-PSAs reported experiencing problems finding a primary care provider to accept TRICARE, compared to 24 percent in former PSAs. (See fig. 4.) DOD officials told us that they were unsure of the exact reasons for the difference between PSAs and non- PSAs. However, they explained that PSAs are often located in more populated areas, where TRICARE beneficiaries may not make up a large market share for local civilian providers, who may have a wide array of patients with other health plans. Nonenrolled beneficiary survey results by network status. Nonenrolled beneficiaries with network providers reported experiencing fewer problems finding civilian providers, compared to nonenrolled beneficiaries with nonnetwork providers. For example, 20 percent of the nonenrolled beneficiaries who used a network civilian primary care provider reported that they had a problem finding a primary care provider that would accept TRICARE compared with the 44 percent of nonenrolled beneficiaries who used a nonnetwork civilian primary care provider. (See fig. 5.) In addition, when compared with the results of the last survey (2008- 2011), the percentages of nonenrolled beneficiaries who reported that they experienced problems finding a specialty care or mental health care provider increased in the most recent survey (2012-2015) for beneficiaries who used nonnetwork providers, but there were no changes over time if their specialty care or mental health care providers were in the network. (See fig. 6.) Compared to the prior survey, a higher percentage of nonenrolled beneficiaries reported that they were able to obtain appointments as soon as they desired. Specifically, the percentage of nonenrolled beneficiaries who made non-urgent appointments for health care and reported that they were able to usually or always obtain an appointment as soon as they thought they needed increased from 87 percent in the 2008-2011 survey to 90 percent in the 2012-2015 survey. However, the most commonly reported length of time they waited between making an appointment and actually seeing a provider did not change from the 2008- 2011 surveys—most respondents in both surveys reported they were able to get appointments within 3 days (about 54 percent for both years’ surveys). The 2012-2015 survey also asked specific questions about how easy it was to get an appointment with specialty care providers and mental health care providers: Of those nonenrolled beneficiaries who tried to make an appointment with a civilian specialty care provider, 84 percent reported it was “usually easy,” or “always easy,” to get appointments. These results also varied by network status, as a higher percentage of those who used a network specialty care provider reported that they found it “usually easy” or “always easy” to get appointments (85 percent) compared to those that used a nonnetwork specialty care provider (74 percent). Of those nonenrolled beneficiaries that received treatment or counseling from a civilian mental health care provider, 73 percent reported that when they needed treatment or counseling right away, they usually or always saw someone as soon as they wanted. We found that this result did not change since the prior survey, nor did we find any statistically significant differences between beneficiaries’ responses for seeing a network versus a nonnetwork mental health provider. Ratings of TRICARE over time. Nonenrolled beneficiaries’ positive ratings of TRICARE have generally increased since the previous survey. Specifically, over time, nonenrolled beneficiaries’ positive ratings of five different categories related to TRICARE have either increased (primary care rating, specialty care rating, and health plan rating) or remained the same (mental health care rating and health care rating). (See fig. 7.) Furthermore, nonenrolled beneficiaries’ positive ratings of their mental health care providers were lower than their ratings for their primary and specialty care providers. We also found that there were no significant differences at the 95 percent confidence level for nonenrolled beneficiaries’ ratings of primary care, specialty care, or mental health care providers based on their network status. Ratings of TRICARE compared to other federal health plans. When we compared these results to those of the 2013-2015 CAHPS surveys, we found that nonenrolled TRICARE beneficiaries’ positive experience ratings for primary care providers and specialty care providers were lower than those of Medicare fee-for-service beneficiaries and higher than those of Medicaid beneficiaries, which is similar to what we found for the previous survey. We also found that TRICARE beneficiaries’ positive experience ratings for their health care were higher than that of both Medicare fee-for-service beneficiaries and Medicaid beneficiaries, but TRICARE beneficiaries’ positive experience ratings for their health plan were lower than both of these groups. (See fig.8.) Provider awareness over time, by provider type and by location type. Nationwide, a higher percentage of civilian providers reported that they were aware of TRICARE in the 2012-2015 civilian provider survey (84 percent) than those from the 2008-2011 civilian provider survey (82 percent). Specifically, since the previous survey, we found that awareness increased for specialty care providers (from 92 to 94 percent) and mental health care providers (from 68 to 74 percent). In addition, when we analyzed these results by location type, we found that civilian providers in both PSAs and non-PSAs reported higher awareness of TRICARE since the previous survey (from 79 to 82 percent in PSAs and from 87 to 89 percent in non-PSAs). Awareness among civilian providers in locations now designated as former PSAs remained statistically unchanged at the 95 percent confidence level (89 percent in 2012-2015). However, despite some increases in awareness, civilian providers in PSAs reported lower awareness than those in non-PSAs and former PSAs in the 2012-2015 surveys. Provider awareness by network status. Providers within the TRICARE network reported higher awareness of TRICARE than nonnetwork providers, regardless of individual provider type. (See fig. 9.) Among individual provider types, the biggest difference in awareness between network and nonnetwork providers was for mental health care providers, with 96 percent of network mental health care providers reporting awareness of TRICARE compared with 72 percent of nonnetwork mental health care providers. Provider acceptance over time, by provider type and location type. Nationwide, we found an overall decrease reported in civilian providers’ acceptance of new TRICARE patients in the 2012-2015 civilian provider survey (55 percent) compared to the 2008-2011 civilian provider survey (58 percent). However, when we analyzed acceptance by provider type, we found that the overall decrease was mainly attributable to a decrease in mental health care providers’ acceptance rates, as primary and specialty care providers’ acceptance rates remained unchanged. Specifically, mental health care providers’ TRICARE acceptance rate decreased from 39 to 36 percent. However, this low acceptance rate may not be an issue unique to TRICARE, as we have previously reported that there is a nationwide shortage of mental health professionals. In addition, when we analyzed results for all civilian providers by location type, we found that civilian providers in PSAs and non-PSAs reported lower acceptance rates of new TRICARE patients since the previous survey (from 55 to 53 percent in PSAs, and from 66 to 62 percent in non- PSAs). Acceptance among civilian providers in locations now designated as former PSAs remained statistically unchanged at the 95 percent confidence level (60 percent in 2012-2015). Similar to our findings on providers’ awareness, we found that civilian providers in PSAs reported lower acceptance rates than those in non-PSAs and former PSAs. miscellaneous, and A Department of Defense official told us that some examples of “miscellaneous” are “in a private practice”, and “not a preferred provider.” Provider acceptance by network status. When we analyzed civilian providers’ acceptance of new TRICARE patients by providers’ network status, we found that network providers reported higher acceptance of new TRICARE patients than nonnetwork providers, regardless of provider type. (See fig. 10.) Among individual provider types, the biggest difference in acceptance between network and nonnetwork providers was for mental health care providers with 79 percent of network mental health care providers reporting acceptance of new TRICARE patients compared with 30 percent of nonnetwork mental health care providers. Of those mental health care providers that were not accepting new TRICARE patients, one of the top reasons reported by those not in the network was a lack of awareness of TRICARE. Due to the relatively small number of network mental health providers who provided reasons for not accepting new TRICARE patients, it was not possible to identify one primary reason; however, some of the reasons they cited include reimbursement, not accepting new patients, and specialty was not covered. Our analysis of the 2012-2015 nonenrolled beneficiary and civilian provider surveys indicated that beneficiaries may have difficulty accessing a primary care provider, a specialty care provider, or both in 6 out of the 190 specific geographic locations that were surveyed. For the 6 locations we identified, beneficiaries reported higher levels of problems finding providers, and providers reported lower rates of accepting TRICARE patients. Primary care. We identified two locations where access to primary care providers may be particularly problematic. (See table 2.) In these two locations, the percent of beneficiaries who reported that they had problems finding a primary care provider was at or above the 2012- 2015 beneficiary survey’s national average of 22 percent, and also where the percent of primary care providers who reported that they were accepting new TRICARE patients was at or below the 2012- 2015 civilian provider survey’s national average of 68 percent. Specialty care. We identified five locations where access to specialty care providers may be particularly problematic. (See table 2.) In these five locations, the percent of beneficiaries who reported that they had problems finding a specialty care provider was at or above the 2012- 2015 beneficiary surveys’ national average of 23 percent, and also where the percent of specialty care providers who reported that they were accepting new TRICARE patients was at or below the 2012- 2015 civilian provider surveys’ national average of 78 percent. When we compared this analysis to our analysis of the 2008-2011 beneficiary and provider surveys, the “Dallas/Fort Worth, Texas” HSA was identified in both results. Using data from the prior survey, our analysis identified it as being potentially problematic for primary care, but using data from the more recent survey, we identified specialty care access as being potentially problematic. DOD officials told us that their past analysis of beneficiaries’ complaints in this location centered on appointment wait times exceeding beneficiaries’ preferences and on drive times to providers’ offices. Officials explained that although there was a wide range of network specialty care providers in this location, TRICARE beneficiaries were a very small percentage of the overall population. Furthermore, this location is home to a number of large corporations that have health care plans that reimburse providers more than TRICARE. DOD officials added that due to these factors, providers in this location do not give preference to TRICARE beneficiaries, and drive times in this location are often long due to the traffic patterns and overall congestion of a large urban area. In reviewing a draft of this report, DOD concurred with our overall findings. DOD’s written response is reprinted in appendix I. We are sending copies of this report to the Secretary of Defense and appropriate congressional committees. The report is also available at no charge on GAO’s website at http://www.gao.gov. If you or your staff has any questions regarding this report, please contact Debra A. Draper at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Debra A. Draper at (202) 512-7114 or draperd@gao.gov. In addition to the contacts named above, Bonnie Anderson, Assistant Director; Jeff Mayhew, Analyst-in-Charge; Amy Andresen; and Jennie Apter made key contributions to this report. Also contributing were Zhi Boon, Jacquelyn Hamilton, Vikki Porter, and Eric Wedum.", "summary": "DOD provides health care, including mental health care, to eligible beneficiaries through TRICARE. Beneficiaries who use TRICARE Prime, a managed care option, must enroll to receive care. Prior to Jan. 1, 2018, beneficiaries did not need to enroll for TRICARE Standard, a fee-for-service option, or TRICARE Extra, a preferred provider organization option (referred to as nonenrolled beneficiaries). Although the TRICARE Standard and Extra options were terminated effective Jan. 1, 2018, the new TRICARE Select option has similar benefits for obtaining care from network and nonnetwork providers. The National Defense Authorization Act (NDAA) for Fiscal Year 2008 directed DOD to conduct surveys of nonenrolled beneficiaries and civilian providers about access to care under the TRICARE Standard and Extra options. It also directed GAO to review the surveys' results. Additionally, the NDAA for Fiscal Year 2017 included a provision for GAO to review access to care under TRICARE Extra. This report addresses both provisions. GAO analyzed DOD's surveys to determine (1) nonenrolled beneficiaries' access to care, (2) nonenrolled beneficiaries' ratings of TRICARE, (3) civilian providers' awareness and acceptance of TRICARE, and (4) nonenrolled beneficiaries' access by individual geographic area. GAO interviewed agency officials, analyzed the 2012-2015 surveys, and compared them to DOD's 2008-2011 surveys and to surveys of Medicare and Medicaid beneficiaries. In commenting on a draft of this report, DOD concurred with GAO's findings. The Department of Defense's (DOD) most recent surveys of TRICARE beneficiaries and civilian health care providers show that access to care has generally improved for nonenrolled beneficiaries who used the TRICARE Standard and Extra options. Specifically, GAO found the following: Nonenrolled beneficiaries reported improved access to care in the most recent 4-year survey (2012-2015), compared to the prior survey (2008-2011). For example, a lower percentage of nonenrolled beneficiaries reported that they experienced problems finding a civilian provider in the most recent survey (29 percent) than those in the prior survey (31 percent). In addition, a higher percentage of nonenrolled beneficiaries (90 percent) reported that they were usually or always able to obtain a non-urgent appointment as soon as they thought they needed compared to the prior survey (87 percent). The percentage of nonenrolled beneficiaries who reported positive experience ratings of TRICARE ranged from 71 to 83 percent over five categories, including ratings of primary, specialty, and mental health care providers. These ratings were generally higher than the prior survey. When compared to other federal health plans, nonenrolled TRICARE beneficiaries' positive experience ratings of primary and specialty care providers were lower than those of Medicare fee-for service beneficiaries, but higher than those of Medicaid beneficiaries. The percentage of civilian providers who were aware of TRICARE increased from 82 percent in the prior survey to 84 percent. However, the percentage who accepted new TRICARE patients decreased from 58 percent to 55 percent. According to GAO's analysis of survey data, this overall decrease was mainly attributable to a decrease in mental health care providers' acceptance rates, as the acceptance rates for primary and specialty care providers remained unchanged. Network providers reported both higher awareness and acceptance of TRICARE than providers not in the network (referred to as nonnetwork providers). The biggest gap in both awareness and acceptance between network and nonnetwork providers was for mental health care providers: About 96 percent of network mental health care providers reported awareness of TRICARE compared to 72 percent of nonnetwork mental health care providers. About 79 percent of network mental health care providers reported accepting new TRICARE patients compared to 30 percent of nonnetwork mental health care providers. GAO's analysis of both the beneficiary and provider surveys identified locations in New York, Washington, Texas, and Washington, D.C. where access to providers may be particularly problematic. Specifically, in these locations, beneficiaries reported more problems finding providers who accepted TRICARE and providers reported lower acceptance of TRICARE, compared to national averages.", "document_type": "gao"}
{"report": "ATF is one of several DOJ law-enforcement components, including the Federal Bureau of Investigation (FBI) and the Drug Enforcement Administration (DEA), responsible for fighting violent crime. ATF is the lead agency charged with enforcing federal firearms laws and regulating the firearms industry. ATF is also responsible for investigating criminals and criminal organizations that use firearms, arson, or explosives in violent criminal activity. ATF investigates and combats violent crime related to firearm trafficking, criminal possession and use of firearms, and the diversion of firearms from legal commerce. This work includes law-enforcement operations and intelligence gathering and analysis. For example, special agents investigate reports of prohibited individuals acquiring or attempting to acquire firearms from private sellers in order to avoid background checks that would otherwise be required if purchasing through an FFL. According to ATF officials, intelligence analysts may help agents by gathering information from the public social-media profiles of individuals under investigation. In addition, ATF investigates reports of individuals engaging in the business of dealing firearms without a license, thereby circumventing background-check, record-keeping, and other requirements. The National Firearms Act of 1934 (NFA) and the Gun Control Act of 1968 (GCA) are the primary federal laws that regulate the manufacture, sale, distribution, and possession of firearms. There are no laws that specifically regulate firearms transactions facilitated by the Internet. Rather, firearms transactions facilitated by the Internet are subject to the same legal requirements and regulations as traditional firearms sales. The NFA defines the specific types of firearms and components subject to the provisions of the act based on the firearm’s function, design, configuration, or dimensions. For example, the NFA applies to machine guns, short-barreled rifles, short-barreled shotguns, and silencers. The NFA requires these firearms and components to be registered with ATF. The lawful transfer of firearms and components subject to the NFA generally requires ATF approval, a process that involves the submission of application forms, fingerprints, and photographs to ATF, as well as payment of a transfer tax. Transfers outside of this ATF-approval process are generally illegal. The GCA, the main federal statute applicable to firearms such as handguns, shotguns, and rifles, requires all persons engaged in the business of manufacturing, importing, or dealing in firearms to become an FFL through ATF. The GCA defines a person “engaged in the business” as a dealer of firearms as someone who “devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms.” The definition excludes individuals who make “occasional” sales or purchases to enhance a personal collection or for a hobby or who sell all or part of a personal collection of firearms. The GCA requires that FFLs maintain records of all their gun sales. These records are used, among other purposes, to trace a firearm recovered by law-enforcement officials from its first sale by the manufacturer or importer through the distribution chain to the first retail purchaser, in order to provide law-enforcement agencies with investigative leads. As amended by the Brady Handgun Violence Prevention Act, the GCA generally requires FFLs to contact the FBI’s National Instant Criminal Background Check System (NICS) prior to transferring a firearm to a nonlicensed individual. During a NICS background check, the buyer provides the FFL with appropriate identification, such as a valid driver’s license. The FFL submits descriptive data, including the buyer’s name and date of birth, to NICS, which searches three national databases containing criminal history and other relevant records to determine whether federal or state law prohibits the person from receiving or possessing a firearm. The transfer may proceed if NICS informs the FFL that it has no information indicating that the transfer would be in violation of law, or if 3 business days have elapsed without notification that the transfer would violate the law. The GCA prohibits individuals from knowingly making a false statement intended to deceive FFLs with respect to any fact material to the lawfulness of the sale, such as a person claiming that he or she is the actual buyer of a firearm and not acquiring the firearm on behalf of another person, when in fact he or she is purchasing the firearm with the intent to transfer it to a prohibited person. This type of transaction is often referred to as a “straw purchase.” In addition, the GCA establishes the categories of persons generally prohibited from shipping, transporting, receiving, or possessing firearms and ammunition. Specifically, persons are prohibited from shipping, transporting, receiving, or possessing a firearm if they (1) have been convicted of a felony; (2) are a fugitive from justice; (3) are an unlawful user of or addicted to any controlled substance; (4) have been committed to a mental institution or judged to be mentally defective; (5) are aliens illegally or unlawfully in the United States, or certain other aliens admitted under a nonimmigrant visa; (6) have been dishonorably discharged from the military; (7) have renounced their U.S. citizenship; (8) are under a qualifying domestic violence restraining order; or (9) have been convicted of a misdemeanor crime of domestic violence. In addition, federal law prohibits persons under felony indictment from shipping, transporting, or receiving a firearm. Individuals who are not engaged in the business of dealing in firearms may not legally sell firearms to other unlicensed individuals under certain circumstances. For example, a transaction between unlicensed individuals would be illegal if the seller knows or has reasonable cause to believe that the buyer is legally prohibited from possessing firearms or is a resident of a different state than the seller. If the seller is not aware of these circumstances, the seller may transfer the firearm to the buyer without any record-keeping or background-check requirements. Nonprohibited, nonlicensed individuals may legally purchase firearms through an FFL or through individual private sales with residents of the same state. Regardless of whether an FFL is involved in an Internet- facilitated firearm purchase, if a seller knows or has a reasonable cause to believe that the prospective recipient is prohibited from possessing firearms, the seller must not transfer the firearm. See figure 1. As outlined in figure 1, the Internet can facilitate legal purchases either through FFLs or through nonlicensed private sellers. For purchases through an FFL, an individual orders a firearm online, and generally completes the transaction process in person. The FFL submits the required paperwork to ATF. A background check is processed directly by NICS or through a state government that checks NICS. Unless denied by the background check, the transaction is completed. If the individual is purchasing the firearm from an FFL in another state, the original FFL will transfer the firearm to an FFL in the state the buyer resides in to complete the transaction. If both the buyer and seller are residents of the same state, transfers between private nonlicensed parties facilitated by the Internet without the involvement of an FFL may be lawful. The firearm may be transferred in person between the buyer and the seller, or, if the firearm is a shotgun or rifle, it may be mailed intrastate between the individuals. The seller has no record-keeping obligations, and no NICS background check is performed on the buyer. However, a nonlicensed individual is usually prohibited from directly transferring a firearm to a person who the transferor knows or had reasonable cause to believe is residing in another state. In addition, it is usually illegal for any nonlicensed individual to transport into or receive in the state where he resides any firearm purchased or otherwise obtained outside that state. Therefore, interstate transactions between two nonlicensed individuals are likely to be illegal unless an FFL becomes a party to the transaction. For a legal transaction between residents of different states, the seller must send the firearm to an FFL in the buyer’s state. The FFL submits the paperwork, a background check is processed, and, unless denied by the background check, the FFL transfers the firearm to the buyer. Potential gun buyers can view firearm advertisements and make purchases from the following categories of websites: major retailers, online retailers, online auctions and marketplaces, online classified listings, online forums and social media networks, and Dark Web websites. According to ATF reports, major retailers and online retailers meet the definition of firearm dealers and therefore must be FFLs in order to operate. To see how purchases may be facilitated by various Internet marketplaces, see figure 2. GAO, DOJ, and the Congressional Research Service (CRS), as well as a gun-control advocacy group, have reported on the issue of Internet firearm sales since the early 2000s. In 2001 we reported the results of our undercover inquiries to private individuals who advertised firearms online. We attempted to purchase firearms from two of these individuals. Both individuals were willing to complete the transactions in person, though we did not complete the sales. Also in 2001, as part of a larger report on reducing gun violence, DOJ identified issues related to firearms sales facilitated by the Internet. Among the issues outlined in the report was the possibility prohibited individuals may use the Internet to acquire firearms. The report also stated that the Internet may facilitate illegal sales by individuals selling firearms commercially without a license. The report stated that enforcement mechanisms must be established to prevent prohibited individuals from obtaining firearms through the Internet and to make sure that both FFLs and nonlicensed sellers follow existing law when conducting sales through the Internet. The report noted that ATF was working to establish a unit to identify and respond to criminal violations involving the Internet and other new computer technology and worked with other federal law-enforcement agencies to establish enforcement mechanisms to prevent prohibited individuals from obtaining firearms through the Internet and to make sure both FFLs and nonlicensed sellers follow existing law when conducting sales through the Internet. In 2012, CRS reported on Internet firearm and ammunition sales. The report outlined the extent to which federal law regulates the sale of firearms via the Internet, which is not treated as legally distinct from sales not facilitated by the Internet. CRS noted that this situation has raised concerns about the possibility of increased violation of federal firearm laws and about challenges that law-enforcement agencies may face when attempting to investigate violations of these laws. Additionally, a prior report by an advocacy group explored how the Internet may facilitate firearm sales to prohibited individuals. However, the report described how prohibited individuals may use the Internet to find firearms for sale and then to conduct face-to-face transactions. The report did not demonstrate how prohibited individuals may have firearms mailed directly to them, thus circumventing the FFL purchase process, or otherwise break the law. Representatives from the investigative organization that performed this work stated that they did not break the law when performing their testing. As we noted above, there are no specific statutes or regulations pertaining to Internet firearms transactions. Hence, ATF does not distinguish between private firearms transactions taking place in person versus those that use the Internet to facilitate the sale. Licensed and nonlicensed sellers use the Internet to facilitate firearm sales in a variety of ways. Major retailers with a federal firearms license enable customers to browse available firearms on their websites but require transactions to be made in person at the store. Online retailers with a federal firearms license advertise firearms online and transfer the firearm to the purchaser through either a storefront that qualifies as an FFL or another FFL in the buyer’s state. Online auction and marketplace websites, online classifieds, and online forums also facilitate sales between buyers and both licensed and nonlicensed sellers. Depending on the website, potential buyers can search for firearms nationwide or narrowed down to city or zip code. According to ATF, searching capabilities can affect whether transactions among nonlicensed individuals are more likely to occur in person or through an FFL as well as the potential for illegal activity to occur. A private sale between two nonlicensed individuals would have an unlawful component if, for example, (1) the seller knows or has reasonable cause to believe that the buyer is legally prohibited from possessing firearms or is a resident of a different state; (2) the seller is engaged in the business of dealing in firearms without a license; or (3) the item is an NFA-restricted weapon. ATF officials who oversee Internet- related investigations said that it is not possible to monitor private firearms transactions coordinated over the Internet as they take place. Federal law does not require the seller in a private firearm transaction to conduct a background check or otherwise process paperwork through ATF. According to ATF officials, in 2012 the agency created a national center for Internet-related investigations, now known as the Internet Investigations Center (Center). ATF officials noted that, as an example of its activities, field agents who perform work involving the Internet will coordinate with the Center to ensure they have the necessary training to operate online in an undercover capacity. The Center has access to a variety of tools to facilitate Internet investigations. Much of the Center’s software that is used to analyze online content for investigations is free and open source. For example, according to ATF officials, using free open-source software allows analysts to glean information from public websites without violating users’ privacy rights. ATF officials stated that the Center investigates buyers and sellers who use the Internet to facilitate illegal firearms transactions. The officials with the Center noted that these investigations are generally reactive, meaning that the Center initiates them after receiving a tip or a request from a field agent. For example, in November 2014 the Center received a tip from a person who was selling firearms on an online firearms marketplace and was suspicious of a prospective buyer attempting to obtain a pistol without involving an FFL. The Center identified the prospective buyer and engaged in an undercover operation in which the individual agreed to provide the undercover agent with components designed to turn pistols and rifles into fully automatic firearms in exchange for a pistol and cash. The undercover agent and the buyer met in person and completed the transaction. ATF agents arrested the buyer at the scene, and he was later sentenced to 33 months in prison. ATF officials said the agency frequently receives tips about nonlicensed sellers engaging in the business of firearms. For example, ATF investigated a nonlicensed seller who posted more than 280 firearms for sale on multiple online firearms marketplaces; purchased at least 54 firearms; and sold at least 51 firearms at a profit. The seller, who was also found to have made straw purchases for other buyers, was sentenced in August 2010 to 2 years in prison. For additional examples of ATF enforcement actions involving sales facilitated by the Internet, please see appendix II. According to ATF officials, the Center also performs investigative work on the Dark Web, which requires knowledge of the Internet and investigative techniques. For example, ATF analysts must understand virtual currency, such as Bitcoin values. They must also know what sellers are charging for their products, because prices on the Dark Web “skyrocket” due to the criminal nature of the merchandise. In addition, the analysts learn common terms associated with firearm culture, in order to communicate with users engaged in criminal activity. ATF officials with the Center also noted that investigations might involve both the Surface Web and the Dark Web. For example, to identify an anonymous user on the Dark Web, the Center works to establish the user’s “digital footprint” on the Surface Web. In some cases, users might conduct illegal activity on the Dark Web but might then go to the Surface Web, such as a social-networking website with chat forums on a wide variety of topics, and discuss their illegal activity. From there, analysts can link the user to other social-media accounts, where the user may post a photo showing a street sign or other characteristics to help investigators narrow the user’s location. The ATF officials with the Center noted that posts on some websites contain meta-data, which includes geo-coding that helps the analysts identify where posts originated. ATF issued the Firearms and Internet Transactions Intelligence Assessment Report in April 2016 to provide information and analysis in the area of online firearm sales, including both legal and illegal transactions. The report highlighted several key findings about how firearm transactions are facilitated by the Internet. Specifically, the ATF analysis of the online marketplaces for firearms demonstrated the ease with which individuals can choose to circumvent the generally applicable law in this arena. Within the report, ATF detailed a market analysis of firearms transactions, including Surface Web and Dark Web marketplaces. Firearms transactions that occur on the Dark Web are more likely to be conducted in person or via the mail or common carrier, versus through an FFL. Additionally, the report noted that it appears that the price of a firearm increases as the transaction becomes more covert or when parties attempt to subvert laws and regulations. According to ATF staff, they plan to update the report when there is a significant shift in Internet gun trafficking. The ATF officials with the Center said they have not determined the frequency with which updated reports will be issued but they do not plan to update it annually. To enforce the NFA, GCA, and related firearms regulations, ATF carries out a variety of regulatory activities. For example, ATF monitors the firearms industry from manufacture and importation through retail sale. Specifically, ATF Industry Operations Investigators determine whether FFL applicants are qualified to engage in firearms commerce through routine inspections and regulatory oversight. Industry Operations Investigators also routinely inspect FFLs to ensure continued compliance with statutes and regulations. ATF officials stated that investigators conduct compliance inspections of FFLs—who must renew their licenses every 3 years. ATF conducts these inspections at least once during the 3- year licensing period. Additionally, ATF officials stated that as part of each inspection, officers will review all sales transactions an FFL has made in the last 12 months and analyze the data for aberrant patterns. Based on a review of DOJ Office of Inspector General documentation and our own observations during an FFL inspection, we determined that, during these inspections, ATF performs an inventory of the FFL’s firearms and checks it against the FFL’s inventory to ensure that firearm transactions reconcile with the firearm inventory; reviews the FFL’s records of background checks for purchases processed through NICS; checks the prior year’s Firearms Transaction Record forms, which document acquisition and disposition information that ATF uses to trace firearms involved in crimes; and reviews sales records to ensure that the FFL has recorded appropriate tax information. While ATF investigators routinely monitor firearms transactions of FFLs, the agency does not monitor private firearms transactions among nonlicensed individuals. As noted above, private sales among nonlicensed individuals who are residents of the same state are not subject to record-keeping or background-check requirements, so ATF does not have a means by which to monitor these sales as they take place. One aspect of the enforcement work undertaken by ATF agents is to investigate reports of individuals engaging in the business of dealing in firearms without a license. According to agency officials with the ATF Violent Crime Intelligence Unit, as part of these investigations, agents gather information about a suspect’s firearm transactions. On the basis of the activity detected, agents will determine whether the extent of the sales history is significant enough to warrant further action. In fiscal years 2014–2016, ATF made 322 arrests for engaging in the business of dealing in firearms without a license. These figures represent all arrests, as ATF does not identify or track whether transactions were facilitated by the Internet. During the same time, ATF also made 53 arrests for charges related to the unlawful interstate transfer of firearms, 204 arrests for charges related to the sale of firearms to a prohibited person, and 12,586 arrests for charges related to the possession of a firearm by a prohibited person. These arrests may include but are not limited to Internet-related investigations. According to documentation provided by ATF, 89 percent of the defendants in these arrests received a conviction. See table 1. Our agents successfully purchased two firearms from sellers we located on a Dark Web marketplace as a result of seven total attempts. ATF officials stated that the Dark Web is completely anonymous and is designed to facilitate criminal activity online. Further, an ATF report states that most used firearms are sold via the online auctions, online marketplaces, and on the Dark Web as compared to the Surface Web. In the seven attempts, our agents did not disclose any information indicating they were prohibited from possessing a firearm. In the five attempts where we did not ultimately purchase a firearm, the prospective seller stopped responding to our inquiries, stated the firearm was no longer for sale, refused to use an escrow account for payment, or experienced technical problems using the Dark Web marketplace. The first weapon that we purchased was an AR-15 rifle, which is a semiautomatic firearm. The serial number on the firearm was obliterated. The Dark Web seller shipped the dismantled weapon directly to the undercover address provided by our agent. It is unlawful for any person to possess or ship in interstate commerce a firearm which has had the importer’s or manufacturer’s serial number removed, obliterated, or altered, if the individual had such knowledge about the serial number. Additionally, because the firearm was shipped across state lines, the seller may not have been a resident of the same state as our agent. We did not confirm whether the seller notified the shipping company that the package contained a firearm. Any of these circumstances—removing a serial number, selling to a resident of a different state, or failing to properly notify the shipping company that the shipment contained a firearm—if proven, would likely violate federal law. A photo of the weapon can be seen in figure 3. The second weapon we purchased was an Uzi, which is an Israeli-made semiautomatic firearm, and was advertised as a fully automatic firearm. See photo in figure 4. If the firearm meets the NFA’s definition of a machine gun, the seller’s prior possession of the Uzi, and the shipment to our agent, likely violated federal law. Generally, only machine guns that were lawfully possessed prior to May 19, 1986, may continue to be possessed and transferred, with ATF approval, if they are registered in accordance with the NFA. We are referring information regarding our two Dark Web purchases to applicable law-enforcement agencies to inform any ongoing investigations for any further action they deem appropriate. Our covert testing involving GAO agents attempting to purchase firearms illegally on the Surface Web were unsuccessful. Specifically, private sellers on Surface Web gun forums and in classified ads were unwilling to sell a firearm to our agents that self-identified as being prohibited from possessing a firearm. In our 72 attempts to purchase firearms from private sellers on the Surface Web, 56 sellers refused to complete a transaction once we revealed that either the shipping address was across state lines or that we were prohibited by law from owning firearms. The scenarios we applied to the purchases were derived from provisions in the GCA. The five scenarios disclosed status information that would disqualify our agents from purchasing a firearm. For example, in one scenario we stated that we were a convicted felon; in another scenario, we informed the seller that we had a dishonorable discharge from the military. In these 56 attempts, 29 sellers refused because they would not ship a firearm and 27 refused after we presented the scenario. Furthermore, in five of these attempts, the accounts we set up on several forums were frozen by the websites, which prevented us from using them after we disclosed our prohibited status or requested interstate shipment and attempted to make a purchase. In the 11 remaining attempts, we encountered private sellers that appeared to have scammed us, or attempted to scam us, after we disclosed our prohibited status or asked to avoid using an FFL. In two of these instances, we made a payment and never received the firearm or a refund. In the remaining nine attempted scams, our agents determined that the seller may not be legitimate and therefore did not complete the purchase. For example, in one attempt, the agent conducted investigative research on the seller and found evidence suggesting that the seller may be involved in online fraud. As a result, the agent did not follow through with the purchase attempt. ATF does not have jurisdiction over fraud cases so, when it encounters such circumstances, the agency may refer the case to the Joint Support and Operations Center or to local or state law-enforcement agencies or may encourage the victim to file a police report. The results of our attempts on the Surface Web are summarized in figure 5. We provided a draft of this report to ATF and DOJ on October 31, 2017, for review and comment. ATF provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Deputy Director of ATF and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Seto Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov, or Wayne McElrath at (202) 512-2905 or mcelrathw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. For our covert attempts to buy firearms on the Internet, we performed tests on both the Dark Web and the Surface Web to compare and contrast how transactions are completed. For the tests, our agents employed undercover identities and accessed online marketplaces where firearms were advertised for sale. In both Dark Web and Surface Web testing, the agents contacted sellers that posted ads online, and attempted to complete firearm purchases. For our testing, we did not proactively attempt to purchase firearms from Federal Firearm Licensees (FFL), focusing our efforts on private sellers. We counted an attempt as successful if we received a firearm. We counted an attempt as a failure if we contacted the seller and expressed interest in purchasing the advertised firearm and the seller refused to complete the purchase, or if the seller failed to respond after initial contact was made. In some instances on the Surface Web, after we contacted a seller and described our prohibited status, we were “banned,” or prohibited from accessing the gun forum or classified ad website. Additionally, in two instances, our agents were apparently “scammed” in that we remitted payment for a firearm we did not receive, or our agents otherwise identified indicators that the firearm would not be shipped. The results of our testing are for illustrative purposes only and are not generalizable. Prior to beginning our testing, to understand how prohibited individuals may use the Internet to purchase firearms or firearm components, we reviewed Department of Justice (DOJ) and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) published reports, including adjudicated criminal cases. We also met with third-party groups with knowledge of the firearms industry, including state law-enforcement agencies, a purveyor of commercial website that host online firearm classified advertisements, a gun-control advocacy group, a firearm-industry organization, and an academic research center, to learn about online firearm marketplaces, criminal pathways to illegally purchase or sell firearms, and enforcement responses. Additionally, we reviewed reports by a gun-control advocacy group to understand how prior similar work in this area was performed. We learned through our review and our subsequent interviews with individuals who performed this work that no federal laws were broken when this testing was conducted. Accordingly, to demonstrate how the Internet may facilitate illegal firearm transactions, we decided our agents would complete the firearm purchases. Agents also accessed firearm advertisements on a Dark Web marketplace and attempted to purchase firearms or firearm components from nonlicensed private sellers. Agents focused on one Dark Web marketplace for this stage of testing. Our agents performed a preliminary test to assess the feasibility of purchasing a firearm on the Dark Web. This attempt was successful, so our agents proceeded with additional planned attempts to purchase additional firearms on the Dark Web. Testing ended once a firearm was successfully purchased and received by our agents, with a total of seven attempts completed. For these covert tests, we did not disclose any information about our presumed prohibited status. We also focused our efforts on purchasing a firearm that appeared to be restricted by the National Firearms Act of 1934 (NFA). To perform Surface Web testing, our agents accessed public gun forums and other classified ads where private nonlicensed sellers listed firearms for sale. These forums and classified ads were identified from our meetings with ATF and third-party entities, and a review of available documentation. We considered the following factors when selecting online classified websites: hosted nationwide or regional ads, quantity of ads, variety of firearms available, and accessibility of website. Recently posted ads on these sites were selected if they fell within a designated price range, and were for transactions between private nonlicensed individuals. The purpose of our Surface Web purchase attempts was to determine whether private sellers would knowingly sell a firearm to an individual prohibited from possessing one, as outlined by the Gun Control Act of 1968 (GCA). Our agents used one of five scenarios based on a provision of the GCA when attempting to purchase a firearm. The scenarios involved overtly explaining why our agent was prohibited from possessing a firearm. The scenarios based on the GCA covered the following: a felon avoiding a background check, an individual with a domestic-violence background or a restraining order against him or her, an individual who unlawfully uses controlled substances (or is an an individual who was dishonorably discharged from the military, and an individual who has renounced his or her citizenship or is otherwise an unlawful alien. Before we began testing, we determined that we would run each scenario iteratively until we successfully completed a purchase, we exhausted the number of applicable ads, or we capped out our predetermined cap of 15 purchase attempts, with a total of 75 attempts to be made in total. However, due to investigative decisions, we only employed 72 attempts. We conducted this performance audit from July 2015 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work in accordance with the standards prescribed by the Council of the Inspectors General on Integrity and Efficiency. As noted above, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) does not track statistics on firearm enforcement actions that involve illegal transactions facilitated by the Internet. However, ATF officials provided several examples of closed, adjudicated cases where the agency took enforcement action against individuals who were using the Internet to facilitate illegal transactions. The following summaries provide examples of the type of investigative and enforcement work ATF agents perform: One individual was indicted in February 2015 for being a felon in possession of firearms and for possessing a machine gun. In November 2014, ATF’s Internet Investigation Center (the Center) received a tip from the ATF Tip Line; a legitimate seller was suspicious of a buyer who was attempting to obtain a firearm without involving a Federal Firearm Licensee (FFL) and suggested the seller could obliterate the serial numbers. The Center identified the prospective buyer as a convicted felon. The individual agreed to provide the undercover agent with a Glock auto sear—which, when attached to a firearm makes it a fully automatic weapon—and firearm components that could be used to transform an M-16 style rifle into a machine gun. In exchange, the undercover agent would provide the individual with a Glock pistol and $300 cash. The individual and an undercover agent completed the transaction and the individual was immediately arrested. The individual’s criminal history included a recent prior felony gun-possession conviction. The individual pleaded guilty to being a felon in possession of a firearm and to the illegal transfer or possession of a machine gun, and was sentenced to 33 months imprisonment and 36 months of supervised release. In 2009, one individual was indicted on six counts of federal criminal violations, including one count for engaging in the business of firearms without a license. According to the indictment, from approximately January 1, 2005, to May 8, 2008, while serving as an FBI agent, the individual purchased multiple firearms from various sources including private sellers, local stores, and sellers he dealt with over the Internet. He posted at least 280 firearms for sale on a legitimate firearm website, some of which were multiple listings of the same item in the event that interested bidders did not meet his target price. During this period, he purchased at least 54 firearms and sold at least 51 firearms. He profited from all the sales, collecting more than $118,000 in gross receipts. The individual was also indicted on four counts of causing a firearms dealer to maintain false records, which related to his purchasing firearms for third parties (straw purchases). In addition, the individual was indicted on one count of providing ATF with a false document listing the firearms he bought and sold; agents recovered a more-extensive and more-descriptive list. The individual was found guilty on all counts in April 2010, and was sentenced in August 2010 to 2 years in federal prison. According to an affidavit from an ATF Special Agent, an individual offered silencers, pistols, and rifles for sale on the Dark Web, as well as nationwide shipping. The ATF Center “proactively targeted” the individual’s vendor name “through various methods of analysis,” identified numerous Internet forum and social-media profiles associated with the individual, and ultimately discovered his true identity. The Center referred “an investigative lead” and the corresponding evidence and analysis to the respective ATF Field Division. According to the affidavit, the Special Agent conducted a controlled purchase through one of the Dark Web marketplaces, reviewed U.S. Postal Service security video and observed the individual mail the firearm, and executed arrest and search warrants. The individual pled guilty to one count of causing a firearm silencer to be delivered by the U.S. Postal Service without proper notification, and was sentenced to 6 months in federal prison and 3 years of supervised release. In October 2013, an individual was indicted for illegal exportation, shipment, and delivery of firearms and firearm components that were sold on a Dark Web site. The man shipped a handgun concealed in a video game system to a buyer in Sydney, Australia. Australian Federal Police intercepted the package and alerted ATF, which began an investigation. During the investigation, the individual shipped a 9 mm pistol with an obliterated serial number to the United Kingdom, various assault-rifle parts to Australia, and a .22-caliber pistol with an obliterated serial number and a weapon magazine to Sweden. Each firearm was disassembled and concealed in a broken electronic device. The individual pleaded guilty and was sentenced to 2 years imprisonment and 2 years of supervised release. In February 2015, an individual was indicted for dealing in firearms without a license and selling firearms to residents of other states. The individual sold firearms via two Dark Web sites and shipped them to buyers in the United States and internationally. In an attempt to hide his identity, the man placed false return-address labels on the packages, used aliases to send the packages, and packed the firearms so that they appeared to be computer hard drives. The individuals agreed to sell handguns to undercover ATF agents posing as gun buyers and then shipped the guns from Alabama to Nebraska and New Jersey. The individual was found guilty and sentenced in November 2015 to 51 months in prison and 36 months supervised release. In addition to the contact named above, Dave Bruno (Assistant Director), Dean Campbell, Julia DiPonio, Robert Graves, and Kristen Timko made key contributions to this report. Other contributors include Marcus Corbin, Colin Fallon, Maria McMullen, James Murphy, Anna Maria Ortiz, Julie Spetz, and Helina Wong.", "summary": "The current federal legal framework governing buying and selling of firearms does not specifically address the use of the Internet to facilitate these transactions. Additionally, private transactions involving the most-common types of firearms between individuals who are not licensed to commercially sell weapons and who are residents of the same state, including transactions facilitated by the Internet, are generally not subject to federal background-check requirements. Congressional requesters asked that GAO assess the extent to which ATF is enforcing existing laws and investigate whether online private sellers sell firearms to people who are not allowed or eligible to possess a firearm. This report describes (1) techniques ATF uses to investigate and enforce generally applicable firearm laws in instances where the firearm or firearm-component transaction is facilitated by the Internet and (2) results of GAO's undercover attempts to buy firearms on the Dark Web and Surface Web. GAO analyzed documents and interviewed officials to identify actions ATF has taken to prohibit illegal firearm transactions. GAO also attempted to purchase firearms from Dark Web and Surface Web marketplaces. The results of the testing are illustrative and nongeneralizable. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is responsible for investigating criminal and regulatory violations of firearms statutes and regulations that govern firearms transactions, including sales that are facilitated by the Internet. Two components of the Internet may be used to facilitate Internet firearm sales: the Surface Web and the Dark Web. The Surface Web is searchable with standard web search engines. The Dark Web contains content that has been intentionally concealed and requires specific computer software to gain access. ATF created the Internet Investigations Center (Center) to investigate buyers and sellers who use the Internet to facilitate illegal firearms transactions. The Center uses several tools to provide investigative support to ATF, which has resulted in the arrests of individuals using the Internet to facilitate illegal firearm purchases. ATF officials with the Center also noted that investigations might involve both the Surface Web and the Dark Web. For example, to identify an anonymous user on the Dark Web, the Center works to establish a user's “digital footprint” on the Surface Web. In 2016, the Center also issued a report about Internet firearm transactions. This and other ATF reports highlighted the following about Internet-facilitated firearm transactions: The relative anonymity of the Internet makes it an ideal means for prohibited individuals to obtain illegal firearms. The more anonymity employed by a firearms purchaser, the greater the likelihood that the transaction violates federal law. Firearm transactions that occur on the Dark Web are more likely to be completed in person or via the mail or common carrier, versus through a Federal Firearm Licensee. GAO agents attempted to purchase firearms from Dark Web and Surface Web marketplaces. Agents made seven attempts to purchase firearms on the Dark Web. In these attempts, agents did not disclose any information about whether they were prohibited from possessing a firearm. Of these seven attempts, two on a Dark Web marketplace were successful. Specifically, GAO agents purchased and received an AR-15 rifle and an Uzi that the seller said was modified so that it would fire automatically. GAO provided referral letters to applicable law-enforcement agencies for these purchases to inform any ongoing investigations. Tests performed on the Surface Web demonstrated that private sellers GAO contacted on gun forums and other classified ads were unwilling to sell a firearm to an individual who appeared to be prohibited from possessing a firearm. Of the 72 attempts agents made to purchase firearms on the Surface Web, 56 sellers refused to complete a transaction: 29 sellers stated they would not ship a firearm and 27 refused after the disclosure of the undercover identities' stated prohibited status. Furthermore, in 5 of these 72 attempts, the accounts GAO set up were frozen by the websites, which prevented the agents from using the forums and attempting to make a purchase. GAO is not making recommendations in this report. ATF provided technical comments, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "To be eligible for the Job Corps program, an individual must generally be 16 to 24 years old at the time of enrollment; be low income; and have an additional barrier to education and employment, such as being homeless, a high school dropout, or in foster care. See table 1 for characteristics of students served by Job Corps during program year 2016. Once enrolled in the program, youth are assigned to a specific Job Corps center, usually one located nearest their home and which offers a job training program of interest. The vast majority of students live at Job Corps centers in a residential setting, while the remaining students commute daily from their homes to their respective centers. This residential structure is unique among federal youth programs and enables Job Corps to provide a comprehensive array of services, including housing, meals, clothing, academic instruction, and job training. In program year 2016, about 16,000 students received a high school equivalency and about 28,000 students completed a career technical training program, according to ETA officials. ETA administers Job Corps’ 123 centers through its national Office of Job Corps under the leadership of a national director and a field network of six regional offices located in Atlanta, Boston, Chicago, Dallas, Philadelphia, and San Francisco (see fig. 1). Job Corps is operated primarily through contracts, which according to ETA officials, is unique among ETA’s employment and training programs (other such programs are generally operated through grants to states). Among the 123 centers, 98 are operated under contracts with large and small businesses, nonprofit organizations, and Native American tribes. The remaining 25 centers (called Civilian Conservation Centers) are operated by the U.S. Department of Agriculture’s (USDA) Forest Service through an interagency agreement with DOL. Job Corps center contractors and the USDA Forest Service employ center staff who provide program services to students. The President’s fiscal year 2019 budget seeks to end USDA’s role in the program, thereby unifying responsibility under DOL. The Administration reported that it was proposing this action because workforce development is not a core mission of USDA, and the 25 centers it operates are overrepresented in the lowest performing cohort of centers. According to ETA officials, the Office of Job Corps has oversight and monitoring responsibility to ensure that center operators follow Job Corps’ Policy and Requirements Handbook, including the safety and security provisions. Job Corps regional office staff are largely responsible for these duties. Job Corps’ Policy and Requirements Handbook requires centers to report certain significant incidents to the national Office of Job Corps and to regional offices using SIRS. Centers are required to report numerous categories of incidents, including assaults, alcohol and drug-related incidents, and serious illnesses and injuries (see appendix II for definitions of these categories of incidents). Within the Policy and Requirements Handbook, ETA establishes student standards of conduct that specify actions centers must take in response to certain incidents. In some cases, the incident categories in SIRS are related to the specific infractions defined in the Policy and Requirements Handbook, which are classified according to their level of severity. Level I infractions are the most serious, and includes infractions such as arrest for a felony or violent misdemeanor or possession of a weapon, and are required to be reported in SIRS. Level II includes infractions such as possession of a potentially dangerous item like a box cutter, or arrest for a non-violent misdemeanor. The majority of these infractions are required to be reported in SIRS. Minor infractions—the lowest level—include failure to follow center rules, and are not required to be reported in SIRS. Centers must report incidents involving both Job Corps students and staff, and incidents that occur onsite at centers as well as those that occur at offsite locations. According to ETA officials, the agency and its center operators must take steps to protect the safety and security of Job Corps students when students are under Job Corps supervision. Students are under Job Corps supervision when they are onsite at Job Corps centers and when they are offsite and engaged in center-sponsored activities, such as work-based learning or community service. According to ETA officials, the agency and its contractors are not responsible for protecting the safety and security of Job Corps students when students are offsite and not under Job Corps supervision, such as when students are at home on leave. However, when offsite safety and security incidents of any type occur, Job Corps center operators are responsible for enforcing the student conduct policy. For example, if a student is arrested for a felony offsite while not under Job Corps supervision, the arrest may result in a Level I infraction and dismissal from the program. Since 2002, ETA used its student satisfaction survey to periodically obtain views from enrolled Job Corps students on various aspects of the program, including career development services, interactions between students and staff, access to alcohol and drugs, and overall satisfaction with the program. The survey of 49 questions has remained the same over time and included 12 questions on students’ perceptions of safety and security at centers. ETA used the responses to the 12 safety-related survey questions to calculate a center safety rating, which represented the percentage of Job Corps students who reported feeling safe at each center, as well as a national safety rating, which represented the percentage of Job Corps students who reported feeling safe nationwide. ETA officials said they used these ratings to assess students’ perceptions of safety at individual centers and nationwide, to monitor and evaluate center operators, and to determine whether ETA needed to take action to better address students’ safety and security concerns. In 2018, ETA will pilot a stand-alone survey for safety related topics and remove the safety questions from the student satisfaction survey. Our analysis of ETA’s data from the Significant Incident Reporting System (SIRS) showed that Job Corps centers reported 13,673 safety and security incidents involving students, including those that occurred both onsite and offsite, in program year 2016. During this time period (July 1, 2016, through June 30, 2017), approximately 79,000 students were served by the program, according to ETA officials. Drug-related incidents (29 percent) and assaults (19 percent) accounted for 48 percent of all reported incidents involving students. The remaining 52 percent of reported incidents involving students included breaches of security and safety (12 percent), alcohol-related incidents (6 percent), serious illness and injury (6 percent), theft or damage to property (5 percent), danger to self or others (5 percent), and all other types of incidents (18 percent) (see fig. 2). According to ETA officials, about half of the 3,926 drug- related incidents are due to positive drug test results among students that are administered drug tests about 40 days after entering the program. We found that about 20 percent of reported onsite and offsite incidents in program year 2016 were of a violent nature, which we define as homicides, sexual assaults, and assaults. There were two reported homicide incidents in program year 2016 and both occurred while students were offsite and not under Job Corps supervision. Also, centers reported 177 sexual assaults and 2,593 assaults involving students during program year 2016. For each reported sexual assault and assault, SIRS provides an additional description of the incident (see table 2). In our June 2017 testimony, we stated that 49,836 onsite and offsite safety and security incidents of various types were reported by Job Corps centers between January 1, 2007, and June 30, 2016, based on our preliminary analysis of ETA’s SIRS data. We cannot compare our analysis of safety and security incidents in our June 2017 testimony to the analysis contained in this report for program year 2016 due to a policy change by ETA beginning July 1, 2016, which affected the categorization and number of reportable incidents. Specifically, ETA changed the way some incidents are defined, and required that some incidents be reported in SIRS that previously had no such requirement. Anecdotally, officials from one ETA regional office and two Job Corps centers that we visited said that the number of reported incidents has increased since July 1, 2016, due to these changes. In its December 2017 report, the DOL OIG compared the number of safety and security incidents reported to the OIG for the same 8-month periods in 2016 and 2017 and found an increase of 134 percent. According to the DOL OIG, this increase is likely due to more accurate incident reporting as a result of the recent policy change. In addition, the DOL OIG said an actual increase in incidents is also possible. Our analysis of SIRS data found that in program year 2016, 90 percent of the 13,673 reported safety and security incidents involving students occurred onsite at Job Corps centers, and 10 percent occurred at offsite locations (see fig. 3). For example, 99 percent of drug-related incidents, 96 percent of assault incidents, and 84 percent of alcohol-related incidents occurred onsite. While most reported incidents occurred onsite, our analysis showed that the majority of reported arrests, deaths, and motor vehicle accidents occurred offsite. For example, of the 21 student deaths,18 occurred at offsite locations and 3 occurred onsite. In our June 2017 testimony, we reported that from January 1, 2007, through June 30, 2016, 76 percent of the reported safety and security incidents occurred onsite at Job Corps centers, and 24 percent occurred at offsite locations based on our preliminary analysis of ETA’s SIRS data. However, as previously noted, that analysis is not comparable to the analysis in this report for program year 2016 due to ETA’s July 1, 2016, policy change that impacted the categorization and number of reportable incidents. We analyzed the 1,406 incidents of 13,673 total reported incidents that were reported to have taken place offsite in program year 2016 to determine if the students involved were on duty (i.e., under Job Corps supervision) or off duty (i.e., not under Job Corps supervision). We found that for offsite incidents, similar percentages of student victims and perpetrators were on duty and off duty. Specifically, we found that 50 percent of student victims were on duty, 44 percent were off duty, and we were unable to determine the duty status of 6 percent. For student perpetrators, we found that 45 percent of students were on duty, 45 percent were off duty, and we were unable to determine the duty status of 10 percent. Some types of reported incidents occurred more frequently when students were offsite and off duty. For example, of the reported arrest incidents that occurred offsite, 76 percent of student perpetrators were off duty. Of the reported death-related incidents that occurred offsite, student duty status was reported as off duty for 16 of 18 incidents. We were unable to determine the duty status for all students involved in offsite incidents due to inconsistencies in ETA’s data. Of the 1,406 offsite incidents reported in SIRS, there were 178 instances in which a student’s duty status location conflicted with the incident location. For example, the student’s duty status was listed as onsite and on duty, but the incident location was listed as offsite. We asked ETA officials why these inconsistencies existed and they were unable to explain all instances in which these inconsistencies occurred. ETA officials did state, however, that these inconsistences can sometimes occur when centers enter information in SIRS based on the student’s duty status at the time the incident report is completed instead of the student’s duty status at the time the incident occurred. Due to this data limitation, we were unable to determine if the 178 students involved in those incidents were on duty or off duty. We analyzed SIRS data to determine the characteristics of students involved in reported safety and security incidents and found that about 17,000 students were reported as victims or perpetrators of all onsite and offsite incidents in program year 2016. The total number of students reported as victims or perpetrators is 22 percent of the students served in program year 2016. The number of student victims and perpetrators varied across incident types (see fig. 4). In program year 2016, we found that about 5,000 students (6 percent of students served) were reported as victims of various types of onsite and offsite incidents. We separately examined the gender, age, and enrollment time of reported student victims and found that for all reported incidents the majority of student victims were male, under age 20, and enrolled in Job Corps for less than 4 months (see fig. 5). These characteristics are somewhat similar to the overall Job Corps student population, which is primarily male and under age 20, as previously noted. For example, 65 percent of reported assault victims and 73 percent of reported theft victims were male. However, the number of female victims exceeded the number of male victims within some reported incident categories, such as sexual assault, inappropriate sexual behavior, and missing persons. Students under age 20 were victims of 67 percent of reported assault incidents and 63 percent of danger to self or others incidents. According to ETA officials, 18 percent of students served in program year 2016 were enrolled for less than 4 months; however, across all reported incidents 56 percent of student victims were enrolled for less than 4 months. For example, about 60 percent of student victims of reported assault and danger to self or other incidents were enrolled in Job Corps for less than 4 months. Our analysis of SIRS data shows that about 13,000 students (17 percent of students served) were reported as perpetrators of various types of onsite and offsite incidents in program year 2016. The most commonly reported incidents—drug-related and assaults—also had the highest numbers of student perpetrators. We found that 6 percent and 5 percent of students served in program year 2016 were perpetrators of reported drug-related and assault incidents, respectively. Similar to our analysis of student victims, we separately examined student characteristics and found that the majority of reported student perpetrators of all reported incidents were male, under age 20, and enrolled in Job Corps for less than 4 months (see fig. 6). Our analysis of ETA’s student satisfaction survey data from program year 2016 showed that while students generally reported feeling safe at Job Corps centers, a smaller proportion reported feeling safe in certain situations. ETA considers students to feel safe if they provide certain responses to each of the 12 safety-related survey questions, some of which are phrased as statements. For example, if a student provided a response of “mostly false” or “very false” to the statement “I thought about leaving Job Corps because of a personal safety concern,” that student would be counted as feeling safe on that survey question. On 6 of the 12 safety-related survey questions in program year 2016, at least 70 percent of responding students indicated that they felt safe (see table 3). For example, 74 percent of students responded that they did not ever or in the last month carry a weapon, and 83 percent of students responded that it was very or mostly true that a student would be terminated from Job Corps for having a weapon at the center. These are responses that ETA considered to indicate feeling safe. At the two centers we visited, students that we interviewed said that they felt safe onsite at their center. For example, students at one center said that they felt safe because absolutely no weapons, fighting, or drugs were allowed at the center. A smaller number of students reported feeling safe on questions that dealt with hearing threats or hearing things from other students that made them feel unimportant. For example, 36 percent of students reported they had not ever or in the last month heard a student threaten another student at the center, which is considered safe according to ETA policy. Meanwhile, 49 percent reported that they had heard a student threaten another student at least once in the last month, and ETA considered these responses to indicate that students felt unsafe. Another 15 percent chose “don’t know / does not apply.” On another question, 53 percent of students reported that other students had not ever or in the last month said things that made them feel like they were not important, which ETA considered as feeling safe. Yet 30 percent reported that others made them feel unimportant at least once in the last month—which ETA considered as feeling unsafe—and 17 percent chose “don’t know / does not apply.” In response to a question about the student conduct policy, 35 percent of students indicated that the policy was not applied equally to all students. At the two centers we visited, students that we interviewed had varying views on applying the student conduct policy. Students from one center said that staff have applied the policy in a fair way. Yet at another center, students told us that they have occasionally perceived that staff have not applied the student conduct policy fairly. They mentioned that they were aware of favoritism in a few recent incidents when staff applied the policy’s disciplinary consequences for certain students but not others. For example, they said that a student they perceived as the perpetrator remained in Job Corps while a student they perceived as innocent was dismissed. Our June 2017 testimony contained similar observations about students’ perceptions of their safety, with students generally reporting that they felt safe at their Job Corps centers. For example, most students reported feeling safe because a student found with a weapon at the center would be terminated. In that testimony, we also noted that students reported feeling less safe on such questions as hearing threats or applying the student conduct policy. In addition to the 12 safety-related questions, we examined data on the 2 questions about access to alcohol or drugs, and found that almost two- thirds of survey respondents said that it was mostly or very false that they could access alcohol or drugs at their Job Corps center. Although a large number of reported incidents in program year 2016 involved drugs or alcohol, less than 15 percent of survey respondents said that it was mostly or very true that they could access alcohol or drugs at their Job Corps center. Based on students’ responses to the 12 safety-related questions, ETA determined that 88 percent of students indicated that they felt safe in program year 2016. ETA calculated its national measure of safety— referred to as a safety rating—to summarize and track students’ perceptions of their safety and to determine the need for additional action, as noted previously. Similarly, it calculated a safety measure for each center. However, we calculated a national measure differently and found that an average of 73 percent of students reported feeling safe in program year 2016. Our national measure reflected the average of how safe each student felt on the 12 safety-related survey questions. We estimated that one key difference accounted for about 11 of the 15 percentage points between our and ETA’s measure. (See table 7 in appendix I.) Specifically, we calculated our measure based on a numeric average for each student without rounding. For example, if a student answered all 12 safety questions with 6 responses that he felt safe and another 6 that he felt unsafe, we counted this student as half safe (0.5). Meanwhile, ETA rounded the average to either safe or unsafe, so that ETA counted a student with 6 safe responses and 6 unsafe responses as feeling safe. In addition to differences in calculations, we developed our own national measure of safety because it is important to assess and track students’ perceptions for the program as a whole, as ETA has noted. Also, a national measure facilitates analysis of groups of students, such as male or female students or younger or older students, as described below. We examined whether our national measure differed by age, gender, time in program, center size, or operator type and found statistically significant and meaningful differences in our national measure by students’ length of time in the program. In particular, an average of 78 percent of students in the program for less than 4 months responded that they felt safe, compared to an average of 71 percent for students in the program for at least 4 months. According to ETA officials, differences in responses based on length of time in the program may relate to new students being less aware about life at the center because they begin the program with other newly arrived students for up to 2 months. For example, ETA officials said that new students may live in a dormitory specifically for new students. Thus, they are not yet fully integrated into the larger student body. Although differences were also statistically significant between age groups, center size, and operator type, such differences were not meaningful in a practical manner (i.e., around 3 percentage points or less). Differences in our national measure by gender were not statistically significant. When we analyzed the survey’s separate question about overall satisfaction with Job Corps, we found that students who reported they were satisfied with the Job Corps program responded that they felt safer than students who were not satisfied. In program year 2016, about two- thirds of students said it was very or mostly true that they would recommend Job Corps to a friend, which ETA uses to gauge overall satisfaction with the program. Of the 65 percent of students who would recommend Job Corps to a friend, 79 percent said they felt safe. Of the 11 percent of students who would not recommend Job Corps to a friend, 52 percent felt safe. ETA officials said that the agency is creating a new expanded safety survey to improve upon the prior survey. With Job Corps’ heightened attention to safety and security, the new survey—the Student Safety Assessment—is focused solely on safety and security issues and is designed to provide more timely and more detailed information. More timely information. ETA plans to administer the new safety survey monthly to a random sample of students rather than twice per year to all enrolled students. Also, it will be web-based, rather than the current paper-based survey. As a result, ETA officials said that they will receive more timely information from students because it will take less time to administer the survey and analyze the responses. More detailed information. The number of questions about center safety will increase from 12 to about 50—pending finalization of the survey—which is about the same number of questions on the current student satisfaction survey. For example, the new questions will ask about sexual assaults and harassment or the types of drugs bought or used at the center, which were not topics covered by the prior survey. ETA continues to work with its contractor with survey expertise to develop, test, and administer the new survey in 2018, according to ETA officials. To develop the new survey, ETA and its contractor have considered, incorporated, and revised questions from other existing surveys. For example, they have drawn from safety surveys of teenage students and postsecondary students. ETA plans to continue developing and refining the survey and its administration in 2018, including conducting monthly pilots from January to June 2018, assessing response rates, and developing a new way to calculate national and center-level safety measures. Additionally, ETA officials said that, in 2018, they will seek to obtain comments and approval on the survey from the Office of Management and Budget. ETA officials told us that they plan to administer the new survey nationally by January 2019. As ETA refines and administers this new survey, officials told us they plan to develop a new way to measure student safety based on the more detailed survey. In 2014, ETA launched multiple actions to improve safety and security at Job Corps centers in response to DOL OIG recommendations (see table 4). For example, in 2015 the DOL OIG found ETA’s oversight of Job Corps centers ineffective, in part, because ETA’s student conduct policy excluded some violent offenses. As a result, ETA revised its student conduct policy by elevating several infractions previously classified as Level II to Level I (the most severe) and by adding several new categories of reportable incidents. Under the revised student conduct policy, assault, a Level I infraction, now includes fighting, which was previously a Level II infraction. In addition, the DOL OIG found that ETA did not monitor centers regularly enough to ensure center consistency in administering Job Corps disciplinary policies. In response, ETA implemented a risk- based monitoring strategy that identifies potential safety and security issues before they occur. Staff from five ETA regional offices and at one Job Corps center we visited said that ETA’s actions overall helped to improve center safety and security. For example, staff from five regional offices said that the changes to the student conduct policy that were implemented in July 2016 clearly describe the penalties for infractions and eliminate grey areas that previously allowed center staff to use their professional judgement. Staff from four regional offices also said these changes resulted in tradeoffs that reduced center staff discretion in imposing penalties. In addition, at one center we visited, the Director of Safety and Security told us he updated the center’s security-related standard operating procedures in response to ETA’s guidance. ETA’s guidance was part of the 2017 updates to the Policy and Requirements Handbook in response to DOL OIG concerns about reporting potentially serious criminal misconduct to law enforcement. ETA national officials said that the new risk-based monitoring strategy has improved center monitoring because it has allowed them to more effectively direct resources to areas of greatest need. Officials in five ETA regional offices agreed that the new strategy improved their ability to monitor centers. The new monitoring strategy shifted the focus from addressing problems after they have occurred to a data-driven strategy that tracks center performance and identifies emerging problems. This strategy provides ETA and center operators an opportunity to address problems before they occur, according to ETA national officials. For example, the new monitoring strategy features new tools, including the Risk Management Dashboard. The dashboard is a summary analysis tool that conducts trend analysis using center data and allows regional staff to engage in targeted interventions at centers with potential safety and security concerns. In addition, under the new monitoring strategy, instead of only conducting scheduled monitoring visits to a center at set times, regional staff conduct unannounced visits based on data indicating a decline in center performance or other triggers. See appendix VI for additional information on the new monitoring strategy. Although the new risk-based monitoring strategy has improved center monitoring, it is not consistently implemented across regional offices, according to ETA national officials. They told us that similar problems identified at centers may be treated with different levels of focus or intensity from one region to another. In addition, national and regional officials told us that regional office staff have relied on professional judgment to determine the appropriate response to centers that may be at risk of noncompliance with safety and security policies, which could lead to inconsistencies. For example, when problems are identified at centers, the type of assessment to conduct is left to regional office staff discretion. As a result, staff in one region may decide that the most comprehensive assessment, the Regional Office Center Assessment, is needed, while another region’s staff would select a targeted assessment, which is more limited in scope. ETA national officials said that although each determination could be justified based on resource constraints and competing priorities, they would like to increase implementation consistency in this area. To address regional inconsistencies, ETA national and regional office staff said that guidance in the form of standard operating procedures (SOP) would be helpful. These procedures would promote consistency in how policies are interpreted and applied and would help ensure that centers are held to the same standards, according to ETA national officials. For example, SOPs could specify which type of assessment to conduct in response to specific problems identified at centers. Internal control standards state that managers should document in policies each unit’s responsibility for an operational process. Regional office staff said that they previously had a helpful tool, the Program Assessment Guide, that linked policies in the Policy and Requirements Handbook to the monitoring assessment process. Regional office staff said they used the Program Assessment Guide to prepare for center monitoring visits and it was a helpful training tool for new staff. Our review of ETA documentation found that the Program Assessment Guide included specific questions to ask center staff about how they meet safety and security requirements and suggested where to look for information to determine center compliance with policies. However, the Program Assessment Guide, which has not been updated since 2013, does not include recent changes to the Policy and Requirements Handbook, such as the updated student conduct policy. ETA national officials told us that limited staffing has made it difficult to update the Program Assessment Guide as frequently as changes are made to the Policy and Requirements Handbook. In February 2018, ETA national officials told us they plan to issue a variety of SOPs related to monitoring center safety and security issues (see table 5). ETA officials initially said these SOPs would be completed in August or November 2018 and later revised its plans with a goal of completing all SOPs by August 2018. However, in August 2017, ETA officials had told the DOL OIG that these SOPs would be completed in the March to July 2018 timeframe. ETA officials said that a staffing shortage in the Office of Job Corps’ Division of Regional Operations and Program Integrity delayed development of the SOPs. This Division— established in 2015 to coordinate regional operations and strengthen communications and quality assurance—includes eight staff positions; however, as of January 2018, the Division has two staff members on board. ETA officials said that they have not yet received departmental approval to fill the six vacant positions in the Division. Given this uncertainty, it is questionable whether ETA’s revised timeframes will be met. Without SOPs or other relevant guidance, ETA cannot ensure that monitoring for center safety and security will be carried out uniformly across the program. As a result, centers may be held to different standards, and the program may not achieve its center safety and security goals. In addition to inconsistencies in monitoring and a lack of sufficient guidance, staff in all six regional offices told us that components of ETA’s risk-based monitoring strategy created reporting overlaps. As part of the new monitoring strategy, regional staff have additional reports that they complete—such as the Risk Management Dashboard Action report and Corrective Action Tracker—about potential safety and security problems or actual violations found at centers. Some regional staff said the desk monitoring report includes similar information to the Risk Management Dashboard and Corrective Action Tracker reports, which regional offices submit to the ETA national office. Staff in one regional office said that they enter the same information about the status of center safety and security violations multiple times on the Corrective Action Tracker because the time between reporting periods is too short to allow for meaningful action to be taken. Staff from four regional offices said completing duplicative reports reduces time that could be used to conduct additional center monitoring, such as onsite visits, or to perform other key duties. ETA national officials disagreed that overlap exists among monitoring reports. They said that although reports may appear to overlap, the reports are complementary and not duplicative, and are used at different points in the monitoring process (see fig. 7 for an overview of ETA’s monitoring process). For example, ETA national staff told us that desk monitoring reports are primarily used by regional staff at the beginning of the monitoring process to identify potential problems and are not substantially reviewed by the national office. ETA national officials also said that the Risk Management Dashboard report is used at the beginning of the monitoring process to identify problems, whereas the Corrective Action Tracker is used later in the process after violations have been identified and corrective actions have been planned to bring the center back into compliance. In addition, ETA national officials also noted that regional staff are not asked to complete all reports every month. For example, regional staff complete a Risk Management Dashboard Action report only for those centers with potential safety and security concerns. We compared the information included in five monitoring reports—the Center Culture and Safety Assessment, Corrective Action Tracker, Desk Audit, Regional Office Center Assessment, and Risk Management Dashboard Action report—and found opportunities for streamlining. For example, we found that the Center Culture and Safety Assessment, Corrective Action Tracker, and Regional Office Center Assessment, all include a narrative description of the violations identified by regional staff categorized according to the corresponding requirement in the Policy and Requirements Handbook. In addition, ETA regional office staff said the Corrective Action Tracker, a Microsoft Excel spreadsheet, is cumbersome to use and within the spreadsheet they attach and submit additional documentation. ETA national officials agreed that streamlining or automating monitoring tools would be helpful for its regional staff, along with additional training to help staff understand the different reports and how to write the required narratives. ETA national officials also told us that they did not systematically review existing reports before creating additional ones for the new risk-based monitoring process. Officials said they have lacked the resources to make some improvements that could reduce the time regional office staff spend on reporting. Standards for internal control state that managers should identify the organizational level at which the information is needed, the degree of specificity needed, and state that managers should review information needs as an on-going process. Streamlining or automating reporting requirements can help centralize documentation relevant to monitoring center safety and security, possibly eliminate seemingly duplicative reporting requirements, and help regional staff manage their workloads. While ETA initiated multiple actions to address various safety and security issues, the agency does not have a comprehensive plan to improve center safety and security. A comprehensive plan describes the organization’s long-term goals, its strategy and timelines for achieving those goals, and the measures that will be used to assess its performance in relationship to its goals. It can also guide decision-making to achieve desired outcomes, including the priority with which to implement these efforts. ETA officials told us that although they do not have a single document that reflects a formal comprehensive plan, they have employed a comprehensive approach to improve center safety and security. However, in prior work, GAO established the importance of comprehensive planning to ensure agencies effectively execute their missions and are accountable for results. GAO has also identified leading practices that help ensure organizations achieve their objectives. These leading practices include developing goals, strategies to achieve goals, plans to assess progress toward goals, and leadership and stakeholder involvement in plan development (see table 6). ETA officials agreed that a comprehensive plan is needed, but told us that limited staff capacity and lack of expertise have hindered their ability to produce a comprehensive plan. In particular, the Division of Regional Operations and Program Integrity would have a role in developing the agency’s comprehensive plan. As previously mentioned, ETA officials told us that they did not have approval to fill the six vacant positions in the Division. With only two of the eight positions filled, ETA officials said that they prioritized correcting the deficiencies identified by the DOL OIG and responding to immediate safety and security concerns. ETA officials told us they plan to produce a comprehensive plan when they have secured the staff to do so. However, at this time, ETA does not have a specific timeframe for producing such a plan. When the agency begins developing a comprehensive plan, it could consider using the leading practices outlined above and drawing on the expertise of the government-wide Performance Improvement Council. In the absence of a comprehensive plan for safety and security, ETA risks the success of its new initiatives because they are not linked in an overall framework that demonstrates how they are aligned or contribute to goals for improving center safety and security. It is important that Job Corps students be provided with a safe and secure learning environment. For the last several years, however, numerous incidents have threatened the safety and security of students. ETA has taken steps to improve center safety and security, but its efforts could be strengthened by ensuring regional office staff responsible for monitoring Job Corps centers are better supported with additional guidance and streamlined reporting requirements. Without providing regional staff with this additional support, the full potential of the new monitoring strategy may not be realized. While ETA has implemented several actions to address safety and security concerns, it does not have a comprehensive plan to guide all of its efforts. Without a comprehensive plan, ETA will not be able to assess its overall effectiveness in addressing center safety and security. We are making the following three recommendations to ETA: The Assistant Secretary of ETA should ensure the Office of Job Corps expeditiously develops additional guidance, such as SOPs or updates to the Program Assessment Guide, to ensure regional offices consistently implement the risk-based monitoring strategy. (Recommendation 1) The Assistant Secretary of ETA should ensure the Office of Job Corps streamlines the monitoring reports completed by regional office staff. This streamlining could include automating monitoring tools, consolidating monitoring reports, or taking other appropriate action. (Recommendation 2) The Assistant Secretary of ETA should ensure the Office of Job Corps commits to a deadline for developing a comprehensive plan for Job Corps center safety and security that aligns with leading planning practices, such as including a mission statement with goals, timelines, and performance measures. This could also include developing the planning expertise within the Office of Job Corps, leveraging planning experts within other agencies in DOL, or seeking out external experts, such as the government-wide Performance Improvement Council. (Recommendation 3) We provided a draft of this report to DOL for review and comment. We received written comments from DOL, which are reprinted in appendix VII. DOL concurred with our three recommendations. The department stated that it will move forward to develop standard operating procedures for its risk-based monitoring strategy, review and streamline existing monitoring reports, and provide additional training for its regional office staff. The department also plans to develop a formal written comprehensive plan for Job Corps safety and security. DOL also provided technical comments that we have incorporated in the report as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of Labor. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VIII. The objectives of this review were to examine (1) what is known about the number and types of reported incidents involving the safety and security of Job Corps students in program year 2016; (2) what is known about student perceptions of safety and security at Job Corps centers, and what steps, if any, is the Employment and Training Administration (ETA) taking to improve the survey used to collect this information; and (3) the extent to which ETA has taken steps to address safety and security at Job Corps centers. To address all three objectives, we reviewed agency policies and procedures, such as the Job Corps Policy and Requirements Handbook and guidance issued to center operators and ETA staff. In addition, we interviewed ETA officials, including Office of Job Corps national staff, Office of Job Corps regional directors, and staff in all six regional offices. We also conducted site visits at the Woodstock Job Corps Center in Woodstock, Maryland, and the Potomac Job Corps Center in Washington, D.C. We selected these two centers because they were within geographical proximity to Washington, D.C., operated by different contractors, and had over 100 reported safety and security incidents each in program year 2016. At each center, we interviewed the Center Director, Head of Safety and Security, a group of staff members, and a group of students. The staff and students we spoke with were selected by the centers. While these two site visits are not generalizable to all Job Corps centers, they provide examples of student and staff experiences with safety and security. To determine the number and types of safety and security incidents reported by Job Corps centers, we analyzed ETA’s incident data for program year 2016 (July 1, 2016 to June 30, 2017). This was the most recent year of Job Corps data available at the time of our review. ETA captures these data in its Significant Incident Reporting System (SIRS). Centers must report incidents involving both Job Corps students and staff, and incidents that occur at onsite and offsite locations. ETA has 20 categories of incidents in SIRS. See appendix II for incident category definitions. The incident categories and definitions in this report are taken directly from ETA documents and represent how ETA categorizes these incidents. We did not assess these categories and definitions. In this report, we present information on reported safety and security incidents in program year 2016 involving at least one student victim or perpetrator. There were 13,673 reported incidents involving students; additional incidents are reported in SIRS that did not involve students. When these additional incidents are included, a total of 14,704 safety and security incidents were reported in program year 2016. See appendix III for further information on the total number of incidents reported. To calculate the number and types of reported incidents, we analyzed the primary incident type that was assigned to each incident reported in SIRS. To provide additional information on reported assaults and sexual assaults, we also analyzed the secondary incident type that was assigned to each reported assault and sexual assault in SIRS. To calculate the total number and types of reported deaths, we analyzed both primary incident types and secondary incident types. In SIRS, deaths can be reported under three different primary incident types (“death”, “assault”, and “danger to self or others”). When an incident is assigned to any of these primary incident types, it may also be assigned a secondary incident type of “homicide,” among other secondary incident types. In addition, we analyzed the duty status for student victims and perpetrators of offsite incidents. In SIRS, students are described as being either (1) on duty, which means that they are onsite at a center or in a Job Corps supervised offsite activity; or (2) off duty, which means they are offsite and not under Job Corps supervision. For the 1,406 offsite incidents, we were unable to determine student duty status in 178 instances due to inconsistencies in ETA’s data. This report focuses on reported safety and security incidents in program year 2016, which was from July 1, 2016, to June 30, 2017. On July 1, 2016, ETA implemented policy changes that impacted the categorization and number of reportable safety and security incidents. Accordingly, incident data after July 1, 2016, are not comparable with earlier incident data, including incident data we reported in a June 2017 testimony. We assessed the reliability of SIRS data by reviewing relevant agency documentation about the data and the system that produced them and interviewing ETA and Department of Labor Office of Inspector General (DOL OIG) officials knowledgeable about the data. We determined the data were sufficiently reliable to report the minimum number of incidents that occurred in program year 2016. It is likely that the actual number of incidents was greater than the number reported in SIRS because the information is reported by Job Corps centers and the DOL OIG previously found instances of underreporting by a non-generalizable sample of center operators. In its March 2017 report, DOL OIG found that 12 of 125 Job Corps centers did not report 34 percent of significant incidents in SIRS from January 1, 2014, through June 30, 2015. ETA has recently taken steps to improve center reporting of significant incidents, such as revising the student conduct policy to more clearly define behavior infractions and conducting system-wide training to ensure uniform understanding and enforcement of student conduct policies. However, DOL OIG officials told us in January 2018 that it is too early to determine if these steps have resolved the DOL OIG’s concerns regarding center underreporting. To examine what is known about student perceptions of their safety and security at Job Corps centers, we analyzed students’ responses to the student satisfaction survey administered during program year 2016: September 2016 and March 2017. We analyzed responses from both of these surveys in program year 2016, which was the most recent year for which data were available. ETA provided centers with the standardized paper-based survey to administer to students in-person on designated weeks. The survey of 49 close-ended questions contained 12 questions that ETA used to assess students’ safety. In addition to questions on student safety, the survey includes questions on other topics, including student demographics, overall satisfaction with Job Corps, and access to drugs and alcohol on center. According to data from ETA, the response rate for each survey was approximately 90 percent of all enrolled students. ETA calculated the response rate by dividing the number of students who responded to the survey by the number of enrolled students during the week of survey administration. Students responded anonymously to the survey. Because about 90 percent of students provided responses and about 10 percent did not, we analyzed the potential for non-response biases based on several student characteristics. If the responses of those who did not respond would have differed from the responses of those who did on relevant safety questions, the results calculated solely from those who responded may be biased from excluding parts of the population with different characteristics or views. We compared age, time in program, race, and gender—key characteristics available for the population of enrollees and respondents—to determine areas for potential bias. We determined that the potential for non-response biases existed for particular groups of students: younger students and those enrolled in the program for at least 6 months. For race, the potential for non-response bias was unclear. We found no potential bias for gender. Specifically, we found the following: Age. Younger students were under-represented, and older students were over-represented among survey respondents. Thus, to the extent that non-responding younger students would have answered safety questions differently than responding younger students, the potential for bias existed in the survey results we analyzed. When we asked ETA officials about such a potential bias, they responded that they did not have evidence or documentation suggesting that age is a predictor of students’ level of perceived safety in the program. Length of time in the program. Students in the program less than 6 months were over-represented among survey respondents, and students enrolled in the program over 6 months were under- represented in the survey. To the extent that non-responding students would have answered safety questions differently based on length of time enrolled, the potential for bias existed in the survey results we analyzed. When we asked ETA officials about such a potential bias, they noted that new students may be less aware about life at the center because they begin the program with other newly arrived students for up to 2 months. Thus, they are not yet fully integrated into the larger student body. Otherwise, they did not have evidence or documentation suggesting that length of time in the program correlates with students’ level of perceived safety. Race. It is unclear whether the distribution of race for respondents differs from that in the population. Specifically, ignoring item non- response, about 7 percent of respondents selected “Other,” and if those respondents were Black/African American, the distributions between the respondents and sample would be similar since this would result in the respondent race percentage being close to 50 percent, like the population of enrollees. If respondents who selected “Other” were actually distributed across the race categories, this would result in a difference between the respondent and population race/ethnicity characteristics, and to the extent that students’ responses to safety questions differ by race, this could result in a potential bias of respondent survey results we analyzed. We analyzed race for purposes of potential non-response bias, and not as part of statistical tests of survey results described below. Gender. We found no potential non-response bias for gender because the distribution of gender for respondents was similar to that in the population of students enrolled in the program. In addition to our non-response bias analysis, we assessed the reliability of the survey data by reviewing relevant agency documentation about the data and the system that produced them, testing data electronically, and interviewing ETA officials knowledgeable about the data. We determined that the student survey data were sufficiently reliable for our purposes. For the 12 safety-related survey questions, Job Corps policy specified responses that the agency counted as safe or unsafe, which we followed. As noted previously, ETA considers students to feel safe if they provided certain responses to each of the 12 safety-related survey questions, some of which are phrased as statements. For example, if a student provided a response of “mostly false” or “very false” to the statement “I thought about leaving Job Corps because of a personal safety concern,” that student would be counted as feeling safe on that survey question (see table 3). The percentages that we calculated are not comparable to prior publications, including ETA reports, because, for example, ETA revised (i.e., recoded) students’ responses in certain circumstances, as explained below in table 7. Meanwhile, we used the original responses that students provided and did not revise them. Also, ETA excluded responses of “don’t know / does not apply” from its percentages. As a result, our percentages are not comparable with those reported by ETA. We also calculated national measures of safety for the program and for particular demographic groups of students (e.g., male, female). Our calculation was similar to ETA’s national safety rating in certain respects. For example, as ETA did, we determined how safe each individual student felt as the unit of analysis. Therefore, the national measures of GAO and ETA may not equal the average of the 12 questions because, for example, not all students answered every safety question. However, in other respects, we produced our national measure differently than ETA. Table 7 explains the three ways that our calculation differed from ETA’s. Although the student safety surveys were an attempt to survey a census of the population of participants, we treated the survey as a sample in certain respects due to the non-response of about 10 percent of students as well as the ongoing nature of the regularly repeated survey. Therefore, we considered these data as a random sample from a theoretical population of students in this program and used statistical tests to assess any differences. Treating the data as a statistical sample, we carried out statistical tests of differences in safety measures for student characteristics (e.g., age, gender, length of time in the program). Because of the large sample size, smaller differences may be detected as statistically significant. This is because statistical significance is a function of the magnitude of the true difference (statistical tests are more likely to detect differences when the true values are very different) as well as the sample size (larger samples can detect statistical significance of smaller magnitudes, when compared to smaller sample sizes, when all else is equal). However, we used statistical significance in conjunction with whether the detected differences are meaningful or important, in a practical sense. In particular, we used a series of f-tests to statistically test, at the alpha = 0.05 level, for difference in average safety measure, across categories of age, gender, time in program, center size, and operator type. Appendix II: Categories of Incidents in the Significant Incident Reporting System (SIRS) Our analysis of the Employment and Training Administration’s (ETA) Significant Incident Reporting System (SIRS) data showed that there were 14,704 reported safety and security incidents at Job Corps centers in program year 2016, which include incidents involving students, staff, and non-Job Corps individuals. See table 9. Job Corps centers reported 13,673 safety and security incidents involving students, including those that occurred both onsite and offsite, in program year 2016. See table 10 for information on each Job Corps center, including the number of incidents involving students reported in program year 2016. We calculated safety measures for each Job Corps center, based on student responses to the safety-related questions on the student satisfaction survey (see table 11). We used the methodology described in appendix I to calculate safety measures for the centers. Results in table 11 are from the March 2017 survey, the most recent for program year 2016. The percentages in this table are not comparable and should not be analyzed with the numbers of reported incidents at each center because they are distinct measures that cover different periods of time. The Employment and Training Administration’s (ETA) risk-based monitoring strategy is designed to identify emerging problems that place a Job Corps center at-risk for safety and security problems. The strategy is largely implemented by regional office staff, which work with the Office of Job Corps’ newly formed Division of Regional Operations and Program Integrity and use a variety of tools to assess, track, and report on center performance (see table 12). In addition to the contact named above, Mary Crenshaw (Assistant Director), Andrea Dawson (Analyst-in-Charge), Sandra Baxter, and Matthew Saradjian made key contributions to this report. Additional assistance was provided by Alex Galuten, Gretta Goodwin, Benjamin Licht, Grant Mallie, Mimi Nguyen, Nhi Nguyen, Monica Savoy, Almeta Spencer, Manuel Valverde, Kathleen van Gelder, and Sonya Vartivarian.", "summary": "Deficiencies identified in multiple DOL Inspector General audits since 2009 and two student deaths in 2015 have raised concerns regarding the safety and security of Job Corps students. GAO was asked to review safety and security of students in the Job Corps program. GAO's June 2017 testimony summarized preliminary observations. This report further examines (1) the number and types of reported safety and security incidents involving Job Corps students; (2) student perceptions of their safety at Job Corps centers; and (3) the extent to which ETA has taken steps to address safety and security at Job Corps centers. GAO analyzed ETA's reported incident data for Job Corps centers from July 1, 2016, through June 30, 2017. GAO also analyzed ETA's student survey data from the same period, reviewed relevant documentation, and interviewed ETA officials at its national office and all six regions. GAO also visited two Job Corps centers that had different operators and at least 100 recent incidents. These two centers are not generalizable to all centers. Job Corps centers reported 13,673 safety and security incidents involving students from July 2016 to June 2017, according to GAO's analysis of the Department of Labor's (DOL) Employment and Training Administration's (ETA) data. Most reported incidents occurred onsite and involved recently enrolled male students under age 20. During that time, the program served about 79,000 students at 125 Job Corps centers, according to ETA officials. ETA's Office of Job Corps administers the program, which is the nation's largest residential, educational, and career and technical training program for low-income youth generally between the ages of 16 and 24. Drug-related incidents and assaults accounted for 48 percent of all reported incidents (see fig.). Students generally felt safe at Job Corps centers, yet fewer felt safe in some situations, based on GAO's analysis of ETA's September 2016 and March 2017 Job Corps student satisfaction surveys. At least 70 percent of students reported that they felt safe on half of the 12 safety-related questions in the 49 question survey about their experiences in the Job Corps program; but fewer students reported feeling safe when asked if they were made to feel unimportant or if they heard students threaten each other. ETA plans to administer a new survey nationally by January 2019 that focuses solely on safety and security issues. ETA has initiated several actions to improve safety and security at Job Corps centers, but insufficient guidance for its monitoring staff and absence of a comprehensive plan for safety and security may put the success of these actions at risk. Among its actions, ETA adopted a new risk-based monitoring strategy to identify emerging problems at the centers. Officials GAO spoke with in five of ETA's regional offices said that the new strategy has improved monitoring, but that more guidance on how to interpret and apply safety and security policies is needed to promote consistency across centers. Also, ETA lacks a comprehensive plan linking its new efforts to an overall safety and security framework. ETA officials told GAO that limited staff capacity and lack of expertise have hindered their efforts in developing such a plan. Without a comprehensive plan, ETA runs the risk that its new efforts will not be successful. GAO is making three recommendations to DOL, including that ETA develop additional monitoring guidance and a comprehensive plan for safety and security. DOL agreed with GAO's three recommendations.", "document_type": "gao"}
{"report": "Civil aviation in the United States can be generally divided into two broad categories—general aviation and commercial aviation. All civilian pilot students undergo their initial pilot training in the general aviation sector, which comprises all aviation activities other than military and commercial airlines. Once hired in the commercial aviation sector for businesses that carry passengers or cargo for hire or compensation, pilots may receive additional, employer-specific training. FAA is responsible for regulating the safety of civil aviation in the United States, including the administration of pilot certification (licensing) and conducting safety oversight of pilot training. Regulations for initial pilot training and certification are found in two parts of the Federal Aviation Regulations—pilot training requirements and requirements for obtaining a pilot school certificate. Pilot training requirements: These regulations prescribe the minimum training, knowledge, and experience requirements for acquiring a private, commercial, or airline transport pilot certificate, and for becoming a certificated flight instructor (CFI). Individual flight instructors can provide pilot training to individuals under these regulations and the training is not subject to direct FAA oversight beyond the initial flight instructor certification and subsequent renewal. Requirements for obtaining a pilot school certificate: These regulations prescribe requirements pilot schools must meet to obtain an FAA certificate and the general operating rules applicable to a school’s holding a certificate. FAA-certificated schools are required to meet prescribed standards with respect to training equipment, facilities, student records, personnel, and curriculum. Schools’ pilot program curriculum can vary in content, but FAA provides core training guidelines that schools must follow to receive a certificate. To ensure safety, FAA requires its inspectors to conduct on-site inspections of each FAA-certificated school at least once a year, focusing on pilot school operations and training aircrafts’ airworthiness. Schools that provide initial pilot training generally fall into three categories: (1) collegiate aviation schools, (2) non-collegiate vocational pilot schools, and (3) non-collegiate, instructor-based pilot schools. Collegiate aviation schools that provide initial pilot training typically offer a 2- or 4- year undergraduate degree in an aviation-based major along with the pilot certificates and ratings necessary to become a commercial pilot. All pilot schools must comply with FAA’s pilot training requirements, but some may elect to become FAA-certificated as well. Instructor-based schools offer flexible training environments where the training sequence can be altered to meet specific students’ needs and time commitments. Upon completion of the training, the students can obtain pilot certificates for which they were trained, as long as they pass FAA’s tests. FAA-certificated vocational schools do not allow flexible training environments as the training sequence outlined in the curriculum cannot be altered. FAA requires annual inspections of these schools, unlike flight instructor- based schools. As we have previously reported, it takes years of training to meet FAA’s certification and aeronautical experience qualifications to become an airline pilot. Once cleared by a medical examination, an individual may obtain a medical certificate and a student pilot certificate from FAA. Pilot students may then begin training, acquiring the knowledge and flight training to obtain a private pilot certificate, instrument rating, commercial pilot certificate, and multi-engine rating (see fig. 1). To be eligible for hire as either a captain or first officer for an airline, individuals must also obtain an airline transport pilot (ATP) certificate in addition to the other certificates and ratings. In July 2013, FAA began requiring all first officers to have an ATP certificate, which requires 1,500 hours of flight experience. Pilots with fewer than 1,500 hours can obtain a “restricted-privileges” ATP certificate (R-ATP), under which specific academic training courses can count toward the required hours of total flight time. FAA made this change for airline first officers following the 2009 Colgan Air Inc. crash in New York, and subsequent legislation that required FAA to modify, among other things, first officer qualifications. In our 2014 report, FAA and industry stakeholders estimated that it could take an additional 1 to 2 years for pilots coming out of school to meet the 1,500 hour requirement. Consistent with airline representatives’ views from our prior report, regional airline association representatives have recently cited the revised first officer training requirements and several other factors as contributing to a tight pilot labor market. By increasing the minimum number of required flight hours for a first officer, entry into the airline pilot profession may take longer, which may decrease the pool of eligible pilots that mainline and regional airlines can hire as a first officer. In addition, as we previously reported, the civil aviation industry has been a historically volatile industry because demand for air travel is sensitive to economic conditions, as well as political, international, and even health-related events. After several years of industry contraction during the 2007-2009 economic recession, demand for air travel has increased since 2012, and FAA projects continued future growth. In addition, since 2014, pilot retirements have been increasing, further tightening the labor market, according to one study. That study forecasts between 2,000 and 3,000 annual mandatory age retirements from the mainline airlines between 2018 and 2021. According to the Bureau of Labor Statistics, most of the newly hired pilots in the next 10 years will be replacing retiring pilots. We identified 147 U.S. colleges and universities that offered at least one professional pilot degree program in academic year 2015-2016. These collegiate aviation schools are located throughout the country, as shown in figure 2. They may offer pilot programs within different academic departments, such as aviation or business. Within a department, pilot programs may be offered as a stand-alone program, as an integral part of a larger major, such as flight education or aviation management, or as a specialty or track within a major. Professional pilot degree programs at collegiate aviation schools may vary in several ways: School type: About three-quarters of collegiate aviation schools are public (110 out of 145), while the remainder are either private non- profits or private for-profits, according to Education’s data (see fig. 3). Program degree length: A majority of collegiate aviation schools offer 4-year degree programs, as shown in figure 3. Program degree length may affect how long it takes pilot students to meet FAA’s requirements and their career options once they complete training. For example, pilot students in 2-year degree programs may complete the program and acquire a commercial pilot certificate and ratings in less time than the 4-year degree program, which may save the students time and money. However, according to associations representing pilot training providers and pilots, mainline airlines prefer pilots with a 4-year degree. In addition, representatives from one mainline airline told us that the airline requires a 4-year degree for employment as a pilot. Regardless of which school and degree program a pilot student graduates from, all pilot students must pass the same knowledge and flight tests to obtain pilot certificates and are, by FAA’s standards, eligible for the same career opportunities. FAA Regulations and academic curriculum: Forty-six collegiate aviation schools we identified operate their pilot programs solely under FAA’s pilot training requirements. The remaining 101 collegiate aviation schools’ pilot programs are certificated by FAA under FAA’s pilot school requirements. As previously discussed, FAA-certificated schools must meet prescribed standards, have structured programs, and FAA must approve their pilot program’s curriculum. In addition, each pilot program’s academic curriculum may differ, though all must meet FAA’s pilot training requirements and, if the school is certificated, FAA’s pilot school requirements. R-ATP authorization: Only FAA-certificated collegiate aviation schools may apply to FAA for authority to certify eligible graduates for an R- ATP certificate with a reduced number of flight hours. Since FAA promulgated the new first officer qualification rule and established the R-ATP certificate in 2013, FAA has issued R-ATP authorizations to more schools each year. As of August 22, 2017, 86 collegiate aviation schools hold R-ATP authorizations. In addition, the number of R-ATP certificates FAA has issued to eligible graduates each year has steadily increased, from 37 in 2013 to 2,190 in 2016. The number of R-ATP certificates issued in 2016 represented about 18 percent of all ATP certificates. The reduced flight-hour eligibility may save students time and money on their path to becoming a professional pilot, depending on how they gain flight experience, which may motivate more students to consider attending collegiate aviation schools that are authorized for R-ATP certificates, compared to other training alternatives. Aviation Accreditation Board International accreditation: Schools’ professional pilot programs may choose to pursue program accreditation in addition to the school’s institutional accreditation. Thirty-two collegiate aviation schools we identified have pilot programs accredited by the Aviation Accreditation Board International and an additional 4 schools have pilot programs that are candidates for accreditation, as of December 27, 2017. The collegiate aviation schools we identified require that students complete training that includes both classroom (ground) and flight training. Ground school aims to provide students with the required aeronautical knowledge and cognitive skills necessary to perform the tasks required to become a pilot. Flight training focuses on teaching how to manipulate the controls of and safely operate an airplane. Most schools (89 of 147) conduct their own flight training using university-owned or – leased aircraft and university employed CFIs (in-house flight training). The number of CFIs employed by collegiate aviation schools varies and is one of the primary determinants of a school’s enrollment capacity. The remaining 58 schools contract out their flight training to one or more pilot schools or allow students to complete their flight training at a pilot school of the student’s choosing. Schools that provide in-house flight training operate at a relatively small number of all domestic airports, which vary greatly in size as measured by annual passenger enplanements (see fig. 4). Approximately 69 percent of these schools operate at non-primary airports—those with fewer than 10,000 passenger enplanements a year. Flight training may comprise a large proportion of an airport’s activity, particularly at smaller airports, according to representatives from seven schools and two airport authorities. The remaining 28 percent of the schools that provide in-house flight training operate at primary airports with over 10,000 passenger enplanements a year. There are advantages to operating at small and large airports. Representatives from three schools and five stakeholders representing flight training providers, airports, and pilots told us that operating out of smaller airports may be advantageous because they are less crowded, a condition that can save waiting time for take-offs and allows students to practice certain maneuvers that may be more difficult to perform at larger airports. Conversely, according to representatives from two schools, two pilot training provider associations, and one airport, operating at larger airports can be advantageous because students can learn to fly in the controlled environment that airline pilots will eventually fly in. For several reasons, there are no comprehensive data on pilot student enrollment at collegiate aviation schools. First, because non-certificated schools are not subject to periodic FAA inspections, FAA does not collect any enrollment data for these schools. Second, enrollment data are available for only some FAA-certificated schools because reporting that data is optional for those schools during FAA’s certification and inspection process. In addition, FAA does not verify the data to determine their accuracy. As previously noted, FAA is responsible for regulating the safety of civil aviation in the United States. As such, according to FAA officials, FAA requires data collection when such a requirement serves a safety purpose, such as data required for pilot school certification and FAA oversight. FAA officials told us that other data on collegiate aviation schools, such as enrollment numbers, do not serve FAA’s primary safety purpose. The size of collegiate aviation schools appears to vary greatly. Although voluntary, almost all FAA-certificated collegiate aviation schools submitted enrollment data to FAA. According to FAA’s data provided to us on October 5, 2017, 92 FAA-certificated schools had reported average yearly enrollment data for their pilot programs. Reported enrollment at these FAA-certificated collegiate aviation schools varied greatly—from 5 professional pilot students to 850. Despite this wide range, most (66) of these schools reported that they enrolled 100 students or less in their pilot programs. A majority (15 of 18) of representatives from selected collegiate aviation schools noted an increase in enrollment over the past 5 years. Additionally, the data on graduations from professional pilot programs are not comprehensive. Education requires schools, including collegiate aviation schools, to report how many students they graduate annually. School officials classify and report completed degrees by program type to Education using the agency’s classification system. One of Education’s program codes—for “Airline/Commercial/Professional Pilot and Flight Crew”—appears to best capture graduates from professional pilot programs. Education’s data for professional pilot degrees awarded by collegiate aviation schools under this code totaled 1,356 in academic year 2015–2016. However, of the 147 collegiate aviation schools we identified for academic year 2015–2016, 72 reported pilot student graduates using the code. This might be because collegiate aviation schools may report their pilot student graduates under other program codes, such as “Aeronautics/Aviation/Aerospace Science and Technology, General” and “Aviation/Airway Management and Operations.” According to an Education official, while the agency expects schools to provide precise reporting of graduations from each degree program, he said it is possible that some school officials may not perceive their programs consistently with Education’s program classifications, despite specific definitions for each program category. Because pilot student graduates could be reported under a number of aviation-related program codes in Education’s system, the number of professional pilot graduates could be higher. According to Education’s data, the number of professional pilot degrees awarded by collegiate aviation schools under the Airline/Commercial/Professional Pilot and Flight Crew code fluctuated from year to year between academic year 2010–2011 and 2015–2016. Almost half of the representatives from our selected collegiate aviation schools (8 of 18) noted increased pilot student graduations over the past 5 years. The number of these graduations could continue to increase in the next few years since, according to representatives from seven schools, student enrollment generally responds to industry need and the perception of a more stable career pathway. According to one of these representatives, graduations increase with a lag relative to the increased industry demand and student enrollment, given the time it takes to complete the degree program. Given the observations from school representatives of increasing enrollment, graduations may continue to increase as well. Selected school and other aviation industry representatives we spoke with generally agreed that retaining and recruiting flight instructors is one of the key challenges facing collegiate aviation schools. Representatives from nearly all (16 of 18) of the schools identified recruiting and retaining flight instructors as a great or moderate challenge and a majority stated that it was their greatest challenge affecting their ability to produce pilots (see app. I for a summary of the responses.). According to representatives from 3 aviation industry stakeholders, in the current environment some schools are unable to recruit and retain enough flight instructors to train all the pilots that they otherwise have the resources to accommodate in their pilot programs. To illustrate, representatives from 2 schools reported an inability to accept some qualified students because they did not have sufficient flight instructors. Meanwhile, representatives from 4 other schools said they have been able to hire enough new instructors to keep up with flight instructor attrition. In addition to presenting a management challenge, instructor turnover may hinder training effectiveness. For example, one pilot association representative told us that the quality of instruction tends to be lower when students are routinely subject to new instructors since there is little instructional continuity. Representatives of 6 of the collegiate aviation schools we interviewed said they recognize that instructor turnover is unavoidable because most pilots do not pursue flight instruction as a long-term career. Regardless, the rate of turnover in recent years has increased, according to selected school and other aviation industry representatives. As previously discussed, school representatives told us that most pilots use flight instruction as a stepping stone to accrue the required flight time to become an airline pilot, which commands a higher salary and greater prestige than flight instructor positions. Flight instructors generally seek employment with an airline as soon as they are eligible, according to most school representatives (15 of 18) and other stakeholders we spoke with. According to two aviation industry stakeholder representatives, the career progression of civilian-trained pilots from flight instructor to commercial airline pilot has typically worked in this way. However, stakeholders have stated that in recent years, airline industry growth, increasing pilot retirements, and other factors previously discussed have caused commercial airlines to accelerate pilot recruitment, ultimately causing pilots to move through the instructor ranks more quickly. Regional airlines now hire qualified pilots as soon as they accrue the minimum hours required by FAA, according to representatives from one airline pilots association. According to one study, in the mid-2000s most of the larger regional airlines set minimum flight-hour requirements for first officer applicants of 800 to 1,000 hours, which were well above the FAA requirements at the time. Furthermore, applicants needed an even higher number of hours to be competitive for those positions prior to that time—between 1,500 and 2,000 hours, according to representatives of a pilots’ association. Recruiting and retaining flight instructors with more advanced qualifications, such as instructors qualified to train other pilots to be flight instructors and chief instructors, can be a particular challenge for collegiate aviation schools: Flight instructors qualified to train flight instructors: FAA requires flight instructors to have a minimum 2 years of instructor experience before they may train other pilots to obtain their CFI certificate. Representatives from almost half (8 of 18) of collegiate aviation schools reported challenges with retaining flight instructors long enough for them to meet that requirement. According to some school representatives, flight instructors typically accrue the minimum hours required to qualify for their ATP or R-ATP within 2 years or soon afterward. The resulting attrition of experienced flight instructors can therefore hamper schools’ ability to train enough pilots to become flight instructors, an ability that is crucial for turning out the next generation of instructors and pilot students. Chief Instructors: FAA requires certificated schools to have a chief instructor who meets minimum regulatory qualifications, such as at least 2,000 hours of flight time as “pilot-in–command.” Representatives from two schools told us that because of high instructor turnover, few instructors meet these qualifications and the schools find it challenging to recruit qualified chief instructors. Four school representatives and two other aviation stakeholders we interviewed noted that the revised first officer requirements have helped collegiate aviation schools retain flight instructors. As previously discussed, these revised requirements increased the minimum number of flight hours a pilot must have to become a first officer, so instructors continue to instruct longer than they might have otherwise. The school representatives noted that while they are still experiencing high flight instructor turnover the situation would be more challenging without the new requirements. In addition, representatives from two large collegiate aviation schools stated that when there is a high demand for pilots, they would not be able to recruit and retain any flight instructors in the absence of FAA’s first officer requirements. As shown in table 1, several of the collegiate aviation schools we interviewed have taken some actions to address the challenge of recruiting and retaining flight instructors. At least 6 regional airlines offer cadet programs, which may provide additional incentives for graduates to remain at their alma mater as flight instructors until they meet FAA’s first officer qualification requirements, according to school representatives we spoke to. These programs may include incentives such as bonus pay for a number of flight hours, health benefits, or tuition reimbursement. Students who sign onto the cadet programs typically accept a provisional employment offer and are expected to work for the airline upon obtaining the number of hours necessary for the ATP certificate and completing an airline’s new hire training. Representatives from two schools said that few students participated in these programs, attributing lower participation to students who may not want to commit to one airline. In addition to actions that schools can take to retain flight instructors, school representatives suggested additional actions that would require cooperation from airlines. Representatives from one state university told us that the school negotiated an agreement with one airline to initially hire its graduates as part-time pilots, allowing the pilots to continue to work part-time as flight instructors. The school is attempting to go one step further by negotiating agreements whereby airlines will not hire its instructors until the school is ready to relinquish them. According to the school’s representatives, two regional airlines have recognized that keeping instructors at the school longer could be to their benefit, increasing the school’s capacity to produce more pilots that the airlines will then hire. Another school representative suggested that airlines might consider loaning out their pilots to instruct for schools, but a representative from an airline association said that airlines do not have extra personnel to spare. Representatives of a pilot school said they are working with airlines to change the seniority system so that pilots can get their seniority number while they are instructors, which could reduce the strong incentive to become an airline pilot as quickly as possible. School representatives and a stakeholder described additional actions that could be taken to address this issue, including encouraging students to obtain their CFI, encouraging retired airline pilots to instruct, and raising the profile of the flight instructor profession as a possible career path. Collegiate aviation schools may require their students to obtain a CFI to graduate. Those schools that do not require a CFI may produce fewer graduates who are qualified to instruct. A representative from one school told us that it is now encouraging students to obtain their CFI as a way to increase the number of potential flight instructors. Representatives from three industry associations said the FAA should consider changing its requirement for instructors to have 2 years instructing experience before they may train other pilots to obtain their CFIs. In addition, in 2017 the FAA Aviation Rulemaking Advisory Committee issued a report recommending that FAA permit completion of an FAA-approved standardized course at FAA-certificated schools as an alternative to the 2-year experience requirement. According to FAA officials, the agency is drafting a proposed regulatory change to allow appropriately qualified flight instructors who have met proficiency requirements to train other pilots to obtain a CFI. There was general agreement among the majority of school representatives we interviewed that in the last 5 years more students have shown interest in the pilot profession by applying for and enrolling in pilot programs at collegiate aviation schools. Representatives from eight schools and one aviation industry stakeholder noted that students may be interested in becoming pilots because there appears to be more pilot career opportunities and a greater likelihood of a secure and lucrative career path. Some airlines have created career path programs that document the requirements to move along the career path from pilot school to a particular regional airline and on to a particular mainline airline. According to an association representing pilots, they have done so to encourage more students to enter the pilot profession. Nonetheless, representatives from nearly all schools we interviewed identified the cost of a professional pilot degree program as a great (10 schools) or a moderate (6 schools) challenge to recruiting and retaining students. While high education costs are not unique to pilot programs, these programs can be particularly expensive, and therefore unaffordable to many students. As previously reported, professional pilot students incur flight training “lab fees” in addition to general college tuition and fees, that together often exceeds $100,000. Schools’ tuition and fees can vary significantly. Factors affecting cost include whether the school is public, private non-profit, or private for-profit, whether the school offers a 2-year or 4-year program, and the student’s resident status. According to Education’s data, annual in-state tuition at public collegiate aviation schools we identified ranges from approximately $1,100 to $13,000. However, annual out-of-state tuition at a public 4-year program can cost as much as approximately $28,800. Private school tuition can cost more. For example, one 4-year private for-profit collegiate aviation school lists estimated annual undergraduate tuition of nearly $36,000, not including room and board or flight training costs. Flight training costs also vary considerably. According to the University Aviation Association’s 2016 directory of collegiate aviation schools, a majority of pilot programs (27 of 45) have total approximate flight training costs of more than $50,000, with an upper cost of about $81,000. Flight training costs may vary, depending on the school requirements, student interest, and aptitude. Pilot program curriculum may differ and some students may choose to take additional classes. Each additional certificate and rating adds to the total cost of the training. Also, the time required for students to complete their certificates and ratings varies. Compounding the issue of cost is that the maximum federal financial aid available to eligible students is well below the full cost of a collegiate flight education, a factor that is also not unique to collegiate aviation students. For academic years 2017–2018 and 2018–2019, the maximum federal Pell Grant award is currently $5,920, and annual federal loan limits range from $5,500 up to $12,500 depending on the student’s year in school, dependency status, and other factors. Most students need to either use family resources or take out private loans to pay for the total cost of a pilot program, according to representatives from four schools. Not all students have the means to do so, as private lenders may require a co-signer with good credit and a minimum income level. Also, representatives from two schools said that some students who initially secure private loans for flight training are unable or unwilling to secure loans needed later on to complete this training, causing them to leave the pilot program. This financing challenge may pose a significant barrier for lower income students to enter the pilot profession. There are lower cost alternatives to collegiate aviation schools, though they are not entirely equivalent. Students may obtain a flight education and achieve the same FAA certificates and ratings from a non-collegiate pilot school and incur flight training expenses without the added cost of college tuition. As previously discussed, a pilot with non-collegiate flight training could be eligible for the same employment opportunities with regional airlines, but according to five stakeholders, airlines prefer or have typically hired pilots with a 4-year degree. Military service is another lower cost alternative for flight training, as service members are compensated for their time while they are training. However, one school representative noted that service members may enlist in the military with the intention of pursuing flight training, but they are not guaranteed to receive a flight assignment. Representatives from two stakeholders told us it is not possible to significantly reduce the cost of flight training because it is inherently expensive, and four school representatives said that costs are increasing. One approach to controlling costs for students is to make it easier for them to transfer from public 2-year pilot programs to 4-year programs, since public 2-year programs are typically less expensive. A representative from a state university told us that he is developing a degree completion program for professional pilot students from U.S. 2- year colleges. This program would enable students to complete their bachelor’s degree online with the university after they have obtained an associate’s degree in flight. Similarly, a community college has transfer agreements with several 4-year universities, and most of its students aim to obtain a 4-year college degree. We previously found that when colleges provide their students with information on transfer agreements they help students save on tuition costs by enabling students to predict which credits will transfer and reducing the likelihood that they will need to repeat coursework. Two schools have opened satellite campuses for their flight programs, and two other schools are considering that option, both to expand their capacity and to provide options for students to receive flight training while living closer to home, according to school representatives. Other actions schools have taken focus on ensuring that students are able to pay for the program and offering assistance with costs where possible. Representatives of three schools told us that they are raising money for departmental scholarships, and a representative of one school said the school raises awareness about outside scholarships that may be available to its students. A representative from a community college said that there are scholarships available for women and minorities. According to one industry representative, there are not enough women and minorities in aviation, which will negatively affect the supply of future pilots. One state university offers in-state tuition for flight students who are residents of nearby states, with the aim of both reducing some students’ costs and increasing enrollment at the school. Representatives of four schools told us that they emphasize communication with potential students about costs before they enroll to improve pilot student retention. In addition, one school we spoke with requires students to pay their flight training fees for each certification upfront in one lump sum to ensure that students will be able to complete the training. Initiatives to assist students with funding and reduce costs of flight training have been in place for a long time with limited impact, according to one flight training provider association. Other aviation stakeholders noted that regional and mainline airlines could have a greater effect than previous efforts by working together. For example, airlines could provide scholarships and subsidize students’ flight training while students are still in school. The airlines could also work together as an industry to provide scholarships to students. However, as one aviation association noted, airlines are reluctant to provide scholarships to students who are likely to fly for a competitor. Representatives from two stakeholders suggested that increases to limits on federal student loans could provide additional resources to help students pay for flight training costs. To some extent and even if additional actions are taken to help defray some of the educational costs, some students may not be able to afford the cost of collegiate aviation schools. Some selected school representatives also cited other challenges, though these challenges were cited by fewer representatives, and most of the representatives characterized these challenges as moderate or slight. Purchasing and maintaining aircraft. Representatives from 13 schools said that purchasing or maintaining aircraft, or obtaining the requisite purchase approvals can be challenging. New single-engine training aircraft could cost more than $300,000, while a new multi-engine aircraft can cost around $750,000. Purchasing older, used equipment is one possible way to defray aircraft costs, but older equipment requires more time offline for maintenance. Representatives from two schools stated that aircraft used for training requires extensive scheduled and unscheduled maintenance, which can interfere with their ability to train students. Airport infrastructure and airspace constraints. When asked about challenges related to airport infrastructure, representatives of six schools identified challenges related to space constraints. Issues included insufficient space to store and maintain aircraft, insufficient classroom and office space, and crowded airspace that cannot accommodate the desired flight operations to train the number of pilot students they could with their existing resources. Few representatives identified infrastructure availability at the airport as a great (1 school) or moderate (3 schools) challenge, while 6 representatives reported that infrastructure posed only a slight challenge and 7 said it was not a challenge at all. VA education benefit program administration—publication of specific training hours and costs. Representatives from eight schools and two stakeholders expressed some concern about new enforcement of VA education benefit rules from the Post 9/11 GI Bill, as amended by the Post-9/11 Veterans Educational Assistance Improvements Act of 2010. VA issued two policy advisories in 2015 to notify collegiate aviation schools about statutory education benefit policies and bring them into compliance. One policy advisory notified schools that they must publish the specific number of training hours, as well as the specific cost of training, for each flight course, effectively setting a maximum number of training hours and fixed fees for each course taken as part of a standard degree program. According to VA, before the agency issued the policy advisories there was great public and congressional outcry about individual pilot students receiving hundreds of thousands of dollars from VA for their education. VA issued the policy advisories to specify what pilot training activities are appropriate uses of VA money, and under what circumstances. VA funds cannot be used to pay for pilot training to proficiency because that would entail an unlimited amount of funds to be available for an individual’s flight training. Representatives from five selected schools reported that this rule made it difficult to provide efficient and effective flight training for all pilot students. Depending on the program structure, students who cannot finish the course in the set number of hours must either pay out of pocket for additional training or accept a failing grade and take the course again. VA education benefits pay for eligible beneficiaries to repeat the course if needed. In contrast, FAA imposes a minimum but not a maximum number of hours per certificate, because the training goal is to achieve a certain level of proficiency for each certificate. One school representative stated that the school allowed its VA education benefit eligibility to lapse because it allowed them the freedom to train students to proficiency without maximum training hours; however, veterans can no longer use their benefits to enroll in that program. VA education benefit eligibility for contracted flight instruction. Representatives of two out of the five schools we interviewed that contract out flight training and one stakeholder reported a challenge concerning a rule described in the second VA policy advisory; the rule places restrictions on collegiate aviation schools that contract out flight training to a non-collegiate school. Previously, veterans received benefits for flight training conducted at non-collegiate pilot schools through the institution of higher learning that contracted out the flight training. However, in its policy advisory VA stated that this practice was not consistent with the rules of the education benefit program because there are different rules for non-collegiate pilot schools; VA benefits cannot be used to pay for training toward private pilot certification at non-collegiate pilot schools. In addition, federal law states that the VA cannot approve the enrollment of an eligible veteran in a course if it involves contracted training that is either otherwise barred from being approved or has not obtained approval on its own. As a result, to remain eligible for VA education benefits, a collegiate aviation school cannot include private pilot certification training provided by a non-collegiate pilot school in its degree program since such training is statutorily barred from approval at the contracted non- collegiate pilot school. Therefore, all students enrolled in such programs must have already earned their private pilot certificate before matriculating in the program, whether they use veterans’ education benefits or not. According to VA, it issued its policy advisory to clarify the statutory limitations of education benefits under the GI Bill relating to private pilot certificate courses. Representatives from two schools said that they are currently not eligible for VA education benefits as a result of this rule, which representatives of one school said has affected the school’s enrollment of veterans. Furthermore, industry stakeholders have expressed concern about greater limits on VA education benefits for flight training based on possible future legislative action. Meanwhile, the U.S. Department of Transportation has announced a new “Forces to Flyers Initiative” with two objectives: (1) to assess the level of interest among veterans in becoming pilots and (2) to help veterans who are not former military pilots to receive the training they need to become commercial pilots. Though representatives from five schools identified this issue as a great challenge, overall its impact is limited because not all schools have students using veterans’ benefits for their pilot programs, and a small percentage of students overall use veterans’ benefits to pay for their education. We provided a draft of this product to the DOT, Education, and VA for comment. DOT provided technical comments, which we incorporated as appropriate. Education and VA declined to provide formal or technical comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Transportation, the Secretary of the Department of Veterans Affairs, the Secretary of the Department of Education, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at 202-512-2834 or vonaha@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. For our review we addressed (1) what is known about collegiate aviation schools with professional pilot degree programs in terms of location, types of training programs available, and enrollment; and (2) challenges that affect collegiate aviation schools’ ability to produce professional pilots and schools’ response to these challenges. To address both objectives, we reviewed a range of reports from GAO, Federal Aviation Administration (FAA), Congressional Research Service, and Bureau of Labor Statistics: these reports included general background information on a variety of related issues on pilot training, issues such as pilot certification and training issues in the United States; FAA regulatory training requirements for different levels of pilot certification; types and requirements of pilot training schools; current supply and demand, and forecasts for commercial airline pilots; and airport infrastructure financing. Furthermore, we reviewed the Federal Aviation Regulations related to training and certification for pilots under Part 61 and Part 141. We also reviewed provisions of the Airline Safety and Federal Aviation Administration Extension Act of 2010 (Pub. L. No. 111-216) related to “Flight Crewmember Screening and Qualifications” and “Airline Transport Pilot Certification.” To determine what is known about collegiate aviation schools we analyzed several sets of data and interviewed representatives from collegiate aviation schools and other aviation stakeholders. To identify colleges and universities with professional pilot degree programs for fixed wing aircraft in academic year 2015–2016, we compared FAA’s data on FAA-certificated pilot schools as of August 19, 2016; the Aircraft Owner and Pilot Association’s list of colleges and universities with aviation programs as of September 19, 2016; and the University Aviation Association’s 2016 directory of collegiate aviation schools. These data were the most applicable given the academic year reviewed. We verified schools on all three lists by checking school websites, typically the program’s webpage or course catalog detailing degree program requirements. For schools that were included on only one or two of the lists, two staff members independently reviewed school information and categorized the school as inside or outside of our scope. Disagreements between coders were reviewed by a third staff member and resolved through discussion. In a few cases where website information was unclear, the staff member contacted school officials to verify that they offered a professional pilot degree program. To determine the airport and airport types at which schools with professional pilot degree programs operated their flight training, we reviewed information from FAA’s National Plan of Integrated Airport Systems, the Aircraft Owner and Pilot Association, and school websites. We also selected and interviewed representatives of six airports of varying types (e.g., medium-hub, small- hub, and non-hub) and in different geographic areas of the country, all of whom had collegiate aviation school tenants. Because we selected the airports as part of a nonprobability sample, our findings cannot be generalized to all airports with collegiate aviation school tenants. To determine what is known about the institution type, college-wide tuition and fees, and graduations at these schools, we analyzed data from Education’s Integrated Postsecondary Education Data System (IPEDS). Of the 147 collegiate aviation schools with professional pilot degree programs that we identified, 146 of them have an IPEDS identification number. According to Education officials, schools with an IPEDS identification number are likely to participate in Title IV financial aid, be accredited, and consequently be monitored by Education through several mechanisms including IPEDS, federal student aid compliance, and accreditation. With respect the institution type, the categories of schools included in our analysis included degree-granting institutions of the following types: public, private non-profit, and private for profit with either 4-year baccalaureate or 2-year associates degrees. With respect to tuition and fees, we reviewed both in-state and out-of-state costs schools reported to Education. Data were not available for academic year 2014–2015 for two collegiate aviation schools we identified. In a few instances schools offered lower-cost tuition and fees to local students (in-district). For purposes of comparison, we did not include these costs in our report, since not all schools offer in-district discounts. With respect to the graduations data, we analyzed graduations data in academic year 2015– 2016 in 10 aviation-related categories within Education’s Classification of Instructional Programs (CIP) for schools we identified as having professional pilot degree programs. We determined that IPEDS data were sufficiently reliable for the purposes of our reporting objectives based on prior testing of the data from these systems and interviews with knowledgeable officials at Education’s National Center for Education Statistics. To determine what is known about enrollment at collegiate aviation schools, we analyzed enrollment and flight instructor data voluntarily reported to FAA by some schools between October 2015 and October 2017. Through interviews with FAA officials, we have determined these data were the most complete sources available and, while limited, were sufficiently reliable for the purpose of illustrating the variety in the size of professional pilot degree program enrollment. We also obtained and analyzed FAA’s pilot certificate and instrument rating data to identify, for a number of categories, the number of new pilot certificates FAA issued from 2012 through 2016 and the total number of pilot certificate holders for those years. One limitation associated with the database in which FAA stores certificate-holder information is that the agency does not have an active process in place to discover and deactivate deceased pilots. This lack may lead to an over count in the number of active pilot certificates. However, airline transport pilot certificate holders must regularly renew their medical certificates to remain active. We found that the data were sufficiently reliable for the purposes of reporting the number of “restricted privileges” airline transport pilot certificates FAA has issued since 2013. To determine challenges that affect collegiate aviation schools’ ability to produce professional pilots, we reviewed documents, interviewed, and administered a standardized question set to a non-generalizable sample of 18 collegiate aviation schools about their pilot programs and key challenges that affect their ability to produce professional pilots. To select our non-generalizable sample of schools, we used information from FAA, the Aircraft Owner and Pilot Association, school websites, and initial interviews with aviation stakeholders. Based on the schools’ geographic location, we selected schools in each of FAA’s nine airport regions. In order to provide a variety of perspectives in our selection, we included schools of each institution type (public, private non-profit, and private for- profit), of each program type (2-year and 4-year), some that were FAA- certificated and some that contracted out flight training. While the sample allowed us to learn about challenges that affect these schools’ ability to produce professional pilots, it was designed to provide anecdotal information, not findings that would be representative of all collegiate aviation schools with professional pilot degree programs in the United States. Our initial selection included 20 schools, of which 19 responded to our request for interview. Of these 19, 18 schools responded to our question set, and representatives of one additional school provided us with general information about their program. In our question set, we asked schools to rate 10 factors that we identified in preliminary interviews as potentially affecting schools’ ability to recruit, retain, and train professional pilot students—thereby affecting their ability to produce pilots. Schools rated each factor as a great challenge, a moderate challenge, a slight challenge, or not a challenge to the ability to recruit, retain, and train professional pilot students. After our interviews with officials from the selected schools, we analyzed and aggregated responses to these questions, and identified two factors that schools most frequently cited as the most challenging to their ability to produce pilots. In addition, 3 other factors were cited by multiple schools as a great or moderate challenge. Schools generally cited the remaining 5 factors as a slight or moderate challenge. To describe stakeholders’ views of factors that affect collegiate aviation schools’ ability to produce pilots and actions that have been or could be taken to address these factors, we reviewed and summarized schools’ comments. We also reviewed documents and interviewed FAA officials, representatives of airports and industry organizations representing collegiate and non-collegiate pilot schools, airports, flight instructors, pilots, regional airlines, and mainline airlines, selected to reflect a range of perspectives about initial pilot training. (See table 4.) In addition, we reviewed documents and interviewed Education and Department of Veterans Affairs officials about regulations and policies related to pilot programs’ eligibility for federal student financial aid and the use of veterans’ education benefits. We conducted this performance audit from September 2016 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Gerald Dillingham, Ph.D. (Director); Vashun Cole (Assistant Director); Jaclyn Mullen (Analyst-in- Charge); Amy Abramowitz; Danielle Ellingston; Dave Hooper; Delwen Jones; Serena Lo; John Mingus; Natasha Oliver; Malika Rice; Michelle St. Pierre; and Elizabeth Wood made key contributions to this report.", "summary": "Collegiate aviation schools are one pathway for initial civilian pilot training in the United States and are a key source of airline pilots. Over the past 5 years, aviation stakeholders have voiced concerns that there is an insufficient supply of qualified airline pilots, citing increased airline pilot retirements, among other factors. The explanatory statement accompanying the Consolidated Appropriations Act of 2017 included a provision for GAO to review aspects of collegiate aviation schools' operations. This report examines: (1) what is known about schools with professional pilot degree programs and (2) challenges that affect schools' ability to produce professional pilots and schools' responses to these challenges. GAO reviewed relevant statutes, regulations, and documents from the FAA, Veterans Affairs, and Education; analyzed FAA's data on flight schools, airports, and pilots; and analyzed Education's degree completion data for the 2015–2016 academic year, the most recent data available. GAO also interviewed representatives from: 18 schools, selected based on factors including program type and location; 6 airports selected based on type and location; and 11 additional aviation stakeholders representing schools, airlines, pilots, airports, and flight instructors, selected to reflect a range of perspectives about initial pilot training. The results of the interviews are not generalizable to all aviation schools and stakeholders. GAO is not making recommendations in this report. On a draft of the report, DOT provided technical clarifications, which GAO incorporated as appropriate. GAO identified 147 collegiate aviation schools that offered professional pilot degree programs in academic year 2015–2016. All pilot students must pass the same knowledge and flight tests to obtain pilot certificates from the Federal Aviation Administration (FAA), but schools' programs vary. For example, 101 of these schools operated relatively more formalized, FAA-certificated degree programs. The other 46 schools operated under a model that provides flexibility and meets FAA requirements but that does not require FAA certification to conduct such training. Total annual pilot-student enrollment and graduation numbers are not known. According to FAA officials, FAA does not require schools to submit enrollment data and does not verify enrollment data that many certificated schools voluntarily submit. Regarding graduation data, schools must classify and report completed degrees by program type to the Department of Education (Education) using that agency's classification system. Education's data indicated a total of 1,356 professional pilot degrees in academic year 2015–2016. Because pilot-student graduates can be classified under a number of aviation-related programs in Education's system, the number of pilot-student graduates could be higher. Flight instructor retention, which has been influenced by the current high demand for airline pilots, and the high cost of pilot training are key challenges that affect schools' ability to produce pilots, according to aviation stakeholders GAO interviewed. Flight instructor retention : Nearly all (16 of 18) selected school representatives cited difficulty recruiting and retaining flight instructors as a great or moderate challenge for schools' ability to train pilots. According to most school representatives (15) and other selected stakeholders, instructors who aspire to be airline pilots are rapidly accruing the flight hours necessary to qualify and are obtaining employment as soon as they are eligible. In addition, regional airlines have recently increased hiring, generating high turnover among flight instructors, who are traditionally their main source of new pilots. High cost of training : Nearly all (16) selected schools' representatives identified the cost of a professional pilot degree program as a great or moderate challenge to recruiting and retaining pilot students. High education costs are not unique to these programs. Nonetheless, in addition to tuition, flight training fees alone often exceed $50,000, well above the cap for federal financial aid available to eligible students. Schools and regional airlines have taken a range of actions to address these challenges. For example, eight selected school representatives reported increasing flight instructors' compensation and benefits. In addition, some regional airlines' cadet programs provide mentorship and incentives such as bonus pay or tuition reimbursement to select students while they are still in school. The Department of Transportation (DOT) has also launched an initiative to assess the level of interest among veterans in becoming pilots and to examine strategies for employing military veterans as pilots.", "document_type": "gao"}
{"report": "As part of the credentialing and privileging process, VAMC officials are responsible for monitoring each provider’s performance on an ongoing basis and identifying any concerns about clinical care that may warrant further review. VAMCs can identify concerns about providers’ clinical care in a variety of ways, including the following: Ongoing monitoring. VHA requires VAMCs to conduct and document ongoing monitoring of each provider’s performance at least twice a year through an ongoing professional practice evaluation. During this evaluation, a provider’s performance is evaluated against benchmarks established by VAMC leadership that define acceptable performance, such as documenting patient visits appropriately and achieving specific patient outcomes. Peer review triggers. VHA has a separate process, called peer review, that VAMCs may use to review adverse events. While information collected as part of peer review is protected for quality improvement purposes and may not be used to take action against a provider, VAMCs can identify concerns about a provider’s clinical care based on a trend of certain peer review outcomes over a specified period of time, referred to as triggers. VHA requires VAMCs to establish peer review triggers. An example of a peer review trigger is when a provider has two or more episodes of patient care within a 12- month period for which a peer determined that most experienced, competent providers would have managed the episodes differently. Complaints or incident reports. Concerns about a provider’s clinical care can also be identified through complaints and incident reports. These can come from any individual with a concern, including patients, providers, or VAMC leadership. Tort claims. Filed or settled tort claims or malpractice claims can raise a concern about a provider not identified through ongoing monitoring or peer review. Once a concern about a provider’s clinical care is identified, VHA policy and guidance establish processes for VAMC officials to use to review the concern and determine whether an action should be taken against the provider’s clinical privileges. VHA policy states that if allowing a provider under review to continue delivering patient care could result in imminent danger to veterans, VAMC officials should remove the provider from delivering patient care through a summary suspension of privileges. VAMC officials have flexibility to determine the most appropriate process to use to review a provider’s clinical care depending on the specific concerns and the situation. These processes include the following: Focused professional practice evaluation (FPPE) for cause. This is a prospective review of the provider’s care over a specified period of time, during which the provider has the opportunity to demonstrate improvement in the specific area of concern. Failure to improve could result in further review or action. Retrospective review. This is a review of the provider’s delivery of patient care focused on a specific period of time in the past, a specific area of practice, or both, based on an identified concern. Comprehensive review. This is a more extensive retrospective review, generally performed by a panel of experts to ensure fairness and objectivity. In addition to reviewing the provider’s past patient care, these reviews may also include interviews with the provider, patients, and staff. These reviews generally result in conclusions about whether care delivered by the provider met the standard of care and may include recommendations about the provider’s privileges. Once a review is completed, VAMC leadership officials and the VAMC credentialing committee make decisions about next steps, which could include the following: do nothing, if the review did not substantiate the concerns; conduct further review (such as an FPPE for cause to allow the provider an opportunity for improvement or a comprehensive review if more information is needed); or take an adverse privileging action, including limiting one or more privileges (such as prescribing medication or performing a certain procedure) or revoking all of the provider’s privileges. If the VAMC’s credentialing committee recommends an adverse privileging action, it is the VAMC director’s responsibility to weigh all available information, including recommendations, and take an action. After a permanent provider is notified of the director’s decision, the provider can appeal the decision to the Disciplinary Appeals Board as part of their due process rights. The adverse privileging action is considered final once the Disciplinary Appeals Board reaches a decision and the Deputy Under Secretary for Health executes the Board’s decision. If a permanent provider does not make use of the offered due process procedures within 7 days, the provider waives his or her right to due process and the adverse privileging action is considered final. VHA policy requires VAMCs to alert certain entities if there are serious concerns with regard to a provider’s clinical performance. VHA policy assigns reporting responsibility and authority to the VAMC director, who generally delegates the task of reporting to other VAMC officials. VHA makes this information available to other health care entities through two distinct reporting processes: NPDB. Under VHA policy, VAMC directors must report to the NPDB any adverse privileging action the facility takes that 1) affects the clinical privileges of a provider for a period longer than 30 days and 2) is related to professional incompetence or professional misconduct. VHA policy requires VAMCs to submit these NPDB adverse action reports within 15 calendar days of the date the adverse privileging action is made final— that is, when all applicable internal due process procedures have been completed and the VAMC director has signed off on the action. VAMC directors are also required to report to the NPDB providers who resign or retire while under investigation or in return for the VAMC not conducting such an investigation or proceeding. To avoid any errors in the facts of the report, the VAMC director must notify any provider who is about to be reported to the NPDB and give the provider an opportunity to discuss the content of the report before it is submitted. SLBs. VHA policy requires VAMC directors to report providers—both current and former employees—when there are serious concerns about the providers’ clinical care to any SLB where the providers hold an active medical license. Specifically, VHA policy requires VAMCs to report providers who so substantially failed to meet generally accepted standards of clinical practice as to raise reasonable concern for the safety of patients. According to VHA policy and guidance, the SLB reporting process should be initiated as soon as it appears that a provider’s behavior or clinical practice fails to meet accepted standards. VAMC officials are directed not to wait to report to SLBs until adverse privileging actions are taken because an SLB conducts its own investigation of the provider to determine whether licensure action is warranted. This reporting process comprises five stages as established in VHA policy, and VHA policy states that the process should be completed in around 100 days (see figure 1). Performance pay—a component of VA provider compensation—is an annual lump sum payment based on the extent to which an individual provider achieves specific goals. The goals may vary for providers across VA, at the same VAMC, or within a particular specialty. VA policy establishes minimum performance pay eligibility criteria, including being employed by VA from July 1 through September 30 of the fiscal year being reviewed. Documentation frequently lacking. We found that the five selected VAMCs collectively required reviews of 148 providers’ clinical care after concerns were raised from October 2013 through March 2017, but VAMC officials were unable to provide documentation that almost half of these reviews were conducted. We found that all five VAMCs lacked at least some documentation of the reviews they told us they conducted, and in some cases the required reviews were not conducted at all. We also found VHA does not adequately oversee these reviews, as discussed later in this report. FPPEs for cause. FPPEs for cause accounted for most of the missing documentation of clinical care reviews, despite VHA policy requiring VAMCs to document FPPEs for cause in the providers’ files. Specifically, of the 112 providers for whom the selected VAMCs required FPPEs for cause from October 2013 through March 2017, the VAMCs were unable to provide documentation of the FPPEs for nearly a quarter (26) of the providers. Additionally, VAMC officials confirmed that FPPEs for cause that were required for another 21 providers were never conducted. Other reviews. The selected VAMCs were also unable to provide documentation of some retrospective reviews. Specifically, of the 27 providers for whom the selected VAMCs conducted a retrospective review, 8 were missing documentation. While VHA guidance recommends that VAMCs document these reviews, VHA policy does not require that VAMCs document retrospective or comprehensive reviews. VHA officials told us that they expected VAMCs to document these types of reviews so that the information could be used to support adverse privileging actions, if necessary. Without clearly stated documentation requirements in VHA policy, VAMC officials inconsistently document their results, preventing VAMC directors and VISNs from properly evaluating the effectiveness of its retrospective and comprehensive reviews, which are used to, among other things, ensure patient safety. Additionally, we found that key officials from two VAMCs were not aware of the VHA guidance and that 5 of the 8 missing retrospective reviews were from these two VAMCs. We also found that one VAMC was missing documentation of clinical care reviews for 12 providers who met the VAMC’s peer review trigger. In the absence of this documentation, we were unable to identify the type of reviews that were missing for these 12 providers. The selected VAMCs’ failure to document reviews of providers’ clinical care after concerns were raised is inconsistent with federal internal control standards for monitoring and documentation, which state that management should conduct and document separate evaluations, when necessary. In the absence of VAMC documentation of such separate evaluations of providers, VAMC leadership officials lack key information needed to make decisions about whether providers’ privileges are appropriate, and they also lack reasonable assurance that appropriate reviews are conducted. Reviews not always timely. We found that the five selected VAMCs’ reviews of providers’ clinical care were not always conducted in a timely manner after concerns were raised. Specifically, of the 148 providers, the VAMCs’ initiation of reviews of 16 providers’ clinical care was delayed by more than 3 months, and in some cases for multiple years, after the concern was raised. At one VAMC, service chiefs were not instructed to conduct reviews of 14 providers until 4 to 13 months after these providers met the VAMC’s peer review trigger. Before the service chiefs were notified of the concerns, 3 of these providers had at least one additional concerning episode of care—that peer reviewers judged would have been handled differently by most experienced providers—identified through the peer review process. As pointed out in VHA guidance, earlier intervention could prevent additional patients from receiving substandard care. Officials from another VAMC did not conduct retrospective reviews on 2 providers until we requested documentation of the reviews, approximately 3 and a half years after the credentialing committee had initially requested a review. While VHA officials told us that clinical care reviews should be conducted as expeditiously as reasonably possible, VHA policy does not specify a timeliness requirement. Allowing more time to elapse before a clinical care review is initiated weakens the intended purpose behind clinical care reviews and further increases risk to patient safety. Federal internal control standards for monitoring state that management should evaluate issues and remediate identified deficiencies in a timely manner. A clinical care concern could represent a potential deficiency in providing medical care, and as a result, VHA increases its risk further without establishing a policy that sets timeframes for conducting clinical care reviews. VHA oversight is inadequate. We also found that VHA does not adequately oversee VAMC reviews of providers’ clinical care after concerns have been raised, including ensuring that these reviews are completed and documented in a timely manner. Under VHA policy, VISNs are responsible for overseeing the credentialing and privileging processes at their respective VAMCs. While reviews of providers’ clinical care after concerns are raised are a component of credentialing and privileging, we found that the VISNs with responsibility for overseeing the selected VAMCs through routine audits do not include these reviews in their audits. While the standardized tool VHA requires the VISNs to use for these audits instructs the VISNs to identify and review providers who were on an FPPE for cause, none of the VISN officials we spoke with described any routine oversight of FPPEs or any other reviews of identified clinical care concerns. This may be in part because some VISN officials are not using VHA’s standardized audit tool as required. Officials from one VISN said they had developed their own audit tool and officials from another VISN said that they were not conducting the audits due to multiple instances of turnover in a key position at the VISN. Further, VHA’s standardized audit tool does not direct the VISN to oversee any other types of reviews of clinical care concerns, such as retrospective or comprehensive reviews. The tool also does not require VISN officials to look at documentation of the FPPEs for cause; instead, it calls for reviewing credentialing committee meeting minutes. Without reviewing documentation, VISN officials would be unable to identify the incomplete documentation that we identified in our review. Both VHA and VISN officials described instances of assisting VAMC officials with reviews of providers’ clinical care after concerns had been raised, but VHA and VISN officials told us that their involvement in these reviews is typically consultative and not routine. (For example, the VISN may assist by identifying providers outside of the VAMC to conduct the review.) As a result, VHA and the VISNs are not conducting routine oversight to ensure that VAMC reviews of providers’ clinical care after concerns are raised are conducted appropriately, including adequately ensuring that the reviews are completed and documented in a timely manner, in accordance with VHA policy. The lack of routine VHA oversight, through the VISNs, of VAMC reviews of providers’ clinical care after concerns are raised is inconsistent with federal internal control standards for monitoring, which state that management should establish and operate monitoring activities. In the absence of routine monitoring of VAMCs’ evaluations of providers after concerns have been raised, VHA lacks reasonable assurance that VAMCs adequately review all identified concerns about providers’ clinical care and take appropriate privileging actions to ensure that VA is providing safe, high quality care for veterans. NPDB and SLB reporting not completed. We found that the five selected VAMCs did not report the majority of providers who should have been reported to the NPDB or SLBs in accordance with VHA policy. Our analysis shows that from October 2013 through March 2017, of the 148 providers whose clinical care required a review, the VAMCs took adverse privileging actions against 5 providers, and another 4 providers resigned or retired while under review but before an adverse privileging action could be taken. However, at the time of our review, we found that the five selected VAMCs had only reported 1 of these 9 providers to the NPDB and none of these providers to the SLBs. Furthermore, the 1 provider who was reported to the NPDB for an adverse privileging action was reported 136 days after all internal VA appeals were complete, far beyond the 15 day reporting requirement. In addition to these nine providers, one of the selected VAMCs terminated the services of four contract providers based on deficiencies in the providers’ clinical performance, effectively revoking their clinical privileges. For example, the VAMC documented that one contractor’s services were terminated for cause related to patient abuse after only 2 weeks of work at the VAMC. A VAMC leadership official told us there was no further documentation of whether reporting was considered or whether any comprehensive review was conducted, despite the fact that the VAMC credentialing committee recommended both. While VHA policy identifies the requirements, steps, and limited fair hearing process for reporting contract providers, these required steps were not followed, and none of these providers were reported to the NPDB or SLB. As a result of our audit work, in August 2017, one of the VAMCs reported to the NPDB three of the providers who resigned or retired while under investigation but before an adverse privileging action could be taken. These reports were completed between 11 months and over 3 and a half years after the providers resigned or retired. VAMC officials could not confirm that they sent the required copies of the NPDB reports to the appropriate SLBs. The five selected VAMCs did report two providers to their respective SLBs for reasons other than adverse privileging actions. In accordance with VHA policy, these SLB reports were made after VAMC officials determined that the providers’ behavior or clinical practice so substantially failed to meet generally accepted standards of clinical practice as to raise reasonable concern for the safety of patients—the standard for SLB reporting. One of these providers could not have an adverse privileging action taken against them because VAMC officials unintentionally allowed the provider’s privileges to expire during a comprehensive review of the provider’s care. The other provider reported to the SLBs was considered for an adverse privileging action, but VAMC officials suspended the provider instead. The provider demonstrated improvement after the suspension. SLB reporting not always timely. While two of the selected VAMCs had each reported a provider, we found that in these cases the SLB reporting process took significantly longer than the 100 day timeframe suggested in VHA policy. Specifically, it took over 500 days for each of the two completed reports to pass initial and comprehensive review at the VAMC, receive concurrence from the VISN, and be submitted to the SLB. For example, one of the two providers self-reported to the SLB the concerning episode of care at the VAMC. However, before the VAMC submitted its SLB report 328 days later, the SLB had completed its investigation of the provider’s self-report and put in place an agreement that placed restrictions and requirements on the provider’s medical license. Subsequently, the provider successfully met the requirements of the agreement and had all restrictions on the license removed. Officials at two VAMCs told us the SLB reporting is more tedious or cumbersome than the NPDB reporting process, making it difficult to complete in a timely manner. One VAMC official commented that while completing the process in less than a year seems reasonable, the typical timeframe for submitting a SLB report is at least 2 years. At the five selected VAMCs, we found that providers were not reported to the NPDB and relevant SLBs as required because officials were generally not familiar with or misinterpreted related VHA policies. VHA officials commented that adverse privileging actions and clinical care concerns rising to the level of reporting are infrequent, with officials at two VISNs estimating that only a few occur across the facilities within their network each year. Staff at three VAMCs commented that there has been turnover in positions that have been delegated tasks related to reporting and one VAMC official told us that turnover in these positions is a barrier to timely reporting. For example, at one facility, we found that officials failed to report six providers to the NPDB because the officials were unaware that they had been delegated responsibility for NPDB reporting. Officials at two of the selected VAMCs told us that VHA cannot report contract providers to the NPDB. This assertion is inconsistent with VHA policy. Officials at two of the selected VAMCs were waiting to start the SLB reporting process for providers until after all appeals had been exhausted. This approach is inconsistent with VHA policy, which states that the process should start within 7 days of when the reporting standard is met. For example, for one provider who was reported, VAMC officials unnecessarily waited 7 months for the completion of the appeals process before they resumed the reporting process, which ultimately took 547 days. Officials at one VAMC did not report a provider to the NPDB or SLB following an adverse privileging action because the SLB had found out about the issue independently. This is inconsistent with VHA policy for NPDB and SLB reporting, and the SLBs in other states where the provider held a license were not alerted of concerns about the provider’s clinical practice. VHA oversight is inadequate. We also found that VHA and the VISNs do not adequately oversee NPDB and SLB reporting and they cannot ensure that VAMCs are reporting providers when required to do so by VHA policy. While the VISNs are responsible for overseeing the credentialing and privileging at their respective VAMCs under VHA policy, VHA policy does not require the VISNs to oversee whether VAMCs are reporting providers to the NPDB or SLB when warranted. As a result, VISN officials were unaware of situations in which VAMC directors failed to report providers to the NPDB, as evidenced by our review. In the case of reporting processes for SLBs, VISN officials told us that they review the evidence files to ensure, among other things, that the files are in compliance with privacy laws. However, officials told us that the VISNs do not oversee the reporting process to ensure that VAMC directors are reporting all providers to the SLB who should be reported. Additionally, VHA officials told us that they are not aware of the number of cases that have been initiated for SLB reporting. Further, by failing to report providers as required, VHA facilitates providers who provide substandard care obtaining privileges at another VAMC or a hospital outside of VA’s health care system without an indication on their record that an adverse privileging action was taken against them or that they resigned or retired while under investigation. For example, we found that two of the four contract providers whose privileges were revoked and were not reported to the NPDB or SLBs by one VAMC continue to be able to provide care to veterans outside of that VAMC. Specifically, one provider whose services were terminated related to patient abuse subsequently held privileges at another VAMC, while the other provider belongs to a network of providers that provides care for veterans in the community. Seven of the 12 providers who were not reported to the NPDB or SLBs after their privileges were revoked—through adverse privileging actions or the termination of services on a contract—or who resigned or retired while under investigation have current Medicare enrollment records, indicating that they are likely practicing outside of VA and may still be receiving federal dollars by billing for services provided to Medicare beneficiaries. We also identified one case where a VAMC director did not report a provider to the NPDB or SLB after an agreement was reached that the provider would resign, though the VAMC credentialing committee recommended the provider’s privileges be revoked. We found that the provider’s privileges were also revoked from a non-VA hospital in the same city for the same reason 2 years later. The director’s decision not to report the provider as required left patients in that community vulnerable to adverse outcomes because problems with the provider’s performance were not disclosed. There was no documentation of the reasons why the VAMC director did not report the provider to the NPDB or SLBs. This lack of routine oversight from VHA through the VISNs of VAMCs’ reporting of providers to the NPDB and SLBs is inconsistent with federal internal control standards for monitoring. The standards state that management should establish and operate monitoring activities to monitor the internal control system and appropriately remediate deficiencies on a timely basis. Without routine monitoring of the reporting process, VHA lacks reasonable assurance that all providers who should be reported to the NPDB and SLBs are reported. None of the five providers who had an adverse privileging action taken against them in the period we reviewed received performance pay for the fiscal year the action was taken because they were ineligible, per VA policy. This is because VA policy requires providers to be employed through the end of the fiscal year to be eligible for performance pay, and none of the five providers we reviewed were still employed by the VAMCs at the end of the fiscal year in which the actions were taken. All five of the adverse privileging actions resulted from concerns about the providers’ clinical care in previous fiscal years. Among the five providers, two providers received performance pay in the fiscal year before their privileges were revoked, and three providers did not. For example, one provider’s privileges were revoked in 2015 due to concerns raised in 2014 regarding the provider’s failure to complete necessary documentation of patient care in a timely manner. This provider did not receive credit for the performance pay goal directly related to timely completion of documentation, and ultimately the provider received half of the maximum amount of performance pay for fiscal year 2014. In the case of another provider who did not receive any performance pay for the fiscal year before the adverse privileging action was taken, VAMC officials noted that the provider had been removed from practice for a portion of the fiscal year while they were reviewing the clinical care concern and thus was unable to meet performance pay goals. VHA is responsible for ensuring that providers at its VAMCs deliver safe care to veterans and that concerns that may arise about providers’ clinical care are reviewed and addressed at VHA’s 170 VAMCs. However, our work shows that at our five selected VAMCs, reviews of concerns about providers’ clinical care were not always documented or conducted in a timely manner and VAMCs had not reported the majority of providers they should have reported to the NPDB or SLBs. This is concerning for several reasons. First, without documentation of the reviews of these concerns about providers’ clinical care, VAMC leadership officials may not have the information they need to make decisions about whether a provider’s privileges at the VAMC are appropriate. Second, if VAMCs do not document that they have reviewed provider’s clinical care after concerns have been raised, VHA lacks reasonable assurance that the VAMCs are adequately addressing such concerns or that VAMCs are limiting or revoking providers’ privileges when necessary. Third, if these reviews are not conducted in a timely manner and providers continue to deliver potentially substandard care, VHA may be increasing the risk that veterans will receive unsafe care at VAMCs. Finally, VAMCs’ failure to report providers to the NPDB and SLBs, as required under VHA policy, makes it possible for providers to obtain privileges at other VAMCs or non-VA health care entities without disclosing the problems with their past performance. In effect, this can help shield the providers from professional accountability outside of VA’s health care system. Further, VHA’s inadequate oversight of these processes calls into question the extent to which VAMCs are held accountable for ensuring that veterans receive safe, high quality care. As our review shows, the VISNs responsible for overseeing the five selected VAMCs do not routinely oversee VAMC reviews of providers’ clinical care after concerns are raised to ensure that these reviews are completed in accordance with VHA policies; nor do the VISNs oversee the VAMCs to ensure that all providers that should be reported are reported to the NPDB and SLBs. Until VHA strengthens its oversight of these processes, veterans may be at increased risk of receiving unsafe care through the VA health care system. We are making the following four recommendations to VA: The Under Secretary for Health should specify in VHA policy that reviews of providers’ clinical care after concerns have been raised should be documented, including retrospective and comprehensive reviews. (Recommendation 1) The Under Secretary for Health should specify in VHA policy a timeliness requirement for initiating reviews of providers’ clinical care after a concern has been raised. (Recommendation 2) The Under Secretary for Health should require VISN officials to oversee VAMC reviews of providers’ clinical care after concerns have been raised, including retrospective and comprehensive reviews, and ensure that VISN officials are conducting such oversight with the required standardized audit tool. This oversight should include reviewing documentation in order to ensure that these reviews are documented appropriately and conducted in a timely manner. (Recommendation 3) The Under Secretary for Health should require VISN officials to establish a process for overseeing VAMCs to ensure that they are reporting providers to the NPDB and SLBs, and are reporting in a timely manner. (Recommendation 4) We provided a draft of this report to VA for comment. In its written comments, which are reproduced in Appendix I, VA agreed with our conclusions and concurred with our recommendations. In its comments, VA stated that VHA plans to revise existing policy to require documentation of reviews of providers’ clinical care after concerns have been raised and to establish expected timeframes for completing such reviews. VA estimates that it will complete these actions by September 2018. VA also stated that VHA will update the standardized audit tool used by the VISNs so that it directs them to oversee reviews of providers’ clinical care after concerns have been raised and to ensure timely reporting to the NPDB and SLBs. According to VA, the revised tool will also facilitate aggregate reporting by VISNs to identify trends and issues. VA estimates that it will complete these actions by October 2018. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Veterans Affairs, and the Under Secretary for Health. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Sharon M. Silas at (202) 512-7114 or silass@gao.gov or Randall B. Williamson at (202) 512-7114 or williamsonr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, Marcia A. Mann (Assistant Director), Kaitlin M. McConnell (Analyst-in-Charge), and Summar C. Corley made major contributions to this report. Also contributing were Krister Friday, Jacquelyn Hamilton, Vikki Porter, and Brienne Tierney.", "summary": "Nearly 40,000 providers hold privileges in VHA's 170 VAMCs. VAMCs must identify and review any concerns that arise about the clinical care their providers deliver. Depending on the findings from the review, VAMC officials may take an adverse privileging action against a provider that either limits the care a provider is allowed to deliver at the VAMC or prevents the provider from delivering care altogether. GAO was asked to review VHA processes for reviewing concerns about providers' clinical care. This report examines, among other things, selected VAMCs' (1) reviews of providers' clinical care after concerns are raised and VHA's oversight of these reviews, and (2) VAMCs' reporting of providers to the NPDB and SLBs and VHA's oversight of reporting. GAO visited a non-generalizable selection of five VAMCs selected for the complexity of services offered and variation in location. GAO reviewed VHA policies and files from the five selected VAMCs, and interviewed VHA, VISN, and VAMC officials. GAO also evaluated VHA's practices using federal internal control standards. Department of Veterans Affairs (VA) medical center (VAMC) officials are responsible for reviewing the clinical care delivered by their privileged providers—physicians and dentists who are approved to independently perform specific services—after concerns are raised. The five VAMCs GAO selected for review collectively required review of 148 providers from October 2013 through March 2017 after concerns were raised about their clinical care. GAO found that these reviews were not always documented or conducted in a timely manner. GAO identified these providers by reviewing meeting minutes from the committee responsible for requiring these types of reviews at the respective VAMCs, and through interviews with VAMC officials. The selected VAMCs were unable to provide documentation of these reviews for almost half of the 148 providers. Additionally, the VAMCs did not start the reviews of 16 providers for 3 months to multiple years after the concerns were identified. GAO found that VHA policies do not require documentation of all types of clinical care reviews and do not establish timeliness requirements. GAO also found that the Veterans Health Administration (VHA) does not adequately oversee these reviews at VAMCs through its Veterans Integrated Service Networks (VISN), which are responsible for overseeing the VAMCs. Without documentation and timely reviews of providers' clinical care, VAMC officials may lack information needed to reasonably ensure that VA providers are competent to provide safe, high quality care to veterans and to make appropriate decisions about these providers' privileges. GAO also found that from October 2013 through March 2017, the five selected VAMCs did not report most of the providers who should have been reported to the National Practitioner Data Bank (NPDB) or state licensing boards (SLB) in accordance with VHA policy. The NPDB is an electronic repository for critical information about the professional conduct and competence of providers. GAO found that selected VAMCs did not report to the NPDB eight of nine providers who had adverse privileging actions taken against them or who resigned during an investigation related to professional competence or conduct, as required by VHA policy, and none of these nine providers had been reported to SLBs. GAO found that officials at the selected VAMCs misinterpreted or were not aware of VHA policies and guidance related to NPDB and SLB reporting processes resulting in providers not being reported. GAO also found that VHA and the VISNs do not conduct adequate oversight of NPDB and SLB reporting practices and cannot reasonably ensure appropriate reporting of providers. As a result, VHA's ability to provide safe, high quality care to veterans is hindered because other VAMCs, as well as non-VA health care entities, will be unaware of serious concerns raised about a provider's care. For example, GAO found that after one VAMC failed to report to the NPDB or SLBs a provider who resigned to avoid an adverse privileging action, a non-VA hospital in the same city took an adverse privileging action against that same provider for the same reason 2 years later. GAO is making four recommendations, including for VA to direct VHA to require VAMCs to document reviews of providers' clinical care after concerns are raised, develop timeliness requirements for these reviews, and ensure proper VISN oversight of such reviews as well as timely VAMC reporting of providers to the NPDB and SLBs. VA concurred with GAO's recommendations and described steps it will take to implement them.", "document_type": "gao"}
{"report": "U.S. taxpayers who earn income abroad may be subject to U.S. taxes on that income. Firms incorporated in the United States can earn income from their own foreign activities or through their ownership of foreign subsidiaries. In such cases, income is subject to tax in both the country where it was earned and in the United States. In this report, we focus on U.S. corporations with operations in foreign countries. Countries have generally adopted one of two alternative approaches to taxing corporations’ foreign income. Prior to the enactment of Public Law 115-97—commonly referred to by the President and many administrative documents as the Tax Cuts and Jobs Act of 2017 (TCJA)—the U.S. government taxed U.S. corporations largely on a worldwide basis, meaning that the United States taxed both the domestic and foreign earned income of corporations. Most other countries, including most OECD member countries, use a largely territorial approach that taxes income earned within their borders, and exempts certain foreign-earned income of their resident corporations from taxation. However, under both a worldwide and a territorial system, income earned by foreign entities from operations within a country is taxed by that country. As such, the corporation or its subsidiary must file a tax return in that country, and the country’s tax authority can audit the tax return and adjust taxable income and taxes due. Countries have adopted measures to limit the potential for double taxation, which occurs when two or more countries levy taxes on the same income due to differences in the tax jurisdictions and tax systems. To avoid double taxation, countries—including the United States—that tax on a worldwide basis provide a credit for foreign taxes paid that reduces the MNC’s domestic tax liability. In addition, countries maintain tax treaties with each other that cover a wide range of tax issues but have two primary purposes: (1) avoiding double taxation, and (2) preventing tax evasion. Despite these efforts to limit disputes, a U.S. MNC may disagree with an adjustment made to its taxable income. In such cases, an MNC can go directly to the country’s tax authority to try to resolve the dispute. According to tax experts we spoke with, if, however, a U.S. MNC views this process as unlikely to be successful or if it was unsuccessful and believes the adjustment would result in double taxation, the corporation can ask USCA for assistance in resolving the dispute. In the United States, the designated USCA is the commissioner of the Large Business and International Division of the IRS. The USCA office is made up of two groups: the Advance Pricing and Mutual Agreement Program (APMA) and the Treaty Assistance and Interpretation Team. According to USCA officials, most disputes involving U.S. MNCs—the focus of this report—are resolved through APMA. TJCA significantly changed the way in which the United States taxes MNC’s income but some experts have pointed out that the law is unlikely to end profit shifting. The Congressional Budget Office estimated in April 2018 that TCJA would reduce profit shifting by about $65 billion per year out of an estimated $300 billion of profit shifting per year prior to the act. For U.S. corporations earning income directly through foreign subsidiaries, the act moved the United States from a system that generally taxed worldwide income and provided a credit for taxes paid abroad to a system that generally does not tax foreign-sourced income. However, the new ‘territorial’ system created by the act included a number of provisions designed to protect the United States’ corporate tax base by taxing some foreign income. It included (1) a lower worldwide tax on global intangible low-taxed income, and (2) a corresponding tax on intangible income earned abroad based on assets in the United States (foreign-derived intangible income). The act also added a corporate tax base erosion and antiabuse tax. It is not clear how these provisions will affect corporations’ allocation of profits and business activity. The process of resolving a dispute through MAP usually begins when a U.S. MNC requests assistance from USCA to resolve disputes over an adjustment in either its foreign-filed or its U.S. tax return. According to IRS, the number of active MAP cases, as of October 2017, was 686 and covered $26 billion of income subject to potential double taxation. It should be noted that a single U.S. taxpayer can be involved in multiple MAP cases because disputes are resolved bi-laterally. For example, if a U.S. MNC had a dispute involving the allocation of overhead costs across multiple subsidiaries in different countries, then there would be separate dispute cases for each country involved. According to IRS data, the number of MAP cases filed each year has been growing, more than doubling in 5 years from 100 in 2010 to 286 in 2014. As noted earlier, when a U.S. MNC disputes a foreign tax authority’s adjustment to a tax return, the U.S. MNC can try to resolve the issue through the appeals process within the taxing jurisdiction. However, according to tax experts we spoke with, if the U.S. MNC is unsuccessful or if the U.S. MNC believes the local appeal will be less successful than the MAP process, it can request assistance from USCA. Once a taxpayer has requested assistance through MAP, USCA conducts an initial review to determine if it will accept the request. For example, USCA analysts would ensure that the request involves potential double taxation and that the foreign country was a treaty partner. If USCA accepts the MAP request for assistance, it reviews the technical facts of the dispute and prepares its position prior to negotiating on a resolution with the foreign competent authority. When IRS, rather than the foreign tax authority, initiates the adjustment, USCA will discuss the facts of the case with the IRS examiner who proposed the adjustment, but determines on its own how much of the adjustment is justified. In the case of foreign-initiated adjustments, USCA will contact the foreign competent authority while developing its position to provide updates and obtain any needed information. According to USCA officials, based on its review, the USCA determines whether it considers the adjustment valid and the amount of the adjustment that should be withdrawn by the initiating tax authority, and what amount of relief USCA may provide. USCA can also unilaterally decide to fully withdraw the IRS adjustment or provide full correlative relief for a foreign-initiated adjustment that USCA considers valid. USCA resolves disputes brought to it by MNCs according to MAP specified in the tax treaties. Under the treaties, international tax disputes that may result in double taxation can be resolved in the following five ways: The country that initiated the adjustment to taxable income can fully withdraw the adjustment, leaving the taxpayer’s reportable taxable income unchanged. USCA can provide correlative relief to the MNC. This relief usually takes the form of a corresponding adjustment, which relieves double taxation caused by the other country’s adjustment. USCA and the foreign country can agree to a combination of withdrawing some of the adjustment to taxable income and providing relief for the remaining adjustment to provide full relief of double taxation to the taxpayer. USCA and the foreign country can agree on some combination of withdrawal and relief that results in partial relief to the taxpayer. No relief from adjustment. Figure 1 provides an overview of the basic process of a MAP request for assistance. Appendix III provides illustrative examples of dispute resolution cases and resolutions. Once USCA has determined its position, it begins negotiating with the foreign competent authority to resolve the dispute. These cases can take several years to resolve with some taking much longer than the average, particularly if there is a fundamental disagreement. For example, USCA’s APMA inventory data from 2013 to 2017 indicate the average processing time was around 2 years, but cases ranged from as little as a few months to 5 years to resolve, with a few cases taking even longer. In addition, the inventory data show that disputes are generally over taxable income from prior years. For example, a MAP case resolved in 2017 could have been filed in 2008 for a dispute over 2005 taxable income. However, cases may be shorter when the tax treaties include provisions for binding arbitration. The United States has treaties with four counties that include provisions for binding arbitration. If the two countries are unable to resolve the dispute within 2 years, the taxpayer can request that the case go to arbitration for a decision. Throughout the entire process, the taxpayer has a right to withdraw the request and accept the tax authority’s adjustment which may entail double taxation. According to tax experts that we interviewed, if the adjustment is small, a taxpayer may prefer to accept the double taxation rather than incur the cost of going through the MAP process. These costs can include direct costs of retaining tax advisors as well as the indirect costs of listing the amount of funds that are in dispute on their financial statement as an unresolved tax issue. The taxpayer can also refuse the negotiated or arbitrated resolution and appeal the case to the IRS office of appeals or foreign tax authority. USCA provides information about the MAP process through an IRS web page on competent authority assistance. The webpage includes contact information for USCA offices and a link to a document that describes the process for requesting assistance. The document is in the form of a Revenue Procedure—an official statement of a procedure based on the Internal Revenue Code, related statutes, tax treaties, and regulations. Our analysis of the information on the website found a number of issues that limit its accessibility: The website does not include an overview or high-level description of the MAP process. The website lacked elements such as frequently asked questions or fact sheets that IRS has developed for similar processes that help promote understanding of complex tax issues. The website does not explain in clear language what constitutes a tax dispute eligible for the MAP resolution process. Other IRS websites provide more detailed information for other issues relevant to U.S. MNCs. For example, the IRS website for country-by-country reporting provides a detailed page explaining the new reporting guidance with multiple links for additional guidance. In addition, USCA’s guidance for requesting MAP assistance is an 87- page revenue procedure. While this document is complete, it is highly technical and may not be easily understood by taxpayers seeking relief from double taxation. IRS requires information for taxpayers to be clear and accessible. IRS’s Taxpayer Bill of Rights states that taxpayers have the right to clear explanations of tax laws and IRS procedures. In addition, the federal internal control standards, the Plain Writing Act of 2010, and Office of Management and Budget plain writing guidance state that agencies should, for example, communicate the necessary quality information externally. Moreover, accessibility is consistent with the criteria we have previously identified for a good tax system. IRS’s Strategic Plan for Fiscal Years 2018-2022 notes that the agency faces a business environment that is becoming more global, dynamic, and digital, further underscoring the importance of taxpayers having accessible, plain language guidance on MAP. The Organisation for Economic Co-operation and Development (OECD) also assessed the accessibility of USCA’s guidance and found that it met OECD’s minimum standards. As part of its base erosion and profit-shifting project, the OECD has been reviewing countries’ administrations of the mutual agreement processes. In its review of the United States’ process, the OECD concluded that while U.S. MAP guidance is comprehensive and available, and fully met the OECD’s minimum standards, some further clarity could be provided. The OECD review offered examples of how other countries provide taxpayers with overview information they can use before accessing more detailed technical guidance. For example, Canada publishes an annual MAP Program Report on its website that includes background information on its process, as well as general information on the steps in the process and high-level information on timeframes. Singapore’s MAP web page includes basic information on the MAP process, an example of a case that would be suitable for MAP, and a link for users to provide feedback on the usefulness of the information. USCA officials said that they have not improved the information provided on their website because they believe the current guidance to be sufficient. However, USCA officials told us that they are engaged in some efforts that may improve the information they provide to taxpayers. USCA officials stated that USCA is close to finalizing a “practice unit” explaining the competent authority process. According to USCA officials, this unit uses plain language to walk taxpayers step by step through MAP and the competent authority process. The unit also highlights the roles and responsibilities of all the stakeholders in the process, including the taxpayers. USCA officials said they intend to make the practice unit available on USCA’s public website and the United States’ OECD MAP Profile. APMA officials also said they expect that the additional information on the requirements of MAP and Revenue Procedure 2015-40 will be useful to those unfamiliar with the processes. USCA officials did not provide a date for when this practice unit would be completed. Providing taxpayers with a clear overview and accessible guidance on the MAP process would help ensure that taxpayers who might benefit from entering the MAP process are aware of the process, know how to navigate it, and understand the general time frames for relief. Providing information that helps facilitate this process could help reduce taxpayer burden. USCA may contact taxpayers about their cases for various reasons. Officials in the APMA office stated that they send acknowledgement letters when the MAP request is accepted, and routinely gather additional information from taxpayers to fully develop a MAP case. They said that an analyst generally will communicate with a taxpayer before and after APMA has substantive discussions with its foreign counterparts regarding the taxpayer’s case. While officials stated they provide regular contact, they do not have a process to systematically record or track these contacts, other than in the case file. Regular contact with taxpayers may help make the process more transparent and help ensure that they are informed about their cases. One of the criteria we have previously identified for a good tax system is transparency. A transparent tax system reduces uncertainty for taxpayers, allowing them to better plan their decisions about employment and investment. According to IRS officials, APMA provides general guidance on when a taxpayer should be notified of developments in the case or its status. APMA officials stated that contact will vary depending on the facts and circumstances of the case such as its complexity and frequency of communications with the foreign competent authority. However, the guidance is focused on taxpayer expectations and does not address any requirements of officials to track or record contacts. Contacts with taxpayers could affect perceptions of the transparency and fairness of the MAP process. Tracking and recording contact with taxpayers would help provide APMA with assurance that taxpayers are being kept aware of the status of their MAP case in a timely manner. Monitoring such information would help APMA to evaluate the transparency and fairness of its MAP administration. It would also help assure APMA there is consistency in contacting taxpayers. APMA maintains an inventory database that tracks some information on MAP cases. These data include how many months it took to resolve the case, the analyst assigned to the case, and whether an economist was assigned. According to APMA officials, each MAP case is assigned an analyst and, for complex cases, an economist. APMA groups analysts into teams that work on MAP cases from different geographic regions. Three teams consist of economists that are assigned to cases managed by other teams. APMA data on how staff are deployed are shown in table 1. While these data provide some information on workload, they do not provide information on how many hours or staff days are associated with a particular case. This information would be useful to know because it could provide insight about the resources needed for different cases based on differences in complexity and other factors. Standards for internal control state that management should establish and operate monitoring activities that can be used to evaluate results and ensure that objectives are met with minimum wasted resources. However, according to APMA officials, their tracking system is not set up to track hours or staff days spent on each case. Instead, according to APMA officials, their staffing process accounts for differences in complexity in other ways. Officials explained that when APMA receives a MAP request, it ranks the request according to complexity using a scale that runs from 1 to 5. The more complex cases, those ranked 3 or higher, are assigned an economist which can increase the cost of working the more complex cases. In our review of a generalizable sample of MAP case files we found a number of inconsistencies between the amount of adjustment recorded in APMA’s inventory database, the amount recorded in the original MAP request, and the amount recorded in the resolution letter provided to taxpayers and the foreign competent authority. We also found inconsistencies between the request letter and the resolution letter amounts. On the basis of our sample, we estimate that about 30 percent of the entries in the inventory database had these types of discrepancies. The cause of some of these discrepancies was relatively easy to identify and correct, such as transcription errors, which could have been detected if APMA had a more robust inventory management system in place. Other inconsistencies in the data were more difficult to resolve. According to IRS officials, some discrepancies could be explained by changes in exchange rates over time. However other inconsistencies could be not be as easily explained. These inconsistencies exist because APMA does not have controls in place to systematically and routinely evaluate the quality of the data in its inventory of cases. As a result, the accuracy of program measures that USCA might develop based on these data may be uncertain. Having controls in place to ensure the accuracy of data in the inventory database would also help APMA meet OECD’s minimum standards. The OECD has called for countries to provide MAP case statistics by country and published these statistics for the first time in 2018. According to APMA officials, APMA is currently working on implementing an upgraded inventory management system that should help APMA meet this goal. Development and full implementation of this project has been underway for 4 years. APMA’s inventory data-base includes data on both pending and resolved MAP cases that can help management monitor program operations and potentially identify areas to improve the management of MAP cases. However, APMA does not systematically analyze data to identify areas for improvement. For example, analysis of trends and comparisons of certain case characteristics—such as the country initiating the adjustment, the elapsed time on the case, whether an economist was assigned to the case, and the negotiated outcome—can help to identify how these characteristics may be related. According to APMA officials they do not undertake this kind of data analysis because they use the data as needed to manage current resources and to achieve their primary goal of satisfying the OECD’s minimum standards. These minimum standards include such goals as countries ensuring that adequate resources are provided to the MAP function and ensuring that both competent authorities should be made aware of MAP requests and given an opportunity to share their views on whether the request should be accepted. According to federal internal control standards, management should design information systems to provide information to meet the entity’s objectives and respond to risks. Information and analysis that helps APMA understand changes in international environment and complexity of U.S. MNCs would better enable it to identify future resource needs by evaluating trends in case characteristics. In the absence of quantifiable analysis conducted by APMA, we used information from its existing inventory data to illustrate the types of analysis that may be possible. For example, figure 2 shows that the volume of cases can vary greatly by country over time. The figure shows that the number of cases resulting from an adjustment by IRS ranged from a low of 22 in 2015 to high of 85 in 2017. Conducting similar analysis of trends in volume may help APMA better plan for allocating its limited resources to different teams in anticipation of increased case volume. In addition, because APMA allocates staff across teams that focus on particular countries, tracking trends in case load by country could help USCA prepare to anticipate spikes in cases and allocate resources more effectively across country teams. By conducting regular trend analyses, APMA could also identify areas for further analysis to determine what may be driving variations in case load by country. Similarly, figure 3 shows our analysis of the average time to resolve a case. Average case time ranged between 15 and 40 months, with the average case time exceeding the OECD-recommended 24-month period for a number of countries and years. By conducting similar analysis of the trends and differences in processing time across MAP cases, APMA would be better able to identify areas meriting additional review for ways to improve timeliness. We also used inventory data to analyze outcomes in terms of the determinations reached through MAP negotiations. One analysis included an examination of the share of cases in which the United States provided some relief to the taxpayer. As can be seen in figure 4, most foreign cases in most years resulted in relief being shared between the two countries involved in a dispute. As shown in figure 4, in 2017, approximately two-thirds of all foreign cases were resolved with both countries providing some relief compared to less than 10 percent of U.S. cases. However, as shown in figure 5, USCA in most years fully withdrew a large percentage of adjustments made by IRS. In 2017, 74 percent of IRS adjustments were withdrawn. The data show that U.S.-initiated cases were more often resolved entirely by the United States than with the foreign country providing some of the relief. However, these data on case resolutions need to be interpreted with caution. For example, as pointed out by IRS officials, a measure like the percent withdrawn may be misinterpreted if it concerns a small number of large MNCs with operations in many countries, and the adjustments are small unless this information is provided as context. Nonetheless, the case resolution data can be useful for guiding further analysis by helping to identify areas that would merit further analysis of the reasons for withdrawing cases or the reasons IRS examiners are making adjustments that are not upheld by USCA. Analyzing trends in outcomes would help to ensure that APMA is not missing opportunities to protect the U.S. corporate tax base and that IRS examiners are cognizant of tax treaty treatment of foreign source income of U.S. MNCs. Additional examples of MAP case data analysis are provided in appendix IV. While APMA must work all MAP cases, developing quality data on MAP cases would help to ensure effective management of the program. Analyzing trends in case data could help identify and manage evolving demands and priorities—such as the challenges present in a changing global tax environment. According to federal internal control standards, as a part of management controls, management should design information systems to obtain and process information to meet operational needs. Because APMA cannot alter its workload, it is all the more important to effectively manage staff and time. Reliable information systems are essential for effective management. Without assessing APMAs’ current and past performance, APMA may be less able to identify areas for improvement. Conducting analysis and improving the quality of data could help inform APMA’s allocation of resources and inform other parts of the agency concerning international tax issues. For example, IRS exams may be better able to judge the appropriateness of its tax adjustments when it is informed about how USCA has viewed similar adjustments governed by tax treaties. The APMA inventory database contains select characteristics of resolved cases, such as the time it took to resolve the case and the country that initiated the adjustment in dispute. However, it does not contain information on the tax issue that was in dispute. Without tracking the tax issue in dispute, APMA is unable to analyze trends in tax issues which could be used to determine if there are systemic issues that could be solved through means such as changes in IRS regulations, treaty, or statute. USCA officials told us that there are additional costs to tracking tax issues and that defining the type of tax issue involved in complex international tax cases could be difficult. However, IRS tracks issues in other similar areas. For example, IRS’s Office of Appeals, which handles a wide range of tax controversies covering both international and domestic issues, tracks the tax issue in dispute. Furthermore, APMA includes categories of tax transactions in its annual statutory reports. The categories are used in Advanced Pricing Agreements (APA) to distinguish between a U.S. entity and non-U.S. entity, and to determine whether a transaction covered by an agreement involved the sale of tangible property, use of intangible property or the provision of services. APAs are agreements between IRS and MNCs on how transactions among related entities of the MNC should be priced. APAs can prevent potential disputes by having agreement on the transaction prior to filing a tax return with IRS. These categories or alternative categories that APMA has already developed could be added to the inventory database to provide additional information on the tax issue in dispute. To illustrate how the additional information on tax issues can help inform management decisions, we categorized the tax issues in our sample of MAP cases using APA categories. As shown in figures 6 and 7, we compared the estimated percentage of certain tax issues in all MAP cases between 2015 and 2017 with those in APA cases in 2014. We also compared tax issues with other characteristics of the MAP cases. As figure 6 shows, an estimated 37 percent of MAP cases involved disputes over a tax adjustment related to services provided by a non-US entity such as a foreign corporation. Figure 6 also shows that disputes concerning the provision of services (both U.S. and non-U.S.) are estimated to account for 61 percent of cases, which far exceeded disputes over the use of intangible property, at 17 percent or the sale of tangible property at 15 percent. Conducting similar reviews of this type of information could help APMA better match its resources in terms of experience with different types of tax issues. We also compared tax issues identified in MAP cases with the transactions covered in APAs. The results illustrate how tracking tax issues could be useful for improving the administration of both programs. For example, as shown in figure 7, 23 percent of APA transactions covered sales of tangible property into the United States in 2014. Our categorization of MAP cases reported in figure 6 shows sales of tangible property into the United States as a disputed issue in only an estimated 8 percent of those cases. This difference in relative frequencies may suggest a connection between the programs, as tax practitioners have suggested increasing the use of APAs as a way of reducing international tax disputes. However, some of the differences in percentages between figure 6 and 7 could arise from differences in years covered and in categorization of tax issues. We also categorized the information to illustrate how tracking tax issues and other characteristics, such as location and the outcomes of the dispute resolution process could help with administration. For example, as shown in table 2, the tax issue with the largest estimated share of foreign MAP cases (67 percent) involved the provision of services. U.S. MAP cases, in contrast, were spread more evenly across tax issues, with no single tax category having an estimated share greater than 50 percent. Conducting a similar review of this type of information could help APMA match its resource allocations in terms of staff experience with different types of tax issues within its country-focused teams. Additionally, table 3 shows when we tracked outcomes of the dispute resolution process, we found that an estimated 69 percent of cases resolved by a combination of withdrawal and correlative relief involved the provision of services. For other outcomes, this tax issue of provision of services is estimated to occur 49 percent of the time. Further research on how outcomes and tax issues may be related could also inform how APMA trains and assigns staff. Other analyses could examine the tax issue and whether an economist was assigned or the average processing time. These statistics may help identify insights into complex cases. Undertaking similar reviews across tax issues may help identify areas for increased scrutiny to ensure effective administration. Federal internal controls standards state that as part of an effective internal control system, management should establish activities to monitor program performance. Reliable information on program operations requires the collection of quality data. Collecting key characteristics and conducting relevant analyses would help ensure effective internal control and could help improve USCA’s management of MAP cases. In a world with a growing number of international transactions, the United States needs an efficient and effective dispute resolution process to ensure that it is protecting the U.S. taxpayer and the U.S. corporate tax base. The MAP processes adopted by countries—including the United States—in their tax treaties are in place to prevent double taxation and ensure the accurate application of treaty provisions. USCA plays a key role in resolving disputes over double taxation but the agency has weaknesses in its processes that hamper its efforts. First, USCA has not provided clear guidance to taxpayers on how the MAP process works. As a result, taxpayers may be unaware of the process and not fully understand what to expect when they undergo it. Furthermore, USCA does not record when and for what reason there is contact between the taxpayer and USCA, therefore making it difficult for USCA to ensure that taxpayers are informed about the progress of their case. Second, USCA does not track the hours that analysts spend on cases and the milestones of cases. As a result, USCA does not have a full understanding of the efficiency of the MAP process, including ways to improve it. It also does not have processes to ensure the quality of the data it collects, therefore cannot ensure accurate performance measurement. While APMA aims to meet the minimum standards of the OECD, it does not analyze the data to identify areas for improvement. Analyses of USCA’s data could more fully inform its management decisions. A number of potential analyses are available of how cases are resolved. By forgoing these types of analyses, USCA may be unaware of certain trends, possible explanations for them, or any need to adjust guidance or resources to address these issues. Finally, many of APMA’s tasks depend on factors beyond its control (for example, the volume of taxpayer requests), but management of the processes could benefit from the collection and analysis of well-defined measures and quality data. We are making the following eight recommendations to the IRS. The Commissioner of Internal Revenue should direct USCA to provide an overview of the MAP process that is more accessible and transparent than the Revenue Procedure. (Recommendation 1) The Commissioner of Internal Revenue should direct USCA to ensure that APMA staff record and track contact with taxpayers. (Recommendation 2) The Commissioner of Internal Revenue should direct USCA to ensure that APMA staff record and track the hours they spend on MAP cases. (Recommendation 3) The Commissioner of Internal Revenue should direct USCA to ensure that APMA identify and record the dates of key milestones throughout MAP case resolutions. (Recommendation 4) The Commissioner of Internal Revenue should direct USCA to ensure that APMA puts procedures in place to review the quality of inventory data. (Recommendation 5) The Commissioner of Internal Revenue should direct USCA to ensure that APMA records the dollar amounts of MAP case outcomes in its database. (Recommendation 6) The Commissioner of Internal Revenue should direct USCA to ensure that APMA analyzes trends in case characteristics as part of routine program management activities. (Recommendation 7) The Commissioner of Internal Revenue should direct USCA to ensure that APMA identify and record categories of the tax issue relevant in the dispute. (Recommendation 8) We provided a draft of this report to the Commissioner of Internal Revenue for review and comment. In its written comments, reprinted in appendix II, IRS agreed with our eight recommendations and will provide detailed corrective action plans in its 60-day letter response to Congress. IRS also provided technical comments, which we incorporated where appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. As noted earlier, to assess the extent to which the Internal Revenue Service (IRS) evaluates management of dispute resolution cases, we interview IRS officials. Having determined that the Advanced Pricing Mutual Agreement Program (APMA) does not conduct analysis of mutual agreement procedure (MAP) case data, we used information from its existing inventory data to illustrate the types of analysis that may be possible. The inventory database APMA provided us contained all MAP cases that were closed from 2013 to 2017, as well as the current stock of open MAP cases. Because of a change in the method of recording the outcome variable between 2013 and 2014, we restricted our analysis of outcomes to 2014 to 2017. The inventory database did not include a variable for the tax issue in dispute. To illustrate the type of analysis that could be conducted if the tax issue were recorded we collected a sample of MAP case files. To estimate features such as tax issue and outcome for the inventory database, we selected a generalizable random sample of 84 cases that was proportionally allocated across four strata described in table 4. The strata included wither the initiating country was U.S. or Non-U.S. and whether an Economist was involved. This sample was selected from the population frame that consists of all files from APMA 2013-2017 Resolved and 2017 Pending inventory for cases resolved in years 2015 to 2017. Overall, this sample was designed to produce 95 percent confidence intervals for percentage estimates that are within approximately +/- 10 percentage points. The sample is not designed to provide estimates for other reporting groups at the same level of precision, and all margins of error are reported along with estimates. To create a tax issue variable, we reviewed the summary of competent authority issues required by Rev.Proc. 2015-40 to be included in the MAP request letter. We then allocated the tax issue described in the narrative to APMA’s advanced pricing agreement transaction categories. Some case files included multiple tax issues, but these cases accounted for less than 18 percent of the sample. The illustrations provided rely on the first tax issue noted in the narrative. Table 5 provides the estimates and margins of error for the categories. The following tables illustrate how a resolution can be reached in different types of disputes. Table 6 provides a hypothetical example of U.S.- initiated adjustment to a transfer price and a resolution that provides full relief from double taxation through a combination of partial withdrawal and correlative relief. In this example, the U.S. multinational corporation (MNC) parent sells a product to its subsidiary incorporated in a foreign country for $1,000. The U.S. parent is taxed on the income of $1,000 from the sale and the subsidiary is able to deduct that payment. The U.S. tax authority audits the parent’s return and determines that the price the parent sold the product for was too low and adjusts to price up from $1,000 to $2,000, resulting in an increase in taxable income. The U.S. MNC parent disputes the adjustment and requests assistance from the U.S. Competent Authority (USCA). The new adjusted transfer price results in $1,000 that is subject to double taxation because the foreign subsidiary has not deducted the additional $1,000 as the price paid to the U.S. parent, while the U.S. tax authority is now considering that income taxable. USCA negotiates with the foreign competent authority and the two parties agree on a revised transfer price of $1,600. The negotiated resolution results in USCA agreeing to withdraw $400 of the original adjusted amount of the transfer price. In turn, the foreign competent authority agrees to correlative relief in the form of an increased deduction of $600 of the additional price that the foreign subsidiary will pay the U.S. parent. The taxpayer receives full relief from double taxation since the total of the withdrawal and the correlative relief erases the $1,000 of double-taxed income that resulted from the increased adjustment. Alternatively, foreign tax authorities can make adjustments that affect a U.S. taxpayer. Table 7 provides a hypothetical example of a foreign initiated adjustment to a cost-sharing arrangement, and a resolution that provides full relief from double taxation, again, through a combination of partial withdrawal and correlative relief. In this scenario, the U.S. parent and its foreign subsidiary agree to share the costs of developing a product that will yield income of $10,000. As part of the agreement, the subsidiary will receive 10 percent of the income yield while the parent will receive 90 percent. The foreign tax authority audits the subsidiary’s tax return and determines that the amount of income assigned to the subsidiary is too low. It then adjusts the percentage to 50 percent, increasing the income allocated to the subsidiary from $1,000 to $5,000. This adjustment results in a potential $4,000 of income that is now subject to double taxation. The subsidiary decides that resolving this dispute locally is unlikely and through the U.S. parent requests assistance from USCA. USCA and the foreign competent authority negotiate a new allocation of 35 percent resulting in new income allocated to the subsidiary of $3,500. This resolution results in a combination of withdrawal and correlative relief. The competent authority agrees to withdraw $1,500 of the adjustment as income to the subsidiary, and the U.S. competent authority agrees to reduce the amount taxable to the parent by $2,500. The taxpayer receives full relief from double taxation since the total of the withdrawal and the correlative relief erases the $4,000 of double-taxed income that resulted from the increased adjustment. All mutual agreement procedure (MAP) cases are not the same in terms of complexity. One possible indicator of complexity is whether an economist was assigned to a case. United States Competent Authority (USCA) ranks the cases in order of complexity and assigns economists to the more complex cases. Our analysis of Advanced Pricing and Mutual Agreement Program (APMA) data in figure 8 shows how the use of economists varies by source of MAP cases. For most years, APMA assigned economists to a higher percentage of cases that involved U.S. than Canadian initiated adjustments. For most years, the share of economists assigned to foreign initiated cases was similar to U.S. initiated cases. However, in 2015 and 2016 the share of U.S. cases receiving an economist was more than double that of all foreign initiated cases. For most years, an economist was assigned to less than a quarter of foreign and U.S. MAP cases. We also analyzed USCA inventory data to compare the percentage of cases that were assigned an economist and the average time it took to resolve cases. As figure 9 shows, the average time a case was in processing tends to decrease when the percentage of cases that are assigned an economist increases. This relationship suggests that assigning economists to a case may reduce the time it takes to resolve it despite the greater complexity of the case. However, there may be many other factors that could influence processing time. APMA officials noted that many these factors include the readiness of the foreign competent authority to discuss the case in a timely fashion. Further analysis would be necessary to isolate the effects of specific resource allocation changes on process efficiency. In addition to the contact named above, Kevin Daly (Assistant Director), Jennifer G. Stratton (Analyst-in-Charge), Bertha Dong, Dawn Bidne, Michael Bechetti, Sonya Vartivarian, Ed Nannenhorn, David Dornisch, and A.J. Stephens made significant contributions to this report.", "summary": "With increasing globalization, multinational corporations can take advantage of differences in countries' corporate tax systems to reduce their overall tax liabilities. However, globalization can also lead to disputes about the correct tax liability for U.S. MNCs in different countries. GAO was asked to review how the United States administers the process for resolving international tax disputes when a U.S. MNC disagrees with a tax determination of another country. This report (1) describes IRS's dispute resolution process, (2) assesses the information IRS provides to taxpayers about the process, and (3) assesses the extent to which IRS evaluates its management of dispute resolutions cases. GAO reviewed IRS guidance on the MAP process, interviewed IRS officials and compared IRS actions to federal standards for internal control and GAO's criteria for a good tax system. GAO analyzed MAP data for cases closed from 2013 to 2017 as well as a stratified random sample of MAP case files. A U.S. multinational corporation (MNC) operating in a foreign country is subject to taxes in that country as well as in the United States. The U.S. MNC's tax return may be audited by the United States or the other country. Such audits can result in an adjustment to the U.S. MNC's taxable income that may result in income being subject to tax in both countries. If the U.S. MNC disagrees with the adjustment, it can ask the United States Competent Authority (USCA) within the Internal Revenue Service (IRS) to help resolve the dispute through the mutual agreement procedure (MAP). Generally, disputes are resolved by one country withdrawing some or all of the adjustment and the other country providing other relief to the MNC to address double taxation of income. The following figure provides an overview of the dispute resolution process. Dispute resolution assistance is available to U.S.MNCs that need it and USCA provides comprehensive technical information on its website on how to request assistance. However, because USCA's website does not provide an overview or plain language guidance on the MAP process U.S. MNCs may not have clear information on how to navigate the process. USCA has taken a number of steps to ensure efficient management of MAP cases including assigning staff with requisite background and skills to cases according to their complexity and organizing staff into teams that specialize by countries. However, GAO identified a number of weaknesses that impact USCA's management of MAP cases. These include the following key data are not tracked and existing data are not used to assess the effective allocation of resources for the program, few controls have been established to monitor and ensure the reliability of the data in the case management database, and lack of trend analyses on dispute case characteristics that could help inform management decision making and the more efficient operation of the program. GAO is making a total of eight recommendations, including that IRS improve the clarity of information on the dispute resolution process, track and use dispute resolution case data, ensure the quality of case data, and analyze trends in dispute case characteristics. IRS agreed with GAO's recommendations and said it will provide detailed corrective action plans.", "document_type": "gao"}
{"report": "Global defense posture is an enabler of U.S. defense activities and military operations overseas and is a central means of defining and communicating U.S. strategic interests to allies, partners, and adversaries. It is driven by a hierarchy of national-level and DOD-specific guidance, which includes the National Defense Strategy and the National Military Strategy. Under DOD Instruction 3000.12, global defense posture includes three elements: Forces: forward stationed or rotationally deployed forces, U.S. military capabilities, equipment, and units (assigned or allocated). Footprint: networks of U.S. foreign and overseas locations, infrastructure, facilities, land, and prepositioned equipment. Agreements: treaties and access, transit, support, and status- protection agreements and arrangements with allies and partners that set the terms regarding the U.S. military’s presence within the territory of the host country. EUCOM is one of six geographic combatant commands and is responsible for missions in all of Europe, large portions of Asia, parts of the Middle East, and the Arctic and Atlantic Oceans (see figure 1). EUCOM evaluates the adequacy of posture in Europe to support relevant plans and achieve military objectives. EUCOM shares responsibility with the Chairman of the Joint Chiefs of Staff and the Office of the Secretary of Defense for U.S. military relations with allies and partners in Europe and the North Atlantic Treaty Organization (NATO). The number of U.S. military sites located in EUCOM’s area of responsibility and the number of military personnel assigned to Europe have decreased substantially since the end of the Cold War, and two heavy combat brigades had been deactivated by the end of fiscal year 2014. As of May 2016, EUCOM supported one airborne infantry brigade and one Stryker brigade, as well as approximately 62,000 military personnel across approximately 250 sites. Since 2009, we have reported on issues related to DOD’s efforts to estimate and report on the total cost of its global defense posture. In 2009, we identified weaknesses in DOD’s approach for adjusting its global defense posture and recommended, among other things, that DOD issue guidance for estimating total costs for global defense posture and modify its annual report to Congress to include the total cost to complete each planned posture initiative. In February 2011, we reported that EUCOM lacked comprehensive cost data in a key posture planning document and that therefore decision makers lacked critical information that they needed to make fully informed posture decisions. We recommended that the Chairman of the Joint Chiefs of Staff revise the Joint Staff’s posture planning guidance to include direction on how the combatant commands should analyze costs and benefits when considering changes to posture and to require that posture plans include comprehensive cost estimates. DOD agreed with the recommendations in both reports and subsequently took steps to implement them. In June 2012, we reported that DOD did not fully understand the cost implications of two posture initiatives in Europe—including its decision to return two heavy brigades from Europe to the United States—and that key posture planning documents did not completely and consistently include cost data. We recommended that DOD fully estimate the cost implications of these two initiatives, clarify components’ roles and responsibilities for estimating costs, and develop a standard reporting format for cost data. DOD generally agreed with our recommendations and has taken steps to implement two of them. Following the President’s June 2014 announcement of ERI, EUCOM identified five lines of effort that it would pursue under ERI, as described in table 1. Three of ERI’s lines of effort are expected to enhance DOD’s posture in Europe. For example, DOD is using ERI to increase the forces present in Europe by rotating an armored brigade combat team and elements of a combat aviation brigade to Europe every nine months. DOD also plans to enhance its footprint in Europe by using ERI funding to make infrastructure improvements and establish locations for prepositioned equipment. Finally, in order to implement ERI’s lines of effort and support U.S. activities, DOD is partnering with the State Department to negotiate host nation agreements that, among other things, establish protections for U.S. military personnel and provide DOD the authority to improve host nation installations and infrastructure. DOD is also supporting additional exercises and training to improve interoperability with partner countries while providing them with the capability and capacity to defend themselves, but these efforts are not expected to affect DOD’s long-term posture in Europe. Since 2014, DOD has expanded ERI’s objectives, increased its funding, and planned enhancements to posture in Europe. In fiscal years 2015 and 2016, ERI’s objective was to provide short-term reassurance to allies, and the initiative had little funding for long-term enhancements to posture. DOD focused its efforts on bolstering the security and capacity of NATO allies and partners by funding training, conducting exercises, and temporarily rotating Army and Air Force units to Eastern Europe. In fiscal year 2017, DOD expanded ERI’s objectives to include deterring Russian aggression in the long term and developing the capacity to field a credible combined force should deterrence fail. Recognizing that ERI’s expanded objectives would require DOD to alter its posture in Europe, DOD has requested increased ERI funding. DOD will have requested approximately $4.5 billion in ERI funding for posture enhancements through the end of fiscal year 2017; about $3.2 billion of this was requested for use in fiscal years 2017. During the time of our review, EUCOM had identified a need for additional funding over the next several years for additional posture enhancements in Europe. Specific details about EUCOM’s future posture plans and funding requirements were omitted because they are classified. DOD has requested increased funding to support planned enhancements to all three posture elements—forces, footprint, and agreements—in Europe: Force deployments to Eastern Europe: In fiscal years 2015 and 2016, the Army deployed armored brigade combat teams to Eastern Europe to provide short-term reassurance to allies and partners, which DOD officials said included Estonia, Latvia, Lithuania, and Poland, among other countries. These short-duration deployments were intermittent and focused on demonstrating U.S. commitment to allies and partners. Additionally, the Air Force deployed air units on 4- month rotations to help protect allies’ and partners’ air space. In the fiscal year 2017 budget justification materials provided to Congress, as ERI’s objectives expanded, DOD requested funding to retain Air Force fighter units in Europe. It also began deploying a rotational armored brigade combat team so that one such brigade would be present in Europe at all times (see figure 2). The first deployment, in January 2017, included approximately 4,000 personnel, 90 Abrams tanks, 90 Bradley Infantry fighting vehicles, and 112 supporting vehicles. Additionally, DOD began procuring and prepositioning equipment for two planned armored brigades in Europe, one of which will include modernized tanks, as an additional deterrent. According to Army officials, these force enhancements in Europe give the Army the ability to quickly deploy a substantial ground force in the event of a conflict. As of April 2017, DOD was still evaluating force enhancements in Europe as part of its fiscal year 2018 budget submission. Specific details were omitted because they are classified. New locations and improvements to infrastructure: Since ERI was announced in 2014, DOD has established new enduring locations in Europe. An enduring location is designated by DOD and is a geographic site that DOD expects to access and use to support U.S. security interests for the foreseeable future. During our review, DOD had not yet determined whether additional enduring locations would be needed to support ERI. In addition to establishing new enduring locations, DOD plans to improve installations and infrastructure. From fiscal years 2015 through 2017, DOD requested funding in its budget justification submissions to Congress for major military construction projects in nine European countries and to improve support infrastructure—such as roads, railheads, and airbasing—at these locations. Major military construction projects are those projects specified in National Defense Authorization Acts. During the time of our review, DOD was considering addition improvements to existing infrastructure, specific details of which are classified. According to DOD and State Department officials, DOD is also working with U.S. allies and partners to determine what infrastructure improvements to roads, railroads, and bridges need to occur outside enduring locations to allow rapid response to a conflict. New host nation agreements: Since ERI was announced, DOD and the State Department have completed host nation agreements with six European nations in support of ERI efforts: Romania, Bulgaria, and Poland, implementing previous agreements, in order to facilitate U.S. construction on installations and areas in the host country (June and July 2015 and June 2016). Estonia, Latvia, and Lithuania, providing an overarching framework for protections for U.S. personnel and U.S. access to installations in host nations (January 2017). DOD is using a separate process instead of its established posture planning process to plan for ERI’s posture initiatives because of the emergent nature of ERI requirements and their having been funded through the OCO budget. DOD has established global defense posture management and base budget development processes that plan for posture initiatives and collectively support the department’s efforts to establish priorities, evaluate resource requirements, and develop strategy and policy. As a result of its not using its established processes, DOD is not prioritizing posture initiatives funded under ERI against posture initiatives funded through its base budget, estimating these initiatives’ long-term sustainment costs, or communicating their future costs to Congress. DOD is planning ERI posture initiatives outside of its established processes and is funding these enduring initiatives—including rotational deployments and infrastructure projects—out of its OCO budget. We have previously identified risks associated with DOD’s practice of completing construction projects outside of its established processes. For example, in September 2016 we reported that DOD had not issued implementing guidance to establish a formal process for reevaluating ongoing contingency construction projects when missions change and that as a result DOD risked completing unnecessary construction projects. We also found that DOD lacked visibility into the amount of funding it was spending on operations and maintenance-funded construction projects in U.S. Central Command and that this increased financial risk and duplication risk for the department. Like U.S. Central Command, EUCOM is using DOD’s OCO budget to fund construction projects and is planning those projects outside of its established processes. Based on our analysis, DOD plans to spend approximately $503 million from fiscal year 2015 through the end of fiscal year 2017 on ERI-related construction projects—about $279 million for major military construction projects and $224 million for minor military construction and facilities maintenance and repair projects (hereafter, minor construction and repair), as shown in table 2. DOD has established global defense posture management and base budget development processes that plan for posture initiatives and collectively support the department’s efforts to establish priorities, evaluate resource requirements, and develop strategy and policy. According to DOD Instruction 3000.12, DOD’s global defense posture processes apply to DOD forces, footprint, and agreements that support joint and combined global operations and plans in foreign countries. According to the instruction, DOD’s components use these processes to address planning for global defense posture, resource requirements, and policy development, among other things. Further, it states that these processes are overseen by an executive council that provides recommendations, inputs, and expertise on global defense posture to key national strategy products. DOD’s Planning, Programming, Budgeting, and Execution Process serves as the annual resource allocation process for DOD and is intended to enable DOD to align resources to prioritized capabilities; balance necessary warfighting capabilities with risk, affordability, and effectiveness; and provide mechanisms for making and implementing fiscally sound decisions in support of the national security strategy and the national defense strategy. DOD is using a separate and evolving process to plan ERI’s posture initiatives—rather than following its established processes—because ERI is being funded through DOD’s OCO budget. According to officials from the Office of the Secretary of Defense, Cost Assessment and Program Evaluation, the department has recognized that the short-term planning process used to develop DOD’s OCO budget can create problems when it is used to plan for enduring initiatives. As a result, DOD has developed a separate process to plan for ERI. As part of the fiscal year 2018 planning process, EUCOM provided a prioritized list of potential requirements and an estimate of its annual costs by appropriation account to the Director for Cost Assessment and Program Evaluation. According to officials from the Office of the Secretary of Defense, Cost Assessment and Program Evaluation, DOD completed its review and provided recommendations to DOD’s senior leaders for approval in October 2016 and final decisions were made within DOD in April 2017. The specific criteria by which DOD assessed EUCOM’s potential requirements are classified. DOD is requesting funds for ERI’s posture initiatives as part of its OCO budget, which is generally intended to be short-term funding for ongoing contingency operations. In February 2009, the Office of Management and Budget, in collaboration with DOD, issued criteria to assist in determining whether funding properly belonged in DOD’s base budget or in its OCO budget. These criteria were updated in September 2010 and currently indicate that funding requests should be for specific geographic areas where combat or direct combat support operations occur (such as Iraq and Afghanistan). Further, budget items must meet other criteria. For example, OCO funding requests may be for constructing facilities and infrastructure in the theater of operations in direct support of combat operations. In these cases, the level of construction should be the minimum needed to meet operational requirements, and construction completed at enduring locations must be tied to surge operations or major changes in operational requirements. In January 2017, we reported that DOD did not apply the OCO criteria to ERI prior to deciding to budget for its requirements using its OCO budget. We recommended that DOD, in consultation with the Office of Management and Budget, reevaluate and revise the criteria for determining what can be included in OCO budget requests. DOD concurred with our recommendation and noted that it plans to propose revised OCO criteria. As of May 2017, the department has not implemented our recommendation. DOD’s planning for ERI’s posture initiatives does not establish priorities for ERI initiatives relative to those in the base budget, estimate long-term sustainment costs for some posture initiatives funded under ERI, or communicate future ERI costs to Congress. When planning ERI’s posture initiatives, DOD establishes priorities among ERI’s initiatives but does not review posture initiatives funded under ERI relative to those funded in the military services’ base budgets. DOD’s posture management process is intended to establish priorities among global posture elements and is overseen by a Global Posture Executive Council. According to DOD Instruction 3000.12, the Executive Council is responsible for reviewing, prioritizing, and endorsing across the combatant commands key posture elements such as military construction projects and international agreements. The Executive Council’s endorsements inform the military services’ budget deliberations. For the fiscal year 2017 ERI budget, EUCOM requested funding for several posture initiatives, including the continuous, rotational deployment of an armored brigade combat team and the establishment of prepositioned equipment in Europe. Officials representing the Under Secretary of Defense for Policy and the Director, Cost Assessment and Program Evaluation said that as part of its planning process for ERI the Deputy’s Management Action Group evaluated and prioritized posture initiatives funded under ERI. However, DOD could not provide documentation that it had established priorities relative to posture initiatives funded through the base budget. Further, the Global Posture Executive Council did not review or prioritize posture initiatives funded under ERI relative to posture initiatives funded through DOD’s base budget. Similarly, as DOD prepared the fiscal year 2018 ERI budget request, the Global Posture Executive Council did not prioritize EUCOM’s proposed ERI posture initiatives relative to initiatives funded through DOD’s base budget. More detailed information about these proposals, and their potential funding requirements, are classified. According to officials from the Office of the Under Secretary of Defense for Policy and the Joint Staff, DOD did not prioritize posture initiatives funded under ERI against base-budget funded posture initiatives, because ERI is funded through DOD’s OCO budget—which does not directly affect the services’ base budgets. However, because it does not prioritize ERI initiatives against other initiatives funded through the base budget, DOD lacks an understanding of the relative importance of initiatives funded under ERI and may begin investing in projects that it would not support in the absence of funding from DOD’s OCO budget. For example, Army officials noted that if funding were to become unavailable in DOD’s OCO budget, the Army is unsure how initiatives funded under ERI would rank in importance relative to other posture initiatives funded in its base budget. Consequently, the Army would be forced to make critical—and potentially costly—decisions quickly and without a clear idea of which posture initiatives were most important to the department. In planning for posture initiatives funded under ERI, EUCOM and the military services have not fully estimated the long-term sustainment costs of ERI’s posture initiatives to establish prepositioned equipment and construct new facilities. DOD’s global defense posture guidance indicates that, when evaluating potential changes to posture, the combatant commands should work with the military services to estimate the full cost of planned posture initiatives, including sustainment costs. DOD’s guidance on economic analysis also notes the importance of understanding both the size and timing of costs. Finally, our prior work has demonstrated that comprehensive cost estimates of current and future resource requirements are critical to making funding decisions and assessing program affordability. DOD leadership emphasized throughout the fiscal year 2018 budget review process that the services would need to fund ERI posture sustainment costs through their respective base budgets, but DOD did not direct the services and EUCOM to estimate these costs as they would have under their established processes. Officials from the Office of the Secretary of Defense, Cost Assessment and Program Evaluation said that DOD leadership emphasized that the military services would need to fund all future sustainment costs for ERI projects from their base budgets. Based on DOD’s approach for calculating rough order sustainment costs, we determined that ERI sustainment costs for prepositioned equipment and construction could be substantial. Army and Air Force officials said that they were working to identify and incorporate these costs into future base budget submissions. DOD officials said that we correctly applied DOD’s approach for estimating sustainment costs, but noted that actual costs may be lower than the estimated costs, because the military services may not fully fund sustainment. Additionally, officials said that EUCOM is trying to negotiate burden sharing agreements with host nations; however, it is unclear whether these negotiations will be successful or how any resulting agreements would affect DOD’s future costs. Without comprehensive estimates of the sustainment costs for the prepositioned equipment and major military construction projects in Europe, DOD decision makers have been limited in their ability to evaluate the affordability of these initiatives. Further, in the absence of these estimates, the services have been limited in their ability to plan for costs in future budgets, because they have an incomplete understanding of the magnitude of those costs and of when they are likely to be incurred. The funding plan that DOD submits to Congress for ERI does not contain information about ERI’s future costs. This is in contrast to the way DOD submits its funding plan for its base budget, where DOD provides Congress with cost projections over a 5-year period, by appropriation, leaving Congress with a better understanding of how and when to allocate resources. In reviewing the fiscal year 2018 ERI request, the Director for Cost Assessment and Program Evaluation assessed future costs associated with posture initiatives funded under ERI. We previously reported that DOD was not developing enduring requirements funded through its OCO budget as part of its budget and programming process. Officials from the Office of the Under Secretary of Defense (Comptroller) and the Office of the Secretary of Defense, Cost Assessment and Program Evaluation told us that DOD has not been required to provide estimates for future OCO costs for ERI to Congress previously. An official from the Office of the Under Secretary of Defense (Comptroller) told us that DOD does not plan to provide these future costs to Congress along with its fiscal year 2018 ERI budget submission. Additionally, in preparing its posture requirements, EUCOM did not identify assumptions regarding host nation and NATO burden sharing. For example, officials from the Office of the Under Secretary of Defense for Policy said that DOD has submitted a request to the NATO Security Investment Programmé for $200 million in funding to build a facility in Poland to store Army equipment. Officials told us that, as a result, this construction project was identified as a lesser priority in EUCOM’s fiscal year 2018 request for funding. A senior Army officer told us that completion of a facility in Poland was critical to its plans in Europe. Officials from the U.S. Mission to NATO told us that as of July 2016 NATO had approved funding to complete preliminary architectural and engineering design for this project. Officials expect additional funding will be made available in July 2017 to complete final design and site preparation and the full cost of the project will be approved in early 2019. However, these officials noted that additional funding beyond what has been approved by NATO may be required to meet U.S.-specific requirements. Similarly, EUCOM officials said that they are working to identify opportunities to defray future costs through host nation contributions, but it is unclear how much funding—if any—host nations will provide moving forward. Congress has expressed interest in knowing the future costs of enduring activities being funded through DOD’s OCO budget. The Senate Appropriations Committee’s report accompanying a bill for DOD’s fiscal year 2015 appropriations stated that the committee does not have an understanding of enduring activities funded by the OCO budget. The committee further noted that there is a potential for risk in continuing to fund non-contingency-related activities through the OCO budget. Both GAO’s and other federal standards emphasize that agencies should provide complete and reliable information on the costs of programs externally, so that decision makers can make informed decisions when allocating resources. DOD has not provided Congress projections of future costs for posture initiatives funded under ERI because it is reviewing those requirements outside of its budget and programming processes, and DOD officials said that the department is not required to provide this information. As a result, DOD is limiting congressional visibility into the resources needed to achieve ERI’s objectives. If DOD does not provide Congress with projections of the future costs of posture initiatives funded under ERI and information on its assumptions pertaining to host nation support and burden sharing, it will continue to impede congressional visibility into the resources that are needed to fully implement these initiatives. Russia’s annexation of Crimea and the subsequent threat of further aggression led DOD to establish and later expand ERI’s objectives and enhance posture in Europe to support a new U.S. strategy toward Russia. DOD has requested funding for these enhancements using its OCO budget; however, the processes DOD uses to develop its OCO budget were not designed to plan for and fund long-term, enduring initiatives such as ERI. By following a separate planning process when funding ERI with OCO, DOD is taking on risk by not reviewing and prioritizing ERI posture plans against other posture initiatives, estimating the costs for sustaining ERI initiatives, and providing Congress with estimates of ERI’s future costs. DOD risks making decisions that lack a strategic vision in comparison to other DOD priorities and may fund initiatives that cannot be sustained over the long term. Furthermore, Congress is likely to face challenges in assessing DOD’s estimated costs for ERI and the affordability of initiatives funded under ERI over the long term. To better ensure that DOD can target resources to its most critical initiatives and establish priorities across its base budget and overseas contingency operations budget, we recommend that the Secretary of Defense prioritize posture initiatives under ERI relative to those funded in its base budget as part of its established posture-planning processes. (Recommendation 1) To better enable decision makers to evaluate the full long-term costs of posture initiatives under ERI, we recommend that the Secretary of Defense direct EUCOM and the military services to develop estimates for the sustainment costs of prepositioned equipment and other infrastructure projects under ERI and ensure that the services plan for these long-term costs in future budgets. (Recommendation 2) To support congressional decision making, we recommend that the Secretary of Defense provide to Congress, along with the department’s annual budget submission, estimates of the future costs for posture initiatives funded under ERI and other enduring costs that include assumptions such as those pertaining to the level of host nation support and burden sharing. (Recommendation 3) We provided a draft of the classified report to DOD for review and comment. DOD partially concurred with all three of our recommendations, and we have reproduced DOD’s comments on the classified report in appendix II. DOD also provided technical comments, which we incorporated as appropriate. DOD partially concurred with our first recommendation to use its established posture-planning processes to prioritize ERI’s posture initiatives relative to those funded in DOD’s base budget. In its comments, DOD stated that it will continue to prioritize the negotiation of international agreements supporting ERI through the Global Posture Executive Council, and that an on-going Strategic Review will inform ERI and guide both EUCOM and the services in their program planning efforts. These are positive steps. DOD also stated it will adjudicate its ERI-funded force requirements through its global force management process, adding that it will continue to resource OCO funds for ERI requirements until there is a sufficient increase in DOD’s base budget to do so. However, we continue to believe, as noted in our report, that DOD could improve its planning for posture initiatives funded under ERI, whether or not they are funded through OCO, by using DOD’s established posture planning processes. Although DOD’s global force management process directly affects overseas military posture in the near term, this process is not designed to evaluate long-term posture priorities. If DOD does not prioritize the forces and infrastructure projects funded under ERI against those funded using the military services’ base budgets, it will continue to lack an understanding of the relative importance of the posture initiatives funded under ERI. Without such an understanding, DOD increases the risk that the services will need to make critical and potentially costly decisions without a clear idea of which posture initiatives are most critical to the department. DOD partially concurred with our second recommendation that EUCOM and the military services develop estimates for future sustainment costs and plan for these costs in future budgets. In its comments, DOD stated that its components will continue to estimate the sustainment costs for prepositioned stocks and other infrastructure projects during DOD’s annual program and budget review process. DOD also commented that without additional topline base budget funding, some portion of the associated sustainment costs will need to be financed with OCO funds. However, as we noted in our report, neither the Army nor the Air Force has fully estimated these potentially significant future costs, nor had either service incorporated them into their future budgets. Using OCO funds would mark a departure from DOD leadership’s emphasis that the services would need to fund ERI posture sustainment costs through their respective base budgets. Additionally, not developing robust estimates for sustaining these initiatives could increase long-term fiscal risk for the department if DOD shifts more ERI-associated enduring costs into its OCO budget. In the absence of robust cost estimates and deliberate planning to address those costs in future budgets, DOD will continue to be limited in its ability to evaluate the affordability of posture initiatives funded under ERI, and the military services may not plan adequate funding to sustain posture investments in Europe. DOD partially concurred with our third recommendation, to provide Congress with estimates of the future costs for posture initiatives funded under ERI and information on any underlying assumptions, such as those pertaining to the level of host nation support and burden sharing. In its comments, DOD stated that it does not currently prepare a formal 5-year Future Years Defense Program for OCO-related costs. Moreover, DOD commented that it factors in host nation support and burden sharing when preparing budget estimates for Congress. However, DOD does not state whether it will begin to provide Congress future estimates and any underlying assumptions with its budget submission. It is critical that DOD increase congressional visibility into ERI’s future costs and its underlying assumptions to facilitate congressional oversight and reasonably ensure that initiatives can be sustained over the long-term. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Commander, U.S. European Command. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (404) 679-1816 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in Appendix III. The Army and Air Force identified approximately $224 million in unspecified minor military construction and facilities maintenance and repair projects (hereafter, minor construction and repair) that were programmed or obligated for the European Reassurance Initiative (ERI) in fiscal years 2015 through 2017. This includes $157 million for minor construction and repair projects identified by the Army and nearly $67 million for minor construction and repair projects identified by the Air Force. According to U.S. European Command officials, Navy and Marine Corps construction projects funded under ERI were either major military construction or exercise-related construction projects. The tables below do not include Navy and Marine Corps exercise-related construction projects. Using the data provided by the military services, we compiled the programmed and obligated funding for these minor construction and repair projects by fiscal year, country, location, and project name in tables 3 and 4. The information in these tables was provided by U.S. Army Europe and U.S. Air Force Europe in response to our request for a list of minor military construction and repair projects. The data provided did not identify the appropriations used for each project. Accordingly, we have not conducted a review to examine whether funds were appropriately used for a given project. In addition to the contact named above, Kevin O’Neill, Assistant Director; Alex Winograd, Analyst-in-Charge; Scott Bruckner, Adrianne Cline, Martin De Alteriis, Joanne Landesman, Jennifer Leotta, Carol Petersen, Michael Shaughnessy, and Jena Sinkfield all made key contributions to this report.", "summary": "In response to Russia's annexation of Crimea in March 2014, the President announced the ERI, to reassure allies in Europe of U.S. commitment to their security. This initiative has been funded using OCO appropriations, which Congress provides in addition to DOD's base budget appropriations. The Joint Explanatory Statement accompanying the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, included a provision for GAO to review matters related to ERI. In this report, we (1) describe changes in ERI's objectives, funding under ERI, and DOD's posture in Europe since 2014 and (2) evaluate the extent to which DOD's planning processes for posture initiatives funded under ERI prioritize those initiatives, estimate their long-term costs, and communicate their estimated costs to Congress. GAO analyzed DOD strategy documentation, budget and cost analysis guidance, budget justification materials, and cost and obligations data. GAO also interviewed knowledgeable officials within the Office of the Secretary of Defense, U.S. European Command, the military services, and the State Department. Since 2014, the Department of Defense (DOD) has expanded the European Reassurance Initiative's (ERI) objectives, increased its funding, and planned enhancements to European posture. DOD expanded ERI's objectives from the short-term reassurance of allies and partners to include deterring Russian aggression in the long term and developing the capacity to field a credible combined force should deterrence fail. With respect to funding, DOD will have requested approximately $4.5 billion for ERI's posture enhancements through the end of fiscal year 2017 (about $3.2 billion for fiscal year 2017 alone), and in July 2016 EUCOM identified funding needs for future posture initiatives. The expansion of ERI's objectives has contributed to DOD's enhancing its posture in Europe. Specifically, DOD has increased the size and duration of Army combat unit deployments, planned to preposition Army equipment in Eastern Europe, added new enduring locations (e.g., locations that DOD expects to access and use to support U.S. security interests for the foreseeable future), improved infrastructure, and negotiated new agreements with European nations. As of April 2017, DOD was considering further force enhancements under ERI as part of the department's ERI budget request. DOD also was reviewing whether new enduring locations to support ERI were needed and was considering other improvements to existing infrastructure. DOD's process for planning ERI has not established priorities among posture initiatives funded under ERI relative to those in its base budget, nor estimated long-term sustainment costs for some posture initiatives funded under ERI, nor communicated future costs to Congress. ERI is being planned using a separate process from DOD's established processes and is funded from DOD's overseas contingency operations (OCO) appropriations. GAO found several weaknesses: Lack of prioritization : DOD establishes priorities among ERI posture initiatives but has not evaluated them against base budget initiatives using its posture management process. As a result, DOD lacks an understanding of the relative importance of ERI initiatives and may be investing in projects that it will not continue should OCO funding become unavailable. Lack of sustainment costs : EUCOM and the military services have not fully estimated the long-term costs to sustain equipment and construction funded under ERI. Based on DOD's approach for calculating rough order sustainment costs, GAO determined that these costs could be substantial. DOD officials said that GAO correctly applied DOD's approach for estimating sustainment costs, but noted that actual costs may be lower, because the military services may not fully fund sustainment. In the absence of comprehensive estimates, DOD has been limited in its ability to assess affordability and plan for future costs. Not communicating future costs : DOD limits Congress's visibility into the resources needed to implement ERI and achieve its objectives because it does not include future costs in its ERI budget request. This is a public version of a classified report issued in August 2017. Information on specific posture planning, guidance, and budget estimates that DOD deemed to be classified have been omitted from this report. GAO recommends that DOD prioritize ERI posture initiatives against initiatives in its base budget, develop cost estimates for sustaining initiatives, and communicate future costs to Congress. DOD partially concurred with GAO's recommendations. GAO continues to believe that these recommendations are warranted.", "document_type": "gao"}
{"report": "In a traditional auction, the intent is for multiple buyers to bid against one another by submitting bids to purchase a good or service that is for sale. Generally speaking, the bidder offering the highest price receives the item for sale and the seller benefits from receiving more money due to competition. In contrast, reverse auctions are intended to encourage multiple vendors to compete against one another to win a contract from the government by lowering the price for which the vendor is willing to sell a particular good or service. The buyer—typically a contracting official—then evaluates the technical proposals and bids, and selects a winning vendor—generally the bidder who submitted the lowest price bid with an acceptable proposal—to meet the government’s need. Figure 1 compares these two types of auctions. Reverse auctions can be opened to any vendor on the open market or can be limited to vendors that hold contracts on existing contract vehicles, such as indefinite-delivery vehicles under which the government has already determined that a specific group of vendors is qualified to sell specific goods or services. Existing vehicles provide a simplified way to procure commercial products and services. Agencies can use reverse auctions as a tool to further promote competition and lower prices, among other potential benefits. Agencies can use reverse auctions to order from various existing contract vehicles, including: The Army’s CHESS program. CHESS is the Army’s primary source for commercial information technology hardware, software, and services. DHS’s First Source II. First Source II is a 100 percent small business contract vehicle, specifically designed as a preferred source to acquire commercially available information technology commodities, solutions, and value-added vendor services to support DHS programs. GSA’s Federal Supply Schedules program. The Federal Supply Schedules provide federal agencies a simplified method of purchasing commercial products and services off of multiple schedules, from numerous vendors, at prices associated with volume discount buying. National Aeronautics and Space Administration’s Solutions for Enterprise-Wide Procurement (SEWP). SEWP allows federal agencies government-wide to purchase from over 140 vendors and offers a wide range of commercial advanced technology products and product-based services. Reverse auction providers can be private companies or offices within federal agencies, and the providers may provide reverse auction services across the government or to specific agencies. Since we last reported on this issue in December 2013, two federal agencies developed platforms to facilitate reverse auctions through existing contract vehicles, by adapting existing electronic platforms. In July 2013, GSA’s Federal Acquisition Service launched its platform, GSA Reverse Auctions, which was built off its e-Buy tool and initially offered reverse auctions for a limited number of GSA and VA Federal Supply Schedule contracts, expanding to additional schedule contracts and agency-specific multiple award contracts over the following 2 years. In November 2015, GSA Reverse Auctions expanded further to offer open market auctions. In January 2016, Army’s CHESS program launched a capability using its IT e-mart to run reverse auctions on certain CHESS contracts. Similarly to when the private sector builds a platform, new government capabilities have costs associated with development and ongoing maintenance. According to GSA officials, development of the reverse auction capability cost approximately $2 million, and operations and maintenance costs are expected to total about $650,000 over the next 3 fiscal years. According to CHESS officials, its capability was developed at no additional financial cost under the fixed-price contract for the IT e-mart, although there were opportunity costs because other lower priority actions were delayed. Table 1 includes information about the reverse auction providers we identified in our review. Reverse auction providers offer differing levels of service, ranging from simply providing a web-based reverse auction platform to a full-service model. Full-service providers may offer services such as creating draft auctions, soliciting vendors to participate, helping create a marketplace of vendors, and encouraging vendor participation for low-bid-count auctions. Agency buyers can select which additional services, if any, to use. FedBid is an example of a full-service provider, whereas Army CHESS provides a self-service web-based reverse auction platform, the IT e-mart. While the government pays some reverse auction providers directly, other reverse auction providers, including FedBid and GSA, collect reverse auction fees through an indirect payment process. Generally, in the indirect payment process, the reverse auction provider adds a fee onto the winning vendor’s bid. Then, the agency pays the winning vendor this total amount. In turn, the reverse auction provider collects the fee from the winning vendor (see figure 2). In December 2013, we reviewed the use of reverse auctions at four agencies—Army, DHS, Interior, and VA—and found that these agencies steadily increased their use of reverse auctions (in number and dollar value) from fiscal years 2008 to 2012. For auctions in 2012 across the four agencies, we found: Agencies awarded about 95 percent of reverse auctions for $150,000 or less. Information technology goods and services were among the top categories purchased. Products made up about 90 percent of total dollar value of awarded reverse auctions. 47 percent of reverse auctions were for orders from existing contracts. 80 percent of reverse auction dollars and about 86 percent of reverse auctions were awarded to small businesses. In addition, we found that the four agencies in our review did not maximize the potential benefits of reverse auctions—competition and savings. We found that over one-third of reverse auctions in 2012 had no iterative bidding and that it was unclear whether savings calculated for reverse auctions were accurate because cost estimates developed before the auction may have been set too low or too high. In addition, we found that almost half of the reverse auctions were used to obtain items from existing contracts. We further noted that there was a lack of comprehensive government-wide guidance and that the Federal Acquisition Regulation (FAR) did not specifically address reverse auctions, resulting in confusion about their use. We recommended the Director of the Office of Management and Budget (OMB) take steps to amend the FAR to address agencies’ use of reverse auctions and issue government-wide guidance to maximize competition and savings when using reverse auctions. OMB’s OFPP subsequently issued guidance in June 2015 on reverse auctions, and the proposed FAR changes are currently being reviewed prior to being published for public comment. Prior to 1997, the FAR prohibited agencies from using auctioning techniques. In 1997, the FAR was revised to eliminate these prohibitions as part of an overall effort to make the source selection process more innovative, simplify the acquisition process, and facilitate a best value acquisition approach. In June 2015, OFPP issued guidance to federal agencies on the effective use of reverse auctions. This memorandum reviewed the benefits of reverse auctions, offered a set of reminders to help contracting offices maximize the value of this tool, and asked agencies to work with OFPP in identifying and collecting data that can be used to evaluate and improve results. Specifically, the memorandum noted that some of the benefits of reverse auctions are price reductions, enhanced competition, and significant small business participation. In addition, the memorandum noted that reverse auctions are not a “one size fits all” solution and are likely to be most effective in the following circumstances: are steady and relatively simple and might otherwise be acquired using either a sealed bid or achieving best value through “low price technically acceptable” source selection criteria; and result in fixed price agreements. Typically, these circumstances exist in acquisitions for commercial items and simple services that often fall under the simplified acquisition threshold. The memorandum reminds agencies that, as with any procurement, market research must be conducted to understand the marketplace and to determine if it is reasonable to assume that the potential benefits of a reverse auction can be achieved. It also notes that agencies should regularly evaluate their experiences with reverse auctions and the effectiveness of existing practices and policies as part of procurement management reviews so that refinements can be made as necessary. The issues addressed in the OFPP memorandum have not yet been incorporated into the FAR. While the FAR does not specifically address reverse auctions, several provisions facilitate agencies’ use of them, such as allowing the use of innovative strategies and electronic commerce. We found the value of awarded reverse auctions decreased approximately 22 percent across the government between 2013 and 2017, from about $1.9 billion to about $1.5 billion. Although the number of auctions consistently decreased each year from 2013 to 2017, the dollar value of auctions increased after 2015, indicating that some individual reverse auctions have been for larger dollar values in the past couple of years (see figure 3). During this same period, the overall trend in federal contract obligations initially decreased from 2013 through 2015 and then increased overall through 2017—from about $490 billion in 2013 to $508 billion in 2017. Hence, since 2013, contracts awarded through reverse auctions have consistently represented less than 0.5 percent of federal contract spending. In addition, almost all auctions and the vast majority of the dollars agencies awarded between 2013 and 2017 resulted from the use of the FedBid reverse auction platform. We also found that the dollar value of awarded reverse auctions varied from 2013 to 2017 across the six agencies we reviewed, with total reverse auction value greater in 2017 than in 2013 for half of the agencies (DHS, Navy, and State) (see figure 4). Our analysis indicates that agencies’ and components’ policies may influence the use of reverse auctions. Specifically, two agencies that experienced substantial reductions in their use of reverse auctions changed their policies so that contracting officers would no longer be required to use reverse auctions. For example, Interior’s August 2015 policy rescinded a previous requirement to first consider using reverse auctions for commercial items using simplified procedures above the micro-purchase threshold and below the simplified acquisition threshold. The revised policy encouraged contracting officials to use procurement tools as appropriate, allowing for the use of reverse auctions at contracting officials’ discretion. VA’s Veterans Healthcare Administration—formerly one of the largest users of reverse auctions— revised its procurement manual in February 2014 to suspend the use of any reverse auction platform to conduct new reverse auctions. The Veterans Healthcare Administration amended its procurement manual again in October 2015 to lift the suspension of GSA Reverse Auctions, but kept in effect the suspension of all other reverse auctions platforms. VA and Veterans Healthcare Administration officials stated that they revised their policies following investigations about the use of reverse auctions at the Veterans Healthcare Administration by the VA Office of Inspector General. Other agencies and components we reviewed have policies that encourage the use of reverse auctions. For example: State’s May 2015 policy memorandum established a requirement that contracting officials first consider using reverse auctions conducted through FedBid for all noncomplex commodities. DHS’s Customs and Border Protection’s August 2014 standard operating procedure required that reverse auctions conducted through FedBid be given priority consideration when acquiring non-complex commodities. A Naval Supply Systems Command’s November 2014 policy letter required use of reverse auctions for commercial off-the-shelf supply items valued from $25,000 to the simplified acquisition threshold. The Army’s Mission Installation Contracting Command Desk Book has generally required use of reverse auctions for all acquisitions above the micro-purchase threshold for commercial supplies in certain categories. Overall, of the almost 15,000 reverse auctions conducted and awarded in 2016 by the five agencies for which we reviewed detailed data, we found that about 94 percent were for contracts valued below $150,000. However, we found that nearly two-thirds of the dollar value of awarded reverse auctions was for purchases above $150,000 (see figure 5). Further, we found that reverse auctions valued at more than $1 million in 2016 accounted for less than 1 percent of the number of auctions and 32 percent of the dollar value. Most (about 80 percent) of these higher- dollar-value auctions were for information technology-related products and services, while the remainder included hand tools, cabling equipment, radios, uniforms, air rifles, and vehicle trailers. Our analysis also found that the selected agencies generally used reverse auctions with fixed-price contracts, commercial items, products, and to promote small business participation—a few of the effective uses outlined in the June 2015 OFPP memorandum. For example, in terms of award value, 87 percent was for products and 13 percent for services. In addition, 60 percent of auction award value was for information technology-related purchases. Further, 83 percent of auction value was for awards made to small businesses. The agencies we reviewed obtained iterative bidding, indicating enhanced competition between multiple vendors, in nearly three-quarters of reverse auctions, and contracting officials cited reduced administrative burden as another key benefit, but determining the actual amount of savings is challenging due to data issues. Overall, in fiscal year 2016, the agencies we reviewed achieved iterative bidding for 75 percent of reverse auctions. However, in 20 percent of auctions only one bidder participated. Auctions representing nearly half of the value of State’s reverse auction awards had only one bidder, driven by large dollar value procurements, in part due to State’s requirement to use reverse auctions for all non-complex commodities without regard to expectations for competition. Contracting officials we spoke to cited reduced administrative burden, particularly at the end of the fiscal year, as a key factor in the decision to use reverse auctions. Based on data from reverse auction providers, reverse auctions that took place in 2016 resulted in contract awards that were an estimated $100 million below the government’s pre-auction estimate, though the extent to which this figure represents actual savings is difficult to determine. We found the agencies we reviewed achieved iterative bidding on 75 percent of auctions in fiscal year 2016, accounting for 68 percent of dollars spent. However, in 20 percent of the auctions, only one bidder participated (see figure 6). OFPP’s June 2015 guidance states that reverse auctions are likely to be most effective in highly competitive marketplaces. We found that auctions with iterative bidding resulted in award prices that were, on average, about 12 percent lower than pre-auction cost estimates, which generally reflect the government’s independent cost estimate. In contrast, this difference was about 6 percent among those auctions without iterative bidding. Of the 40 auctions we selected for in-depth review, we reviewed 29 auctions with iterative bidding. Review of the bid history for some of these auctions demonstrated the potential benefits of iterative bidding. For example: State awarded an approximately $4.3 million contract for night vision goggles following an open market reverse auction that got 110 bids from 16 vendors. The winning vendor bid 17 times and lowered its price by roughly 30 percent over the course of the auction, not including the reverse auction provider’s indirect fee. DHS’s Customs and Border Protection awarded an approximately $268,000 contract, including an option period, for tires following an open market reverse auction that got 35 bids from 13 vendors. The winning vendor bid three times and lowered its bid by roughly 25 percent over the course of the auction, not including the reverse auction provider’s indirect fee. Army National Guard Bureau awarded an approximately $14,000 contract for ice climbing equipment following an open market reverse auction that got 20 bids from 7 vendors. The winning vendor bid six times and lowered its price by roughly 10 percent over the course of the auction, not including the reverse auction provider’s indirect fee. Although three-quarters of 2016 auctions achieved iterative bidding for the agencies we reviewed, we found that in 20 percent of the awarded reverse auctions only one bidder participated, representing 27 percent of the dollars awarded. This percentage is higher than the percent of obligations on all 2016 competitive procurements for which there was only one offer received across the government (14 percent). However, this varied by agency. Four of the five agencies we reviewed had higher proportions of only one bidder participating on reverse auctions, by dollar value, than for their competitive procurements in general, particularly at State. The other agency, Interior, had a lower proportion of only one bidder participating in reverse auctions. Table 2 describes differences in competition for selected agencies in 2016. Our analysis indicates that requiring the use of reverse auctions through agency or component-level guidance may contribute to agencies obligating more money through reverse auctions that attract only one bidder. Specifically, State’s percentage of dollar value for auctions with one-bidder—almost 40 percent—was substantially higher than other agencies in our review and more than twice State’s percentage of dollars obligated on competitive procurements in general when only one offer was received. This was driven by the results of reverse auctions for larger dollar value contracts. In 2016, State awarded more auctions valued over $1 million than any of the other agencies we reviewed. Of 36 State auctions valued at more than $1 million, 13 had only one bidder— accounting for 27 percent of the total dollar value of State’s reverse auctions in 2016. State’s May 2015 guidance requires contracting officials to first consider using FedBid’s reverse auction platform for the acquisition of non-complex commodities, but does not mention competition or its benefits. While the policy allows contracting officers to seek waivers in certain circumstances, none of the potential exceptions listed in the policy include the expectation of a lack of robust competition. Some State contracting officials we spoke to said that the requirement encourages the use of reverse auctions even if there is not a reasonable expectation of competition. We reviewed four State auctions valued at more than $1 million where there was only one bidder. Contracting officials responsible for three of the four auctions cited the guidance as a reason they used a reverse auction. For example, State awarded a $12 million contract for brand name computer and storage infrastructure equipment following a 2-day reverse auction at the end of the fiscal year open to National Aeronautics and Space Administration SEWP vendors. The contracting official responsible for this auction told us that market research indicated that two SEWP vendors could meet their needs, but only one vendor had responded to inquiries during market research. However, she said that she used a reverse auction because State policy required it for contracts of this type. In the fourth instance, State officials acknowledged that other factors, including poor acquisition planning that resulted in tight timeframes, led them to use a reverse auction as a “crisis management tool”. State awarded a $19 million contract, including option periods, for construction support services in Afghanistan following a 17-hour reverse auction among Federal Supply Schedule vendors, although only one vendor had responded to market research inquiries. Officials said that they had sought to combine this contract with another set of services for which the same vendor was the only identified source likely to respond, but coordinating with the customers took too long, and they ultimately ran out of time before the predecessor contract was set to expire and services would stop. Under tight timeframes that risked the program losing critical services, contracting officials said they used a reverse auction because it allowed them to make a contract award quickly while still opening the requirement to multiple vendors, even though there was little chance of multiple vendors bidding. OFPP’s June 2015 reverse auctions guidance states that market research—the process used to collect and analyze data about the capabilities in the market to satisfy agency needs—must be conducted to understand the marketplace and to determine if it is reasonable to assume that the potential benefits of reverse actions can be achieved. State’s requirement to first consider using FedBid’s reverse auction platform for all non-complex supplies, even with exceptions, may contribute to State using and paying for reverse auctions when a different approach could garner more competition and potentially a better price. For the almost 15,000 auctions the five selected agencies conducted in 2016, nearly $590 million—about 65 percent—of total awarded reverse auction value was for orders on existing contract vehicles. We found that, in comparison to open market auctions, reverse auctions using existing contract vehicles had 1) higher rates of only one bidder participating, and 2) were less likely to have iterative bidding (see table 3). The 40 auctions we reviewed in-depth included 24 auctions that used existing contract vehicles, including 5 in which only one bidder participated—4 awarded by State and 1 by DHS’s Customs and Border Protection. However, our review of these examples did not identify clear reasons why auctions on existing contract vehicles have lower competition rates overall than open market auctions. Agency procurement officials told us that they are aware of variations in the competition obtained for particular existing vehicles more generally than when reverse auctions are used, and suggested that it would be useful to examine the competition dynamics for reverse auctions vehicle by vehicle. None of the agency guidance we reviewed comprehensively addressed how to use reverse auctions effectively when ordering from existing contract vehicles. Further, none of the five agencies we reviewed have collected data on or assessed why the number of reverse auctions with only one bidder on existing contract vehicles was significantly higher than reverse auctions using open markets. OFPP’s June 2015 reverse auctions guidance states that agencies should be evaluating their experiences with reverse auctions and the effectiveness of existing practices and policies so that refinements can be made as necessary. Standards for internal control require management to periodically review policies and procedures for continued relevance and effectiveness in achieving the entity’s objectives. Without understanding what factors indicate that conducting reverse auctions using existing contract vehicles is appropriate and providing this information to contracting officials so that they can consider it when developing their acquisition strategies, agencies may be using and paying for reverse auctions when another approach might yield better competition and pricing. Similar to what we found in December 2013, of the 35 contracting officials we interviewed, 29 cited ease of use and reduced administrative burden as key reasons why they chose to use reverse auctions, particularly at the end of the fiscal year. Officials noted that certain reverse auction providers, such as FedBid, offer acquisition support services in addition to the reverse auction platform itself that can decrease the workload for contracting officials. In particular, contracting officials noted the following as ways that reverse auctions assisted them in performing their responsibilities: The reverse auction provider performed functions such as building complex auctions and following up with vendors to encourage participation. In some instances, such as at State or Customs and Border Protection, FedBid provides support personnel on-site at agencies. Contracting officials told us that this is helpful because they are able to obtain in-person support for troubleshooting and time-sensitive purchases. Officials said that they used these additional services for 7 of the 29 FedBid auctions about which we interviewed contracting officials. Reverse auction platforms produced auction documentation that decreased the administrative burden of producing a contract file. For example, Army officials responsible for a $14,000 award for ice climbing equipment explained that the summary document produced by the FedBid platform includes much of the competition information, such as auction participants and bids, needed for the contract file. The reverse auction platforms enabled contracting officials to replicate past auctions for similar items, then update auction-specific information. For example, a DHS Immigration and Customs Enforcement contracting official responsible for a $38,000 award for detention uniforms said that he makes frequent purchases of the same items, so the ability to clone past auctions and update the quantities, pre-auction cost estimates, clauses, and sources (open market or existing contracts) saves a lot of time. He said that with other procurement methods he must re-enter procurement information each time. Reverse auctions enabled them to work on multiple procurements simultaneously, rather than sending emails or making phone calls to individual vendors to obtain quotes. For example, a DHS Customs and Border Protection contracting official responsible for two auctions we reviewed said that reverse auctions allow him to work on multiple contract awards at a time at the end of the fiscal year. Data we collected from reverse auction providers found that contracting officials make greater use of reverse auctions at the end of the fiscal year. While the agencies we reviewed made a disproportionate number of new awards in the last fiscal quarter of 2016—42 percent—reverse auctions were used even more heavily, with agencies conducting 53 percent of reverse auctions in the last quarter (see figure 7). Based on fiscal year 2016 data from reverse auction providers, Army, Navy, DHS, Interior, and State awarded contracts with values that totaled more than $100 million less than the agencies’ pre-auction cost estimates, after including any reverse auction provider fees (see table 4). The agencies we reviewed generally rely on reverse auction providers to report savings estimates to them. FedBid—the largest provider used by our selected agencies—and GSA Reverse Auctions generally calculate savings as the difference between the pre-auction cost estimate— represented by the auction’s “target price” set by buyer—and the award price, which is the winning vendor’s bid plus the reverse auction provider’s fee. In some cases, however, FedBid will modify this approach to account for potential shortcomings in the quality of pre-auction cost estimates. FedBid does this in two different scenarios. First, to correct for situations when using the agency target price results in abnormally high savings—generally defined by FedBid as savings more than 50 percent above the target price—instead FedBid uses a target price based on an average of bids received during the auction. FedBid representatives explained that these adjustments help avoid overstating savings caused by outlier target prices. Second, to correct for situations when the agency target price was lower than the winning bid, and would result in a calculated savings of less than $0, instead FedBid uses a target price equal to the winning bid, so that calculated savings equal $0. FedBid representatives explained that, in their opinion, a contracting official would not proceed with an award if the winning bid was higher than the target price unless the contracting official believed that the pre-auction estimate was invalid. Overall, we found that in 4 of the 33 FedBid auctions we reviewed, the awarded reverse auction prices were collectively $900,000 higher than the pre-auction cost estimates (which were used as the target prices). Prior to reporting savings to the agencies, FedBid adjusted the target prices to match the award values and reported that these auctions resulted in no savings. FedBid representatives said that they have provided details about this data normalization process to the contracting officers responsible for their agency contracts. We identified other approaches to calculating savings resulting from reverse auctions. For example, in December 2016, the Army negotiated a new contract with FedBid that established a different method for calculating savings in an attempt to isolate the savings due to the specific effects of reverse auctions. The Army calculates savings as the difference between the “initial leading bid”—the second bid usually—and the winning bid. GSA Reverse Auctions and Army CHESS have also calculated savings through different methods, including as the difference between the highest bid and the lowest bid, as well as between the winning vendor’s initial and lowest bids. Contracting officials acknowledged several challenges in using the pre-auction cost estimate as a baseline from which to calculate savings. For example: Contracting officials at Interior’s US Geological Services stated that it is critical to ensure that the pre-auction cost estimates they set in the reverse auction system are based on good market research, and that the target price is set at the lowest price they can obtain outside of a reverse auction. They noted that before conducting a reverse auction for water filters, these officials lowered the pre-auction cost estimate by about $450,000 from the program office’s initial cost estimate, to reflect a lower price identified in subsequent market research. During the reverse auction, Interior obtained five bids from four vendors, resulting in an award valued at $1.4 million, including option periods. The auction’s savings were then calculated to be $670,000. In another auction resulting in a $430,000 contract awarded by the Army for laptops, the contracting official noted that the pre-auction cost estimate was developed by the customer based on historic pricing. In turn, the price obtained through the reverse auction reflected a calculated savings of $67,000 or about 13 percent from the pre-auction estimate. However, the contracting official said that this method is not a reliable way to calculate savings as his customers typically use a high estimate to make sure they do not have to request additional funds. The contracting officer also noted that, in his experience, using historical pricing for technology products can be problematic since pricing changes very quickly as new technology is developed and old products become obsolete. We reported in December 2013 that it was unclear whether comparing auction award prices to the pre-auction cost estimate produced an accurate estimate of savings, as it depended on the quality of the pre-auction cost estimate, which is generally informed by market research. In our current review, contracting officials reiterated this perspective. Federal regulations provide flexibility in terms of the extent to which market research should be conducted, and how that research should be conducted, including for low dollar procurements. Because the FAR has not yet been amended to address any specific requirements for reverse auctions as we recommended in our previous report, we are not making additional recommendations on this issue. For reverse auctions conducted in 2016, the five agencies we reviewed indirectly paid more than $13 million in fees. Similar to our findings from our December 2013 review, we found that agency contracting officials we interviewed generally did not have a complete and accurate understanding of reverse auction fee structures. This hinders their ability to make informed decisions about when to use reverse auctions or which reverse auction platform to use for a specific procurement, potentially leading to paying more fees than necessary for reverse auctions for the level of service required. Our analysis of agency- and component-level guidance found that none of the agency-level guidance we reviewed fully informed contracting officials about the availability of reverse auction providers and platforms and any applicable reverse auction fee structures, nor did the guidance ensure that contracting officials would compare the options available to them when considering whether to use reverse auctions. In addition, agencies that used the services of FedBid, the largest reverse auction provider, did not always draft sufficiently detailed fee arrangements to ensure that the agencies were knowledgeable about and could conduct oversight of FedBid’s indirect fees. The five agencies we reviewed indirectly paid about $13.4 million in fees to reverse auction providers in 2016. As discussed previously, generally, in the indirect payment process, the reverse auction provider adds a fee onto the winning vendor’s bid. Then, the agency pays the winning vendor this total amount. In turn, the reverse auction provider collects the fee from the winning vendor. Agencies we reviewed primarily conducted reverse auctions using three reverse auction providers’ platforms in 2016. The agencies paid indirect fees to two of these reverse auction providers in 2016—FedBid and GSA—while the third provider, Army CHESS, did not charge a fee for its services. Indirect fees paid to FedBid and GSA generally varied from 0 to 3 percent of the value of the transaction, though both FedBid and GSA cap certain fees and will waive fees in certain circumstances. For example, GSA does not charge an indirect reverse auction fee for Federal Supply Schedule orders or agency contracts based on Federal Supply Schedule contracts. See table 5 for additional details on typical fee structures of reverse auction providers used by the agencies we reviewed. We found that none of the guidance we reviewed from the five agencies included the information needed to help ensure that contracting officials understand reverse auction indirect fees and their roles in assessing those fees. OFPP’s June 2015 guidance states that contracting officers should consider the amount of fees paid when evaluating whether the price of a product or service in a reverse auction is fair and reasonable, including any additional fees for use of another agency’s existing contract. This expectation is further established in agency guidance at the Army, DHS, and Interior. Our review found, however, that contracting officers generally did not understand how fees would be applied or the amount they would actually pay to use a reverse auction. This finding is consistent with our observation from our December 2013 report that agency officials were uncertain about how reverse auction fees were paid. Understanding reverse auctions’ costs is essential to making informed business decisions about when to use reverse auctions or which reverse auction platform to use for a particular procurement. Without such understanding, the risk increases that agencies may be paying more in fees than necessary for the level of service required. Agency officials we interviewed generally did not have an accurate understanding of reverse auction indirect fee structures. For example, acquisition policy officials at State told us that their contract with FedBid has no cost to the agency because the fees are paid from the companies that win the auctions and it is up to the companies whether or not to include the fee in their final price to the government. As discussed above, however, FedBid automatically adds fees on to all vendor bids. An official who was involved in developing policy related to reverse auction use at Interior told us that agency officials were not fully aware of the fee structure used by FedBid when they initially contracted for the company’s reverse auction services in October 2010. The official added that in hindsight, the fee structure is something that should have been more closely considered. Additionally, while the contracting officials we interviewed for the 30 auctions we reviewed that incurred an indirect reverse auction fee were generally aware that they were paying a fee, officials responsible for 28 of these 30 auctions were uncertain about one or more elements of the reverse auction fee structure. For example: Lack of understanding of fee amount charged: Contracting officials who conducted 18 of the 29 FedBid auctions in our review were not aware of the fee charged for the reverse auction. All but three of these officials told us that they generally do not see the fee amount because it is included in the vendors’ bids and is not broken out separately, so they evaluate the price inclusive of the fee. In response, FedBid representatives told us that since March 2014 they have offered functionality in the FedBid system that displays the fee separately. However, FedBid only turns this functionality on at the request of agency officials, which had not occurred at the time of our review. We found that procurement officials at all five of the agencies we reviewed were unaware that this feature was available. According to FedBid representatives, they have since notified the contracting officers responsible for their agency contracts about this feature. Confusion about circumstances for fee waivers or reductions: Although FedBid will waive or reduce its fee when the fee causes the auction to be above the pre-auction cost estimate or an established contract price, contracting officials responsible for 22 of the 29 FedBid reverse auctions did not accurately understand how this would work when we asked about it. For instance, some contracting officials at State and Customs and Border Protection told us in error that FedBid would waive its fee if there was only one bidder in an auction. Additionally, contracting officials for two auctions told us that they thought the fees associated with their auctions had been waived and expressed surprise when they learned the fee amount. For one auction, a State contracting officer told us that if she had been aware of the amount of the potential fee for an auction for construction services for which only one bid was received, she may have considered other alternatives for awarding the contract. Uncertainty about how fee caps are applied: While FedBid generally caps its reverse auction fees at $10,000 per transaction, officials we interviewed that were responsible for 20 of 29 FedBid auctions told us they were not aware of this or did not know the dollar threshold for the fee cap. Additionally, while increased competition is typically cited as a benefit of reverse auctions, we found that about 18 percent of fees paid to reverse auction providers in 2016—approximately $2.5 million—were for auctions in which there was only one bidder participating (see table 6 for detail by agency). Further, we found that agencies in our review indirectly paid approximately $3.3 million in fees for reverse auctions conducted in 2016 even when an alternative no-fee reverse auction platform was likely available. The availability of an alternative platform does not necessarily mean that the no-fee platform is the most appropriate option, because different platforms provide different levels of service. We did not determine whether particular platforms were more appropriate or resulted in lower overall prices to the government. However, we found that agencies paid these fees to FedBid to conduct reverse auctions for orders on Federal Supply Schedule contracts or Army CHESS contracts when they might have used GSA Reverse Auctions or the Army CHESS IT e-mart without paying a fee. Our 40 case studies included 10 auctions for orders off GSA’s Federal Supply Schedules or Army CHESS contracts that used FedBid rather than using GSA Reverse Auctions or the Army CHESS IT e-mart. For five auctions at Army and State, contracting officials told us they were required or strongly encouraged by agency or component policy to use FedBid. For the other five auctions, contracting officials told us that they preferred FedBid because it was easier to use or they were more familiar with it than GSA Reverse Auctions. Without considering which provider best meets its needs in these cases, the agencies may have paid more in fees than necessary for the required level of service. We found that none of the agency guidance we reviewed was sufficient to ensure that contracting officials understood reverse auction fees and their roles in assessing those fees. A clear understanding is necessary to make informed decisions about when to use reverse auctions or which reverse auction platform to use for a particular procurement (see table 7). We found that agency guidance we reviewed at two of the five agencies—Navy and State—did not address the role of contracting officials in understanding and assessing reverse auction fees. Specifically: Navy does not have agency-wide guidance that addresses the circumstances and processes for using reverse auctions. At the component level, the Naval Supply Systems Command’s November 2014 guidance states that contracting officials may use any available government or commercial reverse auction platform for reverse auctions, unless ordering off GSA’s Federal Supply Schedule or other contract vehicle posted at GSA’s eBuy site, but the guidance does not provide information about how contracting officers should consider reverse auction fees in deciding which platform to use. State’s guidance on reverse auctions does not address the role of contracting officers in considering reverse auction fees. As noted previously, State’s May 2015 policy memorandum requires that contracting officers first consider using FedBid for acquisition of all non-complex commodities unless a waiver is obtained. Guidance we reviewed at the other three agencies—Army, Interior, and DHS—did address the role of contracting officials in understanding and assessing reverse auction fees, although the level of detail varied among the three agencies. Specifically: A June 2015 policy alert from the Army stated that contracting officials are required to be aware of reverse auction fees and consider them in evaluating whether the price of the product or service being acquired is fair and reasonable. Similarly, Interior’s August 2015 guidance states that contracting officers need to evaluate the estimated amount of reverse auction fees that will be paid when assessing whether prices are fair or reasonable. DHS’s May 2017 guidance states that contracting officers need to understand the fees charged by a provider, and determine and document that the fee structure represents a fair and reasonable cost and offers the best value to the government. None of the agency-wide guidance we reviewed at the five agencies detailed the fee structure of each reverse auction platform used by the respective agency. As a result, contracting officials’ ability to understand and assess the fees—an existing requirement in OFPP guidance and at the Army, Interior, and DHS—is hindered. Neither State nor Interior had guidance that detailed the specific fee structures of reverse auction providers used by contracting officials at those agencies. While one Army command developed guidance on FedBid’s fee structure, the Army has not provided any agency-wide guidance on FedBid or GSA Reverse Auctions fee structures, even though the Army awarded reverse auctions valued at approximately $326 million using these two providers in 2016. Similarly, while the Navy’s May 2017 memorandum of understanding for using GSA Reverse Auctions informs contracting officials of GSA Reverse Auctions’ fee structure, the Navy does not have guidance that details FedBid’s fee structure. In 2016, the Navy conducted more than 10 times as many auctions using FedBid’s platform as it did using GSA’s platform. Additionally, we found that none of the agencies had agency-wide guidance that required contracting officials to consider whether no-fee reverse auction alternatives, such as GSA Reverse Auctions for Federal Supply Schedule orders and the Army’s CHESS IT e-mart for Army CHESS orders, would meet their needs. State, DHS, and Interior guidance does not address this issue at all. Similarly, while neither the Army nor Navy have agency-wide guidance that does so, each agency has component or command-level guidance that addresses this issue to a limited extent. For example, Naval Supply Systems Command guidance issued in November 2014 requires that contracting officials use GSA Reverse Auctions for products or services off the Federal Supply Schedule. More recently, according to Army officials, as of July 2017, the Army’s CHESS program began recommending that reverse auctions for orders off Army CHESS contracts be conducted using the Army CHESS IT e-mart. Standards for internal control in the federal government require agencies to develop policies that address operational processes and the responsibilities of individuals for carrying out those processes. Our review found that, while certain agencies or agency components had guidance that provided some information about reverse auction fees, none of the agency-level guidance we reviewed fully addresses contracting officials’ role in understanding and assessing reverse auction fees, details fee structures for reverse auction platforms used by the agency, or requires that contracting officers compare the options for reverse auction providers that are available to them, particularly regarding no-fee alternatives. Without such guidance, contracting officers are at risk of paying more in fees than necessary for the level of service they require. We found that while nearly all reverse auction fees were paid to FedBid since FedBid was by far the largest reverse auction provider used by the selected agencies, agencies’ approaches to contracting with FedBid did not result in sufficiently detailed fee arrangements to ensure that the agencies were knowledgeable about the fees they were paying and could conduct oversight of whether FedBid was applying indirect fees as expected. For the five agencies we reviewed that conducted reverse auctions using FedBid in 2016, two did not have documented agency- level fee arrangements with FedBid, while the other three had contracts that did not fully address at least one element of FedBid’s fees, as shown in table 8. Three of the five agencies we reviewed that used FedBid—Army, Navy, and State—had agency-wide contracts in place with FedBid, but we found that these contracts did not always document key aspects of the fee terms with FedBid. Specifically: Lack of clarification on how the fee cap applies to contracts with option years: FedBid representatives stated that their standard practice is that the fee cap will apply separately to each option year awarded. The Navy’s January 2018 contract with FedBid is consistent with this practice and explains how the fee cap will apply to contracts’ option years. In contrast, Army’s and State’s December 2016 contracts with FedBid do not specify how the fee cap would apply to option years. Contracting officials who were responsible for managing the FedBid contract at the Army told us they believed that the fee cap was a total of $10,000 per contract awarded, including for the base and all option years. Lack of detail on calculation of fee cap: Navy and State’s contracts with FedBid did not include full details on how the fee cap would be applied. As discussed above, FedBid generally caps its fee at $10,000. However, due to the way FedBid calculates fees, if the lowest bid is not selected, the fee on the selected bid may be over $10,000. We found that 19 reverse auctions in 2016 resulted in FedBid fees over $10,000. Neither the Navy’s January 2018 contract nor State’s December 2016 contract explains that the fee may be above $10,000. According to agency officials, DHS and Interior did not have agency-wide contracts with FedBid for reverse auctions conducted in 2016. While three DHS components had their own contracts with FedBid that were active in 2016, four additional components plus DHS headquarters used FedBid in 2016 without either an agency- or component-level contract in place. At Interior, the contract with FedBid expired in September 2015 and was not renewed, although contracting officials at Interior components continued to conduct reverse auctions on FedBid. Contracting officials at these agencies used FedBid’s services by agreeing to its standard terms and conditions each time they accessed the FedBid platform. FedBid representatives told us they consider the terms of use to be the contract between FedBid and the government when there is no agency- or component-level contract in place, and that this is similar to how commercial e-commerce marketplaces operate with federal agencies for micro-purchases. FedBid’s standard terms and conditions, however, do not provide detailed information on fees, such as the precise fee percentage charged or the amount of the fee cap. FedBid representatives told us that they typically charge federal agencies a 3 percent fee, but that fee details are not included in the standard terms and conditions because commercial and government customers may pay different fees. At DHS and Interior, when there are not agency- or component-level contracts in place and contracting officials use FedBid by agreeing to the standard terms and conditions, there is a risk that they may agree to fees or other terms that have not been reviewed and approved by agency acquisition and legal offices. Lastly, we found that only two of the agencies we reviewed—the Army (since December 2016) and the Navy (since May 2012)—required and received regular monthly reporting from FedBid on reverse auction fees paid indirectly by the agency. Both agencies also have contractual requirements for FedBid to provide this information annually, in addition to the monthly reporting. Army officials told us that requiring additional data in their December 2016 contract with FedBid was a result of lessons learned from their September 2012 contract, and was intended, in part, to improve oversight of fees paid. Army and Navy officials provided examples of FedBid reverse auction fee reports, and described how they used this information to oversee their contracts with FedBid. The Army and Navy also both requested and received monthly reports from GSA Reverse Auctions that included detailed information on fees. In contrast, DHS, Interior, and State did not require or receive regular reporting on fees from FedBid or GSA Reverse Auctions. As previously discussed, according to officials, DHS and Interior do not have agency- wide contracts with FedBid and, therefore, do not have a mechanism in place to require agency-wide reporting. Interior officials told us they do not receive any reports on fees paid from FedBid. For the two DHS components we reviewed, Immigration and Customs Enforcement officials told us that they received ad hoc reporting on fees paid to FedBid and provided us with a sample report that included fee data. While Customs and Border Protection’s contract with FedBid requires reporting on costs incurred by the government, officials told us that they do not receive any reporting on fees. State neither requires nor receives reporting on fees from FedBid. State and Customs and Border Protection officials told us that they do not receive such reporting since fees are paid by winning vendors and therefore there is no direct cost to the government to use FedBid. We found, however, that these agencies indirectly paid almost $4.2 million in fees to FedBid in 2016. Standards for internal control require agencies to appropriately document transactions and significant events to assist with oversight and help ensure that agency objectives are being achieved effectively and efficiently. Without a documented contract or arrangement in place between agencies or components and FedBid that provides a clear and common understanding of payment terms and fee structure, agencies lack sufficient information to conduct contract oversight to determine whether FedBid is applying its indirect fees as the agencies expect. Further, internal control standards emphasize timely and reliable information and data so that agencies can effectively monitor their operations. Without requiring reporting on reverse auction fees, agencies may not have sufficient information to understand and oversee their use of reverse auction platforms and conduct contract oversight to ensure that the fees they are being charged are appropriate. The landscape of reverse auctions has changed slightly since our last review in December 2013. There are more reverse auction providers, including government providers, in the marketplace, with the vast majority of auctions conducted through FedBid. The use of reverse auctions, however, continues to constitute a relatively small percentage of federal contract spending. For the most part, agencies are using reverse auctions to acquire low-cost, commercial products and benefitting from the ease of use and reduced administrative burden that reverse auctions can provide. Agencies are also achieving more robust competition in the form of iterative bidding on nearly three-quarters of reverse auctions. Despite this level of competition, however, precisely quantifying the amount of savings is inherently difficult. Given that the vast majority of auctions are small dollar procurements which are, by design, intended to be simpler and to pose less administrative burden on the acquisition workforce, it may be counterproductive to expend more time and resources to produce a better estimate of savings. Nevertheless, there is room for improvement in the guidance agencies provide to their contracting personnel to ensure the appropriate use of reverse auctions, increase benefits, and reduce costs. Agencies could benefit from paying more attention to rates of one-vendor participation, provider fee structures, and contracts with reverse auction providers. Across the agencies in our review, often only one bidder participates, in particular when agencies conduct a reverse auction using existing contract vehicles rather than opening the auction to all potential vendors. At State, its requirement for contacting officers to use reverse auctions for all non-complex acquisitions may result in reverse auction use in situations where it is not warranted; that is, without the type of highly competitive marketplace that can result in savings. Our work also identified a need for agencies to provide contracting officers better information on the fee structures so that they can make informed decisions as to whether to use a reverse auction and which reverse auction platform to use. Further, agencies are not requiring data on or analyzing the fees they are paying. The indirect nature of provider fees—combined with fee arrangements that are missing important details or are nonexistent and a lack of visibility into those fees—puts agencies at risk of paying more than necessary for the level of service needed. These issues are not new: we raised similar concerns in our report more than 4 years ago. Taken together, these issues put the government at risk of failing to maximize the benefits that the effective use of reverse auction can provide, and worse, put agencies at risk of paying millions of dollars more in fees than necessary for the level of service needed. We are making a total of 21 recommendations, including 3 to Army, 4 to Navy, 4 to DHS, 4 to Interior, and 6 to State. We are making the following seven recommendations to heads of agencies within the Department of Defense: The Secretary of the Army should: assess why reverse auctions that are conducted using existing contract vehicles have only one bidder at higher rates than reverse auctions conducted on the open market; determine what factors indicate that conducting reverse auctions is appropriate when using existing contract vehicles; and provide this information to contracting officials so that they can consider it when developing their acquisition strategies. (Recommendation 1) The Secretary of the Army should: document and provide information to contracting officials that describes available reverse auction providers and platforms, and any associated fee structures; and provide guidance, as appropriate, to contracting officials to ensure that they compare the options that are available to them when considering whether to use reverse auctions. (Recommendation 2) The Secretary of the Army should clarify with FedBid how fees apply when contract option years are exercised. (Recommendation 3) The Secretary of the Navy should: assess why reverse auctions that are conducted using existing contract vehicles have only one bidder at higher rates than reverse auctions conducted on the open market; determine what factors indicate that conducting reverse auctions is appropriate when using existing contract vehicles; and provide this information to contracting officials so that they can consider it when developing their acquisition strategies.(Recommendation 4) The Secretary of the Navy should review the agency’s current guidance to assess whether it adequately addresses contracting officer responsibilities to consider the cost of any fees associated with reverse auction options they may be considering when developing their acquisition strategies, and revise its guidance as appropriate. (Recommendation 5) The Secretary of the Navy should: document and provide information to contracting officials that describes available reverse auction providers and platforms, and any associated fee structures; and provide guidance, as appropriate, to contracting officials to ensure that they compare the options that are available to them when considering whether to use reverse auctions. (Recommendation 6) The Secretary of the Navy should clarify with FedBid how FedBid’s fee cap will be calculated. (Recommendation 7) We are making the following four recommendations to DHS: The Secretary of the Homeland Security should: assess why reverse auctions that are conducted using existing contract vehicles have only one bidder at higher rates than reverse auctions conducted on the open market; determine what factors indicate that conducting reverse auctions is appropriate when using existing contract vehicles; and provide this information to contracting officials so that they can consider it when developing their acquisition strategies.(Recommendation 8) The Secretary of Homeland Security should: document and provide information to contracting officials that describes available reverse auction providers and platforms, and any associated fee structures; and provide guidance, as appropriate, to contracting officials to ensure that they compare the options that are available to them when considering whether to use reverse auctions. (Recommendation 9) The Secretary of Homeland Security should determine if it would be advantageous for the agency to enter into contracts with third-party reverse auction providers. (Recommendation 10) The Secretary of Homeland Security should obtain timely information on how much the agency is paying for reverse auction services. (Recommendation 11) We are making the following four recommendations to Interior: The Secretary of the Interior should: assess why reverse auctions that are conducted using existing contract vehicles have only one bidder at higher rates than reverse auctions conducted on the open market; determine what factors indicate that conducting reverse auctions is appropriate when using existing contract vehicles; and provide this information to contracting officials so that they can consider it when developing their acquisition strategies.(Recommendation 12) The Secretary of the Interior should: document and provide information to contracting officials that describes available reverse auction providers and platforms, and any associated fee structures; and provide guidance, as appropriate, to contracting officials to ensure that they compare the options that are available to them when considering whether to use reverse auctions. (Recommendation 13) The Secretary of the Interior should determine if it would be advantageous for the agency to enter into contracts with third-party reverse auction providers. (Recommendation 14) The Secretary of the Interior should obtain timely information on how much the agency is paying for reverse auction services. (Recommendation 15) We are making the following six recommendations to State: The Secretary of State should review the agency’s current guidance to assess whether it leads contracting officials to use reverse auctions in situations where there is not a highly competitive marketplace, and revise its guidance as appropriate. (Recommendation 16) The Secretary of State should: assess why reverse auctions that are conducted using existing contract vehicles have only one bidder at higher rates than reverse auctions conducted on the open market; determine what factors indicate that conducting reverse auctions is appropriate when using existing contract vehicles; and provide this information to contracting officials so that they can consider it when developing their acquisition strategies. (Recommendation 17) The Secretary of State should review the agency’s current guidance to assess whether it adequately addresses contracting officer responsibilities to consider the cost of any fees associated with reverse auction options they may be considering when developing their acquisition strategies, and revise its guidance as appropriate. (Recommendation 18) The Secretary of State should: document and provide information to contracting officials that describes available reverse auction providers and platforms, and any associated fee structures; and provide guidance, as appropriate, to contracting officials to ensure that they compare the options that are available to them when considering whether to use reverse auctions. (Recommendation 19) The Secretary of State should clarify with FedBid how FedBid’s fee cap will be calculated and how fees apply when contract option years are exercised. (Recommendation 20) The Secretary of State should obtain timely information on how much the agency is paying for reverse auction services. (Recommendation 21) We provided a draft of this report to DOD, DHS, Interior, State, the Department of Housing and Urban Development, GSA, VA, and OMB. Collectively, the agencies concurred with 18 of the 21 recommendations we made, and did not concur with three. In its written response, reproduced in appendix IV, DOD concurred with our seven recommendations—three to the Army and four to the Navy— and stated that the department expected to complete actions to address the recommendations by the end of calendar year 2018. In its written response, reproduced in appendix V, DHS concurred with two recommendations and did not concur with two recommendations. DHS concurred with our recommendation that it assess why reverse auctions conducted using existing vehicles have higher one bidder rates and provide information to contracting officials about factors that indicate conducting reverse auctions using existing vehicles is appropriate. However, DHS did not believe that it needed to conduct an assessment specific to reverse auctions. The department stated that the factors that contribute to one bidder participating in other procurements—such as inadequate market research and poorly defined requirements—would similarly affect reverse auctions. Nevertheless, DHS stated that the Office of the Chief Procurement Officer will communicate to its contracting officials that when market research for a planned reverse auction buy on an existing contract vehicle demonstrates that only one bid is expected, a reverse auction must not be used to conduct the procurement. DHS expects to complete actions in response to this recommendation by the end of November 2018. DHS also concurred with our recommendation that it determine if it would be advantageous for the agency to enter into contracts with third party reverse auction providers. DHS stated that an assessment should be done periodically to determine if there is a need to have a department- wide reverse auction provider. In that regard, DHS stated that an assessment was conducted in 2016 to evaluate providers and platforms and, based on this evaluation, DHS made the decision to continue to provide contracting offices the flexibility to choose their own reverse auction provider. DHS stated that it believes its past actions address our recommendation. However, the intent of our recommendation is not to suggest that DHS consider whether to mandate a certain provider be used agency-wide. Rather, we are recommending that DHS assess whether agency-level contracts with reverse auction providers—be it one or several different providers—are desirable to protect against the risk that individual contracting officials may be agreeing to fees or other terms that have not been reviewed and approved by agency acquisition and legal offices. It is unclear whether DHS’s 2016 assessment considered these issues. DHS did not concur with our recommendation that it provide information to contracting officials regarding available reverse auction providers and fee structures and, as appropriate, provide guidance to contracting officials to ensure they compare available options for reverse auctions. In its response, DHS stated that there is limited value in centrally collecting and updating this information, and that it is the contracting officer’s responsibility, as a part of market research, to be knowledgeable about reverse auction providers and fee structures. DHS stated that its May 2017 reverse auctions policy requires contracting officers to understand the fees that will be charged and determine and document that the fee structure represents a fair and reasonable cost and offers best value to the government. DHS stated that the Office of the Chief Procurement Officer will issue an alert reminding contracting professionals of these responsibilities by the end of November 2018. Given the pervasive confusion we found among contracting officials about the fee structures of reverse auction providers, we continue to believe that DHS should document and provide information to contracting officials, which could help eliminate confusion and minimize the duplication of individual reverse auction users repeatedly collecting the same information. DHS also did not concur with our recommendation that it obtain timely information on how much the agency is paying for reverse auction services, stating that aggregating fee data at the department level would require systems changes or manual collection that would not inform DHS as to whether reverse auctions were used correctly or if the fee was too high. In this case, however, our work found that reverse auction providers have this data available upon request. As such, in lieu of making changes to systems or attempting to have contracting officers manually collect this information, we believe DHS could obtain this information from its reverse auction provider and use this information to help DHS understand what it pays for reverse auction services. This approach would also better inform the department in its periodic assessments of contractual relationships with reverse auction providers. In its written response, reproduced in appendix VI, State concurred with all six recommendations, and described actions the Office of Acquisitions Management intends to take to address them, including reviewing current guidance and revising it as appropriate; increasing contracting officer awareness through training and policy guidance; and engaging with its primary reverse auction provider to obtain a better understanding of the fee structure and timely reporting of fees. State did not provide information as to when it expected these actions to be completed. In its written response, reproduced in appendix VII, Interior concurred with three recommendations and did not concur with one recommendation. Interior concurred with our recommendation that it assess why reverse auctions conducted using existing vehicles have higher one bidder rates and provide information to contracting officials about factors that indicate conducting reverse auctions using existing vehicles is appropriate. The department stated that it will implement policy regarding the use of reverse auctions with existing contract vehicles. Interior also concurred with our recommendation that it provide information to contracting officials regarding available reverse auction providers and fee structures and, as appropriate, provide guidance to contracting officials to ensure they compare available options for reverse auctions. The department stated it would review and update guidance to provide contracting officials with current and relevant information on available reverse auction providers, platforms, and associated fee structures. Interior also concurred with our recommendation that it obtain timely information on how much the agency is paying for reverse auction services. Interior did not provide information as to when it expected the above actions to be completed. Interior did not concur with our recommendation to determine if it would be advantageous for the agency to enter into contracts with third-party reverse auction providers, stating that it would be more efficient to provide guidance to contracting officials so that they can make the best business decision. Interior officials told us verbally that they have already considered whether or not to enter into contracts with reverse auction providers and determined that it is not to the department’s advantage to do so. Interior officials told us they would provide us information about the factors considered in making this decision, but we did not receive this information prior to issuing this report. In its written response, reproduced in appendix VIII, VA provided information about its use of reverse auctions for energy purchases through GSA and its energy reverse auction provider, EnerNOC. The Department of Housing and Urban Development, GSA, and OMB informed us that they had no comments on this report. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of Homeland Security, the Secretary of Housing and Urban Development, the Administrator of General Services, the Secretary of the Interior, the Secretary of State, the Secretary of Veterans Affairs, and the Administrator of Federal Procurement Policy. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. The Defense Logistics Agency’s (DLA) use of reverse auctions declined over 80 percent from fiscal years 2013 to 2017 from about $7 billion to about $1 billion in constant fiscal year 2017 dollars, according to data we obtained from DLA’s provider Procurex for all auctions conducted (that may or may not have resulted in an award). According to DLA officials, the agency’s declining use is largely due to a policy revision that no longer requires, but rather allows contracting officers to consider using reverse auctions for all procurements over $150,000. DLA pays a flat fee to its reverse auction provider for use of the reverse auction platform. This payment mechanism is different from the fee arrangements in contracts between agencies and many other reverse auction providers, for which providers calculate fees on a per-transaction basis. In addition, DLA generally uses a reverse auction as a price negotiation tool among a group of selected vendors that the agency determined to be technically acceptable based on vendors’ initial responses to a solicitation. Because of these differences, DLA does not have a need to track the reverse auctions awarded for its reporting and oversight purposes. The Army Computer Hardware Enterprise Software and Solutions (CHESS) Information Technology (IT) e-mart program introduced its reverse auction capability in January 2016. It offers fee-free reverse auctions for a number of the CHESS contracts. According to Army officials, in July 2017, the CHESS program began recommending use of its reverse auction capability rather than other reverse auction platforms. According to data provided by the CHESS program office for all auctions conducted (that may or may not have resulted in an award), use of reverse auctions increased over 225 percent between fiscal years 2016 and 2017 from about $28 million to about $91 million in constant fiscal year 2017 dollars. The CHESS IT e-mart does not track which auctions result in awards. According to officials, users capture award information in the agency’s contract writing system. While CHESS officials told us they are interested in that kind of information, CHESS does not charge a fee and does not have a need to track the reverse auctions awarded for its oversight purposes. This report examines (1) federal agencies’ use of reverse auctions between 2013 and 2017, (2) the extent to which selected agencies achieved benefits through reverse auctions, and (3) the extent to which selected agencies have insight into reverse auction fees. For all objectives, we reviewed policies and guidance related to reverse auctions from Office of Federal Procurement Policy (OFPP) and at selected agencies and relevant components of those agencies we reviewed, as well as the Standards for Internal Control in the Federal Government and relevant work by agency Inspectors General. We also interviewed procurement policy officials from the selected agencies and representatives from reverse auction providers. To examine federal agencies’ use of reverse auctions between 2013 and 2017, we collected data from reverse auction providers we identified by reviewing our past work in this area, reviewing federal procurement solicitation and award information, conducting interviews with agency officials, and conducting internet searches about federal use of reverse auctions. Through these efforts, we identified eight reverse auction providers that offered reverse auction services either government-wide or to specific agencies (see table 10 below). While it is possible that our efforts did not identify all reverse auction providers that federal agencies use, we are reasonably confident we have included the largest reverse auction providers used by the selected agencies in our review. In addition to the identification efforts described above, for the selected agencies in our review, we asked component officials to identify reverse auction providers with which the agency has a contractual relationship and which reverse auction platforms the agency’s contracting officials use. We also asked numerous individual contracting officers about the various platforms the individual has used. No additional providers or platforms were identified as part of those efforts. We collected fiscal year 2013 through 2017 data on reverse auctions use from these reverse auction providers and analyzed it to identify the number of reverse auctions conducted annually across the government and the dollar value of those reverse auctions. For our analysis of the number and dollar value of the auctions, we analyzed auctions that resulted in a contract award between the agency and a vendor in a particular year, according to provider data. We describe these as awarded reverse auctions. The dollar value of an awarded auction is based on the dollar amount of the bid selected for award; however, the dollar amount of the bid selected for award is not necessarily equivalent to the amount ultimately obligated on the resulting contract. We present the dollar value of agencies’ awarded auctions from 2013 through 2017 in constant fiscal year 2017 dollars using the Congressional Budget Office’s June 2017 Gross Domestic Product price index projection—the most recent projection available at the time of our analysis. We generally collected data from reverse auction providers because information about reverse auction use is not available in the Federal Procurement Data System-Next Generation, a government-wide source of contract data. In addition, the selected agencies we reviewed do not separately track use of reverse auctions. We collected data from the Department of Housing and Urban Development directly because the agency tracks its reverse auction use, including which auctions it awards. Two of the providers we identified, Procurex and the Army CHESS IT e-mart reverse auction platform, do not track the reverse auctions that agencies award to vendors. The agencies using these providers, Defense Logistics Agency and the Department of the Army, do not require this information for their own reporting and oversight purposes or for paying for the reverse auction services. For purposes of this report, all references to reverse auction use exclude auctions conducted with these providers. Therefore, our analysis includes only the value and number of known, awarded auctions between 2013 through 2017. As a result, we underestimate total federal reverse auction use. Using available data for the Department of the Army, we estimate our analysis includes over 95 percent of the value and 99 percent of Army auctions. For the Defense Logistics Agency, Procurex reported that over the five-year period the agency conducted approximately 7,100 auctions valued at about $19 billion. While we cannot say with certainty the number and value of awarded auctions, we can assume the agency awarded fewer auctions than it conducted. Based on information from other providers for which we have data on the number of auctions conducted and awarded, agencies using these providers awarded about 45 percent of the auctions conducted between 2013 and 2017. Of the six providers with awarded auction data, FedBid accounted for almost all auctions and the vast majority of dollars agencies awarded using reverse auctions from 2013 through 2017. We also used this data to identify six of the largest users of reverse auctions for that period—Departments of the Army, Homeland Security (DHS), the Interior, the Navy, State, and Veterans Affairs (VA)—by number of auctions and dollar value. In determining the largest users of reverse auctions, we excluded energy-related auctions from our analysis. Energy-related auctions represented a sizable portion—10 percent—of reverse auction value, but less than 1 percent of auctions. We determined that conducting a detailed review of energy-related auctions was not likely to provide insight for other procurements because the unique characteristics of energy markets make it difficult to compare to reverse auctions for other goods and services that were included in our review. For five of the six selected agencies (Army, Navy, DHS, Interior, and State), we collected additional data on auctions awarded in fiscal year 2016—the most recent year of detailed data available at the time that we began our review. We limited our analysis to auctions for which we identified a start, end, and contract award date in 2016, according to provider data. Our analysis of fiscal year 2016 auctions included almost 15,000 auctions with a total awarded value of approximately $910 million. We excluded reverse auctions for which the data indicated that they were awarded in 2016 but for which the auction dates indicated that the auctions were conducted in a prior year. At least some of these auctions represent options exercised on earlier auctions, rather than new auctions, and we wanted to ensure we could compare auction activity to policies and procedures in place for a specific period. Our analysis of awarded auctions excluded auctions identified as cancelled or with an auction start, end, or award date outside of 2016. The sixth agency (VA) conducted less than a dozen new auctions in 2016, and so we excluded them from our analysis of 2016 data, as well as our analysis of the benefits and fees associated with reverse auctions. We analyzed agencies’ use of reverse auctions, including but not limited to the number and dollar value of the awarded auctions, types of products and services purchased, level of competition achieved (number of participating vendors and bids received), savings from government pre-auction estimates, and fees associated with the auctions. For our analysis of the number and dollar value of the awarded auctions, we included auctions that resulted in a contract award between the agency and a vendor, according to provider data. Actual award obligations may differ. For example, an agency may adjust the procurement (such as increasing or decreasing the number of items purchased) between the auction and the final award, which may not be reflected in the data we used. In addition, the number of awarded auctions may differ. While we took steps to exclude awarded auctions for which agencies had cancelled the resulting contracts, if the provider data did not identify an auction as cancelled we may have included it in our analysis. For the analysis of products and services, we examined auctions conducted and awarded in 2016 by two of the three reverse auction providers, both of which had product and service code data available for awarded reverse auctions. These two providers accounted for almost all contracts awarded via reverse auctions that year. Provider data included an overall product and service code for the auction. The auction may include goods and services outside that particular code. For our purposes, we used the code provided to categorize the auction as a product or service and the type of purchase. The third provider, GSA Reverse Auction, does not capture similar product and service code data. Using other data GSA Reverse Auction provided, we were able to estimate that about 20 percent of dollars awarded using GSA’s Reverse Auctions platform included information technology products and services. For our analysis of contract vehicles, we used provider data on whether the buyer selected to conduct the auction on the open marketplace or limit the auction to vendors qualified to bid on existing contract vehicles. For example, buyers may have conducted auctions on the open market, which is available to any vendor selling the good or service that is registered to bid via the reverse auction provider or conducted auctions that were limited to vendors with specific agency or government-wide contracts. For our analysis of competition, we included all vendors and associated bids submitted in provider data. During our interviews with contracting officials, we learned that in some auctions officials determined particular vendors were not technically acceptable following an auction. This information is not available in provider data and, as a result, our analysis includes vendors that contracting officials determined were not technically acceptable. We also obtained contract-related information from the Federal Procurement Data System-Next Generation for awarded auctions with available contract or order numbers to identify if agencies used commercial acquisition procedures and firm-fixed-price contracts in accordance with the effective practices outlined in the June 2015 OFPP memorandum. Government auditing standards require that we assess the reliability of data we use in our products. As part of our assessment, we reviewed the reverse auction data collected for obvious issues, such as missing data elements, duplicates, and outliers. We also tested the relationships between variables. In addition, we interviewed agency and reverse auction provider officials to understand the data and collected information on the systems used to collect and store the data, as well as how those data are used. Further, we compared the data for a non-generalizable sample of 40 auctions to contract files. We assessed the reliability of the data used in this report and determined they were sufficiently reliable for describing the known number and value of awarded reverse auctions by federal agencies from 2013 through 2017 and identifying salient characteristics of selected agencies’ awarded auctions in 2016, including the number of participating vendors and bids, type of good or service purchased, and indirect fees associated with the auction. To identify the extent to which selected agencies achieved the benefits of reverse auctions, we analyzed the 2016 data we collected on reverse auction use at our five selected agencies to identify factors related to competition (e.g., the number of participating vendors in auctions and the number of bids received, and the frequency of iterative bidding, defined as when there are multiple bidders and at least one bidder submits more than one bid during the auction) and savings (e.g., savings as calculated by the reverse auction providers). This analysis excludes auctions conducted using the Army CHESS IT e-mart because it does not track which auctions result in awards. However, the analysis still includes at least 93 percent of reverse auction award value and 98 percent of the awarded auctions in 2016. To obtain a more in-depth understanding of the benefits achieved by selected agencies, we selected and reviewed a nongeneralizable selection of 40 contracts awarded from 2016 reverse auctions across the five agencies. These contracts were chosen to obtain variety across the following characteristics: buying agency and component; contract vehicle (open market or orders on existing contracts such as Federal Supply Schedules or agency indefinite-delivery / indefinite-quantity contracts); dollar value; fees charged by the reverse auction providers; and goods and services being purchased (see table 11). At DHS, we selected case studies from two components, Customs and Border Protection and Immigration and Customs Enforcement. Customs and Border Protection had an active contract with FedBid in 2016 and Immigration and Customs Enforcement did not, so we selected these two components in order to understand the difference in how components with and without an active contract used FedBid. For each of the selected case studies, we reviewed contract documentation related to the reverse auction, such documentation of market research, pre-auction cost estimates (e.g. independent cost estimates), price negotiation memoranda, and contract award documents. In addition, to obtain contracting officials’ perspectives on the benefits of reverse auctions, we interviewed the contracting officials involved with 35 of these 40 auctions: for the remaining 5, knowledgeable officials were not available to interview. We conducted our interviews using a semi- structured interview process in which we asked contracting officials a standard set of questions about their experiences conducting reverse auctions. We did not compare reverse auctions to alternative acquisition methods to compare the relative costs and benefits. To identify the extent to which selected agencies had insight into reverse auction fees, we analyzed provider data on fees paid indirectly to FedBid and GSA Reverse Auctions in 2016 for the five agencies selected for our review. Fees paid to these two reverse auction providers were paid indirectly by the agencies through the winning vendor. Our analysis included the total amount of fees paid by each agency in 2016 to each reverse auction provider and the amount of fees paid by each agency in 2016 for auctions with only one bidder. We also analyzed agency guidance to determine the extent of information provided to contracting officials on reverse auction fees. Specifically, we assessed whether agency guidance identified roles and responsibilities of contracting officials in understanding and assessing reverse auction fees and provided sufficient information to help ensure contracting officers understood how reverse auction fees are applied. Further, we interviewed contracting officials for 35 of our 40 selected auctions to develop an understanding of the officials’ knowledge of the fees related to the auctions they conducted. As noted above, officials for the other 5 auctions were not available to interview. The 40 selected auctions included 33 that incurred an indirect fee, 2 for which the provider waived the fee, and 5 for which no fee applied. We interviewed the contracting officials involved with 30 of the auctions that incurred a fee and 5 of the auctions for which the fee was waived or no fee applied. To determine whether contracting officials we interviewed had a complete and accurate understanding of reverse auction fee structures, we analyzed their responses to questions about reverse auction fee structures and the fee paid for the reverse auction we reviewed in detail, and compared their responses to fee structures documented in agency contracts and reverse auction provider terms and conditions. Lastly, to determine whether agencies had sufficient insight into reverse auction fees to conduct appropriate oversight, we analyzed contracts between the selected agencies and FedBid as well as other fee arrangements, including provider terms of service and GSA’s Federal Supply Schedule contract with FedBid. Our analysis included both contracts that were in place in fiscal year 2016 in order to understand the terms and conditions that covered the reverse auctions we reviewed in detail, as well as contracts agencies awarded subsequent to fiscal year 2016 so that we could understand whether and how agencies fee arrangements with reverse auction providers had changed. We analyzed the contracts and other fee arrangements to determine the extent to which they explained details of how the fees were applied, such as what fee percentage would be charged, how the fees would apply to contract option years, and how fee caps were applied. We also used a variety of investigative tools and techniques to determine if reverse auction procurement officials and commercial and government providers have engaged in potential fraud, waste, abuse, and mismanagement associated with reverse auction use. We reviewed fraud alerts to learn about potential complaints, coordinated with agency inspector general offices regarding work related to reverse auctions, inquired about contracting officials’ awareness of fraud incidents among the 35 case studies for which we interviewed contracting officials, and conducted a limited review for obvious financial relationships among agency officials responsible for drafting reverse auction policy and commercial reverse auction providers. While steps we took did not uncover any obvious fraud, waste, abuse, or systemic mismanagement, we cannot definitively state that there is no fraud, waste, abuse, or mismanagement in federal use of reverse auctions. We conducted this performance audit from January 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work from April 2017 to March 2018 in accordance with investigative standards prescribed by the Council of the Inspectors General on Integrity and Efficiency. In addition to the contact named above, Janet McKelvey (Assistant Director), Luqman Abdullah, Cory Ahonen, Peter Anderson, Leslie Ashton, Matthew Crosby, Alexandra Dew Silva, Lorraine Ettaro, April H. Gamble, Anne McDonough, Miranda Riemer, Robin Wilson, and Helina Wong made key contributions to this report.", "summary": "Reverse auctions are intended to result in enhanced competition, lower prices, and reduced acquisition costs. GAO has previously found that agencies did not maximize these benefits. GAO was asked to review federal agencies' use of reverse auctions. This report examines (1) the use of reverse auctions and the extent to which selected agencies achieved benefits, such as competition; and (2) the extent to which selected agencies had insight into reverse auction fees. GAO collected and analyzed data on federal agencies' use of reverse auctions from fiscal years 2013 to 2017. For five of the largest users of reverse auctions—the Departments of the Army, Homeland Security, Interior, Navy, and State—GAO reviewed documentation for 40 auctions that resulted in contract awards in fiscal year 2016 (the most recent data available when the review began), and that were selected to obtain a mix of dollar values and levels of competition, among other factors. GAO also interviewed contracting officials and analyzed agency guidance. Federal agencies' use of reverse auctions—a process where vendors bid against each other with lower prices to win government contracts—declined between fiscal years 2013 and 2017, from about 34,000 to 19,000 auctions valued at about $1.9 billion and $1.5 billion, respectively. In fiscal year 2016, the year GAO studied in detail, nearly three-quarters of auctions at the agencies GAO reviewed resulted in iterative bidding—when there are multiple bidders and at least one bidder submits more than one bid during the auction (see figure). Contracting officers said reverse auctions reduce administrative burden, especially during peak contracting times. Reverse auctions data indicate that selected agencies may have saved more than $100 million in 2016. The five agencies GAO reviewed indirectly paid about $13 million in fees to reverse auction providers through awardees in 2016. However, 28 of the 30 contracting officials GAO interviewed did not fully understand how fees were set. Further, in 2016, agencies GAO reviewed indirectly paid approximately $3 million in fees for reverse auctions for which a fee-free alternative was likely available. None of the guidance GAO reviewed provided sufficient information for contracting officers to assess the appropriateness of these fees (see table). Without better information, contracting officials may be offsetting potential savings by paying more in fees than necessary for the level of services required. GAO is making a total of 21 recommendations to the five agencies in GAO's review, including that agencies inform contracting officials about fees to better compare available provider options. Defense, State, and Interior concurred with this recommendation. DHS did not, stating that contracting officials should obtain this knowledge during market research. GAO believes managing this information centrally could eliminate confusion and minimize duplicate efforts.", "document_type": "gao"}
{"report": "Radiological material is used throughout the world for medical and industrial purposes. Possession of this material within the United States requires a license from NRC or from one of the 37 Agreement States to which NRC has relinquished regulatory responsibility. NRC and Agreement States issue two types of licenses authorizing the possession and use of radiological materials: specific licenses and general licenses. Specific licenses are issued for devices that typically contain larger quantities of radiological material, such as medical equipment used to treat cancer, cameras used for industrial radiography, and moisture and density gauges used in construction. Devices approved for use under a general license, by contrast, such as luminous exit signs, normally contain relatively small quantities of radiological material. Such devices are designed with inherent safety features, are widely available commercially, and do not require NRC or Agreement State approval to possess. Not all radiological material requires an NRC license for possession. For example, there is naturally occurring radioactive material in ceramics, fertilizers, and granite tile that does not require a license. This report focuses on radiological material that requires specific licenses for possession and use. Beyond requiring specific licenses for possession of radiological material, NRC may also require a general or specific license to import such material. Generally, NRC will issue an import license when the recipient of the material is authorized to receive and possess the material being imported. When issuing licenses for the possession of radiological material, NRC and Agreement States take steps to ensure companies are legitimate. Specifically, NRC and Agreement State officials are to conduct pre- licensing visits with all unknown applicants, using detailed screening criteria. According to NRC, the purpose of the site visit is to have a face- to-face meeting with the applicant to determine whether there is a basis for confidence that the applicant will use the radiological materials sought as represented in the application when the applicant receives the license. NRC has established a 14-point checklist to guide pre-licensing site visits and has developed a list of questions and activities related to each applicant’s business operations, facility, radiation safety operations, and personnel qualifications, to scrutinize the applicant and provide a basis for confidence that the applicant will use the radiological material as specified in the license. In 2003, the International Atomic Energy Agency published a system— which NRC adopted in 2004—that ranks quantities of individual radionuclides into one of five categories on the basis of their potential to harm human health. Under this system, a given radionuclide is considered dangerous when gathered in sufficient quantity and in close enough proximity to people to cause direct human health effects. A category 1 quantity, if not safely managed or securely protected, is likely to cause permanent injury to a person who handles or is otherwise in contact with it for more than a few minutes. Being close to this amount of unshielded material for a period of a few minutes to an hour will probably be fatal. A category 2 quantity, if not safely managed or securely protected, can cause permanent injury to a person who handles or is otherwise in contact with it for a short time (minutes to hours). Being close to this amount of unshielded radioactive material for a period of hours to days can be fatal. A category 3 quantity, if not safely managed or securely protected, can cause permanent injury to a person who handles or is otherwise in contact with it for some hours. Being close to this amount of unshielded radioactive material for a period of days to weeks can be fatal. Category 4 and 5 quantities are unlikely to cause permanent injury. In addition to categorizing radionuclides on the basis of their potential to harm human health, NRC has identified 16 radionuclides that are sufficiently attractive for use in a dirty bomb or for other malicious purposes. These 16 radionuclides of concern, shown in table 1, warrant enhanced security and protection measures—such as cameras, alarms, and other physical security measures—under NRC regulations. Radiological material is imported into the United States by both express consignment couriers arriving by air and air cargo carriers. Express consignment couriers, such as FedEx, move cargo for the public under express commercial services and provide door-to-door delivery. Air cargo carriers transport radiological material in cargo containers on commercial airlines. We have previously reported on the disparity in portal monitor deployment between the express consignment and air cargo environments. There are dozens of portal monitors in U.S. airports servicing express couriers, but few servicing air cargo carriers. According to CBP officials, handheld monitors are used to scan radioactive material at airports where portal monitors are not available. The CBP mission includes the border enforcement of the customs, immigration, and agriculture laws and regulations of the United States and enforcement on behalf of numerous federal agencies. The mission includes enforcement of the laws relating to the importation and exportation of merchandise into and out of the United States. In addition, the agency’s mission includes denying entry to terrorists and their weapons and criminals and their contraband. CBP’s Office of Field Operations is responsible for passenger and cargo processing activities related to border security, trade, immigration, and agricultural inspection at the nation’s air, sea, and land ports of entry. Prior to importing goods into the United States, information is submitted to CBP declaring the contents of shipments. This information includes, among other things, a description of goods, the name of the recipient, the port of entry, and a tariff code that classifies goods. CBP uses various data systems to track shipments into the United States and identify shipments for license verification. According to CBP, the Automated Commercial Environment is the primary system for processing shipments entering the United States, and it enables the government to make determinations about whether to admit goods into the country. The data stored in the Automated Commercial Environment are also used to ensure proper duty is collected for imported goods. CBP officials also view Automated Commercial Environment data in CBP’s Automated Targeting System, which is a decision support tool that analyzes shipment data to assess risk and identify potential violations. The Automated Targeting System includes automated alerts, which notify CBP officials when they need to take additional actions before shipments can be released. Information about NRC and Agreement State licenses for radiological material is included in NRC’s Web-Based Licensing System, which includes information about NRC and Agreement State licenses for category 1 and 2 quantities of radiological material. In addition, the Web-Based Licensing System includes up-to-date information on all NRC and six Agreement States’ specific licenses, including licenses that authorize possession of radiological material below the category 2 threshold. However, licenses for quantities of material below the category 2 threshold issued by 31 Agreement States are not kept in the system. The CBP data systems used to identify shipments for license verification are listed in table 2. CBP has implemented a policy and procedures requiring CBP officials at airports to contact experts within a centralized CBP office to verify licenses for radiological material being shipped into the United States. Specifically, CBP issued its “Radiation Detection Standard Operating Procedures Directive” policy in March 2014, outlining when CBP officials at ports of entry are required to contact internal experts at CBP’s Teleforensic Center who possess the technical expertise to verify that NRC and Agreement State licenses for radiological materials are legitimate. The function of the Teleforensic Center is to provide field CBP officials with assistance in resolving scientific and technological questions, including detection, isolation, and control of potential threats that may result from the presence of chemical, biological, radiological, or nuclear materials. The Teleforensic Center is staffed with scientists with expertise in a range of scientific disciplines, including chemistry, biology, explosives, radiological science, and nuclear science. The Teleforensic Center has established a hotline to receive requests for license verification, among other things, and the experts are available 24 hours a day, 7 days a week. CBP’s 2014 policy requires CBP personnel to verify the legitimacy of NRC and Agreement State licenses for all commercial imports of industrial and medical radionuclides that require a license from NRC or one of the 37 Agreement States. To implement this policy, CBP has established procedures for private-sector entities and CBP. These procedures, which apply equally to all quantities and types of licensable radiological material, can be broken down into three parts: submission of paperwork, identification of material, and verification of the license by experts in the Teleforensic Center, as outlined in figure 1. Once the shipment information is entered into the Automated Commercial Environment, CBP data systems identify which shipments of radiological material require license verification. Specifically, CBP’s Automated Targeting System uses certain information to identify shipments requiring license verification. Details about this information are omitted from this report because they were deemed to be sensitive by CBP. Once shipments are flagged as containing licensable radiological material, an alert is sent to CBP officials at the airport informing them that the material requires a license from NRC or an Agreement State. The alert outlines the steps the officials need to take to verify that the license is legitimate. Among other things, the alert explicitly states the phone number for contacting the Teleforensic Center and includes instructions for handling the material. According to CBP procedures, CBP officials are not allowed to release the shipment until they receive approval from the Teleforensic Center. Officials at the Teleforensic Center primarily use NRC’s Web-Based Licensing database to verify the legitimacy of licenses granted by NRC. However, as we’ve previously reported, licenses for some radiological material that are granted by Agreement States are not kept in that database, requiring the center’s experts to also call specific points of contacts at Agreement States to verify these licenses. CBP officials told us that Agreement State offices typically are not open 24 hours a day, 7 days a week, occasionally requiring CBP to hold shipments until an official can be reached. In addition to consulting the Web-Based Licensing database and contacting Agreement State officials to verify licenses, experts at the Teleforensic Center can also request additional information from CBP officials at the airports. After the experts verify that a license is legitimate, they give approval to the CBP officials at the airport to release the shipment. CBP officials at the airport then document the release. CBP officials at the four airports we visited and experts at the Teleforensic Center told us that it typically takes 30 to 90 minutes to verify a license, but it can take longer if the experts have to consult with an Agreement State. If a license cannot be verified, the shipment is returned to the sender or, in the case of an illegal shipment, seized and referred to proper law enforcement officials, as outlined in the policy. CBP has not verified all licenses for radiological materials as required in its policy and procedures. During the 21-month period we reviewed, CBP personnel at airports across the country did not verify the legitimacy of a significant number of shipments CBP considered as containing potentially dangerous radiological material. CBP officials at two of the four airports we visited may not have verified the legitimacy of licenses for many of the shipments of radiological material imported during the 21-month period, which was not consistent with CBP policy. After we brought this issue to CBP’s attention, it issued additional guidance. However, this guidance was not clear and caused confusion at the two airports we visited where actions continued to be taken that were not consistent with CBP policy. CBP officials did not verify the legitimacy of licenses for many of the shipments of radiological material imported from January 1, 2015, to September 30, 2016. We found that during this time frame, CBP officials stationed at airports nationwide did not make the required calls to verify licenses for a significant number of shipments of radiological material identified by CBP as requiring license verification—leaving many licenses unverified over this 21-month period. These shipments came through airports across the United States and, according to CBP officials we interviewed, arrived by both express courier and air cargo companies. At two of the four airports we visited, we observed that CBP officials were taking actions that were consistent with CBP policy. Specifically, we noted the following: At one airport, officials responsible for reviewing shipments of imported radiological material told us that they call the Teleforensic Center whenever they receive an alert from CBP’s data system, consistent with CBP policy. In addition, the officials said that they send any requested information to the Teleforensic Center and wait for approval from the center before releasing shipments. At another airport, officials responsible for reviewing shipments of imported radiological material told us that they also call the Teleforensic Center whenever they receive an alert and only release shipments upon receiving approval. However, at the remaining two airports we visited, officials responsible for reviewing shipments of imported radiological material took actions that were not consistent with CBP policy to verify the legitimacy of radiological shipments entering the country. As a result, officials at these airports had not verified hundreds of licenses as required under CBP’s policy because the officials misunderstood what they were required to do. In discussions with these officials, some described taking actions that were not consistent with the license verification requirements. Details about the extent of verification are omitted from this report because the information was deemed to be sensitive by CBP. At one airport, CBP officials told us they typically verify licenses on- site without calling the Teleforensic Center. This airport had more than 100 shipments of licensable radiological material during the 21-month period for which CBP provided data, but officials only made a few calls to the Teleforensic Center to verify licenses during this time, leaving many shipments of material unverified. Instead of calling the Teleforensic Center as required, the CBP officials said that they reviewed the shipment paperwork and looked for anomalies. CBP officials said that they undertake this paperwork review regardless of the risk of the radiological material in the shipment. For example, they said they would use this approach to verify licenses for category 1 materials, which NRC and the International Atomic Energy Agency classify as likely to cause permanent injury to a person who comes into contact with them. The officials told us that they call the Teleforensic Center only when there is something wrong with the shipment. Officials at CBP headquarters told us that this procedure does not comply with their verification policy and would not be effective. At the second airport, CBP officials we interviewed told us that license verification was conducted by private-sector express couriers overseas, negating the need for officials at the port of entry to call the Teleforensic Center. The CBP officials at the airport believed that a Memorandum of Understanding (MOU) between CBP and private companies delegates responsibility to express couriers to scan material with radiation detection equipment. These CBP airport officials said that express couriers also verify licenses as part of this process. However, the MOU between CBP and express couriers does not address the verification of licenses for radiological shipments. CBP headquarters officials we interviewed told us that the airport’s practice does not comply with the agency’s verification policy and confirmed that the Teleforensic Center is the only entity that can verify licenses. The headquarters officials also reiterated to us that license verification is not conducted by overseas private-sector companies. Officials we interviewed from an express courier that ships radiological material also told us that they do not verify licenses. This airport made few calls to the Teleforensic Center to verify licenses during the 21-month period, according to the data provided to us by CBP. In February 2017, we briefed CBP headquarters officials on our findings from the site visits to the four airports. We included in our briefing a summary of findings from our site visits and information on the number of calls made by CBP officials to verify licenses. At this meeting, CBP headquarters officials indicated that they would look into why calls were not made. Subsequently, in March 2017, in response to this briefing, CBP headquarters issued additional guidance to remind all field officials of CBP’s license verification policy. The guidance states that CBP officials must contact the Teleforensic Center to verify the license for all shipments of licensable radiological material. In addition, the guidance states that shipments may not be released from the airport until experts at the Teleforensic Center have completed verification of the license. The guidance was issued in the form of a “muster”—a type of memorandum addressed to all CBP field offices to emphasize CBP policy. Once such a memorandum is issued, CBP relies on local officials to interpret and pass along this information to those working directly with the shipments. According to CBP officials, the guidance was communicated to managers and then the managers communicated this information to front-line staff through weekly meetings and informal discussions. However, the muster was not successful in correcting previous misconceptions at the two airports we visited where officials’ actions were not consistent with CBP policy and the muster did not fully resolve their noncompliance with CBP policy. In part this was because, according to officials, they found the muster confusing. In April and May 2017, several weeks after CBP issued the muster, we contacted officials at the four airports we previously visited. Based on interviews with CBP officials at the two airports where actions were not consistent with CBP policy before the muster, we determined that they were continuing to take actions that were not consistent with CBP policy after they received the muster. For example, CBP officials at one of the two airports said they were continuing to conduct license verification without the assistance of the Teleforensic Center. Officials at this airport told us that they believed their actions were consistent with the policy, even though they had not altered their actions in response to the muster. Similarly, at the other airport where actions were not consistent with the CBP policy before the muster, officials told us again that license verification can be conducted overseas by express couriers, citing the MOU allowing express couriers to scan material with radiation detection equipment. When we discussed the content of the muster with CBP officials in headquarters in June 2017, they acknowledged the muster was confusing and stated it needed to be further clarified. Subsequent to our June 2017 meeting with CBP officials, they provided additional data that suggested an increase in calls to the Teleforensic Center. In July 2017, CBP officials told us they planned to issue additional clarifications. Subsequently, in November 2017, CBP issued an additional muster emphasizing its policy to call the Teleforensic Center for all shipments of licensable radiological material. CBP headquarters officials told us that they were unaware, until we informed them, that selected airports were not calling the Teleforensic Center to verify licenses and that licenses were not being verified for some imported radiological material. This is because CBP does not have a mechanism, such as a monitoring system, to ensure that all required license verifications are occurring. Such a system could also conduct checks to ensure CBP officials are following agency policy. The challenge to creating such a system is that CBP houses the data necessary to create it in separate systems that do not communicate with each other, and these systems are currently run by different offices with differing missions within CBP. Federal standards for internal control state that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. Until CBP develops a monitoring system to help ensure that CBP officials comply with the license verification policy, the agency will not have reasonable assurance that it can identify activities that are inconsistent with its policy and take corrective action as necessary. CBP policies and procedures are not effective at ensuring that only properly licensed radiological material is imported into the United States. Specifically, CBP’s procedures for identifying licensable radiological material do not ensure that all shipments of radiological material are identified and verified, resulting in the exclusion of a significant number of shipments that possibly contained radioactive material during the 21- month period we reviewed. Moreover, CBP’s current policy and procedures treat all radiological shipments with the same level of scrutiny and do not target resources based on the risk of the material. Details about these issues are omitted from this report because the information was deemed to be sensitive by CBP. CBP procedures for identifying licensable radiological material do not effectively implement its policy to verify the license for all shipments of licensable radiological material. We identified the following issues that result in limitations in CBP’s procedures. Specifically, the data system that CBP uses to implement its procedures does not sufficiently identify all shipments of potentially dangerous radiological materials. To implement its procedures, the agency chose to use an existing data system designed to process all types of imports into the United States. This system uses general customs information to identify the contents of shipments. Consequently, of the 44,152 shipments that could contain licensable radiological material, the system alerted CBP officials that they were required to verify relatively few licenses from January 1, 2015, to September 30, 2016. In addition, CBP’s license verification procedures do not currently target the higher-risk radiological materials. CBP’s method for identifying the contents of shipments does not include information that describes the quantity of radiological material. Specifically, categories 1, 2, and 3 quantities of radiological material can cause permanent injury or death to a person in contact with them for some period of time. As a result, according to a senior CBP official, it is safer to assume all shipments of radiological material are dangerous until proven otherwise. Federal standards for internal control recommend that agencies design control activities to achieve objectives and respond to risks. Until CBP develops a robust system that can identify all shipments of radiological material that pose risk, it will not have reasonable assurance that it has the appropriate policies and procedures necessary to verify licenses for these shipments. Furthermore, as we reported in December 2016, an essential element of enterprise risk management is to examine risks considering both the likelihood of the risk and the impact of the risk on the mission, in order to help prioritize risk response. Although CBP officials recognize that their current system and procedures have limitations and do not allow them to fully implement the agency policy to verify all shipments of radiological material that enter the United States, we found that they have not developed a system nor revised their procedures to address the issues we identified. Of particular concern is that CBP has not conducted a comprehensive assessment of (1) the information not currently included in the automated alert to determine what additional information would indicate shipments that may contain dangerous material or (2) how to create a more risk-based approach that distinguishes between higher- and lower-risk categories of radiological materials. Until it conducts such an assessment, CBP will not know how to adjust its current procedures to ensure that it is identifying all shipments of potentially dangerous radiological material and targeting its limited resources to those that pose the greatest risk. CBP has implemented a policy and procedures intended to ensure that the tens of thousands of shipments of potentially dangerous radiological material imported through U.S. airports each year are properly licensed. However, CBP’s procedures do not effectively implement CBP’s policy of ensuring that only properly licensed radiological material gains entry to the United States. This is because CBP does not have a monitoring system to help ensure that CBP officials at airports nationwide are complying with the license verification policy. Until CBP develops such a system, the agency will not have reasonable assurance that it can identify activities that are inconsistent with its policy and take corrective action as necessary. In addition, CBP’s procedures for identifying licensable radiological material do not ensure that all shipments of radiological material are identified and verified. This is the result of CBP’s automated alert, which currently does not include all relevant information needed to identify such shipments. Additionally, CBP procedures do not distinguish between high-risk categories of radiological materials and lower-risk categories; therefore CBP cannot target its limited resources to the shipments that pose the greatest risk. CBP has not conducted a comprehensive assessment of the information not currently included in the automated alert and does not know which shipments pose the greatest risk. A comprehensive assessment could help CBP gain a better understanding of information not currently included in the automated alert, and it could better position the agency to make appropriate changes to its existing system and procedures, as well as target its limited resources toward the quantities of material that pose the greatest risk. We are making the following three recommendations to CBP: The Commissioner of CBP should develop a monitoring system to help ensure that CBP officials comply with license verification policies and procedures. (Recommendation 1) The Commissioner of CBP should conduct a comprehensive assessment of information not included in the automated alert to determine what information is needed to identify licensable radiological material. (Recommendation 2) The Commissioner of CBP should develop a system that better identifies shipments of radiological material that pose the greatest risk and revise CBP’s policies and procedures as necessary to verify licenses for these shipments. (Recommendation 3) We provided a draft of this product to the Department of Homeland Security (DHS) and NRC for review and comment. DHS provided written comments, reproduced in appendix I, in which it concurred with our three recommendations. DHS stated that it will take the following actions, among others, to address our recommendations: (1) include a monitoring process in an updated version of its policy addressing license verification, (2) conduct a comprehensive assessment of information not included in the automated alert to determine what information is associated with dangerous material, and (3) develop an intelligence-driven process that identifies shipments of radiological materials that pose the greatest threat. In addition, DHS and NRC provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Chairman of the U.S. Nuclear Regulatory Commission, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix II. In addition to the individual named above, Ned Woodward, Assistant Director; Jeffrey Barron; Richard Burkard; Kendall Childers; Cindy Gilbert; Cynthia Norris; Danny Royer; Jerry Sandau; Travis Schwartz; and Kiki Theodoropoulos made key contributions to this report.", "summary": "Thousands of shipments containing radiological material enter the United States each year through airports across the country. Radiological material is used in various medical and industrial applications, and possession requires a license from the Nuclear Regulatory Commission (NRC) or one of the 37 states to which NRC has relinquished licensing authority. Failure to verify the licenses could allow terrorists to acquire radiological material for a dirty bomb, which uses explosives to disperse the material. GAO was asked to review CBP policies and procedures related to license verification. This report examines, among other things, (1) the extent to which CBP follows its policies and procedures, and (2) the effectiveness of these policies and procedures. GAO reviewed relevant policies and procedures, analyzed CBP data related to radiological material shipments and license verification, interviewed CBP and NRC officials, and selected four airports to visit based on expected traffic of radiological shipments. U.S. Customs and Border Protection (CBP) agency officials at U.S. airports have not verified the legitimacy of all licenses for imported radiological materials as required by CBP's policy. The policy requires CBP officials, when alerted, to verify licenses by calling experts in a centralized CBP office. CBP officials at two of four airports GAO visited said they were calling as required. However, CBP officials at the other two airports did not verify many licenses from January 1, 2015, through September 30, 2016, and headquarters officials were unaware of non-compliance with CBP policy. Also, GAO found that during this time frame nationwide, CBP officials were alerted to verify licenses for a significant number of shipments of licensable radiological material for all U.S. airports, but they did not make all the required calls—leaving numerous shipments potentially unverified over this 21-month period. This situation occurred because CBP does not have a monitoring system to ensure that officials make license verification calls as required. Until CBP develops a monitoring system for license verification, it will not have reasonable assurance that it can identify activities inconsistent with its policy and take corrective action. CBP procedures cannot effectively implement the agency's policy that its officials verify all radiological material shipments imported into the United States. The procedures are not effective for this policy in part because they rely on automated alerts that are based on some but not all relevant information that could indicate potentially dangerous radiological material. Consequently, CBP's current system and procedures cannot ensure that all such materials will be identified. Under federal internal control standards, agencies are to design control activities to achieve objectives and respond to risks. However, CBP does not have the information it needs to develop a robust system or revise its procedures because it has not conducted a comprehensive assessment of the information not included in its automated alert system. In particular, CBP has not assessed relevant information not currently included in the automated alert or how to create a more risk-based approach that distinguishes between higher- and lower-risk quantities of radiological materials. Without such an assessment, CBP may be unable to develop a system or procedures that best support its policy for verifying imported radiological materials. This is a public version of a sensitive report GAO issued in September 2017. Information CBP deemed sensitive has been omitted. GAO recommends that CBP develop a monitoring system to help ensure that CBP officials comply with the agency's license verification policy, conduct an assessment to determine relevant information that is not included in the automated alerts, and develop a system that allows it to identify shipments of greatest risk. CBP concurred with GAO's three recommendations and outlined actions to implement those recommendations.", "document_type": "gao"}
{"report": "SAMHSA defines a peer provider as “a person who uses his or her lived experience of recovery from mental illness and/or addiction, plus skills learned in formal training, to deliver services in behavioral health settings to promote mind-body recovery and resilience.” Generally, peer providers are known as “peer support specialists” in mental health settings. Peer support specialists are distinguished from traditional mental health service providers by their lived experience recovering from mental illness. People with serious mental illness generally receive longer term and more intensive treatment—either in a primary care or specialty setting—and peer support specialists may play a key role in the recovery process for these individuals. Peer support specialists work in a variety of settings, including clinical settings such as hospital emergency rooms, independent peer-run organizations, and on support teams in housing agencies that help eligible low-income families and persons with disabilities find rental housing. They can also deliver a varied set of services, including sharing of experience, goal-setting, developing coping and problem solving strategies to help individuals self-manage their mental illnesses, and linking individuals to desired resources like transportation or volunteer opportunities. Importantly, the services provided by peer support specialists complement, but do not replace, clinical services. Like other behavioral health specialties, the requirements for certifying peer support specialists vary by state, and certification bodies range from state government entities to independent non-profit organizations. The development of state-level peer support specialist certification programs was largely driven by another HHS agency, the Centers for Medicare & Medicaid Services, which in 2007 recognized peer support services as an evidence-based mental health model of care and established minimum requirements for states seeking federal Medicaid reimbursement for peer support services. One of these requirements is that peer support specialists complete a training and certification program as defined by the state. Another requirement is that peer support specialists receive supervision from a “competent mental health professional,” which may be provided through direct oversight or periodic care consultation. The state defines the amount, scope, and duration of the supervision as well as who is considered a competent mental health professional. States have used the flexibility allowed by the Centers for Medicare & Medicaid Services to create their own programs to certify peer support specialists. Some of these state peer support specialist programs are assessment-based certificate programs—programs that provide training and then evaluate whether applicants achieved the learning objectives of that training through an examination in order to receive certification. Other programs are professional certification programs—programs that evaluate applicants against predetermined standards of knowledge, skills, or competencies. In professional certification programs, the certifying body is independent from, and is not responsible for, the training process. SAMHSA supports the peer support specialist field through training, technical assistance, and grant funding. For example: From 2009 to 2014, SAMHSA partnered with stakeholders, such as the National Association for State Mental Health Program Directors, to gather nationally-recognized experts and stakeholders from across the United States for an annual meeting. These meetings, known as the “Pillars of Peer Support,” aimed to identify and create consensus around factors that facilitate the use of peer support services in state mental health systems of care. In 2015, SAMHSA developed core competencies defining the critical knowledge, skills, and abilities needed by anyone who provides peer support services through a technical assistance project. According to officials, the core competencies were developed in response to inconsistencies in the training and certification of peer support specialists that emerged as states began to develop their programs. SAMHSA’s core competencies reflected the five foundational principles of peer support identified by consumers and other stakeholders: services should be (1) recovery oriented; (2) person- centered; (3) voluntary; (4) relationship-focused; and (5) trauma informed. In addition to developing the core competencies, the project provides trainings and offers technical assistance to states, counties, providers, and other stakeholders. Although Medicaid provides the largest share of funding for state mental health agencies, followed by state funds, SAMHSA also provides grant funding that states can use for both the service and administrative components of their peer support specialist programs. For example, SAMHSA’s Center for Mental Health Services funds peer support programs through its administration of the Community Mental Health Services Block Grant, which provides flexible funding to the states to support services and related support activities for individuals with serious mental illness. While the Community Mental Health Services Block Grant accounted for less than 1 percent of total revenues received by state mental health agencies in fiscal year 2015, the flexibility of the funds allows them to be expended to pay for services that Medicaid and other health insurance will not pay for, such as training and developing standards. In fiscal year 2018, 40 states and the District of Columbia reported using the funds from the Community Mental Health Services Block Grant for peer support. SAMHSA also provides discretionary grants directly to domestic nonprofit organizations that aim to expand the capacity of peer support providers. These discretionary grants, including the Statewide Consumer Network Program grants, have helped establish recovery-oriented, consumer- driven services at the state level. SAMHSA also provides block and discretionary grants focused on substance use through its Center for Substance Abuse Treatment and Center for Substance Abuse Prevention, both of which have been used for peer recovery coaches. While most states use SAMHSA grants and state general funds to develop and sustain their peer support programs, as of 2016, 41 states and the District of Columbia were receiving federal Medicaid reimbursement for the services provided by peer support specialists. Georgia was the first state to receive federal Medicaid payment for peer support services in 1999, and additional state Medicaid programs began to provide coverage of peer support after the Center for Medicare & Medicaid Services issued guidance in 2007 on the requirements for federal payment for such services. In addition to meeting the minimum requirements for peer support services—including training and certification, supervision, and care coordination—states that bill for peer support services under the Medicaid program must comply with all Medicaid regulations and policies. Programs in all six states that we reviewed generally use the same process for screening, training, and ultimately certifying peer support specialists. See figure 1 for an illustrated example of this process. Although the six states’ programs generally use the same process for certifying peer support specialists, as of May 2018 the programs varied in the specific requirements applicants must meet for each of the three stages of certification: screening, training, and certifying. See appendix II for detailed information on state program requirements. To determine applicants’ eligibility for peer support specialist certification, all six state programs we reviewed have screening requirements applicants must meet when applying for certification. These screening requirements include requirements related to education, lived experience with mental illness, prior work or volunteer experience, and letters of recommendation. The extent to which each screening requirement was used by each state varied, and the specifics of each requirement also varied across the six programs we reviewed (see fig. 2). Education. Five of the six states that we reviewed required a high school diploma or equivalent. Officials from four of these states indicated that this level of education was necessary given the skills needed by peer support specialists, such as reading comprehension and communication skills. In contrast, Oregon officials told us that they did not require a high school diploma or equivalent; however, the officials noted that most of their peer support specialists have at least a high school education. Mental health experience. While all six state programs we reviewed required applicants to have lived experience in recovery from mental illness, the programs implemented this requirement in different ways. Some required a mental health diagnosis, while others required a minimum length of recovery time or required applicants to have received services for a mental illness. Texas officials said they did not have a specified length of recovery requirement due to the difficulty of pinpointing the specific time a person began his or her recovery; rather, Texas required applicants to self-identify as having experience living in recovery. Prior work or volunteer experience. Three of the six state programs required applicants to have prior relevant work or volunteer experience, although the amount of experience required varies. For example, to start the certification process, applicants in Michigan must be currently working in a peer support specialist role and have been in that position for at least 10 hours a week for the past 3 months. In contrast, Georgia officials told us that they found this requirement to be a barrier for some individuals who have not been able to work; therefore, Georgia did not have this requirement. Letters of recommendation. Three of the six states required letters of recommendation as another way to assess applicants’ readiness to become peer support specialists. State officials stressed that the letter should be a personal, work, or volunteer reference, rather than a clinical reference. To ensure the competence of the peer support specialist workforce, all six state programs we reviewed required applicants to complete an initial training, which we refer to as “core training.” The core training is the initial training provided to applicants seeking to become certified peer support specialists and, while the curricula may vary by state or training vendor, its purpose is to convey the skills and competencies that peer support specialists need to enter the workforce. Topics covered during the training typically include ethics, recovery, sharing the recovery story, and communication skills. (See app. III for an example of a peer support specialist core training schedule.) While all six states require applicants to attend core training, the length, cost, and curricula of these trainings varied across the states, as figure 3 shows. Length of training. All six programs required at least 40 hours of in- person core training, with Georgia and Pennsylvania requiring more than 70 hours. The six states required at least a week of core training to allow sufficient time to cover a core curriculum of general peer-related information, such as the meaning and role of peer support services, and at times including role play, in an effort to develop the interpersonal skills needed for an effective peer leadership. Cost of training. All states but Florida charged applicants fees to attend training. Training fees varied by state, ranging from $85 in Georgia to $1,400 in Pennsylvania. These fees varied because what they covered also varied. For example, state program officials from Michigan told us that, among other things, the $600 fee covers the price of lodging for the core training, consultant fees, materials, and college credit hours that can be earned by attending the training and the graduation ceremony. In contrast, state program officials from Georgia told us that the $85 they charge covered the cost of producing the course manual and that all other costs are covered by the state. Training curriculum. Four of the six state programs had their own approved core training curriculum to be used for applicants, while the remaining two programs in Oregon and Pennsylvania allowed applicants to select from approved training vendors—each of which had its own training curricula. To complete the certification process, all state programs we reviewed assessed applicants’ knowledge of the concepts taught in the core training through an examination. The applicants also had to sign and abide by a code of ethics. However, as of May 2018, the state programs varied as to who administered the certification examination, the type of code of ethics applicants were required to sign, the frequency with which certifications had to be renewed, and the continuing education requirements certified peer support specialists had to meet. (See fig. 4.) Examination. Four of the states we reviewed administered a single, statewide exam that applicants must pass before becoming certified, while in the remaining two states applicants had to pass an exam administered by the approved training vendor. The exams included multiple choice or essay questions. One training vendor responsible for conducting training in at least two states told us that the vendor included an oral evaluation component as part of the exam, in light of the communication and interpersonal skills needed for the peer role. Similarly, a state program official from Pennsylvania told us that observational assessments are also used to determine an applicant’s skills and knowledge. Code of ethics. Like other health professions, peer support specialists typically must agree to abide by a code of ethics. All six states we reviewed required peer support specialists to sign a code of ethics before becoming certified. Of the six states, the codes of ethics in Pennsylvania, Georgia, Michigan, and Texas were unique to peer support specialists, while Florida and Oregon used codes of ethics that also applied to other workforces, such as substance use disorder professionals and community health workers. Relatedly, five of the six states also had formal processes in place to investigate and take action in the event that a peer violated the code of ethics by, for example, disclosing confidential information. These actions range from reprimand to revocation of certification. Certification renewal. Three of the six states we reviewed required peer support specialists, once certified, to renew their certifications every 1 to 3 years, while the remaining three states awarded lifetime certifications. Continuing education. Five of the six states required certified peer support specialists to meet annual continuing education requirements, which ranged from approximately 10 hours per year to 36 hours every 2 years. According to some state program officials, requiring continuing education ensures continued competence in the field of peer support or provides specialized training, such as training for working with specific populations (such as veterans) or incorporating additional approaches or skill sets (such as training about the Wellness Recovery Action Plan). Officials from peer support specialist programs in selected states generally cited six leading practices for certifying peer support specialists. The 10 stakeholders—representing the perspectives of researchers, training or consulting organizations, associations, and advocacy organizations—we spoke with generally agreed that the six identified leading practices should be incorporated into programs that certify peer support specialists because the practices can lead to stronger quality of services for individuals with serious mental illnesses. Leading practice one: Systematic screening of applicants. Program officials in five of the six selected states cited the importance of systematic or detailed screening of applicants to become peer support specialists as a leading practice. All six state programs assessed applicants through a variety of approaches, including (1) using screening questions about the applicants’ understanding of the peer role, (2) conducting telephone interviews with applicants, (3) reviewing applications with a standardized tool or scoring rubric, and (4) having multiple people review applications for objectivity. Eight of the 10 stakeholders we interviewed confirmed that this was a leading practice, though some cautioned that these requirements should not unnecessarily exclude individuals with unique backgrounds or little work history. The Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury, which in 2011 explored how to most effectively apply peer support in the military environment as part of its ongoing mission, has similarly identified systematic screening with defined selection criteria as a best practice for peer support programs. While work or volunteer experience can be used as a screening requirement for applicants and was required by three of the states we reviewed, four of the stakeholders we interviewed commented that meeting these requirements can be challenging for individuals with a history of mental illness who may have been previously unable to enter the workforce. Research has shown that the stigma associated with mental illness is a significant barrier to work for individuals with mental illness and has shaped employer decisions about hiring or keeping a person with mental illness in the workplace. These workplace barriers, along with others, such as access to mental health treatment, contribute to the relatively low workforce participation of adults with serious mental illnesses. One stakeholder commented that peer support programs have a responsibility not to contribute to barriers in the workplace for individuals with mental illnesses. Our review shows that some of the peer support specialist programs in the six selected states are taking steps to address these barriers. For example, Florida recently changed its requirements and now provisionally certifies peer support specialists who meet all the certification requirements except for the requirement to have 500 hours of work or volunteer experience. After receiving the provisional certification, peer support specialists have 1 year to complete the work or volunteer hours necessary to upgrade to the full certification. Leading practice two: Conducting core training in-person. Program officials from five of the six selected states cited core training that is conducted in-person, as opposed to online, as a leading practice. Three program officials told us that core training should be done in-person to foster relationship building and experiential learning to develop the interpersonal skills a certified peer support specialist needs. All six state programs had in-person core training, regardless of whether the training was run by the state program itself or through approved vendors. For example, Michigan hosts its core trainings at a retreat center where participants are encouraged to stay for the week. Michigan program officials told us that this creates a place for training participants from across the state to network, discuss how their agencies work and the types of issues they face as peer support specialists, and share best practices. SAMHSA’s core competencies identify the importance of using active listening skills, understanding when to share experiences and when to listen, and using their own recovery story to inspire hope. All 10 stakeholders we interviewed confirmed that providing in-person training was a leading practice, though 3 commented that some of the knowledge segments could be done online. Five stakeholders we interviewed told us that observing the skills of peer support specialists during training or incorporating observation as part of the certification exam is important. One stakeholder explained that while written tests are a good measure of basic knowledge, the tests cannot fully assess the skills and competencies needed for certification. While 2 stakeholders cited the increased costs of delivering and grading exams with an observational component as the reasons many states use written exams only, 1 stakeholder noted that including an observational component is a more accurate assessment of whether or not people have developed needed skills. Another stakeholder commented that using a written test alone may allow individuals who are good test takers to become certified, even if they lack the interpersonal skills needed to be a peer support specialist. Leading practice three: Incorporating physical health and wellness into training or continuing education. Program officials from five of the six selected states cited the importance of emphasizing to peer support specialists that they should help others manage their physical health—in addition to their mental health—during core training or continuing education as a leading practice. All six of the selected states incorporated managing physical health conditions into their core training or continuing education. (See text box.) In these trainings, peer support specialists learn how to help others with access to needed care and prevention services, set personal health goals to promote recovery and a wellness lifestyle, and adopt healthy habits to prevent disease or lessen the impact of existing chronic health conditions. The need for physical health- related training was identified after a 2006 report found that individuals with serious mental illnesses were dying 25 years earlier than the general population, largely due to treatable medical conditions caused by modifiable risk factors, such as smoking and poor nutrition or obesity. SAMHSA identified educating peers about health, wellness, recovery, and recovery supports as a core competency. All 10 stakeholders we interviewed confirmed that emphasizing the importance of physical health was a leading practice, though 2 stakeholders commented that incorporating physical health and wellness into trainings should only be done as continuing education. Example of Leading Practice Three: Georgia Peer Support Whole Health and Wellness Georgia determined it was important to incorporate physical health and wellness into training for peer support specialists and was the first state to have related services— which it calls Peer Support Whole Health and Wellness—provided by certified peer support specialists covered by Medicaid. These peer support specialists—who complete additional training and are certified in Whole Health Action Management—receive medical technical support from registered nurses and are trained to work in both primary care and behavioral health settings. Georgia created the service using a SAMHSA- funded Transformation Transfer Initiative grant, which was designed to give states the opportunity to increase their efforts to make their state behavioral health delivery systems more consumer driven, among other things. The SAMHSA-Health Resources and Services Administration Center for Integrated Health Solutions adapted Georgia’s training, along with a training developed by New Jersey, to publish a Whole Health Action Management Peer Support Training Participant Guide in 2015. This adapted 2-day training aims to teach peers to use a person-centered planning process to create a whole health goal and how to engage in peer support, including Whole Health Action Management peer support groups, to meet that goal. Leading practice four: Preparing organizations to effectively use peers. Program officials from four of the six selected states cited efforts to ready provider organizations—such as hospitals or drop-in centers—to employ certified peer support specialists as a leading practice. State program officials told us that organizational readiness includes making sure staff understand the role of peer support specialists and can provide appropriate supervision. (See text box.) Five of the selected states have developed guidance or training for supervisors of peer support specialists. Nine of the 10 stakeholders we interviewed confirmed that this was a leading practice. SAMHSA identified using supervision effectively and engaging in problem-solving strategies with a supervisor as a core competency for this workforce. Example of Leading Practice Four: Michigan Peer Liaisons In order to help provider organizations understand the role of peer support specialists, Michigan created an informal peer liaison role at all 46 of the local Community Mental Health Services Programs tasked with coordinating mental health services. State officials told us that these peer liaisons have telephone calls and in-person meetings to provide informal feedback on technical assistance needs and share information on how certified peer support specialists are doing in their roles and responsibilities. According to state officials, peer liaisons have helped prepare mental health agencies to work with peer support specialists and have helped the state identify what new trainings should be developed to better help peer support specialists succeed in the workplace. Many of the stakeholders we interviewed highlighted the importance of having individuals in an organization who understand the peer support role. Eight of the stakeholders we interviewed told us that supervisors need to understand or be trained in the peer support role and skillset, with three stakeholders commenting that supervisors need to be specifically aware of the difference between peer support specialists and clinical providers. For example, to achieve this the training and certifying organization in Texas runs a twelve month program that helps provider organizations effectively implement peer support services. The program, which is designed as a learning community, focuses on changing organizational culture, defining and clarifying the peer support specialist role, and supervising these staff, among other things. Relatedly, three stakeholders told us that there should be more than one peer support specialist at each organization. One stakeholder noted that having multiple peer support specialists at an agency provides built in support and understanding of the peer role, which is important given that peer support specialists typically have the lowest level of power in an organization. Another stakeholder noted that putting a single peer support specialist in an organization can be isolating. Leading practice five: Continuing education requirements specific to peer support. Program officials from five of the six selected states considered it a leading practice to require, after certification, peer support specialists to take continuing education that is specific to the peer support role. This is to ensure that peers maintain their competency and are aware of new developments in the field. Five of the six selected states required certified peer support specialists to maintain their competence through continuing education, and all five of these states had a requirement that the continuing education be specific to the peer support role. (See text box.) All 10 stakeholders we interviewed confirmed that this was a leading practice. The Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury similarly identified as a best practice enabling continued learning through structured training. SAMHSA identified seeking opportunities to increase knowledge and skills of peer support as a core competency for peer support specialists. Example of Leading Practice Five: Pennsylvania Continuing Education Requirement As an added step to ensure that the peer support specialist workforce is competent, Pennsylvania places some of the burden on provider agencies for ensuring that certified peer support specialists meet continuing education requirements. The state requires its licensed provider agencies to develop a staff training plan to ensure that each certified peer specialist receives the continuing education they need. Pennsylvania also requires these agencies to provide opportunities for certified peer specialists to network with other certified peer specialists both within and outside the agency. The state monitors compliance with these requirements through annual inspections. State officials told us that this requirement serves as a safety net and assures them that certified peer support specialists are up to date in their training. Leading practice six: Engaging peers in the leadership and development of certification programs. Program officials from four of the six selected states cited having certified peer support specialists lead or participate in the certification process of applicants as a leading practice. State program officials told us that peers should lead in a variety of ways, including helping screen applicants, developing curricula, providing training, and serving as mentors or supervisors to other certified peer support specialists. For example, Michigan concurrently runs its continuing education courses and core training in the same location so that experienced peer support specialists can mentor new peers. Officials from all six selected states told us that certified peer support specialists in their states participate in some part of the certification process. (See text box.) The Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury similarly identified as a best practice leveraging the unique experiences and benefits peer support specialists offer as peers throughout a peer support specialist program, including in positions of leadership. All 10 stakeholders we interviewed confirmed that this was a leading practice. Example of Leading Practice Six: Oregon Traditional Health Worker Commission Through service on a statewide commission, peer support specialists in Oregon have a leadership role in developing the education and training requirements for certified peer support specialists and others. The Oregon Health Authority’s Traditional Health Worker Commission promotes the role, engagement, and utilization of traditional health workers—health workers who are certified by the state—in Oregon’s health care delivery system. The commission includes member representatives of each type of traditional health worker, including peer support specialists. In addition to developing the education and training requirements for peer support specialists and other types of traditional health workers, the commission developed the scope of practice to be used by provider organizations that employ peer support specialists. On an ongoing basis, the commission advises the Oregon Health Authority about the traditional health worker program and ensures that the program is responsive to consumer and community health needs. Oregon state officials consider having this advisory body with representation from the peer community to be a best practice, commenting that the commission provides the hands-on knowledge that the state can then implement through policy and rules. We provided a draft of this report to HHS for review and comment. The Department did not have any comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Health and Human Services, the Secretary of the Department of Defense, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff should have any questions about this report, please contact me at (202) 512-7114 or DeniganMacauleyM@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Recovery experience Must have lived experience with a mental illness or substance use disorder and have been in recovery for a minimum of 2 years. Must have been in recovery for at least 1 year between diagnosis of mental illness or substance use disorder and application for training program. Must have been diagnosed with a mental illness and been in recovery for a minimum of 1 year. Must currently be or formerly have been receiving services for mental illness or substance use disorder. Must currently be or formerly have been receiving services for a mental illness. Minimum of 12 months of work or volunteer experience within the last 3 years Not required 2 (type unspecified) Must self-identify as being in recovery from a mental health challenge. For the purposes of this report, we use the term “peer support specialist” to describe individuals who use their own lived experience recovering from mental illnesses to support others in their recovery; however, each state may have different titles in place for the certified role achieved through their peer support specialist programs. The training schedule below, developed by the Appalachian Consulting Group, illustrates the content areas that may be included in core training curriculum for peer support specialists seeking certification. The Appalachian Consulting Group’s curriculum was used in the first Medicaid-billable peer support specialist program in Georgia in 1999, and since then the curriculum has been used to train peer support specialists in 25 states. This training schedule is an example of the types of content that could be included in such training, and is not an endorsement of a particular training curriculum. In addition to the contact named above, Tom Conahan (Assistant Director), Summar Corley (Analyst-in-Charge), JoAnn Martinez (Analyst- in-Charge), Kaitlin Asaly, Muriel Brown, Krister Friday, and Emily Wilson made key contributions to this report.", "summary": "As the peer support workforce has grown, there has been increased attention to standardizing the competencies of peer support specialists through certification. The 21st Century Cures Act included a provision for GAO to conduct a study to identify best practices related to training and certification in peer support programs in selected states that receive funding from SAMHSA. This report, among other things, describes leading practices for certifying peer support specialists identified by program officials in selected states. GAO interviewed state program officials in six selected states and reviewed online, publicly available information about their peer support programs. GAO selected the states in part based on the state's certification program being well-established (at least 2 years old), use of SAMHSA funding for peer support, and stakeholder recommendations. The six selected states—Florida, Georgia, Michigan, Oregon, Pennsylvania, and Texas--are among the 41 states and the District of Columbia that, as of July 2016, had programs to certify peer support specialists. In addition to the state program officials, GAO interviewed SAMHSA officials and 10 stakeholders familiar with peer support specialist certification, including mental health researchers and officials from training organizations, among others. GAO provided a draft of this report to HHS for review and comment. The Department did not have any comments. According to officials from the Substance Abuse and Mental Health Services Administration (SAMHSA) within the Department of Health and Human Services (HHS), shortages in the behavioral health workforce are a key reason that individuals with mental illnesses do not receive needed treatment. In recent years, there has been an increased focus on using peer support specialists—individuals who use their own experience recovering from mental illness to support others—to help address these shortages. Program officials GAO interviewed in selected states generally cited six leading practices for certifying that peer support specialists have a basic set of competencies and have demonstrated the ability to support others.", "document_type": "gao"}
{"report": "The Homeland Security Act of 2002, as amended, designates the Under Secretary for Science and Technology as responsible for coordinating all R&D activities of DHS. The Act also provides that nothing in it precludes other department components from carrying out R&D activities as long as the activities are coordinated through S&T. As of September 2018, seven DHS components have budget authority to conduct R&D activities—S&T, the Coast Guard, the CWMD, the Secret Service, the Cybersecurity and Infrastructure Security Agency, TSA, and the Office of the Chief Information Officer within the Office of the Undersecretary for Management. Figure 1 provides an organizational overview of DHS components and offices that are involved in the R&D process as of December 2018. S&T reorganized its structure in September 2018 and currently has three technical divisions responsible for managing R&D programs related to improving border, immigration, and maritime security; supporting first responders; and countering physical and cybersecurity threats among others, as shown in figure 2. Most of S&T’s R&D portfolio consists of applied and developmental R&D, which can be transitioned to use within 3 years, as opposed to longer- term basic research. In addition to conducting projects for its DHS customers, S&T conducts research for other federal agencies and first responders. S&T is also responsible for conducting basic and applied research, and collaborates with other government agencies, academia, the private sector, and others. Questions have been raised about S&T’s ability to demonstrate the impact of its investments—in terms of value, tangible products, and advances toward the homeland security mission. Accordingly, for example, House appropriations committee report language has directed S&T to demonstrate how its R&D efforts are timely, with results relatively well defined and to make investment decisions based on clear and sensible priorities. In 2016, Congress passed the National Defense Authorization Act of 2017 (NDAA) which requires DHS to report annually to Congress on the department’s R&D projects including details such as the project name, the component carrying out the project, associated funding levels, and expected objectives and milestones for each project, among other items. Since DHS began operations in 2003, we have made multiple recommendations designed to improve DHS efforts to manage and oversee R&D efforts, as described later in this report. In September 2012, we reported that DHS did not have a department-wide policy defining R&D or guidance directing its components how to report R&D activities. As a result, DHS did not know its total annual investment in R&D, which limited the department’s ability to oversee components’ R&D efforts and align them with agency-wide R&D goals and priorities. We also reported that DHS’s R&D efforts were fragmented and overlapping, which increased the risk of unnecessary duplication. We recommended that DHS develop policies and guidance for defining, reporting and coordinating R&D activities across the department, and that DHS establish a mechanism to track R&D projects. As of August 2017, DHS had implemented these recommendations by, among other things, issuing guidance defining research and development activities and establishing Integrated Product Teams (IPT) as a primary mechanism for coordinating R&D. These actions and others are described in more detail later in this report. Figure 3 provides a summary of key events related to S&T since its inception. After the consolidation in 2002 of 22 agencies into a single department, DHS had, until recently, different appropriation structures and budget management practices based on agencies’ funding structures prior to DHS consolidation. In 2018, we found that, with over 70 different appropriations and over 100 formal program, project, or activity accounts, DHS operated for over a decade with significant budget disparities and inconsistencies across its components. The lack of uniformity hindered visibility, inhibited comparisons between programs, and complicated spending decisions, including for R&D-related programs. For example, in 2012 we reported that S&T, the Domestic Nuclear Detection Office, and Coast Guard were the only three DHS components with budget authority to conduct R&D. However, in 2012, we identified an additional $255 million in R&D obligations by other DHS components at that time. Further, we found in 2012 that the Domestic Nuclear Detection Office did not report certain R&D budget data to OMB, and R&D budget accounts included a mix of R&D and non-R&D spending, which further complicated DHS’s ability to identify its total investment in R&D activities. Within DHS, IPTs – established in 2015 – are to identify and prioritize technological capability gaps, and identify current or future R&D efforts or other solutions to close the gap, among other things. Specifically, the IPT process consists of three activities: 1) Identifying R&D activities in progress, funded, planned, or recently completed; 2) Prioritizing technological capability gaps and corresponding R&D efforts to address those gaps; and 3) Validating and reporting the gaps. The DHS IPT effort is led by S&T, but the individual IPTs are composed of senior-level officials from across DHS. IPT members prioritize R&D gaps based on departmentwide needs and requirements, and align current and planned R&D efforts to the identified gaps. In prioritizing and evaluating the capability gaps, four pre-defined criteria and rating scales are used and are discussed below: Strategic alignment: assesses the R&D gaps alignment with DHS- level and component-level strategic priorities. Impact: assesses if addressing the R&D gap would result in enhanced risk or threat reduction capability, among other things. Feasibility: assesses the feasibility of addressing the R&D gap, given its technical complexity. Considerations include feasibility related to technology, time, and transition. R&D needs: assesses whether the R&D gap would provide a critical R&D solution in an otherwise unaddressed area. The IPT’s role in coordinating R&D is discussed later in this report. GPRA, as updated and expanded by GPRAMA, requires agencies to establish annual performance goals with target levels of performance against which to measure progress towards those goals. In addition, GPRA requires executive agencies to prepare an Annual Performance Report on program performance for the previous fiscal year. DHS has developed goals and targets to assess and communicate R&D performance. As shown in figure 4, DHS’s performance assessment process also includes identifying performance gaps and implementing corrective actions to address unmet performance goals. DHS uses strategic and management performance goals and measures to assess and communicate on the performance of its R&D efforts. In addition, DHS uses milestones to track and communicate progress of its R&D project activities. Milestones: A milestone is a scheduled event signifying the completion of a major deliverable or a phase of work. Milestones can help agencies demonstrate that they have clear and fully developed strategies and are tracking progress to accomplish their goals. Milestones are often used as the basis of an alternative form of performance goal. Milestones related to DHS R&D efforts are reported to Congress and publicly available through the DHS congressional budget justification. Strategic Goals: A type of performance goal used to reflect achievement of missions that are publicly reported in the DHS Annual Performance Report. As part of DHS’s Annual Performance Report, these goals are subject to GPRA and GPRAMA requirements. Management Goals: A type of performance goal used to gauge program results and tie to resource requests that are reported to Congress and publicly available through the DHS congressional budget justification along with the strategic goals. As we previously reported in 1997, experts in research measurement have tried for years to develop indicators that would provide a measure of the results of R&D. However, the very nature of the innovative process makes measuring the performance of science-related projects difficult. For example, a wide range of factors determine if and when a particular R&D project will result in commercial or other benefits. It can also take many years for a research project to achieve results. DHS is required to report department-wide R&D-related funding to OMB on an annual basis. DHS uses several mechanisms to report the R&D- related funding, including budget authority (the legal authorization to obligate funds), obligations (binding agreements to make a payment for services), and outlays (payments to liquidate obligations representing amount expended). Further, OMB requires agencies to submit data on R&D programs as part of their annual budget submissions on investments for basic research, applied research, development, R&D facilities construction, and major equipment for R&D using OMB’s definition of R&D. Based on our analysis of OMB’s federal obligations data, we identified R&D-related obligations data for DHS components for fiscal years 2010 through 2017. Figure 5 depicts the R&D related obligations that were reported for fiscal years 2010 through 2017, which, on average, were about $1.3 billion annually or more than $10 billion overall for that time frame. Additionally, S&T obligated nearly 80 percent of all DHS R&D funds for that time period. S&T may conduct or fund R&D activities on its own or jointly with other entities. In addition to S&T, six other DHS components currently have budget authority to conduct R&D—the Coast Guard, CWMD, TSA, Secret Service, Cybersecurity and Infrastructure Security Agency, and the Undersecretary for Management. In August 2018, S&T reported that there were at least 132 ongoing R&D projects across the Department. Some R&D projects aim to produce a specific prototype or piece of technology for an end user, while others might be for developing IT systems, conducting specific training, or providing written reports, or knowledge products. According to S&T officials, S&T generally leads or funds R&D projects by providing technology and knowledge products for four homeland security areas: Disaster resilience. Improving community resilience to natural disasters through technology and tools that support planning, decision-making and mitigation efforts; Critical incidents. Improving technological capabilities during all stages of critical incident response; Border security. Improving the nation’s ability to detect, interdict and prosecute illegal activity across air, land and sea. Cybersecurity. Developing technologies, tools and techniques to defend, mitigate, and secure current and future systems, networks and critical infrastructures against cyberattacks. Figure 6 illustrates the types of R&D projects that are either led or funded by S&T for each category. For more in-depth examples and descriptions of S&T projects, please see appendix I. In its efforts to determine how to best support the DHS components and first responders, S&T seeks first to identify the end user’s needs by discussing operational challenges with components and first responders; then develop prototypes or leverage existing technologies to find solutions; and finally to test and evaluate potential solutions to ensure that they meet the end user’s needs and ultimately deploy solutions to the field. The other six DHS components with R&D budget authority typically lead and fund R&D projects tailored to support their specific operational requirements and respective missions. Examples of R&D projects conducted by DHS components other than S&T are listed below in table 1. DHS established its IPT process in August 2015 as the central mechanism to coordinate R&D efforts across the department, in accordance with recommendations we made in 2012. The IPT process works to identify DHS technological capability gaps and coordinate R&D to close the gaps across DHS mission areas. The IPTs consist of senior representatives from operational components. As of October 2018, IPTs are organized according to the department’s identified missions and include the following sub-IPTs, as shown in table 2. Each IPT has an establishing charter document, which formally identifies the IPT component members and responsibilities and lists the corresponding sub-IPTs. IPTs and sub-IPTs are to meet multiple times throughout the year to support the process of identifying and prioritizing R&D capability gaps and R&D efforts. For example, the charter for the “Secure Borders” IPT states that they anticipate meeting at least 2 or 3 times per year, or more frequently to support the annual program planning and budgeting process. Overall, components reported that the IPT process enhanced collaboration and improved visibility into R&D efforts across DHS. Officials from all 10 of the DHS components we interviewed reported the IPT process has been helpful in various ways, including identifying capability gaps, prioritizing and closing the gaps, and providing transparency and insight into other components’ R&D efforts. For example, CBP officials reported that, through the IPT process, they were able to identify R&D projects that the Coast Guard had been pursuing related to maritime security. The R&D projects that Coast Guard was pursuing were also of interest to CBP, and therefore CBP worked through the IPT process to prevent duplicative work and combine some of those efforts. In another example, TSA officials reported that they collaborated with the Secret Service to test explosive screening technologies, and that the IPT process facilitated their ability to collaborate and share information about the screening technologies. In addition to enhancing collaboration, component officials provided their perspectives on how the IPT process prioritizes technology capability gaps that components have identified. For example, TSA officials reported that the gap identification and prioritization process works well, but that funding R&D activities to close the gaps is more challenging because it is influenced heavily by competing budget priorities, emerging threats, and other DHS senior leadership priorities. TSA officials further reported that departmental resource constraints limit the number of identified capability gaps that can be addressed. However, officials from CBP reported that several R&D projects were successfully implemented after CBP had worked with S&T to identify a capability gap and transition a solution to close the gap, such as certain upgrades needed on CBP trucks. S&T officials stated that they have also taken steps to integrate with the department’s Joint Requirements Council and utilize component requirement executives who work with component agencies to provide a basis for requirements and aid the components with the means to track the progress and disposition of each capability gap on a regular basis. In 2012, we found that, among other things, DHS had not developed a policy defining who was responsible for coordinating R&D within the department and what processes should be used to coordinate it. As a result, components did not consistently coordinate with S&T on what R&D was planned or underway, leading to increased risk of unnecessary duplication of R&D efforts. We recommended that DHS develop and implement policies and guidance for overseeing R&D that included, among other things, a description of the department’s process and roles and responsibilities for overseeing and coordinating R&D investments. DHS concurred with our recommendation, and, in response, the Secretary for Homeland Security delegated the authority to coordinate and integrate the department’s R&D, testing, evaluation efforts to the Under Secretary for Science and Technology in 2014. In 2015 and 2016, DHS issued two guidance documents regarding the establishment and progress of the IPT process. These documents specified how DHS, through the IPT process, is to implement processes and mechanisms to coordinate department-wide R&D efforts. Additionally, in January 2017, DHS issued an R&D directive and associated instruction to formalize R&D reporting and coordination among components, as shown in figure 7. The 2017 directive and associated instruction identify the roles and responsibilities, including IPT participation requirements, for key entities involved in R&D across DHS. However, the directive and instruction do not specifically address steps to be taken if components do not adhere to the requirements. For example, the January 2017 DHS instruction states that “to effectively coordinate DHS R&D activities, DHS components are required to follow the DHS IPT process.” However, officials from CWMD stated that they do not participate in the S&T-led IPT sessions because they have their own internal process for identifying and prioritizing capability gaps. S&T officials stated that CWMD’s predecessor organization, the Domestic Nuclear Detection Office, participated in the IPT process until DHS initiated a reorganization of its weapons of mass destruction programs (resulting in the current CWMD). Current non-participation by CWMD, which has the second-largest R&D budget within DHS and obligated approximately 17 percent of DHS R&D funds, or $176 million in fiscal year 2017, poses risk of R&D project information not being shared among components. In August 2018, we reported that DHS’s chemical defense programs and activities were fragmented and not well coordinated across the department, including R&D activities. We recommended that CWMD develop a strategy and implementation plan to help DHS integrate and coordinate its chemical defense programs and activities, among other things. Additionally, in its 2014-2018 Strategic Plan, DHS states that, to anticipate key threats, DHS should, among other things, prioritize R&D activities related to chemical, biological, radiological, and nuclear terrorism. Given these factors, CWMD’s participation in the IPT process is important to ensure that all R&D efforts are fully coordinated thereby mitigating the risk of potential duplication of other DHS R&D efforts. S&T officials recognize that some components might not be complying fully with the departmental directives and associated guidance documents which require participating in the IPT process – the key R&D coordination mechanism within DHS. S&T officials stated that, despite these challenges, they have strong collaborative relationships with the components, and the existing collaboration mechanisms, such as the IPT process, continue to mature and facilitate R&D-related information sharing. However, DHS guidance documents require that components participate in the IPT process. By ensuring that all required components participate in the IPT process, DHS can help S&T maintain visibility of R&D projects in order to fulfill its statutory role of coordinating R&D. Since 2012, S&T has taken steps to identify and track information related to ongoing R&D projects across DHS, and in 2017, DHS developed a common appropriations structure that standardized R&D budgeting processes across the department. However, S&T’s efforts to identify and track R&D project information have limitations and can result in information that is not comprehensive. We also identified challenges in collecting information related to the achievement of R&D milestones. In 2017, DHS developed a common appropriations structure that allowed it to calculate and monitor its expenses, including R&D expenses, across the department. Officials from DHS’s OCFO reported that, prior to the new structure, some components categorized their R&D expenses as other types of expenses, such as “salaries and expenses.” These categorizations made it difficult to account for R&D expenses outside of an individual component’s budget management division. Furthermore, OCFO officials reported that components previously utilized inconsistent R&D definitions, which often led to discrepancies in how components would report R&D activities. In our April 2018 report, we found that DHS had operated for over a decade with significant budget disparities and inconsistencies across its components. We found that the lack of uniformity hindered visibility, inhibited comparisons between programs, and complicated spending decisions. According to DHS OCFO officials, the introduction of the common appropriations structure, among other things, has helped improve transparency within DHS and among the components so that R&D can be more readily identified and tracked. DHS is also able to compare R&D funding amounts throughout DHS more easily than in previous years. In addition, of the seven components that have their own R&D funding to report, five indicated that the new structure has improved the department’s ability to identify and report R&D activities. We identified multiple sources of component R&D project information, each posing its own challenges or limitations. As described below, these challenges and limitations include difficulty in collecting and integrating R&D project information, and reporting that is not comprehensive. DHS’s response to the National Defense Authorization Act of 2017: The NDAA, passed in December 2016, required DHS to provide a list of ongoing R&D projects and accompanying milestone information by January 2017, and annually thereafter, to specified congressional committees. In December 2017, DHS officials reported that they had not yet submitted the report, and anticipated that the response to the NDAA requirement would be completed by January 2018. In August 2018, DHS submitted its response to the committee, then 19 months late. S&T officials stated that the reporting delays were due to challenges in collecting and integrating the data. S&T officials also reported that it used the components’ congressional budget justification documents as a starting point to identify R&D projects to include in its report in response to the NDAA requirement. However, additional details about the R&D projects had to be collected via a “data call” process from the components. S&T officials told us that it was a challenge to have components report information about their R&D projects consistently and systematically. Furthermore, S&T officials identified terminology-related challenges in their R&D data call efforts, including making distinctions between R&D projects, efforts, and activities. S&T officials also reported that, in its current format, they would not be able to easily identify how many projects were added to the NDAA list across years, or if a given R&D project experienced a large increase or decrease in funding. Annual Reports of Coordinated R&D: In response to a 2015 request from the Secretary of Homeland Security that the IPTs identify R&D work being performed across DHS, S&T issued a “Report of Coordinated R&D” in 2016 and 2017. The content for the reports was developed through a “data call” process, and the reports identified R&D activities and projects across DHS. The reports – for 2016 and 2017 – contain tables of R&D project names and the component leading the project, among other things. However, during the course of our review, S&T officials reported that these annual reports should not be considered authoritative lists of R&D projects due to inconsistencies in the project information that components reported which led to the reports not being comprehensive. For example, when we asked about some significant variations in the number of projects between 2016 and 2017, S&T officials told us that one DHS component responded to the data call with a list of R&D activities that included a “wish list” of R&D for their component, and not actual ongoing R&D activities. DHS officials acknowledged that they do not have a mechanism to ensure the comprehensiveness of information reported by the components through the data call process. In addition, two components did not respond to S&T’s request for R&D project information for the 2017 Annual Report of Coordinated R&D. Congressional Budget Justifications: In May 2018, in the absence of a single, comprehensive list of R&D projects across DHS prior to the issuance of its report in response to the NDAA, S&T officials referred us to the R&D projects listed within the seven individual congressional budget justifications for the components that currently have budget authority to conduct R&D. Furthermore, as discussed earlier, S&T officials used the congressional budget justifications as their starting point in developing their response to the NDAA. However, S&T officials stated that there may be differences between the projects listed in the NDAA response and the projects listed in the congressional budget justifications. For example, S&T stated that the report in response to the NDAA includes all “ongoing” projects, regardless of the fiscal year in which they received funds; while the congressional budget justifications include R&D projects for which funding was requested for the given fiscal year. In other words, S&T officials clarified, they included all R&D projects in their response to the NDAA that had project activity, regardless of whether funding was requested in a particular congressional budget justification. S&T’s Project Tracker Database and the S&T Analytical Tracking System: A 2014 House Appropriations Committee report noted that the committee had repeatedly raised questions about S&T’s prioritization of R&D projects and that, without the ability to easily review and compare detailed information on all S&T projects and activities, the Under Secretary for S&T could not effectively carry out S&T’s responsibilities. Accordingly, the Committee directed S&T to develop a method or system for tracking all S&T-funded R&D projects. A November 2016 DHS Directive reiterates this requirement, specifying that the list of projects should be updated on at least a quarterly basis throughout the duration of an R&D project. S&T officials told us that, in response to the committee report, they developed the Project Tracker Database, which was in use at the time of our review, but was transitioned to a new system, the S&T Analytical Tracking System, in September 2018. Neither the S&T Analytical Tracking System nor its predecessor system, the Project Tracker Database, is intended to comprehensively collect information on R&D projects across the department, only for R&D projects managed within S&T. Given the recent implementation of the S&T Analytical Tracking System, it is too soon to tell whether it will improve and streamline S&T’s efforts to collect and analyze R&D-related information within the directorate. In addition, S&T officials stated that none of the above R&D information sources are suited to long-term trend analysis or data aggregation of department-wide R&D project information, and that these sources are disparate across DHS. S&T officials also acknowledged that better aligning R&D project information sources is an important aspect of improving how the department collects information DHS-wide. Standards for Internal Control in the Federal Government call for agencies to maintain quality information that is, among other things, current, accurate, accessible, and provided on a timely basis. Furthermore, the standards call for an agency’s management team to process relevant data from reliable sources and utilize it to make informed decisions. The disparate R&D project information sources that S&T maintains, such as DHS’s response to the National Defense Authorization Act of 2017 and the Annual Reports of Coordinated R&D discussed above, and the manual data-call process it takes to update the sources limits departmental access to current and reliable R&D project information. For example, an internal DHS web-based portal with pre- defined fields could provide component officials with a means for reporting information more consistently and comprehensively. Without complete and readily accessible R&D information, DHS may not have the information it needs to make informed decisions about R&D investments, such as which projects are to be prioritized. By developing a mechanism to address challenges and limitations related to the collection, integration, and comprehensiveness of R&D data across the department, S&T can improve its visibility on R&D efforts across DHS in accordance with its role as DHS’s coordinator of R&D efforts. DHS components have processes in place to collect certain indicators of R&D performance, but we found that these processes have limitations. The methods used to assess and report performance and progress of DHS R&D efforts we identified include: Milestone information – used to assess and communicate progress to Congress and agency decision makers on individual R&D projects Strategic and Management Performance Goals – milestone and other information is aggregated to provide summary information on R&D performance by mission area Customer feedback – information gathered by component officials on R&D customer perspectives on the utility of ongoing or completed projects Below is our analysis of the three methods. Milestones are often used as the basis of an alternative form of performance goal. Performance goals specified in alternative form must be described in a way that makes it possible to discern if progress is being made toward the goal. Milestones related to DHS R&D efforts are reported to Congress and publicly available through the DHS congressional budget justification. A milestone is a scheduled event signifying the completion of a major deliverable or a phase of work, and can be described in a way that makes it possible to discern if progress is being made toward a goal. Milestones can also help agencies demonstrate that they have clear and fully developed strategies and are tracking progress to accomplish their goals. In our analysis of 14 milestones for seven S&T high-priority R&D projects identified in fiscal year 2018 DHS budget justification documents, we found that 3 of the 14 milestones fully adhered to DHS guidance for milestone descriptions. DHS budget development guidance suggests DHS components, which develop milestones for inclusion in congressional budget justification documents, utilize leading practices provided in the guidance. The leading practices state that successful milestones contain the following characteristics: 1. Specific - provide a clear understanding of expected results; 2. Measurable - the result can be reported in quantitative or qualitative 3. Results-Oriented/Relevant - milestone clearly links to results-oriented activities such as strategy, budget, and/or program/project plans; 4. Time-Bound - milestone specifies a beginning and end date for As shown in table 3, we identified that more than half of the milestones (8 of 14) were not specific and 10 of 14 were not results-oriented. Eleven of 14 milestones we analyzed were measurable and time-bound. While our analysis is not generalizable to all fiscal year 2018 R&D milestones, it illustrates areas where the selected milestones do not fully incorporate the DHS guidance. Below is more detail on our assessment of the Specific and Results- Oriented guidance. Specific. Of the 14 milestones we reviewed, eight did not contain specific information that would allow reviewers to have a clear understanding of the result expected in connection with the milestone. For example, one milestone for a cyber-related R&D project states that “testbeds and pilots would be conducted with at least one department or agency.” However, the milestone is not specific enough to ascertain what types of testbeds or pilots are being assessed and how the testbed effort would link to a possible end result. Results-Oriented and Relevant. Ten of the 14 milestones that we reviewed did not clearly link the milestone back to results-oriented activities, such as strategy, budget, or project/program plans. For example, one milestone for a first responder program stated the following: “Transition, commercialize, or make available through open source platforms at least three technologies (e.g., Analyses, models, technology prototypes and/or knowledge prototypes).” It is unclear which technologies would be transitioned or how these technologies would be transitioned and made available. According to DHS OCFO officials, DHS congressional budget justifications, which include milestones, serve to provide explanation and detail for why DHS believes Congress should support the department’s R&D projects. DHS components are instructed by DHS’s budget office to routinely submit their congressional budget justifications for internal DHS review, which is a process and mechanism that results in the supporting justifications for R&D funding requests. DHS OCFO officials also stated that they are not aware of a singular reason for why milestones do not consistently incorporate DHS’s guidance and stated that they have also identified instances in which milestones do not align with the guidance. As our analysis indicates, S&T’s milestones could better incorporate milestone criteria included in DHS’s budget preparation guidance. Without milestone information that more closely aligns with DHS guidance, Congress and DHS decision-makers may not be able to fully assess whether R&D projects are meeting specific goals within assigned time frames or identify what adjustments, if any, may be needed to facilitate the achievement of project goals and the R&D mission overall. DHS has developed 12 performance goals to assess and report on its R&D efforts, DHS is required to identify department-wide goals in its strategic plan and annual performance report. For fiscal years 2016 through 2018, DHS’s Annual Performance Report included two strategic performance goals related to S&T’s R&D efforts. DHS’s congressional budget justification includes the two strategic performance goals as well as 10 related management performance goals. For a detailed listing of the 12 performance goals, see table 4. Seven of the 10 management performance goals were for S&T R&D efforts and the remaining three were for Domestic Nuclear Detection Office’s R&D efforts, which cover the components that account for 96 percent of DHS’ fiscal year 2017 R&D obligations. DHS has performance goals for mission programs that produce operational results that link directly to the DHS Strategic Plan, according to officials from the OCFO’s Program Analysis and Evaluation division. DHS also uses milestones to track the progress of the other components’ R&D efforts. DHS components that conduct R&D use various methods to collect and analyze customer feedback to assess their R&D efforts, as shown in table 5. However, DHS is not well positioned to integrate the results because limited customer feedback information is collected and analyzed. Six DHS components that have R&D-related responsibilities evaluate customers’ needs and improve customer satisfaction by listening to customers’ feedback about the quality of deliverables they receive—both good and bad— and making changes necessary to enhance that deliverable. Specifically, officials from S&T, the Coast Guard, CWMD, TSA, the Cybersecurity and Infrastructure Security Agency, and the Secret Service stated they have varying methods in place for gathering customer feedback regarding the progress and the results of R&D activities and deliverables. Below is a summary of these components’ efforts to consider customer feedback. S&T. S&T’s project management guide outlines a process for ensuring customer requirements are being adequately met using a customer survey that can be modified and provided to the customer to complete at each major milestone. In addition, proceedings (e.g., minutes) from regularly scheduled meetings with customer and end user groups may be used to gather information regarding value and operational impact in lieu of a survey. The S&T survey asks customers to rate their overall satisfaction with S&T products and services, along with specific aspects of support, such as providing products in time to meet needs and effectively keeping customers informed. However, out of the 97 R&D activities that S&T reported in fiscal year 2017 and the 110 activities in fiscal year 2016, S&T collected one customer survey form. Coast Guard. The Coast Guard also has a process in place for surveying and interviewing its customers following the completion of an R&D project and officials reported using this information for future R&D planning. The Coast Guard’s survey instrument seeks feedback on: customer satisfaction, timeliness, utility, and communications, among other things. The customer service survey is distributed for feedback on deliverables. At least 6 months after an R&D project is completed, Coast Guard also conducts an in-person interview with project sponsors to collect project transition performance success and feedback information. The surveys that Coast Guard uses to obtain feedback elicit a relatively low number of responses from customers, significantly limiting their usefulness in soliciting feedback data. Specifically, the response rates for fiscal years 2013-2017 were 16%, 17%, 27%, 13%, and 17%, respectively. Experts on customer satisfaction measurement have stated that although survey response rates are never 100 percent, an organization should strive to get its rate as close as possible to that number. They suggest that ideally, organizations can obtain response rates of over 70 percent. CWMD. CWMD does not have a formal mechanism, such as standard processes and procedures, for collecting and analyzing customer feedback. However, CWMD officials stated that certain informal mechanisms are used to collect customer feedback. For example, CWMD officials reported that the CWMD Office of Policy, Plans, Analysis, and Requirements Directorate communicate with customers and gather customer needs and requirements. In addition, as part of these informal mechanisms, internal and external reviews feedback may be obtained from eventual end users of the R&D technology such as operators from CBP, the U.S. Coast Guard, and the TSA, according to CWMD officials. Cybersecurity and Infrastructure Security Agency. The directorate does not have a formal mechanism for collecting and analyzing customer feedback. However, periodic control gates are used to gather customer feedback, according to directorate officials. The input received during these reviews is used to make corrective actions and manage R&D efforts as necessary. For example, according to directorate officials, they conduct a comprehensive review of R&D coordination efforts annually to determine what was effective and what can be improved. TSA. TSA does not have a formal mechanism for collecting and analyzing customer feedback. However, according to TSA officials, informal feedback may be obtained through review of the weekly reports and meetings regarding recent developments and project milestones. In addition, feedback may be obtained during quarterly program management reviews, third party project development, and certification testing. Secret Service. The Secret Service does not have a formal mechanism for collecting and analyzing customer feedback. However, according to Secret Service officials, informal feedback may be obtained in conjunction with other related internal review activities, including program management reviews. To formalize and improve customer feedback processes for R&D efforts, the National Academy of Sciences has stated that feedback from both R&D failures and successes may be communicated to stakeholders and used to modify future investments. Research on leading practices in the area of customer satisfaction suggests that multiple approaches are needed to effectively listen to customers about their perceptions of quality service and needs. The research also points to a need for centrally integrating all customer feedback so that managers can achieve a better understanding of customers’ perceptions and needs. Also, we have previously reported that leading organizations combine quantitative and qualitative listening tools to obtain customer feedback and then centrally integrate the data in one location. Such approaches include the following: Customer satisfaction surveys. We previously reported that most major organizations use tools such as surveys to periodically capture customers’ overall perceptions about their organization and to measure satisfaction with specific transactions soon after they occur. These surveys can be administered through the mail, by telephone, in person, or electronically. Benchmark surveys. Benchmark surveys gather perceptions of performance from the entire market. These surveys usually gather customer perceptions of performance about top competitors in an industry. This allows the company to examine its customer-perceived strengths and weaknesses in the overall marketplace. While continuous improvement may be a result of this listening tool, the real value, according to the research in this area, comes from breakthrough thinking to gain a sustainable advantage. Focus groups. Organizations use focus groups to get better information from customers than survey results provide. In these groups, customers are probed about why they answered survey questions the way they did. Customer interviews. Conducting interviews with customers can provide a way to get very detailed information about their specific needs and problems. Like focus groups, this tool is used by leading customer service organizations to probe survey respondents as to why they answered survey questions a certain way. The National Academy of Sciences have stated that evaluating the relevance and impact of R&D is a key stage of the R&D process and that measuring the impact of R&D activities requires looking to the end users and stakeholders for an evaluation of the impact of a research program, such as through polling or systematic outreach. In addition, Standards for Internal Control in the Federal Government calls for entities to determine an oversight structure to fulfill responsibilities that are set forth by feedback from key stakeholders, among other things. As a result of the limited customer feedback information that is collected and analyzed, DHS is unable to more fully understand its customers’ perceptions and experience to allow it to assess the benefits and performance of its R&D efforts. Moving forward, standard processes and procedures for collecting and analyzing R&D customer feedback would help in assessing R&D efforts. Since 2010, DHS has obligated more than $10 billion dollars on R&D to develop technologies to support DHS’s efforts to prevent, mitigate, and recover from terrorist and natural threats. S&T officials indicated that they have strong collaborative relationships with components; however, it is important that required components fully participate in the IPT process in order for S&T to maintain visibility of R&D projects and successfully fulfill its statutory role of coordinating R&D and to help reduce the risk of potential duplication of R&D efforts across the department. Furthermore, S&T faces challenges and limitations related to the collection, integration, and comprehensiveness of information on R&D projects. Without a mechanism that aligns information sources and results in comprehensive and accurate data, among other things, DHS may not have the information it needs to make informed decisions about R&D investments. S&T also does not fully leverage existing guidance when developing milestones for R&D efforts. Without milestone information that more fully aligns with DHS criteria, Congress and DHS decision-makers may not have a full understanding of R&D progress and challenges. Finally, standard processes and procedures for collecting and analyzing R&D customer feedback would help to assess its R&D efforts. We are making the following four recommendations to the Deputy Secretary of the Department of Homeland Security: The Deputy Secretary of the Department of Homeland Security should ensure that all components adhere to IPT participation requirements, in accordance with the DHS directives. (Recommendation 1) The Deputy Secretary of the Department of Homeland Security should develop a mechanism that aligns processes and information sources for collecting R&D project data from DHS components to ensure that the information can be collected, integrated and result in a comprehensive accounting of R&D projects DHS-wide. (Recommendation 2) The Deputy Secretary of the Department of Homeland Security should direct OCFO program officials to ensure that S&T take steps to more fully incorporate leading practices, such as those included in DHS’s budget preparation guidance, into R&D milestones. (Recommendation 3) The Deputy Secretary of the Department of Homeland Security should develop standard processes and procedures for collecting and analyzing customer feedback, applicable to components conducting R&D, for improving the usefulness of existing customer feedback mechanisms to assess R&D efforts and for implementing such mechanisms where absent. (Recommendation 4) We provided a draft of this report to DHS for review and comment. DHS provided written comments which are reproduced in appendix II. In its comments, DHS concurred with our recommendations and described actions planned to address them. S&T, OCFO, CBP, the Cybersecurity and Infrastructure Security Agency, and CWMD also provided technical comments, which we incorporated as appropriate. With regard to our first recommendation, that the Deputy Secretary of the Department of Homeland Security should ensure that all components adhere to IPT participation requirements, in accordance with DHS directives, DHS stated that S&T’s Office of Science & Engineering will revise the relevant DHS directive to require participation in the IPT process by all components. DHS estimated that this effort would be completed by December 31, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our second recommendation, that the Deputy Secretary of the Department of Homeland Security should develop a mechanism for collecting R&D project data in order to complete a comprehensive accounting of R&D projects DHS-wide, DHS stated that S&T’s Office of Science & Engineering will revise the relevant DHS directive to include requirements for data collection on all R&D projects across DHS to ensure alignment of the appropriate data elements and existing guidance. DHS estimated that this effort would be completed by December 31, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our third recommendation, that the Deputy Secretary of the Department of Homeland Security should direct OCFO program officials to ensure that S&T take steps to more fully incorporate leading practices, such as those included in DHS’s budget preparation guidance, into R&D milestones, DHS stated that the OCFO will continue to work with S&T to incorporate the leading practices and that the OCFO will validate all S&T annual budget submissions and provide S&T feedback, as appropriate. DHS estimated that this effort would be completed by April 30, 2020. This action, if fully implemented, should address the intent of the recommendation. With regard to our fourth recommendation, that the Deputy Secretary of the Department of Homeland Security should standardize processes for collecting and analyzing customer feedback to aid in assessing R&D efforts, DHS stated that S&T’s Office of Science & Engineering will revise the relevant DHS directive to incorporate customer feedback procedures into the IPT process for the recipients of R&D programs. DHS estimated that this effort would be completed by December 31, 2019. This action, if fully implemented, should address the intent of the recommendation. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact William Russell at (202) 512-8777 or russellw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. The following appendix provides a general overview of the Department of Homeland Security’s (DHS) Science and Technology Directorate (S&T) research and development (R&D) projects and programs that support the following homeland security mission areas: (1) border security; (2) disaster resilience; (3) critical incidents, and (4) cybersecurity. The examples provided below are illustrative and therefore not intended to provide a comprehensive list of DHS R&D programs or projects. S&T and the U.S. Coast Guard conducted drone demonstrations and tests at two sites in Mississippi to test unmanned aerial systems before they are deployed to the field. The Technical Assessment of Counter Unmanned Aerial Systems Technologies in Cities is designed to help public safety and industry officials identify potential methods for countering nefarious uses of small unmanned aerial systems. The Wall System Design Support Tool Independent Verification and Validation seeks to strengthen the U.S. Border Patrol’s decision analysis model used to identify the areas of the border where a wall would be most beneficial. The Border Research in Instrumented Construction Project is designed to identify cameras, sensors and other technology that can be applied on or near a smart wall via ground, surface/air, subsurface and water to enhance border security and agent safety. The Apex Border Situational Awareness program aims to help U.S. Customs and Border Protection access more data sources, develop decision support tools and share information with partner law enforcement agencies to improve situational awareness. The Integrated Maritime Domain Enterprise is a platform that seeks to bridge disparate data systems to make it easier for DHS components to share information and collaborate. The Adaptive Sensor Analytics Project aims to provide automated data analytics to process satellite imagery, identify patterns of nefarious activity and alert DHS officials. Ground-Based Technologies Program seeks to improve the ability to detect illegal activity at the border through stronger situational awareness, automated detection and alerts, target classification and tools to promote agent safety Air-Based Technologies Program is designed to identify, test and evaluate unmanned and manned aircraft platforms and sensors for law enforcement, search and rescue, and disaster response in both land and maritime environments. The Expert Tracker training program aims to help U.S. Border Patrol agents improve their ability to track movement in rough terrain along the nation’s borders. Port of Entry Based Technology Program seeks to improve illicit cargo detection and legitimate cargo throughput by upgrading legacy scanning systems and linking them to new analysis and information sharing tools that may make the most of personnel resources. The Port of Entry People Screening Program aims to identify, evaluate and implement combinations of process and technology improvements that facilitate the movement of people through the nation’s air, land and sea ports of entry. Autopsy is an open-source digital forensics platform that seeks to help law enforcement determine how electronic devices were used in a crime and recover evidence. Voice Forensics aims to help identify individuals who make hoax rescue calls to the U.S. Coast Guard, which may make it easier to find and prosecute suspects. Child Exploitation Image Analytics seeks to reduce the amount of time it takes to identify and rescue children from exploitation, as well as identify perpetrators, through automated face recognition algorithms and forensic tools. The Tunnel Detection and Surveillance Program is designed to help border officials detect and locate clandestine tunnels, as well as gather forensic data to support investigation and prosecution of drug smuggling activities. The Port of Entry Forensics and Investigations Program aims to help combat transnational crime and investigate child exploitation and human trafficking through open source data and forensic analysis of material collected from suspicious packages and cargo. DHS S&T seeks to help improve community resilience to natural disasters through technology and tools that support planning, decision making and mitigation efforts. The Canada-U.S. Enhanced Resiliency Experiment series aims to use real-world exercises to demonstrate that seamless communication is possible between responders on either side of the northern border during a large-scale emergency. DHS S&T and the Central United States Earthquake Consortium are developing a suite of decision support tools designed to help emergency managers analyze data used when planning, managing, coordinating and communicating during natural disasters The Mutual Aid Resource Planner is a prototype application designed to help jurisdictions develop more accurate resource plans by incorporating custom data on geospatial hazards, risk assessments and potential mutual aid partners. The National Mutual Aid Technology Exercise seeks to test existing mutual aid systems to improve users’ ability to exchange information between systems in real time and develop technical guidance for future use. The Coastal Resilience Center of Excellence aims to conduct targeted research and education to address key challenges facing coastal communities in the United States, including storm surge modeling, pre-disaster planning, communicating risk and more. The Flood Apex Program is designed to help identify and develop technology that can reduce flood-related fatalities and property loss, increase community resilience and improve flood preparation, response and recovery. The Internet of Things Low Cost Flood Inundation Sensors project seeks to develop and test sensor technology that can provide real- time updates on rising water levels. The Kentucky Dam Safety project aims to create technology and processes to better monitor dams and alert communities of potential danger, reducing loss of life and property. The Advanced CIRCulation modeling tool seeks to accurately predict coastal flooding threats to help emergency managers better coordinate evacuation and response. The Hurricane Evacuation -eXtended platform is a decision support tool for emergency managers designed to organize and stage resources for hurricane response. The Simulation-Based Decision Support System for Water Infrastructural Safety Lite™ tool is designed to quickly model the effects of potential dam breaks, helping officials develop accurate emergency response plans and anticipate evacuation needs. The Tunnel Plug is an inflatable device that aims to seal off subway tunnels to prevent water from flowing into the system, minimizing damage to critical transportation systems. The Linking the Oil and Gas Industry to Improve Cybersecurity project seeks to facilitate cooperative research, development, testing and evaluation procedures to improve cybersecurity in petroleum industry digital control systems The Homeowner Flood Insurance Roundtable aims to help reduce future uninsured flood losses by identifying decision support and research and development needs. The Automated National Structures Inventory project is seeking to build a comprehensive list of private and commercial property at risk for flood damage, which may help promote proper insurance and more effective flood protection efforts. The Smart Cities IoT innovation project is designed to help first responders improve their situational awareness through advances in autonomous drone navigation, intelligent building sensors and body- worn interoperability platforms. The Wireless Emergency Alerts Research, Development, Testing and Evaluation program aims to inform changes to the Federal Communications Commission’s alerting system, including increased character length and adding URLs, pictures, videos and geo-targeting capabilities. The System Assessment and Validation for Emergency Responders program seeks to evaluate available responder technology on affordability, usability, and other criteria to help agencies understand which equipment will best fit their needs. The Urban Operational Experimentation program is designed to let responders test new technologies in real-world settings, and may help provide developers with direct feedback on how their products can better meet operational needs. The Enhanced Dynamic Geo-Social Environment training platform is a free virtual tool that aims to allow responders to practice responding to an active shooter incident, whether within a single agency or with multiple jurisdictions and disciplines. The Surface Transportation Explosives Threat Detection program is aiming to develop screening technology that can identify potential threats on people and in their bags without physically interacting with them. The Explosives Detection Canine program is designed to help detection canine teams identify new explosive compounds through non-hazardous training aids and increase their proficiency through realistic self-assessment and training events across the country. The Datacasting project aims to help responders send encrypted video, data files, and other critical information through existing public broadcast television signals, which helps prevent other communication channels from being overwhelmed. The Next-Generation Incident Command System, a web-based platform, seeks to allow responders to share data and request assistance in real-time, and also allows officials to observe and make critical decisions during evolving situations to better support preparation, response, and recovery. The Android Team Awareness Kit, a free app, is designed to help responders visually track team members and assets in real time during an incident, as well as share encrypted data across jurisdictions, disciplines, and components. The Assistant for Understanding Data through Reasoning, Extraction and Synthesis platform aims to help responders overcome information overload by providing actionable insight based on up-to-the-minute sensor data. The First Responder Electronic Jamming Exercise seeks to identify mitigation tactics against intentional or accidental communications jamming, which responders were able to practice implementing in realistic scenarios. The Telephony Denial of Service program is designed to help improve 911 emergency call centers’ ability to defend against attacks through cyber security technologies that can analyze incoming calls and may help determine potential threats in real time. The Finding Individuals for Disaster and Emergency Response is designed to detect human heartbeats under up to 30 feet of rubble, which may help responders more effectively target rescue efforts. The Rapid DNA technology can complete a DNA test within 90 minutes or less from the field, which seeks to help officials identify victims and inform family members in a timely manner. The Forensic Video Exploitation and Analysis tool aims to help responders quickly analyze video to identify potential suspects by allowing users to tag a person to a left-behind item and reconstruct that individual’s path across multiple camera views. The Cyber Risk Economics program seeks to fund applied R&D, knowledge products by gathering stakeholders across government, industry and academia to discuss cyber risk economics capability gaps and needs. Through these stakeholder discussions, along with scholarly cybersecurity economics research literature reviews and authoritative U.S. federal government documents, DHS S&T developed the newly released Cyber Risk Economics Capability Gaps Research Strategy which aims to consider business, legal, technical and behavior factors impacting cyber risk. William Russell, (202) 512-8777 or russellw@gao.gov. In addition to the contact named above, Ben Atwater (Assistant Director), Melissa Hargy (Analyst-in-Charge), Nanette Barton and Gary M. Malavenda made key contributions to this report. In addition, key support was provided by Chris P. Currie, Dominick Dale, Michele Fejfar, Richard Hung, Benjamin Licht, John Mingus, Janet Temko-Blinder, and Sarah Veale.", "summary": "Conducting R&D on technologies is vital to enhancing the security of the nation. The Homeland Security Act of 2002, as amended, designates S&T as responsible for coordinating all R&D activities of DHS. Questions have been raised about S&T's ability to demonstrate the impact of its R&D investments. Since DHS began operations in 2003, GAO has made recommendations to help improve DHS's efforts to coordinate and oversee R&D. GAO was asked to review DHS's R&D efforts. This report examines (1) how much DHS has obligated for R&D and what types of R&D DHS conducts, (2) to what extent S&T coordinates R&D across DHS, and (3) how, if at all, DHS identifies and tracks R&D efforts. GAO reviewed documentation from DHS related to the conduct, coordination, tracking, and evaluation of R&D projects. GAO interviewed DHS officials with responsibilities related to, among other things, R&D financial reporting, performance evaluation, and the IPT process, including officials from the 10 DHS components that participate in the IPTs. GAO also reviewed DHS R&D budget and obligation data from fiscal years 2010 through 2017. The Department of Homeland Security (DHS) obligated more than $10 billion for research and development (R&D) from fiscal years 2010 through 2017. Seven DHS components have budget authority to conduct R&D, and the Science and Technology Directorate (S&T) obligated nearly 80 percent of all DHS R&D funds during this time period. These components conduct a wide range of R&D, from cybersecurity to border security projects. S&T generally leads or funds R&D projects by providing technology and knowledge products to support four homeland security mission areas: Disaster resilience . Improving community resilience to natural disasters through technology and tools; Critical incidents . Improving response technological capabilities; Border security . Improving the nation's ability to detect, interdict and prosecute illegal activity across air, land and sea. Cybersecurity . Developing technologies and tools to secure systems and critical infrastructures against cyberattacks. S&T strengthened its R&D coordination efforts across DHS, but some challenges remain. In 2015, DHS established an R&D coordination mechanism, to be led by S&T, and in 2017 issued R&D coordination-related guidance. Specifically, to improve coordination, DHS established an Integrated Product Team (IPT) process to serve as the key R&D coordination mechanism within DHS. All ten DHS components that GAO interviewed stated that the IPT process improved visibility into DHS R&D efforts. However, the component that obligated approximately 17 percent of DHS R&D funds in 2017, or $176 million, did not participate in the IPT process in 2018, as required. Nonparticipation poses a risk to R&D coordination efforts across DHS, including R&D project information not being shared among components. Furthermore, ensuring that all required components participate in the IPT process would help S&T maintain visibility of R&D projects in order to fulfill its statutory role of coordinating R&D, and mitigate the risk of potential duplication of effort. S&T, in its coordination role for DHS, uses disparate information sources to identify and track R&D project information and faces challenges to track progress and other information for ongoing R&D projects. For example, R&D project information is stored in multiple information sources leading to difficulty in integrating complete R&D project information and resulting in reporting that is not comprehensive. By developing a mechanism to address these challenges, S&T can further improve its efforts to report and analyze R&D project information, and have improved visibility on R&D efforts across DHS. GAO also identified challenges in collecting information related to R&D performance. Among other things, DHS is not well positioned to integrate the results and share lessons learned because limited R&D customer feedback information is collected and analyzed. Of the seven DHS components with R&D budget authority, two reported having formal customer feedback mechanisms. As a result, DHS is unable to more fully understand its customers' perceptions and experience which would allow DHS to better assess the performance of its R&D efforts. GAO is making four recommendations, with which DHS concurred, including that DHS: 1) ensure all components participate in the IPT process, 2) develop a mechanism that aligns R&D project tracking sources, and 3) collect feedback from R&D customers.", "document_type": "gao"}
{"report": "The United States railroad system consists of a vast network of operations that includes more than 780 railroads operating across 220,000 miles of track—including about 212,000 grade crossings. Both freight and passenger railroads operate across the system. The freight railroad industry is dominated by the seven largest railroads, referred to as class I railroads, whereas passenger rail service includes Amtrak and 29 commuter railroads. FRA is responsible for providing regulatory oversight of the safety of both freight and passenger railroads. To accomplish this oversight, FRA issues and enforces numerous safety regulations, including requirements governing track, signal and train control systems, grade crossing warning systems, and railroad-operating practices. FRA monitors railroads’ compliance with federal safety regulations through routine and special emphasis inspections on railroads’ systems. FRA’s inspectors generally specialize in one of five areas. These inspection areas are called disciplines and include: (1) operating practices, (2) track, (3) hazardous materials, (4) signal and train control, and (5) motive power and equipment. FRA also has specific responsibilities related to the safety of grade crossings, including issuing regulations regarding the use of train horns at grade crossings. FRA issued regulations in August 2006, after FRA’s analysis illustrated the dangers of whistle bans. Federal regulations require that train horns be sounded in advance of all public grade crossings. However, the regulations also provide an opportunity for public authorities to reduce the effects of noise associated with the train horn by establishing quiet zones. While railroads are directed to cease the routine sounding of the train horn at-grade crossings within quiet zones, the final rule states that train horns may still be sounded in emergency situations and to comply with other federal regulations and railroad operating rules. As of June 2017, there were 570 new quiet zones located across 42 states (see fig. 1). Train engineers are generally required to sound the horns at least 15 seconds, and no more than 20 seconds, in advance of all grade crossings. Train horns must be sounded in a standardized pattern of 2 long, 1 short and 1 long blast, with the volume ranging from 96 decibels to 110 decibels. Each pedestrian crossing or private crossing to an active commercial or industrial site must be reviewed by a diagnostic team and equipped or treated in accordance with its recommendations. The public authority must invite the state agency responsible for grade crossings’ safety and all affected railroads to participate in the diagnostic review. FRA is not required to participate in diagnostic reviews. The Notice of Intent provides railroads and state agencies with an opportunity to provide comments and recommendations on the quiet zone. A complete and accurate U.S. Department of Transportation Grade Crossing Inventory Form must be on file with FRA for all crossings within the quiet zone to reflect the current conditions at each crossing. A Notice of Quiet Zone Establishment must be issued to FRA, applicable railroads, and relevant state agencies indicating a quiet zone is being established at least 21 days prior to the establishment date. Throughout the process public authorities may work with a number of stakeholders who have roles and responsibilities related to grade crossings. These include: FRA: In addition to issuing rules and regulations governing train horns and quiet zones, FRA has staff—in headquarters and in FRA’s eight regional offices—that review public authority applications for use of ASMs, issue guidance on implementing federal regulations, answer questions from the public, and provide technical assistance related to the establishment of quiet zones. For example, FRA’s 19 regional GCMs serve as subject matter experts on the train horn regulations and respond to questions from public authorities, while FRA program officials approve ASMs and conduct required annual reviews of quiet zones established relative to the Nationwide Significant Risk Threshold to ensure they equal or fall below this risk index. Railroads: Railroads work with public authorities to: (1) identify appropriate safety measures at grade crossings; (2) participate in diagnostic review meetings when the quiet zone includes public, private, or pedestrian grade crossings; (3) receive and comment on public authority’s quiet zone notifications (e.g., the Notice of Intent and Notice of Quiet Zone Establishment); (4) install safety measures on railroad property; and (5) direct train crews not to sound horns in established quiet zones. State departments of transportation and rail regulatory agencies: These agencies receive and comment on Notices of Intent, public authority applications, and Notices of Quiet Zone Establishment; review, and in some cases approve grade crossing modifications; and participate in diagnostic reviews. Private industry consultants: In some cases, public authorities hire consultants to provide subject matter expertise on establishing quiet zones. Consultants may perform such tasks as determining the feasibility of a quiet zone; arranging diagnostic reviews; assessing quiet zone risks; and identifying appropriate safety measures. According to FRA officials, federal funding is available to reduce the risks of accidents at grade crossings, but funding specific to quiet zones is limited and no dedicated source exists. The primary source of federal funding to improve grade crossings’ safety is the Federal Highway Administration’s (FHWA) Railway-Highway Crossings (Section 130) Program, which received a set-aside of $230 million for fiscal year 2017 from amounts authorized for the Highway Safety Improvement Program. While the funds are not specific to quiet zones, Section 130 funds may be used to upgrade crossing infrastructure, an upgrade that may result in a public authority’s being more easily able to establish a quiet zone. However, according to FRA program officials, the program is competitive and funding must be used for safety projects. They said projects are selected on a safety priority basis, and quiet zones are generally considered a quality of life issue, not a safety improvement. Hence, it is unlikely that many public authorities will obtain these funds to establish quiet zones. Further, the officials said that while other federal funding is available for which grade crossing improvements may be an eligible expense, none is dedicated to quiet zones. According to FRA officials, limited federal funding is available because quiet zones are not a national issue. They produce highly localized quality-of-life benefits and little or no improvement in the level of safety at grade crossings, but rather the safety measures are installed to compensate for silencing the sound of a train horn at grade crossings. As a result, public authorities seeking to establish quiet zones generally fund the installation of SSMs and ASMs. Given limited funding, public authorities determine whether the benefits of establishing a quiet zone outweigh the costs to establish them. Benefits derived from establishing quiet zones and reducing noise from the train horn have not been quantified in research we reviewed or by the public authorities (i.e., communities) that we interviewed. Specifically, our review of literature did not identify any studies that had quantified the benefits resulting from public authorities establishing quiet zones at grade crossings where the horn was previously sounded. Further, FRA has not quantified benefits associated with quiet zones, but did note in its RFIA that quiet zones would likely result in localized quality-of-life benefits from silencing of the horn at locations where it had previously been sounded. Finally, none of the public authorities we interviewed have conducted any analysis that has quantified benefits associated with quiet zones or were aware of any studies that quantified these benefits. While the benefits of quiet zones have not been quantified, the majority of stakeholders whom we interviewed stated that quiet zones do provide benefits for communities. The most commonly cited benefit (35 of 40 stakeholders) was the reduction in noise due to the absence of routine sounding of the train horn. Stakeholders told us this noise reduction led to improvements in quality of life from, for example, the ability to sleep better at night, as well as a reduction in residents’ noise complaints. To a lesser extent, stakeholders also cited economic development and safety as benefits for communities. Almost half of the stakeholders (19 of 40) we interviewed told us that areas with new quiet zones saw an increase in economic development from such things as new businesses or residential developments. Similarly, almost half of the stakeholders (17 of 40) said that quiet zones increased safety along rail lines, given the addition of new safety measures at the grade crossings. While the benefits associated with quiet zones have not been measured, more generally, researchers have analyzed the effect of transportation noise on property values and health to understand the effects. Property values: Our review identified two studies that analyzed the effect of freight train noise on property values in selected communities and found mixed results. In one study, the authors looked at the effect of a freight rail line on home prices and concluded that, while for smaller homes results suggest a negative and statistically significant effect on sale prices, results for medium and larger units were mixed. In the second study, the author examined the effect of a railroad’s decision to ignore whistle bans and found that proximity to rail lines and crossings had a negative and statistically significant effect on residential property values in some communities, with the effect varying depending on distance to the rail line. The author concluded that the crossing effects were largely temporary, because over time, buyers less sensitive to noise would likely move into the area, reducing or eliminating any long-term effect of the railroad’s decision. However, both of these studies have limitations, are based on data almost two decades old, and the results might not be representative of the economic effects associated with quiet zones. Health effects: In 2002, FRA summarized available academic literature on the undesirable effects of noise—primarily focusing on transportation noise associated with aircraft, highways, and railroads. According to the research, transportation noise can cause undesirable psychological health effects, such as annoyance, and physiological health effects, such as hearing impairments and sleep disturbance on individuals. Total costs to establish quiet zones depend on many factors and vary widely. Prior to issuing regulations, in the RFIA, FRA identified the types of costs associated with establishing quiet zones that can be incurred by public authorities, states, railroads, and FRA. These factors included such things as upgrading signals at grade crossings; purchasing, installing, and maintaining safety measures like flashing lights and gates; developing, reviewing, and evaluating quiet zones; and designing public education and awareness efforts. The actual cost that public authorities incur to establish quite zones will vary and depend on these and other factors. Both FRA program officials and FRA guidance has stated that, in general, the factors that affect the costs include such things as the number of grade crossings in a quiet zone, the geography of the area in which the quiet zone is established, and the types of safety measures a public authority decides to install. For example, some grade crossings may require upgrades to constant-warning-time devices or installation of complex and costly SSMs (e.g., four-quadrant gates), whereas other grade crossings may require fewer upgrades or less complex safety measures (e.g., traffic channelization devices). In 2013, FRA published guidance for public authorities in which it estimated that the capital costs public authorities may incur to establish quiet zones may range from about $30,000 to more than $1 million per grade crossing, depending on the types of safety improvements and existing infrastructure at grade crossings. The RFIA stated that, because grade crossings may differ significantly, public authorities must analyze the characteristics of each and the safety measures needed to accurately estimate costs to establish quiet zones. Public authorities we interviewed confirmed that the costs to establish quiet zones do vary and depend on many factors. All 13 public authorities we interviewed often said that in establishing quiet zones they incurred costs for identifying safety measures for grade crossings, purchasing and installing these safety measures, and maintaining quiet zones, among other things. According to the public authorities we spoke with in our review, the cost to establish quiet zones ranged from about $14,000 to several million dollars. However, this range also reflects different levels of quiet zone activity; for example, one public authority established a quiet zone at a single grade crossing, while another established a quiet zone that encompassed 60 grade crossings. In addition, railroads, states, and FRA may incur costs as part of establishing quiet zones. For example, officials from seven of the eight railroads we interviewed stated that they incur costs for such things as (1) participating in diagnostic reviews, (2) commenting on Notice of Intents and Notice of Quiet Zone Establishments; and (3) notifying and training crews not to sound horns in quiet zones. States may also incur costs. Two states included in our review—California and Colorado—have public utility commissions that told us they are required to review and approve any modifications to grade crossings in their states, including those associated with quiet zones. Finally, FRA incurs costs related to quiet zones. This cost includes reviewing quiet zone applications, participating in diagnostic reviews when invited, and the time GCMs or other FRA staff spends providing technical assistance to public authorities and others on establishing quiet zones. While public authorities are generally responsible for paying the costs to establish quiet zones, about half of the public authorities we interviewed (10 of 13) said they obtained funding from outside sources to help pay for the zones, for example: Federal funds: Six of the public authorities we interviewed reported receiving federal funds to help establish their quiet zones. In particular, one public authority that we interviewed reported receiving a $3.3 million Transportation Investment Generating Economic Recovery grant to establish a quiet zone. Alternatively, public authorities in the remaining five communities were eligible for grade crossing safety improvement efforts that were designated by the state through FHWA or other programs. State or railroad funds: For three of the public authorities we interviewed, quiet zones were established in conjunction with larger state department of transportation highway or railroad projects and these entities paid a portion of the costs. Grade crossing incentive funds: Four of the public authorities we interviewed received grade-crossing incentive funds from railroads or state departments of transportation to close grade crossings that were part of a quiet zone. Private funds: In two communities, private investors provided financial assistance to public authorities for a quiet zone. For example, a private developer paid for a quiet zone in order to facilitate the building of residential developments. Public authorities and other stakeholders that we spoke with reported several types of challenges with establishing quiet zones. These stakeholders noted three primary challenges, which included the cost to establish quiet zones, obtaining stakeholder cooperation, and the process to establish quiet zones. As aforementioned, public authorities generally incur costs to establish quiet zones, so cost plays a major role in a public authority’s decision of whether to pursue a quiet zone or not. The most commonly cited challenge was cost (29 of 40 stakeholders). In some cases, officials whom we interviewed reported that costs were the main reason that public authorities delayed or discontinued the process to establish a quiet zone. In addition to cost, stakeholders cited two other primary challenges to establishing quiet zones—obtaining cooperation among quiet zone participants and the process for establishing quiet zones—and suggested a variety of improvements related to bolstering the process. Cooperation among quiet zone participants (18 of 40): Although stakeholders we spoke with cited a number of cooperation issues, including difficulties in getting private grade crossing owners to participate and lack of state cooperation, over half (10 of 18) cited cooperation between public authorities and railroads as a challenge. Such cooperation is important since both must typically work together to establish quiet zones. However, there are natural tensions between public authorities and railroads with respect to establishing quiet zones. As discussed earlier, stakeholders we spoke with supported quiet zones believing they not only maintain safety, but improve quality of life. On the other hand, all eight railroads told us that the train horn is the most effective safety measure. The process for establishing quiet zones (16 of 40): In general, the stakeholders we spoke with cited a variety of process related challenges, including that the train horn regulations are difficult to understand, FRA waivers are difficult to obtain, and that the quiet zone process could be better explained by FRA. In particular, over half of the stakeholders whom said that process was a challenge (10 of 16) explained that the quiet zone process was either difficult to understand or navigate or that the requirements to establish a quiet zone were confusing. For example, one public authority told us that rules for establishing a quiet zone can be difficult to interpret and that this difficulty could impact public authorities’ establishment of quiet zones. Four of the 16 stakeholders also told us the process was time consuming and, in some instances, can take years to complete. FRA program officials said the turnaround time for FRA reviews depends on the quality of materials provided. They said it generally takes 90 to 120 days for FRA to complete its review, but it can take longer if there is missing information or other problems with a public authority’s application, as is often the case. Stakeholders we spoke to suggested three types of process-related improvements: administrative changes to improve the efficiency of the process, improvements to FRA’s role in the quiet zone process, and improvements to FRA guidance that public authorities use to establish quiet zones. Administrative improvements: Twenty-five of the 40 stakeholders that we interviewed identified one or more types of administrative process improvements to improve the efficiency of the process for establishing quiet zones or better facilitate their establishment. These suggested improvements included: Making the quiet zone process more user-friendly (11 of 40 stakeholders that offered suggestions related to the quiet zone process): Stakeholders we interviewed identified various improvements that could streamline some administrative requirements of the quiet zone process. These steps include standardizing or automating the quiet zone process, developing sample Notices of Intent or Notices of Quiet Zone Establishment that public authorities could use to input information, and making quiet zone materials available electronically. For example, GCMs in one FRA region told us that by standardizing the paperwork all regions would receive the same documents, a step that would make review easier. In addition, these officials said public authorities often forget to include key information in the Notice of Intent and with a standard form this may not occur. Requiring diagnostic reviews for all quiet zones (7 of 40): As discussed earlier, when there are private grade crossings that allow public access to active commercial or industrial sites or pedestrian grade crossings in a quiet zone, a diagnostic review is required. The regulations require public authorities to provide state agencies and affected railroads, among others, the opportunity to participate in diagnostic reviews. According to FRA program officials, FRA is not required to participate in diagnostic reviews. Diagnostic reviews evaluate conditions at proposed quiet-zone crossings and a diagnostic review team makes recommendations about measures that are needed to protect safety at these crossings. Seven stakeholders we interviewed suggested that diagnostic reviews should be required for all quiet zones, not just instances when there are private or pedestrian crossings. For example, one GCM told us conducting a review for all grade crossings provides a better idea of what safety measures are needed and is a prudent action to protect public safety. FRA’s Role in the Process: About half of the stakeholders we spoke with (21 of 40) suggested improvements related to FRA and its role in the quiet zone process: Increase FRA oversight and inspection of quiet zones (11 of 40): In general, these stakeholders believe FRA should be more involved with inspections and oversight of quiet zones, particularly between when a Notice of Quiet Zone Establishment is issued and when a quiet zone is established. Most of the railroad stakeholders we spoke with (6 of 8) believe there is a need for increased FRA involvement with quiet zones’ oversight. Among the railroad concerns were that without additional FRA oversight, quiet zones may not achieve compliance with the train horn regulations, and that public authorities may not actually install the safety measures identified in the Notice of Quiet Zone Establishment. A GCM in one FRA region told us that officials discovered noncompliant safety measures and missing signs after quiet zones had been established in this region, and that safety measures that were supposed to be installed were not. We discuss quiet zone oversight issues later in this report. Expedite FRA’s review of quiet zone applications (10 of 40): As discussed earlier, FRA plays a role in the quiet zone process, in part, by reviewing quiet zone applications when ASMs are used. The 10 stakeholders felt that FRA should expedite its review process. For example, a GCM in one FRA region suggested FRA shorten the review time by developing a list of frequently used ASMs and their safety effectiveness ratings and posting them online, a process that would save FRA time when reviewing ASMs. Guidance about the process: Finally, stakeholders we spoke with suggested guidance on the quiet zone process could be improved (17 of 40). In particular, 13 of the 17 stakeholders whom offered suggestions about guidance said that FRA’s quiet zone guidance should be clearer or that training about the quiet zone process is needed. As previously discussed, some stakeholders told us the quiet zone process is difficult to understand or navigate, or that FRA could better explain the process. In particular, two public authorities suggested some form of step-by-step guide is needed to better describe the process, and GCMs in three FRA regions also suggested classes or other types of education were needed to better help public authorities understand the quiet zone process. According to FRA program officials, FRA’s quiet zone guidance consists of its user guide and a document on how to create a quiet zone. The train horn regulations also specifies how public authorities are to establish quiet zones and includes steps to follow under the public authority designation or public authority application processes. Moving forward, FRA is in the process of conducting a retrospective regulatory review and deciding what, if any, changes may be needed. In March 2016, FRA issued a Notice of Safety Inquiry, which, according to FRA, is a retrospective review of the train horn regulations. The Notice of Safety Inquiry solicited comments about many aspects of the train horn regulations, including whether FRA can decrease the barriers public authorities encounter when establishing a quiet zone. Among other things, the inquiry seeks comments about whether there should be an online process for submitting notices and other required quiet zone paperwork, whether diagnostic reviews should be required for all quiet zones, and if the regulations should be amended to include common ASMs in the list of approved SSMs. The Inquiry is also looking at other aspects of the quiet zone process and guidance. As of July 2017, FRA was still in the process of reviewing comments received in response to the notice. FRA program officials did not indicate what, if any, changes may result from this inquiry, but said any changes that are made would be handled through a rulemaking. However, FRA program officials noted that a rulemaking would not be necessary for the agency to provide public authorities with additional tools to aid in the development of a quiet zone, such as guidance. One way FRA evaluates the effectiveness of its train horn regulations is through conducting analyses of data on the safety of grade crossings in quiet zones. Those analyses show that grade crossings in quiet zones are generally as safe as the same grade crossings when the train horn was sounded. Specifically, FRA conducted analyses in 2011 and 2013 to assess whether there was a statistically significant difference in the number of accidents before and after implementation of quiet zones. The results showed that there was generally no statistically significant difference in the number of accidents that occurred before and after quiet zones were established. To conduct the analyses, FRA grouped quiet zones by the number of years of available data since establishment of the quiet zone, using an equal number of months before and after establishment. FRA’s analyses in 2011 and 2013 included 359 and 203 quiet zones, respectively. While FRA’s analyses of quiet zones generally showed that grade crossings in quiet zones were as safe as the same grade crossings when the train horn was sounded, in 2013 FRA identified one exception that FRA program officials reported resolving in a subsequent analysis. Specifically, while FRA’s 2011 analysis did not show any differences in safety after establishment of the quiet zones, in 2013 FRA concluded that for quiet zones established from May 2010 through April 2011, there was a statistically significant increase in the number of accidents that occurred after the establishment of the quiet zones. Specifically, FRA found that accidents doubled from 11 accidents before establishment of the quiet zones to 22 accidents following the establishment of the quiet zone. After that finding, FRA program officials conducted a preliminary analysis for 2017 and reported that the results did not show a statistically significant increase in accidents for any period of quiet zones, including those established from 2010 through 2011. In addition to looking at quiet zones by establishment year, FRA’s 2013 analysis also grouped quiet zones by how they were established, such as with safety measures at all crossings or against FRA’s risk indexes. Results from this analysis did not show an increase in accidents by any establishment method analyzed. As a result, FRA program officials told us that they believe the result in 2013 for quiet zones established from 2010 through 2011 was likely an anomaly and that those quiet zones are as safe as other crossings. Before-and-after analysis is a methodologically acceptable practice, but the reliability of the results decrease over time because unlike other types of analyses, they do not control for factors that may change over time. In particular, FRA’s analyses assume that the number of accidents experienced before the quiet zone is established is a good estimate of the number of accidents that would be expected in the future had the quiet zone not been established. However, FRA’s before-and-after analyses have limitations because, unlike other methodologies, they do not take into account changes to characteristics of grade crossings over time. For example, a multivariate method can control for changes to characteristics at grade crossings that may impact safety. These characteristics can include changes to train or vehicle traffic, train or vehicle speeds, time of day when train activity occurs, number of highway lanes, the number of tracks in use, or other changes to surrounding roads or infrastructure at a crossing. For example, if train or vehicle traffic increased over time, it is possible that the number of incidents would increase, while the risk of an accident would stay the same. Specifically, closing a grade crossing near a quiet zone or increases in traffic from new businesses around a quiet zone could increase traffic after the establishment of a quiet zone; however, these changes would not be factored into FRA’s current methodology for conducting safety analyses. This inherent limitation is exacerbated over time, because the assumption that there would be no changes to relevant characteristics of the grade crossings is less likely to be the case as more time passes. FRA also conducts annual reviews of selected quiet zones to ensure their safety, and FRA program officials told us that this review further validates its before-and-after analyses. As mentioned previously, FRA conducts annual reviews of quiet zones established against the Nationwide Significant Risk Threshold because the measure is variable and subject to change over time. According to FRA program officials, about 11 percent of all quiet zones are established against the Nationwide Significant Risk Threshold and are thus included in this annual review. To ensure that established quiet zones fall at or below the Nationwide Significant Risk Threshold, FRA is required to recalculate this measure on an annual basis and notify a public authority if the Quiet Zone Risk Index no longer falls at or below the threshold. By doing so, FRA program officials told us that they are further validating that the grade crossings in quiet zones are as safe as other grade crossings. While this annual review may provide FRA with additional support that grade crossings in quiet zones are as safe as others, it does not address the underlying limitations of a before-and-after analysis. While the reliability of a before-and-after analysis may decrease over time, FRA has no plans to revise its methodology. In fact, as mentioned previously, FRA program officials told us that preliminary results for their 2017 safety study mirror results from 2011, showing that there was no statistically significant difference in accidents before and after the establishment of quiet zones. According to FRA program officials, the agency is not required to conduct this analysis, but moving forward, program officials plan to conduct the same analysis on a biennial basis to internally validate that grade crossings in quiet zones are as safe as others. By continuing to rely on the current methodology, FRA’s future analyses may continue to provide the agency with information that does not account for changes in characteristics of grade crossings over time. The Standards for Internal Control in the Federal Government states that management should use quality information to make informed decisions. This requirement can be satisfied by, for example, obtaining relevant data from reliable sources, obtaining that information on a timely basis, and processing that data into quality information that accurately represents what it purports to represent. Furthermore, a previous FRA study that the agency relied on in developing the final rule has reported that changes in grade crossings’ characteristics can affect the results of analyses used to predict accidents at grade crossings. As a result, FRA’s Rail-Highway Crossing Resource Allocation Procedures recommended that analyses used to predict accidents at grade crossings only include accident data for the most recent 5 years because older accident history information may be misleading due to changes that occur in grade crossings’ characteristics over time. While FRA’s recommendation was not developed to analyze the safety of grade crossings in quiet zones, the agency’s recommendation that accident data older than 5 years may be misleading because of changes that occur to grade crossings’ characteristics over time is relevant to those analyses. Nevertheless, FRA program officials told us that they have no plans to revise the methodology because it effectively compares the safety of grade crossings in quiet zones to other grade crossings. By continuing to use the same methodology, the agency may be missing an opportunity to fully understand the safety of grade crossings in quiet zones. In addition to conducting studies, FRA also oversees quiet zones by inspecting them to ensure their safety and compliance with train horn regulations. According to FRA program officials, FRA is not required to inspect quiet zones; rather, public authorities, in conjunction with the railroads, are responsible for maintaining quiet zones and ensuring compliance with train horn regulations. Until recently, FRA has utilized its GCMs to, among other things, informally inspect quiet zones and work with public authorities to resolve issues affecting the safety of quiet zones—issues such as foliage covering signage, maintenance issues with safety devices, or outdated pavement markings. In fact, GCMs in all eight regions told us that they informally inspect quiet zones. According to FRA program officials, the agency has recently identified the need for “more eyes on the ground” to more systematically address maintenance issues within quiet zones and to ensure compliance with train horn regulations. As a result, FRA is transitioning its informal inspection program for quiet zones to a more formal inspection process. As of August 2017, FRA had not terminated any quiet zones because of violations or fined any entities for quiet zone violations. August 2017 that they planned to hire 24 new Inspectors. As of August 2017, FRA had also developed the Inspector training curriculum, and began training three Inspectors. FRA program officials expressed uncertainty over when the remaining 21 Inspectors will be hired because of uncertainty regarding FRA’s hiring and training priorities, among other things. In September 2017, FRA program officials told us that one of the newly hired Inspectors had completed the training and had begun inspecting quiet zones. While FRA has started conducting formal quiet-zone inspections, we found that FRA has not developed guidance on how the inspections should be conducted, including guidance on how frequently these inspections should be conducted and what should be examined. As a result, such guidance is not included as part of the training curriculum developed for Inspectors. According to FRA program officials, this guidance has not been developed because program officials are still finalizing the inspection program. Although no guidance has been developed, FRA program officials told us that they are considering inspecting all new quiet zones between when the public authority submits a Notice of Quiet Zone Establishment and when the quiet zone is established. Additionally, FRA program officials told us that existing quiet zones would be inspected based on mission requirements, risk, and the availability of resources, but ideally every 3 years. With respect to how the quiet zones are to be inspected, FRA program officials said they plan to develop guidance for Inspectors that is akin to the other FRA safety disciplines. FRA program officials told us that they are working toward establishing an Audit Division, which would be responsible for developing this guidance. However, as of August 2017, FRA program officials had not provided a timeline for when this division or guidance would be completed. The absence of guidance on inspections is inconsistent with internal control standards. Specifically, the Standards for Internal Control in the Federal Government states that management should implement control activities through its policies that document each unit’s responsibility, or further delineates day-to-day procedures. These procedures may also include the timing of when a control activity occurs and state that management should communicate these policies to its staff. Without this type of guidance, FRA cannot have reasonable assurance that inspections are being conducted consistently across FRA’s eight regions and as FRA intends. Grade crossing collisions are one of the leading causes of fatalities in the railroad industry, and ensuring safety in these areas, including those within quiet zones, is a vital part of FRA’s mission. While public authorities are primarily responsible for safety in quiet zones, FRA can help ensure that grade crossings in quiet zones are as safe as others. However, the methodology FRA uses to assess the safety of quiet zones has limitations because it does not account for changes to grade crossings’ characteristics over time. By continuing to rely on this methodology, FRA may be missing an opportunity to ensure that established quiet zones are providing the same level of safety as when train horns were sounded. In addition to its safety studies, FRA is also taking steps to formalize its process for conducting physical inspections of quiet zones. While FRA has started hiring and training a few Inspectors, it lacks guidance on how and when quiet zone inspections are to be performed. Without this guidance, FRA cannot ensure that quiet zones will be inspected consistently across FRA’s eight regions. We are making the following two recommendations to FRA: The Administrator of FRA should revise the methodology for the analysis of safety in quiet zones to take into account relevant changes over time— including changes in train and automotive traffic, or in the physical characteristics of the grade crossing. (Recommendation 1) The Administrator of FRA should develop guidance for Inspectors on the nature and frequency of quiet zone inspections. (Recommendation 2) We provided a draft of this report to the Department of Transportation for review and comment. The department provided a written response (see app. II), as well as technical comments that we incorporated as appropriate. The department concurred with the second recommendation regarding developing guidance for quiet zone inspectors and partially concurred with the first recommendation regarding revising the methodology for analyzing the safety of quiet zones. The department said it would consider our recommendation to revise its methodology as it explores options for updating its methodology. We are encouraged that FRA is willing to consider revising its methodology for analyzing the safety of grade crossings in quiet zones. However, we continue to believe that our recommendation is valid and that to fully understand quiet zone safety FRA needs to revise its methodology to account for relevant characteristics of quiet—zone grade crossings. As we state in the report, the reliability of FRA’s current methodology will likely decrease over time because it does not control for relevant changes to grade crossings in quiet zones including changes to vehicle or train traffic or speeds. These and other factors are critical determinants of grade-crossing safety. Further, developing a methodology that incorporates characteristics that affect safety at grade crossings in quiet zones may also provide FRA insight into the safety of grade crossings more generally. Since grade-crossing accidents are a major source of fatalities and, according to the department, are expected to increase as train- and highway-traffic increases, it will become increasingly important to have reliable information about grade-crossing safety, both in quiet zones and across grade crossings more generally. We will send copies of this report to appropriate congressional committees, the Secretary of Transportation, and the Administrator of the Federal Railroad Administration. In addition, we will make copies available to others upon request, and the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The Fixing America’s Surface Transportation Act included provisions for GAO to review the effectiveness of the Federal Railroad Administration’s (FRA) final rule governing the use of train horns at highway-rail grade crossings. The objectives of this report were to determine: (1) what is known about the benefits and costs of quiet zones, (2) what challenges, if any, public authorities and others encounter in establishing quiet zones, and (3) how, if at all, FRA is evaluating the effectiveness of federal train horn regulations. The scope of this report was limited to new quiet zones—that is, quiet zones that were established since FRA published the final rule in August 2006. Federal regulations govern the use of train horns at public-highway-rail-grade crossings (grade crossings) and provide public authorities—typically a city, town, or county—with the opportunity to create quiet zones where train horns are not sounded. We focused on new quiet zones to better understand the benefits, costs, challenges, and safety impacts associated with the regulations. To obtain information about quiet zones, we reviewed FRA’s data on quiet zones established from 2005 through 2017. To assess the reliability of these data, we examined FRA’s reports, analyzed the data to identify any outliers, and interviewed FRA officials about how the data were collected and used. We determined that the data were sufficiently reliable for our purposes. For each of our objectives, we reviewed pertinent law and FRA regulations and documents; interviewed FRA program officials in headquarters; and conducted in-depth interviews with a nongeneralizable sample of 40 stakeholders. This sample included stakeholders from 8 freight railroads, 5 private industry consulting firms with experience helping public authorities establish quiet zones, 6 state agencies, 13 public authorities within these six states, and FRA Grade Crossing Managers (GCMs) in each of FRA’s 8 regions. The railroads selected included all seven class I railroads, plus the Florida East Coast Railway. The latter was selected due to its previous experience with whistle bans, and it was located in a state where we conducted interviews. The private industry consultants were selected based on several factors, including (1) experience with assisting public authorities in establishing quiet zones, (2) recommendations from FRA and other stakeholders we interviewed, and (3) geographic dispersion. We selected six states as part of a nongeneralizable sample for interviews. These states included California, Colorado, Florida, Illinois, Maryland, and Texas. The states were selected based on a variety of factors, including the number of new quiet zones and the number of grade crossings in new quiet zones. Five of the six states accounted for about 48 percent of new quiet zones (California, Colorado, Florida, Illinois, and Texas). We also conducted interviews in Maryland before we conducted other interviews to test our interview protocol. Maryland was selected for this purpose to, among other things, minimize resources. Within these states, we conducted interviews with 13 judgmentally selected public authorities (see table 1). The public authorities were also selected based on factors such as the number of new quiet zones and recommendations from FRA and other stakeholders we interviewed. For all our objectives we also conducted a literature review of pertinent studies in scholarly/peer-reviewed journals, conference papers, non-profit or think tank publications, and trade publications or industry articles to identify research on quiet zones. We restricted our review to results published between January 1, 1996, and October 17, 2016, and our search yielded 99 results. Of these 99 results, we reviewed each abstract or full article if available, to determine whether it was relevant to any of our objectives. Our analysis identified 10 results pertaining to safety, 11 results related to benefits and costs, and 1 result related to challenges. With respect to the articles related to costs and benefits, we also looked at citations within the studies we reviewed to identity whether any of these were relevant to our objective on costs and benefits of quiet zones. Using this approach we identified one additional study. Each abstract was reviewed by two analysts to determine whether it seemed relevant. Where disagreement existed with respect to whether the abstract was relevant, we included the abstract in our request for the complete study. We then developed criteria/requirements for each objective and reviewed each study against our criteria/requirements. Namely, we were only interested in studies that quantified the benefits or costs of quiet zones or that used data or analytics to measure safety at grade crossings in quiet zones or compared safety at-grade crossings in quiet zones to grade crossings where train horns sound. Further, each study was reviewed by an analyst and a statistician or economist to determine its relevance. With respect to our objective on the effectiveness of the train horn regulations, we determined that none of the studies met our underlying criteria. Specifically, none of the studies measured the safety at grade crossings in quiet zones or compared the results to grade crossings where the train horn sounded. Conversely, with respect to our objective on the costs and benefits of quiet zones, we determined that six studies were relevant. To assess the reliability and methodological soundness of the studies we determined were relevant, we compared the studies with general guidelines based on standards for assessing research and analysis from the literature, past GAO reports on evaluating research programs, and our internal expertise in research design. These guidelines include, for example, examining a study based on: (1) the extent to which it was well designed and the methodology supports the objectives; (2) whether the assumptions were reasonable and explicitly stated; (3) whether the study used the best available data; and (4) whether the conclusions and recommendations were balanced and supported by data analysis. To determine what is known about the benefits and costs of quiet zones, we reviewed the literature search discussed above and analyzed any studies obtained using the methodology described above. We also reviewed FRA’s Regulatory Evaluation and Regulatory Flexibility Assessment for Use of Locomotive Horns at Highway-Rail Grade Crossings Final Rule (RFIA). The RFIA was issued before the final rule and analyzed the potential economic effects of requiring the train horn to be sounded at all public grade crossings, of eliminating whistle bans, and of providing conditions under which the train horn can be silenced at- grade crossings. To review the RFIA, we compared it to selected principles from Office of Management and Budget’s (OMB) guidance for developing regulatory analyses. These principles included whether the analysis considered alternatives; whether the analysis estimated the incremental effect of the rule compared to a business-as-usual baseline; and whether the analysis analyzed uncertainty. In evaluating the RFIA, an analyst and economist independently reviewed the analyses and subsequently came to consensus about each element’s adherence to OBM guidance. We also reviewed FRA’s September 2013 user guide for quiet zones. This guide provides a high-level overview of the quiet zone process, including an estimated cost range to establish quiet zones. We discussed the cost range with FRA, including the source of the information and its reliability. Since FRA program officials told us it was an “order of magnitude” estimate and not meant to represent actual costs to establish quiet zones, we did not determine the reliability of the information. As a result, the cost range information is used for illustrative purposes only, and we included a disclaimer about its reliability. Finally, we interviewed FRA GCMs in all eight of FRA’s regional offices, states, public authorities, railroads, and private industry consultants about the benefits and costs of establishing quiet zones. Some of these stakeholders provided information about costs to establish quiet zones, but this was anecdotal, and we did not attempt to verify its completeness or accuracy. To determine the challenges encountered by public authorities and other stakeholders in establishing quiet zones and improvements stakeholders suggested to the quiet zone process, we interviewed FRA GCMs, states, public authorities, railroads, and private industry consultants. We asked these stakeholders to identify the primary challenges in establishing quiet zones and for suggested improvements to the quiet zone process. We then analyzed the information obtained to identify common themes of challenges or suggested improvements. Based on this analysis, an initial list of categories for each challenge and improvement was then developed along with their definitions. The definitions identified specific types of comments to be included in each challenge or improvement category. After reviewing the initial list for overlaps and duplication, as well as to keep the list manageable, a final consolidated list was developed that consisted of eight types of challenges and seven types of improvements (see table 2). Using this list, an analyst then reviewed each interview and judgmentally assigned the information into one of the categories. A second analyst then independently reviewed these assignments using the consolidated list of categories and definitions. Any differences were then reconciled by the two analysts. To further enhance our understanding of quiet zone challenges and improvements, we reviewed guidance issued by FRA about quiet zones and the train horn rule. This included FRA’s How to Create a Quiet Zone document (posted to the FRA website in September 2012) and FRA’s user guide about quiet zones published in September 2013. Additionally, we reviewed FRA’s regulations governing train horns and quiet zones. We also interviewed FRA program officials about the quiet zone process, application processing, various aspects of the train horn rule, and obtained information from FRA about quiet zone guidance. To determine how FRA is evaluating the effectiveness of the federal train horn regulations, we reviewed FRA’s analysis of the safety of quiet zones at highway-rail-grade crossings completed in 2011 and 2013, which compared the safety of grade crossings in quiet zones to the safety of grade crossings where the train horn is sounded. We also discussed with FRA program officials the methodologies used to prepare these studies, and concerns with the data, conclusions, and plans to conduct future analyses. To assess the reliability and methodological soundness of the studies, we used the same approach as above. Both analyses were reviewed by a statistician and economist to corroborate the review. In addition to developing criteria for reviewing the analyses, we also reviewed guidance by FRA and others regarding analyzing incident data at grade crossings and about the limitations of a paired t-test—FRA’s methodology for comparing the grade crossings. To assess the extent to which FRA’s methodology generally reflects internal control principles, we reviewed it against practices for presenting accurate information and communicating with internal and external stakeholders outlined in the Standards for Internal Control in the Federal Government. We also conducted data reliability assessments with respect to the underlying data FRA used in its analyses. FRA’s analyses used data that originated from two distinct FRA databases: ccmMercury (CCM) and the Safety Data Analysis website. CCM is a correspondence management system which includes all data on quiet zones—such as the establishment date and grade crossings included, among others. This information is contained in the Notice of Quiet Zone Establishment that the public authority establishing the quiet zone is required to provide to FRA. Alternatively, the Safety Data Analysis website contains two datasets: the Grade Crossing Inventory System (GCIS) and the Railroad Accident/Incident Reporting System (RAIRS). The GCIS contains information on every crossing in the nation and was used to identify the characteristics of the individual crossings within the quiet zone, whereas the RAIRS contains details about each crossing collision incident that has occurred. To assess the reliability of the data used in our review, we examined FRA reports, reviewed prior GAO data reliability material, and interviewed FRA stakeholders about how the data were collected, stored, and used. We determined that the data were sufficiently reliable for the purposes of our objectives. Finally, to understand how FRA conducts oversight of quiet zones, we interviewed FRA program officials about oversight of quiet zones, guidance to staff and public authorities, and any planned changes for how the agency conducts oversight of quiet zones. We also interviewed GCMs in each of FRA’s eight regions to understand how they carry out oversight of quiet zones and to learn about the extent to which differences exist across regions. We also reviewed prior GAO reports that summarized FRA’s oversight approach to the rail industry, including its more traditional inspection disciplines. We also asked stakeholders included in our sample of FRA GCMs, states, public authorities, railroads, and private industry consultants about the challenges of establishing quiet zones and potential improvements to the quiet zone process. We then assessed FRA’s oversight approach using the Standards for Internal Control in the Federal Government. We conducted this performance audit from July 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Susan Zimmerman (Assistant Director), Krister Friday, Sarah Gilliland, Timothy Guinane, Richard Jorgenson, SaraAnn Moessbauer, Malika Rice, Amy Rosewarne, Melissa Swearingen, Larry Thomas, and Crystal Wesco made significant contributions to this report.", "summary": "Accidents at grade crossings are a major source of fatalities in the railroad industry. FRA—the federal agency responsible for providing regulatory oversight of grade-crossing safety—–issued regulations on the use of train horns in 2005. Railroads generally support sounding the horn, whereas, communities often support quiet zones to reduce noise. Congress included a provision in statute for GAO to examine FRA's train horn regulations, including those on quiet zones. Among other things, this report: (1) describes benefits and costs of quiet zones, and (2) examines how FRA evaluates the effectiveness of its train horn regulations. GAO analyzed FRA's documentation on quiet zones, including FRA's train horn regulations and 2011 and 2013 studies on quiet zone safety; reviewed literature; and interviewed FRA program officials in headquarters, Grade Crossing Managers in FRA's 8 regions, and a nongeneralizable sample of another 32 stakeholders from 6 states, railroads, public authorities, and private industry consulting firms. State and public authorities were selected based on the number of quiet zones, geographic diversity, and FRA's recommendations. GAO found that the benefits of quiet zones—–i.e., highway-rail at-grade crossings (grade crossings) where train horns are not sounded—have not been quantified and that the costs to establish quiet zones vary. The Federal Railroad Administration's (FRA) train horn regulations allow public authorities (e.g., cities or towns) the opportunity to establish quiet zones if they install safety measures that reduce risks associated with the absence of the train horn (see fig.). While GAO did not identify any research that has quantified the benefits of quiet zones, most stakeholders GAO interviewed said that these quiet zones provide benefits to communities, such as reducing noise or increasing economic development. According to FRA guidance, the factors that affect the costs to establish quiet zones can vary based on the number of grade crossings and types of safety measures used. Public authorities, which typically incur the costs and receive the benefits of quiet zones, must therefore decide whether the benefits of quiet zones exceed the costs. To evaluate the effectiveness of its train horn regulations, FRA has analyzed data on grade crossings in quiet zones and is transitioning to a formal process for inspecting quiet zones. Analyses: FRA's analyses showed grade crossings in quiet zones were generally as safe as they were when train horns were sounded. However, these analyses did not control for changes to grade crossings' characteristics over time—–e.g., train speeds or frequency. Such changes may decrease the analyses' reliability. A revised methodology that accounts for these changes could provide FRA with better information on the long-term effects of the train horn regulations, including the safety of quiet zones. Inspections: Recognizing the need for additional oversight, FRA has taken steps to formalize its process for inspecting quiet zones. FRA has primarily relied on public authorities to oversee quiet zones and ensure compliance with the train horn regulations, in addition to informal inspections by FRA's Grade Crossing Managers. In September 2017, FRA began conducting formal inspections of quiet zones using Grade Crossing Inspectors. However, FRA has not developed guidance for how inspections are to be conducted, including how frequently inspections are to be performed or what should be examined. Without guidance, FRA cannot ensure that inspections are being conducted consistently across FRA's eight regions. GAO recommends that FRA: (1) revise its methodology for analyzing the safety of quiet zones, and (2) develop guidance on conducting quiet zone inspections. The Department of Transportation partially concurred with the first recommendation, saying it would consider it, and fully concurred with the second. GAO continues to believe changes to the methodology are needed, as discussed in the report.", "document_type": "gao"}
{"report": "Federal agencies carry out a variety of missions, including protecting and defending government buildings, public lands, and natural resources, as well as federal employees, elected officials, and visitors to federal sites. Agencies with FLEOs are also charged with investigating civil and criminal violations of federal laws. Inspectors General, which may also have FLEOs, are independent and objective units within agencies that are charged with combatting waste, fraud, and abuse within the programs and operations of their agencies. Table 2 lists the agencies within our review (20 agencies included in our review of spending data and 5 agency components included in our review of inventory controls) and describes their law enforcement missions. For more information about the data each agency provided, see appendix II. For the purposes of our review, a firearm is any weapon that is designed to expel a projectile by the action of an explosive or that may be readily converted to do so. Some firearms are single-shot, while others may be semi-automatic (requires a separate pull of the trigger to fire each cartridge) or fully automatic (can shoot automatically more than one shot, without manual reloading, by a single function of the trigger). Ammunition includes its component parts, such as cartridge cases, primers, bullets, or propellant powder designed to be used in a firearm. Ammunition can be used in multiple types of firearms, based on the size. For example, 9mm caliber ammunition used in pistols can also be used in certain types of fully automatic firearms. See figure 1 below for more information about the types of firearms FLEOs may use. In addition to firearms and ammunition, federal agencies may also have a variety of tactical equipment available to their officers to support their law enforcement roles. For example, officers engaged in counterdrug activities may use armored vehicles for drug raids in rural areas or night- vision equipment to maintain surveillance of drug activities. Officers that work in counterterrorism and border security may use helicopters or other aircraft, as well as armored or tactical vehicles, to patrol or surveil locations. See figure 2 for examples of selected tactical equipment in our review. Federal Procurement Data System-Next Generation (FPDS-NG) is a comprehensive web-based tool for agencies to publicly report contract transactions, including firearms, ammunition, and tactical equipment purchases. The public can download FPDS-NG data on contract actions from the USASpending.gov website, and this data set enables users to examine spending in multiple categories across government agencies. The contracting officer, who awards a contract or order against an existing contract, has responsibility for accurately recording the individual contract action information in FPDS-NG. Agencies are responsible for developing a process for recording contract actions and monitoring results to ensure their timely and accurate reporting in FPDS-NG, and must submit certifications about the accuracy of contract reporting to the General Services Administration. The Federal Acquisition Regulation (FAR) and the FPDS-NG Government User’s Manual require that each transaction record include the name of the funding agency—the agency that provided the obligated funds for the transaction. The FPDS-NG Government User’s Manual also requires a product or service code (PSC) that reflects the product or service procured. If more than one PSC applies, the PSC that represents the predominance of the dollars obligated should be selected. Generally, the FAR requires that agencies report contract actions with a total estimated value greater than $3,500 to FPDS-NG. Generally, contract actions that do not meet the $3,500 threshold may also be reported, but the FAR does not require agencies to do so. The 20 federal agencies in our review reported data from their internal record-keeping systems on the amount they spent on firearms, ammunition, and selected tactical equipment. These agencies reported spending at least $38.8 million on firearms, $325.9 million on ammunition, and $1.14 billion on tactical equipment—at least $1.5 billion in total—from fiscal years 2010 through 2017. For detailed information about the data each agency provided, see appendix II. The 20 agencies in our review reported spending a total of at least $38.8 million on firearms for their FLEOs from fiscal years 2010 through 2017, based on available spending data they provided from their internal record- keeping systems. The amount each agency reported spending on firearms over the 8-year period ranged from $106,000, in the case of the Social Security Administration’s Office of the Inspector General (SSA OIG) to $4 million at U.S. Customs and Border Protection (CBP). Of the 20 agencies in our review, 18 agencies also reported the number of firearms they bought. These agencies reported buying a total of at least 44,551 firearms during this time. The quantity of firearms each of these 18 agencies reported buying over the 8-year period ranged from at least 311 at SSA OIG to at least 8,500 at the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). Agencies buy a variety of firearms in support of their law enforcement missions. From fiscal years 2010 through 2017, agencies reported buying pistols, rifles and shotguns, and three of the agencies—NPPD, ICE, and U.S. Secret Service—also reported buying revolvers. Seventeen agencies reported buying semi-automatic firearms, while eight agencies reported buying fully automatic firearms and ten agencies reported buying single-shot firearms. See figure 3 for more information about the types of firearms that agencies reported buying over the 8-year period. Agency officials told us there were several reasons why they buy firearms, such as to update their entire firearms inventory, to replace malfunctioning firearms, or to test new models of firearms. Agencies typically do not update their firearms inventory often because firearms can last many years when properly serviced and maintained. This is reflected in agencies’ spending data, which generally show periodic larger orders of firearms and more frequent smaller orders. For example, ATF reported buying several thousand pistols in both fiscal years 2012 and 2017, and fewer than 1,000 pistols and rifles in total in the intervening years. Similarly, BIA reported buying several hundred firearms in 2010, 2012, and 2014, and fewer than 200 in total in the remaining 5 years of our review. When firearms near the end of their useful life, agencies can choose to retire or replace them. Additionally, agencies frequently reported buying three or fewer firearms at a time, and officials from one agency we spoke with said that they may buy a single firearm at a time in order to test out new models for future consideration. The 20 agencies in our review reported spending a total of at least $325.9 million on ammunition for their FLEOs from fiscal years 2010 through 2017, based on available spending data from agencies’ internal record- keeping systems. The amount each agency reported spending on ammunition over the 8-year period ranged from $309,000 (SSA OIG) to $128 million (CBP). Of the 20 agencies in our review, 16 agencies also reported the number of rounds of ammunition they bought. The 16 agencies reported buying a total of at least 767 million rounds of ammunition during this time. The number of rounds of ammunition each of these agencies reported buying over the 8-year period ranged from at least 846,000 rounds (SSA OIG) to at least 429 million rounds (CBP). These agencies most frequently reported buying handgun ammunition, and .40 caliber was the most frequently reported caliber. See figure 4 for more information about the types of ammunition that agencies reported buying over the 8-year period. Agency officials we spoke with said the quantity of ammunition they buy annually varies within each agency based on factors such as ammunition usage in previous years, the number of officers qualifying to use a firearm each year, the skill level of officers, the type of training conducted, and their budget each fiscal year. Specifically, agencies require officers to pass certain firearms qualifications standards in order to maintain their proficiency—typically quarterly for pistols, and biannually for rifles and shotguns. Officers must qualify on each firearm they are authorized to carry, and some agencies may have additional training requirements throughout the year. For example, HHS Office of Inspector General (OIG) officials said that, in addition to quarterly qualifications, officers also complete eight additional training modules each year that cover topics that include responding to multiple assailants, use of cover, and reactive shooting techniques. HHS OIG officials noted that they may add additional training if needed, and officials take this into account when determining the type and amount of ammunition they order each year. Of the 20 agencies in our review, 17 provided spending data for their tactical equipment. The 17 agencies reported spending a total of at least $1.14 billion on tactical equipment for their FLEOs from fiscal years 2010 through 2017, based on available spending data from agencies’ internal record-keeping systems. The amount each agency reported spending on tactical equipment over the 8-year period ranged from $10,000 (SSA OIG) to $609 million (CBP). We cannot report the total quantities of tactical equipment agencies bought because agencies reported quantity data using different units of measurement. For example, when we requested data on the number of camouflage uniforms agencies bought, agencies used “1” to refer to a variety of clothing, such as a single pair of pants or a full set of uniforms. A few agencies accounted for a significant portion of the total reported spending on tactical equipment. Specifically, four agencies—CBP, U.S. Marshals Service, Federal Bureau of Investigation (FBI), and Drug Enforcement Administration—reported spending at least $755 million in the manned aircraft category, or 66 percent of all reported tactical equipment spending for all agencies. See figure 5 for the types of tactical equipment agencies reported in spending data. The 17 agencies that reported buying tactical equipment most frequently reported buying aiming devices, such as sights and scopes, and specialized image enhancement devices, such as thermal cameras or night-vision goggles. Few agencies reported buying tactical and weaponized vehicles, aircrafts, and vessels. See figure 6 for more information about the types of equipment reported in each agency’s spending data. For the three agencies we reviewed—BIA, Forest Service, and ICE— publicly-available purchase data from USASpending.gov on firearms and ammunition did not consistently match the internal agency data we reviewed. Table 3 shows the total dollar value of the firearms and ammunition obligations that each agency reported to us, alongside the dollar value of the obligations in the publicly-available data. Differences between the agency-reported values and the values shown in the publicly-available data ranged from less than 1 percent to approximately 700 percent of the values reported by the agencies. Of the three agencies that we reviewed, ICE had the largest discrepancies between the agency-reported and publicly-available values. ICE reported to us $2,539,585 in firearms obligations and $47,965,399 in ammunition obligations for fiscal years 2010 through 2017; however, the publicly- available data for ICE for the same time period shows $19,728,786 in firearms obligations—about eight times greater than what ICE reported to us—and $146,198,549 in ammunition obligations—about three times the amount that ICE reported to us. According to our analysis, some of the difference between the ICE- provided and publicly-available obligations in USASpending.gov results from other DHS agencies using ICE contracts to make firearms and ammunition purchases, and ICE not properly identifying the funding agency for those purchases in the Federal Procurement Data System- Next Generation (FPDS-NG), the database from which USASpending.gov draws contracting data. In these cases, agency officials told us that under a process known as “strategic sourcing,” ICE performs the procurement functions and is reimbursed by the purchasing agency. The Federal Acquisition Regulation (FAR) requires that the agency that “provided the predominant amount of funding for the contract action” be recorded in FPDS-NG. The FPDS-NG Government User’s Manual also specifies that users record the agency that “provided the obligated funds”—that is, the agency that purchased the item or service. However, when ICE records the transaction data in FPDS-NG, ICE lists itself as the funding agency for firearms and ammunition transactions. For example, in the publicly-available records, a fiscal year 2013 purchase of pistols from the manufacturer totaling $847,960 in obligations shows ICE as the funding agency, but the transaction description states: “to purchase pistols for FPS .” As a result, ICE appears to be the funding agency for more firearm and ammunition transactions in the publicly-available data than in the data ICE reported to us. ICE officials explained that their contracting officers manually enter ICE as the funding agency in FPDS-NG. They interpret the FPDS-NG Government User’s Manual guidance to allow designation of ICE as the funding agency, since payment for the purchase is made from an ICE account even when those funds are reimbursed by the agency that actually receives the purchased product. However, the FPDS-NG Government User’s Manual specifically requires the identification of the funding agency and distinguishes between the agency that makes the payment and the agency that ultimately provides the funds for the purchase. FPDS-NG guidance also clarifies that when one agency buys on behalf of another, the agency that is requiring the purchase should be recorded as the funding agency, not the payment office. Because ICE recorded other agencies’ purchases as its own in the publicly-available data, it significantly inflated the apparent dollar value of its firearms and ammunition purchases. As a result of ICE not accurately recording the correct funding agency information in FPDS-NG, the public does not have accurate information on the value of firearms and ammunition purchases made by ICE, and the agencies that make purchases using ICE contracting services. As we have previously reported, data need to be presented in a way that meets the needs of the end users—both policy makers and the public—if USASpending.gov is to fulfill its purpose of increasing accountability and transparency in federal spending. Improving the accuracy of the reported funding agency can better help the public understand and use federal data, and increase accountability and transparency of these sensitive purchases. Data on obligations for the publicly-available purchase records had smaller discrepancies when compared with purchases of firearms and ammunition reported to us by the BIA and Forest Service. The BIA’s ammunition obligations in the agency- and publicly-reported data sets closely matched, with a discrepancy of less than 1 percent overall from fiscal years 2010 through 2017. The Forest Service’s firearms obligation amounts in the agency- and publicly-reported data sets also closely matched, with a discrepancy of less than 1 percent overall from fiscal years 2010 through 2017. However, the dollar value of the Forest Service’s ammunition obligations recorded in the publicly-available data was approximately 25 percent greater than the value of the ammunition purchases in the data that they provided to us. Forest Service officials explained that the publicly-reported data includes ammunition purchased for non-law enforcement purposes—such as protecting Forest Service employees from wildlife attacks, controlling invasive species, or euthanizing injured animals—and those purchases were excluded from the data that they provided to us because the scope of this review focuses on purchases for FLEOs. The type and amount of information recorded in the publicly-available data also contribute to discrepancies between agency-provided and publicly-available purchase records. As a result, the publicly-available data may comply with the data reporting requirements enumerated in the FAR and in the FPDS-NG Government User’s Manual and still differ from the agency-provided data. Differences between publicly-available data and agency purchase records include: The product or service code (PSC) selected in the publicly-available data may not reflect all of the items in a purchase. According to the FPDS-NG Government User’s Manual, the PSC selected for a purchase should reflect the items that constitute “the predominance of the dollars obligated,” and only one PSC may be associated with a purchase. Therefore, when a purchase is assigned a firearms or ammunition PSC, but the purchase includes non-firearms or non- ammunition items as well, the total obligated amount of the purchase will be associated only with the selected PSC in the publicly-available data. This may result in over- or under-reporting the value of the obligations for firearms or ammunition purchases. For example, in fiscal year 2014, BIA purchased 103 shotguns, 220 tactical lights, and other equipment in a single transaction. The total value of the obligation was $145,970, of which the shotguns constituted 50.4 percent of the purchase ($73,549). Consistent with FPDS-NG guidance, the entire purchase was categorized as “Guns, through 30mm” in the publicly-available data, even though almost half of the purchase was for non-firearms items, thereby over-reporting the obligated value of the firearms purchased—in this case, effectively doubling the apparent obligated value of the firearms purchased while omitting the obligated value of the non-firearms items that were part of the purchase. Conversely, a purchase categorized as “Optical Sighting and Ranging Equipment” obligated for $2,971 included a line item for $500 of ammunition. BIA included the $500 ammunition purchase in the data provided to us, but that amount was included under the equipment PSC in the publicly-available data in keeping with FPDS-NG guidance. This excluded the purchase from the publicly-available data that we reviewed and under-reported the obligated value of ammunition purchases by BIA. The available PSCs in the publicly-available data do not distinguish between firearm parts and fully functional firearms. Several purchases associated with firearms PSCs included descriptive information indicating that the purchase was for firearms parts. ICE officials also confirmed that an order described as firearm “parts” could include fully functional firearms. The officials noted that whether a particular purchase included fully functional firearms, firearms parts, or both cannot be determined without the statement of work, and the statement of work is not part of the publicly-available data. By including purchases of both fully functional firearms and firearm parts in the same category, publicly-available data may inflate the obligated value of functional firearms purchases. Firearms and ammunition purchases may not be assigned a related PSC in the publicly-available data. In cases where agencies assigned a non-firearms or ammunition PSC to a firearms or ammunition purchase, those purchases were excluded from the publicly-reported data that we analyzed. For example, a Forest Service purchase of rifles and sights which obligated $50,799 was assigned a PSC for “Assemblies Interchangeable Between Weapons In Two or More Classes” in the public data, rather than a firearms- or ammunition- specific PSC. Another Forest Service purchase for rifles which obligated $23,457 was assigned a PSC for “R&D-Defense System: Weapons (Basic Research).” Agencies are not required to report purchases of $3,500 or less to FPDS-NG. Because purchases of $3,500 or less generally are not required to be reported to FPDS-NG, these purchases may be reported inconsistently or not at all in the publicly-available data. Ammunition is often purchased by the selected agencies in small quantities and may cost $3,500 or less. For example, Forest Service officials noted that such small ammunition purchases may be made using a purchase card, and their internal data included at least 130 such purchases. In addition, the publicly-available data do not include a field for agencies to report quantity information associated with purchases. Therefore, the number of firearms or rounds of ammunition that an agency purchased are not available in the publicly-available purchase data. HHS, EPA, and IRS law enforcement components, our case studies, in total reported inventories of five types of firearms—all with corresponding types of ammunition—and nine types of tactical equipment. According to officials in all components, their inventories of these items can be attributed to a variety of factors, including the missions and responsibilities of their FLEOs, the number of FLEOs, and the office’s schedule for disposing of and acquiring inventory. Table 4 summarizes the types and quantities of firearms, ammunition, and tactical equipment reported at case study components as of November 2017. For additional information on case study components, see appendix II. Firearms. The numbers and types of firearms the components in our review reported having in their inventories varied. As of November 2017, all components reported inventories of pistols and shotguns, five components reported rifles, and three reported fully automatic firearms. Officials noted that they make decisions about what to have in their inventories based on factors such as their number of FLEOs and mission needs. All components issued pistols to FLEOs to carry, in accordance with their statutory authority. Officials stated that these firearms are to be carried on duty so FLEOs are prepared for potentially dangerous circumstances, such as serving warrants on armed individuals. Similarly, qualified FLEOs in all components can temporarily carry rifles or shotguns in anticipation of, or in response to, high-risk situations, such as active shooter threats or arrests of suspects who are believed to be dangerous. We found that components had more pistols per FLEO than shotguns or rifles per FLEO, which reflects components’ preferences to issue pistols to officers as their duty weapons. For example, six components reported having roughly a 2 to1 or 3 to 1 pistol-to-officer ratio, while EPA OIG agents had a 5 to1 ratio. Case study components generally reported having more pistols than FLEOs because every FLEO is assigned at least one pistol. On the other hand, six components reported having about 1 shotgun or fewer per every two FLEOs. However, EPA Office of Enforcement and Compliance Assurance (OECA) had a 1.4 to 1 shotgun- to-FLEO ratio. According to EPA OECA officials, their shotgun-to-agent ratio is higher than other agencies because of two factors: 1) EPA OECA historically had more agents, which made their shotgun-to-agent ratios lower than when they acquired the shotguns in use today, and 2) EPA OECA sends additional unassigned shotguns to natural disaster response locations to pre-position them for EPA OECA agent use. Components in the Food and Drug Administration (FDA) and IRS reported keeping a relatively smaller number of shotguns, which they said they only deploy for high-risk investigations. Among the five components with rifles, rifle-to- FLEO ratios ranged widely—from less than 1 to 10 to 6 to 10 —due to differences in the number of FLEOs and mission needs. For example, officials with IRS Police, which had four rifles for nine officers, stated that they only use the rifles for continuity of operations drills and annual qualifications. Ammunition. As of November 2017, case study components reported inventories of ammunition ranging from 14,706, in the case of the IRS Police, to approximately 5 million rounds held by IRS CI. (See table 4 for all components’ inventories of ammunition.) Each law enforcement agency independently decides how much ammunition to allocate to its firearm-carrying personnel for training and qualification. Component officials noted that ammunition inventories constantly fluctuate throughout the year, based on factors such as the amount used for qualification and training purposes, and the timing of ammunition shipments. Officials from all components stated that their ammunition inventories can quickly change by thousands of rounds depending on training and qualification timing. For example, according to NIH officials, between November 2017 and February 2018, officers used 5,110 rounds of rifle ammunition during training, and subsequently NIH acquired 14,400 rounds of rifle ammunition. To help ensure they have sufficient ammunition on hand to support the training and operational needs of their FLEOs, components may maintain inventories of ammunition to last for several months. The length of time between ordering and receiving ammunition orders can be lengthy, sometimes up to 1 year, according to officials. Therefore, components order ammunition in large quantities to ensure there is enough available for training and qualification purposes. Tactical Equipment. Six case study components reported inventories of 9 of the 18 types of tactical equipment reviewed. Breaching equipment and aiming devices were the most frequently reported kinds of tactical equipment at these six components: four components reported breaching equipment and four reported aiming devices in inventories. Three components reported other equipment. EPA OIG reported inventories of silencers and tactical lighting; however, in February 2018 EPA OIG officials told us they began to transfer their silencers to another federal agency because officials decided that they were no longer necessary to meet their mission. Among the agencies in our review, NIH reported having pyrotechnics and large-caliber launchers. NIH officials said these items were necessary for assisting other law enforcement agencies in the event that extreme circumstances, such as a terrorist attack or riot, occurred in the area. HHS, IRS, and EPA case study components have inventory controls in place for firearms, ammunition, and tactical equipment. Components generally followed their procedures at selected locations to track and secure FLEOs’ firearms. In addition, all 12 case study components’ offices that we visited were in compliance with their ammunition and tactical equipment inventory controls. All components had some controls governing ammunition and equipment, though the specific controls varied by component. HHS, IRS, and EPA case study components have controls in place for tracking, verifying, and securing FLEOs’ firearms. Through our observations, we found these components are generally following their inventory and security procedures at selected locations. According to Standards for Internal Control in the Federal Government, agencies should design control activities to respond to risks related to vulnerable assets. To ensure these controls operate effectively, management can take steps such as periodically counting and comparing such assets to control records, and establishing physical control to secure and safeguard vulnerable assets. Other examples of these controls include security for and limited access to assets, such as equipment that might be vulnerable to risk of loss or unauthorized use. In addition, we have identified areas that have been consistently recognized as important for effective inventory management that align with these controls. These areas include recording and tracking firearms inventory data and maintaining, controlling, and accounting for firearms inventories, among other things. Firearms Tracking. At each of these components, firearms are considered sensitive items and are tracked in electronic data systems or using paper records. At HHS OIG, there is a separate firearms tracking system, and other components track firearms in their overall property management system. A barcode or serial number is used to track the firearm through the life-cycle of the weapon—which includes initial assignment, changes in assignment (to a different agent or to storage), and weapon disposal. According to each component’s policy, every firearm has a bar code or serial number associated with it, and each firearm is assigned to an agent or placed in storage. When an agency receives a firearm, the serial number or bar code is entered into the agency’s firearms inventory system and upon assignment to an agent updated with the agent’s name. Typically, firearms in storage are assigned to the primary firearms instructor or the firearms coordinator in the inventory system to ensure accountability. At all case study components the primary firearms instructors and firearms coordinators are the persons responsible for managing the firearms inventory of an office and ensuring firearms are properly tracked—these are considered ancillary duties for these individuals, in addition to their regular responsibilities as FLEOs. We observed demonstrations or documentation of these tracking records at each office we visited and found them to be generally in accordance with office policies. Firearms Verification. Each component has a process whereby at least once a year officials conduct a firearms inventory to ensure that issued and stored firearms match with records in the office’s inventory tracking system. Figure 7 describes a general process that all components we reviewed follow to verify their firearms inventory. Five components we examined require this annual firearms inventory process to be conducted in person and entail the visual inspection of the serial number and condition of the firearm. However, FDA and EPA OECA FLEOs are permitted to send an email containing their firearm serial number, a photo of the firearm, or both to the official conducting the inventory to virtually verify they are in possession of their firearm. Officials stated that this saved them the expense of FLEOs in remote locations traveling for annual inventory checks. In addition to regularly verifying inventories of their firearms, five case study components conduct periodic checks to verify the accuracy of firearm inventory data. During these checks, headquarters or other inspection officials review data recorded about inventories, storage controls, and proper maintenance of weapons. For example, IRS CI and HHS OIG conduct regular internal reviews of firearms inventories and records that they use to identify data errors and make recommendations to improve data quality. We found that recent checks at the case study components have rarely identified issues related to recorded firearms data, and the majority of the identified issues were related to minor data errors, such as incorrectly recorded assignments of guns to FLEOs, locations of guns, and serial numbers. For example, in May 2017 EPA OECA’s check of one area office found two firearms listed as being in storage were actually in service. All components with these administrative errors corrected them as they became aware of them, according to the audit reports and agency officials. However, during our review of EPA OIG inventory control practices for firearms, we found that EPA OIG headquarters did not have a management review process in place for firearms inventory, which contributed to examples of inaccurate firearms inventory data. Specifically, we found 6 out of the 12 EPA OIG offices reported inventories with at least one firearm that did not match the location and individual to which it was assigned. For example, we found that the Special Agent in Charge at one EPA OIG’s field office verified that 10 firearms were physically in the office when actually they had been shipped to headquarters 11 months prior to the inventory date. According to EPA OIG officials, the errors we found were largely due to EPA OIG headquarters not updating records when agents transferred firearms from one office to another. As a result of our review, headquarters is implementing practices to improve future data quality. Specifically, EPA OIG officials said they reconciled their inventory data and had field offices with inaccurate inventories prepare memos to reflect their actual inventories. EPA OIG also updated firearms procedures to include headquarters increased oversight of firearms audits and inspections. In practice, EPA OIG officials stated that this will entail an annual reconciling of inventory memos sent by field offices with inventory data records maintained at EPA OIG headquarters. Thus, EPA OIG can more reliably track the location and agents responsible for firearms, ensuring proper weapons control procedures and accountability. Firearms Storage. All case study components had policies in place that required secure storage of firearms. All seven components’ policies specify that this must include a locked container, such as a file cabinet or desk safe for issued firearms or a firearm vault or safe for unissued firearms. In all 12 of the components’ offices we visited, we observed unissued firearms stored in a designated room that was kept locked with limited access. Specifically, we observed firearms storage rooms secured by keycard access, alarms, cameras, and other security devices. At all of the components’ offices we visited, only FLEOs with a need to enter the rooms had authorization to do so. For example, only FLEOs in management roles and firearms instructors had access to the firearms storage room at the IRS CI and HHS OIG offices we visited, according to officials at each. In the secure firearms storage rooms at all of the locations we visited, we observed firearms that were further protected by cabinets, cages, safes, vaults, or combinations of these devices. We also observed some instances of firearms being stored securely in safes outside of the designated firearms storage room. For example, two EPA OIG and OECA offices we visited had spare shotguns and related equipment in biometric safes in offices to be used in response to active shooter threats. Qualified FLEOs in these two offices can use their fingerprints to open the safes and respond to such threats. Based on our observations, the offices we visited for the six components were in compliance with their firearms storage policies. However, we found the IRS Police office in Martinsburg to be out of compliance with policy that limits access to stored firearms to the armorer and chief of security and its policy that restricts storage in locked cabinets to five firearms. Based on our finding, IRS Police officials said they will update their policy to reflect its current practice of allowing all IRS Police officers access to stored firearms to respond to active shooter threats and acquired an additional safe to store firearms in June 2018. For each of the components we examined in our review, there were no instances of firearms being lost or stolen from any office, according to component data and officials. All 12 offices for case study components that we visited were in compliance with their ammunition and tactical equipment inventory controls and procedures. All components had policies to treat ammunition and equipment as items with some level of control, though the specific controls varied by component. Ammunition. At the components’ offices we visited, we observed various methods for tracking ammunition inventories, such as electronic logs, physical logs, or visual inspection. In general, case study components’ policies require ammunition tracking through an ammunition log updated as ammunition is used, a regular inventory, or both. Components track ammunition to ensure they have enough on hand for training and qualifications, according to component officials. Some components, such as EPA OIG, maintain tight controls over their ammunition use by tracking ammunition use by lot number and the number of bullets used by each gun in physical logs. EPA OIG officials stated that they used this level of precision for three reasons: to track how many bullets are fired through each firearm for maintenance purposes, to quickly identify ammunition in inventory that may be affected by recalls, and to have a high degree of accountability. HHS OIG tracks ammunition using an electronic log, which they said they update whenever ammunition is removed for training and qualifications. IRS CI currently limits access to ammunition and entrusts use of force coordinators with independently managing their ammunition inventory to meet the training needs of their area of responsibility. One IRS CI use of force coordinator said that she relies on her experience and judgment to keep track of ammunition use at her field office without formally recording it. IRS CI is the only component in our review that does not have a documented policy to track ammunition or conduct a regular inventory; however, IRS CI officials indicated they are in the process of establishing a nationwide policy to track ammunition and conduct a regular ammunition inventory. Officials at two case study component offices said they provide their FLEOs extra boxes of ammunition to use for practice at a firing range outside of work hours. In general, four of the seven case study components did not track the real- time amount of ammunition they had on hand; rather, component officials said they had a general sense of the amount of ammunition in order to know if they had enough for training and qualifications, and when they would need to reorder ammunition. All case study components’ policies require secure storage of ammunition. In all 12 of the components’ offices we visited, we observed that ammunition was stored in their firearms storage rooms, and all offices took the additional step of securing the ammunition further in locked safes. For example, IRS CI requires ammunition storage in a security cabinet or a security room, preferably separately from firearms. Both of the IRS CI offices that we observed stored ammunition separately from firearms and with limited access. In the offices for two components, NIH and HHS OIG, we observed ammunition secured in a separate room from the firearms. Tactical equipment. Case study components do not control the tactical equipment in their inventory in the same ways that they control firearms and ammunition. Case study components that possessed aiming, breaching, and tactical lighting equipment did not have policies guiding their storage because they do not generally consider them to be as dangerous as a firearm or valuable enough to be tracked. However, components that possessed silencers, large-caliber launchers, pyrotechnics, or other items did have policies to control these items. Specifically, IRS CI policy requires the electronic tracking and inventory of night-vision equipment, optical equipment, and vehicles. NIH policy directs that large-caliber gas launchers be stored in the armory and pyrotechnics be stored in their bunker with ammunition. IRS CI, NIH, and EPA OIG all tracked this equipment during their annual inventory verification. Case study components did not report any instances of loss or theft of the tactical equipment in their inventories. Storage of tactical equipment varied and corresponded with case study components’ use of items. For example, we observed silencers and aiming devices stored on or near firearms at EPA OIG and NIH because they are accessories that attach to firearms. We observed breaching equipment to be stored either in the firearms storage room, vehicles, or elsewhere in the offices we visited. For example, at EPA OIG’s headquarters office, breaching equipment was stored in the firearms room because officials stated that they were only likely to use breaching equipment as part of a planned operation. However, officials at the FDA and NIH offices we visited said that their breaching equipment was stored in vehicles so it could be more readily accessible if they needed to use it. Accurate reporting of firearms and ammunition is critical for accountability and transparency of these sensitive purchases. While reporting such purchases with precision is difficult, the execution of this responsibility impacts the public’s access to information about which agencies purchase what types of firearms and ammunition, and the amount that they spent on those purchases. However, ICE did not properly identify the funding agency in FPDS-NG for purchases where other DHS agencies used ICE contracts to procure firearms and ammunition. This inflated its publicly-available data to show a significantly higher obligated dollar value of purchases than it actually purchased. Because ICE does not accurately report the agency that funded the purchase to FPDS-NG, the public does not have accurate information on how much ICE and the agencies that make purchases using ICE procurement services have obligated for firearms and ammunition. Data need to be presented in a way that meets the needs of the end users—both policymakers and the public—if USASpending.gov is to fulfill its purpose of increasing accountability and transparency in federal spending. Improving the accuracy of the reported funding agency can better help the public understand and use federal purchase data, and increase accountability and transparency for these sensitive purchases. To improve the accuracy of publicly-available purchase information, the Director of ICE should update ICE’s contracting process to include the name of the appropriate funding agency in data entered into FPDS-NG for firearms and ammunition purchases. (Recommendation 1) We provided a draft of the sensitive product to DHS, DOI, DOJ, EPA, HHS, SSA OIG, Treasury, USDA, and VA for review and comment. Agencies provided technical comments, which we incorporated as appropriate. DHS also provided written comments on the sensitive report, which are reproduced in full in appendix III. In its written comments, DHS concurred with our recommendation and described the actions ICE plans to take in response. We are sending copies of this report to interested congressional committees, the Secretaries of the Department of the Interior, the Department of Homeland Security, the Department of Agriculture, the Department of Justice, the U.S. Department of Veterans Affairs, the Social Security Administration, the Department of the Treasury, the Environmental Protection Agency, and the U.S. Department of Health and Human Services. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report provides additional information on our objectives, scope, and methodology. Specifically, our objectives were to examine the following questions: 1. What do available data show about spending on firearms, ammunition, and selected tactical equipment made by federal agencies with 250 or more federal law enforcement officers from fiscal years 2010 through 2017? 2. To what extent have selected agencies accurately reported purchases of firearms and ammunition in publicly-available data on USASpending.gov? 3. What types and quantities of firearms, ammunition, and selected tactical equipment do the Department of Health and Human Services (HHS), Environmental Protection Agency (EPA), and Internal Revenue Service (IRS) have documented to be in their inventory systems, as of November 2017? 4. What inventory controls and procedures are in place at HHS, EPA, and IRS, and to what extent do these agencies follow these procedures at selected locations? This report is the public version of a sensitive report that we issued in October 2018. HHS, IRS and the Transportation Security Administration (TSA) deemed some of the information in our October report to be sensitive, which must be protected from public disclosure. Therefore, this report omits sensitive information about the number of FLEOs at the TSA, an illustration of how HHS’s National Institutes of Health Police secures its firearms, and the number and types of some firearms, ammunition, and tactical equipment in NIH’s and IRS’s inventory. Although the information provided in this report is more limited, the report addresses the same objectives as the sensitive report and uses the same methodology. To address our first question, we obtained available spending data on firearms, ammunition, and certain tactical equipment from 20 agencies from the departments named in the Chief Financial Officers Act that employed 250 or more federal law enforcement officers (FLEOs) at any point from fiscal years 2010 through 2017. Specifically, we identified applicable agencies by reviewing Office of Personnel Management employment data and contacting agency officials to verify the employment of 250 or more FLEOs during the timeframe we reviewed. We excluded military branches from our review, such as all Department of Defense (DOD) branches and the U.S. Coast Guard, which is part of the Department of Homeland Security (DHS). Table 5 shows the 20 agencies, within eight departments, included in our scope for this question. Because there was no definitive list of what is considered tactical equipment, we developed a list of equipment to include in our review. To do so, we reviewed the National Firearms Act List, the Law Enforcement Equipment Working Group Recommendations, the DOD’s list of Controlled Property, and the Special Weapons and Tactics Gear used by the New York, Los Angeles and Houston police departments. We then selected and categorized the tactical equipment that appeared in two or more of these lists to include in our review. The 18 categories of tactical equipment we created were: (1) silencers, (2) explosive devices, (3) large-caliber weapons (>.50 caliber, excluding shotguns), (4) armored vehicles, (5) weaponized aircraft, vessels, or vehicles, (6) camouflage uniforms, (7) manned aircraft, (8) unmanned aerial vehicles, (9) tactical vehicles, (10) command and control vehicles, (11) pyrotechnics and specialized munitions, (12) breaching apparatus, (13) riot batons, (14) riot helmets, (15) riot shields, (16) tactical lighting (excludes basic flashlights), (17) specialized image enhancement devices (such as thermal imaging devices and night vision gear), and (18) aiming devices (such as scopes and tripods). To more closely describe the types of equipment frequently reported in the large-caliber weapons and breaching apparatus categories, we refer to them in the report as large-caliber launchers and breaching equipment, respectively. To collect data from the 20 agencies within the scope of our review for this objective, we developed a data collection instrument that requested spending data of firearms, ammunition, and selected tactical equipment from agencies’ internal record-keeping systems from fiscal years 2010 through 2017. For this objective, we requested the types of information that agencies reported using the data collection instrument: the date of each purchase; descriptive information on what was bought, including the caliber or gauge of firearms and ammunition; the quantity of items bought; the amount spent and whether those amounts were estimates; the type of record-keeping system used by the agency and any limitations associated with it or challenges compiling the information we requested; descriptions of changes or updates to the system that may have affected the data; and the contracting office(s) that were responsible for buying these items for the agency. We asked agencies not to include data on any items they received without spending funds, so agencies may have received more firearms, ammunition, or equipment in their inventories than what they reported in their spending data. For example, agencies may have received these items through interagency transfers, which may have no cost to receiving agencies. For the first objective, we analyzed the data agencies reported in the “amount spent” column, and we use the terms “spending” and “spent” to refer to these data. In cases where agencies only reported the amount they obligated for a purchase on the data collection instrument, we confirmed with agencies that those amounts reflected the amount they spent on the purchase and that we could use those amounts in our analysis. We pre-tested the instrument with Veterans Health Administration and U.S. Immigration and Customs Enforcement (ICE), whose officials provided feedback on the feasibility of providing the requested data. Based on the feedback we received from the pre-test, we revised and finalized the instrument and requested that the 20 agencies provide spending data on firearms, ammunition, and tactical equipment from fiscal years 2010 through 2017 from their internal record-keeping systems. To assess the reliability of the spending data, we conducted tests for missing data and obvious errors, reviewed relevant documentation, interviewed agency officials about their spending records and data reporting practices, and followed up with agency officials as needed. We re-categorized agency data that appeared to be miscoded. For example, we received data on specialized munitions and large-caliber launchers that agencies categorized as ammunition and firearms, respectively. Based on the descriptive data that agencies had provided, we re- categorized those items. We also adjusted the data to ensure consistency in their format, such as consistent entry of dates and use of categories of tactical equipment. Agencies in our review submitted a range of detail about their firearms when reporting their data, and we could not determine to what extent firearms were fully automatic. Some firearms have selector switches that allow the user to switch between semiautomatic and fully-automatic capabilities, while others are limited to shooting three-round bursts with each pull of the trigger. As such, we reported all firearms that are capable of firing multiple rounds with the single pull of the trigger as fully-automatic firearms. We also combined ammunition intended for use in machine guns with rifle ammunition because machine guns shoot rifle-caliber ammunition, and we did not have confidence that every agency accurately distinguished which rifle- caliber ammunition was intended for use in machine guns and what was reserved for rifles. We found the data sufficiently reliable for the purpose of reporting the minimum thresholds of total amounts agencies spent and the numbers of firearms and rounds of ammunition they purchased during fiscal years 2010 through 2017. However, we found the data were not reliable for reporting the number of tactical equipment items purchased or reporting further comparative analysis. Agency officials reported various challenges in compiling the data we requested and we identified some data limitations, as described in table 6. To address our second question, we selected three agencies—the Bureau of Indian Affairs (BIA), the U.S. Forest Service, and the U.S. Immigration and Customs Enforcement (ICE)—to assess the extent to which their purchases of firearms and ammunition were accurately reflected in publicly-available data. We requested that agencies report internal purchase data for firearms and ammunition that included, among other things, the amount obligated for these items, a unique transaction identifier (called the Procurement Instrument Identifier), and the product or service code for firearms and ammunition purchases from fiscal years 2010 through 2017. We compared the amounts these three agencies obligated for firearms and ammunition purchases, as reported to us in their data collection instruments, with the obligation data that are publicly- available data on USASpending.gov for those three agencies. We obtained publicly-available data from USASpending.gov, which includes purchase data from the Federal Procurement Data System-Next Generation (FPDS-NG), using product or service codes (PSC) that identify contracts for firearms or ammunition purchases. We also reviewed our related work and Inspector General reports on the quality of USASpending.gov data. We obtained records for purchases made in fiscal years 2010 through 2017. We did not include equipment purchases because the publicly-available data lack product or service codes that would allow us to reliably identify those records. To select the three agencies for inclusion in this analysis, we started with the 20 agencies with at least 250 FLEOs in our scope. From those, we selected agencies that provided us with records of their firearms and ammunition purchases and that USASpending.gov listed as the funding agency for one or more firearms or ammunition purchase (12 agencies). From those, we selected three agencies based on the total dollar value of purchases reported in USASpending: one small (BIA), one medium (Forest Service), and one large (ICE), based on natural breaks in dollar values and not selecting multiple agencies from the same department. We then compared obligations data provided to us by each of the three agencies against obligations in the publicly-available purchase records using the Procurement Instrument Identifier to match records across agency-provided and publicly-available purchase data. We additionally corroborated these obligations by comparing fields related to the date of purchase, purchase value, and vendor. We reviewed a portion of purchase records to compare and interviewed agency officials about differences in the publicly-available and agency-provided data. For firearms, we included the following PSCs: 1005 - Guns, through 30mm 1010 - Guns, over 30mm up to 75mm 1015 - Guns, 75mm through 125mm 1020 - Guns, over 125mm through 150mm 1025 - Guns, over 150mm through 200mm 1030 - Guns, over 200mm through 300mm 1035 - Guns, over 300mm We excluded several weapons PSCs from our analysis that described weapons other than firearms, such as 1040 – Chemical Weapons and Equipment. Any excluded PSC, particularly 1095 – Miscellaneous Weapons, may have been used as the PSC to categorize a purchase that included firearms and those purchases would be excluded from the publicly-available records that we examined. Similarly, for ammunition, we included records associated with the following PSCs: 1305 – Ammunition, through 30mm 1310 – Ammunition, over 30mm up to 75mm 1315 – Ammunition, 75mm through 125mm 1320 – Ammunition, over 125mm Like firearms, we excluded records that were associated with non- firearms ammunition, such as 1336 – Guided Missile Warheads and Explosive Components. Any excluded PSC, particularly 1395 - Miscellaneous Ammunition, may have been used as the PSC to categorize a purchase that included firearms ammunition and those purchases would be excluded from the publicly-available records that we examined. To address our third and fourth questions, we reviewed inventory information and controls for case study federal law enforcement components within U.S. Department of Health and Human Services (HHS), Environmental Protection Agency (EPA), and Internal Revenue Service (IRS). These components are as follows: EPA Office of Inspector General (OIG), Office of Enforcement and Compliance Assurance (OECA); Food and Drug Administration (FDA), National Institutes of Health (NIH), HHS OIG, and IRS. Within IRS, two offices employ FLEOs: Criminal Investigation (CI) and Police Officer Section (Police). Accordingly, we can draw conclusions only about these components. We obtained and analyzed inventory data and other available documentation provided by these components regarding their current inventory as of November 2017 of firearms, ammunition, and tactical equipment. This included firearms in storage as well as those in FLEO possession. To assess the reliability of the inventory data, we reviewed components’ documentation related to data management, especially policies to ensure that items are properly entered and removed from the system. In addition, we reviewed components’ recent purchases to verify that purchases were inventoried and reviewed their purchase data for any limitations that may affect their quality. We reviewed components’ acquisitions through DOD’s excess property program, known as the Law Enforcement Support Office (LESO) or 1033 program, to ensure these items were inventoried. We did not conduct physical inventories during site visits, and therefore did not actually count components’ physical inventories. To examine these components’ firearms, ammunition, and tactical equipment inventory controls, we reviewed their policies describing storage protocols and inventory control procedures, and we interviewed components’ officials to better understand these policies and procedures in practice. We also compared these policies with applicable Standards for Internal Control in the Federal Government and key areas that we have identified as important for effective inventory management. We reviewed internal and external inspection and Inspector General reports related to the controls over firearms, ammunition, and tactical equipment at these components to identify any reported deficiencies and actions taken or planned to address those deficiencies. We also conducted site visits to components’ offices selected based on a variety of factors, including the number of agencies with component offices in each city we visited, data discrepancies at field offices, and reports of loss or theft at these offices. The IRS Police facility we visited in Martinsburg, West Virginia is the only location for this component. In all, we visited 12 offices. During site visits, we observed officials demonstrating inventory inspection, inventory data entry, and access and other security controls. In addition, we interviewed officials responsible for maintaining and inventorying firearms, ammunition, and certain tactical equipment. The observations and information we obtained from the offices visited cannot be generalized to other locations for these components, but provide insights about the components’ controls for firearms, ammunition, and tactical equipment. We conducted this performance audit from June 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with the agencies addressed in this report from October 2018 to December 2018 to prepare this public version of the original sensitive report for release. This public version was also prepared in accordance with these standards. This appendix summarizes agency-provided spending data for the 20 agencies with 250 or more federal law enforcement officers and the 5 additional agency components that were included in our review. This appendix also identifies the challenges that agency officials identified in collecting the requested data and the limitations we identified while analyzing their data. To compile this information, we asked the agencies to provide data on their spending on firearms, ammunition, and selected tactical equipment from fiscal years 2010 through 2017. We reviewed the spending data provided by agencies to assess their accuracy and completeness, and followed up with agency officials as needed. Some agencies reported limited access to spending records because of their storage format or physical location, and we asked agencies to report the data that were accessible to them within the timeframe of this review. We found the data sufficiently reliable for the purpose of reporting the minimum thresholds of total amounts agencies spent and the numbers of firearms and rounds of ammunition they bought during the 8-year period in our scope. However, we found that data were not reliable for reporting the number of tactical equipment items purchased or for comparing the data across and within agencies. For more information on the methodology we used to collect these data and the challenges agencies faced compiling these data, see appendix I. Officials also provided information about the missions of their agencies or components, and the roles and responsibilities of their law enforcement officers. We included inventory data as of November 2017 for the agency components that were included in our review of inventory controls. Protects the public, employees, natural resources, and property under the jurisdiction of the Forest Service by enforcing the applicable laws and regulations that affect the National Forest System. Officers are responsible for conducting enforcement and investigations of criminal and civil offenses that affect the management of the National Forest System. Officers engage in public safety patrol operations, investigations of significant criminal offenses, community policing programs, natural disaster response, and law enforcement services at large group events, among other things. Agency stores purchase records for six years, which limited access to older data. Ammunition purchases and record-keeping are mostly decentralized among field offices, and officials could not provide the level of detail requested for all purchases. Upgrades to the record-keeping system may have compromised data from previous systems. Dollars (in thousands) No known limitations. Dollars (in thousands) FDA’s Office of Criminal Investigations protects public health and furthers the FDA’s mission by investigating suspected criminal violations of the Federal Food, Drug, and Cosmetic Act and other related laws. No known challenges. Officers conduct investigations related to criminal violations of the Food Drug and Cosmetic Act, which include conducting search and seizure warrants, transporting prisoners following arrest, conducting undercover operations, and other hazardous duties as necessary. Dollars (in thousands) Dollars (in thousands) Protects our country’s scientific research and the NIH research community, ensures that the mission of NIH is not impeded by personal attacks, loss of assets, criminal activity or acts of terrorism. Officers with the Division of Police are responsible for protecting property, employees and visitors; screening visitors entering NIH facilities; monitoring onsite equipment, cameras and alarms; operating the visitor badging system on and off campus; safeguarding selected buildings; patrolling areas of the NIH; providing traffic enforcement; conducting intelligence gathering and reporting; providing dignitary protection; and preparing warrants and arresting suspects. No known challenges. Dollars (in thousands) Dollars (in thousands) No known limitations. NIH determined inventory information to be sensitive. U.S. Department of Health and Human Services (HHS) No known challenges. Special agents conduct criminal investigations related to fraud, waste, and abuse within HHS’ hundreds of programs, which can involve surveillance, undercover operations, search warrants, and arrest warrants. Safeguards America’s borders, protects the public from dangerous people and materials, and enables legitimate trade and travel. Officers are responsible for preventing terrorists and weapons from entering the country, enforcing laws at ports of entry, and preventing the illegal trafficking of people, narcotics and contraband. Record-keeping system was implemented in 2016. Prior records required manual review. Records of purchases made at local field offices may be unavailable. Enforces federal laws governing border control, customs, trade and immigration to promote homeland security and public safety. responsible for conducting investigations to protect critical infrastructure industries that are vulnerable to sabotage, attack or exploitation. Some purchases are decentralized among field offices. Hard copy records required manual review and were difficult to access. Older records stored at field offices may not have been available. No known limitations. Dollars (in millions) NPPD’s Federal Protective Service prevents, protects, responds to and recovers from terrorism, criminal acts, and other hazards threatening the U.S. Government’s workforce, critical infrastructure, services, and the people who receive these services. No known challenges. Officers with the Federal Protective Service are responsible for enforcing all federal laws and regulations on and off federal property; investigating, mitigating, and defeating threats to federal facilities and the people who work within or visit those facilities; and providing integrated security, law enforcement, and protective intelligence capabilities to ensure the Federal Government functions securely. Dollars (in thousands) Dollars (in thousands) No known limitations. TSA’s Federal Air Marshal Service (FAMS) detects, deters and defeats criminal and terrorist activities that target our nation’s transportation systems. TSA’s Office of Inspection (OOI) ensures the integrity, efficiency, and effectiveness of TSA’s workforce, operations, and programs through objective audits, covert testing, inspections, and criminal investigations. No known challenges. Officers with FAMS are deployed on U.S. aircraft worldwide to protect airline passengers and crew against the risk of criminal and terrorist violence, and perform investigative work to proactively fight terrorism. Officers with OOI investigate allegations of misconduct by TSA employees and contractors, conduct inspections of TSA operations, and evaluate effectiveness of security systems through covert testing and audits. No known limitations. Dollars (in millions) Ensures the safety and security of the President, the Vice President, their families, the White House, the Vice President’s Residence, national and visiting world leaders, former U.S. Presidents and events of national significance; and protects the integrity of our currency and investigates crimes against our national financial system committed by criminals around the world and in cyberspace. Officers are responsible for executing security operations that prevent, deter, and mitigate identified threats and vulnerabilities; and conducting investigations to identify, locate and apprehend individuals and criminal organizations targeting the nation’s critical financial infrastructure and payment systems. Record-keeping system changed in 2015 and older records may be incomplete. Officials were unable to provide records of equipment purchases because purchasing is decentralized among field offices and records required manual review; they provided current inventory records of the equipment instead. Dollars (in thousands) Officials reported that some cost data were estimated based on available information The percentages do not total 100 because of rounding. Dollars (in millions) BIA’s Office of Justice Services upholds tribal sovereignty and customs while supporting tribal justice systems, and corroboratively ensures the safety of Indian communities by protecting life and property, enforcing laws, and maintaining justice and order. Officers are responsible for patrolling designated Indian reservations, providing local law enforcement, responding to calls for emergency response, investigating crimes, transporting prisoners to and from tribal court appearances, gathering and analyzing criminal intelligence, and collaborating with state and federal task forces. The current financial management system was implemented in 2013, and records from the previous system may be incomplete. Dollars (in thousands) No known limitations. Dollars (in thousands) Because of incomplete data from the agency, we determined the data are not reliable for reporting in this category. Dollars (in thousands) Dollars (in thousands) Because of incomplete data from the agency, we determined the data are not reliable for reporting in this category. events within the NPS; and providing protection for dignitaries and visiting foreign heads of state. NPS’ Visitor and Resource Protection Directorate—under which fall the Law Enforcement, Security, and Emergency Services and U.S. Park Police—protects the safety and health of NPS visitors, partners, and staff, as well as our natural and cultural resources. Financial management system implemented in 2013, and older records did not retain the cost data fields. Some records kept as paper copies and were decentralized among field offices. Dollars (in thousands) Dollars (in thousands) Protects the public from crimes involving firearms, explosives, arson, and the diversion of alcohol and tobacco products; regulates lawful commerce in firearms and explosives; and provides worldwide support to law enforcement, public safety, and industry partners. Officers are responsible for reducing violent crime by targeting firearms traffickers, violent criminal organizations, armed violent offenders, and career criminals; investigating and arresting individuals and organizations that illegally supply firearms to prohibited individuals; and deterring the diversion of firearms from lawful commerce into the illegal market with enforcement strategies and technology. Retention policy is 6 fiscal years, so older records may have been unavailable. There may be errors associated with manual data entry. Dollars (in thousands) firearms in 2017. At the time of our review, the funds were obligated but not yet spent. Dollars (in thousands) No known limitations. No known limitations. No quantity or type data reported. Firearm of intended use for all years No quantity or firearm of intended use data reported. Protects society by confining offenders in prisons and community-based facilities and provides work and other self-improvement opportunities to assist offenders in becoming law-abiding citizens. Officers are responsible for ensuring the security of federal prisons, providing inmates with needed programs and services, and modeling mainstream values. Officers help protect public safety and provide security and safety to the staff and inmates in prison facilities. All non- custody staff are trained to assume the duties of Correctional Officers. Officials reported limited data—most records prior to 2016 were stored in file cabinets at prison facilities or in warehouses and would have required significant time and resources to review. Purchasing is decentralized across prison facilities, which limited the availability of data, and inconsistent data entry procedures among officials may limit the reliability of data. illicit drug trafficking; coordination with law enforcement officials on drug enforcement efforts and to reduce availability of illicit drugs. Firearms purchases were embedded in contracts and required manual review. Dollars (in thousands) Dollars (in millions) Officers provide for the security of federal courts and execute and enforce federal court orders, apprehend fugitives and non-compliant sex offenders. Officers also transport federal prisoners from arrest to incarceration, manage and disposes of assets subject to forfeiture, and provide protection for government witnesses and their families. The record-keeping system changed in 2012, and there may be gaps in the data from 2013 and 2014 while the agency transitioned to the new system. Dollars (in thousands) Firearm of intended use for all years No quantity data provided. IRS’ Criminal Investigation serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in compliance with the law. Officers enforce tax laws and support tax administration to ensure compliance with the law and combat fraud. Investigations focus on tax fraud, abusive tax schemes, identity theft, public corruption, virtual currency, cyber-crimes, and narcotics-related financial crimes. Some requested data were not retained in the system. Agency could not provide equipment purchase data. Ammunition, equipment, and purchases $3,500 or less are decentralized among field offices. IRS’ Police Force at the Enterprise Computing Center in Martinsburg, West Virginia provides protection for the people, property and processes of this location, which houses 10 of IRS’ 19 critical tax processing functions. No known challenges. Officers patrol the facility and have authority to serve warrants and make arrests. No reported firearms purchases between fiscal years 2010 through 2017. Dollars (in thousands) No known limitations. Provides independent oversight of Internal Revenue Service (IRS) activities and addresses threats arising from lapses in IRS employee integrity, violence directed against the IRS, and external attempts to corruptly interfere with federal tax administration. Officers are responsible for conducting investigations that protect the integrity of the IRS; detecting and preventing fraud and other misconduct within IRS programs; investigating allegations of criminal violations and administrative misconduct by IRS employees; and protecting IRS against external attempts to corrupt or threaten its employees. After fiscal year 2016, record-keeping system no longer tracked purchases under $3,000. Dollars (in thousands) No known limitations. Dollars (in thousands) No known limitations. No known challenges. Officers with the Mint Police protect life and property, prevent, detect, and investigate criminal acts, collect and preserve evidence, make arrests, and enforce federal and local laws. EPA’s criminal enforcement program focuses on criminal conduct that threatens people’s health and the environment; enforces the nations’ laws by investigating cases, collecting evidence, conducting forensic analyses; and provides legal guidance to assist with prosecutions. No known challenges. Agents enforce the nation’s laws by investigating cases, collecting evidence, conducting forensic analyses and providing legal guidance to assist with prosecutions. No reported firearms purchases from fiscal years 2010 through 2017. Dollars (in thousands) Helps the agency protect the environment in a more efficient and cost effective manner by performing audits, evaluations, and investigations of EPA and its contractors; promoting economy and efficiency; and preventing and detecting fraud, waste, and abuse. Law enforcement agents conduct criminal investigations of financial fraud involving EPA programs or funds; employee misconduct; intrusion into EPA computers; threats against EPA employees, contractors, facilities and assets; assaults on EPA employees or contractors and other acts of violence in EPA facilities; impersonating EPA officials; counterfeiting or misuse of insignia, logos or credentials; and theft of property or funds within EPA facilities. No known challenges. OIG’s Office of Investigations conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement in SSA programs and operations. No known challenges. Officers with the Office of Investigations investigate wrongdoing by applicants, beneficiaries, contractors and third parties, and employees; conduct joint investigations with other law enforcement agencies; share responsibility for investigating threats or violence against SSA employees and facilities; and assist in the investigation of terrorism cases and other cases involving national security. Dollars (in thousands) No known limitations. Dollars (in thousands) No known limitations. No known limitations. Protects veterans by enforcing federal law at VA medical facilities (and some National Cemetery and Benefits locations) and by serving as initial response forces to active threat incidents. Officers protect veterans, visitors, and staff on department facilities and grounds; investigate serious incidents on VA controlled property; and provide personal protection to the Secretary and Deputy Secretary of the VA. Purchasing and record-keeping are decentralized among facilities, and there is no agency-wide system for recording purchases. Purchase card records were not easily accessible or identifiable. Dollars (in thousands) We identified missing data for some cost and date fields Officials reported some cost data were estimated based on available information The percentages do not total 100 because of rounding. Dollars (in thousands) In addition to the above contact, Adam Hoffman (Assistant Director) and Michelle Serfass (Analyst-in-Charge) managed this assignment. Christoph Hoashi-Erhardt, Allison Gunn, and Kelsey Burdick made significant contributions to this report. David Alexander, David Blanding Jr., Willie Commons III, Eric D. Hauswirth, Julia Kennon, Susan Hsu, Diana Maurer, Wayne McElrath, and Kevin Reeves also contributed.", "summary": "Federal law enforcement agencies purchase firearms, ammunition, and tactical equipment, such as riot shields, to support their missions. GAO was asked to review these purchases for federal law enforcement agencies, and inventory controls at HHS, EPA, and IRS specifically. This report examines, among other objectives (1) firearms, ammunition, and selected tactical equipment spending by federal agencies with 250 or more FLEOs from fiscal years 2010 through 2017; (2) the extent to which select agencies accurately reported purchases of firearms and ammunition in publicly-available data; and (3) inventory controls in place at HHS, EPA, and IRS. GAO obtained available data on purchases from 20 agencies and from USASpending.gov, and reviewed inventory information and controls within HHS, EPA, and IRS. GAO also conducted site visits to HHS, EPA, and IRS offices to observe inventory controls, selected based on data discrepancies or reports of loss or theft, among other factors. This is a public version of a sensitive report that GAO issued in October 2018. Information that HHS, IRS, and the Transportation Security Administration deemed sensitive has been omitted. The 20 federal law enforcement agencies in GAO's review reported spending at least $38.8 million on firearms, $325.9 million on ammunition, and $1.14 billion on tactical equipment—at least $1.5 billion in total—from fiscal years 2010 through 2017, based on data agencies provided to GAO. The internal agency data on firearms and ammunition purchases for the Bureau of Indian Affairs, U.S. Forest Service, and U.S. Immigration and Customs Enforcement (ICE) did not always match data that were publicly available on USASpending.gov—a government source for federal contract data. In particular, the dollar value of firearms purchases by ICE in USASpending.gov was approximately 8 times greater than the value of the purchases reported by ICE to GAO. Some differences result from other agencies using ICE contracts to make firearms and ammunition purchases, and ICE not properly identifying the funding agency for those purchases in the system that supplies data to USASpending.gov. Because ICE does not accurately report the agency that funded these purchases, the public does not have accurate information on how much ICE—and the agencies that make purchases using ICE contracts—have spent on firearms and ammunition. This decreases accountability and transparency of federal purchases, which is in conflict with the intended purpose of this system. Department of Health and Human Services (HHS), the Environmental Protection Agency (EPA), and the Internal Revenue Service (IRS) have inventory controls for tracking, verifying, and securing federal law enforcement officers' (FLEOs) firearms. GAO observed these agencies' law enforcement components and found them to be generally following their inventory and security policies at selected locations. In instances where agencies were not in compliance with their policies, the agencies made corrections during the course of GAO's review. Each component has a process whereby at least once yearly officials review the firearms inventory to ensure that firearms match with records in the office's inventory system. The figure below illustrates a general process that all components GAO reviewed follow to verify their firearms inventory. Ammunition and tactical equipment inventory controls varied because agencies generally did not consider these items to be as sensitive as firearms. Examples of these controls include security for, and limited access to, equipment that might be vulnerable to risk of loss or unauthorized use, such as silencers or pyrotechnics. GAO recommends that the Director of ICE update ICE's contracting process to provide the name of the agency funding the purchase of firearms and ammunition to improve the accuracy of publicly available data. ICE concurred with the recommendation.", "document_type": "gao"}
{"report": "IPIA requires agencies to conduct a risk assessment for all programs and activities at least once every 3 years, and OMB guidance implementing IPIA also directs agencies to report on the assessment in either the agencies’ AFRs or PARs. Each agency must institute a systematic method of performing the improper payment risk assessment, which may take the form of either a quantitative analysis based on a statistical sample or qualitative evaluation (e.g., a risk assessment questionnaire). IPIA identifies seven risk factors and OMB guidance includes two additional risk factors that agencies are to consider when conducting improper payment risk assessments. According to OMB M-15-02, agencies’ risk assessments (either quantitative or qualitative) should consider all of the following nine risk factors that are likely to contribute to significant improper payments: 1. whether the program or activity reviewed is new to the agency; 2. the complexity of the program or activity reviewed, particularly with respect to determining correct payment amounts; 3. the volume of payments made annually; 4. whether payments or payment eligibility decisions are made outside of the agency, for example, by a state or local government or a regional federal office; 5. recent major changes in program funding, authorities, practices, or 6. the level, experience, and quality of training for personnel responsible for making program eligibility determinations or certifying that payments are accurate; 7. inherent risks of improper payments because of the nature of agency 8. significant deficiencies in the agency’s audit reports, including but not limited to the agency IG or GAO audit findings or other relevant management findings that might hinder accurate payment certification; and 9. results from prior improper payment work. OMB guidance describes these nine risk factors as the minimum factors that agencies should consider and notes that additional risk factors, such as those specific to the program or activity being assessed, should also be considered, as appropriate. If an agency’s improper payment risk assessment finds that a program is susceptible to significant improper payments, the agency is required by IPIA to estimate the annual amount of improper payments for the program, publish corrective action plans, set reduction targets, and annually report on the results of addressing these requirements for that program. IPIA states that each agency is required to publish the improper payment information in an annual report in the form and content required by OMB—typically an AFR or a PAR—for the most recent fiscal year, and post that report on the agency’s website. OMB Circular A-136 and OMB M-15-02 provide guidance for agencies on preparing their AFRs or PARs, including the reporting of improper payment information. Specifically, this OMB guidance directs agencies to disclose the following in their AFRs or PARs: (1) the basis for grouping programs and activities for improper payment risk assessments; (2) the risk factors considered during their risk assessment; and (3) a listing of all programs that were assessed for a given year, regardless of whether a program or activity was deemed susceptible to significant improper payments. Given that OMB guidance is updated periodically, some reporting directives may differ for each fiscal year. As shown in table 1, the directive to disclose the basis for grouping programs and activities was applicable for all 3 years included in the scope of our review (i.e., fiscal years 2014 through 2016). However, the directives to disclose all the risk factors considered and include a listing of all programs and activities assessed were only applicable for fiscal years 2015 and 2016. During fiscal years 2014 through 2016, the 24 CFO Act agencies, excluding the Department of Defense (DOD), reported in their AFRs or PARs that that they completed at least one risk assessment on at least one program or activity in one or more of those years. For the agencies that reported that they completed an improper payment risk assessment, we found that most generally adhered to the reporting directives that were applicable for fiscal years 2014 through 2016. For example, for fiscal year 2014, 21 of the 24 CFO Act agencies reported completing a risk assessment, and for those 21 agencies, we found that 19 agencies adhered to OMB guidance for reporting the basis of groupings of programs and activities and 2 did not. (See fig. 1.) For fiscal years 2015 and 2016, all 18 CFO Act agencies that reported completing a risk assessment adhered to OMB guidance for this directive. Appendix III provides additional details regarding the agencies’ reporting of completing an improper payment risk assessment each year and adherence to the OMB improper payment risk assessment reporting directives. Further details on each of these reporting directives are provided below. Reporting the basis for grouping programs and activities. During the 3-year period from fiscal years 2014 through 2016, we found two instances where the agencies—the Departments of Commerce (Commerce) and Energy (Energy)—did not adhere to the reporting directive for agencies to report the basis of grouping programs and activities. Although these two agencies did not adhere to this reporting directive in fiscal year 2014, Commerce adhered to this directive in fiscal year 2015 and fiscal year 2016. Energy adhered to this directive in fiscal year 2015, and this reporting directive was not applicable for fiscal year 2016 because Energy did not report completing any risk assessments that year. All other applicable agencies were in full adherence to this OMB directive in fiscal years 2015 and 2016. Reporting a listing of all programs and activities assessed during the agencies’ improper payment risk assessments. During fiscal years 2015 through 2016, the applicable CFO Act agencies, except for the U.S. Agency for International Development (USAID), adhered to the reporting directive for listing all programs and activities assessed during the agencies’ improper payment risk assessments. USAID did not adhere to this reporting directive in fiscal year 2015; however, in fiscal year 2016, USAID did list all programs and activities. USAID officials provided us an OMB e-mail indicating, among other things, that USAID could be on a 3- year cycle of performing risk assessments starting in fiscal year 2015. Notwithstanding that e-mail, USAID continued to perform improper payment risk assessments annually, according to USAID officials, to maintain audit readiness and expertise. These officials further stated that this OMB e-mail served as support for not adhering to the OMB directive for reporting risk assessments. However, we did not find upon our review that the e-mail explicitly provided such support. Reporting the risk factors considered during the agencies’ risk assessments. As directed by OMB guidance, agencies are to report the risk factors considered during improper payment risk assessments in their AFRs or PARs. Given that IPIA identifies seven risk factors that agencies are to consider and OMB guidance includes two additional risk factors, agencies are directed by OMB to consider a minimum of nine risk factors. Therefore, the AFRs and PARs adhering to OMB guidance are to include a discussion regarding the agencies’ consideration of these nine factors as well as any other factors considered. In our analysis, we found that six agencies failed to adhere to OMB reporting directives either in fiscal year 2015, fiscal year 2016, or both. Specifically, we found the following: The Office of Personnel Management (OPM) did not adhere to the improper payment risk assessment reporting directives in fiscal year 2015. However, OPM subsequently corrected the reporting issue in fiscal year 2016. Three agencies—USAID, the U.S. Department of Agriculture (USDA), and the Social Security Administration (SSA)—did not adhere to the improper payment risk assessment reporting directives in fiscal years 2015 and 2016. In their fiscal years 2015 and 2016 AFRs, USAID did not report its consideration of any of the nine risk factors, USDA reported that it considered four of the nine risk factors, and SSA reported that it considered six of the nine risk factors. Two agencies, the Department of Education (Education) and the Department of Labor (Labor), did not adhere to the improper payment risk assessment reporting directive in fiscal year 2016. In their fiscal year 2016 AFRs, neither Education nor Labor provided a detailed description of all the risk factors that were considered in their risk assessments. Education stated that its risk assessment analysis “included a quantitative review of questioned costs from Single Audit findings versus total program expenditures, as well as a qualitative review of other risk factors including changes in legislation or regulations and history of audit findings.” Labor did not list the risk factors considered in its improper payment risk assessments but instead provided a hyperlink to IPIA. As noted above, officials from USAID stated that an OMB e-mail served as support for not adhering to the OMB directive for reporting risk assessments, including the risk factors. However, we found upon our review that the e-mail did not explicitly provide such support. Officials from USDA, Labor, and SSA, three of the five agencies that did not adhere to the reporting directive in fiscal year 2016, informed us that they considered the nine risk factors but were not aware that they had to specifically list the nine risk factors in their AFRs or PARs. In addition, Labor officials stated that they included a link to IPIA instead of mentioning the nine risk factors to help simplify the reporting. However, OMB Circular A-136 specifically directs the agencies to include a description of the risk factors considered in their improper payment risk assessments in their AFRs or PARs. Although Labor officials stated that they considered all nine risk factors, Labor’s link to IPIA only includes seven required risk factors and not the two additional risk factors that are referenced in OMB guidance. After we brought these concerns to their attention, officials from these three agencies indicated that they plan to report the risk factors considered, as directed by OMB, which should include consideration of all nine risk factors. By adhering to the OMB directive for reporting risk factors, the agencies will improve the transparency of the risk assessments reported in their AFRs or PARs. An Education official stated that the department did not consider all nine risk factors for its non-Federal Student Aid programs during fiscal year 2016 because Education’s analysis was quantitative in nature. However, OMB guidance states that all nine risk factors must be considered in both qualitative and quantitative improper payment risk assessments. In May 2017, the Inspector General for Education recommended that Education ensure that improper payment risk assessments conform with IPIA and OMB guidance when determining whether programs may be susceptible to significant improper payments and identify all programs that may be susceptible to significant improper payments. In response to the recommendation in the Office of Inspector General (OIG) audit report, Education stated that it will align its improper payment risk assessments with the nine risk factors beginning in fiscal year 2017. A revised version of OMB Circular A-136 that was issued in August 2017 no longer directs agencies to report improper payment risk assessment information in the agencies’ fiscal year 2017 AFRs and PARs. Specifically, agencies will no longer have to report in their AFRs or PARs for a given year (1) the basis for grouping programs and activities for improper payment risk assessments, (2) a listing of all programs and activities assessed during their risk assessments, and (3) the risk factors considered during their risk assessments. OMB staff stated that their primary motivation for eliminating the risk assessment reporting directives from OMB guidance was to reduce the administrative burden on agencies. Although OMB guidance will not direct agencies to report the three items noted above, agencies are still required to complete the risk assessments, as required by IPIA and directed in OMB guidance. Further, OMB staff stated that they rely on each agency’s OIG to review the quality of each agency’s risk assessment, which should include assessing the three items noted above; therefore, these reporting directives are not necessary. While we recognize the importance of reducing administrative burden, we also have previously reported on the importance of risk assessments for managing improper payments. We believe that the requirement for agencies to publicly report the improper payment risk assessment information has helped hold agencies accountable and provided additional transparency to the agencies’ improper payment processes, as well as assisted Congress and others in their oversight of government- wide improper payments. However, if OMB is going to rely on each agency’s OIG to ensure quality risk assessments, it is important that these reviews are performed consistently throughout the federal government. In our May 2017 report, we found that OIGs inconsistently reported agencies’ compliance with the IPERA criterion for conducting program-specific risk assessments. For example, certain OIGs reported agencies as noncompliant when agencies did not consider all nine risk factors, as outlined in IPIA, OMB guidance, or both, during program- specific risk assessments, whereas other OIGs reported agencies as compliant with this IPERA criterion, despite also finding issues with the agencies’ consideration of the nine risk factors. To help ensure that government-wide compliance under IPERA is consistently determined and reported, we recommended in May 2017 that the Director of OMB coordinate with the Council of the Inspectors General on Integrity and Efficiency (CIGIE) to develop and issue guidance, either jointly or independently, to specify what procedures should be conducted as part of the OIGs’ IPERA compliance determinations. OMB did not provide any comments on our recommendation, and as of August 2017, OMB had not yet issued such guidance. CIGIE stated that it would coordinate with OMB as needed and provide feedback on any draft OMB guidance. Subsequent to the issuance in August 2017 of a revised version of OMB Circular A-136 and after we notified OMB of our views on the importance of certain data, OMB staff stated that they plan to direct agencies to report additional risk assessment data. Specifically, in September 2017, OMB staff told us that they plan to direct agencies to provide a listing of all programs and activities assessed during their risk assessments on www.paymentaccuracy.gov for fiscal year 2017 reporting, and that they plan to continue to direct agencies to report this listing for subsequent fiscal years. In addition, although the basis for grouping programs and activities for improper payment risk assessments and the risk factors considered during the risk assessments will not be required to be reported in fiscal year 2017 AFRs and PARs, OMB staff stated that they plan to revise the guidance for fiscal year 2018 so that agencies report such information in their AFRs and PARs. We found that three of the nine selected CFO Act agencies that we reviewed, Energy, the Department of Justice, and USAID, had documented procedures for performing the required improper payment risk assessments and these procedures included the design of control activities necessary to help ensure that all programs and activities were assessed at least once every 3 years. However, the remaining six agencies did not properly design control activities for this purpose. Specifically, three of these six selected agencies did not have documented procedures for performing the required improper payment risk assessments. The remaining three agencies improperly excluded specific programs and activities from the improper payment risk assessment process. Appendix IV provides more detail on our analysis of these selected agencies’ procedures for performing improper payment risk assessments. We did not evaluate whether all control activities related to conducting improper payment risk assessments were properly designed or evaluate other internal control components, such as the control environment. If we had done so, additional deficiencies may or may not have been identified that could impair the overall effectiveness of the control activities evaluated as part of this audit. Three of the nine selected CFO Act agencies—Commerce, the National Science Foundation (NSF), and the Nuclear Regulatory Commission (NRC)—did not have documented procedures for conducting improper payment risk assessments for fiscal years 2014 through 2016. Although two of these three agencies (Commerce and NSF) had developed processes to help ensure that all programs and activities were assessed for susceptibility to significant improper payments at least once every 3 years, these processes were not documented in written procedures. By the end of our review, the three agencies subsequently established documented procedures during fiscal year 2017. We reviewed the procedures for Commerce, NRC, and NSF and found that they included control activities designed to help ensure that all programs and activities are included in the agencies’ improper payment risk assessments at least once every 3 years, as required by IPIA. Although the Departments of the Interior and State and the National Aeronautics and Space Administration (NASA) had documented procedures for conducting improper payment risk assessments, we found that these agencies did not have properly designed control activities to help ensure that all programs and activities were assessed for susceptibility to improper payments. These three agencies specifically excluded certain programs and activities from the improper payment risk assessment process, as follows. Department of the Interior (Interior). In our review of Interior’s design of control activities, we found that Interior did not include payments made by the department for certain programs. When asked why the programs associated with these payments were not assessed, Interior officials told us that the list that the department used to ensure that all programs and activities for which the department made payments were properly assessed excluded those payments from Interior’s program population. Subsequent to our inquiry, Interior officials told us that Interior will update its procedures to ensure that they capture all programs in Interior’s assessments. In addition, Interior officials provided us a draft of Interior’s updated procedures, and we found that these draft procedures included control activities designed to help ensure that all programs and activities are included in the department’s improper payment risk assessments at least once every 3 years, as required by IPIA. Department of State (State). In our review of State’s design of control activities, we found that State excluded certain programs and activities from the improper payment risk assessment based on threshold limitations on outlay data. Specifically, State only included programs and activities in the improper payment risk assessments if the outlays were greater than (1) $100 million or (2) $85 million and a 50 percent increase from the prior year. Programs and activities that fell below these thresholds were not assessed for susceptibility to significant improper payments. State officials told us that they believed the $100 million threshold limitation was reasonable because State predicted that it was improbable one of its programs would have an improper payment estimate of at least 10 percent in order to meet the IPIA threshold of $10 million. According to State officials, State’s justification for its assessment threshold was based on many factors, including sampling of expenditures, past external audits, and internal OMB Circular A-123 reviews. However, IPIA requires that improper payment risk assessments be performed for each program and activity that the agency head administers. In commenting on our draft report, State officials informed us that State had updated its documented procedures to lower the assessment threshold to the $10 million threshold identified in IPIA. State officials provided us a copy of the updated procedures, and we found that the procedures included control activities designed to help ensure that all programs and activities are included in the department’s improper payment risk assessments at least once every 3 years, as required by IPIA. NASA. In our review of NASA’s design of control activities, we found that NASA has documented procedures for conducting improper payment risk assessments; however, the procedures used for improper payment risk assessments conducted for fiscal years 2014 through 2016 were outdated. Specifically, the documented procedures, dated 2012, did not account for changes to IPIA in 2013 or updates to OMB’s guidance issued in fiscal year 2014. In June 2017, NASA subsequently updated its procedures for improper payment risk assessments to properly address OMB’s current improper payments guidance. The updated procedures also included a description of key control activities designed to help ensure that all NASA programs and activities, other than OIG activities, have undergone an improper payment risk assessment. According to NASA officials, NASA’s improper payment risk assessment process specifically excluded OIG activities because its OIG receives its own appropriation, and therefore, OIG activities are not considered part of NASA’s programs or activities for improper payment risk assessments. In addition, NASA officials stated that NASA OIG activities are excluded from the improper payment risk assessments because of concerns regarding NASA OIG’s independence as NASA OIG conducts the agency’s annual IPERA compliance audit. NASA could not provide us with any guidance or documentation that specifically addresses the exclusion of OIG activities. The NASA OIG is part of NASA, and IPIA requires that improper payment risk assessments be performed for each program and activity that the agency head administers. To the extent that the potential threat to OIG independence prevents NASA from conducting a risk assessment of payments made by the OIG’s programs and activities, the NASA Administrator may transfer this responsibility to the OIG. By not making an assessment, NASA has not determined whether OIG programs and activities are susceptible to significant improper payments. Standards for Internal Control in the Federal Government states that management should develop control activities to achieve objectives and respond to risks and implement control activities through policies. When an agency does not have properly designed policies and procedures to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years, there is an increased risk that the agency may not always identify all risk-susceptible programs and activities, resulting in incomplete improper payment estimates. Performing improper payment risk assessments and reporting on such assessments are key to identifying programs and activities that may be susceptible to significant improper payments. Agencies’ nonadherence to the OMB guidance to report on the results of their risk assessments may result in Congress not having the information necessary to monitor and take prompt action to address problematic programs. Most of the nine selected agencies did not properly design control activities to include all programs and activities in their improper payment risk assessments at least once every 3 years during fiscal year 2014 through fiscal year 2016, the time period of our review. Subsequent to fiscal year 2016, with the exception of NASA, which did not include its OIG’s activities, the federal agencies that were identified as lacking properly designed control activities drafted or updated their procedures to help ensure that all programs and activities were assessed for susceptibility to significant improper payments. Without proper control activities, NASA may not be identifying all programs and activities that should be included in its improper payment risk assessments. If a program or activity is not assessed for risk, then an agency could be at risk of noncompliance with IPIA or nonadherence to OMB guidance as the risk assessment process is a crucial step in determining programs and activities that are susceptible to significant improper payments and thus subject to additional reporting and monitoring requirements. We are making the following recommendation to NASA: The Administrator of NASA should take steps to revise the agency’s procedures for conducting improper payment risk assessments to include the activities of its OIG in its risk assessment process to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years as required by IPIA. (Recommendation 1) We provided a draft of this report to the 24 CFO Act agencies and OMB for comment. We received written comments from 4 agencies—NASA, State, SSA, and USAID, which are reproduced in appendixes V through VIII. We also received technical comments from Energy, OMB, State, and USAID, which we incorporated in the report as appropriate. All of the other agencies notified us that they had no comments. The following discusses the written comments we received from the four agencies noted above. In its comments, NASA concurred with our recommendation and stated that the agency will revise its procedures for conducting improper payment risk assessments to include OIG programs and activities by September 2018. In the draft report provided to State for comment, we had recommended that State reevaluate the agency’s use of dollar thresholds for excluding programs and activities from its risk assessment process and revise its procedures for conducting improper payment risk assessments to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years as required by IPIA. In its comments, State questioned the practicality of our proposed recommendation; however, State stated that it updated its procedures to lower the assessment threshold to the minimum dollar threshold of $10 million. We noted that this threshold aligns with the IPIA threshold of $10 million. We reviewed State’s updated procedures and confirmed that State had revised its dollar threshold for conducting risk assessments, which effectively addressed our preliminary findings. Therefore, we have removed the recommendation from our report. In its comments, SSA stated that it believed that its risk assessment reporting fully complied with OMB guidance. SSA stated that it considered the nine required risk factors but only reported on the risk factors that were applicable to the agency. However, given that SSA reported that it considered six risk factors and did not indicate in its AFRs that the other factors were not applicable to SSA, we continue to believe that SSA did not report, as directed by OMB guidance, on all the risk factors considered in its improper payment risk assessments for fiscal years 2015 and 2016. In its comments, USAID stated that our draft report was inaccurate in stating that USAID did not adhere to OMB reporting directives. USAID stated that an e-mail from OMB provided USAID relief from improper payment reporting. However, OMB’s e-mail did not explicitly provide USAID a waiver from the OMB risk assessment reporting directives. Moreover, USAID reported in its AFRs for fiscal years 2014 through 2016 that it conducted annual risk assessments for the time period covered in this audit. As stated in appendix III, USAID did properly report the basis for grouping programs and activities for fiscal years 2014 through 2016, and the agency also properly reported a listing of all programs and activities that were assessed for fiscal year 2016. Accordingly, we believe that USAID also should have followed all OMB risk assessment reporting directives for the time period covered for our audit, and we believe that our report accurately characterizes this issue. We are sending copies of this report to the appropriate congressional committees, the heads of the 24 CFO Act agencies, the Director of the Office of Management and Budget, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. This report examines the extent to which (1) the 24 agencies subject to the Chief Financial Officers Act of 1990 (CFO Act) followed Office of Management and Budget (OMB) guidance for reporting on improper payment risk assessments in their agency financial reports (AFR) or performance and accountability reports (PAR) for fiscal years 2014 through 2016 and (2) selected CFO Act agencies have designed control activities to include all of their programs and activities in an improper payment risk assessment at least once during a 3-year period, as required by the Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments Elimination and Recovery Improvement Act of 2012. At the time of our review, the latest 3-year period was fiscal years 2014 through 2016. To address our first objective, we reviewed improper payment risk assessment requirements in IPIA, as amended, and the related guidance in OMB Circular A-136, Financial Reporting Requirements, including the OMB directives for agencies’ risk assessment reporting, and OMB Circular A-123, Appendix C, Requirements for Effective Estimation and Remediation of Improper Payments (OMB M-15-02). We analyzed these statutes and guidance to identify key criteria that agencies must meet for reporting on improper payment risk assessments. IPIA, as amended, identifies seven risk factors and OMB guidance includes two additional risk factors that agencies are to consider in their improper payment risk assessment to determine susceptibility to significant improper payments. Additionally, for fiscal years 2014 through 2016, OMB M-15-02 directed agencies that conducted improper payment risk assessments to disclose in their AFRs or PARs the basis for grouping programs and activities for improper payment risk assessments. For fiscal years 2015 and 2016, OMB Circular A-136 directed agencies to report (1) a listing of programs and activities that were assessed for susceptibility to significant improper payments in a given year, regardless of whether a program or activity was deemed risk-susceptible, and (2) the risk factors considered during their improper payment risk assessments. We analyzed the AFRs or PARs of the 24 CFO Act agencies for fiscal years 2014 through 2016 to determine whether each agency met the key OMB reporting criteria described above. For our review, we focused on whether the agencies reported the risk assessment information in their AFRs or PARs and did not evaluate the quality of improper payment risk assessments completed. For any agencies that did not meet the reporting directives outlined in OMB guidance for their improper payment risk assessments, we interviewed appropriate agency officials to determine why those agencies did not meet these key criteria. For fiscal year 2017, a revised version of OMB Circular A-136 that was issued in August 2017 no longer directs agencies to report improper payment risk assessment information in the agencies’ fiscal year 2017 AFRs and PARs. Subsequent to the issuance in August 2017 of a revised version of OMB Circular A-136 and after we notified OMB of our views on the importance of certain data, OMB staff stated that they plan to direct agencies to report additional risk assessment data. Specifically, in September 2017, OMB staff told us that they plan to direct agencies to provide a listing of all programs and activities assessed during their risk assessments on www.paymentaccuracy.gov for fiscal year 2017 reporting, and that they plan to continue to direct agencies to report this listing for subsequent fiscal years. In addition, although the basis for grouping programs and activities for improper payment risk assessments and the risk factors considered during the risk assessments will not be required to be reported in fiscal year 2017 AFRs and PARs, OMB staff stated that they plan to revise the guidance for fiscal year 2018 so that agencies report such information in their AFRs and PARs. To address our second objective, we reviewed IPIA, as amended; the related OMB guidance; and relevant internal control standards to determine the relevant control activities needed to help ensure that agencies conduct improper payment risk assessments for all programs and activities at least once every 3 years. For this objective, we selected nine CFO Act agencies that did not report improper payment estimates for any programs or activities in fiscal year 2015 or 2016 except those estimates that were required to be reported pursuant to the Disaster Relief Appropriations Act, 2013. These nine agencies were the Departments of Commerce, Energy, the Interior, Justice, and State; the National Aeronautics and Space Administration; the National Science Foundation; the Nuclear Regulatory Commission; and the U.S. Agency for International Development. We reviewed these agencies’ procedures for conducting improper payment risk assessments and interviewed agency officials to determine whether the agencies designed and documented control activities to include all programs and activities in an improper payment risk assessment at least once every 3 years. To verify each agency’s assertions that all programs and activities are reviewed at least once every 3 years, we compared the line item for gross outlays contained in each agency’s Statement of Budgetary Resources for the relevant period to outlay data provided by each agency for each program and activity covered by improper payment risk assessments for fiscal years 2014 through 2016. When we identified differences between the two data sources, we interviewed agency officials to understand the cause for the differences and obtained any supporting documentation to ensure that all significant programs and activities were properly assessed. While our second objective focused on certain significant control activities related to the selected agencies’ inclusion of programs and activities in their improper payment risk assessments at least once during fiscal years 2014 through 2016, we did not evaluate all control activities and other components of internal control. If we had done so, additional deficiencies may or may not have been identified that could impair the effectiveness of the control activities evaluated as part of this audit. We conducted this performance audit from June 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Standards for Internal Control in the Federal Government provides the overall framework for establishing and maintaining internal control. Internal control should be designed, implemented, and operating effectively to provide reasonable assurance that the operations, reporting, and compliance objectives of an entity will be achieved. The five components of internal control are as follows: Control environment - The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives. Risk assessment - Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses. Control activities - The actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system, which includes the entity’s information system. Information and communication - The quality information management and personnel communicate and use to support the internal control system. Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews. An effective internal control system has each of the five components of internal control effectively designed, implemented, and operating and the five components operating together in an integrated manner. In this audit, we focused on certain significant control activities related to the selected agencies’ inclusion of programs and activities in their improper payment risk assessments at least once during fiscal years 2014 through 2016. As noted in our report, the Improper Payments Information Act of 2002, as amended by the Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments Elimination and Recovery Improvement Act of 2012, requires agencies to conduct improper payment risk assessments for all federal programs and activities in fiscal year 2011 and at least once every 3 years thereafter. During fiscal years 2014 through 2016, the 24 agencies subject to the Chief Financial Officers Act of 1990 (CFO Act), excluding the Department of Defense, reported in their agency financial reports (AFR) or performance and accountability reports (PAR) that they completed at least one risk assessment on at least one program or activity in one or more of those years. For each agency that reported completing an improper payment risk assessment in a given year, we evaluated whether the agency adhered to certain Office of Management and Budget (OMB) reporting directives. It is important to note that our audit scope did not include evaluating whether the agencies completed the required risk assessment for all programs and activities. We evaluated the 24 CFO Act agencies’ fiscal years 2014 through 2016 AFRs and PARs to determine if agencies adhered to OMB guidance for reporting on improper payment risk assessments. Table 2 summarizes agencies’ adherence to the OMB guidance to report a basis for grouping programs and activities in the AFRs or PARs for fiscal years 2014 through 2016. Table 3 summarizes agencies’ adherence to the OMB directive to list all of the programs and activities that were assessed for susceptibility to significant improper payments and describe the risk factors considered during their assessments for fiscal years 2015 and 2016. There was no directive to report this information for fiscal year 2014. Table 4 summarizes our analysis of the selected agencies’ procedures for performing improper payment risk assessments to help ensure that all programs and activities were properly reviewed once every 3 years. In addition to the contact named above, Matt Valenta (Assistant Director), Michelle Philpott (Assistant Director), Laura Bednar (Auditor-in-Charge), Stephanie Adams, Youssef Amrani, Francine DelVecchio, and Kailey Schoenholtz made key contributions to this report.", "summary": "Reported improper payment estimates totaled over $1.2 trillion government-wide from fiscal years 2003 through 2016. Agencies are statutorily required to perform improper payment risk assessments to identify programs and activities that may be susceptible to significant improper payments and are required to report an improper payment estimate for ones that are susceptible to significant improper payments. GAO was asked to review federal agencies' improper payment risk assessments. This report examines the extent to which (1) the 24 CFO Act agencies followed OMB guidance for reporting on improper payment risk assessments and (2) selected CFO Act agencies properly designed control activities to include all of their programs and activities in an improper payment risk assessment at least once every 3 years, as statutorily required. GAO analyzed the 24 CFO Act agencies' AFRs and PARs and reviewed the procedures at 9 selected agencies. GAO selected 9 agencies that did not report improper payment estimates in fiscal year 2015, except for those estimates that were mandated to be reported pursuant to the Disaster Relief Appropriations Act, 2013. For this review, GAO did not evaluate the quality of improper payment risk assessments completed. GAO's review of the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies' fiscal years 2014 through 2016 agency financial reports (AFR) and performance and accountability reports (PAR) found that these agencies generally adhered to the Office of Management and Budget's (OMB) improper payment risk assessment reporting directives. However, GAO found instances of nonadherence, including the following: There were two instances of nonadherence to OMB's directive for agencies to report the basis for how they grouped programs and activities, both of which occurred in fiscal year 2014. All agencies that completed risk assessments adhered to this directive for fiscal years 2015 and 2016. The Improper Payments Information Act of 2002, as amended, identifies seven risk factors and OMB guidance includes two additional risk factors that agencies are to consider when conducting risk assessments. For fiscal years 2015 and 2016 reporting, OMB directed agencies to report the risk factors considered in their risk assessments. However, GAO found six agencies that did not report one or more of the nine risk factors in their AFRs or PARs. OMB's revised guidance for fiscal year 2017 no longer directs agencies to report on their risk assessments. OMB staff stated that their primary motivation for removing such reporting was to reduce the administrative burden. After GAO notified OMB of the importance of certain data, OMB staff plan to direct agencies to provide additional data, including a listing of risk assessed programs and activities, on www.paymentaccuracy.gov for reporting beginning in fiscal year 2017. OMB staff also plan to revise the guidance for fiscal year 2018 for agencies to report the other risk assessment information in their AFRs or PARs. GAO also found that three of the nine selected agencies (the Departments of Energy and Justice and the U.S. Agency for International Development) that it reviewed had designed and documented control activities to help ensure that all programs and activities were assessed every 3 years. For the remaining six agencies, GAO found that the agencies did not properly design control activities for this purpose. Specifically, GAO found the following: Three agencies—the Department of Commerce, the National Science Foundation, and the Nuclear Regulatory Commission—did not have documented procedures for conducting risk assessments during fiscal years 2014 through 2016 but subsequently documented them. Three agencies—the Departments of the Interior (Interior) and State (State) and the National Aeronautics and Space Administration (NASA)—documented procedures for conducting risk assessments but did not include all programs and activities in their risk assessments. Interior later drafted revisions to its procedures and State updated its procedures to include them. Without properly designed and documented control activities, there is a risk that an agency may not identify all programs and activities that require a risk assessment, which could result in the agency failing to develop and report improper payment estimates for programs and activities that should have been identified as susceptible to significant improper payments. GAO recommends that NASA revise its procedures to help ensure that all programs and activities are assessed for susceptibility to significant improper payments at least once every 3 years. NASA concurred with the recommendation.", "document_type": "gao"}
{"report": "GSA spends hundreds of millions of dollars each year on needed repairs to the more than 1,600 federally owned buildings under its custody and control, which are occupied by a wide variety of federal tenant agencies. The agency’s R&A program provides repairs and alterations for buildings to ensure that they will protect both the government’s investment and the health and safety of buildings’ occupants, support the transfer of federal agencies from leased space, and be cost-effective. GSA prioritizes capital and small R&A projects for selection differently. GSA gives priority to repairs to prevent deterioration and damage to buildings, their support systems, and operating equipment. GSA’s central office uses criteria based on agency-wide strategic goals to rank and prioritize projects for funding. According to GSA’s Fiscal Year 2019 Congressional Justification, the agency prioritizes R&A capital projects relative to a set of six criteria, each of which consider factors such as space consolidation, customer priorities, project urgency, facility conditions, historic status, and code compliance. For small R&A projects, GSA’s central office reviews those with estimated costs exceeding $250,000 and develops an “approved” list of projects for its regions using criteria similar to those used to prioritize capital projects. GSA’s small R&A projects primarily focus on building repairs and equipment and other replacement issues. The Federal Buildings Fund (FBF), established by the Public Buildings Act Amendments of 1972 and administered by GSA, is the primary source of funds for all operating and capital costs associated with federal space—including repairs and alterations. GSA collects rent from tenant agencies, deposits it into FBF, and is appropriated obligational authority by Congress to fund real property acquisition, repairs and alterations, operation, maintenance, and disposal. As shown in figure 1, the amount of funding appropriated in obligational authority for R&A projects has steadily decreased since fiscal year 2014—and has been below the amount GSA requested each fiscal year. According to GSA officials, this decline in funding has contributed to the agency’s backlog of deferred maintenance. In fiscal year 2018, GSA requested more than $1.4 billion for R&A activities; $666 million in obligational authority was appropriated from the FBF to perform major and minor repairs and alterations. GSA has requested $909.7 million for R&A activities for fiscal year 2019. GSA’s Public Buildings Service manages R&A projects through its central office in Washington, D.C., and 11 regional offices. GSA’s central office establishes programming, design, and construction standards and guidance, and provides technical backup, as needed. GSA officials in both the central and regional offices are involved in assessing the needs of federal facilities and guiding R&A project development and execution. Once a project is authorized and funded, GSA’s regional offices oversee the design and construction phases of the project, from the procurement of design through the management of construction until project closeout. Further details of GSA’s R&A project design and construction delivery process are shown in figure 2. In order to track projects, GSA has developed numerous systems that regional officials are required to use to collect information electronically on R&A projects. Each of these systems is used to collect different types of information, such as information on potential projects or funding details. These systems are used throughout the phases of GSA’s project design and construction delivery process, starting at the point that a potential project is first identified, and each system serves various management purposes, as noted in table 1. While GSA uses all of these systems to collect information on R&A projects, ePM/ePMXpress is the system used to track a project’s progress because it supports and facilitates the tracking of project status and related performance reporting. GSA regional officials initially create records of capital projects in ePM early in the planning process—about 2 years before funding is requested from Congress—and for small projects in ePMXpress soon after they are authorized for initial funding. Once a project is entered into ePM/ePMXpress, GSA project team members (which include the project manager, other regional GSA staff, and may include external contractors) populate and update key types of project information at specific points in the project’s design and construction delivery process. GSA’s central office first introduced ePM as a pilot project in 2009 and, to establish consistency in the information collected, issued minimum requirement guidelines for the project information to be input in the system in 2011. These guidelines require project team members to enter specific information on both capital and small projects into ePM. GSA introduced ePMXpress in late 2012, and it provides regional officials with a simplified interface to input and track small project information. This simplification is reflected in the types and amounts of information GSA requires project teams to collect in ePM compared to ePMXpress: For capital projects in ePM, there are 42 modules such as project details, funding, contracts, and schedule data. For small projects in ePMXpress, there are 7 modules—program information, project details, project team details, schedule, funding, project manager financials, and file manager information. Within these modules, project team members are required to input specific baseline and actual milestone dates in ePM/ePMXpress for both small and capital projects, including when a project’s design is complete, when construction is authorized to begin, and when construction is substantially complete. Capital projects require 57 milestones, compared with up to 16 milestones for small projects. See appendix II for additional information on the specific types of information that regional GSA officials are required to collect on their capital and small R&A projects. GSA guidelines also encourage project team members to collect and record additional R&A project information in ePM/ePMXpress—beyond what is required for capital and small projects—as a best practice. Officials from GSA’s central office said storing additional information in this system encourages collaboration across both project teams and regions, promotes a project management culture that results in more efficiency, and allows GSA to more efficiently prepare reports for its customers. Officials from three of the four regional offices we contacted provided examples of project team members in their region inputting more information on their R&A projects than required by GSA’s central office. For example, officials in one region said they have required their project team members to collect additional information on their projects that allow the region to monitor staff workload, forecast the number of future small projects that may be needed, and ensure that officials have sufficient resources available to oversee their region’s projects. According to GSA officials, they have seen improvements in the collection of capital R&A project information since first requiring regional offices to use ePM. Officials from GSA’s central office said that since ePM was first introduced in 2009, they have worked with regional officials to adjust the types of information that project team members must input to improve the completeness, timeliness, and usefulness of project information collected. As a result, GSA officials reported that project team members are now (1) consistently creating capital R&A projects in ePM and (2) regularly updating information on these projects in a complete and timely manner, throughout the agency’s project design and construction delivery process. Officials from GSA’s central office said they verify that the projects have been entered into ePM when regional officials request them for inclusion in GSA’s budget, a process that occurs during a project’s early planning stages. These officials added that once a capital project is funded, project team members are required to actively manage its details in ePM, providing regular updates through various reporting tools. Furthermore, they stated that, as few new capital projects are funded each year, each capital project is highly visible and subject to a degree of scrutiny that leads to the identification and correction of any errors in ePM. In addition, according to GSA officials, missing project information would be captured in regional performance reports. For these reasons, GSA officials said they do not develop reports on the creation of capital projects in ePM or the timeliness of updates made to these projects. Project team members we interviewed said that having information on capital R&A projects in ePM is useful in a number of ways. For example, project team members from all four regions we interviewed said they find the “earned value” tool in ePM to be useful for project management. This tool uses schedule and budget information to forecast how a capital project is expected to progress and analyzes progress as new information is added. In addition, officials from two regions stated that ePM is a good tool for storing project documents for internal agency use, and officials from one of the regions said ePM offers a useful means to securely transmit capital project documents to both internal and external stakeholders. GSA also reported improvements in the completeness and timeliness of updates to small projects’ information in ePMXpress in recent years. GSA conducts monthly checks to assess the number of small projects in ePMXpress with information that is either missing or out of date and issues reports to its regions summarizing the results of these checks. In May 2015, GSA issued an internal memorandum that reiterated its existing requirement that all small R&A projects be created in ePMXpress and updated in a complete and timely manner. In October 2016, GSA’s reports showed that, of all small R&A projects in ePMXpress, on average, 5 percent had schedule data errors and 7 percent had budget data errors. These rates varied across GSA’s regional offices, from 0 to 11 percent for schedule errors and 1 to 16 percent for budget errors. To reduce the rate of budget data errors, in 2017 GSA began using some contract award information available in EASi or FMIS to assess small projects’ performance, instead of relying on information input in ePMXpress. GSA’s central office officials said that they found the information in these systems to be more up to date. After GSA implemented this action, its September 2017 report showed that less than one percent of small R&A projects had errors in their schedule or budget data. Specifically, nine of GSA’s 11 regions had no small R&A projects with schedule errors, and 10 regions had no budget errors. GSA has reported that the rate at which project team members initially create all of their small R&A projects in ePMXpress has also improved in recent years. Each month, officials from GSA’s central office take steps to verify that funded projects have been created in ePMXpress by manually reconciling information between ePMXpress and IRIS. GSA’s stated goal is to have 100 percent of small projects created in ePMXpress, and its guidelines require project team members to create all small projects in ePMXpress within 30 days of being approved for funding. We found that recent GSA reports on this reconciliation showed that the overall percentage of small projects having been created in the system has improved. At the beginning of fiscal years 2016, 2017, and 2018, nationwide compliance trended from 81 percent to 95 percent to 92 percent, respectively. In addition, the lowest percentage of small projects created in ePMXpress in any one individual region at the start of fiscal year 2016—61 percent—had improved to 88 percent by the outset of fiscal year 2017 and was 85 percent at the beginning of fiscal year 2018. At that time, the percentage of small projects created in ePMXpress ranged, by region, between 85 and 100 percent. GSA officials said they expect to find some small projects to be missing in ePMXpress because, in some cases, not enough time will have elapsed between the date of funding and the date of the reconciliation. GSA officials explained that they are continuing to take steps to emphasize the importance of having complete and timely information on all small R&A projects in ePMXpress to its regional offices. For example, to support the expectation that all small projects are created in ePMXpress, one official from GSA’s central office said monthly meetings are held with regional officials to discuss expectations for the completeness and quality of the project information. Regional officials, including project team members, told us that ePMXpress is not useful to their work on small R&A projects, a situation that has limited the extent to which the officials use this tool, an outcome that can affect the completeness and timeliness of small project information. Specifically, officials from one region said that they view ePMXpress solely as a tracking tool for GSA’s central office, not as a project management tool. In addition, some regional officials said they do not find ePMXpress to be effective as a project management tool because ePMXpress does not allow them to collect information on useful project details, such as why schedules or cost estimates change during a project or why certain events happened. Project team members from three regions said that they continue to maintain offline “cuff records”— which allow them to customize their notes on why things happened during a project—because they are easier to access and update. Similarly, officials from all four regions we interviewed noted that the process of manually creating and updating all of their small projects in ePMXpress— of which there are hundreds each year—is time consuming. Furthermore, small R&A projects can often be started and completed in a short period of time, and can be completed before a project team is required to create a record in ePMXpress (within 30 days of a project’s approval). For this reason, officials from one region said that it is not useful to use ePMXpress for these projects. Officials in another region also reported that one of the functions that makes ePM useful for managing capital projects—that it can securely transmit documents outside of GSA—is not useful for small projects because they do not require as much interaction with external parties. GSA has begun considering replacement systems for ePM/ePMXpress that GSA officials suggested could include the automated creation of projects upon project approval. As of March 2018, GSA had developed a statement of work to begin pursuing a replacement for ePM/ePMXpress. According to officials from the Office of GSA’s Chief Information Officer, the overall goals of a replacement include ensuring that it is easier for project team members to use than the current system. However, the capabilities of any such system are not currently known, nor are the ways in which a different system would affect the challenges reported by regional officials. In the meantime, GSA is continuing to emphasize the importance of using ePMXpress to create and capture information for all small R&A projects to its regional offices, as the agency is using the information to support both ongoing and new efforts. For example, creating and updating project information in a timely manner improves GSA’s ability to assess R&A projects’ performance at the individual, regional, and national levels, as discussed later in this report. In fiscal year 2018, GSA plans to use project information input in ePM/ePMXpress to support its efforts to improve communication with tenant agencies, and GSA guidelines state it will be important that project team members use ePMXpress throughout all project phases for their small projects and ensure that the required information is up to date. In addition, the overall amount of information that project team members are required to input will increase moving forward because GSA is now requiring staff to create additional small projects in ePMXpress in a shorter period of time. In March 2018, GSA both reduced the time that project teams have to create small projects in ePM/ePMXpress from 30 to 15 days and also began requiring that additional, non-R&A small projects be created in the system. GSA has estimated this will result in approximately 1,100 additional projects being created in ePMXpress each year. GSA’s central office assesses the performance of capital and small R&A projects across its regional offices by focusing primarily on schedule and budget-related measures. According to internal GSA guidelines on performance measures, measuring projects’ schedule and budget performance allows GSA to continuously improve the project delivery and accountability of its work in order to demonstrate good stewardship of its stakeholders’ limited funding. GSA assesses the performance of R&A projects using a few key measures. First, GSA uses a “timely award” measure. According to internal GSA guidelines on performance measures, the “timely award” measure reflects the effectiveness of early planning by assessing the timeliness of the obligation of funds for construction contracts following a project’s initial authorization. This measure is based on schedule information that project team members input in ePM/ePMXpress and, as mentioned earlier, budget information from the FMIS and EASi systems to compare planned obligations, projected contract award amounts, and planned contract award dates to actual results. Specifically, GSA officials stated that a project’s performance relative to the timely award measure is determined based on the percentage of awards that are made within set timeframes. This measure varies slightly between capital and small projects; for example, a capital project is viewed as successful if 90 percent of its planned obligation dollars are awarded within 30 days of its planned “baseline” award dates set at a project’s outset, and partially successful if this awarding occurs within 45 days. Conversely, a small project is deemed successful if 85 percent of its planned obligation dollars are awarded within 30 days of its baseline award dates or within 10 percent of its estimated construction costs. If 80 percent of these funds are awarded within 45 days or 20 percent of estimated construction costs, a small project is considered partially successful with respect to this measure. GSA also has two “project delivery” measures. Once construction begins, GSA uses information from ePM/ePMXpress, EASi, and FMIS to assess whether projects are delivered “on-schedule” and “on-budget” by comparing the alignment of a project’s (1) estimated baseline schedule and budget to its (2) actual schedule and budget. As shown in figure 3, GSA’s project-delivery measures focus on the time between the start of construction and substantial completion, which is the date on which a project is suitable for occupancy. GSA’s project delivery targets are to have 85 percent of R&A projects be completed within 10 percent of their baseline schedules, and 85 percent of them to have total costs within 10 percent of their baseline budgets. GSA reported that it uses these measures to understand how capital R&A projects contribute to its agency-wide strategic objective to establish GSA as a more effective provider of real estate services for all agencies. According to GSA officials, tracking the rate at which capital projects—including capital R&A projects—are completed on time and within budget helps regional officials manage project expectations with their customers. GSA reported that most of its R&A projects met the agency’s overall timely-award and project-delivery performance targets in fiscal year 2017. For the timely award measure, GSA reported that in fiscal year 2017, 93 percent of capital projects had their planned obligation dollars awarded within 30 days of their baseline award dates and that 87 percent of small projects had awards made within 45 days of their baseline dates. For the project delivery measure, GSA reported that 99 percent of all capital projects completed on-schedule and 99 percent were on-budget in fiscal year 2017. In that same year, GSA reported that 88 percent of small R&A projects were on-schedule and 86 percent were on-budget. GSA arrived at these results by rolling up information on individual projects’ performance. Officials from GSA’s central office said that capital projects are typically completed on-schedule and on-budget at a higher rate than small projects because capital projects have a more comprehensive planning process and are often reviewed by third parties, and they said that this process tends to result in more accurate baseline estimates. These officials also said that, while GSA has assessed the performance of its capital projects for 14 years and its regional officials have grown familiar with measurement of these projects, the agency only began assessing small projects’ performance in the past 3 years and regional officials are still growing accustomed to the idea of measurement on projects with lesser costs. GSA officials are able to adjust the baseline schedule milestones and cost estimates against which the agency assesses performance when circumstances requiring additional time or funding arise during a project’s construction phase. According to an internal GSA document detailing requirements related to performance measures and reporting for capital projects, it is more difficult to change baseline milestones for a capital project than to adjust the dates for a small project because once a capital project’s baselines are input in ePM, they can only be altered through an adjudication process involving GSA’s central office. As described by officials in one GSA region, this process focuses on determining whether the reasons provided to support a request are strong enough to justify a baseline change. If such a change is approved by the central office, actual performance will then be compared against adjusted baseline milestone dates or cost estimates. GSA officials stated that, although there is no such adjudication process for small projects, any changes to schedule or budget baselines must be approved by regional management or, in some cases, officials from the central office depending on the context of the change. The brief nature of some small R&A projects may affect the entry of their information and the interpretation of the reported performance. For example, we found that all eight of the small projects we reviewed had either missing baseline dates or baseline and actual milestone dates that matched exactly in the system. When asked why this may occur, officials from one region explained that small R&A projects with short durations can sometimes be completed before a project team is required to create the project’s record in ePMXpress. This can result in either missing data or baseline and completion dates simply being entered in a single session. Officials from GSA’s central office said that they rely on regional officials to input accurate information throughout the course of a project, as baselines are set and actual milestones are either met or exceeded. GSA’s central office produces regional and national reports and provides them to their regional offices to facilitate internal discussion on R&A projects’ performance. Specifically, GSA shares the reports containing regional and overall results of its timely award measure, project delivery measures, and the previously discussed reconciliation measure to encourage conversations among senior GSA leadership and regional management. For example, one report compares projects’ actual progress with baseline milestones using the project delivery measures to assess the accuracy of teams’ planning. GSA also shares R&A project delivery measure results with the Office of Management and Budget when compiling its annual performance reports. Regional officials varied in the extent to which they viewed R&A performance reports as useful, and some regions have developed their own approaches to understanding projects’ performance. For example, officials in all four GSA regions we interviewed said that some reports distributed by the central office are not specific to their information needs. Officials from one of these regions described one report as having little value because it is difficult to understand what message the report is intended to convey. Officials from another region said they do not find a particular report to be useful because—in addition to the timely award measure that GSA emphasizes in working to understand R&A project performance—it also includes less prominent milestones in identifying whether a project is on schedule. These officials said that while their region focuses on significant milestones like a project’s contract award date (“timely award” measure) to assess progress, the report often flags projects as being behind schedule based on less critical interim milestones that can be done concurrently with other tasks, such as submitting a document for legal review. When regional officials have not found the reports shared by GSA’s central office to be useful, some said they rely on varying sources of information to understand performance. For example, officials from one region we interviewed said they use raw data, made available by the central office, to create reports that they feel offer a more complete picture of performance in their region and highlight projects that may be at risk. Similarly, officials from another region said they create custom consolidated reports to discuss projects and obtain an overall impression of the information available, track and assign workloads, and assess any relevant trends emerging across projects. Officials from GSA’s central office said they are aware that some regions have not found R&A performance reports to be useful. These officials 1) acknowledged that the extent of information and features that ePM/ePMXpress offers is less than some regions have told them they need to manage their projects and 2) said updating these reports only once or twice per month is not often enough for some regions. The officials added that some regions’ opting to rely on other sources of information has contributed to an inconsistent understanding of R&A projects’ performance across the agency. GSA has been conducting outreach to its regional offices to better understand what information regions find useful to understanding their projects’ performance. GSA’s plan for this outreach states that one of its aims is to ensure that regions clearly understand the purpose, outcome, and value of new reports being developed. According to this plan, GSA intends to assess the effectiveness of its outreach by gathering feedback from regional officials and reviewing analytics on usage of the reports developed. As outreach to regions continues, GSA has begun to introduce what officials describe as “self-service dashboard” reports to present a consolidated view of R&A project information, with the intent of promoting a consistent understanding of performance across the agency. According to GSA’s outreach plan for one of the forthcoming dashboards, GSA intends for these new reports to improve the transparency and timeliness of information on R&A projects, increase accountability, help identify information gaps and redundancies, and expand knowledge sharing across the agency. Even with these dashboards, GSA officials acknowledge that some regional offices may also continue to rely on other sources of information but added that the near real-time nature and ability to filter information offered by the dashboards will allow regional officials to do more with the information that their project teams input on their projects than in the past. Specifically, GSA recently introduced a Capital Program Information Dashboard, which is an interactive, online presentation of information on all capital projects—including R&A projects—that is updated as often as daily, in some cases, using information from ePM, IRIS, FMIS, and other sources. The overall Capital Program Information Dashboard consists of a series of dashboards that present project information in a number of ways. For example, the National Summary Dashboard is comprised of three sections: Program Measures Performance: This section provides a national and regional view of schedule and budget performance for capital projects, using the 85 percent fiscal year 2018 target as a reference line to show how each region is performing. Program Award Performance: This section provides a national and regional view of capital projects’ performance with regard to GSA’s timely award measure, displaying comparisons of actual contract award dates and original baseline dates. Program Summary: This section provides a national and regional view of capital projects, both by dollars appropriated and by the number of projects, for categories including: active projects, projects declared substantially complete within the current fiscal year, and overall combined totals. This section displays these values at a regional level in chart form and by state in an interactive map. At the same time that GSA introduced regional and national-focused dashboard reports on capital projects, it also introduced (1) a Project Details Dashboard for capital projects that provides project-level information by region and state and (2) a Project Award Performance Dashboard that provides capital project-level information for planned awards; this dashboard can be filtered by fiscal year, program, vendor, project name, and contract type or number. Both of these dashboards have multiple sections; for example, the Project Award Performance Dashboard includes sections that focus on performance relative to the project delivery and timely award measures, highlight capital projects that may require adjustments to their schedule or budget baselines, and detail reasons for requested changes to baselines. In April 2018, GSA also launched a draft version of a dashboard for small projects that it expects to give regional officials direct access to up-to-date information on their small R&A projects. Similar to the Capital Project Information Dashboard, the Small Project Dashboard will integrate information from systems including ePMXpress, IRIS, EASi, and FMIS. GSA’s plan for implementation states that this dashboard will present regional officials with a consolidated view of program and project information that includes status updates on timely-award and project- delivery measures. GSA expects that this dashboard, which is to be finalized before the end of fiscal year 2018, will offer “near real-time access” to small project information and reports to facilitate program management and data-driven decision-making. Finally, GSA officials said the agency is also planning to introduce a dashboard that will provide its customer agencies with up-to-date information in 2018. GSA expects this report to remove the delay between the inputting of project information and its accessibility to all parties involved, making the information more transparent both internally and externally. GSA’s ability to assess and understand the performance of R&A projects will continue to rely on project team members’ entry of information as it finalizes its set of dashboard reports. GSA documentation on the introduction of the Small Projects Dashboard states that because ePM/ePMXpress will continue to serve as a key source of schedule information, regional officials’ regular input of R&A project information will be needed to make the dashboards meaningful. This documentation also suggests that regional officials consider entering additional project information, beyond what is required, so it will be available to them in the dashboards. Officials from GSA’s central office acknowledge that their ongoing outreach to the regional offices emphasizes the importance of complete and timely information—as discussed earlier—to the agency’s ability to comprehensively understand R&A projects’ performance. We provided a draft of this report to GSA for comment. An official in GSA’s Audit Management Division told us in an email that the agency had no comments on the draft report. We will send copies of this report to appropriate congressional committees and the Administrator of the General Services Administration. In addition, we will make copies available to others upon request, and the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at 202-512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to discuss how GSA (1) collects information on repair and alteration (R&A) projects and (2) assesses the performance of R&A projects. The scope of the work focused on R&A projects from two R&A program funding streams: “capital” R&A projects (those with costs greater than $3.095 million) and “small” R&A projects (those with costs less than or equal to $3.095 million and greater than $25,000); we did not include projects related to new building construction projects or reimbursable work authorization projects, which are those performed by GSA but funded by other federal agencies to improve or renovate federal facilities. We collected information on systems supporting GSA’s management of its R&A projects, including its Electronic Project Management (ePM/ePMXpress) system, Pegasys, Financial Management Information System (FMIS), Inventory Reporting Information System (IRIS), and Enterprise Acquisition Solution integrated (EASi) system. Despite some discussions of the accounting systems involved with R&A projects, this review did not involve a financial audit of the R&A program. We also reviewed our prior work and reports from the GSA’s Office of Inspector General to obtain background information and identify any existing audit findings on the R&A program that might be relevant for our objectives. To determine how GSA collects information on individual R&A projects, we reviewed documentation related to the R&A program, both provided to us by GSA and found on the agency’s web site. In addition, we reviewed GSA reports of the rates at which regional officials have created and updated information on their small projects in a timely and complete manner in ePMXpress. By reviewing reports generated by GSA’s central office—which are (1) based on their manual reconciliation of information between ePMXpress and IRIS and (2) based on the GSA identified errors in on-budget and on-schedule data in ePMXpress, EASi, and FMIS—we were able to assess the variance between regions in the extent to which project team members created their small R&A projects in ePMXpress— and subsequently updated this information as projects move forward— between 2015 and 2017. We reviewed the information in these reports to identify potential trends in regions’ complete and timely entry of R&A project information and interviewed GSA officials about the sources of information used to generate the reports and steps officials take to ensure its accuracy. However, we did not independently verify the accuracy of the data contained in these reports. We also selected 12 R&A projects using GSA’s central office data from October 2013 through August 2017 to understand how information is input into the systems by regional officials, how it is used by officials from GSA’s central office and selected regional offices, and whether there are any issues affecting the information’s completeness or timeliness. We selected the 2013 to 2017 time frame because this time period represents the period after GSA officials said that they began tracking small projects in the system used to collect information on project status, and the period represents the most recent data available at the time of our selection. For our project selection, we obtained data from GSA central office for all R&A projects that existed but not were closed out as of the beginning of fiscal year 2014 or had been added since the beginning of fiscal year 2014. We reviewed documentation on the collection of the data and analyzed the data for missing information and found the data to be sufficiently reliable for the purpose of selecting projects to understand how R&A project information is input by regional officials and how it is used across GSA. To arrive at these 12 projects, we selected projects from regions that had one or more capital R&A projects categorized as having been substantially completed between October 2013 and August 2017, as most regions undertake few capital projects in a given year. We initially identified seven GSA regions that had substantially completed at least one capital project during this timeframe and narrowed this number to four regions—GSA regions 5, 6, 7 and 9—which had varying degrees of performance based on our initial review of GSA reports containing schedule and budget metrics. Specifically, to ensure that we were not selecting four comparable regions, we selected two regions that surpassed GSA performance targets and two regions that did not surpass their performance targets. In addition, we gave preference to regions in proximity to our field offices’ locations to minimize costs associated with site visits. Within each of the four selected regions, we identified the sole capital R&A project that was substantially completed between October 2013 and August 2017, for a total of four capital projects. We then selected two small projects—those with the highest and lowest “Estimated Cost of Construction at Award” and had been active between October 2013 and August 2017—for a total of eight small projects (see table 2 for list of selected projects). We conducted interviews with regional officials from these four regions— visiting two of the four regions that were located near our field offices. During those interviews, we discussed data entry processes and posed questions both specific to the region’s selected projects and the R&A program more broadly. During interviews with both GSA’s central and regional offices, we asked officials to explain how the IRIS, ePM/ePMXpress, EASi, and any other systems are used throughout the planning and execution of R&A projects. Specifically, we reviewed and discussed processes related to project information collection in general with regional officials and specific project detail, budget, and schedule information with the project team members who input information on the selected capital and small projects into these systems; for example, we raised questions about instances in which baseline and actual dates matched for some projects. Information on the projects we selected is not generalizable to all R&A projects, and the views of the regional officials interviewed are not generalizable to all of GSA’s regional offices. To determine how GSA assesses the performance of its R&A projects, we requested and reviewed documentation from GSA on the extent to which the agency evaluates the performance of its R&A projects and inquired about the project information systems used to produce related performance reports. In addition to the documents provided by GSA, we used publicly available annual reports and budget justifications detailing GSA’s overall goals and mission and the ways in which GSA has stated that the R&A program supports these aims. After an initial review of documents provided by GSA, we identified and requested specific internal guidance and guidelines, information on the criteria used to select individual R&A projects for funding, and reports related to both capital and small projects’ performance. We used information contained in some of these reports to identify the performance metrics GSA has established for assessing R&A projects’ performance and to assess overall regional performance relative to these metrics, as reported by GSA. We did not independently verify the accuracy of the on-schedule and on-budget figures reported by GSA, a methodological consideration that was beyond the scope of this review; our focus was on how GSA assesses the performance of R&A projects—not on the results of their assessments. We also interviewed officials from GSA’s central office and the four regional offices to discuss the agency’s assessment of R&A projects’ performance and the performance reports provided to regional officials. Furthermore, we reviewed information about GSA’s plans to introduce new “dashboard” reports and outreach that officials from GSA’s central office had conducted to understand regional officials’ reporting needs. Finally, we interviewed these central-office officials and officials from the selected regional offices described above to discuss the use and usefulness of the performance reports. We conducted this performance audit from May 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The tables below show the details and differences in the General Services Administration’s (GSA) data entry requirements for capital projects in ePM and small projects in ePMXpress. Although some of the ePM modules may not be applicable for every project, there are mandatory fields and functions in each that drive GSA’s metrics, measures, and standardized reports. Table 3 identifies the elements required, by GSA’s fiscal year 2018 measures, for capital projects and indicates whether each is used in a key performance indicator. Table 4 identifies the small-project data entry requirements for ePMXpress, as required for fiscal year 2018 measures, and whether they are used in a key performance indicator. Table 5 contains a list of standard project milestones that must be maintained by GSA project managers in the ePM and ePMXpress schedule modules, as identified in table 3 for capital projects and table 4 for small projects. In addition to the contact named above, Nancy Lueke, Assistant Director; Chad Williams, Analyst-in-Charge; Terence Lam; Les Locke; Cynthia Nelson; Josh Ormond; Amy Rosewarne; Kelly Rubin; James Sweetman, Jr.; and Crystal Wesco made key contributions to this report.", "summary": "Each year, GSA spends hundreds of millions of dollars on R&A projects to address the repair, renovation, or modernization needs of the more than 1,600 federally owned buildings under the agency's custody and control—the average building's age is 47 years old. In fiscal year 2018, Congress appropriated $666 million in obligational authority from the Federal Buildings Fund for GSA's R&A program. Collecting information is fundamental to monitoring progress and assessing projects' performance. GAO was asked to review issues about GSA's collection of information needed to manage its R&A projects. This report examines how GSA (1) collects information on individual R&A projects and (2) assesses the performance of R&A projects. GAO reviewed documentation on the systems that GSA uses to support its management of the R&A program, as well as internal GSA reports on regional offices' use of the system that tracks projects' status. GAO also interviewed officials from GSA's central office and four regional offices to understand the types of information collected on R&A projects and how the information is input in GSA's systems. To identify the regional officials to be interviewed, GAO selected a non-generalizable sample of four capital R&A projects and eight small R&A projects, active between October 2013 and August 2017, based on a preliminary analysis of GSA data. GSA had no comments on the report. The General Services Administration (GSA) requires its regional offices to collect information on their repair and alteration (R&A) projects electronically and is working to improve the completeness and timeliness of this collection. Since 2011, GSA has required its regional offices to input and update information on both capital projects (those costing more than $3.095 million as of fiscal year 2018) and small projects (those costing less than $3.095 million). Officials from the four regions GAO interviewed said they find this system to be useful for forecasting how a capital project will progress. Regarding small projects' information, GSA has taken steps to improve regional offices' collection by, for example, conducting monthly checks to ensure that all small projects have been created in the system, assessing the number of projects that have missing information, and introducing a simplified way that GSA's regions can enter information in the system. GSA officials reported that, moving forward, they are continuing to emphasize the importance of collecting complete and timely information, which is needed to assess the performance of all R&A projects. GSA uses schedule- and budget-focused measures to assess the individual, the regional, and the national performance of capital and small R&A projects and is working to create a consistent understanding of performance. GSA's measures rely on information input by regional officials. For example, during the construction phase, GSA uses two “project delivery” measures, which compare a project's estimated schedule and budget with actual outcomes. GSA produces regional and national reports detailing projects' performance relative to these measures. However, not all regional officials GAO spoke with view these reports as useful because they are not specific to the officials' information needs. As a result, some regions have created their own reports, contributing to an inconsistent understanding of R&A projects' performance across the agency. GSA has conducted outreach to its regions and has begun to introduce new “dashboard” reports that present a consolidated view of R&A projects' information. Moving forward, GSA's ability to assess R&A projects' performance will continue to rely on regional officials' complete and timely input of information for both capital and small projects.", "document_type": "gao"}
{"report": "While IT investments have the potential to improve lives and organizations, federally funded IT projects can—and, too often, have— become risky, costly, and unproductive mistakes. We have previously reported that the federal government has spent billions of dollars on failed or troubled IT investments, such as the Office of Personnel Management’s (OPM) Retirement Systems Modernization program, which was canceled in February 2011, after spending approximately $231 million on the agency’s third attempt to automate the processing of federal employee retirement claims; the United States Coast Guard’s effort, initiated in 2010, to replace its aging electronic health records system, but which was discontinued in October 2015 after spending nearly $67 million. As a result, the Coast Guard currently has a manual, paper-based health records management process; the tri-agency National Polar-orbiting Operational Environmental Satellite System, which was halted in February 2010 by the White House’s Office of Science and Technology Policy after the program spent 16 years and almost $5 billion; the Department of Veterans Affairs’ (VA) Scheduling Replacement Project, which was terminated in September 2009 after spending an estimated $127 million over 9 years; the Farm Service Agency’s Modernize and Innovate the Delivery of Agricultural Systems program, which was halted in July 2014 after spending $423 million to modernize IT systems over 10 years; and the Department of Health and Human Services’ (HHS) Healthcare.gov website and its supporting systems, which were to facilitate the establishment of a health insurance marketplace by January 2014, but which encountered significant cost increases, schedule slips, and delayed functionality. These failed or troubled projects often suffered from a lack of disciplined and effective management, such as project planning, requirements definition, and program oversight and governance. In many instances, agencies had not consistently applied best practices that are critical to successfully acquiring IT investments. To help address these ongoing challenges, in February 2015, we added improving the management of IT acquisitions and operations to our list of high-risk areas for the federal government. This area highlighted several critical IT initiatives in need of additional congressional oversight, including (1) reviews of troubled projects; (2) efforts to increase the use of incremental development; (3) efforts to provide transparency relative to the cost, schedule, and risk levels for major IT investments; (4) reviews of agencies’ operational investments; (5) data center consolidation; and (6) efforts to streamline agencies’ portfolios of IT investments. We noted that implementation of these initiatives had been inconsistent and more work remained to demonstrate progress in achieving IT acquisitions and operations outcomes. In our February 2015 high-risk report, we also identified actions that OMB and federal agencies needed to take to make progress in this area. These included implementing FITARA and at least 80 percent of our recommendations related to the management of IT acquisitions and operations within 4 years. Specifically, between fiscal years 2010 and 2015, we made 803 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations, including many to improve the implementation of the previously mentioned six critical IT initiatives and other government-wide, cross-cutting efforts. In February 2017, we issued an update to our high-risk series and reported that, while progress had been made in improving the management of IT acquisitions and operations, significant work still remained to be completed. For example, as of May 2017, OMB and federal agencies had fully implemented 380 (or about 47 percent) of the 803 recommendations. Nevertheless, in fiscal year 2016, we made 202 new recommendations, thus further reinforcing the need for OMB and agencies to address the shortcomings in IT acquisitions and operations. Also, beyond addressing our prior recommendations, our 2017 high-risk update noted the importance of OMB and federal agencies continuing to expeditiously implement the requirements of FITARA. The Federal Acquisition Regulation (FAR) is the primary regulation for use by federal executive agencies in their acquisition of supplies and services with appropriated funds. The FAR requires agencies to perform planning for all acquisitions. Acquisition planning begins when an agency need is identified and includes developing requirements and creating written acquisition plans. A detailed acquisition plan must address all of the technical, business, management, and other significant considerations that will control the acquisition. It should include, among other things, a statement of need, cost, a plan of action, and milestones. The FAR is less specific on the requirements for an acquisition strategy, but it states that acquisition planning should include developing the overall strategy for managing the acquisition. Once a contract is awarded, the awarding agency must enter certain information into the Federal Procurement Data System-Next Generation, the federal government’s database that captures information on contract awards and obligations and is the primary database that serves as the source of other contracting data systems, such as USAspending.gov. The system captures information on contract awards and obligations, including, the vendor, and amount obligated. Further, agencies must select a product and service code that represents the predominant product or service being purchased. Product and service codes are used to describe and identify products, services, and research and development spending within the system. In an effort to eliminate redundancies and increase efficiencies in federal acquisition, in September 2015, the Category Management Leadership Council and OMB developed a government-wide category structure to support category management implementation across the federal government. The Council and OMB reviewed the product and service codes and grouped them into 19 individual spend categories, including IT. See appendix II for a list of the 79 IT-related product and service codes. Over the last three decades, Congress has enacted several laws to help federal agencies improve the management of IT investments. For example, the Clinger-Cohen Act of 1996 requires agency heads to appoint CIOs and specifies many of their responsibilities with regard to IT management. Among other things, CIOs are responsible for implementing and enforcing applicable government-wide and agency IT management principles, standards, and guidelines; assuming responsibility and accountability for IT investments; and monitoring the performance of IT programs and advising the agency head whether to continue, modify, or terminate such programs. The Clinger-Cohen Act, as amended, also defines IT as: any equipment or interconnected system or subsystem of equipment, used in the automatic acquisition, storage, analysis, evaluation, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information by the agency or a contractor under a contract with the agency. As previously mentioned, recognizing the severity of issues related to the government-wide management of IT, Congress enacted FITARA in December 2014. The law includes provisions related to seven areas at covered agencies: Agency CIO authority enhancements. CIOs at agencies are required to (1) approve the IT budget requests of their respective agencies, (2) certify that OMB’s incremental development guidance is being adequately implemented for IT investments, (3) approve the appointment of other agency employees with the title of CIO, and (4) review and approve contracts for IT. With regard to the review of IT contracts, FITARA requires that agency CIOs review and approve IT contracts prior to award, unless that contract is associated with a non- major investment. When the contract is associated with a non-major investment, the CIO are allowed to delegate the review and approval duties to an official that reports directly to the CIO. Alternatively, the law states that an agency may use its governance processes to approve any IT contract, as long as the agency CIO is a full participant in the governance processes. Federal data center consolidation initiative. Agencies are required to provide OMB with a data center inventory, a strategy for consolidating and optimizing the data centers (to include planned cost savings), and quarterly updates on progress made. The law also requires OMB to develop a goal for how much is to be saved through this initiative, and provide annual reports on cost savings achieved. Enhanced transparency and improved risk management. OMB and agencies are to make detailed information on federal IT investments publicly available, and agency CIOs are to categorize their investments by level of risk. In addition, in the case of major IT investments rated as high risk for 4 consecutive quarters, the law requires that the agency CIO and the investment’s program manager conduct a review aimed at identifying and addressing the causes of the risk. Portfolio review. Agencies are to annually review IT investment portfolios in order to, among other things, increase efficiency and effectiveness and identify potential waste and duplication. In establishing the process associated with such portfolio reviews, the law requires OMB to develop standardized performance metrics, to include cost savings, and to submit quarterly reports to Congress on cost savings. Expansion of training and use of IT acquisition cadres. Agencies are to update their acquisition human capital plans to address supporting the timely and effective acquisition of IT. In doing so, the law calls for agencies to consider, among other things, establishing IT acquisition cadres or developing agreements with other agencies that have such cadres. Government-wide software purchasing program. The General Services Administration (GSA) is to develop a strategic sourcing initiative to enhance government-wide acquisition and management of software. In doing so, the law requires that, to the maximum extent practicable, GSA should allow for the purchase of a software license agreement that is available for use by all executive branch agencies as a single user. Maximizing the benefit of the federal strategic sourcing initiative. FITARA requires that OMB issue regulations for federal agencies that do not use the federal strategic sourcing initiative to purchase services and supplies that are offered by this initiative. The regulations are to include a requirement for agencies to analyze the comparative value between what is to be purchased and what the strategic sourcing initiative offers. In June 2015, OMB released guidance describing how agencies are to implement FITARA. The guidance emphasizes the need for CIOs to have full accountability for IT acquisition and management decisions, and gives agencies considerable flexibility in making those decisions. Among other things, the guidance is intended to: assist agencies in aligning their IT resources with agency missions, goals, and requirements; establish government-wide IT management controls that will meet the law’s requirements, while providing agencies with flexibility to adapt to agency processes and mission requirements; clarify the CIO’s role and strengthen the relationship between department CIOs and bureau or component CIOs; and strengthen CIO accountability for IT cost, schedule, performance, and security. With regard to CIOs’ review and approval of IT contracts, OMB’s guidance expands upon FITARA in a number of ways. Specifically, according to the guidance: CIOs may review and approve IT acquisition strategies and plans, rather than individual IT contracts; CIOs can designate other agency officials to act as their representatives, but the CIOs must retain accountability; Chief Acquisition Officers (CAO) are responsible for ensuring that all IT contract actions are consistent with CIO-approved acquisition strategies and plans; and CAOs are to indicate to the CIOs when planned acquisition strategies and acquisition plans include IT. OMB’s FITARA implementation guidance requires agencies’ CAOs to indicate to CIOs when planned acquisition strategies and acquisition plans include IT. Given the Category Management Leadership Council and OMB’s categorization of IT product and service codes, CAOs should be identifying the obligations that have IT-related codes. The 22 selected agencies identified 78,249 IT-related contracts, to which they obligated approximately $14.7 billion in fiscal year 2016. Of that amount, approximately $14 billion was categorized as IT-related, consistent with the Category Management Leadership Council and OMB’s product and service codes, and approximately $626 million was categorized under other, non-IT codes. The $626 million in obligations with non-IT codes could contain embedded IT or be associated with IT programs. For example, the agencies reported IT-related acquisitions categorized under such non-IT codes as IT/telecommunications training, data analysis, and research and development. Three agencies accounted for most of these non-IT obligations: the Department of Veterans Affairs (VA) accounted for $220 million, the Environmental Protection Agency (EPA) accounted for $156 million, and the Department of Labor (Labor) accounted for $105 million. However, in addition to the obligations that agencies reported to us, we identified 31,493 additional contracts at 21 agencies with IT-related product and service codes. The associated agencies obligated approximately $4.5 billion to these contracts, raising the total amount obligated to IT contracts in fiscal year 2016 to at least approximately $19.2 billion. Figure 1 reflects the obligations agencies reported to us relative to the obligations we identified. The percentage of additional IT contract obligations that we identified varied among the selected agencies. For instance, the Department of State (State) did not identify 1 percent of its IT contract obligations. Conversely, eight agencies—the Departments of the Interior (Interior), Transportation (Transportation), and the Treasury (Treasury), as well as the National Science Foundation (NSF), the U.S. Agency for International Development (USAID), HHS, GSA, and OPM did not identify over 40 percent of their IT contract obligations. Figure 2 reflects the contract obligations that the selected agencies reported to us (both with IT-related codes and those with non-IT codes) relative to the obligations we identified. For additional information about the IT obligations identified by these agencies, see appendix III. Agencies offered various reasons for why they had not identified the approximately $4.5 billion in IT obligations. For example, officials from OPM and NSF stated that their agencies only identified new IT contracts and did not include contract modifications in their identified IT obligations, making their submissions much smaller. NSF also noted that it only identified IT contracts over $150,000. In addition, GSA and Transportation officials stated that at least one of the Category Management Leadership Council’s IT product and service codes should not be considered IT. For instance, an official in GSA’s Vendor Management Office stated that contracts using a product and service code for miscellaneous maintenance, repair, and rebuilding should not be categorized as IT. Likewise, Transportation officials provided examples of contracts that the agency did not consider being IT-related, even though they were categorized under IT product and service codes for program review or development services. In addition, Transportation and USAID officials stated that they did not use the complete list of IT product and service codes in their identification efforts. A Treasury official in the Office of the CIO stated that the department focused on codes that were the most important. We agree that the Council’s IT product and service codes could include contracts that are not IT. Further, as previously discussed, IT is included in product and service codes that the Council did not identify as IT. Nonetheless, the Council has provided a valuable service in developing specific categories from which agencies can select in identifying IT. To the extent that agencies have concerns about specific categories, they could raise them to the Council. In addition, the majority of the selected agencies that did not identify the $4.5 billion in IT obligations also did not follow OMB’s guidance to have the CAO identify all IT acquisitions for CIO review and approval. As those tasked with monitoring their respective agencies’ acquisition activities, the offices of the CAOs are in a unique position to identify prospective IT acquisitions to the CIOs. Of the 21 selected agencies that did not identify the approximately $4.5 billion in IT obligations, 8 involved the acquisition offices in the identification of their IT acquisitions. For example, OPM’s process followed OMB’s guidance by directly involving its senior procurement executive in the identification of the acquisitions. Conversely, the other 14 agencies did not follow OMB’s guidance to have a process in which the acquisition offices identified, or helped to identify, IT acquisitions for CIO review. Among these agencies, for example, EPA officials indicated that program office officials are responsible for identifying IT requirements and obtaining the appropriate approvals. EPA’s process does not require acquisition office participation. Instead, the program office officials work with IT officials to determine if the contract is IT-related and subject to the IT acquisition approval policy. In addition, 7 agencies reported that they rely on the requesting program offices to self-identify whether their acquisitions are IT-related. Table 1 summarizes the officials responsible for the identification of IT acquisitions at the selected agencies. We have previously reported on the importance of developing and issuing policies or supporting guidance in order to successfully implement processes and achieve related objectives. In recognition of the importance of establishing guidance to assist agency officials in identifying IT, 14 of the 22 selected agencies issued such guidance. However, 7 agencies did not. Specifically, the Departments of Agriculture (USDA), Energy (Energy), Justice (Justice), Labor, and Transportation; the National Aeronautics and Space Administration (NASA); and the Social Security Administration (SSA) did not establish guidance regarding the identification of IT-related acquisitions. For instance, officials in Justice’s Office of the CIO stated that the agency does not follow a prescribed process to determine which acquisitions are IT-related and does not use guidance or checklists to aid with the identification. One other agency, Interior, had established draft guidance to assist officials when identifying IT; however, the agency did not identify a schedule for finalizing the draft guidance. Until agencies involve the acquisition office in their IT identification processes, and establish and effectively implement supporting guidance, they will likely not be able to ensure that all IT acquisitions are identified. As a result, agencies risk not having appropriate oversight of IT worth billions of dollars. FITARA and OMB’s associated implementation guidance require major civilian agency CIOs to review and approve acquisitions of IT either directly, or through the agency’s governance processes. In particular, OMB’s guidance states that agencies shall not approve any acquisition plan or strategy that includes IT without the agency CIO’s review and approval. OMB’s guidance also allows the CIO to delegate these responsibilities to other agency officials to act as the CIO’s representative; however, staff in OMB’s Office of the Federal CIO noted that these assignments need to be approved by OMB. Alternatively, FITARA and OMB’s guidance allow agencies to use IT governance processes to conduct these reviews and approvals as long as the CIO is a full participant in the process. Most of the processes at the 22 selected agencies do not fully satisfy OMB’s requirements that the CIO review and approve IT acquisition plans or strategies (or that the CIO participate in a governance process that reviews and approves IT acquisition plans and strategies). Specifically, 8 agencies’ processes fully satisfy OMB’s requirements, while 14 of the agencies’ processes do not fully satisfy the requirements. Of these, 8 agencies partially satisfy the requirements and 6 do not satisfy the requirements. For example, NSF fully satisfies OMB’s requirement by requiring that the CIO review and approve each IT acquisition plan. Similarly, SBA requires the CIO to review and approve each IT acquisition plan over the FAR’s simplified acquisition threshold. HUD partially satisfies OMB’s requirements in that its process only requires the office of the CIO to review a subset of IT acquisitions (those over $500,000). In addition, the HUD CIO has delegated the approval authority to the Deputy CIO and others within the Office of the CIO, but this delegation has not been approved by OMB. VA does not yet have a process in place that satisfies OMB’s requirements, but officials in VA’s Office of Information and Technology stated that they are currently developing processes and procedures necessary to implement FITARA accountability and responsibilities for IT acquisitions. While the agency did not submit a documented time frame for its plans, VA officials stated that they would like to implement the new process by the second quarter of fiscal year 2018. Table 2 summarizes the extent to which the selected agencies’ processes satisfy OMB’s requirements for the CIO to review and approve IT acquisition plans. Appendix IV provides additional details about the agencies’ processes that are used to review and approve IT acquisitions. Of 96 randomly selected IT contracts at 10 agencies, only 11 acquisitions associated with these contracts had been reviewed and approved as required by OMB. The acquisitions associated with 85 contracts, with a total possible value of approximately $23.8 billion, did not receive the appropriate level of review. Further, despite having CIO review and approval processes in place that fully or partially satisfied OMB’s requirements, four agencies (the Department of Commerce (Commerce), HHS, Justice, and SSA) did not consistently ensure that the CIO or a designee reviewed and approved the acquisition plan or strategy. Table 3 summarizes the number and total possible value of IT contracts that we reviewed for consistency with OMB’s requirements. Appendix V provides more details on the selected IT acquisitions and the CIO approval of them. Four key factors contributed to the acquisitions associated with the 85 contracts not being reviewed and approved by the CIOs in accordance with OMB’s requirements: Non-compliant processes. As previously mentioned, agencies’ processes at 7 of the 10 agencies did not fully satisfy OMB’s requirements that the CIO review and approve IT acquisition plans and strategies. Four agencies reported that they were following their own agency processes which we determined do not fully align with requirements. For example, NASA officials responsible for information regarding one of the selected contracts stated that the CIO only provides technical guidance and concurrence on the acquisition plan and does not approve the acquisition plan. This is not consistent with OMB’s requirement that the CIO or designee review and approve IT acquisition plans. In addition, for 16 contracts, the respective agencies stated that there were no acquisition plans associated with the particular acquisitions. For example, a director in USDA’s Forest Service’s acquisition office issued waivers for 2 acquisitions, making them exempt from needing acquisition plans. Thus, the CIO did not review and approve acquisition plans for those contracts. As noted earlier, OMB’s guidance states that if there is not an acquisition plan or strategy, the contract action itself should be reviewed and approved. However, in all 16 cases, the associated agencies’ CIOs did not undertake such reviews. Improper delegation. We identified 16 instances where agencies allowed CIOs to delegate their review to levels lower than agency policy or OMB allows. For example, Treasury’s CIO delegated contract approval to the component CIOs—one of whom further delegated this approval based on monetary thresholds to a variety of other officials. According to the component’s policy, one of the selected acquisitions, worth over $22 million, should have been approved by the component’s Deputy CIOs, Associate CIOs, or Deputy Associate CIOs. However, this particular acquisition was approved by an IT Project Manager. Further, two agencies allowed their CIOs to delegate IT acquisition approvals to other officials, without having these assignments approved by OMB. For example, three of NASA’s selected acquisitions were reviewed and approved by the component CIOs; however, NASA had not had these assignments approved by OMB. Approval of other documentation. In 26 instances, CIOs or designees reviewed and approved acquisition documentation other than the required acquisition plan or strategy. For example, CIOs or designees reviewed and approved documents such as a requisition, a procurement request, or a business case analysis. While the CIOs or designees reviewed and approved some form of acquisition documentation prior to the award of these acquisitions, these forms of documentation did not have all the elements typically associated with an acquisition plan. As a result, the CIO (or designee) may not have been adequately equipped to make an informed decision about the acquisition. Undocumented approvals. We identified 2 instances where the agency reported that the CIO or designee approved the IT acquisition, but did not document the approval. For example, regarding one contract, Commerce officials stated that one of the agency’s selected acquisitions was reviewed and approved by its component CIO for the Bureau of Economic Analysis. However, the agency could not provide evidence to show the CIO’s approval beyond an e-mail after the contract was signed stating that the CIO was aware of and had approved that particular acquisition. Until agencies fully satisfy FITARA and OMB’s requirements by ensuring that CIOs, or their appropriate designees, review and approve IT acquisitions, CIOs risk continuing to have limited visibility and input into their agencies’ planned IT expenditures and not being able to use the increased authority that FITARA’s contract approval provision is intended to provide. In addition, agencies are missing an opportunity to strengthen CIOs’ authority and to provide needed direction and oversight of their IT acquisitions. As a result, agencies may award IT contracts that are duplicative, wasteful, or poorly conceived. Given the history of failures and amount of money at stake, it is imperative that agencies properly oversee IT acquisitions. While the 22 selected agencies reported $14.7 billion in IT obligations, 21 agencies did not identify $4.5 billion as IT. Further, because the selected agencies did not always identify their IT acquisitions, it is likely that agencies have additional unidentified IT spending. Among other reasons, this shortfall existed because many agencies did not ensure that their acquisition offices were involved in the identification process, or provide clear guidance for ensuring that IT was properly identified. Without proper identification of IT acquisitions, agencies and CIOs cannot effectively provide oversight of them. In addition, many of the selected agencies covered by FITARA did not ensure the appropriate CIO review and approval of IT acquisitions that were identified. The CIOs’ review and approval presents an opportunity for CIOs to increase visibility into agency IT and recognize opportunities for improvement. However, the review and approval processes at 14 of the selected agencies were not in full compliance with OMB requirements, and only 11 of 96 randomly selected IT acquisitions were appropriately reviewed and approved by the CIO. As a result, agencies awarded IT contracts with a total possible value of $23.8 billion without the required CIO review and approval. Consequently, CIOs had limited visibility and insight into their agencies’ IT, thereby increasing the risk of entering into contracts that were duplicative, wasteful, or poorly conceived. We are making a total of 39 recommendations to federal agencies. We are making the following 3 recommendations to USDA: The Secretary of Agriculture should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 1) The Secretary of Agriculture should direct the CAO and CIO to issue specific guidance to ensure IT-related acquisitions are properly identified. (Recommendation 2) The Secretary of Agriculture should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 3) We are making the following 2 recommendations to Commerce: The Secretary of Commerce should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 4) The Secretary of Commerce should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 5) We are making the following 2 recommendations to Education: The Secretary of Education should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 6) The Secretary of Education should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 7) We are making the following 2 recommendations to Energy: The Secretary of Energy should direct the CAO and CIO to issue specific guidance to ensure IT-related acquisitions are properly identified. (Recommendation 8) The Secretary of Energy should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 9) We are making the following recommendation to HHS: The Secretary of HHS should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 10) We are making the following 2 recommendations to the Department of Housing and Urban Development: The Secretary of Housing and Urban Development should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 11) The Secretary of Housing and Urban Development should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 12) We are making the following 3 recommendations to Interior: The Secretary of the Interior should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 13) The Secretary of Interior should direct the CAO and CIO to finalize and issue guidance on identifying IT acquisitions in order to ensure the CIO review and approval of those acquisitions. (Recommendation 14) The Secretary of the Interior should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 15) We are making the following 2 recommendations to Justice: The Attorney General should direct the senior procurement executive and CIO to issue specific guidance to ensure IT-related acquisitions are properly identified. (Recommendation 16) The Attorney General should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 17) We are making the following 3 recommendations to Labor: The Secretary of Labor should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 18) The Secretary of Labor should direct the CAO and CIO to issue specific guidance to ensure IT-related acquisitions are properly identified. (Recommendation 19) The Secretary of Labor should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 20) We are making the following 2 recommendations to State: The Secretary of State should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 21) The Secretary of State should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 22) We are making the following recommendation to Treasury: The Secretary of the Treasury should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 23) We are making the following 3 recommendations to Transportation: The Secretary of Transportation should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 24) The Secretary of Transportation should direct the CAO and CIO to issue specific guidance to ensure IT-related acquisitions are properly identified. (Recommendation 25) The Secretary of Transportation should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 26) We are making the following 2 recommendations to VA: The Secretary of VA should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 27) The Secretary of VA should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 28) We are making the following recommendation to EPA: The Administrator of EPA should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 29) We are making the following 3 recommendations to NASA: The Administrator of NASA should ensure that the office of the CAO is involved in the process to identify IT acquisitions. (Recommendation 30) The Administrator of NASA should direct the CAO and CIO to issue specific guidance to ensure IT-related acquisitions are properly identified. (Recommendation 31) The Administrator of NASA should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 32) We are making the following recommendation to NRC: The Chairman of NRC should ensure that the office of the senior procurement executive is involved in the process to identify IT acquisitions. (Recommendation 33) We are making the following recommendation to OPM: The Director of OPM should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 34) We are making the following recommendation to SBA: The Administrator of SBA should ensure that the office of the senior procurement executive is involved in the process to identify IT acquisitions. (Recommendation 35) We are making the following 3 recommendations to SSA: The Commissioner of SSA should ensure that the office of the senior procurement executive is involved in the process to identify IT acquisitions. (Recommendation 36) The Commissioner of SSA should direct the senior procurement executive and CIO to issue specific guidance to ensure IT-related acquisitions are properly identified. (Recommendation 37) The Commissioner of SSA should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 38) We are making the following recommendation to USAID: The Administrator of USAID should ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. (Recommendation 39) We provided a draft of this report to OMB and the other 22 agencies included in our review. Among the comments received, 16 agencies (Energy, GSA, HHS, HUD, Interior, Justice, Labor, NASA, OPM, SBA, SSA, State, Transportation, USAID, USDA, and VA) agreed with our recommendations; 2 agencies (EPA and OMB) did not agree or disagree with our recommendations; 1 agency (Education) partially agreed with our recommendations; 1 agency (NRC) disagreed with our recommendations; and 2 agencies (Treasury and NSF) had no comments on the recommendations. One other agency (Commerce) did not provide comments on the report. The agencies’ comments that we received, and our evaluations of them, are summarized as follows: In comments provided via e-mail on December 8, 2017, an OMB GAO liaison did not agree or disagree with our findings. The official stated that improved coordination and collaboration between CIOs, CAOs, and senior procurement executives is critical, but represents a significant cultural shift for most agencies. The official added that OMB’s Office of Federal Procurement Policy and Office of the Federal CIO are working closely with agency CAOs and CIOs through the CIO Council and CAO Council to discuss practices that agencies have found helpful in achieving this cultural change. In comments provided via e-mail on November 18, 2017, a Senior Advisor from USDA’s Office of the CIO stated that the department concurred with the findings in our report and had no additional comments. In written comments, Education concurred with one of our recommendations, which called for the department to ensure that the office of the CAO is involved in the process to identify IT acquisitions. However, Education did not concur with a second recommendation to ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. The department stated that the CIO reviews and approves IT acquisition strategies and plans as part of his review and approval of IT investments. Specifically, the department stated that its Departmental Directive OCIO: 3-108, “Information Technology Investment Management” establishes a process for Office of the CIO review of IT acquisitions. Further, the department stated that its Statement of Work Review Process adds increased rigor to the CIO’s review and approval by requiring all acquisitions with IT elements to be submitted for Office of the CIO review. Finally, the department stated that the Federal Student Aid Investment Review Board charter documents the agency CIO as a voting member. The department added the CIO is required to vote on Federal Student Aid IT investments greater than $10 million. For Federal Student Aid investments less than $10 million, the CIO is provided the same level of insight as any other Investment Review Board member, but has delegated the required vote to the Federal Student Aid CIO. The IT Investment Management Directive, together with the department’s associated Lifecycle Management Framework (referenced in the directive), indicates that the office of the CIO is to review IT acquisition plans. However, the department’s Statement of Work Review Process does not require the review and approval of acquisition plans. Instead, the process states that the office of the CIO may review IT acquisition plans or strategies as one of several possible documents, including statements of work or cost estimates. We also reviewed the Federal Student Aid Investment Review Board charter and updated our report to reflect the department CIO’s involvement on the Federal Student Aid’s Investment Review Board. Based on this collective information, we updated our assessment of Education’s IT acquisition policy to reflect that the department had partially met OMB’s requirements. Nevertheless, the CIO’s review of the department’s acquisition plans and strategies should be required, rather than optional. Thus, we believe that our recommendation to ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance is still warranted. Education’s comments are reprinted in appendix VI. In written comments, Energy concurred with our two recommendations directed to the department and stated that it has activities underway to revise the department’s acquisition policy. Energy added that it planned to address the recommendations by December 31, 2017. Energy’s comments are reprinted in appendix VII. In comments provided via e-mail on December 7, 2017, a Management Analyst in HHS’s Office of the CIO stated that the department agreed with the recommendation and had no comments on the report. In written comments, HUD stated that it concurred with our two recommendations to the department. HUD’s comments are reprinted in appendix VIII. In written comments, Interior stated that it concurred with our three recommendations to the department. Interior’s comments are reprinted in appendix IX. In comments provided via e-mail on November 27, 2017, a Program Analyst from Justice’s Internal Review and Evaluation Office stated that the department concurred with our two recommendations. The department also provided technical comments, which we have incorporated in the report, as appropriate. In written comments, Labor concurred with our three recommendations that we directed to the department. These recommendations called for the department to (1) ensure that the office of the CAO is involved in the process to identify IT acquisitions, (2) issue specific guidance to ensure IT-related acquisitions are properly identified, and (3) ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. Labor detailed actions recently taken to implement each of the recommendations and submitted documentation to support its assertions. For example, the department submitted its Acquisition Plan Preparation Guide and related acquisition plan templates to show that it had issued guidance on identifying IT and required the CIO review and approval of IT acquisition plans. Implementation of these steps should help ensure appropriate oversight of IT acquisitions. Labor’s comments are reprinted in appendix X. In written comments, State agreed with both of our recommendations. In particular, regarding our recommendation to ensure that the office of the CAO is involved in the process to identify IT acquisitions, the department stated that senior State officials, including the CAO and CIO, will develop a plan to ensure that the CAO monitors acquisition activities and ensures acquisition decisions are consistent with all applicable laws, such as FITARA. Further, regarding the recommendation to ensure that the department’s IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance, State referenced its capital planning and investment control guide that describes how a group under the direction of the CIO reviews acquisition strategies during the IT portfolio selection process. However, while the guide states that the CIO is to approve the finalized IT portfolio, the guide does not state that the CIO is to review the individual acquisition strategy documents. As a result, our recommendation is still warranted. State’s comments are reprinted in appendix XI. In comments provided via e-mail on December 7, 2017, an Audit Liaison from Treasury’s Office of the CIO stated that the department had no comments on the report. The department did not say whether it agreed or disagreed with the recommendation, but noted that it had planned corrective actions to work with Treasury stakeholders, to include the Chief Procurement Executive, Bureau CIOs, and Acquisition officials; and OMB officials to develop acquisition plans and strategies according to OMB’s FITARA guidance for IT acquisition. In comments provided via e-mail on November 27, 2017, the Director of Audit Relations and Program Improvement within the Department of Transportation stated that the department concurred with the findings and recommendations. In written comments, VA concurred with our two recommendations to the department and stated that it is taking steps to address the recommendations. Specifically, regarding the recommendation to ensure that the office of the CAO is involved in the process to identify IT acquisitions, the department stated that it had addressed this concern by implementing an updated version of the Acquisition and Management of VA IT Resources directive in November 2017. In its discussion of this directive, the department stated that the CIO, in conjunction with the CAO, collaborates on all IT actions to ensure FITARA compliance. While the directive clarifies the scope of VA’s IT resources subject to the oversight authority of the CIO, the directive does not indicate that the office of the CAO is also involved in this process. It will be important for VA to consider this recommendation as it continues to implement FITARA requirements. Further, regarding the recommendation to ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance, the department stated that its Office of Strategic Sourcing is currently developing processes and procedures necessary to implement FITARA accountability and responsibilities for IT acquisitions. The department also stated that the new acquisition review process is scheduled to be implemented in the second quarter of fiscal year 2018. VA’s comments are reprinted in appendix XII. In written comments, EPA stated it did not take exception to the report’s findings, conclusions, and recommendations. Regarding the recommendation to ensure that the office of the CAO is involved in the process to identify IT acquisitions, the agency stated that the policy which implements interim guidance from the CIO to comply with FITARA requirements is being updated. The agency added that future policy revisions are to include the requirement that the CAO or a designee will address this recommendation. EPA’s comments are reprinted in appendix XIII. In comments provided via e-mail on November 17, 2017, a program analyst in GSA’s GAO/Office of Inspector General Audit Management Division stated that the agency concurred with the report and had no additional comments. In written comments, NASA concurred with the three recommendations to the agency and stated that it believes it has already addressed them. Specifically, regarding the recommendation to ensure that the Office of the CAO is involved in the process to identify IT acquisitions, NASA asserted that its CAO is already adequately involved. However, NASA did not provide evidence that it fulfills this requirement. For instance, none of the processes mentioned in NASA’s comments support the assertion that the acquisition office is involved in the identification of individual acquisitions as IT. Further, the discussion of a form used to identify IT acquisitions (NASA Form 1707) confirmed our original conclusion that the officials identifying IT acquisitions are not in the acquisition office. In addition, NASA concurred with our recommendation to issue specific guidance to ensure IT-related acquisitions are properly identified, and stated that the agency currently has several policies that provide such guidance. However, the policies named by the agency (NASA Policy Directive 1000.5B, NASA Interim Directive 1000.110, NASA FAR Supplement 1804.7301, and NASA FAR Supplement 1807.71) do not contain guidance on how the identifying officials should determine whether an acquisition is IT-related. For example, our review of NASA Form 1707 (required by NASA FAR Supplement 1804.7301) showed that, while this form has instructions on how to fill out its IT section, it does not contain guidance on how to properly identify an acquisition as IT-related. In addition, NASA did not provide an official policy on the role of the Center Functional Review Team in the identification process. Further, NASA concurred with our recommendation to ensure that its IT acquisition plans or strategies are reviewed and approved according to OMB guidance and stated that, on September 27, 2017, the CIO had issued a memo delegating the authority to review and approve all IT acquisitions to the Center CIOs. However, as previously mentioned, these delegations of authority need to be approved by OMB, and NASA’s delegation of IT acquisition authority had not been approved by OMB, as required. In addition, NASA has not demonstrated that the CIO’s review and approval is occurring, as none of the 9 acquisitions we randomly selected were reviewed and approved by the CIO. NASA also stated that the CIO and Assistant Administrator for Procurement review acquisition plans as part of their participation in Acquisition Strategy Meetings. However, as we mention in the report, not all IT contracts have acquisition strategy meetings. NASA’s comments are reprinted in appendix XIV. In written comments, NRC did not concur with our recommendations and stated that our draft report did not accurately reflect the agency’s process for reviewing and approving IT acquisitions. With regard to our recommendation to ensure that the office of the senior procurement officer is involved in the process to identify IT acquisitions, the agency provided technical comments which stated that acquisition office officials review acquisitions to ensure that IT is properly identified. However, the agency did not provide supporting documentary evidence to support this assertion. Lacking evidence from the agency that would enable us to verify the implementation of the process described in its comments, we maintain that our recommendation is warranted. In addition, our draft of this report included a recommendation for NRC to ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance. NRC disagreed with this recommendation and stated in its technical comments that the agency does not require the development of acquisition plans for acquisitions under $1 million. Thus, the NRC CIO does not review acquisition plans under that threshold. The agency also stated that it has a process for approving contract actions under the $1 million threshold. According to OMB guidance, in the absence of acquisition plans or strategies, CIOs may approve the corresponding contract actions. Since NRC has a process for approving contract actions under the $1 million threshold, we revised the report to reflect that NRC has processes in place for the review and approval of acquisition plans in a manner consistent with OMB guidance and removed the associated recommendation. NRC’s comments are reprinted in appendix XV and its technical comments have been incorporated in the report, as appropriate. In comments provided via e-mail on November 21, 2017, an NSF liaison stated that the agency had no comments. In written comments, OPM concurred with our recommendation and stated that the agency will review and update its policies and processes as needed, so that they are aligned with OMB’s guidance. OPM’s comments are reprinted in appendix XVI. In written comments, SBA agreed with our recommendation to ensure that the office of the CAO is involved in the process to identify IT acquisitions. SBA noted that it is not required to have a CAO, but agreed with having its acquisition workforce involved in IT acquisitions. Based on the agency’s comments, we modified the associated recommendation to refer to the agency’s senior procurement executive rather than the CAO. SBA stated that it has already begun to implement the recommendation for fiscal year 2018. SBA’s comments are reprinted in appendix XVII. In written comments, SSA agreed with the three recommendations that we had directed to the agency, stated that it had taken steps to address the recommendations, and submitted supporting documentation. In particular, SSA agreed with the recommendation to ensure that the office of the CAO is involved in the process to identify IT acquisitions and, in response, provided documentation that is to detail the involvement of its Chief Financial Officer (who is the agency’s senior procurement executive) in identifying and approving IT acquisitions. Implementation of these steps should help ensure appropriate oversight of IT acquisitions. Regarding our recommendation to issue specific guidance to ensure IT-related acquisitions are properly identified, SSA agreed with the recommendation and stated that, according to its IT Acquisition Approval Policy, the Chief Financial Officer notifies the CIO of IT acquisitions by submitting acquisition plans to the CIO for approval. However, while SSA’s policy does support this method of CIO notification, it does not provide guidance to assist in identifying IT. Further, SSA agreed with our recommendation to ensure that IT acquisition plans or strategies are reviewed and approved according to OMB’s guidance and provided its September 2017 policy for acquisition plan approval. After reviewing this policy and SSA’s 2017 capital planning and investment control process, we updated our report to show that SSA’s processes satisfy OMB’s requirements. While SSA has made progress in implementing OMB’s FITARA requirements, the agency needs to demonstrate that the CIO’s review and approval are occurring, as 3 of the 10 acquisitions we randomly selected were not reviewed and approved as required by OMB’s guidance. It will be important for SSA to consider this recommendation as it continues to implement FITARA requirements. SSA’s comments are reprinted in appendix XVIII. The agency also provided technical comments, which we have incorporated in the report as appropriate. In written comments, USAID agreed with our recommendation and stated that the CIO and CAO are working together to (1) ensure all IT- related acquisition plans and strategies are reviewed and approved by the CIO and (2) further communicate this requirement to the acquisition planning stakeholders. USAID’s comments are reprinted in appendix XIX. The agency also provided technical comments, which we have incorporated in the report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretaries of the Departments of Agriculture, Commerce, Education, Energy, Health and Human Services, Housing and Urban Development, Labor, State, the Interior, the Treasury, Transportation, and Veterans Affairs; the U.S. Attorney General of the Department of Justice; the Administrators of the Environmental Protection Agency, General Services Administration, National Aeronautics and Space Administration, Small Business Administration, and the U.S. Agency for International Development; the Commissioner of the Social Security Administration; the Directors of the National Science Foundation and the Office of Personnel Management; and the Chairman of the Nuclear Regulatory Commission. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9286 or at pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XX. Our objectives were to determine the extent to which (1) federal agencies identify information technology (IT) contracts and how much is invested in them, and (2) federal agency Chief Information Officers (CIO) are reviewing and approving IT acquisitions. For both objectives, our review included the Office of Management and Budget (OMB) and 22 agencies of the 24 agencies covered by the Chief Financial Officer Act. We did not include the Department of Defense because it is excluded from the relevant provision in the Federal Information Technology Acquisition Reform Act (FITARA) requiring CIO approval of IT contracts. Further, we did not include the Department of Homeland Security because we recently issued a report that reviewed the department’s implementation of FITARA, including the CIO’s approval of IT contracts. For specific information on the CIOs’ review of individual IT contracts, we focused on 10 agencies covered by FITARA that obligated the most money to IT contracts in fiscal year 2016 (except the Departments of Defense and Homeland Security). To determine the extent to which federal agencies identify IT contracts and how much is invested in them, we requested that each of the 22 selected agencies submit a list of their IT contract obligations for fiscal year 2016. We also requested the associated contract identification number, obligation amount, and product and service code. In order to determine if the agencies gave us a full accounting of their IT obligations, we used the Category Management Leadership Council’s categorizations of federal government spending by product and service codes. In particular, we used the Council’s list of 79 IT-related codes, which is listed in appendix II, to identify fiscal year 2016 IT-related contract obligations on USAspending.gov. For each funding agency, we downloaded all contracts associated with the IT-related codes, such as purchase orders, blanket purchase agreements, and government-wide acquisition contracts. By comparing the resulting list of IT-related contracts on USAspending.gov data to those provided by the agencies, we were able to determine which IT-related contract obligations the agencies had not identified. In doing so, we gave the agency credit for identifying the entire IT contract if an agency identified any portion of the contract (e.g., a contract modification). Consequently, the total of obligations that agencies did not identify is likely higher than the totals we were able to report. To assess the reliability of the USAspending.gov data, we reviewed publicly available documentation related to the database, such as the USAspending.gov data dictionary. We also reviewed the results of our previous reports on USAspending.gov that had identified deficiencies in the accuracy and reliability of the reported data. For both the USAspending.gov and agency-supplied contract data, we tested the datasets to look for duplicate records and missing data in key fields. We also interviewed agency officials to corroborate the data. We found the contract data from USAspending.gov, while sometimes incomplete, were sufficient for our purpose of identifying IT contracts and demonstrating the amount of obligations toward IT contracts. In addition, we found the contract data provided by the agencies to be sufficiently reliable for the purposes of our reporting objectives. We used these data as evidence to support our findings, conclusions, and recommendations. We also compared the product and service codes in the lists of IT contracts provided by the agencies to the list of IT product and service codes developed by the Category Management Leadership Council. From this comparison, we determined which agency-submitted obligations were associated with IT-related product and service codes and which obligations were associated with non-IT codes. To determine the cause for any discrepancies between the agency- provided list of obligations and those found on USAspending.gov, we asked each agency to describe and provide evidence of the Chief Acquisition Officer’s (CAO) involvement in the process for identifying IT acquisitions for CIO review. We also collected both testimonial evidence and documentation that described the identification process for potential IT acquisitions. We analyzed these data from each agency to determine the involvement of the CAO and officials within the CAO’s acquisition office. We also determined the involvement of officials positioned outside of the acquisition office, such as officials from the office requesting the IT acquisition or from the Office of the CIO. As a result, we were able to establish which officials were responsible for identifying acquisitions for IT review at each agency. We also reviewed the submitted evidence to determine whether the agencies provided guidance that clearly described or defined IT to the identifying officials. To determine the extent to which federal agency CIOs are reviewing and approving IT acquisitions, we first compiled a composite list of IT-related contracts from fiscal year 2016 for each of the 10 selected agencies by combining: contracts associated with IT-related product and service codes from USAspending.gov, contracts associated with IT vendors from USAspending.gov, contracts linked with major IT investments as listed on OMB’s IT Dashboard, and contracts provided by agencies in response to our earlier request for a list of IT contracts. We then randomly selected 10 IT contracts from each of the 10 agencies on which to perform additional analysis (100 total contracts). For each of the 100 selected contracts, we asked the associated agency to confirm that the contract was, in fact, IT-related and requested evidence of CIO or CIO designee review and approval of the contract’s associated acquisition. We compared the resulting documentation to FITARA and OMB guidance to determine the extent to which the IT acquisitions had been reviewed and approved. In order to receive full credit, agencies had to provide evidence that the CIO had reviewed and approved the acquisition plans or strategies for those IT acquisitions associated with major IT investments. For IT acquisitions associated with non-major IT investments, agencies had to provide evidence that the CIO, or a designee that reports directly to the CIO, reviewed and approved the acquisition plan or strategy. If agencies could not associate the IT acquisition with a particular IT investment, we looked for evidence that the CIO reviewed and approved the acquisition plan or strategy, since FITARA does not state that the review and approval of these IT acquisitions can be delegated. To determine whether agencies had processes in place to ensure the review and approval of IT acquisitions, we reviewed agency documentation on IT acquisition processes and procedures and compared it to the requirements in FITARA and OMB guidance. We also interviewed agency officials to clarify their respective processes and policies. In order to receive full credit, agencies had to provide evidence that they had a process in place that required the agency CIO to review and approve IT acquisition plans or strategies with the exception of those associated with non-major IT investments. Agencies received partial or no credit if their processes had one or more of the following shortfalls: approval was not documented, delegated IT acquisition review and approval without OMB approval of did not provide the CIOs or their delegates oversight of all IT involved the review of other documentation instead of the required acquisition plans or strategies, or did not provide department CIO oversight over IT acquisitions at the component level. We conducted this performance audit from July 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In September 2015, the Category Management Leadership Council and the Office of Management and Budget (OMB) identified a total of 79 information technology (IT)-related product and service codes, of which 43 are for IT services and 36 are for IT products. Table 4 provides details on the IT-related services and product codes. The 22 selected agencies identified approximately $14.7 billion in obligations for information technology (IT)-related contracts in fiscal year 2016. Of that amount, approximately $14 billion was categorized as IT- related per the Category Management Leadership Council’s product and service codes, and approximately $626 million was categorized under other, non-IT codes. In addition to the obligations that agencies reported to us, we identified an additional $4.5 billion in obligations for contracts with IT-related product and service codes, raising the total amount obligated to IT contracts in fiscal year 2016 to at least approximately $19.2 billion. Table 5 provides details on each selected agency’s obligations for IT-related contracts in fiscal year 2016. The Federal Information Technology Acquisition Reform Act (FITARA) and the Office of Management and Budget’s (OMB) associated implementation guidance require major civilian agency chief information officers (CIO) to review and approve acquisitions of information technology (IT) either directly, or as full participants in the agency’s governance processes. In particular, OMB’s guidance states that agencies shall not approve an acquisition plan or strategy that includes IT without the agency CIO’s review and approval. OMB’s guidance also allows the CIO to delegate these responsibilities to other agency officials to act as the CIO’s representative; however, staff in OMB’s Office of the Federal CIO noted that these assignments need to be approved by OMB. Alternatively, FITARA and OMB’s guidance allows agencies to use IT governance processes to conduct these reviews and approvals, as long as the CIO is a full participant in the process. Table 6 provides details on the selected agencies’ acquisition processes and the degree to which the processes comply with OMB’s requirements. Of 96 randomly selected information technology (IT) contracts at 10 agencies, 9 acquisitions associated with these contracts had been reviewed and approved as required by the Office of Management and Budget (OMB). The acquisitions associated with the remaining 87 contracts did not receive the appropriate levels of Chief Information Officer (CIO) review and approval in accordance with OMB requirements. Table 7 provides details on the selected IT acquisitions and the CIO review and approval of them. David A. Powner, (202) 512-9286 or pownerd@gao.gov. In addition to the contact named above, Kevin Walsh (Assistant Director), Jessica Waselkow (Analyst in Charge), Chris Businsky, Rebecca Eyler, Angel Ip, Tarunkant Mithani, David Plocher, Meredith Raymond, and Adam Vodraska made key contributions to this report.", "summary": "The federal government invested more than $90 billion on IT in fiscal year 2016. However, prior IT expenditures have produced failed projects. Recognizing the severity of issues, in December 2014 Congress enacted IT acquisition reform legislation (referred to as the Federal Information Technology Acquisition Reform Act, or FITARA). Among other things, OMB's FITARA implementation guidance requires covered agencies' chief acquisition officers to identify IT contracts for the CIOs to review and approve. GAO's objectives were to determine the extent to which (1) federal agencies identify IT contracts and how much is invested in them, and (2) federal agency CIOs are reviewing and approving IT acquisitions. To do so, GAO reviewed data on IT contracts from fiscal year 2016 at 22 agencies and compared agency actions to law and OMB guidance. Most of the 22 selected agencies did not identify all of their information technology (IT) contracts. The selected agencies identified 78,249 IT-related contracts, to which they obligated $14.7 billion in fiscal year 2016. However, GAO identified 31,493 additional contracts with $4.5 billion obligated, raising the total amount obligated to IT contracts in fiscal year 2016 to at least $19.2 billion (see figure).The percentage of additional IT contract obligations GAO identified varied among the selected agencies. For example, the Department of State did not identify 1 percent of its IT contract obligations. Conversely, 8 agencies did not identify over 40 percent of their IT-related contract obligations. Many of the selected agencies that did not identify these IT acquisitions did not follow Office of Management and Budget's (OMB) guidance. Specifically, 14 of the 22 agencies did not involve the acquisition office in their process to identify IT acquisitions for Chief Information Officer (CIO) review, as required by OMB. In addition, 7 agencies did not establish guidance to aid officials in recognizing IT. Until agencies involve the acquisitions office in their IT identification processes and establish supporting guidance, they cannot ensure that they will identify all IT acquisitions. Without proper identification of IT acquisitions, agencies and CIOs cannot effectively provide oversight of these acquisitions. In addition to not identifying all IT contracts, 14 of the 22 selected agencies did not fully satisfy OMB's requirement that the CIO review and approve IT acquisition plans or strategies. Further, only 11 of 96 randomly selected IT contracts at 10 agencies that GAO evaluated were CIO-reviewed and approved as required by OMB's guidance. The 85 IT contracts not reviewed had a total possible value of approximately $23.8 billion. Until agencies ensure that CIOs review and approve IT acquisitions, CIOs will continue to have limited visibility and input into their agencies' planned IT expenditures and will not be able to use the increased authority that FITARA's contract approval provision is intended to provide. Further, agencies will likely miss an opportunity to strengthen CIOs' authority and the oversight of IT acquisitions. As a result, agencies may award IT contracts that are duplicative, wasteful, or poorly conceived. GAO is making 39 recommendations, including that agencies ensure that acquisition offices are involved in identifying IT and issue related guidance; and to ensure IT acquisitions are reviewed according to OMB guidance. OMB and 20 agencies generally agreed with or did not comment on the recommendations. One agency agreed with one recommendation, but disagreed with another. GAO believes this recommendation is warranted. One agency disagreed with two recommendations. GAO subsequently removed one of these, but believes the other recommendation is warranted, as discussed in the report.", "document_type": "gao"}
{"report": "Personal property refers to a wide variety of property that may include commonly used items such as computers, office equipment and furniture, and vehicles, as well as more specialized property specific to agencies such as medical equipment for VA and medical helicopters for the Army. See figure 1. The personal property exchange/sale authority allows agencies to replenish property that is not excess or surplus and that is still needed to meet the agency’s continuing mission. Agencies must meet several requirements, including: The property exchanged or sold is similar to the property acquired. Agencies can meet the similarity requirement in one of several ways. First, the property acquired is identical to the property replaced. Second, the acquired property and the replaced property fall within a single federal supply group of property. Third, both the acquired and the replaced property constitute parts or containers for similar parts. Fourth, the acquired and the replaced property are designed or constructed for the same purpose. For instance, ambulances and station wagons adapted for use as ambulances would be considered similar. The property exchanged or sold was not acquired for the principal purpose of later exchanging or selling it using the authority. For example, an agency cannot purchase a costly piece of equipment for the sole reason that it will deliver a higher value when sold using the authority. Proceeds from the sale can only be put toward the purchase of replacement property and cannot be spent on services. In other words, an agency can use proceeds from the sale of a vehicle to purchase a new vehicle, but it cannot use proceeds to hire a mechanic to repair an existing vehicle. In addition, GSA regulations, except as otherwise authorized by law, require that proceeds from sales be available during the same fiscal year the property was sold or the following fiscal year for replacement property. For an item sold in fiscal year 2018, an agency has the rest of fiscal year 2018 as well as fiscal year 2019 to purchase a replacement item. If agencies do not spend these funds by the end of fiscal year 2019, monies are to be deposited in the U.S. Treasury. Finally, agencies are prohibited from using the authority to replace certain types of property (i.e., hand tools and clothing). However, agencies may request a waiver from GSA to sell these prohibited items or to extend the time frame to purchase replacement property. Agencies may choose between two transaction methods to replace property—the exchange (trade-in) or sale method, but must determine which method provides the greater return to the government, including administrative and overhead expenses. A typical exchange occurs when the original manufacturer delivers a replacement item to the agency and removes the item being replaced. The manufacturer applies a trade-in credit (an allowance) for the purchase of a replacement item. If the sale method is used, the agency receives the sale proceeds for the sale of the non-excess items (needed to meet mission requirements) and applies those proceeds to the purchase of the replacement personal property. See figure 2. In conducting a sale, agencies are to follow a process similar to the disposal process for excess property. When an agency disposes of excess property, it makes the item available to other federal agencies and state agencies by posting it in GSAXcess—GSA’s website for reporting, searching, and selecting excess property. The disposal process generally consists of four sequential stages in which personal property may be transferred to another agency or eligible recipient, donated, sold, or abandoned or destroyed. Similarly, agencies may use GSAXcess to facilitate the replacement of property under the exchange/sale authority. However, unlike the disposal process for excess property that may be offered at no cost, if another federal agency or state agency needs the property, the agency is to pay no more than the fair market value for the item or a negotiated fixed price, respectively. Otherwise, the property may be listed for sale to the general public at approved sales centers, such as GSA AuctionsSM, or through other approved methods, such as live auctions or Internet sales. After the sale closes, the agency receives the proceeds to apply toward the purchase of a similar item. Agencies are required to submit a summary report to GSA at the end of each fiscal year on the type, the quantity, the exchange allowances or sale proceeds, and the original acquisition cost of items for both exchange and sale transactions. Agencies that made no transactions during a fiscal year must submit a report stating that they made no transactions. Ultimately, agencies decide whether to use the exchange/sale authority to replace property in their inventory. In managing property, federal law requires agencies to maintain adequate inventory controls and accountability systems as well as assess the extent to which the agency’s mission depends on the property. According to GSA’s annual summary data, 27 agencies reported using the exchange/sale authority and received a total of about $3.1 billion in exchange allowances or sale proceeds from fiscal year 2013 through fiscal year 2017. While many agencies used the authority, a few agencies, particularly GSA, together accounted for about 90 percent of all allowances and proceeds. Specifically, 5 of 27 agencies reported nearly all exchange allowances and sale proceeds. GSA accounted for about $1.9 billion of about $3.1 billion (or about 60 percent) of reported allowances and proceeds across the federal government. Four other agencies—the Departments of Homeland Security, Agriculture, Defense, and the Interior—accounted for about $934 million (or about 30 percent) of the total. The other 22 agencies using the authority reported about $332 million (or about 11 percent) in exchange allowances or sales proceeds over the 5-year period. See figure 3. Finally, agencies reported using the sale method more than the exchange method. Sales by agencies accounted for about $2.9 billion (or about 91 percent), while use of the exchange method accounted for about $275 million (or about 9 percent) of total transactions reported, primarily due to GSA’s and DOD’s reporting more use of the sale method over the exchange method. While some agencies reported hundreds of millions of dollars in exchange allowances and sale proceeds, the data show that 10 federal agencies— including the Department of Labor, Office of Personnel Management, and the Social Security Administration—reported relatively few transactions, which totaled less than $100,000 in exchange allowances and sales proceeds. GSA OGP officials consider the agency-reported data to provide a representative picture of the overall exchange/sale transactions occurring across the federal government. GSA OGP officials rely on the agencies to ensure the accuracy and completeness of the exchange/sale information. According to GSA OGP officials, because GSA does not have authority to compel the agencies to report or address quality issues, it does not look at record level data from the agency to determine the data’s accuracy and does not have a way of verifying if exchange data are accurate and complete. Nonetheless, GSA officials said they take steps to ensure the data are reliable and complete. For example, GSA OGP officials said they review the data for any obvious inaccuracies and follow up with the reporting agency to correct the inaccuracy. In addition, according to GSA OGP officials, they report the sales portion of most agencies’ exchange/sale transactions for any sales that were conducted by GSA and ask agencies to verify the data before finalizing it in the summary report. While agencies exchanged and sold a wide variety of items, GSA’s annual summary data show that high-value items, primarily vehicles, accounted for the vast majority of allowances and proceeds from fiscal year 2013 through fiscal year 2017. Specifically, vehicle sales across the federal government accounted for about $2.6 billion of $3.1 billion (or about 84 percent) in total proceeds, of which GSA’s Fleet program accounted for about 71 percent of that total. According to GSA Fleet program officials, the authority allows GSA to continuously update its fleet of over 214,000 vehicles while keeping lease payments low for its 75 customer agencies. The program sells an average of about 36,000 vehicles each year, bringing in about $370 million in sales proceeds annually. In fiscal year 2017, the program received almost $300 million in proceeds from vehicle sales and spent about $776 million acquiring new vehicles. Three agencies—the Departments of Agriculture, Homeland Security, and the Interior—each reported over $100 million in proceeds from vehicle sales. In addition to vehicles, agencies reported exchanging and selling other types of high-value items. For example, DOD reported using the authority to sell or exchange helicopters. According to the Army Aviation Program Executive Office, the Army continues to divest and plans to replace up to 800 Black Hawk helicopters from 2014 to 2025, each having an average value of about $1.5 million. See figure 4. DOD reported about $150 million in exchange allowances and sale proceeds by using the authority to replenish aircraft, and as of January 2018 Army Aviation had purchased five Black Hawk helicopters. Other DOD agencies—the Naval Air Systems Command and the Air Force Life Cycle Management Center—are using the authority for exchanging aircraft engines and parts containing rare earth metals under a reclamation and propulsion material exchange program. In addition to high-value items, agencies reported selling a wide variety of other items, including missiles, office equipment, lumber, and packing supplies. One of our selected agencies, VA, predominately used the authority to exchange medical equipment. See figure 4. However, we did not find data for VA to be sufficiently reliable to report separately. Based on our interviews with VA medical centers we found that reported data did not reflect actual exchange/sale transactions, which we discuss later in this report. However, we have included VA data in the reported $332 million for “Other federal agencies” in figure 3. GSA regulations for the personal property exchange/sale authority set forth several conditions for using the authority, including that the property exchanged or sold is not excess or surplus and that agencies report information on their exchange/sale transactions to GSA on an annual basis. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives. However, the agencies in our review had different levels of understanding about the authority, which affected their experiences for how they used the authority and outcomes. For example, VA officials said they misunderstood key aspects of the exchange/sale authority, resulting in inefficiencies and data inaccuracies, as described below: Process for selling property: Officials from all three selected VA medical centers said they did not understand the sequence of events in selling property using the sale method, a situation that led to VA’s using a potentially less economical method to acquire new equipment. For example, officials at two selected VA medical centers told us that they believed that they had to sell their medical equipment prior to acquiring replacement equipment. Officials at one medical center said this sequence of events makes it difficult to use the sales method of the exchange/sale authority because VA medical centers must have medical equipment, such as x-ray machines, readily available and fully operational for veterans at all times. However, GSA OGP officials stated that replacement property can be purchased prior to the sale of property. In addition, officials at a VA medical center reported they had limited storage, making it difficult to buy replacement equipment and store it until VA can sell the equipment. As a result, a VA medical center official stated that they instead used the exchange method because it provided a seamless replacement of equipment to prevent any break in availability of medical equipment. While the exchange method is a viable approach, in this case, the sales method could have delivered a higher monetary return. In addition, by using the sale method, VA could potentially have replaced equipment more efficiently than replacing the full cost of the item with the agency’s appropriation. A VA headquarters official was also unclear about how to use the proceeds from sales. This official was unclear whether the sales proceeds could be used from any type of medical equipment in a particular supply category, such as a scalpel, toward the replacement of another item in that same classification, such as a wheelchair, or whether the items had to be identical or serve a similar purpose. Data Reporting: Officials at two selected VA medical centers did not clearly understand the annual summary data reporting process. These officials stated that they found GSA’s reporting template confusing because it provides minimal direction to the user and does not clearly define some data-reporting elements. The template includes a space for reporting “exchanged/sold;” however, officials at one medical center were unaware that “sold” referred specifically to exchange/sale transactions only and not to other transactions referred to as sales, such as surplus property sales; according to medical center officials, this medical center reported about 1,000 misclassified sales in GSA’s annual summary data. Exchange/sale versus disposal: According to VA officials, they or others involved in personal property management did not fully understand the distinction between the process for acquiring replacement property under the exchange/sale authority and the process for declaring property as excess. Officials within all three selected VA medical centers misunderstood the difference between the two processes, possibly because both processes use GSAXcess to sell property under the exchange/sale authority or to report property as excess for disposal. As a result, one VA medical center mistakenly reported excess disposals as exchange/sale in the GSA OGP annual summary data. In addition, two facilities disposed of some still needed property instead of conducting sales under the exchange/sale authority. A VA headquarters official acknowledged that property managers in charge of implementing the exchange/sale authority at medical centers may be confusing these two processes or may be unaware that the exchange/sale authority exists. Similarly, officials from the Air Force and Navy said they or others involved in personal property management did not always understand the difference between these two processes. An Air Force official stated that DOD’s policies do not clearly distinguish the exchange/sale process from the disposal process and do not consistently define terms, such as “excess” and “non-excess” property, that align with GSA’s regulations. In retrospect, Air Force officials stated that they disposed of property that could have been replaced through the exchange/sale authority. Generally, disposal results in (a) sales proceeds being returned to the U.S. Treasury rather than retained by the agency and (b) services possibly having to use their appropriation for replacement property, rather than working directly with the vendor to obtain a replacement at a reduced cost. We have previously reported on DOD’s disposing of $855 million in excess items for which they will likely have a continuing need. Conversely, based on our interviews and review of their policies, records, and transaction data, two program offices within the Army and GSA— Army Aviation and GSA Fleet—appeared to understand how to use the exchange/sale process. We found that these offices may have a greater level of understanding for a few key reasons: Narrow scope: Both programs are designed around replacing one type of item—helicopters for helicopters or vehicles for vehicles. When items are not so directly interchangeable, determining whether or not an item sold and replaced or exchanged are “similar” can be challenging. Because the Army Aviation and the GSA Fleet programs focus on one type of item, the determination of what constitutes similar property under the GSA regulation is not a challenge. Established programs with frequent sales: The Army Aviation and the GSA Fleet programs have sold hundreds of aircraft and tens of thousands of vehicles over the past several years. They have invested resources into developing an exchange/sale process. Conversely, programs that may sell or exchange an item or two a year—even very expensive items, such as medical equipment—may not have the same opportunities to develop processes and guidance through repeated sales or exchanges. High-value items: Similarly, both the Army Aviation and the GSA Fleet programs sell high-value items. Thus, investing resources in an exchange/sale process makes sense, as programs benefit from the sales and have a process to guide and track these high-value items. For an agency like VA, which disposes of some low-value items, there may not be the same motivation to develop a standard process. GSA OGP officials emphasized that high-value items, such as helicopters and vehicles, are best suited for using the exchange/sale authority. GSA OGP officials stated that they recognize some agencies, such as VA, may experience confusion using the authority, that the regulations are misunderstood by agencies, and that aspects of the authority need to be clarified. According to these officials, GSA attempted to amend the regulations in 2015 to address key areas of confusion, including: restricting the definition of similar to ensure that items replaced are clearly similar. GSA wanted to change the federal supply category criteria to make agencies replace items at the more specific four digit level rather than the broader two digit level. As an illustration, this change would help clarify the confusion VA reported about whether a scalpel and a wheel chair qualify as similar items. clarifying the process for selling property; specifically, clarifying that agencies can purchase replacement property prior to the sale of property that no longer adequately performs its task. However, GSA OGP officials stated that they did not complete the rulemaking process in order to give the incoming administration an opportunity to review and approve any revisions. Since the change in administration, GSA officials said they have been focused on evaluating the continued need and relevance of all of their regulations as part of the administration’s plan to conduct regulatory reviews. Nonetheless, GSA OGP officials said they plan to address these areas of confusion by amending the regulations. Specifically, they plan to clarify the definition of similar property and the difference between excess and non-excess property, among other changes. However, officials estimate the rulemaking will likely not be finalized for at least 2 years. As a result, the extent to which the rulemaking process will result in clarifying language is unknown. Although GSA anticipates initiating a rulemaking to amend regulations, which could make the definition of “similar” more restrictive, GSA OGP officials told us that clarifying the issues agencies found confusing would not necessarily require a rulemaking. They highlighted other actions they are taking to promote the use of the authority, inform agencies of the requirements, and train agencies on using the authority. For example, they conduct outreach by making presentations at national conferences (i.e., FedFleet), meet with representatives from the National Property Management Association, and hold small group discussions with program managers specializing in certain high-value items, such as aircraft. GSA’s presentations aim to educate agencies on what the authority is, the conditions and requirements of the authority, and when to use the authority. According to GSA OGP officials, as a result of their outreach, they have seen immense growth in exchange/sale transactions among the aviation community. GSA has also issued bulletins to help dispel misunderstandings related to using the exchange/sale authority. For example, GSA issued a bulletin in 2010 to federal agencies to remind them to submit annual reports on exchange/sale transactions. This bulletin contained information on the reporting requirements, frequently asked questions, and points of contact for agencies to reach out to with additional questions. In summer 2018, GSA OGP officials drafted a new bulletin to further address financial aspects of the exchange/sale authority and expect to issue it in December 2018. This bulletin details why agencies should use the authority and directs agencies to develop policies for using the authority and to consult with the Chief Financial Officer of the agency to obtain more information. According to these officials, an additional bulletin would take 3 to 4 months to develop and issue. However, neither GSA’s outreach nor its draft bulletin addresses existing confusion regarding the sales process or data reporting, or distinguishes the exchange/sale process from the disposal process. For example, GSA’s outreach, such as the FedFleet presentation, generally describes the authority and discusses provisions of using the authority but does not address issues agency officials told us they found confusing. The presentation tells agencies that they can sell property under the authority but does not go into the mechanics of how to sell property. By making presentations like these to address areas agencies found confusing, GSA would have an opportunity to help clarify these issues and encourage agencies to use the authority more. Moreover, GSA OGP officials told us that they believe that a lack of knowledge of the authority is a reason why some agencies do not use it more. As we reported earlier, 10 of the 27 federal agencies that reported transactions had few exchange/sale transactions over the past 5 years. According to a VA official, if VA medical centers better understood how to use the authority, they could see a significant increase in use throughout the agency. Furthermore, if GSA provided clearer information on using the authority, the 10 agencies that we found that used the authority infrequently may increase their use. Additionally, GSA’s draft bulletin on financial issues does not address the logistical issues agencies found confusing, such as how to sell property using the exchange/sale authority. The bulletin addresses accounting procedures agencies should follow when conducting transactions but does not describe how agencies are to conduct these transactions. Until GSA takes action to address confusion, agencies may continue to misunderstand and not use the exchange/sale authority. If agencies continue to misunderstand aspects of the exchange/sale authority, they may not take full advantage of the authority, thereby missing opportunities to be more effective stewards of government property and replenish property more efficiently. Agencies are responsible for managing their own personal property, including monitoring their exchange/sale activities. Federal internal control standards call on managers to establish and operate monitoring activities to monitor the internal control system and evaluate the results. Monitoring involves regular management and supervisory activities, comparisons, reconciliations, and other routine actions. We found that the Army monitored its exchange/sale activities, as outlined in its policies. The Army’s policy delegated responsibility to the Army’s Deputy Chief of Staff (Logistics) to monitor and approve Army programs seeking to use the authority. Our review of Army’s policy found that multiple Army offices monitor financial, logistical, legal, and procurement functional areas as they reviewed and communicated on the eligibility of exchange/sale transactions. The policy also allows program and inventory managers to use the authority for high-value items, requires contracting officers and attorneys to review the transactions, and uses a management checklist for transactions. Consistent with policy, the Army’s Deputy Chief of Staff, in conjunction with offices within DOD, reviewed and approved requests from Army Aviation to use the exchange/sale authority to sell Black Hawk helicopters and apply proceeds to replacement helicopters. The Army official said that the office continues to monitor exchange/sale transactions in collaboration with the Army Aviation program to manage the exchange and sale of their personal property that includes Black Hawk helicopters. Unlike the Army, GSA OAS did not monitor its internal exchange/sale activities. In 2009, GSA’s internal policy established a position responsible for ensuring compliance with government-wide, personal property requirements. However, GSA officials stated that the position was never staffed and later subsumed into GSA OAS when the office was established in 2011 to manage personal property, including exchange/sale activities, within the agency. Since that time, GSA OAS officials said that they have not monitored these activities because senior management did not prioritize personal property, including exchange/sale transactions. For example, management did not clarify GSA OAS’s responsibilities nor did it define the scope of its authority for monitoring exchange/sale activities. As a result, GSA OAS officials said they have not been involved with any exchange/sale activities within the agency, and besides GSA Fleet, they do not know the extent to which other internal offices are using (or should be using) the authority. According to GSA OAS officials, they have recently focused on an effort to rebuild an internal personal-property management program that will take several years to develop given the current staff of two. As part of this effort, GSA OAS revised the policy for internal personal property management in 2018 and is drafting a standard operating procedure that is expected to provide additional clarification for monitoring and conducting exchange/sale activities within GSA. According to GSA officials: the 2018 policy provides relevant updates and more details that distinguish between (a) the exchange/sale authority for the exchange and sale of non-excess, non-surplus personal property and (b) the disposal authority with a focus on the disposal of excess personal property. the draft standard operating procedure is to provide procedures for all internal GSA offices to follow when using the authority. This standard operating procedure establishes a position to, among other things, help internal offices conduct and report exchange/sale transactions. GSA OAS officials referred to this procedure as a work-in-progress and were uncertain when it would be finalized. However, GSA OAS officials said that they do not know whether this policy revision will allow them to monitor exchange/sale activities for two reasons. First, GSA OAS is unclear about the scope of its authority, such as whether the GSA Fleet program falls under its exchange/sale purview. GSA Fleet program officials said that they are not opposed to having GSA OAS monitor their program in the future. Second, this procedure will not be formally approved or coordinated throughout GSA, a situation that means there may not be consensus among all GSA offices as to GSA OAS’s responsibilities and scope of authority. As a result, the revision of the policy and completion of the procedure may not be enough to ensure compliance with exchange/sale requirements. In the absence of clear responsibilities and scope of its authority, GSA OAS may not be able to monitor exchange/sale activities or provide clear information and direction to other offices within GSA. Similar to GSA, VA conducted limited monitoring of its exchange/sale activities. VA policy states that the Deputy Assistant Secretary for Acquisition and Logistics has the departmental-wide responsibility for personal property inventory management, utilization, and disposition as well as to monitor VA logistics programs and policies. Within VA’s Veterans Health Administration (VHA), the Office of Procurement and Logistics assigns logistics officers at VHA Regional Offices with monitoring responsibilities of medical centers to ensure compliance with VA and VHA policies. However, we found that the three VHA Regional Offices conducted limited monitoring of 23 medical centers under their purview. According to the officials we contacted, they conducted a cursory review of end-of-year data from medical centers before the data were submitted through VHA to GSA for the annual summary report. According to officials at one Regional Office, they did not focus on monitoring exchange/sale transactions beyond a cursory review to see that property fell within the medical or laboratory equipment supply categories. As previously mentioned, we found that reported data did not reflect actual exchange/sale transactions. Specifically, we found that none of the sale transactions reported in 2016 as exchange/sale transactions by a selected medical center in this region was correct. Instead, these transactions were sales of surplus property. According to officials at another Regional Office, they have no reason to review exchange/sale transactions in a more robust manner because end-of-year reporting presented no problems in the past that would warrant a more standardized approach. However, for the one selected medical center in this region, we found several errors in reporting end-of-year data from 2013 through 2017. Specifically, we found that nearly all reported exchanges were actually sales of surplus property, a reported exchange in 2017 was actually a transfer to another medical center, and despite reporting no transactions in 2016, we identified an exchange valued at $500,000. According to officials from a third Regional Office, they monitored various aspects of VA’s personal property program—inventories and disposals, but not exchange/sale transactions. During our review, we found that one selected medical center under their purview reported about 1,000 sale transactions to GSA, but none was correct. Instead of sales of needed (non-excess, non-surplus) property, they were actually sales of surplus property. Regional officials are aware of this error and have added four new questions about exchange/sale transactions to the checklist used for their annual quality-control reviews. They said they do not know whether other Regional Offices perform similar reviews. An official in VA’s Office of Acquisition and Logistics acknowledged that these findings are likely not uncommon because the office has not developed or communicated the management activities necessary for Regional Offices to consistently monitor medical centers’ exchange/sale transactions. The lack of communication on monitoring procedures was corroborated by two Regional Offices. An official with the Office of Acquisition and Logistics explained that the office promulgates policy and that VHA’s Office of Procurement and Logistics helps ensure policy is followed, but the absence of monitoring stems, in part, from these two offices’ not collaborating or communicating the activities Regional Offices are to conduct. VHA Regional Offices monitor medical centers through annual quality-control reviews, but the reviews did not have an exchange/sale component. Furthermore, VA internally reviews a small sample of the VHA’s annual quality-control reviews each year. From a Regional Office perspective, officials told us they prioritized other activities, such as monitoring inventories or disposal of equipment, over exchange/sale activities. The VA office has also not communicated with VA medical centers on how to effectively use the authority to support their medical equipment replacement needs or the benefits associated with the authority. For example, the VA office has not provided specific guidance beyond issuing personal property policies for how to conduct and monitor exchange/sale transactions. VA officials are taking steps to improve communication to those involved in exchange/sale transactions throughout the agency—those monitoring transactions and those initiating transactions. For example, officials within the Office of Acquisition and Logistics stated that they plan to clarify the use of the exchange/sale authority within the agency’s policies for personal property disposal. This clarification will be in the form of a notice (an incremental policy change) or as part of a planned rewrite of personal property policies. However, it is uncertain whether the information will have a level of detail to be useful for medical centers to understand the requirements for using the exchange/sale authority or will delineate how the exchange/sale process differs from the disposal process. Adding to this is the uncertainty about the time frame for finalizing and communicating such information to medical centers. Furthermore, VA officials said the policy changes alone will not be sufficient and assistance from VHA will be necessary to ensure Regional Offices understand their monitoring roles and responsibilities. A VHA official acknowledged the need to work with Regional Offices to augment the annual quality-control review checklists with an exchange/sale component, but it is unclear if and when such an update will take place. Until VA and VHA work together to develop a detailed policy for monitoring and establish time frames with milestones for communicating information, they cannot be assured that 172 medical centers and 18 Regional Offices understand the exchange/sale authority, how to use it, and how to monitor end-of-year reporting data. By using the exchange/sale authority, agencies have an opportunity to be good stewards of government property by efficiently replacing needed property, including high-value items, that serves critical and continuing requirements to meet agency missions. However, unfamiliarity with the exchange/sale authority and confusion surrounding the authority may lead to decisions that may not be in the government’s best interest. Although GSA OGP officials acknowledge the need to amend the regulations to address areas that require rulemaking, delay in taking action to address areas of confusion that currently exist but do not require rulemaking will continue to lead to misinterpretation or misunderstanding about the authority. Moreover, until GSA specifies GSA OAS’s responsibilities and defines the scope of its authority, it will continue a long-term pattern of not monitoring GSA’s exchange/sale activities. Finally, until VA develops and communicates the necessary information to help Regional Offices and medical centers with their exchange/sale responsibilities, it will not have an assurance that all VA medical centers are reporting transactions accurately or effectively using the exchange/sale authority. We are making the following two recommendations to GSA and one recommendation to VA. The GSA’s Associate Administrator for the Office of Government-wide Policy should take action to address specific areas of federal agency confusion with the exchange/sale authority, areas such as the process for selling property, reporting data, and distinguishing the exchange/sale process from the disposal process. Such actions could include issuing bulletins or conducting expanded outreach and, as necessary, issuing regulations. (Recommendation 1) The Administrator of General Services should take steps to improve agency-wide monitoring of exchange/sale activities within GSA by specifying the Office of Administrative Services’ responsibilities and by defining the scope of its authority. (Recommendation 2) The VA’s Deputy Assistant Secretary of Acquisition and Logistics, in collaboration with VHA’s Office of Procurement and Logistics, should revise VA’s policy to include details on the exchange/sale authority, particularly those related to monitoring by Regional Offices and use of the authority for medical centers, and establish time frames with milestones for communicating such information. (Recommendation 3) We provided a draft of this report to GSA, DOD, and VA for comment. All three agencies agreed with the findings. GSA and VA also agreed with the recommendations for their agencies. DOD provided a technical comment to the report in an email; we incorporated the technical suggestion. GSA agreed with our recommendations and stated that it has already begun to increase understanding and appropriate use of the exchange/sale authority within GSA and across the federal government. GSA is finalizing a plan to address the recommendations. GSA’s written response is reprinted in appendix II. VA agreed with our recommendation to revise its policy to include details on the exchange/sale authority. VA stated that the Office of Acquisition and Logistics, in conjunction with the VHA Procurement and Logistics Office, has produced two draft memorandums to amend policy related to the exchange/sale authority as well as the utilization and disposal of personal property. The agency plans to promulgate the new policy by December 2018. VA’s written response is reprinted in appendix III. We are sending copies of this report to the appropriate congressional committees, the Administrator of General Services, the Secretary of Defense, and the Secretary of Veterans Affairs. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Our objectives were to (1) describe what is known about personal property exchange/sale transactions, as reported by federal agencies from fiscal years 2013 through 2017, and (2) examine selected agencies’ experiences using the personal property exchange/sale authority and monitoring such activities. To address both objectives, we reviewed applicable federal statutes and regulations pertaining to personal property management and the exchange/sale authority, our prior work, and reports by federal agencies’ offices of inspectors general on personal property management issues. To understand General Services Administration’s (GSA) role and responsibilities for personal property management in support of exchange/sale activities across the federal government, we reviewed GSA’s personal property management structure, policies, bulletins, briefings, and training materials. To describe what is known about the personal property exchange/sale transactions, we analyzed annual exchange/sale summary data, as reported to GSA’s Office of Government-wide Policy (GSA OGP) from federal agencies from fiscal year 2013 through fiscal year 2017. These data identify the agency involved in the transactions, the transaction method, and the type and value of the property. These data are the only federal government-wide data available on exchange/sale transactions. Accordingly, we analyzed these summary data to characterize transactions over a 5-year time frame, by agency, by type of transaction (exchange or sale), by type of personal property using personal property categories, and by amount of exchange allowances and sale proceeds. We assessed the reliability of these data from a government-wide perspective and for selected agencies. From a government-wide perspective, we reviewed GSA’s electronic template provided to federal agencies for reporting data, viewed a training video used to help agencies report data to GSA, and reviewed the users’ guide and other materials related to GSA’s personal property reporting tool. In addition, we interviewed GSA OGP officials regarding their data processes—such as data collection, submission, reconciliation, verification, and compilation of annual exchange/sale summary reports—to understand the steps GSA OGP takes to determine the accuracy, consistency, and completeness of data. We did not independently verify all the exchange and sales data that was provided to us because of the large quantity of detailed data associated with each agency and because some of the data were not within the scope of our selected agencies and personal property categories. However, we determined that GSA’s government-wide summary data was sufficiently reliable for our purposes of describing the agencies that use the authority, the general types of property they acquire, and the relative order of magnitude of exchange allowances and sales proceeds. For sales conducted through GSA sales centers, GSA reports summary information on behalf of most agencies. GSA officials told us all exchange transactions are self-reported by agencies. GSA does not ensure the accuracy of this information beyond a review for obvious errors. However, because sales account for about 91 percent of the dollar value of all transactions, we believe that the total value of transactions across the federal government is sufficiently reliable for our purposes of describing exchange/sale activity. To assess the reliability of GSA and other selected agencies’ summary data, we compared annual exchange/sale summary data collected by GSA OGP with detailed GSAAuctionsSM sales data associated with the exchange/sale authority collected by GSA’s Office of Personal Property Management. We looked to see if aggregated sales totals matched, identified similarities and gaps, and observed individual agency and government-wide trends for using the exchange/sale authority. We found data reported by GSA’s Office of Fleet Management (GSA Fleet) and the Army’s Program Executive Office for Aviation (Army Aviation) to be reliable. However, we found reliability issues with data reported by the Department of Veterans Affairs (VA). As a result of our interviews with selected facilities, we found that some reported sale and exchange data from VA did not represent actual exchange/sale transactions. Accordingly, we determined that VA data were not reliable to analyze independently. We did include these data in the total for the federal government given that they accounted for about 1 percent of that total. To examine selected agencies’ experiences using the exchange/sale authority and monitoring such activities, we selected three agencies— GSA, the Department of the Army within the Department of Defense (DOD), and the VA—based on various characteristics, such as the values of the agencies’ exchange allowances and sale proceeds; the quantity of items exchanged and sold; and selected three different types of personal property categories—vehicles, aircraft, and medical equipment—for which the exchange/sale authority was used over the 5-year time period. GSA: We selected GSA because it reported a high-value of exchange/sale transactions. Within GSA, two offices have key roles in the internal use of the exchange/sale authority. First, through GSA Fleet, GSA manages the government-wide motor-pool program (the largest user of the exchange/sale authority) that acquires vehicles and then leases them to other federal agencies. Second, GSA’s Office of Administrative Services (GSA OAS) is the office responsible for performing personal-property management functions, such as developing policy and procedures, internal to the agency. Army: We selected the Army because it reported a relatively low- number of high-value items. In particular, Army Aviation accounted for the majority of high-value aviation-related exchange/sale transactions within DOD. During the course of our review, we also attended a joint GSA-DOD presentation focused on major end items that brought together GSA, Army, Navy, and Air Force officials to discuss their experiences using the exchange/sale authority. VA: We selected VA because it reported a high-number of low-value items sold or exchanged. For in-depth interviews, we selected three medical centers (Long Beach, California; Cincinnati, Ohio; and Portland, Oregon) that reported using the authority for the acquisition of medical equipment and the three Veterans Integrated Service Networks (Regional Offices) responsible for monitoring these medical centers. See table 1 below. At all of these agencies, we reviewed exchange/sale transactions to understand agencies’ experiences in using the authority, personal property policies and program, financial documents applicable to exchange/sales, and applicable Standards for Internal Control in the Federal Government and GSA’s regulations. We also reviewed relevant sections of Principles of Federal Appropriations Law to understand decisions on using the exchange/sale authority for acquiring personal property. In addition, we examined agencies’ monitoring of exchange/sale transactions in the context of internal control standards. We interviewed officials from each of our selected agencies responsible for using exchange/sale authority and implementing processes to manage and monitor personal property. We interviewed GSA Fleet officials and visited Army Aviation officials in Huntsville, Alabama. During these interviews, GSA and Army Aviation officials walked through materials and explained their exchange/sale processes by using actual sample transactional information. We examined personal property documentation associated with personal property that had been either been exchanged or sold. For VA, we selected 3 of 172 VA medical centers to understand how these medical centers implemented their personal property exchange/sale processes and procedures. We selected one site based on its high number of exchange/sale transactions of medical equipment and its close geographic proximity to one of our field offices. The other two sites were chosen based on a high and low number of exchange/sale transactions of medical equipment. At the VA locations, we interviewed medical center officials responsible for supply chain management as well as Regional Office officials responsible for oversight of those selected medical centers and the exchange/sale management activities. During these interviews, we discussed selected agency officials’ understanding and use of the exchange/sale authority, reviewed data and documentation, addressed what officials did to implement processes for their exchange/sale programs, identified challenges, and took photographs at one location of selected personal property that was exchanged or sold. Information we obtained from the three selected agencies is not generalizable to all federal agencies but provides illustrative examples in how agencies have used the authority. We conducted this performance audit from August 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on the audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, the following individuals made important contributions to this report: Nancy Lueke (Assistant Director); Steve Martinez (Analyst-in-Charge); Aisha Cabrer; SaraAnn Moessbauer; Malika Rice; Amy Rosewarne; Jerry Sandau; Travis Schwartz; and Crystal Wesco.", "summary": "According to the U.S. Treasury, the government owns about $1.3 trillion in “personal property” such as computers, furniture, and vehicles. Federal law authorizes agencies to exchange or sell personal property and retain the allowances or proceeds for replacing similar needed property. These are called “exchange/sale” transactions. GSA is responsible for issuing exchange/sale regulations and guiding agencies on the use of the authority. GAO was asked to review agencies' use of the exchange/sale authority. This report (1) describes what is known about personal property exchange/sale transactions from fiscal year 2013 through fiscal year 2017 and (2) examines selected agencies' experiences using the exchange/sale authority and monitoring such activities. GAO analyzed multi-year data compiled by GSA OGP and found the data to be sufficiently reliable. GAO selected three agencies—GSA, the Army, and VA—based on the type, quantity, and value of personal property exchanged and sold; reviewed agencies' personal property policies; examined agencies' monitoring of exchange/sale activities; and interviewed their officials about personal property management. According to data compiled by the General Services Administration's Office of Government-wide Policy (GSA OGP), 27 agencies executed exchange/sale transactions, governed by statute and GSA regulations, to exchange (trade-in) or sell personal property from fiscal year 2013 through fiscal year 2017. The 27 agencies reported transactions totaling about $3.1 billion. Vehicle sales accounted for $2.6 billion (about 84 percent) of that total. GAO found that GSA officials who procure vehicles for federal agencies and Army officials who purchase helicopters appeared to understand the exchange/sale process and used it frequently. However, Department of Veterans Affairs (VA) officials expressed confusion about key aspects of the authority. For example, officials were unclear about how to sell property; this lack of clarity led to missed opportunities to use sale proceeds for replacing property. GSA OGP officials who guide agencies on the use of the authority acknowledged that the exchange/sale regulations can be confusing but GSA's plan to amend them is at least 2 years away. Because GSA does not plan to address this confusion in the near term through other means such as bulletins or outreach, agencies' misunderstanding of the authority could lead to additional missed opportunities to be effective stewards of government funds. Regarding monitoring of exchange and sale activities, GAO found that the Army monitored activities consistent with its policy. However, GSA and VA performed limited monitoring because: GSA had not clarified its responsibilities or defined the scope of its authority for monitoring internal GSA exchanges and sales, and VA did not have a detailed policy for monitoring and had not communicated information about monitoring to pertinent employees. Until GSA clarifies its responsibilities and the scope of its authority and VA revises its policy with pertinent details and communicates this information to staff members, neither agency will be positioned to sufficiently monitor exchange/sale activities. GAO is recommending that GSA OGP address agency confusion about the exchange/sale authority and that GSA clarify its responsibilities and the scope of its authority. GAO is also recommending VA revise its policy to address monitoring and communicate the revision to staff. Both agencies agreed with the recommendations.", "document_type": "gao"}
{"report": "Federal agencies and our nation’s critical infrastructures—such as energy, transportation systems, communications, and financial services— are dependent on computerized (cyber) information systems and electronic data to carry out operations and to process, maintain, and report essential information. The information systems and networks that support federal operations are highly complex and dynamic, technologically diverse, and often geographically dispersed. This complexity increases the difficulty in identifying, managing, and protecting the myriad of operating systems, applications, and devices comprising the systems and networks. Cybersecurity professionals can help to prevent or mitigate the vulnerabilities that could allow malicious individuals and groups access to federal information technology (IT) systems. The ability to secure federal systems depends on the knowledge, skills, and abilities of the federal and contractor workforce that designs, develops, implements, secures, maintains, and uses these systems. This includes federal and contractor employees who use the systems in the course of their work, as well as the designers, developers, programmers, and administrators of the programs and systems. However, the Office of Management and Budget has noted that the federal government and private industry face a persistent shortage of cybersecurity and IT talent to implement and oversee information security protections to combat cyber threats. This shortage of cybersecurity professionals makes securing the nation’s networks more challenging and may leave federal IT systems vulnerable to malicious attacks. Having experienced and qualified cybersecurity professionals is important for DHS to help mitigate vulnerabilities in its own and other agencies’ computer systems as a result of cyber threats. In recent years, the federal government has taken various steps aimed at improving the cybersecurity workforce. These include establishing a national initiative to promote cybersecurity training and skills and developing guidance to address cybersecurity workforce challenges. The National Initiative for Cybersecurity Education (NICE): This initiative, which began in March 2010, is a partnership among government, academia, and the private sector. It is coordinated by the National Institute of Standards and Technology (NIST) to help improve cybersecurity education. According to NICE, its mission includes promoting cybersecurity education, training, and workforce development, and coordinating with government, academic, and industry partners to build on existing successful programs and facilitate change and innovation. The initiative’s goal is to increase the number of skilled cybersecurity professionals in order to boost national IT security. National Cybersecurity Workforce Framework: In April 2013, NICE published the National Cybersecurity Workforce Framework, which is intended to provide a consistent way to define and describe cybersecurity work at any public or private organization, including federal agencies. The initial framework defined 31 cybersecurity- related specialty areas that were organized into 7 categories. In August 2017, the framework was revised to include 33 cybersecurity- related specialty areas. The 7 categories are: securely provision, operate and maintain, protect and defend, investigate, collect and operate, analyze, and oversee and govern. For example, in the oversee and govern category, a specialty area is cybersecurity management, which covers the management of personnel, infrastructure, policy, and security awareness. Further, in the protect and defend category, the vulnerability assessment and management specialty area covers conducting assessments of threats and vulnerabilities and recommending appropriate mitigation countermeasures in order to protect information systems from threats. In August 2017, NIST also revised the framework to define work roles within each specialty area and describe cybersecurity tasks for each work role. The revision also described the knowledge, skills, and abilities that a person should have in order to perform each work role. The revised framework is intended to enable agencies to examine specific IT and cybersecurity-related work roles and identify personnel skills gaps. OPM Guidance for Assigning Employment Codes to Cybersecurity Positions: OPM sets data standards for federal job classifications, including cybersecurity positions. The data standards, issued by OPM in November 2014 created a 2-digit employment code for each work category and specialty area defined in the initial 2013 NICE cybersecurity workforce framework. Federal agencies use the codes to identify cybersecurity positions in personnel systems, such as the National Finance Center’s personnel and payroll system. According to OPM, assigning codes to federal cybersecurity positions is intended to lay the groundwork for a consistent governmentwide count of the federal cybersecurity workforce. Use of these codes is intended to enable OPM and federal agencies to more effectively identify the cybersecurity workforce; determine baseline capabilities; examine hiring trends; identify skill gaps; and recruit, hire, train, develop, and retain an effective cybersecurity workforce. (See appendix II for a description of the specialty areas defined in the NICE Cybersecurity Workforce Framework and their corresponding OPM codes). In January 2017, OPM issued new guidance to agencies for assigning employment codes to cyber-related positions. This guidance created a unique 3-digit employment code for each cybersecurity work role identified in a draft version of the 2017 NICE cybersecurity workforce framework. To enhance the recruiting and hiring of workers with needed skills, agencies are to use the new 3-digit employment codes to identify critical needs, and provide training and development opportunities for cybersecurity personnel. In October 2017, NIST issued guidance, which reflected the finalized 2017 NICE framework and included a crosswalk of the 2-digit employment codes to the 3- digit employment codes. DHS is the third largest department in the federal government, employing approximately 240,000 people and with an annual budget of about $60 billion—$6.4 billion of which was spent on IT in fiscal year 2017. The department leads the federal government’s efforts to secure our nation’s public and private critical infrastructure information systems. For example, DHS collects and shares information related to cyber threats and cybersecurity risks and incidents with other federal partners to enable real-time actions to address these risks and incidents. DHS is made up of 15 components: 7 front-line, or operational, components, and 8 support components. The operational components lead the department’s front-line activities to protect the nation, while the support components are to provide the resources, analysis, equipment, services, and other support to ensure that the operational components have the tools and resources to accomplish the department’s mission. The 15 operational and support components, including the 6 that we reviewed, are identified in figure 1. The components perform a diverse range of cybersecurity functions. These functions include combating cybercrime; responding to cyber incidents; sharing cyber-related information, including threats and best practices; providing cybersecurity training and education; and securing both privately owned critical infrastructure and non-military federal networks. The missions and cybersecurity functions for the six components selected for our review are described in table 1. HSCWAA required DHS to perform several workforce assessment-related activities. Specifically, the department was to: 1. Establish procedures for identifying and categorizing cybersecurity positions and assigning codes to those positions. This was to be done within 90 days of the law’s enactment. 2. Identify all positions with cybersecurity functions and determine the work category and specialty areas of each position. DHS was required to identify all cybersecurity positions—both filled and vacant—within the department. In addition, it was to determine the cybersecurity work category and specialty areas for each such position. Work categories and specialty areas are defined in the NICE Cybersecurity Workforce Framework. 3. Assign codes to all filled and vacant cybersecurity positions. The department was to assign the appropriate 2-digit employment code, as set forth in OPM’s Guide to Data Standards, to each position based on the position’s primary cybersecurity work category and specialty areas. In addition, after completing the aforementioned activities, the department was to: 4. Identify the cybersecurity work categories and specialty areas of critical need in the department’s cybersecurity workforce and report to Congress. 5. Submit to OPM an annual report through 2021 that describes the work categories and specialty areas of critical need and substantiates the critical need designations. The act required DHS to complete the majority of the activities by specific due dates between March 2015 and September 2016 (see table 2). Beyond HSCWAA, the Federal Cybersecurity Workforce Assessment Act of 2015 was enacted in December 2015. It assigned specific workforce planning-related activities to all federal agencies, including DHS. Specifically, the law requires all federal agencies to identify all positions that perform information technology, cybersecurity, or other cyber-related functions and assign the appropriate employment code to each position. Similar to HSCWAA, the federal act also requires all federal agencies, including DHS, to identify and report to OPM on its cybersecurity work roles of critical need; each agency also is to submit a progress report on identifying cyber-related work roles of critical need to Congress. According to OPM officials within Employee Services, which oversees the federal cybersecurity workforce activities and implementation, agencies are not expected to continue coding to the 2-digit data standard and, instead, are to adopt the 3-digit data standard and complete coding the 3- digit standard by April 2018. As defined in OPM’s guidance and required by HSCWAA, DHS has begun activities related to identifying, categorizing, and assigning the appropriate employment codes to its cybersecurity positions. However, DHS has not completed all of these activities, as required. Specifically, the department did not develop timely and complete procedures or review its components’ procedures. In addition, it did not completely and reliably identify and assign employment codes because its processes were manual, undocumented, and resource-intensive. As indicated in table 3, the department did not complete any of the activities associated with establishing procedures and identifying and assigning employment codes to positions by the statutorily defined due dates, and two of these efforts are still ongoing. HSCWAA required DHS to establish procedures to identify and assign the appropriate employment code to all of the department’s filled and vacant positions with cybersecurity functions, in accordance with OPM’s Guide to Data Standards by March 2015. In addition, DHS’s April 2016 Cybersecurity Workforce Coding guidance stated that components should ensure procedures are in place to monitor and to update the employment codes as positions change over time. Further, Standards for Internal Control in the Federal Government recommends that management assign responsibility and delegate authority to key roles and that each component develop individual procedures to implement objectives. The standard also recommends that management periodically review such procedures to see that they are developed, relevant, and effective. Toward this end, OCHCO has developed procedures and recommended implementation steps for coding positions with cybersecurity functions for the department’s components. The procedures include criteria to be used in identifying cybersecurity positions. For example, the procedures state that any position that performs cybersecurity work at least 25 percent of the time should be identified as a cybersecurity position. The procedures also include information on how components are to select the appropriate data element codes. Nevertheless, although OCHCO developed procedures for identifying positions and assigning codes, the procedures were not timely. Specifically, DHS did not include in its procedures information on identifying positions and assigning codes to address the act’s requirements until April 2016—13 months after the due date. In addition, the procedures were not complete in that they did not include information related to identifying and coding vacant positions, as the act required. For example, while the National Finance Center system, which is DHS’s system of record for employment codes assigned to cybersecurity employees, was modified to capture the codes for filled positions, the system was not modified to capture data on vacant positions. (For an explanation of National Finance Center’s system and how DHS relates to it, see footnote 12.) In addition, the department’s procedures did not address how to identify or code vacant positions, or where such information should be reported in a standardized manner across the department. Moreover, the departmental procedures did not identify the individual within each DHS component who was responsible for leading and overseeing the identification and coding of the component’s cybersecurity positions. For example, the procedures did not identify a responsible individual for leading the effort to identify and code CBP’s cybersecurity positions. Because there was no identified individual responsible for the entirety of the CBP cybersecurity workforce identification efforts, CBP officials told us they were unable to comment on, or provide a status update on, where they were on the cybersecurity coding process. Further, although components were able to supplement the departmental procedures by developing their own component-specific procedures for identifying and coding their cybersecurity positions, DHS did not review selected components’ procedures for consistency with departmental guidance. The department could not provide documentation that OCHCO had verified or reviewed component-developed procedures. OCHCO officials acknowledged that they had not reviewed the components’ procedures and had not developed a process for conducting such reviews. OCHCO officials identified several factors that they said limited their ability to develop timely and complete procedures for identifying and coding cybersecurity positions, and to review the supplemental procedures developed by the components. For example, they stated that: DHS did not complete its update of the procedures for identifying cybersecurity positions and assigning codes until April 2016 because the department could not decide whether or not certain positions within the department should be considered cybersecurity positions; each component had the best understanding of their human capital systems and processes, so the development of tailored procedures was best left up to each component; each of the six selected DHS components recorded and tracked vacant positions differently; therefore, the department’s human capital office could not issue department-wide guidance on vacant positions; the cybersecurity specialty areas for vacant positions were not known until a position description was developed or verified and a hiring action was imminent; and DHS did not assign responsibilities for, or review, components’ procedures because, as noted previously, the department believed that its components had the best understanding of their specific human capital systems; thus, what the components included in their own procedures was best left up to them. OCHCO officials said that they plan to work with their internal accountability team to review component-developed procedures, but they had not established a time frame for doing so. Without assurance that procedures are timely, complete, and reviewed, DHS cannot be certain that components are effectively prepared to identify and code all positions with cybersecurity functions, as required by the act. HSCWAA required DHS to identify all cybersecurity positions, including vacant positions, by September 2015 in order to meet the act’s other deadlines. Further, the act called for the department to use OPM’s Guide to Data Standards to categorize the identified positions and determine the work category or specialty area of each position. As of December 2016, the department reported that it had identified 10,725 cybersecurity positions, including 6,734 federal civilian positions, 584 military positions, and 3,407 contractor positions. However, as of November 2017, the department had not completed identifying all of its cybersecurity positions or determining the work categories or specialty areas of the positions. For example, three of the six DHS components we reviewed had not identified their vacant cybersecurity positions. OCHCO officials stated that components varied in reporting their identified vacant positions because the department did not have a system to track vacancies. DHS also reported that it most commonly determined that the work category or specialty area of its cybersecurity positions were in the “protect and defend,” “securely provision,” and “oversight and development” work categories, and in the “security program management” and “vulnerability assessment and management” specialty areas of the NICE framework. DHS reported at least 12 of 15 DHS components as having cybersecurity positions in these categories and specialty areas. However, DHS could not provide data to show the actual numbers of positions in each of these categories and specialty areas. According to OCHCO officials, the department was still in the process of identifying positions for the 2-digit codes and would continue this effort until the 3-digit codes were available in the National Finance Center personnel and payroll system in December 2017. At that time, OCHCO officials stated that the department intends to start developing procedures for identifying and coding positions using the 3-digit codes. In addition to identifying all of its positions with cybersecurity functions and determining the work categories and specialty areas of each position consistent with the NICE framework, HSCWAA required DHS to assign positions codes to all such identified positions by September 2015. According to the Office of Management and Budget, having complete data consistent with the framework will help agencies to effectively examine the cybersecurity workforce; identify skill gaps; and improve workforce planning. Further, Standards for Internal Control in the Federal Government states that agencies should obtain relevant data from reliable sources that are accurate. DHS has not completely and accurately assigned employment codes to its cybersecurity workforce. As of August 2017—23 months after the due date—the department had not completed the process of assigning the 2- digit employment codes to all of its identified cybersecurity positions. For example, five of the six components we selected for review had not completed the coding of their cyber positions. In addition, DHS did not completely or accurately assign codes to all filled and vacant cybersecurity positions as required by the act. In August 2017, OPM provided a progress report to Congress containing DHS data that stated that 95 percent of DHS-identified cybersecurity positions had been coded. However, our analysis determined that the department had assigned cybersecurity position codes to approximately 79 percent, rather than the reported 95 percent, of identified federal civilian cybersecurity positions. See figure 2 below. DHS could not demonstrate that it had assigned codes to 95 percent of its positions, as reported, since its coding progress data never indicated such a percentage. The percentage of coded positions reported for DHS was overstated because it was not based on complete information. Specifically, the percentage reflected information on the progress of filled federal civilian cybersecurity positions, but excluded vacant positions, even though the act required DHS to report these positions. Among the six components that we selected for our review, five of them had not yet completed the coding of their positions. Figure 2 shows the results of our analysis of DHS’s progress in coding its cybersecurity positions, which considered both filled and vacant federal civilian cybersecurity positions, in comparison to what the department identified, which considered incomplete data—using only filled positions. In addition to being incomplete, DHS’s results were not accurate. Specifically, OCHCO developed a bi-monthly dashboard to monitor and report coding progress; however, the office did not have assurance that its data were accurate. OCHCO officials stated they did not verify the components’ data for accuracy. For example, while no more than 100 percent of identified positions should be coded, OCHCO reported 122.7 percent of positions as being coded for the Office of the Chief Information Officer. Such anomalies were due to DHS components reporting the total number of identified cybersecurity positions on a semi-annual basis, while OCHCO determined positions coded on a bi-monthly basis using data from the National Finance Center personnel and payroll system. Yet, OCHCO analyzed and reported these numbers together, even though they were representative of different time periods. This produced unreliable results that were not representative of actual progress. Table 4 provides examples of components’ coding progress, as reflected in DHS’s August 29, 2017 dashboard report, which showed one component that had more cybersecurity positions coded than were identified. OCHCO officials reported several factors related to their processes and systems that had limited their ability to collect and use data that were complete and accurate. Specifically, the officials stated that OCHCO did not have documented processes to collect and verify data from the components. The officials also stated that the components did not report vacancies consistently, and that the department does not have a system to track the vacancies. The officials further stated that the cybersecurity workforce amounts frequently changed, and that they could not review workforce data for reliability, as such a review was a resource-intensive activity. However, if DHS does not assure that processes are in place to obtain and use data that are complete, including vacant positions, and accurate, then the department cannot be assured that it will have an accurate understanding of its internal coding progress. Without the ability to code its cybersecurity positions in a complete and accurate manner, DHS will not be able to effectively examine the cybersecurity workforce; identify skill gaps; and improve workforce planning. While DHS has identified workforce capacity and capability gaps, it has not identified or reported to Congress its department-wide cybersecurity critical needs that align with the NICE framework. Additionally, the department has not reported its critical needs to OPM or developed plans and time frames for completing priority actions for reporting critical needs annually to OPM. Further, as indicated in table 5, the department did address any required activities by the statutorily defined due dates. HSCWAA required DHS to identify its cybersecurity work categories and specialty areas of critical need in alignment with the NICE framework and to report this information to the appropriate congressional committees by June 2016. In addition, according to a DHS directive, the DHS Chief Human Capital Officer is responsible for providing guidance to the department’s components on human resources standards, such as identifying workforce needs. According to GAO’s leading practices on strategic workforce planning, developing and providing guidance could help agencies identify their critical needs in order to effectively recruit, hire, train, and retain cybersecurity personnel. Although required to do so by June 2016, DHS has not yet identified its cybersecurity work categories and specialty areas of critical need in alignment with the NICE framework. The department identified workforce skills gaps and included this information in a report that it submitted to congressional committees in March 2017. However, the department did not align the workforce skills gaps report to the NICE framework’s work categories and specialty areas as required by HSCWAA. (The categories and specialty areas are described in appendix II.) Specifically, although the framework required that critical needs be align with a specific specialty area, DHS did not align the skills gaps to a particular specialty area in the NICE framework. For example, DHS identified a skill gap called development operations, which is related to 12 different specialty areas in the NICE framework. This skill gap also overlaps with other DHS skill gaps and creates the potential for double- counting critical needs. Furthermore, although three selected components reported in our questionnaires that they were able to identify their critical needs that aligned to the framework, they did not report this information to OCHCO. According to OCHCO officials, DHS has not identified department-wide cybersecurity critical needs that align with the framework partly because OPM had not provided DHS with guidance for identifying cybersecurity critical needs. According to OPM officials, however, they provided oral guidance to DHS on using the 2-digit codes for identifying its critical needs during four meetings in 2016 and 2017. The OPM officials also stated that they had plans to develop governmentwide guidance for using the 3-digit codes to identify cybersecurity critical needs by March 2018 to fulfil the requirements of the Federal Cybersecurity Workforce Assessment Act of 2015. According to OPM, agencies such as DHS are required to identify critical needs for the 3-digit codes by April 2019. DHS OCHCO officials said that DHS plans to transition to identifying cyber- related work roles of critical need once they have completed the 3-digit coding efforts under the 2015 federal act mentioned previously. Further, DHS has not developed and provided guidance to help its component-level agencies to identify their critical needs that align to the NICE framework. Specifically, DHS did not include guidance in its procedures that instructed components on how to report on their critical needs or to align to the NICE framework work categories and specialty areas. Two selected components’ officials told us they required guidance from OCHCO on how best to identify critical needs. According to OCHCO officials, they did not provide components guidance on critical needs that align with the NICE framework because the components were in the best position to determine their critical needs. Further, OCHCO officials stated that the components do not generally view critical skills gaps in terms of the categories or specialty areas as defined in the NICE framework, but instead, describe their skills gaps using position titles that are familiar to them. For example, one selected component identified security engineering as a skills gap familiar to them. However, according to OCHCO officials, this gap may align to five different specialty areas in the NICE framework’s securely provision work category. As mentioned previously, the framework required that critical needs be align with a specific specialty area. In September 2017, OCHCO developed a draft document that crosswalks identified department-wide cybersecurity skills gaps to one or more specialty areas in the NICE framework. However, the document does not adequately help components identify their critical needs by aligning their gaps with the NICE framework. Half of the DHS skills gaps overlap with two or more work categories, but the National Finance Center payroll system allows components to enter only one code per position. Further, the document does not provide additional decision rules to help components determine a critical need in cases in which a skills gap is mapped to multiple work categories. Without providing relevant guidance to help components identify their critical needs, DHS and the components are hindered from effectively identifying and prioritizing workforce efforts to recruit, hire, train, develop, and retain cybersecurity personnel across the department. HSCWAA required that, annually from September 2016 through September 2021, DHS, in consultation with OPM, submit a report to OPM that describes and substantiates critical need designations. In addition, Standards for Internal Control in the Federal Government states that management should develop plans to achieve objectives. Developing plans to report critical needs is a control activity that could help capture and sequence all of the activities that DHS must complete in order to report critical needs. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. DHS did not report cybersecurity critical needs to OPM in September 2016 or September 2017 as required. Instead, the department first reported its cybersecurity coding progress and skills gaps in the March 2017 report that it sent to OPM and Congress addressing several of the HSCWAA requirements. The report did not describe or substantiate critical need designations because DHS has not yet identified them. OCHCO officials stated that the department plans to submit another report to OPM; however, they did not indicate whether critical needs will be included in the report, and did not have a time frame for when they plan to submit the report to OPM. Additionally, DHS has not developed plans or time frames to complete priority actions that OCHCO officials said must be completed before it can report its cybersecurity critical needs to OPM. DHS’s Comprehensive Cybersecurity Workforce Update reported two priority actions to identify, describe, and substantiate cybersecurity critical needs—developing a DHS cybersecurity workforce strategy and completing its initial cybersecurity workforce research—by the end of fiscal year 2017. However, DHS did not complete the priority actions by the end of fiscal year 2017, as planned. As of September 2017, the department was still in the process of finalizing the DHS cybersecurity workforce strategy and had not yet completed the initial cybersecurity workforce research. OCHCO officials said that the strategy is to be influenced by ongoing efforts to finalize the DHS comprehensive cybersecurity mission strategy, provide DHS reports required by the May 2017 cybersecurity-related presidential executive order, and finalize and implement the new cybersecurity-focused personnel system. According to OCHCO officials, the department plans to conduct additional interviews and focus groups in fiscal year 2018. According to DHS OCHCO officials, the department did not develop plans or schedules with time frames to report cybersecurity critical needs. These officials stated that the report that the department submitted to Congress in March 2017 had contained plans and schedules. However, it did not capture and sequence all of the activities that DHS officials said must be completed in order to report critical needs. For example, the report did not include a schedule for completing the cybersecurity workforce strategy or conducting additional interviews and focus groups to complete the initial cybersecurity workforce research. Until DHS develops plans and schedules with time frames for reporting its cybersecurity critical needs, the department may not have important insight into its needs for ensuring that it has the workforce necessary to carry out its critical role of helping to secure the nation’s cyberspace. Further, OPM may be hindered from using DHS’s reports to understand critical needs consistently on a governmentwide basis. DHS has begun the required workforce assessment activities to identify, categorize, and assign codes to its cybersecurity positions. However, the department did not complete the activities by their statutorily defined due dates and efforts are still ongoing. Specifically, the department did not develop timely and complete procedures or review its components’ procedures. In addition, DHS’s efforts to identify, categorize, and code cybersecurity positions were incomplete and unreliable. Without the ability to identify, categorize, and code its cybersecurity positions in a complete and accurate manner, DHS will not be able to effectively examine the cybersecurity workforce, identify skill gaps, and improve workforce planning. DHS has identified critical gaps in its cybersecurity workforce, but these gaps did not align with the NICE framework work categories and specialty areas of critical need, as required by the act. Specifically, DHS has not developed guidance to help its component agencies and offices identify their cybersecurity critical needs. Moreover, DHS lacks plans with defined time frames for completing its required annual reporting to OPM. Until the department addresses these issues, it may continue to miss reporting deadlines and be hindered from effectively identifying and prioritizing critical workforce efforts to recruit, hire, train, develop, and retain cybersecurity personnel across its multiple components. In addition, DHS may not have cybersecurity personnel with the required skills to better protect federal networks and national critical infrastructure from threats. The commitment of DHS’s leadership is essential to successfully addressing these issues and the associated management weaknesses. By taking urgent and diligent action now, DHS will be better positioned to fulfill the requirements of HSCWAA and to identify and code its filled and vacant cybersecurity positions accurately when it transitions to using the revised NICE framework. We are making the following six recommendations to DHS: The Secretary of Homeland Security should develop procedures on how to identify and code vacant cybersecurity positions. (Recommendation 1) The Secretary of Homeland Security should identify the individual in each component who is responsible for leading that component’s efforts in identifying and coding cybersecurity positions. (Recommendation 2) The Secretary of Homeland Security should establish and implement a process to periodically review each component’s procedures for identifying component cybersecurity positions and maintaining accurate coding. (Recommendation 3) The Secretary of Homeland Security should ensure OCHCO collects complete and accurate data from its components on all filled and vacant cybersecurity positions when it conducts its cybersecurity identification and coding efforts. (Recommendation 4) The Secretary of Homeland Security should develop guidance to assist DHS components in identifying their cybersecurity work categories and specialty areas of critical need that align to the NICE framework. (Recommendation 5) The Secretary of Homeland Security should develop plans with time frames to identify priority actions to report on specialty areas of critical need. (Recommendation 6) We received written comments on a draft of this report from DHS. In the comments (reprinted in appendix III), the department concurred with our six recommendations and provided estimated completion dates for implementing each of them. With regard to recommendations 1 and 2, DHS stated that, by February 28, 2018, it plans to finalize and disseminate an updated version of its cybersecurity position identification and coding guidance to address vacant positions, as well as issue a memorandum requiring its components to designate a lead for reporting progress to OCHCO. Further, by April 30, 2018, the department said it plans to address recommendation 3 by disseminating a memorandum that includes a process for periodically reviewing component procedures and instructions for components to report related data and documents. DHS also stated that, by June 29, 2018, it plans to issue memorandums to its components that provide instructions, guidance, and plans to address recommendations 4 through 6. The department added that it intends to (1) periodically review compliance and cybersecurity workforce data concerns with component leads to ensure data accuracy; (2) disseminate a reporting schedule for identifying cybersecurity critical needs; and (3) develop and disseminate a project plan with milestones, due dates, and responsibilities for reviewing progress and reporting on workforce planning actions in fiscal years 2018 and 2019. The aforementioned actions, if implemented effectively, should help DHS address the intent of our recommendations. In addition, we received technical comments from the department, which we have incorporated, as appropriate. We also provided a draft of this report for OPM’s review and comments. In response, an OPM program analyst stated, via email, that the agency had no edits, comments, or revisions to the draft report. We are sending copies of this report to appropriate congressional committees, the Secretary of Homeland Security, and the Director of the Office of Personnel Management. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov, or Chris Currie at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Our objectives were to identify the extent to which DHS has: 1. identified, categorized and assigned employment codes to 2. identified its cybersecurity workforce areas of critical need. To address both objectives, we examined Department of Homeland Security (DHS) Office of Chief Human Capital Officer (OCHCO) and component cybersecurity workforce data and documentation and interviewed OCHCO and component officials. In addition, we reviewed Standards for Internal Control in the Federal Government and Key Principles for Effective Strategic Workforce Planning, and then compared the cybersecurity workforce internal controls and project management processes that DHS implemented to address the act to the selected standard. We also administered a questionnaire and data collection instrument (DCI) to a nonprobability sample of 6 of 15 DHS components. To select the 6 components we used OPM’s Enterprise Human Resources Integration-Statistical Data Mart data on DHS civilian positions. We segmented the 15 components into 3 groups, based on their reported total number of cybersecurity personnel in DHS—high, medium, and low. From each group, we selected 2 DHS components with the highest number of cybersecurity functions, as reported by DHS. Where components or offices in the same tier have equivalent cybersecurity functions, we selected the DHS component or office with the highest share of cybersecurity employees. This approach resulted in the selection of the following DHS components: U.S. Customs and Border Protection, Departmental Management and Operations, National Protection and Programs Directorate, U.S. Secret Service, Science & Technology Directorate, and U.S. Citizenship and Immigration Services. The results of this analysis are not generalizable to all DHS components. In both the questionnaire and DCI, we asked questions related to the status of DHS’s identification, categorization and assignment of employment codes to cybersecurity positions, and identification of its cybersecurity workforce areas of critical need. To minimize errors that might occur from respondents interpreting our questions differently from our intended purpose, we performed a preliminary review of the questionnaire and DCI with OCHCO officials. The selection of OCHCO officials for preliminary review was based on OCHCO’s oversight role in the implementation of the Homeland Security Cybersecurity Workforce Assessment Act of 2014 (HSCWAA). During this review, we interviewed the officials to ensure that the questions were applicable, clear, unambiguous, and easy to understand. We then revised our questionnaire and DCI based on the feedback provided during the preliminary review. All respondents completed the final questionnaire and DCI, although not all survey respondents answered every question. We then reviewed the responses and interviewed relevant component officials in order to get clarification and validation of their responses. We determined that the data obtained from the questionnaire and DCI are sufficiently reliable for the purpose of reporting DHS’ progress in assigning cybersecurity codes. However, these data have the following limitations: component responses may be from a particular program or office and not cover the breadth of the program, and component reported data may be estimated or unavailable. To address our first objective, we reviewed and analyzed DHS’s department-level cybersecurity workforce procedures and communications and organizational documents for identifying cybersecurity positions and assigning work-position codes in accordance with the act. Further, we examined department-level data from the Department of Agriculture’s National Finance Center, DHS dashboard reports, and DHS progress reports to the Office of Personnel Management (OPM) and Congress. To assess the reliability of OCHCO and component cybersecurity workforce data, we compared them with data from OPM’s Enterprise Human Resources Integration-Statistical Data Mart data on DHS civilian positions and against the National Finance Center personnel and payroll system data on the cybersecurity coding of DHS civilian positions as appropriate. In addition, we reviewed and analyzed component-level cybersecurity workforce procedures, as well as cybersecurity workforce data and documentation, including data calls to selected component-level offices in DHS. We evaluated these documents against the act’s requirements and Standards for Internal Control in the Federal Government to ensure that DHS’s processes addressed leading practices. To address our second objective, we reviewed and analyzed DHS’s planned actions for identifying its cybersecurity workforce areas of critical need, including data calls to components, and DHS progress reports to OPM and Congress. We also examined OCHCO and component cybersecurity workforce data and department-level workforce planning documentation to evaluate the status of the department’s efforts to identify its cybersecurity workforce areas of critical need. We compared these documents against the act’s requirements, DHS-wide and component-specific workforce planning processes, the National Initiative for Cybersecurity Education (NICE) framework categories and specialty areas, and Standards for Internal Control in the Federal Government to ensure DHS met its requirements. To assess the reliability of OPM’s Enterprise Human Resources Integration-Statistical Data Mart data on DHS civilian positions, we reviewed the data for obvious errors as well as compared OPM’s written responses to our data reliability questionnaire regarding the generation and use of the data. We determined that the data were sufficiently reliable for the purpose of helping inform our selection of a nonprobability sample of 6 DHS components as described above. To assess the reliability of National Finance Center personnel and payroll system data on the cybersecurity coding of DHS civilian positions, we examined the data for outliers and obvious errors and compared those data to data and documentation from DHS components. In addition, we interviewed and observed DHS officials generate and use the National Finance Center data. We determined that the data were sufficiently reliable for the purposes of reporting DHS cybersecurity workforce coding progress. The data are limited in that only filled federal civilian positions were reported in the National Finance Center system. Vacancies, contractors, and military were not included in those data. To assess the reliability of DHS’s OCHCO and component human capital systems data on the DHS civilian cybersecurity workforce, we reviewed the data for outliers and obvious errors, and compared them against data from the National Finance Center personnel and payroll system. We also interviewed officials from OCHCO and selected DHS components regarding the generation and use of the data. We determined that the data were sufficiently reliable for the purpose of reporting DHS’ progress in assigning cybersecurity codes. However, the data have the following limitations: component responses may be from a particular program or office and not cover the breadth of the program, data may be estimated by components, and data may be measured at different intervals—for example, total cybersecurity workforce may be measured at a different point in time than cybersecurity workforce positions coded. For both objectives, we supplemented the information and knowledge obtained from our assessments by holding discussions with relevant DHS OCHCO and the six components’ officials to evaluate the status of the department’s efforts to implement the act. We conducted this performance audit from March 2017 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: National Initiative for Cybersecurity Education (NICE) Cybersecurity Workforce Framework Categories and Specialty Areas Oversees, evaluates, and supports the documentation, validation, assessment, and authorization processes necessary to assure that existing and new information technology (IT) systems meet the organization’s cybersecurity and risk requirements. Ensures appropriate treatment of risk, compliance, and assurance from internal and external perspectives. Develops and writes/codes new (or modifies existing) computer applications, software, or specialized utility programs following software assurance best practices. Works on the development phases of the systems development life cycle. Consults with customers to gather and evaluate functional requirements and translates these requirements into technical solutions. Provides guidance to customers about applicability of information systems to meet business needs. Develops system concepts and works on the capabilities phases of the systems development life cycle; translates technology and environmental conditions (e.g., law and regulation) into system and security designs and processes. Conducts technology assessment and integration processes; provides and supports a prototype capability and/or evaluates its utility. Develops and conducts tests of systems to evaluate compliance with specifications and requirements by applying principles and methods for cost- effective planning, evaluating, verifying, and validating of technical, functional, and performance characteristics (including interoperability) of systems or elements of systems incorporating IT. Addresses problems; installs, configures, troubleshoots, and provides maintenance and training in response to customer requirements or inquiries (e.g., tiered-level customer support). Develops and administers databases and/or data management systems that allow for the storage, query, and utilization of data. Manages and administers processes and tools that enable the organization to identify, document, and access intellectual capital and information content. Installs, configures, tests, operates, maintains, and manages networks and their firewalls, including hardware (e.g., hubs, bridges, switches, multiplexers, routers, cables, proxy servers, and protective distributor systems) and software that permit the sharing and transmission of all spectrum transmissions of information to support the security of information and information systems. Installs, configures, troubleshoots, and maintains server configurations (hardware and software) to ensure their confidentiality, integrity, and availability. Also, manages accounts, firewalls, and patches. Responsible for access control, passwords, and account creation and administration. NICE Specialty Area definition Conducts the integration/testing, operations, and maintenance of systems security. Conducts training of personnel within pertinent subject domain. Develops, plans, coordinates, delivers and/or evaluates training courses, methods, and techniques as appropriate. Applies knowledge of data, information, processes, organizational interactions, skills, and analytical expertise, as well as systems, networks, and information exchange capabilities to manage acquisition programs. Executes duties governing hardware, software, and information system acquisition programs and other program management policies. Provides direct support for acquisitions that use information technology (IT) (including National Security Systems), applying IT-related laws and policies, and provides IT-related guidance throughout the total acquisition life cycle. Provides legally sound advice and recommendations to leadership and staff on a variety of relevant topics within the pertinent subject domain. Advocates legal and policy changes, and makes a case on behalf of client via a wide range of written and oral work products, including legal briefs and proceedings. Oversees the cybersecurity program of an information system or network; including managing information security implications within the organization, specific program, or other area of responsibility, to include strategic, personnel, infrastructure, requirements, policy enforcement, emergency planning, security awareness, and other resources. Develops policies and plans and/or advocates for changes in policy that supports organizational cyberspace initiatives or required changes/enhancements. Supervises, manages, and/or leads work and workers performing cybersecurity work. Uses defensive measures and information collected from a variety of sources to identify, analyze, and report events that occur or might occur within the network in order to protect information, information systems, and networks from threats. Tests, implements, deploys, maintains, reviews, and administers the infrastructure hardware and software that are required to effectively manage the computer network defense service provider network and resources. Monitors network to actively remediate unauthorized activities. Responds to crises or urgent situations within the pertinent domain to mitigate immediate and potential threats. Uses mitigation, preparedness, and response and recovery approaches, as needed, to maximize survival of life, preservation of property, and information security. Investigates and analyzes all relevant response activities. Conducts assessments of threats and vulnerabilities; determines deviations from acceptable configurations, enterprise or local policy; assesses the level of risk; and develops and/or recommends appropriate mitigation countermeasures in operational and nonoperational situations. Analyzes threat information from multiple sources, disciplines, and agencies across the intelligence community. Synthesizes and places intelligence information in context; draws insights about the possible implications. Analyzes collected information to identify vulnerabilities and potential for exploitation. Applies current knowledge of one or more regions, countries, non-state entities, and/or technologies. Identifies and assesses the capabilities and activities of cybersecurity criminals or foreign intelligence entities; produces findings to help initialize or support law enforcement and counterintelligence investigations or activities. Applies language, cultural, and technical expertise to support information collection, analysis, and other cybersecurity activities. Executes collection using appropriate strategies and within the priorities established through the collection management process. Performs activities to gather evidence on criminal or foreign intelligence entities in order to mitigate possible or real-time threats, protect against espionage or insider threats, foreign sabotage, international terrorist activities, or to support other intelligence activities. Performs in-depth joint targeting and cybersecurity planning process. Gathers information and develops detailed Operational Plans and Orders supporting requirements. Conducts strategic and operational-level planning across the full range of operations for integrated information and cyberspace operations. Collects, processes, preserves, analyzes, and presents computer-related evidence in support of network vulnerability mitigation, and/or criminal, fraud, counterintelligence or law enforcement investigations. Applies tactics, techniques, and procedures for a full range of investigative tools and processes to include, but not limited to, interview and interrogation techniques, surveillance, counter surveillance, and surveillance detection, and appropriately balances the benefits of prosecution versus intelligence gathering. OPM guidance states that individuals primarily engaged in project or program management for cybersecurity projects or tasks should be coded with the Cybersecurity Program/Project Management value (80). In addition to the contacts above, Ben Atwater (assistant director), Tammi Kalugdan (assistant director), David Hong (analyst-in-charge), Christy Abuyan, Alexander Anderegg, David Blanding, Jr., Chris Businsky, Wayne Emilien, Jr., David Plocher, Luis E. Rodriguez, and Priscilla Smith made significant contributions to this report.", "summary": "DHS is the lead agency tasked with protecting the nation's critical infrastructure from cyber threats. The Homeland Security Cybersecurity Workforce Assessment Act of 2014 required DHS to identify, categorize, and assign employment codes to all of the department's cybersecurity workforce positions. These codes define work roles and tasks for cybersecurity specialty areas such as program management and system administration. Further, the act required DHS to identify and report its cybersecurity workforce critical needs. The act included a provision for GAO to analyze and monitor DHS's implementation of the requirements. GAO's objectives were to assess the extent to which DHS has (1) identified, categorized, and assigned employment codes to its cybersecurity positions and (2) identified its cybersecurity workforce areas of critical need. GAO analyzed DHS and OPM workforce documentation and administered a data collection instrument to six major DHS components. GAO also interviewed relevant DHS and OPM officials. The Department of Homeland Security (DHS) has taken actions to identify, categorize, and assign employment codes to its cybersecurity positions, as required by the Homeland Security Cybersecurity Workforce Assessment Act of 2014 ; however, its actions have not been timely and complete. For example, DHS did not establish timely and complete procedures to identify, categorize, and code its cybersecurity position vacancies and responsibilities. Further, DHS has not yet completed its efforts to identify all of the department's cybersecurity positions and accurately assign codes to all filled and vacant cybersecurity positions. In August 2017, DHS reported to the Congress that it had coded 95 percent of the department's identified cybersecurity positions. However, GAO's analysis determined that the department had, at that time, coded approximately 79 percent of the positions. DHS's 95 percent estimate was overstated primarily because it excluded vacant positions, even though the act required DHS to report these positions. In addition, although DHS has taken steps to identify its workforce capability gaps, it has not identified or reported to the Congress on its department-wide cybersecurity critical needs that align with specialty areas. The department also has not reported annually its cybersecurity critical needs to the Office of Personnel Management (OPM), as required, and has not developed plans with clearly defined time frames for doing so. (See table). Without ensuring that its procedures are complete and that its progress in identifying and assigning codes to its positions is accurately reported, DHS will not be positioned to effectively examine its cybersecurity workforce, identify its critical skill gaps, or improve its workforce planning. Further, until DHS establishes plans and time frames for reporting on its critical needs, the department may not be able to ensure that it has the necessary cybersecurity personnel to help protect the department's and the nation's federal networks and critical infrastructure from cyber threats. The commitment of DHS's leadership to addressing these matters is essential to helping the department fulfill the act's requirements. GAO recommends that DHS take six actions, including ensuring that its cybersecurity workforce procedures identify position vacancies and responsibilities; reported workforce data are complete and accurate; and plans for reporting on critical needs are developed. DHS concurred with our six recommendations and described actions the department plans to take to address them. OPM did not have any comments.", "document_type": "gao"}
{"report": "CSPF is a defined benefit multiemployer pension plan. Multiemployer plans are often created and maintained through collective bargaining agreements between labor unions and two or more employers, so that workers who move from job to job and employer to employer within an industry can continue to accrue pension benefits within the same plan over the course of their careers. Multiemployer plans are typically found in industries with many small employers such as trucking, building and construction, and retail food sales. In 2017, there were about 1,400 defined benefit multiemployer plans nationwide covering more than 10 million participants. Most multiemployer plans are jointly administered and governed by a board of trustees selected by labor and management. The labor union typically determines how the trustees representing labor are chosen and the contributing employers or an employer association typically determines how the trustees representing management are chosen. The trustees set the overall plan policy, direct plan activities, and set benefit levels (see fig. 1). Multiemployer plans are “prefunded,” or funded in advance, primarily by employer contributions. The employer contribution is generally negotiated through a collective bargaining agreement, and is often based on a dollar amount per hour worked by each employee covered by the agreement. Employer contributions are pooled in a trust fund for investment purposes, to pay benefits to retirees and their beneficiaries, and for administrative expenses. Multiemployer plan trustees typically decide how the trust fund should be invested to meet the plan’s objectives, but the trustees can use investment managers to determine how the trust fund should be invested. A plan’s funded percentage is its ratio of plan assets to plan liabilities. Because the amount needed to pay pension benefits for many years into the future cannot be known with certainty due to a variety of economic and demographic factors, including the potential volatility of asset values, estimates of a plan’s funded percentage may vary from year to year. Defined benefit pension plans use a “discount rate” to convert projected future benefits into their “present value.” The discount rate is the interest rate used to determine the current value of estimated future benefit payments and is an integral part of estimating a plan’s liabilities. The higher the discount rate, the lower the plan’s estimate of its liability. Multiemployer plans use an “assumed-return approach” that bases the discount rate on a long-term assumed average rate of return on the pension plan’s assets. Under this approach, the discount rate depends on the allocation of plan assets. For example, a reallocation of plan assets into more stocks and fewer bonds typically increases the discount rate, which reduces the estimated value of plan liabilities, and therefore, reduces the minimum amount of funding required. Looking at the entire “multiemployer system”—the aggregation of multiemployer plans governed by ERISA and insured by PBGC—shows that while the system was significantly underfunded around 2001 and 2009, its funded position has improved since 2009. Specifically, analyses published by the Center for Retirement Research at Boston College and the Society of Actuaries used plan regulatory filings to calculate the funded status for the system and determined that it was approaching 80 percent funded by 2014 after falling during the 2008 market downturn. However, some observers have noted that while many plans are making progress toward their minimum targets, a subset of plans face serious financial difficulties. Multiemployer retirement benefits are generally determined by the board of trustees. The bargaining parties negotiate a contribution rate and the trustees adopt or amend the plan’s benefit formulas and provisions. Decisions to increase benefits or change the plan are also typically made by the board of trustees. Benefit amounts are generally based on a worker’s years of service and either a flat dollar amount or the worker’s wage or salary history, subject to further adjustment based on the age of retirement. CSPF was established in 1955 to provide pension benefits to International Brotherhood of Teamsters union members (Teamsters) in the trucking industry and it is one of the largest multiemployer plans. In the late 1970s, CSPF was the subject of investigations by the IRS within the U.S. Department of the Treasury (Treasury), and by DOL and the U.S. Department of Justice (DOJ). The DOL investigation ultimately resulted in the establishment of a federal court-enforceable consent decree in 1982 that remains in force today. CSPF held more than $4.3 billion in Net Assets at the end of 1982 after the consent decree was established. The plan’s Net Assets peaked at nearly $26.8 billion at the end of 2007 and declined to about $15.3 billion at the end of 2016 (see fig. 2). As of 2016, CSPF reported that it had about 1,400 contributing employers and almost 385,000 participants. The number of active CSPF participants has declined over time. In 2016, 16 percent of about 385,000 participants were active, i.e., still working in covered employment that resulted in employer contributions to the plan. In comparison, CSPF reported in 1982 that 69 percent of more than 466,000 participants were active participants. Since the 1980s, CSPF’s ratio of active to nonworking participants has declined more dramatically than the average for multiemployer plans. By 2015, only three of the plan’s 50 largest employers from 1980 still paid into the plan, and for each full-time active employee there were over five nonworking participants, mainly retirees. As a result, benefit payments to CSPF retirees have exceeded employer contributions in every year since 1984. Thus, CSPF has generally drawn down its investment assets. In 2016, CSPF withdrew over $2 billion from investment assets (see fig. 3.). CSPF has historically had fewer plan assets than were needed to fully fund the accrued liability—the difference referred to as unfunded liability. In 1982, we reported that CSPF was “thinly funded”—as the January 1, 1980, actuarial valuation report showed the plan’s unfunded liability was about $6 billion—and suggested that IRS should closely monitor CSPF’s financial status. In 2015, the plan’s actuary certified that the plan was in “critical and declining” status. The plan has been operating under an ERISA-required rehabilitation plan since March 25, 2008, which is expected to last indefinitely. As of January 1, 2017, the plan was funded to about 38 percent of its accrued liability. In September 2015, CSPF filed an application with Treasury seeking approval to reduce benefits pursuant to provisions in the Multiemployer Pension Reform Act of 2014 (MPRA), which is fully discussed later in this section. The application was denied in May 2016 based, in part, on Treasury’s determination that the plan’s proposed benefit suspensions were not reasonably estimated to allow the plan to remain solvent. In 2017, CSPF announced it would no longer be able to avoid the projected insolvency. (See app. I for a timeline of key events affecting CSPF.) As previously mentioned, CSPF was the subject of investigations in the 1970s by IRS, DOL, and DOJ. DOL’s investigation focused on numerous loan and investment practices alleged to constitute fiduciary breaches under ERISA, such as loans made to companies on the verge of bankruptcy, additional loans made to borrowers who had histories of delinquency, loans to borrowers to pay interest on outstanding loans that the fund recorded as interest income, and lack of controls over rental income. As a result of its investigation, DOL filed suit against the former trustees of CSPF and, in September 1982, the parties entered into a consent decree, which remains in force today. The consent decree provides measures intended to ensure that the plan complies with the requirements of ERISA, including providing for oversight by the court and DOL, and prescribes roles for multiple parties in its administration. For example, certain plan activities must be submitted to DOL for comment and to the court for approval, including new trustee approvals and some investment manager appointments. According to DOL, to prevent criminal influence from regaining a foothold of control over plan assets, the consent decree generally requires court-approved independent asset managers—called “named fiduciaries”—to manage CSPF’s investments. CSPF’s trustees are generally prohibited from managing assets; however, they remain responsible for selecting, subject to court approval, and overseeing named fiduciaries and monitoring plan performance. To focus attention on compliance with ERISA fiduciary responsibility provisions, the consent decree provides for a court-appointed independent special counsel with authority to observe plan activities and oversee and report on the plan. (See app. II for additional detail on the key provisions of the consent decree.) In 1974, Congress passed ERISA to protect the interests of participants and beneficiaries of private sector employee benefit plans. Among other things, ERISA requires plans to meet certain requirements and minimum standards. DOL, IRS, and PBGC are generally responsible for administering ERISA and related regulations. DOL has primary responsibility for administering and enforcing the fiduciary responsibility provisions under Part 4 of Title I of ERISA, which include the requirement that plan fiduciaries act prudently and in the sole interest of participants and beneficiaries. Treasury, specifically the IRS, is charged with determining whether a private sector pension plan qualifies for preferential tax treatment under the Internal Revenue Code. Additionally, the IRS is generally responsible for enforcing ERISA’s minimum funding requirements, among other things. ERISA generally requires that multiemployer plans meet minimum funding standards, which specify a funding target that must be met over a specified period of time. The funding target for such plans is measured based on assumptions as to future investment returns, rates of mortality, retirement ages, and other economic and demographic assumptions. Under the standards, a plan must collect a minimum level of contributions each year to show progress toward meeting its target, or the plan employers may be assessed excise taxes and owe the plan for missed contributions plus interest. Minimum contribution levels may vary from year to year due to a variety of economic and demographic factors, such as addressing differences between assumed investment returns and the plan’s actual investment returns. To protect retirees’ pension benefits in the event that plan sponsors are unable to pay plan benefits, PBGC was created by ERISA. PBGC is financed through mandatory insurance premiums paid by plans and plan sponsors, with premium rates set by law. PBGC operates two distinct insurance programs: one for multiemployer plans and another for single- employer plans. Each program has separate insurance funds and different benefit guarantee rules. The events that trigger PBGC intervention differ between multiemployer and single-employer plans. For multiemployer plans, the triggering event is plan insolvency, the point at which a plan begins to run out of money while not having sufficient assets to pay the full benefits that were originally promised when due. PBGC does not take over operations of an insolvent multiemployer plan; rather, it provides loan assistance to pay administrative expenses and benefits up to the PBGC-guaranteed level. According to PBGC, only once in its history has a financial assistance loan from the multiemployer pension insurance program been repaid. In 2017, PBGC provided financial assistance to 72 insolvent multiemployer plans for an aggregate amount of $141 million. For single-employer plans the triggering event is termination of an underfunded plan—generally, when the employer goes out of business or enters bankruptcy. When this happens, PBGC takes over the plan’s assets, administration, and payment of plan benefits (up to the statutory limit). The PBGC-guaranteed benefit amounts for multiemployer plans and the premiums assessed by PBGC to cover those benefit guarantees are significantly lower than those for single-employer plans. Each insured multiemployer plan pays flat-rate insurance premiums to PBGC based on the number of participants covered. The annual premium rate for plan years beginning in January 2017 was $28 per participant and it is adjusted annually based on the national average wage index. (See app. I for the PBGC premium rates that have been in effect since the consent decree was established in 1982.) When plans receive financial assistance, participants face a reduction in benefits. For example, using 2013 data, PBGC estimated 21 percent of more than 59,000 selected participants in insolvent multiemployer plans then receiving financial assistance from PBGC faced a benefit reduction. The proportion of participants facing reductions due to the statutory guarantee limits is expected to increase. About 51 percent of almost 20,000 selected participants in plans that PBGC believed would require future assistance were projected to face a benefit reduction. Since 2013, the deficit in PBGC’s multiemployer program has increased by nearly 700 percent, from a deficit of $8.3 billion at the end of fiscal year 2013 to $65.1 billion at the end of fiscal year 2017. PBGC estimated that at of the end of 2016, the present value of net new claims by multiemployer plans over the next 10 years would be about $24 billion, or approximately 20 percent higher than its 2015 projections. The program is projected to become insolvent within approximately 8 years. If that happens, participants who rely on PBGC guarantees will receive only a very small fraction of current statutory guarantees. According to PBGC, most participants would receive less than $2,000 a year and in many cases, much less. We have identified PBGC’s insurance programs as high-risk. This designation was made in part because multiemployer plans that are currently insolvent, or likely to become insolvent in the near future, represent a significant financial threat to the agency’s insurance program. We designated the single employer program as high-risk in July 2003, and added the multiemployer program in January 2009. Both insurance programs remain on our high-risk list. Multiemployer Pension Plan Amendments Act of 1980 Among other things, the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) made employers liable for a share of unfunded plan benefits when they withdraw from a plan, unless otherwise relieved of their liability, and strengthened certain funding requirements. An employer that chooses to withdraw from a multiemployer plan may be required to continue to contribute if the plan does not have sufficient assets to cover the plan’s current and known future liabilities at the time the employer withdraws; however, these payments may not fully cover the withdrawing employer’s portion of the plan’s liabilities. In such cases, the employers remaining in the plan may effectively assume the remaining liability. The Pension Protection Act of 2006 The Pension Protection Act of 2006 (PPA) was intended to improve the funding of seriously underfunded multiemployer plans, among other things. It included provisions that require plans in poor financial health to take action to improve their financial condition over the long term and established two categories of troubled plans: (1) “endangered status” or “yellow zone” plans (this category also includes a sub-category of “seriously endangered”), and (2) more seriously troubled “critical status” or “red zone” plans. PPA further required plans in the endangered and critical zones to develop written plans to improve their financial condition, such as by revising benefit structures, increasing contributions, or both, within a prescribed time frame. Multiemployer plans in yellow or red zone status must document their remediation strategies in a written plan, notify plan participants, and report annually on whether scheduled progress has been made. Since the 2008 market decline, the number of participants in endangered and critical plans has generally been decreasing (see fig. 4). The Multiemployer Pension Reform Act of 2014 In response to the funding crisis facing PBGC and multiemployer pension plans, the Multiemployer Pension Reform Act of 2014 (MPRA) made changes to the multiemployer system that were intended to improve its financial condition. Key changes included: Creation of critical and declining status. MPRA created a new category, “critical and declining,” for plans in critical status projected to become insolvent during the current plan year or within any of the 14 succeeding plan years, or in certain circumstances, within any of the 19 succeeding plan years. In 2017, PBGC reported that more than 100 multiemployer plans (more than 7 percent of plans) representing approximately 1 million participants (about 10 percent of participants) have been determined to be “critical and declining.” Permitted reduction of accrued benefits. MPRA permits plans to reduce participants’ and beneficiaries’ accrued retirement benefits if the plan can demonstrate such action is necessary to remain solvent. Plans apply to Treasury for the authority to reduce benefits. Treasury, in consultation with PBGC and DOL, reviews the applications and determines whether the proposed changes would enable the plan to remain solvent. Increased PBGC premiums. MPRA also increased the PBGC premiums for multiemployer plans from $12 to $26 (per participant per plan year) in 2015 and from $26 to $28 in plan year 2017. The annual premium in subsequent years is indexed to changes in the national average wage index. Creation of new framework of rules for partition. Partition allows a multiemployer plan to split into two plans—the original and a successor. Partitions are intended to relieve stress on the original plan by transferring the benefits of some participants to a successor plan funded by PBGC and to help retain participant benefits in the plans at levels higher than the PBGC-guaranteed levels. At the time the consent decree was established in 1982, CSPF had less than half the estimated funds needed to cover plan liabilities (and to pay associated benefits over the lifetime of participants) and it has not attained 100 percent of its estimated funding need since then, according to regulatory filings. CSPF’s 1982 Form 5500 we reviewed shows that the plan was less than 40 percent funded prior to the consent decree becoming effective. Over the next two decades, the plan generally made progress toward achieving its targeted level of funding but was never more than 75 percent funded, and funding has generally deteriorated since its 2002 filing (see fig. 5). Overall, the plan’s unfunded liability increased by approximately $11.2 billion (in inflation-adjusted dollars) between January 1983 and January 2016. As a consequence, participant benefits were never fully secured by plan assets over this period, as measured by ERISA’s minimum funding standards, and the plan consistently needed to collect contributions in excess of those needed to fund new benefit accruals to try to make up for its underfunded status. CSPF officials and other stakeholders identified several factors that contributed to CSPF’s critical financial condition and reflect the challenges faced by many multiemployer plans. For example, like CSPF, many multiemployer plans have experienced financial difficulties due to a combination of investment losses and insufficient employer contributions. In addition to being underfunded prior to the consent decree going into effect, stakeholders identified other specific factors that contributed to CSPF’s critical financial condition, such as trends within the national trucking industry and its workforce, funding challenges and common investment practices of multiemployer plans, and the impact of market downturns on long-term investment performance. Stakeholders also described the effects of the 2007 withdrawal of a key employer, United Parcel Service (UPS), on CSPF’s critical financial condition. Stakeholders we interviewed said changes to the workforce, such as declining union membership rates and changes resulting from industry deregulation, affected CSPF and some other multiemployer plans by reducing the number of workers able to participate in their plans. While the multiemployer structure distributes bankruptcy risk across many employers, for any particular multiemployer plan employers are often concentrated in the same industry, making the plans vulnerable to industry-specific trends and risks. For example, stakeholders noted the impact that the Motor Carrier Act of 1980 had on the trucking industry. Specifically, deregulation of the trucking industry reduced government oversight and regulation over interstate trucking shipping rates. The trucking industry became increasingly dominated by nonunion trucking companies resulting in the bankruptcy of many unionized trucking companies, according to stakeholders. New trucking companies typically did not join multiemployer plans because their labor force was not unionized and this, coupled with the bankruptcy of many contributing employers, contributed to a decrease in active participant populations for many plans serving the industry. As the total number of active participants in a plan declines, the resources from which to collect employer contributions declines proportionally. Stakeholders also said these changes were unforeseeable. Limitations on a plan’s ability to increase contributions mean that a plan has less capacity to recover from an underfunded position or to make up for investment returns that fall short of expectations. A decline in the number of active workers can also accelerate plan “maturity,” as measured by the ratio of nonworking to working participants. Plan maturity has implications for a plan’s investment practices and the time frame over which the plan must be funded. According to PBGC’s data for the multiemployer plans it insures, there were approximately three active participants for every nonworking participant in 1980 (3:1); by 2014, the ratio was approximately one active worker for every two nonworking participants (1:2). Figure 6 shows the change in the percentages of active and nonworking participants for the multiemployer plans that PBGC insures. CSPF saw an even more dramatic change in its active to nonworking participant ratio from 1982 through 2015. In 1982, there were more than two active workers for every nonworking participant (2:1) and by 2016 that ratio had fallen to approximately one active worker for every five nonworking participants (1:5) (see fig. 7). Because CSPF’s contributing employers were largely trucking companies, stakeholders said this made the fund especially vulnerable to industry-wide shocks. Like the industry as a whole, CSPF was unable to attract new employers to replace exiting employers, in part because of the lack of new unionized employers. CSPF officials said that changes to the trucking industry and its workforce also led to other challenges for the plan. For example, contributions to the plan declined with the shrinking number of active workers. CSPF officials told us they could not significantly increase the contribution rate paid by remaining employers because of the financial hardship it would cause, and as a result, the plan’s ability to recover from its underfunded position was limited. CSPF officials said that this increased the plan’s reliance on investment returns to try to close the gap between its assets and liabilities. Stakeholders we interviewed cited challenges inherent in multiemployer plans’ funding and investment practices, and described how the challenges may have contributed to the critical financial condition of some plans, including CSPF. Stakeholders said that CSPF and many other multiemployer plans have been challenged by employer withdrawals. An employer withdrawal reduces the plan’s number of active worker participants, thereby reducing its contribution base and accelerating plan maturity. A withdrawing employer generally must pay a share of any unfunded benefits. Stakeholders identified several ways in which the withdrawal liability framework could result in a withdrawing employer underpaying its share of an unfunded liability. We have previously reported on the challenges associated with withdrawal liability, including: withdrawal liability assessments are often paid over time, and payment amounts are based on prior contribution rates rather than the employer’s actual withdrawal liability assessment; withdrawal liability payments are subject to a 20-year cap, regardless of whether an employer’s share of unfunded benefits has been fully paid within this 20-year timeframe; plans often did not collect some or all of the scheduled withdrawal liability payments because employers went bankrupt before completing their scheduled payments; and fears of withdrawal liability exposure increasing over time could be an incentive for participating employers to leave a plan and a disincentive for new employers to join a plan. Stakeholders we interviewed also added that the calculation used to determine withdrawal liability may use an investment return assumption that inherently transfers risk to the plan. When exiting employers do not pay their share of unfunded benefits, any remaining and future employers participating in the plan may effectively assume the unpaid share as a part of their own potential withdrawal liability as well as responsibility for the exiting employer’s “orphaned” participants. Participating employers may negotiate a withdrawal if they perceive a risk that the value of their potential withdrawal liability might grow significantly over time. In its MPRA application, CSPF cited employer withdrawals and bankruptcies as a significant challenge for the plan. CSPF reported that after deregulation, the number of contributing employers dropped by over 70 percent. While some of the drop could be due to the consolidation of trucking companies after deregulation, CSPF officials cited several cases in which employers went bankrupt or withdrew from the plan, which reduced the plan’s contribution base and accelerated its maturity. Additionally, when employers went bankrupt, they often did not pay their full withdrawal liability. For example, CSPF said two of its major contributing employers left the plan between 2001 and 2003, and left $290 million of more than $403 million in withdrawal liability unpaid after they went bankrupt. Stakeholders identified funding timeframes as a factor that contributed to the challenges facing many multiemployer plans, including CSPF. ERISA’s minimum funding standards have historically allowed multiemployer plans to amortize, or spread out the period of time for funding certain events, such as investment shortfalls and benefit improvements. For example, CSPF began a 40-year amortization of approximately $6.1 billion in underfunding on January 1, 1981, giving the plan until the end of 2021 to fully fund that amount. Longer amortization periods increase the risk of plan underfunding due to the number and magnitude of changes in the plan’s environment that may occur, such as a general decline in participants or deregulation of an industry. The Pension Protection Act of 2006 shortened amortization periods for single- employer plans to 7 years and the amortization periods for multiemployer plans to 15 years. Shorter amortization periods provide greater benefit security to plan participants by reducing an unfunded liability more rapidly. In addition, shorter amortization periods can be better aligned with the projected timing of benefit payments for a mature plan. However, shorter periods can be a source of hardship for plans with financially troubled contributing employers because they may require higher contributions. According to CSPF officials, CSPF requested and received an additional 10-year amortization extension from the IRS in 2005 after relating that contribution requirements could force participating employers into bankruptcy. One CSPF representative said an amortization extension can also help avoid subjecting the plan’s employers to IRS excise taxes for failing to make required minimum contributions. Stakeholders we interviewed said that certain common investment practices may have played a role in the critical financial condition of CSPF and other mature and declining plans. In general, multiemployer plans invest in portfolios that are expected, on average, to produce higher returns than a low-risk portfolio, such as one composed entirely of U.S. Treasury securities. Stakeholders also stated that these investment practices may have been too risky because returns can be more volatile, and the higher expected returns might not be achieved. In addition, the Congressional Budget Office has reported that if “plans had been required to fund their benefit liabilities—at the time those liabilities were accrued—with safer investments, such as bonds, the underfunding of multiemployer plans would have been far less significant and would pose less risk to PBGC and beneficiaries.” Stakeholders also told us that for mature plans like CSPF, these investment practices can pose further challenges. Mature plans, with fewer active employees, have less ability to recoup losses through increased contributions and have less time to recoup losses through investment returns before benefits must be paid. Market corrections, such as those that occurred in 2001 through 2002 and in 2008, can be particularly challenging to mature plans and their participants, especially if a mature plan is also significantly underfunded. Mature plans could mitigate these risks by investing more conservatively, however, the resulting lower expected returns from more conservative investing necessitates higher funding targets and contribution rates, which could be a hardship for employers in an industry with struggling employers. Alternatively, a plan that invests more conservatively may provide lower promised benefits to accommodate the level of contributions it can collect. Lower investment returns from a more conservative investment policy would cost employers more in contributions and could potentially result in employers leaving the plan. Further, investing in a conservative portfolio would be relatively unique among multiemployer plans, and stakeholders said plan managers may feel they are acting in a prudent fashion by investing similarly to their peers. Underfunded plans like CSPF may not see conservative investment as an option if they cannot raise the contributions necessary to fully fund their vested benefits. Officials from CSPF told us that, because they lacked the ability to significantly increase revenue or decrease accrued benefits, the named fiduciaries sought incrementally higher investment returns to meet funding thresholds required by the amortization extension they received in 2005. On the other hand, there are challenges associated with risk-bearing investments. In our prior work, we reported that multiemployer plans generally develop an assumed average rate of investment return and use that assumption to determine funding targets, required contributions, and the potential cost of benefit improvements. Experts we interviewed for that report told us that using a portfolio’s expected return to value the cost of benefits increases the risk that insufficient assets could be on hand when needed. They also told us that using the portfolio’s expected return to calculate liabilities could incentivize plans to invest in riskier assets and to negotiate higher benefit levels because the higher returns expected from riskier portfolios can result in lower reported liabilities. Plan Terms Set through Collective Bargaining Stakeholders we interviewed said that plan terms, such as contribution rates, which are set through the collective bargaining process, can create an additional challenge for multiemployer plans. Employers in multiemployer plans generally are not required to contribute beyond what they have agreed to in collective bargaining, and these required employer contributions generally do not change during the term of a collective bargaining agreement. CSPF officials said that up until the early 2000s, plan officials did not request modifications to collective bargaining agreements, such as reallocating contribution dollars, to respond to adverse investment returns. Stakeholders highlighted the effects of market downturns on multiemployer plan assets as another contributing factor to CSPF’s critical financial condition and that of other multiemployer plans. Failure to achieve assumed returns has the effect of increasing unfunded liabilities. For the multiemployer system in aggregate, the average annual return on plan assets over the 2002 to 2014 period was about 6.1 percent, well short of typical assumed returns of 7.0 or 7.5 percent in 2002. Many multiemployer plans were especially impacted by the 2008 market downturn. PBGC estimated that from 2007 to 2009, the value of all multiemployer plan assets fell by approximately 24 percent, or $103 billion, after accounting for contributions to and payments from the plans. Although asset values recovered to some extent after 2009, some plans continued to be significantly underfunded, and stakeholders said this could be due to the contribution base not being sufficient to help recover from investment shortfalls. CSPF’s investment performance since 2000 has reflected performance similar to other multiemployer plans and the plan went from 73 percent funded in 2000 to about 38 percent funded in 2017. While the plan used an assumed rate of return of 7.5 to 8.0 percent per year between 2000 and 2014, our analysis of the plan’s regulatory filings shows that the plan’s weighted-average investment return over this period was about 4.9 percent per year. CSPF officials said the 2008 downturn significantly reduced CSPF’s assets and it was unable to sufficiently recoup those losses when the market rebounded in 2009. Plan assets declined from $26.8 billion at the beginning of 2008 to $17.4 billion at the beginning of 2009, with $7.5 billion of the decline attributable to investment losses. Despite reporting a 26 percent return on assets during 2009, CSPF had only $19.5 billion in assets at the end of 2009 because benefits and expenses exceeded the contributions it collected and because it had fewer assets generating returns for the plan. By the end of 2009, CSPF’s funding target was $35.9 billion but the fund had less than $20 billion that could be used to generate investment returns. If CSPF’s portfolio had returned 7.5 percent per year over the 2000-2014 period, instead of the approximately 4.9 percent we calculated, we estimate that the portfolio value would have exceeded $32.0 billion at the end of 2014, or 91 percent of its Actuarial Accrued Liability. In addition to the factors mentioned that affected many multiemployer plans, stakeholders we interviewed also noted the unique effect of the UPS withdrawal on CSPF. In 2007, UPS negotiated with the International Brotherhood of Teamsters for a withdrawal from CSPF and paid a withdrawal liability payment of $6.1 billion. This payment was invested just prior to the 2008 market downturn. Moreover, the loss of UPS, CSPF’s largest contributing employer, reduced the plan’s ability to collect needed contributions if the plan became more underfunded. A UPS official said that, following the market decline of 2001-2002, the company considered whether it should withdraw from all multiemployer plans because it did not want to be the sole contributing employer in any plan. According to this official, UPS considered the large number of UPS employees in CSPF and the plan’s demographics—such as an older population and fewer employers—in its decision to withdraw. CSPF officials said they did not want UPS to withdraw because its annual contributions accounted for about one-third of all contributions to the plan. CSPF officials also told us that, prior to the UPS withdrawal, they had expected the population of active UPS workers in the plan to grow over time. UPS’ withdrawal of 30 percent of CSPF’s active workers, in combination with the significant market downturn just after UPS withdrew, reflected the loss of working members and investment challenges on a large scale. Additionally, stakeholders noted that although each of the factors that contributed to CSPF’s critical financial condition individually is important, their interrelated nature also had a cumulative effect on the plan. Industry deregulation, declines in collective bargaining, and the plan’s significantly underfunded financial condition all impaired CSPF’s ability to maintain a population of active workers sufficient to supply its need for contributions when investment shortfalls developed. Given historical rules for plan funding and industry stresses, CSPF was unable to capture adequate funding from participating employers either before or after they withdrew from the plan. The plan’s financial condition was further impaired when long-term investment performance fell short of expectations. For an underfunded, mature plan such as CSPF, the cumulative effect of these factors was described by some stakeholders as too much for CSPF to overcome. The consent decree describes roles and responsibilities for several parties, including CSPF, its trustees, and DOL. Generally, it reiterates the requirement that CSPF must comply with ERISA, and gives DOL the authority to provide input on certain actions proposed by the plan. Additionally, the consent decree requires CSPF to employ a named fiduciary to administer and manage the plan’s investment assets, set investment policy, and select and supervise investment managers to create separation of plan trustees and staff from the management of plan investments. The plan must seek court approval for certain actions, such as the appointment of new trustees and named fiduciaries, and DOL can raise objections to these proposed actions. The named fiduciary must also seek court approval for proposed changes to the investment policy. (Appendix II provides a more comprehensive description of roles and other key provisions of the consent decree and its amendments.) The consent decree also provides for a court-appointed independent special counsel to assist the court in overseeing the plan, attend meetings of the board of trustees, and submit quarterly reports on plan activities to the court (see table 1). Although certain stakeholders have stated that the consent decree has achieved its purpose, DOL and CSPF agree that it still provides valuable protections, and the consent decree remains in place. The intent of the consent decree was to address alleged breaches of fiduciary duties under ERISA, including plan officials’ roles in the mismanagement of assets that were identified during DOL’s investigation of the plan in the 1970s. The former Assistant Secretary for the Employee Benefits Security Administration (EBSA) stated that the consent decree was primarily focused on preventing corrupt conduct and the influence of organized crime found during investigations prior to the consent decree’s establishment. Stakeholders agreed the consent decree accomplished its objectives by requiring the plan to seek court approval for certain activities. In 2004, the presiding judge noted in a memorandum opinion and order that the “professional management guidelines” that arose from the consent decree had worked well. In 2002, discussions arose between CSPF and DOL as to whether the consent decree should be dissolved. In 2011, the independent special counsel wrote in a letter to the court that he believed the plan was well-run and the role of the independent special counsel was no longer necessary. However, DOL officials stated that the provisions of the consent decree have created a strong incentive for ERISA compliance and have had a positive impact on the administration of the plan and the selection of trustees. Similarly, CSPF officials stated they had not requested the consent decree be dissolved because its requirements have provided valuable protection from stakeholder influence. In accordance with the requirements of the consent decree, DOL may provide input on and oversight to certain plan activities. For example, DOL may comment on or object to proposedboard of trustee candidates and proposed named fiduciaries prior to court approval. CSPF must provide notice to the court and DOL within specific time frames when seeking court approval for such actions. The consent decree requires CSPF to submit trustee and named fiduciary candidates to the court and DOL 60 days before filing their request for court approval (see fig. 8). In addition, the consent decree states that CSPF must notify DOL of new trustee candidates, selected by union or employer processes, 60 days prior to the proposed effective date of the candidate’s term and DOL may object to, or comment on, the approval of trustee candidates within 30 days. Although the consent decree does not require DOL to take any specific actions in determining whether it will comment on or object to a trustee candidate, DOL officials reported that with the assistance of other agencies they have taken the following steps to review trustee candidates: Requesting trustee candidate information. DOL requests that CSPF provide information on prospective trustee candidates; Providing questionnaires to trustee candidates via CSPF. Responses to questionnaires are reviewed by DOL’s Offices of Labor- Management Standards and Inspector General, the Department of Justice, the Federal Bureau of Investigation, and the Office of the Chief Investigator at the Teamster’s Independent Review Board (IRB); Compiling additional information. DOL searches internal and external databases for information regarding the trustee candidates; Assessing the information. DOL reviews any findings identified by the attorney assigned to CSPF in DOL’s Office of the Solicitor, officials in DOL’s Plan Benefits Security Division, and EBSA management staff. A recommendation regarding whether to file an objection is discussed and, if filing an objection is being considered, it is first discussed with the plan; and Filing objections. If any identified issues cannot be resolved, DOL files an objection with the court. Documents submitted to the court by DOL also indicated the agency has sought input on trustee candidates from PBGC, IRS, and the National Labor Relations Board. Several trustees we interviewed confirmed that DOL’s process to vet them included background checks. Our review of correspondence and other documentation found DOL routinely took such steps to vet trustee candidates. CSPF and DOL provided documents associated with the appointment and approval process of the 21 trustees appointed to the board since 1982 and one additional trustee candidate who was not presented to the court for approval because DOL identified issues during the vetting process. Vetting trustees took from approximately 1 to 5 months for the cases we reviewed. Our review of documentation also found that DOL provided input and collaborated with CSPF in two cases where approved trustees were asked to resign post- approval. The length of time for the process to vet trustee candidates (in advance of submitting them to the court) varied, but, in the cases we reviewed, took as long as 5 months. Correspondence showed various factors contributed to in the duration of DOL’s vetting process prior to submitting candidates to the court for approval, including DOL officials’ workload and vacation schedules, scheduling, and additional time spent clarifying any issues identified during the vetting process. In 2009, the vetting processes used by CSPF and DOL identified concerns with a trustee candidate before the candidate was presented to the court. During the 4-month vetting process, the candidate was found to be involved in two ongoing court cases in his role as a fiduciary for two other pension plans. Although the nominating employer association did not consider his involvement in the suit to be a problem, they eventually withdrew the nomination and proposed another candidate. In 2012, DOL’s review of a candidate to fill a vacancy left by a trustee who died during his term in office was completed in approximately 1 month. In 2015, DOL’s vetting process for a trustee candidate identified and resolved a concern before the candidate was presented to the court. DOL reported that they made inquiries to agencies and the Teamsters’ Independent Review Board (IRB) about the candidate during the vetting process, and the IRB did not report any issues with the trustee candidate at the time of DOL’s inquiry. More than 7 months after the candidate was approved, DOL received a report from the IRB that alleged lapses in financial controls and expense payment practices and procedures at a Teamsters’ local union office when the then-trustee had served as president. The trustee resigned from CSPF’s board 7 weeks later, but continued to serve as a trustee for an additional 5 months until a replacement was vetted by DOL and presented to the court for approval. In 2007 and 2009, CSPF kept DOL apprised of trustees who resigned and were replaced because employers were leaving the plan. The consent decree does not discuss court or DOL involvement in resolving issues with trustees already serving on the board, but in 1996, DOL assisted the CSPF board of trustees when they learned that one of their trustees, who had been on the board of CSPF for about 11 years, was accused of fiduciary misconduct in carrying out his duties for another pension plan. To assist the nominating board and the plan’s board of trustees in determining the proper course of action, CSPF consulted with DOL and the court before filing a motion with the court to appoint a special counsel to investigate, and to authorize expenditures for the investigations. Following the special counsel’s report, the nominating board recommended that trustee be removed, and the trustee chose to resign. Documents we reviewed also indicated DOL provided input to CSPF and the court on proposed amendments to the consent decree. For example, DOL assisted in writing a proposed amendment that would allow for the addition of a second named fiduciary and for named fiduciaries to act as investment managers for the plan. In addition, in 2007, a named fiduciary requested that CSPF assume responsibility for determining the plan’s asset allocation and indemnify it for any losses it might incur in fulfilling its role. In response to the request, CSPF considered several approaches to insulating the named fiduciary from fiduciary risk, and whether they would be inconsistent with the consent decree; however, CSPF decided against requesting the consent decree be dissolved. CSPF officials consulted with DOL regarding the approaches they considered, including one that would allow for flexibility in the allocation of investment assets within prescribed bands. CSPF waited to file its motion to amend the consent decree until DOL had an opportunity to evaluate the proposals. CSPF decided not to proceed with the proposed amendments, and instead worked with the named fiduciary to make changes to the investment policy to reduce risk for the named fiduciary. In our review of documents provided by CSPF, we also found that DOL regularly reviewed the quarterly reports from the independent special counsel, which included topics of discussion at the meetings of the board of trustees, a quarterly financial report, and other recent events of significance to the plan. Our review of communication between CSPF and DOL showed the plan also provided updates and allowed for DOL’s input on other actions. For example, CSPF responded to DOL inquiries about changes in the number of participants and the plan’s funded status in 2011 and 2014, respectively. In 2009, CSPF also provided details about a possible arrangement to allow a contributing employer that was at risk of bankruptcy to defer its contribution payments instead of suspending its participation in the plan. CSPF received input from DOL on the employer’s request to use real estate as collateral in place of cash contributions to the plan. Separate from its role under the consent decree, DOL has a primary oversight role over plans under ERISA, which it carries out through investigations and other activities. DOL is responsible for enforcing the reporting, disclosure, and fiduciary responsibility provisions of ERISA. Additionally, ERISA grants DOL investigative authority. Title I of ERISA establishes responsibilities for fiduciaries, such as persons who are responsible for the administration and management of employee benefit plans, to ensure that they act solely in the interest of plan participants and beneficiaries, and gives DOL authority to examine and investigate plans to ensure they comply with the provisions. ERISA sets forth a “prudent man” standard of care that requires fiduciary duties to be executed “…with the care, skill, prudence, and diligence…that a prudent man acting in a like capacity and familiar with such matters would use…”. According to a DOL compliance guide, prudence focuses on the process for making fiduciary decisions, and the guide states that a fiduciary lacking needed expertise is encouraged to hire others with professional knowledge to carry out fiduciary function, including investing fund assets. The guide further notes that, if a plan appoints an investment manager that is a bank, insurance company, or registered investment advisor, the plan is responsible for selecting and monitoring the manager, but is not liable for the individual investments of that manager. Further, in testimony, the former Assistant Secretary for EBSA stated that plan fiduciaries are not liable for plan losses merely because an investment lost money, but rather would be in instances where they acted imprudently in selecting and monitoring investments. Beyond the requirements of ERISA, the consent decree requires that CSPF hire a named fiduciary with exclusive responsibility and authority to manage and control the assets allocated to them. The consent decree also requires the independent special counsel to provide quarterly reports to the court and DOL. The quarterly reports include topics of discussion at the meetings of the board of trustees, a quarterly financial report, and other recent events of significance to the plan. Although stakeholders identified major factors contributing to the plan’s critical financial condition those factors are not the focus of DOL’s role under ERISA. DOL has provided assistance to the plan in identifying and assessing solutions to its financial condition. For example, in 2010, CSPF’s executive director worked directly with the assistant secretary of Labor as the plan prepared a partition application for PBGC consideration. According to CSPF officials, the plan chose not to submit the application because it did not believe the application would be approved. In 2015, CSPF had discussion with the assistant secretary about MPRA before CSPF ultimately submitted its application to Treasury to reduce pension benefits under MPRA. CSPF-provided documents show it also collaborated with DOL in developing strategies to improve the broader multiemployer plan system. For example, DOL contacted CSPF’s executive director to participate in a meeting as a “thought leader” on PBGC investment policy. The plan also worked with the assistant secretary and DOL and other government officials on legislative proposals, including modifications to statutes concerning partitioning and how partitions are funded through PBGC. In 2010, the assistant secretary testified regarding changes to the partition process proposed by CSPF and others, stating DOL would continue to work with CSPF on the proposal. IRS and PBGC also have roles under ERISA related to key factors that stakeholders identified as contributing to CSPF’s critical financial condition. IRS is responsible for enforcing certain ERISA requirements, including minimum participation, vesting and benefit accrual which are generally requirements to qualify for favorable tax treatment and minimum funding standards. Plans certify their PPA funding (or zone) status to IRS annually. PBGC, in addition to collecting premiums and providing financial assistance to insolvent multiemployer plans to pay participants a statutorily guaranteed benefit for the rest of their retirement lifetimes, provides technical assistance to multiemployer plan professionals, monitors plans, and administers certain tools to help preserve plans, such as assisting with plan mergers, reviewing methods for alternative withdrawal liabilities, and providing possible relief through plan partitions. DOL has completed at least two investigations of the plan since the consent decree was established; neither of which resulted in adverse findings or action against CSPF. DOL carries out its ERISA enforcement through a wide range of activities, including civil and criminal investigations and the agency’s enforcement priorities are set annually at the national level. DOL officials stated that to meet those priorities, the national and regional offices of DOL develop enforcement projects to focus enforcement activities on specific plan activities. Investigations based on enforcement projects or triggered by participant complaints are conducted by regional offices—DOL officials also stated that the Chicago Regional Office is primarily responsible for oversight of CSPF at the regional level. National and regional projects may be broadly applicable or may focus on specific types of plans. Since 2012, there have been seven national projects and five regional projects (two of the regional projects are currently underway). Currently, there is a Chicago Regional Office project focused on multiemployer plans. DOL officials noted that field offices generally exercise broad discretion in determining when investigations will be opened and what entities or people will be investigated. During investigations, the field offices gather information and evaluate compliance with ERISA’s civil and criminal provisions. Potential issues for investigation are identified through participant complaints, targeting based on computer-generated results of Form 5500 review and analysis, media, and referrals from federal, state, and local government, advocacy groups and service providers. For the period between 2007 and 2016, DOL opened an average of nearly 2,600 civil and criminal pension cases annually; about 5 percent of the cases were investigations of multiemployer plans. ERISA’s fiduciary responsibility provisions are intended to ensure that plan fiduciaries act solely in the interest of plan participants. Accordingly, if investigators review the selection of investments, they generally focus on the fiduciaries’ duty of prudence in the selection and monitoring of investments, rather than the ultimate performance of the asset. The investigation was opened based on a referral from DOL’s Office of the Solicitor, the entity that coordinates DOL oversight of CSPF under the consent decree. The investigation centered on alleged breaches of fiduciary responsibility by the plan trustees in private litigation. The parties settled for a withdrawal liability of one-fifth of the alleged amount owed and did not pursue a malpractice claim against attorneys who represented CSPF in the litigation. DOL’s Chicago Regional Office concluded that CSPF trustees were not in violation of ERISA. DOL’s Office of Enforcement concurred. The investigation was closed without action. The investigation was opened based on a complaint from a former employee of the named fiduciary who alleged he was fired when he brought possible misconduct to the attention of the named fiduciary. DOL’s investigation was centered on alleged securities violations by the named fiduciary. DOL’s Chicago Regional Office concluded that no violations occurred. Because of incomplete documentation from DOL and because agency officials could not provide further information, we were unable to determine why the investigation was closed. CSPF provided documents that indicated it had also been subject to earlier DOL investigations. For example, CSPF provided a June 1989 letter from DOL indicating the agency had investigated whether CSPF met its fiduciary duties through adequate procedures for monitoring legal services provided to the plan. In the letter, the DOL investigator noted that CSPF had written procedures for monitoring services and addressing disputes and that the plan provided reports showing activities surrounding the monitoring of legal fees. DOL concluded, based on available information, that CSPF had implemented monitoring procedures and DOL would take no further action. DOL did not provide further information about the letter or investigation. We provided a draft of the report to the U.S. Department of Labor, U.S. Department of the Treasury, and the Pension Benefit Guaranty Corporation for review and comment. We received technical comments from the U.S. Department of Labor and the Pension Benefit Guaranty Corporation, which we incorporated as appropriate. The U.S. Department of the Treasury provided no comments. We will send copies to the appropriate congressional committees, the Secretary of Labor, the Secretary of the Treasury, Director of the Pension Benefit Guaranty Corporation, and other interested parties. This report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Below is a list of selected events that have affected the Central States, Southeast and Southwest Areas Pension Fund (CSPF) as identified through a review of relevant documentation and interviews with stakeholders and agency officials. It is not intended to be an exhaustive list of the events that have impacted CSPF, nor is it intended to include comprehensive descriptions of each event. On September 22, 1982, the Department of Labor (DOL) entered into a court-enforceable consent decree with the Central States Southeast and Southwest Areas Pension Fund (CSPF) to help ensure the plan’s assets were managed for the sole benefit of the plan’s participants and beneficiaries as required by the Employee Retirement Income Security Act of 1974 (ERISA). The consent decree has been amended several times and currently remains in effect, as amended, under the jurisdiction of the Federal Court for the Northern District of Illinois, Eastern Division. Below is a description of the key parties to and their primary responsibilities under the consent decree. The consent decree defines roles and responsibilities for its parties, including the court, the court-appointed independent special counsel, DOL, the plan and its Board of Trustees, and the independent asset manager, which is called the named fiduciary. The primary role of the court is to oversee and enforce the consent decree. Specifically, the court: appointed an independent special counsel to assist it in administering has approval over the appointment of named fiduciaries and trustees; has approval over the appointment of investment managers of the may, for good cause shown, remove a named fiduciary after 60 days’ notice provided to the named fiduciary and DOL; and may, upon request by the plan, dissolve the consent decree absent good cause shown by DOL why the consent decree should continue in effect. The court-appointed independent special counsel is intended to serve the court by assisting in identifying and resolving issues that arise in connection with the plan’s compliance with the consent decree and Part 4 of Title I of ERISA, and to report on the plan to the court. Specifically, the independent special counsel: has full authority to examine the plan’s activities and oversee and report on the plan’s performance of the undertakings of the consent decree; may, with court approval, employ attorneys, accountants, investigators, and others reasonably necessary and appropriate to aid him in the exercise of his responsibilities; has full access to all documents, books, records, personnel, files, and information of whatever type or description in the possession, custody, or control of the plan; may attend meetings of the plan, including meetings of the board of trustees and any meetings at which plan-related matters are discussed or considered; can petition the court to compel the plan to cooperate with the independent special counsel in the performance of his duties and responsibilities; may consult with DOL, the Internal Revenue Service, and other agencies, as appropriate, but must provide access to DOL upon its request to any documents prepared by the independent special counsel within the exercise of his power; is required to file quarterly reports, as well as any other reports the independent special counsel deems necessary or appropriate, with the court, and provide copies to DOL and the plan; may have other powers, duties, and responsibilities that the court may later determine are appropriate; and cannot be discharged or terminated during the duration of the consent decree except for leave of court, and upon the termination, discharge, death, incapacity, or resignation of an independent special counsel, the court will appoint a successor. Under the consent decree, DOL has an oversight role and may object to certain proposed plan changes. Specifically, DOL: may request and review certain reports provided by the plan and any documents prepared by the independent special counsel in the exercise of his authority; may object to the appointment of proposed trustees, named fiduciaries, investment managers of the passively-managed accounts, and asset custodians; receives notice of proposed changes to the plan’s investment policy statements from the plan; and may object to the dissolution of the consent decree. The plan must operate in full compliance with the consent decree, with ERISA, and with any conditions contained in determination letters it receives from the Internal Revenue Service. Specifically, CSPF, its board of trustees, and its internal audit staff must meet certain requirements. is required to use an independent asset manager known as the named fiduciary; must rebid the named fiduciary role at least once within every 6 years, with the option to extend the appointment for one calendar year; may remove a named fiduciary without cause shown on 6 months’ written notice to the named fiduciary and DOL; must cooperate with the independent special counsel in the performance of his duties and responsibilities and with DOL in its continuing investigation and enforcement responsibilities under ERISA; is required to recommend to the court three replacement candidates, agreeable to DOL, to replace an outgoing independent special counsel; and is required to maintain a qualified internal audit staff to monitor its affairs. is required to appoint, subject to court approval, the investment managers of the passively-managed accounts; is prohibited from authorizing any future acquisitions, investments, or dispositions of plan assets on a direct or indirect basis unless specifically allowed by the consent decree; and is required to comply with ERISA fiduciary duties, such as monitoring the performance of the assets of the plan, under Part 4 of Title I of ERISA. is required to review benefit administration, administrative expenditures, and the allocation of plan receipts to investments and administration; and is required to prepare monthly reports setting forth any findings and recommendations, in cooperation with the executive director of the plan, and make copies available to the independent special counsel and, upon request, to DOL and the court. The independent asset managers, known as named fiduciaries, are appointed by the plan’s trustees, subject to court approval, and have exclusive responsibility and authority to manage and control all assets of the plan allocated to them. Specifically, the named fiduciaries: may allocate plan assets among different types of investments and have exclusive authority to appoint, replace, and remove those have responsibility and authority to monitor the performance of their are required to develop, in consultation with the Board of Trustees, and implement investment policy statements for the assets they manage, giving appropriate regards to CSPF’s actuarial requirements. Charles A. Jeszeck, (202) 512-7215 or jeszeckc@gao.gov. In addition to the individual named above David Lehrer (Assistant Director), Margaret J. Weber, (Analyst-in-Charge), Laurel Beedon, Charles J. Ford, Jessica Moscovitch, Layla Moughari, Joseph Silvestri, Anjali Tekchandani, Frank Todisco, and Adam Wendel made key contributions to this report. Also contributing to this report were Susan Aschoff, Deborah K. Bland, David M. Chrisinger, Helen Desaulniers, Ted Leslie, Sheila McCoy, Mimi Nguyen, and Walter Vance. Central States Pension Fund: Investment Policy Decisions and Challenges Facing the Plan. GAO-18-106. Washington, D.C.: June 4, 2018. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Pension Plan Valuation: Views on Using Multiple Measures to Offer a More Complete Financial Picture. GAO-14-264. Washington, D.C.: September 30, 2014. Private Pensions: Clarity of Required Reports and Disclosures Could Be Improved. GAO-14-92. Washington, D.C.: November 21, 2013. Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies. GAO-13-240. Washington, D.C.: March 28, 2013. Private Pensions: Multiemployer Plans and PBGC Face Urgent Challenges. GAO-13-428T. Washington, D.C.: March 5, 2013. Pension Benefit Guaranty Corporation: Redesigned Premium Structure Could Better Align Rates with Risk from Plan Sponsors. GAO-13-58. Washington, D.C.: November 7, 2012. Private Pensions: Changes Needed to Better Protect Multiemployer Pension Benefits. GAO-11-79. Washington, D.C.: October 18, 2010. Private Pensions: Long-standing Challenges Remain for Multiemployer Pension Plans. GAO-10-708T. Washington, D.C.: May 27, 2010. The Department of Labor’s Oversight of The Management of the Teamsters’ Central States Pension and Health and Welfare Funds. GAO/HRD-85-73. Washington, D.C.: July 18, 1985. Investigation to Reform Teamsters’ Central States Pension Fund Found Inadequate. GAO/HRD-82-13. Washington, D.C.: April 28, 1982.", "summary": "Multiemployer plans are collectively bargained pension agreements often between labor unions and two or more employers. CSPF is one of the nation's largest multiemployer defined benefit pension plans, covering about 385,000 participants. Since 1982, the plan has operated under a court-enforceable consent decree which, among other things, requires that the plan's assets be managed by independent parties. Within 7 years, CSPF estimates that the plan's financial condition will require severe benefit cuts. GAO was asked to review the events and factors that led to the plan's critical financial status and the oversight DOL provides under the consent decree and under other federal laws. GAO reviewed (1) what is known about the factors that contributed to CSPF's critical financial condition, (2) DOL's role in the administration of the 1982 CSPF consent decree and what actions the agency has taken under that role, and (3) what actions, if any, DOL has taken to oversee CSPF, beyond those required under the consent decree. GAO reviewed the consent decree and its amendments, relevant federal laws and regulations, agency guidance on plan management, and DOL protocols for investigating plans; interviewed CSPF representatives, International Brotherhood of Teamsters officials and members, federal officials, and industry stakeholders; and reviewed correspondence between DOL and CSPF and documents related to DOL investigations. The Central States, Southeast and Southwest Areas Pension Fund (CSPF) was established in 1955 to provide pension benefits to trucking industry workers and is one of the largest multiemployer plans. According to its regulatory filings, CSPF had less than half the estimated funds needed to cover plan liabilities in 1982 at the time it entered into a court-enforceable consent decree that provides for oversight of certain plan activities. Since then, CSPF has made some progress toward achieving its targeted level of funding; however, CSPF has never been more than 75 percent funded and its funding level has weakened since 2002, as shown in the figure below. Stakeholders GAO interviewed identified numerous factors that contributed to CSPF's financial condition. For example, stakeholders stated that changes within the trucking industry, as well as a decline in union membership, contributed to CSPF's inability to maintain a healthy contribution base. CSPF's active participants made up about 69 percent of all participants in 1982, but accounted for only 16 percent in 2016. The most dramatic change in active participants occurred in 2007 when the United Parcel Service, Inc. (UPS) withdrew from the plan. At that time, UPS accounted for about 30 percent of the plan's active participants (i.e. workers). In addition, the market declines of 2001 to 2002 and 2008 had a significant negative impact on the plan's long-term investment performance. Stakeholders noted that, while each individual factor contributed to CSPF's critical financial condition, the interrelated nature of the factors also had a cumulative effect on the plan's financial condition. The 1982 consent decree between the U.S. Department of Labor (DOL) and CSPF came about as a result of an investigation of alleged breaches of fiduciary duty and mismanagement of plan assets, and is intended to prevent their reoccurrence. In addition to reiterating the requirement that the plan comply with the Employee Retirement Income Security Act of 1974 (ERISA)—the primary law governing the treatment of private-sector pensions in the United States—the consent decree further outlines requirements for the plan to help ensure fiduciary controls and plan management, including seeking court approvals for the appointment of new trustees and changes to the plan's investment policy. The consent decree also delineates roles for DOL and other stakeholders. For example, it allows DOL to object to or comment on certain proposed plan actions, but does not require the agency to do so. GAO's review of plan documents found that the agency provided oversight and technical assistance in the areas specifically identified for its involvement under the consent decree, such as vetting proposed trustees prior to the court's approval. DOL is primarily responsible for enforcing the reporting, disclosure, and fiduciary provisions of ERISA for all tax-qualified pension plans, including CSPF. ERISA sets forth a “prudent man standard of care” in the execution of fiduciary duties that, according to DOL, focuses on the process for making proper fiduciary decisions. Plan fiduciaries are responsible for selecting and monitoring investment managers, but are generally not liable for the individual investment decisions of those managers. To enforce ERISA, DOL conducts examinations and investigations. Since the consent decree was established, DOL officials reported that the agency has completed two investigations of CSPF. The two investigations—completed in 1998 and 2004—were closed without adverse findings against the plan. Beyond the agencies' oversight role, DOL collaborated with CSPF and others on steps intended to improve the plan's financial position, including contributing to discussions on proposed legislation and working with CSPF on its application to reduce benefits under the Multiemployer Pension Reform Act of 2014. The application was not approved by the U.S. Department of the Treasury. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "VA serves veterans of the U.S. armed forces and provides health, pension, burial, and other benefits. The department’s three operational administrations—VHA, Veterans Benefits Administration, and National Cemetery Administration—operate largely independently from one another. Each has its own contracting organization, though all three administrations also work with national contracting offices under the Office of Acquisition, Logistics, and Construction for certain types of purchases, such as medical equipment and information technology. VHA, which provides medical care to about 9 million veterans at 172 medical centers, is by far the largest of the three administrations and, as such, is the primary focus of our review. These VHA medical centers are organized into 18 VISNs, organizations that manage medical centers and associated clinics across a given geographic area. Each VISN is served by a corresponding Network Contracting Office, which awards contracts for goods and services needed by the VISN. VA’s Office of Procurement Policy and Warrant Management (referred to in this report as the Office of Procurement Policy), within the Office of Acquisition and Logistics, is responsible for all procurement policy matters at the VA. Figure 1 shows the organizational structure of the procurement function at VA. The 2006 Veterans Benefits, Health Care, and Information Technology Act established a requirement that VA contract competitions must be restricted to SDVOSBs and VOSBs if: 1) the contracting officer reasonably expects that at least two such businesses will submit offers, and 2) the award can be made at a fair and reasonable price that offers the best value to the government. (In this report, we refer to these two elements of the law as criteria.) This determination is known as the “VA Rule of Two.” The statute also establishes an order of priority for the contracting preferences, with the highest preference for SDVOSBs, followed by VOSBs. (In this report, we refer to these businesses collectively as SD/VOSBs.) There are a number of socio-economic programs implemented in the Federal Acquisition Regulation (FAR) that provide contracting preferences or special contracting authorities for specific groups. These include contracting preferences for small businesses overall as well as more targeted preferences such as SBA’s 8(a) Business Development Program, which assists disadvantaged small businesses. Unlike these other socioeconomic preference programs that generally apply to agencies across the federal government, the 2006 statute created a preference for SD/VOSBs that applies only to VA. In June 2016, the Supreme Court decision in Kingdomware Technologies, Inc. v. United States found that the manner in which VA had been applying the preference for SD/VOSBs was not consistent with the 2006 statute. This case arose because VA was not applying the statute’s preference in competitions for orders under the FSS, which VA uses to order medical supplies, among other things. The Supreme Court ruled that VA’s FSS orders are subject to the 2006 statute, and that the VA Rule of Two must be applied because the statute mandates its use before contracting under competitive procedures. Previously, VA considered FSS a mandatory source of supplies and services that must be used when possible, but did not require that contracting officers apply the Rule of Two when placing FSS orders. An example of a mandatory source used across the federal government is the AbilityOne procurement list. AbilityOne is a program to employ the blind and people with severe disabilities to provide supplies and services to federal customers. Federal agencies that need the specific products and services on AbilityOne’s procurement list are generally required to purchase them through the program. Contracting officers, who are authorized to commit the government to contracts, are ultimately responsible for awarding and administering contracts, including ensuring compliance with the VA Rule of Two. Within the VA contracting organizations we reviewed, the contracting officer typically designates a representative of the customer office—the organization that has requested the purchase of a good or service for its use—as the contracting officer’s representative. This individual assists with tasks that support the work of the contracting officer, such as market research, developing independent government cost estimates, and monitoring contractor performance. The 2006 statute also required VA to maintain a database of verified SD/VOSBs, and required that only firms appearing in the database may qualify for VA awards set aside for SD/VOSBs. VA’s Office of Small and Disadvantaged Business Utilization (OSDBU) maintains this database through its Center for Verification and Evaluation, which assesses whether small businesses meet the criteria for being veteran-owned and controlled by verifying self-certifications provided by the SD/VOSBs. A separate federal agency, SBA, is responsible for setting size standards (by revenue and employees) for what constitutes a small business; the threshold varies by industry. Certified SD/VOSBs—which VA has verified as owned and controlled by veterans—are listed in VA’s Vendor Information Pages (VIP). This is an online database accessible to VA’s contracting workforce and the public that includes basic information about each firm. Firms listed in this database select numerical codes based on the North American Industry Classification System to identify the types of goods and services they seek to provide to the VA; firms can do business under a variety of these codes. While SD/VOSBs that receive awards through set-asides may subcontract with firms that do not have small business status, the SD/VOSBs generally must perform a certain percentage of the work on a contract themselves. The SBA establishes regulations that govern these subcontracting limitations, which were most recently revised in May 2016. These regulations place limits on the percentage of the overall contract value that firms in particular socio-economic categories, including SD/VOSBs, may pay to subcontractors that do not belong to the same category. The purpose of the subcontracting limitations is to ensure that firms that receive awards on a set-aside basis perform a material portion of the contract themselves, rather than subcontracting a majority of the work to firms that would have been ineligible for the award. Under SBA’s revised regulations, subcontracted work performed by “similarly situated” entities—those in the same socio-economic category as the firm awarded the set-aside contract—does not count against the subcontracting limitation. Table 1 lists the maximum percentage a firm that is awarded a set-aside contract may subcontract to firms that are not in the same socio-economic category under SBA’s 2016 Subcontracting Limitations regulations. If a firm violates the subcontracting limitations, SBA’s subcontracting limitation regulation would allow the government to impose a penalty of $500,000 or, if it is greater, the dollar amount spent on subcontracted work in excess of the permitted level. Contracting officers are responsible for ensuring compliance with the terms of the contract, and, as discussed in more detail below, the terms of a contract may include a requirement to comply with SBA’s limitations on subcontracting regulation. In addition, we have reported that contracting officers were not clear who was responsible for the monitoring, and uncertain about how to conduct the monitoring. The VA’s Inspector General and SBA compliance reviews have reported similar findings. VA’s set-asides to SD/VOSBs increased following the 2016 Supreme Court decision, particularly among non-construction contract actions. The change in percentage of obligations made under set-aside contracts varied across VA contracting organizations, in part because of differences in the types of goods and services they bought. The number of SD/VOSBs certified by VA also increased, as did the number of those firms that received contract awards. VA obligations and awards for SD/VOSB set-asides increased in fiscal years 2016 and 2017, particularly fiscal year 2017, which was the first full fiscal year following the 2016 Supreme Court decision. VA obligations for SD/VOSB set-asides have increased as a percentage of total VA obligations over this period, while the percentage of obligations through other set-aside types—mostly non-veteran-owned small business set- asides—remained almost steady. VA obligated about $3.9 billion through SD/VOSB set-asides in fiscal year 2017, and VA’s overall obligations also increased. Figure 2 depicts this information. The number of individual awards—new contracts and orders—made by VA through SD/VOSB set-asides has also increased as a percentage of total VA awards from fiscal years 2014 through 2017, particularly in fiscal year 2017 following the Supreme Court decision, as shown in figure 3. VA has consistently set aside a much greater percentage of construction contracts and orders for SD/VOSBs than for other types of goods and services, according to our analysis of VA eCMS data from fiscal years 2014 through 2017. Construction accounted for about 51 percent of obligations under SD/VOSB set-asides, despite construction representing only about 15 percent of VA’s overall contract obligations during this period. VA contracting officials we spoke with stated that the market for firms performing construction services generally has a greater percentage of capable SD/VOSBs than the market for firms providing non- construction goods and services. VA contracting officers working on construction contracts told us that they experienced little effect from the policy changes related to the 2016 Supreme Court decision because they had already been setting aside most construction contract actions for SD/VOSBs. Nonetheless, there was an increase in the percentage of total obligations for construction set-asides to SD/VOSBs in fiscal year 2017, while total obligations for construction contracts declined. Figure 4 shows total and set-aside obligations for construction and non-construction contract actions in fiscal years 2014 through 2017. As depicted in figure 4, obligations for non-construction SD/VOSB set- asides increased in fiscal year 2017 both in total dollars and as a percentage of total obligations. Among obligations for non-construction SD/VOSB set-asides, the top five categories of goods and services by obligations across fiscal years 2014 through 2017 included: 1. Automatic data processing and telecommunications. 2. Information technology equipment, software, supplies, and support equipment. 3. Medical/dental equipment and supplies. 4. Professional services. 5. Housekeeping services. The percentage of obligations for SD/VOSB set-asides varied across VA contracting organizations. Among the contracting offices for VHA’s 18 VISNs—which together accounted for about 47 percent of total obligations—the percentage for SD/VOSB set-asides ranged from approximately 17 percent to 40 percent in fiscal year 2017, as shown in figure 5. Total obligations and SD/VOSB set-aside obligations also varied across VA’s three national contracting offices—the National Acquisition Center, Strategic Acquisition Center, and Technology Acquisition Center—in part because of differences in the types of goods and services they procure. The Technology Acquisition Center had a larger increase in SD/VOSB set-aside obligations than other contracting organizations in fiscal year 2017. This increase is consistent with our finding that IT-related categories were among the types of goods and services that had the highest increase in SD/VOSB obligations following the Supreme Court decision. The National Acquisition Center consistently had the lowest volume and percentage of obligations for SD/VOSB set-asides; officials noted that its areas of focus in pharmaceuticals and high tech medical equipment are markets that have little participation from small businesses and SD/VOSBs. Figure 6 shows obligations on set-aside and non-set- aside contracts and orders in these three national contracting offices over fiscal years 2014 through 2017. Data from VA’s OSDBU shows consistent increases over the last several years in the number of certified firms listed in its VIP database, with a noticeable spike following the Supreme Court decision. While the number of certified SD/VOSBs in VIP increased annually from fiscal years 2014 through 2017, the largest increase—from 8,925 to 11,926 firms— occurred in the last year of this time frame. The number of SD/VOSBs that received set-aside contracts or orders also increased over fiscal years 2015 through 2017. The largest year-to- year increase during this period was in the last year of this time frame, when the number increased from 1,174 to 1,663, as shown in figure 7. In response to the Supreme Court’s 2016 decision in the case of Kingdomware Technologies, Inc. v. United States, VA released a July 2016 policy for the Veterans First program, a revision to its 2007 policy. To develop this revised policy, officials from VA’s Office of Procurement Policy said they created an integrated project team that consisted of representatives from VA procurement leadership, the Office of General Counsel, OSDBU, and others. VA’s Office of Procurement Policy also subsequently issued a “class deviation” to the VA Acquisition Regulation to implement changes VA viewed as necessary for consistency with the Supreme Court’s decision. VA’s Deputy Senior Procurement Executive issues class deviations when necessary to allow VA’s contracting organizations to deviate from the FAR or VA Acquisition Regulation. According to VA officials, these deviations effectively replace existing policy. The Office of Procurement Policy also issued guidance to provide clarifications on certain issues. Among the guidance VA issued was a decision tree that summarized how to apply the VA Rule of Two under the new 2016 Veterans First policy. Figure 8 presents our analysis of VA’s process. VA’s Office of Acquisition and Logistics had issued an Information Letter in June 2007 that established procedures for the Veterans First program, to comply with the 2006 federal statute that directed VA to prioritize SD/VOSBs in their contracting decisions. While the basic principle of the VA Rule of Two was the same across the 2007 and 2016 policies, the 2007 policy did not provide contracting officers as many details for applying the VA Rule of Two. In contrast, the 2016 policy provides more detail on how contracting officers must implement set-asides for SD/VOSBs across different types of procurements and various steps in the contracting process, including market research and use of existing contract vehicles—such as FSS and agency-wide indefinite delivery contracts. These changes had implications for how VA contracting officers make contracting decisions and document their work. Table 2 summarizes key differences in emphasis between the 2007 and 2016 policies and the work that contracting officers must perform. VA has conducted training for its workforce on the 2016 Veterans First policy and subsequent updates and guidance. VA’s Office of Procurement Policy collaborated with the VA Acquisition Academy to provide several installments of online training to contracting officers. The academy offered initial training to contracting officers in July 2016, just after the policy was issued. Supplemental training was offered to supervisors in December 2016. In March 2018, the academy offered follow-up training for all contracting officers to provide further clarification on the Veterans First policy. These trainings focused on specific areas of frequent questions that the Office of Procurement Policy received from contracting officers, including market research, fair and reasonable price determinations, and limitations on subcontracting, among other things. These trainings were highly encouraged but not mandatory. Figure 9 details the training provided to contracting officers. VA’s Office of Procurement Policy addressed some aspects of the 2016 Veterans First policy that had caused confusion and concerns among contracting officers by providing additional guidance and policy. Contracting officers we met with told us of their initial uncertainty about whether they could use existing contract vehicles and whether they must apply the VA Rule of Two before using these vehicles under the Veterans First policy. In response to such concerns, the Office of Procurement Policy gathered frequently asked questions, and created guidance by posting answers on its website as another mechanism for providing clarification to contracting officers. VA also issued new policy and guidance to address contracting officers’ concerns about the additional work and delays associated with cases where they set-aside a solicitation for SD/VOSBs but did not receive any offers. Specifically, 28 of the contracting officers we interviewed individually and in roundtable discussions told us they sometimes had to cancel SD/VOSB solicitations for this reason and then reopen procurements without the SD/VOSB set-aside, resulting in delays in the contract award process. Other contracting officials we spoke with told us that since the implementation of the 2016 Veterans First policy, individual contract actions take longer to award on average due to the need to re- solicit in cases where they set aside solicitations for SD/VOSBs but do not receive acceptable offers, as well as due to expectations for increased documentation of the rationale for issuing a solicitation without an SD/VOSB set-aside restriction. For instance, a contracting officer at one of the VISN contracting offices we visited stated that a majority of his contract actions have involved multiple rounds of solicitations, which has increased his workload and procurement lead times. In response to such concerns, VA’s Office of Procurement Policy provided informal guidance in early 2017, followed by policy in February 2018 that contracting officers could use “tiered” or “cascading” solicitations. Under VA’s current policy, VA issues a solicitation that requests offers from multiple types of firms, or “tiers,” including SD/VOSBs, other small business types, and, potentially, large businesses. The solicitation establishes an order of preference among the different tiers. The contracting officer separates the offers based on the firms’ size or socioeconomic status, and then evaluates them in the order of preference established by the solicitation. If the award cannot be made at the first tier, the evaluation moves to the succeeding tier or tiers until an award can be made. Applying the 2016 Veterans First policy has presented challenges for contracting officers. First, the VA system that contracting officers are required to use for the initial step of market research was not designed for this purpose, and contracting officers we interviewed expressed dissatisfaction with it. Second, contracting officers we spoke with expressed confusion about conducting market research and applying the VA Rule of Two criteria—determining whether there is a reasonable expectation that two or more SD/VOSBs will submit offers and that award can be made at a fair and reasonable price that offers best value to the government. Further, contracting officers also expressed confusion on how to determine whether the prices offered by SD/VOSBs in response to a set-aside solicitation are fair and reasonable. Finally, continuing workload issues, real and perceived pressure to set aside contracts, and training not reaching all VA contracting officers are other factors that continue to contribute to the challenges. VA’s 2016 Veterans First policy requires contracting officers to use VIP as the first step in market research to identify SD/VOSBs capable of performing the work. While the use of VIP and documentation of its use had been required by the VA Acquisition Regulation since 2009, presenting it as the first step for all market research was a key change in how contracting officers use this system. Forty-one out of 60 contracting officers we interviewed individually and in roundtable discussions expressed dissatisfaction with VIP as the starting point for market research, citing difficulty in using it and lack of usefulness to conduct market research. Specifically, several of these contracting officers stated that while VIP can be used to determine whether firms are certified as SD/VOSBs, it does not contain much information to help them determine whether these SD/VOSBs will be capable of performing the contract. They also stated, and OSDBU officials confirmed, that each SD/VOSB self-selects the codes that indicate the types of goods and services it can provide, and many list a large number. As a result, a search can return hundreds of results. Twenty-six contracting officers we interviewed— either individually or in roundtable discussions—stated that they have had instances where they issued an SD/VOSB set-aside solicitation based on a VIP search returning a high number of SD/VOSB contractors that provide the desired goods or services, but no SD/VOSBs submitted offers. Many of these contracting officers stated that, because they feel they cannot rely on the VIP results, they have taken subsequent steps such as using public “sources sought” notices to gauge interest from SD/VOSBs. While this step requires additional time, they said they found it to be a better source of information for making a VA Rule of Two decision. VA OSDBU officials stated that they would like to provide contracting officers with enhanced utility for conducting and documenting market research. They acknowledged that VIP is not designed to be used as a market research tool and that the challenges contracting officers noted were not surprising. The director of OSDBU stated that VA is planning to make some improvements to its VIP database to provide better information on SD/VOSB capability, but, according to these officials, these improvements are not yet available for use. The 2016 Veterans First policy requires contracting officers to document their VIP searches in the contract file, but this requirement is being implemented inconsistently. Specifically, 29 of the 35 contract files we reviewed did not contain such documentation. The cognizant contracting officers for most of these contracts told us they conducted the VIP searches; some stated they forgot to print and attach the results to the contract file, while others stated they had difficulty printing the results. According to VA’s Veterans First policy, documenting the results of the VIP search is required to establish the contracting officer’s basis for the VA Rule of Two decision, regardless of whether the contract is set aside or not. Documenting this information in the case files, as required, provides VA with assurance that contracting officers have performed this search to support their overall market research efforts. There are a large number of certified SD/VOSBs offering various goods and services—about 12,000 as of fiscal year 2017, according to VIP data provided by the OSDBU. A number of contracting officers we met with stated that this can result in VIP searches that return a lengthy list of SD/VOSBs. As a result, the decision of whether to set aside a solicitation is often based on the second criterion of the VA Rule of Two—whether there is a reasonable expectation that the award can be made at a price that is fair and reasonable and offers the best value to VA. To meet this criterion, the contracting officer combines research and professional judgment to make a decision whether to set aside or not, according to VA officials. While these VA Rule of Two criteria have not changed since 2007, contracting officers told us that their perception of the rule’s application has changed following the Supreme Court decision and VA’s 2016 Veterans First policy. Several contracting officers we met with stated that sometimes, when they identified that there were two or more SD/VOSBs that they expected to submit offers, they set aside a solicitation without providing full consideration of this second criterion. These contracting officers told us it is difficult in some cases to make a prospective determination that they can reasonably expect to be able to make an award at a fair and reasonable price without any actual offers in-hand. Contracting officers told us that prior to the Supreme Court decision their understanding was that they had the option to set aside contract actions for SD/VOSBs when they expected that the price would be fair and reasonable. They stated that after the decision, management relayed an expectation that contracting officers must set aside contract actions to SD/VOSBs unless they can prove that they cannot reasonably expect to make an award at a fair and reasonable price. Contracting officers also told us of instances where they identified multiple SD/VOSBs likely to submit proposals, but, based on their market research, it was unlikely that an award could be made at a fair and reasonable price that offered best value to VA. Many of these contracting officers stated that, despite those findings, they focused only on the number of SD/VOSBs, in part because they felt pressure to do so from local or headquarters’ management, OSDBU, or feared protests from SD/VOSBs, which would delay the award. In two specific areas of contracting we found examples of differing approaches to addressing the challenges faced by contracting officers when applying the VA Rule of Two criteria. Prior to the Supreme Court decision, there was little use of SD/VOSB set-asides in real property leasing or for high-tech medical equipment, according to officials from contracting offices responsible for these procurements. After the decision, there was uncertainty about whether and how to apply the Veterans First policy to these areas of contracting. As illustrated in the examples below, real property officials continue to face challenges applying the VA Rule of Two to leasing, whereas high-tech medical equipment contracting officials addressed this challenge by preparing a business case and used it to apply the VA Rule of Two consistently across their contracts: Officials in VA’s headquarters Construction and Facilities Management office—responsible for planning, designing, and constructing VA facilities—told us that prior to the Supreme Court decision they did not apply the VA Rule of Two to its real property leases. These officials stated that they have found the Rule of Two to be difficult to apply. According to the officials, VHA facilities have requirements for specific size, space, and location, and there are few SD/VOSBs in this industry, so it is rare that an SD/VOSB can meet these requirements. These officials further told us that, since the Supreme Court decision, they have often set aside lease solicitations for SD/VOSBs as long as there were two firms available despite uncertainty that these firms could compete for the work at a fair and reasonable price at best value to the VA. According to these VA officials, based on guidance they received from OGC and others, they felt compelled to conduct the procurements as SD/VOSB set-asides even when they were unsure that the second criterion of the VA Rule of Two would be met. These officials stated they are often unable to make awards to those firms—either because their proposals were not acceptable, or the SD/VOSBs did not submit proposals at all. They expressed concern that the Veterans First program is being applied to leasing when, from their perspective, it is impractical to do so. They stated that these challenges in applying VA’s Rule of Two criteria have added an average of 3 to 6 months to the process of awarding a new lease, resulting in delays in developing new facilities. Similarly, officials responsible for awarding leases at one VISN contracting office we visited told us they set aside a solicitation to an SDVOSB even though only one SDVOSB responded to a sources sought notice. This action was taken, according to the contracting officials, because they were concerned that their decision would be challenged by OSDBU if they did not set it aside. They stated they had been without a broker—a firm that helps to negotiate leases—for more than a year due to challenges in applying the VA Rule of Two, making it difficult for them to move forward with any new leases. In both cases, VA officials stated that they decided to solicit on an SD/VOSB set-aside basis even though they lacked confidence that there was a reasonable expectation that two or more SD/VOSBs would submit offers and that award could be made at a fair and reasonable price that offered the best value to the government. Also, in both cases, VA had to reissue solicitations without the SD/VOSB set-aside restriction, which lengthened the time that VA procurement staff were required to spend on the acquisition and delayed the fulfillment of VA’s leasing requirements. In contrast, another VA contracting organization determined that SD/VOSB set-asides were not feasible because there was no reasonable expectation that two or more SD/VOSBs would submit offers and that award could be made at a fair and reasonable price. The National Acquisition Center’s program to procure high-tech medical equipment—such as magnetic resonance imaging and X-ray machines—historically had little participation from SD/VOSBs. Following the release of the 2016 Veterans First policy, contracting officials responsible for the program halted all non-emergency purchases for over a year while they conducted an analysis of how to apply the VA Rule of Two to purchases of high-tech medical equipment. These officials analyzed the marketplace and concluded that no SD/VOSBs manufacture such equipment, and that purchasing this equipment from SD/VOSB resellers would greatly increase costs and not present the best value to VA. The results of this analysis were summarized in an internal report that was used as documentation to support the contracting officers’ decision not to set-aside high-tech medical equipment purchases for SD/VOSBs. As a result, they continued to meet medical centers’ equipment needs through existing purchasing arrangements. The contracting officers told us they also periodically revisit their analysis to identify any opportunities to set aside specific solicitations for SD/VOSBs. Contracting officers must determine whether the price proposed by an SD/VOSB is fair and reasonable and offers the best value to VA before awarding the contract. The 2016 Veterans First policy did not change this requirement, and contracting officers are generally required to make this determination for every contract award. However, we found that many of the contracting officers we interviewed were uncertain how to balance the Veterans First preference with the determination of fair and reasonable price when lower prices were available on the open market. Twelve of the 30 contracting officers we interviewed for selected contract actions stated that it is difficult to assess whether the SD/VOSB’s offered price is fair and reasonable, and 8 stated that, in some cases, they lacked confidence in their determinations that prices were fair and reasonable. In many of these cases, contracting officers told us that they determined that a higher price was fair and reasonable in order to effectuate the Veterans First preference. For instance, a branch chief we interviewed provided five examples of purchases under $16,000 where, in recent, separate procurements, non-SD/VOSB small businesses had proposed prices for the same or substantially similar items that were about $400 to $3,000 less than those proposed by SD/VOSBs. These procurements were conducted as SD/VOSB set-asides, and awards were made to SD/VOSBs on the basis of the Veterans First preference. The FAR establishes that adequate price competition normally establishes a fair and reasonable price, and it provides methods for determining fair and reasonable pricing, such as comparing proposed prices to each other, previous prices paid for the same or similar items, published prices, or the independent government cost estimate. However, a few of these contracting officers told us that some of these comparison methods may not be reliable for offers received under SD/VOSB set-asides. They stated that they lacked the confidence that using these methods consistently provided robust and well-documented support for their decision to not award to an SD/VOSB. For example, they stated that in some instances, the independent government cost estimate is outdated, and the customer responsible for preparing it conducts limited market research. This issue is not unique to VA; in 2017, we reported on shortcomings in the usefulness and documentation of independent government cost estimates across several agencies. VA Procurement Policy officials emphasized that contracting officers must apply professional judgment and that no across-the-board standard exists—a higher price compared to non-SD/VOSBs might be appropriately found reasonable in some cases but not others, depending on many variables, including the degree of difference between the prices and the size and complexity of the requirement. However, in response to requests for clarification from contracting officers, VA officials provided conflicting informal guidance. For example, a contracting officer stated that, during a webinar training on the implementation of the Veterans First policy in late 2016, VHA’s Acting Chief Procurement and Logistics Officer said that, as a general rule, he would be hesitant to pay 5 percent more than any recent prices identified in contracting officers’ market research for the same or similar supplies or services from non-SD/VOSBs, a view he repeated when we interviewed him in spring of 2018. In contrast, the Executive Director for the Office of Acquisition and Logistics said he would not advocate paying any amount above recent prices identified in contracting officers’ market research for the same or similar goods or services from non-SD/VOSBs for any requirement. He stated that the Veterans First statute and policy did not authorize higher prices for goods and services from SD/VOSBs. According to a contracting officer we met with, he shared this view in a training session at a VA conference in March 2017, as well as when meeting with us in spring of 2018. A consistent message from senior management would provide VA greater assurance that its contracting officers have confidence when making fair and reasonable price determinations in set-aside acquisitions. In one of VA’s national contracting offices, the Strategic Acquisition Center, the Director told us that contracting officers were confused about how to implement the Veterans First policy in their work, particularly in making VA Rule of Two decisions and fair and reasonable price determinations. In order to address confusion and provide guidance to contracting officers, the Director stated that he provided a series of case studies to contracting officers that demonstrated effective application of these aspects of the Veterans First policy. Separately, other senior VA procurement officials stated that contracting office managers have a responsibility to address confusion and serve as a source of information for their contracting workforce. The judgments that VA contracting officers are asked to make—in conducting market research, making VA Rule of Two decisions, and determining whether proposed prices are fair and reasonable—can in some cases be inherently complex, and there are additional challenges that VA has faced in implementing Veterans First. There are several factors that contribute to these challenges. While VA provided training concurrently with the issuance of its 2016 Veterans First policy, the training did not reach all staff. According to VA Acquisition Academy officials, 81 percent of all VA contracting officers completed the initial training on the 2016 Veterans First policy in the summer of 2016. We reviewed academy training records for the 60 contracting officers we interviewed, and these records show that 14 of them did not take the initial training in 2016. In addition, only 52 percent of VA contacting officers completed the follow-up training on the Veterans First policy in the spring of 2018. According to the academy, the feedback provided by those that attended these training sessions was favorable, with ratings of 4.59 out of 5 and 4.75 out of 5, respectively. In communicating about the training to contracting officers, VA sent an announcement to all contracting officers, describing the training as “strongly encouraged” but not mandatory. According to VA Acquisition Academy and Office of Acquisition and Logistics officials, this is because neither of these organizations has the authority to designate training as mandatory—only VA’s Office of Human Resources and Administration has the ability to do so. GAO’s Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. In doing so, management should ensure that training is aimed at developing and retaining employee knowledge, skills, and abilities to meet changing organizational needs—such as those that occurred after the 2016 Supreme Court decision. Based on our review of the training, it does not fully address the more challenging aspects of implementing the Veterans First policy, such as making fair and reasonable price determinations when acquisitions have been set aside. Establishing more targeted training on the Veterans First policy and providing this training to all contracting officers would provide the VA with greater assurance that contracting officers have the knowledge and skills necessary to implement the more challenging components of this policy. Further, without establishing the importance of training on the Veterans First policy by assessing whether to make its attendance mandatory, management is not fully communicating its importance, and contracting officers may lack the tools needed to implement this policy. As previously stated, contracting officers told us they were not always confident in applying the Veterans First policy, in part because of pressure—real or perceived—from others. Contracting officers cited perceived negative scrutiny from leadership, OSDBU, Office of General Counsel reviewers, or potential protests from SD/VOSBs as reasons for their reluctance to not set aside requirements for SD/VOSBs, or to deem prices proposed by SD/VOSBs not fair and reasonable. Contracting officers explained that objections raised from any of these parties would add time to the procurement process, and a decision to cancel a set- aside because the prices were found not fair and reasonable would require yet more time to start the solicitation process again. Some contracting officers stated that they could not risk delays in awarding contracts by pursuing an approach other than setting aside for SD/VOSBs. We noted that training slides from a 2016 conference for VA contracting officials included a statement that, “contracting officers may not know if they have properly applied the VA Rule of Two standard until a court rules on the facts of a given case.” VA’s Acting Chief Acquisition Officer stated that he is aware of these perceived pressures and stated that some of these pressures are long-standing. He stated that VA had an initial effort to communicate the Veterans First policy immediately after the 2016 Supreme Court decision, but he acknowledged that contracting officers’ confusion remains, especially regarding fair and reasonable price determinations. VHA contracting officers also noted that because their customers are hospitals, there is an inherent need to avoid delays in the procurement process to prevent an adverse effect on patient care. The effect of these pressures was exacerbated by a concern we noted among contracting officers of whether their management would fully support a decision not to set-aside a contract. The struggles that contracting officers are facing in making VA Rule of Two and fair and reasonable price determinations, as discussed above, are exacerbated by continuing workload stresses they have faced for years. In September 2016, we reported that managing workload is a challenge for VA’s contracting officers. For example, one medical center official stated that his local contracting office had at times turned away some purchase requests because it could not staff them. In November 2017, we also reported on contracting inefficiencies that affected contracting officers’ ability to provide goods and services in a timely manner and at best value to medical centers. Results from a recent survey of VA staff also illustrate existing workload stress within VA contracting. Specifically, in the Office of Personnel Management’s Federal Employee Viewpoint Survey, federal employees are asked if they believe their workload is reasonable; according to VA’s analysis of this data in 2017, 54.2 percent of the contracting officers at VA who responded said their workload was not reasonable. In many cases, clauses that require compliance with and enable monitoring of subcontracting limitations are not included in VA contracts and orders with SD/VOSBs. Contracting officers are generally aware of subcontracting limitations, but they told us they do not have sufficient time or knowledge to conduct oversight. VA conducts some audits of compliance through a separate program. While the scale of that effort has been limited, these audits have identified a number of violations. VA, however, has not shared subcontracting limitation compliance risks or practices to improve monitoring efforts. VA contracting officers are required to include two different clauses when issuing solicitations for SD/VOSB set-asides: One clause requires contractors to comply with SBA’s subcontracting limitations regulation. Another enables the VA to obtain access to the SD/VOSB prime contractor’s records to monitor compliance with subcontracting limitations. Under the first clause, an SD/VOSB must comply with the SBA regulation that limits the percentage of the amount paid by the government under the contract that may be subcontracted to firms that are not in the same socio-economic category—that is, firms that are not also SD/VOSBs. This is known as the subcontracting limitations requirement. For example, under a services contract set aside for SD/VOSB contractors, an SD/VOSB prime contractor may only subcontract to non-SD/VOSBs a maximum of 50 percent of the amount paid by the government under the contract. The purpose of the subcontracting limitations requirement is to ensure that the SD/VOSBs that are awarded set-aside contracts do not subcontract the work beyond prescribed levels, and ensure that the goal of Veterans First—to promote opportunities for veteran-owned small businesses—is not undermined. In July 2016, VA updated its standard SDVOSB and VOSB set-aside clauses to refer to SBA’s revised subcontracting limitations regulation. For example, the SD/VOSB clause defines the criteria that firms contracting with VA must meet to be eligible for SD/VOSB set-asides and requires SD/VOSBs to agree to comply with SBA’s subcontracting limitations regulation in the performance of set- aside contracts. VA’s acquisition regulations require contracting officers to include the clause in all SD/VOSB set-aside contracts. We selected 35 VHA contracts and orders for review, 29 of which were set-aside to SD/VOSBs, to determine whether they contained the July 2016 (current) version of the SD/VOSB set-aside clause. All of our selected contract actions occurred after the 2016 Veterans First policy was issued, and after VA adopted SBA’s 2016 update of its subcontracting limitation regulation, which made the prior clause obsolete. We found that 11 of the 29 contract actions did not contain the current version of the clause—it was either missing entirely or an outdated version of the clause was used (see figure 10). The contracts and orders that contained the outdated version of the clause did not reference the significantly changed version of the SBA limitations on subcontracting regulation that is currently in effect, and therefore did not reference the version of the regulation that includes the penalty provision establishing that contractors that do not comply with subcontracting limitations may be subject to a $500,000 fine. Contracting officials told us the contracting officers likely forgot to include the clause or included an outdated version of the clause by mistake. Without including the mandatory clause in the contract actions as required, VA lacks assurance that SD/VOSBs are aware of subcontracting limitations. For the second clause, establishing VA’s right to access information from SD/VOSBs to monitor their compliance with the subcontracting limitations requirement, we found that 22 of the 29 contracts and orders we reviewed did not contain this clause. VA contracting officials told us the clause was not included in the contract in some cases because the contracting officers were unaware of the requirement, which was established in a June 2011 Information Letter policy memorandum. The policy memorandum directed contracting officers to include the clause in solicitations, which the Division Chief at one VISN contracting office identified as the reason it was not included in the contracts. However, the clause would not be in effect if not contained in the contract, and a VA procurement policy official confirmed that the intent was for this clause to be included in both solicitations and contracts. Without this clause, VA could face challenges in attempting to obtain information needed from the SD/VOSBs to determine their compliance with subcontracting limitations. Omission of this clause also poses a risk to VA by hindering its ability to detect violations, enforce the subcontracting limitations requirement, and ensure that the goal of Veterans First—to promote opportunities for veteran-owned small businesses—is not undermined. In June 2018, the VA rescinded the 2011 policy memorandum and issued a class deviation to the VA Acquisition Regulation. The class deviation revised the second clause—limitations on subcontracting monitoring and compliance—and required the clause to be included in solicitations and contracts. This is an important step to communicate that this clause is required in the contract. However, as noted above, the first clause—VA’s notice of set-aside clause that requires compliance with SBA’s limitations on subcontracting regulation—is already required by a previous class deviation and was missing from 8 of 29 contracts we reviewed. Given this, it is uncertain whether this VA Acquisition Regulation update alone will ensure that the monitoring clause is included in all contracts. VA contracting officers conduct little oversight to ensure that SD/VOSBs comply with SBA’s subcontracting limitations regulations. According to the FAR, contracting officers are responsible for ensuring that the contractor complies with the terms of the contract, and, as discussed above, the terms of the contract may include subcontracting limitations. For the 29 SD/VOSB set-aside contracts and orders we reviewed, we found little evidence that contracting officers were monitoring compliance with SBA’s regulatory limitations on subcontracting requirements, which includes ensuring the VA clause that requires compliance with the subcontracting limitation is in the contract. Contracting officers we spoke with were aware of these responsibilities but cited several barriers to executing them, including high workload, a focus on awarding over administering contracts, and uncertainty of what steps to take. Senior VA procurement officials stated that monitoring the subcontracting limitations requirement has not been a high priority and that contracting officers have competing priorities and, thus, limited time available to conduct this monitoring. The VA’s limited oversight of subcontracting limitations has been a long- standing problem. In September 2016, SBA conducted a surveillance review of one of VA’s VISN contracting offices. In its review of 29 contract files, SBA found no evidence that the subcontracting limitations requirement was being monitored by contracting officers and recommended that VA take measures to ensure it conducts active monitoring. In July 2017, SBA followed up to determine what steps the VISN contracting office had taken to implement its recommendation to improve monitoring of the subcontracting limitations requirement. The SBA concluded that the VISN contracting office needed to take additional steps in order to close the recommendation. Some of the VA contracting officers we met with told us they rely on contracting officers’ representatives (COR) to monitor compliance with the subcontracting limitations and identify possible violations. CORs are generally at the location where the goods are being delivered or the services are performed to observe whether the SD/VOSB contractor is accomplishing the required work as specified in the contract. VA procurement officials told us that monitoring subcontracting limitations is the responsibility of contracting officers. In June 2011, VA’s Office of Acquisition and Logistics established the Subcontracting Compliance Review Program (SCRP) within the Risk Management and Compliance Service (RMCS) to assist contracting officers in conducting subcontracting limitations reviews. RMCS conducts its own reviews of compliance with subcontracting limitations, but the scale is limited. Specifically, RMCS conducted reviews of 95 SD/VOSB and other set-aside contracts out of thousands that were awarded since 2011, and the office is in the process of reviewing another 24 contract actions. The office selects a sample of contract actions awarded each fiscal year to review and may review other contract actions if contracting officers or other VA officials contact it with referrals of instances that warrant a review. RMCS officials told us they have received very few referrals to date. Many of the contracting officers we met with were unaware that SCRP existed, or that they could refer potential subcontracting limitations violations to it for review. However, VA’s manual describing the SCRP is housed on a portal accessible to contracting officers, and, in March 2018, VA’s Acquisition Academy training included information on the SCRP. RMCS’s subcontracting limitations reviews have identified a number of instances of non-compliance. Specifically, since 2011, the office has identified 25 instances of non-compliance with subcontracting limitations among the 95 reviews it has completed, or 26 percent of selected contract actions. For example, one review found that a VOSB contractor responsible for providing project management services paid more than the allowable percentage (50 percent) of the contract’s value to non- VOSB firms. In another example, the review found an SDVOSB contractor responsible for providing courier services paid more than 88 percent of the contract’s value to non-SDVOSB firms at about the halfway point in the contract’s period of performance. If VA’s mechanisms for monitoring and enforcing subcontracting limitations are not robust, the department exposes itself to increased risk of not detecting noncompliance. RMCS’s SCRP manual states that the evidence RMCS collects is to be provided to the contracting officer so that he or she can make a determination about whether the contractor is in compliance. The manual also outlines the various remedies available to contracting officers if an SD/VOSB is suspected of being or is found to be in noncompliance with the subcontracting limitations. A RMCS official told us that remedial actions taken with respect to noncompliant contractors are determined on a case-by-case basis and that contractors are generally provided an opportunity to correct the deficiency, if the contractor submits a viable plan. In several of the cases where the RMCS office identified non- compliance, contracting officers requested that SD/VOSBs develop a plan for becoming compliant with the subcontracting limitations requirement. For example, one plan specified additional oversight steps that the VOSB would take to ensure compliance with the subcontracting limitations, such as having the project manager provide a compliance plan to senior management for any instance of subcontracting with a non-VOSB that was anticipated to exceed a significant percentage of the total value of the contract award. RMCS officials said they had anticipated receiving additional resources to conduct the planned reviews when the SCRP was initially created but have yet to receive them. Officials stated they currently rely on three support contractor staff to conduct the reviews but are exploring the possibility of hiring additional staff to increase the number of reviews they can complete each year. In addition, the Acting Director also told us that the office has created a database that will ultimately allow contracting officers and CORs to identify contracts with which they have subcontracting limitations concerns. They have only implemented some of the database’s capabilities due to resource limitations. RMCS’s Acting Director stated she would like to grow the office and establish mechanisms to better facilitate communication between contracting officers and RMCS. She noted, however, that the lack of a permanent Director for RMCS, as well as competing funding priorities have made it difficult to establish these mechanisms. The Acting Director said she is the office’s sixth one in the past 2 and 1/2 years, and each person in this role has had other duties in addition to the position. Because VA has few mechanisms for monitoring subcontracting limitations and RMCS reviews are limited in scope, VA may not be able to detect the risk of fraud for the Veterans First program. Proactive fraud risk management is meant to facilitate a program’s mission and strategic goals by ensuring that taxpayer dollars and government services serve their intended purposes. To help agencies better address fraud, GAO’s 2015 report, A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework), includes a comprehensive set of leading practices that serve as a guide when developing or enhancing efforts to combat fraud in a strategic, risk-based manner. These practices include: Identifying and assessing risks. Collaborating and communicating with stakeholders—in this case, contracting officials— to share information on fraud risks. Applying lessons learned to improve the design and implementation of control mechanisms and communicating those changes to stakeholders. The Fraud Reduction and Data Analytics Act of 2015, and Office of Management and Budget guidance implementing its provisions, affirm that agencies should adhere to the leading practices identified in the Fraud Risk Framework. In our review of VA’s mechanisms for monitoring subcontracting limitations, we found that VA’s Office of Acquisition and Logistics as well as the RMCS perform some identification and assessment of risks, but that this assessment is not comprehensive. In addition, VA is not collaborating with and communicating these risks to stakeholders, as called for in GAO’s Fraud Risk Framework. By conducting a comprehensive assessment of fraud risk, VA would be better positioned to detect potential fraud related to subcontracting limitations for the Veterans First program. RMCS officials told us they were unable to comprehensively identify and assess the risks related to subcontracting limitations due to limited staff and resources. Nonetheless, they told us that they have identified certain situations—based on the reviews they have conducted to date and discussions with contracting officers—that may pose a higher risk of non- compliance with subcontracting limitations. These situations include: contracts for certain types of services, such as grounds maintenance, van transportation, and specialty trade construction; where a SD/VOSB has multiple contracts across several VISNs for the same services; and where a SD/VOSB does not have a business presence in the same geographical area where the services are being performed. They said these were higher risk situations because the SD/VOSBs have had difficulty completing the required work on their own, or the lack of a local business presence increases the likelihood that the SD/VOSB might rely on a local, non-SD/VOSB contractor to do more than the permissible portion of the work. According to RMCS officials, they have not shared information on subcontracting limitation risks with stakeholders, such as contracting officers and their management, but they agreed this could be a helpful step. By sharing information on higher risk situations, contracting officers would have a better understanding of when to refer cases to RMCS. Our prior work on subcontracting limitations, in the context of SBA’s 8(a) program, also identified situations presenting an increased risk that subcontracting limitations may be exceeded. These situations included instances when the 8(a) prime contractor proposed subcontractors that were the agency’s incumbent contractor or that had more experience in meeting the agency’s current requirement than the small business. It also included situations where the subcontractor, rather than the prime contractor, submitted documents to or corresponded directly with government officials. These situations highlight the importance of monitoring the extent of subcontracting. SBA has also identified risk factors to consider prior to contract award, such as the incumbent contractor working as a subcontractor or if the prime contractor lacks relevant experience and must rely upon its more experienced subcontractor to win the contract. In our review, contracting officers cited several contracts where subcontracting risk factors were present. In one case we reviewed, the contracting officer reported that a large business was the prime contractor on a previous water treatment services contract. After the 2016 Supreme Court decision, the contract was re-competed on a SDVOSB set-aside basis; a SDVOSB won the award and the incumbent contractor served as a subcontractor. According to the contracting officer, he suspected that the subcontractor was performing more than 50 percent of the work based on the SDVOSB’s limited capacity, but he said he did not have the authority to request information on payments from the SDVOSB prime contractor to the subcontractor. We found that neither the set-aside clause that limits subcontracting nor the monitoring clause were included in this contract, limiting the contracting officer’s ability to ensure the SDVOSB was meeting the appropriate subcontracting limitation requirement. The COR told us that the subcontractor performed most of the water treatment services work—the primary requirement under the contract—while the SDVOSB prime contractor sent invoices and conducted oversight. RMCS officials told us they have identified some helpful practices that could improve compliance with subcontracting limitations. They said they have encouraged some contracting officers to require SD/VOSBs to explain in their proposals how they planned to comply with the subcontracting limitations requirement and said that some contracting officers have also used a worksheet to collect data on the work the SD/VOSB planned to complete themselves versus subcontract. Other VA contracting officials we met with also told us about additional practices they had implemented to facilitate monitoring of compliance with subcontracting limitations. These practices included the following: require the SD/VOSB contractors to submit quarterly reports during contract performance that indicate the percentage of the work completed by the SD/VOSB contractor and any subcontractors; hold pre-award discussions between the contracting officer and the SD/VOSB about the need to comply with subcontracting limitations; and convene post-award conferences between the contracting officer and COR to discuss whether the SD/VOSB is in compliance or not. Standards for Internal Control in the Federal Government state that management should internally communicate the necessary quality information to achieve the entity’s objectives. Although RMCS provides information to contracting officers and their management through the SCRP manual and related training, RMCS officials told us that they have not included these monitoring practices among the information they have shared. Having this information could improve contracting officers’ ability to ensure compliance with subcontracting limitations. The basic premise of the Veterans First Contracting Program has not changed in the 12 years since its implementation began. However, the 2016 Supreme Court decision prompted VA to refocus and refine its policy, and implementing the refined policy and the associated VA Rule of Two across the entire enterprise of VA contracting has been challenging due to inherent complexities, perceived and real pressures to award contracts to SD/VOSBs, and inconsistent and sometimes conflicting management guidance. This environment created mixed messages and lessened some contracting officers’ confidence about how to appropriately apply the VA Rule of Two criteria, particularly in making a determination that there is a reasonable expectation that award could be made at fair and reasonable prices. Most of the contracting officers for the selected contracts we reviewed expressed dissatisfaction with VIP as the starting point for market research, citing difficulty in using it. While documentation of the VIP search results is required by the Veterans First policy, over three-quarters of the contract files we reviewed lacked such documentation. Such documentation, combined with support for overall market research efforts, provides VA with assurance that contracting officers have performed this search as part of the basis for their Rule of Two decision. These contracting officers also had some difficulty applying the VA Rule of Two, particularly in the more challenging component, determining whether they can reasonably expect prices offered by SD/VOSBs to be fair and reasonable—issues that could be mitigated by establishing more targeted training that would provide the VA with greater assurance that its contracting officers have the knowledge and skills necessary to implement this policy. Further, assessing whether training on the Veterans First policy should be designated as mandatory would provide VA with information necessary to determine if such training would be beneficial for all contracting officers. Monitoring of subcontracting limitations is an important oversight tool to ensure effective implementation of VA’s Veterans First program. Without ensuring that required contract clauses regarding subcontracting limitations are included in all SD/VOSB set-aside contracts, VA lacks assurance that SD/VOSBs are aware of subcontracting limitations. Additionally, VA’s Subcontracting Compliance Review Program has found subcontracting limitation violations and has identified some risk factors and practices for monitoring compliance with subcontracting limitations. Conducting a comprehensive assessment of fraud risk, using GAO’s Fraud Risk Framework, would help better position VA to detect potential fraud related to subcontracting limitations for the Veterans First program. Further, VA has not communicated identified risk factors and monitoring practices to stakeholders as called for in GAO’s Framework. We are making the following six recommendations to VA. The Secretary of Veterans Affairs should ensure that VA’s Director of the Office of Acquisition and Logistics, in consultation with OSDBU, takes measures to ensure that VA contracting staff adhere to the requirements for documenting the required Vendor Information Pages searches in contract files. (Recommendation 1) The Secretary of Veterans Affairs should ensure that the Director of VA’s Office of Acquisition and Logistics directs the VA Acquisition Academy to provide more targeted training for the more challenging components of implementing the Veterans First policy, such as making fair and reasonable price determinations. (Recommendation 2) The Secretary of Veterans Affairs should, in consultation with VA’s Office of Human Resources and Administration, and the Director of VA’s Office of Acquisition and Logistics, assess whether training on the Veterans First policy should be designated as mandatory and take appropriate action based on the assessment results. (Recommendation 3) The Secretary of Veterans Affairs should ensure that the Director of the Office of Acquisition and Logistics establishes a mechanism to ensure that mandatory clauses relating to subcontracting limitations are consistently incorporated in all contracts that are set aside for SD/VOSBs. (Recommendation 4) The Secretary of Veterans Affairs should ensure that the Director of the Office of Acquisition and Logistics conducts a fraud risk assessment for the Veterans First program. (Recommendation 5) The Secretary of Veterans Affairs should ensure that the Director of the Office of Acquisition and Logistics directs the Risk Management and Compliance Service to share, through guidance, training, or other methods, subcontracting limitation risks and monitoring practices with contracting officers and their management. (Recommendation 6) We provided a draft of this report to the Department of Veterans Affairs and the Small Business Administration for review and comment. VA provided written comments on the draft report. In its comments, which are reprinted in appendix II, VA concurred with all of our 6 recommendations. SBA provided technical comments, which were incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Veterans Affairs, the Administrator of the Small Business Administration, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by email at oakleys@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. You requested that we examine changes to how the Department of Veterans Affairs (VA) implements the Veterans First program as a result of the Supreme Court’s decision. In June 2016, the Supreme Court’s decision in Kingdomware Technologies, Inc. v. United States clarified conflicting interpretations of the requirement for the preference, concluding that VA must restrict competition to veteran-owned small businesses if the contracting officer reasonably expects that at least two such businesses will submit offers and the award can be made at a fair and reasonable price that offers best value to the United States. This report assesses: (1) how VA procurement obligations to veteran-owned small businesses changed in the period from fiscal years 2014 through 2017; (2) what actions VA has taken to update Veterans First policies and regulations and provide training following the Supreme Court’s decision; (3) what challenges, if any, VA is encountering in applying Veterans First policies; and (4) the extent to which VA has mechanisms in place to monitor compliance with subcontracting limitations by veteran-owned small businesses, and the effectiveness of such mechanisms. To assess how VA procurement obligations to veteran-owned small businesses changed in the period from fiscal years 2014 through 2017, we obtained data from VA’s Electronic Contract Management System (eCMS) on all contracts from fiscal years 2014 through 2017, chosen to provide data before and after the Supreme Court decision. We chose to exclude orders reported in Express Reports—summaries of multiple orders placed on existing contracts—from our analysis. These actions were only consistently reported in eCMS starting in 2017; because they represent billions of dollars of obligations with relatively little set-asides to service-disabled veteran-owned small businesses and veteran-owned small businesses (SD/VOSB), including them would have distorted year- to-year comparisons of percentages set aside for SD/VOSBs. We analyzed these eCMS data to determine changes in the use of set-asides for SD/VOSBs relative to overall VA contracting obligations during this period. We used this analysis to determine the extent to which VA set- aside contract obligations to SD/VOSBs in the period after the Kingdomware decision compared to the period before the decision. We adjusted obligations for inflation to fiscal year 2017 dollars using the fiscal year gross domestic product price index. We also analyzed the data to identify patterns of set-asides as a percentage of obligations among different contracting activities and across VA contracting organizations. To determine the extent to which new businesses are obtaining SD/VOSB certification, we obtained Vendor Information Pages (VIP) data from VA’s Office of Small and Disadvantaged Business Utilization (OSDBU) for fiscal years 2014 through 2017. We used these data to identify the change in the total number of certified SD/VOSBs in VIP during this period. We also analyzed VA’s eCMS data to determine the number of unique, individual SD/VOSBs that received awards for set-asides during the same period. With these data from VIP and eCMS, we compared the number of certified SD/VOSBs to the number of businesses awarded set- asides for each year during this period. To assess reliability of these data, we also reviewed available eCMS documentation and interviewed officials responsible for maintaining eCMS data to gather information on processes, accuracy, and completeness of these data. We determined that these eCMS and VIP data were sufficiently reliable for the purpose of describing changes in VA’s use of SD/VOSB set-asides over this period. To assess what actions VA has taken to update Veterans First policies and regulations and provide training following the Supreme Court’s decision, we analyzed policies, regulations, guidance, and training materials related to the program, and compared these to what VA had in place prior to the decision. We obtained and analyzed the program’s initial Information Letter, policy memorandum, and revisions to VA’s Acquisition Regulations, which detailed the Department’s intention to comply with federal statute. We also obtained and reviewed additional program documentation, including briefings, presentations, and training provided to contracting officers. We met with leadership at VA’s national contracting organizations to discuss implementation of the Veterans First policy within their organizations, and interviewed senior officials in VA’s Office of Acquisition and Logistics—including Office of Procurement Policy and VA Acquisition Academy—OSDBU, Office of General Counsel, and the Veterans Health Administration’s (VHA) Procurement and Logistics Office to discuss policies, guidance and training regarding the Veterans First program. To assess what challenges, if any, VA is encountering in applying the Veterans First policy, we gathered documentation from six contracting organizations across the VA. We conducted reviews of eCMS data to determine VA’s use of set-asides and the increase in the use of set- asides for all VA contracting organizations. Based on our analysis of these data, we determined that VHA had the greatest use of set-asides in fiscal year 2017. As such, we conducted site visits at a non-generalizable selection of three VHA regional offices, known as Veterans Integrated Service Networks (VISN). The three VISNs we selected are as follows: VISN 8: St. Petersburg, Florida Network Contracting Office 8 Orlando, Florida VA Medical Center Tampa, Florida VA Medical Center VISN 12: Westchester, Illinois Network Contracting Office 12 Hines, Illinois VA Medical Center Milwaukee, Wisconsin VA Medical Center VISN 16: Ridgeland, Mississippi Network Contracting Office 16 Jackson, Mississippi VA Medical Center New Orleans, Louisiana VA Medical Center We focused our site visits on VHA, because it is the largest contracting organization in the Department. We selected these VISNs primarily based on changes in total contract obligations to SDVOSBs and VOSBs from fiscal year 2015 to fiscal year 2017—the first full fiscal years before and after the Supreme Court decision—selecting two with among the largest percentage changes, and one with the lowest. The first site visit to VISN 8 was chosen because it had a high change in the percent of obligations on SD/VOSB set-asides from fiscal years 2015 through 2017 and high total obligations in fiscal year 2017. After completing the first site visit, we decided to exclude obligations for construction-related contracts, as our analysis of VA’s eCMS data found that construction had not been affected much by the 2016 Veterans First policy because the majority of construction contracts have always been—and continue to be—awarded to SD/VOSBs. The second site visit to VISN 12 was chosen because it had a low change in the percent of non-construction obligations on SD/VOSB set-asides from fiscal years 2015 through 2017 with high total non-construction obligations in fiscal year 2017. The final site visit to VISN 16 was chosen because it had a high change in the percent of non- construction obligations on SD/VOSB set-asides from fiscal years 2015 to 2017 with high total non-construction obligations in fiscal year 2017. At each selected VISN, we interviewed the VISN Deputy Network Director. We also obtained documentation from and interviewed leadership at the National Acquisition Center, Strategic Acquisition Center, and the Technology Acquisition Center. At the selected VISNs, we interviewed leadership at their respective Network Contracting Offices, and selected a non-generalizable sample of 35 total contracts and orders—29 of which were set aside for SDVOSBs or VOSBs—selected based on high dollar value, and for procurements of construction, services, or supplies. For each of the selected contracts and orders, we reviewed the contract files and interviewed both the contracting officer and the customer—in most cases the contracting officer’s representative. We also held roundtable discussions of Veterans First implementation, training, and other matters with 8 to 11 contracting officers at each location, randomly selected from the construction, services, and supply teams. We selected a non-generalizable sample of 12 contract actions from VISN 8, 11 contract actions from VISN 12, and 12 contract actions from VISN 16. The selection was based primarily on: contracts and orders that were set-aside to SD/VOSBs; product and service codes for services and supplies; and awards with a total value above $1 million as well as those between $150,000 and $1 million. We obtained and reviewed the contract files for each of the selected contract actions, which are also stored in eCMS, including signed awards, solicitations, market research reports, fair and reasonable price determinations, independent government cost estimates, statements of work, and other documents. We visited each of the Network Contracting Offices and interviewed the contracting officer for each of the selected contract actions and discussed the set-aside determination and their experiences with the Veterans First policy; because some were responsible for more than one, we interviewed 30 contracting officers for the 35 selected contracts and orders. We interviewed leadership at each location, and held 5 roundtable discussions with contracting officers from various product lines—supplies, services, construction, and leasing— whose contracts were not included in our non-generalizable sample. We also interviewed the customer—in most cases the contracting officer’s representative or subject matter expert—for each of the selected contract actions. Finally, we met with leadership at VA’s national contracting organizations—including the National Acquisition Center, Strategic Acquisition Center, Technology Acquisition Center, and Construction and Facilities Management—to discuss the implementation of the 2016 Veterans First policy within their organizations. To assess the extent to which VA has mechanisms in place to monitor compliance with subcontracting limitations by veteran-owned small businesses and the effectiveness of such mechanisms, we analyzed VA and Small Business Administration (SBA) acquisition policies and regulations to identify the monitoring mechanisms in place to ensure compliance with subcontracting limitations. To assess the effectiveness of VA’s mechanisms, we leveraged our reviews of files for the 29 selected contracts that were set aside, and we assessed whether the required set- aside and monitoring clauses were included. In cases where we selected an order, we reviewed the overarching indefinite delivery contract if it was awarded by VA. We also assessed the extent to which the files reflected evidence of monitoring. We reviewed VA’s Information Letter that established the Risk Management and Compliance Service’s Subcontracting Compliance Review Program and the program’s manual for conducting subcontracting limitations compliance audits and analyzed the audit results. We also assessed the extent to which these mechanisms met GAO internal control and fraud framework criteria. We interviewed senior VA procurement officials responsible for developing and/or implementing these mechanisms and providing training to contracting officers and contracting officers’ representatives. We also reviewed our prior work and SBA and VA Inspector General reports on VA and other agencies’ compliance with subcontracting limitations. We conducted this performance audit from October 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Lisa Gardner, Assistant Director; Pete Anderson; Matthew T. Crosby; Susan Ditto; Jeff Hartnett; Alexandra Jeszeck; Teague Lyons; Lorraine Ettaro; Suellen Foth; Ashley Rawson; Eric Schwab; Roxanna Sun; and Alyssa Weir made key contributions to this report.", "summary": "VA spends billions every year to procure goods and services and is required to give preference to veteran-owned small businesses when awarding contracts—a program known as Veterans First. In turn, those firms must comply with limitations on the use of subcontracting. A 2006 statute established Veterans First, and a 2016 Supreme Court decision clarified conflicting interpretations, resulting in changes to how VA must now implement the program. GAO was asked to review VA's implementation of Veterans First since the Supreme Court decision. Among other things, this report assesses the extent to which (1) changes occurred in procurement obligations to veteran-owned small businesses from fiscal years 2014 through 2017; (2) VA has encountered any challenges in implementing Veterans First policies; and (3) VA has mechanisms to oversee contractor compliance with subcontracting limitations. GAO analyzed VA regulations, policies, and contracting data; conducted three site visits; and reviewed a non-generalizable sample, selected based on factors such as high dollar value, of 35 contracts and orders, 29 of which VA awarded under Veterans First. GAO found that the percentage of Department of Veterans Affairs (VA) obligations set aside for veteran-owned small businesses under its Veterans First program was higher in 2017—the first full year following the 2016 Supreme Court decision—than in previous years. In its decision, the court clarified that VA contract competitions must be restricted to these businesses if they meet two criteria: (1) the contracting officer reasonably expects that at least two such businesses will submit offers, and (2) the award can be made at a fair and reasonable price and best value to the government. This has become known as the “VA Rule of Two.” VA created a new policy for implementing Veterans First following the 2016 decision. The percentage of obligations set aside for veteran-owned small businesses increased from fiscal years 2014 to 2017 (see figure). Contracting officers face challenges implementing aspects of Veterans First, some of which VA has addressed through policy and optional training. However, 12 of the 30 contracting officers GAO interviewed cited difficulty in assessing the second criterion of the VA Rule of Two when making a set-aside decision. Eight of them stated that they sometimes lacked confidence in their fair and reasonable price determinations. VA's training, however, does not fully address these more challenging aspects of implementing the Veterans First policy. More targeted training would provide VA with greater assurance that its contracting officers have the knowledge and skills necessary to implement the policy. Additionally, assessing whether training on this policy should be mandatory would allow VA to determine if it would be beneficial for all contracting officers. GAO found that VA conducts limited oversight of contractor compliance with limitations on subcontracting and has few mechanisms for ensuring compliance. For example, GAO found that the required clause for ensuring that veteran-owned small business contractors perform the required portion of work was either missing entirely or an outdated version was used in 11 of the 29 set-aside contract actions GAO reviewed. Without better oversight, VA is limited in its ability to detect violations and ensure that the goal of Veterans First—to promote opportunities for veteran-owned small businesses—is not undermined. GAO is making six recommendations, including that VA provide more targeted training for contracting officers, assess whether training should be mandatory, ensure required clauses are included in contracts, and improve oversight of compliance with subcontracting limitations. VA agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "HUD administers its public housing and HCV programs—which serve eligible low- and very-low income households, the elderly, and persons with disabilities—through local PHAs. PHAs are typically municipal, county, or state agencies created under state law to develop and manage public housing units for low-income families. PHAs that participate in the programs contract with HUD to provide housing in exchange for federal grants and subsidies. In total, there were 3,825 PHAs as of December 2017, according to HUD data. PHAs may administer both public housing and HCV programs. HUD’s public housing program provides low-rent housing units to over 1 million eligible households. According to HUD, the majority of PHAs (approximately 3,300 of the 3,825 PHAs) across the country take part in its public housing program. These PHAs own and manage public housing properties, which can include high-rise and low-rise buildings, scattered single family properties, or be part of mixed-income housing developments. Some PHAs manage public housing programs with less than 100 units and others manage programs with more than 30,000 units. For the public housing program, PHAs handle admissions, calculate rents, and enforce leases, among other duties. Under the terms of their contracts with HUD, PHAs agree to administer their properties according to federal statute and HUD regulations, and in exchange they receive funding from HUD. These statutes and regulations provide PHAs with more discretion in developing certain policies, such as parts of the admissions process, and less discretion in developing other policies, such as the income determination process. PHAs are required to develop plans that describe their policies through a process that allows for—and responds to—community feedback. Approximately 2,200 PHAs across the country are responsible for managing the day-to-day operations of the HCV program, including determining the eligibility of households, approving applications, and distributing vouchers. The HCV program subsidizes housing costs for approximately 2.2 million households in the private rental market as of March 2018, according to HUD officials. In the HCV program, participants are able to find their own housing within the PHA’s jurisdiction, including most single-family homes, townhouses, and apartments. If the household moves out of the unit, it can move with continued assistance to another private rental unit. PHAs are required to state their admissions policies within their administrative plans and make these plans publically available. HUD’s Office of Public and Indian Housing (PIH) is responsible for implementing HUD’s public housing and HCV programs, among others. Forty-five PIH field offices across the country are charged with overseeing PHAs’ compliance with HUD rules. Within PIH, the Office of the Deputy Assistant Secretary for Public Housing and Voucher Programs develops national policy, allocates funding, and provides program direction for public housing and HCV programs. The Office of the Deputy Assistant Secretary for Field Operations oversees the field offices. Figure 1 shows the organizational chart for selected HUD divisions with responsibilities related to public housing and HCV programs. HUD OIG operates independently within HUD and reports to the Office of the Secretary. The OIG conducts audits, evaluations, and investigations to detect and prevent fraud, waste, and abuse; and promotes effective and efficient government operations. The HUD OIG Office of Investigations conducts work through a headquarters office and seven regional offices. The Office of Investigations initiates investigations about possible violations of laws or regulations in the administration of HUD programs and activities, or misconduct on the part of HUD employees or recipients of HUD funds. The HUD OIG Office of Investigations began the Fugitive Felon Initiative in fiscal year 2003, in response to a request from USMS and one of our prior recommendations. The Initiative began as a data-sharing effort between HUD OIG and USMS to identify fugitives that may be living in HUD-assisted housing. According to HUD OIG officials, the data-sharing responsibilities were transferred from USMS to the FBI in 2004. This initiative has been governed by three memoranda of understanding (MOU). Specifically, a 2002 MOU between HUD OIG and USMS facilitated sharing USMS a 2004 MOU between HUD OIG and the FBI established a process to share a larger set of warrant data from federal, state, and local law enforcement agencies; and a 2012 MOU between HUD OIG and the FBI clarified the purposes of the Fugitive Felon Initiative and the roles of HUD OIG and the FBI. For the purposes of this report, we refer to the Fugitive Felon Initiative as the data-sharing effort between HUD OIG and the FBI to locate and apprehend fugitives. The term “Fugitive Felon Initiative,” however, is HUD OIG’s name for the program. The FBI participates in the data-sharing efforts with HUD OIG through the FBI’s Fugitive Identification Notice Delivery project. This project leverages FBI data-sharing with a small number of federal agencies, including HUD, to identify the possible location of fugitives. The Fugitive Felon Initiative is a law enforcement initiative, and it operates separately from PHA processes for conducting criminal history screenings to determine eligibility for housing assistance. Consistent with the 2002 and 2004 MOUs, the 2012 MOU states that the primary purpose of the Fugitive Felon Initiative is to apprehend fugitives and the secondary purpose is for HUD OIG to investigate, identify, and refer for prosecution the fraudulent receipt of HUD benefits. The Fugitive Felon Initiative includes HUD programs administered by PHAs—including public housing and HCV—as well as additional HUD programs not administered by PHAs. Through the Fugitive Felon Initiative, the HUD OIG leverages FBI and HUD data to identify potential investigative leads into the possible location of fugitives. The FBI shares with the HUD OIG nationwide data on felony and misdemeanor warrants from the FBI’s Wanted Persons File. The Wanted Persons File is included in the FBI’s National Crime Information Center (NCIC) database. The HUD OIG also accesses data from HUD’s Public and Indian Housing Information Center (PIC) system and Tenant Rental Assistance Certification System (TRACS). These systems maintain data on tenants who receive housing assistance. The HUD OIG then cross-references the FBI and HUD data to identify potential investigative leads based on possible matches between these data sources. As shown in figure 2, after the FBI receives a list of potential investigative leads from the HUD OIG, the FBI is to verify that warrants associated with the leads remain active because some warrants may have been resolved during the period of time the HUD OIG cross-referenced the FBI and HUD data. For example, a warrant may no longer be active if the individual associated with the warrant was already arrested or if the case involving the warrant was dismissed. For warrants that remain active, the FBI disseminates these investigative leads by sending “lead letters” to the federal, state, or local law enforcement agencies that entered the warrant into NCIC. These lead letters provide information, such as a possible address for an individual with the outstanding warrant. HUD OIG also disseminates potential investigative leads to its regional offices. HUD OIG regions may assist law enforcement in apprehending a fugitive or make referrals to PHAs to take administrative action against a tenant. This referral informs the PHA that one of its tenants may be a fugitive or has been apprehended. To ensure law enforcement agencies have sufficient time to apprehend wanted persons, the 2012 MOU states that HUD OIG regions must wait 60 days after law enforcement agencies have received the investigative leads before making referrals to PHAs. PHAs then have discretion about whether to take administrative action against the tenant to terminate assistance. PHAs must follow federal statutes and HUD regulations (federal requirements) in determining eligibility for public housing and HCV assistance for persons with criminal history records. These requirements include the following: Conducting criminal background checks for program applicants. PHAs are required to conduct criminal background checks on all applicants to the public housing and HCV programs. PHAs must conduct these checks in the state where the housing is located and also check for criminal history records in other states where the applicant and members of the applicant’s household are known to have resided. When recertifying tenants, PHAs are not required to conduct criminal background checks. According to HUD officials, there are barriers to conducting background checks when recertifying tenants such as limited staff resources and cost constraints. Obtaining sufficient evidence of criminal activity. In November 2015, HUD’s Office of Public and Indian Housing issued a notice on the use of arrest records and other issues related to denying and terminating housing assistance for individuals who have engaged in criminal activity. The notice stated that the fact that an individual was arrested is not sufficient evidence that the individual engaged in criminal activity and informed PHAs that arrest records could not be used as the basis for denying admissions, terminating assistance, or evicting tenants. In a Frequently Asked Questions document pertaining to the notice, HUD advised PHAs to review their plans and revise their policies, as needed, to comply with the Notice. PHAs may use other forms of evidence such as conviction records, police records, or witness statements to determine whether the individual engaged in disqualifying criminal activity. The notice also reminded PHAs that their policies and procedures for screening applicants and eviction or termination of assistance must comply with the Fair Housing Act and the Civil Rights Act, and that inconsistent application of standards or decisions based on partial or inaccurate information (such as arrest record information) may result in liability under these laws. Establishing a process that allows applicants and tenants to dispute adverse information. PHAs must provide applicants and tenants with notification and the opportunity to dispute the accuracy and relevance of a criminal record before denying admission or terminating assistance on the basis of such a record. Denying or terminating assistance for certain types of criminal-related offenses. HUD regulations mandate that PHAs deny admission to the public housing and HCV programs for six types of offenses, two of which require lifetime bans on admissions. Specifically, PHAs must permanently ban admissions for individuals convicted of producing methamphetamine on the premises of federally assisted housing and individuals subject to a lifetime registration requirement under a state sex offender program. For the other four mandatory denials—which are related to illegal drug use, drug-related crime, and alcohol abuse—PHAs have some discretion to determine whether the offense applies to an applicant or household member or to consider mitigating circumstances. While six offenses require denial of admissions, only one of these offenses—the offense related to methamphetamine production—also mandates termination of assistance, as shown in table 1. In addition, federal statute and HUD regulations require that PHAs include certain offenses that are grounds for denial or termination in their policies, but give PHAs discretion on when and how to act on them. For example, PHAs can, but are not required to, terminate assistance for “fugitive felons.” Table 1 provides a summary of criminal history-related restrictions for the public housing and HCV programs. PHAs generally have discretion in establishing their specific criminal history policies, apart from the specific federal requirements discussed above. Below are examples of how policies vary among the 10 PHAs we reviewed. PHAs Have Discretion by Design In the 1990s, Congress enacted legislation to deregulate federal housing assistance programs, which gave public housing agencies broader discretion in establishing their own policies for tenant selection, income and rent, and administrative operations for the public housing and Housing Choice Voucher programs. This included discretion on policies for screening applicants, denying admissions, and terminating assistance. Denials and terminations. PHAs may choose to deny or terminate assistance for additional offenses that are not specifically listed in federal requirements. All of the PHAs we reviewed had established policies to deny admissions or terminate tenancy for additional offenses. For example, in addition to the mandatory denials, one PHA had a written policy to deny admission to public housing to applicants or household members convicted of arson or child molestation and persons who committed homicide, armed robbery, trafficking, or domestic violence in the past 3 years. Another PHA would deny housing assistance if an applicant, tenant, household member, or guest had ever committed homicide, kidnapping, rape or sexual assault, indecency with a child, or arson. According to selected PHA’s written policies, other offenses for which PHAs may deny admission or terminate tenancy include selling, producing, or manufacturing illegal substances; violent behavior; property destruction; and fraud, bribery, or other crimes in connection with a federally-assisted housing program. Lookback periods. PHAs can establish periods of time before the admission decision during which an applicant must not have engaged in certain types of criminal activity, such as drug-related or violent crimes, known as lookback periods. Based on our interviews with selected PHAs, lookback periods generally ranged from 2 years to 7 years but were sometimes longer for offenses such as homicide or assault. For example, one PHA had a policy to deny housing assistance to individuals who have committed manslaughter, robbery, illegal possession of a firearm or deadly weapon, assault, or physical violence to persons or property within a 5-year period. Another PHA had a 5-year lookback period for felony convictions for burglary; a 10-year lookback period for felony convictions for assault, kidnapping, abduction, forcible sex, or arson; and a 20-year lookback period for convictions for first degree murder, according to its screening criteria for the public housing and HCV programs. Some PHAs began the lookback period on the date of the conviction, and others on the date the offense occurred. Representatives of three PHAs we interviewed said that they had revised their policies in the past 5 years to reduce their lookback periods. For example, from 2013 through 2016, one PHA reduced its lookback period for all offenses first from 10 years to 7 years, and then finally to 3 years. The officials said their neighborhood had a high incarceration rate and they wanted to give second chances to ex-offenders. Officials from another PHA said that in 2016, they changed their lookback period from 10 years to 5 years at the suggestion of their new deputy director. Use of arrest records. According to HUD’s 2015 guidance, PHAs cannot rely on arrest records to determine eligibility for housing assistance. However, they may still review arrest records and may make an adverse housing decision based on the conduct underlying an arrest if the conduct indicates that the individual is not suitable for tenancy and the PHA has sufficient evidence (in addition to the arrest record) that the individual engaged in the conduct. Officials from 9 of the 10 PHAs said that they did not rely on arrest records to determine eligibility for assistance. Officials from the remaining PHA told us they have used arrest records as the basis for denying assistance for certain offenses and believed they complied with HUD’s notice on the use of arrest records by providing the applicant or tenant the right to appeal the denial or termination. Of the 9 PHAs that did not rely on arrest records for determining eligibility for assistance, officials at 5 PHAs indicated that they obtained and reviewed information on arrest records, but that they did not take action to deny assistance or terminate tenancy based on an arrest record. Officials at 1 PHA stated that they only took action based on conviction records and officials at another PHA stated they do not use arrest records at all in making eligibility determinations. For cases where an applicant has charges pending, officials at 2 PHAs said that they may wait for the case to be closed prior to making an eligibility determination. Consideration of mitigating circumstances and other factors. PHAs sometimes consider mitigating circumstances for applicants or tenants who may otherwise be denied housing assistance. Officials from PHAs we interviewed took different approaches to allowing mitigating circumstances and other factors. For example, officials from one PHA said that it always considered mitigating circumstances and requested such information as part of the application process. Officials at another PHA said that after a denial letter is sent, applicants can provide evidence of mitigating circumstances during the appeals process. Another PHA’s officials said that in making eligibility decisions, they considered the severity of the crime and whether the individual completed rehabilitation. As allowed by federal requirements, some PHAs included in their policies factors to consider when determining whether or not to deny or terminate housing assistance. For example, one PHA’s policy stated that in making such determinations it considers several factors such as the seriousness of the case and the effects that denying assistance may have on other household members or the community. Officials from another PHA said that they allowed public housing residents to preserve their tenancy on the condition that the offending household member is permanently excluded from the public housing unit. Selected PHAs’ Coordination with Local Law Enforcement Officials we interviewed at 10 public housing agencies (PHA) said they coordinated with local law enforcement as part of their efforts to address criminal activity in public housing. Two PHAs have their own police departments. Three PHAs said that local police officers patrol their public housing properties and inform the PHA if there are any issues related to criminal activity. Officials at one of the larger PHAs we interviewed said that staff check arrest reports every night to see if any crimes were committed by their tenants. Officials at another PHA said that they had off-duty police officers regularly patrol their public housing properties and had security cameras on their properties that are monitored by local police. Timing and Frequency of Background Checks. In addition to federal requirements to conduct criminal background checks at time of application, PHAs may also choose to conduct such checks as part of an annual recertification process for persons already receiving rental assistance. Officials from 3 of the 10 PHAs we interviewed said that they conducted background checks on tenants during the recertification process. In addition, officials from 3 other PHAs said that they may conduct background checks if issues arise during a person’s tenancy or at any time. Officials from the other 4 PHAs we interviewed did not provide additional details on conducting tenant background checks. Methods Used to Obtain Criminal History Information. Federal statute and HUD regulations authorize PHAs to obtain criminal history information from law enforcement agencies. HUD has also recognized that PHAs may obtain this information through other means. HUD officials at one regional office estimated that most of the PHAs under their purview use private companies to obtain criminal history information. Of the 10 PHAs we interviewed, 6 said that they hired private screening companies to provide the PHA with a criminal history report for an applicant or tenant. Criminal History Records and Data Quality Challenges The completeness and accuracy of criminal history information is a known and persistent challenge for state and federal agencies and private companies that compile and sell this information to entities such as employers and public housing agencies. In its 2015 notice on the use of arrest records, the Department of Housing and Urban Development (HUD) affirmed its commitment to the goal of ensuring that individuals are not denied access to HUD-subsidized housing on the basis of inaccurate, incomplete, or otherwise unreliable evidence of criminal conduct. In addition, the Federal Interagency Reentry Council, of which HUD is a participating agency, reported that it plans to take steps to address widespread inaccuracies in criminal records, and that it would work with consumer reporting agencies to develop best practices for improving the accuracy of criminal records. Officials from one of the selected PHAs we interviewed said that the housing authority’s police department conducted the criminal background check and determined whether to approve or deny the applicant based on the results, consulting with the PHA if needed. Officials at two PHAs said a local law enforcement agency or state agency did the initial criminal background check to determine if the applicant has a criminal record, and if so, a private screening company may obtain the individual’s detailed criminal record. Another PHA said that their staff used state databases to conduct criminal background checks. As of mid-May 2018, HUD officials stated that they were in the process of updating HUD’s HCV Program Guidebook and Public Housing Occupancy Guidebook (guidebooks), including updating sections of these guidebooks with new criminal history policies. However, the documentation HUD provided on these updates did not specifically address criminal history policies. The guidebooks serve as key reference documents and are designed to advise PHAs on the administration of the HCV and public housing programs, but have not been revised since 2001 and 2003, respectively. From 2011 through 2016, HUD issued notices and other documents that urged PHAs to move away from policies that deny admissions or tenancy to anyone who has engaged in criminal activity, and instead to seek policies that strike a balance between resident safety and the reentry needs of formerly incarcerated individuals and others with criminal history records. In 2011, the Secretary of HUD issued a letter to PHAs encouraging them to allow ex-offenders to rejoin their families in the public housing or HCV programs when appropriate. The letter reminded PHAs that they have broad discretion to set admission and termination policies for the public housing and HCV programs, aside from the federal requirements. The letter also reminded PHAs that they have discretion to consider other factors such as evidence of rehabilitation or participation in social service programs when screening applicants for suitability. HUD issued a notice in 2012 recommending that PHAs terminate the tenancy of persons living in federally assisted housing who were erroneously admitted while subject to a state lifetime sex offender registration requirement or who commit sex offenses while living in federally assisted housing. HUD recommended that PHAs ask at the time of annual recertification whether any member of the household is subject to a state lifetime sex offender registration program in any state. If the PHA finds that a member of the household engages in criminal activity, including sex offenses, while living in HUD-assisted housing, the PHA should pursue termination of tenancy, according to the notice. As previously discussed, HUD issued a notice on criminal history policies and the use of arrest records in 2015, stating that the fact that an individual was arrested is not sufficient evidence that the individual engaged in criminal activity. In addition, the notice stated that HUD does not require the adoption of “one strike” policies (for example, policies that deny admissions or tenancy to anyone who has engaged in criminal activity), and that in most cases PHAs have discretion to determine whether to deny admission or terminate assistance to applicants or households with criminal history records. In 2016, the HUD Office of General Counsel issued a document indicating that policies that exclude individuals based on arrests do not satisfy the Fair Housing Act’s burden of proof. The document further stated that housing providers should consider factors such as the type of crime and the length of time since conviction when making housing decisions based on criminal history records. As of mid-May 2018, HCV and public housing guidebooks were outdated because they did not reflect the letters and notices cited above. HUD has not updated the guidebooks in more than 15 years because they do not frequently update these documents. For example, according to HUD’s website, the 2003 Public Housing Occupancy Guidebook is the first update in over 20 years. We reported previously that HUD had struggled to maintain up-to-date and complete policies and procedures across its management functions. In March 2018, HUD officials told us they had begun the process of updating their HCV and public housing guidebooks, noting that PHAs have requested such an update. HUD officials said the eligibility chapters of the updated guidebooks will reflect the notices that HUD has provided to PHAs in recent years on criminal history policies. However, we requested documentation on HUD’s planned updates and the information we received did not clearly indicate that the new criminal history guidance would be incorporated into the guidebooks. Federal internal control standards state that management should communicate the necessary quality information to achieve the entity’s objectives. This can include ensuring appropriate means of communicating with external parties. Effective communications can take many forms, including guidance. By updating its HCV and public housing guidebooks to reflect newer criminal history guidance, HUD can ensure that these guidebooks serve as consolidated and up-to-date references for PHAs that accurately communicate HUD’s current guidance on criminal history policies. HUD reviews the criminal history policies for the small number of PHAs it designates as high risk or very-high risk, but these reviews do not address all related federal requirements or their implementation. Using its National Risk Assessment, HUD designates each PHA on a quarterly basis as low, moderate, high, or very-high risk. The assessment uses quantitative and qualitative data sources to identify, mitigate, prevent, and anticipate potential risk in five categories: financial, physical, governance, management risks, and risks to the HCV program. This assessment does not include specific metrics related to PHAs’ criminal history policies, according to HUD officials. HUD uses the results to direct field staff resources towards higher-risk PHAs, such as providing these PHAs with technical assistance or conducting compliance reviews. HUD Field Staff May Have Cause to Review PHAs’ Criminal History Policies for Various Reasons Outside of the Department of Housing and Urban Development’s (HUD) Compliance Monitoring Checklist, HUD field staff may have cause to review a PHA’s criminal history policies for other reasons. Those reasons include complaints from applicants who were denied assistance for criminal history reasons or low occupancy rates, which could indicate that people do not want to live in particular public housing complexes for safety reasons, or that a PHA’s screening policies may be too stringent. HUD may also review a PHA’s criminal history policies through the annual plan submission process. According to HUD officials, about one-third of PHAs are required to submit annual plans, which describe PHAs’ policies governing resident or tenant eligibility, and selection and admission, among other policies. Although HUD does not routinely monitor PHAs’ compliance with federal requirements on criminal history policies, it does evaluate some aspects of compliance for those high-risk and very-high-risk PHAs that receive a compliance review. To conduct these compliance reviews, field staff use HUD’s Compliance Monitoring Checklist (checklist). The checklist, which was first piloted in 2016 among six PHAs, contains six questions field staff must cover that directly relate to PHAs’ criminal history policies. These include questions on the PHA’s policies for denying applicants for drug-related criminal activity and checking states’ sex offender registry lists. In 2017, HUD expanded the use of the checklist to 74 high-risk and very-high-risk PHAs. For 2018 reviews, HUD officials stated that each of HUD’s 45 field offices will be required to use the checklist for at least one high-risk PHA in their portfolio, meaning the checklist will be applied to at least 45 PHAs out of 626 PHAs designated as high risk and very-high risk (out of a total of 3,825 PHAs as of December 2017), according to HUD officials. HUD field offices can choose to use the checklist at more than one PHA, according to HUD officials. Prior to this checklist, HUD officials said HUD field staff collected information on PHAs’ criminal history policies through HUD’s Rental Integrity Monitoring reviews by which HUD field office staff collect and analyze PHA income and rent information, identify income and rent errors, and assess PHA policies and procedures in both the public housing and HCV programs. However, HUD no longer required these reviews after 2006, though field staff may still conduct them, according to HUD officials. As shown in table 2, the checklist generally directs field staff to obtain a copy of a PHA’s written policies related to criminal history. For two of the six questions, field staff are also directed to review supporting materials and interview PHA staff, but for the other four questions, no additional information must be obtained. According to HUD officials, field staff who conduct the reviews are experienced and know to obtain additional information even if it is not listed in the checklist guidance. Officials stated that the checklist was not intended to be a step-by-step guide. HUD’s checklist does not include items to assess PHAs’ compliance with additional aspects of PHAs’ criminal history policies. As shown in table 2, the checklist includes specific items related to federal requirements on drug-related criminal activity, sex offenders, and convictions for methamphetamine production for which PHAs are required to deny admissions for public housing and HCV programs. The checklist, however, does not cover the requirement related to the abuse of alcohol. In addition, HUD’s checklist also does not address the requirement that PHAs may not use arrest records as the basis for denying or terminating assistance. Officials from 8 of the 10 PHAs we interviewed stated that they were already implementing policies or changed their policies to follow HUD’s notice on arrest records. However, we found that 1 of the 2 remaining PHAs we interviewed had not yet updated its written policies, though officials at this PHA said they did not base any decisions on arrest records in practice. The other PHA’s policies state that a record of arrest(s) will not be used as the basis for the denial or proof that the applicant engaged in disqualifying criminal activity, but officials from this PHA said that they did use arrest records as the basis for denying assistance to persons. Specifically, PHA officials stated that they based assistance decisions on records of arrest for drug-related or violent activity if the arrest had not been dismissed, had not reached disposition, and occurred within the last 5 years. Officials from this PHA said that they comply with HUD’s 2015 notice by providing the applicant the right to appeal a denial or termination (officials said that appeals by applicants are rare). HUD’s checklist instructions direct Office of Public and Indian Housing (PIH) field staff to note regulatory violations that they observe when conducting compliance reviews using the checklist. However, officials in HUD headquarters stated that they could not provide information on any regulatory violations related to PHAs’ criminal history policies specifically because they have aggregate results from the 2017 checklist reviews, which do not specify the type of compliance issues identified by field staff. As a result, violations related to criminal history policies would be included under the general categories of PHA’s Admissions and Continued Occupancy Policies (for public housing) or Administrative Plans (for HCV). In addition, none of the HUD staff we interviewed from July through December 2017 from five of HUD’s field offices discussed any instances of noncompliance specifically related to PHAs’ criminal history policies. Field staff we interviewed identified a range of potential actions they might take if they found that a PHA’s criminal history policies did not meet HUD’s requirements. These actions could include providing technical assistance to the PHA, requiring the PHA to make corrective actions within a specified time frame, or requiring the PHA to rescreen applicants. HUD is required by law to assess the performance of PHAs in all major areas of management operations, including implementing effective screening and eviction policies and other anticrime strategies. In addition, federal internal control standards indicate that management should design control activities to achieve objectives and respond to risks. However, HUD’s checklist does not address PHAs’ criminal history policies in a comprehensive manner. For example, it generally does not require field staff to go beyond reviewing written policies and obtaining additional information on how the policies are being implemented. In addition, field staff are not required to address some federal requirements, such as PHAs’ use of arrest records. According to agency officials, HUD issued the arrest record notice in response to information indicating that PHAs were basing denial decisions on whether an individual had been arrested, which is not sufficient evidence of criminal activity. In our interviews of 10 selected PHAs, as discussed above, officials from one PHA described practices that were not in line with its written policy on the use of arrest records. Specifically, the officials stated that they make housing assistance decisions based on arrest records though their policies state they will not. Another PHA had not updated its written policy to reflect its practice of not basing decisions on arrest records. HUD officials stated that, due to resource issues, they developed the checklist to address high-risk areas, but that they planned to review the checklist again after the guidebooks are updated. By reviewing the checklist to determine what additional criminal history policy requirements should be included and revising the checklist instructions to direct staff to obtain information on PHAs’ implementation of criminal history policy requirements, HUD could improve its ability to identify areas of noncompliance. Noncompliance, according to HUD’s public housing guidebook, could lead to admission of ineligible families or unlawful discrimination. Through the Fugitive Felon Initiative, the HUD OIG and the FBI have shared information that has produced thousands of potential investigative leads on the location of fugitives who may live in HUD-assisted housing. From May through June 2017, the HUD OIG identified approximately 18,000 potential investigative leads using FBI warrant data from September 2016, according to HUD OIG officials and FBI data. The HUD OIG identified these leads by cross-referencing the approximately 2.4 million felony and misdemeanor warrants in the FBI’s Wanted Persons File with the approximately 10.6 million records in HUD’s PIC and TRACS data systems. Cross-referencing involves identifying corresponding records within the FBI and HUD data that show the same or similar names, the same date of birth, and the same sex. A HUD OIG official stated that this process is designed to be overly inclusive to minimize the risk of missing a potential investigative lead. In addition, because the Fugitive Felon Initiative uses data from HUD tenant files, fugitives who live in HUD-assisted housing but are not listed on the rental agreement would not be identified through this process, according to HUD OIG officials. As part of its activities under the Fugitive Felon Initiative, after cross- referencing the FBI and HUD data, the HUD OIG distributed potential investigative leads to HUD OIG regional offices and the FBI. According to HUD OIG officials, the list of potential investigative leads they sent to HUD OIG regional offices only included extraditable warrants for felony offenses. The FBI did not verify these potential investigative leads to determine if the warrants remained active. The list of potential investigative leads the HUD OIG sent to its regional offices differed from the list of leads the FBI distributed to law enforcement agencies. Specifically, the investigative leads the FBI distributed to law enforcement agencies contained only extraditable warrants for both felony and misdemeanor offenses that the FBI verified remained active, according to FBI officials. According to our analysis of HUD OIG data, many of the potential investigative leads the HUD OIG sent to its regional offices involved nonviolent offenses, though a small percentage included crimes such as assault or homicide. Specifically, from May through June 2017, the HUD OIG sent 4,814 potential investigative leads (about 27 percent of the approximately 18,000 potential investigative leads) to its regional offices. As shown in table 3, about one-third of these leads were for failure to appear in court or probation violations—the two most frequently occurring offenses. According to FBI officials, once they electronically receive the list of potential investigative leads from the HUD OIG, their system automatically removes potential leads when either (1) the warrant associated with the lead is no longer active or (2) the warrant associated with the lead is not extraditable. A warrant would no longer be active if an arrest or other warrant resolution occurred between the time the FBI sent the Wanted Persons File to the HUD OIG and the time the HUD OIG returned the list of potential investigative leads to the FBI. An investigative lead would not be extraditable if the fugitive’s address fell outside of the geographic extradition area. According to HUD OIG officials, the HUD OIG sent the FBI approximately 18,000 potential investigative leads in 2017. FBI data show that the warrants associated with 9,415 of these leads remained active once the FBI received the leads. Of the potential leads with active warrants, FBI data show that 4,957 of the warrants were extraditable and active. According to FBI officials, they sent lead letters— which notify law enforcement agencies of the possible location of a fugitive who may be receiving HUD assistance—for the leads associated with the extraditable warrants that remained active to the relevant law enforcement agency. Lead letters include information from HUD tenant data and the associated warrant, such as name, date of birth, Social Security number, warrant number, date of the lead, and a possible address for the individual. The FBI’s investigative lead letters have led to over 1,200 fugitive apprehensions from fiscal years 2013 through 2017 as a result of the Fugitive Felon Initiative. FBI data show that the FBI sent lead letters to law enforcement agencies for active, extraditable warrants each time the FBI received a list of potential investigative leads from the HUD OIG from fiscal years 2013 through 2017. From fiscal years 2013 through 2017, the FBI sent approximately 45,100 lead letters to law enforcement agencies for extraditable warrants that remained active (out of approximately 66,000 total potential investigative leads FBI data show it received from the HUD OIG during this time period, which included extraditable and nonextraditable active warrants). Law enforcement agencies provide information to the FBI on the disposition of most warrants associated with lead letters. According to FBI officials, when the FBI provides a lead letter to law enforcement agencies, it includes an optional questionnaire on the disposition of the warrant. Law enforcement agencies return the questionnaire about 75 percent of the time, according to FBI data. Data from these questionnaires show that law enforcement agencies reported 1,260 fugitive apprehensions that were facilitated by information from the Fugitive Felon Initiative from fiscal years 2013 through 2017. Lead letters do not always result in apprehensions. For example, law enforcement agencies may have resolved the outstanding warrant through a separate investigation, been unable to locate the subject of the warrant, or decided to not extradite a subject located in another state, according to FBI data. There may also be additional apprehensions that occurred without the FBI’s knowledge if the law enforcement agency apprehended an individual but did not return the disposition questionnaire to the FBI. From fiscal years 2013 through 2016, law enforcement agencies reported numbers of apprehensions resulting from the Fugitive Felon Initiative ranging from 254 to 339 each year (see table 4). However, in fiscal year 2017, law enforcement agencies reported a substantial decrease in apprehensions to 77. FBI officials stated that this decrease was a direct result of the decrease in the frequency and speed with which the HUD OIG cross-referenced HUD and FBI data and provided potential leads to the FBI. Specifically, the HUD OIG did not cross-reference data for over a year during fiscal years 2016 and 2017, and the HUD OIG did not return the results to the FBI for 10 months after receiving warrant data from the FBI in September 2016, which resulted in many warrants no longer being active, according to FBI officials. HUD OIG officials stated that the lag in returning potential investigative leads to the FBI in July 2017 was due to staff turnover. HUD OIG officials stated they are developing a process so that staff turnover will not prevent the HUD OIG from cross-referencing the data in the future. Of the 77 apprehensions in fiscal year 2017 based on the HUD OIG’s potential investigative leads, our analyses showed that many were for nonviolent offenses. Specifically, about 57 percent were for failure to appear in court or probation violations. The next most frequent offenses included larceny, fraud, dangerous drugs, harassing communication, parole violation, and contempt of court. These offenses made up approximately 25 percent of all apprehensions. Participation in the Fugitive Felon Initiative among the HUD OIG’s regional offices was inconsistent and declined from fiscal years 2012 through 2016. In April 2018, the HUD OIG revised its Standard Operating Procedure (SOP) for the Fugitive Felon Initiative to define regional office responsibilities, improve consistency among regional offices’ participation, and leverage the FBI’s efforts. The inconsistent participation of HUD OIG regional offices in the Fugitive Felon Initiative resulted from changes in HUD OIG investigative priorities, inconsistent data-sharing from HUD OIG headquarters, and resource constraints: Change in agency priorities. According to HUD OIG officials, beginning in 2012, the HUD Inspector General prioritized investigations that would have significant financial effects, such as fraud committed by PHA employees. Subsequently, four of the seven HUD OIG regional offices did not participate in the Fugitive Felon Initiative from 2012 through 2016, according to regional officials, while the other three regional offices participated by following-up on at least some of the potential investigative leads. In addition, most HUD OIG regional offices stopped participating in USMS fugitive task forces after 2012. Specifically, officials in six of the seven regional offices said that before 2012, they coordinated with or participated in USMS task forces to investigate potential leads they received from HUD OIG headquarters. An agent in one regional office who participated as a member on the USMS Regional Fugitive Task Force said that he gathered additional information on fugitives from law enforcement and assisted in the apprehension of fugitives. According to officials in that region, they stopped participating in the task force in 2012. Similarly, officials in four other regional offices that coordinated with or participated in USMS fugitive task forces either did not receive the data from HUD OIG headquarters after 2012 or stated that they discontinued their formal involvement in the USMS task forces around 2012. Officials in the sixth regional office stated that they continue to interact with the USMS fugitive task force. Officials in the seventh regional office reported not working with USMS on fugitive apprehensions. Officials we interviewed from three USMS fugitive task forces confirmed their prior interaction with three HUD OIG regions. According to HUD OIG and USMS officials, the three HUD OIG regional offices stopped working with the USMS fugitive task forces in 2005, 2012, and 2015, respectively. For example, officials from one task force stated that a HUD OIG agent was detailed to the task force until 2015 and provided them with related HUD information to locate potential fugitives. Inconsistent data-sharing. HUD OIG headquarters did not consistently share potential investigative leads with all regional offices after 2012, which affected their participation in the Fugitive Felon Initiative. HUD OIG headquarters did not track when it shared potential investigative leads with its regional offices, but our interviews indicate that regional offices did not consistently receive leads from HUD OIG headquarters. Officials from three regional offices stated that they continued to receive data on the potential leads from headquarters from 2012 through 2016, one received data on the potential leads from 2012 through 2014, one received the data upon request from 2012 through 2015, and two did not receive the data after 2012. Of the three regional offices that received the potential leads from 2012 through 2016, officials from two offices stated that they conducted further investigations or coordinated with law enforcement to pursue apprehensions of fugitives on at least some of the potential leads. Resource constraints. Resource constraints limited HUD OIG regional office participation in the Fugitive Felon Initiative, according to officials from six of the seven regional offices. Officials from two of these regions stated that their staff levels have been reduced in recent years, limiting the resources available to address the hundreds of potential investigative leads from HUD OIG headquarters. They noted that following up on each lead was time-consuming, requiring agents to reenter warrant information into NCIC, identify the law enforcement agency point of contact, and call the agency to provide the potential location of the wanted person. Officials from four regions that continued to receive the potential investigative leads after 2012 stated that they investigated a subset of leads, such as leads for violent offenses. Officials from another region that continued to receive the leads after 2012 stated they did not follow up on any of the leads they received due to work constraints. In April 2018, the HUD OIG revised its SOP and added guidance for regional office participation in the Fugitive Felon Initiative. The prior version of the SOP (issued in 2016) did not specifically define regional activities. The 2018 SOP states that regional offices will be responsible for verifying that the warrant associated with the potential investigative lead is still active and coordinating with the law enforcement agency that originally entered the warrant into NCIC. In addition, regional offices will generally be required to conduct additional research by querying criminal databases, referring leads to PHAs for administrative action, and recording their efforts in the HUD OIG case management system. The 2018 SOP states that based on resource and staffing levels, HUD OIG regions may limit their participation in the Fugitive Felon Initiative to only “priority” leads. According to HUD OIG headquarters officials, regional offices are to follow up on priority leads by undertaking activities listed in the 2018 SOP such as coordinating with law enforcement agencies and referring leads to PHAs for administrative action. The Prioritized Fugitive Felon List is defined as leads associated with warrants for violent felonies, sexual assault, and narcotics distribution, as well as other offenses that may affect the health and safety of housing residents, children, national security, or law enforcement. The 2018 SOP also details a new process in which HUD OIG headquarters will provide regional offices with (1) the priority list of leads and (2) the nonpriority list of leads, which includes all leads associated with extraditable felony warrants not included in the priority list. The 2018 SOP also states that the HUD OIG will cross-reference FBI and HUD data twice each year and return the list of potential investigative leads to the FBI before sending it to HUD OIG regional offices. As a new step under the 2018 SOP, the FBI will verify whether each warrant on the list is active before sending the list back to the HUD OIG, which according to HUD OIG officials, is intended to reduce the number of leads with inactive warrants provided to regional offices. Because the HUD OIG only recently issued the new SOP, it is too early to assess its effectiveness in enhancing regional office participation in the Fugitive Felon Initiative. The 2018 SOP includes some added requirements for HUD OIG headquarters to track and report some statistics related to its regional offices’ activities, but the HUD OIG does not plan to collect or assess data on some activities listed in the 2018 SOP that HUD OIG officials stated regional offices are required to undertake for the Prioritized Fugitive Felon List. Under the 2018 SOP, HUD OIG headquarters will be responsible for tracking and reporting statistics on the number of referrals, evictions, PHA actions, and positive matches. However, the 2018 SOP does not require the HUD OIG to track the extent to which its regional offices undertake all the activities that HUD OIG officials stated regions are required to undertake, such as contacting and coordinating with relevant law enforcement agencies for the leads on the Prioritized Fugitive Felon List. The HUD OIG’s 2018 SOP states that the development and use of the SOP is integral to a successful quality control system and that it provides pertinent information needed to perform a required task properly by facilitating consistency. Federal internal control standards state that management should establish activities to monitor the internal control system and evaluate results. HUD OIG headquarters officials stated that they do not plan to collect or assess information on the extent to which regional offices are implementing the new SOP because collecting such information would be resource intensive. However, we believe the HUD OIG could obtain more comprehensive information on its regional offices’ activities using current resources. For example, the 2018 SOP states that HUD OIG regions are to create a subject profile in the case management system on all confirmed hits. This indicates that the regions will track their efforts to implement the new SOP. As a result, HUD OIG headquarters could collect and assess this information on the extent to which regions are implementing the new SOP through periodic data calls to its regional offices. Collecting and assessing more comprehensive information would better enable the HUD OIG to (1) determine the extent to which HUD OIG regions are undertaking activities listed in the 2018 SOP, including activities agency officials stated regions are required to undertake for the leads on the “Prioritized Fugitive Felon List” and (2) identify any areas for improvement. Such assessments of regional office efforts would also inform HUD OIG headquarters of whether the new SOP is being implemented as intended and consistently, which is particularly important given the regions’ inconsistent participation in the initiative in the past. The HUD OIG and the FBI have not consistently shared information on the results of the Fugitive Felon Initiative or agreed on the type of information that would be the most useful to share. The 2012 MOU for the initiative states that (1) the FBI is to provide apprehension and other fugitive felon statistics to the HUD OIG monthly and (2) the HUD OIG is to provide apprehension information and estimated program savings to the FBI every 30 days. FBI Apprehension Data. Prior to 2012, the FBI shared aggregate data on apprehensions that resulted from its lead letter process with the HUD OIG, but stopped doing this at the request of the HUD OIG, according to FBI officials. During our review and at the request of the HUD OIG, the FBI resumed sharing information on apprehensions with the HUD OIG in November 2017. However, rather than providing aggregate apprehension statistics, the FBI provided individual disposition letters to the HUD OIG on a weekly basis. While the disposition letters contain information on apprehensions, HUD OIG officials stated that aggregate statistics would better assist them in judging the effectiveness of the initiative. HUD OIG Apprehension Data. HUD OIG headquarters has not tracked the numbers of apprehensions of wanted persons under the initiative and therefore has not shared this information with the FBI. HUD OIG officials stated that it is not feasible for them to collect and share this information with the FBI every month. The HUD OIG’s April 2018 SOP also states that the HUD OIG will no longer share information on apprehensions with the FBI. As of April 2018, FBI officials said that they were not aware of any changes to the HUD OIG’s responsibilities for sharing apprehension information under the 2012 MOU. HUD OIG Program Savings Data. FBI data show that HUD OIG headquarters has not shared program savings data with the FBI since 2012. HUD OIG headquarters officials stated that they do not currently have a method for estimating program savings under the Fugitive Felon Initiative although they have calculated program savings in the past. FBI data show that the HUD OIG provided an estimate of program savings in 2012. The HUD OIG and the FBI have not agreed on whether sharing information on program savings would be useful in implementing the initiative. The 2012 MOU also does not specify for what purpose the HUD OIG should share information on program savings with the FBI. FBI officials stated, however, that if they received data on apprehensions and program savings in the future, they would use this information to report to FBI management to show the ongoing results from the initiative as well as benefits for law enforcement. In our prior work, we found that collaborating agencies should develop mechanisms to monitor, evaluate, and report results. Reporting on these activities can help the agencies identify areas for improvement such as policy and operational effectiveness. In the 2012 MOU, the HUD OIG and the FBI documented the information they would share on results; however, they have not consistently shared this information, according to HUD OIG and FBI officials. In addition, in its 2018 SOP, the HUD OIG stated that it would no longer collect or share data on apprehensions or program savings with the FBI, but this change is not reflected in the current MOU. By agreeing on what information on results would be useful to share, and consistently sharing this information, the HUD OIG and the FBI could enhance their ability to identify areas for improvement and evaluate the effectiveness of the initiative. In addition to not consistently sharing information on results, we found several other areas where the 2012 MOU between the HUD OIG and the FBI does not align with current processes for implementing the Fugitive Felon Initiative. The MOU also does not reflect changes made by HUD OIG’s April 2018 SOP, and the HUD OIG generally had not discussed these changes with the FBI. Prosecution for Fraud. According to HUD OIG officials, the HUD OIG generally does not pursue tenant fraud cases as part of the Fugitive Felon Initiative, although the MOU lists this as one of the purposes of the initiative. Specifically, the MOU states that in addition to apprehending fugitive felons, the secondary purpose of the initiative is to investigate, identify, and refer for prosecution individuals who fraudulently receive HUD benefits. However, according to HUD OIG headquarters and officials from one regional office, the HUD OIG generally does not pursue federal tenant fraud cases because these cases typically do not meet the dollar threshold for federal prosecution. New Data-Sharing Process. The HUD OIG’s 2018 SOP includes a new procedure in which the FBI will return verified investigative leads to the HUD OIG, but the MOU does not include this new responsibility for the FBI. As discussed earlier, the FBI will now be responsible for verifying whether each warrant on the list of potential investigative leads is active and then sending a list of investigative leads with active warrants to the HUD OIG for distribution to its regional offices. According to FBI officials, they have discussed this added step with the HUD OIG and are currently developing the capability to implement it. HUD OIG Referrals to PHAs. The MOU states that HUD OIG regional offices should not refer cases to PHAs for administrative action for 60 days after the FBI sends the lead letter to law enforcement. However, the MOU does not specify how HUD OIG regional offices will be notified about when the 60-day period begins. In addition, officials from HUD OIG regional offices had differing understandings of when this 60-day period begins, and officials from one region stated that they had only recently become aware that there was a 60-day waiting period. Further, the current MOU does not reflect new language in the HUD OIG’s 2018 SOP that allows HUD OIG regional offices to make referrals to PHAs if the subject of the warrant is on the Prioritized Fugitive Felon List and is apprehended before the 60-day period expires. HUD OIG Interaction with Law Enforcement. The HUD OIG and the FBI have not updated the 2012 MOU to reflect that, under the 2018 SOP, HUD OIG regional offices are now generally tasked with proactively contacting and coordinating with law enforcement. Further, according to HUD OIG officials, regional offices are required to proactively contact and coordinate with law enforcement for persons on the Prioritized Fugitive Felon list. However, the MOU only states that the HUD OIG will encourage law enforcement agencies to contact the HUD OIG’s regional Special Agents in Charge for assistance with fugitive apprehension activities. Our prior work has found that agencies that articulate their agreements in formal documents can strengthen their commitment to working collaboratively, and written agreements are most effective when they are regularly updated. The HUD OIG and the FBI articulated their agreement for the Fugitive Felon Initiative in the 2012 MOU, but the MOU has not been updated to reflect either of the agencies’ current implementation of the initiative or the HUD OIG’s updated April 2018 SOP, according to HUD OIG and FBI officials. As discussed previously, the HUD OIG’s April 2018 SOP includes program changes that affect the activities listed in the 2012 MOU, but according to HUD OIG officials, they have only raised some tentative changes with the FBI. According to FBI officials, as of April 2018 HUD OIG officials mentioned that they are interested in updating the MOU, but the HUD OIG has not discussed any specific changes with the FBI and has not made a formal request to update the MOU. HUD OIG officials stated that they are waiting to process the findings of this GAO report before finalizing program changes with the FBI. Jointly agreeing to any changes in HUD OIG and FBI responsibilities under the Fugitive Felon Initiative and updating the MOU to reflect these changes could improve collaboration between the HUD OIG and the FBI and improve implementation of the initiative. Criminal history policies for federally assisted housing and the Fugitive Felon Initiative help ensure the safety of residents receiving rental assistance. In the past decade, HUD issued notices and other documents urging PHAs to strike a balance between resident safety and the reentry needs of individuals with criminal history records. By completing its planned updates of program guidebooks to reflect this guidance, HUD could help ensure that PHA staff know and follow HUD’s current guidance on criminal history policies. In addition, HUD could improve its ability to identify and address potential noncompliance by determining what additional criminal history requirements to include in its compliance reviews and obtaining additional information on how PHAs are implementing their policies as part of these reviews. Through the Fugitive Felon Initiative, the HUD OIG and the FBI undertook efforts that led to over 1,200 apprehensions of wanted persons in the past 5 years. During the course of our review, the HUD OIG updated its procedures for the initiative in an effort to better define regional office responsibilities and improve the consistency of their participation, as well as to leverage the FBI’s efforts. However, collecting and assessing more comprehensive information on the extent to which regional offices are implementing these new procedures would better enable the HUD OIG to determine the extent to which its regional offices are fulfilling their responsibilities and identify areas for improvement. In addition, by consistently sharing useful information on the results of the initiative, the HUD OIG and the FBI would have better information with which to evaluate the overall effectiveness of the initiative. Finally, the HUD OIG and the FBI could improve their collaboration by agreeing to changes in HUD OIG and FBI responsibilities under the initiative and updating the MOU to reflect these changes. We are making a total of seven recommendations: two to HUD’s Office of Public and Indian Housing, three to HUD’s Office of the Inspector General Office of Investigation, and two to the FBI. Specifically: The HUD Assistant Secretary for the Office of Public and Indian Housing should complete its updates of the HCV Program Guidebook and Public Housing Occupancy Guidebook to reflect current guidance on criminal history policies for its public housing and HCV programs. (Recommendation 1) The HUD Assistant Secretary for the Office of Public and Indian Housing should review HUD’s Compliance Monitoring Checklist to determine if questions should be added to address additional federal criminal history requirements and revise checklist instructions to direct HUD staff to obtain information on PHAs’ implementation of these requirements during compliance reviews. (Recommendation 2) The HUD Assistant Inspector General for the Office of Investigation should collect and assess more comprehensive information on regional efforts to implement the activities listed in the 2018 SOP. (Recommendation 3) The HUD Assistant Inspector General for the Office of Investigation should, in collaboration with the FBI, determine what information on fugitive apprehensions and any estimated program savings that occur as the result of the Fugitive Felon Initiative would be most useful and consistently share such information with the FBI. (Recommendation 4) The HUD Assistant Inspector General for the Office of Investigation should, in collaboration with the FBI, update the Fugitive Felon Initiative MOU to reflect the agencies’ current activities and responsibilities. (Recommendation 5) The Director of the FBI should, in collaboration with the HUD OIG, determine what information on fugitive apprehensions that occur as the result of the Fugitive Felon Initiative would be most useful and consistently share such information with the HUD OIG. (Recommendation 6) The Director of the FBI should, in collaboration with the HUD OIG, update the Fugitive Felon Initiative MOU to reflect the agencies’ current activities and responsibilities. (Recommendation 7) We provided a draft of this report to HUD, the HUD OIG, and DOJ (including the FBI and USMS) for review and comment. HUD provided comments in an email and the HUD OIG provided comments, the latter of which are reproduced in appendix II. The FBI provided technical comments, which we incorporated as appropriate. USMS informed us that they did not have any comments. In an email received from a HUD PIH audit liaison on July 16, 2018, HUD stated that they agreed with our recommendation to reflect current guidance on criminal history policies in HUD’s updated public housing and HCV program guidebooks (Recommendation 1) and expect to publish the relevant updated chapters in December 2018. In response to our recommendation to review questions in HUD’s Compliance Monitoring Checklist and include instructions for obtaining information on the implementation of the requirements (Recommendation 2), agency officials stated that they reviewed the current checklist questions and determined that no additional questions or revisions are needed at this time. However, the officials did not provide supporting documentation on how they determined that the existing questions were sufficient. They also did not address the part of our recommendation related to HUD revising its checklist instructions to direct staff to obtain information on PHAs’ implementation of criminal history policy requirements. We believe these actions are needed to fully address our recommendation. In its written comments, the HUD OIG disagreed with our recommendation that it collect and assess more comprehensive information on regional office efforts to implement activities listed in the 2018 SOP (Recommendation 3). The HUD OIG stated that it is not feasible to capture information on regional offices’ activities without diverting resources from its primary mission, and that it would be burdensome to create additional mechanisms to monitor participation. We disagree. According to the 2018 SOP, the HUD OIG will be responsible for collecting and reporting statistics for some regional office activities, such as the number of referrals. As discussed in this report, we believe the HUD OIG could obtain more comprehensive information on additional required regional activities using existing resources, such as through periodic data calls to regions. Such assessments of regional office activities are particularly important given that regional offices had not consistently participated in the Fugitive Felon Initiative in the past. Accordingly, we believe our recommendation is still warranted. The HUD OIG also disagreed with our recommendation to determine what information on results of the Fugitive Felon Initiative would be the most useful to share in collaboration with the FBI (Recommendation 4). The HUD OIG stated that its ability to determine apprehensions and program savings is limited. However, the current MOU between the HUD OIG and the FBI states that the HUD OIG is to share this information with the FBI. In addition, in May 2018, HUD OIG officials stated that HUD OIG plans to track statistics on apprehensions that occur with HUD OIG involvement and eventually share these statistics with the FBI. The intent of our recommendation is for the HUD OIG and the FBI to collaborate to determine what information on results should be shared and then share such information consistently. We believe our recommendation provides sufficient flexibility for the HUD OIG and the FBI to determine what information on results would be feasible to collect, and maintain that such collaboration could better position the HUD OIG and the FBI to enhance their ability to identify any areas for improvement and evaluate the effectiveness of the initiative. The HUD OIG agreed with our recommendation to update the Fugitive Felon Initiative MOU to reflect the agencies’ current activities and responsibilities (Recommendation 5). In an email received on July 9, 2018, an FBI management and program analyst stated that the FBI agreed with our recommendation to determine what information on apprehensions resulting from the Fugitive Felon Initiative would be most useful to share and consistently share this information with the HUD OIG (Recommendation 6). The FBI also agreed with our recommendation to update the Fugitive Felon Initiative MOU to reflect the agencies’ current activities and responsibilities (Recommendation 7). As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the Department of Housing and Urban Development, the Inspector General of the Department of Housing and Urban Development, the Attorney General of the United States, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact Daniel Garcia-Diaz at (202) 512-8678 or garciadiazd@gao.gov, or Gretta Goodwin at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. This report examines (1) the statutory and regulatory requirements for public housing agencies’ (PHA) criminal history policies for public housing and Housing Choice Voucher (HCV) programs; (2) the extent to which the Department of Housing and Urban Development (HUD) provides guidance and monitors PHA implementation of criminal history policy requirements for public housing and HCV programs; and (3) the implementation of the Fugitive Felon Initiative by the HUD Office of Inspector General (OIG), in coordination with the Federal Bureau of Investigation (FBI). To describe the statutory and regulatory requirements (federal requirements) for PHAs’ criminal history policies, we reviewed federal statutes and HUD regulations for the public housing and HCV programs on providing housing assistance to persons with criminal history records and arrest warrants, including fugitive felons. We focused on the public housing and HCV programs because PHAs screen applicants and determine eligibility for these programs, whereas property owners are primarily responsible for these functions for other HUD rental assistance programs. In addition, the HCV program is the U.S. government’s largest rental assistance program. In addition, we interviewed officials from HUD headquarters as well as officials in five HUD field offices and 10 PHAs in four selected metropolitan areas: Chicago, Dallas/Ft. Worth, New York City, and Philadelphia. We used a cluster sampling technique to select the four metropolitan areas. In selecting these areas, we considered geographic location and proximity of HUD field offices and HUD OIG regional offices to each other, whether there were options to visit a variety of differently sized PHAs that had different characteristics (such as ones that managed both the public housing and HCV programs or had a law enforcement department), and participation of HUD OIG regional offices in the Fugitive Felon Initiative. In each of the four selected metropolitan areas, we selected two to three PHAs to visit, for a total nongeneralizable sample of 10 PHAs (see table 5). In selecting PHAs, we considered PHA size (as measured by the number of public housing and HCV units), whether the PHA implemented both public housing and HCV programs, distance in miles between a PHA and the HUD and HUD OIG metro area offices, and whether a PHA was in an urban or nonurban location and had a law enforcement department. We selected five HUD field offices by determining which field office oversees each of the selected PHAs. We interviewed officials from the 10 selected PHAs and reviewed their criminal history policies to better understand the federal requirements and how PHAs implemented them for the public housing and HCV programs. We did not conduct a compliance audit of the selected PHAs. We also interviewed officials from three housing associations (selected based on their expertise with the public housing and HCV programs) about federal requirements and PHAs’ implementation of the requirements. In addition, we interviewed a nonprofit organization that wrote a report on HUD’s criminal records policies and two private companies that conducted criminal background screening for PHAs to better understand criminal screening processes. To determine the extent to which HUD provides guidance and monitors PHA implementation of criminal history policy requirements, we reviewed HUD letters and notices for the public housing and HCV programs. We also reviewed HUD’s 2001 HCV Program Guidebook and 2003 Public Housing Occupancy Guidebook. We interviewed officials from the 10 selected PHAs for their perspectives on HUD’s guidance. We also reviewed HUD’s monitoring procedures for PHAs. Specifically, we reviewed documentation related to HUD’s National Risk Assessment as well as HUD’s Compliance Monitoring Checklist for reviewing PHA compliance with federal requirements, including requirements on providing housing assistance to persons with criminal history records. We interviewed officials from HUD headquarters and our sample of five HUD field offices about the agency’s efforts to monitor and oversee PHAs’ implementation of criminal history policy requirements (same selected regional offices discussed above). We assessed HUD’s guidance and compliance procedures in relation to federal requirements for criminal history policies in relation to federal statutes, HUD regulations concerning criminal history policies, and internal control standards. To determine the extent to which the HUD OIG, in coordination with law enforcement agencies, implements and monitors the Fugitive Felon Initiative, we reviewed memorandum of understanding (MOU) agreements between the HUD OIG and the FBI and between the HUD OIG and the U.S. Marshals Service (USMS) on their efforts to share and analyze data on HUD tenants and wanted persons and coordinate any apprehension efforts. We reviewed HUD OIG’s Standard Operating Procedure for the Fugitive Felon Initiative and interviewed officials from the FBI, HUD OIG, and USMS headquarters to obtain information on the processes these agencies follow as part of the initiative. We also interviewed officials from all seven HUD OIG Office of Investigation regional offices and relevant USMS Fugitive Task Forces in our four selected metropolitan areas to obtain information on their involvement with and perspectives on the Fugitive Felon Initiative. We worked with USMS Headquarters to identify the relevant fugitive task force that would have jurisdiction over the geographic area covered by a HUD OIG regional office. We assessed the HUD OIG’s and the FBI’s activities in relation to their current MOU, OIG’s Standard Operating Procedure for the Fugitive Felon Initiative, and federal internal control standards. We collected and analyzed data on the HUD OIG’s Fugitive Felon Initiative. Specifically, we analyzed the results of the HUD OIG’s 2017 efforts to cross-reference HUD tenant data and the FBI’s Wanted Persons File (from September 2016) to identify potential investigative leads into the possible location of fugitive felons. We summarized the types of offenses related to these potential investigative leads by grouping similar offenses together and identified the top 10 most frequently occurring offenses. Table 6 lists the subcategories of assault, burglary, fraud, forgery, larceny, and robbery. There were no subcategories associated with the other 4 offenses in the top 10 most frequently occurring (failure to appear, probation violation, parole violation, and dangerous drugs). To assess the reliability of the HUD OIG data, we interviewed knowledgeable agency officials, conducted electronic testing for missing data and obvious errors, observed the HUD OIG’s process for cross- referencing HUD tenant data and the FBI’s Wanted Persons File, and reviewed system documentation for the data systems the HUD OIG uses to cross-reference the data. We determined these data to be reliable for our purposes of describing the number of potential investigative leads produced by the initiative, the types of offenses associated with the potential investigative leads, and the HUD rental assistance programs in which identified fugitive felons participated. We also reviewed FBI data on the results of law enforcement agencies (as reported to the FBI from fiscal years 2013 through 2017) in apprehending fugitive felons based on potential investigative leads produced by the initiative. To assess the reliability of the FBI data, we interviewed knowledgeable agency officials and reviewed documentation for the data system the FBI uses to store and retrieve these data. We determined these data to be reliable for our purposes of describing the number of apprehensions that result from the potential investigative leads identified as part of the Fugitive Felon Initiative. We conducted this performance audit from January 2017 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contacts named above, Allison Abrams (Assistant Director), Eric Erdman (Assistant Director), Charlene J. Lindsay (Analyst in Charge), Charlene Calhoon, Mara McMillen, David Ballard, Rudy Chatlos, Willie (Billy) Commons III, Marc Molino, Tovah Rom, and Tyler Spunaugle made key contributions to this report.", "summary": "HUD has encouraged PHAs to balance resident safety with the housing needs of persons with criminal records when administering its rental assistance programs. PHAs are responsible for screening program applicants. The HUD OIG and the FBI implement the Fugitive Felon Initiative to identify and apprehend wanted persons receiving rental assistance. GAO was asked to review HUD's criminal history policies and the Fugitive Felon Initiative. This report examines (1) federal requirements for PHAs' criminal history policies, (2) HUD guidance and monitoring of these requirements, and (3) implementation of the Fugitive Felon Initiative. GAO reviewed federal statutes and regulations and interviewed officials from HUD, the HUD OIG, and the FBI; analyzed Fugitive Felon Initiative data from 2013 through 2017; and interviewed staff at a nongeneralizable sample of 10 PHAs (selected based on size and other factors). Federal requirements for public housing agencies. Federal statutes and Department of Housing and Urban Development (HUD) regulations require public housing agencies (PHA) to conduct criminal history checks on individuals applying for rental assistance under HUD's public housing and Housing Choice Voucher programs and deny assistance for six types of offenses. Mandatory denials include convictions for producing methamphetamine on the premises of federally-assisted housing and lifetime sex offender registrants. Otherwise, PHAs generally have discretion in establishing their criminal history policies and may deny assistance for other offenses or factor in mitigating circumstances. HUD monitoring of public housing agencies. From 2011 through 2016, HUD issued new guidance to PHAs on criminal history policies, but these changes are not reflected in HUD's program guidebooks for PHAs. These guidebooks serve as key reference tools, but have not been updated in over 15 years. Updating them would help HUD more accurately communicate its criminal history policies. While HUD officials said their current efforts to update the guidebooks will reflect recent criminal history policy notices, documentation provided by the agency on these updates did not specifically address criminal history guidance. In addition, HUD's compliance reviews of high-risk PHAs do not address some criminal history policy requirements, such as the prohibition on using arrest records as the basis for determining eligibility. Further, these reviews are largely limited to examining PHAs' written policies and do not cover how PHAs implement those policies. More comprehensive compliance reviews would improve HUD's ability to identify areas of noncompliance with criminal history policy requirements. Fugitive Felon Initiative. From fiscal years 2013 through 2017, the HUD Office of Inspector General (OIG) and the Federal Bureau of Investigation (FBI) shared data through the Fugitive Felon Initiative, which led to the apprehension of more than 1,200 wanted persons who may have lived in HUD-assisted housing. However, GAO found that the HUD OIG had not defined its regional office responsibilities under the initiative and that four of the seven HUD OIG regions did not participate from 2012 through 2016. The HUD OIG revised its procedures for the initiative in April 2018 to include regional office responsibilities, such as coordinating with law enforcement agencies. According to HUD OIG officials, regional offices are now required to coordinate with law enforcement agencies on a priority list of investigative leads, which include warrants for violent felonies, sexual assault, and narcotics distribution. However, the HUD OIG does not plan to assess regional office implementation of several requirements. Collecting and assessing more comprehensive information on regional office activities would help the HUD OIG determine the extent to which regions are undertaking required activities. In addition, the HUD OIG and the FBI have not consistently shared information on the initiative's results—such as apprehension statistics and program savings—which could help evaluate the effectiveness of the initiative. Further, the HUD OIG's and the FBI's current activities to implement the initiative differ in some areas from the agreed-upon responsibilities listed in their 2012 memorandum of understanding. Updating the memorandum to reflect current responsibilities under the initiative could help improve collaboration between the agencies and improve implementation. GAO is making seven recommendations, including that HUD update PHA guidebooks and improve monitoring procedures; that the HUD OIG assess more comprehensive information on the implementation of the Fugitive Felon Initiative; and that the HUD OIG and the FBI consistently share information on the initiative's results and update their memorandum of understanding to reflect current responsibilities. HUD and the FBI generally agreed. The HUD OIG did not agree with two of our recommendations. GAO maintains the recommendations, as discussed in the report.", "document_type": "gao"}
{"report": "Coast Guard staffing for the TAP program reflects the organizational structure of its Health, Safety, and Work-Life Directorate, which oversees TAP policy. The Coast Guard’s TAP managers are assigned to 13 installations where Health, Safety, and Work-Life offices are located. One or two TAP managers are assigned to each of the Coast Guard’s nine districts, which often span multiple states and territories, and these TAP managers oversee operations both for the installation where they work and for units stationed throughout the region (see fig. 1). For example, the TAP manager assigned to Coast Guard Base Cleveland oversees TAP implementation both for that installation and for Coast Guard units serving in Coast Guard District 9—a region that encompasses portions of eight states and the Great Lakes area. The program manager in Coast Guard Headquarters manages Coast Guard’s Transition Assistance Program. The Coast Guard protects and defends over 100,000 miles of U.S. coastline and inland waterways, and consequently, TAP-eligible Coast Guard servicemembers sometimes work in small, widely dispersed units assigned to remote locations, including on Coast Guard vessels. One aspect of the Coast Guard’s mission—a first responder for maritime search and rescue in United States waters—can require Coast Guard servicemembers to respond to emergency situations at a moment’s notice. The Coast Guard, which is overseen by DHS, not DOD, generally oversees TAP implementation for its servicemembers. Federal law requires DOD and DHS to require eligible servicemembers under their respective command to participate in TAP, with some exceptions. In response to this statutory requirement, DOD has promulgated regulations and developed issuances which require that servicemembers complete the component parts of the TAP program, and that commanding officers ensure that servicemembers under their command complete these parts, with some exceptions. In contrast, according to Coast Guard officials, Coast Guard has not promulgated any regulations to implement TAP. Further, Coast Guard issued its most recent Commandant Instruction in 2003, approximately 8 years prior to TAP redesign in 2011. However, Coast Guard issued policy guidance in 2014 that made some limited updates to the Commandant Instruction. Coast Guard officials also said the Coast Guard plans to issue a new TAP Commandant Instruction in May 2018. Under the redesigned TAP, Coast Guard servicemembers—like their DOD counterparts—begin TAP by attending pre-separation or transition counseling where they are briefed on TAP requirements and available transition resources. Pre-separation or transition counseling can be delivered by TAP managers, uniformed career counselors, or online (see fig. 2). Coast Guard servicemembers are able to participate in TAP either through the Coast Guard or at a DOD installation, if space is available. During or at the end of pre-separation or transition counseling, participants register for and attend TAP courses. The core curriculum includes three required courses—the Department of Labor (DOL) Employment Workshop, unless exempt, and Department of Veterans Affairs (VA) Benefits Briefings I and II—and other courses that focus on aspects such as translating military skills and experiences into credentialing for civilian jobs and preparing a financial plan. Participants may also elect to attend additional 2-day classes either at a Coast Guard or DOD installation or online through the Joint Knowledge Online platform, according to agency officials. These additional 2-day classes include Accessing Higher Education, Career Technical Training, and Entrepreneurship. Federal law requires the Coast Guard to permit servicemembers who elect to take these additional 2-day classes to receive them. Federal law establishes a time frame within which servicemembers with anticipated separation or retirement dates should begin the program. According to federal law, retirees with anticipated separation dates are expected to begin TAP as soon as possible during the 24-month period preceding that date, but not later than 90 days before separation. Similarly, servicemembers with anticipated separation dates who are not retiring are expected to begin as soon as possible during the 12-month period preceding that date, but not later than 90 days before separation. Servicemembers who learn that they will separate or retire from the military fewer than 90 days before their anticipated separation or retirement date are expected to begin TAP as soon as possible within their remaining period of service. As we previously reported, officials from multiple federal agencies collaborate to deliver and assess TAP. The TAP interagency governance structure includes senior officials from DOD, VA, DOL, DHS, the Department of Education, the U.S. Office of Personnel Management, and the Small Business Administration (SBA), who participate in TAP Senior Steering Group meetings at least every month and TAP Executive Council meetings each quarter. Further, officials tasked to particular interagency working groups focus on specific elements of TAP (e.g., curriculum or performance measures), meet more frequently (typically at least once a month), and generally communicate weekly, according to agency officials. The TAP program manager for the Coast Guard told us that he participates in several of the working groups. One such working group is the performance management working group that oversees the interagency TAP evaluation plan, which includes monitoring performance measures related to TAP requirements, indicators of post-program outcomes, and formal evaluations sponsored by interagency partners. While DOD tracks TAP-specific performance measures, other interagency partners track indicators of how well veterans fare after leaving military service. For example, DOD tracks performance measures prior to servicemembers’ separation, such as TAP participation and credential attainment rates, while other agencies track post-separation indicators, such as unemployment rates among veterans ages 18 to 24. The performance management working group also reviews the formal evaluation efforts led by individual agencies and provides feedback to help shape their efforts in accordance with the TAP Evaluation Plan. The Coast Guard does not have complete or reliable data on participation levels in TAP. According to Coast Guard officials, a major reason why the data are not reliable is that the Coast Guard lacks an up-to-date Commandant Instruction that specifies when to record TAP participation data. Consequently, the data are updated on an ad-hoc basis, according to agency officials, and may not be timely or complete. For example, one TAP manager said she updates the list of TAP participants for her installation only once every few months because of her other duties. According to federal internal control standards, management should use quality information—including current and timely information— to achieve the entity’s objectives and to communicate quality information to external parties. Given the lack of timely and complete data, we determined the Coast Guard’s TAP data were not sufficiently reliable for an analysis of participation in TAP classes. Because it lacks policies and procedures governing reliable data collection, including when data should be entered and by whom, the Coast Guard cannot determine to what extent its servicemembers attend TAP, although federal law mandates that DHS ensure all TAP-eligible servicemembers participate in the program. In addition, the data collection system currently used to track TAP participation is not sufficient to ensure reliable data. For example, according to Coast Guard staff, TAP staff enter TAP participation data into a shared spreadsheet that all TAP managers can edit. Specifically, staff record the names of servicemembers they identify as TAP-eligible and whether these individuals completed required portions of TAP. Coast Guard officials said they are in the process of adopting a new data system, in October 2018, to more reliably track TAP participation and that they expect to fully adopt this system–DOD’s TAP-IT Enterprise System—after a new Commandant Instruction is finalized, in May 2018. In November 2016, DOD launched the new system to collect TAP-related data for servicemembers in the Army, Navy, Air Force, and Marine Corps. In addition to standardizing data collection and improving data completeness and accuracy, the TAP-IT Enterprise System is expected to track information related to the time frames of servicemembers’ participation. According to a senior DOD official, the military services will not be able to use the system to generate unit-level or installation-level reports until October 2018. According to our survey, the most common factor affecting TAP participation, cited at 11 of the 12 Coast Guard installations we surveyed, pertained to servicemembers assigned to geographically remote locations. The next three most commonly cited factors–each cited by 7 of the 12 installations surveyed—relate to the timing of TAP participation: rapid separation from the military, not being sufficiently aware of the need to attend TAP, and starting the transition process too late to attend. (See fig. 3.) Headquarters-based TAP officials identified additional factors that may affect servicemember participation, such as separating from the Coast Guard Reserves or retiring with no plans to work after leaving the military. However, the Coast Guard lacks participation data to verify whether participation rates for these groups are in fact lower than for other Coast Guard servicemembers. Coast Guard installations we surveyed did not indicate that unit commanders or direct supervisors affected participation in TAP’s required courses or additional 2-day classes. However, Coast Guard servicemembers and TAP officials we spoke with said unit commanders or direct supervisors sometimes prevented participation. All three TAP managers we spoke with (of 12 nationwide) told us that while commanders generally allowed servicemembers to register for TAP courses, they occasionally required them to return to their duties before completing the courses. We observed this during a TAP class at a Coast Guard installation we visited when a servicemember’s commander ordered her to return to the unit during TAP training and she missed a briefing she wanted to attend. Two of three TAP managers we interviewed also said commanders sometimes required servicemembers under their command to wait to take TAP classes until close to their separation date because of mission priorities. Two of three TAP managers interviewed said that commanders in the Coast Guard face unique challenges in ensuring TAP participation. They said commanders in all branches of the military must balance competing demands, including their primary mission and the training needs of the personnel they oversee. They said it can be particularly difficult for Coast Guard commanders to juggle these priorities because Coast Guard servicemembers are sometimes assigned to very small units or called to return to duty for emergency situations during scheduled TAP classes. One TAP manager said that a commander in a remote location had collaborated with her to provide a classroom-based TAP class for transitioning Coast Guard servicemembers within the commander’s unit, but rescue efforts occurred during the class which resulted in most of those servicemembers returning to their vessel to respond to the emergency. In addition, all three TAP managers we spoke with said there are limited resources for holding TAP in a classroom setting. Consequently, classroom-based TAP may not be offered frequently in remote locations, making rescheduling difficult. One TAP manager said that her installation typically offers three or four TAP classes a year and because classes are so infrequent, servicemembers are encouraged to start TAP as soon as possible prior to separation. Coast Guard staff we interviewed said that juggling competing priorities affected the Coast Guard’s ability to implement TAP. Both the frontline and headquarters staff who oversee TAP implementation said they oversee at least three other programs in addition to TAP at their installation and throughout their regions, including the Coast Guard’s relocation and spousal employment programs. The Coast Guard relies on online delivery of TAP information and classes for servicemembers who are rapidly separating and assigned to remote and geographically dispersed units, according to our survey results and several Coast Guard staff we interviewed. For example, all 12 installations we surveyed cited servicemembers facing rapid separations as a reason for accessing TAP training online, and 11 cited servicemembers being remotely stationed as a reason. Coast Guard staff also said online TAP was used for servicemembers interested in attending additional 2-day classes. The three TAP managers we interviewed also identified several reasons why installations had to rely on online TAP classes. For example, one manager corroborated our survey results, saying that many Coast Guard servicemembers worked in small units assigned to remote and geographically dispersed locations, making it difficult to convene a sufficient number of transitioning Coast Guard servicemembers to meet minimum class size requirements. In addition, all three managers said they used the online version of TAP for remotely stationed Coast Guard servicemembers because the Coast Guard lacked the resources for them to attend classes in person. Although they preferred that servicemembers participate in live, classroom-based TAP classes, all of the managers acknowledged that the online version of TAP played an integral role in ensuring that more servicemembers could participate in the program. However, two of them noted that while classroom delivery of TAP classes provided an interactive learning environment that allowed participants to ask questions and learn from their peers, online participants generally clicked quickly through the slides and had difficulty understanding the information being presented. Two managers told us that they regularly used the online version to deliver parts of the TAP curriculum. For example, one TAP manager said she required participants to complete the crosswalk of military and civilian occupations class online before attending required classes in person. Two managers noted that additional 2-day classes were available online, and one noted that some servicemembers attended these classes in a classroom setting either on a Coast Guard base or a DOD installation. Finally, all three TAP managers said that many participants in online TAP classes would benefit from participating in a real-time virtual version of TAP led by live facilitators. Two managers told us that having a remote facilitator delivering TAP in real time would give participants more opportunity to ask questions and better understand and absorb class content. Despite these challenges, TAP managers and separating Coast Guard servicemembers we interviewed provided generally positive feedback about the TAP program. All of the 25 Coast Guard servicemembers we spoke with said that the information they received during the courses was useful and they liked the instructors. One Coast Guard servicemember praised the classroom courses for being interactive, and several Coast Guard servicemembers said they wanted the opportunity to retake TAP before or shortly after they separated from the Coast Guard. However, many said the volume of information presented in a short period of time could be overwhelming and was like “trying to drink from a firehose.” The Coast Guard has not set a formal performance goal for TAP participation, according to a Coast Guard official, and as previously discussed, does not have complete, reliable data. Without reliable information, the Coast Guard cannot effectively monitor TAP implementation or measure program performance. DHS is mandated to ensure that all TAP- eligible servicemembers of the Coast Guard participate in TAP before leaving military service. However, without effective monitoring of program participation, the Coast Guard cannot know to what extent its servicemembers receive the required training they need to prepare for civilian life. According to federal internal control standards, management should consider external requirements—such as the laws with which the entity is required to comply—to clearly define objectives in specific and measurable terms. In addition, establishing goals can help agencies define expected performance and articulate results. A Coast Guard official said the Coast Guard’s long-term goal is for full compliance with TAP requirements, but in the interim, the Coast Guard uses DOD’s 85 percent VOW compliance goal as an informal benchmark against which to gauge the Coast Guard’s TAP performance. However, the Coast Guard has not communicated a specific, measurable goal to TAP staff implementing the program, or to Coast Guard commanders who oversee separating and retiring Coast Guard servicemembers, according to a Coast Guard official. Establishing and communicating a formal goal could help the Coast Guard define expected performance. The official also told us that, like DOD, the Coast Guard tracks the elements of TAP mandated under the VOW Act— transition or pre-separation counseling, VA Benefits I and II, and the DOL Employment Workshop. The Coast Guard does not monitor the (1) timeliness of participation in TAP, and (2) access to additional 2-day classes. A Coast Guard official said the Coast Guard does not currently monitor TAP beyond tracking whether separating servicemembers participate in the required courses, and currently lacks the capacity to undertake additional monitoring efforts. However, he said additional monitoring would be possible once the Coast Guard completed the move to the DOD TAP-IT Enterprise data system. According to a Coast Guard official, the Coast Guard does not currently monitor the timeliness of TAP participation although federal law prescribes time frames for servicemembers to begin TAP participation. Generally, separating servicemembers who are not retiring are to begin TAP participation no later than 90 days before their separation date. Without a systematic method for monitoring timeliness, the Coast Guard cannot know whether its servicemembers begin the program on time or account for the timeliness of TAP participation. As a result, the Coast Guard cannot know whether its servicemembers are starting TAP early enough to complete the training they need to adequately prepare for their transition to civilian life. The Coast Guard does not track which of its servicemembers participate in the additional 2-day classes, according to a Coast Guard official we interviewed, even though federal law requires that DHS ensure those who elect to participate are able to receive the training. By not tracking which Coast Guard servicemembers participate in 2-day classes or requiring transition staff to document when servicemembers ask to attend, the Coast Guard cannot determine the extent to which servicemembers who wished to attend these courses were able to do so, as required by law. Coast Guard commanders and TAP managers do not have clearly defined roles and responsibilities in implementing TAP because of the lack of an up-to-date Commandant Instruction, according to TAP staff we interviewed. As previously discussed, the Coast Guard’s last Commandant Instruction on TAP was issued in 2003, approximately 8 years prior to TAP’s redesign. According to federal internal control standards, to achieve the entity’s objectives, management should assign responsibility and delegate authority to key roles throughout the entity. Without an up-to-date Commandant Instruction, TAP managers and commanders may be unclear on who is ultimately responsible for ensuring servicemembers attend TAP. Moreover, two TAP managers also told us that an up-to-date Commandant Instruction might lead some commanders to place higher priority on ensuring TAP participation. Coast Guard officials said the Coast Guard was in the process of revising the TAP Commandant Instruction and anticipated issuing the new instruction in May 2018. The Coast Guard lacks the ability to share data with commanders, limiting its ability to monitor TAP participation and ensure servicemembers attend the program. According to a Coast Guard official, the Coast Guard’s current data collection system also cannot generate installation or unit- level participation rates to share with commanders who oversee transitioning and retiring servicemembers. Federal internal control standards state that management should share quality information throughout an organization to enable personnel to perform key roles, and we have previously reported that by regularly sharing useful performance information with leaders at multiple levels of an organization, agencies can help leaders make informed decisions. Without this information, individual unit commanders or the commanders’ supervisors cannot determine whether Coast Guard servicemembers under their command completed TAP or identify whether there is a need for corrective actions to ensure they do so. As we mention earlier in this report, the Coast Guard plans to adopt DOD’s TAP-IT Enterprise System, which according to officials, could help the Coast Guard ensure eligible servicemembers participate in the program. According to a Coast Guard official, once the system is fully implemented by the Coast Guard, commanders will be required to verify and document whether Coast Guard servicemembers under their command completed TAP, potentially making commanders more vested in the process. We previously reported that a senior DOD official said that the TAP-IT Enterprise System may be able to generate unit- and installation-level reports for the four DOD-led military services by October 2018, and a Coast Guard official said he would work with DOD to identify whether this capability could also extend to the Coast Guard. Once data reliability improves, sharing installation and unit-level TAP performance information with Coast Guard commanders could support monitoring efforts. The performance measures tracked by the TAP interagency working group do not reflect TAP implementation broadly across all five military services, according to a Coast Guard official we interviewed. The Coast Guard does not currently share TAP data it collects with DOD or other members of the interagency performance working group. While the benefits of interagency data sharing cannot be realized without the Coast Guard first improving the quality and completeness of its TAP data, we have identified leading practices for interagency collaboration, including that members of interagency working groups identify and share relevant agency performance data. Moreover, federal internal control standards call for management to communicate quality information to external parties. Because the Coast Guard does not share TAP data, the performance measures tracked by the interagency group do not reflect Coast Guard servicemembers’ experiences and thus do not provide a complete picture of TAP implementation across the five military services. More specifically for the Coast Guard, without such data sharing, future TAP evaluations may not be able to assess the effectiveness of TAP delivery, hindering the Coast Guard’s ability to make program adjustments to better prepare its servicemembers to successfully transition to life after military service. Coast Guard officials said migrating to DOD’s TAP-IT Enterprise System will facilitate information sharing with interagency partners and that improving data completeness and reliability is a top priority for 2018. Given the sacrifices servicemembers have made to serve their country, it is imperative they are afforded every chance to adequately prepare for civilian life before leaving military service. In order to make a successful transition, servicemembers need to be well-positioned to get a job or make an informed decision about whether to pursue additional education or start a small business. As such, the Transition Assistance Program (TAP) serves a critically important function—to give servicemembers the tools and information they need to successfully transition to life outside the military. Federal law requires that the Coast Guard ensure all eligible servicemembers participate in the program, but thousands of Coast Guard servicemembers may have transitioned without the support provided by TAP. Reliably tracking participation has proven to be a challenge for the Coast Guard, in part because it lacks a current Commandant Instruction that defines the roles and responsibilities of staff responsible for implementing TAP and ensuring complete and reliable data are collected. In preparing to issue an updated Commandant Instruction, the Coast Guard has taken a positive step toward addressing the limitations of its current TAP data, and will be better positioned to ensure compliance with VOW Act requirements using reliable data. In addition to collecting reliable data, the Coast Guard could further demonstrate its commitment to meeting TAP requirements by establishing formal performance goals that measure the extent to which Coast Guard servicemembers participate in TAP. By establishing interim performance goals, the agency would be able to show its progress towards achieving full compliance. Moreover, communicating performance goals to unit and installation commanders could enhance accountability and might spur progress toward meeting federal program requirements. By expanding its monitoring efforts beyond tracking participation in TAP’s required classes, the Coast Guard could enhance its ability to ensure other TAP requirements are met and that its servicemembers are able to access additional transition resources. Monitoring the timeliness of participation would help ensure Coast Guard servicemembers have adequate time to complete TAP before leaving the military. Further, by monitoring requests to participate in additional 2-day classes and 2-day class attendance, the Coast Guard would be in a better position to identify whether servicemembers who wish to attend the classes are able to do so, to determine whether more classes are needed, and to communicate this information to the interagency partners responsible for delivering these classes. Commanders can also play a key role in bolstering TAP participation. Having an up-to-date written Commandant Instruction that explicitly describes commanders’ roles and responsibilities could enhance commanders’ ability to ensure TAP’s proper implementation and compliance with VOW Act requirements. Moreover, once data quality improves, providing commanders a mechanism to readily determine whether servicemembers under their command have completed TAP could help them monitor the program to ensure that all TAP-eligible servicemembers receive the resources they need to successfully transition to civilian life. Finally, once more reliable data on Coast Guard servicemember participation are available, sharing this information with interagency partners could improve TAP implementation on a broader scale. Sharing reliable data, such as participation figures for the Coast Guard, would give TAP interagency partners a more complete picture of implementation across all five military services. Sharing such information would also enhance the interagency group’s ability to evaluate how well TAP serves the entire population of servicemembers. Improving the reliability of the Coast Guard’s TAP data will be essential for the benefits of data sharing to be realized. To ensure that all eligible Coast Guard servicemembers are provided the opportunity to complete the Transition Assistance Program (TAP), we recommend the Commandant of the Coast Guard take the following seven actions: Issue an updated Commandant Instruction that establishes policies and procedures to improve the reliability and completeness of TAP data by including when and by whom data should be recorded and updated. (Recommendation 1) Establish a formal performance goal with a measurable target for participation rates in VOW Act-mandated portions of TAP. (Recommendation 2) Monitor the extent to which Coast Guard servicemembers participate in TAP within prescribed time frames. (Recommendation 3) Monitor the extent to which Coast Guard servicemembers who elect to participate in additional 2-day classes are afforded the opportunity to attend. (Recommendation 4) Issue an updated Commandant Instruction that defines the roles and responsibilities of the personnel who administer the program and ensure servicemembers’ participation. (Recommendation 5) Once reliable data are available by installation or unit, enable unit commanders and the higher-level commanders to whom they report to access TAP performance information specifically for the units they oversee so that they can monitor compliance with all TAP requirements. (Recommendation 6) Once reliable data are available, share TAP information with DOD and other interagency partners, such as data on participation in required TAP courses and additional 2-day classes. (Recommendation 7) We provided a draft of this report to the Departments of Homeland Security, Defense, Education, Labor, and Veterans Affairs, the Office of Personnel Management, and the Small Business Administration for their review and comment. The formal written response of the Department of Homeland Security (DHS) is reproduced in appendix II. In addition, DHS provided technical comments from Coast Guard officials that we incorporated into the report as appropriate. The other agencies did not provide any comments. In its written comments, DHS agreed with all seven of our recommendations. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) what is known about the reliability of Transition Assistance Program (TAP) data on participation levels and the factors that affect Coast Guard servicemembers’ participation, and (2) the extent to which the Coast Guard measures TAP performance and monitors key areas of TAP implementation. To address these questions, we surveyed Coast Guard installations with full-time TAP operations; reviewed Coast Guard data on TAP participation for fiscal years 2012 to 2017; visited one Coast Guard installation and interviewed TAP managers from two additional Coast Guard installations selected for diversity in location, among other reasons; and interviewed Coast Guard officials responsible for overseeing TAP implementation for the Coast Guard. We also reviewed relevant federal laws, regulations, policies, documents, and publications. Information in this report is current as of the date GAO received formal agency comments from DHS. Our survey of Coast Guard installations with full-time TAP operations asked about how TAP was being implemented. The survey included questions about the accessibility of TAP components, challenges Coast Guard servicemembers faced in attending the components, and the level of commander support for participation. Our survey targeted front-line TAP managers, who could draw on the expertise of TAP course facilitators, transition counselors, career counselors, and other key TAP staff as necessary. After drafting the survey questions, we pretested them with a TAP manager to ensure (1) the questions were clear and unambiguous, (2) terminology was used correctly, (3) the survey did not place an undue burden on agency officials, (4) the information could feasibly be obtained, and (5) the survey was comprehensive and unbiased. We revised the content and format of the survey based on the feedback we received. We initially sent the survey to TAP managers at all 13 Coast Guard installations at which TAP staff were located. We removed one installation when we later found that the TAP manager position was vacant and revised the total to 12 Coast Guard installations. The survey was accessible online from October 31, 2016, through January 18, 2017, through a secure server that recipients were able to access using unique usernames and passwords. We sent an email announcement to TAP staff at all 13 Coast Guard installations at which TAP staff are located on October 24, 2016. We sent a second email on October 31, 2016 to notify participants the survey was available online, and provided their unique passwords and usernames. We sent two follow-up e-mails (November 14, 2016 and November 28, 2016) to those who had not responded. Finally, we contacted all remaining nonrespondents by telephone starting December 5, 2016. The survey was available online until we reached a 100 percent response rate. To increase our understanding into how TAP was being implemented at installations and supplement our survey findings, we visited one Coast Guard installation and interviewed TAP managers from two additional installations. We selected the installations based on several factors, including the size of the installation, proximity to Department of Defense (DOD) installations, and diverse locations in the United States. (See table 1.) At Coast Guard Base Elizabeth City in North Carolina, the installation we visited, we interviewed the TAP manager, uniformed career counselors, and senior installation leadership. During our interviews with TAP managers at all three installations, we asked about the extent to which Coast Guard servicemembers participate in TAP’s required and additional 2-day classes, including whether the servicemembers attended classes online or in a classroom setting, challenges to ensuring Coast Guard servicemembers participate in TAP, and the extent to which they monitor Coast Guard servicemembers’ participation in TAP. At Coast Guard Base Elizabeth City, we also interviewed 25 Coast Guard servicemembers (both officers and enlisted personnel) to get their perspective on how well TAP worked and any challenges they had participating. To help guide the interviews with the Coast Guard servicemembers, we asked them to complete a short questionnaire that asked about their experiences with the TAP program. We also interviewed TAP staff at Coast Guard headquarters to learn about TAP policy, monitoring efforts, and performance measures for the service overall. For example, we asked what policies and procedures guide installations’ TAP implementation; what performance measures the Coast Guard uses to monitor TAP; how performance results are reported and shared with different levels of Coast Guard leadership; and to what extent the Coast Guard uses results from TAP participant satisfaction assessments. We also asked whether the Coast Guard plans to shift to DOD’s new TAP-IT Enterprise System and how using the new system could affect its monitoring efforts in the future. In evaluating the Coast Guard’s performance measures, we focused on measures related to servicemembers’ transition experiences before leaving the military. We did not gather information on post-program evaluations and outcomes because they were determined to be outside the scope of this review. We reviewed DHS data on TAP participation for fiscal years 2012 to 2017. To assess the reliability of the Coast Guard’s TAP participation data, we interviewed agency officials knowledgeable about the data. We determined these data were not sufficiently reliable due to limitations with the Coast Guard’s data collection system. Specifically, the system lacks adequate controls to ensure TAP data are complete and accurate. We conducted this performance audit from February 2016 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Meeta Engle (Assistant Director), Amy MacDonald (Analyst-in-Charge), James Bennett, Holly Dye, David Forgosh, Ying Long, Jonathan McMurray, Jean McSween, Andrew Sherrill, Benjamin Sinoff, and Timothy Young, made significant contributions to this report. Also contributing to this report were Susan Aschoff, Jessie Battle, Ramona Burton, Melinda Cordero, Elizabeth Curda, Dawn Hoff, Ben Licht, Serena Lo, Sheila McCoy, Almeta Spencer, Christopher Schmitt, James Whitcomb, and Jill Yost. Transitioning Veterans: DOD Needs to Improve Performance Reporting and Monitoring for the Transition Assistance Program, GAO-18-23. Washington, D.C.: November, 8, 2017. Transitioning Veterans: Improvements Needed in DOD’s Performance Reporting and Monitoring of the Transition Assistance Program, GAO-18-225T. Washington, D.C.: November 8, 2017. Department of Defense: Transition Assistance Program (TAP) for Military Personnel, GAO-16-302R. Washington, D.C.: December 17, 2015. Veterans’ Employment: Need for Further Workshops Should Be Considered before Making Decisions on Their Future, GAO-15-518. Washington, D.C.: July 16, 2015. Military and Veteran Support: DOD and VA Programs That Address the Effects of Combat and Transition to Civilian Life, GAO-15-24. Washington, D.C.: November 7, 2014. Veterans Affairs: Better Understanding Needed to Enhance Services to Veterans Readjusting to Civilian Life, GAO-14-676. Washington, D.C.: September 10, 2014. Transitioning Veterans: Improved Oversight Needed to Enhance Implementation of Transition Assistance Program, GAO-14-144. Washington, D.C.: March 5, 2014. Military and Veterans’ Benefits: Enhanced Services Could Improve Transition Assistance for Reserves and National Guard, GAO-05-544. Washington, D.C.: May 20, 2005. Military and Veterans’ Benefits: Observations on the Transition Assistance Program, GAO-02-914T (July 18, 2002).", "summary": "Thousands of Coast Guard servicemembers have left the military and transitioned into civilian life, and some of these new veterans may face significant challenges, such as finding and maintaining employment. To help them prepare, federal law mandated that DHS provide separating Coast Guard servicemembers with counseling, employment assistance, and information on veterans' benefits through TAP. GAO was asked to examine TAP implementation. This review analyzes (1) the reliability of TAP data on participation levels for Coast Guard servicemembers and the factors that affect participation, and (2) the Coast Guard's performance measures and monitoring efforts related to TAP. GAO interviewed Coast Guard headquarters staff; surveyed 12 Coast Guard installations that conduct TAP (100 percent response rate); collected and reviewed participation data for reliability; and interviewed TAP managers from three installations selected for size and location, and 25 Coast Guard servicemembers at one location. (For a companion report on TAP implementation for separating and retiring servicemembers in other military services, see GAO-18-23 .) The United States Coast Guard (Coast Guard), which is overseen by the Department of Homeland Security (DHS), lacks complete or reliable data on participation in the Transition Assistance Program (TAP), designed to assist servicemembers returning to civilian life. According to senior Coast Guard officials, a major reason why data are not reliable is the lack of an up-to-date Commandant Instruction that specifies when to record TAP participation data. Consequently, the data are updated on an ad-hoc basis and may not be timely or complete, according to officials. Federal internal control standards call for management to use quality information to achieve the entity's objectives. Until the Coast Guard issues an up-to-date Commandant Instruction that establishes policies and procedures to improve the reliability and completeness of TAP data, it will lack quality information to gauge the extent to which it is meeting TAP participation requirements in the VOW to Hire Heroes Act of 2011. According to GAO's survey of Coast Guard installations, various factors affected participation, such as servicemembers serving at geographically remote locations or separating from the Coast Guard rapidly. TAP officials and Coast Guard servicemembers GAO interviewed said commanders and direct supervisors sometimes pulled servicemembers out of TAP class or postponed participation because of mission priorities. TAP managers also said they rely on delivering TAP online because many Coast Guard servicemembers are stationed remotely. The Coast Guard cannot effectively measure performance to ensure key TAP requirements are met because it lacks reliable data and does not monitor compliance with several TAP requirements. Further, the Coast Guard has not established a formal performance goal against which it can measure progress, although federal internal control standards stipulate that management should consider external requirements—such as the laws with which the entity is required to comply—to clearly define objectives in specific and measurable terms. Establishing a goal could help the Coast Guard define expected performance. In addition, the Coast Guard does not monitor TAP requirements regarding the timeliness of servicemembers' TAP participation or their access to additional 2-day classes. Consequently, it cannot know whether servicemembers are starting TAP early enough to complete the program or those who elected to attend additional 2-day classes were able to do so before separation or retirement, as required by the Act. Finally, the Coast Guard lacks an up-to-date Commandant Instruction that establishes the roles and responsibilities of Coast Guard staff in implementing TAP. Federal internal control standards stipulate that management should assign responsibility and delegate authority to key roles throughout the entity. Issuing an up-to-date Commandant Instruction that defines roles and responsibilities would clarify who is ultimately responsible for ensuring Coast Guard servicemembers attend TAP, thereby facilitating accountability. GAO is making seven recommendations, including that the Coast Guard issue a new Commandant Instruction establishing data collection policies, set TAP performance goals, monitor timeliness and access, and define roles and responsibilities. DHS agreed with all of GAO's recommendations.", "document_type": "gao"}
{"report": "To help manage its multi-billion dollar acquisition investments across its components, DHS has established policies and organizations for requirements validation, acquisition management, and budgeting. The department uses these to monitor and guide delivery of the acquisition programs the components require to close critical capability needs, enabling DHS to execute its missions and achieve its goals. DHS has 14 components, which, as a part of their operational missions, are responsible for assessing capability needs, developing the requirements to fill these needs, and creating acquisition programs to meet these requirements. The number and cost of acquisition programs vary by component. DHS generally defines a capability as the means to accomplish a mission or objective that may be achieved through materiel and non-materiel solutions. Once the component has a JRC-validated capability gap, and identifies and documents the need for a materiel solution, it develops the operational requirements. Requirements can be unique to an individual component, or they can be joint requirements that apply to more than one component. Within the components, program management offices are responsible for planning and executing individual programs within cost, schedule, and performance parameters, and preparing required acquisition documents. The DHS requirements process generally starts with the identification of mission needs and broad capability gaps from which components develop a program’s operational requirements, key performance parameters, and more definitive technical requirements. Figure 1 depicts this traceability from mission needs to technical requirements. Operational requirements are what the end users need to fill capability gaps and conduct the mission. Operational requirements, in part, define the purpose for the acquisition program and set boundaries for user needs. Subject matter experts, such as system engineers, support development of operational requirements to ensure that they are clearly developed. Well-defined operational requirements trace to one or more of the identified capability gaps. After components define operational requirements, they identify some as key performance parameters that denote the most important and non- negotiable requirements that the program has to meet to fulfill its fundamental purpose. According to DHS policy, failure to meet any key performance parameter results in a re-evaluation of a program that may lead to requirements changes or program cancellation. See figure 2 below for an overview of the requirements process. According to DHS policy on managing acquisition programs, components further decompose operational requirements into technical requirements, such as design or material specifications. For example, an operational requirement may be the ability to detect explosives at the airport. The technical requirement may then be the ability to detect metal or explosive material within certain parameters. Through the JRC, DHS provides oversight of operational requirements for the acquisition programs developed by its components. The JRC consists of a chair and 14 members, called principals, who are senior executives or officers that represent key DHS headquarters offices and seven of the department’s operational components. JRC principals represent the views of both their components and DHS, and validate and prioritize capability needs and operational requirements. Among other responsibilities, the JRC is to provide requirements-related advice and validate key acquisition documentation to prioritize requirements and inform DHS investment decisions for all Level 1 and Level 2 major acquisitions, as well as for programs that are joint interest, regardless of level. Separate from the JRC, DHS’s Office of Program Accountability and Risk Management, which reports directly to the Under Secretary for Management, oversees major acquisitions and guides acquisition policy. DHS also has a separate office for budget management and a planning, programming, budgeting, and execution process to allocate resources, such as funding, to acquisition programs. In addition, the Science and Technology Directorate conducts systems engineering reviews and technology assessments of the technical solutions for major acquisition programs. The Directorate also provides department-level guidance on requirements development in its Systems Engineering Life Cycle Guidebook. Multiple DHS directives and manuals establish the framework for the department’s Joint Requirements Integration and Management System (JRIMS)—a process by which the department reviews and validates capability gaps—and requirements to mitigate those gaps. DHS further clarified its directives in April 2016 through DHS Instruction Manual 107- 01-001-01, Department of Homeland Security Manual for the Operation of the Joint Requirements Integration and Management System. The JRC also instituted a series of training courses that provide an overview of JRIMS and its core concepts. JRC validation of requirements confirms the requirements are traceable, feasible, and cost-informed. In addition to validation by the JRC, DHS’s Under Secretary for Management approves the operational requirements that the components developed and reviews them at a series of predetermined acquisition decision events. Figure 3 depicts the acquisition life cycle established in DHS acquisition policy. DHS initially established its acquisition process in policy in November 2008. An important aspect of acquisition decision event 2A, which begins the “Obtain” phase and system development, is the decision authority’s review and approval of key acquisition documents that establish the cost, schedule, and requirements baselines for a program. The operational requirements document and acquisition program baseline are key acquisition documents requiring this approval and include a program’s key performance parameters. DHS also revisits these baselines at subsequent acquisition decision events in order to determine whether the requirements remain achievable. We have previously reported on the importance of stable requirements and the costs of changing them. In March 2016, we found that changes to key performance parameters have been common and are likely to continue for several reasons. While some changes may have a valid reason, such as a response to emerging threats, we found that one of the most common reasons programs changed key performance parameters was that the originally approved key performance parameters had been poorly defined. Key performance parameter changes on several programs were associated with schedule slips and cost growth. DHS leadership acknowledged that the department has had difficulty defining key performance parameters, and said that the Office of Program Accountability and Risk Management has improved its ability to help programs define key performance parameters. We recommended, among other things, that DHS should require the components to submit program funding certification memos to aid affordability discussions. DHS concurred and implemented our recommendation. In October 2016, we found that the JRC’s structure and management approach—informed by assessments of requirements processes, guidance, and lessons learned from DHS components—are generally consistent with key practices for mergers and organizational transformations. However, we recommended that DHS’s Office of the Chief Information Officer have a more formal and consistent role than that of a non-voting advisor to the JRC, since 24 of 36 major acquisitions were information technology programs, and we previously identified poor requirements definition as a factor in failed information technology programs. DHS concurred with our recommendation and implemented it in November 2016. In April 2017, we found that DHS’s acquisition policy was not consistent with acquisition best practices in terms of when to enter the “Obtain” phase depicted in figure 3. Specifically, best practices call for ensuring that a program’s needs are matched with available resources—such as technical and engineering knowledge, time, and funding—prior to starting product development. We recommended, among other things, that DHS require that major acquisition programs’ technical requirements be well-defined and conduct key technical reviews prior to approving programs to initiate product development, in accordance with acquisition best practices. DHS concurred with our recommendation, but has not yet implemented it. Our analysis found that 9 of 14 programs from the seven components that we reviewed changed key performance parameters for various reasons after program approval and entry into the “Obtain” phase. DHS had initially approved most programs’ key performance parameters before DHS reestablished the JRC in November 2014. Whether these programs changed DHS-approved key performance parameters is shown in table 1. We found that the causes of these changes varied, but included requirements did not accurately describe end user needs, were not achievable given available technologies, or that programs pursued greater capability than originally intended. Further details on the nine programs that changed their requirements are in table 2. To mitigate these types of requirements changes, we identified several principles that are critical as the first steps to successful implementation of programs and the remainder of this report presents examples of when the principles have been implemented and when they have not. Among the seven DHS components we reviewed, each of which is responsible for managing major acquisition programs, only the U.S. Coast Guard has a formalized policy in place for developing requirements. Of the other six components, some are developing such policies and others rely on JRIMS guidance. In the absence of component-level policies, some sub-organizations and programs within the components have developed their own requirements policies. The U.S. Coast Guard, which has a long history of managing large acquisition programs, established a requirements policy to assess needs and fill capability gaps in 2009 and updated it in 2017. The most recent version of this requirements policy, the Coast Guard Operational Requirements Generation Manual, aligns its policies with DHS’s acquisition and requirements policies. The manual contains guidance on requirements development and the analytic efforts used to develop the requirements documents. The manual also describes the personnel that are to be included in requirements development and provides guidance on drafting the necessary documentation, and includes templates to do so. As part of the process, requirements development personnel work with end users to generate requirements, which the U.S. Coast Guard reviews and approves before going to the DHS JRC for validation. The status of developing a requirements policy across the other six components is as follows: Immigration and Customs Enforcement, National Protection and Programs Directorate, Transportation Security Administration, and U.S. Citizenship and Immigration Services officials told us that they are currently developing or considering developing policies. These components have not yet set time frames for approving these policies. A Federal Emergency Management Agency official stated that they are planning to develop a formal requirements policy but are waiting for the JRC to clarify JRIMS policy on information technology program reviews and decision authorities before doing so. However, such clarification does not prevent them from drafting an interim policy. Customs and Border Protection has a draft requirements development policy but did not provide a definitive timeline for completion. Although Customs and Border Protection does not yet have a finalized policy, the following sub-component operational organizations have documented their requirements policies. For example: Border Patrol finalized a requirements management process policy on June 12, 2018 that defined roles and responsibilities throughout the process. The requirements policy was preceded by an October, 18, 2016 policy on the process for identifying capability gaps. GAO previously reported on the Border Patrol’s policy in February 2017 and recommended clarifying the roles and responsibilities of the parties involved. The Office of Technology Innovation and Acquisition developed a draft requirements handbook in 2011 that provided guidance for the execution of activities within each stage of development, including defining operational requirements. The Passenger Systems Program Office also documented its requirements management policy in 2010 that outlined requirements development at a high level. While these sub-components have taken the key step of documenting their policies, without a single component policy, Customs and Border Protection may not be efficiently and effectively meeting its mission. In the absence of component-level policies, we found that components are less likely to establish the base of knowledge needed for requirements development. Further, we found this contributes to an inability to properly mitigate capability gaps and meet mission and end user needs. Outcomes for a number of our case study programs illustrate the potential benefits of having component-level requirements development policies in place. National Flood Insurance Program PIVOT (not an acronym): Federal Emergency Management Agency officials told us that the current attempt is the third effort to modernize its information technology systems after two failed attempts. Program officials said that one of the previous program attempts failed to meet capability gaps and end user needs because of a lack of clear policies for developing requirements. The officials said that failure is less likely as the program currently uses lessons learned from the previous attempts. In addition, the JRC is encouraging the component to adopt rigorous standards for developing requirements. However, without a policy to capture these lessons learned, programs within the Federal Emergency Management Agency are at risk for losing the knowledge. National Security Cutter: The U.S. Coast Guard began requirements development for the National Security Cutter in the late 1990s, before it had established a documented requirements development policy in 2009. We found in 2010 that the lack of overarching, formalized policy resulted in requirements that were vague, not testable, not prioritized, and not supportable or defendable. In 2014, the National Security Cutter completed initial operational testing but did not fully demonstrate 7 of its 19 key performance parameters, including those related to unmanned aircraft and cutter-boat deployment in rough seas. To meet the cutter-boat deployment parameter, U.S. Coast Guard officials said that the program had to overcome differing interpretations of the parameter between the U.S. Coast Guard and its independent test officials. One key practice for requirements development is assigning roles and responsibilities, such as when and in what capacity test officials should be involved in requirements development, to avoid just such an outcome and the resulting effect on cost and schedule. U.S. Coast Guard officials stated that end users of the National Security Cutter have since demonstrated its key performance parameters during U.S. Coast Guard operations. Electronic Baggage Screening Program: Without a finalized requirements development policy, the Transportation Security Administration’s program developed requirements that focused on how the system functioned as opposed to the capability that it would provide. Program officials said that neither the Transportation Security Administration nor the program office had a documented policy for requirements development when the program began in 2004. In this environment, the program adopted an informal approach to develop operational requirements by collecting end user input. However, officials noted that end users listed technical requirements rather than broader operational requirements. Officials told us that the program “backed into” operational requirements using these technical requirements, resulting in a system more focused on function and less on capability. Without a focus on the capability, the program risked not meeting the capability gap and end user need. We also found an example of where a component’s policy was beneficial to a program developing requirements: Offshore Patrol Cutter: The U.S. Coast Guard has matured its requirements development policies since the National Security Cutter program as described above. For the Offshore Patrol Cutter, the U.S. Coast Guard has six DHS-approved key performance parameters, such as operating range and duration. The U.S. Coast Guard plans to use engineering reviews and developmental and operational tests throughout the acquisition to refine and demonstrate requirements. For example, to refine the requirements and ensure end user input, the U.S. Coast Guard had an early operational assessment of the cutter’s key performance parameters and associated lower level technical requirements. According to officials, specific policies guided the assessment to, in part, ensure that the program refined key performance parameters before progressing through the remaining acquisition phases. DHS’s JRIMS directive and manual are not designed to provide the level of specificity for component-level requirements development. JRIMS encourages components to elicit end user needs and translate them into requirements. It also authorizes the components to develop their own policies consistent with the intent of and required capability documentation in the JRIMS manual and DHS Instruction Manual. Federal standards for internal control and key practices for requirements development, such as those in Carnegie Mellon University’s Capability Maturity Model Integration for Development, state that organizations should establish responsibility and authority by having documentation that communicates the “who, what, when, where, and why” of achieving their missions. A policy also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel. Such a policy should include a documented process for developing and managing requirements which can help reduce the risk of developing a system that does not meet end user needs, cannot be adequately tested, and does not perform or function as intended. We depict four key practices for requirements management in figure 4. DHS officials indicated to us that one factor which contributes to a component’s lack of finalized requirements policies is the prioritization of starting an acquisition over developing requirements. This situation reflects what we have found over many years at the Department of Defense. Undesirable program outcomes share a common origin; decisions are made to move forward with programs before the knowledge needed to reduce risk and support those decisions is sufficient. There are strong incentives within the acquisition culture to overpromise performance while understating cost and schedule. A key enabler of successful programs is firm, feasible requirements that are clearly defined, affordable, and clearly informed. Once programs begin, requirements should not change without assessing their potential disruption to the program. Of note, DHS established its formal acquisition process in 2008, and did not have a similar emphasis on requirements development until 2016, when the JRIMS process was set forth. DHS requirements officials said that the renewed emphasis on requirements development at DHS requires a significant culture change among the components, pushing the components away from previous practices that undervalued well-defined requirements. They said that the components generally completed the necessary requirements documents to comply with department guidance and formats rather than to ensure that the components identified the needed capabilities and generated the correct requirements. DHS officials said that in the past, some program offices would contract out the capability assessment and requirements development, have them approved by DHS, but not use the resulting documentation to guide the acquisition. Two component requirements officials told us that their components’ previous acquisition and requirements processes focused on obtaining funding before developing requirements. Most components indicated that they are planning on drafting a requirements development policy. However, without specific timeframes for completing their efforts, there is a risk that management attention will not be sustained and planned actions will not be implemented. Without component-level requirements policies that are aligned with the JRC and JRIMS standards, DHS is missing an opportunity to help ensure that components’ programs are set-up from the beginning to meet end user needs and close capability gaps. Three of the seven DHS components in our review have established requirements development organizations, such as offices or directorates independent of the acquisition function. Among the reasons cited by these components’ officials was recognition of the importance of the operational requirements development function for addressing capability gaps. Those that do not have separate requirements organizations cited, among other things, the smaller size of their components. However, according to key principles, independent lines of authority should develop operational requirements and manage acquisitions separately, regardless of size. Three of the seven DHS components in our review have established independent requirements development organizations that are separate from acquisition offices, as shown in table 3. The three components that established requirements organizations did so at various times. In 2009, the U.S. Coast Guard formally placed responsibility for its requirements development policy in its capabilities directorate under the Assistant Commandant for Capability, who reports to the Deputy Commandant for Operations, one level below the Vice Commandant of the Coast Guard. The capabilities directorate, which is separate from the acquisitions directorate, provides oversight and management of its requirements development process. This directorate provides expertise as well as an independent quality review of the requirements documents generated for approval. Customs and Border Protection officials noted that they created a requirements organization in 2010 in the Office of Technology Innovation and Acquisition. In 2016, through an organizational realignment, Customs and Border Protection separated the requirements organization and established the Planning, Analysis, and Requirements Evaluation Directorate. The officials stated that due to concerns about independence from the acquisitions office, Customs and Border Protection placed this Directorate in the Operations Support office. The Transportation Security Administration established the Office of Requirements and Capabilities Analysis in 2017, in part, because officials told us they recognized that prior requirements development efforts were not being done the right way. This new office, which is separate from the Office of Acquisition Management, reports directly to the Executive Assistant Administrator of Operations Support. The remaining four components that we reviewed did not have separate, independent requirements development organizations. Officials from Immigration and Customs Enforcement, National Protection and Programs Directorate, and U.S. Citizenship and Immigration Services noted that they are planning on developing such organizations but have not provided specific time frames for doing so. An official from the National Protection and Programs Directorate told us that although an independent office has not been established, he serves as an independent requirements official, separate from acquisitions. Among the reasons cited by components’ officials for not having a requirements organization at the time of our review was a primary focus on the acquisition function, associated funding issues, and reliance on the JRC to help refine their requirements. Officials also noted the smaller size of their respective components and the fewer number of major acquisitions as reasons for not having an independent requirements organization. Regardless of size, components need to ensure that requirements development is independent of acquisitions in order to guard against possible bias by acquisition officials toward a specific materiel solution. According to federal standards for internal controls, independent lines of authority should develop requirements and manage acquisitions separately. These standards state that management should design control activities to achieve objectives and respond to risks. In addition, authorities should segregate incompatible duties to prevent risks such as management override. For example, if requirements developers were part of the acquisition function, management could tailor operational requirements to satisfy preferred acquisition outcomes, increasing the risk that capability gaps will not be addressed. The absence of an independent requirements organization hampers the components’ ability to remove biases and identify crosscutting opportunities and investments. See figure 5 for a notional example of organizations with separate functions. In accordance with these standards, DHS, at the department level, has separate requirements, acquisitions, and resourcing organizations—each with its own governance structure. In addition, U.S. Coast Guard policy notes that requirements development, when separated from acquisition organizations, results in an operational requirements document that conveys the user’s true needs. The policy goes on to state that the requirements development organization informs the acquisition process by ensuring requirements are traceable to strategic objectives and recommended courses of action to address capability gaps are cost informed and assessed for feasibility. According to GAO’s best practices, while these organizations should be separate, there should be consistent collaboration and feedback throughout the process. We found examples of programs in our review that would have benefited from an independent organization at the component level. Immigration and Customs Enforcement, TECS Modernization (not an acronym): The acquisition program office set the requirements without an understanding of the capability gaps it was trying to close. Without a requirements development office to guide development, program officials stated that they generated approximately 25,000 requirements, which consisted of both technical and operational requirements to address the capability gaps that they were unable to prioritize. The program revised its operational requirements a few times and went through a replanning initiative that included a full review of all the requirements to ensure completeness and accuracy to determine the program’s operational requirements. Immigration and Customs Enforcement officials stated that they recognize the importance of requirements development and are in the process of establishing a requirements organization. U.S. Citizenship and Immigration Services, Transformation: The program began requirements development in 2006 in the absence of an independent organization for requirements development and has subsequently generated three operational requirements documents over a six-year period. Our review showed that the key performance parameters from the oldest document to the most recent one changed significantly. For example, the operational requirements document from 2009 had a key performance parameter called “account hardening,” which involved gathering identity and biometric evidence. The document from 2015 did not contain this parameter. In April 2015, nine years after starting requirements development, DHS leadership finalized a revised set of operational requirements after the program struggled again to meet its previous requirements. We also found an example of where a component’s requirements organization was beneficial to a program developing requirements: Customs and Border Protection, Cross Border Tunnel Threat: This program is analyzing alternative capabilities as it moves toward the JRC’s validation of its requirements. To aid in developing the operational requirements, Border Patrol, a sub-component of Customs and Border Protection, has its own Operational Requirements Management Division. In addition, Customs and Border Protection officials noted that its Planning, Analysis, and Requirements Evaluation Directorate is coordinating, guiding, and providing oversight to ensure the operational requirements address the capability gaps. In doing so, these requirements organizations facilitate input from subject matter experts on tunnel threats and from end user agents who have to mitigate these threats. We found that two components have assessed requirements workforce needs, and one has provided requirements specific training. Components gave different reasons why they have not yet taken one or more of these steps, including a lack of resources. Two of the seven components we reviewed, Federal Emergency Management Agency and Customs and Border Protection, performed assessments of workforce needs for requirements development. The Federal Emergency Management Agency assessed its requirements workforce needs in 2016 and found, among other things, that it does not have the capacity to identify and analyze capability gaps or accurately trace operational requirements to capability needs. As a result of the assessment, the agency requested additional requirements personnel in the fiscal year 2019–2023 budget cycle. Customs and Border Protection requirements officials stated that they last conducted an assessment in 2013. They stated that the assessment identified the appropriate number and types of personnel necessary to conduct requirements development through an analysis of historical requirements workloads. In addition, Customs and Border Protection officials said that they are currently performing an assessment as part of their Acquisition Management Performance Improvement initiative. The initiative assesses training needs and availability and is due at the end of fiscal year 2018. Requirements officials from Immigration and Customs Enforcement, National Protection and Programs Directorate, Transportation Security Administration, and U.S. Citizenship and Immigration Services told us that they have not assessed their requirements workforce needs and have no plans to do so. U.S. Coast Guard requirements officials told us that although they have not conducted a formal assessment of their workforce needs, they informally assess those needs and would like to increase the personnel who have requirements training across the organization. Although the U.S. Coast Guard has not conducted an assessment of its workforce needs, it is the only component that has an established requirements training process. Requirements officials told us that the U.S. Coast Guard initially established training and training-related certification standards in 2007 to emulate similar changes taking place at the Department of Defense and address previous U.S. Coast Guard acquisition challenges. Specifically, the U.S. Coast Guard requirements development organization assigns end users for a two to three year rotation and provides them training and certification on requirements development. The requirements development certification program is two levels and requires both classroom-based training and on-the-job experience. The U.S. Coast Guard assigns those who complete a higher level of certification to develop requirements for more complex and costly programs. This helps to ensure that requirements personnel can give timely, relevant end user input but also differentiate between operational and technical requirements. U.S. Coast Guard requirements officials told us that the training and certification standardizes the proficiency of the requirements workforce across the component. In addition, Customs and Border Protection officials told us that they are in the process of training their personnel on operational requirements development as part of a larger training program implemented through their Acquisition Management Performance Improvement effort. Components provided multiple reasons why they have not assessed their requirements workforce development needs or implemented a requirements training program. Specifically: Federal Emergency Management Agency is waiting on resources to build a requirements organization and provide component-specific training. Immigration and Customs Enforcement officials stated that they are standing up a requirements development organization and have requested additional personnel. However, they have not done a comprehensive assessment of their workforce needs nor established additional training as a result of resource constraints. National Protection and Programs Directorate requirements officials told us that they do not currently have plans to assess the sufficiency of requirements development personnel and do not have component- specific requirements training. Transportation Security Administration has recently established a requirements development organization but has not yet assessed its workforce needs or established component-specific training. U.S. Citizenship and Immigration Services requirements officials told us that they have not assessed their workforce and training needs, as they are more focused on processes supporting information technology programs rather than requirements overall. Assessment and training—according to GAO’s internal controls, workforce development key principles, and DHS’s workforce guidance— are two key steps in workforce planning to ensure that the right numbers of people with the right skills are available at the right time. Specifically, an assessment should include an understanding of the goals and objectives of the component, the workforce needed to achieve the goals, and the capacity and capabilities needed to support workforce strategies. With a better understanding of the needs and current capabilities of the workforce, management can develop specific strategies to better educate the workforce and standardize skill levels. Organizations can then develop specific training to develop the workforce and fill areas of identified need with involvement of management and employees. Organizations can use a variety of instruction approaches for training—for example, classroom based learning; distance learning; or structured on- the-job training. When warranted, organizations should consider blending learning methods (such as web-based and instructor-led) within the same training effort to leverage resources in the most efficient way possible. See figure 6 for a notional workforce planning process that matches workforce needs with the goals of the organization. The JRC approved a DHS-wide Requirements Specialization as a part of the Technology Manager Certification on June 21, 2018. In addition, JRC officials stated that they are expanding requirements development training and determining course content for the certification. We have previously found the importance of having the appropriate workforce as a factor in meeting an agency’s mission. Until the components assess their needs and take appropriate action, acquisition programs may continue to be at risk of not meeting end user needs, as they will not have a trained workforce to develop requirements. Selected case study acquisition programs further illustrate the effect of a trained requirements development workforce. Customs and Border Protection and Immigration and Customs Enforcement, TECS Modernization (not an acronym) programs: These programs illustrate the effect that knowledgeable requirements officials can have. Customs and Border Protection’s TECS program had an engineer with requirements development experience. According to this official, TECS Modernization traced all program requirements from the operational to the technical level in a matrix to ensure that they were valid and understood. A trained workforce, however, is one principle among many needed to provide a program with a sound start. In this case, a trained requirements official took the critical step of tracing the requirements to the gap, but his involvement cannot address the requirements and program executing issues that may arise throughout the life of a program. In fact, TECS Modernization later experienced changes to requirements and schedule. In contrast, Immigration and Customs Enforcement’s TECS Modernization program officials told us that the program initially utilized contractors for requirements development. Rather than develop operational requirements to close the capability gap, development started with thousands of technical requirements. The program could not trace these requirements back to the capability gap, and could not implement the proposed solution. Immigration and Customs Enforcement re-started the program by bringing in trained requirements development personnel who worked with the end users to determine the appropriate operational requirements. Current Immigration and Customs Enforcement officials acknowledged the problems of the past but indicated that with the operational requirements now in place, they have a greater likelihood of success. Transportation Security Administration, Electronic Baggage Screening and Passenger Screening Programs: End users of the screening units at an airport told us they are not aware of anyone, such as a requirements development official, with whom they can communicate emerging threats or problems with the screening units. They also said that some of the key performance parameters, such as the number of bags processed per hour, are not based on current data. In their experience, the volume of travelers and bags has increased significantly. Without a trained requirements development official with whom end users can provide input, the program risks not meeting end user needs. U.S. Coast Guard, Offshore Patrol Cutter: Requirements officials told us that they continue to mature their requirements workforce to ensure the appropriate requirements for programs. The U.S. Coast Guard’s requirements workforce, as stated previously, utilizes an end user with requirements training as a subject matter expert on requirements development. These end users with requirements training work together with end users currently using the assets to ensure that requirements are well-defined. For this program, the U.S. Coast Guard recently held an assessment of the draft requirements for the cutter that solicited input from users across the organization. The trained requirements personnel facilitated the assessment and gathered the input to refine the requirements. While it is too early to determine how this acquisition program will perform against baselines, this initial focus on requirements is positive. As most components recognize the need for requirements development, it is important that they assess their needs for a workforce and align those needs with training to develop a workforce that can help ensure that requirements match end user needs. DHS is taking steps to standardize training and certification across its requirements workforce to ensure that the workforce across all levels implements requirements development in accordance with JRIMS. However, DHS remains at risk until such training and certification are fully implemented throughout DHS and its components. While DHS now has the JRIMS in place, which authorizes the components to create their own internal requirements development organizations, the components lag in creating the means to develop requirements and close identified capability gaps. While DHS components generally are working toward developing their own requirements policies, they have not yet established timeframes for completing this effort. Without specific timeframes, there is the risk that management attention will be lost. Further, some components do not have in place independent requirements development organizations, separate from their acquisition functions. The overlap in these responsibilities does not comport with best practices and engenders a risk that acquisition officials may override requirements developers to procure a preferred solution as opposed to the one needed by the end user. Further, most of the components in our review have not taken steps to assess their requirements workforces and provide training. Compounding this problem is a lack of training and certification standards for requirements personnel at the agency level. Rather, components have prioritized obtaining funding and starting acquisition programs over requirements development. Not giving requirements development adequate priority is likely to contribute to poorly defined requirements and delays in achieving—or failure to achieve—the capabilities necessary to perform components’ missions. DHS, at a department level, has recognized the importance of having a requirements policy, an independent requirements organization, and a trained workforce by establishing JRIMS, the JRC, and associated training. While the components vary in acquisition activity, it is incumbent on them to recognize the importance of these critical elements. Past acquisitions have demonstrated the need to do so. We are making a total of 25 recommendations to the Secretary of DHS. Specifically, that the Secretary of DHS ensures that: The Commissioner of Customs and Border Protection through the Executive Assistant Commissioner for Operations Support finalizes and promulgates the Customs and Border Protection’s draft policy for requirements development. (Recommendation 1) The Commissioner of Customs and Border Protection through the Executive Assistant Commissioner for Operations Support updates the 2013 workforce assessment to account for the independent requirements organization’s current workforce needs. (Recommendation 2) The Commissioner of Customs and Border Protection through the Executive Assistant Commissioner for Operations Support establishes component specific training for requirements development. (Recommendation 3) The Administrator of the Federal Emergency Management Agency establishes a policy for requirements development. (Recommendation 4) The Administrator of the Federal Emergency Management Agency establishes an independent requirements development organization within the Federal Emergency Management Agency. (Recommendation 5) The Administrator of the Federal Emergency Management Agency updates the 2016 workforce assessment to account for an independent requirements organization’s workforce needs. (Recommendation 6) The Administrator of the Federal Emergency Management Agency establishes component specific training for requirements development. (Recommendation 7) The Director of Immigration and Customs Enforcement establishes a policy for requirements development. (Recommendation 8) The Director of Immigration and Customs Enforcement establishes the planned independent requirements development organization within Immigration and Customs Enforcement. (Recommendation 9) The Director of Immigration and Customs Enforcement conducts a workforce assessment to account for an independent requirements organization’s workforce needs. (Recommendation 10) The Director of Immigration and Customs Enforcement establishes component specific training for requirements development. (Recommendation 11) The Under Secretary of Homeland Security for the National Protection and Programs Directorate finalizes and promulgates the National Protection and Programs Directorate’s draft policy for requirements development. (Recommendation 12) The Under Secretary of Homeland Security for the National Protection and Programs Directorate establishes the planned independent requirements development organization within the National Protection and Programs Directorate. (Recommendation 13) The Under Secretary of Homeland Security for the National Protection and Programs Directorate conducts a workforce assessment to account for an independent requirements organization’s workforce needs. (Recommendation 14) The Under Secretary of Homeland Security for the National Protection and Programs Directorate establishes component specific training for requirements development. (Recommendation 15) The Administrator of the Transportation Security Administration through the Executive Assistant Administrator of Operations Support finalizes and promulgates the Transportation Security Administration’s draft policy for requirements development. (Recommendation 16) The Administrator of the Transportation Security Administration through the Executive Assistant Administrator of Operations Support conducts a workforce assessment to account for an independent requirements organization’s workforce needs. (Recommendation 17) The Administrator of the Transportation Security Administration through the Executive Assistant Administrator of Operations Support establishes component specific training for requirements development. (Recommendation 18) The Commandant of the U.S. Coast Guard through the Assistant Commandant for Capability conducts a workforce assessment of the U.S. Coast Guard’s capabilities directorate. (Recommendation 19) The Director of the U.S. Citizenship and Immigration Services finalizes and promulgates the U.S. Citizenship and Immigration Services’s draft policy for requirements development. (Recommendation 20) The Director of the U.S. Citizenship and Immigration Services establishes the planned independent requirements development organization within U.S. Citizenship and Immigration Services. (Recommendation 21) The Director of the U.S. Citizenship and Immigration Services conducts a workforce assessment to account for an independent requirements organization’s workforce needs. (Recommendation 22) The Director of the U.S. Citizenship and Immigration Services establishes component specific training for requirements development. (Recommendation 23) The JRC collaborate with components on their requirements development policies and, in partnership with the Under Secretary for Management, provide oversight to promote consistency across the components. (Recommendation 24) In addition, the Secretary of DHS should ensure that training for requirements development is consistent by establishing training and certification standards for DHS and the components’ requirements development workforces. (Recommendation 25) We provided a draft of this report for review and comment to DHS. DHS provided written comments, which are reproduced in appendix II. In its comments, DHS concurred with all 25 of our recommendations and identified actions it plans to take to address them. DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report discusses (1) how often selected Department of Homeland Security (DHS) programs changed requirements; and assesses the extent to which the selected components have (2) developed policies for requirements development, (3) established independent requirements organizations, and (4) taken steps to assess and train a requirements workforce. Our focus for this report was on the DHS components, as they are responsible for developing the requirements to meet end user needs. To conduct our work, we reviewed the DHS Master Acquisition Oversight List as of April 2017 and selected seven DHS components with Level 1 and Level 2 major acquisition programs and cover a broad range of missions. The seven components are as follows: Customs and Border Protection Federal Emergency Management Agency National Protection and Programs Directorate U.S. Citizenship and Immigration Services From these seven components, we selected 14 major acquisition programs with DHS-approved key performance parameters to serve as case studies for our review. We selected a non-generalizable sample of programs based on different factors, including their acquisition phase, component, acquisition level, and whether they were information technology (IT) or non-IT. We selected the programs on these factors to reflect the broad spectrum of DHS components’ operations. In addition, we coordinated our program selection with the DHS Office of Inspector General due to its ongoing audit on the implementation of Joint Requirements Council (JRC) policies in DHS acquisition programs. See table 4 below for a description of the programs. We also reviewed two programs that did not have DHS-approved key performance parameters at the time of our review to understand how requirements are determined before DHS validation. The two programs were Customs and Border Protection’s Cross Border Tunnel Threat and Biometric Entry-Exit Program. To determine the extent to which the selected programs changed operational requirements, we examined key performance parameters, which the programs document in requirements and acquisitions documents, before and after DHS approval when key performance parameters should be stable. Such program documents include the operational requirements documents and acquisition program baselines. In certain cases, programs had multiple iterations of these documents. We then compared the extent to which key performance parameters changed between documents. We selected operational requirements documents and acquisition program baselines because these are the key requirements documents validated by DHS management in order for programs to begin development. We focused on the presence of policies for requirements development, independent requirements organizations, and requirements specific workforce and training in components as our past work on major acquisitions has shown that these are the fundamental building blocks required to develop well-informed operational requirements. This selection was also informed by our standards for internal controls. To determine the extent to which DHS components’ requirements development policies exist, as well as determine the extent to which those components established independent organizations, we reviewed component documentation pertaining to requirements development, such as instruction manuals, mission statements, and capability analyses. We also reviewed DHS documentation such as the Joint Requirements Integration and Management System Instruction Manual and the Acquisition Management Instruction to determine the requirements development guidance provided to the components. We also reviewed program-level documents such as mission need statements and operational requirements documents to determine the capability gaps that respective programs were intended to mitigate, and the programs’ key performance parameters. To help determine assessment, training, and certification standards for DHS’s requirements development workforce, we spoke with officials from Defense Acquisition University regarding comparable standards that apply to the Department of Defense’s requirements workforce. We also reviewed training standards materials provided by these officials. In addition, we spoke with JRC and U.S. Coast Guard officials regarding their requirements development training and certification standards and reviewed available documentation. To inform each of our objectives, we interviewed officials at various levels throughout DHS to understand their relationship to requirements development. We interviewed JRC officials to determine their interaction with components for requirements development, policies, training, and organizational standards. We also interviewed component-level officials to understand the extent to which they have implemented requirements development policies, organizations, and training for their components. We then interviewed both program officials and program end users to understand their roles in requirements development, the extent to which their feedback is incorporated into the requirements development process, and then the extent to which they receive requirements development training. In addition, we furthered this understanding through reviewing component- and program-level documentation including guidance manuals, mission needs statements, and operational requirements documents. We assessed the components’ requirements development practices against GAO’s standards for internal control and additional supporting criteria. The standards identify key principles to help entities achieve their objectives, such as delivering capabilities to end users. Specifically, management should establish structure, responsibility, and authority including developing an organizational structure and documentation. In addition, management should have a commitment to competence by developing individuals, such as through training. We conducted this performance audit from May 2017 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Marie A. Mak, (202) 512-4841, or makm@gao.gov. In addition to the contact named above, J. Kristopher Keener, Assistant Director; James Kim; Stephen V. Marchesani; Cody Knudsen; Claire McGillem; Pete Anderson; Roxanna Sun; and Sylvia Schatz made key contributions to this report.", "summary": "GAO has previously found that DHS's components had acquisition programs that did not meet requirements and that those requirements were, in some cases, poorly defined. Poorly defined requirements increase the risk that acquisitions will not meet the needs of users in the field—for example, border patrol agents or emergency responders. GAO was asked to examine DHS components' practices for developing requirements. This report addresses the policies, organizations, and workforce that selected DHS components use to develop requirements for their acquisition programs. GAO selected seven DHS components with significant acquisition programs and a non-generalizable sample of programs—based on cost, component, and acquisition phase—as case studies. GAO analyzed policies and program documentation; and interviewed DHS and component officials, as well as end users of DHS programs. GAO compared components' practices to industry best practices and federal internal control standards. GAO has identified several best practices to ensure that operational requirements for acquisitions are well-defined and found some Department of Homeland Security's (DHS) components met them while others did not. These practices include a formal policy for developing requirements, an independent requirements organization, and an understanding of workforce needs and training. The table below shows GAO's assessment of seven of DHS's components against these practices. Establishing a formal policy to guide the process is critical to developing well-defined requirements. However, only the Coast Guard has an approved policy for requirements development among the seven components reviewed. Without well-defined requirements, components are at risk of acquiring capabilities that will not meet mission needs. DHS officials told GAO that components have generally prioritized obtaining funding and starting programs over developing requirements. Three components have a requirements development organization, separating requirements from acquisition in addressing capability gaps. Officials from components without such organizations told GAO that they have fewer major acquisitions and rely on DHS to assist in requirements development. DHS policy and best practices, however, maintain the importance of this separation regardless of the number of major acquisitions to guard against possible bias by acquisition officials toward a specific materiel solution. Two components have assessed requirements development workforce needs, but both need to be updated; and one component has provided requirements development training and certification. Other component officials told GAO that they lack the resources necessary to take these steps. Best practices indicate that without an appropriately sized and trained workforce, components remain at risk of acquiring capabilities that fail to meet end user needs. GAO is making 25 recommendations, including to individual components to establish policies and independent organizations for requirements development, assess workforce needs, and establish training and certifications. DHS concurred with all the recommendations.", "document_type": "gao"}
{"report": "The National Cemeteries Act of 1973 created the modern veterans’ cemetery system. NCA, within VA, manages a majority of veterans’ cemeteries in the United States. In that role NCA maintains existing national cemeteries and builds new national cemeteries for the nation’s veterans and their family members. Since 1978 NCA has also provided funding through VA’s Veterans Cemetery Grants Program (Grants Program) to help establish, expand, or improve state and tribal veterans’ cemeteries. States and tribal governments seeking funding from the Grants Program must apply to the VA. Any cemetery established, expanded, or improved through funding from VA’s Grants Program must be maintained and operated in accordance with NCA’s operational standards. Veterans from all 50 states, the District of Columbia, Puerto Rico, and some U.S. territories are served by national, state, or tribal cemeteries. In addition, over time NCA has changed its policies and procedures to better fulfill its mission to serve and honor veterans and their family members. For example, in 2011 NCA lowered its policy threshold for establishing new national cemeteries from an area having at least 170,000 veterans who are unserved by burial options to an area having 80,000 unserved veterans. NCA established this revised policy threshold in recognition that many highly populated areas still lacked reasonable access to a burial option, and based on data and analysis provided by an independent review of VA’s burial benefits program in 2008. This revised minimum veteran population threshold was chosen based on data showing that state veterans’ cemeteries funded through VA’s Grants Program were located in areas that typically served a maximum of 80,000 veterans within a 75-mile service area. According to VA documentation, moving to this lower threshold has enabled the agency to establish new national cemeteries in areas where states may not have been willing to place them because of the size and cost of operating a larger state veterans’ cemetery. NCA offers a variety of facilities to meet the burial needs of veterans, including various cemetery configurations that either provide burial options to eligible veterans or improve their access to burial options, as shown in table 1. NCA uses county-level population data to determine whether veterans currently have reasonable access to burial options and uses county-level population projections to support decisions about future cemetery locations. NCA makes its decisions regarding whether a veteran is served or unserved based on the county in which the veteran resided, without reference to the location of the veteran’s actual residence. NCA’s methodology uses a veteran’s county of residence as a proxy for being within 75 miles of a veterans’ cemetery. NCA’s plan entails establishing 18 new national cemeteries—comprised of five traditional national cemeteries and 13 urban and rural initiative national cemeteries—and awarding funds for new state veterans’ cemeteries. In 2014, we reported that NCA estimated approximately 90 percent of the veteran population had reasonable access to burial options, and that it expected to reach its strategic goal of providing reasonable access to 96 percent of veterans by the end of fiscal year 2017. Since 2014, NCA has revised its strategic goal to provide reasonable access to 95 percent of the veteran population, and NCA’s current long-range plan to achieve this goal covers fiscal years 2018- 2022. NCA’s 2014 plan to increase veterans’ access to burial options included building 18 new national cemeteries as follows: Five traditional national cemeteries, to be located in Western New York; Central East Florida; Southern Colorado; Tallahassee, Florida; and Omaha, Nebraska. Taken together, according to NCA, these cemeteries are intended to provide a burial option to an additional 550,000 veterans and their families. Five urban initiative cemeteries, to be located in Los Angeles, California; the San Francisco Bay Area, California; Chicago, Illinois; Indianapolis, Indiana; and New York, New York. Taken together, according to NCA, the urban initiative is intended to expand burial options for approximately 2.4 million additional veterans in certain urban areas. NCA announced this initiative in 2011 with the purpose of expanding burial options in urban areas through building columbaria-only (facilities for cremated remains) national cemeteries close to the urban core. Eight rural initiative cemeteries, to be located in Idaho, Maine, Montana, Nevada, North Dakota, Utah, Wisconsin, and Wyoming. Taken together, according to NCA, the intent of the rural initiative is to increase the burial options for approximately 106,000 additional veterans in certain rural areas. NCA announced this initiative in 2012 with the purpose of increasing access by establishing new national cemeteries for states with no open national cemetery and a population of 25,000 or fewer veterans. In addition, since 1978, NCA has used the Grants Program to help increase veterans’ cemetery access. The Grants Program was established to complement national cemeteries by assisting state, territory, and tribal government applicants to establish, expand, or improve veterans’ cemeteries in order to provide gravesites for veterans in those areas where NCA cannot fully satisfy their burial needs. As noted earlier, states and tribal governments seeking grant funding must apply to the VA. States, funded by the Grants Program, often build in areas with veteran populations that are too small to qualify for a national cemetery. NCA prioritizes pending grant applications by giving the highest priority to cemetery construction projects in geographic locations with the greatest projected number of veterans who will benefit from the project, as determined by NCA based on county-level population projections. In 2018, NCA provided funding for a total of 15 grants for the expansion, improvement, or establishment of state and tribal government veterans’ cemeteries. This includes the establishment of two new state and tribal government veterans’ cemeteries. In 2019, NCA expects to provide funding for 17 state and tribal government veterans’ cemetery projects, three of which would be for new cemeteries. While NCA has made some progress in implementing its plan to increase burial access for veterans, that progress has been limited, as it is years behind its original schedule for opening new cemeteries. In its efforts, NCA has experienced three key challenges: (1) acquiring suitable land for new national cemeteries, (2) estimating the costs associated with establishing new national cemeteries, and (3) using all available data to inform how its Grants Program targets unserved veteran populations. In 2014, NCA planned to open 18 new sites by the end of fiscal year 2017 to better serve the burial needs of the veteran population. As of September 2019, NCA has opened four new traditional national cemeteries—Tallahassee National Cemetery in Tallahassee, Florida; Cape Canaveral National Cemetery in Mims, Florida; Omaha National Cemetery in Omaha, Nebraska; and Pikes Peak National Cemetery in Colorado Springs, Colorado. NCA also opened two of its eight planned rural initiative cemeteries—Yellowstone National Cemetery in Laurel, Montana, and Fargo National Cemetery in Harwood, North Dakota. As a result, according to NCA, by the end of fiscal year 2018 the percentage of veterans with reasonable access had increased from 90 percent to about 92 percent. As previously discussed, NCA’s goal is to provide 95 percent of veterans with reasonable access to burial options. As we reported in 2014, NCA had initially planned to open all of its 13 urban and rural initiative sites by the end of fiscal year 2017. As shown in figure 1, NCA had originally estimated completing all five of its urban initiative sites by the end of fiscal year 2015. However, the completion dates for all of these sites have slipped multiple times. In July 2019, NCA officials stated that the planned completion dates for the urban initiative sites were as follows: October 2019 for Los Angeles, sometime in 2020 for New York and Indianapolis, September 2021 for Chicago, and sometime in 2027 for San Francisco. As shown in figure 2, NCA has opened two of its rural initiative sites, in Laurel, Montana, and Fargo, North Dakota. However, the completion dates for the other six rural initiative sites have slipped multiple times. In September 2019, NCA officials stated that the planned completion dates for the rural initiative sites were currently Fall 2019 for Twin Falls, Idaho, Machias, Maine, and Rhinelander, Wisconsin; sometime in 2020 for Cheyenne, Wyoming; and Summer 2021 for Cedar City, Utah. NCA did not provide a specific estimated completion date for the site in Elko, Nevada, affirming that it would be completed “in a future year.” When we asked NCA officials why the rural and urban initiative sites were currently projected to take years longer to complete than originally planned, they replied that they might have overstated their 2014 expectations for having all initiative sites completed by the end of fiscal year 2017. NCA officials also stated that it takes at least 12 months for the land acquisition phase of cemetery construction projects; 9 to 12 months for the design phase; and 12 to 15 months—sometimes up to 30—for the construction phase. According to NCA officials, as of September 2019, five of the 11 initiative sites had reached the construction phase, and one of the sites no longer had an estimated completion date. There were still some outstanding or unresolved issues that had complicated NCA’s ability to estimate a completion date for the site in Elko, Nevada. See figure 3 for a timeline of each of NCA’s urban and rural initiative sites as of September 2019. In executing its plans to increase access to burial options for veterans, NCA has experienced three key challenges: (1) acquiring suitable land for new national cemeteries; (2) estimating the costs associated with establishing new national cemeteries; and (3) using all available data to inform how its Grants Program targets unserved veteran populations. The primary factor that has led NCA to adjust its timelines for completing these cemeteries concerns challenges in acquiring suitable land. Such challenges include difficulty in finding viable land for development, legal issues related to the acquisitions process, and resistance from the local community, among others. Four examples are described below, including two instances in which, as of July 2019, NCA had not yet acquired suitable land, which may further delay the opening of those specific urban and rural sites. Chicago, Illinois. NCA officials stated that they are on their fifth attempt to acquire land for the urban initiative site in Chicago, Illinois. In addition, they said that the environmental assessment process for the Chicago site is currently underway, and that a site viability decision will not occur until the environmental assessment process is completed later in 2019. According to NCA documentation we reviewed, NCA initiated the land acquisition process for the Chicago site in June 2011 and planned to complete the process by July 2018. If the fifth attempt to acquire land is not successful, then NCA will attempt—for the sixth time—to acquire land. According to NCA officials, this would result in an additional 12 to 18 months to identify and evaluate new property for potential acquisition, likely further delaying the opening of this site. See figure 4 for more details on NCA’s attempts to acquire land for the urban initiative site in Chicago. Elko, Nevada. NCA officials stated that they have identified a top- rated site for the rural initiative site in Elko, Nevada, on land currently owned by the Bureau of Land Management. However, according to NCA officials, Congress would need to enact legislation transferring this land from the Bureau of Land Management to VA before NCA could begin construction. As of June 2019, Congress had not done so. According to NCA officials, VA has opened dialogue with local officials about drafting a utility agreement for the city to construct infrastructure needed to supply water to the site. Implementation of a utility agreement would be dependent upon whether future legislation may potentially be introduced and subsequently passed authorizing the Bureau of Land Management to permanently transfer property to VA for national cemetery use. Also, according to NCA officials, once legislation has passed to allow the transfer of land from the Bureau of Land Management to VA, they estimate it will take 12 to 18 months for the land transfer to be completed. Indianapolis, Indiana. In a written response, NCA officials stated that construction for the urban initiative site in Indianapolis, Indiana, has been delayed by about a year due to a public protest of NCA’s acquisition of the site because of environmental concerns, which resulted in a land transfer with the previous landowner in January 2019. In addition, NCA had to conduct a partial project re-design for the exchanged property. According to NCA’s May 2018 plan of actions and milestones, it had expected to have acquired the land for the Indianapolis site by August 2018 and to have completed construction in December 2019. However, officials told us in September 2018 that, due to the delays in acquiring the land, NCA had revised its planned construction completion date to August 2020. Los Angeles, California. According to officials, NCA is partnering with the Veterans Health Administration, which transferred property for the proposed columbarium at the Los Angeles, California, urban initiative site. Officials stated that this project was delayed initially due to the need to remove existing encumbrances on the land (for example, leases with tenants), among other things. In July 2019, officials stated that the project is scheduled for completion in October 2019. According to NCA officials, unforeseen site conditions can also contribute to delays in cemetery construction projects. During the design phase, soil and geotechnical samples are taken but do not cover the entire site. After excavation begins, issues such as rock formations or hazardous waste not identified during the geotechnical investigation may create challenges to developing land for cemetery use. For example, in July 2019 NCA officials stated that the urban initiative site in San Francisco had encountered major geotechnical and soil issues, causing the project completion to slip to 2027. Also, according to NCA’s 2017 annual status report to Congress on new national cemeteries, the cemetery construction contract for a new cemetery construction project in Western New York could not begin solicitation until additional parcels of land had been acquired. Those parcels of land have a gas well and a gas pipeline that must be relocated. According to NCA officials, as of September 2019, six of the 11 urban and rural initiative sites had not yet begun to be excavated, and any issues that arise during the excavation process at these sites could pose further scheduling delays. NCA’s Cost Estimates for Most of Its Rural Initiative Sites Have Increased Significantly We found that NCA’s cost estimates for seven rural initiative sites have increased significantly above what NCA officials had initially estimated. In its strategy, NCA had estimated that the construction cost estimate for each of the seven rural initiative sites would be approximately $1 million (totaling approximately $7 million). However, NCA officials told us in August 2018 that the construction cost estimates for these sites had increased to more than $3 million each (totaling almost $24 million). This amounts to a cost increase of more than 200 percent. Further, the information they provided was not always consistent. For example, in July 2018 NCA officials provided us the average land acquisition and construction costs for the urban and rural initiatives. According to the document they provided, the average construction cost for each urban initiative cemetery is $7.5 million. However, in August 2018 NCA stated in a written response that the construction cost estimates for each of the urban initiatives ranged from approximately $9 million to more than $22 million, reflecting an average cost of $13.6 million. NCA’s cost-estimating guidance used to prepare construction cost estimates does not fully incorporate the 12 steps identified in our Cost Guide that should result in reliable and valid estimates that management can use to make informed decisions, as shown in table 2. Appendix I provides a detailed summary of our assessment of NCA’s cost-estimating guidance. Specifically, NCA’s cost-estimating guidance fully met one step, substantially met four steps, partially met four steps, minimally met two steps, and did not meet one step. For example: NCA’s cost-estimating guidance fully met the step of “obtaining the data” in that it requires a market survey that explores all factors that will affect the bid cost and collects valid and useful historical data to develop a sound cost estimate. NCA’s cost-estimating guidance substantially met the step of “updating the estimate” in that it requires cost estimates to be regularly updated. For instance, it requires an updated cost-estimating report at each stage of the design of the construction project. NCA’s cost-estimating guidance minimally met the step of “conducting a risk and uncertainty analysis” in that, while it mentions the inclusion of a risk analysis, it does not describe what a risk analysis is and how it relates to cost. Additionally, none of the guidance we reviewed contains any discussion of risk management. NCA’s cost-estimating guidance did not meet the step of “conducting a sensitivity analysis.” According to our Cost Guide, a sensitivity analysis should be included in all cost estimates because it examines the effects of changing assumptions and ground rules. Because uncertainty cannot be avoided, it is necessary to identify the cost elements that represent the most risk, and cost estimators should if possible quantify the risk. NCA uses multiple guidance documents on cost estimation and requires that managers and contractors use all of these documents in implementing their projects. Specifically, NCA uses VA’s 2011 Manual for Preparation of Cost Estimates and Related Documents for VA Facilities (Manual); VA’s 2011 Architect/Engineer (A/E) Submission Requirements for National Cemetery Projects Program Guide PG 18-15 Volume D (Guide); and NCA’s Construction Program Conceptual Estimate Worksheet. We refer to these documents collectively as “NCA’s cost- estimating guidance.” We previously reported on VA’s management of minor construction projects and made several recommendations, including that the Veterans Health Administration revise its cost-estimating guidance to incorporate the 12 steps presented in the Cost Guide, to help VA have greater assurance that its cost estimates for minor construction projects are reliable. VA concurred and stated that it would ensure that the Veterans Health Administration update its cost-estimating guidance by incorporating the 12 steps outlined in the Cost Guide, as applicable. As of August 2019, VA had not taken any action to implement this recommendation. The guidance document it plans to update, the VA Manual, is also used by NCA. Further, NCA uses additional guidance documents to develop cost estimates for its cemetery construction projects—including the urban and rural initiatives—that do not fully incorporate the 12 steps presented in the Cost Guide. Without NCA’s revising its cost-estimating guidance to more fully reflect the 12 steps in the Cost Guide, including “conducting a risk and uncertainty analysis,” NCA will not be well-positioned to provide reliable cost estimates to VA and enable it to make informed decisions regarding the management of cemetery construction projects. As noted earlier, the Grants Program is part of NCA’s plan to increase veterans’ reasonable access to burial options. According to NCA officials, their plan to meet their strategic goal of 95 percent of veterans being served by burial options relies, in part, on the state and tribal government efforts funded by the Grants Program. The Grants Program, in turn, relies on states and tribal governments applying for funding to build new cemeteries or expand existing cemeteries. An NCA official told us that NCA does not have the authority to formally request that a state seek grant funding to expand access in an unserved area. However, according to VA officials, the Grants Program has had informal discussions with states that it believes have larger concentrations of unserved veterans, in order to encourage grant applications to provide increased burial access for unserved veteran populations. When reviewing grant applications, NCA considers a number of factors, including how the grant would enhance access for unserved veterans. NCA officials stated that they use the VA’s county-level population data to identify veteran population areas unserved by national, state, or tribal government veterans’ cemeteries. This analysis also allows NCA to project where additional state and tribal government veterans’ cemeteries may be most needed. Specifically, NCA has ranked what it identified as the 40 largest currently unserved veteran population areas. NCA performs this ranking at the county level, not the more precise census tract level, although as we have previously reported it has the technical ability to use census tract data. In September 2014, we reported that NCA was using population data at the county level to identify veterans not served by burial options, and that using population data at the census tract level would enhance NCA’s management of the national cemetery program. Specifically, we recommended that NCA use its existing capabilities to estimate the served and unserved veteran populations using census tract data. This would have allowed them to make better-informed decisions concerning where to locate new national cemeteries, as well as identify which state and tribal government cemetery grant applications would provide reasonable burial access to the greatest number of veterans. However, VA did not concur with that recommendation. In its comments on our draft report, VA agreed that census tract data may yield more precise information than county-level population data, but it disagreed with our conclusion that the use of census tract data would have helped VA to make better-informed decisions regarding the location of burial options. For this review, we performed an analysis using census tract data to examine the 40 prospective sites that NCA has identified as the currently largest unserved areas, using current veteran population data. Our analysis yielded estimates for veterans in the service areas for these prospective sites that differed substantially in some instances from the numbers used by NCA (see figure 5). For example, NCA ranked Erie, Pennsylvania, as 4th on its list of prospective sites, based on its estimate that an additional 45,154 veterans could be served by a cemetery at this location. However, using census tract data we estimate that only about 10,000 veterans could be served there, resulting in a lower priority for Erie, Pennsylvania, on this list of prospective sites. Similarly, the county- based methodology used by NCA ranked Decatur, Alabama, as 25th on the list of prospective sites, while our methodology based upon nearby census tracts placed it 2nd on the list by estimated number of veterans in the service area. Thus, even though it could serve many additional veterans, Decatur, Alabama, would not be ranked highly on the list for funding using NCA’s methodology. By using the more precise census tract data to help inform its grant- making decisions, NCA could enhance its ability to implement its plan to provide burial options to unserved veterans. Comparing estimates of unserved veterans based on current census tract data with such estimates based on current county-level data can be a useful supplement to NCA’s current reliance on long-term projected county-level population data. Comparing census tract data with county-level data could also identify areas where the county-level projections might be overridden or require additional scrutiny. This could position NCA to better identify those areas of the country that will have the most significant unserved veteran populations. Additionally, this could help NCA refine its current plans or develop new ones, as it deems appropriate. We therefore continue to maintain the validity of our 2014 recommendation for VA to use census tract data to estimate the served and unserved veteran populations to help inform its plans for providing reasonable access to burial options. By NCA’s estimates, more than 2.1 million veterans—about 10 percent of the veterans in the United States—did not have reasonable access to burial options at the end of fiscal year 2013. According to NCA, its plan had helped increase the percentage served by burial options to about 92 percent of the veteran population by the end of fiscal year 2018. However, completion of some of the urban and rural sites that are part of NCA’s plan is currently estimated to take 5 years or longer than planned at significantly higher cost, in part because construction cost estimates for the remaining sites may be unreliable. Without NCA’s revising its cost- estimating guidance to more fully reflect the 12 steps in the Cost Guide, including “conducting a risk and uncertainty analysis,” NCA will not be well-positioned to provide reliable cost estimates to VA and enable it to make informed decisions regarding the funding and oversight of NCA’s ongoing minor construction projects to enhance veterans’ burial options. The Secretary of Veterans Affairs should ensure that the Under Secretary for Memorial Affairs update its cost-estimating procedures for cemetery construction projects to fully incorporate the 12 steps identified in the GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs. We provided a draft of this report to VA for review and comment. In written comments, VA concurred with our recommendation. VA also provided technical comments, which we incorporated as appropriate. VA’s comments are printed in their entirety in appendix II. In its technical comments, VA disagreed with our finding that NCA had made limited progress implementing its plan for increasing burial access for veterans and stated that NCA had instead made significant progress. As we note in this report, in 2014, NCA planned to open 18 new sites by the end of fiscal year 2017 to better serve the burial needs of the veteran population. However, as of September 2019, only six of the planned sites were open, with NCA years behind its original schedule. For this reason, we characterized the progress as “limited.” While the progress has been limited, it is important to note that the opening of the six sites has increased accessibility of burial options to veterans. VA also stated that it continues to disagree with our 2014 recommendation that VA use census tract data to estimate the current served and unserved veteran populations to inform its plans for providing reasonable access to burial options. In its written response, VA stated that we recommended NCA use census tract rather than county-level data. However, that is not what we recommended. As we stated in this report, comparing estimates of unserved veterans based on current census tract data with estimates based on current county-level data would provide a useful supplement to NCA’s current reliance on long-term projected county-level population data. Specifically, NCA would be better positioned to identify those areas of the country that will have the most significant unserved veteran populations and refine its current plans or develop new ones, as it deems appropriate. We are sending copies of this report to interested congressional committees and the Secretary of Veterans Affairs. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix III. We compared NCA’s cost-estimating guidance with the 12 steps identified in the GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs (Cost Guide). We found that NCA’s cost-estimating guidance on preparing cost estimates for cemetery construction projects—specifically Department of Veterans Affairs’ (VA) Manual for Preparation of Cost Estimates & Related Documents for VA Facilities (Manual), VA’s Architect/Engineer Submission Requirements for National Cemetery Projects, Program Guide 18-15 Volume D (Guide), and NCA’s Construction Program Conceptual Estimate Worksheet (Worksheet)—does not fully incorporate these 12 steps, as shown in table 3. The guidance incorporates some of the 12 steps to some degree, but not others, raising the possibility of unreliable cost estimates for NCA’s urban and rural initiatives. Specifically, NCA’s guidance on preparing cost estimates: fully or substantially met five of the 12 steps, partially met four of the 12 steps, and minimally met or did not meet three of the 12 steps. Diana Maurer, (202) 512-9627 or maurerd@gao.gov. In addition to the contact named above, Brian Lepore, Director (Retired); Maria Storts, Assistant Director; Pamela Nicole Harris, Analyst-in-Charge; Brian Bothwell, Jennifer Echard, Alexandra Gonzalez, Jason Lee, Amie Lesser, Serena Lo, John Mingus, Brenda Mittelbuscher, Maria Staunton, Frank Todisco, Cheryl Weissman, and John Wren made significant contributions to this report.", "summary": "The VA is responsible for ensuring that veterans have reasonable access to burial options in a national or state veterans' cemetery. In fiscal year 2018 VA estimated that about 92 percent of veterans had reasonable access to burial options, which was an increase from 90 percent in fiscal year 2014 but short of its goal of 96 percent by the end of fiscal year 2017. The House Appropriations Committee has expressed concerns that there are geographic pockets where veterans remain unserved by burial options. House Report 115-188 accompanying a bill for the Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018, includes a provision for GAO to examine veterans' access to burial options. This report (1) describes VA's plan for increasing reasonable access to burial options for veterans and (2) assesses VA's progress in implementing its plan and any challenges experienced. GAO reviewed applicable VA and NCA documents, compared NCA's cost-estimating practices with GAO's cost-estimating 12 steps, and met with cognizant officials regarding NCA's efforts to provide reasonable access to burial options. Within the Department of Veterans Affairs (VA), the National Cemetery Administration (NCA) has a plan to establish 18 new national cemeteries to increase reasonable access to burial options for veterans. NCA defines reasonable access as a national or state veterans' cemetery being located within 75 miles of veterans' homes. Key parts of NCA's plan include establishing 13 urban and rural initiative national cemeteries and awarding grant funds to state applicants for establishing new state veterans' cemeteries. NCA has made limited progress in implementing its plan to increase burial access and is years behind its original schedule for opening new cemeteries. For example, NCA has opened only two of its planned urban and rural initiative sites and is behind its original schedule for the other 11 (see fig. below). The primary factor delaying NCA's completion of these cemeteries has been challenges in acquiring suitable land. NCA has also been challenged in producing accurate estimates of construction costs for most of its rural initiative sites. Cost estimates have increased more than 200 percent (from about $7 million to $24 million) for these sites, and NCA's guidance for developing cost estimates for the cemeteries does not fully incorporate the 12 steps identified in cost-estimating leading practices—such as conducting a risk and uncertainty analysis or a sensitivity analysis. As a result, NCA is not well positioned to provide reliable and valid cost estimates to better inform decisions to enhance veterans' cemetery access. GAO recommends that NCA fully adopt cost-estimating leading practices into its procedures to assist in improving its cost estimates for establishing cemeteries. NCA concurred with our recommendation.", "document_type": "gao"}
{"report": "Effective communications are vital to first responders’ ability to respond to emergencies and ensure the safety of both their personnel and the public. In particular, first responders use communications systems to gather information, coordinate a response, and request additional resources and assistance from neighboring jurisdictions and the federal government. First responders use different communications systems, such as land mobile radio (LMR) and commercial wireless services. LMR: These systems are the primary means for first responders to gather and share information while conducting their daily operations and to coordinate their emergency response efforts. LMR systems are intended to provide secure, reliable voice communications in a variety of environments, scenarios, and emergencies. Across the nation, there are thousands of separate LMR systems. They operate by transmitting voice communications through radio waves at specific frequencies and channels within the radio frequency portion of the electromagnetic spectrum. Commercial wireless services: For data transmissions (such as location information, images, and video) public safety entities often pay for commercial wireless services. Some jurisdictions also use commercial wireless services for voice communications. These systems must work together, or be interoperable, to ensure effective communication. Emergency communications interoperability refers to the ability of first responders and public safety officials to use their radios and other equipment to communicate with each other across agencies and jurisdictions when needed and as authorized, as shown in our hypothetical example of response to a fire in figure 1. First responders may use designated radio frequencies—known as interoperability channels—to help communicate among different jurisdictions. Certain interoperability channels have been designated for federal agencies to communicate with non-federal agencies, and others have been designated for use at the state and local levels. OEC, created within DHS in 2007, has taken a number of steps aimed at supporting and promoting the ability of public safety officials to communicate in emergencies and work toward operable and interoperable emergency communications nationwide. OEC develops policy and guidance supporting emergency communications across all levels of government and various types of technologies. OEC also provides technical assistance—including training, tools, and online and on-site assistance for federal, state, local, and tribal first responders. Also as required by the Post-Katrina Act, OEC developed the National Emergency Communications Plan in 2008 and worked with federal, state, local, and tribal jurisdictions to update it in 2014 to reflect an evolving communications environment. The long-term vision of the plan—which OEC views as the nation’s current strategic plan for emergency communications—is to enable the nation’s emergency response community to communicate and share information across levels of government, jurisdictions, disciplines, and organizations for all threats and hazards, as needed and when authorized. FEMA is responsible for coordinating government-wide disaster response efforts, including on-the-ground emergency communications support and some technical assistance. Additionally, FEMA provides a range of grant assistance to state, local, tribal, and territorial entities, including preparedness grants that can be used for emergency communications. FEMA provides assistance to the RECCWGs, which report to their respective FEMA regional administrator. A chair and co-chair serve as the leaders for each RECCWG and provide direction in determining activities and priorities. These groups are comprised of federal, state, and local officials, and coordinate with private sector stakeholders. For example, members include representatives from local fire departments, state and local police departments, tribal officials, telecommunications companies, and federal agencies. Figure 2 shows the member states and territories that compose each group. The Post-Katrina Act established the RECCWGs and requires each group: to assess local emergency communications systems to meet goals of the National Emergency Communications Plan, to ensure a coordination process for multijurisdictional and multi- agency emergency communications networks through the expanded use of mutual aid agreements for emergency-management and public-safety communications, and to coordinate support services and networks designed to address immediate needs in responding to disasters, acts of terrorism and other manmade disasters. According to FEMA officials, these groups are run by their members and determine their own activities. FEMA plays a role in facilitating the groups and provides some administrative support. Each group reports annually on the status of the region’s operable and interoperable emergency- communications initiatives. In these reports, the groups describe how they fulfill their responsibilities and identify areas for improvement. FEMA compiles the reports into a RECCWG annual report with an executive summary and distributes it to the heads of OEC, the Federal Communications Commission, and the National Telecommunications and Information Administration, as well as to the groups themselves, which may further distribute the final report as they see fit. We identified several prevalent challenges to emergency communications based on our analysis of RECCWG annual reports, case studies, and interviews with emergency communications stakeholders. These challenges included achieving the interoperability of communication systems, obtaining funding, ensuring ongoing training, and increasing the emphasis on communications during emergency response exercises. As discussed in more detail later, DHS technical assistance and grant programs as well as coordination efforts of the RECCWGs have focused on addressing these ongoing challenges. We identified ongoing technical and non-technical challenges in achieving interoperability of emergency communications systems. In the 2016 RECCWG annual report, most of these groups (7 of 10) cited interoperability as a challenge to emergency communications in their regions. We have reported over the years that interoperability issues can affect mission operation and put first responders and the public at risk when responding officials cannot communicate with one another. Interoperability challenges can exist due to technical issues such as equipment’s incompatibility. As mentioned previously, first responders primarily rely on LMR to communicate and coordinate during emergencies. Although LMR systems have similar components, such as handheld portable radios and mobile radios mounted in vehicles, systems that operate on different radio frequency bands are not always interoperable, making it difficult for different jurisdictions to communicate with each other without technical solutions such as multi-band radios and interoperable gateways. Within Los Angeles County, local stakeholders told us that many jurisdictions use LMR systems that operate on different radio frequency bands across the area’s 88 cities and 56 law enforcement agencies. When an emergency involves first responders from a variety of jurisdictions, communication among them can be challenging. For example, one stakeholder told us about an incident in September 2015 where a carjacking turned into a car chase through multiple jurisdictions before the suspect barricaded himself with hostages in a restaurant. The restaurant was surrounded by multiple law enforcement entities and none of them could immediately communicate with each other since their LMR systems operated on different radio frequency bands. According to this stakeholder, this interoperability challenge was dangerous because the officers could not share information such as a description of the suspect. Interoperability challenges can also exist because of a reliance on commercial wireless providers for voice and data emergency communications. In such cases, if the commercial network is overloaded or damaged, first responders could be unable to communicate within their own agency. This situation could also result in interoperability challenges when an agency’s first responders cannot communicate with other jurisdictions. According to a 2017 OEC report, reliance on commercial providers for first responders’ voice and data access can be problematic for a variety of reasons—including that they must share these networks with the public. According to the report, recent events around the country have demonstrated that regional and city commercial networks are sometimes overwhelmed and compromised by both routine events and large gatherings of people. For instance, the report stated that during the 2017 Mardi Gras celebrations in New Orleans, first responders’ wireless voice and data connections were impaired while responding to an accident along the parade route, possibly because of the spike in cellular usage by the public. Additionally, two stakeholders from the same region told us that a state in their region does not have a statewide LMR system and relies on commercial wireless service for emergency communications; such reliance could cause interoperability challenges in the event of an emergency. The First Responder Network Authority (FirstNet) is working to establish a nationwide dedicated network for public safety use that is intended to foster greater interoperability, support important data transmissions, and meet public safety officials’ reliability needs. FirstNet is working with five jurisdictions designated as “early builder projects” of the public-safety broadband network that are deploying local and regional public-safety broadband networks similar to what FirstNet must do on a national scale. Interoperability challenges can also result from non-technical or human factors such as a lack of coordination or not properly using interoperability channels. Additionally, as we reported in 2016, 23 states’ responses to our survey indicated that they have experienced interoperability difficulties when communicating or attempting to communicate with federal partners during disasters. For example, following Hurricane Harvey, stakeholders with the City of Houston and Harris County reported interoperability challenges when they were unable to communicate with members of FEMA’s Urban Search & Rescue teams deployed to the area. However, according to stakeholders we interviewed, they were initially unaware these teams were operating in the area because the teams did not share information—including the LMR channels on which they were operating— with local first responders. According to a stakeholder from the State of Texas this was a communications coordination challenge. Stakeholders from the City of Houston, Harris County, and the State of Texas told us that having this information would have been useful to help coordinate emergency response. FEMA officials told us that they were aware of this issue, which they noted was an isolated incident, and have emphasized to these teams the importance of sharing this information in the future. We also found that at least one stakeholder in each of our case study locations identified challenges due to first responders not using interoperable LMR channels properly. Additionally, a report about the response to the Boston Marathon bombings stated that first responders underutilized dedicated channels or had difficulty accessing them, a situation that limited coordination. Two stakeholders in Boston told us that officials in the city develop a comprehensive communications plan for major events to help allow all levels of government to better communicate, but one of these stakeholders said there is a continued need for training on using interoperability channels. As discussed later, DHS offers technical assistance and grants to improve interoperability. Based on RECCWG annual reports, our case studies, and interviews with stakeholders, we identified: (1) an ongoing need for training and (2) the lack of a communications component in emergency response exercises as both challenges to emergency communications. Stakeholders in each of our three case study locations told us there is an ongoing need for training and practice in using emergency communications equipment. Additionally, this issue was raised in a recent RECCWG annual report and a report about the response to the 2013 Boston Marathon bombing. Stakeholders in two of our case study locations, Los Angeles and Boston, told us that first responders continue to need training after investments are made in new interoperable communications equipment, posing an ongoing need for training. In addition, stakeholders from all three of our case study locations told us that first responders need training on the proper use of interoperability channels. For example, this gap in training was the case during the response to the Boston Marathon bombing when responders used their everyday channels rather than interoperable channels. If all responders are not operating on the same channels, there is the possibility of missing critical information. Additionally, with staff turnover and position changes, four stakeholders told us there is a constant need to educate first responders and other personnel. For example, officials from one department told us that emergency communications training is always a challenge with their approximately 10,000 personnel. Other stakeholders also told us that public safety officials must know how to properly use new technologies and that evolving technology requires additional training. OEC officials said that their training and technical assistance has evolved to address new and emerging technologies such as broadband. For example, OEC’s current technical assistance catalog contains new or revised offerings on topics related to Next Generation 911 such as the technical and procedural challenges associated with integrating digital communications into these 911 systems. OEC officials told us they work with various emergency communications stakeholders, such as state and local agencies, to stay informed about training needs. Exercises—which can be planned and carried out at the federal, state, or local level—are important in preparing for emergencies because they can expose challenges, which can then be addressed before an actual emergency, according to stakeholders we interviewed. According to OEC officials, these exercises are intended to simulate large-scale disasters or emergencies and bring participants (including first responders, state and federal officials, hospital personnel, etc.) together to test equipment and actual response procedures. According to DHS’s Interoperability Continuum, implementing effective exercise programs to practice communications interoperability is essential for ensuring that the technology works and that first responders are able to effectively communicate. One stakeholder in Houston told us that planned events prior to Hurricane Harvey revealed that many first responders in the area were not comfortable using interoperability channels because they did not typically operate on these channels or did not need to use radios for their daily work. After planned events (such as the 2017 Super Bowl), they gained experience and familiarity, and were able to use these interoperability channels without incident during the response to Hurricane Harvey, according to this stakeholder. According to RECCWG annual reports in 2015 and 2016, major emergency-response exercises often do not include a large communications component, which can limit the preparedness of state and local public safety officials. Additionally, the 2016 RECCWG annual report states that in a large-scale disaster, compromised or insufficient communications can have dramatic effects on response efforts. All 10 RECCWGs agreed on the need to test communications during emergency response exercises, and two of these groups cited this need as a specific priority for the upcoming year. FEMA officials told us they are working to build scenarios into exercises that will also help to test communications. Three stakeholders told us that during large-scale events, there is still too often an assumption that emergency communications systems will remain operational in the event of an emergency. The stakeholders said exercises are more beneficial and realistic when communications personnel are included in exercise planning and the exercises include a communications component. OEC officials told us that communications are frequently either omitted from or only notionally included in exercises and assessments, and because of this situation, OEC offers training on planning exercises. As discussed later, DHS offers technical assistance to help address the above challenges related to training and exercises. Based on RECCWG annual reports and interviews with emergency communication stakeholders we identified challenges in obtaining funding for acquiring and maintaining interoperable equipment and systems, as well as for travel and training. For example, a recent RECCWG annual report noted that determining funding sources to address interoperability needs was a challenge. This report raised concerns that two federal grant programs that jurisdictions previously used to address interoperability needs are no longer funded. Stakeholders told us that DHS grant programs have been important for emergency communications projects in their regions. They also noted that within a jurisdiction many projects compete for a limited amount of funding. For example, one stakeholder explained that even after his jurisdiction used a DHS grant to purchase a new LMR system, the jurisdiction must continue to seek funding to upgrade and maintain the system. Further, one recent RECCWG annual report identified funding limitations as causing many states and agencies to make trade-offs among capabilities essential for operable and interoperable communications—such as deciding whether to upgrade equipment or systems. As existing communications systems and equipment continue to age or become obsolete, these trade-offs put the agencies at an increasing risk of not being able to effectively exchange communications during an event response, according to this recent RECCWG annual report. Additionally, leaders from all 10 RECCWGs also told us funding was currently a challenge to emergency communications in their region. For example, half (10 of 20) of these group cited limited funding to upgrade or replace equipment as a challenge in their region. According to a leader in one region that identified funding as a major challenge, many entities within the region need funding for this purpose. They noted that efforts to find alternative funding sources have not been successful and that as emergency communications technology evolves it will grow increasingly difficult for first responders to keep pace with the changes. Likewise, representatives from one public safety association told us that maintaining interoperable communications is a challenge due to the expense of new radios and software. As a result, they noted that jurisdictions, particularly those in less populated areas, might decide to purchase less costly equipment that is not interoperable. Such purchases can result in emergency communications challenges. The leader of one RECCWG told us that due to consistent budget shortfalls over the past several years, one state in the region has deferred maintenance of communications infrastructure. This deferral is expected to create more expensive problems in the future. Leaders from 5 of the 10 RECCWGs told us they have also experienced funding challenges related to travel or training. For example, one regional group leader told us that funding is a challenge because funding shortfalls prevent personnel from attending courses that would increase their knowledge of equipment and new technologies. Another regional group leader told us that funding is a challenge in that travel money is very limited. Given the large geographic area covered by this RECCWG, it is expensive for group members to travel to meetings, inhibiting participation and information sharing at RECCWG meetings. Technical assistance, including guidance and training, is one of OEC’s main responsibilities, and while FEMA does provide certain technical assistance, it is not the agency’s primary responsibility. These OEC and FEMA efforts are intended help address emergency communications challenges, including those discussed above. OEC offers various types of technical assistance, such as workshops and assessments to help participants strengthen their communications plans and governance structures, as well as a seminar to help participants incorporate communications into emergency response exercises. According to OEC officials, they have delivered more than 2,000 technical-assistance-training courses and workshops since OEC was created in 2007. In addition, OEC has developed other resources, such as a toolkit for managing emergency communications at planned events such as the Super Bowl. According to OEC officials, they have a technical assistance budget of approximately $9 million per year, and OEC delivers this assistance at no cost to the requesting state or territory. OEC also has 11 subject matter experts located across the country who help jurisdictions with their communications programs and resources. These individuals seek to build partnerships across different levels of government and the private sector and are involved with their respective RECCWGs. FEMA offers training related to emergency communications, such as various courses on emergency management topics. FEMA also has 10 regional emergency communications coordinators who are responsible for providing assistance on an as-needed basis to their respective regions and coordinating FEMA’s tactical communications support during a disaster or emergency. These coordinators also support the RECCWGs. OEC and FEMA jointly provide training to first responders and other public safety officials to prepare them to act as communications unit leaders. OEC also provides training for other specialized communications support roles. The communications unit is part of a standardized organizational emergency response structure called the Incident Command System. When a disaster or emergency occurs, the communications unit is responsible for managing the operational and technical aspects of communications. For example, one of the unit leader’s tasks includes developing a plan to coordinate the radio frequencies used by first responders, to help ensure interoperability. The unit may also include a communications technician who provides the technical skills to implement the required equipment and systems. OEC trained more than 8,000 individuals between 2007 and August 2017 to serve in communications unit positions, according to OEC information. While stakeholders continue to face a range of emergency communications challenges, they are generally satisfied with DHS’s technical assistance to help address them. Specifically, nearly all the stakeholders we contacted (36 of 41) were generally satisfied with technical assistance from OEC, FEMA, or both. In addition, in 2016 we reported that all states had received OEC technical assistance and that almost all were satisfied with the support they received from OEC. When asked about the general topic of DHS technical assistance, more than half (25 of 41) of stakeholders we interviewed said that training for communications unit positions was useful in advancing emergency communications capabilities in their jurisdictions. OEC and FEMA also employ a “train-the-trainer” approach for the communications unit-leader course. Houston-area stakeholders told us that over 1,000 local personnel across the state had received communications unit training and that the area now has a large number of local trainers. Five stakeholders we interviewed for our Houston case study praised this training and said it was critical in preparing communications personnel to respond to Hurricane Harvey. Specifically, one stakeholder who served as a communications unit leader during Hurricane Harvey told us that this training prepared him to develop an effective interoperable radio communications plan for the storm. This individual also said that first responders who came to assist from outside the region often brought their own communications unit leaders with them, and because this training is consistent nationwide, the outside groups knew how the response effort would be organized and whom to call about which radio frequencies to use. However, a stakeholder from the Los Angeles area told us that while having the communications unit train itself was useful, it was insufficient without opportunities to practice the skills in real-life situations, a challenge that other stakeholders also noted in a recent RECCWG annual report. Based on feedback from state and local personnel, OEC is assisting states with establishing policies and procedures for their communications unit resources, including a process to demonstrate skills required for these specialized positions. While stakeholders are generally satisfied with technical assistance, many (19 of 41) stakeholders said their jurisdictions would still benefit from additional technical assistance, aligning with a challenge we identified earlier regarding the need for training. Four stakeholders told us that OEC adapted technical assistance offerings to the needs of their jurisdictions. OEC officials told us that they customize technical assistance as needed—for example, when providing communications- planning support to a local jurisdiction, OEC will collect local agencies’ policies and facilitate a discussion with stakeholders to determine the best overall approach. A stakeholder in Texas said that OEC’s technical assistance—including communications-focused exercises and support with developing a statewide interoperability plan—had helped to advance capabilities in the state. Another stakeholder told us that FEMA’s training has been critical in helping tribal nations build emergency-management programs, including providing an introduction to emergency communications. When asked about their experiences with technical assistance, six stakeholders specifically told us they had benefited from OEC’s support with communications planning or coordination for special events, such as the Super Bowl. Each state or territory can request up to five offerings per year from OEC’s technical assistance catalog, and OEC officials told us that, given their available resources, they can generally fulfill about 60–70 percent of requests each year. DHS administers several grant programs to help address emergency communications challenges. Three programs provided the majority of DHS’s grant funding aimed at improving emergency communications from fiscal year 2011 to 2016, based on our analysis of data from FEMA’s Grants Reporting Tool. FEMA administers these three grant programs, which are intended to support a wide range of emergency response capabilities, one of which is operational communications. Urban Area Security Initiative: Assists high-threat, high-density urban areas in efforts to build and sustain the capabilities necessary to prevent, protect against, mitigate, respond to, and recover from acts of terrorism. This assistance can include building, sustaining, and enhancing emergency preparedness activities, including emergency communications interoperability. State Homeland Security Program: Assists state, local, tribal, and territorial preparedness activities that address high-priority preparedness gaps across all emergency preparedness capabilities— including communications to prevent, protect against, respond to, and recover from acts of terrorism and other catastrophic events. Emergency Management Performance Grant: Assists state, local, tribal, and territorial emergency-management agencies in preparing for “all hazards,” and can be used to support all capabilities, including communications. Each state and territory and the District of Columbia receive a base amount of funding, and the program requires recipients to commit matching funds. According to FEMA’s data, which is reported by recipients, between fiscal years 2011 and 2016 more than $700 million in grants were provided to support emergency communications, as described in table 1. According to FEMA officials, these funding amounts are approximate totals because the recipient-reported data have certain limitations. For example, the information may be incomplete if the recipient does not submit required biannual reports. In addition, FEMA officials told us that recipients identify which core capability the funding was used to support, but the data might not capture all aspects of a project because only one core capability may be selected at a time. FEMA officials told us that FEMA tracks funds obligated and dispersed at the overall grant level and uses the recipient-reported data to have a general understanding of how funding supports emergency communications and other capabilities. According to FEMA officials, recipient-reported data is sufficient for that general purpose. We have a substantial body of work related to DHS’s grant program management and in 2013 recommended that FEMA make improvements in collecting and validating performance data for certain grant programs. FEMA implemented these improvements in 2017. FEMA officials told us they have also initiated a multi-year effort to improve the oversight and monitoring of grants and support data analytics for improved efficiencies—called the Grant Management Modernization program—which is scheduled to be operational in 2020. Given these ongoing actions, we did not assess FEMA’s grants management efforts as part of this review. Some state and local stakeholders told us that DHS grants (outlined in table 1 above) have allowed them to build and enhance communications capabilities that their jurisdictions would otherwise lack funding to address. These grants have been used to, among other things, build interoperable communications networks and purchase equipment, for example: Urban Area Security Initiative grant funds were used to enhance a regional radio system in the Houston area. According to stakeholders, the system helped the region respond to Hurricane Harvey because it enhanced interoperability in the Houston area, so that first responders from multiple counties and agencies were all using the same system to communicate. Urban Area Security Initiative grant funds have also been used to help build the LMR component of an interoperable communications network in Los Angeles County. Urban Area Security Initiative and State Homeland Security Program grants funds were used to build a large radio cache in Massachusetts, with over 400 multi-band radios that can be quickly deployed into the field to support both emergency and planned events across multiple jurisdictions. One stakeholder told us that these radios are requested on a regular, often weekly, basis. Emergency Management Performance grants have been used to establish and enhance state and local emergency operations centers across the country. These centers are activated during disasters and emergencies and provide a single location for leaders to coordinate the response effort, including the coordination of communications. As part of the Post-Katrina Act, Congress established the RECCWGs to help address emergency communications issues, such as a lack of equipment interoperability. We found the RECCWGs have enhanced emergency communications capabilities through relationship building and information sharing—with demonstrated benefits. Although these groups have had successes, they still face challenges, such as ensuring continuous and broad participation and increasing the national visibility of the groups. Further, collaboration across these groups is limited. Without ways to collaborate across the regions, RECCWG members may be missing opportunities to share best practices and leverage the experience of their counterparts nationwide. The RECCWGs bring together communications stakeholders from different levels of government and the private sector, and all of these groups have identified relationship building as a major benefit, according to our analysis of RECCWG annual reports and interviews with these groups’ leaders. Members expand their professional networks and build relationships within their regions when they gather for in-person meetings and participate in regular conference calls. For example, a leader of one RECCWG told us that through these interactions, members learn about each other’s areas of expertise and also make connections in the region. A leader of another RECCWG told us that his members were more willing to call on each other for assistance because of the strong working relationships they had developed in the group. The relationships established in these groups have facilitated cooperation and resulted in more effective emergency response efforts, as described below. All of the RECCWGs share best practices and lessons learned, according to the groups’ annual reports and the leaders of these groups. Information sharing takes a variety of forms, including discussing lessons learned after disasters or other major events, sharing experiences with new technologies, and presenting information from federal and private industry partners. For example, the Region X group reported in 2016 that members shared lessons learned after declared disasters in several states. Further, according to the 2016 RECCWG annual report, in Region VII, members from Nebraska shared their experiences with expanding their statewide LMR system. This expansion helped members in Iowa construct their own system in a more timely and cost-effective way. RECCWG members share information about communications resources within their regions; that information can be deployed when a disaster or emergency occurs. For example, nearly all of these groups (9 of 10) groups have or are working to compile information about communications assets, such as equipment and personnel. Information sharing about communications resources has been used to facilitate response efforts, as described below. The groups have helped promote awareness of developments in federal programs, such as the public safety broadband network, according to the 2016 RECCWG annual report. The groups also provide a forum for FEMA to understand the regions’ capabilities, needs, and vulnerabilities. According to FEMA officials, they use this information to develop regional plans that help FEMA assist the regions more effectively during a disaster. In several instances, RECCWG members have reported assisting each other during disasters and emergencies, drawing on the relationships and information sharing fostered by the groups. For example, a member of the Region I group, which includes New England, told us that prior to his group’s formation, emergency communications stakeholders from different levels of government in that region did not meet. However, because of the relationships that regional group helped to build, these stakeholders now meet regularly to develop communications plans for large planned events and have collaborated to provide communications support in responding to the Boston Marathon bombing in 2013, Hurricane Sandy in 2012, and other events both within and outside of the region. According to a leader of the Region X group, relationships developed in the group were also helpful in responding to wildfires in Washington State in 2014 and 2015. In addition, after Hurricane Matthew and a major flood in 2016, Region IV group members drew on relationships developed in the RECCWG to coordinate support from other states in the region to assist South Carolina, according to a leader of that group. As discussed earlier, nearly all of these groups (9 of 10) have or are working to share information about resources that can be deployed during a disaster. At least three regions have consulted these resource compilations during recent disasters. For example, according to the 2016 RECCWG annual report, this information was used during Hurricanes Hermine and Matthew in 2016, severe storms and flooding in Minnesota and Wisconsin in 2016, and severe winter storms in New England in 2015. Several RECCWGs have or are working to develop technical solutions to enhance interoperability within or bordering their regions, according to the groups’ annual reports, the leaders of these groups, and FEMA officials. For example, the group in Region V connected disparate statewide radio systems in Illinois, Indiana, Ohio, and Michigan, so that responders would be able to communicate in the event of a regional disaster or emergency. The Region VIII group, which includes the border states of Montana and North Dakota, is working to develop solutions to enhance interoperability among states in the region and with Canada. After the Deepwater Horizon oil spill in 2010, the Region IV group, which includes the southeastern states along the Gulf of Mexico, developed a communications network that is still in place and could be used for other events affecting the Gulf Coast. In 2011 this network was modified to connect to Arkansas and Louisiana’s statewide communications networks, and was successfully tested during a multi-state hurricane evacuation exercise. The Region IV group is also working to identify technology to directly connect emergency operations centers in the southeastern states to coordinate assistance and evacuations when other communications methods fail, according to the 2016 RECCWG annual report. RECCWGs have addressed or are working to address several policy concerns based on joint positions developed within their groups, according to the groups’ annual reports, interviews with RECCWG leaders, and FEMA officials. For example, RECCWG efforts led to changes in the National Telecommunications and Information Administration manual allowing for state and local use of federal interoperability channels, according to FEMA officials. In addition, the Region I group raised concerns regarding an interoperability challenge with Department of Defense (DOD) first responders, resulting in a nationwide rule change for DOD’s land mobile radios used for domestic response activities. After a corporate jet crashed at Hanscom Air Force Base in Massachusetts in 2014, local first responders could not communicate with the Hanscom Fire Department because the base’s radio programming policies did not permit the use of interoperable radio channels. The RECCWG subsequently collaborated with DOD and other federal agencies on an initiative to program DOD radios with national interoperability channels. In addition, during a Region VI group meeting, members learned that multiple states were experiencing a common problem with the use of national interoperability channels. They found that in multiple areas, local entities were using these channels for day-to-day operations, meaning they could not be reliably used during disaster and emergency situations because first responders experienced interference on these interoperability channels. In February 2017, the Region VI group raised its concerns to the Federal Communications Commission, which had licensed these channels to local entities for use on a secondary basis, and the group continues to work on addressing this issue. FEMA officials told us that the participation and involvement of federal agencies in the RECCWGs has been critical in addressing policy changes. Although the RECCWGs have cited several achievements, they have ongoing challenges, such as ensuring broad, continuous participation and establishing national visibility for the groups, according to their annual reports and interviews with group leaders and other selected group members. Various factors can make participation in these groups difficult. Participation is on a volunteer basis, in addition to members’ regular work responsibilities, and some groups cover large geographic areas. Leaders or members from four RECCWGs told us their groups have had turnover in membership, such as when individuals move to other positions or retire. FEMA officials told us that this turnover is a challenge shared across the RECCWGs. In the 2016 RECCWG annual report, many of these groups reported progress in broadening and diversifying their membership. For example, 7 of 10 groups added state and local 911 representatives to their membership, and nearly all saw an increase in participation from cellular providers. However, four of the groups identified challenges with tribal participation in 2016, and all 10 groups reported that they have continued outreach to tribal nations in their respective regions. A representative from a tribal emergency-management organization told us that time and resource demands can affect the level of engagement from tribal members, because emergency response personnel for tribal nations often have many other primary responsibilities. The activity level and achievements also vary across the 10 RECCWGs, according to our analysis of the groups’ reports, as well as interviews with group leaders, selected group members, FEMA officials, and other stakeholders. As noted earlier, each group determines its own activities. Stakeholders we interviewed told us that some regions have very active groups with many achievements, while other RECCWGs meet less frequently and have had fewer achievements. For example, stakeholders from Region I told us that they meet on a monthly basis and collaborate frequently outside of formal meetings. On the other hand, a leader from another region said that his group has not been very active in recent years. According to the 2016 RECCWG annual report, that group did not have any formal meetings in 2016, and instead stakeholders worked together through other coordination groups in the members’ states and territories. We also found that the emergency communications stakeholders’ awareness of the activities of the RECCWGs can vary. For example, two stakeholders told us they are interested in regional collaboration but were not aware that these groups existed. In addition, four other stakeholders we interviewed knew about the groups in their respective regions, but they told us the groups’ activities were limited or they were not aware of what the group had done. The RECCWGs have identified other issue areas they are working to address. For example, almost all of these groups (9 of 10) are working to improve the information that states, private sector partners, and others share about communications resources that can be deployed during disasters or emergencies, according to the 2016 RECCWG annual report. In addition, a member of one RECCWG told us it can be challenging to address policy concerns when federal agencies they contact are not aware of the groups or their purpose. This stakeholder said that it was important to increase the national visibility of the groups in order to improve their effectiveness. Increasing national collaboration, as discussed below, could be one way to address this concern. OEC’s National Emergency Communications Plan—which OEC views as the nation’s strategic plan for this area—established a vision of enabling the nation’s emergency response community to communicate and share information across all levels of government, disciplines, and jurisdictions. This plan has prioritized enhancing coordination among stakeholders, processes, and planning activities across the emergency response community. In addition, our previous work has found that collaboration can be used to address a range of purposes, including information sharing and communication. In this work, we identified key considerations for implementing interagency collaborative mechanisms, such as ensuring that all relevant participants have been included. Federal internal control standards also speak broadly to the importance of communicating to achieve an entity’s objectives. FEMA has taken some steps to encourage collaboration among RECCWG leaders, but broader collaboration across regions remains limited. RECCWGs have periodically shared information with their counterparts in other regions, but according to our analysis of the groups’ annual reports and interviews with group leaders, these exchanges primarily involve one region working with another on an ad-hoc basis. For example, according to one group member in Region VI, members of other RECCWGs reached out to him to learn more about communications successes and challenges during Hurricane Harvey. FEMA has taken some steps to encourage information sharing and collaboration among the RECCWGs. Specifically, FEMA encouraged the establishment of a monthly conference call for RECCWG co-chairs in 2015, and its Disaster Emergency Communications division distributes a biweekly newsletter to RECCWG members, according to FEMA officials. However, there is not an ongoing mechanism for communication across all of the regions so that the full membership can effectively share information with each other and collaborate. While the co-chair conference calls are intended to enhance collaboration across the regions, the meetings do not involve the broader membership of the groups. Most RECCWG leaders (15 of 20), as well as 9 other stakeholders, told us that more collaboration across the groups was needed. For example, four stakeholders explained to us that if a RECCWG in another part of the country has identified best practices it would be useful to share the information more broadly. Three other stakeholders who said their groups were less active told us it would still be helpful to receive information about what other groups are doing to enhance emergency communications. Stakeholders suggested several possible methods, such as an in-person conference or a national-level working group that functions using virtual or other means. FEMA officials have considered ways to enhance collaboration but they face certain limitations. Specifically, FEMA officials told us they had considered an in-person national conference, but FEMA’s budget for the groups was limited and a national conference would be too resource- intensive. FEMA officials also explained that they facilitate the groups, but the groups are run by their members. According to FEMA officials, they have tried some ways to enhance collaboration across the RECCWGs, such as by encouraging the groups to extend meeting invitations to other regions and use online portals for collaboration. Developing and implementing an appropriate ongoing mechanism for collaboration may be a worthwhile investment because it could further enhance the RECCWGs’ efforts to improve emergency communications. Reaching a consensus with RECCWG members may help FEMA determine options that are both useful for the membership and feasible, given FEMA’s resource constraints. In the role as a facilitator for RECCWGs FEMA is well positioned to lead this effort. Without ways for all members of the RECCWGs, not just the groups’ leaders, to collaborate across regions, members may be missing opportunities to share best practices and leverage the knowledge and experience of their counterparts throughout the nation. For example, lessons learned from Hurricane Harvey and other natural disasters in 2017—such as how first responders used interoperability channels effectively—may not be shared across all of the regions without additional methods for collaboration. Further, several of these groups are working to address similar challenges and priorities, as discussed above. For example, nearly all of the groups want to improve the way information about emergency communications resources is shared in their regions, so that these resources can be better leveraged during disasters and emergencies. Some of the RECCWGs have explored ways to better leverage these resources, but in the absence of methods to exchange information more broadly, RECCWGs may not be able to easily share what has been successful for their regions. When disasters strike or emergencies arise, they can span multiple jurisdictions, making coordination and collaboration critically important for effective emergency response. The RECCWGs established by the Post- Katrina Act have enhanced emergency communications within their regions. While the relationship building and information sharing within these groups have contributed to benefits at the regional level, nationwide collaboration among the groups has been more limited. Such collaboration could help the groups address common challenges by providing a way to improve the sharing of best practices and lessons learned and to allow members to leverage the knowledge and experience of their counterparts to improve emergency communications capabilities in their regions and nationwide. Therefore, it could benefit FEMA to work with these groups to reach consensus on and to implement a mechanism for accomplishing cross-regional collaboration. A concerted effort focusing on these groups’ collaboration needs, while also considering FEMA’s resource constraints, could help FEMA and regional stakeholders determine an appropriate mechanism for collaboration moving forward. The Administrator of FEMA should work with RECCWG members to reach consensus on and implement an ongoing mechanism to encourage nationwide collaboration across these groups, considering the costs of one or more suitable methods, such as a national-level working group that uses virtual or other means of coordination, as appropriate. (Recommendation 1) We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are reprinted in appendix I. In written comments, DHS concurred with our recommendation and provided an attachment describing the actions it would take to implement the recommendation. DHS noted that FEMA is committed to increased collaboration among RECCWGs to coordinate multi-state efforts and measure progress on and improving survivability, sustainability, and interoperability of communication at the regional level and nationwide. Separately FEMA provided technical comments that we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Homeland Security and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or members of your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix II. In addition to the individual named above, David Sausville (Assistant Director); Aaron Kaminsky (Analyst in Charge); Melissa Bodeau; Josh Ormond; Kate Perl; Cheryl Peterson; and Kelly Rubin made key contributions to this report.", "summary": "During emergencies, reliable communications are critical. Disasters, such as 2017's hurricanes, continue to test the nation's emergency communications capabilities. As disasters can cross jurisdictional boundaries, collaboration within and across regions is very important. GAO was asked to review implementation of the Post-Katrina Act's provisions related to disaster preparedness, response, and recovery. This report examines: (1) challenges related to emergency communications that selected stakeholders have experienced; (2) their views on DHS's emergency communications assistance; and (3) the regional working groups established by the Post-Katrina Act and their effect on emergency communications capabilities. GAO reviewed DHS's reports and grant data for fiscal years 2011–2016 and conducted case studies of three cities—Houston, Los Angeles, and Boston—selected based on the number of declared disasters, DHS grant funding, and geographic diversity. GAO interviewed DHS officials; leaders of all 10 regional working groups and other stakeholders, including public safety officials in the case study cities; and others chosen for their expertise. Selected first responders and public safety officials identified various challenges related to emergency communications. These challenges include attaining the interoperability of communication systems, obtaining funding, ensuring ongoing training, and increasing the emphasis on communications during emergency response exercises. For example, some stakeholders told GAO about challenges related to equipment that is not interoperable, and others said first responders need training after investments are made in new interoperable communications equipment. To help address these challenges and as required by the Post-Katrina Emergency Management Reform Act of 2006 (Post-Katrina Act), the Department of Homeland Security (DHS) has provided technical assistance, such as training, and Federal Emergency Management Agency (FEMA) grants. It has also established regional emergency communications coordination working groups, which bring together stakeholders from different levels of government and the private sector within FEMA's 10 regions. While emergency communications challenges persist, stakeholders told GAO that DHS's technical assistance generally meets their needs and that FEMA grants have helped them enhance emergency communications capabilities. In particular, stakeholders found training for specific communications positions was useful. Houston-area officials said this training was critical in preparing first responders for Hurricane Harvey. Some stakeholders told GAO that FEMA grants helped them address needs that would otherwise go unfunded, including interoperable communications networks and equipment. GAO found that the regional working groups have enhanced emergency communications capabilities through building relationships and sharing information. Within the respective regions, group members have: assisted each other during disasters and emergencies, developed technical solutions to enhance interoperability, and addressed policy concerns, such as the use of interoperable radio channels during emergencies. However, most regional group leaders told GAO that more collaboration across the groups was needed. GAO's prior work has also found that including all relevant participants can enhance collaborative efforts. Further, DHS's strategic plan for emergency communications established a vision of collaboration among stakeholders across the nation. While FEMA has encouraged collaboration among regional working-group leaders, cross-regional efforts have been limited and do not involve all group members. Developing and implementing an appropriate ongoing mechanism for collaboration could enhance emergency communications capabilities, such as by helping group members address common challenges. Without ways for all members of these groups to collaborate across regions, members may be missing opportunities to share information and leverage the knowledge and experiences of their counterparts throughout the nation. FEMA should work with regional working-group members to reach consensus and implement an ongoing mechanism, such as a national-level working group, to encourage nationwide collaboration across regions. DHS concurred with this recommendation.", "document_type": "gao"}
{"report": "Noncompliance, including fraud, does not have a single source, but occurs across different types of taxes and taxpayers. It includes unintentional errors as well as intentional evasion, such as intentionally underreporting income, intentionally over-reporting expenses, and engaging in abusive tax shelters or frivolous tax schemes. IRS uses many approaches to address noncompliance, from sending notices to taxpayers to conducting complex audits. Many of these approaches can be burdensome to IRS and to taxpayers since they may occur years after taxpayers file their return. We have long highlighted the importance of strong preventive controls for detecting fraud because preventing payment of invalid refunds is easier and more cost-effective than trying to recover revenue through the pay- and-chase model of audits. IRS uses pre-refund compliance checks to confirm taxpayers’ identities, quickly and efficiently correct some clerical and mathematical errors, and detect possible fraud and noncompliance. As shown in figure 1, RRP analyzes individual tax returns claiming refunds and identifies characteristics predictive of IDT and other refund fraud before IRS issues refunds for those returns. IRS reported that between January 2015 and November 2017, RRP prevented the issuance of more than $6.51 billion in invalid refunds. As of March 30, 2018, IRS reports spending about $419 million developing and operating RRP. For fiscal year 2019, IRS requested $106 million to operate and further develop RRP. According to IRS, RRP supports data, analytical, and case processing activities conducted by employees working in revenue protection, accounts management, taxpayer communications, and criminal prosecution. IRS employees from across these areas coordinate to oversee the development and operation of the system (see fig. 2). Four IRS divisions work with IRS’s Information Technology (IT) organization and Office of Research, Applied Analytics, and Statistics (RAAS) to develop, maintain, and operate RRP. The Wage and Investment (W&I) division leads the management of RRP with IRS’s IT offices. W&I’s audit programs cover mainly refundable credits claimed on individual income tax returns and the division develops policy and guidance for RRP and other pre-refund programs that detect suspicious returns. Coordinating with other IRS divisions, W&I and IT update RRP as needed to reflect any new business rules or changes to existing business rules, for example. The Large Business and International division provides RRP with business requirements specific to large corporations. The Criminal Investigation division reviews and analyzes tax returns throughout the filing season to identify fraudulent patterns and trends to incorporate into RRP. The Small Business and Self-Employed division audits individual and business tax returns to detect misreporting. RAAS leads development of some of RRP’s predictive models and IDT filters. As IRS’s primary pre-refund system for detecting IDT and other refund fraud, RRP performs three major activities (see fig. 3). According to IRS, RRP uses advanced analytic techniques and evaluates data from various sources to assign multiple scores to individual returns claiming refunds. The scores are based on characteristics of IDT and other refund fraud known to IRS. Higher fraud scores indicate the return’s greater potential for refund fraud. IRS officials told us that RRP’s design helps IRS identify increasingly sophisticated tax fraud. RRP’s analytic techniques include the following: Predictive models. IRS develops many different models that help detect emerging fraud, outliers, and taxpayer behavior inconsistencies in returns claiming refunds. These models also mine data and help IRS seek out patterns predictive of IDT and other refund fraud. For example, a model may use a combination of existing variables from the 1040 individual tax return, such as tax credits claimed and income. Business rules. RRP contains over 1,000 rules (a “yes” or “no” outcome) developed by IRS to flag returns for evidence of anomalous behavior. For example, RRP uses a business rule to distinguish between returns for which it has received an associated Form W-2, Wage and Tax Statement (W-2), from those which it has not. Clustering. RRP uses a tool that reveals patterns and relationships in masses of data allowing RRP to identify clusters of returns that share traits predictive of schemes and refund fraud. For example, IRS could use clustering to identify groups of returns that share the same geographic location, among other traits. According to IRS, this technique was developed to automate certain aspects of Criminal Investigation’s identification of fraud schemes. A number of systems connect to RRP and provide additional taxpayer data or third-party information for RRP to analyze. RRP contains taxpayers’ prior three years’ filing history and third parties—employers, banks, and others—file information returns to report wages, interest, and other payment information to taxpayers and IRS. For example, the Social Security Administration sends W-2s to IRS. The W-2 information is loaded regularly into RRP, along with other information returns, to validate wage and income information reported on individual returns claiming refunds—a process IRS calls systemic verification. RRP has filters that combine results from the analytic techniques to automatically make a selection decision and then a treatment decision before the return can move to the next processing step and a refund can be issued. Returns not selected by RRP continue through the pipeline process. Selection decision. Returns with fraud scores above thresholds— and meeting other criteria set by IRS management—will automatically be selected by RRP filters for further action or review. According to IRS, the agency’s capacity to review selected returns is part of the automated selection decision, as are other criteria that weigh the cost and risk to IRS. IRS reports that for the 2017 filing season, RRP selected 857,438 returns as potential IDT refund fraud and 219,210 returns as potential other refund fraud. This is less than 1 percent of almost 158 million individual returns filed that year. Treatment decision. RRP automatically assigns selected returns to the appropriate treatment based on the characteristics of IDT or other refund fraud RRP detected. Examples of treatments include the following: Identity theft refund fraud. Returns selected by an IDT filter are automatically assigned for treatment in the Taxpayer Protection Program. IRS notifies taxpayers that they must authenticate their identity before IRS will process the return or issue a refund. Taxpayers can verify their identity by calling an IRS telephone center, visiting a Taxpayer Assistance Center, or in some cases, authenticating online or via mail. If the taxpayer does not respond to the letter or fails to authenticate, the return is confirmed to be IDT refund fraud. Other refund fraud. If a return is selected by one of RRP’s non- identity theft filters, RRP automatically assigns the return, based on the characteristics of fraud identified, to the Integrity and Verification Operations (IVO) function within W&I’s Return Integrity and Compliance Services office for further action or review. For example, RRP may select a return as potential refund fraud because it is missing verification of income for a refundable tax credit, such as the Earned Income Tax Credit. IVO tax examiners may then, for example, contact employers to confirm the income and withholding amounts reported on the return. Frivolous returns. RRP selects returns that contain certain unsupportable arguments to avoid paying taxes or reduce tax liability. If IRS determines these returns to be frivolous, the taxpayer may be subject to penalty. RRP assigns potentially frivolous returns to IVO for review and to notify the taxpayer. Non-workload returns. RRP’s non-workload filters select returns that, according to IRS, score just below the thresholds for RRP’s other filters described above. IRS officials told us that RRP loops these returns for additional scoring and detection. RRP supports IRS’s efforts to prevent issuing invalid refunds in the following ways: Freezing refunds. RRP connects directly to IRS’s systems for processing individual tax returns and issues transaction codes directly to the Individual Master File depending on the type of refund fraud RRP detected. IRS reports that for the 2017 filing season, RRP prevented IRS from issuing about $4.4 billion in invalid refunds. Of that amount, $3.3 billion was attributed to IDT refund fraud and $1.1 billion to other refund fraud. When RRP selects a return as potential IDT refund fraud, RRP will simultaneously assign the return for treatment and issue a transaction code telling IRS’s processing systems to freeze the refund until the case is resolved. As a result, IRS can protect the refund until the review is complete or a legitimate taxpayer has authenticated his or her identity, at which point IRS will release the return. If RRP’s non-identity theft filters select the return because of characteristics predictive of other refund fraud, RRP issues a transaction code to freeze the return for 14 days while IVO examiners have the opportunity to screen the return. After 14 days, the return automatically resumes processing and the refund may be released. Accordingly, IRS officials told us that RRP prioritizes IDT treatment and if a return is selected by both IDT and other refund fraud filters, RRP will automatically assign the return to the Taxpayer Protection Program and freeze the refund. IRS officials told us that when RRP’s non-workload filters select a return, RRP will issue a transaction code that delays the payment of the refund associated with the return for 1 week. According to IRS officials, this delay provides IRS an opportunity to manually review returns that contain suspicious characteristics. Incorporating treatment results. IRS integrates the results from each return review into its analytic techniques to improve RRP’s detection ability and accuracy on an ongoing basis. For the 2018 filing season, IRS officials told us they were able to add functionality that uses real-time case feedback data to automatically improve the accuracy of some of RRP’s IDT fraud filters. IRS officials can also change RRP’s selection criteria or filters during the filing season based on emerging fraud or workload concerns. Detailed data and analysis. With RRP, all available taxpayer information is linked together and available for analysis and queries by IRS employees for post-refund enforcement activities, such as criminal investigations. RRP creates and distributes a report with the results of RRP’s clustering analysis to analysts in Criminal Investigation. IRS employees are also able to search RRP and analyze data relevant to their specific enforcement activities. Criminal Investigation officials told us they use RRP reports to identify suspicious returns that were not selected by RRP and flag them for further post-refund review. As the primary system for detecting IDT and other refund fraud and preventing IRS from paying invalid refunds, RRP is an integral part of IRS’s ability to process returns during the filing season. Therefore, monitoring and evaluation activities that rely on quality information to identify, analyze, and respond to changes—such as emerging fraud trends—are critical to ensure that RRP is operating effectively. Federal standards for internal control and the Fraud Risk Framework highlight the importance of monitoring and incorporating feedback on an ongoing basis so the system remains aligned with changing objectives, environments, laws, resources, and risks. Consistent with these practices, IRS follows an industry-standard process to conduct a range of monitoring and evaluation activities for RRP throughout the year (see fig. 4). According to IRS officials, each year beginning in February, IRS evaluates and updates RRP to improve detection and accuracy for the next filing season. A leading practice in the Fraud Risk Framework is for managers to use the results of monitoring, evaluations, and investigations to improve fraud prevention, detection, and response. A more accurate RRP helps IRS use its resources more effectively. For example, if RRP automatically detects fraudulent returns previously identified by manual processes or post-refund enforcement activities, IRS can redirect those enforcement resources to identifying new and emerging fraud schemes. Further, as RRP selects fewer legitimate returns as suspicious, IRS employees are able to devote more of their time to identifying fraudulent returns. IRS officials stated that to improve RRP’s accuracy, IRS incorporates information about all refund fraud and noncompliance detected by other enforcement activities into RRP’s detection tools. IRS also uses information from its research efforts and external entities, as described below. Other enforcement activities. These activities include the Fraud Referral and Evaluation program, where, according to IRS, analysts manually review select tax returns that scored just below RRP’s selection thresholds. Another enforcement activity is the Dependent Database, a pre-refund screening system that identifies potential noncompliance related to the dependency and residency of children. IRS staff told us they evaluate refund fraud detected by the Dependent Database and Fraud Referral and Evaluation program that RRP missed and update RRP’s analytic techniques for the next year. Third, investigators in Criminal Investigation told us that they work with other IRS offices to incorporate new and emerging refund fraud patterns, such as those identified as a result of external data breaches, into RRP’s detection tools. To ensure that the updates are operating effectively, IRS staff track the percentage of invalid returns that RRP automatically selected that were previously detected by other IRS processes. IRS research. IRS officials stated that the agency uses information from a number of research efforts to inform updates or adaptations to RRP. For example, for the 2018 filing season, IRS changed RRP’s filters and selection criteria to automatically select returns that IRS held manually in 2017. IRS officials told us they made these changes after researching taxpayer behavior in noncompliant claims of the Earned Income Tax Credit and Additional Child Tax Credit during the 2017 filing season. Third-party information. IRS collaborates with external entities to strengthen IRS’s defenses against paying invalid refunds. IRS officials told us they use information from their collaborative efforts to update RRP’s detection tools for the upcoming filing season. These efforts include the External Leads Program, where participating financial institutions provide leads to IRS regarding deposits of suspicious refunds, and the Opt-In Program, a voluntary program where participating financial institutions flag and reject refunds issued by IRS via direct deposit if they find that certain characteristics do not match. IRS reported that in 2017, banks recovered 144,000 refunds with a value of $204 million. IRS has also used information from the Security Summit to improve RRP’s detection of IDT refund fraud. The Security Summit is a partnership between IRS, the tax preparation industry, and state departments of revenue to improve information sharing around IDT refund fraud. For the 2017 filing season, IRS incorporated a number of data elements into RRP’s detection tools that were identified by the Security Summit. IRS also incorporates legislative changes into RRP for the upcoming filing season. IRS officials told us in March 2018 that they are working to determine all the updates and changes they need to make to RRP’s analytic techniques for the 2019 filing season to ensure that RRP will make appropriate selections in accordance with Pub. L. No. 115-97, “An act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.” Between September and December each year, IRS tests RRP to ensure that the system’s updated detection tools meet objectives to increase detection and accuracy for the upcoming filing season. A key factor is setting RRP’s thresholds used to trigger if a return will be selected by RRP. For a given set of rules and criteria, as a threshold is lowered, the number of returns that RRP selects as suspicious will increase, including both fraudulent and legitimate returns. During this testing period, IRS officials determine appropriate threshold settings for RRP given IRS’s fraud detection objectives and IRS resources available to review selected returns. IRS management uses this process to inform its risk tolerance and fraud risk profile. According to the Fraud Risk Framework, effective managers of fraud risks use the program’s fraud risk profile to help decide how to allocate resources. IRS officials told us they test RRP’s analytic techniques and filters by running a random sample of prior-year returns through numerous iterations using different settings. This testing produces various outcomes. According to documents we reviewed and IRS officials, IRS management evaluates the outcomes using the following measures: Selection volume: the number of returns that RRP selects as potentially fraudulent and requiring further action or review by IRS analysts and examiners to confirm the return as fraudulent or legitimate. IRS uses this measure to gauge the workload resulting from certain combinations of settings in RRP. Accuracy: the percent of selected returns confirmed to be legitimate (the false detection rate). IRS uses this measure to evaluate the effect RRP’s settings may have on legitimate taxpayers whose refund may be delayed because their return was inaccurately selected. Revenue protected: the value of refunds associated with returns selected by RRP that IRS confirmed to be fraudulent. This measure can provide an estimate of RRP’s return on investment based on different combinations of settings in RRP. After IRS updates RRP and establishes selection criteria, RRP is ready to operate during the filing season. To ensure that RRP is performing as expected, IRS managers collect and analyze performance reports, meet weekly during the filing season, and adapt RRP to address emerging fraud or make other adjustments. We reviewed the various reports produced by RRP and IRS staff and determined that the information is reliable, relevant, and timely, as required by federal standards for internal control. IRS officials told us that daily reports highlighting RRP’s selections are helpful, especially during the first weeks of the filing season, to ensure that systems are operating effectively. Consistent with federal standards for internal control and the Fraud Risk Framework, we found that RRP is designed to be flexible and adaptive, and IRS can adjust RRP during the filing season to respond to emerging threats or other concerns. IRS officials told us they made several adjustments to RRP during the 2017 filing season: IRS adjusted the selection thresholds for one of RRP’s IDT filters after observing that the number of selections was exceeding projections, resulting in more selections than IRS officials expected and possibly a higher rate of legitimate returns being incorrectly selected. According to IRS officials, adjusting selection thresholds takes approximately 24 hours. To respond to an external data breach, for example, IRS officials told us they might lower RRP’s selection thresholds so that RRP selects more returns for review. IRS reported that it disabled a rule that it determined was incorrectly selecting legitimate tax returns. IRS officials told us they could address selection errors or respond to new or emerging fraud patterns by modifying RRP’s analytic techniques, such as its business rules and models. According to IRS officials, these types of changes require approval of the business rules governance board and take, on average, 10 business days. According to IRS documents we reviewed, early in the 2017 filing season, IRS discovered that RRP did not issue appropriate transaction codes to the Individual Master File to freeze about 11,000 returns selected as potential IDT refund fraud. As a result, some of these returns posted and refunds may have been issued incorrectly. IRS told us they fixed this error within 3 days of identifying it. IRS plans to continue developing RRP to expand its capabilities to detect refund fraud on business and partnership returns, as well as on individual returns that improperly claim nonrefundable tax credits. According to IRS, continued development of RRP will automate previously manual processes, eliminate duplicative efforts, and achieve greater efficiency. Business returns and partnership returns. IRS officials told us in January 2018 that they are currently working to develop rules, models, and filters in RRP to detect noncompliance and fraud in business and partnership returns. According to IRS, identity thieves have long used stolen business information to create and file fake W- 2s along with fraudulent individual tax returns. However, identity thieves are now using this information to file fraudulent business returns. In May 2018, IRS reported a sharp increase in the number of fraudulent business and partnership returns in recent years. Nonrefundable tax credits. IRS plans to develop models and rules in RRP to detect refund fraud on individual returns that improperly claim nonrefundable tax credits. A nonrefundable tax credit is limited to the taxpayer’s tax liability, which means the credit can be used to offset tax liability, but any excess of the credit over the tax liability is not refunded to the taxpayer. Examples of nonrefundable credits include the Child Tax Credit, Foreign Tax Credit, and Mortgage Interest Credit. According to IRS officials, IRS currently relies on a number of systems, including the Dependent Database, to screen returns for noncompliance associated with tax credits. IRS’s management of other major investments will affect the agency’s ability to realize the full potential of RRP’s current and planned capabilities because RRP interfaces with numerous legacy systems. For example, RRP obtains taxpayer information from the Individual Master File, which IRS has been working to replace with a modern database, the Customer Account Data Engine 2 (CADE 2). According to IRS, CADE 2 will provide RRP with additional taxpayer history data and more frequent data updates, improving RRP’s detection capabilities. However, as we reported in June 2018, IRS delivered only 46 percent of planned scope for CADE 2 during the time period we reviewed and paused a number of CADE 2 projects. As of June 2018, a completion date is uncertain. RRP’s effectiveness is limited by the system’s dependence on a legacy case management system. In 2015, IRS approved plans to implement an enterprise-wide case management system to consolidate and replace over 60 legacy systems IRS currently uses. IRS reports a number of limitations with the current systems, including redundancies between systems and limited visibility between programs. However, IRS encountered challenges with the investment, and in 2017 IRS paused development activities. As of June 2018, IRS is working to acquire another product to serve as the platform for IRS’s enterprise-wide case management system. Our prior work has identified actions that Congress could take that would improve IRS’s ability to administer the tax system and enforce tax laws. These actions could also improve IRS’s ability to further leverage RRP’s capabilities. For example, in August 2014 we suggested that Congress provide the Secretary of the Treasury with the regulatory authority to lower the threshold for requiring employers to electronically file W-2s from 250 returns annually to between 5 to 10 returns, as appropriate. Under current law, employers who file 250 or more W-2s annually are required to file W-2s electronically, while those who file fewer may opt to file on paper. Without this change, some employers’ paper W-2s are unavailable to RRP for matching before IRS issues refunds due to the additional time the Social Security Administration needs to process paper forms. Lowering the threshold would help IRS use RRP to verify returns before issuing refunds. This proposed change has been included in H.R. 5444. As of June 2018, H.R. 5444 passed the House and was being considered by the Senate Finance Committee. We have also suggested that Congress grant IRS broader math error authority, with appropriate safeguards against misuse of that authority, to correct taxpayer errors during tax return processing. IRS officials told us that this type of corrective authority would allow IRS to develop more efficient treatments for returns selected by RRP with obvious errors. Although the Consolidated Appropriations Act, 2016 gave IRS additional math error authority, it is limited to certain circumstances. Giving IRS broader math error authority or correctible error authority with appropriate controls would enable IRS to correct obvious noncompliance, would be less intrusive and burdensome to taxpayers than audits, and would potentially help taxpayers who underclaim tax benefits to which they are entitled. As of June 2018, Congress had not provided Treasury with such authority. IRS has additional opportunities to improve data available to RRP to enhance RRP’s detection and accuracy. As described above, RRP’s analytic techniques depend on taxpayer data and information from numerous IRS systems and external entities. RRP’s access to useful and timely information enables IRS to more fully utilize RRP’s analytic techniques to detect suspicious returns, leading to more accurate selection and treatment decisions. Given RRP’s importance to IRS’s mission, it is critical that IRS considers and addresses risks that could affect the accuracy and effectiveness of RRP’s detection and selection activities. According to the Office of Management and Budget, risks include not only threats but also opportunities that could affect an agency’s ability to achieve its mission. IRS and Congress have previously considered opportunities and taken steps to enhance some data made available to RRP. For example: IRS expanded RRP’s use of relevant data from electronically filed returns and information returns. For example, as mentioned previously, IRS incorporated a number of data elements identified through the Security Summit into RRP. In 2016 and 2017, IRS used these data elements to develop additional business rules and models specific to electronically filed returns. IRS also expanded RRP analytic techniques to incorporate data from Forms 1099-MISC, which taxpayers may use to report non-employee compensation. Consistent with our prior reporting, in 2015 Congress enacted legislation to help IRS prevent invalid refunds associated with IDT and other refund fraud. This change allows IRS more time to use RRP to match wage information to tax returns and to identify any inconsistencies before issuing refunds. Since 2017, employers have been required to submit W-2s to the Social Security Administration by January 31, about 1 to 2 months earlier than in prior years. The act also required IRS to hold refunds for all taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit. In 2018 we made recommendations that IRS fully assess the benefits and costs of using existing authority to hold additional taxpayer refunds as well as extending the date for releasing those refunds until it can verify wage information. IRS outlined a number of actions it plans to take to address these recommendations. Taking these actions could prevent IRS from issuing millions of dollars in invalid refunds annually. IRS officials told us that they are taking steps to enhance RRP’s ability to detect fraudulent returns filed using prisoners’ Social Security numbers. To do this, IRS is working to load updated prisoner data into RRP more frequently and developing additional business rules. The Treasury Inspector General for Tax Administration (TIGTA) has reported that refund fraud associated with prisoner Social Security numbers is a significant problem for tax administration, accounting for IRS’s issuance of potentially fraudulent refunds worth tens of millions of dollars in 2015. Based on our prior work, we found that there may be additional opportunities for IRS to enhance RRP by improving data made available to it: Making W-2 information available more frequently. In January 2018, we reported that IRS’s ability to verify information on tax returns early in the filing season was affected by limitations with its IT systems. IRS receives and maintains information return data, including W-2 and 1099-MISC forms, through the Information Return Master File (IRMF) system. IRMF then makes the data available to RRP for systemic verification, the automated process that uses W-2s to verify that taxpayers accurately reported their income and other information on their tax returns. IRS receives the W-2 data from the Social Security Administration daily—up to 25 million W-2s per day— but only loads the data into IRMF and RRP weekly. According to IRS, to add new information returns to IRMF, IRS staff need to reload all existing information at the same time. As employers and financial institutions send more documents to IRS during the filing season, reloading IRMF can take 3 days or more because updates take more time as IRMF’s file increases in size, ultimately containing billions of information returns. IRS officials told us that having W-2s available for analysis sooner would benefit RRP detection and selection of fraudulent returns. In addition, matching W-2 information can also provide sufficient assurance of a valid return, even if characteristics of the return might otherwise raise suspicion. According to our analysis of RRP data for the 2017 filing season, matching available W-2s resulted in RRP excluding 367,027 electronically filed returns that RRP otherwise would have selected as suspicious. Having W-2 information loaded more frequently and available for RRP’s systemic verification helps IRS improve its use of limited enforcement resources by more accurately identifying fraudulent returns and excluding legitimate returns. As of April 2018, IRS officials had drafted but not yet approved a work request to send IRMF data to RRP daily between January and March during the 2019 filing season. In preparing the draft request, IRS officials told us they are assessing how frequently the agency can efficiently load data into IRMF as the filing season progresses. Federal standards for internal control require federal managers to analyze and address risks to agency objectives. As noted previously, risks include not only threats but also opportunities. Leading practices in fraud risk management further state that managers should take into account external risks that can impact the effectiveness of fraud prevention efforts. Until IRS makes incoming employer W-2s available to RRP more frequently, IRS will not address an opportunity to expand the use of RRP’s systemic verification process to more accurately detect and select invalid refund returns for additional action. Making more information available electronically from returns filed on paper. RRP’s analytic techniques could be strengthened if the program had electronic access to additional information from filers of paper returns. While about 90 percent of individual taxpayers file their returns electronically, over 19 million taxpayers filed on paper in 2017. To control costs, IRS transcribes a limited amount of information provided by paper filers into its computer databases. This practice limits the amount of information readily available for enforcement and other tax administration activities that rely on digitized information. We also reported that according to IRS officials, digitizing and posting more comprehensive information provided by paper filers could facilitate enforcement efforts, expedite contacts for faster resolution, reduce handling costs, and increase compliance revenue. In October 2011 we found that IRS considered a number of options to make more information from paper returns available electronically, including increasing manual transcription, optical character recognition technology, and barcoding technology. An optical character recognition system would read text directly from all paper returns using optical scanners and recognition software and convert the text to digital data. A 2-D bar code is a black and white grid that encodes tax return data allowing IRS to scan the bar code to digitize and import the data into IRS’s systems, such as RRP. We recommended in 2011 that IRS determine whether and to what extent the benefits of barcoding would outweigh the costs. In response to our recommendations, in 2012 IRS updated an earlier evaluation of implementing barcoding technology for paper returns. The agency estimated that implementing and using barcoding technology over a 10-year period from fiscal years 2015 to 2025 would yield about $109 million in benefits, compared to about $13 million in costs—a substantial return on investment. IRS estimated benefits based on anticipated reductions in staff hours dedicated to the coding, editing, transcription, and error resolution functions of paper return processing. However, because of statutory limitations, a legislative change is necessary to require individuals, estates, and trusts to print their federal income tax returns with a scannable bar code. In each of its congressional justifications for fiscal years 2012 to 2016, IRS requested that Congress require returns prepared electronically but filed on paper include a scannable code printed on the return. The National Taxpayer Advocate made a similar legislative proposal in 2017. As of June 2018, Congress had not taken action on the proposal. In addition to barcoding, there are other technologies IRS could use to digitize more information from paper returns to further improve tax administration and enforcement activities. However, as of June 2018, IRS had not taken any additional steps to further evaluate the costs and benefits of digitizing individual return information, taking into consideration new technology or additional benefits associated with RRP’s enhanced enforcement capabilities. IRS’s strategic plan identifies expanding the agency’s use of digitized information as a key activity toward its goal to increase the efficiency and effectiveness of IRS operations. Updating and expanding its 2012 analysis of the costs and benefits of digitizing returns to consider any new technology or additional benefit to RRP would provide IRS managers and Congress with valuable information to implement the most cost-effective options for making additional, digitized information available for enforcing and administering taxes. This information could help IRS make progress toward its mission by improving RRP’s detection and selection of suspicious returns. In addition, greater efficiency in the paper return transcription process could free additional resources for enforcement and administration activities. IRS has not yet evaluated the costs and benefits of expanding RRP to improve other tax enforcement activities, such as compliance checks or audits, for returns not claiming refunds. All individual returns (Forms 1040) are loaded into RRP as part of return processing. However, RRP is used to prevent IRS from paying invalid refunds as part of IRS’s pre- refund enforcement activities and, therefore, according to IRS officials, RRP has been limited to detecting and selecting individual returns claiming refunds. Currently, IRS does not use RRP to support other enforcement activities that detect misreporting or noncompliance on individual tax returns not claiming refunds, which also contribute to the tax gap—the difference between taxes owed and what are paid on time. Underreporting of income represents the majority of the tax gap, with the average annual underreporting of individual income tax on both refund and non-refund returns for tax years 2008 to 2010 estimated by IRS to be about $264 billion or 57 percent of the total gross tax gap of $458 billion. Given the large amount of revenue lost each year due to underreporting, it is important that IRS consider opportunities to improve its enforcement efforts and promote compliance. IRS’s enforcement of tax laws helps fund the U.S. government by collecting revenue from noncompliant taxpayers and, perhaps more importantly, promoting voluntary compliance by giving taxpayers confidence that others are paying their fair share. According to IRS officials, RRP has benefited IRS’s pre-refund enforcement activities by enhancing detection of IDT and other refund fraud, providing more cost-effective treatment, and enhancing data analytics for improved enforcement. Based on this review of RRP’s capabilities and our prior work on tax enforcement and administration, we identified a number of activities and processes that could be improved and enhanced if IRS expanded RRP to analyze returns not claiming refunds, in addition to returns with refunds. For example: Enhanced detection and selection of potential noncompliance. IRS reported that RRP significantly enhanced its detection of IDT and other refund fraud over prior systems. In January 2018 we recommended—and IRS outlined planned actions—that IRS assess the benefits and costs of additional uses and applications of W-2 data for pre-refund compliance checks, such as underreporting, employment fraud, and other noncompliance. Underreporting occurs when a taxpayer underreports income or claims unwarranted deductions or tax credits. As previously noted, underreporting accounts for the largest portion of the tax gap. To detect underreporting by individuals, after the filing season and after refunds have been issued, IRS uses its Automated Underreporter (AUR) program to electronically match income information reported to IRS by third parties, such as banks and employers, against information that taxpayers report on their tax returns. During our review, we found that this process of matching income information is similar to RRP’s pre- refund systemic verification process that occurs during return processing, but only applies to returns claiming refunds. IRS should consider expanding RRP’s capabilities to use RRP as a platform to perform AUR matching on all individual returns during return processing and post-processing, as more information returns are available for matching. In May 2018, IRS officials told us that, in response to our January 2018 recommendation, IRS is assessing the possibility of using RRP to perform some AUR checks. However, until IRS expands RRP to analyze returns not claiming refunds, these compliance checks will not cover all potential underreporting. During this review of RRP, we also found that IRS could implement predictive models of noncompliance in RRP to select returns for audits. Audits are an important enforcement tool for IRS to identify noncompliance in reporting tax obligations and to enhance voluntary reporting compliance. IRS’s Small Business and Self-Employed (SB/SE) division conducts audits of individual taxpayers after the return has been processed. SB/SE staff review the returns identified for potential audit by various processes. One of these audit selection processes is a computer algorithm—discriminant function (DIF)—that uses models to score all individual returns (with and without refunds) for their likelihood of noncompliance, an indicator of their audit potential. The DIF models are developed from a unique data set and include variables IRS has found to be effective in predicting the likelihood that a return would have a significant tax change if audited. The additional information available in RRP, such as taxpayer history, has the potential to improve the DIF models and therefore the DIF scoring. IRS officials told us that they plan to examine opportunities to use RRP for some SB/SE audit selection processes, such as incorporating DIF scoring into RRP. However, as of April 2018 IRS had not taken any action. More efficient and effective treatment of potentially noncompliant returns. IRS reported that RRP automated and streamlined many of IRS’s selection and treatment processes for preventing the issuance of invalid refunds. Using RRP to improve IRS’s detection and selection of potentially noncompliant returns during return processing could lead IRS to consider treatment options, such as soft notices, that engage taxpayers earlier, to help IRS and taxpayers resolve issues more quickly. A soft notice does not always require a response from the taxpayer; instead, it provides information about a potential error and asks taxpayers to review their records. Consequently, soft notices can be more efficient than other treatments, such as telephone calls or in-person interactions. This treatment option is consistent with IRS’s strategic objective to reduce the time between filing and resolution of compliance issues. One strategy IRS highlights to achieve this objective is to review and refine IRS’s risk-based systems, like RRP, to detect potential issues early. Currently, IRS’s enforcement activities, including SB/SE audits and AUR, occur after the return has been processed and the filing season ends. For example, AUR begins matching information returns to individual tax returns in July after the filing season has ended, and according to TIGTA, routinely identifies more than 20 million individual tax returns with discrepancies each year. In 2013 we reported that IRS took on average, over 1 year—2 years in some cases—to notify taxpayers about discrepancies. These delays are a challenge for IRS and the taxpayer. For example, when additional tax is owed, as time passes taxpayers may be less likely, or less able, to pay the original debt owed and any associated penalties that may have accrued since the time of filing. Taxpayers may also be less likely to have the relevant tax records needed to respond to IRS questions. Notifying taxpayers earlier of a potential error could help bring them into compliance more effectively than other enforcement options. We found that IRS could also expand RRP’s capabilities to use RRP to identify and generate soft notices for taxpayers that do not pay taxes owed at the time of return processing. IRS does not contact electronic filers with an unpaid tax balance until mid-May, weeks after the April payment deadline. This treatment option could help IRS collect taxes owed and also help taxpayers by making them aware of payment options earlier and allowing them to avoid interest and penalties. IRS officials agreed that it is more likely to recover any debt owed if the taxpayer is notified earlier. Enhanced data analytics for improved enforcement. Just as IRS is using RRP data and reporting capabilities to better target resources for enforcement activities associated with refund returns, we found that IRS could increase its access to useful data if it expanded RRP to analyze returns not claiming refunds. For example, using RRP’s enhanced data analytics, including access to multiple data sources, IRS could better identify characteristics of other types of noncompliance to improve detection and enforcement. This approach is consistent with IRS’s strategic goal to advance data analytics to inform decision making and improve operational outcomes. Officials from IRS’s Office of Research, Applied Analytics, and Statistics told us that RRP is a valuable data source for research on IDT and other refund fraud. However, until IRS expands RRP to analyze and score individual returns not claiming refunds, IRS will be limited in its ability to use RRP’s data analytics to help IRS address other types of noncompliance and fraud. Evaluating the costs and benefits of expanding RRP to analyze individual returns not claiming refunds to support other tax enforcement activities is consistent with the goals and objectives outlined in IRS’s Strategic Plan to encourage compliance through tax administration and enforcement and increase operational efficiency and effectiveness. IRS has identified and implemented opportunities to expand RRP to better detect IDT and other refund fraud in individual and business returns. However, until IRS evaluates the costs and benefits of expanding RRP to support other enforcement activities, IRS may be missing opportunities to realize operational efficiencies by streamlining the detection and treatment of other types of noncompliance and fraud. Additionally, IRS may be missing an opportunity to promote voluntary compliance with tax laws and make progress toward closing the estimated $458 billion average annual gross tax gap. Noncompliance, including tax fraud, has been a long-standing challenge for IRS. More recently, IDT refund fraud has emerged as a costly and evolving threat to taxpayers and the tax system. As part of IRS’s effort to strategically address these challenges, RRP provides opportunities for IRS to operate more efficiently, increase taxpayer compliance, and combat refund fraud. IRS has plans to continue developing and enhancing RRP, including analyzing business returns for fraud. However, IRS has not fully examined opportunities to improve the availability of information that RRP’s analytic tools rely on. These opportunities include examining the costs and benefits of making more information from paper returns available electronically and making W-2 information available to RRP for income verification more frequently. Until IRS conducts such analyses, the agency will be missing opportunities to improve RRP’s detection and accuracy and prevent paying invalid refunds. These evaluations can also inform Congress’s decisions on requiring scannable codes on some printed tax returns, as well as issues we highlighted in our previous work, including lowering the e-file threshold for employers filing W-2s and expanding IRS’s correctible error authority. Congressional action on these issues would help IRS better leverage RRP’s capabilities. Further, RRP has the potential to improve tax enforcement in other areas such as underreporting and audit selection if IRS can successfully expand RRP’s detection and selection capabilities to analyze individual tax returns, including those not claiming refunds, for fraud and noncompliance. Earlier detection of anomalies and notification can increase compliance and collection rates. Congress should consider legislation to require that returns prepared electronically but filed on paper include a scannable code printed on the return. (Matter for Consideration 1) We are making the following five recommendations to IRS. The Commissioner of Internal Revenue should increase the frequency at which incoming W-2 information is made available to RRP. (Recommendation 1) The Commissioner of Internal Revenue should update and expand a 2012 analysis of the costs and benefits of digitizing returns filed on paper to consider any new technology or additional benefits associated with RRP’s enhanced enforcement capabilities. (Recommendation 2) Based on the assessment in recommendation 2, the Commissioner of Internal Revenue should implement the most cost-effective method to digitize information provided by taxpayers who file returns on paper. (Recommendation 3) The Commissioner of Internal Revenue should evaluate the costs and benefits of expanding RRP to analyze individual returns not claiming refunds to support other enforcement activities. (Recommendation 4) Based on the assessment in recommendation 4, the Commissioner of Internal Revenue should expand RRP to support identified activities. (Recommendation 5) We provided a draft of this report to the Commissioner of Internal Revenue for review and comment. In its written comments, which are summarized below and reprinted in appendix II, IRS agreed with our five recommendations stating that it is taking action to address them and will provide a more detailed corrective action plan. IRS agreed with our recommendations aimed at improving information available to RRP to enhance detection of fraudulent returns. IRS stated that it is evaluating the frequency at which W-2 data is made available to RRP and options for digitizing returns filed on paper. IRS further noted that it is evaluating other associated information provided to RRP for detection. As stated earlier, efforts to improve RRP’s detection and accuracy will protect additional federal revenue. IRS agreed with our recommendations to evaluate options for expanding RRP to improve tax enforcement and compliance. IRS stated that its objective is to make RRP the primary detection system for pre- and post- refund processing across the agency. IRS stated that to expand RRP to analyze returns not claiming refunds, a legislative change requiring all information returns to be filed electronically will be necessary to achieve maximum benefit from RRP. In this report, we highlight legislative issues from our prior work, including lowering the e-file threshold for employers filing W-2s and expanding IRS’s correctible error authority, to help IRS better leverage RRP’s capabilities. However, we are confident that even under current conditions, IRS could use RRP to further improve compliance and its enforcement efforts. For example, with the current electronic filing requirements, RRP could help IRS detect and resolve individual underreporting earlier in the process. IRS stated its intention to collaborate with GAO and other organizations to determine appropriate actions after assessing the results of its analyses. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512- 9110 or mctiguej@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The Return Review Program (RRP) is one of the Internal Revenue Service’s (IRS) major information technology investments. IRS began developing RRP in 2009 to improve its ability to detect fraudulent returns. In October 2016, RRP replaced IRS’s legacy system, the Electronic Fraud Detection System (EFDS) as IRS’s primary fraud detection system. IRS originally planned for RRP to be operating by 2014 because IRS had determined that by 2015 EFDS would not be reliable. However, in 2014, IRS paused RRP’s development to reconsider RRP’s capabilities within IRS’s strategic fraud detection goals. The year-long pause delayed EFDS replacement and retirement until 2016. RRP operated as IRS’s primary system for detecting identity theft and other refund fraud beginning with the 2017 filing season. Figure 5 is a timeline of IRS’s development of RRP. In addition to the contact named above, Neil Pinney (Assistant Director), Margaret M. Adams (Analyst-in-Charge), Michael Bechetti, Mark Canter, Pamela Davidson, Robert Gebhart, James A. Howard, Jesse T. Jordan, Paul Middleton, Sabine Paul, J. Daniel Paulk, and Bradley Roach, made significant contributions to this report.", "summary": "Tax noncompliance, including refund fraud, threatens the integrity of the tax system and costs the federal government hundreds of billions of dollars annually. RRP is IRS's primary pre-refund system for detecting and preventing the issuance of invalid refunds. IRS reported that between January 2015 and November 2017 RRP prevented the issuance of more than $6.51 billion in invalid refunds. GAO was asked to examine RRP's capabilities. This report (1) describes how RRP detects and selects suspicious returns and prevents invalid refunds; (2) assesses how IRS monitors and adapts RRP; and (3) examines what else, if anything, IRS can do to strengthen RRP and use it to address other enforcement issues. GAO reviewed IRS plans for RRP and documents on its performance. GAO compared IRS's efforts to federal internal control standards, GAO's Fraud Risk Framework and IRS's strategic plan. GAO interviewed IRS officials who work on and use RRP. The Internal Revenue Service's (IRS) Return Review Program (RRP) detects and selects potentially fraudulent returns to prevent the issuance of invalid refunds. According to IRS, RRP uses advanced analytic techniques and various data sources, including prior-year tax returns, to assign multiple scores to individual returns based on characteristics of identity theft and other refund fraud. GAO found that IRS routinely monitors RRP's performance and adapts RRP to improve detection and address evolving fraud threats. Each year IRS updates RRP's detection tools to improve accuracy for the next filing season. IRS has plans to continue developing RRP to further prevent invalid refunds, including using RRP to analyze and detect fraudulent business returns. However, GAO identified other opportunities for IRS to improve RRP's fraud detection and to use RRP for other enforcement activities: RRP's ability to accurately detect and select suspicious returns could benefit from having information on Forms W-2, Wage and Tax Statements (W-2) available for analysis more frequently. As of April 2018, IRS officials said they were drafting but had not yet approved a work request to load W-2s into RRP daily instead of weekly for the 2019 filing season. IRS could collect more information electronically from paper filers. One approach IRS evaluated in 2012 is to digitize some paper returns using barcoding technology, but it has not updated that analysis or expanded it to consider other digitizing technologies. IRS requested that Congress require that returns prepared electronically but filed on paper include a scannable code printed on the return, but Congress had not done so as of May 2018. IRS could apply RRP's capabilities to improve other tax enforcement activities, such as audit selection or underreporting detection. Individuals' underreporting of tax liabilities accounts for hundreds of billions in lost tax revenue. Until IRS evaluates the costs and benefits of expanding RRP to analyze returns not claiming refunds, IRS will not have the information needed to make decisions that could help streamline processes for detecting and treating additional types of noncompliance and fraud. GAO suggests Congress consider legislation to require that returns prepared electronically but filed on paper include a scannable code. GAO is also making five recommendations to IRS, including that IRS take action to make incoming W-2s available to RRP more frequently, update and expand a 2012 analysis of the costs and benefits of digitizing returns filed on paper, evaluate the costs and benefits of expanding RRP to analyze returns not claiming refunds, and take any appropriate action based on those evaluations. IRS agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "19 U.S.C. § 1555(b)(8)(D). portion was then being smuggled back into the United States without payment of U.S. taxes. Congress legislated on duty-free stores through the Omnibus Foreign Trade and Competitiveness Act of 1988, which required duty-free stores located in airports to restrict the sale of duty-free merchandise to any one individual to “personal use quantities,” which is defined as “quantities only suitable for uses other than resale.”10 During consideration of the legislative language that was enacted in 1988, a senator introduced an amendment to permit duty-free stores located along the border to continue to sell goods in wholesale quantities. In introducing the amendment, the senator observed that a large part of the sales by the border stores along the U.S.-Mexico border were in wholesale quantities and that restricting the stores’ ability to sell in such quantities would adversely affect the stores’ business and the regional economy. Congress adopted the law with the amendment and applied the concept of “personal use quantities” only to airport duty-free stores.12 This requirement does not apply to land border stores. Pub. L. No. 100-418, § 1908(b), 102 Stat. 1107, 1315 (codified as amended at 19 U.S.C. § 1555(b)). The act does not identify any quantity amount with respect to personal use but defines personal use quantities as quantities that are only suitable for uses other than resale and includes reasonable quantities for household or family consumption as well as for gifts to others. Discussion of this topic occurred as part of congressional consideration of Senate Bill 1420, the Omnibus Trade and Competitiveness Act of 1987. One senator highlighted the potential for economic harm to communities adjacent to the U.S.-Mexico border if the provision precluding duty-free sales in wholesale quantities were applied to land border stores. Congress passed the Omnibus Foreign Trade and Competitiveness Act of 1987, but the President vetoed the bill, and a vote to override the veto failed in the Senate. (See H.R. 3, 100th Cong. (1987). S. 1420 was incorporated into H.R. 3.) The provision limiting the concept of “personal-use quantities” to airports was in the Omnibus Foreign Trade and Competitiveness Act of 1988, which Congress passed and the President signed. Pub. L. No. 100-418, § 1908(b), 102 Stat. 1107, 1316. At Commerce, Census is responsible for collecting, compiling, and publishing export trade statistics. AES is the primary instrument for collecting export trade data. Census takes steps to ensure compliance by AES filers, including duty-free store operators, through training and follow-up on unusual transactions, according to Census officials. At DHS, CBP and ICE are the components with roles related to duty- free cigarette exports. CBP is responsible for oversight of duty-free stores, including the requirements for establishment of stores and ensuring stores’ compliance with various requirements for operations and lawful sales. Duty-free stores are regulated as a type of bonded warehouse. CBP port directors ensure that duty-free stores establish operating procedures. According to CBP officials, the agency is also responsible for enforcing the Foreign Trade Regulations, including consideration of enforcement action when an AES filer submits incorrect information regarding a shipment of merchandise being exported. Such enforcement action may include the issuance of penalties or the seizure of the merchandise intended for export. ICE enforces U.S. laws related to tobacco smuggling for cases in which it has investigative jurisdiction, including related offenses such as money laundering. According to agency officials, ICE also coordinates with CBP on enforcement efforts, such as seizures of merchandise due to violations of U.S. laws or customs regulations. At DOJ, ATF investigates trafficking in cigarettes that have illegally entered U.S. commerce and enforces federal antitobacco smuggling laws under Title 18 of the U.S. Code, particularly the Prevent All Cigarette Trafficking Act and Contraband Cigarette Trafficking Act (CCTA).17 As we previously reported, by enforcing the CCTA, ATF seeks to reduce illegal cigarette trafficking, divest criminal and terrorist organizations of money derived from this activity, and significantly reduce tax revenue losses to the affected states. At Treasury, TTB is responsible for administering and enforcing the federal tax laws relating to tobacco products. Federal law requires that every person, prior to commencing business as a manufacturer or importer of tobacco products or establishing a TTB-regulated export warehouse for the storage of nontax-paid tobacco products pending export, obtain a permit from TTB. According to TTB officials, among the regulations that TTB enforces are those governing the export of tax-exempt tobacco products, under which only tobacco product manufacturers and export warehouse proprietors may remove tobacco products for export without payment of tax. TTB officials also stated that a manufacturer of tobacco products or an export warehouse proprietor is relieved of the liability for tax on tobacco products upon providing evidence satisfactory to TTB of exportation or proper delivery, including delivery to a customs bonded warehouse operating as a duty-free facility. TTB may audit TTB permit holders to confirm such deliveries or exports. See Prevent All Cigarette Trafficking Act of 2009, Pub. L. No. 111-154, 124 Stat. 1087 (2010) and Contraband Cigarette Trafficking Act, Pub. L. No. 95-575, 92 Stat. 2463 (1978) (codified as amended at 18 U.S.C. §§ 2341-2346). The Contraband Cigarette Trafficking Act makes it unlawful (a felony) for any person to ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes. Contraband cigarettes are cigarettes in a quantity of more than 10,000 sticks (currently, 50 cartons) that bear no evidence of applicable state or local cigarette tax payment in the state or locality in which the cigarettes are found, if such state or local government requires a stamp or other indicia to be placed on the packages or other containers of cigarettes to evidence payment of cigarette taxes and which are in the possession of any person other than specified persons, including permit holders under the Internal Revenue Code, common carriers transporting cigarettes with proper bills of lading, or individuals licensed by the state where the cigarettes are found. Duty-free stores may sell tax-exempt cigarettes in any quantity to passengers departing the United States for Mexico at a port on the land border; agencies have identified schemes and practices associated with duty-free sales that are used to evade U.S. and Mexican taxes. U.S. regulations require duty-free stores to have procedures to provide reasonable assurance that duty-free merchandise sold will be exported and requires the exporter to report information on the export of commercial cargo, which CBP considers to be transactions valued at more than $2,500. Census data indicate that about 18,500 such transactions occurred from 2010 through 2015 at duty-free stores on the southwest border. According to information from CBP and a Mexican customs official, Mexican requirements dictate that, depending on place of residence, some adult travelers to Mexico can bring in one carton of cigarettes tax-exempt, and some residents can bring in an additional three cartons if they pay taxes on them. Bringing in any quantity above four cartons would require an individual to register as an importer with the Mexican government, according to the same Mexican official. U.S. agencies identified three schemes used to evade cigarette-related taxes and other legal requirements in the United States and Mexico: (1) diverting cigarettes from the store directly into U.S. commerce; (2) smuggling duty-free cigarettes into Mexico through U.S. ports of entry by concealing them, while potentially also bribing Mexican customs officials to evade payment of Mexican taxes; and (3) smuggling duty-free cigarettes back into the United States after first smuggling them into Mexico. Cigarettes manufactured in the United States and labeled for export may be shipped, without payment of federal or state tax, to duty-free stores for export and consumption beyond the jurisdiction of U.S. internal revenue laws. In addition to U.S.–manufactured cigarettes, duty-free stores can sell cigarettes imported from overseas. Duty-free cigarettes, which are cigarettes labeled for export, are considered to be in violation of U.S. law if sold for domestic consumption in the United States.24 According to CBP officials, in the duty-free retail environment, the individual purchasing the merchandise is the exporter. Cigarettes sold at duty-free stores are generally distributed to duty-free retail outlets from warehouses maintained by the duty-free operator. Figure 2 outlines potential steps in the lawful export of duty-free cigarettes, according to U.S. and Mexican agency officials. Tobacco products manufactured in the United States and labeled for exportation may not be sold or held for sale for domestic consumption in the United States unless such articles are removed from their export packaging and repackaged by the original manufacturer into new packaging that does not contain an export label. 26 U.S.C. § 5754(a)(1)(C). TTB regulates export warehouses. CBP requires duty-free stores to have procedures designed to provide reasonable assurance that duty-free merchandise is exported.25 For duty- free stores along the southwest border, such procedures are designed to ensure export by pedestrians and passengers in vehicles crossing into Mexico. The four operating procedures for duty-free stores that we reviewed require that they assure that individuals and their merchandise depart the United States for Mexico under escort or observation. Figure 3 shows the procedures at a duty-free store in Laredo, Texas, that is located at the border. This duty-free store sells cigarettes from a drive- through window; at the time of purchase, a store employee puts a numbered red cone on the roof of the vehicle. A private security guard employed by the duty-free store removes the red cone at the border crossing to verify that the vehicle exits the United States. In other ports, duty-free stores may be located farther from the U.S. border crossing, and the procedures designed to assure export of duty-free goods could entail having a store employee in a van or other vehicle escort purchasers to the crossing. According to the procedures of one duty-free store we visited, refusal by a pedestrian customer to cross into Mexico should typically result in that customer returning to the store and being given a refund for the duty-free goods purchased, and if the customer refuses to return to the store for a refund and does not cross into Mexico, that individual is not allowed to purchase in the facility again. In the case of a customer in a vehicle, the store should notify CBP, and that customer should not be allowed to purchase in that facility again. U.S. laws and a customs regulation stipulate that duty-free stores shall establish procedures to provide reasonable assurance that duty-free merchandise sold by the store is exported. 19 U.S.C. § 1555 and 19 C.F.R. § 19.36. Customs regulations further specify conditions for delivery of such items at land border locations, meaning an exit point from which individuals depart to a contiguous country by vehicle or on foot by bridge, tunnel, highway, walkway, or by ferry across a boundary lake or river. 19 C.F.R. § 19.39. For every duty-free store transaction in which the value of the goods is more than $2,500, the Foreign Trade Regulations generally require that the U.S. principal party in interest (USPPI) or its agent file electronic export information through AES. (In this report, we use “exporter” to refer to the USPPI.) According to CBP officials, this requirement extends to purchases of duty-free cigarettes. The export information includes 28 mandatory data elements such as the value, quantity, name of exporter, name of the person receiving the shipment, and method of transportation. AES data from Census showed a total of 18,504 such transactions from 2010 through 2015 from duty-free stores on the southwest border, with almost 70 percent exported from Texas (see fig. 4 and table 1). The number of duty-free cigarette transactions valued at over $2,500 peaked in 2012 at 4,685 and declined to a level about 45 percent lower in 2014 and 2015. According to CBP officials in Laredo and the San Diego area, while it is not possible to determine the exact cause, duty-free stores may have reported greater numbers of these transactions in 2012 due to an increase in enforcement actions at those ports that encouraged greater compliance with export data filing requirements. These officials said stores may have reported fewer transactions valued at over $2,500 in subsequent years due to CBP’s continued enforcement actions. CBP officials said that they have no way of systematically knowing the full scale of exports that occur through transactions valued at under $2,500. Those transactions are not captured in data that are required to be reported to the U.S. government. According to information provided by officials from CBP and the Mexican customs agency, Mexican residents above the age of 18 are allowed to bring up to four cartons of cigarettes into Mexico, depending on where they live. Specifically, officials from CBP and the Mexican customs agency provided the following details: The Mexican customs agency allows each adult who is a resident of the interior of Mexico (not living in towns adjacent to the border) crossing from the United States to bring up to four cartons of cigarettes into Mexico; the first would be exempt from Mexican taxes, and the remaining three would be taxed at a 573-percent rate. Mexican border-zone residents, defined as those who live in towns along the U.S.-Mexico border such as Ciudad Juarez and Tijuana, are subject to different rules and are not permitted to bring cigarettes into Mexico. A Mexican customs official said that bringing in any quantity of cigarettes above these amounts would require an individual to register as an importer with the Mexican government, including both the customs agency and health ministry, and obtain a health authorization in advance of the importation. This official also said that commercial cigarettes are charged a 67-percent import duty, a 16-percent value-added tax, and other special duties or taxes that may be applicable. For purposes of this report, we use “divert” and “diversion” to refer to the unlawful introduction of duty-free cigarettes into U.S. commerce using a scheme that does not involve the crossing of the southwest border. We use “smuggle” and “smuggling” to refer to the surreptitious exporting or importing of duty-free cigarettes that involves the crossing of an international border. In this scheme, cigarettes are purchased from a land border duty-free store and diverted into the United States without paying applicable taxes. According to ICE officials, individuals diverting cigarettes use methods that include bribery of a duty-free store official to allow a vehicle to stay in the United States without informing CBP instead of observing its crossing into Mexico. CBP and ICE officials also reported instances of individuals loading cigarettes into a car after the duty-free store had closed. CBP officers in the San Diego area also identified the following deceptive practices in the course of a 2010 operation, some of which were carried out with the complicity of store employees who took actions such as escorting vehicles using unapproved exit routes, allowing purchasers of large quantities to leave the store unescorted, assisting purchasers in their efforts to conceal goods in the door panels and engine compartments of their vehicles. In April 2013, ICE received information of a pending large purchase of cigarettes from a duty-free store in Nogales, Arizona. ICE agents were surveilling the store when they observed an individual loading cigarettes into a van and leaving without an escort from the store. The van did a U- turn just before reaching the crossing into Mexico. ICE seized 840 cartons of cigarettes purchased from a duty-free store after pursuing the van in which the purchaser drove north away from the border into the United States instead of traveling across the border into Mexico. In this scheme, according to CBP and ICE officials, individuals legally purchase cigarettes from duty-free stores in the United States and smuggle them into Mexico through U.S. ports of entry by concealing these goods in their vehicles or on their person. The individuals may attempt to bribe Mexican customs officials to evade payment of Mexican taxes, according to CBP and ICE officials. CBP and ICE officials reported that they observed individuals in the parking lots of duty-free stores near the port of San Diego loading cigarettes into concealed compartments in personal vehicles to smuggle them into Mexico. An ICE officer in California told us that smugglers had posted Internet advertisements online to recruit runners to move cigarettes across the border from the United States. ICE officials provided data that they obtained from the government of Mexico on cigarette seizures its officials conducted from 2012 through 2015 at numerous locations along the border, including entry points in Mexico directly opposite El Paso, Texas, and San Diego, California, as well as in other parts of Mexico. The data indicate that the Mexican government seized 1.2 million cartons of cigarettes in 2012; the number of cartons seized steadily decreased to about 320,000 cartons in 2015. At least one of the brands among those seized is associated with the operator of multiple duty-free stores on the southwest border. (See fig. 6 for photographs of duty-free cigarettes concealed in vehicles and discovered by Mexican customs officials.) CBP officials in Laredo told us that they had conducted joint operations with Mexican officials at the passenger crossings but that counter surveillance by smugglers often limited their effectiveness. Typically, a short time after initiating an operation, they would observe that smugglers had ceased activities temporarily and that every vehicle CBP officers examined contained only one or two cartons of cigarettes, an amount that, according the CBP officials, complies with Mexican import restrictions. In this scheme, duty-free cigarettes that are smuggled into Mexico are brought back across the border and introduced into U.S. commerce without declaring the goods to CBP upon reentry, thus avoiding relevant U.S. taxes. Smugglers might bring these goods back into the United States in small amounts, to avoid detection, and take them to rented storage facilities along the border, according to CBP officials at the port of San Diego. The smuggled cigarettes are bundled into larger quantities and subsequently transported for sale at locations in the interior of the United States. During our fieldwork at the port of San Ysidro, CBP officials identified warehouses where such cigarettes had been stored in the past. According to agency officials, traffickers engaged in diversion and smuggling schemes minimize their visibility to the U.S. government by dividing a large purchase of duty-free cigarettes into smaller ones to avoid the AES reporting threshold of $2,500. Such structured transactions can be carried out by individual buyers or by multiple individuals making purchases on behalf of the holder of an account at a duty-free store. As part of a 2012 enforcement operation, CBP officials reviewed receipts for cigarette sales from three duty-free stores in San Ysidro and identified six people who made multiple purchases during the same day at one of the stores. One of these six individuals made 14 consecutive purchases of cigarettes valued at $200 and then a final purchase of $100 for a total of $2,900 which, as a single transaction, would have exceeded the $2,500 threshold for reporting such exports. In addition, CBP officials in Laredo described a 2010 scenario in which U.S. citizens moved $100,000 worth of tobacco products into Mexico over the course of a month by making repeated crossings on foot with under $2,500 in merchandise each time so that no reporting was required. Further, CBP officials at the port of San Diego said that following a series of CBP operations related to duty-free stores from 2010 through 2012, they reviewed the stores’ sales records and noticed a decrease in high-value sales. An ICE official said, however, that cigarette smuggling operations may have moved eastward in response to CBP operations in California. In addition, according to these CBP officials, a 2010 operation discovered multiple store operators maintaining two sets of accounts to link cash outlays upfront for multiple purchases. U.S. agency officials said that some smuggling of duty-free cigarettes across the southwest border has links to organized crime, supplies the illicit tobacco market in Mexico, and poses oversight challenges. ICE officials told us that transnational criminal organizations use smuggled, duty-free cigarettes to launder money and generate revenue. Furthermore, a Mexican customs official noted that relatively inexpensive cigarettes manufactured in the United States, which cannot legally be sold in the United States or in Mexico, are routinely sold for export from duty-free stores on the southwest border; such cigarettes are then smuggled across to supply Mexico’s illicit tobacco market. One brand of such cigarettes has been cited in recent studies as a significant part of the illicit tobacco trade in Mexico. U.S. officials reported that their efforts to counter the illicit movement of duty-free cigarettes face challenges related to the purchaser’s ability to buy duty-free cigarettes in unlimited quantities and to use passenger, not commercial, crossings from the United States into Mexico. According to U.S. officials, while U.S. agencies do not have the authority to seize exports that violate Mexico’s laws related to these cigarettes, U.S. officials reported working with Mexican officials on activities to enforce the customs laws and regulations of both countries. The term “black market” refers to trade in goods or commodities in violation of laws and regulations. method of generating funds. In addition to U.S.– manufactured cigarettes, foreign cigarettes are also smuggled into Mexico. According to ICE officials, transnational criminal organizations launder money by depositing illicit funds into client accounts at duty-free stores along the southwest border. They then make withdrawals from these accounts, just as they would from a bank account, to purchase duty-free tobacco and alcohol.37 According to ICE officials, transnational criminal organizations purchase in quantities such that some duty-free stores give them substantial discounts on the stores’ in-house cigarette brands. Subsequently, these goods are smuggled either by concealment or bribery of Mexican customs officials, according to ICE officials. According to an official from the Mexican customs agency, some drug cartels add their own product identification codes onto packs of cigarettes from duty- free stores for sale in areas that they control. ICE defines trade-based money laundering as the use of trade to legitimize, conceal, transfer, and convert large quantities of illicit cash into less conspicuous assets. ICE officials in San Diego explained that, in Southern California, criminals use other commodities more frequently than cigarettes for trade-based money laundering. According to a public health warning issued by a federal commission of the Mexico health secretariat, this particular brand of U.S.-made cigarettes for duty-free sale is among those cigarettes “which can be counterfeit, adulterated, and even made with unknown ingredients, increasing the possibility that they contain potentially toxic non-tobacco chemicals.” the illicitly trafficked cigarettes that the Mexican government confiscated at various locations in the country from 2012 through 2015. In addition, in 2013, the Mexican customs agency executed a number of seizures of this brand of duty-free cigarettes that were undeclared at ports of entry on the U.S.-Mexico border (see fig. 7).This brand of cigarettes has been cited in recent studies as a significant part of the illicit tobacco trade in Mexico. ICE officials provided a November 2015 report issued by the National Cyber-Forensics & Training Alliance, a public-private partnership, which stated that this U.S.-made brand of cigarettes was recognized as the largest illegal brand being sold in Mexico. The report also stated that this brand of cigarettes was being diverted into Mexico through various duty-free stores in Laredo, Texas, and San Diego, California.39 Another study reported that, as of June 2014, 64 percent of the inflow of tobacco into Mexico from the United States consisted of this brand of cigarettes manufactured and trademarked in the United States and sold at duty-free stores on the southwest border. The study also noted that this brand of cigarettes accounted for about 13 percent of the overall illicit cigarette market in Mexico. National Cyber-Forensics & Training Alliance (NCFTA), Southern Border Illicit Tobacco Activity (Pittsburgh, Penn.: November 2015). The NCFTA is funded by private sector entities, including tobacco firms. ICE has a partnership agreement with the NCFTA and assigns agents there through the National Intellectual Property Rights Coordination Center that it leads. Mexico and that they did not have an obligation to know since the company is not the exporter of the cigarettes. CBP and ICE officials in Laredo said that the ability to buy unlimited quantities of duty-free cigarettes at the land border facilitates large shipments of these goods to be clandestinely smuggled into Mexico. CBP officials acknowledge that duty-free stores on the southwest border are functioning as wholesale suppliers of cigarettes. During congressional consideration of duty-free store legislation, a senator raised the issue of the potential for economic harm to communities adjacent to the U.S.- Mexican border if a provision precluding duty-free sales in wholesale quantities were applied to land border stores. Congress later enacted the Omnibus Foreign Trade and Competitiveness Act of 1988, which required duty-free stores located in airports to restrict the sale of duty-free merchandise to any one individual to “personal use quantities,” a requirement that does not apply to land border stores. According to CBP officers in San Diego, duty-free store representatives told them in 2010 that the stores at the port of San Ysidro were some of the most profitable in the country and that merchandise sold in wholesale quantities was an important part of their business. U.S. officials said that the ability to use passenger crossings to export wholesale quantities of duty-free cigarettes enables these goods to enter Mexico with less scrutiny and oversight than if they were processed through a commercial crossing. U.S. ports on the land border may have multiple crossings, some designated for passenger traffic and others for commercial traffic. CBP officials said that duty-free cigarettes are treated as noncommercial goods that exit via passenger crossings and, therefore, are not subject to the same requirements and potential for CBP oversight as commercial exports. Requirements for commercial cargo leaving the United States include submission of electronic information to CBP in advance of departure. CBP and ICE officials in Laredo noted that CBP does not define what constitutes a commercial export, enabling the use of passenger crossings by purchasers of “commercial-type” quantities.45 CBP officials in Laredo and San Diego said that individuals purchasing large quantities of duty-free cigarettes would likely be less able to evade Mexican taxes if the goods were to exit from a commercial crossing. Officials said that CBP-enforced regulations also do not provide a definition for what would constitute a commercial quantity and that the agency has not adopted its own definition or guidelines in part because commercial transactions can have different quantities and varying price points. CBP officials said that they view commercial exports to be merchandise for business resale or for profit, rather than for individual use, such as for personal or household consumption. In the San Diego area, which has one of the highest concentrations of duty-free stores among ports on the southwest border and has multiple crossings into Mexico, CBP took steps to try and address the challenge of large quantities of duty-free cigarettes moving through passenger crossings. In 2010, CBP in San Diego prepared a draft notice for members of the area trade community, including duty-free stores, announcing that the Port Director had decided more controls were necessary to ensure the export of duty-free merchandise purchased for resale. The draft notice identified four scenarios that would meet the definition of a commercial purchase and identified appropriate exit procedures for any commercial purchases to include exit from a commercial (or cargo) export facility, instead of from the passenger crossing. In July 2017, CBP officials indicated that no change in exit procedures for duty-free tobacco products had taken place; previously, they had stated that CBP had not issued the notice because it was still undergoing review. Officials at CBP headquarters in Washington, D.C., informed us that the agency was planning to engage with port officials in San Diego to plan appropriate next steps in assessing the type of crossing through which duty-free cigarettes should be exiting. CBP officials said the agency does not have the authority to seize goods that are being smuggled into Mexico contrary to that country’s laws. Officials at CBP headquarters said that enforcing Mexican laws is not the responsibility of U.S. agencies, but officials at two different ports of entry also described efforts to work with Mexican counterparts on activities related to enforcing customs laws and regulations of both countries. In addition, CBP in Laredo instructed duty-free store operators to discourage customers from concealing duty-free items by including procedures about this in their employee manuals. We reviewed the procedures manual for one of these operators and found that it directed employees to inform customers that they were not allowed to hide or conceal duty-free items. CBP and ICE officials told us they are able to take some actions in concert with their Mexican counterparts related to coordination and information sharing at both the border and headquarters levels. Specifically, CBP officials in Laredo told us that they conduct joint enforcement operations with Mexican officials to inspect passenger vehicles as they exit the United States and enter Mexico. ICE and CBP officials in Laredo also said that the issue of cigarette smuggling has been raised at bilateral security cooperation meetings that are routinely held with Mexican customs and law enforcement counterparts. Additionally, according to officials there, ICE’s National Intellectual Property Rights Coordination Center, under terms of the U.S.-Mexico Customs Mutual Assistance Agreement, has obtained information from the Mexican customs agency on that country’s seizures of cigarettes nationwide to advance related investigations in the United States. An ICE official said that the agency has also worked concurrently with its counterparts in Mexico to advance an investigation related to the smuggling of cigarettes from U.S. bonded warehouses that were destined for duty-free stores but were being smuggled directly into Mexico and possibly diverted back into the United States. According to the ICE official, ICE has continued to keep Mexico abreast of developments through its attaché in Mexico City. According to CBP, in many cases duty-free stores on the southwest border are filing some noncompliant information that they are required to report on cigarette exports valued at more than $2,500. Our analysis of export data from Census also showed that many transactions include some noncompliant information. Specifically, we identified the following three compliance issues: According to CBP, in most instances, the duty-free store should identify the purchaser of the cigarettes as the exporter, and subsequently, report the purchaser’s name and also provide a unique numerical identifier for the purchaser such as a passport or border crossing card number. In our analysis of reported data for 18,504 transactions involving cigarettes at duty-free stores on the southwest border from 2010 through 2015, we found that 99 percent of these transactions indicate that the duty-free store operator sold the merchandise to an individual purchaser but identified itself as the exporter through use of its Internal Revenue Service employer identification number (EIN). According to CBP officials, these transactions pose potential compliance concerns. Duty-free stores on the southwest border owned by one operator commonly used the operator’s postdeparture filing privilege for cigarette transactions while also reporting them as routed export transactions. However, the Foreign Trade Regulations specify that postdeparture filings cannot be made for routed export transactions. This duty-free store operator incorrectly used its postdeparture filing privilege and marked transactions as routed exports in 16,384 of the 16,387 transactions it reported during 2010 through 2015. In response to our inquiries, CBP reviewed AES filings for this duty- free store operator and found additional compliance concerns related to filings showing Otay Mesa, California, as the port of exit. Specifically, according to CBP, the duty-free store operator was filing information indicating that the cigarettes were leaving the country through the port of Otay Mesa, although CBP officials had previously observed the sales leaving through the port of San Ysidro, California. CBP has acted to address its compliance concerns with one duty-free store operator, but other possible actions remain, including the issuance of final instructions and guidance to all operators on the border and the public. According to CBP, one of the ways it fosters adherence to rules and regulations in the trade community is through “informed compliance,” the idea that, in order to maximize voluntary compliance with trade laws and regulations, the trade community needs to be clearly and completely informed of its legal obligations. We have previously found that information programs are a key part of CBP’s informed compliance strategy at both headquarters and the ports. For example, CBP issues directives, handbooks, and a series of “informed compliance publications” that provide guidance on various trade-related matters. In 2012, CBP informed the duty-free store operator with the largest number of AES transactions we reviewed that its transactions incorrectly identified its stores as the exporter when in fact the purchaser was the exporter. Regulations state that knowingly failing to file or knowingly submitting false or misleading export information through AES is a violation subject to penalties. CBP is authorized to enforce the Foreign Trade Regulations, which include regulations on reporting through AES. With regard to the compliance issue that CBP raised in 2012, CBP did not take action until after April 2014, when a CBP assessment of export transactions found that the problem with the operator’s cigarette export filings continued. In August 2014, CBP issued a penalty to the duty-free store operator, and the operator requested that CBP give it time to arrive at an agreement with the agency and remove the penalty, noting that a change to current practices might have adverse consequences on its business and further emphasizing that its practices had been widely known for years. According to CBP officials, due to the operator’s confusion over correct procedure, the penalty was canceled, and officials decided to take steps to ensure proper filing of AES through informed compliance. In October 2015, CBP provided the operator with interim instructions on how to comply with its requirements under the Foreign Trade Regulations. Those instructions included scenarios illustrating both compliant and noncompliant export data filings for transactions involving cigarettes. CBP officials also told us that a planned meeting with the duty-free store operator to finalize instructions never took place and that CBP never provided final instructions to that operator. According to CBP officials, this duty-free store operator continues to identify itself as the exporter and to use its postdeparture filing privilege. CBP officials said that duty-free stores assert that they are working to be compliant, but it is challenging for them in part because the cigarette purchasers are often unaware of their role and do not have accounts established to file the electronic export data. Additionally, one CBP official said that purchasers may be reluctant to provide a verifiable numeric identifier, such as a passport number or border crossing card, if they are involved in smuggling operations. Furthermore, CBP and ICE officials said that employees working at land border duty-free stores may not be fully trained and aware of proper filing procedures. In response to our inquiries, Census re-sent the 2015 interim instructions to the duty-free store operator in March 2017, after confirming that the operator was still using its postdeparture privilege when it should not. CBP officials indicated in July 2017 that they plan to conduct outreach to duty-free stores on the southwest border and provide guidance to the ports there to ensure proper data submission and appropriate use of postdeparture filing. CBP headquarters officials informed us that they had recently held initial discussions on this topic with agency officials in Laredo, but they had not issued any further information to the duty-free store operators and to the public; they said further discussions were planned. CBP officials did not identify instances of providing similar information to, or having discussions with, the other duty-free store operators. The Foreign Trade Regulations state that the filer of export information in AES is responsible for transmitting accurate data as known at the time of filing. An ICE official said that properly completed export data with purchasers’ verifiable identification numbers would allow ICE to corroborate that information against other databases, such as the Automated Targeting System (ATS), during an investigation. ATS compares traveler, cargo, and conveyance information against law enforcement, intelligence, and other enforcement data to assess risk. In addition, ICE sought data from Mexico, such as names and dates of birth of individuals arrested in connection with cigarette seizures in that country, to keep that information on file in the event the individuals were associated with cases in the United States. Agency officials said that verifiable identification information, such as the type that is collected in AES filings, would further help ICE corroborate and identify individuals participating in the illicit trade of duty-free cigarettes. CBP officials said that accurate data on the identity of the exporter would benefit law enforcement and intelligence operations. Without accurate data, including correct and complete information on the exporter, agencies may lack the information they need to enhance their enforcement and intelligence efforts related to the illicit trade of duty-free cigarettes on the southwest border. Unlike duty-free stores at U.S. airports, duty-free stores associated with U.S. land borders may sell tax-exempt cigarettes in any quantity. Since Congress legislatively adopted this policy in 1988, changes on both the U.S. and Mexican sides of the southwest border have affected this trade. Agencies have cited a number of schemes used by individuals to divert these products into Mexico and into U.S. commerce, despite efforts by CBP to enforce relevant regulations and procedures. Agencies have noted that, as smuggling has become potentially more lucrative, an existing linkage may grow stronger between cigarette smuggling and organized crime on the southwest border, where they believe that criminal organizations have created distribution networks to illicitly move cigarettes in both countries. CBP officials also state that the agency does not have the authority to seize goods that are being smuggled into Mexico contrary to that country’s laws. CBP has made efforts to utilize available data collected on transactions valued at over $2,500 to evaluate duty-free store compliance with regulations. However, despite various outreach and enforcement efforts, agency officials said that inaccurate filings by one large operator— comprising nearly 89 percent of the transactions we reviewed—continue, and other store operators are still potentially out of compliance. Until steps are taken to ensure that duty-free store operators and exporters fully comply with reporting requirements, U.S. agencies will lack the accurate, complete information that can help them conduct their enforcement and intelligence efforts. The Commissioner of the U.S. Customs and Border Protection should take steps to strengthen compliance with export reporting requirements related to duty-free cigarette sales on the southwest border, such as issuing guidance to all duty-free store operators. (Recommendation 1) We provided a draft of this product to Commerce, DHS, DOJ, and Treasury for comment. DHS provided substantive comments that are reproduced in appendix III. Commerce and DHS also provided technical comments, which we incorporated as appropriate. DOJ and the Treasury provided no comments. In its comments on our draft report, DHS concurred with our recommendation. DHS stated that CBP’s Office of Field Operations will issue guidance and engage field personnel to strengthen compliance with export requirements. In addition, DHS stated that ports would be instructed to provide guidance to all duty-free store operators on correct filing procedures for electronic export information (EEI), including use of the correct port of export and identifying the party responsible for filing the EEI. DHS gave an estimated completion date for these actions of October 31, 2017. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Commerce, the Secretary of Homeland Security, the Attorney General, the Secretary of the Treasury, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) requirements that govern the lawful sale and export of cigarettes from duty-free stores on the southwest border and schemes for illicit trade in such cigarettes that agencies identified, (2) U.S. agency observations about these duty-free cigarette exports and efforts to counter illicit trade, and (3) the extent to which selected cigarette transaction data submitted by duty-free stores indicate compliance issues with reporting requirements. To obtain background information on duty-free stores, we reviewed documents related to the legislative history of duty-free stores, including those from the Congressional Record and U.S. laws and customs regulations. To describe relevant agency roles related to duty-free cigarette exports, we reviewed documents from the agencies and utilized information from interviews with their officials. To address the first two objectives, we collected and analyzed information through several methods. We reviewed relevant federal laws and regulations. We also interviewed officials from the Department of Commerce’s U.S. Census Bureau (Census); the Department of Homeland Security’s U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE); the Department of Justice’s Bureau of Alcohol, Tobacco, Firearms, and Explosives; the Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau; and tax-collection officials from the state of California. We also interviewed representatives from private sector tobacco and duty-free firms. We conducted field work in California in the areas around San Diego, including Otay Mesa and San Ysidro, and Los Angeles. We selected these locations based on the presence of duty-free stores or reports of cigarettes being diverted from duty-free stores into the United States, supplemented by insights from agency officials. We also used information gathered from field work in Laredo, Texas, that we conducted under a related review. We spoke with U.S. agency officials in Nogales, Arizona, and in the Washington, D.C., area. Lastly, we spoke with and obtained data from an official from the Mexican customs agency, the Tax and Customs Administration Service. To describe how cigarettes are sold and exported from duty-free stores on the southwest border, we also reviewed relevant U.S. laws and customs regulations and collected information from U.S. and Mexican officials on allowances and requirements for duty-free cigarettes imported into Mexico. In addition, to describe the views that agency officials have expressed with regard to cigarette exports from duty-free stores on the southwest border, we reviewed CBP documents that described operating procedures at the ports of Laredo, Texas, and San Diego, California; a draft port information notice from the port of San Diego; and reports from the private sector and a public-private partnership, the National Cyber- Forensics & Training Alliance, on the illicit tobacco market in Mexico. We also analyzed data on seizures from the Mexican Tax and Customs Administration Service and information from interviews with officials from CBP, ICE, and the Mexican government. We also analyzed Automated Export System (AES) data from Census for 2010 through 2015 on recorded transactions at the duty-free stores CBP identified as being adjacent to the U.S.-Mexico border, also referred to as the southwest border, spanning Texas, New Mexico, Arizona, and California. We determined that value and quantity data for those transactions were not reliable for the purposes of this report; we based our assessment on a review of related documentation and on interviews with Census officials about the agency’s procedures to ensure the quality of the data and with CBP officials to discuss relevant aspects of how transaction data might be entered in AES. According to Census officials, it is not possible to identify from AES whether or not an export came from a duty-free store, as such information is not required when filers submit electronic export information. We used an alternative method to identify the AES data associated with transactions at duty-free stores on the southwest border: We obtained the employer identification numbers (EIN) for those duty-free stores from CBP, which identified 88 duty-free stores on the southwest border that in some cases used the same EIN because some stores owned by the same proprietor used the same EIN. We obtained 54 EINs covering the 88 border stores. In one instance, a single EIN applied to 7 duty-free stores. Census provided us with the export transactions recorded in AES that corresponded to the 54 EINs provided by CBP. Census protects the confidential data contained in export transaction records it receives from firms but may disclose the data to other government agencies if the agency determines it is in the national interest to do so. For each transaction record, we requested the data for 24 of the 28 mandatory fields in AES for which exporters must provide information. In addition, we asked Census to filter the information by several fields to include country of destination (Mexico) and the Harmonized Tariff Schedule codes associated with cigarettes. Census identified 19,101 transaction records in response to our request. After removing those records that fell outside of our parameters (e.g., entries from 2009 and entries for which the value was $2,500 or less), 18,504 export transaction records remained. To identify the schemes related to the illicit trade in duty-free cigarettes, we reviewed court documentation from criminal cases at the state and federal levels. We also reviewed Federal Register notices for historical references to cases of smuggling in addition to interviewing officials from the U.S. and Mexican governments. To evaluate the extent to which duty-free cigarette export data presented potential compliance issues with reporting requirements, we reviewed such data from AES and compared select data elements to reporting requirements as stated in the Foreign Trade Regulations. We also reviewed summaries of events that CBP provided relating to a specific penalty issued by the port of Laredo to a duty-free store operator for failure to comply with AES reporting requirements. We examined a document Census provided to us that was submitted to that agency and CBP from the operator’s lawyers as well as the interim document provided to that operator by CBP and Census. We also analyzed a subset of our data concurrently with agency officials to evaluate the compliance of the specific transaction records we received from Census with a requirement in the Foreign Trade Regulations. Additionally, we reviewed documents from the Commercial Customs Operations Advisory Committee to contextualize one of the largest duty-free store operator’s use of its postdeparture filing privilege. We conducted this performance audit from November 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We analyzed U.S. Census Bureau (Census) transaction-level data from the Automated Export System (AES) on sales of duty-free cigarettes purchased at stores located on the U.S. southwest border from 2010 through 2015. Census collects electronic export information in AES to report trade statistics, including the export of duty-free cigarettes. Stores that are principal parties to a sale of duty-free cigarettes for export generally self-report the transaction through AES. Some duty-free operators integrate point-of-sales systems to AES for automatic entry, and some enter the data manually or into software programs that are approved by Census, according to U.S. Customs and Border Protection (CBP) officials. Self-reported data captured in AES include transaction- related variables such as date of export, port of export, value, quantity, weight, method of transportation, and ultimate consignee. Census then uses the AES data to compile and publish export trade statistics. CBP and Census share responsibility for monitoring compliance with trade law, including the data reporting requirements that duty-free stores must meet. According to CBP officials, CBP officers regularly review duty-free store operators’ inventory control and recordkeeping systems during unannounced spot checks and compliance assessments. However, according to these officials, CBP’s compliance reviews of inventory control systems do not generally include an examination of how store operators report data in AES. AES is built to include automated electronic checks of stores’ AES submissions as the data are entered; these data-entry validation checks produce alerts when required information is invalid or missing. Census also sometimes sends staff to meet with companies that have a high rate of submission errors, such as reporting shipments late. If they identify problems with the accuracy of the information that store operators are filing in AES, CBP and Census can take appropriate steps to enforce compliance with the law. CBP is responsible for the enforcement of the Foreign Trade Regulations. When data are incorrectly entered in AES, CBP can take enforcement action, including issuing penalties or seizing merchandise, according to CBP officials. Census can also respond to noncompliant reporting of electronic export information by operators by revoking special privileges granted to some, such as permission to file export information after a shipment has been exported, among other actions. In compiling and analyzing AES data, Census makes corrections to some data that appear erroneous, but CBP officials said that Census does not flag or report the data corrections it makes to CBP. Census officials stated that, while they reach out to some filers to suggest corrective action, the scale of the trade data program and the number of transactions processed every month precludes comprehensive outreach. Our testing found that the unprocessed transaction-level AES data on duty-free cigarettes for 2010 through 2015 are not reliable for use in describing the value and quantity of duty-free cigarettes, and associated trends, exported from the southwest border. For that time period, we received data on 18,504 transactions of duty-free cigarettes that had a reported value of $2,500 or above, in keeping with AES reporting requirements. To examine the data on value and quantity, we evaluated the reasonableness of the ratio of these variables, the unit price (value divided by quantity), and the consistency and stability of reported prices. We found that many of these transactions’ reported unit prices are far below reasonable price levels. For example, 2.3 percent of transactions in these unprocessed data are associated with a unit price of under $4.42 per 1,000 cigarette sticks—the cost of tobacco on commodity markets as of calendar year 2015, which excludes necessary costs of cigarettes such as paper costs and manufacturing costs. However, these transactions with extremely low unit prices account for more than 98 percent of the quantity of trade in duty-free cigarettes as reported in the AES data we obtained. Moreover, 39 percent of the reported transactions (accounting for more than 99.6 percent of the total reported quantity sold) were associated with unit prices lower than what we conservatively estimate to be the price at which duty-free stores could procure cigarettes from manufacturers, as discussed in the section below. We also found high levels of reported price variation in the data, with reported median unit sales prices frequently doubling or halving from year to year, even within the same port location. Census is responsible for collecting, compiling, and publishing AES trade data for duty-free cigarettes, and Census officials said that they clean and correct (process) these data by changing value entries to equal a “price adjustment factor” when the unit price of transactions falls outside of an expected range, as explained below. For cigarette exports as of February 2017, including those transactions exempt from taxes and duties, these officials said that this range includes a minimum of $11 per 1,000 cigarette sticks, a price adjustment factor of $40 per 1,000 sticks, and a maximum of $75 per 1,000 sticks. According to these officials, Census sets its price range and adjustment factor by examining the data and identifying outlier levels based on judgment. Census officials stated that they updated this expected price range in February 2017. Census officials stated that price adjustment factors are not updated on a fixed schedule and do not automatically adjust for inflation. Instead, Census may choose to update factors when it believes there have been significant changes in an industry’s trade patterns. According to these officials, prior to February 2017, the price range for cigarettes was last updated in 2007. From 2007 through January 2017, the price adjustment factor for cigarettes was $11.46—about one-fourth of its current value—with a minimum of $8.87 and a maximum of $27.39. Census’s current price range for cigarettes is not appropriate for cleaning data to analyze trends in duty-free cigarette exports because it may significantly underestimate a reasonable expected price range for cigarettes. Approximately 39 percent of the observations in the unprocessed, duty-free cigarette data are associated with sales prices below Census’s minimum price or above Census’s maximum price. We estimated minimum and maximum expected prices for cigarettes that are substantially greater than Census’s current price adjustment factor range for cigarettes. To estimate a minimum expected price for cigarettes, we examined commodity prices, production costs, and revenue data from a large, publicly traded cigarette manufacturer. We found that the manufacturing cost of cigarettes exceeded Census’s estimated minimum sales price by 30 percent, $14.26 per 1,000 cigarette sticks instead of $11. Thus, even if the manufacturer sold its cigarettes directly to a duty-free store, and neither the manufacturer nor the duty-free store made a profit, we would still expect a price greater than Census’s lower bound. This expected minimum retail price increases significantly if we account for cigarette manufacturers’ revenue. Using revenue data from the public accounting statements of the same manufacturer, and again conservatively assuming direct sales to a duty-free store that itself sells for no profit, we would expect to see a price of $43.65 per 1,000 cigarette sticks, which is nearly 300 percent greater than Census’s lower bound of $11 per 1,000 cigarette sticks and about 9 percent larger than Census’s current price adjustment factor of $40 per 1,000 sticks. To estimate a maximum expected price for cigarettes, we examined the price of a premium cigarette brand listed for sale on a duty-free store’s website. We found that this price was 163 percent higher than the upper bound in Census’s price range, $197.50 per 1,000 cigarette sticks instead of $75 per 1,000 sticks. For any observed prices in trade data outside of this expected range for a given tariff code, Census officials said that they attempt to correct these observations by adjusting the reported quantity such that the reported price is equal to the price adjustment factor—$40 per 1,000 cigarette sticks. For example, if a reported sale is $80 per 1,000 cigarette sticks, Census will adjust the reported quantity to 2,000 sticks while leaving the reported value unchanged, so the reported price (value divided by quantity) becomes $40 for each unit of 1,000 sticks. Census officials stated that this data cleaning process is sufficient for their use in producing aggregated trade statistics because of the volume of transactions they must review and the ease with which Census analysts can apply this method to clean trade data. Census’s process of correcting missing or outlying data (unreliable data) with its price adjustment factor is not appropriate for our use because it would significantly alter the relationships among subgroups within our data, distorting trends that we otherwise would intend to analyze. For example, in a hypothetical dataset where the average sales price is $40 per 1,000 cigarette sticks across exports from the United States, Census’s replacement of missing and outlying data using a price adjustment factor of $40 would not change this overall average. But if one state in the data has an average sales price lower than the national average, reflecting lower costs of doing business, any missing or outlying data replaced with the same price adjustment factor as other higher costing states would increase the state’s reported average sales price. The distinction between high-price states and low-price states would thus become less clear. Moreover, we cannot determine the appropriateness of Census’s decision to preserve reported value and adjust reported quantity when processing data to manage the relationship between value, quantity, and price. This is because we cannot determine whether the unprocessed value or the unprocessed quantity data are reliable. Applying our minimum expected price for cigarettes, discussed above, excludes many transactions in the unprocessed data, indicating problems with value, quantity, or both. Census officials stated that they believe the value data are more reliable than the quantity data and so change the reported quantity data when processing the data, though they also stated that this is a general assumption without specific insight as to whether or why this method may be valid for cigarettes. While CBP officials stated that high-level postaudit checks can be used to ensure that a store’s AES system is working properly, they said that these checks are rare, and the inventory control system compliance review does not otherwise provide assurance that data self-reported into AES are reliable. CBP officials stated that they were not confident about which transaction data in AES were more reliable: value or quantity. Because neither agency’s control process provides strong assurance that either the value or the quantity data are reliable for our use, we cannot appropriately use value, quantity, or price as a benchmark to correct the other variables. Alternative methods for determining appropriate replacement values for outlying data, referred to as imputation, would not make the duty-free cigarette data reliable for our intended use. For example, stochastic regression imputation replaces a missing or excluded variable value within an observation by drawing randomly from within the error distribution of a best-fit model. Correctly specifying such a model allows data processing to occur while preserving the dataset’s overall average values, correlations, and variation. However, identifying the observations that require correction remains a challenge. As discussed above, we can estimate the approximate manufacturer’s sales price for cigarettes. In the absence of additional proprietary data, we are unable to determine a price range that accounts for retail store costs and profit. Without this information, and given that the duty-free cigarette data include significant and questionable variation of reported prices even within our estimated price band, it is not possible to identify which observations require correction or deletion with appropriate levels of confidence. Lacking a clear basis for finding either the value data or quantity data reliable, we also cannot appropriately determine how to manage the relationship between value and quantity if we were to impute replacement price levels for these observations. In addition to the contact named above, Emil Friberg (Assistant Director), Farhanaz Kermalli (Analyst-in-Charge), Giff Howland, David Dayton, Neil Doherty, Andrew Kurtzman, and Grace Lui made key contributions to this report. Pedro Almoguera, Ming Chen, Jill Lacey, and Mary Moutsos provided technical assistance.", "summary": "Since the 1970s, U.S. agencies have recognized that high-volume cigarette sales at duty-free stores near the U.S.–Mexico land border, although lawful, could be related to illicit activity. In 1988, U.S. law limited the quantity of duty-free tobacco products an individual can purchase at stores located in airports, restricting the sale of tobacco products to quantities consistent with personal use. This requirement, however, does not apply to land border duty-free stores. GAO was asked to review information on sales of cigarettes at duty-free stores along the southwest border. CBP identified 88 such stores and warehouses. This report describes (1) requirements that govern the lawful sale and export of cigarettes from duty-free stores on the southwest border and schemes for illicit trade in such cigarettes, (2) U.S. agency observations about these exports and efforts to counter illicit trade, (3) the extent to which selected cigarette transaction data submitted by duty-free stores indicate compliance issues. GAO analyzed Census data on these exports; reviewed CBP, ICE, and Department of the Treasury documents; and interviewed agency officials in Washington, D.C., and in several ports along the southwest border, including Laredo, Texas, and the San Diego, California, area. Duty-free stores at the southwest border may sell tax-exempt cigarettes in any quantity to passengers departing the United States for Mexico; agencies have identified schemes associated with duty-free cigarette sales used to evade U.S. and Mexican taxes. U.S. Customs and Border Protection (CBP), an agency within the Department of Homeland Security (DHS), regulates duty-free stores. U.S. regulations require the stores to have procedures to provide reasonable assurance of export of cigarettes and the exporter to report export information on transactions valued at over $2,500. U.S. Census Bureau (Census) data show that about 18,500 such transactions involving cigarettes occurred from 2010 to 2015. According to information from U.S. and Mexican officials, the Mexican government limits the amount of duty-free cigarettes that can be brought into Mexico (see figure). U.S. agencies identified three schemes to evade U.S. and Mexican cigarette-related tax and other laws: (1) diversion from a duty-free store into U.S. commerce; (2) smuggling into Mexico through U.S. ports; and (3) smuggling back into the United States after export to Mexico. U.S. agency officials said that some smuggling of duty-free cigarettes across the southwest border has links to organized crime, supplies the illicit tobacco market in Mexico, and poses oversight and enforcement challenges. U.S. Immigration and Customs Enforcement (ICE) officials said they have identified links between the smuggling of large quantities of duty-free cigarettes and transnational criminal organizations that use the smuggled cigarettes to launder money and generate revenue. Inexpensive cigarettes made in the United States are part of the trade in duty-free cigarettes along the southwest border, including brands that a Mexican official stated are prohibited for sale in Mexico. U.S. officials reported that their efforts to counter the illicit trade in duty-free cigarettes face challenges, primarily due to the ability to buy unlimited quantities of duty-free cigarettes at the land border. According to CBP, in many cases, duty-free stores on the southwest border are filing noncompliant information that they are required to report on cigarette exports valued at more than $2,500. For example, officials had compliance concerns with filings in which stores identify themselves, and not the purchaser, as the exporter. CBP and Census have met with representatives of one of the largest operators of duty-free stores on the southwest border to clarify regulatory requirements. However, CBP officials said that this duty-free store operator continues to make incorrect filings. CBP has not issued guidance to all operators to clarify the correct procedure. Without accurate export data, agencies may lack the information they need to enhance their enforcement and intelligence efforts. CBP should take steps to strengthen compliance with export reporting requirements for duty-free cigarette sales on the southwest border, such as issuing guidance to all duty-free store operators. DHS agreed and noted CBP plans to address the recommendation.", "document_type": "gao"}
{"report": "Since January 2017, the Navy has suffered four significant mishaps at sea that have resulted in serious damage to Navy ships and the loss of 17 sailors (see figure 1). Three of the four at sea mishaps that have occurred—two collisions and one grounding—have involved ships homeported overseas in Yokosuka, Japan. Appendix II provides a summary of major mishaps for Navy ships at sea in fiscal years 2009 through 2017. The Navy currently has 277 ships, a 17 percent reduction from the 333 ships it had in 1998. Over the past two decades, as the number of Navy ships has decreased, the number of ships deployed overseas has remained roughly constant at about 100 ships; consequently, each ship is being deployed more to maintain the same level of presence. We reported in September 2016 that the Navy, along with the other military services, had been reporting persistently low readiness levels. The Navy attributes these, in part, to the increased deployment lengths needed to meet the continuing high demand for its aircraft carriers, cruisers, destroyers, and amphibious ships. For example, the deployment lengths for carrier strike groups had increased from an average of 6.4 months during the period of 2008 through 2011 to a less sustainable 9 months for three carrier strike groups that were deployed in 2015. In 2016, the Navy extended the deployments of the Harry S Truman and Theodore Roosevelt Carrier Strike Groups to 8 and 8.5 months, respectively. In addition, the Navy has had to shorten, eliminate, or defer training and maintenance periods to support these high deployment rates. These decisions have resulted in declining ship conditions across the fleet and have increased the amount of time required for the shipyards to complete maintenance on these ships. Lengthened maintenance periods, in turn, compress the time that ships are available for training and operations. As we previously reported, to help meet the operational demands using its existing inventory of ships, the Navy has assigned more of its surface combatants and amphibious ships to overseas homeports. Since 2006, the Navy has doubled the percentage of the fleet assigned to overseas homeports. In 2006, 20 ships were homeported overseas (7 percent of the fleet); today, 40 ships are homeported overseas (14 percent of the fleet) in Japan, Spain, Bahrain, and Italy; and an additional destroyer will be homeported in Yokosuka, Japan in 2018 (see figure 2). According to the Navy, homeporting ships overseas is an efficient method for providing forward presence and rapid crisis response. Our prior work confirms that having ships homeported overseas provides additional presence, but it comes at a cost. For example, we found in May 2015 that homeporting ships overseas results in higher operations and support costs than homeporting ships in the United States. In addition, the operational schedules the Navy uses for overseas-homeported ships limit dedicated training and maintenance periods, resulting in difficulty keeping crews fully trained and ships maintained. In fact, the primary reason that Navy ships homeported overseas provide more deployed time than ships homeported in the United States is that the Navy reduces their training and maintenance periods in order to maximize their operational availability. Ships homeported overseas do not operate within the traditional fleet response plan cycles that apply to U.S.-based ships. Since the ships are in permanent deployment status during their time homeported overseas, they do not have designated ramp-up and ramp- down maintenance and training periods built into their operational schedules (see figure 3). Navy officials told us that because the Navy expects these ships to be operationally available for the maximum amount of time, their intermediate and depot-level maintenance are executed through more frequent, shorter maintenance periods or deferred until after they return to a U.S. homeport—generally after 7 to 10 years overseas. In May 2015, we also found that high operational tempo for ships homeported overseas limits the time for crew training when compared with training time for ships homeported in the United States. Navy officials told us that U.S.-based crews are completely qualified and certified prior to deploying from their U.S. homeports, with few exceptions. In contrast, the high operational tempo of ships homeported overseas had resulted in what Navy personnel called a “train on the margins” approach, a shorthand way to say there was no dedicated training time set aside for the ships so crews trained while underway or in the limited time between underway periods. We found that, at the time of our 2015 review, there were no dedicated training periods built into the operational schedules of the cruisers, destroyers, and amphibious ships homeported in Yokosuka and Sasebo, Japan. As a result, these crews did not have all of their needed training and certifications. We recommended that the Navy develop and implement a sustainable operational schedule for all ships homeported overseas. DOD concurred with this recommendation and reported in 2015 that it had developed revised operational schedules for all ships homeported overseas. However, when we contacted DOD to obtain updated information in August 2017, U.S. Pacific Fleet officials stated that the revised operational schedules for the cruisers and destroyers homeported in Japan were still under review and had not been employed. As of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews homeported in Japan had expired, and over two-thirds of the expired certifications—including mobility-seamanship and air warfare—had been expired for 5 months or more. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since our May 2015 report. The Navy’s Surface Force Readiness Manual states that the high operational tempo and frequent tasking of ships homeported overseas requires that these ships always be prepared to execute complex operations and notes that this demand for continuous readiness also means that ships homeported overseas should maintain maximum training, material condition, and manning readiness. With respect to the material condition of the ships, we found in May 2015 that casualty reports—incidents of degraded or out-of-service equipment—nearly doubled over the 2009 through 2014 time frame, and the condition of overseas-homeported ships decreased even faster than that of U.S.-based ships (see figure 4). The Navy uses casualty reports to provide information on the material condition of ships in order to determine current readiness. For example, casualty report data provide information on equipment or systems that are degraded or out of service, the lack of which will affect a ship’s ability to support required mission areas. In 2015, Navy officials acknowledged an increasing number of casualty reports on Navy ships and a worsening trend in material ship condition. They stated that equipment casualties require unscheduled maintenance and have a negative effect on fleet operations, because there is an associated capability or capacity loss. In our May 2015 report, we recommended that the Navy develop a comprehensive assessment of the long-term costs and risks to its fleet associated with the Navy’s increasing reliance on overseas homeporting to meet presence requirements; make any necessary adjustments to its overseas presence based on this assessment; and reassess these risks when making future overseas homeporting decisions. DOD concurred with this recommendation, but, as of August 2017, it has not conducted an assessment, even though it has continued to increase the number of ships homeported overseas. In the early 2000s, the Navy made several changes to its process for determining the size and composition of ship crews that may contribute to sailor overwork and create readiness and safety risks. These changes were intended to drive down crew sizes in order to save on personnel costs. However, as we reported in May 2017, these changes were not substantiated with analysis and may be creating readiness and safety risks. With fewer sailors operating and maintaining surface ships, the material condition of the ships declined, and we found that this decline ultimately contributed to an increase in operating and support costs that outweighed any savings on personnel (see figure 5). The Navy eventually reassessed and reversed some of the changes it had made during this period—known as “optimal manning”—but it continued to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload—both of which may be leading to sailors being overworked. Additionally, we found that heavy workload does not end after ships return to port. Crews typically operate with fewer sailors while in port, so those crew members remaining must cover the workload of multiple sailors, causing additional strain and potential overwork. In 2014, the Navy conducted a study of the standard workweek and identified significant issues that could negatively affect a crew’s capabilities to accomplish tasks and maintain the material readiness of ships, as well as crew safety issues that might result if crews slept less to accommodate workload that was not accounted for. The Navy study found that sailors were on duty 108 hours a week, exceeding their weekly on-duty allocation of 81 hours. This on-duty time included 90 hours of productive work—20 hours per week more than the 70 hours that are allotted in the standard workweek. This, in turn, reduced the time available for rest and resulted in sailors spending less time sleeping than was allotted, a situation that the study noted could encourage a poor safety culture. Moving forward, the Navy will likely face manning challenges, especially given its current difficulty in filling authorized positions, as it seeks to increase the size of its fleet by as much as 30 percent over its current size. Navy officials stated that even with manpower requirements that accurately capture all workload, the Navy will be challenged to fund these positions and fill them with adequately trained sailors at current personnel levels. Figure 6 shows the Navy’s projected end strength and fleet size. In our May 2017 report, we found that the Navy’s guidance does not require that the factors it uses to calculate manpower requirements be reassessed periodically or when conditions change, to ensure that these factors remain valid and that crews are appropriately sized. We made several recommendations to address this issue, including that the Navy should (1) reassess the standard workweek, (2) require examination of in- port workload, (3) develop criteria to reassess the factors used in its manpower requirements process, and (4) update its ship manpower requirements. DOD concurred with our recommendations, stating that it is committed to ensuring that the Navy’s manpower requirements are current and analytically based and will meet the needs of the existing and future surface fleet. As of August 2017, DOD had not yet taken any actions to implement these recommendations. We believe that, until the Navy makes the needed changes, its ships may not have the right number and skill mix of sailors to maintain readiness and prevent overworking its sailors. To address its persistently low readiness levels, the Navy began implementing a revised operational schedule in November 2014, which it referred to as the optimized fleet response plan. This plan seeks to maximize the employability of the existing fleet while preserving adequate time for maintenance and training, providing continuity in ship leadership and carrier strike group assignments, and restoring operational and personnel tempos to acceptable levels. The Navy’s implementation of the optimized fleet response plan—and readiness recovery more broadly—is premised on adherence to deployment, training, and maintenance schedules. However, in May 2016, we found that the Navy was having difficulty in implementing its new schedule as intended. Both the public and private shipyards were having difficulty completing maintenance on time, owing primarily to the poor condition of the ships after more than a decade of heavy use, deferred maintenance, and the Navy’s inability to accurately predict how much maintenance they would need. We reported that in 2011 through 2014 only 28 percent of scheduled maintenance for surface combatants was completed on time and just 11 percent was completed on time for aircraft carriers. We updated these data as of August 2017 to include maintenance availabilities completed through the end of fiscal year 2016 and found continued difficulty completing maintenance on time for key portions of the Navy fleet (see figure 7): Aircraft Carriers (CVNs): In fiscal years 2011 through 2016, maintenance overruns on 18 of 21 (86 percent) aircraft carriers resulted in a total of 1,103 lost operational days—days that ships were not available for operations—the equivalent of losing the use of 0.5 aircraft carriers each year. Surface Combatants (DDGs and CGs): In fiscal years 2011 through 2016, maintenance overruns on 107 of 169 (63 percent) surface combatants resulted in a total of 6,603 lost operational days—the equivalent of losing the use of 3.0 surface combatants each year. Submarines (SSNs, SSBNs, and SSGNs): In fiscal years 2011 through 2016, maintenance overruns on 39 of 47 (83 percent) submarines resulted in a total of 6,220 lost operational days—the equivalent of losing the use of 2.8 submarines each year. Navy officials are aware of the challenges faced by both the public and private shipyards and have taken steps to address the risks these pose to maintenance schedules, including hiring additional shipyard workers and improving their maintenance planning processes. However, Navy officials have told us that it will take time for these changes to bring about a positive effect. For example, as of May 2016, data on the public shipyards’ workforce showed that 32 percent of all employees had fewer than 5 years of experience. According to Navy officials, this workforce inexperience negatively affects the productivity of the shipyards, and it will take several years for them to attain full productivity. Just last week, we issued another report, prepared in response to direction from this committee, examining the ability of the Navy’s public shipyards to support the Navy’s readiness needs. We found that capacity limitations as well as the poor condition of the shipyards’ facilities and equipment contributed to the maintenance delays we discussed earlier and were hindering the shipyards’ ability to support the Navy. Specifically, we found that the shipyards will be unable to support 73—or about one-third—of 218 maintenance periods planned over the next 23 years. In addition, this estimate did not factor in planned increases to the fleet. We made three recommendations, with which the Navy agreed to take steps to improve its management of capital investment in the shipyards. However, we noted that at current average funding levels it would take at least 19 years and a Navy-estimated $4.86 billion to clear the backlog of restoration and modernization projects at the shipyards. Furthermore, this estimate does not include the $9 billion that the Navy estimates it will need for capacity and capability upgrades over the next 12 years to support maintenance operations for the current fleet. In September 2016, we found that although DOD has stated that readiness rebuilding is a priority, implementation and oversight of department-wide readiness rebuilding efforts did not fully include key elements of sound planning, and the lack of these elements puts the overall rebuilding efforts at risk. The Navy states that its overall goal for readiness recovery is to reach a predictable and sustainable level of global presence and surge capacity from year to year. The Navy identified carrier strike groups and amphibious ready groups as key force elements in its plan for readiness recovery and had set 2020 for reaching a predictable and sustainable level of global presence and surge capacity by implementing the optimized fleet response plan. However, we found in 2016 that the Navy faced significant challenges, such as delays in completing maintenance and emerging demands, in achieving its readiness recovery goals for carrier strike groups and amphibious ready groups, and projections show that the Navy will not meet its time frames for achieving readiness recovery. As a result, we recommended that DOD and the services establish comprehensive readiness goals, strategies for implementing them, and associated metrics that can be used to evaluate whether readiness recovery efforts are achieving intended outcomes. DOD generally concurred with our recommendations and, in November 2016, issued limited guidance to the military services on rebuilding readiness; it has also started to design a framework to guide the military services in achieving readiness recovery but has not yet implemented our recommendations. The Navy has since extended its time frame for readiness recovery to at least 2021, but it still has not developed specific benchmarks or interim goals for tracking and reporting on readiness recovery. Navy officials cited several challenges to rebuilding readiness, chief among them the continued high demand for its forces, the unpredictability of funding, and the current difficulty with beginning and completing ship maintenance on time. In January 2017, the President directed the Secretary of Defense to conduct a readiness review and identify actions that can be implemented in fiscal year 2017 to improve readiness. DOD and Navy officials told us that, as part of this readiness review, the Navy prioritized immediate readiness gaps and shortfalls. These officials added that this review would guide the Navy’s investment decisions in future budget cycles, with the intention to rebuild readiness and prepare the force for future conflicts. However, high demand for naval presence will continue to put pressure on a fleet that is already stretched thin across the globe. Looking to the future, the Navy has plans to grow its fleet by as much as 30 percent, but it has not yet shown the ability to adequately man, maintain, and operate the current fleet. These readiness problems need to be addressed and will require the Navy to implement our recommendations—particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, managing investments in its shipyards, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges. Chairmen McCain, Ranking Member Reed, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. If you or your staff have questions about this testimony, please contact John Pendleton, Director, Defense Capabilities and Management at (202) 512-3489 or pendletonj@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Suzanne Wren, Assistant Director; Steven Banovac, Chris Cronin, Kerri Eisenbach, Joanne Landesman, Amie Lesser, Felicia Lopez, Tobin McMurdie, Shari Nikoo, Cody Raysinger, Michael Silver, Grant Sutton, and Chris Watson. Over the past three years, we issued several reports related to Navy readiness cited in this statement. Table 1 summarizes the status of recommendations made in these reports, which contained a total of 14 recommendations. The Department of Defense generally concurred with all of these recommendations but has implemented only one of them to date. For each of the reports, the specific recommendations and their implementation status are summarized in tables 2 through 5. The Navy defines a class A mishap as one that results in $2 million or more in damages to government or other property, or a mishap that resulted in a fatality or permanent total disability. We analyzed data compiled by the Naval Safety Center for fiscal years 2009 through 2017 to provide a summary of major Navy mishaps at sea (see table 6). Report numbers with a C or RC suffix are Classified. Classified reports are available to personnel with the proper clearances and need to know, upon request. Naval Shipyards: Actions Needed to Improve Poor Conditions that Affect Operation. GAO-17-548. Washington, D.C.: September 12, 2017. Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet. GAO-17-798T. Washington, D.C.: September 7, 2017. Department of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017. Military Readiness: Coastal Riverine Force Challenges. GAO-17-462C. Washington, D.C.: June 13, 2017. (SECRET) Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18, 2017. Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-841. Washington, D.C.: September 7, 2016. Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016. (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May 2, 2016. Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports. GAO-15-329. Washington, D.C.: May 29, 2015. Military Readiness: Navy Needs to Assess Risks to Its Strategy to Improve Ship Readiness. GAO-12-887. Washington, D.C.: September 21, 2012. Force Structure: Improved Cost Information and Analysis Needed to Guide Overseas Military Posture Decisions. GAO-12-711. Washington, D.C.: June 6, 2012. Military Readiness: Navy Needs to Reassess Its Metrics and Assumptions for Ship Crewing Requirements and Training. GAO-10-592. Washington, D.C.: June 9, 2010. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Since January 2017, the Navy has suffered four significant mishaps at sea that resulted in serious damage to its ships and the loss of 17 sailors. Three of these incidents involved ships homeported in Japan. In response to these incidents, the Chief of Naval Operations ordered an operational pause for all fleets worldwide, and the Vice Chief of Naval Operations directed a comprehensive review of surface fleet operations, stating that these tragic incidents are not limited occurrences but part of a disturbing trend in mishaps involving U.S. ships. This statement provides information on the effects of homeporting ships overseas, reducing crew size on ships, and not completing maintenance on time on the readiness of the Navy and summarizes GAO recommendations to address the Navy's maintenance, training, and other challenges. In preparing this statement, GAO relied on work it has published since 2015 related to the readiness of ships homeported overseas, sailor training and workload issues, maintenance challenges, and other issues. GAO updated this information, as appropriate, based on Navy data. GAO's prior work shows that the Navy has increased deployment lengths, shortened training periods, and reduced or deferred maintenance to meet high operational demands, which has resulted in declining ship conditions and a worsening trend in overall readiness. The Navy has stated that high demand for presence has put pressure on a fleet that is stretched thin across the globe. Some of the concerns that GAO has highlighted include: Degraded readiness of ships homeported overseas: Since 2006, the Navy has doubled the number of ships based overseas. Overseas basing provides additional forward presence and rapid crisis response, but GAO found in May 2015 that there were no dedicated training periods built into the operational schedules of the cruisers and destroyers based in Japan. As a result, the crews of these ships did not have all of their needed training and certifications. Based on updated data, GAO found that, as of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews based in Japan—including certifications for seamanship—had expired. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since GAO's May 2015 report. The Navy has made plans to revise operational schedules to provide dedicated training time for overseas-based ships, but this schedule has not yet been implemented. Crew size reductions contribute to sailor overwork and safety risks: GAO found in May 2017 that reductions to crew sizes the Navy made in the early 2000s were not analytically supported and may now be creating safety risks. The Navy has reversed some of those changes but continues to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload—both of which have contributed to some sailors working over 100 hours a week. Inability to complete maintenance on time: Navy recovery from persistently low readiness levels is premised on adherence to maintenance schedules. However, in May 2016, GAO found that the Navy was having difficulty completing maintenance on time. Based on updated data, GAO found that, in fiscal years 2011 through 2016, maintenance overruns on 107 of 169 surface ships (63 percent) resulted in 6,603 lost operational days (i.e., the ships were not available for training and operations). Looking to the future, the Navy wants to grow its fleet by as much as 30 percent but continues to face challenges with manning, training, and maintaining its existing fleet. These readiness problems need to be addressed and will require the Navy to implement GAO's recommendations—particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, managing investments to modernize and improve the efficiency of the naval shipyards, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges. GAO made 14 recommendations in prior work cited in this statement. The Department of Defense generally concurred with all of them but has implemented only 1. Continued attention is needed to ensure that these recommendations are addressed, such as the Navy assessing the risks associated with overseas basing and reassessing sailor workload and factors used in its manpower requirements process.", "document_type": "gao"}
{"report": "This section describes DOE’s M&O contracts, incentives in those contracts, general requirements for DOE’s M&O contractor performance evaluation processes, and contracting and performance challenges involving DOE’s M&O contracts that have been identified by previous reporting. Since the Manhattan Project produced the first atomic bomb during World War II, DOE and its predecessor agencies have depended on the expertise of private firms, universities, and others with the scientific, manufacturing, and engineering expertise needed to carry out research and development work and manage and operate the government-owned, contractor-operated facilities where the bulk of the department’s mission activities are carried out. DOE relies on contracts in general, and M&O contracts in particular, to do this work. According to DOE’s Fiscal Year 2017 Agency Financial Report, the department spends approximately 90 percent of its annual budget on contracts, and in fiscal year 2016 DOE managed contracts valued at more than $24 billion. Of that amount, DOE spent approximately 80 percent on its M&O contracts. The work is closely related to the agency’s mission and is of a long-term or continuing nature, and there is a need to ensure its continuity and for protection covering the orderly transition of personnel and work in the event of a change in contractors. and sites that are contaminated from decades of nuclear weapons production and nuclear energy research. The Office of Fossil Energy (FE) manages the nation’s Strategic Petroleum Reserve, which is an emergency stockpile of oil stored in underground salt caverns in Texas and Louisiana. NNSA, a separately organized agency within DOE, is responsible for maintaining and enhancing the safety, reliability, and performance of the nation’s nuclear weapons stockpile, promoting international nuclear safety and nonproliferation, and supporting U.S. leadership in science and technology, among other things. The Office of Nuclear Energy’s (NE) primary mission is to advance nuclear power as a resource capable of making major contributions in meeting the nation’s clean energy supply and energy security needs. The Office of Science (SC) supports scientific research for energy and the physical sciences both by supporting (1) such research, and (2) the development, construction, and operation of scientific user facilities. These DOE offices use M&O contracts to carry out their research and development, nuclear weapons production, and other missions. For example, for research and development, DOE is the nation’s single largest funding source for basic physical sciences research, supporting research in energy sciences, advanced scientific computing, physics, and other fields. For weapons production, NNSA uses production sites to maintain, evaluate, repair, and dismantle both the nuclear and non- nuclear components for nuclear weapons; manufacture weapons components; and process tritium, a key isotope used to enhance the power of nuclear weapons. DOE also uses M&O contracts for sites dedicated to other types of missions, including nuclear waste disposal and an emergency stockpile of oil. Figure 1 and appendix II provide additional information on DOE’s M&O contracts. In August 2016, we identified three key attributes associated with DOE’s M&O contracts. First, M&O contracts have a limited competitive environment—we found that about half of DOE’s fiscal year 2015 M&O contract spending was on contracts awarded noncompetitively or that received a single offer at the time they were competed. In addition, M&O contracts include longer terms than other federal contracts, so they are competed less frequently. Second, DOE M&O contracts have broad scopes of work that cover nearly all aspects of work at a site. In particular, though mission activities of M&O contractors can be highly technical, mission support activities generally accounted for about 25 to 50 percent of contractors’ total costs in fiscal year 2015, and encompassed such things as managing infrastructure, facilities, and grounds; security; and the internal audit function. Third, M&O contracts and DOE management practices contribute to a closer relationship between contractors and the government. For example, M&O contractors are generally more integrated with DOE in how they are paid and in their accounting systems than other types of contractors. With regard to payment, rather than traditional bill payment methods including invoices, payment approval and authorization, and disbursement of funds, M&O contractors can draw funds directly from federal accounts through “letter of credit financing.” With regard to accounting systems, as we reported in August 2016, DOE requires M&O contractors to follow DOE’s Accounting Handbook and integrate their costs and liabilities in DOE’s accounts each month. DOE officials said that this provides visibility into contractor accounts and allows DOE to monitor the appropriateness of the contractors’ withdrawal of funds in near real time. According to DOE officials, this integration carries over into how the value of contracts are determined—rather than establishing the cost of the contract at the time of contract award, the value of the M&O contract is determined by the amount annually obligated on the contract by DOE, consistent with DOE’s annual congressional appropriations. Cost-reimbursement type contracts allow the agency to contract for work when circumstances do not allow the agency to sufficiently define its requirements or estimate its costs to allow for a fixed-price contract. Under a fixed-price contract, a contractor accepts responsibility for completing a specified amount of work for a fixed price. In contrast, under cost-reimbursement contracts, the government reimburses a contractor for allowable costs incurred, to the extent prescribed by the contract. The government may also pay a fee that is either fixed at the outset of the contract or adjustable based on performance criteria set out in the contract. In September 2009, we reported that cost-reimbursement contracts are considered high risk for the government because of the potential for cost escalation and because the government pays a contractor’s costs of performance regardless of whether the work is completed. As such, cost-reimbursement contracts are suitable only when (1) circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract; or (2) uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract. One major reason for the inability to accurately estimate costs is the lack of knowledge of the work needed to meet the requirements of the contract, such as with research contracts, which necessarily involve substantial uncertainties. The DOE Acquisition Regulation (DEAR) states that cost-plus-award-fee (cost reimbursement) contracts are generally the appropriate contract type for M&O contracts and that the agency can choose among a number of different contract types for its M&O contracts. Under the FAR, cost-reimbursement contracts may include specific incentives, such as arrangements intended to improve contractor efforts and discourage inefficiency and waste. Table 1 provides definitions of incentives commonly included in DOE’s M&O contracts. Generally, according to DOE officials, award fees and incentive fees are intended to motivate M&O contractor performance on an annual basis, as outlined in annual performance evaluation plans. All DOE M&O contracts GAO analyzed also include “conditional payment of fee” clauses that permit the agency to reduce an otherwise earned fee if it determines that the contractor’s performance did not meet minimum requirements, such as those related to safety, health, or the environment. Under the award term incentive, contractors can earn one additional year of performance under the contract for each year they exceed certain thresholds in their annual performance evaluations. (See apps. III through VIII for additional information on the incentives included in each M&O contract, by DOE office.) In addition, other elements of contract administration or oversight, while not formally incentives, can influence contractor performance. For example, option periods—which are established in the contract—enable the government to unilaterally extend the performance period and performance of services. According to DOE officials, other potentially important influences on contractor behavior include public reputation and the ability to compete for follow-on DOE or other government contracts. The FAR, DEAR, DOE’s Acquisition Guide, and DOE policies provide requirements and guidance for DOE’s annual performance evaluations of contractor performance. Under the FAR, all contracts providing for award fees must be supported by an award fee plan that establishes procedures for evaluating award fees and an Award Fee Board to conduct award fee evaluations. A Fee Determining Official makes the final determination regarding the amount of award fee the contractor earns during the evaluation period. Additionally, the FAR generally calls for entities that administer contracts providing award fees to use a set of ratings from Excellent to Unsatisfactory, which include performance descriptions and associated available award fee percentages (see Table 2 below). Award fee ratings are associated with a range of percentages of the total available award fee that DOE offices may award to a contractor based on the contractor’s assessed performance. DOE offices develop two primary documents to guide and report assessments of contractors’ performance for each fiscal year: a Performance Evaluation and Measurement Plan (PEMP) and a Performance Evaluation Report (PER). The PEMP is to be developed at the beginning of each fiscal year—which is the beginning of the evaluation period—and is to establish expectations for contractor performance and describe how the responsible DOE office will evaluate and measure performance against those expectations. The PEMP provides the blueprint for what performance is expected of contractors, how contractors’ performance will be evaluated, and how the evaluations will be used to determine award fees, award terms, and any other incentives. The PER is to be developed at the end of each evaluation period—which typically is the end of the fiscal year—and is the responsible DOE office’s evaluation of contractor performance, in which DOE documents the performance rating and, in some cases, the fees and other incentives that will be awarded to the contractor. Figure 2 shows the general steps of DOE’s performance evaluation of contractors. Further, under the FAR and DOE policy, the department is to consider technical, administrative, and cost performance during acquisition planning. The FAR provides that, for M&O contracts, replacement of an incumbent contractor is largely based on an expectation of meaningful improvement in performance or cost; thus, an agency or department should consider three categories of performance—technical, administrative, and cost—when deciding whether to extend or compete a contract at the end of the contract’s term. According to DOE officials, the annual performance evaluation process and the related PER are important sources of information for making these decisions. Thus, the PER should include relevant information on an M&O contractor’s technical, administrative, and cost performance. For DOE, the M&O contract PER is also important because DOE uses information from the PER to update a contractor’s past performance information in the Contractor Performance Assessment Reporting System (CPARS), which DOE and other agencies use to understand a contractor’s performance history and to inform their evaluations of future contract proposals. A number of commissions, task forces, and other outside groups have identified challenges involving DOE’s M&O contracts. For example, two independent commissions—the Augustine-Mies Panel and CRENEL— have reported on related contract management challenges. The 2014 Augustine-Mies report focused on NNSA and made numerous recommendations for comprehensive reforms, including addressing dysfunctional government-M&O contractor relationships, improving oversight of M&O contractors, and reforming award fee and performance incentive structures. CRENEL, taking a broader view of all 17 national laboratories across DOE, in 2015 found a similar erosion of trust between DOE and some of its M&O contractors while noting that some laboratories, in particular those under SC, had better, more effective relationships. The CRENEL report recommended reforms to the management and oversight of M&O contractors and performance incentive structures. In addition to challenges, CRENEL also noted that SC’s annual performance evaluation and planning processes were robust and suggested that they be adapted by other DOE offices. NNSA’s and EM’s contract management remains on our High-Risk List for government operations vulnerable to fraud, waste, abuse, and mismanagement. In addition, since 2005 we have identified a variety of project and program outcomes associated with deficiencies in DOE’s management and oversight of its M&O contractors. We have also identified improvements needed in core processes and functions DOE relies on to oversee its M&O contractors and assess their performance. These reports include the following examples: Since 2005, during various reviews, we found that cost accounting practices used by NNSA’s M&O contractors have varied, making it difficult for NNSA to compare costs across its sites or accurately identify the total costs across its nuclear security enterprise and to obtain reliable cost data. In January 2017, we reported on the importance of reliable enterprise-wide cost information to effective management and oversight and found that the plan NNSA submitted to Congress in 2016 to improve and integrate its financial management, as required by Congress in 2013, did not provide a useful road map for guiding NNSA’s efforts. We recommended that NNSA develop a plan for producing cost information that fully incorporates leading planning practices. NNSA agreed, and we are monitoring implementation of the recommendation. In October 2014, we reported on actions taken to address challenges with the Uranium Processing Facility under construction at the NNSA Production Office Sites (specifically at the Y-12 National Security Complex), which is managed by the M&O contractor at that site. A challenge with this facility was that in July 2012 the M&O contractor concluded that required equipment would not fit into the facility as designed and that addressing this issue would cost an additional $540 million. NNSA’s analysis of the factors that contributed to this issue identified several causes, including project oversight deficiencies— specifically, failure to ensure that requests and directives from NNSA to the contractor were implemented. In May 2015, we reported on NNSA’s use of contractor assurance systems to conduct oversight and evaluate the performance of M&O contractors. Contractor assurance systems are designed and used by M&O contractors to oversee their own performance and to self- identify and correct potential problems. We found that NNSA had not fully established policies or guidance for using information from these systems to conduct oversight of M&O contractors and that NNSA therefore did not have standards for ensuring that contractors are overseen consistently. We recommended that NNSA establish policies and guidance for using information from contractor assurance systems for the oversight of M&O contractors; NNSA concurred with the recommendations and has taken some steps to establish policies and guidance, though it has not yet fully addressed our recommendations. In March 2017, we reported that DOE needed quality data to manage its risk of fraud and recommended that DOE require contractors to maintain sufficiently detailed transaction-level cost data that are reconcilable with amounts charged to the government. DOE did not concur with the recommendation and has not taken steps to implement it. Because DOE does not require its contractors to maintain sufficiently detailed transaction-level cost data that are reconcilable with amounts charged to DOE, it is not well positioned to employ data analytics as a fraud detection tool. As a result, DOE is missing an opportunity to develop, refine, and improve its data analytics and better meet requirements of the Fraud Reduction and Data Analytics Act. In fiscal years 2006 through 2016, the six DOE offices generally used one of three different approaches to evaluate M&O contractor performance. All but one of these offices have documented their approaches in policies and procedures; NNSA has a broad policy but does not have procedures for implementing it, in particular for collecting and using performance information. In the absence of documented procedures, NNSA may not consistently collect and use performance information in evaluating contractor performance. According to DOE officials, DOE does not have a department-wide performance evaluation process and offices developed their approaches to performance evaluation based on their varying missions and performance evaluation priorities. We identified the following three general approaches: The Science and Energy Lab approach (used by SC, EERE, and NE) uses broad, office-wide performance criteria and a detailed process and web-based tool to collect performance information and determine ratings and incentives. The NNSA approach also uses broad, office-wide performance criteria, but ratings and incentives are determined through a series of management meetings. The Site Specific approach (used by FE and EM) uses more detailed performance criteria specific to each contract and makes rating and incentive determinations in ways that vary based on the individual criteria. These approaches generally differ in their (1) performance criteria, (2) methodologies used to determine contractor ratings, and (3) methodologies used to determine incentives. Appendixes III through VIII provide additional information on each office’s performance evaluation approach. Based on our review of DOE documents, the three approaches all use a combination of what PEMPs describe as subjective and objective performance criteria. The Science and Energy Lab and NNSA approaches use primarily subjective criteria, and the Site Specific approach uses primarily objective criteria. Subjective criteria are generally qualitative statements that describe desired contractor performance, according to DOE officials. For example, a subjective criterion that SC used during fiscal year 2016 was for contractors to “provide effective and efficient strategic planning and stewardship of scientific capabilities and program vision.” In contrast, DOE officials explained that objective criteria generally describe performance that may be measured on a “pass/fail” or quantitative basis. For example, FE used objective criteria such as developing a strategic plan by a specific date or ensuring that all phases of construction were mechanically complete regarding the conversion of a tank. Performance criteria under the Science and Energy Lab and NNSA approaches share a similar structure of three tiers of criteria: goals, objectives, and notable outcomes (called key outcomes under NNSA’s approach). The criteria are also mostly subjective and broad enough to be consistent across all the contracts of the responsible DOE office. Based on our review of DOE documents and information, SC and EERE have used the Science and Energy Lab approach since fiscal year 2006 and NE since fiscal year 2007. NNSA used the NNSA approach in fiscal years 2013 through 2016. Under the Science and Energy Lab and NNSA approaches, goals are general overarching statements of the desired outcomes for each major performance area under the contract and constitute the highest performance criteria used to evaluate contractor performance. Based on documentation describing these approaches, goals are to be composed of at least two objectives, which are statements of desired results for an organization or activity and that discuss specific actions the contractor will undertake to accomplish a goal. Each office uses its respective goals and objectives consistently for each of its M&O contracts (EERE and NE each have only one site) and generally cover the same functional areas across the offices, though some NNSA goals focus specifically on NNSA’s nuclear weapons and national security missions. For complete lists of goals and objectives used by the offices using the Science and Energy Lab and NNSA approaches, see appendixes III, VI, VII, and VIII. The third tier performance criteria used to evaluate contractor performance is the notable outcome, which, according to agency documents, is intended to focus the contractor on specific items that officials identified as the most important initiatives or highest risk issues the contractor must address. According to DOE documents, notable outcomes differ from goals and objectives in that they (1) are usually objective, (2) are specific to each contractor, and (3) change from year to year. However, not all goals and objectives have associated notable outcomes. Figure 3 provides an example of the relationship between a goal and its related objectives and notable outcomes for SC’s Brookhaven National Laboratory contractor for fiscal year 2016. Our review of agency documents found that the Site Specific approach consists primarily of objective performance criteria that are specific to each contract, as well as a few broader, objective criteria. This is in contrast to the other two DOE approaches to performance evaluation, which primarily rely on broad, subjective criteria and a few objective criteria. Based on our discussions with agency officials, both EM and FE have generally used this Site Specific approach since fiscal year 2006. For both offices, objective performance criteria are defined based on quantifiable metrics (e.g., a contractor’s demonstrated waste processing rate) and milestones (e.g., whether a contractor completed a task on or before a scheduled date). For example, one of FE’s fiscal year 2016 objective performance criteria for the Strategic Petroleum Reserve M&O contract is whether facilities and systems functioned at a level adequate to meet program requirements based on average scores from its Maintenance Performance Appraisal Rating tool. Further, our review of agency documents showed that the Site Specific approach uses subjective performance criteria for aspects of performance that may be difficult to capture objectively—such as determining how effectively measures a contractor has taken have prevented harm to workers, the general public, and the environment. (See apps. IV and V for examples of the objective and subjective criteria EM and FE use.) Prior to fiscal year 2013, NNSA also used the Site Specific approach, and it had specific, objective performance criteria that varied by contract. Based on our review of agency documents, NNSA’s performance criteria were generally divided into four performance areas: (1) mission, (2) operations, (3) business, and (4) multi-site. According to NNSA officials, as a result of “lessons learned” efforts, NNSA updated this approach to its current one to provide more succinct, structured, and consistent reporting by ensuring that all NNSA M&O contractors have identical goals and objectives. Based on our review of DOE documents, rating methodologies vary across the three approaches—the Science and Energy Lab approach uses a detailed, formulaic methodology; the NNSA approach determines ratings at a series of management meetings; and in the Site Specific approach, ratings depend primarily on whether the contractor accomplishes specific tasks. Based on our review of agency documents, under the Science and Energy Lab approach, stakeholders—including officials from headquarters, field offices, and internal and external customers— generally evaluate contractor performance against the criteria for each objective and notable outcome (“lab customers” evaluate objectives under science and technology goals only). Their evaluations, in the form of narratives and numerical scores, are entered into a web-based information collection tool that aggregates the scores using a series of calculations and weights to generate ratings that are then approved by the Fee Determining Official for the responsible DOE office. For example, for SC, once individual stakeholders enter objectives’ scores into the Laboratory Rating Tool, those scores are then weighted and added together through a predetermined formula to provide an overall rating of contractor performance for each goal. Under this approach, the Laboratory Rating Tool aggregates the objective scores into numerical goal ratings and corresponding letter grades from 4.3 (A+) to 0 (F) for the contractor. Notable outcomes are rated on a “pass/fail” basis, meaning that the contractor either met or did not meet them. Receiving a passing rating for the notable outcome is required for the contractor to earn a B+ or better for the notable outcome’s associated objective. Thus, although notable outcomes are not given their own numerical score or letter grade, they can have a significant effect on a contractor’s objective ratings and, ultimately, goal ratings. (See apps. III, VII, and VIII for examples of the weighting and calculations involved in aggregating ratings for EERE, NE, and SC M&O contractors.) Based on our review of agency information, the methodology for the NNSA approach to determine contractor ratings entails officials holding a series of meetings to review various internally developed periodic reports and other inputs (e.g., contractor self-assessments and inspection reports). The participants in these meetings include field office managers, program managers, and NNSA executive leadership who collaboratively review contractor performance and determine ratings. According to NNSA officials, at these meetings NNSA collaboratively reviews all M&O contracts across the NNSA complex, thereby allowing officials to weigh and compare performance. The Fee Determining Official determines the final performance ratings for each M&O contractor using rating categories from the FAR: Excellent, Very Good, Good, Satisfactory, and Unsatisfactory. NNSA does not use numerical calculations to score and weigh individual objectives or goals. Instead, NNSA officials use professional judgment to determine overall goal ratings. Based on our review of agency information, under the Site Specific approach, field office officials rate contractor performance against objective performance criteria quantitatively or pass/fail and rate subjective performance criteria using FAR award fee categories. That is, they evaluate performance against objective performance criteria as completed or not completed—for example, whether the contractor packaged 10 waste drums during the fiscal year. For the subjective performance criteria, officials assign ratings using the FAR rating categories in a similar manner to the NNSA approach. Based on our review of DOE documents, the three performance evaluation approaches also use different methodologies for determining award and incentive fees, and two offices use similar methods to determine whether the contractor receives award term. Based on our review of agency documents, under the Science and Energy Lab approach, once ratings are determined, several additional detailed calculations determine how much of the available award fee is provided to the contractor. Precisely how ratings are weighted to determine fee differs by DOE office, but generally performance in technical areas is more important in determining the amount of fee the contractor earns. For example, SC determines award fees based on the contractor’s final science and technology area rating and adjusts that fee if the final management and operations area rating is 3.0 (grade B) or below. (See app. VIII for additional information on SC’s fee determination, app. III for EERE, and app. VII for NE.) Based on our review of agency information, under the NNSA approach, officials assign goals specific portions of the available award fee for each contract at the beginning of the fiscal year. At the end of the fiscal year, officials determine ratings and fees at the same time in the collaborative meeting with NNSA leadership. For example, for the Los Alamos National Laboratory contractor in fiscal year 2016, the nuclear weapons goal was 30 percent of fee, and the operations and infrastructure goal was 35 percent. As discussed earlier, the Fee Determining Official makes the final determination on the ratings and also determines how much fee to provide the contractor within the range defined by the FAR rating (Excellent, Very Good, Good, Satisfactory, Unsatisfactory). In fiscal year 2016, NNSA awarded the Los Alamos National Laboratory M&O contractor an “Excellent” rating for the nuclear weapons goal, which is associated with the contractor earning from 91 to 100 percent of the available fee for that goal. To determine the overall award fee for the contract, NNSA adds up the award fees for all of its goals. (See app. VI for an example of a NNSA fee determination letter.) Our review of DOE documents showed that the Site Specific approach has a different process for determining incentive and award fees, depending on whether the fee is tied to objective or subjective performance criteria. According to agency officials and documents, the Site Specific approach generally provides more money toward incentive fees tied to objective criteria than to award fees tied to subjective criteria—about 60 to 75 percent of available fee money goes to incentive fees. Incentive fees tied to objective performance criteria are awarded based on completion of the specific tasks or quantitative targets defined by the performance criteria. For example, one of the objective performance criteria for EM’s Waste Isolation Pilot Plant (WIPP) M&O contractor in fiscal year 2016 was to develop a maintenance and engineering program, called the Material Condition and Aging Management Program, and complete certain program activities. EM set a maximum incentive fee of $500,000 in the PEMP to be awarded upon completion of the activities. In regard to award fees that are tied to subjective performance criteria under the Site Specific approach, offices using this approach take a similar method to the NNSA approach, in that they determine ratings and fees simultaneously. Specific portions of an available award fee are assigned to subjective performance criteria at the beginning of the fiscal year and documented in the PEMP, and officials then determine the percentage of fee to award and corresponding ratings from the FAR award fee categories for each subjective performance criterion. The final decision on the percentage of the available fee awarded for subjective performance criteria is made by the Fee Determining Official, who is generally an on-site official. The overall fee awarded is the sum of the individual objective incentive fees and subjective award fees. (See apps. IV and V for examples of how fee is assigned to specific criteria under the Site Specific Approach.) With regard to award term, for the SC and NNSA contracts that had award term as an incentive, the contracts defined the conditions for receiving it, and those conditions generally included meeting certain rating thresholds, based on our review of documents from those offices. For SC, the contractor (1) was to earn at least a 3.5 (A-) science & technology area rating and a 3.1(B+) management & operations area rating, and (2) have no individual goal ratings below 3.1(B+) for science & technology area goals and 2.5 (B-) for management & operations area goals. The contracting officer is to prepare and submit a standardized document along with an annual contractor performance evaluation presentation for review through program officials, and the Director of the Office of Science is to make the final award term determination. For NNSA contracts, the contractor generally must (1) earn a rating of “Very Good” or better in four of the six goals and receive no rating of “Satisfactory” or lower in any goal, and (2) meet any additional requirements as specified in the contract. All of DOE’s offices have documented policies outlining their performance evaluation approaches, and all but NNSA have documented how information is to be collected and used to make rating determinations. SC, EERE, NE, FE, and EM have included in their documented policies and performance evaluation plans detailed procedures for collecting information on contractors’ performance that outline, among other things, how officials are to gather input from internal and external stakeholders and how the officials are to use that information in making rating determinations. For example, under SC’s Laboratory Performance Appraisal Process and PEMP Preparation Guidance (SC’s Appraisal Guidance), stakeholders are to provide evaluations using SC’s web- based information collection tool, the Laboratory Rating Tool, to provide scores and narratives on contractor performance. As a result, SC’s contractor performance evaluation approach clearly traces where performance information comes from and how the information is used in determining contractors’ final ratings. Similarly, EM and FE document how officials are to collect information and use it in PEMPs or other performance evaluation plans. For example, EM’s PEMP for the WIPP M&O contract provides step-by-step procedures for how field office officials are to assess contractor performance against each performance criterion. These procedures guide the flow of information from contractor to field office officials, who are to check and validate the information and provide rating and fee recommendations to the on-site Fee Determining Official. Similarly, field office officials at EM’s Savannah River Site and FE’s Strategic Petroleum Reserve also have detailed procedures for assessing and distributing information regarding performance. Such detailed written procedures can provide better assurance to agencies that officials are consistently gathering and using performance evaluation information and that one can trace the ultimate performance rating in the PER to the underlying performance information. In contrast to the detailed documented policies of other DOE offices, during the period of our review NNSA’s documented policy did not always match its performance evaluation approach, and the policy did not contain procedures for how officials should collect and use information so that one can trace the performance rating to the underlying performance information. As noted above, NNSA changed from using the Site Specific performance evaluation approach that focused on objective performance criteria to the agency’s current approach in fiscal year 2013. However, NNSA did not update its policy to reflect this change until December 2016. Thus, in fiscal years 2013 through 2016, NNSA was using a policy intended to evaluate site-specific objective performance criteria and incentive fees rather than the broad, office-wide subjective performance criteria that NNSA was using during those 4 fiscal years. NNSA brought its policy into alignment with its performance evaluation approach in December 2016 by issuing its Corporate Performance Evaluation Process for Management and Operating Contractors policy (NAP-4C). NAP-4C provides a general framework under which NNSA officials provide input into the contractor performance evaluation process; the policy also provides a general schedule for implementing the performance evaluation approach, as well as general references to information collection. However, NAP-4C does not include detailed procedures for how performance information should be collected and used, and according to NNSA officials, individual NNSA offices and officials determine how they collect and distribute information. This means information may be collected inconsistently across the agency, depending on individual offices’ preferences. For example, NAP-4C states that officials should “leverag information from contractor assurance systems . . . to monitor performance” but does not discuss how and when officials should use this information to ensure performance information is traceable to rating determinations. In May 2015, we reported on the importance of tracing performance information from contractor assurance systems to performance evaluations. We reported that a senior NNSA official told us NNSA could not track the extent to which information from contractor assurance systems was used in evaluating contractor performance because it could be difficult to identify the sources of information used in performance evaluations. We recommended that NNSA revise policy, guidance, and procedures on performance evaluation to fully address how and under what circumstances those responsible for evaluating M&O contractors’ performance should use information from contractor assurance systems for this purpose. NNSA concurred with our recommendation and issued revised policy for contractor oversight but has not yet developed guidance or procedures for how to use information from contractor assurance systems in its performance evaluation process. We continue to follow up on this recommendation. In addition to NAP-4C, NNSA’s Fee Determining Official issued implementation guidance for the fiscal year 2016 performance evaluation cycle. This implementation guidance directs relevant NNSA officials to follow a series of templates for interim reports to the contractor and provides the format of the final PER and specific dates for those reports. The guidance does not include procedures as to how officials throughout NNSA are to collect or use information to create the content for those templates. For example, the guidance’s Interim Feedback Report schedule states that the “program/functional offices provide input to field offices.” There is no discussion of how the program/functional office is to provide such input, what types of input are important, or how the input is to be used. Similarly, NNSA’s PEMPs also do not discuss how officials should collect or use performance information. In the absence of documented, detailed procedures, NNSA may not consistently collect and use performance information from program managers and field office officials for contracts in a given fiscal year and may therefore inconsistently apply NNSA’s evaluation process. For example, we identified two instances in which the NNSA Fee Determining Official made handwritten changes to proposed award fee amounts during fiscal year 2012 without documenting in the PER the basis for the changes, such as by identifying the performance information that would support the handwritten changes to create traceability between the award fee amounts and its supporting performance documentation. These changes awarded (1) Los Alamos National Laboratory’s contractor a year of award term, even though the contractor had not met the established rating threshold for award term, and (2) Lawrence Livermore National Laboratory’s contractor a higher award fee that also qualified the contractor for award term it otherwise would not have received. With these changes, these contractors received award terms and fees in a manner inconsistent with how award terms and fees were assessed for other M&O contractors. According to NNSA officials, this type of action would not happen currently because the agency’s approach is rooted in a policy (NAP-4C) and implementation guide that is supported by a more collaborative decision-making process. However, even under the new policy, because NNSA does not have clearly documented procedures specifying how officials are to collect or use performance information, NNSA leadership cannot have assurance that there is clear traceability between the contractor evaluation and its underlying support. Federal standards for internal control state that management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control in management directives, administrative policies, or operating manuals. NNSA has a documented policy, but this policy does not clearly specify how to collect and use contractor performance information to evaluate contractor performance. NNSA officials stated that in their opinion their policy was still effective and robust without detailed procedures for its implementation. However, without developing and documenting clear procedures for implementing NAP-4C that specify the process for collecting contractor performance information and how officials are to ensure this information can be traced to rating determinations, NNSA leadership does not have reasonable assurance that the agency is consistently evaluating contractor performance and that it is using relevant performance information as intended. We found that DOE offices’ fiscal year 2016 PERs provided less information on M&O contractors’ cost performance—evaluations of the contractor’s spending, budgeting, strategic sourcing, and costs, including the contractor’s cost-effectiveness—and provided more information regarding technical and administrative areas of performance. Specifically, the PERs were 67 pages long on average and contained about 1 page of cost performance-related information overall. In contrast, information on contractors’ technical and administrative performance included in-depth descriptions of contractors’ scientific discoveries and production progress that spanned numerous pages. Figure 4 provides typical examples of the type of technical, administrative, and cost performance descriptions that we found in our review of fiscal year 2016 M&O contract PERs. In addition, in our review of the number of performance descriptions in DOE’s 2016 PERs, we found about 24 percent (179 of 737) of the performance descriptions in the PERs provided information on cost performance; about 71 percent (524 of 737) provided information on administrative performance (evaluations of contractor’s performance on mission support activities, such as information technology, human resources, legal activities, environmental safety and health, property management, risk management, and leadership activities); and about 53 percent (390 of 737) provided information on technical performance (evaluation of contractor’s performance on mission- related activities such as research and development, production, storage, clean-up, and construction). In addition to providing less information on M&O contractors’ cost performance than on other areas of performance, the cost information contained in DOE offices’ PERs is of limited use for acquisition decision- making. DOE’s Information Quality Guidelines define quality, in part, as information that is useful to DOE and the public. We examined whether the PERs included such useful information that would permit an overall assessment of contractor cost performance. FAR and DOE policy call for such an overall assessment, which therefore is useful to DOE for acquisition decision-making and to the public generally. Our analysis showed that the information on contractors’ cost performance in the PERs did not permit such an assessment of contractor cost performance for two primary reasons. First, the information consisted of statements that lacked detail, such as “within budget,” and did not address the significance of the performance described. For example, cost performance-related statements such as “over/under budget” and “cost savings/cost overrun” did not commonly provide information on the amount saved or lost, making it difficult to identify the significance of what was reported. Information on cost effectiveness was also rare—cost-effectiveness information was included in about 11 percent of the instances in which cost performance was discussed (48 of 441 instances). Second, cost performance information commonly applied to specific activities under the contract, such as construction activities, rather than to achievement of overall operating efficiencies. When cost performance information is limited to specific activities, it is not possible to assess a contractor’s overall cost performance based on information in the PER. We identified one reason and DOE officials identified three additional reasons why more cost performance information was not provided in DOE’s fiscal year 2016 PERs. We believe all of these contribute to why the cost performance information that was included was often not useful for acquisition decision-making: DOE offices’ policies and PEMPs did not specifically require PERs to include cost performance information and did not discuss how to ensure that cost information is useful for acquisition decision-making. Based on our review, DOE offices’ policies did not specifically require that PERs include cost performance information, nor did they discuss information quality. In addition, DOE offices’ PEMPs—which serve as a general blueprint for the type of performance information that offices should include in the corresponding PER—generally did not include specific cost performance criteria or explicitly call for evaluations of contractors’ cost performance. In contrast, DOE offices’ fiscal year 2016 PEMPs commonly included explicit technical and administrative performance criteria such as: “provide S&T results with meaningful impact on the field” (technical) and “provide an efficient and effective worker health and safety program” (administrative). There were three exceptions in which PEMPs included specific cost performance criteria: EM’s WIPP M&O contract, NE’s Idaho National Laboratory, and FE’s Strategic Petroleum Reserve M&O contract. Although SC does not have explicit cost performance goals or objectives, according to SC officials, cost performance is listed as a factor to consider in SC’s PEMPs’ descriptions of how to evaluate certain performance criteria. However, SC officials told us that PER performance descriptions may not include cost information for these criteria unless there were notable cost overruns or the contractor was doing an exceptionally good job in these areas. SC officials stated this is, in part, to keep PERs shorter and streamlined. However, when PERs are silent on cost performance, there is no formal documented record of M&O contractor cost performance. M&O contract missions made it difficult for DOE to assess contractor cost performance, resulting in less cost performance information in PERs. According to DOE officials, it is difficult to assess the costs of the scientific and research missions covered by many M&O contracts. For example, according to DOE officials, it is difficult to develop cost estimates for research activities because it is not always certain when scientific breakthroughs will occur or how long they will take. DOE uses cost-reimbursement contracts for its M&O contracts, in part because it is not possible to know with certainty and in advance how much research and development efforts will cost or what level of effort will be required. While we agree that assessing cost performance for scientific and research activities may be difficult, M&O contractors also carry out a variety of other activities for which costs may be more readily assessed. For example, a sizeable portion of the costs under M&O contracts are for administrative or mission support and other business operations activities, such as personnel, business processes, human resources, procurement, and security. In our previous work, we found that such administrative and support activities accounted for about 25 to 50 percent of M&O contractor costs in fiscal year 2015.Similarly, SC’s fiscal year 2016 annual laboratory plans identify areas, such as infrastructure and information systems, as the major cost drivers for that year. We have found that other agencies assess cost performance for contractors performing such administrative activities. DOE officials we interviewed agreed that measuring cost performance in these areas would be more feasible than measuring it for its scientific and research missions. The M&O contract type made it difficult to some degree for DOE to assess contractor cost performance. According to DOE officials, certain aspects of how DOE implements cost-reimbursement M&O contracts create challenges to evaluating cost performance. Some officials described these challenges as the result of “the budget-based nature” of M&O contracts. Specifically, according to DOE officials, M&O contract budgets (the amount contractors are allowed to spend) are not set up front in the original contract. Rather, according to DOE officials, M&O contract budgets are commonly determined by the amount DOE obligates to the contract on an annual basis, based mostly on annual congressional appropriations to the relevant DOE programs. Further, these officials noted, because much of DOE’s appropriated funds are available until expended rather than expiring at the end of the fiscal year for which they were appropriated, M&O contractors may be able to carry over those funds to spend in future fiscal years. According to DOE officials, DOE reviews M&O contractor estimates when developing its budget request, including determining how much work is required by its contractors to execute the program scope outlined in the budget request. Agency officials also noted that, with regard to cost reimbursement contracts, the federal government is legally required to reimburse contractors for all allowable costs up to the approved budget amount. We have previously reported that cost-reimbursement contracts carry a high risk for the federal government, resulting in the potential for cost escalation, as some expenditures may be allowable under the contract but may not be cost effective. We recognize that M&O contracts are unique in many ways. Nevertheless, the manner in which DOE allocates funds to the contract, and the requirement to reimburse contractors for allowable costs do not, by themselves, affect DOE’s ability to assess contractor cost performance. Some cost performance evaluation conducted outside of the annual performance evaluation process is not included in PERs. DOE officials told us they perform some activities related to contractor cost performance outside the performance evaluation process for M&O contracts, though information on these activities is not always included in PERs. For example, according to DOE officials, some M&O contractors participate in group purchasing efforts, where contractors coordinate purchases to drive up competition and drive down costs. Also, DOE offices generally monitor M&O contractor indirect costs to ensure they do not escalate without reason. In particular, SC’s M&O contractors include a “Cost of Doing Business” section in their annual laboratory plans, in which SC contractors report on indirect costs. According to SC officials, SC also uses its reviews of the Cost of Doing Business sections as opportunities to discuss options to reduce operational costs. SC officials stated that an internal process in which SC’s laboratories compete and are awarded work, in part, also serves to control costs. According to DOE officials, efforts such as group purchasing and indirect cost monitoring and reporting are not commonly included in PERs because the agency considers its existing performance criteria to be sufficiently broad to assess contractor performance. Though these efforts may be important to address contractor costs and information from the efforts could inform assessments of cost performance, they do not, on their own, represent DOE office’s evaluation of contractor’s cost performance. In addition, PERs are important records of DOE offices’ evaluations of contractor performance because, according to agency officials, DOE uses the PERs to inform acquisition decisions and help form the basis for a contractor’s performance record. We and the DOE Inspector General have identified how important it is for DOE to obtain quality cost information and use it to evaluate cost performance. For example, for more than a decade, we have reported that some DOE offices have experienced challenges obtaining quality information that could enable the offices to make better-informed decisions about programs’, and therefore DOE’s, budgetary needs. Furthermore, we reported in July 2012 that NNSA based much of its congressional budget request on contractor-generated budget proposals, which the agency often did not thoroughly evaluate. More recently, according to a 2017 DOE Inspector General report, challenges in evaluating cost performance have contributed to NNSA’s and its M&O contractors’ difficulty in demonstrating the anticipated cost savings for the NNSA Production Office Sites contract. DOE created this contract by consolidating the contracts for the Y-12 National Security Complex and the Pantex Plant into a single contract for the explicit purpose of saving costs. While collecting quality information on, measuring, and reporting on cost performance for M&O contracts may be challenging, this information is important for two reasons. First, the FAR, DOE policy, and CPARS highlight the importance of information on contractor’s cost performance for acquisition decision-making. As we previously noted, the FAR and DOE policy provide that decisions to extend or compete an M&O contract be based on an expectation of meaningful improvement in performance or cost, including consideration of a contractor’s technical, administrative, and cost performance. In addition, according to DOE officials, they largely copy information from PERs into the federal government database on contractors’ past performance, CPARS, which agencies use to inform their awarding of contracts. CPARS has several performance criteria that agencies are required to complete, one of which is “cost control.” This is challenging to address, according to DOE officials, because PERs do not typically include an explicit evaluation of cost performance even though, also according to DOE officials, PERs are the primary source of information entered into CPARs. Second, as we reported in 2009, there are inherent risks to the government from cost-reimbursement contracts such as DOE’s M&O contracts, particularly with cost escalation because the government is required to pay the contractor’s allowable costs regardless of whether the contractor completes the work. Because of these risks, we found that these types of contracts involve significantly more government oversight than do fixed-price contracts. This is, in part, because the agency needs to monitor contractor costs to provide a reasonable assurance that efficient methods and effective cost controls are used. As we previously noted, FAR, DOE guidance and policy, and CPARS highlight the importance of quality information on contractor’s cost performance. In addition, federal standards for internal control state that management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control in management directives, administrative policies, or operating manuals. DOE offices have policies on contractor performance evaluation, but these do not specifically require that PERs include quality cost performance information that can be used to make an overall assessment of cost performance. By updating policies to require inclusion of quality cost performance information in PERs to enable an overall assessment of a contractor’s cost performance, DOE offices could strengthen their oversight of M&O contractor costs. For example, DOE offices could better inform acquisition decisions such as whether to extend or compete a contract, complete CPARS with greater ease, inform incentives for contractor performance, and uncover opportunities for federal cost savings. This is particularly important given that these cost- reimbursement type contracts carry risks of cost escalation. In reviewing DOE’s M&O contractor performance evaluations for fiscal years 2006 through 2016, we found the results of the evaluations to generally include high performance ratings and most available performance incentives, including a median of 94 percent of available award and incentive fees. During this time frame, administrative performance sometimes had lower ratings—though these were balanced out in overall ratings by strong performance elsewhere—and some safety issues and accidents resulted in additional fee reductions outside the performance evaluation process. In fiscal years 2006 through 2016, three contractors received 50 percent or less of available award fee due to two significant incidents—a safety and security issue and a major accident. For the 239 annual M&O contractor evaluations from the 24 DOE contract rating sites we reviewed, in fiscal years 2006 through 2016, DOE offices provided award and incentive fees equivalent to the FAR rating categories of Excellent or Very Good 94 percent of the time. Contractors at more than half of the 24 contract rating sites (17 of 24) received award and incentive fee percentages consistent with only Excellent or Very Good ratings for all fiscal years from 2006 through 2016. As discussed above, while the precise approaches for determining ratings and fees vary by DOE office, ratings and fees are directly linked in all three approaches: Fee is either determined through a formula based on ratings, or DOE offices determine ratings and fees at the same time. Differences between rating methodologies across offices and changes in performance evaluation approaches over time mean directly comparing ratings requires some caution; however, even acknowledging those differences, there is a clear trend of a high percentage of award and incentive fees awarded and high equivalent performance ratings across sites and years. From fiscal years 2006 through 2016, DOE also provided its M&O contractors with a median of 94 percent of their available award and incentive fees. See Table 3 for the results by FAR award fee rating category for each contract rating site for this period, and Table 4 for an analysis of average and median percentages of fees awarded by site. The amount of fee available, fee as a share of total contract spending, and the use of other incentives have varied across sites, yet performance results have been generally similar. Appendixes III through VIII provide additional details by DOE office. Contract rating site by DOE office Office of Energy Efficiency and Renewable Energy Savannah River Site–Environmental Management Waste Isolation Pilot Plant Office of Fossil Energy Strategic Petroleum Reserve Office Office of Nuclear Energy National Nuclear Security Administration Kansas City National Security Campus Lawrence Livermore National Laboratory Los Alamos National Laboratory Nevada National Security Site NNSA Production Office Sites Pantex Plant Y-12 National Security Complex Sandia National Laboratories Savannah River Site–National Nuclear Security Administration Thomas Jefferson National Accelerator Facility 94 in annual performance evaluation plans. Fixed fees are set at the inception of the contract and do not vary for performance. Of further note from our analysis of the extent to which contractors earned fees in fiscal years 2006 through 2016: Contractors for the 24 M&O contract rating sites that included award fees earned approximately $4.3 billion in total fees over this time. About three-quarters ($3.4 billion) of the $4.3 billion in fees were award fees and incentive fees, and the remaining amount was fixed fees. NNSA’s M&O contracts represent 68 percent of the fees paid and 55 percent of the total M&O contract spending over this period. As discussed above, DOE offices provided a median of 90 to 95 percent of available annual award fee to 18 of 24 M&O contract rating sites. However, six rating sites, all conducting work for NNSA, had median award fee percentages below 90 percent. Several NNSA sites had fixed fees in addition to award fees. When including those fixed fees, the percentage of total fee awarded rises, with median fee percentages rising above 90 percent for three of the sites. Contract rating sites rarely received less than 75 percent of available award fee. In addition to awarding contractors high percentages of available fees, DOE offices generally awarded M&O contractors most of the available award term incentives. Several DOE and contractor officials we interviewed noted that award term is perhaps the most valuable incentive from a contractor perspective because an extra year of work on the contract represents much more revenue for them than fees. SC and NNSA—the two offices with contracts that had award term—awarded 92 percent of award term years available, or 76 out of 83 possible award term years. Specifically, SC included award term in seven contracts and awarded M&O contractors with 95 percent of potential award term years, and NNSA included award term in four contracts and awarded contractors with 83 percent of potential award term years (see Table 5 below). Three of the unearned award term years are attributable to the contractor at Los Alamos National Laboratory, which also had a fourth award term year that NNSA revoked retroactively. According to NNSA officials, upon not earning an award term for the fourth time, Los Alamos’s contractor—in accordance with the terms of the contract—had all of its award terms revoked, and NNSA decided to recompete the contract. Within the pattern of high overall performance ratings, ratings for administrative performance have generally been lower than ratings for technical performance, and some administrative performance issues— particularly safety issues and accidents—resulted in fee reductions outside the performance evaluation process, as noted in table 6 below. For example, since fiscal year 2013, when NNSA adopted common performance goals across its contract rating sites, about 83 percent of possible goal ratings (134 of 162) had been rated Very Good or better. Of the 28 goal ratings below Very Good, 22 (79 percent) were in administrative goals. In many cases, incidents that led to lower ratings involved site operations issues, such as in safety and security. Similarly, the contractors at the 10 SC contract rating sites and one NE contract rating site also showed generally higher technical performance ratings with 9 of 11 contract rating sites having higher average technical area scores than administrative area scores (the two other contract rating sites had average technical area scores that were about equal to the average administrative scores). From our review of DOE documents and discussions with officials, one factor that may be an important influence in the difference between technical and administrative scores at SC and NE rating sites is that the Science and Energy Lab performance evaluation approach does not incentivize administrative performance above a B+. As discussed above, contractors generally receive additional award fee for higher ratings, but under the Science and Energy Lab approach, in the administrative area, all scores of B+ and above lead to the same amount of award fee. Therefore, a contractor whose only difference was an administrative score of B+ versus A+ would receive the same amount of award fee. According to DOE officials, this structure is meant to encourage contractors to reinvest cost savings into technical performance rather than improving administrative systems that already meet expectations. Relatively low performance in certain areas can be balanced out in overall ratings by strong performance ratings elsewhere. Of nine occasions since fiscal year 2013 that an NNSA contractor received at least one Satisfactory goal rating (below 50 percent), the overall rating for the contractor remained Good or Very Good, and contractors were provided the majority of their fees in all but one case (the contractor for Los Alamos National Laboratory in fiscal year 2014, which we discuss further below). For example, following the break-in of trespassers and related security lapses at Y-12 in 2012, NNSA provided the M&O contractor with Satisfactory ratings in operations in fiscal years 2012 and 2013. However, Very Good and Excellent ratings in other areas meant NNSA provided an overall rating of Good to the contractor in those years, and the contractor received more than 50 percent of available award fees. For SC, in the five occasions since fiscal year 2006 in which a contractor received at least one goal rating of C (2.0) or below, overall area scores remained As and Bs and fees above 75 percent, except for one instance. On that occasion, Princeton Plasma Physics Laboratory in 2016 received multiple goal ratings of C, which led to a technical score of C+ and a fee of 68 percent. This 2016 rating for Princeton Plasma Physics Laboratory is also the only case from fiscal years 2006 through 2016 of a Satisfactory-level goal rating in a technical area goal, as the others were all in the administrative areas of site operations or leadership. The extent to which a single area of performance affects overall ratings is influenced by the broad scope of activities under an M&O contract, the broad types of performance required under the contract, and the weights used to determine overall ratings and incentives. According to DOE officials, one way the Science and Energy Lab approach addresses these factors is to include all the ratings provided by each stakeholder and for each objective in the PER. In this way, while a C from one stakeholder or objective may be weighted out overall, the grade and the feedback associated with it are still provided to the M&O contractor and clearly visible to readers of the reports. Another way that DOE offices have addressed individual performance deficiencies that may get balanced out in overall ratings is through additional fee reductions. Most offices have reduced fees outside the performance evaluation process to address specific performance deficiencies—generally administrative concerns, such as safety issues. In particular, all offices except EERE have reduced fees that would have been provided from performance evaluation results, relying on contract clauses that allow for fee reductions. Such clauses allow DOE offices to unilaterally reduce fees for the evaluation period if, for example, the contractor fails to meet performance requirements of the contract relating to environment, safety, and health. For example, NE used such clauses in 7 of the 11 years we reviewed to reduce the fee provided to the Idaho National Laboratory M&O contractor. FE has also frequently used fee reductions to address issues outside its predominantly objective performance criteria. SC, NNSA, and EM have also occasionally used additional fee reductions outside the performance evaluation process. For all offices, fee reductions generally resulted from administrative performance issues—safety issues and accidents—rather than technical performance. These fee reductions ranged from $10,000 to $35 million, and while the fee received by the contractor was lowered, the original ratings were not revised. In most cases, these reductions were for 10 percent or less of award and incentive fees provided and less than $1 million dollars; however, they represented large portions of contractors’ fees in a few cases. See Table 6 below for a list of fee reductions. Three times in fiscal years 2006 through 2016, M&O contractors received 50 percent or less of available award and incentive fees due to a safety and security issue at the Lawrence Livermore National Laboratory (LLNL) in fiscal year 2008 and a major accident involving the WIPP in Carlsbad, New Mexico, and the Los Alamos National Laboratory (LANL) in fiscal year 2014. LLNL, 2008. LLNL’s M&O contractor received 50 percent of the available award and incentive fees—$15,795,584 out of $31,879,519—due to weaknesses in environmental management, security, and management/performance improvement that resulted in Satisfactory ratings in those respective areas and an overall Satisfactory rating in operations. In particular, an April 2008 inspection and force-on-force exercise conducted by DOE’s Office of Health, Safety, and Security found significant weaknesses in protective force and classified matter protection and control programs that led to an Unsatisfactory rating in security. The performance evaluation also reported issues with contractor assurance system progress, staffing, and “unacceptable” losses of key personnel. LLNL’s contractor received overall ratings of Outstanding in mission and Good in institutional management. In addition, the contractor received $21,862,651 in fixed fees, for a total fee award of $37,658,235. WIPP, 2014. WIPP’s contractor received 6.9 percent—$561,266 out of $8,192,895—of the fees available under its contract in fiscal year 2014 due to two unrelated accidents, a truck fire and a waste drum explosion, that resulted in the suspension of waste disposal at the site—the nation’s only facility for disposal of transuranic waste. The 6.9 percent of fees awarded represented an additional reduction of fees from the amounts the contractor earned for meeting a portion of its objective criteria targets and receiving Satisfactory ratings in all four subjective criteria. WIPP did not resume waste disposal operations until 2017. LANL, 2014. LANL’s contractor received none of the available award fee, and no DOE fixed fee, in fiscal year 2014 due to its improper oversight and packaging of the waste drum that exploded at WIPP. Of $63,406,380 in available fee, LANL’s contractor received about $6.3 million in fixed fee associated with work completed under contract with other federal agencies that, according to NNSA officials, could not be revoked. Similar to WIPP’s contractor, this represented an additional reduction of fees from the amounts that would have resulted from an overall Satisfactory rating (including an Unsatisfactory for operations and infrastructure; Satisfactory for science, technology and engineering; Satisfactory for leadership; and Very Good for the two mission goals). In addition to losing fee and award term, the waste portion of the LANL contract was withdrawn from the M&O contract and contracted out separately by EM. In all three cases, in the year following the 50 percent or less in award and incentive fees, performance ratings returned to at least Good levels and contractors received at least three-quarters of available award and incentive fees. With regard to the WIPP accident involved in two of the three cases, efforts to recover from the waste drum incident and return to full operations have cost hundreds of millions to date and are estimated to cost more than $600 million in total, all of which will be costs to the taxpayer. The combined unearned and reduced fee for both contractors amounted to $64,788,464, or about 10 percent of total estimated costs to the government. In addition to fee reductions, NNSA officials stated that the WIPP accident played a significant role in NNSA’s decision to not exercise the last 7 years of possible award term on the LANL contract and thus recompete the contract in 2018. According to NNSA, those 7 years translate into approximately $17 billion in work and up to $500 million in fee the LANL contractor could have earned. Also, with regard to additional actions EM took after the accidents at WIPP, according to DOE officials, EM modified the contract terms from having a single 5-year option period to five 1-year option periods. While there are differences in how DOE’s offices approach performance evaluation of M&O contractors, all of the offices use the annual performance evaluations of the contractors and the associated rating and fee determinations to evaluate the extent to which contractors are operating sites as intended and accomplishing mission work, and to justify incentives such as fee and additional contract term. These annual performance evaluations also provide valuable information for contract management and acquisition decisions, such as whether to renew or compete expiring M&O contracts. DOE also recognizes the importance of improving performance evaluation and oversight of contractors. All of DOE’s offices except NNSA have clearly documented procedures on how to collect and use information to make rating determinations. NNSA provides a general framework for its performance evaluations in its NAP-4C policy but leaves how to collect, distribute, and document information to the discretion of individual offices and officials. In the past, NNSA officials have made changes to incentives awarded without underlying performance documentation to support the change. Without developing and documenting clear procedures for implementing NAP-4C that specify the process for collecting contractor performance information and how officials are to ensure this information can be traced to rating determinations, NNSA leadership does not have reasonable assurance that it is consistently evaluating contractor performance and that it is using relevant performance information as intended. The cost performance information included in DOE offices’ fiscal year 2016 PERs is of limited use for acquisition decision-making in that this information does not permit making an overall assessment of M&O contractors’ cost performance. DOE offices have not required specific assessment of cost performance in their performance evaluation policies, nor discussed how to ensure that cost information is useful for acquisition decision-making. However, the PERs are important sources of information for contract management—particularly for acquisition decisions and oversight of spending on cost-reimbursement contracts. DOE officials identified challenges in evaluating M&O contractors’ cost performance and ways this evaluation may occur outside of the annual performance evaluation process. These challenges contribute to why there is less cost performance-related information in PERs than for other types of performance. While collecting, measuring, and reporting quality cost performance information may be challenging, such information is important for fully assessing contractor performance and managing the inherent risks of cost-reimbursement contracts. By updating their policies to require quality cost performance information in PERs to enable an overall assessment of M&O contractor cost performance, the six DOE offices with M&O contracts could strengthen their oversight of costs for contracts worth about $20 billion a year and use this information to improve acquisition decision-making. We are making seven recommendations to DOE offices: The Administrator for the National Nuclear Security Administration should develop and document clear procedures for implementing NAP-4C, specifying the process for collecting contractor performance information and describing how officials are to ensure this information can be traced to rating determinations. (Recommendation 1) The Assistant Secretary for the Office of Energy Efficiency and Renewable Energy should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 2) The Assistant Secretary for the Office of Environmental Management should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 3) The Assistant Secretary for the Office of Fossil Energy should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 4) The Administrator for the National Nuclear Security Administration should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 5) The Assistant Secretary for the Office of Nuclear Energy should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 6) The Director of the Office of Science should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 7) We provided a draft of this report to DOE for comment. DOE provided us with written comments, as well as technical comments, which we incorporated as appropriate. In its written comments, reproduced in appendix IX, DOE agreed with four of our seven recommendations and partially agreed with the others. DOE partially agreed with our recommendations that three DOE offices— EERE, NE, and SC—update their policies to require that PERs include quality information on cost performance to enable an overall assessment of M&O contractor cost performance. In its written comments, DOE said that the three offices have concerns that (1) our report gives the impression that DOE does not review cost performance of their respective national laboratories in an adequate manner, and (2) by focusing on the annual PERs, our report does not capture the cost performance reviews conducted in day-to-day contract oversight, the annual laboratory planning process, and contract extend/compete decisions. In its comments, DOE stated that since EERE, NE, and SC conduct cost performance reviews in normal operations and at the year-end annual evaluation process, adequate information is available to assess whether the contractor cost performance is acceptable to the department. In the report, we note that DOE conducts some cost performance evaluation activities outside of the annual performance evaluation process, although we did not assess these efforts. While there may be adequate information available, DOE does not commonly document this information or assessments from such activities in the PERs. We continue to believe that the PERs are important sources of information for contract management—particularly for acquisition decisions and oversight of spending on cost-reimbursement contracts—and that action is needed to improve these formal records of contractor performance. By not including quality information on overall cost performance and assessments in PERs, DOE offices are missing a valuable opportunity to better document contractors’ cost performance, improve acquisition decision-making, and strengthen oversight of billions of dollars in contracting. We continue to believe that it is important for EERE, NE, and SC to implement the recommendations and that by doing so, these offices would have better assurance that M&O performance evaluations fully address required elements. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix X. This report reviews the Department of Energy’s (DOE) performance management of its management and operating (M&O) contracts. Specifically, it examines (1) how DOE offices evaluated M&O contractor performance in fiscal years 2006 through 2016 and the extent to which these offices have documented their evaluation approaches; (2) the extent to which DOE’s fiscal year 2016 M&O contractor performance evaluation reports provide information on contractors’ technical, administrative, and cost performance; and (3) the results of DOE’s M&O contractor performance evaluations from fiscal years 2006 through 2016. For all three objectives, we reviewed performance evaluation documentation—performance evaluation plans, performance evaluation reports (PERs), fee determinations, award term determinations, and option term determinations—for 21 of the 22 DOE M&O contracts in place as of fiscal year 2016, the most recently completed contract year at the time we initiated our review. We also reviewed documentation for Bettis and Knolls Atomic Power Laboratories’ M&O contract but excluded it from our analysis because the contract does not have annual reviews and ratings comparable to the other DOE M&O contracts. The Bettis and Knolls contract does not have an award fee and thus NNSA’s Office of Naval Reactors—the office responsible for overseeing the M&O contract—does not produce annual PERs similar to those of the other offices. In addition, we did not include in our scope the DOE contract for the cleanup of the West Valley Demonstration Project in upstate New York because it was not an M&O contract in fiscal year 2016; according to DOE officials, it switched from being an M&O to a non-M&O contract in fiscal year 2007. In addition, we also interviewed DOE officials to gain a further understanding of the department’s performance evaluation processes and results, including officials at DOE headquarters and at several field offices that are responsible for providing day-to-day oversight of the activities of M&O contractors. To provide additional perspective, we interviewed officials at the Department of Defense, the National Aeronautics and Space Administration, and the Department of Homeland Security, which we selected because they also manage government-owned, contractor- operated laboratories and sponsor work at DOE laboratories, sometimes contributing views incorporated into DOE performance evaluations. To examine how DOE offices have evaluated M&O contractor performance, we reviewed DOE’s and DOE offices’ policies and procedures for performance evaluations, as well as annual performance evaluation and measurement plans and PERs from fiscal years 2006 through 2016. We also compared each office’s policies and procedures for conducting performance evaluations against federal standards for internal control, as well as the Federal Acquisition Regulation (FAR), DOE’s Acquisition Guide, and the Department of Energy Acquisition Regulations. In addition, to examine the extent to which these offices have documented their evaluation approaches, we discussed the evaluation approaches and processes with DOE officials and compared those approaches with documented policies and procedures. To evaluate the extent to which PERs provided information on each of the performance areas outlined in the FAR—technical, administrative, and cost—we performed a content analysis of 22 DOE fiscal year 2016 PERs for M&O contractors. We developed operationalized definitions of each of the three areas with input from DOE’s offices. Broadly, the operationalized definition of technical performance included mission- related activities, the operationalized definition of administrative performance included mission support activities, and the operationalized definition of cost performance included spending-related activities. Mission-related activities included, for example, research and development, production, storage, clean-up, and construction. Mission support activities included, for example, information technology, human resources, legal activities, environmental safety and health, property management, risk assessment, and leadership activities. Cost-related activities included, for example, spending, budgeting, strategic sourcing, and costs, including the contractor’s cost-effectiveness. In identifying information related to cost performance, we considered all evaluative statements related to cost, including broad terms such as saving, cost, spending, and budget. Then we categorized performance descriptions under these three performance areas and counted the number of performance descriptions that included information in the M&O contracts’ PERs related to each of the areas. A performance description could be categorized as related to one, two, or all three areas. Two analysts independently reviewed each PER and then met to agree on the categorizations. When differences arose, we included a third analyst to arrive at a consensus. For the vast majority of M&O contracts, we analyzed the performance descriptions at the level of objectives—where most performance descriptions were found—and included notable outcomes described under those objectives. In a few instances, we used other comparable units of analysis, such as goals, for some National Nuclear Security Administration (NNSA) M&O contracts (in which performance information was provided by goals, not objectives) and criteria for Office of Environmental Management (EM) and Office of Fossil Energy (FE) (in which performance information was provided under numerous subjective and objective criteria). Based on our analysis, we reported the total number of performance descriptions for each area, as well as the percentage of performance descriptions that contained information related to each area. Because performance criteria descriptions could contain information related to more than one area, the percentages total more than 100 percent. To determine the extent of cost performance-related information in DOE’s fiscal year 2016 PERs for its M&O contracts, we performed a content analysis. From our analysis, we reported the total number of pages the cost performance-related information represented, compared with the average number of total report pages. To determine the number of pages, we counted the number of pages of each PER. In addition, to evaluate the quality of cost performance-related information, we reviewed DOE Information Quality Guidelines, which apply to information DOE offices make available to the public. We then performed a content analysis of DOE fiscal year 2016 PERs based on the definition of quality in the guidelines, which includes that information generated for DOE and the public be useful. We further analyzed and categorized the types of cost performance-related information. Types of cost information included, for example, within budget, over budget, cost savings, cost overrun, and cost effectiveness. We defined cost effectiveness as good value for money spent. To examine the results of DOE’s M&O contractor performance evaluations from fiscal years 2006 through 2016, we analyzed performance ratings and incentives awarded in PERs, fee determination letters, and other performance evaluation documents. Throughout the report, we analyzed and provided information by “contract rating sites” rather than individual contractors or physical sites, because the individual contractors and how certain sites align with the contracts have changed over time. We analyzed 24 distinct contract rating sites covered by 21 M&O contracts in place as of fiscal year 2016. There are three more contract rating sites than the number of contracts in 2016: two additional contract rating sites because two individual contracts were consolidated into one contract during the period we covered—we analyzed the two individual contracts from prior to 2014 separately from the current consolidated contract—and one additional contract rating site because two DOE offices separately evaluated the performance of a single contractor that performed activities for each of those offices. To summarize the results of DOE’s annual contract performance evaluations, we analyzed overall annual percentages of available award and incentive fees provided at each contract rating site and presented the corresponding FAR rating categories. We reviewed performance evaluation ratings from 239 performance evaluations at the 24 contract ratings sites. We also did not include ratings from the EM portion of the Savannah River Site contract for fiscal years 2006 through 2008 because, according to EM officials and award fee documents, it had multi-year award fee targets that did not align with individual fiscal years. We conducted this performance audit from October 2016 through February 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 7 provides additional information on the Department of Energy’s 22 management and operating contracts, contractors, contract award and end year, and total spending through these contracts. Table 8 presents the spending data adjusted for inflation. The Office of Energy Efficiency and Renewable Energy (EERE) focuses on aiding the development and implementation of renewable energy technologies and improving energy efficiency across various sectors. EERE administers its management and operating (M&O) contract at the National Renewable Energy Laboratory (NREL), in Golden, Colorado. As we describe in our report, EERE follows a Science and Energy Lab approach to evaluate its M&O contractor’s performance that uses broad, office-wide performance criteria, which are mostly subjective. Table 9 provides the full list of the goals and objectives EERE used to evaluate its M&O contractor performance in fiscal year 2016. For the most part, these performance criteria remained unchanged from fiscal year 2006 through fiscal year 2016. As we describe in our report, EERE uses detailed methodologies to determine ratings and incentives. To illustrate the detailed formulas and calculations involved, Figure 5 provides an example of how ratings and fees are calculated. Table 11 shows the rating scores the contractors earned for Mission and Operations goals. Figure 6 shows the annual total fee (both award fee and fixed fee) EERE provided to its M&O contractors for fiscal years 2006 through 2016. Table 12 provides the percentage of available award and incentive fees provided to the M&O contractors for fiscal years 2006 through 2016 by contract rating site. The Department of Energy’s Office of Environmental Management (EM) is responsible for decontaminating and decommissioning facilities and sites that are contaminated from decades of nuclear weapons production and nuclear energy research. EM has two management & operating (M&O) contract sites: the Savannah River Site (SRS) in Aiken, South Carolina; and the Water Isolation Pilot Plant (WIPP) in Carlsbad, New Mexico. As we describe in our report, EM follows a Site Specific approach to evaluate its M&O contractors that uses detailed performance criteria specific to each contract. Under this approach, most performance criteria we reviewed are objective criteria, and a few are broader, subjective criteria. Tables 13 through 16 provide examples of some of the specific criteria EM used at each site. We provide examples rather than a full list because each site has numerous individual metrics, which are often quite technical. Specifically, Tables 13 and 14 provide examples of EM’s objective performance criteria, which are defined based on quantifiable metrics (e.g., a contractor’s demonstrated waste processing rate) and milestones (e.g., whether a contractor completed a task on or before a scheduled date). Table 13 includes 3 of the 6 objective performance criteria EM used to evaluate the SRS contractor’s performance during fiscal year 2016. Table 14 contains examples of 3 of the 9 objective criteria EM used to evaluate the WIPP contractor in fiscal year 2016. Tables 15 and 16 provide examples of EM’s subjective criteria, which are used for aspects of performance that may be difficult to capture objectively. Table 15 provides examples of 3 of the 12 subjective criteria for evaluating the SRS M&O contractor’s performance during fiscal year 2016, while Table 16 contains the fiscal year 2016 subjective criteria for evaluating the WIPP M&O contractor’s performance. The following tables and figure provide details on the incentives available to and earned by EM’s M&O contractors from fiscal year 2006 through fiscal year 2016. Table 17 shows the performance incentives that EM included in its M&O contracts. We use the term “contract rating sites” rather than individual contractors or physical sites, because the individual contractors and how certain sites align with the contracts may have changed over time. Figure 7 shows the annual total fee (both award fee and fixed fee) provided to EM M&O contractors for fiscal years 2006 through 2016. Because EM and National Nuclear Security Administration activities at the Savannah River Site are rated separately, only the EM portion of fees is represented below. Table 18 provides the percentage of available award and incentive fees EM’s M&O contractors earned for fiscal years 2006 through 2016. The Department of Energy’s Office of Fossil Energy (FE) manages the nation’s Strategic Petroleum Reserve (SPR), which consists of salt caverns storing crude oil in Texas and Louisiana. As we describe in our report, FE follows a Site Specific approach to evaluate its M&O contractors that uses detailed performance criteria specific to each contract. Under this approach, most performance criteria we reviewed are objective criteria, and a few are broader, subjective criteria. Table 19 provides examples of FE’s objective performance criteria, which are defined based on quantifiable metrics (e.g., the contractor’s demonstrated oil drawdown rate) and performance targets (e.g., whether a contractor completed a task on or before a scheduled date). Table 19 includes 4 of the 11 objective performance criteria FE used to evaluate the Strategic Petroleum Reserve Office (SPRO) contractor’s performance during fiscal year 2016. We provide examples rather than a full list because there were numerous individual metrics, which are often quite technical. Table 20 contains the full list of FE’s subjective performance criteria— which FE uses for aspects of performance that may be difficult to capture objectively—for evaluating the SPRO M&O contractor’s performance during fiscal year 2016. Table 21 shows the performance incentives that FE included in its M&O contract. Figure 8 shows the annual total fee (both award fee and fixed fee) FE provided to its M&O contractors for fiscal years 2006 through 2016. Table 22 provides the percentage of available award and incentive fees provided to M&O contractors for fiscal years 2006 through 2016. The National Nuclear Security Administration (NNSA), a separately organized agency within DOE, is responsible for maintaining and enhancing the safety, reliability, and performance of the nation’s nuclear weapons stockpile, promoting international nuclear safety and nonproliferation, and supporting U.S. leadership in science and technology. NNSA administers management and operating (M&O) contracts at eight national laboratories, plants, and sites: Bettis and Knolls Atomic Power Laboratory in West Mifflin, Pennsylvania, and Niskayuna and West Milton, New York Kansas City National Security Campus in Kansas City, Missouri Lawrence Livermore National Laboratory in Livermore, California Los Alamos National Laboratory in Los Alamos, New Mexico Nevada National Security Site near Las Vegas, Nevada NNSA Production Office Sites Pantex Plant in Amarillo, Texas Y-12 National Security Complex in Oak Ridge, Tennessee Sandia National Laboratories in Albuquerque, New Mexico Savannah River Site in Aiken, South Carolina As we describe in our report, NNSA follows an approach to evaluate its M&O contractors that uses broad, office-wide performance criteria that are mostly subjective. Table 23 provides the full list of the goals and objectives NNSA used to evaluate its M&O contractors’ performance in fiscal year 2016. While there have been some language amendments, overall, goals and objectives have remained the same from fiscal year 2013 through fiscal year 2016. As we describe in our report, under the NNSA approach, goals are assigned specific portions of the available award fee for each contract at the beginning of the fiscal year—and at the end of the fiscal year, officials determine ratings and fees at the same time in a collaborative meeting with NNSA leadership. Figure 9 provides an example of award fee amounts assigned to individual goals. Table 24 shows the performance incentives that NNSA included in its M&O contracts. We use the term “contract rating sites” rather than individual contractors or physical sites, because the individual contractors and how certain sites align with the contracts have changed over time. Specifically, NNSA consolidated its Y-12 National Security Complex and Pantex Plant contracts into the National Production Office Sites contract in fiscal year 2014, and NNSA and the Office of Environmental Management separately evaluated their respective activities carried out by the Savannah River Site contractor. Table 25 provides annual performance ratings by goal for fiscal years 2013 through 2016 for each NNSA contract rating site. Figure 10 shows the annual total fee (both award fee and fixed fee) provided to NNSA M&O contractors for fiscal years 2006 through 2016 by contract rating site. Table 26 provides the percentage of available award and incentive fees provided to M&O contractors for fiscal years 2006 through 2016 by contract rating site. The Office of Nuclear Energy’s (NE) primary mission is to advance nuclear power as a resource capable of making major contributions in meeting U.S. energy supply, environmental, and energy security needs. NE administers its management and operating (M&O) contract at the Idaho National Laboratory (INL), in Idaho Falls, Idaho. As we describe in our report, NE follows a Science and Energy Lab approach to evaluate its M&O contractor that uses broad, office-wide performance criteria that are mostly subjective. Table 27 provides the full list of the goals and objectives NE used to evaluate its M&O contractor performance in fiscal year 2016. For the most part, these performance criteria have remained unchanged from fiscal year 2007 through fiscal year 2016. As discussed above, NE uses detailed methodologies to determine ratings and incentives. To illustrate the detailed formulas and calculations involved, Figure 11 provides an excerpt from a fee determination letter as an example of how ratings and fees are calculated. Table 28 shows the performance incentives that NE included in its M&O contract. Table 29 shows the rating scores the contractor earned for Mission and Operations goals. Figure 12 shows the annual total fee (both award fee and fixed fee) provided to NE’s M&O contractor for fiscal years 2006 through 2016. Table 30 provides the percentage of available award and incentive fees provided to M&O contractor for fiscal years 2006 through 2016. The Office of Science (SC) supports scientific research for energy and the physical sciences both by directly supporting such research, for example, through grants to and cooperative agreements with universities, and by supporting the development, construction, and operation of scientific user facilities. SC administers management and operating (M&O) contracts at 10 national laboratory sites: Ames Laboratory in Ames, Iowa Argonne National Laboratory in Argonne, Illinois Brookhaven National Laboratory in Upton, New York Fermi National Accelerator Laboratory in Batavia, Illinois Lawrence Berkeley National Laboratory in Berkeley, California Oak Ridge National Laboratory, in Oak Ridge, Tennessee Pacific Northwest National Laboratory in Richland, Washington Princeton Plasma Physics Laboratory in Princeton, New Jersey SLAC National Accelerator Laboratory in Stanford, California Thomas Jefferson National Accelerator Facility in Newport News, As we describe in our report, SC follows a Science and Energy Lab approach to evaluate its M&O contractors that uses broad, office-wide performance criteria that are mostly subjective. Table 31 provides the full list of the goals and objectives SC used to evaluate its M&O contractors’ performance in fiscal year 2016. Generally, these performance criteria remained mostly unchanged from fiscal year 2006 through fiscal year 2016. As discussed above, SC uses detailed methodologies to determine ratings and incentives. To illustrate the detailed formulas and calculations involved, Figure 13 provides excerpts from a performance evaluation report as an example of how ratings and fees are calculated. The following tables and figure provide details on the incentives available to and earned by SC’s M&O contractors from fiscal year 2006 through 2016. Table 32 shows the performance incentives that SC included in its M&O contracts. We use the term “contract rating sites” rather than individual contractors or physical sites, because the individual contractors and how certain sites align with the contracts may have changed over time. Table 33 shows the rating scores the contractor earned for the Science and Technology goals and Maintenance and Operations goals, by contract rating site. Figure 14 shows the annual total fee (both award fee and fixed fee) SC M&O contractors earned for fiscal years 2006 through 2016 by contract rating site. Table 34 provides the percentage of available award and incentive fees SC’s M&O contractors earned for fiscal years 2006 through 2016 by contract rating site. Under the award term incentive, some SC M&O contractors are able to earn one additional year of performance under the contract for each year they exceed certain thresholds in their annual performance evaluations. Table 36 shows award term results for fiscal years 2006 through 2016 by contract rating site. In addition to the contact named above, Quindi Franco (Assistant Director), Ryan Gottschall (Analyst in Charge), Danny Baez, and Diantha Garms made key contributions to this report. Also contributing to this report were John Delicath, Brenna Derritt, Cindy Gilbert, Timothy Guinane, Rich Johnson, Danny Royer, Kiki Theodoropoulos, and Tatiana Winger.", "summary": "In fiscal years 2006 through 2016, the federal government spent almost $193 billion on DOE's M&O contracts—a form of contract that traces its origins to the Manhattan Project. Six DOE offices use M&O contracts to manage and operate federally owned sites that perform work to fulfill DOE's diverse missions, such as conducting scientific research and maintaining nuclear weapons. GAO was asked to review DOE's performance management of its M&O contracts. This report examines, among other things, (1) how DOE offices evaluated M&O contractor performance in fiscal years 2006 through 2016; (2) the extent to which DOE's fiscal year 2016 M&O contractor PERs provide information on contractors' technical, administrative, and cost performance; and (3) the results of DOE's M&O contractor performance evaluations for fiscal years 2006 through 2016. GAO reviewed performance evaluation documents for 21 of the 22 DOE M&O contracts; analyzed DOE policies, procedures, and guidelines, and federal regulations; analyzed technical, administrative, and cost aspects of M&O contracts' 2016 PERs; and interviewed DOE officials. In fiscal years 2006 through 2016, six offices within the Department of Energy (DOE) generally used one of three different approaches to evaluate management and operating (M&O) contractor performance. Although these approaches varied in the performance criteria and methodologies used for determining contractor ratings and incentives, all the offices annually set expectations for contractors and assessed performance. In analyzing DOE's fiscal year 2016 Performance Evaluation Reports (PER), GAO found that these reports provided less information on M&O contractors' cost performance than on contractors' technical and administrative performance. The cost information provided in the PERs often was not detailed, did not indicate the significance of the performance being described, and applied only to specific activities. Further, the information is of limited use for acquisition decision-making, such as deciding whether to extend the length of a contract, because it does not permit an overall assessment of cost performance. A key reason PERs did not include more cost performance information is that the DOE offices' policies do not require specific assessments of cost performance or discuss how to ensure cost information is useful for future acquisition decision-making. By updating policies to require inclusion of quality cost performance information in PERs, DOE offices could better assess M&O contractors' costs, improve acquisition decision-making, and ensure performance evaluations fully address required elements. Based on GAO's review of DOE M&O contractor performance evaluations from fiscal years 2006 through 2016, DOE generally provided high performance ratings and more than 90 percent of available performance incentives (see figure). Ratings for some areas of contractor performance, as well as ratings for contractor performance at specific DOE sites, varied from this trend. For example, three times during this period contractors received 50 percent or less of available award and incentive fees due to a major accident and safety and security issues. GAO is making seven recommendations to DOE, including to each of the six DOE offices to update their policies requiring that PERs include quality information to enable an overall assessment of M&O contractor cost performance. In commenting on a draft of this report, DOE generally agreed with these recommendations.", "document_type": "gao"}
{"report": "All SNAP recipients ages 16 through 59, unless exempted by law or regulation, must comply with general work requirements. (See fig. 1.) These requirements generally include registering for work, reporting to an employer if referred by a state agency, accepting an offer of a suitable job, not voluntarily quitting a job or reducing work hours below 30 hours a week, or participating in a SNAP E&T program or a workfare program—in which recipients perform work on behalf of the state—if assigned by the state agency. SNAP recipients are exempt from complying with these work requirements if they meet certain criteria, such as being responsible for caring for a dependent child under age 6 or an incapacitated person. In addition, per federal law, those who are employed for 30 or more hours per week are exempt from the work requirements. SNAP recipients who are subject to the work requirements—known as work registrants—may lose their eligibility for benefits if they fail to comply with the requirements without good cause. In addition to meeting the general work requirements, able-bodied adults without dependents (ABAWDs) must work or participate in a work program 20 hours or more per week, or participate in workfare, which is performing work to earn the value of their SNAP benefits. Participation in SNAP E&T, which is a type of work program, is one way for ABAWDs to meet the 20-hour-per-week ABAWD work requirement, but other work programs are acceptable as well. Unless ABAWDs meet these work requirements or are determined to be exempt, they are limited to 3 months of SNAP benefits in a 36-month period. (See fig. 2.) At the request of states, FNS may waive the ABAWD time limit for ABAWDs located in certain areas of a state or an entire state when certain circumstances are met. For example, a waiver may be granted if the area has an unemployment rate of over 10 percent or the number of jobs available is insufficient to provide employment for these individuals. If the time limit is waived, ABAWDs are not required to meet the ABAWD work requirement in order to receive SNAP for more than 3 months in a 36-month period, but they must still comply with the general work requirements. Federal requirements for state SNAP E&T programs were first enacted in 1985 and provide state SNAP agencies with flexibility in designing their SNAP E&T programs, including whom to serve and what services to offer. The state can require some or all SNAP work registrants to participate in the SNAP E&T program as a condition of eligibility, an approach commonly referred to as a mandatory program. In mandatory programs, individuals can be sanctioned if they fail to participate in an assigned SNAP E&T activity. State SNAP agencies also may elect to exempt categories and individuals from participating in SNAP E&T, such as those living in rural areas or experiencing homelessness. In addition, states may exempt all work registrants from participation in SNAP E&T and only serve volunteers, an approach commonly referred to as a voluntary program. States also determine which types of services to provide participants through their SNAP E&T programs, although they must provide at least one from a federally determined list. This list includes job search programs, job search training programs, workfare, programs designed to improve employability through work experience or training, education programs to improve basic skills and employability, job retention services, and programs to improve self-sufficiency through self- employment. There are three types of federal funding streams for state SNAP E&T programs: 100 percent funds—formula grants for program administration, including planning, implementing, and operating a SNAP E&T program; 50 percent federal reimbursement funds; and ABAWD pledge funds— grants to states that pledge to serve all of their at-risk ABAWDs. While the federal allocation for 100 percent funds has generally been capped at $90 million over the last decade, some states do not obligate or expend their full allocation, and as a result, the following year FNS reallocates these funds to other states that request additional funds, according to FNS officials. Total federal expenditures on SNAP E&T programs increased from about $282 million in fiscal year 2007 to about $337 million in fiscal year 2016, according to FNS data (see fig. 3). Federal 50 percent reimbursement funds, which are generally not capped, constitute the largest portion of federal expenditures on SNAP E&T and were responsible for the majority of the increase in total federal SNAP E&T expenditures over the last decade. These funds are used for program administrative costs for operating SNAP E&T programs, as well as SNAP E&T participant expenses, such as transportation and dependent care costs. In 2014, FNS created the Office of Employment and Training to provide support and oversight for the SNAP E&T program. Specifically, FNS expanded its headquarters staff dedicated to SNAP E&T from one to six full-time employees, and added a dedicated SNAP E&T official in each FNS regional office to provide technical assistance to states. FNS has also developed resources, such as a SNAP E&T Operations Handbook, intended to help states implement and expand their SNAP E&T programs. To inform its program support and oversight, FNS collects information on SNAP recipients and work registrants, as well as SNAP E&T program participants, services, and expenditures. More specifically, FNS periodically collects data from states on the total number of work registrants, ABAWDs, SNAP E&T participants, and participants in each type of SNAP E&T service. FNS also collects data from states on a sample of all households participating in SNAP each month as part of the Quality Control process. The Quality Control data include characteristics of SNAP recipients, including whether they are work registrants, for example. In addition, as a result of requirements in the Agricultural Act of 2014, FNS began collecting annual SNAP E&T outcome and participant characteristics data from states in January 2018. Furthermore, FNS collects quarterly information from states on SNAP E&T expenditures. States are also required to submit an annual SNAP E&T plan to FNS, including information on the services they plan to offer during the year and their projected budget and program participation numbers. Guidance on plan requirements is provided in an FNS handbook for states. FNS national and regional officials review the plans to ensure compliance with requirements, and plans must be approved by regional officials before SNAP E&T funding is allocated to a state. State SNAP E&T programs have served a small and decreasing percentage of overall SNAP recipients over time, and although these data are generally reliable, FNS data on SNAP E&T program participant characteristics and outcomes are not reliable. State SNAP E&T programs have served a small percentage of SNAP recipients over the last decade potentially due in part to certain policy changes during that time, such as the increasing number of states moving from mandatory to voluntary SNAP E&T programs. The number of SNAP recipients served by SNAP E&T programs has also potentially been low because a limited number of those referred to state programs go on to participate in services. FNS’s lack of reliable SNAP E&T data, as well as the agency’s lack of a plan for using newly reported participant characteristics and outcome data to assess program performance, constrain FNS’s ability to understand the extent to which agency goals are being met. According to FNS data, among the approximately 43.5 million total SNAP recipients, only a small percentage—0.5 percent, or about 200,000—were served by state SNAP E&T programs in an average month of fiscal year 2016, due to several factors. (See fig. 4.) First, according to FNS data, most SNAP recipients are exempt from work requirements for various reasons, under federal law and regulation. For example, according to FNS data, almost two-thirds of SNAP recipients were children, elderly, or adults with a disability in an average month of fiscal year 2016, and these groups generally are exempt from work requirements. As a result of federal exemptions, in an average month of fiscal year 2016, about 14 percent of SNAP recipients, or about 6.1 million individuals, were work registrants who were subject to work requirements, according to FNS data. Further, state SNAP agencies may elect to exempt individuals for whom participation is judged to be impractical or not cost effective. Moreover, SNAP work registrants may participate in other activities to comply with work requirements, such as other federal- and state-funded E&T programs. In recent years, the number and percentage of SNAP recipients and work registrants participating in SNAP E&T programs has decreased, according to FNS data. From fiscal years 2008 through 2016, the average monthly number of SNAP E&T participants decreased from about 256,000 to about 207,000, or by 19 percent, according to state data on SNAP E&T participants that were reported to FNS. (See fig. 5.) However, the data also show that over the same time period, the average monthly number of SNAP recipients increased from about 27.8 million to about 43.5 million, and work registrants increased from about 3.2 million to about 6.1 million. As a result, the percentage of total SNAP recipients participating in SNAP E&T programs decreased from about 0.9 percent to about 0.5 percent, and the percentage of work registrants participating in these programs decreased from approximately 8.1 percent to approximately 3.4 percent. The decline in SNAP E&T participation in recent years may have been influenced by certain policy changes, including states’ widespread use of waivers for ABAWDs. According to FNS data, from fiscal years 2008 through 2012, the number of states with statewide waivers due to economic conditions increased from 7 to 46 states, potentially enabling ABAWDS in these states to continue receiving SNAP benefits without meeting ABAWD work requirements. As a result, these waivers potentially reduced the number of ABAWDs nationwide who may otherwise have participated in SNAP E&T programs in order to continue receiving SNAP benefits. Further, according to FNS data, from fiscal years 2011 through 2015, the majority of states continued to operate under statewide waivers of the ABAWD time limit. According to FNS data, states have also increasingly moved from mandatory to voluntary SNAP E&T programs in recent years, another policy change that may have influenced SNAP E&T participation. In fiscal year 2010, 36 states operated mandatory programs; however, by fiscal year 2017, 19 states operated mandatory programs. (See fig. 6.) When states move to a voluntary program, they generally experience a decline in SNAP E&T participation, according to FNS officials and our analysis of FNS data. Specifically, of the 21 states that changed from a mandatory to a voluntary program from fiscal year 2010 through fiscal year 2016, 13 experienced a decrease in SNAP E&T participation in the year following the change—ranging from a 21 percent decrease to a 93 percent decrease. This trend was generally inconsistent with the trend in work registrants, as 9 of the 13 states that changed from a mandatory to a voluntary program and experienced a decrease in SNAP E&T participation also experienced an increase in their total number of SNAP work registrants during the same time period. Furthermore, voluntary programs are generally smaller overall than mandatory programs, according to our analysis of FNS data. In fiscal year 2016, for example, the 31 states operating voluntary programs together served less than half of the total number of SNAP E&T participants served by the 22 states operating mandatory programs, although these two groups of states had similar numbers of new work registrants. FNS officials told us that there are various reasons states may move to voluntary programs. For example, FNS officials said that many states have reported to them that offering employer-driven, skills-based, intensive employment and training services, such as vocational training or work experience, through voluntary programs yields more engaged participants with stronger outcomes. FNS officials stated that they have been actively encouraging states to offer these types of services because they believe these types of services are more effective in moving SNAP recipients, who may be more likely to have barriers to employment, toward self-sufficiency. However, they noted that SNAP E&T funding may not be sufficient to provide these types of services in mandatory programs that require participation by SNAP recipients and thus have higher participation. In addition, FNS officials told us that voluntary programs are less administratively burdensome than mandatory programs, as they allow states to focus on serving motivated participants rather than sanctioning non-compliant individuals. In addition, participation rates are low for SNAP recipients referred to the SNAP E&T program, according to FNS officials, state program officials, and available data, regardless of whether the state operates a mandatory or voluntary program. FNS officials said that engaging SNAP recipients who are referred to the program is a challenge across all states—a point confirmed by the states we selected and available data. Among the 11 states that reported data to FNS on SNAP E&T participation by those referred to the program, which included states operating mandatory and voluntary programs, the percentage of SNAP recipients who were sent a referral letter but did not participate in any activity ranged from 35 to 98 percent in fiscal year 2017. For 8 of these states, about 70 percent or more of SNAP recipients who were sent a referral letter did not participate in any activity. FNS officials, state officials, and SNAP E&T service providers in our selected states indicated that participation by SNAP recipients referred to SNAP E&T may be low for various reasons. For example, FNS officials told us that some recipients face barriers to participation, such as a lack of transportation, childcare, or treatment for mental health issues, yet they have not been exempted by the state. For example, SNAP E&T providers and state officials in our selected states noted that SNAP recipients in rural areas, in particular, experience challenges participating in the E&T program due to a lack of transportation to E&T services, as well as the limited range of available services and employment opportunities. State officials and providers in all five of the states we selected also noted that SNAP recipients with mental health needs or substance abuse issues usually require additional services to participate in the SNAP E&T program, such as intensive case management or treatment. Lack of awareness of E&T services may also affect participation, as three SNAP E&T providers we spoke with said that SNAP recipients can be transient, and as a result, may not receive referral letters provided by mail. Further, some SNAP recipients may decide not to participate, despite the potential loss of SNAP benefits, or others face certain barriers to employment that may deter them from participating. For example, formerly incarcerated SNAP recipients may be discouraged from participating in SNAP E&T due to past struggles finding employers willing to hire those with a criminal background. Low participation rates are common across other employment and training programs serving similar populations, and although FNS has not researched how to address this issue in SNAP E&T, other agencies have assessed ways to improve participation in these programs. For example, in our past work, we found that states faced challenges with low participation in employment and training activities by Temporary Assistance for Needy Families cash assistance recipients. Recognizing that states would benefit from strategies on how to increase engagement in such activities, the U.S. Department of Health and Human Services contracted for research on behavioral interventions that affect attendance rates for employment and training services. Researchers found that strategies such as sending text messages to participants—in addition to letters in the mail—could increase the likelihood that they would attend program activities, particularly when communications encouraged recipients to make a detailed plan to participate. FNS officials stated that they are aware of research on strategies to address low participation in E&T programs; however, they noted that they have not researched causes of low participation in the SNAP E&T program. FNS officials added that they believe states could take steps to make enrolling and participating in SNAP E&T activities less burdensome for SNAP recipients. Further, FNS officials acknowledged that states could potentially benefit from technical assistance on increasing the rates at which referred SNAP recipients participate in SNAP E&T activities, but the agency’s SNAP E&T technical assistance resources have generally not focused on this issue. In a recent policy brief, FNS indicated that collecting data on SNAP E&T participation can help state agencies and providers determine where attrition is occurring and point towards processes or services that need improvement. However, the brief did not provide strategies for improving processes or services to reduce attrition, and FNS officials acknowledged that they generally have not focused their resources on getting recipients to initially engage with service providers. Rather, FNS has focused its technical assistance resources on an approach intended to improve participation among those recipients who engage with the SNAP E&T program. Specifically, according to FNS officials, the agency’s resources have focused on encouraging SNAP E&T providers to offer more intensive services, including skills-based training, as these services may be better able to address SNAP recipients’ barriers to employment. Officials noted that they believe these types of services may be more responsive to SNAP recipients’ needs, which could increase participation in E&T. Assisting state efforts to increase the level of participation for SNAP recipients who are referred to the E&T program could help FNS achieve agency goals, as well as help SNAP recipients move toward self- sufficiency. Specifically, USDA’s fiscal year 2018 strategic plan includes increased participation in SNAP E&T as a strategy for supporting SNAP recipients in achieving self-sufficiency. Similarly, in a 2016 letter to states, FNS noted that expanding SNAP recipients’ access to employment and training services is critical to helping them transition off the SNAP program by becoming economically self-sufficient. If states continue to struggle with low participation in SNAP E&T, and FNS does not expand its technical assistance to include a broader array of strategies to increase participation, both FNS’s ability to meet its strategic goals, and the program’s ability to help recipients achieve self-sufficiency, will be hindered. Although data on the number of overall participants in SNAP E&T programs in an average month from one FNS dataset are generally reliable, data on SNAP E&T program participant characteristics and outcomes are not reliable, according to our analysis of state data on SNAP E&T programs reported to FNS and our discussions with FNS and state officials. Specifically, in our review of the three FNS datasets that include state-reported information on SNAP E&T, we found several issues that affect the reliability of these data. According to our analysis, these data reliability issues include widely varying counts of SNAP E&T participants, ABAWDs, and work registrants across the datasets; missing or incomplete data on work registrants, ABAWDs, SNAP E&T participant characteristics and outcomes, and SNAP E&T services within the datasets; and inconsistencies within and between quarterly and annual reports of SNAP E&T participants in one of the datasets. For example, according to FNS officials, some states inaccurately reported participation in a single SNAP E&T service that exceeded the state’s total number of SNAP E&T participants. FNS has taken steps to address some of the SNAP E&T data limitations, including providing additional training and guidance to states. For example, FNS provided training to states in July 2014 and September 2018 on how to accurately report SNAP E&T participant information through one of the state-reported datasets on SNAP E&T. In addition, in response to state questions regarding how to collect new outcome measures on SNAP E&T required by the Agricultural Act of 2014, FNS issued two memoranda in 2016 and 2017 providing additional policy clarifications. Recently, in 2018, FNS issued two memoranda providing clarifications on work requirements for ABAWDs and on SNAP E&T, in part to improve the reliability of data collected. Even with these efforts, our analysis suggests that FNS continues to lack reliable data on SNAP E&T programs for at least two reasons: imprecise instructions on data collection forms and staff confusion at the state level. Imprecise instructions on data collection forms. According to our analysis, state-reported data on SNAP E&T participants and characteristics are not reliable due to imprecise instructions on the respective data collection forms. For example, the form used by states to collect information on SNAP recipients nationwide asks states to indicate if recipients are work registrants, and if so, participate in employment and training programs. Although FNS officials told us that this was intended to capture SNAP E&T participants alone, the form does not specify this. As a result, FNS officials explained that they believe states are incorrectly reporting SNAP recipients participating in any E&T program. Without a reliable link to SNAP E&T participation, FNS is unable to use this source, which provides detailed information on SNAP recipients’ demographic, educational, and economic characteristics, to analyze SNAP E&T participant characteristics. Similarly, in the case of another state-reported data source, we found that the form used to collect data on the types of SNAP E&T services participants receive does not list or define required services. According to FNS officials, states report widely varying SNAP E&T services within the same categories. Staff confusion at the state level. According to FNS officials, there has been widespread confusion among states regarding the need to track ABAWDs when waivers are in place. Consequently, some states were not tracking ABAWD participation or properly documenting SNAP recipients’ ABAWD status in recent years, according to FNS officials and some of the state SNAP agency officials we spoke with. FNS noted the importance of accurately tracking ABAWDs following the expiration of the waivers and reinstatement of the time limit in a March 2015 memorandum to regional directors. Further, FNS officials told us that states should have continued to track ABAWDs even if the state was under a statewide ABAWD waiver. FNS noted in its 2015 memorandum that states that failed to accurately track ABAWDs risked potential overpayments, as ABAWDs who fail to meet work requirements are ineligible for benefits. Further, although we found generally reliable SNAP E&T participation data in one FNS dataset, staff confusion has also likely affected these participation data. FNS officials told us that some states may mistakenly include those referred into SNAP E&T programs who did not participate in a program activity in their count of SNAP E&T participants. Finally, in the case of SNAP E&T data on outcomes, FNS regional officials told us that state-level staff were confused by the two different definitions for completion of a SNAP E&T activity used by FNS—an issue which may have affected the reliability of the outcome data. FNS has acknowledged that it is important to have reliable data on the SNAP E&T program for program oversight. Recently, in August and September 2018, FNS presented information to states at a national conference and in a webinar regarding the interactions of the different state-reported SNAP E&T data sources, and the importance of these data for funding and planning purposes. In a July 17, 2009 memorandum, FNS also stated that it is important that the agency collect reliable data on SNAP E&T to satisfy the increasing demands of Congress, advocacy groups, and the public for an accurate picture of the types of activities provided and participation patterns in those activities. This is generally consistent with federal internal control standards and our previous work on SNAP E&T. Federal internal control standards state that agencies should maintain quality data in order to produce and share quality information with stakeholders to help achieve agency goals. Further, in our 2003 report on SNAP E&T, we found that no nationwide data existed on whether SNAP E&T programs helped participants obtain employment, and we recommended that FNS collect nationwide data on program participants and require states to collect outcome measures. However, at present, the lack of reliable state-reported data on SNAP E&T participant characteristics and outcomes hinders FNS’ ability to effectively oversee and monitor the SNAP E&T program. Without such information, states, FNS, and the Congress are unable to fully assess whether agency goals are being met through the SNAP E&T program. Further, the lack of reliable state-reported data on work registrants and ABAWDs affects FNS’s ability to monitor states’ implementation of program rules, including work requirements, and ensure program integrity. In addition, as data on work registrants and ABAWDs are used to allocate federal funds to states for SNAP E&T, unreliable estimates of these groups have funding implications. FNS’s ability to understand the extent to which agency goals are being met is further hampered because FNS has not yet determined how it will use newly reported data to assess the performance of state SNAP E&T programs. As a result of provisions in the Agricultural Act of 2014, FNS required states to report new data on SNAP E&T participants’ outcomes, such as the median quarterly earnings of certain program participants, and participant characteristics, such as the percentage of participants who have received a high school diploma. In addition, the Act requires that FNS assess the effectiveness of states’ performance. In the preamble to the relevant interim final rule, FNS described at a high level how it intends to use the data, including identifying which program activities are most successful at moving individuals into employment. However, FNS officials told us that they were not yet certain how they will use the data to make such determinations. In addition, regional officials we spoke with stated that the current data might not allow FNS to answer questions about whether the program is achieving its goals. Similarly, state SNAP E&T officials we spoke with during our review did not know how the recently collected data related to program performance. Specifically, state officials in all five states we selected indicated that they were not certain how FNS will use these data to assess states’ performance. Officials in three states also said that a lack of clarity about how these data relate to program goals has led to confusion. FNS officials told us that they have not determined how they will use the newly reported data or whether the current data are sufficient, in part, because the agency has instead focused its resources on assisting the states in submitting the data to meet the new reporting requirements. According to FNS regional and national officials, states required extensive technical assistance to obtain the requisite data and calculate the reporting measures. For example, one regional official said that his office had been providing the states technical assistance for a year and a half to prepare them for the new reporting requirements. States we spoke with also indicated that the data were time-consuming and challenging to obtain. For example, many states struggled to obtain data sharing agreements with workforce agencies for the required employment data. According to FNS officials, after receiving the first round of reports in January 2018, FNS officials continued to provide technical assistance to states to improve the quality of the data, and FNS required states to submit revised reports in May. However, as of August 2018, one state and one territory had not submitted the required reports to FNS, according to FNS officials. In the absence of FNS taking steps to determine how it will use the newly reported data to assess state effectiveness, questions about whether SNAP E&T programs meet their goals will remain unanswered. Further, states may continue to be challenged to report these data, and without information from FNS on how state performance will be assessed, states may lack clarity on how collecting these data will help contribute to program goals. As of October 2018, FNS officials said that they are exploring ways to improve their ability to collect and analyze all of the program data necessary to do a comprehensive assessment of state SNAP E&T. Our prior work has emphasized the importance of establishing how performance data relates to program goals. In addition, federal internal control standards state that management should determine whether performance measures for the defined objectives are appropriate for evaluating the agency’s performance in achieving those objectives. Federal internal control standards also state that management should communicate necessary quality information to relevant internal and external parties to help the agency achieve its objectives. In recent years, state SNAP agencies have increasingly partnered with other state and local organizations, such as nonprofit community-based social service providers, community colleges, and workforce agencies, to provide services to SNAP E&T participants, according to FNS officials and states we selected for our review. In fiscal year 2018, 50 state SNAP agencies partnered with at least one other organization to deliver SNAP E&T services, with the majority partnering with more than one, according to an analysis by FNS (see fig. 7). In that year, 36 states partnered with community-based social service providers, 33 states had partnerships with workforce agencies, and 24 states partnered with community colleges. FNS officials in all seven regions said that states have increasingly used an approach FNS refers to as third party partnerships in recent years to leverage outside funding to serve SNAP E&T participants. In this model, according to FNS officials, third party organizations use non-federal funding to provide allowable E&T services and supports to SNAP recipients, and state SNAP agencies are then eligible for a federal reimbursement of 50 percent of these expenditures. FNS has promoted this third party partnership model through various technical assistance resources provided to states, including an operations handbook and webinars, and has added a dedicated position for a SNAP E&T official in each regional office, in part, to help develop these partnerships. Federal 50 percent reimbursement funds expended increased from nearly $182 million to more than $223 million, or by 23 percent, from fiscal year 2007 to fiscal year 2016. According to FNS national officials as well as officials in some FNS regions and states, partnerships play a critical role in SNAP E&T programs because state SNAP agencies may lack the capacity, resources, and expertise to provide the type of intensive employment and training services FNS considers most likely to lead to self-sufficiency for SNAP recipients. For example, two of our selected states reported that they have partnered with community colleges to train participants for local in-demand occupations, including information technology, healthcare, and welding. According to officials in one FNS regional office, community- based social service providers and community colleges may have staff with expertise in workforce development, which SNAP agencies may not have, and this enables SNAP agencies to expand their programs and services without the expense of growing their own staff. According to officials in some FNS regions and some of our selected states, partnering with workforce agencies has enabled some states to provide training to participants using Workforce Innovation and Opportunity Act (WIOA) funds and supportive services using SNAP E&T funds, maximizing their ability to address participants’ needs. Officials in one of the states we visited also said that partnering with the workforce agency allows them to ensure basic E&T services, such as job search assistance, are available to SNAP recipients across all counties in their state. (See fig. 8.) FNS officials also said that these partnerships better position states to improve their program outcomes by tapping into providers currently serving communities that include SNAP recipients. For example, one of our selected states partnered with nonprofit community-based social service providers experienced in working with homeless and previously incarcerated populations. Officials in this state said that the providers tailor E&T services based on their knowledge of these populations’ unique barriers to employment. Further, officials in three of our five selected states said that some of the community-based social service organizations they partner with provide SNAP E&T participants with additional supportive services, including transitional housing, clothing, financial advising, and mental and physical health services, to address a broader set of barriers to employment. Although states are increasingly partnering with external entities to provide SNAP E&T services, according to FNS data for fiscal year 2018, 20 state SNAP agencies have not partnered with workforce agencies for SNAP E&T. According to FNS officials, the nationwide network of more than 2,500 American Job Centers, which are operated by state and local workforce agencies, can help to fill service gaps in areas lacking community based organizations or community colleges. However, despite the broad availability of E&T services such as job search assistance through American Job Centers, 12 state SNAP agencies directly provided job search or job search training for their SNAP E&T programs, according to their fiscal year 2017 state SNAP E&T plans. In addition, some states have not yet fully leveraged resources from the broader workforce development system, which includes workforce agencies, community-based organizations, and community colleges, to provide SNAP E&T services. For example, FNS data for fiscal year 2018 show that three states’ SNAP agencies operated their own SNAP E&T programs in fiscal year 2018 and did not involve existing workforce development system entities in the provision of these services. According to their fiscal year 2017 state plans, these states each offered one or two types of SNAP E&T services, and the services they offered—primarily job search and job search training—are considered less intensive by FNS officials. In contrast, states with workforce development system partnerships offered a broader range of services, as well as more intensive services, such as vocational education. For example, all 36 state SNAP agencies that offered vocational education did so through workforce development system partnerships. As previously noted, FNS officials have said that intensive services are likely more effective in moving SNAP E&T participants, who may be more likely to have barriers to employment, toward self-sufficiency. Overlap and a lack of coordination in federally-funded E&T programs is a long-standing concern, and relatedly, state SNAP agencies are required to make use of workforce development system resources for SNAP E&T, when possible. In our prior work, we found that SNAP E&T was 1 of 47 federally funded E&T programs, nearly all of which overlapped with at least one other program by providing similar services to similar populations. We noted that overlap among federal E&T programs raises questions about the efficient use of resources, and we highlighted the value of coordination between these programs to ensure efficient and effective use of resources. Consistent with our findings, federal regulations require that each component of a state agency’s SNAP E&T program be delivered through its statewide workforce development system, unless the component is not available locally through such a system. FNS national and regional officials, as well as state officials, described challenges states face in forming effective workforce development system partnerships. FNS officials said that challenges are often caused by differences in workforce agency and SNAP E&T program target populations and service delivery approaches. According to FNS, SNAP E&T participants often have more barriers to employment, such as low literacy and limited work experience, than the broader population served by workforce agencies. Because those with employment barriers could adversely impact the workforce agencies’ employment and earnings performance, which could jeopardize agencies’ workforce program funding, workforce agency staff are sometimes reluctant to serve SNAP E&T participants, according to FNS national and regional officials in three of the seven regions, as well as officials in one of our selected states. For example, officials in one region said that workforce agency staff had stopped serving SNAP E&T participants in the past when they realized the participants needed more supportive services or time in workforce programs to meet employment goals. Recognizing these challenges, in recent years, USDA has urged state SNAP agencies to collaborate with workforce agencies and others to improve coordination of E&T services. For example, in March 2016, USDA and the Department of Labor issued a joint letter encouraging state SNAP agencies and state and local workforce agencies to work together to develop shared strategies to better connect SNAP recipients with E&T opportunities through American Job Centers. FNS has also provided states with technical assistance materials on SNAP E&T and WIOA partnerships, which describe respective program requirements and how SNAP E&T and WIOA-funded workforce programs can complement one another. However, FNS has not ensured that all states take steps to identify potential workforce development system partners. Federal internal control standards state that agencies should collect complete and reliable information to ensure effective monitoring. FNS officials told us that they do not independently assess the availability of states’ workforce development system partners but instead rely on states to document this information in their state SNAP E&T plans, a key tool used by FNS for program monitoring. However, we found that 24 states did not provide information in their fiscal year 2017 SNAP E&T plans that would allow FNS to verify whether these states had assessed available workforce development system providers. For example, the states’ plans did not describe existing workforce development services in the state, despite FNS guidance that directs states to describe the statewide workforce development system and identify the E&T services that will be delivered through this system in their plans. States that are not fully leveraging resources available through the workforce development system may miss opportunities to provide a wider variety of services to SNAP E&T participants and serve a greater number of SNAP recipients through SNAP E&T programs. If state SNAP agencies do not assess workforce development system resources available in their state, they may lack awareness of potential partners and the resources they offer, potentially leading to an inefficient use of resources. In addition, without complete and reliable information on states’ available workforce development system resources, FNS is not able to ensure that states are complying with the requirement to deliver SNAP E&T services through their state workforce development systems. FNS has made strides in recent years to provide additional support and oversight of states’ SNAP E&T programs, yet the agency lacks complete and accurate information on these programs, which may limit the effectiveness of its efforts. For example, SNAP E&T programs have served a small percentage of SNAP recipients over time, and while FNS recognizes that states lack information on strategies for increasing participation among those referred to the SNAP E&T program, it has not provided technical assistance in this area. As a result, FNS may miss opportunities to help more SNAP recipients receive program services intended to increase their self-sufficiency, a USDA strategic goal. FNS’s ability to assess whether the program is assisting the department in meeting this goal is also hindered because FNS lacks reliable data on SNAP E&T participant characteristics and outcomes. Without reliable data on SNAP recipients subject to work requirements and participation in SNAP E&T, the agency’s ability to monitor states’ implementation of program rules to ensure recipients are not receiving benefits for which they are ineligible is also limited. Further, because FNS has not yet determined how it will use the newly required outcome and participant characteristics data to assess state SNAP E&T programs, questions about program performance remain unanswered. In addition, without information from FNS on how state performance will be assessed, states will continue to lack clarity on how reporting these data will help contribute to program goals. Finally, because partnerships can be a crucial source of additional capacity, resources, and expertise for SNAP E&T programs, states that are not fully leveraging available workforce development system resources may miss opportunities to serve a greater number of SNAP recipients through SNAP E&T and provide a wider variety of services to SNAP E&T participants. In addition, states may provide overlapping or duplicative services and use resources inefficiently, because FNS has not ensured that all states take steps to identify potential workforce development system partners. We are making the following four recommendations to FNS: The Administrator of FNS should identify and disseminate strategies to states and service providers for increasing the participation of SNAP recipients referred to the SNAP E&T program. (Recommendation 1) The Administrator of FNS should take additional steps to address data reliability issues in the state-reported data on SNAP E&T participant characteristics and outcomes, including steps to address imprecise instructions on data collection forms and staff confusion at the state level. (Recommendation 2) The Administrator of FNS should determine and communicate to states how the agency will use newly reported outcome and participant characteristics data to assess the effectiveness of state SNAP E&T programs. (Recommendation 3) The Administrator of FNS should take additional steps to assist states in leveraging available workforce development system resources. Such steps should include ensuring that state SNAP E&T plans provide the agency with sufficient information to verify that states have assessed available workforce development system providers. (Recommendation 4) We provided a draft of this report to USDA for review and comment. On November 5, 2018, the Deputy Associate Administrator for SNAP and FNS officials from SNAP’s Office of Employment and Training provided us with the agency’s oral comments. FNS officials told us that they generally agreed with the recommendations in the report. They noted that they have been implementing strategies to help states improve their SNAP E&T programs, including expanding the reach of the programs and improving the reliability of state reported data. FNS officials stated that the agency plans to build on these current efforts to address the recommendations. We acknowledge the agency’s ongoing efforts in our report but continue to believe that additional action is necessary to address our recommendations. FNS also provided technical comments, which we incorporated into the report as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the USDA, congressional committees, and other interested parties. In addition, this report will be available at no charge on the GAO website at https://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. This appendix discusses in detail our methodology for addressing our two research objectives examining (1) what is known about Supplemental Nutrition Assistance Program (SNAP) employment and training (E&T) program participants and outcomes over time and (2) the extent to which state SNAP E&T programs have partnered with other programs offering similar services. We scoped our review of state SNAP E&T programs to include the 50 states, the District of Columbia, Guam, and the Virgin Islands. In addition to the methods we discuss below, to address both our research objectives, we reviewed relevant federal laws, regulations, and guidance; interviewed United States Department of Agriculture (USDA) Food and Nutrition Service (FNS) officials in its headquarters and seven regional offices; and reviewed relevant research from FNS and the USDA Office of Inspector General, as well as our prior work on SNAP E&T programs. Further, we interviewed representatives of a range of nationwide organizations knowledgeable about SNAP E&T and state officials from seven state SNAP E&T programs: Idaho, Louisiana, New York, Pennsylvania, Tennessee, Washington, and the District of Columbia. We also analyzed SNAP E&T expenditures using form FNS- 778 data for fiscal years 2007 through 2016, the most recent data available. The form FNS-778—Federal Financial Report—is a form used by FNS to collect quarterly expenditure data for state SNAP E&T programs. To assess the reliability of these data, we interviewed FNS and state officials, performed data testing, and reviewed relevant documentation. We determined these data to be sufficiently reliable for the purposes of our report. We excluded from our review the SNAP E&T pilot programs that were authorized by the Agricultural Act of 2014 because these are being evaluated separately by FNS. We conducted this performance audit from September 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To address our first objective, we analyzed data on SNAP E&T participation from three FNS data sources. First, we analyzed aggregate data on SNAP E&T participants collected from state SNAP agencies for fiscal years 2008 through 2016, the most recent data available. Second, for the same time period, we analyzed Quality Control data on individual SNAP recipients, work registrants, and SNAP E&T participants. Finally, we reviewed and analyzed aggregate participation data from state SNAP agencies’ fiscal year 2017 outcome and participant characteristics reports. We analyzed the average monthly number of SNAP recipients participating in SNAP E&T using the form FNS-583 data. The form FNS- 583—U.S. Department of Agriculture Food and Nutrition Service SNAP Employment and Training (E&T) Program Activity Report—is used by FNS to collect quarterly and annual participation data for state SNAP E&T programs. To assess the reliability of these data, we interviewed FNS and state officials, performed data testing, and reviewed relevant documentation. Data testing included checks for missing data elements, duplicative data, and values outside a designated range. We determined the data were sufficiently reliable to identify the number of average monthly SNAP E&T participants and to assess change over time. To further examine what is known about participation in SNAP E&T, we also assessed form FNS-583 data on work registrants and able-bodied adults without dependents (ABAWDs) participating in SNAP E&T for fiscal years 2008 through 2016. To assess the reliability of these data, we interviewed FNS and state officials, performed data testing, and reviewed relevant documentation. We determined these data to be unreliable for the purposes of our report. As described above, for example, FNS officials learned in recent years that there was widespread confusion among states regarding the need to track ABAWDs when waivers were in place. Consequently, some states were not tracking ABAWD participation or properly documenting SNAP recipients’ ABAWD status. We analyzed SNAP Quality Control data on individual SNAP recipients, work registrants, and SNAP E&T participants. The SNAP Quality Control database contains detailed demographic, economic, and SNAP eligibility information for a nationally representative sample of SNAP households. We estimated the number of SNAP recipients and work registrants for fiscal years 2008 and 2016 using the public use Quality Control dataset and calculated confidence intervals to determine if the change over time was statistically significant (see table 1). To assess the reliability of these data, we interviewed officials from FNS and the contractor responsible for maintaining the Quality Control dataset, as well as state officials; reviewed relevant technical documentation; and conducted data testing. For example, we compared the estimates we produced for fiscal years 2008 and 2016 to the publicly reported estimates in the annual Characteristics of Supplemental Nutrition Assistance Program Households reports for those years. We determined that the data, and the corresponding estimates in these reports, were sufficiently reliable for our purposes. As a result, for fiscal years 2009 through 2015, we relied on the estimates of SNAP recipients and work registrants published in the reports. We also analyzed SNAP Quality Control data on SNAP E&T participants for fiscal year 2016. To assess the reliability of these data, we interviewed officials from FNS and the contractor responsible for maintaining the Quality Control dataset, as well as state officials; reviewed relevant technical documentation; and conducted data testing. For example, we compared the estimate of SNAP E&T participants from the SNAP Quality Control dataset to the number of SNAP E&T participants reported by states on the FNS-583, which we had determined was reliable. From our review, we determined the Quality Control SNAP E&T participation data to be unreliable for the purposes of our report. As described above, for example, the form used by states to collect information on SNAP recipients nationwide asks states to indicate if recipients participate in employment and training programs. Although FNS officials told us that this was intended to capture SNAP E&T participants alone, the form does not specify this, and FNS officials said that some states are incorrectly reporting SNAP recipients participating in any E&T program. To determine the percentage of SNAP recipients and work registrants that participate in SNAP E&T, we used the data that we had determined were reliable. Specifically, we used the Quality Control data on SNAP recipients and work registrants, as well as the form FNS-583 data on SNAP E&T participants, for fiscal years 2008 through 2016. We also reviewed and analyzed fiscal year 2017 outcome and participant characteristics data reported by state SNAP agencies in the SNAP E&T Annual Report Federal Fiscal Year 2017. These data include information on SNAP E&T participants’ outcomes, such as the median quarterly earnings of program participants, and participant characteristics, such as the percentage of participants who have received a high school diploma. Certain outcome data were only collected by FNS for two quarters of fiscal year 2017, whereas participant characteristics data were collected for the entire year. We received copies of these data reports from FNS as states submitted their initial reports to FNS in early 2018. Subsequent to FNS’ review of these initial reports and their efforts to help states improve the accuracy and consistency of their reporting, FNS provided us with updated versions of the reports for many of the states. We used the reports to describe rates at which SNAP recipients referred to the SNAP E&T program participated in services—data that were reported by 11 states. We did not validate the accuracy of these data. To address our second objective on the extent to which state SNAP E&T programs have partnered with other programs offering similar services, we reviewed fiscal year 2017 SNAP E&T state plans for all 53 state SNAP agencies. Specifically, we reviewed the plans to determine which services states planned to offer through partnerships with other programs in that year and the extent to which states documented their use of available workforce development system resources. To supplement our review of the plans, we also analyzed fiscal year 2018 summary data from FNS on the number of state SNAP agencies that partnered with community-based organizations, workforce agencies, and community colleges, as well as the number with state SNAP agency-operated SNAP E&T programs. We also analyzed fiscal year 2010 and 2017 summary data from FNS on mandatory and voluntary programs to determine how the number of state SNAP agencies with each program type changed over time. To assess the reliability of the FNS summary data, we interviewed FNS and state officials and reviewed relevant documentation. We determined these data to be sufficiently reliable for the purposes of this report. To help inform both of our objectives and gather additional information about state SNAP E&T programs, we selected five states: Delaware, Oregon, Kansas, Texas, and Virginia. We selected these states based on several criteria to ensure our sample included state SNAP E&T programs with different service delivery approaches and other program characteristics, as well as geographic diversity. Specifically, we considered state SNAP E&T participation and expenditures, including utilization of federal 50 percent reimbursement funds. In addition, we considered whether the state operated a mandatory or voluntary SNAP E&T program, a county- or state-administered program, and opted to be an ABAWD pledge state. We also considered whether the state submitted its SNAP E&T plan as part of a Workforce Innovation and Opportunity Act Combined State Plan. Using semi-structured questions, we interviewed officials from the state agencies responsible for administering SNAP in the five selected states. We gathered information on SNAP E&T administration at the state level, including information on partnerships; program participation and expenditures; data collection efforts, including those related to assessing program outcomes; and any challenges to administering the program, as well as efforts to address such challenges. We conducted site visits to our selected states in which services are provided through partnerships with local providers—Delaware, Oregon, Texas, and Virginia—and interviewed selected local program staff with knowledge of SNAP E&T program operations, participant characteristics, and coordination with the state SNAP agency who provide SNAP E&T services in both urban and rural areas. We conducted these visits in February and March 2018. During each site visit, we used semi- structured questions to gather information on the goals and mission of the providers’ organizations, types of services provided to SNAP E&T participants, needs and characteristics of SNAP E&T participants and how these might differ from those of other clientele, sources of funding used to provide services to SNAP E&T participants, and efforts to coordinate with the state SNAP agency. The local program staff we interviewed included representatives of workforce agencies, non-profit community-based organizations, a for-profit company, and community colleges. Information collected from state and local SNAP E&T officials during our site visits cannot be generalized to all SNAP E&T officials nationwide. In addition to the contact named above, Rachel Frisk (Assistant Director), Kristen Jones (Analyst-in-Charge), Morgan Jones, and Kelly Snow made key contributions to this report. Also contributing to this report were Alex Galuten, Mimi Nguyen, Sam Portnow, Julia Robertson, Monica Savoy, Almeta Spencer, Jeff Tessin, Kathleen van Gelder, Nicholas Weeks, and Jessica L. Yutzy.", "summary": "SNAP is the nation's largest federally funded nutrition assistance program. In fiscal year 2017, it provided about $64 billion in benefits. To maintain eligibility for benefits, certain SNAP recipients must comply with the program's work requirements, which may include participating in a state's SNAP E&T program if required by the state. This report examines (1) what is known about SNAP E&T program participants and outcomes over time and (2) the extent to which state SNAP E&T programs have partnered with other programs offering similar services. GAO reviewed relevant federal laws, regulations, and guidance; analyzed USDA data on SNAP recipients, work registrants, and SNAP E&T participants from fiscal years 2008 through 2016, the most recent data available; reviewed states' fiscal year 2017 SNAP E&T plans and outcome reports; and interviewed USDA officials and state officials in five states selected, in part, to reflect a range of SNAP E&T program characteristics. The Supplemental Nutrition Assistance Program's (SNAP) Employment and Training (E&T) programs, which are overseen by the U.S. Department of Agriculture (USDA) and administered by states, have served a small percentage of SNAP recipients over time, and information on participant characteristics and outcomes is limited. In an average month of fiscal year 2016, SNAP E&T served about 0.5 percent of the 43.5 million SNAP recipients. Further, since 2008, the percentage of SNAP recipients served by SNAP E&T has declined. Participation in SNAP E&T may be low, in part, because most SNAP recipients were exempt from work requirements, according to USDA data. In addition, SNAP recipients may participate in other activities to comply with work requirements. Although data on the number of recipients served in SNAP E&T are generally reliable, USDA lacks reliable data on participant characteristics and outcomes because of imprecise instructions on data collection forms and staff confusion at the state level. USDA has taken some steps to address these issues, but data reliability issues persist. As a result, USDA's ability to assess whether agency goals are being met through the SNAP E&T program is limited, as is the department's ability to monitor states' implementation of work requirements and ensure program integrity. In fiscal year 2018, most state SNAP agencies partnered with workforce development system entities, such as community colleges and workforce agencies, to provide services to SNAP E&T participants, according to USDA data. Regional and state officials reported that state SNAP agencies often have used these partnerships to leverage non-federal funding sources and provide additional capacity and expertise to help expand SNAP E&T services. However, 3 states operated their own SNAP E&T programs without partnering with any other program, and a total of 20 states lacked partnerships with workforce agencies, according to USDA data for fiscal year 2018. Federal regulations require that SNAP E&T services be delivered through the state's workforce development system unless the services are not available locally through this system. USDA and state officials described challenges to forming effective partnerships with workforce agencies, including perceived disincentives to serving SNAP recipients. However, states that are not fully leveraging resources available through the workforce development system may miss opportunities to provide a wider variety of services to SNAP E&T participants and serve a greater number of SNAP recipients through SNAP E&T. GAO is making four recommendations, including that USDA take additional steps to address SNAP E&T data reliability issues and to help states leverage available workforce development system resources. USDA officials generally agreed with our recommendations.", "document_type": "gao"}
{"report": "Medicaid is jointly financed by the federal government and the states. States administer their Medicaid programs within broad federal rules and according to a state plan approved for each state by CMS. CMS issues program requirements in the form of regulations and guidance, approves changes to states’ Medicaid programs, provides technical assistance to states, and conducts other oversight activities. States are responsible for establishing state policies and procedures in accordance with federal requirements. Each state must designate a single state agency to administer its Medicaid program. That agency can delegate programs or functions—such as enrollment in HCBS programs—to other state and local agencies, but is responsible for their supervision. States may provide certain types of HCBS under their state plans. In addition, states may seek permission from CMS to provide HCBS under waivers of traditional Medicaid requirements; for example, in order to provide services to a targeted population or to a limited number of beneficiaries. Both state plans and waivers are developed and proposed by states and must be approved by CMS in order for states to receive federal matching funds for medical expenditures. Medicaid HCBS cover a wide range of services and supports to help individuals remain in their homes or live in a community setting, such as personal assistance with daily activities, assistive devices, and case management services to coordinate services and supports that may be provided from multiple sources. With approval from CMS, states can provide Medicaid HCBS under one or more types of programs authorized under different sections of the Social Security Act, including several state plan and waiver authorities. (See table 1.) States can have multiple HCBS programs operating under different authorities, and these authorities have distinct features such as different functional eligibility criteria. For example, some types of Medicaid HCBS programs only serve beneficiaries who are functionally eligible for an institutional level of care; that is, beneficiaries must have needs that rise to the level of care usually provided in a nursing facility, hospital, or other institution. Under some types of HCBS programs, states can tailor their programs to the needs of specific beneficiary populations they choose to target. Common populations that states target with their HCBS programs include: older adults and people with physical disabilities, people with intellectual or developmental disabilities, people with addictions or mental illness, and other populations with specific conditions such as traumatic brain injury or Alzheimer’s disease. States use different delivery systems to provide Medicaid HCBS, and these may vary across distinct HCBS programs within a state. Historically, states have predominantly provided HCBS using fee-for- service delivery systems in which states pay providers for HCBS rendered to beneficiaries and billed to the state. Alternatively, under managed care long-term services and supports delivery systems, states contract with managed care plans to provide HCBS to beneficiaries and typically reimburse the plans through capitation payments, which are periodic payments for each beneficiary enrolled under the contract. Managed care plans may contract with HCBS providers to provide services to beneficiaries or may provide services directly. A state may use a combination of fee-for-service and managed care delivery systems within or among its HCBS programs. Estimated expenditures on HCBS provided under managed care have grown from $8 billion in fiscal year 2012 to $19 billion in fiscal year 2015. Individuals require HCBS because they are limited in their ability to care for themselves due to physical, developmental, or intellectual disabilities, or to chronic conditions. These services can assist beneficiaries with activities of daily living—basic, personal, everyday activities such as bathing, dressing, and eating—or with instrumental activities of daily living, which are other activities that allow individuals to live independently in the community, such as meal preparation or managing finances. States generally assess a beneficiary’s needs for HCBS based on designated assessment tools—or sets of questions—that assessors use to collect information from sources such as beneficiaries, caregivers, and health records. Examples of this information include the following: Functional support needs: The need for assistance with activities of daily living or instrumental activities of daily living. Clinical care needs or medical health concerns: Information on an individual’s health history, active diagnoses, medications, and clinical services (e.g., wound care or dialysis). Cognitive and behavioral support needs: The loss of memory function, behaviors that pose risks, or adaptive and maladaptive behaviors. Beneficiaries’ strengths, preferences, and goals. The needs assessment processes may vary across states and distinct HCBS programs within a state, but typically involves the following key steps: States direct potentially eligible individuals to entities that conduct Medicaid HCBS needs assessments. An assessor conducts a needs assessment, generally in a face-to- face setting, using a designated assessment tool to collect information based on methods such as interviews with beneficiaries and caregivers, observation, and review of other sources of information needed to determine functional eligibility for services. Additional information relevant for service planning purposes may be included in this needs assessment, or collected in additional assessments that may occur after an individual is determined eligible for HCBS. Needs assessment results are used to inform determinations of whether an individual meets particular HCBS programs’ functional eligibility requirements. Needs assessment results for eligible individuals inform the development of a service plan. The service plan includes the type and amount of services to be provided to the beneficiary within state- specified limits. States may use distinct needs assessments for service planning to collect more detailed information or may use the same assessment that was used to determine functional eligibility. (See fig. 1.) CMS’s goals for HCBS and other Medicaid long-term services and supports include achieving a sustainable and efficient system that provides appropriate services to beneficiaries. Effective needs assessments can help beneficiaries to receive appropriate services to help them live independently and help states manage utilization of services, and therefore costs. An effective assessment process would facilitate efficient use of services and beneficiaries’ access to available services appropriate to their needs by accurately and consistently estimating beneficiaries’ needs. Assessment processes that overestimate needs, underestimate needs, or both, may result in HCBS programs that offer more services than needed or deny eligible beneficiaries access to needed services. (See fig. 2.) There are varied reasons why HCBS needs assessments may not accurately and consistently estimate beneficiaries’ needs. HCBS needs assessments cover complex subject matter and may require assessors to make observations and judgments about beneficiaries’ needs. For example, needs assessments typically address numerous and varied tasks necessary for a beneficiary to live independently, which can be difficult to measure and subject to interpretation—such as a beneficiary’s ability to manage finances. Furthermore, CMS has stated that assessors’ conflicts of interest can influence decisions even without individual assessors realizing this. Conflicts of interest can arise when an assessor has an incentive for a beneficiary to either over- or under-utilize HCBS, or an incentive to put the needs of assessors ahead of program goals, such as promoting certain HCBS when others may be more beneficial or cost effective. As examples to further illustrate these points, incentives that could result in over- or under-utilization of HCBS include the following, respectively. On one hand, an assessor may be a provider of the services for which the beneficiary may be eligible or a managed care plan that covers these services, and thus have an incentive to find that individuals need the services or coverage they offer. Conversely, a managed care plan may have incentives to reduce enrollees’ service utilization in order to reduce costs below the capitation payments that the plan receives to provide care to its enrollees and thus to maximize its profits, which could influence needs assessments used for service planning. Each of the six selected states we reviewed used varied needs assessment tools across their distinct Medicaid HCBS programs, for which both functional eligibility criteria and amount of services available to beneficiaries can differ widely. The selected states varied in the extent to which their needs assessment tools were either tailored to a single Medicaid HCBS program or used across multiple, though not necessarily all, HCBS programs in the state. The selected states also varied in the extent to which the same or different needs assessment tools were used for different purposes, such as determining functional eligibility and developing a service plan: Connecticut. State officials reported that the state was in the process of piloting a uniform needs assessment tool that it planned to use for all but one of the Medicaid HCBS programs in the state. This needs assessment tool was used both to determine functional eligibility and to develop beneficiary service plans. Kentucky. State officials reported that the state had implemented a new needs assessment tool for one Medicaid HCBS Waiver program while continuing to use previous tools for other Medicaid HCBS Waiver programs. The same assessment was used for determining functional eligibility and for developing the service plan. In selecting and adapting the new tool, officials said that they considered the assessment needs of the other Medicaid HCBS waiver programs, because they would ultimately like to use only one assessment tool across all HCBS Waiver programs. Minnesota. State officials reported that the state had designed a uniform needs assessment tool for use across all HCBS programs in the state and had implemented it for most programs. The uniform assessment tool was used to determine functional eligibility for all HCBS programs in the state for which it was implemented and was also used to inform the development of service plans. New York. State officials reported that the state had implemented a set of needs assessment tools, referred to as a uniform assessment system, for use across multiple HCBS programs. The same uniform assessment system was used to both determine functional eligibility and to inform development of beneficiary service plans. North Carolina. At the time of our review, officials described generally using different assessment tools for the separate HCBS programs in the state. State officials reported that the state had developed a new needs assessment tool for one Medicaid HCBS Waiver program, and that they planned to expand use of this tool to another program in the future. The state used different needs assessments to determine functional eligibility and for service planning in its HCBS Waiver programs. Washington. State officials reported that a uniform assessment system was used across HCBS programs in the state. The system was composed of multiple needs assessment components. One version of the assessment was used for HCBS programs serving individuals with intellectual and developmental disabilities, and a different version was used for all other programs. For all HCBS programs, the same needs assessment system was used to determine functional eligibility and to develop the service plan. All six states we studied reported using more than one type of entity to conduct needs assessments for HCBS programs. For example, New York used five different types of entities, North Carolina used four different types of entities, and the remaining four states used two or three types of entities to conduct needs assessments. State agencies, local public agencies, and independent contractors were used by four states to conduct needs assessments for at least one HCBS program. All states but one, Washington, used HCBS providers or managed care plans to conduct needs assessments (see table 2). The types of entities that conduct needs assessments in the selected states varied across distinct HCBS programs, or for distinct needs assessment purposes within a single HCBS program. States may use multiple types of entities to conduct needs assessments because of differences in how particular HCBS programs were delivered. For example, the entities used in Minnesota varied by delivery system—the state reported that it used local public agencies to conduct needs assessments for all Medicaid HCBS programs other than its managed care HCBS program, for which managed care plans conducted needs assessments. In other states, different entities conducted needs assessments within the same HCBS programs depending on the purpose of the assessment. For example, because managed care plans may have a financial interest in eligibility determinations, New York began by July 2015 to use an independent contractor exclusively to conduct needs assessments to determine functional eligibility for HCBS for new enrollees in its managed care HCBS program. Once individuals were determined eligible for managed care HCBS, the managed care plans conducted the same assessment a second time in order to develop beneficiary service plans. The six selected states also varied in whether they used formulas based on information collected using Medicaid HCBS needs assessment tools to inform key functional eligibility and service planning decisions. States may use such formulas as a means of meeting goals of consistent treatment of individuals based on needs. In making functional eligibility determinations, five of the six selected states—Connecticut, Minnesota, New York, North Carolina, and Washington—reported using a formula to compare the results of completed needs assessments to eligibility criteria for at least one of the HCBS programs in the state. For example, for specific HCBS programs, the assessment tool may compile results of certain assessment questions into a score that indicates whether or not the beneficiary is considered to have a need for an institutional level of care, which is required in order to be functionally eligible for some types of HCBS programs. For service planning purposes, four states— Connecticut, Minnesota, North Carolina, and Washington—reported that in at least one of these states’ distinct HCBS programs, the assessment tools included formulas. These formulas specified a particular amount of services or guided a potential range of service amounts for beneficiaries based on the results of particular assessment questions. (See table 3.) Professional judgment may also be used in conjunction with formulas. For example, when formulas are used to specify particular service levels based on the needs assessment results, they may specify a number of service hours or service budget. In either case, other factors may also be considered in some circumstances. State officials in one state described the use of formulas to allocate services as an initial step prior to the detailed person-centered service planning process. For example, in Minnesota a state formula specifies a certain number of hours of personal care services partly based on the level of need for assistance with activities of daily living such as eating, bathing, and toileting. However, the beneficiary and the entity responsible for the service planning process determine the specific services to prioritize within the overall number of hours available, and they may decide to use the authorized hours toward covered services that were not necessarily part of the formula, such as instrumental activities of daily living. In contrast, in states or HCBS programs that did not utilize formulas to specify or guide a particular amount of services based on assessment results, the amount of services may be determined—within the scope of service limits applicable to the particular HCBS program—by the entity responsible for working with the beneficiary on the service planning process. The six selected states reported taking steps to unify needs assessment processes across Medicaid HCBS programs as a means of meeting goals such as improving the efficiency and effectiveness of assessments. Specifically, states reported taking steps to implement assessment tools for use across multiple Medicaid HCBS programs in the state. Four states—Connecticut, New York, Minnesota, and Washington—had adopted or were piloting needs assessment tools that were used across multiple state Medicaid HCBS programs (though not necessarily all such programs in the state) rather than completing separate needs assessments for each separate program. In addition, Kentucky and North Carolina had recently implemented new tools for specific Medicaid HCBS programs that would be considered for use in additional HCBS programs in the future. Important benefits to beneficiaries and HCBS programs have resulted from efforts to coordinate needs assessment processes by using a uniform assessment across distinct HCBS programs, according to state officials and advocates. For example: State officials and advocates described that using a uniform assessment tool to determine functional eligibility for multiple state HCBS programs resulted in benefits and efficiencies for beneficiaries. Officials and advocates in Minnesota said that the uniform assessment process allowed beneficiaries to connect with the program best suited to their needs, even if they may not have otherwise been aware of it when initially seeking assistance. For example, officials said that families of children with autism may apply for personal care services, but may benefit more from being connected to another HCBS program that is available and designed to support the children’s specific needs. Similarly, officials in Connecticut said that uniform assessment across HCBS programs allows beneficiaries to access the services that are most appropriate without multiple assessments. For example, if an individual applies for a particular HCBS program but a separate program would be more appropriate, a second assessment is not necessary. Connecticut, Washington, and New York officials described how uniform assessment tools allowed consistent information to be shared with care providers or when beneficiaries transitioned between care settings. This, in turn, could allow care providers to better manage beneficiary care. State officials reported uniform assessment tools can result in better informed program management and policy decisions because they allow for the ability to collect consistent information across HCBS programs. For example, officials from Connecticut and Washington described how comparable assessment information could inform equitable policies for allocating services. Washington officials described using information about the extent of beneficiary needs to inform decisions about how many program staff were needed. Kentucky officials described how a more uniform assessment process helped them become aware of when beneficiaries were receiving services from multiple different non-Medicaid HCBS programs that were state-funded. States and advocates also reported challenges, including inefficiencies, to using uniform assessments under certain circumstances, such as when states have different criteria for functional eligibility across their different HCBS programs, or when different beneficiary populations have different assessment needs. For example: Minnesota officials reported that beneficiaries may need to address multiple versions of similar eligibility-related questions in its uniform assessment tool. This was due to the decision to incorporate each HCBS program’s previously separate functional eligibility questions into its tool to avoid changes in the information they used to determine eligibility. Beneficiary advocates in three states expressed concerns with the use of assessments designed for a particular population on a different population, such as using assessments designed for adults to assess the needs of children. Officials from Kentucky also noted concerns about using assessments across distinct populations as part of the reason the state was not using a single assessment tool. State officials and advocates also reported that uniform assessments resulted in lengthier assessment question sets that take longer to complete for both the assessor and the beneficiary. Selected states reported making efforts to improve their assessment processes to increase consistency in how assessors conduct HCBS needs assessments. These efforts included using structured questions and emphasizing training to ensure individual assessors approached the assessment questions consistently and according to policy, and addressing potential conflicts of interest by using independent assessors rather than HCBS providers and managed care plans to conduct certain needs assessments. States’ improvement efforts included the following: Structured questions. Officials from five states described that structured approaches to assessment questions could improve the consistency of the assessment results, which are used to make functional eligibility and service planning decisions. Examples of structured questions that state officials described included questions that limited responses to a specific time period—such as the past 7 days—when assessing needs, and questions that used a standard scale for responses. Assessor training. Officials from four states reported focusing on assessor training to improve consistency. For example, North Carolina officials reported that determinations of need for personal care services were improved after training. In the training, assessors were taught to comply with a state policy to ask that beneficiaries demonstrate need for assistance with activities of daily living, such as mobility, rather than solely asking them questions about their needs. Independent needs assessments. Officials from three of the selected states—New York, North Carolina, and Kentucky—reported that needs assessments were improved by removing entities that had a financial interest in assessment results from conducting certain assessments. For example, Kentucky officials reported that using independent assessors rather than HCBS providers enhanced consistency because HCBS providers may skew beneficiaries’ assessment results to generate demand for their services. They noted that providers had resisted their removal from the process. Three of the six selected states reported that using a formula to summarize assessment results increased the consistency with which functional eligibility determinations or decisions about the amount of services to provide were made based on each individual’s assessment results. For example, officials from Washington reported that after implementing a formula to generate an overall classification of need, the amount of service hours authorized for beneficiaries was distributed more equitably and evenly across a continuum from minimum to maximum, rather than beneficiaries mainly always receiving the maximum number of hours allowed under program limits. This could allow for limited resources to be allocated more consistently across beneficiaries with similar levels of need. Officials from Connecticut similarly reported that during testing of a formula that was planned for use to specify the amount of service to provide, they had identified beneficiaries receiving more services than would be indicated by the formula based on their assessed needs. While officials reported that these efforts enhanced consistency of eligibility determinations and service authorization decisions, state officials and advocates also acknowledged challenges related to balancing consistency with flexibility in arriving at decisions—particularly with respect to the use of formulas for service allocation. The different approaches of relying on a formula or relying on the judgement of individual entities each presented its own challenges: In two states where there was a formula to specify or guide the amount of services to provide, advocates raised concerns that the indicated amount did not adequately address needs for some individuals. For example, advocates noted that the results of a lengthy and nuanced assessment tool were ultimately reduced to a single score in order to inform a particular budget for services. While this score might reflect the average needs of beneficiaries with similar assessment results, it did not adequately convey individualized needs of some beneficiaries, according to the advocates. On the other hand, there were concerns that relying on entities’ judgment resulted in inconsistency across beneficiaries. Advocates in three states raised concerns about inconsistent decisions across managed care plans or geographic areas, or over time, when determinations of functional eligibility or amount of services to provide were not based on state-determined formulas. In one state, state officials and advocates noted that these concerns were addressed by using formulas to allocate services but allowing beneficiaries to use an alternative assessment process in certain circumstances or receive “exceptions” to the amount of service authorized by the state’s formula based on individual circumstances. Beneficiary advocates also emphasized that the amount of services that are authorized for beneficiaries may reflect the scope of available services rather than the needs of an individual beneficiary. To the extent that a given HCBS program has limited resources for providing services, assessment results may be used to allocate resources within those limitations rather than to estimate the amount of services that would fully meet needs. For example, an assessment formula in Washington is designed to specify service amounts based on beneficiaries’ identified levels of need and the amounts that are available for particular levels of need may increase or decrease based on the state budget. State officials in Connecticut also said that because funding can vary for different HCBS programs within a single state, moving to a consistent formula for analyzing assessment results may shed light on the extent that beneficiaries with similar levels of need receive different levels of services depending on available program resources. CMS has implemented two key programs that facilitate state efforts to make their HCBS needs assessment processes more uniform, among other goals. One of these is called Testing Experience and Functional Tools (TEFT) and is designed, in part, to test the effectiveness of a set of specific questions that states can use to conduct needs assessments. CMS designed the TEFT assessment questions for use across multiple HCBS beneficiary populations, including beneficiaries (1) of advanced age, or with (2) intellectual or developmental disabilities, (3) physical disabilities, (4) serious mental illnesses, or (5) traumatic brain injuries. The assessment questions being tested are limited to needs that may be relevant among these populations and do not assess needs that may apply to only certain populations; for example, questions to assess cognitive status that may apply to those with intellectual or developmental disabilities or other conditions but that do not apply to those with physical disabilities only. CMS announced TEFT in 2012 and six states received grants to test needs assessment questions for their effectiveness, which includes their validity (defined as accuracy in measuring individuals’ functional abilities) and reliability (defined as the consistency of results across assessors). Three of these six states were among those we selected for this review: Connecticut, Kentucky, and Minnesota. Officials in these states told us that they had not completed field testing the TEFT questions, and officials in two of these states (Connecticut and Minnesota) said they would consider the option of using TEFT questions in their assessments in the future. CMS officials told us that CMS plans to make the assessment questions they determine to be valid and reliable available to all states in the spring of 2018. Another key program that CMS has implemented is the Balancing Incentive Program, which was authorized by the Patient Protection and Affordable Care Act in 2010, to provide incentives for eligible states to rebalance their long-term services and supports systems towards more home- and community-based care. Among other things, this program required participating states to collect information on specific topics related to beneficiaries’ needs, but allowed states to choose the needs assessment questions. Under this program, states could use different assessment tools to gather information for HCBS programs serving different populations as long as the states used tools that collected information on 26 key topics that spanned five broad areas, or domains. The five domains were (1) activities of daily living, (2) instrumental activities of daily living, (3) medical conditions/diagnoses, (4) cognitive functioning, memory, and learning, and (5) behavior concerns (e.g., injurious, uncooperative, or destructive behavior). The requirement to collect information from these five domains for each beneficiary population was designed to promote consistency in determining beneficiaries’ needs across HCBS programs, while allowing states to tailor their assessment processes to specific beneficiary populations, according to CMS officials. For example, New York reported collecting information on the required topics using a suite of six assessment tools that varied to reflect differences in beneficiaries’ age, population, and other factors. The Balancing Incentive Program ended in 2015, although some states were provided extensions to carry out planned activities. Of 20 participating states evaluated, 18 successfully carried out the requirement to incorporate the 26 key topics in their needs assessments, according to a program evaluation prepared for the HHS Assistant Secretary for Planning and Evaluation. In addition, CMS has provided information and lessons learned from the Balancing Incentive Program to all states via its website and, according to CMS officials, has done several related presentations. While CMS does not have plans to conduct additional evaluations of assessment tools used by participating states, CMS officials told us that there would be some value to doing so and they may consider it in the future. CMS has sought to improve HCBS needs assessments by addressing concerns about the potential for conflicts of interest that HCBS providers and managed care plans may have in conducting assessments. As previously noted, HCBS providers may have a financial interest in providing services that could potentially lead to over-utilization of services, while managed care plans may have a financial interest in increasing enrollments and reducing enrollees’ service utilization. CMS has taken steps to address conflicts of interest that may occur when HCBS providers conduct needs assessments, but gaps remain. The Balancing Incentive Program, which ended in 2015, required the 21 participating states to either separate HCBS provision from needs assessment processes or to take steps to mitigate the potential for conflicts of interest that occur when HCBS providers conduct assessments. In addition, CMS implemented regulations requiring all states to establish standards for conducting needs assessments that address certain potential conflicts for particular types of HCBS programs. The specific requirements may differ by program and whether the assessment is used to determine functional eligibility or develop service plans: For example, for State Plan HCBS—a relatively small program that accounted for less than 1 percent of estimated Medicaid HCBS expenditures in fiscal year 2015—states are required to establish conflict-of-interest standards that address both (1) evaluation of eligibility, and (2) needs assessments used to develop service plans. These standards must prohibit HCBS providers from conducting eligibility evaluations and needs assessments for this program, with certain exceptions in which the potential for conflict of interest must be mitigated. Under the HCBS Waiver, Community First Choice, and Self-Directed Personal Assistant Services programs—which collectively accounted for 60 percent of estimated expenditures for Medicaid HCBS in fiscal year 2015—states are required to establish standards that generally prohibit HCBS providers from conducting assessments of need used to develop service plans, but this requirement does not apply to assessments that states may use to determine functional eligibility. In addition, for State Plan Personal Care Services programs and other HCBS authorized under Section 1905(a) of the Social Security Act— which collectively accounted for 29 percent of estimated Medicaid HCBS expenditures in fiscal year 2015—regulations do not specifically limit HCBS providers from conducting assessments that states may use to determine eligibility or develop service plans. As a result of these differences in requirements across HCBS authorities, there are gaps in federal conflict-of-interest requirements applicable to entities that may conduct needs assessments. For example, several types of HCBS programs have specific requirements for states to establish standards to address potential conflicts of interest when HCBS providers conduct needs assessments that are used for service planning, but there are no equivalent requirements for State Plan Personal Care Services programs. (See table 4). In addition, HCBS providers may conduct certain needs assessments that inform HCBS functional eligibility determinations, but specific conflict of interest requirements are generally not in place for such assessments. With respect to gaps in requirements specific to needs assessments that are used to inform functional eligibility determinations, CMS officials suggested that state agencies’ responsibility for making final eligibility determinations addresses conflict- of-interest concerns. Specifically, officials noted that CMS regulations require state agencies to determine eligibility, and that, in doing so, states may consider needs assessments conducted by assessor entities as well as information from other sources. However, states may vary in the extent to which they consider information from other sources. In addition, it is unclear how the requirement that the state maintain responsibility for eligibility determinations addresses potential conflicts of interest when an HCBS provider conducts a needs assessment upon which a determination of eligibility for HCBS may be based. Gaps in requirements to address the potential for conflicts of interest when HCBS needs assessments are conducted by HCBS providers are not consistent with federal internal control standards, which require federal agencies to identify, analyze, and respond to risks related to achieving defined objectives. While CMS has a goal of achieving an effective long-term services and supports system that provides appropriate services to beneficiaries, because the agency does not require states to address the potential for HCBS providers’ conflicts of interest in conducting needs assessments under all HCBS authorities, there is a risk that some states may rely on HCBS providers to conduct assessments without addressing HCBS providers’ financial incentives, which can lead to over-utilization of HCBS. Examples among our case study states include: North Carolina: A program integrity review conducted by CMS in North Carolina found that the state’s transition to the use of an independent entity to conduct needs assessments for the State Plan Personal Care Services Program—rather than relying on HCBS providers to assess beneficiary needs—was followed by a reduction in both the number of beneficiaries using the program and a 30 percent reduction in average monthly expenditures. This suggests the program may have been over-utilized before the independent entity was used to conduct needs assessments. CMS highlighted this use of an independent entity as a practice that merits consideration from other states. Kentucky: State officials told us that when they transitioned to the use of independent assessors they also identified apparent instances of over-utilization that were occurring before they implemented independent assessments and other program changes. For example, officials said that when testing a new assessment tool using independent assessors, they identified individuals who had a low level of needs, and who did not appear to require an institutional level of care, as required for program eligibility, but who had been assessed at that level in the past. Conflict-of-interest concerns also exist for states with managed care HCBS programs where managed care plans conduct assessments. CMS has taken separate steps to address these concerns, including issuing guidance and new regulatory requirements. CMS issued guidance in May 2013 that addressed best practices and CMS’s expectations of new and existing managed long-term services and supports programs, which include managed care HCBS. The guidance stated that managed care plans may not be involved in any HCBS functional eligibility determinations or needs assessment processes prior to a beneficiary’s enrollment in the plan. CMS officials told us that allowing managed care plans to assess individuals before enrollment without proper oversight by the state may provide an opportunity for plans to selectively enroll individuals who require less HCBS. Despite this risk, we found that CMS does not always take steps to ensure that states have procedures in place to guard against this practice prior to approving their programs. CMS officials told us that they evaluate state programs individually and may not apply all of the detailed concepts in its guidance when developing state-specific requirements for managed care HCBS programs. CMS’s application of the guidance in the three states selected for this review varied across types of HCBS programs. Examples from 1115 Demonstration and HCBS Waiver programs for our case study states include the following: 1115 Demonstration programs: Of the six states we selected for this review, one—New York—operated a managed care HCBS program authorized by an 1115 demonstration. Prior to July 2015, New York used managed care plans to assess and determine individuals’ functional eligibility for certain HCBS programs. One managed care plan admitted to enrolling 1,740 individuals in managed care HCBS whose needs did not qualify them for the program from January 2011 to September 2013, and it resolved allegations that it had submitted false claims for Medicaid HCBS in a $35 million settlement with the U.S. Department of Justice. In 2013, CMS amended the terms and conditions of New York’s demonstration to require the state to use an independent assessor entity to both conduct needs assessments and determine eligibility for managed care HCBS, and New York has contracted with an independent assessor to carry out these functions. While this requirement applied specifically to New York, it does not necessarily apply to other states, as CMS’s terms and conditions for 1115 demonstrations can vary across states. According to CMS, an additional 11 states had managed care HCBS programs approved under 1115 demonstrations as of July 2017. However, CMS officials told us that they did not have information on whether or not these 11 states were using managed care plans to conduct needs assessments for the purpose of determining individuals’ functional eligibility. HCBS Waiver programs: Two of our six selected states—Minnesota and North Carolina—used managed care plans to deliver services for HCBS Waiver programs. In these states, CMS approved HCBS Waiver applications that proposed to use managed care plans to conduct or evaluate needs assessments used to determine functional eligibility for the programs, contrary to CMS’s May 2013 guidance. CMS officials said that when states allow managed care plans to be involved in these assessments, CMS would expect states to provide oversight as part of their quality improvement strategies required under HCBS Waivers. However, CMS does not require states to provide assurances or evidence of oversight directly related to managed care plans’ potential for conflicts of interest when plans are involved in needs assessments that states use to determine functional eligibility. CMS officials told us that states that do allow managed care plans to conduct assessments used to determine eligibility for HCBS should be aware of the potential for conflicts of interest in order to provide adequate oversight. CMS officials also told us that they engage in a conversation with states related to oversight of the assessment process when CMS learns of such states. However, CMS does not collect complete information on which states use managed care plans for needs assessments prior to enrollment, and states may not implement precautions absent a specific CMS requirement to address the potential for these conflicts of interest. The absence of requirements for states to address acknowledged risks is not consistent with federal internal control standards that require federal agencies to identify, analyze, and respond to risks related to achieving defined objectives. Developing Service Plans and Determining the Amount of HCBS to Provide Separate concerns pertain to managed care plans’ involvement in HCBS needs assessments for service planning purposes that are conducted by plans after enrollment. Advocates in two of the three selected states with managed care HCBS programs, New York and North Carolina, expressed concerns about managed care plans’ incentives to reduce their costs by reducing enrollees’ HCBS service levels, leading to reduced access to needed HCBS. For example, advocates in New York highlighted the growth in fair hearings that enrollees initiated to dispute reductions in HCBS they receive, which can result from inaccurate needs assessments. In May 2016, in the preamble to a final rule that amended managed care regulations, CMS responded to concerns from commenters about managed care plans’ involvement in the needs assessments used to develop service plans by stating that managed care plans’ HCBS needs assessments of enrollees are a critical component of the plans’ efforts to manage enrollees’ care. CMS also noted that existing appeals processes, which are similar to fair hearings, provide adequate safeguards to address instances when enrollees believe their needs assessments do not reflect their true needs. However, according to CMS, beneficiaries enrolled in managed long-term services and supports are among the most vulnerable and often require enhanced protections to assure their health and welfare. To implement additional beneficiary protections, the May 2016 managed care regulations require states with managed care HCBS programs to implement a beneficiary support system. A beneficiary support system generally provides individuals with education and assistance related to appeals, grievances, and fair hearings, and assists states with the identification and resolution of systemic issues through review and oversight of program data. These regulations also require states to report annually on the activities and performance of these systems in order to drive continual improvements. CMS stated that reporting requirements of this nature would help the agency address fragmented program information about state managed care programs and help improve oversight efforts. However, as of September 2017, CMS had not issued guidance to states on the content and form of this reporting, and under the regulations, states are not required to submit reports until CMS issues such guidance. CMS officials told us they were unsure whether they would issue this guidance, and thus it is unclear whether and when the reporting requirement will take effect. We previously made a recommendation to CMS that pertains to this issue. Specifically, in a report published in August 2017, we identified similar concerns with the lack of requirements for state managed long- term services and supports programs to report information that CMS needs to adequately oversee states’ programs for ensuring beneficiary access to services. We found that existing state reporting did not always include key elements necessary for CMS to monitor certain key aspects of beneficiaries’ access and quality of care, including data related to appeals and grievances. We recommended that CMS improve its oversight of managed long-term services and supports by taking steps to identify and obtain key information needed to oversee states’ efforts to monitor beneficiary access to quality services. HHS concurred with this recommendation and stated that the agency will take this recommendation into account as part of an ongoing review of the 2016 managed care regulations. This action could help to address the concerns discussed above regarding managed care plans’ potential for conflicts of interest in conducting needs assessments for service planning purposes. HCBS needs assessments can directly affect whether individuals are eligible to receive HCBS and the amount of services they receive. Given the growth in spending for Medicaid HCBS and the potential vulnerability of individuals seeking HCBS, it is critical that needs assessments are effective in ensuring that beneficiaries receive the help they need to live independently while at the same time reducing the risk of over-utilization of HCBS. CMS plays an important role in ensuring that states appropriately assess the needs of those seeking HCBS, including addressing the potential for entities that conduct needs assessments to have conflicts of interest. Conflicts of interest can result in inaccurate assessments, potentially leading to provision of unnecessary services or restricting other beneficiaries’ access to needed services. CMS has required states to take actions to avoid or mitigate the potential for conflicts of interest for some HCBS programs, and states that have taken steps to protect against conflicts of interest in HCBS programs have reported improvements; however, we found gaps in federal requirements for such safeguards. These gaps in requirements are inconsistent with federal control standards that require federal agencies to identify, analyze, and respond to risks related to achieving defined objectives. CMS could improve the efficiency and effectiveness of Medicaid HCBS programs by taking additional steps to consistently require all types of states’ programs to avoid or mitigate the potential for conflicts of interest in conducting needs assessments, as appropriate. The Administrator of CMS should ensure that all types of Medicaid HCBS programs have requirements for states to avoid or mitigate potential conflicts of interest on the part of entities that conduct needs assessments that are used to determine eligibility for HCBS and to develop HCBS plans of service. These requirements should address both service providers and managed care plans conducting such assessments. (Recommendation 1) We provided a draft of this report to HHS for review and comment, and HHS provided written comments, which are reprinted in appendix I. HHS also provided technical comments, which we incorporated as appropriate. HHS concurred with our recommendation to ensure that all types of Medicaid HCBS programs have requirements for states to avoid or mitigate potential conflicts of interest on the part of entities that conduct needs assessments. HHS stated that it has a regulatory structure in place to protect against potential conflicts of interest on the part of entities responsible for determining eligibility for HCBS and developing service plans. As described in our report, however, there are gaps in required conflict of interest standards applicable to entities that conduct needs assessments that inform HCBS eligibility determinations. Further, the conflict of interest requirements related to service plans do not apply to all programs, such as State Plan Personal Care Services programs. Developing additional requirements in response to such gaps would further improve efficiency and effectiveness. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Tim Bushfield (Assistant Director), Emily Beller Holland, Anne Hopewell, Laurie Pachter, Chris Piccione, Vikki Porter, Russell Voth, and Jennifer Whitworth made key contributions to this report.", "summary": "With approval from CMS, the federal agency responsible for overseeing state Medicaid programs, states can provide long-term care services and supports for disabled and aged individuals under one or more types of HCBS programs. State and federal Medicaid HCBS spending was about $87 billion in 2015. Effective needs assessments help states ensure appropriate access to, and manage utilization of, services and therefore costs. States' processes vary, and challenges include the potential for assessors to have conflicts of interest leading to over- or under-estimating of beneficiaries' needs for HCBS. GAO was asked to examine states' needs assessment processes for provision of long-term services and supports. This report addresses (1) how selected states assess needs for HCBS, and (2) steps CMS has taken to improve coordination and effectiveness of needs assessments, among other objectives. GAO studied six states that varied in terms of assessment tools in use, participation in federal initiatives, HCBS delivery systems, and geographic location; reviewed federal requirements and documents; and interviewed CMS officials and stakeholders. The six selected states that GAO reviewed used multiple approaches to assess individuals' needs for Medicaid home- and community-based services (HCBS). Each state may have multiple HCBS programs authorized under different sections of the Social Security Act. These programs serve beneficiaries who generally need assistance with daily activities, such as bathing or dressing. States establish needs assessment processes to collect data on functional needs, health status, and other areas that they use to determine individuals' eligibility for HCBS and to plan services, such as the amount of services needed. The selected states varied in the extent to which they used different assessments across HCBS programs and used multiple types of entities—such as state or government agencies, contractors, or providers—to conduct them. The Centers for Medicare & Medicaid Services (CMS) has taken steps to improve needs assessments but concerns about conflict of interest remain in regard to HCBS providers and managed care plans. HCBS providers may have a financial interest in the outcome of needs assessments, which could lead to overstating needs and overprovision of services. CMS has addressed risks associated with HCBS provider conflicts, such as by requiring states to establish standards for conducting certain needs assessments, but these requirements do not cover all types of HCBS programs. For example, specific conflict of interest requirements are generally not in place for needs assessments that are used to inform HCBS eligibility determinations. In addition, requirements for states to establish standards to address HCBS providers' potential for conflict of interest in conducting needs assessments that are used for service planning do not apply across all programs. Similarly, managed care plans may have a financial interest in the outcome of HCBS assessments used for both determining eligibility and service amounts. Managed care plans could have an incentive to enroll beneficiaries with few needs, as plans typically receive a fixed payment per enrollee. For example, a plan in one state admitted in a settlement with the federal government to enrolling 1,740 individuals, from 2011 through 2013, whose needs did not qualify them. In 2013, CMS issued guidance that managed care plans may not be involved in assessments used to determine eligibility for HCBS, but CMS has not consistently required states to prevent this involvement. Among three states GAO reviewed with managed care HCBS programs, CMS required one to stop allowing plans to conduct such assessments but allowed plan involvement in two states. The absence of conflict-of-interest requirements across all types of HCBS programs and states is not consistent with federal internal control standards, which require agencies to respond to risks to program objectives. GAO recommends that CMS ensure that all Medicaid HCBS programs have requirements for states to address both service providers' and managed care plans' potential for conflicts of interest in conducting assessments. HHS concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "The rapid increase of UAC apprehended by DHS in 2014 led to USAID’s assistance for reception and reintegration efforts in Central America’s Northern Triangle. USAID’s efforts, carried out by its implementing partner IOM, have focused on children and family units, as they are considered the most vulnerable migrant populations. According to DHS, the number of UAC from any country who were apprehended at the U.S.- Mexico border rose from nearly 28,000 in fiscal year 2012 to more than 42,000 in fiscal year 2013, and to more than 73,000 in fiscal year 2014. Prior to fiscal year 2012, the majority of UAC apprehended at the border were Mexican nationals. However, nearly three-fourths of UAC apprehended in fiscal year 2014 were nationals from El Salvador, Guatemala, and Honduras. In fiscal year 2014, approximately 122,000 nationals (both children and adults) from the Northern Triangle countries were removed from the United States and returned to their home countries, according to DHS. That number decreased to approximately 75,000 in fiscal year 2017. For the number of nationals from El Salvador, Guatemala, and Honduras removed by DHS’s U.S. Immigration and Customs Enforcement (ICE) from fiscal years 2014 through 2017, see figure 1. In addition to migrants returned from the United States, the Northern Triangle countries also receive migrants returned from Mexico. In 2016 and 2017, the number of returnees from Mexico to these three countries was greater than those returning from the United States, according to information from countries’ migration directorates. In 2017, however, the number of returning migrants from the United States and Mexico decreased in all three countries, as figure 2 shows. We have previously reported that the causes of migration from El Salvador, Guatemala, and Honduras to the United States are multiple and include: the lack of economic and job opportunities, gang-related violence and other insecurity issues, high poverty rates and poor living conditions, the desire for family reunification, and perceptions of U.S. immigration policy. A number of U.S. agencies provide assistance to these countries to address some of these socioeconomic issues, such as violence and poverty. For example, USAID, State, and DHS have programs providing assistance in areas such as economic development, rule of law, citizen security, law enforcement, education, and community development funded through the U.S. Strategy for Central America, including the Central America Regional Security Initiative. To support efforts to prevent migration, such as targeting human smuggling organizations and developing public information campaigns, the U.S. embassies in El Salvador, Guatemala, and Honduras coordinate through interagency working groups. For more information on these coordination activities, see appendix II. USAID has provided funding for short- and long-term assistance to migrants returning to El Salvador, Guatemala, and Honduras, including assisting returning migrants upon arrival at points of entry and reintegrating them into their home countries. USAID provided approximately $27 million to IOM through three program contribution agreements to conduct these efforts. These efforts are in various stages of development in all three countries. Host governments face challenges in their efforts to reintegrate migrants, including limited resources and a lack of employment opportunities. USAID has provided funding for short- and long-term assistance to migrants returning to El Salvador, Guatemala, and Honduras, whether they are returning from the United States or Mexico. Short-term efforts assist returning migrants arriving at reception centers in their home countries. These efforts involve processing migrants upon arrival at the points of entry and generally providing post-arrival assistance, such as food, transportation, hygiene and school kits, and clothes within the first two days after returning (see fig. 3). Long-term efforts focus on reintegrating migrants into their home countries. Reintegration seeks to restore migrants into society and to reestablish economic, psychological, and social ties. USAID has assisted migrants returning to their home countries since 2014 through three program contribution agreements, implemented by IOM. 1. Reception/ In-Processing and Repatriation Assistance to Returning Families and Unaccompanied Children in the Northern Triangle of Central America Agreement (also known as Post-Arrival and Reception Assistance or PARA), (July 2014–April 2016). This agreement between USAID and IOM—established in response to a rapid increase of UAC from El Salvador, Guatemala, and Honduras arriving at the U.S. border in 2014—intended to, among other things, achieve the overall objective of contributing to the “dignified, holistic, and sustainable” return of children and families in the Northern Triangle. According to the program description, IOM viewed infrastructure improvements as a key component of the program. For example, IOM included the renovation of reception centers and shelters among the activities that might be carried out to meet one of the program goals, which related to supporting the countries’ capacities to process and assist returnees at points of entry and migrant shelters. Other goals included efforts to address topics such as providing capacity building to key government agencies, non- governmental organizations, and other partners offering assistance to returning migrants, and improving migration data collection and information sharing among governments, donors, humanitarian agencies, and civil society. 2. Northern Triangle Migration Information Initiative Agreement (NTMI), (September 2015–March 2018). This second agreement between USAID and IOM focused on improving the quality, reliability, and uniformity of migration information. According to the program description, the program would address the need for improved migration information to contribute to the development of more strategic public policies among institutional counterparts involved in the reception, assistance, and reintegration of returning migrants. The program’s goal was to strengthen the governments’ capacity to manage, collect, and analyze migration information to support humanitarian action and protect vulnerable populations in the Northern Triangle countries. This effort also involved taking steps to develop and strengthen data systems to register returning migrants’ information. 3. Return and Reintegration in the Northern Triangle Agreement, (June 2016–June 2019). This third agreement between USAID and IOM was intended to continue to promote and ensure more humane and dignified assistance to and sustainable reintegration of migrants upon return to communities of origin by strengthening the capacities of key stakeholders to assist, care for, and protect returning UAC and migrant families in the Northern Triangle countries. According to the agreement, the program would address things such as expanding the range of government-supported opportunities for returning migrants while providing high-quality services during the reintegration process at the local level. USAID provided approximately $27 million for assistance to IOM through the three program contribution agreements. Once the program contribution agreement is signed and the funds are disbursed to IOM, USAID considers the funds expended for its purposes. As of April 2018, IOM has expended all the funds for the first two agreements, $7.6 million and $2.5 million respectively, and $7.1 million of $16.8 million, or 42 percent, of the funds for the third. For all three agreements, from fiscal year 2014 through April 2018, IOM expended about $9.1 million in El Salvador, about $5.4 million in Honduras, and about $2.7 million in Guatemala, according to IOM. (See figure 4.) Asociación de Retornados Guatemaltecos (ARG) The civil society organization Asociación de Retornados Guatemaltecos (ARG) begins its work with returning migrants from the United States at the Guatemalan Air Force Base Reception Center. Members of ARG are returned migrants themselves who started the association in 2013 because they understood the experiences of returning migrants and wanted to help people in similar situations by providing a support network. According to an ARG volunteer and our observations, at the reception center, an ARG volunteer greets every returning migrant as they come through the door. After migration authorities process the returning migrants and provide them a snack, an ARG volunteer helps them make a domestic or international telephone call to their family members. Once the migrants have received any belongings and exchanged money, ARG volunteers offer them clothing, help with various tasks—such as receiving money through wire transfers or registering them for a new identity card—and, if necessary, purchase bus tickets for them to return to their communities of origin. ARG volunteers stay until all the returning migrants are served, and, if the migrants are fearful of returning to their communities, accompany them to the Casa del Migrante, a shelter that provides protection assistance. The volunteers told us that they maintain a database to track the returned migrants, later call the returned migrants to make sure they arrived safely in their communities, and offer them assistance in getting certified in skills they may have acquired abroad, such as construction work or speaking English. ARG also connects returned migrants with vocational or training opportunities and potential scholarships. $49,740 to expand a network of migrant returnees to facilitate reintegration and provide information on locally available resources to returnees, such as credit access, government-training programs, market information, and contracting opportunities. The grantee also developed a working group to discuss with government officials and the private sector the health issues returnees face. Even though the grant has ended, the lnstituto Salvadoreño del Migrante’s efforts continue with funds from other donors, according to IAF. Efforts to assist reception, migrant-related data collection, and reintegration are in various stages of development in all three countries. IOM, with U.S. assistance, has renovated seven reception centers and shelters in El Salvador, Guatemala, and Honduras and improved the collection of migration data to understand the characteristics of the population returning to their countries to inform decisions about allocating resources needed for reintegration. However, in all three countries the use of migration information varies and reintegration efforts are just beginning. El Salvador has one reception center for returning migrants; Guatemala has three reception centers and two shelters; and Honduras has three reception centers. See figure 5 for the locations of these reception centers and shelters as well as points of entry. We observed that at the reception centers in the three countries, returning migrants go through a similar reception process. The process may differ slightly depending on the country and whether the returning person is an adult, part of a family unit, or UAC. See figure 6. IOM has assisted in the renovation of the countries’ reception centers and shelters and provided post-arrival assistance to returning migrants. Country-specific information on these facilities follows. El Salvador has one IOM-supported reception center, called Dirección de Atención al Migrante (DAMI), Directorate of Assistance to Migrants, but informally known as La Chacra. IOM completed its efforts to renovate the center in February 2016, and increased its capacity to receive up to 200 returning migrants at a time. The center serves adults, UAC, and family units returned by chartered bus from Mexico or on chartered flights from the United States. Post-arrival assistance is provided at the center. See figures 7 and 8. Guatemala has three reception centers and two shelters for returning migrants. IOM renovated the two shelters in 2015 and one of the reception centers in 2017. IOM also provided information technology equipment for one reception center and plans to renovate another reception center in 2018. See figure 9. The three reception centers include: Sala de Recepción de Niñas, Niños y Adolescentes Migrantes no Acompañados y Unidades Familiares (Reception Center for Unaccompanied Migrant Children and Family Units), La Aurora International Airport, Guatemala City. This center, which opened in May 2017, serves UAC and family units returning by commercial flights from Mexico or the United States. The center provides post- arrival assistance, and has areas for immigration processing, psychological and social assistance, and breast-feeding. It also has a medical clinic and a play area for children. See figure 10. Centro de Recepción de Retornados de la Fuerza Aérea Guatemalteca (Reception Center for Returnees at Guatemalan Air Force Base), Guatemala City. This reception center serves adults, UAC, and families returning by chartered flights from the United States, and provides post-arrival assistance to them. See figure 11. Adults traveling without children are processed separately from families. In July 2015, IOM opened a small remodeled area of the center that receives returning migrant families and provides post- arrival assistance. Centro de Recepción de Retornados en Tecún Umán (Reception Center for Returnees at Tecún Umán), Tecún Umán. This reception center, on the border with Mexico, serves adults, UAC, and family units returning by chartered bus from Mexico. IOM has supported the center mainly by providing IT equipment in October 2016 to process returning migrants. The children go through immigration processing at Tecún Umán and are then moved to Casa Nuestras Raíces Quetzaltenango by bus, accompanied by a government social worker to ensure the protection of UAC until a parent or guardian picks them up. The two shelters include: Casa Nuestras Raíces Guatemala (Our Roots Shelter, Guatemala), Guatemala City. This shelter serves UAC returning by chartered flights from Mexico and commercial or chartered flights from the United States who have been processed at either La Aurora or Fuerza Aérea Guatemalteca. IOM renovated this shelter in August 2015 and supports post-arrival assistance for returning migrants and their relatives who come to take them home. See figure 12. Casa Nuestras Raíces Quetzaltenango (Our Roots Shelter, Quetzaltenango), Quetzaltenango. This shelter serves UAC returning by chartered bus from Mexico. UAC are processed first at Tecún Umán and then transported to Quetzaltenango. Similar to the shelter in Guatemala City, IOM renovated this shelter in August 2015 and provides post-arrival assistance. Honduras has three reception centers. IOM renovated two of the reception centers and upgraded the third. See figure 13. Centro de Atención al Migrante Retornado SPS (SPS Assistance Center for Returned Migrants), San Pedro Sula. This reception center serves adults returning by chartered flights from the United States. IOM completed renovating and equipping this center in February 2016. It provides post-arrival assistance to returning migrants. Centro de Atención para Niñez y Familias Migrantes Belén (Belén Assistance Center for Children and Families), San Pedro Sula. This center serves UAC and family units returning by chartered bus from Mexico or commercial flights from Mexico or the United States. IOM completed renovating and equipping the center in February 2016. Post-arrival, psychological, and medical assistance is also provided at Belén. Centro de Atención al Migrante Retornado Omoa (Omoa Assistance Center for Returned Migrants), Omoa. This center serves adults who are returned by chartered bus from Mexico. IOM provided hygiene, sanitation, and water upgrades to the center, and, according to IOM, plans to make electrical improvements and construct a sports field, sidewalks, and parking area; some of these efforts were started in September 2018. IOM began assisting the countries in September 2015 with the collection and use of migration data with funding from USAID through its NTMI agreement. Since September 2015, all three host governments collect and digitize migration data. The governments use the data to understand the characteristics of the population returning to their countries so they can make decisions about allocating resources needed for reintegration, according to IOM. To facilitate the collection of relevant information, IOM helped each government in the three countries develop its own form to gather the information needed by the various ministries involved in reception and reintegration efforts. According to IOM, this uniform questionnaire has promoted data sharing among institutions, reduced interviewing times, and helped ensure that returning migrants are not required to provide the same information multiple times. In addition to counting the number of returned migrants and recording where they are returning from, each country now collects detailed information about each migrant. For example, the Honduran government collects information on an individual’s reason for migrating, labor skills, place of birth, and education level. Through the NTMI agreement, IOM also provided government agencies in all three countries with information technology equipment, software, and training to collect and analyze relevant information about returning migrants. For example, IOM developed the Honduran government’s data repository and official website for the agency responsible for the registration and publication of data on returning migrants. In Guatemala, IOM is helping the migration directorate implement a system to use fingerprints to identify returning migrants who had migrated previously and returned, providing information on recidivism. IOM has also trained personnel involved with migrant programs in all three countries on how to use and analyze this information. El Salvador, Guatemala, and Honduras are at different stages in establishing reintegration efforts, and each government has different priorities, according to IOM. While some reintegration efforts began earlier, IOM’s main reintegration efforts began under the third contribution agreement with USAID in 2016, focusing on expanding the range of government-supported opportunities for returning migrants while providing high-quality services during the reintegration process at the local level. Reintegration efforts in all three countries seek to support returnees with resources in their home communities, including psychological and social services, vocational and employment training, employment opportunities, and upgrades to public spaces. Civil society organizations support some of these reintegration efforts. USAID, through its agreements with IOM, assists these reintegration efforts in a context in which the three host countries experience challenges, such as limited resources and employment opportunities, which affect implementation. Reintegration Efforts in El Salvador El Salvador is furthest along in establishing reintegration efforts, at both the national and municipal levels. These efforts focus on the entire spectrum of returnees—children, adolescents, and adults—by providing education, psychological, and social assistance to children and families, and reintegration information to adults. At the national level, IOM has been working since November 2015 with the government of El Salvador’s Assistance Centers for Returned Migrant Children and Adolescents and its information centers that support reintegration services for adults, called Ventanillas de Atención al Migrante, Migrant Assistance Windows (commonly known as Ventanillas). The Assistance Centers for Returned Migrant Children and Adolescents are located in four municipalities, all of which have high numbers of returning migrants, including children and adolescents. These centers provide returning migrant children and families with social services and case management to facilitate their economic and social reintegration. These services include psychological and social assistance and crisis intervention; legal assistance, including safety and protection; health services, including nutrition and immunizations; educational support to ensure children and adolescents are incorporated into the formal education system; and referral services. The Ventanillas are information centers supporting reintegration in the five municipalities with the highest number of returning migrants. Each center has one person who is responsible for providing assistance to returned migrants such as employment assistance, school enrollment, training opportunities, and lines of credit. IOM equipped the centers with office furniture and such items as storage cabinets, water coolers, air conditioners, and telephones. At the municipal level, IOM is also assisting other government initiatives in four communities that have high numbers of returned migrants and which the government has prioritized under its Plan El Salvador Seguro (Safe El Salvador Plan). Specifically, IOM is working with municipal governments and community organizations to: improve public spaces with small scale infrastructure projects; raise awareness and knowledge of migration and reintegration at the community level among local governments, communities, and community leaders; and provide psychological and social assistance. The infrastructure projects are meant to create safe, public spaces to build social cohesion within communities. For example, in two areas in Zacatecoluca that we visited, IOM supported an effort to rebuild a sports complex, which included basketball and soccer fields, and a playground and community center. In Usulután, IOM supported the renovation of the municipal gym (see fig. 14). In January 2018, IOM also began providing technical assistance to the Zacatecoluca municipal government to help it obtain feedback from the community on services needed and working with local service providers to facilitate assistance to beneficiaries, among other things. Guatemala also has government reintegration efforts at both the national and municipal levels. The current reintegration activity underway is the municipal level Centro de Formación Quédate (Stay Here Vocational Training Center), supported by IOM. Implemented by the Secretariat for Social Welfare, this technical and vocational center provides certified vocational courses and alternative education opportunities for youth, including returned UAC and host community adolescents. While the Secretariat for Social Welfare began operations at the center in 2015, IOM’s support started in July 2018. In addition, Guatemala’s President and First Lady launched a national strategy in March 2017 that aims to prevent migration and to care for returning Guatemalan migrants and their families. The strategy’s goal is to consolidate all government agencies’ activities and create a comprehensive system for returning migrants, including children. Honduras, with support from IOM, has focused at the national level on improving and maintaining its reception centers, and at the municipal level on opening reintegration assistance centers. In addition, the Honduran First Lady has concentrated on UAC and their needs, such as prioritizing secure reunification. Honduras’ effort to link returned migrants, specifically families and UAC, with government services in the municipalities are focused on reintegration assistance centers. There are nine centers, with plans to open seven more by the end of 2018. The Belén Assistance Center, discussed earlier in this report, refers returning migrants to the reintegration assistance centers, according to a center official. The reintegration assistance centers then obtain information from the returning migrants about assistance they are seeking and send it to one of 12 government agencies, such as the Ministries of Development and Social Inclusion, Education or Health, and the Women’s National Institute. In addition to assisting government-sponsored reintegration efforts, IOM supports civil society organizations in Honduras that provide reintegration services. In Honduras, we visited three civil society organizations whose programs work directly with returned UAC. Casa Alianza. Casa Alianza provides reintegration support including psychological and social assistance, child protection services, and children’s rights advocacy for returnees as well as internally displaced persons. The organization worked in the Belén Assistance Center from 2014 to 2017 with returning UAC, according to Casa Alianza officials. Mennonite Committee for Social Action. This organization’s Support for Returned Migrants Program began in 2014 and has various components including: (1) vocational training, (2) psychological assistance, (3) complementary workshops on life skills, and (4) humanitarian assistance. The program focuses on youth between ages 15 and 25 returning to the San Pedro Sula area. Collaboration and Effort Association. This program in Tegucigalpa focuses on providing returned children a safe place to live, teaching them responsibility and cooperation, and supporting their education. Many of the adolescents are returned UAC, and all beneficiaries must themselves help run the association’s programs. Host Government Challenges Affect Reintegration Efforts USAID, through its agreements with IOM, is providing assistance to host countries where various challenges affect reintegration efforts. Some of these challenges affecting host countries, such as limited employment opportunities and resource constraints, are long-standing in nature. Limited resources: With limited resources dedicated to reintegration efforts, the centers can connect few returning migrants with the appropriate government services. For example, at a Ventanilla we visited in El Salvador, just one official—who has no vehicle—is responsible for providing services to all returning migrants in an area roughly one-fifth the country’s overall size and containing roughly one- fifth of its returning migrants. Similarly, at the Honduran reintegration assistance center we visited, there was only one staff member and no psychologist. As of July 2018, the Honduran government had opened 9 of the 16 planned reintegration assistance centers; it plans to open the remaining ones by the end of 2018. Few training and employment opportunities: There are limited training and employment opportunities for returning migrants. One of the primary reasons cited for migration is the lack of employment opportunities in the countries. Additionally, the employment opportunities that are available may not fit the migrants’ skills. For example, only migrants with sufficient English skills can be placed in call centers. At the same time, the training programs being offered at a particular time may not interest the migrant. Further, the few opportunities available may not be offered in the locations where migrants can readily access them. Finally, an official from a multilateral organization working in the region raised the concern that many of the training opportunities offer similar skills, such as training to be a barber, beautician, or mechanic, and the market can support only so many people in these professions. Need for individualized services: Each returning migrant has a different set of needs, skills, and interests, but providing customized assistance takes time and resources. Staff at reintegration assistance centers we visited told us that they try to match a migrant with the services or opportunities they need. For example, a returning migrant may be a single mother with good English skills and referred to services and opportunities based on that profile. Additionally, according to U.S. and Honduran government officials, large-scale reintegration efforts encounter the challenge of reintegrating migrants with different and individualized profiles. Voluntary nature of seeking and finding assistance: Receiving reintegration assistance and services depends in part on the initiative and desire of the returning migrant. Returning migrants must seek assistance to receive reintegration services, and so must be aware of and connect with the reintegration assistance centers. In El Salvador, only about 7 percent of returning migrants requested help from the reintegration assistance centers in 2017; of those who requested assistance, however, 91 percent received it, according to El Salvador’s Ministry of Foreign Affairs. In both El Salvador and Honduras, the reintegration assistance offered by the government is publicized at the reception centers where migrants are processed upon their return. However, in El Salvador, a government official told us that migrants may not have the patience to wait to receive information after traveling and going through the reception process. Termination of TPS May Increase the Need for Reception and Reintegration Services in El Salvador and Honduras With the Secretary of Homeland Security’s decisions to terminate TPS in the United States for nationals of El Salvador and Honduras, as of September 9, 2019, and January 5, 2020, respectively, both countries face the possibility of a significant influx of returnees—as many as 262,500 Salvadorans and 86,000 Hondurans, along with their U.S. citizen children. Reintegration efforts may also be complicated by the different backgrounds and needs of returning migrants who benefited from TPS. According to State officials, returning migrants who had TPS are likely to be older with more skills and education than those who left the country more recently. Successful strategies to reintegrate former TPS beneficiaries will be different than those that are currently in place. TPS beneficiaries may also have children who are U.S. citizens with different needs than UAC. During our country visits in March 2018, State officials indicated that official planning for the return of former TPS beneficiaries was either just beginning, as in El Salvador, or had not begun, as in Honduras because an official decision on the termination of TPS for Hondurans had not yet occurred. U.S. officials, though, were meeting with their counterparts to discuss the challenges of reintegrating TPS beneficiaries. In both El Salvador and Honduras, U.S. officials have encouraged the government to address the challenges of reintegrating former TPS beneficiaries. For example, in February 2018, USAID’s mission in El Salvador convened a one-day conference on current efforts to prevent migration and to plan for the return of migrants with TPS. At the same time, U.S. government officials also stated that some or most TPS beneficiaries might choose to stay in the United States without lawful status, attempt to adjust their status, or move to a third country rather than return to their home countries. Leadership turn-over and guidance: Elections in the three countries, and the subsequent turnover of government officials, also affect implementation, according to IOM. Furthermore, in Guatemala leadership turn-over in key agencies has affected what the government can achieve in terms of reintegration of returning migrants, according to IOM officials. Both the Secretariat of Social Welfare and the Directorate of Migration have had various leaders over the past few years. The government of Guatemala has not yet determined which institution is responsible for reintegration activities and a national plan has not yet been developed, which complicates reintegration efforts, according to IOM. USAID assessed the effectiveness of its reception and migrant-related data collection efforts through site visits, meetings with IOM, and report reviews. This assistance has improved the capacity of the governments of El Salvador, Guatemala, and Honduras to provide reception services to returning migrants and to collect and utilize migration information. USAID has not yet assessed the effectiveness of reintegration efforts conducted to date, but plans to sign an agreement by the end of December 2018 for a new reintegration program which will include a monitoring and evaluation component. Beginning in October 2014, after signing the first agreement IOM, USAID monitored program implementation and assessed the effectiveness of IOM’s efforts to assist returning migrants and improve migration information through site visits, regular meetings with IOM, and review of IOM reports. USAID and IOM officials noted that USAID’s periodic site visits to IOM projects and frequent communications between the two parties helped USAID track progress and results, and make needed adjustments in a timely manner. In a memorandum approving the third program, USAID’s mission in Honduras stated that IOM “responded quickly and satisfactorily to any concerns.” IOM, in consultation with USAID, adapted activities as needed for each country, such as by rebidding a contract to renovate a reception center in Guatemala City in response to corruption allegations. During our site visit in March 2018, we observed USAID officials’ familiarity with specific details related to IOM’s activities and the close working relationship between USAID and IOM staff. In addition, USAID regularly reviewed the activity and progress reports provided by IOM, which included weekly, monthly, and quarterly reports. According to USAID officials, these activity and progress reports served as the basis for conversations with IOM about program progress and assessment. The reports included information such as an overview of achievements, activity updates by country, and challenges and actions taken. For example, the reports detailed information such as the number of returning migrants provided with post-arrival assistance, including food or hygiene kits, as well as progress on larger projects such as constructing small-scale, community-based infrastructure or renovating reception centers. IOM also explained challenges encountered and plans for overcoming them, such as building strong relationships with new key government personnel when there was turnover in Guatemala and Honduras. IOM also provided information to USAID through periodic, two- page information sheets that summarized its activities in a certain geographical area, such as a municipality in El Salvador, or with a certain program, such as NTMI in Honduras. As part of the agreements with USAID, IOM agreed to conduct mid-term and final evaluations of the three programs. IOM produced written mid- term and final evaluations for the first program (PARA) based on reviews of documents, field visits, and interviews with government counterparts and USAID, among others. The final evaluation highlighted the program’s achievements, challenges, effective practices, lessons learned, and recommendations. For example, it noted IOM’s strong working relationship with USAID and host government agencies, as well as the need to conduct high-quality assessments in each country during program design. Instead of a written mid-term evaluation for the second program (NTMI), IOM held an internal workshop, which a USAID representative attended. According to IOM officials, IOM plans to present USAID with a mid-term evaluation for the Return and Reintegration program and a final evaluation for the NTMI program, although both have been delayed due to staffing issues. USAID also assessed IOM’s programs during internal USAID meetings. For example, according to USAID officials, when USAID considered IOM’s requests for no-cost extensions for the PARA and NTMI agreements, USAID assessed the progress and challenges of the activities implemented as part of the agreements and whether they were fulfilling their goals. USAID also discussed the effectiveness of IOM’s programs at a strategic level during portfolio reviews and program performance reports, according to USAID officials. USAID officials told us that because the first program with IOM was productive and had good results, USAID also funded the second and third programs through program contribution agreements. In the memorandum approving the third program, USAID’s mission in Honduras stated that “IOM has been a very effective partner in the first Program Contribution” and noted that IOM collaborated with USAID, the host governments, and other donors to design the follow-on program focused on reintegration efforts. The memo also stated that IOM has “sound management systems and controls, and has long been an effective partner” of the U.S. government. With U.S. assistance, IOM improved the capacity of the Northern Triangle governments to provide reception services to returning migrants and to collect migration information. With U.S. assistance, IOM renovated the region’s seven reception centers and shelters currently in use and provided post-arrival assistance such as hygiene kits and medical services. The final evaluation for IOM’s first program indicated that IOM designed the renovations in consultation with the host government agencies to meet their needs and to provide a welcoming space for returning migrants. During our site visit in March 2018, we visited five reception centers and one shelter in the three countries, including the Belén Assistance Center in Honduras, which we had visited in March 2015, prior to its renovation. The Belén Assistance Center renovations were extensive, including the dining areas, kitchen, bathrooms, dormitories, play spaces, clinics, and counseling areas as well as a conference room used for facilitating meetings and workshops among government entities and partners. We observed the improved facilities as well as the processing of returning migrants (see fig. 15). Likewise, IOM extensively renovated the Casa Nuestras Raíces Shelters in Guatemala City and Quetzaltenango, Guatemala, including the kitchen, bathrooms, dormitories, play spaces, clinics, and counseling areas. In addition to improving infrastructure, IOM provided the governments with post-arrival assistance such as hygiene kits, clothing, meals, buses, and medical, psychological, and social support for returning migrants. For example, from 2014 through 2017 in all three countries, IOM reported that it supplied in total: nearly 60,000 hygiene kits, nearly 34,000 items of clothing, and more than 75,000 meals to returning migrants. In fiscal year 2017, IOM provided post-arrival assistance to over 29,000 returning migrants, according to IOM. Additionally, IOM provided the host governments with 12 buses to transport returning migrants from the airport to the reception center and from the reception center to the bus station to return to their communities. U.S. and host government officials in the three countries noted that, with USAID and IOM’s assistance, the reception of returnees has improved. For example, IOM expanded and renovated the DAMI Reception Center in San Salvador, adding separate areas for the various ministries involved so that returning migrants can receive specialized services such as a medical examination, psychological and social assistance, and the beginning of job placement assistance. The center also provides integrated child protection and social services. During our site visits to the reception centers and shelter in Guatemala City and San Pedro Sula in March 2018, we observed staff distributing food to returning migrants upon their arrival. Through technical assistance and other support, IOM also helped build the capacity of host government institutions as it relates to the reception process and their ability to provide better reception services. For example, IOM worked with government agencies to develop protocols and procedures for receiving returned migrants and trained reception staff on issues such as human rights. At the reception centers in all three countries, multiple government agencies are now working together to assist returning migrants, according to IOM. With IOM’s support, the governments of the Northern Triangle have improved their capacity to collect data about returning migrants. According to USAID, the technical assistance and support provided by IOM through the NTMI agreement strengthened the governments’ capacity to collect, manage, analyze, and share migration information. Prior to these USAID-assisted efforts, data on returning migrants was limited in all three countries and the information produced was not readily available for use by other government agencies, according to USAID. Since 2015, with IOM equipment and training, all three countries have moved toward uniform, more detailed data collection systems. In Honduras, for instance, technical assistance from IOM enabled the creation of a single data repository, which provides migration data for all agencies to use. IOM has trained staff of the countries’ migration directorates to use the registration systems for returning migrants and has trained personnel of other government agencies on how to analyze and use the data produced by the migration directorates. Each government now knows the number of migrants returning to the country—information that was not available previously. (See fig. 2 earlier in this report.) In addition, the governments now have such information as: the causes of migration reported by returnees; the location from which the migrants are returning; and the location to which they are returning. For example, in El Salvador, approximately 27 percent of children and adolescent migrants returning in 2017 said they left because of violence, approximately 27 percent left to reunify with families, and approximately 43 percent left for economic reasons, according to IOM’s analysis of information from El Salvador’s Directorate of Migration. Additionally, according to USAID officials, IOM trained the staff at El Salvador’s General Directorate of Statistics and Census and the agency is now conducting its own surveys of migrants. According to USAID and IOM officials, the Northern Triangle governments are using the expanded information about returning migrants to make informed decisions, design public policies, and develop programs to provide reintegration assistance. Prior to USAID and IOM entering into the NTMI agreement, no official statistics were available that allowed for evidence-based decisions or public policy design. Now, during the registration process in Honduras, for instance, returning migrants are asked what trade they would like to learn, which can inform host government planning. With information about the reasons migrants left the country, governments can also refer migrants to existing programs or create programs to address those issues, such as developing training and employment opportunities. According to IOM and USAID officials, examples of how governments use this information include the following. In El Salvador, multiple government institutions use returning migrant information to design specific programs for this population and redirect programming if necessary. The Ministry of Labor, for instance, uses this information to design entrepreneurship programs. Relevant migration information is also shared with committees of the Alliance for Prosperity Plan. In Honduras, returning migrant information is used by government institutions for planning, budgeting, and monitoring reception, assistance, and reintegration activities. For instance, the First Lady of Honduras’ Task Force for Child Migrants bases its strategy for the reception centers on returning migrant data. Detailed information on returning migrants in these countries has also been useful for U.S. government officials and has informed USAID’s strategy and programming. According to a USAID official in Guatemala, the new information has been integral to USAID’s ability to evaluate migration issues in a more informed manner. For example, USAID officials in Guatemala told us that much of their programming is based in the Western Highlands because they now have data showing most migrants come from this area of the country. In addition, USAID’s mission in El Salvador convened a conference in February 2018 to discuss the termination of Temporary Protected Status for Salvadorans and used information gathered by El Salvador’s Directorate of Migration about reasons for migration and returnees’ profiles to discuss possible reintegration strategies for this population. USAID has not assessed the effectiveness of reintegration efforts conducted to date. Reintegration is a long-term process and many of the reintegration assistance programs are just beginning. Specifically, El Salvador began opening five information centers supporting reintegration in November 2015, Honduras opened nine reintegration assistance centers in 2017 and early 2018, and Guatemala’s one center began assisting returned adolescents in July 2018. Given the number of returning migrants and the nascent reintegration services, relatively few have benefited from services offered by these centers. For example, in El Salvador, only about 1,700 of nearly 26,500 returning migrants were connected with government reintegration services through the centers in 2017. In addition, determining the effectiveness of reintegration efforts is challenging because of the difficulties of tracking migrants once they return to their communities and of accounting for the various external factors that influence an individual’s decision to migrate again. USAID, IOM, and host government officials cited the challenges of tracking and following up with returned migrants once they leave the reception centers. Although the countries are beginning to offer reintegration assistance, through the information and municipal assistance centers in El Salvador and Honduras, there are currently no systems in place to track migrants when they return to their communities. U.S. government officials also noted there are multiple external factors that may influence an individual’s decision to migrate again, some of which cannot be addressed through reintegration assistance programs. For example, the desire to reunify with family may affect an individual’s decision, as well as the country’s economic conditions and levels of violence and insecurity. Although USAID has not yet assessed the effectiveness of reintegration efforts, it plans to monitor and evaluate efforts. As part of the third program, IOM plans to evaluate each country’s reintegration assistance projects. In addition, by the end of December 2018, USAID expects to sign a 3-year agreement with a Public International Organization (PIO) for a new program which will, among other things, continue assisting the host governments’ efforts to reintegrate returning migrants. According to the USAID memorandum describing the new program, it will be underpinned by a monitoring and evaluation plan, and is expected to result in, among other things, a strengthened focus on monitoring and evaluation systems to track reintegration at the community level. Additionally, according to the memorandum, the new program will use a cost-type agreement which is structured such that the PIO will be reimbursed or advanced funds for costs of goods and services to achieve the agreement purpose. We are not making any recommendations in this report. We provided a draft of this report to DHS, IAF, State, and USAID. All the agencies provided technical comments, which we incorporated as appropriate. USAID and IAF provided written comments which we have reprinted in appendices III and IV. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report’s date. At that time, we will send copies to the appropriate congressional committees and the Administrator of the U.S. Agency for International Development, the President of the Inter-American Foundation, and the Secretaries of Homeland Security and State. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. If you or your staff has any questions about this report, please contact me at (202) 512-7141 or groverj@gao.gov. This report examines (1) the U.S. Agency for International Development’s (USAID) efforts to assist the reception and reintegration of migrants from El Salvador, Guatemala, and Honduras into their home countries since fiscal year 2014; and (2) what is known about the effectiveness of these efforts. In addition, we reviewed how U.S. agencies have coordinated efforts to assist the reintegration of returning migrants. To examine USAID’s efforts to assist the reception and reintegration of returning migrants from fiscal year 2014 through fiscal year 2017 in El Salvador, Guatemala, and Honduras, we reviewed USAID’s three program contribution agreements with the International Organization for Migration (IOM). We also reviewed grant agreements for Inter-American Foundation (IAF) projects in El Salvador and Guatemala. In addition, we obtained data from USAID, the Department of State (State), and IAF on agency funding to El Salvador, Guatemala, and Honduras from fiscal years 2014 through 2017. We assessed the reliability of USAID expenditures by reviewing expenditure data from USAID’s Phoenix system for the three contribution agreements. We determined these data to be sufficiently reliable for reporting the amount of funding U.S. agencies expended on reintegration programs. We also reviewed IOM expenditure data from fiscal year 2014 through April 2018. We determined these data were sufficiently reliable to illustrate the general scale of IOM’s expenditures. Additionally, we reviewed IOM program reporting documents detailing the status of the projects, including weekly, biweekly, and monthly progress reports and project presentations related to renovations, information management, and reintegration efforts. During our March 2018 site visit, we interviewed USAID, State, IAF, and IOM officials in all three countries regarding the status of the projects being implemented under the contribution agreements or grants, and we met with host government officials to discuss these projects. We interviewed representatives from nongovernmental organizations in the three countries to learn about how their work supports reintegration. We conducted five site visits to reception centers, one in El Salvador, two in Guatemala, and two in Honduras, where we observed the reception process, and we visited one shelter in Guatemala City, Guatemala. We selected the locations to visit based on the location of the majority of reception centers and shelters in the countries. In Honduras, we met with unaccompanied children (UAC) at three centers operated by different nongovernmental organizations with IOM support, where we discussed their reasons for making the journey to the U.S, and how the programs were assisting their reintegration. Spanish-speaking GAO staff primarily conducted the interviews and GAO contracted for interpreters with State to help facilitate the interviews, when necessary. We also interviewed USAID, State, and IAF officials in the United States who are responsible for these programs. To determine the number of migrants returned to El Salvador, Guatemala, and Honduras, we reviewed and tabulated IOM data from calendar year 2015 to 2017. We did not review 2014 data because IOM’s effort had not yet begun. To determine the number of people removed from the United States, we reviewed and tabulated Department of Homeland Security (DHS) data from fiscal years 2014 through 2017. We assessed the reliability of IOM migration data on the number of returnees, and DHS data on people removed, by reviewing documents and interviewing knowledgeable agency officials and host government officials about how the data were produced, selected, and checked for accuracy. We determined the IOM data to be sufficiently reliable to provide background information on the number of migrants returning to the three countries. We determined the DHS data was sufficiently reliable for reporting on number of removals of migrants from the United States to El Salvador, Guatemala, and Honduras from fiscal years 2014 through 2017. The data for the number of Temporary Protected Status (TPS) beneficiaries is from DHS reporting in the Federal Register, which is sufficiently reliable for reporting the approximate number of TPS beneficiaries. To examine how USAID assessed the effectiveness of its assistance for reintegration efforts in El Salvador, Guatemala, and Honduras, from fiscal years 2014 through 2017, we reviewed IOM’s contribution agreements, USAID’s evaluation policies for the agreements, country strategy documents for each country, and regional planning documents. We also interviewed USAID officials. To gather migration related information and requirements, we reviewed the U.S. Strategy for Central America, the associated quarterly reporting cables, and State’s Justification Memoranda for releasing foreign assistance to Central America. During our March 2018 site visit, we also interviewed USAID and IOM officials at overseas locations regarding their evaluation requirements and policy and how they monitored and evaluated the projects. We reviewed IOM’s reported progress towards achieving its goals by reviewing its mid-term and final evaluation reports for the first contribution agreement, and other reporting documentation containing progress updates for the other two contribution agreements. During our site visit to El Salvador, we visited renovation projects that IOM supported, including two playgrounds, a municipal gymnasium, and a community center in Zacatecoluca and Usulután. In addition, we visited several reintegration initiatives, including an Assistance Center for Returned Migrant Children and Adolescents and, one municipal information center supporting reintegration center, both in El Salvador, and one municipal reintegration assistance center in Honduras. We selected reception and reintegration initiatives to visit based on proximity to San Salvador and San Pedro Sula. We also met with U.S. embassy officials, including the U.S. Ambassador to Guatemala and acting chiefs of mission in El Salvador and Honduras, to obtain their views on U.S. assistance for returning migrants and to understand what efforts were underway to address the impact of termination of Temporary Protected Status for El Salvadoran and Honduran beneficiaries. We also interviewed IOM officials in El Salvador on the host nation’s ability to reintegrate Temporary Protected Status beneficiaries, and reviewed documents regarding El Salvador and Honduras by DHS and State on this topic. To examine interagency coordination, we obtained information on how USAID, State, DHS, and IAF headquarters offices with responsibility for overseeing assistance for reception and reintegration activities and country team operations in El Salvador, Guatemala, and Honduras have been coordinating with each other and with host country partners. During our March 2018 site visit, we interviewed USAID and IOM representatives at overseas locations to discuss their coordination efforts. We also interviewed USAID, State, and DHS officials in the United States who are responsible for these programs to obtain their views on interagency coordination. In addition, we obtained related information from IAF officials on coordination by email. We conducted this performance audit from November 2017 to November 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Interagency coordination on reception and reintegration efforts takes place at U.S. embassies among the U.S. Agency for International Development (USAID), Department of State (State), Department of Homeland Security (DHS), and others, in El Salvador, Guatemala, and Honduras. These efforts occur on a formal basis as part of interagency working groups focused on migration at the U.S. embassies in El Salvador and Honduras and on an ad hoc basis in Guatemala, where no formal migration working group exists. Additionally, the Inter-American Foundation (IAF) coordinates its reintegration efforts with USAID’s missions in El Salvador and Guatemala, where it funds such projects. The migration working group at the U.S. embassy in El Salvador, according to group officials, coordinates the efforts of the various U.S. agencies working on migration issues, in support of the U.S. embassy’s overall goal of curbing illegal migration to the United States. Members of the working group come from USAID; State, including various sections such as Political, Consular, and Public Affairs; DHS components, including U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement; and others as appropriate. According to these officials, the working group’s purpose is to have all the agencies at the U.S. embassy support and work together on migration-related issues, share information, and avoid duplication of effort. These officials told us the working group also responds to issues raised by State headquarters. For example, State officials in Washington asked the working group to assess the potential impact of former beneficiaries of Temporary Protected Status in the United States returning to El Salvador. The migration working group at the U.S. embassy in Honduras initially focused on addressing the rapid increase of unaccompanied children (UAC) from El Salvador, Guatemala, and Honduras arriving at the U.S. border in 2014, according to group officials. Members of the working group include individuals from USAID, State, DHS, and others as appropriate. In September 2017, the working group, according to these officials, shifted its focus to reintegration, as well as issues related to internally displaced persons. Officials told us that the working group has spun off other working groups, including one to address the issue of beneficiaries with Temporary Protected Status returning to Honduras. The U.S. embassy in Guatemala had no formal inter-agency migration working group, in March 2018 when we visited, but it had several others, including a law enforcement working group that meets once a week. According to the working group, the Ambassador meets with them if any sensitive issues regarding migration arise. In addition, it has an economic and political working group focused on the ports and trade that regularly discusses what is occurring at the ports of entry. Among these working groups, migration is discussed at the U.S. embassy as needed, according to embassy officials we spoke with who participate in these groups. Members of the working groups include individuals from USAID, State, DHS, and others as appropriate. IAF also coordinates its reintegration efforts with all three U.S. embassies, to ensure that (1) its projects are aligned with U.S. foreign policy objectives and (2) its grantees are appropriate. State provides feedback on IAF proposed grants and the relevant U.S. embassies provide their approval. According to IAF officials, for each fiscal year since 2016 IAF has presented a detailed proposal to USAID’s Latin American and Caribbean Bureau, outlining its programing and funding objectives, and monitoring and evaluation plan in the Northern Triangle countries. The proposals are intended to facilitate USAID’s transfer of funds to IAF, ensuring that community-led projects are included in the efforts it supports to advance the U.S. Strategy for Central America. USAID coordinates its assistance for reception and reintegration efforts with foreign partners, including host governments and international organizations, through the International Organization for Migration (IOM), which is the primary implementing partner for these efforts. USAID officials told us, however, they engage with both the host government and other national and multilateral organizations when it identifies a constructive opportunity. Specifically, USAID’s three program contribution agreements with IOM addressed the benefits of partnerships and coordination with counterparts in government, civil society, multilateral organizations, and the private sector. Additionally, IOM noted it would engage with various stakeholders to coordinate responses and avoid duplication. For example, according to IOM, in 2014, it had already met with various private sector counterparts, such as Americares, and the civil society organizations Glasswing International and World Vision, to identify potential activities to build upon USAID-funded assistance before the initiation of the first program contribution agreement. IOM also coordinated with various civil society, multilateral, and private sector organizations in the three countries in its implementation of the program contribution agreements. For example, in Guatemala, IOM officials stated that their coordination with the United Nations Population Fund enabled IOM to provide computer hardware, while the United Nations provided computer software to the Ministry of Foreign Relations to register UAC, thus avoiding duplication. IOM also coordinated with civil society organizations such as: Fundación Cristosal, in El Salvador, which is working to implement a new registration system of victims of internal displacement. Fundación Avina, in Guatemala, which assists returnees with social and labor reintegration. Scalibrini Missionary Sisters, in Honduras, which operates the reception center at San Pedro Sula and provides returnees bus tickets back to their communities of origin, if needed and also phone calls to reach their family members upon their arrival. During our site visit to Honduras in March 2018, we attended a roundtable meeting with representatives from the International Committee of the Red Cross, the Norwegian Refugee Council, and the United Nations High Commissioner of Refugees, where these representatives discussed coordination and efforts to avoid duplication at reception centers. For example, officials at the meeting stated that during the post-election protests in Honduras in late 2017 and early 2018, returning children and families could not access the Centro de Atención para Niñez y Familias Migrantes Belén (Belén Assistance Center for Children and Families) to be processed by IOM, so they were processed by the Honduran Red Cross at the Centro de Atención al Migrante Omoa (Omoa Assistance Center for Migrants). The organizations worked together and consistently communicated to ensure that there were no gaps in coverage for the returning UAC and families, according to officials at the meeting. USAID officials told us that IOM programs helped strengthen the relationship between the U.S. government and the host country governments. The host government agency must formally request IOM’s assistance before IOM will provide support, and IOM officials said this letter of request is important to ensure institutional support for and cooperation with IOM’s programs. Additionally, IOM, USAID, and the host government agencies worked together to improve reception and reintegration services for returning migrants. For example, in Honduras in March 2018, USAID, IOM, the Ministry of Foreign Affairs, and the National Center for Social Sector Information met to discuss what additional information they would like to obtain about returning migrants and how to analyze the data. The program contribution agreements also called for the establishment of coordination committees to facilitate coordination and consultation among its members. According to the agreements, the committees were to share information as needed to provide assistance, evaluate the effectiveness of the assistance, and otherwise share relevant information. The committee meetings, according to IOM officials, were held regionally among representatives of IOM and the USAID missions under the first program contribution agreement, Repatriation Assistance to Returning Families and Unaccompanied Children in the Northern Triangle of Central America, when the efforts were beginning and there was a sense of urgency due the rapid influx of UAC at the U.S. border from El Salvador, Guatemala, and Honduras. When the third program contribution agreement, Return and Reintegration in the Northern Triangle, began in 2016, the meetings between IOM and USAID were held bilaterally in each country. The coordination committee played an important role during the beginning of the first program contribution agreement because, according to USAID officials, it facilitated interaction with the host governments, helped with coordination, and established working relationships between USAID and IOM. Once the program and relationships were established by the time of the third contribution agreement, coordination had evolved, according to USAID officials. IOM officials said that although committee meetings occur on an ad hoc basis under the third program contribution agreement, coordination is stronger. For example, USAID and IOM coordinate closely on strategic decisions, such as IOM’s decision to rebid the contract to renovate and expand the reception center at the Guatemalan Air Force Base, after allegations of corruption arose surrounding the initial contractor. Finally, USAID interacts in various ways with IOM, outside of the formal terms of the contribution agreements. According to IOM and USAID officials, USAID and IOM engage in regular discussions about the programs’ progress and implementation challenges, to help IOM make decisions and redefine plans of action if necessary. USAID is involved in IOM’s strategic decisions, and IOM regularly consults USAID for feedback and recommendations regarding programming. USAID and IOM participated in forums such as conferences and a workshop where lessons learned and best practices were discussed. In addition to the contact named above, Judith Williams (Assistant Director), Joe Carney (Assistant Director), Julie Hirshen (Analyst-in- Charge), Kathryn Bassion, Neil Doherty, Daniela Rudstein, Aldo Salerno, Michael Silver, and K. Nicole Willems made key contributions to this report.", "summary": "In 2014, instability driven by insecurity, lack of economic opportunity, and weak governance led to a rapid increase of unaccompanied alien children (UAC) from El Salvador, Guatemala, and Honduras arriving at the U.S. border. In fiscal year 2017, the Department of Homeland Security reported (DHS) apprehending more than 200,000 nationals from these countries and removed nearly 75,000 nationals, including UAC, of these countries from the United States and returned them to their home countries. Current estimates also indicate nearly 350,000 individuals may need to be reintegrated to El Salvador and Honduras over the next few years when their Temporary Protected Status in the United States expires. GAO was asked to review U.S. efforts to support the reintegration of Central American migrants. This report describes (1) USAID efforts to assist reception and reintegration of migrants from El Salvador, Guatemala, and Honduras into their home countries since fiscal year 2014; and (2) what is known about the effectiveness of these efforts. GAO reviewed agency program documents and funding data; interviewed officials from U.S. government agencies, IOM, and host governments and beneficiaries; and conducted site visits in these countries. GAO is not making any recommendations in this report. USAID and IAF provided formal comments, which are reproduced in this report, and all agencies provided technical comments, which were incorporated as appropriate. Since fiscal year 2014, the U.S. Agency for International Development (USAID) has provided approximately $27 million to the International Organization for Migration (IOM)—an intergovernmental organization focusing on migration—for assistance to migrants returning to El Salvador, Guatemala, and Honduras. Assistance to migrants includes short-term reception services, such as food and transportation, renovating reception centers, and collecting data on returning migrants that are used to support their reintegration. Assistance also includes long-term reintegration efforts, such as counseling services and employment assistance to make it easier for migrants to readjust to and stay in their home countries. These various efforts are in different stages of development. While reception services for migrants have improved, USAID has not yet assessed the effectiveness of reintegration efforts. USAID monitored and assessed reception services through site visits, meetings, and reports from IOM. IOM's early efforts improved the three host governments' capacity to provide reception services to returning migrants. For example, since fiscal year 2014, IOM renovated the seven reception centers and shelters being used in El Salvador, Guatemala, and Honduras. Further, with IOM's assistance, the host governments have improved their capacity to collect data about returning migrants. According to USAID and IOM, host governments are using these data to design policies and develop programs to provide reintegration assistance. While USAID has not yet assessed the effectiveness of reintegration efforts, many of these programs are just beginning. USAID expects to sign a new agreement by the end of December 2018 that would involve, among other things, monitoring and evaluating reintegration efforts in the three countries.", "document_type": "gao"}
{"report": "When DCTAG was created, there was no income eligibility requirement. However, in 2007, federal law limited eligibility to students from families with annual taxable incomes less than $1,000,000. In 2015, federal law further limited eligibility to students from families with annual taxable incomes less than $750,000; the law provided that this limit was to be subsequently adjusted for inflation as measured by the percentage increase, if any, in the Consumer Price Index for All Urban Consumers. For example, in academic year 2018, eligibility was limited to students from families with annual taxable incomes less than $762,000 (see textbox for selected eligibility requirements). Complete the Free Application for Federal Generally begin a course of study within 3 years of graduating high school or obtaining a General Equivalency Diploma. institution’s requirements for Satisfactory Academic Progress. Universities (HBCU) nationwide and other participating private nonprofit institutions in the D.C. metropolitan area. We identified the following trends in eligibility for and enrollment in DCTAG and graduation rates for recipients: DCTAG’s potentially eligible population. ACS data for calendar years 2007−2016 indicate that the population of high school students with incomes within DCTAG’s eligibility requirements has remained relatively stable. Over this time frame, about 25,000 students in D.C. were enrolled in high school each year, and about 90 percent of D.C. households had annual incomes less than $200,000. Additional households with annual incomes of $200,000 and above were also likely eligible for DCTAG based on income. Enrollment in DCTAG. DCTAG program data indicate that the number of DCTAG recipients remained relatively stable over the last decade. DCTAG provided awards to an average of about 4,750 recipients annually over academic years 2007−2016 (see fig. 1). While enrollment in DCTAG peaked in academic year 2012, the number of DCTAG recipients in academic year 2016, the last year in our period of review, was similar to the number of recipients in academic year 2007, the first year in our period of review. Enrollment in DCTAG by type of high school attended. DCTAG program data indicate the majority of recipients over academic years 2007–2016 graduated from D.C.’s public high school system—both traditional public schools and public charter schools. D.C.’s traditional public schools include six selective schools, or magnet schools, that limit admission to students that meet certain criteria or eligibility requirements. For example, in academic year 2016, more than 70 percent of DCTAG recipients graduated from D.C.’s public high school system (see fig. 2). Many DCTAG recipients have also graduated from private schools or schools outside D.C., were home schooled, or attained their General Equivalency Diploma. For academic years 2007−2016, between about 30 and 40 percent of DCTAG recipients came from high schools or programs outside the D.C. public school system. Enrollment in DCTAG by taxable household income. Although in 2007 federal law limited eligibility for DCTAG to students from families with annual taxable incomes less than $1,000,000, DCTAG enrollment data show the program made awards to students from families with a wide range of household taxable incomes in academic years 2009−2016. At the same time, enrollment data indicate the program’s particular support for students from middle and lower income families. Nearly 60 percent of recipients over this time frame came from families with annual household taxable incomes of $50,000 or less (see fig. 3). Enrollment in DCTAG by Ward. DCTAG program data indicate that for academic years 2007−2016, about 50 percent of recipients came from the three D.C. wards with the lowest median household incomes, according to American Community Survey estimates (see fig. 4). Enrollment in DCTAG by attendance at 4-year and 2-year institutions. DCTAG program data show that for academic years 2007−2016, about 90 percent of DCTAG recipients attended 4-year institutions (see fig. 5). To counter the downward trend in enrollment at 2-year institutions that began in academic year 2013, OSSE officials told us they made programmatic changes to DCTAG for academic year 2018. Specifically, OSSE officials told us they determined out-of-state-tuition at 2-year public institutions attended by DCTAG recipients exceeded in-state tuition by an average of $4,500 per year. However, the maximum annual award for recipients attending these institutions was only $2,500. For academic year 2018, OSSE officials said they increased the maximum annual award to attend 2-year public institutions to $10,000 to close this gap. Enrollment in DCTAG by amount awarded. For academic years 2007−2016, the percentage of recipients receiving DCTAG’s maximum annual awards increased from 40 percent to 62 percent (see fig. 6). OSSE officials linked an increase in the percentage of recipients receiving maximum awards to rising tuition at colleges and universities over this period. We analyzed data from IPEDS on average tuition and required fees at 4-year public institutions and our analysis confirmed that the average gap between out-of-state and in- state tuition exceeded DCTAG’s $10,000 maximum annual award starting in academic year 2015. DCTAG graduation rates. College graduation rates are an important measure of performance for DCTAG. OSSE officials told us they maintain a program goal of helping recipients choose schools from which they are likely to graduate. For academic years 2012−2015, 6- year college graduation rates for DCTAG recipients were lower than those for students nationwide. However, OSSE officials reported that rates for recipients compare favorably to rates for national and regional groups of students with characteristics similar to those of DCTAG recipients. Our analysis confirmed that in academic year 2015, about 72 percent of DCTAG recipients were African-American and the DCTAG graduation rate was about 10 percentage points higher than for African-Americans nationwide. Similarly, in academic year 2015, nearly 40 percent of DCTAG recipients attended Historically Black Colleges and Universities (HBCU) and the DCTAG graduation rate was about 15 percentage points higher than for the nationwide population of students at these schools (see fig. 7). Additionally, OSSE officials estimated that more than 65 percent of DCTAG recipients were eligible for Pell Grants in academic year 2016. The National Center for Education Statistics recently started reporting graduation rates for Pell Grant recipients, beginning with the cohort of recipients that should have graduated by academic year 2016. Although not directly aligned, the academic year 2016 graduation rate for Pell Grant recipients nationwide was 48 percent— similar to the academic year 2015 graduation rate for DCTAG recipients. DCTAG partners with other entities to offer support services intended to help D.C. students prepare for college, apply for financial aid, and stay on track to graduate college. These partners include other entities within OSSE, as well as partners in the broader community such as public and private high school officials and college access providers. DCTAG provides some support services directly to students, such as individual counseling on how to complete a DCTAG application (see fig. 8). An OSSE official told us that DCTAG counselors instruct applicants and renewing recipients on tasks such as how to obtain required supporting documents to verify their residency in D.C. Additionally, to keep recipients on track to graduate, DCTAG emails recipients a quarterly newsletter with reminders to reapply for DCTAG and federal student aid so that they do not disrupt their studies by losing financial assistance. OSSE officials also said that DCTAG expands the reach of its support services by partnering with other entities within OSSE and in the community. For example, DCTAG works with OSSE’s Office of College and Career Readiness, whose mission is to increase D.C. public school students’ access to college. Through this collaboration, DCTAG helps eligible students prepare for higher education, such as through assistance to public schools to offer college entrance exams at no cost to students. Similarly, by partnering with college access providers, DCTAG supplements the support services it offers to help students stay on track to graduate. For example, DCTAG partners with the D.C. College Access Program, a privately funded scholarship program that offers support services for D.C. students in college. One of their services includes using scholarship recipients to mentor incoming D.C. students. We found that although OSSE communicates DCTAG’s program data and activities to internal stakeholders, Congress, and the public in various formats, these reporting methods do not include the program’s four goals (see textbox), relate performance information to these program goals, or describe progress toward achieving them (see table 1). For example, OSSE’s 2017 annual report to Congress on DCTAG did not include DCTAG’s four program goals, nor did OSSE relate information about the performance of the program to those goals. Instead, the 2017 annual report was comprised of descriptive statistics that were presented without explanation or sufficient context to allow readers to understand the significance of what was being reported. Specifically, this information was unrelated—quantitatively or qualitatively—to DCTAG’s program goals of ensuring D.C. residents are aware of and apply to DCTAG, or of helping DCTAG students make smarter college choices, which OSSE officials told us includes helping students select schools where they are more likely to graduate. As a result, it is unclear how to interpret the information presented in these reports and whether reported results indicate positive or negative program performance. Federal standards for internal control state that program managers should communicate necessary quality information so both internal and external parties can help the program achieve its objectives. We have previously reported that annual reports are essential for managers of federal programs to communicate to decision makers the progress an agency has made toward achieving its goals during a given year and, in cases where goals are not met, identify opportunities for improvement or whether goals need to be adjusted. In addition, our prior work found that managers of these programs can increase the value of their reports to congressional decision makers and the public by relating annual performance information to the agency’s strategic goals and mission. Furthermore, we reported that performance measurement does not require establishing a causal link between program activities and program outcomes, but rather emphasizes that the nature of performance measurement is the ongoing monitoring and reporting of program accomplishments, particularly toward pre-established goals. OSSE officials agreed on the importance of developing an annual report relating performance to program goals for the DCTAG program and concurred with our finding that they had not communicated DCTAG’s performance information, such as progress toward program goals, in a single annual report. They explained that developing performance measures is challenging. For example, they said DCTAG recipients have access to multiple support programs, which creates difficulties in establishing causal links between a program and the desired outcome. OSSE officials also stated that many DCTAG initiatives are new and, as a result, complete data on those initiatives are not yet available. Although we recognize that developing an annual report could be challenging, our prior work has found performance measurement guidelines would not require program managers to establish causal links as part of ongoing performance monitoring and reporting of progress toward program goals. Unless DCTAG’s stakeholders have access to an annual report that relates performance information to the program’s goals, they may be limited in their ability to judge the significance of what is being reported, determine whether the agency is making progress toward achieving its goals, or make informed program management and funding decisions. Each of the three other selected scholarship programs we reviewed was created to meet unique state or local needs. Boston Tuition-Free Community College Plan. Created to make college more affordable for the city’s low-income students. Kalamazoo Promise. Created to promote the economic and social well-being of the community by expanding college access with full- tuition scholarships. Washington State Opportunity Scholarship. Created to address shortfalls in the state’s Science, Technology, Engineering, and Mathematics (STEM) and health care workforce and increase educational opportunities for low-income and middle-income students. Because each program was designed to address a unique state or local need, they differ with regard to eligibility, funding, recipient supports, and outcome measures. (For additional information on these three programs see appendix I.) Eligibility. Each of the three selected scholarship programs established eligibility criteria, such as income requirements, residency requirements, and grade point average (GPA) requirements among others, that reflect program objectives. For example, to ensure that the Boston program serves the intended low-income population, the program requires students to be eligible for Pell grants to receive funding. Funding. While the selected scholarship programs have dedicated funding streams, their funding sources reflect the origins of each program. For example, Boston’s program was initiated by the city’s mayor and is funded through a public charitable trust from fees for large-scale commercial building projects while the Kalamazoo promise was initiated by a group of anonymous donors who have funded the program in perpetuity, according to program officials. Alternately, the Washington program was initiated through cooperation between the state government and private sector companies and is funded by private donations that are matched by state funds up to an annual maximum of $50 million. Recipient supports. Each of the selected scholarship programs have developed supports such as coaching and peer mentoring to help recipients transition to college and stay on track to graduate. For example, the Kalamazoo Promise partners with and provides funding to two local colleges to create counseling, coaching, or peer mentoring services for scholarship recipients, according to program managers. Outcome measures. The selected scholarship programs have developed outcome measures to better understand the programs’ impact, such as whether students stay on track to graduate or find employment post-graduation. For example, program managers with the Washington program said they initiated a post-graduation survey in 2015 to better understand the employment status of graduates in STEM and health care fields, their job location, and annual salary. Steady enrollment in DCTAG provides an encouraging signal that the program may be meeting the purpose set forth in federal law to expand access to higher education opportunities for D.C. students. However, without annual reports that relate DCTAG’s performance information to the program’s goals, it is difficult to assess the impact of the program and its support services. The information OSSE currently makes available about DCTAG does not provide the context needed for the program’s internal stakeholders, Congress, or the public to determine whether the program is meeting its goals or if any changes may be necessary. OSSE should issue an annual report on DCTAG that relates information about the program’s performance to the program’s goals. (Recommendation 1) We provided a draft of this report to the Mayor of the District of Columbia for review and comment. Comments from the Mayor are reproduced in appendix II. In response to our recommendation, the Mayor stated that OSSE plans to expand DCTAG’s current annual reports to Congress with direct links to DCTAG’s annual strategic performance goals and the reports will combine data points to illustrate the program’s performance. The Mayor also raised a concern about the title of the draft report, stating that it implied OSSE is not meeting legislative requirements. We have modified the title and text of the report to avoid this implication. We are sending copies of this report to the appropriate congressional committees, the District of Columbia Office of the State Superintendent of Education, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. Based on interviews with officials of three selected state and local scholarship programs and a review of program documents, we present a selection of information to provide additional context on these programs. They include the Boston Tuition-Free Community College Plan, the Kalamazoo Promise, and the Washington State Opportunity Scholarship. The following tables include information on these scholarship programs’ eligibility requirements, funding sources, recipient supports, and annual reports and performance measures. Table 2 presents a selection of eligibility requirements for the Boston Tuition-Free Community College Plan, the Kalamazoo Promise, and the Washington State Opportunity Scholarship. Table 3 presents a summary of the three selected scholarship programs’ funding sources, as well as how students may use those funds. Table 4 presents a summary of the supports developed by the three selected scholarship programs to support students, keep them on track to graduate from college, and help them begin their careers. Table 5 presents a summary of the annual reports and selected performance measures developed by the three selected scholarship programs. Melissa Emrey-Arras, (617) 788-0534 or emreyarrasm@gao.gov. In addition to the contact named above, Bill J. Keller (Assistant Director), Tom Moscovitch (Analyst-in-Charge), and Michael C. Duane made significant contributions. Also contributing to this report were James Bennett, Deborah K. Bland, Sheila R. McCoy, Benjamin A. Sinoff, Rachel R. Stoiko, and Kate van Gelder.", "summary": "Congress funds DCTAG through an annual appropriation, which was $40 million in fiscal year 2018. DCTAG provides D.C. residents up to $10,000 per year to attend college. The Consolidated Appropriations Act, 2017, included a provision for GAO to review DCTAG. This report examines, among other things, the characteristics of DCTAG recipients and steps taken by the program to support recipients, as well as the extent to which OSSE reports DCTAG's performance to internal and external stakeholders. GAO assessed the most recent data available on DCTAG, covering academic years 2007–2016, as well as data on college graduation, tuition, and fees from the Department of Education's Integrated Postsecondary Education Data System for academic years 2007–2016, and data on enrollment in high schools and median household income in D.C. from the U.S. Census Bureau's American Community Survey for 2007–2016; interviewed representatives of DCTAG and the entities it partners with to support recipients; and reviewed relevant laws, the applicability of standards for internal control, and guidance on performance management. The federally funded District of Columbia Tuition Assistance Grant (DCTAG) program was created in 1999 to give college-bound District of Columbia (D.C.) residents greater choices among institutions of higher education. Since its creation, the DCTAG program has awarded over $440 million to more than 26,000 residents to defray costs charged to out-of-state residents at some of the nation's public colleges and universities. While the program serves students from families with a wide range of household incomes, about half the students receiving a DCTAG award in academic years 2007–2016 came from the three D.C. wards with the lowest household incomes, as the figure below illustrates. DCTAG coordinates with public and private partners in the community to help students prepare for college, complete financial aid applications, and stay on track to graduate college. Although the Office of the State Superintendent of Education (OSSE), which manages DCTAG on behalf of the Mayor of the District of Columbia, issues various annual reports, these reports do not relate program performance to the program's four goals. One of these goals is to help D.C. students make smarter college choices. OSSE officials stated that they regularly communicate information about DCTAG data and activities internally and externally. However, these efforts do not provide the context necessary for program managers, Congress, or the public to understand the program's goals, nor determine whether DCTAG is making progress toward meeting them. Standards for internal control state that program managers should communicate information that internal and external stakeholders need to help the program achieve its objectives. Absent an annual report relating performance to goals, DCTAG's stakeholders will be limited in their ability to assess the program's performance or identify opportunities to improve it. GAO recommends OSSE issue annual reports relating DCTAG's performance to program goals. In response to the recommendation, the Mayor stated that OSSE will expand annual reporting to include direct linkages and combine data points to better illustrate the program's performance.", "document_type": "gao"}
{"report": "Risk management, as applied to security of federal facilities, entails a continuous process of applying a series of mitigating actions—assessing risk through the evaluation of threats, vulnerabilities, and consequences; responding to risks with appropriate countermeasures; and monitoring risks using quality information (see fig. 1). In 1995, Executive Order 12977 established the ISC after the bombing of the Oklahoma City Alfred P. Murrah Federal Building in April 1995. The ISC’s mandate is to enhance the quality and effectiveness of security in and protection of federal facilities in the United States occupied by federal employees for nonmilitary activities. The order directs the ISC to develop and evaluate security standards for federal facilities, develop a strategy to ensure executive agencies and departments comply with such standards, and oversee the implementation of appropriate security measures in federal facilities. The ISC has released a body of standards, including the ISC Standard, designed to apply to the physical security efforts of all federal, non-military agencies. The ISC Standard prescribes a process for agencies to follow in developing their risk assessment methodologies (see fig. 2). Most federal departments and agencies are generally responsible for protecting their own facilities and have physical security programs in place to do so. The ISC Standard requires executive departments and agencies to follow the risk-management process when conducting risk assessments for each of their facilities. That process begins with determining the facility security level, ranging from level I (lowest risk) for facilities generally having 100 or fewer employees to level V (highest risk) for the most critical facilities and generally having greater than 750 employees. The security level designation determines the facility’s baseline countermeasures. For each facility, departments and agencies are required to (a) consider all of the “undesirable events” that could pose a risk to their facilities— such as active shooters, vandalism, and explosions—and (b) assess three factors of risk (threats, vulnerabilities, and consequences) to specific undesirable events. Subsequently, agencies are to combine all three factors to yield a measurable level of risk for each undesirable event (see app. III). Based on the results of these assessments, agencies should customize (either increase or decrease) the countermeasures to adequately reflect the assessed level of risk. In addition, as part of planning for physical security resources within an agency’s budget process, the ISC has identified the need to balance allocations for countermeasures with other operational needs and with competing priorities. The ISC Best Practices have some similarities with leading practices in capital decision-making. For example, both state that the allocation of resources should be integrated into the agency’s mission, objectives, goals, and budget process. However, beyond the ISC Best Practices, the Office of Management and Budget and we have developed more comprehensive leading practices in capital decision- making that provide agencies with guidance for prioritizing budget decisions such as for countermeasure projects. The Office of Management and Budget and our guidance also emphasize evaluating a full range of alternatives, informed by agency asset inventories that contain condition information, to bridge any identified performance gap. Furthermore, the guidance calls for a comprehensive decision-making framework to review, rank, and select from among competing project proposals. Such a framework should include the appropriate levels of management review, and selections should be based on the use of established criteria. The following describes the mission and physical security program characteristics for the agencies in our review: CBP, the nation’s largest law enforcement agency, has responsibility for securing the country’s borders. It also has responsibility for conducting security assessments at about 1,200 facilities, including approximately 215 federally owned and agency-controlled higher-level facilities (facility security levels III and IV). These facilities include border patrol stations with holding cells for people detained at the border, office buildings, and canine-training centers. CBP conducts these assessments. FAA’s mission is to provide a safe and efficient aerospace system for the country. According to agency data, FAA has 55 federally owned and agency-controlled higher-level facilities—including critical air traffic control towers. According to FAA officials, FAA specialists conduct security assessments. ARS conducts research related to agriculture and disseminates information to ensure high-quality safe food and to sustain a competitive agricultural economy. According to agency data, ARS has security responsibility for four domestic federally owned and agency- controlled higher-level facilities—including laboratories for research to improve food and crop quality, office buildings, and warehouses. ARS security personnel have responsibility for conducting security assessments. The Forest Service sustains the health, diversity, and productivity of the nation’s forests and grasslands. According to agency officials, the Forest Service has one federally owned and agency-controlled higher- level facility—a regional headquarters office building. The Forest Service’s security officials have responsibility for conducting security assessments, but at the time of our review, USDA security officials conducted the assessment at Forest Service’s one higher-level facility. None of the four selected agencies’ security assessment methodologies fully aligned with the ISC Standard. The ISC gives agencies some flexibility to design their own security-assessment methodologies for identifying necessary countermeasures as long as the chosen methodology adheres to fundamental principles of a sound risk- management methodology. Specifically, methodologies must: consider all of the undesirable events identified in the ISC Standard as possible risks to federal facilities, and assess three factors of risk (threats, vulnerabilities, and consequences) for each of the events. Furthermore, the ISC Standard requires executive departments and agencies to document decisions that deviate from the ISC Standard. Agencies’ policies and methodologies reference the ISC Standard. However, none of the agencies’ methodologies considered all of the undesirable events during assessments although they used some type of risk assessment methodology. In addition, the agencies did not always adhere to these principles of risk management (see table 1). At the time of our review, CBP’s methodology did not fully align with the ISC Standard because it did not consider all of the 33 undesirable events nor assess threat and consequence. CBP security specialists assessed vulnerabilities at building entrances and exits, in interior rooms, and around the perimeter using a yes/no checklist during the assessment process. However, assessment reports showed that specialists did not assess the threats and consequences of undesirable events at each facility. According to security officials, the gap occurred because they designed the checklist to meet requirements in the 2009 CBP Security Policy and Procedures Handbook, which predates the first edition of the ISC Standard issued in 2010. CBP officials told us that as of January 2017, they began using an improved methodology to assess the threats, vulnerabilities, and consequences for 30 of 33 undesirable events— omitting three now identified in the November 2016 revision to the ISC Standard. However, CBP has not yet updated its handbook to align with the ISC Standard, even though it started this effort over 3 years ago in December 2013. CBP officials did not provide a draft of its updated handbook, but they provided a plan with milestone dates for issuing the handbook by September 2018. CBP officials also told us that updates to the handbook may have to wait due to competing priorities, including efforts to address the backlog of assessments (which we discuss later in this report). Delays in updating the handbook mean that CBP’s policy will continue to not align with the ISC Standard. Furthermore, although CBP security officials told us that all of the agency’s security specialists have been trained to use the improved assessment methodology, without documentation of the methodology in agency policy, there may be greater risk of its inconsistent application. Standards for Internal Control emphasize the importance of agencies developing and documenting policies to ensure agency-wide objectives are met. Documentation serves to retain institutional knowledge over time when questions about previous decisions arise. Without an updated policy handbook that requires a methodology that assesses all undesirable events consistent with the ISC Standard, CBP cannot reasonably ensure that its facilities will have levels of protection commensurate to their risk. FAA’s methodology does not fully align with the ISC Standard because it does not consider all of the 33 undesirable events nor does it assess all three factors of risk. FAA security specialists assess vulnerabilities to the site perimeter, entryways, and interior rooms using a yes/no checklist, but the checklist does not assess the consequences from each of the undesirable events at each facility. With respect to threat, FAA applies the ISC’s baseline threat—a general federal facilities threat level that relates directly to a set of baseline countermeasures—across all its higher-level facilities because FAA policy states that there is no agency-specific threat that exceeds the current baseline threat. According to FAA officials, the baseline threat standardizes the security needs across their facilities rather than addressing the security needs of individual facilities from specific threats. When necessary, FAA policy allows specialists to modify countermeasures based on an evaluation of conditions at the facility. FAA realized that this approach was no longer appropriate given the agency-wide goal to make risk-based decisions, a review of the assessment process after a 2014 Chicago fire incident that destroyed critical FAA equipment, and an awareness of ISC initiatives to assess compliance. To address the resulting methodological gaps, FAA hired a contractor to design, develop, test, and validate an improved risk- assessment methodology. Subsequently, FAA improved its methodology in January 2017 to assess the threats, vulnerabilities, and consequences for 30 of the 33 undesirable events identified in the November 2016 revision to the ISC Standard —and tested the methodology at lower- and higher-level facilities. This revised methodology addresses the need to assess individual facility needs rather than using a standardized baseline approach. In April 2017, FAA officials told us of their plan for implementing this methodology and provided tentative milestone dates to conduct further testing, training, and analysis before deciding to use the improved methodology, which they expect to complete by January 2018. However, their plan lacks the necessary information to ensure successful implementation, such as detail on how many facilities they will test and how they will use the results of testing, training, and analysis to implement the improved methodology within the identified 9-month time frame. Furthermore, the improved methodology does not address undesirable events for which ISC issued countermeasures in May 2017. Without a detailed implementation plan to assess the methodology’s impact on its security program, FAA cannot reasonably ensure that its facilities have the proper countermeasures. With ongoing changes to its security program, FAA has an opportunity to fully align its improved methodology with the ISC Standard by including all 33 undesirable events and to update its policy requiring the use of such a methodology. Unlike CBP and FAA—which developed their own methodologies separate from their parent departments (Department of Homeland Security (DHS) and Department of Transportation (DOT), respectively)— ARS and the Forest Service follow an assessment methodology developed by USDA. USDA’s methodology does not fully align with the ISC Standard because it does not consider all of the 33 undesirable events for which ISC issued countermeasures in May 2017. Security specialists from USDA headquarters typically assess ARS’s and the Forest Service’s higher-level facilities using a risk-based methodology that considers the 31 undesirable events listed in the previous version of the ISC Standard dated August 2013. However, until recently, USDA did not assign ratings to each of the three risk factors—threat, vulnerability, and consequence—and then combine these ratings to yield a measurable level of risk for each undesirable event. USDA security officials said that they have revised the assessment-reporting format to include this risk calculation and trained their specialists to measure risk in this way. USDA officials provided us with a new assessment template that addresses all 33 undesirable events and includes measuring risk. Additionally, USDA officials said that they are revising their outdated physical security manual and expect to complete it by April 2018. With a revised manual and application of the new assessment template, USDA should be better positioned to assess risk at its facilities. When agencies do not use methodologies that fully align with the ISC Standard, they could face deleterious effects, ranging from facilities having inappropriate levels of protection to agencies having an inability to make informed resource allocation decisions for their physical security needs. Specifically, the ISC Standard states that facilities may face the effect of either having (1) less protection than needed resulting in inadequate security or (2) more protection than needed resulting in an unnecessary use of resources. The ISC Standard also states that these effects can be negated by determining the proper protection according to a risk assessment. Identified excess resources in one risk area then can be reallocated to underserved areas, thus ensuring the most cost- effective security program is implemented. As an illustration of such potential effects, we found that two agencies assessing two higher-level facilities came to two different conclusions in terms of their need for X-ray machines to screen for guns, knives, and other prohibitive items in federal facilities. Specifically, one agency based its decision on a policy that does not deviate from the ISC’s baseline set of countermeasures, and the other agency based its decision on professional judgement that deviated from the ISC’s baseline set of countermeasures. Neither agency based its decision on a risk assessment nor documented its decision—both ISC requirements, specifically: Without conducting a risk assessment, FAA recently expanded a policy requirement calling for all higher-level facilities to have X-ray machines and magnetometers. This new requirement poses a potentially sizeable investment for the agency with an estimated cost of X-ray machines of about $24,000 and magnetometers of about $4,000 each. FAA may need such equipment at all its higher-level facilities. However, the ISC Standard requires that agencies conduct risk assessments first to justify their needs. Without conducting risk assessments, FAA managers could unnecessarily use resources by installing such equipment in all higher-level air traffic facilities when there may be higher priority needs A USDA security specialist decided, despite an ISC baseline requirement that higher–level facilities have X-ray machines, not to recommend an X-ray machine at a higher-level Forest Service facility. The specialist reasoned that unlike other federal buildings with numerous unknown visitors, this facility receives mostly known individuals and a limited number of visitors. The ISC Standard allows for professional judgement; however, the ISC requires that agencies document deviations from the baseline set of countermeasures. Reducing the facility’s level of protection without documenting an assessment of risk could result in no record of the basis of the decision for current and future facility managers and security officials to review or use as justification in the case of a question of compliance. In another case, we found that one higher-level facility did not have access control for employees or visitors nor did it have armed guard patrols. The facility manager told us that intelligence and a history without incidents gave leadership reason to believe that these measures were not needed and that therefore the agency did not require and would not fund such protective measures for this facility—in effect, accepting the risks to the facility. Security officials said they also had the same understanding and did not document the matter in the assessment report even though agency policy and the ISC Standard require written documentation when officials deviate from the baseline requirement. Without security assessments that fully align with the ISC Standard and provide measureable levels of risk, agencies do not have the information they need to determine priorities and make informed resource allocation decisions. For example, they may not be able to assess whether to acquire or forego costly physical-security countermeasures—such as, X- ray machines, access control systems, and closed-circuit television systems—for facilities. Additionally, after determining the need to acquire a countermeasure, agencies must fund the countermeasure. As previously discussed, leading practices in capital decision-making include a comprehensive framework to review, rank, and select from competing project proposals for funding. In conducting risk assessments that do not fully align with the ISC Standard (i.e., not assessing threats, vulnerabilities, and consequences and measuring risks), agencies miss the opportunity for more informed funding decisions. Three of the four agencies (CBP, ARS, and the Forest Service) currently prioritize funding for operational needs over physical security needs (see table 2) when agencies’ priorities might be different if they based their decisions on an aligned risk assessment. Standards for Internal Control state that agencies should use quality information on an ongoing basis as a means to monitor program activities and take corrective action, as necessary. The ISC requires that agencies assess higher-level facilities at least once every 3 years—an interval requirement to identify and address evolving risks. We found that three of the four agencies (CBP, ARS, and the Forest Service) did not meet this requirement. Officials reported various challenges including (1) assessments competing with other security activities, (2) an insufficient number of qualified staff to conduct assessments when compared to the number of facilities, or (3) not knowing of the required assessment schedule. An “information system” is the people, processes, data, and technology that management organizes to obtain, communicate, or dispose of information. that had not been reassessed since 2010. CBP security officials attributed the backlog to (1) having too few security specialists assigned to assess about 1,200 facilities and (2) the specialists working on competing priorities, such as revising the security handbook, conducting technical inspections, and reviewing new construction designs and renovation projects. According to CBP security officials, they have developed a plan to eliminate the backlog by the end of fiscal year 2018 by prioritizing the completion of assessments. While we found the plan comprehensive, the schedule did not seem feasible. For example, the plan assumes that one specialist can complete six assessments in 3 consecutive days and that another specialist can complete three assessments in 1 day. In contrast, security officials told us specialists take about 20 work hours (or 2½ days) to conduct an on-site assessment of one facility. CBP officials said that they believe they can meet the time frames of the plan because they have set aside other priorities and have a thorough understanding of the scope of work involved at the facilities. They added that it will not be easy to meet the timeline, but they can accomplish it with a motivated and committed workforce, adequate financial resources, and absent activities that would otherwise require shifting of resources. We question the feasibility of setting aside important priorities, such as updating the policy manual and reviewing physical security elements in new construction designs, as well as the workload assumptions for completing the assessments. Further, these other priorities are also key to securing facilities. Without balancing assessments with competing priorities, CBP’s time frames for completing the assessments by the end of fiscal year 2018 may not be feasible and may also result in the agency’s not addressing other important physical security responsibilities. Since the ISC issued its standard in 2010, ARS and the Forest Service have assessed their higher-level facilities at least once. However, these agencies have not reassessed all of their higher-level facilities within the 3-year interval requirement. Specifically, security specialists have not conducted required reassessments of two ARS and one Forest Service higher-level facilities. The ARS headquarters official explained that the agency had not reassessed the two facilities due to competing priorities and insufficient internal resources. During the course of our review, ARS headquarters officials said they began assessing one of the two ARS facilities in May 2017 and will begin assessing the second facility in October 2017. The Forest Service official explained that the agency missed its security reassessment of the regional office because the facility staff had not requested one. During our visit, facility staff responsible for security told us that they were not aware of the ISC’s 3- year interval requirement. Facility staff requested a reassessment, and security officials told us that they expected to complete it by mid-June 2017. Completing this one-time assessment may address the facility’s security needs temporarily. However, ARS and the Forest Service have not implemented a long-term schedule with key milestones and lack a means to monitor completion of assessments of higher-level facilities at least once every 3 years. Consequently, these agencies cannot reasonably ensure that they have full knowledge of the risks to their facilities. FAA data from 2010 through 2016 show that FAA has assessed its 55 higher-level facilities at least once every 3 years. FAA policy requires that specialists schedule assessments of higher-level facilities every 12– 18 months depending on whether the facility has met FAA physical security standards. The ISC Standard states that to make appropriate resource decisions, agencies need information, such as what is being accomplished, what needs management attention, and what is performing at expected levels. We found that agencies’ methods of collecting and storing security information had limitations that affected agency and facility officials’ oversight of the physical security of their facilities (see table 3). Without having long-term, agency-wide information to monitor whether assessments are conducted on schedule, ARS and the Forest Service may not meet the ISC Standard, resulting in not adequately protecting their facilities and employees. The ISC Standard also states that agencies should measure their security program’s capabilities and effectiveness to demonstrate the need to fund facility security and to make appropriate decisions for allocating resources. However, the agencies in our review were unable to demonstrate appropriate oversight of their physical security programs because: CBP’s handbook does not include requirements for data collection and analysis for monitoring physical-security program activities. Facility managers and security officials do not enter assessment results, such as the countermeasures recommended for facilities, in the real property database. Consequently, they do not have comprehensive data to manage their security program, assess overall performance, and take any necessary corrective actions. A CBP official told us that a comprehensive database would allow CBP to set priorities for addressing countermeasures. Without including data collection and analysis requirements in its updated handbook, CBP may be unable to monitor the performance of its physical security program. FAA’s policy does not require ongoing monitoring of physical security information, such as the status of recommended countermeasures or assessment schedules. As a result, FAA officials do not proactively use physical security information to assess the overall performance of its physical security program and take corrective actions before an incident occurs. Without a policy requiring ongoing monitoring of information—an internal control activity, FAA may be unable to assess the overall performance of its security program and take necessary corrective actions. USDA has a decentralized security program and places the responsibility on agencies to create their physical security programs. Security officials from ARS and the Forest Service told us that USDA does not have a policy for collecting and managing agency-wide information; however, they said that USDA is drafting a new departmental regulation and manual that will specify (1) the roles and responsibilities of agency and facility managers and (2) electronic- data-reporting requirements for monitoring the performance of the physical security program. USDA officials provided a draft of USDA’s regulation and manual for our review. The draft regulation did not mention data reporting and monitoring, while the draft manual only contained a table of contents that included a section entitled “Facility Tracking Database.” USDA officials expect to issue new policies sometime between October 2017 and April 2018. In the absence of new departmental regulation and manual, USDA and Forest Service officials told us that they have begun to develop a Forest Service system for storing electronic copies of agency-wide assessments and that they plan to expand the use of this system to track site specific assessment dates and status of recommended countermeasures. Forest Service officials provided milestone dates and described the capabilities for a future information system, which they expect to complete in September 2017. However, we could not determine whether the manual will have information system requirements to monitor agencies’ physical security program, an internal control activity. Without USDA’s including data collection and analysis requirements in its manual, its agencies may not be able to monitor the performance of their physical security programs. Without agencies having information to monitor security activities, they were unable to provide us information on the status of countermeasures across their entire portfolio. In order to better understand the status of countermeasures implemented and facilities’ experiences when implementing countermeasures, we determined the status of countermeasures at 13 facilities we visited. As previously noted, risk management, as it pertains to physical security, involves agency officials monitoring their physical security programs. During our visits to 13 selected facilities, we found the four agencies differed in the number of countermeasures that they had not implemented. Facility officials provided us with some information on why countermeasures had not been implemented, specifically: CBP had a significant number of recommended countermeasures from 2010 through 2016 that remained open at the eight selected CBP facilities. CBP facility officials gave reasons why recommended countermeasures had not been implemented. At one facility, officials did not know about the recommended countermeasures from its last 2010 assessment because the individuals previously knowledgeable about the assessments left the organization without communicating the results. By taking action to improve facility security, they implemented some needed countermeasures. However, at the time of our review, a large number of the recommendations remained open. At another facility, officials told us that they too had not known (for the same reason mentioned above) of their 2010 assessment, which contained recommended countermeasures. However, these officials told us that they submitted a funding request a few weeks before our visit to address all except one of the open countermeasures. In other cases, facilities have not implemented needed countermeasures due to resource constraints or physical site limitations. FAA had a large number of recommended countermeasures from 2010 through 2016 that remained open at the time of our review for the two FAA facilities visited. In this case, the most recent security assessment, completed in late 2016, resulted in one facility’s having little time to implement countermeasures by the time we conducted our analysis. While ARS had closed almost all recommended countermeasures at two facilities at the time of our review, one Forest Service facility had not yet implemented a recommendation (to secure its entrance doors) that was identified in a 2013 security assessment (see bottom center photo, fig. 3). This countermeasure remained open because facility officials said they continued to explore alternatives to address the recommendation. Figure 3 shows examples of countermeasures not fully implemented at selected facilities we visited. During our site visits and discussions with facility staff, we found that physical site limitations or other priorities can make it difficult for facility managers to implement countermeasures. For example, a countermeasure might involve correcting a clear zone violation—that is, moving an object (such as a brick wall) a certain distance away from the facility’s perimeter fence to prevent a potential intruder from using the object to climb over the fence. However, when the object near the fence is a building and the property outside of the fence is not federally owned (see bottom right photo, fig. 3), it may not be cost effective to correct the clear zone violation. In this situation, the agency bears the responsibility for exploring ways to address the vulnerability. In following the ISC Standard, as previously noted, managers are required to justify and document why they could not implement recommended countermeasures—what the ISC calls risk acceptance. Selected agencies carry a great responsibility for protecting facilities that support border protection activities, provide safe and efficient air traffic around the country, and protect the quality of the nation’s food supply. With this responsibility comes the need to appropriately assess risk to ensure the security of these agencies’ facilities. However, 7 years after the ISC issued its initial risk-management process standard, each of four selected agencies continued to use assessment methodologies that did not fully align with this standard. During our review, agencies improved their methodologies to better align with the ISC Standard, but the agencies had not yet incorporated the methodologies into their policies and procedures. Without updated policies and procedures requiring a methodology that adheres to the ISC Standard (including all 33 undesirable events now identified in the November 2016 revision to the ISC Standard), agencies may not collect the information needed to assess risk and determine priorities for improved security. This situation could hamper the agencies’ ability to make informed resource allocation decisions or to recommend countermeasures commensurate to the needs at specific facilities. To address challenges in conducting timely assessments, agencies that had a backlog developed plans to address them, but the assumptions used in CBP’s plans and time frames did not appear to fully reflect the agency’s competing priorities and actual experience. Additionally, ARS and Forest Service have not implemented a long-term assessment schedule with key milestones to ensure that higher-level facilities are reassessed at least once every 3 years. Further, in cases where the agencies may have had risk assessment information, CBP, ARS, and the Forest Service lack the means to collect, store, and analyze this information in order to monitor the status of a facility’s security. Without these key aspects of a comprehensive security program—a methodology that meets the standard, policies, and procedures that incorporate that methodology; the ability to complete assessments on time; and information to perform monitoring—agencies remain vulnerable to substantial security risks. To improve agencies’ physical security programs’ alignment with the ISC Risk Management Process for Federal Facilities and Standards for Internal Control in the Federal Government for information and monitoring, we recommend that the Commissioner of U.S. Customs and Border Protection take the following three actions: with regard to the updated Security Policy and Procedures Handbook, the ISC’s Risk Management Process for Federal Facilities requirement to assess all undesirable events, consider all three factors of risk, and document deviations from the standard, and data collection and analysis requirements for monitoring the performance of CBP’s physical security program. revise the assumptions used in the plan to address the backlog to balance assessments with competing priorities, such as updating the policy manual and reviewing new construction design, to develop a feasible time frame for completing the assessment backlog. Secretary of Transportation direct the FAA Administrator to take the following three actions: develop a plan that provides sufficient details on the activities needed and time frames within the date when FAA will implement an improved methodology; update FAA’s policy to require the use of a methodology that fully aligns with the ISC’s Risk Management Process for Federal Facilities for assessing all undesirable events, considering all three factors of risk, and documenting all deviations from the standard countermeasures; and update FAA’s policy to include ongoing monitoring of physical security information. Secretary of Agriculture take the following two actions: include data collection and analysis requirements for monitoring the performance of agencies’ physical security programs, in the department’s revised physical-security manual, and direct the Administrator of the Agricultural Research Service and the Chief of the Forest Service to implement and monitor a long-term assessment schedule with key milestones to ensure that higher-level facilities are reassessed at least once every 3 years. We provided a draft of this report to the Departments of Homeland Security, Transportation, and Agriculture for review and comment. All three departments agreed with the findings and recommendations for their respective agencies. DHS agreed with our recommendations and provided actions and timeframes for completion. With regard to our recommendation to update the Security Policy and Procedures Handbook, DHS stated that CBP is updating the handbook to include: (1) a discussion and diagram of the ISC risk management process and its application within CBP’s assessment processes; (2) specific guidance for conducting risk assessments in accordance with the ISC’s Risk Management Process for Federal Facilities; and (3) a requirement and guidance for data collection and analysis in support of a robust physical security program. With regard to our recommendation to revise the assumptions used in the plan to address the assessment backlog, DHS stated that CBP has reevaluated current priorities and believes the current plan to eliminate the risk assessment backlog by the end of fiscal year 2018 is achievable. DHS also provided technical comments, which we incorporated as appropriate. DHS’s official written response is reprinted in appendix IV. DOT also agreed with our recommendations and by e-mail requested that we publish the response to the sensitive version of this report. DOT stated that FAA continues to refine its policy and develop processes that address the ISC threats, vulnerabilities, and consequences. Further, DOT stated that FAA would either validate that current mitigation strategies address those risks or apply additional appropriate countermeasures. DOT stated that it will provide a detailed response to each recommendation within 60 days from the date of this report. DOT’s official written response is reprinted in appendix V. USDA agreed with our recommendations and provided the agency-wide actions for completion. USDA provided a plan to ensure compliance with the ISC’s Risk Management Process for Federal Facilities by development of a standard physical-security assessment process and by initiation of a compliance program to track assessments and monitor the installation of countermeasures. In an e-mail, USDA provided milestone dates and planned completion by January 2019. USDA’s official written response is reprinted in appendix VI. If you or your staff has any questions about this report, please contact me at (202) 512-2834 or RectanusL@gao.gov. GAO staff who made key contributions to this report are listed in appendix VI. This report examines: (1) how selected agencies’ assessment methodologies align with the Interagency Security Committee’s (ISC) risk management standard for identifying necessary countermeasures and (2) what management challenges, if any, selected agencies reported facing in conducting physical security assessments and monitoring the results. To determine how selected agencies’ assessment methodologies align with ISC standards for identifying the necessary countermeasures, we identified federal executive branch departments and agencies reported by the Department of Homeland Security (DHS) to have received delegations of authority to protect their own buildings. We reviewed the Federal Real Property Council’s data on the Federal Real Property Profile to identify federally owned and agency-controlled buildings. We determined that these data were sufficiently reliable for the purpose of our reporting objectives based upon our recent report that reviewed these data fields. We selected four agencies based upon their large quantity of reported federally owned and agency-controlled buildings: DHS, U.S. Customs and Border Protection (CBP); Department of Transportation (DOT), Federal Aviation Administration (FAA); United States Department of Agriculture (USDA), Agricultural Research Service (ARS) and USDA’s United States Forest Service (Forest Service). This methodology purposely does not include federal buildings protected by FPS and under the control of the General Services Administration as well as other agencies that we reported on in our previous work. We obtained and reviewed one particular ISC standard, The Risk Management Process for Federal Facilities (the ISC Standard) and its related appendices for assessing physical security and providing recommended countermeasures at federal facilities. We obtained and analyzed the selected departments’ and agencies’ facility-security policies and procedures for a risk assessment methodology. According to the ISC Standard, agencies’ risk assessment methodologies must: consider all of the undesirable events identified in the ISC Standard as possible risks to federal facilities as listed in appendix III; assess the threat, consequences, and vulnerability to specific produce similar or identical results when applied by various security provide sufficient justification for deviations from the ISC-defined security baseline. We limited the scope of this review to the first two standards above because agencies’ adherence to these standards could be objectively verified by reviewing and analyzing agency documentation and interviewing agency officials, and their adherence to the two additional standards could not be verified in this manner. We did not conduct risk assessments with independent security professionals to evaluate: 1) the results from prior agency evaluations and 2) the sufficiency of justifications for deviations from the ISC-defined security baseline, as both evaluations were outside of the scope of the engagement. Therefore, for the purposes of this report, risk assessment policies, procedures and resulting methodology that align with ISC standards are those that consider all of the undesirable events and assess the threats, consequences, and vulnerabilities to specific undesirable events. We reviewed and analyzed information to answer the following five questions: 1. Do the policies and procedures mention the ISC standards? 2. Do the policies and procedures consider all of the undesirable events? 3. Do the policies and procedures assess the threat of specific undesirable events? 4. Do the policies and procedures assess the consequences of specific undesirable events? 5. Do the policies and procedures assess the vulnerability to specific undesirable events? We answered each of these questions as either a “Yes” or “No” for our selected agencies. The “No” answer to questions 3, 4, and 5 includes the following two possibilities: (a) the agency’s threat, consequence, or vulnerability ratings are not tied to specific undesirable events, or (b) the agency does not have a framework or formalized steps within which it collects and analyzes threat-, consequence-, or vulnerability-related information. If the answer to each of the five questions was “Yes,” then the agency’s overall risk assessment methodology aligns with ISC risk assessment standards for the purposes of this report. If the answer to one or more of the five questions was “No”, then the agency’s methodology does not to align with ISC standards for the purposes of this report. We interviewed security officials at ISC; three departments (DHS, DOT, and USDA); and four agencies (CBP, FAA, ARS, and the Forest Service). We obtained and analyzed agency guidance on prioritizing physical security needs and interviewed agencies’ facility maintenance and budget officials. We reviewed the ISC’s best practices for planning for physical security resources within an agency budget process. Additionally, we reviewed the Office of Management and Budget’s and our leading practices in capital decision-making that provide agencies with guidance for prioritizing budget decisions such as “countermeasure projects.” We also reviewed Standards for Internal Control in the Federal Government because internal controls play a significant role in helping agencies achieve their mission-related responsibilities. Our findings from our review of the selected agencies are not generalizable to all ISC member agencies, but provide insight into and illustrative examples about selected agencies’ facility risk-assessment methodologies. To determine what management challenges selected agencies reported facing in conducting physical security assessments and monitoring results, we interviewed agencies’ security, maintenance, and budget officials. We requested agency security officials to provide portfolio- wide data on facility security assessments for our review in order to select sites to visit and analyze data for dates of assessments and the status of findings. We assessed the reliability of this data through interviews with knowledgeable agency staff and a review for completeness and any unexpected values. We compiled information from physical security assessments when no portfolio-wide agency data were available. We determined that these data were sufficient for the purpose of our reporting objectives and selected geographically dispersed sites with buildings with higher reported security levels per the ISC Standard, as these higher security levels have greater requirements and therefore the potential for greater resource needs. See appendix II for the 13 sites we selected. For these selected sites, we interviewed agency staff concerning the assessment process, site-specific findings, recommendations, justification for deviations from ISC’s baseline standards, and management challenges faced in addressing physical security needs. We observed and photographed the status of the findings from the site physical security assessments. We did not independently determine what constitutes a management challenge or a physical security finding. Rather, we relied on these stakeholders to determine these physical security concerns as defined in their own standards and guidance. The information from our selected sites is illustrative and cannot be generalized to sites agency- wide. The performance audit upon which this report is based was conducted from June 2016 to August 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate, evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with DHS, DOT and USDA from August 2017 to October 2017 to prepare this version of the original report for public release. This public version was also prepared in accordance with these standards. Error! No text of specified style in document. Error! No text of specified style in document. Appendix VII: GAO Contact and Staff Acknowledgments Error! No text of specified style in document. In addition to the contact named above, Amelia Shachoy (Assistant Director), Steve Martinez (Analyst-in-Charge), Jennifer Clayborne, George Depaoli, Geoffrey Hamilton, Joshua Ormond, Alison Snyder, Amelia Michelle Weathers, and Elizabeth Wood made key contributions to this report.", "summary": "Protecting federal employees and facilities from security threats is of critical importance. Most federal agencies are generally responsible for their facilities and have physical security programs to do so. GAO was asked to examine how federal agencies assess facilities' security risks. This report examines: (1) how selected agencies' assessment methodologies align with the ISC's risk management standard for identifying necessary countermeasures and (2) what management challenges, if any, selected agencies reported facing in conducting physical security assessments and monitoring the results. GAO selected four agencies—CBP, FAA, ARS, and the Forest Service—based on their large number of facilities and compared each agency's assessment methodology to the ISC Standard; analyzed facility assessment schedules and results from 2010 through 2016; and interviewed security officials. GAO also visited 13 facilities from these four agencies, selected based on geographical dispersion and their high risk level. None of the four agencies GAO reviewed—U.S. Customs and Border Protection (CBP), the Federal Aviation Administration (FAA), the Agricultural Research Service (ARS), and the Forest Service—used security assessment methodologies that fully aligned with the Interagency Security Committee's Risk Management Process for Federal Facilities standard (the ISC Standard). This standard requires that methodologies used to identify necessary facility countermeasures—such as fences and closed-circuit televisions—must: 1. Consider all of the undesirable events (i.e., arson and vandalism) identified by the ISC Standard as possible risks to facilities. 2. Assess three factors—threats, vulnerabilities, and consequences—for each of these events and use these three factors to measure risk. All four agencies used methodologies that included some ISC requirements when conducting assessments. CBP and FAA assessed vulnerabilities but not threats and consequences. ARS and the Forest Service assessed threats, vulnerabilities, and consequences, but did not use these factors to measure risk. In addition, the agencies considered many, but not all 33 undesirable events related to physical security as possible risks to their facilities. Agencies are taking steps to improve their methodologies. For example, ARS and the Forest Service now use a methodology that measures risk and plan to incorporate the methodology into policy. Although CBP and FAA have updated their methodologies, their policies do not require methodologies that fully align with the ISC standard. As a result, these agencies miss the opportunity for a more informed assessment of the risk to their facilities. All four agencies reported facing management challenges in conducting physical security assessments or monitoring assessment results. Specifically, CBP, ARS, and the Forest Service have not met the ISC's required time frame of every 3 years for conducting assessments. For example, security specialists have not conducted required reassessments of two ARS and one Forest Service higher-level facilities. While these three agencies have plans to address backlogs, CBP's plan does not balance conducting risk assessments with other competing security priorities, such as updating its policy manual, and ARS and the Forest Service lack a means to monitor completion of future assessments. Furthermore, CBP, ARS, and the Forest Service did not have the data or information systems to monitor assessment schedules or the status of countermeasures at facilities, and their policies did not specify such data requirements. For example, ARS and the Forest Service do not collect and analyze security-related data, such as countermeasures' implementation. FAA does not routinely monitor the performance of its physical security program. Without improved monitoring, agencies are not well equipped to prioritize their highest security needs, may leave facilities' vulnerabilities unaddressed, and may not take corrective actions to meet physical security program objectives. This is a public version of a sensitive report that GAO issued in August 2017. Information that the agencies under review deemed sensitive has been omitted. GAO recommends: (1) that CBP and FAA update policies to require the use of methodologies fully aligned with the ISC Standard; (2) that CBP revise its plan to eliminate the assessments backlog; and (3) that all four agencies improve monitoring of their physical security programs. All four agencies agreed with the respective recommendations.", "document_type": "gao"}
{"report": "The Veterans Access, Choice, and Accountability Act of 2014 provided up to $10 billion in funding for veterans to obtain health care services from community providers through the Choice Program when veterans faced long wait times, lengthy travel distances, or other challenges accessing care at VA medical facilities. The temporary authority and funding for the Choice Program was separate from other previously existing programs through which VA has the option to purchase care from community providers. Legislation enacted in August and December of 2017 and June 2018 provided an additional $9.4 billion for the Veterans Choice Fund. Authority of the Choice Program will sunset on June 6, 2019. In October 2014, VA modified its existing contracts with two TPAs that were administering another VA community care program—the Patient- Centered Community Care program—to add certain administrative responsibilities associated with the Choice Program. For the Choice Program, each of the two TPAs—Health Net and TriWest—are responsible for managing networks of community providers who deliver care in a specific multi-state region. (See fig. 1.) Specifically, the TPAs are responsible for establishing networks of community providers, scheduling appointments with community providers for eligible veterans, and paying community providers for their services. Health Net’s contract for administering the Choice Program will end on September 30, 2018, whereas TriWest will continue to administer the Choice Program until the program ends, which is expected to occur in fiscal year 2019. VA’s TPAs process claims they receive from community providers for the care they deliver to veterans and pay providers for approved claims. Figure 2 provides an overview of the steps the TPAs follow for processing claims and paying community providers. VA’s contracts with the TPAs do not include a payment timeliness requirement applicable to the payments TPAs make to community providers. Instead, a contract modification effective in March 2016 established a non-enforceable “goal” of processing—approving, rejecting or denying—and, if approved, paying clean claims within 30 days of receipt. To be reimbursed for its payments to providers, the TPAs in turn submit electronic invoices—or requests for payment—to VA. TPAs generate an invoice for every claim they receive from community providers and pay. VA reviews the TPAs’ invoices and either approves or rejects them. Invoices may be rejected, for example, if care provided was not authorized. Approved invoices are paid, whereas rejected invoices are returned to the TPAs. The federal Prompt Payment Act requires VA to pay its TPAs within 30 days of receipt of invoices that it approves. The VA MISSION Act of 2018, among other things, requires VA to consolidate its community care programs once the Choice Program sunsets 1 year after the passage of the Act, authorizes VA to utilize a TPA for claims processing, and requires VA to reimburse community providers in a timely manner. Specifically, the act requires VA (or its TPAs) to pay community providers within 30 days of receipt for clean claims submitted electronically and within 45 days of receipt for clean claims submitted on paper. In December 2016, prior to enactment of the VA MISSION Act of 2018, VA issued an RFP for contractors to help administer the Veterans Community Care Program. The Veterans Community Care Program will be similar to the current Choice Program in certain respects. For example, VA is planning to award community care network contracts to TPAs, which would establish regional networks of community providers and process and pay those providers’ claims. However, unlike under the Choice Program, under the Veterans Community Care Program, VA is planning to have medical facilities—not the TPAs—generally be responsible for scheduling veterans’ appointments with community providers. From November 2014 through June 2018, VA’s TPAs paid a total of about 16 million clean claims—which are claims that contain all required data elements—under the Choice Program, of which TriWest paid about 9.6 million claims and Health Net paid about 6.4 million. Data on the median number of days VA’s TPAs have taken to pay clean claims each month show wide variation over the course of the Choice Program—from 7 days to 68 days. As discussed previously, in March 2016, VA established a non-enforceable goal for its TPAs to process and, if approved, pay clean claims within 30 days of receipt each month. Most recently, from January through June 2018, the median number of days taken to pay clean claims ranged from 26 to 28 days for TriWest, while it ranged from 28 to 44 days for Health Net. (See fig. 3.) In addition to the 16 million clean claims the TPAs paid from November 2014 through June 2018, during this time period they also paid approximately 650,000 claims (or 4 percent of all paid claims) that were classified as non-clean claims when first received after obtaining the required information. Non-clean claims are claims that are missing required information, which the TPA must obtain before the claim is paid. From November 2014 through June 2018, TriWest paid around 641,000 non-clean claims (or 6 percent of all paid claims) while Health Net paid about 9,600 non-clean claims (or less than 1 percent of all paid claims). Data on the median number of days VA’s TPAs have taken to pay non- clean claims each month also show wide variation over the course of the Choice Program—from 9 days to 73 days. (See fig. 4.) The data on the time TPAs have taken to pay approved clean and non- clean claims do not fully account for the length of time taken to pay providers whose claims are initially rejected or denied, as, according to the TPAs, providers are generally required to submit a new claim when the original claim is rejected or denied. Thus, providers that submit claims that are rejected or denied may experience a longer wait for payment for those claims or may not be paid at all. In some cases, providers’ claims may be rejected or denied multiple times after resubmission. VA and its TPAs identified three key factors affecting the timeliness of claim payments to community providers under the Choice Program: (1) VA’s untimely payments of TPA invoices; (2) Choice Program contractual requirements related to provider reimbursement; and (3) inadequate provider education on filing Choice Program claims, as discussed below. VA’s untimely payments of TPA invoices. According to VA and TPA officials, VA made untimely invoice payments to its TPAs—that is, payments made more than 30 days from the date VA received the TPAs’ invoices—which resulted in the TPAs at times having insufficient funds available to pay community providers under the Choice Program. A VA Office of Inspector General (OIG) report estimated that from November 2014 through September 2016, 50 percent of VA’s payments to its TPAs during this time frame were untimely. VA officials stated that VA’s untimely payments to the TPAs resulted from limitations in its fee-basis claims system, which VA used at the beginning of the Choice Program to process all TPA invoices. In addition, the VA OIG found that VA underestimated the number of staff necessary to process Choice Program invoices in a timely manner. Choice Program reimbursement requirements. According to VA and TPA officials, three Choice Program requirements, some of which were more stringent than similar requirements in other federal health care programs, led to claim denials, which, in turn, contributed to the length of time TPAs have taken to pay community providers when the providers did not meet these requirements: 1. Medical documentation requirement. Prior to a March 2016 contract modification, VA required providers to submit relevant medical documentation with their claims as a condition of payment from the TPAs. According to TriWest officials, those Choice Program claims that did not include medical documentation were classified by TriWest as non-clean claims and placed in pending status until the documentation was received. When community providers did not provide the supporting medical documentation after a certain period of time, TriWest typically denied their claims. According to Health Net officials, Choice Program claims that did not include medical documentation were denied by Health Net. 2. Timely filing requirement. VA requires providers to file Choice Program claims within 180 business days from the end of an episode of care. TPAs deny claims that are not filed within the required time frame. 3. Authorization requirement. VA requires authorizations for community providers to serve veterans under the Choice Program and receive reimbursement for their services; however, if community providers deliver care after an authorization period or include services that are not authorized, the TPAs typically deny their claims. According to TPA data, denials related to authorizations are among the most common reasons the TPAs deny community provider claims. Inadequate provider education on filing Choice Program claims. According to VA and TPA officials as well as providers we interviewed, issues related to inadequate provider education may have contributed to the length of time it has taken the TPAs to pay community providers under the Choice Program. These issues have included providers submitting claims with errors, submitting claims to the wrong payer, or otherwise failing to meet Choice Program requirements. For example, some VA community care programs require the claims to be sent to one of VA’s claims processing locations, while the Choice Program requires claims to be sent to TriWest or Health Net. Claims sent to the wrong entity are rejected or denied and have to be resubmitted to the correct payer. Ten of the 15 providers we interviewed stated that that they lacked education and/or training on the claims filing process when they first began participating in the Choice Program, including knowing where to file claims and the documentation needed to file claims that would be processed successfully. Four of these 10 providers stated that they learned how to submit claims through trial and error. At the infancy of the Choice Program, November 2014 through March 2016, VA was unable to monitor the timeliness of its TPAs’ payments to community providers because it did not require the TPAs to provide data on the length of time taken to pay these claims. Effective in March 2016, VA modified its TPA contracts and subsequently began monitoring TPA payment timeliness, requiring TPAs to report information on claims processing and payment timeliness as well as information on claim rejections and denials. However, because VA had not established a payment timeliness requirement, VA officials said that VA had limited ability to penalize TPAs or compel them to take corrective actions to address untimely claim payments to community providers. Instead, the March 2016 contract modification established a non-enforceable goal for the TPAs to process and pay clean claims within 30 days of receipt. As of July 2018, according to VA officials, VA did not have a contractual requirement it could use to help ensure that community providers received timely payments in the Choice Program. Officials from VA’s Office of Community Care told us that VA’s experience with payment timeliness in the Choice Program informed VA’s RFP for new contracts for the Veterans Community Care Program, which includes provisions that strengthen VA’s ability to monitor its future TPAs. For example, in addition to requiring future TPAs to submit weekly reports on claim payment timeliness as well as claim rejections and denials, VA’s RFP includes claim payment timeliness standards that are similar to those in the Department of Defense’s TRICARE program. Specifically, according to the RFP, TPAs in the Veterans Community Care Program will be required to process and pay, if approved, 98 percent of clean claims within 30 return claims, other than clean claims, to the provider with a clear explanation of deficiencies within 30 days of original receipt, and process resubmitted claims within 30 days of resubmission receipt. The RFP also identifies monitoring techniques that VA may employ to assess compliance with these requirements, including periodic inspections and audits. VA officials told us that VA will develop a plan for monitoring the TPAs’ performance on these requirements once the contracts are awarded. We found that VA has made system and process changes that improved its ability to pay TPA invoices in a timely manner. However, while VA has modified two Choice Program requirements that contributed to provider claim payment delays, it has not fully addressed delays associated with authorizations for care. Furthermore, while VA and its TPAs have taken steps to educate community providers in order to help prevent claims processing issues, 9 of the 15 providers we interviewed reported poor customer service when attempting to resolve these issues. VA has taken steps to reduce untimely payments to its TPAs, which contributed to delayed TPA payments to providers, by implementing a new system and updating its processes for paying TPA invoices so that it can pay these invoices more quickly. Specifically, VA has made the following changes: In March 2016, VA negotiated a contract modification with both TPAs that facilitated the processing of certain TPA invoices outside of the fee basis claims system from March 2016 through July 2016. According to VA officials, due to the increasing volume of invoices that the TPAs were expecting to submit to VA during this time period, without this process change, VA would have experienced a high volume of TPA invoices entering its fee basis claims system, which could have exacerbated payment timeliness issues. In February through April 2017, VA transitioned all TPA invoice payments from its fee basis claims system to an expedited payment process under a new system called Plexis Claims Manager. VA officials told us that instead of re-adjudicating community provider claims as part of its review of TPA invoices, Plexis Claims Manager performed up front checks in order to pay invoices more quickly, and any differences in billed and paid amounts were addressed after payments were issued to the TPAs. In January 2018, VA transitioned to a newer version of the Plexis Claims Manager that enabled VA to once again re-adjudicate community provider claims as part of processing TPA invoices, but in a timelier manner compared with the fee basis claims system. According to VA officials, this is due to the automation of claims processing under Plexis Claims Manager, which significantly reduced the need for manual claims processing by VA staff that occurred under the fee basis claims system. Based on VA data, as of July 2018, VA is paying 92 percent of TriWest’s submitted invoices within 7 days, with payments being made in an average of 4 days, and 90 percent of Health Net’s invoices within 7 days, with payments being made in an average of 4 days under the newer version of Plexis Claims Manager. In addition to steps taken to address untimely payments to the TPAs under the current Choice Program contracts, VA has taken steps to help assure payment timeliness in the forthcoming Veterans Community Care Program. Specifically, the RFP includes a requirement for VA to reimburse TPAs within 14 days of receiving an invoice. VA officials stated that to achieve this metric, they are implementing a new payment system that will replace Plexis Claims Manager and will no longer re-adjudicate TPA invoices prior to payment. VA has issued a contract modification and waivers for two Choice Program contract requirements that contributed to provider payment delays—(1) the medical documentation requirement and (2) the timely filing requirement. However, while VA issued a contract modification to amend the requirements for obtaining authorizations for Choice Program care, provider payment delays associated with requesting these authorizations may persist, because VA is not ensuring that VA medical centers review and approve these requests within required time frames. Elimination of medical documentation requirement. Effective beginning March 2016, VA issued a contract modification that eliminated the requirement that community providers must submit medical documentation as a condition of receiving payment for their claims. Data from one TPA showed a reduction in non-clean claims following the implementation of this contract modification. For example, starting in April 2016, after this modification was executed, almost 100 percent of claims submitted to TriWest were classified as clean claims, as opposed to 49 percent of claims submitted in March 2016. However, when the modification first went into effect in March 2016, TriWest and Health Net officials stated that they processed a large amount of claims from community providers that had previously been pended or denied because they lacked medical documentation and, in turn, submitted a large number of invoices to VA for reimbursement. As previously discussed, to help address the increased number of TPA invoices, VA issued lump-sum payments to the TPAs during this time period. Modification of timely filing requirement. In February and May 2018, VA issued waivers that gave TPAs the authority to allow providers to resubmit rejected or denied claims more than 180 days after the end of the episode of care if the original claims were submitted timely—that is, within 180 days of the end of the episode of care. VA officials stated that the waivers were intended to reduce the number of rejected and denied claims by giving community providers the ability to resubmit previously rejected or denied claims for which the date of service occurred more than 180 days ago. VA’s waivers were implemented as follows: In February 2018, VA issued a waiver that allowed community providers to resubmit certain claims rejected or denied for specific reasons when the provider or TPA could verify that the provider made an effort to submit the claim prior to the claims submission deadline. In May 2018, VA issued a second waiver that removed the 180 day timeliness requirement for all Choice Program claims. The waiver also provided instructions to the TPAs on informing providers that they may resubmit claims rejected or denied for specific reasons and how the TPAs are to process the resubmitted claims. In regards to the first waiver, TPA officials stated that the processing of those resubmitted claims adversely affected the timeliness of the TPAs’ payments to community providers because the waiver resulted in a large influx of older claims. As the second waiver was in the process of being implemented by the two TPAs at the time we conducted our work, we were unable to determine if the second waiver affected the TPAs’ provider payment timeliness. Changes to authorization of care requirement. VA issued a contract modification in January 2017 to expand the time period for which authorizations for community providers to provide care to veterans under the Choice Program are valid. In addition, in May 2017, VA expanded the scope of the services covered by authorizations, allowing them to encompass an overall course of treatment, rather than a specific service or set of services. According to VA officials, the changes VA made related to the authorization of care requirement were also intended to reduce the need for secondary authorization requests (SAR). Community providers request SARs when veterans need health care services that exceed the period or scope of the original authorizations. Community providers are required to submit SARs to their TPA, which, in turn, submits the SARs to the authorizing VA medical facility for review and approval. Both Health Net and TriWest officials told us that since VA changed the time frame and scope of authorizations, the number of SARs has decreased. Despite efforts to decrease the number of SARs, payment delays or claim denials are likely to continue if SARs are needed. We found that VA is not ensuring that VA medical facilities are reviewing and approving SARs within required time frames. VA policy states that VA medical facilities are to review and make SAR approval decisions within 5 business days of receipt. However, officials from one of the TPAs and 7 of the 15 providers we interviewed stated that VA medical facilities are not reviewing and approving SARs in a timely manner. According to TriWest officials, as of May 2018, VA medical facilities in their regions were taking an average of 11 days to review and make approval decisions on SARs, with four facilities taking over 30 days for this process. According to an official from VA’s Office of Community Care, VA does not currently collect reliable national data to track the extent of nonadherence to the VA policy to review and make SAR approval decisions within 5 business days. The official told us that instead, VA relies on employees assigned to each Veterans Integrated Service Network to monitor data on VA medical facilities’ timeliness in making these SAR approval decisions. If a VA medical facility is found not to be in adherence with the SAR policy, the official told us that staff assigned to the Veterans Integrated Service Network attempt to identify the reasons for nonadherence, and perform certain corrective actions, including providing education to the facility. Despite these actions, the official told us that there are still VA medical facilities not in adherence with VA’s SAR approval policy. According to a VA official, VA is in the process of piloting software for managing authorizations that will allow VA to better track SAR approval time frames across VA medical facilities in the future. However, even after this planned software is implemented, if VA does not use the data to monitor and assess SAR approval decision time frames VA will be unable to ensure that all VA medical facilities are adhering to the policy. Standards for internal control in the Federal Government state that management should establish and operate monitoring activities to evaluate whether a specific function or process is operating effectively and take corrective actions as necessary. Furthermore, monitoring such data will allow VA to identify and take actions as needed to address any identified challenges VA medical facilities are encountering in meeting the required approval decision time frames. Without monitoring data to ensure that all VA medical facilities are adhering to the SAR approval time frames as outlined in VA policy, community providers may delay care until the SARs are approved or provide care without SAR approval. This in turn increases the likelihood that the community providers’ claims will be denied. Further, continued nonadherence to VA’s SAR policy raises concerns about VA’s ability to ensure timely approval of SARs when VA medical facilities assume more responsibilities for ensuring veterans’ access to care under the forthcoming Veterans Community Care Program. We found that VA and its TPAs have taken steps to educate community providers in order to help prevent claims processing issues that have contributed to the length of time TPAs have taken to pay these providers. Despite these efforts, 9 of the 15 providers we interviewed reported poor customer service when attempting to resolve claims payment issues. While VA’s contracts with the TPAs do not include requirements for educating and training providers on the Choice Program, both TPAs have taken steps to educate community providers on how to successfully submit claims under the Choice Program. Specifically, TriWest and Health Net officials told us that they have taken various steps to educate community providers on submitting claims correctly, including sending monthly newsletters, emails, and faxes to communicate changes to the Choice Program; updating their websites with claims processing information; and holding meetings with some providers monthly or quarterly to resolve claims processing issues. Officials from both TPAs also told us that they provided one-on-one training to some providers on the claims submission process to help reduce errors when submitting claims. In addition, VA’s RFP for the Veterans Community Care Program contracts includes requirements to provide an annual training program curriculum and an initial on-boarding and ongoing outreach and education program for community providers, which includes training on the claims submission and payment processes and TPA points of contact. VA and the TPAs have also made efforts to help providers resolve claims processing issues and outstanding payments. For example, VA launched its “top 20 provider initiative” in January 2018 to work directly with community providers with high dollar amounts of unpaid claims and resolve ongoing claims payment issues. This initiative included creating rapid response teams to work with community providers to settle unpaid claim balances within 90 days and working with both TPAs to increase the number of clean claims paid in less than 30 days. In addition, VA has developed webinars on VA’s community care programs and—in conjunction with trade organizations and health care systems—has delivered provider education on filing claims properly. TriWest officials stated that it has educated the customer service staff at its claims processing sub-contractor, who field community provider calls regarding claims processing issues, to help ensure that the staff are familiar with Choice Program changes and can effectively assist community providers and resolve claims processing issues. Internal TriWest data show that providers’ average wait time to speak to a customer service representative about claims processing issues decreased from as high as 18 minutes in 2016 to as low as 2.5 minutes in 2018. Health Net officials were unable to provide data, but stated that since the fourth quarter of 2017, Health Net has decreased the time it takes for a community provider to speak with a customer service representative by adding additional staff and extending the hours in which providers can call with questions. In addition, Health Net officials stated that they have required customer service staff to undergo additional training related to resolving claims processing issues. Despite these efforts, 7 of the 10 providers that participate in the Health Net network and 2 of the 7 providers that participate in the TriWest network we interviewed between April and June 2018 told us that when they contact the TPAs’ customer service staff to address claim processing questions, such as how to resolve claim rejections or denials, they experience lengthy hold times, sometimes exceeding one hour. In addition, 7 of the 15 providers we spoke with told us they typically reach employees who are unable to answer their questions. According to these providers, this experience frustrated them, as they often did not understand why a claim had been denied or rejected, and they required assistance correcting the claim so it could be resubmitted. One community provider stated that their common practice to resolve questions or concerns was to call customer service enough times until they received the same answer twice from a TPA representative. In addition, 5 of the 10 Health Net providers we interviewed stated that they have significant outstanding claim balances owed to them. One of these providers—who reported over $3 million in outstanding claims—stressed the importance of being able to effectively resolve claims issues with TPA customer service staff, as the administrative burden of following up on outstanding claim balances takes time away from caring for patients. The issues concerning customer service wait times and TPA staff inability to resolve some claims processing issues reported by community providers appear to be inconsistent with VA contractual requirements. VA’s current Choice Program contracts require the TPAs to establish a customer call center to respond to calls from veterans and non-VA providers. The contract requires specified levels of service for telephone inquiries at the call center. For example, VA requires TPA representatives to answer customer service calls within an average speed of 30 seconds or less and requires 85 percent of all inquiries to be fully and completely answered during the initial telephone call. However, VA officials explained that VA does not enforce the contractual requirement for responding to calls from community providers. Furthermore, according to these officials, VA allows the TPAs to prioritize calls from veterans. Officials from VA’s Office of General Counsel, Procurement Law Group, confirmed that this requirement does apply to the TPAs’ handling of calls from community providers. Because VA does not enforce the customer service requirement for providers, VA has not collected data on or monitored the TPAs’ compliance with these requirements for providers’ calls. As previously stated, standards for internal control in the Federal Government state that management should establish and operate monitoring activities to evaluate whether a specific function or process is operating effectively and take corrective actions as necessary. Without collecting data and monitoring customer service requirements for provider calls, VA does not have information on the extent to which community providers face challenges when contacting the TPAs about claims payment issues that could contribute to the amount of time it takes to successfully file claims and receive reimbursement for services under the Choice Program. This, in turn, poses a risk to the Choice Program to the extent that community providers who face these challenges decide not to serve veterans under the Choice Program. Looking forward, VA has included customer service requirements in its RFP for the Veterans Community Care Program contracts, and VA officials have told us that these requirements are applicable to provider calls. For example, the RFP includes a requirement for its future TPAs to establish and maintain call centers to address inquiries from community providers and has established customer service performance metrics to monitor call center performance. Monitoring data on provider calls under the contracts will be important as Veterans Community Care Program TPAs will continue to be responsible for building provider networks, processing claims, and resolving claims processing issues. The Choice Program relies on community providers to deliver care to eligible veterans when VA is unable to provide timely and accessible care at its own facilities. Although VA has taken steps to improve the timeliness of TPA claim payments to providers, VA is not collecting data or monitoring compliance with two Choice Program requirements, and this could adversely affect the timeliness with which community providers are paid under the Choice Program. First, VA does not have complete data allowing it to effectively monitor adherence with its policy for VA medical facilities to review SARs within 5 days of receipt, which impacts its ability to meet the requirement. To the extent that VA medical facilities delay these reviews and approvals, community providers may have to delay care or deliver care that is not authorized, which in turn increases the likelihood that the providers’ claims will be denied and the providers will not be paid. Second, VA requires the TPAs to establish a customer call center to respond to calls from veterans and non-VA providers. However, VA does not enforce the contractual requirement for responding to calls from community providers and allows the TPAs to prioritize calls from veterans. Consequently, VA is not collecting data, monitoring, or enforcing compliance with its contractual requirements for the TPAs to provide timely customer service to providers. As a result, VA does not have information on the extent to which community providers face challenges when contacting the TPAs about claims payment issues, which could contribute to the amount of time it takes to receive reimbursement for services. To the extent that these issues make community providers less willing to continue participating in the Choice Program and the forthcoming Veterans Community Care Program, they pose a risk to VA’s ability to successfully implement these programs and ensure veterans’ timely access to care. We are making the following two recommendations to VA: Once VA’s new software for managing authorizations has been fully implemented, the Undersecretary for Health should monitor data on SAR approval decision time frames to ensure VA medical facilities are in adherence with VA policy, assess the reasons for nonadherence with the policy, and take corrective actions as necessary. (Recommendation 1) The Undersecretary for Health should collect data and monitor compliance with the Choice Program contractual requirements pertaining to customer service for community providers, and take corrective actions as necessary. (Recommendation 2) We provided a draft of this report to VA for review and comment. In its written comments, reproduced in appendix I, VA concurred with our two recommendations and said it is taking steps to address them. For example, VA plans to implement software in spring 2019 that will automate the SAR process and allow for streamlined reporting and monitoring of SAR timeliness to ensure ongoing compliance. Additionally, VA has included provider customer service performance requirements and metrics in its Veterans Community Care Program RFP, and will require future contractors to provide a monthly report to VA on their call center operations and will implement quarterly provider satisfaction surveys. We are sending copies of this report to the Secretary of Veterans Affairs, the Under Secretary for Health, appropriate congressional committees, and other interested parties. This report is also available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact Sharon M. Silas at (202) 512-7114 or silass@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, Marcia A. Mann (Assistant Director), Michael Zose (Analyst-in-Charge), and Kate Tussey made major contributions to this report. Also contributing were Krister Friday, Jacquelyn Hamilton, and Vikki Porter.", "summary": "Questions have been raised about the lack of timeliness of TPAs' payments to community providers under the Choice Program and how this may affect the willingness of providers to participate in the program as well as in the forthcoming Veterans Community Care Program. You asked GAO to review issues related to the timeliness of TPAs' payments to community providers under the Choice Program. This report examines, among other things, (1) the length of time TPAs have taken to pay community providers' claims and factors affecting timeliness of payments, and (2) actions taken by VA and the TPAs to reduce the length of time TPAs take to pay community providers for Choice Program claims. GAO reviewed TPA data on the length of time taken to pay community provider claims from November 2014 through June 2018, the most recent data available at the time of GAO's review. GAO also reviewed documentation, such as the contracts between VA and its TPAs, and interviewed VA and TPA officials. In addition, GAO interviewed a non-generalizable sample of 15 community providers, selected based on their large Choice Program claims volume, to learn about their experiences with payment timeliness. The Department of Veterans Affairs' (VA) Veterans Choice Program (Choice Program) was created in 2014 to address problems with veterans' timely access to care at VA medical facilities. The Choice Program allows eligible veterans to obtain health care services from providers not directly employed by VA (community providers), who are then reimbursed for their services through one of the program's two third-party administrators (TPA). GAO's analysis of TPA data available for November 2014 through June 2018 shows that the length of time the TPAs took to pay community providers' clean claims each month varied widely—from 7 days to 68 days. VA and its TPAs identified several key factors affecting timeliness of payments to community providers under the Choice Program, including VA's untimely payments to TPAs, which in turn extended the length of time TPAs took to pay community providers' claims; and inadequate provider education on filing claims. VA has taken actions to address key factors that have contributed to the length of time TPAs have taken to pay community providers. For example, VA updated its payment system and related processes to pay TPAs more quickly. According to VA data, as of July 2018, VA was paying at least 90 percent of the TPAs' invoices within 7 days. In addition, VA and the TPAs have taken steps to improve provider education to help providers resolve claims processing issues. However, 9 of the 15 providers GAO interviewed said they continue to experience lengthy telephone hold times. According to VA and TPA officials, steps have been taken to improve the customer service offered to community providers. However, VA officials do not collect data on or monitor TPA compliance with customer service requirements—such as calls being answered within 30 seconds or less—for provider calls because they said they are not enforcing the requirements and are allowing TPAs to prioritize calls from veterans. Without collecting data and monitoring compliance, VA does not have information on challenges providers may face when contacting TPAs to resolve payment issues. GAO is making two recommendations, including that VA should collect data on and monitor compliance with its requirements pertaining to customer service for community providers. VA concurred with GAO's recommendations and described steps it will take to implement them.", "document_type": "gao"}
{"report": "TSA allocates TSOs to airports using its Resource Allocation Plan, which is intended to provide each airport with the optimum number of TSOs needed to screen passengers for threats to aviation security, such as prohibited and other potentially dangerous items. To implement passenger screening and pursue efficient operations, in addition to relying on TSOs, TSA works with officials from airlines and airports, as well as officials from associations that represent airlines and airports. At airports, FSDs and their designees work with individual airport operators and airlines to, among other things, adjust TSA resources (i.e., TSOs and screening assets such as metal detectors) in response to increases in passenger throughput at each checkpoint, and monitor passenger wait times at checkpoints. At TSA headquarters, the Office of Security Operations (OSO) has primary responsibility for operation of the Resource Allocation Plan and allocation of TSOs across airports. To allocate staff to the nearly 440 TSA-regulated airports in the United States, OSO is to use a combination of computer-based modeling and line-item adjustments based on airport- specific information. First, the agency is to work with a contractor to evaluate the assumptions—such as rates of expedited screening—used by the computer-based staffing allocation model to determine the optimal number of TSOs at each airport based on airport size and configuration, flight schedules, and the time it takes to perform checkpoint and baggage screening tasks. Second, after the model has determined how many TSOs are required for each airport, headquarters-level staff are to make line item adjustments to account for factors such as differences in staff availability and training needs that affect each airport. In 2007, we reviewed the Resource Allocation Plan (referred to as the Staffing Allocation Model at that time) and recommended, among other things, that TSA establish a mechanism to ensure periodic assessment of the assumptions, such as passenger and checked baggage screening rates, underlying the plan. TSA agreed with the recommendation, and in December 2007 developed and implemented a plan to periodically assess the plan’s assumptions. At each airport, TSA is to collect throughput data on the number of passengers screened under both expedited and standard screening and monitor passenger wait times at screening checkpoints. TSA airport officials are to submit passenger throughput and wait time data on a daily basis to OSO’s Performance Management Division at TSA headquarters, which compiles the data through the Performance Measurement Information System, TSA’s web-based data collection system. TSA required FSDs and their designees to collect actual wait times from 2002 through 2007 and beginning again in July 2014. From 2008 through June 2014, TSA required that FSDs collect data on wait time ranges, such as between 20 to 29 minutes or greater than 30 minutes. In February 2018, we reported that TSA headquarters officials have taken steps intended to improve information sharing with stakeholders—officials from airlines and airports, as well as officials from associations that represent airlines and airports—about staffing and related screening procedures at airports. For example, we reported that TSA holds daily conference calls with stakeholders at selected airports intended to ensure timely communication and to help identify and address challenges in airport operations such as increases in passenger wait times. Additionally, we reported that TSA conducted a series of presentations and meetings to discuss the Resource Allocation Plan, security enhancements at airports, and airport screening processes, among other things. In February 2018, we reported that TSA collects passenger wait time and throughput data and uses those data to monitor daily operations at airports. TSA’s Operations Directive (directive), Reporting Customer Throughput and Wait Times, provides instructions for collecting and reporting wait time and passenger throughput data for TSA screening lanes. Regarding wait time data, according to the directive, FSDs or their designees at all Category X, I, and II airports must measure wait times every operational hour in all TSA expedited and standard screening lanes. The directive requires wait times to be measured in actual time, using a verifiable system such as wait time cards, closed circuit television monitoring, or another confirmable method. The directive indicates that wait times should be measured from the end of the line in which passengers are waiting to the walk through metal detector or advanced imaging technology units. According to TSA officials at that time, at the beginning of each hour, wait time cards are handed to passengers at the end of the checkpoint line and are collected when a passenger reaches the metal detector or imaging unit. Closed circuit television is monitored from a location other than the checkpoint, such as at the airport’s coordination center. According to TSA headquarters officials, TSA does not require FSDs or their designees to collect wait times from a statistical sample of passengers throughout the hour, but rather requires that one wait time is collected for every operational hour in all screening lanes. If more than one wait time is collected during the hour, the directive indicates that the maximum wait time should be reported. TSA officials at airports we visited for our February 2018 report stated that TSOs return completed wait time cards to supervisors, who then enter the information into a shared spreadsheet and eventually into the Performance Measurement Information System. Each hour’s reported wait time is then applied to all of a lane’s throughput for that given hour. FSDs or their designees at Category III and IV airports may estimate wait times initially, but the directive requires them to measure actual wait times when wait times are estimated at 10 minutes or greater. The directive also requires FSDs or their designees to collect passenger throughput data directly from the walkthrough metal detectors and advanced imaging technology units. According to TSA headquarters officials, the machines have sensors that collect the number of passengers who pass through each hour, and TSOs retrieve the data directly from the units. All airports regardless of category are required to enter their wait time and throughput data daily into the information system no later than 3:30 AM Eastern Time of the next calendar day so that the data can be included in the morning’s Daily Leadership Report (discussed in more detail below). To monitor operations for all airports, TSA compiles a daily report utilizing a variety of data points from the information system, including wait time and throughput data. The Office of Security Operations’ Performance Management Division disseminates the Daily Leadership Report to TSA officials, including regional directors and FSDs and their designees every morning detailing the previous day’s wait times and throughput figures, among other data points. The Performance Management Division includes a quality assurance addendum with each Daily Leadership Report, indicating missing or incorrect data, to include wait time and throughput data, and TSA has procedures in place intended to ensure officials at the airports correct the data in the Performance Measurement Information System within 2 weeks. In addition to the Daily Leadership Report, we reported that TSA utilizes wait time and throughput data to monitor airport operations at 28 airports in near real time. In May 2016, TSA established the Airport Operations Center partly in response to the long screening checkpoint lines in the spring of 2016 at certain airports. The center conducts near real time monitoring of the operations of 28 airports that, according to TSA headquarters officials, represent the majority of passenger throughput nationwide or are operationally significant. TSA requires the 28 airports monitored by the center to enter passenger wait time data and throughput data hourly (whereas the remaining airports are only required to submit data once daily, by 3:30 AM Eastern Time, as described above) so that officials can monitor the operations in near real time. In addition, TSA officials at airports are required to report to the center when an event occurs—such as equipment malfunctions, weather-related events, or unusually high passenger throughput—that affects airport screening operations and results in wait times that are greater than TSA’s standards of 30 minutes in standard screening lanes or greater than 15 minutes in expedited screening lanes. If an airport is undergoing a period of prolonged wait times, we found that officials at the Airport Operations Center reported coordinating with the Regional Director and the FSD to assist in deploying resources. For example, over the course of the summer of 2016, after certain airports experienced long wait times in the spring of 2016 as confirmed by our analysis, the center assisted in deploying additional passenger screening canines and TSOs to those airports that experienced longer wait times. The center disseminates a morning and evening situational report to TSA airport-level officials and airport stakeholders summarizing nationwide wait times, highlighting wait times at the top airports and any hot spots (unexpected passenger volume or other operational challenges) that may have occurred since the most recent report was issued. In addition to the near real-time monitoring of 28 airports, the center also monitors operations at all other airports and disseminates information to airports and stakeholders as needed. For our February 2018 report, to determine the extent to which TSA exceeded its wait time standards, we analyzed wait time data for the 28 airports monitored by the Airport Operations Center for the period of January 2015 through May 2017 for both standard and expedited screening. Our analysis showed that TSA met its wait time standard of less than 30 minutes in standard screening at the 28 airports 99.3 percent of the time for the period of January 2015 through May 2017. For expedited screening for the same time period at the same airports, we found that 100 percent of the time passengers were reported to have waited 19 minutes or less. Additionally, our analysis confirmed that the percentage of passengers in standard screening who waited over 30 minutes increased in 2016 during the months of March, April, and May as compared to 2015 at all 28 airports. Our analysis also confirmed that reported wait times increased in the spring of 2016 at selected airports, as mentioned in the news media. For example, in May 2016, approximately 22 percent of passengers at Chicago O’Hare International airport and 26 percent of passengers at Chicago Midway International airport waited over 30 minutes in standard screening as opposed to zero percent for both airports in May 2015, which accounted for the longest wait times in the spring of 2016. These two airports were part of the 28 airports for which we analyzed wait time data for the period of January 2015 through May 2017. In February 2018, we reported that FSDs and their staff at the airports we visited identified a variety of tools that they utilize to respond to increases in passenger wait times and/or throughput. TSOs from the National Deployment Force —teams of additional TSOs—are available for deployment to airports to support screening operations during major events and seasonal increases in passengers. For example, TSA officials at one airport we visited received National Deployment Force officers during busy holiday seasons and officials at another airport received officers during the increase in wait times in the spring and summer of 2016. TSA officials at selected airports used passenger screening canines to expedite the screening process and support screening operations during increased passenger throughput and wait time periods. For example, TSA officials at one airport we visited emphasized the importance of passenger screening canines as a useful tool to minimize wait times and meet passenger screening demands at times when throughput is high. Officials at another airport we visited relied on these canines in busy terminals during peak periods. According to officials at two of the airports we visited, the use of passenger screening canines helped them to reduce wait times due to increased passenger volumes in the spring and summer of 2016. TSA officials at selected airports also utilize part-time TSOs and overtime hours to accommodate increases in passenger throughput and wait times. For example, according to officials at all eight of the airports we visited, they used overtime during peak travel times, such as holiday travel seasons, and officials usually planned the use of overtime in advance. Additionally, TSA officials at four of the airports we visited told us they used part-time TSOs to help manage peak throughput times throughout the day. According to TSA officials at two of the airports we visited, they moved TSOs between checkpoints to accommodate increases in passenger throughput at certain checkpoints and to expedite screening operations. For example, TSA officials at one airport we visited have a team of TSOs that terminal managers can request on short notice. Officials at the other airport estimated that they move TSOs between terminals about 40 times per day. Chairman Katko, Ranking Member Watson Coleman and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. For questions about this statement, please contact William Russell at (202) 512-8777 or russellw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Ellen Wolfe (Assistant Director), Joel Aldape, Brendan Kretzschmar, and Natalie Swabb. Key contributors for the previous report that this testimony is based on are listed in the product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "TSA employs about 43,000 Transportation Security Officers (TSO) who screen over 2 million passengers and their property each day at airports in the United States. TSA allocates TSOs to airports using both a computer-based staffing model and information from airports intended to provide each airport with the optimum number of TSOs. In the spring of 2016, long screening checkpoint lines at certain U.S. airports raised questions about TSA's process for allocating TSOs to airports. This testimony addresses (1) how TSA monitors wait times and throughput, and (2) tools TSA uses to respond to increases in passenger wait times. This testimony is based on a report GAO issued in February, 2018: GAO, Aviation Security: TSA Uses Current Assumptions and Airport-Specific Data for Its Staffing Process and Monitors Passenger Wait Times Using Daily Operations Data . GAO-18-236 , Washington, D.C.: February 1, 2018. For that report, among other things, GAO analyzed TSA documentation and passenger wait time and throughput data. In February 2018, GAO reported that the Transportation Security Administration (TSA) uses data to monitor passenger wait times and throughput, the number of passengers that are screened at each airport checkpoint, on a daily basis and responds to increases. For example, TSA's Airport Operations Center (AOC) monitors daily wait times and passenger throughput from 28 airports that TSA officials say represent the majority of passenger throughput nationwide or are operationally significant. Furthermore, TSA officials at airports are required to report to the AOC when an event occurs--such as equipment malfunctions--that affects airport screening operations and results in wait times that are greater than 30 minutes in standard screening lanes. For its February 2018 report, GAO analyzed wait time data for the AOC-monitored airports for the period of January 2015 through May 2017 and found that TSA's reported wait times met its standard of less than 30 minutes in standard screening 99 percent of the time. Within that time frame, two airports accounted for the longest wait times in the spring of 2016. TSA officials also identified several tools, such as passenger screening canines, that they reported using to respond to increases in passenger wait times at these airports. GAO is not making any recommendations.", "document_type": "gao"}
{"report": "For over a decade, Congress and DOD have led a series of efforts to address the governance structure of the Military Health System, including recommending and implementing significant organizational realignments. DOD undertook a significant organizational realignment effort in June 2011, creating an internal task force to review the governance of the Military Health System and subsequently identified as priorities cost containment, greater integration, and increased unity of effort. In March 2012, DOD submitted a report to Congress that, among other things, proposed creating the DHA to achieve cost savings at headquarters- and administrative-level organizations, TRICARE, the headquarters of military departments’ medical commands and agencies, and other management organizations within the Military Health System that do not directly provide health care services. DOD established the DHA in September 2013 to provide administrative support for the military departments’ respective medical programs by adopting common clinical and business processes, combining common shared services, and coordinating the work of the military departments’ respective MTFs and care purchased from the private sector. The DHA also assumed the administrative responsibility for managing the MTFs in the National Capital Region. The NDAA for Fiscal Year 2013 required that DOD create a detailed plan for carrying out its health care system reform to include the goals of the reform and performance measures to achieve them; the personnel levels required for the DHA and the National Capital Region Medical Directorate; and specific information on the shared services, among other things. In 2015, we reported on DOD’s establishment of the DHA and made five recommendations, and DOD concurred or partially concurred with all of these recommendations. DOD has implemented two of the five recommendations by completing some baseline personnel assessments of the DHA workforce and reporting the number and cost of administrative headquarters personnel within the Military Health System in DOD’s fiscal year 2018 Defense Health Program budget estimates. Of the three open recommendations, two relate directly to assessing personnel requirements within the DHA. As of January 2018, these recommendations have not been fully addressed and remain open because DOD has not established processes and procedures to create an overall personnel management process for the DHA. In December 2016, Congress expanded the role of the DHA by directing the transfer of responsibility for the administration of each MTF from the military departments to the DHA. Pursuant to section 1073c(a) of title 10, United States Code, the Director of the DHA shall be responsible for the administration of each MTF, including with respect to budgetary matters, information technology, health care administration and management, administrative policy and procedure, military medical construction, and any other matters the Secretary of Defense determines appropriate. Section 702 of the NDAA for Fiscal Year 2017 required that the Secretary of Defense develop a plan to implement section 1073c of title 10, United States Code, that includes the following four elements: A. how the Secretary will carry out subsection (a) of section 1073c of title 10 of the United States Code; B. efforts to eliminate duplicative activities carried out by the elements of the DHA and military departments; C. efforts to maximize efficiencies in the activities carried out by the DHA; and D. how the Secretary will implement section 1073c in a manner that reduces the number of members of the armed forces, civilian employees who are full-time equivalent employees, and contractors relating to the headquarters activities of the Military Health System, as of the date of the enactment of the act. Section 702 of the NDAA for Fiscal Year 2017 also included a provision for us to review DOD’s interim and final reports on the implementation plan. In our review of DOD’s plan in September 2017, we noted that DOD had selected the component model—in which the Director of the DHA would administer each MTF through military department-led intermediary component commands and military department-led MTFs— as the administrative model DOD would use to meet the requirements specified in section 702. Congress, in the Conference report accompanying the NDAA for Fiscal Year 2018 that was issued in November 2017, raised concern about DOD’s lack of progress on the development of the plan and about the component model. Specifically, Congress noted that the component model was an attempt to maintain current stove-piped organizational constructs that risk continued inefficiencies in the Military Health System command and governance structure. In the third interim report, DOD found that the component model would not be adequate to satisfy statutory requirements and subsequently changed from the component model to a new administrative framework. The NDAA for Fiscal Year 2019 amended section 1073c of title 10, United States Code. The NDAA for Fiscal Year 2019, among other things, provided additional authorities to the Director of the DHA, such as the authority to determine total workforce requirements at each MTF and established within the DHA two subordinate organizations—one for research and development, and one for public health. Additionally, the NDAA for Fiscal Year 2019 extended the date for the transfer of the administration of the MTFs to the DHA from the original deadline of October 1, 2018, to September 30, 2021. Section 1073c of title 10, United States Code, including these amendments, is reproduced in appendix I. Currently, the Under Secretary of Defense for Personnel and Readiness, the Assistant Secretary of Defense for Health Affairs, the DHA, and the military departments have various responsibilities for the oversight and management of the Military Health System: The Under Secretary of Defense for Personnel and Readiness is the principal staff assistant and advisor to the Secretary and Deputy Secretary of Defense for health affairs and, in that capacity, develops policies, plans, and programs for health and medical affairs. The Assistant Secretary of Defense for Health Affairs has the primary responsibility for the Military Health System and serves as the principal advisor to the Under Secretary of Defense for Personnel and Readiness for all DOD health policies, programs, and activities. The Assistant Secretary of Defense for Health Affairs also has the authority to develop policies; conduct analyses; issue guidance; provide advice and make recommendations to the Secretary of Defense, the Under Secretary of Defense for Personnel and Readiness, and others; and provide oversight to the DOD components on matters pertaining to the Military Health System. Further, the Assistant Secretary of Defense for Health Affairs prepares and submits a DOD Unified Medical Program budget to provide resources for the Military Health System. The Director of the DHA, in addition to carrying out the responsibilities outlined above, manages the execution of policy developed by the Assistant Secretary of Defense for Health Affairs. The Secretaries of the military departments coordinate with the Assistant Secretary of Defense for Health Affairs to develop certain Military Health System policies, standards, and procedures and provide military personnel and other authorized resources to support the activities of the DHA, among other things. The Surgeon General of each military department serves as the principal advisor to the Secretary of the military department concerned on all health and medical matters of the military department. DOD addressed each of the four statutory elements in its June 2018 plan. DOD dedicated most of the plan to describing the governance structure of DOD’s new administrative framework and to describing the schedule for the phased transfer of the administration of approximately 457 MTFs to the DHA by October 1, 2021. DOD’s plan provided less detail on addressing efforts to eliminate duplicative activities; maximizing efficiency; and reducing the number of headquarters-level military, civilian, and contractor personnel. The following provides a summary of what DOD’s plan included for each of the four elements in the statute: Information on efforts to transfer the administration of the MTFs to the DHA. In its plan, DOD described the transfer of the MTFs to the DHA, including budgetary matters, information technology, health care administration and management, administrative policy and procedure, military medical construction, and all other MTF operations. DOD dedicated most of the plan to describing the (1) new governance structure of the proposed administrative framework model and (2) timeline for the phased transfer of the administration of the 457 MTFs from the military departments’ respective medical commands to the DHA. For example, DOD states that Military Health System governance will shift its focus from consensus-driven bodies that address both policy and management issues to a smaller, streamlined set of oversight councils that focus on high-level, Military Health System-wide policy and budgetary matters. According to the plan, the Assistant Secretary of Defense for Health Affairs will resolve matters that involve both the military departments and the DHA. DOD also stated that the DHA plans to establish six intermediate management organizations (two for each region) to assist with the administration and management of the MTFs, which are broken out as follows: an East Region, a West Region, and outside the United States. Further, DOD stated that the DHA had established an Assistant Director position for Health Care Administration, as well as four Deputy Assistant Director positions for Information Operations, Financial Operations, Health Care Operations, and Medical Affairs. Regarding the timeline for the phased transfer, beginning no later than October 1, 2018, DOD will transfer 5 of its approximately 679 MTFs to the DHA for the first phase of the transition. MTFs transferring to the DHA for the first phase include the Womack Army Medical Center, Fort Bragg; the Naval Hospital Jacksonville; Force 81st Medical Group, Keesler Air Force Base; 4th Medical Group, Seymour Johnson Air Force Base; and 628th Medical Group, Joint Base Charleston. In the second phase of the transition, which will begin no later than October 1, 2019, DOD will transfer 244 MTFs from the East Region to the DHA. The third phase will begin no later than October 1, 2020, and will include 134 MTFs from the West Region. The fourth phase will include 79 MTFs outside the United States and begin no later than October 1, 2021. DOD also provided DHA organizational charts for each of the four phases. Information on efforts to eliminate duplicative activities carried out by the DHA and the military departments. In its plan, DOD noted that it is undertaking an analysis of the functions that will be performed at DHA headquarters and at the military departments’ respective medical department headquarters. In the plan, DOD provided three figures listing the functions, functional responsibilities, and functional requirements that will be carried out by the DHA, the DHA intermediate management organizations, and the military departments’ medical department headquarters. Specifically, the functions listed included those functions that should be with the DHA intermediate management organizations, such as Emergency Planning and Preparation, and those functions that should be with the military departments’ medical department intermediate commands or headquarters, such as Quality and Safety for Healthcare in the Operational Setting. The three figures primarily focused on functions to be performed during the first phase of the transition. Information on efforts to maximize efficiencies in the activities carried out by the DHA. In its plan, DOD included information about its three principle efforts currently underway to address efficiencies. Specifically, DOD describes its broader efforts to streamline clinical and business processes across the Military Health System and links some of these broader initiatives to section 702. According to the plan, efforts such as the use of centralized contract support functions and common purchasing, among others, are made possible because of the transfer of the administration of the MTFs to the DHA. Specific to the transfer of MTFs to the DHA as required by section 1073c of title 10 of the United States Code, DOD’s plan stated that the DHA is developing, publishing, and implementing procedural instructions to help administer and manage the MTFs. The plan also states that each MTF transferring to the DHA will establish a performance plan—referred to as a quadruple aim performance plan—to monitor performance. According to the plan, Military Health System leadership adopted the quadruple aim performance plan to monitor MTF performance, which they believe will improve performance and contribute to better outcomes and increased efficiencies. The plan states that the performance of all MTFs in the Military Health System will be monitored using the Military Health System quadruple aim performance plan measures beginning October 1, 2018. Information on reducing headquarters-level military, civilian, and contractor personnel within the Military Health System. In its plan, DOD noted that it has already programmed a 25-percent reduction in personnel positions aligned to medical headquarters across the enterprise. Specific to the transfer of MTFs to the DHA as required by section 1073c of title 10 of the United States Code, DOD states that the DHA will experience personnel growth during each subsequent phase of the transition in order to undertake its new responsibilities. Additionally, the plan states that DOD expects at least a 10-percent reduction (approximately 695 positions from the current baseline) in headquarters military and civilian personnel by the end of the transition. However, the plan does not provide specific details about how it will achieve the 10-percent reduction while the DHA experiences personnel growth during each phase. The plan includes a figure depicting military and civilian full-time equivalent positions for the current baseline of the DHA and the military departments’ respective medical department headquarters and intermediate commands. Contractors are also mentioned in the plan at a high level, but without specific data. Additionally, DOD continues to take steps to evaluate personnel requirements. Specifically, according to two June 2018 Under Secretary of Defense for Personnel and Readiness memorandums, DOD is conducting a review and validation of headquarters-level personnel requirements, which we discuss in more depth later in this report. DOD’s June 2018 plan takes steps toward reducing duplication and improving effectiveness and efficiency, as previously discussed. However, the plan has two weaknesses that could be mitigated with additional information from DOD. Specifically, DOD cannot be reasonably assured that its plan will reduce or better manage duplication and improve efficiency since (1) certain functions are excluded from the transfer to the DHA and (2) it is unclear, based on the information in the plan and supporting planning documents, how implementation of the plan will result in the achievement of the stated goal of reducing headquarters-level personnel, including contractor personnel, by 10 percent. As part of its approach for addressing the requirements of section 702 of the NDAA for Fiscal Year 2017, DOD excluded 16 medical functions from the transfer to the DHA. In a February 2018 Under Secretary of Defense for Personnel and Readiness memorandum, these functions were identified as being related to operational readiness and installation- specific missions. That memorandum and another memorandum from the Under Secretary of Defense for Personnel Readiness dated May 2018 listed 16 functions that DOD identified as operational readiness and installation-specific medical functions and that would therefore be excluded from the planned transfer to the DHA (see table 1). DOD cannot be reasonably assured that its plans are reducing or better managing duplication because DOD has not defined the functions or analyzed the potential for the 16 functions to be transferred to the DHA. These functions are not defined in the February or May 2018 memorandums or DOD’s plan. The two memorandums list only the functions and state that they are separate from MTF health care delivery services and MTF business operations. One of the memorandums explains that these functions are tied to organizing, training, and equipping personnel for operational readiness missions. These memorandums also do not explain the rationale used to determine that the 16 functions were different from the other MTF health care functions DOD plans to transfer to the DHA. Further, DOD did not provide any analysis or documentation regarding the decision to exclude these 16 functions in the supporting documentation that we reviewed, such as in the concepts of operations for the Assistant Secretary of Defense for Health Affairs, the DHA, the Army, the Navy, and the Air Force. According to senior-level officials from the Assistant Secretary of Defense for Health Affairs and the DHA, there was no formal analysis or documentation to support the decision. With respect to the exclusion of the transfer of the dental care function to the DHA, Assistant Secretary of Defense for Health Affairs and DHA senior-level officials stated that dental clinics serve only servicemembers, not retirees or family member beneficiaries. Therefore, dental care was considered to be an operational readiness function rather than a health care delivery function, according to these same officials. However, this statement is not completely in line with DOD information regarding overseas dental care and family member beneficiaries. According to DOD information regarding dental care overseas, family members of active- duty servicemembers can receive dental care from military dental clinics. As such, in some instances the delivery of dental care is not solely for ensuring the readiness of servicemembers. Further, senior-level officials from the Assistant Secretary of Defense for Health Affairs and the DHA acknowledged that transferring the dental care function from the military departments to the DHA could potentially reduce duplicative activities and result in more efficiencies. According to a senior-level DHA official, splitting health care and dental care results in two separate health care delivery organizations. Across the Military Health System there are approximately 247 (200 in the United States) dental clinics, which represent about a third of DOD’s facilities within the direct care system when including dental clinics, military hospitals, and ambulatory care clinics (i.e., approximately 679 facilities in total). Moreover, senior-level officials from the Assistant Secretary of Defense for Health Affairs and the DHA stated that by transferring a function from the military departments to the DHA, DOD reduces the number of managers of a function from four (i.e., at the Army, the Navy, the Air Force, and the DHA) to only one at the DHA. In our prior work, we have reported that agencies can act to improve the efficiency of their programs by maximizing the level of services provided for a given level of resources, as well as improving programs’ effectiveness in achieving their objectives. In particular, we have highlighted the need for agencies to define their mission, functions, activities, services, and processes when identifying fragmentation, overlap, and duplication among programs. Agencies should also assess how, if at all, the fragmented, overlapping, or duplicative functions are related and how they are being coordinated between agencies. Understanding this relationship will help inform decisions about whether and how to increase efficiency or reduce or better manage fragmentation, overlap, or duplication. Also, agencies should assess whether potential effects in areas such as program implementation, outcomes, and costs are positive or negative. Identifying the positive and negative effects of fragmentation, overlap, or duplication will help agencies determine whether or not actions to reduce or better manage the fragmentation, overlap, or duplication are economical and efficient. However, DOD has not fully determined whether opportunities exist to achieve additional savings due to the lack of analysis, including clear definitions, of the 16 functions that were excluded by DOD. According to senior-level officials from the Assistant Secretary of Defense for Health Affairs and the DHA, there are potential savings by transferring the 16 functions to the DHA, but these have not been adequately analyzed. Without defining and analyzing the 16 functions, DOD cannot assure decisionmakers that it has fully considered all opportunities for reducing or better managing duplication in its plan to transfer the administration of the MTFs to the DHA. As previously discussed, DOD’s plan identifies the functions that will transfer to the DHA. However, DOD’s plan and supporting documents do not provide details on how DOD established the 10-percent reduction of headquarters-level military, civilian, and contractor personnel by 2021, when the administration of the 457 MTFs is to have been transferred to DHA. The plan also states that DHA personnel will grow during each subsequent phase of the transition. Further, information in other related supporting documentation indicates that headquarters-level personnel will increase rather than decrease to achieve the 10-percent reduction goal. Lastly, DOD did not include information in the plan or in its supporting documents concerning contractor personnel reductions. Officials from the Army, the Navy, the Air Force, the DHA, and the Office of Cost Assessment and Program Evaluation could not identify for us what office within DOD established the 10-percent reduction goal. Our review of key planning documents—the concepts of operations for the Assistant Secretary of Defense for Health Affairs, the DHA, the Army, the Navy, and the Air Force—found that these documents also did not provide details for the 10-percent reduction of headquarters personnel. Specifically, although these documents included some information regarding personnel reductions, they did not include specific details concerning the 10-percent reduction of headquarters personnel. DOD states in the plan that the DHA will experience incremental growth in staffing during each phase of the transition in order to undertake its new responsibilities, but does not explain how it will achieve its 10-percent reduction goal given the projected growth. Further, DOD does not provide any data in the plan about how much the DHA will grow during each phase. Senior-level officials from the offices of the Assistant Secretary of Defense for Health Affairs and the DHA stated that there were no explicit restrictions in section 702 of the NDAA for Fiscal Year 2017 that would prohibit the DHA from increasing its number of personnel. However, section 702 does require that the Secretary implement section 1073c in a manner that reduces the number of members of the armed forces; civilian employees who are full-time equivalent employees; and contractors relating to the headquarters activities of the military health system, which includes the DHA. Further, the projected growth described in DOD’s plan is also consistent with a June 2018 DHA pre-decisional draft briefing concerning full-time equivalent positions based on current information provided by the military departments, which describes a transfer of personnel to the DHA from the military departments rather than a reduction in personnel. According to the briefing, full-time equivalents to support future DHA headquarters and intermediate management organizations would not lead to any reductions in personnel. On the contrary, the briefing states that full-time equivalents for military and civilian personnel would increase by 38 percent at the DHA and result in additional costs. A senior-level DHA official confirmed that the information in the briefing relates to a transfer of personnel from the military headquarters to the DHA for health care delivery, not a reduction in personnel that would result in no cost savings. The briefing also states that information related to current and future state full-time equivalent positions is misleading because contractor data, as well as other relevant personnel data, are not included. Regarding contractor data, DOD did not include any detailed information related to the reduction of contractor personnel in the plan. Specifically, information concerning contractor personnel reductions was not included in the figure or other parts of the section concerning headquarters-level personnel reductions. Overall, contractors are referenced only five times in the entire plan: Three of the references are simply repeating the language from the statutory requirement. Another reference reiterates that the DHA will assume management responsibilities for civilian and contractor personnel performing health care delivery functions and operations. The last reference from the section of the plan related to personnel reductions states that DOD is planning for headquarters personnel reductions, to include military, civilian, and contractor personnel. In reviewing the concepts of operations for the Assistant Secretary of Defense for Health Affairs, the DHA, the Army, the Navy, and the Air Force for details on contractor personnel, we found that most of these documents did not provide details regarding contractors. Four out of five of the aforementioned concepts of operations did not include information concerning contractors in the context of personnel reductions. Although the Assistant Secretary of Defense for Health Affairs’ concept of operations does include information about contractors in the context of personnel reductions, the information does not provide further details about DOD’s plans for this effort. According to DOD Directive 1100.4, Guidance for Manpower Management, it is DOD policy that personnel requirements are driven by workload and shall be established at the minimum levels necessary to accomplish mission and performance objectives. This directive states that personnel is a resource and that changes in personnel shall be preceded by changes to the programs, missions, and functions that require personnel resources. Additionally, the directive states that assigned missions shall be accomplished using the least costly mix of personnel (military, civilian, and contract) consistent with military requirements, among other considerations. The directive also states that military (active and reserve) and civilian manpower resources shall be programmed in accordance with validated personnel requirements, among others. Moreover, key change management practices concerning workforce reductions state that before implementing workforce reduction strategies, it is critical that agencies carefully consider how to strategically downsize the workforce and maintain the staff resources to carry out its mission. These same key change management practices also define “efficiency” as maintaining federal government services or outcomes using fewer resources (such as time and money) or improving or increasing the quality or quantity of services or outcomes while maintaining (or reducing) resources. However, DOD’s ability to develop an analytically-based goal for personnel reductions associated with the transfer of administration to DHA, a plan to achieve that goal given that it is projecting growth in personnel, and how contractors factor into its plan has been limited for two reasons. First, DOD has not validated headquarters-level personnel requirements. Second, DOD has not conducted a comprehensive review—a review that, per DOD’s own guidance, would involve establishing at minimum levels the requirements necessary to accomplish mission and performance objectives and reflect the consideration of the least costly mix of personnel (i.e., military, civilian and contract) consistent with military requirements, among other considerations, to meet the validated requirements. Senior-level officials from the offices of the Assistant Secretary of Defense for Health Affairs and the DHA stated that information regarding contractor personnel reductions was not included in the plan because DOD probably did not have these data. These same officials said that it is difficult to obtain contractor personnel data. As we previously noted, DOD has faced challenges with understanding DHA headquarters personnel requirements and composition. In 2015, we reported on DOD’s establishment of the DHA and on how, among other things, DOD could not determine DHA’s effect on Military Health System administrative and headquarters personnel levels. We found that the DHA had not completed the personnel requirements assessment process or developed a baseline estimate of personnel in the Military Health System before the DHA was created. As discussed previously, we made five recommendations, with which DOD concurred or partially concurred. As of January 2018, DOD had not taken action to fully address three of these recommendations. Of the three recommendations that had not been fully addressed, two relate directly to DHA personnel requirements. Specifically, we recommended the following: To provide decision makers with appropriate and more complete information on the continuing implementation, management, and oversight of the DHA, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to develop a comprehensive requirements assessment process that accounts for needed future skills through the consideration of potential organizational changes and helps ensure appropriate consideration of workforce composition through the determination of the final status of military personnel within the DHA. To provide decision makers with appropriate and more complete information on the continuing implementation, management, and oversight of the DHA, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to develop a plan for reassessing and revalidating personnel requirements as the missions and needs of the DHA evolve over time. Since the recommendations concerning DHA personnel requirements have not been fully addressed and DHA is in the middle of a significant organizational change, it would be timely for DOD to validate headquarters-level personnel requirements and conduct a comprehensive review to determine the appropriate mix of personnel. This validation and comprehensive review should occur prior to transferring authority, direction, and control of the MTFs to the DHA for the third phase, which, as previously noted, is scheduled to begin no later than October 1, 2020. In June 2018, DOD directed a review and validation of headquarters-level personnel requirements. The Under Secretary of Defense for Personnel and Readiness issued two memorandums concerning the review of headquarters-level personnel requirements. The June 7, 2018, memorandum directs the establishment of cross-service manpower teams to conduct a baseline review of DHA headquarters’ current and future personnel requirements. Similarly, the June 15, 2018, memorandum directs the establishment of a working group to determine the appropriate manning of all above MTF-level medical activities in the military departments. This memorandum also requires the working group to review and validate the results of the cross-services manpower teams’ assessment of DHA headquarters activities, among other requirements. Officials with the Office of the Under Secretary of Defense for Personnel and Readiness involved in these efforts said that the goal of the current review is to identify the DHA’s current and future baseline personnel requirements. However, according to these same officials, the review will not (1) validate personnel requirements because of time constraints, (2) identify potential personnel reductions, or (3) consider workforce composition. These officials also clarified that a comprehensive personnel requirements study would take a considerable amount of time and would generate more technical estimates of the work being performed. They said such a study would review major functions and subfunctions, as well as get down to the task level and analyze work processes, which would allow for making process improvement suggestions. In September 2018, the Office of the Under Secretary of Defense for Personnel and Readiness issued the report on DHA’s personnel requirements. The report stated that DHA personnel requirements would increase to support an expanded mission and included several recommendations one of which was to conduct a military essentiality review of DHA positions and functions. According to officials with the Office of the Under Secretary of Defense for Personnel and Readiness, each military department provided headquarters personnel data, which will be reviewed as part of the upcoming Program Budget Review cycle. Until DOD validates headquarters-level personnel requirements and conducts a comprehensive review that considers the least costly mix of personnel, DOD may not be able to achieve its goal of reducing headquarters-level personnel by 10 percent while maintaining the efficient and effective provision of healthcare services. Furthermore, Congress will lack important information to determine the extent to which the transfer of the administration of the MTFs to the DHA is being planned and implemented effectively and efficiently. Congress required DOD to provide a plan to transfer the administration of the MTFs from the military departments to the DHA. DOD provided a final implementation plan, which made significant changes to the administrative approach described in two of DOD’s initial interim plans. In its final plan, DOD addressed all of the elements of the statute. However, the plan did not provide details to demonstrate how DOD will reduce duplicative activities or headquarters-level personnel. Without defining and analyzing the 16 functions currently excluded from transfer to the DHA, validating headquarters-level personnel requirements, and conducting a comprehensive review to determine, per DOD guidance, the least costly mix of personnel, DOD and congressional decisionmakers are not positioned to know how, whether, and to what extent undertaking this significant reform effort will improve effectiveness and efficiency in the administration of the MTFs. We are making the following three recommendations to the DOD: The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with Director of the DHA and the Surgeons General of the military departments, define and analyze the 16 operational readiness and installation-specific medical functions currently excluded from transfer to the DHA to determine whether opportunities exist to reduce or better manage duplicative functions and improve efficiencies in the administration of the MTFs. (Recommendation 1) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with DHA Assistant Director for Health Care Administration and the Secretaries of the military departments, validate headquarters-level personnel requirements to determine that they are established at the minimum levels necessary— per DOD guidance—to accomplish missions and achieve objectives before transferring authority, direction, and control of the MTFs to the DHA for the third phase. (Recommendation 2) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with DHA Assistant Director for Health Care Administration and the Secretaries of the military departments, conduct a comprehensive review to identify the least costly mix—per DOD guidance—of military, civilian, and contractors needed to meet validated requirements—that is, to perform the functions identified at the DHA headquarters and intermediate management organizations and at the military departments’ headquarters and intermediate commands. Additionally, this comprehensive review should be completed before transferring authority, direction, and control of the MTFs to the DHA for the third phase. (Recommendation 3) In written comments reproduced in appendix II, DOD concurred with all three recommendations and noted the actions it was taking to address each recommendation. In response to our third recommendation, DOD noted that it has completed an extensive review of manpower requirements for the management structure of the DHA. The September 2018 report by the Office of the Under Secretary of Defense for Personnel and Readiness is a first step toward addressing our recommendation. The report provided initial information concerning DHA’s personnel requirements. As we noted in our report, however, DOD needs to identify the least costly mix—per DOD guidance—of military, civilian, and contractors once it has validated requirements for DHA. As an additional comment, DOD noted that since our draft report was provided for comment it has refined the estimated projected growth in full- time equivalents for military and civilian personnel at the DHA from 38 percent to 14 percent. In its comments, DOD stated that it continues to believe that it will achieve a 10 percent reduction. However, as we stated in this report, DOD has not demonstrated the extent to which its plan to transfer the MTFs to the DHA will lead to reductions in headquarters-level personnel. We are sending copies of this report to the appropriate congressional committees. We are also sending copies to the Secretary of Defense; the Under Secretary of Defense for Personnel and Readiness; the Assistant Secretary of Defense for Health Affairs; the Director, Cost Assessment and Program Evaluation; the Director, Defense Health Agency; the Surgeon General of the Army; the Surgeon General of the Navy; and the Surgeon General of the Air Force. If you or your staff have any questions concerning this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix III. The National Defense Authorization Act (NDAA) for Fiscal Year 2017 amended Chapter 55 of title 10, United States Code to include a new section: § 1073c Administration of Defense Health Agency and military medical treatment facilities. Section 1073c of title 10, United States Code, as amended by Pub. L. No. 115-91, §§ 713, 1081 (2017), and Pub. L. No. 115-232, § 711 (2018) reads as follows: § 1073c. Administration of Defense Health Agency and military medical treatment facilities (a) Administration of military medical treatment facilities. (1) In accordance with paragraph (4), by not later than September 30, 2021, the Director of the Defense Health Agency shall be responsible for the administration of each military medical treatment facility, including with respect to-- (A) budgetary matters; (B) information technology; (C) health care administration and management; (D) administrative policy and procedure; (E) military medical construction; and (F) any other matters the Secretary of Defense determines appropriate. (2) In addition to the responsibilities set forth in paragraph (1), the Director of the Defense Health Agency shall, commencing when the Director begins to exercise responsibilities under that paragraph, have the authority— (A) to direct, control, and serve as the primary rater of the performance of commanders or directors of military medical treatment facilities; (B) to direct and control any intermediary organizations between the Defense Health Agency and military medical treatment facilities; (C) to determine the scope of medical care provided at each military medical treatment facility to meet the military personnel readiness requirements of the senior military operational commander of the military installation; (D) to determine total workforce requirements at each military (E) to direct joint manning at military medical treatment facilities and intermediary organizations; (F) to address personnel staffing shortages at military medical (G) to select among service nominations for commanders or directors of military medical treatment facilities. (3) The military commander or director of each military medical treatment facility shall be responsible for-- (A) ensuring the readiness of the members of the armed forces and civilian employees at such facility; and (B) furnishing the health care and medical treatment provided at such facility. (4) The Secretary of Defense shall establish a timeline to ensure that each Secretary of a military department transitions the administration of military medical treatment facilities from such Secretary to the Director of the Defense Health Agency pursuant to paragraph (1) by the date specified in such paragraph. (5) The Secretary of Defense shall establish within the Defense Health Agency a professional staff to provide policy, oversight, and direction to carry out paragraphs (1) and (2). The Secretary shall carry out this paragraph by appointing the positions specified in subsections (b) and (c). (b) DHA Assistant Director. (1) There is in the Defense Health Agency an Assistant Director for Health Care Administration. The Assistant Director shall-- (A) be a career appointee within the Department; and (B) report directly to the Director of the Defense Health Agency. (2) The Assistant Director shall be appointed from among individuals who have equivalent education and experience as a chief executive officer leading a large, civilian health care system. (3) The Assistant Director shall be responsible for the following: (A) Establishing priorities for health care administration and management. (B) Establishing policies, procedures, and direction for the provision of direct care at military medical treatment facilities. (C) Establishing priorities for budgeting matters with respect to the provision of direct care at military medical treatment facilities. (D) Establishing policies, procedures, and direction for clinic management and operations at military medical treatment facilities. (E) Establishing priorities and between the military medical treatment facilities. (c) DHA Deputy Assistant Directors. (1) (A) There is in the Defense Health Agency a Deputy Assistant Director for Information Operations. (B) The Deputy Assistant Director for Information Operations shall be responsible for policies, management, and execution of information technology operations at and between the military medical treatment facilities. (2) (A) There is in the Defense Health Agency a Deputy Assistant Director for Financial Operations. (B) The Deputy Assistant Director for Financial Operations shall be responsible for the policy, procedures, and direction of budgeting matters and financial management with respect to the provision of direct care across the military health system. (3) (A) There is in the Defense Health Agency a Deputy Assistant Director for Health Care Operations. (B) The Deputy Assistant Director for Health Care Operations shall be responsible for the policy, procedures, and direction of health care administration in the military medical treatment facilities. (4) (A) There is in the Defense Health Agency a Deputy Assistant Director for Medical Affairs. (B) The Deputy Assistant Director for Medical Affairs shall be responsible for policy, procedures, and direction of clinical quality and process improvement, patient safety, infection control, graduate medical education, clinical integration, utilization review, risk management, patient experience, and civilian physician recruiting. (5) Each Deputy Assistant Director appointed under paragraphs (1) through (4) shall report directly to the Assistant Director for Health Care Administration. (d) Certain responsibilities of DHA Director. (1) In addition to the other duties of the Director of the Defense Health Agency, the Director shall coordinate with the Joint Staff Surgeon to ensure that the Director most effectively carries out the responsibilities of the Defense Health Agency as a combat support agency under section 193 of this title. (2) The responsibilities of the Director shall include the following: (A) Ensuring that the Defense Health Agency meets the the the commanders of operational needs of combatant commands. (B) Coordinating with the military departments to ensure that the staffing at the military medical treatment facilities supports readiness requirements for members of the armed forces and health care personnel. (C) Ensuring that the Defense Health Agency meets the military medical readiness requirements of the senior military operational commanders of the military installations. (e) ADDITIONAL DHA ORGANIZATIONS.—Not later than September 30, 2022, the Secretary of Defense shall, acting though the Director of the Defense Health Agency, establish within the Defense Health Agency the following: (1) A subordinate organization, to be called the Defense Health (A) led, at the election of the Director, by a director or commander (to be called the Director or Commander of Defense Health Agency Research and Development); (B) comprised of the Army Medical Research and Materiel Command and such other medical research organizations and activities of the armed forces as the Secretary considers appropriate; and (C) responsible for coordinating funding for Defense Health Program Research, Development, Test, and Evaluation, the Congressionally Directed Medical Research Program, and related Department of Defense medical research. (2) A subordinate organization, to be called the Defense Health (A) led, at the election of the Director, by a director or commander (to be called the Director or Commander of Defense Health Agency Public Health); and (B) comprised of the Army Public Health Command, the Navy–Marine Corps Public Health Command, Air Force public health programs, and any other related defense health activities that the Secretary considers appropriate, including overseas laboratories focused on preventive medicine, environmental health, and similar matters. (f) Definitions. In this section: (1) The term \"career appointee\" has the meaning given that term in section 3132(a)(4) of title 5. (2) The term \"Defense Health Agency\" means the Defense Agency established pursuant to Department of Defense Directive 5136.13, or such successor Defense Agency. In addition to the contact named above, Lori Atkinson, Assistant Director; Alexandra Gonzalez; Rebecca Guerrero; Mae Jones; Mary Jo LaCasse; Kirsten Leikem; Steven Putansu; and Sarah Veale made key contributions to this report.", "summary": "In fiscal year 2017, DOD provided health care to 9.4 million beneficiaries, including servicemembers, retirees, and their families at a cost of $43 billion. For more than a decade, partially in response to congressional mandates, DOD has worked to address inefficiencies in the Military Health System to control costs. To further achieve efficiencies, the NDAA for Fiscal Year 2017 required DOD to develop an implementation plan that addressed four elements related to transferring the administration of the MTFs to the DHA. DOD issued the plan in June 2018. The NDAA also included a provision for GAO to review the plan. GAO determined whether (1) DOD's plan included the statutory elements related to the transfer of administration of the MTFs to the DHA and (2) additional information would be useful to demonstrate that the plan will reduce or better manage duplication and improve efficiencies. GAO assessed DOD's plan against the required elements and, where appropriate, considered the extent to which the plan provided detailed information related to key change management practices identified in past GAO work. The Department of Defense's (DOD) June 2018 plan addressed the four statutory elements for the transfer of the administration of the military treatment facilities (MTFs) from the military departments to the Defense Health Agency (DHA). Specifically, the plan provided information on (1) how the DHA will take administrative responsibility of the MTFs; (2) efforts to eliminate duplicative activities; (3) efforts to maximize efficiencies in the DHA's activities; and (4) reductions of headquarters-level military, civilian, and contractor personnel. DOD dedicated most of the plan to describing the governance structure of the proposed administrative framework and to describing the timeline for a phased transfer of the approximately 457 MTFs to the DHA by October 1, 2021. Initially, DOD was to transfer responsibility for the administration of the MTFs to the DHA by October 1, 2018. However, Congress in the National Defense Authorization Act (NDAA) for Fiscal Year 2019 amended the law to allow, among other things, DOD to complete the transfer by September 30, 2021. DOD has taken key steps in its June 2018 plan to improve the effectiveness and efficiency of the administration of MTFs. However, DOD's plan has two weaknesses that could be mitigated with additional information. Specifically, DOD excluded 16 operational readiness and installation-specific medical functions from consideration for transfer to the DHA. DOD did not define or analyze the potential effect of excluding these functions, which include dental care, substance abuse, and occupational health. Senior officials from the DHA and the Assistant Secretary of Defense for Health Affairs acknowledged that transferring the dental care function, for example, from the military departments to the DHA could potentially reduce duplicative activities. DOD's plans to achieve the stated goal of reducing headquarters-level personnel, including contractor personnel, by 10 percent are unclear. In its June 2018 plan, DOD states that the DHA will experience personnel growth during each phase of the transition, but that it expects to reduce headquarters-level personnel by 10 percent by 2021. However, the plan does not provide specific details about how DOD will achieve the established goal of reducing headquarters-level personnel by 10 percent while the DHA experiences personnel growth. Further, the plan does not address whether and how contractor personnel factor into the reduction. This lack of clarity exists because DOD has not validated headquarters-level personnel requirements or conducted a comprehensive review to identify the least costly mix of military, civilian, and contractor personnel to meet the validated requirements. Until DOD takes action to resolve these two weaknesses, DOD will likely not be well positioned to reduce or better manage duplication and improve efficiencies, including reducing headquarters-level personnel across the Military Health System. Furthermore, Congress will lack important information to determine the extent to which the transfer of the administration of the MTFs to the DHA is being planned and implemented effectively and efficiently. GAO recommends that DOD define and analyze the 16 operational readiness and installation-specific medical functions for duplication, validate headquarters-level personnel requirements, and identify the least costly mix of personnel. DOD concurred with all three recommendations and noted actions it was taking to address each one.", "document_type": "gao"}
{"report": "Education administers federal student financial aid programs, including the William D. Ford Federal Direct Loan (Direct Loan) program, through the Office of Federal Student Aid. Education issues several types of loans under the Direct Loan program, including subsidized and unsubsidized loans. Prospective borrowers apply and are approved for loans through Education, which then disburses the loan through the borrowers’ school. Upon disbursement of funds, Education assigns each loan to a contracted loan servicer responsible for communicating information to borrowers while they are in school and when they enter repayment. Borrowers receive additional information about their loans and related rights and responsibilities through their loan’s promissory note, Education’s website, and mandatory entrance and exit counseling provided by their school. When borrowers enter repayment, generally 6 months after leaving school, they make payments directly to the assigned servicer. Education offers a variety of repayment plan options that can help Direct Loan borrowers avoid delinquency and default, including Standard, Graduated, Extended, and Income-Driven. Income-Driven Repayment plans can ease repayment by setting loan payment amounts as a percentage of a borrower’s income and extending the repayment period up to 25 years. Unlike Standard, Graduated, and Extended repayment plans, Income-Driven Repayment plans offer loan forgiveness at the end of the repayment term and monthly payments may be as low as $0 for some borrowers. Extending the repayment period may also result in some borrowers paying more interest over the life of the loan than they would under 10-year Standard repayment. In addition to making monthly payments more manageable and offering the potential for loan forgiveness, Income-Driven Repayment plans may also reduce the risk of default. For example, in 2015, we reported that borrowers in two such plans had substantially lower default rates than borrowers in the Standard repayment plan. Eligible borrowers may also temporarily postpone loan payments through deferment or forbearance. Several different types of deferment are currently available to borrowers, each with their own eligibility criteria. Under deferment, the interest generally does not accrue on subsidized loans, but it continues to accrue on unsubsidized loans. Eligible borrowers can also postpone or reduce loan payments through either a general or mandatory forbearance; however, interest on the loan continues to accrue in each type (see table 1). Most borrowers choose general forbearance, which, unlike most types of mandatory forbearance and deferment, can be issued over the phone with no supporting documentation. As of September 2017, $69.9 billion in outstanding Direct Loans was in general forbearance compared to $6.3 billion in mandatory forbearance, according to Education data. Education computes CDRs each year for all schools that enroll students who receive funds through the Direct Loan program. To compute a school’s CDR, Education divides the number of student loan borrowers in a CDR cohort—those entering repayment in the same fiscal year—who have defaulted on their loans in the initial 3 years of repayment by the total number of a school’s student loan borrowers in that CDR cohort (see fig. 1). The CDR does not hold schools accountable for borrowers who default after the 3-year period. Borrowers in deferment and forbearance are considered to be “in repayment” and current on their loans for the purpose of calculating a school’s CDR, even though borrowers in these loan statuses are not expected to make any monthly payments. For the 2014 CDR cohort, the national 3-year CDR was 11.5 percent, meaning 11.5 percent of borrowers who first entered repayment in fiscal year 2014 had defaulted on one or more loans by the end of fiscal year 2016. The national CDR has changed over time, peaking at 22.4 percent for the 1990 CDR cohort and declining to a historic low of 4.5 percent for the 2003 CDR cohort (see fig. 2). Beginning with the 2009 CDR cohort, Education switched from a 2-year measurement to a 3-year measurement as required by the Higher Education Opportunity Act. According to Education officials, there are several possible explanations for the general decrease in the national CDR from the 1990 cohort to the 2003 cohort. They include: 1) Education’s efforts to provide schools with default prevention training; 2) the loss of eligibility to participate in federal student aid programs and subsequent closure of many schools with chronically high CDRs in the early 1990s; 3) enactment of legislation in 1998 that increased the length of time a loan can go unpaid before being considered in default, which decreased the likelihood that a borrower would default within the CDR period; and 4) an increase in borrowers consolidating their loans while in school, an option that was eliminated in 2006. Schools with high CDRs may lose eligibility to participate in federal student aid programs. Specifically, Education generally excludes schools from participation in the Direct Loan program if their CDR is above 40 percent for a single year and from participation in the Direct Loan and Federal Pell Grant programs if their CDRs are 30 percent or greater for 3 consecutive years. Schools potentially subject to these sanctions can pursue an appeal. The CDR is the only borrower outcome measure used to determine eligibility for participation in federal student aid programs for all schools. Schools with high CDRs that do not cross these thresholds may also be subject to additional oversight. For example, schools are certified for up to 6 years to maintain eligibility to participate in federal student aid, but schools with high CDRs may only be granted certification for 2 years, according to Education policy. Education policy also prioritizes selection of schools with high CDRs for program review. Further, schools whose CDRs are equal to or exceed 30 percent for any cohort are required to create a Default Prevention Taskforce that develops and submits a default prevention plan to Education to reduce defaults, among other things. When borrowers do not make payments on their federal student loans, and the loans are in default, the federal government and taxpayers are left with the costs. Borrowers also face severe financial burdens when their federal student loans go into default. For example, upon default the entire unpaid balance of the loan and any accrued interest is immediately due. The amount owed may increase due to late fees, additional interest, and costs associated with the collection process, including court costs, collection fees, and attorney’s fees. The federal government also has tools to collect on defaulted student loans. For example, under the Treasury Offset Program, the federal government can withhold certain federal or state payments to borrowers, including federal or state income tax refunds and some Social Security benefits, to collect on defaulted student loans. The federal government can generally also garnish up to 15 percent of a defaulted borrower’s disposable pay and apply those funds toward the defaulted loan. There is no limit on how long the government can attempt to collect on defaulted student loans, and student loans are more difficult to eliminate in bankruptcy proceedings than other types of consumer debt. Some schools hire default management consultants to help them reduce their CDRs. Education classifies default management consultants as “third-party servicers” and generally has the authority to oversee the services they provide to schools and their students. Schools are required to notify Education when they enter into, modify, or terminate a contract with a third-party servicer. Based on concerns that a significant number of schools had not reported information on the third-party servicers they use as required, Education issued guidance to remind schools of the requirement in January 2015. In addition, Education requires third-party servicers to submit information about the services they provide to schools. As of June 2017, Education reported that it had information on 187 third-party servicers, including 48 that reported providing default management services. Schools must ensure that their third-party servicers, including default management consultants, comply with relevant federal regulations and program requirements. Education also requires third-party servicers to submit an annual compliance audit report that covers the administration of the federal student aid related services they perform to determine compliance with applicable statutes, regulations, and policies. To help manage their default rates, some schools hired default management consultants that encouraged borrowers with past-due student loans to postpone loan payments through forbearance, even when better borrower options may be available. The nine default management consultants we selected, which served over 1,300 schools, used various methods to contact borrowers and attempted to connect them with their loan servicer for assistance (see fig. 3). Seven of the nine participated in three-way conference calls with the borrower and the loan servicer. Further, one consultant visited past-due borrowers at their home to provide in-person loan counseling and connect them to their loan servicer. Income-Driven Repayment Plans May Be Better Options for Some Struggling Borrowers According to Education, postponing payments through forbearance may be appropriate for some borrowers who face temporary hardships. On the other hand, Income-Driven Repayment plans may be a better option for borrowers who are having difficulty repaying their loans for an extended period of time. These plans base monthly payments on income and family size, and payments may be as low as $0 for those who qualify. Income- Driven Repayment plans also feature the potential for forgiveness of remaining loan balances after 20 or 25 years of repayment. Interest generally continues to accrue on loans in both forbearance and Income-Driven Repayment. Under forbearance, accumulated interest that is not paid during the forbearance period will generally be added to the loan balance, resulting in higher monthly payments when forbearance ends. In contrast, the federal government does not charge the unpaid interest for up to 3 years for some borrowers repaying their loans on Income- Driven Repayment plans, and struggling borrowers on these plans are not generally expected to make higher monthly payments until their financial situation improves. In addition, GAO’s past work found that borrowers in Income-Driven Repayment had substantially lower rates of default than those in Standard repayment. GAO previously found that it is difficult for Education to estimate which borrowers have incomes low enough to benefit from or be eligible for Income-Driven Repayment plans because only borrowers who apply for these plans are required to submit income information to Education. Four consultants sent borrowers who were past due on their loans unsolicited emails and letters that included only a forbearance application and instructed borrowers to return the application to them instead of their loan servicer. Representatives of one consultant said that this practice was to ensure that borrowers completed the forms accurately. According to Education, the application provides an opportunity for borrowers to learn about other repayment and postponement options and the potential costs of forbearance. The application includes a statement informing borrowers about the option to request a deferment or Income-Driven Repayment plan and examples of the additional costs borrowers may incur as a result of interest that continues to accrue during forbearance. While this is correct, the application does not include details about these options; instead, it directs borrowers to Education’s website for more information. Borrowers who only receive a forbearance application may inaccurately assume that forbearance is their only or preferred option. Moreover, borrowers may miss the opportunity to learn about other, potentially more favorable repayment and postponement options from Education’s loan servicers, who are responsible for counseling borrowers and approving forbearance requests. One consultant included an inaccurate statement in letters it sent to borrowers who were past due on their loans. This consultant sent past-due borrowers forbearance applications with letters that inaccurately stated that the federal government can take away Supplemental Nutrition Assistance Program and Supplemental Security Income benefits when borrowers default on a federal student loan. Inaccurate information about the consequences of default could cause a borrower who depends on these benefits to feel undue pressure to choose forbearance, even when eligible for more favorable repayment and postponement options. Further, this consultant’s script for its representatives to use when calling borrowers who are past due on their loans referred exclusively to postponing loan payments. The script instructed representatives to tell borrowers “I am now going to conference you in with your loan servicer and they will process your forbearance over the phone.” Borrowers who hear such statements may feel undue pressure to choose forbearance. The script also instructed representatives to tell the loan servicer that the borrower they were about to speak with was requesting a forbearance. Further, representatives from this consultant were also instructed to tell borrowers to “stick to their guns” on the option they have selected before connecting the borrower with their loan servicer on a three-way call. One consultant previously offered borrowers gift cards as an incentive to put their loans in forbearance. Education has also previously identified the use of gift cards to steer borrowers toward forbearance over other available options. An internal review that Education conducted in 2012 and 2013 found that a chain of schools used gift cards to promote forbearance for purposes of lowering its CDR. According to Education’s findings, a borrower who had attended one of the schools stated that she was current in her payments but was offered a $25 gift card to apply for forbearance. Multiple borrowers included in Education’s review expressed the view that they were pressured or forced to apply for forbearance and were not made aware of other options, such as deferment or Income-Driven Repayment plans. Indeed, offering gift cards may steer borrowers toward forbearance over other available options. While the consultant that offered gift cards to borrowers to lower schools’ CDRs has discontinued this practice, and the school Education reviewed has since closed, these practices may have affected reported CDRs and could be used by other consultants and schools. Schools have a financial interest in preventing borrowers from defaulting within the first 3 years of repayment to ensure that their CDRs remain low enough to meet Education’s requirements for participating in federal student aid programs. Consultants also have a financial interest in preventing borrowers from defaulting during the 3-year CDR period. Eight of the nine consultants we selected did not have any school clients that paid them to contact borrowers who were past due on their loans outside the 3-year CDR period. In addition, four of the nine selected consultants were paid by their client schools based on the number of past-due borrowers they brought current on their loans during the CDR period, and representatives’ salaries or incentives at two of these consultants were calculated based on this as well. Some consultants have an incentive to encourage forbearance in particular as a strategy to prevent borrowers from defaulting within the 3- year CDR period in an effort to lower their client schools’ CDRs. This is because forbearance applications can be processed more quickly than other repayment or postponement options. Loan servicers can grant general forbearance based on a request from borrowers over the phone because there are no documentation requirements, whereas borrowers seeking deferment or an Income-Driven Repayment plan generally must submit a written application. According to Education officials, loan servicers are required to process Income-Driven Repayment plan applications within 15 business days. One consultant sent borrowers a letter that stated it could process a verbal forbearance in 5 minutes. The president of one school that contracted with a consultant that is paid based on the number of borrowers brought current told us that he did not care whether the consultant encouraged the use of forbearance as long as borrowers did not default within the 3-year CDR period and the consultant followed federal regulations. According to Education data, nearly 90 percent of the school’s borrowers were in forbearance during the 2013 CDR period. Consultant payment structures, as well as the difference in processing requirements between forbearance, deferment, and Income-Driven Repayment plans may create incentives for consultants to encourage forbearance over other repayment and postponement options. While forbearance can be a useful tool for helping borrowers avoid defaulting on their loans in the short term, it increases their costs over time and reduces the usefulness of the CDR to hold schools accountable. To understand the potential financial impact of forbearance during the first 3 years of repayment (the CDR period), we calculated the cost for a borrower with $30,000 in loan debt over 10 years in the Standard repayment plan with varying lengths of time in forbearance (see fig. 4). A borrower on the 10-year Standard repayment plan who did not spend any time in forbearance would pay $39,427 over the life of the loan. Spending all 3 years of the CDR period in forbearance would cost that borrower an additional $6,742, a 17 percent increase over spending no time in forbearance. One borrower we spoke with who took out $34,700 in loans and opted for forbearance accrued about $10,000 in interest in just over 3 years, an amount that the borrower said she would be paying off “for the rest of my days.” Further, the unpaid interest that accrues while a borrower’s loans are in forbearance may result in higher future monthly payments when the forbearance period ends. Borrowers who cannot make these higher monthly payments may eventually default. If schools’ consultants continue to encourage forbearance over other options that may be more beneficial, such as Income-Driven Repayment plans, some borrowers will continue to be at risk of incurring additional costs without any long-term benefits. Education officials and student loan experts we spoke with said that forbearance is intended to be a short-term option for borrowers facing financial difficulties lasting a few months to a year, such as unexpected medical expenses. Longer periods of forbearance, while not typically advantageous to borrowers, can be an effective strategy for schools to manage their CDRs. Specifically, spending 18 months or more—at least half of the CDR period—in forbearance reduces the potential for borrowers to default within the 3-year period (see fig. 5). This is because forbearance keeps borrowers current on their loans, and borrowers would not go into default until they had made no payments for an additional 360 days after the forbearance period ended. Indeed, according to our analysis of Education’s data for the 2013 CDR period, only 1.7 percent of borrowers who were in forbearance for 18 months or more defaulted within the 3-year CDR period, compared to 8.7 percent of borrowers who were in forbearance up to 18 months during this period, and 20.3 percent of borrowers who were not in forbearance during this period. Borrowers who default outside the 3-year CDR period will not negatively affect a school’s CDR. In an online presentation, representatives from one consultant highlighted that forbearance can be a tool for reducing a school’s CDR and stated that borrowers who postponed payments defaulted less often during the CDR period than other past-due borrowers based on a case study they conducted. According to our analysis of Education’s data, the percentage of borrowers whose loans were in forbearance for 18 months or more during the 3-year CDR period increased each year during the 5 cohorts we reviewed, doubling from 10 percent in the 2009 CDR cohort to 20 percent in the 2013 CDR cohort. During the same time period, the percentage of borrowers whose loans were in forbearance for any amount of time increased from 39 percent to 68 percent (see fig. 6). Further, borrowers in forbearance for 18 months or more defaulted in the year after the 3- year CDR period more often than they did during the CDR period. Specifically, 9.4 percent of these borrowers in the 2013 CDR period defaulted in the year following the CDR period, while only 1.7 percent defaulted in the first 3 years of repayment, suggesting that long-term forbearance may have delayed, not prevented, default for these borrowers. Reducing the number of borrowers in long-term forbearance and directing them toward other repayment or postponement options could help reduce the number of borrowers that later default and save the government money. For example, Education estimates that it will not recover a certain percentage of defaulted Direct Loan dollars even if repayment resumes. Specifically, for Direct Loans issued in fiscal year 2018, Education estimates that it will not recover over 20 percent of defaulted loans. These unrecovered defaulted loan amounts total an estimated $4 billion, according to our analysis of Education’s budget data. In addition to cost savings to the government, borrowers who avoid default would not have to face severe consequences, such as damaged credit ratings that may make it difficult to obtain credit, employment, or housing. In addition, the percentage of borrowers who made progress in paying down their loans during each CDR cohort—the repayment rate— decreased from 66 percent for the 2009 cohort to 46 percent for the 2013 cohort (see sidebar). We analyzed these data for a subset of schools with the largest CDR decreases from the 2009 to 2013 cohorts and found that as these schools’ CDRs improved, other borrower outcomes worsened (see app. II for more information about these schools). Specifically, for this subset of schools, the percentage of borrowers in long-term forbearance doubled, and the percentage of borrowers who made progress in paying down their loans during the CDR period decreased by half, suggesting that these schools may be encouraging forbearance as a default management strategy (see fig. 7). Education has acknowledged that when schools encourage borrowers to postpone loan repayment until the 3-year CDR period ends, it can have a distorting effect on the CDR. Borrowers who have postponed their payments through forbearance or deferment are considered to be “in repayment” for the purpose of calculating the CDR, even though they are not expected to make any payments on their loans while in these statuses. As a result, an increased use of forbearance, particularly long- term forbearance, could result in lower CDRs, and therefore fewer schools being sanctioned due to high CDRs. In July 1999, we reported that the CDR understates the actual number of borrowers who default. We suggested that Congress may wish to consider amending the Higher Education Act of 1965 to exclude borrowers with loans in deferment or forbearance at the end of the CDR period from schools’ CDR calculation and include these borrowers in a future CDR cohort after they have resumed making payments on their loans. Education’s Office of Inspector General made a recommendation to the agency to support similar amendments to the law in December 2003. For this report, we examined the impact that removing borrowers in long- term forbearance from the CDR calculation would have on schools’ reported CDRs. For the 2013 cohort, 35 schools from our population had CDRs of 30 percent or higher. When we excluded from our population borrowers who spent 18 months or more in forbearance and did not default within the 2013 CDR period, we found 265 additional schools that would potentially have had a CDR of 30 percent or higher (see app. II for more information about these schools). Schools with CDRs at this level for 3 consecutive years may lose eligibility to offer their students Direct Loans and Pell Grants. Further, 21 of the 265 schools would potentially have had a CDR greater than 40 percent, making them potentially subject to immediately losing eligibility to offer Direct Loans. Of the 265 schools that would have potentially been subject to sanctions based on our alternative calculation, 261 received a combined $2.7 billion in Direct Loans and Pell Grants in academic year 2016-2017. The CDR is a key tool for holding schools accountable for borrower outcomes and protecting borrowers and the federal government from the costs associated with default. The substantial growth in the percentage of borrowers spending at least half of the CDR period in forbearance reduces the CDR’s usefulness to hold schools accountable. This presents risks to the federal government and taxpayers, who are responsible for the costs associated with high rates of default, and to borrowers who may benefit from other repayment or postponement options. Since the way the CDR is calculated is specified in federal law, any changes to its calculation would require legislation to be enacted amending the law. Strengthening the usefulness of the CDR in holding schools accountable, such as by revising the CDR calculation or using other accountability measures to complement or replace the CDR, could help further protect both borrowers and the billions of dollars of federal student aid funds the government distributes each year. Education’s ability to oversee the strategies that schools and their consultants use to manage CDRs is limited because there are no requirements governing the interactions that schools and their consultants have with borrowers once they leave school. Education requires that schools provide certain information to borrowers about their student loans when they begin and finish school but does not oversee schools’ or their consultants’ communications with borrowers after they leave school. According to Education, the Higher Education Act does not contain explicit provisions that would allow it to impose requirements governing communications that schools and their consultants may have with borrowers who have left school. As noted earlier, we found that some default management consultants, in seeking to help schools lower their CDRs, provided borrowers inaccurate or incomplete information or offered gift cards to encourage forbearance over other repayment or postponement options that may be more beneficial to the borrower. According to Education officials, borrowers are protected from such practices because loan servicers are required to inform borrowers of all available repayment options upon processing a forbearance. Education officials also said that performance-based contracts provide loan servicers an incentive to keep borrowers in repayment. However, a Consumer Financial Protection Bureau report found that borrowers may not be informed about the availability of other repayment plans and instead may be encouraged by their loan servicers to postpone payments through forbearance, which may not be in borrowers’ best interests. Further, some consultant practices we identified, such as instructing borrowers to return the forbearance application to the consultant and remaining on three-way calls with the loan servicer and the borrower, may undermine the role of the loan servicer. Education officials also said that borrowers should be aware of their repayment options because schools are required to inform borrowers of these options through exit counseling when they leave school. However, in 2015 we found gaps in borrowers’ awareness of repayment options. Education’s Office of Federal Student Aid has a strategic goal to help protect borrowers and families from unfair, deceptive, or fraudulent practices in the student loan marketplace. Without clear requirements regarding the information that schools and their consultants provide to borrowers after leaving school, Education cannot effectively oversee schools’ default management strategies. Further, without such requirements, Education cannot ensure that schools and consultants are providing borrowers with the information they need to make informed decisions to manage their loan costs and avoid future default. The limited information Education reports annually to the public about schools that face sanctions for high CDRs overstates the extent to which schools are held accountable for their default rates. Specifically, Education does not report the number of schools that successfully appealed CDR sanctions or the number of schools ultimately sanctioned. For example, with the release of the 2013 CDRs in 2016, Education publicly reported that 10 schools were subject to sanctions, but did not publicly report that 9 schools appealed their sanctions and 8 were successful in their appeals and were thereby not sanctioned (see fig. 8). Office of Management and Budget guidelines call for federal agencies to ensure and maximize the usefulness of information they disseminate to the public. Federal internal control standards call for effective communication with external stakeholders. The number of schools subject to sanction has declined over time—from a high of 1,028 schools in fiscal year 1994 to 10 schools in fiscal year 2017 (see app. III). In addition, unpublished sanction data reveal that a small fraction of borrowers who defaulted on student loans attended schools that have been sanctioned. For example, two schools were ultimately sanctioned in 2016 and accounted for 67 of the nearly 590,000 borrowers whose defaulted loans were included in schools’ 2013 CDRs. By reporting only the number of schools subject to sanction and not those actually sanctioned, Education’s data make it difficult for Congress and the public to assess the CDR’s usefulness in holding schools accountable. Preventing student loan defaults is an important goal, given the serious financial risks default poses to borrowers, taxpayers, and the federal government. The CDR, which is specified in federal law, is intended to hold schools accountable when significant numbers of their borrowers default on their student loans during the first 3 years of repayment. However, the metric in its current form creates incentives for schools that may result in unintended consequences for some borrowers. Schools have an interest in preventing their students from defaulting during the CDR period to ensure that they can continue to participate in federal student aid programs, and some schools contract with private consultants to work with borrowers who have fallen behind on their loan payments. Although some of these consultants have recently changed their communications to borrowers, others continue to provide inaccurate or incomplete information to encourage past-due borrowers to choose forbearance over other repayment options. While postponing payments through forbearance may help struggling borrowers avoid default in the near term, it increases borrowers’ ultimate repayment costs and does not necessarily put borrowers on a path to repaying their loans. Moreover, including borrowers who spend 18 months or more in forbearance in the CDR calculation reduces the CDR’s ability to hold schools accountable for high default rates since long periods of forbearance appear to delay—not prevent—default for some borrowers. Absent a statutory change, schools and their consultants seeking to keep CDRs below allowable thresholds will continue to have an incentive to promote forbearance over other solutions that could be more beneficial to borrowers and less costly to the federal government and its taxpayers. Education plays an important role in overseeing schools and their default management consultants to ensure that they are held accountable and student loan borrowers are protected. However, because Education asserts that it lacks explicit statutory authority to establish requirements regarding the information that schools and consultants provide to borrowers after they leave school, Education does not hold them accountable for providing accurate and complete information about repayment and postponement options. In addition, public information on CDR sanctions is important for assessing the usefulness of the CDR to hold schools accountable. Yet, Education’s practice of reporting the number of schools potentially subject to sanction without reporting the number of schools ultimately sanctioned following the appeals process limits transparency about the CDR’s usefulness for Congress and the public. We are making the following two matters for congressional consideration: Congress should consider strengthening schools’ accountability for student loan defaults, for example, by 1) revising the cohort default rate (CDR) calculation to account for the effect of borrowers spending long periods of time in forbearance during the 3-year CDR period, 2) specifying additional accountability measures to complement the CDR, for example, a repayment rate, or 3) replacing the CDR with a different accountability measure. (Matter 1) Congress should consider requiring that schools and default management consultants that choose to contact borrowers about their federal student loan repayment and postponement options after they leave school present them with accurate and complete information. (Matter 2) The Chief Operating Officer of the Office of Federal Student Aid should increase the transparency of the data Education publicly reports on school sanctions by adding information on the number of schools that are annually sanctioned and the frequency and success rate of appeals. (Recommendation 1) We provided a draft of this product to the Department of Education for review and comment. Education’s comments are reproduced in appendix IV. We also provided relevant report sections to the Consumer Financial Protection Bureau and the nine default management consultants for technical comment. The Consumer Financial Protection Bureau provided technical comments, which we incorporated as appropriate. Education agreed with our recommendation to increase transparency of school sanction data. In its response, Education stated that it makes a significant amount of CDR data publicly available on its website. For example, Education posts CDRs and underlying data for each school for which the rates are calculated and lists schools subject to sanctions as a result of their CDRs. Education also stated that beginning with the release of fiscal year 2015 CDRs, it would provide additional information on its website indicating whether schools subject to sanctions have submitted appeals and the disposition of such appeals. As we recommended in our draft report, Education should also publicly report the number of schools ultimately sanctioned each year. Our draft report included a recommendation for Education to seek legislation to strengthen schools’ accountability for student loan defaults. Education disagreed with this recommendation, asserting that from a separation of powers perspective, it has a responsibility to implement, and not draft, statutes. Education stated that if GAO believes such legislation is needed, it would be best addressed as a matter to Congress. We agree that, as an executive agency, Education is responsible for implementing laws as enacted. However, it is important to note that the President has the “undisputed authority” to recommend legislation to the Congress and the Office of Management and Budget within the Executive Office of the President has outlined procedures for executive branch agencies to submit proposed legislation. Indeed, in making this recommendation, we intended that Education seek legislation through any of the practices used by executive branch agencies in communicating with Congress. In a recent example, both the President’s Budget Request and Education’s Congressional Budget Justification for Fiscal Year 2019 seek a change in the statutory allocation formula for the Federal Work-Study program to focus funds on institutions enrolling high numbers of Pell Grant recipients. Nevertheless, in light of Education’s disagreement with our draft recommendation, and the importance of strengthening schools’ accountability for student loan defaults, we have converted the recommendation into a Matter for Congressional Consideration. Our draft report also included a recommendation for Education to require that schools and default management consultants that contact borrowers about repayment and postponement options after they leave school present accurate and complete information. Education agreed that institutions should provide accurate and complete information about all repayment options. It also stated that institutions should allow the borrower’s stated preference for any given repayment option to guide the ultimate direction of the conversation, and that the information provided should be free from financial incentive. However, Education asserted that it “cannot impose requirements on schools and their consultants without further authority.” Education clarified in a follow-up communication that the Higher Education Act does not contain “explicit provisions” under which it could require schools (and their consultants) to include specific content in the information that they choose to provide to borrowers after the borrowers leave school, but did not address whether there was any other authority under which it could take action in this area. Instead, Education noted that it could provide information to schools and their consultants on best practices in this area. We continue to believe that schools and their consultants should be required to ensure that any information they present to borrowers about repayment and postponement options after they leave school is accurate and complete. As we stated in our draft report, without clear requirements in this area, Education cannot ensure that schools and consultants provide borrowers with the information they need to make informed decisions to manage their loan costs and avoid future default. In light of this, and Education’s response to our draft recommendation, we have converted our recommendation into a Matter for Congressional Consideration. In its comments, Education inaccurately asserted that our findings should be viewed in light of a limited scope. As stated in the draft report, we analyzed trends in forbearance, repayment, and default using national data from Education for the five most recent CDR cohorts for a population of over 4,000 schools. To determine how schools work with borrowers to manage their CDRs, we reviewed the practices of a nongeneralizable sample of nine default management consultants that served over 1,300 schools. These schools accounted for over 1.5 million borrowers in the 2013 CDR cohort. The five consultants that provided inaccurate or incomplete information about forbearance or offered gift cards served about 800 schools, which accounted for over 875,000 borrowers in the 2013 CDR cohort. For each of the consultants, as stated in our draft report, we reviewed documentation including training materials, internal policies and procedures, and examples of correspondence they send to borrowers. Finally, Education inaccurately asserted that we based our findings on a small sample of interviews with 11 borrowers and officials from 3 schools and 4 consultants. We conducted these interviews to better understand borrowers’ loan experiences and the strategies that schools and their consultants use to manage the CDR, and the illustrative interview examples we include in our report do not form the basis of any of our findings or recommendations. In addition, Education commented that the report did not consider the extent to which borrowers enter Income-Driven Repayment plans during the 3-year CDR period or the substantial growth in borrowers participating in these plans over the past several years. Education suggested that such data would be important to consider in determining whether there has been an overreliance on forbearance in the past, and if so, whether any problems in this area are being remedied by the availability of Income- Driven Repayment plans. We have incorporated additional information regarding the increase in borrowers participating in Income-Driven Repayment plans in response. As Education noted in its comments, our draft report acknowledged that increased participation in these plans may have been a factor in the observed increase in overall rates of forbearance since it is common for loan servicers to place borrowers in administrative forbearance while processing applications for Income- Driven Repayment plans. However, as explained in our draft report, since administrative forbearance for this purpose should be for 60 days or less it would not explain the twofold increase in the percentage of borrowers in forbearance for 18 months or longer from CDR cohort years 2009 to 2013. Education also stated that while our report included an example of the additional interest cost incurred by a borrower using forbearance, it did not discuss the potential additional interest costs associated with other repayment options, such as Income-Driven Repayment plans. Education noted that these options could be more costly than forbearance in some instances and all options have consequences for borrowers. We acknowledged in our draft report that interest continues to accrue on loans in Income-Driven Repayment and that the monthly payments of some borrowers on these plans may not be high enough to pay down any principal during the first 3 years of repayment. However, as stated in our draft report, Income-Driven Repayment plans, unlike forbearance, offer borrowers the potential for loan forgiveness after 20 or 25 years of repayment. We have incorporated additional details about the potential costs of these and other repayment plans based on Education’s comments. The potential consequences that Education highlighted in its comments further illustrate the importance of ensuring that borrowers receive accurate and complete information to help them make informed decisions to manage their loan costs and avoid default. In response to our findings regarding communication practices of some default management consultants, Education stated that the draft report did not acknowledge that the forbearance application that selected consultants send to borrowers provides an opportunity for borrowers to learn about other repayment options and the potential costs of forbearance. We have incorporated additional information regarding the information included on the application. Although the form mentions deferment and Income-Driven Repayment, it does not describe these options; instead, it directs borrowers to Education’s website for more information. Therefore, we maintain that borrowers who only receive a forbearance application may inaccurately assume that forbearance is the only or preferred option. Further, Education commented that the draft report did not examine what effect, if any, consultants may have had in encouraging borrowers to seek consecutive forbearances since borrowers can remain in forbearance for no longer than 12 months before they have to reapply. Education also suggested that comparing the use of forbearance at schools that hired consultants that encouraged borrowers to postpone payments with those that did not would have provided a better understanding of the potential impact of such practices. While these topics were beyond the scope of our objectives for this report, Education may wish to explore them in support of its goals to protect borrowers and mitigate risks in the federal student aid programs. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Education, the Director of the Consumer Financial Protection Bureau, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This appendix discusses in detail our methodology for addressing (1) how schools work with borrowers to manage schools’ cohort default rates (CDR), and how these strategies affect borrowers and schools’ accountability for defaults; and (2) the extent to which the Department of Education (Education) oversees the strategies schools and their default management consultants use to manage schools’ CDRs and informs the public about its efforts to hold schools accountable. We conducted this performance audit from May 2016 to April 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To determine how schools work with borrowers to manage their cohort default rates, we examined the practices of companies that schools contract with to help them lower their CDRs. Specifically, we selected a nongeneralizable sample of 9 of the 48 default management consultants on file with Education as of December 2016. To select the 9 consultants, we obtained lists of client schools from Education and reviewed websites for each of the 48 consultants to determine the services each company offered. Some companies offered an array of services to schools, while others focused exclusively on default management. We selected our nongeneralizable sample of 9 consultants by prioritizing those with large numbers of client schools, those with a specific focus on default management, or those with unique default management practices based on our review of their websites. These 9 companies served over 1,300 schools. These schools accounted for over 1.5 million borrowers in the 2013 CDR cohort. We reviewed documentation from the 9 consultants on the strategies they use to reduce borrower defaults during the CDR period; their organizational structure; products and services offered; current client schools; internal training materials; contracts and agreements with schools; methods of compensation for employees responsible for outreach to student loan borrowers; internal policies and procedures; and examples of correspondence (e.g., emails, letters, and repayment applications) with borrowers. Based on the information received from these consultants, we cannot determine how many borrowers were contacted or received correspondence from these companies. However, the consultants we spoke to generally indicated that the materials they provided to us were used for all or most of their school clients. To learn more about the strategies schools and default management consultants use to help schools manage their CDRs, we conducted interviews with managers at 4 of the 9 consultants. We also interviewed employees responsible for working with student loan borrowers to discuss the procedures they use to contact or counsel borrowers on loan repayment options. We selected these 4 consultants by prioritizing those that provided default management services to large numbers of client schools, or had unique default management practices based on website reviews. To determine how schools work with borrowers to manage schools’ CDRs we selected a nongeneralizable sample of 12 schools for review based on data from Education that suggested that they had successfully lowered their CDRs from the 2009 through 2013 cohorts through forbearance. This sample informed our selection of borrowers. We emailed borrowers who attended these 12 schools and requested interviews with them, and selected 3 of the 12 schools for interviews with school officials and document requests. To select the 12 schools, we analyzed CDRs for the 2009-2013 cohorts from Education’s Cohort Default Rate Database; 3-year forbearance rates for fiscal years 2009-2012 from Education’s Annual Risk Assessment data; and 3-year repayment rates for fiscal years 2009-2014 from Education’s College Scorecard data. We selected the 12 schools from the population that had a CDR calculated for 2013. We excluded schools whose 2013 CDR was calculated using a different formula that Education uses for schools with fewer than 30 borrowers entering repayment in a particular cohort. To be considered for selection, schools had to have had CDRs of 25 percent or above for cohort years 2009-2013 and also be in the following: 1) top 20 percent of year-to-year decreases in CDR; 2) top 20 percent of year-to-year increases in 3-year forbearance rates; or 3) top 20 percent of 3-year forbearances that resulted in default after the 3- year CDR period ended. This analysis resulted in a list of 312 schools, which we randomized within strata based on combinations of institutional control (public, nonprofit, and for-profit), maximum length of degree programs offered (less than 4-year or 4-year and above), and school size (fewer than 1,000 borrowers entering repayment in a given fiscal year and 1,000 or more borrowers entering repayment in a given fiscal year). We removed schools that had fewer than 1,000 borrowers entering repayment in a given fiscal year to mitigate the wide variations in forbearance rates and CDRs that may occur at smaller schools. Finally, we judgmentally selected a total of 12 schools from across the remaining strata, choosing the schools from each stratum in the randomized order. We conducted interviews with officials at 3 of these schools (public, nonprofit, and for-profit) and reviewed documentation on the strategies they use to reduce borrower defaults during the CDR period. To examine how default management strategies may affect borrowers, we obtained record-level data from Education’s National Student Loan Data System (NSLDS) related to the 12 schools we focused on in our review, including data on all loans that entered repayment from fiscal years 2011-2014 and contact information for the borrowers that took out these loans. We weighted the sample toward borrowers whose loans were in deferment, forbearance, or were consolidated during the CDR period or defaulted after the CDR period. We then randomly selected about 6,500 of these borrowers and emailed them a request to discuss their student loan repayment experience with us. We received replies from 49 borrowers and interviewed 11 of them that we thought may have been contacted by their school or a default management consultant. We generally selected borrowers for interviews in the order they replied to us. We also prioritized borrowers whose email responses included student loan experiences that were relevant to our objectives, such as receiving communication from their school about student loan repayment and postponement options. We were not able to interview borrowers who did not provide phone numbers or who provided phone numbers but did not respond to our calls. To determine how schools’ default management strategies affect borrowers and the CDR, we analyzed school-level data from Education on borrowers with loans that were included in schools’ official CDR calculations for the 2009 through 2013 cohorts. We selected the 2009 cohort because it was the first cohort held accountable for the 3-year CDR. The 2013 cohort was the most recent CDR available at the time of our analysis. We identified the year borrowers entered repayment using the same logic that Education does for calculating the CDR. A borrower with multiple loans from the same school whose loans enter repayment during the same cohort fiscal year was included in the formula only once for that cohort fiscal year. We excluded schools whose CDR was calculated using a different formula that Education uses for schools with fewer than 30 borrowers entering repayment in a particular cohort. For the population of 4,138 schools that had a CDR calculated for 2013 and a subset of 364 schools that had CDR decreases of 10 or more percentage points from the 2009 to 2013 cohorts, we analyzed cohort default rates (cohorts 2009-2013); the percentage of borrowers who were in forbearance for any length of time during their first 3 years in repayment (cohorts 2009-2013); the percentage of borrowers who were in forbearance for 18 or more months during their first 3 years in repayment (cohorts 2009-2013); the percentage of borrowers who paid down at least $1 of the principal loan amount during the first 3 years of repayment (cohorts 2009-2013); and the percentage of borrowers who were in forbearance for varying lengths of time during their first 3 years in repayment and then defaulted in the year following the CDR period (2013 cohort). We also calculated an alternative CDR for each of these 4,138 schools, in which we excluded borrowers who spent 18 or more months in forbearance during the 2013 cohort and did not default during the CDR period from their school’s CDR calculation. We analyzed how many schools would have potentially exceeded the 30 percent and 40 percent CDR thresholds for the 2013 cohort and calculated the total amount of Direct Loans and Pell Grants that these schools received in academic year 2016-2017. We did not estimate the number of schools that could become ineligible to participate in federal loan programs under this alternative methodology because such schools would be entitled to an appeal and sanctionable thresholds may change with the advent of new methodologies of calculating the CDR. Further, schools may change their default management strategies in response to an alternative CDR. In addition, we assessed the CDR against government standards for internal control for identifying and responding to risks and goals and objectives in the Office of Federal Student Aid’s Fiscal Year 2015-2019 Strategic Plan. Additionally, we analyzed data from Education’s Integrated Postsecondary Education Data System on sector and program length for these 4,138 schools, as well as for certain subsets of these schools (for more information, see app. II). To assess the reliability of the data elements we analyzed for our study, we (1) performed electronic testing of required data elements; (2) reviewed existing information about the data and the systems that produced them; and (3) interviewed agency officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purposes of this report. To determine the extent to which Education oversees the strategies schools and their default management consultants use to manage schools’ CDRs and informs the public about its efforts to hold schools accountable, we reviewed relevant federal laws, regulations, guidance, and internal documentation from Education on how it oversees schools and default management consultants practices as they relate to the CDR and how it implements and reports CDR sanctions. To better understand how CDRs are used in Education’s oversight of schools, we reviewed relevant regulations and interviewed Education officials responsible for administering program review, recertification for eligibility for federal student aid, and oversight of the CDR including default prevention. We assessed Education’s oversight activities against goals and objectives in the Office of Federal Student Aid’s Fiscal Year 2015-2019 Strategic Plan, government standards for internal control for communicating with stakeholders, and Office of Management and Budget guidelines for disseminating public information. To help us understand how the default management strategies used by schools and default management consultants affect borrowers and reported CDRs, we interviewed individuals with expertise on federal student loans. Specifically, we interviewed experts from federal agencies including the Consumer Financial Protection Bureau and Education’s Office of Inspector General. We also interviewed experts from the Association of Community College Trustees, the Career Education Colleges and Universities, the Center for American Progress, The Institute for College Access & Success, Harvard’s Project on Predatory Student Lending, the Illinois Attorney General Office, and Young Invincibles. Appendix II: Sector and Program Length of Schools with Selected Characteristics Schools whose cohort default rates (CDR) were calculated using a different formula that Education uses for schools with fewer than 30 borrowers entering repayment in a particular cohort were excluded from this analysis. Schools were included in this analysis if their CDR decreased by 10 percentage points or more from the 2009 to 2013 CDR cohorts. Foreign schools include schools that are eligible to participate in the Direct Loan program and are located outside the United States. In addition to the contact named above, Kris Nguyen and Debra Prescott (Assistant Directors), Brian Schwartz (Analyst-in-Charge), Alex Galuten, Raheem Hanifa, John Karikari, Kirsten Lauber, Jeffrey G. Miller, John Mingus, Jeff Tessin, Khristi Wilkins, and Stephen Yoder made key contributions to this report. Additional assistance was provided by Susan Aschoff, Rachel Beers, James Bennett, Deborah Bland, Jason Bromberg, Alicia Cackley, Marcia Carlsen, David Chrisinger, William Colvin, Sheila McCoy, Arthur Merriam, Jessica Orr, Ellen Phelps Ranen, Phillip Reiff, Barbara Steel-Lowney, and Christopher Zbrozek.", "summary": "As of September 2017, $149 billion of nearly $1.4 trillion in outstanding federal student loan debt was in default. GAO was asked to examine schools' strategies to prevent students from defaulting and Education's oversight of these efforts. This report examines (1) how schools work with borrowers to manage default rates and how these strategies affect borrowers and schools' accountability for defaults; and (2) the extent to which Education oversees the strategies schools and their default management consultants use to manage schools' default rates. GAO analyzed Education data on student loans that entered repayment from fiscal years 2009–2013, the most recent data at the time of this analysis; reviewed documentation from Education and a nongeneralizable sample of nine default management consultants selected based on the number of schools served (about 1,300 schools as of March 2017); reviewed relevant federal laws and regulations; and interviewed Education officials. According to federal law, schools may lose their ability to participate in federal student aid programs if a significant percentage of their borrowers default on their student loans within the first 3 years of repayment. To manage these 3-year default rates, some schools hired consultants that encouraged borrowers with past-due payments to put their loans in forbearance, an option that allows borrowers to temporarily postpone payments. While forbearance can help borrowers avoid default in the short-term, it increases their costs over time and reduces the usefulness of the 3-year default rate as a tool to hold schools accountable. At five of the nine selected default management consultants (that served about 800 of 1,300 schools), GAO identified examples when forbearance was encouraged over other potentially more beneficial options for helping borrowers avoid default, such as repayment plans that base monthly payments on income. Based on a review of consultants' communications, GAO found four of these consultants provided inaccurate or incomplete information to borrowers about their repayment options in some instances. A typical borrower with $30,000 in loans who spends the first 3 years of repayment in forbearance would pay an additional $6,742 in interest, a 17 percent increase. GAO's analysis of Department of Education (Education) data found that 68 percent of borrowers who began repaying their loans in 2013 had loans in forbearance for some portion of the first 3 years, including 20 percent that had loans in forbearance for 18 months or more (see figure). Borrowers in long-term forbearance defaulted more often in the fourth year of repayment, when schools are not accountable for defaults, suggesting it may have delayed—not prevented—default. Statutory changes to strengthen schools' accountability for defaults could help further protect borrowers and taxpayers. Education's ability to oversee the strategies that schools and their consultants use to manage their default rates is limited. Education's strategic plan calls for protecting borrowers from unfair and deceptive practices; however, Education states it does not have explicit statutory authority to require that the information schools or their consultants provide to borrowers after they leave school regarding loan repayment and postponement be accurate and complete. As a result, schools and consultants may not always provide accurate and complete information to borrowers. Further, Education does not report the number of schools sanctioned for high default rates, which limits transparency about the 3-year default rate's usefulness for Congress and the public. Congress should consider strengthening schools' accountability for student loan defaults and requiring that the information schools and consultants provide to borrowers about loan repayment and postponement options be accurate and complete. GAO recommends that Education increase transparency of reporting on default rate sanctions. Education agreed with our recommendation.", "document_type": "gao"}
{"report": "Fraud and “fraud risk” are distinct concepts. Fraud—obtaining something of value through willful misrepresentation—is a determination to be made through the judicial or other adjudicative system, and that determination is beyond management’s professional responsibility. Fraud risk exists when individuals have an opportunity to engage in fraudulent activity, have an incentive or are under pressure to commit fraud, or are able to rationalize committing fraud. Although the occurrence of fraud indicates there is a fraud risk, a fraud risk can exist even if actual fraud has not yet been identified or occurred. When fraud risks can be identified and mitigated, agencies may be able to improve fraud prevention, detection, and response. Managers of federal programs maintain the primary responsibility for enhancing program integrity and managing fraud risks. Those who are effective at managing their fraud risks collect and analyze data and identify fraud trends and use data and trends to improve fraud risk management activities. Implementing effective fraud risk management processes is important to help ensure that federal programs fulfill their intended purpose, funds are spent effectively, and assets are safeguarded. The Fraud Risk Framework provides a comprehensive set of leading practices that serve as a guide for agency managers developing or enhancing efforts to combat fraud in a strategic, risk-based manner. The Fraud Risk Framework is also aligned with Principle 8 (“Assess Fraud Risk”) of the Standards for Internal Control. It is designed to focus on preventive activities, which generally offer the most cost-efficient use of resources since they enable managers to avoid a costly and inefficient “pay-and-chase” model of recovering funds from fraudulent transactions after payments have been made. The leading practices in the Fraud Risk Framework are organized into four components—commit, assess, design and implement, and evaluate and adapt—as depicted in figure 1. Legislation and guidance has increasingly focused on the need for program managers to take a strategic approach to managing risks, including fraud. FRDAA was enacted to improve federal agency controls and procedures to assess and mitigate fraud risks, and to improve agencies’ development and use of data analytics for the purpose of identifying, preventing, and responding to fraud. FRDAA requires agencies to establish financial and administrative controls that incorporate the Fraud Risk Framework’s leading practices, including 1. conducting an evaluation of fraud risks and using a risk-based approach to design and implement financial and administrative control activities to mitigate identified fraud risks; 2. collecting and analyzing data from reporting mechanisms on detected fraud to monitor fraud trends, and using that data and information to continuously improve fraud-prevention controls; and 3. using the results of monitoring, evaluation, audits, and investigations to improve fraud prevention, detection, and response. Further, agencies are required to annually report to Congress on their progress in implementing the act for each of the first 3 fiscal years after its enactment. FRDAA required OMB, in consultation with the Comptroller General, to establish guidelines for agencies that incorporate leading practices from the Fraud Risk Framework as well as to establish a working group that shares best practices in fraud risk management. In addition, the working group is required to submit a plan to develop a federal interagency data analytics library for fraud risk management. This working group was also required to consult with the Offices of Inspector General and federal and nonfederal experts on fraud risk assessments, financial controls, and other relevant matters as well as to meet not fewer than four times per year. See figure 2 for additional details on FRDAA’s requirements and implementation timeline. Agencies’ steps to manage fraud risks at the agency-wide level—and in response to FRDAA—are at varying stages of planning and implementation, according to our survey of agencies subject to the act. In our survey, we asked the 72 agencies subject to FRDAA to characterize (1) the overall status of their efforts to plan for and implement the act as “not started,” “started but not mature,” or “mature” and (2) whether they regularly undertook specific fraud risk management activities prior to and after FRDAA’s enactment. With respect to overall status, most surveyed agencies (85 percent) indicated that they have at least started planning how they will meet FRDAA requirements (started or mature), and about 78 percent indicated that they have also started or are mature in their efforts to implement the requirements. Fewer agencies, however, characterized either their planning or implementation efforts as “not started” (about 15 and 22 percent, respectively). See figure 3 for agency responses on their FRDAA planning and implementing efforts. While most agencies indicated they have taken planning and implementation steps, agencies varied in the extent to which they indicated undertaking specific fraud risk management activities required by FRDAA at the agency-wide level, according to our survey results. We asked agencies whether they were currently performing key fraud risk management activities at the agency-wide level. The fraud risk management activities identified in the survey were an abbreviated version of the FRDAA requirements for agencies to establish financial and administrative controls, which included (1) conducting an evaluation of fraud risks and using a risk-based approach to design and implement financial and administrative control activities to mitigate identified fraud risks; (2) collecting and analyzing data from reporting mechanisms on detected fraud to monitor fraud trends and using that data and information to continuously improve fraud-prevention controls; and (3) using the results of monitoring, evaluation, audits, and investigations to improve fraud prevention, detection, and response. Most agencies (about 86 percent) indicated they use the results of monitoring, evaluation, audits, and investigations to manage fraud risk. Fewer agencies (about 63 percent) indicated they collect fraud-related data for prevention. Agencies also varied in the frequency with which they perform certain activities. For example, of the agencies that indicated that they collect fraud-related data for prevention, 44 percent indicated they do so regularly, while 18 percent indicated that they do so but not on a regular basis. See figure 4 for additional information on the frequency with which agencies indicated they perform fraud risk management activities related to FRDAA requirements for financial and administrative controls. The majority of agencies we surveyed indicated that they were engaged in a variety of fraud risk management activities before FRDAA’s enactment, but a larger number indicated action in each of these activities since the law was enacted. For example, 86 percent of agencies indicated they used findings from monitoring, auditing, or evaluation of fraud risk activities after the enactment of FRDAA, compared with 79 percent of agencies that indicated they used such findings before FRDAA. See figure 5 for a comparison of the number of agencies reporting that they undertook fraud risk management activities before and after the enactment of FRDAA. To identify relationships among survey responses associated with progress implementing elements of FRDAA and fraud risk management practices, we considered direction and strength of correlations between those questions. Agencies that indicated that they have started implementing FRDAA (85 percent) also reported higher use of some key fraud risk management activities, according to our analysis of the survey data. For example, agencies that indicated their implementation efforts were “mature” or “started but not mature” indicated at higher rates that they conduct risk-based evaluations of fraud risks and collect fraud- related data for prevention since the enactment of FRDAA. As mentioned, these activities are FRDAA requirements and are leading practices in the Fraud Risk Framework. These agencies also indicated at higher rates that they incorporated fraud risk activities into broader ERM, as directed by OMB Circular A-123. Further, while most (89 percent) agencies indicated having a designated entity for managing fraud risk, consistent with one leading practice identified in the Fraud Risk Framework, fewer (74 percent) have designated an entity specifically for FRDAA implementation. Agencies that indicated they had a designated entity for implementing FRDAA indicated that they were at a mature stage of FRDAA implementation more often than agencies without such an entity. Each of the 24 CFO Act agencies reported on their progress implementing FRDAA in their fiscal year 2017 annual financial reports to Congress, as FRDAA requires, but the reporting varied in completeness and detail. FRDAA specifies that, beginning in fiscal year 2017 and for the following 2 fiscal years, agencies must include the following 11 elements in their reports: Agencies must report their progress implementing the financial and administrative controls required to be established by the agency, which include (1) conducting an evaluation of fraud risks and using a risk-based approach to design and implement financial and administrative control activities to mitigate identified fraud risks; (2) collecting and analyzing data from reporting mechanisms on detected fraud to monitor fraud trends and using that data and information to continuously improve fraud-prevention controls; (3) using the results of monitoring, evaluation, audits, and investigations to improve fraud prevention, detection, and response; (4) implementing the fraud risk principle as described in the Standards for Internal Control; and (5) implementing the OMB Circular A-123 section related to leading practices for managing fraud risk. Agencies must report their progress identifying risks and vulnerabilities to fraud. These include (6) payroll, (7) beneficiary payments, (8) grants, (9) large contracts, and (10) purchase and travel cards. Agencies must report their progress (11) establishing strategies, procedures, and other steps to curb fraud. In August 2017, OMB updated its financial-reporting guidance in Circular A-136, Financial Reporting Requirements, with a section on FRDAA reporting requirements, including the reporting elements specified in the act. While the reporting requirements in FRDAA and OMB’s guidance list three categories of information, as noted above, we broke out the unique requirements in each category for our assessment. As a result, our analysis of the completeness of agencies’ annual financial reports is based on whether they contain each of 11 specific reporting elements. See appendix I (table 2) for additional information about these reporting elements. The 24 CFO Act agencies each included fraud-reduction sections in their annual financial reports as FRDAA requires but, at times, the completeness and detail of reporting was limited because some reports did not completely address all of the elements specified in the act. Four agencies reported on all of the specified elements, 19 agencies reported on more than half of the specified elements, and 1 agency reported on fewer than half of the specified elements, according to our analysis. For example, each of the 24 CFO Act agencies reported on their progress in establishing financial and administrative fraud controls required by FRDAA and OMB Circular A-123, but 7 agencies did not report on progress in implementing the fraud risk principle in the Standards for Internal Control. In addition, some agencies did not report on their progress in identifying risks and vulnerabilities with respect to payroll, beneficiary payments, and other elements specified in the act. Specifically, 12 of the CFO Act agencies did not report on payroll, 11 did not report on beneficiary payments, 5 did not report on grants, 9 did not report on large contracts, and 7 did not report on purchase and travel cards. See figure 6 for an analysis of the inclusion of required FRDAA reporting elements in agency reports. Variation in reporting on progress in identifying specific risks and vulnerabilities could result from some agencies’ determinations about their applicability to the agency. For example, some agencies that participated in our roundtable discussion noted that grant risks are not applicable to their agency because they do not have grant programs. However, this would not explain some areas of risk that are applicable to all agencies, but were not reported, such as payroll. As discussed later in this report, variation in reporting on progress in identifying specific risks and vulnerabilities may also be partly due to some agencies’ uncertainty about what information must be reported. The reports also varied in terms of detail provided about agencies’ efforts, including specific actions taken to implement elements of FRDAA. For example, one agency reported that its efforts to comply with the fraud risk principle in the Standards for Internal Control included implementing enterprise risk management (ERM) and establishing a policy for having a common risk assessment tool to ensure consistency across the agency and to determine appropriate mitigation strategies for risks identified in all programs. Conversely, another agency reported that it updated an annual entity-level control assessment to comply with this principle, but the agency did not describe how this update achieved compliance. Without this detail in the report, it is not possible to determine the extent of the agency’s implementation progress, as we describe later in the report. Further, most (16 of the 24 CFO Act agencies) included details about financial fraud risks but did not address nonfinancial fraud risks. For example, one agency reported it had low fraud risk and, as such, did not implement any new controls in response to FRDAA. As support, the agency provided examples of identifying no or limited financial fraud risks, and concluded that it did not have fraud risks to address. The agency did not discuss nonfinancial fraud. However, a 2016 GAO report identified this agency as having vulnerabilities to nonfinancial fraud that present national security risks. In addition, a 2017 report recommended that two agencies responsible for a program with national security–related responsibilities conduct joint fraud risk assessments to obtain comprehensive information on inherent fraud risks that may affect program integrity; provide reasonable assurance that their controls mitigate those risks; and ensure that fraud-prevention efforts target the areas of highest risk. However, one of these agencies did not mention nonfinancial fraud in its report. Further, neither agency identified this program in their report. As mentioned in the Fraud Risk Framework, nonfinancial fraud, such as fraudulently obtained credentials, can potentially facilitate other crimes related to national security such as international terrorism and drug trafficking. In addition, a leading practice of the Fraud Risk Framework is that managers consider nonfinancial effects of fraud, such as those related to the program’s reputation and compliance with laws, regulations, or standards. As discussed later in this report, these limitations in agency reporting may be partly due to limited guidance provided by OMB to agencies regarding the level of detail and type of information that should be included in the reports. Agencies identified challenges undertaking some fraud risk management activities required by FRDAA, according to our analysis of survey and roundtable responses. Top identified challenges were generally related to staffing and resources, among other things. These challenges may affect agencies’ ability to implement leading practices from the Fraud Risk Framework. Some roundtable participants also noted strategies for mitigating some of these challenges. The factors agencies most frequently indicated as great or moderate challenges in undertaking fraud risk management activities include the following: Availability of resources. Agencies most frequently noted the availability of resources, such as staffing and funding to conduct fraud risk management activities, as a challenge to managing fraud risk. About 75 percent of agencies indicated in their surveys that this was a great or moderate challenge. Agencies that participated in our roundtable discussion identified similar “bandwidth” concerns related to staffing. For example, one agency noted the ability of staff to manage multiple responsibilities—such as conducting fraud risk management activities in addition to daily program-related activities— as a top challenge, especially within smaller units of the agency. Some agencies at the roundtable discussion told us that having the authority to use program-integrity funding for fraud risk management would help provide necessary resources to undertake fraud risk management activities required by FRDAA. However, one agency noted that this may not be a viable solution for all agencies, since not all agencies may receive additional program-integrity funding to conduct fraud risk management activities. Limited tools and techniques for data analytics. Most agencies (about 68 percent) indicated that limitations in having and using tools and techniques for data analytics were a great or moderate challenge, according to our survey. Using data analytics to manage fraud risk is a leading practice in the Fraud Risk Framework. While one agency at our roundtable discussion told us that the agency does not have software to assist staff in performing data analytics, other agencies suggested leveraging free or existing resources to gain access to and use data tools. For example, one agency representative described the usefulness of the Department of the Treasury’s Do Not Pay Business Center. This agency representative noted that the Department of the Treasury can proactively analyze agency data it has received and share it with agencies. Another agency suggested that agencies ask their shared service providers to provide data analytics, provide insight, and benchmark against other agencies. Lack of available expertise. The availability of staff with expertise to conduct fraud risk management activities also presents challenges for agencies. Leading practices in the Fraud Risk Framework include designating an antifraud entity that serves as the repository of knowledge on fraud risks and controls and increasing managers’ and employees’ awareness of potential fraud schemes through training and education. About 56 percent of agencies we surveyed, however, identified availability of staff expertise as a great or moderate challenge. Agencies that identified this as a challenge also more frequently indicated that they experience some other challenges associated with FRDAA implementation, such as understanding FRDAA requirements and implementation time frames; reporting on implementation progress in the annual financial reports; and sufficiency of other information or tools to aid in implementation. During the roundtable discussion, some agencies also described having a staffing gap where data-analytic skills were concerned. In response to this challenge, one agency moved its centralized antifraud unit to a newly created, more-experienced unit within the agency to increase the antifraud unit’s capacity to conduct data- analytics reviews. Access to data and information. A majority of agencies also identified having access to data to look for fraud or fraud indicators as a challenge. About 55 percent of agencies indicated that access to data is a great or moderate challenge to their ability to implement fraud risk activities. Agencies that participated in our roundtable discussion also told us that access to data is a key challenge associated with implementing FRDAA requirements. For example, one agency stated that the Privacy Act presents a challenge to data matching that may limit agencies’ ability to share data with one another, such as Social Security numbers involved in potentially fraudulent activity that could cut across multiple agencies. This challenge is not new. In our July 2013 report on using data analytics for oversight and law enforcement and in our March 2017 report on using data analytics to address fraud and improper payments, we reported on similar perceived challenges from other agencies and organizations regarding data sharing among agencies. Some agencies at the roundtable discussion also stated that they did not receive information from their respective Office of Inspector General that would help them manage fraud risks and implement FRDAA. The Fraud Risk Framework highlights the role of the Office of Inspector General in agencies’ fraud risk management activities. According to the framework, the Office of Inspector General itself should not lead or facilitate fraud risk assessments, in order to preserve its independence when reviewing the program’s activities. However, the framework notes that program managers and their Office of Inspector General should collaborate and communicate to help improve understanding of fraud risks and identify emerging fraud risks, in order to proactively enhance fraud-prevention activities. While one agency at the roundtable discussion identified the lack of information from their Office of Inspector General limiting their ability to address fraud risks, some agencies appear to be reaching out to their respective Offices of Inspector General for this information. We spoke with the Council of the Inspectors General on Integrity and Efficiency, which comprises representatives of Offices of Inspector General in the executive branch. During the Council of the Inspectors General on Integrity and Efficiency meeting, representatives from three agency Inspectors General told us that their agencies reached out to them to discuss fraud, such as how an agency can use databases to look for fraud. At least one representative expected to coordinate with the representative’s agency to strengthen internal controls as the agency continues to implement FRDAA. OMB has taken steps to establish guidelines and a working group for agencies, as required by FRDAA, but limited guidelines and working- group coordination hindered some agencies’ implementation of the act. Specifically, OMB issued guidelines for agencies to implement FRDAA’s requirement to establish controls and report on their progress and has established a FRDAA working group, but agencies indicated the need for additional guidance and involvement in working-group activities. Our analysis of survey responses, roundtable discussion results, and agencies’ annual financial reports indicates that (1) agencies had mixed perspectives on the usefulness of OMB’s guidelines for agencies to establish controls; (2) limited details in OMB’s reporting guidelines contributed to CFO Act agencies’ incomplete and insufficiently detailed annual financial reports; and (3) agencies had challenges implementing FRDAA in part due to their lack of involvement in and lack of communication from the working group. In addition to FRDAA, OMB has issued guidance on other government-wide reform and burden-reduction initiatives that could shape how agencies address FRDAA implementation, such as reforms that may change the structure of agencies and related programs or how agencies collect data used in managing fraud risks. While it is still too early to determine the effect of these broader initiatives on agencies’ efforts to implement FRDAA, we have previously reported that broader reform efforts can be leveraged by OMB and agencies to address the high-risk areas and government-wide challenges that present vulnerabilities to fraud, waste, abuse, and mismanagement. To comply with FRDAA, OMB updated existing guidelines for agencies to establish financial and administrative controls to manage fraud risks, but agencies indicated having challenges with the usefulness of these guidelines, according to our survey and roundtable discussion results. Specifically, OMB incorporated guidelines to meet FRDAA requirements into its July 2016 update of Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control, within 90 days of enactment, as required by the act. This particular update of Circular A-123 introduced requirements for agencies to implement ERM and integrate with existing internal control capabilities to improve mission delivery, reduce costs, and focus corrective actions on key risks. The update to Circular A-123 also included a discussion of the Fraud Risk Framework and aligned internal control processes with the 2014 update to the Standards for Internal Control—such as the reference to the fraud risk principle (Principle 8)—which OMB staff stated provided agencies with a broad context for why fraud risk management is expected of agencies. According to OMB staff, including the reference to the Fraud Risk Framework in the circular met the FRDAA requirement to issue guidelines for agencies to establish financial and administrative controls to identify and assess fraud risks. The guidelines have a section on “Managing Fraud Risks in Federal Programs” that encourages agencies to develop the same financial and administrative controls that are listed in FRDAA requirements. This section also directs agencies to adhere to the leading practices described in the Fraud Risk Framework as part of their efforts to effectively design, implement, and operate an internal control system that addresses fraud risks. However, based on our review of the guidance, because FRDAA is never mentioned in the guidelines, there is a risk that agencies may not be aware that the guidelines directly apply to implementing FRDAA’s requirement to establish financial and administrative controls. In addition, OMB’s guidelines provide limited information related to steps that agencies should take to implement FRDAA’s requirement to establish financial and administrative controls, according to our review of the guidelines. Agencies indicated having mixed views on the sufficiency of OMB’s guidelines. For example, 65 percent of the agencies surveyed indicated that OMB’s Circular A-123 guidelines were moderately or very useful. However, 40 percent of the agencies surveyed also identified the sufficiency of OMB’s guidelines as a great or moderate challenge in implementing the act. Among other things, these challenges included agencies’ uncertainty about how ERM and FRDAA requirements differ, given that OMB included the guidelines for managing fraud risk as a subsection of ERM requirements. These challenges contributed to agencies’ lack of clarity, among other things, on the actions they should take to implement FRDAA, as described below. Challenges using OMB guidelines to implement FRDAA’s requirement to establish controls. Some agencies indicated that using OMB guidelines for FRDAA implementation was a challenge, according to our analysis of survey responses. Specifically, 40 percent of agencies indicated the sufficiency of the guidelines was a great or moderate challenge to their implementation efforts. CFO Act agencies reported this challenge more often than non–CFO Act agencies (61 and 30 percent, respectively). Selected Agency Officials’ Perspectives on Office of Management and Budget (OMB) Fraud Reduction (FRDAA) and Data Analytics Act of 2015 Guidelines “What does compliance mean specifically when it comes to FRDAA?” “aving looked at other guidance that’s come out of OMB, particularly like the DATA Act or even ERM [enterprise risk management], there was lots of guidance. . . . In this particular case I think it has not been as robust” Lack of guidance and unclear requirements were also identified as top challenges in our roundtable discussion on implementation of FRDAA required controls. For example, some roundtable participants stated that clearer requirements, such as information on what activities would be considered compliant with the act, would be helpful to better implement FRDAA. In particular, two agencies identified grants and contracts as an area where additional guidance on managing fraud risks would be helpful. In contrast, a theme of the roundtable discussion was that there were trade-offs in having clarity on the objectives and having the flexibility to tailor requirements to different programs. One roundtable participant said that agencies had different definitions of fraud and that it would be difficult to create standardized tools that met every agency’s needs. In order to better understand what steps they should take to implement the controls required by FRDAA, two roundtable participants sought out alternative sources of information to determine whether they were complying with Circular A-123, such as a previously issued GAO report on the Fraud Risk Framework. Other roundtable participants described using non-OMB guidance to implement FRDAA, such as the ERM playbook developed by the CFO Council and Performance Improvement Council, and materials developed by the Association of Certified Fraud Examiners. While relying on other sources of information can be helpful, agencies that do not have knowledge of or access to additional resources such as these may not have sufficient information to effectively implement the act. This point is underscored by the 40 percent of agencies that identified the sufficiency of OMB’s guidance as a great or moderate challenge to their implementation of FRDAA. Selected Agency Officials’ Perspectives on Office of Management and Budget Fraud Reduction and Data Analytics Act of 2015 (FRDAA) Guidelines “I would like some clarification on the intent of , like what will it achieve that the other A-123 or ERM [enterprise risk management] is not achieving?” Uncertainty about the difference between ERM and FRDAA requirements. Many agencies are leveraging existing ERM processes to implement fraud risk activities, according to our survey results, but OMB guidelines were unclear on the relationship between FRDAA and ERM requirements, according to our review of the guidelines and roundtable discussion responses. Under ERM, agencies are required to assess the full spectrum of an organization’s risks, and identify those that are enterprise-level risks. For enterprise risks, agencies are expected to rate those risks in terms of impact and build internal controls to monitor and assess the risk developments at various time points and incorporate risk awareness into the agencies’ culture and operations. Our survey results indicate that more agencies (56 percent) are currently incorporating fraud risk activities into broader ERM compared with before FRDAA enactment in June 2016 (34 percent). Additionally, some roundtable participants stated that they leveraged their existing ERM process and teams to implement FRDAA’s control requirements. While Circular A-123 directs agencies to assess fraud risks as part of a broader assessment of enterprise risk, it does not provide information on how ERM and fraud risk management requirements differ. For example, it does not clarify that FRDAA encompasses a broad set of actions that agencies must take to manage fraud risks, regardless of whether the fraud risk is identified as an enterprise risk. Additionally, Circular A-123 does not specify how to implement the strategies identified in the Fraud Risk Framework within the context of ERM. According to the circular, managers should adhere to the leading practices identified in the framework and are responsible for determining the extent to which the leading practices are relevant to their program. Managers are also responsible for tailoring the practices to align with the program’s operations. While the Fraud Risk Framework does state that the leading practices can be tailored, it enumerates four components and overarching concepts that are necessary for an effective risk management approach. These four components of the framework— commit, assess, design and implement, and evaluate and adapt— collectively encompass the control activities for managing fraud risks and, as outlined in the framework and Standards of Internal Control, should be present in some form to be effective. Therefore, even if agency officials identify fraud risks in a particular program that are not determined to be enterprise-level risks, the officials are still responsible for designing and implementing controls to address them and evaluating and adapting improvements to these controls over time, in line with the Fraud Risk Framework requirements. However, OMB staff informed us that if a fraud risk does not rise to the level of an enterprise risk for an agency in the ERM process, the agency may not go through all of the steps outlined in the Fraud Risk Framework or required by FRDAA to assess and respond to that risk. The Fraud Risk Framework acknowledges that agencies may use initiatives like ERM efforts to assess their fraud risks, but it does not eliminate the separate and independent fraud risk management requirements of FRDAA. In response to our draft report, OMB staff stated that other parts of Circular A-123 helped to fulfill their requirement to establish guidelines for agencies to establish financial and administrative controls. According to OMB, if agencies identify fraud risks that are not discussed in ERM, they will still be addressed by the broader risk management requirements in Circular A-123. These other sections of Circular A-123 existed prior to FRDAA and therefore, were not developed in response to FRDAA’s requirement that OMB establish guidelines for agencies. However, our review of Circular A-123 found that there are some references to managing fraud risks that are in alignment with the spirit of the financial and administrative controls identified in FRDAA. For example, other sections of Circular A-123 describe requirements for agencies to develop a risk profile and state that agency risk profiles must include an operational objective related to administrative and major program operations, including financial and fraud objectives. Further, agencies should identify the existing management process that will be used to implement and monitor proposed actions to address the risks. However, according to Circular A-123, these sections of the document define management’s responsibilities for ERM, which is focused on enterprise level risks. Further, these sections of Circular A-123 do not encourage agencies to incorporate the leading practices outlined in the Fraud Risk Framework to manage their fraud risks, as required by FRDAA. According to OMB staff, if agencies identify fraud risks that are not discussed in ERM, they will still be addressed by the broader risk management requirements in Circular A-123. These other sections of Circular A-123 existed prior to FRDAA and therefore were not developed in response to OMB’s requirement to provide guidance on FRDAA. However, our review of Circular A-123 found that there are some references to managing fraud risks that are in alignment with the spirit of the financial and administrative controls identified in FRDAA. For example, other sections of Circular A-123 describe requirements for agencies to develop a risk profile and state that agency risk profiles must include an operational objective related to administrative and major program operations, including financial and fraud objectives. Further, agencies should identify the existing management process that will be used to implement and monitor proposed actions to address the risks. However, according to Circular A-123, these sections of the document define management’s responsibilities for ERM, which is focused on enterprise-level risks. Further, these sections of Circular A-123 do not encourage agencies to incorporate the leading practices outlined in the Fraud Risk Framework to manage their fraud risks, as required by FRDAA. In addition, OMB staff stated that they believe that, along with Circular A-123, the Standards for Internal Control and the Fraud Risk Framework provide all the guidance that agencies need to implement and comply with FRDAA. However, based on the results of our survey and roundtable, we informed OMB that agencies reported experiencing confusion about the similarities and differences between FRDAA and other requirements, including ERM. According to OMB staff, Circular A- 123 and its focus on ERM is the appropriate place for the FRDAA guidelines because fraud is one type of risk an agency might face. However, OMB staff noted that it is the agencies’ responsibility to determine how to implement the act’s requirements in a way that aligns with the agency’s mission, and accordingly does not have immediate plans to update Circular A-123 to provide more-detailed guidelines for agencies to implement the financial and administrative controls required by FRDAA. The Standards for Internal Control state that management should implement control activities through policies. Documentation of responsibilities through policies and periodic review of control activities contribute to the design, implementation, and operating effectiveness of control activities. In addition, management should externally communicate the necessary quality information to achieve the entity’s objectives. These standards are practices that can assist any entity that is providing guidance to agencies with ensuring that intended objectives are accomplished. To better understand the type and level of detail in guidance that agency managers need to implement management controls, OMB and other similar oversight bodies often seek input and comments from agencies on draft guidance. In this case, OMB staff has not provided evidence that it consulted with agencies on whether the update to Circular A-123 met their needs in implementing FRDAA. While OMB staff stated they held three solicitations for agency comments on a draft update of Circular A-123 prior to FRDAA’s enactment, they did not obtain input from agencies on whether the updates provided the guidance agencies needed to implement the controls in FRDAA’s final enacted requirements. Without input from agencies, OMB does not have the information it needs to determine what additional guidance agencies need to effectively implement the controls required by the act. In addition, without clarifying that FRDAA’s requirements must be addressed for all fraud risks— including those that agencies may have assessed and determined are not enterprise-level risks—agencies may not follow through on the additional steps of designing, implementing, evaluating, and improving controls for their remaining fraud risks. Lastly, without additional detailed guidelines for implementing FRDAA’s control requirements, agencies will continue to lack clarity on the actions they should take to effectively implement the act. OMB updated existing guidelines to include a section on FRDAA reporting requirements, but did not include enough information to effectively assist agencies in producing complete and detailed reports, according to our analysis of annual financial reports and survey and roundtable responses. FRDAA directs agencies to report to Congress on the progress of FRDAA implementation in their annual financial reports for each of the 3 fiscal years after enactment. Although FRDAA does not require OMB to establish guidelines for agencies to comply with the act’s reporting obligations, OMB generally provides guidance to support agencies’ annual financial-reporting requirements in Circular A-136, Financial Reporting Requirements, and accordingly updated this guidance to include a section on FRDAA reporting requirements first in August 2017 and again in July 2018. There were no significant changes to the FRDAA section of Circular A-136 in the July 2018 update. Agencies are to include in their annual financial reports to Congress their progress in: (1) implementing the financial and administrative fraud controls as required by FRDAA, the fraud risk principle in the Standards for Internal Control, and the OMB Circular A-123 section related to leading practices for managing fraud risk; (2) identifying risks and vulnerabilities to fraud, including with respect to payroll, beneficiary payments, grants, large contracts, and purchase and travel cards; and (3) establishing strategies, procedures, and other steps to curb fraud. However, as previously discussed, our analysis of the 24 CFO Act agencies’ annual financial reports found that many reports issued in 2017—the first year of reporting—were incomplete and lacked detail. Some agencies did not report on their progress in identifying risks and vulnerabilities with respect to payroll, beneficiary payments, and other elements specified in the act and did not address nonfinancial fraud risks. In addition, according to our survey results, some agencies considered reporting on implementation progress in the annual financial reports a challenge. Specifically, 31 percent of agencies indicated that reporting was a great or moderate challenge, see figure 7. Further, some of our roundtable participants indicated that they needed more detailed guidance on what should be reported to comply with FRDAA. In the absence of more-detailed guidance from OMB, some agencies turned to each other for help. For example, some roundtable participants indicated that they looked at other agencies’ annual financial reports to see what they were reporting. While relying on other agencies’ reports can be helpful, agencies may be reviewing incomplete information based on our review of the annual financial reports, and may not have appropriate examples of how FRDAA information should be reported. OMB’s guidance to agencies on FRDAA reporting did not include information on the level of detail agencies should report. The FRDAA section of Circular A-136 is a near-exact replication of the reporting elements listed in FRDAA and specifies the period in which agencies are to report on their progress implementing FRDAA. According to OMB staff, they included the content of FRDAA verbatim in Circular A-136 because the reporting requirements are outlined in the act. However, the act provides high-level information on what should be included in agency reports, not operational guidance on how to address the reporting requirements, which is typically outlined in executive guidance to agencies. Further, OMB staff informed us that they instructed agencies to provide a status update of fraud-reduction efforts undertaken in the final quarter of fiscal year 2016 through fiscal year 2017, but did not provide agencies with any specific guidance on how detailed that reporting should be in their annual financial reports. The Standards for Internal Control state that management should implement control activities through policies and documentation and externally communicate the necessary quality information to achieve the entity’s objective. Until OMB provides additional guidelines directing agencies to report more-complete and more-detailed information related to their progress on both financial and nonfinancial risks, some agencies may continue to report incomplete information on their full range of fraud risks and activities they are performing to manage these risks. On the basis of the limitations we identified in agencies’ annual financial reports, Congress and OMB do not have complete and detailed information about agencies’ progress implementing FRDAA’s requirements to establish fraud controls as intended by the act. For example, as previously mentioned, 12 of the 24 CFO Act agencies did not report on payroll fraud risks, which are applicable to all agencies, and 16 did not report on nonfinancial risks such as effect on reputation and compliance with laws, regulations, or standards. The agency reporting requirement was intended to help Congress monitor the progress made by agencies in addressing and reducing fraud risk, including the success or failures of the guidelines created by OMB as a result of the act. Similar to reporting requirements for improper payments, agencies’ reports on their progress implementing FRDAA serve as important oversight tools that can be used to evaluate agency efforts to make needed changes to their processes and policies. In the absence of additional OMB guidelines that include more-complete and more-detailed information for reporting on both financial and nonfinancial risks, some agencies may continue to produce incomplete information on their full range of fraud risks and fraud risk management activities. However, as noted, OMB did not make changes to the FRDAA section in its July 2018 update of Circular A-136, which might have informed agencies’ 2018 reporting efforts. On the basis of FRDAA’s requirements, Congress sought 3 years of reporting on FRDAA implementation, and therefore agencies’ obligation to report on their progress expires after fiscal year 2019. Even if OMB makes changes to its guidelines in 2019 to support more-complete and more-detailed reporting, agencies would report only one time after that— in their 2019 annual financial reports, due in November 2019. We have previously reported on the importance of reporting information that helps facilitate proper stewardship of federal resources, congressional oversight, transparency, and public accountability, among other things. Without an extension of reporting requirements, Congress will not have access to useful information through this reporting mechanism to support oversight and accountability of agencies’ progress implementing the fraud risk management practices required by FRDAA. OMB established a working group of agencies as required by FRDAA, but has not met all of the requirements for the working group, such as those related to member composition, and meeting frequency. As a result of these and other working-group limitations, agencies identified a lack of involvement in and limited information sharing from the working as two of the top challenges to implementing the act. As required, OMB established a working group within 180 days of enactment to improve the sharing of financial and administrative controls and other best practices for detecting, preventing, and responding to fraud, including improper payments, and the sharing and development of data-analytics techniques. OMB also submitted to Congress—but not within 270 days of enactment—a plan for the establishment and use of a federal interagency library of data analytics and data sets to facilitate fraud risk management. However, OMB did not initially include the CFO of each agency in earlier working-group meetings, or, according to OMB, meet four times per year in 2017 as required. The working group also did not effectively facilitate the sharing of controls, best practices, and data-analytics techniques, according to our survey results and roundtable discussion. OMB encountered challenges that limited its ability to fulfill some of these requirements, but did not take the necessary actions to implement others. Plan for data library. In May 2017, OMB submitted a letter to Congress describing the working group’s plan to use a phased approach to establish a federal interagency library of data analytics and data sets, as required by FRDAA. However, OMB did not do so within 270 days of enactment, as required by FRDAA. According to OMB’s letter, the working group is taking a phased approach to develop the plan to establish an interagency data library and took some steps, but identified challenges in the process. When developing the plan, the working group identified two challenges to developing the interagency data library: (1) standardizing how agencies define fraud in their programs, and (2) developing a fraud taxonomy to accurately compile fraud risks and categories. According to the letter, to address these challenges, the working group is creating a fraud-classification system that leverages the existing Association of Certified Fraud Examiners fraud-classification system. OMB’s letter also states that the working group performed an initial inventory of existing tools and materials that will be used to populate the first phase of the library, which is currently located in the OMB MAX Information System. According to the letter, the working group is partnering with agencies to identify a permanent location for the library as well as to develop future enhancements based on the needs of agencies. OMB stated in the letter that it plans to provide Congress additional information once the next phase of the library is implemented. Working-group composition. FRDAA requires the working group to include the CFO of each agency. OMB, in its role as Chair, did not involve all of the relevant agencies in the working group by inviting them to participate or otherwise providing access and input into the working group as required by FRDAA, according to agencies we surveyed and our assessment of OMB documents. In addition to the statutory requirement, we have previously reported that early outreach to participants to identify shared interests is a key practice for enhancing interagency collaboration. However, OMB’s initial working-group efforts in particular did not include some CFO Act agencies or most non–CFO Act agencies subject to FRDAA, representing missed opportunities to share practices and collaborate on ways to advance federal efforts to reduce fraud, waste, and abuse. While the May 2017 letter to Congress states that the CFO from every agency was invited to participate in the working group, OMB staff later noted that only the 24 CFO Act agencies and the Small Agency Council representative from the CFO Council were invited to the working-group meetings. OMB staff indicated that they did not independently reach out to non–CFO Act agencies to invite them to participate because they believed the Small Agency Council representative was responsible for communicating this information to its members. Nevertheless, FRDAA requires the working group to include the CFO of each agency subject to the act, as well as other parties determined to be appropriate by OMB. According to our survey results, about half of the agencies subject to FRDAA were not at all familiar with the working group and about two- thirds did not have an entity responsible for participating in it. Non–CFO Act agencies indicated these responses more often than CFO Act agencies. Specifically, 71 percent of non–CFO Act agencies indicated they were not at all familiar with the working group compared with 21 percent of CFO Act agencies. In addition, 90 percent of non–CFO Act agencies indicated they did not have a designated person or entity participating in the working group, compared with 29 percent of CFO Act agencies (see fig. 8). Similarly, two roundtable participants stated that they thought the working group was geared towards the CFO Act agencies. Most of the CFO Act agencies that participated in our discussion noted that they had been involved in the FRDAA working group. In contrast, almost all of the non– CFO Act agencies that participated in our discussion stated that they were not aware of the working group. Selected Non–Chief Financial Officers (CFO) Act Agency Officials’ Perspectives on Lack of Communication from and Participation in the Working Group “There’s been nothing that I’m aware at Small Agency Council level that’s had meetings or anything to give extra guidance … and I think that would have been very helpful. In most things in small agencies we wait for things to trickle down from the larger agencies if OMB [Office of Management and Budget] doesn’t give us guidance, and we just haven’t gotten any sort of feedback.” It is also unclear how many and which CFO Act agencies attended the working-group meetings. In particular, OMB and agencies provided conflicting information about which agencies attended the working-group meetings. For example, according to one CFO Act agency roundtable participant, the representative was invited to the first meeting and not invited to the next. The participant further stated that the agency recently started to receive information from OMB. However, the information OMB provided about this agency’s involvement in working-group meetings conflicted with this participant’s description of the agency’s attendance at the first four meetings. Agencies identified the lack of involvement in the working group as one of the top challenges to implementing FRDAA. Most CFO and non–CFO Act agencies indicated that their lack of involvement was a moderate or great challenge to implementing FRDAA (see fig. 9). Agencies that indicated having these challenges also more frequently reported challenges with sharing best practices and data-analytics techniques about fraud with other agencies, which was the purpose of the working group. The need for this coordination underscores the importance of identifying shared interests and developing collaborative solutions to help achieve outcomes. OMB and the working group did consult with the Offices of Inspector General on fraud risk matters, as required by FRDAA, by including them in working-group meetings. In OMB’s May 2017 letter to Congress, the agency reported that the working group coordinated with the Council of the Inspectors General on Integrity and Efficiency and other interagency working groups to discuss and share best practices in mission-specific areas. In addition, two agencies’ Offices of Inspector General are listed as having attended the first four working-group meetings. This coordination between the working group and Inspectors General—who often identify and investigate instances of fraud in agencies—is a positive step for the working group. Inspectors General may be able to provide agencies with information that can assist the agencies in analyzing data for potential fraud, such as fraud indicators. In addition, we have previously reported that if collaborative efforts, like the working group, do not consider the input of all relevant stakeholders, important opportunities’ for achieving outcomes may be missed. Frequency of meetings. The working group did not meet the FRDAA requirement to hold at least four meetings per year. OMB staff stated that there have been eight working-group meetings to date—one in 2016, three in 2017, and four in 2018—but these meetings do not meet the FRDAA requirement to meet at least four times per year in 2017. As of October 2018, OMB has shown improvements towards meeting this particular FRDAA requirement in 2018. Specifically, the working group has met at least four times in fiscal year and calendar year 2018, as of October 2018. Vacant appointment positions at OMB and the agencies have slowed efforts to establish the working group, according to OMB staff. FRDAA requires the OMB Controller to serve as the chairperson of the working group, but as of October 2018 the Senate has not made a confirmation for this position. During the roundtable discussion, one participant shared that there was a period when there was no OMB leadership and the working group was largely silent for months. According to OMB staff, it has also been difficult to establish agency membership of the working group due to the lack of confirmed CFOs at some of the 24 CFO Act agencies. As of September 2018, 7 of the 24 CFO Act agencies did not have a CFO. However, OMB and the working group could have held the required minimum number of meetings regardless of OMB and agency vacancies, as evidenced by the seven meetings that were held in the midst of these vacancies. Further, according to OMB staff, aside from the first meeting led by the former Controller, all working-group meetings have been led by the Deputy Controller and other OMB staff, while the Controller position was vacant. Information sharing about controls, best practices, and data- analytics techniques. It is unclear whether OMB, as chair of the working group, documented working-group meetings or any work products that were developed to facilitate sharing information about financial and administrative controls, best practices for fraud management, and data- analytics techniques. OMB staff stated that they do not have documented minutes or notes from working-group meetings, but in August 2018 stated that they uploaded work products to the FRDAA federal community site on the MAX Information System website. However, apart from two screenshots of the MAX website provided to us in February 2018, which indicated that a fraud taxonomy was among the materials produced by the working group, we were not able to obtain documentation of these work products. We have previously reported that one key practice for enhancing and sustaining agency collaboration is using plans and reports to reinforce accountability for collaborative efforts. Without documented discussions, plans, or reports for these collaborative meetings, OMB is unable to share the lessons learned from the meetings with those who cannot attend, and does not have a record of the plans and actions that the working group has agreed to take. This documentation is also important to maintaining the continuity of the working group’s initiatives when leadership changes occur within the agencies and OMB. With respect to the information that was shared at some of the initial working-group meetings, roundtable participants stated that the topics discussed were related to the interagency data library and the working- group plan required to be submitted to Congress, as OMB described in the May 2017 letter. For example, some participants confirmed that the first few meetings were spent discussing ways to establish a standard definition of fraud, the implementation plan due to Congress, and the difficulties agencies experience in sharing data. Our survey results indicate that most agencies identified the sufficiency of information coming from the working group as a great or moderate challenge in their efforts to implement FRDAA (see fig. 10). Roundtable participants also identified data access and sharing, and inter- and intra-agency communication and collaboration, as top challenges for implementing FRDAA. We have previously reported that collaborative mechanisms can be used for a range of purposes such as information sharing. Without participation in appropriately recurring working-group meetings and documentation to facilitate information sharing, agencies will continue to miss opportunities to learn from each other’s experiences and share solutions for establishing financial and administrative controls to prevent, detect, and respond to fraud risks in their programs. OMB has recently issued guidance on other government-wide reform and burden-reduction initiatives that could shape how agencies address FRDAA implementation, such as reforms that may change the structure of agencies and related programs or how agencies collect data used in managing fraud risks. These changes may present challenges and opportunities in establishing the fraud risk management practices outlined in the FRDAA. As examples of these recent reforms, in March 2017 the President issued an executive order requiring a proposed plan to reorganize executive branch agencies. In April 2017, OMB provided guidance to federal agencies for developing their reform and workforce- reduction plans, as required by the President’s executive order. Executive Order 13781—Comprehensive Plan for Reorganizing the Executive Branch—and other recent administration actions prompted OMB to issue a memorandum (M-17-22), that required agencies to submit an agency reform plan to OMB by September 2017. These reform plans were part of the agencies’ fiscal year 2019 budget submission to OMB that included long-term workforce reductions. In addition, OMB issued a memorandum (M-17-26) that required agencies to streamline reporting requirements— an initial effort at removing duplicative, outdated reporting requirements, with the goal of making the federal government more efficient and effective. In March 2018, OMB released the President’s Management Agenda, which provided updated information on the status of government reorganization efforts and is connected with these reform efforts. The President’s Management Agenda also identified a set of cross-agency priority goals, required under the GPRA [Government Performance and Results Act] Modernization Act of 2010, to target those areas where multiple agencies must collaborate to effect change and report progress in a manner the public can easily track. One of these collaborative efforts is focused on reducing the amount of dollars lost to taxpayers through improper payments, including payments resulting from fraud. In addition to the President’s Management Agenda, OMB was required by the March 2017 executive order to develop a comprehensive government-wide reform plan, including, as appropriate, recommendations for both legislative proposals and administrative actions based on agency reform plans, OMB-coordinated crosscutting proposals, and public input. In June 2018, OMB released the government-wide reform plan, which consists of government-wide reorganization and reform proposals with the goal of increasing focus on integrated mission, service, and stewardship delivery. While it is too early to tell whether or how all of these reforms will affect agencies’ efforts to implement FRDAA, we have previously reported that OMB and agencies can leverage these broader reform efforts to address the high-risk areas and government-wide challenges that present vulnerabilities to fraud, waste, abuse, and mismanagement, or are in need of transformation. We surveyed the 72 agencies about whether their plans to implement reforms have had an effect on their efforts to implement FRDAA. About 83 percent of the agencies surveyed reported that they did not address aspects of their fraud risk management in their agency reform plans. Further, OMB reported to us that these plans are still evolving, and have not yet been finalized. However, as we have previously reported, OMB and agencies can consider whether (1) the agency has addressed ways to decrease the risk of fraud, waste, and abuse of programs as part of its proposed reforms and (2) the size of the workforce or resources dedicated to fraud risk management activities may be affected by any of the organizational reforms or efforts to reduce burden, and to make decisions with these considerations in mind. Fraud is one contributor to financial and nonfinancial risks that cost taxpayers dollars, threaten national security, or put consumers at risk. Therefore, agencies must take a more-rigorous preventive approach to managing the risk of fraud in their programs. Compliance with FRDAA provisions can support these efforts. We recognize that effective implementation of the act will take time, and each program and agency may evolve at a different pace. While a small number of agencies reported being mature in their implementation of FRDAA activities, most are in the process of developing key fraud risk activities, and others have yet to start developing them. Wherever agencies fall on this spectrum, it is important that they continue taking actions to enhance their ability to prevent, detect, and respond to fraud risks in their programs and operations. OMB plays an important role in supporting agencies’ efforts to manage fraud risks by providing clear guidelines and facilitating agencies’ involvement with the working group. OMB has taken steps to assist agencies, such as updating ERM guidelines and chairing working-group meetings, but improvements to these efforts could better facilitate agencies’ abilities to implement the act. Specifically, agencies reported the need for additional guidance and clarity on the actions they should take to effectively establish the required controls and report their progress on implementation of the act’s requirements, uncertainty about the difference between ERM and FRDAA requirements, and the need for more involvement and information from the working group. With enhanced guidelines from OMB and improvements to collaboration, agencies would be better positioned to improve controls and procedures to assess and mitigate fraud risks, as FRDAA intends. Promoting the oversight and accountability of agency fraud risk activities through reporting is an important aspect of congressional oversight, as agencies enhance their fraud risk management controls. However, the progress reports submitted by agencies as part of their annual financial reports were incomplete and lacked detailed information to effectively inform Congress of agencies’ implementation status. Further, agencies are only required to report their progress in implementing the requirements of FRDAA through fiscal year 2019. However, it is not clear that more-complete information will be reported by then. Until OMB provides additional guidelines directing agencies to report more-complete and more-detailed information related to both financial and nonfinancial risks, agencies may continue to produce incomplete information on their fraud risk management activities. Requiring agencies to report on the progress of their implementation efforts beyond 2019 could better position Congress to ensure oversight and accountability. We are making the following matter for congressional consideration. Congress should consider extending the requirement in FRDAA for agencies to report on their implementation of fraud controls, identification of fraud risks, and strategies for mitigating them, beyond the current 2019 expiration. (Matter for Consideration 1) We are making the following three recommendations to OMB: The Director of OMB should enhance the guidelines for agencies to establish the controls required by FRDAA, by clarifying the difference between FRDAA and ERM requirements, and through collaboration with agencies to determine what additional information agencies need to implement the controls. (Recommendation 1) The Director of OMB should enhance FRDAA reporting guidelines by directing agencies to report complete and detailed information on each of the reporting elements specified by FRDAA, which should include information related to financial and nonfinancial fraud. (Recommendation 2) The Director of OMB should ensure the working group’s composition meets FRDAA requirements by involving the CFO of all agencies subject to the act by inviting them to participate or otherwise providing access and input into the working group, and ensure that mechanisms to share controls, best practices, and data-analytics techniques are in place. (Recommendation 3) We provided a draft of this report to OMB for review and comment. OMB staff provided oral comments that disagreed with our three recommendations, which we summarize below. OMB staff also provided technical comments that we incorporated as appropriate. OMB disagreed with our first recommendation that it should enhance the guidelines for agencies to establish the controls required by FRDAA by clarifying the difference between FRDAA and ERM requirements, and through collaboration with agencies to determine what additional information agencies need to implement the controls. According to OMB staff, Circular A-123 incorporates all of the guidance that agencies need to implement FRDAA and, outside of the current guidance in Circular A- 123 which OMB staff stated incorporates both GAO’s Standards for Internal Control and GAO’s Fraud Risk Framework, agencies are in the best position to make decisions about how they should implement FRDAA. Further, OMB staff stated that they did not believe that our survey of the 72 agencies and the roundtable with the 14 agencies provided sufficient evidence that a change in their guidance is needed because these responses are based on agencies’ opinions. While Circular A-123 contains a section on Managing Fraud Risks in Federal Programs, we identified important limitations to that section of guidance in our report. In its comments on our report, OMB staff stated that other parts of Circular A-123 provide guidance on FRDAA requirements. These sections of Circular A-123 existed prior to FRDAA and therefore, were not developed in response to FRDAA’s requirement that OMB establish guidelines for agencies. Our review of Circular A-123 found that there are some references to managing fraud risks that are in alignment with the financial and administrative controls identified in FRDAA, and therefore we incorporated that additional information into our report. However, as we reported, agencies stated that they needed additional guidance on how to effectively establish the controls required by FRDAA. OMB was required by FRDAA to establish guidelines. Specifically, lack of guidance and unclear requirements were identified as top challenges during the roundtable discussion, and the sufficiency of OMB’s guidelines was a challenge for 40 percent of the agencies we surveyed. OMB staff stated that they did not believe that our survey and roundtable results are sufficient evidence to warrant a change in their guidance because these responses are based on agencies’ opinions. However, because the purpose of OMB’s guidance is to assist agencies in implementing the administrative controls required by FRDAA, agencies’ experiences and perspectives on the sufficiency of the guidance is an essential part of assessing its effectiveness. Therefore, we reiterate the positions expressed by many agencies that they do not have sufficient guidance on implementing FRDAA requirements related to the establishment of financial and administrative controls. As a result, our recommendation on improving this guidance is still warranted. OMB also disagreed with our second recommendation that it should enhance FRDAA reporting guidelines by directing agencies to report complete and detailed information on each of the reporting elements specified by FRDAA, which should include information related to financial and nonfinancial fraud. According to OMB staff, Circular A-136 is sufficient guidance because it includes the requirements stated in FRDAA, and incorporating this guidance into Circular A-136 was not a requirement of the act. Although not required by FRDAA, OMB’s guidance to agencies on FRDAA reporting is important because these reports can be used to evaluate agency efforts to make changes to their processes and policies. OMB Circular A-136 establishes reporting guidance for executive branch entities required to submit agency financial reports, among other things. Agencies were required to report on their progress implementing FRDAA in these reports. However, FRDAA provides high-level information on what should be included in agency reports, not operational guidance on how to address the reporting requirements, which is typically outlined in executive guidance to agencies. Consequently, the initiative that OMB took to provide guidance on FRDAA in Circular A-136 was an important step in the right direction. However we found that the 24 CFO Act agencies’ annual financial reports for 2017 were incomplete and lacked details, which can be attributed in part to the limited guidance provided by OMB. We found that 31 percent of surveyed agencies indicated that reporting on FRDAA progress was a great or moderate challenge. The agency reporting requirement was intended to help Congress monitor the progress made by agencies in addressing and reducing fraud risks, including the success and failures of the guidelines created by OMB as a result of the act. Therefore, our recommendation to improve OMB’s reporting guidelines is still appropriate. OMB also disagreed with our third recommendation that it should ensure that the FRDAA working group’s composition meets the act’s requirements by involving the CFO of all agencies subject to the act by inviting them to participate or otherwise providing access and input into the working group, and ensuring mechanisms to share controls, best practices, and data-analytics techniques are in place. According to OMB staff, they disagreed because they believe that OMB provided an opportunity for all agencies to attend the working group meeting and they have held four working group meetings in 2018. However, evidence submitted by OMB throughout our review and agencies’ responses to our survey indicate that not all agencies had the opportunity to participate in the working group. The working group was required to include the CFOs of every agency subject to FRDAA, including those that are not subject to the CFO Act. However, 71 percent of non–CFO Act agencies were not at all familiar with the working group, and ninety percent did not have a designated person or entity that participated in the working group, according to our survey. Moreover, 21 percent of CFO Act agencies, which represent the largest federal agencies, were not at all familiar with the working group, and 29 percent did not have a designated person or entity that participated in it, according to our survey results, as of March 2018. To ensure that we obtained information from the right contacts regarding agency participation, we surveyed the CFO or the CFO’s designee of each agency subject to FRDAA. During our audit, OMB indicated that it did not have a list of CFO contacts for all agencies subject to the act, and requested that we share our list of contacts. We have agreed to do so consistent with our protocols, upon public release of the report. Given our findings, our recommendation for OMB to ensure that every agency is then given the opportunity to participate is still warranted. Our survey results also indicated that most agencies identified the sufficiency of information coming from the working group as a great or moderate challenge in their efforts to implement FRDAA. Further, OMB staff stated that they do not have documented minutes or notes from working-group meetings. As we stated in our report, without documented discussions, plans, or reports for these collaborative meetings, OMB is unable to share the lessons learned from the meetings with those who cannot attend, and does not have a record of the plans and actions that the working group has agreed to take. This documentation is also important to maintaining the continuity of the working group’s initiatives when leadership changes occur within the agencies and OMB. As we previously noted, without participation in working-group meetings and documentation to facilitate information sharing, agencies will continue to miss opportunities to learn from each other’s experiences and share solutions for establishing financial and administrative controls to prevent, detect, and respond to fraud risks in their programs. Therefore, we believe that our recommendation on ensuring mechanisms are in place to share controls, best practices, and data-analytics techniques is still warranted. Finally, although OMB did not hold the required number of meetings per year in 2017, it has done so for fiscal year and calendar year 2018, as of November 2018. Therefore, we modified our recommendation to reflect the new actions taken. We are sending copies of this report to appropriate congressional committees and OMB. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Rebecca Shea at (202) 512-6722 or shear@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report reviews agencies’ and the Office of Management and Budget’s (OMB) efforts to implement the Fraud Reduction and Data Analytics Act of 2015 (FRDAA). Specifically, it examines (1) federal agencies’ progress and challenges in implementing fraud risk management practices, including those required by FRDAA, and (2) the extent to which OMB has taken steps that complied with FRDAA requirements and that facilitated agencies’ implementation of the act. To address both of these objectives, we developed and implemented a government-wide survey of agencies subject to the act, conducted a roundtable discussion with selected agencies, reviewed the 24 Chief Financial Officer (CFO) Act agencies’ annual financial reports, interviewed staff from OMB, the CFO Council and the Council of the Inspectors General on Integrity and Efficiency, and reviewed relevant OMB circulars and documents. To determine which agencies were subject to FRDAA and subsequently surveyed, we first sent information requests to 93 federal executive branch entities to determine whether their organization met the definition of “agency” in 5 U.S.C. § 551(1). FRDAA requires the CFO of each agency to be a member of the FRDAA working group. Therefore we identified each entity’s CFO or equivalent using publicly available websites. We sent an email to the 93 entities’ CFO or equivalent and GAO liaison, if present, to notify the agency that we planned to administer a government-wide survey related to the act and requested that an official from the entity’s Office of the General Counsel confirm whether the entity is an “agency” as defined in 5 U.S.C. § 551(1). If the CFO was not the official who was most appropriate to answer our survey about activities related to the act, we requested that the agency identify who should receive our survey. Of these 93 entities, 72 indicated they met this definition of agency, 20 reported that they did not, and 1 entity, the Central Intelligence Agency, did not respond. See table 1 for a list of the 72 executive branch agencies that identified themselves as being subject to the act. To improve the response rate of agencies receiving our survey, while mitigating respondent burden and reducing total survey error, we developed the survey using a variety of quality-assurance techniques. Survey error can arise from population coverage, measurement, nonresponse, and processing errors associated with questionnaire surveys. GAO survey specialists determined survey design parameters and developed, tested, revised, and finalized the questionnaire, in consultation with subject-matter experts on the engagement team. The survey design parameters included population coverage, mode of administration, respondent communication methods, and protection from disclosure of identifiable information. To reduce measurement error, we pretested the questionnaire with selected agency representatives using cognitive interviewing techniques, such as nondirective probing of answers and asking respondents to think aloud when formulating answers. This process allowed us to determine whether questions were understood and answered as intended. Specifically, pretests examined respondent issues related to comprehension of the questions, ability to accurately respond to the questions, perceptions of bias in the questions or scales, and completeness of answer responses. For example, during pretesting we probed respondents on whether our scales were appropriately balanced, and whether individual questions were likely to be applicable to all respondents. We conducted pretests over the phone with CFOs or other FRDAA designated officials from three types of agencies for a total of six agencies: two executive-department CFO Act agencies; two CFO Act agencies that are not executive departments, and two non-CFO Act agencies that are not executive departments. As a result of these pretests, we made modifications to question wordings, scale categories, and other response options to improve respondent comprehension, reduce respondent burden, and mitigate risks of inaccurate or biased responses. An additional survey specialist, who had not been involved in the development of the questionnaire, also reviewed the questionnaire. We then modified the questionnaire based on suggestions made by the reviewer and subject-matter experts. The final version of the questionnaire was copy edited for grammatical and editorial errors. The final questionnaire included questions designed to capture information about FRDAA implementation government-wide and obtain a high-level status update of agencies’ implementation of the act including, but not limited to, the steps agencies had taken since the enactment of the act, fraud risk management activities, challenges they have experienced implementing FRDAA, and their perspectives about OMB’s support of these efforts. It was composed of questions with predetermined answer choices (closed-ended questions) and questions without predetermined answer choices requiring written response (open- ended questions). See appendix II for survey questions and frequencies of agencies’ responses. To administer the survey, we emailed each agency a fillable PDF questionnaire. We fielded the survey from January 18, 2018, through March 27, 2018. To follow up with agencies that did not respond to the initial notice, we emailed or called multiple times to encourage survey participation or provide technical assistance, as appropriate. We received usable questionnaire responses from all 72 agencies, for a response rate of 100 percent. Because this survey was sent to all agencies that were identified as being subject to FRDAA, there is no error as a result of sampling, and results cover the entire population. However, the practical difficulties of conducting any survey may also introduce other types of errors, commonly referred to as nonsampling errors. For example, difficulties in how a particular question is interpreted, in the sources of information available to respondents, or in how the data were entered into a database or analyzed can introduce unwanted variability into the survey results. With this survey, we took a number of steps to minimize these nonsampling errors. For example, our staff with subject-matter expertise designed the questionnaire in collaboration with our survey specialists, and all questions were cognitively pretested with knowledgeable respondents. When the survey data were received from agencies and analyzed, a second independent analyst on our staff verified the analysis programs to ensure the accuracy of the code and the appropriateness of the methods used for the computer-generated analysis. Since this was an electronic survey, respondents entered their answers directly into the questionnaire, thereby mitigating the need to have the data keyed into a database, thus avoiding a source of data-entry error. To collect information about agencies’ experiences implementing FRDAA, we also facilitated a roundtable discussion with selected agencies subject to FRDAA that had completed the survey. The purpose of the roundtable discussion was to obtain agency officials’ perspectives on the strategies and activities used to establish fraud controls and related fraud risk management activities; the guidance and resources used to facilitate the implementation of FRDAA; their challenges in implementing FRDAA; and potential solutions to improve implementation of the act, including any additional guidance or resources that may be useful to implementing the act. We randomly selected and invited a diverse group of agencies that are subject to FRDAA. We planned for a group of agencies that were diverse in terms of the following: 1. agency type, such as whether the agency was a CFO Act agency, an executive department or non–executive department, and membership in the Small Agency Council; and 2. FRDAA implementation status as indicated by their responses to two survey questions. These two survey questions were “overall, what is the status of your agency-wide efforts to implement FRDAA” and “as of today, does your agency do the following to manage fraud risk at the agency-wide level.” We used the survey responses to divide agencies into two groups, a more-mature implementation group and a less-mature implementation group. We invited a total of 27 agencies to participate in our roundtable, an initial group of 20 agencies and 7 backup agencies. Fourteen agencies attended our roundtable: six executive-department CFO Act agencies; two CFO Act agencies that are not executive departments; and six Small Agency Council member agencies. Agency representatives included agency officials with responsibility for antifraud activities, including either the agency’s CFO, Chief Risk Officer, or other staff responsible for fraud risk management activities. The roundtable discussion was held March 26, 2018, and included three sessions: an opening session, a breakout session, and a closing session. In the opening session, all 14 of the roundtable participants were given an overview of our researchable questions and the agenda for the day. Then the agencies were split into two breakout groups based on their response to our survey questions about the maturity of their implementation of FRDAA. In the two breakout groups, roundtable participants discussed the guidance and resources they used for implementation of the act, their approaches used for implementation of the act, and the strategies and challenges associated with implementation of the act. In each breakout group, roundtable participants identified and voted on their top challenges in implementing FRDAA. After the breakout session, GAO facilitators and subject-matter experts on the engagement team then met to create a new list of the top voted challenges of both groups as well as any crosscutting challenges. Finally, in the closing session, all 14 agencies came back together to recap the breakout discussions and have a broader discussion about experiences of successful implementation and potential solutions to improve implementation, including any additional guidance or resources that may be useful to implementing the act. Roundtable participants identified and voted on their top challenges to implementing FRDAA. These results are not generalizable to agencies beyond the 14 that participated. To further assess steps that agencies have taken to implement fraud risk management practices, as required by FRDAA, we also reviewed the fiscal year 2017 annual financial reports for the 24 agencies subject to the CFO Act. FRDAA required agencies to report to Congress on the status of their efforts to implement financial and administrative controls that incorporate leading practices from GAO’s Fraud Risk Framework, identify fraud risks, and establish strategies to mitigate fraud in these reports. We selected these 24 agencies because they were known at the time of our selection to be agencies that were subject to FRDAA, and are estimated to account for over 99 percent of the government-wide improper payments in fiscal year 2015. These agencies also are required to submit their reports directly to GAO. We conducted a content analysis to determine the completeness and quality of the information provided in these reports related to these FRDAA requirements. Because content analysis relies on the judgment of coders to determine whether qualitative data reflects particular categories, we took several steps to ensure that this judgment remained objective, accurate, and consistent. Prior to beginning the content analysis, we worked with subject-matter and legal experts to develop a codebook and definitions for the different kinds of information that FRDAA requires agencies to report, as well as supplemental coding categories related to leading practices in fraud risk management identified in our framework. In order to test the clarity of these codes, we had four independent analysts pretest the content analysis on two annual financial reports, and found high levels of interrater reliability. Specifically, each of the categories had at least 95 percent agreement between coders. As a result to this pretest, minor changes were made to the category definitions. We used two independent coders within GAO to ensure consistent judgment of categories. For the content analysis, each of the 24 annual financial reports was coded by two independent analysts, including one subject-matter expert familiar with fraud risk management and another familiar with each of the CFO Act agencies. Agreement among coders exceeded 99 percent across all of the coding categories. On the basis of this high level of agreement between coders, we are confident that our content analysis represents an objective, accurate, and consistent assignment of these coding categories. Because these coding categories would be further reviewed in making our determinations about completeness and detail, we decided to resolve any intercoder disagreements by keeping all coded material for that review. To assess the completeness of agencies’ reporting on FRDAA implementation, we broke out the unique requirements in each of the three broad categories outlined in FRDAA’s reporting requirements. As a result, our analysis included an assessment of 11 coding categories, which are listed with their definitions in table 2 below. An element was considered present if the corresponding code was applied one or more times in the annual financial reports, and missing if the corresponding code was applied zero times. Each annual financial report was then categorized into one of four categories of completeness, based on these assessments: 1. Fully complete: agencies with reports that contained information on all 11 elements. 2. Mostly complete: agencies with reports that contained information on 6–10 elements. 3. Partially complete: agencies with reports that contained information on 1–5 elements. 4. Not at all complete: agencies with reports that contained information on 0 elements. In addition to assessing whether the annual financial report contained these elements, as required by FRDAA, we also reviewed the content of each of these coding categories, as well as additional categories related to leading practices in fraud risk management. In order to demonstrate the range of the quality and level of detail provided for each element, and for the overall reporting on fraud risk management efforts, we reviewed the specific coded excerpts in NVivo for each agency and summarized the level of detail, length, and other observations specific to each category. To address our second objective, determining the extent to which OMB has taken steps that complied with FRDAA requirements and that facilitated agencies’ implementation of the act, we reviewed relevant documents produced to support the implementation of FRDAA. We also assessed the extent to which the guidelines were consistent with leading practices from the Fraud Risk Framework and the Standards for Internal Control in the Federal Government. To determine the extent to which OMB has taken steps that complied with FRDAA requirements and facilitated agencies’ implementation of the act, we did the following: 1. We interviewed staff from OMB’s Office of Federal Financial Management and Office of Personnel and Performance Management regarding their development of guidelines, the working group, and any challenges OMB may have experienced while implementing the act’s requirements, to determine the extent to which OMB’s efforts to facilitate agency implementation of the act were viewed as helpful by agencies. 2. We reviewed relevant memorandum, circulars, and other OMB documents including Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control, and Circular A-136, Financial Reporting Requirements, and compared these with the requirements for OMB outlined in FRDAA. 3. We evaluated agencies’ perspectives and experiences using OMB’s guidelines and other initiatives to implement the act by assessing our survey responses, annual financial-report analysis, and roundtable discussion for responses related to OMB guidelines and other efforts, and related strengths and challenges. 4. We also interviewed officials from the CFO Council and Council of the Inspectors General on Integrity and Efficiency to get a broader opinion about the effectiveness of OMB and agency efforts to implement FRDAA. We conducted this performance audit from August 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To obtain information about the extent to which executive branch agencies have taken steps required by the Fraud Reduction and Data Analytics Act of 2015 (FRDAA), we identified 72 agencies subject to the act and surveyed these agencies about their fraud risk management practices and related challenges. We received responses from all 72 agencies, for a response rate of 100 percent. The questions we asked in our survey and the percentage of agencies’ responses are shown below. Our survey was composed of questions with predetermined answer choices (closed-ended questions) and questions without predetermined answer choices requiring written response (open-ended questions). In this appendix, we include all survey questions and results of responses to the closed-ended questions; we do not provide information on responses to open-ended questions. The tables below represent the percentage of agencies’ responses to the close-ended questions. The percentages we report are rounded to the nearest whole number. For a more-detailed discussion of our survey methodology, see appendix I. Survey question 13: What other information, if any, should GAO know about your agency’s efforts to implement FRDAA or manage fraud risks? (open-ended response) Survey question 14: Do you have any additional explanations for your answers or comments on any of the issues in this questionnaire? (open-ended response) Survey question 15: Please enter the contact information for the primary person who completed this survey. (open-ended response) In addition to the contact named above, Latesha Love (Assistant Director); Georgette Hagans (Analyst in Charge); Sarah Cantatore, Joy Kim, Grant Mallie, James Murphy, Eve Nealon, Steven Putansu, Kristen Timko, and Shana Wallace made key contributions to this report. Other contributors include Marcus Corbin, Carrie Davidson, Colin Fallon, Barbara Lewis, and Maria McMullen.", "summary": "Fraud poses a significant risk to the integrity of federal programs and erodes public trust in government. Implementing effective fraud risk management processes can help ensure that federal programs fulfill their intended purpose, spend their funding effectively, and safeguard assets. FRDAA requires agencies to establish internal controls to manage their fraud risks and to report implementation progress for the first 3 years after enactment. It also directs OMB to (1) develop guidelines for agencies to establish fraud risk management controls and (2) establish a working group to share best practices in fraud risk management and data analytics. GAO was asked to review agencies' and OMB's efforts to implement FRDAA. This report examines steps (1) agencies and (2) OMB have taken to implement FRDAA. GAO conducted a survey of the 72 agencies subject to the act, held a roundtable discussion with 14 selected agencies, reviewed 24 selected annual financial reports, examined OMB guidelines, and interviewed OMB staff. At varying stages, agencies have begun planning for and implementing fraud risk activities (like conducting an evaluation of fraud risks) required by the Fraud Reduction and Data Analytics Act of 2015 (FRDAA), according to GAO's survey of agencies subject to the act. Overall, most of the 72 surveyed agencies (85 percent) indicated that they have started planning how they will meet FRDAA requirements, and about 78 percent indicated that they have also started taking steps to implement the requirements. To assist agencies in implementing fraud risk management activities, the Office of Management and Budget (OMB) established FRDAA-related guidelines and a working group, as required by the act. However, agencies experienced challenges with OMB's guidelines and the working group, among other things, according to GAO's survey and roundtable discussion results (see figure below). Implementation guidelines. To meet FRDAA requirements, OMB updated Circular No. A-123 guidelines that govern executive agencies. However, this update included limited information on the methodologies agencies can use to assess, document, and report on internal controls required by FRDAA, according to GAO's review of the guidelines. Surveyed agencies had mixed perspectives on the usefulness of OMB's guidelines for implementing FRDAA controls. Similarly, agencies identified the lack of clear requirements and guidance as top challenges in GAO's roundtable discussion with 14 selected agencies. Reporting on implementation progress. Although not required by FRDAA, OMB updated annual financial report guidelines to include FRDAA requirements, but GAO found that the guidelines did not contain enough information to aid agencies in producing complete and detailed progress reports in 2017, the first year of reporting. Additional guidelines from OMB could help agencies produce more complete and detailed reports for 2019, the final year of required reporting. Without a longer reporting period, however, Congress may not have the useful information for continued oversight of agencies' progress. Working Group. OMB has taken steps to establish the working group, but GAO found the working group did not fully meet FRDAA requirements. As Chair, OMB did not (1) involve all agencies subject to the act in the working group or (2) hold the required number of meetings in 2017. Most surveyed agencies indicated a lack of involvement with and information from the working group as challenges in implementing FRDAA. GAO is making three recommendations, including that OMB (1) enhance its guidelines for establishing controls, (2) enhance guidelines for reporting on agencies' progress, and (3) fully implement the working group. OMB did not concur with the need for the recommendations. GAO continues to believe the recommendations are valid, as discussed in the report. Additionally, Congress should consider extending agencies' reporting requirements.", "document_type": "gao"}
{"report": "Border Patrol has divided geographic responsibility for the southwest border among nine sectors, as shown in figure 1. Each sector has a varying number of stations, which serve as bases of operation for agents, and agents are responsible for patrolling within defined geographic areas—known as areas of responsibility. Border Patrol uses a variety of land-based surveillance technologies under the Southwest Border Technology Plan to assist its efforts to secure the border by interdicting illicit cross-border activity and apprehending individuals attempting to cross the border illegally. Border Patrol is responsible for planning, acquiring, and deploying that technology along the southwest border. Border Patrol’s PMOD executes the acquisition and procurement of Border Patrol systems, supplies, and services, including current and planned technology deployments along the southwest border, which was previously conducted by CBP’s Office of Technology Innovation and Acquisition. CBP has an Office of Acquisitions that performs oversight. As noted above, the 2014 Southwest Border Technology Plan incorporated the 2011 Arizona Technology Plan and included plans to extend land-based surveillance technology deployments beyond Arizona to the remainder of the southwest border, beginning with selected areas in Texas and California. Border Patrol developed the Southwest Border Technology Plan using a two-step process. First, the Homeland Security Studies and Analysis Institute conducted an analysis of alternatives, which analyzed five technology options in 13 representative areas along the southwest border, identified the types of environmental conditions under which a given technology option might be more effective or less effective, and provided a general overview of the cost and effectiveness tradeoffs between the technologies. For example, the analysis of alternatives noted that IFTs are potentially effective if vegetation is sufficiently sparse and terrain is flat or rolling, such as in the Ajo station area of responsibility (see figure 2). However, according to Border Patrol officials, the IFT’s radar capabilities may not be suited for urban environments, where illegal crossers and narcotics traffickers can blend in with the legitimate traffic. In some of these locations, such as the Nogales port of entry, Border Patrol has determined that the RVSS is more effective. Second, Border Patrol developed a technology deployment plan that identified the types and quantities of each technology needed for each sector. To develop this plan, Border Patrol officials reviewed the results of the analysis of alternatives and considered each sector’s operational conditions, including patterns of traffic, terrain, infrastructure, weather, available resources, and challenges. For example, Border Patrol selected MSC units for Arizona’s Tucson and El Centro sectors, but not for Texas’s Rio Grande Valley sector because the radar was less effective in the dense vegetation of south Texas, an example of which is shown in figure 3. Figure 4 shows the border surveillance technology systems included in the Southwest Border Technology Plan. Border Patrol follows DHS’s acquisition policy to acquire planned technologies under the Southwest Border Technology Plan. DHS’s overall policy for acquisition management is outlined in Acquisition Management Directive 102-01 and its associated Instructional Manual 102-01-001. DHS’s Under Secretary for Management (USM) is currently designated as the department’s Chief Acquisition Officer and, as such, is responsible for managing the implementation of the department’s acquisition policies and acting as the acquisition decision authority for the department’s largest acquisition programs. Within DHS, the USM is supported by the Office of Program Accountability and Risk Management (PARM), which is responsible for overseeing the acquisition process and assessing the status of acquisition programs through four phases of the acquisition life cycle. These phases include a series of five Acquisition Decision Events (ADE) that provide the acquisition decision authority an opportunity to assess whether the program is ready to proceed through the acquisition life cycle phases. Figure 5 depicts the four phases of the acquisition life cycle and the associated ADEs. In addition, components and program offices have established program- level groups, such as Executive Steering Committees, to provide, among other things, assistance and support during the acquisition process. According to Border Patrol officials, in 2014, Border Patrol began implementing a new process to identify future technology needs. The Requirements Management Process (RMP), according to Border Patrol officials, is a new process designed to facilitate planning in order to fund and deploy operational capabilities, such as surveillance technology and tactical infrastructure, for border security operations. According to Border Patrol officials, Border Patrol will use information resulting from the RMP to fulfill DHS acquisition policy requirements, including information required for Acquisition Decision Events, as appropriate. Border Patrol is working to develop guidance to align the RMP with the DHS acquisition life cycle. The RMP consists of six steps as shown in figure 6. In the first step of the process, Border Patrol reviews strategic guidance to identify mission priorities and goals and assesses the state of the threat to be addressed. The second step, mission analysis, begins with the Capability Gap Analysis Process, which is intended to identify each station’s capability gaps by determining the difference between a station’s existing capabilities and the capabilities required to perform its mission- essential tasks. The identified shortfall in required capability is a capability gap. Under the RMP’s third step—planning—Border Patrol officials examine capability gaps in detail and determine courses of action—that is, solutions, which may include surveillance technologies, to close the capability gaps. For example, potential solutions could include adjusting the technologies or personnel deployed in a specific area or improving maintenance and repair of access roads. The solutions are documented in sector-specific Initial Requirements Documents. The fourth step— execution—involves Border Patrol leadership executing courses of action. Border Patrol officials stated that courses of action are options for Border Patrol commanders and executives to select and implement. Certain courses of action, including acquiring and deploying land-based surveillance technology, may need to proceed through the DHS acquisition life cycle as appropriate. Once implemented, these options are expected to resolve identified capability gaps in operations, according to Border Patrol officials. The fifth and sixth steps of the process— assessment and life-cycle management—involve implementing and monitoring solutions to determine their ability to resolve capability gaps, and gathering sector feedback on how the solutions affect border security operations. As of October 2017, Border Patrol had initiated or completed the planned deployment of select technologies to sectors across areas in Arizona, Texas, California, and New Mexico. In 2014, we reported that Border Patrol had made progress deploying technologies and had completed deployments for two technology programs in Arizona—the Agent Portable Surveillance System (APSS) and the Thermal Imaging Device (TID) technologies. Since our 2014 report, Border Patrol has completed deployments of several additional technology programs. Specifically, according to Border Patrol officials, it has completed deployments of all planned RVSS, MSC, and Unattended Ground Sensors (UGS), as well as 15 of 53 IFT systems to Arizona. Border Patrol has also completed deployments of select technologies to Texas and California, including deploying 32 MSC systems to Texas and California. Border Patrol also has efforts underway for completing deployments of other technology programs, but some of those programs have not yet begun deployment or are not yet under contract. For example, as of October 2017, Border Patrol had not yet initiated deployments of RVSS to Texas because, according to PMOD officials, the program had only recently completed contract negotiations for procuring those systems. According to PMOD officials responsible for the RVSS program, Border Patrol has begun planning the designs of the command and control centers and towers, as well as real estate needs for the Rio Grande Valley sector. Additionally, Border Patrol initially awarded the contract to procure and deploy MVSS units to Texas in 2014 but, because of bid and size protests, did not award the contract until 2015, and the vendor that was awarded the contract did not begin work until March 2016. The deployment status of surveillance technologies is shown in table 1. Border Patrol has revised schedules and cost estimates for its three highest-cost programs—IFT, RVSS, and MSC—and as of October 2017, is on track to meet those revised schedules and estimates; however, risks remain in Border Patrol’s deployment efforts. Border Patrol has rebaselined (i.e., revised original schedule and cost goals) its three highest-cost programs—IFT, RVSS, and MSC—due to schedule, quantity, and cost estimating variances, among other changes to the programs’ original plans. According to our cost and schedule assessment guides, while rebaselining can be beneficial for quickly identifying new variances, reporting a program’s performance based on a rebaselined cost or schedule may not reflect the program’s overall cost and schedule performance or timeline. In March 2014, we reported that CBP had a deployment schedule for each of the seven technology programs planned for deployment at the time––IFT, RVSS, MSC, APSS, MVSS, TID, and UGS––and that four of the programs would not meet their originally planned completion dates. Specifically, we found that the three highest-cost programs (IFT, RVSS, and MSC) had experienced delays relative to their baseline schedules as of March 2013, which were current at the time of our review. We recommended that CBP ensure that scheduling best practices are applied to the IFT, RVSS, and MSC program schedules. DHS concurred with the recommendation and stated that CBP planned to apply scheduling best practices when revising the three programs’ schedules. Based on our assessment of the IFT, RVSS, and MSC programs’ revised schedules that CBP had completed as of January 2017, CBP did not apply all scheduling best practices. However, the revised programs’ schedules for the IFT, RVSS, and MSC reflect substantial improvements in quality and are consistent with the intent of our recommendation. In particular, CBP has improved the quality of its products for analyzing and quantifying risk to the programs’ schedules. Continuing to apply scheduling best practices in future updates will help better position CBP to identify and address any potential delays in its programs’ commitment dates. DHS approved Border Patrol’s rebaseline of the IFT program in December 2015, which extended the program’s completion date to 2020—five years beyond what Border Patrol had estimated in its original baseline schedule. The RVSS and the MSC programs’ completion dates were also extended because the scopes of the programs had increased, among other reasons. While Border Patrol’s revisions to its schedules are positive steps in helping the agency oversee its management of these programs, the programs continue to be behind schedule relative to their original planned baseline documents dated March and September 2012 for the IFT and RVSS programs, respectively, as shown in figure 7. In addition to revising program schedules, Border Patrol has revised the life-cycle cost estimates for the three highest-cost programs to reflect actual costs and include cost estimates for additional and ongoing work. For example, the MSC cost estimate increased by $294.7 million—from $107.2 million to $401.9 million—due to, among other reasons, the program’s expanded scope to Texas, California, and New Mexico. In December 2015, estimated life-cycle costs for the IFT program decreased from its original March 2012 baseline estimate by $211.5 million, in part because of lower-than-expected contract costs. However, from March 2012 to December 2015, IFT’s acquisition cost threshold increased by more than $50 million—from $288 million to $341 million—when CBP included the costs of contractor personnel supporting the program office, the cost of replacing SBInet systems, and actual costs through fiscal year 2014, rather than estimates. According to Border Patrol officials, a CBP policy change required them to include the contractor personnel support costs in the rebaseline, which was previously not required in the original cost baseline. Figure 8 shows original and revised cost estimates for the IFT, RVSS, and MSC programs. In March 2014, we reported that the three highest-cost programs (IFT, RVSS, and MSC) accounted for 97 percent of the Arizona Technology Plan’s estimated cost and that the life-cycle cost estimates for the two highest-cost programs—IFT and RVSS—reflected some, but not all, best practices for cost estimating. Reliable life-cycle cost estimates reflect four characteristics—they are (1) well-documented, (2) comprehensive, (3) accurate, and (4) credible. Our analysis of CBP’s estimates for the two highest-cost programs at the time of our March 2014 review showed that these estimates at least partially met three of these characteristics: well- documented, comprehensive, and accurate. In terms of being credible, these estimates had not been verified with independent cost estimates in accordance with best practices. We concluded that verifying life-cycle cost estimates with independent estimates in accordance with cost- estimating best practices could help better ensure the reliability of the cost estimates. We recommended that CBP verify the life-cycle cost estimates for the IFT and RVSS programs with independent cost estimates and reconcile any differences. DHS concurred with this recommendation, but stated then that it did not believe there would be a benefit from expending funds to obtain independent cost estimates and that if the costs realized to date continued to hold, there may be no requirement or value added in conducting full program updates with independent cost estimates. As part of our updates on CBP’s efforts to implement our 2014 recommendations, CBP officials told us that in fiscal year 2016, DHS’s Cost Analysis Division (CAD) would begin piloting its own independent cost estimate capability with the RVSS program. According to CBP officials, this pilot was an opportunity to assist DHS in developing its independent cost estimate capability. CBP selected the RVSS program for the pilot because the program was at a point in its planning and execution process where it could benefit most from having an independent cost estimate performed, as these technologies were being deployed along the southwest border beyond Arizona. According to CBP officials, CAD completed its independent cost estimate for the RVSS program in August 2016. CBP officials also told us that the RVSS life- cycle cost estimate was finalized and reconciled in March 2017. CBP reported that the component acquisition executive approved the reconciliation estimate in September 2017. According to CBP officials, CBP does not have plans to conduct an independent cost estimate and verification for the IFT. We continue to believe that independently verifying the life-cycle cost estimate for the IFT program and reconciling any differences, consistent with best practices, could help CBP better ensure the reliability of the estimate. While selected technology programs are on track to meet schedule and cost goals, according to Border Patrol officials, some programs have identified risks that may lead to schedule slips or cost growth in the future. Specifically, Border Patrol has experienced delays in completing deployments for planned technologies due to (1) land use and access- related issues; (2) technical issues; and (3) contracting challenges, among other factors. For instance, the IFT program continues to experience delays deploying IFTs to tribal lands in the Tucson sector in Arizona. Border Patrol officials stated that the IFT program has not received authorization from tribal land leaders to build an access road and deploy IFT tower systems on the tribe’s land. They also stated that the historic preservation officer for the tribal lands would need to issue a finding that the IFT would not have any negative impact on cultural resources before Border Patrol could proceed with deployment. In addition, RVSS program officials we met with noted that access to privately owned land is an issue of concern in Texas that could potentially delay RVSS deployment for the Rio Grande Valley sector. Border Patrol has also encountered delays in the IFT program as a result of technical issues identified during delivery of the IFT. For example, we previously reported that testing completed in November 2015 on IFT systems in Nogales had been delayed by 2 months in order for the contractor to address issues related to IFT cameras and operator interfaces. Additionally, Border Patrol has encountered schedule delays due to contracting challenges, such as renegotiations with the contractor after the contract was awarded. For example, according to Program officials, the MVSS contractor proposed a technical change to the system to address safety and maintenance concerns. Border Patrol agreed to the change, which led to delays. We have previously reported that program delays can result in increased costs and force agents to rely on legacy surveillance technologies. According to Border Patrol officials, program managers and Border Patrol are working to mitigate the risk of delays through quarterly executive steering committee meetings of program managers and representatives from other component and headquarters offices, such as DHS’s PARM. During these meetings, program managers discuss cost and schedule risks and evaluate options for mitigating those risks. For example, according to PARM officials, at one such meeting, officials reviewed the RVSS program and determined that it met cost criteria to receive additional DHS oversight. According to Border Patrol officials, Border Patrol has also used quarterly executive steering committee meetings to involve stakeholders and address potential risks as it moves forward with full production in the IFT program. As Border Patrol proceeds with these programs, it will be important to continue to find ways to mitigate the risk of delays in order to meet its revised schedules. Border Patrol’s RMP and other initiatives are intended to help inform future technology deployment decisions, but, as we reported in February 2017, additional actions are needed to ensure station officials understand the process and their respective roles and responsibilities. Border Patrol officials reported that the Southwest Border Technology Plan is the baseline for identifying technology needs and planning technology deployments, and that changes to the plan are needed as threats and priorities evolve. To help address these changes and remain adaptive, in 2014, Border Patrol began implementing the RMP that, among other things, is intended to identify capability gaps in border security operations and identify solutions to those capability gaps. In February 2017 we found that Border Patrol had documented the RMP, but had not developed written guidance on how officials were to use the information and analyses resulting from the process when requesting tactical infrastructure—that is, fencing, gates, roads, bridges, lighting, and drainage infrastructure—for deployment purposes. For example, we reported that sectors varied in their understanding of how to use results from the Capability Gap Analysis Process when engaging in planning processes or when making resource allocation decisions. We recommended that Border Patrol develop and implement written guidance for the steps within its requirements process for identifying, funding, and deploying tactical infrastructure for border security operations, including clarifying the roles and responsibilities of the parties involved in the RMP. In response to our recommendation, Border Patrol officials reported that they are currently updating the RMP documentation, training, and guidance to the field. Border Patrol officials expect to have an updated Internal Operating Procedure and Manual for the RMP by the second quarter of fiscal year 2018. According to CBP officials, actions taken in response to our recommendation would apply to surveillance technology as well—not solely tactical infrastructure. By developing this written guidance, Border Patrol intends to reduce the risk of relevant agency officials not having the information needed to perform their appropriate role in the process. We will continue to monitor the progress of Border Patrol efforts related to the RMP to determine whether these actions meet the intent of our recommendation to fully develop and implement written guidance for the steps within the RMP. Until then, Border Patrol is less likely to have reasonable assurance that it has the best available information to inform future investments in surveillance technologies and resource allocation decisions among surveillance technologies. In addition to the RMP, future surveillance technology deployments will be affected by other ongoing DHS and CBP initiatives. Specifically, Border Patrol officials in the Strategic Planning and Analysis Division reported that the Domain Awareness: Land Surveillance initiative requirements documents and Southwest Border Capability Roadmap will also be taken into consideration throughout the RMP and will influence future surveillance technology deployments. CBP’s Domain Awareness: Land Surveillance initiative is intended to depict current CBP land domain awareness capabilities and inform future capabilities, which could help Border Patrol identify solutions during various phases of the RMP. Border Patrol officials stated that Border Patrol, with CBP’s Air and Marine Operations and U.S. Immigration and Customs Enforcement, is developing mission needs statements, concepts of operations, and capability operational requirements documents for (1) mobile, (2) fixed and relocatable, and (3) agent-portable capabilities which will help inform future technology deployments. Border Patrol also proposed a Southwest Border Capabilities Roadmap in April 2017 to assist with identifying solutions, such as surveillance technology, mobility and access, and personnel. This roadmap is intended to inform a balanced, risk-based investment strategy driven by capability gaps, geographic priorities, terrain, and other environmental factors, and to consider the evolving cross-border threat. The roadmap identifies specific requirements for persistent surveillance assets, such as RVSS, and was used to support CBP’s fiscal year 2018 budget justification for RVSS deployments in the Rio Grande Valley sector. To create this roadmap, Border Patrol officials reported reaching out to stations within 40 miles of the border to discuss their current gaps and how they would close them (either through physical barriers, manpower, or technology). Because Border Patrol is still in the planning phases for future technology deployments, it is too soon to tell how these efforts will assist Border Patrol in structuring and planning those deployments. Border Patrol has made progress identifying performance metrics for the technologies under the Southwest Border Technology Plan, but additional actions are needed to fully implement our prior recommendations in this area. In November 2011, we found that CBP did not have the information needed to fully support and implement the ATP and recommended that CBP (1) determine the mission benefits to be derived from implementation of the ATP and (2) develop and apply key attributes for metrics to assess program implementation. We reported in 2014 that, in response to our recommendations, CBP had identified mission benefits expected from the implementation of the surveillance technologies under the ATP, but had not fully developed key attributes for performance metrics for the technologies. We recommended, among other things, that CBP analyze available data on apprehensions and seizures and technological assists, in combination with other relevant performance metrics or indicators, to determine the contribution of surveillance technologies to CBP’s border security efforts. CBP officials stated that they planned to develop objectives for each performance measure, at which time the agency would begin using the data to evaluate the contributions of specific technology assets. CBP also intended to establish a tool by the end of fiscal year 2016 that explained the qualitative and quantitative impacts of technology and tactical infrastructure on situational awareness in specific areas of the border environment. In September 2016, Border Patrol provided us a case study that assessed technology assist data, along with other measures, to determine the contributions of surveillance technologies to its mission. In April 2017, we reported that this was a helpful step in developing and applying performance metrics; however, the case study was limited to one border location and the analysis was limited to select technologies. In May 2017, Border Patrol officials demonstrated the agency’s new Tracking, Sign Cutting, and Modeling (TSM) system, which they said is intended to connect between agents’ actions (such as identification of a subject with a camera) and results (such as an apprehension) and allow for more comprehensive analysis of the contributions of surveillance technologies to Border Patrol’s mission. One official said that data from the TSM will have the potential to provide decision makers with performance indicators, such as changes in apprehensions or traffic before and after technology deployments. However, the TSM is still early in its use and officials confirmed that it is not yet used to support such analytic efforts. The official stated that over time it would be used to analyze performance on a systematic basis and provide information to decision makers. We continue to believe that it is important for Border Patrol to assess technologies’ contributions to border security and will continue to monitor the progress of the TSM and other Border Patrol efforts to determine whether these actions sufficiently meet the intent of our November 2011 recommendation to fully develop and apply performance metrics for its border technologies. Until then, Border Patrol is not well positioned to fully assess its progress in implementing the Southwest Border Technology Plan and determine when mission benefits have been fully realized. Border Patrol agents collect and report data on asset assists, which are instances in which technologies or other assets (such as canine teams, bicycle patrols, or air support from CBP’s Air and Marine Operations) contributed to an apprehension or seizure; however, the agency does not have sufficient controls to ensure the accuracy and reliability of that data. In March 2014, we reported that CBP was not capturing complete asset assist data on the contributions of its surveillance technologies to apprehensions and seizures and that Border Patrol agents were not consistently recording these data across locations. We recommended that CBP require data on asset assists to be recorded and tracked within the DHS Enforcement Integrated Database (EID), which contains data on apprehensions and seizures. Since then, Border Patrol has taken actions to better record asset assists and to expand the types of technologies that can be tracked, consistent with our prior recommendation. Specifically, in June 2014, Border Patrol issued guidance informing agents that the asset assist data field within the e3 Portal to the EID had become a mandatory data field. Additionally, when recording asset assists, agents initially could only choose from “camera,” “mobile surveillance system,” “scope truck,” “unattended ground sensor,” or “other” when selecting technologies. In May 2016, Border Patrol expanded the types of assets available for agents to choose from to include MSC, IFT, and APSS, among others. Border Patrol requirements for entering asset assist data into the e3 Portal and expansion of the types of assets listed have been positive steps to help better position Border Patrol to assess the contributions of surveillance technologies to border security efforts, as we recommended in 2014. However, we have identified issues with the completeness and reliability of the asset assist data. In particular, we analyzed data on asset assists from October 1, 2014 through May 3, 2017 and our analysis showed that agents incorrectly attributed some apprehensions and seizures to certain technologies rather than others. For example, stations in the Rio Grande Valley sector recorded assists from IFTs in nearly 500 instances from June through September 2016, which cannot be accurate, since the sector does not have IFTs. When we brought this issue to the attention of Border Patrol headquarters officials, they told us in December 2016 that they would discuss the matter with Rio Grande Valley sector officials. However, data from December 2016 through May 3, 2017 indicated that agents in the Rio Grande Valley sector continued to record asset assists from IFTs. Additionally, we found that one station in the Tucson sector with SBInet towers was recording asset assists from the SBInet towers as “other,” when Border Patrol headquarters officials told us that SBInet towers should be recorded as “IFT.” Moreover, our analysis showed that “other” (including “other” listed alongside additional assets) made up nearly 16 and 23 percent, respectively, of asset assists recorded in the Tucson and Rio Grande Valley sectors from October 1, 2016 through May 3, 2017. Border Patrol officials told us that “other” should be any technology not otherwise listed, and could include technologies or support that officials were interested in tracking locally. Officials said the large number of “other” assets could also be a result of agents not understanding their responsibilities or agents working to complete the asset assist data entry as quickly as possible so they could move on to other duties. According to Border Patrol officials, data integrity and quality checks are the responsibility of the individual sectors, and each station has a designated point of contact for data integrity and a system administrator to oversee data quality. However, Border Patrol has not provided written guidance to the sectors on how to oversee data integrity or conduct quality checks of asset assist data, and Border Patrol’s guidance on how to enter asset assist data is limited. According to Border Patrol officials, Border Patrol’s asset assist guidance for sectors consists of two training presentations. We reviewed the training slides for these presentations and found they included photographs and general descriptions of some technologies, along with two case examples for recording an asset assist. However, the slides did not discuss how sectors should conduct data integrity or quality checks. Furthermore, the slides did not address how agents should record assists for SBInet towers. The slides also did not explain why asset assist data are collected (other than that the Chief of the Border Patrol requires it), what it could be used for, or why it was important to ensure data were accurately recorded. Officials told us in June 2017 that the asset assist data were only used to respond to data requests from external agencies—the data were not being used for planning, budgeting, performance measurement, or other purposes. Standards for Internal Control in the Federal Government states that management should obtain relevant data from reliable internal and external sources in a timely manner based on the identified information requirements. Reliable internal and external sources provide data that are reasonably free from error and bias and faithfully represent what they purport to represent. Management should evaluate both internal and external sources of data for reliability. Additionally, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. If there is a significant change in the entity’s process (such as the addition of new asset assist fields), management should review this process in a timely manner to determine that the control activities are designed and implemented accordingly. Without sufficient guidance for sectors on how to enter and review asset assist information, Border Patrol does not have reliable data on asset assists that could help monitor the contribution of surveillance technologies to Border Patrol apprehensions and seizures and inform resource allocation decisions. Border Patrol has a variety of mechanisms for collecting agent feedback on technology performance and for using that information to improve current and future deployments. For example, officials from the Border Patrol Program Management Office Directorate (PMOD) reported that they conduct required technology performance evaluations at specified intervals (e.g., a 6-month post-deployment review and an annual operational analysis) to regularly collect and evaluate agent feedback, and conduct monthly reviews of maintenance and repair requests. Officials said that this feedback is consolidated, prioritized based on cost effectiveness, and used to identify system upgrades (both for systems that have been deployed and for future deployments). The PMOD also collects feedback as part of the annual process for developing an operational analysis report. In the 2016 operational analysis for the MSC program, the PMOD assessed Border Patrol agents’ overall satisfaction with the MSC system, whether it enabled agents to perform their functions more easily and efficiently, and whether it met agents’ needs. Agents identified several MSC benefits, including performance improvements from the prior system (known as the Mobile Surveillance System), radars that exceeded the performance of other mobile systems’ radars, and targets being detected at farther ranges than the system specification. However, the analysis identified more opportunities for improvement, including the need for improvements to the MSC’s camera, video analytics, tracking, graphical user interface, engineering, and other changes. Border Patrol also reported using post-implementation reviews to collect agent feedback and identify improvements. For technologies under the ATP and Southwest Border Technology Plan, Border Patrol completed post-implementation reviews for the MSC in July and October of 2014, for the IFT in June 2016, and for the RVSS in October 2016. In August 2017, Border Patrol reported expecting to conduct reviews for the remaining technologies within 6 to 18 months of each technology reaching initial operating capability. A post-implementation review’s primary purpose is to determine the impact of the system on stakeholders, quantitative and qualitative performance of the system, and the ability of the system to meet identified goals. For example, the MSC review from October 2014 reported that the system was generally an improvement over the older Mobile Surveillance System; however, program risks included damage to trucks and sensors from Border Patrol agent operator error and the need to improve or widen access roads given the larger footprint of the MSC trucks (compared to the prior Mobile Surveillance System trucks). The review concluded with six recommendations to improve future assessments of the system and to plan for new sensor deployments. The recommendations to the PMOD and Border Patrol acquisition office included updating the life-cycle cost estimate to track manpower costs; using a skills-based qualification standard for MSC operators; and ensuring future Border Patrol surveillance systems include the ability to extract actual performance, operational, and environmental data. In August 2017, Border Patrol reported a range of actions underway to address these recommendations, including (1) developing updates to the MSC’s support system to better capture all service requests and maintenance work orders, (2) providing standardized training to each MSC operator with refresher training available upon request, and (3) updating key acquisition documents to reflect the increase in the number of MSCs to a full operating capability of 90 units. In addition to required reports, PMOD officials reported gathering agent feedback directly. For example, a PMOD official with responsibility for the IFT program reported conducting feedback meetings with agents. The meetings included both contractors and government personnel in order to ensure a shared understanding of agent-identified issues. The PMOD also reported conducting weekly, monthly, and real-time monitoring of trouble-tickets—that is, agent-generated reports of maintenance or other technical issues. PMOD officials reviewed the issues identified and prioritized them based on cost and the potential increases in capability. For issues beyond contractual requirements, the PMOD vets the requests and forwards them to senior Border Patrol leadership for approval and funding. Since 2005, Border Patrol has spent more than one billion dollars deploying technologies to the southwest border, but is not yet positioned to fully quantify the impact these technologies have on its mission. We continue to believe that developing and applying performance metrics for its border technologies, in accordance with our prior recommendation, would help Border Patrol more fully assess its progress in implementing the Southwest Border Technology Plan and determine when mission benefits have been realized. Border Patrol has taken some steps toward tracking the performance of its surveillance technologies, including requiring agents to record when technologies assist in an apprehension or seizure. However, additional guidance to better ensure the quality of these data (including agent training and managerial review), would help Border Patrol determine the mission benefits of its surveillance technologies, which in turn could be used to inform Border Patrol’s resource allocation decisions. The Chief of the Border Patrol should issue guidance for sectors to improve the quality and usability of its surveillance technology asset assist information to help ensure it has reliable data so that Border Patrol can be better positioned to measure the impact of these technologies on its border security efforts and inform future investments. (Recommendation 1) We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are summarized below and reproduced in full in appendix I. DHS also provided technical comments, which we incorporated as appropriate. DHS concurred with our recommendation and described actions planned to address it. Specifically, DHS stated that Border Patrol will revise its training presentation concerning asset assists to include additional information on how sectors should conduct asset assist data integrity checks, why the data are collected, how the data can be used, and why Border Patrol needs to ensure asset assist data are accurately recorded. Border Patrol also plans to prepare and release a video concerning asset assists for all field office personnel. Border Patrol plans to complete these actions by February 28, 2018. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Jeanette Henriquez (Assistant Director), Ashley Davis, Charlotte Gamble, Yvette Gutierrez, Eric Hauswirth, Nancy Kawahara, Marycella Mierez, Sasan J. “Jon” Najmi, and Claire Peachey made key contributions to this report.", "summary": "The southwest border has long been vulnerable to cross-border illegal activity. In fiscal year 2016, Border Patrol apprehended over 409,000 illegal entrants. Border Patrol has employed a variety of land-based surveillance technologies to assist in securing the border. GAO has reported regularly on CBP's progress and challenges deploying surveillance technologies. GAO was asked to review CBP's use of surveillance technology. This report examines (1) the deployment status of surveillance technology programs and the extent to which CBP has developed plans for future technology deployments and (2) what data are available on the contributions of deployed technologies to CBP's border security efforts and the extent to which CBP has assessed technology performance. GAO analyzed technology program documents; interviewed CBP and Border Patrol officials; and conducted site visits to Arizona and south Texas to observe the operation of various land-based technologies. We selected these locations because CBP has deployed or has plans to deploy a mix of technologies there, among other factors. The U.S. Border Patrol, within the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP), has made progress deploying surveillance technology along the southwest U.S. border under its 2011 Arizona Technology Plan (ATP) and 2014 Southwest Border Technology Plan. The ATP called for deployment of a mix of radars, sensors, and cameras in Arizona; the 2014 plan expanded these deployments to the rest of the southwest border. As of October 2017, Border Patrol had completed the planned deployment of select technologies to Arizona, Texas, California, and New Mexico. For example, in Arizona, Border Patrol deployed all planned Remote Video Surveillance Systems (RVSS) and Mobile Surveillance Capability (MSC) systems, and 15 of 53 planned Integrated Fixed Tower (IFT) systems. Border Patrol also deployed all planned MSC systems to Texas, California, and New Mexico and completed contract negotiations to deploy RVSS to Texas. These technology programs have experienced delays, but are currently on track against revised program schedules and cost baselines. To plan for future technology deployments, Border Patrol reports it will use its Requirements Management Process (RMP)––a process designed to facilitate planning by, among other things, identifying capability gaps and collecting agents' feedback––and other initiatives. Border Patrol is currently developing written guidance for the RMP to ensure station officials understand their roles and responsibilities in the process. Border Patrol agents collect and report data on asset assists, which are instances in which technologies or other assets (such as canine teams) contributed to an apprehension or seizure; however, Border Patrol has not provided sufficient guidance to ensure the accuracy and reliability of that data. For example, agents incorrectly attributed some apprehensions or seizures to certain technologies rather than others. Stations in the Rio Grande Valley sector recorded assists from IFTs in about 500 instances from June through December 2016; however, this sector does not have IFTs. Data integrity and quality checks are the responsibility of individual sectors, but Border Patrol has provided limited guidance on how to ensure data quality. Without sufficient guidance to ensure the quality of asset assist data, Border Patrol is limited in its ability to determine the mission benefits of its surveillance technologies and use information on benefits to inform resource allocation decisions. GAO recommends that Border Patrol issue guidance to improve the quality and usability of its asset assist information. DHS concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "In accordance with the UN Charter, peacekeeping operations aim to maintain international peace and security, among other things. The UN has deployed 71 peacekeeping operations since 1948. As of December 2018, the UN had 14 active peacekeeping operations worldwide (see fig. 1). We have previously reported that UN peacekeeping operations have become more complex since 1998. Traditional UN peacekeeping operations were primarily military in nature and limited to monitoring cease-fire agreements and stabilizing situations on the ground while political efforts were made to resolve conflicts. More recently, in response to increasingly complex situations in which conflicts may be internal, involve many parties, and include civilians as deliberate targets, several UN peacekeeping operations deploy civilian and police personnel, in addition to those from the military, and focus on peacebuilding activities. There are three principal UN bodies active in peacekeeping: The General Assembly, which consists of 193 member states that work through membership in one of six main committees and various subsidiary components tasked with specific issue areas. The Security Council, which has 15 members, including 5 permanent members with veto power: the United States, the United Kingdom, France, Russia, and China. The remaining 10 members of the Security Council are elected for 2-year terms to ensure geographical representation. The Secretariat, which comprises the administrative component of the UN and is led by the Secretary-General, who has responsibility for managing multiple UN departments, offices, and activities. The United States holds positions in two of these three components—the General Assembly and the Security Council. See table 1 for more information. State’s Bureau of International Organization Affairs (State/IO) and the USUN serve primary roles with regard to the UN. State/IO is the U.S. government’s primary interlocutor with the UN and other international organizations, and is charged with advancing U.S. national interests through multilateral engagement on a range of global issues, including peace and security, nuclear nonproliferation, human rights, economic development, climate change, and global health. The USUN serves as the United States’ delegation to the UN and is responsible for carrying out U.S. participation in the organization. The USUN represents the United States’ political, legal, military, and public diplomacy interests at the UN. As part of its oversight of UN peacekeeping operations, State/IO conducts annual monitoring trips to most UN peacekeeping operations and documents the findings of these trips in Mission Monitoring and Evaluation reports. These reports summarize State/IO’s evaluation of each peacekeeping operation’s progress toward meeting its mandate and identify challenges the operation faces in doing so. State/IO summarizes the findings of these reports for the National Security Council in a U.S. strategy and priorities memorandum that includes recommendations for U.S. action, including how the United States should conduct negotiations and vote on upcoming renewals of the mandates that authorize peacekeeping operations. According to State, the National Security Council conducts an interagency policy formulation process based on this input. Other U.S. government entities also support UN peacekeeping operations. For instance, State’s Bureau of Political-Military Affairs and Bureau of International Narcotics and Law Enforcement Affairs provide capacity-building support for troops and police from troop- and police- contributing countries, respectively, serving in UN peacekeeping operations. Additionally, the Department of Defense participates in UN peacekeeping operations by providing UN forces with equipment, personnel, and other support services. In April 2017, during a Security Council meeting on peacekeeping, the U.S. Permanent Representative to the UN outlined five principles that the United States believes are critical for effective peacekeeping. She remarked that, while peacekeeping is the UN’s most powerful tool to promote international peace and security, there is room for improvement, citing examples of operations that no longer need to exist or have limited host country consent. To make peacekeeping operations more effective, she emphasized that the UN should identify operations that lack the underlying political conditions for a resolution to the conflict, noting that numerous studies have concluded that such conditions are central to an operation’s success. To guide this process, she announced a set of five principles to which peacekeeping operations should be held: 1. Peacekeeping operations must support political solutions to conflict. 2. Operations must have host country consent. 3. Mandates must be realistic and achievable. 4. There should be an exit strategy, which would articulate the Security Council’s agreement on what success looks like and how to achieve it. 5. The Security Council should be willing to adjust peacekeeping mandates when situations improve or fail to improve. Since the Permanent Representative’s announcement of these principles, State/IO has included an assessment of each peacekeeping operation against these principles in the U.S. strategy and priorities memoranda that it prepares for the National Security Council. With regard to the fifth principle, in these memoranda, State/IO assesses whether and how a mandate itself should be changed, rather than assessing the Security Council’s willingness to change the mandate. Officials indicated that they conduct their assessment in this manner in order to inform and establish the U.S. negotiating position. Security Council resolutions establishing UN peacekeeping operations define mandates, or tasks, for each operation, and the peacekeeping operations perform a variety of activities to fulfill these tasks. In some cases, these activities are specifically mandated by a Security Council resolution; in others, the peacekeeping operation engages in an activity pursuant to a broad grant of authority to achieve a task. Each UN peacekeeping operation performs a unique set of tasks. The mandates of peacekeeping operations established prior to 1998 tend to include the monitoring of cease-fire as a mandated task, while those established after 1998 also include tasks such as the protection of civilians, facilitation of humanitarian assistance, and enforcement of economic sanctions or an arms embargo. Comparatively, operations in the African region have mandates that include the highest number of tasks. See appendix II for a list of the mandated tasks of all 14 peacekeeping operations. The UN has defined 16 categories into which these activities can be classified, including supervision or monitoring of ceasefire agreements, the protection and promotion of human rights, and protecting civilians. See table 3 for a list and description of these categories. Based on our review of State’s most recent assessments and discussions with State officials, we found that despite some military and political successes of individual peacekeeping operations, UN peacekeeping operations generally do not fully meet the U.S.-stated principles of effective peacekeeping and face challenges to achieving their mandates. For the 11 peacekeeping operations with mandates that renew on a regular basis, State prepares strategy and priority memoranda for appropriate committees of the National Security Council to inform the mandate renewal process. We reviewed these memoranda and spoke with State officials about their assessments of these operations against four of the U.S. principles. Table 4 presents GAO’s categorization of the results of State’s assessments. Supporting political solutions to conflict. Based on State’s assessment, we categorized 10 of the 11 peacekeeping operations as having met (five) or partially met (five) the principle of supporting political solutions to the conflict. For example, in Cyprus, State assessed that the United Nations Peacekeeping Force in Cyprus (UNFICYP) met this principle because its activities generally support a political solution, despite the country’s slow progress toward negotiating a final settlement of conflict between the Greek Cypriot and Turkish Cypriot communities. We categorized one peacekeeping operation, the United Nations Mission for the Referendum in Western Sahara, as not meeting this principle. Host country consent. Based on State’s assessment, we categorized all 11 peacekeeping operations as having met (four) or partially met (seven) the principle of host country consent. For example, State officials assessed that the government of the Central African Republic cooperates fully with the UN Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA). With respect to other peacekeeping operations, officials noted that a country’s consent to host an operation differs from cooperation with all aspects of a peacekeeping operation. For example, State reported that while the government of the Democratic Republic of the Congo has consented to the UN Organization Stabilization Mission in the Democratic Republic of the Congo’s (MONUSCO) presence in the country, the government has, at times, been hostile toward and actively taken steps to undermine the mission. Realistic and achievable mandates. Based on State’s assessment, we categorized seven of the 11 peacekeeping operations as having met (two) or partially met (five) the principle of having realistic and achievable mandates. For example, we categorized the African Union-United Nations Hybrid Operation in Darfur (UNAMID) as having partially met this principle because State reports that it has been able to carry out many of its mandated tasks; however, according to State’s assessments, government obstructions, a slow peace process, and mission management inefficiencies prevent the full implementation of UNAMID’s mandate. We categorized the remaining four peacekeeping operations as not meeting this principle. Exit strategies. Based on State’s assessment, we categorized five of the 11 peacekeeping operations as having met (two) or partially met (three) the principle of having an exit strategy in their mandates. For example, we categorized MINUSCA as having partially met the principle because, according to State’s assessment, the operation’s mandate has an exit strategy that will take several years to achieve given the lack of host government capacity. We categorized the remaining six peacekeeping operations as not meeting this principle. For example, based on State’s assessment, we categorized the UN Mission in the Republic of South Sudan (UNMISS) as not meeting this principle because the operation had not considered a near-term exit strategy because of ongoing conflict and the political stalemate in South Sudan. In addition to the four principles in the table, the fifth principle for effective peacekeeping reads as the Security Council’s willingness to change the mandate. In its memoranda, State assessed the fifth principle by examining whether the mandate was achieving its objective and, if not, should be adjusted. Using this method, State assessments show that the Security Council should adjust the mandates of nine of the 11 peacekeeping operations. For example, State assessed that the UNFICYP (Cyprus) mandate should be adapted to address the stalled political process. Although we found that State’s assessments show most peacekeeping operations are not fully meeting the U.S.-stated principles for effective peacekeeping, State officials we interviewed noted the important role UN peacekeeping operations play in maintaining stability in volatile conflicts around the world. These officials noted the dangerous and hostile environments in which peacekeeping operations are located, and, in some cases, human atrocities these operations help prevent. Further, U.S. and UN officials cited UN peacekeeping operations’ strengths, including international and local acceptance, access to global expertise, and the ability to leverage assistance from multilateral donors and development banks. Officials also cited strengths of individual operations, such as the protection of civilians against atrocities in South Sudan, the Democratic Republic of the Congo, and the Central African Republic, assistance toward the peaceful conduct of elections in numerous countries, police capacity building in Haiti, and support to peace processes and agreements in numerous countries. According to State/IO and USUN officials, continual evaluation and adjustment of the mandates of UN peacekeeping missions to better align with the U.S. principles remains a key tenet of the Administration’s UN peacekeeping policy, but the U.S. government faces two key challenges in this regard. First, some aspects of two of the five principles—host country consent and support for a political process—may be outside of the control of any international organization or bilateral partner. For example, MONUSCO’s (Democratic Republic of the Congo) mandate includes the provision of elections assistance in support of the nation’s political process, but, according to State officials, the lack of host government cooperation has relegated MONUSCO’s efforts in this area to technical assistance. Second, these officials explained that the Security Council does not always adopt U.S. proposals to change mandates to align with these principles, such as including an exit strategy. Changing peacekeeping mandates requires nine affirmative votes and no vetoes from permanent Council members, which, according to State and USUN officials, can be difficult. For example, USUN officials stated that the UN Interim Administration Mission in Kosovo (UNMIK) had fulfilled its mandate, but Russia and China were not supporting a vote to close the operation. Moreover, State officials noted that the assessment process using the principles began in 2017 and the United States has had a limited number of opportunities to negotiate changes to peacekeeping mandates because renewals generally occur annually. State officials cited several examples of notable progress, however, in improving the efficiency and focus of UN peacekeeping operations. According to State officials, through U.S. leadership, the Security Council reconfigured the operation in Haiti to focus on police and the rule of law. Additionally, the Security Council changed and downsized the operation in Darfur to reflect current political and security realities. State officials also said that the UN Security Council supported responsible drawdowns of peacekeeping operations, most recently in Cote d’Ivoire, while pushing peacekeepers in Lebanon to use all of their mandated authorities to be more effective in carrying out their tasks. According to State officials, adherence to these principles is not sufficient to guarantee success. An operation could fully meet all the principles, but still face challenges carrying out its mandate because of formidable circumstances, such as insecure security environments or limited government cooperation. However, State officials also noted that these principles describe critical conditions for effective peacekeeping in that an operation that does not meet these principles is unlikely to be able to fully carry out its mandate. Moreover, given the importance of establishing the necessary conditions for peacekeeping success, State/IO and USUN officials acknowledged that State must continue to work with the Security Council to ensure that peacekeeping operations meet the principles of effectiveness, such as modifying mandates to include exit strategies. In doing so, the UN and its member states could have greater assurance that they have set up peacekeeping operations for success. When the U.S. agencies involved in peacekeeping agree that the UN should change a peacekeeping operation’s mandate, USUN officials told us that the USUN works with other Security Council members to make adjustments, such as adding or removing tasks from an operation’s mandate. While not all proposals are adopted by the Security Council, State officials highlighted several types of mandate adjustments the United States has pursued, including: Removal of tasks. State and USUN officials told us they strive to remove tasks from peacekeeping mandates when those tasks have been achieved or are no longer relevant or achievable. For example, officials noted that the USUN successfully advocated that election monitoring be removed from the list of mandated tasks for MINUSCA because the elections had taken place in the previous year and, therefore, the task was no longer relevant. Addition of language to prioritize tasks. State and USUN officials told us that another strategy is to add language to a mandate to designate priority tasks. Officials stated that, as a result of such language in mandates for MINUSCA, MONUSCO, and MINUSMA, management at these peacekeeping operations had shifted mission resources to focus on priority tasks. For example, officials cited MINUSCA’s proposed budget, which increased resources for protection of civilians—a task designated as a priority by the Security Council—and reduced resources for Security Sector Reform, an area of less relevance to the mission given the current situation in the Central African Republic. Addition of language to clarify exit strategies. State and USUN officials noted that adding language to clarify exit strategies aids an operation’s success. For example, for the MINUJUSTH (Haiti) 2017 mandate, USUN officials noted that the United States had advocated successfully for the Security Council to include language calling for an exit strategy with benchmarks to assist the UN in monitoring the progress of the operation’s transition to a non-peacekeeping mission beginning in October 2019. USUN officials told us that they do not have sufficient information to allow them to determine accurate resource allocation to peacekeeping operations when the Security Council makes a change to the mandate. For example, USUN officials told us that as a result of the Security Council’s decision to reduce resources for specific tasks in MONUSCO’s 2017 mandate—such as Security Sector Reform and Disarmament, Demobilization, and Reintegration activities, where little progress had been achieved—the United States had sought to reduce the MONUSCO budget to reflect this change. However, the USUN did not have complete information from the UN on all of the costs associated with this change, including support costs, such as flight hours and fuel for transport vehicles. In the absence of such information from the UN, USUN officials estimated these costs and advocated for a reduction in MONUSCO’s budget based on their own estimates. USUN officials noted that without input from the UN, they did not have sufficient information to determine the accuracy of their estimates. USUN officials told us that these information gaps exist because UN peacekeeping budgets do not include estimated costs by task. Rather, UN peacekeeping budgets provide information on the operation’s use of financial resources for personnel and operational costs. Thus, according to USUN officials, when the Security Council changes a peacekeeping operation’s mandate—such as by adding or removing a task—it is not clear how to adjust the budget for that operation to accurately reflect the change. UN headquarters officials told us that the UN does not prepare peacekeeping budgets with estimated costs by task because it is challenging to do so. However, senior officials with whom we spoke at two peacekeeping operations said that, despite challenges, it is possible to estimate costs by mandated task, which would provide additional budget transparency for the UN. Further, USUN officials stated that having UN estimates readily available to all member states would not only improve the accuracy of decisions related to resource allocation, but also improve the transparency of the budget negotiation process. UN guidance on peacekeeping states that when the UN changes an existing peacekeeping mandate it should make commensurate changes in the resources available to the operation. Further, internationally- accepted and federal standards for internal control note that organizations should use quality information to make informed decisions to achieve their objectives. Without information on estimated costs by task, USUN and other UN member states have difficulty determining that resources for UN peacekeeping operations accurately reflect changes to the mandates of peacekeeping operations. With this information, the United States and the international community can better ensure that resources provided to peacekeeping operations support the tasks agreed upon by UN member states. UN member states, including the United States, have expressed concerns regarding the quality of information regarding UN peacekeeping operations. Specifically, according to member states, information on peacekeeping performance can be incomplete and is not always provided on a timely basis, despite ongoing UN efforts to improve performance information. UN Security Council resolutions and peacekeeping guidance documents have stated the importance of having access to quality performance information to make management decisions. For example, UN Security Council resolutions note that data—based on clear and well- defined benchmarks—should be used to improve the performance of peacekeeping operations. The UN’s Special Committee on Peacekeeping Operations has also called for a timely flow of information regarding how well peacekeeping operations perform their mandated activities. Additionally, internationally-accepted and federal standards for internal control also highlight the importance of quality information in enhancing the ability of organizations to achieve their performance goals. Quality information includes information that is complete and provided on a timely basis, among other attributes. UN member states have expressed concerns regarding the completeness of peacekeeping performance information. For example, USUN officials have noted concerns related to the completeness of performance information about peacekeeping troops. USUN officials noted that while the UN maintains some performance information on peacekeeping operations, such as a database with information on troop capabilities and readiness to deploy, it does not provide a complete picture of peacekeeping performance. Specifically, USUN officials noted that they would like better performance information about when peacekeeping units are engaging well, failing to engage, or lack the training to perform the tasks they have been asked to carry out. Also, the Security Council noted concern in a September 2018 resolution sponsored by the United States about the underperformance of some peacekeepers, such as inaction in the face of imminent threats of physical violence against civilians and conduct issues. Another concern relates to the completeness of performance information about civilian peacekeeping staff. According to the UN, civilian peacekeeping staff, who comprise about 14 percent of all peacekeeping personnel, perform many of the mandated activities of peacekeeping operations, including promoting and protecting human rights, helping strengthen the rule of law, and fostering the political process. However, according to USUN officials, the UN needs more complete information on the performance of these staff. For example, as noted above, UN officials told us that the UN had developed a database to collect performance information on military personnel staffed to UN peacekeeping operations, but did not have a similar way to track information on civilian personnel. Additionally, the Security Council noted in a September 2018 resolution that the UN must improve evaluation of all UN personnel supporting peacekeeping operations, including civilians. Individual member states have concurred, with some stating that better performance information is needed in all sectors of UN peacekeeping and others noting the need for comprehensive information on all peacekeeping personnel, including civilian personnel. The Security Council has also noted concerns about underreporting of information, which can affect data completeness. For example, in a September 2018 resolution, the Security Council expressed concern regarding the underreporting of sexual exploitation and abuse by some UN peacekeepers and non-UN forces authorized under a Security Council mandate, including military, civilian, and police personnel. The UN has reported that instances of sexual exploitation and abuse by peacekeepers undermine the credibility of peacekeeping operations by breaking down the trust between an operation and the communities it serves. UN member states have also expressed concerns regarding the timeliness of UN performance information on peacekeeping. For example, USUN officials cited instances of conduct violations by UN troops in the Central African Republic and the Democratic Republic of the Congo about which the Security Council had not been informed for several months. Ultimately, the Security Council learned of these incidents from media reporting and had to seek additional information from the UN Secretariat. Additionally, the Security Council has expressed concern regarding the timely reporting of performance information on police personnel assisting peacekeeping operations. For instance, in Resolution 2382 adopted in November 2017, the Security Council emphasized the need to improve accountability and effectiveness in the performance of peacekeeping operations, requesting that the UN Secretariat provide member states timely and complete information regarding the training needs of police personnel. Further, the UN’s Special Committee on Peacekeeping Operations has also called for a timely flow of information on a range of peacekeeping performance issues, such as reports and evaluations of peacekeeping operations, incidents involving the safety and security of peacekeepers, and troop misconduct, such as sexual exploitation and abuse. For example, in its March 2018 report, the committee stressed the need for timely information sharing about serious incidents involving the safety and security of peacekeepers, noting that prompt reporting of such incidents contributes to their prevention and positive resolution. USUN officials told us that they have concerns about the quality of peacekeeping performance data because the UN does not have comprehensive performance information about its peacekeeping operations and officials are unsure whether new UN reforms in this area will address their concerns. USUN officials described various UN sources of performance information on peacekeeping operations, such as strategic reviews conducted by the Secretary-General on the performance of peacekeeping operations and a UN database containing information on peacekeeping troops’ readiness to deploy. However, officials noted that this information is insufficient to help them assess the overall performance of UN peacekeeping operations. For instance, USUN officials noted that the information collected is not standardized across UN peacekeeping operations or for all peacekeeping personnel. Without better information, USUN officials said that they had challenges obtaining a clear picture of the performance of UN peacekeeping operations. According to USUN officials, a culture of performance in peacekeeping is important to better deliver on peacekeeping mandates and improve the safety and security of peacekeepers in the field. Acknowledging challenges related to peacekeeping, the UN Secretary- General announced a peacekeeping reform initiative known as Action for Peacekeeping in March 2018. As part of this effort, the Secretary-General invited member states to help develop a set of mutually agreed principles and commitments to improve peacekeeping operations. The Secretary- General announced these shared commitments in August 2018 and, as of September 2018, 151 member states and several regional organizations had made political commitments to implement them. The declaration of shared commitments includes a commitment to ensure the highest level of peacekeeping performance and to hold all peacekeeping personnel accountable for effective performance by, among other things, ensuring that performance data are used to inform planning, evaluation, deployment decisions and reporting. However, USUN officials told us in October 2018 that their concerns about the quality of UN peacekeeping performance data still remained because the UN is in the early stages of adopting these reforms. Further, USUN officials stated that they have yet to see concrete plans of action and as such, it is not clear to them that the reforms will address their concerns to ensure that the UN provides complete and timely peacekeeping performance information to its member states. For instance, officials stated that in September 2018—6 months after the Action for Peacekeeping agreements to improve the use of performance data to manage peacekeeping operations—the Security Council adopted Resolution 2436, which noted continued concerns related to completeness and timeliness of peacekeeping performance information provided to the Council. Without fully addressing member states’ concerns about the quality of information on the performance of peacekeeping operations, the Security Council is limited in its ability to identify problems and take corrective action to improve the performance of peacekeeping operations. More complete and timely performance information could enhance the Security Council’s ability to effectively manage peacekeeping operations. Peacekeeping operations are a key instrument for implementing the UN’s central mission of maintaining international peace and security. As a member state of the UN, a permanent member of the Security Council, and the largest financial contributor to the UN peacekeeping budget, the United States plays a significant role in both the management of peacekeeping operations and encouraging reforms to improve peacekeeping activities. According to State, the U.S.-stated principles for effective peacekeeping are critical conditions for peacekeeping operations to carry out their mandates. Given the importance of establishing the necessary conditions for peacekeeping success, State/IO and USUN officials acknowledged the imperative of continuing to work with the Security Council to ensure that peacekeeping operations meet U.S.-stated principles of effectiveness. In doing so, the UN and its member states could have greater assurance that they have set up peacekeeping operations for success. Without information on estimated costs by task, USUN and other UN member states have difficulty determining that resources for UN peacekeeping operations accurately reflect changes to the mandates of peacekeeping operations. With this information, the United States and the international community can better ensure that resources provided to peacekeeping operations support the tasks agreed upon by UN member states. Additionally, while the UN has initiated reform efforts to strengthen peacekeeping, including better use of performance information, UN member states have continued to express concerns about the quality of this information and note that it is too soon to tell whether reforms will address their concerns. Without fully addressing member states’ concerns about the quality of information on the performance of peacekeeping operations, the Security Council is limited in its ability to identify problems and take corrective action to improve the performance of peacekeeping operations. We are making the following three recommendations to State: The Secretary of State should continue to work with the Permanent Representative to the United Nations to ensure that UN peacekeeping operations fully meet principles of effective peacekeeping. (Recommendation 1) The Secretary of State should work with the Permanent Representative to the United Nations to ensure that the United Nations provides information to member states on the estimated costs of mandated peacekeeping tasks to provide better cost information when the Security Council adjusts peacekeeping mandates. (Recommendation 2) The Secretary of State should continue to work with the Permanent Representative to the United Nations to ensure that the United Nations takes additional steps to address member states’ concerns about complete and timely information on the performance of United Nations peacekeeping operations. (Recommendation 3) We provided a draft of this report to the Departments of Defense and State for review and comment. The Department of Defense told us that they had no comments on the draft report. In its comments, reproduced in appendix V, State concurred with our recommendations. State also provided technical comments, which we incorporated as appropriate throughout the report. We are sending copies of this report to congressional committees; the Acting Secretary of the Department of Defense; and the Secretary of the Department of State. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VI. In this report, we examine (1) the United Nations’ (UN) process to establish and renew peacekeeping operations, including the tasks these operations perform; (2) the Department of State’s (State) assessment of the effectiveness of UN peacekeeping operations; (3) how the United States works within the UN to adjust peacekeeping mandates and associated resources; and (4) UN member states’ concerns regarding the UN’s performance information. To examine the UN’s process to establish and renew peacekeeping operations and the tasks these operations perform, we reviewed UN policy and guidance, as well as various UN websites accessed as of November 2018, and interviewed State and UN officials to discuss UN processes. To determine the tasks these operations perform, we analyzed the most recent UN resolution authorizing the peacekeeping operation passed by the Security Council as of December 31, 2018— generally referred to as a mandate—for each of UN’s 14 peacekeeping operations, and categorized the tasks of each operation. We describe UN categories of activities to achieve mandated tasks as listed in the Department of Peacekeeping Operations-Department of Field Support’s Core Pre-deployment Training Materials for United Nations Peacekeeping Operations, which lists and defines 16 categories. We also analyzed the most recent mandate as of December 31, 2018 for the 14 UN peacekeeping operations to identify the date on which the authority for each operation expires and the period of time reported until the next renewal decision. To examine State’s assessment of the effectiveness of UN peacekeeping operations, we analyzed State’s Bureau of International Organization Affairs’ (State/IO) most recent Mission Monitoring and Evaluation reports as of December 2018 and the accompanying U.S. strategy and priorities memoranda outlining U.S. priorities for the operations’ mandate renewal. State bases its Mission Monitoring and Evaluation reports on annual field visits to peacekeeping operations during which assessors interview U.S. and UN officials to evaluate the operation’s progress toward meeting its mandate and identify factors that affect the operation’s ability to do so. Based on these reports, State’s strategy and priorities memoranda summarize U.S. observations on the peacekeeping operation and, among other things, propose options for U.S. action within the Security Council. Each of the 11 memoranda we reviewed also includes State’s assessment of the peacekeeping operation against the U.S. government’s stated principles of effective peacekeeping, which State considers to be critical conditions for an operation to successfully implement its mandate. These principles are whether a peacekeeping operation (1) supports a political solution to conflict, (2) has host country consent, (3) has a realistic and achievable mandate, and (4) has an exit strategy; and (5) whether the Security Council is willing to adjust the mandate if the situation in the country improves or fails to improve. We reviewed State’s memoranda on the operations and considered the following types of factors when determining whether to categorize State’s assessments as met, partially met, or not met: Supporting political solutions: Mediation processes, peace agreements, and support for democratic elections. Host country consent: Consent to the operation, and the necessary freedom of action, both political and physical to carry out its mandated tasks. Realistic and achievable mandates: Extent to which operation tasks appeared feasible in light of current conditions and available resources. Exit strategies: Strategic goals and targets, strategic planning, and timetables for withdrawal. We categorized a principle as “met” if State indicated that the operation was generally succeeding in an area. We categorized a principle as “not met” if State indicated that the operation was generally not succeeding in an area. We categorized a principle as “partially met” if State indicated that the operation had some areas of success, but was generally not succeeding or restricted from success in some way. The fifth principle for effective peacekeeping reads as the Security Council’s willingness to change the mandate. However, in its memoranda, State/IO assesses whether and how a mandate should be changed, rather than assessing the Security Council’s willingness to change the mandate. For this principle, we categorized State’s results as either “yes” or “no.” We coded the results as “yes” if State assessed that the Security Council should adjust the mandate. We categorized the results as “no” if State assessed that the Security Council did not need to adjust the mandate. The coding was conducted by one GAO analyst and separately verified by two other GAO analysts. In December 2018, we met with State/IO and USUN officials to discuss their current assessment of each peacekeeping operation. We updated our categorization of State’s written assessments to reflect the agency’s most current assessment as appropriate. We discussed our methodology and results with officials from the U.S. Mission to the UN (USUN), who confirmed that our methodology and results were valid. We also discussed with these officials additional steps the United States could take to ensure that peacekeeping operations fully meet the principles for effective peacekeeping. We did not independently verify State’s assessment, but we reviewed State’s methodology and discussed it with officials and found the information in State’s reporting to be sufficiently reliable for the purposes of this report. To examine how the United States works within the UN to adjust peacekeeping mandates and associated resources, we interviewed USUN officials to understand the different approaches the Security Council takes to revise mandates and to understand the types of information available to UN member states to determine appropriate resource adjustments when mandates change. We also interviewed a senior official from the UN Department of Field Support’s Field Budget and Finance Division and reviewed UN budget and performance reports to identify how the UN reports on peacekeeping budget information to member states. In addition, we interviewed officials at two of the four peacekeeping operations we selected for in-depth case studies, as discussed below, to determine whether they were able to report on the operation’s budget by mandated task. To determine the extent to which State has sufficient information to advocate for resources adjustments when mandates change, we compared information currently provided by the UN to internationally-accepted and federal standards for internal control, which state that organizations should have quality information to help them make decisions. To examine UN member states’ concerns regarding the UN’s performance information, we interviewed officials from the USUN to understand their concerns regarding performance information available to them from the UN. Based on these interviews, we identified two main issues of completeness and timeliness. To understand the extent to which UN member states share these concerns, we analyzed the UN Special Committee on Peacekeeping’s 2016, 2017, and 2018 annual reports and Security Council resolutions to confirm member states’ concerns related to completeness and timeliness of performance information. We did not independently verify the veracity of these concerns, because we did not have access to the UN’s internal performance information. We also reviewed UN documents on the Secretary-General’s new reform efforts, transcripts of meetings the Security Council held on peacekeeping in 2018, and Security Council resolutions to identify steps the UN is taking to address these concerns. Further, we analyzed the extent to which the UN could better address member state concerns regarding performance information by comparing the Secretary-General’s plans for implementing the UN’s new reform efforts with internationally-accepted and federal standards for internal controls, which identify necessary elements of performance information. To inform our analyses of all four objectives, we also selected UN peacekeeping operations in four countries—the Democratic Republic of the Congo, Haiti, Kosovo, and Lebanon—for in-depth case studies. We selected these peacekeeping operations because they are the largest of the three types the UN employs, and are located in the four geographic regions in which UN peacekeeping operations are currently deployed— Africa, Europe, the Middle East, and the Western Hemisphere. While the findings from these peacekeeping operations cannot be generalized, they provide an illustrative mix of the UN’s peacekeeping activities. To inform our audit, we conducted a literature review using ProQuest language searches, focusing on literature published between 2015 and 2018. In total, we identified and reviewed 12 relevant publications that helped inform our study of the four operations. We conducted fieldwork at peacekeeping operations in Haiti, Kosovo, and Lebanon, and interviewed U.S., UN, and host government officials, as well as representatives of other donor countries and civil society. In lieu of fieldwork, we conducted videoconferences with senior officials at the peacekeeping operation in the Democratic Republic of the Congo. We conducted this performance audit from October 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We analyzed United Nations (UN) Security Council resolutions authorizing the 14 UN peacekeeping operations, in effect as of December 31, 2018, and identified the mandated tasks of these operations. See table 5 below for a complete list. To inform its oversight of United Nations (UN) peacekeeping operations, the Department of State’s Bureau of International Organizations Affairs (State/IO) conducts annual monitoring trips to most UN peacekeeping operations. State/IO evaluates peacekeeping operations’ progress toward meeting their mandates and identifies any challenges to their progress. State/IO documents its findings in Mission Monitoring and Evaluation reports and disseminates these reports for comment to various State bureaus involved in international peacekeeping efforts and to relevant offices in the Department of Defense. The findings of these assessments are intended to inform the National Security Council and the U.S. Mission to the United Nations in their decision-making. We analyzed the most recent Mission Monitoring and Evaluation reports that State had conducted through June 30, 2018. In our analysis of State’s assessments, we found that the challenges State most frequently identified for each UN peacekeeping operation were those associated with host government cooperation, resources, and the security situation. According to the UN, the UN does not deploy a peacekeeping operation unless the organization has the consent of the involved parties, which often include the governments of the countries in which conflicts occur. While host governments generally have consented to the presence of UN peacekeeping operations, State found instances in which the host government did not cooperate fully or did not have a positive relationship with the peacekeeping operation working in-country. For example, in Darfur, State found that while the Sudanese government had demonstrated some progress, it continued to restrict the African Union- United Nations Hybrid Operation in Darfur’s (UNAMID) access and movement in certain regions. Additionally, according to government officials in Kosovo, the government of Kosovo does not engage with the UN Interim Administration Mission in Kosovo (UNMIK) because it considered the operation to have completed its mandate as a transitional authority once Kosovo declared its independence and established a functioning government. As a result, UNMIK works on community trust- building activities with local communities according to the vision and strategic direction of the head of the peacekeeping operation. State found that several operations faced financial, human, and material resource constraints. For example, State assessed that the peacekeeping operations in Mali; the Democratic Republic of the Congo; the Golan Heights, Syria; and Haiti did not have enough funds to meet their needs. State also found that troops in the peacekeeping operations in the Central African Republic; the Democratic Republic of the Congo; and the Golan Heights, Syria did not have enough troops with sufficient skillsets. Further, State found that the operations in the Democratic Republic of the Congo; Haiti; Mali; and Abyei, Sudan lacked adequate equipment. Officials from the peacekeeping operation at the UN Interim Force in Lebanon (UNIFIL) also told us they anticipated a budget shortfall of over $2 million for the 2018-2019 peacekeeping fiscal year as a result of a reduced budget and an increase in UN troop salaries. However, officials at the UN Organization Stabilization Mission in the Democratic Republic of the Congo (MONUSCO) told us about ways in which they were maximizing and readjusting existing resources in spite of these challenges. They stated that MONUSCO’s March 2018 mandate renewal was intended to streamline the operation and was informed by the UN’s most recent strategic review of the operation. Senior MONUSCO officials also told us that, as a result of the review, the Security Council had reduced its work in the justice reform sector by 50 percent because it believed the operation would be able to engage more meaningfully in this arena after the presidential election. State identified several peacekeeping operations that worked in environments in which there were ongoing ceasefire violations or unstable security situations. State found that peacekeeping operations in the Democratic Republic of the Congo; the Golan Heights, Syria; Western Sahara; Cyprus; and Lebanon faced ongoing ceasefire violations. State also found that the peacekeeping operations in Mali and the Central African Republic worked in dangerous conditions and the operations in Mali and the Democratic Republic of the Congo faced persistent attacks on civilians. During our field work in Lebanon, UNIFIL officials emphasized the importance and successes of the UNIFIL-facilitated tripartite mechanism, which provides regular opportunities for soldiers from the Lebanese Armed Forces and the Israeli Defense Force to help prevent any event from escalating into a major event. According to U.S. embassy officials, because of the prevalence of armed groups in eastern Congo, the government’s and international community’s response to the Ebola outbreak that started there in August 2018 was significantly more complex and challenging than their response to the May 2018–July 2018 outbreak in northwestern Congo, an area that does not have a significant presence of armed groups. We selected United Nations (UN) peacekeeping operations in four countries—the Democratic Republic of the Congo, Haiti, Kosovo, and Lebanon—for case studies. Below is a synopsis of each of these peacekeeping operations and key challenges they face, according to U.S. and UN officials. Key Facts About DRC Population: Approximately 83.3 million people live in DRC. About 60 percent of the population is under the age of 25, and about 40 percent is under the age of 15. There are over 200 ethnic groups; the majority is Bantu. Map of the Democratic Republic of the Congo (DRC) Government: DRC is a semi- presidential republic. The last presidential election was held on December 30, 2018. Economy: DRC’s estimated gross domestic product for 2017 was $40.4 billion. Conflict and corruption have contributed to the poor economic performance of DRC, despite its vast natural resource wealth. Timeline of Key Events 1960: The Republic of the Congo is granted independence from Belgium. 1960-1964: The UN deploys the United Nations Operation in the Congo (ONUC) to ensure the withdrawal of Belgian forces from the Republic of the Congo, among other things. 1998: “Africa’s World War” begins, with seven countries fighting in DRC. Current Status and Challenges According to U.S. and United Nations (UN) officials, MONUSCO’s most important mandated tasks are the protection of civilians and support to the government of DRC’s elections. According to the Secretary-General, the impact of intercommunal violence and attacks by armed groups continue to persist in eastern and southern DRC and have led to the displacement of thousands of people. Held after several delays, the results of the December 30, 2018 national and provincial elections are expected to result in the first democratic transition of power in the nation’s history. Despite varied disputes over preliminary results and reports of sporadic violence, the UN reports that the elections were relatively peaceful. However, according to the UN, pending the announcement of the final results by the DRC Constitutional Court, the coming days will be critical. 1999: The Lusaka Ceasefire is signed, ending the war. The UN establishes a peacekeeping operation in DRC—United Nations Organization Mission in the Democratic Republic of the Congo (MONUC). July 2010: The UN renames MONUC MONUSCO and updates the peacekeeping operation’s mandate. According to U.S. and UN officials, the biggest challenges MONUSCO faces in carrying out its mandated tasks are the vast size of DRC and the fact that the government of DRC will accept limited help from MONUSCO in carrying out its elections. According to UN officials, MONUSCO is having some success in addressing instability in eastern DRC. For example, MONUSCO said it receives 300 to 400 calls per month alerting it to attacks and that either MONUSCO or DRC forces respond to 90 percent of these calls. In addition, UN officials told us that the Security Council provided MONUSCO with a budget to use for logistical support for elections assistance, so MONUSCO can readily help the DRC government if and when it asks for assistance. Key Facts about Haiti Population: Approximately 10.6 million people live in Haiti. More than 50 percent of the population is under the age of 24. Government: Haiti is a semi- presidential republic. Economy: Haiti’s estimated gross domestic product for 2017 was $8.36 billion. Haiti continues to rely on international economic assistance for fiscal sustainability, with over 20 percent of its budget coming from foreign aid. In 2010, Haiti’s unemployment rate was estimated to be 40.6 percent, and in 2012, 58.5 percent of its population was estimated to be living below the poverty line. Timeline of Key Events 1993: Following a military coup, the UN establishes the first of a series of three peacekeeping operations. The last of these operations leaves in 2000. 2004: The UN establishes the United Nations Stabilization Mission in Haiti (MINUSTAH) to help restore and maintain order after the collapse of the government. 2017: The UN establishes MINUJUSTH as a successor to MINUSTAH, composed of police and civilian personnel and focused on institutional strengthening and development. Current Status and Challenges The United Nations (UN) established MINUJUSTH in 2017 to assist the government of Haiti in strengthening rule-of-law institutions, further support and develop the Haitian National Police, and engage in human rights monitoring, reporting, and analysis. In the resolution establishing MINUJUSTH, the Security Council called on the Secretary-General to develop a 2-year exit strategy with clear benchmarks. The Secretary- General regularly reports on MINUJUSTH’s progress toward reaching its benchmarks. The Security Council resolution extending the MINUJUSTH mandate to April 2019 calls on the Secretary-General to conduct a strategic assessment of the operation by early 2019 and present recommendations on the UN’s future role in Haiti. To facilitate the transition, the UN has created a joint UN Development Program and MINUJUSTH rule-of-law program to continue its work in this area after the peacekeeping operation ends. According to U.S. and UN officials, Haiti continues to struggle with weak institutions and high levels of government corruption. Moreover, according to MINUJUSTH officials, the process of transitioning from the previous peacekeeping operation in Haiti to MINUJUSTH was challenging because of the level of effort involved in liquidating assets, among other things. These officials told us that similar issues will make the MINUJUSTH transition to a non-peacekeeping UN presence equally challenging. Key Facts about Kosovo Population: Approximately 1.9 million people live in Kosovo. About 42 percent of the population is under the age of 25. The primary ethnic group is the Albanian Kosovars, making up approximately 93 percent of the population. Other ethnic minorities include Serbs and Bosnians. Government: Kosovo is a parliamentary republic. Economy: Kosovo’s estimated gross domestic product in 2017 was an estimated $19.6 billion. Kosovo's economy has achieved some stability, but it is still highly dependent on the international community for financial and technical assistance. Kosovo’s unemployment rate is 33 percent, with a youth (under 26) unemployment rate near 60 percent. Timeline of Key Events 1991: Kosovo's Albanians declare independence from Serbia. 1998: Multi-year conflict results in large numbers of casualties, refugees, and displaced persons. Current Status and Challenges The Security Council established UNMIK to provide an interim administration for Kosovo, under which UNMIK had authority over the territory and people of Kosovo, including all legislative and executive powers and administration of the judiciary. Following the declaration of independence by the Kosovo Assembly in June 2008, the tasks of the operation have changed to focus primarily on the promotion of security, stability, and respect for human rights in Kosovo, as well as reducing tensions between Serbia and Kosovo. 1999: A 3-month NATO military operation against Serbia results in the Serbs withdrawing their military and police forces from Kosovo. 1999: UN Security Council Resolution 1244 (1999) places Kosovo under a transitional administration pending a determination of Kosovo's future status. According to U.S. and United Nations (UN) officials, the greatest challenge UNMIK faces in carrying out its mandate is that the Kosovo government will not engage directly with UNMIK. According to U.S., UN, and Kosovo government officials, the Kosovar government will not engage with UNMIK because it views UNMIK’s mandate as obsolete, given Kosovo’s independence. U.S. officials believe that UNMIK has achieved its mandate and should be closed. However, these officials also noted that Russia, as a permanent member of the Security Council with a veto, prevents the affirmative decision necessary to close UNMIK. 2008: The Kosovo Assembly declares Kosovo’s independence. U.S. and UN officials told us that UNMIK has found ways to indirectly assist the Kosovo government, such as by providing funding for government efforts in Kosovo through other UN agencies with which the Kosovo government will engage. For instance, one UN official told us that UNMIK had provided a ground-penetrating radar to the Office of the United Nations High Commissioner for Human Rights to assist in efforts to locate missing persons, which will help clarify the fate and whereabouts of people unaccounted for after the conflict with Serbia. Key Facts about Lebanon Population: Approximately 6.2 million people live in Lebanon. The country is about 27 percent Sunni, 27 percent Shia, and 41 percent Christian. Officially, there are almost 1 million Syrian refugees in Lebanon. Government: Lebanon is a parliamentary republic, with a unicameral legislature that elects the president. Currently, 35 of 128 legislative seats are held by the Shia Amal-Hezbollah coalition. Lebanon's borders with Syria and Israel remain unresolved. Economy: Lebanon’s estimated gross domestic product for 2017 was $52.7 billion, with a real growth rate of 1.5 percent. The growth rate is down from about 7 percent in 2010. Timeline of Key Events 1975-1990: Sectarian violence leads to the Lebanese civil war. 1978: Israel sends troops into Lebanon. March 1978: UNIFIL is established to supervise the withdrawal of Israeli forces from southern Lebanon. Israeli forces withdraw in 2000. Current Status and Challenges UNIFIL was created by the Security Council in March 1978 to supervise the Israeli withdrawal from Lebanon, restore international peace and security, and assist the government of Lebanon in restoring its authority. In late 2006, following renewed conflict between Israel and Lebanon, the Security Council enhanced UNIFIL’s forces and added additional tasks to its mandate to include monitoring the cessation of hostilities and extending UNIFIL’s assistance to help ensure humanitarian access to civilian populations and the voluntary and safe return of displaced persons. The United Nations (UN) reported in March 2018 that the situation in UNIFIL’s area of operations has remained generally calm, but there has been no progress toward implementing a permanent ceasefire. Early 1980s: Israeli forces in southern Lebanon start facing opposition from a militant group that would become Hezbollah, backed by Iran. July-August 2006: Hezbollah captures two Israeli soldiers, sparking a 34-day war with Israel. UN Security Council Resolution 1701 calls for a cease-fire between the two sides and supplements UNIFIL’s mandate. According to U.S. and UN officials, one challenge UNIFIL faces in carrying out its mandate is that Israel and Lebanon have not agreed on a peaceful solution to their conflict. Officials noted that there is no articulated exit strategy for the operation and that the Lebanese Armed Forces lack the capacity to secure the southern border with Israel—a necessary condition for the successful exit of UNIFIL. However, U.S. and UN officials agreed that UNIFIL plays a vital role by deterring further hostilities in southern Lebanon and providing a neutral forum for meetings between Israel and Lebanon. In addition to the individual named above, Elizabeth Repko (Assistant Director), Shirley Min (Analyst in Charge), Julia Jebo Grant, Sarah Amer, Molly Miller, Debbie Chung, Martin de Alteriis, Neil Doherty, Mark Dowling, Michael Rohrback, and Brandon Hunt made contributions to this report.", "summary": "As of December 2018, the UN had 14 ongoing peacekeeping operations with approximately 103,000 personnel. The United States is the single largest financial contributor to these operations, assessed by the UN to contribute an estimated $1.7 billion in fiscal year 2018, according to State. It is also a member of the Security Council, the UN body tasked with maintaining international peace and security. GAO was asked to review UN peacekeeping operations. In this report, GAO examines (1) the UN's process to establish and renew peacekeeping operations, including the tasks these operations perform; (2) State's assessment of the effectiveness of UN peacekeeping operations; (3) how the United States works within the UN to adjust peacekeeping mandates and associated resources; and (4) member states' concerns regarding the UN's performance information. To address these objectives, GAO analyzed UN and U.S. documents and interviewed UN and U.S. officials. GAO also interviewed officials at peacekeeping operations in the Democratic Republic of the Congo, Haiti, Kosovo, and Lebanon. GAO selected these operations because they represent those that perform a variety of tasks and are located in diverse regions. The United Nations (UN) Security Council establishes and renews peacekeeping operations by issuing resolutions, generally referred to as mandates, which can include a range of tasks, such as monitoring ceasefires and protecting civilians. Generally once or twice a year, the Security Council renews an operation's mandate and makes adjustments as needed. GAO's review of the Department of State's (State) assessments as of December 2018 and discussions with State officials found that UN peacekeeping operations generally do not fully meet U.S. principles for effective peacekeeping, which include host country consent and an exit strategy, among others. GAO's review of 11 operations found that all 11 met or partially met the principle of host country consent, while five included or partially included an exit strategy. State officials stated that they must continue to work with the UN to ensure peacekeeping operations meet principles of effectiveness, which they noted are key to success. The United States works with the UN Security Council and member states to adjust peacekeeping mandates, but it lacks sufficient information to determine if associated resources accurately reflect these adjustments. State officials noted that they do not have this information because UN peacekeeping budgets do not estimate costs by mandated task. UN peacekeeping guidance states that when the UN changes a peacekeeping mandate, it should make commensurate changes to that operation's resources. Without information on estimated costs by task, member states have difficulty determining that resources for UN peacekeeping operations accurately reflect mandate changes. The UN has taken steps to improve peacekeeping performance data, but member states have raised concerns about that information's quality, including its completeness and timeliness. Among other concerns, member states note that the UN does not have complete information to assess the performance of civilians, who comprised about 14 percent of peacekeeping personnel, as of December 2018. In March 2018 the UN began peacekeeping reforms, including those to improve performance data. However, according to State officials, these efforts are in the early stages and more work is needed. Without fully addressing member states' concerns about the quality of information, the UN is limited in its ability to improve the performance of peacekeeping operations. GAO recommends that State take additional steps to ensure that the UN (1) peacekeeping operations meet principles of effectiveness, (2) provides information on the estimated costs of mandated tasks, and (3) addresses member states' concerns about the quality of performance information. State agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "CMS used payment information from the CBP to adjust payment rates for 393 Healthcare Common Procedure Coding System (HCPCS) codes (generally referred to as “items” in this report) in non-bid areas. Most of these items were included in at least one CBP round; however, some are no longer included in current CBP rounds. For example, 81 items with adjusted rates were not included in the CBP rounds that were in effect at the end of calendar year 2016. CMS grouped the 393 items with adjusted rates into 11 general product categories. See table 1 for these categories and the number of items in each category. CMS uses different methodologies to adjust FFS payment rates in non- bid areas. These adjustments are based on CBP payment information depending on the number of CBP areas in which a particular item has been competitively bid and the geographic area in which the adjusted rate is applied. For example, for an item that is competitively bid in more than 10 CBP areas and is furnished to beneficiaries residing in non-rural areas of the contiguous United States, CMS calculates a separate adjusted rate for each of eight geographic regions. In each region, the item’s average regional adjusted rate reflects the unweighted average competitively bid rate for all CBP areas located fully or partially within the region. To address concerns regarding the possible effect of adjusted rates on beneficiaries residing in rural areas, CMS may apply an additional premium to the adjusted rates for items furnished to beneficiaries residing in rural areas of the contiguous United States. Similarly, CMS may also apply a premium in non-contiguous areas of the United States—Alaska, Hawaii, and the U.S. territories—that applies to non-rural and rural areas alike. See figure 1 for a map of CBP and non-bid areas as of 2016. According to CMS, it initially used a phased-in approach to adjust FFS payment rates beginning in 2016; this allowed for a transition period in which the agency could closely monitor health outcomes and access to affected DME items prior to implementing fully adjusted rates. From January 1 through June 30 of 2016, FFS payment rates were based on a 50/50 blend of non-adjusted and adjusted rates, and from July 1 through December 31 of the same year, FFS payment rates were 100 percent adjusted based on CBP information. However, the 21st Century Cures Act required CMS to retroactively apply the 50/50 blended payment rates to claims in the second half of 2016, delaying the fully adjusted payment rates to January 1, 2017. Because the retroactively applied 50/50 blended rates were based on newly available information from the CBP round 2 recompete that went into effect on July 1, 2016, the adjusted rates for the second half of 2016 may have differed from the adjusted rates for the first half of 2016. CMS contractors retroactively adjusted claims for this period, which were processed during the second half of calendar year 2017. Because this rate change became effective mid- December 2016, most decisions by suppliers and beneficiaries during the second half of 2016 were made based on the 100 percent adjusted rates, and the retroactive adjustments affected the total allowed charges, or expenditures, that suppliers were reimbursed. The implementation of adjusted rates may also affect other populations in addition to Medicare suppliers and Medicare beneficiaries in non-bid areas, because some private and other government insurers base their payment rates on Medicare’s fee schedule. For example, the federal government’s TRICARE military health program uses Medicare’s fee schedule to help determine how much it pays for DME items. CMS has established certain requirements that all DME suppliers must meet in order to enroll in Medicare and maintain Medicare billing privileges, which include accreditation and appropriate licensure. Specifically, DME suppliers must meet Medicare enrollment and quality standards. CMS also requires all DME suppliers and each of their locations to be accredited by a CMS-approved accrediting organization. In addition, DME suppliers must meet state licensure requirements in order to furnish certain items or services. Finally, certain DME suppliers are required to post a surety bond of at least $50,000 for each business location. There are two key differences between supplier requirements in non-bid areas versus CBP areas. First, only suppliers who are awarded a contract—referred to as contract suppliers—can furnish certain DME items at competitively determined prices to Medicare beneficiaries residing in CBP areas, and they are contractually obligated to furnish items in their contract upon request. According to CMS’s competitive acquisition ombudsman, contract suppliers in CBP areas may receive more scrutiny than DME suppliers in non-bid areas because CMS can take action to ensure the suppliers are meeting their contract obligations. However, in non-bid areas, any Medicare-enrolled DME supplier can furnish DME items. DME suppliers do not sign contracts in non-bid areas and are not contractually obligated to furnish items upon request. Second, contract suppliers in CBP areas must accept Medicare assignment, meaning that they must accept the competitively determined Medicare payment rate in full (and may not charge beneficiaries more than any unmet deductible and 20 percent coinsurance), whereas suppliers in non- bid areas may choose not to accept assignment and there is no limit on the amount they may charge a beneficiary. CMS has implemented several activities to monitor whether beneficiary access has been affected by the implementation of adjusted rates in non- bid areas, as summarized below. Inquiries to 1-800-MEDICARE. Beneficiaries with DME questions— referred to by CMS as inquiries—are directed to call CMS’s 1-800- MEDICARE call line. Callers are assisted by customer service representatives trained to answer questions and assist beneficiaries in finding DME suppliers. One CMS official told us the agency tracks DME-related inquiries to 1-800-MEDICARE but does not track whether inquiries are received from beneficiaries in CBP areas versus non-bid areas. Health Status Monitoring Tool. CMS analyzes Medicare claims data to monitor real-time health outcomes, such as death, hospitalizations, emergency room visits, and physician visits for beneficiaries in both CBP and non-bid areas. CMS posts information on its website to show historical and regional trends in health outcomes for specific groups of beneficiaries. Monitoring Changes in the Number of Suppliers and Beneficiary Utilization Rates. CMS officials told us they closely monitor changes in the number of suppliers furnishing items subject to adjusted rates in non-bid areas as well as changes in beneficiary utilization of rate- adjusted items. Monitoring Assignment Rates. CMS monitors the percentage of claims suppliers have submitted as “assigned” in non-bid areas. According to CMS, assignment rates are a good indicator of whether FFS payment amounts are sufficient. While CMS conducted beneficiary satisfaction surveys before and after the implementation of previous CBP rounds in order to measure changes in beneficiary satisfaction in CBP areas, CMS officials reported they have not conducted similar surveys of beneficiaries residing in non-bid areas. The payment rate reductions for DME items in non-bid areas were generally significant. The average unweighted percentage reduction across the top product category items combined—measured by calculating the percentage change between the 2015 non-adjusted and the 2017 fully adjusted rates—was 46 percent. However, payment rate reductions varied by DME product category and by individual item within product categories. This is not unexpected given that the adjusted rates for each item were based on competitively determined payment rates from prior or current CBP rounds, and rate reductions for those payment rates also varied widely by product category and item. Specifically, average payment rate reductions by DME product category ranged from 18 percent to 74 percent with a midpoint of 47 percent. For example, the average payment rate reduction for the top items in the oxygen product category—the category that accounted for the highest percentage of total expenditures in 2016—was 39 percent. The range of reductions among individual items within product categories also varied. For example, payment rate reductions for the top items in the enteral nutrients product category ranged from 46 percent to 56 percent. In contrast, payment rate reductions for the three items in the negative pressure wound therapy (NPWT) product category ranged from 6 percent to 61 percent. (See table 2.) Table 3 shows 2015 non-adjusted and 2017 fully adjusted rates and the percentage reduction in these rates for the rate-adjusted item in each product category with the largest share of 2016 total expenditures. (See Appendix II for detailed information on the 2015 non-adjusted payment rates, 2016 transitional 50/50 blended adjusted rates, and 2017 fully adjusted rates for items with the highest 2016 expenditures in each product category.) The number of suppliers furnishing any of the 393 rate-adjusted items to beneficiaries in non-bid areas in 2016—the first year that CMS adjusted payment rates in non-bid areas—decreased 8 percent compared to 2015. This continued a trend of annual decreases in non-bid areas going back to at least 2011—the first year CMS began implementing the CBP in nine areas. The largest percentage decrease in suppliers, 13 percent, occurred in 2014 (the year after the CBP was expanded to an additional 100 areas), followed by 9 and 8 percent decreases in 2015 and 2016, respectively. This information is based on our review of the number of suppliers billing Medicare, so it is unclear as to how much the decreases were attributable to suppliers closing their businesses, conducting mergers or acquisitions, no longer accepting Medicare beneficiaries, or other factors. Also, the number of suppliers furnishing non-adjusted items to beneficiaries residing in non-bid areas decreased 4 percent in 2016 compared to 2015. Similar to trends found for rate-adjusted items, this continued a trend of annual decreases since at least 2011, although these decreases were smaller. As was the case with rate-adjusted items, the largest percentage decrease in the number of suppliers occurred in 2014 and then slowed in subsequent years. (See fig. 2.) Because 2016 was the most recent year of complete Medicare claims data available at the time of our study, we could only review data for the first year that adjusted rates were in effect in non-bid areas and could not determine if these trends continued in 2017. Some DME industry trade organization representatives we interviewed reported that suppliers face an additional challenge of having to travel long distances when furnishing items to beneficiaries in rural areas, which may result in suppliers limiting their service areas. However, there was little difference between non-rural and rural non-bid areas in terms of changes in the number of suppliers between 2015 and 2016. For example, the number of suppliers furnishing rate-adjusted items to beneficiaries residing in non-rural non-bid areas decreased 7 percent between 2015 and 2016 compared with a decrease of 8 percent in rural non-bid areas. (See fig. 3.) There was also little difference between non-rural and rural areas in terms of changes in the number of suppliers who furnished non-adjusted items to beneficiaries residing in non-bid areas. For example, between 2015 and 2016 the number of suppliers furnishing non-adjusted items to beneficiaries in non-bid areas decreased 3 percent in non-rural areas and 4 percent in rural areas. We found that the number of suppliers furnishing rate-adjusted items in non-bid areas decreased between 2015 and 2016 in all product categories, though the extent of these decreases varied. For example, we found that the number of suppliers furnishing items in the infusion pumps product category decreased by 1 percent between 2015 and in 2016 while the number of suppliers furnishing general home equipment decreased by 10 percent. Trends for 2010 through 2016 were generally similar. The number of suppliers decreased in all product categories, and the extent of decreases varied. Individual suppliers may furnish items across multiple product categories. (See fig. 4.) The number of beneficiaries in non-bid areas receiving at least one rate- adjusted item in 2016—the first year that CMS implemented adjusted rates in non-bid areas—showed little change compared to 2015, decreasing by less than one-half of a percentage point. This stabilization in beneficiary utilization occurred following three years of decreases in non-bid areas with the largest decrease (4 percent) in 2014—the year following the CBP’s expansion to an additional 100 areas. In comparison, the number of beneficiaries in non-bid areas who received at least one non-adjusted item increased 3 percent in 2016. (See fig. 5.) In general, the annual trends in CBP areas paralleled those in non-bid areas. Between 2015 and 2016, there was little change in the number of beneficiaries in CBP areas who received at least one rate-adjusted item, with a decrease of less than one-half a percentage point. In non-bid areas, there was little difference between non-rural and rural areas in terms of changes in 2016 in the number of beneficiaries who received rate-adjusted items, with decreases in both of less than one-half a percentage point. There was also little difference in terms of the changes in the number of beneficiaries in non-bid areas who received non-adjusted items. The total decrease for the 2010 to 2016 period was smaller in non-rural areas than rural areas. (See fig. 6.) We found that the number of beneficiaries in non-bid areas receiving at least one rate-adjusted item decreased in 2016 for 9 of the 11 product categories. Changes ranged from a 45 percent decrease for the TENS product category to a 9 percent increase for the CPAP/RAD product category. For the 2010 through 2016 period, most product categories also had total net percentage decreases, and percentage changes varied across product categories. (See fig. 7.) Individual product category decreases were generally larger in CBP areas than in non-bid areas. For example, between 2010 and 2016, the percentage change in the number of beneficiaries who received oxygen product category items was -29 percent in CBP areas as compared to -19 percent in non-bid areas. CPAP/RAD was the one product category for which the number of beneficiaries receiving at least one item increased rather than decreased in 2016 and between 2010 and 2016 in both non-bid and CBP areas. This is consistent with what we have previously reported. We could only report on utilization for one year following adjustment of rates because 2016 was the most recent year with complete data available; as such utilization trends may differ in 2017 and subsequent years. CMS has reported that data from its health status monitoring tool indicate the reduced payment rates have not resulted in changes in access to DME items or health outcomes in non-bid areas in 2016 as compared to 2015. CMS uses the health status monitoring tool to analyze Medicare claims data and track seven health outcomes—deaths, hospitalizations, emergency room visits, physician visits, admissions to skilled nursing facilities, average number of days spent hospitalized in a month, and average number of days in a skilled nursing facility in a month—for beneficiaries in both CBP and non-bid areas. The data for non-bid areas are broken out by rural and non-rural areas across eight different regions of the country and non-contiguous U.S. areas. CMS monitors these health outcomes for three Medicare FFS beneficiary groups: 1) all beneficiaries enrolled in FFS, 2) beneficiaries who are likely to use one of the rate-adjusted items on the basis of related health conditions, and 3) beneficiaries who have a claim for one of the rate-adjusted items. CMS’s tool considers historical and regional trends in health status to monitor health outcomes in all CBP and non-bid areas. CMS officials told us that staff meet bi-weekly to review monitoring tool trends as well as external complaints or stakeholder feedback to identify and investigate potential DME access issues. The officials told us these investigations have not identified any adverse health outcomes as a result of the implementation of adjusted rates. We previously conducted an analysis of CMS’s methodologies and scoring algorithm that focused on evaluating health outcome trends in CBP areas and found them to be generally sound. CMS officials told us they have not made significant revisions to the tool’s underlying methodologies but did create a separate workbook specially tailored to the implementation of the adjusted rates in non-bid areas that includes additional capabilities, such as review of assignment rates. In addition, because CMS uses a 4-month window to evaluate health outcomes of all beneficiaries that meet the criteria, for this report we also conducted our own analysis of health outcomes over a longer period of time to determine if our results for a particular set of beneficiaries were consistent with CMS’s shorter-term results. Specifically, we tracked a cohort of about 256,000 beneficiaries in both non-bid and CBP areas who began using oxygen items in the first half of 2014 and followed their utilization through the end of 2016 to determine if mortality and hospital admissions rates remained consistent before and after the implementation of adjusted rates. We found that the trends in mortality and hospital admissions rates for this cohort were generally consistent with the cumulative trends displayed in CMS’s monitoring tool. We did not find a change in health status between 2015 and 2016 related to the reduced payment rates. One way that CMS verifies that beneficiaries have access to needed items and services is by reviewing the percentage of suppliers who enroll as Medicare “participating” suppliers and the percentage of claims that suppliers have submitted as assigned. Participating suppliers must accept the FFS payment rate in full for all claims and cannot charge beneficiaries an additional amount above the 20 percent copayment. DME suppliers can also elect to be “non-participating” suppliers meaning they can choose to accept assignment on a claim-by-claim basis and there is no limit on the amount that they can charge for a DME item. Non- participating suppliers in non-bid areas are not required to accept assignment of Medicare claims. This means a non-participating supplier can decide not to accept assignment for an item and can charge beneficiaries an amount above the Medicare payment rate. CMS told us the rate of participating suppliers in 2016 was unchanged from 2015 and decreased by one percent in 2017, and the rates of assignment for rate- adjusted items remained very high (over 99 percent of all claims for rate- adjusted items in non-bid areas) in 2016 and 2017. CMS told us the nationwide number of inquiries to 1-800-MEDICARE associated with access issues did not increase after the implementation of adjusted rates. According to a CMS official, CMS uses the same process for all DME calls received, regardless of whether the caller lives in a CBP or non-bid area, so there is no way to distinguish DME-related calls in CBP areas from non-bid areas. However, the CMS official said there has been no evidence of systemic access issues in non-bid areas, such as beneficiaries reporting they were not able to find suppliers to furnish DME items with adjusted rates. We spoke with officials from three of CMS’s regional offices, who also reported there has not been an increase in the number of DME-related inquiries since adjusted rates in non-bid areas went into effect. One of the officials told us that her regional office is forwarded information about all inquiries related to Medicare Parts A and B from the other CMS regional offices. She also said the regional offices generally receive direct inquiries from a variety of sources including beneficiaries, beneficiary advocates, local partners, congressional district offices, and providers, and some are also escalated by 1-800-MEDICARE customer service representatives. According to that official, each year regional offices receive close to 40,000 inquiries nationwide regarding a wide range of DME issues, and most are related to questions about coverage and documentation requirements (such as what types of DME may require additional documentation or face-to-face visits with physicians). In addition, the official told us that regional offices capture detailed information about each inquiry. This includes contact information for the individual submitting the inquiry, the type of DME involved and whether it is included in the CBP, and the regional office’s response. Officials said they review this information to specifically look for access issues or trends by product category but have not identified any issues. One official said she had heard anecdotal reports of beneficiaries contacting regional offices claiming they had experienced access issues, but such reports did not indicate these issues were widespread or sustained. We also interviewed representatives from the State Health Insurance Assistance Program who reported there has not been an increase in requests for assistance with DME-related issues since the adjusted rates went into effect. The representatives told us State Health Insurance Assistance Program counselors log all contacts, but the data do not distinguish between non-bid and CBP areas. However, they said counselors have received about 300 to 500 DME-related contacts each quarter since 2015, and the number of requests for assistance with DME- related issues remained consistent before and after adjusted rates went into effect. State Health Insurance Assistance Program representatives said counselors attempt to resolve issues on their own, but can also contact CMS’s regional offices for assistance. We interviewed representatives from one state hospital association, three beneficiary advocacy groups, and four DME industry trade organizations who provided anecdotal examples of varying degrees of beneficiary access issues in non-bid areas. For example, representatives from the state hospital association told us some hospital case managers in non-bid areas have reported difficulty in locating suppliers to provide DME items such as wheelchairs or walkers, but these issues are not widespread. A representative from one beneficiary advocacy group told us her organization does not receive many direct inquiries from Medicare beneficiaries in regard to access issues to DME, but it has been contacted by entities such as hospital discharge planners and pharmacies regarding issues with delivery of DME items. For example, the representative said some hospital discharge planners have reported that DME suppliers are more resistant to delivering DME items, such as wheelchairs and walkers, to the hospital when the beneficiary resides in a non-bid area as opposed to a CBP area. However, the representative said such reports are anecdotal and she does not think that issues reported are widespread or have created significant hardship. She added that her organization makes webinars available on a fairly regular basis, and very few people signed up for the DME webinar, which was not the case for webinars held for other topics. In contrast, a representative of another beneficiary advocacy group that focuses on a condition in which beneficiaries would typically use oxygen items with adjusted rates told us that without a real research instrument, it is difficult to determine if the increase in complaints that her group began receiving in 2016 from beneficiaries in non-bid areas is directly related to the adjusted rates, but she said she believes they are because she had not heard certain types of complaints before the adjusted rates went into effect. For example, she said the beneficiary advocacy group has received complaints about reduced delivery services and reductions in the number of portable oxygen tanks that DME suppliers are willing to furnish in a single delivery and these complaints are more frequent from beneficiaries who live in rural areas. The representative said given that rural areas may have higher delivery costs, it is not surprising that some suppliers may have decreased the number of deliveries, but she was surprised to hear they have decreased the number of portable oxygen tanks they are willing to provide. According to CMS, the agency encourages individuals to report any supplier that delivers fewer tanks of oxygen than a beneficiary needs to CMS, so this violation can be immediately addressed. Representatives from four DME industry trade organizations that we spoke with told us the implementation of adjusted rates has caused some suppliers to change their business models and practices. Specifically, individuals from all four DME industry trade organizations told us DME companies have lowered costs by reducing their number of employees, decreasing their service areas, or consolidating deliveries in specific areas to only certain days. For example, several DME suppliers told us that since the implementation of adjusted rates, they will only service beneficiaries who reside within the city limits or within a certain number of miles from their locations. Several DME suppliers told us the quality and range of items provided by DME suppliers in non-bid areas has changed since the adjusted rates went into effect. For example, several suppliers reported they provide cheaper, lower quality items and that some suppliers will no longer provide liquid oxygen to Medicare beneficiaries. In addition, individuals from all four DME industry trade organizations also told us there have been delays in hospital discharges as a result of not being able to find a DME supplier to provide needed DME. In contrast, CMS officials told us they investigated reported concerns about delayed patient discharges because of difficulties in acquiring rate-adjusted items and found there has not been a noticeable change in the average length of hospital stay before and after the implementation of adjusted rates. Specifically, CMS officials told us they measured: 1) average length of hospital stay for beneficiaries who received new rate-adjusted items shortly after their discharge, 2) whether beneficiaries were being discharged prior to receiving new rate-adjusted items, and 3) average length of stay for beneficiaries in individual access groups whether or not they received rate-adjusted items after being discharged. According to CMS, results of this analysis indicated no apparent changes in the average length of hospital stay after adjusted rates were implemented. In addition to speaking with these representatives, we also reviewed several publicly released studies that assessed the effect of the implementation of adjusted rates on beneficiaries, DME suppliers, and others. We found these studies did not provide persuasive evidence of substantial effects, primarily because of methodological issues with how the participants in the studies were recruited. Specifically, respondents were recruited on social media platforms or through targeted email notifications, raising concerns about selection bias. Although the number of DME suppliers and beneficiary utilization of DME items have decreased throughout the past several years, available evidence indicates there were not widespread beneficiary access issues in 2016. According to CMS officials, the long-term decreases in utilization do not necessarily indicate that beneficiaries did not receive needed DME, and suggested instead that these decreases are the result of a decline in unnecessary utilization. However, some stakeholders we interviewed continued to express concerns that lower FFS payment rates may have made it more difficult for some beneficiaries to receive needed DME, and one DME trade organization told us some decreases in utilization could be attributed to beneficiaries opting to pay for items outright rather than going through Medicare. Because there is only limited experience on changes in the number of DME suppliers and utilization of DME based on the first year that adjusted rates have been in effect, some effects may take longer to appear, and it is possible that trends could differ in 2017 or subsequent years. This underscores the importance of CMS’s continued monitoring activities. We provided a draft of this report to HHS for comment. HHS provided technical comments, which were incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services and appropriate congressional committees. The report will also be available at no charge on our website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or clowers@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. The Centers for Medicare & Medicaid Services (CMS) has implemented several antifraud efforts that affect durable medical equipment (DME) suppliers. Specifically, CMS began phasing in DME competitive bidding program (CBP) rounds in 2008. (See fig. 8.) In addition to the CBP, CMS has also implemented several other broader initiatives. (See fig. 9.) Table 4 includes the top five Healthcare Common Procedure Coding System (HCPCS) codes for each product category based on the percentage of 2016 total expenditures for items included in the competitive bidding program (CBP) and subject to adjusted rates in non- bid areas. Combined, these items account for 80 percent of 2016 total expenditures across all 393 rate-adjusted items. A. Nicole Clowers, (202) 512-7114 or clowersa@gao.gov. In addition to the contact named above, Kathleen M. King, Director; Martin T. Gahart, Assistant Director; Michelle Paluga, Analyst-in-Charge; Sam Amrhein; Todd Anderson; Barbara Hansen; and Emily Wilson made key contributions to this report. Medicare: CMS’s Round 2 Durable Medical Equipment and National Mail- order Diabetes Testing Supplies Competitive Bidding Programs. GAO-16-570. Washington, D.C.: September 15, 2016. Medicare: Utilization and Expenditures for Complex Wheelchair Accessories. GAO-16-640R. Washington, D.C.: June 1, 2016. Medicare: Bidding Results from CMS’s Durable Medical Equipment Competitive Bidding Program. GAO-15-63. Washington, D.C.: November 7, 2014. Medicare: Second Year Update for CMS’s Durable Medical Equipment Competitive Bidding Program Round 1 Rebid. GAO-14-156. Washington, D.C.: March 7, 2014 Medicare: Review of the First Year of CMS’s Durable Medical Equipment Competitive Bidding Program’s Round 1 Rebid. GAO-12-693. Washington, D.C.: May 9, 2012. Medicare: The First Year of the Durable Medical Equipment Competitive Bidding Program Round 1 Rebid. GAO-12-733T. Washington, D.C.: May 9, 2012. Medicare: Issues for Manufacturer-level Competitive Bidding for Durable Medical Equipment. GAO-11-337R. Washington, D.C.: May 31, 2011. Medicare: CMS Has Addressed Some Implementation Problems from Round 1 of the Durable Medical Equipment Competitive Bidding Program for the Round 1 Rebid, GAO-10-1057T. Washington, D.C.: September 15, 2010. Medicare: CMS Working to Address Problems from Round 1 of the Durable Medical Equipment Competitive Bidding Program. GAO-10-27. Washington, D.C.: November 6, 2009. Medicare: Covert Testing Exposes Weaknesses in the Durable Medical Equipment Supplier Screening Process. GAO-08-955. Washington, D.C.: July 3, 2008. Medicare: Competitive Bidding for Medical Equipment and Supplies Could Reduce Program Payments, but Adequate Oversight Is Critical. GAO-08-767T. Washington, D.C.: May 6, 2008. Medicare: Improvements Needed to Address Improper Payments for Medical Equipment and Supplies. GAO-07-59. Washington, D.C.: January 31, 2007. Medicare Durable Medical Equipment: Class III Devices Do Not Warrant a Distinct Annual Payment Update. GAO-06-62. Washington, D.C.: March 1, 2006. Medicare: More Effective Screening and Stronger Enrollment Standards Needed for Medical Equipment Suppliers. GAO-05-656. Washington, D.C.: September 22, 2005. Medicare: CMS’s Program Safeguards Did Not Deter Growth in Spending for Power Wheelchairs. GAO-05-43. Washington, D.C.: November 17, 2004. Medicare: Past Experience Can Guide Future Competitive Bidding for Medical Equipment and Supplies. GAO-04-765. Washington, D.C.: September 7, 2004.", "summary": "To achieve Medicare DME savings, Congress required CMS to implement a CBP in certain geographic areas for certain DME items. Beginning in 2011, CMS began implementing the CBP in several phases. The agency estimates that the CBP will save the Medicare program $19.7 billion between 2013 and 2022.The Patient Protection and Affordable Care Act required CMS to use CBP information to adjust fee-for-service payment rates for certain DME items in non-bid areas. On January 1, 2016, adjusted rates for 393 items went into effect in non-bid areas. CMS estimated these adjustments will save the Medicare program about $3.6 billion between fiscal years 2016 and 2020. GAO was asked to review the potential effects of reduced payment rates for DME in non-bid areas. In this report, GAO examines (1) payment rate reductions and any changes in the number of suppliers; (2) any changes in the utilization of rate-adjusted items; and (3) available evidence related to potential changes in beneficiaries' access to rate-adjusted items. GAO compared non-adjusted 2015 fee-for-service payment rates to adjusted 2016 and 2017 rates and reviewed Medicare claims data from 2010 through 2016. GAO also reviewed CMS's monitoring activities and interviewed CMS officials. In addition, GAO interviewed select beneficiary advocacy groups and DME industry trade organizations. The Centers for Medicare & Medicaid Services (CMS) implemented a competitive bidding program (CBP) for certain durable medical equipment (DME), such as wheelchairs and oxygen, in 2011 that is currently operating in 130 designated U.S. areas. On January 1, 2016, CMS used information from the CBP to start adjusting Medicare fee-for-service payment rates for certain DME throughout the country in areas that had previously not been subject to the CBP (known as non-bid areas). For the first year adjusted rates were in effect in non-bid areas, GAO found: Reductions in payment rates were generally significant but varied by category of DME item. The unweighted average reduction in payment rates for the five rate-adjusted DME items with the highest expenditures in 2016 within each DME category was 46 percent. Changes in the number of suppliers furnishing rate-adjusted items were generally consistent with the years before adjusted rates went into effect. GAO found that the number of suppliers furnishing rate-adjusted items in non-bid areas in 2016 decreased 8 percent compared to 2015. GAO's review of Medicare claims data found that beneficiary utilization of rate-adjusted items in non-bid areas in 2016 showed little change compared to 2015. GAO also found that CMS's activities to monitor beneficiary access, including changes in health outcomes, showed little change between 2015 and 2016. GAO interviewed several stakeholder groups that reported anecdotal examples of specific beneficiary access concerns they attributed to the rate adjustments, but stakeholders could not provide evidence to substantiate that the access issues were widespread. GAO's findings are consistent with CMS's monitoring results, which indicate that there were no widespread effects on beneficiary access in the year after the adjusted rates went into effect. However, some effects may take longer to appear, underscoring the importance of CMS's continued monitoring activities. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "The Secret Service plays a critical role in protecting the President, Vice President, their immediate families, and national leaders, among others. In addition, the component is responsible for safeguarding the nation’s currency and financial payment systems. To accomplish its mission, Secret Service officials reported that, as of June 2018, the component had approximately 7,100 employees (including the Uniformed Division, special agents, and administrative, professional, and technical staff). These employees were assigned to the component’s headquarters in Washington, D.C., and 133 field offices located throughout the world (including 115 domestic offices and 18 international offices). The Secret Service’s employees are heavily dependent on the component’s IT infrastructure and communications systems to perform their daily duties. According to data reported on the Office of Management and Budget’s IT Dashboard, the component planned to spend approximately $104.8 million in fiscal year 2018 to modernize and maintain its IT environment. To manage this IT environment, the Secret Service hired a full-time CIO in November 2015. In addition, in an effort to improve its management structure, the component consolidated all IT staff and assets under this new CIO in March 2017. OCIO officials stated that these staff include the government employees who provide direct and indirect support of the day-to-day operations of the Secret Service’s enterprise systems and services. According to Secret Service officials, the component’s IT workforce included 190 staff, as of July 2018. These officials stated that 166 of these employees were located in the component’s headquarters in Washington, D.C., and 24 were located in domestic field offices. The officials also reported that these July 2018 staffing levels were below their current approved staffing level of 220 staff (which included 44 positions in domestic field offices). Secret Service IT staff also deploy to other locations, as necessary, to provide support for certain security activities. For example, the Secret Service reported that, in 2017, OCIO deployed over 79 staff to New York, N.Y., to provide communications support during the United Nations General Assembly. As a component of DHS, the Secret Service must follow the department’s policies and processes for managing acquisitions, including IT acquisitions. DHS categorizes its acquisition programs according to three levels that are determined by the life cycle costs of the programs. These levels then determine the extent of required program and project management and the acquisition decision authority (the individual responsible for management and oversight of the acquisition). The department also categorizes its acquisition programs as major or non- major based on expected cost. Table 1 describes the levels of DHS’s acquisition programs and their associated acquisition decision authorities. DHS’s policies and processes for managing major acquisition programs are primarily set forth in its Acquisition Management Directive 102-01 and Acquisition Management Instruction 102-01-001. In particular, these policies establish that a major acquisition program’s decision authority is to review the program at a series of predetermined acquisition decision events to assess whether the program is ready to proceed through the acquisition life cycle phases. Figure 1 depicts the acquisition life cycle established in DHS acquisition management policy. DHS’s Acquisition Management Directive and Instruction do not establish an acquisition life cycle framework for the department’s non-major acquisition programs. Instead, according to the Instruction, Component Acquisition Executives (i.e., the senior acquisition official within a component that is responsible for implementation, management, and oversight of the component’s acquisition process) are required to establish component-specific non-major acquisition policies and guidance that support the “spirit and intent” of the department’s acquisition policies. To that end, the Secret Service developed a policy that establishes an acquisition life cycle framework for its non-major acquisition programs. This acquisition framework for the component’s non-major acquisition programs is consistent with the acquisition framework that DHS established for its major acquisition programs. In particular, the Secret Service’s framework includes the same phases and decision events as DHS’s framework (e.g., acquisition decision event 2A, the point at which the acquisition decision authority determines whether a program may proceed into the obtain phase). In addition, DHS’s Systems Engineering Life Cycle Instruction and Guidebook outline a framework of major systems engineering activities and technical reviews that are to be conducted by all DHS programs and projects, both major and non-major. This framework is intended to ensure that appropriate systems engineering activities are planned and implemented, and that a program’s development effort is meeting the business need. In particular, the systems engineering life cycle framework consists of nine major activities (e.g., requirements definition, integration, and testing) and a set of related technical reviews (e.g., preliminary design review) and artifacts (e.g., requirements documents). DHS policy allows programs to tailor these activities, technical reviews, and artifacts based on the unique characteristics of the program (e.g., scope, complexity, and risk). For example, a program may combine systems engineering technical reviews and artifacts, or add additional reviews. This tailored approach must be documented in a program’s systems engineering life cycle tailoring plan. The systems engineering technical reviews are intended to provide DHS the opportunity to determine how well a program has completed the necessary systems engineering activities. Each technical review includes a minimum set of exit criteria that must be satisfied before a program may move on to the next systems engineering activity. At the end of the technical review, the program manager must develop a technical review completion letter that documents the outcome of the review, including stakeholder concurrence that the exit criteria were satisfied. Moreover, DHS’s agile instruction, which was first issued in April 2016 and updated in April 2018, identifies agile as the preferred development approach for the department’s IT programs and projects. Agile is a type of incremental (i.e., modular) development, which calls for the rapid delivery of software in small, short increments rather than in the typically long, sequential phases of a traditional waterfall approach. DHS’s agile instruction also states that component CIOs are to set modular (i.e., incremental) outcomes and target measures to monitor progress in achieving agile implementation for IT programs and projects. To that end, the department identified core metrics that its agile IT programs are to use to monitor progress, including the number of story points completed per release and the number of releases per quarter. Further, DHS policy and guidance have established an acquisition (i.e., contract) review process that is intended to enable the DHS CIO to review and effectively guide the department’s IT expenditures. According to the department’s IT acquisition review guidance, DHS components with a CIO (which includes the Secret Service) are to submit to DHS OCIO for review, IT acquisitions that (1) have total estimated procurement values of $2.5 million or more; and (2) are funded by a level 1, 2, or 3 program with a life cycle cost estimate of at least $50 million (i.e., a major investment, as defined by DHS’s capital planning and investment control guidance). DHS policies and guidance also establish numerous responsibilities for the department’s component-level CIOs that are aimed at ensuring proper oversight and management of the components’ IT investments. Among other things, these component-level CIO responsibilities relate to topics such as IT budgeting, portfolio management, and oversight of programs’ systems engineering life cycles. Table 2 identifies 14 selected IT oversight responsibilities for DHS’s component CIOs. The Secret Service acquires IT infrastructure and services that are intended to improve its ability to execute its investigation and protection missions. According to data reported on the Office of Management and Budget’s IT Dashboard, the Secret Service planned to spend about $104.8 million on IT in fiscal year 2018, which included approximately $34.6 million for the development and modernization of its IT infrastructure and services, and about $70.2 million for the operations and maintenance of this infrastructure (including 21 existing IT systems). Also according to data reported on the IT Dashboard, as of April 2018, the Secret Service had one major IT investment (called the Information Integration and Technology Transformation and discussed in more detail later in this report), seven non-major IT investments, and one non- standard infrastructure investment. Figure 2 depicts the Secret Service’s planned IT spending for fiscal year 2018. The Secret Service has faced long-standing challenges in managing its IT infrastructure. For example, A National Security Agency audit of the Secret Service’s IT environment in 2008 identified network and system vulnerabilities that needed immediate remediation to protect the component’s systems and electronic information. The Secret Service determined in 2010 that it had IT capability gaps associated with three key areas: network security, information sharing and situational awareness, and operational communications. The component reported that it required a significant IT modernization effort with sustained investment of resources to replace dated and restrictive network and communications capabilities. The Secret Service also reported in 2010 that it had 42 mission- support applications that were operating on a 1980’s mainframe that lacked multi-level security (i.e., the ability to view classified information from two security levels, such as secret and top secret, at the same time), was beyond its equipment life cycle, and was at risk of failing. Further, in 2011, DHS’s Office of Inspector General reported that the Secret Service’s existing infrastructure did not meet current operational requirements. According to the Secret Service, this dated infrastructure was unable to support newer technologies (e.g., Internet protocol), share common DHS enterprise services, or migrate to the department’s consolidated data centers. To address challenges with its IT environment, in 2009, the Secret Service initiated the IITT investment, which is intended to modernize and enhance the component’s infrastructure, communications systems, applications, and processes. In particular, IITT is a portfolio of programs and projects that are meant to, among other things, improve systems availability in support of the Secret Service’s business operations, increase interoperability with other government systems and networks, enhance the component’s system and network security, and enable scalability to support growth. From 2010 to July 2018, according to OCIO officials, the Secret Service spent approximately $392 million on IITT. In fiscal year 2018, the component had planned to spend approximately $42.7 million on IITT (i.e., about 40 percent of its total planned IT spending for the fiscal year), according to data reported on the Office of Management and Budget’s IT Dashboard. In total, the planned life cycle cost estimate for IITT is at least $811 million. As of June 2018, IITT was a major investment comprised of two programs (one of which included three projects) and one standalone project (i.e., it was not part of another program) that had capabilities that were in planning or development and modernization. These programs and project were the Enabling Capabilities program, Enterprise Resource Management System program (which included three projects that were each being implemented using an agile methodology: Uniformed Division Resource Management System, Events Management, and Enterprise-wide Scheduling), and the Multi-Level Security project. Table 3 describes the IITT programs and projects that had capabilities that were in planning or development and modernization, as of June 2018. The table also includes the associated level, acquisition decision authority, estimated life cycle costs, and planned or actual dates of operational capability for each of the programs and projects. (Appendix II also provides additional information on these programs and projects.) The Enabling Capabilities program within IITT is designated as a major acquisition program. As such, its acquisition decision authority is the DHS Under Secretary for Management, and both DHS and the Secret Service provide oversight to this program. IITT’s other program and project—the Enterprise Resource Management System program (which includes three projects, as discussed earlier) and Multi-Level Security project—are designated non-major acquisition programs. In June 2011, DHS’s Under Secretary for Management delegated acquisition decision authority for this non-major program and project to the Secret Service Component Acquisition Executive. As such, oversight of the Enterprise Resource Management System program (including its three projects) and the Multi- Level Security project is conducted primarily at the component level. The Secret Service also implemented other capabilities that are now in operations and maintenance (i.e., the capabilities have been fielded and are operational) as part of the IITT investment, such as a capability to move data between systems in separate classification levels (e.g., top secret and secret) and communications interoperability. Table 4 describes IITT capabilities that are in operations and maintenance. DHS, including the Secret Service, has faced long-standing challenges in effectively managing its workforce. In January 2003, we designated the implementation and transformation of DHS as high risk, including its management of human capital, because it had to transform 22 agencies—several with major management challenges—into one department. This represented an enormous and complex undertaking that would require time to achieve in an effective and efficient manner. Since that time, the department has made important progress in strengthening and integrating its management functions. Nevertheless, we have continued to report that significant work remains for DHS to improve these management functions. Among other things, we previously reported that the department had lower average employee morale than the average for the rest of the federal government. We also reported that, in 2011, based on employee responses to the Office of Personnel Management’s Federal Employee Viewpoint Survey—a tool that measures employees’ perceptions of whether and to what extent conditions characterizing successful organizations are present in their agency—DHS was ranked 31st out of 33 large agencies on the Partnership for Public Service’s Best Places to Work in the Federal Government rankings. The most recent results of these surveys in 2017 showed that DHS continues to maintain its low rankings. DHS’s Office of Inspector General has reported on challenges that the Secret Service has faced in managing its IT workforce. Specifically, in October 2016, the Inspector General reported that the Secret Service CIO did not have oversight of, or authority over, all IT resources, including the workforce; in particular, almost all of the component’s IT employees were located in a division outside of OCIO; and the Secret Service had vacancies in key positions responsible for managing IT, including not having a full-time CIO from December 2014 through November 2015. As previously discussed, the Secret Service has taken actions to address these two issues with the management of its IT workforce. These actions included hiring its full-time CIO in November 2015 and consolidating the workforce and all IT assets under this CIO in March 2017. Of the 14 selected responsibilities established for component-level CIOs in DHS’s IT management policies, the Secret Service CIO had fully implemented 11 responsibilities and had partially implemented 3 responsibilities. Table 5 summarizes the extent to which the Secret Service CIO had implemented each of the 14 responsibilities. The Secret Service CIO fully implemented 11 of the 14 selected component-level CIO responsibilities. Examples of the responsibilities that the CIO fully implemented are as follows: Develop, implement, and maintain a detailed IT strategic plan. Consistent with DHS’s IT Integration and Management directive, in January 2017, the Secret Service CIO developed an IT strategic plan that outlined the CIO’s strategic IT goals and objectives, as well as tasks intended to meet the goals and objectives. The CIO maintained this strategic plan, to include updating it in January 2018. The CIO also took steps to implement the tasks identified within the strategic plan, such as working to develop an IT training program. In particular, as part of this effort to develop an IT training program, OCIO identified recommended training for the office’s various IT workforce groups (discussed in more detail later in this report). Concur with each program’s and/or project’s systems engineering life cycle tailoring plan. In accordance with DHS’s Systems Engineering Life Cycle instruction, the Secret Service CIO concurred with the systems engineering life cycle tailoring plan for one program and three projects included in the Secret Service’s IITT investment. Specifically, the CIO documented his approval via his signature on the tailoring plans for IITT’s Enabling Capabilities program, and Multi-Level Security, Uniformed Division Resource Management System, and Events Management projects. Participate on DHS’s CIO Council, Enterprise Architecture Board, or other councils/boards as appropriate, and appoint employees to serve when necessary. As required by DHS’s IT Integration and Management directive, the Secret Service CIO participated on two required DHS-level councils/boards, and appointed a delegate to serve in his place, when necessary. Specifically, the Secret Service CIO or the CIO’s delegate—the Deputy CIO—attended bi-monthly meetings of the DHS CIO Council. In addition, another Secret Service CIO appointee—the component’s Chief Architect—attended an ad hoc meeting of the Enterprise Architecture Board in June 2017. In addition, the Secret Service CIO had partially implemented three component-level CIO responsibilities, as follows. Manage the component IT investment portfolio, including establishing a component-level IT acquisition review process that enables component and DHS review of component acquisitions (i.e., contracts) that contain IT. As directed in DHS’s Capital Planning and Investment Control directive and guidebook, the Secret Service CIO took steps to manage the component’s IT investment portfolio, including reviewing certain contracts containing IT. For example, among our random sample of 33 IT contracts that the Secret Service awarded between October 1, 2016, and June 30, 2017, we found that the CIO or the CIO’s delegate had reviewed 31 of these contracts. However, the CIO had not established and documented a defined process for reviewing contracts containing IT, which may have contributed to why the CIO or the CIO’s delegate did not review 2 of the 33 contracts in our sample. OCIO officials were unable to explain why neither of these officials reviewed the 2 contracts, which had a combined planned total procurement value of approximately $1.75 million. In particular, one of the contracts, with a planned total procurement value of about $1,122,934, was to provide credentialing services for the 2017 Presidential Inauguration. The other contract, with a planned total procurement value of about $629,337, was to provide maintenance support for a logistics system. The OCIO officials acknowledged that both contracts should have been approved by one of these officials. Without establishing and documenting an IT acquisition review process that ensures that the CIO or the CIO’s delegate reviews all contracts containing IT, as appropriate, the CIO’s ability to analyze the contracts to ensure that they are a cost-effective use of resources and are aligned with the component’s missions and goals is limited. Ensure all component IT policies are in compliance and alignment with DHS IT directives and instructions. As required by DHS’s IT Integration and Management directive, the Secret Service CIO had ensured that certain component IT policies were in compliance and alignment with DHS IT directives and instructions. For example, in alignment with the department’s IT Integration and Management directive, the Secret Service’s Investment Governance for IT policy specifies that the component CIO (in conjunction with each Secret Service Office) is responsible for developing the component IT spend plan, as well as developing and maintaining an IT strategic plan. However, the Secret Service’s enterprise governance policy was not in compliance with DHS’s IT Integration and Management directive. Specifically, while the department’s policy states that the Secret Service CIO is responsible for developing and reviewing the component’s IT budget formulation and execution, the Secret Service’s enterprise governance policy does not specify this as the CIO’s responsibility. According to OCIO officials, the Secret Service CIO participates in the development and review of the IT budget formulation and execution as a member of the Executive Resources Board (the Secret Service’s highest-level governing body, which has the final decision authority and responsibility for enterprise governance), and the Secret Service Deputy CIO is a voting member of the Enterprise Governance Council (the Secret Service’s second-level governance body and advisory council to the Executive Resources Board). However, the Secret Service’s enterprise governance policy has not been updated to reflect these roles. The Secret Service did not update its enterprise governance policy to properly reflect the CIO’s and Deputy CIO’s roles on the Executive Resources Board or Enterprise Governance Council because OCIO officials were not aware that these roles were not properly documented in the component’s policy until we identified this issue during our review. Further compounding the issue of the Secret Service’s enterprise governance policy not properly reflecting the CIO’s and Deputy CIO’s roles and responsibilities on the component’s governance boards is that the Secret Service has not developed a charter for its Executive Resources Board. We have previously reported that a best practice for effective investment management is to define and document the board’s membership, roles, and responsibilities. One such way to do so is via a charter. According to Secret Service officials, the component does not have a charter for the board because, while the Secret Service has established the board pursuant to law, there is little statutory guidance on how the board must be formalized, including whether a charter is required. The officials acknowledged that development of a board charter is a best practice. They stated that, in response to our review, the component has begun efforts to develop a charter for the Executive Resources Board, but they did not know when it would be completed. Until the Secret Service updates its enterprise governance policy to specify (1) the CIO’s current role and responsibilities on the Executive Resources Board, to include developing and reviewing the IT budget formulation and execution, and (2) the Deputy CIO’s role and responsibilities on the Enterprise Governance Council, the CIO’s ability to develop and review the component’s IT budget may be limited. Further, until the Secret Service develops a charter for its Executive Resources Board that specifies the roles and responsibilities of all board members, including the CIO, the Secret Service will not be effectively positioned to ensure that all members understand their roles and responsibilities on the board and will perform them as expected. Set modular outcomes and target measures to monitor the progress in achieving agile implementation for IT programs and/or projects within their component. Consistent with DHS policy, the Secret Service CIO has set modular outcomes and target measures to monitor the progress of two IITT projects that the component is implementing using an agile methodology—Uniformed Division Resource Management System and Events Management. For example, the modular outcomes set for these projects included measuring planned and actual burndown (i.e., the number of user stories completed). In addition, the projects were to measure their velocity (i.e., the rate of work completed) for each sprint (i.e., a set period of time during which the development team is expected to complete tasks related to developing a piece of working software). However, the modular outcomes and target measures did not include product quality or post-deployment user satisfaction, although such measures are leading practices for managing agile projects. According to Secret Service OCIO officials, the component does not mandate the specific metrics that its agile projects are to use; instead, each project is to determine the metrics based on stakeholder requirements and unique project characteristics. The officials further stated that these metrics are to be documented in an acquisition program baseline and program management plan; this baseline and program management plan are then to be approved by the CIO. To its credit, the component’s one agile project that, as of May 2018, had deployed its system to users—the Uniformed Division Resource Management System—did measure product quality. OCIO officials also stated that they regularly receive verbal, undocumented feedback from users on the system and they plan to conduct a documented user satisfaction survey on this system by September 2018. Nevertheless, without ensuring that product quality and post- deployment user satisfaction metrics are included in the modular outcomes and target measures that the CIO sets for monitoring agile projects, the Secret Service lacks assurance that the Events Management project or other future agile projects will measure product quality or post-deployment user satisfaction. Without guidance specifying that agile projects track these metrics, the projects may not do so and the CIO may be limited in his knowledge of the progress being made on these projects. Workforce planning and management is essential for ensuring that federal agencies have the talent, skill, and experience mix they need to execute their missions and program goals. To help agencies effectively conduct workforce planning and management, the Office of Personnel Management, the Chief Human Capital Officers Council, DHS, the Secret Service, and we have identified numerous leading practices related to five workforce areas: strategic planning, recruitment and hiring, training and development, employee morale, and performance management. Table 6 identifies the five workforce areas and 15 selected leading practices associated with these areas (3 practices within each area). Of the five selected workforce planning and management areas, the Secret Service had substantially implemented two of the areas and minimally implemented three of the areas for its IT workforce. In addition, of the 15 selected leading practices associated with these workforce planning and management areas, the Secret Service had fully implemented 3 practices, partly implemented 8 practices, and did not implement any aspects of 4 practices. Table 7 summarizes the extent to which the Secret Service had implemented for its IT workforce the five selected workforce planning and management areas and 15 selected leading practices associated with those areas, as of June 2018. Strategic workforce planning is an essential activity that an agency needs to conduct to ensure that its human capital program aligns with its current and emerging mission and programmatic goals, and that the agency is able to meet its future needs. We previously identified numerous leading practices related to IT strategic workforce planning, including that an organization should (1) establish and maintain a strategic workforce planning process, including developing all competency and staffing needs; (2) regularly assess competency and staffing needs, and analyze the IT workforce to identify gaps in those areas; and (3) develop strategies and plans to address gaps in competencies and staffing. The Secret Service minimally implemented the three selected leading practices associated with the IT strategic workforce planning area. Specifically, the component partly implemented two of the practices and did not implement one practice. Table 8 lists these selected leading practices and provides our assessment of the Secret Service’s implementation of the practices. Establish and maintain a strategic workforce planning process, including developing all competency and staffing needs—partly implemented. The Secret Service took steps to establish a strategic workforce planning process for its IT workforce. For example, the Secret Service CIO developed and maintained a plan that identified strategic workforce planning tasks, to include analyzing the staffing requirements of the IT workforce. In addition, the Secret Service defined general core competencies (e.g., communication and customer service) for its workforce, including IT staff. However, OCIO did not identify all required knowledge and skills needed to support this office’s functions. In particular, while OCIO identified certain technical competencies that its IT workforce needs, such as cybersecurity, the office did not identify and document all of the technical competencies that it needs. OCIO officials stated that they did not identify and document the technical competencies that the office needs because the Secret Service was focused on reorganizing the IT workforce under a single, centralized reporting chain within the CIO’s office. Consequently, the officials stated that they had not completed the work to identify all required IT knowledge and skills necessary to support the office. Yet, the Secret Service completed the IT workforce reorganization effort over a year ago, in March 2017 and, since then, OCIO has not identified all of the required IT knowledge and skills that the office needs. OCIO officials told us that they plan to identify all of the technical competency needs for the IT workforce, but they were unable to specify a time frame for when these needs would be fully identified. Until OCIO identifies all of the required knowledge and skills for the IT workforce, the office will be limited in its ability to identify and address any competency gaps associated with this workforce. In addition, the Secret Service did not reliably determine the number of IT staff that it needs in order to support OCIO’s functions. Specifically, in January 2017, an independent review of the staffing model that the component used to identify its IT workforce staffing needs found that the model was not based on any verifiable underlying data. In late August 2018, Office of Human Resources officials reported that they had hired a contractor in early August 2018 to update the staffing model to improve the quality of the data. These officials expected the contractor to finish updating the model by August 2019. The officials plan to use the updated model to identify the Secret Service’s IT workforce staffing needs for fiscal year 2021. Updating the staffing model to incorporate verifiable workload data should increase the likelihood that the Secret Service is able to appropriately identify its staffing needs for its IT workforce. Regularly assess competency and staffing needs, and analyze the IT workforce to identify gaps in those areas—not implemented. The Secret Service regularly assessed the competency and staffing needs for 1 of the occupational series within its IT workforce (i.e., the 2210 IT Specialist series). However, it did not regularly assess the competency and staffing needs for the remaining 11 occupational series that are associated with the component’s IT workforce, nor identify any gaps that it had in those areas. OCIO officials stated that they had not assessed these needs or identified competency or staffing gaps because, among other things, the Secret Service was focused on reorganizing the IT workforce under a single, centralized reporting chain within the CIO’s office. However, as previously mentioned, the component completed this effort in March 2017, but OCIO did not subsequently assess its competency and staffing needs, nor identify gaps in those areas. OCIO officials reported that they plan to assess the competencies of the IT workforce to identify any gaps that may exist; however, they were unable to identify a specific date by which they expect to have the capacity to complete this assessment. Until OCIO regularly analyzes the IT workforce to identify its competency needs and any gaps it may have, OCIO will be limited in its ability to determine whether its IT workforce has the necessary knowledge and skills to meet its mission and goals. Further, Office of Human Resources officials reported that they plan to update the staffing model that they use to identify their IT staffing needs to include more reliable workload data. However, as discussed earlier, the Secret Service had not yet developed that updated model to determine its IT staffing needs. Office of Human Resources officials reported that once they update the staffing model they plan to re- evaluate the Secret Service’s IT staffing needs. The officials also stated that, going forward, they plan to reassess these needs each year as part of the annual budget cycle. Regular assessments of the IT workforce’s staffing needs should increase the likelihood that the Secret Service is able to appropriately identify the number of IT staff it needs to meet its mission and programmatic goals. Develop strategies and plans to address gaps in competencies and staffing—partly implemented. The Secret Service developed recruiting and hiring strategies to address certain competency and staffing needs (e.g., cybersecurity) for its IT workforce. These strategies included, among other things, participating in DHS-wide recruiting events and using special hiring authorities. However, because OCIO did not identify all of its IT competency and staffing needs, and lacked a current analysis of its entire IT workforce, the Secret Service could not provide assurance that the recruiting and hiring strategies it developed were specifically targeted towards addressing current OCIO competency and staffing gaps. For example, without an analysis of the IT workforce’s skills, OCIO did not know the extent to which it had gaps in areas such as device management and cloud computing. As a result, the Secret Service’s recruiting strategies may not have been targeted to address any gaps in those areas. Until the Secret Service updates its recruiting and hiring strategies and plans to address all IT competency and staffing gaps identified (after OCIO completes its analysis of the entire IT workforce, as discussed earlier), the Secret Service will be limited in its ability to effectively recruit and hire staff to fill those gaps. According to the Office of Personnel Management, the Chief Human Capital Officers Council, and our prior work, once an agency has determined the critical skills and competencies that it needs to achieve programmatic goals, and identifies any competency or staffing gaps in its current workforce, the agency should be positioned to build effective recruiting and hiring programs. It is important that an agency has these programs in place to ensure that it can effectively recruit and hire employees with the appropriate skills to meet its various mission requirements. The Office of Personnel Management, the Chief Human Capital Officers Council, and we have also identified numerous leading practices associated with effective recruitment and hiring programs. Among these practices, an agency should (1) implement recruiting and hiring activities to address skill and staffing gaps by using the strategies and plans developed during the strategic workforce planning process; (2) establish and track metrics to monitor the effectiveness of the recruitment program and hiring process, including their effectiveness at addressing skill and staffing gaps, and report to agency leadership on progress addressing those gaps; and (3) adjust recruitment plans and hiring activities based on recruitment and hiring effectiveness metrics. The Secret Service minimally implemented the selected three leading practices associated with the recruitment and hiring workforce area. Specifically, the component partly implemented one of the three practices and did not implement the other two practices. Table 9 lists these selected practices and provides our assessment of the Secret Service’s implementation of the practices. Implement recruiting and hiring activities to address skill and staffing gaps by using the strategies and plans developed during the strategic workforce planning process—partly implemented. OCIO officials implemented the activities identified in the Secret Service’s recruiting and hiring plans. For example, as identified in its recruiting plan, OCIO participated in a February 2017 career fair to recruit job applicants at a technology conference. In addition, in August 2017, OCIO participated in a DHS-wide recruiting event. Secret Service officials reported that, during this event, they conducted four interviews for positions in OCIO. However, as previously discussed, OCIO did not identify all of its IT competency and staffing needs, and lacked a current analysis of its entire IT workforce. Without complete knowledge of its current IT competency and staffing gaps, the Secret Service could not provide assurance that the recruiting and hiring strategies that it had implemented fully addressed these gaps. Establish and track metrics to monitor the effectiveness of the recruitment program and hiring process, including their effectiveness at addressing skill and staffing gaps, and report to agency leadership on progress addressing those gaps—not implemented. The Secret Service had not established and tracked metrics for monitoring the effectiveness of its recruitment and hiring activities for the IT workforce. Officials in the Office of Human Resources attributed this to staffing constraints and said their priority was to address existing staffing gaps associated with the Secret Service’s law enforcement groups. In June 2018, Office of Human Resources officials stated that they plan to implement metrics to monitor the effectiveness of the hiring process for the IT workforce by October 2018. The officials also stated that they were in the process of determining (1) the metrics that are to be used to monitor the effectiveness of their workforce recruiting efforts and (2) whether they need to acquire new technology to support this effort. However, the officials did not know when they would implement the metrics for assessing the effectiveness of the recruitment activities and whether they would report the results to leadership. Until the Office of Human Resources (1) develops and tracks metrics to monitor the effectiveness of the Secret Service’s recruitment activities for the IT workforce, including their effectiveness at addressing skill and staffing gaps; and (2) reports to component leadership on those metrics, the Secret Service and the Office of Human Resources will be limited in their ability to analyze the recruitment program to determine whether the program is effectively addressing IT skill and staffing gaps. Further, Secret Service leadership will lack the information necessary to make effective recruitment decisions. Adjust recruitment plans and hiring activities based on recruitment and hiring effectiveness metrics—not implemented. While the Secret Service CIO stated in June 2018 that he planned to adjust the office’s recruiting and hiring strategies to focus on entry- level staff rather than mid-career employees, this planned adjustment was not based on metrics that the Secret Service was tracking. Instead, the CIO stated that he planned to make this change because his office determined that previous mid-career applicants were often unwilling or unable to wait for the Secret Service’s lengthy, required background investigation process to be completed. However, as previously mentioned, the Secret Service did not develop and implement any metrics for assessing the effectiveness of the recruitment and hiring activities for the IT workforce. As a result, the Office of Human Resources and OCIO were not able to use such metrics to inform adjustments to their recruiting and hiring plan and activities, thus, reducing their ability to target potential candidates for hiring. Until the Office of Human Resources and OCIO adjust their recruitment and hiring plans and activities as necessary, after establishing and tracking metrics for assessing the effectiveness of these activities for the IT workforce, the Secret Service will be limited in its ability to ensure that its recruiting plans and activities are appropriately targeted to potential candidates. In addition, the component will lack assurance that these plans and activities will effectively address skill and staffing gaps within its IT workforce. An organization should invest in training and developing its employees to help ensure that its workforce has the information, skills, and competencies that it needs to work effectively. In addition, training and development programs are an integral part of a learning environment that can enhance an organization’s ability to attract and retain employees with the skills and competencies needed to achieve cost-effective and timely results. DHS, the Secret Service, and we have previously identified numerous leading training and development-related practices. Among those practices, an organization should (1) establish a training and development program to assist the agency in achieving its mission and goals; (2) use tracking and other control mechanisms to ensure that employees receive appropriate training and meet certification requirements, when applicable; and (3) collect and assess performance data (including qualitative or quantitative measures, as appropriate) to determine how the training program contributes to improved performance and results. The Secret Service minimally implemented the selected three leading practices associated with the training and development workforce area. Specifically, the component partly implemented two of the three practices and did not implement one practice. Table 10 lists these selected leading practices and provides our assessment of the Secret Service’s implementation of the practices. Establish a training and development program to assist the agency in achieving its mission and goals—partly implemented. OCIO was in the process of developing a training program for its IT workforce. For example, OCIO developed a draft training plan that identified recommended training for the office’s various IT workforce groups (e.g., voice communications employees). However, the office had not defined the required training for each IT workforce group. In addition, OCIO officials had not yet determined which activities they would implement as part of the training program (e.g., soliciting employee feedback after training is completed and evaluating the effectiveness of specific training courses), nor did they implement those activities. OCIO officials stated that they had not yet fully implemented a training program because their annual training budget for fiscal year 2018 was not sufficient to implement such a program. However, resource constrained programs especially benefit from identifying and prioritizing training activities to inform training budget decisions. Until OCIO (1) defines the required training for each IT workforce group, (2) determines the activities that it will include in its IT workforce training and development program based on its available training budget, and (3) implements those activities, the office may be limited in its ability to ensure that the IT workforce has the necessary knowledge and skills for their respective positions. Use tracking and other control mechanisms to ensure that employees receive appropriate training and meet certification requirements, when applicable—partly implemented. OCIO used a training system to track that the managers for IITT’s programs had met certain certification requirements for their respective positions. In addition, OCIO manually tracked the technical training that certain IT staff took. However, as discussed earlier, OCIO did not define the required training for each IT workforce group. As such, the office was unable to ensure that IT staff received the appropriate training relevant to their respective positions. Until it ensures that IT staff complete training specific to their positions (after defining the training required for each workforce group), OCIO will have limited assurance that the workforce has the necessary knowledge and skills. Collect and assess performance data (including qualitative or quantitative measures, as appropriate) to determine how the training program contributes to improved performance and results—not implemented. As previously discussed, OCIO did not fully implement a training program for the IT workforce; as such, the office was unable to collect and assess performance data related to such a program. OCIO officials stated that, once they fully implement a training program, they intend to collect and assess data on how this program contributes to improved performance. However, the officials were unable to specify a time frame for when they would do so. Until OCIO collects and assesses performance data (including qualitative or quantitative measures, as appropriate) to determine how the IT training program contributes to improved performance and results (once the training program is implemented), the office may be limited in its knowledge of whether the training program is contributing to improved performance and results. Employee morale is important to organizational performance and an organization’s ability to retain talent to perform its mission. We have previously identified numerous leading practices for improving employee morale. Among other things, we have found that an organization should (1) determine root causes of employee morale problems by analyzing employee survey results using techniques such as comparing demographic groups, benchmarking against similar organizations, and linking root cause findings to action plans; and develop and implement action plans to improve employee morale; (2) establish and track metrics of success for improving employee morale, and report to agency leadership on progress improving morale; and (3) maintain leadership support and commitment to ensure continued progress in improving employee morale, and demonstrate sustained improvement in morale. With regard to its IT workforce, the Secret Service substantially implemented the selected three practices associated with the employee morale workforce area. Specifically, the component fully implemented two of the selected practices and partly implemented one practice. Table 11 lists these selected practices and provides our assessment of the Secret Service’s implementation of the practices. Determine root causes of employee morale problems by analyzing employee survey results using techniques such as comparing demographic groups, benchmarking against similar organizations, and linking root cause findings to action plans. Develop and implement action plans to improve employee morale—fully implemented. The Secret Service used survey analysis techniques to determine the root causes of its low employee morale, on which we have previously reported. For example, the component conducted a benchmarking exercise where it compared the morale of the Secret Service’s employees, including IT staff, to data on the morale of employees at other agencies, including the U.S. Capitol Police, U.S. Coast Guard, and the Drug Enforcement Administration. As part of this exercise, the Secret Service also compared its employee work-life offerings (e.g., on-site childcare and telework program) to those available at other agencies. In addition, the Secret Service developed and implemented action plans for improving employee morale. Among these action plans, for example, the component implemented a student loan repayment program and expanded its tuition assistance program’s eligibility requirements. Establish and track metrics of success for improving employee morale, and report to agency leadership on progress improving morale—fully implemented. The Secret Service tracked metrics for improving employee morale and reported the results to leadership. For example, the component tracked metrics on the percentage of the workforce, including IT staff, that participated in the student loan repayment and tuition assistance programs. In addition, the Chief Strategy Officer reported to the Chief Operating Officer the results related to meeting those metrics. Maintain leadership support and commitment to ensure continued progress in improving employee morale, and demonstrate sustained improvement in morale—partly implemented. Secret Service leadership developed and implemented initiatives that demonstrated their commitment to improving the morale of the Secret Service’s workforce. For example, since 2014, the Secret Service had worked with a contractor to identify ways to improve the morale of its entire workforce, including IT staff. However, as of June 2018, the Secret Service was unable to demonstrate that it had sustained improvement in the morale of the component’s IT staff. In particular, the component was only able to provide IT workforce-specific results from one employee morale assessment that was conducted subsequent to the consolidation of this workforce into OCIO in March 2017. These results were from an assessment conducted by the component’s Inspection Division in December 2017 (the assessment found that the majority of the Secret Service’s IT employees rated their morale as “very good” or “excellent.”) While the component also provided certain employee morale results from the Office of Personnel Management’s Federal Employee Viewpoint Survey in 2017, these results were not specific to the IT workforce. Instead, this workforce’s results were combined with those from staff in another Secret Service division. According to OCIO officials, the results were combined because, at the time of the survey, the IT workforce was administratively identified as being part of that other division. OCIO officials stated that, going forward, they plan to continue to assess the morale of the IT workforce on an annual basis as part of the Federal Employee Viewpoint Survey. In addition, the officials stated that OCIO-specific results may be available as part of the 2018 survey results, which the officials expect to receive by September 2018. By measuring employee satisfaction on an annual basis, the Secret Service should have increased knowledge of whether its initiatives that are aimed at improving employee morale are in fact increasing employee satisfaction. Agencies can use performance management systems as a tool to foster a results-oriented organizational culture that links individual performance to organizational goals. We have previously identified numerous leading practices related to performance management that are intended to enhance performance and ensure individual accountability. Among the performance management practices, agencies should (1) establish a performance management system that differentiates levels of staff performance and defines competencies in order to provide a fuller assessment of performance, (2) explicitly align individual performance expectations with organizational goals to help individuals see the connection between their daily activities and organizational goals, and (3) periodically provide individuals with regular performance feedback. The Secret Service substantially implemented the selected three leading practices associated with the performance management workforce area. Specifically, the component fully implemented one of the three practices and partly implemented the other two practices. Table 12 lists these selected leading practices and provides our assessment of the Secret Service’s implementation of the practices. Establish a performance management system that differentiates levels of staff performance and defines competencies in order to provide a fuller assessment of performance—partly implemented. The Secret Service’s performance management process requires leadership to make meaningful distinctions between levels of staff performance. In particular, the component’s performance plans for IT staff, which are developed by the Office of Human Resources and tailored by OCIO, as necessary, specify the criteria that leadership use to determine if an individual has met or exceeded the expectations associated with each competency identified in their respective performance plan. The performance plans include pre-established, department-wide competencies that are set by DHS, as well as occupational series-specific goals that may be updated by the Secret Service. However, because OCIO did not fully define and document all of its technical competency needs for the IT workforce, as discussed earlier, the Secret Service’s performance plans for IT staff did not include performance expectations related to the full set of technical competencies required for their respective positions. In addition, because OCIO officials were unable to specify a time frame for when they will identify all of the technical competency needs for the IT workforce (as previously discussed), the officials were also unable to specify a time frame for when they would update the IT workforce’s performance plans to include those relevant technical competencies. Until OCIO updates the performance plans for each occupational series within the IT workforce to include the relevant technical competencies, once identified, against which IT staff performance should be assessed, the office will be limited in its ability to provide IT staff with a complete assessment of their performance. In addition, Secret Service management will have limited knowledge of the extent to which IT staff are meeting all relevant technical competencies. Explicitly align individual performance expectations with organizational goals to help individuals see the connection between their daily activities and organizational goals—partly implemented. The Secret Service’s performance plans for IT staff identified certain goals that appeared to be related to organizational goals and objectives. For example, the performance plan for the Telecommunications Specialist occupational series (which is one of the series included in OCIO’s IT workforce) identified a goal for staff to support the voice, wireless, radio, satellite, and video systems serving the Secret Service’s protective and investigative mission. This performance plan goal appeared to be related to the component’s strategic goal on Advanced Technology, which included an objective to create the infrastructure needed to fulfill mission responsibilities. However, the Secret Service was unable to provide documentation that explicitly showed how individual employee performance links to organizational goals, such as a mapping of the goals identified in employee performance plans to organizational goals. Specifically, while Office of Human Resources officials stated that each Secret Service directorate is responsible for ensuring that employee goals map to high-level organizational goals, OCIO officials stated that they did not complete this mapping. The officials were unable to explain why they did not align the goals in their employees’ performance plans to the component’s high-level goals. According to the officials, the Secret Service is in the process of implementing a new automated tool that will require each office to explicitly align individual performance expectations to organizational goals. The officials stated that OCIO plans to use this tool to create employees’ fiscal year 2019 performance plans. By explicitly demonstrating how individual performance expectations align with organizational goals, the Secret Service’s IT staff should have a better understanding of how their daily activities contribute towards achieving the Secret Service’s goals. Periodically provide individuals with regular performance feedback—fully implemented. Secret Service leadership periodically provided their IT staff with performance feedback. Specifically, on an annual basis, OCIO staff received feedback during a mid-year and end-of-year performance feedback assessment. In our prior work, we have stressed that candid and constructive feedback can help individuals maximize their contribution and potential for understanding and realizing the goals and objectives of an organization. Further, this feedback is one of the strongest drivers of employee engagement. According to leading practices of the Software Engineering Institute, effective program oversight includes monitoring program performance and conducting reviews at predetermined checkpoints or milestones. This is done by, among other things, comparing actual cost, schedule, and performance data with estimates in the program plan and identifying significant deviations from established targets or thresholds for acceptable performance levels. In addition, the Software Engineering Institute previously identified leading practices for effectively monitoring the performance of agile projects. According to the Institute, agile development methods focus on delivering usable, working software frequently; as such, it is important to measure the value delivered during each iteration of these projects. To that end, the Institute reported that agile projects should be measured on velocity (i.e., number of story points completed per sprint or release), development progression (e.g., the number of user stories planned and accepted), product quality (e.g., number of defects), and post-deployment user satisfaction. DHS and the Secret Service had fully implemented the selected leading practice for monitoring the performance of one program and three projects within the IITT investment, and conducting reviews of this program and these projects at predetermined checkpoints. In addition, with regard to the selected leading practice for monitoring agile projects, the Secret Service had fully implemented this practice for one of its two projects being implemented using agile and had partially implemented this practice for the other project. Table 13 provides a summary of DHS’s and the Secret Service’s implementation of these leading practices, as relevant for one program and three projects within IITT. Monitor program performance and conduct reviews at predetermined checkpoints or milestones. Consistent with leading practices, DHS and the Secret Service monitored the performance of IITT’s program and projects by comparing actual cost, schedule, and performance information against planned targets and conducting reviews at predetermined checkpoints. For example, within the Secret Service: The Enabling Capabilities program and Multi-Level Security project monitored their contractors’ costs spent to-date on a monthly basis and compared them to the total contract amounts. OCIO used integrated master schedules to monitor the schedule performance of the Enabling Capabilities program and Multi-Level Security project. OCIO also monitored the cost, schedule, and performance of the Uniformed Division Resource Management System and Events Management projects during monthly status reviews. In addition, DHS and the Secret Service conducted acquisition decision event reviews and systems engineering life cycle technical reviews of IITT’s program and projects at predetermined checkpoints and, when applicable, identified deviations from established cost, schedule, and performance targets. For example: Secret Service OCIO met with DHS’s Office of Program Accountability and Risk Management in February 2017, and with DHS’s Acting Under Secretary for Management in June 2017, to discuss a schedule breach for the Enabling Capabilities program. In particular, the Enabling Capabilities program informed DHS that the program needed to change the planned date for acquisition decision event 3 (the point at which a decision is made to fully deploy the system) in order to conduct tests in an operational environment prior to that decision event. This delay was due to the Secret Service misunderstanding the tests that it was required to conduct prior to that decision event. Specifically, the Enabling Capabilities program had conducted tests on “production representative” systems, but these tests were not sufficient to meet the requirements for acquisition decision event 3. The project team for Multi-Level Security identified that certain technical issues they had experienced would delay system deployment and full operational capability (the point at which an investment becomes fully operational). As such, in October 2017, the project notified the Secret Service Component Acquisition Executive of these expected delays. In particular, the web browser that was intended to provide users on “Sensitive But Unclassified” workstations the ability to view information from different security levels, experienced technical delays in meeting personal identity verification requirements. The project team also described for the executive how the schedule delay would affect the project’s performance metrics and funding, and subsequently updated the project plan accordingly. Measure and monitor agile projects on, among other things, velocity (i.e., number of story points completed per sprint or release), development progression (e.g., the number of features and user stories planned and accepted), product quality (e.g., number of defects), and post-deployment user satisfaction. Secret Service OCIO measured its two agile projects—Uniformed Division Resource Management System and Events Management— using certain agile metrics. In particular, OCIO officials measured the Uniformed Division Resource Management System and Events Management projects using key metrics related to velocity and development progression. For example, the officials measured development progression for both projects on a daily basis. In addition, OCIO officials monitored each project’s progress against these metrics during bi-weekly reviews that they conducted with each project team. The OCIO officials also tracked product quality metrics for the Uniformed Division Resource Management System. For example, on a monthly basis, the officials tracked the number of helpdesk tickets that had been resolved related to the system. In addition, on a quarterly basis, they tracked the number of Uniformed Division Resource Management System defects that (1) had been fixed and (2) were in the backlog. However, while OCIO officials received certain post-deployment user satisfaction information from end-users of the Uniformed Division Resource Management System by, among other things, tracking the number of helpdesk tickets related to the system and via daily verbal, undocumented feedback from certain Uniformed Division officers, OCIO officials had not fully measured and documented post- deployment user satisfaction with the system, such as via a survey of employees who use the system. The officials stated that they had not conducted and documented a survey because they were focused on (1) addressing software performance issues that occurred after they deployed the system to a limited number of users, and (2) continuing system deployment to the remaining users after they addressed the performance issues. OCIO officials stated that they plan to conduct such a documented survey by the end of September 2018. The results of the user satisfaction survey should provide OCIO with important information on whether the Uniformed Division Resource Management System is meeting users’ needs. The Secret Service’s full implementation of 11 of 14 component-level CIO responsibilities constitutes a significant effort to establish CIO oversight for the component’s IT portfolio. Additional efforts to fully implement the remaining 3 responsibilities, including ensuring that all IT contracts are reviewed, as appropriate; ensuring that the Secret Service’s enterprise governance policy appropriately specifies the CIO’s role in developing and reviewing the component’s IT budget formulation and execution; and ensuring agile projects measure product quality and post-deployment user satisfaction, will further position the CIO to effectively manage the Secret Service’s IT portfolio. When effectively implemented, IT workforce planning and management activities can facilitate the successful accomplishment of an agency’s mission. However, the Secret Service had not fully implemented all of the 15 selected practices for its IT workforce for any of the five areas— strategic planning, recruitment and hiring, training and development, employee morale, and performance management. The Secret Service’s lack of (1) a strategic workforce planning process, including the identification of all required knowledge and skills, assessment of competency gaps, and targeted strategies to address specific gaps in competencies and staffing; (2) targeted recruiting activities, including metrics to monitor the effectiveness of the recruitment program and adjustment of the recruitment program and hiring efforts based on metrics; (3) a training program, including the identification of required training for IT staff, ensuring that staff take required training, and assessment of performance data regarding the training program; and (4) a performance management system that includes all relevant technical competencies, greatly limits its ability to ensure the timely and effective acquisition and maintenance of the Secret Service’s IT infrastructure and services. On the other hand, by monitoring program performance and conducting reviews at predetermined checkpoints for one program and three projects associated with the IITT investment, in accordance with leading practices, the Secret Service and DHS provided important oversight needed to guide that program and those projects. Measuring projects on leading agile metrics also provided the Secret Service CIO with important information on project performance. We are making the following 13 recommendations to the Director of the Secret Service: The Director should ensure that the CIO establishes and documents an IT acquisition review process that ensures the CIO or the CIO’s delegate reviews all contracts containing IT, as appropriate. (Recommendation 1) The Director should update the enterprise governance policy to specify (1) the CIO’s current role and responsibilities on the Executive Resources Board, to include developing and reviewing the IT budget formulation and execution; and (2) the Deputy CIO’s role and responsibilities on the Enterprise Governance Council. (Recommendation 2) The Director should ensure that the Secret Service develops a charter for its Executive Resources Board that specifies the roles and responsibilities of all board members, including the CIO. (Recommendation 3) The Director should ensure that the CIO includes product quality and post-deployment user satisfaction metrics in the modular outcomes and target measures that the CIO sets for monitoring agile projects. (Recommendation 4) The Director should ensure that the CIO identifies all of the required knowledge and skills for the IT workforce. (Recommendation 5) The Director should ensure that the CIO regularly analyzes the IT workforce to identify its competency needs and any gaps it may have. (Recommendation 6) The Director should ensure that, after OCIO completes an analysis of the IT workforce to identify any competency and staffing gaps it may have, the Secret Service updates its recruiting and hiring strategies and plans to address those gaps, as necessary. (Recommendation 7) The Director should ensure that the Office of Human Resources (1) develops and tracks metrics to monitor the effectiveness of the Secret Service’s recruitment activities for the IT workforce, including their effectiveness at addressing skill and staffing gaps; and (2) reports to component leadership on those metrics. (Recommendation 8) The Director should ensure that the Office of Human Resources and OCIO adjust their recruitment and hiring plans and activities, as necessary, after establishing and tracking metrics for assessing the effectiveness of these activities for the IT workforce. (Recommendation 9) The Director should ensure that the CIO (1) defines the required training for each IT workforce group, (2) determines the activities that OCIO will include in its IT workforce training and development program based on its available training budget, and (3) implements those activities. (Recommendation 10) The Director should ensure that the CIO ensures that the IT workforce completes training specific to their positions (after defining the training required for each workforce group). (Recommendation 11) The Director should ensure that the CIO collects and assesses performance data (including qualitative or quantitative measures, as appropriate) to determine how the IT training program contributes to improved performance and results (once the training program is implemented). (Recommendation 12) The Director should ensure that the CIO updates the performance plans for each occupational series within the IT workforce to include the relevant technical competencies, once identified, against which IT staff performance should be assessed. (Recommendation 13) DHS provided written comments on a draft of this report, which are reprinted in appendix III. In its comments, the department concurred with all 13 of our recommendations and provided estimated completion dates for implementing each of them. For example, with regard to recommendation 2, the department stated that the Secret Service would update its enterprise governance policy and related policies to outline the roles and responsibilities of the CIO and Deputy CIO, among others, by March 31, 2019. In addition, for recommendation 13, the department stated that the Secret Service OCIO will include relevant technical competencies in performance plans, as appropriate, in the next performance cycle that starts in July 2019. If implemented effectively, these actions should address the weaknesses we identified. The department also identified a number of other actions that it said had been taken to address our recommendations. For example, in response to recommendation 8, which calls for the Office of Human Resources to (1) develop and track metrics to monitor the effectiveness of the Secret Service’s recruitment activities for the IT workforce and (2) report to component leadership on those metrics, DHS stated that the Secret Service’s Office of Human Resources’ Outreach Branch provides to the department metrics on recruitment efforts toward designated priority mission-critical occupations. However, for fiscal year 2017, only 1 of the 12 occupational series associated with the Secret Service’s IT workforce was designated as a mission-critical occupation for the component (i.e., the 2210 IT Specialist series). The 11 other occupational series were not designated as mission- critical occupations. In addition, for fiscal year 2018, none of these 12 occupational series were designated as mission-critical occupations. As such, metrics on recruiting for these IT series may not have been reported to DHS leadership. Moreover, while we requested documentation of the recruiting metrics for the Secret Service’s IT workforce and, during the course of our review, had multiple subsequent discussions with the Secret Service regarding such metrics, the component did not provide documentation that demonstrated it had established recruiting metrics for its IT workforce. Tracking such metrics and reporting the results to Secret Service leadership, as we recommended, would provide management with important information necessary to make effective recruitment decisions. Further, in response to recommendation 10, which among other things, calls for the CIO to define the required training for each IT workforce group, the department stated that the Secret Service OCIO recently developed training requirements for each workforce group, which were issued during our audit. However, while during our audit OCIO provided a list of recommended training courses, the office did not identify them as being required courses. Defining training that is required for each IT workforce group, as we recommended, would inform OCIO of the necessary training for each position and enable the office to prioritize this training, to ensure that its staff have the needed knowledge and skills. In addition to the aforementioned comments, we received technical comments from DHS and Secret Service officials, which we incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Director of the Secret Service, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. Should you or your staffs have any questions on information discussed in this report, please contact me at (202) 512-4456 or HarrisCC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. Our objectives were to evaluate the extent to which: (1) the U.S. Secret Service (Secret Service) Chief Information Officer (CIO) has implemented selected information technology (IT) oversight responsibilities, (2) the Secret Service has implemented leading workforce planning and management practices for its IT workforce, and (3) the Secret Service and the Department of Homeland Security (DHS) have implemented selected performance and progress monitoring practices for the Information Integration and Technology Transformation (IITT) investment. To address the first objective, we analyzed DHS’s policies and guidance on IT management to identify the responsibilities that were to be implemented by the component-level CIO related to overseeing the Secret Service’s IT portfolio, including existing systems, acquisitions, and investments. From the list of 33 responsibilities that we identified, we then excluded the responsibility that was associated with information security, which is expected to be addressed as part of a separate, subsequent GAO review. We also excluded those responsibilities that were significantly large in scope (e.g., implement an enterprise architecture) or that, in our professional judgment, lacked specificity (e.g., provide timely delivery of mission IT services). As a result, we excluded from consideration for this review a total of 10 CIO responsibilities. For the 23 that remained, we then combined certain responsibilities that overlapped with other related responsibilities. For example, we combined related responsibilities on the component CIO’s review of IT contracts. As a result, we identified 14 responsibilities for review. We validated with the acting DHS CIO that these responsibilities were key responsibilities for the department’s component-level CIOs. We then included all 14 of the responsibilities in our review. The 14 selected component-level CIO responsibilities were: 1. Develop and review the component IT budget formulation and execution. 2. Manage the component IT investment portfolio, including establishing an IT acquisition review process that enables component and DHS review of component acquisitions (i.e., contracts) that contain IT. 3. Develop, implement, and maintain a detailed IT strategic plan. 4. Ensure all component IT policies are in compliance and alignment with DHS IT directives and instructions. 5. Concur with each program’s and/or project’s systems engineering life cycle tailoring plan. 6. Support the Component Acquisition Executive to ensure processes are established that enable systems engineering life cycle technical reviews and that they are adhered to by programs and/or projects. 7. Ensure that all systems engineering life cycle technical review exit criteria are satisfied for each of the component’s IT programs and/or projects. 8. Ensure the necessary systems engineering life cycle activities have been satisfactorily completed as planned for each of the component’s IT programs and/or projects. 9. Concur with the systems engineering life cycle technical review completion letter for each of the component’s IT programs and/or projects. 10. Maintain oversight of their component’s agile development approach for IT by appointing the responsible personnel, identifying investments for adoption, and reviewing artifacts. 11. With Component Acquisition Executives, evaluate and approve the application of agile development for IT programs consistent with the component’s agile development approach. 12. Set modular outcomes and target measures to monitor the progress in achieving agile implementation for IT programs and/or projects within their component. 13. Participate on DHS’s CIO Council, Enterprise Architecture Board, or other councils/boards as appropriate, and appoint employees to serve when necessary. 14. Meet the IT competency requirements established by the DHS CIO, as required in the component CIO’s performance plan. To determine the extent to which the Secret Service CIO has implemented these responsibilities, we obtained and assessed relevant component documentation and compared it to the responsibilities. Specifically, we obtained and analyzed documentation including evidence of the CIO’s participation on the Secret Service governance board that has final decision authority and responsibility for enterprise governance, including the IT budget; monthly program management reports showing the CIO’s oversight of IT programs, projects, and systems; monthly status reports on program spending; the Secret Service’s IT strategic plan; the Secret Service’s enterprise governance policy; meeting minutes from the DHS board and council on which the CIO participated (i.e., the CIO Council and Enterprise Architecture Board); and documentation demonstrating whether the CIO met the IT competency requirements. In addition, we obtained and analyzed relevant documentation related to the CIO’s oversight of the major IT investments on which the Secret Service was spending development, modernization, and enhancement funds during fiscal year 2017. As of July 2017, the component had one investment—IITT—that met this criterion. IITT is a portfolio investment that, as of July 2017, included two programs (one of which included three projects) and one standalone project (i.e., it was not part of another program) that had capabilities that were in planning or development and modernization: the Enabling Capabilities program, Enterprise Resource Management System program (which included three projects, called Uniformed Division Resource Management System, Events Management, and Enterprise-wide Scheduling), and Multi-Level Security project. In particular, we obtained and analyzed documentation related to the CIO’s oversight of the systems engineering life cycles for IITT’s Enabling Capabilities program and the Uniformed Division Resource Management System, Events Management, and Multi-Level Security projects. This documentation included acquisition program baselines, systems engineering life cycle tailoring plans, and systems engineering life cycle technical review briefings and completion letters. We then compared the documentation against the five selected systems engineering life cycle oversight responsibilities (responsibilities 5, 6, 7, 8, and 9). We also obtained and analyzed documentation related to the CIO’s oversight of two projects that the Secret Service was implementing using an agile methodology—Uniformed Division Resource Management System and Events Management. Specifically, we obtained and assessed documentation of (1) the CIO’s approval for these projects to be implemented using an agile methodology and (2) the agile development metrics that the CIO established for each of these projects. We then compared this documentation to the three agile development-related component-level CIO responsibilities (responsibilities 10, 11, and 12). Further, to determine the extent to which the Secret Service CIO had established an IT acquisition (i.e., contract) review process that enabled component and DHS review of component contracts that contain IT (which is part of responsibility 2), we first asked Secret Service officials to provide us with a list of all new, unclassified IT contracts that the component awarded between October 1, 2016, and June 30, 2017. The Secret Service officials provided a list of 54 contracts. We validated that these were contracts for IT or IT services by: (1) searching for them in the Federal Procurement Data System – Next Generation; (2) identifying their associated product or service codes, as reported in that system; and (3) determining whether those codes were included in the universe of 79 IT product or service codes identified by the Category Management Leadership Council. In validating the list of 54 contracts provided by the Secret Service, we determined that 5 of the contracts were not associated with an IT product or service code. As such, we removed those contracts from the list. In addition, we found that three other items identified by the component were not in the Federal Procurement Data System – Next Generation. Secret Service officials subsequently confirmed that these three items were not contracts. We therefore removed these three items from the list. As such, the final list of validated contracts identified by the Secret Service included 46 IT contracts. In addition, to identify any IT contracts that were not included in the list provided by the Secret Service, we conducted a search of the Federal Procurement Data System – Next Generation to identify all unclassified contracts that (1) the component awarded between October 1, 2016, and June 30, 2017; (2) were not a modification of a contract; and (3) were associated with 1 of the 79 IT product or service codes identified by the Category Management Leadership Council. Based on these criteria, we identified 144 Secret Service IT contracts in the Federal Procurement Data System – Next Generation (these 144 contracts included the 46 contracts previously identified by Secret Service officials). We then asked Secret Service officials to validate the accuracy, completeness, and reliability of these data, which they did. From each of these two lists of IT contracts (i.e., the list of 46 IT contracts identified by the Secret Service and the list of 144 IT contracts that we identified from the Federal Procurement Data System – Next Generation), we then selected random, non-generalizable samples of contracts, as described below. First, from the list of 46 IT contracts identified by Secret Service officials, we removed 4 contracts that had total values of less than $10,000. To ensure that we selected across all contract sizes, we randomly selected 12 contracts from the remaining list of 42 contracts, using the following cost ranges: $10,000 to $50,000 (4 contracts), more than $50,000 to less than $250,000 (4 contracts), and more than $250,000 (4 contracts). Second, from our list of 144 IT contracts that we identified from the Federal Procurement Data System – Next Generation, we removed the 46 contracts identified by Secret Service officials. We also removed 12 contracts that had total values of less than $10,000. To ensure that we selected across all contract sizes, we randomly selected 21 contracts from the remaining list of 86 contracts, using the following cost ranges: $10,000 to $50,000 (7 contracts), more than $50,000 to less than $250,000 (7 contracts), and more than $250,000 (7 contracts). In total, we selected 33 IT contracts for review. We separated the contracts into the three cost ranges identified above in order to ensure that contracts of different value levels had been selected. This enabled us to determine the extent to which the CIO appropriately reviewed contracts of all values. To determine the extent to which the CIO had established an IT contract approval process that enabled the Secret Service and DHS, as appropriate, to review IT contracts, we first asked Secret Service Office of the CIO (OCIO) officials for documentation of their IT contract approval process. These officials were unable to provide such documentation. Instead, the officials stated that the Secret Service CIO or the CIO’s delegate approves all IT contracts prior to award. The officials also provided documentation that identified four staff to whom the CIO had delegated his approval authority. Further, the officials stated that, in accordance with DHS’s October 2016 IT acquisition review guidance, they submitted to DHS OCIO for approval any IT contracts that met DHS’s thresholds for review, including those that (1) had total estimated procurement values of $2.5 million or more, and (2) were associated with a major investment. Based on the IT acquisition review process that Secret Service OCIO officials described, we then obtained and analyzed each of the 33 selected IT contracts and associated approval documentation to determine whether or not the Secret Service CIO or the CIO’s delegate had approved each of the contracts. In particular, we (1) reviewed the name of the contract approver on the approval documentation, and (2) compared the signature dates that were on the contracts to the signature dates that were identified on the associated approval documentation. In addition, to determine whether or not the Secret Service CIO submitted to DHS OCIO for approval the IT contracts that (1) had total estimated procurement values of $2.5 million or more, and (2) were associated with major investments, we first analyzed the 144 Secret Service IT contracts that we had previously pulled from the Federal Procurement Data System – Next Generation to determine which contracts met the $2.5 million threshold. We identified 4 contracts that met this threshold. We then requested that OCIO identify the levels (i.e., major or non-major) of the investments associated with these contracts. According to OCIO officials, 3 of the 4 contracts were associated with non-major investments and 1 was not associated with an investment. As such, based on DHS’s October 2016 IT acquisition review guidance, none of these contracts needed to be submitted to DHS OCIO for review. We also interviewed Secret Service officials, including the CIO and Deputy CIO, regarding the CIO’s implementation of the 14 selected component-level responsibilities. We assessed the evidence against the selected responsibilities to determine the extent to which the CIO had implemented them. To address the second objective—determining the extent to which the Secret Service had implemented leading workforce planning and management practices for its IT workforce—we first identified seven topic areas associated with human capital management based on the following sources: The Office of Personnel Management’s Human Capital Framework. Office of Personnel Management and the Chief Human Capital Officers Council Subcommittee for Hiring and Succession Planning, End-to-End Hiring Initiative. GAO, High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO, IT Workforce: Key Practices Help Ensure Strong Integrated Program Teams; Selected Departments Need to Assess Skill Gaps. GAO, Department of Homeland Security: Taking Further Action to Better Determine Causes of Morale Problems Would Assist in Targeting Action Plans. GAO, Human Capital: A Guide for Assessing Strategic Training and Development Efforts in the Federal Government. GAO, Results-Oriented Cultures: Creating a Clear Linkage between Individual Performance and Organizational Success. DHS acquisition guidance. Secret Service acquisition guidance. Among these topic areas, we then selected five areas that, in our professional judgment, were of particular importance to successful workforce planning and management. They were also previously identified as part of our high-risk and key issues work on human capital management. These areas include: (1) strategic planning, (2) recruitment and hiring, (3) training and development, (4) employee morale, and (5) performance management. We also reviewed these same sources and identified numerous leading practices associated with the five topic areas. Among these leading practices, we then selected three leading practices within each of the five areas (for a total of 15 selected practices). The selected practices were foundational practices that, in our professional judgment, were of particular importance to successful workforce planning and management. Table 14 identifies the five selected workforce areas and 15 selected associated practices. To determine the extent to which the Secret Service had implemented the selected leading workforce planning and management practices for its IT workforce, we obtained and assessed documentation and compared it against the 15 selected practices. In particular, we analyzed the Secret Service’s human capital strategic plan, human capital staffing plan, IT strategic plan, documentation of the component’s staffing model that it used to determine the number of IT staff needed, an independent verification and validation report on the component’s staffing models, documentation of the current number of IT staff, the Secret Service’s recruitment and outreach plans, documentation of DHS’s hiring authorities (which are applicable to the Secret Service), the Secret Service’s training strategic plan, IT workforce training plan, action plans for improving employee morale, and templates used for measuring and reporting employee performance. We also interviewed Secret Service officials—including the CIO, Deputy CIO, and workforce planning staff—about the component’s workforce- related policies and documentation. Further, we discussed with the officials the Secret Service’s efforts to implement the selected workforce practices for its IT workforce. Regarding our assessments of the Secret Service’s implementation of the 15 selected workforce planning and management practices, we assessed a practice as being fully implemented if component officials provided supporting documentation that demonstrated all aspects of the practice. We assessed a practice as not implemented if the officials did not provide any supporting documentation for that practice, or if the documentation provided did not demonstrate any aspect of the practice. We assessed a practice as being partly implemented if the officials provided supporting documentation that demonstrated some, but not all, aspects of the selected practice. In addition, related to our assessments of the Secret Service’s implementation of the five selected overall workforce areas, we assessed each area as follows, based on the implementation of the three selected practices within each area: Fully implemented: The Secret Service provided evidence that it had fully implemented all three of the selected practices within the workforce area; Substantially implemented: The Secret Service provided evidence that it had either fully implemented two selected practices and partly implemented the remaining one selected practice within the workforce area, or fully implemented one selected practice and partly implemented the remaining two selected practices within the workforce area; Partially implemented: The Secret Service provided evidence that it had partly implemented each of the three selected practices within the workforce area; Minimally implemented: The Secret Service provided evidence that it partly implemented two selected practices and not implemented the remaining one selected practice within the workforce area, or partly implemented one selected practice and not implemented the remaining two selected practices within the workforce area; or Not implemented: The Secret Service did not provide evidence that it had implemented any of the three selected practices within the workforce area. To address the third objective—determining the extent to which the Secret Service and DHS have implemented selected performance and progress monitoring practices for IITT—we reviewed leading project monitoring practices and guidance from the Software Engineering Institute. First, we reviewed the practices within the Project Monitoring and Control process area of the Institute’s Capability Maturity Model Integration® for Acquisition. Based on our review, we identified four practices associated with monitoring program performance and progress. In our professional judgment, all four of these practices were of significance to managing the IITT investment given the phase of the life cycle that the investment was in. As such, we elected to include all four of these practices in our review, and combined them into one practice, as follows: Monitor program performance and conduct reviews at predetermined checkpoints or milestones by, among other things, comparing actual cost, schedule, and performance data with estimates in the program plan and identifying significant deviations from established targets or thresholds for acceptable performance levels. Next, given the agile development methodology that the Secret Service was using for certain projects within IITT, we reviewed the Software Engineering Institute’s technical note on the progress monitoring of agile contractors. Based on our review, and in consultation with an internal expert, we selected four agile metrics that the Institute identified as important for successful agile implementations and that, in our professional judgment, were of most significance to monitoring the performance of IITT’s agile projects. We then combined these four metrics into one practice, as follows: Measure and monitor agile projects on velocity (i.e., number of story points completed per sprint or release), development progression (e.g., the number of features and user stories planned and accepted), product quality (e.g., number of defects), and post-deployment user satisfaction. To determine the extent to which DHS and the Secret Service had implemented the first selected practice, we analyzed relevant program management and governance documentation for IITT’s Enabling Capabilities program, and Multi-Level Security, Uniformed Division Resource Management System, and Events Management projects. In particular, we analyzed acquisition program baselines, DHS acquisition decision event memorandums, artifacts from DHS and Secret Service program oversight reviews, cost monitoring reports, program integrated master schedules, and program status briefings, and compared this documentation to the selected practice. We also interviewed Secret Service OCIO officials regarding the Secret Service’s and DHS’s efforts to monitor the IITT investment’s performance and progress. To determine the extent to which the Secret Service had implemented the second selected practice related to measuring and monitoring agile projects on agile metrics (i.e., velocity, development progression, product quality, and post-deployment user satisfaction), we obtained and analyzed agile-related documentation for the two projects that the Secret Service was implementing using an agile methodology—Uniformed Division Resource Management System and Events Management. Specifically, to determine the extent to which the Secret Service was measuring and monitoring these two projects on metrics for velocity and development progression, we obtained and analyzed documentation, such as sprint burndown charts and monthly program status reports, and compared it to the selected practice. In addition, the agile metrics for product quality and post-deployment user satisfaction were only applicable to projects that had been deployed to users. As such, these metrics were applicable to the Uniformed Division Resource Management System (which the Secret Service had deployed to users) and were not applicable to Events Management (which the Secret Service had not yet deployed to users, as of early May 2018). We therefore obtained and analyzed documentation demonstrating that Secret Service OCIO measured product defects for the Uniformed Division Resource Management System. We also requested documentation demonstrating that OCIO had measured and monitored post-deployment user satisfaction for this project, including via a survey. OCIO officials stated that they had not conducted such a survey and were unable to provide documentation demonstrating they had measured post- deployment user satisfaction for the Uniformed Division Resource Management System. To assess the reliability of the cost, schedule, and agile-related data that were in DHS and the Secret Service’s program management and governance documentation for the IITT investment, we (1) analyzed related documentation and assessed the data against existing agency records to identify consistency in the information, and (2) examined the data for obvious outliers, incomplete, or unusual entries. We determined that the data in these documents were sufficiently reliable for our purpose, which was to evaluate the extent to which DHS and the Secret Service had implemented processes for monitoring the IITT investment’s performance and progress. We conducted this performance audit from May 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. As of June 2018, the Secret Service’s Information Integration and Technology Transformation (IITT) investment included two programs (one of which included three projects) and one project that had capabilities that were in planning or development and modernization, as described below: Enabling Capabilities. This program is intended to, among other things, (1) modernize and enhance the Secret Service’s information technology (IT) network infrastructure, including increasing bandwidth and improving the speed and reliability of the Secret Service’s IT system performance; (2) enhance cybersecurity to protect against potential intrusions and viruses; and (3) provide counterintelligence and data mining capabilities to improve officials’ ability to perform the Secret Service’s investigative mission. Enterprise Resource Management System. This program comprises three projects that are intended to provide: a system that will enable the Secret Service’s Uniformed Division to efficiently and effectively plan, provision, and schedule missions (this project is referred to as Uniformed Division Resource Management System), a system that will unify the logistical actions (e.g., assigning personnel) surrounding special events that Secret Service agents need to protect, such as the United Nations General Assembly (this project is referred to as Events Management), and a capability for creating schedules for Secret Service agents and administrative, professional, and technical staff, as well as the ability to generate reports on information such as monthly hours worked (this project is referred to as Enterprise-wide Scheduling). Multi-Level Security. This project is intended to enable authorized Secret Service users to view two levels of classified information on a single workstation. Previously, data at various security levels were contained and used in multiple disparate systems. Multi-Level Security is intended to streamline users’ access to information at different security levels in order to enable them to more quickly and effectively perform their duties. Table 15 provides the planned life cycle cost and schedule estimates (threshold values) for each IITT program and project that had capabilities in planning or development and modernization, as of June 2018. In addition, the table describes any changes in those cost and schedule estimates, as well as the key reasons for any changes, as identified by officials from the Secret Service’s Office of the Chief Information Officer. In addition to the contact named above, the following staff made key contributions to this report: Shannin O’Neill (Assistant Director), Emily Kuhn (Analyst-in-Charge), Quintin Dorsey, Rebecca Eyler, Javier Irizarry, and Paige Teigen.", "summary": "Commonly known for protecting the President, the Secret Service also plays a leading role in investigating and preventing financial and electronic crimes. To accomplish its mission, the Secret Service relies heavily on the use of IT infrastructure and systems. In 2009, the component initiated the IITT investment—a portfolio of programs and projects that are intended to, among other things, improve systems availability and security in support of the component's business operations. GAO was asked to review the Secret Service's oversight of its IT portfolio and workforce. This report discusses the extent to which the (1) CIO implemented selected IT oversight responsibilities, (2) Secret Service implemented leading IT workforce planning and management practices, and (3) Secret Service and DHS implemented selected performance monitoring practices for IITT. GAO assessed agency documentation against 14 selected component CIO responsibilities established in DHS policy; 15 selected leading workforce planning and management practices within 5 topic areas; and two selected leading industry project monitoring practices that, among other things, were, in GAO's professional judgment, of most significance to managing IITT. The U.S. Secret Service (Secret Service) Chief Information Officer (CIO) fully implemented 11 of 14 selected information technology (IT) oversight responsibilities, and partially implemented the remaining 3. The CIO partially implemented the responsibilities to establish a process that ensures the Secret Service reviews IT contracts; ensure that the component's IT policies align with the Department of Homeland Security's (DHS) policies; and set incremental targets to monitor program progress. Additional efforts to fully implement these 3 responsibilities will further position the CIO to effectively manage the IT portfolio. Of the 15 selected practices within the 5 workforce planning and management areas, the Secret Service fully implemented 3 practices, partly implemented 8, and did not implement 4 (see table). Within the strategic planning area, the component partly implemented the practice to, among other things, develop IT competency needs. While the Secret Service had defined general core competencies for its workforce, the Office of the CIO (OCIO) did not identify all of the technical competencies needed to support its functions. As a result, the office was limited in its ability to address any IT competency gaps that may exist. Also, while work remains to improve morale across the component, the Secret Service substantially implemented the employee morale practices for its IT staff. Secret Service officials said the gaps in implementing the workforce practices were due to, among other things, their focus on reorganizing the IT workforce within OCIO. Until the Secret Service fully implements these practices for its IT workforce, it may be limited in its ability to ensure the timely and effective acquisition and maintenance of the component's IT infrastructure and services. Of the two selected IT project monitoring practices, DHS and the Secret Service fully implemented the first practice to monitor the performance of the Information Integration and Technology Transformation (IITT) investment. In addition, for the second practice—to monitor projects on incremental development metrics—the Secret Service fully implemented the practice on one of IITT's projects and partially implemented it on another. In particular, OCIO did not fully measure post-deployment user satisfaction with the system on one project. OCIO plans to conduct a user satisfaction survey of the system by September 2018, which should inform the office on whether the system is meeting users' needs. GAO is making 13 recommendations, including that the Secret Service establish a process that ensures the CIO reviews all IT contracts, as appropriate; and identify the skills needed for its IT workforce. DHS concurred with all recommendations and provided estimated dates for implementing each of them.", "document_type": "gao"}
{"report": "This section provides information on translating research into new products or services, the federal government’s role in supporting research, and OSTP’s role in fostering collaboration among the various entities. It also provides information on the areas of quantum computing and synthetic biology. Technological innovation involves not only creating new ideas but also translating those ideas into a new product or service. Innovation, and the research driving it, is inherently risky because the likelihood that research can be translated into a product or service and the ultimate value of that product or service are unknown. Because of this risk and the long time frames sometimes associated with technology development, there can be a gap in funding and investment support that makes it challenging to translate research into commercialized products or services. While government and universities often support early-stage research and industry tends to support later stages of development, there may be a gap during the middle stages of innovation during which innovators may have difficulty finding financial support, as illustrated in figure 1 (see app. III for a printable version). The linear, or pipeline, model of innovation presents innovation as a succession of outputs that transfer to the next level as inputs. The starting point in the pipeline model is basic research. Knowledge created through basic research transitions to the next stage of applied research then to development and, finally, commercialization. Under this model, innovation takes place in distinct and sequential phases. Critics of the pipeline model have noted that innovation is actually cyclical because the development of knowledge involves feedback and interaction at these different stages of the cycle. Alternative innovation models include the following: Extended pipeline model. Under this model certain research and development organizations support the entire technology development process, from basic research to initial commercialization. Unlike the pipeline model, in which the government’s support is disconnected from the rest of the innovation ecosystem, under the extended pipeline model the government’s role is deeply connected to the rest of the system. Under this model, federal entities such as DOD support the evolution of technologies, including electronics, computing, and the internet, across all stages of innovation. Induced innovation model. Innovation that follows this model is more industry-led because the parties involved have a market niche that the research needs to meet. Research under this model is more likely to lead to incremental advances because it is conducted in response to market demand. Manufacturing-led model. Under this model, innovation is pursued with the main objective of manufacturing. This model describes innovations in production technologies, processes, and products that emerge from the manufacturing process. The production process is supplemented by applied research and development. It is typically industry-led but may have strong government support, particularly in countries such as Germany, Japan and China whose economies are organized around this model. While the different innovation models receive various levels of federal support, examining the organization of federal agencies in support of innovation is complex because of the decentralized nature of the federal research system. More than 25 federal agencies support intramural or extramural research, and these agencies may play different roles in supporting research that may lead to potentially transformational technologies. For example, NSF supports basic research that is in keeping with its mission of promoting the progress of science; advancing the national health, prosperity, and welfare; and securing the national defense. DOD supports research in line with its mission to provide the military forces needed to deter war and to protect the United States’ security, while DOE supports research in line with its mission to ensure America’s security and prosperity by addressing its energy, environmental, and nuclear challenges. Commerce’s National Institute of Standards and Technology (NIST) supports research in measurement science, standards, and technology, in keeping with its mission to promote innovation and industrial competitiveness. Other agencies—such as EPA, and HHS’s Food and Drug Administration—support research in their capacity as regulatory agencies. Federal support for research is not only decentralized but also changes over time. Factors such as international conflict, budgetary pressures, and globalization may contribute to shifts in U.S. science and technology policy. In times of war, federal support for research has increased in part because of the view that America’s military survival might depend on science and technology leadership. Budgetary pressures also affect the federal role in research when such pressures lead to reductions in federal funding for research. Globalization and the associated integration of the world economy may also affect federal science and technology policy. While the United States invests far more resources in research and development than any other country, its rank in research and development intensity has slowly fallen in recent years. Researchers have said that, in addition to globalization, domestic changes—such as the structure of U.S. companies—present new challenges to commercializing new products and services. For example, in the last few decades, the amount of research produced by industrial laboratories has declined. Further, U.S. companies, particularly small and midsized firms, devote fewer resources to train employees compared to firms from the 1980s. In recognition of the need for a more skilled workforce to enhance U.S. competitiveness, the federal government has increasingly shifted attention to preparing students for careers in STEM fields. The federal role also changes in response to differing policy views. One policy perspective maintains that the federal role should be to support innovation across the economy. This policy approach has underpinned innovation and economic growth since at least the end of World War II. As we reported previously, another perspective is that the federal role should be to support individual sectors. Critics of the latter perspective argue that the government should not “pick winners and losers” in commercial contexts because it is unlikely that the government will have sufficient information or foresight about an individual firm’s or a particular technology’s growth potential to select it for special subsidy. This view advocates allocating resources through market mechanisms because such mechanisms are anticipated to result in U.S. investments that are most efficient and best suited to the comparative advantages of the United States. However, the federal government has supported individual sectors from research and development through implementation, most often because of the government’s own needs in areas deemed important for national security (e.g., aerospace and defense). In addition, findings of economic market failures have justified other interventions, such as for research, development, and demonstrations in various sectors, including agriculture and energy, and recently, advanced production technologies. The federal government has partnered with nonfederal entities to translate research into commercialized products to foster economic growth. For example, DOD, through programs such as the Defense Advanced Research Projects Agency (DARPA), has partnered with nonfederal entities to support both early-stage research and later-stage production. Some of these partnerships have led to development of transformational technologies. For example, in the 1970s DOD supported development of a communications network to facilitate information sharing, which is considered the foundation of the modern internet. DOD also funded research in the 1950s on speech recognition and artificial intelligence that commercial companies leveraged in the 1990s and 2000s to develop technologies such as the Speech Interpretation and Recognition Interface, the iPhone assistant. NIST research, such as its critical technical evaluations of speech recognition technologies dating back to the 1980s, also contributed to the development of Speech Interpretation and Recognition Interface, according to NIST officials. Alongside DOE, HHS and NSF, DOD has funded research that led to technologies used to make the first iPod and later the iPhone (see fig. 2). Many federal agencies also support other mechanisms, such as Small Business Innovation Research and Small Business Technology Transfer grants, to stimulate innovation by facilitating interactions among the federal government, private sector, and nonprofit research institutions. OSTP was established in 1976 to provide advice on the scientific, engineering, and technological aspects of issues that require attention at the highest levels of government. Advances in technology in areas such as quantum computing and synthetic biology have become increasingly interdisciplinary, and OSTP works with agencies across the decentralized federal research system to coordinate activities to support these advances. The National Science and Technology Council (NSTC) is a key component of these efforts and is charged with coordinating science and technology policy across the federal government. One of the NSTC’s primary objectives is to establish clear national goals for federal science and technology investments. NSTC organizes its work under six committees, such as the Committee on STEM Education, which is responsible for coordinating federal programs and activities in support of STEM education. In addition to pulling together federal entities, OSTP also plays a role in pulling together nonfederal entities to help tackle technological issues of importance to the nation. For example, the National Strategic Computing Initiative, created in 2015, is a government collaboration with industry and academia to sustain and enhance U.S. leadership in high-performance computing. Quantum computing has the potential to revolutionize computing by introducing a fundamentally new approach to computing not available with classical computers, which constitute most computers in use today. Classical computers process two different states as 1s and 0s (binary digits) to form “bits” of information that the computer manipulates. Bits can exist in either a 1 or 0 state. These bits may be created using, for example, specific voltage or current levels in a circuit, and there is a limit as to how quickly transistors in classical computers can manipulate these bits to conduct calculations or how many circuit components can be included on a computer chip. While classical computers rely on bits, quantum computers rely on quantum bits (“qubits”). Unlike bits, qubits can be in combinations of both a 1 and a 0 at the same time due to quantum superposition. Phenomena such as quantum superposition and quantum entanglement (the ability of two particles to have correlated information, even at a distance) make quantum computers more powerful than even today’s most advanced classical supercomputers for solving some complex problems. This ability to exist in combinations of both states simultaneously allows for the efficient implementation of certain algorithms, resulting in the ability to solve certain types of problems significantly faster than classical computers. To date, a universal quantum computer is not commercially available. As of 2017, quantum computers contain at most 50 qubits and can perform some small calculations more slowly than classical computers. Among the challenges to building a quantum computer are developing software and hardware. Quantum hardware allows the computer to manipulate qubits by completely isolating quantum processors from outside forces. Quantum computing hardware is at the laboratory prototype stage and is progressing steadily, according to a 2016 federal report. Hardware development efforts include the creation of logical qubits, which use error correction techniques to actively mitigate errors, thus stabilizing the quantum state of the qubit even in the presence of external factors (i.e., noise). Quantum information is extremely fragile and requires special techniques and equipment, such as extreme refrigeration, to maintain the qubit. Other challenges include creating qubits of high quality, packaging them together in a scalable form so they can perform complex calculations in a controllable way, and limiting the errors that can result from heat and electromagnetic radiation. Addressing these challenges may require developing new materials. Stakeholders still consider developing a universal quantum computer a long-term goal. When available, these computers could provide new computational methods and powerful new tools for researchers. Quantum computing has the potential to support significant breakthroughs in medicine, manufacturing, artificial intelligence, defense, and improved cybersecurity. However, it may take a decade or more before such technology is ready to be demonstrated at scale. Synthetic biology represents an intersection of biology and engineering that focuses on the modification or creation of novel biological systems. The current state of synthetic biology is mostly the result of research in biology, engineering, computer science, and information technology dating back to the mid-1900s. Synthetic biology has drawn increasing attention as a potentially transformative platform technology. Whether found in nature or synthesized in a test tube, the building blocks of synthetic biology are assembled to create biological systems. Synthetic biological systems can function in cell-free environments, such as cell extracts, or may be placed into living cells, such as bacteria, which serve as a “chassis.” In the short-term, synthetic biology is enhancing understanding of how living organisms work through progress in the ability to design and construct biological parts. Synthetic biology is already being applied in a variety of fields. Through the creation of novel biological systems, synthetic biology offers potential solutions to many current challenges, such as climate change, energy needs, and global health. For example, synthetic biology may help address global warming through the development of artificial leaf technology, a synthetic version of the photosynthesis process. In the energy sector, synthetic biology is being used to devise more efficient methods of producing biofuels, and in the healthcare sector, synthetic biology may lead to biosensors that can permanently reside in the body to detect and treat abnormalities such as cancer. Synthetic biology has already resulted in biosensors that can detect arsenic in drinking water. Factors that may support growth in synthetic biology applications include a decline in the cost of deoxyribonucleic acid (DNA) sequencing and increases in genetically engineered crop development, expenditures in research and development by biotechnology and pharmaceutical companies, and demand for synthetic genes. On the other hand, bio- safety and bio-security concerns about the potential that synthetic biology could be used for nefarious purposes may restrict the short-term growth of synthetic biology. Multiple federal agencies and nonfederal entities support quantum computing and synthetic biology research that could lead to transformational technological advances in many areas of the U.S. economy, including energy, medicine, and national security. We identified 6 agencies that in fiscal year 2016 through the second quarter of fiscal year 2018 supported quantum computing research to advance foundational understanding of quantum computing or to develop related hardware and software. We found that 4 of the 6 agencies reported a combined total of at least $23.4 million in obligations to support quantum computing research in fiscal year 2017. Similarly, we identified 10 agencies that, during the timeframe we reviewed, supported synthetic biology research to advance foundational understanding of synthetic biology or knowledge of how to apply it in bioengineering, national security, and biofuels development. We found that 6 of the 10 agencies reported a combined total of at least $211.2 million in obligations to support synthetic biology research in fiscal year 2017. We also identified a variety of nonfederal entities, such as universities and private companies, that conduct research in quantum computing and synthetic biology. In fiscal year 2017, 6 agencies—DOD, DOE, ODNI, NASA, Commerce’s NIST, and NSF—supported quantum computing research, and 4 of these 6 agencies reported a combined total of at least $23.4 million in obligations toward those efforts. Agency officials, stakeholders, and experts we interviewed told us they expect quantum computers could lead to transformational advances in national security technologies or in technology areas that rely heavily on simulation, such as machine learning for defense capabilities, pharmaceuticals, and materials science for advanced manufacturing. However, there is still uncertainty surrounding the specific applications of quantum computing. Agency officials, stakeholders, and experts told us that they anticipate that quantum computing applications may include large number factoring, optimization of certain tasks, and simulation of other quantum systems. Accordingly, agencies’ quantum computing efforts included research to advance foundational understanding of quantum information science as well as research to develop the hardware and software needed to build a universal quantum computer. Joint Quantum Institute (JQI) The JQI is a research partnership between the National Institute of Standards and Technology and the University of Maryland, with the support and participation of the Laboratory for Physical Sciences. JQI was created in 2006 to pursue theoretical and experimental studies of quantum physics in the context of information science and technology. Among other objectives, JQI conducts fundamental research on the engineering and control of systems based on quantum mechanics, which describes the behavior of matter and energy at the smallest physical scales. One attribute of quantum physics is that certain properties of a particle, such as its momentum and position, are not fixed; instead these properties follow probability distributions that describe the likelihood a property may be a particular value. Researchers have also discovered that the quantum states of two separate objects, like two atoms, can be entangled such that the state of one object is correlated with the other. This entanglement makes it possible to move quantum information from one place to another. The phenomena that occur at the quantum scale have the potential to affect disparate economic sectors and could lead to improvements in computing and materials science, among others. For example, researchers at JQI have devised a new chip that generates and steers single photons, which could allow researchers to systematically assemble pathways for single photons and enable new types of optical devices. An illustration of a photonic chip created by JQI researchers. and Revolutionary Computing program, NSF supports theoretical and experimental research on quantum-based computing paradigms, information, transmission, and manipulation. Also, the NSF Physics Division’s Physics Frontiers Centers program supports university- based centers and institutes in enabling transformational advances through interdisciplinary research across different areas of focus. One of the Physics Frontier Centers that NSF supports is located at the JQI; this center supports research that focuses on studying the controlling and monitoring of quantum phenomena to support quantum engineering. A second Physics Frontier Center is at JILA. Both the JQI and JILA represent partnerships between the NSF and NIST. DOE’s Office of Science supports foundational quantum computing research as part of its Advanced Scientific Computing Research program, which focuses on discovering, developing, and deploying computational and networking capabilities to analyze, model, simulate, and predict complex phenomena important to DOE and the advancement of science. The program’s efforts include partnering with other Office of Science program offices to support research aimed at understanding how future computing technologies, including those based on quantum information science, could impact DOE’s mission. NASA’s Quantum Artificial Intelligence Laboratory—a collaborative effort with Google and the Universities Space Research Association— supports foundational research to maximize utilization of emerging quantum hardware. This work involves analytical and experimental research on the mechanisms underlying quantum computing, including, for example, researching quantum entanglement and measurement-based quantum computation. NASA also supports university-based quantum computing research through programs such as the Established Program to Stimulate Competitive Research (EPSCoR). Lincoln Laboratory’s Quantum Computing Laboratory The Massachusetts Institute of Technology’s Lincoln Laboratory is a federally funded research and development center sponsored by the Department of Defense that researches and develops a broad array of advanced technologies to meet critical national security needs. In the area of quantum information science, researchers with Lincoln Laboratory’s Quantum Computing Laboratory are exploring the fundamentally different ways that information can be stored and manipulated through quantum physics. Specifically, Lincoln Laboratory researchers are working to develop and scale up two systems that could comprise the quantum bits, or “qubits” of a quantum computer. In one method, called Josephson junction-based superconducting circuits, Lincoln Laboratory researchers are using cryogenic dilution refrigerators and microwave test and measurement equipment to control and measure superconducting qubits at extremely cold temperatures. In another method, researchers are using cryogenically cooled vacuum systems to house micro-fabricated chips that trap individual strontium and calcium ions, which are manipulated using lasers and other electromagnetic fields. For both methods, researchers are working to scale up systems of qubits to a size large enough to address real computational problems. Laser light manipulation of trapped ion qubits at Lincoln Laboratory. broader portfolios of research across the department. For example, as part of DOD’s Applied Research for the Advancement of Science and Technology Priorities program, the Office of the Secretary of Defense administers the Quantum Science and Engineering Program—a cross-cutting effort that has supported research related to technologies for controlling qubit entanglement, among other things. Additionally, DOD supports a research program on Quantum System Sciences at Lincoln Laboratory, a federally funded research and development center operated by the Massachusetts Institute of Technology (MIT). This research encompasses, among other topics, development of quantum-based computation technologies. DOE’s quantum science research efforts, such as those supported by the Office of Science’s Advanced Scientific Computing Research program, includes quantum computing hardware and architecture. After DOE issued its 2015 report on quantum computing for science, the agency held a February 2017 workshop to obtain information from stakeholders on the opportunities and challenges in establishing a quantum testbed to advance quantum computing hardware.Subsequently, DOE issued solicitations in 2017 and 2018 for proposals to support developing quantum testbeds. According to an April 2018 announcement for one of these solicitations, a testbed laboratory will host experimental quantum computing platforms that are not yet ready for commercialization, and will function as a collaborative facility to provide internal and external researchers with access to novel, early-stage quantum computing resources. NIST’s quantum science research efforts include projects within its Physical Measurement Laboratory that are looking at a spectrum of potential quantum computing hardware approaches, such as superconducting circuits or ion trap-based quantum computing, that could provide viable approaches for processing and manipulating quantum information. By working across multiple approaches, NIST has been able to apply different quantum hardware platforms to address computing and metrology problems, including creating one of the most advanced ion trap-based quantum computing platforms. Furthermore, NIST is using its advanced microfabrication facilities to develop a broad array of components that will enable the scaling of different quantum computing hardware platforms. ODNI, through the Intelligence Advanced Research Projects Activity’s (IARPA) Logical Qubits Program, is supporting research to overcome the limitations of current multi-qubit systems, whereby qubits are impacted by other qubits, environmental factors, and other forces, which can generate errors in quantum computing operations. IARPA’s Logical Qubits Program is sponsoring research teams to build qubit structures with reduced susceptibility to these types of problems and has developed a quantum system with between 10 and 20 qubits. NSF supports research related to quantum computing hardware as part of a broader portfolio of research under its Computing and Communication Foundations Division, which supports research that explores the foundations of computing and communications devices and their usage, including advancing hardware designs for computers and computational sciences, among other focus areas. For example, under the division’s Expeditions in Computing program, which provides financial assistance awards of up to $10 million over 5 years, NSF provided an award for the Enabling Practical-Scale Quantum Computation project in 2018. This project is a multi-institution, university-based effort to build a 100-qubit computer. Agency officials, stakeholders, and experts said one area in which a quantum computer could offer potential benefits over a classical computer is solving optimization problems. However, using a quantum computer for this or other applications requires developing software to, for example, translate algorithms into the steps to manipulate qubits to perform computing operations. Among the six agencies that support quantum computing research, examples of agencies’ efforts to support research to develop software necessary to operate a quantum computer include the following: DOD’s Air Force Research Laboratory issued a multi-year funding opportunity announcement for research on Quantum Computing Sciences with a focus on quantum computing algorithmic implementation and problem solving. Among other potential research topics, the Air Force is seeking research proposals to develop new algorithms to help solve optimization and machine learning problems. NASA’s Advanced Supercomputing Division provides funding for the Quantum Artificial Intelligence Laboratory. Through this effort, NASA hosts a 2,031-qubit D-Wave 2000 quantum device. NASA researchers are using this system to explore the potential for quantum computers to tackle optimization problems that are difficult or impossible for traditional supercomputers to handle and to explore the software algorithms that would be needed to do so. In fiscal year 2017, 10 agencies—DOD, DHS, DOE, EPA, HHS, ODNI, NASA, NIST, NSF, and USDA—supported synthetic biology research, and 6 of these agencies reported a combined total of at least $211.2 million in obligations toward those efforts. According to one agency official and experts, although synthetic biology has advanced significantly, foundational understanding is still needed in some key areas, including measurement and tool development. Accordingly, synthetic biology research that federal agencies supported included research to advance foundational understanding of the science, and the application of synthetic biology in specific areas, such as bioengineering, genome editing, national security, and biofuels and bioproduct development. Genome in a Bottle The Genome in a Bottle consortium is one of several ongoing collaborations among the National Institute of Standards and Technology, Stanford University, and other partners in the Joint Initiative for Metrology in Biology. The initiative focuses on measurements and standards supporting the newest developments in genomics and synthetic biology. The Genome in a Bottle consortium focuses on genome sequencing, which involves determining the chemical building blocks of deoxyribonucleic acid (DNA) or ribonucleic acid (RNA) and can give insights into the genes carried by an individual and how and when they are activated. Since the completion of the Human Genome Project in 2003 that first sequenced the whole genome of a human, scientists have worked to make whole human genome sequencing faster and less expensive. The consortium aims to develop the tools needed to ensure the accuracy of human genome sequencing. These tools include reference materials, standards, and data to enable the translation of whole human genome sequencing to clinical practice. Illustration of a chromosome inside a bottle. NIST supports foundational synthetic biology research by developing measurement solutions, serving as a neutral ground for the discussion of underpinning measurements and other manufacturing needs, and leading and contributing to the development of standards. NIST measurement infrastructure includes the development of enabling tools, methods, and protocols; bioinformatics and modeling tools; and documentary standards and reference materials. NIST also leads several consortia to work with measurement stakeholders and partners to accelerate breakthroughs in genomics and synthetic biology. These include NIST’s Genome in a Bottle consortium and the Joint Initiative for Metrology in Biology. DOE supports foundational research related to synthetic biology as part of a broader portfolio of research under the Biological and Environmental Research (BER) Genomic Science program, which seeks to understand how genomic information is translated to functional capabilities, enabling more confident redesign of microbes and plants for sustainable biofuel production, improved carbon storage, or contaminant bioremediation. Within BER, DOE funds the Joint Genome Institute to produce high-throughput sequencing, a fast method of determining the order of bases of genetic material, synthesis and analysis in support of BER’s bioenergy and environmental missions. Research enabled through this user facility includes developing renewable and sustainable sources of biofuels from plant biomass and exploring the biological processes controlling greenhouse gas accumulation in the atmosphere. Within HHS, multiple NIH institutes and centers support foundational research involving synthetic biology techniques, including NIH Common Fund support for research to understand and combat antibiotic resistance and National Cancer Institute support for research into new cancer immunotherapy methods. Additionally, the National Institute of Biomedical Imaging and Bioengineering has provided grants to researchers studying or using a multitude of synthetic biology techniques for applications, such as improving stem cell quality for biomedicine. NSF funds an estimated $60 million a year in foundational synthetic biology research across several directorates. For example, in 2013, NSF awarded a 5-year, $10 million Expeditions in Computing grant for a multi-university effort led by the California Institute of Technology to enable theoretical investigations in several synthetic biology-related topic areas. In 2016, NSF awarded a second 5-year, $10 million Expeditions in Computing grant for a multi-university effort led by Boston University to support synthetic biology research. Gene Editing The National Institutes of Health (NIH) describes gene editing as a group of technologies that give scientists the ability to add, remove, or alter genetic material at particular locations in the genome. One such technology is known as CRISPR-Cas9, which is short for clustered regularly interspaced short palindromic repeats and CRISPR- associated protein 9. According to NIH, the CRISPR-Cas9 system has generated excitement in the scientific community because it is faster, cheaper, more accurate, and more efficient than other existing gene editing methods. The system was adapted from a naturally occurring gene editing system that helps bacteria defend themselves against viruses by targeting the deoxyribonucleic acid (DNA) of the virus. In the lab, CRISPR-Cas9 allows researchers to cut out a specific sequence of DNA from cells. Once researchers cut out the targeted DNA sequence, they can use other techniques to add or delete genetic material. These genetic changes can cause the edited cells to express new physical traits, such as eye color, or change their disease risk. Gene editing is being applied to research on many diseases; however, according to NIH, there are still significant technical barriers to using gene editing therapies to treat human diseases. Further, the use of gene editing raises a number of ethical concerns. An illustration of a chromosome unravelling to show the DNA that makes up individual genes. Development programs are developing on-demand nutrients from microbes engineered to produce targeted nutrients for human consumption as well as examining how to manipulate certain types of bacteria to produce lightweight construction tools and materials. EPA employs synthetic biology approaches through its Chemical Safety for Sustainability Research Program, which seeks to develop new prediction techniques, pioneer the use of innovative technologies for chemical toxicity testing, and design tools to advance the management of chemical risks. For example, researchers are developing virtual tissues by building complex computer models for biological development. According to an EPA publication, the models will help reduce dependence on animal study data and provide faster chemical risk assessments. NSF’s Science and Technology Center Program’s Center for Cellular Construction seeks to develop tools to predict, design, and test the impact on cellular function of changes to cells’ internal organization. The center will also develop living “bioreactors” that will generate products of commercial value. NSF has funded research into bacterial immunity, which led to the development of clustered regularly interspaced short palindromic repeats (CRISPR)-Cas9—a technology that allows researchers to precisely edit genes. Several NIH institutes and centers support research related to bioengineering. For example, NIH’s Synthetic Biology for Engineering Applications Funding Opportunity Announcement solicits applications to support research to advance the understanding and application of synthetic biology for human health. In addition, NIH institutes and centers have supported research across various areas, including engineering synthetic receptor systems and genetic controller circuits, engineering microbes as therapeutic platforms, and developing enabling technologies for human-machine hybrid tissues. Application of synthetic biology may support U.S. national security efforts by aiding with monitoring for biological or conventional threats, and strengthening the resilience of soldiers in combat. Among the 10 agencies that support synthetic biology research, officials from DOD, ODNI, and DHS said their agencies support synthetic biology research with potential national security applications. Examples of federal efforts in this area include the following: DOD’s Office of Naval Research funds research to extend the natural capabilities of living organisms such as microbes and plants to create systems that will provide new naval capabilities, according to the office’s website. Office of Naval Research officials told us the office is funding ongoing research related to engineering gut microbes in order to enhance the resilience of service members to deployment stressors, among other things. In addition, DARPA’s Safe Genes Project supports force protection and military health and readiness by protecting service members from accidental or intentional misuse of genome-editing technologies. For example, researchers are developing the genetic circuitry and genome-editing machinery for robust, spatial, temporal, and reversible control of genome-editing activity in living systems. ODNI supports synthetic biology research through efforts including IARPA’s Functional Genomic and Computational Assessment of Threats program, which supports research to protect against critical threats related to pathogens and other biological threats. Researchers aim to develop better approaches and tools for characterization and analysis of biological threats based on gene function. DHS’s Biological Threat Characterization program and its Biodefense Knowledge Center program support synthetic biology research to understand the risks associated with the technologies useful for synthetic biology and the harmful pathogens that may be created by those who wish to do harm. Synthetic biology is being used to develop cost-effective methods for producing biofuels and bioproducts according to agency officials, experts, and DOE’s website. Among the 10 agencies that support synthetic biology research, officials from DOE and USDA said their agencies support synthetic biology research related to biofuels development applications. Examples of federal efforts in this area include the following: DOE officials told us that the Office of Energy Efficiency and Renewable Energy’s Bioenergy Technologies Office manages the Conversion Program and the Advanced Algal Systems Program, both of which employ synthetic biology techniques to accomplish office goals. Within the Conversion Program, DOE funds the Agile BioFoundry to help develop and transition synthetic biology tools from the laboratory to the biofuels and bioproducts industry. The program accomplishes this through targeted research and development partnerships with industry and academia, as well as by developing integrated synthetic biology tools designed to speed up biomanufacturing. In addition, the office funds the Advanced Algal Systems Program, which supports early-stage applied research to apply synthetic biology approaches to alternative fuels that use algae as their source, among other things. According to a DOE website, this industry has the capability of producing billions of gallons per year of renewable diesel, gasoline, and jet fuel. USDA, through the Agricultural Research Service, led a collaborative project between federal, industry, and academic researchers to produce a commercial rubber-based tire using the guayule plant, a small shrub native to the United States that has been considered a possible alternative source of natural rubber. Nonfederal research to advance quantum computing includes efforts to address existing hardware and software challenges. We identified a variety of nonfederal entities, such as universities and private companies, that have ongoing efforts aimed at building a quantum computer. Stakeholders we spoke to told us that private companies have been increasing their research in quantum computing. Academic and industry stakeholders we interviewed described various efforts to develop the hardware needed for a quantum computer. Examples of ongoing efforts include the following: Academic researchers at Purdue University partner with Microsoft at Station Q-Purdue to perform a variety of experiments and activities related to building a semiconductor-based quantum computer, including testing different hardware designs. Academic researchers from Yale’s Quantum Institute are working to develop scalable superconducting devices. Researchers at IonQ are working to develop general-purpose quantum information processors using a trapped-ion approach to create a quantum computer that is scalable and that could support a broad array of applications across a variety of industries. A Google official told us that the company has been working for several years to build a quantum computer through the Quantum Artificial Intelligence Lab. In a March 2018 press release, Google announced its newest 72-qubit quantum computer, called Bristlecone. Academic and industry stakeholders we interviewed described ongoing efforts related to software development. Examples of ongoing efforts include the following: An official from Microsoft said the company is working to develop quantum algorithms and software to run on a quantum computer for a given set of problems. Researchers are also currently developing an operating system and various applications that could be run on a quantum device. An IBM official told us that, in 2016, the company launched the Quantum Experience, a quantum computing system with five superconducting qubits on the cloud, encouraging students and researchers worldwide to explore quantum computing. Over the past two years, the system’s software has been expanded and upgraded for greater functionality and exploration of quantum algorithms to allow researchers around the world to use the system to write more than 80 research publications. MIT and many other universities now use the Quantum Experience in their curricula. We identified a variety of nonfederal entities, such as universities and private companies, that conduct research in synthetic biology to advance foundational understanding and develop new products. The iGEM Foundation The International Genetically Engineered Machine (iGEM) Foundation is an independent, non-profit organization dedicated to the advancement of synthetic biology, education and competition, and the development of an open community and collaboration. The foundation does these by fostering an open, cooperative community and friendly competition. The main iGEM program is the iGEM competition, which began in January 2003 as an independent study course at the Massachusetts Institute of Technology in which students developed biological devices to manipulate cells. This course became a summer competition with 5 teams in 2004, grew to 13 teams in 2005, and had expanded to 310 teams by 2017, reaching more than 40 countries. The competition was originally aimed at college students but has expanded to include high school students and others. The iGEM competition gives students the opportunity to push the boundaries of synthetic biology by tackling everyday issues facing the world. Multidisciplinary teams made up of primarily university students work together to design, build, test, and measure a system of their own design using interchangeable biological parts and standard molecular biology techniques. Every year nearly 6,000 people dedicate their summer to iGEM and then come together in the fall to present their work and compete at the annual Jamboree. A picture of the iGEM logo. The International Genetically Engineered Machine (iGEM) Foundation hosts an annual worldwide synthetic biology competition in Boston, the iGEM Giant Jamboree. The competition attracts teams from around the world (primarily university students) to use standardized genetic parts to address real-world problems in fields including health, medicine, manufacturing, and bioenergy. At MIT’s Synthetic Biology Center, researchers work with federal and industry partners to advance understanding of synthetic biology for genetic programming, DNA synthesis, and genome design. Researchers at the Synthetic Biology Center seek to create a programming language for living cells that is similar to languages used to program computers and robots. DNA Storage To facilitate storing an ever-increasing amount of digital data, researchers from Microsoft, in collaboration with the University of Washington, are studying the use of synthetic deoxyribonucleic acid (DNA) as a means of storing data. According to a Microsoft researcher, this technology uses a process by which custom sequences of synthetic DNA are produced or manufactured to store information. The researcher described three main advantages of storing data in DNA as compared to the current means of storing data, generally magnetic and optical media: Density. DNA may allow for the storage of up to 1 exabyte (one quintillion bytes) of data per cubic millimeter. In comparison, according to Microsoft, storing similarly large volumes of data in optical discs would occupy significant physical space. IBM researchers are developing biosensors that may be used for the early detection of cancer. They are also working on understanding and analyzing cardiac, neurological, and mental health conditions. Researchers from Microsoft said the company is conducting research related to data storage using synthetic DNA as the information preservation medium. This storage technology uses a process by which custom sequences of synthetic DNA are manufactured to store information. Ginkgo Bioworks officials said the company is focused on trying to de- risk supply chains and improve supply chain management through synthetic biology approaches. To that end, the company designs custom enzymes for a variety of customers including companies in a wide range of industries such as food and fragrance companies. relevant storage mechanism, unlike other means of storing digital data (e.g., floppy discs), which becomes outdated as technology advances. The Energy Biosciences Institute is a partnership among the University of California, DOE’s Lawrence Berkeley National Lab, and the University of Illinois. Researchers at the Energy Biosciences Institute carry out research in the areas of biofuels, carbon sequestration, and sustainable chemicals productions, among other things. Agency officials we interviewed said they coordinate on quantum computing and synthetic biology research through a range of efforts, but we found that certain efforts are new and that agencies have not fully implemented selected leading practices for collaboration in these efforts. Agency officials told us they use means of coordination ranging from attending ad hoc meetings, such as conferences or workshops, to participating in ongoing interagency groups, such as interagency groups on quantum information science (QIS) and synthetic biology. However, we found that new interagency groups on QIS and synthetic biology have not fully implemented leading practices that can enhance and sustain collaborative efforts. Agency officials said that they coordinate on quantum computing and synthetic biology research by attending ad hoc meetings, as well as through ongoing efforts such as participating in interagency working groups. The means of coordinating that officials most frequently cited were participating in working groups or attending a conference or workshop. Meetings such as these bring together representatives of different agencies or departments to discuss common problems, exchange information, or develop agreements on issues of mutual interest, as we have reported in the past. Specifically: Officials from 4 of the 6 agencies that support quantum computing research said they attended a conference or workshop related to quantum computing at some point from October 2015 through March 2018. For example, NASA and DOE officials participated in a 2017 NASA workshop that brought together experts from NASA research centers, DOE national laboratories, academia, and industry to discuss quantum information science and computation. Officials from all 10 agencies that support synthetic biology research cited attendance at a conference, and officials from 7 of these 10 cited workshops as a way in which they coordinated on synthetic biology research from October 2015 through March 2018. For example, officials from DOD, DOE, NIST, and national laboratories attended a 4-day conference in June 2017 to discuss synthetic biology applications in genetic engineering. Officials from 7 of the 10 agencies that support synthetic biology research also said they coordinated research with other selected agencies through communities of practice or consortia that meet on an ad hoc basis. For example, NASA officials said they support synthetic biology work through the Space Technology Research Institute in Biomanufacturing, a University of California Berkeley-led consortium of universities. Officials we interviewed also said they coordinate with one another through ongoing efforts, such as interagency groups. For example, on June 21, 2018, NSTC established the Subcommittee on Quantum Information Science (QIS Subcommittee) to coordinate quantum computing research. According to its June 2018 charter, the QIS Subcommittee’s purpose is to establish and maintain a national agenda in quantum information science and technology, expand U.S. economic and national security, and coordinate federal quantum information science and technology policy and programs. The functions of the QIS Subcommittee include to issue and update plan(s) that coordinate(s) federal policy to expand U.S. leadership in quantum information science and technology; enable stakeholders to invest effectively in quantum information science and technology and post-quantum application spaces through data gathering, analysis, consultation, planning, convening, and reporting; and provide a forum for research and development coordination and collaboration, including sharing expertise and best practices for program management and conducting joint workshops and program reviews. The QIS Subcommittee is led by co-chairs from NIST, DOE, NSF, and OSTP and includes 9 additional agencies. The QIS Subcommittee met for the first time as an official chartered group on June 28, 2018. The OSTP official serving as a co-chair for the QIS Subcommittee said that the group’s first priority will likely be to develop a national approach to QIS research and development. Officials from 5 of the 6 agencies that support quantum computing research said that prior to the formation of the QIS Subcommittee, they coordinated through the NSTC Interagency Working Group on Quantum Information Science (QIS working group), which was formed in 2014. In July 2016, the QIS working group produced a report, which the agency officials serving as the group’s co-chairs told us included its strategic plan for federal QIS research. The July 2016 report identified QIS as a priority for federal coordination and investment as a component of U.S. scientific leadership, national security, and economic competitiveness. The QIS Subcommittee co-chair from OSTP said that the shift from a working group to a subcommittee is a significant elevation that communicates the importance of QIS to the administration. Agencies also coordinated synthetic biology research through interagency working groups. Officials from NSF and USDA told us that, in December 2017, they formed a new synthetic biology working group that had 7 member agencies as of February 2018. These officials said that the participating agencies saw a need for continued communication and information sharing, and the officials said the group’s efforts will increase coordination. Prior to the formation of this new group, 7 of the 10 agencies that support synthetic biology research participated in an NSTC Synthetic Biology Working Group that NSF officials said existed from 2012 to 2013 and was co-chaired by DOD and DOE, according to a 2013 DOE report to Congress that the group produced. According to some officials, the working group ended after it produced this report, which described synthetic biology research and development needs at the time and identified which federal agencies were planning synthetic biology research. The report also discussed the need for communication and coordination among federal agencies that support basic and applied synthetic biology research to build synergies, consider new research and development needs, and evaluate issues as they emerge. According to a senior NSF official we interviewed who was helping lead efforts to establish the new group, one of its first undertakings will be to update the 2013 report to provide a roadmap for agencies’ synthetic biology research. However, the official also stated that the participating agencies were still considering the new group’s activities. By recently establishing the QIS Subcommittee and a synthetic biology working group, NSTC and federal agencies, respectively, took steps to further coordination on quantum computing and synthetic biology research. However, the new subcommittee and working group have not fully implemented leading practices for collaboration. We have reported that effective collaboration can help reduce or better manage fragmentation, overlap, and duplication of federal programs. As described above, a number of federal agencies support research related to quantum computing and synthetic biology. In our April 2015 guide to evaluating and managing fragmentation, overlap, and duplication, we define fragmentation as those circumstances in which more than one federal agency, or organization within an agency, is involved in the same broad area of national need, and opportunities exist to improve service delivery. This definition applies concerning federal agencies’ quantum computing and synthetic biology research, with more than one agency involved in the same broad area of national need. However, as shown in our description above of the agencies’ support for research in these two areas, agencies’ activities sometimes differ in meaningful ways or leverage the efforts of other agencies. We examined agencies’ efforts to coordinate through interagency groups by selecting six leading practices that we have previously identified can enhance and sustain interagency collaboration: Define and articulate a common outcome. Effective collaboration requires agencies to define and articulate common outcomes or purposes they are seeking to achieve that are consistent with their respective agencies’ goals and missions. Establish mutually reinforcing or joint strategies. Having mutually reinforcing or joint strategies enables agencies to align activities, core processes, and resources to achieve a common outcome. Identify and address needs by leveraging resources. Agencies can sustain their collaborative efforts by identifying the human, information technology, physical, and financial resources necessary to achieve identified outcomes. Agree on roles and responsibilities. By defining and agreeing on roles and responsibilities, including leadership, collaborating agencies can better clarify who will do what, organize their joint and individual efforts, and facilitate decision making. Establish compatible policies, procedures, and other means to operate across agency boundaries. Agencies can facilitate collaboration by addressing the compatibility of standards, policies, procedures, and data systems that will be used in the collaborative effort. Develop mechanisms to monitor, evaluate, and report on results. Creating the means to monitor and evaluate collaborative efforts enables agencies to identify areas for improvement. We identified limitations in agencies’ past efforts to coordinate quantum computing and synthetic biology research. In the area of quantum computing, the QIS working group—which preceded the subcommittee— took steps to implement selected leading practices for collaboration, but the group did not fully implement these practices. For example, the QIS working group’s July 2016 report broadly identified quantum computing research needs but did not identify common outcomes for agencies’ collaborative efforts to advance QIS, including quantum computing. The three senior officials who served as co-chairs of the QIS working group said they were not aware of any federal goals or outcomes for quantum computing research, and DOE officials said that clarifying common goals could help interagency collaboration on quantum computing research. Officials from some agencies cited challenges with collaborating on joint quantum computing projects—for instance, because of variations among agencies on time frames for providing financial assistance. OSTP officials described the establishment of the QIS Subcommittee as an effort to further previous coordination conducted through the QIS working group. While the QIS Subcommittee has taken initial steps to implement certain leading practices for collaboration, it has not fully implemented the relevant leading collaboration practices we identified. For example, by developing a charter that identifies its high-level purpose and functions and that identifies co-chairs for the group, the QIS Subcommittee has taken initial steps to identify some agencies’ roles and to establish means for operating across agency boundaries. Moreover, by having a charter signed by senior officials, the QIS Subcommittee has taken steps to document agencies’ agreement to collaborate, which is a key feature of collaborative mechanisms we have identified in our prior work. However, the working group has not defined roles and responsibilities for agencies other than the co-chairs. OSTP officials said that efforts to date have focused on ensuring that all relevant agencies are included in the QIS Subcommittee; the officials also said that agencies’ roles and responsibilities for contributing to the subcommittee will evolve. Table 1 provides additional information on the extent to which the QIS Subcommittee has implemented leading practices for collaboration. With regard to interagency coordination on synthetic biology research, NSF and USDA officials noted that the new synthetic biology working group hoped to, through continued communication and information sharing, address limitations in agencies’ coordination that existed prior to its formation. Officials from NSF said the group was needed for communication, information sharing and to leverage resources and DOD officials agreed that the working group was needed. Additionally, one DOD official and one expert said that limited interagency coordination had resulted in lost opportunities to further develop the area of synthetic biology. They also noted that having a national strategy for synthetic biology would be beneficial. Other officials noted that, as in the area of quantum computing, differences in funding timeframes across agencies hinder their ability to coordinate their synthetic biology research. Some of these officials also said such differences make it difficult to develop an integrative roadmap for their research. Like the QIS Subcommittee, the new synthetic biology working group has taken initial steps to implement some leading practices for interagency collaboration but has not fully implemented the relevant leading collaboration practices we have identified. For example, the group has taken initial steps to identify member agencies’ roles by having NSF serve as the lead agency for the first 2 years. However, the group has not identified other member agencies’ roles and responsibilities. An NSF official said the new working group had also considered developing a document, such as a charter, to guide its efforts but, as of June 2018, it had not yet decided whether to do so. Table 2 provides additional information on the extent to which the Synthetic Biology Working Group has implemented leading practices for collaboration. As we previously reported, interagency collaborative mechanisms can take many different forms, such as working groups or subcommittees, and the leading practices we identified that help enhance and sustain interagency collaboration can be adapted to help address the specific challenges agencies face. For example, incorporating the leading practices into agencies’ collaborative efforts can help address issues associated with potential fragmentation, overlap, and duplication in instances where multiple agencies have activities in a similar area. The QIS Subcommittee and the synthetic biology working group are mechanisms through which agencies can address limitations in past interagency coordination on quantum computing and synthetic biology. However, as of July 2018, the subcommittee and working group were still new and have had limited time to fully implement the leading practices we have identified. As the subcommittee and the working group move forward, by taking steps to fully implement these leading practices, member agencies could better marshal their collective efforts to support research in the areas of quantum computing and synthetic biology and help maintain U.S. competitiveness through transformational technological advances. Experts who participated in the meeting we convened with the assistance of the National Academies identified four key considerations for maintaining U.S. competitiveness through transformational technological advances. These considerations extend beyond quantum computing and synthetic biology, and more broadly address the role of federal and nonfederal entities in supporting research for such advances. The key considerations experts identified were (1) developing a strategic approach for transformational technology, (2) fostering information sharing, (3) focusing on technology development and commercialization, and (4) strengthening the science and technology workforce. Experts emphasized the importance of developing a strategic approach for advancing potentially transformational technologies for maintaining U.S. competitiveness. has a technological focus, such as additive manufacturing, advanced flexible electronics, or regenerative medicine, and includes members such as companies, nonprofit organizations, academic institutions, and federal agencies. Semiconductor Manufacturing Technology consortium (SEMATECH). Experts described SEMATECH, a nonprofit consortium that supported research and development on advanced semiconductor manufacturing, as a successful, industry-led, public-private collaboration that helped government and industry stakeholders take a strategic approach to challenges facing the U.S. semiconductor industry in the late 1980s.However, Commerce’s NIST officials noted that after federal support ended, SEMATECH began accepting memberships from companies from competitor countries, which led to a transfer of technology through the consortium’s work outside the United States. are industry-led and industry provides at least half of the annual funding because industry can best design a research program to meet its needs; develop a comprehensive industry assessment and prepare an operating plan that identifies realistic objectives and milestones as a basis for receiving federal funds; include active participation by member companies’ senior executives in establishing research priorities and overseeing technological progress; have a program to improve long-term working relationships between manufacturers and key suppliers, unless inappropriate for the industry’s structure; emphasize research projects that improve an industry’s overall efficiency and that have industrywide applications; consider ways to provide access for smaller industry members that might not have the resources to participate; and establish criteria for determining how or when government should end its funding. Grand challenges, strategies, and roadmaps. Experts described the importance of grand challenges, strategies, and roadmaps in supporting a strategic approach to developing transformational technologies. In particular, experts described how these mechanisms help stakeholders coalesce around technology goals and organize efforts toward reaching them. Examples experts noted included the following: Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative. Experts described the BRAIN Initiative, which was launched in 2013 to build neuroscience measurement tools, as a key example of a grand challenge. The BRAIN Initiative—led by HHS (specifically NIH), NSF, and DARPA, with the participation of other federal agencies as well as foundations, universities, and industry—seeks to deepen understanding of the human mind and to improve how brain disorders are treated, prevented, and cured. National Nanotechnology Initiative. Experts described the National Nanotechnology Initiative as a key example of a federal government strategic effort. The National Nanotechnology Initiative began in 2000 and is an interagency effort to bring together the nanotechnology-related activities of 28 federal agencies in an effort to enhance understanding and control of nanoscale material. The National Nanotechnology Initiative maintains a strategic plan describing the initiative’s vision and goals and the strategies to achieve these goals. In discussing this initiative, experts described how it could enable federal agencies to share information on their research and ensure that key research areas are advanced in pursuit of a long-term national nanotechnology strategy. Grand challenges may be articulated through strategy documents and, according to experts, involve getting stakeholders to think about potentially transformational technologies in a future-oriented way. Roadmaps, according to experts, represent detailed plans to guide progress toward a technology goal. Federal agencies, industry, or others may lead roadmapping efforts, according to experts. Additionally, one expert stated that roadmaps can help accelerate technology development. Another expert noted that for some fields, such as quantum computing and synthetic biology, a technology development strategy is needed in addition to a research and development strategy because the former outlines how a technology would move forward beyond the research and development phase. Across both of these aspects of a strategic approach, experts emphasized the importance of a sustained commitment of resources to support technology development. One expert also emphasized the importance of setting tough performance objectives without specifying how innovators will solve a problem. Experts acknowledged that developing shared national strategies is challenging in the United States, in part because of the decentralized nature of research support across multiple federal agencies. However, experts also cited as strengths of the federal research system the ability of federal agencies to support multiple approaches to developing transformational technologies in accordance with their missions and the ability to evolve and try new approaches. Experts identified several indicators of when developing a strategic approach might be important to support U.S. competitiveness through transformational technological advances in a particular area. Specifically: Convergence of advances across different technology areas. Experts described how transformational technologies often occur as a result of different technologies that have advanced incrementally over time. One expert noted the development of the Global Positioning System as an example of a technology that required the convergence of advances in computing power, satellite technology, geospatial imaging, and timekeeping. Because of the strength and role of the federal government in convening and fostering engagement among non-traditional collaborators on interdisciplinary issues, experts identified technology convergence as a potential indicator of the need to take a strategic approach. Progress from discovery to real-world application. Experts described how progress from discovery in an area of science to the appearance of niche applications for a technology can be an indicator of the need to take a strategic approach. According to one expert, one challenge in technology development is how to push the technology forward as quickly as possible to develop it into something useful. Experts explained that by taking a strategic approach that extends beyond early-stage research, the federal government can support the development of potentially transformational technologies. Existence of barriers to technology development. Experts identified several barriers to the development of transformational technologies that could indicate the need to take a strategic approach to developing a technology. Examples of barriers experts identified included high capital costs for research, prototyping, demonstration, or other aspects of a technology development life cycle; regulatory barriers; lack of consensus on standards; and technology measurement challenges, such as limitations in the availability of tools with which to measure products or processes. Experts described multiple ways in which the federal government can play an important role in addressing such barriers through helping efforts to de-risk technologies, establishing or revising regulations, supporting standards development, and developing measurement tools. Increasing involvement across multiple stakeholders or competitors. Experts described aspects of how increasing involvement across multiple stakeholders in a particular technology area can indicate the need to take a strategic approach to developing a transformational technology. For example, when multiple federal agencies are working in a technology area or industrial participants increase involvement in a particular technology, experts said such involvement could signal that a strategic approach is needed to work across boundaries and engage the research community in a coordinated way. Similarly, according to one expert, increasing international competition in a technology area could serve as an indicator of the need for the federal government to exercise leadership through a strategic approach to organize domestic public and private efforts in order for the United States to remain competitive. Need for sustained, long-term investment in areas of national interest. Experts identified the need for sustained, long-term investment in areas of national interest as a potential indicator of the need for a strategic approach to transformational technologies. Experts described how the short-term cycles of many federal programs and disincentives for the private sector to sustain long-term investments can present challenges to developing transformational technologies, which one expert noted can take years or even decades to develop. Experts also cited a need for a strategic approach to advancing a technology when it has the potential to be transformational and presents enormous societal benefits. In the areas of quantum computing and synthetic biology, experts cited a need to develop a strategic approach to maintain U.S. competitiveness. Within the area of quantum computing, experts cited all of the indicators identified above in stating that U.S. competiveness in quantum computing could benefit from a national strategy. For example, experts described the need to foster interdisciplinary engagement across the fields of physics, engineering, and computer science to support convergence of advances in these areas to further quantum computing technology. Experts also indicated that real-world applications are beginning to become apparent in the area of quantum computing. However, they noted that significant barriers to development exist and discussed a need for sustained long- term investment in this area, which has significant implications for national security, and according to one expert, economic competitiveness. Moreover, experts expressed concern over the significant and increasing international competition from China, the European Union, and other countries. One expert noted that given the security implications of quantum computing technology, the United States needs to find a way to counter the significant investment that China is making. Stakeholders and one agency official we interviewed cited similar concerns, such as the European Union’s plans to launch a flagship initiative on quantum technology, which includes quantum computing; therefore, the United States needs a national quantum computing strategy, the experts said. Similarly, with regard to synthetic biology, experts cited several of the indicators described above in stating that the United States could benefit from a strategic approach to maintain competitiveness. For example, experts discussed barriers to technology development, including a lack of measurement tools and regulatory barriers. According to one expert, before the 2017 update to the Coordinated Framework for the Regulation of Biotechnology, the system was last updated in 1992. The expert said that it was not yet clear if the updated framework would help advance synthetic biology research. Experts also noted the need to engage across multiple stakeholders in this area; in particular, one expert noted the need for leadership to advance a dialogue about how synthetic biology could help address issues of national concern. Experts described significant foreign competition in synthetic biology. One expert said that there are more than 40 countries that have a unified strategy for synthetic biology. While one expert stated that NSF has initiated a synthetic biology roadmapping effort, a few experts stated that the United States does not have a similar unified synthetic biology strategy. One expert said that in the absence of such a strategy, the United States faces economic and physical security risks. Stakeholders we interviewed raised similar concerns. Experts also suggested considering how to foster information sharing to help maintain U.S. competitiveness through transformational technological advances. Experts discussed the role the federal government can play in bringing together stakeholders to discuss emerging technologies and collaborate on pre-competitive research. For example, according to one expert, in 2015, 2 years after the BRAIN initiative was launched, the White House convened a meeting that brought together industry partners, academic researchers, and government scientists to share information and discuss research plans. This expert highlighted the importance of communication among representatives of organizations that would not normally work together, and how these conversations about where they saw research going over the next 5 years led to greater understanding and collaboration to support the research under this initiative. Experts identified three key reasons for sharing information to facilitate transformational technological advances in supporting U.S. competitiveness: Convergence of different disciplines. Experts generally agreed that information sharing can facilitate an interdisciplinary approach to study a problem, which they said is important to the nation’s ability to conduct research for transformational technological advances. The federal government’s ability to convene groups, according to one expert, is particularly important for interdisciplinary areas of study because it can help bring stakeholders together to discuss how research could help address an area of national need. Another expert explained that agencies’ research is increasingly interdisciplinary, which increases the importance of coordinating across agencies.Agency officials and stakeholders we interviewed also discussed the importance of sharing information across fields of study. One stakeholder said that without government funding for interdisciplinary efforts in quantum computing, it will be challenging to solve problems, such as creating some of the computer programming needed to operate a quantum computer, that need to be solved in order to make quantum computing viable. Overcoming barriers to innovation. Experts discussed how information sharing can facilitate the identification of barriers to innovation and help overcome them. For example, one expert noted the importance of information sharing in trying to address the challenges the U.S. semiconductor industry faced in the 1980s. The expert emphasized the recognition that individual companies could not address the barriers to innovation on their own and that they needed information sharing, such as cross-licensing of intellectual property and communication about roadmapping to overcome barriers that they faced. Another expert explained that information sharing across federal agencies led to the identification of the U.S. biotechnology regulatory system as a significant barrier to innovation and that, based on this, the Coordinated Framework for the Regulation of Biotechnology was updated. This expert further said that information sharing is the first step in coordination—by sharing information, agencies can determine where there might be overlapping research efforts or gaps in ongoing research. Leveraging international research. Experts explained that bringing technologies to the United States that were developed elsewhere is not something that has been central to U.S. science and technology policy, but they stressed that the United States needs to consider how to take advantage of research that other countries are conducting and effectively utilize that information to maintain U.S. competitiveness. For example, one expert described the importance of the iGEM competition as an opportunity for information exchange among researchers from around the world who are working in synthetic biology-related fields. In describing this example, the expert noted that most bioengineers will not be U.S.-based and that, to remain competitive in synthetic biology, the United States needs to better understand discoveries being made by researchers from around the world. Experts said that while information sharing is important, there are tradeoffs, particularly with regard to sharing and protecting pre- competitive intellectual property. The experts said that the benefits of sharing pre-competitive intellectual property include the opportunity to speed innovation by allowing multiple researchers to work with the intellectual property concurrently and by preventing foreign competitors from restricting use of the intellectual property through obtaining a patent. Economically valuable knowledge can spread through publicly and freely available records such as scientific publications and open source software. Such knowledge can be used repeatedly, can quickly spread to users outside the institutions where it was created, and can lead to the creation of new products. For example, one expert stated that, as of October 2017, a quantum computer we described earlier in this report had been available over the Internet for public use for about a year and had 50,000 users. Having a larger number of users working with this resource could lead to more rapid discovery of ways in which a quantum computer might be used than if it had not been shared. The expert said that because this technology exists, it should be developed as quickly as possible to determine what its first useful application will be and to find the first problem that only a quantum computer can solve. Doing so, the expert said, would create opportunities in which a U.S. company could profit from the technology while also developing it. In addition, information sharing was cited as instrumental to the success of the Human Genome Project, according to NIH officials we interviewed, because the project made the genome’s sequencing available as a resource for researchers to use. A deoxyribonucleic acid (DNA) strand around the outline of a person. The Human Genome Project, which formally began in 1990, was a 13-year international collaborative research project coordinated by the Department of Energy and the National Institutes of Health. The Human Genome Project’s goals were to (1) identify all the genes in human DNA, (2) determine the chemical base pair sequences of human DNA, (3) store this information in databases, (4) improve data analysis tools, (5) conduct technology transfer, and (6) address the ethical, legal, and social issues that may arise from the project. The full sequence of the human genome was completed and published in April 2003. Through its policy of open data release, the Human Genome Project facilitated the research of others. The Human Genome Project also anticipated and promoted commercializing genomic resources and applications by establishing an infrastructure and supporting private-sector technology development. Consequently, the project led to new tools to support biological research. Further, the data and technologies generated by the project and related research present a broad array of commercial opportunities across many areas of the economy. These include more individualized diagnostics, prognostics, drugs, and other therapies as well as hardier, more nutritious, and healthier crops and animals, among other applications. At the same time, experts said that while information sharing is important, there are risks, such as foreign commercialization of U.S. intellectual property. Experts noted that the world is increasingly competing with the United States in research for transformational technological advances. One expert cautioned that while information sharing is important for transformational technologies, it must be done carefully so that other companies do not exploit a technology or it is not leaked to a foreign competitor. Similarly, one stakeholder said that while information sharing is beneficial at the early stages of technology development, a balanced approach to information sharing—an approach that allows for trade secrets and that guards some research results—is needed once a technology is no longer in the early stages of development. In light of these tradeoffs, experts emphasized the importance of ensuring that intellectual property protections support U.S. competitiveness; however, they also described challenges with how intellectual property is managed in the United States. For example, experts said it can be challenging to bring industry and academic researchers into partnerships that support transformational technological advances. Experts explained that some collaborators are willing to openly share their intellectual property, while other experts noted that some collaborators may be less inclined to do so because they view intellectual property as a profitable commodity. Additionally, one expert cited differences between potential industry and academic collaborators’ knowledge of, and attention paid to, developing technologies into commercial products as a potential barrier. One expert said that foreign countries generally allow university- developed intellectual property to be owned and licensed by the inventors or third-party companies (instead of the university). This can create a foundation for a startup company or make it easier to get the interest of companies who would like to acquire a university-based technology or process. The expert noted that in one circumstance, this has given an advantage to a foreign university in recruiting top researchers, helping it to become a leader in quantum computing. However, another expert stated that most major research universities have moved to a model of developing partnerships with firms, especially startups, which has minimal upfront licensing costs, and shared gains over time if the project is successful—according to that expert, such universities typically share research intellectual property rights with faculty inventors. Focusing on technology development and commercialization is another policy consideration that experts identified for maintaining U.S. competitiveness through transformational technological advances. According to experts, the United States’ “innovation ecosystem”—the network of public and private institutions within a country whose activities and interactions initiate, develop, commercialize, and diffuse new technology innovations—has either lost or needs better mechanisms for commercializing technologies to maintain U.S. competitiveness. To address this issue, experts discussed how the federal government could focus on technology development and commercialization by providing support across multiple stages of innovation and support for the development of tools to enhance innovation. Experts discussed a need to improve technology development and commercialization by providing support across multiple stages of innovation. Experts described how sustained federal research investments have led to key scientific discoveries, including, for example, NIST and IARPA’s decade-long support for quantum computing research and NSF’s investment in synthetic biology. However, while experts said federal agencies’ ability to support new discoveries is a strength, they explained that the United States is losing the ability to commercialize technologies that are invented here. For example, according to one expert, while the technology might soon be available to build small (100 qubit) quantum computers, the United States does not have the necessary enterprise in place to manufacture those systems. Experts stated that it may take decades or more from the time research is funded until it is commercialized. During this intervening period, significant investment is needed to support the innovation cycle in terms of research in the design, building, and testing of new product prototypes and production processes. Experts described an increasing reliance, over time, on venture capital funding to support investments in the innovation cycle. They said that while this is generally working well in some areas such as software and biotechnology, venture capital investors have become less willing to support other technologies that require higher levels of capital investment, longer-term returns, and greater risk. For example, one expert stated that while the U.S. venture capital system spends $70 billion annually on technology commercialization activities, in 2015, the expert estimated that 5 percent of venture capital funding went to hard technologies. Multiple reports in recent years have documented the challenges associated with how the innovation cycle is supported in the United States and its implications for the domestic commercialization and production of new technologies. For example, in a 2012 report, the National Research Council stated that discoveries and inventions originating from research conducted at U.S. universities, corporations, and national laboratories no longer naturally led to products that are commercialized and manufactured within the United States. According to this report, manufacturing is important in developing new products because in many high-technology industries, design cannot easily be separated from manufacturing, and a lack of sustained investment in research and infrastructure threatens to damage the U.S. innovation ecosystem, economy, and security. To address this issue, experts discussed a need to provide longer-term federal financial assistance to better support technology development across multiple stages of innovation. Experts stated that federal agencies often support research on short-term funding cycles (e.g., 3 years or less) that may not be conducive to the long-term support sometimes needed to effectively de-risk potentially transformational technologies. A 2017 National Academies report cited short-term funding as one factor that has resulted in U.S. science losing its flexibility and nimbleness, elements that feed new discovery. Additionally, experts said that federal agencies’ support may not extend to the later stages of technology development but providing longer-term support for research is an important part of the federal government’s role in advancing transformational technologies. For example, one expert said that long-term federal support facilitates creating a research infrastructure that can support a technology’s development. Experts cited several examples of how federal agencies’ programs provide different models for supporting technology development across multiple stages of innovation. Advanced Technology Program. Experts cited NIST’s Advanced Technology Program—which COMPETES 2007 repealed—as a success in terms of its efforts to support transformational research.Experts cited several aspects of the program in discussing its success, including its support for (1) research that accelerated the development of high-risk technologies with the potential for broad- based economic benefits to the nation; (2) information sharing across different sectors; (3) active project management and workshops that taught awardees how to pitch their technology to venture capital investors, according to one expert. One expert noted that the program collaborated with NIH to develop diagnostic approaches that advanced the genomic revolution. ARPA-E. Experts described ARPA-E—which was modeled after DARPA—as an important challenge-based federal effort to advance technologies in areas aligned with DOE’s mission. Aspects of the ARPA-E model one expert cited as important to the program’s ability to support transformational technological advances included, among others, support for higher-risk research and the autonomy that program directors have in seeking expert input and selecting research projects. Manufacturing USA Institutes. One expert described the Manufacturing USA institutes as an important federal effort to support emerging technologies across multiple stages of innovation. Another expert explained that in order to continue to capture the economic benefits of the innovation system, the United States needs to embed the knowledge for technology production locally within the country. The first expert said the Manufacturing USA institutes help increase the connectivity among different actors involved with specific technology areas and improve their ability to leverage advances in those areas. Experts also discussed how other countries’ long-term funding for research efforts may help them support technology development. For example, one expert discussed Germany’s Fraunhofer Institutes, where the government makes research investments over time frames of 5 or even 20 years and rewards successful projects with funding increases each year. In addition, one expert noted that other countries such as the Netherlands and Singapore also provide long-term research funding, allowing them to develop the broader research infrastructure necessary to support technology development. In the area of quantum computing, one expert stated that the Netherlands’ investment has contributed to one of the largest quantum computing-focused efforts in the world. According to one expert, if U.S. researchers do not conduct the research necessary over the long term to prove their research ideas, other countries will have the opportunity to pick up where U.S. researchers leave off and commercialize technologies based on this research. Experts stated that tool development is critical to transformational technological advances and discussed a need for federal government support for tool development to maintain U.S. competitiveness. A tool is something—such as equipment used for a specific purpose, a modified biological system, or a computer program—that is used to perform a task or that is needed to practice a profession. According to one expert, tools are crucial supporting technologies that are necessary for the product development process. According to recent reports, research in tools development can lead to the introduction of new products, materials, or the ability to produce materials at the commercial level. A bioprinted coronary artery. 3D bioprinting is a tool that scientists are developing in the field of regenerative medicine. 3D bioprinting uses 3D printing with biological materials to create skin, bones, arteries, and a variety of other tissues and organs. For example, the Department of Defense has conducted research into using 3D bioprinting to repair skin damaged by burns—injuries that account for 10 to 30 percent of battlefield casualties. To repair burned skin, researchers have created scans of burns that a computer then uses to have a 3D printer reconstruct the burned skin. 3D bioprinting has also been used to create small blood vessel networks that contain living cells that have joined with the blood vessel networks in a mouse, allowing blood to circulate through them. Such printed blood vessels could be used to replace a damaged heart muscle. In the future, such organs could be grown using 3D bioprinting and the cells of the person who needs the organ, and they could be used in place of transplanted organs. 3D bioprinted tissues could also be used to test the safety of new drugs. 3D bioprinting is in the early stages of development. Experts explained that the United States is at risk of losing its ability to develop tools, and they identified challenges to tool development, including the following: Unclear needs and long time frames. According to experts, industry may be less likely to invest in tool development when tools do not support existing products, but, rather, are a part of solving technology challenges that are not clearly defined. In this context, experts explained that tool development can take a relatively long time, which may not be compatible with industry’s short innovation time frames. Potentially high or unrecoverable costs. Developing tools is expensive, according to experts, and when creating a new tool, companies have to consider whether they will be able to recover their costs. One expert described a circumstance in which a modified laser was needed to support research on a quantum system. The expert explained that a laser manufacturing company would need to change its production line in order to make the modified laser, and it would be very expensive for the company to adjust its production line to make only the modified laser. Experts emphasized the important role federal agencies can play in helping overcome these challenges to tool development. For example, experts described the importance of federal support for developing measurement tools to accelerate and improve the learning cycles around designing, building, and testing technologies and products. Experts specifically cited NIST’s role in the development of measurement tools. For example, through the NIST-on-a-Chip program NIST is developing ultra-compact, inexpensive tools that will measure quantities such as time, distance, current and voltage, and temperature and pressure and that will allow measurement technologies to be deployed without requiring traditional measurement services. In line with NIST’s goals, the private sector will manufacture and distribute these technologies. Experts also noted the important role federal agencies play in providing access to tools, such as technology testbed facilities to support de-risking technologies through prototyping and other development activities. Experts identified strengthening the science and technology workforce as a consideration for maintaining U.S. competitiveness through transformational technological advances. According to experts, there is a need for federal agencies to work with academia and industry to improve connections between the training academia provides and what industry needs, such as interdisciplinary training. Experts further discussed the recruitment of researchers and the retention of research talent and a technically trained workforce; according to experts, attracting researchers has historically been a U.S. strength, but this ability may be at risk. Experts identified the need to improve connections between academic institutions and industry so that the training academia provides corresponds to industry’s needs, particularly for interdisciplinary research fields. Without strengthening these connections, according to experts, academia may not deliver the interdisciplinary training needed for some research areas. Experts identified the systems engineering training needed to build a quantum computer as one such area of interdisciplinary training. For example, one expert said engineers are usually unfamiliar with the quantum mechanics used in a quantum computer and this is challenging since knowledge of both disciplines—quantum mechanics and engineering—is necessary to develop the technology. Also, not many quantum computing researchers are trained in the fields of computer science or engineering, according to stakeholders and agency officials we interviewed. A few experts said that because universities are not training the researchers needed in some interdisciplinary areas, there are not enough researchers in those areas available for industry to hire. Experts, other stakeholders and agency officials we interviewed, as well as some recent reports, identified several factors that may contribute to a disconnect between academic training and industry needs. For example, experts explained that universities appear to operate on the assumption that industry, not universities, must teach students the practical skills needed to be productive members of an engineering team. Additionally, according to a 2012 report by the National Research Council, job markets and careers for doctoral scientists and engineers have shifted since 1990 so that more than 50 percent of new doctorates work outside of academia, but there are few incentives to motivate graduate programs to align doctoral education with evolving employment activities. According to one expert, graduate education is largely supported by federally funded research awards to universities which tend to support basic research, not applied research or development. This expert further stated that as a result, graduate students are not taught later stage applied work relevant to industry because that has not been what federal research has historically funded. According to a different 2012 National Research Council report, cultural barriers often separate industry from academia and are reinforced by organizational incentives— universities have traditionally emphasized the need to publish research, not commercialize it. Further, one expert, a stakeholder, and an agency official we interviewed said that universities generally were not hiring faculty who focus on quantum computing as part of their computer science and engineering departments. The expert attributed this to limited funding available to support those research programs. According to this expert, the financial assistance federal research programs provide can send an important signal to universities that can lead to evolving academic programs and hiring in interdisciplinary fields. A 2016 MIT report made similar observations and said that many universities remain siloed along departmental lines and need resources and structures that allow for team teaching—two people from different research areas co- teaching a course—or research in which students from different disciplines could be paired to answer a research question. However, in synthetic biology, one expert noted that some universities have started entirely new Departments of Bioengineering because aspects of synthetic biology contribute to the development of an independent, distinctive, and complementary type of engineering. This has resulted in the development of a new curriculum that incorporates synthetic biology into the training and development of bioengineers, according to this expert. Experts discussed the importance of recruiting researchers and retaining talent and a technically trained workforce. Experts stated that attracting researchers to come and stay in the United States has historically been a national strength. The Congressional Budget Office has reported that foreign-born workers contribute disproportionately to innovation. Further, according to this report, foreign-born researchers account for a disproportionate number of the scientific researchers who yield many of the big discoveries and conceptual breakthroughs that drive science. However, according to a few experts, and a National Research Council report, the United States is increasingly competing with other countries to recruit and retain talented researchers. Countries such as Canada, China, and Singapore are attracting talented researchers to their universities and research institutes by offering high salaries and the opportunity to run well-funded programs, according to a National Research Council report. For example, according to a few experts, China started the Thousand Talents Program in 2008 to get talented researchers to return to China. The Thousand Talents Program’s goal is to bring top talent trained overseas to China on a full- or part-time basis. One expert gave the example of a university president resigning from a U.S. university because he believed the possibilities for research were greater in Asia. According to one expert, the nation’s ability to recruit and retain researchers may be at risk because the United States is not working to retain and incentivize talent. According to that expert, this puts the nation at risk of missing out on the next global transformational technological advance. According to some experts, one challenge to retaining talent in the United States is that limited job opportunities are available to young researchers trained in certain areas. It is important to create conditions for young researchers to find employment in research and development, according to one expert, so that they can contribute to these areas. Creating the right incentive structure for people to produce transformational technologies in the United States is important, according to another expert, because when technologies are produced in the United States, the skills needed to produce them become embedded in that community. We have previously reported that too much location of skilled manufacturing jobs abroad can, in general, put the United States at a disadvantage in terms of its ability to design new products, according to participants in a 2013 forum on nanomanufacturing. Similarly, in a 2012 report, the National Research Council stated that manufacturing is integral to new product development, and production lines are linked to an iterative innovation chain that includes research and development, product refinement, and full-scale production. In many high-technology industries, design cannot be easily separated from manufacturing, and talent availability is the most important factor for deciding where to place a production facility. In some cases, according to this 2012 report, companies are choosing to produce abroad because of concerns related to the capacity of the U. S. supply chain, technical skills of U.S. workers, and the investment climate for high-volume manufacturing. Also according to this report, as a result of these factors, the United States is finding it increasingly difficult to capture the economic value generated by public and private investments in research and development. Federal support for research in areas such as quantum computing and synthetic biology can help promote U.S. competitiveness in the global economy. For example, advances in quantum computing have the potential to lead to transformational advances in national security technologies or technology areas that rely heavily on simulation, such as pharmaceuticals and materials science for advanced manufacturing. Research in synthetic biology could help achieve significant advances in health care, energy, and other sectors. When agencies collaborate on their research efforts, they can produce more public value than when they act alone. Moreover, collaboration through mechanisms such as interagency groups can help address complex issues, such as those remaining to be resolved in quantum computing and synthetic biology. Collaboration can also mitigate challenges associated with fragmentation of efforts across multiple agencies, as well as potential overlap and duplication. NSTC and federal agencies have taken steps, building on earlier efforts, to coordinate their activities in the areas of quantum computing and synthetic biology. Specifically, both the new QIS Subcommittee and the new synthetic biology working group have taken initial steps to implement certain leading practices that can enhance and sustain collaborative efforts. For example, both have taken steps toward agreeing on roles and responsibilities. These steps could help address problems identified in previous interagency coordination efforts. However, both the subcommittee and working group are recently established and have had limited time to fully implement the leading practices that we describe in this report. As the subcommittee and working group move forward, by taking steps to fully implement these leading practices for collaboration, member agencies could better marshal their collective efforts to support research in quantum computing and synthetic biology and help maintain U.S. competitiveness through transformational technological advances. We are making a total of five recommendations, including one to OSTP, one to Commerce, one to DOE, and two to NSF. As the QIS Subcommittee moves forward, the Office of Science and Technology Policy co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 1) As the QIS Subcommittee moves forward, the Department of Commerce co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 2) As the QIS Subcommittee moves forward, the Department of Energy co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 3) As the QIS Subcommittee moves forward, the National Science Foundation co-chair, in coordination with other co-chairs and participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 4) As the Interagency Working Group on Synthetic Biology moves forward, the Director of the National Science Foundation, in coordination with participating agency officials, should take steps to fully implement leading practices that enhance and sustain collaboration. (Recommendation 5) We provided a draft of this product to Commerce, DOD, EPA, DOE, DHS, HHS, NASA, NSF, ODNI, OSTP and USDA for comment. Commerce, DOE, NSF, and OSTP generally agreed with the recommendations directed to them. Commerce, DOE, and NSF provided written comments that are reproduced in appendixes IV, V, and VI, respectively. In expressing concurrence with the recommendations directed to them, these agencies’ written comments discussed aspects of the interagency groups’ efforts we examined in our report or the agencies’ own efforts related to coordination and collaboration. OSTP’s General Counsel provided OSTP’s comments by email. In its comments, OSTP stated that it sees value in our recommendation and will implement the recommendation as resources allow. However, OSTP expressed concern about the impact that resource limitations could have on its ability to implement the recommendation. We recognize that OSTP faces certain resource limitations. However, we believe that implementing our recommendation would allow leveraging of limited resources across the agencies participating in a collaborative effort. In an email from an official with the Office of the Chief Financial Officer in USDA’s Agricultural Research Service, USDA provided general comments on our findings and our recommendation pertaining to the Interagency Working Group on Synthetic Biology. Specifically, USDA concurred that federal support for research and development help drive technological advances and promote U.S. competitiveness. USDA also agreed that the leading practices we discuss in our report can enhance and sustain interagency collaboration, and it expressed support for the implementation of these practices in the Interagency Working Group on Synthetic Biology, consistent with our recommendation. In addition, Commerce, DHS, DOE, EPA, HHS, NASA, and OSTP provided technical comments, which we incorporated as appropriate. Officials from DOD and ODNI stated via email that they had no comments on the report. We also provided a draft of this report to a participant who served as moderator in our October 2017 expert meeting on research for transformational technological advances. We requested his views on aspects of the report on which he has expertise and, in particular, the characterization of statements made by experts at our meeting. He provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Agriculture, Commerce, Defense, Energy, Health and Human Services, and Homeland Security; the Administrators of the Environmental Protection Agency and the National Aeronautics and Space Administration; the Directors of National Intelligence, the National Science Foundation and the Office of Science and Technology Policy; and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VII. The objectives of our review were to (1) describe federal agencies’ and nonfederal entities’ support for research for transformational technological advances in selected areas, (2) examine federal agencies’ coordination on this research, and (3) provide experts’ views on considerations for maintaining U.S. competitiveness through transformational technological advances. For the purposes of this report, we selected quantum computing (a sub- area of quantum information science) and synthetic biology (the intersection of biology and engineering that focuses on the modification or creation of novel biological systems) as examples of research for transformational technological advances. We selected these two areas of research because they: (1) represent enabling or platform technologies, which could lead to other advances, (2) are supported by a mix of federal agencies and nonfederal entities, and (3) represent areas of congressional interest in which we have not recently conducted work. We conducted this performance audit from November 2016 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To describe federal agencies’ and nonfederal entities’ support for research for transformational technological advances in quantum computing or synthetic biology we reviewed agency documentation, relevant literature, and our prior work related to federal research efforts. We focused on federal and nonfederal efforts in fiscal years 2016 through the second quarter of fiscal year 2018. For example, we reviewed the National Science and Technology Council’s 2016 report on advancing quantum information science which discusses the state of the research area and federal involvement. We also interviewed officials from 10 agencies and departments that have ongoing work in either quantum computing or synthetic biology, or in some instances, work in both research areas. These agencies were the: Department of Commerce, Department of Defense, Environmental Protection Agency, Department of Energy, Department of Homeland Security, Department of Health and Human Services, National Aeronautics and Space Administration, National Science Foundation (NSF), Office of the Director of National Intelligence, and U.S. Department of Agriculture. We initially selected federal agencies on the basis of those that had total research and development obligations of $500 million or greater in fiscal year 2016 according to NSF’s Survey of Federal Funds for Research and Development. Additionally, we included an agency which we learned, through the course of our work, had significant ongoing work in both research areas. We did not seek to develop comprehensive information on federal agencies’ efforts to support research in quantum computing and synthetic biology. As a result, federal agencies could have ongoing efforts in these two areas that we do not discuss in our report. To examine the funding federal agencies provide for quantum computing and synthetic biology research, we requested data on obligations for quantum computing and synthetic biology research for fiscal years 2016 through 2017, information on the type of research funded, and the names of individual studies or projects. We requested funding data from all agencies within our scope but some agencies did not provide such data. We assessed the reliability of the data we obtained by checking for obvious errors in accuracy and completeness and by comparing the data with other sources of funding information, such as agency budget documents, where possible. We determined that the data were sufficiently reliable for reporting an approximate, minimum amount of federal financial assistance obligated for quantum computing and synthetic biology research. To examine the extent to which nonfederal entities have supported research related to synthetic biology and quantum computing, we interviewed stakeholders from 21 nonfederal entities with experience in the areas of quantum computing, synthetic biology, or federal research more broadly. To collect a range of viewpoints, we selected nonfederal entities from industry, academia, nonprofit organizations, and professional associations. The 21 nonfederal entities we interviewed included: 1. American Chemical Society 2. American Physical Society 3. Arizona State University 4. Georgia Institute of Technology 8. IBM 9. Institute of Electrical and Electronics Engineers 10. Information Technology and Innovation Foundation 12. Massachusetts Institute of Technology (MIT)13. Materials Research Society 15. National Venture Capital Association 17. Science and Technology Policy Institute 18. University of California 19. University of Colorado We also defined the people cited in this report in the following manner: 1. Experts: individuals who participated in our expert meeting. 2. Stakeholders: academic researchers, industry officials, and representatives of professional organizations who we interviewed. This group does not include agency officials. 3. Agency officials: federal officials we interviewed. We identified and selected these stakeholders through a literature review and referrals. We conducted a literature review to learn about the current state of each research area as well as to identify relevant stakeholders in the areas of synthetic biology and quantum computing. We then contacted the stakeholders for interviews and asked them for additional references. We interviewed stakeholders both in person and over the phone. We did not seek to develop comprehensive information on nonfederal efforts to support research in quantum computing and synthetic biology. As a result, we acknowledge that there are nonfederal entities that may have ongoing efforts in these two areas that we do not discuss in our report. To examine federal agencies’ coordination on quantum computing and synthetic biology research, we identified coordination efforts in fiscal year 2016 through the second quarter of fiscal year 2018 through our review of agency documentation and interviews with federal officials. Additionally, we interviewed officials with the Office of Science and Technology Policy. For ongoing interagency coordination efforts, we compared agencies’ efforts with selected leading practices for enhancing and sustaining collaboration. We selected six of the eight practices based on their relevance to the operations of the interagency coordination efforts we identified. In this report, and in our past work, we define collaboration broadly as any joint activity that is intended to produce more public value than could be produced when organizations act alone. Through interviews and a data request, we asked agency officials to provide information on their efforts to coordinate quantum computing and synthetic biology research from fiscal year 2016 through the second quarter of fiscal year 2018. For interagency groups related to quantum computing and synthetic biology, we obtained information through June 2018. To provide experts’ views on considerations for maintaining U.S. competitiveness through transformational technological advances, we convened a meeting of 19 experts on October 12 and 13, 2017, with the assistance of the National Academies of Sciences, Engineering, and Medicine. The experts included current and former federal officials, as well as subject matter experts from industry, academia, nonprofit organizations, and professional associations. About half of the experts were subject matter experts in the areas of quantum computing or synthetic biology, while the other half were experts with broader perspectives on the role of federal and nonfederal entities in supporting research for transformational technological advances. We worked with the National Academies staff to select experts with a range of viewpoints. Prior to the meeting, we worked with National Academies staff to help ensure balance and to assess potential conflicts of interest among the experts. For example, we asked all participating experts to provide information on (1) whether their immediate family had any investments or assets that could be affected, in a direct and predictable way, by a decision or action based on the information or opinions they would provide to GAO; (2) whether they or their spouse received any income or hold any organizational positions that could be affected, in a direct and predictable way, by the information or opinions they would provide GAO; and (3) whether there were any other circumstances, not addressed in the two previous questions, that could be reasonably viewed by others as affecting participants’ point of view on the topics to be discussed. We received signed responses from all participating experts. Three of the 19 experts reported potential conflicts. We evaluated their statements and determined that they did not have any inappropriate biases when taken in the context of the overall group of experts taking part in the meeting. As a result of these efforts, we determined that the group of 19 experts, overall, was balanced and had no inappropriate biases. However, the views of these experts cannot be generalized to everyone with expertise on research for transformational technological advances; they represent only the views of the experts who participated in our meeting. We list the experts who participated in our meeting in Appendix II. We divided the 2-day expert meeting into 8 sessions focused on a range of topics, such as the role of federal and nonfederal entities in keeping the United States competitive. Each session featured an opening presentation by two selected experts, followed by open discussion among all meeting participants. At the end of each session, one expert was tasked with highlighting the key themes discussed during that session. We then solicited feedback from the experts to determine whether there were any additional comments they wanted to add to those themes. We recorded and transcribed the meeting to ensure that we accurately captured the experts’ statements. We analyzed the information gathered from the experts by reviewing and conducting a content analysis of the transcript and identifying considerations for maintaining U.S. competitiveness based on categorizing the experts’ comments. For purposes of quantifying expert remarks, we refer to a statement from an individual expert as being from one expert, and unless there is significant disagreement in the transcript, we refer to statements from two or more experts as being from experts. In cases of significant disagreement in the transcript, we refer to statements from two to three experts as being from a few experts, and statements from four to six experts as being from some experts. Before publication and consistent with our quality assurance framework, we provided the experts with a draft of our report and asked them to provide their views on whether our overall characterization of the meeting generally reflected the considerations discussed during the meeting. Of the 18 experts who responded to our request for review, 13 experts agreed that our overall characterization generally reflected the key considerations identified during the meeting, one partially agreed, and one differed with our report’s presentation of specific issues regarding synthetic biology. We incorporated feedback experts provided on the draft, as appropriate. To corroborate statements made by the experts on particular topics, as appropriate, we identified and analyzed studies and reports by agencies, the National Academies, and others that were recommended to us by experts. In addition, we compared the experts’ statements to other information provided by agency officials and stakeholders we interviewed. Appendix II: Participants in GAO’s Meeting on Research for Transformational Technological Advances Affiliation Ceres Nanosciences, Inc. Appendix III: Funding/Investment Gap in the Manufacturing-Innovation Process (Corresponds to fig. 1) Figure 3 shows the potential gap during the middle stages of innovation, in which innovators may have difficulty finding financial support. The figure includes a static display of the rollover information included in figure 1, which is interactive. Figure 3 Funding/Investment Gap in the Manufacturing-Innovation Process (Corresponds to fig. 1) In addition to the contact named above, the following individuals made contributions to this report: Christopher Murray (Assistant Director), Angela Miles (Analyst-in-Charge), Justin Fisher, Scott Fletcher, Ashley Grant, Charlotte E. Hinkle, Gwen Kirby, Patricia Moye, Cynthia Norris, Emily Pinto, Tind Shepper Ryen, McKenna Storey, and Walter Vance.", "summary": "Scientific and technological innovation contributes to U.S. economic competitiveness and prosperity. Federal agencies support transformational technological advances—those that result in new or significantly enhanced technologies—by, for example, funding research (nearly $70 billion in obligations in fiscal year 2017). GAO was asked to examine support for research that could lead to transformational technological advances. This report (1) describes federal agencies' and nonfederal entities' support for such research in selected areas, (2) examines federal agencies' coordination on this research, and (3) describes experts' views on considerations for maintaining U.S. competitiveness through such advances. GAO selected quantum computing and synthetic biology as examples of research areas that could lead to transformational technological advances. GAO reviewed agency documents and interviewed federal officials, subject matter experts, and stakeholders. GAO also worked with the National Academies of Sciences, Engineering, and Medicine to convene a meeting to solicit views from 19 experts selected from government, academia, and industry, among others. Multiple federal and nonfederal entities support research for transformational technological advances in the areas of quantum computing—the manipulation of bits of data using the behavior of individual atoms, molecules, or other quantum systems to potentially outperform supercomputers—and synthetic biology—the combination of biology and engineering to create or modify biological systems. GAO found that at least 6 agencies support quantum computing research; at least 10 agencies support synthetic biology research; and nonfederal entities, such as universities and businesses, support research in both areas. Agency officials said they coordinate on quantum computing and synthetic biology through efforts such as conferences and interagency groups, but GAO found that certain new efforts have not fully implemented selected leading collaboration practices. The quantum computing group, co-chaired by officials from 4 agencies, and the synthetic biology group, led by the National Science Foundation, have taken initial steps to implement some leading practices GAO identified that can enhance and sustain interagency collaboration. For example, both groups agreed to coordinate their research, and participating agencies documented agreement with the quantum computing group's purpose through a charter. However, the groups have not fully implemented other practices, such as agreeing on roles and responsibilities and identifying common outcomes, that could help ensure they effectively marshal agencies' efforts to maintain U.S. competitiveness in quantum computing and synthetic biology. Experts identified considerations for maintaining U.S. competitiveness through transformational technological advances. The considerations broadly address federal and nonfederal entities' roles in supporting such advances and include: developing a strategic approach using consortia or other mechanisms to bring together potential partners; fostering an environment in which information is shared among researchers while also considering the risks of information sharing; focusing on technology development and commercialization, for example, by providing support across multiple stages of technology innovation; and strengthening the science and technology workforce through training, recruiting, and retaining talent. GAO recommends that the agencies leading the interagency quantum computing and synthetic biology groups take steps to fully implement leading collaboration practices. The agencies agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Over the last decade, VHA has increasingly provided care on an outpatient basis, including primary care and mental health care services. VHA Handbook 1006.02, VHA Site Classifications and Definitions, defines classifications for outpatient sites of care including CBOCs. VHA’s Directive 1229, Planning and Operating Outpatient Sites of Care, outlines the process for establishing new CBOCs. VHA provides outpatient care through CBOCs, health care centers, and other outpatient services sites, which are defined in VHA’s site classification policy: CBOCs are clinics that provide primary care and mental health care services, and also may provide specialty care services such as cardiology or neurology, in an outpatient setting. CBOCs can provide a wide array of services, ranging from a small, mainly telehealth clinic with one technician and a nurse, to a large clinic with several specialty care services and providers. Each clinic is overseen by, and separate from, its VAMC; each VAMC in turn is overseen by one of 18 VISNs. Health care centers are large multi-specialty outpatient clinics that provide primary care, mental health care, and on-site surgical services, in addition to other health care services. Other outpatient services sites provide nonclinical services, such as social services, homelessness services, and support services. They may also provide services that are clinical in nature through telehealth or other arrangements. (See fig. 1.) To establish a new CBOC, VHA’s policy states that the VAMC and VISN must ensure that one is needed by first exhausting existing VHA resources (such as changing clinic hours or staffing) and determining that VHA community care programs cannot meet the identified demand. The VAMC and VISN follow several steps to assess the need for a new clinic: Step 1—The VAMC and VISN identify an underserved area using VHA models that project changes in the veteran population and trends in veterans’ health care needs. Step 2—The VAMC develops a detailed proposal for the new clinic— an Access Expansion Plan—that includes information such as whether the proposed clinic will be VHA-operated or contracted, projected workload, scope of the services to be provided, and cost. It also describes, as required by VHA policy, how the VAMC has exhausted existing VHA resources before proposing a new clinic. Step 3—The VISN reviews the expansion plan, and if approved forwards it to an interdisciplinary panel at VHA’s central office, which reviews it. A list of approved clinics is then sent to the Under Secretary for Health for endorsement. Step 4—Endorsed clinics are included in the VISN’s Strategic Capital Investment Planning process submission for the fiscal year. Final approval and funding for a new CBOC is dependent on Office of Management and Budget approval of VA’s budget submission and VHA’s final appropriations. In fiscal year 2015, VHA suspended the establishment of new CBOCs beginning in fiscal year 2018 due to several factors, including budget constraints and an emphasis on the use of VHA community care programs. However, VISNs can submit requests for exceptions to the Deputy Under Secretary for Health for Operations and Management for review. VHA officials told us 11 exceptions had been granted as of February 2018. We found that VHA-operated CBOCs provided more specialty care and less primary care and mental health care as a proportion of their total provided services than contracted CBOCs in fiscal years 2014 through 2016. For example, in fiscal year 2016, specialty care (e.g., cardiology, gastroenterology, physical therapy) comprised 13 percent of services provided at VHA-operated clinics and 5 percent of services provided at contracted clinics. In contrast, VHA-operated clinics provided proportionally less primary care and mental health services (services offered at all CBOCs) in fiscal year 2016—these services comprised 66 percent of the services provided at VHA-operated clinics, but 84 percent of the services provided at contracted clinics. (See fig. 2.) We found that VHA-operated CBOCs provided several specialty care services that were not offered in contracted CBOCs. For example, dental care services and gastrointestinal endoscopy were provided by multiple VHA-operated clinics, but were not provided by any of the contracted clinics in fiscal year 2016. In addition, we found that VHA-operated clinics were generally larger and provided more complex services than contracted clinics. For example, multi-specialty CBOCs (clinics that provide two or more on-site specialty care services, and which may offer procedures requiring local anesthesia or sedation) were more often VHA- operated than contracted. Of the 733 CBOCs in fiscal year 2016, 210 were classified by VHA as multi-specialty, and nearly all of these (206) were VHA-operated. Officials from the four VAMCs and VISNs in our review told us decisions about what types of services CBOCs provide are made on a case-by- case basis according to local needs. For example, officials from one VAMC told us they decided to add physical therapy specialty care to one of their VHA-operated clinics based on analysis indicating that veterans’ need for this care in their community would increase. Also, officials said they wanted to alleviate the travel burden for veterans who needed the care, as the next closest VHA facility that offered this care was a 2.5-hour drive away. Officials from another VAMC told us that they approached the service needs at their clinics from a regional perspective, allowing for veteran demand for services to be met across multiple clinics in the same geographic area instead of relying on one clinic to meet the need. As a result of this approach, VAMC officials were in the process of expanding services at two of its clinics. From fiscal years 2014 through 2016, we found that VHA-operated CBOCs had higher per-encounter expenditures than contracted CBOCs—a difference ranging from 3 to 5 percent per encounter. (See table 2.) We also found that per-encounter expenditures for almost all service types were higher on average for VHA-operated CBOCs than contracted CBOCs in fiscal year 2016; the exception was mental health care services, where VHA-operated clinics’ per-encounter expenditures were 2 percent lower than for contracted clinics. The difference in per-encounter expenditures was greatest for specialty care services. For example, VHA- operated clinics’ per-encounter expenditures for specialty care services were 46 percent higher than for contracted clinics. This is in contrast to primary care, where VHA-operated clinics had 11 percent higher per- encounter expenditures, on average, compared to contracted clinics. (See fig. 3.) Officials told us that several factors can influence per-encounter expenditures, including (1) differences in provider compensation and types of providers (physicians vs. physician assistants); (2) the number of patients with complex health conditions that generally require longer visits and more costly services (as opposed to patients with well-managed conditions); and (3) geographic differences in the cost of providing care. One of our selected contracted CBOCs had one of the highest per- encounter expenditures for fiscal year 2016 among all clinics. Officials from this clinic’s VAMC told us this was due to the contractor being able to command a very high payment rate at the time of the contract award, due to temporarily strong local economic conditions, as well as being the only contractor in the area capable of providing the required services. Officials said the VAMC is in the process of awarding a new contract for this clinic. Although per-encounter expenditures were generally lower for contracted CBOCs, officials from the VISNs and VAMCs in our review told us they consider several factors in determining whether a new clinic will be VHA- operated or contracted. Such factors include the ability to directly monitor performance and implement new standards of care, as well as the ability to recruit and staff the clinic. For example, officials from two VAMCs in our review told us that VHA-operated clinics can be easier to manage because the VAMC has direct control of the clinic. Officials said this makes it easier to implement changes to VHA standards of care without the need to enter into contract modification negotiations. On the other hand, officials from three of the four VISNs and three of the four VAMCs in our review told us that contractors can be more flexible than VHA in recruiting staff (such as the ability to offer higher salaries), making a contracted clinic desirable for geographic areas where VHA has challenges recruiting or retaining providers. We found that VHA has implemented certain oversight requirements, but not others described in Directive 1229—its policy that outlines VHA’s oversight responsibilities for outpatient sites of care, including CBOCs. In terms of the oversight requirements that VHA implemented, we found it has provided reports on patient satisfaction to VISNs and VAMCs on a monthly basis. Specifically, VHA distributes the results of the VHA Survey of Healthcare Experiences, a monthly survey of veterans’ satisfaction with the care they received through VHA health care facilities. In addition, VHA implemented the requirement to make measures related to evaluating the progress of outpatient sites of care, such as data on wait times, workload, and costs, available on an internal VHA website. However, VHA has not implemented other oversight requirements, which is inconsistent with federal standards for internal control related to monitoring, which state that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. We found that VHA has not implemented the following requirements in Directive 1229: VHA has not developed guidelines for monitoring the quality and comprehensiveness of care in CBOCs. Officials from the three VHA offices with responsibility for collaborating to develop guidelines for monitoring the quality and comprehensiveness of care in CBOCs, as required in the policy, told us that they are not currently developing these guidelines and they have no plans to do so. First, officials from the office of the Assistant Deputy Under Secretary for Health for Policy and Planning told us they had not developed these guidelines because they no longer believed it was their office’s responsibility, despite the fact that officials from the office had helped to develop the recently issued policy. Second, officials from the office of the Deputy Under Secretary for Health for Organizational Excellence told us that their office was not responsible for addressing the broader issue of monitoring clinics. Third, officials from the office of the Deputy Under Secretary for Health for Operations and Management told us that although they do not have formal guidelines in place, they believe their office meets the Directive 1229 requirement as part of their regular VISN oversight. Officials said they collect and review VISN- level performance data, such as patient satisfaction data, which can be broken down to the level of the CBOC if there is a performance problem. However, VHA may miss clinic performance problems that are not identifiable in the VISN-level data. In addition, without developing such guidelines, VHA has not established standardized processes for how it monitors CBOCs, which can lead to inconsistent oversight. This poses the risk that veterans may be subject to different standards of care depending on the clinic visited. VISNs do not conduct continuous quality monitoring of CBOCs to ensure that consistent, quality care is being delivered. We found that three of the four VISNs in our review largely delegated oversight of the CBOCs to the VAMCs, rather than conducting continuous quality monitoring as required in the policy. Specifically, officials from these VISNs said that they largely focus their oversight on the VAMCs and do not separately review the performance of every CBOC unless the VAMC informs them of a quality problem at a particular clinic. Officials from the remaining VISN in our review said they do conduct CBOC-specific oversight activities. Specifically, this VISN had created a performance review survey tool that it sends to each clinic on an annual basis, and the results are reviewed by a workgroup made up of VISN staff. The workgroup examines trends across the CBOCs, including a comparison of VHA-operated and contracted performance. For example, one question in the tool asks how an individual CBOC’s performance compares with others overseen by the VAMC. The delegation of oversight responsibility for the CBOCs to the VAMCs without consistent VISN-level oversight creates the potential for inconsistencies in oversight, which does not align with VHA policy to provide one standard of care for all clinics. Consequently, veterans may be subject to different standards of care across clinics. The Deputy Under Secretary for Health for Operations and Management has not reviewed CBOC performance with VISNs as part of the quarterly VISN performance reviews. The Deputy Under Secretary for Health for Operations and Management is responsible for conducting reviews of VISN performance with each VISN director. Specifically, the office of the Deputy Under Secretary for Health for Operations and Management is required by VHA policy to review CBOC-level performance data during quarterly VISN performance reviews. However, officials from this office and two of the VISNs we contacted told us they do not specifically do this unless the VISN identifies a performance problem. Of the remaining two VISNs, officials at one VISN reported only having mid-year and year-end meetings with VHA central office at which they did not specifically discuss the CBOCs, and officials from the other VISN said they did not have any regular quarterly performance reviews with VHA central office. This lack of consistent oversight poses the risk that VHA is not providing one, high quality standard of care to veterans across CBOCs. Directive 1229 requires VHA to provide reports to the VISNs and VAMCs on CBOC quality of care on a quarterly and year-end basis. We found that the CBOC Report, which is VHA’s only report that allows for comparing clinical quality of care data across VHA-operated and contracted CBOCs, lacks accurate and complete information. These gaps limit the CBOC Report’s usefulness as a monitoring tool to determine whether VHA-operated and contracted CBOCs are providing the same standard of care. This is inconsistent with federal standards for internal control for information and communication, which state that management should use quality information to achieve the entity’s objectives. Specifically, VHA distributes the CBOC Report to VISNs and VAMCs on a quarterly and year-end basis, which compiles CBOC quality of care performance results based on the Healthcare Effectiveness Data and Information Set (HEDIS)—an industry standard set of quality measures. VISNs and VAMCs have access to other types of CBOC performance data, such as patient satisfaction data and wait time data, but these data are not used to assess clinical quality of care and they cannot be used to examine performance across all CBOCs or stratified by VHA-operated versus contracted CBOCs. In contrast, the CBOC Report allows for the comparison of clinical quality of care data across all CBOCs, which can be stratified according to whether the clinic is VHA-operated or contracted. However, we found the following issues with the CBOC Report: Incorrect classification of CBOCs. We compared CBOCs from the most recent CBOC Report at the time of our review (the first quarter of fiscal year 2017) against sites in the VAST system as of January 3, 2017, which is VHA’s listing of all VHA sites of care and their characteristics. We found that 22 percent of sites were incorrectly classified as CBOCs, based on the site classifications in VAST. Several of these sites were much more complex, such as health care centers and VAMCs. For example, a VAMC was included in the report as a CBOC, but this VAMC has three specialized intensive care units and serves as a regional referral center for intensive inpatient surgery, including open heart surgery. In addition, we also identified sites included in the report that provided less complex services than those that are provided in CBOCs, such as other outpatient services sites. VHA officials who produce the CBOC Report told us that, prior to the establishment of the VAST site classifications in 2014, they used their judgment to classify existing sites of care as CBOCs and they have not updated their classifications since then. For sites established since 2014, officials told us they use the VAST site classifications, but may also use their judgment in certain situations. For example, if a site’s classification changed in VAST from a non-CBOC to a CBOC, they would make a decision about whether to classify it as a CBOC in the report by examining various aspects of the facility, such as the services provided and encounters. This procedure differs from what is documented in the methodology section of the CBOC Report, which states that site classifications are based on VAST. Further, VHA officials said they did not have a document available that outlined how they make these decisions. Because the site classifications in the CBOC Report are based, in part, on officials’ judgment in addition to the classifications in VAST, the report does not present accurate information on CBOCs across VHA and is of limited usefulness to VHA as a tool to ensure that VHA-operated and contracted CBOCs are providing the same standard of care that is of high quality. Missing CBOCs. We found that 53 CBOCs (7 percent of all CBOCs) were missing from the CBOC Report from the first quarter of fiscal year 2017, rendering the data incomplete. VHA officials provided examples of why a CBOC might not be included in the report. For example, a newer CBOC might not be included because it did not have quality of care data available at the time the report was developed. However, we identified several other sites that were listed in the report, despite unavailable data. Inaccurate summary calculations. Due to the incorrect site classifications and missing CBOCs, the national- and VISN-level summary calculations of performance in the CBOC Report were also inaccurate. Specifically, the report includes national- and VISN-level averages for each HEDIS measure, which VHA officials can use as benchmarks for clinic performance. These averages were over- inclusive—incorporating performance results from additional sites that were not CBOCs, and under-inclusive—omitting performance results from CBOCs that were missing from the report. These inaccuracies may lead VHA officials to draw incorrect conclusions about the quality of care provided in CBOCs. For example, officials from one VAMC told us that they use the national averages as benchmarks against which they compare the performance of their CBOCs. Because this VAMC requires CBOCs with lower-than-average HEDIS performance results to develop a formal action plan to improve performance, officials may not be identifying clinics that are in need of an action plan due to the inaccuracy of the averages. In addition, VHA central office officials who develop the CBOC Report said that the results from recent reports have shown that VHA-operated and contracted clinics in general provided the same standard of care, but this conclusion may not be correct as it is based on unreliable data. No guidance or training for use of the CBOC Report. VHA central office officials do not provide guidance or training specific to the CBOC Report to assist VISNs and VAMCs in using it to oversee CBOCs. This is inconsistent with federal standards for internal control related to the control environment, which state that management should, among other things, develop personnel to achieve the entity’s objectives. Such development may include training to enable individuals to develop competencies appropriate for key roles. In our review of the CBOC Report from the first quarter of fiscal year 2017, we found that in several places in the report, shorthand text and acronyms were used, but not defined. In addition, although there is a methodology section, it is not clear that the measures described in the report are HEDIS measures, for which VHA makes training available. Several VAMC and VISN officials stated that guidance or training that is specific to understanding the CBOC Report would be helpful. If VISNs and VAMCs are not trained on how to use the report, they may not know how to use it to oversee CBOCs and ensure they are providing one standard of care that is of high quality. No requirement for VISNs or VAMCs to use the CBOC Report. VHA does not require that the CBOC Report be used as a tool to oversee CBOCs. As a result, we found that the report was not widely used. Specifically, an official from the office of the Deputy Under Secretary for Health for Organizational Excellence—which produces the CBOC Report—told us that the office’s role is to compile the reports and distribute them, but not to monitor performance. Officials from the office of the Deputy Under Secretary for Health for Operations and Management said that VISNs and VAMCs are expected to use the report as part of their CBOC oversight; however, we found there is no requirement that they do so. We found that officials from three of the four VISNs and three of the four VAMCs in our review were not regularly using the CBOC Report. Officials from one of the four VAMCs and one of the four VISNs in our review were using it as part of CBOC oversight activities at the time of our review. Officials from another VISN said that they planned to start using the CBOC Report after we made them aware of it during our interview. If VISN and VAMC officials do not use the report as a part of their oversight, they may be missing opportunities to compare VHA- operated and contracted CBOCs and ensure they are providing one standard of care that is of high quality. CBOCs are an integral part of VHA’s health care delivery system, and VHA requires that such clinics, whether VHA-operated or contracted, provide the same standard of care to veterans that is of high quality. Although VHA has implemented certain policy requirements for CBOC oversight, we found several weaknesses in its oversight that make it difficult to determine whether it is ensuring this consistent standard of care across the clinics. Specifically, VHA has not fully implemented oversight requirements that align with its established policies, including a requirement to establish guidelines for overseeing CBOC quality of care. The CBOC Report, as VHA’s only report comparing clinical quality of care across both VHA- operated and contracted clinics, could be an important part of those guidelines. However, as it currently stands, the report is inaccurate and incomplete and VISNs and VAMCs are not trained on or required to use it; thus, it is of limited use to VHA, including the VISNs and VAMCs that have responsibility for CBOC oversight. As a result, VHA lacks assurance that both VHA-operated and contracted CBOCs are providing one standard of care that is of high quality. We are making the following four recommendations to the VHA Undersecretary for Health: Implement oversight requirements that align with VHA’s existing policy, including developing guidelines for monitoring quality of care in CBOCs. (Recommendation 1) Establish a process for regularly updating the CBOC Report to ensure it contains an accurate and complete list of CBOCs that is consistent with VHA’s established site classifications. (Recommendation 2) Ensure that VISNs and VAMCs receive guidance or training on how to use the CBOC Report. (Recommendation 3) Require the use of the CBOC Report as an oversight tool for ensuring one standard of care that is of high quality across VHA-operated and contracted CBOCs. (Recommendation 4) We provided VA with a draft of this report for its review and comment. VA provided written comments, which are reprinted in appendix I. In its written comments, VA concurred with all four of the report’s recommendations, and identified actions it is taking to implement them. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Veterans Affairs, the Under Secretary for Health, and other interested parties. In addition, the report is available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Debra A. Draper, (202) 512-7114 or draperd@gao.gov. In addition to the contact named above, Janina Austin, Assistant Director; Malissa G. Winograd, Analyst-in-Charge; Jennie F. Apter; Zhi Boon; Keith Haddock; and Sarah-Lynn McGrath made key contributions to this report. Also contributing were Jacquelyn Hamilton and Vikki Porter.", "summary": "In fiscal year 2016, VHA's 733 CBOCs provided care to more than 3 million veterans at a cost of $5.3 billion. Although most of these clinics are VHA-owned and -operated, 101 are operated through contracts with non-VHA organizations. VHA policy states that CBOCs, whether VHA-operated or contracted, must provide one standard of care that is of high quality. GAO was asked to review VHA's use of contracts to carry out core functions. This report examines, among other issues, the extent to which VHA oversees CBOC operations. To conduct this work, GAO reviewed VHA's policies and CBOC Report. GAO also interviewed officials from VHA's central office and from a nongeneralizable sample of eight CBOCs and their four respective VAMCs and VISNs. The CBOCs were selected for variation in factors such as contract status and geographic area. Community-based outpatient clinics (CBOC) are an important part of the Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) health care delivery system. These clinics are geographically separate from VA medical centers (VAMC) and provide outpatient services, including primary care and mental health care. GAO found weaknesses in VHA's oversight of CBOCs: Incomplete policy implementation. VHA has not implemented certain CBOC oversight requirements as outlined in its policy. Specifically, VHA has not developed guidelines for monitoring the quality and comprehensiveness of care in CBOCs and officials said they have no plans to do so. Officials told GAO they believe the requirement was met as part of their regular oversight of Veterans Integrated Service Networks (VISN)—regional networks responsible for oversight of VAMCs and CBOCs. However, VHA may miss CBOC performance problems that are not identifiable in VISN-level data. Further, although policy requires VHA central office officials to review CBOC performance as part of quarterly VISN performance reviews, officials said they do not specifically do so unless the VISN identifies a problem. Officials from three of the four VISNs in GAO's review said they largely delegate CBOC oversight to VAMCs, and do not separately review clinic performance unless a VAMC identifies a problem. An inaccurate and incomplete CBOC Report. VHA's CBOC Report is prepared by VHA central office and distributed to VISNs and VAMCs quarterly and at year-end. The CBOC Report could be useful to compare clinical quality of care between VHA-operated and contracted CBOCs, but it is inaccurate and incomplete. Specifically, VHA officials have used their judgment to classify certain sites as CBOCs in the report, rather than use the official classifications in policy. GAO found that 22 percent of sites were incorrectly classified as CBOCs when they were other types of sites, including VAMCs. As a result, the report is of limited usefulness to VHA as an oversight tool. Lack of guidance or training on the CBOC Report. VHA central office officials do not provide guidance or training specific to understanding the CBOC Report to assist VISNs and VAMCs in their oversight of CBOCs. GAO found that in several places in the report, shorthand text and acronyms were used, but not defined. In addition, several VISN and VAMC officials stated that guidance or training would be helpful. No requirement to use the CBOC Report. VHA officials told GAO that VAMCs and VISNs are expected to use the CBOC Report as an oversight tool, but GAO found that VHA lacks a requirement that they do so. Officials from three of the four VISNs and three of the four VAMCs in GAO's review were not using the report. These weaknesses potentially lead to inconsistent oversight and create a risk that VHA is not providing one standard of care that is of high quality to veterans across VHA-operated and contracted CBOCs. GAO recommends that VHA (1) implement oversight requirements that align with existing policy; (2) establish a process to ensure the CBOC Report is accurate and complete; (3) provide guidance or training to VISNs and VAMCs on how to use the CBOC Report; and (4) require use of the CBOC Report as an oversight tool. VA concurred with all of GAO's recommendations and identified actions it is taking to implement them.", "document_type": "gao"}
{"report": "The electricity operation and delivery system—collectively referred to as the grid—in the United States and Canada includes four functions: generation, transmission, distribution, and system operations (see fig. 1). Electricity is generated at power plants by burning fossil fuels; through nuclear fission; or by harnessing renewable sources such as wind, solar, geothermal energy, or hydropower. Once wholesale electricity is generated, it enters the bulk power system—a network of high-voltage, high-capacity transmission systems—where it is transformed to a higher voltage and flows through transmission lines, generally over long distances, to areas where it is transformed to a lower voltage and sent through the local distribution system for use by various customers. Throughout this process, system operations are managed by a system operator, such as a local utility. Below is additional information on the functions of the electric grid, including equipment that may be vulnerable to GMD and HEMP. Electricity generation. Power plants generate electricity by converting energy from other forms—such as coal, natural gas, or wind—into electricity. While they produce electricity once operating they are vulnerable when power outages occur because initially starting a power plant after an outage typically requires an external source of electricity to operate the control systems—electronics that are integral to their operations. Some power plants have the capability to restore operations by employing a “black start,” which is the process of restoring a plant to operation without relying on off-site sources of electricity, usually through using dedicated diesel generators to provide the electricity needed. However, not all plants have this capability and in the event of a power outage could therefore be vulnerable to lengthy system disruptions. Electricity transmission. Power plants are generally geographically distant from the areas where electricity is consumed. To move electricity from where it is produced to where it is used, electricity is sent over transmission lines; together, these lines form a network, or grid. To transport energy over long distances with reduced power losses, suppliers increase voltages—the “force” that makes electricity flow through a conductor—and utilize high-voltage transmission lines, operating from 230 up to 765 kilovolts (kV) in North America. According to the Quadrennial Energy Review, as of January 2017, there were approximately 240,000 miles of high-voltage transmission circuit lines in the contiguous United States. During a solar storm, high-voltage transmission lines can act as “antennae” that allow GMD to enter the electric system. Transformers. Transformers are critical to the efficient and effective delivery of electricity to customers and, under certain circumstances, can be vulnerable to the effects of GMD and HEMP. Transformers facilitate the efficient transfer of electricity over long distances through the transmission system by converting electricity to different voltages along the delivery system—either up or down, depending on the design and function of the transformer (see sidebar). Figure 2 depicts a large power transformer. paired with equipment—for example, a protective relay—that is designed to take them out of service temporarily when the effects of an electromagnetic event reach the grid. If transformers were temporarily taken out of service for preventative purposes, it could lead to an interruption of electricity service to consumers. However, if transformers—especially those more vulnerable due to age, condition, or design—are not taken out of service during an electromagnetic event they are at risk of being permanently damaged when additional electrical current flows into them, causing excessive localized heating and damage to internal components. (See fig. 3 for an example of transformer windings that were damaged from localized heating associated with a GMD event.) Transformers that become permanently damaged during an electromagnetic event can also contribute to interruptions in service. According to DOE, replacing a damaged transformer can be challenging because they are custom-designed and interchangeability and availability of spares is limited. If a usable spare transformer is not immediately available, obtaining a replacement transformer is often a long and costly process, usually involving long delivery lead times due to their size and weight, limited inventory, a complex procurement and manufacturing process, and other factors. According to DOE, in 2014 the average lead time to obtain a large power transformer was between 5 and 16 months, but could take more than 20 months in the event of supply disruptions or delays in procuring raw materials or key parts; larger, more sophisticated models are generally manufactured abroad. According to a transformer manufacturer, depending on the function of the transformer, the voltage rating, and the model, in 2017 the approximate price of a large power transformer, weighing from 170 to 410 tons, ranged from approximately $2 to $7.5 million in the United States. Distribution system. The final stage in the electric power system is the distribution system, which carries electricity out of the transmission system to industrial, commercial, residential, and other consumers. The distribution system includes equipment that can be damaged during electromagnetic events, but the extent of the risk is limited because distribution lines are generally too short and of too low voltage to pose a risk to distribution equipment. System operations: Operation of the electricity system is managed by entities such as a local utility, which this report collectively refers to as system operators. Because electric energy is not typically stored in large quantities, system operators must constantly balance the generation and consumption of electricity to maintain reliability. To do this, system operators utilize a system of sensors and controls to monitor power consumption and generation from a centralized location. Operators use computerized systems to send signals to power plants and other grid components to adjust their output to match changes in consumption. Electromagnetic events can interrupt or damage some of the equipment system operators use, which can cause a disturbance in control systems (for example, such events can cause relays to unintentionally operate, which can disable system protection equipment). Because the electric power system increasingly operates at or near reliability limits during peak demand periods, a relatively modest disturbance to the system can potentially pose a risk to system reliability. In the United States, the electrical infrastructure is primarily operated by private industry, which owns approximately 85 percent of the nation’s critical electrical infrastructure. In contrast, Canada’s electrical infrastructure is primarily organized along provincial lines with large, government-owned, integrated public utilities playing a leading role in the generation, transmission, and distribution of electricity. Based on our review of relevant studies and interviews with cognizant government and industry officials, there are differing opinions on the potential impact electromagnetic events could have on the electric grid and the risk of long-term, widespread damage. However, they generally agree that more study on the effects of electromagnetic events is needed. The following section describes (1) the nature and potential impact of GMD, U.S. efforts to monitor it, and the frequency of past occurrences; and (2) the nature and potential impact of HEMP events. Naturally occurring solar weather events can create electromagnetic impacts—or GMD—of sufficient intensity that can adversely affect the electric power system. Solar weather events include, for example, large coronal mass ejections (CME), which are energetic eruptions in the sun’s atmosphere that can cause the release of a large mass of charged particles from the sun into space. When a large CME travels from the Sun to the Earth it can interact with and create disturbances in the Earth’s geomagnetic field, referred to as a geomagnetic storm; the resulting impact on Earth is commonly referred to as a geomagnetic disturbance, or GMD. Figure 4 illustrates how solar weather can create a GMD. Strong GMDs can create large geomagnetically induced current (GIC) on the grid. The degree to which GMD and accompanying GIC affect the electric power system depends on several factors, including the magnitude of the GMD, design and geomagnetic latitude of the power system, and geology of the local area, among other things. According to NERC, the most likely consequence of a strong GMD and the accompanying GIC is the loss of voltage stability, although GMD can also damage components of the system, including high-voltage transformers. In the United States, the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service manages the Space Weather Prediction Center (SWPC), which is responsible for monitoring and providing services on space weather, including geomagnetic storms. SWPC uses a variety of ground and space-based sensors, as well as imaging systems, to monitor conditions on the Sun and to observe and forecast geomagnetic activity around the world. SWPC uses this information to issue Watches, Warnings, and Alerts for geomagnetic storms through e-mail and website postings to those who are impacted by space weather, such as owners and operators of the electric grid, spacecraft operations, users of radio signals, and others. In addition, SWPC provides immediate telephone notification and confirmation of imminent and ongoing geomagnetic storms to all NERC reliability coordinators through a NERC hotline. To communicate the magnitude of geomagnetic storms (disturbances in Earth’s magnetic field) and to determine whether geomagnetic alerts and warnings should be issued, SWPC relies on a real-time estimate of the Planetary K-index (Kp-index), which ranges from Kp = 0, or quiet, to Kp = 9, or extreme storm intensity. (See appendix II for more information on SWPC’s notification system as well as their estimates of overall impact of geomagnetic storms to the electric power system, by storm level.) Figure 5 shows the range of planetary geomagnetic activity, by solar cycle and Kp level, from 1933 through 2017. As shown in this figure, recent activity—between 2007 and 2017, approximately equivalent to the average length of a solar cycle—exhibited the fewest occurrences of GMD events (minor, moderate, strong, severe, and extreme) of any solar cycle in nearly a century. -index) data show the maximum fluctuations in the magnetic field observed from a network of selected magnetometers—instruments that measure relative change of a magnetic field at a particular location—relative to a quiet day. According to the 2008 EMP Commission, a nuclear EMP is the burst of electromagnetic radiation that results from the detonation of a nuclear device, which can disrupt or destroy electronic equipment. The threat primarily focused on by the 2004 and 2008 EMP Commissions, and specifically addressed in this report, is the high-altitude EMP (HEMP). A HEMP event is caused by the detonation of a nuclear device above the atmosphere, from about 40 to 400 kilometers (approximately 25 to 250 miles) above the Earth’s surface. A HEMP attack does not cause direct physical impacts at the Earth’s surface, such as injury or damage directly from heat, blast, or ionizing radiation, but instead creates an intense electromagnetic pulse. The components of HEMP—commonly identified as E1, E2, and E3—can disrupt or damage critical electrical infrastructure, such as computers, electronics, and transformers. EMP can also be produced using nonnuclear weapons, but these generally have a short range and are not a focus of this report. Responsibility for regulating electricity is divided between states and the federal government. Most electricity consumers are served by retail markets that are regulated by the states, generally through state public utility commissions or equivalent organizations. As the primary regulator of retail markets, state commissions approve many aspects of utility operations, such as the siting and construction of new power plants, as well as approving the prices consumers pay and how those prices are set. Prior to being sold to these retail consumers, such as households and businesses, electricity is bought, sold, and traded in wholesale electricity markets by companies that own power plants, as well as utilities and other companies. Wholesale interstate electricity markets are regulated by FERC. Historically, FERC-approved wholesale electricity rates based on utilities’ costs of production plus a rate-of-return that it determined to be reasonable. Beginning in the late 1990s, FERC took a series of significant steps to restructure the wholesale electricity markets to increase the role of competition—market forces of supply and demand— in setting wholesale electricity prices, a process referred to as electricity restructuring. Subsequently, FERC has provided authority for many entities—for example, independent owners of power plants—to sell electricity in wholesale markets at prices determined by supply and demand. These entities can now compete with existing utilities and one another to sell electricity in wholesale markets, but have no assurance that their costs will be recovered. While electricity restructuring has introduced a measure of market-based pricing to the generation of electricity, transmission (and distribution, regulated by states) are still subject to regulation on a cost-recovery basis. FERC has jurisdiction over transmission rates on the federal level, and state regulators have jurisdiction over the charges that utilities incorporate in customers’ rates in order to recover their transmission costs. As part of the restructuring process, FERC also encouraged the voluntary creation of new entities called Regional Transmission Organizations (RTO) and Independent System Operators (ISO) to manage regional networks of electric transmission lines as grid operators—functions that, in these areas, had traditionally been carried out by local utilities. These RTOs, in many cases, established and manage wholesale electricity markets for electricity buyers and sellers to participate in. As grid operators, RTOs are also responsible for managing transmission in their regions, which includes establishing and implementing rules and pricing related to transmission, among other things. As we reported in 2003, 24 states also introduced retail competition to electricity markets they regulate and allow former utilities and new companies to compete to serve customers; since then, the states where retail competition is occurring have changed. In states with retail competition, in general, electricity rates for generators other than the original utility are not structured to guarantee recovery of generation-related costs. In addition to its role in regulating aspects of the electricity market, FERC is also responsible for reviewing and approving standards to ensure the reliability of the bulk power system. FERC designated NERC to develop and enforce these reliability standards, subject to FERC review and approval. These standards outline general requirements for planning and operating the bulk power system to ensure reliability. (See appendix III for information on NERC reliability standards requiring electricity suppliers to address the potential impact of GMD on the reliable operation of the U.S. electric grid.) NERC and its Regional Entities, along with FERC, can all independently enforce reliability standards. Within the boundary of each regional entity, there are one or more NERC-certified reliability coordinators. Reliability coordinators are charged with the task of continuously assessing the reliability of the transmission system. The coordinator has the authority to direct stakeholders—transmission operators, generators, and others involved with the electric grid’s operations—to take action to preserve the reliability and integrity of the bulk power system. U.S. and Canadian government and industry organizations have studied and publicly reported on potential GMD effects on the electric grid. These studies have covered the general threats to the nation’s electric grid from GMD but do not cover the unique aspects of individual suppliers’ generation and transmission networks that could potentially make them more or less vulnerable to GMD events. In addition, these studies typically identified areas in which more research is needed regarding the GMD threat and potential mitigation measures that would inform suppliers’ own assessments of the potential impact of GMD events on their unique networks. These select studies we identified included those performed by NERC, DOE, EPRI, and other private industry groups and generally examined the areas of vulnerability for the grid with respect to GMD events, potential impact on the grid from these events, possible mitigation measures, and areas needing further research. While noting the need for further research, some of these studies vary with regard to their assessment of the likelihood of long-term, widespread damage to the grid from these events. The following is a summary of some of these selected studies performed since 2010 and grouped by the entities responsible for performing them: NERC. In June 2010, NERC issued a report, based on a joint effort with DOE, which included a plan to form a task force of government and industry efforts to examine GMD. This resulted in the formation of the NERC GMD Task Force consisting of government and industry officials to examine the GMD threat to the nation’s power grid. The task force’s work in evaluating the potential impact of GMD events resulted in NERC’s subsequent February 2012 report which outlined its plans for working with industry on new reliability standards for protecting the grid against GMD events. This report concluded, among other things, that the failure of a large number of transformers during a severe GMD event was unlikely, although certain older transformers, along with generator step-up transformers, could be particularly susceptible. As a result of this work, and as directed by FERC, NERC developed the EOP-010-1 and TPL-007-1 GMD reliability standards. Also, as a result of this work, NERC issued a GMD Planning Guide for electricity suppliers, which assists the suppliers in carrying out studies of their individual vulnerabilities to a GMD event. DOE/National Labs. Since 2010, DOE has been engaged in a number of efforts regarding GMD. For example, in 2011, DOE enlisted the Pacific Northwest National Laboratory (PNNL) to study the potential effect of GMD on long, high-voltage transmission lines and associated mitigation measures that could potentially be employed. Also, in April 2014, DOE reported on the results of its study of the vulnerabilities of large power transformers to GMD and other threats and the challenges facing the replacement of these transformers in the wake of such events. EPRI. In conducting research for its private industry membership, the Electric Power Research Institute engaged in a number of studies from October 2010 to March 2014. These efforts began with an effort to examine potential impacts from GMD through an assessment of various risk factors. EPRI’s later efforts involved the development of approaches for modeling the impacts from GMD on the grid to allow suppliers to better protect their networks from these events. Other private industry. Private entities conducted studies in January 2010 and November 2011 for Oak Ridge National Laboratory and DHS, respectively, that examined prior GMD events and assessed the potential future impact of these events on the grid along with areas of vulnerability and potential mitigation measures. Other private studies included those examining which regions of North America are most vulnerable to GMD events in addition to the potential impact on the insurance industry and society in general from these events. See appendix IV for additional details on these and other select studies performed by government and industry regarding protection of the grid from GMD events. These past research efforts have generally identified the degree to which the electric power system is affected by a GMD event. The level of impact from these events can depend on various factors including, among other things, magnitude of the event, design and geomagnetic latitude of the power system, and geology of the local area. Further, these studies identified that GMD can have a broad range of impacts when it is introduced to a power system, ranging from minor events such as radio interference and control malfunctions to wide-scale disruptions. NERC has identified two predominant risks to the system: (1) potential voltage instability in the transmission system caused by insufficient reactive power support and (2) possible damage to system components. The first risk and, according to NERC, the most likely consequence of a strong GMD event and accompanying GIC, is the insufficient reactive power support, which can lead to voltage instability and power system collapse. Reactive power support is necessary to stabilize the transfer of electricity through the electric power system, from generation to consumption. With regard to the second risk, several components of the electric system are susceptible to damage from GMD and GIC, but government and industry officials agree that the vulnerable components with the greatest potential consequence in the event of loss are transformers, which typically exist at substations throughout suppliers’ transmission networks. High-voltage transmission lines act as “antennae,” allowing GIC to enter the electric power system, disrupting normal operations and, in some cases, damaging equipment. Transformers, in turn, run the risk of overheating during a GMD event. According to NERC, restoration times for these two risk scenarios are significantly different. Restoration time from voltage collapse—i.e., system blackout—would be a matter of hours to days, while the replacement of transformers, as previously discussed, could take months or potentially years. Therefore, the failure of large numbers of transformers, while less likely, would have considerable impacts on portions of the electric power system. While general information on the potential impact of GMD events on the electric grid is available from the aforementioned government and industry reports, individual suppliers must assess the potential impact on their own, unique networks. For example, of the 13 selected suppliers we spoke with, 11 reported performing analyses to evaluate the potential impact of GMD on their specific generation systems or transmission networks. The 11 suppliers that had performed these analyses did so in advance of all suppliers being required to analyze the vulnerabilities of their networks as part of their compliance with NERC’s second-stage GMD reliability standard TPL-007-1. The nature of the analyses the 11 suppliers engaged in required the use of modeling software to determine the specific vulnerabilities of their networks which further allowed them to design their own mitigation measures, if warranted, to address any vulnerabilities identified and prevent equipment damage or power outages. Suppliers we contacted noted that potential GMD mitigation measures included installation of specific equipment to assist with network stability and voltage regulation. As noted previously, past research efforts have indicated that GMD events can have a variety of impacts ranging from minor malfunctions to wide-scale disruptions. For example, 3 of the 11 suppliers we contacted that had performed an analysis of their networks’ potential vulnerabilities had also reported prior impacts on their networks from a GMD event. Of these three suppliers, two (including Hydro-Quebec) reported major power interruption or equipment damage from the event. The remaining supplier reported a brief power outage on one transmission line during the same 1989 GMD event that caused a major power outage for Hydro- Quebec; however, this power outage did not result in any significant loss of electricity to the supplier’s customers. Outside of the 1989 event, this same supplier reported minor power fluctuations and voltage drops from smaller GMD events. Most suppliers we contacted that had assessed their networks’ vulnerabilities to GMD expressed confidence in their ability to avoid major damage or power interruptions from future GMD events. Specifically, 6 of the 11 selected suppliers that had performed analyses of their networks’ vulnerabilities to GMD reported that, going forward, they expected that any effects from a future GMD event on their networks would likely be minimal (i.e., no significant damage or power interruption). Six suppliers also thought that procedures and technology currently in place afforded better protection from these events than in the past. For example, one northern U.S. supplier we contacted had, after acquiring new GMD analysis software, studied its system and concluded that it could easily withstand the GMD “benchmark event” established by NERC in its TPL- 007-1 reliability standard and that its current technology and procedures were adequate to deal with the threat. Also, another supplier studied its system and is using the results to inform future decisions on transformer purchases to obtain technology that is more resistant to GMD. According to U.S. government and industry officials we spoke with, completed research and available information on the vulnerability of the grid to HEMP, along with its potential effects, is less extensive and lags behind industry understanding of GMD. These officials noted that the understanding of HEMP and how it can affect the electricity system is general in nature and not specific to the commercial electric grid. Specifically, the Department of Defense has developed information regarding the potential effects of HEMP on military assets and facilities. According to DOE, the most detailed HEMP testing has been performed on military communication and weapons systems, not on the commercial electric grid. In a number of studies since 2010, both government and private industry have examined the HEMP threat to the grid while also noting the need for further research to fully understand the specific threats to components of the grid that would allow suppliers to protect against these events. While noting the need for further research, some of these studies vary with regard to their assessment of the likelihood of long-term, widespread damage to the grid from HEMP. See appendix IV for additional details on government and industry studies on the threat to the grid from EMP events including HEMP. The government and private industry studies generally note the threat to the grid presented by the E1, E2, and E3 pulse components of HEMP as follows: E1. The E1 pulse is capable of destroying microelectronics (such as computers), communication and control systems, and other electronic equipment that can disrupt the grid and other critical sectors. According to DOE, E1 can also generate very large and damaging voltage surges in power lines. Figure 6 depicts the potential impact from an E1 pulse, and shows the higher the altitude the greater the potential radius of the impact from an E1 pulse. E2. The E2 pulse, similar to lightning, has an ability to impair or destroy control features that are not protected from lightning. However, the grid typically has protections in place to address the lightning threat to major components. E3. The E3 pulse is similar to GMD and also creates similar disruptive currents in transmission lines which can cause grid instability and heating that damages transformers. Few electricity suppliers we contacted reported taking steps to examine how HEMP could impact their systems. Specifically, 3 of 11 selected suppliers who responded to our inquiry on this topic reported performing a study of the potential impact of HEMP events on their network infrastructure. Two of these three suppliers reported studying the potential impact of HEMP events on their network in conjunction with these suppliers’ design of hardened control centers expected to be resistant to HEMP and other hazards. One of the two suppliers that designed control centers resistant to HEMP did so due to a concern over being able to maintain power to certain critical customers for which the loss of power would have national security implications. The other supplier that had designed an HEMP-resistant control center did so as part of an “all hazards” approach to protecting its transmission infrastructure. The third supplier that had studied the potential impact of HEMP on its system did so as part of a combined study, required by its state legislature, on the threats posed by both GMD and HEMP. Specifically, this supplier examined the potential impact of the HEMP E3 pulse on its system which is similar to GMD, and, therefore, is expected to involve similar mitigation measures. The supplier stated that the lack of available modeling and analysis tools prevents them from fully understanding the potential impact of all components of HEMP— particularly the E1 and E2 pulses. Four of the 8 suppliers we contacted who stated they had not studied the potential impact of HEMP on their networks indicated a desire to see EPRI complete its ongoing EMP research before engaging in studies of their own networks. Further, all eight suppliers who stated they had not performed any studies of the potential impact of HEMP on their networks also noted a lack of key information on the nature and risk of the HEMP threat that would allow them to complete studies of their networks and develop corresponding mitigation measures. Six of the suppliers cited the classified nature of much of the available information maintained by the federal government on the EMP threat—particularly HEMP—as a contributing factor to the industry’s lack of needed information on the threat. In addition, according to NERC officials, while they have developed reliability standards directing suppliers to study the vulnerabilities of their networks to GMD and establish procedures for dealing with those events, it has yet to produce similar standards for EMP or HEMP due to the lack of information available to industry on the EMP threat and how it may impact the grid. According to DOE, more research is needed to fully investigate and evaluate how an electric utility could protect itself from, or mitigate the effects of, HEMP on its systems. DOE also noted that government and industry have ongoing research efforts to better understand these potential effects and develop possible mitigation measures. For example, DOE has three ongoing research efforts related to HEMP. First, DOE is collaborating with DHS to advance the understanding of HEMP effects on the grid through research at the Los Alamos National Laboratory. Second, DOE has funded efforts underway at the Idaho National Laboratory focused on developing potential HEMP strategies, protections, and mitigations for the electric grid—including hardening of infrastructure, blocking of currents, developing a strategy for stocking and prepositioning of spare parts, as well as developing operational and emergency planning tools. Finally, DOE has enlisted the Oak Ridge National Laboratory in analyzing the vulnerability of the grid to a HEMP event, along with the potential damage from such an event, and how it would impact on the reliability and delivery of electric power. The analysis will examine resilience options such as hardening some facilities, stockpiling some parts, and contingency planning. In addition to these research projects, DOE officials told us both Los Alamos National Laboratory and Lawrence Livermore National Laboratory are working to produce unclassified information on the characteristics of the electromagnetic signals associated with HEMP that could be shared with electricity suppliers to better inform their planning efforts. In addition to its ongoing research efforts, DOE and industry have taken steps to enhance understanding of HEMP issues. In particular, DOE and industry issued the Joint Electromagnetic Pulse Resilience Strategy (Joint Strategy) in July 2016 to study HEMP and improve the sharing of information on HEMP that would be useful to industry. According to DOE, central to development of the Joint Strategy was an effort to enhance shared government-industry understanding of the current status of risks from, and preparedness for, HEMP events. DOE added that this effort is important because what is currently known about HEMP effects to the grid has been developed from computer models designed for other purposes (e.g., understanding Department of Defense system effects), or is classified and thus difficult to share with industry. Specifically, the Joint Strategy includes five strategic goals to guide DOE and industry in minimizing HEMP impacts and improving resilience of the grid to these events. These strategic goals are (1) improving and sharing understanding of HEMP: threat, effects, and impacts, (2) identifying priority infrastructure, (3) testing and promoting mitigation and protection approaches, (4) enhancing response and recovery capabilities relating to a HEMP attack, and (5) sharing best practices across government and industry both nationally and internationally. Following development of the Joint Strategy, both DOE and EPRI (working with DOE, on industry’s behalf) committed to developing separate, but coordinated, action plans that would implement the five strategic goals for studying HEMP and providing needed information to industry. DOE’s Electromagnetic Pulse Resilience Action Plan (DOE Action Plan), issued in January 2017, delineates the steps that DOE will take to address HEMP risks and emphasizes the federal government’s ability to clarify and communicate HEMP threats and impacts, reduce HEMP vulnerabilities, and facilitate the energy sector’s response and recovery after HEMP events. DOE stated that its Action Plan also considers the over 90 recommendations made in the 2008 EMP Commission report and at least partially addresses 10 of the 15 recommendations directly related to the electric power system made by the EMP Commission in their report. See appendix V for additional detail on the DOE Action Plan, including its relationship to the EMP Commission’s work. As noted in the Joint Strategy, EPRI’s industry action plan—initiated in April 2016—is a complement to the DOE Action Plan and includes research to be performed to (1) detail the potential impacts of HEMP on the bulk power system, (2) examine potential industry actions to mitigate HEMP risks, and (3) inform industry investment decisions regarding those mitigation options. According to DOE and EPRI, the research that is outlined in the industry action plan is ongoing and scheduled for completion over a 3-year period with the first two reports being issued in September 2016 and February 2017. EPRI officials added that this research is intended to provide the electric industry with what it needs— specifically, an unclassified, science-based approach to HEMP with regard to (1) threat characterization, (2) testing results, (3) modeling and simulation, and (4) recommended strategies for mitigating the impacts of HEMP including prudent and practical hardening and recovery options. To meet these goals, EPRI, together with participating suppliers, have undertaken this 3-year long research effort and expect to complete this work in 2019. This research effort is comprised of the following tasks: HEMP threat characterization. For the first part of this task, EPRI is identifying the state of knowledge of unclassified HEMP research for all three components of the HEMP environment (i.e., the E1, E2 and E3 pulse components of HEMP). This portion of EPRI’s research was achieved by the issuance of the aforementioned September 2016 report. The remaining two components of this task are ongoing and include (1) identifying characteristics of the electromagnetic signals associated with HEMP that can be used to assess the potential impacts on bulk power system components, and (2) investigating the physics of HEMP’s transmission to, and impact on, power system infrastructure. Electric infrastructure EMP vulnerability. This task involves identifying the vulnerability of transmission systems and support assets (e.g., protection and controls systems, communications, transformers, etc.) exposed to the HEMP threat by performing laboratory tests. EPRI will test various infrastructure components at two EMP test labs by subjecting them to E1 pulses. According to EPRI, initial results for this task are possible by the end of 2017. Electric infrastructure impacts. For this task, EPRI is assessing the potential impacts of a HEMP attack on the bulk power system by combining the system modeling-related efforts in the first task above with the equipment testing results of the second task above. Under this task, EPRI is also developing assessment techniques, models, and tools for assessing the impacts of a HEMP attack. The aforementioned February 2017 report assessing the potential effects of the E3 pulse component of HEMP on U.S. bulk-power transformers represents a portion of the work under this task. In this report, EPRI found that a small number of geographically-dispersed transformers (14 out of the tens of thousands included in EPRI’s analysis) were potentially at risk for thermal damage from the E3 pulse. EPRI produced a companion report assessing the potential impacts of the E3 pulse on the stability of the bulk-power system (i.e., the potential for voltage collapse) in December 2017 to be followed by the results of the first E1 pulse assessment at a later date. Mitigation, hardening, and recovery. Under this task, EPRI is assessing various mitigation and hardening approaches that can be employed to reduce the impacts of HEMP on bulk-power system reliability—including examinations of potential unintended consequences of these approaches and cost effectiveness. As an initial step, EPRI is developing interim guidance on hardening substations based on military and international standards that is scheduled to be completed by the third quarter of 2017. Risk-based decision support. For this task, EPRI is developing methodologies and tools to support risk-informed decisions regarding the implementation of HEMP hardening and mitigation measures. Trial implementation. Once hardening measures have been identified, EPRI’s supporting member utilities will have the opportunity to evaluate implementation of these measures on aspects of their networks. This task will develop a collection of leading industry practices with regards to HEMP mitigation and hardening. EPRI is to communicate the effectiveness of these measures including lessons learned. Project member and stakeholder communication. Under this task, EPRI will communicate the results of its research project to its supporting members and stakeholders in order to share new learning in a timely manner. Overall, 10 of the 13 selected suppliers we contacted reported making technological improvements to provide a range of system reliability benefits, some of which can also provide collateral benefits for protecting against GMD and HEMP events. These 10 suppliers purchased and maintained their own transmission-related equipment, while the remaining three suppliers were reliability coordinators who did not purchase or own their equipment. Various examples of these technological improvements for improved system reliability—that had the added benefit of protecting against GMD or HEMP events—were reported by the suppliers we contacted and include the following: Replacement of older transformers for various reasons, including susceptibility to GMD. Overall, 7 of the 13 suppliers we contacted noted that transformer replacement occurs for a variety of reasons, including increased efficiency. However, seven of the ten suppliers that purchased their own equipment added that, when they acquire new transformers, they generally selected models that have the added benefit of being more resilient to the effects of GIC during a GMD event. These seven suppliers reported that their specifications for the acquisition of new transformers specifically included qualities to make them more resilient to GIC. The suppliers also told us they are adhering to these specifications whenever they replace an older, less resilient, transformer as part of ongoing system upgrades. One supplier reported that they have undertaken a broad review of the transformers used in their system and taken steps to systematically reduce the number of unique units as part of a broader effort to make their system more consistent. They told us they have worked, to the extent possible, to standardize their transformer designs since implementing a new transformer purchasing program in 2008 which included upgrades such as more stringent specifications for protection against GMD. This supplier told us these efforts would also make it easier and less costly to maintain spares and to replace individual transformers that could be damaged from GMD or HEMP events. Participation in spare transformer programs to facilitate timely recovery of suppliers’ networks after transformer failures, including those caused by GMD and HEMP events. Of the 10 selected suppliers we contacted who purchased their own equipment, 6 reported having participated in at least one spare transformer program. For example, five of these suppliers participated in the Edison Electric Institute’s (EEI) Spare Transformer Equipment Program (STEP) which was intended as a coordinated approach to developing a shared inventory of spare transformers and streamlining the process of sharing transformers with affected companies. This program requires participating utilities to maintain a specific number of transformers up to 500 kV to be made available to other utilities in case of a critical substation failure. According to program documentation, any investor-owned, government-owned, or rural electric company in the U.S. or Canada may participate in the EEI STEP. The sixth supplier did not participate in an outside spare transformer program such as EEI’s, but, instead, maintained its own, in-house program. Investment in series capacitors to enhance network efficiency. Eight of the 10 selected suppliers we contacted, who purchased their own equipment, stated that they had added series capacitors to their networks. Seven of these eight suppliers told us they had acquired series capacitors to enhance the efficiency of their networks and help with network stability and voltage regulation. These suppliers stated that these devices offer the added benefit of mitigating the impacts of GMD and HEMP events because series capacitors block GIC, therefore preventing GIC from affecting certain parts of the transmission system. For example, one Canadian supplier, whose customers were almost totally dependent on electricity for heat during the winter, reported installing these technologies to improve overall network reliability but recognized the benefits of the technology for helping alleviate the threat of GMD events—which, according to DOE, is particularly acute at its far northern latitude. Installation of digital relays with enhanced functionality. Four of the 10 suppliers we contacted who acquired their own equipment had replaced, or were in the process of replacing, older electro- mechanical protective relays used in their grid control systems with newer digital relays. Unlike electro-mechanical relays—which can fail to operate properly under certain conditions resulting from a GMD event—digital relays can be programmed to properly respond to these conditions. FERC officials confirmed that digital relays may offer some degree of protection during GMD events, but cautioned that they are likely more susceptible than the older electro-mechanical relays to the E1 pulse of HEMP events. Construction of hardened control centers to protect against a variety of threats, including HEMP. Two of the 10 suppliers we contacted that purchased their own equipment had built, or were planning to build, control centers specifically designed to be resilient to the effects of EMP and other threats. For example, one electricity supplier’s customers included critical national security agencies and others in the Washington, D.C. area—resulting in the supplier’s desire to protect against the HEMP threat. The second supplier was in the process of designing its own hardened control center to guard against both EMP and other threats posed by extreme weather events occasionally occurring in its area of the country. In addition to technological improvements to provide a range of system reliability benefits, some suppliers are considering investments in technology specifically focused on blocking harmful GIC produced during GMD events. This GMD mitigation technology is referred to as a “GIC blocking device” and is still being tested. Since this technology is for the sole purpose of blocking GIC produced during GMD events, its cost may be directly attributed to GMD mitigation. One of our 13 selected electricity suppliers had installed such a prototype device on its high- voltage transmission system as part of an ongoing field trial to assess its performance and overall system impact in order to determine the effectiveness of the device under different operating conditions. Four selected suppliers expressed concern that GIC blocking devices can have unintended consequences on the stability or reliability of their transmission networks which could limit their overall benefits. Two of these suppliers stated that, before considering the installation of these blocking devices, they would perform analysis to determine their effectiveness in suppressing GIC at the system level and the impact on the functioning of their transmission system. NERC’s initial reliability standard EOP-010-1 requires certain suppliers to have GMD operating procedures to mitigate the potential effects of GMD events on the reliable operation of the transmission networks for which they are responsible. As of May 2017, the 13 suppliers we contacted told us they were all subject to the requirements of the EOP-010-1 standard and had GMD operating procedures in place to comply with the standard. Moreover, three of the 13 suppliers functioned as reliability coordinators and told us that all of the suppliers they oversaw in their territory also had operating procedures in place in accordance with EOP- 010-1. Officials with the reliability coordinators stated they reviewed their suppliers’ operating procedures to ensure they did not conflict with the procedures of other electricity suppliers in the coordinators’ geographic areas of responsibility. In addition, NERC’s Compliance Registry indicates that 188 electricity suppliers in the United States and Canada are potentially subject to the EOP-010-1 standard. NERC officials stated that, based on audit reports reviewed from its Regional Entities that included EOP-010-1, suppliers with transformers fitting the criteria specified in EOP-010-1 have developed the operating procedures required by the standard. NERC officials also stated that the EOP-010-1 standard requires electricity suppliers’ operating plans and procedures to mitigate the effects of GMD events on the reliable operation of the grid—as well as for the reliability coordinators to coordinate these plans and procedures within their area of responsibility. NERC officials stated that, as part of their compliance review for the standard, the NERC regions will assess the reasonableness of these plans and procedures. According to NERC, the standard provides the suppliers the flexibility to develop the procedures they think they need for their respective networks. NERC officials added that the quality of the measures put in place to address vulnerabilities to GMD would be further addressed under NERC’s second-stage GMD standard, TPL-007-1. NERC’s initial GMD-related reliability standard, EOP-010-1, went into effect in April 2015. NERC’s next reliability standard, TPL-007-1, includes requirements that will be phased in over a 5-year period from July 2017 to January 2022. The TPL-007-1 standard lists a total of seven requirements of which all but one are directed at planning coordinators and transmission planners whose planning area includes certain high- voltage transformers. In general, these requirements detail further steps suppliers must take to periodically model their networks and assess the vulnerable points of their networks to GMD. Depending on the vulnerabilities suppliers identify in conducting future assessments in accordance with TPL-007-1, suppliers will be required to develop corrective action plans, starting in January 2022, to ensure their generation or transmission networks meet certain performance requirements during a GMD event (e.g., no cascading blackouts). According to NERC, corrective actions in each plan may include (1) operational procedures, (2) enhanced training, (3) installation of devices (e.g., GIC blocking devices), (4) modification of devices (e.g., modifying equipment for greater GIC resilience), (5) removing vulnerable devices (e.g., old transformers), and (6) spare transformer programs. See appendix III for additional detail on TPL-007-1’s 7 requirements for certain electricity suppliers along with implementation dates for each. NERC has an established process to verify electricity suppliers’ compliance with reliability standards, including EOP-010-1 and TPL-007- 1. Annually, NERC identifies and prioritizes risks based on the potential impact to reliability across its eight North American regions and the likelihood that such an impact might be realized. This process results in an annual compilation of risk elements for the coming year that are reflected in NERC’s implementation plan for compliance monitoring of reliability standards throughout its eight regions. In this implementation plan, NERC obtains input from the regions on risks inherent in their geographic areas of responsibility, and NERC links these areas of risk with specific reliability standards. For example, since becoming effective in 2015, NERC officials stated that the EOP-010-1 standard has been an annual area of focus in the implementation plan under the “extreme physical events” risk area. NERC’s overarching implementation plan provides a template for the regions to follow in developing their own regional implementation plans. NERC’s eight Regional Entities build on NERC’s guidance on risks facing all regions by assessing risks to the reliable operation of the bulk power system in their specific geographic areas of responsibility and identifying the reliability standards associated with those local areas of risk that they will focus on in their compliance monitoring efforts for the upcoming year. Further, according to NERC officials, each NERC Regional Entity performs individual risk assessments for each of the electricity suppliers in their areas of responsibility which further inform their approach to compliance monitoring for each of these suppliers—including which tools to use when assessing compliance. According to NERC, these individual risk assessments, along with the overarching and region- specific risks, inform the regions compliance monitoring oversight plan for each supplier. At the end of this planning process, NERC approves each region’s implementation and audit plans and submits the audit plans to FERC. As of August 2017, NERC’s regions had conducted 63 compliance audits of suppliers that included the EOP-010-1 reliability standard out of the total of 188 electricity suppliers potentially subject to the standard in the United States and Canada. According to NERC officials, the EOP-010-1 reliability standard went into effect in April 2015, and, as noted previously, NERC Regional Entities conduct compliance audits of individual suppliers—including those that must comply with EOP-010-1—at least once every 3 years. Therefore, due to this reason and the fact that these audits are just one of several options for NERC to consider in compliance monitoring, not every supplier subject to EOP-010-1 has been the subject of a compliance audit that included that standard in its scope as of the date of this report. NERC regions conducted these compliance audits on both reliability coordinators and transmission operators registered in the U.S. that were subject to EOP-010-1. As of September 2017, NERC had reported a total of two instances of non-compliance with the EOP-010-1 standard since its inception in April 2015. Electricity suppliers self-reported these two instances of non-compliance to NERC, and they were not the result of a compliance audit. NERC concluded that these incidents posed minimal risk to the reliability of the bulk power system. The two suppliers engaged in mitigation activities (e.g., training of personnel and modification of procedures) to address their non- compliance with the standard, which was verified by NERC’s Regional Entities. NERC concluded that no further action was needed in these two cases. Selected electricity suppliers told us the costs they have incurred to date for protecting against GMD and HEMP events have been small relative to their overall system costs. One supplier said that the costs they have incurred are generally associated with projects that provide broader system reliability or other benefits not specific to GMD or HEMP events. Based on interviews with selected suppliers, there are several types of projects that protect against GMD and HEMP events at different levels of costs: Projects providing collateral GMD or HEMP protection at no specific, incremental cost. As noted previously in this report, selected suppliers have installed several types of equipment for the purposes of transmission efficiency or benefits of general stability, and this equipment also provides collateral protection against GMD or HEMP events. This equipment has included series compensation systems installed on transmission lines, replacement of older electro- mechanical protective relays used in the suppliers’ grid control systems with newer digital relays, and acquisition of spare transformers or participation in shared spare transformer programs which improves their ability to quickly restore transmission systems from any cause, including GMD or HEMP events. Total project costs may vary widely depending on the amount and type of equipment suppliers choose to install, but according to suppliers we interviewed and information from transformer manufacturers, costs for this equipment can range from thousands of dollars per digital relay to tens of millions of dollars for a series compensation system. Projects providing supplemental GMD or HEMP protection at minimal added cost. As also noted previously in this report, some suppliers we interviewed said they have added specifications for improved protection against GMD or HEMP events as part of larger equipment procurement or construction projects and that this improved protection typically came at a relatively small increase in total project price. For example, several suppliers told us that transformers and other transmission equipment used to control voltage levels can be made more resistant to GIC by using certain designs or materials, and one supplier said this would increase equipment costs by 2 to 3 percent or less. In addition, the two suppliers we interviewed who have designed new control centers that are to be hardened against a range of hazards—including extreme weather (earthquakes, tornadoes, hurricanes, lightning), physical attacks, and HEMP events—told us that adding HEMP protection to the design of new control centers has increased total project costs from about 5 to approximately 20 percent. Projects built primarily for GMD or HEMP protection. As also noted previously in this report, one supplier has installed a prototype GIC-blocking device, designed specifically to protect against GMD events, as part of a pilot effort to test its operational impacts. The costs of deploying these devices are expected to be better understood after the pilot effort is completed, but based on its initial results, the supplier expects that the total cost for a well-designed GIC-blocking device would be at least $500,000, excluding installation and other costs and one device could be required to protect each transformer. Suppliers we interviewed told us they have also developed plans or procedures to mitigate for GMD. According to suppliers, in general these plans emphasize reducing the (1) level of power provided by individual power plants and (2) amount of power flowing over power lines to levels below their operating limits. For example, the plan for one coordinator—a grid operator—requires that they immediately take action to reduce the transfer of power down to GMD Operating Plan-designated limits; if these limits are approached or exceeded, selected power plants are directed to reduce the levels of power provided and, if necessary, the grid operator modifies the levels of power flowing through the system until designated transfer limits are reached. According to suppliers, lowering these power levels can reduce the temperatures of key equipment such as transformers and provide for greater flexibility to operate the system during an event. In some cases, such plans can require increased use of power plants that are more costly to operate, potentially increasing overall system costs. The costs of emergency operating procedures implemented in response to electromagnetic events are likely to vary considerably on a case-by-case basis, depending on such factors as the level of demand and the generation resources available during the event. In terms of customer costs, U.S. suppliers we interviewed said that the costs they have incurred for GMD or HEMP protection thus far would represent a negligible increase in rates paid by customers. For example, one supplier we interviewed serves about 4.5 million retail customers, and officials from that supplier estimated the cost of hardening a planned control center against HEMP to be at least $10 million. If this cost is fully passed on to customers and paid for in a single year, we calculated that it would amount to a total of about $2 for the average customer’s electric bill for that year. In the future, suppliers could face increased costs for protecting against GMD, depending on the corrective actions needed to address vulnerabilities, which suppliers are to identify in accordance with reliability standard TPL-007-1. The standard does not require suppliers to complete vulnerability assessments and develop corrective action plans until 2022, and suppliers told us it is too early to know what types of corrective actions may be required. However, the costs associated with some types of potential actions could be high. In particular, examples of potential corrective actions provided in the standard, such as installing new equipment or modifying existing equipment for improved GIC resilience, could be costly according to some suppliers we interviewed. For example, high-voltage transformers can cost tens of millions of dollars each. If suppliers identify multiple transformers that are vulnerable to thermal impacts from GIC flows, replacing or modifying them would be costly. Similarly, a supplier may need to install GIC-blocking devices throughout their network to effectively protect against a GMD event because the devices re-direct GIC flows elsewhere in the network. Therefore, a blocking device strategy could be costly if suppliers determine that large numbers of their transformers are vulnerable. Based on our prior review of federal efforts to enhance electric grid resiliency and federal emergency management programs, and interviews with agency and industry representatives, there are no sources of direct federal funding specifically to reimburse suppliers for costs they incur for protecting against GMD or HEMP events. DHS officials told us there are two DHS grant programs that could be used to indirectly support suppliers’ efforts to prepare for GMD or HEMP events. However, DHS directly awards these grants to state, local, or tribal governments, and DHS officials told us that it is rare for these grant funds to be passed through to private companies and they have no record of instances in which electricity suppliers received funding for grid preparedness efforts. At the federal level, in FERC’s September 22, 2016, order approving NERC’s TPL-007-1 reliability standard, FERC stated that cost recovery for prudent costs associated with or incurred to comply with the standard would be available to suppliers for whom FERC approves rates. Two suppliers we interviewed said that because FERC requires suppliers to comply with the standard and has provided specific assurance that prudent costs will be recoverable, they do not expect challenges recovering such costs. According to FERC officials, FERC determines whether suppliers’ investments are prudent on a case-specific basis, in part by considering whether the supplier acted reasonably given industry norms. FERC officials also stated that for most transmission rates, it does not conduct in-depth reviews of the reasonableness and prudence of each cost item unless a stakeholder such as a ratepayer advocacy group, large customer, or state public utility commission challenges the suppliers’ rate filing with FERC. FERC officials told us they were not aware of any cases in which stakeholders challenged GMD-related costs. Some suppliers we interviewed said that the revisions to TPL-007-1 that FERC required in Order 830—particularly, revisions to the benchmark GMD event suppliers must use in their vulnerability assessments—could result in added costs for suppliers. For instance, one supplier expressed concern that they could have to begin work to assess vulnerabilities and protect against the first version of the benchmark event, and that the revised standard would require them to re-do such work using a new benchmark event, at additional cost. In response to such concerns, FERC stated that it could not yet determine what impacts the revisions might have on the actions suppliers would have to take to comply, because NERC had not yet developed or proposed the revisions. However, FERC re-affirmed that cost recovery for prudent costs associated with or incurred to comply with reliability standard TPL-007-1, and future revisions to the standard, will be available to regulated suppliers. Representatives from the state regulators we interviewed said they allow recovery of prudent generation or distribution costs for regulated utilities for improvements needed to meet federally-required reliability standards, such as NERC’s GMD reliability standards. In addition, some of the selected suppliers told us that they use federally-required reliability standards to justify necessary investments when filing a rate case with state regulators. As with FERC, state regulators we interviewed said they determine the prudence and reasonableness of costs on a case-specific basis. To the extent suppliers and regulators determine that HEMP events pose a risk to bulk power system reliability, FERC may allow recovery of prudent costs for protecting against EMP events. However, according to FERC officials, determining prudence for costs associated with new, emerging areas such as HEMP mitigation could be challenging because regulators and suppliers have limited understanding of HEMP risks. In 2004, FERC publicly assured suppliers that it will allow for recovery of prudent costs necessary for ensuring the reliability of the bulk power system. Specifically, FERC issued a policy statement assuring public utilities that FERC will approve applications to recover prudently-incurred costs necessary to ensure bulk power system reliability, including prudent expenditures for compliance with good utility practices—practices engaged in or approved by a significant portion of the electricity industry or that could be expected to accomplish the desired result at a reasonable cost. Two suppliers we interviewed said that they expect FERC would allow them to recover transmission costs they deemed necessary for protecting against HEMP events. FERC officials told us that they are not aware of any cases to date where suppliers have sought recovery of transmission costs associated with HEMP protection through FERC-approved rates, so they do not know what challenges they might encounter in determining whether these costs are prudent. Also, unlike GMD events, suppliers and electricity industry stakeholders told us there are not yet tools for assessing suppliers’ vulnerability to HEMP events, standards for protecting against these events, or tools for assessing the effectiveness of protective remedies. Suppliers and state regulators we met with said more information is needed to understand HEMP risks and mitigation efforts in order to determine to what extent costs would be recoverable. Electricity industry stakeholders and suppliers told us that they are sensitive to the fact that their costs are typically borne by customers, and more complete knowledge of HEMP risks would allow them to invest responsibly in HEMP protection from both a reliability and cost perspective. Similarly, one state regulator we interviewed has not yet received any rate filings from suppliers that include costs associated with HEMP protection. However, one supplier said that their state regulators prioritize reliability, and they expect the regulators would allow recovery of costs for HEMP protection if suppliers determined such protection was needed. As with FERC, state regulators said that when rate filings involve new technologies or practices, there is more uncertainty regarding costs and benefits and it can be more difficult for regulators to determine prudency. For example, one state regulator told us that DHS is doing work to understand risks associated with HEMP events, and what protections such events may necessitate. The regulator said they would like to see the results of this work before suppliers invest in mitigation equipment, so there can be more certainty that the costs will be considered prudent. Independent generators—generators that sell power in wholesale electricity markets and are not part of an integrated utility—do not have a mechanism assuring cost recovery for reliability improvements, including such as GMD and HEMP protection. FERC officials stated that these generators sell electricity at prices determined by supply and demand in markets that FERC has determined are sufficiently competitive or that have adequate procedures in place to mitigate the effect of companies to manipulate prices, such as could be the case for a company with a large market share. As such, according to electricity industry and FERC officials, independent generators do not have the assurances of cost recovery that traditionally-regulated suppliers do. If they invest in protecting their facilities from the potential effects of GMD and HEMP, the prices independent generators obtain for selling electricity so as to be competitive in the wholesale markets may be too low to allow them to fully recover their costs. According to data from DOE’s Energy Information Administration, independent generators represented nearly 47 percent of electric generation facilities and generated about 39 percent of utility- scale electricity in the U.S. in 2015. FERC officials said they recognize that independent generators could face challenges recovering costs for step-up transformers—generator equipment which, if it is vulnerable to GMD, may need to be replaced or modified in accordance with NERC standard TPL-007-1. Independent generators must balance the need to recover costs associated with these transformers with the need to offer prices for their electricity that are competitive in wholesale markets. According to suppliers, until studies are completed to identify how companies will comply with TPL-007-1 it is unclear the extent of the risk to step-up transformers owned by independent generators and the extent of the challenges of paying for steps to mitigate those risks. We provided a draft of this report to DOE, DHS, NOAA, NRC, FERC, and NERC for their review and comment. DOE, DHS, NRC, FERC, and NERC provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretaries of Commerce, Energy, and Homeland Security, the Chairmen of the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission, and the Chief Executive Officer of the North American Electric Reliability Corporation. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Chris Currie at (404) 679-1875 or curriec@gao.gov or Frank Rusco at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. In conducting our work, we interviewed representatives from 13 of the 181 U.S. and Canadian electricity suppliers—entities that own or operate generation or transmission infrastructure—subject to the North American Electric Reliability Corporation’s (NERC) 2014 geomagnetic disturbance (GMD) reliability standard and which conduct planning and generation, transmission, and distribution operations. We selected these 13 electricity suppliers based on input from the U.S. Department of Energy (DOE), NERC, industry associations, and research institutions as to which suppliers had taken steps to prepare for and mitigate impacts from electromagnetic events. We also considered, among other things, the following supplier preparedness and mitigation actions and characteristics: (1) efforts or plans to install mitigation equipment or technology; (2) efforts or plans to develop specific mitigation processes, procedures, or other operational actions; (3) infrastructure, such as length and voltage of transmission lines; (4) high-voltage equipment, including transformers over 230 kilovolts (kV); (5) geomagnetic latitude; and (6) experience with GMD-related service disruptions. We included 3 Canadian electricity suppliers among the 13 suppliers we interviewed due to their (1) experiences with past geomagnetic disturbance (GMD) events, (2) research on the impacts of GMD, and (3) actions taken to prepare for and mitigate GMD events. We conducted site visits to 6 of the 13 suppliers to better understand their experiences with past GMD events and identify actions they have taken to prepare for and mitigate GMD and High-Altitude Electromagnetic Pulse (HEMP) events, among other things. During these visits we met with organization officials; observed operations and facilities, such as control centers hardened to mitigate effects from HEMP events; and viewed equipment potentially vulnerable to GMD, such as high-voltage transformers. While we cannot generalize the information we learned from these selected suppliers to all U.S. and Canadian suppliers, they provided insight on what electricity suppliers may know regarding the potential impacts of electromagnetic events on the electric grid, as well as steps suppliers may be taking to prepare for and mitigate such impacts. The selected U.S. suppliers also identified opportunities available to them for recovering costs for protecting against electromagnetic events. Based on input from DOE, NERC, supplier, and industry officials, and because of these organizations’ specialized knowledge and experience with the electricity industry, we also interviewed representatives from six industry organizations—five industry associations and one industry research organization—two transformer manufacturers, one software modelling company specializing in simulations of high-voltage power system operations, and one designer of a prototype geomagnetically induced current (GIC)-blocking device. To determine the extent to which U.S. and Canadian electricity suppliers have identified information about the effects of GMD and HEMP on the electric grid, we reviewed selected U.S. and Canadian government studies issued—or commissioned by—DHS, DOE, U.S. National Laboratories, Natural Resources Canada, the Federal Energy Regulatory Commission (FERC), and NERC since 2010 regarding, among other things, the vulnerability of transmission and generation infrastructure and equipment to GMD and HEMP events, possible measures to mitigate the effects of GMD and HEMP, and areas requiring further research. We also reviewed relevant studies published since 2010 from the Electric Power Research Institute (EPRI) and private contractors referred to us by government, supplier, and industry representatives. We identified these studies based on feedback from all entities listed above and through references in reports and other documentation. While we did not compile a comprehensive list of all studies of the effects of GMD and HEMP on the U.S. and Canadian electric grid, industry experts indicated that we had identified relevant studies published on this subject since 2010. We also interviewed knowledgeable officials from these U.S. and Canada government agencies, national laboratories, and industry organizations to clarify our understanding of the issues addressed in these studies. We assessed the methodologies used in the relevant reports and determined them to be sufficiently rigorous to provide information about the potential effects of GMD and HEMP events on the electric grid. To better understand the effects of solar weather on the electric grid, how GMD is measured, and mechanisms in place for notifying electricity suppliers of potentially dangerous solar storms, we interviewed representatives from the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service, the U.S. Geological Survey (USGS), and the National Aeronautics and Space Administration (NASA). We also reviewed relevant documentation on processes and procedures. -index) is a near real-time estimate of the official Planetary K-index maintained by the GFZ German Research Centre for Geosciences. events occurring from 1933 through 2016. We also interviewed Department of Homeland Security (DHS) officials regarding the Department’s efforts to address requirements in the National Defense Authorization Act for Fiscal Year 2017. To obtain perspectives on efforts individual electricity suppliers have taken to better understand the effects of GMD and HEMP, we interviewed officials from 13 U.S. and Canadian suppliers regarding the extent to which they had evaluated the impact of electromagnetic events on their specific generation systems or transmission networks and what they had learned from these evaluations. With respect to ongoing efforts to research the effects of HEMP, we reviewed DOE and EPRI’s Joint Electromagnetic Pulse Resilience Strategy and the U.S. Department of Energy Electromagnetic Pulse Resilience Action Plan and interviewed relevant DOE and EPRI officials regarding these plans. Further, we interviewed officials from various national laboratories regarding their ongoing efforts to fully investigate and evaluate how an electric utility could protect itself from, or mitigate the effects of, HEMP on its systems. We also interviewed officials from the Nuclear Regulatory Commission (NRC) regarding efforts to assess the ability of a nuclear power plant to achieve safe shut down following a GMD or EMP event and the extent to which plants are required to implement strategies or guidelines in the event of a prolonged loss of offsite power, similar to what could be caused by a GMD or EMP event. Finally, we reviewed the 2008 Commission to Assess the Threat to the United States from Electromagnetic Pulse Attack (EMP Commission) report with recommendations on preparing for and recovering from a possible EMP attack. In October 2017, we also requested an interview with a representative from the EMP Commission but did not receive a response to our requests. To identify steps selected U.S. and Canadian electricity suppliers have taken to protect against GMD and HEMP events and understand how NERC has monitored these efforts, we reviewed FERC orders and NERC reliability standards that require certain suppliers to take steps to assess and prepare for GMD impacts. We interviewed FERC and NERC officials to discuss these standards and reviewed public comments submitted by stakeholders during the FERC rulemaking process. We also interviewed officials from 13 U.S. and Canadian electricity suppliers to identify steps they had taken to comply with NERC reliability standards as well as any additional actions to prepare for and mitigate potential GMD and HEMP effects, such as replacement of older equipment or investment in spare transformer programs. Additionally, we reviewed relevant federal guidance on preparing for GMD and HEMP events, such as DHS’s Electromagnetic Pulse protection guidelines and NERC’s Geomagnetic Disturbance Planning Guide. To identify the extent to which NERC has monitored electricity suppliers’ steps to comply with NERC reliability standard EOP-010-1, we reviewed NERC monitoring processes, including procedures for developing an annual, nationwide implementation plan for conducting monitoring activities. NERC officials provided the number of compliance audits conducted between April 2015—when NERC, through Regional Entities to which it has delegated enforcement authority, first began reviewing suppliers for compliance with EOP-010-1—and August 2017 that included the EOP-010-1 reliability standard. We contrasted the number of compliance audits with the total number of suppliers potentially subject to NERC’s GMD reliability standard EOP-010-1. We assessed the reliability of the data on the total number of suppliers subject to EOP-010-1 by interviewing agency officials regarding data sources, system controls, and any quality assurance steps performed by officials before the data were provided; we found the data to be sufficiently reliable to provide the number of suppliers subject to EOP-010-1 since it went into effect. We also discussed with cognizant NERC officials the organization’s processes for collecting and reporting comprehensive data on the status of their overall compliance monitoring efforts. To identify what opportunities exist for U.S. electricity suppliers to recover costs for protecting against GMD and HEMP events, we reviewed FERC regulations and orders related to cost recovery, such as suppliers’ costs for spare transmission equipment services. We also interviewed FERC officials and representatives of selected state regulators whose jurisdictions include suppliers we interviewed, regarding procedures available to electricity suppliers to recover costs for actions taken to prepare for and mitigate GMD and HEMP effects. We asked these officials to discuss previous, current, and potential future regulatory actions—orders or rate cases they have overseen—involving recovery of costs for actions taken to protect against GMD and HEMP events. Further, we interviewed cognizant DHS and DOE officials to identify the extent to which financial incentives—such as preparedness grants—are available to U.S. electricity suppliers to offset the costs of preparation and mitigation efforts. As part of our review of actions taken by ten selected U.S. electricity suppliers to prepare for and mitigate the impact of electromagnetic events, we interviewed officials regarding the extent to which they had recovered costs expended on preparedness and mitigation efforts and what, if any, options they were considering to recover such costs in the future. While the information provided by these selected electricity suppliers is not generalizable to the U.S. industry, it illustrates examples of actions selected suppliers have taken to recover costs for GMD and HEMP mitigation and preparedness efforts. In addition, we interviewed representatives from various trade associations to identify challenges suppliers face in recovering costs for mitigation and preparedness efforts. We conducted this performance audit from May 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In the United States, the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service manages the Space Weather Prediction Center (SWPC), which is responsible for monitoring and providing services on space weather, including geomagnetic storms. SWPC uses a variety of ground and space-based sensors, as well as imaging systems, to view and estimate geomagnetic activity around the world, and to issue Watches, Warnings, and Alerts for geomagnetic storms through e-mail and website postings to those who are impacted by space weather. Additionally, in the event of imminent geomagnetic storms, SWPC issues immediate voice notification and confirmation to all North American Electric Reliability Corporation (NERC) reliability coordinators through a special hotline. is a “range index”—a measure of variation that saturates at K= 9—Dst is an unbounded measure of solar storm effects on the Earth’s magnetic field. In this report, we use the K- index, the history of which spans three solar cycles more than the Dst-index. = 9 (extreme)—to determine whether geomagnetic alerts and warnings should be issued. SWPC’s primary notifications include: Watches: Watch forecasts for impending geomagnetic storms— coronal mass ejections (CME)—are issued when the highest predicted Kp-index for a day is between K = 5 or higher and are posted approximately 1 to 2 days before a storm reaches Earth. According to SWPC, Watch forecasts are less reliable in predicting storm intensity and timing than other types of forecasts, but are considered useful for longer-range notification. Watch forecasts are based primarily on space and ground-based solar observations as well as modelling predictions. Warnings: Warnings of geomagnetic storms are issued when estimated K-indices of K = 4 or higher are expected; they are generally issued 20 to 40 minutes in advance and are based on real- time observations of the solar wind conditions affecting earth. SWPC considers Warning notices as more reliable than Watch forecasts in terms of measuring storm intensity and timing. -index to determine the G-scale level (G1 through G5), in which “K= 5” corresponds to “G1” and “K= 9” corresponds to “G5.” A K of 0 to 4 is below storm levels and is labeled as “G0.” For purposes of consistency, we use the K- index in this report. Alerts: Alerts are near real-time indications that a specific storm threshold—K = 4 or above—is reached; they are based on SWPC’s minute-by-minute estimate of GMD activity. Alerts are derived from ground-based magnetometer observations from eight locations around the world. According to SWPC, Watches, Warnings, and Alerts are to be issued as activity occurs and therefore can be issued very frequently during high- activity intervals and not at all during quiet periods. SWPC issues these notifications when storm levels reach a specific estimated K level. Table 1 shows the estimated K-indices that trigger each SWPC notification product as well as the estimated impacts to the electrical power system. In May 2013, the Federal Energy Regulatory Commission (FERC) directed NERC to develop reliability standards requiring electricity suppliers to address the potential impact of GMD on the reliable operation of the U.S. bulk power system. In June 2014, FERC approved standard EOP-010-1, submitted by NERC, requiring that certain suppliers prepare for the effects of GMD events by developing contingency operating plans, procedures, and processes. FERC approved a second standard—TPL- 007-1—in September 2016, also submitted by NERC, requiring certain suppliers to assess the vulnerability of their transmission systems to GMD events; suppliers that do not meet certain performance requirements must develop a plan to achieve the performance requirements. Table 2 summarizes the specific requirements in NERC’s stage 1—EOP-010-1— and stage 2—TPL-007-1—standards, the electricity industry entities responsible for them, and their effective dates for the requirements. An electromagnetic event can result from a naturally occurring, large- scale geomagnetic disturbance (GMD), caused by severe solar weather, or from human-made sources, such as the high-altitude detonation of a nuclear device to create a high-altitude electromagnetic pulse (HEMP). Table 3 provides details on a select number of geomagnetic-related studies performed since 2010 with respect to their objectives, findings, and recommendations. These studies include details on (1) areas of vulnerability for the grid with respect to GMD events, (2) potential impact on the grid from these events, (3) possible mitigation measures, and (4) areas needing further research. For example, as shown in the table, the North American Electric Reliability Corporation’s (NERC) and the Department of Energy’s (DOE) June 2010 report included a plan to form a task force of government and industry efforts to examine GMD. This resulted in the formation of the NERC GMD Task Force, consisting of government, industry, and academic experts, to examine the GMD threat to the nation’s power grid. The task force’s work in evaluating the potential impact of GMD events resulted in NERC’s subsequent February 2012 report (also shown in table 3) which outlines its plans for working with industry on new reliability standards for GMD events, among other things. As a result of this work, and as directed by the Federal Energy Regulatory Commission (FERC), NERC developed the EOP-010-1 and TPL-007-1 GMD reliability standards. Also as a result of this work, NERC issued a GMD Planning Guide for electricity suppliers, which assists the suppliers in carrying out studies to assess the effects of GMD on their individual networks. Table 4 provides details on a select number of unclassified HEMP-related studies performed since 2010 with respect to their objectives, findings, and recommendations. These studies include details on (1) areas of vulnerability for the grid with respect to HEMP events, (2) potential impact on the grid from these events with respect to all three HEMP pulses (E1, E2, and E3), (3) possible mitigation measures, and (4) areas needing further research. DOE’s EMP Action Plan (DOE Action Plan), issued January 2017, describes 19 actions to be taken by September 30, 2021, to enhance the resilience of the electric power grid to high-altitude electromagnetic pulse (HEMP) effects. DOE stated that its Action Plan considers the over 90 recommendations made in the 2008 Commission to Assess the Threat of the United States from Electromagnetic Pulse (EMP) Attack (EMP Commission) report and at least partially addresses 10 of the 15 recommendations directly related to the electric power system made by the EMP Commission in their report. See table 5 for these 10 EMP Commission recommendations from 2008 and corresponding components of DOE’s 2017 Action Plan. As of November 2017, based on our review of implementation dates for specific actions in DOE’s plan, the agency had yet to complete 15 of the 19 actions detailed in the Action Plan but had initiated efforts under the plan to identify gaps in HEMP knowledge and coordinate government and industry information sharing with the electricity sector and other critical industry sectors. Future work DOE expects to address under the plan will include (1) evaluating existing models used to estimate EMP impacts to the grid, (2) the adequacy of backup power generation in the wake of an EMP event, (3) establishing a national capability for conducting EMP testing of existing grid components, (4) identifying and evaluating mitigation and protection measures for various grid components, and (5) assessing the feasibility of testing different hardening techniques for substations for EMP scenarios. The DOE Action Plan includes deliverables and due dates for the 19 action items detailed in the plan which, according to DOE, are subject to the availability of necessary funding. See table 6 for details on these deliverables, and associated dates, for each action item. In addition to the individuals named above, Jon Ludwigson (Acting Director), Ben Atwater (Assistant Director), and Barbara Guffy (Analyst-in- Charge) managed this assignment. Frederick K. Childers, Jonathan Felbinger, Daniel Friess, Alexandra D. Gebhard, Michael Harmond, Eric Hauswirth, Richard Hung, Miles Ingram, and Heidi Nielson made key contributions to this report.", "summary": "A severe GMD or HEMP event could potentially have significant impacts— including power outages—on the nation's electric grid, which could affect other sectors that depend on electricity, such as communications. In response, NERC created two regulatory standards requiring certain U.S. and Canadian suppliers to assess their vulnerability to GMD and take appropriate steps in response. GAO was asked to review electricity industry actions to prepare for and mitigate electromagnetic risks. This report examines, among other things, (1) to what extent U.S. and Canadian electricity suppliers have identified information about GMD and HEMP effects on the grid, (2) what steps selected U.S. and Canadian suppliers have taken to protect against GMD and HEMP, and (3) what opportunities exist for U.S. suppliers to recover costs for protecting against GMD and HEMP. GAO examined government and industry studies and interviewed federal and industry officials about potential GMD and HEMP effects on grid infrastructure; reviewed regulatory standards, monitoring processes, and NERC compliance audit data from April 2015 through August 2017; reviewed federal regulations and interviewed state regulators on cost recovery issues; and interviewed officials from a nongeneralizable sample of 13 U.S. and Canada electricity suppliers, selected based on factors such as GMD experience and preparation for GMD and HEMP events. GAO provided a draft of this report to five federal agencies and NERC. Technical comments provided were incorporated as appropriate. U.S. and Canadian electricity suppliers—electricity generation and transmission owners and operators—have identified information on the potential effects of a severe geomagnetic disturbance (GMD), resulting from a solar storm, but have identified less information about the potential effects of a high-altitude electromagnetic pulse (HEMP), resulting from the detonation of a nuclear device, on the electric grid. There is general agreement that more research is needed on both GMD and HEMP. Government and industry have publicly reported on the potential impacts of GMD on the grid. For example, one study identified two main risks: (1) potential voltage instability, causing power system collapse and blackouts; and (2) possible damage to key system components. However, these studies do not address the unique aspects of individual suppliers' networks. Recognizing this, 11 of the 13 selected suppliers GAO contacted said they had assessed their network vulnerability; of these 11, 6 expected GMD effects to be relatively small. In contrast, Department of Energy (DOE) and industry officials told GAO that information on HEMP effects is limited in that suppliers lack key information to fully understand HEMP effects on their networks. Historically, study of HEMP effects focused on impacts to military equipment rather than the commercial electric grid. Recently, DOE and industry began research to better understand HEMP effects. Of the 11 suppliers who responded to GAO about their HEMP efforts, 3 reported having studied the impact of HEMP on their networks and 2 of the 11 had integrated, or planned to integrate, HEMP-resistant features into new control centers. Of the 13 selected suppliers GAO contacted, 10 reported making technological and operational improvements to enhance overall network reliability that also provided some protection against GMD and HEMP risks. For example, suppliers reported making technological improvements such as replacement of some older transformers and unprotected control centers. As of May 2017, all 13 suppliers stated they had complied with a GMD regulatory standard issued by the North American Electric Reliability Corporation (NERC)—the federally designated regulatory authority responsible for developing and enforcing reliability standards–-to develop operating procedures to mitigate GMD effects. A second regulatory standard—which is to be implemented in phases through 2022—will generally require suppliers to further assess their vulnerability to GMD. Selected U.S. suppliers told GAO that costs they have incurred to protect against GMD and HEMP have been relatively small so far and they expect to recover those costs through customer rates. Suppliers could face future increased costs depending on corrective actions needed to comply with the second GMD regulatory standard. Federal and state regulators indicated that regulated U.S. suppliers' costs for protecting against GMD are generally recoverable through customer rates, but recovery is less certain for protection against HEMP because less is known about HEMP risks. Further, some suppliers could face challenges to cost recovery. Specifically, independent owners of power plants—those that sell power in wholesale electricity markets and are not part of an integrated utility—must recover reliability improvement costs through their sales of electricity and are not assured of cost recovery; federal regulators told GAO they are aware this could be a challenge for these independent owners.", "document_type": "gao"}
{"report": "In 1984, the Commercial Space Launch Act gave DOT the authority, among other things, to license and monitor the safety of commercial space launches and to promote the industry. Executive Order 12465 designated DOT as the lead federal agency for enabling private-sector launch capability. The Office of Commercial Space Transportation and its responsibilities, which were originally within the Office of the Secretary of Transportation, were transferred to FAA in 1995. The U.S. commercial space launch industry has achieved several milestones since 1984. For example, in recent years SpaceX, a commercial space launch company, has successfully tested reusable elements of expendable launch vehicles and landed them back on land and on an off-shore landing vessel called a drone ship. In addition, the industry is changing with the emergence of some suborbital launch vehicles that are capable of being launched into space more than once and can enable space tourism. For example, Blue Origin has successfully launched and landed the vehicle it intends to use in the future for space tourism. By adding an expendable upper stage, suborbital vehicles can also be used to transport small satellites to orbit. Furthermore, although licensed launches historically took place at federal launch sites such as Cape Canaveral Air Force Station and the National Aeronautics and Space Administration’s Kennedy Space Center, launch sites now can be private spaceports or FAA-licensed launch sites. One launch site is co-located at an airport that has scheduled commercial airline flights and other spaceports are used for general aviation. As of August 2017, there were 10 licensed launch sites in the United States. The Office of Commercial Space Transportation works with other FAA lines of business such as: the Air Traffic Organization on integrating licensed launches and permitted activities in the national airspace, the Office of Airports regarding airports that seek to be or already are licensed launch sites, and the Office of Aviation Safety on launch vehicles that follow aircraft rules and can be used for commercial space activities. In fiscal year 2017, the Office of Commercial Space Transportation had 104 full-time equivalent positions and an operations budget of $19.8 million—an increase of 20 full-time equivalent positions and $2 million over fiscal year 2016. FAA has a staff of over 40,000 people and a budget of $16.4 billion in fiscal year 2017. According to the Office of Commercial Space Transportation, its workload has increased significantly in recent years, particularly regarding pre-application consultations for launch and launch site licenses. The Office of the Secretary of Transportation has offices that are responsible for policy, legal, and government affairs among other issues. In 1987, the House Appropriations Committee recommended that DOT perform a comprehensive organization and management study of the Office of Commercial Space Transportation with the objectives of eliminating duplication of activities carried out by offices within the Office of the Secretary and DOT modal administrations, and determining potential areas for streamlining operations. In 1991, DOT asked the National Academy of Public Administration to analyze and evaluate the key organizational and management issues facing the Office of Commercial Space Transportation which at that time was located in the Office of the Secretary of Transportation. The report considered organizational options for the office including establishing an independent regulatory office, merging the office into an existing operating administration such as FAA, transferring this office to bureau status in DOT, or creating a new operating administration in DOT. According to the report, three of the study’s five panel members stated that they believed that the office should be removed from the Office of the Secretary of Transportation and established as an operating administration because its mission was inconsistent with the broad and cross-cutting organizations within the Secretary’s Office that are focused on policy, budget, and administrative issues. Representatives from the commercial space launch companies and spaceports we spoke to described both potential advantages and disadvantages of moving the office, but most of them favored moving the office. On the other hand, most FAA officials we interviewed did not favor the idea. A senior official in the Office of Commercial Space Transportation said that there are advantages and disadvantages to moving the office and that whether such an action would be beneficial depended on the implementation details and the administration’s preferences. Officials from the Office of the Secretary of Transportation said they currently do not have plans to move the office. Stakeholders and officials provided perspectives on what they believe might result from a move including discussions regarding communicating with the industry and coordinating within FAA, program operations, updating regulations, and obtaining resources for the office, and other issues. Officials in the Office of the Secretary of Transportation said a possible advantage of moving all or part of the office would be having a unified point of contact for communicating with the industry on commercial space launch issues. Representatives from a commercial space launch company also said that rather than working with various FAA offices, they would like there to be a “one-stop shop” for commercial space launch issues and a senior official in the Office of Commercial Space Transportation indicated the office’s original purpose was to fulfill that role. Some company representatives further explained that although they generally work with the Office of Commercial Space Transportation on licensing issues and with the Air Traffic Organization on airspace access, in some cases, the lines of responsibility between the two offices are not clearly defined. Furthermore, a spaceport official said that in addition to working with the Office of Commercial Space Transportation he also needs to work with FAA’s Office of Airports, which reviews the effects of spaceports on airports, among other responsibilities. In discussing these issues with the senior official involved in the Air Traffic Organization’s emerging technologies integration efforts, the official said that although there is overlap and a need for more communication between the Office of Commercial Space Transportation and the Air Traffic Organization, coordination between the two offices is improving. He also said that later this year or early next year, FAA plans to start an aviation rulemaking advisory committee that will help to determine airspace access priorities for all national airspace users. Similarly, an official from the Office of Airports said the office is developing standard operating procedures and a memorandum of understanding with the Office of Commercial Space Transportation to resolve issues. A spaceport official who has been working on a launch site operator’s license application for several years confirmed that coordination among various FAA offices on commercial space launch issues has significantly improved during the last 6 months. Furthermore, several FAA senior officials said that moving the office could make it more difficult for FAA offices to coordinate on commercial space activities. For example, a senior official involved in the Air Traffic Organization’s emerging technologies integration efforts said that although such a move may increase the visibility of the Office of Commercial Space Transportation, it would not necessarily improve airspace integration. In addition, written responses to our questions from the Office of Aviation Safety indicated that their ability to interact with the Office of Commercial Space Transportation at an internal agency level may be less cumbersome than having to go through the additional communication protocols at the level of the Office of the Secretary of Transportation. Similarly, officials from the Office of Airports indicated that coordinating airspace review is an inherently FAA function that uses the experience and knowledge of subject matter experts located within the FAA, and that moving the commercial space office to the Office of the Secretary of Transportation could affect the efficiency of these reviews. Officials from the Office of the Secretary of Transportation also said that even if the commercial space transportation office were moved to their office, they would still need to work with FAA on airspace access issues and that they would not necessarily favor the industry regarding airspace issues. Moreover, FAA officials we interviewed said they are working on improving commercial space coordination through various working groups, particularly through the Commercial Space Transportation Executive Working Group that was formed earlier this year to coordinate on commercial space issues. This group is chaired by the official directing commercial space integration in the Office of Commercial Space Transportation and is comprised of executives from across the agency, including the Air Traffic Organization, the Office of Airports, and the Office of Aviation Safety. According to the group’s chairman, this group was formed to formalize coordination on commercial space launch issues across the agency because there was confusion among commercial space stakeholders and across the agency, and commercial space launch companies were hearing different things from different FAA lines of business. The group’s chairman said that the Executive Working Group reports to FAA’s New Entrants Board, a group formed to provide status updates on activities and events as well as decide how to move forward on specific initiatives associated with new entrants to the airspace such as drones and commercial space launch vehicles and is comprised of the principal leaders of FAA lines of business working on these issues. An FAA senior official told us that he believes commercial space coordination issues will be resolved as launches become more routine. In addition, the Air Traffic Organization has formed an Emerging Technologies Integration Office to focus on integrating commercial space operations and unmanned aircraft system activities within the national airspace system. A senior official in that office said that for decades, the Air Traffic Organization was focused on airplanes and that any deviation in airplane flow was viewed as an impediment, but that his office’s goal is to shift the understanding within the organization from an airplane-only focus to the idea that several types of vehicles can use the national airspace system. A representative from one commercial space launch company said that an advantage of moving the Office of Commercial Space Transportation and thereby making space transportation its own mode, is that it could facilitate a more “level playing field” for space activities operating in and through the national airspace system. The representative noted that the Air Traffic Organization is a much larger office than the Office of Commercial Space Transportation and is focused on aviation safety which is regulated differently than space activities. As a result, the representative said that companies perceive an unequal playing field between these two offices and the risk of negative effects if aviation standards are imposed on space, including airspace closures during launch and reentry. According to the representative, because of the Air Traffic Organization’s lack of familiarity with space launch operations and the mechanics of placing a spacecraft into orbit or on a trajectory to another celestial body, the office has suggested launch times be limited to certain times of day and certain days of the month as dictated by the amount of air traffic. The representative said that the Air Traffic Organization’s proposed approach is “untenable” for commercial space launches because launch times are dictated by orbital mechanics and that the Air Traffic Organization has imposed airspace restrictions during the holidays that have required launches to be rescheduled. A representative from another commercial space launch company said that an unequal playing field between these two offices results in the Office of Commercial Space Transportation not having the practical authority commensurate with its responsibility. According to this representative, the impact of this mismatch results in confusion over authority and negatively affects when commercial space companies are able to launch as well as excessive time and volume of airspace closed during a launch. A representative from a third company said that there are multiple variables to consider about moving the office. The representative said that while moving the Office of Commercial Space Transportation to the Office of the Secretary of Transportation would provide it with much more visibility, the office may still be at a disadvantage when it disagrees with larger offices in the FAA. In addition, the representative said that most launch companies would still have to work with FAA on air traffic control issues as well as hybrid vehicles and experimental aircraft licenses. Moreover, a representative from the Commercial Spaceflight Federation said that although the association does not have a consensus position on moving the Office of Commercial Space Transportation, its members are concerned that the Air Traffic Organization is attempting to treat the rapidly developing area of commercial space similarly to how it treats the mature commercial aviation industry. In response to these comments, an Air Traffic Organization official told us that the airspace is restricted to commercial space launches for about 15 days per year during the holidays because a launch can affect hundreds of flights and that they prefer that launches occur when there are fewer effects on the national airspace system, for example, at night. However, an official said that the Air Traffic Organization has only denied one launch request over the last 5 years. An Air Traffic Organization official also said that they do not regulate the commercial space launch industry and focus on providing safe access to the airspace by all users of the national airspace system. In addition, an official involved with commercial space integration in the Office of Commercial Space Transportation and a spaceport representative told us they expect that technology will allow for more efficient use of the national airspace in the future by reducing the amount of time that the airspace will need to be shut down for launches. Some stakeholders said that moving the Office of Commercial Space Transportation could help accelerate the pace of updating regulations to reflect new technology, which they said was proceeding too slowly. A senior official in the Office of Commercial Space Transportation said that instead of competing with other FAA offices for rulemaking approval within the agency, moving the Office of Commercial Space Transportation to the Office of the Secretary might give the commercial space office a higher priority with regard to rulemaking. However, officials from the Office of the Secretary of Transportation also said that the regulatory rulemakings are not allocated by office but are set according to the priorities of each administration, so moving the office would not necessarily affect regulatory reform efforts. According to some stakeholders and a senior official in the Office of Commercial Space Transportation, moving the office out of FAA could give commercial space launch issues a higher profile and more resources because FAA is focused on aviation as opposed to commercial space. One stakeholder also said moving the office out of FAA would make the office a priority as an independent organization within DOT. Furthermore, a senior official in the Office of Commercial Space Transportation said that the office has reached the limits of what it can accomplish with existing resources, policies, and authorities, and that moving the office could enable industry growth. In addition, a company representative said that the primary possible advantage of moving the office would be to have an Assistant Secretary for Commercial Space Transportation who would be in a leadership position to represent the growing industry directly to the Secretary of Transportation. However, officials from the Office of the Secretary of Transportation said that it is uncertain whether the Office of Commercial Space Transportation would receive more resources if it were moved to the Secretary’s office. In addition, some stakeholders said that if moved, the office would have to pay for support services that are currently available within FAA, such as legal, regulatory, human resources, and administrative support. A commercial space launch company representative suggested that the Office of Commercial Space Transportation’s promotional responsibilities should be separate from its regulatory responsibilities to avoid even the appearance of a conflict of interest between regulating safety and promoting a company interest, but did not suggest that its promotional responsibilities had affected safety. In addition, a senior FAA official said that it would make sense to move the Office of Commercial Space Transportation’s promotion duties out of FAA because of an inherent conflict with the office being both a promoter and a regulator. Officials from the Office of the Secretary said transferring the policy and promotion aspects of the Office of Commercial Space Transportation’s work to the Secretary’s office, but not the launch licensing responsibilities, is one of various options regarding the office but that they have not advanced a specific proposal. A senior official in the Office of Commercial Space Transportation said there is no specific office within the Office of Commercial Space Transportation that promotes the industry and that the office’s promotional functions are part of its overall responsibilities, so moving only the promotional responsibilities would not be feasible. A former DOT official who served in a senior position when the Office of Commercial Space Transportation was transferred to FAA in 1995 noted that one reason the office was moved was because of the belief that the Office of the Secretary of Transportation should not be involved in programmatic activities that belong in the operating agencies. However, in 2014, Congress moved a programmatic office, the Research and Innovative Technology Administration (RITA), to the Office of the Secretary of Transportation. This former DOT official also said that the Office of Commercial Space Transportation would benefit from the technological and engineering support available within FAA. Finally, representatives from commercial space launch companies and an FAA official had different perspectives on whether the Office of Commercial Space Transportation would or should be its own modal agency within DOT or part of the Office of the Secretary of Transportation. For example, a company representative who favored moving the office said that commercial space could easily be considered its own transportation mode and not as part of aviation. Another company’s representative expected that the Office of Commercial Space Transportation, if it were moved out of FAA, would start out as its own modal agency. A third stakeholder suggested that eventually space transportation will become its own independent mode of transportation such as air, sea, rail, and roads and that moving the Office of Commercial Space Transportation out of the FAA is an inevitable first step in that direction. A senior official from the Office of Commercial Space Transportation said that moving the Office of Commercial Space Transportation would be a step toward considering commercial space transportation as a mode similar to rail or highway transportation. All or part of the Office of Commercial Space Transportation can be transferred back to the Secretary’s office through a rulemaking process as was used in 1995 to amend the existing DOT delegation regulation. This process, which does not require congressional approval, was used when the Secretary of Transportation delegated the office’s responsibilities from DOT to FAA in 1995. FAA officials and the former Deputy Secretary of Transportation said moving the Office of Commercial Space Transportation from the Office of the Secretary of Transportation to FAA in 1995 was a “seamless” process. FAA and DOT officials said the following steps would need to be taken to move the office: Equivalent salaries would need to be determined for employees who are transferring because FAA and DOT have different pay scales. Legal, human capital, and administrative support currently provided by FAA would need to be obtained from DOT. New physical space for the office would likely need to be obtained, as FAA and the Office of the Secretary of Transportation are in different buildings. New processes and procedures for coordination and communication would need to be established. Our prior work has identified key practices and questions for consideration when evaluating proposals for or implementing organizational changes such as a consolidation or merger. We have previously found that implementing large-scale change management initiatives, such as mergers and organizational transformations, are not simple endeavors and require the concentrated efforts of both leadership and employees to realize intended synergies and to accomplish new organizational goals. We have found that mergers and transformations that incorporate strategic human capital management approaches will help to sustain agency efforts and improve the efficiency, effectiveness, and accountability of the federal government. These key merger and transformation practices include focusing on a key set of principles and priorities at the outset of the transformation, setting implementation goals and a timeline to build momentum and show progress, and establishing a communication plan. Questions to consider when evaluating consolidation proposals include (1) What are the goals of the consolidation? and (2) What will be the likely costs and benefits of the consolidation? Based on these key practices and considerations, DOT and FAA, for example, would need to determine the purpose of moving the Office of Commercial Space Transportation and the costs and benefits of such a move. Furthermore, to ensure employee and management support, DOT and FAA would need to obtain the buy-in of various FAA offices involved in commercial space launch issues such as the Air Traffic Organization. In addition, to assess the costs of the transformation, DOT and FAA would need to determine the costs of any additional support that would be needed by moving to the Office of the Secretary such as legal and administrative support. Moreover, DOT could consider the risk of unintended consequences of moving the office such as incurring additional costs. In addition, a spaceport representative told us that he is more concerned about the execution of moving the office than its placement. The representative said that although conceptually moving the office to the Office of the Secretary of Transportation could bring it more visibility and resources, the move would be futile if it is executed poorly. Therefore, if a decision were made to move the office, an implementation plan would be needed, consistent with our key mergers and transformation practices. Implementing a large-scale organizational transformation requires the concentrated efforts of both leadership and employees to accomplish new organizational goals. Agencies should have an implementation plan that includes essential change-management practices such as active, engaged leadership of executives at the highest possible levels; a dedicated implementation team that can be held accountable for a strategy for capturing best practices, measuring progress toward the established goals of the consolidation, retaining key talent, and assessing and mitigating risk, among others. Table 1 of appendix I lists the key practices and implementation steps that we have previously identified for mergers and organizational transformations. Table 2 of appendix I provides the key questions we have identified for evaluating proposals to consolidate physical infrastructure and management functions. Although moving the office does not involve a consolidation, we believe that many of these questions would apply to other organizational changes such as an office move. We provided a draft of this report to DOT for review and comment. DOT provided technical comments via email which we incorporated as appropriate. We are sending copies of this report to the Secretary of Transportation, the Administrator of the Federal Aviation Administration, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions concerning this report, please contact me at (202) 512-2834 or dillinghamg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Appendix I: Key Practices for Mergers and Organizational Transformations and Questions to Consider for Consolidations Key Questions What are the goals of the consolidation? What opportunities will be addressed through the consolidation and what problems will be solved? What problems, if any, will be created? What will be the likely costs and benefits of the consolidation? Are sufficiently reliable data available to support a business-case analysis or cost-benefit analysis? How can the up-front costs associated with the consolidation be funded? Who are the consolidation stakeholders, and how will they be affected? How have the stakeholders been involved in the decision, and how have their views been considered? On balance, do stakeholders understand the rationale for consolidation? To what extent do plans show that change-management practices will be used to implement the consolidation? (Please see table 1 for the key merger and transformation practices.) In addition to the contact named above, Cathy Colwell (Assistant Director); Bob Homan (Analyst-in-Charge); Maureen Luna-Long; Dave Hooper; SaraAnn Moessbauer; and Sarah Veale made key contributions to this report.", "summary": "The Office of Commercial Space Transportation, which regulates and promotes the U.S. commercial space launch industry, was established in 1984 within the Office of the Secretary of Transportation and transferred to FAA in 1995. In 2015, GAO reported that the Office of Commercial Space Transportation faced challenges associated with the growth of the commercial space launch industry such as licensing more launches. To help meet these and other challenges such as updating regulations, some industry stakeholders and others suggested that the Office of Commercial Space Transportation should be moved back to the Office of the Secretary of Transportation. GAO was asked to review issues regarding transferring the Office of Commercial Space Transportation from FAA to the Office of the Secretary of Transportation. This report addresses: (1) selected stakeholders' and officials' perspectives on transferring the Office of Commercial Space Transportation from FAA to the Office of the Secretary of Transportation, (2) what steps would be required to make this transfer, and (3) key practices and considerations GAO has previously identified for organizational changes that could be instructive for such a transfer. GAO interviewed industry stakeholders and FAA and DOT officials, reviewed the steps taken during the office's 1995 transfer, and reviewed prior reports on key practices and questions to consider regarding organizational changes. GAO is making no recommendations in this report. Representatives from commercial space launch companies and spaceports GAO interviewed described advantages and disadvantages of moving the Office of Commercial Space Transportation to the Office of the Secretary of Transportation, but most of them favored moving the office. Conversely, most Federal Aviation Administration (FAA) officials GAO interviewed did not favor the idea. A senior official in the Office of Commercial Space Transportation said that there are advantages and disadvantages to moving the office and that whether such an action would be beneficial depends on the implementation details and the administration's preferences. Officials from the Office of the Secretary of Transportation said they currently do not have plans to move the office. Stakeholders' and officials' perspectives are based on what they perceive could occur as a result of a move, for example: Communication and coordination: Department of Transportation (DOT) officials said that a possible advantage of moving the office would be having a unified point of contact for the industry in communicating about commercial space launch issues, while FAA officials said that moving the office could make it more difficult for FAA offices to coordinate on commercial space activities. Regulations: Some stakeholders said that moving the office could help accelerate the pace of commercial space regulatory reform, but DOT officials said that moving the office would not necessarily do so. Resources: According to some stakeholders and a senior official in the Office of Commercial Space Transportation, moving the office out of FAA could give commercial space launch issues a higher profile and more resources because FAA is focused on aviation as opposed to commercial space. However, officials from the Office of the Secretary of Transportation said that it is uncertain whether the office would receive more resources if it were moved to the Secretary's office. The Secretary of Transportation could move all or part of the office through a delegation of responsibilities for commercial space, as was the case in the prior move in 1995. If the office were moved, other necessary steps would include addressing the differences in pay scales between FAA and the Office of the Secretary of Transportation, obtaining support services and office space, and establishing new coordination and communication processes and procedures. GAO's prior work has identified key practices and questions for consideration when evaluating proposals for or implementing organizational changes such as a consolidation or merger. These key practices include: (1) focusing on a key set of principles and priorities at the outset of the transformation, (2) setting implementation goals and a timeline to build momentum and show progress, and (3) establishing a communication plan. Questions to consider when evaluating consolidation proposals include (1) What are the goals of the consolidation? and (2) What will be the likely costs and benefits of the consolidation?", "document_type": "gao"}
{"report": "Federal and state Medicaid spending on long-term care continues to increase; for example it increased from $146 billion in 2013 to $158 billion in 2015. Individuals seeking long-term care generally need care that is, by definition, longer term in nature and more costly than other types of care. Spending on long-term care services provided in home and community settings, including assisted living facilities, exceeds the amount spent on institutional settings such as nursing homes. State Medicaid programs may cover certain medical and non-medical services that assisted living facilities provide; however, the Medicaid statute does not provide for coverage of room and board charges of an assisted living facility. In their federal-state partnership, both CMS and states play important roles in the oversight of Medicaid. CMS is responsible for oversight of state Medicaid programs. To conduct this oversight, CMS issues program requirements in the form of regulations and guidance, approves changes states make to their programs, provides technical assistance to states, collects and reviews required information and data from states and, in some cases, reviews individual state programs. States are responsible for the day-to-day administration of their Medicaid programs, including monitoring and oversight of the different HCBS programs through which they cover assisted living services, within broad federal rules and requirements. Each state is required to identify and designate a single state agency to administer or supervise the administration of its Medicaid program. The state Medicaid agency may partially or fully delegate the administration and oversight of the state’s HCBS programs to another state agency or other entity, such as a state unit on aging, a mental health department, or other state departments or agencies with jurisdiction over a specific population or service. However, the state Medicaid agency is ultimately accountable to the federal government for compliance with the HCBS requirements. Under different authorizing provisions of federal law, states have considerable flexibility to establish multiple HCBS programs including those covering assisted living services. A state Medicaid program can have multiple HCBS programs operating under different federal authorities. CMS is responsible for ensuring that states meet the requirements associated with their HCBS programs under these different authorities. Key to states’ monitoring of the health and welfare of Medicaid beneficiaries is their tracking of, and response to, incidents that may cause harm to a beneficiary’s health or welfare, such as abuse, neglect, or exploitation—commonly referred to as critical incidents. Such monitoring is required for most HCBS programs; however, we previously found that requirements for states related to oversight of the health and welfare of beneficiaries in different types of HCBS programs varied, and recommended that CMS take steps to harmonize those requirements across programs. The most common HCBS programs with the most stringent federal requirements are HCBS waiver programs. These programs serve beneficiaries who are eligible for an institutional level of care; that is, beneficiaries must have needs that rise to the level of care usually provided in a nursing facility, hospital, or other institution. CMS oversees states’ HCBS waiver programs specifically by reviewing and approving applications and reviewing HCBS program reports that states submit. HCBS waiver program applications include specific requirements implementing various statutory and regulatory provisions. (See text box below.) One requirement is that states have the necessary safeguards in place to protect the health and welfare of beneficiaries receiving services covered by HCBS waiver programs. For each of their HCBS waiver programs, states must demonstrate to CMS that they are meeting various requirements CMS has established regarding beneficiary health and welfare. The Six Requirements States Must Demonstrate for Home- and Community-Based Services Waiver Programs 1. Administrative authority: The Medicaid agency retains ultimate administrative authority and responsibility for the operation of the waiver program by exercising oversight of the performance of waiver functions by other state and local/regional non-state agencies (if appropriate) and contracted entities. 2. Level of care: The state demonstrates that it implements the processes and instrument(s) specified in its approved waiver for evaluating/re-evaluating an applicant’s/waiver participant’s level of care consistent with care provided in a hospital, nursing facility, or intermediate care facility. 3. Qualified providers: The state demonstrates that it has designed and implemented an adequate system for assuring that all waiver services are provided by qualified providers. 4. Service plan: The state demonstrates it has designed and implemented an effective system for reviewing the adequacy of service plans for the waiver participants. 5. Health and welfare: The state demonstrates it has designed and implemented an effective system for assuring waiver participant health and welfare. 6. Financial accountability: The state must demonstrate that it has designed and implemented an adequate system for insuring financial accountability of the waiver program. CMS also provides ongoing oversight of state HCBS programs through annual reports that states must submit for each of their HCBS waiver programs as well as renewal reports submitted about two years before an HCBS waiver is scheduled to end. The state reports are intended to provide CMS with information on the operation of state HCBS waiver programs. In contrast to long-term care services provided in nursing facilities, less is known at the federal level about the oversight and quality of care in assisted living facilities. Generally, states establish their own licensing and oversight requirements for assisted living facilities. As a result, the requirements for assisted living facilities and the type and frequency of oversight can vary across states. In contrast, nursing homes must meet a comprehensive set of federal requirements in order to receive payment for long-term care services for Medicaid and Medicare beneficiaries in addition to state requirements. CMS contracts with state entities to regularly inspect nursing facilities and investigate complaints to assess whether nursing homes meet these federal quality requirements. Annually CMS publishes a comprehensive report on nursing homes that serve Medicaid and Medicare beneficiaries, including the extent that beneficiaries are at risk for harm, based on these investigations and inspections. In addition, CMS publicly reports a summary of each nursing home’s quality data using a five-star quality rating based on health inspection results, staffing data, and quality measure data. The goal of this rating system is to help consumers make meaningful distinctions among high- and low-performing nursing homes. This type of standardized framework for oversight, investigation and inspections, and reporting on quality of care concerns does not exist for assisted living facilities and other types of HCBS providers. Forty-eight state Medicaid agencies reported collectively spending about $10 billion in state and federal Medicaid funds for assisted living services in 2014, according to our survey. The other 3 states reported that they did not pay for assisted living services. We estimate that this spending for services provided by assisted living facilities represents 12.4 percent of the $80.6 billion Medicaid spent on HCBS in all settings that year. More than 330,000 Medicaid beneficiaries received assisted living services, based on data reported to us by the 48 states. Nationally, the average spending per beneficiary on assisted living services in the 48 states in 2014 was about $30,000; states provided these HCBS services through fee-for-service and managed care delivery models. Fee-for-service spending comprised 81 percent of total spending on assisted living services and managed care spending was about 19 percent of the total. The cost per beneficiary reported by surveyed states also varied based on payment type; average per beneficiary cost was $31,000 for fee-for-service and $27,000 for managed care. About 21 percent of Medicaid assisted living enrollment was for beneficiaries receiving these services under a managed care delivery model. (See table 1.) Average per-beneficiary spending varied significantly across the states. For example, for the nine states with the lowest spending per beneficiary, average Medicaid spending ranged from about $1,700 to about $9,500 per beneficiary. In contrast, in the nine states with the highest per- beneficiary spending, the average spending ranged from about $43,000 to $108,000 per beneficiary. (See Figure 1.) For more information on each state’s enrollment, total spending, and average per beneficiary spending on assisted living services, see appendix I. The 48 states that reported covering assisted living services in 2014 said they did so through 132 different programs. The majority of the states, 31 of the 48, reported administering more than one program that covered assisted living services. As illustrated in table 2 below, of the different types of HCBS programs under which states can provide coverage for assisted living services, HCBS waivers were the most common type of program they used. Specifically, 39 states and 69 percent of the programs that provided assisted living services, were operated under the HCBS waiver program. (See appendix II for additional details on each state’s number of programs by program type and total number of HCBS programs that covered assisted living facility services in 2014.) Almost all of the 48 states that covered assisted living services did so for two groups of Medicaid beneficiaries eligible through their programs. In 45 of 48 states, aged beneficiaries received services provided by assisted living facilities. Similarly, in 43 of 48 states, physically disabled beneficiaries received services. (See Figure 2.) In 38 or more of the 48 states that covered assisted living services, six types of services were provided. For example, 45 states covered assistance with activities of daily living, such as bathing and dressing; 44 states covered medication administration; and 41 states covered coordination of meals. (See Figure 3.) State Medicaid agency approaches for oversight of assisted living services varied widely in terms of who provided the oversight for their largest programs, according to their responses to our survey. Thirteen of the 48 state Medicaid agencies reported delegating administrative responsibilities, including oversight of beneficiary health and welfare, to other state or local agencies. State Medicaid agencies may delegate the administration of programs to government or other agencies through a written agreement; however, state Medicaid agencies retain the ultimate oversight responsibility for those delegated functions. For example, among the 13 states that delegated HCBS program administration, the administering agencies were those that provided services to the aged, disabled, or both of these populations, such as the states’ Departments of Aging. (See text box, below, for examples of states’ delegation.) Examples of State Medicaid Agencies’ Delegation of Authority for Administration of Home- and Community-based Services’ Programs Covering Assisted Living Services Georgia’s Elderly & Disabled Waiver Program was operated in 2014 by the Georgia Department of Human Services Division of Aging Services, a separate agency of the state that was not a division/unit of the Medicaid agency. The Georgia Medicaid Agency maintained a formal interagency agreement with the Division of Aging Services which describes by function the required deliverables to support compliance and a schedule for delivery of reports. Nebraska’s Waiver for Aged and Adults and Children with Disabilities is operated by the state Medicaid agency Division of Medicaid and Long Term Care. The majority of services are provided by independent contractors in order to allow service delivery in the rural and frontier areas of the state. The state Medicaid agency contracts with the Area Agencies on Aging, Independent Living Centers, and Early Development Network agencies to perform a variety of operational and administrative functions including authorizing services and monitoring the delivery of services. States also varied in the types of information they reported reviewing as part of the oversight of assisted living services, and the extent to which state Medicaid agencies review the information when another agency is responsible for administration. For example, other entities outside the state Medicaid agency—such as the agency delegated to administer an HCBS program, or a contractor that manages provider enrollment—may check to ensure a provider is allowed to deliver services to Medicaid beneficiaries; in such cases, however, the state Medicaid agency might not be aware of the results of such checks. As illustrated in table 3, in all 48 states the types of information generally reviewed by either the state Medicaid agency, the agency delegated administrative responsibilities, or other agencies were: critical incident reports, the HHS Office of Inspector General’s list of excluded providers, patient service plans, and information on concerns about care received directly from patients, relatives, caregivers or the assisted living facility itself. In many cases, the state Medicaid agency did not review all information sources reviewed by other agencies. For example, although all critical incident reports were reviewed in the 48 states by either the state Medicaid agency, the agency delegated administrative responsibilities, or another agency; in 16 of those states, the state Medicaid agency was not involved in those reviews, according to responses to our survey. Instead, the critical incident reports were reviewed by another entity designated responsible for the HCBS program in the state or another state entity with regulatory responsibility over the assisted living facility. Such reviews, including any critical incidents found, may not have been communicated back to the state Medicaid agency, according to responses to our survey. State Medicaid agencies also varied in reporting the extent to which they were made aware or notified when enforcement actions were taken as a result of concerns with beneficiary care identified by other entities. Various oversight actions may be taken by the state Medicaid agency, the agency delegated to administer an HCBS program, or a state regulatory agency, such as a state agency responsible for licensing and inspecting various types of HCBS providers. When delegated agencies or other licensing agencies take corrective action, the state Medicaid agency may not be aware unless notified by the agencies taking that action. For example, in 23 states, the investigation of potential incidents related to beneficiary health and welfare was delegated to another agency but in only 6 of these states was the state Medicaid agency always notified of such an investigation based on our survey. (See table 4 and text box below.) Example of a Collaborative Approach to Monitoring and Ensuring Quality Care Specifically for Assisted Living Facilities In 2009, the Wisconsin Coalition for Collaborative Excellence in Assisted Living was formed to redesign the way quality is ensured and improved for individuals residing in assisted living communities. This public/private coalition utilizes a collective impact model approach that brings together the state, the industry, the consumer, and academia to identify and implement agreed upon approaches designed to improve the outcomes of individuals living in Wisconsin assisted living communities. The core of the coalition is the implementation of an association developed, department approved, comprehensive quality assurance, quality improvement program. For their largest HCBS programs that covered assisted living services, the 48 states varied in how they monitored “critical incidents” that caused actual or potential harm to Medicaid beneficiaries in assisted living facilities. Specifically, the 48 states varied in their ability to report the number of critical incidents; how they defined incidents, and the extent to which they made information on such incidents readily available to the public. These states varied in whether they could provide us the number of critical incidents involving beneficiaries for their largest programs covering assisted living services, and for those that could report, the number of incidents they reported varied widely. In 26 of the 48 states the Medicaid agencies were unable to report, for their largest program covering assisted living services, the number of critical incidents that had occurred in assisted living facilities in 2014. The remaining 22 states reported a total of 22,921 critical incidents involving Medicaid beneficiaries in their largest programs covering assisted living services. The number of critical incidents reported in these states ranged from 1 to 8,900. For six of these states the number of critical incidents reported was more than 1,000, (See text box, below, for examples of selected state processes managing critical incidents.) Selected States’ Processes for Managing Beneficiary Harm or Potential Harm in Assisted Living Facilities Georgia: According to state officials in 2014 there was no centralized or comprehensive system for capturing and tracking the data on actual and potential violations. State officials acknowledged the lack of a centralized system prevents the Division of Community Health from tracking the status of each problem. Nebraska: According to state officials, Nebraska’s Adult Protective Services operates an electronic system that coordinates across state social service programs. When Adult Protective Services initiates an investigation of reported harm to an assisted living resident, the state Medicaid agency is automatically notified. Reasons state Medicaid agencies reported for being unable to provide us with the number of critical incidents included limitations in the data or data systems for tracking them. Nine states reported an inability to track incidents by provider type, and thus distinguish critical incidents in assisted living facilities from other providers of home and community based services. States also cited lacking a system to collect critical incidents (9 states), and that the system for reporting could not identify whether a resident was a Medicaid beneficiary (5 states). Even in the 32 states where the state Medicaid agencies reported reviewing information about critical incidents, 20 states were unable to provide the actual number of critical incidents that occurred in assisted living facilities. State Medicaid agencies’ definitions of critical incidents also varied. As illustrated in Figure 4, all 48 states cited physical assault, emotional abuse, and sexual assault or abuse as a critical incident in their largest programs providing assisted living services in 2014. However, for other types of incidents, several states did not identify the incident as critical, including discharge and eviction from the facility (not a critical incident in 24 states), medication errors (not a critical incident in 7 states), and unauthorized use of seclusion, (not a critical incident in 6 states). For other serious incidents, a relatively small number of states did not identify the incident as critical, such as unexplained death (not a critical incident in 3 states) and missing beneficiaries (not a critical incident in 2 states). See appendix IV for a full list of the beneficiary-related incidents and the number of states that identify each as critical. Although half of the 48 states that cover assisted living services did not consider discharges or evictions to be critical incidents, according to state responses to our survey, 42 states offered certain protections related to involuntary discharge of Medicaid residents who live in assisted living facilities. The majority of protections consisted of a lease agreement requirement that applied to other housing contracts in the state, such as providing residents with eviction notices. Other protections included an appeals process (10 states) and a requirement for the facility to find an alternative location for the resident (10 states). State Medicaid agencies also varied in whether they made information on critical incidents and other key information readily available to the public. (See table 5.) Beneficiaries seeking care in an assisted living facility may want to know the number of critical incidents related to a particular facility. Through our survey we found that states differed in the availability of information related to health and welfare that was available to the public. For example, 34 of the 48 states reported that they made critical incident information available to the public by phone, website, or in person, and the remaining 14 states did not have such information available at all. Although all 48 states had information in some form on which assisted facilities accepted Medicaid beneficiaries, 8 states could not provide this information by phone and 22 states could not provide the information in person. In recent years, CMS has taken steps to improve oversight of beneficiary health and welfare in HCBS programs by adding new HCBS waiver application requirements for state monitoring of beneficiary health and welfare. CMS requires state waiver applications to include specific requirements that implement various statutory and regulatory provisions, including a provision that states assure that they will safeguard the health and welfare of Medicaid beneficiaries. In March 2014, CMS added unexplained death to the events that states must be able to identify and address on an ongoing basis, as part of their efforts to prevent instances of abuse, neglect, and exploitation, and added four new requirements for states to protect beneficiary health and welfare. (See table 6.) In its guidance implementing the 2014 requirements, CMS noted that state associations and state representatives’ work groups had agreed that “health and welfare is one of the most important assurances to track, and requires more extensive tracking to benefit the individuals receiving services, for instance by using data to prevent future incidents.” As a condition for approval of their HCBS waiver applications for each of the requirements, states must identify and agree with CMS on the type of information they will collect to provide as evidence that they will meet the requirements. However, according to CMS officials, each state Medicaid agency has wide discretion over the information it will collect and report to demonstrate that it is meeting the health and welfare requirements and protecting beneficiaries. Although CMS added the additional requirements in 2014 for safeguarding beneficiary health and welfare, the agency generally did not change requirements for how it oversees state monitoring efforts once HCBS waivers are approved. We found a number of limitations in CMS’s oversight of approved HCBS waivers that undermine the agency’s ability to effectively monitor state oversight of HCBS waivers. These limitations include: unclear guidance on what states should identify and report annually related to any identified program deficiencies; lack of requirements on states to regularly provide CMS information on critical incidents; and CMS’s inconsistent enforcement of the requirement that states submit annual reports. Unclear guidance on what states should identify and report annually related to any identified program deficiencies. Federal law requires states to provide CMS with information annually on an HCBS waiver’s impact on (1) the type and amount, and cost of services provided and (2) the health and welfare of Medicaid beneficiaries receiving waiver services. CMS reporting requirements give states latitude to determine what to report as health and welfare deficiencies found through state monitoring of their HCBS programs. With respect to health and welfare, CMS’s State Medicaid Manual directs states when preparing their annual reports to “check the appropriate boxes regarding the impact of the waiver on the health and welfare” of beneficiaries and to describe relevant information. States are required to provide a brief description of the state process for monitoring beneficiary safeguards, use check boxes to indicate that beneficiary health and welfare safeguards have been met, and identify whether deficiencies were detected during the monitoring process. If states determine that deficiencies were identified through monitoring, states are required to “provide a summary of the significant areas where deficiencies were detected” and an explanation of the actions taken to address deficiencies and ensure the deficiencies do not recur. CMS’s written instructions for completing the HCBS annual report do not provide further guidance regarding reporting of deficiencies. For example, the reporting instructions do not describe or identify 1) what states are supposed to report as deficiencies, 2) how they are to identify which deficiencies are most significant, and 3) the extent to which states need to explain the steps taken to ensure that deficiencies do not recur. The lack of clarity is inconsistent with federal internal control standards, in particular, the need for federal agencies to have processes that identify information needed to achieve objectives and address risk. Without clear instructions as to what states must report, states’ annual reports may not identify deficiencies with states’ HCBS waiver programs that may affect the health and welfare of beneficiaries. States may determine that issues or problems they identified through monitoring do not represent reportable deficiencies and therefore may not report those deficiencies to CMS, increasing the risk that problems are not elevated to CMS’s attention. In the case of one of the selected states we reviewed, no problems were included on the annual reports submitted to CMS between 2011 and 2015. However, when CMS completed its review in the fourth year of the state’s waiver— for purpose of renewing the waiver—it determined the state was not assuring beneficiary health and welfare. CMS found that the information the state submitted for purpose of renewal suggested a “pervasive failure” by the state to assure the health and welfare of beneficiaries receiving services, including assisted living services. In particular, CMS noted the state provided insufficient information regarding the number of unexpected or suspicious beneficiary deaths. CMS concluded that the state failed to demonstrate that it has effective systems and processes for ensuring the health and welfare of beneficiaries. Lack of requirements on states to annually provide CMS information on critical incidents. Despite the importance of state critical incident management and reporting systems to protecting the health and welfare of beneficiaries, CMS lacks written requirements that states provide information needed for the agency oversight of state monitoring of critical incidents. According to CMS, a critical element of effective state oversight is the operation of data systems that support the identification of trends and patterns in the occurrence of critical incidents to identify needed improvements. Such a system is also consistent with federal internal controls standards which specify, in particular, the need for federal agencies to have processes that identify information needed to achieve objectives and address risk. CMS requires states to operate a critical incident reporting system. On their waiver applications states must check a box indicating they operate a system and also describe their system—including who must report and when, and what must be reported. Despite this requirement for states to have critical incident reporting systems, CMS does not require states to report to CMS any data from these systems on critical incidents as part of their required annual reports. Specifically, states are not required to include, in their annual reports, the number of critical incidents reported or substantiated that involve Medicaid beneficiaries. As a result, CMS does not have a method to confirm what states describe about critical incident management systems, which is a required component of states’ waiver applications or to assess the capabilities of states’ systems. For example, CMS cannot confirm whether the state systems can report incidents by location or type of residential provider, such as assisted living facilities; the type and severity of critical incidents that occurred; and the number of incidents that involved Medicaid beneficiaries. Without annual critical incident reporting, CMS may be at risk of (1) not having adequate evidence that states are meeting CMS requirements to have an effective critical incident management and reporting system and of (2) being unaware of problems with states’ abilities to identify, track, and address critical incidents involving Medicaid beneficiaries. Our prior work has shown that the lack of explicit reporting requirements on critical incidents not only impacts HCBS waiver programs but also impacts other types of Medicaid long-term services programs as well. Specifically, In a November 2016 report, we found that CMS requirements for states to report on their critical incident monitoring systems for the HCBS waiver program were more stringent than those for other types of HCBS programs, potentially leaving those other programs at even greater risk. We recommended that CMS take steps to harmonize requirements across different types of HCBS programs. HHS concurred with the recommendation stating it would seek input from states, stakeholders, and the public regarding harmonizing requirements across programs. In an August 2017 report we found similar issues in critical incident reporting requirements for other types of long term services programs, particularly those used to provide HCBS and other long term services under managed care. We found that CMS was not always requiring states that contracted with managed care organizations to provide long term services and supports to report to CMS sufficient information on critical incidents and other key areas needed to monitor beneficiary access and quality. We recommended that CMS take steps to identify and obtain key information needed to better oversee states’ efforts to monitor beneficiary access to quality services in their managed long-term services and supports programs. HHS concurred with this recommendation and stated that the agency would take this recommendation into account as part of an ongoing review of its 2016 Medicaid managed care rule. We continue to believe that the implementation of our prior recommendations is needed to help improve CMS oversight of states monitoring of beneficiary safety. CMS’s inconsistent enforcement of the requirement that states submit annual reports. States must prepare and submit an annual report for each HCBS waiver as a condition of waiver approval. According to CMS guidance, the agency’s review of the annual report is part of the ongoing oversight of HCBS waiver programs and not submitting an annual report jeopardizes the states renewal of HCBS waiver programs. However, some states have not been timely in submitting the required annual reports for their HCBS waivers. A review of 2013 HCBS annual reports by a CMS contractor, published in 2016, found that annual reports were missing for 29 HCBS waivers and multiple years’ of annual reports were missing for 8 waivers. In 2014, CMS adopted new strategies to ensure compliance with HCBS waiver requirements, including the requirement that states submit annual reports on a timely basis. These strategies include withholding federal funding, placing a moratorium on enrollment in the waiver, or other actions the agency determines necessary. CMS officials reported that the agency had not used these new strategies with states that were delinquent in submitting their annual reports. Officials said they were in the process of reviewing how to implement these new strategies in the case of one state; however, as of August 2017 officials had not finalized a decision. CMS’s ability to provide effective oversight of state programs and protect beneficiary health and welfare is undermined by the lack of enforcement and receipt of required annual waiver reports. Effective state and federal oversight is necessary to ensure that the health and welfare of Medicaid beneficiaries receiving assisted living services are protected, especially given the particular vulnerability of many of these beneficiaries to abuse, neglect, or exploitation. CMS has taken steps to strengthen beneficiary health and welfare protections in states’ HCBS waiver programs, the most common type of program that covers assisted living services and one that serves the most vulnerable beneficiaries. In particular, CMS now has multiple requirements for states to safeguard beneficiaries’ health and welfare, including requirements to operate an effective critical incident management and reporting system to identify, investigate, and address incidents of beneficiary abuse, neglect, exploitation, and unexplained death. However, CMS’s ability to effectively monitor how well states are assuring beneficiary health and welfare is limited by gaps in state reporting to CMS. CMS has not provided clear guidance to states on what information to include in annual reports on deficiencies they identify. As a result, CMS lacks assurance that it is receiving consistent, complete, and relevant information on deficiencies that is needed to oversee beneficiary health and welfare. Lacking clear guidance on the reporting of deficiencies may result in a delayed recognition of problems that may affect beneficiary health and welfare. Further, for years, states have been required to check a box attesting that they operate a critical incident management system, but have not always been required to report information on incidents of potential or actual harm to beneficiaries. Given the increasing prevalence of assisted living facilities as a provider of services to Medicaid beneficiaries, it is unclear why more than half of states responding to our survey could not provide us information on the number of critical incidents that occurred in these facilities in their states. Reporting data from their critical incident systems, such as the number of incidents, the type and severity of the incidents, or the location or type of facility in which the incident occurred would provide evidence that an effective system is in place, provide information on the extent beneficiaries are subject to actual or potential harm, and allow for tracking trends over time. Finally, CMS has not ensured that all states submit annual reports on their HCBS waiver programs as required. Without improvements to state reporting, CMS cannot ensure states are meeting their commitments to protect the health and welfare of Medicaid beneficiaries receiving assisted living services, potentially jeopardizing their care. We are making the following three recommendations to CMS: The Administrator of CMS should provide guidance and clarify requirements regarding the monitoring and reporting of deficiencies that states using HCBS waivers are required to report on their annual reports. (Recommendation 1) The Administrator of CMS should establish standard Medicaid reporting requirements for all states to annually report key information on critical incidents, considering, at a minimum, the type of critical incidents involving Medicaid beneficiaries, and the type of residential facilities, including assisted living facilities, where critical incidents occurred. (Recommendation 2) The Administrator of CMS should ensure that all states submit annual reports for HCBS waivers on time as required. (Recommendation 3) We provided a draft of this report to HHS for review and comment. HHS provided written comments, which are reproduced in Appendix V. The department also provided technical comments, which we incorporated as appropriate. In its written comments, the department concurred with two of our three recommendations, specifically, that CMS will clarify requirements for state reporting of program deficiencies and ensure that all states submit required annual reports on time. HHS did not explicitly agree or disagree with our third recommendation to require all states to report information on critical incidents to CMS annually. The department noted it has established a workgroup to learn more about states’ health and welfare systems and that it will use the results of this workgroup to determine which additional reporting requirements would be beneficial. The workgroup’s review will continue through calendar year 2018. In technical comments, HHS indicated that after the workgroup’s review is complete it will consider annual reporting of critical incidents. We believe establishing the workgroup is a positive first step towards improving oversight and state reporting and encourage HHS to require annual reporting on critical incidents when developing additional reporting requirements. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of CMS, the Administrator of the Administration for Community Living, appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or at iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix VI. Our survey of state Medicaid agencies regarding coverage, spending, enrollment, and oversight of assisted living services in 2014, obtained information on challenges for Medicaid beneficiaries to access assisted living services in their states. States provided information related to factors that create challenges for Medicaid beneficiaries’ ability to access and receive assisted living services and the extent states had policies to help beneficiaries with the cost of room and board. A number of states in our survey cited common factors as creating the greatest challenges to a beneficiary’s ability to access assisted living services, including the number of assisted living facilities willing to accept Medicaid beneficiaries (13 states or 27 percent of the 48 states) program enrollment caps (9 states or 19 percent of the 48 states) beneficiaries’ inability to pay for assisted living facility room and board (9 states or 19 percent of the 48 states), which Medicaid typically does not cover low rates the state Medicaid program paid assisted living facilities (8 states or 17 percent of the 48 states). A number of states reported that they had policies to assist Medicaid beneficiaries with the costs of room and board charged by assisted living facilities, which Medicaid does not typically cover. Two common policies, cited by at least half of the states, were aimed at limiting how much assisted living facilities could charge Medicaid beneficiaries for room and board. For example, 30 of 48 states, limited the amount facilities could charge for room and board to the amount of income certain beneficiaries receive as Supplemental Security Income. The other commonly cited policies focused on providing financial assistance to the beneficiaries to defray the room and board costs. (See table 9.) In addition to the contact named above, Tim Bushfield and Christine Brudevold (Assistant Directors), Jennie Apter, Shirin Hormozi, Anne Hopewell, Kelsey Kreider, Perry Parsons, Vikki Porter, and Jennifer Whitworth made key contributions to this report.", "summary": "The number of individuals receiving long term care services from Medicaid in community residential settings is expected to grow. These settings, which include assisted living facilities, provide a range of services that allow aged and disabled beneficiaries, who might otherwise require nursing home care, to remain in the community. State Medicaid programs and CMS, the federal agency responsible for overseeing the state programs, share responsibility for ensuring that beneficiaries' health and welfare is protected. GAO was asked to examine state and federal oversight of assisted living services in Medicaid. This report (1) describes state spending on and coverage of these services, (2) describes how state Medicaid agencies oversee the health and welfare of beneficiaries in these settings, and (3) examines the extent that CMS oversees state Medicaid agency monitoring of assisted living services. GAO surveyed all state Medicaid agencies and interviewed officials in a nongeneralizeable sample of three states with varied oversight processes for their assisted living programs. GAO reviewed regulations and guidance, and interviewed CMS officials. State Medicaid agencies in 48 states that covered assisted living services reported spending more than $10 billion (federal and state) on assisted living services in 2014. These 48 states reported covering these services for more than 330,000 beneficiaries through more than 130 different programs. Most programs were operated under Medicaid waivers that allow states to target certain populations, limit enrollment, or restrict services to certain geographic areas. With respect to oversight of their largest assisted living programs, state Medicaid agencies reported varied approaches to overseeing beneficiary health and welfare, particularly in how they monitored critical incidents involving beneficiaries receiving assisted living services. State Medicaid agencies are required to protect beneficiary health and welfare and operate systems to monitor for critical incidents—cases of potential or actual harm to beneficiaries such as abuse, neglect, or exploitation. Twenty-six state Medicaid agencies could not report to GAO the number of critical incidents that occurred in assisted living facilities, citing reasons including the inability to track incidents by provider type (9 states), lack of a system to collect critical incidents (9 states), and lack of a system that could identify Medicaid beneficiaries (5 states). State Medicaid agencies varied in what types of critical incidents they monitored. All states identified physical, emotional, or sexual abuse as a critical incident. A number of states did not identify other incidents that may indicate potential harm or neglect such as medication errors (7 states) and unexplained death (3 states). State Medicaid agencies varied in whether they made information on critical incidents and other key information available to the public. Thirty-four states made critical incident information available to the public by phone, website, or in person, while another 14 states did not have such information available at all. Oversight of state monitoring of assisted living services by the Centers for Medicare & Medicaid Services (CMS), an agency within the Department of Health and Human Services (HHS), is limited by gaps in state reporting. States are required to annually report to CMS information on deficiencies affecting beneficiary health and welfare for the most common program used to provide assisted living services. However, states have latitude in what they consider a deficiency. States also must describe their systems for monitoring critical incidents, but CMS does not require states to annually report data from their systems. Under federal internal control standards, agencies should have processes to identify information needed to achieve objectives and address risk. Without clear guidance on reportable deficiencies and no requirement to report critical incidents, CMS may be unaware of problems. For example, CMS found, after an in-depth review in one selected state seeking to renew its program, that the state lacked an effective system for assuring beneficiary health and welfare, including reporting insufficient information on the number of unexpected or suspicious beneficiary deaths. The state had not reported any deficiencies in annual reports submitted to CMS in 5 prior years. GAO recommendations to CMS include clarifying state requirements for reporting program deficiencies and requiring annual reporting of critical incidents. HHS concurred with GAO's recommendations to clarify deficiency reporting and stated that it would consider annual reporting requirements for critical incidents after completing an ongoing review.", "document_type": "gao"}
{"report": "Nearly three-quarters of states (37 as of November 2016) have CMS- approved Medicaid section 1115 demonstrations, which allow states to test new approaches to coverage and to improve quality and access or generate savings or efficiencies. CMS has approved demonstrations for a wide variety of purposes. For example, under demonstrations, states have extended coverage to populations or for services not otherwise eligible for Medicaid, made payments to providers to incentivize delivery system improvements, and, more recently, expanded Medicaid to certain low-income adults by using Medicaid funds to purchase private health insurance coverage. While state demonstrations vary in size and scope, many are comprehensive in nature, affecting multiple aspects of states’ Medicaid programs simultaneously. For example, Kansas’s demonstration, approved in 2012, significantly expands the use of managed care to deliver physical, behavioral, and long-term care services to almost all the state’s Medicaid populations, care that for some populations was previously provided on a fee-for-service basis. The demonstration also established a funding pool of up to $344 million to provide payments to hospitals to finance uncompensated care. Kansas’s demonstration expenditures accounted for about 94 percent of the state’s total Medicaid expenditures in fiscal year 2015. In fiscal year 2015, federal spending under demonstrations represented a third of all Medicaid spending nationwide. In 10 states, federal spending on demonstrations represented 75 percent or more of all federal spending on Medicaid. (See fig. 1.) Demonstrations are typically approved by CMS for an initial 5-year period (referred to as a demonstration cycle), but some states have operated portions of their Medicaid programs under a demonstration for decades. This can be achieved through a series of renewals approved by CMS, generally occurring every 3 to 5 years. What a state is testing and implementing under its demonstration can change from one cycle to the next. States often make changes to their demonstrations, either through the renewal process or by requesting an amendment during the demonstration cycle. These changes can be relatively small or can be significant and can represent testing of a new approach for the state. For example, at renewal a state could request approval to expand coverage to a new population or add requirements that beneficiaries share in the cost of care by paying a monthly premium. CMS has long required states to conduct evaluations of section 1115 demonstrations. CMS oversees the evaluations and can influence them at several key points during the demonstration process. Application review and approval: When a state applies for a demonstration, CMS reviews the state’s application, which describes the goals and objectives of the demonstration and what the demonstration will test, among other things. As part of the review and approval process, CMS negotiates with the state on the STCs, including evaluation requirements. These requirements might include, for example, reporting timeframes and broad standards for the evaluation, such as standards around the independence of the evaluator and acceptable evaluation methods. Evaluation design phase: After a demonstration is approved, states are required to submit an evaluation design to CMS for review and approval. The evaluation design must discuss, among other things, the hypotheses that will be tested, the data that will be used, and how the effects of the demonstration will be isolated from other changes occurring in the state. During review of the design, CMS can seek adjustments such as requiring the state to address certain objectives or using particular performance measures. Demonstration renewal: In the event that a state wishes to renew its demonstration, it must generally submit an application to CMS at least 1 year before the demonstration is scheduled to expire. The application must include, among other things, a report presenting the evaluation’s findings to date, referred to as an interim evaluation report. CMS can use the information from the interim evaluation report to negotiate changes in the STCs for the evaluation of the next demonstration cycle. If CMS renews the demonstration, the evaluation process starts over with the state submitting a new evaluation design that reflects changes in what is being tested in the new cycle. Demonstration end: CMS requires states to submit a final evaluation report for review and approval generally after the end of the demonstration, at which time the agency can work with the state to, for example, add clarity and disclose the limitations of the evaluation before the final evaluation report is made public. Within the framework that CMS has established for state-led evaluations, states design evaluations to the specifics of their demonstrations. As the size and scope of demonstrations varies considerably across states, so, too can evaluations vary in their breadth and complexity. State-led evaluations may assess the effects of several different policies, each with its own set of hypotheses—predictions of the effects of the policy—and methods. For example, a state could evaluate the effects of moving to a managed care delivery model for providing managed long-term services and supports (referred to as MLTSS), implementing provider payment pools aimed at delivery system reform, and expanding coverage to a new population all within the same demonstration. Each of those three elements would have its own hypotheses and methods and may have varying timeframes for the number of years of experience needed to be able to effectively measure the effects of what is being tested. CMS has the authority to initiate its own federal evaluations of section 1115 demonstrations, and states must fully cooperate with any such evaluations. Between 2014 and 2016, CMS initiated three federal evaluations that were ongoing as of November 2017. The first evaluation, initiated in 2014, is a large, multi-state evaluation examining four broad demonstration types in several states. (See table 1.) According to CMS, it selected these demonstration types—which together account for tens of billions of dollars in federal and state Medicaid spending—because they included policies that the agency considered priority areas for evaluation. CMS awarded a contract to an evaluation organization to implement the 5-year study. According to CMS, the estimated total cost of this evaluation for the 5-year life of the contract is $8.3 million. The evaluation was designed to produce three sets of results: a series of reports providing contextual information about the demonstrations being evaluated, referred to as rapid cycle reports; interim evaluation reports featuring early results of more in-depth analysis; and final evaluation reports. CMS contracted with another evaluation organization to conduct two federal evaluations examining demonstrations in single states—Indiana and Montana—over 4 years. As of September 2017, the estimated cost of this contract, inclusive of all options, was $8.2 million. In total, spending for Indiana’s and Montana’s demonstrations was about $2 billion in fiscal year 2015, including $1.6 billion in federal spending. Indiana: CMS initiated this evaluation in 2015. CMS officials told us they started this evaluation to better understand how policies in Indiana’s demonstration, many of which were unprecedented, were affecting beneficiaries. These policies included, for example, charging monthly contributions for most newly eligible adults with incomes from 0 to 138 percent of the federal poverty level; imposing a lock-out period of 6 months for nonpayment of premiums for most people with incomes above the federal poverty level; and charging co-payments above statutory levels for non-urgent use of emergency room services. The federal evaluation is aimed at estimating the effects of Indiana’s demonstration on health insurance coverage and access to and use of care, and documenting beneficiary understanding of enrollment, disenrollment, and copayment policies, among other things. Montana: CMS initiated this evaluation in 2016. CMS officials told us they started this evaluation to provide a point of comparison to Indiana’s demonstration, as Montana was implementing similar policies to Indiana but with some variations. For example, under Montana’s demonstration, the state charges premiums to most newly eligible adults with incomes between 51 and 138 percent of the federal poverty level; and disenrolls beneficiaries with incomes above the federal poverty level for nonpayment of premiums, with reenrollment when overdue premiums are paid. Similar to the federal evaluation of Indiana’s demonstration, the evaluation of Montana’s demonstration is aimed at estimating the effects of the demonstration on insurance coverage, access to and use of care, and documenting beneficiary understanding of and experience with premiums, copayments, enrollment, and disenrollment, among other things. State-led evaluations of demonstrations in selected states often had significant methodological weaknesses and gaps in results that affected their usefulness for federal decision-making. Though CMS has been taking steps since 2014 to improve the quality of these evaluations, the agency has not established written procedures to help implement some of these improvements. The state-led evaluations we reviewed in our selected states often had methodological limitations that affected what could be concluded about the demonstration’s effects. CMS hired a contractor to review state evaluation designs and reports, and that contractor identified a number of methodological concerns with the evaluations in our selected states. For example, CMS’s contractor raised concerns about the comparison groups, or lack thereof, used to isolate and measure the effects of the demonstrations in the Arkansas, California, Indiana, and Maryland evaluations. The contractor also raised concerns with the sufficiency of sample sizes and survey response rates for beneficiary surveys in Indiana. These surveys were key methods for assessing the effect of demonstrations on access, beneficiary understanding, and perceptions on affordability. Finally, the contractor raised concerns with the analysis of the effects of the demonstration on cost in Arkansas, California, and Maryland. Officials in several states told us that some of the methodological limitations in their evaluations were difficult to control. For example, officials in two states told us that isolating the effects of the demonstration was difficult given other changes happening in the state’s health care system at the same time. Some state officials also noted that state resources, including both funding and staff capacity, present challenges in completing robust evaluations. program, with approved funding up to about $690 million. Under the demonstration STCs, the state was required to evaluate whether the seven hospitals participating in the DSRIP were able to show improvements on certain outcome measures related to improving quality of care, improving population health and access to care, and reducing the per capita costs of health care. However, the evaluation report, submitted by the state 5 years after approval of the DSRIP program, provided only descriptive or summary information about the number and types of projects implemented by the hospitals receiving payments and did not provide any data to measure or conclusions on the effects of those payments. Arkansas: Under its demonstration, the state was testing the effects of using Medicaid funds to provide premium assistance for the more than 200,000 beneficiaries newly eligible under PPACA to purchase private insurance offered through the state’s health insurance exchange. The state’s evaluation was designed to assess whether beneficiaries would have equal or better access to care and equal or better outcomes than they would have had in the Medicaid fee-for- service system. The evaluation was also aimed at examining continuity of coverage for beneficiaries, as the expansion population was anticipated to have frequent income fluctuations leading to changes in eligibility and gaps in coverage. However, evaluation results submitted over two and a half years into the demonstration— the only results submitted for the state’s first cycle—were limited to data only from the first year of the demonstration and did not provide data on continuity of coverage. Achieving continuity of coverage was part of the state’s rationale for using an alternative approach to Medicaid expansion. Arizona: Among other things, Arizona’s demonstration includes MLTSS, including for the particularly complex populations of adults who have intellectual and developmental disabilities and for children with disabilities. As part of its evaluation, the state was assessing whether the quality of and access to care, as well as quality of life, would improve during the demonstration period for long-term care beneficiaries enrolled in MLTSS. However, evaluation results submitted in October 2016—the only results submitted for the state’s most recently completed demonstration cycle—lacked data on key measures of access, such as hospital readmission rates, and on quality of life, such as beneficiaries’ satisfaction with their health plan, provider, and case manager. A key contributor to the gaps in the information included in the state-led evaluations we reviewed was that CMS historically had not required the states to submit final, comprehensive evaluation results at the end of each demonstration cycle. As a result, for our selected states, including those discussed above, CMS had received only interim evaluation reports that were generally based on more limited data from the early years of the demonstration cycle and did not include all of the analyses planned. Though CMS had required final evaluation reports in the demonstration STCs, the due dates for those reports were tied to the expiration of the demonstrations or, in one case, CMS did not enforce the specified due date. Under such conditions, due dates for final evaluation reports were effectively pushed out when the demonstrations were renewed. Evaluation due dates could be pushed out for multiple cycles. CMS officials acknowledged that the lack of data in the interim evaluation reports from the more mature years of the demonstration affected the conclusions that could be drawn from them. We found that due dates for final evaluation reports were pushed out upon renewal in all seven of our states that had completed a demonstration cycle, leading to a gap in evaluation reporting of up to 6 or 7 years for several states. In Maryland, for example, CMS approved the demonstration to run from 2013 to 2016 with a final evaluation report due 120 days after the expiration of the demonstration. In 2016, CMS extended the demonstration, pushing the deadline for the final evaluation report to 18 months following the end of the new cycle, or June 2023. At that time, it will be 7 years since the interim evaluation report was submitted. See figure 2. The limitations in state-led evaluations—including methodological weaknesses and gaps in results—have, in part, hindered CMS’s use of them to inform its policy decisions. CMS officials told us that, historically, state-led evaluations have generally provided descriptive information but lacked evidence on outcomes and impacts. As a result, officials noted that they consider the data reported in the evaluations but, generally, state-led evaluations have not been particularly informative to their policy decisions. CMS officials told us that there have been cases where data, but not the conclusions, from state-led evaluations have informed their thinking on certain policy changes. For example, CMS officials said that data reported in early evaluations of DSRIP programs helped them in considering whether and how the agency should modify the basic policy structure of these programs. State officials had mixed perspectives on whether state-led evaluations influenced CMS decision-making around renewing their demonstrations. Officials in one state told us that while CMS reviewed their interim evaluation results, the results did not appear to influence the negotiations around the demonstration renewal. In contrast, officials from another state told us that discussion of interim evaluation results and limitations was a significant part of negotiations in 2016 regarding whether CMS would be willing to reauthorize funding for certain programs, including a new DSRIP investment and broader delivery system reforms the state was trying to implement. Officials in several states told us that there was value to state-led evaluations and in the federal-state partnership in designing the evaluations. CMS has implemented several procedures since 2014 aimed at improving the quality of state-led evaluations. CMS officials told us that these changes were part of CMS placing increased focus on monitoring and evaluation, which also resulted in CMS establishing a new office in 2015 that is responsible for these activities. One of the key changes CMS began implementing in 2014 was to set more explicit requirements for evaluations in the STCs, including requirements to improve the evaluation methodologies. According to CMS officials, the agency realized that one reason why state-led evaluations had generally lacked rigor and been of limited usefulness was that CMS had not been setting clear expectations for evaluations in the STCs. The officials said that CMS began strengthening evaluation requirements starting in 2014 with demonstrations implementing approaches in CMS’s high priority policy areas. In our review of the STCs for current demonstration cycles in our seven selected states that had completed a demonstration cycle, all of which were approved in 2014 or later, we found evidence of CMS’s efforts. Specifically, we found an increased focus on the use of independent evaluators and more explicit expectations for rigor in the design and conduct of evaluations: Consistent requirements for independent evaluators. The STCs for the most recently approved cycle of demonstrations in all seven states required the state to use an independent evaluator to conduct the evaluation. In some cases, the STCs also required that the evaluation design discuss the process to acquire the independent evaluator, including describing the contractor’s qualifications and how the state will assure no conflict of interest. These requirements were new in most states. More explicit expectations for rigor. In four of the seven states we reviewed, the STCs for the most recently approved cycle of states’ demonstrations included new, explicit language requiring state evaluations to meet the prevailing standards of scientific and academic rigor. These included standards for the evaluation design and conduct as well as the interpretation and reporting of findings. Some states’ STCs further specified the characteristics of rigor that CMS expected, including using the best available data, discussing the generalizability of results, and using controls and adjustments for and reporting the limitations of data and their effects on results. According to CMS, in the past, states have not always discussed methodological limitations in their evaluation reports. In addition to strengthening evaluation requirements, CMS has also taken steps since 2014 to enhance its oversight during the design and early stages of state-led evaluations, and, according to officials, some of these steps are likely to improve the usefulness of evaluations. Specifically, CMS has provided technical assistance to help states design their evaluations, sometimes leveraging expertise from other parts of HHS, including the HHS Office of the Assistant Secretary for Planning and Evaluation and the Center for Medicare & Medicaid Innovation as well as outside contractors. For example, officials stated that the agency assists states in developing relevant and standardized measures and provides assistance to help address states’ data limitations. Officials said this has resulted in more robust evaluation designs with increased potential to isolate outcomes and impacts. CMS has also used contractors to help in its review of state evaluation designs, including sampling designs, and evaluation reports. Since 2014, one contractor has provided over 30 assessments of evaluation designs and findings in at least 11 states. According to officials, this has increased CMS’s capacity to identify methodological weaknesses and negotiate changes with states to improve the usefulness of evaluations. For example, CMS’s contractor reviewed four draft survey instruments that Indiana planned to use in its evaluation, providing comments on the sampling frames and the structure and organization of survey questions. In response to the contractor’s feedback, Indiana made changes to the surveys to gather more reliable information and improve their readability. Finally, CMS has begun making changes to how it sets due dates for final evaluation reports. CMS officials told us that in spring 2017, CMS began requiring states to submit a comprehensive evaluation report for demonstrations in its high priority policy areas for evaluation at the end of each demonstration cycle, rather than after the expiration of the demonstration. CMS’s recent demonstration renewals in Florida and Missouri—approved in August and September of 2017, respectively— required a final, summative evaluation report at the end of the demonstration cycle, consistent with the policy. In October 2017, CMS officials stated that the agency was expanding this policy and was now planning to require final reports at the end of each cycle for all demonstrations, as they are approved or renewed. However, CMS had not established written procedures for implementing this new policy. It is too soon to assess the effectiveness of CMS’s recent efforts to strengthen state-led evaluations. CMS has been implementing the strategies on a rolling basis as states apply for demonstration renewals and new demonstrations. If implemented and enforced consistently, CMS’s efforts to improve the quality of state-led evaluations have the potential to result in more conclusive evaluations. Further, CMS’s efforts to improve the quality of state-led evaluations and its plan to require final reports after each demonstration cycle are consistent with evaluation guidance from the American Evaluation Association that recommends that federal agencies conduct evaluations of public programs and policies throughout the programs’ life cycles, not just at their end, and that agencies use evaluations to improve programs and assess their effectiveness. Federal internal control standards also state that management should implement control activities through policies. However, CMS does not have written procedures for implementing its planned policy, for example, for ensuring that the requirement is included in the STCs for all demonstrations, despite unique negotiations with each state, and that those requirements are consistently enforced. As a result, some state-led evaluations could continue to produce only more limited, interim findings that leave critical questions about the effects of the these demonstrations on beneficiaries and costs unanswered. CMS oversight of state-led evaluations may see further changes, as CMS officials told us that their oversight procedures are still evolving. For example, CMS officials told us that as of October 2017 the agency plans to begin to make distinctions in the level of evaluation required across demonstrations. They said that they are considering, for example, whether longstanding and largely unchanged components of a demonstration, and approaches previously tested by a number of other states without concern, require the same level of evaluation as testing a new approach to Medicaid expansion. Officials said that they plan to include language in demonstration STCs, as the agency did in the recent renewals for Florida and Missouri, instructing the state to consider those factors as the state designs its evaluation. Specifically, in the evaluation design submitted for CMS approval, the state should include in the discussion of limitations whether the demonstration is long-standing, noncomplex, has previously been rigorously evaluated and found to be successful, or is also considered to be successful without issues or concerns. CMS officials said that the expected level of rigor for the evaluation could be balanced against such factors. The implications of limiting evaluation requirements for certain types of demonstration approaches would depend on CMS’s definitions of what is, for example, noncomplex or has previously been rigorously evaluated. As of October 2017, CMS had not established specific criteria for determining when a demonstration component would require less rigorous evaluation. Agency officials told us they were planning to develop such criteria after concluding a pilot of alternative criteria and expectations in certain demonstrations related to providing services for family planning and former foster care children. They said that when these pilots have concluded they will evaluate the results. It is unclear how these narrowly scoped demonstrations—scoped for a particular type of service or population—can be used to inform criteria for comprehensive demonstrations that can affect a state’s entire Medicaid population and all services. Further, though CMS has begun indicating to states, including those with comprehensive demonstrations, that the agency may allow less rigorous evaluations for certain types of demonstration approaches, CMS has not established timeframes for issuing the criteria defining those conditions. Federal standards for internal control stress that management should implement control activities through policy and should internally and externally communicate necessary information to achieve the agency’s objectives. If CMS does not establish clear criteria for components of demonstrations that require limited evaluation, characteristics such as “long-standing” or “noncomplex” could be broadly interpreted. This could result in demonstrations that receive significant amounts of federal funds and affect many beneficiaries not being thoroughly evaluated. Written criteria could also reduce the potential for inconsistencies in the level of evaluation required across demonstrations. Data and other challenges have significantly limited the scope and progress of CMS’s large, multi-state evaluation and the agency’s evaluation of Indiana’s demonstration. Further, CMS has not released available evaluation results from the multi-state evaluation nor set timeframes for making these and future federal evaluation findings public. CMS encountered numerous data challenges in its multi-state evaluation that significantly reduced the scope of the analyses planned. These data challenges included limitations in the quality of CMS data and delays obtaining data directly from states. These limitations caused CMS to narrow the evaluation’s scope, often by reducing the number of state demonstrations evaluated or limiting what was being examined. All four demonstration types targeted in the multi-state evaluation—which reflect CMS’s high priority policy areas—were affected by these challenges. In the most extreme case, data limitations reduced the scope of the MLTSS evaluation to two states out of the more than 20 states operating such programs. As a result, the evaluation findings will not be generalizable to all MLTSS programs. (See table 2.) The data challenges were in addition to other challenges that affected the evaluation. For example, there were difficulties in trying to isolate demonstration effects in the context of rapidly changing health systems, or recent demonstrations had not been in operation long enough to allow CMS to appropriately assess longer- term effects. Many of the data challenges CMS encountered in the multi-state evaluation reflect long-standing concerns with the lack of accurate, complete, and timely Medicaid data. Specifically, we and others have found that data states are required to submit to CMS have, at times, been incomplete or have not been reported at all, particularly managed care encounter data. Complicating the availability of these data is CMS’s ongoing transition to a new data system, the Transformed Medicaid Statistical Information System (T-MSIS), which is CMS’s primary effort to improve Medicaid expenditure and utilization data. States’ transitions to T-MSIS, however, have introduced substantial delays in state data submissions. For example, by 2015, a large number of states had stopped submitting data through the legacy information system until they established T-MSIS submissions, which meant CMS had to obtain data directly from individual states for the multi-state evaluation. New data challenges have also emerged as states under demonstrations have enrolled newly eligible beneficiaries in health insurance exchange coverage. Lack of accessible data on beneficiaries enrolled in plans offered through the exchange resulted in the delays in obtaining data for Arkansas for the multi-state evaluation. In the past, we have made recommendations to CMS to take action to improve the data available for Medicaid program oversight, including to T-MSIS. As with the multi-state evaluation, data challenges, particularly obtaining needed data from the state, also proved to be a significant hurdle in CMS’s evaluation of Indiana’s demonstration. CMS initiated its federal evaluation of Indiana’s demonstration in 2015 to understand how the approaches being tested in Indiana’s demonstration affected beneficiaries (see sidebar). However, in 2016, Indiana raised concerns about sharing enrollee data with CMS’s evaluation contractors. Specifically, in a letter to CMS, the state cited concerns about the controls that CMS had in place to ensure that its contractors would protect enrollee information consistent with state and federal privacy protections. Despite assurances by CMS, CMS’s contractor and the state were not able to execute a data use agreement. This effectively halted the evaluation’s progress. The data use agreement was necessary for the contractor to access state enrollment data that drove a number of planned evaluation activities, including a key beneficiary survey. In October 2017, CMS officials told us that they were continuing to work with the state and anticipated that a data use agreement would be executed and the federal evaluation of Indiana’s demonstration would proceed. They did not have timeframes for when the agreement would be reached. Despite the data challenges and delays, CMS’s evaluations of Medicaid demonstrations, as planned, are likely to provide new information on the effects of demonstrations in different states to inform policy decisions. The multi-state evaluation, for example, is expected to provide information on whether living in a state that collects monthly contributions from beneficiaries affects the likelihood of beneficiaries enrolling in Medicaid and how per-beneficiary spending differs between premium assistance demonstration states and states that have implemented more traditional Medicaid expansions. CMS officials emphasized that federal evaluations allow for cross-state evaluations that can be used to validate the findings of related studies and also to identify which findings are generalizable to other states and populations. CMS has yet to make initial reports from the multi-state evaluation publicly available, limiting the potential use of those findings by states and other federal policymakers. As of October 2017, CMS’s contractor had produced 15 rapid cycle reports on states’ progress in implementing demonstrations in the high priority policy areas. These reports provide information on states’ implementation of their demonstrations and variations in design and provide details that can help with the interpretation of evaluation results, inform federal policymaking, and provide lessons learned to states and other stakeholders. The reports also describe policy and other challenges states encountered in implementing their programs, which could be useful to other states interested in replicating these models. (See table 3.) However, despite having received some of these reports from its contractor in 2015, CMS had not released these findings as of October 2017. CMS officials said that the reports were still under agency review and acknowledged that since some of the rapid cycle reports were almost 2 years old, CMS’s contractor was reviewing and updating the information in them. CMS officials noted that the rapid cycle reports had provided useful information and had influenced ongoing work with states designing related demonstrations. For example, according to officials, findings from the rapid cycle reports played a part in how the agency structured the latest DSRIP demonstrations. They also said that rapid cycle reports on beneficiary engagement have shed light on the effectiveness of different beneficiary education strategies, such as what approaches are more successful in capturing beneficiaries’ attention and what strategies are easiest for states to implement. In October 2017, CMS officials stated that they had recently decided to make the rapid cycle reports public, although the agency’s clearance process for the reports was still being decided and the officials did not have timeframes for the reports’ release. It is also uncertain when CMS will make interim and final evaluation reports from the multi-state evaluation public. By September 2017, CMS’s contractor for the multi-state evaluation produced three interim evaluation reports covering the four demonstration types. CMS officials regard these as draft interim evaluation reports, and, as of October 2017, said they were under agency review and would not be publicly released. CMS expects the contractor to submit final interim evaluation reports, which are anticipated to include some additional information beyond the draft reports, by September 2018, about 1 year later than when the final interim evaluation reports were originally due. CMS officials said that the agency planned to release the final interim evaluation reports, although there was no specific timetable for this. Timeframes for the completion and release of final evaluation results are even more uncertain, both because of the delays in the evaluation progress and because CMS has no standard policy for timeframes for releasing evaluation results. It is also uncertain when evaluation results will be available and made public for CMS’s evaluations of the Indiana and Montana demonstrations. Two years after the approval of the contract for the Indiana evaluation, CMS’s contractor has produced an evaluation design but no evaluation findings. CMS had not posted the evaluation design on its website until November 2017, according to officials, about 1 year after it was originally submitted. As discussed above, the lack of findings is due to the contractor and state not having negotiated a data use agreement. To the extent that Indiana’s evaluation moves forward and evaluation reports are produced, CMS officials said the agency plans to release the final evaluation report but did not indicate whether interim findings, available a year earlier, would be released. With regard to the Montana evaluation, CMS expects to receive the interim evaluation report by September 2018 and the final evaluation report by September 2019. How soon these findings would be publicly available, however, is difficult to estimate, as CMS officials told us the agency must review these before making them publically available and does not have timeframes for this review. The lack of a standard policy for the public release of findings from federal evaluations of Medicaid demonstrations is inconsistent with recommendations of the American Evaluation Association. The Association recommends that evaluation findings related to public accountability be disseminated to the public, and that evaluation results be made available in a timely manner and be easily accessible through the internet. For state-led evaluations, CMS must post on its website, or provide a link to the state’s website, all evaluation materials, including research and data collection, for the purposes of sharing findings with the public within 30 days of receiving the materials. CMS has not established a comparable policy for the release of findings from federal evaluations of demonstrations. CMS officials stated that federal evaluations provide a unique cross-state perspective that states typically do not have the capacity to provide in their own state-led evaluations; however, if these reports are not made public in a timely fashion, opportunities may be missed to inform federal and state policymakers and other stakeholders on the effects of Medicaid demonstrations. Section 1115 demonstrations have long been an important tool for providing states with the flexibility to test new approaches to providing and financing Medicaid coverage. Given the potential effects on millions of beneficiaries and significant federal investment in these demonstrations—over $100 billion in 2015—it is critical that they be evaluated. Evaluating Medicaid demonstrations is complex, both within a single state and across states. These programs are dynamic, and there are many factors affecting outcomes, making it challenging to isolate the effects of policy changes implemented under a demonstration. Further, persistent challenges with Medicaid data that we have highlighted over the years add to the complexity of evaluating demonstrations. Despite these challenges, targeted and well-designed evaluations offer the potential to identify policies that improve outcomes for beneficiaries and reduce costs to Medicaid. With the growing complexity of Medicaid programs and limited resources, that information could prove key in helping to sustain the program. CMS’s approach to overseeing state-led evaluations in the past has resulted in limited information about the effects of demonstrations, leaving gaps in evidence about policies that might improve state Medicaid programs. CMS’s efforts since 2014 to improve the usefulness of evaluations in informing state and federal Medicaid policy decisions have promise. If CMS consistently sets and enforces clear expectations and provides support for rigorous and timely state-led evaluations for all demonstrations as planned, those evaluations could yield more useful information within the next several years. However, CMS has not established written procedures for requiring final, comprehensive evaluation reports at the end of each cycle for all demonstrations, a key step in improving the usefulness of state-led evaluations. Further, CMS is planning to allow less rigorous evaluations for some demonstrations but has not yet established specific criteria for doing so. Federal evaluations led by CMS also show promise. The evaluations currently underway—despite challenges that caused delays and reduced scope—are likely to provide a cross-state look at the effects of policies that are of great interest to CMS, Congress, and other states. However, CMS has not yet made potentially useful rapid cycle reports public and has no established policy for making future evaluation reports public. By not making the results of the federal evaluations public in a timely manner, CMS is missing an opportunity to inform important policy discussions happening at the state and federal levels. We are making the following three recommendations to CMS: The Administrator of CMS should establish written procedures for implementing the agency’s policy that requires all states to submit a final evaluation report after the end of each demonstration cycle, regardless of renewal status. (Recommendation 1) The Administrator of CMS should issue written criteria for when CMS will allow limited evaluation of a demonstration or a portion of a demonstration, including defining conditions, such as what it means for a demonstration to be longstanding or noncomplex, as applicable. (Recommendation 2) The Administrator of CMS should establish and implement a policy for publicly releasing findings from federal evaluations of demonstrations, including findings from rapid cycle, interim, and final reports; and this policy should include standards for timely release. (Recommendation 3) We provided a draft of this report to HHS for review and comment. HHS concurred with all three recommendations. Regarding our first recommendation that CMS establish written procedures for implementing its policy requiring states to submit final evaluation reports after the end of each demonstration cycle, HHS said that it is in the process of developing such written procedures. HHS said that it is currently making this a requirement through the STCs for each demonstration as demonstrations are approved or renewed. Regarding our second recommendation that CMS issue written criteria for when the agency will allow states to limit evaluations of their demonstrations, HHS said it is in the process of testing such criteria, and that once it has experience with the criteria, it will develop written guidance. Regarding our third recommendation that CMS establish and implement a policy for publicly releasing findings from federal evaluations of demonstrations, HHS said that CMS is in the process of establishing such a policy. HHS added that CMS plans to have all finalized federal rapid cycle reports and final interim evaluation reports publicly available in the near future. HHS also provided technical comments, which we incorporated as appropriate. HHS’s comments are reproduced in appendix II. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services, appropriate congressional committees, and other interested parties. The report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The Medicaid section 1115 demonstrations (referred to as demonstrations) in our eight selected states varied in terms of the number of years the demonstrations had been in effect and cost, among other things. For example, three of the more mature demonstrations—those in Maryland, Massachusetts, and New York—had been in place for two decades. Demonstrations in Arkansas and Kansas represented more recent approvals, both approved in 2013. (See table 4.) With regard to cost, all of the selected states were among the top 15 states in terms of amount of spending under demonstrations. Together, spending under demonstrations in our selected states accounted for about 47 percent of all spending under demonstrations in fiscal year 2015. In addition to the contact named above, Susan Barnidge (Assistant Director), Linda McIver (Analyst-in-Charge), John Lalomio, Hannah Locke, and Corissa Kiyan-Fukumoto made key contributions to this report. Also contributing were Laurie Pachter and Emily Wilson.", "summary": "Demonstrations—which represented roughly a third of the more than $300 billion in federal Medicaid spending in 2015—are a powerful tool to test new approaches to providing coverage and delivering Medicaid services that could reduce costs and improve beneficiaries' outcomes. Evaluations are essential to determining whether demonstrations are having their intended effects. States are required to evaluate their demonstrations and CMS can initiate its own federal evaluations of demonstrations. GAO was asked to examine evaluations of demonstrations, including how the results have been used to inform Medicaid policy. This report examines (1) state-led evaluations and (2) federal evaluations. GAO reviewed evaluation documentation for eight states with high demonstration expenditures that varied in the number of years their demonstrations had been in effect and by geography. GAO also reviewed documentation for the ongoing federal evaluations and interviewed state and federal Medicaid officials. GAO assessed evaluation practices against federal standards for internal control and leading evaluation guidelines. Under section 1115 of the Social Security Act, the Secretary of Health and Human Services (HHS) may approve Medicaid demonstrations to allow states to test new approaches to providing coverage and for delivering services that can transform large portions of states' programs. However, GAO found that selected states' evaluations of these demonstrations often had significant limitations that affected their usefulness in informing policy decisions. The limitations included gaps in reported evaluation results for important parts of the demonstrations. (See table.) These gaps resulted, in part, from HHS's Centers for Medicare & Medicaid Services (CMS) requiring final, comprehensive evaluation reports after the expiration of the demonstrations rather than at the end of each 3- to 5-year demonstration cycle. CMS has taken a number of steps since 2014 to improve the quality of state-led evaluations, and in October 2017, officials stated that the agency planned to require final reports at the end of each demonstration cycle for all demonstrations. However, the agency has not established written procedures for implementing such requirements, which could allow for gaps to continue. CMS also plans to allow states to conduct less rigorous evaluations for certain types of demonstrations but has not established criteria defining under what conditions limited evaluations would be allowed. Federal evaluations led by CMS have also been limited due to data challenges that have affected the progress and scope of the work. For example, delays obtaining data directly from states, among other things, led CMS to considerably reduce the scope of a large, multi-state evaluation, which was initiated in 2014 to examine the impact of state demonstrations in four policy areas deemed to be federal priorities. Though CMS has made progress in obtaining needed data, it is uncertain when results from the multi-state and other federal evaluations will be available to policymakers because CMS has no policy for making results public. By not making these results public in a timely manner, CMS is missing an opportunity to inform important federal and state policy discussions. GAO recommends that CMS: (1) establish written procedures for requiring final evaluation reports at the end of each demonstration cycle, (2) issue criteria for when it will allow limited evaluations of demonstrations, and (3) establish a policy for publicly releasing findings from federal evaluations of demonstrations. HHS concurred with these recommendations.", "document_type": "gao"}
{"report": "VAPIHCS provides comprehensive health care to eligible veterans who reside in Hawaii and the three U.S. territories in the Pacific— American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. According to VAPIHCS officials, the geographic distances between the Pacific Islands and the use of multiple sources of health care to provide services to veterans in this region create complex care delivery and coordination challenges for VAPIHCS. VAPIHCS generally provides outpatient primary and mental health care services to the veterans it serves. These services are provided through its ambulatory care clinic, housed at the Spark M. Matsunaga VAMC in Honolulu, Hawaii, on the island of Oahu, and 10 clinics located in other communities across the Pacific Islands. These 10 clinics include 7 in the state of Hawaii on the islands of Oahu (1 clinic); Hawaii (2 clinics); Maui (1 clinic); Lanai (1 clinic); Molokai (1 clinic); and Kauai (1 clinic); 1 in the territory of American Samoa; 1 in the territory of Guam; and 1 in the Commonwealth of the Northern Mariana Islands on the island of Saipan. VAPIHCS provides some outpatient specialty care services through the ambulatory care clinic and through traveling VAPIHCS specialty care providers. Table 2 shows the number of enrolled veterans and the number of veterans that have used outpatient services in fiscal year 2017 at each VAPIHCS facility. According to VAPIHCS officials, VAPIHCS provides most specialty care and inpatient services to veterans at military treatment facilities through joint venture and sharing agreements with DOD or through non-VA providers in the community. In fiscal year 2017, VAPIHCS sent 50,000 referrals outside of VA, mostly to DOD or through the Choice Program. Military treatment facilities. Two military treatment facilities located in the Pacific Islands provide care for veterans through joint venture and sharing agreements with VAPIHCS: TAMC and NHG. According to VAPIHCS’ data, VAPIHCS made more than 8,000 referrals to these facilities in fiscal year 2017. VAPIHCS’ joint venture with TAMC: VAPIHCS’ joint venture agreement with TAMC—1 of 10 joint venture agreements in place between VA and DOD as of December 2017—states that VAPIHCS may refer veterans to TAMC providers for specialty care and inpatient services and, in return, for VAPIHCS to provide services for DOD beneficiaries, such as psychiatric and post-traumatic stress disorder services. VAPIHCS’ sharing agreement with NHG: VAPIHCS’ sharing agreement with NHG—1 of more than 200 active sharing agreements in place between VA and DOD as of December 2017—states that VAPIHCS may refer patients from the Saipan and Guam clinics to NHG for available specialty care, laboratory, emergency care, and inpatient services. NHG is located within a mile of the Guam clinic. Choice Program. VAPIHCS may also refer veterans to a non-VA provider in the community when veterans need care that is not offered by VAPIHCS, or cannot obtain the needed care in a timely manner. In fiscal year 2017, 61 percent of VAPIHCS referrals sent to community providers were through the Choice Program. (See fig. 1 for the breakdown of the number and percent of referrals sent to care outside of VAPIHCS in fiscal year 2017.) Veterans may opt to obtain health care services from a network of community providers through the Choice Program if they meet certain criteria, including: 1. the next available medical appointment with a VHA clinician is more than 30 days from the veteran’s preferred appointment date or the date the veteran’s physician determines he or she should be seen; 2. the veteran lives more than 40 miles driving distance from the nearest VHA facility with a full-time primary care physician; 3. the veteran needs to travel by air, boat, or ferry to the VHA facility that is closest to his or her home; 4. the veteran faces an unusual or excessive burden in travelling to a VHA facility based on geographic challenges, environmental factors, or a medical condition; 5. the veteran’s specific health care needs, including the nature and frequency of care needed, warrants participation in the program; or 6. the veteran lives in a state or territory without a full-service VHA medical facility. As the third-party administrator of the Choice Program for VAPIHCS, TriWest is responsible for establishing networks of community providers, scheduling appointments with community providers for eligible veterans, and paying providers for their services. TriWest has contractual time frames in which to accept and schedule the appointment, or return the referral to VAPIHCS for further action. Our review of 30 medical records of newly enrolled veterans accessing initial primary care services at the American Samoa, Guam, or Maui clinic found some delays in processing of health care benefits enrollment applications and contacting of veterans to schedule appointments. Once contacted, however, most veterans in our sample received initial primary care within VHA’s timeliness goal. These enrollment delays may have contributed to the time taken for veterans to see primary care providers, consistent with findings from our prior work. Enrollment for VA Health Care Benefits To receive VA health care benefits, a veteran may submit an enrollment application by mail, telephone, through VA’s website, or by applying in person at a VA health care facility. Once a veteran submits an application, there are three key steps for processing the application: (1) intake of application, (2) verification of eligibility, and (3) enrollment determination. In fiscal year 2016, most enrollment applications were processed by VA medical center staff. According to Veterans Health Administration policy, staff are required to process applications within 5 business days of receipt. applications within the timeliness goal set in VHA policy. For 27 of the 30 veterans in our sample, VHA staff recorded the date the application was received, which enabled us to assess the timeliness of enrollment processing for these veterans. We found that 22 of these 27 applications were processed within VHA’s required 5 business days, with an average of 1 day for processing. (See table 3.) Five applications were not processed within the 5-day requirement; for four of these veterans, it took an average of 10 days to process the enrollment applications. For the fifth veteran, it took 627 days for VHA to process the application, and for which VAPIHCS staff could not explain the delay. New Enrollee Appointments Veterans can request on their enrollment applications that Department of Veterans Affairs (VA) staff contact them to schedule an initial outpatient appointment. After a veteran’s enrollment application has been processed, VA staff are to initiate the scheduling of appointment requests within 7 days. within 7 days of their eligibility determination as required by VHA policy. We found that 15 of the 30 veterans in our review had contact initiated within 7 days to schedule an appointment, with an average of 4 days. (See table 4.) Fifteen veterans did not have contact initiated within the 7 day requirement; for 14 of these veterans, it took an average of 20 days to initiate contact. For the 15th veteran, it took 183 days to initiate contact. According to clinic staff, gaps in communication between clinic and VAPIHCS staff responsible for veteran enrollment, as well as staffing shortages, may have contributed to delays in contacting newly enrolled veterans. Clinic staff reported differences in how they are notified that a veteran’s enrollment application has been processed and that appointment scheduling should be initiated. In addition, staff from two clinics said there were staffing vacancies for primary care appointment schedulers in their clinics during the time of our medical record sample selection (October 2016 through March 2017), which may have caused delays in contacting veterans. Timeliness of initial primary care services. For the 30 newly enrolled veterans’ medical records we reviewed, we found that, once contacted, 27 veterans received initial primary care services within VHA’s timeliness goal of 30 days of their preferred appointment dates (the date a veteran requests health care services), with an average wait time of 7 days. (See table 4.) Three veterans did not receive initial primary care appointments at the Guam clinic within the 30-day requirement, and waited an average of 62 days. However, as we have previously reported, VHA’s timeliness goal monitors only a portion of the overall time it takes newly enrolled veterans to access primary care, and does not account for the time it takes to process enrollment applications, to notify clinic staff of successful enrollments, or to contact veterans to schedule their appointments. In our March 2016 report, we recommended that VA monitor the full amount of time newly enrolled veterans wait to be seen by primary care providers, starting with the date veterans request they be contacted to schedule appointments. When accounting for the time to process applications and contact veterans, we found 6 of the 30 veterans in our review waited more than 90 days to see a provider while 9 waited 30 days or less. Our review of a randomly selected sample of 30 medical records for veterans who accessed mental health care services for the first time at one of the selected three clinics found that most veterans received initial mental health care within VHA’s timeliness goal. Although most veterans in our sample received timely initial services, our review found that those veterans needing comprehensive mental health evaluations often experienced delays receiving them. Mental Health Care Appointments Veterans can either request mental health care services, or be referred for these services, such as by their primary care providers. Once care is requested for non- emergent mental health care needs, appointments are to be scheduled within 30 days of the referral’s clinically indicated date, or in the absence of a clinically indicated date, the veteran’s preferred date for their first mental health care appointment. In addition to scheduling the initial appointment, veterans are to receive a comprehensive mental health evaluation within 30 days of that initial referral’s clinically indicated date, or in the absence of a clinically indicated date, the veteran’s preferred date for their first mental health care appointment. This comprehensive mental health evaluation occurs during a mental health appointment, and includes a diagnosis and a plan for treatment. While this evaluation does not necessarily have to occur during the first mental health care appointment, it is expected to be completed within the timeliness goals as noted. Timeliness of initial mental health care services. Our review found that 21 of the 30 veterans in our sample who needed mental health care received their initial mental health care appointments within VHA’s timeliness goal of 30 days of their documented clinically indicated dates (the date an appointment is deemed clinically appropriate by the referring provider), or in the absence of clinically indicated dates, their preferred dates. (See table 5.) These 21 veterans were seen by a mental health care provider within an average of 7 days of their clinically indicated date or preferred date. Nine veterans did not receive initial mental health care appointments within VHA’s 30-day timeliness goal, and waited an average of 46 days to receive care from a mental health provider. Timeliness of comprehensive mental health evaluations. Although 21 of 30 veterans in our sample received initial mental health care appointments in a timely manner, our review found that most veterans needing comprehensive mental health evaluations experienced delays receiving them. Of the 30 veterans in our sample, 25 were identified as needing a comprehensive mental health evaluation, and only 9 received that evaluation within VHA’s timeliness goal of 30 days of their clinically indicated date, or in the absence of a clinically indicated date, the veteran’s preferred date. (See table 6.) These 9 veterans received their evaluations within an average of 8 days. For the 16 veterans that did not receive a comprehensive mental health evaluation within the 30-day requirement, it took between 35 and 217 days (an average of 82 days) for 15 veterans to receive an evaluation from the initial referral’s clinically indicated date or veteran’s preferred appointment date. The remaining veteran had not completed an evaluation as of February 2018. The process by which veterans received comprehensive mental health evaluations varied by clinic, and this sometimes resulted in the evaluations being completed outside of VHA’s timeliness goal: American Samoa clinic staff stated that they provide veterans with a hard-copy comprehensive mental health evaluation at the veteran’s first appointment. The veteran is instructed to complete the form at home, and return to the clinic at a later date to discuss with a provider. Staff stated that allowing veterans to fill out the form on their own saves time at the clinic, and allows veterans to be more thorough in their answers. A staff member stated that the comprehensive mental health evaluation is just one piece of the diagnostic interview and that, presumably, the provider obtains sufficient information from the veteran to develop a treatment plan and initiate services for the veteran while waiting for the veteran to complete the form. Guam clinic staff said that they generally complete the comprehensive mental health evaluation during the veteran’s first mental health care appointment, but do sometimes need to schedule a second appointment to complete the entire evaluation. Staff stated that the first priority is to treat and address what is clinically indicated, so they are sometimes delayed in completing all form requirements until a later time. Maui clinic staff stated that they typically schedule the first appointment with a veteran, and if it becomes clear that the veteran needs to continue receiving mental health services, they will schedule a comprehensive mental health evaluation at a future appointment. Follow-Up Appointments After a veteran is seen for an appointment at a Department of Veterans Affairs (VA) facility, the provider is to document in the veteran’s medical record a clinically appropriate specific return date or interval (such as 2, 3, or 6 months), when the provider determines the veteran should return for care. This is also known as the clinically indicated date. The follow-up appointment should then be scheduled within 30 days of the clinically indicated date. Our review of a randomly selected sample of medical records for 30 veterans in the Pacific Islands (15 veterans needing primary care and 15 veterans needing mental health care) who received follow-up appointments found that most of these veterans received care within VHA’s timeliness goal. Specifically, we found that of the 30 veterans, 25 veterans received follow-up care within 30 days of the clinically indicated date determined by each veteran’s provider, in accordance with VHA policy. (See table 7.) This included 10 veterans needing follow-up primary care (who received care an average of 6 days within the veteran’s clinically indicated date), and all 15 veterans needing follow-up mental health care (who received care an average of 3 days within the veteran’s clinically indicated date). The 5 veterans needing follow-up primary care that were not seen within the required 30 days were seen between 109 and 584 days (an average of 299 days) from their clinically indicated dates. Explanations for the length of time it took for these 5 veterans to receive care varied; for example, Guam clinic staff told us that one veteran’s follow-up care was delayed due to clinical and scheduling staffing shortages. We found that VAPIHCS referred 67 of 69 randomly selected specialty care referrals in our sample to non-VA providers in the Choice Program or through DOD within 7 days, in accordance with the timeliness goal set in VHA policy. Specifically, VAPIHCS met this goal for 28 of 30 specialty care referrals sent to Choice Program providers, and all 39 specialty care referrals sent to DOD providers at two military treatment facilities. VAPIHCS staff took an average of 2 days to review and send referrals to VAPIHCS staff responsible for Choice Program referrals, and an average of 1 day to review and send specialty care referrals to TAMC and NHG. VAPIHCS staff responsible for Choice Program referrals also are responsible for uploading the referrals into TriWest’s portal, the Choice Programs’ third-party administrator within VAPIHCS. Although VHA policy applies to referrals sent to in-house providers, a VHA official told us that VHA expects VAMCs to manage non-VA referrals as they would those referred in-house. A VAPIHCS official confirmed that it holds staff to the 7-day requirement found in VHA policy. We found that once specialty care referrals in our review were sent to the Choice Program or one of the two DOD military treatment facilities— TAMC and NHG—the amount of time it took veterans to receive care from these non-VA providers varied, and sometimes was lengthy. Time taken to receive care from a Choice Program provider. Once VAPIHCS staff reviews and uploads each referral into TriWest’s portal, TriWest is required to meet VA’s timeliness requirements for the Choice Program, which specify the amount of time TriWest has to (1) contact the veteran, (2) schedule the appointment, (3) and provide veterans with care. We found that for all 30 referrals in our sample, TriWest first attempted to contact the veteran within the 4 business days required once TriWest received and accepted the referral from VAPIHCS. However, we also found that TriWest did not follow the requirements for mailing letters for 3 of the referrals when it was unable to reach the veterans by phone. If TriWest is unable to reach a veteran after calling a minimum of three times over 4 business days, a letter is to be mailed to the veteran on the 7th business day after receiving the referral notifying them that they have 10 business days from the date of the letter to contact TriWest to schedule an appointment. For these 3 referrals, TriWest mailed a letter, but did not do so until one day later than the required 7th business day after receiving and accepting the referral. We found that after reaching the veteran, TriWest staff scheduled appointments for 17 of the 25 referrals within the 5 business days required for scheduling an appointment after the veteran opts in to the Choice Program. (See table 8.) We found varying reasons that may have delayed the scheduling of an appointment. For example, some records showed that TriWest staff did not begin to call a provider until 4 or more days after they reached the veteran and confirmed they wanted to utilize, or opt in to, the Choice Program to receive care. In addition, some providers required time to review the veteran’s medical record before scheduling the appointment with TriWest. We found that 20 of the 30 veterans referred to Choice Program providers received care within VHA’s 30-day timeliness goal that VA used to evaluate TriWest’s performance under its contract. TriWest has an overall timeliness goal from VHA to provide veterans care through Choice Program providers, although the way this was calculated changed during our review due to changes in their practice and modifications to the contract. The 20 veterans that received care within the timeliness goal did so within an average of 14 days. The 10 veterans that did not receive care within the 30-day timeliness goal waited between 31 and 126 days (an average of 62 days). Veteran preferences and specific provider tendencies sometimes led to delays in scheduling, causing care to be completed outside VHA’s timeliness goal. For example, our review of TriWest records found that two veterans in Guam noted that they preferred to stay on island for their ophthalmology referrals, rather than flying to Honolulu, and the non-VA Guam orthopedist sometimes took a week or more to review a veteran’s file before scheduling the appointment with TriWest. The 30-day timeliness goal that VA used to evaluate TriWest’s performance captured a portion of the overall amount of time that it took for these veterans to receive care. We found that the number of days from the referral’s creation to the date that veterans received care from Choice Program providers varied by clinic, and ranged from 19 to 239 days, with the average being 75 days. (See table 9.) This range and average includes circumstances outside of TriWest’s control; for example, four veterans in our sample chose to reschedule their appointments for a later date. One veteran from American Samoa was originally scheduled for an appointment within 40 days of the referral’s creation date; however, the veteran chose to reschedule the appointment and, in doing so, it took a total of 166 days for the veteran to be seen. three other veterans experienced delays in care after VAPIHCS initially sent their referrals to TAMC or NHG and later redirected the referrals to the Choice Program. VAPIHCS referred one veteran from Guam for specialty care at NHG. However, when VAPIHCS discovered that NHG could not provide care to the veteran, the veteran’s referral was redirected to the Choice Program 88 days after the referral creation date. This veteran encountered additional delays because of the time it took the Choice Program provider to review medical records before scheduling the appointment. As a result, it took a total of 180 days for the veteran to be seen. Time taken to receive care from a DOD provider. After referring a veteran to a DOD provider, VHA does not have any timeliness goals or requirements in place related to the scheduling of appointments, or when the veteran should receive care. Our review found wide ranges in the time it took for the 39 veterans in our sample to receive care at TAMC and NHG. (See table 10.) TAMC: It took up to 95 days for 29 veterans from the American Samoa, Guam, and Maui clinics referred to TAMC to receive specialty care, with an average of 37 days from the creation of the referral to receiving care. These time frames include some veterans that rescheduled their appointments for later dates. For example, one veteran from Maui did not show up to the originally scheduled appointment (which was scheduled for approximately a month after the referral creation date), and the appointment was rescheduled for two months later. NHG: It took up to 107 days for 10 veterans from the Guam clinic referred to NHG to receive specialty care, with an average of 47 days from the creation of the referral to receiving care. When reviewing VAPIHCS’ referrals to NHG, we found weaknesses with the VAPIHCS’ referral process, including (1) incorrectly canceling referrals, (2) inconsistent guidance describing roles and responsibilities, and (3) untimely referral management. These weaknesses may have contributed to the amount of time it took for veterans to receive care, or resulted in the veteran not receiving care. Military Treatment Facility Referral Process After the Department of Veterans Affairs (VA) Pacific Islands Health Care System (VAPIHCS) staff review a referral and decide care should be rendered at a military treatment facility, there are two different processes for sending the referral to Tripler Army Medical Center (TAMC) or Naval Hospital Guam (NHG). If it is determined that a veteran needs care at TAMC, VAPIHCS staff review and send the referral to TAMC’s VA Referral Center. There, TAMC staff enters the referral information into DOD’s electronic medical record system and completes the appointment scheduling process. If it is determined that a veteran needs care at NHG, VAPIHCS staff review and send the referral to designated staff on Guam who have access to enter the referral directly into NHG’s electronic medical record. After the designated staff on Guam enter the referral into the system, NHG staff are then responsible for scheduling the veteran’s appointment. Some referrals sent to NHG were incorrectly canceled by VAPIHCS staff. Specifically, in addition to the 10 completed referrals we reviewed, we also examined 5 referrals sent to NHG that were subsequently canceled by VAPIHCS staff responsible for referral management, but with no indication of appointments ever being scheduled. The reason for cancelations recorded in the veterans’ medical records was that the referrals had been open for more than 90 days; however, this practice is not in alignment with VHA policy. According to VHA policy confirmed by a VHA official, canceling a referral is an action taken by the receiving service to alert the sending provider that additional information is needed, or to correct an obvious error in the referral; a referral should not be canceled due to the length of time the referral has been open without care being provided. VHA policy also states that canceled referrals older than 90 days are not to be resubmitted by the sending provider; instead, the sending provider must reassess the patient’s needs, as the clinical circumstances may have changed, and create a new referral, as necessary. Based on our review, it is unclear why VAPIHCS staff responsible for referral management were not following VHA policy for canceling referrals, whether it was because they did not understand the policy or for other reasons. Federal internal control standards require management to review processes in a timely manner to ensure that control activities are appropriately designed and implemented. Because our review found that in some cases VAPIHCS staff were not following VHA’s referral policy, it is important for VAPIHCS to determine why staff are not adhering to the policy and take needed steps to ensure compliance. Ultimately, in our review of the veterans’ medical records, we did not find documentation that these veterans received the recommended care included in the canceled referrals. Additionally, we did not find evidence that four of the five referrals had been updated and resubmitted, or that any new referrals had been submitted in their place, which may have delayed needed care; or that the five affected veterans were contacted by VAPIHCS to understand why appointments had not been scheduled. Inconsistent guidance exists describing the roles and responsibilities of VAPIHCS staff involved in the NHG referral process. We identified different VAPIHCS guidance that provided inconsistent descriptions of the referral process with NHG. For example, a VAPIHCS flowchart depicting the referral process states that, after review, the referral is to be sent to a VAPIHCS staff member embedded within NHG to enter the referral information into NHG’s electronic medical record. However, language in the referral itself states that, after review, the referral is sent to Guam clinic staff to enter into NHG’s record. Federal internal control standards call for management to assign responsibility and delegate authority to achieve an agency’s objectives. A VAPIHCS official stated that the embedded member within NHG entering in referrals in NHG’s electronic medical record was an interim fix and that there are plans in place for those responsibilities to be transferred to NHG staff. Specifically, VAPIHCS and NHG officials reported that NHG plans to hire two staff members to manage the referral process, but as of December 2017, these 2 staff members had not yet been hired due to budgetary constraints. Whether or not NHG hires additional staff, it is important for VAPIHCS to clarify and document the roles and responsibilities of their staff for sending, managing, and monitoring referrals to NHG. Without such clarification, there is the risk for confusion about responsibilities for entering referrals into NHG’s electronic medical record, which could potentially create delays in appointment scheduling and veterans’ receiving care. VAPIHCS did not always manage referrals to NHG in a timely way. Our review found instances throughout the NHG referral process where lack of timely referral management by VAPIHCS staff may have contributed to delays in veterans receiving care. VHA policy states that the referral process should include appropriate staff to manage referral notification, disposition, scheduling and completion; and designate staff to run referral reports, which must be reviewed at least weekly to resolve issues. In addition, federal internal control standards state than an organization should establish and operate monitoring activities to determine appropriate corrective actions on a timely basis. One factor that contributed to the lack of timely referral management was that VAPIHCS does not effectively monitor the referrals sent to NHG. First, VAPIHCS staff did not always monitor the availability of services at NHG with the frequency necessary to ensure the timeliness of referral management. NHG is to provide VAPIHCS with a list of available outpatient services no less than quarterly so VAPIHCS can determine if a referral for a specific service can be made to NHG; we confirmed that NHG provided these lists quarterly during our review time frame. However, VAPIHCS staff did not monitor whether services remained available after sending referrals to NHG in a timely manner. For example, one veteran in our review was originally referred to NHG in late November 2016, but it was not until VAPIHCS staff followed up on the referral in early February 2017 that they were informed that NHG could not accommodate the veteran at that time and that they instead should refer the veteran to a non-VA provider. This may have contributed to delay in care for the veteran by more than 2 months. Second, VAPIHCS staff did not ensure that referrals were entered into NHG’s electronic medical record system in a timely manner to begin the appointment scheduling process; under the process agreed to by VAPIHCS and NHG, it is the responsibility of designated VAPIHCS staff to enter referrals into the NHG electronic medical record system. For example, VAPIHCS staff referred one veteran for care to NHG in November 2016. However, it was not until December 2016—one month later—that VAPIHCS staff checked on the status of the referral. Finding no evidence of actions taken to schedule an appointment, staff added a reminder for the embedded VAPIHCS staff member at NHG to enter the referral into NHG’s electronic medical record, to restart the appointment scheduling process. Third, VAPIHCS staff did not always manage referrals to ensure the timely disposition and scheduling of appointments. Among the five canceled referrals that we reviewed, we found VAPIHCS staff noticed appointments had not been scheduled only when they reviewed the referrals months later. For example, of the five referrals VAPIHCS sent to NHG, one referral, sent in mid-November 2016, was canceled in early February 2017 after VAPIHCS staff found no evidence that an appointment had or would be scheduled. another referral was sent in late November 2016. After VAPIHCS staff reviewed the referral and found no evidence that an appointment had or would be scheduled, they noted that the referral was 101 days old and canceled it in late January 2017. VAPIHCS staff referred another veteran to NHG in mid-March 2017. After VAPIHCS staff reviewed the referral and found no evidence that an appointment had or would be scheduled, they noted that the referral was almost 4 months old and canceled it in June 2017. VAPIHCS’ lack of timely referral management was also due to poor communication between VAPIHCS staff and NHG. Federal internal control standards state that an organization should communicate with external bodies to receive the necessary quality information required to achieve the entity’s objectives. A VAPIHCS official stated that VAPIHCS staff do not have the same level of communication with NHG as they do with TAMC, which has its own staff to schedule veteran appointments and communicate that information back to VAPIHCS on a weekly basis, including if they cannot schedule a veteran. Instead, the official stated that VAPIHCS staff have to independently monitor the status of referrals to NHG, or ask the embedded VAPIHCS staff member at NHG to complete referral research for them. In addition, our review of the referral notes for these veterans found no evidence of communication between VAPIHCS staff and NHG staff regarding NHG’s efforts to schedule appointments for veterans before VAPIHCS staff canceled them. Furthermore, we also found no evidence of communication regarding outreach by NHG staff to VAPIHCS staff to discuss any scheduling difficulties, such as being unable to contact a veteran. Because VAPIHCS relies on NHG to provide inpatient and specialty care services for veterans from Guam and the Commonwealth of the Northern Mariana Islands, it is essential that referrals sent to NHG are managed in a timely manner, including verifying the availability of services and ensuring referrals are entered into NHG’s electronic medical record system, as well as communicating with NHG about the status of veterans’ appointments. Without a more robust referral management process, VAPIHCS is unable to ensure that veterans receive needed care in a timely manner, if they receive care at all. We found that VAPIHCS has faced physician recruitment and retention challenges that are both unique to the Pacific Islands, such as the limited number of local physicians from which to recruit, and challenges that are common across VHA, such as the amount of time it takes to hire a new physician. Having an adequate physician workforce is key to ensuring veterans’ timely access to health care. Overall, there were at least 17 physician vacancies out of approximately 100 positions across VAPIHCS as of October 2017, as well as several more vacancies for other types of health care providers, some of which have been unfilled for some time. For example, Guam clinic staff told us that at one point between October 2016 and March 2017, the period of our medical record review, the clinic had 1.8 primary care physician full-time equivalents even though it was authorized for 4. VAPIHCS officials told us they are constantly trying to recruit physicians for their facilities. Recruitment and Retention Challenges Unique to VAPIHCS. Through our review of relevant literature and interviews with VAPIHCS officials, we learned that physician recruitment is challenging for VAPIHCS in the following ways, particularly because of its geographic remoteness: There is one local medical school and limited local providers from which VAPIHCS recruits. The University of Hawaii’s John A. Burns School of Medicine is the only local medical school across Hawaii, Guam, and American Samoa from which VAPIHCS recruits physicians. The islands of American Samoa, Guam, and Hawaii all include counties, facilities, or populations designated as Health Professional Shortage Areas, which indicate health care provider shortages in primary, dental, or mental health care. These designations indicate a limited number of local physicians for VAPIHCS to target in the event of a vacancy. A 2015 University of Hawaii study further highlighted these shortages. It found that the Hawaiian Islands had a deficit of more than 600 physicians, with a projected shortage of between 800 and 1,500 physicians by 2020. This requires VAPIHCS to focus its recruitment efforts on medical schools and physicians located on the mainland United States. Travel options for VAPIHCS staff and their families are limited. Finding physicians that are willing to relocate to such remote locations is difficult, according to VAPIHCS officials. In prior work, we found that other VAMCs experienced challenges recruiting physicians who were reluctant to practice in rural or geographically remote areas. This challenge is likely more pronounced for VAPIHCS, given the location of its clinics. Both American Samoa and Guam are thousands of miles from the mainland United States and travel to and from these islands requires significant time and money. For example, American Samoa only has two direct commercial flights a week (on Mondays and Fridays) and Guam has only a daily direct commercial flight to Honolulu. While the Hawaiian Islands are more accessible to the mainland, they are still geographically isolated relative to the rest of the United States, and face some of the same travel challenges as American Samoa and Guam. Residents face a high cost of living, limited community resources, and trade-offs associated with island living. While other regions of the country face similar challenges, they may be more pronounced living on an island where alternatives are limited. The cost of living in Hawaii is higher than the nationwide average, and VAPIHCS officials told us that the real estate market in Hawaii is extremely expensive. These officials also said that physician candidates have raised concerns about the quality of the public school system in some areas of the islands, which could add a potential expense of sending their children to private schools and thus deter them from accepting employment. Other concerns include, for example, the lack of a veterinarian on American Samoa. According to an official, VAPIHCS lost a candidate who had agreed to relocate to the island until learning of the lack of veterinary services. Technical issues due to locations. One physician in American Samoa told us that it can take almost 1.5 hours to access the web- based program VHA offers for voice-activated dictation of medical notes, and thus, instead, he often uses services offline, although doing so means he has to enter his notes into VA’s medical record at a later time. Guam clinic staff, including physicians, also face unique challenges due to working across the International Date Line from the Spark M. Matsunaga VAMC. Specifically, the Guam clinic information technology system operates off of a server located in Honolulu that is 20 hours, or almost a day, behind Guam. Veterans being treated in Guam are essentially being treated in the “future” according to VA’s server in Honolulu, as the date of a health care appointment in Guam is always one day ahead of the server in Honolulu. For example, if a Guam physician sees a patient on Monday at 3:00 pm, it is 7:00 pm on Sunday in Honolulu. As a result, physicians must wait until the next day to retroactively complete clinical notes. Officials also said that physicians are frustrated working in a system that may require multiple days to complete clinical notes, and that this issue has impacted physician recruitment and retention. Guam clinic staff also said that, due to the time change, they only have about 16 business hours per week that the clinic is open that overlap with business hours of VAPIHCS officials working in Honolulu, which limits the amount of time physicians at the Guam clinic can consult with other VAPIHCS physicians or administrators in Honolulu. Recruitment and Retention Challenges across VHA. VAPIHCS has encountered some of the same physician recruitment and retention challenges that we have previously found are common across VHA, although some of these challenges may be compounded by the Pacific Islands’ geographic remoteness. For example: Differences in interpretation of recruiting and hiring policies may have contributed to lengthy recruiting times. In prior work, we found that differences in VAMC officials’ understanding of some of VHA’s recruitment and hiring policies contributed to lengthy recruitment and hiring processes. We also heard differences in policy interpretations during our discussions with VAPIHCS officials for this review. For example, some officials mentioned that a physician vacancy must be posted to USAJobs; however, VHA’s hiring authorities allow facilities to hire physicians for positions without regard to civil service requirements, such as requiring public notice of the vacancy. Some VAPIHCS officials also mentioned having to wait to post a position until after the predecessor had vacated it, while another official correctly noted that the recruitment process to replace a departing physician can begin before the position is vacated. Failure to understand VHA’s hiring authorities and use an expeditious hiring process most suitable for a particular vacancy may contribute to the length of the recruitment process. Lack of interoperable electronic medical record systems between VA and DOD. We have reported for more than a decade that VA and DOD lack interoperable electronic medical record systems that permit the efficient electronic exchange of patient health information. VA and DOD partly addressed the lack of interoperability by utilizing a web-based Joint Legacy Viewer to facilitate information-sharing for VA and DOD patients, including those at VAPIHCS, NHG, and TAMC. The Joint Legacy Viewer provides VAPIHCS physicians with access to clinical notes on a veteran being treated at a military treatment facility. However, VAPIHCS and DOD officials told us that there are challenges using the Joint Legacy Viewer, including the absence of robust information found in electronic medical records, the need for physicians to toggle between multiple applications to obtain a patient’s full history, slow networks, and reduced worker productivity as a result of operating several different systems simultaneously. Retention of physicians may be difficult in an environment where the administrative burdens associated with information technology may take time away from providing patient care. Primary responsibility for physician recruitment and retention rests with each Veterans Affairs medical center (VAMC) While each Veterans Integrated Service Network has a Human Resources office responsible for overseeing the VAMC-level Human Resources offices within its network, individual VAMCs are responsible for managing their employee recruitment and retention programs. The Veterans Health Administration supports VAMCs in recruiting and retaining providers by providing system- wide strategies for their use. VAPIHCS and VHA officials told us they have recruited and retained physicians to the Pacific Islands by promoting attributes of its location and by using VHA strategies, similar to other VAMCs nationwide. Locally, officials told us they have advertised the Pacific Islands’ weather and scenery during their recruitment efforts. Officials also said they promoted VAPIHCS’ unique relationship with DOD through its joint venture with TAMC in Honolulu as an incentive for moving to Hawaii. For example, some VAPIHCS physicians working in Honolulu have the opportunity to work alongside DOD physicians at TAMC—including the ability to consult face-to-face regarding care for a veteran referred to TAMC and provide care to DOD beneficiaries in certain settings. VAPIHCS also used many of the VHA strategies used at VAMCs nationwide to help with its physician recruitment and retention efforts. VAPIHCS officials discussed the use of the following VHA strategies, and noted limitations associated with some of them. Financial incentives. VAPIHCS officials reported that they sometimes used recruitment and retention bonuses and relocation allowances for physicians. For example, in fiscal year 2017, VAPIHCS paid $217,257 in recruitment incentives to three specialty care providers (for an average of $72,419 per physician). VAPIHCS did not offer any other financial incentives that year. Education Debt Reduction Program. Through the Education Debt Reduction Program, VHA reimburses qualifying education loan debt for employees, including physicians, in hard-to-recruit positions. In fiscal year 2017, three primary care physicians in VAPIHCS had applications approved for this program. Each recipient was awarded, on average, $17,000. VAPIHCS officials said the program was generally considered a “great recruiting tool,” but that its success was inconsistent given uncertainties regarding the amount of funding that would be available to the facility in a given year. Funds for the Education Debt Reduction Program, which are centrally managed by VHA’s Healthcare Retention and Recruitment Office, are based on the availability of funds and demand each year. In instances where centralized funding is not available, VAPIHCS and other VAMCs are authorized to use local funds to support program offers, but VAPIHCS officials said they have not used any local funds to support the program in the last 5 years. National Recruitment Program. VHA’s National Healthcare Recruitment Service, a division of VHA’s Workforce Management and Consulting Office, operates the National Recruitment Program, which provides direct physician recruitment services to VAMCs for hard-to- recruit positions by using private-sector recruiting techniques, including representing VHA at medical conferences and screening resumes. As part of VISN 21, VAPIHCS may also use the services of the network’s one dedicated recruiter responsible for serving the nine facilities in the VISN. In the almost 6 years since this recruiter has worked for VISN 21, he reported recruiting seven physicians and one social worker for VAPIHCS, and is in the process of recruiting a nephrologist. The recruiter observed that with recent leadership changes, VAPIHCS officials have been more engaged with his office and the recruiting assistance he can provide. VAPIHCS officials shared these sentiments, echoing their interest in increasing utilization of the VISN recruiter. Rural Health Training and Education Initiative. According to VHA officials, VAPIHCS is one of five facilities to participate in VHA’s Office of Rural Health’s Rural Health Training and Education Initiative to enhance its physician recruitment efforts. This program works with academic affiliates to help place physicians in rural areas and enhance VAMCs’ recruitment efforts and educate trainees about working within a VA rural health environment. According to VAPIHCS officials, 3 out of 16 physicians from this program who are eligible to be hired have taken positions at its clinics, including positions in Guam and Molokai. Enhanced Physician Recruiting and Onboarding Model. In 2015, VHA issued its Enhanced Physician Recruiting and Onboarding Model to standardize interpretation of its recruitment policy, strengthen overall physician recruitment at VAMCs, and shorten hiring processing time. VAMCs were not required to implement the model, and in our prior work, we found that implementation has been limited due to, for example, the lack of resources to implement the recommendation for a dedicated VAMC-based physician recruiter. VAPIHCS officials we spoke with said they were unaware of the Enhanced Physician Recruitment and Onboarding Model, but reported that they use 20 of the 30 best practices listed under the model, when asked about those practices. These best practices include, for example, leveraging increased pay rates when recruiting physicians, engaging with the VISN recruiter for hard-to-fill vacancies, and identifying interview questions and an interview panel before recruitment begins. VAPIHCS officials reported that they do not use other best practices such as utilizing VA’s human resources program for tracking recruitment actions and having a dedicated physician recruiter because they already have an alternate practice in place or a practice does not match their needs, among other reasons. However, officials told us they plan to examine whether there are opportunities to leverage any of these remaining best practices. As noted, in a prior report we recommended that VHA should conduct a comprehensive, system-wide evaluation of the physician recruitment and retention strategies used by VAMCs to determine their overall effectiveness, identify and implement improvements, ensure coordination across VHA offices, and establish an ongoing monitoring process. However, because VAMCs are primarily responsible for managing their own employee recruitment and retention programs and given the unique and ongoing challenges VAPIHCS has experienced with recruiting and retaining physicians, it is also important for VAPIHCS to similarly evaluate whether the strategies it uses are effective. An evaluation conducted by VHA on system-wide recruitment and retention strategies would not preclude the need for VAPIHCS to evaluate the strategies it uses; rather, it would further help identify those specific strategies that are most effective for recruiting and retaining physicians in the Pacific Islands. Federal standards for internal control related to monitoring calls for agencies to perform monitoring activities, including completing evaluations to monitor the design and effectiveness of the operations at a specific time. Agencies are to then evaluate the results of these activities and take corrective actions as needed. Ensuring veterans have timely access to health care services is one of VA’s objectives, which is dependent upon having an adequate number of physicians to provide the care. VAPIHCS officials told us that as of December 2017 they have not conducted any type of evaluation of their current strategies for facilitating physician recruitment and retention due to recent changes in leadership positions. Without evaluating the strategies currently used to determine their effectiveness, or determining if additional strategies offered by VHA might be appropriate, VAPIHCS risks missing the opportunity to target its efforts to those strategies that have the greatest potential to ameliorate long-standing staffing shortages. According to VAPIHCS officials, veterans face challenges accessing health care services on the Pacific Islands due to the lack of certain specialty care providers on many of the islands, the significant travel that is required to obtain these services, and limitations associated with telehealth services. Lack of certain specialty care providers. VAPIHCS officials told us that several Pacific Islands lack certain specialty care services entirely or significantly enough that there may be only one or a few of a certain provider type available to serve all residents, including veterans. Overall, VAPIHCS officials noted that the availability of different types of physicians across the islands is constantly in flux, but said that notable shortages are in gastroenterology, audiology, podiatry, rheumatology, dermatology, and neurology. For example, according to VAPIHCS officials, there is only one dermatologist on Guam practicing at NHG, and there is only one gastroenterologist in the community providing certain services; Kauai has a shortage of oncologists; Maui has a shortage of cardiologists; and American Samoa has a shortage of almost all types of specialty care providers because it only has one hospital—the Lyndon B. Johnson Tropical Medical Center—to provide medical care to its approximate 55,000 residents. VAPIHCS officials said the hospital is lacking many specialty services. According to VA, it does not authorize non-VA care there because the hospital receives funding from other federal agencies to provide medical services. Additionally, the hospital is not accredited for safety and quality. TriWest officials reiterated that there are virtually no specialty providers available on American Samoa for them to contract with; as of July 2017, there was only one Choice Program provider contracted on the island. As a result, essentially all eligible veterans must travel to Hawaii for specialty care services. Significant travel required of veterans. Because many of the islands lack certain specialty providers, VAPIHCS officials said that veterans often must fly elsewhere to obtain care. While travelling such distances helps improve veterans’ access to health care services, it also creates challenges. For example, such travel requires time away from their homes and families, which may be particularly difficult for veterans in poor health. The time and distance required for travel can also be quite significant—for example, veterans from American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands must travel thousands of miles by plane to receive services in Honolulu. A Guam veterans group said that veterans were frustrated with having to fly 8 hours to Hawaii for health care services. In instances where the necessary services are beyond those available in Honolulu, veterans must fly to the mainland United States for care—a flight from Honolulu to California adds about 5 hours. The flight times are even longer for veterans travelling from American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam. Figure 2 illustrates the locations of veterans enrolled in VAPIHCS and the distances and flight times they may need to travel to receive care. According to VAPIHCS data, most VAPIHCS veterans travelling for health care services over the years have received care in Honolulu, although some have had to travel to the mainland United States for subspecialty care or highly specialized care such as organ transplants. Eligible veterans are provided reimbursement for travel-related expenses under VHA’s Beneficiary Travel Program. In fiscal year 2017, VAPIHCS provided beneficiary travel funds to 348 veterans from American Samoa and 92 veterans from Guam to travel to Honolulu for care, for a total of 678 trips. During this same year, 15 veterans traveled to the mainland United States for care. VAPIHCS reported that, overall, 830 VAPIHCS veterans used beneficiary travel benefits to travel to Honolulu or the mainland United States for care that year. This represents approximately 2 percent of the total number of veterans (51,213) who received some type of care through VAPIHCS in fiscal year 2017. Veterans are responsible for paying for travel if they are ineligible for travel benefits and travel is required to receive care. The significant costs associated with travel among the Pacific islands—flights, lodging, meals—could be cost prohibitive for these veterans and, as a result, they may be unable to access VA or non-VA health care services off island. Limitations with telehealth services. Veterans face challenges accessing health care services due to limitations with telehealth services. For example, VAPIHCS officials told us there are limitations with the availability of internet services on the islands of Guam and American Samoa. This could lead to disruptions—or even cancellations—of veterans’ telehealth appointments. For example, VAPIHCS officials shared that damaged cables in the Pacific Ocean due to natural disasters and equipment failure on the part of internet service providers on the islands have led to disrupted and cancelled appointments for veterans. In March 2018, VAPIHCS reported that it had increased bandwidth and purchased new equipment to help support its telehealth efforts. Additionally, the extent to which a veteran can receive telehealth in his or her home versus the local clinic may depend upon the licensure of the provider delivering care. If a veteran is receiving telehealth services while he or she is physically located in a clinic, under federal law, the provider is not required to be licensed in the state in which the facility is located. When the patient is receiving telehealth services at home, however, a state may require that the provider be licensed in the state in which the patient is located. An official said that this is currently hampering VAPIHCS’ telehealth expansion efforts into the home. VAPIHCS has utilized a system of travelling VAPIHCS providers and is working to improve its use of telehealth services to better ensure veterans’ timely access to care, among other strategies, according to VAPIHCS officials. Use of travelling providers. VAPIHCS officials reported that travelling providers enable VAPIHCS to better ensure access for veterans who are not eligible for beneficiary travel, and reduce the travel burden on veterans who are. Furthermore, they noted that it can be more cost effective for VAPIHCS to send a travelling provider to an island on a set schedule than it is to fly veterans to Honolulu for care. These providers also help expand access by providing specialty care that is in short supply or missing entirely in some communities. For example, a VAPIHCS optometrist travels to American Samoa for one week each month, according to officials, because there is no board-certified optometrist on the island. In addition, the travelling providers offer veterans the opportunity to receive specialty care from a VA provider. Officials said they adjust the travelling providers’ schedules to reflect changes in service availability in the local communities. Table 11 illustrates the types of VAPIHCS travelling providers and the frequency with which they visit different clinics, as of December 2017. Increased use of telehealth services. Even though internet service on the Pacific Islands is not always reliable as previously noted, VAPIHCS has been increasing its use of telehealth services to improve veterans’ access to health care services. In fiscal year 2017, VAPIHCS reported that 3,046 VAPIHCS veterans utilized clinic-based telehealth services compared to 1,299 veterans in fiscal year 2011, an increase of more than 134 percent. VAPIHCS launched two new telehealth hubs in June 2017: According to VA officials, VAPIHCS was 1 of 8 VAMCs selected to establish a hub, or center for delivery of teleprimary care from the VAMC to distant clinics within its system. According to VAPIHCS officials, the teleprimary care hub in the Spark M. Matsunaga VAMC is currently providing services to veterans at the Guam clinic and is exploring opportunities to provide teleurgent care in partnership with VAPIHCS’ call center. Officials further noted this would allow telehealth staff to provide veterans with “almost instant access” to health care services and, if successful, help improve veterans’ timely access to care by increasing the number of appointments at the clinics that could be dedicated to more complex concerns. VAPIHCS officials also said that the teleprimary care hub would also be used for long-term coverage for clinics with provider vacancies. Similarly, VAPIHCS was one of 11 VAMCs selected to establish a telemental health hub. According to VAPIHCS officials, this hub is currently serving veterans at the Oahu, Guam, and Molokai clinics and one of the Hawaii clinics (Hilo), with plans to expand services to the Kauai clinic in the future. Overall, officials said that feedback from veterans using these hubs has been “overwhelmingly positive,” as veterans appreciate receiving care from VAPIHCS providers, the privacy afforded by telehealth, and not having to travel for their services. The number of telehealth users in VAPIHCS is likely to continue increasing as a result of these new hubs. While feedback has been positive, VAPIHCS officials said they have experienced some challenges with the launch of these hubs, including the time and date difference between Guam and Honolulu where the staff for both hubs are located. Staff from the hubs had to adjust their schedules to support Guam’s hours given that only 16 business hours per week overlap between the two islands. Having sufficient space in the clinics for telehealth services is another challenge. To address this, one official said they are encouraging veterans to hold video visits with their providers from their homes if clinical exams are not required during their appointments. Improvements to clinical space. Because sufficient examination and treatment space is lacking in many of its clinics, VAPIHCS is in the process of building new or expanding existing clinics to increase the number and type of services available to veterans. According to a VAPIHCS official, as of August 2017, VAPIHCS has plans to replace six of its existing clinics and open one new clinic. These new clinics are expected to be open by fiscal year 2020. For example, the American Samoa clinic will be expanded to include additional space for mental health consultations and group meeting spaces, while the Guam clinic will be expanded to include additional primary and mental health care clinic space. This may help address a concern of the Guam veterans group we spoke with in Guam, who said the clinic was too small and did not offer sufficient patient privacy. According to VAPIHCS officials, VAPIHCS’ new clinic, expected to open in 2020, is to be located on the island of Oahu and will be a multi-specialty outpatient clinic offering many different services, including primary care, mental health, telemedicine, women’s care, dental care, a pain clinic, physical and occupational therapy, prosthetic, laboratory and pathology, pharmacy, and imaging services. Improvements to the beneficiary travel process. VAPIHCS is in the process of updating its process for arranging beneficiary travel, which ultimately could improve veterans’ access to care. Under the old process, officials told us that much of the responsibility for coordinating veterans’ travel fell on nursing and administrative staff, creating stress and reducing the amount of time nurses could spend on providing patient care. As a result, VAPIHCS decided to centralize its beneficiary travel process in the Office of Beneficiary Travel in Honolulu. The goal, according to VAPIHCS officials, is to remove the clinic staff from the process—thereby increasing the amount of time dedicated to their clinical duties—and instead encourage veterans to work directly with the staff in Honolulu to arrange their travel. As of September 2017, VAPIHCS was still in the process of implementing this new process. VAPIHCS also created a task force to improve the process for arranging travel for American Samoa veterans needing care off-island. As a result of their efforts, VAPIHCS officials reported in December 2017 that they had managed to reduce the time clinic staff in American Samoa dedicated each day to addressing travel issues from an average of 408 minutes to 64 minutes. Communicating with veterans about VA and Non-VA services. VAPIHCS uses a variety of mechanisms to communicate with veterans about access to VA and non-VA health care services. Veterans are introduced to these services through New Veteran Orientations that are offered at some of the clinics. VAPIHCS also gives newly enrolled veterans handbooks that are specific to the clinics where they enrolled. VAPIHCS also communicates with veterans through town hall meetings, health forums, its Facebook page, television and radio shows, and community events. For example, staff from the American Samoa clinic told us that they partner with a local television station to host a 30-minute monthly segment to educate veterans about available VA services. VAPIHCS officials reported they had planned to conduct approximately 170 outreach events, spanning 9 islands and targeting about 6,000 veterans, for fiscal year 2017. VAPIHCS officials told us that they try to provide culturally appropriate communications with veterans of the different Pacific Islands. For example, they said they are planning to translate materials into Samoan for veterans from American Samoa. They also recognize that many veterans prefer face-to-face interactions with VA officials rather than receiving information electronically; for example, the Hawaiian tradition known as “talk story” focuses on informal conversations and sharing information with friends in the community. VAPIHCS has generally provided primary and mental health care within VHA’s timeliness goals for most veterans reviewed, but there are weaknesses in the referral process for specialty care services. Because most specialty care services are provided to veterans outside of VA through DOD providers or through non-VA providers in the community, it is crucial that VAPIHCS improve its management of these referrals to ensure adherence to VHA policy. Without improvements to adherence to VHA policy in the referral process, inconsistent guidance on roles and responsibilities, and lack of timeliness of referral management, these weaknesses are likely to persist, and may add to the amount of time it takes for some veterans to receive care, or may result in some veterans not receiving care at all. In addition, maintaining an adequate clinical workforce to meet the health care needs of veterans is necessary to ensuring veterans’ timely access to care. Doing so is particularly important for VAPIHCS given the unique challenges it faces in recruiting and retaining physicians in the geographically remote Pacific Islands. It is therefore critical that VAPIHCS identify and use the most effective recruitment and retention strategies offered by VHA. However, VAPIHCS has not evaluated the strategies that it has used to determine if they are the most optimal or if other available strategies would be more effective. Without completing such an evaluation, VAPIHCS does not know if it is optimizing its resources to improve its hiring efforts and ameliorate long-standing physician shortages. We are making the following four recommendations to VA: 1. The Secretary of VA should ensure that VAPIHCS review its referral process for referrals to DOD providers, including referral cancellation, to determine why VHA policy is not being adhered to and make changes as needed. (Recommendation 1) 2. The Secretary of VA should ensure that VAPIHCS clarify guidance to clearly define and document roles and responsibilities for VAPIHCS staff involved in the referral process with NHG. (Recommendation 2) 3. The Secretary of VA should ensure that VAPIHCS improves the monitoring of referrals and communication with NHG to ensure the timely management of referrals to NHG, including verifying the availability of services for veterans; ensuring referrals are entered into NHG’s electronic medical record system; and obtaining information about the status of scheduling appointments for veterans. (Recommendation 3) 4. The Secretary of VA should ensure that VAPIHCS evaluates the effectiveness of strategies it currently uses to promote physician recruitment and retention, including how the strategies could be improved. The plan should also include an assessment of whether additional strategies currently offered by VHA would be beneficial. (Recommendation 4) We provided a draft of this report to VA and DOD for review and comment. VA provided written comments, which are reproduced in appendix I. In addition, both VA and DOD provided technical comments, which we have incorporated as appropriate. In its written comments, VA concurred with three of our four recommendations and provided information on its plans to address them. VA partly concurred with our recommendation for VAPIHCS to improve the monitoring of referrals and communication with NHG to ensure the timely management of referrals to NHG. For this recommendation, VA agreed that it should improve its monitoring of referrals by verifying the availability of services at NHG for veterans and obtaining the status of their appointments to be scheduled, and noted that VAPIHCS is developing a standard operating procedure that includes, among other things, monitoring referrals weekly to resolve issues. However, VA did not agree with ensuring referrals are entered into NHG’s electronic medical record system as part of its monitoring efforts and stated that it does not have the authority to do so. During our review, we found that designated VAPIHCS staff on Guam have access to, and are responsible for entering referrals directly into, NHG’s electronic medical record. Only after VAPIHCS staff enter referrals directly into NHG’s electronic medical record did NHG staff assume responsibility for scheduling veterans’ appointments. We confirmed this practice through interviews with VAPIHCS and DOD staff and through our review of a sample of referrals sent to NHG, which showed that VAPIHCS staff had entered the referrals. Furthermore, the sharing agreement between VAPIHCS and NHG documented the arrangement for VAPIHCS staff to be granted access to NHG’s electronic medical record. As long as VAPIHCS staff continue to be responsible for entering referrals into NHG’s electronic medical record system, we believe that it is also their responsibility to monitor the status of these referrals, including ensuring that referrals are entered correctly and timely. Because VAPIHCS relies on NHG to provide inpatient and specialty care services for veterans from Guam and the Commonwealth of the Northern Mariana Islands, it is important for VAPIHCS to monitor the entire referral management process to ensure that veterans receive needed care in a timely manner. We are sending copies of this report to the appropriate congressional committees and the Secretaries of Veterans Affairs and Defense. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or at DraperD@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Ann Tynan, Assistant Director, Kaitlin Coffey (Analyst in Charge), Kate Tussey, Jennie Apter, and Jackie Hamilton made key contributions to this report. Also contributing were Emily Binek, Muriel Brown, Natalie Hagy, Alexis MacDonald, and Brienne Tierney. Veterans Health Administration: Better Data and Evaluation Could Help Improve Physician Staffing, Recruitment, and Retention Strategies, GAO-18-124. Washington, D.C.: October 19, 2017. VA Health Care: Opportunities Exist for Improving Implementation and Oversight of Enrollment Processes for Veterans, GAO-17-709. Washington, D.C.: September 5, 2017. VA Health Care: Improvements Needed in Data and Monitoring of Clinical Productivity and Efficiency, GAO-17-480. Washington, D.C.: May 24, 2017. Veterans Health Care: Preliminary Observations on Veterans’ Access to Choice Program Care, GAO-17-397T. Washington, D.C.: March 7, 2017. Veterans Health Administration: Management Attention Is Needed to Address Systemic, Long-standing Human Capital Challenges, GAO-17-30. Washington, D.C., December 23, 2016. Veterans Health Care: Improvements Needed in Operationalizing Strategic Goals and Objectives, GAO-17-50. Washington, D.C.: October 21, 2016. Veterans Health Administration: Personnel Data Show Losses Increased for Clinical Occupations from Fiscal Year 2011 through 2015, Driven by Voluntary Resignations and Retirements, GAO-16-666R. Washington, D.C.: July 29, 2016. VA Health Care: Actions Needed to Improve Newly Enrolled Veterans’ Access to Primary Care, GAO-16-328. Washington, D.C.: March 18, 2016. VA Mental Health: Clearer Guidance on Access Policies and Wait-Time Data Needed, GAO-16-24. Washington, D.C.: October 28, 2015. VA Primary Care: Improved Oversight Needed to Better Ensure Timely Access and Efficient Delivery of Care. GAO-16-83. Washington, D.C.: October 8, 2015. VA Health Care: Oversight Improvements Needed for Nurse Recruitment and Retention Initiatives, GAO-15-794. Washington, D.C.: September 30, 2015. VA Health Care: Actions Needed to Ensure Adequate and Qualified Nurse Staffing, GAO-15-61. Washington, D.C.: October 16, 2014. VA Health Care: Management and Oversight of Consult Process Need Improvement to Help Ensure Veterans Receive Timely Outpatient Specialty Care, GAO-14-808. Washington, D.C.: September 30, 2014. VA Health Care: Reliability of Reported Outpatient Medical Appointment Wait Times and Scheduling Oversight Need Improvement, GAO-13-130. Washington, D.C.: December 21, 2012. VA and DOD Health Care: Department-Level Actions Needed to Assess Collaboration Performance, Address Barriers, and Identify Opportunities, GAO-12-992. Washington, D.C.: September 28, 2012. Veterans’ Health Care: Service Delivery for Veterans on Guam and the Commonwealth of the Northern Mariana Islands, GAO/HEHS-99-14. Washington, D.C.: November 4, 1998. Veterans’ Benefits: Availability of Benefits in American Samoa, GAO/HRD-93-16. Washington, D.C.: November 18, 1992.", "summary": "Veterans' access to timely health care at VA medical facilities has been a long-standing problem identified by GAO and VA's Office of Inspector General. The remote nature of the Pacific Islands creates some unique challenges for VAPIHCS, which may affect its ability to provide the approximately 50,000 veterans it serves in American Samoa, Guam, Hawaii, and the Commonwealth of the Northern Mariana Islands with timely access to primary, mental health, and specialty care. House Report 114–497 included a provision for GAO to review VHA's efforts to provide timely access to health care within VAPIHCS. Among other things, this report examines: the extent to which the VAPIHCS veterans received (1) timely primary and mental health care, and (2) timely specialty care; and (3) any challenges VAPIHCS faced in recruiting and retaining physicians, and strategies to resolve them. GAO reviewed relevant policy documents and a randomly selected, non-generalizable sample of 164 medical records, and interviewed VHA, VAPIHCS, and DOD officials. For the sample of veterans' medical records that GAO reviewed, most veterans received primary and mental health care from the Department of Veterans Affairs (VA) Pacific Islands Health Care System (VAPIHCS) within timeliness goals set by VA's Veterans Health Administration (VHA). However, GAO also found that some of these veterans experienced delays related to the processing of their enrollment applications, contacting them to schedule appointments, and completing comprehensive mental health evaluations. These delays were similar to some GAO had identified in previous work pertaining to veterans' access to care nationwide. For the sample of veterans' medical records that GAO reviewed, VAPIHCS referred nearly all specialty care to non-VA providers within VHA's timeliness goal, but the time taken to provide care was variable and sometimes lengthy. Specifically, VAPIHCS sent specialty care referrals to the Veterans Choice Program (Choice Program)—for veterans that GAO reviewed, the number of days to receive care from the Choice Program was, on average, 75 days. Department of Defense (DOD) military treatment facilities—for veterans that GAO reviewed, the number of days to receive care from the two DOD facilities for which VAPIHCS has agreements was, on average, 37 days from one facility and 47 days from the other. GAO identified weaknesses in VAPIHCS' management of its referral process for sending veterans for specialty care services at one of the two military treatment facilities. GAO found VAPIHCS did not always manage referrals to the military treatment facility in a timely way and there was inconsistent guidance describing the roles and responsibilities of the VAPIHCS staff involved in the process. These weaknesses may have contributed to the amount of time it took for veterans to receive specialty care services. GAO also found that VAPIHCS faces challenges recruiting and retaining physicians. As of October 2017, 17 of approximately 100 VAPIHCS physician positions were vacant, as were several other types of health care providers. Some of the challenges VAPIHCS faced are unique to the Pacific Islands, such as the availability of only one local medical school from which to recruit, along with travel burdens and a high cost of living that may discourage physicians from relocating there. Other challenges were similar to those GAO has previously identified as faced by VA medical centers across the country, such as differences in interpretation of hiring and recruiting policies. VAPIHCS officials said they use several strategies to help recruit and retain physicians, including VHA strategies used by other VA medical centers such as financial incentives and an educational debt reduction program. Although they described limits to the success of some of these strategies, they have not evaluated their effectiveness. Without completing an evaluation of its strategies, VAPIHCS may not be optimizing its resources to improve its hiring efforts and may continue to struggle with physician shortages. GAO makes four recommendations, including that VAPIHCS improve monitoring of referrals to one DOD facility and evaluate the effectiveness of physician recruitment and retention strategies. VA concurred with three recommendations and partially concurred with the fourth. GAO maintains that monitoring referrals to the DOD facility is needed, as discussed in the report.", "document_type": "gao"}
{"report": "Arsenic is a naturally occurring element that is widely distributed in the earth’s crust in two general forms—organic and inorganic. It commonly enters the body through ingestion of food or water. Most data reported for arsenic in food describe the levels of total arsenic because analyses that provide information about the forms of arsenic present are more difficult to perform, and relatively few laboratories are able to perform these analyses. Data on the levels of specific forms of arsenic, however, are becoming increasingly important because, according to the Agency for Toxic Substances and Disease Registry, the two forms have different toxicities, with inorganic arsenic being considered the more toxic form. Further, foods may have different proportions of organic and inorganic arsenic as well as different levels of total arsenic. According to the European Food Safety Authority, plants generally contain low levels of both total and inorganic arsenic, but rice may contain significant levels of total arsenic and inorganic arsenic. Levels of arsenic in groundwater, a major source of drinking water in many parts of the world, may be high in some areas; essentially all the arsenic in drinking water is inorganic arsenic. The form and level of arsenic in rice may vary depending on the geographic region where rice is grown, conditions under which rice is grown, variety of the rice, and rice milling practices. In the United States—where, according to USDA, approximately 80 percent of the rice consumed domestically is grown—rice is primarily grown in six states: Arkansas, California, Louisiana, Mississippi, Missouri, and Texas. In 2016, the latest year for which USDA data were available, about 47 percent of the rice grown in the United States was grown in Arkansas, and about 21 percent was grown in California. The amount of arsenic rice absorbs varies by geographic region because of differing levels of arsenic in the soil and other factors. Arsenic levels in the soil vary both naturally and as a result of human activity. Natural processes that contribute to arsenic levels in the soil may include bedrock weathering, because arsenic is present in many rock-forming minerals. Human activities that contribute to arsenic levels in the soil may include the use of arsenic-based pesticides and animal drugs, the mining and smelting of metal, and coal combustion. Figure 1 shows the results of a 2013 U.S. Geological Survey sampling of soils to measure the levels of arsenic in the contiguous United States. In addition, the figure shows the outlines of rice-growing counties based on 2016 data from USDA. Compared to other plants, rice absorbs more arsenic from the environment, in part because of the physiology of rice. For example, rice may readily absorb certain compounds of arsenic because, among other reasons, these compounds are similar in size to compounds containing silicon, an essential nutrient for rice. The conditions under which rice is grown may also cause it to absorb more arsenic than other plants. For instance, rice is often grown in flooded fields to control pests, grasses, and diseases, among other reasons. However, flooded conditions may promote the formation of arsenic compounds that may be easily absorbed by the rice plant. Even under the same growing conditions, some varieties of rice tend to have higher levels of arsenic in their grain, on average, than others, owing to a need for longer growing periods, among other factors. In addition, the concentrations of the two forms of arsenic may vary within the rice grain. While organic arsenic may be distributed throughout the rice grain, most of the inorganic arsenic is found in the bran layer. As seen in figure 2, the process of milling rice removes the bran layer; thus, levels of inorganic arsenic in white, or milled, rice may be lower than those in brown, or whole grain, rice. A number of federal agencies are responsible for ensuring the safety and quality of rice and for assessing the human health effects of ingestion of arsenic in rice. Within HHS, FDA has overall responsibility for implementing provisions of the Federal Food, Drug, and Cosmetic Act, as amended. Specifically, FDA is responsible for determining whether food, including rice, is deemed to be adulterated (i.e., whether it bears or contains any poisonous or deleterious substance that may render it injurious to health). Under its regulations, FDA may issue guidance to establish a level of a contaminant that a food should not exceed. FDA would consider case-by-case whether a food that contains the contaminant is adulterated. For example, in 2013, FDA issued draft guidance for arsenic in apple juice, on the basis of its risk assessment that estimated the long-term cancer risk posed by inorganic arsenic. According to FDA, its Center for Food Safety and Applied Nutrition is responsible for regulatory and research programs that address the health risks associated with foodborne contaminants and is aided in this role by the Office of Regulatory Affairs, which is responsible for field-based activities such as inspections, sampling, and testing of regulated products. The Center for Food Safety and Applied Nutrition also conducts industry outreach and educates consumers, among other things. Other agencies within HHS may also conduct research, collect data, and provide information on the health effects of arsenic. For example, the National Institutes of Health (NIH) sponsor research on the health effects of ingestion of arsenic. The Centers for Disease Control and Prevention (CDC) administer the National Health and Nutrition Examination Survey, which, among other things, collects data about diet and exposure to certain substances, such as arsenic. Under the Superfund Amendments and Reauthorization Act of 1986, the Agency for Toxic Substances and Disease Registry prepares toxicological profiles for certain hazardous substances, including arsenic. Agencies within USDA conduct and sponsor research to advance food safety and to help farmers market rice and manage the risk of growing it. Within USDA, ARS and NIFA conduct and sponsor research, to, among other things, maintain an adequate, nutritious, and safe supply of food to meet human nutritional needs and requirements. NIFA also distributes capacity grants that support research and extension programs at land- grant universities, which provide science-based information to farmers. The Agricultural Marketing Act of 1946 authorizes the Federal Grain Inspection Service (FGIS) to establish quality standards, including standards for rice. FGIS also offers inspection services for rice farmers and processors upon request. The Risk Management Agency manages the Federal Crop Insurance Corporation, which offers crop insurance to farmers for over 100 different crops, including rice. For the 2018 crop year, the rice crop insurance provisions generally require that the rice be flood-irrigated (i.e., intentionally covered with water at a uniform and shallow depth throughout the growing season). Other agencies play a role in managing the risk of arsenic. EPA regulates the presence of certain substances, such as arsenic, in drinking water under the Safe Drinking Water Act and conducts toxicological assessments. In 2001, EPA issued a rule limiting the level of arsenic in drinking water to 10 parts per billion (ppb) to protect consumers from the health effects of long-term exposure. Under its Integrated Risk Information System program, EPA conducts assessments that provide toxicity values—such as for increased cancer risk due to lifetime ingestion of a specified quantity of a substance. In accordance with congressional direction, EPA submitted a plan for developing a draft assessment and preliminary assessment materials for inorganic arsenic to NRC for review. In 2013, NRC released an interim report, which provided guidance to EPA and included a preliminary survey of the scientific literature. In addition, in accordance with Executive Order 13272, the Small Business Administration’s Office of Advocacy helps agencies assess the potential impacts of draft rules on small businesses—which could include members of the rice industry—small governmental jurisdictions, and small organizations. Entities outside of the federal government have recently proposed or established limits or guidance for arsenic in rice. For example, in 2017, the Codex Alimentarius, an international standard-setting body, published a code of practice that provides guidance for preventing and reducing arsenic contamination in rice, as well as communicating the risk to stakeholders. In 2014 and 2016, the Codex Alimentarius established a standard for inorganic arsenic of 200 ppb for white rice and 350 ppb for brown rice. In 2015, the European Commission issued a regulation limiting inorganic arsenic in various rice-based foods, including limits of 200 ppb in white rice, 250 ppb in brown rice, and 100 ppb in rice destined for food for infants and young children. Enterprise risk management allows agencies to assess threats and opportunities that could affect the achievement of their goals. In a 2016 report, we updated our 2005 risk management framework to (1) reflect changes to OMB’s Circular A-123, which requires agencies to implement enterprise risk management; (2) incorporate recent federal experience; and (3) identify essential elements of federal enterprise risk management. Beyond traditional internal controls, enterprise risk management promotes risk management by considering its effect across the entire organization and how it may interact with other identified risks. Additionally, it also addresses other topics such as setting strategy, governance, communicating with stakeholders, and measuring performance, and its principles apply at all levels of the organization and across all functions—such as those related to managing the risk of arsenic in rice. The six essential elements of enterprise risk management that we identified in December 2016 are as follows: Align risk management process with goals and objectives. Ensure the process maximizes the achievement of agency mission and results. Identify risks. Assemble a comprehensive list of risks, both threats and opportunities, that could affect the agency’s ability to achieve its goals and objectives. Assess risks. Examine risks, considering both the likelihood of the risk and the impact of the risk to help prioritize risk response. Respond to the risks. Select risk treatment response (based on risk appetite), including acceptance, avoidance, reduction, sharing, or transfer. Monitor risks. Monitor how risks are changing and whether responses are successful. Communicate and report on risks. Communicate risks with stakeholders and report on the status of addressing the risks. NRC, in its 2013 report, and recent key scientific reviews reported evidence of associations between long-term ingestion of arsenic and adverse human health effects. NRC identified stronger evidence of these associations at higher arsenic levels—defined by NRC as 100 ppb or higher in drinking water—than at lower levels, which are more common in the United States. NRC reported greater uncertainty regarding the associations with some health effects at lower levels of arsenic and noted that research on the health effects of ingestion of lower levels of arsenic is ongoing. Many of the studies on which NRC based its conclusions were focused on the ingestion of arsenic from drinking water, but other studies were based on arsenic from all sources, including dietary sources such as rice. Further, NRC reported that evidence from CDC dietary surveys and related academic studies suggests that food, particularly rice, may be a significant source of inorganic arsenic, especially when arsenic levels in drinking water are lower; however, consumption of rice and levels of arsenic in rice vary widely, making it difficult to estimate arsenic intake from rice. NRC reported strong evidence of causal associations—that is, a potential cause and effect—between the long-term ingestion of arsenic from water or dietary sources, such as rice, and the following five health effects: Skin diseases. Skin lesions. Skin lesions due to arsenic ingestion predispose a person to some skin cancers and may indicate increased susceptibility to other cancer and noncancer diseases. Skin lesions have a well-established dose-response relationship with arsenic in drinking water. Skin cancer. Arsenic is an established skin carcinogen, according to NRC. NRC stated that almost all published studies found evidence of an association between arsenic ingestion and nonmelanoma skin cancers. Lung cancer. Arsenic from drinking water is an established lung carcinogen in humans, according to NRC. NRC cited studies conducted in Argentina, Chile, Japan, Taiwan, and the United States that reported associations between high levels of arsenic ingestion and lung cancer. NRC reviewed several studies that examined ingestion of lower levels of arsenic, some of which found evidence of an association, while others did not. Cardiovascular disease. NRC stated that many studies found a causal association between the ingestion of arsenic and cardiovascular disease and mortality. Studies suggest that the ingestion of lower levels of arsenic in drinking water and possibly in food is associated with cardiovascular disease, but additional evidence is needed to fully understand the relationship. Bladder cancer. Arsenic is an established bladder carcinogen in humans, according to NRC. NRC cited a 2012 assessment by the International Agency for Research on Cancer that indicated higher mortality from bladder cancer in populations that are exposed to high levels of arsenic compared to those that are not based on studies in Argentina, Chile, and Taiwan. NRC reported that there was moderate evidence of association between the long-term ingestion of various levels of arsenic from water or dietary sources such as rice, and adverse health effects, although some studies found evidence of an association and others did not. Adverse health effects include, for example, neurodevelopmental toxicity and pregnancy outcomes related to infant illness, disease, or injury. NRC also reported that there was limited evidence of an association between the long-term ingestion of arsenic from water and dietary sources and adverse health effects, such as liver and pancreatic cancer and renal disease. We analyzed 14 scientific reviews, published since NRC’s 2013 report, from January 2015 through early June 2017, that generally have supported NRC’s conclusions that long-term ingestion of arsenic is associated with the above-mentioned health effects. Two reviews reporting additional evidence related to cardiovascular disease suggested that there may be a threshold—an arsenic level below which there is no significant occurrence of cardiovascular disease. However, one of these reviews noted that the number of studies they examined was small, among other limitations. Regarding lung cancer, another recent review proposed a dose-response relationship, which NRC identified as a gap in the understanding of this adverse health effect. However, this review noted that the studies it included did not distinguish between the risk of lung cancer in smokers and non-smokers, which NRC reported may be a key confounding factor. The review also cited other limitations, including the small number of studies it used to model this relationship. See appendix II for additional information about the reviews we identified. FDA and USDA have taken actions to manage the risk to human health from arsenic in rice, including assessing the type and prevalence of health effects that may result from long-term ingestion. These efforts were generally consistent with the six essential elements for managing risk, which we have found could help agencies assess threats that could affect the achievement of their goals. Specifically, FDA has taken actions that were consistent with five of the six essential elements, including: (1) aligning risk management process with goals and objectives, (2) identifying risks, (3) assessing risks, (4) responding to the risks, and (5) monitoring risks. However, FDA has not fully taken action on the sixth element of communicating and reporting on risks. FDA issued a risk assessment in 2016 for public comment and a draft guidance limiting the levels of arsenic in infant rice cereal, but it has not updated or finalized these key documents. USDA has taken actions consistent with five of the six essential elements but has not taken actions to monitor the risk because of its more limited, nonregulatory role. FDA and USDA have aligned their actions to manage the risk to human health from arsenic in rice to goals in their strategic plans. According to FDA officials, FDA’s actions align with three of the six goals identified in the 2015–2018 research strategic plan for FDA’s Center for Food Safety and Applied Nutrition, including advancing diet and health research that contributes to the development of science-based policies and communication strategies. Regarding USDA’s actions, ARS officials stated that their research on arsenic in rice aligned with four goals in ARS’s fiscal year 2012–2017 strategic plan, such as protecting food from pathogens, toxins, and chemical contamination during production, processing, and preparation. NIFA officials stated that the research they sponsored on arsenic in rice aligned with one of the sub-goals in NIFA’s fiscal year 2014–2018 strategic plan: to reduce the incidence of foodborne illness and provide a safer food supply. FGIS officials provided documentation showing that their actions aligned with one of the goals in their fiscal year 2016–2020 strategic plan: provide the environment for fair and competitive market practices between agricultural producers and buyers. FDA’s and USDA’s actions were consistent with the essential element of aligning risk management actions to their strategic plans. Total Diet Study The Food and Drug Administration’s (FDA) Total Diet Study, which began testing for arsenic in 1991, is an ongoing program that monitors the levels of about 800 contaminants and nutrients in the average U.S. diet. To conduct the study, FDA buys, prepares, and analyzes about 280 kinds of foods and beverages from representative areas of the country and estimates the average amounts of contaminants and nutrients the entire U.S. population, some subpopulations, and each person consumes annually. The sampling plan calls for purchasing each type of food four times a year, each time in a different region. Within each region, FDA purchases each food product from three different stores and combines them into a composite sample, for a total of four estimates each year. FDA makes results of the study, from 1991 through 2015, available to the public in electronic form on its website. FDA and USDA have taken actions to identify the risk of arsenic in rice. FDA has identified the risk of arsenic in rice through the Total Diet Study—an annual testing of contaminants and nutrients in food. As part of conducting the Total Diet Study, FDA collects samples of certain foods, including rice, and tests them for a variety of toxic chemicals, including total arsenic. From 2014 through 2015, the most recent years for which data are available, FDA tested six different categories of rice-based foods for arsenic. FDA officials told us that they identified arsenic in rice as a priority based, in part, on the results of the Total Diet Study, which indicated that rice had higher levels of arsenic compared to other foods. Some university researchers we interviewed stated that the Total Diet Study would be more helpful if it measured inorganic arsenic or had a more robust methodology. For example, one university researcher noted that the number of samples in the Total Diet Study is not big enough to be nationally representative. FDA officials told us that starting with the fiscal year 2018 Total Diet Study, they plan to begin testing rice-based foods for inorganic arsenic, increase the number of samples they collect, and make other improvements to the sampling methodology. USDA officials have taken actions to identify the risk of arsenic in rice through a variety of research programs. ARS officials told us that they have conducted research on arsenic in rice under four national programs: (1) plant genetic resources, genomics, and genetic improvement; (2) water availability and watershed management; (3) human nutrition; and (4) food safety. For example, ARS researchers are examining whether changes in soil chemistry as a result of organic or conventional management practices affect arsenic levels in rice. NIFA officials stated that NIFA sponsors research on arsenic in rice through formula-based grants to universities and through competitive grants, such as those offered through the Agriculture and Food Research Initiative. To identify what research to undertake, ARS officials told us that they typically meet with industry to identify its highest priorities. For example, ARS officials from the Delta Water Management Research Unit in Arkansas stated that they started researching arsenic in rice after participating in a joint ARS-USA Rice Federation conference in 2012. FGIS officials told us that contaminants such as arsenic may affect the quality of a grain, such as rice, and hence its value. They stated that they work closely with the grain industry to develop new standards and tests to meet industry’s needs. FDA and USDA have taken actions to assess the risk of arsenic in rice. In 2012, FDA published its current method to detect inorganic arsenic in rice. FDA officials told us that this method, though useful, is time- consuming and expensive, and the agency continues to develop other methods to reduce cost and time. For example, in 2017, FDA developed another method to detect inorganic arsenic in wine and rice that takes less time than its current method. FDA officials told us they have an ongoing research project on a field-deployable method based on a commercially-available digital arsenic test kit for detecting arsenic in drinking water called the Arsenator. In addition, FDA has been using laser ablation, the process of removing a material from a solid using a laser beam so that it can be measured, as a way to study arsenic distribution in rice. From 2011 through 2014, FDA conducted targeted sampling of more than 1,400 rice-based foods—including rice, rice beverages, cereals, and snacks—for inorganic arsenic. This targeted sampling and a literature review of articles published before February 2015 informed a risk assessment of arsenic in rice that FDA issued for public comment in April 2016. Specifically, the risk assessment used the results of the targeted sampling to identify levels of inorganic arsenic in rice and examined available scientific information to provide quantitative estimates of lung and bladder cancer risk—that is, the number of expected lung and bladder cancer cases per million people that may be attributable to long- term ingestion of inorganic arsenic in rice and a qualitative assessment of other adverse health effects. The risk assessment also analyzed alternative approaches to reducing the risk of arsenic in rice, such as instituting limits on the allowable level of arsenic in various rice-based foods, limiting the amount and frequency of consumption of rice, and cooking practices. FDA’s actions have helped assess the risk of arsenic in rice, although some stakeholders we interviewed have identified limitations to FDA’s actions. For example, one rice producer noted that because FDA’s current detection method is time-consuming and expensive, it is not widely used—companies only use it when tests for total arsenic reveal that the levels exceed the limit for inorganic arsenic that their customers request. Some stakeholders noted that the evidence FDA used to assess the risk of the ingestion of low levels of arsenic, which may be more relevant for rice consumption, is more uncertain. USDA agencies have also taken actions to assess the risk by conducting research to develop faster and less expensive methods to detect inorganic arsenic in rice. In 2016, ARS developed a method using hydride generation, which uses an acid to convert the inorganic arsenic into a gas that can be detected by an instrument. ARS officials stated that they have conducted research on the hydride generation method for more than 5 years and were able to further refine the method with funding from the Rice Foundation. Stakeholders from the rice industry and a university researcher we interviewed noted that, while the hydride generation method is faster and cheaper than FDA’s current detection method, it is too time-consuming and expensive for commercial purposes. For example, rice mills could not keep pace with trucks lining up to unload rice if they use the hydride generation method. However, ARS officials stated that researchers may use it if they need to analyze thousands of samples and are willing to trade off some accuracy for speed and cost. In addition, FGIS conducted some of its own development work on the Arsenator. Agency officials said that they began research on the Arsenator to help provide a rapid and inexpensive method of detecting inorganic arsenic at FGIS official testing locations that could include rice mills but have suspended their efforts because representatives of the rice industry have told them that these tests are not necessary. FDA and USDA have taken actions to respond to the risk of arsenic in rice. In 2016, FDA issued draft guidance, which proposed an action level, recommending that the rice industry not exceed a level of 100 ppb inorganic arsenic in infant rice cereal, and FDA has conducted research on cooking methods that may reduce arsenic. In its draft guidance, FDA stated that it used its risk assessment, among other considerations, to identify the level of inorganic arsenic in infant rice cereal. FDA further noted that it selected 100 ppb because of the potential for human health risks associated with inorganic arsenic and because such a level is achievable with the use of current good manufacturing practices— specifically, selecting sources of rice or rice-derived ingredients with lower inorganic arsenic levels. FDA officials told us that they focused on infant rice cereal because infants are at a higher risk of experiencing some of the health effects of ingesting inorganic arsenic, such as neurodevelopmental effects, and because the diet of infants is less varied than that of adults. FDA officials noted that the proposed guidance sets a limit for infant rice cereal that is generally consistent with the limit set by the European Commission and that other types of rice sold in the United States also generally meet the Codex Alimentarius standards. University researchers and a group representing consumers we interviewed stated that FDA’s draft guidance is a good first step, but that FDA should establish limits for arsenic in other rice products, such as rice crackers and other foods that children eat. FDA officials noted that the next most susceptible group would likely be toddlers and young children, but because their diet is more diverse than that of infants, rice-based foods make up a smaller portion of their diet. FDA requested public comments on certain aspects of the draft guidance, such as its feasibility, and noted that when it is finalized, it will represent FDA’s current thinking on this topic. The public comments were due to FDA in July 2016, although FDA noted that the public may comment on its guidance at any time. University researchers and stakeholders from the rice industry we interviewed stated that FDA’s draft guidance has become a de facto industry standard for infant rice cereal. In 2016, FDA also published research on the effect that cooking methods, such as cooking rice in excess water, may have on reducing the level of arsenic in rice. FDA officials told us that they provided advice to consumers on cooking methods that could reduce arsenic in rice on the FDA website but said FDA will not direct manufacturers to change the cooking instructions for rice because the alternative methods may reduce the nutritional value of the rice. Within USDA, ARS and NIFA have sponsored published and ongoing research that can help respond to the risk, such as research on ways to reduce the uptake of arsenic by rice through new rice varieties, water management practices, and soil additives, as well as research on the genetic mechanisms underlying the uptake and transport of arsenic in the rice plant. For example, ARS has been conducting research on rice varieties that can improve yield and grain quality, including lower levels of arsenic, at the Dale Bumpers National Rice Research Center in Arkansas for more than 30 years. In 2016, university and ARS researchers published a study showing that growing rice using a water management practice called alternate wetting and drying could decrease the levels of arsenic. Under this practice of growing rice, shown in figure 3 below, fields are periodically drained and re-flooded during the growing season. ARS officials stated that the alternate wetting and drying water management practice has been adopted to a limited extent in Arkansas, but pointed out that other benefits, such as reducing water use, may have been more influential to its adoption than the lowering of arsenic levels. They noted that there are a number of challenges that may preclude widespread use, including inadequate water-pumping capacity and the lack of crop insurance coverage for the practice. In addition, in 2015, university researchers and an ARS researcher, with a grant from NIFA, published a study on the effects of adding iron oxide to the soil on the levels of arsenic in rice; they found that iron oxide resulted in significant reduction of arsenic for the two varieties of rice that the study examined. FDA, which is responsible for ensuring the safety of rice and rice-based foods, has taken actions to monitor the risk of arsenic in rice. USDA has not done so, because of its more limited, nonregulatory role. FDA has a compliance program designed to monitor over 1,400 products annually, including foods that are most likely to contribute to the dietary intake of toxic elements, among other contaminants. In fiscal years 2015 and 2016, FDA monitored the risk of arsenic by assessing the levels in rice and rice-based foods under this compliance program, and FDA officials told us that they plan to continue to do so in fiscal years 2017 and 2018. FDA officials told us that they generally test the rice for total arsenic but have recently analyzed some samples for inorganic arsenic based on factors such as the level of total arsenic found. FDA considers whether to conduct follow-up actions, including enforcement actions, on a case-by- case basis. As a result of its monitoring in 2016 and 2017 FDA considered, but did not take, two enforcement actions for arsenic in infant rice cereal. FDA officials stated that the inorganic arsenic level in one case was close to the 100 ppb limit and within the margin of error of the detection method, and in the second case, FDA determined during its follow-up to the initial sample that the manufacturer destroyed the remaining product. USDA agencies have not monitored arsenic in rice. The Food Safety and Inspection Service is USDA’s regulatory agency for food safety, but officials have told us they have not taken actions in this area because rice is not under the agency’s jurisdiction. ARS maintains a food composition database, but it does not monitor rice for contaminants such as arsenic because, according to ARS officials, that is not the database’s purpose. FGIS officials stated that they do not have an arsenic testing program for rice at this time. They told us that they considered establishing a testing program for rice intended for export at the request of the rice industry. However, FGIS officials stated that they suspended their efforts when industry determined that it did not need a testing program. FDA and USDA have taken actions to communicate and report on the risk of arsenic in rice to the public. FDA has issued a risk assessment and draft guidance on arsenic in infant rice cereal, but it has not updated or finalized these documents. FDA’s 2016 risk assessment report provides information about the risk from long-term ingestion of arsenic in rice, and its draft guidance on arsenic in infant rice cereal includes a link to an FDA website with information for consumers, including pregnant women and parents. FDA has requested comments and received 22 public comments from 17 individuals and organizations on both documents. The comments have addressed a range of issues, including the methodology FDA used in its risk assessment; the 100 ppb limit and scope of the agency’s draft guidance; and the effectiveness of the agency’s communication to the public. However, FDA has not publicly issued versions of the guidance or the risk assessment that address these comments. In our prior work, we have found that sharing risk information and incorporating feedback from internal and external stakeholders can help organizations identify and better manage risks, as well as increase transparency and accountability to Congress and taxpayers. In the risk assessment, FDA stated that it will provide an update after considering public comments and any newly-available information. For example, FDA officials told us that they plan to consider newly-available information, such as any updates to EPA’s Integrated Risk Information System assessment for inorganic arsenic, and may update the risk assessment as a result. With regard to public comments, FDA officials told us that they do not intend to make any changes to the approach or findings of the risk assessment and that they are still considering whether to make changes to the draft guidance as a result of public comments. FDA officials stated that they are still reviewing comments and that, before publication, the guidance would have to undergo interagency review. FDA officials also stated that the agency is not required to provide a response to comments in the final guidance. Further, FDA officials stated that the agency does not need to finalize the guidance in order to sample foods for a contaminant or to take enforcement action when contamination may pose a health hazard. Stakeholders we interviewed stated that updating the risk assessment and finalizing the draft guidance would improve FDA’s communication of the risk. For example, some stakeholders we interviewed told us that the information used in the risk assessment—both regarding the health effects of arsenic and the levels of arsenic in rice—may need to be updated to incorporate the results of more recent research. Further, two stakeholders we interviewed—one representing the rice industry and the other representing consumers—noted that it is not clear to them what actions FDA can take based on the draft guidance. However, FDA officials could not give us a timeline for when they plan to update the risk assessment or finalize the guidance. By developing a timeline for updating the risk assessment on arsenic in rice to incorporate any newly- available information, FDA could help clarify when it will take action. Developing a timeline for finalizing the draft guidance on arsenic in infant rice cereal could also help FDA improve the transparency of its decisions—such as by clarifying the effectiveness of the draft guidance. USDA has taken actions that can help communicate and report on the risk of arsenic in rice. ARS officials told us that they have communicated the results of their research on arsenic in rice in a number of ways, such as through presentations at conferences and through outreach to farmers, including in cooperation with extension programs at universities. For example, USDA researchers demonstrated automated irrigation systems that can be used for the alternate wetting and drying water management practice. In 2017, ARS researchers contributed to the development of a bulletin in conjunction with University of Arkansas researchers that contains recommended practices about irrigation methods that can reduce the levels of arsenic in rice. ARS officials told us that their communication efforts could help increase farmers’ interest and adoption of methods they have researched. They also stated that they work with extension programs because these programs have good access to farmers. FDA coordinated with USDA and other federal agencies on the actions to manage the risk of arsenic in rice for which coordination would be expected, to varying extents. FDA coordinated with USDA and several other federal agencies, including CDC, EPA, and NIH, on the development of the risk assessment and draft guidance on arsenic in infant rice cereal, but USDA raised concerns about the extent of the coordination. FDA and USDA coordinated to a limited extent to develop faster and less expensive methods to detect arsenic in rice. FDA coordinated with several federal agencies on the development of the risk assessment and draft guidance on arsenic in infant rice cereal. According to FDA officials, in developing the risk assessment, FDA initially coordinated with EPA on two noncancer health effects—adverse pregnancy outcomes and developmental neurotoxicology effects in young children—to ensure consistency with the work EPA was doing to update its Integrated Risk Information System assessment for arsenic. When FDA completed the draft of the noncancer section of its risk assessment, the agency provided it to EPA and NIH’s National Institute of Environmental Health Sciences for review. FDA incorporated comments from EPA and NIH in the risk assessment document, which EPA, CDC, and NIH subsequently reviewed. From December 2014 through June 2015, the risk assessment and draft guidance underwent HHS’s clearance process. Through this process, CDC and NIH, along with HHS’s Assistant Secretary for Legislation and its Office of the Assistant Secretary for Planning and Evaluation, reviewed the documents, and FDA revised the risk assessment and draft guidance to address their comments. CDC, EPA, and NIH officials told us that they were generally satisfied with FDA’s coordination efforts and the extent to which FDA addressed their comments. For example, CDC officials said that the agency provided FDA several rounds of comments, and by the end of the process, all of its comments had been considered. OMB also chose to review FDA’s risk assessment and draft guidance on arsenic in infant rice cereal through its interagency review process. According to FDA officials, as part of this process, which occurred from May 2015 through March 2016, FDA coordinated with EPA again, as well as with OMB’s Office of Information and Regulatory Affairs and the U.S. Trade Representative within the Executive Office of the President, the Small Business Administration’s Office of Advocacy, and USDA. Officials from the Small Business Administration’s Office of Advocacy said that they were generally satisfied with the review process and characterized the outcome as typical in that some, but not all, of their suggested changes were accepted. However, USDA officials raised concerns about FDA involving them too late in the coordination process and about the extent to which FDA addressed their comments. From May 2015 through July 2015, USDA conducted its first review of these documents and provided FDA with comments. USDA had offered to provide FDA with feedback on versions of the risk assessment on several occasions earlier in the process, but FDA did not accept USDA’s offers, according to a USDA official. As discussed below, FDA chose to engage USDA later in the process. In their comments, USDA officials expressed concerns regarding uncertainties and data limitations in the risk assessment and draft guidance on arsenic in infant rice cereal. USDA also raised questions about whether sufficient data on the link to adverse health effects existed to warrant the draft guidance. Furthermore, USDA stated that because the documents focus solely on rice, instead of addressing risks to the diet as a whole, FDA needs to share clear, consistent, and understandable messages with the public to alleviate fear and misunderstanding related to the risk posed by arsenic in rice. According to USDA officials, FDA did not adequately address their comments in the revised documents, including FDA’s communication strategy. However, according to a senior USDA official, in its response to USDA’s comments, FDA maintained that, overall, the comments it received from its external peer reviewers—five university researchers—were supportive of the risk assessment and that based on the peer review, FDA did not change its findings or conclusions. According to this USDA official, FDA also noted that there are insufficient data to accurately quantify the risk from arsenic in rice to pregnant women or children but that it decided moving forward with the draft guidance on arsenic in infant rice cereal would be prudent. FDA and USDA did not agree on USDA’s role in developing the risk assessment and the point at which they should begin coordinating on the risk assessment. FDA officials told us that FDA generally considers agencies’ expertise in determining whether and when to include them in the development of risk assessments and related documents. FDA did not see USDA as having a role in developing the risk assessment; rather, FDA officials told us that they reached out to USDA after the risk assessment was drafted, when the agency began to consider how to reduce the levels of arsenic in rice during the growing process and the feasibility of industry meeting its draft guidance on arsenic in infant rice cereal. The officials said that FDA met with USDA officials on numerous occasions and invited them to attend additional meetings with various stakeholders. However, according to a senior USDA official, USDA has relevant scientific and technical expertise that should have played a role in developing the risk assessment. According to this official, if FDA had involved USDA earlier in the development process, FDA may have addressed USDA’s comments to a greater extent. We have shown in prior work that agencies can facilitate their collaborative efforts by developing a mechanism for interagency coordination, and a key issue to consider when developing such a mechanism is whether participating agencies have clarified their roles and responsibilities. FDA officials stated that they were not aware of the existence of any mechanism for coordinating risk assessments of contaminants in food, including arsenic in rice, which among other things, could clarify the roles and responsibilities of participating agencies. FDA officials told us that they followed a 2002 report listing guiding principles when developing the risk assessment, but this report, which broadly applies to all foodborne contaminants, did not specify the process FDA should follow to coordinate its risk assessment. However, our review of this 2002 report shows that it recommends that FDA encourage active participation and communication with other agencies and stakeholders and collaboration, when appropriate, as part of its risk assessment development process. Although FDA did reach out to USDA, those meetings were after the completion of the risk assessment. By developing a mechanism for working with relevant agencies to identify their roles and responsibilities for coordinating risk assessments of contaminants in food, including arsenic in rice, FDA could have better assurance that it fully utilizes the expertise of all participating federal agencies. FDA and USDA’s FGIS and ARS coordinated on the development of detection methods to a limited extent. Officials from FDA and FGIS told us that they began to coordinate in March 2016, when they discovered, in the course of ongoing coordination in another area, that they were each working independently on developing a faster and less expensive detection method using the Arsenator. According to FDA officials, FDA became aware of FGIS’s interest in developing methods to detect arsenic in rice during a Codex Alimentarius meeting that researchers from both agencies attended. Therefore, the avoidance of potentially duplicative effort occurred as a result of an informal discussion that occurred during this meeting. With regard to ARS, FDA officials told us that FDA did not coordinate with ARS on the development of the hydride generation method but that FDA used its own validated method to provide ARS with actual arsenic concentrations of samples to help ARS test its method. According to ARS officials, ARS did not coordinate with FDA or FGIS when developing its method on hydride generation. According to an FDA official, FDA did not coordinate the development of its current method to detect inorganic arsenic in rice, the faster method for wine and rice, or the laser ablation method with FGIS, ARS, or any other federal agency. We have shown in prior work that many of the meaningful results that the federal government seeks to achieve, such as those related to protecting food and agriculture, require the coordinated efforts of more than one federal agency. ARS officials told us that from their perspective, there was no reason to coordinate because ARS, FDA, and FGIS are trying to meet different needs with their research. Further, ARS officials told us that coordinating with FDA would blur the distinction between ARS’s scientific role and FDA’s regulatory role and may imply that ARS has regulatory responsibilities or expertise. However, all three agencies share a crosscutting strategic interest in developing methods for detecting foodborne contaminants, including arsenic in rice. The strategic plans for ARS and FDA’s Center for Food Safety and Applied Nutrition include outcomes and strategies related to the development of detection methods for chemical contaminants or residues. Further, FGIS’s strategic plan includes a strategy of developing innovative tests to measure grain quality, and according to FGIS officials, they have considered testing inorganic arsenic as part of measuring grain quality. According to FGIS officials, once they began coordinating with FDA on the Arsenator, they saw value in coordinating and did so for about 9 months before suspending work on the detection method. We have noted in prior work that interagency mechanisms to coordinate programs that address crosscutting issues may reduce potentially duplicative efforts. However, neither FDA nor USDA has such a mechanism to coordinate the development of methods to detect arsenic in rice or other methods to detect contaminants in food. FDA officials told us that the agency works with USDA research agencies on food safety in an informal manner, and USDA officials told us that they are not aware of any mechanism for coordination and that coordination with FDA generally occurs at the secretarial level because it cuts across a number of USDA agencies. Recently, we also found another example in which FDA and USDA did not coordinate in developing detection methods for other contaminants in foods. FDA and another USDA agency—the Food Safety and Inspection Service—did not coordinate in developing detection methods for drug residues in seafood. By developing a mechanism to coordinate their crosscutting efforts to develop faster and less expensive methods for detecting contaminants in food, including arsenic in rice, FDA and USDA could enhance their ability to use their resources efficiently and avoid engaging in unnecessary and potentially duplicative efforts. NRC and key recent scientific reviews have indicated that long-term ingestion of arsenic may pose a significant risk to human health, and FDA and USDA have taken various actions to manage the risk to human health of arsenic in rice. Their actions are generally consistent with the essential elements we have identified for managing risk, which can help agencies assess threats that could affect the achievement of their goals. For example, both agencies have conducted research on arsenic detection methods, and FDA has issued for public comment a risk assessment on the human health effects from the long-term ingestion of arsenic in rice. In addition, according to FDA officials, because infants are at a higher risk of experiencing some of the health effects of ingesting arsenic, such as neurodevelopmental effects, and the diets of infants are less varied than that of adults, FDA issued a draft guidance regarding arsenic in infant rice cereal. However, FDA officials have not provided a specific timeline for updating the risk assessment in response to newly- available information or for finalizing the draft guidance for infant rice cereal in response to public comments. Both of these documents could help communicate to the public the risk of arsenic in rice, and updating or finalizing them could also help FDA demonstrate its commitment to increasing transparency and accountability by addressing public comments and clarifying its enforcement authority, among other things. FDA coordinated the development and review of these key documents with several federal agencies, and these agencies were generally satisfied with FDA’s coordination efforts. However, USDA raised concerns about being involved too late in the process and the extent to which its comments were addressed. By developing a mechanism for working with relevant agencies to identify their roles and responsibilities for coordinating risk assessments of contaminants in food, including arsenic in rice, FDA could better ensure that it fully utilizes their expertise. Furthermore, FDA and USDA coordinated on the development of arsenic detection methods to a limited extent. Developing a mechanism to coordinate their crosscutting efforts to develop methods to detect contaminants in food, including arsenic in rice, could help FDA and USDA manage their resources and avoid engaging in unnecessary and potentially duplicative efforts. We are making a total of five recommendations, including four to FDA and one to USDA. Specifically: The Commissioner of FDA should develop a timeline for updating the risk assessment on arsenic in rice. (Recommendation 1) The Commissioner of FDA should develop a timeline for finalizing the draft guidance on arsenic in infant rice cereal. (Recommendation 2) The Commissioner of FDA should develop a mechanism for working with relevant agencies to identify their roles and responsibilities for coordinating risk assessments of contaminants in food, including arsenic in rice. (Recommendation 3) The Commissioner of FDA should work with USDA to develop a mechanism to coordinate the development of methods to detect contaminants in food, including arsenic in rice. (Recommendation 4) The Secretary of Agriculture should work with FDA to develop a mechanism to coordinate the development of methods to detect contaminants in food, including arsenic in rice. (Recommendation 5) We provided a draft of this report to EPA, HHS, OMB, and USDA for their review and comment. HHS and USDA provided written comments, which are summarized below and reproduced in appendix III and appendix IV, respectively. In addition, EPA, HHS, and USDA provided technical comments, which we incorporated as appropriate. OMB did not comment. In its comments, HHS generally agreed with our findings and three of the four recommendations directed to it and partially agreed with the other recommendation. Specifically, HHS partially agreed with our first recommendation for FDA to develop a timeline for updating the risk assessment on arsenic in rice, noting that the evolving nature of science precludes it from committing to a specific timeline. We recognize that new scientific studies continue to add to the understanding of the risk of arsenic. However, we continue to believe that FDA should demonstrate its commitment to increasing transparency and accountability by developing a timeline to update the risk assessment, potentially in conjunction with finalizing the draft guidance on arsenic in infant rice cereal. Such an update may state that recent scientific studies or public comments have not resulted in a change to FDA’s assessment of the risk. HHS generally agreed with our findings about the actions it has taken to manage the risk from arsenic in rice and the extent of its coordination with USDA and other agencies. HHS noted that it anticipates developing a final guidance establishing an action level of 100 ppb of inorganic arsenic in infant rice cereal by the end of 2018, which will be consistent with our recommendation. HHS also noted that it will consider ways to enhance mechanisms—such as the Interagency Risk Assessment Consortium—to collaborate and coordinate in the development of risk assessments with agencies that have regulatory responsibility or specific expertise. Further, HHS stated that FDA agrees that a mechanism for better coordinating with USDA on the development of methods to detect contaminants in foods would be worthwhile. FDA will consider whether and how existing mechanisms, such as the lnteragency Residue Control Group and the annual meeting with USDA's ARS and the Food Safety and Inspection Service on food safety research, could be used to improve collaboration with USDA on method development. HHS’s plans to enhance or use existing interagency mechanisms may be responsive to our recommendations if they focus on enhancing coordination with other agencies that have expertise or similar goals in the areas of risk assessments and methods to detect foodborne contaminants. In its comments, USDA generally agreed with our findings and the one recommendation we directed to it. Specifically, USDA generally agreed with our findings about the extent to which FDA coordinated with USDA on the development of methods to detect contaminants in food, including arsenic in rice. It also generally agreed with our recommendation that USDA work with FDA to develop a mechanism to do so and stated that the USDA Office of the Chief Scientist will facilitate this effort. Further, USDA noted that the Interagency Risk Assessment Consortium may be an appropriate mechanism for addressing GAO’s recommendations. USDA’s proposal has the potential to be responsive to our recommendation if it focuses on enhancing coordination with FDA regarding the development of detection methods for foodborne contaminants. As agreed with your office, unless you publicly announce the contents earlier, we plan no further distribution of this report until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Secretaries of Agriculture and Health and Human Services; the Administrator of EPA; the Director of OMB; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report examines (1) what the National Research Council (NRC) and recent key scientific reviews have reported about the effects of ingestion of arsenic on human health, (2) the extent to which the Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA) have managed the risk to human health from arsenic in rice, and (3) the extent to which FDA has coordinated with USDA and other federal agencies on actions to manage the risk. In this report, we use the term arsenic to refer to either total arsenic or inorganic arsenic. We use the term rice to encompass rice grain and products made with rice, such as infant rice cereal. To determine what NRC and recent key scientific reviews have reported about the effects of ingestion of arsenic on human health, we analyzed NRC’s 2013 report on inorganic arsenic and 14 reviews of the scientific literature published from January 2015 through early June 2017 on the human health effects of ingestion of arsenic. We conducted a literature search of several research databases, such as PubMed and Toxline, to identify reviews that (1) were focused on the effects of ingestion of arsenic on human health; (2) were peer-reviewed; (3) relied on human, rather than animal, studies; (4) provided conclusions or summary statements related to more than one study, rather than just listing individual study findings; (5) included an abstract; and (6) were written in English. We assessed the scientific and statistical credibility, reliability, and methodological soundness of the reviews. We also contacted some of the authors for additional methodological information. Methodological information included, for example, criteria for selecting the studies used in the review; meta-analyses; or meta-regression approach. It also included limitations that the authors cited for the studies they reviewed or for any analyses they conducted. We excluded articles for which we could not clearly determine the methodology. We also reviewed the authors’ statements regarding conflicts of interest and determined that none of the articles should be excluded for this reason. We did not examine the references cited by these reviews as part of our analysis. We also did not examine the studies cited by the NRC. The studies we reviewed are listed in appendix II. To determine the extent to which FDA and USDA have managed the risk to human health from arsenic in rice, we examined relevant provisions in the Federal Food, Drug, and Cosmetic Act, as amended; the Federal Agriculture Improvement and Reform Act of 1996; and other relevant laws, regulations, and policies. We also used the essential elements for managing risk as identified in our prior work on enterprise risk management. These include: (1) align the risk management process with goals and objectives, (2) identify risks, (3) assess risks, (4) respond to the risks, (5) monitor the risks, and (6) communicate and report on the risks. We identified information on agency actions for managing the risk from arsenic in rice by collecting documentation and interviewing officials from FDA and USDA and we reviewed the information in light of the requirements, policies, and elements. We assessed FDA’s and USDA’s reported actions to determine the extent to which each agency’s actions aligned with these elements. In assessing FDA’s and USDA’s actions against these essential elements, we used the terms “consistent” and “partially consistent” to reflect the extent to which each agency’s actions aligned with an essential element. A determination of “consistent” meant that the agency provided evidence that it had taken major actions in alignment with that essential element. A determination of “partially consistent” meant that the agency provided evidence that it had taken some actions in alignment with that essential element. We also interviewed 17 stakeholders to obtain their views on the extent to which FDA’s and USDA’s actions managed the risk, including university researchers (academics) specializing in relevant fields such as epidemiology and soil chemistry, representatives of a consumer organization, and representatives of the rice industry, including rice mills and farms. We identified stakeholders based on suggestions from agency officials and other stakeholders; through our site visit in Arkansas’ rice agricultural research and production areas and rice mills; and based on the stakeholders’ unique perspective or qualifications, such as membership in the NRC Committee on Inorganic Arsenic. The views we obtained from these interviews are not generalizable to all university researchers or consumer or rice industry organizations but they provide illustrative examples of the views of such stakeholders. Table 1 lists information about the 17 stakeholders we interviewed. To determine the extent to which FDA has coordinated with USDA and other federal agencies on actions to manage the risk to human health from arsenic in rice, we identified relevant actions and examined whether FDA developed interagency collaborative mechanisms, which we have previously reported could help to facilitate coordination between agencies. To identify actions for which the agencies shared similar goals in their strategic plans or relevant expertise and for which FDA would be expected to coordinate with USDA and other federal agencies, we reviewed relevant provisions in the Federal Food, Drug, and Cosmetic Act, as amended; the Federal Agriculture Improvement and Reform Act of 1996; other relevant laws, regulations, and policies; the current science and research strategic plan for FDA’s Center for Food Science and Applied Nutrition and current strategic plans for USDA’s Agricultural Research Service (ARS) and Federal Grain Inspection Service (FGIS); and information about the agencies’ missions from their websites. These actions were the development of FDA’s risk assessment and draft guidance on arsenic in rice and FDA’s and USDA’s efforts to develop detection methods for arsenic in rice. We interviewed FDA officials and reviewed documentation they provided to identify the other federal agencies and offices with which FDA coordinated the development and review of its risk assessment and draft guidance on arsenic in infant rice cereal and the development of methods for detecting arsenic in rice. These agencies and offices included ARS, the Centers for Disease Control and Prevention, the Environmental Protection Agency (EPA), FGIS, National Institutes of Health’s National Institute of Environmental Health Sciences, the Department of Health and Human Services’ Assistant Secretary for Legislation and Office of the Assistant Secretary for Planning and Evaluation, Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs, the Small Business Administration’s Office of Advocacy, and the U.S. Trade Representative. To determine the extent to which FDA coordinated its risk assessment and draft guidance on arsenic in rice with USDA and other federal agencies, we obtained and reviewed FDA’s framework for conducting risk assessments; reviewed agencies’ comments on these documents; interviewed FDA officials regarding FDA’s efforts to coordinate with other agencies; and interviewed officials from the Centers for Disease Control and Prevention; EPA; the National Institutes of Health; OMB; the Small Business Administration’s Office of Advocacy; and USDA regarding the nature of their comments, their experiences coordinating with FDA, and the extent to which FDA addressed their comments. To examine the extent to which FDA and USDA coordinated the development of arsenic detection methods, we obtained and reviewed documents, including those describing the detection methods that FDA, ARS, and FGIS have developed or have under development, and we interviewed officials from these agencies regarding their efforts to develop these methods and coordinate their development efforts. We also interviewed officials from these agencies to gather their views on the effectiveness of these coordination efforts. We then examined whether FDA had interagency collaborative mechanisms for the development of its risk assessment and draft guidance, and its efforts with USDA to develop arsenic detection methods. We also examined whether participating agencies clarified their roles and responsibilities. Our prior work identified this as a key issue for agencies to consider when implementing coordination mechanisms. We selected this practice because it was relevant to the challenges the agencies faced. We conducted this performance audit from December 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following list identifies recent key reviews of the health effects of ingestion of arsenic that we analyzed. Amadi, C.N., Z.N. Igweze, and O.E. Orisakwe. “Heavy Metals in Miscarriages and Stillbirths in Developing Nations.” Middle East Fertility Society Journal, vol. 22, no. 2 (2017): 91-100. Bardach, A.E., A. Ciapponi, N. Soto, M.R. Chaparro, M. Calderon, A. Briatore, N. Cadoppi, R. Tassara, and M.I. Litter. “Epidemiology of Chronic Disease Related to Arsenic in Argentina: A Systematic Review.” The Science of the Total Environment, vol. 538, (2015): 802-16. Karagas, M.R., A. Gossai, B. Pierce, and H. Ahsan. “Drinking Water Arsenic Contamination, Skin Lesions, and Malignancies: A Systematic Review of the Global Evidence.” Current Environmental Health Reports, vol. 2, no. 1 (2015): 52-68. Khanjani, N., A. Jafarnejad, and L. Tavakkoli. “Arsenic and Breast Cancer: A Systematic Review of Epidemiologic Studies.” Reviews on Environmental Health (2017). Lamm, S.H., H. Ferdosi, E.K. Dissen, J. Li, and J. Ahn. “A Systematic Review and Meta-Regression Analysis of Lung Cancer Risk and Inorganic Arsenic in Drinking Water.” International Journal of Environmental Research and Public Health, vol. 12, no. 12 (2015): 15498-15515. Mayer, J.E. and R.H. Goldman. “Arsenic and Skin Cancer in the USA: The Current Evidence regarding Arsenic-Contaminated Drinking Water.” International Journal of Dermatology, vol. 55, no. 11 (2016): e585-e591. Milton, A.H., S. Hussain, S. Akter, M. Rahman, T.A. Mouly, and K. Mitchell. “A Review of the Effects of Chronic Arsenic Exposure on Adverse Pregnancy Outcomes.” International Journal of Environmental Research and Public Health, vol. 14, no. 6 (2017). Phung, D., D. Connell, S. Rutherford, and C. Chu. “Cardiovascular Risk from Water Arsenic Exposure in Vietnam: Application of Systematic Review and Meta-Regression Analysis in Chemical Health Risk Assessment.” Chemosphere, vol. 177 (2017): 167-175. Quansah, R., F.A. Armah, D.K. Essumang, I. Luginaah, E. Clarke, K. Marfoh, S.J. Cobbina, et al. “Association of Arsenic with Adverse Pregnancy Outcomes/Infant Mortality: A Systematic Review and Meta- Analysis.” Environmental Health Perspectives, vol. 123, no. 5 (2015): 412-21. Robles-Osorio, M.L., E. Sabath-Silva, and E. Sabath. “Arsenic-Mediated Nephrotoxicity.” Renal Failure, vol. 37, no. 4 (2015): 542-7. Sidhu, M.S., K.P. Desai, H.N. Lynch, L.R. Rhomberg, B.D. Beck, and F.J. Venditti. “Mechanisms of Action for Arsenic in Cardiovascular Toxicity and Implications for Risk Assessment.” Toxicology, vol. 331 (2015): 78-99. Sung, T., J. Huang, and H. Guo. “Association between Arsenic Exposure and Diabetes: A Meta-Analysis.” BioMed Research International, (2015). Tsuji, J.S., M.R. Garry, V. Perez, and E.T. Chang. “Low-Level Arsenic Exposure and Developmental Neurotoxicity in Children: A Systematic Review and Risk Assessment.” Toxicology, vol. 337, (2015): 91-107. Von Stackelberg, K., E. Guzy, T. Chu, and B.C. Henn. “Exposure to Mixtures of Metals and Neurodevelopmental Outcomes: A Review.” Risk Analysis, vol. 35, no. 6 (2015): 971-1016. In addition to the contact named above, Anne K. Johnson (Assistant Director), Ruth Solomon (Analyst in Charge), Kevin Bray, Stephen Cleary, Ellen Fried, Juan Garay, Rebecca Parkhurst, Beverly Peterson, Anne Rhodes-Kline, Sara Sullivan, Kiki Theodoropoulos, Sarah Veale, and Khristi Wilkins made key contributions to this report.", "summary": "Arsenic, an element in the earth's crust, can be harmful to human health and may be present in water and certain foods, such as rice. Rice may be more susceptible to arsenic contamination than other crops due to the flooded conditions in which it is typically grown. FDA and USDA work to address food safety risks. FDA's responsibilities for rice include regulatory and research programs; USDA's include research programs. GAO was asked to review issues related to arsenic and rice. GAO examined (1) what NRC and recent key scientific reviews have reported about the effects of ingestion of arsenic on human health, (2) the extent to which FDA and USDA have managed the risk to human health from arsenic in rice, and (3) the extent to which FDA has coordinated with USDA and other federal agencies on actions to manage the risk. GAO analyzed a 2013 NRC report on inorganic arsenic, 14 reviews of scientific studies on the human health effects of ingesting arsenic published from January 2015 to June 2017, and agency documents; interviewed agency officials; and compared good practices with actions FDA and USDA took to manage risk and that FDA took to coordinate. The National Research Council (NRC) of the National Academy of Sciences, in 2013, and more recent key scientific reviews reported evidence of associations between long-term ingestion of arsenic and adverse human health effects, such as cardiovascular disease. Many of the studies NRC reviewed as part of its survey of the scientific literature examined the ingestion of arsenic in drinking water, but others looked at arsenic from all sources, including dietary sources such as rice. NRC stated that evidence suggests that food, particularly rice, may be a significant source of inorganic arsenic, the more toxic of the two forms of arsenic; however, consumption of rice and levels of arsenic in rice vary widely, making it difficult to estimate arsenic intake from rice. NRC identified stronger evidence for some health effects at higher levels of arsenic—defined by NRC as 100 parts per billion or higher in drinking water—than at lower levels, which are more common in the United States, and noted that research on the health effects of ingesting lower levels of arsenic is ongoing. The Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) have taken actions to manage the risk of arsenic in rice to human health, including assessing the type and prevalence of health effects that may result from long-term ingestion of arsenic in rice. FDA also has taken action to publicly communicate and report on the risk. In 2016, FDA issued a risk assessment about the human health effects from long-term ingestion of arsenic in rice and draft guidance recommending industry not exceed a level of 100 parts per billion of inorganic arsenic in infant rice cereal. FDA noted it issued this guidance because infants face a higher risk owing to their less-varied diets. However, FDA has not updated the risk assessment, which was informed by a review of scientific studies published before February 2015, or finalized the draft guidance. In prior work, GAO has found that sharing risk information and incorporating stakeholder feedback can help organizations identify and better manage risks, as well as increase transparency and accountability to Congress and taxpayers. FDA officials stated that they may update the risk assessment based on newly-available information and consider public comments before finalizing the draft guidance. However, FDA officials could not provide a specific timeline for either. By developing such a timeline, FDA could help clarify when it will take action and improve the transparency of its decisions. FDA coordinated with USDA and other federal agencies on actions to manage the risk of arsenic in rice to varying extents. For example, FDA and USDA coordinated on developing arsenic detection methods for rice to a limited extent, although both agencies have crosscutting strategic goals for developing detection methods for foodborne contaminants, including arsenic. GAO has noted in prior work that developing interagency mechanisms to coordinate crosscutting issues may reduce potentially duplicative efforts. FDA and USDA officials stated that they coordinated on an informal basis but have no mechanism for coordinating more formally. By developing a coordination mechanism, FDA and USDA could enhance their ability to use their resources efficiently and avoid potentially duplicative efforts. GAO is making five recommendations, including that FDA develop a timeline for updating its risk assessment and finalizing its draft guidance and that FDA and USDA develop a coordination mechanism for developing methods to detect foodborne contaminants, including arsenic. FDA and USDA generally agreed with the recommendations.", "document_type": "gao"}
{"report": "In 2010 PPACA authorized the establishment of PCORI to improve CER quality and relevance. PPACA also established requirements for HHS to, among other things, disseminate findings from federally funded CER, including findings published by PCORI, and coordinate with relevant federal health programs to build data capacity for research. PPACA established a Trust Fund to fund these CER activities by PCORI and HHS through fiscal year 2019. PPACA authorized the establishment of PCORI as a federally funded, nonprofit corporation aimed at advancing the quality and relevance of evidence through research to help patients, clinicians, purchasers, and policy-makers to make informed health care decisions. PCORI is required to identify research priorities, establish a research project agenda, fund research consistent with its research agenda, and disseminate research findings, among other responsibilities. In 2015 we reported that PCORI had conducted activities consistent with its legislative requirements. For example, we reported that since its inception in 2010, PCORI established and implemented priorities for funding CER and related activities, developed plans to disseminate funded research and track its utilization, and took steps to make its research more centered on outcomes prioritized by patients. Further, PCORI developed PCORnet as a distributed research network initiative that enables electronic health-related data from multiple sources to be available for research. PPACA requires HHS to perform several requirements related to CER, which it has implemented through AHRQ and ASPE. Specifically, AHRQ is required to disseminate and support the incorporation of CER funded by PCORI and other federal entities, as well as to foster capacity for conducting CER by supporting training in the methods used to conduct such research. ASPE, in turn, is required to build data capacity for conducting CER. In 2015, we reported that AHRQ had taken some steps to disseminate research findings, but had not taken other actions to help it fully address its dissemination requirements. Furthermore, we reported that ASPE coordinated among various agencies to fund projects intended to build data capacity for research, but that its approach lacked key elements—such as defined objectives, milestones, and time frames—that are necessary to ensure effectiveness. In our 2015 report, we made five recommendations to HHS to direct AHRQ and ASPE to address these issues, as appropriate. HHS concurred with these recommendations and specified actions it would take to address them. Four of the recommendations have since been implemented. PPACA established the Trust Fund through which PCORI and HHS receive funds for CER activities. The law provides that for fiscal years 2010 through 2019, the Trust Fund will receive appropriations from the general fund of the Treasury, transfers from the Medicare trust funds, and fees collected by the Department of the Treasury (Treasury) from private insurance and self-insured health plans. Eighty percent of the amounts in the Trust Fund must be made available to PCORI in fiscal years 2011 through 2019, and Treasury must transfer the remaining 20 percent to the Secretary of HHS in each of those years. Under current law, appropriations and transfers to the Trust Fund will end in fiscal year 2019. The law also provides that no amounts shall be available for expenditure from the Trust Fund after September 30, 2019, and specifies that any amounts remaining in the Trust Fund after that time will be transferred to the general fund of the Treasury. (See fig. 1 for an overview of transfers to the Trust Fund and distribution of funds to PCORI and HHS). PPACA limits the use of CER in certain ways; for example, the law prohibits PCORI from developing or using a dollars-per-quality adjusted life-year to establish what type of health care is cost effective or recommended, and prohibits the Secretary of HHS from using such measures as a threshold to determine coverage, reimbursement, or incentive programs under Medicare. HHS may use CER findings to help inform Medicare coverage decisions, but PPACA does not allow Medicare coverage to be denied solely on the basis of CER findings. In fiscal years 2010 through 2017, PCORI committed about $1.6 billion (or 79 percent of its total award commitments of $2.0 billion) to awards for conducting CER and $325 million (or 16 percent) to awards for building data capacity for research. In addition, PCORI committed $93 million for engagement and workforce awards to involve stakeholders in the research process and expand the research workforce, and committed $12 million for awards to disseminate and implement its research findings. Awards for the dissemination and implementation of its research findings were limited as of the end of fiscal year 2017, as most of this research was still underway. (See table 1 for PCORI’s award commitments for fiscal years 2010 through 2017.) By the end of fiscal year 2024, PCORI projects to spend a total of almost $3.3 billion, which reflects its projected Trust Fund revenue through fiscal year 2019 plus interest income. This total amount encompasses the commitments PCORI has made for awards through fiscal year 2017, as well as $514 million in projected additional research award commitments to be made by the end of fiscal year 2019 and $207 million for other award commitments to be made by the end of fiscal year 2021. In addition to awards, the total includes PCORI’s expenditures for program and administrative support services in fiscal years 2010 through 2017, as well as projected expenditures for these services through fiscal year 2024. (See fig. 2 for PCORI’s actual and projected commitments and expenditures and see app. I for an overview of PCORI’s awards.) The following information provides details on PCORI’s awards related to research, building data capacity, engagement and workforce activities, and the dissemination and implementation of its research findings. PCORI committed $1.6 billion, or 79 percent of its total award commitments, for research in fiscal years 2010 through 2017. In fiscal years 2018 and 2019, PCORI projects to commit an additional $514 million for research awards. PCORI research awards have increasingly focused on conditions that impose a substantial health or financial burden on patients and the healthcare system. (See table 2 for information on the health conditions that received the highest research award funding.) Similar to certain types of CER that may take many years, the entire research award process for PCORI-funded CER may span multiple years from the funding announcement to the dissemination of completed research. Specifically, the process PCORI established can take as many as 6 years, which includes requesting and reviewing proposals, awarding contracts, recruiting participants or obtaining data, conducting and reviewing research, and disseminating findings and typically involves awards that span multiple years. For example, PCORI estimates that the typical timeframe for announcing funding and selecting applications to receive research awards can take 8 to 11 months as PCORI brings scientists, patients, payers, and other stakeholders together to prioritize proposals based on the impact of the condition, potential to improve health, technical merit, patient-centeredness, and engagement. (See fig. 3.) Most of PCORI’s research projects, awarded through fiscal year 2017, were still underway. Only 53 of its 543 research projects had been completed as of the end of fiscal year 2017—in part because PCORI’s research award process typically takes 2 to 6.5 years to complete, and because almost two-thirds of the funds committed for research projects were awarded in fiscal years 2015 through 2017. While most PCORI- funded research is underway, a larger number of research studies are projected to be completed by of the end of each year from 2018 to 2022, with all of the remaining studies to be completed by 2024. (See fig. 4.) PCORI officials told us that the institute attempts to manage its funds to ensure that its research awards are funded and managed through completion, including peer review and the distribution of research findings, in recognition of the time needed to conduct this research as well as the uncertainty regarding the total amount of funding available. Officials from all but one of the stakeholder organizations we interviewed—public and private payers, health care providers, and patient advocacy organizations that represented potential users of CER— generally supported PCORI’s research award priorities. Most of the stakeholders we interviewed stressed the importance of research conducted by unbiased organizations, such as the federally funded research funded by PCORI and HHS. In addition, most stakeholders also told us that PCORI’s efforts to engage patients in the research process have changed the way research is conducted for the better, such as prioritizing research outcomes that are most meaningful to patients. However, officials from an organization representing payers (and from an individual health plan) told us that PCORI’s priorities did not fully align with their needs, such as their needs for CER on certain high-cost conditions, medications or treatments. PCORI committed the second largest portion of award funding—$325 million through fiscal year 2017—for awards to build data capacity for research through the development of PCORnet. PCORI officials told us that the institute supported the development of the PCORnet initiative in order to use existing medical records and claims data and to transform much of that data into a common data model to be used for clinical research, until such time when such data will have been standardized in electronic health records so that they can easily be used for research. As of December 2017, PCORnet included 36 partner networks agreeing to link their electronic claims and health data. PCORI officials told us that this distributed data network already comprises a nationally representative sample of approximately 128 million individuals whose data can be used in randomized clinical trials, large observational studies, and other research. In fiscal years 2018 and 2019, PCORI projects to commit an additional $70 million for these awards to continue building this data capacity. PCORnet research is managed through its Coordinating Center, which oversees the translation of certain categories of the partner networks’ data into the common data model and forges agreements with each of the partners to share results of queries using their data with researchers. This research process generally starts when a researcher requests to query data on a specific population, after which PCORnet may approve the request and invite network partners to participate. Participating network partners then run queries on their data following established parameters and submit the results to a secure portal that the researcher can access in order to analyze the results for research. (See fig. 5.) PCORI officials told us that there were 32 research projects using PCORnet that received funding through PCORI’s research award process as of the end of December 2017, as well as 45 research projects funded by other parties, including federal agencies and private industry. Further, as part of its building data capacity awards, in fiscal year 2017 PCORI committed $25 million to the People-Centered Research Foundation, a nonprofit foundation formed in March 2017 to support the network partners and other entities conducting research using PCORnet. This funding was provided to support this foundation’s development of a business plan, as well as its governance structure, to ensure the continuity of the PCORnet network partnership efforts after PCORI funding for PCORnet ends. PCORI has indicated it may provide additional funding to the foundation, provided that the foundation and the networks make progress toward self-sustainability. Officials from most stakeholder organizations we interviewed generally agreed that PCORnet offers value by improving the data available to conduct CER. Officials from two organizations told us that PCORnet has made it possible to use network partners’ aggregated data to make conducting research more efficient than in the past. Through fiscal year 2017, PCORI also committed $93 million for engagement and workforce awards. For example, PCORI committed a total of $63 million for engagement awards, intended to involve a variety of stakeholders in the research process and to improve the methodology for carrying out CER. Engagement awards include “Eugene Washington Engagement Awards” that are intended to bring patients, caregivers, clinicians, and other healthcare stakeholders into the research process and to disseminate study results. In addition, “Pipeline to Proposal Awards” are intended to bring together stakeholders with strong interests in a specific health issue to develop research proposals to address their needs. Officials from the two patient advocacy organizations we interviewed told us that PCORI’s engagement awards have helped to support patient involvement in the research process. For example, one official noted that, while it has not been easy to find patients willing to participate, these awards have been important to train and support patients in the research process. PCORI also committed $30 million to workforce training awards for clinicians and researchers. For example, one of PCORI’s career development programs, conducted in partnership with AHRQ, is designed to train clinician and research scientists to conduct patient-centered outcomes research and to actively engage stakeholders in efforts to improve the quality and safety of care. Dissemination and implementation awards for PCORI-funded research findings thus far have been limited as most of the research was still underway, but, according to PCORI officials, awards for this work will substantially increase as research is completed. Specifically, through fiscal year 2017, PCORI committed a total of $12 million for awards to disseminate and implement PCORI-funded research by helping researchers and other stakeholders to publicize findings and by supporting patients and providers to utilize findings. PCORI projects to commit an additional $91 million for these awards in fiscal years 2018 through 2021. Dissemination and implementation awards are intended to encourage PCORI awardees that have completed research and their patient and stakeholder partners to pursue strategic activities to disseminate and implement their findings. For example, PCORI awarded about $0.4 million to increase awareness and promote the use of research findings on using technology to deliver virtual care home visits for those with Parkinson’s disease. According to PCORI, these funds will be used to train neurologists and other health professionals to provide virtual care for patients in their homes. In addition, as part of its efforts to summarize research findings, PCORI also awarded funds to the American Institutes for Research to establish a Translation Center that develops two summaries of each of PCORI’s research findings: a public abstract for general audiences that is also translated into Spanish and a professional abstract for clinicians. In addition to awards, PCORI has fostered the dissemination and implementation of its research findings in other ways, including through its website, publications, and roundtable briefings. For example, according to PCORI, it posts research findings on its website within 90 days of receiving final peer-reviewed research results so that patients and providers have access to the information to make healthcare decisions. In addition, according to PCORI, it pays journals’ open access fees to allow free public access to selected research and plans to support research awardees to place accepted journal manuscripts in the PubMed Central database. PCORI also facilitates roundtable briefings that bring together clinicians, patients, and others with interests in recent findings in order to build support for immediate use of the findings. PCORI also coordinates its dissemination efforts with AHRQ. PCORI considers the implementation of its research methods and findings to be an integral part of its dissemination efforts and a culmination of its work and so has begun efforts to track implementation, such as the number of its findings published in peer-reviewed journals, and the use of its findings in clinical care. For example, PCORI officials told us that that there were 891 publications in peer-reviewed journals that resulted from studies fully or partially funded by PCORI through October 2017. According to PCORI, two PCORI-funded studies on prostate cancer, one study on oral versus intravenous antibiotics for certain children, and one study on self-monitoring of blood glucose were included in medical resource software that is used by nearly 90 percent of academic medical centers in the United States. Most of the stakeholder officials we interviewed noted the importance of disseminating research findings quickly and in ways that are readily available and understandable to both experts and the general public to raise awareness about the findings. While officials representing two payers noted limitations to the usefulness of PCORI’s research findings because they do not take treatment costs into account, most stakeholder officials noted the importance of the PCORI-funded research underway and looked forward to utilizing the research findings once they become available. In particular, officials representing provider and patient advocacy organizations told us that they were interested in ensuring that the most important research findings would be quickly implemented by patients and clinicians. Between fiscal years 2011 and 2017, HHS’s AHRQ obligated about $260 million (or 58 percent of HHS’s $448 million in total obligations) for the dissemination and implementation of CER findings. According to AHRQ officials, because most PCORI-funded research had not been completed by the end of fiscal year 2017, these efforts were primarily focused on the dissemination and implementation of research funded by other entities, including NIH and the Centers for Disease Control and Prevention (CDC). Additionally, AHRQ obligated $94 million for efforts to train researchers on conducting CER, and ASPE obligated $85 million for efforts to build data capacity. AHRQ and ASPE have obligated a total of $9 million for administrative activities during those years. Table 3 provides an overview of HHS’s obligations in each fiscal year. AHRQ and ASPE plan to obligate an additional $120 million for dissemination and implementation, training, building data capacity, and administrative activities during fiscal years 2018 through 2020. They expect to have $245 million available to fund ongoing and future CER activities, based on expected transfers from the Trust Fund in fiscal years 2018 and 2019. (See fig. 6.) The following information provides details on HHS-funded projects related to dissemination and implementation, training on conducting CER, and building data capacity. During fiscal years 2011 through 2017, AHRQ obligated a total of $260 million for CER dissemination and implementation initiatives and plans to obligate an additional $93 million for these initiatives in fiscal years 2018 through 2020. According to officials, AHRQ plans to fund additional dissemination and implementation initiatives in fiscal years 2018 and 2019 but had not finalized those plans as of January 2018. (See app. II for an overview of all of AHRQ’s dissemination and implementation initiatives.) AHRQ’s dissemination and implementation initiatives comprise efforts to synthesize CER findings, translate and communicate research findings to potential users, and implement them: Synthesis of CER findings: According to AHRQ officials, AHRQ’s Evidence-Based Practice Centers developed 48 systematic reviews of CER findings based on completed research. As of the end of fiscal year 2017, 40 of these reviews had been published, while 8 were still in progress. Officials told us that these systematic reviews have likely not included PCORI-funded research, as most of that research had not been completed by the end of fiscal year 2017. Translation and communication of CER findings: AHRQ funded initiatives, which—according to the agency—are aimed at making CER findings accessible and understandable to health care professionals, patients, and others. For example, AHRQ developed a “Library of Patient-Centered Outcomes Research Resources” website with links to CER databases maintained by other entities including NIH and PCORI. Another example is AHRQ’s “John M. Eisenberg Center for Clinical Decisions and Communications Science,” which translates research findings into information that can be used by consumers, health care providers, and policymakers. Implementation of CER findings: AHRQ funded four key initiatives to implement CER findings. According to AHRQ officials, one of the four initiatives includes PCORI-funded research, while the other three have thus far focused on implementing existing CER funded by other entities: The “Dissemination and Implementation Initiative” was designed to disseminate and implement government-funded CER findings— including PCORI-funded findings—relevant to physicians, healthcare providers, patients, and others. This initiative consists of a multi-step approach for identifying several areas of CER each year that—according to AHRQ officials—have the greatest potential for impact and are feasible to implement. (See figure 7 for an overview of this process.) According to AHRQ officials, as of December 2017, 37 findings have been nominated for consideration under AHRQ’s Dissemination and Implementation Initiative, including 5 findings nominated by PCORI. According to these officials, 1 of the findings PCORI has nominated is under consideration for implementation. Two were rejected—1 because of insufficient impact and the other because of challenges in implementation feasibility. (Two are still under review.) The “Evidence Now” initiative disseminates CER evidence directly to primary care practices and supports them in implementing clinical and organizational evidence in practice through regional cooperatives. The “Comparative Health System Performance Initiative” established three centers of excellence and a coordinating center to identify, classify, track, and compare health systems. AHRQ’s goal is to understand the factors that affect health systems’ use of CER and to identify best practices in disseminating and using CER. The “Clinical Decision Support (CDS) Initiative” is designed to use CDS to promote the timely incorporation of CER findings into clinical practice. Some of AHRQ’s dissemination and implementation initiatives—such as “Evidence Now” and “CDS Initiative”—include an evaluation component, as described in app. II. According to AHRQ officials, as of January 2018 results from these evaluations were not yet available. Between fiscal years 2011 and 2017, AHRQ obligated a total of $94 million for awards supporting training in the methods used to conduct CER. AHRQ plans to obligate an additional $14 million for training on conducting CER by fiscal year 2020. AHRQ has funded eight categories of awards for individual researchers or research institutions. For example, AHRQ’s “Infrastructure Development Program in Patient-Centered Outcomes Research” award supports institutions in the development of their capacity to conduct and implement CER. Its “Institutional Mentored Career Development Award Program in Patient-Centered Outcomes Research” award supports the development of researchers in academic and applied settings. (See app. III for an overview of these awards.) Starting in fiscal year 2018, AHRQ plans to fund an additional training award category in conjunction with PCORI. AHRQ developed a plan to evaluate its training activities and, according to AHRQ officials, the evaluation is expected to be funded in fiscal year 2018. Between fiscal years 2012 and 2017, ASPE obligated a total of $85 million for 30 projects designed to build data capacity for conducting CER and plans to obligate an additional $6 million to existing projects and 1 new project through fiscal year 2019. Officials told us that ASPE plans to fund additional projects to build data capacity in fiscal years 2018 and 2019, based on HHS leaders’ priorities, but had not finalized those plans as of January 2018. ASPE manages these projects, which are largely carried out by other HHS agencies through interagency agreements and are intended to develop and maintain a comprehensive, interoperable data network to collect, link, and analyze data on outcomes and effectiveness from multiple sources for CER. (See app. IV for an overview of these activities.) In response to a recommendation in our 2015 report on HHS’s CER activities, ASPE implemented a monitoring system to track progress toward its milestones and deliverables for these projects. ASPE also contracted to evaluate its projects to build data capacity for CER. The evaluation, completed in December 2017, found that ASPE made progress managing these projects towards the core functionalities outlined in its strategic framework. However, among other things, the evaluation found that additional efforts are needed to explore how to enhance data privacy and security, ensure data quality, and operationalize related standards. According to ASPE officials, the evaluation will inform the development and implementation of future ASPE projects to build data capacity for conducting CER. We provided a draft of this report to PCORI and HHS for review and comment. PCORI and HHS provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Executive Director of PCORI, the Secretary of Health and Human Services, the Director of AHRQ, the Assistant Secretary for ASPE, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in app. V. Appendix I: Patient-Centered Outcomes Research Institute (PCORI) Award Commitments Made During Fiscal Years 2010 through 2017 Award category description These awards generally fund research studies in priority areas for conditions that impose a substantial burden on patients and the healthcare system. Information about individual research awards can be found at: https://www.pcori.org/research-results?f%255B0%255D=field_project_type%3A298&f%5B0%5D=fiel d_project_type%3A298#search-results. These awards fund infrastructure projects to build data capacity through the development of PCORnet and support for clinical and patient-powered data research networks. Information about individual building data capacity awards can be found at: https://www.pcori.org/research-results?f%5B0%5D=field_project_type%3A441#search-results. Engagement awards fund projects to improve the methodology for carrying out research by involving patients, caregivers, clinicians, and other healthcare stakeholders into the research process. Workforce training awards provide accredited continuing education opportunities, in coordination with the Agency for Healthcare Research and Quality, for researchers and clinicians. Information about individual engagement awards and workforce awards can be found at: https://www.pcori.org/research-results?f%5B0%5D=field_project_type%3A299#search-results and https://www.pcori.org/research-results/2017/k12-institutional-mentored-career-development-program. Dissemination and implementation awards are intended to help researchers and other stakeholders to publicize findings, and support the utilization of findings for patients and providers. Information about individual dissemination and implementation awards can be found at: https://www.pcori.org/research-results?f%5B0%5D=field_project_type%3A308#search-results. Appendix II: Agency for Healthcare Research and Quality’s (AHRQ) Dissemination and Implementation Initiatives, as of September 30, 2017 Description Disseminates evidence to primary care practices and supports them in implementing clinical and organizational evidence in practice through regional cooperatives. AHRQ awarded a separate grant to establish an independent, external evaluation to study improvements in the delivery of the ABCs. Develops three Centers of Excellence on “Comparative Health System Performance in Accelerating PCOR Dissemination.” According to AHRQ, the Centers of Excellence will identify and classify characteristics of health care systems over 5 years. They will also identify ways to assess the quality and cost of such systems, including their use of PCOR, understand the characteristics of high performing systems, and identify what system characteristics are associated with more rapid adoption and diffusion of PCOR- recommended practices throughout a system. Evaluates and synthesizes research findings to aid decision-making for patients, providers, and payers, among others. Translates PCOR findings into tools, such as research summaries and decision aids, designed to help patients and consumers, clinicians, and policymakers make informed and evidence-based health care decisions. Expands an existing initiative or creates a new initiative that supports multi-site, multi-region, multi-stakeholder dissemination and implementation of evidence. Develops and tests methods for translating and disseminating PCOR findings to hard-to- reach audiences, including patients with low health literacy, disadvantaged populations, isolated clinicians and policy makers, and other decision makers who may not have had the benefit of more traditional translation and dissemination efforts. Integrates PCOR into clinical practice using various methods shown to improve the uptake of scientific evidence in clinical decision making. Grantees were asked to consider both educational theory and the relevance of “new media” as they designed their programs. Searches for emerging interventions, prioritizes those most likely to have a large impact in the near future, and disseminates the information to the public. According to AHRQ, the Horizon Scanning System screened more than 22,000 potential intervention leads and tracked over 2,300 intervention topics. Provides targeted audiences—such as providers and payers—with an accessible tool for obtaining objective, detailed information on evidence-based clinical practice guidelines to further their dissemination, implementation, and use. Promotes collaboration, reduces redundancy, and improves transparency in patient registries. Description Created informational tools to support the dissemination and implementation of PCOR findings, including best practices and new knowledge about the use of electronic health record data for research and quality improvement. Promotes the timely incorporation of PCOR findings into clinical practice—which encompasses a variety of tools to enhance clinical decision-making. Collaborated with 176 national organizations to disseminate materials for the Effective Health Care Program. Multi-media campaign to educate health care consumers about the value of reviewing medical evidence when weighing treatment options. Educating the Educators Conducted and disseminated research to develop a process for shared decision making that includes exploring and comparing the benefits, harms, and risks of each option through meaningful dialogue about what matters most to the patient. Collects patient-generated health data, integrates patient-generated health data with PCOR evidence, and disseminates PCOR findings using mobile health technology. Identifies ways to reduce health care differences across diverse populations with a particular focus on minority populations in under-resourced healthcare settings. Established five regional offices, responsible for developing and cultivating dissemination partnerships within each region. This repository houses study data extracted from primary research publications during the course of conducting systematic reviews. It is designed to increase the transparency of comparative effectiveness reviews, improve the ability to update systematic reviews, improve the quality of abstracted data, and enhance the efficiency and reduce the costs of conducting reviews. Gathers input from patients on a complex topic related to the implementation of evidence- based health-care decision making. Increases the relevance of AHRQ systematic reviews for patients, clinicians, and policymakers by examining and addressing challenging topic areas that may affect the credibility and utility of the review for end users and that are areas of inconsistency or variation among AHRQ systematic reviews. Conducted three projects to improve the development of registries, a major activity of AHRQ’s Effective Health Care Program. Description Provides online continuing education materials that inform physicians and other health care providers about PCOR from the Effective Health Care Program. Worked with health professional student associations to evaluate students’ understanding of the importance and clinical applicability of PCOR and shared decision-making to their practice and evaluated students’ educational needs and preferences related to integrating PCOR findings into their training curricula. Created a decision-modeling methods center that reviewed the existing research and guidance published on modeling methods with input from a multidisciplinary group of experts. Provides for maintenance and updating of existing data resources to conduct future CER through a grant competition. The grants fund three to four 1-year pilot projects aimed at enabling a future, larger competition to enhance the data infrastructure and move the resources to self-sustaining models. Disseminates CER findings published by the Patient-Centered Outcomes Research Institute (PCORI) and other government entities to providers, patients, payers, and others. This initiative consists of a seven-step approach for identifying research findings that have the greatest potential for implementation. Provided an understanding of how AHRQ could effectively disseminate and promote PCOR findings and tools in the development and maintenance of clinical decision support systems. The project included a market analysis and an assessment of potential stakeholders and audiences, including vendors of health information technology focused on clinical decision support. Information gathered from this project directly informed the concept for the PCOR clinical decision support initiative that was launched in 2016. Promoted PCOR through public service announcements nationwide. Created a new page on AHRQ’s website that highlights the agency’s own resources, as well as directs researchers, health professionals, patients, caregivers, and families to additional databases that collect information on CER. These databases provide summaries of findings from a wide range of CER findings and research that is in progress. PCOR is a form of CER. Appendix III: Agency for Healthcare Research and Quality’s (AHRQ) Training Awards, as of September 30, 2017 Description Funds a 5-year, renewable effort to support the development of PCOR capacity among institutions that have basic health services research capacity but need to develop capacity to conduct and implement PCOR. The program would potentially include institutions located in geographic areas that lack capacity, and institutions that serve predominantly minority populations. Supports the development of researchers in academic and applied settings. The program combines didactic and experiential opportunities, focusing on the generation, adoption, and spread of new scientific evidence. The goal is to improve population-specific health outcomes by developing and disseminating evidence-based information to patients, clinicians, and other decision-makers, responding to their expressed needs, about which interventions are most effective for which patients under specific circumstances. Provides basic, advanced, and experiential training on the methods to conduct PCOR, particularly prospective observational research, registries, and clinical trials. The program was open to researchers employed in both the public and private sectors, particularly those who serve minorities, economically or medically disadvantaged populations. Facilitates the transition of postdoctoral candidates from mentored to independent research positions, accelerating research independence for PCOR researchers. Provides support for intensive, research career development for individual investigators in academic or applied settings, leading to research independence in the field of PCOR and the generation and translation of new scientific evidence and analytic tools. Provides career development awards for established investigators to further develop their research expertise in PCOR methodologies. This concept seeks to accelerate the development of the research workforce capable of conducting PCOR. Provides 2-year fellowships for training in PCOR. A focus for these fellowships is recruitment of trainees from diverse disciplines, including social and behavioral sciences, business, and engineering. The expected output of these fellowships is trained PCOR researchers. Establishes an expert panel, comprised of 7 to 10 leaders in the fields of learning healthcare system, health services research, and PCOR, to assess the current state of health services research and PCOR training and recommend ways to improve core competencies/curriculum to meet the needs of the health system. Develops a report summarizing the panel’s recommendations concerning current deficiencies and recommendations regarding skills and competencies needed to meet the challenges. PCOR is a form of CER. Total obligations (dollars in millions) Developed technical standards for how health care providers, researchers, and the public health community access and extract data from electronic health records to conduct Patient-Centered Outcomes Research (PCOR). Identified and developed the functional and technical specifications necessary to enable electronic health record systems to retrieve, display, and fill a structured form or template and store and submit the completed form to an external repository. Provided researchers with access to the Centers for Medicare & Medicaid Services’ Chronic Conditions Warehouse, which contains Medicare and Medicaid beneficiary, claims, and assessment data, and supported infrastructure enhancements to conduct CER. Longitudinal follow-up of certain cancer patients to assess vital statistics, disease recurrence, disease progression, and additional treatment types. Treatment data submitted each year to the Centers for Disease Control and Prevention and provided to researchers through the National Center for Health Statistics Research Data Center. Included clinical encounters for all patients and all conditions seen at the community health centers from 2006 to 2013 in the Community Health Applied Research Network Registry data warehouse, a research network comprising 18 community health centers. A de-identified analytic file and associated data codebook were developed to support the use of analytic files by researchers outside of the network. Established a process for investigators to access the data warehouse through the development of a data access plan. Maintained the infrastructure for PCOR and for quality improvement in the safety net. Developed common data elements and standards for CER .The results were the initial entries into the National Institutes of Health’s National Library of Medicine common data element repository. Developed a conceptual framework and environmental scan; produced policy documents ranging from patient-initiated data, through research data on care processes, transitions and coordination, to researcher access to claims data; and developed the ‘HHS Strategic Roadmap for Building Data Capacity for Clinical Comparative Effectiveness Research.’ The overall CER Inventory project was to design and implement a system for the categorization and cataloguing of CER activities through a web-based tool. Due to the rapidly evolving technologies supporting web-based search engines, and the improved methods for identification of more recent CER, the development of the CER Inventory (as a web-based search engine using a retrospective algorithm) was determined to have been superseded by existing search engine tools available. Description Designed and conducted an independent evaluation of the ASPE portfolio to systematically assess progress related to the strategic framework functionalities. Total obligations (dollars in millions) Conducted CER analyses on the beta release of the Multi-Payer Claims Database and evaluated beta testers’ experiences requesting and using data from the MPCD for research. Results of the beta test found that the project was successful in achieving the key objectives of building a pilot database. Planned for development and implementation of the Centers for Medicare & Medicaid Services’ Blue Button—a service that allows patients to access their own health information in electronic form. Linkage of data on fact, cause, and manner of death from the National Death Index to several federal population-based health data platforms in order to demonstrate the feasibility of such linkage, enable PCOR on patterns and correlates of mortality via the resulting linked data; and to facilitate collaboration between federal partners regarding strengthening the infrastructure and methods for linking healthcare data to mortality outcomes and using such linked data for PCOR. Improve the infrastructure to support timely and complete mortality data collection through more timely delivery of state death records to the National Death Index database and by linking National Death Index database records with nationally collected hospital datasets to obtain a more complete picture of patient care. Identify the best patient attributes to address the challenge of linking patients’ data across research, clinical, and claims data sets in order to support the PCOR data infrastructure that enables standardization and sharing of patient data across organizations. Create a coordinated registry network for women’s health technologies that will collect patient reported outcomes and employ structured data capture from electronic health records for data collection and exchange. Build data infrastructure for conducting PCOR using data from routine clinical settings. The sources of these data may include, but are not limited to, insurance billing claims, electronic health records, and patient registries. This project intends to harmonize several existing common data models, potentially including PCORnet and other networks. Develop technical tools for collecting and integrating patient-reported outcome assessments into electronic health records or other health information technology products. Create an interface that enables CMS beneficiaries to connect their MyMedicare.gov data to applications and services they trust, including research platforms related to research studies in which the beneficiary may be interested in participating. Provide technical assistance to the Trust Fund awardees in informatics and assist ASPE in setting up additional oversight processes and procedures to monitor progress. Description Develop a privacy and security data infrastructure blueprint, legal analysis, and ethical framework to address legal and privacy and security related policy issues that affect the use of data for various types of PCOR. Convene clinical topic-specific working groups to discuss the data definitions currently in use and how these definitions can be harmonized to promote common definitions for outcome measures across systems. These common definitions are to be made publicly available to PCOR researchers and analysts. Develop a natural language processing service that will be accessible and publicly available to researchers on the Public Health Community Platform – a cooperative platform for sharing interoperable technologies to address public health priority areas aimed at improving population health outcomes and health equity (e.g., tobacco use). Leverage the Sync for Science and Blue Button application programming interface programs to enable Medicare beneficiaries to donate their medical claims data for scientific research studies. Develop and test the capability to conduct timely and secure distributed regression analysis in distributed data networks. Additionally, explore the feasibility of creating virtual linkage capabilities to utilize data from multiple data sources and data for one specific patient with information at different institutions. Create the infrastructure for collecting data from patients through a mobile device application, allowing patient-generated data to be linked with a single data partner that participates in the Food and Drug Administration’s Sentinel distributed network. The project will develop and pilot a mobile application to capture data from pregnant women who volunteer to participate. Develop a policy framework for the use of patient-generated data in research and care delivery that addresses data collection tools, data donation policies, regulatory gaps, combining data with medical record data, and interoperability of data across health information systems and devices. Create and implement a metadata standard data capture and querying system for data quality and characteristics, data source and institutional characteristics, and “fitness for use.” Cross-Network Directory Service Create an interoperable service that allows data partners to participate in multiple data research networks, query across the networks, and share analytic capabilities and knowledge across networks. The project will be piloted across two existing networks: Food and Drug Administration’s Sentinel and PCORnet. Generate tools and data standards that could be deployed in other CER studies by leveraging the infrastructure of an existing research study called the ADAPTABLE trial (Aspirin Dosing: A Patient-Centric Trial Assessing Benefits and Long Term Effectiveness). This trial is the first major randomized comparative effectiveness trial to be conducted by PCORnet. Description Create a flexible, extensible, and computable mechanism for rolling data into clinically relevant equivalence groups that enable more efficient processing aggregation of laboratory data and other data from diverse health information technology systems. The primary focus of this work will be on laboratory tests. Total obligations (dollars in millions) Create a single point data capture approach from the electronic health record to electronic data capture systems using the Retrieve Form for Data Capture standard. Stakeholders will be provided with a tool to seamlessly integrate electronic health record and electronic data capture systems. In addition to the projects listed, ASPE plans to obligate $2.0 million for one new project starting in fiscal year 2018. In addition to the contact named above, Karin Wallestad, Assistant Director; Michael Zose, Analyst-in-Charge; Kye Briesath; Laurie Pachter; Vikki Porter, and Jennifer Whitworth made key contributions to this report.", "summary": "In 2010, the Patient Protection and Affordable Care Act (PPACA) authorized the establishment of PCORI to carry out CER and improve its quality and relevance. PPACA also established new requirements for HHS to, among other things, disseminate findings from federally funded CER, including findings published by PCORI; and coordinate with relevant federal health programs to build data capacity for this research. To fund CER activities, PPACA established the Trust Fund from which PCORI and HHS are expected to receive an estimated $4.0 billion from fiscal years 2010 through 2019. PPACA included a provision for GAO to review PCORI's and HHS's use of the Trust Fund. This report examines (1) PCORI's use of the Trust Fund for CER activities, including the dissemination and use of research findings; and (2) HHS's use of the Trust Fund for these activities. GAO examined PCORI and HHS documents and data related to use of the Trust Fund, such as commitment, obligation, and expenditure data; PCORI's audited financial statements; and descriptions of CER activities. GAO also interviewed PCORI and HHS officials responsible for planning and carrying out CER activities and interviewed officials from stakeholder organizations representing potential users of CER, including public and private payer organizations, provider organizations, and patient organizations. PCORI and HHS provided technical comments, which GAO incorporated as appropriate. The Patient-Centered Outcomes Research Institute (PCORI) made about $2 billion in commitments for awards in fiscal years 2010 through 2017. PCORI is a federally funded, nonprofit corporation established to carry out and improve comparative clinical effectiveness research (CER), which evaluates and compares the health outcomes and the clinical effectiveness, risks, and benefits of two or more medical treatments, services, or items. PCORI provides funding through award commitments from the Patient Centered Outcomes Research Trust Fund (Trust Fund) and may pay these awards over multiple years. Of the $2 billion PCORI committed as of the end of fiscal year 2017, about $1.6 billion (or 79 percent of its commitments) is for research awards, and $325 million (or 16 percent) is for building the capacity to use existing health data for research. Through fiscal year 2017, commitments for dissemination and implementation awards—intended to share CER findings with potential users of this research—were limited because most PCORI-funded research was still underway. PCORI projects to commit an additional $721 million for awards in fiscal years 2018 through 2021. In addition to awards, PCORI spent $310 million on program and administrative support services in fiscal years 2010 through 2017 and projects to spend an additional $206 million for these services through fiscal year 2024. From fiscal years 2011 through 2017, the Department of Health and Human Services (HHS) obligated about $448 million from the Trust Fund. Of this amount, HHS obligated about $260 million (or 58 percent of all obligations) to the dissemination and implementation of CER findings. As most PCORI-funded CER had not yet been completed due to the time needed to conduct this research, HHS efforts focused instead on the dissemination and implementation of CER funded by other federal entities. Additionally, HHS obligated funds for efforts to train researchers on conducting CER, build data capacity, and on administrative activities. HHS projects to obligate an additional $120 million for these activities in fiscal years 2018 through 2020.", "document_type": "gao"}
{"report": "Burn pits—shallow excavations or surface features with berms used to conduct open-air burning—were often chosen as a method of waste disposal during recent contingency operations in the CENTCOM area of responsibility, which extends from the Middle East to Central Asia and includes Iraq and Afghanistan. In 2010, we reported that there were 251 active burns pits in Afghanistan and 22 in Iraq. However, in 2016, we reported that the use of burn pits in the CENTCOM area of responsibility had declined since that time. As of June 2016, DOD officials told us that there were no military-operated burn pits in Afghanistan and only one in Iraq. According to DOD officials, the decline in the number of burn pits from 2010 to 2016 could be attributed to such factors as (1) using contractors for waste disposal and (2) increased use of waste management alternatives such as landfills and incinerators. However, DOD officials acknowledged that burn pits were being used to dispose of waste in other locations that are not military-operated. Specifically, these officials noted instances in which local contractors had been contracted to haul away waste and subsequently disposed of the waste in a burn pit located in close proximity to the installation. In such instances, officials stated that they requested that the contractors relocate the burn pit. According to a DOD official, as of May 2018 there are two active burn pits in the CENTCOM area of responsibility. Although burn pits help base commanders to manage waste, they also produce smoke and emissions that military and other health professionals believe may result in acute and chronic health effects for those exposed. We previously reported that some veterans returning from the Iraq and Afghanistan conflicts have reported pulmonary and respiratory ailments, among other health concerns, that they attributed to burn pit emissions. Numerous veterans have also filed lawsuits against a DOD contractor alleging that the contractor mismanaged burn pit operations at several installations in both Iraq and Afghanistan, resulting in exposure to harmful smoke that caused these adverse health effects. We also previously reported on the difficulty of establishing a correlation between occupational and environmental exposures and health issues. For example, in 2012 we reported that establishing causation between an exposure and an adverse health condition can be difficult for several reasons, including that for many environmental exposures, there is a latency period—the time period between initial exposure to a contaminant and the date on which an adverse health condition is diagnosed. When there is a long latency period between an environmental exposure and an adverse health condition, choosing between multiple causes of exposure may be difficult. In addition, in 2015 we reported that the Army had recently published a study that evaluated associations between deployment to Iraq and Kuwait and the development of respiratory conditions post-deployment. However, the study was unable to identify a causal link between exposures to burn pits and respiratory conditions. In our 2016 report, we found that the effects from exposing individuals to burn pit emissions were not well understood, and DOD had not fully assessed these health risks. Under DOD Instruction 6055.01, DOD Safety and Occupational Health (SOH) Program, it is DOD policy to apply risk-management strategies to eliminate occupational injury or illness and loss of mission capability or resources. DOD Instruction 6055.01 also instructs all DOD components to establish procedures to ensure that risk- acceptance decisions were documented, archived, and reevaluated on a recurring basis. Furthermore, DOD Instruction 6055.05, Occupational and Environmental Health (OEH), requires that hazards be identified and risk evaluated as early as possible, including the consideration of exposure patterns, duration, and rates. Notwithstanding this guidance, which applies to burn pit emissions among other health hazards, DOD had not fully assessed the health risks of use of burn pits according to DOD officials. According to DOD officials, DOD’s ability to assess these risks was limited by a lack of adequate information on (1) the levels of exposure to burn pit emissions and (2) the health impacts these exposures had on individuals. With respect to information on exposure levels, DOD had not collected data from emissions or monitored exposures from burn pits as required by its own guidance. DOD Instruction 4715.19 requires that plans for the use of open-air burn pits include ensuring the area was monitored by qualified force health protection personnel for unacceptable exposures, and CENTCOM Regulation 200-2, CENTCOM Contingency Environmental Standards, requires steps to be taken to sample or monitor burn pit emissions. However, DOD officials stated that there were no processes in place to specifically monitor burn pit emissions for the purposes of correlating potential exposures. They attributed this to a lack of singular exposure to the burn pit emissions, or emissions from any other individual item; instead, monitoring was done for the totality of air pollutants from all sources at the point of population exposure. As we reported in September 2016, given the potential use of burn pits near installations and their potential use in future contingency operations, establishing processes to monitor burn pit emissions for unacceptable exposures would better position DOD and combatant commanders to collect data that could help assess exposure to risks. In the absence of the collection of data to examine the effects of burn pit exposure on servicemembers, the Department of Veterans Affairs in 2014 created the airborne hazards and open-air burn pit registry, which allows eligible individuals to self-report exposures to airborne hazards (such as smoke from burn pits, oil-well fires, or pollution during deployment), as well as other exposures and health concerns. The registry helps to monitor health conditions affecting veterans and servicemembers, and to collect data that would assist in improving programs to help those with deployment exposure concerns. With respect to the information on the health effects from exposure to burn pit emissions, DOD officials stated that there were short-term effects from being exposed to toxins from the burning of waste, such as eye irritation and burning, coughing and throat irritation, breathing difficulties, and skin itching and rashes. However, the officials also stated that DOD did not have enough data to confirm whether direct exposure to burn pits caused long-term health issues. Although DOD and the Department of Veterans Affairs had commissioned studies to enhance their understanding of airborne hazards, including burn pit emissions, the then- current lack of data on emissions specific to burn pits limited DOD’s ability to fully assess potential health impacts on servicemembers and other base personnel, such as contractors. For example, in a 2011 study that was contracted by the Department of Veterans Affairs, the Institute of Medicine stated that it was unable to determine whether long-term health effects are likely to result from burn pit exposure due to inadequate evidence of an association. While the study did not determine a linkage to long-term health effects, because of the lack of data, it did not discredit the relationship either. Rather, it outlined a methodology of how to collect the necessary data to determine the effects of the exposure. Specifically, the 2011 study outlined the feasibility and design issues for an epidemiologic study—that is, a study of the distribution and determinants of diseases and injuries in human populations—of veterans exposed to burn pit emissions. Further, the 2011 study reported that there were a variety of methods for collecting exposure information, but the most desirable was to measure exposures quantitatively at the individual level. Individual exposure measurements could be obtained through personal monitoring data or biomonitoring. However, if individual monitoring data were not available, and they rarely are, individual exposure data might also be estimated from modeling of exposures, self-reported surveys, interviews, job exposure matrixes, and environmental monitoring. Further, to determine the incidence of chronic disease, the study stated that servicemembers must be tracked from their time of deployment, over many years. While the Institute of Medicine outlined a methodology of how to conduct an epidemiologic study, DOD had not taken steps to conduct this type of research study, specifically one that focused on the direct, individual exposure to burn pit emissions and the possible long-term health effects of such exposure. Instead, some officials commented that there were no long-term health effects linked to the exposures of burn pits because the 2011 study did not acknowledge any. Conversely, Veterans Affairs officials stated that a study aimed at establishing health effect linkages could be enabled by the data in its airborne hazards and open-air burn pit registry, which collects self-reported information on servicemembers’ deployment location and exposure. In response to a mandate contained in section 201 of Public Law 112- 260, the Department of Veterans Affairs entered into an agreement with the National Academies of Sciences, Engineering, and Medicine to convene a committee to provide recommendations on collecting, maintaining, and monitoring information through the registry. The committee assessed the effectiveness of the Department of Veterans Affairs’ information gathering efforts and provided recommendations for addressing the future medical needs of the affected groups. The study was conducted in two phases. Phase 1 was a review of the data collection methods and outcomes, as well as an analysis of the self- reported veteran experience data gathered in the registry. Phase 2 was focused on the assessment of the effectiveness of the actions taken by the Department of Veterans Affairs and DOD and provided recommendations for improving the methods enacted. The committee released its final report in February 2017. As we reported in September 2016, considering the results of this review as well as the methodology of the 2011 Institute of Medicine study as part of an examination of the relationship between direct, individual exposure to burn pit emissions and long-term health effects could better position DOD to fully assess those health risks. In our September 2016 report we recommended that the Secretary of Defense direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to: take steps to ensure CENTCOM and other geographic combatant commands, as appropriate, establish processes to consistently monitor burn pit emissions for unacceptable exposures; and in coordination with the Secretary of Veterans Affairs, specifically examine the relationship between direct, individual, burn pit exposure and potential long-term health-related issues. As part of that examination, consider the results of the National Academies of Sciences, Engineering, and Medicine’s report on the Department of Veteran Affairs registry and the methodology outlined in the 2011 Institute of Medicine study that suggests the need to evaluate the health status of service members from their time of deployment over many years to determine their incidence of chronic disease, with particular attention to the collection of data at the individual level, including the means by which that data is obtained. DOD concurred with the first recommendation, stating that the department will ensure that geographic combatant commands establish and employ processes to consistently monitor burn pit emissions for unacceptable exposures at the point of exposure and if necessary at individual sources. In a May 2018 status update regarding this recommendation, DOD stated that it will be updating applicable department policy and procedures, its tactics techniques and procedures manual, and guidance for sampling and analysis plans to improve monitoring of burn pit emissions and other airborne hazard emissions. Specifically, DOD stated it will update DOD Instruction 6490.03, Deployment Health; that the update will provide revised procedures on deployment health activities required before, during, and after deployments, including Occupational and Environmental Health Site Assessments; and that it estimates this will be completed by the 4th quarter of fiscal year 2018. In addition, the department stated it will update its Occupational and Environmental Health Site Assessments tactics, techniques, and procedures manual and update guidance for sampling and analysis plans and that the updates will provide revised tactics, techniques, and procedures that will improve the quality of health risk assessment. The department expects this to be completed by the 1st quarter of fiscal year 2019. GAO believes that upon completion of these actions, DOD will have met the intent of this recommendation. With respect to our recommendation to sponsor research, in coordination with the Secretary of Veterans Affairs, to specifically examine the relationship between burn pit exposure and potential health-related issues, DOD partially concurred, stating that a considerable volume of research studies had already been completed, were ongoing, or were planned in collaboration with the Department of Veterans Affairs and other research entities to improve the understanding of burn pit and other ambient exposures to potential long-term health outcomes and that the studies, where applicable, consider and incorporate the methodology outlined in the 2011 Institute of Medicine study. In a May 2018 status update regarding this recommendation, the department stated that DOD and the Department of Veterans Affairs continue to collaborate with each other and other entities on research activities that address burn pit and other airborne exposures, and potential long-term health outcomes. Specifically, the department cited a DOD/Veterans Affairs Airborne Hazards Symposium held in May 2017; an update to the Veterans Affairs/DOD Deployment Health Working Group \"Airborne Hazards Joint Action Plan\" to be completed by the 3rd quarter of fiscal year 2018; and the completion of research to examine airborne hazard exposures and potential health-related issues. GAO believes that to the extent that continued studies consider and incorporate the methodology outlined the 2011 Institute of Medicine study, where appropriate, DOD will have met the intent of this recommendation. Chairman Dunn, Ranking Member Brownley, and Members of the Subcommittee, this concludes my statement for the record. If you or your staff have any questions about this statement, please contact Cary Russell, Director, Defense Capabilities and Management, at 202-512-5431 or russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Guy LoFaro (Assistant Director), Lorraine Ettaro, Shahrzad Nikoo, Jennifer Spence, and Matthew Young. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Burn pits help base commanders manage waste generated by U.S. forces overseas, but they also produce harmful emissions that military and other health professionals believe may result in chronic health effects for those exposed. This statement provides information on the extent to which DOD has assessed any health risks of burn pit use. This statement is based on a GAO report issued in September 2016 (GAO-16-781). The report was conducted in response to section 313 of the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015. Specifically, GAO assessed the methodology DOD used in conducting a review of the compliance of the military departments and combatant commands with DOD instructions governing the use of burn pits in contingency operations and the adequacy of a DOD report for the defense committees. GAO also obtained updates from DOD on actions taken to assess health risks from burn pits since September 2016. GAO reported in September 2016 that the effects from exposing individuals to burn pit emissions were not well understood, and the Department of Defense (DOD) had not fully assessed the health risks associated with the use of burn pits. Burn pits—shallow excavations or surface features with berms used to conduct open-air burning—were often chosen as a method of waste disposal during recent contingency operations in the U.S. Central Command (CENTCOM) area of responsibility, which extends from the Middle East to Central Asia and includes Iraq and Afghanistan. According to DOD Instruction 6055.01, DOD Safety and Occupational Health (SOH) Program , DOD should apply risk-management strategies to eliminate occupational injury or illness and loss of mission capability or resources. The instruction also requires all DOD components to establish procedures to ensure that risk-acceptance decisions were documented, archived, and reevaluated on a recurring basis. Furthermore, DOD Instruction 6055.05, Occupational and Environmental Health (OEH), requires that hazards be identified and risk evaluated as early as possible, including the consideration of exposure patterns, duration, and rates. While DOD has guidance that applies to burn pit emissions among other health hazards, DOD had not fully assessed the health risks of use of burn pits, according to DOD officials. According to DOD officials, DOD's ability to assess these risks was limited by a lack of adequate information on (1) the levels of exposure to burn pit emissions and (2) the health impacts these exposures had on individuals. With respect to information on exposure levels, DOD had not collected data from emissions or monitored exposures from burn pits as required by its own guidance. Given the potential use of burn pits near installations and during future contingency operations, establishing processes to monitor burn pit emissions for unacceptable exposures would better position DOD and combatant commanders to collect data that could help assess exposure to risks. GAO recommended that the Secretary of Defense (1) take steps to ensure CENTCOM and other geographic combatant commands, as appropriate, establish processes to consistently monitor burn pit emissions for unacceptable exposures; and (2) in coordination with the Secretary of Veterans Affairs, specifically examine the relationship between direct, individual, burn pit exposure and potential long-term health-related issues. DOD concurred with the first recommendation and partially concurred with the second. In a May 2018 status update regarding these recommendations, DOD outlined a series of steps it had implemented as well as steps that it intends to implement. The department believes these efforts will further enhance its ability to better monitor burn-pit emissions and examine the relationship between direct, individual, burn pit exposure and potential long-term health related issues. GAO believes the steps DOD is taking are appropriate. GAO made two recommendations focused on improving monitoring of burn pit emissions and examining any associated health effects related to burn pit exposure. DOD concurred with one recommendation and partially concurred with the other. GAO continues to believe the recommendations are valid.", "document_type": "gao"}
{"report": "According to SBA, the purposes of the scorecard program are to monitor government-wide performance in meeting small business contracting goals and to provide accurate and transparent information through the public reporting of small business procurement data for individual agencies and government-wide. SBA uses its scorecard methodology to calculate a numeric score for each agency annually. SBA then converts those numeric scores to letter grades on an A+ through F scale. Each year, SBA negotiates small business prime contracting goals with each federal agency with procurement authority such that, in the aggregate, the federal government meets its overall 23-percent goal for the percentage of prime contract dollars awarded to small businesses. In setting annual agency goals, SBA considers prior-year achievement and other factors. In addition to an overall prime contracting goal, Congress also established statutory contracting goals for various socioeconomic subcategories of small businesses. These small business subcategories are small disadvantaged businesses, women-owned small businesses, service-disabled veteran-owned small businesses, and businesses located in Historically Underutilized Business Zones (HUBZone). SBA does not negotiate agency-specific goals for prime contracting and subcontracting achievement within each small business socioeconomic subcategory. Instead, each agency’s goal is the same as the government- wide goals. Prime contracting and subcontracting achievement goals for each subcategory are shown in table 1 below. SBA uses two government-wide data systems maintained by the General Services Administration (GSA) to measure agencies’ small business contracting activity. SBA uses the Federal Procurement Data System- Next Generation (FPDS-NG) to calculate agencies’ prime contracting awards to small businesses. Federal agencies are required to report to FPDS-NG all contracts whose estimated value is $3,500 or more, and FPDS-NG also records whether the contract has gone to a small business. GSA requires that agencies annually certify the accuracy of data submitted. To measure subcontracting, SBA uses the Electronic Subcontracting Reporting System (eSRS), which captures data on spending on first-tier subcontracts, including spending directed to small businesses. Prime contractors that hold one or more government contracts totaling more than $700,000 are required to report their small business subcontracting activity in eSRS. In 1978 Congress amended the Small Business Act to require that all federal agencies with procurement powers establish an Office of Small and Disadvantaged Business Utilization (OSDBU). These offices are intended to advocate for small businesses in procurement and contracting processes, and thus work with agencies to achieve contracting goals. OSDBUs have multiple functions and duties that are codified in section 15(k) of the Small Business Act, as amended. In addition to their agency responsibilities, OSDBU directors serve with the SBA administrator or a designee on the Small Business Procurement Advisory Council, which was established in 1994. The council’s duties include identifying best practices for maximizing small business utilization in federal contracting and conducting peer reviews of each OSDBU to determine compliance with section 15(k). SBA has included the results of this peer review as part of its scorecard calculations for several years. SBA revised the scorecard methodology prior to fiscal year 2017 to make it consistent with changes required by the 2016 NDAA. Specifically, SBA reduced the proportion of the total scorecard results related to prime contracting performance from 80 percent to 50 percent and added an element to calculate changes in the number of small business prime contractors compared to the prior year. SBA officials said they considered, but did not add, a scorecard element that calculated changes in the number of small business subcontractors, which the 2016 NDAA required to be included if data were available. Officials said that unlike prime contracting data, which are validated by agencies, subcontracting data are recorded by the prime contractor and are based on contracting plans and not obligated federal funds. As a result, SBA officials said they determined that data were not available to implement this change. SBA also made other changes to the scorecard methodology, as the agency was permitted to do under the 2016 NDAA. SBA adjusted the weights of other scorecard elements, increasing subcontracting performance from 10 percent to 20 percent of the total scorecard result and increasing the peer review evaluation element from 10 percent to 20 percent. SBA also established that the new statutorily required element to assess changes in the number of prime contractors would be weighted at 10 percent. (See fig. 1 for a summary of revisions to the scorecard methodology.) Officials said they increased the subcontracting weight because it was an increasingly important area of small business procurement activity. In addition, SBA officials and other Small Business Procurement Advisory Council members revised the peer review evaluation methodology in an effort to facilitate a more in-depth review of agencies’ compliance with section 15(k) requirements. SBA included the results from this new peer review process in its revised scorecard methodology. Specifically, the council changed the peer review process in an effort to have peer reviewers make compliance determinations for categories that directly corresponded to the individual subparts of section 15(k). The prior peer review process asked reviewers to assign scores in seven areas, which the process termed “success factors.” For the fiscal year 2017 scorecard, SBA asked peer reviewers to assess and provide scores for 18 of the 21 individual subparts. Categories for the three remaining 15(k) subparts were incorporated starting with the fiscal year 2018 scorecard methodology. SBA officials said members of the Small Business Procurement Advisory Council were active participants in determining the revisions to the scorecard methodology. For example, SBA officials said the council members gave input on proposed revisions and recommended changes prior to the adoption of the new scorecard methodology. OSDBU directors also discussed potential methodological revisions in meetings of the Federal OSDBU Directors Interagency Council. SBA officials said the OSDBU directors’ input was incorporated into SBA’s revised scorecard guidance and, as a result, the criteria within the scorecard were more robust. Officials we interviewed from SBA and other agencies said the adopted scorecard revisions were the result of a consensus among Small Business Procurement Advisory Council members, although no formal votes were taken. Revisions to the scorecard methodology were outlined in a memorandum circulated to agencies in August 2016, about 8 weeks before the start of fiscal year 2017. SBA officials said that many agencies were tracking their progress toward goals using the revised methodology before results were issued. Agencies also had an opportunity to review preliminary scorecard results for fiscal year 2017 before the official scorecard results were published in May 2018. Scorecard results under the revised methodology were similar to those of prior years. For example, in fiscal year 2017, the distribution of agencies’ letter grade results was similar to those of fiscal years 2014 through 2016, with between 19 and 21 of the 24 scored agencies achieving at least an A grade each year (see table 2). Prime contracting achievement. Agencies’ performance in small business prime contracting was similar in fiscal year 2017 and fiscal year 2016 (see table 3). In both years, 18 of 24 agencies met their overall prime contracting goals. In fiscal year 2017, 15 of 24 agencies met at least three of the four small business subcategory goals—one fewer than in fiscal year 2016. Subcontracting achievement. In fiscal year 2017, 15 of 24 agencies met their subcontracting goals compared to 16 of 24 in the prior year. However, among the small business subcategories, more agencies met at least three subcategory goals in 2017 (14 agencies) than in fiscal year 2016 (10 agencies) (see table 4). Peer review evaluations element. The fiscal year 2017 government- wide score for the peer review of section 15(k) compliance (a score of 19.25 out of a maximum 20.00) was nearly identical to the government- wide score for fiscal year 2016, once we adjusted for changes in the scoring scale between the 2 years. The government-wide score in fiscal year 2016 was 9.60 out of 10, which equates to 19.20 on a 20-point scale. Number of small business prime contractors. The overall number of small business prime contractors declined between fiscal years 2016 and 2017. The number of prime contractors overall decreased from 120,009 in fiscal year 2016 to 117,480 in fiscal year 2017, a decrease of approximately 2 percent. However, the 24 agencies, in aggregate, had more small business prime contractors in three of the four small business subcategories in fiscal year 2017 than in the prior year (see table 5). Comparison with prior scorecard weighting formula. We found that agencies’ numerical scores for fiscal year 2017 were generally lower under the revised scorecard methodology than they would have been under the fiscal year 2016 methodology’s weighting of scorecard elements. Twenty-two of 24 agencies had a lower score than they would have had under the prior methodology’s weighting. The revised methodology adjusted the weight of multiple scorecard elements, and there are a variety of reasons why an agency might have received a lower score than under the fiscal year 2016 methodology’s weighting. However, reducing the weight for prime contracting achievement under the revised methodology could explain at least part of the lower score for 21 of the 22 agencies. The overall median score for fiscal year 2017 was about 7 points lower than it would have been under the weighting formula used in fiscal year 2016. (The median score for fiscal year 2017 scorecards was 111 and would have been 118 under the prior methodology’s weighting formula.) In June 2018, SBA officials told us they were not preparing a plan for evaluating the effects of scorecard revisions because they thought such a plan would be premature. At that time, SBA officials said they had identified some aspects of the revised methodology for further review, including two issues related to the peer review evaluations—the peer review scoring scale and whether agencies believed SBA’s requests for supporting information were reasonable. In July 2018, however, SBA officials said that, in response to our preliminary findings, they had begun to develop a plan for evaluating the revised scorecard methodology’s effects, if any, on meeting the government-wide procurement goals. The officials did not provide us a draft plan or details about the plan. They said they expected to complete the evaluation plan by October 2018 and to complete the evaluation itself by the end of December 2018. Federal internal control standards state that management should use quality information to achieve the entity’s objectives, such as those in an agency’s strategic plan. These standards also call for management to design control activities to achieve goals and respond to risks—for example, activities to monitor performance measures and indicators. SBA’s strategic plan includes an objective to ensure federal contract and innovation set-aside goals are met or exceeded. The agency uses scorecard results to measure progress toward meeting or exceeding the statutory goal of 23 percent for overall small business prime contracting. Scorecard results are also used to measure progress toward other goals for the small business socioeconomic subcategories. We have previously identified key attributes of effective program evaluation design, which include the following: clear criteria for making comparisons that would lead to strong, defensible evaluation conclusions; an established evaluation scope that would ensure that the evaluation is tied to its research questions, effectively defines the subject matter to be assessed, and can be completed in a timely fashion to meet reporting deadlines; clear and specific research evaluation questions that use terms that can be readily defined and measured; and carefully thought-out data and analysis choices, which can enhance the quality, credibility, and usefulness of the evaluation. A comprehensive evaluation of revisions to the scorecard that includes the key attributes outlined above could aid SBA officials in determining whether the revised scorecard provides better information and whether the scorecard revisions are designed and implemented appropriately. Such an evaluation also could assist SBA in understanding whether the scorecard revisions may contribute to maximizing contract dollars awarded to small businesses, which is one of the goals in SBA’s strategic plan. In addition, the 2016 NDAA requires that SBA report to Congress by March 31, 2019, about changes stemming from the revised methodology and recommend whether the scorecard program should continue or be further modified. Such an evaluation could also be used by SBA to inform its report to Congress and future decisions about the scorecard methodology and program. The two data systems SBA uses to measure agencies’ small business contracting activity—FPDS-NG and eSRS—are the best available sources of procurement data for calculating scorecard results, according to SBA. However, eSRS has limitations that agency officials cited and that we have previously identified that could hinder the reliability of scorecard results on subcontracting. Federal law prohibits SBA from requiring agencies to use alternative data collection methods for the purposes of the scorecard calculations. GSA intends to replace both systems as part of an initiative to consolidate the functions of several existing data systems, according to GSA documents. As we reported in 2014, this new system is intended to better link prime contracting and subcontracting data. Agency officials we interviewed said eSRS has limitations that make it challenging to verify the accuracy of reported subcontracting activity, and we also have identified eSRS limitations in our prior work. Prime contractors are responsible for reporting their subcontracting activity to the federal government, and the self-reported nature of these data is a limitation that could hamper the accuracy of eSRS data, agency officials said. Although prime contractors generally are required to submit a plan describing planned subcontracting activity, officials explained that eSRS did not provide a method to allow agency officials to verify that actual subcontracting activity matched the levels described in prime contractors’ plans. In addition, not all prime contractors are required to file subcontracting plans. Exceptions to the requirement include, for example, when the prime contract is for goods or services worth $700,000 or less or if the prime contractor is exempt. Small business prime contractors are one example of an exempt group that is not required to prepare subcontracting plans. SBA officials added that measuring subcontracting activity also is challenging because there are no federal funds obligated for subcontracts. Therefore, the federal government does not have a verified record of who performed subcontracting work and the amount paid. In addition, our previous work has found that eSRS was not designed to provide a list of subcontractors associated with a particular prime contract and that linking small business subcontractors to prime contracts when there is a subcontracting plan that pertains to multiple contracts is especially difficult. In addition, our previous work has identified some limitations with FPDS- NG focused on specific agencies and small business programs, although we have not more broadly assessed the reliability of the FPDS-NG data fields that SBA uses to compile scorecard results. For example, we found mismatches between certain accounting records from the Department of Veterans Affairs and data captured in FPDS-NG, and we identified challenges in using FPDS-NG data to monitor the eligibility of Alaska Native Corporations for certain small business contracts available to small disadvantaged businesses. However, officials from SBA and two departments we interviewed for this work said prime contracting data in FPDS-NG generally do not have the same weaknesses they identified with subcontracting data in eSRS. Scorecard results originally published by SBA on May 22, 2018, contained errors, including one agency scorecard published with an incorrect letter grade. SBA officials said they discovered the publication errors within approximately 2 days of publication and published corrected versions. However, these corrections occurred after SBA issued a public announcement highlighting the new results, and interested parties may have downloaded erroneous results prior to the corrected versions being posted on SBA’s website. We identified errors from SBA’s originally published scorecards independent of SBA’s determination that the agency had published scorecards containing errors. The errors we and SBA identified were concentrated in the scorecard for the Department of Education and the government-wide scorecard: The scorecard for the Department of Education showed an incorrect letter grade of A+, rather than the correct grade of A. The published scorecard also showed an incorrect overall numeric score. The Department of Education’s score for the peer review component of the scorecard was incorrect. The government-wide scorecard showed incorrect scores for changes in the number of women-owned small business contractors and the number of service-disabled veteran-owned small business contractors. SBA did not initially document on the corrected scorecards how they had been changed from the original scorecards. However, SBA later added documentation that the scorecards for the Department of Education and government-wide results had been corrected. SBA took this step after we inquired about the absence of documentation about revisions that had been made to the fiscal year 2017 scorecards. SBA officials said they performed accurate calculations for determining agencies’ performance and that inaccuracies in the published scorecards were the result of transcription errors associated with formatting the results for publication. Officials said SBA used new software to publish the fiscal year 2017 scorecards so that they could be accessible to visually impaired readers. Making the scorecards more accessible required some additional steps and at times required manual data entry due to limitations in SBA’s software. These additional steps resulted in errors, officials said. One set of errors—the inaccurate government-wide scores for changes in the number of women-owned small business contractors and the number of service-disabled veteran-owned small business contractors—canceled each other out and did not lead to erroneous overall scorecard results. SBA officials said they review the scorecard data and calculations before they are prepared for publication. However, the agency does not have a process to review formatted scorecards prior to publication to confirm that the version for publication matches actual calculations. Agency officials said they believed that such a process was not necessary. Additionally, agency officials said SBA has instituted a process to update previously issued scorecards to make them accessible for the visually impaired. SBA officials said they intend to review the accuracy of these updated scorecards for characteristics such as accurate letter grades as agency resources permit. Both the Office of Management and Budget and SBA have issued policies related to transparency and integrity of government data. The Office of Management and Budget has issued government-wide guidance on transparency in sharing government data and instructed federal agencies to develop their own policies. SBA’s policy on information quality says the policy is intended, in part, to ensure the integrity of information SBA disseminates. SBA’s policy also says the agency should have full, accurate, transparent documentation and should identify and disclose to users any error sources affecting data quality. In addition, federal internal control standards cite the need for management to design controls— including controls over information processing—to achieve objectives. Errors in the published scorecards may impair the other agencies’ or Congress’s access to quality information to make informed decisions and evaluate an agency’s performance in meeting small business goals. The scorecard errors that we and SBA identified after publication—and the lack of any indicator that scorecards had been corrected—also may undermine confidence in the integrity and transparency of the scorecard data. Agency officials and representatives of small business groups we spoke with generally expected the revised scorecard methodology for fiscal year 2017 to have little impact on small business procurement opportunities. OSDBU officials in the four agencies we interviewed said their offices, in general, are not altering existing efforts at advocating for small business opportunities as a result of scorecard revisions. Some agency officials also said they would need additional years of scorecard data before making any changes to their efforts or reassessing how their priorities align with the revised scorecard’s formula. However, officials from one agency said they updated their agency’s internal monitoring of subcontracting activity as a result of the revised scorecard methodology’s increased emphasis on subcontracting measures. Officials said they updated the monitoring process so the agency would place more emphasis on small business subcontracting activity. Officials said the change to this agency’s internal monitoring process took effect for fiscal year 2018. Officials from three of the four federal departments and representatives from the three small business groups we interviewed said they had not seen any changes in opportunities for small business prime contracting as a result of the scorecard’s methodological changes. Instead, representatives from three small business groups and officials from two departments said any changes in prime contracting opportunities that might have occurred would be influenced by other government-wide procurement initiatives. Specifically, representatives from the three small business groups said the federal government’s emphasis on “category management” was resulting in fewer prime contracts available to all government contractors, including small business contractors. Under the category management initiative, the federal government groups commonly purchased goods and services into categories to streamline procurement processes with the goal of eliminating redundancies and reducing costs. However, representatives of small business groups said these policies result in fewer contract awards and opportunities for small businesses. Representatives from the three small business groups said that the new scorecard element that calculates the annual changes in the number of small business contractors could help highlight the effects of these prime contracting trends on procurement opportunities. According to agency officials and small business representatives, subcontracting opportunities are also unlikely to be impacted by the revised scorecard methodology, which increased the weight of subcontracting performance. Officials from two of the four departments we interviewed told us that their agencies have stable purchasing patterns and that subcontracting activity is not likely to change as a result of scorecard revisions. Representatives from two of the three small business groups said the influence of the scorecard revisions in incentivizing agencies to focus on subcontracting opportunities is limited by the reliability of available subcontracting data, discussed previously. For example, one agency told us that the shift from prime to subcontracting performance reduces the agency’s ability to influence scorecard outcomes because the agency has no means of validating the subcontracting data that are recorded. Similarly, representatives from two of the three small business groups said that because the data on subcontracting are entered by the prime contractors at the time of proposed contracting rather than confirmed contracting, the data do not include verification of subcontracting activity and therefore might not be an accurate measure of subcontracting activity. Representatives from agencies and small business groups said the scorecard program has generally played a role in drawing attention to agencies’ performance in identifying small business procurement opportunities. For example, SBA officials said the scorecard results provide public information about how well the government performed overall in providing small business procurement opportunities and help to ensure that all agencies are contributing toward those goals. Officials at one agency told us that the scorecard was an important factor in driving internal goals and opportunities for small businesses. Another agency said that while it had been reaching its overall prime contracting goal, its performance in certain small business subcategories was falling short of goals. As a result, the agency has directed additional outreach efforts to those types of small businesses. In addition, representatives of all three small business groups said because results are public, the scorecard has created additional pressure on agencies to meet procurement goals. SBA uses its scorecard program to monitor federal agencies’ compliance with goals set by Congress to promote small business participation in federal contracting, and SBA has identified having agencies meet or exceed those participation benchmarks as one of its agency-wide goals in its strategic plan. The effects of recent changes to the scorecard and their potential benefits for improving federal contracting opportunities for small businesses are uncertain. SBA recently began to develop a plan for evaluating whether or how changes to the scorecard might facilitate SBA’s ability to meet government-wide procurement goals. Completing such an evaluation and making sure the evaluation plan is aligned with key attributes for effective evaluations could help SBA management: determine whether the revised scorecard provides quality information—consistent with federal internal control standards—and whether it helps meet the agency’s strategic goals; fully address whether the revisions are effective in measuring and creating small business procurement opportunities; and make a well-supported recommendation about whether to continue or modify the scorecard program. Congress required that SBA recommend by March 31, 2019, whether to continue or modify the scorecard program. In addition, the scorecard appears to have played a role in drawing attention to agencies’ performance in identifying small business procurement opportunities. However, there were errors in the initial fiscal year 2017 scorecards published on SBA’s website, and SBA did not initially take steps to notify the public after it made corrections. SBA officials said that SBA does not have a process to ensure that published scorecard results are accurate. Errors in the published scorecards and a lack of timely disclosure about corrections may impair other agencies’ or Congress’s access to quality information to make informed decisions. We are making the following two recommendations to SBA: The SBA Administrator or her designee should complete the design and implementation of a comprehensive evaluation of the Small Business Procurement Scorecard aligned with key attributes of effective program evaluations to assess the effectiveness of the revised scorecard in measuring agency performance and promoting small business procurement opportunities. (Recommendation 1) The SBA Administrator or her designee should institute a process to review Small Business Procurement Scorecards for accuracy prior to publication and a mechanism for publicly identifying when issued scorecards have been revised. (Recommendation 2) We provided a draft of this report to SBA for review and comment. In written comments, reproduced in appendix II, SBA generally agreed with both of our recommendations. Regarding our recommendation that SBA design and implement an evaluation of the revised scorecard methodology, SBA said it planned to evaluate the changes to the scorecard methodology mandated by the 2016 NDAA. As discussed in our report, in revising the scorecard, SBA also made other changes not specifically mandated by the 2016 NDAA, such as increasing the emphasis on small business subcontracting activity and incorporating a revised peer review process to facilitate a more in-depth review of agencies’ compliance with section 15(k) requirements. As stated in our report, we recommend that SBA plan and implement an evaluation of all aspects of the revised scorecard methodology. SBA also indicated that it will not complete the evaluation until after it has validated data for the fiscal year 2018 procurement scorecard. We note that SBA can prepare an evaluation plan and begin to consider potential evaluation findings using available scorecard data from fiscal year 2017. We also note that our recommendation states that SBA’s evaluation plan should be aligned with the key attributes of effective evaluation design. Regarding our recommendation that SBA institute a process to review scorecards for accuracy prior to publication and a mechanism for publicly identifying when issued scorecards have been revised, SBA said it had taken several steps to revise the processes for publishing accurate scorecard results, including adding steps to compare the prepared scorecard documents to source documents prior to publication and to annotate any score corrections that are made to published scorecards. While we have not yet had the opportunity to assess SBA’s actions, the steps SBA describes in response to our recommendation could improve other agencies’ or Congress’s access to quality information. We will send copies to the Administrator of SBA and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. This report describes (1) revisions to the Small Business Procurement Scorecard (scorecard) methodology for fiscal year 2017 and results of the fiscal year 2017 scorecard, as well as the extent to which the Small Business Administration (SBA) plans to evaluate the effects of revisions; (2) the extent to which SBA’s revised scorecard methodology uses relevant and reliable information and SBA publishes accurate scorecards; and (3) views of selected federal agencies and industry stakeholders on the extent to which SBA’s revised scorecard methodology may encourage agencies to expand small business procurement opportunities. To examine the changes SBA made to the Small Business Procurement Scorecard and the rationale for these changes, we reviewed relevant documents, including the National Defense Authorization Act for Fiscal Year 2016, SBA’s descriptions of the prior and revised scorecard methodology, and revised peer review guidance used for the scorecard element that assesses compliance with section 15(k) of the Small Business Act. We also interviewed officials from SBA and four other agencies about the revisions to the scorecard calculation methodology, the peer review guidance, the process for providing input on scorecard revisions, and how revisions were implemented. The four agencies (the Departments of Agriculture, Defense, Energy, and Homeland Security) represented a judgmental, nongeneralizable sample of federal agencies with procurement powers, selected based on small business procurement volume, recent improvement in scorecard results, and level of participation in discussions with SBA and other agencies about potential changes to the scorecard. We also interviewed SBA officials about their plans to evaluate the effects of scorecard revisions on small business procurement opportunities and about their plans, if any, to evaluate the revised scorecard. In addition, we reviewed federal internal control standards and GAO’s key attributes for designing effective evaluations. We analyzed the distribution of agencies’ letter grade results (A+, A, B, C, D, and F) from the fiscal year 2017 scorecard and compared this distribution to fiscal years 2014 through 2016, which used a different scorecard methodology. We also reviewed the distribution of results of fiscal year 2017 individual scorecard elements—specifically, results of prime contracting achievement, subcontracting achievement, and peer reviews—and compared this distribution to results for fiscal year 2016. We compared agencies’ prime contracting and subcontracting performance against their small business procurement goals for fiscal years 2016 and 2017. To compare peer review results across years, we made adjustments to account for changes in the value of peer review results (raised from 10 points to 20 points from fiscal years 2016 to 2017). To adjust for this difference, we doubled the value of fiscal year 2016 scores to put both years’ scores on a 20-point scale. Finally, we compared actual fiscal year 2017 scorecard results to the results if SBA had used the 2016 scorecard weighting. To do this, we increased the weighting of fiscal year 2017 prime contracting results from 50 percent to 80 percent of each agency’s total scorecard grade, decreased the weight of subcontracting results from 20 percent to 10 percent, and decreased the weight of peer review results from 20 percent to 10 percent. We also excluded results from the new scorecard element calculating changes in the number of small business contractors, which was not part of the 2016 methodology. To examine the extent to which SBA’s revised scorecard methodology considers relevant and reliable information, we interviewed officials from SBA and the Departments of Agriculture, Defense, Energy, and Homeland Security. We reviewed documents describing the prior and revised scorecard methodology. We discussed limitations, if any, in the electronic data systems that capture government-wide data on prime contracting and subcontracting (which SBA uses to calculate those respective scorecard elements). We also reviewed our prior work that assessed these data systems. To assess the data reliability of the published scorecards, we reviewed them for obvious errors and interviewed SBA officials about the cause of errors we identified. We found the scorecards to be reliable for analyzing scorecard results for fiscal year 2017. We also compared SBA’s revised scorecard methodology against the agency’s policies on information quality and against GAO’s standards for internal control in the federal government. To collect views on the extent to which SBA’s revised scorecard methodology may encourage agencies to expand small business procurement opportunities, we interviewed officials from SBA and the four selected departments cited above, as well as representatives from three organizations representing the interests of small businesses. These three organizations were selected to represent a mix of small business types: one (The American Small Business Chamber of Commerce) represented all types of small businesses; one (Women Impacting Public Policy) represented a small business socioeconomic subcategory with a 5 percent goal for prime contracting and subcontracting (as a percentage of total prime contracting and subcontracting); and one (The Task Force for Veterans’ Entrepreneurship, also known as Vet-Force) represented a small business subcategory with a 3 percent goal for prime contracting and subcontracting. We conducted this performance audit from January 2018 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Andy Pauline (Assistant Director), Steve Robblee (Analyst in Charge), William Chatlos, Holly Hobbs, Marc Molino, Jessica Sandler, and Jennifer Schwartz made key contributions to this report.", "summary": "Each year SBA produces a scorecard measuring federal contract spending allocated to small businesses. The 2016 NDAA included a provision for SBA to revise the scorecard's methodology and for GAO to evaluate the effects of those revisions for fiscal year 2017. This report discusses, among other things, (1) SBA's changes to the scorecard methodology and plans, if any, to evaluate the effects of these changes, (2) the extent to which SBA has processes to disseminate reliable information, and (3) views of selected stakeholders on the scorecard's effects on small business procurement opportunities. GAO analyzed SBA's prior and revised scorecard methodology and results and interviewed officials from SBA, four other federal agencies selected based on small business procurement volume and other attributes, and three groups representing the interests of small businesses. For fiscal year 2017, the Small Business Administration (SBA) revised the methodology for its Small Business Procurement Scorecard, which is used to assess federal agencies' progress toward small business procurement goals. SBA made revisions to address requirements specified in the National Defense Authorization Act for Fiscal Year 2016 (2016 NDAA). SBA (1) reduced the share of the total scorecard grade devoted to prime contracting achievement, which is the dollar amount of contracts awarded directly to small businesses, and (2) added an element calculating changes in the number of small businesses receiving prime contracts. SBA made two additional revisions—with input from other agencies' representatives—to increase the share of subcontracting achievement results and peer review of required activities designed to facilitate small business procurement (see figure). In July 2018, officials said they had begun developing a plan to evaluate the effects of the revised scorecard methodology but did not provide a draft plan. Conducting a well-designed and comprehensive evaluation could aid SBA in determining whether the scorecard is an effective tool for helping to achieve the agency's strategic goals. (Scorecard elements are expressed as a percentage of total scorecard grade.) The published fiscal year 2017 scorecards originally contained errors, including an incorrect grade and numeric score for one agency, and SBA does not have a process to ensure that scorecard results are published accurately. Although SBA later corrected the errors, the agency did not initially document that scorecards had been changed, which is inconsistent with SBA's policy on information quality. SBA officials said that errors occurred in the process of formatting scorecards for publication. Errors in the published scorecards—and the initial lack of disclosure about corrections—weaken data reliability and may undermine confidence in scorecard data. Agency officials and representatives of small business groups that GAO interviewed generally expected the scorecard revisions to have little impact on small business procurement opportunities. However, one agency's officials said they would focus more on tracking subcontracting activity as a result of changes to the scorecard. GAO is recommending that SBA (1) design and implement a comprehensive evaluation to assess scorecard revisions and (2) institute a process for reviewing scorecards for accuracy prior to publication and a mechanism for disclosing corrected information. SBA generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Electronic health records that are interoperable and contain all relevant patient information are crucial for optimizing the health care provided to patients. Historically, patient health information has been scattered across paper records kept by different caregivers in many different locations, making it difficult for a clinician to access all of a patient’s health information at the time of care. Lacking access to these critical data, a clinician may be challenged in making the most informed decisions on treatment options, potentially putting the patient’s health at risk. Thus, the move toward collecting, storing, retrieving, and transferring these records electronically can significantly improve the quality and efficiency of care. This is especially true in the case of military personnel and veterans, such as those in the Coast Guard, because they tend to be highly mobile and may have health records at multiple facilities both within and outside the United States. Therefore, EHRs that are interoperable among health care systems of providers such as the Coast Guard, the Department of Defense (DOD), and the Department of Veterans Affairs (VA) are key to improving the care these patients receive. In April 2004, the President called for widespread adoption of interoperable EHRs by 2014. Similarly, in August 2006, the President instructed agencies, as they implemented, acquired, or upgraded health information technology (IT) systems, to utilize systems and products that met recognized interoperability standards. For nearly two decades both DOD and VA have been working to implement interoperable health care systems, although with little success. The Coast Guard’s HSWL Directorate is responsible for ensuring the readiness and health of nearly 50,000 members throughout the United States. In this regard, the Office of Health Services within HSWL is charged with providing healthcare to Coast Guard members, other military active duty and reserve members, retired personnel, and eligible family members. The Coast Guard’s healthcare services are supported by 41 U.S. based health clinics and 125 sick bays. In an effort to meet the need for interoperable EHRs, in 2002, the Coast Guard implemented DOD’s Composite Health Care System (CHCS) at its clinics and sickbays. According to the Coast Guard’s medical manual, the clinics and sickbays used CHCS for various health care-related activities, including scheduling patient appointments; documenting patient consults and referrals; storing prescriptions; tracking and controlling prescribed medications; and tracking laboratory orders. CHCS interfaced with the DOD Defense Eligibility Enrollment Reporting System, which provided verification of the identity and benefit eligibility of Coast Guard members; other military active duty, reserve, and retired personnel; and their eligible family members. CHCS also interfaced with other health care-related systems, such as a DOD prescription repository, a patient lab delivery system used by health care providers, a system that provided eyewear-related services, and the military’s health insurance provider’s system. To provide a more user-friendly way of accessing CHCS, the Coast Guard implemented DOD’s Provider Graphical User Interface (PGUI) in 2004. This interface also provided clinics and sick bays with additional system functionality, such as the ability to create and store medical notes electronically. According to HSWL staff, although CHCS and PGUI provided the Coast Guard with a way to manage health records electronically, these systems were outdated and lacked key functionality such as billing, scheduling, and case management. Therefore, the Coast Guard intended to transition from CHCS and PGUI to DOD’s more modernized Armed Forces Health Longitudinal Technology Application (AHLTA) in 2009 to achieve interoperability with DOD and VA and comply with executive orders and statutes that called for efficient health care initiatives. However, HSWL staff stated that the cost of adopting and maintaining AHLTA, as well as the need for the Coast Guard to meet its unique mission requirements, led the agency to move forward with implementing a new system of its own in 2010. The new system was intended to be interoperable with both DOD’s and VA’s health information systems. Toward this end, on September 30, 2010, the Coast Guard awarded a 5- year, $14 million contract to acquire a commercial off-the-shelf (COTS) EHR system. According to the Coast Guard’s EHR business case, the system was to provide ambulatory services, including online management of patient health records; patient scheduling and billing services; dental and radiology modules; management of prescribed medications and tracking laboratory orders, among other capabilities. However, while working to implement the COTS EHR system, HSWL staff determined that many other Coast Guard health care-related IT systems were outdated and also needed modernization. As a result, the HSWL Directorate began an effort to expand the original EHR modernization effort to integrate these other necessary and outdated services. This expanded project was called IHiS. According to the HSWL Directorate, IHiS was to provide additional services such as work-life and safety data management, work-life case management, wireless access, and an integrated patient portal that was intended to allow patients to access their medical records at any time. The project consisted of various contracts with 25 different vendors and was estimated to cost approximately $56 million to implement, which included the original $14 million COTS EHR contract. HSWL staff stated that, at the time that the IHiS project was being planned and designed, the Department of State was also planning to develop an EHR system. In order to reduce the overall cost to both parties, in 2012, the Department of State signed an interagency agreement with the Coast Guard to utilize IHiS for that department’s personnel. The system was to be implemented in phases with beta testing at two to three selected Coast Guard clinics in October 2015, and then subsequent implementation at the other clinics, sick bays, and Department of State locations. However, on October 19, 2015, the Coast Guard decided to terminate the IHiS project and decommissioned PGUI in 2015 and CHCS in 2016. According to the Director of HSWL, who was appointed to the position in August 2015, financial, technical, schedule, and personnel risks led the Coast Guard’s EOC to decide to terminate the IHiS project. Specifically, the Director of HSWL provided us a written summary of information on the IHiS project risks that she said she had verbally communicated to the EOC during meetings on September 24, 2015, and October 6, 2015. The financial risks that the Director presented were based on internal investigations initiated in January 2015 and May 2015 to determine whether the HSWL Directorate had violated the Antideficiency Act by using incorrect funding sources and incorrect fiscal year funds for the IHiS project. In this regard, the Coast Guard ordered project management and contractor staff to cease work on IHiS until a determination was made regarding the antideficiency violation. In addition, the Director stated that she relayed technical risks to the EOC. These risks were identified in an e-mail in late August 2015 by Coast Guard project management staff who participated in the design and development efforts for IHiS. The Director and the related e-mail identified the following technical risks: Lack of testing. IHiS lacked an independent security assessment to verify that the system’s security infrastructure was adequate. In addition, full interface testing with systems such as the Defense Eligibility Enrollment Reporting System had yet to be completed to ensure security and data integrity. Limited system functionality. The system that was to provide user verification and IHiS role management services was not yet complete. In addition, Coast Guard workstations could not yet access IHiS from the network and the patient portal lacked two-factor authentication. Further, the service that was to register new IHiS users in the system had yet to be completed. The Director also presented schedule and personnel risks to the EOC: Delays in the implementation timeline. The Director stated that between August 2015 and September 2015, she requested that the DOD’s Defense Health Agency Solution Delivery IT team independently validate the IHiS timelines and the status of the project. The Director said she requested this review because of the technical risks identified in the August 2015 e-mail and concerns as to whether IHiS would be ready to be piloted at the first clinic in the fall of 2015. According to the Director, the Defense Health Agency team projected the timeline for the first clinic implementation to be approximately 1 year later than originally estimated. The Director added that Defense Health Agency team members stated that the timeline was delayed, in part, because critical IHiS interfaces and workflows were not complete or operational. The Director told us that these estimations were provided by the Defense Health Agency team verbally and that the team did not provide the Coast Guard any written documentation outlining its findings. Changes in project management staff. Although HSWL staff had been managing the IHiS project since it was initiated in 2010, C4&IT was directed to assume the oversight responsibilities for IHiS implementation in May 2015 due to concerns about the project’s adherence to established governance processes raised by the internal investigators looking into the potential Antideficiency Act violations. By August 2015, the key project management personnel that had overseen the project since 2010 had been removed. According to C4&IT staff, IHiS was cancelled during the transition of project managers. As a result of the changes in staff, one vendor noted that it was unclear as to who were stakeholders, responsible parties, and decision makers. According to the Director, these risk factors had demonstrated that the project was far from ready for deployment and that continuing IHiS could cause significant stewardship and reputational harm to the Coast Guard. As a result of the risks presented by the Director, the EOC members made the decision to cancel IHiS, and did not consider any other alternatives to its cancelation. Subsequent to the project’s cancelation, the Deputy Commandant for Mission Support conducted an analysis of the amount of money that had been obligated for and spent on the project. According to the analysis, which included obligations and expenditures from September 2010 to August 2017, the Coast Guard had obligated approximately $67 million and, of that amount, had spent approximately $59.9 million on the IHiS project at the time of its cancelation. Further, according to Office of Budget and Programs staff members, no equipment or software from the IHiS project could be reused for future efforts. In addition, according to senior staff within the Acquisition Directorate, the Coast Guard continued to pay millions of dollars to vendors over 2 years after the project’s cancelation to satisfy existing contractual obligations. For example, according to staff within the Acquisition Directorate: $102,993 was paid in November 2017 to one vendor for leased equipment that was damaged or missing, as part of closing out the contract. $460,352 was paid in November 2017 to an equipment vendor because the Coast Guard was obligated to do so after it had exercised the contract option period just prior to canceling IHiS. Approximately $872, 000 was paid to various vendors by November 2017 as part of closing out other contractual obligations for items such as software licensing and support and a data storage center. Approximately $2.4 million is to be paid to one vendor by February 2018 for software and licensing products. Approximately $2.8 million is to be paid by February 2018 for removal and shipment of equipment. However, the amount spent on the project is likely underestimated because the Coast Guard’s analysis of spending did not include labor costs for the agency’s personnel (civilian or military) who spent approximately 5 years managing, overseeing, and providing subject matter expertise on the project. It also did not include any travel costs incurred by these personnel. The Coast Guard could not demonstrate that it effectively managed and oversaw the IHiS project prior to its discontinuance. Specifically, although the Coast Guard was to follow the SDLC Practice Manual to guide its management and oversight of the project, the agency could not provide complete evidence that it had addressed 15 of the 30 SDLC practices we selected for evaluation. In addition, project team members provided inconsistent explanations regarding whether or not documentation existed to demonstrate the actions taken to manage and oversee the IHiS project. Further, although the Coast Guard developed charters for various governance boards to provide project oversight and direction, the boards were not active and the Chief Information Officer (CIO) was not included as a member of the boards, further contributing to a lack of key governance mechanisms for IHiS. Finally, the Coast Guard did not document and share lessons learned from the failed project to help prevent similar outcomes for future IT projects. In an effort to institute disciplined, repeatable practices for IT development and acquisition, the Coast Guard developed the SDLC Practice Manual, which establishes the seven-phase methodology for developing the Coast Guard’s Assistant Commandant for C4&IT systems, such as IHiS. The practice manual is intended to guide project management teams through a progression of activities for managing and overseeing IT projects from conceptual planning to disposition. (Appendix II provides a discussion of each SDLC phase included in the practice manual and the 30 selected practices that we evaluated.) Although IHiS was to adhere to the SDLC practices established in the manual, the Coast Guard could not demonstrate that the staff providing day-to-day management of the project had always done so. Specifically, of the 30 selected project management practices that we evaluated for the initial four SDLC phases of IHiS—Conceptual Planning, Planning and Requirements, Design, and Development and Testing—Coast Guard officials provided documentation that the project management team fully addressed 15 practices and partially addressed 5 practices. The agency could not provide documentation that the project team had addressed 10 other practices. Table 1 provides a complete listing of the SDLC project management practices that we selected for evaluation and the extent to which the Coast Guard could demonstrate that it completed each practice. For this phase, the Coast Guard demonstrated that steps had been taken to address five of the seven selected project management practices for IHiS. Specifically, it assigned project management roles, such as the project manager, asset manager, and the system’s sponsor. The agency also documented the initial IHiS business case and acquisition strategy, as well as the designation memorandum that identified IHiS as a C4&IT system. However, the Coast Guard could not demonstrate that the project management team had validated the project’s alignment with the agency’s enterprise architecture and that the project had received the required phase exit approval. As a result, the Coast Guard could not provide evidence that the necessary steps were taken to ensure that the project would align with the agency’s business objectives and that project management staff had received approval to proceed to the next SDLC phase. For this phase, the Coast Guard demonstrated that 8 of the 11 selected project management practices were performed for the IHiS project. Specifically, the agency provided evidence that it had completed the tailoring plan that detailed the SDLC processes that would be required throughout the IHiS system’s lifecycle, developed an initial risk management plan that included a list of vulnerabilities and the measures to overcome or lessen them, and conducted a cost benefit analysis. The Coast Guard also documented functional requirements; reviewed external mandates, such as those mentioned earlier; created an initial training plan; and designated the system development and system support agents. Finally, the Acting CIO approved the project to move to the next phase and stated in a memorandum that the project had met all the requirements of the planning and requirements phase. However, the Coast Guard could not demonstrate that it had fully completed all of the requirements of this phase. For example, the Coast Guard provided documentation that partially met the requirement to develop a project management plan. Specifically, the agency created a project management plan that included certain required elements, such as a project description, work breakdown structure, and a life cycle cost estimate. However, it did not complete other required elements. Specifically, although the Coast Guard developed a project schedule for IHiS, it was not well-constructed, which made the overall quality of the IHiS schedule unreliable. For example, the IHiS schedule allowed for many activities to slip a significant number of days before impacting the dates of key events. Further, the Coast Guard could not demonstrate that it had created a communication plan—another element of the project management plan—that is essential to identifying how system development progress is to be communicated across the project management team. The Coast Guard also could not demonstrate that two other selected practices were addressed. Specifically, the agency could not provide an integrated logistics support plan that is intended to document processes for ensuring IHiS data management and records management, among other things. In addition, the Coast Guard could not demonstrate that it had developed an information assurance plan that is intended to articulate the information security controls required to ensure the availability, integrity, authentication, and confidentiality of the patient health information that was to be stored in IHiS. As a result, the Coast Guard could not demonstrate that it had performed key steps to construct a reliable schedule for IHiS, plan for how the project’s progress was to be communicated to key stakeholders, ensure appropriate data and records management for information stored in IHiS, and plan for the controls necessary to secure patient health information. The Coast Guard demonstrated that actions had been taken to partially address three of the eight selected project management practices for the design phase. In this regard, the agency partially addressed the requirement to develop a detailed system design. Specifically, the system design documentation included a description of the operating system, external and internal system interfaces, inputs and outputs of each subsystem, administrative components that are intended to connect systems, and system security requirements. However, the system design documentation did not include information on the system architecture components, system timing and sizing, and system auditing requirements. The documentation also did not address all IHiS functional requirements as required by the SDLC. The Coast Guard also partially addressed the requirement to develop an operational analysis plan. For example, the plan included performance and operating measures related to availability, maintainability, and training. It also included support measures related to system utilization, incident management, and problem management. However, the Coast Guard had not included mission-related performance measures; operating measures related to reliability, user satisfaction, and effectiveness of technology; and other system support measures related to change management. In addition, the agency partially addressed the requirement to create the test and evaluation master plan. Specifically, the test and evaluation master plan included required elements, such as the scope, content, methodology, and sequence of testing, as well as the management of and responsibilities related to testing activities. However, the plan did not define activities for integration and security testing, both of which are intended to validate that the integrated system components function properly. The Coast Guard could not demonstrate that five other selected practices were addressed for the IHiS project. In this regard, it could not demonstrate that the project team had: held review sessions with the user community to ensure that the requirements and the design were consistent with the new or enhanced business requirements; developed contingency and disaster recovery plans to document the steps necessary to continue IHiS operations in the event of a disruption; completed the privacy impact analysis to describe what information was to be collected by IHiS, why the information was being collected, intended use of the information, and how the information was to be secured, among other things; tested the system design to ensure that it would have met requirements and support business processes; and obtained exit approval for the design phase to demonstrate that all requirements of the phase were met. As a result, no evidence was provided that the Coast Guard performed all of the required steps to translate detailed system requirements into the system design and develop plans for life cycle support, such as those that address contingencies, disaster recovery, and testing for IHiS. The Coast Guard demonstrated that actions had been taken to address two of the four selected practices and partially addressed one practice for the development and testing phase. For example, the agency developed the IHiS implementation plan that specified key activities, such as system training and monitoring, and included a schedule of activities that were to be accomplished during implementation. In addition, the Coast Guard created a diagram of the IHiS system layout as part of its effort to address one practice—to develop system documentation. However, it could not demonstrate that other required system documentation, such as system and user manuals that specify how to use and operate the system, had been created. Further, the Coast Guard could not demonstrate that it had conducted IHiS system testing, although the agency granted an authority to operate (ATO) and indicated in the ATO memorandum that the system had undergone some form of testing. The Coast Guard’s SDLC specifies that system testing is to take place prior to the issuance of an ATO. However, according to a memorandum signed by the IHiS authorizing official, a short-term ATO was granted for the system on March 30, 2015, in an attempt to ensure there would be a functioning replacement system in place prior to the decommissioning of CHCS. Nevertheless, the Coast Guard could not provide complete evidence that it took the necessary steps intended to ensure that the system would function as expected, such as conducing system testing. Over the course of our review, Coast Guard project team members provided inconsistent explanations regarding the availability of documentation to support the project management activities for IHiS. For example, with regard to the SDLC practices that we identified as not having been implemented, the former IHiS project manager and a knowledgeable representative for the contractor responsible for providing engineering and acquisition technical assistance for IHiS stated that the agency had developed most of the supporting documentation which would demonstrate that actions consistent with the SDLC practices had been taken. In addition, annotations within the IHiS acquisition strategy indicated that required SDLC artifacts, such as enterprise architecture documentation; plans for integrated logistics support, contingency, and disaster recovery; and a privacy impact assessment, among many others, were documented, available, and maintained within a document management tool. However, staff within the HSWL Directorate, the Office of Budget and Programs, and the Office of Enterprise Applications Management told us that the documentation either did not exist or could not be located because several of the key project management team members were no longer employees of the Coast Guard. The absence of the various documents and other artifacts that would support the required SDLC activities raises doubts that the Coast Guard took the necessary and appropriate steps to ensure effective management of the IHiS project. Carrying out established procedures for effective management and oversight of IT projects will be important for supporting any system development and acquisition effort that the Coast Guard undertakes to implement a future EHR system. According to the IT Investment Management Framework, efforts to build a foundation for IT governance involve establishing specific critical processes, such as instituting investment boards and controlling investments as they are developed. In addition, we have long reported that federal IT projects have failed due, in part, to a lack of oversight and governance especially at an executive-level, such as the CIO. The Coast Guard documented charters for four governance bodies that were intended to provide oversight to the IHiS project: The Executive Steering Committee was to provide executive oversight of the design, implementation, operation, and long term direction for IHiS. Responsibilities of the committee were to include monitoring the overall acquisition, integration, and operation of IHiS; authorizing major changes in the project’s objectives, scope, and requirements; and reviewing the reliability, availability, and affordability of the project, among other things. Members of the committee were to include representatives from the Coast Guard’s HSWL Directorate, the Office of Enterprise Applications Management, and Department of State representatives. The User Group was to make recommendations to the IHiS Program Management Office on functionality and system design and to ensure that decisions were based on end-user needs. Responsibilities of the group were to include making suggestions on improving IHiS for the user, participating in planning for future changes or upgrades to the system, and evaluating strategies to maintain and improve system efficiency. The IHiS project manager was to serve as chair of the group, and the Coast Guard and Department of State were to nominate user representatives from each functional area of IHiS as additional group members. The Change Control Board was to evaluate change proposals in regard to technical, user, and cost impact to the system and recommend change requests to the IHiS baseline. Members of the board were to include representatives from the Coast Guard’s Office of Enterprise Applications Management, the Business Operations Division, and the Department of State. The System Security Committee was to manage the risk to IHiS and identify and mitigate security vulnerabilities. Responsibilities of the committee were to include reviewing IHiS security configurations, changes to those configurations, and proposed changes to IHiS to ensure that the system’s security would not be compromised. Members of the committee were to include representatives from the Coast Guard’s Office of Enterprise Applications Management, the Business Operations Division, and Department of State security and privacy representatives. While the Coast Guard chartered these various governance bodies for IHiS oversight, the agency could not provide evidence that the boards had ever been active in overseeing the project prior to its cancelation. As a result, the IHiS project lacked important oversight mechanisms to ensure the project’s success. In addition, the CIO (Deputy Assistant Commandant for C4&IT) was not included as a member of any of the IHiS governance bodies. According to a memorandum signed by the Acting CIO in 2011, C4&IT was responsible for ensuring that the IHiS project was compliant with SDLC requirements. However, the Coast Guard could not provide evidence that demonstrated how C4&IT and the CIO were involved in ensuring compliance with the requirements. Taking steps to fully implement governance boards that include the CIO will be important to the Coast Guard’s oversight efforts in implementing a future EHR system and may decrease the risk of IT project failure. We developed the IT Investment Management Framework that stresses the importance of identifying lessons learned to support future investment decisions. We have also previously reported that mechanisms for documenting, sharing, and disseminating lessons learned serve to communicate acquired knowledge more effectively and ensure that beneficial information is factored into planning, work processes, and activities. Lessons learned provide a powerful method of sharing good ideas for improving work processes, facility or equipment design and operation, quality, safety, and cost-effectiveness. They can be based on positive experiences or on negative experiences that result in undesirable outcomes, such as the cancelation of the IHiS project. Additionally, it is important to disseminate lessons learned since lessons are of little benefit unless they are distributed and used by people who will benefit from them. Although Coast Guard officials stated that lessons learned had been identified throughout the process of developing IHiS, as of 2 years after its cancelation, the agency had not documented and shared any lessons learned from the project and does not have established plans for doing so. According to an official from the Office of Budget and Programs, the Coast Guard had not yet documented lessons learned because the agency views the lessons learned process as ongoing. While the Coast Guard may view the lessons learned process as ongoing, the IHiS project was canceled in 2015, and it is important to document and share the lessons already identified so that this beneficial information can be factored into the planning activities for future systems and projects. Until the Coast Guard takes steps to document and share identified lessons learned with individuals charged with developing and acquiring its IT systems, opportunities to protect future systems against the recurrence of mistakes that contributed to the failure of IHiS will likely be missed. In the absence of an EHR system, the Coast Guard currently relies on a predominately paper health record management process to document health care services for its nearly 50,000 military members. After canceling the IHiS project in October 2015, the agency could not return to managing health records using its legacy electronic capabilities because PGUI was decommissioned in 2015 and CHCS was decommissioned in January 2016. Thus, the Coast Guard directed clinics and sick bays to remove relevant information from CHCS and PGUI and maintain all health records for its members using a predominately paper process. The Coast Guard supplements its current paper process by using applications that various other agencies operate and maintain. For example, the Coast Guard uses the Navy’s Medical Readiness Reporting System to, among other things, track immunizations, periodic health assessments, dental exams, dental status, and required physical exams. In addition, the agency uses the Army’s Aeromedical Electronic Resource Office electronic tracking system to document aviation physical exams and aero medical summaries. However, while these systems hold valuable information, they are separate applications requiring separate logins and do not encompass comprehensive Coast Guard health beneficiary information. Currently, the Coast Guard’s clinical staff (i.e., clinic administrators and clinicians) are to generally perform the following steps to process each paper health record: Schedule an appointment for patient using Microsoft Outlook’s calendar feature. Provide the patient with the required forms for completion upon his or her arrival. Verify that all required paper forms are complete and correct. Handwrite clinical notes in a paper health record during the appointment. Complete referrals on an internal referral form and fax the form to the external provider. Handwrite prescription. Review and initial all lab and x-ray reports before filing them in the paper health record. File forms in their assigned sequence within the health record. Store all paper health records in secure cabinets or other secure areas of the facility. Conduct an accuracy and completeness check of the health record upon notification that an individual will be transferred to another facility and correct any identified deficiencies. Mail patient’s paper health record to a new facility if there is a permanent change of station, or provide the patient his or her health record in a large sealed envelope to carry by hand. Figure 1 generally depicts the required steps for managing paper health records. In response to our survey, the 12 HSWL Regional Managers identified a number of challenges that clinics and sick bays in their regions had experienced in managing and maintaining paper health records. These challenges were grouped into 16 categories. Further, the 120 clinic and sick bay administrators that subsequently responded to a separate survey reported varying degrees to which they viewed each category as challenging. Figure 2 provides the clinic and sick bay respondents’ views of the challenges. The following summarizes clinic and sick bay responses for each identified challenge with managing and maintaining paper health records: Incomplete records. Ninety-eight (82 percent) of the respondents reported incomplete records as challenging. In this regard, 34 of the survey respondents reported that not all CHCS and PGUI records were printed out and included in patients’ paper health records as required before the systems were retired; therefore, they had no way to ensure the patients’ paper records were complete. According to one respondent, paper records are also often incomplete due to parts of the record being dispersed across different medical facilities, thus, making it difficult to put together a complete patient history and sometimes resulting in the need to repeat testing and treatment of patients. Penmanship. Among the 91 (76 percent) survey respondents that reported penmanship as challenging, several noted that it is difficult for staff to read illegible handwritten medical notes. This, in turn, results in difficulty determining the accurate diagnosis, the required prescription, or a referral. Tracking medications. According to 89 (76 percent) of the respondents, it is challenging to track medications without an EHR. For example, one administrator stated that the lack of an EHR makes the management of patient medication use difficult, as staff are unable to verify what medications a patient is taking, what medications have been prescribed from an outside location, and/or the effectiveness of medications. Another administrator stated that staff members rely heavily on patients to remember what medications they are taking—potentially causing harm if patients cannot remember what medications they are taking and the medications have dangerous interactions. Amount of time to manage records. According to 86 (72 percent) of the respondents, managing paper health records is challenging and requires more time for staff to complete and file paperwork. Several respondents stated that the size of the paper health records has increased, resulting in additional time required to review and file records. Ability to search within records. Eighty-three (70 percent) of the respondents reported the ability of clinical staff to search within paper health records for information as challenging. For example, one respondent stated that providers must flip through individual pages of a record to search for necessary information. Another respondent reported that some patients have up to three volumes of a health record and it can take up to 2 or 3 days to find requested information if the patient does not recall when or where the medical care was performed. Figure 3 shows a large paper health record and the multiple storage cabinets used to store them, which illustrates the difficulty in manually searching for information within the records. Missing records. Eighty-three (69 percent) of the survey respondents stated that missing records are challenging. According to one administrator, repeat evaluations that may not be required for chronically ill patients are being conducted due to missing records. Another administrator stated that information can often get misfiled in the record of a patient with a similar name. Availability of records. Seventy-eight (65 percent) of the respondents reported that the availability of records is challenging. For example, one administrator reported that many records are located in different locations, making it difficult to access the necessary information. Another administrator stated that delays occur when clinic staff have to wait for patients to bring records in for review or wait for updated notes from a previous location. Amount of time for patient encounters. According to 65 (55 percent) of the respondents, the lack of an EHR has resulted in an increase in the amount of time required to check-in patients, complete patient appointments, and enter information in the patient record. According to one administrator, clinical documentation has to be completed by hand and some clinicians wait until the end of the day to complete notes. Another administrator reported that the clinician stays after the clinic closes to complete notes. Conducting consultations. Sixty-one (51 percent) of the respondents reported conducting consultations with paper records as challenging. Several administrators stated that patient information is faxed or scanned and submitted for the consulting provider to review. According to one administrator, there are times when documentation must be faxed or scanned multiple times in order to produce a legible copy, resulting in increased time spent gathering and submitting information. Health trends. According to 59 (50 percent) of the respondents, the use of paper records makes combining data to understand population health trends challenging. According to one survey respondent, accomplishing this without an EHR requires manually searching through every paper health record. Ability to view and print laboratory reports. Fifty-six (47 percent) of the survey respondents reported that the inability to view and print laboratory reports without an EHR is challenging. One administrator stated that their clinic could view and print the results from one particular laboratory, but if a patient received services from any other lab the clinic staff would have to request that the patient bring the laboratory results to the clinic. Another administrator stated that it could take 2 or more days to receive requested lab results because there was no way to easily obtain them via a centralized system. Sending referrals. Forty-two (35 percent) of the respondents stated that sending referrals is challenging. One administrator reported facing challenges with faxed referral forms not being received after obtaining a fax confirmation. Another respondent reported having to spend an increased amount of time on the referral process with each referral necessitating at least 20 minutes to complete the required forms and fax them to the external provider—with 10–25 referrals being sent each day. Cost of maintaining records. Thirty-nine (33 percent) of the respondents reported that the cost of maintaining paper health records is challenging. For example, one administrator reported that health records are frequently mailed to other medical locations or to the National Archives (for those separated or retired), which is a large expense for the Coast Guard. Another administrator stated that the time taken to gather paperwork, wait for civilian providers to send notes, and coordinate and execute health record updates is costly to the Coast Guard. Lastly, several administrators reported that expenditures for paper and printing products have increased due to the lack of an EHR. For example, one administrator reported that the clinic had increased its expenditure for paper by 50 percent. Scheduling of appointments. Thirty-eight (32 percent) of the respondents reported that the time it takes to schedule appointments is challenging. One administrator stated that, due to the lack of a scheduling system, patient appointments are being scheduled using the Outlook calendar function, which is time consuming when there are network slowdowns or freezes during high rates of utilization. Another administrator reported that appointments are sometimes double scheduled or occasionally disappear from the calendar and, in one instance, a patient received an appointment reminder for an appointment that the patient had never scheduled. Security/privacy of records. According to 34 (28 percent) of the respondents, the security and privacy of health records is challenging. One administrator reported that paper records are more prone to be within reach of individuals that should not have access to them because they are not stored in a secure EHR that has protections built in. Ordering x-rays. Thirty-one (26 percent) of the respondents reported that the process for ordering x-rays is challenging. According to several administrators, the current process for ordering x-rays involves submitting a referral by fax, which takes additional time for processing and waiting for results to be returned by fax. Several administrators reported that it is difficult to know if all x-ray results have been received and filed. The responding clinic and sickbay administrators described a range of alternative work-around processes that they have developed to help alleviate several of the challenges. Specifically, they reported having developed additional forms, tracking methods, and alternative processes, as well as having notified Coast Guard HSWL management of the challenges they face. Regarding developing forms, approximately 31 percent of the survey respondents noted that they had developed additional forms in order to more easily obtain the information that they would have had available to them with an EHR in place. According to one administrator, these forms are based on the most common patient encounter needs and capture information such as medications, allergies, chronic issues, and family history. In addition, these administrators reported developing electronic file versions, such as a Microsoft Word document, of the standard health forms so that they can e-mail them to patients and reduce the number of paper forms that have to be completed by hand and scanned. According to the administrators, these steps help address handwriting and space challenges. In addition, approximately 37 percent of the respondents reported developing tracking methods, such as Microsoft Excel spreadsheets and logs, to collect data and assist in tracking patient and provider information. One administrator reported that a spreadsheet was created to track patients with conditions that require monitoring, since there is no longer a system that has the data in one place. Another administrator reported creating a spreadsheet to track referrals, numbers of physicals, patient encounters, and medical readiness. Based on the survey responses, these tracking methods have helped address the challenges related to combining data to understand health trends, and tracking medications and referrals. Further, 30 percent of the survey respondents noted that they have also developed alternative processes to mitigate some of the challenges with managing paper health records. For example, one administrator stated that the clinic started conducting weekly reconciliations of referrals to ensure that all treatment records from outside referrals were obtained by the clinic and placed in the paper health record. Another administrator stated that the clinic had begun e-mailing patient encounter notes to the medical officer for review in an effort to ensure patient records are complete. Finally, approximately 55 percent of the respondents reported that they have notified HSWL senior management of the challenges encountered with managing and maintaining paper records. According to an official within the Acquisitions Directorate, the Coast Guard plans to mitigate many of the challenges identified by the Regional Managers with a new EHR system initiative. However, these alternative processes may not provide sustained solutions to overcoming these challenges. Until Coast Guard implements a new EHR solution, the challenges inherent in a predominantly paper process will likely remain. The Coast Guard has begun taking steps to acquire a new EHR system referred to as the Electronic Health Record Acquisition (eHRa). According to the Acquisitions Directorate, the Coast Guard plans to manage and oversee the acquisition of eHRa through its non-major acquisition process (NMAP), as described in its Non-Major Acquisition Process (NMAP) Manual. The NMAP requires formal approval reviews at three discrete knowledge points called acquisition decision events (ADE) and includes three phases to assess the readiness and maturity of the acquisition. Figure 4 graphically represents the ADEs and phases of the NMAP. (Appendix V provides a more detailed discussion of each ADE and each of the three phases that make up the NMAP process.) Once the Coast Guard identifies the need for a new acquisition program, the program’s sponsor is to seek ADE-1 approval. ADE-1 occurs when the program is designated as a non-major acquisition by the Deputy Commandant for Mission Support. If an acquisition receives ADE-1 approval, it proceeds to the analyze/select phase of the NMAP. The analyze/select phase is the first of three phases of the process, and includes required work activities such as preparing a requirements document, conducting market research to identify available alternatives, developing an acquisition strategy, developing a life cycle cost estimate, and preparing a project plan. The Coast Guard formally identified the need for a new EHR system on February 1, 2016, and obtained ADE-1 approval on February 13, 2016. Subsequent to the ADE-1 approval, the Coast Guard initiated the following activities associated with the analyze/select phase: Requirements development. As part of its efforts to develop new system requirements for eHRa, the Coast Guard identified its capability gaps as a result of the lack of an EHR in a Capability Analysis Report. The report offered two courses of action to address the capability gaps: (1) business process re-engineering to enhance the current paper-based process, or (2) transition to a system-based solution. According to the Acquisitions Directorate, the Coast Guard plans to use the report to inform its effort in developing requirements for eHRa. Market research. The Coast Guard issued a request for information in April 2017 to assess industry capabilities as part of market research for the new system. The request for information asked that the solutions fall into one of four categories that the Coast Guard was considering: Federal shared service. This option would allow the Coast Guard to use a system that is already in use by another federal agency. In addition, this option aligns with the Office of Management and Budget’s Federal Information Technology Shared Services Strategy, issued in May 2012, which highlighted the prevalence of redundancy in federal IT systems. Managed by the Coast Guard, but externally hosted. This solution would require the Coast Guard to acquire a COTS system and manage its implementation. However, the system would be maintained by a vendor at an externally hosted data center. Commercial software as a service. This option involves purchasing commercial software for an EHR solution that is operated and maintained by a commercial vendor. In-house. With this solution, the Coast Guard would manage the implementation and maintenance of a COTS system with support from a commercial vendor. As a result of the Coast Guard’s request for information, the agency collected cost, schedule, and capabilities information from commercial and government solution providers, including DOD and VA. The Coast Guard used the providers’ responses to develop an alternatives analysis report that was completed in October 2017. The report recommended a solution based on performance, risk, cost, and schedule advantages. The report indicated that the Coast Guard plans to use the results of the alternatives analysis to refine the acquisition strategy, and to support the development of artifacts which are required to successfully achieve the ADE-2 milestone. Staff within the Acquisitions Directorate stated that they were also in the process of finalizing a life cycle cost estimate and a project plan for eHRa—documents necessary for ensuring that appropriate business decisions will be made regarding eHRa’s logistics, affordability, and resources, among other things. As of December 2017, the Coast Guard had not yet made a final determination as to which option would be chosen as the solution for the eHRa acquisition. Until a solution is chosen and successfully implemented, the Coast Guard and its thousands of members will continue to face the many challenges inherent with managing and maintaining paper health records. The Coast Guard abruptly discontinued the IHiS project in 2015, citing financial, technical, schedule, and personnel risks. Coast Guard officials estimate this failed project has thus far cost the agency about $60 million. Further, this effort left the Coast Guard without any reusable system components for future EHR efforts. The Coast Guard could not demonstrate that it had fully implemented effective management and oversight for the IHiS project prior to its discontinuance. Specifically, the Coast Guard could not fully show key project management actions were taken for IHiS, lacked governance mechanisms, and did not document lessons learned for the failed project. By not doing so, the agency reduced the probability of the project’s success. The Coast Guard’s decision to revert to a predominately paper process has created a number of challenges for its many clinics and sick bays. These challenges are hindering their ability to deliver services. To help alleviate several of these challenges, the Coast Guard’s clinics and sick bays have developed alternative work-around processes. However, these alternative processes will likely not provide sustained solutions. The Coast Guard is currently taking steps to plan for a new EHR system, but as of December 2017—over 2 years after the cancelation of the IHiS project—it had not yet selected another solution. Successfully and quickly implementing an EHR system is vital to overcoming the challenges the Coast Guard currently faces in managing paper health records. The expeditious and judicious implementation of such a system can significantly improve the quality and efficiency of care to the thousands of Coast Guard active duty and reserve members that receive health care. We are making the following four recommendations to the Coast Guard: The Commandant should direct the Chief Information Officer and the Chief Acquisition Officer to expeditiously and judiciously pursue the acquisition of a new EHR system. (Recommendation 1) The Commandant should direct the Chief Information Officer and the Chief Acquisition Officer to ensure established processes required for the future acquisition or development of an EHR are effectively implemented and adequately documented. (Recommendation 2) The Commandant should direct the Chief Information Officer and the Chief Acquisition Officer to establish and fully implement project governance boards for the future EHR effort that include the Chief Information Officer. (Recommendation 3) The Commandant should direct the Chief Information Officer and the Chief Acquisition Officer to document any lessons learned from the discontinued IHiS project, share them with the new project management team, and ensure lessons learned are utilized for the future EHR effort. (Recommendation 4) The Department of Homeland Security provided written comments on a draft of this report. In its comments (reprinted in appendix VI), the department concurred with our four recommendations and identified actions being taken or planned to implement them. Among these actions, the department stated that it is judiciously pursuing an EHR solution, called eHRa, through its acquisition process, which is currently in the analyze/select phase of the NMAP process. The department also stated that a contract award for eHRa is planned for later this fiscal year. In addition, the department stated that it established a designated acquisition program with a dedicated program management office team and oversight council for EHR activities, and that the EOC monitors eHRa’s progress through the acquisition process. The department further added that governance boards for eHRa have been established that include the CIO as required by the NMAP manual. Finally, the department said that it plans to compile lessons learned from the discontinued IHiS project by March 30, 2018. Given the actions identified, the department requested that we consider the first three of our four recommendations to be closed. However, while the Coast Guard is taking positive steps with regard to initiating the eHRa program, the department noted that key decisions related to analyzing, selecting, and acquiring the new system remain to be made. Further, the Coast Guard has not yet awarded a contract for an EHR solution and is not planning to do so until later this fiscal year. Thus, the extent to which it establishes and effectively implements processes and governance boards throughout the project, and expeditiously and judiciously pursues the acquisition of the new system, remain to be seen. Accordingly, we will not yet close any of the recommendations. The department also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Commandant of the Coast Guard, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. The objectives of this study were to (1) describe what led the United States Coast Guard (Coast Guard) to the decision to terminate further Integrated Health Information System (IHiS) development, and how much was spent on the project; (2) evaluate the Coast Guard’s management and oversight actions for the discontinued electronic health records (EHR) modernization project and what, if any, lessons learned were identified; (3) describe the Coast Guard’s current process for managing health records and the challenges, if any, it is encountering; and (4) determine the Coast Guard’s plans for effectively implementing a new EHR system and the current status of its efforts. To address the first objective, we reviewed relevant IHiS project documentation, such as key contracts, the project plan, presentations by the project management team, and IHiS-related memorandums. We also reviewed project expenditures documentation developed by the Deputy Commandant for Mission Support and the Acquisitions Directorate. We supplemented our review with interviews of agency officials within the Health Safety and Work-Life (HSWL) Directorate, Office of Budget and Programs, Office of Resource Management, Office of Contract Operations, and the Office of Acquisition Support, as well as six key contractors. To address the second objective, we reviewed relevant policies and guidance, such as the Coast Guard’s Command, Control, Communications, Computers and Information Technology (C4&IT) System Development Life Cycle (SDLC) Policy and the SDLC Practice Manual intended to guide the management and oversight of development and acquisition projects at the Coast Guard. We evaluated available IHiS project management documentation, such as project plans, the project’s schedule, decision memorandums, charters for IHiS governing bodies, and Executive Oversight Council (EOC) meeting minutes, which demonstrated actions taken by project management staff during the IHiS project, and assessed them against selected practices identified in the Coast Guard’s SDLC Practice Manual. The practices we selected are fundamental to effective information technology (IT) management and oversight. These included practices for conceptual planning, planning and requirements, design, and development and testing. We selected the practices from each applicable phase that had an associated artifact or called for the agency to take specific action(s) that we were able to validate through evidentiary review. If an artifact was applicable to multiple practices in multiple phases of the SDLC, we evaluated the artifact in only one phase and one practice. We also interviewed agency officials from Coast Guard offices such as the HSWL Directorate, Office of Budget and Programs, and Office of Resource Management regarding their role in managing and overseeing the IHiS project. In addition, we interviewed or received written responses from knowledgeable representatives for six key contractors tasked with providing the ambulatory care system and patient portal, safety data management and user credentialing system, software, and engineering and acquisition technical assistance. These interviews focused on the contractor’s role in the IHiS project, any issues they experienced, and the status of the services they were providing at the time of cancelation. Lastly, we interviewed Coast Guard officials within the HSWL and Acquisition Directorates to determine whether lessons learned were obtained and documented to inform future decisions for the new EHR project. Our methodology to determine the extent to which the Coast Guard demonstrated the completion of the selected SDLC phase practices included three levels of assessment: (1) the Coast Guard provided documentation that demonstrated that the IHiS project satisfied all of the elements of the required SDLC project management practice; (2) the Coast Guard provided documentation that demonstrated that the IHiS project partially satisfied some but not all elements of the required SDLC project management practice; and (3) the Coast Guard could not provide documentation that demonstrated that the IHiS project satisfied any of the elements of the required SDLC project management practice. To address the third objective, we reviewed Coast Guard medical records management documentation, such as medical manuals, workflow procedures, and standard operating policies and procedures for clinics and sick bays. We also administered a survey via e-mail questionnaire to all of the 12 HSWL Regional Managers and a web-based survey to all of the 166 clinic and sick bay administrators. The survey to Regional Managers included questions on whether the clinics and sick bays in their region faced challenges in managing health records without an EHR system in place and whether all the records from decommissioned EHR systems had been included in the paper records. The survey to clinic and sick bay administrators included questions on the challenges reported by Regional Managers and the mitigation strategies, if any, employed for the challenges identified. Before administering the surveys we pretested them by interviewing 1 Regional Manager and 5 clinic and sick bay administrators to ensure that our survey questions and skip pattern were clear and logical and that respondents could answer the questions without undue burden. We administered the survey to the 12 Regional Managers from March 2017 to April 2017; therefore, the corresponding responses reflect information and views as of that time period. We received 12 responses, for a 100 percent response rate. We administered the survey to the clinic and sick bay administrators from April 2017 to August 2017; therefore, the corresponding responses reflect information and views as of that time period. We received 120 responses, for a 72 percent response rate. To address the fourth objective, we identified the process through which the Coast Guard is managing its acquisition of its new system, the Non- Major Acquisition Process (NMAP) Manual. We then obtained planning documentation, such as relevant memorandums that described the Coast Guard’s need for an EHR, the Coast Guard’s request for information to assess industry capabilities for market research purposes, and a capabilities analysis study plan to identify gaps in the Coast Guard’s EHR capabilities. We also reviewed a capabilities analysis report which details required capabilities for improving patient care, and an alternatives analysis report which details solutions the Coast Guard should consider based on performance, risk, cost, and schedule. We assessed these documentation against requirements identified in the NMAP, specifically within the first phase of the acquisition process. We also interviewed officials within the Acquisition Directorate to determine the status of the efforts to acquire or develop a new EHR system. We conducted this performance audit from October 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Coast Guard implemented the Systems Development Life Cycle (SDLC) process for non-major information technology (IT) acquisitions in 2004 to help ensure IT projects are managed effectively and meet user needs. The process, as described in the Coast Guard’s SDLC Practice Manual, consists of seven phases and related practices—30 of which we selected for evaluation for the initial four SDLC phases of Integrated Health Information System (IHiS). The following is a summary of each SDLC phase and a description of the project management practices we selected for review: Phase 1: Conceptual Planning This phase is the first step of the development or significant enhancement process. During this phase, high-level business needs are identified, a concept for fulfilling the business needs is proposed and validated, and resources are committed. Activities (or practices) we selected for review in this phase include formalizing SDLC role designations, such as the project manager, asset manager, and sponsor; developing the initial business case with information regarding the background, system justification, and project risk management, among other things; validating alignment with the enterprise architecture; identifying the funding source and providing a rough order of magnitude cost estimates as part of developing the acquisition strategy; designating the system as a Command, Control, Communications, Computers, and Information Technology (C4&IT) system; and obtaining approval to exit the conceptual planning phase. Phase 2: Planning and Requirements This phase begins after the project has been defined and appropriate resources have been committed. During this phase, business requirements are collected, defined, and validated. More specifically, as part of the phase practices we selected for review, the SDLC tailoring plan is completed; and initial life cycle management plans for project management, risk management, integrated logistics support, training, and information assurance are developed. In addition, a cost benefit analysis is conducted; functional requirements are documented; external mandates are reviewed; the system development agent and system support agent are designated; and approval to exit the planning and requirements phase is obtained. During this phase, business requirements are translated into system requirements to develop the detailed system design. Selected practices for this phase include developing the detailed system design to specify the operating system, architecture components, timing and sizing, and interfaces, among other things; developing the operational analysis plan to document system performance measures, system operating measures that address reliability, maintainability, availability, training, and user satisfaction; and system support measures containing the level of effort needed to support the system; conducting review sessions with the user community to ensure that the system design sufficiently met all functional requirements; developing contingency and disaster recovery plans; completing the privacy impact analysis; documenting the test and evaluation master plan with the scope, content, methodology, sequence, management of, and responsibilities for test activities; testing the system design according to the operational test and evaluation plan and capturing design test results in the test and evaluation master plan; and obtaining approval to exit the design phase. Phase 4: Development and Testing The system is developed or acquired based on detailed system design specifications and validated through a variety of tests during this phase. The objective is to ensure that the system functions as expected and that sponsor and user requirements are satisfied. More specifically, as part of the phase practices that we selected, system testing is conducted; system documentation, such as system manuals, user manuals, and diagrams of the system is developed; an implementation plan is developed; and an authority to operate is obtained. During this phase, the system is placed in the production environment and system users are trained. It also includes efforts required to implement the system and resolve problems identified during the system’s transition from development to deployment. We did not select practices to evaluate in this phase since the system was discontinued before implementation. Phase 6: Operations and Maintenance The system becomes operational during this phase, and its main purpose is to ensure that the system continues to perform according to specifications. In addition, routine hardware and software maintenance and upgrades are performed to ensure effective system operations; user training continues as needed; and additional user support is provided to help resolve reported problems. We did not select practices to evaluate in this phase since the system was discontinued before implementation. This phase represents the end of the system’s life cycle. It provides for the systematic termination of a system to ensure that vital information is archived. The emphasis of this phase is to ensure that the system (e.g., equipment, software, data, procedures, and documentation) is packaged and disposed of in accordance with appropriate regulations and requirements. We did not select practices to evaluate in this phase since the system was discontinued before implementation. The questions we asked in our survey of the 12 Health Safety and Work- Life (HSWL) Regional Managers from March 2017 to April 2017 are shown below. For a more detailed discussion of our survey methodology see appendix I. The questions we asked in our survey of the 166 clinic and sick bay administrators from April 2017 to August 2017 are shown below. For a more detailed discussion of our survey methodology see appendix I. Coast Guard’s Non-Major Acquisition Process (NMAP) Manual defines the process for the designation, management, and oversight of non-major acquisitions. The NMAP requires formal approval reviews at three discrete knowledge points called acquisition decision events (ADE) and includes three phases to assess the readiness and maturity of the acquisition. The phases represent work that must be accomplished to demonstrate readiness to proceed to the next phase. The following is a summary of each ADE and subsequent phase within the NMAP: ADE-1 occurs when the Deputy Commandant for Mission Support designates the procurement as a non-major acquisition and approves the acquisition to enter the analyze/select phase. Following ADE-1 approval, the Chief Acquisition Officer or Chief Information Officer (CIO) designates a project manager. The analyze/select phase includes project management activities such as conducting market research to identify available alternatives, preparing a requirements document, developing an acquisition strategy, developing a life cycle cost estimate, and preparing a project plan. The primary purpose of ADE-2 is to approve the alternatives identified through market research and to assess the readiness of the acquisition for a contract award in which the acquisition moves into the obtain phase. The CIO is the decision authority and provides oversight for ADE-2. The obtain phase includes activities such as evaluating whether the proposed solution can effectively meet the functional requirements, initiating deployment planning, and conducting usability testing. The primary purpose of ADE-3 is to assess the readiness of the acquisition to be deployed and supported by authorizing the acquisition to enter the produce/deploy and support phase. The CIO is the decision authority and provides oversight for ADE-3. The produce/deploy and support phase includes activities such as ensuring the delivered product meets cost, schedule, and performance baselines as described within the project plan, as well as executing production contracts. In addition to the contact named above, key contributors to this report were Nicole Jarvis (Assistant Director), Ashfaq Huda (Analyst in Charge), Chris Businsky, Juana Collymore, Sharhonda Deloach, Rebecca Eyler, Andrea Harvey, Gina Hoover, Jason Lee, Rob Letzler, Monica Perez- Nelson, Kelly Rubin, and Andrew Stavisky.", "summary": "In 2010, the Coast Guard initiated an effort—known as IHiS—to replace its aging EHR system with a suite of modernized systems that was to automate various health care services for its nearly 50,000 military members. However, in October 2015, the Coast Guard announced that the modernization project would be canceled. GAO was asked to review the Coast Guard's efforts to develop a modernized EHR system. GAO's objectives were to (1) describe what led the Coast Guard to terminate further IHiS development, and how much was spent on the project; (2) evaluate the Coast Guard's management and oversight for the discontinued project and what, if any, lessons learned were identified; (3) describe the Coast Guard's current process for managing health records and the challenges, if any, it is encountering; and (4) determine the Coast Guard's plans for effectively implementing a new EHR system and the current status of its efforts. To do so, GAO reviewed project expenditures, analyzed key project management documentation, surveyed Regional Managers and clinical staff, and interviewed knowledgeable staff. Financial, technical, schedule, and personnel risks led to the United States Coast Guard's (Coast Guard) decision to terminate the Integrated Health Information System (IHiS) project in 2015. According to the Coast Guard (a military service within the Department of Homeland Security), as of August 2017, $59.9 million was spent on the project over nearly 7 years and no equipment or software could be reused for future efforts. In addition, the Coast Guard could not fully demonstrate the project management actions taken for IHiS, lacked governance mechanisms, and did not document lessons learned for the failed project. As a result of the cancelation of the IHiS project and the decommissioning of the two legacy electronic health record (EHR) systems IHiS was to replace, the Coast Guard directed its clinics to revert to maintaining health records using a predominantly paper process. Coast Guard Regional Managers and clinic and sick bay administrators informed GAO of the many challenges encountered in returning to a paper process. These challenges include the inability for some clinics to adequately track vital information such as the medications members are taking—potentially causing harm to them. To help alleviate several of these challenges, the Coast Guard has developed alternative work-around processes. However, these alternative processes may not provide sustained solutions to overcoming these challenges. In February 2016, the Coast Guard initiated the process for acquiring a new EHR system. As of November 2017, agency officials had conducted research and recommended a solution based on performance, risk, cost, and schedule advantages. However, 2 years after canceling IHiS and moving toward a predominately manual process, the agency has not yet made a final determination on this. Successfully and quickly implementing an EHR system is vital to overcoming the challenges Coast Guard currently faces in managing paper health records. The expeditious implementation of such a system can significantly improve the quality and efficiency of care to the thousands of Coast Guard active duty and reserve members that receive health care. GAO is recommending the Coast Guard (1) expeditiously and judiciously pursue the acquisition of a new EHR system, and in doing so (2) ensure key processes are implemented, (3) establish project governance boards, and (4) document lessons learned. The Department of Homeland Security concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The majority of illicit drugs consumed in the United States is produced in Mexico and South America and enters the United States across the southwest border or through the Caribbean. Among countries in the Western Hemisphere, Colombia and Peru are major producers of illicit drugs, while Bolivia, Jamaica, and Mexico are both major producers and major transit countries, according to State (see fig. 1). Mexico is a major source and transit country for heroin, methamphetamine, and marijuana destined for the U.S. market. Jamaica is likewise the largest Caribbean supplier of marijuana for the U.S. market. Colombia is the world’s top producer of cocaine and is the major provider of cocaine available in the United States. While Bolivia and Peru are also major producers of cocaine, cocaine from these countries is generally smuggled into other South American countries for domestic consumption or for shipment to Europe, East Asia, and beyond, according to State. According to U.S. government estimates, illicit drugs originating in Mexico enter the United States directly through the southwest border, but virtually all cocaine from South America and marijuana from Jamaica are trafficked to the United States through the “Transit Zone”—a 7-million- square-mile area that encompasses Central America, Mexico, the eastern Pacific Ocean, the Gulf of Mexico, and the Caribbean Sea. The Transit Zone has four principal maritime trafficking routes: the Eastern Pacific, Western Caribbean, Central Caribbean, and Eastern Caribbean. The Transit Zone land route is funneled north through Central America into Mexico, where it splits in several directions up to the U.S. southwest border. Although Canada is not within the Transit Zone, various drugs, including fentanyl, transit through it before entering the United States, according to the Department of State. In recent years, the production, trafficking, and marketing of various illicit substances consumed in the United States have undergone significant shifts. For example, according to the 2016 National Drug Control Strategy, over the previous 8 years, opioid abuse emerged as the greatest drug threat to the nation. This development was complicated by a spike in the supply and purity of heroin, primarily from Mexico, resulting in a combined epidemic of heroin-opioid overdose deaths. According to the Centers for Disease Control and Prevention, heroin overdose deaths more than tripled between 2010 and 2015, as powerful synthetic opioids, notably illicit fentanyl, were often mixed with heroin without the user’s knowledge. Similarly, in its 2017 International Narcotics Control Strategy Report, State reported various indicators suggesting a significant increase in cocaine production and trafficking from Colombia. For example, according to this report, coca cultivation in Colombia increased by 39 percent in 2014 and by 42 percent in 2015, and the amount of cocaine trafficked out of Colombia has reached record levels. Consistent with these reported trends in cocaine production and trafficking, Centers for Disease Control and Prevention data indicate that, after falling sharply in the middle of the past decade, overdose deaths related to cocaine have been gradually rising in the United States. Finally, while a significant portion of the marijuana consumed in the United States continues to be smuggled from Western Hemisphere countries, including Canada, Jamaica, and Mexico, the domestic production and marketing of marijuana are undergoing important shifts, as several states and the District of Columbia have passed measures that legalize possession of limited amounts of the drug and provide for regulation of its production, processing, and sales. These shifting trends pose challenges for agencies’ counternarcotics efforts in the Western Hemisphere and domestically, as they strive to respond to changing conditions. ONDCP coordinates the National Drug Control Program and develops a 5-year National Drug Control Strategy, which it updates annually, as well as a number of companion strategies that focus on various geographical areas and emerging threats, to articulate the administration’s drug control policy. ONDCP was established by the Anti-Drug Abuse Act of 1988 to, among other things, enhance national drug control planning and coordination and represent the drug policies of the executive branch before Congress. In this role, ONDCP is responsible for (1) developing a national drug control policy, (2) developing and applying specific goals and performance measurements to evaluate the effectiveness of national drug control policy and National Drug Control Program agencies’ programs, (3) overseeing and coordinating the implementation of the national drug control policy, and (4) assessing and certifying the adequacy of the budget for national drug control programs. ONDCP requires National Drug Control Program agencies to submit an annual drug control budget, categorized into 10 federal drug control program areas. One program area is international efforts, which ONDCP defines as activities focused on regions outside the United States that are intended to reduce illegal drug availability in the United States or abroad. Three additional ONDCP drug control program areas—intelligence, interdiction, and investigations—include domestic as well as international efforts, as interdictions may occur at or outside U.S. borders, and intelligence and investigative efforts may target drug organizations operating outside the United States. In addition to ONDCP, eight agencies are involved in the four program areas that support counternarcotics efforts in the Western Hemisphere to stop the production and transshipment of illicit drugs or their precursors destined for the United States. These activities include the following: interdictions at U.S. borders; maritime drug interdictions in international waters and in international interdictions in concert with partner nations in international and territorial waters; intelligence gathering to support drug interdictions, investigations, and international activities; investigations of drug organizations based in countries outside the United States; eradication support and efforts; and building foreign partner capacity to conduct counternarcotics activities. Table 1 shows the eight U.S. government agencies that allocate resources in one or more of the four ONDCP program areas— counternarcotics intelligence, interdiction, international activities, and investigations—that we included in our review. For a detailed description of ONDCP’s program areas, more information on the roles of these agencies, and the countries in which they operate, see appendixes I, II, and III, respectively. Of the agencies included in our review, DOD, ICE, INL, and USAID track counternarcotics spending on a regional basis and provided data on funds obligated for counternarcotics activities in the Western Hemisphere. As table 2 shows, these agencies obligated more than $5 billion for counternarcotics activities in the Western Hemisphere during fiscal years 2010 through 2015. (See app. III for the agencies’ regional or country-level counternarcotics obligations, as available). DOD obligated a total of more than $2.8 billion for counternarcotics activities in the Western Hemisphere for fiscal years 2010 through 2015. According to DOD documents, these activities support U.S. domestic and foreign government efforts to combat drug trafficking and drug-related terrorist activities through detection and monitoring of illicit drug smuggling, information and intelligence sharing, and capacity building. DOD generally tracks its counternarcotics spending by geographic combatant command and various functional areas. A significant portion of DOD’s counternarcotics activities in the Western Hemisphere are conducted by U.S. Northern Command and U.S. Southern Command. These resources fund DOD’s training and equipment provided to foreign partners conducting counternarcotics activities, surveillance and communications systems, aircraft patrolling the transit zone, and costs associated with operating DOD’s Joint Interagency Task Force South. However, the obligations for counternarcotics activities that DOD reported for fiscal years 2010 through 2015 underrepresent its overall obligations for such activities because the reported amounts do not include U.S. Northern Command’s and U.S. Southern Command’s salaries and expenses of its personnel and counternarcotics-related intelligence activities. It also does not include DOD’s agency-wide intelligence gathering and training, as well as aircraft flight hours and ship days in support of counternarcotics activities. ICE expended a total of about $212 million for salaries and expenses of Homeland Security Investigations’ (HSI) agents and analysts working on drug cases in various countries in the Western Hemisphere during fiscal years 2010 through 2015. ICE made these expenditures for the following three HSI programs: The Domestic Investigations program covers enforcement efforts to disrupt cross-border criminal activity related to contraband smuggling and the dismantling of the transnational criminal organizations responsible for these activities. International Operations covers HSI’s international investigations involving transnational criminal organizations and serves as ICE’s liaison to foreign law enforcement counterparts overseas. The Office of Intelligence provides intelligence services for Domestic Investigations and International Operations to support criminal investigations to disrupt and dismantle criminal organizations involved in the transnational drug trade and associated money-laundering crimes. INL obligated a total of more than $1.5 billion for counternarcotics activities in the Western Hemisphere in fiscal years 2010 through 2015. During this period, INL funded projects that were designed to improve foreign law enforcement and intelligence-gathering capabilities; enhance the effectiveness of criminal justice sectors to allow foreign governments to increase drug shipment interdictions; investigate, prosecute, and convict narcotics criminals; and break up major drug-trafficking organizations. INL also used U.S. federal law enforcement entities to provide technical assistance to its counterparts overseas. Examples of INL’s technical assistance include the following: In Mexico, INL’s efforts focused on enhancing the Mexican government’s capacity to interdict illegal narcotics while not impeding the flow of legitimate goods. This included providing detection dogs, equipment, and training to the Mexican Federal Police, Customs, Army, and Navy. In Colombia, INL’s program focused on aerial eradication of coca plants, land and maritime interdictions, and capacity building for counternarcotics forces. In Peru, INL programs included support for manual eradication of coca plants, interdiction efforts, and drug demand reduction activities. In Central America, INL efforts included building interdiction capacities such as funding vetted units sponsored by federal law enforcement partners and providing technical assistance and equipment for air and maritime interdiction. In the Caribbean, INL efforts focused on building partner nation interdiction capacity, providing support for vetted units, and enhancing information sharing among partner nations. USAID obligated a total of about $638 million for Western Hemisphere counternarcotics activities in fiscal years 2010 through 2015, supporting alternative development projects in Bolivia, Colombia, Ecuador, and Peru. According to agency officials, the USAID mission in Colombia is working to create licit alternatives to coca production, including holistic support to viable and lucrative agricultural value chains, such as cacao, specialty coffee, and other products that can be sold on domestic and export markets; provision of rural financial services and credits for licit opportunities; efforts to attract private sector investment into rural regions; and, to a lesser degree, helping communities build infrastructure, such as roads, to help licit products reach markets. USAID’s alternative development program in Peru aims to promote licit incomes and improved governance to sustain coca reductions achieved through forced eradication. In partnership with the Peruvian national drug commission, the USAID mission in Peru facilitates the implementation of alternative development programs in the country, including improving the drug commission’s ability to monitor and evaluate these programs. The mission has also partnered with the private sector to improve processes involved in preparing cacao crops for the market. While the other agencies in our review—CBP, Coast Guard, DEA, and OCDETF—do not track spending specific to their counternarcotics activities in the Western Hemisphere, they conduct most of their counternarcotics activities in the Western Hemisphere or target threats originating in Western Hemisphere countries, according to agency officials. Thus, while the agencies’ overall counternarcotics obligations overstate spending for such activities in the Western Hemisphere, these obligations approximate the Coast Guard’s, CBP’s, and OCDETF’s spending on activities that were primarily for these purposes in the region. However, DEA was not able to identify spending levels for counternarcotics activities in the Western Hemisphere, and the obligations it provided included spending for some domestic and other international counternarcotics activities. These four agencies had total obligations of nearly $34 billion for their overall counternarcotics activities during fiscal years 2010 through 2015 (see table 3). The Coast Guard obligated a total of almost $5.3 billion for its drug- interdiction activities for fiscal years 2010 through 2015. As the nation’s principal federal agency for maritime safety, security, and stewardship, the Coast Guard has a drug interdiction objective to reduce the flow of illegal drugs entering the United States by denying smugglers access to maritime routes. The Coast Guard’s counternarcotics obligations in fiscal years 2010 through 2015 covered the agency’s operating expenses, which include costs associated with operating Coast Guard facilities, maintaining capital equipment, improving management effectiveness, and maintaining an active duty military and civilian workforce. These funds also supported reserve training and acquisition, construction, and improvement of capital assets and facilities. The Coast Guard does not maintain data on the portion of the agency’s drug resources that are used for the interdiction of drugs trafficked to or from countries outside the Western Hemisphere. However, according to Coast Guard officials, because the agency’s counternarcotics efforts take place around U.S. maritime borders and in transit zones in the Western Hemisphere, the agency’s drug resources are generally expended in the Western Hemisphere. CBP obligated a total of more than $13 billion for its counternarcotics activities in fiscal years 2010 through 2015. According to the agency’s budget documents, CBP used its counternarcotics spending to carry out its border security mission at and between all ports of entry and to conduct air and marine operations in source, transit, and arrival zones in the Western Hemisphere. The agency also obligated funds to invest in border security technology and infrastructure to detect and monitor suspicious air, maritime, and land traffic. CBP’s counternarcotics funds also were used for training and information technology to support its activities. CBP officials indicated that, because CBP’s mission is to protect U.S. borders, the agency’s counternarcotics spending should generally be considered resources spent in the Western Hemisphere. However, CBP’s reported obligations also include resources dedicated to border protection measures to interdict shipments of drugs and precursor chemicals from countries outside the Western Hemisphere. DEA obligated a total of almost $13 billion for its domestic and international enforcement activities in fiscal years 2010 through 2015. DEA is the lead U.S. agency responsible for the development of the overall federal drug enforcement strategy, programs, planning, and evaluation. DEA’s budget includes categories for domestic enforcement, international enforcement, and state and local support. While domestic enforcement accounts for the majority of DEA’s resources, DEA coordinates its domestic and international enforcement activities (i.e., DEA’s foreign offices) to pursue, at the highest level, multinational drug organizations and, at the lowest level, independent drug cells, according to documents. With regard to international enforcement, DEA tracks regional spending for salaries and expenses associated with agents and intelligence analysts posted in countries overseas. DEA’s international enforcement includes more than $1 billion in obligations for salaries and expenses for personnel posted in Western Hemisphere countries in fiscal years 2010 through 2015. OCDETF obligated a total of about $2.1 billion for counternarcotics- related efforts in fiscal years 2010 through 2015. According to OCDETF reports, this funding supported investigations targeting the highest priority drug-related transnational crime organizations. OCDETF’s funds were used to reimburse a number of DOJ components—DEA, the FBI, and the OCDETF Fusion Center, a multiagency intelligence center—for their support of OCDETF investigations of high-priority targets. According to a senior OCDETF official, although the agency’s financial system does not contain information that would allow us to ascertain the amounts obligated for investigations of international targets located in the Western Hemisphere, very few OCDETF cases involve drugs coming into the United States from outside the Western Hemisphere. Most OCDETF investigations target drugs coming into the United States from other Western Hemisphere countries. ONDCP facilitates the sharing of best practices and lessons learned with interagency and foreign partners by including the topic on the agendas of key meetings, according to ONDCP officials. For example, ONDCP officials described the sharing of best practices and lessons learned with stakeholders from Canada, Mexico, and the United States at technical workshops of the North American Drug Dialogue held in March 2017. At these workshops, the Department of State shared with its Mexican partners lessons learned pertaining to Colombia and Peru, including the following: Eradication of coca alone is not sufficient. A whole-of-government approach that provides security, the incentive of alternative development, the disincentive of eradication, and intelligence-led interdiction efforts that deny harvesters or traffickers the ability to profit from the product is essential. Results take time. For example, the 90-percent reduction in coca production in San Martin, Peru, took 12 years. Efforts should be geographically targeted and driven by information and intelligence, given scarce resources. For example, data can be used to allow for planning targeted eradication operations, based on intelligence or other information, and for the planning of complementary interventions, such as rural development or target eradication goals. According to ONDCP officials, best practices and lessons learned are also described in the National Drug Control Strategy as well as companion strategies such as the Southwest Border and Caribbean Counternarcotics strategies. For example, according to the 2010 National Drug Control Strategy, lessons learned such as the following can be drawn from Colombia’s experience that might be useful elsewhere: Host-government ownership. For example, although Plan Colombia required extensive U.S. financial support, the Colombian government demonstrated that it was fully committed to the initiative under consecutive administrations. Government-wide approach. Eradication can be an effective deterrent to illicit cultivation and can provide an incentive to move to licit crops. However, eradication must be accompanied by a government presence in rural areas; alternative development to preclude replanting or dispersal of plots; and a focus on rule of law and human rights, humanitarian needs, and social and economic reform to reduce the incentive to revert to illicit crops. Security. Security is a precondition for the successful expansion of social services and developmental assistance. Security must be maintained to allow the expansion of legal economic activities and the delivery of civilian services, including justice, education, and health, to a population unaccustomed to a significant government presence. Flexibility. Programs must adapt to changing circumstances, including adjusting programs that are not working as expected and adding new initiatives, if necessary. Long-term approach. Major counternarcotics programs designed to address complex and long-standing challenges require a multiyear investment in terms of financial resources and political commitment. ONDCP has also promoted best practices through other efforts. For example, the 2015 National Drug Control Strategy included an action item to work with the Organization of American States’ Inter-American Drug Abuse Control Commission to strengthen counterdrug Institutions in the Western Hemisphere. As part of this effort, ONDCP and the Department of State participated in the Demand Reduction and the Alternatives to Incarceration meetings, which focused on promoting best practices and expanding host-nation capacity. Reflecting this effort, Organization of American States’ officials cited as a best practice the training of 300 Colombian and Argentinian judges and chief justices, who learned about the Alternatives to Incarceration model, in November 2016. Officials at 7 of the 10 agencies included in our review reported having processes for identifying and collecting best practices and lessons learned from counternarcotics efforts in the Western Hemisphere. Officials at each of these seven agencies also reported having mechanisms to share best practices and lessons learned, including through web-enabled systems, and sharing these best practices and lessons learned with other U.S. agencies and foreign partners. In addition, officials at six of the seven agencies reported having a formal review process for determining best practices and lessons learned. USAID and DOD guidance and officials described comprehensive processes for collecting and sharing information about best practices and lessons learned. For example, according to USAID guidance, its Country Development Cooperation Strategy “should include a summary of lessons learned from the implementation of the previous Country Development Cooperation Strategy or other strategic plans (if applicable) and from previous experiences (e.g., projects and activities).” The guidance states that at least once during the course of implementing the Country Development Cooperation Strategy, USAID missions must collect information by conducting reviews of ongoing efforts and of options for better aligning their programs with changes in the context, agency direction, and lessons learned. In addition, according to USAID officials, other levels of program planning incorporate lessons learned and good programming, such as portfolio reviews and other processes involving the periodic assessment of a particular aspect of a mission or a Washington operating unit’s strategy, projects, or activities. USAID evaluations of its alternative development projects in Colombia include examples of best practices and lessons learned, such as the following: The success of a project depends on reducing the appeal of coca by improving the social and economic value of legal alternatives. Robust licit economies fueled by productive associations, local and regional market integration, and improved transportation networks can reduce coca cultivation. A necessary precondition for successful alternative development is the allocation of resources and personnel to rural areas where coca is cultivated. Only those strategies that can be accomplished within predetermined time frames and resource parameters and that have a proven track record of reducing coca cultivation should be implemented. Reinforcing local community institutions and providing youth-focused programming can help insulate vulnerable communities against the allure of drug trafficking and coca cultivation. DOD reported using a formal process for identifying and collecting best practices and lessons learned through its Joint Lessons Learned Program, which consists of five phases: discovery, validation, resolution, evaluation, and dissemination. According to DOD officials, the collection of best practices and lessons learned relating to counternarcotics in the Western Hemisphere through this program is intended to enhance readiness and effectiveness. DOD officials noted that the effort to collect best practices and lessons learned is routine and helps inform policy and budget proceedings. Annual conferences, such as the Counternarcotics and Global Threats Coordination Conference and the Program Objective Memoranda Conference, also offer an opportunity to identify, collect, and disseminate best practices and lessons learned as they relate to DOD’s counterdrug and counter-transnational-organized-crime operations. According to DOD officials, such conferences provide a forum for participants to learn how other relevant DOD components working on counternarcotics efforts are approaching counterdrug, transnational organized crime, and related issues. DOD officials also noted that they intend to use an interagency-agency-task-forces approach to counternarcotics interdiction that the U.S. Southern Command developed in Guatemala as a model for sharing best practices and lessons learned in the region. According to DOD officials, the U.S. Southern Command’s support included training in interdiction tactics, techniques, and procedures, and maintenance of provided equipment such as intercept boats, tactical vehicles, communications gear, and night vision devices. DOD officials reported that lessons learned include establishing the interagency legal framework early, clearly defining interagency relationships, developing the task force’s intelligence capability, implementing police authority and leadership, identifying measures of success, communicating the task force’s purpose and success to the public, and maintaining equipment. DOD officials said that they plan to use the Guatemalan interagency task force as a model with other foreign partners and new counterdrug units in Guatemala and in the region. State’s report, “Lessons Learned from the Mérida Initiative and Plan Colombia with Regard to Judicial Reform Efforts,” provides specific examples of operational and tactical lessons, as follows: Political will is critical. According to State, one of the clearest symbols of political will was Mexico’s and Colombia’s dedication of additional resources (to initiatives under the Mérida Initiative and Plan Colombia). In addition, according to State, the governments of El Salvador, Guatemala, and Honduras created a joint regional plan, the Plan of Alliance for Prosperity, underscoring their political will and significant commitment to improve economic opportunities, governance, and public safety. For example, these governments identified $2.6 billion in their 2016 budgets to, among other things, target criminal networks, tackle corruption, and strengthen government institutions. No lasting security without enhanced access to justice. The governments of Colombia and Mexico have undertaken efforts to expand access to justice in their countries. Since 2008, the government of Mexico has been working to improve the transparency and efficiency of its judicial system by implementing an oral-based accusatorial system. Partnership across agencies is critical. Plan Colombia represented a whole-of-government approach, with a broad U.S. interagency presence to work across the breadth of the Colombian government. This U.S. interagency presence built linkages at all levels and ensured continuity of vision through leadership transitions in the U.S. and Colombian governments. ONDCP works with agencies to coordinate responses to changing conditions in a variety of ways. ONDCP is responsible for developing (1) the National Drug Control Strategy, which sets forth a comprehensive plan to reduce illicit drug use through programs intended to prevent or treat drug use or reduce the availability of illegal drugs; and (2) several associated companion strategies, which target government efforts to respond to emerging counternarcotics threats for key geographic areas. The Strategy issued in 2010 laid out the administration’s 5-year blueprint for combatting drug use and included a section on counternarcotics efforts in the Western Hemisphere. The 2010 Strategy described an approach that reflected two core focus areas: (1) disrupting domestic drug trafficking and production and (2) strengthening international partnerships to reduce the availability of foreign-produced drugs in the United States. The Strategy, including the portions associated with counternarcotics efforts in the Western Hemisphere, is updated annually to reflect current priorities and conditions. According to ONDCP officials, an example of a key change since 2010 is the developing focus on the opioid crisis. In 2010, the President’s first National Drug Control Strategy emphasized the need for action to address opioid use disorders and overdose, while ensuring that individuals with pain receive safe, effective treatment. On April 19, 2011, the White House released its national Prescription Drug Abuse Prevention Plan, which outlined its goals for addressing prescription drug abuse and overdose. The 2016 Strategy continued the previous administration’s focus on the opioid crisis but recognized the growing threats from drug-trafficking organizations involved in manufacturing and distributing cocaine and synthetic drugs, including novel psychoactive substances such as synthetic cannabinoids. To address these efforts, the Strategy described U.S. agencies’ interdiction activities, and DEA led efforts to disrupt synthetic drug production and trafficking. The 2016 Strategy also noted U.S. collaboration with China to limit the export of precursor chemicals associated with the production of psychoactive substances. ONDCP also develops companion strategies with a geographic focus, such as the National Southwest Border Counternarcotics Strategy, the Northern Border Counternarcotics Strategy, and the Caribbean Border Counternarcotics Strategy. The 2015 Strategy acknowledges the companion strategies and indicates that the efforts they describe will be carried out. These strategies include objectives such as enhancing intelligence, interdicting drugs and drug proceeds, ensuring prosecution, disrupting and dismantling drug-trafficking organizations, and improving cooperation with international partners. The companion strategies have provided opportunities for more targeted responses to address emerging threats in specific geographic areas, which include the following: National Southwest Border Counternarcotics Strategy focused primarily on U.S. government efforts to prevent the trafficking of illicit drugs—heroin, methamphetamine, cocaine, and foreign-produced marijuana—across the U.S.-Mexican border. The strategy also addressed the illegal outbound movement of weapons and bulk currency from the United States, both of which are associated with activities of narcotics traffickers. As an example of the growing threat posed by the trafficking of heroin from Mexico, the quantity seized on the southwest border nearly tripled, from 1,080 kilograms in 2010 to 3,158 kilograms in 2015. To address these threats, ONDCP expanded the focus of the 2011 National Southwest Border Counternarcotics Strategy to provide border communities with enhanced prevention and drug treatment assistance, in the context of maintaining strong and resilient communities. The 2013 strategy stressed the same basic goals and objectives: substantially reduce the flow of illicit drugs, drug proceeds, and associated instruments of violence across the southwest border as well as maintain strong and resilient communities. This strategy also included indicators related to seizures of drugs at the border. The 2016 strategy differed slightly from the 2013 strategy by elaborating on the threats of various illicit drugs. It also noted that “anything that affects one part of the border affects the entire border” and noted that, for this reason, the National Southwest Border Counternarcotics Strategy must be synchronized with the other companion strategies, and the Heroin Availability Reduction Plan. National Northern Border Counternarcotics Strategy. The 2012 National Northern Border Counternarcotics Strategy, which ONDCP first issued that year, parallels the National Southwest Counternarcotics Border Strategy and focuses on ongoing efforts to reduce transnational organized crime threats on both sides of the border between the United States and Canada, specifically the movement of illicit drugs such as marijuana, ecstasy, methamphetamine, and cocaine, and the proceeds from the sale of those drugs. The 2014 strategy emphasizes enhanced federal collaboration with state, local, and tribal law enforcement agencies. The legislation mandating that ONDCP publish the National Northern Border Counternarcotics Strategy requires that this document be released biannually; as of June 2017, the 2016 version had not been released. Caribbean Border Counternarcotics Strategy. The Caribbean Border Counternarcotics Strategy, issued in January 2015, is substantially equivalent to the national counternarcotics strategies for the southwest and northern borders, according to ONDCP. The strategy identifies cocaine as the principal drug threat and a source of associated violence in the Caribbean region and notes that the documented cocaine flow via the Caribbean to the United States more than doubled from 2011 to 2013, rising from 38 metric tons to 91 metric tons. According to DEA, over 90 metric tons of cocaine was trafficked from South America using sea routes through the Caribbean corridor, primarily toward the Dominican Republic and Puerto Rico, in 2014. ONDCP facilitates a number of interagency working groups to address emerging threats. According to ONDCP’s 2016 National Southwest Border Counternarcotics Strategy, interagency working groups relevant to counternarcotics efforts allow agencies with different authorities and resources to address common concerns, create a common operating picture, identify resource and capability gaps, and leverage resources. ONCDP has created working groups, such as groups focused on heroin and cocaine, to develop actions, goals, and measures to reduce the supply of those drugs in the U.S. market as a part of the overall effort to address treatment and demand, as noted in the following examples: In November 2015, ONDCP established the National Heroin Coordination Group in coordination with the National Security Council to provide guidance on interagency activities aimed at reducing the supply of heroin and illicit fentanyl in the U.S market. The working group includes agencies with federal law enforcement responsibilities and their components, select High Intensity Drug Trafficking Areas (HIDTA), the U.S. embassy in Mexico, and other federal agencies and state entities. In June 2016, the group produced the 5-year Heroin Availability Reduction Plan as part of the administration’s effort to prevent and treat heroin abuse. In January 2016, ONDCP created an internal working group on methamphetamine and synthetic drugs to coordinate efforts across drug control agencies. The group’s priorities included working in concert with federal partners, with source and transit countries to reduce the availability of illicit methamphetamine in the United States, and multilaterally to reduce the global trafficking of illicit methamphetamine and precursor chemicals coming primarily from Mexico. In September 2016, ONDCP created a National Cocaine Coordination Group to address emerging threats from cocaine brought on by the spike in coca cultivation and production as well as the associated increase in its trafficking and use in the United States. In addition to employing three permanent staff, the interagency group draws from expertise in intelligence, public health, and international demand reduction at DOJ, the FBI, other federal partners, and various parts of ONDCP. Agencies use task forces to enhance the interagency coordination needed to respond to emerging threats, according to officials. For example, to address the smuggling of illicit drugs over the southwest border, in May 2014 DHS established three new joint task forces—Joint Task Force–East, Joint Task Force–West, and the Joint Task Force for Investigations—in support of its Southern Border and Approaches Campaign. The task forces coordinate operations to combat transnational criminal organizations and counter illegal drug flows at maritime approaches and in between ports of entry. All three joint task forces incorporate elements of the Coast Guard, CBP, and ICE as well as DHS’s U.S. Citizenship and Immigration Services. Joint Task Force–East is responsible for the southern maritime border and approaches, Joint Task Force–West is responsible for the southern land border and the West Coast, and the Joint Task Force for Investigations focuses on investigations in support of the geographic task forces. Task forces also enhance coordination, deconfliction, and information sharing by colocating representatives from different entities, which facilitates interaction and enables information sharing, as we previously reported. For example, Joint Interagency Task Force South includes 26 agencies and 20 foreign partners that work together to detect and monitor illicit trafficking in the air and maritime domains, facilitating international and interagency interdiction and apprehension. Information sharing is a critical aspect of the Joint Interagency Task Force South’s strategic approach in supporting national and foreign partner nation law enforcement and promoting regional stability in the Western Hemisphere. As part of this effort, Joint Interagency Task Force South uses a tool known as the Cooperative Situational Information Integration system to share strategic communications and information with foreign partner nations, according to Joint Interagency Task Force South officials. In addition, U.S. Tactical Analysis Teams, which are posted at U.S. missions overseas, and liaison officers from foreign partner nations, provide for a high level of integrated information, according to officials at Joint Interagency Task Force South. Officials indicated that Tactical Analysis Teams and liaison officers provide the information that results in 60 to 70 percent of all task force cases, directly contributing to 50 to 60 percent of all Joint Interagency Task Force South drug seizures. The task force reported that its efforts resulted in 80 percent of total U.S. cocaine seizures (282 of 338 metric tons) in fiscal year 2016. According to Joint Interagency Task Force South, the advantages of working as a task force include the ability to use the participants’ various legal authorities (see the text box for an example): DOD brings detection and monitoring authorities. DOJ and DHS bring anticrime authorities. The Coast Guard brings its maritime law enforcement authorities. DEA, the FBI, and HSI bring drug and finance laws enforcement authorities. CBP and HSI bring customs and immigration authorities. Partner nations bring multiple authorities from their countries. A typical case that illustrates how the various authorities of component agencies work together in the Joint Interagency Task Force South could start with receipt of actionable law enforcement information from the Drug Enforcement Administration. This information prompts the deployment of a Customs and Border Protection or Coast Guard plane that subsequently detects and monitors a suspect vessel until Joint Interagency Task Force South can deploy a Coast Guard, U.S. Navy, or allied government’s ship with an on-board law enforcement detachment to investigate. When the deployed ship arrives at the vessel’s location, the Coast Guard assumes control of the investigation. If the suspect vessel is not registered in the United States, the Coast Guard commander implements a bilateral agreement with the vessel’s country of registration to confirm the vessel’s nationality and to stop, board, and search the vessel for drugs. If drugs are found, the State Department, Department of Justice, and the vessel’s country of registry coordinate jurisdiction over, and disposition of, the vessel, drugs, and crew. OCDETF has also established multiagency Strike Forces (i.e., a type of task force) in 12 key cities around the country. According to OCDETF’s fiscal year 2017 report to Congress, the Strike Forces aggressively target the highest-level trafficking organizations and function as central points of contact for OCDETF agents and federal prosecutors nationwide, gathering intelligence and disseminating investigative leads throughout neighboring areas. The report states that Strike Force members are colocated in offices separate from their parent agencies and interact with each other on a daily basis using the resources and support of their parent agencies. According to OCEDTF’s report, Strike Force efforts help further counternarcotics investigations by combining the resources and expertise of all OCDETF participating investigators and prosecutors. The report also states that, in recognition of the nationwide heroin threat, OCDETF adjusted its resources to target heroin investigations and that when heroin use was rising in 2014 and 2015, the percentage of indictments with heroin charges likewise increased over the same time frame. According to OCDETF’s report, Strike Force effectiveness is reflected in the caseload of active investigations linked to OCDETF’s Consolidated Priority Organization Targets. OCDETF reported that, in fiscal year 2015, 45 percent of Strike Forces’ active investigations were linked to OCDETF Consolidated Priority Organization Targets; in contrast, 22 percent of all OCDETF investigations addressing transnational organized crime were linked to these targets. The National Security Council has a number of interagency policy committees that prioritize counternarcotics, including changing conditions, in the Western Hemisphere. National Security interagency policy committees are the primary day-to-day forums for interagency coordination of national security policy, according to Presidential Decision Directive 1. National Security Presidential Directive 25 directs U.S. government agencies to attack the vulnerabilities of drug-trafficking organizations and disrupt key business sectors and weaken the economic basis of the drug trade. For example, the Transborder Security and Western Hemisphere Directorates interagency policy committee on Mexico Security Priorities directed ONDCP to establish the National Heroin Coordination Group. The agencies represented on the interagency policy committees vary, but the core group involved in addressing heroin and fentanyl include ONDCP, State, DOJ, DOD, DHS, the Department of Health and Human Services, the Office of the Director of National Intelligence, the U.S. Postal Inspection Service (as appropriate), and the Office of Management and Budget. Several interagency policy committees related to addressing heroin include (1) Transborder Security and Western Hemisphere, (2) Fentanyl Surge, and (3) the Heroin Availability Reduction Plan. Among the topics discussed at the committee meetings were the formation of the National Heroin Coordination Group, which created the Heroin Availability Reduction Plan, as well as approval of the plan, and deliberate and tangible actions the interagency policy committees could take under the Heroin Availability Reduction Plan to visibly disrupt the fentanyl supply chain coming into the United States. There were also various efforts set up to address common issues related to illicit opioids among the United States, Mexico, and Canada, which were addressed in forums such as the North American Drug Dialogue or the U.S.-Mexico Security Cooperation Group. Subinteragency policy committees include the U.S.- Mexico Security Group; North American Drug Dialogue; and Fentanyl- Asia, Fentanyl-Cyber, Fentanyl Screening, and Fentanyl Sub-Interagency Policy Committees. Among the topics discussed were the fentanyl threat and sources of supply into the United States, tangible actions to disrupt the fentanyl supply chain, Asia’s role in the fentanyl supply and actions that could be taken to address it, and an examination of the purchase and sale of fentanyl over the Internet for shipment through the mail services and actions taken to detect such shipments. The interagency policy committees that address cocaine and methamphetamine generally involve the same agencies that are involved in the interagency policy committees addressing heroin. We are not making recommendations in this report. We provided a draft of this report to the DOD, DHS, DOJ, ONDCP, State, and USAID for review and comment. We received technical comments from DHS, DOJ, ONDCP, and State, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 12 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Secretaries of Defense, Homeland Security, and State; the Attorney General of the United States; and the Director, Office of National Drug Control Policy. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-6991 or farbj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report examines (1) U.S. agencies’ spending for counternarcotics efforts in the Western Hemisphere in fiscal years 2010 through 2015, (2) agencies’ efforts to gather and share best practices and lessons learned from their counternarcotics efforts both domestically and internationally, and (3) mechanisms that agencies have used to address changing drug threats. To examine U.S. agencies’ spending for counternarcotics efforts in the Western Hemisphere in fiscal years 2010 through 2015—our first objective—we selected eight U.S. departments and components (collectively, in this report, “agencies”) that implement aspects of the National Drug Control Strategy and conduct counternarcotics activities in the Western Hemisphere: (1) the Department of Defense (DOD); the Department of Homeland Security’s (2) Customs and Border Protection (CBP), (3) Immigration and Customs Enforcement (ICE), and (4) Coast Guard; the Department of Justice’s (DOJ) (5) Drug Enforcement Administration (DEA) and (6) Organized Crime Drug Enforcement Task Forces (OCDETF); the Department of State’s (7) Bureau of International Narcotics and Law Enforcement Affairs (INL); and (8) the U.S. Agency for International Development (USAID). To select these eight agencies, we used the following two criteria: 1. Agencies that have international counternarcotics efforts in one or more of the areas that the Western Hemisphere Drug Policy Commission has been asked to review. The Office of National Drug Control Policy (ONDCP), which coordinates the National Drug Control Program, requires all National Drug Control Program agencies to submit an annual drug budget identifying the amounts the agencies plan to spend on counternarcotics efforts for the upcoming fiscal year. The agencies report spending for such efforts in 10 program areas: Corrections, Intelligence, Interdiction, International, Investigations, Prevention, Prosecution, Research and Development, State and Local and Tribal Law Enforcement Assistance, and Treatment. On the basis of ONDCP’s definitions of these program areas, we determined that four of these areas—Intelligence, Interdiction, International, and Investigations—were relevant to the areas that the Western Hemisphere Drug Policy Commission has been directed to examine. 2. Agencies that allocated a combined total of at least $50 million for their counternarcotics efforts for the Intelligence, Interdiction, International, and Investigations program areas in fiscal year 2015. The following summarizes ONDCP’s definitions of these four program areas: Intelligence. Intelligence efforts encompass several drug control intelligence support, including the collection, analysis, and membership, finances, communications, and activities of drug- areas. Such efforts include providing strategic drug‐related dissemination of drug‐related information regarding structure, trafficking organizations and the identification of drug‐related threats. Other activities facilitate the sharing among U.S. agencies of domestic and foreign intelligence information on the production and trafficking of drugs in the United States and foreign countries; analysis of the willingness and ability of partner nation governments to carry out drug control programs; federal, state, local, and tribal law enforcement initiatives to gather, analyze, and disseminate information among domestic law enforcement agencies; and all other activities that provide intelligence and other information for use by national policy makers, strategic planners, and local law enforcement. Interdiction. Interdiction activities are intended to reduce the availability of illegal drugs in the United States or abroad by targeting transportation links. Interdiction efforts encompass the interception of shipments of illegal drugs and their precursors and the disruption of trafficking networks and their proceeds; such efforts may include air and maritime seizures and deterring transport via air, sea, and land routes. Other efforts involve accurate assessment and monitoring of interdiction programs; enhancing the ability of nations that are drug sources to interdict drugs; interdicting the flow of drugs, weapons, and bulk currency along borders; and other air and maritime activities that disrupt illegal drug-trafficking operations. International. International activities are primarily focused on areas outside the United States and are intended to reduce illegal drug availability in the United States or abroad. Activities may include source-country programs designed to help international partners manage the consequences of drug production, trafficking, and consumption in their own societies, including programs to train and equip security forces; efforts to raise awareness of science-based practices and programs to prevent, treat, and provide recovery from substance abuse; and support for economic development programs to help reduce the production or trafficking of illicit drugs. These efforts may also include assessment and monitoring of international drug production programs and policies; coordination and promotion of compliance with international treaties, including those directed at the eradication of illegal drugs and the production and transportation of illegal drugs; involvement of other nations in international law enforcement programs and policies to reduce the supply of drugs; and all other overseas drug law enforcement efforts to disrupt the flow of illicit drugs into the United States. Investigations. Investigations activities are designed to develop a prosecutable case against individuals and organizations responsible for the production and distribution of illegal drugs, including identifying seize them; identifying the leaders of illegal drug and other criminal profits and assets from drug‐related criminal enterprises in order to organizations; gathering information about drug‐related criminal activity; ensuring that legitimate controlled substances are handled, manufactured, and distributed in accordance with federal laws and regulations; and all other drug law investigative efforts to identify, disrupt, and dismantle drug smuggling in the United States. We requested and obtained data on spending for counternarcotics activities from these eight agencies and the Federal Bureau of Investigation (FBI), which OCDETF reimburses for international counternarcotics investigations. We also reviewed each agency’s annual accounting for its counternarcotics budget. In addition, we interviewed agency officials to understand their counternarcotics budgets as they are reported in the annual ONDCP budget and performance summary reports and to determine the extent to which the agencies could identify the funding they had obligated for counternarcotics activities in the Western Hemisphere. Our methodology for identifying counternarcotics spending varied by agency, since some of the agencies—DOD, ICE, INL, and USAID—track such spending by region, while other agencies—the Coast Guard, CBP, OCDETF, and DEA—do not. Moreover, with the exception of DEA’s and OCDETF’s counternarcotics activities, the agencies’ counternarcotics activities represent only one aspect of their larger missions. On the basis of our review of the data, our review of each agency’s annual accounting of its drug budget, and interviews with agency officials, we determined that the data were sufficiently reliable for our reporting purposes. The following summarizes the Western Hemisphere counternarcotics activities reflected in the funding data we present for each agency. (The data we present for OCDETF include its reimbursements to the FBI.) DOD. All DOD counternarcotics activities under U.S. Northern Command and U.S. Southern Command. CBP. All CBP counternarcotics spending. Given that the agency’s jurisdiction is triggered by the illegal movement of criminal goods across national borders, the agency considers all of its efforts to be specific to the Western Hemisphere. However, the agency’s spending also includes interdictions and intelligence gathering to support these interdictions of drugs coming from all locations outside the United States. ICE. The portion of ICE’s Homeland Security Investigations’ spending for investigation of Western Hemisphere drug organizations. Coast Guard. All Coast Guard counternarcotics spending. Given that the Coast Guard’s interdictions occur in Western Hemisphere waters, the agency considers all of its counternarcotics efforts to be specific to the Western Hemisphere. DEA. DEA obligations for Investigations, Intelligence, and International program areas for domestic and international enforcement activities. DEA was also able to provide its obligations for salaries and expenses for investigations and intelligence-gathering activities conducted by agents posted in overseas locations in the Western Hemisphere (see app. III). OCDETF. OCDETF reimbursements for drug investigations conducted by DEA, the FBI, and ICE as well as OCDETF contributions to the OCDETF fusion center. FBI. OCDETF reimbursements for investigations of transnational crime organizations with a drug nexus. (App. III details the FBI’s expenditure of OCDETF funds). INL. International Narcotics Control and Law Enforcement funds for counternarcotics activities for Western Hemisphere countries. USAID. Economic Support Funds and Development Assistance funds for alternative development activities in Western Hemisphere countries. To examine how agencies gather and share best practices and lessons learned from their counternarcotics efforts both domestically and internationally—our second objective—we reviewed the National Drug Control Strategy and companion strategies for examples of best practices as well as other agency documents that identify best practices and lessons learned. We also sent the eight selected agencies, the FBI, and ONDCP a standard set of questions. These questions addressed how the agencies collected and identified best practices and lessons, whether they had formal definitions of best practices and lessons learned, whether their efforts to identify and collect this information were routine, whether they had review processes to assess the information, and whether they shared these practices with other agencies and with international partners. In addition, we asked the agencies to identify best practices related to counternarcotics efforts in the Western Hemisphere. Further, we conducted interviews with agency officials, seeking clarification to written responses as appropriate and asking whether the agencies had any policies or strategies regarding best practices, and we reviewed the documents that were provided to us in response. To identify the mechanisms U.S. agencies have used to address changing drug threats—our third objective—we reviewed key U.S. government-wide and agency-specific documents pertaining to U.S. counternarcotics efforts in the Western Hemisphere, including those that encompass counternarcotics efforts as part of broader national security areas. These documents include the National Drug Control Strategies, Southwest Border Counternarcotics Strategies, Northern Border Counternarcotics Strategies, the Caribbean Border Counternarcotics Strategy, the Strategy to Combat Transnational Organized Crime, and the National Interdiction Command and Control Plan. Agency-specific strategic plans included CBP’s Vision and Strategy 2020, Homeland Security Investigations’ Strategic Plan, ICE’s Strategic Plan, DOJ’s Strategic Plan, DEA’s Strategic Plan, OCDETF’s Strategic Plan, the Department of State’s Functional Bureau Strategies and the Western Hemisphere Affairs and Latin America and the Caribbean Joint Regional Strategy, and USAID’s Country Development Cooperation Strategies for Colombia and Peru. We also interviewed ONDCP and agency officials about the development of these strategies. We interviewed ONDCP officials about, and obtained documentation describing, the roles of the National Heroin Coordination Group and the Cocaine Coordination Group, and we identified the roles of other working groups through agency interviews and documents. To understand how agencies coordinated efforts and cooperate with foreign partners, we visited the U.S. Southern Command and the Joint Interagency Task Force South in Miami and Key West, Florida, and interviewed officials at both locations. Additionally, in discussions with officials from the other agencies we reviewed, we asked whether the agencies cooperated with foreign partners. We conducted this performance audit from August 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings based on our audit objectives. The Office of National Drug Control Policy coordinates the National Drug Control Program and develops the National Drug Control Strategy, which is implemented by a number of U.S. government agencies. The following summarizes the Western Hemisphere counternarcotics activities of key National Drug Control Program agencies and their components as well as the Federal Bureau of Investigation (FBI). The Department of Defense (DOD) maintains the lead role in detecting and monitoring aerial and maritime transit of illegal drugs into the United States and plays a key role in collecting, analyzing, and sharing intelligence on illegal drugs with U.S. law enforcement and international security counterparts. DOD supports other interdiction activities with the use of its assets. DOD also provides counternarcotics foreign assistance to train, equip, and improve the counternarcotics capabilities of relevant agencies of foreign governments. The Department of Homeland Security (DHS) is responsible for U.S. policies related to interdiction of illegal drugs entering the United States from abroad. Key agencies within DHS that participate in counterdrug activities include the following: Customs and Border Protection (CBP) is the lead agency for border security and is responsible for, among other things, keeping terrorists and their weapons; criminals and their contraband, including drugs; and inadmissible aliens out of the country. CBP is responsible for border security at ports of entry; the 6,000 miles of land borders between ports of entry; and nearly 2,700 miles of coastal waters surrounding the Florida Peninsula and Puerto Rico. Immigration and Customs Enforcement’s (ICE) primary mission is to promote homeland security and public safety through the enforcement of federal laws governing border control, customs, trade, and immigration. ICE’s office of Homeland Security Investigations investigates immigration crime; human rights violations and human smuggling; smuggling of narcotics, weapons, and other types of contraband; financial crimes; cybercrime; and export enforcement issues. The Coast Guard is the lead federal agency for maritime drug interdiction in the Transit Zone. The Coast Guard provides resources to the Joint Interagency Task Force South, generally including major cutters, maritime patrol aircraft, and helicopters capable of deploying airborne use of force. The Department of Justice (DOJ) is responsible for federal law enforcement and to ensure public safety against foreign and domestic threats, including illegal drug trafficking. The following are DOJ’s primary agencies that focus on international drug control activities: The Drug Enforcement Administration (DEA) is the nation’s federal agency dedicated to drug law enforcement and, accordingly, works to disrupt and dismantle the leadership, command, control, and financial infrastructure of major drug- trafficking organizations. DEA operates around the world to disrupt drug-trafficking operations; dismantle criminal organizations; enforce the drug-related laws of the United States; and bring to justice those organizations and individuals involved in the growing, manufacture, or distribution of illicit drugs destined for the United States. The Federal Bureau of Investigation (FBI) conducts its counternarcotics activities under the agency’s broader strategy to counter transnational criminal organizations by targeting their command-and-control structures as well as the support networks that facilitate the smuggling of illicit goods, including drugs, into the United States. The Organized Crime and Drug Enforcement Task Forces’ (OCDETF) primary goal is to identify, investigate, and prosecute the transnational, national, and regional criminal organizations most responsible for the illegal drug supply in the United States, the diversion of pharmaceutical drugs, and the violence associated with the drug trade. It effectively leverages the resources and expertise of its seven federal agency members. The Department of State’s Bureau of International Narcotics and Law Enforcement Affairs develops, funds, and manages counternarcotics and law enforcement assistance programs to help reduce the entry of illicit drugs into the United States and minimize the impact of international crime on the United States. The U.S. Agency for International Development supports the U.S. counternarcotics effort through alternative development programs that help farmers find legal sources of income through licit crops such as cacao and coffee and that provide technical assistance, such as training in modern farming techniques and access to capital for investment in equipment. The Department of Defense (DOD), the Department of Homeland Security’s Immigration and Customs Enforcement (ICE), the Department of Justice’s Federal Bureau of Investigation (FBI), the Department of State’s Bureau of International Narcotics and Law Enforcement Affairs (INL), and the U.S. Agency for International Development (USAID) provided data showing their obligations for counternarcotics activities in the Western Hemisphere. The Drug Enforcement Administration (DEA) provided data showing a portion of its counternarcotics obligations for salaries and expenses associated with DEA agents posted overseas. DOD data show obligations for counternarcotics activities by the U.S. Northern Command and the U.S. Southern Command, which have responsibility over the Western Hemisphere. Table 4 contains the commands’ counternarcotics obligations for fiscal years 2010 through 2015. Table 5 shows the U.S Northern Command’s and U.S. Southern Command’s counternarcotics obligations in support of foreign partners in the Western Hemisphere, by country, for fiscal years 2013 through 2015. Table 6 shows ICE expenditures for counternarcotics investigations and intelligence activities conducted by ICE agents for Western Hemisphere drug cases, by country, during fiscal years 2010 through 2015. Table 7 shows DEA obligations for salaries, expenses, and administrative costs for DEA personnel located in 30 Western Hemisphere countries during fiscal years 2010 through 2015. Table 8 shows OCDETF reimbursements to the FBI for expenditures related to its investigations of transnational Central American, South American, Mexican, and Caribbean crime organizations; drug-smuggling and money-laundering organizations; alien-smuggling organizations; and drug-related public corruption cases in the Western Hemisphere, as well as headquarters administration expenses, for fiscal years 2010 through 2015. Table 9 shows INL obligations for counternarcotics activities in 13 Western Hemisphere countries and for two regional programs in the Western Hemisphere, the Central America Regional Security Initiative, and the Caribbean Basin Security Initiative, during fiscal years 2010 through 2015. Table 10 lists USAID’s obligations for alternative development projects in four countries in the Western Hemisphere during fiscal years 2010 through 2015. National Drug Control Program agencies’ planning for counternarcotics efforts in the Western Hemisphere is represented in a variety of strategic documents, which may be broad or targeted, depending on their mission. For example, the Department of Defense’s (DOD) 2011 Counternarcotics and Global Threats Strategy focuses primarily on the department’s efforts to combat narcotics trafficking and transnational organized crime. DOD officials indicated that they are currently updating the strategy. Similarly, the Coast Guard’s 2014 Western Hemisphere Strategy includes counternarcotics as part of the agency’s broader regional mission. According to Coast Guard officials, the Coast Guard does not plan to update its strategy. The Department of Homeland Security (DHS) has several strategic documents that relate to its components’ counternarcotics activities, as described below: Customs and Border Protection’s Vision and Strategy 2020 incorporates counternarcotics efforts as part of its mission to facilitate legitimate trade and safeguard land, air, and maritime borders. Immigration and Customs Enforcement also has a specific goal, protecting the homeland against illicit trade, travel, and finance, including an objective targeting drug-trafficking organizations in its Homeland Security Investigations’ Strategic Plan Fiscal Years 2012- 2016. The Department of Justice’s (DOJ) Fiscal Years 2014-2018 Strategic Plan includes the Drug Enforcement Administration’s (DEA) goal of disrupting and dismantling major drug-trafficking organizations within a much broader set of law enforcement missions. DEA’s Fiscal Years 2009-2014 Strategic Plan indicates the agency has focused on international and domestic drug-trafficking and money-laundering organizations identified as having the most significant impacts internationally and domestically, known as “Consolidated Priority Organization Targets” and “Priority Targeted Organizations.” In addition, DEA’s Drug Flow Attack Strategy, developed in 2009, identifies vulnerable chokepoints to disrupt the flow of drugs. DEA officials indicated they are updating the strategy. DOJ also released a Strategy for Combating the Mexican Cartels in January 2010, which was designed to be consistent with the National Drug Control Strategy and the National Southwest Border Counternarcotics Strategy. The DOJ strategy’s 10 objectives include (1) reduce the flow of narcotics and other contraband entering the United States, (2) strengthen Mexico’s operational capacities and enhance its law enforcement institutions, (3) increase bilateral cooperation between Mexico and the United States on fugitive capture and extradition activities, and (4) increase intelligence and information sharing among law enforcement agencies in the United States and Mexico to achieve focused targeting of the most significant criminal organizations. DOJ’s Organized Crime Drug Enforcement Task Forces (OCDETF) has a long-term drug enforcement strategy for using its prosecutor- led, multiagency task forces in the field to conduct intelligence-driven, coordinated, multijurisdictional prosecutions and investigations. Specifically, OCDETF member agencies focus on Consolidated Priority Organization Targets—that is, “command and control” organizations representing the most significant drug-trafficking and money-laundering organizations threatening the United States. OCDETF member agencies also pursue organizations identified as regional priorities because they have a significant impact on the illicit drug supply within a specific region. Officials in the Department of State’s (State) Bureau of International Narcotics and Law Enforcement Affairs (INL) stated that the bureau uses a variety of strategic planning documents in its efforts to address counternarcotics in the Western Hemisphere. INL’s Functional Bureau Strategy includes the broad objective of reducing illicit drug production and drug demand, along with other activities such as working with the United Nations Office of Drug and Crime. The Western Hemisphere Affairs and Latin America and the Caribbean Joint Regional Strategy, which focuses on a goal of a secure and democratic future for all citizens in Latin America and the Caribbean, includes interdiction goals for specific drugs such as opium gum (used for producing heroin) and cocaine. Integrated Country Strategies at posts and INL Country Plans are focused strategies, targeting, for example, the eradication of a specific number of hectares of coca or the seizure of a certain number of metric tons of illicit drugs and precursor chemicals. The U.S. Agency for International Development (USAID) does not have a specific strategy related to counternarcotics and instead relies on the Office of National Drug Control Policy’s National Drug Control Strategy to help guide its alternative development activities in countries confronting illicit drug production and trafficking, according to USAID officials. USAID’s targeted efforts are described in its Country Development Cooperation Strategies for Colombia and Peru, where alternative development efforts are currently underway. The Colombia strategy describes the U.S. government’s development assistance in support of Colombian efforts to continue its transition out of conflict. According to the Colombia strategy, investments under several of its development objectives would help create conditions for alternative livelihoods and legal behaviors, contributing to broader U.S. and Colombian efforts to address drug trafficking. The Peru strategy includes alternatives to illicit coca cultivation as a development objective in specific regions, supporting the overall goal of strengthening stability and democracy through increased social and economic inclusion, reductions in illicit coca cultivation, and the illegal exploitation of natural resources. USAID conducted operations focused on alternative development in Bolivia until May 2013, when the mission closed. Cooperation with foreign partners is a crucial element in addressing changing narcotics conditions in the Western Hemisphere. For example, the Department of State’s (State) Bureau of International Narcotics and Law Enforcement Affairs (INL), the U.S. Agency for International Development (USAID); the Department of Homeland Security’s (DHS) Coast Guard and Customs and Border Protection (CBP); and the Department of Justice’s (DOJ) Drug Enforcement Administration (DEA) and Federal Bureau of Investigation (FBI) work with host nation counterparts on a variety of counternarcotics efforts. U.S. assistance programs to disrupt the flow of cocaine and other harmful products are designed to build capacity of judicial, law enforcement, and treatment institutions in partner countries, according to INL’s 2017 International Narcotics Control Strategy Report. These programs are carried out through the Central America Regional Security Initiative, the Caribbean Basin Security Initiative, and the Mérida Initiative. Key activities of these programs include drug interdiction cooperation, especially maritime-based efforts in Central America and the Caribbean; law enforcement capacity building; anticorruption initiatives and support; and enhanced prosecution and judicial reform strengthening efforts. For example: In Mexico, as of September 2016, Mérida Initiative funding had supported 238,000 federal, state, and municipal police officers’ standardized training in their role as first responders in the country’s new criminal justice system, according to INL’s report. The report also stated that as of 2016, Mexico had seized over 230 metric tons of illegal drugs and over $50 million in illegal currency with Mérida- funded equipment and training. In Central America, State has provided targeted assistance to help enhance the ability of local partners to interdict drug shipments, disrupt trafficking networks, and control domestic production, according to State officials. For example, State officials reported that State had partnered with DEA to support local vetted police units to interdict drug shipments and investigate traffickers. According to the officials, the 20-officer Maritime Interdiction Vetted Unit in Costa Rica interdicted 1,151 kilograms of cocaine in April 2017, and similar units in Guatemala seized 2,532 kilograms of cocaine in June 2017. In addition, according to State officials, INL assisted the Guatemalan counternarcotics police in developing an opium poppy eradication program that resulted in the destruction of 1,000 acres of poppy cultivation in a 2-month period in the spring of 2017. Moreover, State officials reported that a State-provided wiretapping system and associated training allowed Costa Rican prosecutors to convict seven Sinaloa cartel members in May 2017, shutting down an operation that, according to State officials, had been sending 14 metric tons of cocaine per year to the United States. USAID also relies on international partnerships to implement its alternative development activities. For example, USAID reported that it plans to continue its mitigation of drug-related security threats in Peru by replicating successes it had in the country’s San Martin region and in other coca-growing regions in collaboration with the government of Peru and other U.S. government agencies, in its Peru Country Development Cooperation Strategy for 2012 through 2016. Results from the Monzon Valley in Peru also demonstrate how foreign partnerships can impact the illicit drugs trade. USAID focused its alternative development assistance on the coca stronghold of the Monzon Valley, which once supported about 10,000 hectares of coca, from 2013 to 2015. The average income was about $1.89 per day per person, well below the national extreme poverty line of $2.20 per day per person in 2013. Households that remained under assistance during the strategy period saw a 53-percent increase in income. Moreover, the percentage of assisted families in extreme poverty dropped by 25 percent, from 55 percent to 30 percent. Coca cultivation dropped by more than 91 percent in all areas where recent coca eradication was followed by sustained alternative development assistance, according to the United Nations Office on Drugs and Crime. The Central Intelligence Agency’s Crime and Narcotics Center recorded a less robust, but still impressive, reduction of 64 percent over the same period, according to USAID officials. Furthermore, USAID officials noted that while its resources for alternative development in Peru diminished, the budget for the National Commission for Development and Life without Drugs, Peru’s development organization, grew from $15 million in 2011 to $38 million during 2014 and 2015. In Colombia, USAID reported in its 2014-2018 Country Development Cooperation Strategy that it is trying to address the need for licit economic opportunities by supporting cocoa, specialty coffee, rubber, and dairy sectors in former coca-growing areas, which would help create the conditions for alternative livelihoods and legal behaviors for small producers in areas vulnerable to coca cultivation and drug production, contributing to broad U.S. government and Colombian efforts to address drug trafficking. This alternative development work increased under Plan Colombia, with USAID and the government of Colombia working together on several large-scale rural development projects. Three programs evolved that incorporate public and private partnerships to facilitate economic growth from 2006 to 2017. The first program reportedly generated 250,000 new jobs by investing in agricultural sectors such as rubber, cacao, and African palm enterprises as well as hotels and tourism. The second program supported the provision of grant subsidies to agricultural value-chains, linking small farmer associations with national and international private-sector buyers. In the 2013 selection round, for example, more than 30 selected projects included crops and products such as cacao, rubber, fruits, dairy, and meat. In the third program, USAID carried sustainable development by encouraging private-sector investment in target areas. For example, USAID focused on developing alliances with key private-sector leaders in the coffee and cacao sectors in the former sector by raising yields and quality and addressing infrastructure needs especially in conflict-prone zones. Today, Colombia is the world’s largest producer of premium-quality Arabica beans, according to USAID. Likewise, fine cocoa is a successful crop in Colombia, with a growing world demand, according to USAID. The Colombian cocoa industry is relatively small, with 25,000 farmers producing about 42,000 tons, or 0.2 percent of the global market. However, about 85 percent of Colombian cocoa is from “fine” species, giving Colombia a 3-percent share of global fine cocoa exports. USAID also developed a private investment equity fund, providing capital to small- and medium-sized enterprises in Colombia. The fund is now an independent, for-profit enterprise providing small- and medium-sized Colombian enterprises with capital and operational support. The Coast Guard’s efforts to support foreign partners include its Multilateral Maritime Counter Drug Summits, where U.S. and foreign partners meet to discuss operational and legal issues. The summits are attended by U.S. agencies including, among others, DEA, CBP, the Department of Defense’s Joint Interagency Task Force South, State, and DOJ. Representatives from Western Hemisphere countries, including Belize, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, and Peru, among others, also attend the summits. For example, at a summit held in May 2016, Mexico briefed about its judicial system’s transition to an adversarial system, and Honduras briefed about its successes using increased penalties for money-laundering violations, when it is proven that the money is from drug trafficking, according to a Coast Guard document. On the operational side, Panama made presentations on regional operations, and the U.S. Coast Guard presented on capacity building for counterdrug operations, among other efforts. Other issues—such as how to leverage increased maritime awareness regionally resulting from investments by partner nations in radar and the linking of vessel-tracking technologies along their coastlines with the Joint Interagency Task Force South’s Cooperative Situational Information Integration system—are discussed at these meetings. DHS cooperates with foreign partners in variety of ways to target emerging counternarcotics threats, as follows: ICE’s Homeland Security Investigations works with foreign partners to (1) coordinate criminal investigations, including those related to counternarcotics; (2) disrupt criminal efforts to smuggle people and material, including drugs into the United States; and (3) build international partnerships through outreach and training. In ONDCP’s fiscal year 2017 Budget and Performance Summary report, ICE established a target of 29 percent of transnational drug investigations resulting in the disruption or dismantlement of high-threat, transnational drug-trafficking organizations or individuals for fiscal year 2015. According to the report, ICE fell short at 15 percent but indicated there were several reasons, including a methodology that allowed double counting; as a result, the methodology was revised. CBP also has a network of attachés and advisors, who serve in U.S. diplomatic missions and act as liaisons between law enforcement components such as DEA; the FBI; and DOJ’s Bureau of Alcohol, Tobacco, Firearms and Explosives. Attachés and advisors also work with foreign partners building capacity and provide training, technical assistance, and mentoring on border security, according to CBP officials. For example, CBP has trained over 1,000 Panamanian customs and law enforcement officers since 2014. Also, since February 2017, CBP helped vet, train, and mentor a unit of Peruvian intelligence analysts. Twenty tons of cocaine have been seized since the unit was created, according to CBP officials. CBP’s National Targeting Center hosts representatives from participating foreign agencies and works with these international liaisons and other U.S. government agencies to detect and disrupt narcotic-smuggling operations, drug-trafficking organizations, and their associates. According to agency officials, in fiscal years 2015 and 2016, the center’s efforts with foreign partners led to results in the Western Hemisphere such as discovery and seizure of over 100 kilograms of cocaine, identification of a previously unknown foreign company suspected of narcotics involvement, and seizure of counterfeit identification documents destined to the United States with links for possible bank fraud and the illicit money laundering. DOJ works with foreign country counterparts to conduct bilateral investigations and support joint counterdrug operations, among other things, such as the following: DEA’s special agents, who work at embassies or consulates overseas, conduct bilateral investigations with their foreign counterparts. These special agents also carry out institution-building activities with their counterparts. DEA reported that it provides investigative equipment and training, in large part through its Sensitive Investigative Units in selected countries, including Mexico and Colombia. The Sensitive Investigative Units seek to create focused, well-trained, and vetted drug investigative and intelligence units, targeting the most significant drug- trafficking organizations affecting the United States. DEA sees the program’s impact as building international cooperation, facilitating institution building and professional development, and improving judicial processes. DEA’s International Drug Enforcement Conference is another venue for cooperation with foreign partners. The conference brings senior international drug law enforcement officials together, in regional and bilateral meetings where, according to DEA, topics such as cross- border coordination of operations, intelligence sharing, and joint training activities are addressed. According to INL’s 2017 International Narcotics Control Strategy Report, at a meeting in Peru, in April 2016, geographical regional and multiregional working groups identified collective targets, agreed upon multilateral counterdrug enforcement and interdiction operations, and assessed the progress and evaluated intelligence on existing and emerging targets. The 2015 Caribbean Border Counternarcotics Strategy noted that the DEA-led International Drug Enforcement Conference is a forum for building coalitions between U.S. federal law enforcement and foreign counterparts and that within the Caribbean, law enforcement officials from over 20 nations participate in the annual meetings to discuss regional investigative targeting efforts. One measure DEA tracks as contributing to ONDCP’s National Drug Strategy is the number of international, domestic, and diversion priority targets linked to consolidated priority organization targets it disrupts or dismantles. In ONDCP’s fiscal year 2017 Budget and Performance Summary, DEA reported that in fiscal year 2015, it set a goal of disrupting or dismantling 440 targets linked to consolidated priority organization targets and achieved 356 of these targets. DEA indicated that it did not achieve its goal due to budgetary constraints. FBI legal attachés carry out capacity-building programs, providing equipment and training to enhance foreign partners’ ability to combat criminal activity connected to transnational criminal organizations, according to FBI officials. These officials stated that FBI-trained and - vetted investigative units in Colombia and the Dominican Republic target the most significant criminal organizations affecting the United States. The FBI conducts multiple trainings with Mexican law enforcement as a means of developing contacts and fostering cooperative relationships with its law enforcement counterparts in Mexico, according to FBI officials. These officials noted that the FBI’s ability to advance investigations with a nexus south of the border is greatly enhanced through these contacts. According to these officials, the FBI also sponsors numerous trainings throughout Latin America to enhance its foreign partners’ ability to deal with the increasing transnational organized crime threat. In addition to the individual named above, Juan Gobel (Assistant Director), Julie Hirshen (Analyst-in-Charge), Lynn Cothern, Martin De Alteriis, Neil Doherty, Mark Dowling, Reid Lowe, and Shirley Min made key contributions to this report. Dawn Locke and Diana Maurer provided technical support.", "summary": "Western Hemisphere nations such as Mexico and Colombia are major sources of illicit drugs such as cocaine, heroin, methamphetamine, and marijuana. Precursor chemicals used in the production of illicit fentanyl and other dangerous synthetic drugs often originate in China but typically enter the United States through Canada and Mexico. U.S. agencies implementing the National Drug Control Strategy conduct several activities to disrupt the flow of illicit drugs and dismantle the organizations that control them (see fig.). In December 2016, Congress established the Western Hemisphere Drug Policy Commission to, among other things, evaluate the U.S.-funded counternarcotics programs in the Western Hemisphere. In this context, GAO was asked to review key issues related to U.S. counternarcotics efforts in the Western Hemisphere. This report examines (1) U.S. agencies' spending for counternarcotic efforts in the Western Hemisphere during fiscal years 2010-2015, the most recent data available; (2) how agencies are gathering and sharing best practices and lessons learned from their counternarcotics efforts domestically and internationally; and (3) mechanisms U.S. agencies have used to address changing drug threats. GAO analyzed agencies' data and documents, interviewed agency officials, and conducted fieldwork at the U.S. Southern Command and Joint Interagency Task Force South in Florida. GAO is not making any recommendations in this report. Several agencies provided technical comments on a draft of this report which we incorporated as appropriate. U.S. agencies implementing the National Drug Control Strategy identified billions in spending for Western Hemisphere counternarcotics efforts in fiscal years 2010 through 2015. Agencies that track their counternarcotics spending regionally—the Department of Defense (DOD), the Department of Homeland Security's (DHS) Immigration and Customs Enforcement, the Department of State, and the U.S. Agency for International Development—reported spending nearly $5 billion for such activities in the region during this period. Agencies that do not track counternarcotics spending regionally—DHS's Customs and Border Protection and Coast Guard; and the Department of Justice's Drug Enforcement Administration and Organized Crime Drug Enforcement Task Forces—reported spending about $34 billion for counternarcotics activities in fiscal years 2010 through 2015. According to officials of these four agencies, most of their counternarcotics activities are in the Western Hemisphere. We are not reporting Federal Bureau of Investigation counternarcotics spending separately, since it is included as part of Organized Crime Drug Enforcement Task Forces. The Office of National Drug Control Policy (ONDCP), which coordinates the National Drug Control Program, facilitates the sharing of best practices and lessons learned at meetings such as the North American Drug Dialogue workshop, including Canada, Mexico, and the United States. In addition, 7 of the 10 agencies GAO reviewed described processes they have in place for identifying and collecting best practices or lessons learned from counternarcotics efforts in the Western Hemisphere. For example, DOD reported using a process, known as the Joint Lessons Learned Program, that consists of five phases: discovery, validation, resolution, evaluation, and dissemination. U.S. agencies use a variety of mechanisms to address changing narcotics conditions in the Western Hemisphere. ONDCP collaborates with agencies working directly on regional counternarcotics efforts to address emerging threats, as reflected in the annually updated National Drug Control Strategy and the Southwest Border Counternarcotics Strategy. In addition, documentary evidence GAO reviewed showed that a variety of interagency groups, task forces, and committees have been created to coordinate the U.S. government's responses to counternarcotics threats. For example, the National Heroin Coordination Group was established to provide guidance aimed at reducing the growing supply of heroin and illicit fentanyl in the U.S. market.", "document_type": "gao"}
{"report": "DOD defines a hosted payload as an instrument or package of equipment—a sensor or communications package, for example— integrated onto a host satellite, which operates on orbit making use of the host satellite’s available resources, including size, weight, power, or communications. A commercially hosted DOD payload is a DOD payload on a commercial satellite. In general, hosted payloads may be either experimental or operational. Experimental payloads demonstrate new or existing technologies on orbit for potential use on future operational space systems. Operational payloads deliver required capabilities to end users. Hosted payload arrangements may be unsuitable for some missions. For example, some payloads may be too large or need too much power for a host satellite to feasibly accommodate, or may require unique satellite maneuvers that, if exercised, would negatively affect a host satellite’s primary mission. Civil government agencies, like NASA and the National Oceanic and Atmospheric Administration (NOAA), have used or have plans to use commercially hosted payloads. For more information on the commercially hosted payloads that civil agencies have used or plan to use, see appendix I. We and others have identified potential benefits of using commercially hosted payloads to gain space-based capability, such as: Cost savings—Commercially hosted payloads may increase affordability because the government payload owner pays for only a portion of the satellite development and shared launch and ground systems costs, rather than for the entire system. Also, smaller, lighter, and less complex systems may shorten procurement timelines, reduce research and development investment, and reduce risk in technology development. Some government agencies have reported saving hundreds of millions of dollars to date from using innovative arrangements such as hosted payloads. Faster on-orbit capability—Because commercial satellites tend to take less time from concept development to launch than DOD systems do and have relatively frequent launches, hosting government payloads on commercial satellites may achieve on-orbit capability more quickly. Increased deterrence and resilience—Distributing capabilities across more satellites increases the number and diversity of potential targets for an adversary and may make it more difficult for an adversary to decide which assets to attack, serving as a deterrent. Additionally, more frequent launches could increase DOD’s ability to reconstitute its satellite groups—or constellations—more quickly in case of unexpected losses of on-orbit capabilities. Recent strategic and policy guidance government-wide and at DOD have stressed the need for U.S. space systems to be survivable, or resilient, against intentional and unintentional threats—both types of which have increased over the past 20 years. Intentional threats can include purposeful signal jamming, laser dazzling and blinding of satellite sensors, missiles intended to destroy satellites, and ground system attacks. Some unintentional threats to satellites are created by the harsh space environment itself, like extreme temperature fluctuations and radiation, and the growing number of satellites, used rocket parts, and other space debris on orbit, which could collide with orbiting satellites. Continual technology upgrades and industrial base stability— New technologies may be continually incorporated into space systems using hosted payloads, which may be uniquely suited for higher rates of production and launches than traditional DOD satellites. Using commercial satellites for government payloads could help maintain the U.S. commercial space industry’s ongoing technology developments by maintaining stable business and incentivizing new companies to enter the marketplace. Further, increased production may be distributed over multiple contractors—including traditionally lower-tier contractors—to foster more competition. As we reported in October 2014, hosted payloads are among several avenues DOD is considering to increase the resilience of its satellites in the face of growing threats. DOD has been looking at ways to break up larger satellites into multiple smaller satellites or payloads after decades of building large, complex satellites to meet its space-based requirements. The broader concept of breaking up larger satellites into smaller ones is known as disaggregation. In 2014, we reported that DOD lacked critical knowledge about the concept of disaggregation, including how to quantify a broad range of potential effects. At the time, for example, DOD did not have common measures for resilience, which we found is a key consideration in making a choice as to whether to continue with a current system architecture or to change it. Recently, senior DOD officials have also made public statements that indicate a willingness to consider innovative acquisition approaches so that acquisition timelines can be reduced. For example, in a 2016 strategic intent document, the Commander of Air Force Space Command stated that the Air Force should seek innovative acquisition approaches that leverage DOD’s buying power across the industry. Additionally, the Secretary of the Air Force stated that the Air Force is exploring more affordable and innovative ways to acquire its satellite communication services through investments in commercial industry and international partnerships. Opportunities to match a DOD payload with a commercial host can arise in various ways. DOD may first develop a payload and seek to match it with a commercial host, DOD may work in tandem with a commercial company to develop a payload to be hosted, or commercial companies— likely the satellite owner, operator, or system integrator—can first identify upcoming satellite hosting opportunities to DOD. In each scenario, the DOD program (or payload owner) and the commercial host generally consider the basic properties of both the payload and host satellite in attempting to find a match. These properties—including the size, weight, area, power, and required orbital characteristics of the payload and host satellite—should be complementary to create an arrangement that is mutually compatible for each party, according to Aerospace Corporation recommendations and officials we spoke with. Specifically, these properties include: The size of the payload when it is stowed and when it is deployed on orbit, including the available area on the host satellite; The available weight and mass distribution the host satellite can The available power on the host satellite; The thermal requirements of the payload and corresponding capability of the host satellite; The requirements to limit electromagnetic interference—disturbances that affect electrical circuits on the payload and host satellite; The available command, telemetry, and mission data rate requirements of the payload and corresponding capability of the host satellite; The compatibility of interfaces between the payload and host satellite; The pointing accuracy and stability of the host satellite; and The necessary orbits, including altitude and inclination. Other considerations when matching a DOD payload with a host satellite are the compatibility of radio frequency spectrum (spectrum) needs between the payload and host, and the satellite’s intended orbital location. Spectrum is a natural resource used to provide essential government functions and missions ranging from national defense, weather services, and aviation communication, to commercial services such as television broadcasting and mobile voice and data communications. The frequencies, or frequency bands, of spectrum have different characteristics that make them more or less suitable for specific purposes, such as the ability to carry data long distances or penetrate physical obstacles. Each frequency band has a limited capacity to carry information. This means that multiple users operating at approximately the same frequency, location, and time have the potential to interfere with one another. Harmful interference occurs when two communication signals are either at the same frequencies or close to the same frequencies in the same vicinity, a situation that can lead to degradation of a device’s operation or service. As such, a payload or satellite’s specific placement in any given orbit could potentially interfere with a neighboring payload or satellite in the same orbit. In the United States, the National Telecommunications and Information Administration (NTIA) of the Department of Commerce is responsible for establishing policy on regulating federal government spectrum use and assigning spectrum bands to government agencies. The Federal Communications Commission (FCC) allocates spectrum and assigns licenses for various consumer and commercial purposes. Additionally, all government and commercial satellite programs must apply for approval to operate at a given orbital location using a given band of spectrum internationally through the International Telecommunication Union (ITU). The ITU is an agency of the United Nations and coordinates spectrum standards and regulations. In 2011, the Air Force created the Space and Missile Systems Center’s (SMC) Hosted Payload Office (HPO) to provide acquisition architectures that achieve on-orbit capability more quickly and affordably. The HPO uses various resources and capabilities to meet its objectives: Hosted Payload Solutions Contract: In 2014, SMC established the Hosted Payload Solutions (HOPS) multiple award indefinite delivery indefinite quantity (IDIQ) vehicle. According to HPO documents, SMC established the contract—available to all DOD and civil agencies—to streamline commercially hosted payload arrangements by selecting a pool of commercial vendors that government payload owners can use to access space on commercial host satellites. Programs do not have to use HOPS, however, and may contract with commercial companies directly. The HOPS vehicle includes 14 vendors across the commercial satellite industry. SMC awarded task orders for studies to each of the vendors with a contract to gather information on potential host opportunities, orbits and launch schedules, cost estimates for hosting fees, and existing host satellite interfaces. Feasibility Studies: Using the information it gathered from the 14 vendor studies, the HPO stated that it built a database to provide information on potential satellite hosts and the suitability of certain payloads for host opportunities, including cost estimates. The HPO stated that it can use this information to assess the feasibility of a hosted payload opportunity for interested SMC space programs. The HPO also conducts feasibility studies for interested programs based on publicly available information and from industry requests for information. Hosted Payload Interface Design guidelines: The HPO published hosted payload interface design guidelines to provide technical recommendations for hosted payload developers. According to HPO officials, the intent of these guidelines is to reduce integration costs and improve the host-ability of all hosted payloads. Hosted Payload Data Interface Unit: The HPO is developing a secure hosted payload data interface unit to protect payload data from unauthorized access by the host. Following its release of draft documentation to industry stakeholders in March 2018, the HPO is currently integrating National Security Agency requirements into its request for data interface unit prototype proposals. According to HPO officials, the office plans to issue a request for prototype proposals in May 2018, integrate a data interface unit and payload in 2020, and launch the integrated system in 2022. Hosted Payload Expertise: The HPO provides general advice and expertise to programs in the form of hosted payload architectural studies, input on acquisition planning and strategy documents, and other research efforts, according to the office. Since 2009, DOD has launched three experimental payloads on commercial host satellites and plans to conduct three more missions through 2022, as shown in figure 1. DOD estimates that it has achieved cost savings of several hundred million dollars from these experimental payloads. According to DOD officials, DOD expects to realize additional cost savings and be able to place capabilities on orbit more quickly from several hosted payload efforts that are planned or underway. Opportunities for additional hosted payload efforts may arise in the near term amid DOD planning for upcoming and follow-on space systems. Since 2009, DOD has placed experimental payloads—intended to test or demonstrate an on-orbit capability—for three programs on commercial host satellites. Several officials within DOD told us that experimental payloads tend to be smaller, less expensive, and their missions more risk- tolerant than traditional operational DOD payloads. In these ways, they said experimental payloads are better-suited to hosting arrangements than operational DOD payloads. The Air Force has not yet used the HOPS multiple award IDIQ vehicle—which was awarded to facilitate commercially hosted payload arrangements—to match a government payload with a commercial host. The HPO told us that, in 2019, NASA and NOAA will be the first agencies to use the HOPS vehicle to find a host satellite for two of their payloads. Table 1 describes the three experimental payloads hosted on commercial satellites to date. For more information on civilian agencies that use or plan to use commercially hosted payloads, see appendix I. Air Force officials told us that using commercial host satellites for their experimental payloads has saved several hundred million dollars across these programs and shortened timelines for launching payloads into space. For example, the HPO estimated that the Air Force saved nearly $300 million by using a commercial host satellite for its Commercially Hosted Infrared Payload (CHIRP), as compared to acquiring the same capability using a dedicated, free-flying satellite. In addition, Air Force officials estimated that using commercial host satellites for its Responsive Environmental Assessment Commercially Hosted (REACH) effort saved the Air Force approximately $230 million. The REACH effort consists of over 30 payloads hosted on multiple satellites. Further, because of the commercial host’s launch schedule, the Air Force achieved its on-orbit capability sooner than if it had acquired free-flying satellites. In April 2013, we found that the Internet Protocol Routing in Space (IRIS) payload, launched in 2009, was a commercially hosted payload pilot mission that would provide internet routing onboard the satellite, eliminating the need for costs associated with certain ground infrastructure. DOD and Air Force officials told us they are planning to pursue commercially hosted payloads for three programs in the coming decade to achieve cost savings and on-orbit capability more quickly. In each case, officials said they have identified cost and schedule benefits for their respective programs. For example, the Missile Defense Agency (MDA) stated that it expects to save approximately $700 million compared to the cost of traditional, free-flying satellites by acquiring its Spacebased Kill Assessment capability as payloads on commercial host satellites, and expects to achieve on-orbit capability years earlier than if it had acquired dedicated satellites for these payloads. Additionally, a program official from the Defense Advanced Research Projects Agency (DARPA) told us DARPA plans to use a commercially hosted payload for the Phoenix Payload Orbital Delivery effort to test more affordable ways to access space. Moreover, Air Force officials told us they expect to save $900 million over free-flying satellites by using two Space Norway satellites to fly an Enhanced Polar System Recapitalization payload. Space Norway plans to launch its satellites in 2022, which the Air Force expects will allow it to meet its need for DOD’s required capability. See table 2 for additional details on DOD’s planned hosted payloads. Additional opportunities for commercially hosted payloads may be forthcoming as DOD develops requirements and designs for new and follow-on space programs. DOD has been analyzing various alternatives to explore possible future space system designs and acquisition strategies for several of its upcoming follow-on programs. In these cases, the analysis of alternatives (AOA) study guidance, set forth by DOD’s Office of Cost Assessment and Program Evaluation, included direction for the studies to consider new approaches for acquiring space capabilities. For example, AOA guidance directed study teams to include hosted payloads or other disaggregated designs, and commercial innovations in technology and acquisition to meet some space mission requirements. Table 3 provides further details of recently completed and ongoing AOAs to study new designs—or architectures—for upcoming follow-on satellite systems. Two factors have contributed to DOD’s limited use of commercially hosted payloads. First, DOD officials identified logistical challenges to matching government payloads with any given commercial host satellite. For example, most of the offices we spoke with cited size, weight, and power constraints, among others, as barriers to using hosted payloads. Second, while individual DOD offices have realized cost and schedule benefits, DOD as a whole has limited information on costs and benefits of hosted payloads. Further, the knowledge it has gathered is fragmented across the agency—with multiple offices collecting piecemeal information on the use of hosted payloads. The limited knowledge and data on hosted payloads that is fragmented across the agency has contributed to resistance among space acquisition officials to adopting this approach. DOD acquisition officials within the Office of the Secretary of Defense told us matching requirements between government payloads and commercial satellites is typically too difficult for programs to overcome. Specifically, they said the cumulative complexity of matching size, weight, power, and spectrum needs; aligning government and commercial timelines; and, addressing concerns over payload control and cybersecurity amounts to too great a challenge. DOD’s Hosted Payload Office is developing tools designed to help address these challenges and DOD offices that have used hosted payloads have also found ways to overcome them. Officials from DOD acquisition and policy offices, as well as Air Force and industry officials we spoke with, cited matching size, weight, and power between DOD payloads and commercial host satellites as a challenge. We similarly found in April 2013 that ensuring compatibility between payloads and host satellites can pose challenges because not all commercial satellites are big enough or have enough power to support hosting a payload. Whether a host satellite can accommodate a payload can depend on the size of the payload. Additionally, according to industry representatives, the space taken up by the hosted payload affects the amount of revenue-generating payloads the host may place on its satellite, such as additional transponders—devices that emit and receive signals—for the communications services it provides to customers. The complexity of integrating a government payload onto a commercial host can also drive the overall cost of the arrangement. However, officials said these challenges can be mitigated through the use of various expertise and lessons learned. HPO officials and industry representatives have proposed several approaches to help match properties like size, weight, and power between a DOD payload and a commercial host satellite. The HPO is developing a hosted payload interface unit that could potentially provide a standard for payload developers and system integrators to develop and test their systems. One commercial company proposed an interface unit that would accommodate a “universal” DOD payload. Additionally, industry experts stated that with sufficient planning and time for system integration, nearly any payload can be accommodated on a host satellite. The HPO issued guidelines in 2017 to assist DOD payload developers in working toward typical payload requirements and standards for host satellites in low Earth orbit and geostationary Earth orbit. These guidelines inform the payload’s electrical power and mechanical designs. The principal guideline—echoed by the successful CHIRP demonstration in 2011—is that the hosted payload must “do no harm” to the mission performance of its host. Also, satellite interfaces can vary from company to company. Some commercial companies had experience with the task—and business opportunity—of integrating multiple customers’ payloads onto satellites since at least the 1990s. Air Force, HPO, and industry officials told us that, ideally, the payload should use the same spectrum allocation as the commercial host. They said that this is due in part to the lengthy satellite registration process that takes place in the United States and through the ITU that must be undertaken prior to placing a satellite on orbit. Some DOD officials added that the process for all new satellites from initial filing to ITU approval takes around 7 years. If a satellite owner registers for one frequency band of spectrum and later requires a different band, the owner has to begin the registration process from the beginning—restarting the 7-year timeline. This can be problematic for DOD payload owners seeking to match their military communications payload with an already-registered host satellite—particularly if the host satellite’s spectrum allocation is incompatible with the DOD payload. HPO and other DOD officials said that very different spectrum needs between payload and host would therefore preclude the match. Moreover, a need for military—as opposed to commercial—spectrum for communications payloads can introduce additional complications. Although a process exists for a commercial satellite owner to license military spectrum for use by a hosted payload, representatives from DOD’s Chief Information Officer’s (CIO) office could cite only one instance where this has happened. One possible explanation stems from a 2012 memorandum from DOD’s CIO that outlines various preferred processes for a commercial host satellite to host military communications payloads. Several industry officials we spoke to said that the various processes outlined in the 2012 memorandum would add to the already-lengthy process of spectrum registration. Further, the memorandum instructs that contractual terms between the payload and host satellite owners should restrict all military spectrum use exclusively to the U.S. military. However, one industry official told us that international entities do not necessarily recognize U.S. military spectrum, and commercial companies that obtain licenses through other countries are permitted to use those frequencies. For example, a senior official of one commercial company we met with stated that the company licensed U.S. military spectrum through another North Atlantic Treaty Organization government after failing to successfully coordinate an FCC request with DOD and NTIA. DOD and industry representatives told us that from a business perspective, it makes little sense for a commercial company to seek hosting opportunities for DOD payloads that require U.S. military spectrum. Government and industry officials we spoke with said that aligning the development and acquisition timelines of a government payload and commercial host satellite is a challenge. The timeline associated with developing government sensors is generally much longer than that of commercial satellites, potentially creating difficulties in scheduling and funding commercially hosted payload arrangements. For example, DOD satellite systems take, on average, over 7 years to develop and launch a first vehicle, while commercial satellite programs typically take between 2 and 3 years. DOD payload owners may find it challenging to accelerate development and acquisition schedules to match those of the commercial satellite host. Additionally, DOD officials we spoke with said that their budget and planning processes require funding commitments up to 2 years in advance of actually receiving those funds. This can further complicate alignment with commercial timelines because the development of a government sensor would need to be underway well in advance of a decision to fund a commercially hosted payload approach. Furthermore, federal law generally prohibits agencies from paying in advance for a future service or from obligating future appropriations. However, several DOD and other government agency officials we spoke with said that it is possible to align government and commercial timelines. For example, MDA adopted the commercial host’s schedule to ensure its Spacebased Kill Assessment payload was ready for integration and launch without delaying the host satellite or worse—missing its own ride to space. DARPA officials told us they were also able to align DARPA acquisition and development schedules with the commercial host. The Air Force’s Enhanced Polar System (EPS) Recapitalization program officials were able to leverage existing documents such as requirements documents and acquisition strategies from the predecessor program to speed up the acquisition process. According to Air Force officials, the EPS Recapitalization program had a unique opportunity to take advantage of the availability of a commercial host and had the support of a high ranking Air Force official that enabled the program to move forward using a commercially hosted payload approach. Some officials cited concerns with combining government and commercial space missions. For example, officials across DOD told us they were wary of losing control over a hosted payload should a commercial company’s needs change. They said that theoretically, a commercial provider could decide to turn off power to the government’s payload if the host satellite needed extra power to perform a certain function. Additionally, DOD space program officials expressed concern that commercial practices for ensuring the mission success of the payload may not be up to government standards—that commercial testing and integration standards may be less robust than those used by traditional government programs to ensure success, adding risk to the government payload. Furthermore, officials in one DOD program office expressed a distrust of commercial host motives in offering to support a government payload on their satellite, suggesting that a company could be intending to steal government technologies. However, industry officials we spoke with said that DOD can generally issue a solicitation that includes necessary stipulations. For example, including a condition to preserve the payload’s priority of mission and other terms to protect the government’s investment may provide some assurance to those officials that perceive security risks. Additionally, some officials we spoke to cited cybersecurity concerns. They cited loss of control over data security as a challenge to using hosted payloads. Officials told us the data could be vulnerable to eavesdropping or manipulation as it travels between government ground systems and the commercially hosted government payload. However, according to HPO officials, the Air Force overcame this challenge on the CHIRP mission by procuring a secure interface that provided a data link between the payload and dedicated transponder and ground terminal. As mentioned previously, the Hosted Payload Office is developing a hosted payload data interface unit to mitigate this challenge by securing payload data communications from the host satellite. DOD, at the department-wide level, has limited information on commercially hosted payloads—mostly due to a lack of experience in using hosted payloads and complexities associated with them. For example, acquisition officials in the Office of the Secretary of Defense told us that DOD needs more data and analysis of the potential costs and benefits. However, realistic cost modeling for commercially hosted DOD payloads is unavailable because costs can vary across potential hosts and DOD has minimal experience using commercial hosts. Similarly, the HPO performs market research and cost estimates based on data from commercial companies, but according to one official in the HPO, the costs tend to vary based on the supply and demand in the commercial satellite industry. Additionally, HPO officials said their cost savings analyses are based on only two real-world commercially hosted DOD payloads— CHIRP and REACH. HPO officials told us that with additional government data they could compare the costs of system architectures that include free-flier satellites with those that use commercially hosted payloads. Additionally, some potential benefits of using commercially hosted payloads, such as resilience, may be difficult to measure. In our 2014 report on disaggregation, we recommended that DOD define key measures related to disaggregation, including developing metrics to measure resilience. DOD is in the process of developing standard metrics for resilience. DOD’s knowledge of commercially hosted payloads is also fragmented across the agency. Several DOD offices are independently conducting activities related to commercially hosted payloads, such as pursuing commercially hosted payload arrangements, developing lessons learned, and determining demand for commercial hosts. For example, MDA officials told us they have developed cost and technical data and lessons learned based on MDA’s Spacebased Kill Assessment payload— launched earlier this year—but have not shared it across the agency. On the other hand, the Space Test Program, also housed within the Air Force’s SMC develops lessons learned on its payloads, which are government payloads on government host satellites and officials there told us they provide lessons learned to the HPO. In October 2017, SMC’s Launch Office sent a request for data on hosted payloads to DOD agencies, research laboratories, and universities, but the HPO was not an active participant in this request. Independent efforts within DOD to collect and analyze cost, schedule, and performance results from hosted payloads can create fragmentation in DOD’s knowledge base and can increase the risk of duplicative efforts within DOD. DOD does not collect or consolidate agency-wide knowledge on commercially hosted payloads and has no plans to do so. Agency officials stated that DOD does not require programs outside of SMC to consult the HPO when seeking commercially hosted payload arrangements. The Air Force established the HPO to facilitate commercially hosted payloads, however, the 2011 Program Management Directive that established the HPO states that the HPO will coordinate with SMC directorates for detailed implementation of hosted payloads but does not address coordination with agencies or directorates outside of SMC. According to an HPO official, programs are not required to use HPO expertise or tools as they pursue using hosted payloads. Further, this official stated that programs are not required to provide any data or lessons learned to the HPO, or any other central point within DOD, following the pursuit or completion of a hosted payload arrangement. The 2011 Program Management Directive directs the HPO to provide lessons learned to SMC directorates but does not direct SMC offices to share information— such as costs, technical data and lessons learned on completed commercially hosted payload efforts—with the HPO. An HPO official indicated that the HPO obtains data through informal communication with those programs using hosted payloads that are willing to share data. We found that limitations and fragmentation of data and knowledge are contributing to resistance within DOD to using hosted payloads. Several DOD acquisition and program officials we spoke with who did not have experience with hosted payloads generally stated that the potential risks to using hosted payloads outweighed the benefits, and that there was little evidence-based analysis to prove otherwise. They were not aware of existing tools that could assist them in making decisions even though the HPO has been developing these tools and has made efforts to share them within SMC. DOD acquisition and program officials consistently cited a preference for maintaining the acquisition status quo over introducing any perceived added risk to their programs. At the same time, however, officials who have used hosted payloads were able to overcome logistical and technical challenges and realize cost savings. However, according to an HPO official, there is currently no requirement in place to facilitate sharing their approaches to doing so. We have reported in the past that DOD’s culture has generally been resistant to changes in space acquisition approaches and that fragmented responsibilities for acquisitions have made it very difficult to coordinate and deliver interdependent systems. Moreover, our past studies of commercial strategic sourcing best practices have found that that leading companies centralize procurement decisions by aligning, prioritizing, and integrating procurement functions within the organization. Establishing the Hosted Payload Office is one step in this direction, but the office is organized under the Advanced Systems and Development Directorate—a research and development organization—under SMC. Moreover, the 2011 directive that established the HPO does not address coordination or responsibilities for agencies or directorates beyond SMC. Consolidating knowledge is important because it allows organizations to share information and data upon which to develop consistent procurement tactics, such as ways to overcome challenges in matching a government payload with a commercial host. As we found in our work on commercial strategic sourcing best practices, organizations that struggled with fragmented information in the past overcame this challenge in part by consolidating their data on costs and spending. While hosted payload acquisitions are not a typical service acquisition, successful organizations have found that these techniques work for highly specialized technical services for which few suppliers exist. As DOD considers new architectures and acquisition approaches, commercially hosted payloads have the potential to play a role in delivering needed capabilities on orbit more quickly and at a more affordable cost than traditional DOD space acquisitions. Placing DOD payloads on commercial satellites might also be an effective method by which to increase resiliency. However, DOD’s experience and the data collected so far are limited in informing decisions on the use of these payloads. DOD would benefit from leveraging the knowledge and information gained from each hosted payload experience. Centralized collection and assessment of agency-wide data would help enable DOD to mitigate the logistical challenges inherent in matching payloads to hosts, and better position DOD to make reasoned, evidence-based decisions on whether a hosted payload would be a viable solution to meet warfighter needs. Without such knowledge, and a way for interested programs to leverage it, DOD may not be fully informed about using hosted payloads and may risk missing opportunities to rapidly and affordably address emerging threats in space. The Secretary of Defense should require programs using hosted payloads to provide cost and technical data, and lessons learned to a central office. In implementing this recommendation, DOD should consider whether the Hosted Payload Office is the most appropriate office to centralize agency-wide knowledge. (Recommendation 1) We provided a draft of this report to the Department of Commerce, NASA, and DOD for comment. The Department of Commerce provided technical comments, which we incorporated as appropriate. NASA did not have comments on our draft report. In its written comments, DOD concurred with our recommendation and stated that SMC had initiated a major reorganization since we drafted our report and that under the new organizational construct, the Hosted Payload Office had changed and may not be the appropriate office for centralizing DOD-wide hosted payload knowledge. DOD’s comments are reproduced in appendix II. DOD also provided technical comments which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Commerce, the Secretary of Defense, the Administrator of NASA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or by email at chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. As shown in table 4, civil and other government agencies use commercially hosted payloads to enhance navigation systems, monitor environmental pollution, conduct scientific missions, and improve search and rescue systems. Officials from all of the agencies we spoke with cited cost savings and the ability to leverage existing commercial schedules and technologies among the reasons they use commercial host satellites. Cristina T. Chaplain (202) 512-4841 or chaplainc@gao.gov. In addition to the contact named above, Rich Horiuchi (Assistant Director), Erin Cohen (Analyst in Charge), Claire Buck, Jon Felbinger, Stephanie Gustafson, Matthew Metz, Sylvia Schatz, and Roxanna Sun made key contributions to this report.", "summary": "Each year, DOD spends billions of dollars to develop, produce, and field large, complex satellites. For such satellite systems, a single adversary attack or on-orbit failure can result in the loss of billions of dollars of investment and significant loss of vital capabilities. As DOD plans new space systems and addresses an increasingly contested space environment, it has the opportunity to consider different acquisition approaches. One such approach is to integrate a government sensor or payload onto a commercial host satellite. House Armed Services Committee report 115-200, accompanying a bill for the Fiscal Year 2018 National Defense Authorization Act, included a provision for GAO to review DOD's use of commercially hosted payloads. This report (1) determines the extent to which DOD uses commercially hosted payloads and (2) describes and assesses factors that affect their use. GAO reviewed DOD policies, documentation, and planning documents, and interviewed a wide range of DOD and civil government officials, and commercial stakeholders. GAO and others have found that using commercial satellites to host government sensors or communications packages—called payloads—may be one way DOD can achieve on-orbit capability faster and more affordably. Using hosted payloads may also help facilitate a proliferation of payloads on orbit, making it more difficult for an adversary to defeat a capability. Since 2009, DOD has used three commercially hosted payloads, with three more missions planned or underway through 2022 (see figure below). DOD estimates that it has achieved cost savings of several hundred million dollars from using commercially hosted payloads to date, and expects to realize additional savings and deliver faster capabilities on orbit from planned missions. Cost savings can result from sharing development, launch, and ground system costs with the commercial host company. Among the factors that affect DOD's use of hosted payloads are a perception among some DOD officials that matching government payloads to commercial satellites is too difficult; and limited, fragmented knowledge on how to mitigate various challenges GAO found that further opportunities to use hosted payloads may emerge as DOD plans new and follow-on space systems in the coming years. However, DOD's knowledge on using hosted payloads is fragmented, in part because programs are not required to share information. In 2011, the Air Force created a Hosted Payload Office to provide expertise and other tools to facilitate matching government payloads with commercial hosts. However, GAO found that DOD programs using hosted payloads are not required and generally do not provide cost and technical data, or lessons learned, to the Hosted Payload Office, or another central office for analysis. Requiring programs that use hosted payloads agency-wide to provide this information to a central location would better position DOD to make informed decisions when considering acquisition approaches for upcoming space system designs. GAO recommends that DOD require programs using commercially hosted payloads to contribute resulting data to a central location. In implementing this recommendation, DOD should assess whether the Air Force's Hosted Payload Office is the appropriate location to collect and analyze the data. DOD concurred with the recommendation.", "document_type": "gao"}
{"report": "There are several aspects of individual market plans sold through the exchanges for consumers to consider when selecting a plan, including: (1) metal tiers; (2) premium variation and plan availability; (3) covered benefits; and (4) premium tax credits. Current exchange consumers who are eligible for continued health insurance and do not actively select and enroll in a health plan for the subsequent year may be automatically re-enrolled in the same or a similar crosswalked plan. Plans sold through exchanges are offered at one of four levels of coverage, or metal tiers—bronze, silver, gold, and platinum—that reflect the out-of-pocket costs that may be incurred by a consumer. The four metal tiers correspond to the plan’s actuarial value—a measure of the relative generosity of a plan’s benefits that is expressed as a percentage of the covered medical expenses expected to be paid, on average, by the issuer for a standard population and set of allowed charges for in-network providers. The actuarial values of these metal tiers are as follows: bronze (60 percent), silver (70 percent), gold (80 percent), and platinum (90 percent). If an issuer sells a plan on an exchange, it must offer at least one plan at the silver level and one plan at the gold level. Issuers are not required to offer bronze or platinum plans. Premium Variation and Plan Availability As we have previously reported, the range of premiums for health plans offered through the exchanges can vary widely across counties and states, and the number and type of plans available in the health insurance exchanges vary from year to year. Issuers can add new plans and adjust or discontinue existing plans from year to year, or they can extend or restrict the locations in which plans are offered. As a result, the options available to consumers can change from year to year. PPACA requires that health insurance plans offered through the exchanges be certified as qualified health plans, meaning that they must provide essential health benefits, comply with cost sharing limits, and meet certain other requirements. Essential health benefits include items and services within ten categories. Some health insurance plans offered through the exchanges include benefits above and beyond the minimum requirements. For these plans, only the percentage of the plan premium that covers the essential health benefits is considered when determining the consumer’s benchmark plan. Certain consumers purchasing health insurance through the exchanges are eligible for and receive premium tax credits that may reduce their out-of-pocket costs for premiums. To be eligible for premium tax credits, individuals and families must generally have a household income of at least 100, but no more than 400, percent of the federal poverty level (FPL). Consumers who are eligible for premium tax credits and enrolled in the benchmark plan are responsible for paying premiums that are generally limited to a percentage of household income, such that individuals and families with lower household incomes contribute a smaller portion of their income toward the health plan premium than individuals and families with higher incomes, and premium tax credits may be applied to only the portion of the premium that covers essential health benefits. For example, in 2016, the percentage of household income that consumers who were eligible for premium tax credits and who lived in the United States were expected to pay toward the portion of their premiums for their benchmark plan that covered essential health benefits was 2.03 percent for those at 100 percent of the FPL, 8.18 percent for those at 250 percent of FPL, and 9.66 percent for those at 400 percent of FPL. A consumer’s required contribution to the premium is the amount of that benchmark plan premium that is not covered by the premium tax credit. (See table 1.) Although consumers’ premium tax credit amounts are determined in part based on the cost of premiums for their local benchmark plan, the credit can also be applied towards the premiums for other eligible exchange plans. However, the premium tax credit available to consumers does not increase if they enroll in exchange plans with higher premiums than the local benchmark plan. In such cases, consumers are responsible not only for their required contribution but also for the difference in premiums. Similarly, if a consumer chooses to enroll in an exchange plan with lower premiums than the local benchmark plan premium, then the consumer’s premium tax credit would also generally remain the same, so the consumer would pay less for that plan. The tax credit cannot, however, exceed the total value of the premium. Because most consumers enrolling in exchange plans are eligible for premium tax credits, most consumers’ out-of-pocket premium costs are lower than the advertised cost of premiums. (See table 2.) Re-enrollment in an exchange plan may occur through either an active choice by a consumer or through automatic re-enrollment by the exchange. Eligible returning consumers may enroll in a health insurance plan through the exchange each year during an open enrollment period. Federally facilitated exchanges automatically re-enroll eligible exchange consumers for the next year, unless their health insurance is terminated or the consumer makes an active plan selection. Through automatic re-enrollment a consumer is re-enrolled in the same plan for the next year if that plan remains available to him or her; if the same plan is no longer available (e.g., because the issuer decided to discontinue a particular plan or to stop offering the plan in certain locations), then the consumer is generally re-enrolled in a similar crosswalked plan. The criteria HHS established for identifying appropriate similar crosswalked plans have changed over time, but the similar crosswalked plan is typically the same metal tier level as the original plan. During the 2015 to 2016 transition, all similar crosswalked plans were plans offered by the same issuer as the original plan. If that issuer no longer offered an exchange plan, there was generally no crosswalked plan and automatic re-enrollment was not an option. Starting with the 2016 to 2017 transition, if the original issuer did not offer a similar plan, then automatic re-enrollment could be into a health plan offered by a different issuer, with plan similarity determined using established criteria. Both issuers and exchanges have had roles in informing consumers about the enrollment process. For example, prior to the start of the 2015 and 2016 open enrollment periods, both the exchange and health plan issuer were to provide current exchange consumers with general information about the upcoming enrollment period, including key dates and information regarding eligibility for re-enrollment. In addition, some consumers were also to receive special notices from the exchange that provided more detailed information regarding their application status, eligibility for enrollment and affordability programs, and potential effects on enrollment if they had not updated information about their income or eligibility or reviewed their re-enrollment options with the exchange prior to the end of the open enrollment period. Consumers who were automatically re-enrolled by an exchange were to receive an additional notice with updated information about their re-enrollment status. According to CMS officials, automatically re-enrolled consumers were provided with information about their new premium amount and any new advance premium tax credit amounts in a message confirming their enrollment. In most of the nearly 2,600 counties included in our analysis, the plan that we identified as the benchmark plan changed from 2015 to 2017. For example, in 85 percent of the counties included in our analysis, the 2015 benchmark plans were not benchmark plans in either 2016 or 2017, the other 2 years we studied. The benchmark plan was the same plan in all 3 years in only 3 percent of counties. (See table 3.) In addition, benchmark plan premiums were more likely to increase than decrease from year to year, and increases were higher from 2016 to 2017 than they were from 2015 to 2016. Among all the counties in our analysis, the median change in monthly premiums for the benchmark plans was an increase of 11 percent from 2015 to 2016, and 28 percent 2016 to 2017. As shown in figure 1, the gross premiums for benchmark plans increased by more than 55 percent from 2016 to 2017 in 12.4 percent of the counties in our analysis but did not increase by more than 55 percent in any counties from 2015 to 2016. In contrast, although not particularly common, relatively stable or even decreasing premiums from year to year were more likely from 2015 to 2016 than from 2016 to 2017. Appendix I provides examples of median benchmark plan premiums for 2015, 2016, and 2017 for select groups of consumers. Because premium tax credits limit eligible consumers’ payments for benchmark plan premiums to a percentage of their income, an increase in premiums may not increase their financial responsibility. Instead, for eligible consumers, the amount of the tax credit would increase. According to HHS, most exchange consumers have been eligible for these tax credits; those who were not eligible for tax credits would not have this protection from premium increases. The premium increases for consumers who were not eligible for premium tax credits, or for those who were eligible but who chose plans that had higher premiums than their benchmark plan premiums, could have had a more substantial financial impact, because premium tax credits would not have offset, or fully offset, the higher premiums. Although gross premiums for benchmark plans were likely to increase from 2015 to 2016 and from 2016 to 2017, we found that in many counties, the implications for automatically re-enrolled consumers were modest because net premiums—after accounting for tax credits for those eligible for those credits—were limited. We compared the 2016 premiums for plans that had been benchmark plans in 2015 to the 2016 benchmark plan premiums, and we compared the 2017 premiums for plans that had been benchmark plans in 2016 to the 2017 benchmark plan premiums. To focus this analysis on the potential effects for those who were automatically re-enrolled, we limited our comparisons to plans that were available in both years, or plans for which a similar crosswalked plan had been identified for the second year. For this analysis, we excluded plans that were benchmark plans in one year and were also benchmark plans, or were crosswalked to a benchmark plan, in the following year. We found that in many counties, the new premiums for plans that had been (but were no longer) benchmark plans differed only modestly from the new benchmark plan premiums. For example, in 60 percent or more of the counties in our analysis, the premium for the previous benchmark plan was within plus or minus about 7.5 percent of the new benchmark plan premium. This finding indicates that automatic re-enrollment from a benchmark plan into a plan that was not a benchmark plan did not necessarily result in substantially higher premiums compared to the premiums for the new benchmark plans, and the same would be true for consumers who actively chose their same or similar crosswalked plan. While modest premium differences were not uncommon in either year, figure 2 also shows that some differences were substantial. (See fig. 2.) Although consumers who were eligible for premium tax credits were somewhat insulated from large differences in premiums, if they were automatically re-enrolled in a plan with a premium that was higher than their benchmark plan premium, no matter how great the difference, they would have been be required to pay a larger share of their incomes on those premiums. And, as already noted, the premium differences for consumers who were not eligible for premium tax credits, or for those who were eligible but who chose plans that had higher premiums than their benchmark plan, could have had a more substantial financial impact because premium tax credits would not have offset, or fully offset, the higher premiums. Among consumers who were enrolled in plans through the federal platform in both 2015 and 2016, 30 percent (about 1.7 million consumers) were automatically re-enrolled. Of those consumers who were automatically re-enrolled, 71 percent were re-enrolled in their same plan and 29 percent were re-enrolled in a similar crosswalked plan, because their 2015 plan had been discontinued or was no longer offered in the consumer’s local area. These data do not indicate whether these consumers explored their options for switching plans and made an active decision not to change plans. The remaining 70 percent of consumers who enrolled in exchange plans through the federal platform in both 2015 and 2016 (more than 3.9 million consumers) actively re-enrolled in 2016. Of these consumers, 39 percent chose the same plan in which they had been enrolled in 2015 or the similar crosswalked plan to which they would have been automatically re-enrolled. The majority of consumers who re-enrolled actively, 61 percent, switched to a plan that was neither their 2015 plan nor the similar crosswalked plan. (See fig. 3.) Of those consumers who actively switched plans, more than half (54 percent) would have been automatically re-enrolled in their same plan if they had not actively switched plans, indicating that plan discontinuation was not the only factor involved in consumers’ decisions to change plans. Consumers’ median net monthly premiums (after premium tax credits) generally increased less from 2015 to 2016 for those who actively re-enrolled ($5) than for those who were automatically re-enrolled ($22). As shown in table 4, consumers who actively re-enrolled had a lower median increase in their net monthly premiums than consumers who were automatically re-enrolled for both the same and similar crosswalked plans. Moreover, table 4 also shows that consumers who re-enrolled actively, and who switched plans from 2015 to 2016, enrolled in plans with median monthly net premiums that increased the least overall—a median net increase of $1 compared to $13 per month for those who enrolled in the same plan. In addition, the table shows that enrollment in a similar crosswalked plan did not generally result in a higher median net premium than enrollment in the same plan: whether enrollment was active or automatic, consumers’ median net monthly premiums increased less for those who enrolled in a similar crosswalked plan than for those who enrolled in the same plan. Changes in net monthly premiums varied around these medians, however, with some consumers facing large increases or, in some cases, large decreases in their net monthly premiums. Large increases or decreases in net monthly premiums could result from changes to eligibility for tax credits, selections of plans of different metal levels, or other circumstances. Our findings are consistent with other work by ASPE that suggested that consumers consider possible cost savings when deciding to switch plans. For example, ASPE found that average net monthly premium for the 61 percent of consumers who actively switched plans in 2016 was $132, which represented an average savings of $42 per month compared to what they would have paid if they stayed in their same or similar crosswalked plans. This work also found that the net monthly premiums of consumers who actively chose to remain in their same or similar crosswalked plans in 2016 were, on average, only $10 more than those for consumers who actively switched plans. In addition, ASPE found that consumers’ plan selections indicated sensitivity to net premiums. For example, ASPE found that consumers were much more likely to switch plans when the net premium of their 2015 plan increased than when the gross premium of their 2015 plan increased, but the net premium did not. We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Acting Secretary of Health and Human Services and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Benchmark plan premiums generally increased from 2015 through 2017. Table 5 shows the median monthly gross benchmark plan premiums (exclusive of any applicable premium tax credits) for select consumer groups. In addition to the contact named above, Gerardine Brennan, Assistant Director; Kristen Joan Anderson, Analyst-in-Charge; Todd Anderson; and LaKendra Beard made key contributions to this report. Also contributing were Muriel Brown; Daniel Lee; Laurie Pachter; and Emily Wilson.", "summary": "During open enrollment, eligible returning consumers may re-enroll in their existing health insurance exchange plan or choose a different plan. Those who do not actively enroll in a plan may be automatically reenrolled into a plan. According to the Department of Health and Human Services, automatic re-enrollment is intended to help ensure consumers' continuity in coverage. However, some have questioned whether automatic reenrollment could have unintended financial consequences for consumers. GAO was asked to review automatic reenrollment and benchmark plans. GAO examined 1) the extent to which plans identified as benchmark plans remained the same plans from year to year, and how premiums for benchmark plans changed; 2) the proportion of exchange consumers who were automatically re-enrolled into the same or similar plans, and how these proportions compared to those for consumers who actively re-enrolled, and 3) the extent to which consumers' financial responsibility for premiums changed for those who were automatically re-enrolled compared to those who actively re-enrolled. GAO reviewed relevant guidance and analyzed county-based data from the Centers for Medicare & Medicaid Services (CMS) for the 37 states that used the federal information platform, healthcare.gov, from 2015 through 2017. GAO also interviewed CMS and ASPE officials and analyzed information from ASPE on reenrollment from 2015 to 2016. Through the exchanges established under the Patient Protection and Affordable Care Act, consumers can directly compare and select among health plans based on a variety of factors, including premiums. Most consumers who purchase health plans through the exchanges receive tax credits to help them pay for their premiums. The value of a consumer's premium tax credit is based, in part, on the premium for the benchmark plan, which is the second lowest cost option available in the consumer's local area within the exchange's silver metal tier (one of four metal tiers that indicate the value of plans). Because plan premiums and plan availability can change over time, the benchmark plan in each local market can also change over time. GAO analyzed changes in benchmark plans and premiums from 2015 through 2017 and found: In most of the nearly 2,600 counties included in the analysis, the plans identified as benchmark plans, and the premiums for these plans, changed from year to year. For example, in 85 percent of counties, the 2015 benchmark plans were not benchmark plans in either 2016 or 2017. Gross benchmark premiums (exclusive of tax credits) increased from year to year, and increases were higher from 2016 to 2017 than they were from 2015 to 2016. Premium tax credits would limit the costs of increasing premiums for most consumers, though some consumers, including those not eligible for premium tax credits, would have incurred more or all of the higher premium costs. During the annual open enrollment period, consumers who do not make an active plan selection are automatically reenrolled into their existing plan or, if that plan is no longer available, they are generally re-enrolled into a similar plan if one has been identified. GAO analyzed information from the Office of the Assistant Secretary for Planning and Evaluation (ASPE) for consumers enrolled in both 2015 and 2016 and found: About 30 percent of consumers were automatically re-enrolled in 2016, while the remaining 70 percent chose to actively re-enroll. Median net monthly premiums—what consumers paid after premium tax credits—increased less from 2015 to 2016 for those who actively enrolled ($5) than for those who were automatically reenrolled ($22), although there was variation. Our findings are consistent with other work by ASPE that suggests that consumers consider possible cost savings when deciding to switch plans. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "FDA classifies each medical device type intended for human use into one of three classes based on the level of risk it poses to the patient or the user and the controls necessary to reasonably ensure its safety and effectiveness. Examples of types of devices in each class include the following: Class I: tongue depressors, elastic bandages, reading glasses, and Class II: electrocardiographs, powered bone drills, and mercury Class III: pacemakers and replacement heart valves. Before medical devices may be legally marketed in the United States, they are generally subject to one of two types of FDA premarket review processes. Premarket approval (PMA) process: Class III device types are typically required to obtain FDA approval through the PMA process. Under this process, the medical device sponsor must submit an application that includes—among other things—full reports of investigations, typically including clinical data, providing reasonable assurance that the new device is safe and effective. The PMA process is the most stringent type of premarket review. A successful application results in FDA’s approval to market the device. From 2001 through 2016, medical device sponsors submitted 651 PMA applications, and FDA approved for marketing 506 of those submissions. (See fig. 1.) Premarket notification, or 510(k), process: Most medical devices requiring premarket review are subject to FDA’s premarket notification or 510(k) process. This includes class I and II device types that are not specifically exempted from the 510(k) notification requirement. Under this process, the medical device sponsor must notify FDA at least 90 days before it intends to market a new device and demonstrate to FDA that the new device is substantially equivalent to a predicate device, and therefore does not require a PMA. For most 510(k) notifications, clinical data are not required and substantial equivalence will normally be determined based on comparative descriptions of intended device uses and technological characteristics, and may include performance data. A successful 510(k) submission results in FDA’s clearance to market the device. From 2001 through 2016, medical device sponsors submitted 61,439 premarket notifications and FDA cleared 51,028 devices for market. (See fig. 2.) During premarket review under both the PMA and 510(k) processes, FDA and the medical device sponsor may engage in an interactive process. To start, there may be a pre-submission meeting between FDA and the sponsor, during which the parties discuss the upcoming review and try to resolve potential obstacles for approval or clearance. Then, FDA receives the premarket submission, makes a determination to accept or not accept the submission, and assigns a reviewer. In making its assessment whether to approve, or clear, a submission, FDA relies on the sponsor to provide supporting data as part of the submission. However, the agency can request additional information in the course of the review in order to make a determination of reasonable assurance of safety and effectiveness, or of substantial equivalence. This additional information can be obtained through informal interactions, such as a phone call or email. Alternatively, for more significant issues, FDA may make a more formal request for additional information, known as a deficiency letter in the case of a PMA application and additional information (AI) letter for a 510(k) notification. FDA will issue such requests if the submission lacks significant information necessary for FDA to complete its review, and the agency will request the sponsor amend the submission to provide the necessary information regarding the device. If a sponsor disagrees with an FDA regulatory decision concerning a medical device submission, including a CDRH employee’s decision to request additional information or a significant decision regarding approval or clearance of a medical device, it can take multiple actions. Specifically, a sponsor can, among other things, (1) contact the CDRH Ombudsman for assistance, (2) file an internal appeal of an FDA decision, or (3) request that the disagreement be resolved through CDRH’s Medical Device Dispute Resolution Panel, as described below. Ombudsman: According to FDA’s guidance, prior to the agency reaching a regulatory decision, the most effective means of resolving a dispute between CDRH and an external stakeholder is through discussion and agreement. The CDRH Ombudsman is available to assist in clarifying issues, mediate meetings and teleconferences, and conduct discussions with the parties in an effort to resolve disagreements short of a formal review or internal appeal. Internal Appeal: Once FDA makes a regulatory decision, a sponsor can request a supervisory review of that decision, which we refer to as an internal appeal. For this process, the supervisor of an FDA employee will, at the request of a medical device sponsor, review a decision or action of the employee and issue a decision. The decision rendered by the supervisor, acting as the review authority, customarily takes one of the following forms: overturning the decision of the employee; upholding the employee decision; or, in some circumstances, referring the matter back to the employee for reconsideration under defined conditions. Medical Device Dispute Resolution Panel: If the dispute remains unresolved, the sponsor may request that FDA convene the Medical Device Dispute Resolution Panel. The panel is intended to provide a means for independent review of a scientific controversy or dispute between a sponsor and FDA, and make a recommendation to the Center director. According to FDA’s guidance, the panel is primarily intended to address scientific controversies rather than other issues such as regulatory, legal, or statutory authority disputes. As part of its commitments associated with the Medical Device User Fee Amendments of 2012 (MDUFA III), FDA agreed to participate in an independent, comprehensive assessment of the medical device submission review process. Acting on recommendations from the contractor that conducted the assessment, FDA established working groups for each submission type, including PMAs and 510(k)s, which studied existing review processes and made recommendations. In August 2017, the Medical Device User Fee Amendments of 2017 (MDUFA IV) reauthorized FDA’s medical device user fee program, and FDA committed to another independent assessment. FDA has committed to hiring a contractor to conduct this assessment by the end of December 2017 with a second phase to begin in 2020. In 1997, FDAMA added a requirement that the agency use the least burdensome approach during certain parts of PMA and 510(k) reviews. These requirements were intended to reduce unnecessary burdens associated with the premarket approval and clearance processes; however, they did not lower the statutory criteria for demonstrating a reasonable assurance of safety and effectiveness or substantial equivalence. While the language in FDAMA differs slightly for the PMA and 510(k) processes, in both instances FDA was directed to consider the “least burdensome” means of requesting information needed for its review. Specifically, FDAMA requires that when the agency specifies data that must be submitted as part of a PMA application, the agency must consider the least burdensome appropriate means of evaluating device effectiveness that would have a reasonable likelihood of resulting in approval. The agency must similarly consider the least burdensome appropriate means of demonstrating substantial equivalence when requesting information under the 510(k) notification process. In both cases, FDA is statutorily required to request only information that is necessary to support the determination that there is reasonable assurance of effectiveness or substantial equivalence, respectively. Subsequent laws have clarified the least burdensome requirements. In 2012, the Food and Drug Administration Safety and Innovation Act clarified that the term “necessary” means the minimum required information that would support either a determination that a PMA application provides reasonable assurance of the effectiveness of the device or a determination, for a 510(k) notification, of substantial equivalence between a new device and a predicate device. In 2016, the 21st Century Cures Act added a provision applying the least burdensome concept to FDA’s requests for additional information in the PMA process. The law also applied the least burdensome concept to significant decisions, such as denials of PMA applications, requiring such decisions to include a brief statement regarding how least burdensome requirements were considered and applied. Additionally, the law mandated each FDA employee involved in premarket submission reviews, including supervisors, to receive training on the least burdensome provisions, and required the agency to conduct an audit of the training, among other things, no later than June 2018. Although FDA officials have noted that the least burdensome principles are broad and could apply to all activities within the PMA and 510(k) premarket review process, they noted that the requests for additional information represent a key juncture for the application of least burdensome requirements. According to agency officials and industry representatives, the requests for additional information—deficiency letters in the case of PMAs and AI letters for its 510(k) reviews—are when FDA and the sponsor could disagree on whether the requested information is necessary for the agency to reach a final decision on the medical device under review. Following the enactment of FDAMA in 1997, FDA went through a process in collaboration with the medical device industry to define the least burdensome concept and develop an approach to implement the provisions. Based on this, FDA released multiple guidance documents related to least burdensome requirements from 2000 through 2002. In November 2000 guidance, FDA outlined a four-part approach— referred to as “four-part-harmony” by FDA staff—for communicating deficiencies to medical device sponsors in accordance with the least burdensome requirements. The guidance helps reviewers describe deficiencies identified in submissions in ways that are direct, concise, and complete, thus ensuring a more effective use of reviewers’ and sponsors’ time, effort, and resources. It also provides a suggested format for sponsors to respond to FDA. FDA updated this guidance in September 2017. In 2002 guidance, FDA described its principles for implementing the least burdensome requirements and its activities to assess implementation. The guidance outlines FDA’s interpretation of the least burdensome concept as described in FDAMA, and explains its application to activities associated with PMA and 510(k) reviews. The guidance also states that FDA was in the process of developing tools to be used by both agency staff and its stakeholders to periodically assess the implementation of the least burdensome principles. It noted some measurement tools had already been developed and that additional tools were also needed to assess the impact of the least burdensome approach on expediting the development of new medical technologies. In addition, FDA has included language about those requirements in other guidance documents. For example, in 2014, FDA issued guidance on the 510(k) program that describes how the least burdensome principles may affect the type of information necessary to demonstrate substantial equivalence at different decision points in the review of a 510(k). FDA requested sponsors provide additional information for a majority of the PMAs and 510(k)s it reviewed. For the period 2001 through 2016, FDA issued a large number of deficiency and AI letters relative to the number of submissions, although there was variation annually. For PMAs, the number of deficiency letters as a percentage of new PMA applications submitted ranged from about 54 percent to 113 percent annually, or 82 percent on average, from 2001 through 2016. For the years 2006 through 2010, this percentage, as well as the total number of letters was higher, and FDA issued more deficiency letters than there were PMA applications submitted. Similarly, AI letters as a percentage of total 510(k) notifications received ranged from about 58 percent to more than 174 percent annually, or about 106 percent on average, from 2001 through 2016. While the number of 510(k) notifications remained similar across the time period we examined, from 2009 through 2012, the number of AI letters issued each year was, on average, nearly double the number in other years. During this period, FDA issued more AI letters than there were 510(k) notifications submitted. Since 2014, these percentages have been lower for both PMAs and 510(k)s. FDA officials acknowledged the historical increase in the number of deficiency and AI letters and noted the more recent decrease. The officials attributed this decrease to a number of changes the agency agreed to in MDUFA III. For example, FDA implemented a policy to review submissions for administrative completeness prior to accepting the submission. They said this allowed the agency to limit deficiency and AI letters to issues related to the quality of the data provided and the studies conducted in support of the submission rather than to administrative issues. Also as a result of MDUFA III, the agency implemented an interactive review process to increase informal interaction between FDA and applicants and to minimize the number of review questions communicated through deficiency and AI letters. (See table 1.) We identified changes in how the deficiency letters and AI letters referenced the least burdensome requirements. Based on our sample of 73 letters from 1997 through 2016, FDA included an explicit acknowledgment of the least burdensome requirements in the letters issued from 2001 through 2009. However, based on our review, this practice ended in 2010, and later letters did not include this standard language. Representatives from the medical device industry told us that including the least burdensome language in the deficiency letters was a good practice because it raised awareness of the least burdensome principles. In September 2017, FDA released updated deficiencies guidance that, according to FDA officials, instructs staff how to better articulate the reason that the information is needed in accordance with the least burdensome requirements. This guidance does not set forth boilerplate language regarding the least burdensome requirements for use in deficiency letters, but does include examples of well-constructed deficiencies, definitions for major and minor deficiencies, and a statement that FDA will attempt to resolve minor deficiencies interactively. The least burdensome requirements were often a significant contributing factor in disagreements raised by medical device sponsors, according to FDA officials and available FDA data. According to FDA, the most effective means of resolving disagreements is through discussion and mediation, and to that end, the Ombudsman’s office is routinely involved in discussions between firms and medical device reviewers during the review process. For example, in 2016, the CDRH Ombudsman was involved with PMA and 510(k) medical device reviews 360 times out of 3,444 submissions. Although the agency was unable to identify which of these interactions were related to least burdensome requirements, agency officials told us that a substantial number likely resulted from a difference of opinion between the applicant and FDA on the appropriate level of scientific evidence, a portion of which likely have a least burdensome component. The least burdensome provisions were also frequently related to issues that applicants raised during internal agency appeals of FDA decisions of PMA and 510(k) reviews. Although FDA did not have readily available data on appeals that occurred prior to 2013, the agency was able to provide information about the 63 appeals of significant decisions that occurred from 2013 through 2016. Of these 63 appeals, FDA identified 33 appeals—2 related to PMAs and 31 related to 510(k)s—in which the issue identified by the sponsor was related to least burdensome principles. According to medical device industry representatives, sponsors may not always pursue an appeal, so the number of official appeals may not represent the extent of least burdensome-related issues that sponsors experience. They said the sponsor may determine it is best to avoid conflict that could complicate future device submissions and comply with the request for additional information, even if it disagrees. Of these 33 appeals, FDA agreed, or partially agreed with the sponsor for 11 appeals, which resulted in FDA overturning the decision or reopening the file and continuing the review. For the remaining 22 appeals, the agency upheld the initial reviewer decision. The following presents examples of appeals where the issue identified by the sponsor was related to the least burdensome requirements. In one appeal related to a 510(k) review, the sponsor objected to the reviewer’s finding that the device was not substantially equivalent to a device already on the market. The sponsor stated that it had provided sufficient data for a substantial equivalence determination, and the FDA reviewer’s request for additional risk mitigation measures and supplemental testing was unwarranted and inappropriate. The review authority determined that, while the information provided in the 510(k) premarket submission was not sufficient to establish substantial equivalence, some of FDA’s requests were unwarranted. As a result of the appeal, FDA reopened the file and provided the sponsor an opportunity to respond to a new set of requests for additional information. In an appeal related to a PMA review, the sponsor contended that FDA’s not approvable decision reflected an inconsistent and erroneous interpretation of the clinical data supporting the safety and effectiveness of the subject device, and that the data it had provided was sufficient for FDA to reach an approved decision. The sponsor further contended that the review staff failed to utilize the principles outlined in FDA guidance. The review authority upheld FDA’s initial decision and determined there was not sufficient valid scientific evidence to demonstrate a reasonable assurance that the subject device was safe and effective under the proposed conditions of use. The Medical Device Dispute Resolution Panel, which provides another avenue to resolve disagreements between sponsors and the agency, has also addressed issues related to the least burdensome requirements. Since the panel was created following FDAMA in 1997, medical device sponsors have requested that FDA resolve three disagreements through this avenue, each related to PMAs. Although not tracked by FDA, at our request, officials reviewed the records and found that one of the three disputes was related to the least burdensome requirements. Specifically, for a September 2001 dispute, FDA officials said the sponsor requested the panel after FDA initially found that the data from the clinical study submitted by the sponsor did not sufficiently support effectiveness. After reviewing evidence from the applicant and from FDA, the dispute resolution panel determined that the sponsor had provided sufficient evidence to prove effectiveness, and the device was ultimately approved. FDA officials indicated that training specific to the least burdensome requirements was held in the years following the enactment of FDAMA in 1997. FDA was unable to provide records of that training, including its content. However, officials told us that the training was specific to the least burdensome requirements and offered from 1997 through 1999. FDA officials said the agency offered other presentations in subsequent years that they said covered similar least burdensome topics. For example, the agency provided slides from a presentation created in 2000 that provided an overview of FDA’s implementation of the requirements. Although FDA officials told us this least burdensome specific training was not offered after 1999, they identified various other trainings that they said incorporated the least burdensome concept. For example, a 2005 presentation on clinical trial design has multiple slides on least burdensome requirements, and specifically states that a course objective is to “understand how least burdensome principles apply.” Least burdensome requirements are also mentioned in other training materials where they may not be the focus—for example one slide of a presentation on biomarkers included a mention of least burdensome requirements. Officials also identified the training program for new reviewers that FDA implemented in 2011 as a source of training on least burdensome principles. Specifically, the Reviewer Certification Program is a training curriculum that FDA has required most new device reviewers to complete since 2011. The training curriculum covers a wide variety of courses on topics related to a reviewer’s responsibilities. While none of these courses is specific to the least burdensome requirements, there are courses covering related topics. For example, there is one course on technical writing that includes FDA’s guidance on developing deficiencies with least burdensome principles. Five other courses on different topics mention either the least burdensome requirements or related principles, such as a course on FDA’s legislative history that included a slide identifying the least burdensome statutory provisions as an element of FDAMA, though the slide did not explain the least burdensome requirements or provide additional context. Of the 490 staff assigned to review PMAs and 510(k)s, FDA indicated that as of the end of calendar year 2016, 335 had completed the Reviewer Certification Program, 150 started working on premarket submissions prior to the beginning of 2011, and the remaining 5 individuals did not complete the training for varying reasons. In response to the 21st Century Cures Act, enacted in December 2016, FDA is providing mandatory online training specific to the least burdensome requirements. FDA indicated that the training focuses on key behaviors that reflect the least burdensome approaches as documented in updated guidance that FDA issued in September 2017. FDA officials told us that, as of October 31, 2017, 91 percent of CDRH staff had received the new least burdensome specific training. In addition to the online training, FDA plans other activities, such as follow-up office-level briefings to address questions or concerns and an introductory podcast from the CDRH director. In addition to providing this training to current employees, FDA plans to incorporate least burdensome requirement training into new employee orientation and the Reviewer Certification Program, and plans to include ongoing support and promotion of least burdensome principles through a center working group on the least burdensome requirements. In addition to course-based training, FDA officials told us that least burdensome concepts are conveyed to reviewers through mentoring. Officials explained that much of the training on the least burdensome requirements occurs through mentoring and conversations with supervisors, and that those encounters are not documented. While FDA has not had processes in place to evaluate its medical device training, it is implementing such processes for all training, including courses related to the least burdensome requirements. In its June 2014 report, the contractor performing the independent evaluation noted that CDRH did not have mechanisms in place to measure the quality and effectiveness of its training programs. The report noted that FDA should identify metrics and incorporate methods to better assess review process training satisfaction, learning, and staff behavior changes. FDA officials explained that while they had customer reaction evaluations for trainings for at least 24 years, they started evaluating training participant learning with the Reviewer Certification Program starting in 2010. FDA is in the process of implementing a training evaluation model, which includes various levels of evaluation, from assessing participant response to the training to evaluating its impact on the agency. As of 2017, FDA reported it was evaluating training programs to determine participant learning and preparing to evaluate whether that learning changed participant behavior. Officials told us they anticipate beginning to conduct evaluations that assess agency impact in fiscal year 2018, and they plan to have the model completely implemented for all trainings by fiscal year 2020. FDA currently evaluates its Reviewer Certification Program to determine participant learning, and though the least burdensome requirements are not specifically addressed in the Reviewer Certification Program evaluation materials FDA provided to us, they did include questions on topics related to least burdensome requirements. In addition to its current training evaluation plan, FDA is also required by the 21st Century Cures Act to conduct an audit of the training and its effectiveness in implementing the least burdensome requirements. Specifically, the training audit is to be conducted by the ombudsman responsible for premarket reviews, identified by FDA as the CDRH Ombudsman. According to a draft plan, FDA plans to conduct training evaluations, a process review of 510(k) and PMA documentation to assess reviewer compliance with FDA procedures, and seek feedback from industry on its experience with the premarket review process and how the least burdensome requirements are applied. Officials indicated that criteria are still under development and that they hoped to have them further developed in the first quarter of 2018, with the authorizing legislation requiring completion of the audit by June 2018, 18 months after enactment of the law. Some stakeholders and others have raised concerns about the consistency and clarity of FDA’s requests for additional information during medical device reviews. For the past 17 years, FDA has required reviewers to only request information that is necessary to make a PMA determination of “reasonable assurance of safety and effectiveness” or a 510(k) determination of “substantial equivalence” in their review of a submission. Representatives of one of the organizations representing the medical device industry noted the high percentages of medical device submissions that involve a letter, and some of their member companies have said that FDA reviewers may request additional information as a result of intellectual curiosity rather than a “need to know.” In addition, the independent assessment’s 2014 report, funded by FDA as part of MDUFA III, found inconsistent decision-making among FDA review staff throughout various stages of the review process, including additional information requests. While the 2014 report did not address least burdensome requirements explicitly, it examined related processes. For example, according to the report, there was inconsistent decision-making among FDA review staff throughout various stages of the review process, including a lack of clarity regarding FDA reviewer thresholds for triggering deficiency letters. The report recommended that FDA develop criteria and establish mechanisms to improve consistency in decision-making throughout the review process. To address problems identified during the independent assessment, FDA is implementing several initiatives to improve center processes. FDA officials told us that, in anticipation of MDUFA IV, they recognized a need for a dedicated quality management infrastructure. In 2014, FDA established a Quality Management Unit to improve center processes, which they said would include those related to the least burdensome requirements. The unit completed a framework that outlined its vision and mission and established organizational objectives, such as developing a document control system, providing training, and conducting quality assessments, audits, and management reviews. In addition, FDA officials told us that starting in October 2017, FDA planned to fulfill its MDUFA IV commitments to improve the clarity and consistency of its deficiency letters and AI letters after releasing updated guidance. In September 2017, FDA published guidance reflecting the commitments under MDUFA IV that all deficiency letters and AI letters include a statement indicating the specific basis for any cited deficiencies. According to FDA officials, this new approach will help ensure that the letters more consistently ground requests for information in the specific reason that FDA is requesting the information from the sponsor. For example, FDA may cite a law, final rule, or specific scientific issue as the basis for its request, rather than providing a more general statement of the request’s relevance. According to industry representatives, in the past, FDA reviewers have, at times, asked for additional information without including justification, and may have requested additional information as a result of intellectual curiosity rather than a “need to know.” The representatives stated that this new policy may better ensure the reviewers apply the least burdensome approach to their review. The updated guidance also explains that all deficiency letters and AI letters will undergo supervisory review prior to issuance to ensure that the information requested is relevant to a marketing authorization decision, all four elements of the deficiency are included, deficiencies are prioritized from most to least significant, and each deficiency is appropriate to include in light of the totality of all deficiencies. Officials told us that while supervisory concurrence was previously needed, under the new guidance, supervisors are now expected to review for certain criteria. For example, in the past, supervisors may have considered whether four-part harmony was addressed in each deficiency letter, but under the updated guidance this is now an expected practice. Officials said this will increase the extent to which deficiency letters are consistently constructed. In the MDUFA IV commitment letter, FDA agreed to base all deficiency letters and AI letters on a complete review of the submission and include all deficiencies. Therefore, FDA officials told us that any deficiencies identified following that letter would generally be limited to issues raised as a result of new information. For example, if FDA asked for information on bio-compatibility testing, FDA will first review that information, and based on that review may ask for new information. In that instance, the information responding to the initial deficiency is new information. FDA officials said that past letters should also have included all deficiencies, but this may have been done inconsistently. To further standardize its process for reviewing medical device submissions and developing requests for additional information, FDA is developing and implementing smart templates. FDA officials told us that these templates guide device reviewers through a standardized process for each submission. For example, they help reviewers identify the types of information necessary and include prewritten deficiency letters that have been approved by internal experts. FDA has had a smart template in place for the 510(k) process since 2013, according to FDA reports. FDA indicated that the template is already required for certain offices and divisions within CDRH, and plans for full adoption in the future. FDA officials told us that the agency also developed templates for de novo premarket submissions, which are currently available for voluntary use and will likely be mandatory in fiscal year 2018. Officials told us they plan to hire a person to develop a template to guide PMA reviews, which will likely take most of 2018. They told us the use of the smart template for PMAS will likely become mandatory for use by all reviewers in 2019. In addition to improving the consistency of deficiency letters, FDA officials said the information generated from the templates could be used to track deficiencies and requests for additional information, as well as provide information on the number and type of deficiencies in the letters. FDA officials told us that the plans for database and back-end analytical capabilities using information from the smart templates were less certain and dependent on available resources, and they pointed out that the information technology infrastructure can present unforeseen challenges. FDA has not established performance metrics that would allow it to evaluate its implementation of the least burdensome provisions. FDA officials told us that the agency does not track concerns related to the least burdensome requirements, such as by examining dispute data to identify those that may be related. According to FDA’s 2002 guidance, the agency was in the process of developing tools to be used by both agency staff and its stakeholders to periodically assess the implementation of the least burdensome requirements. The FDA guidance identified a need for additional tools to accurately assess the agency’s incorporation of the least burdensome principles into its various regulatory activities and to assess the impact of the least burdensome approach on expediting the development of new medical technologies. Agency officials told us FDA had not developed these tools, but was now in the process of making other tools available. For example, they cited the development of the smart templates that will guide reviewers as they evaluate medical device submissions and generate deficiency letters. Officials noted that, given the scientific nature of the inquiry, and because least burdensome is a general principle, developing a metric specific to the least burdensome requirements is a challenge. While this can be a challenge, FDA officials have noted that they are attempting to identify surrogate measures that can provide an indication that the reviewer considered the least burdensome requirements when making a request. According to federal standards for internal control, performance metrics are important for management to have relevant, reliable, and timely information available for management decision–making and external reporting purposes. Without such a metric, FDA may be asking medical device sponsors to provide information unnecessarily or in less efficient ways that are not in compliance with the requirement to use the least burdensome approach to medical device reviews. FDA is in the process of developing an audit program that could provide it with information on its implementation of the least burdensome requirements. FDA has committed to conducting annual quality audits, which will be led by CDRH’s Quality Management Unit. Accordingly, FDA plans to identify, with industry input, areas to audit at least once per year. Initially, the agency has agreed to complete an audit of deficiency letters and pre-submissions by the end of fiscal year 2020. As of August 2017, FDA was still planning the deficiency letters audit, and developing its methodology and identifying audit outcomes. FDA officials told us the agency plans to finalize a deficiency letters audit plan by the spring of 2018 and begin data collection by early summer of 2018. Officials explained that the audit will focus on processes—for example, the audit will not examine the scientific content of deficiency letters but will instead focus on whether CDRH has followed existing policies and procedures surrounding deficiency letters. In addition, the Quality Management Unit was still in the process of hiring most of its staff. As of August 2017, FDA officials told us the unit had 6 staff reporting to an Associate Director, and CDRH plans to gradually hire 20 more staff by 2020, starting once MDUFA IV funds are available beginning in October 2017. In addition to these more specific efforts, FDA also plans to continue its overall evaluation of the medical device review process. The 2016 independent assessment resulting from MDUFA III broadly evaluated FDA’s device review process, and although it mentioned least burdensome requirements only briefly, it addressed a number of related elements, including the quality of the review process and staff training. Under MDUFA IV, FDA committed to another independent assessment in two phases: (1) an evaluation of FDA’s implementation of the corrective action plan FDA developed in response to the MDUFA III assessment and (2) an evaluation of FDA’s premarket device review program to identify efficiencies that should be realized as a result of the process improvements and investments under MDUFA III and IV, among other things. As with the prior assessment, the new assessment will likely examine processes related to the least burdensome requirements, though the extent to which it will address the requirements is not yet known. Agency officials told us that FDA has committed to hiring a contractor by the end of December 2017. FDA must balance the need to obtain sufficient data to determine the safety and effectiveness of medical devices under review, with the potential for undue burden and approval delays if unnecessary data is requested. Assuring that the agency uses the least burdensome method to complete its review helps to ensure it is able to make decisions about medical device approval in a timely way. While FDA implemented guidance and training related to the least burdensome requirements following the passage of FDAMA in 1997, it has taken few steps to develop performance metrics to evaluate the extent to which reviewers are using a least burdensome approach when reviewing medical device submissions. Recently, FDA implemented several changes that have the potential to improve its oversight of the least burdensome requirements and the clarity with which reviewers communicate the need for additional information. While planned audits of FDA’s medical device review process have the potential to provide the agency with evaluation tools through which to assess performance, these audits are still early in their development and the extent to which they will allow FDA to assess implementation of the least burdensome requirements is unclear. A complete and thorough assessment will be important for the agency to assure itself and external stakeholders that its reviews adhere to the least burdensome principles and requirements and thus are appropriately balanced. We are making the following recommendation to FDA: The Commissioner of FDA should develop performance metrics and use them to evaluate the implementation of the least burdensome requirements, such as during its planned audits of medical device deficiency letters. (Recommendation 1) We provided a draft of this report to HHS. HHS concurred with our recommendation and provided written comments, which are reprinted in appendix I. In its written comments, HHS agreed that appropriate implementation of the least burdensome requirements is essential to FDA’s evaluation of its PMA and 510(k) medical device submissions, and agreed that it is important for FDA to evaluate how successfully it is implementing the requirements. HHS also reiterated FDA’s commitment to the least burdensome principles and provided an overview of its related efforts, several of which were noted in our draft report. HHS noted its concern that our draft report did not sufficiently capture all of FDA’s efforts. While HHS cited FDA’s efforts related to improving the science underlying its regulatory decisions, which could reduce burden on medical device sponsors, our review focused on the steps involved in FDA’s review process. In this regard, HHS concurred with our recommendation that it develop performance metrics and use them to evaluate the implementation of the least burdensome requirements, such as during its planned audits of medical device deficiency letters. In response to this recommendation, HHS indicated that FDA intends to assess how it follows least burdensome requirements as part of these audits. We continue to encourage FDA to develop the evaluation tools necessary to ensure it conducts a complete and thorough assessment of its implementation of the least burdensome requirements. In addition to these general comments, HHS provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or crossem@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact above, William Hadley (Assistant Director), Matthew Byer (Analyst-in-Charge), Luke Baron, and William Garrard made key contributions to this report. Also contributing were Sam Amrhein and Jennifer Rudisill.", "summary": "Determining that a new medical device is safe and effective is a substantial investment of time and resources for the sponsor and FDA, the agency that regulates medical devices. FDA relies on the device sponsor to provide supporting data at the time of its original submission, and the agency can request additional information during the review. The Federal Food, Drug, and Cosmetic Act, as amended, requires that when FDA requests additional information from sponsors, the agency consider the least burdensome means of evaluating a medical device. GAO was asked to provide information on FDA's implementation of the least burdensome requirements in its medical device review process. This report (1) describes FDA's requests for additional information and sponsor disagreements, (2) describes its least burdensome training efforts, and (3) describes FDA actions to improve its requests for additional information and examines the extent to which it has evaluated its implementation of the least burdensome requirements. GAO reviewed FDA documents and guidance and interviewed agency officials. GAO also interviewed officials from four relevant medical device manufacturing associations. Since 1997, the Food and Drug Administration (FDA) has been required to consider the least burdensome means of evaluating certain types of medical devices for marketing, including when requesting that sponsors—generally manufacturers—seeking to market their medical devices provide information in addition to what was provided in their submissions. GAO found that, from 2001 through 2016, FDA issued letters asking sponsors to provide such information for a majority of the more than 62,000 medical device submissions that it reviewed. Sponsors may formally disagree with the request on the grounds that it is not the least burdensome method needed for FDA to review the submission. For example, sponsors appealed FDA decisions internally to agency management 63 times from 2013 through 2016, and of these, FDA identified 33 such appeals in which the sponsor raised an issue related to least burdensome requirements. FDA agreed or partially agreed with the sponsors in 11 of these appeals. Medical device industry representatives noted that these appeals may not fully represent the number of such disagreements, because applicants are generally concerned that an appeal would damage their relationship with FDA and potentially negatively affect future device applications. FDA provided staff training that was specifically dedicated to addressing the least burdensome requirements from 1997 through 1999. Since 1999, FDA has not offered a course dedicated to the least burdensome requirements, but has incorporated related concepts into other training programs, such as in a training mandatory for most new reviewers. In response to the 21st Century Cures Act, enacted in 2016, FDA is providing new least burdensome training to all relevant employees, and said that 80 percent had received the training as of October 2, 2017. Although FDA did not specifically evaluate the effectiveness of past training on least burdensome requirements, it is implementing an evaluation of all device-related training, including the new least burdensome training. It also plans to complete a required audit of training on least burdensome requirements by June 2018. FDA has not specifically evaluated implementation of the least burdensome requirements. However, in response to broader evaluations, such as an independent assessment of its medical device review process, the agency is in the early stages of developing processes that may improve its requests for additional information. For example, FDA plans to conduct an audit of letters requesting additional information. FDA is developing the audit's methodology and expects it will assess whether the agency's process was followed. However, due to their early stage, the extent to which these efforts will allow FDA to assess implementation of the least burdensome requirements is unclear. In 2002, FDA stated that it planned to periodically assess the implementation of the least burdensome principles, and federal internal control standards identify the importance of performance metrics for such assessments. However, the agency has yet to develop performance metrics to do so. Until such measures are developed and used, FDA will not be able to evaluate whether it effectively and consistently applies a least burdensome approach in its medical device reviews. GAO is making one recommendation that FDA develop and use performance metrics to evaluate the implementation of the least burdensome requirements. The Department of Health and Human Services agreed with GAO's recommendation.", "document_type": "gao"}
{"report": "Example of Foreign-Trade Zones (FTZ) Benefits The FTZ Board might authorize an automobile manufacturer that imports foreign-source components, such as engines and transmissions into an FTZ, to pay the customs duty rate on the value of the finished vehicles (2.5 percent) instead of the sum of the duties owed for certain imported components. Duty rates for those components generally range from 0 percent to approximately 10 percent. As a result, the company would pay lower custom duties to manufacture automobiles in an FTZ than it would pay outside the FTZ. To encourage companies to maintain and expand their operations in the United States, the FTZ program offers a range of benefits, including the possible reduction or elimination of duties on certain imported goods. For example, a company operating in an FTZ that manufactures products using foreign materials or components can pay lower overall duties by electing to pay the duty rate for the finished product rather than for the product’s imported foreign component parts, which may have a higher duty rate (see sidebar). This benefit provides an incentive to companies to manufacture in the United States rather than move their manufacturing operations overseas to avoid paying U.S. duties. We reported in July 2017 that, while FTZs were created to provide benefits to the American public, little is known about their overall economic impact. Few economic studies have focused on FTZs, and those studies have not quantified economic impacts or examined the effect of companies’ FTZ status on regional and overall economic activity such as employment. As of June 2018, there were 262 approved FTZs in the United States, with at least 1 in each state and in Puerto Rico, according to Board staff. Most FTZs consist of multiple physical locations, known as sites or subzones, which include individual companies’ plants as well as multi- user facilities such as seaports or airports. According to Board staff, the Board’s responsibilities include, among others, approving the establishment of FTZs and reviewing notifications and applications for production authority. The Board must authorize any proposed production activity before a company can bring into an FTZ the specified foreign-source materials or components for incorporation into a final product and to potentially receive FTZ benefits. Current Board staff are Commerce employees and comprise an Executive Secretary, eight staff analysts who gather and analyze information for the Board’s consideration, and a coordinator who handles clerical tasks, according to Board staff. CBP is responsible for oversight and supervision of FTZ operators, including the collection of duties, taxes, and fees. CBP reviews production notifications and applications with respect to its ability to provide oversight and ensure program compliance and informs the Board of its ability to oversee a proposed production activity if it were to be authorized. Federal regulations set forth processes and procedural rules for companies applying for, and operating in, FTZs as well for the Board’s evaluation of notifications and applications for production authority, pursuant to the FTZ Act of 1934 as amended. According to Board staff, the Board issued updated and modified regulations for FTZs in February 2012 to simplify the application process and expedite the review of applications when possible. The Board staff stated that they took into consideration comments from industry, including companies whose production activities require authorization decisions within short time frames, when updating the regulations. The 2012 regulations divided the production application process into two processes to create a less resource-intensive process for companies and the U.S. government, according to Board staff. Board staff said that the 2012 regulations allow the Board to approve notifications and applications with restrictions. For example, the Board may decide to, among other things, (1) authorize the exemption of duty payments on some, but not all, components named in the notification for the proposed production activity; (2) authorize the activity for a limited time period; or (3) authorize the activity for a specified quantity of the component to be brought into the FTZ. The following describes the notification and application processes under the 2012 regulations. Notification process. A company must first submit a production notification—which requires less information from companies than a production application—requesting production authority in an FTZ. If the Board approves a company’s notification, the company can begin the production activity. For example, in a 2013 notification, a company requested authority to produce printing plates used in the newspaper industry and to pay duties at the duty rate applicable to the final product (i.e., printing plates) instead of the duty rates applicable to the five individual foreign-source components (e.g., aluminum coils). The Board approved the notification without restrictions, allowing the company to begin conducting the authorized activity. If a notification is approved with restrictions, the company may begin the production activity while adhering to the specified restrictions. For example, in another 2013 notification, a company requested authority to produce sports safety helmets, bicycle baby seats, and bicycle car-carrier racks and pay duties on the final products instead of paying individual duties on some foreign-source components (e.g., helmet and baby seat parts). The Board approved the notification with a restriction, authorizing the company to begin the production activity but requiring it to pay duty on one foreign-source component (textile bags). Application process. According to Board staff, if a notification is approved with restrictions or denied, the company may file a more detailed production application to continue seeking authority for the activity that was restricted or denied. If the Board does not unanimously decide to authorize the application with or without restrictions, the production authority is denied. For example, in 2012, the Board determined that a notification requesting that a company’s existing authority to produce plastic adhesive bandages in an FTZ be expanded to include production of fabric adhesive bandages using foreign-source textile components warranted further review and denied the notification. The company subsequently filed an application for the expanded authority, providing additional information to support its request, which the Board also denied. A company whose application is denied may appeal the Board’s decision to the U.S. Court of International Trade. According to Board staff, the production application process is similar to the application process under the pre-2012 regulations. Figures 1 and 2 provide an overview of the Board processes for considering notifications and applications for production authority. The 2012 regulations detail criteria for the Board to consider when reviewing notifications and applications. These criteria include threshold and economic factors as well as consideration of significant public benefits (see table 1). According to the regulations, if the Board determines that any of the threshold factors apply to a proposed or ongoing production activity, it shall deny or restrict authority for the activity. After reviewing the threshold factors, if there is a basis for further consideration of the application, the Board shall consider economic factors listed in the regulation when determining the net economic effect of the proposed activity. The regulations’ requirements for the Board to consider these criteria when reviewing notifications and applications differ as follows (italics added for emphasis): Notifications. Section 400.37 of the regulations states that the Executive Secretary’s recommendation shall consider, among other things, comments submitted in response to the notification in the context of the factors set forth in section 400.27. The regulation does not state that the Executive Secretary’s recommendation must consider each factor individually. Applications. Section 400.27 states that the Board shall apply the criteria set forth therein. According to section 400.27, the Board must first review the threshold factors and after its review, if there is a basis for further consideration of the application, must consider all of the listed economic factors when determining the net economic effect of the proposed activity. Additionally, the Board is to take the threshold factors and economic factors into account in considering the significant public benefit(s) that would result from the production activity. Board staff observed that the notification process is designed for identifying concerns related to the proposed production authority, not for resolving such concerns. If the Board identifies any concerns that it deems significant enough to deny a notification, the application process allows the Board to collect more information to inform further analysis. Board staff stated that examples of concerns related to production notifications and applications might include objections from domestic producers of component materials, such as textiles, who believe they would be negatively affected by duty reduction on foreign-source components used in the proposed production activity. According to the Board, of the 293 production notifications submitted from April 2012 through September 2017 for which it rendered decisions, 218 notifications were approved without restrictions, 62 were approved with restrictions, and 13 were not approved (see fig. 3). For further information about the Board’s decisions for the 293 notifications by industry category, see appendix II. Of the companies that submitted the 75 production notifications approved with restrictions or not approved from April 2012 through September 2017, nine companies subsequently submitted production applications. As of September 2017, the Board had authorized two of these applications with restrictions and had not authorized one application, according to Board staff. For the remaining six applications, the Board had not authorized one application and the Board’s decisions were pending for the other five applications as of August 2018. Our review of Board documents and interviews with Board staff found that the Board has established procedures for the evaluation of notifications that generally align with the Board’s regulations. The Board’s procedures for evaluating notifications can be organized into three phases: (1) information collection, (2) analysis and recommendation, and (3) authorization decision (see fig. 4). Each phase includes steps specifying the responsible party and the intended product and result. In general alignment with the regulations, the Board’s procedures for evaluating production notifications include steps for collecting information from the notifications, from public comments submitted in response to Federal Register notices of the notifications, from reviews of the notifications by industry specialists at Commerce and other agencies, and from CBP regarding its ability to oversee the proposed production activity. Notification information. The regulations specify that notifications must (1) provide the identity and location of the FTZ user; (2) identify the materials, components, and finished products associated with the proposed activity; and (3) include information as to whether any material or component is subject to a trade-related measure or proceeding, such as orders for antidumping duties. The Board procedures require staff to determine whether a notification is complete before beginning to evaluate it. To help companies complete the application, Board staff provide an instruction sheet listing the information required by the regulations. Federal Register comments. The Board regulations require the Executive Secretary to invite public comments in response to a Federal Register notice, unless the Executive Secretary determines, based on the notification’s content, to recommend further review without inviting public comment. The Board procedures instruct staff to publish a notice in the Federal Register after determining that the notification is complete. Agencies’ reviews. The Board regulations do not require that industry specialists review notifications. The Board procedures instruct staff to request industry specialists at Commerce and, as appropriate, at other agencies to review the notifications. CBP comments. The Board regulations do not require Board staff to request CBP comments for notifications. The Board procedures instruct staff to prepare a letter to the CBP Port Director. According to CBP officials and guidance, CBP provides comments regarding its ability to oversee the proposed production activity to help ensure FTZ program rules and regulations are followed if it is approved. In general alignment with the regulations, the Board’s procedures for evaluating production notifications include steps to guide staff in considering the information collected and in preparing a recommendation to the Board regarding whether to approve the notification. Review of comments and other relevant factors. The Board regulations require that the Executive Secretary’s recommendation to the Board consider any comments submitted in response to the Federal Register notice; guidance from specialists within the government; and other relevant factors based on Board staff’s assessment of the notification in the context of the criteria, including threshold and economic factors listed in section 400.27. The Board procedures require staff evaluating notifications to consider any public comments submitted in response to the Federal Register notice and comments from industry specialists and CBP Recommendations and memos. The Board regulations do not require Board staff to prepare recommendations or memos. The Board procedures require staff to use a prescribed format to prepare a recommendation, based on the information collected, regarding whether a notification should be approved (with or without restrictions) or not approved because further review of the proposed production activity is warranted. The staff also must prepare memos for the Treasury and Commerce Board members. The staff are to provide the memos with the recommendation to the Executive Secretary for review before sending them to the Board members. In general alignment with the regulations, the Board’s procedures for evaluating production notifications include steps for the Executive Secretary to make a recommendation to the Board for its consideration and for Board staff to notify the applicant of the Board’s decision and to ensure that evaluation of the notification is completed within specified time frames. Executive Secretary’s recommendation and Board’s decision. The Board regulations specify that the Executive Secretary is required to submit a recommendation to the Board regarding whether further review of all or part of the proposed production activity is warranted. The Board procedures require the Executive Secretary to review the memos and recommendations prepared by the Board staff and submit them to the Board members for their review and concurrence with the recommendation. Notice to applicant. The Board regulations require the Executive Secretary to inform the applicant of the Board’s decision regarding authorization of the notification. Similarly, the Board procedures require Board staff to notify the applicant of the Board’s decision. Evaluation time frames. The Board regulations and procedures specify time frames for notification evaluation. For example, under the regulations, the Executive Secretary shall submit to the Board a recommendation on whether further review of all or part of the activity subject to the notification is warranted within 80 days of receipt of the notification. Similarly, the procedures state that Board staff will ensure that the recommendation is finalized so that the recommendation and memos can be sent to the Board members within 80 days of receipt of the notification. In addition, the regulations and procedures require that the applicant be informed of the Board’s decision about the notification within 120 days. Our analysis of Board case records for 59 notifications and our interviews with Board staff and Commerce, Treasury, and CBP officials showed that when evaluating the notifications, the Board followed its procedures in collecting the required information from the applicants; inviting public comments in response to Federal Register notices; requesting reviews from specialists at other agencies and Commerce; and, for most notifications, requesting CBP comments. The Board collected the required information from applicants for the 59 notifications we reviewed. All of the notifications included (1) the identity and location of the FTZ user; (2) the materials, components, and finished products associated with the proposed activity; and (3) information on whether any material or component was subject to a trade-related measure or proceeding. For 5 of the 59 notifications we reviewed, Board staff recommended further review of the proposed activity on the basis of the applicant information and staff knowledge of the industry, according to Board staff. The staff explained that if the Board is aware of issues that would require a more detailed review of the proposed activity, the Board can decide, without collecting additional information, not to approve the notification. In such cases, the company must file a more detailed application if it wants to proceed with its request for production authority. For example, for 2 of these 5 notifications, Board staff recommended further review without collecting additional information because they were already reviewing production applications requesting similar production authorities for carbon fiber. For another notification, staff recommended further review without collecting additional information because the Board had not previously reviewed a similar request and the staff needed the additional information that would be collected through the application evaluation process. Of the five companies that submitted these 5 notifications, three companies decided to submit applications for production authority. For the remaining 54 notifications, Board staff published notices in the Federal Register and received public comments on 5 of them. The comments included both opposition and support from domestic producers and associations. For example, in comments responding to one of the notifications, a company opposed authorization of the proposed activity because the company believed that the activity, if approved, would likely have a negative impact on the domestic silicon metal industry. According to the comments, the price of silicon metal had declined significantly and granting the requested production authority would result in further downward pressure on U.S. silicon metal prices. In comments responding to another notification, a company supported the proposed extension of FTZ authority to produce upholstered furniture and related parts. The comments stated that the activity would, among other things, encourage production in a related industry, domestic thread production. Board staff sought and received reviews of the 54 notifications from industry specialists in six Commerce offices, including the Offices of Textiles and Apparel, Consumer Goods, Materials, and Energy and Environmental Industries. The specialists recommended approving 49 of the notifications (with or without restrictions) and not approving the remaining 5 notifications because further review was warranted. For example, for one notification, an industry specialist’s review recommended approval, noting that the competitive landscape in Puerto Rico—the FTZ’s location—had changed and some industry sectors had shifted manufacturing to foreign locations. According to the review, approval of the notification would therefore contribute to maintaining manufacturing operations in Puerto Rico, which would provide employment and an economic boost to the national economy. For a second notification, an industry specialist’s review recommended denying the requested production authority because of concerns about the possible effect of importing a textile component that was being produced domestically. The review stated that if the notification were approved, the company would avoid paying duties on the textile component, resulting in a significant incentive for the use of imported products over those produced domestically. For a third notification, the Board staff requested and received comments from the Department of Justice regarding a firearm import regulation for a notification seeking production authority for the demilitarization (or disassembly) of munitions and other explosive components. According to the industry specialists who had reviewed notifications in our sample, their analyses were based on their knowledge of the industry, including domestic manufacturers of components that applicants sought to import into an FTZ, and on public comments submitted to the Federal Register, among other things. For 6 of the 59 notifications, Board staff did not ask CBP about its ability to oversee a proposed production activity because the staff were recommending further review of the notification. For the remaining 53 notifications, we found that the Board requested comments from CBP regarding its ability to provide oversight. We found that Board staff followed the Board’s procedures in reviewing comments and other relevant factors for all notifications in our sample and providing recommendations to the Board regarding authorization of the notifications. Review of Comments and Other Relevant Factors Our review of Board case records found that Board staff prepared evaluations for all 59 of the notifications we reviewed, documenting consideration of public comments, any agency specialists’ reviews, and CBP comments. In addition, although the regulations do not explicitly require consideration of the criteria listed in the regulations when evaluating notifications, Board staff informed us that they always considered economic and threshold factors when they had collected information that identified potential areas of concern. Our review of the case records for the 59 notifications found that some of the factors Board staff considered included whether similar production authority had been granted in the past for another company and whether concerns had been raised by domestic industries. For example, for one notification requesting production authority for wind turbine components, the Board staff’s evaluation noted that the Board had previously approved production authority involving wind turbines and related components for other companies. For another notification, requesting production authority to import a foreign-source textile fabric for adhesive bandages duty free, the Board staff’s evaluation noted that similar requests claiming lack of availability of domestically produced textile fabric at competitive prices had been strongly disputed by domestic producers, trade associations, or both. More than half of the Board staff evaluations of the notifications we reviewed included a discussion of economic factors, and nearly a third included discussion of threshold factors. For example, 15 evaluations discussed the proposed activity’s potential impact on related domestic industries. The evaluation of a notification requesting authority to produce customized plastic containers stated that a domestic company producing reusable plastic containers opposed the request on the grounds that the proposed activity could harm that company in the U.S. market. In addition, 13 evaluations discussed exporting and re-exporting finished products. For example, an evaluation of a notification requesting authority to produce automotive textile upholstery material noted that the company did not intend to enter the finished product into the U.S. market for domestic consumption (i.e., the company would re-export the finished product for sale outside the U.S. market). Our review of case records for the 59 notifications found that the Board staff prepared recommendations for each notification and also prepared memos to the Treasury and Commerce Board members for the Executive Secretary’s review before providing them to the Board members. Reasons noted in recommendations to authorize a production activity without restrictions included prior authorization of a similar activity or lack of impact on domestic industry. Reasons for recommending denial of authorization included new or complex policy issues that required further review. Recommendations to authorize an activity with restrictions included restrictions on the quantity of a component that could be imported duty-free into an FTZ, on the amount of time for which a production activity would be authorized (e.g., 5 years), and on the eligibility of some components for FTZ benefits. For example, for one notification requesting authority to produce upholstered furniture, the memo recommended, among other things, restricting the amount of a specific foreign-source fabric that could be imported duty free into an FTZ and requiring that all other foreign-source fabrics be admitted to an FTZ under duty-paid status. We found that for all 59 notifications, the Board staff’s recommendations were in agreement with the industry specialists’ comments. Our review of the 59 sample notifications found that for each notification, the Board’s Executive Secretary followed the Board’s procedures in submitting a memo to the Board with recommendations for its decision and notifying the applicants of the decision. In addition, the Board staff generally followed time frames listed in the procedures. Executive Secretary’s Recommendation and Board’s Decision The Board’s Executive Secretary submitted a memo to the Board recommending approving, approving with restrictions, or not approving each of the 59 notifications we reviewed. The Executive Secretary recommended approving 34 notifications, approving 15 notifications with restrictions, and denying 10 notifications (see fig. 5). We found that the Executive Secretary’s recommendations concurred with the Board staff’s recommendations for all 59 notifications and that the Commerce and Treasury Board members concurred with the FTZ Executive Secretary’s recommendations for 56 of the 59 notifications. For the remaining 3 notifications, the Executive Secretary recommended that further reviews were warranted and the Commerce Board member concurred. Because the notification was not approved, the Executive Secretary did not contact the Treasury Board member for his concurrence. According to Board staff, a notification will not be approved if at least one Board member determines further review is needed. See appendix III for more information about the Board’s decisions for the 59 notifications in our sample. For all 59 notifications, Board staff informed the applicant of the Board’s decision. For the majority of the notifications in our sample, the Board generally followed time frames listed in the procedures. For example, for 46 of the 59 notifications, the Board informed the applicant of its decision within 120 days after the notification’s submission, as required by the regulations and procedures. The other 13 cases were completed within 122 to 160 days. According to Board officials, processing some notifications took more time because of a government shutdown or internal procedural delays. (See app. IV for more information about the processing times for notifications in our sample.) The Board staff also noted that even when a case was delayed, processing the notification took less time than if the company had submitted an application under the production application process before the regulations were revised in 2012. According to Board staff, the notification process is designed to ensure that the applicant receives an authorization decision within 120 days. Board staff stated that, in general, any issues arising during evaluation of a production notification will lead to an authorization with restriction or denial of the notification, since decisions on the merits of such issues would require extended comment and rebuttal periods and additional analysis that could not be completed within the 120-day time frame for notifications. Board staff stated that, in these cases, a company can choose to submit a more detailed application, triggering the Board’s application evaluation process. Among the companies that filed the 59 production notifications we reviewed, three companies whose notifications were not approved had filed a more detailed application for production authority as of September 2017. Our review of Board documents and interviews with Board staff showed that the Board has established procedures for evaluating production applications that generally align with its regulations. The Board’s procedures for evaluating production applications can be organized into the same three phases as those for evaluating production notifications— (1) information collection, (2) analysis and recommendation, and (3) authorization decision—although some of the requirements differ (see fig. 6 for an illustration of the Board’s application process). For each phase, the procedures include steps that specify the responsible party and the intended product and result. In general alignment with the regulations, the Board’s procedures for evaluating production applications include steps for collecting information from the applications, from public comments submitted in response to Federal Register notices of the applications, from reviews of the applications by industry specialists at Commerce and other agencies, and from CBP. Application information. The Board regulations require the applicant to provide detailed information about the proposed production activities, such as (1) a summary of the reasons for the application, including a description of the finished products and imported components; (2) the estimated annual value of benefits to the applicant; and (3) an explanation of the requested production authority’s anticipated economic effects. To guide companies in completing applications, the Board provides an application instruction sheet with numerous questions, many of which are similar to requirements listed in the regulations. The Board’s procedures require Board staff to determine whether the application is complete before beginning to evaluate it. Federal Register comments. The Board regulations require that, after Board staff determine that the application satisfies regulatory requirements, the Executive Secretary shall, among other things, publish a notice in the Federal Register inviting public comments. Similarly, the Board procedures require the preparation of a notice for the Executive Secretary’s review and signature that will be transmitted to the Federal Register. Agencies’ review. While the Board’s regulations do not specifically require Board staff to ask industry specialists to review the production applications, the procedures instruct staff to consult with industry specialists at Commerce and other agencies as appropriate. See the text box for a description of production application reviews by industry specialists in Commerce’s Office of Textiles and Apparel (OTEXA). Description of Production Application Review by Department of Commerce Industry Specialists According to industry specialists at the Department of Commerce, when Foreign-Trade Zones (FTZ) Board staff receive an application pertaining to textiles products, they forward the application to the department’s Office of Textiles and Apparel (OTEXA). OTEXA officials then issue a mass mailing alerting industry (i.e., nongovernment) representatives that a textile case was submitted. In addition, the industry specialists said that the department co-manages the Industry Trade Advisory Committee on Textiles and Clothing, consisting of 23 vetted advisory committee members representing domestic producers, importers, retailers, distributors and associations, among others. The specialists stated that OTEXA officials would notify this committee about the Federal Register notice for the textile application to help ensure that the industries have seen the notice. According to the industry specialists, OTEXA will thoroughly review the case, taking into account public comments, and submit a memo with a recommendation to the FTZ Board staff for consideration. The specialists stated that the main purpose of OTEXA’s review is to determine whether the applicant is seeking to bring into an FTZ a textile component that is being manufactured domestically. According to the specialists, if OTEXA determines that the component is manufactured domestically, it will recommend to the FTZ Board staff that the application should not be authorized. The industry specialists said that lack of opposition to the application usually indicates that there is no domestic manufacturer of the product. CBP’s review. The regulations require the Executive Secretary to provide the application and Federal Register notice to CBP for review and require CBP to submit any comments about the application to the Executive Secretary by the conclusion of the Federal Register public comment period. Similarly, the Board procedures require Board staff to prepare a letter to the CBP Port Director. According to the Board staff and CBP officials, a letter is sent to the local CBP Port Director to collect information on CBP’s ability to provide oversight and help ensure that FTZ program rules and regulations are followed if the activity is authorized. Our review of available documents for each of the three applications in our sample indicate that Board staff followed the Board’s procedures in collecting information from companies, publishing notices and obtaining public comments from the Federal Register, and gathering comments from agencies such as Commerce and CBP. All three companies requested authority to import textiles from foreign suppliers into an FTZ for use in manufacturing products that would be later imported from the FTZ into the U.S. market for consumption. The Board staff collected information from all three companies’ applications. For example, each company provided information regarding (1) reasons for the application and an explanation of its anticipated economic benefits; (2) the estimated total annual value of benefits of the proposed activity to the company; (3) whether the activity was consistent or inconsistent with U.S. trade and tariff law or policy formally adopted by the executive branch; (4) whether approval of the activity under review would seriously prejudice U.S. tariff and trade negotiations or other initiatives; and (5) whether the activity involved items subject to quantitative import controls or inverted tariffs. We found that two of the companies responded partially to a question soliciting data on annual current and planned production capacity for the proposed FTZ activity. In addition, one of these companies did not respond to a question regarding whether the production activity would result in significant public benefits, taking into account the threshold and economic factors. According to Board staff, applicants may not be able to provide the quantitative information needed to answer some of the questions. The staff stated that, because the evaluation process does not lend itself to specific calculations, the absence of certain data does not prevent the Board’s evaluation of the application. According to Board staff, the Board’s recommendations are based on the totality of qualitative and quantitative information in the case record. The Executive Secretary posted notices in the Federal Register of the three production applications, pursuant to the Board’s procedures, and received public comments on all three. One application received two comments from a domestic textile producer that opposed the application. Another application received three comments—two from a domestic textile producer and one from domestic textile industry trade associations—opposing the application and received a fourth comment— from a domestic textile producer—supporting it. The third application received 14 comments from domestic textile producers, textile organizations, and congressional and city government officials, among others. Twelve of the 14 comments supported the application; the remaining 2 comments, from the same domestic producer, opposed it. Board staff requested that industry specialists review one of the three production applications, although the Board’s procedures do not require such reviews, according to Board staff. In a memo from Commerce’s OTEXA, a specialist who reviewed the application recommended not approving it because the textile components that the company had planned to import into the FTZ were also produced domestically by other manufacturers. In addition, the memo stated that granting the company’s request for FTZ production authority would provide a significant incentive to use imported textile materials rather than textile materials produced domestically, which could have negative economic effects on domestic producers and companies supplying the production components. For the other two applications—both related to the production of carbon and other fiber with foreign-source components—the Board staff did not seek comments from industry specialists and initiated their own industry research instead. According to Board staff, they did not reach out to OTEXA because OTEXA had recently provided comments on a similar carbon fiber case. The Board staff did not request that other agencies review the three applications. CBP’s local Port Director reviewed all three production applications and responded that it could provide oversight of the proposed activities. We found that Board staff followed the Board’s procedures in reviewing comments and other relevant factors for the three production applications and providing recommendations to the Board regarding approval of the applications. Review of Comments and Other Relevant Factors Our review of Board case records for the three applications found that in evaluating the applications, Board staff considered the public comments submitted in response to the Federal Register notices as well as comments from industry specialists and CBP. In addition, although the case records did not document consideration of all required criteria for two of the three applications, we concluded after interviewing Board staff that they had considered the required criteria. The procedures do not require Board staff to document consideration of the required criteria. The case records we reviewed also showed that Board staff considered the authorization decisions of recent applications involving similar foreign- source components. Examiner’s Reports and Recommendations We found that the Board staff issued preliminary recommendations and subsequently prepared detailed examiner’s reports, with final recommendations, for the three production applications. For two of the applications, the examiner preliminarily recommended authorizing one of the requested production activities with a restriction, namely, requiring that the final product be re-exported and not sold on the U.S. market. For the third application, the examiner preliminarily recommended, on the basis of the OTEXA specialist’s analysis, not approving the request for expanded FTZ production authority. The Board staff also prepared reports with final recommendations for the Executive Secretary’s review, taking into account new evidence and rebuttals that the applicants had submitted in response to opposing public comments. The final recommendations proposed by the Board staff were identical to the preliminary recommendations. For the two applications that received final recommendations to authorize with restrictions, the examiner’s reports stated that an authorization without restrictions would negatively impact a domestic producer and that the applicants had not demonstrated a causal link between proposed FTZ-related cost savings and an overall net positive national economic effect, among other reasons. For the application that the industry specialist had reviewed, the examiner’s report stated that, after reviewing all comments and information on the case record, OTEXA’s position continued to be that approving FTZ production authority in this circumstance, given the domestic supply of required textile materials, would encourage the use of imported textiles and reduce purchases from domestic producers, which could cause domestic production to decline. Our review of the case records for the three production applications found that the Executive Secretary submitted the examiner’s reports and recommendations to CBP for review and comment and to the Board members for their respective votes, pursuant to the Board’s procedures and regulations, and that the applicants were notified of the Board’s decisions. We also found that all three applications took longer than the general 12-month time frame detailed by the regulations. Executive Secretary’s Recommendation and Board’s Decision We found that CBP reviewed, and concurred with, the examiner’s recommendations for all three applications. The Executive Secretary submitted copies of his memos for each of the three applications, along with the examiner’s reports and recommendations, to both the Treasury and Commerce board members. The memos recommended authorizing with restrictions two of the applications and not authorizing the third application, in agreement with the examiner’s recommendations. In addition, the Executive Secretary’s memo to the Board regarding the application that OTEXA had reviewed stated that, as with recent cases involving textile-based production components, the content of OTEXA’s memorandum established a key basis for the final recommendation for the Board’s action. The Board members unanimously concurred with the Executive Secretary’s recommendations for all three applications. For all three applications, the Board staff notified the applicants of the Board members’ decisions. Board staff developed the examiner’s preliminary recommendation within the general 150-day time frame cited in the Board’s procedures for one of the three applications we reviewed and took additional time for the other two applications. Each of the three applications involved textiles related to foreign-source components, which our review of the case records showed can be controversial. For the three applications, the examiner took 116, 235, and 431 days, respectively, to complete the preliminary recommendations. In addition, the Board’s evaluation of each of the three applications that we reviewed took longer than the general 12-month time frame detailed by the regulations; however, the regulations state that processing a case may take longer when it involves a controversial or complex issue. Processing the three applications took approximately 18, 28, and 28 months, respectively, from the dates when the Board received the applications to the dates when the applicants were notified of the Board’s decisions. For all three applications, preliminary recommendations to either authorize with restrictions or not authorize led to the submission of additional evidence by the applicants, opposition and support by various parties through public comments in response to the Federal Register notices, and the applicants’ rebuttals of public comments. For example, Board staff said that for one of the applications, the OTEXA specialist who reviewed it asked the Board staff to request additional information from the applicant to facilitate analysis of the potential impact of the proposal. The applicant took more than 3 months to provide the information. After the specialist and the Board staff reviewed the additional information, a preliminary negative recommendation was rendered, which necessitated opening an additional public comment period. An opposing party requested an extension of that comment period. After the extended comment period ended, the Board staff said that it allowed a public comment period for rebuttal comments. According to Board staff, another application that we reviewed involved somewhat similar sets of complex circumstances. Board staff noted that these two applications each involved a complex set of circumstances that needed to be carefully and thoroughly reviewed. While the Board’s procedures and regulations do not call for staff to document their consideration of all criteria required by section 400.27 of the regulations, the absence of such documentation for two of the three applications we reviewed made it difficult to verify that the Board had considered all of these criteria when evaluating the applications. For example, the examiner’s report for one of these two applications did not include documentation to demonstrate that the Board staff had considered the required threshold factors. Also, the reports for the two applications did not include documentation that the staff had considered several of the required economic factors, including (1) retention or creation of value-added activity, (2) extent of value-added activity, and (3) overall effect on import levels of relevant products. The records for all three applications included documentation of consideration of the proposed production activity’s potential significant public benefits. Board staff and the Executive Secretary explained in interviews and in written responses to our questions how they had considered all the required threshold and economic factors and any significant public benefits when evaluating the three applications we reviewed. The examiner’s reports for the two applications did not include documentation indicating the Board staff’s rationale for selecting criteria as relevant. According to Board staff, each examiner’s report includes information that is most relevant to the analysis of the case. Each report also provided a narrative discussing the criteria that the Board staff considered relevant and that supported the recommendation, and each report explained the rationale for the Board staff’s decision to recommend authorizing with restrictions or not authorizing the production activity. According to the Board staff, because only the most relevant criteria are included in the examiner’s report, not all of the threshold and economic factors are explicitly documented. According to Standards for Internal Control in the Federal Government, management should clearly document internal control and all transactions and other significant events in a manner that allows the documentation to be readily available for examination. If management determines that a criterion is not relevant, management should support that determination with documentation that includes its rationale. Without such documentation in the examiner’s reports, Board members lack readily available written assurance that the recommendations reflect consideration of all of the required criteria and that its decisions comply with U.S. trade and tariff laws and policy that has been formally adopted by the executive branch. In addition, such documentation would provide an institutional record of the examiner’s consideration of all the required criteria. According to Board staff, the examiner’s reports may contain varying levels of discussion on each criterion, depending on the specific circumstances of the application. Board staff stated that the criteria listed in section 400.27 of the regulations form the framework and basis of the analysis in each examiner’s report, although the analysis and discussion in the reports may not refer directly to each economic factor. With respect to the examiner’s report that contained no documentation of the consideration of the threshold factors, the Board staff stated that their consideration of the economic factors had indicated that the application should be denied and had formed the basis of the report’s recommendation. The recommendation and the Board’s decision would not be affected by including in the report a discussion of the threshold factors, according to the Board staff. In addition, Board staff stated that the extent to which the examiner’s reports discuss specific pieces of evidence can vary depending on the relevance and significance of each piece of evidence to determining whether the applicant has met the burden of proof for approval under the regulatory factors or criteria. The Board staff also noted that the extent to which the examiner addresses each piece of evidence is generally a subject of discussion with the Executive Secretary during the drafting of the report. Only by interviewing Board staff, in conjunction with our review of the case records, were we able to determine that the Board had considered all of the required criteria when making its recommendations to authorize (with or without restrictions) or not authorize an application for production authority. The Board has procedures that generally align with the regulations for evaluating production notifications and applications for production authority, and our review of FTZ sample cases and interviews with Board staff and other relevant agencies found that the Board followed these procedures. The Board regulations include criteria that the Board is required to consider during its review of an application for production authority. However, the examiner’s reports we reviewed did not consistently include documentation demonstrating that the examiner considered all required criteria before recommending whether the applications should be authorized. While not required by the Board regulations and procedures, such documentation would provide the Board members readily available written assurance that the recommendations reflect consideration of all of the required criteria and that its decisions comply with U.S. trade and tariff laws. In addition, such documentation would provide an institutional record of the examiner’s consideration of all the required criteria. The Secretary of Commerce, as Chairman of the FTZ Board, should ensure that the Board’s Executive Secretary incorporates into its procedures a requirement that each examiner’s report document Board staff’s consideration of all required criteria listed in section 400.27 of the regulations during evaluations of applications for production authority. (Recommendation 1) We provided a draft of this report to Commerce, Treasury, and the Department of Homeland Security for review and comment. Commerce provided written comments, which are reproduced in appendix V. In its comments, Commerce concurred with our recommendation and stated that it had taken action to address it. In addition, Commerce and Treasury provided technical comments, which we incorporated as appropriate. The Department of Homeland Security stated by email that it had no comments about our draft report. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretaries of Commerce, the Treasury, and Homeland Security and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report examines (1) the extent to which the Foreign-Trade Zones Board (the Board) has established and followed procedures aligned with its regulations for evaluating production notifications and (2) the extent to which the Board has established and followed procedures aligned with its regulations for evaluating production applications. To examine the extent to which the Board has established procedures aligned with its regulations for evaluating production notifications and applications, we reviewed and compared the Board’s 2012 regulations to the Board’s staff internal procedures. In conducting this analysis, we also identified procedures that the Board is required to follow in evaluating notifications and applications. We interviewed Board staff, industry specialists in the Department of Commerce (Commerce), and officials from the Department of the Treasury (Treasury) and the Department of Homeland Security’s Customs and Border Protection (CBP) to identify their roles in the evaluation of notifications and applications and to clarify the regulations’ requirements and the Board’s internal procedures. To examine the extent to which Board staff followed the Board’s procedures when evaluating production notifications and applications, we selected and analyzed a nongeneralizable sample of case records for 59 of the 293 production notifications submitted to the Board from April 2012 through September 2017. We selected this time period to ensure that the sample reflected the Board’s activities between April 2012—when, according to staff, the Board began implementing regulations that it had modified in February 2012—and the end of fiscal year 2017. To select our sample of 59 notifications, we first selected 10 of the 13 notifications submitted during the selected time period that were not approved by the Board. We did not select the remaining 3 notifications that were not approved, because the companies that submitted those notifications subsequently submitted production applications and the Board’s decisions about the applications were pending when we made our selection. The notifications that were not approved were submitted by companies in seven industry categories—silicones/polysilicon, textiles/footwear, oil refineries/petrochemical facilities, other energy, chemicals, medical supplies and devices and miscellaneous. For each of these seven categories, our sample of 59 notifications includes all notifications for which the Board had rendered decisions at the time of our selection and excludes any for which decisions were pending. Our sample does not include six production notifications submitted by companies in the textiles/footwear industry category that the Board did not approve or approved with restrictions, because those companies subsequently submitted applications. Our final sample of 59 notifications includes all three types of Board decisions (34 approved, 15 approved with restrictions, and 10 not approved). However, because of its size, our final sample is not generalizable to all notifications submitted from April 2012 through September 2017. We also selected and analyzed three production applications, respectively submitted by three companies that submitted 3 of the 59 notifications we analyzed. These three applications were the only applications that the Board reviewed and rendered final decisions on from April 2012 through September 2017. We analyzed case records containing documents that companies submitted when they filed their production notifications and applications; information collected by Board staff from public comments in response to Federal Register notices; comments from industry specialists at Commerce, CBP, and the Department of Justice; and reports prepared by Board staff, documenting their analyses and recommendations for each notification and application. To conduct a systematic assessment of the case records, we created a data collection instrument to determine, among other things, whether the applicant submitted all required information for each notification and application. In addition, at least two analysts, including an economist, independently reviewed each case record; any resulting disagreements were resolved through discussion among team members and, as appropriate, with Board staff. Further, we collected and analyzed data for these cases on the types of Board decisions (approved, approved with restrictions, and not approved); the extent of public comments received for both notifications and applications; the extent of industry specialists’ and CBP’s comments; the types and amount of notification restrictions; and whether the duration of the Board’s evaluations was within the time frames detailed in the Board’s regulations and procedures. We also determined the extent to which the recommendations of the Board’s analysts, Commerce’s industry specialists, the Board’s Executive Secretary, and Board members were in agreement. We determined that the case records data we reviewed, which we obtained from the Board’s case tracking system, were sufficiently reliable for our purposes of understanding the universe of notifications and applications submitted for production authority and reviewing a sample from that universe. To make this determination, we took steps that included reviewing related documentation guidance for the Board’s case records tracking system; interviewing knowledgeable agency officials; and reviewing a sample of cases with our data collection instrument, which confirmed information included in the case tracking system data. Further, we analyzed the extent to which Board staff considered all required threshold and economic factors and any significant public benefits for the three applications in our sample. While neither the Board’s regulations nor its procedures require Board staff to document consideration of all required threshold and economic factors and significant public benefits, as detailed in section 400.27 of the regulations, during their evaluations of production applications, Standards for Internal Control in the Federal Government calls for such documentation. To conduct this analysis, we reviewed the examiner’s reports for all three applications and interviewed Board staff to determine whether the examiner had considered all of the required criteria. We cannot generalize or extrapolate our analysis for the three applications to all notifications and applications submitted to the Board from April 2012 through September 2017. We also interviewed relevant officials from Commerce (including industry specialists), Treasury, and CBP to obtain clarifications regarding some of the notifications and applications in our sample. We conducted this performance audit from July 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. From April 2012 through September 2017, the Foreign-Trade Zones Board (the Board) rendered decisions on 293 notifications requesting foreign-trade zones (FTZ) production authority that were submitted by companies in 25 industry categories (see table 2). The Board reported approving 218 notifications (74 percent), approving 62 notifications with restrictions (21 percent), and not approving 13 notifications (4 percent). Nine of the companies whose notifications were approved with restrictions or not approved continued to seek production authority by submitting production applications. Our analysis of the Board’s decisions from April 2012 to September 2017 found the following. The Board approved all production notifications for six industry Auto parts (25 notifications) Pharmaceutical (21 notifications) Other electronics/telecommunications (10 notifications) Metals and minerals (7 notifications) Semiconductors (3 notifications) Oil drilling equipment (2 notifications) According to Board staff, companies in some industry categories, such as auto parts and pharmaceutical, often have long-established records of operating in FTZs. Board staff also stated that many companies in these industry categories submit notifications requesting production authority for items similar to those for which the Board has granted authority in the past. Officials also stated that companies are more likely to submit notifications requesting authorization for certain production activities if other companies have previously received authorization for similar activities. Textiles/footwear was the industry category with the largest number of notifications that were approved with restrictions or not approved. Of the 23 notifications submitted, 14 were approved with restrictions and 4 were not approved. Board staff noted that domestic textile producers that could be affected by authorization of production notifications are often those that oppose approval of the notifications. Of the companies that submitted the 75 production notifications that were approved with restrictions or not approved, 9 companies continued seeking production authority by filing a more detailed production application with the Board. As of August 2018, 2 applications had been authorized with restrictions, 2 applications had not been authorized, and the Board’s decisions were pending for the remaining 5 applications. We selected and analyzed Foreign-Trade Zones (FTZ) Board (the Board) case records for a nongeneralizable sample of 59 notifications to identify the rationales for the Board’s decisions and the types of restrictions, if any, included in the decisions. Table 3 shows the Board’s decisions for the 59 notifications in our sample, by industry category. The Board approved production authority for 34 of the 59 notifications in our sample. Our analysis of Board case records found that the Board’s rationale for its decision for 32 of the 34 authorizations fell into one of the following four categories: The Board had previously approved similar production authority for another company (23 notifications). For example, in evaluating a notification requesting production authority for lithium ion batteries and electric vehicle motors, Board staff noted that the Board had approved similar production notifications for other companies in recent years. No opposition or concerns were raised by an industry or industry analyst during the Board’s review of the notification (4 notifications). For example, in evaluating one notification, Board staff noted that no concerns were raised during the public comment period or by Department of Commerce industry analysts. No duty savings would be realized for the finished product of the proposed activity (3 notifications). For example, in evaluating a notification requesting authority to produce finished upholstery grade leather and cut parts, Board staff noted that duties for the finished goods were not lower than the duties for the components (leather hides) required for production. No products of foreign origin would be involved in the proposed activity (2 notifications). For example, in evaluating one notification Board staff noted that the applicant was not requesting the use of any foreign-source steel in the proposed FTZ operations. Our sample of 59 notifications included 15 cases in which the Board approved production authority with restrictions. Our analysis of Board case records found that the restrictions imposed by the Board fell into one or more of the following six categories. The Board required the company to pay duties on one or more components before importing the component into the FTZ (9 notifications). For example, the Board’s decision for one notification stated that the company must pay duties on certain foreign-origin upholstery fabrics before bringing them into the zone. The Board required the company to pay duties on some or all components brought into the FTZ when transferring the finished product from the zone, even if the components were used in production (8 notifications). For example, for one notification, the Board required the company to pay duties on upholstery leather brought into an FTZ for manufacturing furniture when the furniture left the FTZ. The Board authorized a limited quantity of certain components specified in the notification (6 notifications). For example, the Board decision for one notification limited the square yards of a given fabric that the company was allowed to admit into an FTZ. The Board required the FTZ user to submit additional data and information (6 notifications). For example, the Board decision for one notification required the company to submit supplemental annual report data and information for the purpose of monitoring by Board staff. The Board restricted the duration of FTZ production authority (4 notifications). For example, the Board decision for one notification limited production authority to 5 years. The Board required that a product be re-exported from the zone (not for entry into U.S. market) (1 notification). For this notification, the Board instructed the company to ship all of the foreign upholstery fabric out of the subzone and not ship it into the United States for U.S. consumption. For the 15 notifications that were approved with restrictions, our analysis of Board case records found that the Board’s rationales for its decisions fell into one or more of the following six categories. Similar authority had been approved in the past (6 notifications). For example, in its decision for one notification, the Board noted that a similar authority had been requested by another company and that the authority was granted with a similar restriction. The proposed activity supported U.S.-based production that otherwise would be conducted abroad (4 notifications). For example, in decisions for two notifications, the Board noted that the approved production authority supported domestic U.S. production that otherwise could be (or was being) conducted abroad. The restriction for these notifications concerned the quantity of a fabric that could be brought into the zone duty free. New or complex policy issues were involved (2 notifications). For example, in its decision for one notification, the Board approved the requested production authority for the first time and added a time restriction that would allow the Board to identify any domestic impact. No opposition was raised by domestic industry or by industry analysts (1 notification). In its decision for this notification, the Board noted that industry analysts at Commerce had no concerns as long as the company paid duties on imported fabric components specified in the notification when the finished good left the zone. No duty savings would be realized for the finished product of the proposed activity (1 notification). In its decision for this notification, the Board noted that the applicant had indicated it would pay duties on all foreign-source materials when leaving the zone for sale in the United States. The proposed activity would have no duty-reduction benefit and would help only with logistics or record-keeping (1 notification). In its decision for this notification, the Board noted that production authority had previously been approved with restrictions and that the company had requested a change to the authorization for record- keeping purposes. The Board’s reasons for not approving 10 notifications fell into one or more of the following two categories. New or complex policy issues or concerns were involved (5 notifications). For example, in its decisions for these notifications, the Board noted that (1) it had not previously approved production authority for a given component or a given product, (2) circumstances within the industry and opposition to the production notification continued to evolve, (3) the production process made tracking the source or destination of a given component difficult when it entered or left the FTZ, (4) the component or product involved sensitive trade policy issues, or (5) the economic impacts and potential precedents were unclear. Further review was needed because of domestic industry concerns (8 notifications). For example, in its decisions for these notifications, the Board cited concerns that included the possibility that authorization would put pressure on domestic industries already experiencing low growth and depressed prices and would cause disagreements between the applicant and industry members regarding the domestic availability of an FTZ production component at competitive prices. In addition, for one notification, the Board’s decision rationale stated that, although similar authority had been approved several years earlier, authority was not currently being granted because conditions had changed since the earlier authorization. The Foreign-Trade Zones Board (the Board) regulations establish time frames for evaluating notifications and applications submitted by companies seeking permission to conduct production activities in a foreign-trade zone (FTZ). The regulations require that the Executive Secretary inform the applicant of the Board’s authorization decision within 120 days of receiving the notification. The regulations also state that the general time frame to process applications for production authority is 12 months. We selected and analyzed a nongeneralizable sample of 59 notifications and 3 applications and the Board’s case records to examine, among other things, whether the Board completed its processing of these notifications and applications within the time frames detailed in the Board’s regulations. We found that the Board generally followed the 120- day time frame for the majority of the 59 notifications in our sample but, for all 3 applications that we reviewed, took longer than the general 12- month time frame set in the regulations for the applications. According to the regulations, additional time may be required to process applications that involve a complex or controversial issue. The Board generally completed its processing of the 59 notifications we reviewed within the time frames detailed in the regulations. Eight cases were completed in less than 120 days, with time frames ranging from 21 to 119 days. Twenty-five cases were completed in exactly 120 days. In 13 cases, the 120th day fell on a weekend or a holiday and the review was completed on the next business day. Another 13 cases were delayed and completed in 122 to 160 days. According to Board staff, processing 5 of these 13 notifications exceeded the 120-day time frame because of a government shutdown. In addition, according to the Board staff, processing 8 of the 13 notifications exceeded the 120-day time frame because of internal procedural delays, such as an industry specialist’s needing more time to analyze a notification. Of those 8 notifications, 7 were submitted by companies in the textiles/footwear industry and the eighth was submitted by a company in the “other energy” industry category. The time that the Board took to complete processing (i.e., finish its evaluations and inform applicants of its decisions) for the 59 notifications we reviewed varied by industry category (see table 4). For example, the Board informed all of the applicants that submitted notifications in the chemical, medical supply and device, and silicone/polysilicon industry categories of its decisions within 120 days or within 120 days plus the next business day. However, for 7 of 17 notifications from companies in the textiles/footwear industry category, the Board informed applicants of its decisions after the 120-day period. The Board’s processing of each of the three applications in our sample took longer than the general 12-month (365 days) time frame set in the regulations. Processing of the three applications took 558, 866, and 864 days, respectively, from the date when Board received the application to the date when the applicant was notified of the Board’s decisions. For all three applications, the Board issued preliminary recommendations either to approve with restrictions or not to approve the requested production authority. These preliminary decisions led to the submission of additional evidence, rebuttals to additional evidence, and opposition and support by various parties, which extended the time needed for final decisions by the Board members. The regulations state that evaluating an application may take longer when it involves a controversial or complex issue. The three applications we reviewed involved textile-related foreign components, which the case records and our interviews with Board officials showed can be controversial. For the three applications, completing certain steps delayed Board staff’s processing of the applications, causing it to exceed the general time frame set in the regulations. For example, the regulations state that the examiner shall generally develop recommendations and submit a report within 150 days after the end of the public comment period. For the three applications, the examiner took 116, 235, and 431 days, respectively, to complete the preliminary recommendations. According to Board staff, processing two of the applications took longer than the general time frame because of a complex set of circumstances that called for careful and thorough review. In addition, under the regulations, once the Executive Secretary has circulated the examiner’s report, the Department of the Treasury (Treasury) Board member is generally expected to return a vote within 30 days. For the three applications we reviewed, Treasury took 26, 90, and 212 days, respectively, to return a vote. A Treasury official also stated that before rendering a decision about two applications requesting the same type of authorization, Treasury waited for Board staff to complete its review of both applications. The Treasury official stated that he held substantial discussions with Board staff about each of the three applications before reaching a decision. In addition to the individual named above, Christine Broderick (Assistant Director), Barbara R. Shields (Analyst-in-Charge), Claudia Rodriguez, Pedro Almoguera, Martin de Alteriis, Grace Lui, Reid Lowe, and Christopher Keblitis made key contributions to this report. Other contributors include Lilia Chaidez, Philip Farah, Peter Kramer, and Julia Robertson.", "summary": "FTZs allow companies to reduce, eliminate, or defer duty payments on foreign goods imported into FTZs for distribution or as components of other products before transferring the finished goods into U.S. commerce or exporting them overseas. The value of foreign and domestic goods admitted to FTZs in 2016 exceeded $610 billion. Responsibilities of the Board, consisting of officials from the Departments of Commerce (Commerce) and the Treasury, include evaluating production notifications and applications on the basis of factors such as the proposed activity's net effect on the U.S. economy. Federal regulations set forth requirements, pursuant to the Foreign-Trade Zones Act of 1934, for these evaluations. GAO was asked to review the Board's evaluation processes. This report examines the extent to which the Board has established and followed procedures aligned with regulations for evaluating (1) notifications and (2) applications. GAO analyzed the Board's regulations and procedures and interviewed Commerce, Treasury, and U.S. Customs and Border Protection officials. GAO also analyzed a nongeneralizable sample of 59 of 293 notifications the Board evaluated from April 2012 through September 2017, which GAO selected to include a range of Board decisions and exclude pending decisions. GAO also analyzed all three applications the Board issued decisions on during that period. The U.S. Foreign-Trade Zones Board (the Board) has procedures that generally align with its regulations for evaluating production notifications and followed these procedures for all 59 notifications GAO reviewed. Notifications are filed by companies proposing to bring foreign components into a foreign-trade zone (FTZ) for use in manufacturing finished products, among other purposes. GAO found, for example, that, following Board procedures, Board staff evaluating the notifications collected and considered comments from the general public, industry specialists, and U.S. Customs and Border Protection and recommended to the Board whether to authorize companies' proposed activities. Of the 59 notifications GAO reviewed for seven industry categories, 49 notifications either were approved or were approved with restrictions—for example, the proposed activity was authorized for a limited time period or certain duty benefits were denied for one or more foreign components. Ten notifications were denied for reasons such as new or complex policy issues that required further review. The Board also has procedures that generally align with its regulations for evaluating production applications and followed these procedures for the three applications GAO reviewed. The applications were submitted by three of the companies whose notifications were denied. According to Board staff, if a notification is not approved or is approved with restrictions, a company may submit an application with additional details. Following Board procedures, Board staff, for example, collected and considered comments and recommended to the Board whether to authorize the proposed activities. Two of the applications were approved with restrictions, and the third was not approved. While the regulations require consideration of a number of criteria—for example, consistency with U.S. trade and tariff law—Board staff did not document consideration of all required criteria for two of the three applications, and the procedures do not require such documentation. Board staff said they document only the most relevant criteria in their reports. Standards for Internal Control in the Federal Government states that management should document its rationale for determining a criterion is not relevant and make this documentation readily available for examination. Without such documentation, the Board lacks an institutional record that all required criteria were considered and also lacks assurance that its decisions comply with U.S. trade and tariff law and public policy. Commerce should require Board staff to document consideration of all criteria required in the regulations when evaluating production applications. Commerce concurred with this recommendation.", "document_type": "gao"}
{"report": "Enforcing tax laws helps IRS collect revenue from noncompliant taxpayers and, perhaps more importantly, promotes voluntary compliance by giving taxpayers confidence that others are paying their fair share. However, every year, taxpayers fail to pay hundreds of billions of dollars in taxes. This tax gap—the difference between tax amounts that taxpayers should pay and what they actually pay voluntarily and on time—has been a persistent problem for decades. In our 2017 High-Risk Report we continued to include Enforcement of Tax Laws as a high-risk area. Key components of this high-risk area include both addressing the tax gap and improving tax compliance. IRS has four business operating divisions responsible for enforcing tax law and providing taxpayer service to ensure taxpayer compliance, as shown in table 1. For this report, we refer to these divisions as compliance units and their staff as compliance staff. Formed in 1927, Appeals is the only administrative function of IRS with authority to consider settlements of tax controversies and has the primary responsibility to resolve these disputes without litigation to the maximum extent possible. IRS states that the appeal process is both less formal and costly than court proceedings and is not subject to judicial rules of evidence or procedure. The IRS Restructuring and Reform Act of 1998 (Restructuring Act) specified that IRS must provide an independent appeals function. Appeals carries out this function. Appeals is a separate unit within IRS, and its chief reports directly to the Commissioner of Internal Revenue. The Restructuring Act also prohibits communications between Appeals staff and other IRS functions without the taxpayer or representative being given an opportunity to participate. In 2016, IRS clarified that Appeals is separate from the IRS compliance functions, including examination and collection units, that initially review a taxpayer’s case and that Appeals may return cases to compliance units when taxpayers provide new information for consideration. Taxpayers may appeal many IRS decisions, including tax collection actions and proposed tax assessments, with some exceptions. Taxpayers cannot appeal solely due to moral, religious, political, constitutional, conscientious, or other similar grounds. Taxpayers requesting appeals can range from individuals to large multinational corporations. IRS provides publications that explain taxpayer’s rights for both examination and collection appeals. IRS also developed online self-help tools to help taxpayers understand what can be appealed. For collection actions, the Restructuring Act created a statutory right for collection due process appeals and provides an impartial review for taxpayers facing possible levies for collecting delinquent taxes or who have had a notice of federal tax lien filed against them. IRS also offers a collection appeals program for a broader range of collection issues, such as when IRS rejects or terminates an installment agreement to pay taxes owed. In contrast, for examination decisions, the tax code does not provide statutory rights to administrative appeals. In certain circumstances, IRS will designate an examination issue for litigation and not offer access to the administrative appeal process. In other circumstances, IRS may decide not to refer cases docketed in the U.S. Tax Court to Appeals for settlement if it determines doing so will be in the best interest of sound tax administration. For example, IRS may decide not to refer a docketed case to Appeals in cases (1) involving a significant issue common to other cases in litigation for which it is important that the IRS maintain a consistent position or (2) related to a case over which the Department of Justice has jurisdiction. Appeals’ workload is organized into seven workstreams based on similarities in case characteristics. Two workstreams involve collection appeals where IRS is pursuing taxpayers who failed to fully pay taxes and penalties owed. Four workstreams include a wide range of examination appeals where IRS is proposing additional tax and penalty assessments based on auditing tax returns. The last workstream covers other cases that do not fit into the collection and examination workstreams. Figure 1 below provides an overview of the appeal workstreams, including which IRS business operating divisions transfer the cases to Appeals. While Appeals is separate from IRS’s examination and collection compliance functions, its budget is part of the IRS enforcement budget appropriation. From fiscal year 2010 to fiscal year 2018, Appeals represented about 4 percent of the IRS enforcement budget appropriation. Appeals’ funding has decreased by 29 percent since 2010 to $175 million in 2018 (see fig. 2). Adjusting for inflation, Appeals funding has decreased 38 percent since 2010. Over this same time period, Appeals received fewer cases as IRS enforcement activities declined. For example, the individual examination (or audit) coverage rate declined by about 50 percent from fiscal years 2010 to 2017. Also, the number of notices of federal tax liens filed declined by nearly 60 percent over the period. Faced with declining budgetary resources, IRS compliance units can prioritize and select fewer taxpayers to examine or pursue collection action. Appeals officials said their office generally must work every case received. Appeals aims to close approximately the same number of cases each year as it anticipates receiving during the year. Appeals closure rate—or the number of cases it resolved divided by the number it received in a year—improved from 98 percent for fiscal year 2010 to 103 percent for fiscal year 2017. Annual closure rates for 2017 varied by workstream, ranging from 72 percent for the innocent spouse workstream to nearly 109 percent for the examination workstream. Figure 3 shows the total number of cases received and pending at year end since fiscal year 2010. The diverse array of appeal requests across IRS compliance units that flow into Appeals workstreams follows the same standard process. As illustrated in figure 4, the appeal process involves multiple steps, beginning with a taxpayer filing an appeal of a proposed IRS compliance action and ending with a decision from Appeals. If the taxpayer and IRS cannot reach agreement through the appeal process, the taxpayer may have the case reviewed in federal court if eligible. While certain types of cases must go through the appeal process before review by a court, others may bypass it and taxpayers may directly petition IRS’s proposed actions in federal court. Compliance action. For proposed examination actions to assess additional taxes and penalties or collection actions, such as filing a notice of federal tax lien or proposing a levy to collect delinquent taxes, IRS notifies the taxpayer in writing about the proposed compliance action and explains their appeal rights. The notification states that the taxpayer has 30 days to file an appeal and includes a list of IRS publications and other information on how to file an appeal. Taxpayer action. Within 30 days from the compliance notification, taxpayers who disagree with the IRS proposed action must send a formal written request to appeal. The appeal request must include: the taxpayer’s name and address, and a daytime telephone number; a statement that the taxpayer wants to appeal the IRS findings to the a copy of the letter showing the proposed changes and findings that the taxpayer does not agree with; the tax periods or years involved; a list of the changes that the taxpayer does not agree with, and why the taxpayer does not agree; the facts supporting the taxpayer’s position on any issue that the taxpayer does not agree with; the law or authority, if any, on which the taxpayer is relying; and a signature on the written protest, stating that it is true, under the penalties of perjury. Taxpayers may choose to represent themselves or have professional representation before Appeals. A representative must be a federally authorized practitioner, who can be an attorney, certified public accountant, or enrolled agent authorized to practice before the IRS. Low-income taxpayers or those who speak English as a second language may be eligible for free or low cost representation from a Low Income Taxpayer Clinic. Based on our analysis of ACDS data for appeal cases closed from fiscal year 2014 through 2017, 57 percent of taxpayers had a representative and 43 percent were taxpayers representing themselves. The share of appeal cases with taxpayers representing themselves varied significantly across the workstreams, ranging from 18 percent for large case examination appeals to 95 percent for innocent spouse appeals. Taxpayers are instructed to send their appeal and supporting material to the examination or collection compliance unit that proposed the action. IRS states sending the appeal request directly to the Office of Appeals will result in delays and may result in the appeal not being considered a timely request. Compliance review. Compliance staff work directly with the taxpayer to try to resolve the issue once they determine a taxpayer is requesting an appeal. This may involve multiple interactions by telephone or correspondence. Compliance staff will review any new information submitted by the taxpayer as they attempt to resolve open collection or examination matters. Figure 5 illustrates the steps compliance staff are to follow when they receive an appeal. If compliance staff cannot reach agreement with the taxpayer, the compliance unit forwards the appeal request and documentation from the taxpayer along with the proposed compliance action documentation to Appeals. Appeals provides a case routing tool on the IRS intranet with instructions and addresses for compliance staff transferring appeal documentation to an Appeals location. In general, taxpayer appeals related to examination and collection campus cases are transferred to an Appeals campus location. Appeals for field examination and collection cases are transferred to an Appeals office near the taxpayer’s location. Compliance staff may not forward an appeal request to Appeals if the taxpayer did not file the request in time or refuses to sign the appeal under penalty of perjury, among other reasons. Appeals receipt and review. Figure 6 provides an overview of how Appeals receives and assigns cases. Upon receipt of an appeal, Appeals processing staff log each appeal case into the ACDS used to control and track cases in Appeals inventory. Most appeal cases arrive from compliance as paper files, and Appeals is working to receive certain collection cases electronically. For examination cases, Appeals processing staff also check that sufficient time remains for Appeals to complete its review. Generally, examination cases must have at least 365 days remaining on the assessment statute expiration date when the case is received in Appeals. An Appeals manager is to assess a case’s complexity and difficulty to determine how to assign the case. The manager is to consider the factual and legal complexity of the case issues and the level of conference negotiation skills needed to handle the case. The manager also is to consider whether the case has industry-wide implications or the decision would potentially affect other taxpayers and overall voluntary compliance. Generally, Appeals employees with higher skill levels and expertise are expected to be assigned more complex cases. The manager is then to assign the case to an Appeals staff person based on the employee’s grade level, ability, and case load. The Appeals employee leading the case may also draw on support from Appeals technical specialists, such as engineers and economists. For the large case examination workstream, an Appeals team case leader may oversee multiple Appeals employees working a large appeal case with highly complex issues and disputed amounts of $10 million or more. Figure 7 provides an overview of the Appeals case review process once a case is assigned to an Appeals employee. First, the Appeals employee sends a letter to the taxpayer with information about the appeal process and schedules a meeting. The letter details what additional material is needed, if any, and explains that a determination will be made on the information provided if there is no further contact from the taxpayer. The letter states that Appeals is independent from IRS compliance offices and refers to Publication 4227—Overview of the Appeals Process. Finally, the letter mentions that the taxpayer may be asked to participate in an Appeals customer satisfaction survey after they have completed the appeal process. Appeals offers conferences to provide taxpayers with an opportunity to present their position (see fig. 7). Based on our analysis of ACDS data for appeal cases closed, about 87 percent of appeal cases that were closed in fiscal year 2014 through 2017 had a conference. Most conferences are held by telephone which can be a quick and efficient means for taxpayers to resolve their issues. Appeals campus locations conduct telephone conferences because these locations currently are not configured to accommodate in-person conferences. Appeals may be able to resolve some taxpayer appeals with mail correspondence only. For perspective, about 10 percent of appeal cases that were closed and also had a conference from fiscal year 2014 through 2017 did so only by correspondence, and the penalty workstream accounted for nearly two-thirds of those appeal cases. Appeals also holds in-person conferences, usually at an Appeals office. Alternatively, under its conference policy as of August 2018, Appeals staff can meet taxpayers in a mutually convenient location when the taxpayer, representative, or business is beyond a certain distance from an Appeals office. In-person conferences may be used, among other things, for reviews involving substantial books and records, judging the credibility of witnesses, or accommodating with a taxpayer with a special need, such as disability or hearing impairment. Based on our analysis of ACDS data for appeal cases closed, about 6 percent of appeal cases that were closed from fiscal year 2014 through 2017 had an in-person conference, although this varied significantly by workstream. About half of the large case examination appeals closed over the period had in-person conferences, whereas about 3 percent of appeal cases closed in the collection due process, innocent spouse, and penalty workstreams had in-person conferences. As of August 2018, Appeals had revised its policy on in-person conferences twice since October 2016. Prior to that, campus appeal cases were transferred to a field office when taxpayers requested a face- to-face conference. For fiscal year 2017, Appeals limited in-person conferences to appeal cases meeting specific criteria, such as involving those with substantial books and records to review or where the taxpayer has special needs that can only be accommodated with an in-person conference. Appeals managers had final approval on granting taxpayer requests for in-person conferences. In October 2017, Appeals further revised its policy stating it would attempt to schedule in-person conferences requested by taxpayers for field appeal cases at a time and location reasonably convenient for both the taxpayer and Appeals. Appeals stated it was intending to strike the right balance between making in-person conferences available to taxpayers and ensuring the process is efficient and workable for Appeals. Appeals also offers virtual technology interaction to potentially allow more taxpayers, especially those in remote locations, to have an option other than a phone conference. Using IRS virtual service delivery capacity, Appeals staff at campus locations can conduct virtual conferences with taxpayers who schedule to use video terminals at some taxpayer assistance centers. In August 2017, Appeals began piloting web-based virtual conferences. If taxpayers provide Appeals with new information or evidence, or raise a new issue that requires additional investigation or analysis, Appeals will return the case to the originating compliance unit for further review. After a compliance unit transfers a case to Appeals, communication between compliance staff and Appeals staff is generally restricted without the taxpayer or representative being given an opportunity to participate. In line with its mission to resolve cases prior to litigation, Appeals is authorized to review the facts of the case considering the hazards that would exist if the case were litigated. Appeals is the only IRS unit authorized to consider hazards of litigation when deciding whether to allow taxes and penalties. This means that Appeals may recommend a fair and impartial resolution somewhere between fully sustaining and fully conceding the compliance unit’s proposal that reflects the probable result in the event of litigation. Appeals decision. Appeals makes a decision on a taxpayer’s case after weighing evidence from the compliance unit and the taxpayer. Appeals determines whether IRS compliance decisions correctly reflect the facts, as well as applicable law, regulations, and IRS procedures. To resolve an examination appeal case, Appeals may (1) agree with the IRS examination compliance unit and fully sustain its recommended assessment, (2) disagree and reduce the recommended assessment to partially sustain the assessment, or (3) fully concede to the taxpayer’s position and not sustain the assessment. To resolve a collection appeal case, Appeals may (1) agree with and sustain the proposed enforcement action, (2) disagree and modify the proposed action (e.g., propose an installment agreement rather than a levy) or defer collection, or (3) fully concede to the taxpayer’s position and not sustain the collection action. This is the final decision by Appeals. Once Appeals makes its decision, it informs the taxpayer in writing and also IRS. Taxpayers dissatisfied with Appeals’ decision may file a petition in tax court if they are eligible. To handle the diverse array of taxpayer appeals across all workstreams, IRS relies on an Appeals workforce that must have sufficient numbers of staff with expertise in all areas of tax law. However, Appeals experienced nearly a 9 percent annual attrition rate from fiscal year 2015 to fiscal year 2017 and projects a similar attrition rate for fiscal years 2018 and 2019. As shown in figure 8, Appeals staffing levels have declined from 2,172 in fiscal year 2010 to 1,345 in fiscal year 2017, nearly a 40 percent decrease. As previously noted, Appeals workload also decreased over this period of time as IRS examination and collection enforcement activity declined. Appeals anticipates a continued risk of losing subject matter expertise given that a large share of its workforce is eligible for retirement. According to an Appeals report, at the end of fiscal year 2017, about one-third of the Appeals workforce was eligible for retirement. Moreover, Appeals officials reported that close to half of the staff who are critical to Appeals’ mission—including those who handle the most complex cases—were eligible for retirement. Based on our analysis of ACDS data for appeal cases closed, these types of cases accounted for about one-third of appeal cases closed in fiscal years 2014 through 2017. Gaps in available staff with critical skills and training can result in delays resolving appeal cases. For example, in fiscal year 2017 Appeals received an increased number of innocent spouse appeals, and officials told us they initially lacked sufficient numbers of trained staff ready to review those cases. As of April 2018, the time from receipt by Appeals to case closing for the innocent spouse workstream had increased by 39 percent over the same time period in 2017—from 205 days to 285 days. In response, Appeals was training additional staff and is working to resolve the increased volume of cases. Appeals has taken action to mitigate the risk of having a sufficient number of staff needed to handle its workload. Appeals has a tool that draws on historical ACDS case data to project the number of Appeals staff needed to review the numbers and types of case receipts expected from IRS compliance units. From fiscal year 2014 through fiscal year 2017, Appeals requested and received approval to hire 292 employees. In November 2017, IRS changed its policy to allow business units funded from IRS’s enforcement budget, including Appeals, to manage their own staff levels in certain instances provided they do not exceed their fiscal year staff limits. Under this policy, Appeals will be able to hire staff as its workforce declines due to attrition. While the steps Appeals has taken can be useful stopgap measures, they are not substitutes for nor do they replace the longer-term benefits of strategic workforce planning and conducting critical skills gap analysis. We have identified that key principles of effective workforce planning include that an agency must define the critical skills that it will need to meet its strategic goals and achieve its mission in the future. An agency must then develop strategies tailored to address staffing and skills gaps in its workforce, including how to acquire, develop, and retain staff to meet its goals. We have previously reported that mission-critical skills gaps within the federal workforce pose a high risk to the nation and that individual agencies must take steps to address skills gaps. We have also reported on the need to close government-wide mission critical skills gaps and to develop strategies to help agencies meet their missions in an era of highly constrained resources. Agencies that do not conduct a critical skills gap analysis risk significant negative effects. We have previously reported that in a time of declining resources, it is important for top management to take actions that ensure the agency maintains capacity—including its workforce—in order to achieve its mission. Once skill gaps are identified, strategies should be tailored to address the gaps. Appeals has identified knowledge loss and maintaining expertise during a time of declining staff levels as one of its top risks in its Business Performance Reviews. Although it has not conducted a skills gap analysis, Appeals has identified that maintaining expertise in all areas of tax law is essential because it must have staff trained to work a diverse array of appeal cases across all workstreams. Many Appeals staff who review appeal cases, including those who conduct in-person conferences, are in the appeals officer job series critical to Appeals’ mission. As of July 2018, about 60 percent of the Appeals workforce was in this job series. As of September 2018, Appeals is participating in a larger IRS effort to address workforce planning. IRS states that its workforce planning is to involve an integrated and systematic process for identifying current and future human capital needs, the competencies that align with future organizational goals, and the strategies to be implemented to reduce the gaps. Created in 2017, the IRS Workforce Planning Council is comprised of representatives from all business units, including Appeals. The council is to share workforce planning activities and best practices across IRS and assist in developing the IRS strategic workforce plan. The council is working to develop an agency-wide workforce plan, which will include identifying gaps between current and projected workforce needs and developing strategies to close the gaps. According to IRS human capital officials responsible for workforce planning, a service-wide strategic workforce planning effort will include identifying skills and competency gaps in mission critical occupations. Initially planned for the middle of fiscal year 2018, the initiative was delayed as of September 2018, according to IRS human capital officials. IRS units redirected resources to implementation of Public Law 115-97— commonly referred to by the President and many administrative documents as the Tax Cuts and Jobs Act—and requested an extension. IRS human capital officials also told us the workforce planning team lost resources due to attrition and anticipated the initiative would be complete in the third quarter of fiscal year 2019. Appeals officials told us that they expected to begin their activities once the IRS planning tools are in place. While the broader Treasury and IRS initiatives will benefit Appeals with longer-term strategic workforce planning, Appeals faces ongoing challenges in achieving its goal and may be unable to mitigate the risk of maintaining staff expertise. Gaps in the Appeals workforce could delay the timely review of Appeals cases. The large share of its staff who are critical to the mission who are eligible for retirement underscores the importance of conducting critical skills gap analysis for Appeals. Given Appeals’ unique role in ensuring taxpayers’ administrative option to dispute most IRS decisions, it is important for Appeals to have the tax expertise necessary to review appeals cases across multiple workstreams. These factors underscore the importance of Appeals conducting a skills gap analysis in coordination with Treasury and IRS human capital efforts to ensure Appeals immediate skill needs are reflected in broader agency planning. Within the standard process that all appeal cases follow, Appeals has developed a series of process measures that use ACDS data to monitor the amount of time for a case to move through an Appeals workstream. These measures track the number of days from Appeals receipt through the appeal review process to when a case is closed in ACDS. Appeals also measures the amount of time for compliance units to transfer appeals cases. For the purpose of this report, total appeal resolution time is the length of time from when a taxpayer submitted the appeal request to IRS to when the case is closed in ACDS. Appeals managers use ACDS to monitor progress staff have made reviewing each case assigned to them, including holding a conference with the taxpayer and reaching a decision to resolve the appeal. ACDS inventory reports allow managers to monitor total employee time per case and determine if a case has not had any activity recorded for 60 days. Appeals officials explained that the process measures are indicators that assist in making management decisions and identifying data driven process efficiencies to control workflow within each workstream. For example, an Appeals manager may use the ACDS data to address case review backlogs and offer assistance to help expedite case review. Appeals reports its review time measure by workstream in its monthly performance report to the Commissioner of Internal Revenue. The IRS website states that if a taxpayer has not heard from Appeals and it has been more than 120 days since the request was submitted, the taxpayer should contact the IRS office to which they sent their appeal request. According to IRS examination and collection officials we interviewed, compliance unit staff attempt to resolve all taxpayer requests and work with taxpayers to obtain additional information if needed and answer questions about pending compliance actions. According to Appeals officials, there are different levels of case complexity across the workstreams. For appeal cases closed from fiscal years 2014 through 2017, table 2 shows the average number of days from when IRS received a taxpayer appeal to when the compliance unit completed its review and transferred the case file to Appeals. Across the appeals workstreams, the compliance review time varied from 30 days for innocent spouse appeals to 108 days for large case examination appeals. Any delay during compliance review adds to the total time to resolve an appeal. As shown in table 2, compliance review accounted for about a quarter of the total resolution time for collection appeals. Among the examination workstreams, the compliance review share of total resolution time ranged from 12 percent for innocent spouse appeals to about 45 percent for penalty appeals. According to the IRM, IRS requires SB/SE collection units to review collection due process appeals within a 45 day period of receipt of the taxpayer requests. The 45 calendar days after receipt of an appeal request includes time to ensure completeness of the request, obtain additional information if necessary, and transfer the request to Appeals. Collection unit staff reviewing appeal requests may experience delays with taxpayers submitting additional material to support their requests. With management approval, collection units may have an additional 45 days to continue working with the taxpayer to resolve the collection issue in dispute. The IRM time requirement does not specifically apply to offer in compromise collection appeals. According to our analysis of ACDS data for appeals closed in fiscal years 2014 to 2017, the majority of collection due process appeals were transferred within the IRM time requirements. In fiscal year 2017, approximately 57 percent of collections due process appeals were transferred in less than 45 days and approximately 93 percent of these cases were transferred within 90 days. However, IRS did not always transfer collection due process appeals in a timely manner. For collection due process appeal cases closed in fiscal year 2017, approximately 4 percent (1,559) of these collection appeals took more than 120 days to be transferred to Appeals (see fig. 9). As shown in figure 9, the majority of offer in compromise collection appeals were also transferred within 90 days, even though the IRM time requirement applies specifically for collection due process appeals. Approximately 11 percent (995) of these collection appeals took more than 120 days to be transferred to Appeals in fiscal year 2017. Delays in transferring collection due process appeals, in turn, affect prompt resolution for the taxpayer and IRS. Each tax assessment has a collection statute expiration date of 10 years after the assessment. When a taxpayer appeals a collection action within 30 days of receiving the notice, IRS suspends further collection activity until Appeals decides the case. When the IRS suspends the collection statute for a period longer than its policy allows, this means that the taxpayer can face a longer period where IRS can collect the balance owed. Standards for Internal Control in the Federal Government states that management should establish and operate monitoring activities to monitor internal controls. Management should evaluate the results and remediate any identified deficiencies. SB/SE collection tracks the number of collection due process appeals that are not transferred to Appeals within 45 days of receipt from the taxpayer. SB/SE collection officials told us that they do not have reports or tools to systematically track transfer times for other types of collection appeals. Although SB/SE has the capacity to identify how long collection due process appeals have been waiting, collection officials we interviewed acknowledged that they do not always monitor whether they are meeting the transfer time requirement. For non-docketed cases closed in fiscal year 2017, the deficiency in transferring nearly 1,600 collection due process appeals more than 120 days after receipt points to the lack of monitoring. Evaluating the existing tracking reports for collection due process appeals and remediating deficiencies in collection staff following procedures would be a key step to achieve timely transfer of these collection appeals. Unlike the requirements for collection due process cases, the IRM does not establish timeframes for compliance review and transfer of taxpayer appeals of examination disputes. According to Appeals officials, examination cases can have many issues, and the level of review to try to resolve examination issues can be significant prior to the taxpayer appeal request being transferred to Appeals. Review procedures differ across the business operating divisions. In its examination quality standards, SB/SE field examination has national standard timeframes, which include 20 days from the receipt of a taxpayer appeal request to close the examination case and then 10 days for SB/SE technical services to transfer the file to Appeals. IRS officials acknowledged that SB/SE field does not always meet its 30-day timeframe standard for appeal transfers, in part, because examiners must review any new information submitted with a taxpayer’s appeal request. Our analysis of ACDS data showed that about two-thirds of all examination appeals closed in fiscal years 2014 through 2017 had been transferred from IRS examination compliance units within 90 days. However, nearly a quarter of examination appeals took more than 120 days to be transferred to Appeals (see fig. 10). As shown in figure 11, transfer times for examination appeals varied across IRS examination compliance units. For appeal cases closed in fiscal year 2017, more than two-thirds of examination appeals originating in SB/SE and LB&I were transferred by those units within 90 days. For examination appeals originating in W&I, less than half were transferred within 90 days, and 37 percent took more than 120 days to transfer. TE/GE transferred fewer appeals than the other units, but nearly half of TE/GE appeals took more than 120 days to be transferred to Appeals. Delays in transferring examination appeal requests can result in increased costs for taxpayers because interest continues to accumulate on the tax liability during the appeal process. Further, taxpayers unsure of the status of their appeals, particularly those over 120 days, may generate additional calls and correspondence with IRS—further tying up other IRS staff to respond to inquiries on appeals experiencing delayed transfer. IRS examination officials in SB/SE and W&I, which accounted for 97 percent of all examination appeals closed in fiscal year 2017, said that their compliance units do not specifically track incoming appeal requests and the time spent on initial appeal review within compliance. In effect, appeal requests resolved during compliance review would be reflected as compliance cases closed in the examination information systems. As a result, IRS does not maintain readily available data on the total number of examination appeal requests received and how many are resolved during initial review by compliance. IRS campus examination officials we interviewed said that taxpayer correspondence delays contribute to increased time to identify and transfer correspondence examination appeals for SB/SE and W&I. A taxpayer request for an appeal arrives like any other taxpayer correspondence related to ongoing correspondence examinations. However, according to W&I campus examination officials, taxpayer requests may sit for months before they are identified as an appeal. Once compliance unit staff determine an examination dispute cannot be resolved in their unit, the appeal request will be transferred to Appeals. SB/SE and W&I examination officials we spoke with said the steps to transfer the files to Appeals take about 5 to 10 days. IRS examination officials we interviewed explained that they cannot readily track information on the number of days between the taxpayer’s request for an appeal to when the case was transferred to Appeals. They explained that it could require looking case by case in the examination systems. SB/SE and W&I officials we interviewed were not aware of any feedback from Appeals about the timeliness of the appeals requests transferred from their units. Although Appeals has this information, it does not include compliance transfer time information in its own monthly performance reports to the Commissioner of Internal Revenue. Also, Appeals officials said that they historically have not provided ACDS compliance transfer time data to IRS compliance units. Appeals has quarterly coordination meetings with the various IRS compliance units to discuss how compliance plans may affect projected appeal case volumes as well as technical training opportunities. Appeals officials said that information about transfer times has been shared at prior meetings but is not a standing agenda item. As a result, Appeals and compliance units do not consistently review performance data on the amount of time for compliance units to transfer taxpayer cases to Appeals. Critical information about the time it takes to transfer cases from compliance units is collected by Appeals as part its process measures but has not been shared within IRS, including with other units involved in the appeal process. The ongoing coordination meetings between Appeals and IRS compliance units could present a valuable opportunity to share data about the length of time it takes for cases to be transferred to Appeals. Sharing this information could be a low-cost first step to help IRS examination units understand their current performance and how compliance review factors into total appeal resolution time. Standards for Internal Control in the Federal Government also states that management should define objectives in specific terms so they are understood at all levels of the entity. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. Internal control standards require that controls be documented, and an agency’s documentation of them should be properly managed and maintained. IRS requires primary sources of guidance with an IRS-wide or organizational impact—such as policy documents, procedures, and guidelines—to be included in the IRM. This requirement is intended to ensure that IRS employees have the approved policy and guidance they need to carry out their responsibilities in administering the tax laws. The absence of defined timeframes for the initial compliance review and documented controls over incoming examination appeals make it difficult to hold IRS units accountable for ensuring timely transfer to Appeals. The IRM specifies that Appeals should complete a conference with a taxpayer in a timely manner and make a prompt decision to resolve the dispute. This enables the taxpayer to know with the least amount of delay the final IRS decision about the amount of tax liability or other issue in dispute. It also results in Treasury receiving any additional revenue involved at the earliest practicable date. Within Appeals, the time from Appeals receipt to a decision closing the case varies across the Appeals workstreams, as shown in figure 12. For fiscal years 2014 to 2017, collection due process—the workstream with the highest volume of closed cases—averaged 193 days to resolve a case within Appeals. Average appeals review time for large case examination appeals, the smallest volume, averaged 529 days. Although IRS states on its website that it takes anywhere from 90 days to 1 year for Appeals to resolve a case, this generic timeframe does not reflect the total resolution time counting from when a taxpayer requests an appeal to when a final decision is made. Further, this timeframe does not provide perspective on the range of resolution times across different types of appeals. According to our analysis of ACDS data of appeal cases closed from fiscal year 2014 through 2017, about 15 percent of all appeal cases closed within 90 days. Approximately 85 percent of all cases were resolved within 1 year of when the taxpayer requested an appeal. However, over that same period, approximately 15 percent of all appeal cases took more than one year in total to resolve, and of these, approximately 2 percent of all closed cases took more than 2 years to resolve. Total resolution times varied considerably across the Appeals workstreams, as shown in figure 13. The share of cases closed within 90 days ranged from approximately 3 percent for the collection due process workstream to 71 percent for the other workstream. The share of appeals cases closed within a year ranged from approximately 30 percent for the large case examination workstream to approximately 90 percent for the other workstream. Information about actual total appeal resolution times is not shared with taxpayers. Office of Appeals welcome letters include Appeals staff contact information and a conference date, if applicable, but do not provide total average appeal resolution time. According to the external stakeholders we interviewed, no formal communication of total appeal resolution time is shared with the taxpayer or their representative. Responses to a focus group of taxpayer representatives who went through the appeal process conducted by Appeals in 2014 shared a similar perspective. Focus group participants indicated that the acknowledgement letters did not contain enough or accurate information to set expectations. Additionally, these focus group participants noted that Appeals staff did not inform them how long the appeal process was expected to take. Critical information about total appeal resolution time is not shared with taxpayers. Without easily accessible information, taxpayers are not well informed on what to expect when choosing to request an appeal. Taxpayers may not understand how few appeals are likely to be resolved within 90 days. Faced with the general timeframe that Appeals will resolve cases in about a year, other taxpayers may choose to forgo their opportunity to appeal rather than risk interest accumulating during the appeal process. Standards for Internal Control in the Federal Government states that management should externally communicate necessary quality information to achieve the entity’s objectives. Government entities should report this information to government leaders and regulators, as well as the general public. Feeling uninformed about appeal case wait times has been a consistent theme with taxpayers and their representatives both in IRS’s customer satisfaction surveys and our interviews with external stakeholders. Total resolution time information, such as historical averages, may be especially valuable to taxpayers when considering that interest continues to accrue on tax amounts in dispute while appeals are being reviewed. In January 2017, we recommended that IRS develop and maintain an online dashboard to display customer service standards and performance information such that it is easily accessible and improves the transparency of its taxpayer service. Similarly, more detailed information on total average resolution times specific to different workstreams could provide a more transparent view of the amount of time a taxpayer can expect to receive a decision on their case from Appeals. GPRAMA requires that agencies, in this case the Treasury, establish a balanced set of performance indicators to be used in measuring progress toward performance goals, including goals for customer service. Executive Order 13571 stated that agencies set clear customer service standards and expectations, including, where appropriate, performance goals for customer service required by GPRAMA. Customer service standards should inform customers what they have a right to expect when they request services. The President’s Management Agenda highlights the importance of customer service through its cross-agency priority goal of Improving Customer Experience with Federal Services. In response to GPRAMA, Executive Orders, and other policies, Treasury and IRS have taken steps to define customer service targets and align them to Treasury’s and IRS’s strategic and performance plans. As part of the Appeals Quality Measurement System (AQMS) review process outlined in the IRM, Appeals defines its standard for customer service as whether Appeals has: (1) timely communications with the taxpayers in an appropriate, professional manner; (2) addressed the taxpayers’ needs; and (3) respected the taxpayers’ rights. AQMS lays out the internal attributes and internal measures which track progress towards Appeals customer service standard (see table 3). The performance results for the customer standard are shared as part of the annual AQMS report with Appeals executives and employees. For fiscal years 2014 through 2017, Appeals internal measures reflect that its customer service performance exceeded 86 percent annually. Appeals also makes a written commitment to taxpayers about what they can expect during the appeal process. IRS Publication 4227—An Overview of the Appeals Process—explains that taxpayers should expect the Office of Appeals to: (1) be fair and impartial; (2) be courteous and professional; (3) listen to their concerns; (4) explain their appeal rights and the appeal process; (5) be responsive; and (6) allow the taxpayer reasonable time to respond to any requests for information. Appeals officials explained that this publication, last updated in 2013, is included in the acknowledgement letter taxpayers receive from the Office of Appeals. However, most Appeals customers who participated in a focus group conducted by the Office of Appeals in 2014 said that they did not thoroughly review the Appeals acknowledgement letter and its enclosures, which includes Publication 4227. Therefore, relying on sharing this publication enclosed in the first letter the taxpayer receives may not be an effective mechanism to make this commitment known to taxpayers. Further, the official customer service standard and the related attributes and measures are not transparent to the public, and the performance results are not publicly reported. Taxpayer representatives with whom we spoke were not aware of the Appeals customer service standards outlined in the IRM and explained that publications included with letters from Appeals, such as Publication 4227, are often not read by taxpayers. Taxpayer representatives we interviewed also said that customer service standards are not discussed in conferences with taxpayers. Standards for Internal Control in the Federal Government outlines that management should externally communicate necessary quality information to achieve an entity’s objectives. Key elements of effective customer service standards say that making customer service standards publicly available is a key element to improve those standards and the related services. While Appeals articulates its customer service standard in the IRM and uses AQMS to internally measure customer service delivery, the standard and related results are not available on the Appeals website and not shared during interactions with taxpayers. According to Appeals officials, Appeals, like the rest of IRS, does not publish its customer service standard or explain how performance against the standard is measured. However, as a separate entity within IRS, Appeals has an opportunity to make customer service standards and related outcomes available to the public. Without standards clearly and explicitly communicated, taxpayers may not know what to expect, when to expect, and from whom to expect interactions surrounding the appeal process. Likewise, Appeals does not make its customer service performance results public, and Appeals officials said this is consistent with IRS practice. However, in 2017, we recommended that IRS take similar actions to make customer service standards and performance information easily accessible and improve the transparency of its taxpayer service. Measuring performance allows organizations to track their progress and gives managers crucial information on which to base their organizational and management decisions. The absence of publicly reported standards and related performance information does not allow customers to understand what to expect for the services they seek. Appeals conducts an annual survey to assess customer satisfaction with the appeal process over time and to identify areas where Appeals can do more to improve customer service. According to Appeals officials, Appeals has conducted a customer satisfaction survey for over a decade. The annual survey yields an overall customer satisfaction score as well as qualitative written comments on the appeal process. Appeals contracts with a vendor to manage the survey sample selection based on Appeals ACDS closed case data; pre-survey notification; management of the online survey; telephone follow-up with non-respondents; and analysis of the survey data. The survey vendor sends potential respondents pre-notification invitations to complete the survey and follow-up attempts to connect with potential respondents. In fiscal years 2015 and 2016, the response rate was 36 percent and 33 percent, respectively. In fiscal year 2017, Appeals surveyed 1,447 out of approximately 107,000 possible customers with a response rate of 37 percent. According to OMB Standards and Guidelines for Statistical Surveys, agencies are to design surveys to achieve the highest practical rates of response and conduct a statistical test for potential bias if the expected response rate is below 80 percent. The vendor provides a comparison of frequencies to understand any overrepresentation in survey responses of certain taxpayer types or for different workstreams within Appeals. For example, according to the vendor’s comparison of frequencies for the fiscal year 2017 survey (the most recent available at the time of our work), fewer survey responses were received from taxpayers who went through the collection due process workstream—the workstream with the highest volume of cases—than were in the population of potential respondents. The customer satisfaction survey annual report details the analysis of the survey results and summarizes significant changes in satisfaction over time, as well as customer satisfaction by categories such as taxpayer type and the length of the appeal process. Appeals reports overall customer satisfaction in its performance reports to the Commissioner of Internal Revenue. For appeal cases closed in fiscal years 2014 through 2017, about two thirds of taxpayers who responded to the survey were satisfied overall with the appeals process. According to the fiscal year 2017 annual survey report, customers who have higher rates of satisfaction: (1) have professional representation; (2) agree with the outcome of their case; and (3) have shorter case cycle time. The 2017 report also states that customers were most satisfied with the degree of respect shown and the professionalism of the Appeals staff. Customers were least satisfied with the consideration of information presented and the length of the appeal process. The annual survey also identifies the drivers of satisfaction with the appeal process which, Appeals officials said, helps Appeals determine which specific attributes of the appeal process have the most impact on overall customer satisfaction. The 2017 survey identified the drivers of overall satisfaction including: (1) how well Appeals listened to information taxpayers presented related to their case and (2) how well Appeals considered information taxpayers presented. Taxpayer representatives we interviewed identified similar factors that affect how satisfied their clients are with the appeal process. Their responses generally corroborated the drivers of satisfaction identified in the annual customer satisfaction survey analysis. For example, taxpayer representatives explained that their clients are more satisfied when they feel their perspectives have been heard and the Appeals staff had an open mind about the case. The representatives we interviewed also stated that the amount of time, as well as transparency about the amount of time, it takes Appeals to respond to a taxpayer’s case is significant to satisfaction with the appeal process. According to Appeals officials, the customer satisfaction survey is one tool to assess customer satisfaction, and the survey information is part of the overall information that Appeals uses in management decisions. The national survey report is shared with the executive level staff each year and survey results may be shared with staff. Appeals reports annual overall customer satisfaction survey scores, along with other data on business results, employee engagement, and staffing, in its performance reports to the Commissioner of Internal Revenue. According to Appeals officials, information from the customer satisfaction survey has been used to improve Appeals procedures and interactions with taxpayers, including changes to correspondence templates to improve comprehension and readability, and how Appeals schedules taxpayer conferences. Each year, Appeals conducts outreach presentations at tax practitioner conferences to share information about its policy and procedures, including recent changes or new initiatives that affect taxpayers and the tax practitioner community. Appeals officials told us that Appeals, in recent years, has also used these outreach presentations as an opportunity to solicit input from the attendees about the appeal process and implementation of operational or policy changes. According to Appeals officials, they obtain feedback at outreach sessions and place an emphasis on listening to commentary from the tax practitioner community. Taxpayer representatives we interviewed generally corroborated this and said that they saw improvement in their ability to communicate with Appeals and offer feedback on recent policies. Outreach presentations at tax practitioner conferences present an opportunity to obtain feedback and input on prospective policy changes as well. According to taxpayer representatives that we interviewed, while Appeals executives have more openly solicited feedback on policy changes, the outreach requests for feedback usually took place after the policy decision was made and implemented. For example, in October 2016 Appeals changed its policy to limit the availability of in-person appeal conferences. Appeals officials explained that this policy change was based on its data showing that for many appeal cases transferred to field staff to accommodate taxpayer requests for in-person conferences, the taxpayers ultimately chose to have phone conferences. Appeals officials acknowledged that they had not solicited public input beforehand and had received negative feedback that this was an unpopular change. As a result of feedback from the tax practitioner community at outreach events as well as written comments, in October 2017, Appeals revised its policy and will now attempt scheduling in-person conferences requested by taxpayers for field appeal cases. In its efforts to obtain feedback from the tax practitioner community at conferences, Appeals has attempted to be inclusive of tax practitioners representing a range of taxpayer types and income levels. According to Appeals officials, Appeals obtained feedback from the Low Income Taxpayer Clinics and conducted outreach sessions at their 2017 annual conference. However, soliciting feedback at professional association meetings for accountants and attorneys means that the opportunity to provide comments to Appeals is limited to those in attendance at the conferences. One taxpayer representative we interviewed said that he was not sure how he could submit suggestions or input to Appeals other than by attending a conference where Appeals executives were present and solicited feedback from attendees. Further, several taxpayer representatives we interviewed explained that taxpayers representing themselves without professional representation face greater challenges in the appeal process. Outreach relying on professional conferences may not be inclusive of all taxpayer experiences and may miss opportunities to understand the perspectives of individual and small business taxpayers navigating without professional assistance. IRS has formal advisory committees that provide forums to discuss issues with tax administration or taxpayer issues. Among these, the Internal Revenue Service Advisory Council (IRSAC) provides an opportunity for members to provide public perspective on IRS policies and procedures and recommends policies with respect to emerging tax administration issues. Conveying the public’s perception of IRS activities to the Commissioner, the IRSAC charter states that it is to be comprised of individuals who bring substantial, disparate experience and diverse backgrounds to the Council’s activities. IRSAC reports that its membership is balanced to represent the taxpaying public, the tax professional community, small and large businesses, state tax administration, and the payroll community. Although its role is to focus on broad policy matters, IRSAC recently took action to comment specifically on recent changes to Appeals policy and operations. In its 2017 public report, IRSAC commented on attendance of IRS compliance and counsel personnel at Appeals conferences with taxpayers. IRSAC stated that ensuring the independence of Appeals from the operating divisions is indispensable to Appeals’ achieving its mission. Executive Order 13571, building on GPRAMA requirements, stated that agencies, in this case Treasury, should establish “mechanisms to solicit customer feedback on Government services” and that agencies use “such feedback regularly to make service improvements.” In its strategic plan, IRS outlines a strategic goal to collaborate with external partners proactively to improve tax administration. Appeals has identified engaging with stakeholders to improve the taxpayer experience in Appeals as a fiscal year 2018 organizational goal. Appeals officials we interviewed said that Appeals’ approach is to test and learn, and that they anticipate issues and complaints will continue to happen as future policy changes are implemented. While outreach is one way to get practitioner reaction as new policies are rolled out, other mechanisms could serve as a way to receive regular customer feedback and to hear the public’s perspective and observations about both current operations as well as proposed IRS policies, programs, and procedures. For example, IRS already uses advisory groups as another way to engage with external partners via open, two- way, external reporting lines for assistance with receiving and analyzing customer feedback as well as offering a mechanism to solicit public input before policies are finalized and implemented. Without an effective mechanism to regularly consider and review customer feedback and policy changes before implementation, Appeals is missing an opportunity to obtain public input on policy changes that can substantially affect the taxpayer’s experience in the appeal process. Possible mechanisms could include leveraging existing IRS advisory resources, exploring development of an Appeals advisory body, or offering a public comment capacity, such as an email address. Engaging with external stakeholders could offer opportunities for Appeals to gain insight on how to bring transparency to its customer service standards and measures along with providing ongoing assistance with considering results from the annual customer satisfaction survey. This would enhance Appeals’ ongoing efforts to improve customer satisfaction with planned service improvements or policy changes and make modifications where appropriate. Each year, Appeals resolves a diverse array of taxpayer appeals of IRS enforcement actions and decisions. Faced with a declining workforce, Appeals has identified that maintaining skills and expertise necessary to review its case load is a top risk to achieving its mission. High retirement eligibility rates underscore the importance for Appeals to be positioned to identify any gaps in the skills of its workforce. Conducting a skills gap analysis specific to Appeals mission needs is a key step towards developing a strategy to help ensure Appeals will retain the necessary tax expertise to review appeals cases across multiple workstreams. Time spent by IRS compliance units on initial review of taxpayer appeals of IRS collection and examination actions can represent a significant portion of the total appeal resolution time. For appeal cases closed in fiscal year 2017, approximately 4 percent of collection appeals cases and nearly one quarter of examination appeal requests took more than 120 days to be transferred from IRS to Appeals. Delays in transferring requests to Appeals affect prompt resolution for the taxpayer and IRS. Additional monitoring of collection transfer time requirements together with establishing transfer time guidelines and procedures for examination appeal review could improve appeal review timeliness and overall taxpayer experience. Appeals maintains data on the time taken to transfer appeals and monitors the progress and time to resolve appeals within its diverse workstreams. Sharing these performance data within IRS could shed light on actual transfer times and aid compliance units in improving and establishing related controls to ensure more timely transfer. Increasing the transparency of total case resolution time with more detailed information by Appeals workstream would improve taxpayers’ understanding about what to expect when choosing to request an appeal. Improving the taxpayer experience with the appeals process also depends on clarity on customer service standards and related performance results. Under GPRAMA and Executive Orders, Treasury is responsible for customer service performance. Publicly stating what service taxpayers should expect and from whom sets the stage for a customer-focused appeals process where taxpayers can feel their story is heard. This also helps fulfill Treasury’s customer service responsibility. Appeals has demonstrated its willingness to analyze customer satisfaction feedback. IRS and Appeals share goals to work with stakeholders, and Appeals has acted to address practitioner reactions to operational changes underway. Developing a mechanism to leverage public input on future policy and procedure proposals would better position Appeals to bolster customer service and effectively implement changes to improve the taxpayer experience. We are making the following five recommendations to IRS and two recommendations to the Department of the Treasury. The Commissioner of Internal Revenue should direct the Chief of Appeals, in coordination with the IRS Human Capital Office, to conduct a skills gap analysis specific to Appeals mission needs and develop a strategy for mitigating any identified gaps. (Recommendation 1) The Commissioner of Internal Revenue should evaluate the existing monitoring for collection due process appeal requests and address deficiencies in collection staff meeting the requirement for timely transfer to the Office of Appeals. (Recommendation 2) The Commissioner of Internal Revenue should establish timeframes and monitoring procedures for timely transfer of taxpayer appeals requests by examination compliance units to the Office of Appeals. (Recommendation 3) The Commissioner of Internal Revenue should direct the Chief of Appeals to regularly report and share with each compliance unit the data on the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals. (Recommendation 4) The Commissioner of Internal Revenue should provide more transparency to taxpayers on historical average total appeal resolution times. This could include publishing average total resolution times by workstream on an Office of Appeals web page as well as including total expected times in the Appeals welcome letter. (Recommendation 5) The Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, should ensure that the Commissioner of Internal Revenue takes action to make Appeals customer service standards and performance results more transparent to the public. This could include publishing customer service standards and related performance measure results on the Office of Appeals web page on IRS.gov. (Recommendation 6) The Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, should ensure that the Commissioner of Internal Revenue takes action to develop a mechanism to solicit and consider public input and customer feedback on a regular basis on current and proposed IRS appeal policies and procedures. This could include leveraging existing IRS advisory bodies or establishing an Office of Appeals advisory body representing the taxpaying public, the tax practitioner community, and businesses to solicit customer perspectives. (Recommendation 7) We provided a draft of this report to the Commissioner of Internal Revenue and the Secretary of the Treasury for review and comment. In its written comments, reprinted in appendix I, IRS agreed with our five recommendations directed to it and plans to provide detailed corrective action plans in its 60-day letter response to Congress. IRS also provided technical comments, which we incorporated where appropriate. In an email from the audit coordinator in the Office of the Deputy Chief Financial Officer, Treasury agreed with our two recommendations directed to it. During the agency comment period, we modified language in recommendations 6 and 7 to clarify Treasury’s role and responsibilities for customer service. Treasury agreed to monitor IRS’s actions to make Appeals customer service standards and performance more transparent as part of its coordination of the President’s Management Agenda cross-agency priority goal for customer experience. Treasury plans to monitor IRS’s actions to develop a mechanism to solicit public input on appeal policies and procedures as part of the audit management process. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or LucasJudyJ@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix II. In addition to the contact named above, MaryLynn Sergent (Assistant Director), Keith O’Brien, (Analyst-in-Charge), James Cook, and Steven Flint, made key contributions to this report. Shea Bader, Jehan Chase, Lisa Pearson, Robert Robinson, Cynthia Saunders, and Tatiana Winger also provided support.", "summary": "The Taxpayer Bill of Rights entitles taxpayers with the right to appeal a decision of the Internal Revenue Service (IRS) in an independent forum. GAO was asked to review this administrative appeal process within IRS. Among other things, this report (1) describes the IRS appeal process and staffing; (2) assesses how IRS monitors and manages the time to receive and resolve taxpayer appeals cases; and (3) evaluates the extent to which Appeals communicates customer service standards and assesses taxpayer satisfaction with the appeal process. GAO reviewed IRS guidance, publications, and documentation on the appeal process. GAO analyzed IRS data for administrative appeal cases closed in fiscal years 2014 through 2017 to compare appeal case resolution time for different types of cases. GAO interviewed IRS officials and a non-generalizable sample of external stakeholders, including attorneys and accountants, knowledgeable about the appeal process. Among other things, GAO compared IRS actions to federal standards for internal control and customer service. The Internal Revenue Service (IRS) has a standard process to resolve a diverse array of taxpayer requests to appeal IRS proposed actions to assess additional taxes and penalties or collect taxes owed. The process begins with a taxpayer filing an appeal with the IRS examination or collection unit proposing the compliance action and ends with a decision from the Office of Appeals (Appeals). Appeals must have staff with expertise in all areas of tax law to review taxpayer appeals. However, its staffing levels declined by nearly 40 percent from 2,172 in fiscal year 2010 to 1,345 in fiscal year 2017. Appeals anticipates a continued risk of losing subject matter expertise given that about one-third of its workforce was eligible for retirement at the end of last fiscal year. Appeals monitors the number of days to resolve taxpayer appeals of examination, collection, and other tax disputes. However, IRS does not monitor the timeliness of transfers of all incoming appeal requests. GAO analysis showed that the time to transfer appeal requests from compliance units varied depending on the type of case (see table below). Collections workstreams —taxpayer appeals where IRS (1) filed a notice of federal tax lien or proposed a levy (collection due process) or (2) rejected an offer to settle a tax liability for less than owed (offer in compromise). The Internal Revenue Manual (IRM), IRS's primary source of instructions to staff, requires transfer to Appeals within 45 days for the largest collection workstream. With manager approval, collection staff may have an additional 45 days to work with the taxpayer. Nearly 90 percent of collection appeals closed in fiscal years 2014 to 2017 were transferred to Appeals within 90 days. Examination workstreams —taxpayer appeals of additional tax and penalty assessments IRS proposed based on its auditing of tax returns over a wide range of examination issues. IRS does not have an IRM requirement with guidelines and procedures for timely transfer for examination appeals. Accordingly, more than 20 percent of examination appeals closed in fiscal years 2014 to 2017 took more than 120 days to be transferred to Appeals. Delays in transferring appeals can result in increased interest costs for taxpayers. Although Appeals maintains data on total appeal resolution time—from IRS receipt to Appeals' decision—such information is not readily transparent to IRS compliance units or the public. GAO analysis of IRS data found that, for fiscal years 2014 to 2017, about 15 percent of all appeal cases closed within 90 days (see figure below). About 85 percent of all cases were resolved within one year of when the taxpayer requested an appeal. Total resolution times differed by case type. However, without easily accessible information on resolution times, taxpayers are not well informed on what to expect when requesting an appeal. Although Appeals has customer a service standard and conducts a customer satisfaction survey, its standard and related performance results are not readily available to the public. Under the GPRA Modernization Act of 2010 (GPRAMA) and Executive Orders, the Department of the Treasury is responsible for customer service performance. Appeals conducts outreach to the tax practitioner community but does not regularly solicit input before policy changes. Without a mechanism, such as leveraging existing IRS advisory groups or alternatively developing its own advisory body, Appeals is missing an opportunity to obtain public input on policy changes affecting the taxpayer's experience in the appeal process. GAO makes seven recommendations to help enhance controls over and transparency of the IRS appeals process (several of the recommendations are detailed on the following page). GAO recommends, among other things, that the Commissioner of Internal Revenue Establish timeframes and monitoring procedures for timely transfer of taxpayer appeals requests by examination compliance units to the Office of Appeals. Direct the Office of Appeals to regularly report and share with each compliance unit the data on the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals. Provide more transparency to taxpayers on historical average total appeal resolution times. GAO recommends, among other things, that the Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, ensure that the Commissioner of Internal Revenue develops a mechanism to solicit and consider customer feedback on a regular basis on current and proposed IRS appeal policies and procedures. Treasury and IRS agreed with GAO's recommendations, and IRS said it will provide detailed corrective action plans.", "document_type": "gao"}
{"report": "The federal government has provided financial assistance to public and private stakeholders for preparedness activities through various grant programs administered by DHS through its component agency, FEMA. Through these grant programs, DHS has sought to enhance the capacity of states, localities, and other entities, such as ports or transit agencies, to prevent, prepare for, protect against, respond to, and recover from, and mitigate a natural or manmade disaster, including terrorist incidents. Two of the largest preparedness grant programs are the SHSP and UASI grant programs. SHSP grants provide federal assistance to support states’ implementation of homeland security strategies to address the identified planning, organization, equipment, training, and exercise needs at the state and local levels to prevent, prepare for, protect against, and respond to acts of terrorism. SHSP grants are annually awarded to all the nation’s 56 states and territories. SHSP grant awards are calculated in two parts. All states and territories are to receive a minimum grant amount required by law, based on a percentage of the total amount of SHSP and UASI appropriations in a given fiscal year. The remaining award amounts are based on FEMA’s risk-based grant assessment model. UASI grants provide federal assistance to address the unique needs of high-threat, high-density urban areas, and assists the areas in building an enhanced and sustainable capacity to prevent, prepare for, protect against, respond to acts of terrorism. Since 2015, Congress has instructed through the Explanatory Statements accompanying the annual DHS Appropriations Acts that the UASI grants should be awarded to urban areas that reflect up to 85 percent of nationwide risk. For the UASI program, FEMA uses the risk-based grant assessment model each year to identify those urban areas that will be eligible to receive funding. Annual funding for the SHSP and UASI programs have generally declined over the period of fiscal years 2008 through 2018, but have remained consistent since fiscal year 2016. Figure 1 shows the changes to SHSP and UASI programs’ annual funding during this period. For example, annual funding for SHSP decreased from about $861 million in fiscal year 2008, to $402 million in fiscal year 2018. During this same period, annual funding for UASI also declined, from about $782 million in fiscal year 2008 to $580 million in fiscal year 2018. However, annual funding for the UASI program has been higher than the SHSP program since fiscal year 2010. Risk=Threat x Vulnerability x Consequence Threat–A natural or man-made occurrence, individual, entity, or action that has or indicates the potential to harm life, information, operations, and/ or property Vulnerability–Physical feature operational attribute that renders an entity, asset, system, network, or geographic area open to exploitation or susceptible to a given hazard. Consequence–Effect of an event, incident, or occurrence, commonly measured in four ways: human, economic, mission, and psychological, but may also include other factors such as impact on the environment. FEMA’s risk-based grant assessment model uses three variables: Threat, Vulnerability, and Consequence. The purpose of this model is to apply a risk management process to provide a structured means of making informed trade-offs and choices about how to use finite resources effectively, and monitoring the effect of those choices. Specifically, inherent “uncertainty” is associated with any effort to develop a risk model such as assessing the risk of terrorist attacks, and thus, requires the application of policy judgments and analytic assumptions. The effect that uncertainty has on the results of the risk model can be especially important if the model produces materially different results in response to even small changes in assumptions, often referred to as the “sensitivity” or “robustness” of a model’s assumptions and results. As we reported in June 2008, FEMA’s risk-based grant methodology and its continuous improvement efforts in estimating risk were part of a reasonable process to assist in determining SHSP and UASI grant allocations. For example, the risk-based grant assessment model used from fiscal year 2001 through 2003 largely relied on measures of population to determine the relative risk of potential grantees, and evolved to measuring risk as the sum of threat, critical infrastructure and population density calculations in fiscal years 2004 and 2005. Further, the fiscal year 2006 process introduced a risk assessment model that included measures of Threat, Vulnerability and Consequences. In June 2008, we reported that the way the risk-based grant assessment model measured vulnerability across states and urban areas was limited. We found that the model considered all states and urban areas equally vulnerable to a successful attack, and as a result, the final risk scores were determined exclusively by the Threat and Consequence scores. Specifically, the risk model did not measure vulnerability for each state and urban area; rather it assigned a vulnerability score of 1.0 to every state and urban area. We recommended that DHS and FEMA formulate a methodology to measure variations in vulnerability across states and urban areas. DHS components concurred with our recommendation to measure vulnerability in a way that captures variations across states and urban areas and apply this measure in future iterations of FEMA’s model. In August 2011, FEMA reported that the agency, in coordination with other DHS components, established a Vulnerability Index for the fiscal year 2011 risk-based grant assessment model to better capture the risk to states and urban areas, thereby addressing our recommendation. DHS and the National Research Council (NRC) have also performed reviews of FEMA’s risk assessment methodologies, providing their own conclusions and recommendations, since our 2008 review. For example, in 2010, the NRC reported that FEMA should strengthen its scientific practices, such as documentation, analyses to determine how changes to a model could affect its results, and peer review by technical experts external to DHS, in order to further develop an understanding of the uncertainties in its terrorism-related risk analyses. Additionally, in 2016, the Homeland Security Advisory Council reported that processes by which FEMA uses to assess risk should be made more inclusive, comprehensive and effective. The Homeland Security Advisory Council recommended the following actions to strengthen this process: FEMA should continue to send risk profiles to states and urban areas to promote timely and meaningful feedback, and enable FEMA to evaluate recommended adjustments. Before each year’s budget submission, FEMA should discuss with congressional appropriators the current grant allocation mechanism. We discuss FEMA’s progress in implementing these recommendations later in this report. While all states and territories receive minimum SHSP program grant allocations by law, the risk-based grant assessment model also informs the grant allocation of the remaining funds to each state. However, for a majority of states each year, their SHSP grant awards are primarily based on a legal minimum amount. For example, in fiscal year 2012, 34 states, like New Mexico, were awarded $2,801,000, which included $2,745,000 based on the minimum amount by law, and $56,000 was based on its risk level. By contrast, New York was one of the high-risk states based on the risk model. For that same fiscal year (2012) New York received a total of $55,610,000, which included $2,745,000 based on the minimum amount by law, plus $52,865,000 based on its risk level. Over the period from fiscal years 2008 through 2018, the number of low- risk states whose SHSP grant awards were primarily based on the legal minimum amount had varied from year to year, from 19 states in fiscal year 2008, to 37 states in fiscal year 2018, as shown in table 1. In addition, from fiscal year 2008 through fiscal year 2018, there was a decrease in the percent of total SHSP funds awarded to states and territories based on FEMA’s risk model. The percent of total SHSP funding awarded to states and territories based on FEMA’s model ranged from a high of 63 percent in fiscal year 2009 (about $536 million of the $851 million of total SHSP funds), to 51 percent (about $149 million of $294 million of total SHSP funds) for fiscal year 2012. For fiscal year 2018, the total SHSP funds awarded to states and territories based on the risk-based grant assessment model was 55 percent—about $220 million of $402 million. For specific details on SHSP grant allocations for fiscal years 2008 through 2018 by states and territories, see appendix I, table 4. The UASI program uses FEMA’s risk-based grant assessment model to identify which of the 100 of the nation’s largest urban areas are eligible for grant awards in a particular fiscal year. Then, FEMA’s risk model also helps inform DHS leadership’s decisions on the final funding amounts for each grantee, according to FEMA officials. Specifically, FEMA annually assesses the risk of the 100 most populous metropolitan statistical areas—a geographical region with a relatively high population density at its core and close economic ties throughout the area—as defined by the Office of Management and Budget, in determining the eligible urban areas. From these 100 eligible urban areas, the risk-based grant assessment model identifies those urban areas that reflect recent congressional intent that up to eighty-five percent (85%) of nationwide risk is funded each year. Those urban areas below this 85 percent threshold are ineligible for UASI grant awards in that fiscal year, according to FEMA officials. From fiscal years 2008 through 2018, the number of UASI grantees has remained relatively stable since fiscal year 2011. As figure 2 shows, the annual number of grantees has fluctuated from fiscal years 2008 through 2018, ranging from 60 to 64 grantees during fiscal years 2008, 2009 and 2010. However, since fiscal year 2011 the number of UASI grantees has averaged 31 urban areas, with a high of 39 urban areas in fiscal year 2014 and a low of 25 urban areas in fiscal year 2013. For fiscal year 2018, 32 urban areas were UASI grantees. For additional details on UASI grant awards for fiscal years 2008 through 2018 by urban areas, see appendix I, table 5. Because the UASI grant program is required by annual congressional guidance to fund only those urban areas that comprise up to 85 percent of risk nationally, this eligibility cut off can result in different urban areas being eligible from one year to the next. Specifically, as we demonstrated in June 2008, the variation of risk across urban areas takes on the distribution curve illustrated in figure 3. The few urban areas with the highest relative risk score are represented along the steep part of the relative risk curve. For example, those urban areas receiving the highest awards, informed by their risk scores and ranks, are generally the same each fiscal year: New York City, Los Angeles, and Chicago, as seen in table 2. Those urban areas that have less relative risk are represented along the flat section of the curve. There are urban areas with less risk that may not fall within the 85 percent of risk nationally during a specific year and thus would be ineligible to receive UASI funding during that year. Table 3 lists the lowest-funded urban areas for the last 5 fiscal years, based on our analysis of the funding amounts each received within each fiscal year. For example, during the period of fiscal year 2008 through fiscal year 2018 San Antonio, Texas, and Hampton Roads, Virginia only received awards in fiscal years 2008, 2009, 2014, 2017, and 2018. In addition to changes to urban areas’ risk ranking from one year to the next, the amount that an urban area received of the total amount of UASI funds in a given year can change. FEMA has established a process for developing grant award funding options based on the results of the risk- based grant assessment model. These funding options are provided to the Secretary of Homeland Security for consideration and final approval. According to FEMA officials, the options may vary each year based on DHS leadership’s priorities and concerns at the time; however, all options represent only those eligible grantees that represent up to 85 percent of the nation’s risk, as determined by the risk-based grant assessment model. In fiscal year 2013, FEMA shifted its UASI grant funding to a process referred to as “funding bands.” In fiscal year 2018, for example, UASI grantees such as Orlando, Florida; Hampton Roads, Virginia; and San Antonio, Texas each received a $1.5 million UASI grant, whereas a grouping of UASI grantees that included Sacramento, California; Pittsburgh, Pennsylvania; and Portland, Oregon each received $2.5 million. According to FEMA officials, grouping jurisdictions with similar risk scores into funding bands is an effort to stabilize and retain grantees’ funding levels over multiple years, as annual UASI grants will fund projects that are multiyear investments and carried out over a 24 to 36-month performance period. For example, if one jurisdiction increased by four ranks and another jurisdiction in the same group dropped six ranks, the two jurisdictions would stay in the same funding band if the overall risk scores remained close together. The purpose of the funding bands is to ensure that some consistency in funding exists for jurisdictions, given minor changes in the relative risk ranking. FEMA looks at the natural risk breaks and historical grant allocation data for each year. For example, each year FEMA presents for consideration by DHS leadership the historical funding and the number of urban areas that have been placed in specific funding bands in prior grant years, if any, and the differences between the relative risk scores in the current fiscal year. According to FEMA officials, the last few grant years had produced similar funding bands, which are subject to change depending on DHS leadership’s final decisions. Since 2008, FEMA has taken a number of steps to assess and improve its risk-based grant assessment model for allocating grants based on past reviews, our prior recommendations, and various changes related to evolving terrorist threats and real-world scenarios. For example, FEMA added a Vulnerability Index to its risk model in 2011 in response to our 2008 recommendation. Most recently, for fiscal year 2018, FEMA has included a “soft target index.” According to FEMA officials, this index was added to account for the current threat for areas where crowds congregate. Figure 4 illustrates the timeline of FEMA changes to the risk- based assessment model and prior assessments. Figure 5 depicts the risk-based grant assessment model used for fiscal year 2018 SHSP and UASI grant awards. Figure 6 depicts the changes in the Threat, Vulnerability, and Consequence indexes used in the risk-based grant assessments model for fiscal year 2008, compared to 2018. As we noted above, the 2008 risk model did not measure Vulnerability for each state and urban area, and risk scores were essentially determined by Threat and Consequences indexes. Changes to the Consequence Index can have the most impact on the relative risk scores because of the weight of this index (50 percent), relative to the weights for the Threat and Vulnerability indexes. Further, the weight for population within the Consequence Index represented 30 percent of the total fiscal year 2018 risk model value. As a result, the weight for the population index was greater than the weights of either the Threat Index or Vulnerability Index, each 25 percent. FEMA has decreased the weight for the population index over time, from 40 percent in 2008 to 30 in 2011, where it has remained consistent through 2018. For fiscal year 2018, FEMA modified how the population index was calculated within the Consequence Index to better account for attacks staged by individuals, so-called lone wolves. FEMA did so, in part, by reducing the importance of population density within the population index. In past risk models, the population index had favored high-density, high- rise urban areas, commensurate with building destruction scenarios — the 9/11-style attack scenarios that focused on large building destruction events, according to FEMA officials. The 2018 change to cap population density in the population index reduces the impact those extremely-dense population areas have in the methodology, according to FEMA officials. The other measures used to make up the Consequence Index remain relatively unchanged since our review in 2008, although FEMA has renamed the indexes. As explained earlier, FEMA added a Vulnerability Index to its risk-based grant assessment model in 2011, in response to our 2008 recommendation. According to FEMA officials, the Vulnerability Index helps support what DHS is trying to protect, primarily the protection of citizens and critical infrastructure. For example, the Vulnerability Index includes a measure designed to assess the extent that certain types of national critical infrastructure assets may be considered for possible attack. This Targeted Infrastructure Index measure uses actionable intelligence on types of critical infrastructure targets, such as aviation, mass transit and commuter rail. FEMA works with DHS’s National Protection and Programs Directorate to match its critical infrastructure dataset to actionable intelligence from DHS’s Office of Intelligence & Analysis to compile this measure. Vulnerability Index Designed to measure the likelihood of a successful attack in a state or urban area, based on a) intelligence information of those critical infrastructure assets identified by foreign or domestic terrorists; b) the extent of international borders entries (land, sea and air) located in a state or urban area, and c) special events where crowds congregate and are susceptible to homegrown extremism and lone wolf attacks. For the fiscal year 2018 grant, FEMA has included a “soft target index.” According to FEMA officials, this index was added to account for the current threat for areas where crowds congregate. Based on previous feedback received through this process, FEMA updated the fiscal year 2018 risk methodology to better account for the nation’s current threat environment. The soft target index is composed of two new data elements: Visitors—domestic and international—using the same data used in the calculation of the Population Index; and Special events measure—uses Special Event Assessment Rating data from DHS Office of Operations Coordination to identify large events that are state and local events that may require federal assistance. Examples of such events include the Super Bowl, the Boston Marathon and New Year’s Eve in Times Square. In fiscal year 2018, FEMA added a new “isolation” measure to account for the challenges of response for those states, territories, and urban areas outside the contiguous United States, who rely on prompt mutual aid from neighboring jurisdictions. According to FEMA officials, the isolation data element was included as a response to challenges the agency witnessed as a result of the 2017 Hurricane season, specifically the unique challenges of distant U.S. territories receiving timely mutual aid from other states. For example, if Hawaii, Guam or American Samoa were attacked, there would be little to no outside help for a number of days. As a result, FEMA modified the fiscal year 2018 Border Crossings data element weight, which was dropped from 6 percent to 4 percent, in order to establish a 2 percent weight for the isolation measure. The weight of the Threat Index was raised from 20 percent to 30 percent in fiscal year 2011, and has been modified again for fiscal year 2018. Specifically, according to FEMA and DHS officials, DHS leadership made a policy decision to reduce the Threat Index’s weight from 30 percent in 2017, to 25 percent in 2018, due to the change in current threat environment, since Congress directed FEMA in the Explanatory Statement accompanying the FY 2017 DHS Appropriations Act to review the risk model to account for this changing threat environment. FEMA officials further stated that they assumed, as domestic terrorism and soft targets are considered to be prevalent nationwide and pose more of a challenge in identifying the source of actionable threats. FEMA officials stated that this modification to the Threat Index better reflects real-world scenarios. Since fiscal year 2012, FEMA has included information on domestic terrorism as well as international terrorism in its Threat Index. According to DHS officials, home grown extremism is also a likely threat, often through lone wolf attacks. DHS officials decided to assign all urban areas a minimum threat score to reflect the fact that all areas have some level of threat. According to DHS officials, the addition of a domestic terror threat measure resulted in a decrease in the variation of threat scores across states and urban areas. According to DHS officials, lone wolf attacks are difficult to determine who the actors may be, or when and where they will attack. FEMA annually transmits risk profile information to states and urban areas to promote timely and meaningful feedback. According to FEMA officials, draft risk profiles are sent to all 56 states and territories and 100 eligible urban areas closely after the enactment of DHS’s annual appropriations. States and urban areas are given a 2-week period prior to the release of the Notices of Funding Opportunity to review their draft risk profiles and provide FEMA any comments or data corrections that should be considered. According to FEMA officials, it encourages and welcomes stakeholders to make suggestions for new or different data sets for the subsequent fiscal year's risk assessment at any time during the year convenient to the stakeholder. FEMA also conducts webinars during this period to can explain the risk profiles in detail, as well as discuss any updates to data sets and/or any enhancements to the risk assessment. This will often result in feedback on data elements and the methodology of the risk-based grant assessment model, according to FEMA officials. According to FEMA officials, this feedback process has been used to help guide FEMA’s consideration of enhancements to the risk-based grant assessment model. For example, FEMA officials noted that this process helped them in their efforts to develop the soft targets index into the 2018 risk model. In 2010, the National Research Council (NRC) recommended that incorporating scientific practices can provide decision makers a further understanding of the effects of its policy judgments and assumptions—i.e. addressing uncertainties—in its terrorism-related risk analyses. The NRC identified “good scientific practice” for model-based work. Specifically, the NRC recommended that detailed documentation for all risk models, including rigorous mathematical formulations, be implemented department-wide. Additionally, the NRC recommended that all risk models undergo verification and validation—or a sensitivity analysis at the least—of its risk-based grant assessment model. Finally, the NRC recommended that FEMA should undertake an external peer review by technical experts outside of DHS, and review its risk-informed formulas in order to identify issues such as logic flaws, evaluate the ramifications of the choices of weightings and parameters, and improve the risk model’s transparency. However, FEMA has not fully adopted these scientific practices for its risk-based grant assessment model. Documentation: FEMA documentation on the sources of data used for the model’s calculations does not include information that would enable a reviewer to understand the underlying assumptions that form the basis for its risk-based grant assessment model—such as the size of the weights assigned to Threat, Vulnerability, and Consequence, or the justification for changes to these weights from one year to the next. FEMA officials stated that they focus their limited time and resources on developing the executive summary-level materials that DHS leadership will use to determine final grant eligibility and grant allocation amounts. Also, to a lesser extent, FEMA officials said they rely on the expertise of the subject matter experts from DHS’s Office of Intelligence and Analysis, and DHS’s National Protection and Preparedness Division’s Office of Cyber and Infrastructure Analysis, parts of DHS that contribute to the annual risk assessment process. In April 2018, we identified documentation as one of the key methodological elements to the baseline structure of an economic analysis. Specifically, the elements include that the analysis is clearly written with a plain language summary, has clearly labeled tables that describe the data used and results, and has a conclusion that is consistent with these results. The analysis cites all sources used and documents that it is based on the best available economic information. The analysis documents that it complies with a robust quality assurance process and, where applicable, the Information Quality Act, and should disclose the use and contributions of contractors and outside consultants. FEMA officials agreed with our analysis of FEMA’s supporting documentation, and officials stated that maintaining additional documentation could further assist reviewers. Documenting how subject matter expert assumptions are made would help FEMA increase the transparency of the model for key internal and external stakeholders. In-Depth Analyses: Similarly, we could not determine whether FEMA sufficiently performed all the analyses of the model’s sensitivity needed to determine how changes to its risk-based grant assessment model could affect the resulting risk scores. FEMA officials stated that they have only analyzed the effect of a data element when it has been added to the model (e.g.: the Soft Target Index in 2018). Further, FEMA officials were unable to provide us with documentation on their sensitivity analyses processes or their results. DHS’s Risk Lexicon states that sensitivity analysis can be used to examine how individual variables can affect the outputs of risk assessment methodologies. In addition, OMB Circular A-94 recommends that the outcomes from a risk model should be analyzed to determine how sensitive such outcomes are to changes in the model’s assumptions. The assumptions that deserve the most attention will depend on the dominant elements and the areas of greatest uncertainty of the program being analyzed. In addition, research in the actuarial sciences also states that sensitivity analysis “is of fundamental importance to risk analysts, especially in the presence of complex computational models with uncertain inputs.” As we stated earlier, understanding the extent that uncertainty has on the results of the model can be especially important if the model produces materially different results in response to even small changes in assumptions—often referred to as the “sensitivity” or “robustness” of a model’s assumptions and results. We have reported on FEMA’s risk- based grant assessment model in June 2008 and March 2013, where we found grant years when the risk model was sensitive to even small changes. For example, we noted that a potential increase or decrease in a measure would have resulted in one urban area displacing the eligibility of another, thereby potentially shifting funding as well. FEMA officials stated that they focus their limited time and resources on developing the executive summary-level materials that DHS leadership will use to determine final grant eligibility and grant allocation amounts. FEMA officials agreed that they could better document the steps used in their analyses across all the model’s measures and weights so that a complete understanding of potential impacts are documented and can be made available to leadership when making decisions about changes. FEMA’s implementation of sensitivity analyses could help the agency to assess changes to the risk-based grant assessment model including the introduction of new data elements into Threat, Vulnerability, and Consequence indexes, the modifications to how existing data elements are calculated, and the changing of the weights assigned to the Threat, Vulnerability, and Consequence indexes. Further, FEMA’s implementation of sensitivity analyses has the ability to show decision makers the impact or predicted impact of adjustments to FEMA’s risk- based grant assessment model, including with potential shifts in funding towards or away from certain grantees. Use of External Peer Review: FEMA has not subjected its risk-based grant assessment model to a peer review by independent, external technical experts, as previously recommended in 2010 by the NRC. According to FEMA officials, its risk assessment methodology has undergone comprehensive internal reconsideration over time to better reflect real-world scenarios, but such reviews have not included external peer reviews. FEMA officials stated that its risk-based grant assessment model has gone through past reviews including a review as part of DHS’s quadrennial review in 2014, and the model is reviewed by internal subject matter experts from DHS’s Office of Intelligence and Analysis, and DHS’s National Protection and Preparedness Division’s Office of Cyber and Infrastructure Analysis as part of the annual risk assessment process. FEMA officials stated that the agency is exploring the possibility of participating in a DHS collaborative group to internally review and provide feedback on the model’s underlying assumptions and methods. Such a group could review the underlying components of the current risk-based grant assessment model and suggest improvements, as well as present and evaluate other risk assessment theories and approaches. FEMA officials told us they have encountered time and resources constraints on establishing an external peer review process. As we have previously reported, independent external peer reviews can increase the probability of success by improving the technical quality of projects and the credibility of the decision-making process, and provide reasonable assurance that the agency’s approach is reproducible and defensible. In addition, in December 2004, OMB issued the memorandum “Final Information Quality Bulletin for Peer Review” which established government-wide guidance aimed at enhancing the practice of peer review of government science documents. OMB noted that peer review can increase the quality and credibility of the scientific information generated across the federal government, which was an effort to improve the quality of the scientific information upon which policy decisions are based. OMB also noted that, while peer review may take a variety of forms, agencies will need to consider at least the following issues when coordinating an external peer review: individual versus panel review; timing; scope of the review; selection of reviewers; disclosure and attribution; public participation; disposition of reviewer comments; and adequacy of prior peer review. These scientific processes are designed to help decision makers better understand the impact or predicted impact of risk management alternatives, and provide greater confidence in the reliability of the risk assessment model’s results. Full implementation of these processes better position FEMA to provide further assurances that their risk-based grant assessment model and grant allocation approaches are reasonable, of high-quality, and credible. Given that risk management has been endorsed by the federal government as a way to direct finite resources to states and those urban areas that are most at risk of terrorist attack, it is important that FEMA’s risk-based grant assessment model supports the application of policy judgments and analytic assumptions in the model’s role of allocating those limited resources. Decreased funding levels for SHSP and UASI grant programs have increased the importance of using risk management techniques to more effectively target finite federal dollars. DHS and FEMA have strengthened its risk-based grant assessment model for allocating grants, taking into account analysis and recommendations from a variety of reviews. These improvements include the addition of a Vulnerability Index and modifications to the Threat Index. We have identified opportunities where FEMA could strengthen its scientific practices. First, documenting the model’s underlying assumptions and the results of sensitivity analysis can assist decision makers in better understanding the predicted impact of risk management alternatives. Second, expanding the use of sensitivity analysis could further enhance the model. Developing a greater understanding of the how uncertainty affects its risk-based grant assessment model’s results helps achieve the objectives of risk management. Third, coordinating an independent external peer review of the methodology of its risk-based grant assessment model would better position the agency to provide reasonable assurance that FEMA’s risk model and grant allocation approach that FEMA uses for its SHSP and UASI programs are reasonable, of high-quality, and credible. Applying such scientific practices could assist FEMA in further strengthening its risk-based grant assessment model. We are making the following three recommendations to FEMA. The FEMA Administrator should fully document the underlying assumptions and justifications that form the basis of the risk-based grant assessment model, such as the size of the weights assigned to Threat, Vulnerability, and Consequence, or the justification for changes to these weights from one year to the next. The FEMA Administrator should perform sensitivity analyses to verify how changes to the risk-based grant assessment model could affect the resulting risk scores, and document the results. The FEMA Administrator should take steps to coordinate an independent, external peer review of its risk-based grant assessment model. We provided a draft of this product to the FEMA and DHS for comment. In its comments, reproduced in appendix II, FEMA generally concurred with our findings and three recommendations. In FEMA’s concurrence to our first recommendation that the agency fully document the underlying assumptions and justifications that form the basis of the risk-based grant assessment model, FEMA requested that GAO consider this recommendation resolved and closed as implemented. As part of FEMA’s response, they reiterate their process of providing draft Risk Profiles to all 100 urban areas and 56 states and territories and their annual communications to Congress on how FEMA calculated risk and computed grant awards. We recognized FEMA’s stakeholder feedback efforts in this report. However, as we noted, FEMA’s documentation on the sources of data used for the model’s calculations does not include information that would enable a reviewer to understand the underlying assumptions that form the basis for its risk-based grant assessment model. Further, as stated earlier, documentation is one of the key methodological elements to the baseline structure of this type of analysis, documenting that it complies with a robust quality assurance process and, where applicable, the Information Quality Act, and should disclose the use and contributions of contractors and outside consultants. In order to fully implement this recommendation, documenting how subject matter expert assumptions are made would help FEMA increase the transparency of the model for key internal and external stakeholders, and will further support the efforts of an independent external peer review of FEMA’s risk-based assessment model. Regarding the second recommendation, FEMA concurred, stating that the agency will expand the use of sensitivity analysis to review the entire risk methodology, and will also document these results for leadership review, as appropriate. Finally, regarding the third recommendation, FEMA concurred, stating that they will coordinate an independent external peer review and develop a detailed written response to leadership for further appropriate action. FEMA and DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, and other interested parties. This report will also be available at no charge on our Web site at http://www.gao.gov. Should you or your staff have any questions concerning this report, please contact me at (202) 512-8777 or CurrieC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Chris P. Currie, at (202) 512-8777 or CurrieC@gao.gov. In addition, key contributors to this report were Aditi Archer, Chris Keisling, Assistant Director, John Vocino, Analyst-in-Charge, Chuck Bausell, Dominick Dale, Dorian Dunbar, Eric Hauswirth, Serena Lo, Heidi Nielson, and Hadley Nobles.", "summary": "FEMA, a component of DHS, provides preparedness grants to state, local, tribal, and territorial governments to help prepare for, prevent, protect against, respond to, recover from and mitigate terrorist attacks or other disasters. SHSP grants fund the nation's 56 states and territories, while UASI grants fund eligible urban areas. Grant allocations have been based, in part, on FEMA's risk-based grant assessment model, with states and urban areas deemed to be at higher risk receiving more grant dollars than those deemed at lower risk. Since 2008, GAO and others have assessed the model and made recommendations to strengthen it. This report 1) describes SHSP and UASI grant awards during fiscal years 2008 through 2018, and factors affecting grant distributions; and 2) examines the steps that FEMA has taken to strengthen its risk assessment model for allocating preparedness grants, and any additional opportunities to improve the model. GAO analyzed the information in FEMA's model, and data on SHSP and UASI grant awards for fiscal years 2008 through 2018. GAO also interviewed FEMA and DHS officials and collected documents. GAO found that various factors affected Federal Emergency Management Agency (FEMA) State Homeland Security Program (SHSP) and Urban Area Security Initiative (UASI) grant awards from fiscal year 2008 through 2018. SHSP grant awards to states were based on two factors—(1) minimum amounts set in law each year, and (2) FEMA's risk model. For example, in fiscal year 2012, each state was to receive a minimum of approximately $2.74 million, with each state receiving additional funds based on its relative risk score. Conversely, UASI grant awards are made based on its FEMA's risk-based grant assessment model, which ranks each urban area relative to others in that year, and Department of Homeland Security (DHS) leadership decisions on how funding should be allocated. From fiscal year 2008 through 2018, the number of USAI grantees varied from year to year (see figure below). Since 2008, FEMA has taken steps to strengthen its risk-based grant assessment model, but has not incorporated additional scientific practices into its model. For example, in 2011 FEMA included more information in its model on potential targets and their vulnerability in each state and urban area, addressing a prior GAO recommendation. More recently in 2018, FEMA added additional factors to better assess vulnerability in each state and urban area, such as the number of special events where large crowds gather and soft targets susceptible to lone wolf attacks, among other things. However, GAO found that FEMA does not fully utilize scientific practices recognized by the National Research Council and the Office of Management and Budget as best practices. Specifically, FEMA did not fully document its model's underlying assumptions, such as the weights in its model or the justification for changes to these weights. FEMA also did not perform the level of analysis needed to determine how changes to its model could affect the resulting risk scores. Finally, FEMA has not coordinated an independent external peer review of its model. Applying such scientific practices could assist FEMA in further strengthening its model. GAO is making three recommendations to FEMA to further strengthen its risk-based grant assessment model by (1) fully documenting the model's assumptions and justifications, (2) performing additional in-depth analyses, and (3) coordinating an external peer review. FEMA concurred with our recommendations.", "document_type": "gao"}
{"report": "The Selected Reserve comprises over 811,000 full- and part-time members from the military services’ respective National Guard and reserve components, whom DOD can call to active duty to augment military forces in time of war or national emergency. DOD requires these reservists to maintain readiness by participating regularly in training to maintain the military skills needed to perform their mission. About 91 percent of the members of the Selected Reserve, or 735,876 reservists, are part-time, performing military service in addition to their civilian employment and careers. Reservists typically train for about 1 weekend a month and 2 weeks a year. Reservists may also be required to participate in longer duration training to develop and maintain specialized skills related to their military occupation, such as cyber specialists, or to perform other activities such as backfilling positions in other reserve or active units. The following are descriptions of reservists’ required training and other duties: Annual Training: All six reserve components require an annual training period, typically 2 weeks, to acquire and maintain required military skills. Inactive Duty Training: This training is commonly referred to as the “1 weekend a month” commitment, and reservists fulfill this commitment in connection with prescribed training or maintenance activities of the units to which they are assigned. Active Duty for Training: So that reservists acquire and maintain required military skills, individuals serving as reservists participate in training programs such as initial basic training and advanced individual training, and may attend full time specialized schools. The duration of Active Duty for Training varies considerably, from days to several months. Active Duty Other than Training: All six reserve components may require that reservists perform other support activities, such as backfilling a position in a reserve or active unit. For a variety of reasons, reservists may not live in the same location where they train. For example, reservists may relocate for their civilian occupation, and officials told us that as reservists are promoted, command opportunities are more geographically dispersed. As a result, travel may be necessary to facilitate their service. DOD’s six reserve components reported paying or reimbursing over $925 million in travel costs for reservists in fiscal year 2015, representing about 4.3 percent of the total obligations identified in the Reserve Personnel accounts. With an actual part-time endstrength of 742,683 reservists in fiscal year 2015, DOD spent an average cost of about $1,246 per reservist. Officials told us that DOD does not specifically collect and track data on reservists’ unreimbursed travel expenses, which are therefore unknown. Officials told us that reservists process their travel claims through DOD-wide or military-service-based electronic data systems, such as the Defense Travel Service or the Air Force’s Reserve Travel System, or sometimes using hard-copy forms, depending on the type of duty performed, the reserve component, and other factors. DOD’s Joint Travel Regulations govern the extent to which reservists are eligible to be reimbursed for travel expenses to participate in required training or in other duties. The regulations authorize the reimbursement of different types of expenses depending on the nature and duration of the assignment. Eligible reimbursements include: Per diem, which includes reimbursement for food, temporary lodging, Transportation expenses, ranging from reimbursement for mileage traveled in reservists’ private vehicles to reimbursement for commercial flights; Permanent Change of Station reimbursements related to reservists changing their home of record to the location of the assignment, such as reimbursement for the movement of household goods; and Basic Allowance for Housing, which is based on the costs of adequate rental properties for civilians with comparable income levels in the same location as the permanent duty station, which in the case of reservists is generally the location of their home; is received when reservists are in an active duty status, which includes Active Duty for Training and Active Duty Other than Training; and is determined based on the duration of reservists’ active duty assignments. Reservists also receive cash compensation for the various types of training and other duties they perform; non-cash compensation, such as access to TRICARE Reserve Select and education benefits; and deferred compensation, such as participation in the military retirement system. In addition, reservists may be able to take advantage of a federal tax deduction for out-of-pocket travel expenses associated with their service. Reservists may incur expenses under certain conditions in connection with their service that are not reimbursable under DOD’s travel regulations. Officials responsible for travel regulations and reserve policy issues told us that this can occur because: (1) the cost to attend Inactive Duty Training is a reservist’s responsibility, except in limited circumstances; and (2) DOD designates longer duration training or assignments as a Permanent Change of Station—a change in a reservist’s home of record—and not as temporary travel. Under most circumstances, travel expenses to and from the 1 weekend a month training commitment are reservists’ responsibility with no reimbursement provided, and as a result reservists may incur unreimbursed travel expenses to attend this training. Specifically, the Joint Travel Regulations states that a reserve component member performing Inactive Duty Training ordinarily receives no travel or transportation allowances, particularly when the training duty is performed at the reservist’s assigned unit location. This principle is reflected in travel policy such as the Navy Reserve’s requirement that reservists who live more than 100 miles from their Inactive Duty Training site sign a waiver acknowledging that they will not be reimbursed for travel expenses. Navy travel policy, citing a previous version of the Joint Travel Regulations, states that as part of the requirement to perform Inactive Duty Training, “inherent to this obligation is the travel between the member’s home and the location at which the member normally performs drills” with no reimbursement provided. To mitigate expenses incurred by reservists traveling long distances, the National Defense Authorization Act for Fiscal Year 2008 established a reimbursement program for Inactive Duty Training whereby each component may, at the discretion of the service Secretary and under certain circumstances, provide reimbursement of up to $300 in expenses for each roundtrip to the training location. The Joint Travel Regulations further specifies that reservists must travel no fewer than 150 miles or greater one way from their primary residence to their normal drilling site to be eligible. DOD spent nearly $33.5 million on Inactive Duty Training travel costs in fiscal year 2015. While each service Secretary decides whether an individual component can participate in the program, the Joint Travel Regulations requires such programs to make servicemembers eligible for reimbursement when they meet one of the following criteria: They are qualified in a skill designated as critically short by the Secretary assigned to a unit of the Selected Reserve with a critical staffing shortage, or in a pay grade in the reservists’ component with a critical staffing shortage; or assigned to a unit or position that is disestablished or relocated as a result of Base Realignment and Closure or other force structure reallocation. See table 1 for scenarios illustrating reimbursement eligibility for Inactive Duty Training expenses in the Army Reserve. Three of the six reserve components have established policies to allow for reimbursement of expenses of travel related to Inactive Duty Training, according to component-specific criteria. The Marine Corps Reserve and the Air Force Reserve authorize Inactive Duty Training reimbursement for several occupations, and in the case of the Marine Corps Reserve, entire rank levels. The Army Reserve authorizes reimbursement, but according to its policy targets reimbursements to soldiers and units with the highest payoff in achieving readiness. Specifically, Army Reserve commanders establish Inactive Duty Training reimbursement policy that designates and prioritizes positions, units, and occupational specialties eligible to participate. Both Air National Guard and Army National Guard officials told us that their respective components do not authorize Inactive Duty Training reimbursement. Similarly, Navy officials told us that the Navy does not participate in the reimbursement program, primarily because under its training construct Navy reservists conduct most Inactive Duty Training at a Navy Operational Support Center close to their homes, thereby limiting the training that may occur at a further distance from their homes to a minority of sessions. Travel distances for reservists to their drilling site may have increased over time. For example, the 2012 Report of the Eleventh Quadrennial Review of Military Compensation noted that reservists traditionally lived near a reserve site or drilling location, but reported that at the time of its review more than 100,000 reservists lived more than 100 miles from their drilling locations. Further, according to a 2008 report by the Commission on the National Guard and Reserves, after Base Realignment and Closure actions some reservists may have fewer locations available to them to perform such training. As a result, reservists may be travelling greater distances to attend such training. Officials also told us that the travel distances required to attend Inactive Duty Training can be further increased as reservists progress in their careers in certain occupational specialties or ranks. For example, officials from the Marine Corps Reserve told us that as reservists are promoted to higher ranks, there are fewer positions, which can result in long-distance travel by reservists, while Army Reserve officials told us that some reservists may turn down command positions to avoid long-distance travel. DOD’s Joint Travel Regulations treats Active Duty for Training and other assignments of long-duration as a Permanent Change of Station, or a change in a reservist’s home of record, generally his or her civilian home, and not as Temporary Duty. The treatment of long-duration training or other assignments as a Permanent Change of Station applies equally to reservists and active component members, as DOD travel regulations require all military personnel at a given training or assignment to be in the same status. However, officials told us that due to the interim nature of such assignments reservists are unlikely to move their families, and reservists may incur unreimbursed expenses due to the cost of maintaining two homes. For example, according to a reserve policy official, based on an internal analysis, about two-thirds of Air Reserve members on long-duration training do not move from their civilian homes. Further, the 2012 Report of the Eleventh Quadrennial Review of Military Compensation concluded that reservists would likely return to their civilian homes and employers at the conclusion of their assignments. In addition, officials stated that long-duration training is becoming more common. For example, Army language or medical training can routinely last longer than 140 days and require a Permanent Change of Station. The treatment of long-duration training and other assignments as a Permanent Change of Station and not as Temporary Duty affects the type of expenses that will be reimbursed and the Basic Allowance for Housing rate received by reservists. A Permanent Change of Station is triggered when Active Duty for Training assignments last 140 days or longer and Active Duty for Other than Training assignments last 181 days or longer. The changes in eligibility for reimbursement discussed below can affect the amounts of reservists’ unreimbursed expenses: Per diem: Reservists on training or other assignments that are treated as a Permanent Change of Station are not eligible for reimbursement of per diem expenses, including for temporary lodging and meals. Reservists are unlikely to relocate their civilian homes for such long-duration, though interim, training and assignments. They may therefore incur expenses typically associated with a Temporary Duty assignment, such as temporary lodging expenses, but for which they cannot be reimbursed. Basic Allowance for Housing: Reservists on training or other assignments that are treated as a Permanent Change of Station receive an adjusted Basic Allowance for Housing based on the location of their new duty station. This adjusted housing allowance applies regardless of whether a reservist actually moves his or her civilian home and family to the new duty station. Depending on the new duty location, a reservist may receive Basic Allowance for Housing at a higher or lower rate than the allowance amount based on the location of their civilian home. If a reservist were in Temporary Duty status—training for 139 days or fewer, or an assignment for 180 days or fewer—he or she would continue to receive Basic Allowance for Housing based on the cost of maintaining his or her civilian home. If reservists decide not to relocate themselves and their families to the location of the long-duration training or assignment, reservists may face unreimbursed costs for maintaining two homes. Once a Permanent Change of Station has been triggered, a reservist is no longer in a Temporary Duty status and may no longer receive per diem for temporary lodging. Reservists must either (1) move to government lodging and forego any Basic Allowance for Housing, or (2) receive Basic Allowance for Housing based on the location of the assignment, which may be higher or lower than the allowance based on the location of their home of record, generally their civilian home. In the first situation, reservists must maintain their civilian home without payment of a Basic Allowance for Housing, and thus may face unreimbursed costs associated with the home’s maintenance. In the second situation, reservists must maintain both their civilian home and a new home with a Basic Allowance for Housing adjusted for the location of the home at the new duty station. Unreimbursed costs may result if the Basic Allowance for Housing adjusted for the location of the new duty station is significantly lower than the housing costs in the area of the reservist’s civilian home. As shown in the 2017 illustrative example in figure 1, reservists receive different levels of payment for the temporary lodging allowance and the Basic Allowance for Housing based on the duration of their Active Duty for Training assignments. A service Secretary may grant a waiver for individuals attending a training course to maintain Temporary Duty status beyond the 140-day time limit, which normally would require a Permanent Change of Station. However, such waivers apply to all course attendees, whether they are members of the active or reserve components. DOD maintains data on the number of these waivers, but not for the discrete number of waivers for reserve component training. Individual reservists can also apply for a waiver for the rate of their Basic Allowance for Housing payment to be based on the location of their dependents, effectively allowing payment at the geographic rate of a reservist’s civilian home. However, this option is not available to reservists without dependents. Within the last decade, DOD and the services have conducted a few limited assessments of the potential effect of unreimbursed out-of-pocket travel expenses incurred by reservists to perform required training and other reserve activities on retention of reservists. Although various entities have raised concerns regarding reservists’ out-of-pocket travel expenses, the available information is either anecdotal or applicable to only one reserve component or one aspect of travel policy. DOD reports have noted that such unreimbursed travel expenses, among other factors, may be a challenge for reservists and may therefore affect retention. For example, in 2008, the Commission on the National Guard and Reserves reported that travel requirements and associated costs had a negative effect on DOD’s ability to recruit and retain qualified personnel, particularly for leadership positions. In addition, in minutes of its meetings, the Air Reserve Forces Policy Committee has called for changes to the Permanent Change of Station requirement for long- duration training, noting in 2015 that it, “frequently creates financial hardship for RC Airmen who typically maintain a residence near their assigned unit or civilian employer.” Three DOD studies have explored potential links between reservists’ unreimbursed travel expenses and retention: A 2012 survey commissioned by the Army Reserve of a small sample of reservist officers potentially eligible for battalion command positions reported that unreimbursed travel costs were among several factors that could influence their decision to apply for these positions. A 2014 study commissioned by the Marine Corps found that, based on a statistical model of a sample of Marines eligible to participate in its Inactive Duty Training travel reimbursement program between May 2012 and September 2013, the program had increased the Marine Corps’ ability to fill critical positions. The study also included an assessment of the cost of increasing the level of reimbursement for Inactive Duty Training and its possible effect on staffing. A 2016 survey commissioned by the Army Reserve, drawn from a non-generalizable sample of a few thousand reservists, reported that a significant majority of respondents in 2015 viewed the Inactive Duty Training travel reimbursement program as an incentive for soldier retention. In addition, during our review, officials from most of the reserve components told us that despite the establishment of the reimbursement program for travel costs associated with Inactive Duty Training, such expenses continue to be a challenge for some reservists. In particular, officials noted that this especially affects personnel who do not qualify for reimbursement. One official noted that, in extreme cases, reservists may find that the cost to attend Inactive Duty Training may exceed drill pay, effectively requiring them to pay out-of-pocket to perform military service. While these reports and studies have alerted DOD to a potential problem, DOD has not yet assessed the effect of unreimbursed travel expenses on retention of reservists in a comprehensive manner and the related overall cost to the federal government. For example, DOD has not yet systematically collected data and assessed the potential effect of current travel reimbursement policy on retention across all services, as measured by outcomes such as fill rates for critical positions and other metrics, or collected more basic information such as the number of reservists who do not move their home during long-duration training, the distances traveled for Inactive Duty Training, and the amount of unreimbursed expenses incurred by reservists. The 2014 Marine Corps’ study on Inactive Duty Training reimbursement did explore fill rates for its potential effect on critical positions. However, its findings are not necessarily applicable to the other reserve components. In addition, DOD has not conducted an assessment on the issue of Permanent Change of Station rules for long- duration training or other assignments. While travel policy officials noted that there is no requirement for such an assessment, some agreed that more robust information would allow for a better understanding of the situation as well as any potential changes that are necessary in DOD’s travel policy. One travel official stated that until a direct connection between unreimbursed travel expenses and retention or related areas is observed within their component, change is unnecessary. As of July 2017, DOD and the reserve components were considering changes to reserve travel policy to mitigate the effect of out-of-pocket expenses on reservists. Specifically, these changes include (1) requesting that Congress increase reimbursement for Inactive Duty Training travel expenses from $300 to $500 and (2) increasing the length of time of Temporary Duty travel for training courses or other assignments before such travel is considered a Permanent Change of Station. The Marine Corps Reserve has developed a draft proposal for congressional consideration for an increase in Inactive Duty Training reimbursement, which an official stated was necessary to address the challenge of filling critical occupations. The Military Advisory Panel, which advises on defense travel issues, has considered an increase in the length of time of Temporary Duty travel for training courses or other assignments before a Permanent Change of Station would be required, but no specific proposals have been developed. Federal internal control standards state that management requires quality information to make informed decisions and evaluate an entity’s performance in achieving key objectives and addressing risk. They further require that management identify, analyze, and respond to risks related to achieving the defined objectives. However, without collecting more comprehensive information on the potential effect of the current travel policy on the retention of reservists, DOD would be considering alternative proposals with only the limited data and analysis available to date. Further, the lack of comprehensive data and analysis on the influence of current travel policies will limit DOD’s ability to reach an analytically based decision which weighs the costs and benefits of any potential changes. In deciding to continue or change current travel policies relating to travel reimbursement without the benefit of quality information, DOD risks not managing the potential influence of these policies on reservists’ retention or agency expenditures. Reservists often maintain civilian careers and homes that in some cases can require them to travel long distances to perform their part-time military service. In some instances, such as when performing Inactive Duty Training and long-duration Active Duty for Training or other active duty assignments, such service can result in expenses that cannot be reimbursed to the reservist under DOD’s travel policy. Despite long- standing concerns that out-of-pocket travel expenses reservists incur to perform their service may be increasing, DOD does not have sufficient data and analysis on how reservists’ incurring these expenses could negatively affect DOD’s ability to achieve its mission, the overall costs and benefits of DOD’s travel policy, and how various proposed changes to the travel policy could potentially mitigate any of its possible negative effects. As a result, DOD is not well positioned to move forward with possible changes to travel policy absent further analysis. We recommend that the Under Secretary of Defense for Personnel and Readiness collect quality information and conduct an analysis of the potential effects of unreimbursed travel expenses incurred by reservists to perform military service on DOD’s ability to retain reservists in the force, and respond to these risks by considering the costs and benefits of any possible actions to address the identified issues. We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix II, DOD concurred with our recommendation. We are sending copies of this report to appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense for Personnel and Readiness, the Secretaries of the military departments, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (213) 830-1011 or vonaha@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. To determine DOD’s travel costs for the reserve components, we obtained and reviewed fiscal year 2015 execution cost data, the most recent complete data available, that each reserve component reported on travel costs for training and other activities. These costs are reported in a travel cost exhibit included in each component’s annual Reserve Personnel budget justification document. We did not include any travel costs not included in the reserve components’ Reserve Personnel accounts, such as any travel costs in the components’ respective Operations and Maintenance accounts. We did not include travel costs for the Active Guard and Reserve because individuals serving these components are responsible for the full-time administration of the reserve components and differ significantly from part-time drilling reservists in their responsibilities and associated travel. We also did not include costs for the Individual Ready Reserve because these reservists have different training patterns than other reservists. In table 2, we summarize the costs reported by DOD’s six reserve components for Annual Training, Inactive Duty Training, and all other travel costs for fiscal year 2015 by component. In addition to the contact named above, Margaret Best (Assistant Director), Patricia Donahue, Mae Jones, Linda Keefer, Felicia Lopez, Carol Petersen, and Adam Smith made major contributions to this report.", "summary": "About 91 percent of DOD's 811,000 reservists are part-time, performing military service in addition to civilian employment and careers. These reservists may have to travel to perform required military training or other duties. The National Defense Authorization Act for Fiscal Year 2017 contains a provision for GAO to review the cost of travel for members of the reserve components. This report (1) describes the conditions under which reservists may incur unreimbursed out-of-pocket travel expenses in connection with their service, and (2) addresses the extent to which DOD has assessed the effect of reservists' unreimbursed out-of-pocket travel expenses on retention. GAO reviewed DOD's Joint Travel Regulations and interviewed officials to determine conditions under which reservists might incur unreimbursed travel expenses. It also compared DOD's efforts to analyze the effect of such expenses with federal internal control standards, which state that management requires quality information to make informed decisions and evaluate an entity's performance in achieving key objectives. Reservists may incur unreimbursed out-of-pocket expenses under certain conditions in connection with their service. Although the Department of Defense's (DOD) six reserve components reported paying or reimbursing $925 million in travel costs for reservists in fiscal year 2015, the most recent year for which data were available, reservists may still incur various expenses that are not reimbursable under DOD's travel regulations. Officials responsible for travel regulations told us that unreimbursed travel expenses for reservists generally arise because it is DOD's policy to: (1) not provide reimbursement, except in limited circumstances, for the cost of travel to attend Inactive Duty Training (i.e., the “1 weekend a month” training commitment for reservists) and (2) consider longer duration training or assignments as a Permanent Change of Station—a change in reservists' home of record—and not as temporary travel. The National Defense Authorization Act for 2008 established a reimbursement program for Inactive Duty Training travel costs, but reservists must meet certain eligibility criteria, such as serving in a critical occupation, and not all service Secretaries have chosen to participate. Under the program, reimbursement is limited to $300 for each roundtrip to the training location. Further, DOD's policy to consider longer duration training or assignments as a Permanent Change of Station may also result in unreimbursed expenses. Specifically, according to DOD officials, reservists may have to maintain two households if, because of their part-time status, they decide not to move themselves and their families to the location of Active Duty Training for 140 days or longer, or of other active duty assignments for 181 days or longer. DOD and the services have conducted a few limited assessments of the potential effect of reservists' unreimbursed travel expenses on the retention of reservists. However, several DOD reports and studies and officials whom GAO interviewed have expressed concern that such unreimbursed expenses may, among other factors, be a challenge for reservists and may therefore negatively affect retention. For example, a 2012 survey commissioned by the Army Reserve of a small sample of reservist officers potentially eligible for battalion command positions reported that unreimbursed travel costs were among several factors that could influence their decision to apply for these positions. DOD and the reserve components are considering changes to reserve travel policy to mitigate the effect of unreimbursed expenses on reservists, by, for example, increasing the $300 limit for Inactive Duty Training reimbursement. However, without the benefit of quality information, DOD risks not managing the potential influence of these policies on reservists' retention or agency expenditures. GAO is recommending that DOD collect quality information and conduct an analysis of the potential effects of reservists' unreimbursed travel expenses on retention, and respond to these risks by considering the costs and benefits of any possible actions to address the identified issues. DOD concurred with this recommendation.", "document_type": "gao"}
{"report": "The 340B Program was created in 1992 following the enactment of the Medicaid Drug Rebate Program and gives 340B covered entities discounts on outpatient drugs comparable to those made available to state Medicaid agencies. HRSA is responsible for administering and overseeing the 340B Program. Eligibility for the 340B Program, which is defined in the Public Health Service Act, has expanded over time. Covered entities generally become eligible for the 340B Program by qualifying as certain federal grantees or as one of six specified types of hospitals. Eligible federal grantees include federally qualified health centers (FQHCs), which provide comprehensive community-based primary and preventive care services to medically underserved populations, as well as certain other federal grantees, such as family planning clinics and Ryan White HIV/AIDS program grantees. Eligible hospitals include critical access hospitals—small, rural hospitals with no more than 25 inpatient beds; disproportionate share hospitals— general acute care hospitals that serve a disproportionate number of low- income patients; and four other types of hospitals (see fig. 1). Some covered entities, typically hospitals and FQHCs, have multiple sites: the main site, which HRSA refers to as the parent site, and one or more other associated sites referred to as child sites. Child sites can include satellite clinics, off-site outpatient facilities, hospital departments, and other facilities. According to HRSA officials, to participate in the 340B Program and be considered part of the covered entity, the associated sites must meet program requirements and be registered with HRSA as a child site. The 340B price for a drug—often referred to as the 340B ceiling price—is based on a statutory formula and represents the highest price a participating drug manufacturer may charge covered entities. Covered entities must follow certain requirements as a condition of participating in the 340B Program. For example, covered entities are prohibited from subjecting manufacturers to “duplicate discounts” in which drugs prescribed to Medicaid beneficiaries are subject to both the 340B price and a rebate through the Medicaid Drug Rebate Program. diverting any drug purchased at the 340B price to an individual who is not a patient of the covered entity. Under HRSA guidance defining this term, diversion generally occurs when 340B drugs are given to individuals who are not receiving health care services from covered entities or are receiving services that are not consistent with the type of services for which the covered entity qualified for 340B status. (See table 1 for more information on HRSA’s definition of an eligible patient.) Covered entities are permitted to use drugs purchased at the 340B price for all individuals who meet the 340B Program definition of a patient regardless of their financial or insurance status. Covered entities may choose to dispense 340B drugs they purchase through contract pharmacies. The adoption and use of contract pharmacies in the 340B Program is governed by HRSA guidance. HRSA’s original guidance permitting the use of contract pharmacies limited their use to entities that did not have in-house pharmacies and allowed each entity to contract with only one outside pharmacy. However, March 2010 guidance lifted the restriction on the number of pharmacies with which a covered entity could contract. Since that time, the number of contract pharmacies has increased more than fifteen-fold, from about 1,300 to approximately 20,000. According to HRSA guidance, a covered entity is required to have a written contract in place with each pharmacy through which it intends to dispense 340B drugs, but is not generally required to submit its pharmacy contracts to HRSA. A covered entity that has more than one site at which it provides health care may enter into separate pharmacy contracts for the parent site and each child site, or one comprehensive pharmacy contract including all sites intending to use the pharmacy. It is up to the covered entity to determine which of its sites will be included in a contract with a pharmacy, and thus have what is referred to as a contract pharmacy arrangement with that pharmacy. Figure 2 provides an illustration of a covered entity that has four contract pharmacies but a total of six contract pharmacy arrangements, as not all of the entity’s sites have contracts with each of the pharmacies. Covered entities that choose to have contract pharmacies are required to register with HRSA the names of each of the pharmacies with which they contract. Covered entities may register their contract pharmacies in one of two ways: 1) only in relation to the parent site (use by child sites would be allowed as long as the sites were included in a comprehensive contract between the entity and the contracted pharmacies); or 2) separately for each site (parent and child) involved in a contractual arrangement with the pharmacy. As part of this registration, HRSA guidance specifies that covered entities must certify that they have signed and have in effect an agreement with each contract pharmacy and have a plan to ensure compliance with the statutory prohibitions on 340B drug diversion and duplicate discounts at their contract pharmacies. Like other pharmacies, when contract pharmacies fill prescriptions, they collect payments from the patient; if the patient has health insurance, the pharmacy will bill the insurer for the drug. In addition, each covered entity must determine which prescriptions are for eligible patients of the entity, and thus, can be filled with 340B drugs. One way that a covered entity could choose to do this is to employ a TPA to review all the prescriptions filled by a contract pharmacy to determine which, if any, prescriptions were issued by the covered entity to an eligible patient, and thus are eligible for the 340B discount. The covered entity then pays both the contract pharmacy and the TPA fees that they have negotiated for their roles in managing and distributing 340B drugs. These fees are typically deducted from the reimbursed amounts received from patients and their health insurers by the pharmacy and TPA, and then the balance is forwarded to the covered entity. (See fig. 3 for an example of how covered entities work with contract pharmacies and TPAs to dispense 340B drugs.) In fiscal year 2012, HRSA implemented a systematic approach to conducting audits of covered entities that is outlined on its website. HRSA has increased the number of covered entities audited since it began audits in fiscal year 2012, and now audits 200 entities per year. (See table 2.) HRSA’s audits include covered entities that are randomly selected based on risk-based criteria (approximately 90 percent of all audits conducted each year), and covered entities that are targeted based on information from stakeholders such as drug manufacturers (10 percent of the audits conducted). The criteria for risk-based audits include a covered entity’s volume of 340B drug purchases, number of contract pharmacies, time in the 340B Program, complexity of its program, and history of violations or allegations of noncompliance associated with diversion and duplicate discounts. Among other things, HRSA’s audits include reviews of each covered entity’s policies and procedures, including those for overseeing contract pharmacies; an assessment of the entity’s compliance with respect to 340B eligibility status, the prevention of duplicate discounts and diversion, and other program requirements; and reviews of a sample of prescriptions filled during a 6-month period, including prescriptions dispensed by contract pharmacies, to identify instances of non- compliance. As a result of the audits conducted, HRSA has identified instances of non-compliance with program requirements, including violations related to drug diversion and the potential for duplicate discounts. Based on the audits for which results were posted on HRSA’s website as of February 8, 2018, 72 percent of the covered entities audited in fiscal years 2012 through 2017 had one or more findings of noncompliance. When an audit of a covered entity has a finding of noncompliance, covered entities are required to submit a corrective action plan within 60 days of the audit being finalized for HRSA approval. HRSA closes out the audit once the entity attests that the corrective action plan has been fully implemented and any necessary repayments have been made to affected manufacturers. As of July 1, 2017, about one-third of the more than 12,000 covered entities in the 340B Program had contract pharmacies, but the extent to which covered entities had contract pharmacies varied by type of entity. Overall, a higher percentage of hospitals (69.3 percent) had at least one contract pharmacy compared to federal grantees (22.8 percent). Among the six types of hospitals, the percentage that had at least one contract pharmacy ranged from 39.2 percent of children’s hospitals to 74.1 percent of critical access hospitals. Among the 10 types of federal grantees, the percentage with at least one contract pharmacy ranged from 3.9 percent of family planning clinics to 75.2 percent of FQHCs (see fig.4). Among covered entities that had at least 1 contract pharmacy, the number of contract pharmacies ranged from 1 to 439, with an average of 12 contract pharmacies per entity. However, the number of contract pharmacies varied by covered entity type, with disproportionate share hospitals having the most on average (25 contract pharmacies), and critical access hospitals having the least (4 contract pharmacies). (See fig. 5 for the distribution of contract pharmacies by covered entity type.) However, we found that a covered entity that contracts with a pharmacy may not actually use the pharmacy to dispense 340B drugs. For example, three covered entities that received our questionnaire told us that although they had one or more contract pharmacies registered with HRSA, they did not use those pharmacies to dispense 340B drugs. Moreover, officials from a covered entity we interviewed reported that while the entity maintained a contract with a specialty pharmacy, it had not dispensed 340B drugs through that pharmacy in several years. Officials explained that the covered entity maintained its contract and continued to register this pharmacy with HRSA because it would be financially beneficial should it have a patient fill a 340B-eligible specialty drug at this pharmacy in the future. The actual number of 340B contract pharmacy arrangements—the number of contractual arrangements between contract pharmacies and the sites of a covered entity—is unknown because HRSA does not require a covered entity to register pharmacies with each of its child sites. Rather, HRSA gives covered entities the option to register contract pharmacies only in relation to the parent site: child sites may use that pharmacy if included in the written contract between the entity and the pharmacy. Based on our analysis of HRSA data, 1,645 covered entities that had at least one child site registered their contract pharmacies only with their parent sites. These 1,645 covered entities had a total of 25,481 registered contract pharmacy arrangements. However, if the pharmacies were contracted to work with all of the covered entities’ sites—the parents and all the child sites—then these 1,645 entities could have as many as 866,388 contract pharmacy arrangements. Therefore, the number of contract pharmacy arrangements is likely higher than what is reported in HRSA’s database. Nearly 93 percent of the approximately 20,000 pharmacies that 340B covered entities contracted with as of July 1, 2017, were classified as community/retail pharmacies, less than 1 percent were classified as specialty pharmacies, and about 7 percent were other types of pharmacies including institutional and mail order pharmacies. Furthermore, the majority (75 percent) of 340B contract pharmacies were chain pharmacies, while 20 percent were independent pharmacies and 5 percent were other pharmacies. In contrast, slightly over half of all pharmacies nationwide are chain pharmacies and about one-third are independent. The five biggest pharmacy chains—CVS, Walgreens, Walmart, Rite-Aid, and Kroger—represented a combined 60 percent of 340B contract pharmacies, but only 35 percent of all pharmacies nationwide. Figure 6 shows how the types of pharmacies varied by type of covered entity. Critical access hospitals had a higher proportion of independent contract pharmacies (40 percent of their pharmacies) compared to other covered entity types (which ranged from 11 percent for disproportionate share hospitals to 21 percent for other federal grantees). Our analysis suggests that this is likely due, in part, to a larger proportion of critical access hospitals compared to other types of covered entities being located in rural areas; independent contract pharmacies are also more likely than other contract pharmacies to be located in rural areas. Across all covered entities, the distance between the entities and their contract pharmacies ranged from 0 miles (meaning that the contract pharmacy and entity were co-located) to more than 5,000 miles; the median distance was 4.2 miles. Table 3 shows the distribution of distances between covered entities and their pharmacies overall and by entity type. While there was a range in distances between covered entities and each of their pharmacies, about half of the entities had all their contract pharmacies located within 30 miles, but this varied by entity type. Specifically, more than 60 percent of critical access hospitals and FQHCs had all of their contract pharmacies within 30 miles. In contrast, 45 percent of disproportionate share hospitals had at least one pharmacy that was more than 1,000 miles away compared to 11 percent or less for grantees and critical access hospitals. (See fig. 7.) Contracts we reviewed between selected covered entities and contract pharmacies showed that entities generally agreed to pay their contract pharmacies a flat fee per 340B prescription, with some entities also paying additional fees based on a percentage of revenue. Selected covered entities and TPAs included in our review indicated two main methods entities use to pay for TPA services: 1) per prescription processed, or 2) per contract pharmacy. Twenty-nine of the 30 contracts we reviewed between covered entities and contract pharmacies included provisions for the entities to pay flat fees for each eligible 340B prescription. For the remaining contract, the covered entity and the contract pharmacy were part of the same hospital system, and the contract provided that the entity would not pay fees for 340B prescriptions. In addition to payment of flat fees, 13 of the 29 contracts required the covered entity to pay the contract pharmacy a fee based on a percentage of revenue generated for each 340B prescription. Among the contracts we reviewed, more federal grantees than hospitals had contracts that included both flat fees and fees based on the percentage of revenue (see fig. 8). We found a wide range in the amount of flat fees covered entities agreed to pay pharmacies in the contracts we reviewed, though they generally ranged from $6 to $15 per 340B prescription. (See Appendix I for a description of fees listed in each of the contracts we reviewed.) The amount of the flat fees per 340B prescription varied by several factors according to our review, including covered entity type, type of drug, and patient insurance status: Flat fees were generally higher for hospitals than federal grantees. In general, hospitals’ flat fees were higher than those for grantees, with most flat fees ranging from $15 to $25 per 340B prescription for hospitals, compared to from $6 to $13 for grantees. Flat fees were sometimes higher for brand drugs. Three of the 29 contracts we reviewed specified different flat fees for brand and generic drugs. In 2 of these contracts flat fees were $5 or $7 higher for brand drugs. In the remaining contract, the fees for some brand drugs were substantially higher, ranging from $75 to $1,750 for brand drugs, compared to $0 for generic drugs. Additionally, some contracts we reviewed only specified a fee for brand drugs, and 4 of the contracts either excluded generic drugs from being purchased at the 340B price or limited the use of the 340B Program to brand drugs. Flat fees were different or substantially higher for certain specialty drugs. For 2 of the 29 contracts we reviewed, flat fees were for drugs to treat hemophilia. Given the different nature of hemophilia treatment drugs, fees for these drugs were different than those in the other contracts for other types of drugs, and provided for payments of $.06 and $.09 per unit of blood clotting factor. Additionally, 2 contracts contained substantially higher flat fees for specialty medications. In 1 contract, the flat fees were $125 per prescription for brand and generic human immunodeficiency virus drugs, and $1,750 for brand hepatitis C drugs. In another contract the flat fees were $65 for all specialty drugs, compared to $13 for other drugs. Flat fees were sometimes higher for 340B prescriptions dispensed to patients with insurance. Seven of the 29 contracts we reviewed specified different flat fees for prescriptions provided to patients with health insurance than for patients paying with cash or through a drug discount card provided by the covered entity. The flat fees entities would pay under these contracts ranged from $1 to $16 higher per 340B prescription dispensed to insured patients compared to patients not using insurance. As previously noted, in addition to requiring flat fees for dispensing prescriptions, 13 of the 29 contracts we reviewed included provisions for the covered entity to pay the pharmacy a fee based on the percentage of revenue generated by each prescription. These percentage fees only applied to prescriptions provided to patients with insurance, and ranged from 12 to 20 percent of the revenue generated by the prescriptions. Generally there were two methods for determining the amount of revenue generated. The first method used the reimbursement the pharmacy received for the prescription, while the second method used the net revenue after subtracting the 340B cost of the drug from the reimbursement received by the pharmacy. Officials from the two TPAs we interviewed and questionnaire respondents from the 39 covered entities that use TPAs described two main methods entities use to reimburse TPAs for 340B services: 1) a fee for each prescription processed by the TPA, and 2) a fee for each contract pharmacy for which the TPA processes 340B claims on behalf of the entity. Example of Fees between a Covered Entity and Third-Party Administrator (TPA) In the hypothetical example below, the TPA receives $85 from the contract pharmacy. This amount represents the total reimbursement for the 340B drug, less fees deducted by the contract pharmacy. Pursuant to an agreement with the covered entity, the TPA deducts a fee of $5, and forwards the remaining balance of $80 to the covered entity. This represents the total revenue the covered entity generated from the 340B drug. Officials with the two TPAs we interviewed told us that their agreements with covered entities most frequently involve covered entities compensating them based on a fee for each prescription they process on behalf of the entity. Officials from one of these TPAs described three different fee-per-prescription options they offer to covered entities, with the amount of the fees varying based on the option selected: A small fee, for example, 20 cents, for every prescription filled by the covered entity’s contract pharmacy, and reviewed and processed by the TPA. This includes prescriptions that may not have originated from the covered entity, and may not be 340B eligible, as contract pharmacies can also fill prescriptions for individuals who are not patients of the entity. A mid-sized fee, for example, $1.90, for each prescription filled by the covered entity’s contract pharmacy that the TPA reviewed and determined originated from the covered entity. These prescriptions may or may not be 340B eligible. A larger fee, for example, $5 to $7, for each prescription filled by the covered entity’s contract pharmacy that the TPA determined originated from the entity and is 340B eligible. The 39 covered entities that responded to our questionnaire and reported using a TPA most frequently reported paying their TPAs a fee per each prescription processed, but the exact method varied. For example, some covered entities said they paid their TPAs for each prescription regardless of whether it was determined to be 340B eligible, others limited the fees to prescriptions that were 340B eligible, and some reported paying TPAs for 340B-eligible prescriptions dispensed to an insured patient. (See table 4.) Among the 10 covered entities we interviewed, officials from 8 of these entities said they used TPAs; 5 said they pay their TPAs a fee per prescription, 1 reported paying a fee per contract pharmacy, and 2 reported using both options. Among the covered entities that used fees per prescription and told us the amounts of the fees they pay, the fees ranged from $3.50 to $10.00 per 340B eligible prescription or $3.95 per prescription regardless of whether the prescription was 340B eligible. For those that pay their TPA a fee per contract pharmacy, the fee was $25,000 a year per pharmacy. Of the 55 covered entities responding to our questionnaire, 30 reported providing low-income, uninsured patients discounts on 340B drugs dispensed at some or all of their contract pharmacies, and 25 said they did not offer discounts at their contract pharmacies. All 30 covered entities providing patients with discounts reported providing discounts on the drug price for some or all 340B drugs dispensed at contract pharmacies. Federal grantees were more likely than hospitals to provide such discounts and to provide them at all contract pharmacies (see fig. 9). Of the 30 covered entities that responded to our questionnaire that they provided discounts on the drug price, 23 reported providing patients the full 340B discount—the patients obtained drugs from contract pharmacies at the 340B price or less. In many cases, these covered entities indicated that patients received drugs at no cost. Some covered entities reported that patients would pay more than the 340B price, but less than the wholesale price of the drug or what a self-paying patient would pay, and others indicated they determined discounts for patients on a case-by-case basis. A larger number of federal grantees than hospitals (15 compared to 8) indicated their patients would pay the 340B price or less for their drugs at contract pharmacies where discounts were available. (See fig. 10.) In addition to providing discounts on the 340B drug price, some of the 30 covered entities also reported providing discounts on fees patients may pay to contract pharmacies for 340B drugs. Contract pharmacies may charge fees to dispense 340B drugs or cover administrative costs of participating in a covered entity’s 340B program, including costs associated with tracking drug inventories and ordering new drugs. In general, about two-thirds of the covered entities with patients who would be subject to dispensing or administrative fees at contract pharmacies reported providing discounts on the fees at some or all of their contract pharmacies. Hospitals were more likely than grantees to provide discounts on these fees when applicable. (See fig.11.) The 30 covered entities providing 340B discounts to low-income, uninsured patients reported using a variety of methods to determine whether patients were eligible for these discounts. Fourteen of the covered entities said they determined eligibility for discounts based on whether a patient’s income was below certain thresholds as a percentage of the federal poverty level, 11 reported providing discounts to all patients, and 5 said they determined eligibility for discounts on a case-by-case basis. For those 14 covered entities determining eligibility based on income as a percentage of the federal poverty level, the threshold used to determine who was eligible for discounts varied but most reported that patients with incomes at or below 250 percent of the federal poverty level would be eligible for discounts. (See table 5.) Covered entities reported making patients aware of the availability of discounts at contract pharmacies primarily through oral communication by staff located at either the entity or the pharmacy. In addition, the covered entities reported using a variety of methods to inform contract pharmacies about which patients were eligible for discounts, including through notes in patient medical records sent to the pharmacy or by placing codes on the patient’s prescriptions sent to or presented at the pharmacy. (See table 6.) Officials from one covered entity we interviewed said that it provides patients eligible for discounts with an identification card (which they referred to as a drug discount card) that patients present at the contract pharmacy; this card informs pharmacy staff of the specific discount amount. Officials from another covered entity said they place codes on electronic prescriptions which informs the pharmacy about discounts. Some covered entities that did not provide discounts on 340B drugs at their contract pharmacies reported assisting patients with drug costs through other mechanisms. For example, 6 of the 10 covered entities we interviewed said that while they did not provide discounts on 340B drugs dispensed at their contract pharmacies, they provide charity care to low- income patients, including free or discounted prescriptions. Additionally, 4 of the 25 covered entities that reported on our questionnaire that they did not provide discounts at their contract pharmacies said they provided patients with discounts on 340B drugs at their in-house pharmacies. HRSA does not have complete data on the total number of contract pharmacy arrangements in the 340B Program to inform its oversight efforts, including information that could be used to better target its audits. Additionally, weaknesses in HRSA’s audit process compromise its oversight of covered entities. Finally, the lack of specificity in HRSA’s guidance to covered entities potentially impedes covered entities’ oversight of contract pharmacies. HRSA does not have complete data on all contract pharmacy arrangements in the 340B Program to inform its oversight efforts. HRSA requires covered entities to register their contract pharmacies with the agency and recertify that registration annually. Contract pharmacies registered to each covered entity are recorded in a publicly available database, which according to HRSA, is used by various stakeholders to validate the eligibility of entities and confirm shipping addresses for each contract pharmacy eligible to receive 340B drugs on an entity’s behalf. However, because covered entities differ in the way they register their contract pharmacies, HRSA, and its publicly available database, does not have information on all of an entity’s contract pharmacy arrangements. Specifically, because HRSA does not require covered entities to separately register contract pharmacies to each child site for which a contractual relationship exists, HRSA does not have complete information on which sites of an entity have contracted with a pharmacy to dispense 340B drugs. Our analysis of HRSA data showed that the registration of contract pharmacies for 57 percent of covered entities with child sites only specified relationships between contract pharmacies and the parent site; thus HRSA may only have information on a portion of the actual number of 340B contract pharmacy arrangements. Additionally, manufacturers do not have complete information on which covered entity sites have contracts with a pharmacy to dispense 340B drugs, according to HRSA officials. Manufacturers could use such information to help ensure that 340B discounted drugs are only provided to pharmacies on behalf of a covered entity site with a valid 340B contract with that site. HRSA officials told us that the number of contract pharmacy arrangements recorded in HRSA’s database increases a covered entity’s chance of being randomly selected for a risk-based audit. However, since HRSA gives covered entities multiple contract pharmacy registration options, the likelihood of an entity being selected for an audit is dependent, at least in part, on how an entity registers its pharmacies as opposed to the entity’s actual number of pharmacy arrangements. Without more complete information on covered entities’ contract pharmacy arrangements, HRSA cannot ensure that it is optimally targeting the limited number of risk-based audits done each year to entities with more contract pharmacy arrangements. Federal internal control standards related to information and communication state that management should use quality information to achieve the entity’s objectives, such as by obtaining relevant data that are reasonably free from error and bias and represent what they purport to represent so that they can be used for effective monitoring. Without complete information on covered entities’ use of contract pharmacies, HRSA does not have the information needed to effectively oversee the 340B Program, including information that could be used to better target its audits of covered entities. HRSA primarily relies on audits to assess covered entities’ compliance with 340B Program requirements, including compliance at contract pharmacies, according to HRSA officials; however weaknesses in its audit process impede the effectiveness of its oversight. As a result of its audits, HRSA has identified instances of diversion and the potential for duplicate discounts at contract pharmacies, among other findings of noncompliance. Specifically, through the audits conducted since fiscal year 2012, HRSA identified at least 249 instances of diversion at contract pharmacies and 15 instances of the potential for duplicate discounts for drugs dispensed at contract pharmacies, as of February 2018. HRSA had also identified 33 covered entities with insufficient contract pharmacy oversight. (See Table 7.) However, we identified two areas of weaknesses in HRSA’s audit process that impede its oversight of covered entities’ compliance with 340B Program requirements at contract pharmacies: 1) the process does not include an assessment of all potential duplicate discounts, and 2) the process for closing audits does not ensure all covered entities have fully addressed any noncompliance identified. Medicaid Delivery Systems States provide Medicaid services through either fee-for-service or managed care. Under fee-for-service, states reimburse providers directly for each service delivered. For example, a pharmacy would be paid by the state for each drug dispensed to a Medicaid beneficiary. Under a capitated managed care model, states typically contract with managed care organizations to provide a specific set of services to Medicaid beneficiaries (which could include drugs) and prospectively pays each organization a set amount per beneficiary per month to provide or arrange those services. Not all potential duplicate discounts are assessed. HRSA’s audits only assess the potential for duplicate discounts in Medicaid fee-for- service. They do not include a review of covered entities’ processes to prevent duplicate discounts for drugs dispensed through Medicaid managed care. The potential for duplicate discounts related to Medicaid managed care has existed since 2010 when manufacturers were required to pay Medicaid rebates under managed care, and currently, there are more Medicaid enrollees, prescriptions, and spending for drugs under managed care than fee-for-service. HRSA officials told us that they do not assess the potential for duplicate discounts in Medicaid managed care as part of their audits because they have yet to issue guidance as to how covered entities should prevent duplicate discounts in Medicaid managed care. They agreed that the lack of Medicaid managed care guidance for covered entities was problematic, and HRSA’s December 2014 policy release stated, “HRSA recognizes the need to address covered entities’ role in preventing duplicate discounts under Medicaid managed care, and is working with the Centers for Medicare & Medicaid Services (CMS) to develop policy in this regard.” According to HRSA, in the absence of formal guidance, covered entities should work with their states to develop strategies to prevent duplicate discounts in Medicaid managed care. However, 8 of the 10 covered entities we spoke with described challenges working with their states and local Medicaid managed care organizations to ensure that duplicate discounts were not occurring or expressed the need for more guidance from HRSA on how to comply with 340B requirements related to duplicate discount prevention. As a result of these challenges, some covered entities acknowledged that they did not have assurance that duplicate discounts were not occurring with their Medicaid managed care claims, while other entities told us that they did not seek discounts for the drugs of managed care patients due to compliance challenges. Federal internal control standards related to control activities and monitoring state that agencies should 1) implement control activities through policies, such as by determining the necessary policies based on the objectives and related risks for the operational process; and 2) establish and operate monitoring activities to monitor the internal control system and evaluate results, such as by establishing and operating monitoring activities that are built into each entity’s operations, performed continually, and responsive to change. In addition, federal law directs the agency to develop detailed guidance describing methodologies and options for avoiding duplicate discounts. Until HRSA develops guidance and includes an assessment of the potential for duplicate discounts in Medicaid managed care as part of its audits, the agency does not have assurance that covered entities’ efforts are effectively preventing noncompliance. As a result, manufacturers are at risk of being required to erroneously provide duplicate discounts for Medicaid prescriptions. Audit closure process does not ensure all identified issues of noncompliance are addressed. Under HRSA’s audit procedures, covered entities with audit findings are required to 1) submit corrective action plans to HRSA that indicate that the entities will determine the full scope of any noncompliance (beyond the sample of prescriptions reviewed during an audit); 2) outline the steps they plan to take to correct findings of noncompliance, including any necessary repayments to manufacturers; and 3) specify the timelines for implementing the corrective action plans. HRSA closes the audit when a covered entity submits a letter attesting that its corrective action plan, including its assessment of the full scope of noncompliance, has been implemented and any necessary repayments to manufacturers have been completed. However, we identified two specific deficiencies in HRSA’s approach. First, although HRSA requires that covered entities determine the full scope of noncompliance found in audits, it does not provide guidance as to how entities should make this assessment. Specifically, HRSA does not specify how far back in time covered entities must look to see if any related noncompliance occurred and instead, relies on each entity to make this determination. For example, a document from a fiscal year 2017 audit revealed that a covered entity that had participated in the 340B Program for 3 years only reviewed 5 months of claims to determine whether any other instances of diversion had occurred, diminishing the likelihood that its efforts identified the full scope of noncompliance. Additionally, until April 2018, HRSA did not require covered entities that were audited to communicate the methodology used to assess the full scope of noncompliance, or the findings of their assessments, including how many or which manufacturers were due repayment. Beginning April 1, 2018, HRSA requires covered entities subject to targeted audits to document their methodology for assessing the full scope of noncompliance. However, as previously noted, only 10 percent of the 200 audits HRSA currently conducts each year are targeted audits. Consequently, the vast majority of covered entities audited are not required to provide HRSA with information on their methodology for assessing the full scope of noncompliance. Furthermore, HRSA officials told us that they believe determining the scope of noncompliance is a matter between the covered entities and manufacturers. Thus, HRSA relies on manufacturers to determine the adequacy of a covered entity’s effort to assess the full scope of noncompliance. However, covered entities only contact the manufacturers that they determine were affected by the noncompliance based on the methodology they choose to apply; thus, it is unclear how manufacturers not contacted would be in a position to negotiate an acceptable assessment of the scope of noncompliance and any applicable repayment. Federal internal control standards related to control activities state that agencies should implement control activities through policies, such as by documenting policies in the appropriate level of detail to allow management to effectively monitor the control activity. As HRSA does not provide guidance on how covered entities are to assess the full scope of noncompliance and does not review most entities’ methodology for making such assessments, the agency does not have reasonable assurances that entities have adequately identified all instances of noncompliance. Second, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity is now in compliance with 340B Program requirements. Beginning April 1, 2018, HRSA requires the 10 percent of covered entities that are subject to targeted audits to provide documentation that they implemented their corrective action plans prior to HRSA closing the audits. However, it still relies on the remaining 90 percent of audited covered entities to self- attest to their compliance with program requirements. HRSA officials told us they believe that a covered entity providing a description of the corrective actions is sufficient, and that the self- attestation of corrective action plan implementation provides HRSA with the information necessary to close the audit. However, aside from the self-attestation, HRSA’s only mechanism to ensure that the majority of audited covered entities have implemented their corrective action plans is to re-audit the entities—in other words, subject the entity to a targeted audit. To date, the agency told us that it has re-audited 21 covered entities, and based on those re-audits, determined that 1 entity did not fully implement its corrective action plan from the original audit. However, we found that of the 19 re-audited covered entities for which results were available, 12 had similar findings of noncompliance in their second audits, as were identified in their original audits (e.g., diversion findings in both audits), 3 of which were caused by the same issue, according to information provided to us by HRSA. Federal internal control standards for monitoring specify that agencies should establish and operate monitoring activities to monitor the internal control system and evaluate the results, for example by using ongoing monitoring to obtain reasonable assurance of the operating effectiveness of the service organization’s internal controls over the assigned process. By only reviewing evidence of corrective action plan implementation for the limited number of covered entities subject to targeted audits, HRSA does not have reasonable assurance that the majority of covered entities audited have corrected the issues identified in the audit, and are not continuing practices that could lead to noncompliance, thus increasing the risk of diversions, duplicate discounts, and other violations of 340B Program requirements. HRSA guidance for covered entities on their oversight of contract pharmacies lacks specificity and thus provides entities with considerable discretion on the scope and frequency of their oversight practices. Specifically, HRSA’s 2010 guidance on contract pharmacy services specifies that covered entities are responsible for overseeing their contract pharmacies to ensure that drugs the entity distributes through them comply with 340B Program requirements, but states that, “the exact method of ensuring compliance is left up to the covered entity.” The guidance also states that, “annual audits performed by an independent, outside auditor with experience auditing pharmacies are expected,” but HRSA officials told us that covered entities are not required to conduct independent audits and instead are expected to do some form of periodic oversight of their contract pharmacies. Thus, according to HRSA officials, if a covered entity indicates that it has performed oversight in the 12 months prior to a HRSA audit, then HRSA considers the entity to have met HRSA’s standards for conducting contract pharmacy oversight regardless of what the oversight encompassed. Due, at least in part, to a lack of specific guidance, we found that some covered entities performed minimal contract pharmacy oversight. Officials from a grantee reported auditing claims of 5 randomly selected patients quarterly, despite treating approximately 900 patients each month. Officials from a critical access hospital that serves about 21,000 patients a year at its outpatient clinics reported that the annual independent audit of their hospital system reviewed five claims. Officials from two entities reported that they did not contract for an independent audit of their 340B Program, despite HRSA’s expectation to do so. Additionally, of the 20 covered entities whose audits we reviewed, 6 had no documented processes for conducting contract pharmacy oversight. The identified noncompliance at contract pharmacies raises questions about the effectiveness of covered entities’ current oversight practices. Specifically, 66 percent of the 380 diversion findings in HRSA audits involved drugs distributed at contract pharmacies, and 33 of the 813 audits for which results were available had findings for lack of contract pharmacy oversight. However, the number of contract pharmacy oversight findings may be limited by the fact that officials from HRSA’s contractor said that its auditors rely on verbal responses from entity officials about any internal review or self-audits conducted by the entity. This is despite the fact that HRSA officials told us that the agency requires auditors to review documentation of covered entities’ oversight activities. Federal internal control standards related to control activities state that agencies should implement control activities through policies, such as by documenting the responsibility for an operational process’s objectives and related risks, and control activity design, implementation, and operating effectiveness. The standards also specify that management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving its objectives or addressing related risks. As a result of the lack of specific guidance and its numerous audit findings of noncompliance, HRSA does not have assurance that covered entities’ contract pharmacy oversight practices are sufficiently detecting 340B noncompliance. The 340B Program provides covered entities with discounts on outpatient drugs and the ability to generate revenue on drugs purchased under the program. Use of contract pharmacies enables covered entities to increase the use of 340B drugs by expanding their distribution networks, thereby increasing the volume of 340B drugs dispensed and generating associated savings and revenue. The expansion of contract pharmacies presents an opportunity for entities to fill more prescriptions with discounted 340B drugs, but it also increases potential risks to the 340B Program, such as risks related to diversion and duplicate discounts. Although covered entities and HRSA have taken steps to ensure that 340B Program requirements are being met at contract pharmacies, HRSA’s audits continue to identify instances of noncompliance. As currently structured, weaknesses in HRSA’s oversight impede its ability to ensure compliance with 340B Program requirements at contract pharmacies. HRSA cannot ensure that its limited number of audits target covered entities with the most complex 340B programs, and thus the greatest risk of noncompliance, because the agency does not have complete data on entities’ contract pharmacy arrangements. Additionally, HRSA’s audit process does not adequately identify compliance issues, nor does it ensure that identified issues are corrected. HRSA’s audits do not assess compliance with a key 340B Program requirement (the prohibition regarding duplicate discounts) as it relates to Medicaid managed care, and HRSA does not provide audited entities with guidance for determining the full scope of noncompliance, which reduces the effectiveness of HRSA’s audits in identifying drug diversion and duplicate discounts. Moreover, where audits identify instances of noncompliance, HRSA’s process does not confirm that all covered entities successfully correct the deficiencies and take steps to prevent future noncompliance. Although HRSA made improvements to its process for targeted audits during the course of our review, the agency does not require most covered entities subject to an audit to provide evidence of corrective actions taken. Moreover, the lack of specificity in HRSA’s guidance to covered entities on the methods through which they should ensure compliance may impede the effectiveness of entities’ oversight. For example, without guidance instructing covered entities how to prevent duplicate discounts in Medicaid managed care, entities are left to individually navigate the policies and practices of states and private insurers. Furthermore, by not clearly communicating expectations for covered entities’ oversight of their contract pharmacies, HRSA faces the risk that instances of noncompliance, such as diversion, at contract pharmacies will not be identified and addressed. As the 340B Program continues to grow, it is essential that HRSA address these shortcomings. We are making the following seven recommendations to HRSA: The Administrator of HRSA should require covered entities to register contract pharmacies for each site of the entity for which a contract exists. (Recommendation 1) The Administrator of HRSA should issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care, working with CMS as HRSA deems necessary to coordinate with guidance provided to state Medicaid programs. (Recommendation 2) The Administrator of HRSA should incorporate an assessment of covered entities’ compliance with the prohibition on duplicate discounts, as it relates to Medicaid managed care claims, into its audit process after guidance has been issued and ensure that identified violations are rectified by the entities. (Recommendation 3) The Administrator of HRSA should issue guidance on the length of time covered entities must look back following an audit to identify the full scope of noncompliance identified during the audit. (Recommendation 4) The Administrator of HRSA should require all covered entities to specify their methodology for identifying the full scope of noncompliance identified during the audit as part of their corrective action plans, and incorporate reviews of the methodology into their audit process to ensure that entities are adequately assessing the full scope of noncompliance. (Recommendation 5) The Administrator of HRSA should require all covered entities to provide evidence that their corrective action plans have been successfully implemented prior to closing audits, including documentation of the results of the entities’ assessments of the full scope of noncompliance identified during each audit. (Recommendation 6) The Administrator of HRSA should provide more specific guidance to covered entities regarding contract pharmacy oversight, including the scope and frequency of such oversight. (Recommendation 7) HHS provided written comments on a draft of this report, which are reproduced in app. II, and technical comments, which we have incorporated as appropriate. In its written comments, HHS concurred with four of our seven recommendations, did not concur with three of our recommendations, and stated that it had concerns with some of the other information in our report. In concurring with four of our recommendations, HHS stated that HRSA is making changes to its audit process to strengthen oversight of the 340B Program. Regarding our recommendation related to guidance on duplicate discounts, HHS concurred, but commented that the recommendation did not account for the critical role that CMS would play in its successful implementation. We agree that CMS would play an important role in ensuring compliance with the prohibition on duplicate discounts in Medicaid managed care, which is why we recommended that HRSA coordinate with CMS on the guidance. HHS indicated that HRSA and CMS are strategizing on effective ways to address this issue. HHS also concurred with our recommendations to issue guidance related to identifying the full scope of noncompliance and covered entities’ oversight of their contract pharmacies, although it noted that HRSA would face challenges in issuing guidance related to areas where it does not have explicit regulatory authority. While we recognize that HRSA’s authority to issue regulations governing the 340B Program may be limited, our recommendations were focused on HRSA clarifying certain program requirements through whatever format the agency deems appropriate. Since the establishment of the 340B Program, HRSA has used interpretative guidance and statements of policy to provide guidance to covered entities regarding compliance with program requirements. HRSA has also used certain of its audit procedures, such as the template provided to covered entities for the development of corrective action plans, to provide such clarifications. Our recommendations are intended to expand the availability of information HRSA provides to covered entities to help them improve compliance with existing program requirements. As such, we continue to believe that further clarification, whether provided as interpretive guidance, audit procedures, or another format, is necessary to help ensure compliance with program requirements. Among the recommendations with which HHS did not concur was our recommendation to require covered entities to register contract pharmacies for each site of the entity for which a contract exists. HHS stated that its current registration process is responsive to our concerns for all covered entity types other than hospitals and health centers. However, as we note in the report, hospitals and FQHCs are typically the covered entity types that have multiple sites, and are generally more likely to have contract pharmacies. HHS cited administrative burden for both covered entities and HRSA as a reason not to require covered entities to provide more complete information about contract pharmacy arrangements. However, given that HRSA requires covered entities to register both their sites and their contract pharmacies with the agency, it is unclear why there would be significant additional burden for covered entities to indicate which of the previously registered sites had contracts with which contract pharmacies. It is also important to note that contract pharmacy use by covered entities is voluntary, and covered entities that choose to have contract pharmacies are required to oversee those pharmacies to ensure compliance with 340B Program requirements. Therefore, the use of contract pharmacies inherently comes with additional administrative responsibilities for the covered entity, and we believe that the requirement to register each contract pharmacy arrangement with HRSA should present limited additional burden on covered entities. Rather than implementing our recommendation, HHS stated that HRSA will make changes to its audit selection process; HRSA will assume that all contract pharmacies registered with the parent site would also be used by all sites of the covered entity prior to selecting entities for risk-based audits. Although this may be a good step forward, it does not provide information on the actual number of contract pharmacy arrangements for each covered entity. As such, we continue to believe that HRSA needs more complete information on contract pharmacy arrangements to best target its limited number of audits to covered entities with the most complex 340B programs. This is also important information to provide manufactures to help ensure that 340B discounted drugs are only provided to pharmacies on behalf of a covered entity site with a valid 340B contract with that site. HHS also did not concur with our two recommendations to require covered entities to specify their methodologies for identifying the full scope of noncompliance identified during their audits as part of their corrective action plans, and to provide evidence that these plans have been successfully implemented prior to HRSA closing audits. In its response, HHS noted that on April 1, 2018, HRSA implemented these requirements for entities subject to targeted audits (including re-audits), which represent 10 percent of all entities audited. However, HRSA indicated that implementing these requirements for all covered entities that are audited would create a significant burden for these entities. As we previously noted, HRSA already requires covered entities with audit findings to determine the full scope of noncompliance and to submit corrective action plans. Thus, it is unclear how requiring covered entities to include written descriptions of their methodologies for identifying the full scope of noncompliance, which should already be formulated, and to provide evidence that the corrective actions that entities developed have been implemented, would create significant additional burden for these entities. HHS also expressed concern that these additional steps would significantly delay the audit process and repayments to manufacturers. We recognize that reviewing these documents may create some additional work for HRSA and possibly require additional time to close audits. However, we believe this additional work and time is necessary for the audits to be effective at adequately identifying compliance issues and ensuring that those issues are corrected. Furthermore, these additional actions could reduce the need for re-audits which are burdensome in terms of cost and time, for both the covered entity and HRSA. Finally, HHS also expressed concerns about some of the other information included in the draft report. HHS stated that disclosing actual fees paid by covered entities to pharmacies and TPAs could cause disruptions in the drug pricing market and fluctuations in fees entities pay. Our report provides fees for a small and nongeneralizable sample of contracts, covered entities, and TPAs. For example, we provide contract pharmacy fees for 30 of the thousands of contracts that exist between covered entities and pharmacies. It is unclear how this information could cause disruptions in the drug pricing market or lead to fluctuations in fees covered entities may pay, and HHS did not provide any evidence to support its assertion. Additionally, HHS has raised questions about the effect of the 340B Program on drug pricing. As such, we believe that our discussion of fees brings enhanced transparency to the 340B Program, and provides Congress with important information it requested to gain a better understanding of the program and enhance its oversight. Regarding the distance between contract pharmacies and covered entities, HHS noted that the longest distance was for a specialty pharmacy that was registered for 17 days. As noted in our scope and methodology, our analysis was of covered entities and contract pharmacies participating as of July 1, 2017. Additionally, there were other contract pharmacy arrangements of similarly long distances. HHS also expressed concern that the draft report did not note that such specialty pharmacies may be needed due to restricted distribution by a manufacturer, which would be outside a covered entity’s control. In our report, we noted that the 340B database does not provide information on why a covered entity may choose to contract with a pharmacy that is located a long distance away. However, the report does include some potential reasons HRSA provided us as to why this may occur. HHS also commented that our table on the number and percent of covered entities audited does not fully reflect HRSA’s auditing efforts because it does not include the number of entity sites and contract pharmacies included within each audit. However, HRSA’s audits of covered entities generally do not include visits to multiple covered entity sites, or all contract pharmacies that distribute 340B drugs on a covered entity’s behalf. Additionally, while the audits include a review of a sample of 340B drugs distributed, that sample may not include prescriptions written at, or dispensed from, all of the covered entity’s sites or contract pharmacies. As a result, information in our report highlights the number of entities that were audited. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of HRSA, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at DraperD@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix III. Table 8 provides a brief description of the fees that covered entities pay pharmacies with which they contracted to dispense 340B drugs based on our review of 30 contracts. In addition to the contact named above, Michelle Rosenberg (Assistant Director), N. Rotimi Adebonojo (Analyst in Charge), Jennie Apter, George Bogart, Amanda Cherrin, David Lichtenfeld and Dan Ries made key contributions to this report. Also contributing were Julianne Flowers and Vikki Porter.", "summary": "Covered entities can provide 340B drugs to eligible patients and generate revenue by receiving reimbursement from patients' insurance. The number of pharmacies covered entities have contracted with has increased from about 1,300 in 2010 to nearly 20,000 in 2017. GAO was asked to provide information on the use of contract pharmacies. Among other things, this report: 1) describes financial arrangements selected covered entities have with contract pharmacies; 2) describes the extent that selected covered entities provide discounts on 340B drugs dispensed by contract pharmacies to low-income, uninsured patients; and 3) examines HRSA's efforts to ensure compliance with 340B Program requirements at contract pharmacies. GAO selected and reviewed a nongeneralizable sample of 30 contracts between covered entities and pharmacies, 20 HRSA audit files, and 55 covered entities to obtain variation in the types of entities and other factors. GAO also interviewed officials from HRSA and 10 covered entities. The 340B Drug Pricing Program (340B Program), which is administered by the U.S. Department of Health and Human Services' (HHS) Health Resources and Services Administration (HRSA), requires drug manufacturers to sell outpatient drugs at a discount to covered entities so that their drugs can be covered by Medicaid. Covered entities include certain hospitals and federal grantees (such as federally qualified health centers). About one-third of the more than 12,000 covered entities contract with outside pharmacies—contract pharmacies—to dispense drugs on their behalf. GAO's review of 30 contracts found that all but one contract included provisions for the covered entity to pay the contract pharmacy a flat fee for each eligible prescription. The flat fees generally ranged from $6 to $15 per prescription, but varied by several factors, including the type of drug or patient's insurance status. Some covered entities also agreed to pay pharmacies a percentage of revenue generated by each prescription. Thirty of the 55 covered entities GAO reviewed reported providing low-income, uninsured patients discounts on 340B drugs at some or all of their contract pharmacies. Of the 30 covered entities that provided discounts, 23 indicated that they pass on the full 340B discount to patients, resulting in patients paying the 340B price or less for drugs. Additionally, 14 of the 30 covered entities said they determined patients' eligibility for discounts based on whether their income was below a specified level, 11 reported providing discounts to all patients, and 5 determined eligibility for discounts on a case-by-case basis. GAO found weaknesses in HRSA's oversight that impede its ability to ensure compliance with 340B Program requirements at contract pharmacies, such as: HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care. HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance. HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements. Given these weaknesses, HRSA does not have a reasonable assurance that covered entities have adequately identified and addressed noncompliance with 340B Program requirements. GAO is making seven recommendations, including that HRSA's audits assess for duplicate discounts in Medicaid managed care, and HRSA require information on how entities determined the scope of noncompliance and evidence of corrective action prior to closing audits. HHS agreed with four of the recommendations, but disagreed with three recommendations, which GAO continues to believe are warranted to improve HRSA's oversight as explained in the report.", "document_type": "gao"}
{"report": "Under the Rail Safety Improvement Act of 2008, a PTC system must be designed to prevent train-to-train collisions, derailments due to excessive speed, incursions into work zone limits, and the movement of a train through a switch left in the wrong position. Railroads may implement any PTC system that meets these requirements, and the majority of the 29 commuter railroads are implementing one of three primary types of systems: the Interoperable Electronic Train Management System (I- ETMS), the Advanced Civil Speed Enforcement System, or Enhanced Automated Train Control (E-ATC). PTC’s intended safety benefits can only be achieved when all required hardware has been installed and tested, and a train is able to communicate continually and in real time with the software and equipment of its own railroad and also with that of other railroads operating on the same tracks. Real-time communication is needed to account for changing track conditions, which may, for example, include temporary speed restrictions where railroad employees are conducting track maintenance. Figure 1 illustrates how one system is intended to operate. PTC’s multi-step implementation process can be grouped into three primary phases (see fig.2). Each phase involves key activities for railroads to complete—such as installing PTC equipment—as well as the submission of key documents for FRA review and approval—such as test plans. Based on railroad data reported to FRA, most commuter railroads are currently in the second phase, which involves system design, installation, and testing. According to a recent FRA presentation, completing key activities within this phase is the near-term focus for many commuter railroads. According to FRA officials, railroads must complete certain implementation steps sequentially, while other activities can be worked on simultaneously; for example, railroads may work to finish installing locomotive and wayside equipment while also beginning testing on an initial track segment. Furthermore, based on railroads’ PTC implementation plans, the scale of implementation activities can vary by railroad, based on the size of the railroad and the number of components to be installed. For example, one relatively large commuter railroad must install computer hardware on 528 locomotives and 789 wayside units along 218 route miles, while one relatively small commuter railroad’s installation is limited to 17 locomotives and 35 wayside units along 32 route miles. According to FRA, full implementation of PTC is achieved when a railroad’s system is FRA-certified and interoperable, and all hardware, software, and other components have been fully installed and in operation on all route miles required to use PTC. The PTC system is required to be interoperable, meaning the locomotives of any host railroad and tenant railroad operating on the same track segment will communicate with and respond to the PTC system, including uninterrupted movements over property boundaries. In early 2016, railroads required to install PTC had to submit revised implementation plans to FRA that included a schedule and milestones for specific activities, such as installing locomotive and wayside hardware, acquiring radio spectrum (if necessary), and training employees who will have to use and operate PTC systems. Railroads are required to report annually to FRA certain information on their implementation progress. As part of overseeing railroads’ PTC implementation, FRA established a PTC Task Force in May 2015 to track and monitor individual railroads’ progress. Railroads are also required to report quarterly to FRA on the status of PTC implementation in several areas such as: locomotives equipped, employees trained, territories where revenue service demonstration (RSD) has been initiated, and route miles in PTC operation. FRA’s oversight tools include assessing civil penalties if a railroad fails to comply with legal requirements, including a railroad’s failure to comply with its implementation plan. FRA has a national PTC director, designated PTC specialists in the 8 FRA regions, and a few additional engineers and test monitors responsible for overseeing technical and engineering aspects of implementation and reviewing railroad submissions of documents and test requests. FRA officials told us they conduct various types of PTC-related work simultaneously, such as providing technical assistance to railroads, addressing questions, and reviewing documentation submitted by railroads. As railroads progress with testing and before completing implementation, FRA must review and approve a safety plan for each railroad and certify the PTC system. Commuter railroads that will not be able to implement a PTC system by December 31, 2018, may receive a maximum 2-year extension if they meet six criteria set forth in statute. Specifically, commuter railroads must demonstrate, to the satisfaction of the Secretary of Transportation, that they have: (1) installed all PTC system hardware; (2) acquired all necessary spectrum; (3) completed required employee training; (4) included in a revised implementation plan an alternative schedule and sequence for implementing their PTC system as soon as practicable; (5) certified to FRA that they will be in full compliance with PTC requirements by the date provided in the alternative schedule and sequence; and (6) either initiated RSD on at least one territory required to have operations governed by a PTC system or “met any other criteria established by the Secretary.” Most of the 29 commuter railroads have reported progress in some of the key areas of PTC implementation that FRA monitors, such as locomotive and wayside equipment installation, but the amount of progress reported varies across individual railroads (see fig. 3 below). Over half of the commuter railroads reported that they have made substantial progress in some initial implementation activities, while other railroads reported that they have made much more limited progress or have yet to begin equipment installation or employee training. For example, as of the end of September 2017: Locomotive Equipment Installation: 18 commuter railroads reported 50 percent or more of their locomotive PTC equipment was installed, and of these, 13 had completed installation. In contrast, 6 railroads reported that they had not started installation of locomotive equipment. Wayside Equipment Installation: 16 commuter railroads reported 50 percent or more of their wayside PTC equipment was installed, and half of them reported that they had completed installation. In contrast, 7 reported that less than 20 percent of this equipment was installed. Employee Training: 11 commuter railroads reported completing PTC training for 50 percent or more of their employees requiring training. Of these, four reported that they had completed employee training. Thirteen commuter railroads had completed 10 percent or less of their employee training, and of these, 11 reported that they had not started training their employees. However, some commuter railroad representatives we spoke with stated that they are waiting to conduct training until their PTC system is closer to deployment. For example, representatives from one railroad told us they are waiting to conduct training so employees will be recently trained and familiar with PTC as the system is rolled out. Notably, commuter railroads reported that they have made the most progress in obtaining spectrum, which allows PTC components to transmit information about a train’s movements and location. Specifically, 15 of the 17 railroads that require spectrum reported that they have obtained it. The two other railroads reported that they are in discussions to obtain leased spectrum. Beyond the initial implementation activities, much work remains for the majority of commuter railroads to complete other key PTC activities that will enable them to complete implementation. PTC implementation requires many additional steps to integrate equipment and software systems that go beyond installing equipment and training employees, and the majority of commuter railroads reported that they continue to work to complete these steps, which are technically complex and time consuming. For example, as of the end of September 2017: Locomotives Fully Equipped and PTC-Operable: Fifteen commuter railroads reported that half or more of their locomotives were fully equipped and PTC-operable, meaning that all necessary onboard hardware and software is installed and commissioned, and is capable of operating over a PTC-equipped territory. Eight commuter railroads reported that none of their locomotives were fully equipped and operable. Field Testing: Thirteen railroads reported that they had begun field testing—a key implementation milestone that precedes RSD and allows railroads to assess how PTC components and software function together. FRA officials said that the testing phase can be a long and difficult process, as data obtained during field testing must prove the functionality of the system and be included as part of a railroad’s application to enter RSD. RSD: Following successful field testing, FRA may grant a railroad approval to enter the next level of testing, RSD. In RSD, testing is performed on trains operating PTC as part of regular operations. According to FRA, RSD is the final phase of testing that a railroad completes in order to validate and verify its PTC system, and the results from RSD, along with earlier testing, are to be included in the safety plan a railroad submits to FRA. While six commuter railroads reported that they have begun RSD, most had not yet reached this key milestone—including some of the largest commuter railroads. Conditional Certification: Once FRA approves a railroad’s safety plan, the railroad receives a PTC system certification. According to FRA officials, as of September 30, 2017, only two commuter railroads were conditionally certified—meaning FRA has reviewed their safety plans and granted conditional approval for PTC operations, and the railroads are providing regular service in PTC operations—and two additional commuter railroads had submitted a safety plan for FRA review. Given the variation in commuter railroads’ progress, especially related to completing later-stage PTC activities such as testing and developing safety plans, 13 of 29 commuter railroads told us they planned to seek a deadline extension, and the remaining 16 told us they do not intend to seek an extension. However, the number of commuter railroads planning to seek an extension is subject to change before the end of 2018. Based on our analysis of the PTC schedules of the 29 commuter railroads, over half may not have sufficient time to complete activities needed to implement PTC by the end of 2018 or to qualify for an extension of that deadline by meeting criteria based on initiating RSD— for the purposes of this statement, referred to as an RSD-based extension. In particular, our analysis focused on the time likely needed for railroads to conduct RSD activities, because RSD is both the final step of field testing required by the 2018 deadline as well as one of the statutory options railroads have in seeking a deadline extension. For our analysis, we compared the amount of time railroads plan for completing two key milestones—installing the back office server and conducting field testing—to the amount of time FRA officials estimate is required for each milestone and to the experiences of railroads that have already completed RSD. However, it is important to recognize that numerous factors could affect railroads’ planned and future progress. For example, commuter railroads could face delays due to unexpected issues with PTC components or FRA reviews of documents submitted by the railroads. In May 2017, FRA sent letters to 14 commuter railroads and their respective state departments of transportation and governors informing the recipients that they had not installed at least 50 percent of their required locomotive and wayside equipment. In these letters FRA raised concerns that these railroads were at risk of not meeting the 2018 deadline and not completing requirements for a deadline extension. Subsequently, in January 2018, FRA applied a more stringent benchmark—whether a railroad had installed at least 65 percent of all equipment—and determined that 13 commuter railroads remained at risk. Using this more stringent criterion, only one railroad had made enough progress installing equipment to no longer be classified as at risk by FRA. In addition to FRA’s benchmarks for equipment installation, for our analysis we evaluated more broadly railroads’ progress in completing other implementation activities that follow equipment installation and that FRA and stakeholders said are more difficult to achieve. Specifically, we analyzed commuter railroads’ planned schedules for two key milestones to determine whether these railroads appear to have built sufficient time into their implementation plans to complete these and other activities by the 2018 deadline or to qualify for an RSD-based extension. The two key milestones we examined, both of which need to be completed before a railroad enters RSD, were: installing the back office server (BOS) and associated software necessary to connect and interface with wayside, locomotive, and dispatch equipment (the BOS transmits and receives data among this equipment that enables PTC to work); and conducting field testing, in particular testing of installed infrastructure and initial assessments of the PTC system’s overall functionality on trains that are not transporting passengers or operating during regular passenger service. Our analysis found that at least one quarter, and potentially up to approximately two thirds, of commuter railroads may not have sufficient time to enter RSD and, thus, may not meet the 2018 PTC implementation deadline or qualify for an RSD-based extension. These railroads vary by size and type of PTC system and by whether they plan to apply for a deadline extension. Specifically, our analysis found the following: Projection based on BOS status: Between 9 and 19 commuter railroads appear to be at potential risk of not meeting the 2018 deadline or qualifying for an RSD-based extension based on our analysis. Our analysis found that the 6 commuter railroads already in RSD took an average of 10 months from installing the BOS to starting RSD. However, the schedules of 9 railroads indicate that they plan to install a BOS less than 10 months before the 2018 deadline. We believe that given past experience of other railroads, this places these 9 railroads at potential risk. Moreover, FRA officials estimate that it can take 2 to 3 years for a railroad to install and prepare the BOS and associated software to support testing and RSD. Using FRA’s 2-year installation estimate (which would require BOS installation before January 1, 2017) further exacerbates the potential risk of not meeting the deadline or of not qualifying for any RSD-based extension for up to 19 railroads. Projection based on time allowed to conduct field testing: Based on our review of the planned schedules, between 7 and 14 railroads may not have built sufficient time into their plans either to complete field testing ahead of the 2018 deadline or to qualify for an RSD-based extension. Commuter railroads and FRA officials told us that field testing is challenging and can take a substantial amount of time due to, for example, unanticipated issues and limited available track for testing given regular passenger operations. On average, our analysis found that the 6 commuter railroads already in RSD took 7 months to move from starting field testing to starting RSD. However, 7 commuter railroads plan to start their field testing less than 7 months before the 2018 deadline. This situation raises concerns about their ability to conduct field testing before the 2018 deadline. Moreover, FRA officials told us that moving from the start of field testing to the start of RSD can take between 1 and 3 years, averaging about 2 years, and that most railroads under-estimate the amount of time needed for testing. When we applied the lower end of FRA’s estimate, we found that it further increases the potential risk for 14 railroads that plan to start field testing less than a year prior to the 2018 deadline. As a result, they could be at risk of not meeting the 2018 deadline or qualifying for an RSD-based extension. We used RSD as a benchmark for our analysis of key milestones based on the importance of this benchmark in implementing PTC and on the three RSD-based alternative criteria that FRA has approved to date. While the three approved alternative criteria all include RSD, FRA has broad authority to approve “any other” alternative criteria even if not based on RSD, as noted above. One FRA official told us the agency approved these three alternative criteria requests because they were all based on specific, quantifiable measures, rather than because they included RSD in particular. FRA officials stated that they have not issued guidance on uniform alternative criteria because they will strive for railroads to meet the criteria for a deadline extension that are listed in statute and want the discretion to make determinations on a case-by-case basis. In addition, FRA officials said they want to ensure that each railroad’s criteria are consistent with the statutory requirements for final implementation by December 31, 2020. Because it is unknown what alternative criteria FRA may establish in the coming months, which may not include RSD, it is difficult to determine at this time whether the railroads we found to be potentially at risk of not qualifying for an RSD- based extension might be more or less likely to qualify for an extension based on other, non-RSD criteria. Much uncertainty exists regarding railroads’ ultimate implementation progress and their ability to meet the 2018 deadline or qualify for an extension. This uncertainty is due, in part, to the fact that PTC is a new way of operating and involves technologies that are more complex to implement than many other railroad capital projects. Furthermore, a number of factors can affect commuter railroads’ planned and future progress, including unexpected setbacks installing PTC components and resources and capacity issues. Below we highlight some of the factors that that could affect implementation progress. Three out of five PTC contractors and suppliers and about half of the commuter railroads we spoke with acknowledged that industrywide, there are a limited number of individuals with PTC technical expertise available to successfully implement the technology. This can affect the ability of railroads and contractors to meet planned schedules. For example, one large commuter railroad said it took a year and a half to hire an internal expert to continue work on its PTC project. In addition, five commuter railroads told us that they faced other issues with their prime contractors missing their milestones; such issues, going forward, could impact railroads’ progress during the coming year. Also, though most railroads we spoke to are relying on contractors, some commuter railroads may lack the in-house resources and expertise to plan and oversee a project as large and complex as PTC. Representatives from three commuter railroads we interviewed noted that PTC is not a traditional capital or construction project for a railroad; therefore, it requires additional expertise. FRA officials also stated that small commuter railroads may not have technical capacity or expertise with large contracts for such complex projects, especially given limited industry resources. In addition to limited expertise and resources, some commuter railroads told us they faced unexpected delays in obtaining PTC equipment, such as radios, from the supplier. Some PTC equipment is only available from a single provider, which can lead to delays executing contracts and obtaining equipment. Three commuter railroads we spoke with said they encountered issues executing contracts for PTC radios, in particular negotiating unique liability requirements sought by the only supplier of this equipment, which resulted in delays or higher overall costs to the railroads. One railroad noted that executing sole-source contracts for such circumstances is particularly problematic for state and public agencies. As noted above, PTC is being implemented by different types of railroads using different systems, and achieving interoperability among PTC systems can complicate implementation. For example, Northeast Corridor railroads that are implementing versions of the Advanced Civil Speed Enforcement System need interoperability with freight railroads using I- ETMS. Even railroads that are installing the same PTC system have to take significant steps to ensure that systems will communicate and interoperate properly. In one case, a railroad told us that it is equipping its locomotives with equipment for multiple PTC systems to ensure that it can operate on various host railroads’ tracks. Some commuter railroads that only operate as tenants on other railroads’ tracks may be able to complete some PTC implementation work more quickly, as these railroads may benefit from work the host railroads already completed as they coordinate to implement PTC. For example, representatives from one commuter railroad we spoke with said they have to acquire and install PTC equipment on their locomotives but rely on the host railroads to install the remainder of the necessary PTC infrastructure. These tenant-only commuter railroads, however, have to coordinate field testing and RSD with the host railroads. Unexpected issues with components or technology can also require additional time to complete certain activities, causing schedules to slip. Such issues could affect railroads currently on schedule as well as railroads pursuing aggressive schedules in an effort to overcome late starts or early setbacks. For example, representatives from 10 railroads we spoke with said that installing the BOS and associated software, and ensuring it functions properly, can pose a challenge. One contractor told us that once the BOS is delivered to a railroad, a lot of testing work remains, and unexpected issues inevitably arise during testing, even if the BOS works according to all specifications. Representatives from one railroad said that despite strong organizational commitment to implementation and setting internal targets for progress, their PTC project schedule slipped many times over the course of implementation due to a variety of issues, including on-going software updates that caused delays while also straining the budget and burdening staff. Representatives from that commuter railroad also noted that equipping vehicles with PTC components took three times longer than originally expected (3 years instead of 1 year). However, some railroads are looking for ways to accelerate implementation. For example, representatives from one railroad said they made the difficult decision to cut some weekend passenger service to accelerate wayside equipment installation. Therefore, as representatives from one railroad articulated, given the schedule slippage experienced by railroads further along in implementation, railroads with aggressive schedules would have a limited ability to accommodate any additional delays. As the 2018 deadline approaches and railroads progress with implementation activities, the amount of documentation railroads will submit to FRA for review and approval is likely to increase significantly. For example, FRA reported in summer 2017 that it had taken between 10 and 100 days to review each of the test requests it received from railroads. As the 2018 deadline approaches, FRA will have to review a considerable amount of additional test plans and procedures as well as applications to begin RSD. In addition, FRA will have to concurrently review any safety plans that are submitted by railroads reaching the certification phase. At the American Public Transportation Association’s (APTA) Commuter Railroad Summit in June 2017, FRA officials said that they expect each safety plan review—which involves all the regional specialists and some contract personnel—to take between 6 and 12 months to review. These plans are about 5,000 pages in length. FRA officials told us that reviewing all of the safety plans in a timely manner will be a challenge given staff resources. FRA has 12 technical staff dedicated to the review of railroads’ PTC documentation and monitoring of PTC testing. Representatives from 10 out of 19 commuter railroads we interviewed said they are concerned about FRA’s ability to review submitted documentation in a timely manner. As railroads continue to progress with their projects and the industry becomes more experienced with PTC, railroads could benefit from lessons learned. For example, representatives from one railroad that is implementing I-ETMS, the system all large Class I freight railroads are implementing, told us that they anticipate being able to capitalize on lessons learned from freight railroads that have operated in RSD. By leveraging the freight railroads’ experiences, one commuter railroad hopes to address issues before testing, rather than during, and therefore move more quickly through the testing process. If commuter railroads are able to apply lessons learned from other railroads’ testing processes, then they may be able to accelerate their implementation efforts. Railroads may also accelerate implementation schedules as they become more adept at the overall testing process, which involves submitting test documents to FRA and scheduling multiple tests. This could potentially shorten the average time it takes a railroad to complete one or more of the key milestones analyzed. The two commuter railroads that have been conditionally certified told us they have met with other commuter railroads informally and have shared their project experiences as a way to facilitate information sharing. Since 2015, FRA has assumed additional roles and responsibilities— primarily through the PTC Task Force and regional PTC specialists—to monitor railroads’ implementation progress, review required documentation, and share information about implementation steps and activities. Monitoring and Document Review: In response to a recommendation in our September 2015 report, FRA began to identify and collect additional information from the railroads to enable it to effectively track and monitor railroads’ PTC progress. For example, in 2016, the PTC Task Force began collecting quarterly progress data and monitoring railroads’ annual reports to track progress in meeting the PTC implementation milestones set out in railroads’ implementation plans, such as locomotive equipment installed at the end of the year. As previously noted, the Task Force used this implementation progress data in May 2017 to identify 14 commuter railroads at risk of not meeting the 2018 deadline or requirements for an extension. FRA also monitors railroads’ PTC implementation through meetings with railroad and industry associations, visits to individual railroads, and reviewing and commenting on PTC documentation submissions, such as requests to begin field testing and RSD. FRA officials told us that they monitor railroads’ progress to determine how much commuter railroads understand about the implementation process and to trigger discussions between FRA and the railroads. Regional PTC specialists are responsible for reviewing and approving requests submitted by railroads preparing to test system functionality as well as individual testing procedures describing the specific equipment and movements involved in each test. In addition, FRA officials told us that assessing civil penalties and sending commuter railroads letters of concern are the primary enforcement mechanisms they have available to oversee PTC. Information Sharing: FRA officials said that they have primarily used informal assistance and participation in group meetings to convey information related to the implementation process and specific milestones necessary to meet the 2018 deadline or qualify for an extension. FRA officials acknowledged that they do not have the capacity to provide frequent one-on-one assistance to all railroads given their growing PTC workload and limited agency resources. As such, FRA officials explained that in order to reach a wide audience given the approaching deadline, their current focus is on presentations at industry group meetings (e.g., APTA’s Commuter Rail Summit) and specific PTC systems user-group meetings. FRA’s regional PTC specialists told us they also provide direction on technical aspects of PTC implementation and testing, primarily by discussing issues at individual and railroad-industry meetings and providing informal feedback on commuter railroads’ PTC documentation, such as testing requests. While the majority of the railroad representatives we met with said FRA officials were consistently available to discuss issues that arise during day-to-day PTC implementation activities, the information conveyed by these officials has sometimes been inconsistent. In particular, FRA’s heavy reliance on informal assistance and participation in group meetings to convey information to commuter railroads has led, at least on some occasions, to different or inconsistent information being communicated in different meetings. For example, representatives from one PTC equipment supplier said that FRA has not consistently commented on different railroads’ test plans, and as a result, they have not been able to carry lessons learned on to other railroads’ plans. In addition, while FRA’s officials said their position has been consistent with the regulations stating that the host railroad must submit a safety plan to FRA, representatives from one railroad we met with said they had heard conflicting information from FRA. For example, these railroad representatives told us that FRA officials originally said commuter railroads that are only tenants on other railroads needed to submit their own safety plans but later stated at an industry association meeting that tenant railroads could be included in the host railroads’ plans. In addition, commuter railroads have expressed a need for additional clarification about the criteria for applying for an extension. FRA officials also told us that they have received a lot of questions from commuter railroads about the criteria for an extension related to RSD or other alternative criteria. As noted above, to date, FRA has approved alternative extension criteria for three railroads, and in each case, the criteria involved RSD testing on a shorter track segment. However, representatives from one contractor working with several commuter railroads said it is unclear what “alternative criteria” FRA will approve to receive an extension. In addition, representatives from one commuter railroad stated that any opportunity to clearly outline FRA’s interpretation of the PTC requirements, specifically the alternative extension criteria that could, for example, allow for a shorter test segment, would enable railroads to better position themselves to apply for an extension. Representatives from some commuter railroads we met with were likewise unclear about the agency’s approach to reviewing and granting extension requests. Representatives from three commuter railroads said clarification of FRA’s planned approach would be helpful as the deadline approaches. According to FRA officials, the statute does not set a deadline by which railroads have to apply for an extension, and FRA has not set a deadline or indicated the latest date by which a railroad should apply. Nonetheless, for railroads that do not comply with PTC deadlines, FRA officials said they could impose civil penalties for each day a railroad fails to implement a PTC system by the applicable statutory deadline, but the agency has yet to determine how it will handle railroads that do not meet the deadline or receive an extension. With less than a year remaining before the 2018 deadline, FRA officials stated that they anticipate their workload is likely to increase as railroads submit additional documentation to review and continue to progress with testing. More systematic communication that delineates FRA’s planned approach for the upcoming deadline and extension process may be critical for the agency to efficiently use its limited resources and convey consistent information to all the railroads. Standards for internal control in the federal government state that management should externally communicate the quality information necessary to achieve the entity’s objectives. These standards also note that management should select the appropriate form and method of communication, so that information is communicated widely and on a timely basis. As we have previously found, the particular form of the agency’s communication—for example, by oral presentation, written guidance, or formal regulation—will depend on multiple factors including the purpose and content of the specific communication and applicable legal requirements. Moreover, internal control standards indicate agencies should have standard processes in place to determine which form of communication is appropriate in each case. FRA officials told us that the agency could issue written guidance explaining how it has decided to apply its deadline extension authority and what type of information railroads will then need to submit to get an extension. However, FRA officials stated this written guidance would require time- consuming approval by the Office of Management and Budget under the Paperwork Reduction Act, and would make timely issuance of such guidance difficult. As noted, however, FRA may have the option to use less formal, less time-consuming methods of communicating key information about the extension process, such as webinars or conference calls, to communicate information more systematically. FRA officials acknowledged they are working to identify mechanisms such as these, but they have yet to do so. Absent systematic communication articulating the agency’s planned approach for the extension process, railroads may not have the information they need to effectively prepare for the deadline or seek an extension. While FRA has taken steps to more closely monitor railroads’ implementation progress, the agency has not prioritized its efforts, including its allocation of resources, based on an assessment of risk. In its 2015 Railroad Accountability Plan, FRA stated that its PTC data collection and monitoring efforts would allow the agency to inform, among other things, its resource allocation and risk mitigation. While FRA has used its data to identify at-risk railroads, it has not used this information to prioritize how to allocate its resources or address risks. For example, as discussed earlier after reviewing railroads’ data on their progress in installing PTC equipment, FRA notified 14 commuter railroads of their at- risk status in May 2017. However, while FRA officials said that they hold regular meetings with many—but not all—of the at-risk railroads, 9 of these 14 commuter railroads said that the formal letter they received did not ultimately trigger any change in the type of interaction they have with FRA. More recently, in December 2017, the Secretary of Transportation notified all railroads required to implement PTC by letter of the expectation that all possible measures be taken to ensure implementation requirements are met by the 2018 deadline. However, these letters made no distinction between railroads—that is, the same letter was sent to railroads with conditionally certified PTC systems and to railroads that reported completing no training or installing no locomotive equipment to date—nor did the letters describe how FRA’s approach to working with the railroads would respond to their particular circumstances and risks. As noted above, FRA officials have stated that the agency does not have the resources to meet more frequently with or provide additional assistance to railroads. While the PTC Task Force helps monitor railroads’ progress, FRA still employs fewer than 12 individuals with the requisite PTC expertise and experience to review technical documents and help railroads implement PTC systems. In an environment with limited agency resources, targeting agency efforts to areas of the greatest risk or highest priority areas is one way to leverage existing resources. According to standards for internal control in the federal government, management should identify, analyze, and respond to risks. In addition, FRA’s Strategic Human Capital Plan states that developments including the rapid introduction of new technologies, such as PTC, demand that FRA continuously evaluate its programs and resources to adapt to changing demands. However, FRA has not fully leveraged the implementation progress data that railroads’ submit to the agency to identify and develop a risk-based approach to prioritize agency actions. At present, it is unclear whether the agency’s priorities are, for example, to help the largest commuter railroads meet the deadline or extension requirements, push those railroads that are very close to full implementation, or assist railroads that are in the earliest stages of their PTC project. For example, one regional PTC specialist we met with said that if he did not need to be reviewing documentation or observing railroads’ field testing, he could spend more time with at-risk railroads. By not effectively targeting actions to help mitigate risks posed by railroads most at risk of not meeting the PTC deadline or qualifying for an extension, FRA misses the opportunity to leverage its limited resources by providing direct assistance in the areas of greatest need. Much progress has been made in implementing PTC by commuter railroads. Nevertheless, about half of commuter railroads plan to apply for an extension, and many of the railroads’ planned schedules raise questions about their ability to complete key implementation milestones and qualify for RSD-based extensions prior to the 2018 deadline. As the 2018 deadline rapidly approaches, the need for clear information that is systematically communicated to all railroads implementing PTC becomes even more critical. FRA cannot expect to provide information and guidance to railroads individually, and therefore, adopting a risk-based communication strategy could help it more efficiently share information in the coming year. Moreover, the information FRA collects on railroads’ progress has not been used to inform the agency’s resource allocation decisions. Using this information to better allocate resources could help position FRA to better meet its responsibility to monitor and oversee PTC implementation in the future. We are making the following two recommendations to FRA: The Administrator of FRA should identify and adopt a method for systematically communicating information to railroads regarding the deadline extension criteria and process. (Recommendation 1) The Administrator of FRA should develop an approach to use the information gathered to prioritize the allocation of resources to address the greatest risk. (Recommendation 2) We provided a draft of this statement to DOT for review and comment. In its comments, reproduced in appendix II, the agency concurred with our recommendations. DOT also provided technical comments, which we incorporated as appropriate. Chairman Thune, Ranking Member Nelson, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Susan Fleming, Director, Physical Infrastructure team at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Susan Zimmerman (Assistant Director), Sarah Arnett, Jim Geibel, Delwen Jones, Joanie Lofgren, SaraAnn Moessbauer, Malika Rice, Amy Suntoke, Maria Wallace, Eric Warren, and Crystal Wesco. This statement examines commuter railroads’ implementation of positive train control (PTC). Specifically, this report addresses: commuter railroads’ progress in implementing PTC; how many, if any, commuter railroads may be at risk of not meeting the mandated PTC deadline or certain extension criteria, and what factors may be affecting implementation progress; and the extent to which FRA’s management and oversight approach has helped ensure that commuter railroads either meet the deadline or qualify for an extension. To address these objectives, we reviewed the Rail Safety Improvement Act of 2008, the Positive Train Control Enforcement and Implementation Act of 2015, and applicable Federal Railroad Administration (FRA) regulations, reports, and guidance. Our review focused on the 29 railroads FRA officials identified as commuter railroads required to implement PTC. We also reviewed previous GAO work on PTC and applied Standards for Internal Control in the Federal Government to FRA’s role overseeing PTC implementation, including the principles that management should externally communicate the necessary quality information to achieve the entity’s objectives and that management should identify, analyze, and respond to risks. In addition, we interviewed representatives from 19 commuter railroads to further understand their implementation progress, factors that may be affecting progress, and the interviewees’ perspectives on FRA’s management and oversight of PTC implementation. We selected the 19 railroads to include the 14 railroads that according to FRA were identified in May 2017 as at risk of both not meeting the 2018 implementation deadline and not completing statutory requirements necessary to receive a deadline extension, as well as 5 other railroads that were further ahead with implementation and that varied in geographic location and size of rail system, among other factors. We met with relevant FRA officials involved in PTC monitoring, enforcement, and technical assistance including the PTC Staff Director, regional PTC specialists working in each of the FRA regions where commuter railroads selected for interviews operate, and members of the headquarters-based PTC Task Force. In addition, we met with FRA Office of Railroad Safety specialists and engineers, among others. We also interviewed representatives from all 7 of the Class I freight railroads (which are also required to implement PTC), 5 major PTC equipment suppliers and contractors identified by FRA, and representatives from 2 railroad industry associations—the Association of American Railroads and the American Public Transportation Association—to obtain their perspectives on commuter railroads’ implementation of PTC, factors affecting implementation progress, and FRA’s PTC management and oversight. To identify commuter railroads’ progress in implementing PTC, we reviewed railroads’ third quarter progress reports submitted to FRA for the period ending September 30, 2017. We reviewed the most recently available quarterly data outlining the 29 commuter railroads’ installation and implementation progress in selected areas as of September 30, 2017, including: locomotive equipment installed, wayside equipment installed, employee training, locomotives fully equipped and PTC- operable, spectrum obtained, the status of field testing, and revenue service initiated. As necessary, we also reviewed the narrative fields in the quarterly reports for additional context related to a given railroad’s implementation activities and the extent of progress made in specific implementation areas. We assessed the data in these reports by reviewing it for anomalies, outliers, or missing information, and reviewing supporting narratives to ensure they aligned with the reported data, among other things. Based on these steps, we determined that these data were sufficiently reliable for our purpose of describing railroads’ progress implementing PTC. We also reviewed other sources of information, such as PTC Implementation Plans, railroads’ 2016 annual progress reports, and interviews with railroad representatives. To assess progress on locomotive equipment installation and wayside equipment installation, we compared the quantities installed to the total quantities required for PTC implementation. Similarly, to assess progress on employee training, we compared the number of employees trained to the number of employees required to be trained for PTC implementation. To assess progress in fully equipping locomotives to be PTC-operable, we compared the quantity of locomotives that are fully equipped and PTC-operable to the quantity required for PTC implementation. To assess progress on obtaining spectrum, we reviewed the quarterly update on spectrum. We concluded that a railroad had obtained spectrum if, for one or more area or location, it reported that spectrum was either (1) acquired but not available for use or (2) acquired and available for use. We also reviewed the narrative, as appropriate. For some railroads, we concluded that spectrum was not applicable because they use a PTC system that does not require spectrum, or because their host railroad is responsible for obtaining spectrum. To assess progress on field testing, we reviewed the third quarter status on installation and track-segment progress. We concluded that a railroad initiated field testing if one or more of its segments were reported as (1) testing or (2) operational/complete. To determine which railroads initiated revenue service demonstration (RSD), we reviewed the cumulative territories where RSD had been initiated. If the railroad reported that one or more territories had initiated RSD, we concluded that RSD had been initiated. Finally, to determine which railroads anticipate completing implementation before the December 31, 2018 deadline and which plan to seek any RSD- based extension, we obtained information from all 29 commuter railroads to identify which railroads plan to implement PTC by the 2018 deadline and which plan to submit an alternative schedule (that is, a request for an extension) to implement PTC after the December 31, 2018 deadline. To identify commuter railroads at risk of meeting neither the PTC deadline nor any RSD-based extension criteria, we first reviewed data on railroads’ progress installing PTC locomotive and wayside equipment. We did this because FRA used such installation progress to identify 14 commuter railroads as being at risk and notified them via formal letter in May 2017. To confirm FRA’s identification of commuter railroads that would be at risk based on an updated benchmark for the third quarter of 2017—railroads with less than 65 percent of total hardware installed—we analyzed railroads’ reported locomotive and wayside equipment installation status as of September 30, 2017 to determine the percentage of total hardware installed for each commuter railroad. To build on this analysis, we collected information from all 29 commuter railroads on their actual and planned schedules for key implementation milestones. For the 19 commuter railroads we met with, we collected this information as part of our interviews, and for the remaining 10 commuter railroads, we collected this information by email using a standard data collection instrument. The key implementation milestones covered procuring a prime contractor for PTC implementation; applying for and entering field testing and RSD, which is the final phase of field testing; installing the back office server (BOS) and associated software; and completing PTC implementation. This schedule information was collected between September 2017 and January 2018. We compared the amount of time commuter railroads’ planned for completing two key milestones to the amount of time that FRA officials estimate is required for each milestone and to the experiences of railroads that already initiated RSD. The two milestones are as follows: Install the BOS and associated software necessary to connect and interface with wayside, locomotive, and dispatch equipment. Conduct field testing of installed infrastructure, which is an initial assessment of the PTC system’s overall functionality on trains that are not transporting passengers or operating during regular passenger service. We selected these two milestones because (1) each milestone follows equipment installation (which FRA had previously analyzed to assess commuter railroads PTC implementation progress); (2) a railroad must complete both to enter RSD; and (3) several interviewees, including PTC contractors and suppliers and FRA officials, said these activities are important project milestones that are complex and time consuming. We calculated the amount of time a commuter railroad planned for each milestone (with initiating RSD as the endpoint for each milestone), and compared that amount of time to two benchmarks: first, the anticipated length of time FRA officials said that the milestones have taken or may take, and second, the average amount of time (in months) that each milestone took the six commuter railroads that had started RSD as of September 2017. Since we used two benchmarks, we present a range of railroads that may not have sufficient time to complete these milestones and thus may be at risk of not meeting the 2018 deadline or qualifying for an RSD-based extension. Appendix II: Agency Comments This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Forty-one railroads including 29 commuter railroads are required by statute to implement PTC. Commuter railroads unable to implement a PTC system by December 31, 2018, may receive a maximum 2-year extension if they meet certain statutory criteria. GAO was asked to review commuter railroads' PTC implementation. Among other objectives, this statement discusses (1) commuter railroads that may not be positioned to meet the PTC deadline or to qualify for an extension, and factors affecting their progress, and (2) the extent to which FRA's management and oversight approach has helped ensure that commuter railroads meet the deadline or qualify for an extension. GAO analyzed commuter railroads' most recently available quarterly progress reports and collected information on planned implementation schedules, interviewed 19 commuter railroads—including 14 FRA identified as at-risk and 5 others further ahead with implementation—and interviewed FRA officials. The Federal Railroad Administration (FRA) is responsible for overseeing railroads' (including commuter railroads') implementation of positive train control (PTC) by December 31, 2018. PTC is a communications-based train control system designed to prevent certain types of accidents and involves the installation, integration, and testing of hardware and software components. For example, railroads must install equipment on locomotives and along the track, and complete field testing, including revenue service demonstration (RSD)—an advanced form of testing that occurs while trains operate in regular service. GAO's analysis of commuter railroads' PTC scheduled milestones for two key activities necessary to meet the 2018 deadline or qualify for an RSD-based extension (one of the statutory options) found that as many as two-thirds of the 29 commuter railroads may not have allocated sufficient time to complete these milestones. Specifically, in comparing the commuter railroads' schedules to FRA's estimates of the time required to complete these milestones and the experiences of railroads that have already completed them, GAO's analysis found that from 7 to 19 commuter railroads may not complete the milestones before the 2018 implementation deadline or qualify for an RSD-based extension. For example, FRA estimates that field testing (one of the milestones) takes at least one year, but GAO found that 14 commuter railroads plan to start this testing less than a year before the 2018 deadline, increasing the potential risk that this milestone will not be completed. However, FRA has the authority to establish alternative criteria for an extension not based on RSD, and several other factors can affect commuter railroads' planned and future progress. As a result, the number of commuter railroads at risk of not meeting the deadline or qualifying for an extension could increase or decrease in the coming year. FRA's PTC management and oversight includes monitoring commuter railroads' progress, reviewing documentation, and sharing information with them, but the agency has not systematically communicated information or used a risk-based approach to help these railroads prepare for the 2018 deadline or qualify for an extension. GAO found that FRA has primarily used informal assistance, meetings with individual railroads, and participation in industry-convened groups to share information with commuter railroads, and in some cases the information conveyed has been inconsistent according to industry representatives. Some commuter railroads also told GAO that clarification about the agency's planned process for reviewing and approving extension requests would be helpful. Federal internal control standards state that management should externally communicate the necessary quality information to achieve its objectives. While FRA officials have said they are working to identify additional ways to convey extension-related information, they have not yet done so. Moreover, although FRA receives information from commuter railroads on their progress in implementing PTC, it has not used this information to prioritize resources using a risk-based approach. With the year-end 2018 deadline approaching, and an anticipated significant increase in FRA's workload, targeting resources to the greatest risk can help better ensure that FRA effectively fulfills its oversight responsibilities and provides commuter railroads the information they need to prepare for the 2018 deadline or seek an extension. GAO recommends FRA identify and adopt a method for systematically communicating information to railroads and use a risk-based approach to prioritize its resources and workload. DOT concurred with the recommendations. The agency also provided technical comments, which were incorporated as appropriate.", "document_type": "gao"}
{"report": "In addition to improving the government-wide acquisition of IT, FITARA was intended to assist Congress in holding covered agencies accountable for their progress towards reducing duplication and achieving cost savings. The act also enhanced the CIO’s authority in covered agencies for the formulation and approval of their agency’s IT budgets. In this regard, the act requires CIOs to have a significant role in the decision processes for all annual and multi-year planning, and to approve the IT budget requests of the agency. In June 2015, OMB released guidance that describes how agencies are to implement the requirements of FITARA. The guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory requirements; establish government-wide IT management controls that will meet the law’s requirements, while providing agencies with flexibility to adapt to unique agency processes and requirements; strengthen the relationship between agency CIOs and component CIOs; and strengthen the CIO’s accountability for IT costs, schedules, performance, and security. The guidance identifies a number of actions that agencies are to take to establish a basic set of roles and responsibilities (the common baseline) for CIOs and other senior agency officials. One such action is that agencies are to conduct a self-assessment to determine whether their current policies and procedures meet or do not meet the common baseline requirements. If the agencies do not meet the requirements, they are to submit an implementation plan describing the changes they intend to make to their policies and procedures in order to ensure that the common baseline requirements are met. Further, the guidance notes that senior agency officials—including Chief Financial Officers and Chief Acquisition Officers—are to work in partnership to facilitate successful implementation of the common baseline and to ensure the CIO is a strategic partner in agency strategies, budgets, and operations. In its guidance, OMB states that agency CIOs are allowed to delegate certain responsibilities from the common baseline to other agency officials, such as component agency CIOs. For example, CIOs can delegate to these officials, inclusion in the planning, programming, and budgeting stages for programs with IT resources. However, according to the guidance, agency CIOs cannot delegate their responsibility for reviewing and approving the major IT investments portion of the budget request. The guidance further states that, for delegated responsibilities, agency CIOs are to establish plans that demonstrate how they will retain accountability. These delegation plans should include procedures for ensuring that the delegated official will execute the responsibility with the appropriate level of rigor. In addition to the FITARA implementation guidance, OMB Circular A-130 establishes general requirements for the planning; budgeting; governance; acquisition; and management of federal information, personnel, equipment, funds, IT resources, and supporting infrastructure and services. The circular identifies responsibilities for planning, programming, and budgeting that reinforce requirements in OMB’s FITARA implementation guidance. Moreover, in May 2018 the President issued an executive order that reinforces requirements in OMB’s FITARA implementation guidance. The order noted that its purpose was to further enhance the effectiveness of CIOs by, among other things, requiring agency heads to ensure that the CIO has a significant role in all IT-related annual and multi-year planning, programming, budgeting, and execution decisions. In addition, the executive order noted that agency heads are to direct the CIO to be a voting member of and to chair agency governance boards, including investment review boards, that have purview over IT or that set agency-wide IT standards. We have previously testified that, while agencies have made progress in implementing FITARA, its further implementation is critical to improving IT management. We have also noted that, continued congressional oversight of agencies’ implementation of this law is essential to help ensure that these efforts succeed. In addition, in an August 2018 report, we noted that 23 federal agencies had reported wide variations in the authority over component-level IT spending. For example, 8 agencies reported that the CIO had 100 percent authority over the agencies’ IT spending (including for components), while 10 agencies reported that these officials had authority for less than 50 percent of such spending. These widely varying levels of authority over agency-wide IT spending existed, in part, because OMB’s guidance did not completely define the authority that CIOs should have over this spending. Accordingly, we recommended that OMB define the authority that the CIOs are to have when agencies report on their authority over IT spending. OMB subsequently agreed with our recommendation. As previously mentioned, OMB’s guidance on implementing FITARA requires departments to develop policies and procedures to address a number of requirements identified in the basic set of roles and responsibilities (the common baseline) for CIOs. These include the eight selected common baseline requirements related to the CIO’s responsibility for IT budgeting. As identified in table 1, these requirements can be categorized into three areas: (1) CIO visibility into IT resources, (2) CIO input into IT resource plans, and (3) CIO review and approval of IT budgets. OMB required federal agencies and departments to establish FITARA implementation plans that articulated policies and procedures for addressing each of the common baseline requirements and that described changes the departments intended to make to address any gaps in their policies and procedures. Further, for delegated responsibilities, OMB required agency CIOs to establish delegation plans that demonstrate how they intend to retain accountability for the requirement and ensure that the delegated official will execute the responsibility with the appropriate level of rigor. Toward this end, the selected departments had taken steps to establish policies and procedures that addressed the common baseline requirements established by OMB; however, most of the departments, or their component agencies, lacked comprehensive policies and procedures that fully addressed all of the requirements. Specifically, of the eight common baseline requirements that we reviewed, all four departments and their respective component agencies had fully documented one requirement in their policies and procedures, and either had partially documented or had not documented the other seven requirements. While shortfalls existed for each department, DOJ had the most comprehensive IT budgeting policies and procedures, followed by Treasury, HHS, and DOE, respectively. In addition, department CIOs at Treasury, HHS, and DOE had delegated many of the responsibilities for addressing the IT budgeting requirements to component CIOs—thus, these component agencies were to supplement their departments’ policies and procedures with their own IT budgeting policies and procedures for the responsibilities they were delegated. Among the three respective component agencies to which Treasury, HHS, and DOE had delegated IT budgeting responsibilities, the extent to which the components had documented requirements in their policies and procedures varied. For example, IRS had documented policies and procedures for all four of its delegated requirements. In addition, CMS had documented policies and procedures that satisfied two, partially satisfied two, and did not satisfy one of the five requirements delegated to that component. For its part, NNSA had not documented any of its five delegated requirements in the component’s policies and procedures. Figure 1 illustrates the extent to which all four departments’ policies and procedures had addressed the selected OMB common baseline requirements, and is followed by a discussion of each category of requirement. In addition, the figure highlights areas where component agencies addressed their delegated responsibilities or did not address their delegated responsibilities. Appendices II through V (for DOE, HHS, DOJ, and Treasury, respectively) provide additional details about our assessment of the extent to which the departments’ policies and procedures had addressed the selected OMB common baseline requirements, as well as the extent to which component agencies fulfilled their delegated responsibilities. All four departments had policies and procedures that addressed the level of detail with which IT resources are to be described in order to inform the CIO during the planning and budgeting processes. For example, three of the four departments (DOE, HHS, and Treasury) had policies that required the IT budget to include a description of IT resource categories that are required by OMB’s IT capital planning guidance, such as government labor and certain infrastructure resources. DOJ’s policy required the IT budget to include a description of 49 different IT resource categories. As a result, the departments have increased the likelihood that IT resources will be consistently described with the appropriate level of detail for the CIO. Each of the four departments had documented within their IT budgeting procedures the level of detail that was required for reporting planned IT expenditures to the CIO. However, the procedures did not explicitly require that every transaction that related to IT resources be included in the planned expenditure reporting to the CIO. Without explicitly requiring that all transactions that have IT resources be included in the reporting of planned expenditures, there is increased risk that the CIO cannot ensure that all budget requests contain complete and accurate resource estimates, in a consistent manner, to inform the department’s annual IT budget. The departments varied in the extent to which their policies and procedures included a requirement for the department-level CIO to be included in programs supported with IT resources. For example, DOE and DOJ took steps to ensure that their CIOs are included in the planning and budgeting of programs with IT resources by requiring that each IT acquisition request include information about the investment in the CIO’s IT portfolio that is to support the acquisition. Adding this investment information to each acquisition request is intended to allow the CIO to ensure that the requests are factored into resource planning for the IT budget. However, DOE’s, HHS’s, and Treasury’s policies and procedures did not always require that the CIO be included in the planning and budgeting stages for every program with IT resources. For example, DOE’s policies called for the CIO to be included in the budget development process by requiring the program offices to submit their IT budget to the CIO for review and approval annually. On the other hand, this policy did not apply to NNSA’s IT programs because the responsibility to meet this requirement was delegated to that component. NNSA drafted procedures to carry out the delegated responsibility, but the procedures did not call for the DOE CIO—in addition to the component-level CIO—to have input into the IT budget, as required by the Secretary of Energy’s October 2016 FITARA implementation memorandum. According to officials in NNSA’s Office of the CIO, the component expects to finalize the procedures by the end of August 2018; however, the officials did not say whether the finalized procedures would include a requirement for NNSA to obtain input from the DOE CIO on its IT budget. By not requiring that the department-level CIO be included in the planning and budgeting stages for programs that are fully or partially supported with IT resources, DOE, HHS, and Treasury are at increased risk that the CIO is not providing input into key IT resource planning decisions. The charters for all four department-level investment review boards that inform decisions regarding IT resources indicated that their respective CIOs were included as members. In addition, the charters for component-level investment review boards that inform decisions regarding IT resources at CMS and IRS included their respective component-level CIOs. However, a similar review board at FBI did not include the component-level CIO as a member and NNSA had not yet finalized its charter. Further, none of the charters for the selected components’ investment review boards indicated that the department-level CIOs were members. Among the three CIOs at DOE, HHS, and Treasury that had delegated the responsibility of component-level board membership to component CIOs, the department-level CIOs at these agencies had not established procedures for ensuring that the components had implemented this responsibility, as required by OMB. As previously mentioned, while department CIOs were allowed to delegate this responsibility, OMB requires department CIOs to establish delegation plans that describe each requirement being delegated, demonstrate how the department CIOs will retain accountability for the requirement, and ensure that the delegated official executed the responsibility with the appropriate level of rigor. By not requiring that the department-level CIO be included in key governance board decisions regarding IT investments or establishing delegation plans that outline such activities for component CIOs, the selected departments are at increased risk that the CIO is not providing input into key IT resource planning decisions. Departments varied in the extent to which they had documented the process by which program leadership is to work with the CIO to plan an overall portfolio of IT resources. For example, DOJ and Treasury documented a detailed process with roles and responsibilities for how program leadership is to work with their CIOs to plan resources for the overall portfolio through their IT governance process. However, DOE and HHS had partially documented the process they were to follow to meet this requirement. Specifically, these departments documented that they were to utilize department-level governance boards to plan IT resources with program leadership for investments subject to the governance board reviews. However, they did not always document how CIOs were to work with program leadership in planning IT resources for other investments that were not subject to department-level governance board reviews, such as existing HHS investments that are greater than or equal to $20 million annually and DOE investments initiated by NNSA. As a result of shortfalls in documenting policies and procedures that require the CIO to work with program leadership to plan the IT portfolio, DOE and HHS are at an increased risk that the CIO’s role in the formulation of IT budgets is limited. The four selected departments varied in the extent to which they had documented in their policies and procedures how their CIOs are to review and approve the major IT investments portion of the budget request. For example, DOJ had a documented process for how the CIO is to review and approve all major IT investments through the department’s annual budget planning and IT portfolio review processes. In contrast, the other three departments partially addressed the requirement by documenting the requirement to review and approve certain major investments, but not all major investments. To illustrate, DOE documented policies and procedures that required the CIO to review major IT investments, but the policies and procedures did not apply to major IT investments within NNSA and the national laboratories, including those related to high-performance computing. Further, NNSA had draft policies and procedures requiring its component-level CIO to review major IT investments. However, these policies and procedures had not yet been finalized and approved, and they did not include a requirement for the DOE CIO’s review of these investments. Moreover, the department had not developed policies and procedures stipulating this requirement for the national laboratories. While officials in the department’s Office of the CIO stated that they plan to revise policies and procedures for the national laboratories to include the CIO in their annual planning processes, the officials did not identify a time frame for completing those revisions. As another example, HHS had documented a process that required the department-level CIO to review and approve new major IT investments greater than or equal to $20 million. In addition, the process required that the review and approval of new and existing major investments between $10 million and $20 million annually be delegated to the department’s component CIOs. Accordingly, CMS met this requirement at the component level by documenting IT investment review board policies and procedures that require the component CIO to review and approve major, high-risk, and mission critical IT investments with estimated costs of less than $20 million. However, HHS did not fully address the department-level requirement in that its process did not document how the department-level CIO would review and approve existing (as opposed to new) major investments greater than or equal to $20 million annually. As a result of not fully documenting the process for how the departments are to meet this requirement, DOE, HHS, and Treasury are at increased risk that major investments will be submitted for the budget without being reviewed and approved by the CIO. The departments we reviewed varied in the extent to which they had documented in their policies and procedures how they are to ensure that the CIO has reviewed IT resources that are to support major program objectives and significant increases and decreases in resources. For example, DOJ and Treasury had documented in their policies and procedures their CIOs’ role in reviewing IT resources that support major program objectives and significant increases and decreases in their resources. However, the other two departments—HHS and DOE—had not documented this role for their CIOs. Specifically, HHS policies and procedures did not include a requirement for the CIO to review significant increases and decreases in IT resources. In addition, the HHS CIO delegated to component-level CIOs the responsibility to review IT resources that support major program objectives for investments of less than $20 million annually. However, HHS had not established procedures for ensuring its components carried out the responsibility, and the component agency we selected—CMS—did not include this requirement in its procedures. Similarly, DOE had not documented procedures for the department-level CIO’s role in reviewing IT resources that support major program objectives and significant increases and decreases in IT resources. For NNSA programs, DOE delegated the responsibility to the NNSA CIO. However, NNSA had not documented the NNSA CIO’s role in reviewing planned IT support for major program objectives, as well as significant increases and decreases in IT resources. Until DOE and HHS develop policies and procedures that include how the CIO is to review whether each investment’s IT resources support major program objectives and have increased or decreased significantly, they will have less assurance that the IT budget request consistently supports the departments’ goals and objectives and that the CIOs have approved significant changes in the budget. None of the four departments had documented in their policies and procedures how their CIOs are to ensure, as part of the IT budget review and approval process, that the IT portfolio includes appropriate estimates of all resources. Specifically, DOE, HHS, Treasury, and DOJ had not documented in their policies and procedures the necessary steps that their CIOs would need to take in order to ensure that the portfolios included the appropriate estimates of all IT resources in the budget requests. In addition, Treasury delegated this responsibility to its component CIOs for component-level investments, and IRS had documented procedures for validating the estimates of all IT resources for the IRS budget request. However, Treasury did not document the necessary steps to ensure that its delegated authorities were being carried out, as required by OMB. Without documented policies and procedures for the steps the CIO is to take to review whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request or delegation plans that outline such activities for component CIOs, the selected departments may be limited in their ability to assure that their CIOs are effectively positioned to consistently and adequately review and approve the IT budget request. The shortcomings in the four departments’ policies and procedures related to CIO visibility into IT resources, CIO input into IT resource planning, and CIO review and approval of the IT budget request were due, in part, to having not addressed in their FITARA implementation and delegation plans how they intended to implement the OMB common baseline requirements. For example, none of the four departments’ FITARA implementation plans addressed how they intended to implement the requirement that all transactions related to IT resources be included in planned expenditure reporting to the CIO. These departments’ implementation plans also did not address the requirement that the CIO review whether the IT portfolio includes appropriate estimates of all IT resources identified in the budget request. Officials in DOE’s Office of the CIO stated that the department is in the process of determining ways to add specific review criteria to its capital planning policies and procedures to identify how the department is to review the appropriateness of IT resources in the portfolio. Had such procedures been documented and identified in the department’s FITARA implementation plan, it would have been better positioned to demonstrate how this common baseline requirement is being addressed. In addition, the HHS and Treasury FITARA delegation plans did not address how their CIOs would ensure components carried out their responsibilities for reviewing and approving the IT budget request. Officials in HHS’s Office of the CIO stated that delegation memorandums issued to their components included procedures for ensuring components carried out their responsibilities. However, the delegation plans they provided to us did not include such procedures. Officials in Treasury’s Office of the CIO stated that they did not believe that it was their responsibility to have procedures for verifying that components are carrying out their delegated responsibilities because they viewed it as an audit function. However, having such procedures is called for by OMB’s FITARA implementation guidance. Without FITARA implementation plans that address the shortfalls in policies and procedures for ensuring the implementation of OMB’s common baseline requirements, departments have limited assurance that their CIOs will implement the requirements as intended by OMB and FITARA. In addition, without identifying the steps within the FITARA delegation plans that departments intend to take to ensure the responsibilities delegated to components are appropriately carried out, the departments may have limited assurance that these actions have been taken. While it is important for federal agencies to establish policies and procedures that describe how they are to carry out IT budgeting requirements identified in FITARA and OMB guidance, it is equally important for them to implement the requirements when planning and budgeting for individual IT investments and to retain supporting documentation that would demonstrate that they have done so. Among the eight selected OMB common baseline requirements related to IT budgeting, five of the requirements are applicable at the individual investment level. Table 2 shows how these five common baseline requirements would be implemented at the individual investment level, as well as the related categories. The selected departments and their respective component agencies varied in the extent to which they could demonstrate that they had implemented the five common baseline requirements when developing their fiscal year 2017 funding requests for 16 sampled investments. Figure 2 and the subsequent discussion summarize the extent to which the departments and their component agencies could demonstrate that they had implemented the five requirements in developing fiscal year 2017 budgets for the sample of investments that we reviewed. As described earlier, we reviewed the largest major and non-major investment for each of the four departments and four component agencies. In addition, appendices II through V provide further details about our assessments of the extent to which the departments and component agencies demonstrated that they had implemented the five requirements. For the investments that we reviewed, the departments and their components varied in the extent to which they could demonstrate that they had described their investments’ IT resources. For example, DOJ and Treasury described specific IT resources, such as costs for personnel and software, in spreadsheets or databases for processing annual requests for resources for each proposed IT investment. Conversely, HHS and DOE did not fully describe in supporting documentation their respective IT resources for their investments included in our review. For example, HHS could not demonstrate that it had described the department-level non-major investment’s IT resources. In addition, although HHS described non-labor resources that were allocated for a portion of the sampled department-level major investment, the department did not describe labor resources for the investment. HHS also could not account for the investment’s entire funding request— leaving nearly $17 million in resources that were not described. Officials in HHS’s Office of the CIO were unable to explain why supporting documentation for the investment only accounted for a portion of the investment’s total funding request, and not the entire request. HHS and DOE officials provided various reasons as to why their departments did not describe in supporting documentation all of the IT resources associated with the investments we sampled. For example, HHS could not demonstrate that it had described IT resources for the non-major investment that we reviewed because officials in the Office of the CIO did not have the supporting documentation associated with its funding request. In addition, according to officials in HHS’s Office of the CIO, the department’s omission of required labor resources from program office artifacts supporting the funding request for the department-level major investment was an oversight. According to the officials, during the budget formulation cycle, the department did not consistently maintain documentation for its investments that would describe the IT resources and lacked a mature governance process for reviewing the IT resources associated with the investment. Moreover, officials in DOE’s Office of the CIO stated that the department’s budgeting procedures did not call for clearly identifying specific IT resources. However, at a minimum, DOE’s budgeting procedures required that the budget estimate for investments include planned government labor expenditures. Until HHS and DOE describe IT resources within their investments, the CIO may have limited visibility into what the resources are that are being requested in the annual IT budget. The extent to which each of the four departments’ could demonstrate that their CIOs were included in the planning and budgeting stages for the sampled investments with IT resources varied. Specifically, of the four investments we reviewed for each agency, DOJ and its component included the CIO in the planning and budgeting stages via an annual IT portfolio review that included the four sampled investments. On the other hand, HHS, Treasury, and DOE—along with their components—could not always demonstrate that the department-level CIO was included for their investments. For example, within HHS, its component agency—CMS—partially implemented the requirement for both of the sampled investments. Specifically, CMS documented the CIO’s review and approval of each investment’s detailed IT resource estimates during governance board reviews. However, HHS’s supporting documentation did not demonstrate that the department CIO was involved in the planning process for these investments even though its capital planning and investment control policy required this official to review, validate, and approve these IT investments through the department-level review board. Further, Treasury could not demonstrate that the department’s CIO was included in the planning and budgeting stages for the two department-level investments that we reviewed. According to officials in Treasury’s Office of the CIO, the relevant documentation was not retained for the selected department-level investments because procedures were not in place to document reviews by the CIO and certain artifacts that may have documented such reviews were no longer available in part due to employee turnover within the program offices responsible for the investments. Until DOE, HHS, and Treasury include the CIO in the planning and budgeting stages for investments with IT resources, they may be at risk of duplicating resources or funding investments without the CIO’s knowledge or approval. The selected departments varied in their ability to demonstrate that their CIOs worked with program leadership across the investments we sampled for the fiscal year 2017 funding request—both within and across the departments. For example, DOJ demonstrated that the CIO worked with program leaders in planning IT resources for both the major and non-major investment at the department level by jointly developing a plan for how business units were to utilize funds for IT services. At the component-level, FBI demonstrated that IT officials assisted program leadership in the planning of the major investment, but could not demonstrate that the CIO worked with program leadership on both the major and non-major investment. In addition, HHS fully demonstrated that the CIO worked with program leaders in planning IT resources for its major investment. For example, the CIO reviewed detailed IT resource narratives and line item estimates for the investment at a department-level governance board meeting with program leadership. However, HHS could not demonstrate that the CIO worked with program leadership to plan the non-major investment. At the component-level, CMS partially demonstrated that the CIO took such actions to plan the component-level investments. Specifically, the CIO at CMS worked with program officials to review and approve detailed IT resource requests for the investments. However, HHS could not demonstrate that its CIO was also involved in planning IT resources with program leadership for the same investments, as required by the department’s policy. Officials in the Office of the CMS CIO stated that they believed that the CMS CIO was an authorized delegate for this responsibility. However, the officials could not provide documentation of the delegation as required by OMB. Further, Treasury could not demonstrate that the CIO had worked with program leadership in planning IT resources for the department-level investments. According to officials in the Office of the CIO, they could not demonstrate the actions the CIO took to work with program leadership because documentation that would show the interaction was not retained. The officials stated that documentation was not retained due to turnover within the program offices responsible for the investments. At the component-level, IRS partially demonstrated that the CIO took action to work with program leadership for a portion of the component-level investments’ budget through IT budget reviews. However, IRS could not demonstrate coordination with program leadership for the full amount of the investments’ budget because the agency did not maintain a document trail for lower-level budgeting activities that included all relevant resource planning for the investments. Lastly, DOE could not fully demonstrate that the CIO had worked with program leadership in planning IT resources across all four investments at the department and component. DOE could not demonstrate this, in part, because the Office of the CIO’s internal process, during the formulation of the fiscal year 2017 budget, did not require input from all relevant stakeholders, including senior leadership, directors, and program managers. Officials in DOE’s Office of the CIO acknowledged the gap in its process and stated that the department and its component agency— NNSA—are working to establish processes that include senior management and program officials in the planning process. As of May 2018, DOE did not have a time frame for establishing these processes. The lack of consistent partnership of program leaders and the CIO to plan an investment’s IT resources at the department and component levels limits the ability of the CIO to have a significant role in the formulation of the department’s IT budget. The selected departments varied in the extent to which they could demonstrate that the CIO had appropriately reviewed all the investments we sampled. For example, DOJ demonstrated that the CIO reviewed whether the IT resources for the department- and component-level investments supported major program objectives and whether there were increases and decreases in IT resources for the investments. In addition, HHS partially addressed the requirement for its component-level investments. Specifically, while the component-level CIO at CMS reviewed changes in the investments’ resources, supporting documentation did not show that alignment with major program objectives was reviewed. Further, Treasury and DOE could not demonstrate that their CIOs reviewed whether the investment’s IT resources support major program objectives and any significant increases or decreases in resources for their department-level investments. According to officials in the offices of the CIO at Treasury and DOE, relevant documentation that would have demonstrated review activities had not been maintained for the investments. Until DOE, HHS, and Treasury can consistently demonstrate that the CIO has reviewed whether each investment’s IT resources support major program objectives and have increased or decreased significantly, the departments will have less assurance that the IT budget request supports their goals and objectives and that significant changes in the budget are appropriate. The selected departments varied in the extent to which they could demonstrate that the CIO took steps to review whether the investment’s estimates of IT resources in the portfolio and budget request were appropriate. For example, the CIO for DOE’s component agency—NNSA— demonstrated the review and approval of the non-major investment’s estimates of IT resources. However, NNSA could not demonstrate that the CIO reviewed the estimates for the major investment because it did not retain documentation that would provide details on the investment’s budget formulation and approval. In addition, HHS’s component agency—CMS—partially demonstrated implementation of the requirement on the major investment. Specifically, the CIO for CMS reviewed and approved supporting documentation for the investment’s detailed resource estimates totaling more than $500 million in developing the fiscal year 2017 budget request. However, the fiscal year 2017 budget request for this investment was $399 million, and according to officials in the CMS Office of the CIO, the CMS CIO did not review and approve the lowered estimate—ensuring the IT portfolio reflected an appropriate estimate. According to CMS officials in the Office of the CIO, the lowered estimate was the result of the user fees portion of the investment being removed from the request before it was submitted to OMB because it was not funded by annual appropriations. However, OMB’s fiscal year 2017 IT capital planning guidance required departments to report all budgetary sources of funding for each investment, including amounts available for obligation through collection of fees, as well as annual appropriations. Further, Treasury could not demonstrate that the CIO had reviewed the resource estimates for the department-level investments. At the component level, IRS demonstrated that officials in the Office of the CIO reviewed supporting documentation for detailed cost estimates for the component-level investments. However, these cost estimates only accounted for a portion, and not the full amount, of the investment. Finally, DOJ could not demonstrate that the component agency CIO ensured that the IT portfolio included appropriate estimates of all IT resources for the non-major investment at the component level. While officials in the FBI’s Office of the CIO stated that the component’s CIO was involved in reviewing detailed resource estimates for the investment prior to its submission to the department-level CIO, they could not provide supporting documentation because the FBI had not established procedures that explicitly required documenting the performance of this activity. Until the CIOs at DOE, HHS, Treasury, and DOJ consistently review IT resource estimates for each investment, departments will have less assurance that the estimates in the budget request are appropriate. GAO and international standards recommend certain quality assurance practices that can assist departments in developing an IT budget that is informed by reliable cost information. These practices include, among others: (1) ensuring government labor costs have been accurately reported for all investments, (2) aligning contract costs with the investments, and (3) utilizing budget object class data to capture all IT programs. Further, having documented IT capital planning processes to implement these practices is important because OMB requires department CIOs to fully account for and report on planned expenditures in their annual IT budget requests. All of the four selected departments—DOE, HHS, DOJ, and Treasury— lacked quality assurance processes to ensure government labor costs have been accurately reported, align contract costs with IT investments, and utilize budget data to capture all IT programs. However, OMB’s fiscal year 2019 IT capital planning guidance introduced several major changes to the budgeting process which, if effectively implemented, should provide departments and CIOs with enhanced visibility into IT costs across the portfolio and additional assurance that the budget is being informed by all relevant IT costs. OMB’s fiscal year 2019 IT capital planning guidance, released in August 2017, introduced several major changes to the federal IT budgeting process, including the practice of using a set of low-level cost categories to group spending. Subsequently, the President’s Management Agenda, released in March 2018, identified “improving outcomes through federal IT spending transparency” as one of the Administration’s 14 cross-agency priority goals. According to the President’s Management Agenda, the Administration intends to accomplish the cross-agency priority goal related to improving federal IT spending transparency by, among other things, increasing the granularity in IT budget reporting by utilizing a set of cost categories from OMB’s capital planning guidance. Figure 3 identifies the standard cost categories that OMB plans to implement in IT budget reporting. In its fiscal year 2019 IT capital planning guidance, OMB has recognized potential value in utilizing budget object classes, or similar financial data, to provide CIOs and Chief Financial Officers additional visibility into costs that inform the budget. As noted in the guidance, OMB expects that this new approach for utilizing financial data to inform the IT investment portfolio will enable the reconciliation of this portfolio with the department’s budget submitted by the Chief Financial Officer. Further, this effort is to help CIOs work more closely and in partnership with the Chief Financial Officers by using budget object classes and sub-object classes as a way to reconcile different presentations of estimated costs. In addition, OMB’s guidance stated that departments should begin to identify where they lack capabilities or resources to deliver financial data for the new low-level IT cost categories (shown in figure 3), consider what changes are necessary to achieve the new reporting requirements, and take steps to align reporting with the categories. Moreover, the President’s Management Agenda stated that the changes to how IT spending is to be categorized were made, in part, because federal executives have long known that they could better manage the more than $90 billion in federal government IT spending with increased visibility and more accurate data. The President’s Management Agenda action plan identified several milestones and due dates for accomplishing the goal of improving federal IT spending transparency, such as determining data sources necessary for departments to report within the low-level cost categories and establishing the common tools and services for the required reporting by June 2019. Moreover, the action plan stated that federal departments are expected to report all of the spending within their IT portfolio against the cost categories by September 2019. Given that improving federal IT spending transparency has been identified as one of the President’s top 14 management priorities and is critical to enabling department CIOs in carrying out their IT budgeting authorities from FITARA, it is important that OMB and departments take action now in order to meet the 2019 reporting requirements. The Administration’s approach for obtaining additional granularity on department IT investment spending, when implemented, should provide departments and CIOs enhanced visibility into IT costs across the portfolio. If implemented effectively, this approach could also provide departments additional assurance that their budgets are being informed by relevant IT costs. Recognizing the importance of CIOs’ ability to be responsible for IT budgeting, OMB’s common baseline includes eight requirements that departments’ policies and procedures should address to implement FITARA. While the four selected departments in our review either fully or partially addressed the majority of the requirements, none fully addressed all of them. The lack of policies and procedures was due, in part, to the fact that departments had not adequately addressed all of the required common baseline requirements in their FITARA implementation and delegation plans, as directed by OMB. Until the departments establish policies and procedures that address all requirements, they risk inconsistently applying requirements that are key to providing their CIOs visibility into resources, input to resource plans, and meaningful review and approval of IT budgets. In addition, the lack of policies and procedures has hampered the departments’ ability to demonstrate their implementation of the common baseline requirements for their investments. While DOJ fully demonstrated implementation for the selected requirements for the majority of the investments we sampled, HHS and Treasury partially demonstrated implementation for a majority of their investments, and DOE had not demonstrated implementation for the majority of its investments. As a result, departments were not always able to show that these CIOs had adequate input to resource plans and review of their IT budgets. Without retaining supporting documentation to show how common baseline requirements have been addressed on individual investments, the departments will be challenged in consistently demonstrating that CIOs are sufficiently involved in planning and budgeting annual IT expenditures. Finally, the four selected departments lacked quality assurance processes for ensuring their IT budgets are informed by reliable cost information. This resulted in billions of dollars that were requested without departments having comprehensive information to support those requests. Among other things, this was due to a lack of processes for periodically reviewing data quality and estimation methods for government labor estimates, as well as a lack of processes to cross-walk IT spending data in their procurement and accounting systems with investment data in their IT portfolio management systems. The Administration’s new approach of using a standard set of low-level cost categories to group IT spending could help departments address their lack of processes if properly implemented. It is important that OMB and departments meet the 2019 milestone dates associated with this approach so that department CIOs have additional transparency into IT spending and can make informed budget decisions. Nonetheless, departments will continue to have limited insight into IT budgeting until they capture all relevant IT costs in their budgets. We are making a total of 43 recommendations, including 9 to DOE, 6 to NNSA, 10 to HHS, 4 to CMS, 4 to DOJ, 1 to FBI, 8 to Treasury, and 1 to IRS. The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that establish department-wide policy for the level of detail of planned expenditure reporting to the CIO for all transactions that include IT resources. (Recommendation 1) The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that include the CIO in the planning and budgeting stages for all programs that are fully or partially supported with IT resources. (Recommendation 2) The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that include the CIO as a member of governance boards that inform decisions regarding all IT resources, including component-level boards. (Recommendation 3) The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the processes by which program leadership works with the CIO to plan an overall portfolio of IT resources. (Recommendation 4) The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the process for the CIO’s review and approval of the major IT investments portion of the budget request. (Recommendation 5) The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the CIO’s role in reviewing IT resources that are to support major program objectives and significant increases and decreases in IT resources. (Recommendation 6) The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the steps the CIO is to take to ensure whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request. (Recommendation 7) The Secretary of Energy should direct the Office of the CIO and other offices, as appropriate, to take steps to ensure that the actions taken to comply with OMB’s common baseline for implementing FITARA on individual investments are adequately documented. (Recommendation 8) The Secretary of Energy should ensure that the Office of the CIO and other offices, as appropriate, establish quality assurance processes— such as data quality checks, reviews of estimation methods, linkages between the IT portfolio and procurement system data, and linkages between the IT portfolio and financial system data—for ensuring the annual IT budget is informed by complete and reliable information on anticipated government labor, contract, and other relevant IT expenditures. (Recommendation 9) The Administrator of NNSA should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that establish agency-wide policy for the level of detail with which planned expenditures for all transactions that include IT resources are to be reported to the CIO. (Recommendation 10) The Administrator of NNSA should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that include the CIO in the planning and budgeting stages for all programs that are fully or partially supported with IT resources. (Recommendation 11) The Administrator of NNSA should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that include the CIO as a member of governance boards that inform decisions regarding all IT resources. (Recommendation 12) The Administrator of NNSA should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that document the process for the CIO’s review and approval of the major IT investments portion of the budget request. (Recommendation 13) The Administrator of NNSA should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that document the CIO’s role in reviewing IT resources that are to support major program objectives and significant increases and decreases in IT resources. (Recommendation 14) The Administrator of NNSA should direct the Office of the CIO and other offices, as appropriate, to take steps to ensure that the actions taken to comply with OMB’s common baseline for implementing FITARA on individual investments are adequately documented. (Recommendation 15) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that establish department-wide policy for the level of detail of planned expenditure reporting to the CIO for all transactions that include IT resources. (Recommendation 16) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that include the CIO in the planning and budgeting stages for all programs that are fully or partially supported with IT resources. (Recommendation 17) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that include the CIO as a member of governance boards that inform decisions regarding all IT resources, including component-level boards. (Recommendation 18) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the processes by which program leadership works with the CIO to plan an overall portfolio of IT resources. (Recommendation 19) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the process for the CIO’s review and approval of the major IT investments portion of the budget request. (Recommendation 20) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the CIO’s role in reviewing IT resources that are to support major program objectives and significant increases and decreases in IT resources. (Recommendation 21) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the steps the CIO is to take to ensure whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request. (Recommendation 22) The Secretary of Health and Human Services should direct the department CIO to establish, for any OMB common baseline requirements that are related to IT budgeting that have been delegated, a plan that specifies the requirement being delegated, demonstrates how the CIO intends to retain accountability for the requirement, and ensures through quality assurance processes that the delegated official will execute such responsibilities with the appropriate level of rigor. (Recommendation 23) The Secretary of Health and Human Services should direct the Office of the CIO and other offices, as appropriate, to take steps to ensure that the actions taken to comply with OMB’s common baseline for implementing FITARA on individual investments are adequately documented. (Recommendation 24) The Secretary of Health and Human Services should ensure that the Office of the CIO and other offices, as appropriate, establish quality assurance processes—such as data quality checks, reviews of estimation methods, linkages between the IT portfolio and procurement system data, and linkages between the IT portfolio and financial system data—for ensuring the annual IT budget is informed by complete and reliable information on anticipated government labor, contract, and other relevant IT expenditures. (Recommendation 25) The Administrator of CMS should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that include the CIO in the planning and budgeting stages for all programs that are fully or partially supported with IT resources. (Recommendation 26) The Administrator of CMS should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that document the processes by which program leadership works with the CIO to plan an overall portfolio of IT resources. (Recommendation 27) The Administrator of CMS should ensure that the Office of the CIO and other offices, as appropriate, develop and implement policies and procedures that document the CIO’s role in reviewing IT resources that are to support major program objectives and significant increases and decreases in IT resources. (Recommendation 28) The Administrator of CMS should direct the Office of the CIO and other offices, as appropriate, to take steps to ensure that the actions taken to comply with OMB’s common baseline for implementing FITARA on individual investments are adequately documented. (Recommendation 29) The Attorney General should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that establish department-wide policy for the level of detail of planned expenditure reporting to the CIO for all transactions that include IT resources. (Recommendation 30) The Attorney General should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that include the CIO as a member of governance boards that inform decisions regarding all IT resources, including component-level boards. (Recommendation 31) The Attorney General should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the steps the CIO is to take to ensure whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request. (Recommendation 32) The Attorney General should ensure that the Office of the CIO and other offices, as appropriate, establish quality assurance processes—such as data quality checks, reviews of estimation methods, linkages between the IT portfolio and procurement system data, and linkages between the IT portfolio and financial system data—for ensuring the annual IT budget is informed by complete and reliable information on anticipated government labor, contract, and other relevant IT expenditures. (Recommendation 33) The FBI Director should direct the Office of the CIO and other offices, as appropriate, to take steps to ensure that the actions taken to comply with OMB’s common baseline for implementing FITARA on individual investments are adequately documented. (Recommendation 34) The Secretary of the Treasury should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that establish department-wide policy for the level of detail of planned expenditure reporting to the CIO for all transactions that include IT resources. (Recommendation 35) The Secretary of the Treasury should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that include the CIO in the planning and budgeting stages for all programs that are fully or partially supported with IT resources. (Recommendation 36) The Secretary of the Treasury should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that include the CIO as a member of governance boards that inform decisions regarding all IT resources, including component-level boards. (Recommendation 37) The Secretary of the Treasury should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the process for the CIO’s review and approval of the major IT investments portion of the budget request. (Recommendation 38) The Secretary of the Treasury should ensure that the Office of the CIO and other offices, as appropriate, address gaps in the department’s FITARA plans by developing and implementing policies and procedures that document the steps the CIO is to take to ensure whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request. (Recommendation 39) The Secretary of the Treasury should direct the department CIO to establish, for any OMB common baseline requirements that are related to IT budgeting that have been delegated, a plan that specifies the requirement being delegated, demonstrates how the CIO intends to retain accountability for the requirement, and ensures through quality assurance processes that the delegated official will execute such responsibilities with the appropriate level of rigor. (Recommendation 40) The Secretary of the Treasury should direct the Office of the CIO and other offices, as appropriate, to take steps to ensure that the actions taken to comply with OMB’s common baseline for implementing FITARA on individual investments are adequately documented. (Recommendation 41) The Secretary of the Treasury should ensure that the Office of the CIO and other offices, as appropriate, establish quality assurance processes—such as data quality checks, reviews of estimation methods, linkages between the IT portfolio and procurement system data, and linkages between the IT portfolio and financial system data—for ensuring the annual IT budget is informed by complete and reliable information on anticipated government labor, contract, and other relevant IT expenditures. (Recommendation 42) The IRS Commissioner should direct the Office of the CIO and other offices, as appropriate, to take steps to ensure that the actions taken to comply with OMB’s common baseline for implementing FITARA on individual investments are adequately documented. (Recommendation 43) We provided a draft of this report to the four departments and four component agencies included in our review, as well as to OMB. In response, we received comments from two departments and three component agencies (HHS, CMS, DOJ, FBI, and IRS) which agreed with our recommendations. One department (DOE) partially agreed with one recommendation and agreed with the other recommendations made to it, as well as with the recommendations made to its component agency (NNSA). In addition, one department (Treasury) neither agreed nor disagreed with the recommendations. Further, OMB provided technical comments, which we incorporated in the report, as appropriate. The following departments and component agencies agreed with all of the recommendations that we directed to them: HHS provided written comments, reprinted in appendix VI, stating that it concurred with the 10 recommendations made to the department, and with the 4 recommendations made to CMS. Of the recommendations made to the department, HHS stated that the processes it currently has in place address the various gaps in the department’s FITARA plans, documentation, and quality assurance processes. However, HHS did not provide additional evidence to demonstrate that the weaknesses we identified have been mitigated. Thus, we maintain that the department needs to take further actions to address our recommendations. Until it takes the appropriate actions to address gaps in its FITARA plans, document the actions taken to comply with OMB’s guidance, and implement key quality assurance processes, the department will be at increased risk that its CIO is not effectively engaged in IT budgeting decisions. With regard to its component agency, HHS stated that CMS would take action to implement the recommendations made to it by updating the relevant policies and procedures to more explicitly identify the role of the CIO in developing the IT budget. In comments provided via email on September 27, 2018, an audit liaison in the Internal Review and Evaluation Office of the Justice Management Division stated that DOJ concurred with the four recommendations made to the department, and with the one recommendation made to FBI. IRS provided written comments, reprinted in appendix VII, stating that it concurred with our recommendation, has taken steps to begin implementing our recommendation, and is committed to making further progress toward fully implementing all OMB requirements when planning and budgeting for its individual investments. DOE provided written comments, reprinted in appendix VIII, in which it concurred with eight of the nine recommendations made to the department and partially concurred with one recommendation. The department also concurred with all six recommendations made to NNSA. Of the nine recommendations made to DOE, the department stated that it already had processes in place, or had taken action to address six of the recommendations, including the recommendation with which it partially concurred. However, the department did not provide sufficient evidence to demonstrate that the weaknesses we identified had been mitigated. Thus, we maintain that the recommendations warrant further actions. Until DOE takes the appropriate actions to address gaps in its FITARA plans, document the actions taken to comply with OMB’s guidance, and implement key quality assurance processes, the department will be at increased risk that the CIO is not effectively engaged in IT budgeting decisions. In addition, DOE stated that NNSA’s Office of the CIO plans to develop policies and procedures—in collaboration with the component agency’s Office of Acquisition and Project Management and the agency’s Office of Management and Budget—that should address the findings and six recommendations made to NNSA. The department anticipates that the policies and procedures will be finalized by March 31, 2019. Lastly, Treasury responded via email on September 28, 2018, but did not state whether it agreed or disagreed with our eight recommendations. Specifically, an audit liaison in Treasury’s Office of the CIO stated that the department believes it is implementing most of the OMB common baseline requirements in practice, but agreed that gaps exist in its policies and documentation. The official added that the department had started work on strengthening existing policies and procedures or developing new ones to close the gaps uncovered by our review. We are sending copies of this report to the appropriate congressional requesters; OMB; the Secretaries of the Departments of Energy, Health and Human Services, and the Treasury; the Attorney General; the Administrator of NNSA, the Administrator of CMS, the FBI Director, and the IRS Commissioner. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4456 or at harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. Our objectives were to determine the extent to which selected federal agencies (1) established policies and procedures in place that address the information technology (IT) budgeting requirements of the Federal Information Technology Acquisition Reform Act (FITARA) and related Office of Management and Budget (OMB) IT budget guidance, (2) could demonstrate that they had developed fiscal year 2017 IT budgets for sampled investments consistent with FITARA and OMB guidance, and (3) implemented processes to ensure that annual IT budgets are informed by reliable cost information. To address our objectives, we first identified the subset of the 24 agencies covered by the Chief Financial Officers Act that had a fiscal year 2017 IT budget request of at least $1 billion. From this subset, we then identified the four agencies having the two highest and the two lowest average initial FITARA self-assessment scores, which included an assessment of OMB’s common baseline for IT management (common baseline). In the event that one or more agencies had the same average self-assessment scores, we selected the agency with the largest fiscal year 2017 IT budget. Based on these criteria, we selected four departments for our review: (1) the Department of Energy (DOE), (2) the Department of Health and Human Services (HHS), (3) the Department of Justice (DOJ), and (4) the Department of the Treasury (Treasury). In addition, for each of these four departments, we selected their component agencies that had the largest fiscal year 2017 IT budget request. The components within the four selected departments were: (1) the National Nuclear Security Administration (NNSA) within DOE, (2) the Centers for Medicare and Medicaid Services (CMS) within HHS, (3) the Federal Bureau of Investigation (FBI) within DOJ, and (4) the Internal Revenue Service (IRS) within Treasury. For the first objective, we compared the selected departments’ policies and procedures to requirements selected from OMB’s FITARA guidance (referred to as the common baseline) that related to developing departments’ IT budgets. In selecting the requirements, we reviewed 10 areas related to budget formulation and execution within OMB’s common baseline, and used professional judgment to select 8 requirements that we believed would significantly impact the development and approval of departments’ annual IT budgets. In doing so, we excluded one requirement that affected the development of annual IT budgets to a lesser extent and combined one requirement that was similar to another. Specifically, we excluded the requirement from the area related to the chief information officer’s (CIO) role in program management because the CIO’s review of program management artifacts could not be directly related to the IT budget review and approval process. In addition, two common baseline areas had a similar requirement that the CIO be involved in the internal planning of IT resources prior to the budget submission. We combined these into one requirement for our review. We consulted with OMB officials in the Office of the Federal CIO on the requirements that we selected and how we planned to evaluate them and the officials agreed with our approach. The eight OMB common baseline requirements within budget formulation and execution that we identified and selected are: establish the level of detail with which IT resources are to be described in order to inform the CIO during the planning and budgeting processes; establish agency-wide policy for the level of detail with which planned expenditures for all transactions that include IT resources are to be reported to the CIO; include the CIO in the planning and budgeting stages for programs that are fully or partially supported with IT resources; include the CIO as a member of governance boards that inform decisions regarding all IT resources, including component-level governance boards; document the processes by which program leadership works with the CIO to plan an overall portfolio of IT resources; ensure the CIO has reviewed and approved the major IT investments portion of the budget request; ensure the CIO has reviewed IT resources that are to support major program objectives and significant increases and decreases in IT resources; and ensure the CIO has reviewed whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request. After determining the eight requirements that we would review, we categorized them into three areas: CIO visibility into IT resources, CIO input to IT resource plans, and CIO review and approval of IT budgets. We then reviewed the current policies and procedures that each department had documented for its IT budgeting process to determine whether the department documented a process for how they would address each of the eight common baseline requirements we selected for review. In addition to policies and procedures, we also reviewed each department’s FITARA implementation plan, which included a description of the steps the department must take to ensure that all FITARA and OMB requirements would be implemented; and the delegation memorandums from department CIOs, in which formal assignments of responsibilities to other department officials are documented, where applicable. In cases where the department CIO fully or partially delegated responsibilities to component officials, we requested relevant documentation from the agency component with the largest fiscal year 2017 IT budget request. In such cases, we based our determination of departments’ implementation of the requirement on (1) the extent to which the component agency had documented policies and procedures that carried out the delegated requirement and (2) the extent to which the department CIO had procedures for ensuring the delegation was being carried out by the components. With regard to our second objective, we determined whether the selected departments had implemented key IT budgeting requirements for a non-generalizable sample of investments in their fiscal year 2017 budget formulation. In doing so, we chose 16 investments—the largest major and non-major investments at the department level and the largest major and non-major investments at the component level—based on the selected departments’ fiscal year 2017 IT budget request. Although the information obtained is not generalizable to all of the departments’ investments, the sample provided a range of examples and conditions under which the departments were implementing requirements found in OMB’s common baseline. We then identified a subset of requirements from the eight department requirements for developing IT budgets found in OMB’s common baseline for which implementation could be observed at the investment level. In doing so, we used professional judgment to select the subset of requirements where actions taken to implement these requirements could be observed for individual investments. Specifically, we did not select the requirement to establish agency-wide policy for the level of detail with which planned expenditures for all transactions that include IT resources are to be reported to the CIO, because the requirement primarily applied to enterprise-wide policymaking and reporting. Also, we did not select the requirement to include the CIO as a member of governance boards that inform decisions regarding all IT resources for review on individual investments because certain investments may not have been subject to governance board reviews during fiscal year 2017. In addition, we did not select the requirement to ensure the CIO has reviewed and approved the major IT investments portion of the budget request for review on individual investments because half of the investments we selected were not classified as major investments. The five requirements for which we selected and reviewed implementation at the investment level were: IT resources for each investment are described in order to inform the CIO during the planning and budgeting processes; the CIO is included in the planning and budgeting stages for investments with IT resources; program leadership works with the CIO to plan the investment’s IT the CIO reviews whether the investment’s IT resources support major program objectives and have increased or decreased significantly; and the CIO reviews whether the investment’s estimates of IT resources in the portfolio and budget request are appropriate. For each investment, if available, we obtained artifacts for the fiscal year 2017 budget submission—such as briefings, reports, meeting minutes, memorandums, and other relevant documentation showing the CIO’s involvement in relevant reviews or decisions. We compared this documentation to relevant OMB requirements for developing the IT budget at the individual investment level. To address our third objective, we assessed the selected departments’ efforts to develop their fiscal year 2017 budget with reliable cost information by comparing the department’s IT capital planning and budgeting processes against best practices identified by us and the International Organization for Standardization—such as capturing government labor costs, aligning contract costs with investments, and utilizing budget object class data. We selected these three practices (from among others) because of their potential to inform the development of a complete and accurate IT budget for a federal department. Capturing government labor costs. We reviewed each selected departments’ IT capital planning policies and procedures and government labor estimates within the 2017 IT budget submission reported on the Federal IT Dashboard. For each selected department, we identified the processes by which forecasted government labor costs are to be captured within investment proposals submitted with the annual IT budget. We then analyzed each department’s 2017 IT investment proposals to determine whether the department was capturing government labor for each investment. In doing so, we analyzed each selected department’s IT portfolio submitted with its fiscal year 2017 budget to determine whether the identified investments had included planned government labor costs, as required by OMB. Aligning contract costs with investments. We reviewed each selected departments’ IT capital planning policies and procedures, contract-related information within the 2017 IT budget submission reported on the Federal IT Dashboard, and contract obligation data reported within the Federal Procurement Data System-Next Generation. From these document reviews, we identified the processes by which contract-related costs are to be captured within investment proposals submitted with the annual IT budget. We then determined whether departments were able to align current contracts with 2017 IT investment proposals. In doing so, we identified fiscal year 2016 contracts that departments reported in the Federal Procurement Data System-Next Generation that had an IT-related product or service code and an expected completion date that extended into fiscal year 2017 or beyond. We then attempted to match, using the unique procurement identification number for each contract, a corresponding IT investment for those contracts in departments’ fiscal year 2017 IT budget data. For contracts that we could not find a match, or alignment, with investments in departments’ fiscal year 2017 IT budget data, we identified dollars obligated on those contracts from October 2016 through September 2017. Utilizing budget object class data. We reviewed each selected departments’ IT capital planning policies and procedures, budget object classes that are to help track IT financial transactions, and OMB’s fiscal year 2019 IT capital planning guidance that calls for greater use of IT financial data. We then assessed whether departments’ IT capital planning processes utilized budget object class information to ensure that relevant IT costs are being captured as investments for the annual IT budget. We assessed the reliability of reported government labor costs by identifying instances in which investments had not included planned government labor costs and by corroborating those instances with officials in the departments’ offices of the CIO. We determined that the data were sufficiently reliable for our purposes. Where we identified data quality issues in capturing government labor costs for department investments, we included those in the findings of this report. We also assessed the reliability of Federal Procurement Data System-Next Generation data by performing electronic testing of selected data elements and reviewing existing information about the system and the data it produces. Specifically, we reviewed the data dictionary, data validation rules, and the fiscal year 2016 Federal Government Procurement Data Quality Summary for agency data in the Federal Procurement Data System-Next Generation. We determined that the data were sufficiently reliable for our purposes. We supplemented our review with interviews with officials in the departments’ offices of the CIO, Chief Financial Officer, and program offices to include discussions of our observations of any shortfalls in their processes. We conducted this performance audit from January 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. DOE established department-wide IT capital planning and budgeting procedures that document the level of detail with which IT resources are to be described during the planning and budgeting process. The documented level of detail included OMB’s required reporting on government labor and certain resources for infrastructure investments. This requirement was assigned at the department level. DOE documented IT capital planning procedures for the level of detail of planned expenditure reporting. However, the procedures did not explicitly require that all transactions with an IT component be included in the expenditure reporting. DOE’s FITARA implementation plan stated that the NNSA CIO was to work with the chief financial officer and chief acquisition officer to update NNSA’s policies to ensure they documented the level of detail for planned expenditure reporting for all IT transactions. However, NNSA had not established such policies and procedures. DOE documented IT capital planning and annual budgeting procedures that included the CIO in the planning and budgeting stages for some, but not all programs identified as having IT resources. Specifically, at the time of our review, the department had not yet documented procedures for ensuring the CIO was included in budget decisions for all programs with IT resources, including those within NNSA and national laboratories. According to DOE’s FITARA implementation plan and a memorandum from the Secretary providing further instructions on FITARA, NNSA was to provide an opportunity for the department CIO to provide input in its planning and budgeting stages for programs with IT resources and to document related review processes. However, at the time of our review, NNSA had not yet established the procedures that were to detail how this process was to be carried out. DOE developed charters that included the CIO as a member of department-level IT governance boards, but had not included the CIO as a member of component-level IT investment review boards. According to DOE’s FITARA implementation plan, NNSA was to allow the DOE CIO to provide input into NNSA acquisition decisions through its IT investment review board. However, at the time of our review, NNSA had not yet finalized its investment review board charter and related procedures to include the DOE CIO. DOE documented IT governance board procedures by which the CIO is to work with program leadership in planning IT resources for some, but not all of the programs subject to department-level governance board reviews. Specifically, at the time of our review, the department had not yet documented procedures by which the CIO was to work with program leadership in planning IT resources within NNSA and national laboratories, including high-performance computing efforts. This requirement was assigned at the department level. DOE documented IT capital planning and governance board procedures for its CIO to review and approve some, but not all of its major IT investments. Specifically, at the time of our review, the department had not yet documented procedures for the CIO to review major investments within NNSA and national laboratories, including high-performance computing efforts. According to DOE’s FITARA implementation plan, the NNSA CIO was to review and approve NNSA major IT investments and provide the DOE CIO an opportunity to review and provide input prior to the final decision. However, at the time of our review, procedures to do so had not yet been established. At the time of our review, DOE had not yet documented procedures for reviewing IT resources that are to support major program objectives and significant increases and decreases in IT resources for other department and component agency budget requests. DOE delegated the responsibility to meet this requirement to NNSA for their programs. According to DOE’s FITARA implementation plan, the NNSA CIO was to review and approve NNSA major IT investments and provide the DOE CIO an opportunity to review and provide input prior to the final decision. However, at the time of our review, procedures to do so had not yet been established. In addition, NNSA had not documented procedures by which the NNSA CIO was to review IT resources that are to support major program objectives as well as significant increases and decreases in IT resources. DOE had not documented procedures for this requirement. This requirement was assigned at the department level. ● = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common ◑ = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the ○ = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB common baseline requirement. N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement. GAO’s assessment NNSA could not demonstrate that the CIO reviewed the investment’s alignment with major program objectives or changes in resources. The CIO reviewed IT resources that are to support major program objectives through business case materials that described the goals that the investment supported. In addition, the CIO reviewed decreases in the annual resource requirements by reviewing acquisition planning artifacts that included the investment’s cost estimate details. DOE could not demonstrate that the CIO reviewed the appropriateness of IT resource estimates underlying the investment’s budget request. DOE could not demonstrate that the CIO reviewed the appropriateness of IT resource estimates underlying the investment’s budget request. NNSA could not demonstrate that the CIO reviewed the appropriateness of IT resource estimates underlying the investment’s budget request. The NNSA CIO took steps to ensure the appropriateness of IT resource estimates included in the investment’s budget request by reviewing acquisition planning artifacts that included details on the fiscal year 2017 cost estimates. ● = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment. ◑ = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the ○ = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment. This requirement was assigned at the department level. HHS documented IT capital planning procedures for the level of detail of planned expenditure reporting. However, the procedures had not explicitly required that all transactions with an IT component are included in the expenditure reporting. This requirement was assigned at the department level. HHS documented IT capital planning procedures for including the CIO in the planning and budgeting stages for new programs with IT resources that are greater than or equal to $20 million annually. However, at the time of our review, the department had not documented procedures for ensuring the CIO was included in the budget decisions for existing programs with IT resources that are greater than or equal to $20 million annually or for other programs that may have IT resources, such as those that are not primarily IT-oriented. The HHS CIO delegated the responsibility for carrying out this requirement to component CIOs for investments less than $20 million annually. However, HHS had not established procedures for ensuring its components were carrying out this responsibility. CMS documented annual IT budget instructions and governance board procedures for the component CIO’s involvement in the planning and budgeting stages for major investments less than $20 million annually. However, CMS had not documented procedures for how the CIO was to be involved in budgeting decisions for non-major investments. HHS developed charters that included the CIO on department-level governance boards that inform decisions regarding IT resources, such as the HHS Domain IT Steering Committee and the Chief Technology Officer Council. However, the HHS CIO was not a member of the Service and Supply Fund board—which reviews and approves operations and common service spending across the department—and other component-level IT investment review boards at CMS. The HHS CIO delegated the responsibility for carrying out this requirement to CMS’s CIO for investments less than $20 million annually. However, HHS had not established procedures for ensuring components were carrying out this responsibility. CMS included its CIO as a member of the IT investment review board to oversee investments that are less than $20 million annually, consistent with the delegation from the HHS CIO. HHS documented IT capital planning and governance board procedures by which the CIO is to work with program leadership to plan IT resources for new investments greater than or equal to $20 million annually. However, the department had not established procedures by which the CIO is to work with program leadership in planning resources for existing investments greater than or equal to $20 million annually. HHS’s CIO delegated the responsibility of reviewing and approving IT investments to components for investments less than $20 million annually. However, HHS had not established procedures for ensuring its components were carrying out this responsibility. CMS documented the procedures by which program leadership was to work with the CMS CIO to plan IT resources for selected major and non- major investments through its IT investment review board. However, CMS had not established procedures for how the CIO was to work directly with program leadership on non-major IT investments that are not subject to the IT investment review board. HHS documented IT capital planning and governance board procedures by which the CIO is to review and approve new major IT investments greater than or equal to $20 million annually. However, the department had not established procedures by which the CIO was to review and approve other major IT investments, including major investments greater than or equal to $20 million annually that are not new investments. The HHS CIO delegated the responsibility of the requirement to review and approve major investments between $10 million and $20 million annually to its component CIOs. However, at the time of our review, HHS had not established procedures for ensuring its components carried out the responsibility. CMS documented procedures for its CIO to review and approve major IT investments that are between $10 million and $20 million annually through its IT capital planning and governance board procedures, consistent with its delegation from the HHS CIO. HHS had not documented procedures for the CIO’s review of significant increases and decreases in IT resources. In addition, the HHS CIO delegated the responsibility for the requirement to review IT resources that are to support major program objectives to component-level CIOs for investments less than $20 million annually. However, HHS had not established procedures for ensuring its components carried out the responsibility. CMS had not documented procedures for how the component was to review IT resources that are to support major program objectives, consistent with its delegated responsibility by the HHS CIO. HHS has not documented procedures for this requirement. This requirement was assigned at the department level. ● = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common ◑ = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the ○ = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement. The HHS CIO was included in the planning and budgeting stages of the sampled investment by reviewing the IT resources through budget analysis meetings with the program office and department-level governance board. However, the review board only discussed nearly $15.8 million of the $33 million in total IT resources for the investment that was reported to OMB, and HHS officials could not demonstrate that the CIO was involved in the planning and budgeting stages for the remaining portion of the budget request. HHS could not demonstrate that the CIO was involved in the planning and budgeting stages for the sampled investment’s IT resources. The CMS CIO was included in the planning and budgeting stages for the sampled investment by reviewing and approving the investment’s budget request. However, HHS could not demonstrate that the department-level CIO was involved in the budgeting process for the investment’s IT resources through governance board reviews, as required by HHS policy. In addition, HHS could not demonstrate that the responsibility for this requirement had been delegated to the CMS CIO for the fiscal year 2017 budget request. The CMS CIO was included in the planning and budgeting stages for the sampled investment by reviewing the investment’s budget. However, HHS could not demonstrate that the department-level CIO was involved in the budgeting process for the investment’s IT resources through governance board reviews, as required by HHS policy. In addition, HHS could not demonstrate that the responsibility for this requirement had been delegated to the CMS CIO for the fiscal year 2017 budget request. HHS demonstrated that the CIO worked with program leadership to plan the investment’s IT resources through a department-level governance board meeting with program leadership, a briefing with the program office, and direction to investment managers to plan for a different funding scenario when determining the investment’s IT resource estimate. HHS could not demonstrate that the CIO worked with program leadership to plan the sampled investment’s IT resources. The CMS CIO worked with program leadership to plan the investment’s IT resources by chairing the CMS IT investment review board that approved the investment’s funding proposal. However, HHS could not demonstrate that the department-level CIO was involved in the planning process for the investment’s IT resources as required by HHS policy. In addition, HHS could not demonstrate that the responsibility for this requirement had been delegated to the CMS CIO for the fiscal year 2017 budget request. The CMS CIO worked with program leadership to plan the investment’s IT resources by chairing the CMS IT investment review board that reviewed the investment’s funding proposal. However, HHS could not demonstrate that the department-level CIO was involved in the planning process for the investment’s IT resources as required by HHS policy. In addition, HHS could not demonstrate that the responsibility for this requirement had been delegated to the CMS CIO for the fiscal year 2017 budget request. The HHS CIO reviewed the investment’s alignment with major program objectives during an annual operational analysis review in December 2015. However, HHS did not demonstrate that the CIO reviewed the increase in IT resources for the investment totaling $33 million, more than double its initial estimate of nearly $15.8 million. HHS could not demonstrate that the CIO reviewed the investment’s alignment with major program objectives or changes in resources. The CMS CIO reviewed changes in resources identified within individual activity funding requests related to the investment. However, CMS could not demonstrate that the CIO reviewed the investment’s alignment with major program objectives. In addition, HHS could not demonstrate that the department-level CIO was involved in reviewing changes in IT resources for the investment. Moreover, HHS could not demonstrate that the responsibility for reviewing changes in IT resources had been delegated to the CMS CIO for the fiscal year 2017 budget request. The CMS CIO reviewed changes in resources identified within individual activity funding requests related to the investment. However, CMS could not demonstrate that the CIO reviewed the investment’s alignment with major program objectives. In addition, HHS could not demonstrate that the department-level CIO was involved in reviewing changes in IT resources for the investment. Moreover, HHS could not demonstrate that the responsibility for reviewing changes in IT resources had been delegated to the CMS CIO for the fiscal year 2017 budget request. The HHS CIO took steps to determine the appropriateness of nearly $15.8 million of the IT resource estimates for this investment by reviewing a line item budget estimate prepared for a department-level governance board. However, HHS could not demonstrate that the CIO took steps to determine the appropriateness of the IT resources for the remaining portion of the investment’s total 2017 budget request of $33 million as reported to OMB. HHS could not demonstrate that the CIO or a designee reviewed the appropriateness of the IT resource estimates underlying the investment’s 2017 budget request. The CMS CIO took steps to determine the appropriateness of the investment’s IT resources totaling approximately $500 million by reviewing the detailed budget request at an IT investment review board meeting. However, according to the Federal IT Dashboard, the fiscal year 2017 budget request for this investment totaled $399 million, and CMS could not demonstrate that the CIO took steps to determine the appropriateness of the revised budget total. In addition, HHS could not demonstrate that the department-level CIO reviewed the appropriateness of the investment’s IT resources. Moreover, HHS could not demonstrate that the responsibility for this requirement had been delegated to the CMS CIO for the fiscal year 2017 budget request. The CMS CIO took steps to determine the appropriateness of the investment’s IT budget request by reviewing the IT resource request through the investment review board. However, HHS could not demonstrate that the department-level CIO reviewed the appropriateness of the investment’s IT resources. In addition, HHS could not demonstrate that the responsibility for this requirement had been delegated to the CMS CIO for the fiscal year 2017 budget request. ● = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment. ◑ = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the ○ = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment. DOJ established department-wide IT capital planning and budgeting procedures that document the level of detail with which IT resources are to be described during the planning and budgeting process. The documented level of detail went beyond OMB’s minimum required reporting to include 49 IT resources across four business areas. This requirement was assigned at the department level. DOJ documented IT capital planning procedures for the level of detail of planned expenditure reporting. However, the procedures did not explicitly require that all transactions with an IT component are included in the expenditure reporting. This requirement was assigned at the department level. DOJ documented procedures for including the CIO in the planning and budgeting stages for programs with IT resources. This requirement was assigned at the department level. DOJ documented governance board charters that included the CIO as a member of department-level IT governance boards. However, the CIO was not included a member of key component-level IT investment review boards, including those at FBI. This requirement was assigned at the department level. DOJ documented procedures in its IT Governance Guide by which the CIO is to work with program and component leadership in planning the overall portfolio of IT resources. This requirement was assigned at the department-level. DOJ documented procedures in its IT Governance Guide and Department Investment Review Council for the CIO to review and approve major IT investments. This requirement was assigned at the department level. DOJ documented procedures in its IT Governance Guide and IT capital planning guidance for the CIO to review IT resources that are to support major program objectives and significant increases and decreases in resources. This requirement was assigned at the department level. DOJ did not document procedures for this requirement. This requirement was assigned at the department level. ● = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common ◑ = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the ○ = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement. FBI included the DOJ CIO in the planning and budgeting stages for the sampled investment through a review of the funding request during an annual IT portfolio review in October 2015. FBI included the DOJ CIO in the planning and budgeting stages for the sampled investment through a review of the funding request during an annual IT portfolio review in October 2015. DOJ’s CIO collaborated with program leaders in planning IT resources for the investment through development of the annual operating plan for DOJ’s working capital fund and through meetings with component business leadership and meetings with component CIOs. DOJ’s CIO collaborated with program leaders in planning IT resources for the investment through development of the annual operating plan for DOJ’s working capital fund. While FBI program leadership collaborated with IT representatives from the Criminal Justice and Information Services Division in planning IT resources, FBI could not demonstrate that the CIO was involved in the planning or that the responsibility had been delegated to the division. FBI could not demonstrate that the CIO worked with program leadership to plan the sampled investment’s IT resources. DOJ’s CIO reviewed IT resources that are to support major program objectives and changes in IT resources through development of the annual operating plan for DOJ’s working capital fund and in an annual IT portfolio review in October 2015. DOJ’s CIO reviewed IT resources that are to support major program objectives and changes in IT resources through development of the annual operating plan for DOJ’s working capital fund and in an annual IT portfolio review in October 2015. FBI obtained a review from the DOJ CIO regarding IT resources that are to support major program objectives and significant changes in IT resources through an annual IT portfolio review in October 2015. FBI obtained a review from the DOJ CIO regarding IT resources that are to support major program objectives and significant changes in IT resources through an annual IT portfolio review in October 2015. DOJ’s CIO took steps to ensure the investment included appropriate estimates of IT resources in its budget request by reviewing spreadsheets with additional and more detailed cost information during an annual IT portfolio review in October 2015. DOJ’s CIO took steps to ensure the investment included appropriate estimates of IT resources in its budget request by reviewing spreadsheets with additional and more detailed cost information during an annual IT portfolio review in October 2015. While IT representatives within the Criminal Justice and Information Services Division were involved in validating underlying IT resource estimates, FBI could not demonstrate that the CIO was involved in the planning or that the responsibility had been delegated to the division. FBI could not demonstrate that the CIO or designee reviewed the appropriateness of IT resource estimates underlying the investment’s budget request. ● = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment. ◑ = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the ○ = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment. This requirement was assigned at the department level. Treasury documented IT capital planning procedures for reporting investments’ planned IT expenditures. However, the procedures did not explicitly require that all transactions with an IT component are included in the expenditure reporting. This requirement was assigned at the department level. While the department documented procedures for including the CIO in the planning and budgeting stages for department-level programs that are identified as having IT resources, it did not document procedures for ensuring the CIO is included in all department-level programs that may have IT resources, including those that are not primarily IT-oriented. In addition, Treasury’s CIO delegated this requirement to component CIOs for component-level investments. However, the agency had not established procedures for verifying that components were carrying out this delegated responsibility. IRS documented annual IT budgeting procedures for including the IRS CIO in the component’s planning and budgeting stages for all programs that have IT resources. Treasury developed department-level IT governance board charters that included the CIO as a member. In addition, the Treasury CIO delegated the responsibility for this requirement to component CIOs for component- level IT governance boards. However, the department had not established procedures for verifying that components were carrying out this delegated responsibility. IRS included its CIO as a member of its IT investment review board through its documented IT budgeting procedures. Treasury has documented procedures in its IT capital planning guidance by which the CIO works with program and component leadership in planning IT resources. This requirement was assigned at the department level. While Treasury documented procedures in its IT capital planning guidance for the CIO to review major IT investments with each component, the department had not documented procedures for how the CIO was to approve those investments. In addition, the Treasury CIO delegated to component CIOs the responsibility to develop proposed IT planning and budgeting artifacts while the Treasury CIO would retain the authority to approve them. However, the department had not established procedures for verifying that components were carrying out this delegated responsibility. IRS documented annual IT budgeting procedures that described how the component CIO was to review and approve major IT investments. Treasury established procedures through its Quarterly Performance Reviews and its IT capital planning guidance to review IT resources that are to support major program objectives and significant changes in IT resources. For example, during the annual Spring portfolio review with each component, the CIO was to discuss strategic IT changes for the component and any significant resource changes that have occurred on individual investments. This requirement was assigned at the department level. Treasury had not documented procedures for ensuring the appropriateness of IT resource estimates for department-level investments. In addition, Treasury delegated the responsibility for this requirement to component CIOs for component-level investments. However, the department had not established procedures for verifying that components were carrying out this delegated responsibility. IRS documented annual IT budgeting procedures for ensuring the appropriateness of IT resources within the component-level IT portfolio. The procedures included validating annual IT demand requests that form the basis of the budget request. ● = The department provided documentation that demonstrated that the department or delegated component agency satisfied the OMB common ◑ = The department provided documentation that demonstrated that the department or delegated component agency satisfied some but not all of the ○ = The department could not provide documentation that demonstrated that the department or delegated component agency satisfied any of the OMB N/A = The component agency was not officially delegated the identified responsibilities for the OMB common baseline requirement. IRS demonstrated that managers from the Office of the CIO worked with program leadership from IRS business units in developing a portion of the sampled investment’s budget of $286 million through IT budget reviews conducted by an integrated review team in July 2015. However, the component agency could not demonstrate that Office of the CIO officials worked with program leadership to develop the budget for the full investment totaling $468 million. IRS demonstrated that managers from the Office of the CIO worked with program leadership from IRS business units in developing a portion of the sampled investment’s budget of $40 million through IT budget reviews conducted by an integrated review team in July 2015. However, the component agency could not demonstrate that Office of the CIO officials worked with program leadership to develop the budget for the full investment totaling $343 million. Treasury could not demonstrate that the CIO reviewed the investment’s alignment with major program objectives or changes in resources. Treasury could not demonstrate that the CIO reviewed the investment’s alignment with major program objectives or changes in resources. IRS demonstrated that managers from the Office of the CIO reviewed alignment with major program objectives and changes in underlying resources for a portion of the sampled investment’s budget of $286 million through IT budget reviews conducted by an integrated review team in July 2015. However, the component agency could not demonstrate that Office of the CIO officials reviewed alignment with major program objectives and changes in resources for the full investment totaling $468 million. IRS demonstrated that managers from the Office of the CIO reviewed alignment with major program objectives and changes in underlying resources for a portion of the sampled investment’s budget of $40 million through IT budget reviews conducted by an integrated review team in July 2015. However, the component agency could not demonstrate that Office of the CIO officials reviewed alignment with major program objectives and changes in resources for the full investment totaling $343 million. Treasury could not demonstrate that the CIO or designee reviewed the appropriateness of IT resource estimates underlying the investment’s budget request. Treasury could not demonstrate that the CIO or designee reviewed the appropriateness of IT resource estimates underlying the investment’s budget request. IRS demonstrated that managers from the Office of the CIO reviewed detailed cost estimates for a portion of the sampled investment’s budget of $286 million through IT budget reviews conducted by an integrated review team in July 2015. However, the component agency could not demonstrate that Office of the CIO officials reviewed detailed cost estimates for the full investment totaling $468 million. IRS demonstrated that managers from the Office of the CIO reviewed detailed cost estimates for a portion of the sampled investment’s budget of $40 million through IT budget reviews conducted by an integrated review team in July 2015. However, the component agency could not demonstrate that Office of the CIO officials reviewed detailed cost estimates for the full investment totaling $343 million. ● = The department or component demonstrated that it had implemented the OMB common baseline requirement on the investment. ◑ = The department or component demonstrated that it had implemented some but not all of the OMB common baseline requirement on the ○ = The department or component could not demonstrate that it had implemented the OMB common baseline requirement on the investment. In addition to the contact named above, Dave Powner (Director), Nicole Jarvis (Assistant Director), Joshua Leiling (Analyst-in-Charge), Chris Businsky, Kara Epperson, Rebecca Eyler, Suellen Foth, Torrey Hardee, Tarunkant Mithani, Monica Perez-Nelson, and Andrew Stavisky made key contributions to this report.", "summary": "In December 2014, Congress enacted FITARA, which was intended to improve covered agencies' acquisitions of IT. FITARA also provided an opportunity to strengthen the authority of CIOs to provide needed direction and oversight of agencies' IT budgets. GAO was asked to review whether CIOs' IT budgeting practices are consistent with FITARA and OMB's implementing guidance. This report addresses the extent to which selected federal agencies (1) established policies and procedures that address IT budgeting requirements, (2) could demonstrate that they had developed fiscal year 2017 IT budgets for sampled investments consistent with FITARA and OMB guidance, and (3) implemented processes to ensure that annual IT budgets are informed by reliable cost information. GAO selected four departments to review. These departments had the two highest and the two lowest average initial selfassessments scores of compliance with OMB's FITARA guidance, as well as a fiscal year 2017 IT budget of at least $1 billion. Within each of the departments, GAO also selected the component agencies with the largest fiscal year 2017 IT budget. For each selected department and component agency, GAO reviewed relevant IT budget policies and procedures, analyzed a sample of major and non-major investment proposals against key OMB requirements, and determined whether selected departments captured government labor costs, among other things. The departments GAO reviewed—the Departments of Energy (DOE), Health and Human Services (HHS), Justice (DOJ), and the Treasury (Treasury)—took steps to establish policies and procedures that align with eight selected Office of Management and Budget (OMB) requirements intended to implement information technology (IT) acquisition reform legislation (commonly referred to as the Federal Information Technology Acquisition Reform Act, or FITARA) and to provide the chief information officer (CIO) visibility into and oversight over the IT budget. For example, of the eight OMB requirements, all four departments had established policies and procedures related to the level of detail with which IT resources are to be described in order to inform the CIO during the planning and budgeting processes. Agencies varied, however, as to how fully they had established policies and procedures related to some other OMB requirements, and none of the four departments had yet established procedures for ensuring that the CIO had reviewed whether the IT portfolio includes appropriate estimates of all IT resources included in the budget request. (See table.) Where the departments had not fully established policies and procedures, it was due, in part, to having not addressed in their FITARA implementation and delegation plans how they intended to implement the OMB requirements. Until departments develop comprehensive policies and procedures that address IT budgeting requirements established by OMB, they risk inconsistently applying requirements that are intended to facilitate the CIO's oversight and approval of the IT budget. Departments varied in the extent to which they could demonstrate implementation of key IT budgeting requirements when developing fiscal year 2017 funding requests for sampled investments. Specifically, while DOJ demonstrated that it had fully implemented the selected requirements for the majority of the investments GAO sampled, HHS and Treasury partially demonstrated implementation for a majority of the sampled investments, and DOE could not demonstrate implementation for the majority of the sampled investments. For example, DOE, HHS, and Treasury were not able to fully show that their CIOs had reviewed whether estimates of IT resources included in the budget request were appropriate for two of their respective departments' largest fiscal year 2017 IT investments. Departments often could not demonstrate that they had implemented selected IT budgeting requirements at the investment level because they had not established comprehensive policies and procedures that required them to do so. As a result, departments could not show that CIOs were sufficiently involved in planning fiscal year 2017 IT expenditures at the individual investment level. All four selected departments lacked quality assurance processes for ensuring their IT budgets were informed by reliable cost information. Specifically, the selected departments did not have IT capital planning processes for (1) ensuring government labor costs have been accurately reported, (2) aligning contract costs with IT investments, and (3) utilizing budget object class data to capture all IT programs. This resulted in billions of dollars in requested IT expenditures without departments having comprehensive information to support those requests, and nearly $4.6 billion in IT contract spending that was not explicitly aligned with investments in selected departments' IT portfolios. This was due to a lack of processes for periodically reviewing data quality and estimation methods for government labor estimates, as well as a lack of mechanisms to cross-walk IT spending data in their procurement and accounting systems with investment data in their IT portfolio management systems. In August 2017, OMB developed a new approach of using a standard set of categories to group IT spending that, if properly implemented, has the potential to provide departments and CIOs enhanced visibility into IT costs across the portfolio. Nevertheless, until departments establish processes for assessing or otherwise ensuring the quality of relevant IT cost data used to inform their IT budgets, department CIOs will have less assurance that their budget includes appropriate and comprehensive estimates of IT resources. GAO is making 43 recommendations to the eight selected departments and component agencies to address gaps in their IT budgeting policies and procedures, demonstrate implementation of OMB requirements, and establish procedures to ensure IT budgets are informed by reliable cost information. HHS, the Centers for Medicare and Medicaid Services, DOJ, the Federal Bureau of Investigation, and the Internal Revenue Service agreed with our recommendations. DOE partially agreed with one recommendation and agreed with the other recommendations made to it, as well as with the recommendations made to its component agency—the National Nuclear Security Administration. Treasury neither agreed nor disagreed with the recommendations.", "document_type": "gao"}
{"report": "This section provides an overview of the produce rule and describes how FDA is partnering with states to implement the rule. Produce is an important part of a healthy diet but is susceptible to contamination from numerous sources, including agricultural water, animal manure, equipment, and farm workers. The produce rule established standards to help ensure the safe growing and handling of produce. For example, the rule requires that businesses take steps to ensure that agricultural water that comes into contact with produce is safe and of adequate sanitary quality for its intended use. As part of this, the rule established microbial water criteria to determine the presence of generic E. coli, which is the most commonly used indicator of fecal contamination, and referenced a testing method published by the Environmental Protection Agency to test for the presence of generic E. coli. The rule also established standards specific to sprouts, which are especially vulnerable to contamination because of the warm, moist, and nutrient-rich conditions needed to grow them. In addition to the general requirements of the produce rule, the rule also includes requirements for businesses specifically related to preventing contamination of sprouts, which have been associated with foodborne illness outbreaks. The rule applies to businesses that grow, harvest, pack, or hold produce, including produce that will be imported or offered for import, with some exemptions based on the produce commodity and the size of a business. For example, the rule does not apply to produce that is rarely consumed raw, such as asparagus or black beans, and produce that is to be consumed on the farm. In addition, the rule does not apply to businesses that have an average annual monetary value of $25,000 or less of produce sold during the previous 3-year period. FDA’s implementation of the produce rule will occur over several years. According to the rule, compliance dates are phased in from 2017 through 2022 based on business size and other factors. Compliance dates for certain agricultural water standards and for sprouts differ from the compliance dates for other provisions in the rule. For example, compliance for large businesses under certain agricultural water standards with covered activities not involving sprouts is due in January 2020; compliance for small businesses under certain agricultural water standards with covered activities not involving sprouts is due in January 2021; and compliance for very small businesses under certain agricultural water standards with covered activities not involving sprouts is due in January 2022. In 2019, FDA intends to start inspecting produce businesses, other than those growing sprouts. At that time, FDA is to assess compliance with the produce rule, with the exception of the agricultural water standards, for all produce other than sprouts. See fig. 1 for more information on implementation timelines. FSMA authorized and encouraged FDA to coordinate with states in helping to ensure compliance with the produce rule. According to FDA officials, developing a working relationship with states to implement the rule is of critical importance because states may have an understanding of farming practices as a result of their historically close relationship with farms. To facilitate coordination with states, FDA established the State Produce Implementation Cooperative Agreement Program. The program is to provide funds to support a variety of state activities, including educating and providing technical assistance to produce businesses, to the 43 participating states. Through the program, FDA obligated approximately $22 million in 2016 to 42 states and approximately $31 million in 2017 to 43 states to help these states implement the rule. In addition, in September 2014, FDA entered into a 5-year cooperative agreement with the National Association of State Departments of Agriculture—an organization representing state agriculture departments in all 50 states and 4 U.S. territories. Under this cooperative agreement, the association is working with FDA to support implementation of the produce rule by, among other things, providing technical assistance to states to help them implement their produce safety programs. FDA renewed the cooperative agreement in 2016 with an expanded scope to include states’ assistance with helping businesses understand what is expected of them ahead of compliance dates. Since we last reported on the produce rule, FDA has continued to use its information clearinghouse, the TAN, to take steps to evaluate and respond to questions and concerns from businesses and other stakeholders regarding the produce rule. FDA has also taken other steps, including funding training for industry, conducting visits to farms, and publishing guidance, to evaluate and respond to concerns. In addition, FDA is reviewing the produce rule agricultural water standards and in September 2017 published a proposed rule to extend compliance dates associated with those standards. FDA has continued to use the TAN to evaluate and respond to questions and concerns from businesses and other stakeholders regarding all of the FSMA rules, including the produce rule. Since our last report, we found that FDA received 2,665 additional questions submitted to the TAN from September 4, 2016, through June 30, 2017. Of those 2,665 additional questions, 230 questions (about 9 percent) pertained to the produce rule. Of those 230 questions, 154 questions (about 67 percent) came from individuals who self-identified as belonging to “business/industry.” (See fig. 2.) We reviewed the full text of questions about the produce rule that were submitted to the TAN by those who identified themselves as belonging to business/industry. We reviewed all such questions submitted since September 10, 2015, when the TAN first began operating, through March 31, 2017, the date of the most recently available information when we conducted our audit work (321 total questions). Questions spanned a variety of topics related to the rule, with the most commonly asked questions pertaining to the rule’s agricultural water standards. For example, some businesses submitted questions to clarify whether a specific water testing method they intended to use was acceptable. Other commonly asked questions related to the types of produce covered by the rule and whether a particular business was subject to the produce rule or a related FSMA rule known as the preventive controls for human food rule, which mandates new food safety requirements for food facilities, such as food processing businesses. For example, one business owner who grows almonds and also processes them submitted a question about whether the business is subject to the produce rule or the preventive controls rule. In addition, we found that most submissions (281 questions, or 88 percent) contained requests for additional information or clarification from FDA about implementing the produce rule. Examples of questions about the produce rule that were submitted by businesses are shown in figure 3. According to FDA data, as of June 2017, the agency had responded to about 84 percent (312) of the 372 questions specifically about the produce rule submitted by businesses to the TAN since it began operating. The agency’s median response time to these questions was 48 business days. As of June 2017, FDA had responded to 81 percent (4,307) of all 5,291 questions submitted to the TAN, with a median response time of 16 business days. Officials we interviewed said that FDA’s longer median response time for produce rule questions submitted by businesses was because the agency needed additional time to address several unique produce rule questions that were not considered during the rulemaking process. To understand produce businesses’ concerns in detail, FDA officials said they track questions submitted to the TAN. For example, these officials said they track the number of questions requesting more information about implementing the standards in the produce rule. These officials said that FDA is using these data to inform the development of resources to help businesses comply with the rule. For example, the officials told us that they are developing a set of commonly asked TAN questions about the produce rule that businesses can examine on FDA’s website prior to submitting their questions to the TAN. FDA has already published similar commonly asked TAN questions for some of the other FSMA rules. Representatives we interviewed from two industry associations said that such a list of questions would be helpful as businesses work to comply with the produce rule. Since we last reported on the produce rule, FDA has taken steps in addition to the TAN to evaluate and respond to business concerns regarding the produce rule. Training: FDA has funded partnerships to deliver training to help produce businesses meet the new requirements under the produce rule. The Produce Safety Alliance (PSA)—a collaboration involving Cornell University, FDA, and the U.S. Department of Agriculture—has developed a standardized national training curriculum about the produce rule and has conducted training sessions for more than 6,100 industry participants in the United States and foreign countries. In addition to serving an educational role, PSA training sessions help FDA evaluate and respond to business concerns. For example, FDA officials told us the agency uses questions submitted to the TAN to inform PSA course content, thereby helping to ensure that the training sessions address the most commonly asked questions. In addition, FDA officials and PSA representatives we interviewed said that PSA trainers are able to respond to questions from industry participants during the training sessions. These representatives said that they forward questions that PSA trainers are not able to answer during training sessions to FDA using the TAN and through regular meetings with FDA officials. One PSA trainer we interviewed said that face-to- face interactions with businesses at training sessions are the major way her organization hears about business questions and concerns. The Sprout Safety Alliance (SSA) is a collaboration between the Illinois Institute of Technology and FDA to enhance the sprout industry’s understanding of the produce rule. SSA has developed a training curriculum to help businesses comply with produce rule standards related to sprout production. SSA has conducted training courses for over 100 industry participants in the United States and Canada. According to an SSA representative, SSA has addressed questions and concerns from sprout industry participants during trainings. This representative also said SSA communicates with FDA about questions SSA trainers are unable to answer. Table 1 provides information about trainings provided by PSA and SSA. Educational Farm Visits: FDA officials participated in educational farm visits in 2016 and 2017 across the United States. According to FDA officials we interviewed, these visits were intended to broaden FDA’s knowledge of industry practices on these farms and were not for compliance or inspection purposes. FDA officials said they learned about a variety of industry concerns during these visits, including industry’s concerns with the water standards under the produce rule. FDA conducted these visits in a number of states, including Alaska, Arizona, California, Colorado, Georgia, Maine, Maryland, Nevada, New Mexico, Oregon, Texas, Vermont, Washington, Wisconsin, and the U.S. Virgin Islands, according to agency officials. Outreach to Produce Industry Associations: According to FDA officials, the agency performs outreach to various produce industry associations to educate businesses about the produce rule, answer questions, and learn about produce business concerns. For example, FDA officials said that, since we last reported on the produce rule, they have attended industry conferences and held outreach meetings with produce industry associations and they learned about specific concerns, such as businesses’ need for additional training on the produce rule and for information on how to identify materials that are suitable to properly sanitize surfaces with which produce comes into contact. On-farm Readiness Reviews: According to agency officials, these are voluntary reviews during which state inspectors and educators, accompanied by FDA officials, review businesses’ progress toward meeting the produce rule standards to promote compliance with the rule. States and FDA piloted the program in 2016 and, according to agency officials, they plan to roll out the full program in late 2017 or early 2018. In addition to helping businesses comply with the rule, FDA officials said these reviews have helped the agency learn about businesses’ questions and concerns. For example, officials said they learned during these reviews that some businesses needed additional information regarding water testing methods under the rule, including information on the number of water samples to be collected and the locations of testing laboratories. Produce Safety Network: Recognizing regional differences in growing practices, FDA established the Produce Safety Network in 2017 to address the unique needs of produce businesses in various parts of the country, according to agency officials. This network was established, in part, to respond to business questions and concerns, according to FDA officials. The network is made up of FDA produce safety experts and specialized investigators based in different parts of the country who help evaluate and respond to questions from businesses, state regulators, and other stakeholders in their regions, according to agency officials. For example, according to FDA officials, these produce safety experts learned about business questions regarding FDA’s list of produce the agency considers rarely consumed raw and not subject to the produce rule. In response to these concerns, the network developed a fact sheet outlining FDA’s rationale for developing the list. Guidance: According to FDA officials, the agency has been working on guidance to assist businesses in complying with the produce rule. FDA officials said guidance allows FDA to respond to questions and concerns related to the rule. For example, in January 2017, FDA published draft guidance on sprout-specific requirements under the rule. FDA officials told us they conducted outreach to sprout businesses before releasing this guidance to let businesses know why the guidance was issued and that it was available for public comment. In developing the guidance, FDA also took into account public comments made during the rulemaking process, according to FDA officials. An SSA representative we interviewed confirmed this, saying that the draft guidance was responsive to comments made by sprout businesses during rulemaking that asked FDA to include specific examples of how businesses were to comply with requirements. This representative said the draft guidance contained relevant examples. In addition, in early September 2017, FDA published guidance to help small businesses comply with the produce rule. The guidance provides small businesses with information about who must comply with the rule, training required, and which businesses are eligible for qualified exemptions from the rule, among other things. See appendix I for a list of published and forthcoming FDA produce rule guidance. FDA announced in March 2017 that it would conduct a review of the agricultural water standards under the produce rule and, in September 2017, the agency published a proposed rule in the Federal Register that would extend the compliance dates for the water standards by an additional 2 years from the original compliance dates, depending on business size, for produce other than sprouts (see fig. 4). According to FDA, its review of the water standards is an effort to simplify the standards and make them easier for businesses to comply with. FDA also said that it would use the extended compliance period to work with produce businesses as it considers the best approach to respond to their concerns about the standards. The extended compliance period will also allow FDA to provide additional outreach and training. FDA officials we interviewed said that their decision to review the water standards and extend compliance dates was in response to industry concerns. They also said that they learned about these concerns through some of the steps they have taken, which we identify in this report. For example, FDA officials said they heard numerous questions and concerns from businesses about the water standards during educational farm visits. Also, as we note above, questions about the water standards were the most common produce rule-related questions submitted to the TAN. According to representatives we interviewed from two industry associations, some businesses did not fully understand the water standards because, among other things, they said the standards do not provide a clear definition of “agricultural water,” leaving some businesses uncertain about what water sources and water uses are subject to the rule. In addition, according to documentation from an industry meeting with FDA, some businesses have expressed concerns about costs associated with the new water testing requirements. Some businesses have also expressed concerns that the water testing method described in the standards has not traditionally been used by industry and that finding laboratories that use this method will be difficult. The standards allow for the use of alternative testing methods, but some businesses have expressed concerns that FDA has not specified these alternative testing methods, thereby leaving businesses uncertain about what methods will be acceptable to FDA. Along with its announcement of a review of the water standards, in September 2017, FDA announced a list of eight water testing methods it determined to be equivalent to the method described in the standards. According to FDA officials, the list was established in response to business concerns, and the agency will add to this list as additional equivalent methods are identified. FDA officials we interviewed did not provide specific details or a timeline for the agency’s review of the water standards. These officials said the agency is considering adding clarifying information on the standards in forthcoming guidance and, if necessary, making changes to the standards themselves by revising the produce rule. In addition, officials said they plan on hosting a water summit in early 2018 with stakeholders and technical experts. FDA has begun collecting survey results to assess the effectiveness of its information clearinghouse, the TAN, and has continued to develop metrics that will assess outcomes related to the agency’s overall efforts to evaluate and respond to business concerns. In October 2016, FDA implemented the first part of its survey assessing the TAN. This first part of the survey, which FDA sent to businesses and other stakeholders that submitted questions to the TAN, solicited feedback about the TAN web page provided for submitting questions. This survey included questions about how stakeholders learned about the TAN web page, the clarity of the page, and how FDA could improve the page. Officials told us they have begun making changes to the TAN web page based on the survey results. For example, FDA increased the character limit for questions submitted and provided additional information about FSMA on the web page. FDA is also developing the second part of its TAN survey, which will solicit feedback from stakeholders on the timeliness and quality of answers provided by FDA through the TAN. FDA officials told us that the agency will begin sending out this survey with its responses to TAN questions in spring 2018. In addition to its assessment of the effectiveness of the TAN, FDA officials told us that the agency is continuing to develop metrics intended to assess a number of desired outcomes resulting from implementation of the rule, including outcomes related to FDA’s efforts to evaluate and respond to business concerns. These outcomes are specified in a draft strategic framework the agency has developed to monitor implementation of the produce rule. The framework includes outcomes such as businesses’ compliance with the produce rule, expanded use of incentives for compliance, and increased dissemination of good practices and other on-farm findings. According to FDA officials, outcomes in the framework that relate to FDA’s efforts to evaluate and respond to business concerns include: increased effectiveness of technical assistance provided to businesses by FDA and its partners, improved working relationships with businesses, and increased capacity of FDA partners to educate businesses. Performance metrics are to be targeted to measure these outcomes, officials said. These officials also stressed that the draft strategic framework is subject to change. Because FDA officials we interviewed said they are in the early stages of assessing the TAN and the agency’s other efforts to evaluate and respond to business concerns, we asked produce industry representatives for their perspectives on FDA’s efforts, including representatives from two produce industry associations, a farming organization, and four organizations working with FDA to implement the produce rule. Regarding the TAN, representatives we interviewed from two of these groups said that they had received timely responses from FDA to some questions they had submitted to the TAN, and most groups we interviewed said that at least some of the TAN responses they received provided useful information. However, representatives we interviewed also had two major concerns: Representatives from three groups said that responses were often slow to arrive; representatives from one of these three groups commented that response times remained largely unchanged since we last reported on the produce rule in November 2016. Representatives from another group commented that FDA’s response times to TAN questions seemed to be related to the complexity of a question. For example, questions that required straightforward answers often received faster responses, while questions requiring more complex answers often got slower responses and, in some cases, FDA responded that the question would be answered in forthcoming guidance. Representatives from four groups we interviewed also said that some responses lacked sufficient clarity or specificity to adequately address questions and that industry needed more specific, tailored responses from FDA. For example, some FDA responses restated information from the published produce rule without providing additional detail, and other responses contained “canned” language that did not directly address the question. FDA officials acknowledged that it has been challenging for the agency to provide timely and complete responses to TAN questions, especially early on in the TAN’s operation, but that the agency has to work through complex policy questions related to the rule in order to respond. These officials said they are working to respond more quickly to TAN questions and are revising the FDA review process for TAN responses. Officials also stated that they anticipate posting commonly asked produce rule questions and responses on the TAN web page to provide immediate assistance to businesses for some questions. This is similar to what the agency has done for other FSMA rules, officials said. Regarding FDA’s other efforts to evaluate and respond to business concerns, representatives from one group we interviewed told us that FDA continues to be open to hearing questions and concerns from the produce industry. Nevertheless, representatives from four groups told us that businesses need more information from FDA to comply with the produce rule and are awaiting FDA’s forthcoming guidance pertaining to the rule. Representatives from one of these groups also commented that guidance is needed to explain the produce rule in plain language so that businesses can more easily understand the rule. In addition, representatives from two of these groups said that the produce rule training available to businesses is helpful but limited in the absence of guidance. For example, some questions cannot be answered completely during trainings without additional information from guidance. FDA officials told us they are aware of businesses’ concerns about the need for additional guidance. These officials said they are working to publish guidance on various topics related to the produce rule, as we have described elsewhere in this report. For example, officials said they planned to issue draft compliance and implementation guidance near the first compliance date of January 2018 for businesses producing commodities other than sprouts (see app. I). Through interviews with FDA officials, we identified two key challenges that the agency faces in evaluating and responding to business concerns about the produce rule: (1) identifying businesses subject to the produce rule; and (2) providing consistent, region-specific information to businesses in response to their questions and concerns. FDA officials told us the agency’s State Produce Implementation Cooperative Agreement Program plays a key role in addressing these challenges, as does the Produce Safety Network. Identifying businesses subject to the produce rule: While the produce rule specifies the types of commodities subject to the rule, FDA does not have an inventory of farms producing those commodities and therefore does not know which businesses are subject to the rule. As we have previously reported, FDA’s existing business inventory data are drawn from information provided by businesses required to register with FDA. Farms, however, are not required to register. According to FDA officials, the lack of a registration requirement for farms limits the data the agency has to inform its implementation of the produce rule. For example, FDA officials we interviewed said that not having data regarding farms can make it difficult for FDA to connect businesses with the educational and technical assistance resources to help them comply with the rule. FDA officials told us the agency’s State Produce Implementation Cooperative Agreement Program should help address this challenge. The program, which provides resources to each participating state to support a variety of state activities related to implementing and enforcing the produce rule, includes funding for states to develop and maintain an inventory of businesses subject to the rule. According to the program’s funding announcement, inventory data will be used to determine education and outreach needs related to the produce rule as well as to plan compliance and enforcement activities. FDA officials told us that states participating in the program have started to build their inventories of farms. According to these officials, participating states plan to have their inventories completed before they begin inspections of produce businesses. For states not participating in the cooperative agreement program, FDA officials said the agency is developing farm inventories. Providing consistent and region-specific responses to business questions and concerns: FDA officials told us that it can be a challenge to ensure that FDA and its state partners provide consistent responses to businesses’ questions that are also tailored to account for regional differences in growing conditions. For example, officials said that if a business in one part of the country receives information from one of FDA’s state partners, it can be a challenge to ensure that businesses in other parts of the country also receive the same information, whether from states or from FDA. At the same time, however, information provided to businesses may need to be tailored to account for regional differences in growing conditions. FDA officials told us that, to address this challenge, FDA’s Produce Safety Network staff are stationed around the United States and work closely with states participating in FDA’s Cooperative Agreement Program. According to these officials, this relationship provides a mechanism for states and FDA to share information about the produce rule and helps ensure that information provided by states is consistent with FDA’s interpretation of the rule. In addition, these officials stated that having network staff in different growing regions allows those staff members to develop expertise in the growing conditions and practices in their regions, which in turn enhances their ability to provide outreach and technical assistance that is specifically tailored to the unique needs of those regions. For example, according to FDA officials, if a state in the Cooperative Agreement Program receives a question about the rule from a business, Produce Safety Network staff work with the state and FDA subject matter experts to craft a response that the state can provide to the business and that is tailored to the growing practices and conditions in the region. This approach helps ensure that FDA and its state partners speak with one voice about the produce rule and that the information provided is sensitive to regional differences in the produce industry, officials said. We provided a draft of this product to HHS. HHS provided us with technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II. Date(s) In addition to the contact named above, Anne K. Johnson (Assistant Director), Ramsey Asaly, Tim Bober, Kevin Bray, Alexandra Edwards, Ellen Fried, Cindy Gilbert, Hayden Huang, Dan Royer, Kiki Theodoropoulos, and Rajneesh Verma made key contributions to this report. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Food Safety: A National Strategy Is Needed to Address Fragmentation in Federal Oversight. GAO-17-74. Washington, D.C.: January 13, 2017. Food Safety: FDA’s Efforts to Evaluate and Respond to Business Concerns Regarding the Produce Rule. GAO-17-98R. Washington, D.C.: November 28, 2016. Food Safety: FDA Coordinating with Stakeholders on New Rules but Challenges Remain and Greater Tribal Consultation Needed. GAO-16- 425. Washington, D.C.: May 19, 2016. Department of Health and Human Services, Food and Drug Administration: Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption. GAO-16-299R. Washington, D.C.: December 16, 2015. Federal Food Safety Oversight: Additional Actions Needed to Improve Planning and Collaboration. GAO-15-180. Washington, D.C.: December 18, 2014.", "summary": "Although the United States has one of the safest food supplies in the world, foodborne illness is a common public health problem; some of this illness can be linked to produce. For example, in 2017, a Salmonella outbreak linked to imported papayas sickened more than 200 people in 23 states and killed 1. FDA's produce rule, one of a number of rules required by the FDA Food Safety Modernization Act, established the first enforceable national food safety standards for produce. The Agricultural Act of 2014 required that the produce rule include “a plan to systematically…develop an ongoing process to evaluate and respond to business concerns” about the rule and a provision for GAO to report on FDA's efforts 1 year after the promulgation of the final rule and again the following year. In November 2016, GAO issued the first report. In this follow-up report, GAO examined (1) steps FDA has taken since GAO's 2016 review to evaluate and respond to business concerns regarding the produce rule, (2) steps FDA has taken to assess the effectiveness of its efforts to evaluate and respond to business concerns regarding the rule, and (3) challenges FDA officials reported facing in evaluating and responding to business concerns regarding the rule. GAO examined TAN questions submitted by businesses; interviewed FDA officials and representatives from groups, such as the Produce Safety Alliance, working with FDA to implement the rule; and interviewed representatives from produce industry associations and a farming organization. GAO is not making any recommendations. Since GAO's November 2016 report on the Food and Drug Administration's (FDA) 2015 produce rule, the agency has continued to use its Technical Assistance Network (TAN) to evaluate and respond to questions and concerns about the rule. GAO found that since the issuance of its 2016 report, which contained data as of September 3, 2016, 2,665 more questions were submitted to the TAN, 230 of which pertained to the produce rule, and of those 230 questions, 154 were submitted by businesses (see fig.). a The TAN also receives questions about other rules pertaining to the FDA Food Safety Modernization Act, such as rules on imported food and the sanitary transportation of food. b Others include members of academia, consumers, and federal or state regulators. Most produce rule-related TAN questions concerned agricultural water standards, such as methods for testing water. In addition to the TAN, FDA has taken other steps to evaluate and respond to business concerns, including funding training for industry and visiting farms. FDA is also reviewing the rule's water standards and published a proposed rule in September 2017 to extend the compliance dates associated with those standards in response to concerns. FDA has begun collecting survey results on the web page used for submitting TAN questions and continues to develop a survey to assess the timeliness and quality of TAN responses. FDA also continued to develop metrics intended to assess its overall efforts to evaluate and respond to business concerns, officials reported. Produce industry representatives told GAO that FDA is open to hearing questions and concerns, but businesses need more information to comply with the rule and are awaiting FDA's forthcoming guidance on parts of the rule. FDA officials reported facing two challenges in evaluating and responding to business concerns: identifying businesses subject to the rule and providing consistent, region-specific information in response to concerns. Officials said that the agency's cooperative agreement with 43 states plays a key role in addressing these challenges, as does the Produce Safety Network, a network of region-based FDA food safety experts.", "document_type": "gao"}
{"report": "From 2007 to 2015, HHS, DOL, and DOJ awarded funding to at least 2,586 grantees through at least 53 grant programs that were subject to statutory restrictions on religious-based hiring. Specifically: HHS identified one grant program subject to statutory restrictions on religious-based hiring for which nonprofits were eligible to be primary recipients—the Projects for Assistance in Transition from Homelessness (PATH) program, which is administered by the Substance Abuse and Mental Health Services Administration (SAMHSA). Generally, only states are eligible to be primary recipients for PATH grant awards. However, HHS may award PATH grants directly to public or nonprofit entities if a state does not submit an application or does not meet program requirements. From this program, no grants were awarded to nonprofit organizations and therefore no FBOs were awarded grants. DOL identified 18 grant programs subject to statutory restrictions on religious-based hiring for which nonprofits were eligible to be primary recipients. All 18 of these grant programs were in DOL’s Employment and Training Administration (ETA). From these 18 programs, 931 grantees were awarded grants, including 19 we identified as potential FBOs. DOJ identified at least 34 relevant grant programs administered by OVW, COPS, and six different program offices within OJP that were subject to statutory restrictions on religious-based hiring. The 34 relevant grant programs represent the minimum number of grant programs that were subject to nondiscrimination provisions and for which nonprofit organizations were eligible from fiscal years 2007 through 2015. The number of relevant grant programs could be higher. As discussed below, OJP was unable to identify the total number of relevant grant programs and total number grantees awarded grants under these programs, including potential FBOs. More specifically within DOJ: OVW identified 20 grant programs subject to statutory restrictions on religious-based hiring. From these 20 programs, 604 grantees were awarded grants, including 25 that OVW identified as potential FBOs. OJP identified at least 10 grant programs subject to statutory restrictions on religious-based hiring. According to officials, OJP was not able to readily identify grant solicitations that were available to nonprofit organizations from fiscal years 2007 to 2015 and subject to statutory restrictions on religious-based hiring. This effort, according to OJP, would have required a manual search of each grant solicitation. However, OJP was able to identify at least 10 grant programs subject to statutory restrictions on religious- based hiring. From these 10 programs, at least 1,113 grantees were awarded grants, including 74 we identified as potential FBOs. COPS identified four grant programs subject to statutory restrictions on religious-based hiring. From these four programs, 57 grantees were awarded grants, none of which were potential FBOs. Of the 117 potential FBOs we identified across the three agencies, nine faith-based grantees, all of which were awarded DOJ grants, certified that they were exempt from statutory restrictions on religious-based hiring (see figure 1). These 9 grantees were, therefore, allowed to consider a prospective employee’s religious faith when making employment decisions in connection with the grant. DOL and HHS reported that none of their grantees have sought exemptions from religious-based hiring provisions. As shown in Table 1, 8 of the 9 faith-based grantees that certified that they were exempt were awarded funding through DOJ grant programs from fiscal years 2008 to 2010. The remaining exempted grantee received a funding award in 2015. The total funding awarded to the 9 grantees was approximately $3.2 million, which is less than 1 percent of the $804 million in grants that DOJ awarded that are subject to statutory restrictions from fiscal years 2007 to 2015. DOJ reported that 8 of these grantees received the awards on a noncompetitive basis because they were identified for funding in a DOJ appropriation or accompanying committee report. We interviewed 6 of the 9 grantees that certified that they were exempt from religious-based hiring restrictions. Each of the 6 grantees that we interviewed stated that: hiring individuals who share their religious beliefs to assist with grant activities was critical to their mission and organizational success; they include a “statement of faith” on their organization’s job application form and ask the applicant to attest to the statement of faith, or hired individuals of the same faith already employed within their organization; and had the RFRA exemption not been available to them, they likely would not have sought the grant or they would have had to seek executive- level approval within their organization to apply for the grant. At least 3 of the 6 grantees stated that they were a recipient of other federal grant funding, but those grants were not subject to statutory restrictions on religious-based hiring, and therefore did not require an exemption to make hiring decisions based on religion. Based on grant award documentation, 6 of the 9 grantees used the funding to provide assistance to at-risk youth. However, other services that the remaining grantees provided included first responder training and programs to reduce homelessness, among others, and support and response efforts for victims of sexual assault. As discussed earlier, we also selected 35 potential faith-based grantees that received funding in fiscal years 2014 and 2015 and that agencies reported had not filed a self-certification to be exempted from religious- based hiring restrictions. We interviewed 5 of these 35 grantees to discuss, among other things, whether the grantees were familiar with the exemption options. The five faith-based grantees said they did not recall seeing information about the exemption option in the grant application or grant award documentation, or were not looking for information about the exemption because they were not considering religion in their hiring decisions. Two of the faith-based grantees that did not certify as exempt told us that, while they ask that the applicant have an understanding of the traditions, culture, or languages of their religion, they do not require applicants to share the same faith. DOJ, DOL, and HHS inform grant applicants and recipients of statutory restrictions on religious-based hiring and processes for obtaining an exemption from such restrictions through grant announcements. The agencies also use additional methods that varied across all three agencies for providing this information to grantees. DOJ specifically made this information available on agency web pages as well as in the documentation that is provided to grant recipients. DOJ’s Center for Faith-Based and Neighborhood Partnerships has a web page specifically for FBOs that have applied for or received grant funding. This web page includes a list of Frequently Asked Questions, including one that addresses hiring employees with federal grant funds. The Office for Civil Rights within OJP also provides information on its web page regarding how FBOs may certify that they are exempt from statutory restrictions on religious-based hiring. Additionally, it includes a link to a copy of DOJ’s exemption certification form. We interviewed representatives from four potential faith-based grantees that received a DOJ grant in fiscal years 2014 or 2015 and did not certify for an exemption. All four grantees said they could not recall seeing information in the grant application or award documentation about the exemption option or were not looking for it because they were not considering religion in their hiring decisions. Similarly, DOL has a web page devoted specifically to explaining statutory restrictions on religious-based hiring to faith-based grant applicants and recipients, which also covers the process for seeking exemptions from the restrictions. The web page makes reference to DOL’s regulations related to religious-based hiring by FBOs and also has a link to the June 2007 OLC opinion. Additionally, DOL has prepared a guidance document—available from its grants program overview web page—that explains in detail the process for seeking exemptions and how they are reviewed and approved. A representative from the one potential FBO we interviewed that received a DOL grant in fiscal years 2014 or 2015 but did not certify that they were exempt could not recall seeing information about the exemption option. Lastly, in addition to providing information in grant announcements, HHS provides all SAMHSA grant applicants seeking funds for substance abuse prevention and treatment services with a form that cites laws and regulations governing religious organizations that receive SAMHSA funding, including the regulation that outlines the exemption process. HHS requires the applicants to sign the form, and in doing so, the applicants are certifying that they are aware of and will comply with applicable laws that allow FBOs to provide SAMHSA-funded services without impairing their religious character and without diminishing the religious freedom of those who receive their services. DOJ, DOL, and HHS all require grantees that seek to make employment decisions based on religion to self-certify that they meet requirements to be eligible for an exemption from statutory restrictions on religious-based hiring, but vary in how they review and approve requests for exemptions. DOJ faith-based grantees that wish to demonstrate they are eligible for an exemption from statutory restrictions on religious-based hiring must complete and sign a “Certificate of Exemption for Hiring Practices on the Basis of Religion.” If an applicant is awarded a grant, it must submit a copy of the signed version of this form through DOJ’s Grants Management System. By signing the form, the grantee is certifying that: federally-funded services will be offered to all qualified beneficiaries without regard for the religious or nonreligious beliefs of those individuals; activities that contain inherently religious content will be kept separate from grant-related activities or offered to clients voluntarily; and the organization believes that the services provided are an expression of its religious beliefs, employing persons of a particular religion is important to its mission, and not being able to hire such persons would be a substantial burden to the organization. DOJ does not review these self-certification submissions to approve or deny the requests. It only reviews them for any indication that the applicant may not be an FBO, in which case DOJ officials said they would follow up with the grantee to get clarification. Agency officials also said DOJ would review any self-certifications as part of grantee compliance reviews and in response to complaints from other parties. The self- certification form covers the entire grant award period, and can cover multiple DOJ grants as long as all of the grant programs are subject to the same statutory restrictions on religious-based hiring. There is no deadline for submitting the self-certification and DOJ officials told us that while it is understood that self-certifications should be submitted before grant funds are dispersed, grantees do not need to do so. DOL faith-based grantees that wish to demonstrate they are eligible for an exemption also self-certify, but are required to submit their request to DOL for review and approval by the Assistant Secretary responsible for issuing or administering the grant. In its request, the grantee must certify that: providing the services to be funded by the grant is an exercise of its without the grant, its ability to provide the services funded by the grant would be substantially diminished, and providing those services is demonstrably tied to the recipient’s religious beliefs; employing individuals of a particular religious belief is important to its religious identity, autonomy, or communal religious exercise; conditioning the grant award on compliance with the nondiscrimination provision creates substantial pressure on it, in providing the services being funded, to abandon its belief that hiring based on religion is important to its religious exercise; and it will comply with the requirements of 29 C.F.R. part 2, subpart D, Equal Treatment in Department of Labor Programs for Religious Organizations; Protection of Religious Liberty of Department of Labor Social Service Providers and Beneficiaries. The Assistant Secretary’s office then reviews exemption requests and approves them or provides a reason for denial. DOL has instituted a 30- day deadline to reply back to the grant applicant with its decision. DOL implemented this process in response to the 2007 OLC opinion. However, agency officials said they have never used this process because, as explained earlier in this report, DOL has not received any exemption requests. They also told us exemptions are only valid for the grant award period and new requests must be re-submitted if the grant is renewed. However, an exemption can cover multiple grants to the same grantee as long as those grants are received from the same DOL component. Lastly, the officials said that grant funds can be disbursed before the grantee has submitted an exemption request. HHS faith-based grantees seeking to demonstrate that they are eligible for an exemption from statutory restrictions on religious-based hiring must self-certify that they meet several requirements outlined in HHS regulations. To demonstrate its eligibility for an exemption, a grantee must certify that: it sincerely believes employing individuals of a particular religion is important to the definition and maintenance of its religious identity, autonomy, and/or communal religious exercise; it makes employment decisions on a religious basis in analogous programs; it believes the grant would materially affect its ability to provide the type of services in question; and providing the services in question is expressive of its values or mission. Grantees must then submit their self-certification to HHS requesting an exemption, and maintain supporting justification documentation on file if needed for future review. However, as explained earlier in this report, there is currently only one HHS grant program that is subject to a statutory restriction on religious-based hiring and for which FBOs are eligible to be primary recipients—the PATH program. We did not identify any faith-based recipients of grants from this program from fiscal years 2007 through 2015, and HHS officials confirmed that no nonprofit entities received any grants from the program during this time. We provided a draft of this report to the Departments of Labor, Justice, and Health and Human Services. Although the agencies did not provide formal comments, the Departments of Justice and Health and Human Services did provide technical comments that we incorporated, as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time we will send copies of this report to the Secretaries of Health and Human Services and Labor; the Attorney General; and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact either Diana Maurer at (202) 512-8777 or maurerd@gao.gov; or Cindy Brown Barnes at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in Appendix I. In addition to the contact named above, Mary Crenshaw, Adam Hoffman, and Kristy Love (Assistant Directors); David Ballard; Dominick Dale; Michele Fejfar; Melissa Hargy; Joel Marus; Heidi Nielson; Kelly Rolfes- Haase; and Katrina Taylor made key contributions to this report.", "summary": "The federal government provides billions of dollars in grant funding to organizations offering social services, including FBOs. In carrying out their mission, some FBOs prefer to hire individuals who share their religious beliefs. Although the 1964 Civil Rights Act prohibits employment discrimination based on religion, section 702(a) of the Act exempts FBOs from this prohibition, thereby allowing them to hire based on religion. However, some federal grant programs contain statutory restrictions prohibiting this practice. Since a 2007 DOJ legal opinion, federal agencies allow faith-based grantees to use RFRA as a basis for seeking an exemption to allow religious-based hiring. GAO was asked to review the extent to which faith-based grantees have sought RFRA exemptions from statutory restrictions on religious-based hiring. This report describes (1) what is known about faith-based grantees that have certified exemption from statutory restrictions on religious-based hiring, per RFRA, since 2007; and (2) how agencies inform grantees of statutory restrictions on religious-based hiring and requirements for demonstrating their eligibility for an exemption. GAO reviewed information from DOJ, HHS, and DOL grantees from fiscal years 2007 to 2015 that were subject to statutory restrictions on religious-based hiring. GAO interviewed faith-based grantees that certified as exempt and a selection of those that did not. GAO also reviewed agency grant documentation and guidance provided to grantees and interviewed cognizant officials to understand the processes FBOs must follow to certify as exempt. From fiscal years 2007 through 2015, few faith-based grantees sought an exemption based on the Religious Freedom Restoration Act of 1993 (RFRA) from nondiscrimination laws related to religious-based hiring. Specifically, GAO found that the Department of Justice (DOJ), Department of Health and Human Services (HHS), and Department of Labor (DOL) awarded funding to at least 2,586 grantees through at least 53 grant programs containing nondiscrimination hiring restrictions during this time. The number of relevant grant programs could be higher, because GAO could not identify all such programs due to data limitations. Across the 3 agencies, GAO identified 117 grantees that were potential Faith-Based Organizations (FBOs). Of the 117 potential FBOs, 9 DOJ grantees were FBOs that certified as being exempt from statutory restrictions on religious-based hiring. GAO interviewed 6 of these FBOs, all of which stated that hiring individuals who share their religious beliefs was critical to their mission, and that had the RFRA exemption not been available to them, they likely would not have sought the grant. DOJ, DOL, and HHS inform grant applicants and recipients of statutory restrictions on religious-based hiring and processes for obtaining an exemption from such restrictions generally through grant materials. DOJ and DOL also provide relevant information on their web sites. All three agencies require grantees that seek to make employment decisions based on religion to self-certify that they meet requirements to be eligible for an exemption, but vary in how they review and approve requests for exemptions. For example, DOJ, DOL, and HHS have policies requiring grantees to submit their exemption self-certification, but only DOL reviews exemption requests and either approves them or provides a reason for denial.", "document_type": "gao"}
{"report": "The Military Selective Service Act established the Selective Service System whose mission is to be prepared to provide trained and untrained manpower to DOD in the event of a national emergency when directed by the President and the Congress. Additionally, the Selective Service System is to be prepared to implement an alternative service program within the civilian community for registrants classified as conscientious objectors during a draft. The Selective Service System is an independent agency, and it maintains a database that includes the names, birthdates, social security numbers, and mailing addresses of men ages 18 through 25 who could be drafted into the service of our nation, if needed, in the event of a national emergency. Further, the Selective Service System also is to conduct peacetime activities, such as public registration awareness and outreach; responding to public inquiries about registration requirements; and providing training and support to its workforce of career, non-career, full-time and part-time employees, uncompensated employees, and selected military personnel. The Military Selective Service Act does not currently authorize the use of a draft for the induction of persons into the armed forces. In order to meet a national emergency requiring a mass mobilization, Congress and the President would be required to enact a law authorizing a draft to supplement the existing force with additional military manpower. In the event of a draft, the regulation governing the Military Entrance Processing Stations would have the Under Secretary of Defense for Personnel and Readiness, with input from the military services, provide the Director of the Selective Service System with the number of personnel needed to be drafted. The Selective Service System would then conduct a lottery and send induction notices to selected draftees to supply the personnel requested by the Secretary of Defense. Each draftee would be required to report to one of DOD’s 65 Military Entrance Processing Stations throughout the country at a specific time and date to undergo assessments of their aptitude, character, and medical qualifications in order to determine whether they are fit for military service based on standards set by each military service. Fully qualified draftees would receive induction orders and would be transported from one of the Military Entrance Processing Stations to the appropriate military service’s entry- level training location. According to DOD, the Selective Service System must deliver the first inductees within 193 days from when the President and the Congress authorize a draft, and the military services then are to train, equip, and accommodate in other ways the new inductees. The military services are generally smaller today than they have been in many years. In fiscal year 2003, for example, DOD’s total active military end strength was approximately 1.5 million, while in fiscal year 2017 the number was 1.38 million. Additionally, DOD’s total workforce mix has also changed. For example, in late 2003 DOD directed the military services to convert certain military positions to federal civilian or contract positions based on evaluations that showed that many military personnel were being used to accomplish work that was not military essential and that civilians could often perform these tasks in a more efficient and cost- effective manner than military personnel. In May 2013, we reported that DOD officials stated that about 50,000 military positions were converted to DOD federal civilian positions or to contractors since fiscal year 2004 in order to devote more military positions to the support of ongoing military operations. Under current law, women may serve voluntarily in the armed forces but are not required to register with the Selective Service System. In the 1981 case of Rostker v. Goldberg, the Supreme Court of the United States upheld the constitutionality of our nation’s practice of registering only men. Recognizing the purpose of registration was to prepare for a draft of combat troops and since women were excluded from combat, the Supreme Court ruled that Congress could exclude women from registration. DOD gradually began to eliminate prohibitions on the assignment of women to direct ground combat positions and on January 24, 2013, the Secretary of Defense and the Chairman of the Joint Chiefs of Staff rescinded a 1994 rule preventing women from serving in direct ground-combat positions and directed the military services to open all closed positions and occupations to women by January 1, 2016. In December 2015, the Secretary of Defense announced that all military occupational specialties were open to women and removed all final restrictions on the service of women in combat. As part of the congressional notification process when DOD decided to open previously- closed positions and occupations to women, the department was required to provide a detailed legal analysis of the implications of the proposed change with respect to the constitutionality of the Military Selective Service Act to men only. DOD’s July 2017 report on the purpose and utility of a registration system for military selective service stated that in December 2015, DOD advised Congress that the opening of all positions and occupations to women “further alters the factual backdrop” to the Supreme Court’s ruling on a challenge to the exemption of women from selective service registration. However, the report stated that DOD took no further stance on the legal issues raised by the then-Secretary of Defense’s decision to open all military positions to women. Further, DOD stated that it would consult with the Department of Justice as appropriate regarding these issues. DOD included information on each of the six required reporting elements in its July 2017 report to Congress and the Commission on the purpose and utility of a registration system for military selective service, as shown in table 1. In preparing the report, officials within the Office of the Assistant Secretary of Defense for Manpower and Reserve Affairs stated that they coordinated and consulted with subject matter experts at the Selective Service System and the Joint Staff as well as with officials from selected organizations within the Office of the Secretary of Defense, including the U.S. Military Entrance Processing Command. Further, the DOD report references internal DOD documents, a policy publication from the Congressional Research Service regarding Selective Service issues, statements from former DOD executives, and publications from contributing authors on web-based foreign policy and national security discussion sites for additional support. While DOD included information on the six required reporting elements in its report, we identified additional information that may be useful in supporting the ongoing review of the military selective service process by the Commission. Specifically, based on our review of DOD’s report and our prior work, the Commission could benefit from additional information on (1) DOD’s requirements and timelines for the induction of individuals into the military services who are selected through a draft, and (2) the perspectives of the military services on the military selective service processes. First, one of the six required reporting elements in the NDAA for FY 2017 required DOD to provide a detailed analysis of its personnel needs in the event of an emergency requiring a mass mobilization, along with a timeline for obtaining these inductees. In response, DOD provided the personnel requirements and a timeline that was developed in 1994 and that have not been updated since. These requirements state that, in the event of a draft, the first inductees are to report to a Military Entrance Processing Station in 193 days and the first 100,000 inductees would report for service in 210 days. DOD’s report states that the all-volunteer force is of adequate size and composition to meet DOD’s personnel needs and it has no operational plans that envision mobilization at a level that would require a draft. Officials stated that the personnel requirements and timeline developed in 1994 are still considered realistic. Thus, they did not conduct any additional analysis to update the plans, personnel requirements, or timelines for responding to an emergency requiring mass mobilization. Further, they said that they were limited in the amount of time that they were given to respond to the congressional mandate and that they believed it would be most helpful to produce a report that provided basic information that could serve as a starting point for the Commission to begin a more in-depth review of the military selective service process. As previously discussed, in 2012, we reported that changes in the national security environment require DOD and the services to reassess their force structure requirements, including how many and what types of units are necessary to carry out the national defense strategy. We reported that these changes represented junctures at which DOD could systematically reevaluate service personnel levels to determine whether they are consistent with strategic objectives. As such, we recommended that DOD establish a process of periodically reevaluating DOD’s requirements for the Selective Service System in light of changing operating environments, threats, and strategic guidance. Since DOD did not perform additional analysis to reevaluate its requirements or timelines for obtaining inductees to respond to this mandate and the most recent requirements were determined based on assumptions developed in 1994, we continue to believe our 2012 recommendation is valid. An updated analysis would also benefit the Commission by informing their study and recommendations. Second, the military service officials that we met with told us that their perspectives on the selective service processes that would affect them had not been solicited in the preparation of DOD’s report. For example, while the military services are responsible for training inductees upon their mobilization and integrating them into the force, service officials expressed concerns to us regarding whether, for example, they would have the training facilities, uniforms or funding to receive, train, equip, and integrate a large influx of inductees in the event of a draft. Additionally, the services are expected to provide support to the Selective Service System during a national emergency. A 1997 memorandum of understanding between the Selective Service System and DOD indicates, among other things, that the Department of the Army will provide 1,500 enlisted Army retirees to augment the Selective Service System within 72 hours after a draft is initiated. According to officials within the Office of the Under Secretary of Defense for Personnel and Readiness-Military Personnel Policy, this memorandum of understanding was reviewed and revalidated in 2014. However, Army officials told us that they believed some of their service-specific procedures might require updates identifying individuals to augment the Selective Service System’s staff, especially the retired personnel that would need to be recalled to duty. They thought it would be beneficial for officials within the Office of the Secretary of Defense to conduct a thorough, top-down review, and lead an update of service instructions related to supporting a draft to ensure the services are prepared to provide their share of personnel if needed. These Army officials said, however, that their higher Army headquarters saw no operational reason to review their policies and procedures related to mass mobilization given that DOD has no operational plans that envision mobilization at a level that would require a draft. As discussed previously in this report, DOD’s workforce mix has been changing. For example, over the last decade, the use of unmanned aerial systems has emerged as an integral part of warfighting operations and the demand for their use has outpaced the Air Force’s ability to produce pilots to operate them. Additionally, each of the services has reported critical skill gaps in such areas as various military medical specialties. Further, challenges exist in identifying cyber capabilities of all National Guard units, as required by law, which could be used for the support of a cyber-related emergency. Officials from the Office of the Under Secretary of Defense for Personnel and Readiness-Military Personnel Policy stated that critical skills identified as necessary today may not be the critical skills needed in future crises. Additionally, they said that creating and maintaining tools, such as databases of individuals with these needed critical skills, is costly and may become outdated quickly. We agree that the requirements for critical skills will evolve over time; however, any discussion of a draft using the selective service process— as presented in DOD’s July 2017 report—that focuses on specific military occupational specialties would benefit from the perspectives and input of officials from the military services and the impact a draft may have on meeting those demands. Specifically, these officials would be helpful in identifying the needed critical skill sets for their emerging mission demands and the impact a draft may have on meeting those demands. DOD officials within the Office of the Assistant Secretary of Defense for Manpower and Reserve Affairs stated that they are currently collecting the perspectives of the military services on the selective service process and plan to provide this information to the Commission. DOD officials explained that they did not incorporate information from the military services into their report because DOD’s involvement in any potential decision to initiate and implement a draft is mostly centralized within the Office of the Secretary of Defense, not within the individual military services. They further stated that information regarding the level of additional personnel that would be needed using a draft in the event of a national emergency comes from the war plans that are developed and maintained by the Joint Staff. Additionally, they said that they primarily produced a report that characterized the overall processes and was a factual account of how DOD interacts with various aspects of the Selective Service System. Another provision within the NDAA for FY 2017 required the Secretary of Defense and other Cabinet-level government officials, along with any experts designated by the President, to submit to the Commission and Congress recommendations for the reform of the military selective service process not later than 7 months after the Commission’s establishment date. To accomplish this, officials from the Office of the Assistant Secretary of Defense for Manpower and Reserve Affairs said that they initially developed a questionnaire on which the Commission provided feedback. These officials stated that they sent it to 18 organizations, including the Cabinet positions listed in the act and to additional organizations that were recommended by the National Security Council or that had some role or responsibility in the event of a draft. In order to produce the Secretary of Defense’s submission, these officials further stated that they requested each of the military services and the Joint Staff to complete the questionnaire by November 2017. Further, these officials viewed the questionnaire as an opportunity for the respondents—the military services in the case of DOD—to provide their ideas regarding military selective service processes, both current and future. We provided a draft of this report to DOD for review and comment. In an email, the Director of Accession Policy within the Office of the Deputy Assistant Secretary of Defense for Military Personnel Policy stated that the military services concurred with the report and DOD had no additional comments. We are sending copies of this report to the appropriate congressional committees; the National Commission on Military, National, and Public Service; the Secretary of Defense; the Acting Assistant Secretary of Defense for Manpower and Reserve Affairs; the Commander, U.S. Military Entrance Processing Command; the Secretaries of the Army, the Navy, and the Air Force; the Commandant of the Marine Corps; and the Director, Selective Service System. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the contact named above, Kimberly Seay, Assistant Director; Rebecca Beale; Vincent Buquicchio; Mae Jones; Kevin Keith; Jordan Mettica; and Amber Sinclair made key contributions to this report.", "summary": "The Military Selective Service Act established the Selective Service System whose mission, among other things, is to be prepared to provide trained and untrained manpower to DOD in the event of a national emergency when directed by the President and the Congress. In the NDAA for FY 2017, Congress included a provision requiring that DOD submit a report on the current and future need for a centralized registration system under the Military Selective Service Act. In addition, the act established a Commission to review, among other things, the military selective service process and report on it. The act also included a provision for GAO to review DOD's procedures for evaluating selective service requirements. In this report, GAO compared the information DOD included in its report with the act's required elements and identified additional information that could benefit the Commission as it further reviews the military selective service process. GAO reviewed DOD's report and the statutory elements and interviewed officials involved in the military selective service process to identify additional information that could benefit the Commission's ongoing review. In its July 2017 report to Congress and the National Commission on Military, National, and Public Service (i.e., “the Commission”), the Department of Defense (DOD) provided information regarding each of the six required reporting elements contained in the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017. Specifically, DOD provided information on: 1. the direct and indirect benefits of the military selective service system; 2. the functions performed by the Selective Service System that would be assumed by DOD in the absence of a national registration system; 3. the systems, manpower, and facilities needed by DOD to physically mobilize inductees in the absence of the Selective Service System; 4. the feasibility and the utility of eliminating the focus on the mass mobilization of primarily combat troops in favor of a system that focuses on the mobilization of military occupational specialties, and the extent to which such a change would impact the need for both male and female inductees; 5. DOD's personnel needs in the event of an emergency requiring mass mobilization; an analysis of any additional critical skills that would be needed in the event of a national emergency; and a timeline for when DOD would require the first inductees to report for service; and 6. a list of the assumptions used by DOD to conduct its analysis. GAO identified additional information that may benefit the Commission's ongoing evaluation of the military selective service process. The fifth required reporting element required DOD to analyze its personnel needs in the event of an emergency requiring mass mobilization and a timeline for obtaining these inductees. In response, DOD provided the personnel requirements and timeline that were developed in 1994 and that have not been updated since. DOD officials stated that they did not conduct additional analysis to update these requirements because the all-volunteer force is of adequate size and composition to meet DOD's personnel needs. In 2012, GAO recommended that DOD establish a process to periodically reevaluate DOD's requirements for the Selective Service System. Although DOD concurred with this recommendation, it has not yet implemented it. GAO believes this recommendation is still valid. Having updated DOD Selective Service System requirements and timelines for a potential draft may be useful in supporting the ongoing evaluation of the military selective service process by the Commission. Further, military service officials told GAO that their perspectives on how selective service processes that could affect them had not been solicited in the preparation of DOD's report. Since the military services are to receive, train and integrate the inductees; provide support to the Selective Service System during a national emergency; and could help identify critical skill sets needed to meet emerging demands and the impact a draft could have on meeting those demands, the military service officials' perspectives could be useful to the Commission. DOD officials stated that they are currently collecting these perspectives and plan to provide this information to the Commission. GAO is not making any new recommendations. GAO believes its 2012 recommendation to DOD to periodically reevaluate its requirements for the Selective Service System, which DOD concurred with, is still valid. DOD had no additional comments on this report.", "document_type": "gao"}
{"report": "As of March 2018, the Coast Guard’s portfolio of major acquisitions has 10 programs, 2 more than during our June 2014 review, when the Coast Guard had 8 major acquisition programs (see figure 1). DHS defines major acquisition programs as those with life-cycle cost estimates of at least $300 million. Appendix II provides information on the programs included in the Coast Guard’s major acquisition portfolio in 2018. Programs in the acquisition portfolio progress through a series of four acquisition phases, accompanied by a series of acquisition decision events (ADE), outlined in the DHS’s acquisition life-cycle framework (acquisition process). Figure 2 depicts the acquisition process. The Coast Guard currently has three cross-directorate groups that include members from the acquisitions, resources, and requirements directorates and are responsible for addressing and overseeing issues across the Coast Guard. Since 2011, these three groups—the Executive Oversight Council, the Systems Integration Team, and the Resource Councils— have helped oversee the Coast Guard’s acquisition portfolio. Table 1 provides information on the roles and responsibilities of these three groups. Each of these groups has a charter to identify its purpose and scope of responsibilities, which involve providing cross-directorate representation and information on all of the acquisition programs to help manage its portfolio. The Coast Guard updated the roles and responsibilities for two of its cross-directorate groups in its Major Systems Acquisition Manual, including how the groups are to interact and work together within the established acquisition governance framework. For example, the Resource Councils are to serve as advisors to the senior-level Executive Oversight Council. Each of the Resource Councils is to report directly to the Executive Oversight Council for issues within its own domain and report to the Systems Integration Team for issues that cross domains. The Executive Oversight Council oversees the acquisition governance framework and is positioned to delegate tasks to the other two cross- directorate groups or obtain information from them to assist in the management of acquisitions to address problems related to acquisitions. Coast Guard assets are developed with a specific design service life. According to Coast Guard officials, the design service life for aircraft is established as a maximum number of flight hours; while for cutters, the design service life is the number of years the cutter is expected to operate based on contractual design requirements. An asset’s design service life can be extended through major maintenance events, such as Service Life Extension Projects (SLEP). SLEPs are funded with the Coast Guard’s acquisition, construction, and improvements appropriation account whereas routine depot-level maintenance is funded with the Coast Guard’s operating expenses appropriation account. SLEPs address specific systems and major maintenance to extend the service life of an asset beyond the original plan. A SLEP is not designed to increase an asset’s capability; it extends the service life by replacing obsolete, unsupportable, or maintenance- intensive equipment. Table 2 provides more details about the design service life and maintenance history of select legacy assets. We have issued several reports since 2012 on the Coast Guard’s management of its acquisition portfolio and the oversight of its depot-level maintenance resources. We have made several recommendations in these reports. For example, in September 2012, we found a mismatch between resources needed to support all approved major acquisition program baselines and expected funding levels. This resulted in the Coast Guard requesting funding for programs as a part of its annual budget process below the levels identified in programs’ life-cycle cost estimates, resulting in a bow wave of future funding requirements. At the time, DHS and the Coast Guard acknowledged this resource challenge, but we found they had not developed a clear strategy for moving forward. At that time, DHS officials stated that funding variability results in inevitable trade-off decisions being made on an annual basis. We recommended that the Coast Guard conduct a comprehensive portfolio review to develop revised baselines that reflect acquisition priorities as well as realistic funding scenarios. DHS concurred with our recommendation. Since 2014, the Coast Guard has undertaken efforts to address this issue, but, as of October 2017, we found these efforts have not led to the significant trade-off decisions needed to improve the affordability of the Coast Guard’s portfolio. Additionally, in September 2012, we found that the Coast Guard had established an acquisition governance framework and that the Executive Oversight Council was well positioned to receive information from other cross-directorate groups in order to manage the acquisition portfolio. However, while the Executive Oversight Council had been active in overseeing individual programs, it had not met to oversee the portfolio collectively. Officials told us at that time that the portfolio oversight was done through the annual budget process. We found this approach to managing portfolio affordability was ineffective and facilitated immediate trade-offs, and did not provide the best environment to make decisions in developing a balanced long-term portfolio. We recommended that the Coast Guard identify the Executive Oversight Council as the governing body to oversee the Coast Guard’s acquisition enterprise with a portfolio management approach. In addition, this council should supplement individual program reviews with acquisition portfolio-wide reviews to make performance and affordability trade-off decisions that will help ensure the Coast Guard is acquiring a balanced portfolio to meet mission needs. DHS concurred and the Coast Guard updated the Executive Oversight Council’s charter in 2014 to require the group to annually oversee the acquisitions collectively as a balanced long-term and affordable portfolio. Similarly, in June 2014, we found that the Coast Guard had repeatedly delayed and reduced its capabilities through its annual budget process and did not know the extent to which it would meet mission needs and achieve desired results. We reported that this was because the Coast Guard did not have a long-term fleet modernization plan that identified all acquisitions needed to meet mission needs over the next 20 years within available resources. We recommended that the Coast Guard develop a 20-year fleet modernization plan that identifies all acquisitions needed to maintain the current level of service and the fiscal resources necessary to build the identified assets. We recommended this plan consider trade-offs in cases where the fiscal resources needed to execute the plan are not consistent with annual budgets. DHS concurred, but, according to Coast Guard officials, the plan has yet to be approved. In addition to reporting on the Coast Guard’s management of its acquisition portfolio, we have also issued several reports on how it oversees depot-level maintenance funding. For example, in July 2012, we found that the Coast Guard’s depot-level maintenance cost-estimating process did not fully reflect best practices. We recommended that the Coast Guard conform its estimated depot-level maintenance expenditures with cost-estimating best practices. DHS concurred; however, it raised several points that we found could limit the implementation of the recommendation. DHS stated, for example, that cost-estimating best practices are most applicable for new acquisitions. As our report noted, our cost-estimating best practices guide is intended to be applicable to programs and assets in all stages of their life cycles, including maintenance and support. Additionally, in March 2017, we found that the cost estimates were not adjusted or updated over the course of an asset’s service life, leading to a large discrepancy between expected and actual annual depot-level maintenance expenditures. We recommended that the Coast Guard periodically update standard support levels, which are annual estimates for depot-level maintenance over the course of an asset’s life cycle, to account for actual expenditures. DHS concurred with our recommendation and plans to complete actions to implement it by December 2018. The Coast Guard’s 5-year CIP, a congressionally mandated report, does not fully reflect cost realities or acquisition needs. For example, the most recent CIP—from fiscal years 2018 through 2022—projects funding for its portfolio of major acquisitions that, over the 5-year period, exceeds average budget requests in the last several years. As such, we found that the Coast Guard continues to face the same programmatic risks that annual CIP-based planning perpetuates, similar to what we have been reporting since 2011. To address funding constraints, the Coast Guard has been in a reactive mode by making prioritization decisions through the annual budget process without identifying how trade-off decisions made in the current budget cycle will affect the future of the acquisition portfolio. As a result of this planning process, and as we found in 2012 and in this current review, the Coast Guard has continued to defer planned acquisitions to future years and left a number of operational capability gaps unaddressed that could affect future operations. Moreover, the Coast Guard has not conducted portfolio-wide oversight through its cross-directorate groups. The 5-year CIP is the Coast Guard’s key acquisition portfolio planning tool. However, since 2011, we have reported on shortcomings that limit its effectiveness. As required by statute, the Coast Guard prepares a 5-year CIP that is required to be updated and submitted annually with the administration’s budget request. This 5-year CIP provides information on the proposed budget for the upcoming fiscal year and the following 4 fiscal years. Coast Guard officials told us the 5-year CIP is the starting point for developing the acquisition, construction, and improvements budget for a given year, which funds asset acquisitions as well as major sustainment projects and infrastructure investments. Officials also indicated that operational commanders provide input for the budget, as do senior Coast Guard officials for operations, resources, and others who have a role within its resource governance construct. As we have previously found, the Coast Guard’s 5-year CIPs continue to demonstrate a pattern of certain planning practices, to include: not identifying priorities or trade-offs between acquisition programs and not showing the effect of current decisions on the overall affordability of the acquisition portfolio; projecting funding levels for the current budget year that do not reflect the full extent of the Coast Guard’s projected acquisition needs; and projecting funding levels for future years that frequently surpass the average funding amounts requested by the Coast Guard in recent years. These shortcomings limit the Coast Guard’s ability to manage the affordability of its acquisition portfolio. Coast Guard officials said the CIP reflects the highest priorities of the department within the given top funding level and that prioritization and trade-off decisions are made as part of the annual budget cycle. However, these decisions, and the resulting impacts on affected programs, are not articulated in the CIPs. While the Coast Guard is not required under statute to identify the effects of trade-off decisions in the CIP, failing to show which acquisitions would take on more risk so other acquisitions can be prioritized and adequately funded within budget parameters also makes it difficult for Congress and other stakeholders, such as DHS and the Office of Management and Budget (OMB), to understand other options the Coast Guard considered. GAO’s Cost Estimating and Assessment Guide states that comparative analyses showing facts and supporting details among competing alternatives, such as budget priorities, should consider trade-offs needed to identify solutions and manage risk. Our past work has also highlighted other best practices for portfolio management, such as demonstrating comprehensive knowledge of the portfolio, including needs, gaps, and how to address those gaps; prioritizing investments through alignment of requirements, acquisition, and budget processes; and use of long-term planning. As we found in September 2012, the Coast Guard’s approach of relying on the annual budget process to manage portfolio affordability does not provide the best basis for making decisions to develop a more balanced and affordable portfolio in the long-term. In June 2014, we also found that there is no evidence that short-term budget decisions will result in a good long-term strategy, and the Coast Guard’s annual budget-driven trade-off approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. This results in trade-off decisions between capability and cost being pushed into the future. For example, the Coast Guard has a stated requirement for three medium icebreakers and three heavy icebreakers, and has initiated an acquisition program for heavy icebreakers. Assets acquired under this program will replace the Coast Guard’s only operating heavy icebreaker—the Polar Star—which is well past the end of its original design service life. The Coast Guard currently plans to have the three heavy icebreakers delivered in 2023, 2025, and 2026. Additionally, the Coast Guard operates one medium icebreaker, the Healy, which has an expected end of service life in 2029. Despite the requirement for three medium icebreakers, Coast Guard officials said they are not currently assessing acquisition of the medium polar icebreakers because they are focusing on the heavy icebreaker acquisition and plan to assess the costs and benefits of acquiring medium polar icebreakers at a later time. This planning approach can also lead to delayed capabilities and program risks, as the 5-year CIP does not prioritize acquisition programs in its projections for the 5-year period. We found in 2017 that both acquisition needs—as articulated in program baselines—as well as the 5-year CIP’s funding projections frequently surpass the average requested funding amounts in recent years. Similarly, in this review, we found this to be the case in the 5-year CIP covering fiscal years 2018 through 2022. Congressional appropriations for Coast Guard acquisition, construction, and improvements in fiscal years 2013 through 2018 exceeded the Coast Guard’s requests. Explanatory materials on the annual appropriations acts for these fiscal years indicated, among other things, that funding was provided above requested amounts for procurement of one HC-130J aircraft each year. The House Committee on Appropriations report accompanying the Homeland Security appropriations bill for 2018 noted that the Secretary is expected to include adequate funding in the fiscal year 2019 budget request to normalize the recapitalization of the HC-130 fleet. Recent annual appropriations acts also direct the use of funds to contract for three National Security Cutters that were not a part of the program of record for the fleet of these cutters. Absent any additional funding appropriated by Congress above Coast Guard requests, the acquisition portfolio put forth in the fiscal year 2018 CIP will not be affordable by fiscal year 2019 based on average recent budget requests. Figure 3 shows aggregate projected funding for various major Coast Guard acquisitions over the fiscal year 2018 through 2022 CIP, along with average budget requests and appropriations from fiscal years 2014 through 2018. Further, the previous Commandant of the Coast Guard testified in November 2017 that an annual acquisition budget of $2 billion is needed to modernize the fleet and address other critical priorities, such as the recapitalization of the Coast Guard’s icebreaker fleet. However, the fiscal year 2018 through 2022 CIP, dated October 2017, does not reflect this need for any year in its 5-year budget window. By not providing comprehensive information in the CIP on the acquisitions needed to perform its missions as well as the trade-offs necessary at different funding levels, the Coast Guard is not providing decision makers, including those in Congress, information to help decide which programs are the highest priority and which funding increases may or may not be consistent with the Coast Guard’s programs of record, as approved by DHS. For example, even though recent annual appropriations acts direct the use of funds to contract for three additional National Security Cutters, the Coast Guard had not identified a need for these cutters as they were not part of the original program of record. The Coast Guard has initiated the development of a 20-year Long-term Major Acquisitions Plan, but it is incomplete as of March 2018. According to Coast Guard officials, the Coast Guard’s efforts were in response to Congressional direction in 2016. In February 2016, Congress directed that the Coast Guard develop a Long-term Major Acquisitions Plan to cover the upcoming 2017 fiscal year, and for each of the 20 fiscal years thereafter, and stated that it should be updated every 2 years. Specifically, each plan is to include the following: (1) the number and types of cutters and aircraft to be decommissioned; (2) the number and types of cutters and aircraft to be acquired to replace the cutters and aircraft or address an identified capability gap; and (3) the estimated level of funding in each fiscal year required to acquire the cutters, aircraft, and command and control systems as well as acquire, construct, or renovate shore-side infrastructure. As of November 2017, officials told us that the Coast Guard was developing a 20-year Long-term Major Acquisitions Plan that specifically focused on its highest priority recapitalization and sustainment efforts for its assets and will focus on meeting the intent of the 2016 congressional mandate. These officials said that the plan will also be based on the Coast Guard’s 5-year CIP and will contain the necessary sustainment activities for current assets, according to service life limitations and recapitalization efforts for assets that reach the end of their service lives. Coast Guard officials stated that the plan will not be a budget document, but rather an overall planning document for future budgets. As of March 2018, the Coast Guard had not completed this long-term plan. Since our 2014 review, the Coast Guard has generally demonstrated improved fiscal management of the major programs in its acquisition portfolio and made progress in acquiring the assets in the portfolio. At that time, we found that program cost increases were consuming significant amounts of funding, and the Coast Guard was further from fielding its planned fleet than it was in 2009, in terms of the fiscal resources needed to finish those programs—or the remaining investment required. Since 2014, program costs have generally been stable and, from 2014 to 2018, the Coast Guard reduced the remaining investment required to complete those acquisitions by $4.9 billion or 24 percent (see table 3). However, while the Coast Guard has reduced the remaining investment required to complete its acquisition portfolio, there is little room for additional major acquisitions based on recent budget requests. For example, the National Security Cutter and Fast Response Cutter—two of the Coast Guard’s most expensive acquisitions programs—both experienced delays and were not delivered as originally scheduled. As a result, these delays stretched its acquisition budget longer than intended. Going forward, our analysis indicated that once the Coast Guard begins funding construction of Offshore Patrol Cutters—another major acquisition program critical in replacing vessels well past their service lives—that program is expected to consume a significant portion of the Coast Guard’s planned acquisition, construction, and improvements budget between 2018 and 2032, also raising uncertainties in how the Coast Guard will be able to fund other priorities. According to the previous Commandant of the Coast Guard, the Offshore Patrol Cutter is the Coast Guard’s top priority and, as such, the Coast Guard will prioritize its budget requests for the Offshore Patrol Cutter before other assets, potentially limiting funds requested for other acquisition programs. This approach will limit the portfolio for the foreseeable future and affect other new programs, such as the Heavy Polar Icebreaker and Waterways Commerce Cutter. These two programs represent critical needs for the Coast Guard, as the legacy assets they are intended to replace are well past their designed service lives, but there are limited resources for them if acquisition of the current portfolio is to be completed as scheduled. The polar icebreaker program has an estimated total acquisition cost of more than $3 billion and, according to the Coast Guard, is needed to alleviate a potential icebreaking mission capability gap. Heavy icebreakers are needed, as Coast Guard officials also indicated, to provide year-round access to the Polar Regions, including the clearance of a navigable channel for access to the National Science Foundation’s McMurdo Research Station on Ross Island, Antarctica as well as to facilitate other national security interests in polar waters. DHS approved the icebreaker program for entry into the obtain phase of the acquisition process in March 2018. The Coast Guard—in partnership with the Navy—is expected to award a contract for design and construction of up to 3 heavy polar icebreakers by June 2019, and plans for the first icebreaker to be delivered by the end of fiscal year 2023. We recently reported on this program in April 2018 and have an ongoing review that is expected to be completed by summer 2018. DHS recently approved a new program, known as the Waterways Commerce Cutter program, to recapitalize aging vessels such as its fleet of 35 Inland Tenders (river, buoy, and construction tenders). The assets in the current fleet continue to age beyond their expected service lives and the Waterways Commerce Cutter program is currently in the analyze/select phase of the acquisition process. Coast Guard officials said they are still determining how many new vessels are needed to provide capabilities similar to the current fleet of vessels that replace or relocate river buoys and builds fixed aids to navigational marine structures. A life-cycle cost estimate has not yet been developed for this program, but, according to Coast Guard officials, the preliminary rough order of magnitude estimate for total acquisition cost is $1.1 billion. As we reported in July 2017, the Coast Guard has no method in place to capture the effects of deferred acquisitions on its future portfolio. The lack of a long-term plan, as discussed earlier, and determining priorities and making trade-off decisions based on the annual budget have put the Coast Guard in a reactive planning mode each year. We found that this type of reactive planning and the Coast Guard’s constrained budget environment have created a bow wave of near-term unfunded acquisitions, negatively affecting future acquisition efforts and potentially affecting future operations. This bow wave consists of new acquisition programs and recapitalization efforts, as well as high-cost maintenance projects that use the acquisition construction and improvements account, which continue to put pressure on available resources. These projects include some that are not currently identified in the acquisition portfolio. For instance, the Coast Guard’s 87-foot patrol boats are forecast to require recapitalization beginning in 2023. Additionally, the ocean-going 175-foot coastal buoy tenders—not included in the Waterways Commerce Cutter program—are past the point in their service lives when a midlife maintenance availability would normally have been conducted. However, we found that the Coast Guard has historically operated vessels well past their expected end of service life, and it will likely need to do so with these assets given limited available acquisition funding. Furthermore, the Coast Guard has identified more than $1.5 billion in shore infrastructure projects, which are paid for with funding from the acquisition, construction, and improvements account that it has not been able to address, primarily due to lack of funding, among other reasons. Some of these projects are detailed in an unfunded priorities list the Coast Guard submitted to congressional committees in July 2017 pursuant to statutory requirements. Among the projects identified are recapitalization for waterfront facilities damaged in hurricanes; major acquisition systems infrastructure associated with homeporting the ninth National Security Cutter; and a number of pier replacements, building construction, and navigational aid realignment projects in several locations. The Explanatory Statement regarding the Consolidated Appropriations Act, 2018, reflected approximately $135 million in acquisition, construction, and improvements funding for shore infrastructure/construction projects, including for some previously unfunded priorities. We currently have an ongoing review to assess Coast Guard shore infrastructure projects and expect to issue a report in early 2019. Figure 4 shows the current and future acquisitions that, based on current Coast Guard programs and requirements, need to be addressed in order for the Coast Guard to meet its statutory missions, along with the backlog of shore infrastructure projects noted above. For more information about the Coast Guard’s 11 mission areas, including which assets perform each mission, see appendix III. Federal standards for internal control state that quality information that is appropriate, current, complete, accurate, accessible, and timely is necessary for an organization to achieve its objectives. The Coast Guard has not communicated quality information to Congress or demonstrated how deferred acquisitions will affect the future acquisition portfolio. Including information in the CIP, such as how trade-off decisions will affect other programs in the portfolio, would allow decision makers, including Congress, to better understand Coast Guard priorities and how changes to one program might potentially affect other programs. The Coast Guard has a management body in place to conduct oversight of its major acquisition programs; however, this management body has not conducted oversight across the entire acquisition portfolio from a collective approach. Among the Coast Guard’s three cross-directorate groups, the Executive Oversight Council is positioned to oversee the portfolio collectively and has the potential to implement key portfolio-wide management practices, including conducting formal reviews and issuing reports. This council has cross-directorate senior-level management representation, access to information on acquisition programs, and support from the other two cross-directorate groups (the Systems Integration Team and the Resource Councils). However, this council has not carried out these portfolio-wide practices. Since 2012, the responsibilities of the Executive Oversight Council regarding portfolio- wide management have been changed multiple times (see figure 5). In 2014, the Coast Guard updated the Executive Oversight Council’s charter, in response to our September 2012 recommendation, adding the responsibility for portfolio-wide oversight to include conducting an annual review to assess and oversee acquisitions collectively. However, during our current review, we found that the Coast Guard revised the council’s charter in June 2017, removing this responsibility. According to Executive Oversight Council officials, this responsibility was removed from the 2017 charter because the council did not conduct these annual reviews. Instead, Executive Oversight Council officials indicated that the council facilitates a balanced and affordable portfolio of acquisition programs through the individual program-level reviews. GAO’s best practices work states that successful organizations assess product investments in aggregate, rather than as independent products or programs. For example, by considering the requirements, acquisition, and budget processes collectively, it helps organizations prioritize their product investments. In addition, Coast Guard officials said that a portfolio-wide affordability review or assessment is undertaken by the Systems Integration Team—a cross-directorate, cross-enterprise group below the flag/Senior Executive Service-level—to help inform the annual budget process. The Systems Integration Team’s responsibilities outlined in its current charter include addressing issues tasked by the Executive Oversight Council chair, reporting to the council on cross-programmatic issues, and providing recommendations to the council. For example, officials with the Systems Integration Team said they met with, and gathered information from, each of the Resource Councils and briefed the Executive Oversight Council in February 2018 with proposals for looking at investments collectively across the Coast Guard enterprise to include potential priorities and trade-offs. They said the briefing included a review of the upcoming annual budget, a look at the overall portfolio of major acquisition programs over the next 10 years, and prospective new start initiatives at low, medium, and high funding levels. It is unclear what actions the Executive Oversight Council has taken as a result of the Systems Integration Team briefing. However, we found that the Executive Oversight Council did not review the portfolio from a collective perspective. Further, the members of the Systems Integration Team, who inform and report to the senior-level Executive Oversight Council, are not at the appropriate senior position to oversee or make decisions for the acquisition portfolio. Specifically, the Executive Oversight Council’s revised 2017 charter states that the Systems Integration Team is to support the council in its role to facilitate a balanced and affordable portfolio as a whole. However, as the higher-level cross-directorate group, the Executive Oversight Council has not engaged in overseeing or reporting on the acquisition portfolio collectively and annually. OMB’s 2017 Capital Programming Guide outlines a capital programming process, including how agencies should effectively and collectively manage a portfolio of capital assets. This OMB guidance states that a senior-level executive review committee should be responsible for reviewing the agency’s entire capital asset portfolio on a periodic basis and for making decisions or priorities on the proper composition of agency assets needed to achieve strategic goals and objectives within the budget limits. In the case of the Coast Guard, only the Executive Oversight Council has representation at the senior-level executive level and has the responsibility for oversight of its major acquisition programs. Without collective portfolio reviews at the senior management level, the Coast Guard does not have sufficient cross-directorate information to determine needed trade-offs in the major acquisitions realm, considering budget realities. Given the Coast Guard’s limited acquisition budget in recent years, it is unclear how the Coast Guard will be able to fund planned Service Life Extension Projects (SLEP) on several aging assets in order to sustain them—that is, keep them operating at acceptable levels—until replacement assets are available. We found that each of these sustainment efforts involves a certain amount of risk. For example, according to Coast Guard officials, they plan to operate H-65 and H-60 helicopters to flight hours beyond what has been flown for those aircraft. In addition, several of the Coast Guard’s aging cutters have spent more on depot-level maintenance than was planned. Combined, these cutters—the 210-foot and 270-foot Medium Endurance Cutters, the icebreaker Polar Star, and Inland Tenders—expended in excess of $460 million more than what was originally estimated (standard support levels) from 2010 to 2017. When combined with the challenges facing the acquisition portfolio noted above, the Coast Guard will likely struggle to pay for the maintenance of older assets, a situation that could lead to deferred maintenance and lost operational capability, as we found in our July 2012 review and in our current review. As discussed earlier, the 20- year long-term plan, if completed as directed by our June 2014 recommendation and subsequent congressional direction, will begin to lay out the prioritization of all efforts, trade-offs, and impacts. The Coast Guard currently operates several assets that have passed, or will soon pass, the end of their design service lives—the total period for which they were designed to operate. We found that these legacy assets are generally meeting metrics for availability to conduct operations; however, they are in need of major maintenance overhauls—or SLEPs— in order to continue providing capabilities to operators. According to Coast Guard officials, SLEPs are necessary because the Coast Guard does not have the funds available to initiate a new major acquisition program to recapitalize these assets in the short term, or because a significant amount of maintenance work is required to keep these assets operational until replacements are fielded. Table 4 provides details about the Coast Guard’s plans for SLEPs for selected assets. These planned SLEPs involve several risks including technical, scheduling, and funding. While SLEPs will extend these assets’ expected service lives, they will also add cost to an already constrained Coast Guard acquisition, construction, and improvements account. Since these projects use these funds, we would expect them to be included in the Coast Guard’s forthcoming 20-year long-term plan so that decision makers and stakeholders can see their effects on the broader acquisition portfolio. Additional detail on these planned SLEPs follows. The Coast Guard is planning to conduct a SLEP that will add an additional 10,000 hours to the H-65 rotary-wing aircraft, taking the service life of each aircraft in the fleet to 30,000 hours. The Coast Guard is evaluating alternatives to extend the service lives of the H-60 fleet. According to DHS, two options the Coast Guard is considering include utilizing newer H-60 aircraft from the Navy and conducting a SLEP on those aircraft to extend their service lives to 20,000 hours or extending the life of the current fleet to 30,000 hours. Coast Guard officials said that this will allow both the H-65 and H-60 aircraft to operate into the mid- 2030s so that the Coast Guard can focus funds from the acquisition, construction, and improvements account on the Offshore Patrol Cutter procurement and align its next helicopter acquisition effort with the Department of Defense’s future vertical lift acquisition plans. However, there are risks associated with these SLEP plans. According to Coast Guard officials, they plan to operate H-65 and H-60 helicopters to flight hours beyond what has been flown for those aircraft. The Coast Guard is working with the original manufacturers to identify structural components that would need to be replaced to accomplish the service life extension. From fiscal years 2012 to 2017, the H-65 operational availability—time available to conduct missions—averaged 70.9 percent and the H-60 averaged 73.5 percent, compared to their target of 71 percent. Both aircraft generally met their target but are approaching their end of service lives, with the H-65 expected to reach its 20,000 flight hour limit starting in 2020 and the H-60 in 2023. The Coast Guard expects the H-65 SLEP to cost about $61.6 million, but the H-60 SLEP cost is unknown because the effort has not progressed to the acquisition decision event at which a cost estimate is required to be approved. The H-60 SLEP was recently approved for entry into the analyze and select phase, where it was designated as a level 1 program, which DHS defines as programs with estimated life-cycle costs greater than or equal to $1 billion. The Coast Guard conducted reactivation work on the Polar Star from 2010 to 2013, and the icebreaker resumed its missions for the annual breakout of the National Science Foundation’s McMurdo Research Facility in Antarctica in 2014. The Coast Guard is planning a SLEP on the Polar Star to keep it operational until the first and second new heavy polar icebreakers are delivered (planned for 2023 and 2025, according to current acquisition plans) in order to bridge a potential operational gap. This approach would allow the Coast Guard to operate a minimum of two heavy icebreakers once the first polar icebreaker is delivered. The approach would also provide the Coast Guard with a self-rescue capability—the ability for one icebreaker to rescue the other if it became incapacitated while performing icebreaking operations. The Coast Guard’s plan to conduct the Polar Star SLEP during its existing annual depot-level maintenance periods may not be feasible given the amount of maintenance already required on the cutter. The Polar Star’s mission capable rating has been decreasing in recent years and reached a low point of 29 percent—well below the target of 41 percent—from October 2016 to September 2017. Based on mission capable data, we found this is mostly due to additional time spent in depot-level maintenance, which has increased in recent years from about 6 months in 2015 to more than 8 months in 2017. Additionally, the Polar Star has required extensions of about 3 months for its annual dry dock periods—the period of time when a cutter is removed from the water so that maintenance can be conducted—in 2016 and 2017 to complete required maintenance activities. These dry docks were originally planned to last between 2-1/2 months and 4 months. These extensions also compressed the amount of time that the crew had to prepare for its annual mission to Antarctica, which, according to members of the Polar Star crew, placed a large stress on the crew, risked the quality of work, and reduced or eliminated the crews’ planned rest and personal preparation for their roughly 4-month deployment. Based on our analysis, these delays and extensions are likely to continue as the cutter ages. According to Coast Guard officials, the Polar Star’s SLEP work will be conducted during the annual dry dock periods by adding an additional 1 or 2 months to the annual dry docks. However, if the work is unable to be completed during this time frame, it could force the Coast Guard to miss its commitment to conduct the annual Antarctica mission. Coast Guard maintenance officials stated that until the Polar Star completes the SLEP, its repairs will likely continue to get more expensive and time consuming. We will continue to monitor the Polar Star’s SLEP through our annual review of DHS programs. As we found in July 2017, the Polar Star SLEP effort has a rough order cost estimate of $75 million, which is based on the reactivation work completed in 2013. However, this estimate may be unrealistic based on assumptions the Coast Guard used, such as that it would continue to use parts from the Coast Guard’s other heavy polar icebreaker, the Polar Sea, which has been inactive since 2010. The Coast Guard’s recent assessment of the Polar Star’s material condition—the physical condition of the cutter, which includes the hull structure, habitability, major equipment systems, and spare parts availability—was completed in January 2018. The material assessment stated that many of the available parts from the Polar Sea have already been removed and installed on the Polar Star. As a result of the finite parts available from the Polar Sea, the Coast Guard may have to acquire new parts for the Polar Star that could increase the $75 million SLEP estimate. The Polar Star’s recent material assessment will form the basis to determine which systems will be overhauled during the SLEP and for a more detailed cost estimate. The Coast Guard expects the program to reach the obtain phase of the acquisition life cycle by December 2019, at which time the Polar Star could reach the end of its current useful service life (currently projected to be between 2020 to 2023). This timeline contains risk that the Polar Star could be rendered inoperable before the cutter is able to undergo a SLEP. The Coast Guard operates two fleets of Medium Endurance Cutters (270- foot and 210-foot cutters) and both are either approaching or have exceeded their design service lives. According to Coast Guard maintenance officials, the primary problem facing the 270-foot Medium Endurance Cutters is obsolescence given the age of these cutters. The cutters have several systems that are no longer manufactured, and in many cases the original manufacturer no longer makes parts for the systems, such as the generators, fire pumps, and main diesel engines. In order to sustain the 270-foot Medium Endurance Cutters until the Offshore Patrol Cutters—replacements for the Medium Endurance Cutters—are delivered, the Coast Guard is planning to conduct a SLEP. Officials stated they are evaluating how many of the 13 cutters will undergo the SLEP. The Coast Guard does not have a cost estimate for the SLEP, but officials said that the project should enter the obtain phase and complete its first cost estimate by June 2019. Despite the age and condition of the cutters, the mission capable rate for the 270-foot Medium Endurance Cutters has been increasing since the fleet first started using the metric in August 2014 and has met its minimum target of 49 percent. Specifically, the 270-foot Medium Endurance Cutters’ mission capable rate increased from 47.6 percent in 2015 to 69.4 percent in 2017. This indicates that the Coast Guard has been increasing the amount of time that the cutters are available to conduct operations. However, the mission capable rating of 69.4 percent in 2017 is above the maximum target—61 percent—which means the Coast Guard is operating the cutters more than planned. This could be troublesome since the percentage of time above the 61 percent target is time that is allocated to depot-level maintenance, meaning these cutters are not spending as much time as planned in maintenance. In May 2016, we found that deferring maintenance can lead to declining ship conditions and longer maintenance periods that can reduce a ship’s operational availability. The Coast Guard is also evaluating how long the 270-foot Medium Endurance Cutters should remain in service. According to Coast Guard officials, this decision is at least partially dependent on the delivery of the Offshore Patrol Cutters—specifically the shipbuilder’s ability to deliver 2 cutters per year, which is expected to start in fiscal year 2024 with the 4th and 5th cutters. Officials stated that the Coast Guard does not plan to operate any Medium Endurance Cutters once all 25 Offshore Patrol Cutters are operational, yet the fiscal year 2018 through 2022 CIP report indicates that 7 of the 270-foot Medium Endurance Cutters will still be in service when all 25 Offshore Patrol Cutters are delivered and operational. Officials said this is a contingency plan in case not all Offshore Patrol Cutters are delivered on time. As we found in June 2017, the Coast Guard completed refurbishment work on the 210-foot and 270-foot Medium Endurance Cutters in 2014, but this was not intended to extend the cutters’ service lives. Figure 9 shows the delivery dates for the Offshore Patrol Cutters and the decommissioning dates for the legacy Medium Endurance Cutters. The fiscal year 2018 through 2022 CIP shows that there is little, if any, gap between when the 210-foot and 270-foot Medium Endurance Cutters will be removed from service and when the Offshore Patrol Cutters will be operational. However, both Medium Endurance Cutter classes will be well past their end of service lives by the time they are decommissioned. For instance, in our July 2012 report, we reported that the 210-foot Medium Endurance Cutter Dependable reached its end of service life in 2006. In addition, based on the fiscal year 2018 through 2022 CIP, we found that the Coast Guard plans for the cutter to operate for an additional 23 years (until 2029) without any major sustainment work to extend its service life. While it is not unusual for the Coast Guard to operate cutters for longer than originally planned, the acquisition schedule for fielding the Offshore Patrol Cutters will result in some of the Medium Endurance Cutters being expected to operate up to 30 years beyond their original design service lives when they are removed from service. In the February 2017 Sustainability Assessment of the 210-foot Medium Endurance Cutters, the Coast Guard rated 5 of the 14 cutters as a high risk for sustainability, which reflects either a poor material condition or high maintenance costs. Additionally, the most recent material condition assessments for the Medium Endurance Cutters, which were completed in 2015, found that the: 210-foot Medium Endurance Cutters cannot be expected to meet operational requirements using the normal depot-level maintenance funding levels due to the time required to complete maintenance and the increased maintenance costs in recent years; and mission effectiveness of the 270-foot Medium Endurance Cutters will continue to degrade without a near-continuous recapitalization of older sub-systems. Further, according to the fiscal year 2018 through 2022 CIP, the Coast Guard is planning to operate some of the Medium Endurance Cutters for about the same period of time as other Medium Endurance Cutters that will undergo the SLEP project. This raises questions as to how those cutters that do not go through the SLEP will continue operating until their planned decommissioned date, which in some cases is the same time period as those cutters undergoing the SLEP. As shown in figure 9, the 210-foot Medium Endurance Cutter Alert will be decommissioned in 2030 and will not undergo a SLEP, while the 270-foot Medium Endurance Cutter Bear will also be decommissioned in 2030 and could undergo the SLEP. In July 2012, we found that as assets age beyond their design service lives, they can negatively affect the Coast Guard’s operational capacity to meet mission requirements as the cutters require more maintenance. As discussed earlier, in response to Congressional direction, as the Coast Guard continues its development of a 20-year Long-term Major Acquisitions Plan, it is important to include more details about the 270-foot Medium Endurance Cutter SLEP, including when the SLEP should begin and how much service life the SLEP should add to the cutters. As legacy assets operate longer than originally planned, they are becoming costlier to maintain, which introduces risk to an already constrained Coast Guard budget. For example, depot-level maintenance expenditures from fiscal years 2010 to 2017 for the 210-foot and 270-foot Medium Endurance Cutters, Polar Star, and Inland Tenders exceeded by $460 million the assets’ estimated costs for depot-level maintenance (standard support levels—the Coast Guard’s annual estimates for depot- level maintenance) since these assets are near the end of or have exceeded their expected service lives. Specifically, over the 8-year period the: 210-foot Medium Endurance Cutters’ expenditures were about $151 million (219 percent) more, 270-foot Medium Endurance Cutters’ expenditures were $192 million (265 percent) more, Polar Star’s expenditures were about $15 million (31 percent) more, Inland Tenders expenditures were about $102 million (151 percent) more than standard support levels. The most recent material assessments for the 210-foot and 270-foot Medium Endurance Cutters, completed in September 2015 and November 2015 respectively, stated that the cutters’ current standard support level funding is not sufficient to continue funding the necessary maintenance activities. The assessments noted that there is the likelihood that maintenance will be deferred, postponed, or modified to accommodate this funding shortfall and that the cutters could degrade at an increasing rate if additional funding is not identified. According to Coast Guard guidance, once the cost to maintain or repair equipment is in excess of 50 percent of a cutter’s annual standard support level, it is considered to have zero years of remaining service life. The 210-foot and 270-foot Medium Endurance Cutters and Inland Tenders exceeded this threshold each year from 2010 to 2017 and the Polar Star exceeded this threshold in 2016. This indicates that, although the legacy cutters we reviewed continue to perform missions, the Coast Guard is accepting a significant level of risk based on the cutters’ increased depot-level maintenance expenditures, and that these cutters could experience catastrophic failures. Such an event could result in assets being removed from service without available replacement assets. Our March 2017 recommendation that the Coast Guard periodically update standard support levels to account for actual expenditures would, if implemented, begin to address this problem so that standard support levels would better align with depot-level maintenance expenditures. The Coast Guard continues to use the annual budget process to address the affordability of its portfolio of major acquisition programs by making trade-off decisions that result in delayed acquisitions and reduced capabilities. This approach places decision makers, including those in Congress in a position of committing fiscal resources to individual programs without knowing whether they are affordable or achievable within the context of the Coast Guard’s overall portfolio. While the 5-year CIP shows the Coast Guard’s immediate trade-off decisions, it does not show how these decisions could affect other programs in the portfolio or future acquisition efforts. Not providing comprehensive information in the CIP on the acquisitions needed to perform its missions, the trade-offs necessary at different funding levels, and the impact of the trade-off decisions made, the CIP limits the information available to decision makers, including those in Congress. In addition, the Coast Guard currently is not conducting key oversight that could facilitate a balanced, affordable portfolio. While the Coast Guard has a group in place to conduct portfolio reviews as a part of the annual budget cycle in the Systems Integration Team, it does not have senior- level executive representation or responsibilities necessary for the oversight and management of the portfolio as a whole. The Executive Oversight Council is a flag/Senior Executive Service-level group that monitors major risks and provides direction to other cross-directorate teams. In the past, this council had a documented role to annually review and oversee the Coast Guard’s overall acquisition portfolio, but it never conducted these reviews. Without collective portfolio reviews at the senior management level, the Coast Guard does not have sufficient information to determine needed trade-offs between the major acquisition programs while also considering the affordability of the portfolio and budget realities. We are making the following two recommendations to the Coast Guard: The Commandant of the Coast Guard should work with Congress to include in the Coast Guard’s annual 5-year CIP a discussion of the acquisition programs it prioritized that describes how trade-off decisions made could affect other acquisition programs, such as by delaying recapitalization efforts or needing to conduct Service Life Extension Projects for legacy assets. (Recommendation 1) The Commandant of the Coast Guard should require the Executive Oversight Council, in its role to facilitate a balanced and affordable acquisition portfolio, to annually review the acquisition portfolio collectively, specifically for long-term affordability. (Recommendation 2) We provided a draft of this report to DHS for review and comment. DHS’s written comments are reprinted in appendix IV. The Coast Guard also provided technical comments that we incorporated into the report as appropriate. In responding to a draft of our report, DHS concurred with our first recommendation and non-concurred with our second recommendation. In its response, with respect to our second recommendation DHS noted that several existing organizations within the Coast Guard—such as its Investment Board, Deputies Council, and Investment Review Board—are responsible for making decisions regarding out-year funding. Further, DHS noted that the Executive Oversight Council works outside the Planning, Programming, Budgeting, and Execution process and that the phrase “long-term affordability” is subject to interpretation in the context of our recommendation. DHS also stated that, to meet the spirit of our recommendation, the Coast Guard will update the Executive Oversight Council’s charter to require a review of the collective acquisition portfolio, specifically evaluating long-term planning. We believe that updating the Executive Oversight Council’s charter to include long-term planning is a positive step. However, long-term affordability, as discussed throughout this report, should include the budget realities faced by the Coast Guard in its major acquisition portfolio. If the planning accounts for long-term funding considerations to achieve the Coast Guard’s acquisition goals and objectives, we believe the intent of our recommendation would be met. We are sending copies of this report to the Secretary of Homeland Security and the Commandant of the Coast Guard. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. The objectives of this report are to assess (1) the extent to which the Coast Guard has made changes to how it manages its acquisition portfolio and (2) how the Coast Guard is sustaining existing assets until new assets become operational. To examine the extent to which the Coast Guard has changed how it manages its acquisition portfolio, we assessed Coast Guard practices for managing the portfolio’s affordability and long-term planning. We looked at the portfolio to determine how its composition changed since our last Coast Guard acquisition portfolio review in 2014. We selected a range of acquisition programs based on if they were already major acquisition programs (programs with a life-cycle cost estimate greater than or equal to $300 million or a total acquisition cost greater than or equal to $100 million) by definition, the programs were part of our 2014 review, or they are likely to be major acquisition programs that will require significant funding in the near future. Using acquisition program baselines, we also identified changes in the expected total acquisition costs of these programs using the threshold costs and compared them with what we reported in 2014. We used the threshold acquisition costs—the maximum amount the program should cost as approved by DHS—when referring to the total acquisition cost of a program. We calculated the remaining investment required for each program by taking the total acquisition cost, as reported in the program’s acquisition program baseline, and subtracting the funding reflected for the program in Explanatory Statements regarding annual appropriations acts through fiscal year 2018 appropriations. We reviewed program documentation and interviewed officials from program offices and the Coast Guard’s capabilities and engineering directorates. These discussions helped identify program achievements as well as any risks associated with realizing planned cost, schedule, and capability targets. We analyzed Coast Guard 5-year Capital Investment Plans (CIP) that supported the budget requests for fiscal years 2014 through 2018 to determine how the Coast Guard has managed the affordability of its acquisition portfolio. We also compared annual appropriations acts and accompanying explanatory materials since fiscal year 2014 with acquisition needs and capability gaps identified in the CIPs. We compared Coast Guard practices for managing the affordability of its acquisition portfolio and long-term planning with best practices outlined in GAO’s Cost Estimating and Assessment Guide and prior GAO reports. In addition, we reviewed Atlantic Area Command annual area planning assessments for fiscal years 2011 through 2016 and other Coast Guard documents highlighting shore-side infrastructure and vessel recapitalization needs. We reviewed charters for Coast Guard cross directorate groups—the Executive Oversight Council and Systems Integration Team—that help oversee Coast Guard acquisitions—to identify responsibilities and membership for these organizations, and conducted interviews with officials from these bodies to better understand their portfolio oversight activities. We also reviewed surface and aviation fleet mix studies and other strategy and planning documents. We interviewed Coast Guard officials about the anticipated content of the 20- year Long-term Major Acquisitions Plan. Additionally, we interviewed officials from the Coast Guard resources directorate; the Coast Guard’s two operational commands (Pacific Area Command and Atlantic Area Command); the Department of Homeland Security (DHS) offices for Program Accountability and Risk Management, and Program Analysis and Evaluation; and the Office of Management and Budget (OMB) to discuss Coast Guard planning and budget preparation. We visited Eastern Shipbuilding Group and the Offshore Patrol Cutter Project Resident Office in Panama City Beach, Florida, to discuss Offshore Patrol Cutter production. To examine how the Coast Guard is sustaining existing assets until new assets become operational, we selected assets to review that were at or approaching their end of design service lives—an estimated period before the asset reaches obsolescence—and if the Coast Guard was planning to conduct a Service Life Extension Project (SLEP). We collected and analyzed program documentation on asset operational availability and mission capability, sustainment needs and maintenance history, and plans for extending the service lives of selected assets. We assessed Coast Guard expenditures on depot-level maintenance—which, according to the Coast Guard, is maintenance that is beyond the capability of the crew—for fiscal years 2010 to 2017 for legacy assets, and compared them with standard support levels—annual funding estimates for depot- level maintenance—for those assets over that same time period. We interviewed Coast Guard officials from the Long Range Enforcer Product Line Office, which is responsible for sustainment of the Polar Star, the Coast Guard’s only active heavy icebreaker. We conducted site visits— based on Coast Guard’s availability of assets—to the Coast Guard’s Medium Endurance Cutter Product Line Office in Portsmouth, Virginia, and the Aviation Logistics Center in Elizabeth City, North Carolina. We also toured a 270-foot Medium Endurance Cutter in Portsmouth, Virginia, and interviewed the officers serving on the cutter at the time. Based on the nature of the information we collected, we are not making any generalizable statements from these site visits. We conducted this performance audit from March 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Coast Guard’s major acquisition portfolio comprises 10 surface, aviation, and command and control programs. Major acquisition programs are those with life-cycle cost estimates of at least $300 million. Table 5 provides quantities and descriptions of each major acquisition program in the Coast Guard’s 2018 portfolio. The Coast Guard performs 11 statutory missions, some of which align with DHS missions (such as undocumented migrant interdiction; defense readiness; and ports, waterways, and coastal security) and some of which are broader (such as search and rescue, and living marine resources). Table 6 shows select Coast Guard assets we reviewed and which of the 11 statutory missions they perform. Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition to the contact above, Rick Cederholm, Assistant Director, Peter W. Anderson, John Crawford, Kristine Hassinger, Andrew Redd, Suzanne Sterling, and Roxanna Sun all made key contributions to this report. Homeland Security Acquisitions: Leveraging Programs’ Results Could Further DHS’s Progress to Improve Portfolio Management. GAO-18- 339SP. Washington, D.C.: May 17, 2018. Coast Guard Acquisitions: Status of Coast Guard’s Heavy Polar Icebreaker Acquisition. GAO-18-385R. Washington, D.C.: April 13, 2018. Coast Guard Acquisitions: Limited Strategic Planning Efforts Pose Risk for Future Acquisitions. GAO-17-747T. Washington, D.C.: July 25, 2017. Coast Guard Recapitalization: Matching Needs and Resources Continue to Strain Acquisition Efforts. GAO-17-654T. Washington, D.C.: June 7, 2017. Coast Guard Cutters: Depot Maintenance Is Affecting Operational Availability and Cost Estimates Should Reflect Actual Expenditures. GAO-17-218. Washington, D.C.: March 2, 2017. Coast Guard Aircraft: Transfer of C-27J Aircraft Is Complex and Further Fleet Purchases Should Coincide with Study Results. GAO-15-325. Washington, D.C.: March 26, 2015. Coast Guard Acquisitions: Better Information on Performance and Funding Needed to Address Shortfalls. GAO-14-450. Washington, D.C.: June 5, 2014. Coast Guard: Portfolio Management Approach Needed to Improve Major Acquisition Outcomes. GAO-12-918. Washington, D.C.: September 20, 2012. Coast Guard: Legacy Vessels’ Declining Conditions Reinforce Need for More Realistic Operational Targets. GAO-12-741. Washington, D.C.: July 31, 2012. Coast Guard: Action Needed as Approved Deepwater Program Remains Unachievable. GAO-11-743. Washington, D.C.: July 28, 2011. Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain. GAO-01-564. Washington, D.C.: May 2, 2001.", "summary": "The Coast Guard spends billions of dollars on its major acquisition programs to meet its missions. GAO's prior work has identified the Coast Guard's reliance on its annual budget process to manage its acquisition portfolio as a challenge. GAO was asked to review the recapitalization of the Coast Guard's acquisition portfolio. This report assesses, among other topics, the extent to which the Coast Guard has made changes to how it manages its acquisition portfolio. GAO assessed Coast Guard's major acquisition programs to determine changes since GAO's 2014 portfolio review. GAO analyzed program baselines and interviewed Coast Guard officials. GAO analyzed the CIP for fiscal years 2014 through 2018, and reviewed the EOC's documentation. The Coast Guard, a component within the Department of Homeland Security (DHS), continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan (CIP)—congressionally mandated and used for oversight. This management approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. Further, Coast Guard officials said the CIP reflects the highest priorities of the department—such as the Offshore Patrol Cutter, which is the Coast Guard's highest priority—and that trade-off decisions are made as part of the annual budget process. However, the effects of these decisions, such as which acquisitions would take on more risk so others can be prioritized and adequately funded, are not communicated in the CIP to key decision makers, because including such information is not statutorily required. Over the years, this approach has left the Coast Guard with a build up—or bow wave—of near-term unfunded acquisitions, negatively affecting recapitalization efforts and limiting the effectiveness of long-term planning. Including the effects of these trade-offs in the CIP would align with GAO's cost estimating best practices. Until it does so, the Coast Guard limits its ability to manage its acquisition portfolio in the long-term, beyond the time covered in the 5-year CIP. In response to a September 2012 GAO recommendation, the Coast Guard updated the Executive Oversight Council's (EOC)—a cross-directorate group that oversees major acquisition programs—charter in 2014 to require annual reviews of the acquisition portfolio collectively. However, EOC officials said that these annual reviews never occurred, and GAO found that the annual review requirement was removed from the charter in 2017. Thus, the Coast Guard is without a senior-level group charged to collectively review and ensure affordability of its acquisition portfolio. The Office of Management and Budget's Capital Programming Guide states that a senior-level executive committee should be responsible for reviewing the agency's entire asset portfolio and for making decisions on the proper composition of assets needed to achieve strategic goals within budget constraints. GAO recommends that the annual CIPs reflect acquisition trade-off decisions and their effects, and that the EOC review the overall acquisition portfolio and its affordability annually. DHS concurred with the CIP recommendation. DHS did not concur with the EOC recommendation. It noted that other existing Coast Guard bodies are responsible for evaluating and prioritizing funding. However, DHS stated that the EOC charter will be updated to require it to review the overall acquisition portfolio, including long-term planning. If this long-term planning accounts for budget realities for the acquisition portfolio, GAO believes the intent of the recommendation will be met.", "document_type": "gao"}
{"report": "The federal government receives funds from numerous sources in addition to tax revenues, including collections of user fees, fines, and penalties. According to the Budget of the U.S. Government, in fiscal year 2017, the U.S. government’s total receipts were $3.3 trillion and collections of fees, fines, penalties, and forfeitures were more than $350 billion. User fees (fees): Fees are charges assessed to users for goods or services provided by the federal government, such as fees to enter a national park, and charges assessed for regulatory services, such as fees charged by the Food and Drug Administration for prescription drug applications. Fees are an approach to financing federal programs or activities that, in general, are related to some voluntary transaction or request for government services above and beyond what is normally available to the public. By requiring identifiable beneficiaries to pay all or part of the cost of a good or service, fees can promote both equity and economic efficiency. Regularly reviewing fees help ensure that agencies, Congress, and stakeholders have complete information. Fines and penalties: Criminal fines and penalty payments are imposed by courts as punishment for criminal violations. Civil monetary penalties are not a result of criminal proceedings but are employed by courts and federal agencies to enforce federal laws and regulations. For example, civil monetary penalty payments are collected from financial institutions by certain financial regulators, such as the Federal Deposit Insurance Corporation, from enforcement actions assessed against financial institutions for violations related to anti-money laundering requirements. Reviews and, as needed, adjustments to fines and penalties could help ensure they provide a meaningful incentive for compliance. The design and structure of statutory authorities for fees, fines, and penalties can vary widely. In prior work, we have identified key design decisions related to how fee, fine, and penalty collections are used that help Congress balance agency flexibility with congressional control and oversight. Congress determines the availability of collections by defining the extent to which an agency may obligate and expend them, including the availability of the funds, the period of time the collections are available for obligation, the purposes for which they may be obligated, and the amount of the collections that are available to the agency. Fees, fines, and penalties may be categorized as one of three types of collections based on the structure of their statutory authority: offsetting collections, offsetting receipts, or governmental receipts (see figure 1). Offsetting collections can provide agencies with more flexibility because they are generally available for agency obligation without an additional annual appropriation. In contrast, offsetting receipts and governmental receipts involve greater congressional opportunities for control and oversight because, generally, additional congressional action is needed before the collections are available for agency obligation. For example, Congress must appropriate collections from offsetting receipts before agencies are authorized to obligate these funds. The type of collection also determines how OMB and Treasury report the collections. Offsetting collections and offsetting receipts result from businesslike transactions and are recorded as offsets to spending. Offsetting collections are authorized by law to be credited to appropriation or fund expenditure accounts, while offsetting receipts are deposited in receipt accounts. Because offsetting collections are offsets to spending, an account will generally show the net amount that was collected and spent at any point in time. While there is no statutory requirement for government-wide reporting of data of specific fees, fines and penalties, Congress has enacted legislation to make other data on federal spending and federal programs publicly available: The Digital Accountability and Transparency Act of 2014 (DATA Act). The DATA Act built on previous transparency legislation by expanding what federal agencies are required to report regarding their spending. The act significantly increased the types of data that must be reported, and required the use of government-wide data standards and regular reviews of data quality to help improve the transparency and accountability of federal spending data. These data are reported on the USAspending.gov website. The GPRA Modernization Act of 2010 (GPRAMA). GPRAMA, in part, requires OMB to present a coherent picture of all federal programs by making information available about each federal program on a website, including related budget and performance information. Programs have been defined as an organized set of activities directed toward a common purpose or goal that an agency undertakes or proposes to carry out its responsibilities. A federal program inventory would consist of the individual programs identified by the agencies and OMB and information collected about each of them. OMB and agencies implemented the inventory once, in May 2013. In October 2014, we found several issues limited the usefulness of that inventory and made several recommendations to OMB to ensure the effective implementation of federal program inventory requirements and to make the inventories more useful. Further, in September 2017, we found that OMB continued to delay implementation of the program inventory. We recommended that OMB consider a systematic approach to developing the program inventory and issue instructions to provide time frames and milestones for its implementation. Although OMB updated its instruction in June 2018, it did not provide any time frames or milestones for implementing the inventory. OMB has yet to develop a systematic approach for resuming implementation of the inventory or specific time frames for doing so. There is no source of data that lists all collections of specific fees, fines, and penalties at a government-wide or agency level. Both OMB and Treasury report government-wide budgetary and financial data, including some information on collections of fees, fines, and penalties; however, none of the reports identifies all specific fees, fines, and penalties, and their associated collection amounts at a government-wide level. OMB reports budgetary and financial data in various parts of the Budget of the U.S. Government, including Analytical Perspectives, the Budget Appendix, and the Public Budget Database. Treasury reports financial data in the Combined Statement. Each source provides information for a broader purpose than reporting on collections of fees, fines, and penalties. OMB and Treasury provide specific instructions for agency submission of the underlying data, as described in table 2. OMB’s reports include budgetary and financial information on federal collections at different levels of detail—from aggregated government-wide data to agency account-level data—depending on the source and its purpose. Analytical Perspectives identifies collections as fees and as fines, penalties, and forfeitures and reports government-wide summary information on these collections. For example, in a table summarizing government-wide governmental receipts in Analytical Perspectives, OMB reported fines, penalties, and forfeitures in federal funds as $20.98 billion and in trust funds as $1.17 billion for fiscal year 2017. These summary data do not provide a government-wide total of all federal collections from fines, penalties, and forfeitures because they do not include those that are categorized as offsetting collections or offsetting receipts, according to OMB staff. OMB staff said that OMB does not publish a government- wide total of fines, penalties, and forfeitures. OMB data on governmental receipts include source codes—including a code that identifies fines, penalties, and forfeitures—but data on offsetting collections and offsetting receipts do not include a comparable source code. In the Budget Appendix and the Public Budget Database, OMB reports account-level information by agency, identified by types of collections, such as offsetting collections, offsetting receipts, and governmental receipts. The Budget Appendix and the Public Budget Database do not label collections as fees, fines, or penalties and therefore, cannot be used to calculate government-wide totals for fees, fines, or penalties. To assemble Analytical Perspectives, the Budget Appendix, and the Public Budget Database, OMB compiles data from federal agencies into OMB MAX. OMB MAX, which is not publicly available, contains government-wide data at the account level and captures information such as the type of collection and the type of fund to which collections are deposited. While the data in OMB MAX help drive reporting in the Budget, not all data compiled in OMB MAX appear in the Budget. For example, OMB MAX includes an indicator for accounts that contain fees, but that information is not made available in the Budget of the U.S. Government. According to congressional staff we spoke with, they do not have open access to OMB MAX, but OMB provides excerpts of OMB MAX data to staff upon request. Treasury’s Combined Statement reports both government-wide totals and agency account-level data for collections classified as receipts, by various source categories—such as proprietary receipts from the public, miscellaneous receipts, and fines, penalties, and forfeitures. Fees. Fees may fall within several source categories. Therefore, Treasury does not have a single government-wide total for fees. It does present government-wide totals for various source categories, including, Sale of Products and Fees for Permits and Regulatory and Judicial Services, for example. Treasury also reports some fees under non-fee categories, such as Miscellaneous Taxes and Excise Taxes. Fines, Penalties, and Forfeitures. Treasury reports a government- wide total of receipts of fines, penalties, and forfeitures, which in fiscal year 2017 was $22.2 billion. Treasury’s Combined Statement presents these data, disaggregated by account, in the tables Receipts by Source Categories and Receipts by Department. For example, it identifies total Internal Revenue Service receipts in the category Fines, Penalties, and Forfeitures of about $6.8 million in fiscal year 2017. Treasury also reports some fines, penalties, and forfeitures receipts under other categories; these receipts are not included in its total of fines, penalties, and forfeitures. For example, Department of Homeland Security breached bond penalties are reported in two categories labeled as fees: Miscellaneous Receipts – Fees for Permits and Regulatory and Judicial Services and Offsetting Governmental Receipts – Regulatory Fees (see figure 2). In addition to the government-wide data sources, agencies report some data on their collections of specific fees, fines, and penalties in their annual financial reports, congressional budget justifications, and on agency websites. These data are dispersed by agency, are not comprehensive, and cannot be aggregated to create government-wide data because they vary in format and in the level of detail presented. For example: The Environmental Protection Agency (EPA) has an online, searchable database of enforcement and compliance information that includes data on individual fine and penalty assessments for violations of certain, but not all, statutes. The Department of Labor also makes selected enforcement data accessible in an online database collected by the Employee Benefits Security Administration, the Mine Safety and Health Administration, the Occupational Safety and Health Administration, and the Wage and Hour Division without Department of Labor-wide data standards on individual fine and penalty assessments. USDA’s Animal and Plant Health Inspection Service’s 2019 Congressional Budget Justification, on the other hand, is a PDF document that provides annual collection totals for Agriculture Quarantine Inspection Fees, Import-Export User Fees, Phytosanitary Certificate User Fees, Veterinary Diagnostics User Fees, and Other User Fees, rather than disaggregated to individual fee assessments. The government-wide totals for fees that OMB reports in Analytical Perspectives are not presented at a more disaggregated level, such as by agency or program, except for some major fee collections identified by OMB. For example, in Analytical Perspectives for fiscal year 2017, OMB reported $335.4 billion as a government-wide total of fee collections. OMB also reported some disaggregated data for the subset of fees that were offsetting collections and offsetting receipts. Specifically, it listed 11 fees totaling $258.4 billion collected by specific agencies and listed the remaining $72.3 billion as “all other user charges” without identifying the agency or program. As described in table 1 above, clear and accessible data can be aggregated or disaggregated by the user. OMB has more detailed data on collections in OMB MAX, including the agency, account, type of collection, and fund type, which it uses to compile reported totals of fees as well as fines, penalties, and forfeitures. OMB does not publicly report these data disaggregated below the government-wide level, such as at the agency level. OMB staff said that they do not report the disaggregated data because the purpose of Analytical Perspectives is to develop or support the President’s policies and more detailed tables may not be included if they are not considered necessary for that purpose. However, Analytical Perspectives also serves to provide other significant data that place the President’s Budget in context and assist the public and policymakers in better understanding the budget proposals. For example, Analytical Perspectives includes a chapter on aid to state and local governments that presents the President’s budget proposals for grant programs along with crosscutting information on federal grants to state and local governments, including government-wide grant spending, by agency and program. Analytical Perspectives also presents a summary of fee proposals but does not provide comparable crosscutting information about current fees. For fines and penalties, neither proposals nor crosscutting information is presented by agency. Until OMB makes more disaggregated data on fees, fines, and penalties maintained in its OMB MAX database—such as collections by agency—publicly available, Congress has limited information on such collections to inform oversight and decision-making. Analytical Perspectives’ government-wide totals of fees may include inaccurately labeled collections—other collections that are not fees—and may exclude some fee collections. Data that are clear and accessible are presented with known limitations, as shown in table 1. OMB Circular No. A-11 states that all accounts in which more than half of collections are from fees will be designated as containing fees. OMB staff said that the entire account is designated as containing fees because account-level data are the most disaggregated data OMB collects from agencies. OMB calculates its government-wide total for fees by adding collections in all accounts designated in OMB MAX as containing user fees. However, agency accounts can include multiple sources of budget authority. For example, Treasury’s U.S. Mint’s account “United States Mint Public Enterprise Fund” includes offsetting collections from Mint operations and programs; these include the production and sale of commemorative coins and medals, the production and sale of circulating coinage, the protection of government assets, as well as gifts and bequests of property. The United States Mint Public Enterprise Fund is designated as containing fees in OMB MAX. Therefore, budget authority that is not derived from the collection of fees but is still included in this account will be designated as fees as well when calculating a government-wide total. Conversely, accounts in which fees contribute to less than half of collections are not designated as containing fees amounts, and those fees will not be included in the government-wide total OMB calculates. OMB Circular No. A-11 describes the designation of fee accounts, but the data presented in Analytical Perspectives as totals for fees do not disclose OMB’s designation criteria, including the limitations to the accuracy of the data. OMB staff said they do not report this limitation because they consider OMB Circular No. A-11 a more appropriate document for providing technical information like the designation of accounts containing user fees. However, the section on fees in Analytical Perspectives does not direct the reader to OMB Circular No. A-11 for key information related to the data presented on fees. For other topics, including lease-purchase agreements, Analytical Perspectives directs the reader to OMB Circular No. A-11 for further details. Furthermore, for other topics, OMB provided explanatory information along with the data in Analytical Perspectives. For example, OMB explained a recent change to definitions in the research and development section of Analytical Perspectives and the effect of the change on budget authority. Until OMB provides a description of data limitations regarding the criteria used to identify accounts with fees for compiling government-wide totals in Analytical Perspectives, or directs users to the relevant section of OMB Circular No. A-11, some users are likely to be unaware of the potential for the total user fees to be overestimated or underestimated. In addition, OMB does not regularly review and update implementation of its criteria for designating fees. Standards for Internal Control in the Federal Government state that agency management should use quality information to achieve the objectives, such as processing data into quality information that is current and accurate. OMB Circular No. A-11 states that the fee designation is applied at the time the account is established. OMB staff told us that when establishing a new account, OMB collaborates with Treasury to determine the legal attributes of the account, including any fee authorities, and whether to designate the account as containing fees. OMB staff further explained they review the designation when new legislation is enacted that would change the attributes of the account, or if an agency informs OMB that the makeup of an account has changed because of programmatic changes. However, OMB Circular No. A-11 does not instruct agencies to regularly review or update this designation and report changes to OMB. Therefore, if the makeup of collections in an account changes so that fees go from being more than half of the collections to less than half, or vice versa, the account’s fee designation may not be updated accordingly. Until OMB instructs agencies to regularly review the fee designation in OMB MAX and update the designation, as needed, OMB cannot provide reasonable assurance that accounts are designated correctly, and that the government-wide totals of fees reported in Analytical Perspectives are accurate. While Analytical Perspectives reports government-wide data labeled as fees, fines, and penalties, the other three sources we reviewed—the Budget Appendix, the Public Budget Database, and the Combined Statement—report account-level information by agency. Users cannot further disaggregate the data presented to specific fee, fine, and penalty collections. For example, USDA’s Animal and Plant Health Inspection Service (APHIS) is funded in part by six fees: (1) Agricultural Quarantine Inspection (AQI) fee, (2) Phytosanitary Export Certification fee, (3) Veterinary Services Import Export fee, (4) Veterinary Diagnostics fee, (5) Reimbursable Overtime, and (6) Trust Funds and Reimbursable Funds. However, a user cannot identify collections from each of these APHIS fees in the Budget Appendix. The Budget Appendix specifically identifies AQI fee collections—$768 million in fiscal year 2017—because they are receipts deposited to a trust fund. The other five fees are combined within the total for offsetting collections—$152 million (see figure 3). The Budget Appendix, the Public Budget Database, and the Combined Statement report data at the account level because the purposes of these reports are broader than fees, fines, and penalties, and OMB and Treasury instruct agencies to report data at that level. Treasury’s Financial Manual states that agencies post appropriations and spending authorizations by Congress to accounts established by Treasury. OMB’s Circular No. A-11 instructs agencies to report data at the budget account level in OMB MAX, which supports the data in the Budget Appendix and the Public Budget Database. Because OMB and Treasury do not collect data that can be disaggregated to the level of fee, fine, or penalty, the collections for specific fees, fines, and penalties within accounts are not identifiable within account totals. Both the Budget Appendix and Public Budget Database label and present data within each account by collection type: offsetting collections, offsetting receipts, and governmental receipts. These collection types include fees, fines, and penalties, as well as other sources of collections, as shown in the text box below. Budgetary Collections as Labeled by the Budget of the U.S. Government Include More than Fees, Fines, and Penalties Offsetting Collections and Offsetting Receipts include user fees as w ell as reimbursements for damages, intragovernmental transactions, and voluntary gifts and donations to the government. Governmental Receipts include collections that result from the government’s exercise of its sovereign pow er to tax or otherw ise compel payment, and include taxes, compulsory user fees, regulatory fees, customs duties, court fines, certain license fees, and deposits of earnings by the Federal Reserve System. As a result, the user cannot separate fees, fines, and penalties from other collections. For example, offsetting collections may include fees, reimbursements for damages, gifts or donations of money to the government, and intragovernmental transactions with other government accounts. Analytical Perspectives explains that amounts collected by government agencies are recorded in two ways that broadly affect the formulation of the government-wide budget, but may not provide detail on specific agency collections: (1) governmental receipts, which are compared to total outlays in calculating the surplus or deficit; and (2) offsetting collections or offsetting receipts, which are deducted from gross outlays to calculate net outlay figures. These collections are presented together for budgeting purposes, but cannot be separated to specific fees, fines, or penalties. Therefore, it is not clear what percentage of the reported collections are fees, fines, and penalties as opposed to other collections. Treasury’s Combined Statement and OMB’s Public Budget Database do not identify offsetting collections, including collections of fees, fines, and penalties. Instead, the Combined Statement reports net outlays, which include any offsetting collections as deductions from outlays. Similarly, the Public Budget Database reports budget authority net of any offsetting collections. Treasury clearly describes this presentation of the data in the Combined Statement, but OMB does not in the Public Budget Database. In the “Explanation of Transactions and Basis of Figures” section of the Combined Statement, Treasury describes that outlays are stated net of collections representing reimbursements as authorized by law, which include offsetting collections. With the description provided in the Combined Statement, the user can understand that fees, fines, and penalties that are offsetting collections are not identifiable in the data. OMB reports receipts and budget authority—which include collections from fees, fines, and penalties—in separate spreadsheets of the Public Budget Database. Similar to outlays reported in Treasury’s Combined Statement, the Budget Authority spreadsheet reports the net budget authority of accounts after agencies have credited offsetting collections from fees, fines, penalties, or other collections. For example, the National Park Service reported net budget authority of $2.425 billion for the Operation of the National Park System account in fiscal year 2017 in both the Budget Appendix and the Public Budget Database, both of which present data compiled in OMB MAX. The Budget Appendix presents additional information, reporting offsetting collections that are at least partially derived from fees of $35 million, and gross budget authority of $2.46 billion, as shown in figure 4. The Public Budget Database, on the other hand, does not identify the amount of offsetting collections in the account or gross budget authority. OMB does not describe this presentation of the data in the Public Budget Database User’s Guide. As shown in table 1, data that are clear and accessible are presented with descriptions of the data. The User’s Guide directs users who may not be familiar with federal budget concepts to Analytical Perspectives and OMB Circular No. A-11. However, OMB does not describe, either in the User’s Guide or in the Budget Authority spreadsheet of the Public Budget Database, that this source reports budget authority net of offsetting collections, such as collections of fees, fines, and penalties. OMB staff said they do not describe the presentation because it is explained in Analytical Perspectives. However, the Public Budget Database is available for download separate from Analytical Perspectives, and the User’s Guide specific to the Public Budget Database includes other information describing the data in the spreadsheets. Describing the presentation of the data in the User’s Guide would help ensure that users of the Public Budget Database can correctly interpret the information and not underestimate agencies’ fee, fine, or penalty collections. No source of government-wide data consistently reports data elements related to fees, fines, and penalties that could help inform congressional oversight of agencies and programs, such as the amount collected annually, account balances, and whether the collection is a fee, fine, or penalty. See figure 5 for the extent to which data elements are included in the Budget Appendix, Public Budget Database, and Combined Statement. See appendix I for more detailed information on the data elements that are useful for congressional oversight. To a limited extent there are some cases where government-wide reports included data elements useful for the purpose of congressional oversight of fees, fines, and penalties. In some cases the Budget Appendix includes information on the fund type receiving collections and the extent to which the collections from fees may be appropriated to the agency collecting the fee. The Budget Appendix, for example, reports that collections for the Agricultural Quarantine Inspection (AQI) fee are recorded under “Special and Trust Fund Receipts,” as shown previously in figure 3. The user can also identify the appropriation of collections from the AQI fee under “Program and Financing, Budgetary resources,” as shown below in figure 6. As discussed previously, the other five fees the Animal and Plant Health Inspection Service(APHIS) collects are not individually identifiable in the Budget Appendix, but fall under offsetting collections. OMB and Treasury reports, and the systems that support them, are designed for budget and financial information and not for an inventory of fees, fines, and penalties that includes the data elements that Congress may use in oversight. OMB staff said the agency does not have a requirement to prioritize reporting fee, fine, and penalty data over more detailed information on other types of funds. OMB staff said while they generally agree that additional data elements would be useful for oversight, there are trade-offs between transparency and the burden of collecting and reporting additional information. According to OMB staff and officials from Treasury, the Congressional Research Service, and external organizations with expertise in federal budget issues and data transparency, there are two primary benefits to government-wide reporting of fee, fine, and penalty data: increased transparency and better information for congressional oversight and decision-making. Generally, all congressional staff we spoke with said making additional government-wide data on fees, fines, and penalties, such as those data elements described previously, without additional outreach to agencies, would be useful and increase transparency. While some congressional staff said such data elements are available through direct outreach to agencies, other congressional staff told us they could not always obtain the information they wanted. For example, staff from a congressional committee said that one of the most critical data elements for the purpose of congressional oversight is information on agency reporting of obligations and expenditures because, in their view, currently many agencies do not adequately report this information and some agencies do not report this information at all. These data would provide Congress a more complete picture of individual agencies’ activities and any potential overlap or duplication in multiple agencies’ activities. Congressional staff also said having government-wide data on collections of fees could inform efforts that are crosscutting in nature. For example, APHIS and Customs and Border Protection jointly implement the AQI program to help prevent the introduction of harmful agricultural pests and diseases into the United States, and AQI fee collections are divided between the two agencies. Publicly available data on government-wide collections of fines and penalties could inform the public on agency enforcement activities and compliance of regulated parties, such as those related to health or safety. Some officials from external organizations and congressional staff said that it would be useful to have government-wide data on individual fines and penalties levied by agencies. For example, the Environmental Protection Agency publishes an online database on its compliance and enforcement actions, Enforcement and Compliance History Online (ECHO). According to the website, the data available on ECHO allows the public to monitor environmental compliance in communities, corporations to monitor compliance across facilities they own, and investors to more easily factor environmental performance into decisions. Further, an official from an external organization with expertise in data transparency stated that, ideally, a user would be able to link fine and penalty data to spending data on USAspending.gov to increase transparency in instances where an organization receiving a federal grant or contract has also had a fine or penalty levied against it. Last, publicly available government-wide data on collections could inform the public, specifically payers of fees, fines, and penalties, and facilitate their participation in public comment opportunities. For example, OMB staff said government-wide data could provide the public with clear, transparent information across agencies on fee collections and allow the public to analyze differences in fee programs among agencies. Payers of fees may be able to make more informed comments on proposed changes to a fee program if they had information on how it relates to other fee programs across the federal government. Government-wide fee, fine, and penalty data would provide more information to facilitate congressional oversight. These data could help Congress identify trends in collections and significant changes that could be an indication of an agency’s performance. For example, staff of a Congressional committee stated that fine and penalty data can be used to examine enforcement actions on a particular issue or to identify potential trends over time as an indicator of stronger or weaker enforcement actions by an agency. Congress could also use these data to identify variations in enforcement action among geographic regions or as an indicator of the frequency of violations. Additionally, data on review and reporting requirements can inform congressional oversight of fees, fines, and penalties. We previously reported that regular comprehensive reviews of fees provide opportunities for agencies and Congress to make improvements to a fee’s design which, if left unaddressed, could contribute to inefficient use of government resources. For example, fee reviews could help ensure that fees are properly set to cover the total costs of those activities which are intended to be fully fee-funded. Fee reviews may also allow agencies and Congress to identify where similar activities are funded differently; for example, one by fees and one by appropriations. One such example is the export control system, in which the State Department charges fees for the export of items on the U.S. Munitions List, while the Commerce Department does not charge fees for those items exported under its jurisdiction. Government-wide reporting of fee, fine, and penalty data could also inform Congress’s funding decisions by providing a clearer picture of agencies’ total resources. Congressional staff stated that knowing the statutory authority to collect and obligate funding from fees, fines, and penalties—along with any appropriation an agency may have received from an annual appropriation act, which are currently available to congressional staff—would provide a more complete picture of an agency’s total annual funding, including the portion attributed to the taxpayer and the portion attributed to payers of specific fees, fines, and penalties. For example, staff from congressional committees we spoke with said it would be useful to have data to show programs that receive appropriations from both offsetting collections and appropriations not derived from offsetting collections to inform decisions on how the program is funded. Congressional staff also said this would provide more opportunities to track the flow of money in and out of the government. Overall funding decisions may be affected if an agency has an increase in fee collections, for example. Congressional committee staff also said it would be useful to have government-wide data on specific fees, fines, and penalties that are offsetting collections because these collections are available for obligation without going through the annual appropriations process. Our prior work has shown that it is important to consider how the agencies and entities with this authority facilitate oversight to ensure effective management, transparency, and public accountability. Some committee staff said they can request data directly from agencies when they need more disaggregated information on fees, fines, and penalties, and reported different levels of responsiveness from agencies. Publicly available data could reduce potentially overlapping or duplicative requests from staff to agencies. According to officials from agencies and external organizations, there are potential challenges to defining the government-wide data standard or definition of fee, fine, and penalty programs by which agencies could report. Because there is no statutory requirement for government-wide reporting of fee, fine, and penalty data, agencies collect and use these data for their own purposes, and are not using government-wide data elements and standards that are consistent and comparable between agencies. First, an agency may define a fee program as a single fee or a set of related fees. For example, the U.S. Citizenship and Immigration Services charges more than 40 immigration and naturalization fees to applicants and petitioners that could be grouped together as related fees or split into up to 40 different fee programs. Second, officials from external organizations said there are also challenges in defining data standards the level of detail to report. For example, an official from an external organization said, for large financial penalties, it may be useful for oversight for the data to identify each instance of the penalty, including the fined party. However, that level of detail could raise privacy sensitivities. For example, reporting every individual that paid an entrance fee at a national park could present privacy concerns. Finally, for elements that are useful for congressional oversight, one challenge could be the timing of when funds are collected compared to when they are available for obligation. The amount of funds collected in a year does not necessarily equal the amount available to the agency that year. For example, collections of Harbor Maintenance Fees are deposited to the Harbor Maintenance Trust Fund and are not available for obligation without appropriation. Funds collected in one year may not be necessarily appropriated and obligated until a subsequent year. Our prior work on the Digital Accountability and Transparency Act of 2014 (DATA Act) implementation underscores the importance of standardized and clearly defined data elements. We found inconsistent and potentially confusing instructions from OMB regarding the Primary Place of Performance data elements that resulted in inconsistent reporting among agencies. The standard established by OMB and Treasury defines Primary Place of Performance as “where the predominant performance of the award will be accomplished” while other instructions define it as “the location of the principal plant or place of business where the items will be produced, supplied from stock, or where the service will be performed.” We found some agencies used the first definition and some used the second. In one case, the Departments of Labor and Health and Human Services issued contracts to the same company for similar office printers, but one reported the primary place of performance as California, the location of the office where the printers were delivered and used. The other agency reported the primary place of performance as New Jersey, the location of the company that supplied the printers. As a result, the data were not comparable between agencies or across the federal government, limiting the usefulness for congressional oversight. We previously recommended that OMB and Treasury provide additional instruction to agencies on how to report Primary Place of Performance to ensure the definitions are clear and the data standards are implemented consistently by agencies. Staff from one congressional committee cautioned that attempts to present information on budget authorities for fees, fines, and penalties in a simple and accessible database create an unacceptable risk of confusion and legislative error. The staff said an accurate description of the nature of the spending–-including whether there is authority to obligate without further appropriation–-would be labor intensive and require significant legal analysis and research. Government-wide reporting of fees, fines, and penalties could increase transparency and facilitate oversight and decision-making, but would require time and resources to develop given that there is currently no government-wide system or requirements for agencies to collect and report detailed fee, fine, and penalty data. The level of federal investment would vary depending on factors, such as the number of data elements included and the level of detail reported. Developing a comprehensive and accessible data source would provide greater benefits, but would likely be resource intensive. We have reported on other federal transparency efforts that could provide strategies for reporting government-wide fee, fine, and penalty data. For example, to create a clear and accessible government-wide data source that includes the data elements we identified that would be useful for congressional oversight, Treasury officials said the process would be similar to the implementation of the DATA Act for spending data. To implement the DATA Act, OMB and Treasury led an intensive effort starting in May 2014 through May 2017 when the first government-wide data were reported under the DATA Act’s new standards. Data Standards: OMB, in coordination with Treasury, established 57 standardized data element definitions and approximately 400 associated sub-elements for reporting federal spending information. OMB and Treasury created opportunities for non-federal stakeholders to provide input into the development of data standards, including publishing a Federal Register notice seeking public comment on the establishment of financial data standards; presenting periodic updates on the status of DATA Act implementation to federal and non-federal stakeholders at meetings and conferences; soliciting public comment on data standards using an online collaboration space; and collaborating with federal agencies on the development of data standards and the technical schema through MAX.gov, an OMB- supported website. Technical Process for Reporting: Treasury developed the initial DATA Act Information Model Schema, which provided information on how to standardize the way financial assistance awards, contracts, and other financial and nonfinancial data would be collected and reported under the DATA Act. System to Collect and Validate Data: Treasury developed a system that collects and validates agency data (the DATA Act Broker), which operationalizes the reporting framework laid out in the schema. In addition, Treasury employed online software development tools to provide responses to stakeholder questions and comments related to the development and revision of the broker. Public Reporting: Treasury created and updated the new USAspending.gov website to display certified agency data submitted under the DATA Act. Agencies also took steps to prepare to report spending data. They reviewed data elements OMB identified, participated in standardizing the definitions, performed an inventory of their existing data and associated business processes, and updated their systems and processes to report data to Treasury. OMB and Treasury issued policy directions to help agencies meet their reporting requirements under the act. They also conducted a series of meetings with participating agencies to obtain information on any challenges that could impede effective implementation and assess agencies’ readiness to report required spending data. Although the steps to developing comprehensive, detailed reporting on government-wide collections of fees, fines, and penalties might be similar to the DATA Act efforts, the dollar amounts of collections would be smaller than those of federal spending. In fiscal year 2017, federal spending was $3.98 trillion compared to about $350 billion in collections of fees, fines, penalties, and forfeitures reported by OMB. On the other hand, defining data elements and standards for fee, fine, and penalty data could be more resource intensive than developing data standards for DATA Act implementation because the DATA Act built on earlier reporting requirements. The DATA Act amended the Federal Funding Accountability and Transparency Act of 2006 (FFATA), which required OMB to establish the website USAspending.gov to report data on federal awards, including contracts, grants, and loans. The DATA Act required OMB and Treasury to standardize data required to be reported by FFATA. For fee, fine, and penalty data, OMB and Treasury would be starting without the benefit of some data elements already defined. Further, we have previously reported that effective implementation of provisions to make federal data publicly available, including the DATA Act and GPRAMA’s program inventory, especially the ability to crosswalk spending data to individual programs, could provide vital information to assist federal decision makers in addressing significant challenges the government faces. Incorporating a small number of data elements that Congress identifies as most useful for oversight into ongoing government-wide agency reporting efforts could incrementally improve transparency and information for oversight and decision-making, with fewer resources. For example, Congress required agencies to add selected data elements to their annual financial reports on civil monetary penalties. Specifically, the Federal Civil Penalties Adjustment Act Improvements Act of 2015 requires agencies to include information about the civil monetary penalties within the agencies’ jurisdiction, including catch-up inflation adjustment of the civil monetary penalty amounts, in annual agency financial reports or performance and accountability reports. As shown in figure 7, to facilitate agencies’ reporting, OMB provided a table to define the data elements required in the act in its annual instructions, OMB Circular No. A-136, Financial Reporting Requirements. Agencies started reporting these data in their agency financial reports in fiscal year 2016. In July 2018, we reported that 40 of 45 required agencies reported in their fiscal year 2017 agency financial report information on civil monetary penalties as directed by the OMB instructions. Similarly, if Congress sought additional fine and penalty data elements, such as amounts collected and authority to spend collections, OMB could expand this table in Circular No. A-136 to include those data elements. Circular No. A-136 also outlines that agencies may include the results of biennial reviews of fees and other collections in their agency financial reports. OMB could also update this portion of the circular to require agencies to report specific data elements that are useful for oversight, such as review and reporting requirements. While this information reported in agency financial reports would be disaggregated in portable document format, or PDF, documents, it would provide some transparency on agencies’ activities that Congress could use to prioritize its oversight efforts. In another example, if OMB implements the federal program inventory as required by GPRAMA, it could include a data element on whether a program has a fee, fine, or penalty. We previously reported that the principles and practices of information architecture—a discipline focused on organizing and structuring information—offer an approach for developing such an inventory to support a variety of uses, including increased transparency for federal programs. A program inventory creates the potential to aggregate, disaggregate, sort, and filter information across multiple program facets. For example, from a user’s perspective, a program could be tagged to highlight whether it includes activities to collect fees, fines, or penalties. Then, a user interested in this data facet could select a tag (e.g., fees) that could generate a list of programs that also have fees, fines, or penalties. While the program inventory is broader than agency collections of fees, fines, and penalties and would include programmatic descriptions, it would increase transparency by enabling Congress and the public to identify and isolate all programs that include, as a source of funding or a key data element, a fee, fine, or penalty to inform oversight and target additional requests for information to agencies. Federal agencies are authorized to collect hundreds of billions of dollars from fees, fines, and penalties each year that fund a wide variety of programs, but Congress and the American public do not have government-wide data on these collections that would provide increased transparency and facilitate oversight. OMB’s MAX database contains some disaggregated data labeled as fees, fines, and penalties, but OMB does not make these data publicly available. Without more disaggregated, government-wide, accessible data on collections of fees, fines, and penalties, such as by agency, Congress and the public do not have a complete and accurate picture of federal finances, the sources of federal funds, and the resources available to fund federal programs. In addition, improving the data OMB currently reports related to fees, fines, and penalties could help the user better understand the data and the potential limitations. First, until OMB describes how it identifies accounts with fees including that the government-wide totals of fees it reports in Analytical Perspectives may include collections that are not fees and exclude some fee collections, some users will likely be unaware that reported totals could be over- or under-estimates. Second, without OMB instruction to agencies to regularly review and update implementation of the criteria for designating accounts that contain fees, accounts could be designated incorrectly if the makeup of the collections changes. Therefore, OMB cannot provide reasonable assurance that the total amount of fees it reports is accurate. Third, until OMB describes in the User’s Guide that its Public Budget Database reports budget authority net of offsetting collections, including collections of fees, fines, and penalties, users could misinterpret the information and underestimate collections in some cases. OMB and Treasury do not collect many of the data elements on fees, fines, and penalties that would be useful for congressional oversight, such as review and reporting requirements. There are trade-offs between the potential costs and the potential benefits. While reporting government- wide data on specific fees, fines, and penalties would improve transparency and information for decision-making, more data elements would require greater investment of resources from OMB, Treasury, and agencies. Any new reporting of fee, fine, and penalty data would be most useful if it is designed to be compatible with other transparency efforts— the DATA Act reporting and the federal program inventory. Regardless of the approach taken, linkage of data on fees, fines, and penalties with other government-wide data reporting, such as USASpending.gov, would enhance transparency and facilitate congressional oversight. We are making the following four recommendations to OMB: The Director of OMB should make available more disaggregated data on fees, fines, and penalties that it maintains in its OMB MAX database. For example, OMB could report data on fee collections by agency in Analytical Perspectives. (Recommendation 1) The Director of OMB should present, in Analytical Perspectives, the data limitations related to the government-wide fee totals by describing the 50- percent criteria OMB uses to identify accounts with fees or by directing users to the relevant sections of OMB Circular No. A-11. (Recommendation 2) The Director of OMB should instruct agencies to regularly review the application of the user fee designation in the OMB MAX data and update the designation, as needed, to meet the criteria in OMB Circular No. A-11. (Recommendation 3) The Director of OMB should describe in the Public Budget Database User’s Guide that budget authority is reported net of any offsetting collections, such as collections of fees, fines, and penalties. (Recommendation 4) We provided a draft of this report to Treasury and OMB for review and comment on December 10, 2018. Treasury informed us that they had no comments. As of March 4, 2019, OMB did not provide comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of the Treasury, and the Director of the Office of Management and Budget. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or nguyentt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. This report examines: (1) the extent to which government-wide data on collections of fees, fines, and penalties are publicly available and useful for the purpose of congressional oversight, and (2) the benefits and challenges to government-wide reporting of specific fees, fines, and penalties including data elements that facilitate congressional oversight. To assess the extent and usefulness of publicly available data, we developed criteria for the availability and usefulness for the purpose of congressional oversight of data on collections of fees, fines, and penalties reported in government-wide sources (see table 3). The first three criteria—clear and accessible presentation, complete, and accurate—address the availability of the data and the final criterion, useful for the purpose of congressional oversight, addresses content of the data specific to congressional oversight needs. These criteria are based on: Standards for Internal Control in the Federal Government related to Digital Accountability and Transparency Act of 2014 (DATA Act) government-wide instruction from the Office of Management and Budget (OMB) on public access to data and open government, our prior work on user fees, fines, and penalties, and input from staff of congressional committees on appropriations, budget, and oversight. Using a standard list of semistructured interview questions, we interviewed congressional staff that were available to meet with us on or before November 1, 2018. We shared the criteria with OMB staff and Department of the Treasury (Treasury) officials, and they agreed the criteria are relevant and reasonable. To identify publicly available government-wide sources of data with information on collections of fees, fines, and penalties, we reviewed our prior work on user fees, fines, penalties, and permanent funding authorities, conducted general background research including reviewing Congressional Budget Office (CBO) and Congressional Research Service (CRS) reports, and interviewed staff from OMB, and officials from Treasury, CBO, and CRS. We identified the Budget of the U.S. Government—including Analytical Perspectives, the Budget Appendix, and the Public Budget Database—produced annually by OMB; the Financial Report of the U.S. Government (Financial Report), the Daily Treasury Statement, the Monthly Treasury Statement, the Combined Statement of Receipts, Outlays, and Balances, and USAspending.gov produced by Treasury; and CBO products, such as its budget projections and historical budget tables as containing government-wide federal budget or financial data. Of the sources we identified, we included Analytical Perspectives, the Budget Appendix, the Public Budget Database, and the Combined Statement of Receipts, Outlays, and Balances in our study because they contain government-wide information on collections of fees, fines, and penalties. We excluded the Treasury’s Daily Treasury Statement, Monthly Treasury Statement, Financial Report, and USAspending.gov from this review because we determined that the information presented did not differentiate between types of collections in a way that would allow us to separately identify fees, fines, and penalties. For example, Treasury’s Financial Report reports government-wide information in categories that are broader than fees, fines, and penalties. Specifically, it reports “earned revenue,” which includes collections of interest payments for federal loan programs. Such collections are not fees. The Financial Report also reports fines and penalties combined with interest and other revenues. We also reviewed and excluded CBO products because the data reported are not designed to differentiate between types of collections. We assessed Analytical Perspectives, the Budget Appendix, the Public Budget Database, and the Combined Statement of Receipts, Outlays, and Balances using the criteria we developed for clear and accessible presentation, accurate, and complete. We also assessed the Budget Appendix, the Public Budget Database, and the Combined Statement of Receipts, Outlays, and Balances using the criteria for useful for the purpose of congressional oversight. Further, we assessed relevant portions of OMB and Treasury instructions using Standards for Internal Control in the Federal Government. We also used OMB and Treasury data to identify and report government- wide totals for fees, fines, and penalties to the extent that they were reported. To assess the reliability of OMB’s MAX database data related to the collections of fees, fines, and penalties, we reviewed related documentation, interviewed knowledgeable agency officials, and conducted electronic data testing. To assess Treasury’s Bureau of the Fiscal Service data related to the collections of fees, fines, and penalties, we reviewed related documentation and interviewed knowledgeable agency officials. In both cases, we found the data to be reliable for our purposes. We did not examine whether agencies accurately report collections as fees, fines, and penalties to OMB and Treasury. In addition, we identified and reviewed other sources of data on fees, fines, and penalties that are specific to federal agencies, including annual financial reports and agency websites. We did not apply the criteria we developed for available and useful for the purpose of congressional oversight to these sources because they contain data for an individual agency rather than government-wide data. To determine the benefits and challenges to government-wide reporting of fees, fines, and penalties, we interviewed staff of congressional committees on appropriations, budget, and oversight, OMB staff and Treasury officials, staff of CBO, and external organizations, including the Committee for a Responsible Federal Budget, the Data Coalition, the Data Foundation, the Project on Government Oversight, the Peter G. Peterson Foundation, and the Sunlight Foundation, on the potential benefits and challenges of government-wide reporting of fees, fines, and penalties. In addition, we reviewed our prior work on the DATA Act, federal program inventories, and federal fees, to identify and assess issues to consider in government-wide reporting. We conducted this performance audit from November 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Susan E. Murphy (Assistant Director), Barbara Lancaster (Analyst in Charge), Michael Bechetti, Jacqueline Chapin, Colleen Corcoran, Ann Marie Cortez, Lorraine Ettaro, John Mingus, and Rachel Stoiko made key contributions to this report.", "summary": "Congress has authorized federal agencies to collect hundreds of billions of dollars annually in fees, fines, and penalties. These collections can fund a variety of programs, including programs related to national security, and the protection of natural resources. Data on collections are important for congressional oversight and to provide transparency in agencies' use of federal resources. GAO was asked to review the availability of government-wide data on fees, fines, and penalties. This report examines (1) the extent to which data on collections of fees, fines, and penalties are publically available and useful for the purpose of congressional oversight; and (2) the benefits and challenges to government-wide reporting of fees, fines, and penalties. GAO assessed government-wide fee, fine, and penalty data against criteria for availability and usefulness based on multiple sources, including prior GAO work and input from staff of selected congressional committees. GAO interviewed OMB staff, Treasury officials, and representatives of organizations with expertise in federal budget issues and reviewed prior GAO work to identify benefits and challenges of reporting these data. There are no comprehensive, government-wide data at the level of detail that identifies specific fees, fines, or penalties. The Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) report data that include these collections at the budget account level, which generally covers a set of agency activities or programs. OMB and Treasury also report some summary data for budgeting and financial management purposes. In the Budget of the U.S. Government , for example, OMB data showed government-wide fees totaled just over $335 billion in fiscal year 2017. These reports, however, are not designed to inventory or analyze fee, fine, or penalty collections and have significant limitations for that purpose. Although OMB collects more disaggregated data on fees, fines, and penalties, it does not make the data publicly available. OMB uses the disaggregated data in its OMB MAX database—such as the agency and account—to compile reported totals, such as the government-wide fees total in the Budget of the U.S. Government . Until OMB makes more disaggregated data publicly available, Congress has limited information on collections by agency to inform oversight and decision-making. OMB's government-wide total of fees includes collections that are not fees and excludes some fee collections. The total includes all collections for accounts in which fees make up at least half of the account's collections and excludes all others. OMB does not direct agencies to regularly review and update the accounts included in the total. Therefore, if accounts' makeups change such that fee collections drop below, or rise above, the 50 percent threshold, accounts may have incorrect fee designations and the total may be inaccurate. Further, OMB does not disclose the limitation that the total may exclude some fees and include other collections that are not fees. As a result, some users of the data are likely unaware of the potential for the total fees to be overestimated or underestimated. Further, no source of government-wide data consistently reports data elements on fees, fines, and penalties that could help inform congressional oversight. Generally, congressional staff told us that additional data, such as amounts of specific penalties, would increase transparency and facilitate oversight. These data could help Congress identify trends in collections and significant changes that could be an indication of an agency's performance. While reporting government-wide fee, fine, and penalty data provides benefits, there are trade-offs in terms of the time and federal resources it would take to develop and implement a process for agencies to report these data. The level of federal investment would vary depending on factors, such as the number of data elements included and the level of detail reported. Developing a comprehensive and accessible data source would provide greater benefits, but would likely be resource intensive. Alternatively, incorporating a small number of data elements that Congress identifies as most useful for oversight into ongoing government-wide reporting efforts could incrementally improve transparency and information for oversight and decision-making, with fewer resources. GAO is making four recommendations to enhance OMB reporting on fees, fines, and penalties, including making disaggregated data publically available, updating instructions to federal agencies to review accounts designated as containing fees, and disclosing limitations in data reported. OMB did not provide comments.", "document_type": "gao"}
{"report": "Viewed broadly, IDT refund fraud is comprised of two crimes: (1) stealing or compromising PII and (2) using stolen (or otherwise compromised) PII to file a fraudulent tax return and collect a fraudulent refund. Figure 1 presents an example of how fraudsters may use stolen PII and other information, real or fictitious (e.g., sources and amounts of income), to complete and file a fraudulent tax return and receive a refund. In this example, a taxpayer may alert IRS of IDT refund fraud. Alternatively, IRS can detect IDT refund fraud through its automated filters that search for specific characteristics as well as through other reviews of taxpayer returns. In May 1998, Presidential Decision Directive 63 introduced and promulgated the concept of ISACs, which help critical infrastructure owners and operators protect facilities, personnel, and customers from cyber and physical security threats and other hazards. ISACs typically collect, analyze, and disseminate actionable threat information to their members and provide members with tools to mitigate risks and enhance resiliency. ISACs have been used in other sectors such as energy, financial services, and surface transportation to facilitate coordination between public and private entities. We have reported that ISACs have developed diverse management structures and operations to meet the requirements of their respective critical infrastructure sectors. Likewise, we also have assessed federal support to fusion centers, information sharing platforms between the government and the private sector that prevent and respond to criminal and terrorist activity. ISAC characteristics differ across various sectors; however, we have reported common challenges—including information sharing—that need to be addressed for an ISAC to be successful. Barriers to information sharing may stem from practical considerations because the benefits of sharing information are often difficult to discern, while the risks and costs of sharing are direct and foreseeable. As a result, we have noted that it is important to lower the practical risks of sharing information through both technical means and policies, and to develop internal systems that are capable of supporting operational requirements without interfering with core operations. IRS’s Information Sharing and Analysis Center Mission The mission is to provide a secure platform via a sustainable public/private partnership to facilitate information sharing, consistent with applicable law, and analytics necessary to detect, prevent, and deter activities related to stolen identity refund fraud. IRS’s ISAC—the Identity Theft Tax Refund Fraud-Information Sharing and Analysis Center— is intended to improve collaboration and information sharing among IRS, states, and industry partners and began as a pilot in January 2017. (See sidebar.) Two entities operate under the ISAC umbrella. One entity is the ISAC Partnership, a collaborative organization run jointly by IRS, states, and industry partners. The other entity is the ISAC online platform, which is controlled by IRS and includes an early warning alarm system that allows states and industry partners to share information related to IDT refund fraud and schemes more quickly to better defend against fraud. Outside of the ISAC, four other efforts have supported information sharing about potential IDT refund fraud for years. Suspicious Filer Exchange: The Federation of Tax Administrators (FTA) operates an online platform for states to share information— including record-level data—among themselves about suspected fraud. Industry Leads Program: This IRS-operated program requires tax preparation companies to perform post-filing analysis and provide, on a recurring and timely basis, information to IRS on IDT refund fraud patterns and indices as a condition of electronically filing returns. IRS then provides this information to states, which are to use the information to bolster their fraud detection and prevention efforts. External Leads Program: This IRS-operated program involves third parties such as banks or other financial institutions providing information to IRS about questionable refunds. If the questionable refund is confirmed as fraudulent, IRS requests that the financial institution return the refund. Opt-In Program: IRS operates this program that allows financial institutions to electronically reject suspicious refunds and return them to IRS and indicate why the institution is rejecting the refunds. The RRT, which began in the 2016 filing season, coordinates responses to IDT refund fraud incidents that IRS, states, or industry partners believe pose a significant and immediate threat to taxpayers or the tax system. The Information Sharing work group is responsible for managing the RRT and is led by one representative each from IRS, states, and industry. The main component of the RRT process is a call among relevant IRS, state, and industry partners to coordinate a response to the incident. IRS’s goal is to convene the call within 24 to 72 hours after an incident is discovered. The RRT process describes the next steps for the first 3 days after an incident is identified. The RRT process differs depending on whether the incident is reported by IRS, a state, or an industry partner, based on the laws governing information sharing discussed later in this report. For example, if a state identifies an incident, the RRT process indicates that the state should share that information—including Social Security numbers as appropriate—with IRS and other states on the next business day and with industry in the next 2 to 3 days. If IRS or an industry partner identifies an incident, the RRT process indicates that IRS or the industry partner should share relevant information in the next 2 to 3 days. In the 2016 filing season, the RRT was deployed for six incidents. For example, as we reported in January 2017, IRS announced in February 2016 that cybercriminals had stolen more than 100,000 e-file Personal Identification Numbers (PIN) from an online tool. Stolen e-file PINs could be used to file fraudulent federal tax returns. IRS implemented the ISAC in 2017 to facilitate information sharing among IRS, state, and industry partners—subject to disclosure prohibitions—by launching an online platform, establishing a governance structure, and recruiting members. IRS and state officials and industry representatives attributed increased trust and improved relationships to IRS’s efforts in recent years. Additionally, IRS coordinated with state and industry partners to establish the RRT in 2016, which has been initiated once thus far in 2017. The ISAC online platform provides two capabilities—alerts and record- level data—which facilitate information sharing. Alerts: This capability consists of alerts on potential IDT refund fraud that have been identified by IRS, states, or an industry partner and shared on the ISAC online platform. Alerts are available to all states and Security Summit partners who sign a terms of use agreement. Alerts include detailed information about identified schemes, indicators of suspicious activity, and types of accounts targeted, among other things. Alerts may also include anecdotal evidence from ISAC members who have already been targeted by this scheme. Record-level data and analysis: This capability consists of several tools to facilitate IDT refund fraud prevention and detection, including a secure data transfer tool that members can use to input IDT refund fraud data and record-level data. Record-level data may include PII or other details about suspected fraud. States and industry partners share record-level data with the ISAC. However, according to IRS officials, IRS does not due to legal restrictions. This part of the ISAC also contains, among other things, analytic reports which identify, for example, Internet Protocol (IP) addresses associated with potential fraud. This space is only accessible to full ISAC members. Information that is shared and available to be reviewed by various ISAC stakeholders is controlled by disclosure laws within the Internal Revenue Code. According to IRS officials, IRS does not contribute Federal Tax Information to the ISAC because those data are protected from disclosure under section 6103 of the Internal Revenue Code, which generally prohibits IRS from disclosing tax returns or return information. Similarly, IRS does not control or have ownership of any record-level data on the ISAC. Instead, IRS receives record-level data directly from states and industry partners through other channels such as the External Leads Program. IRS can, however, still contribute alerts that do not include record-level data. Moreover, unless exempted, section 7216 of the Internal Revenue Code prohibits disclosure or use of taxpayer information by preparers of returns and imposes criminal penalties on knowing or reckless disclosure. Disclosure of information from one preparer to another preparer or disclosure to federal, state, or local officials to inform them of activities that may constitute a crime is permitted by Department of the Treasury (Treasury) regulation. As seen in figure 2, tax preparation companies— covered under section 7216 and referred to as industry 7216—have full access to all of the information provided to the ISAC. However, financial institutions—not covered under section 7216 and referred to as industry non-7216—are not able to view record-level data submitted by, or comingled with data from, tax preparation companies. Three of the 17 industry members of the ISAC are financial institutions—non-7216 entities—and therefore have this more limited view. IRS contracted with a company to facilitate information sharing among partners. The contractor developed and manages the online platform and also analyzes data on IDT fraud, which it makes available to IRS’s ISAC members. In addition, IRS developed a governance structure for the ISAC. Figure 3 shows these and other key events. Three of IRS’s goals for the ISAC when it launched in 2017 were to (1) launch the online platform, (2) establish the governance structure, and (3) recruit new members. In terms of its first goal, as noted, the online platform became operational January 23, 2017. IRS’s contractor provided ISAC members with training on how to use the online platform and how to use the data visualization tools. (See figure 4.) The data visualization tools include charts and figures with data on trends in refund fraud. The tools are available to members of the ISAC with the exception of financial institutions that cannot view data visualization tools compiled with tax preparation company data (as noted in figure 2 earlier). The ISAC also established a community of practice (COP) that brings together fraud analysts from IRS, states, and industry partners to share leading practices. The intent is to encourage dialogue among staff involved in implementing fraud prevention strategies. In our focus groups, an industry official said that the COP has been a positive experience for industry, but most state officials said they were not familiar with the COP. In terms of establishing a governance structure, the ISAC Partnership is governed by the ISAC Senior Executive Board (Board) that consists of 15 members, with 5 representatives each from IRS, states, and industry. The Board is principally responsible for crafting mission or vision statements for the ISAC Partnership, recommending ISAC operating procedures,; and nominating new ISAC Platform participants and recommending the removal of such participants, among other responsibilities. An IRS executive official must approve any recommendation by the Board that affects the online platform. The partnership also includes three subgroups: metrics, outreach, and governance. IRS also made progress on its goal of recruiting new participants. As of November 2017, the ISAC had 24 full state members, 7 alerts-only state members, 14 tax preparation company members, and 3 financial institution members. An additional 7 states have membership pending. In total, 38 states are members (either full members or those receiving only alerts) or have membership pending. Goals moving into the 2018 filing season include increasing the participation of current members, exploring additional analytical capabilities, and establishing and refining performance metrics. In our focus groups, industry representatives said that they see ISAC collaboration as critical to managing IDT threats. The ISAC is intended to go beyond other efforts, most notably in that it brings IRS, states, and industry together in equal partnership and allows for communication among all stakeholders. IRS reports over 1.8 million leads submitted to the ISAC from 14 partners. However, the number of leads does not reflect their quality. Industry representatives we spoke with in our focus groups said that they would like feedback from IRS on the usefulness of industry leads so that they can adjust their fraud filters and provide more accurate leads. These comments about the usefulness and quality of industry leads are consistent with what our prior work has found on the value of external leads. Specifically, in 2014, we recommended that IRS take the following actions on its External Leads Program: 1. provide aggregated information on both the success of external leads in identifying suspicious returns, and also emerging trends (pursuant to section 6103 restrictions), and 2. develop a set of metrics to track external leads by the submitting third party. IRS has taken steps to address these recommendations, including developing timeliness metrics for managing leads and holding six feedback sessions with financial institutions participating in the External Leads Program. As of November 2017, we are following up with industry members to determine if they consider the feedback accurate, timely, and actionable. Without such feedback, the more than 600 external parties participating in the External Leads Program do not know if the leads they provide to IRS are useful and they may not be able to assess their success in identifying IDT refund fraud or improve their detection tools. In the focus groups, both state officials and industry representatives said the relationship among IRS, states, and industry has improved as a result of increased collaboration over the last several years. As of November 2017, the ISAC had 48 members. Further, IRS officials said they think trust and the relationship between all parties has and is continuing to improve. Likewise, in the focus groups, industry officials cited benefits of improved coordination from the Security Summit. For example, one industry representative cited IRS’s pushing out communications faster because of the Security Summit, while another noted that participation in the summit has made IRS officials more accessible. However, in focus groups, a few state officials noted that because IRS is compartmentalized, they have found their interactions with IRS to be inconsistent. For example, these state officials reported some IRS units are more responsive than others and that information sometimes is not shared among IRS units. As part of establishing the RRT, IRS outlined the responsibilities of IRS, states, and industry to respond to significant IDT refund fraud incidents. As noted earlier in this report, the RRT was activated six times in 2016. IRS initiated the RRT once in the 2017 filing season for a data breach related to the Department of Education. In March 2017, IRS and the Department of Education responded to security concerns and removed access on https://www.fafsa.gov and https://www.StudentLoans.gov to IRS’s Data Retrieval Tool—the online process through which student financial aid applicants obtain their family’s tax information. IRS suspects that fraudsters used personal information obtained elsewhere to access the Data Retrieval Tool in an attempt to access tax information, particularly adjusted gross income. As of April 6, 2017, IRS reported that fewer than 8,000 fraudulent returns from this incident had been filed, processed, and issued refunds, but IRS estimated that about 100,000 taxpayers may have been affected. The Data Retrieval Tool was taken offline while IRS and the Department of Education made updates and will not be available for completing applications for the current school year (2017-2018). As of November 2017, taxpayers could use the Data Retrieval Tool for completing financial aid applications for the next school year (2018-2019). While IRS initiated the RRT for this incident, an industry official said that the information provided in the press release was more detailed than what was previously provided to industry partners via the RRT. The RRT is administered separately from the ISAC. According to IRS officials, they intend to eventually integrate components of the RRT into the ISAC to further streamline information sharing. Specifically, IRS envisions the ISAC serving as the primary mechanism for states and industry partners to report and escalate IDT refund fraud incidents by facilitating communication among participants. IRS does not have a timeline for this integration. In 2016, we identified five leading practices for designing a well- developed and documented pilot program: (1): ensuring stakeholder communication, (2) establishing objectives, (3) ensuring scalability, (4) having an assessment methodology, and (5) developing a data-analysis plan. These practices enhance the quality, credibility, and usefulness of evaluations and help ensure that time and resources are used effectively. Each leading practice shares common elements but serves a unique purpose and builds on the other. For example, four of the five leading practices recommend either establishing criteria for assessing whether the pilot’s objectives have been met or developing a data plan necessary for effectively evaluating the pilot. While the ISAC pilot is in nascent stages, IRS has taken steps that partially align with key aspects of all five leading practices. (See figure 5.) Ensure appropriate two-way stakeholder communication: In 2016, we reported that it is critical that agencies identify who the relevant stakeholders are and communicate early and often to address their concerns and convey the initiative’s overarching benefits. IRS’s efforts mostly aligned with this practice because IRS included stakeholder input during the design, implementation, and preliminary stages of the data-gathering and assessment phases of the pilot. IRS, through the ISAC working group and the Board, communicated with stakeholders before, during, and after forming the ISAC. Such communication helped ensure that stakeholders were engaged and that their views were understood and incorporated. For example, in 2016, IRS’s contractor conducted a preliminary assessment and interviews to compile and present stakeholder views and aspirations for the ISAC. This process included meeting with state officials and industry partners about ISAC preferences, suggestions, concerns, and risks. According to the IRS ISAC Executive Official, ahead of the ISAC launch, IRS established several mechanisms to ensure ongoing stakeholder input, including coordinating with both state and industry trade organizations, including the FTA and the American Coalition of Taxpayer Rights, to gain their endorsement. IRS and its contractor also solicited feedback at conferences, such as FTA’s annual conferences. During a 3-day fraud simulation exercise hosted by IRS’s contractor, participants discussed partner actions, needs, and processes to inform the ISAC’s development. Additionally, IRS conducted a stakeholder analysis which documented stakeholders’ engagement in the ISAC Partnership. This is intended to inform the development of the ISAC communications plan. Finally, the ISAC’s Partnership governance structure, which includes representatives from states and industry, helps facilitate communication among stakeholders. Despite these efforts, IRS’s message about the ISAC’s benefits has not fully reached states. In our focus groups, a few state officials reported they are unclear about the benefit of the ISAC. To help improve communication, the Board invited relevant trade organizations to participate in its July Board meetings. IRS officials reported that the message about the benefits of the ISAC may not have initially reached states because it took time to build trust among state and industry partners. FTA confirmed that states may not have understood the benefits of working with IRS and industry partners and were wary of joining the ISAC. Further, IRS officials said that some trade organizations that endorsed the ISAC had differing views about the organization of the ISAC—such as who should be invited to participate—which made it challenging for IRS to effectively garner support. A few states reported in our focus groups that FTA’s endorsement was important to their decision to join the ISAC. Until IRS further communicates the ISAC’s benefit to current and potential stakeholders, IRS and the ISAC Board may face challenges in reaching their goal of increasing robust participation in the ISAC. We discuss how IRS can improve its outreach to state and industry partners later in this report. Establish well-defined, appropriate, clear, and measureable objectives: In our 2016 report, we found that well-formulated objectives help ensure that appropriate evaluation data can be collected from the outset of the pilot so that data are available for measuring performance against clear goals and standards. Broad objectives should be translated into specific researchable questions that articulate what will be assessed. Additionally, we have reported that agencies should establish measurable goals for determining when the pilot progresses from one stage to the next to improve their ability to evaluate the success of the pilot. IRS’s efforts mostly aligned with this leading practice. For example the ISAC’s charter sets forth objectives, which include (1) exchanging information among participants, (2) providing a forum for real-time responses to fraud schemes, and (3) promoting strategies to detect and prevent fraud. In February 2017, the Board established the metrics subgroup to assess the performance of the ISAC and develop metrics. The Board noted that metrics are essential for showing the value added by the ISAC compared to other efforts. The ISAC Roadmap, a planning document that outlines three developmental phases over 4 years, shows that IRS and the Board have considered an implementation plan, as well as how the online platform might evolve in the areas of program operations, infrastructure, analytics, and partner engagement. Additionally, IRS’s contractor anticipated and developed risk mitigation strategies to handle scenarios that might arise before, during, and after the ISAC’s launch and interfere with reaching the pilot’s objectives. Finally, ahead of ISAC’s launch, the contractor refined key operational attributes to help define ISAC’s full desired capabilities. However, IRS has not translated its objectives into specific, researchable questions that articulate what will be assessed. For example, one of the ISAC’s objectives is to facilitate the exchange of information among members. While IRS closely monitors members’ use of the ISAC, IRS does not have performance goals, such as desired participation levels, or a plan to assess progress towards those goals, such as members’ usage of ISAC data and tools. These are needed to ensure that appropriate evaluation data are collected during the pilot. Furthermore, IRS does not have measurable goals to determine when the pilot should progress to full implementation. In the early stages of a new program or initiative within a program, evaluation questions tend to focus on program process—on how well authorized activities are carried out and reach intended recipients. We have previously reported that common evaluation questions include the following: Is the program being delivered as intended to the targeted recipients? Have any feasibility or management problems emerged? What progress has been made in implementing changes or new provisions? According to IRS officials, the ISAC pilot is still in early stages; they did not know what to expect the first year but knew they wanted to focus on building trust and, therefore, did not set goals for participation. However, we have previously reported that without well-defined, appropriate, clear, and measurable objectives, it will be difficult to ensure appropriate evaluation data are collected and available to measure performance against the objectives and goals. In short, it will be difficult for IRS to know whether it achieved its objectives. Without knowing this, IRS will have difficulty justifying investing additional resources. Ensure scalability of pilot design: The purpose of a pilot is generally to inform a decision on whether and how to implement a new approach in a broader context. Identifying criteria or standards for identifying lessons about the pilot will help inform an agency’s decisions about scalability and when to integrate pilot activities into overall efforts. We previously reported that the criteria and standards should be observable and measureable events, actions, or characteristics that provide evidence that the pilot objectives have been met. IRS’s efforts in designing the ISAC partially aligned with this leading practice. First, IRS identified and integrated lessons learned into its pilot. For example, ahead of ISAC’s launch, IRS’s contractor identified potential capabilities of the ISAC based on lessons learned from four ISACs from other industries and a 2-day collaborative session in summer 2015. In February 2017, 1 month after the ISAC’s launch, the Board established the metrics subgroup to develop evaluation criteria to determine the extent to which the pilot objectives have been met. According to ISAC Board officials, the metrics subgroup is developing and testing metrics that the ISAC Board expects to use beginning in the 2018 filing season. The metrics are designed to measure participation in the ISAC, contribution of data or information to the ISAC, and the effectiveness of the data or information provided. IRS also took steps to improve the ISAC pilot design, which will help it scale the pilot in the future. For example, in May 2017, IRS’s contractor presented lessons learned from the 2017 filing season, including what was accomplished, what should be changed in future filing seasons, and areas for future attention to consider how well the lessons learned can be applied when the pilot is scaled up. The contractor’s presentation also outlined recommendations from a May 2017 independent assessment of the ISAC, including the current status of each recommendation and actions needed to implement them. In addition, during the July 2017 ISAC Board meeting, IRS’s contractor discussed lessons learned, and the IRS ISAC Executive Official discussed takeaways thus far from standing up the ISAC. Finally, IRS took steps to establish criteria for assessing the pilot’s performance, but these steps are primarily related to participation, access, and data contribution requirements. IRS does not have criteria that would inform decisions about the ISAC’s scalability, including when it is appropriate to include more state and industry members, how to identify additional members, or how to expand the functionalities of the online platform. For example, IRS has yet to articulate the criteria to determine the appropriate time frame for the ISAC to remain in the pilot stage and does not have a plan to decide how and when the ISAC will move from the pilot stage into full implementation. However, IRS officials have said that the ISAC will likely continue in pilot phase through the 2018 filing season. According to IRS officials, IRS had prioritized other activities and is now turning its attention to plans for scaling the pilot. Without measurable evaluation criteria that provide evidence that the ISAC pilot objectives have been met, the Board will have difficulty assessing the ISAC’s performance and making decisions about scalability. Clearly articulate an assessment methodology: In 2016, we reported that key features of an assessment methodology include a strategy for comparing the pilot’s implementation and results with other efforts; a clear plan that details the type and source of the data necessary to evaluate the pilot; and methods for data collection, including the timing and frequency. While IRS’s efforts minimally aligned with this leading practice, it has taken some steps to clearly articulate its assessment methodology. For example, according to the IRS ISAC Executive Official, IRS plans to evaluate the extent to which the revenue protected by the ISAC pilot compares to existing fraud detection and prevention efforts, including the External Leads Program. To help accomplish this, IRS took preliminary steps to collect and track metrics related to ISAC’s performance and compare ISAC’s efforts against other mechanisms to combat fraud. For example, IRS’s contractor collects and disseminates program metrics and ISAC analytics weekly, including the total number of members, leads, alerts, and Internet Protocol (IP) addresses. This is intended to help assess progress in expanding the ISAC and identifying fraud. In addition, the metrics subgroup started comparing ISAC leads against information collected from the states as part of its effort to assess ISAC data quality. However, IRS has not completed an assessment methodology and data gathering strategy that outlines the type and source of data necessary to evaluate the pilot to assess the progress in achieving each of the ISAC’s objectives, including whether the ISAC successfully facilitates the exchange of information and helps detect and prevent fraud. IRS also does not have a strategy for comparing the pilot’s implementation and results with other efforts. For example, while IRS officials expect to determine federal revenue protected by the ISAC and compare that to other efforts, IRS has not formalized this plan and IRS officials do not expect to start until at least October 2017, when the needed data become available. Additionally, according to IRS’s ISAC Executive Official, state and industry partners—who are important stakeholders in the ISAC—may not be able to track dollars protected through the ISAC. As a result, IRS may only know the federal dollars protected, while the amount protected at the state level may remain unknown. This makes it more difficult to communicate the potential benefits to states. Furthermore, the ISAC could be collecting additional data to better meet its objectives. While quantifying federal dollars protected is a key indicator of the ISAC’s success, that metric alone will not demonstrate the ISAC’s benefit and effectiveness. Without a documented strategy to compare the ISAC pilot to other efforts and a methodology that details the type and source of data necessary to evaluate the pilot—beyond the federal dollars protected by the ISAC that would otherwise have been undetected—IRS may find it difficult to assess the effectiveness of the pilot, identify areas for improvement, and demonstrate its capabilities compared with other efforts. Develop a data-analysis plan: In conjunction with a clearly articulated assessment methodology, a detailed data-analysis plan identifies who will analyze the data as well as when and how data will be analyzed to assess the pilot’s performance and draw conclusions about how to improve procedures moving forward. As we previously reported, the results will show the successes and challenges of the pilot, and in turn, how the pilot can be incorporated into broader efforts. While IRS’s efforts minimally aligned with this leading practice, it has taken some steps to measure performance at the activity level. For example, IRS worked with its contractor to regularly track and report engagement metrics; user statistics; and analytics on alerts, leads, and device IP addresses, which at times are categorized and aggregated. (See figure 4 earlier in this report for an example of the ISAC data visualization tool with illustrative data.) IRS’s contractor also surveyed ISAC members to better gauge user experience with alerts and what participants found to be most valuable on the online platform. In response to other recommendations to develop metrics for measuring ISAC’s performance and success, the contractor’s May 2017 ISAC evaluation outlined actions, including beginning to track recommended metrics and exploring means of quantifying the benefit. However, IRS has not formalized the plan to determine the amount of revenue protected nor has it developed a detailed data-analysis plan to determine how the ISAC pilot’s performance will be tracked. The ISAC’s metrics subgroup reported that it is working to develop preliminary performance metrics to benchmark the ISAC pilot’s progress. It acknowledged that metrics and a detailed analysis plan are essential to demonstrate the ISAC’s benefit. The subgroup reported it is in the process of developing them. Without a detailed data analysis and evaluation plan that identifies data sources and criteria, IRS cannot fully determine or demonstrate the pilot’s performance and challenges. As a result, IRS, its partners, and Congress will have difficulty determining the ISAC’s effectiveness and whether IRS should expand the pilot. IRS officials said they are still learning about the five leading practices for pilot design, and as noted, the ISAC at least partially aligns with each one. According to internal control standards in the federal government, an agency should formulate plans to achieve its objectives in order to meet them. Without such a plan to inform decisions about the ISAC’s benefits and performance, IRS, its partners, and Congress will have difficulty determining the effectiveness of the pilot and whether to proceed with full implementation. IRS took actions to improve the ISAC pilot, including waiving the requirement for states to contribute data. However, IRS does not have an outreach plan to increase membership or inform states about the ISAC’s benefits. IRS officials determined that requiring participating states to contribute data on suspected fraud may be a potential barrier and limit participation in the ISAC. Therefore, IRS waived the data contribution requirement for the first year and one state subsequently contributed data to the ISAC in the 2017 filing season. However, as of October 2017, 5 states had contributed data and 8 states had submitted 29 alerts. In our focus groups, officials from a few states reported they were concerned about the data contribution requirement and were unsure if they had the resources to contribute such data and did not fully understand the terms of the data contribution requirement. IRS officials attribute the low data contribution this year to it taking time to build trust among partners. The ISAC Board sought to reframe the discussion about data contribution and, in July 2017, changed the language to describe data contribution as a data/information opportunity. Endorsing organizations are another potential tool to increase participation in the ISAC. Five trade organizations—American Coalition of Taxpayer Rights, Council for Electronic Revenue Communication Advancement, Computer and Communications Industry Association, the Free File Alliance, and FTA—are supporting the ISAC Partnership as endorsing organizations. According to IRS, endorsing organizations provide additional support for the ISAC concept and are uniquely positioned to serve as links between the ISAC and the sectors they represent. While they are not ISAC members and therefore cannot access the online platform, their role is important to build connections between stakeholders. However, according to FTA officials, IRS did not effectively leverage FTA to communicate the benefits to states during the first year of the pilot, but IRS and the ISAC Board have since taken important steps to improve collaboration. FTA endorsed the ISAC in February 2017 and, in our focus groups, both state and industry officials said the endorsement was important for securing more widespread state participation. According to FTA, IRS did not incorporate its feedback about the probable response from states to the ISAC, which FTA officials believe may have resulted in a lower-than- expected rate of participation by states in the early months of the ISAC. According to IRS officials, IRS attempted to work with endorsing organizations while standing up the ISAC online platform and received comments from FTA and an industry trade organization that reflected different interests and priorities. According to IRS officials, IRS attempted to find a middle ground. More recently, the Board attempted to better engage endorsing organizations by including them in a July 2017 meeting about planning the next steps for the ISAC. IRS, states, and industry partners have all faced data safeguarding challenges to participating in the ISAC. For example, IRS is unable to share taxpayer or record-level data in the ISAC due to the section 6103 safeguards discussed earlier in this report. In a June 2017 report to Congress, the Electronic Tax Administration Advisory Committee (ETAAC) recommended IRS identify, analyze, and mitigate barriers that preclude IRS from sharing information in the ISAC. IRS officials said that IRS not sharing information in the ISAC limits the full benefit of the ISAC. While the ISAC is designed to be a three-pronged collaboration between IRS, states, and industry, because IRS does not view or contribute record-level data, such data only flows between states and industry. This limits the full value of the ISAC. Further, it may be challenging for the ISAC partnership to meet a key goal of increasing participation among state and industry members if a key stakeholder in the partnership is unable to fully participate. IRS officials said the agency is considering options to allow it to participate more fully in the ISAC. Specifically, IRS included a request for a legislative change to section 6103 in a report to Treasury. This request is an important step to enable the ISAC to be an effective information sharing and collaboration tool. Likewise, some states faced legal hurdles to joining the ISAC. According to FTA, while it outlined potential concerns about those hurdles in a memo to state legal counsels, it expected those would be manageable for states. Furthermore, some industry partners face difficulties in accessing the ISAC’s online platform. As previously mentioned and shown in figure 2, tax preparation companies—covered under section 7216 and referred to as 7216 industry partners—have full access to all of the information provided to the ISAC. However, financial institutions—not covered under section 7216 and referred to as non-7216 industry partners—have limited access to information in the ISAC. According to IRS officials, IRS is considering a request from financial institutions to amend regulations under section 7216 to allow them greater access to the ISAC. In the 2017 filing season, contribution levels from IRS, states, and industry partners varied significantly. While IRS invited states and Security Summit partners to participate, other stakeholders—such as industry partners that are not members of the Security Summit—have not been included. While IRS has taken steps to reach out to state and industry partners, IRS and the ISAC Partnership have opportunities to more fully engage stakeholders. One challenge to state participation is that there has been a disconnect, at times, between the ISAC Board’s and states’ perceptions of how the ISAC can be used to prevent and detect fraud. For example, IRS views the ISAC as the key tool for information sharing between IRS, states, and industry partners in the future. However, officials from all states represented in our focus groups noted that they either had not used, or were unfamiliar with, the ISAC-specific resources—such as the data visualization tools shown previously in figure 4. These are intended to help users identify IDT refund fraud trends more broadly. Moreover, officials from a few states reported IRS already sends more data on suspected fraud through other channels than they can effectively process with their current resources. IRS is working to quantify the benefits of the ISAC, which could help enhance states’ understanding. The ISAC Board is working with IRS’s research organization to quantify the refund fraud averted and federal dollars protected by analyzing Treasury receipts. According to IRS, it is working with ISAC state members to communicate the value of the ISAC to their leadership and share key activities, as appropriate, to enable their continued involvement. IRS and the ISAC Board also took several steps to inform states and members of industry—both members of the ISAC and non-members—about the benefits of the ISAC. For example, IRS’s contractor provided training to users of the ISAC to demonstrate the platform’s functionality and tools. In addition, IRS officials presented information about the ISAC at conferences with tax industry partners. Relatedly, ETAAC recently recommended that IRS encourage greater participation in the ISAC by stakeholders involved in tax administration. In addition to inviting states to join the ISAC, IRS invited industry partners who were members of the Security Summit to join. Security Summit industry partners account for the majority of tax returns IRS accepts using a paid preparer or tax software. The ISAC Board limited industry participation in the ISAC Partnership to Security Summit partners because it was concerned about securely authenticating new members and scaling up the size of the pilot to accommodate additional participants. Furthermore, although three ISAC members are non-7216 financial institutions, IRS does not consider banks or credit unions—both of which cash refund checks—to be fully represented in the ISAC. IRS officials said they were focused on engaging tax preparation companies and building trust among existing stakeholders. In June 2017, ETAAC recommended that IRS should address expanding the participation of financial institutions in the ISAC, as well as in other efforts. Although the ISAC Partnership does not have an outreach plan, such a plan could, for example, address how to expand ISAC membership or the disconnect between the benefits identified by the ISAC Board and how states perceive the ISAC can be used to prevent and detect fraud in their states. According to IRS officials, the ISAC Partnership has not developed a plan yet because it has been focused on other priorities. Project management standards state that when an entity is planning a project—that is, a temporary endeavor to create a unique product, service, or result—it is important to define relevant activities and determine the scope, sequence, and schedule of those activities, among other things. In addition, federal Standards for Internal Control in the Federal Government state that federal agencies should establish plans to help ensure goals and objectives—such as increasing participation in the ISAC—can be met. Additionally, internal control standards state that documentation of agency decisions and activities is important because it provides a means to retain organizational knowledge, mitigate the risk of having that knowledge limited to a few personnel, and communicate that knowledge to external parties, as appropriate. Furthermore, we have reported that without developing a user outreach plan, an agency risks being unable to provide services to its users where they need them most. For the ISAC, this could mean less effective collaboration among stakeholders or missed opportunities to prevent IDT refund fraud. IRS has taken important steps to improve its ability to respond to the ongoing challenge of IDT refund fraud. Among these efforts, the ISAC and RRT show promise for increasing information sharing and collaboration among IRS, states, and industry to help detect and prevent IDT refund fraud and coordinate responses to fraud incidents. The ISAC pilot goes beyond existing fraud information sharing efforts and has strengthened collaboration among stakeholders. While IRS has taken actions that partially align with key aspects of five leading practices for effective pilot design, its actions do not fully align with any of the practices. Further, IRS has not developed criteria for assessing whether the pilot’s objectives have been met. Without this assessment and better alignment with leading practices for pilot design, IRS, its partners, and Congress will have difficulty determining the effectiveness of the pilot and whether and when to proceed with full-scale implementation. The benefit of the ISAC can only fully be realized when there is robust participation among stakeholders. However, officials from all states represented in our focus groups noted that they either had not used, or were unfamiliar with, the ISAC-specific resources. Part of the issue is that IRS has not effectively communicated the benefits of the ISAC to states, so they can better understand how the ISAC will help them combat IDT refund fraud. Developing an outreach plan to broaden membership to additional states, non-Security Summit members of industry, and financial institutions would further promote stakeholders collaborating and sharing fraud information. We are making the following two recommendations to IRS: The Acting Commissioner of Internal Revenue should ensure that the Information Sharing and Analysis Center (ISAC) pilot better aligns with leading practices for effective pilot design. This should include establishing criteria for assessing whether the pilot’s objectives have been met before making decisions about its scalability and whether, how, and when to when to proceed to full implementation; and developing a data analysis plan that identifies data sources and criteria necessary for effectively evaluating the pilot. (Recommendation 1) The Acting Commissioner of Internal Revenue should ensure that the ISAC Partnership develops an outreach plan to expand membership and improve states’ and industry partners’ understanding of the ISAC’s benefits. (Recommendation 2) We provided a draft of this report to IRS and the co-chairs of the ISAC Board for comment. In written comments reproduced in Appendix II, IRS agreed with both recommendations. IRS reported it will be finalizing an Identity Theft Tax Refund Fraud Pilot Management Plan to help it better align the ISAC pilot with leading practices for pilot design. Additionally, IRS reported it will work with the ISAC Board to ensure that the Board develops an outreach plan to expand membership and improve states' and industry partners' understanding of the ISAC's benefits. In an email dated October 27, 2017, the ISAC Board state and industry co-chairs also agreed with both recommendations and provided technical comments which were incorporated, as appropriate. We are sending copies of this report to the Chairmen and Ranking Members of other Senate and House committees and subcommittees that have appropriation, authorization, and oversight responsibilities for IRS. We are also sending copies to the Acting Commissioner of Internal Revenue, the Secretary of the Treasury, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or lucasjudyj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The objectives of this engagement were to (1) describe actions Security Summit partners are taking to implement an Information Sharing and Analysis Center (ISAC) and a Rapid Response Team (RRT); (2) evaluate the extent to which the ISAC pilot design aligns with leading practices; and (3) identify actions, if any, that the Internal Revenue Service (IRS) could take to improve the ISAC pilot. We selected the ISAC and RRT from among those initiatives identified in the June 2016 IRS Commissioner’s Security Summit Update Report as the focus of our review because of their importance, the potential for a major effect on IDT refund fraud, and the timeline for planned actions. Although the External Leads Process and the Industry Leads Process are discussed in this report, we did not select them for in-depth review. To address all objectives, we reviewed IRS, ISAC Senior Executive Board (Board), ISAC working group, and Information Sharing working group documents. These included meeting minutes, planning documents, the biweekly ISAC dashboard, and IRS’s contractor’s weekly ISAC updates. We also observed a training session IRS’s contractor conducted for new ISAC members and we received a demonstration of the ISAC online platform capabilities, including the visualization tools. (See figure 4.) In addition, we conducted semistructured interviews with IRS, state, and industry co-leads of the ISAC and the Information Sharing working groups; ISAC Board co-chairs; the outreach and metrics ISAC Board subgroups; and trade organizations including the Federation of Tax Administrators and American Coalition of Taxpayer Rights. To further address all objectives, we conducted four focus groups in March and April 2017—two sessions with states and two sessions with industry partners: 1. Five representatives from members of industry that were involved in the ISAC or RRT. 2. Seven representatives from members of industry that were involved in the ISAC or RRT. 3. Six officials from states randomly selected from among those with an official who participated in the ISAC or Information Sharing working groups. 4. Five officials from states randomly selected from among those that had not been involved in either working group. We excluded from our focus group sample those states or industry partners with whom we previously conducted—or planned to conduct— a separate semistructured interview. We asked similar questions for each focus group with some variation between state and industry groups. We recorded and transcribed the focus group sessions for review. We analyzed the focus group transcripts to identify common themes, patterns, and comments. We used these focus group discussions to provide illustrative examples of state and industry perceptions of the benefits and challenges to implementing the ISAC and RRT. However, the responses are non-generalizable and do not reflect opinions of all states or industry partners. Because of concerns about identifying which state and industry partners have been involved in these fraud prevention efforts, we are not identifying the focus group participants or the state officials and industry representatives that we interviewed. To evaluate the extent to which the ISAC aligns with the five leading practices for pilot design, we reviewed our prior work and compared IRS actions against these practices and criteria. Our April 2016 report describes the criteria we developed for evaluating pilot design and the methodology we used to do so. For this work, we evaluated each subcomponent of the leading practices to determine if it met fully, mostly, partially, or not at all with the criteria. Each of those assessments was subsequently verified by another individual. To identify actions, if any, that IRS could take to improve the ISAC pilot, we assessed IRS and the ISAC Board’s efforts to implement the ISAC pilot using internal control standards and performance management standards. We conducted this performance audit from August 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, the following staff made key contributions to this report: Joanna Stamatiades, Assistant Director; Melissa King, Analyst-in-Charge; Parul Aggarwal; Amy Bowser; Ann Czapiewski; Robert Gebhart; Layla Moughari; and Cynthia Saunders.", "summary": "IRS estimates that fraudsters attempted at least $14.5 billion in IDT tax refund fraud in tax year 2015. Since 2015, GAO's High-Risk List has included IRS's efforts to address IDT refund fraud. Starting with its March 2015 Security Summit, IRS has partnered with state tax administrators and tax preparation companies, among others, on initiatives aimed at better preventing and detecting IDT refund fraud. GAO was asked to examine IRS's efforts to collaborate with these partners. This report, among other things, (1) describes actions taken to implement the ISAC and RRT, (2) evaluates the extent to which the ISAC pilot aligns with leading practices for pilot design, and (3) identifies actions, if any, that IRS could take to improve the ISAC pilot. GAO reviewed planning and other documents on the initiatives. It interviewed IRS and state officials and industry and trade organization representatives, among others involved in the ISAC and RRT. GAO also conducted four non-generalizable focus groups with state and industry partners. The Internal Revenue Service (IRS) launched an Identity Theft Tax Refund Fraud Information Sharing and Analysis Center (ISAC) pilot for the 2017 filing season. It aims to allow IRS, states, and tax preparation industry partners to quickly share information on identity theft (IDT) refund fraud. The ISAC pilot includes two components: an online platform run by IRS to communicate data on suspected fraud, and an ISAC Partnership, a collaborative organization comprised of IRS, states, and industry, which is intended to be the governance structure. As of November 2017, the ISAC had 48 members: 31 states (including full members and those receiving alerts only), 14 tax preparation companies, and 3 financial institutions. In addition, IRS is using a Rapid Response Team (RRT) in partnership with states and industry members to coordinate responses to IDT refund fraud incidents that pose a significant threat within 24 to 72 hours of being discovered. IRS deployed the RRT for six incidents in 2016 and once in 2017. GAO found that the ISAC pilot aligns with key aspects of all five leading practices for effective pilot design GAO previously identified, but none fully. For example, IRS has worked to incorporate stakeholder input, but its message about the ISAC's benefits has not fully reached states. Further, IRS does not have criteria for assessing whether the pilot's objectives have been met. Without this assessment and better alignment with leading practices, IRS, its partners, and Congress will have difficulty determining the effectiveness of the pilot and whether to implement it more broadly. IRS has taken actions to improve the ISAC pilot, but the ISAC Partnership does not have an outreach plan. While the ISAC Senior Executive Board limited industry participation to partners who participated in its Security Summit, the ISAC has obtained support from trade organizations. However, officials from almost all states represented in our focus groups noted that they either had not used, or were unfamiliar with, the ISAC-specific resources. While the ISAC Board has taken steps to engage stakeholders, the ISAC Partnership does not have an outreach plan to increase membership and improve states' and industry partners' understanding of the ISAC's benefits. Without such a plan, less effective collaboration is likely among stakeholders and opportunities to prevent IDT refund fraud may be missed. GAO recommends IRS ensure (1) the ISAC better aligns with leading practices for effective pilot design, and (2) the ISAC Partnership develops an outreach plan to expand membership and improve understanding of the ISAC's benefits. IRS and the ISAC Board state and industry co-chairs agreed with the recommendations.", "document_type": "gao"}
{"report": "According to the President’s budget, the federal government plans to invest more than $96 billion for IT in fiscal year 2018—the largest amount ever budgeted. However, as we have previously reported, investments in federal IT too often result in failed projects that incur cost overruns and schedule slippages, while contributing little to the desired mission-related outcomes. For example: The Department of Veterans Affairs’ Scheduling Replacement Project was terminated in September 2009 after spending an estimated $127 million over 9 years. The tri-agency National Polar-orbiting Operational Environmental Satellite System was disbanded in February 2010 by the White House’s Office of Science and Technology Policy after the program spent 16 years and almost $5 billion. The Department of Homeland Security’s Secure Border Initiative Network program was ended in January 2011, after the department obligated more than $1 billion for the program. The Office of Personnel Management’s Retirement Systems Modernization program was canceled in February 2011, after the agency had spent approximately $231 million on its third attempt to automate the processing of federal employee retirement claims. The Department of Veterans Affairs’ Financial and Logistics Integrated Technology Enterprise program was intended to be delivered by 2014 at a total estimated cost of $609 million, but was terminated in October 2011. The Department of Defense’s Expeditionary Combat Support System was canceled in December 2012 after spending more than a billion dollars and failing to deploy within 5 years of initially obligating funds. Our past work found that these and other failed IT projects often suffered from a lack of disciplined and effective management, such as project planning, requirements definition, and program oversight and governance. In many instances, agencies had not consistently applied best practices that are critical to successfully acquiring IT. Such projects have also failed due to a lack of oversight and governance. Executive-level governance and oversight across the government has often been ineffective, specifically from chief information officers (CIO). For example, we have reported that some CIOs’ roles were limited because they did not have the authority to review and approve the entire agency IT portfolio. FITARA was intended to improve covered agencies’ acquisitions of IT and enable Congress to monitor agencies’ progress and hold them accountable for reducing duplication and achieving cost savings. The law includes specific requirements related to seven areas. Federal data center consolidation initiative (FDCCI). Agencies covered by FITARA are required to provide OMB with a data center inventory, a strategy for consolidating and optimizing their data centers (to include planned cost savings), and quarterly updates on progress made. The law also requires OMB to develop a goal for how much is to be saved through this initiative, and provide annual reports on cost savings achieved. Enhanced transparency and improved risk management. OMB and covered agencies are to make detailed information on federal IT investments publicly available, and agency CIOs are to categorize their investments by level of risk. Additionally, in the case of major IT investments rated as high risk for 4 consecutive quarters, the law requires that the agency CIO and the investment’s program manager conduct a review aimed at identifying and addressing the causes of the risk. Agency CIO authority enhancements. Agency heads at covered agencies are required to ensure that CIOs have authority to (1) approve the IT budget requests of their respective agencies, (2) certify that OMB’s incremental development guidance is being adequately implemented for IT investments, (3) review and approve contracts for IT, and (4) approve the appointment of other agency employees with the title of CIO. Portfolio review. Covered agencies are to annually review IT investment portfolios in order to, among other things, increase efficiency and effectiveness and identify potential waste and duplication. In establishing the process associated with such portfolio reviews, the law requires OMB to develop standardized performance metrics, to include cost savings, and to submit quarterly reports to Congress on cost savings. Expansion of training and use of IT acquisition cadres. Covered agencies are to update their acquisition human capital plans to address supporting the timely and effective acquisition of IT. In doing so, the law calls for agencies to consider, among other things, establishing IT acquisition cadres or developing agreements with other agencies that have such cadres. Government-wide software purchasing program. The General Services Administration is to develop a strategic sourcing initiative to enhance government-wide acquisition and management of software. In doing so, the law requires that, to the maximum extent practicable, the General Services Administration should allow for the purchase of a software license agreement that is available for use by all executive branch agencies as a single user. Maximizing the benefit of the Federal Strategic Sourcing Initiative. Federal agencies are required to compare their purchases of services and supplies to what is offered under the Federal Strategic Sourcing Initiative. The Administrator for Federal Procurement Policy was also required to issue regulations related to the initiative. In June 2015, OMB released guidance describing how agencies are to implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls that will meet the law’s requirements, while providing agencies with flexibility to adapt to unique agency processes and requirements; strengthen the relationship between agency CIOs and bureau CIOs; and strengthen CIO accountability for IT costs, schedules, performance, and security. The guidance identified several actions that agencies were to take to establish a basic set of roles and responsibilities (referred to as the common baseline) for CIOs and other senior agency officials, which were needed to implement the authorities described in the law. For example, agencies were required to conduct a self-assessment and submit a plan describing the changes they intended to make to ensure that common baseline responsibilities were implemented. Agencies were to submit their plans to OMB’s Office of E-Government and Information Technology by August 15, 2015, and make portions of the plans publicly available on agency websites no later than 30 days after OMB approval. As of November 2016, all agencies had made their plans publicly available. In addition, in August 2016, OMB released guidance intended to, among other things, define a framework for achieving the data center consolidation and optimization requirements of FITARA. The guidance requires each agency on a quarterly basis to: maintain complete inventories of all data center facilities owned, operated, or maintained by or on behalf of the agency; develop cost savings targets for fiscal years 2016 through 2018 and report any actual realized cost savings; and measure progress toward meeting optimization metrics. The guidance also directs agencies to develop a data center consolidation and optimization strategic plan that defines the agency’s data center strategy for fiscal years 2016, 2017, and 2018. This strategy is to include, among other things, a statement from the agency CIO indicating whether the agency has complied with all data center reporting requirements in FITARA. Further, the guidance indicates that OMB is to maintain a public dashboard that will display consolidation-related costs savings and optimization performance information for the agencies. In February 2015, we introduced a new government-wide high-risk area, Improving the Management of IT Acquisitions and Operations. This area highlighted several critical IT initiatives in need of additional congressional oversight, including (1) reviews of troubled projects; (2) efforts to increase the use of incremental development; (3) efforts to provide transparency relative to the cost, schedule, and risk levels for major IT investments; (4) reviews of agencies’ operational investments; (5) data center consolidation; and (6) efforts to streamline agencies’ portfolios of IT investments. We noted that implementation of these initiatives was inconsistent and more work remained to demonstrate progress in achieving IT acquisition and operation outcomes. Further, our February 2015 high-risk report stated that, beyond implementing FITARA, OMB and agencies needed to continue to implement our prior recommendations in order to improve their ability to effectively and efficiently invest in IT. Specifically, from fiscal years 2010 through 2015, we made 803 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations. These recommendations included many to improve the implementation of the aforementioned six critical IT initiatives and other government-wide, cross-cutting efforts. We stressed that OMB and agencies should demonstrate government-wide progress in the management of IT investments by, among other things, implementing at least 80 percent of our recommendations related to managing IT acquisitions and operations within 4 years. In February 2017, we issued an update to our high-risk series and reported that, while progress had been made in improving the management of IT acquisitions and operations, significant work still remained to be completed. For example, as of March 2018, OMB and agencies had fully implemented 476 (or about 59 percent) of the 803 recommendations. Figure 1 summarizes the progress that OMB and agencies have made in addressing our recommendations as compared to the 80 percent target, as of March 2018. In addition, in fiscal year 2016, we made 202 new recommendations, thus further reinforcing the need for OMB and agencies to address the shortcomings in IT acquisitions and operations. Also, beyond addressing our prior recommendations, our 2017 high-risk update noted the importance of OMB and covered federal agencies continuing to expeditiously implement the requirements of FITARA. To further explore the challenges and opportunities to improve federal IT acquisitions and operations, we convened a forum on September 14, 2016, to explore challenges and opportunities for CIOs to improve federal IT acquisitions and operations—with the goal of better informing policymakers and government leadership. Forum participants, which included 13 current and former federal agency CIOs, members of Congress, and private sector IT executives, identified key actions related to seven topics: (1) strengthening FITARA, (2) improving CIO authorities, (3) budget formulation, (4) governance, (5) workforce, (6) operations, and (7) transition planning. A summary of the key actions, by topic area, identified during the forum is provided in figure 2. In addition, in January 2017, the Federal CIO Council concluded that differing levels of authority over IT-related investments and spending have led to inconsistencies in how IT is executed from agency to agency. According to the Council, for those agencies where the CIO has broad authority to manage all IT investments, great progress has been made to streamline and modernize the federal agency’s footprint. For the others, where agency CIOs are only able to control pieces of the total IT footprint, it has been harder to achieve improvements. Congress has recognized the importance of covered agencies’ continued implementation of FITARA provisions, and has taken legislative action to extend selected provisions beyond their original dates of expiration. Specifically, Congress and the President enacted laws to: remove the expiration date for enhanced transparency and improved risk management provisions, which were set to expire in 2019; remove the expiration date for portfolio review, which was set to expire in 2019; extend the expiration date for FDCCI from 2018 to 2020; and authorize the availability of funding mechanisms to help further agencies’ efforts to modernize IT. In particular, a law was enacted to authorize the availability of funding to help further agencies’ efforts to modernize IT. The law, known as the Modernizing Government Technology (MGT) Act, authorizes agencies to establish working capital funds for use in transitioning from legacy IT systems, as well as for addressing evolving threats to information security. The law creates a technology modernization fund within the Department of the Treasury, from which agencies can “borrow” money to retire and replace legacy systems as well as acquire or develop systems. The current administration has initiated additional efforts aimed at improving federal IT, including digital services. Specifically, in March 2017, the administration established the Office of American Innovation, which has a mission to, among other things, make recommendations to the President on policies and plans aimed at improving federal government operations and services. In doing so, the office is to consult with both OMB and the Office of Science and Technology Policy on policies and plans intended to improve government operations and services, improve the quality of life for Americans, and spur job creation. In May 2017, the administration also established the American Technology Council, which has a goal of helping to transform and modernize federal agency IT and how the federal government uses and delivers digital services. The President is the chairman of this council, and the Federal CIO and the United States Digital Service Administrator are among the members. In addition, on May 11, 2017, the President signed Executive Order 13800, Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure. This Executive Order tasked the Director of American Technology Council to coordinate a report to the President from the Secretary of the Department of Homeland Security, the Director of OMB, and the Administrator of the General Services Administration, in consultation with the Secretary of Commerce, regarding the modernization of federal IT. As a result, the Report to the President on Federal IT Modernization was issued on December 13, 2017, and outlined the current and envisioned state of federal IT. The report recognized that agencies have attempted to modernize systems but have been stymied by a variety of factors, including resource prioritization, ability to procure services quickly, and technical issues. The report provided multiple recommendations intended to address these issues through the modernization and consolidation of networks and the use of shared services to enable future network architectures. In February 2018, OMB issued guidance for agencies to implement the MGT Act. The guidance was intended to provide agencies additional information regarding the Technology Management Fund, and the administration and funding of the related IT Working Capital Funds. Specifically, the guidance allowed agencies to begin submitting initial project proposals for modernization on February 27, 2018. In addition, in accord with the MGT Act, the guidance provides details of the Technology Modernization Board, which is to consist of (1) the Federal CIO; (2) a senior official from the General Services Administration; (3) a member of the Department of Homeland Security’s National Protection and Program Directorate; and (4) four federal employees with technical expertise in IT development, financial management, cyber security and privacy, and acquisition, appointed by the Director of OMB. Agencies have taken steps to improve the management of IT acquisitions and operations. However, agencies would be better positioned to realize billions in cost savings and additional management improvements, if they addressed the numerous recommendations we have made aimed at improving data center consolidation, increasing transparency via OMB’s IT Dashboard, implementing incremental development, managing software licenses, reviewing IT acquisitions, implementing key IT workforce activities, and addressing aging legacy systems. One of the key initiatives to implement FITARA is data center consolidation. OMB established FDCCI in February 2010 to improve the efficiency, performance, and environmental footprint of federal data center activities, and the enactment of FITARA codified and expanded the initiative. However, in a series of reports that we issued from July 2011 through August 2017, we noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies’ data center consolidation plans, data center optimization, and OMB’s tracking and reporting on related cost savings. In these reports, we made a matter for Congressional consideration, and a total of 160 recommendations to OMB and 24 agencies to improve the execution and oversight of the initiative. Most agencies and OMB agreed with our recommendations or had no comments. As of March 2018, 83 of these recommendations remained open. For example, in May 2017, we reported that the 24 agencies participating in FDCCI collectively had made progress on their data center closure efforts. Specifically, as of August 2016, these agencies had identified a total of 9,995 data centers, of which they reported having closed 4,388, and having plans to close a total of 5,597 data centers through fiscal year 2019. Notably, the Departments of Agriculture, Defense, the Interior, and the Treasury accounted for 84 percent of the completed closures. In addition, that report noted that 18 of the 24 agencies had reported achieving about $2.3 billion collectively in cost savings and avoidances from their data center consolidation and optimization efforts from fiscal year 2012 through August 2016. The Departments of Commerce, Defense, Homeland Security, and the Treasury accounted for approximately $2.0 billion (or 87 percent) of the total. Further, 23 agencies reported about $656 million collectively in planned savings for fiscal years 2016 through 2018. This is about $3.3 billion less than the estimated $4.0 billion in planned savings for fiscal years 2016 through 2018 that agencies reported to us in November 2015. Figure 3 presents a comparison of the amounts of cost savings and avoidances reported by agencies to OMB and the amounts the agencies reported to us. As mentioned previously, FITARA required agencies to submit no later than the end of fiscal year 2016 and annually thereafter multi-year strategies to achieve the consolidation and optimization of their data centers. Among other things, this strategy is required to include such information as data center consolidation and optimization metrics, and year-by-year calculations of investments and cost savings through October 1, 2020. Further, OMB’s August 2016 guidance on data center optimization contained additional information for how agencies are to implement the strategic plan requirements of FITARA, and stated that agencies were required to publicly post their strategic plans to their agency-owned digital strategy websites by September 30, 2016. As of April 2017, only 7 of the 23 agencies that submitted their strategic plans—the Departments of Agriculture, Education, Homeland Security, and Housing and Urban Development; the General Services Administration; the National Science Foundation; and the Office of Personnel Management—had addressed all five elements required by the OMB memorandum implementing FITARA. The remaining 16 agencies either partially met or did not meet the requirements. For example, most agencies partially met or did not meet the requirements to provide information related to data center closures and cost savings metrics. The Department of Defense did not submit a plan and was rated as not meeting any of the requirements. To better ensure that federal data center consolidation and optimization efforts improve governmental efficiency and achieve cost savings, in our May 2017 report, we recommended that 11 of the 24 agencies take actions to ensure that the amounts of achieved data center cost savings and avoidances are consistent across all reporting mechanisms. We also recommended that 17 of the 24 agencies each take action to complete missing elements in their strategic plans and submit their plans to OMB in order to optimize their data centers and achieve cost savings. Twelve agencies agreed with our recommendations, 2 did not agree, and 10 agencies and OMB did not state whether they agreed or disagreed. More recently, in August 2017, we reported that agencies needed to address challenges in optimizing their data centers in order to achieve cost savings. Specifically, we noted that, according to the 24 agencies’ data center consolidation initiative strategic plans as of April 2017, most agencies were not planning to meet OMB’s optimization targets by the end of fiscal year 2018. Further, of the 24 agencies, 5—the Department of Commerce and the Environmental Protection Agency, National Science Foundation, Small Business Administration, and U.S. Agency for International Development—reported plans to fully meet their applicable targets by the end of fiscal year 2018; 13 reported plans to meet some, but not all, of the targets; 4 reported that they did not plan to meet any targets; and 2 did not have a basis to report planned optimization milestones because they do not report having any agency-owned data centers. Figure 4 summarizes agencies’ progress in meeting OMB’s optimization targets as of February 2017, and planned progress to be achieved by September 2017 and September 2018, as of April 2017. FITARA required OMB to establish a data center optimization metric specific to measuring server efficiency, and required agencies to report on progress in meeting this metric. To effectively measure progress against this metric, OMB directed agencies to replace the manual collection and reporting of systems, software, and hardware inventory housed within agency-owned data centers with automated monitoring tools and to complete this effort no later than the end of fiscal year 2018. Agencies are required to report progress in implementing automated monitoring tools and server utilization averages at each data center as part of their quarterly data center inventory reporting to OMB. As of February 2017, 4 of the 22 agencies reporting agency-owned data centers in their inventory—the National Aeronautics and Space Administration, National Science Foundation, Social Security Administration, and U.S. Agency for International Development—reported that they had implemented automated monitoring tools at all of their data centers. Further, 10 reported that they had implemented automated monitoring tools at between 1 and 57 percent of their centers, and 8 had not yet begun to report the implementation of these tools. In total, the 22 agencies reported that automated tools were implemented at 123 (or about 3 percent) of the 4,528 total agency-owned data centers, while the remaining 4,405 (or about 97 percent) of these data centers were not reported as having these tools implemented. Figure 5 summarizes the number of agency-reported data centers with automated monitoring tools implemented, including the number of tiered and non-tiered centers. To address challenges in optimizing federal data centers, in our August 2017 report, we made recommendations to 18 agencies and OMB. Ten agencies agreed with our recommendations, three agencies partially agreed, and six (including OMB) did not state whether they agreed or disagreed. To facilitate transparency across the government in acquiring and managing IT investments, OMB established a public website—the IT Dashboard—to provide detailed information on major investments at 26 agencies, including ratings of their performance against cost and schedule targets. Among other things, agencies are to submit ratings from their CIOs, which, according to OMB’s instructions, should reflect the level of risk facing an investment relative to that investment’s ability to accomplish its goals. In this regard, FITARA includes a requirement for covered agency CIOs to categorize their major IT investment risks in accordance with OMB guidance. Over the past 6 years, we have issued a series of reports about the Dashboard that noted both significant steps OMB has taken to enhance the oversight, transparency, and accountability of federal IT investments by creating its Dashboard, as well as concerns about the accuracy and reliability of the data. In total, we have made 47 recommendations to OMB and federal agencies to help improve the accuracy and reliability of the information on the Dashboard and to increase its availability. Most agencies agreed with our recommendations or had no comments. As of March 2018, 19 recommendations remained open. In June 2016, we determined that 13 of the 15 agencies selected for in- depth review had not fully considered risks when rating their major investments on the Dashboard. Specifically, our assessments of risk for 95 investments at the 15 selected agencies matched the CIO ratings posted on the Dashboard 22 times, showed more risk 60 times, and showed less risk 13 times. Figure 6 summarizes how our assessments compared to the selected investments’ CIO ratings. Aside from the inherently judgmental nature of risk ratings, we identified three factors which contributed to differences between our assessments and the CIO ratings: Forty of the 95 CIO ratings were not updated during April 2015 (the month we conducted our review), which led to differences between our assessments and the CIOs’ ratings. This underscores the importance of frequent rating updates, which help to ensure that the information on the Dashboard is timely and accurately reflects recent changes to investment status. Three agencies’ rating processes spanned longer than 1 month. Longer processes mean that CIO ratings are based on older data, and may not reflect the current level of investment risk. Seven agencies’ rating processes did not focus on active risks. According to OMB’s guidance, CIO ratings should reflect the CIO’s assessment of the risk and the investment’s ability to accomplish its goals. CIO ratings that do no incorporate active risks increase the chance that ratings overstate the likelihood of investment success. As a result, we concluded that the associated risk rating processes used by the 15 agencies were generally understating the level of an investment’s risk, raising the likelihood that critical federal investments in IT are not receiving the appropriate levels of oversight. To better ensure that the Dashboard ratings more accurately reflect risk, we made 25 recommendations to 15 agencies to improve the quality and frequency of their CIO ratings. Twelve agencies generally agreed with or did not comment on the recommendations and three agencies disagreed, stating that their CIO ratings were adequate. However, we noted that weaknesses in these three agencies’ processes still existed and that we continued to believe our recommendations were appropriate. OMB has emphasized the need to deliver investments in smaller parts, or increments, in order to reduce risk, deliver capabilities more quickly, and facilitate the adoption of emerging technologies. In 2010, it called for agencies’ major investments to deliver functionality every 12 months and, since 2012, every 6 months. Subsequently, FITARA codified a requirement that covered agency CIOs certify that IT investments are adequately implementing incremental development, as defined in the capital planning guidance issued by OMB. Further, subsequent OMB guidance on the law’s implementation, issued in June 2015, directed agency CIOs to define processes and policies for their agencies which ensure that they certify that IT resources are adequately implementing incremental development. However, in May 2014, we reported that 66 of 89 selected investments at five major agencies did not plan to deliver capabilities in 6-month cycles, and less than half of these investments planned to deliver functionality in 12-month cycles. We also reported that only one of the five agencies had complete incremental development policies. Accordingly, we recommended that OMB clarify its guidance on incremental development and that the selected agencies update their associated policies to comply with OMB’s revised guidance (once made available), and consider the factors identified in our report when doing so. Four of the six agencies agreed with our recommendations or had no comments, one agency partially agreed, and the remaining agency disagreed with the recommendations. The agency that disagreed did not believe that its recommendations should be dependent upon OMB taking action to update guidance. In response, we noted that only one of the recommendations to that agency depended upon OMB action, and we maintained that the action was warranted and could be implemented. Subsequently, in August 2016, we reported that agencies had not fully implemented incremental development practices for their software development projects. Specifically, we noted that, as of August 31, 2015, 22 federal agencies had reported on the Dashboard that 300 of 469 active software development projects (64 percent) were planning to deliver usable functionality every 6 months for fiscal year 2016, as required by OMB guidance. The remaining 169 projects (or 36 percent) that were reported as not planning to deliver functionality every 6 months, agencies provided a variety of explanations for not achieving that goal. These included project complexity, the lack of an established project release schedule, or that the project was not a software development project. Further, in conducting an in-depth review of seven selected agencies’ software development projects, we determined that 129 out of 287 software development projects delivered functionality every 6 months for fiscal year 2015 (45 percent) and 113 out of 206 software projects (55 percent) planned to do so in fiscal year 2016. However, significant differences existed between the delivery rates that the agencies reported to us and what they reported on the Dashboard. For example, for four agencies (the Departments of Commerce, Education, Health and Human Services, and the Treasury), the percentage of delivery reported to us was at least 10 percentage points lower than what was reported on the Dashboard. These differences were due to (1) our identification of fewer software development projects than agencies reported on the Dashboard and (2) the fact that information reported to us was generally more current than the information reported on the Dashboard. We concluded that, by not having up-to-date information on the Dashboard about whether the project is a software development project and about the extent to which projects are delivering functionality, these seven agencies were at risk that OMB and key stakeholders may make decisions regarding the agencies’ investments without the most current and accurate information. As such, we recommended that the seven selected agencies review major IT investment project data reported on the Dashboard and update the information as appropriate, ensuring that these data are consistent across all reporting channels. Finally, while OMB has issued guidance requiring agency CIOs to certify that each major IT investment’s plan for the current year adequately implements incremental development, only three agencies (the Departments of Commerce, Homeland Security, and Transportation) had defined processes and policies intended to ensure that the CIOs certify that major IT investments are adequately implementing incremental development. Accordingly, we recommended that the remaining four agencies—the Departments of Defense, Education, Health and Human Services, and the Treasury—establish policies and processes for certifying that major IT investments adequately use incremental development. The Departments of Education and Health and Human Services agreed with our recommendation, while the Department of Defense disagreed and stated that its existing policies address the use of incremental development. However, we noted that the department’s policies did not comply with OMB’s guidance and that we continued to believe our recommendation was appropriate. The Department of the Treasury did not comment on its recommendation. More recently, in November 2017, we reported that agencies needed to improve their certification of incremental development. Specifically, agencies reported that 103 of 166 major IT software development investments (62 percent) were certified by the agency CIO for implementing adequate incremental development in fiscal year 2017, as required by FITARA as of August 2016. Table 1 identifies the number of federal agency major IT software development investments certified for adequate incremental development, as reported on the IT Dashboard for fiscal year 2017. Officials from 21 of the 24 agencies in our review reported that challenges hindered their ability to implement incremental development, which included: (1) inefficient governance processes; (2) procurement delays; and (3) organizational changes associated with transitioning from a traditional software methodology that takes years to deliver a product, to incremental development, which delivers products in shorter time frames. Nevertheless, 21 agencies reported that the certification process was beneficial because they used the information from the process to assist with identifying investments that could more effectively use an incremental approach, and used lessons learned to improve the agencies’ incremental processes. In addition, as of August 2017, only 4 of the 24 agencies had clearly defined CIO incremental development certification policies and processes that contained descriptions of the role of the CIO in the process and how the CIO’s certification will be documented; and included definitions of incremental development and time frames for delivering functionality consistent with OMB guidance. Figure 7 summarizes our analysis of agencies’ policies for CIO certification of the adequate use of incremental development in IT investments. Lastly, we reported that OMB’s capital planning guidance for fiscal year 2018 (issued in June 2016) lacked clarity regarding how agencies were to address the requirement for certifying adequate incremental development. While the 2018 guidance stated that agency CIOs are to provide the certifications needed to demonstrate compliance with FITARA, the guidance did not include a specific reference to the provision requiring CIO certification of adequate incremental development. We noted that, as a result of this change, OMB placed the burden on agencies to know and understand how to demonstrate compliance with FITARA’s incremental development provision. Further, because of the lack of clarity in the guidance as to what agencies were to provide, OMB could not demonstrate how the fiscal year 2018 guidance ensured that agencies provided the certifications specifically called for in the law. In August 2017, OMB issued its fiscal year 2019 guidance, which addressed the weaknesses we identified in the previous fiscal year’s guidance. Specifically, the revised guidance requires agency CIOs to make an explicit statement regarding the extent to which the CIO is able to certify the use of incremental development, and to include a copy of that statement in the agency’s public congressional budget justification materials. As part of the statement, an agency CIO must also identify which specific bureaus or offices are using incremental development on all of their investments. In our November 2017 report, we made 19 recommendations to 17 agencies to improve reporting and certification of incremental development. Eleven agencies agreed with our recommendations, 1 partially agreed, and 5 did not state whether they agreed or disagreed. OMB disagreed with several of our conclusions, which we continued to believe were valid. In total, from May 2014 through November 2017, we made 42 recommendations to OMB and agencies to improve their implementation of incremental development. As of March 2018, 34 of our recommendations remained open. Federal agencies engage in thousands of software licensing agreements annually. The objective of software license management is to manage, control, and protect an organization’s software assets. Effective management of these licenses can help avoid purchasing too many licenses, which can result in unused software, as well as too few licenses, which can result in noncompliance with license terms and cause the imposition of additional fees. As part of its PortfolioStat initiative, OMB has developed policy that addresses software licenses. This policy requires agencies to conduct an annual, agency-wide IT portfolio review to, among other things, reduce commodity IT spending. Such areas of spending could include software licenses. In May 2014, we reported on federal agencies’ management of software licenses and determined that better management was needed to achieve significant savings government-wide. In particular, 22 of the 24 major agencies did not have comprehensive license policies and only 2 had comprehensive license inventories. In addition, we identified five leading software license management practices, and the agencies’ implementation of these practices varied. As a result of agencies’ mixed management of software licensing, agencies’ oversight of software license spending was limited or lacking, thus potentially leading to missed savings. However, the potential savings could be significant considering that, in fiscal year 2012, 1 major federal agency reported saving approximately $181 million by consolidating its enterprise license agreements, even when its oversight process was ad hoc. Accordingly, we recommended that OMB issue needed guidance to agencies; we also made 135 recommendations to the 24 agencies to improve their policies and practices for managing licenses. Among other things, we recommended that the agencies regularly track and maintain a comprehensive inventory of software licenses and analyze the inventory to identify opportunities to reduce costs and better inform investment decision making. Most agencies generally agreed with the recommendations or had no comments. As of March 2018, 95 of the recommendations had not been implemented. Table 2 reflects the extent to which agencies implemented recommendations in these areas. FITARA includes a provision to enhance covered agency CIOs’ authority through, among other things, requiring agency heads to ensure that CIOs review and approve IT contracts. OMB’s FITARA implementation guidance expanded upon this section of FITARA in a number of ways. Specifically, according to the guidance: CIOs may review and approve IT acquisition strategies and plans, rather than individual IT contracts; CIOs can designate other agency officials to act as their representatives, but the CIOs must retain accountability; Chief Acquisition Officers (CAO) are responsible for ensuring that all IT contract actions are consistent with CIO-approved acquisition strategies and plans; and CAOs are to indicate to the CIOs when planned acquisition strategies and acquisition plans include IT. In January 2018, we reported that most of the CIOs at the 22 selected agencies were not adequately involved in reviewing billions of dollars of IT acquisitions. For instance, most of the 22 selected agencies did not identify all of their IT contracts. The selected agencies identified 78,249 IT-related contracts, to which they obligated $14.7 billion in fiscal year 2016. However, we identified 31,493 additional contracts with $4.5 billion obligated, raising the total amount obligated to IT contracts in fiscal year 2016 to at least $19.2 billion. Figure 8 reflects the obligations agencies reported to us relative to the obligations we identified. The percentage of additional IT contract obligations we identified varied among the selected agencies. For example, the Department of State did not identify 1 percent of its IT contract obligation dollars. Conversely, 8 agencies did not identify over 40 percent of their IT-related contract obligation dollars. Many of the selected agencies that did not identify these IT acquisitions did not follow OMB guidance. Specifically, 14 of the 22 agencies did not involve the acquisition office in their process to identify IT acquisitions for CIO review, as required by OMB. In addition, 7 agencies did not establish guidance to aid officials in recognizing IT. Until agencies involve the acquisitions office in their IT identification processes and establish supporting guidance, they cannot ensure that they will identify all IT acquisitions. Without proper identification of IT acquisitions, agencies and CIOs cannot effectively provide oversight of these acquisitions. In addition to not identifying all IT contracts, 14 of the 22 selected agencies did not fully satisfy OMB’s requirement that the CIO review and approve IT acquisition plans or strategies. Further, only 11 of 96 randomly selected IT contracts at 10 agencies that we evaluated were CIO- reviewed and approved as required by OMB’s guidance. The 85 IT contracts not reviewed had a total possible value of approximately $23.8 billion. Until agencies ensure that CIOs are able to review and approve all IT acquisitions, CIOs will continue to have limited visibility and input into their agencies’ planned IT expenditures and will not be able to use the increased authority that FITARA’s contract approval provision is intended to provide. Further, agencies will likely miss an opportunity to strengthen CIOs’ authority and the oversight of IT acquisitions. As a result, agencies may award IT contracts that are duplicative, wasteful, or poorly conceived. As a result of this report, we made 39 recommendations, including that agencies ensure that acquisition offices are involved in identifying IT and issue related guidance and ensure that IT acquisitions are reviewed according to OMB guidance. OMB and 20 agencies generally agreed with or did not comment on the recommendations. One agency agreed with one recommendation, but disagreed with another. The remaining agency disagreed with two recommendations. We subsequently removed one of these recommendations from the final report, but not the other. As of March 2018, all 39 recommendations remain open. An area where agencies can improve their ability to acquire IT is workforce planning. In November 2016, we reported that IT workforce planning activities, when effectively implemented, can facilitate the success of major acquisitions. Ensuring program staff have the necessary knowledge and skills is a factor commonly identified as critical to the success of major investments. If agencies are to ensure that this critical success factor has been met, then IT skill gaps need to be adequately assessed and addressed through a workforce planning process. In this regard, we reported that four workforce planning steps and eight key activities can assist agencies in assessing and addressing IT knowledge and skill gaps. Specifically, these four steps are: (1) setting the strategic direction for IT workforce planning, (2) analyzing the workforce to identify skill gaps, (3) developing and implementing strategies to address IT skill gaps, and (4) monitoring and reporting progress in addressing skill gaps. Each of the four steps is supported by key activities (as summarized in table 3). However, in our November 2016 report, we determined that the five agencies that we selected for in-depth analysis had not fully implemented key workforce planning steps and activities.For example, four of these agencies had not demonstrated an established IT workforce planning process. In addition, none of these agencies had fully assessed their workforce competencies and staffing needs regularly or established strategies and plans to address gaps in these areas. Figure 9 illustrates the extent to which the five selected agencies had fully, partially, or not implemented key IT workforce planning activities. The weaknesses identified were due, in part, to these agencies lacking comprehensive policies that required such activities, or failing to apply the policies to IT workforce planning. We concluded that, until these weaknesses are addressed, the five agencies risk not adequately assessing and addressing gaps in knowledge and skills that are critical to the success of major acquisitions. Accordingly, we made five recommendations to the five selected agencies to address the weaknesses in their IT workforce planning practices that we identified. Four agencies—the Departments of Commerce, Health and Human Services, Transportation, and the Treasury—agreed with our recommendations and one, the Department of Defense, partially agreed. As of March 2018, the agencies had not addressed the five recommendations. IT investments across the federal government are becoming increasingly obsolete. Specifically, in May 2016, we reported that many agencies were using systems which had components that were, in some cases, at least 50 years old. For example, we determined that the Department of Defense was using 8-inch floppy disks in a legacy system that coordinates the operational functions of the nation’s nuclear forces. In addition, the Department of the Treasury was using assembly language code—a computer language initially used in the 1950s and typically tied to the hardware for which it was developed. Further, in some cases, the vendors were no longer providing support for hardware or software. For example, each of the 12 agencies in our review reported using unsupported operating systems and components. At the time, five of the selected agencies reported using 1980s and 1990s Microsoft operating systems that stopped being supported by the vendor more than a decade ago. Table 4 provides examples of legacy systems across the federal government that agencies report are 30 years old or older and use obsolete software or hardware, and identifies those that do not have specific plans with time frames to modernize or replace these investments. To address this issue, we recommended that 12 agencies identify and plan to modernize or replace legacy systems, including establishing time frames, activities to be performed, and functions to be replaced or enhanced. Most agencies agreed with our recommendations or had no comment. As of March 2018, all of the recommendations remained open. In conclusion, the federal government has an opportunity to save billions of dollars; improve the transparency and management of IT acquisitions and operations; and to strengthen the authority of CIOs to provide needed direction and oversight. The forum we held also recommended that CIOs be given more authority, and noted the important role played by the Federal CIO. Most agencies have taken steps to improve the management of IT acquisitions and operations by implementing key initiatives, including data center consolidation, efforts to increase transparency via OMB’s IT Dashboard, incremental development, management of software licenses, approval of IT acquisitions, implementation of IT workforce key practices, and addressing legacy IT; and they have continued to address recommendations we have made over the past several years. However, additional improvements are needed, and further efforts by OMB and federal agencies to implement our previous recommendations would better position them to improve the management of IT acquisitions and operations. To help ensure that these efforts succeed, OMB’s and agencies’ continued implementation of recommendations is essential. In addition, we will continue to monitor agencies’ implementation of our previous recommendations. Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Dave Powner, Director, Information Technology at (202) 512- 9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Kevin Walsh (Assistant Director), Chris Businsky, Rebecca Eyler, Meredith Raymond, and Jessica Waselkow (Analyst in Charge). This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The federal government plans to invest almost $96 billion in IT in fiscal year 2018. Historically, these investments have too often failed, incurred cost overruns and schedule slippages, or contributed little to mission-related outcomes. In December 2014, Congress and the President enacted FITARA, aimed at improving covered agencies' acquisitions of IT. Further, in February 2015, GAO added improving the management of IT acquisitions and operations across government to its high-risk list. This statement summarizes agencies' progress in improving the management of IT acquisitions and operations. Among others, GAO summarized its published reports on (1) data center consolidation, (2) incremental software development practices, (3) IT acquisitions, (4) IT workforce, and (5) legacy IT. The Office of Management and Budget (OMB) and federal agencies have taken steps to improve the management of information technology (IT) acquisitions and operations through a series of initiatives, to include (1) data center consolidation, (2) implementation of incremental development practices, (3) approval of IT acquisitions, (4) implementation of key IT workforce practices, and (5) addressing aging legacy IT systems. As of March 2018, the agencies had fully implemented about 59 percent of the approximately 800 related recommendations that GAO made during fiscal years 2010 through 2015. However, important additional actions are needed. Consolidating data centers . OMB launched an initiative in 2010 to reduce data centers, which was codified and expanded by a law commonly referred to as the Federal Information Technology Acquisition Reform Act (FITARA). GAO has since noted that, while this initiative could potentially save the government billions of dollars, weaknesses exist in areas such as optimization and OMB's reporting on related cost savings. Accordingly, GAO has made 160 recommendations to OMB and agencies to improve the initiative; however, about half of GAO's recommendations have not yet been implemented. Implementing incremental development . OMB has emphasized the need for agencies to deliver investments in smaller increments to reduce risk and deliver capabilities more quickly. Further, GAO has issued reports highlighting actions needed by OMB and agencies to improve their implementation of incremental development. In these reports, GAO made 42 related recommendations, but the majority of GAO's recommendations have not yet been addressed. Approval of IT acquisitions . OMB's FITARA implementation guidance required covered agencies' chief information officers (CIO) to review and approve IT acquisition plans. In January 2018, GAO reported that many agencies' CIOs were not reviewing and approving acquisition plans, as required by OMB. GAO made 39 recommendations to improve the review and approval of IT acquisitions, but they have not yet been implemented by the agencies. Implementation of key IT workforce practices . Effective IT workforce planning can help agencies improve their ability to acquire IT. In November 2016, GAO reported on agencies' IT workforce planning activities. GAO noted that five selected agencies had not fully implemented key workforce planning activities and recommended that they do so, but the agencies have not yet addressed the recommendations. Addressing aging legacy IT systems. Legacy IT investments across the federal government are becoming increasingly obsolete and consuming an increasing amount of IT dollars. In May 2016, GAO reported that many agencies were using systems which had components that were, in some cases, at least 50 years old. GAO noted, however, that several agencies did not have specific plans with time frames to modernize or replace these investments. GAO recommended that 12 agencies plan to modernize or replace legacy systems; all of which have not yet been implemented. From fiscal years 2010 through 2015, GAO made about 800 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations. Among other recommendations, GAO made recommendations to improve the oversight and execution of the data center consolidation initiative, incremental development policies, the review and approval of IT acquisitions, implementation of key workforce planning activities, and aging federal IT systems. Most agencies agreed with GAO's recommendations. In addition, from fiscal year 2016 to present, GAO has made more than 200 new recommendations in this area. GAO will continue to monitor agencies' implementation of these recommendations.", "document_type": "gao"}
{"report": "VA’s process for deciding veterans’ eligibility for disability compensation begins when a veteran submits a claim to VA. The veteran submits his or her claim to one of VBA’s 56 regional offices, where staff members assist the veteran by gathering additional evidence, such as military and medical records, that is needed to evaluate the claim. Based on this evidence, VBA decides whether the veteran is entitled to compensation and, if so, how much. A veteran dissatisfied with the initial claim decision can generally appeal within 1 year from the date of the notification letter VBA sends to the veteran. Under the current appeals process (now referred to by VA as the legacy process), an appeal begins with the veteran filing a Notice of Disagreement. VBA then re-examines the case and generally issues a Statement of the Case that represents its decision. A veteran dissatisfied with VBA’s decision can file an appeal with the Board. In filing that appeal, the veteran can indicate whether a Board hearing is desired. Before the Board reviews the appeal, VBA prepares the file and certifies it as ready for Board review. If the veteran requests a hearing to present new evidence or arguments, the Board will hold a hearing by videoconference or at a local VBA regional office. The Board’s members, also known as Veterans Law Judges, review the evidence and either issue a decision to grant or deny the veteran’s appeal or refer (or remand) the appeal back to VBA for further work. The 2017 Act made changes to VA’s legacy appeals process that will generally take effect no earlier than February 2019, which is approximately 18 months from the date of enactment. According to its appeals plan, VA intends to implement the Act by replacing the current appeals process with a process offering veterans who are dissatisfied with VBA’s decision on their claim one of five options: two of those options afford the veteran an opportunity for an additional review of VBA’s decision within VBA, and the other three options afford them the opportunity to bypass additional VBA review and appeal directly to the Board. Under the new appeals process, the two VBA options will be: 1. Request higher-level review: The veteran asks VBA to review its initial decision based on the same evidence but with a higher-level official reviewing and issuing a new decision. 2. File supplemental claim: The veteran provides additional evidence and files a supplemental claim with VBA for a new decision on the claim. The three Board options will be: 3. Request Board review of existing record: The veteran appeals to the Board and asks it to review only the existing record without a hearing. 4. Request Board review of additional evidence, without a hearing. 5. Request Board review of additional evidence, with a hearing. The Act also requires VA to submit to the appropriate committees of Congress and GAO, within 90 days of the date of enactment, a comprehensive plan for (1) processing appeals under the legacy process until there are no more to process, (2) implementing the new appeals process, (3) processing of claims under the new appeals process in a timely manner, and (4) monitoring implementation of the new appeals process. In addition to these four broad elements, the Act lists 18 elements required to be included in the plan that relate to, among other things: staffing, information technology (IT), and other resources required to implement the plan; estimated timelines for hiring and training VA employees; and a description of risks associated with each element of the plan. The Act also includes a provision for GAO to assess the plan within 90 days after VA submits it. The Act also requires VA to provide progress reports to the appropriate committees of Congress and GAO at least once every 90 days (starting after VA submits its plan), until the date the Act’s legal changes to the appeals process generally go into effect and then at least once every 180 days after this date for 7 years. The Act also authorized VA to carry out a program to test any assumptions relied upon in developing its comprehensive plan and test the feasibility and advisability of any facet of the new appeals process. In its appeals plan, VA reported its decision to pilot test two of the five new options by allowing veterans with pending appeals in the legacy process (known as legacy appeals) to elect the VBA supplemental claim or the higher-level review options beginning in November 2017. This program, which VA refers to as RAMP, is intended to reduce legacy appeals by providing veterans with a chance for early resolution of their claims within VBA while the Board focuses on reducing its inventory of legacy appeals, according to VA. Participation in RAMP is voluntary, but veterans must withdraw their pending legacy appeal to participate, according to VA. Veterans dissatisfied with their RAMP decisions must wait until VA fully implements the new appeals process (in February 2019 at the earliest) before pursuing an appeal with the Board under the new process, according to VA officials. VA’s appeals plan addresses 17 of the Act’s 22 required elements, partially addresses 4 related to monitoring implementation and workforce planning, and does not address 1 element related to identifying total resources. For example, VA’s appeals plan addresses the required elements related to, among others, identifying legal authorities for hiring and removing employees, estimating timelines for hiring and training employees, and outlining the outreach VA expects to conduct. For the elements in the Act that VA’s appeals plan partially addresses or does not address, see table 1. For a detailed list of the 22 required elements in the Act, see appendix I. When we provided VA with our preliminary assessment, VA officials said they disagreed with our assessment and that their appeals plan addresses all 22 of the required elements. In general, they said that data are not available, and VA cannot yet forecast the information required by the Act until aspects of the new appeals process are tested or implemented. We continue to believe the information as presented in VA’s appeals plan and supplemental materials addresses 17 of the required elements, partially addresses 4, and does not address 1 element. Without complete information on all 22 of the required elements, Congress does not have the information it needs to fully conduct oversight of VA’s appeals plan and the agency’s efforts to implement and administer the new process while addressing legacy appeals. VA also is required to provide information on resources, among other areas, before it can certify that the agency is prepared to carry out timely processing of appeals under the new and legacy appeals process. Further, as discussed below, addressing required elements through a more comprehensive plan and underlying analysis is consistent with sound planning practices and would better position VA to implement the new appeals process while attending to legacy appeals; for example, a plan that provides for carefully monitoring the new and legacy appeals processes against balanced goals and metrics, and clearly articulates resources, milestones and other information needed for effective program management. VA’s appeals plan reflects certain sound planning practices, such as convening a working group on performance tracking; however, the plan could benefit from including important details related to three key planning areas: 1. articulating a balanced set of goals and related measures to monitor and assess the performance of the new appeals process, in conjunction with the legacy process; 2. developing a high-quality and reliable implementation schedule to manage key steps and activities of the project; and 3. assessing key risks in a comprehensive manner, including respective mitigation strategies, and articulating clear criteria and an assessment plan for RAMP, and more fully testing or analyzing all appeal options. VA’s appeals plan reflects steps taken to track performance, but it could improve its planning practices related to monitoring and assessing performance on a range of key dimensions of success. Sound planning practices suggest that agencies develop overall goals tied to meaningful and balanced performance measures. These measures include a mix of outcome, output, and efficiency measures to ensure that an organization’s priorities—as well as government-wide priorities such as quality, timeliness, and cost of service—are addressed. VA’s appeals plan reports that the agency convened a working group to design a process for tracking timeliness of both the legacy appeals and appeals within the new process. In supporting documentation that we requested, VA officials stated they are also determining the best way to measure veterans’ satisfaction with the new appeals process. VA’s appeals plan and supporting documentation also identify timeliness goals for the two VBA-only options and one of the three Board options. Nevertheless, its appeals plan does not articulate a set of goals and measures that cover all aspects of its new appeals process, such as accuracy of decisions and cost. The plan also does not provide details on the metrics the agency will develop, how it will assess if the new appeals process is an improvement over the legacy appeals process, and how it will monitor the allocation of resources between legacy and new appeals claims. More specifically: VA’s reported timeliness measures are incomplete: VA’s appeals plan outlines timeliness goals for the two VBA options (average processing time of 125 days) and for the Board option that does not include new evidence or a hearing (average processing time of 365 days). However, VA’s plan does not establish timeliness goals for the other two Board options: Board review of additional evidence without a hearing and Board review of additional evidence with a hearing. In commenting on our assessment, while VA officials indicated they expect the new process to be more efficient than the legacy process (and, therefore, more timely), data to inform goal setting for all Board options will not be available until VA fully implements these options. However, establishing timeliness goals for all options would provide a more complete picture of VA’s vision for the new appeals process, and help VA to develop concrete, objective, and observable performance measures to show progress in achieving that vision, as well as inform resource estimates. VA’s reported measures lack adequate balance: Other than including certain timeliness goals, VA’s appeals plan does not articulate additional aspects of performance important for managing appeals, such as accuracy of decisions, veteran satisfaction with the process, or cost. We previously reported that VA officials said that they wanted to also use veteran survey results, wait times, and inventories as sources of information to measure progress under the new appeals process. Further, VA’s fiscal year 2018 annual performance plan includes an overall customer satisfaction score for veterans’ benefits. However, these and other potential measures of success are not specified in VA’s appeals plan for monitoring the new appeals process as compared with legacy appeals. By not articulating a set of comprehensive and balanced goals and measures in its appeals plan, VA could be inadvertently creating skewed incentives by focusing on one area of program performance to the detriment of other areas (e.g., processing claims quickly but inaccurately). In commenting on our assessment, VA officials recognized the need to develop additional goals and measures and indicated, for example, that they are developing and testing whether the existing quality assurance goal—requiring 92 percent accuracy—is appropriate for the new process. According to VA officials, once they have developed these other goals and measures, VA will communicate this information as part of the required progress reports to the appropriate committees of Congress and GAO. VA’s plan does not reflect how it will establish baseline data: VA’s approach for evaluating the efficiency and effectiveness of the implementation of the new appeals process falls short of sound practices for using baseline data to assess performance. Our prior work has demonstrated that by tracking and developing a performance baseline for all measures, including those that demonstrate the effectiveness of a program, agencies can better evaluate progress made and whether or not goals are being achieved. However, VA’s appeals plan did not provide important details about what aspects of the new appeals process’ performance will be compared to what aspects of the legacy process’ performance. In particular, section 5 of the Act lists a number of metrics VA is required to report periodically, including some that could be used as baseline measures. For example, VA is required to periodically publish on its website the average time that elapsed between the filing of an initial claim and the final resolution of the claim, for legacy appeals as well as appeals under the new system, which is consistent with our prior recommendation. However, VA’s appeals plan does not explain how or when the agency would collect and use these or other data about the legacy and new processes’ performance—such as accuracy, veteran satisfaction, and cost—to assess their relative performance. As we had previously reported, VA’s business case for reform in some instances relied on unproven assumptions and limited analyses of its legacy process to identify root causes of performance problems. Specifically, VA determined that the open-ended nature of its legacy appeals process, whereby a veteran can submit additional evidence numerous times at any point during the VA appeals process, can cause additional cycles of re-adjudication, a process VA refers to as “churning.” According to VA, this re-adjudication can occur multiple times and can add years to the time needed to reach a final decision on an appeal. Without fully articulating a plan for collecting and using baseline and trend data, VA cannot determine the extent to which the new appeals process, which also allows for multiple appeal opportunities, will achieve final resolution of veterans’ appeals sooner, on average, than the legacy process. In commenting on our assessment, VA indicated that it is working toward capturing the metrics listed in section 5 of the Act. VA officials also noted that reporting on the new appeals process will require IT system functionality that currently does not exist, but stated that efforts are underway to add this functionality. VA’s plan does not explain how the agency will monitor processing of legacy versus new appeals: In addition, VA’s appeals plan does not fully articulate how the agency will monitor whether resources are being appropriately devoted to both the new and legacy appeals process and how it will track both sets of workloads. An appeals plan that does not specifically articulate how VA will manage the two processes in parallel exposes the agency to risk that veterans with appeals in the legacy process may experience significant delays or otherwise poor results relative to those in the new appeals process or vice versa. In commenting on our assessment, VA officials noted that VA was not required under section 3 of the Act to provide a description of its plans to capture metrics listed in section 5. Even if not required by the Act, developing an approach for carefully monitoring the management of new and legacy appeals would help VA track progress being made and achievement of goals. Until VA establishes complete and balanced goals and measures, identifies baseline data, and develops a plan for monitoring and assessing both the new and legacy processes, VA runs the risk of promoting skewed behaviors, or not fully understanding whether the new process is an improvement or whether veterans with appeals in the legacy process are experiencing poor results. VA’s appeals plan reflects certain aspects of sound planning practices related to managing the implementation of process change; however, other key components are not addressed. Sound planning practices for implementing process change suggest establishing a transition team. Consistent with such practices, VA’s appeals plan states that the agency convened an agency-wide governance structure to coordinate implementation of its new appeals process; it is comprised of senior-level employees with authority to make necessary decisions to keep the project on track. VA’s appeals plan also includes a copy of a master schedule. In its plan, VA asserts that the master schedule reflects timelines, interim goals and milestones, reporting requirements, and established deadlines, and that it will be used to guide implementation. VA’s appeals plan also reports that VA is consulting with project management professionals, who are using the master schedule, among other tools, to monitor implementation. In addition, VA made progress addressing some of the issues we previously identified by developing steps and timetables for updating training in anticipation of implementing the new appeals process. However, VA’s master schedule for implementing reform is missing elements of a high-quality and reliable implementation schedule for key activities. We have previously reported that having a well-planned schedule is a fundamental management tool. Generally recognized sound practices from the Project Management Institute (PMI) and GAO call for organizations to employ an integrated and reliable master schedule that defines when work activities will occur, who will complete the work, how long they will take, how they are related to one another, and the constraints affecting the start and completion of work elements, as well as whether resources will be available when they are needed. Such a project management schedule not only provides a road map for systematic project execution, but also provides the means by which to gauge progress, identify and address potential problems, and promote accountability. The master schedule VA provided in its appeals plan should have included other sound practices for project management related to a reliable schedule. Specifically: Key activities and their duration are not included: VA’s master schedule does not capture the Rapid Appeals Modernization Program (RAMP) activities, even though this pilot test is occurring at the same time VA is preparing for full implementation of appeals options at VBA and the Board. In addition, specific Board-related activities are missing from the schedule, such as efforts to develop metrics, and the schedule and other project plans we reviewed do not go beyond February 2019. For example, the schedule does not indicate the period of time when VA expects to no longer be processing legacy appeals. When all key and necessary activities are not included, it raises questions about whether all activities are scheduled in the correct order, resources are properly allocated, or the estimated completion dates are reliable. In addition, if the schedule does not fully and accurately reflect VA’s efforts, it will not serve as an appropriate basis for analysis and may result in unreliable completion dates and delays. Sequencing and linkages among activities are not identified: For the high-level activities VA’s appeals plan identifies, VA’s master schedule does not indicate whether there were linkages or sequencing among them, which is not consistent with sound scheduling practices. Linkages and sequencing would show, for example, if any of these activities or sub-activities must finish prior to the start of other activities, or the amount of time an activity could be delayed before the delay affects VA’s estimated implementation date. For example, VA cannot train new employees until after it hires them. The activities VA identifies also do not appear supported by lower- level project schedules. Specifically, when we requested documentation to support VA’s high-level summary of activities and milestones, VA officials did not provide intermediate or more detailed schedules that reflected these practices. In particular, VA’s appeals plan lacks a complete schedule for IT modifications that clearly defines what is to be achieved and the time frames for achievement. We previously recommended that VA develop a schedule for IT updates that explicitly addresses when and how process reform will be integrated into new systems and when these systems will be ready to support the new appeals process at its onset. For example, VA’s appeals plan references several required IT modifications that do not appear in its master schedule. Schedules that are defined at too high a level may disguise risk that is inherent in lower-level activities. Interim goals are not reflected: VA officials stated that they have interim goals and milestones, though VA’s appeals plan and supporting documentation generally do not include this information. Sound planning and redesign practices suggest closely monitoring implementation and developing project goals that include a mix of intermediate goals to be met at various stages. VA’s appeals plan does not include this information. We previously made a recommendation that VA develop a more robust plan for closely monitoring implementation of process reform, including metrics and interim goals to help track progress, evaluate efficiency and effectiveness, and identify trouble spots—all of which are consistent with sound planning practices. Resources are not assigned to all identified activities: The high- level summary schedule that VA provided us also lacks details regarding the assignment of resources for all activities. Specifically, while the plan identifies workgroups responsible for coordinating elements in the plan, such as regulations, training, and outreach, the schedule does not assign resources to the 40 listed activities. As discussed previously, VA’s appeals plan also does not provide information on the total resources required for this reform effort. Assigning resources to the listed activities, as well as providing other information, could provide a better indication of the estimated total resources required to implement the new appeals process and address legacy appeals. In commenting on our assessment, VA officials stated that the agency is developing lower-level project schedules for key activities—such as RAMP and IT requirements—and will provide these schedules as part of the required progress reports to the appropriate committees of Congress and GAO. VA officials also noted that future updates will include additional dependencies and risks, which VBA and the Board are still developing. Until VA has a robust integrated master schedule, supported by detailed project plans that adhere to sound practices, VA’s appeals plan does not provide reasonable assurance that decision makers have the essential program management information needed for this complex and important effort. VA’s appeals plan includes an assessment of risks involved in implementing the new appeals system, but could more comprehensively reflect key risks posed by such a significant reform effort. VA’s appeals plan and supplementary materials include a “risk register” that describes risks associated with many elements of its plan and the remaining level of risk after its planned response to these risks. VA’s appeals plan also states that senior leaders will receive regular updates of risks and mitigation strategies. However, because VA has not yet articulated a balanced set of performance goals and measures in its appeals plan, it is hindered in its ability to identify and assess risks. Federal internal control standards state, and our previous work at VA and other agencies demonstrates, that establishing clear performance goals and objectives is a necessary pre-condition to effectively assessing risk. Having, for example, more complete timeliness goals, and goals and measures reflecting other areas of performance, would allow VA to better identify and target risks associated with managing two processes in parallel, including the potential that veterans with appeals in the legacy process may experience significant delays relative to those in the new appeals process. Importantly, VA is missing an opportunity to fully benefit from RAMP by not testing and assessing other aspects of the new appeals process. The Act authorizes VA to test the feasibility and advisability of any facet of the new appeals process, and VA is taking a positive step to mitigate some risks by testing the two review options available within VBA (review of a claim by a higher-level official based on the same evidence and review of a supplemental claim with additional evidence) through RAMP. In November 2017, VA began RAMP by inviting 500 veterans whose appeals have been pending the longest to participate. According to VA officials, each month VA plans to continue offering RAMP to additional eligible veterans with pending legacy appeals until January 2019—a month before VA anticipates fully implementing the new appeals system. However, as designed, RAMP does not include features that—consistent with a well-developed and documented pilot test program—would provide VA with an opportunity to evaluate fully the soundness of new processes and practices on a smaller scale. Specifically: VA’s plan does not clearly define success criteria for RAMP: VA’s appeals plan states that the agency will collect certain data from RAMP, such as the rate at which eligible veterans opt into the process, timeliness of claims processing, and individual employee productivity. VA also established an overall average processing time goal of 125 days for the two VBA options; however, the plan and supporting documentation do not clearly articulate whether RAMP reviews are expected to meet this timeliness goal. The plan also did not identify other success criteria for RAMP or the types of results expected before fully implementing the new appeals process. For example, VA’s plan does not articulate the expected number and type of subsequent appeals to the Board that result from RAMP. In commenting on this assessment, VA noted that its intent in implementing RAMP was to collect data and test aspects of the new process, and that RAMP was not an initiative in and of itself. However, developing performance measures and data gathering procedures and defining success criteria for a pilot test before proceeding to full implementation are sound practices for process redesign and pilot testing. In addition, because RAMP was not included in VA’s risk assessment, we asked VA if it had identified any risks or mitigation strategies specific to RAMP. In its supplemental materials, VA stated that the greatest risk to RAMP is a low participation rate among eligible veterans with legacy claims. VA also indicated that it would need 10 percent of eligible veterans to opt into RAMP to yield meaningful results. However, this threshold is not articulated in VA’s appeals plan as an explicit success criterion or objective. According to data provided by VA, as of January 22, 2018, 238 veterans opted in. Of veterans with pending claims in RAMP, two-thirds chose the higher-level review option. VA also reported that 47 RAMP decisions have been made so far. As of yet, no appeals of RAMP decisions have been filed. VA’s plan does not articulate how it will assess RAMP before proceeding with full implementation: Although VA’s appeals plan describes a “close-out” phase in which VA intends to assess the results of RAMP, it does not detail the conditions that would have to be met (or not met) to trigger changes. For example, VA’s plan does not explain when or how it might respond to low opt-in rates for RAMP—other than stating it will increase outreach to eligible veterans—or to unexpectedly high appeal rates to the Board resulting from RAMP decisions. Sound redesign and change management practices both suggest that pilot tests be rigorously monitored and evaluated, and that further roll-out occur only after an agency’s transition team takes any needed corrective action and determines that the new process is achieving previously identified success criteria. Without fully articulating its plan for deciding how and when to roll out changes more broadly, it is not clear whether VA would be prepared to fully implement a new appeals process that achieves its aim of better serving veterans. RAMP does not test all aspects of the new appeals process: RAMP provides an opportunity to learn about experiences at VBA under the new system, such as the rate at which eligible veterans choose those options and the resources that will be required to process their appeals. However, RAMP was not designed to test how many veterans would choose to appeal directly to the Board and, therefore, it will not provide comparable information on the Board appeals options. Sound workforce planning practices suggest that agencies identify the total resources needed to manage the risk of implementing new processes and conduct scenario planning to determine those needs. In addition, although we previously recommended VA conduct additional sensitivity analyses to inform projections of future appeals inventories, VA’s appeals plan does not reflect VA’s use or intended use of sensitivity analyses when projecting staffing needs for new appeals options at the Board. In commenting on our assessment, VA officials said they do not plan to conduct additional sensitivity analyses to project future workloads until they have more information from RAMP to inform their assumptions. As a result, VA will lack data on scenarios in which veterans may overwhelmingly choose options available at the Board over those at VBA when the appeals plan is fully implemented. This presents a risk that VA’s early production projections and initial resource allocations may not be properly balanced between the Board and VBA. This, in turn, may result in an unexpectedly large number of appeals pending with the Board, and corresponding lengthy average wait and decision times for some, if not all, Board options. Having information on the number of veterans who are likely to appeal to the Board is particularly critical, given that similar efforts to create additional review options at VBA did not achieve their goals of reducing the percentage of appeals that continue on to the Board. In 2001, VA established the Decision Review Officer (DRO) process—in which senior staff have the authority to overturn an initial disability claim decision without any new evidence—to resolve more appeals at the regional level and avoid long waits at the Board. However, we reported in 2011 that, although the DRO process helped some veterans get additional benefits at the regional office level, it did not accomplish the program’s primary goal of reducing the percentage of appeals continuing on to the Board. In responding to our assessment, VA officials reiterated their plans to increase outreach in the event of low opt-in rates for RAMP and indicated they recently began to send follow-up RAMP invitation letters. With respect to assessing all appeal options, VA officials stated that, while no legal bar prevents testing of the Board options, the Board is focused on reducing its inventory of pending appeals while RAMP provides early resolution of appeals within the new VBA-only options. Officials conceded that this approach means they cannot collect data on the rate at which veterans opt to appeal directly to the Board (e.g., bypassing additional VBA review) until the new process is fully implemented. However, they noted that they can collect some data on the rate at which veterans whose appeals go through RAMP file subsequent appeals to the Board, even though the Board will not begin processing those appeals until full implementation. By pursuing an approach that does not identify or mitigate significant risks associated with implementing a new process, VA is taking a chance that untested aspects will not perform as desired. The Act provides VA authority to pilot aspects of the process and flexibility on the timing of implementing the new process, which could allow some additional time for VA to carefully measure performance under RAMP and determine whether any corrective actions are necessary. If VA does not take full advantage of this authority, it risks moving forward without knowing whether the new appeals process improves experiences for veterans, and potentially implementing a process that is more expensive or results in longer wait times than originally anticipated. In conclusion, in implementing appeals reform after the enactment of the Veterans Appeals Improvement and Modernization Act of 2017, VA is undertaking a complex endeavor that has the potential to affect the lives of hundreds of thousands of veterans with service-connected disabilities. Such an endeavor demands a commensurate level of planning to be successful. While the Act required VA to submit its plan within 90 days of enactment, VA had proposed and began to plan for appeals reform much earlier, and had our March 2017 recommendations to guide its planning efforts from a foundation of sound practices. VA’s November 2017 appeals plan is a positive step forward. Certain elements of the plan—such as establishing an agency-wide governance structure to oversee implementation and testing aspects of reform prior to full implementation—are notable gains since our March 2017 report. At the same time, the plan partially addresses or does not address five of the required elements called for by the Act, such as delineating the total resources required by VBA and the Board to implement and administer the new appeals process and address legacy appeals. The plan also is not fully responsive to our past recommendations and does not reflect a number of sound planning practices that are essential for gauging progress, establishing accountability, and linking resources to results. One such key practice is articulating a desired “end state”—a vision for what successful implementation would look like for the new appeals process as well as the wind-down of the legacy process, such as accurate and timely processing of appeals while ensuring veteran satisfaction. Without establishing a complete and balanced set of goals and related performance measures to achieve this end state and monitoring and assessing progress along the way, VA risks falling short of its overarching objective—to improve timeliness of appeals decisions for veterans overall. By not fully articulating how it plans to monitor workloads and devote resources to both the new and legacy processes, VA runs the risk of disadvantaging veterans with legacy appeals relative to those in the new process, or vice versa. Just as important is establishing a robust integrated master schedule— rather than a high-level timeline—that is built upon and clearly reflects extensive detailed planning and includes all of the activities necessary to execute the program and interdependencies between these activities. Without such a road map, VA’s appeals plan does not provide reasonable assurance that decision makers have the essential information needed to manage this complex and important program. We are encouraged that VA has taken some steps toward assessing risks, including establishing a risk register and implementing RAMP to collect information on the two VBA appeals options; however, unless VA assesses risks against a balanced set of goals and measures, VA may not be fully aware of risks that may impede successful implementation of appeals reform. Further, although VA will undoubtedly learn from the RAMP experience, it may not learn all that it should from its efforts without (1) establishing clear criteria for what success looks like (or the circumstances that would cause VA to consider making course corrections) and (2) building in time to take stock of the lessons learned before moving to full implementation. VA’s plan places a lot of weight on RAMP to, among other efforts, mitigate risk and generate estimates of the resources needed for successful implementation after fiscal year 2018, even though RAMP does not fully test options for appealing to the Board that will be available to veterans after full implementation. Unless VA addresses key risks associated with fully implementing appeals reform—by either testing or conducting sensitivity analyses for all five appeals options, to better understand potential workloads at the Board—VA runs the risk of fully implementing the process without knowing if it is improving the process for veterans. In our forthcoming report, we anticipate making recommendations to address these issues. Specifically, we are preliminarily considering recommending that the Secretary of Veterans Affairs: address all of the required elements in the Act in VA’s appeals plan to Congress—including delineating resources required for all VBA and Board appeals options—using sensitivity analyses and RAMP results, where appropriate and needed. clearly articulate in VA’s appeals plan how VA will monitor and assess the new appeals process compared to the legacy process, including specifying a balanced set of goals and measures—such as timeliness goals for all VBA appeals options and Board dockets, and measures of accuracy, veteran satisfaction, and cost—and related baseline data. augment the master schedule for VA’s appeals plan to reflect all activities—such as RAMP and modifications to IT systems—as well as assigned responsibilities, interdependencies, start and end dates for key activities for each workgroup, and resources, to establish accountability and reduce overall risk of implementation failures. ensure that the appeals plan more fully addresses risk associated with appeals reform—for example, by assessing risks against a balanced set of goals and measures, articulating success criteria and an assessment plan for RAMP, and testing or conducting sensitivity analyses of all appeal options—prior to fully implementing the new appeals process. Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. For further information about this testimony, please contact Elizabeth Curda at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Other key contributors to this testimony include Michele Grgich (Assistant Director), James Whitcomb (Analyst in Charge), and Rachael Chamberlin. In addition, key support was provided by Susan Aschoff, Mark Bird, David Chrisinger, Daniel Concepcion, Clifton Douglas, Alex Galuten, Nisha Hazra, Melissa Jaynes, Benjamin Licht, Patricia McClure, Sheila McCoy, Lorin Obler, Gloria Proa, Almeta Spencer, James Sweetman, Walter Vance, and Greg Whitney. To assess the extent to which VA’s appeals plan addresses the required elements in the Veterans Appeals Improvement and Modernization Act of 2017 (the Act), we first identified and developed a checklist reflecting each required element for VA’s appeals plan (including sub-parts) under section 3(a) and (b) of the Act. To compare the required elements and their sub-parts against VA’s appeals plan and supplemental materials provided, we developed decision rules for determining whether the VA’s appeals plan addressed, partially addressed, or did not address each required element. Specifically, we concluded that VA’s plan addressed (or partially addressed) a required element if the plan included information related to all (or some) subparts of the requirement. We focused on the plan as presented, rather than auditing the information VA relied on in developing the plan. For example, the Act’s section 3(b)(10) required VA’s plan to include a description of the modifications to the IT systems that VBA and the Board require to carry out the new appeals system, including cost estimates and a timeline for making the IT modifications. We concluded that VA’s plan addressed all sub-parts of this element because it provided a description of required IT modifications, a reference to costs included in the Appeals Modernization IT budget, and a timeline. However, our determination that VA addressed this element should not be construed to necessarily mean that VA fully identified or described all IT requirements, or provided complete estimated costs and timelines associated with those requirements, or that the information in VA’s appeals plan comported with sound planning practices. This type of assessment was outside the scope of this objective. Table 2 summarizes our assessment of VA’s appeals plan against the 22 required elements in the Act.", "summary": "VA's disability compensation program pays cash benefits to veterans with disabilities connected to their military service. In recent years, the number of appeals of VA's benefit decisions has been rising. For decisions made on appeal in fiscal year 2017, veterans waited an average of 3 years for resolution by either VBA or the Board, and 7 years for resolution by the Board. The Veterans Appeals Improvement and Modernization Act of 2017 makes changes to VA's current (legacy) appeals process, giving veterans new options to have their claims further reviewed by VBA or appeal directly to the Board. The Act requires VA to submit to Congress and GAO a plan for implementing a new appeals process, and includes a provision for GAO to assess VA's plan. This testimony focuses on the extent to which VA's plan: (1) addresses the required elements in the Act, and (2) reflects sound planning practices identified in prior GAO work. GAO's work entailed reviewing and assessing VA's appeals plan and related documents against sound planning practices, and soliciting VA's views on GAO's assessments. The Department of Veterans Affairs' (VA) plan for implementing a new disability appeals process while attending to appeals in the current process addresses most, but not all, elements required by the Veterans Appeals Improvement and Modernization Act of 2017 (Act). VA's appeals plan addresses 17 of 22 required elements, partially addresses 4, and does not address 1. For example, not addressed is the required element to include the resources needed by the Veterans Benefits Administration (VBA) and the Board of Veterans' Appeals (Board) to implement the new appeals process and address legacy appeals under the current process. VA needs this information to certify, as specified under the Act, that it has sufficient resources to implement appeals reform and make timely appeals decisions under the new and legacy processes. VA's appeals plan reflects certain sound planning practices, but it could benefit from including important details in several key planning areas: Performance measurement : VA's plan reflects steps taken to track performance, but could articulate a more complete and balanced set of goals and measures for monitoring and assessing performance on a range of dimensions of success. Specifically, the plan reports that VA is developing a process to track timeliness of the new and legacy processes. However, contrary to sound planning practices, the plan does not include timeliness goals for all five appeals options available to veterans, does not include goals or measures for additional aspects of performance (such as accuracy or cost), and does not explain how VA will monitor or assess the new process compared to the legacy process. Unless VA clearly articulates a complete and balanced set of goals and measures, it could inadvertently incentivize staff to focus on certain aspects of appeals performance over others or fail to improve overall service to veterans. Project management : VA's plan includes a master schedule for implementing the new appeals plan; however, this schedule falls short of sound practices because it does not include key planned activities—such as its pilot test of two of the five appeals options. In addition, the schedule does not reflect other sound practices for guiding implementation and establishing accountability—such as articulating interim goals and needed resources for, and interdependencies among, activities. Unless VA augments its master schedule to include all key activities and reflect sound practices, VA may be unable to provide reasonable assurance that it has the essential program management information needed for this complex and important effort. Risk assessment : VA has taken steps to assess and mitigate some risks related to appeals reform by, for example, pilot testing two of the five appeals options through its Rapid Appeals Modernization Program (RAMP). However, as designed, RAMP does not include key features of a well-developed and documented pilot test. For example, VA has not articulated how it will assess RAMP before proceeding with full implementation. In addition, RAMP is not pilot testing three options and, as a result, VA will not have data on the extent to which veterans will appeal directly to the Board when given the option. Unless VA identifies and mitigates key risks associated with implementing a new process, VA is taking a chance that untested aspects will not perform as desired. In its forthcoming report, GAO is considering recommending that VA: fully address all legally required elements in its appeals plan, articulate how it will monitor and assess the new appeals process as compared to the legacy process, augment its master schedule for implementation, and more fully address risk.", "document_type": "gao"}
{"report": "Software development approaches have evolved over time. DOD weapon system acquisition programs have traditionally developed software using what is known as the waterfall development approach, first conceived in 1970 as linear and sequential phases of development over several years that result in a single delivery of capability. Figure 1 depicts an overview of the waterfall approach. Within industry, software development has evolved with the adoption of newer approaches and tools. For example, while a traditional waterfall approach usually is often broadly scoped, multiyear, and produces a product at the end of a sequence of phases, an incremental approach delivers software in smaller parts, or increments, in order to deliver capabilities more quickly. This development technique has been preferred for acquiring major federal IT systems, to the maximum extent practicable, and in OMB guidance since at least 2000. In addition, iterative development promotes continual user engagement with more frequent software releases to users. Figure 2 shows an overview of incremental and iterative development. DevOps is a more recent type of software development first used by industry around 2009. According to the Defense Innovation Board, DevOps represents the integration of software development and software operations, along with the tools and culture that support rapid prototyping and deployment, early engagement with the end user, and automation and monitoring of software. Figure 3 shows a notional representation of the DevOps approach based on DOD and industry information. There are also a variety of other software development approaches. Incremental, Iterative, and DevOps approaches are further described as follows: Incremental development sets high level requirements early in the effort, and functionality is delivered in stages. Multiple increments deliver a part of the overall required program capability. Several builds and deployments are typically necessary to satisfy approved requirements. DOD guidance for incremental development for software-intensive programs states that each increment should be delivered within 2 years, and OMB guidance issued pursuant to FITARA requires delivery of software for information technology investments in 6-month increments. Iterative development takes a flexible approach to requirements setting. In this approach, requirements are refined in iterations based on user feedback. We include Agile development approaches in this category of development; although most Agile approaches include aspects of both iterative and incremental development, as shown in figure 4. The Agile approach was first articulated in 2001 in what is known as the Agile Manifesto. The Agile Manifesto states the importance of four values: (1) individuals and interactions over processes and tools, (2) working software over comprehensive documentation, (3) customer collaboration over contract negotiation, and (4) responding to change as opposed to following a pre-set plan. Approaches that share common Agile principles include: Scrum, Extreme Programming, and Scaled Agile Framework, among others. These approaches stress delivering the most value as early as possible and constantly improving it throughout the project lifecycle based on user feedback. Within industry, Agile development approaches typically complete iterations within 6 weeks, and deliver working software to the user at the end of each iteration. According to DOD and industry, iterative development approaches have led to quicker development at lower costs and have provided strategic benefit through rapid response to changing user needs. DevOps is a variation of Agile that combines “development” and “operations,” emphasizing communication, collaboration, and continuous integration between both software developers and users. According to the Software Engineering Institute, DevOps is commonly seen as an extension of Agile into the operations side of the process, implementing continuous delivery through automated pipelines. In general, all stakeholders—including operations staff, testers, developers, and users—are embedded on the same team from the project’s inception to its end, ensuring constant communication. Automated deployment and testing is used instead of a manual approach, and the developer’s working copies of software are synchronized with the users. Software code is continuously integrated and delivered into production or a production-like environment. According to industry reports, the use of DevOps may lower costs due to immediate detection of problems as well as result in a greater confidence in the software because the users have continuous visibility into development, testing, and deployment. According to DOD officials from the Undersecretary of Defense, Research and Engineering, adopting Agile and DevOps within DOD weapon system acquisitions—which includes DOD space programs—is challenging and requires programs to adopt comprehensive strategies that cover broad topics. Officials said these strategies should include plans for cultural adoption by the program office and contractor; training and certification for program office and contractor personnel; and tools, metrics, and processes that support continuous integration and delivery, among others. While there are a variety of approaches to developing software, involving users in early stages and throughout software development helps detect deficiencies early. Industry studies have shown it becomes more expensive to remove conceptual flaws the later they are found. Previous GAO reports as well as other DOD and industry studies have also found that user involvement is critical to the success of any software development effort. For example, we previously reported that obtaining frequent feedback is linked to reducing risk, improving customer commitment, and improving technical staff motivation. We also previously reported that two factors critical to success in incremental development were involving users early in the development of requirements and prior to formal end-user testing. In the Fiscal Year 2010 NDAA, Congress directed DOD to develop and implement a new acquisition process for information technology systems that, among other things, include early and continuous involvement of the user. This statute, in addition to DOD’s 2010 report to Congress in response to the statute, and DODI 5000.02 identify characteristics of effective user engagement for DOD acquisitions, including: Early engagement: Users are involved early during development to ensure that efforts are aligned with user priorities. Continual engagement: Users are involved on a regular, recurring basis throughout development to stay informed about the system’s technical possibilities, limitations, and development challenges. Feedback based on actual working software: User feedback during development is based on usable software increments to provide early insight into the actual implementation of the solution and to test whether the design works as intended. Feedback incorporated into subsequent development: User feedback is incorporated into the next build or increment. Defense space systems typically consist of multiple segments: one or more satellites, ground control systems, and, in some cases, terminals for end-users. Each segment depends on software to enable critical functionality, such as embedded software in satellite vehicles, in applications installed on computer terminals in ground control stations, or embedded signal processing software in user terminals to communicate with satellites, shown in figure 5. We have previously reported on significant cost growth and schedule delays in numerous DOD space systems, with some space program costs rising as much as 300 percent, and delays so lengthy that some satellites spend years in orbit before key capabilities are able to be fully utilized. In particular, the programs described below have experienced significant software challenges, including addressing cybersecurity requirements, which have contributed to cost growth and schedule delays. The Air Force's JMS program aims to replace an aging space situational awareness and command and control system with improved functionality to better track and catalogue objects in the earth's orbit to support decision making for space forces. Increment 2 is to replace existing systems and deliver additional mission functionality. The Air Force is providing this functionality in three deliveries: the first delivery—Service Pack 7—provided hardware and software updates and was delivered in September 2014; the second delivery—Service Pack 9—aims to improve functions currently being performed, such as determining space object orbits and risks of collision; and the final delivery—Service Pack 11— aims to provide classified functionality. The government is serving as the system integrator directly managing the integration of government and commercially developed software onto commercial, off-the-shelf hardware, so there is no prime contractor. Historical software development challenges include: In 2015, we found that inconsistencies in the program’s software development schedule made it unclear whether the program would be able to meet its remaining milestones. The same year, the program declared a schedule breach against its baseline due, in part, to delays in resolving deficiencies identified during software testing. In 2016, DOD noted that the revised schedule was still highly aggressive with a high degree of risk because the program was concurrently developing and testing software. In 2017, developmental tests found a number of mission critical software deficiencies, which delayed operational testing. The Director of Operational Test and Evaluation also noted that additional work remained to help provide adequate cyber defense for JMS. During operational testing in 2018, JMS was found not operationally effective and not operationally suitable due, in part, to missing software requirements, urgent deficiencies that affected system performance, and negative user feedback. Mobile User Objective System (MUOS) The Navy’s MUOS program aims to provide satellite communications to fixed and mobile terminal users with availability worldwide. MUOS includes a satellite constellation, a ground control and network management system, and a new waveform for user terminals. The ground system includes the ground transport, network management, satellite control, and associated infrastructure to both operate the satellites and manage the users’ communications. The MUOS constellation is complete, and, according to program officials, software development officially ended in 2012 with the delivery of the waveform software. However, the user community still cannot monitor and manage MUOS. MUOS has two types of users: ground operators responsible for managing the MUOS communications network, and the military users of radios. Space and Missile Defense Command / Army Forces Strategic Command (SMDC/ARSTRAT) was the user representative while MUOS was developed. While DOD allowed the program to move into sustainment—the phase after development is formally completed—the program continues to resolve challenges with the ground segment, and the contractor continues to deliver software updates to address deficiencies. In 2017, the program transitioned its software sustainment efforts to an Agile development approach in preparation for a follow-on operational test currently scheduled to begin in June 2019. While Lockheed Martin Space Systems is the prime contractor for MUOS, we evaluated software efforts conducted by General Dynamics, the subcontractor performing software development. Historical software development challenges include: In 2014, DOD found that 72 percent of the software was obsolete. Also in 2014, operational testing was delayed due to software reliability issues in the ground system and waveform. In 2015, we found that over 90 percent of MUOS’ planned capability was dependent on resolving issues related to integrating the MUOS waveform, terminals, and ground systems. Also in 2015, operational tests determined MUOS was not operationally effective, suitable, or survivable due in part to cybersecurity concerns in the ground system. As of 2016, there were still existing and emerging cybersecurity vulnerabilities to be addressed. Lockheed Martin Space Systems (Prime) General Dynamics (Software development subcontractor) Contract Type: Cost Plus Incentive and Award Fee/Fixed Price Incentive (Firm Target) and Award Fee Naval Computer and Telecommunications Area Master Station Pacific (NCTAMS PAC) Space and Missile Defense Command / Army Forces Strategic Command (SMDC/ARSTRAT) Next Generation Operational Control System (OCX) The Air Force’s OCX program is designed to replace the current ground control system for legacy and new GPS satellites. OCX software is being developed in a series of blocks: Block 0 is planned to provide the launch and checkout system and support initial testing of GPS III satellites and cybersecurity advancements. Blocks 1 and 2 are planned to provide command and control for previous generations of satellites and GPS III satellites as well as monitoring and control for current and modernized signals. The OCX contractor delivered Block 0 in September 2017. The Air Force took possession of Block 0 in October 2017 by signing a certificate of conformance, and will accept it at a later date after Block 1 is delivered. Historical software development challenges include: In 2013, DOD paused OCX development due to incomplete systems engineering, which led to continuous rework and deferred requirements. In 2015, we reported that, among other things, OCX had significant difficulties related to cybersecurity implementation. In 2016, the program declared a Nunn-McCurdy unit cost breach. Also in 2016, the contractor began implementing DevOps at the recommendation of Defense Digital Service but, according to the program office and contractor, only planned to automate development without the operations component of DevOps. The contractor did not achieve initial planned schedule efficiencies. In 2017, the Air Force accepted Block 0 despite over 200 open software defects. According to the program, when Block 0 was accepted there was also a plan to resolve the open software defects by the time of the first launch. Since then, according to the program office, all necessary defects related to launch have been addressed. In 2018, DOD noted that the schedule was at risk since the program made aggressive assumptions in its plan to develop, integrate, test software, and resolve defects. Space-Based Infrared System (SBIRS) The Air Force’s SBIRS program is an integrated system of both space and ground elements that aim to detect and track missile launches. SBIRS is designed to replace or incorporate existing defense support ground stations and satellites to improve upon legacy system timeliness, accuracy, and threat detection sensitivity. The Air Force is delivering the SBIRS ground system in one program with two increments: the first increment became operational in 2001 and supports functionality of existing satellites. The second increment, which is still in development, is designed to provide new space segments, mission control software and hardware, and mobile ground capability. The Air Force is delivering these capabilities in multiple blocks: Block 10 was accepted in 2016 and introduced new ground station software and hardware. Block 20 is expected to be complete by late 2019 and is planned to further improve ground station software. Historical software development challenges include: In 2001, 2002, and 2005, cost increases and schedule delays due, in part, to software complexity problems led to four separate Nunn- McCurdy unit cost breaches. In September 2007, we found that the amount of rework resulting from unresolved software discrepancies was contributing to cost growth and schedule delays. In addition, the program had software algorithms that were not yet completed or demonstrated, hundreds of open deficiency reports, and a lack of coordination between space and ground system software databases. In 2016, DOD said that software deficiencies were contributing to delays in delivering the ground architecture. In 2018, DOD noted that flight software development remained a concern to the overall program schedule. According to SBIRS users and the program office, cybersecurity issues found during Block 10 testing are still being addressed as a part of the Block 20 effort. DOD programs we reviewed frequently did not involve users early or continually during development, base user feedback on actual working software, or incorporate user feedback into subsequent software deliveries. Most programs had plans to incorporate these elements of user engagement throughout their software development efforts, but they often did not follow those plans due, in part, to the lack of specific guidance on user involvement and feedback. Regarding frequency of software delivery, while DODI 5000.02 suggests that programs deliver incremental software deliveries every 1 to 2 years, the programs we reviewed often continued to deliver software consistent with the long delivery schedules common to waterfall development. DOD is taking steps to address this issue. The four programs we reviewed often did not demonstrate key characteristics of effective user engagement as summarized below: Early engagement. OCX involved users early and JMS planned to involve users early but, in practice, did not do so; SBIRS and MUOS did not plan to involve users early in software development. Continual engagement. JMS, OCX, and SBIRS all planned to continually involve users but, in practice, did not fully do so; MUOS did not plan to do so. Feedback based on actual working software. OCX and SBIRS have provided users opportunities to provide such feedback but only years into software development; JMS and MUOS did not provide opportunities for feedback. Feedback incorporated into subsequent development. JMS, OCX, and SBIRS all planned to incorporate user feedback but, in practice, have not done so throughout development; MUOS did not plan to do so during software development. Program efforts to involve users often did not match what their planning documentation described. In addition, when user input was collected, program officials did not capture documentation of how user feedback was addressed. Further, we found that, in practice, none of the programs we reviewed had users providing feedback on actual working software until years after system development began. This was the case even for programs utilizing Agile or iterative-incremental software development approaches, where user involvement and feedback from using functional systems early in the development cycle is foundational. These shortcomings were due, in part, to the lack of specific guidance on user involvement and feedback. Both DODI 5000.02 and DOD’s guiding principles for delivering information technology acquisitions note that software should be developed via usable software deliveries to obtain user acceptance and feedback for the next segment of work, but this guidance lacks specificity. In particular, DOD does not specify when to involve users and request their feedback, how frequently to seek user involvement and feedback on software deliverables, how to report back to users on how that feedback was addressed, and how to document the results of user involvement and feedback. As a result of programs’ shortcomings with user involvement and feedback, programs risk delivering systems that do not meet user needs. In selected cases, delivered software was deemed operationally unsuitable by DOD testers and required substantial rework. Further details on the extent to which programs implemented the four key characteristics are described below. JMS: Program documents created at the start of JMS system development contain specific operating procedures for conducting interactions with the user community—Air Force personnel who track and catalogue objects in orbit—during acquisition and fielding. However, the program has not followed these operating procedures during system development. Early Engagement. The JMS program office planned to involve users early in development but, in practice, did not do so. JMS program documentation states that users were to be involved in user engagement sessions within the first 4 weeks of iterative development. However, the first documented user engagement session was held more than a year after development start. Continual Engagement. The JMS program office planned to engage users throughout development but, in practice, did not do so. JMS program documentation states that user engagement sessions are to be held regularly during development—roughly every 2 to 4 weeks. However, in practice, program officials told us they only involved users as needed during software development. We found that the frequency of user engagement events varied from several weeks to more than 6 months. According to program officials, there were limited users available, and their operational mission duties were prioritized over assisting with system development. Feedback Based on Actual Working Software. The JMS program office did not provide users an opportunity to give feedback based on actual working software during development. According to program documentation, designs and notional drawings, not working software, were to be used for user engagement sessions. While JMS did provide users opportunities to provide feedback, this feedback was not on actual working software. Program officials said the goal of these events was never intended to include user feedback on actual working software. However, users told us that when they were finally able to use the system for the first time, 4 years after development started, it did not function as needed. The software did not execute what it had been designed to do, and earlier user engagement on actual working software may have identified these issues. Feedback Incorporated Into Subsequent Development. The JMS program office planned to incorporate user feedback into development but, in practice, did not do so. JMS program documentation states that the program will document user feedback from user engagement events using summary notes communicated back to the user. However, JMS users said it was often unclear if their feedback was incorporated. For example, in March 2016, a user engagement event was held to discuss any questions and concerns relating to the planned system’s conjunction assessment—a key feature that predicts orbit intersection and potential collision of space objects— that resulted in 8 user-identified issues. When we met with the users in 2018, they told us that conjunction assessment issues remained unaddressed, and they would still be reliant on the legacy system to fully execute the mission and perform their duties. The legacy system is still needed, they said, because the program deferred critical functions, and the most recent operational test found the system to be operationally unsuitable. MUOS: The MUOS program office did not engage users—Army Forces Strategic Command personnel who support the narrowband and wideband communications across the Air Force, Marines, Navy, and Army—during software development but are engaging users while developing software during sustainment, the acquisition phase after development when the program mainly supports and monitors performance. Following the end of development, at an operational test event in 2015, DOD testers deemed the system was operationally unsuitable. The MUOS program office moved to an Agile development approach in 2017 to address software deficiencies in preparation for the next operational test event. Early Engagement. The MUOS program office did not engage users early in development. Program documentation does not describe any plans for user engagement or involvement during development and, according to program officials, no users evaluated the actual system during development. Continual Engagement. The MUOS program office did not continually engage with users. Program documentation does not describe any plans for user engagement or involvement during development. Program officials said no users evaluated the system during development because there were no users with real world experience on a system like MUOS. However, as previously noted, SMDC/ARSTRAT represented end users’ interests during MUOS development. Feedback Based on Actual Working Software. The MUOS program office did not provide users an opportunity to give feedback based on actual working software. Program documentation does not describe a process for obtaining user feedback based on actual working software. The first time users had a chance to fully operate the system was after development ended, in preparation for operational testing in 2014, which identified numerous defects. Additionally, MUOS users said that they have since identified 128 functions in 11 critical areas that must be addressed or they will not accept the system. Users also said that some of the vulnerabilities found during operational testing, including cybersecurity vulnerabilities, have been deferred. Feedback Incorporated Into Subsequent Development. The MUOS program office did not incorporate user feedback into development. Program documentation did not describe plans to gain user feedback or acceptance into the development of the MUOS system. In addition, users and the contractor told us that program officials did not allow direct interaction during development due to a concern that such interactions could lead to changes in system requirements. The program office said that user involvement to-date has not caused delays to testing or software delivery. OCX: The OCX program had limited user engagement, but has recently held user engagement events based on releases of actual working software. The program has made efforts to obtain feedback from users, but users have noted there is no time in the schedule to address much of their feedback prior to delivering the system. Early Engagement. The OCX program office involved users early in development in accordance with its plans. From 2011, OCX users were involved in technical meetings where they provided feedback on the concept of operations and the design of the system. Continual Engagement. The OCX program office planned to engage users throughout development but, in practice, did not fully do so. OCX planning documentation includes multiple opportunities for user engagement at various stages of system development, including operational suitability and “hands-on” interaction with an integrated system. According to the program office, numerous events were held for users to give feedback on the system. However, since 2012, the program has only held one of its planned events to address operational suitability. In addition, other opportunities for users to operate the system have been removed to accommodate the program’s schedule, such as “day in the life” events that allowed users to validate the system as they would actually operate it. Users said that removing events like these created fewer opportunities to identify and resolve new deficiencies. Feedback Based on Actual Working Software. OCX did not plan to provide users an opportunity to give feedback based on actual working software but, in practice, did so years into development. OCX planning documents rely on simulations and mock-ups for evaluating system usability. However, users told us that mock-ups do not allow them to test functionality and may not be representative of the final delivered product. Starting in 2014—2 years after development started—users had opportunities to review the limited functionality available at the time. Since 2017, users said they were able to test working software. Feedback Incorporated Into Subsequent Development. The OCX program office planned to incorporate user feedback into development but, in practice, did not do so throughout development. OCX planning documentation includes a user comment response process that would collect and validate user comments and communicate results back to the users. According to the program office, for OCX Block 0, users provided feedback that was incorporated prior to the first launch. While OCX users said that they have the opportunity to provide feedback, there is a growing list of unaddressed Block 1 issues to be resolved. Some of these feedback points, if left unresolved, may result in operational suitability concerns and a delayed delivery to operations. According to the program office, critiques from the users have either been closed, incorporated into the OCX design, or are still under assessment between the contractor and users. A majority of user feedback points for the OCX iteration currently in development remain unresolved, as depicted in figure 6. In 2016, DOD told the Air Force and the contractor to utilize DevOps. As previously noted, DevOps is intended to release automated software builds to users in order to unify development and operations and increase efficiency. The contractor stated it implemented DevOps in 2016. However, both the Air Force and the contractor admitted in 2018 they never had plans to implement the “Ops” side of DevOps, meaning they didn’t plan to automatically deliver software builds to the users. Without incorporating the users and experts in maintainability and deployment, the program is not benefiting from continuous user feedback. SBIRS: SBIRS users—Air Force personnel who operate, command, and control SBIRS satellites to detect and track missile launches—were not involved during early system development and the program only recently increased the frequency of user events. SBIRS users have been able to provide feedback on working software but are unaware how this feedback is incorporated into software development. Early Engagement. The SBIRS program office did not engage users early in development because users were not in place and user groups were not defined. The program planning documentation that instituted the framework for user involvement was not in place until 2004. According to SBIRS users and test officials, this resulted in a poor interface design and users being unable to respond adequately to critical system alerts when using the system. Though the program contractor told us that user involvement is critical for ensuring the developers deliver a system that users need and will accept, DOD officials said that users were not integrated with the development approach until the software was ready to be integrated into a final product. Continual Engagement. The SBIRS program office planned to engage users throughout development but, in practice, did not do so. SBIRS planning documentation includes users involved in regular working groups throughout development. SBIRS users began to be involved with system development in 2013 on a weekly basis. Users were not involved during the 17 years of system development prior to this time. Feedback Based on Actual Working Software. The SBIRS program did not plan to provide users an opportunity to give feedback based on actual working software during development but, in practice, did so years into development. SBIRS documentation only outlines user engagement as reviewing and commenting on design plans. While users were able to provide feedback on working software in 2017, these events did not occur until 21 years after the start of development when the software was ready to be integrated. When users were able to provide feedback, they identified issues with the training system and cybersecurity. Feedback Incorporated Into Subsequent Development. The SBIRS program planned to incorporate user feedback into development but, in practice, did not do so. SBIRS planning documentation includes methods for users to provide feedback, but users said there is no feedback loop between them and the developers; therefore, users are unaware if their comments and concerns are addressed or ignored. DOD officials and DODI 5000.02 point to the benefits of delivering smaller packages of software more frequently, but the four programs we examined have generally delivered them infrequently. DOD is beginning to take steps to address these issues, such as establishing an independent advisory panel and considering recommendations issued by the Defense Science Board on the design and acquisition of DOD software. Selected programs continue to focus on infrequent deliveries. According to industry practices, short, quick deliveries allow a program to deliver useful, improved capabilities to the user frequently and continually throughout development. Within industry, iterations for Agile development approaches are typically up to 6 weeks, and working software is delivered to the user at the end of each iteration. In addition, DODI 5000.02 states that for incremental development increments should be delivered within 2 years. While two programs in our review—JMS and MUOS—say they have undertaken elements of Agile development, which emphasize smaller deliveries of frequent software to users, they still struggled to move away from the long delivery schedules common to waterfall development. In addition, the two programs with incremental development—OCX and SBIRS—have not delivered within suggested DOD time frames. See figure 7 below for program software deliveries. Further observations on each of the four programs follow: JMS program officials and documentation indicate that the program is using an Agile development approach to deliver smaller, rapid deliveries to minimize risk. According to JMS program documentation, software releases were to be delivered in 6-month intervals. However, the program only delivered actual working software once during development—a delivery of capability in 2014. The program was operationally accepted in late 2018. However, only 3 of 12 planned capabilities were accepted for operational use. The MUOS program used a traditional waterfall approach during development from 2004 to 2012 and has only had one overall software product delivery during that time. The program completed the software in 2012, yet continued to make changes during sustainment using the waterfall methodology and adopted an Agile approach in 2017 to address deficiencies. Since this adoption, it has delivered software more frequently—about every 3 months. This is a significant improvement over the delivery time frames during the MUOS waterfall development approach. The OCX program is using an “iterative-incremental” development approach. According to OCX software development plans, this approach was to enable early and frequent deliveries of capabilities. Specifically, the program plans for iterations to be completed every 22 weeks. However, since software development began in 2012, OCX has delivered just one increment of software, referred to by the OCX program as a block. The SBIRS program began in 1996, using a waterfall approach, and has had two deliveries of software. SBIRS Increment 1 was delivered in 2001, and the next increment, SBIRS Increment 2, Block 10, was delivered 15 years later, in 2016. The next increment, SBIRS Increment 2, Block 20, is expected to be delivered in 2019. Part of the reason programs delivered larger software packages less frequently was the adherence to the process steps in the DODI 5000.02 that were designed under the waterfall approach. While DODI 5000.02 authorizes programs to tailor their acquisition procedures to more efficiently achieve program objectives, none of the programs that were trying to employ a newer development approach took steps to tailor procedures in order to facilitate development. For example, the OCX contractor said it was delayed by complying with technical reviews under a military standard for traditional waterfall approaches, such as the Preliminary Design Review, Critical Design Review, and others, but the OCX program did not alter these reviews, despite having flexibility to do so. The contractor told us a more tailored approach would enable execution of smaller iterations of software deliverables. Similarly, the JMS program office noted that it was not fully able to integrate Agile development practices because of all the different technical reviews, but JMS did not tailor these requirements to more efficiently achieve outcomes, despite flexibility to do so. DOD officials have acknowledged these challenges and have recently begun recommending steps to address them. Officials we spoke with from Defense Digital Service, Director of Operational Test and Evaluation, and DOD leadership said that rapid development of software using newer software practices does not fit with the requirements of the DOD acquisition process. Further, DOD’s Special Assistant for Software Acquisition said that DOD software development should be iterative, providing the critical capabilities in smaller, more frequent deliveries rather than delivering capabilities in a single delivery via traditional waterfall software development. In addition, other DOD officials we interviewed agreed that since DOD programs may not always know the full definition of a system’s requirements until late in development, additional flexibility to tailor acquisition approaches could improve software acquisitions. In acknowledging the challenges in moving from a waterfall model to a more incremental approach, various DOD groups have made recommendations to support delivery of smaller, more timely software deliverables: In February 2018, the Defense Science Board issued a series of recommendations to support rapid, iterative software development. The recommendations included requiring all programs entering system development to implement iterative approaches and providing authority to the program manager to work with users. In April 2018, the Defense Innovation Board made recommendations to improve DOD software acquisitions, such as moving to more iterative development approaches that would deliver functionality more quickly. In June 2018, the DOD Section 809 Panel recommended eliminating the requirements for Earned Value Management (EVM)—one of DOD’s primary program planning and management tools—in Agile programs. However, other DOD and industry guides state that Agile programs can still report EVM if certain considerations are made, such as an Agile work structure that provides a process for defining work and tracking progress of this work against planned cost and schedule. Pursuant to the Fiscal Year 2019 National Defense Authorization Act, DOD is required, subject to authorized exceptions, to begin implementation of each recommendation submitted in the final report of the Defense Science Board Task Force on the Design and Acquisition of Software for Defense Systems by February 2020. For each recommendation that DOD is implementing, it is to submit to the congressional defense committees a summary of actions taken; and a schedule, with specific milestones, for completing implementation of the recommendation. We intend to monitor DOD’s progress in implementing the recommendations. The programs we reviewed faced management challenges using commercial software, applying outdated software tools and metrics, and having limited knowledge and training in newer software development. DOD is taking steps to address these challenges. DOD has previously encouraged DOD acquisition programs to use commercial software where appropriate. For example, in 2000 and in 2003, DOD policy encouraged considering the use of commercial software. In addition, regulations continue to emphasize consideration of commercial software suitable to meet the agency’s needs in acquiring information technology. DOD officials said that, although the effort to maintain commercial software may be equivalent to developing such capabilities in-house, programs should still consider the use of commercial software because DOD and its contractors may lack the technical skillsets to develop a similar product. However, three of the programs we reviewed had difficulty integrating and maintaining modified commercial software during development: The JMS acquisition approach was to only use commercial and government-provided software with no new software development planned, but the commercial products selected were not mature and required additional development, contributing to schedule delays. The MUOS program underestimated the level of effort to modify commercial software, which increased cost and introduced schedule delays in completing both the ground system and the waveform. According to an Aerospace official who advised the program on software issues, the MUOS software development approach was to use a commercial software solution but with substantial modifications. In particular, the MUOS contractor planned to take a commercial cellular system and substantially modify it for MUOS. This official, along with the MUOS program office, said that underestimating the level of effort to modify and integrate the commercial software has been the program’s biggest challenge. In September 2015, we found that the OCX contractor was overly optimistic in its initial estimates of the work associated with incorporating open source and reused software. Further, according to the Air Force, OCX program managers and contractors did not appear to follow cybersecurity screening or software assurance processes as required. For example, open source software was incorporated without ensuring that it was cybersecurity-compliant. These problems led to significant rework and added cost growth and schedule delays to address the cybersecurity vulnerabilities and meet cybersecurity standards. In addition, in an independent assessment of OCX, officials from the MITRE Corporation said that there is a lack of appreciation for the effort required for commercial software integration, stating that the level of effort is “categorically underestimated.” Some program officials noted that commercial software updates led to system instability and increased costs. For example, OCX program officials said that updating an operating system version led to 38 other commercial software changes. Each of these changes had to be configured, which took considerable time and added cost to the program. Similarly, the SBIRS contractor said they have been concerned that updates to commercial software could create a domino effect of instability, and the risks could outweigh the benefits of the update. For example, if one commercial software product is updated and becomes unstable, instability may be introduced to other commercial software products and software components. On the other hand, not updating software products could lead to cybersecurity concerns. As we previously noted, developers of commercial software generally update software to address identified flaws and cybersecurity vulnerabilities. We also reported in a review of weapon systems cybersecurity that, although there are valid reasons for delaying or forgoing weapon systems patches, this means some weapon systems are operating, possibly for extended periods, with known vulnerabilities. In addition, the lifecycles of commercial software can contribute to management challenges when these products become obsolete. For example, in 2014, a MUOS Ground System Deep Dive review identified that 72 percent of the MUOS software was considered to be obsolete. According to program officials, commercial software became obsolete before or soon after it was fielded, especially for operating systems and browsers, due to the long MUOS development cycle. Software obsolescence is also among the top risks of the OCX program and has contributed to additional costs during development. DOD officials and others have started to acknowledge challenges in using commercial software. For example, as we previously reported in 2018, DOD has stated that many weapon systems rely on commercial and open source software and are subject to any cyber vulnerabilities that come with them. While DOD states that using commercial software is a preferred approach to meet system requirements, some program officials we interviewed told us that the effort to modify and update commercial software is underestimated. DOD is working on helping programs understand commercial software risks. For example, in January 2018, DOD published a Guidebook for Acquiring Commercial Items. In addition, Defense Acquisition University offers several modules designed to address challenges in integrating commercial solutions. Three of the DOD programs we reviewed have experienced challenges in using outdated software tools or identifying appropriate performance metrics as they transition to newer software development approaches. Contractors continue to rely upon outdated software tools and experience challenges. We found that three of the programs we reviewed used tools that are considered outdated and lack the flexibility needed for iterative development. Contractors for three of the four programs we reviewed have experienced software development challenges due to outdated tools: The SBIRS contractor uses a suite of tools that is considered outdated for newer commercial approaches. For example, one of these tools relies on a central database that, if corrupted, will stop development work and could take days or weeks to fix. According to the contractor, fixing this database has led to multiple periods of downtime and schedule delays. The MUOS contractor also uses a toolset that is considered outdated by commercial software development experts. The program moved to a newer Agile development approach in 2017 but has retained an older software development toolset. The MUOS contractor said they are heavily reliant on these tools for development and do not anticipate changing the toolset. The OCX contractor also uses tools that are considered outdated by commercial approaches. According to the contractor, these tools have been in place for many years, and switching over to a new set of tools would not be in the best interest of the program because it could be disruptive to ongoing development. Defense Digital Service experts said that a particular suite of tools used by the OCX contractor is outdated because the tools lack the flexibility needed for iterative development. Both MUOS and SBIRS contractors said that they have had to train new employees to use their outdated tools. For example, the SBIRS contractor told us that when new employees begin work on the SBIRS program, they already know how to use newer tools but have to be trained on the outdated tools used for SBIRS development. The SBIRS contractor said this has affected retention of its workforce in some cases, and the program has allocated funding to transition to newer tools in order to better recruit and retain personnel. What is Cloud-Based Testing? Cloud-based testing uses cloud computing environments to simulate an application’s real-world usage. According to international standards, cloud testing can lead to cost savings, improved testing efficiency, and more realistic testing environments. Two contractors have taken steps to update their software tools to increase automation and cloud-based testing but have not yet experienced the anticipated efficiencies: The OCX contractor is attempting to employ cloud-based testing and a DevOps approach. The contractor said it had to gain approval from the DOD Chief Information Office to employ commercial cloud-based testing for the unclassified portions of OCX but it has not gained similar approval for the classified portion. The SBIRS contractor is using a software testing tool that would allow for faster automated testing but is not yet realizing the full benefit of its use. The SBIRS testers did not use this tool in the way it was intended. Specifically, the contractor said that when the software was deployed to the testing environment, testers deactivated the software at the end of their shifts instead of allowing it to run continuously until the tests were complete. The contractor said the testers did this because there were concerns over unauthorized access to the system if no one was present. As a result, the contractor separated the tests into 8-hour segments rather than allowing the tests to run continuously, reducing the effectiveness and value of automated testing. The Defense Science Board, Defense Innovation Board, and others have recommended DOD use tools that enable the developers, users, and management to work together daily. As noted, DOD is required to begin implementation of the recommendations made in the Defense Science Board report. Software metrics are measurements which provide insight to the status and quality of software development. Metrics may not support newer development approaches. We have previously found that leading developers track software-specific metrics to gauge a program’s progress, and that traditional cost and schedule metrics alone may not provide suitable awareness for managing iterative software development performance. Three programs have faced challenges in identifying and collecting metrics that provide meaningful insight into software development progress: JMS planned to collect traditional software development metrics to measure software size and quality, as well as Agile metrics that provide insight into development speed and efficiency. However, officials from the JMS government integrator managing sub-contracts said they lack regular reporting of metrics and access to data from subcontractors that would allow them to identify defects early. These officials said this was a challenge because the program has to run its own quality scans at the end of each sprint instead of being able to identify defects on a daily basis. MUOS program officials were able to receive Agile metrics from the contractor when they transitioned to Agile development, but they lacked access to the source data, which they said hindered their ability to oversee development. OCX program officials said they plan to use performance-based metrics throughout the remainder of the program. However, the metrics may not adequately track performance as intended. The Defense Contract Management Agency reviewed OCX metrics, particularly those related to DevOps, and expressed concern that program metrics may only measure total defects that were identified and corrected but may not provide insight into the complexity of those defects. DOD is taking steps to identify useful software development metrics and ways to include them in new contracts. DOD is aware of challenges with metrics and is taking actions to address the issues. For example, the Defense Innovation Board is consulting with commercial companies to determine what metrics DOD should collect; and the Air Force’s Space and Missile Systems Center has tasked The Aerospace Corporation with examining how to apply software performance metrics in contracts for DOD space programs. DOD offices such as the Defense Science Board and DOD Systems Engineering, as well as several Federally Funded Research and Development Centers including the Software Engineering Institute and The Aerospace Corporation, have also attempted to identify new metrics in correlation with advances in software development approaches. Two program offices we reviewed experienced challenges due to limited software development knowledge: OCX experienced an extended period of inefficient processes because it lacked an understanding of newer approaches. According to Defense Digital Service, when the Office of Secretary of Defense advised the OCX program in May 2016, it discovered that neither the program office nor contractor had been aware of the benefits of automated testing. Defense Digital Service helped the OCX contractor automate a process that had been taking as long as 18 months to one in which the same process takes less than a day. If the program office had been aware of newer software approaches, it could have recognized these inefficiencies much earlier and avoided unnecessary schedule delays. The MUOS contractor lacked an “Agile advocate” in the program office, which undermined its ability to fully employ an Agile development approach. For example, even after the contractor adopted an Agile approach, the program office directed the contractor to plan out all work across software builds in order to maintain control over requirements—similar to a waterfall approach but inefficient in Agile. According to the Software Engineering Institute, without an Agile advocate in a program’s leadership, organizations tend to do a partial Agile or “Agile-like” approach. Program officials from the programs we reviewed said that while they have taken some software development training, more would be beneficial. The JMS program office said that there are external training courses available locally as well as trainings at Air Force’s Space and Missile Systems Center, but neither are required. JMS program officials said that, while specific software training has not been required for the program outside of Defense Acquisition University certifications, courses on managing software-intensive programs would have been beneficial. Similarly, Defense Contract Management Agency officials told us that OCX program officials would have benefited from more software development training. The MUOS program office said its training on software acquisition, software and systems measurement, software planning supportability and cost estimating, and software policies and best practices was sufficient, but the program office did not have newer software development training prior to transitioning to an Agile development approach. DOD is working to improve software acquisition training requirements and update them to reflect changes in the software development industry. For example, in 2017, the Defense Acquisition University introduced a course on Agile software development that includes how Agile fits into the overall Defense Acquisition System and how to manage an Agile software development contract. DOD told us it is also working with the Defense Acquisition University to help inform a course on DevOps automation. Software is an increasingly important enabler of DOD space systems. However, DOD has struggled to deliver software-intensive space programs that meet operational requirements within expected time frames. Although user involvement is critical to the success of any software development effort, key programs often did not effectively engage users. Program efforts to involve users and incorporate feedback frequently did not match plans. This was due, in part, to the lack of specific guidance on the timing, frequency, and documentation for user involvement and feedback. The lack of user engagement has contributed to systems that were later found to be operationally unsuitable. Selected programs have also faced challenges in delivering software in shorter time frames, and in using commercial software, applying outdated software tools and metrics, and having limited knowledge and training in newer software development techniques. DOD acknowledges these challenges and is taking steps to address them. We are making the following two recommendations to DOD: The Secretary of Defense should ensure the department’s guidance that addresses software development provides specific, required direction on when and how often to involve users so that such involvement is early and continues through the development of the software and related program components. (Recommendation 1) The Secretary of Defense should ensure the department’s guidance that addresses software development provides specific, required direction on documenting and communicating user feedback to stakeholders during software system development. (Recommendation 2) We provided a draft of this product to the Department of Defense for comment. In its comments, reproduced in appendix II, DOD concurred. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of the report to the Acting Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; and interested congressional committees. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or ludwigsonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Senate and House reports accompanying the National Defense Authorization Act for Fiscal Year 2017 contained provisions for GAO to review challenges in software-intensive Department of Defense (DOD) space systems, among other things. This report addresses, for selected software-intensive space programs, (1) the extent to which these programs have involved users and delivered software using newer development approaches; and (2) what software-specific management challenges, if any, these programs have faced. To select the programs, we identified a non-generalizable, purposeful sample of four major defense programs representing different space military services where software is an essential component and where each program has experienced cost growth or schedule delays attributed, in part, to software challenges. We began our selection process with 49 DOD space programs from the U.S. Air Force and Navy services as identified by the Office of the Assistant Secretary of the Air Force for Space Acquisition and a GAO subject matter expert. We then narrowed our selection to 19 Major Defense Acquisition Programs (MDAP) and Major Acquisition Information System (MAIS) programs identified by DOD. Next, using information from prior GAO Annual Weapons Assessments, DOD Selected Acquisition Reports, DOD Defense Acquisition Executive Summary Reports, and the Defense Acquisition Management Information Retrieval system, we identified 15 programs that were software-intensive systems as defined in the international standard ISO/IEC/IEEE 42207. This standard states that a software- intensive system is one where software contributes essential influences to the design, construction, deployment, and evolution of the system as a whole. From these 15 programs, 8 were found to have had cost growth or schedule delays attributed, in some part, to software development. We further analyzed these 8 programs for unit cost or schedule breaches as defined in 10 U.S.C. § 2433 and 10 U.S.C. § 2366b, ultimately resulting in 7 programs. Finally, from these 7 programs, we chose a purposeful sample of 5 programs, ensuring representation from different DOD services and Acquisition Categories. Family of Advanced Beyond Line-of-Sight Terminals (FAB-T); Air Next Generation Operational Control System (OCX); Air Force MDAP Joint Space Operations Center Mission System Increment 2 (JMS); Air Force MAIS Mobile User Objective System (MUOS); Navy MDAP Space-Based Infrared System (SBIRS); Air Force MDAP We were unable to assess FAB-T software issues with the same level of detail as the other programs we reviewed because, despite prior software challenges, the program stated it does not have documentation that separately tracks software-related requirements or efforts. This brought our total to 4 selected programs. To address the objectives, we interviewed officials from the Undersecretary of Defense for Acquisition and Sustainment, Office of the Deputy Assistant Secretary of Defense for Systems Engineering, Office of Cost Assessment and Program Evaluation, Office of the Director of Operational Test and Evaluation, Defense Digital Service, Defense Innovation Board, and the Office of the Assistant Secretary of the Air Force for Space Acquisition. We also interviewed officials from the selected program offices and their respective contractors, subcontractor, integrator, space systems users, a DOD test organization, and Federally Funded Research and Development Centers. In addition, we conducted a literature search using a number of bibliographic databases, including ProQuest, Scopus, DIALOG, and WorldCat. We reviewed documentation that focused on software-intensive major military acquisitions. We conducted our search in March 2018. To determine how effectively selected DOD software-intensive space programs have involved users and adopted newer software development approaches, we reviewed applicable DOD policies, guidance, and federal statute that identify characteristics of user engagement. These sources were the Department of Defense Instruction (DODI) 5000.02; Office of the Secretary of Defense Report to Congress, A New Approach for Delivering Information Technology in the Department of Defense; and National Defense Authorization Act for Fiscal Year 2010. We supplemented this with Defense Science Board and Defense Innovation Board documentation, and other industry analyses. We then reviewed relevant program plans and documentation, such as human engineering and human systems integration plans, standard operating procedures, acquisition strategies, software development plans, and other program user engagement guidance to identify plans for user engagement. We then conducted interviews with space system users and analyzed software development documentation to evaluate the extent to which programs met these DOD user engagement characteristics. We also analyzed user feedback reports to identify trends in user feedback. We also examined DOD and OMB guidance and applicable leading practices to identify time frames for delivering software under incremental and iterative software development approaches, and we compared these time frames to program performance. To determine what software-specific management challenges, if any, selected programs faced, we reviewed reports and studies on software tools and metrics used to manage software programs, including GAO reports, DOD policies and guidance, and studies from the Software Engineering Institute. We then reviewed program documents, such as Software Development Plans, System Engineering Plans, System Engineering Management Plans, Software Resource Data Reports, Test and Evaluation Master Plans, Master Software Build Plans, and Obsolescence Plans, as applicable, as well as contracts and Statements of Work. We reviewed defect metrics and reports on amounts of new, reused, inherited, and commercial software; test and evaluation reports; program management reports; and external program assessments. We also evaluated program retrospectives and DOD reports on leading practices to understand how programs are making efforts to address challenges in these areas. We spoke with contractors and an applicable subcontractor and government integrator, program officials, and officials from Federally Funded Research and Development Centers to understand program issues, including program office and contractor training requirements. We conducted this performance audit from November 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Raj Chitikila, Assistant Director; Pete Anderson, Erin Carson, Jordan Kudrna, Matthew Metz, Roxanna Sun, and Jay Tallon made key contributions to this report. Assistance was also provided by Mathew Bader, Virginia Chanley, Susan Ditto, Sarah Gilliland, Carol Harris, Harold Podell, Andrea Starosciak, Anne Louise Taylor, and Alyssa Weir. Weapon Systems Cybersecurity: DOD Just Beginning to Grapple with Scale of Vulnerabilities. GAO-19-128. Washington, D.C.: October 9, 2018. Weapon Systems Annual Assessment: Knowledge Gaps Pose Risks to Sustaining Recent Positive Trends. GAO-18-360SP. Washington, D.C.: April 25, 2018. Information Technology: Agencies Need to Involve Chief Information Officers in Reviewing Billions of Dollars in Acquisitions. GAO-18-42. Washington, D.C.: January 10, 2018. Global Positioning System: Better Planning and Coordination Needed to Improve Prospects for Fielding Modernized Capability. GAO-18-74. Washington, D.C.: December 12, 2017. Information Technology Reform: Agencies Need to Improve Certification of Incremental Development. GAO-18-148. Washington, D.C.: November 7, 2017 Space Acquisitions: DOD Continues to Face Challenges of Delayed Delivery of Critical Space Capabilities and Fragmented Leadership. GAO-17-619T. Washington, D.C.: May 17, 2017. Defense Acquisitions: Assessment of Selected Weapon Programs. GAO-17-333SP. Washington, D.C.: March 30, 2017. Immigration Benefits System: U.S. Immigration Services Can Improve Program Management. GAO-16-467. Washington, D.C.: July 7, 2016. GPS: Actions Needed to Address Ground System Development Problems and User Equipment Production Readiness. GAO-15-657. Washington, D.C.: September 9, 2015. Defense Acquisitions: Assessments of Selected Weapon Programs. GAO-15-342SP. Washington, D.C.: March 12, 2015. Defense Major Automated Information Systems: Cost and Schedule Commitments Need to Be Established Earlier. GAO-15-282. Washington, D.C.: February 26, 2015. Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 2014. Software Development: Effective Practices and Federal Challenges in Applying Agile Methods. GAO-12-681. Washington, D.C.: July 27, 2012. Information Technology: Critical Factors Underlying Successful Major Acquisitions. GAO-12-7. Washington, D.C.: October 21, 2011. Space Acquisitions: Development and Oversight Challenges in Delivering Improved Space Situational Awareness Capabilities. GAO-11-545. Washington, D.C.: May 27, 2011. Significant Challenges Ahead in Developing and Demonstrating Future Combat System’s Network and Software. GAO-08-409. Washington, D.C.: March 7, 2008. Space Based Infrared System High Program and its Alternative. GAO-07-1088R. Washington, D.C.: September 12, 2007. Defense Acquisitions: Stronger Management Practices Are Needed to Improve DOD’s Software-Intensive Weapon Acquisitions. GAO-04-393. Washington, D.C.: March 1, 2004. Information Security: Effective Patch Management is Critical to Mitigating Software Vulnerabilities. GAO-03-1138T. Washington, D.C.: September 10, 2003. Test and Evaluation: DOD Has Been Slow in Improving Testing of Software-Intensive Systems. GAO/NSIAD-93-198. Washington, D.C.: September 29, 1993. Mission-Critical Systems: Defense Attempting to Address Major Software Challenges. GAO/NSAID-93-13. Washington, D.C.: December 24, 1992. Space Defense: Management and Technical Problems Delay Operations Center Acquisition. GAO/IMTEC-89-18. Washington, D.C.: April 20, 1989.", "summary": "Over the next 5 years, DOD plans to spend over $65 billion on its space system acquisitions portfolio, including many systems that rely on software for key capabilities. However, software-intensive space systems have had a history of significant schedule delays and billions of dollars in cost growth. Senate and House reports accompanying the National Defense Authorization Act for Fiscal Year 2017 contained provisions for GAO to review challenges in software-intensive DOD space programs. This report addresses, among other things, (1) the extent to which these programs have involved users; and (2) what software-specific management challenges, if any, programs faced. To do this work, GAO reviewed four major space defense programs with cost growth or schedule delays caused, in part, by software. GAO reviewed applicable statutes and DOD policies and guidance that identified four characteristics of effective user engagement. GAO reviewed program documentation; and interviewed program officials, contractors, and space systems users. GAO also analyzed program metrics, test and evaluation reports, and external program assessments. The four major Department of Defense (DOD) software-intensive space programs that GAO reviewed struggled to effectively engage system users. These programs are the Air Force's Joint Space Operations Center Mission System Increment 2 (JMS), Next Generation Operational Control System (OCX), Space-Based Infrared System (SBIRS); and the Navy's Mobile User Objective System (MUOS). These ongoing programs are estimated to cost billions of dollars, have experienced overruns of up to three times originally estimated cost, and have been in development for periods ranging from 5 to over 20 years. Previous GAO reports, as well as DOD and industry studies, have found that user involvement is critical to the success of any software development effort. For example, GAO previously reported that obtaining frequent feedback is linked to reducing risk, improving customer commitment, and improving technical staff motivation. However, the programs GAO reviewed often did not demonstrate characteristics of effective user engagement that are identified in DOD policy and statute: Early engagement. OCX involved users early; JMS planned to but, in practice, did not; SBIRS and MUOS did not plan to involve users early. Continual engagement. JMS, OCX, and SBIRS all planned to continually involve users but, in practice, did not fully do so; MUOS did not plan to do so. Feedback based on actual working software. OCX and SBIRS provided users opportunities to give such feedback but only years into software development; JMS and MUOS did not provide opportunities for feedback. Feedback incorporated into subsequent development. JMS, OCX, and SBIRS all planned to incorporate user feedback but, in practice, have not done so throughout development; MUOS did not plan to do so. As reflected above, actual program efforts to involve users and obtain and incorporate feedback were often unsuccessful. This was due, in part, to the lack of specific guidance on user involvement and feedback. Although DOD policies state that users should be involved and provide feedback on software development projects, they do not provide specific guidance on the timing, frequency, and documentation of such efforts. Without obtaining user feedback and acceptance, programs risk delivering systems that do not meet users' needs. In selected instances, the lack of user involvement has contributed to systems that were later found to be operationally unsuitable. The programs GAO reviewed also faced software-specific challenges in using commercial software, applying outdated software tools, and having limited knowledge and training in newer software development techniques. For example, programs using commercial software often underestimated the effort required to integrate such software into an overall system. Secondly, selected programs relied on obsolete software tools that they were accustomed to using but which industry had since replaced. Finally, GAO found that two of the reviewed programs lacked knowledge of more modern software development approaches. DOD has acknowledged these challenges and has efforts underway to address each of them. GAO is making two recommendations that DOD ensure its guidance that addresses software development provides specific, required direction on the timing, frequency, and documentation of user involvement and feedback. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "Postal retiree health benefits are provided as part of the Federal Employees Health Benefits Program (FEHBP). FEHBP covers federal employees and retirees, including postal and nonpostal retirees, who receive health insurance from companies that contract with OPM. Retiree participation is voluntary; in fiscal year 2018, about 500,000 postal retirees have participated in FEHBP. Funding requirements for postal retiree health benefits are established by law, which divides responsibility among USPS, the federal government, and postal retirees. USPS is responsible for a specific percentage of premiums, the federal government is responsible for paying a prorated share, and retirees are responsible for the rest. The funding requirements for these benefits changed in 2006. Before then, a “pay-as- you-go” system governed USPS’s payments, which required USPS to pay its share of premiums for current postal retirees. The 2006 Postal Accountability and Enhancement Act (PAEA) required USPS to start fully “prefunding” retiree health benefits. This meant that USPS was required to make annual prefunding payments to a newly established fund to build up funds to cover USPS’s share of future postal retiree health benefit costs. PAEA also established the RHB Fund as a new fund in the U.S. Treasury for USPS to deposit money into, and specified that beginning in fiscal year 2017, the fund would be used by OPM to pay USPS’s share of postal retiree premiums for health benefits. Under PAEA, the first 10 years of prefunding payments were fixed—ranging from $5.4 billion to $5.8 billion annually from fiscal years 2007 to 2016. From fiscal years 2007 through 2016, USPS was also required to continue “pay-as-you-go” payments for its share of premiums for current retirees. The permanent schedule for USPS payments to prefund postal retiree health benefits under PAEA started in fiscal year 2017. We have reported that USPS’s financial condition continues to deteriorate and its outlook is bleak. We have separately issued reports and testimonies that examined USPS’s financial condition, including its liabilities, and identified strategies and options for USPS and Congress to reduce postal costs, generate revenue, and restructure the funding of USPS’s pension and retiree health benefits. Looking forward, we have reported that USPS is facing unsustainable financial challenges as First- Class Mail volume continues to decline. USPS has recently reported that its revenue generation options are constrained, including by the price cap on market-dominant mail, and that any cost-cutting opportunities within its control are “relatively limited and dwindling.” USPS stated that the opportunity for further cost savings within its control will not come close to filling its financial gap. With respect to actions taken by companies and state governments, we have previously reported on the long-term trend for these organizations to eliminate or reduce retiree health benefits. Factors contributing to this decline include financial challenges for companies and states, current and expected retiree health benefit costs, and the legal ability to change retiree health benefit programs. The RHB Fund is on an unsustainable path and is projected to be depleted in 12 years under the status quo. USPS has missed approximately $38 billion in payments to the fund since fiscal year 2010, and the fund’s balance is declining. Beginning in fiscal year 2017, OPM started drawing from the fund to pay USPS’s share of premiums for postal retirees’ health benefits. OPM’s payments in that year exceeded the fund’s income from interest, and OPM projects that, based on the status quo, future payments will continue to exceed the fund’s income from interest. As long as USPS continues to miss its annual payments—which were nearly $4.3 billion in fiscal year 2017 and are $4.5 billion in fiscal year 2018—the fund is on track to be depleted in fiscal year 2030 based on OPM projections requested by us (see fig. 1). We reported similar results in our December 2012 report on postal retiree health benefits. At our request, OPM conducted a sensitivity analysis in which alternative projections were made that assumed USPS made payments to the fund of $1 billion per year or $2 billion per year; these alternative projections extended the fund’s projected depletion date from fiscal year 2030 to fiscal years 2032 or 2035, respectively (see fig. 2). OPM estimates the number of postal retirees eligible for federal retiree health benefits will remain near the current level of 500,000 through fiscal year 2035. The outlook for the RHB Fund is poor as USPS has inadequate resources to cover its required payments to the RHB Fund and, in our view, based on past practices and USPS statements, appears unlikely to make partial payments. USPS has repeatedly testified that its required payments to the RHB Fund are “unaffordable” relative to its current financial situation and outlook. In this regard, USPS accumulated net losses of more than $65 billion in the last 11 years and has budgeted for a net loss of about $5 billion in fiscal year 2018. Further, USPS reached its statutory borrowing limit of $15 billion in 2012. Although USPS accumulated liquid assets (cash and cash equivalents) of about $10.5 billion at the end of fiscal year 2017, it did not make $6.9 billion in required payments for retiree health and pension benefits. According to USPS officials, USPS did not make these payments in order to preserve liquidity and cover operational costs. If the RHB Fund is depleted, PAEA requires USPS to fill the resulting financial gap by resuming “pay-as-you-go” payments for its share of retiree health premiums that are currently being paid by the fund. However, PAEA does not address how funding will be provided or whether benefits will be provided if the fund becomes depleted and USPS does not make payments to cover its share of premiums. OPM and USPS have identified the following issues should the fund be depleted: According to OPM: (1) The RHB Fund is the initial funding source for USPS’s share of postal retirees’ health insurance premiums as long as money remains in the fund. (2) If the fund is depleted, then USPS becomes the funding source responsible for paying USPS’s share of these premiums. (3) Regardless of whether funds are available to pay USPS’s share of premiums, postal retirees are statutorily entitled to remain enrolled in their FEHBP plans. (4) Therefore, if the fund is depleted and USPS does not pay its share of premiums, the providers of these FEHBP plans would be underpaid. According to USPS: (1) Current law does not appear to contemplate a situation in which USPS itself is unable to make payments to the RHB Fund after the fund is depleted. (2) The law does not condition postal retirees’ eligibility for health benefits upon the fund or the payment of government contributions by USPS and the federal government. (3) Therefore, USPS stated it is reasonable to expect that postal retirees would remain eligible for health coverage even if USPS is unable to make payments to the RHB Fund after it is depleted. Regarding who would pay for their health coverage at this point, USPS stated that ultimately, it would be up to Congress to legislate a resolution to the funding issue. As the above projections show, the RHB Fund could be depleted in as little as 12 years—and USPS may be unable to cover its share of retiree health insurance premiums should its financial condition remain precarious. Depletion of the fund could affect postal retirees—who have provided a vital service to the nation—as well as USPS, postal customers and other stakeholders, including the federal government. Survey data we reviewed indicate that most companies do not offer retiree health benefits and that the number of companies providing such benefits is decreasing over time. For example, the percentage of all private and public organizations (e.g., state or local governments) with more than 200 employees that offer employee health benefits and that also offer retiree health benefits is estimated to have declined from 40 percent in 1999 to 25 percent in 2017, according to annual surveys conducted by the Henry J. Kaiser Family Foundation and the Health Research & Educational Trust (Kaiser/HRET). Focusing specifically on the results for private for-profit companies, the 2017 Kaiser/HRET survey estimated that only 11 percent of companies with at least 200 employees that offered health benefits to active employees also offered retiree health benefits in 2017, the smallest percentage since comparable data were measured in 2012. The 2017 Kaiser/HRET survey also estimated that the percentage of companies offering retiree health benefits was greater among companies with at least 5,000 employees (35 percent) than those with 1,000 to 4,999 employees (18 percent) and those with 200 to 999 employees (9 percent) (see fig. 3). Surveys sponsored by the Agency for Healthcare Research and Quality (AHRQ) have estimated similar trends for private sector establishments with at least 1,000 employees and with 100-999 employees. According to the AHRQ surveys, an estimated 25 percent of private sector establishments with at least 1,000 employees offered health insurance coverage to retirees age 65 and older in 2016, down from 41 percent in 2003. For retirees under 65, an estimated 32 percent offered such coverage in 2016, down from 42 percent in 2003 (see fig. 4). Based on reports we reviewed and experts we interviewed, many companies that have retained their retiree health benefits have done so by making changes to control costs, including tightening eligibility and restructuring benefits. Depending on the company, the changes have applied to new hires, current employees, or retirees. Specific changes have included the following: Tightening eligibility: Some companies have made new employees and/or employees hired after a given date ineligible to receive retiree health benefits, while other companies have increased the minimum age and/or length of service requirements for eligibility, according to reports and experts we interviewed. Restructuring benefits: Many companies have restructured retiree health benefits to reduce the level of the benefit, to shift costs to retirees, and to change how the benefits are provided. For example, some companies have shifted from an approach under which a company pays a percentage of premiums for a selected health benefit plan, to an approach under which a company pays a fixed dollar amount that employees may put toward health care costs. The 2017 Kaiser/HRET survey estimated that 30 percent of private and public organizations with 200 or more employees that offer retiree health benefits provide a fixed dollar amount that the retiree can use to purchase a retiree health plan they choose. Experts on retiree health benefits that we interviewed told us such companies often shift costs to retirees by maintaining defined contributions at the same level over time, even as overall health care costs increase. Based on multiple reports and experts, nearly all state governments continue to offer retiree health benefits to at least some state government retirees but generally have shifted some costs from the state to retirees and/or active employees in various ways. For example, in 2016, the Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation reported on the following recent changes at the state level related to eligibility for retiree health benefits, benefit levels, and aspects of how the benefits coordinate with Medicare: Tightening eligibility or limiting benefit levels: Most states varied eligibility for retiree health benefits based on factors such as age and years of service, and varied benefit levels based on factors such as date of hire, date of retirement, or vesting eligibility; some states varied benefit levels based on years of service. Between 2000 and 2015, more than a dozen states changed the minimum age or the number of state service years required for retirees to be eligible for health benefits. During that timeframe, at least 10 states adopted formulas for prorating benefits that required different premium-sharing amounts based on years of service, or altered existing prorating formulas, bringing the total to 31 states that used prorating in 2015. At least 5 states stopped making any contributions to health premiums for certain retirees. Medicare coordination: Thirty-five states provided employer- sponsored Medicare Advantage or Medicare Part D plans, known as Employer Group Waiver Plans, to provide health or prescription drug benefit coverage for Medicare-eligible retirees since these options were authorized in 2003. According to the report, “These cost- saving programs provide states with financial subsidies from the federal Medicare program to provide Medicare plus wraparound benefits.” We identified eight potential policy approaches to address the financial sustainability of postal retiree health benefits, primarily based on a review of legislative proposals and pertinent literature on actions that were taken by private companies and state governments and are discussed above. These approaches fall into three categories: (1) approaches that shift costs to the federal government; (2) approaches that reduce benefits or increase costs to postal retirees and/or postal employees; and (3) approaches that change how the benefits are financed. These eight approaches are not mutually exclusive, nor are they an exhaustive list of possible approaches. Each approach could include a range of specific options; thus, even if successfully implemented, no one approach would necessarily be sufficient to make postal retiree health benefits financially sustainable. Although our discussion of the various policy approaches specifically addresses postal retiree health benefits, most approaches could address federal retiree health benefits more broadly, as both postal and non-postal federal employees participate in the same federal health benefits program. All approaches we identified have different potential effects and would require congressional action because current law establishes certain requirements for postal retiree health benefit plans, including basic rules for benefits, enrollment, and participation, and how benefits are to be paid for. Because the RHB Fund has a large and growing financial gap, any approach that would have a significant financial impact could affect the federal government, postal retirees, postal employees, USPS, and customers to varying degrees. Medicare Integration: Various legislative proposals have been made to increase postal retirees’ participation in Medicare—a shift that would decrease USPS’s costs but increase Medicare’s costs, according to analyses by the Congressional Budget Office (CBO). These proposals would establish a program within FEHBP for active postal employees and postal retirees. Under these bills, Medicare-eligible postal retirees enrolled in this program would generally also be required to be enrolled in Medicare Parts A, B, and D. According to CBO analyses, the bills would have resulted in USPS savings, in part because increased participation in Medicare would shift primary responsibility for covering certain health care services to Medicare for those who enroll. As we have previously reported, the primary policy decision for Congress to make is whether to increase postal retirees’ use of Medicare. Supplemental federal appropriations: If the RHB Fund becomes depleted and USPS does not fill the financial gap, supplemental federal appropriations could be an alternative if Congress wants benefits to continue at the same level. As previously noted, OPM officials told us that regardless of whether funds are available to pay USPS’s share of premiums, postal retirees are statutorily entitled to remain enrolled in their FEHBP plans. However, supplemental federal appropriations for postal retiree health benefits could increase the federal budget deficit. In addition, supplemental appropriations for postal retiree health benefits would be inconsistent with USPS functioning as a self-financing entity that covers its costs with revenue it generates. Tighten eligibility or reduce or eliminate retiree health benefits: As some companies and state governments have done, eligibility restrictions could be tightened for postal retiree health benefits, or other actions could reduce the level of benefits or even eliminate benefits, such as making new hires ineligible to receive retiree health benefits. The effects would depend on the specific changes and whether they were made to apply to current retirees, current employees, or future hires. Depending on the extent of the changes, this approach would reduce USPS’s liability for postal retiree health benefits and thereby reduce its unfunded liability. Increase premium payments by postal retirees and/or postal employees: As some companies and state governments have done, premium payments for postal retiree health benefits by postal retirees and/or postal employees could be increased. For example, as others have reported, some companies and state governments have required retirees to pay 100 percent of the health insurance premium for their retiree health benefits. Similarly, a larger share of retiree health premiums could be borne by postal retirees or postal employees could be required to pay for retiree health benefits before they retire. Such changes would require changes to current law that allocates specific financial responsibility for payments among USPS, the federal government, and retirees participating in FEHBP, as active postal employees make no payment for retiree health benefits under current law. The expenses of the RHB Fund could be decreased by these approaches that shift costs to postal retirees, postal employees, or both. Depending on how much of the costs are shifted, the additional costs could increase the challenge for retirees to ensure their accumulated resources last throughout retirement, or for postal employees to save for retirement. Further, as we have reported, rising health care costs can increase the overall amount individuals may need to save to ensure they have an adequate income once they retire. Change the federal contribution to a fixed subsidy: As some companies and state governments have done, postal retiree health benefits could be shifted to a structure with a fixed amount subsidizing the benefit. This amount could be adjusted over time; any adjustments might or might not keep up with costs. Depending on the initial size of the fixed subsidy and any adjustments over time, this approach could reduce the expenses of the RHB Fund and USPS’s required payments. RHB Fund expenses could be reduced over time if the fixed subsidy increases less than postal retiree health premiums. This approach would require changes to current law and regulations that prescribe the federal government’s financial contribution to FEHBP. For example, CBO recently identified one option to change FEHBP’s statutory structure from a premium-sharing structure that is required by law to fixed subsidies for health benefits. Under this option, the fixed subsidies would grow at the rate of inflation rather than at the average rate of growth for FEHBP premiums; CBO stated this change would be expected to slow the growth of federal contributions to FEHBP. A fixed subsidy for retiree health benefits could increase incentives for retirees to make less costly decisions with respect to health care. However, this approach could result in greater cost exposure for retirees, who may face difficult decisions regarding their health care, particularly if their financial resources are limited. As we have reported, individuals face the risk that rising and unpredictable health care or long-term care costs may lead them to draw down their retirement savings faster than expected. Establish a non-federal voluntary employees’ beneficiary association (VEBA) for postal retiree health benefits: As some companies have done to provide retiree health benefits separately from the employer, a VEBA outside the federal government could be established to manage postal retiree health benefits. This approach means that postal retiree health benefits would be provided through the VEBA instead of through the OPM-administered FEHBP. The non-federal VEBA would administer the postal retiree health benefits program, including determining the specific benefits that would be provided and the level of contributions from the VEBA members—who could include retirees and employees—and the investing of its assets. Such an approach would require determining the VEBA’s governance structure, funding sources, level of funding, type of investments, and associated market risks. One issue could be determining the source and level of initial funding for a new VEBA for postal retiree health benefits, such as whether initial funding would come from the RHB Fund, the Treasury, or both. Other issues could be what funds would be provided to the VEBA going forward, including the source(s) and level of funding, and what the benefit levels would be. If the entire RHB Fund were transferred into a VEBA, the current level of benefits would ultimately not be sustainable unless further funding is provided from one or more sources, such as from USPS, retirees, active employees, or the federal government. Thus, trade-offs would involve what level of benefits would be provided, who would bear the costs, and what might happen if VEBA assets decline or become depleted. Reduce the required level of prefunding: Proposed legislation includes an 80 percent funding target for postal retiree health benefits instead of the 100 percent target established by current law. This would reduce USPS’s required payments to the RHB Fund but could increase costs for future postal ratepayers and increase the risk that USPS may not be able to pay for these costs. As previously discussed in this report, state governments either do not prefund their retiree health benefits or generally have a low level of prefunding. We have expressed concern about a proposed 80 percent funding target for postal retiree health benefits that would have the effect of carrying a permanent unfunded liability equal to roughly 20 percent of USPS’s liability, which could be a significant amount. As we previously reported, an alternative could be to build in a schedule to achieve 100 percent funding in a later time period after the 80 percent level is achieved. Although USPS payments with an 80 percent funding target would reduce USPS’s required payments, fully funded benefits protect against an inability to make payments later, make promised benefits less vulnerable to cuts, and protect USPS’s long-term viability. Further, reducing the funding target is unlikely to have any effect as long as USPS continues to make no payments to the RHB Fund, as discussed earlier. We continue to believe that as long as USPS is required by law to pay its share of retiree health benefits premiums, it is important for USPS to prefund its retiree health benefit liability to the maximum extent that its finances permit. We recognize that multiple options exist to prefund benefits and amortize unfunded liability and that no prefunding approach will be viable unless USPS can make the payments and maintain liquidity. As we have reported, making affordable prefunding payments would protect the viability of USPS by not saddling it with bills later on, when employees are already retired and no longer helping it to generate revenue; making payments can also make the promised benefits more secure. We also have reported that deferring payments can pass costs from current to future postal ratepayers. To the extent prefunding is postponed by using a lower funding target, larger payments will be required later, when they likely would be supported by lower levels of profitable First-Class Mail volume. Outside investment: Proposed legislation would initially require 25 percent of the RHB Fund to be invested in index funds modeled after those used for federal Thrift Savings Plan investments. The objective of investing RHB Fund assets outside of U.S. Treasury securities would be to seek a greater rate of return on these assets in an attempt to reduce unfunded liabilities and the amount of required prefunding payments. Such outside investment would require legislation because current law limits RHB Fund assets to U.S. Treasury securities that are backed by the full faith and credit of the federal government. A higher rate of return on RHB Fund assets could reduce long-term funding needs. However, there are other considerations. For example, we have reported that if fund assets were invested in non-Treasury securities, the fund may experience losses in a market downturn and would thus have reduced assets available for health care. Assuming there would be no explicit federal guarantee of the value of the invested assets, we stated that USPS is not well positioned to deal with a potentially significant decline in their value, given its significant operating losses and continuing decline in mail volume. We also reported that the impact of any asset losses could be magnified because a market downturn that negatively affects asset value could be associated with a more general economic downturn that negatively affects USPS mail volume and revenues. About a half million postal retirees receive retiree health benefits. Postal retirees have provided a vital service to the nation, and resolving a key aspect of their future situation warrants congressional action. Failure to address the poor financial outlook of the RHB Fund could pose serious consequences for these retirees as well as USPS, postal customers, and other stakeholders, including the federal government. It is reasonable to believe that USPS will not be able to fill the financial gap once the RHB fund is depleted—a situation that could occur in as little as 12 years under the status quo. There is no certainty on what actions should be taken to address this problem. However, we have identified multiple approaches that could be used, individually or in combination, that Congress could consider to help address the financial shortfall in this area. All of these approaches have different potential effects, and it is up to Congress to consider the merits of the approaches and determine the most appropriate action to take. It would be preferable to take action when careful consideration is possible, rather than wait until lack of adequate funding could disrupt postal retiree health benefits. Congress should consider passing legislation to put postal retiree health benefits on a more sustainable financial footing. We provided a draft of this report to OPM and USPS for their review and comment. OPM provided technical comments, which we incorporated as appropriate. USPS provided a written response, which is reproduced in appendix II of this report. In its written response, USPS stated that it concurred with our matter for congressional consideration that congressional action is necessary to achieve a financially sustainable Postal Service Retiree Health Benefits Fund (RHB Fund). However, USPS said our discussion of potential policy approaches for postal retiree health benefits would benefit from additional context and balance. USPS also put forth additional information for three of the potential policy approaches highlighted in our report. Our report presents a high-level overview of eight potential policy approaches. It was not designed to be a comprehensive catalog of possible options with an analysis of the various considerations relevant to each. With regard to the Medicare integration approach, USPS stated that increased Medicare participation by postal retirees is not limited to the “full Medicare integration option,” as represented in our report and identified variations of such an approach. USPS said readers would benefit from a fuller picture of Medicare integration practices, stating that among employers that continue to provide retiree health benefits, full Medicare integration is a uniform best practice. USPS cited a 2014 report that said Medicare integration is the most common arrangement for employer-provided retiree health benefits, adding that retiree health benefits for Medicare-eligible employees are assumed to be merely supplemental to Medicare as a matter of course. Our report discussed Medicare integration by state governments, but did not present recent data on the percentage of private companies that coordinate their retiree health benefits with Medicare because such data are not publicly available. Additionally, USPS said our report framed the issue of Medicare integration as “solely” a tradeoff between USPS and Medicare costs while there are other factors to consider, such as the relative benefits to USPS compared to the overall cost for the Medicare program. As we noted in our report, the eight potential policy approaches were not designed to be mutually exclusive, nor an exhaustive list of possible approaches. Additionally, we recognize there are various factors related to this approach, but that the primary one is whether to increase postal retirees’ use of Medicare which would lead to further increasing Medicare costs. Second, USPS said it believed our statements about approaches for changing the level of prefunding for retiree health benefits below the 100 percent level were misplaced, citing “universally accepted practices” for other entities to “pay-as-you-go” (i.e., not prefund at all), or to prefund at much lower levels. We have reported on such funding levels in the past as well. However, a proposed 80 percent funding target for postal retiree health benefits would have the effect of carrying a permanent unfunded liability equal to roughly 20 percent of USPS’s liability, which could be a significant amount. As we previously reported, an alternative could be to build in a schedule to achieve 100 percent funding in a later time period after the 80 percent level is achieved. As our report also explained, although USPS payments with an 80 percent funding target would reduce USPS’s required payments, fully funded benefits protect against an inability to make payments later, make promised benefits less vulnerable to cuts, and protect USPS’s long-term viability. Finally, USPS said that our statements about potential risks associated with investment of assets outside the U.S. Treasury seem disproportionate given USPS’s view that diversification of assets set aside for retiree health benefits is “universally accepted” as a best practice. We recognize that a higher rate of return on RHB Fund assets could reduce long-term funding needs for the RHB Fund. However, there are considerations specific to USPS. For example, assuming there would be no explicit federal guarantee of the value of the invested assets, we stated that USPS is not well positioned to deal with a potentially significant decline in their value, given its significant operating losses and continuing decline in mail volume. We also noted that, as we have previously reported, the impact of any asset losses could be magnified because a market downturn that negatively affects asset value could be associated with a more general economic downturn that also negatively affects USPS mail volume and revenues. In summary, we believe our report presents a balanced description of a wide range of possible policy options; it does not endorse or recommend any particular option for Congress. As we concluded, all of these approaches have different potential effects, and the information we present, as well as the additional views presented by USPS, provide critical information for congressional decision-makers to assess as they consider the merits of the approaches and determine the most appropriate action to take. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Postmaster General; and the Director of the Office of Personnel Management. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix III. End of year net funded status (unfunded) (55.0) Missed USPS payments to the fund (53.5) (52.0) (48.6) (46.2) (47.8) (48.3) (48.9) (54.8) (52.1) payments due on Sept. 30, 2017, of $955 million for the amortization of USPS’s unfunded liability for postal retiree health benefits, and $3.3 billion for the “normal costs” of retiree health benefits. The “normal cost” is the annual expected growth in liability attributable to an additional year of employees’ service. In addition to the individual named above, Derrick Collins (Assistant Director); Kenneth John (Analyst-in-Charge); Amy Abramowitz; Taiyshawna Battle; William Colwell; Swati Deo; John Dicken; Leia Dickerson; William Hadley; James Leonard; Emei Li; Thanh Lu; Sara Ann Moessbauer; Joshua Parr; Malika Rice; Matthew Rosenberg; Amy Rosewarne; Frank Todisco; and Crystal Wesco made key contributions to this report.", "summary": "USPS is required to prefund its share of health benefits costs for its retirees. To do so, USPS is required to make payments into the RHB Fund, which is administered by OPM. However, USPS has not made any payments to the fund since fiscal year 2010. At the end of fiscal year 2017, USPS had missed $38.2 billion in payments, leaving the fund 44 percent funded. Pursuant to law, beginning in fiscal year 2017, OPM started drawing from the fund to cover USPS's share of postal retirees' health benefits premiums. GAO was asked to review issues related to the sustainability of the RHB Fund. This report examines (1) the financial outlook for the RHB Fund and (2) policy approaches for postal retiree health benefits, among other topics. GAO evaluated financial projections for the RHB Fund from OPM. GAO reviewed laws and regulations and identified policy approaches primarily by identifying legislative proposals, and literature on actions of companies and state governments to address retiree health benefits. These approaches are not exhaustive or mutually exclusive. GAO also interviewed experts in retiree health benefits and postal stakeholders, chosen on the basis of relevant publications and prior GAO work, and interviewed and obtained written responses from OPM and USPS officials. The financial outlook of the Postal Service Retiree Health Benefits Fund (RHB Fund) is poor. At the end of fiscal year 2017, the fund's assets declined to $49.8 billion and unfunded liabilities rose to $62.2 billion. Based on Office of Personnel Management (OPM) projections requested by GAO, the fund is on track to be depleted in fiscal year 2030 if the United States Postal Service (USPS) continues to make no payments into the fund. Annual payments of $1 billion or $2 billion into the fund would extend the projected depletion date by 2 to 5 years (see figure). USPS has said that its required payments to the fund are unaffordable relative to its current financial situation and outlook. For the past 11 years USPS has incurred large operating losses that it expects will continue. Additionally, USPS has stated that its opportunities for revenue generation and cost-cutting are limited. USPS reported that it did not make required fund payments in 2017 in order to preserve liquidity and cover operational costs. If the fund becomes depleted, USPS would be required by law to make the payments necessary to cover its share of health benefits premiums for current postal retirees. Current law does not address what would happen if the fund becomes depleted and USPS does not make payments to cover those premiums. Depletion of the fund could affect postal retirees as well as USPS, customers, and other stakeholders, including the federal government. About 500,000 postal retirees receive health benefits and OPM expects that number to remain about the same through 2035. GAO identified three categories of policy approaches for postal retiree health benefits, based on legislative proposals and pertinent literature. First, some approaches, such as generally requiring eligible postal retirees to participate in Medicare, would shift costs to the federal government. Second, some approaches would reduce benefits or increase costs to postal retirees and/or employees. Third, some approaches would change how benefits are financed (see table). All of these approaches have different potential effects and would require congressional action. Thus, it is up to Congress to consider the merits of different approaches and determine the most appropriate action to take. It would be preferable to take action when careful consideration is possible, rather than wait until lack of adequate funding could disrupt postal retiree health benefits. Congress should consider passing legislation to put postal retiree health benefits on a more sustainable financial footing. USPS agreed that congressional action is needed and offered views on some policy approaches discussed in this report.", "document_type": "gao"}
{"report": "The FSM and the RMI are independent countries located about 3,000 miles southwest of Hawaii (see fig. 1). The FSM is a federation of four semiautonomous states—Chuuk, Kosrae, Pohnpei, and Yap—whose population and income vary widely. Chuuk, the largest state by population, has the lowest per capita gross domestic product (GDP). Overall, the FSM had a 2016 population of approximately 102,000 and a GDP per capita of about $3,200. The RMI’s 2016 population was approximately 54,000 with a GDP per capita of about $3,600. The RMI’s most recent census, in 2011, found that approximately three-quarters of the population lived in Majuro, the nation’s capital, and on the island of Ebeye in the Kwajalein Atoll. Table 1 shows the FSM’s, FSM states’, and RMI’s estimated population and annual GDP per capita in fiscal year 2016. The FSM states maintain considerable authority, relative to the FSM national government, to allocate U.S. assistance and implement budgetary policies. While the United States provides compact sector grants directly to the FSM national government, a large portion of these grants is passed through and provided to the four FSM states. The states also receive other U.S. program grants that have been passed through from the national government but may also receive grants directly from U.S. agencies. Overall, FSM public sector revenue sources include U.S. compact and program grants; grants from other countries; taxation, including taxation of foreign corporations domiciled in the FSM; and Parties to the Nauru Agreement fishing fees charged to vessels operating in its waters. In addition to maintaining departmental budgets, both the FSM national government and the FSM states have government-owned enterprises and component units, such as public utilities and port authorities, whose operations are supported by public funds. Some of these component units also receive U.S. compact sector grants or other U.S. grants passed through the FSM national or state governments or directly from U.S. agencies. According to Graduate School USA, the FSM’s public sector accounted for about 53 percent of all employment in the FSM in fiscal year 2016. The RMI government is responsible for allocating U.S. assistance in that country, though the RMI’s 24 local governments exercise local government authority. RMI public sector revenue sources include U.S. compact and program grants, grants from other countries, ship and corporate registry earnings, and Parties to the Nauru Agreement fishing fees. The RMI government also has state-owned enterprises and component units whose operations are supported by public funds. Some of these component units receive U.S. compact sector grants or other U.S. grants passed through the RMI government or directly from U.S. agencies. According to Graduate School USA, in fiscal year 2016, RMI’s public sector accounted for approximately 48 percent of all employment in the RMI. The U.S. Army Garrison–Kwajalein Atoll, located near Ebeye island, also provides a significant source of employment for Marshallese. In September 2017, U.S. Army Garrison-Kwajalein Atoll officials estimated that approximately 1,100 Marshallese were employed at the garrison. U.S. relations with the FSM and the RMI began during World War II, when the United States ended Japanese occupation of the region. Beginning in 1947, the United States administered the region under a United Nations trusteeship. During the 1940s and 1950s, the RMI was the site of 67 U.S. nuclear weapons tests on or near Bikini and Enewetak Atolls. The four states of the FSM voted in a 1978 referendum to become an independent nation, while the RMI established a constitutional government and declared itself a republic in 1979. Under the trusteeship agreement, both newly formed nations remained subject to the authority of the United States until 1986. In 1986, following a period of negotiations, the United States entered into a compact of free association with the FSM and the RMI that provided for economic assistance to the two countries, secured U.S. defense rights, and allowed FSM and RMI citizens to migrate to the United States. The compact provided a framework for the United States and the two countries to work toward achieving the following three main goals: (1) establish self-government for the FSM and the RMI, (2) ensure certain national security rights for all of the parties, and (3) assist the FSM and the RMI in their efforts to advance economic development and self- sufficiency. The compact’s third goal was to be accomplished primarily through U.S. direct financial assistance to the FSM and the RMI. Under the original compact, the FSM and the RMI used funds for general government operations; capital projects, such as building roads and investing in businesses; debt payments; and targeted sectors, such as energy and communications. The FSM concentrated much of its spending on government operations at both national and state levels, while the RMI emphasized capital spending. While the original compact set out specific obligations for reporting and consultations regarding the use of compact funds, the FSM, RMI, and U.S. governments provided little accountability over compact expenditures and did not ensure that funds were spent effectively or efficiently. In 2003, following a period of negotiations, the United States approved separate amended compacts with the FSM and the RMI that went into effect on June 25, 2004, and May 1, 2004, respectively. The amended compacts’ implementing legislation authorized and appropriated direct financial assistance to the FSM and the RMI in fiscal years 2004 through 2023, with the base amounts decreasing in most years. The annual decrements in assistance are added to the amounts deposited in the trust funds established under the amended compacts for the two nations. Earnings from the compact trust funds are intended to provide an annual source of revenue after the scheduled end of compact sector grants at the end of fiscal year 2023. Both the compact sector grants and trust fund contributions are partially adjusted for inflation each fiscal year. Appendix II provides additional information on the base and inflation-adjusted amounts of U.S. compact sector grants and trust fund contributions in fiscal years 2004 through 2023. The amended compacts and associated fiscal procedures agreements require that compact sector grants support the countries in six core sectors—education, health, infrastructure, environment, private sector development, and public sector capacity building—with the education and health sectors having priority. These grants are described in section 211(a) of each compact and are referred to as compact sector grants or 211(a) grants. Section 211(b) of the RMI compact further states that the RMI must target a specified amount of grants to Ebeye and other Marshallese communities within Kwajalein Atoll. The RMI MUORA states that the Kwajalein-related funds provided to the RMI in the compacts shall be provided through fiscal year 2023 “and thereafter for as long as this agreement remains in effect.” The amended compacts and their subsidiary trust fund agreements provided that each trust fund is to be managed by a compact trust fund committee. Each compact trust fund committee includes representatives from both the United States and the respective country, but the United States is required by the terms of the trust fund agreements to hold the majority of votes on each committee. The Director of Interior’s Office of Insular Affairs serves as the chair of each committee. Trust fund committee responsibilities include overseeing fund operation, supervision, and management; investing and distributing the fund’s resources; and concluding agreements with any other contributors and other organizations. As part of this oversight, the committees are to establish an investment and distribution policy. The committees are also to determine fiscal procedures to be used in implementing the trust fund agreements based on the fiscal procedures used for compact grant administration unless otherwise agreed by the parties to the agreement. The trust fund agreements between the United States and the FSM and the RMI allow for the agreements to be amended in writing at any time, with mutual consent of the governments. However, the U.S. legislation implementing the amended compacts requires that any amendment, change, or termination of all or any part of the compact trust fund agreements shall not enter into force until incorporated into an act of Congress. According to the trust fund agreements, each trust fund committee is to appoint a trustee and an independent auditor. Each committee has retained an Executive Administrator to manage the daily operations of the trust fund. In addition, the committee has the authority to appoint 1 or more investment advisers and may enter into a separate agreement with 1 or more money managers. The investment policy statement for each fund guides the fund’s investment strategy and portfolio. The compact trust fund agreements state that no funds, other than specified trust fund administrative expenses, may be distributed from the compact trust fund prior to October 1, 2023. From fiscal year 2024 onward, the maximum allowed disbursement from each compact trust fund is the amount of the fiscal year 2023 annual grant assistance, as defined by the trust fund agreement, with full adjustment for inflation. In addition, the trust fund committees may approve additional amounts for special needs. The RMI compact trust fund agreement excludes from the calculation of the allowed disbursement the amount of the Kwajalein- related assistance defined in section 211(b) of the RMI compact. Although the compact trust fund agreements state the maximum allowable disbursement level, they do not establish or guarantee a minimum disbursement level. Each country’s compact trust fund consists of three interrelated accounts: the “A” account, the “B” account, and the “C” account. The A account is the trust fund’s corpus and contains the initial, and any additional, U.S. and FSM or RMI contributions; contributions from other countries; and investment earnings. No funds, other than specified trust fund administrative expenses, may be disbursed from the A account. The B account is the trust fund’s disbursement account and becomes active in fiscal year 2023. All income earned in 2023 will be deposited in the B account for possible disbursement in 2024. Each subsequent year’s investment income will similarly be deposited into the B account for possible disbursement the following year. If there is no investment income, no funds will be deposited in the B account for possible disbursement the following year. The C account is the trust fund’s buffer account. Through 2022, any annual income exceeding 6 percent of the fund balance is deposited in the C account. From 2023 onward, if annual income from the A account is less than the previous year’s disbursement, adjusted for inflation, the C account may be tapped to address the shortfall. After 2023, any funds in the B account in excess of the amount approved for disbursement the following fiscal year are to be used to replenish the C account as needed, up to the maximum size of the account. The size of the C account is capped at three times the amount of the estimated annual grant assistance in 2023, including estimated inflation. If there are no funds in the C account, and no prior year investment income in the B account, no funds will be available for disbursement to the countries the following year. Figure 2 shows the compact trust fund account structure and associated rules. According to the U.S. trust fund agreements with the FSM and the RMI, contributions from other donors are permitted. In May 2005, Taiwan and the RMI reached an agreement that Taiwan will contribute a total of $40 million to the RMI’s compact trust fund A account between 2004 and 2023. A “D” account may also be established to hold any contributions by the FSM and the RMI governments of revenue or income from unanticipated sources. According to the trust fund agreements, the D account must be a separate account, not mixed with the rest of the trust fund. Only the RMI has a D account, governed in part by an agreement between Taiwan and the RMI. The amended compacts’ implementing legislation and their subsidiary fiscal procedures agreements established committees to oversee compact grants to each country—the Joint Economic Management Committee (JEMCO) for the FSM and the Joint Economic Management and Financial Accountability Committee (JEMFAC) for the RMI. Each five- member committee comprises three representatives from the U.S. government and two representatives from the corresponding country, with the Director of Interior’s Office of Insular Affairs serving as the chair. JEMCO’s and JEMFAC’s designated roles and responsibilities include the following: reviewing the budget and development plans from each of the governments; approving grant allocations and performance objectives; attaching terms and conditions to any or all annual grant awards to improve program performance and fiscal accountability; evaluating progress, management problems, and any shifts in priorities in each sector; and reviewing audits called for in the compacts. JEMCO and JEMFAC can require that terms and conditions be attached to any and all annual compact sector grant awards to improve program performance and fiscal accountability. Under the fiscal procedures agreements governing the amended compacts, the Office of Insular Affairs is responsible for using financial reports to monitor each country’s budget and fiscal performance and for using performance reports submitted by the countries to evaluate sector grant performance. The FSM and the RMI also must adhere to specific fiscal control and accounting procedures and are required to submit annual audit reports, within the meaning of the Single Audit Act as amended. The FSM and RMI compacts require each country to develop multiyear plans that are strategic in nature and continuously reviewed and updated through the annual budget process and that address the assistance for the defined sectors. In 2013, we recommended that Interior, as Chair of JEMCO and JEMFAC, ensure that the FSM and the RMI complete plans to address the impact of declining compact sector grants (in this report, decrement management plans). In November 2013, the FSM finalized its decrement management plan for fiscal years 2014 through 2023; the plan indicated that a similar planning process is to be repeated in 3-year intervals. In September 2014, the RMI finalized its decrement management plan for fiscal years 2015 through 2023; the plan similarly stated that a comprehensive planning process to address the ongoing decrement may proceed on a 3-year update schedule. Each decrement management plan includes commitments for budget reductions in the national governments and, in the FSM, the state governments, as well as plans to undertake actions such as tax reform. The amended compacts’ implementing legislation incorporates by reference related agreements extending programs and services to the FSM and RMI. The programs and services agreement with each country identifies the following programs and services as being available to each country: U.S. postal services, weather services, civil aviation, disaster preparedness and response, and telecommunications. Each programs and services agreement extends for 20 years from the compact’s entry into force. Therefore, the agreement with the FSM ends on June 24, 2024, and the agreement with the RMI ends on April 30, 2024. The amended compacts’ implementing legislation (Pub. L. No. 108-188) and other U.S. legislation authorize other U.S. grants, programs, and services for the FSM and RMI. Pub. L. No. 108-188 authorized an annual supplemental education grant (SEG) for the FSM and RMI in fiscal years 2005 through 2023, to be awarded in place of grants formerly awarded to the countries under several U.S. education, health, and labor programs. The FSM and RMI are not eligible for the programs replaced by the SEG during these years. Unlike the compact sector grants, the amended compacts’ implementing legislation authorized the SEG but did not appropriate funds for it. Funding for the SEG is appropriated annually to the U.S. Department of Education (Education) and transferred to Interior for disbursement. Other provisions of the amended compacts’ implementing legislation, as well as other U.S. law, make the FSM and RMI eligible for a number of additional programs. Other federal departments are responsible for the administration and oversight of their respective programs in the FSM and RMI. Compact sector grants and the SEG, each of which end in 2023, continue to support a substantial portion of government expenditures in the FSM and RMI. In the FSM, compact sector grants and the SEG support about one-third of all government expenditures. The four FSM states rely on these grants to a greater extent than the FSM national government does. In the RMI, compact sector grants and the SEG support about one- quarter of all government expenditures. The end of the compacts’ programs and services agreements in 2024 would also require the FSM and RMI to bear additional costs to provide services currently provided by the United States as part of the Agreements. Appendix IV provides a detailed summary of programs and services we identified that have been provided through the amended compacts, the amended compacts’ implementing legislation, compact-related agreements, and other provisions of U.S. law, as well as their status in the FSM and RMI after 2023. The FSM national and state governments overall continue to rely on U.S. support for program expenditures. Compact sector grants, the SEG, and other U.S. grants supported almost half of FSM national and state government expenditures in fiscal year 2016. Compact sector and supplemental education grants that end in 2023 supported approximately one-third of total FSM national and state government expenditures in fiscal year 2016, while other U.S. grants supported an additional 15 percent of total FSM government expenditures (see fig. 3). Compact sector and supplemental education grants that end in 2023 support a larger proportion of FSM state governments’ expenditures than of the FSM national government’s expenditures. In fiscal year 2016, compact sector grants and the SEG supported 8 percent of national government expenditures but supported 50 percent or more of each state’s government expenditures. Among the FSM states, Chuuk—both the largest state and the state with the lowest per capita income in the FSM—has the highest percentage of its expenditures supported by U.S. grants. (See table 2 for a summary of FSM national and state government expenditures supported by compact sector grants and the SEG, and by other U.S. grants.) Compact sector grants and the SEG support an even higher proportion of FSM states’ health and education expenditures. See app. III for a summary of the role of compact funds in the FSM health and education sectors. The RMI continues to rely on U.S. support for program expenditures. Compact sector and supplemental education grants that end in 2023 supported approximately 25 percent of the RMI’s $123.5 million in government expenditures in fiscal year 2016, while other U.S. grants supported an additional 8 percent. Compact Kwajalein-related grants that do not end in 2023 supported an additional 3 percent (see fig. 4). Compact sector grants and the SEG support an even higher proportion of RMI health and education expenditures. See app. III for a summary of the role of compact funds in the RMI health and education sectors. FSM and RMI budgets would be affected if the countries were to assume responsibility for providing some additional programs and services currently provided by the United States. Current U.S. law enables U.S. agencies to continue providing some programs and services now provided under the agreements after they end in 2024. However, under current law, some programs and services provided in the programs and services agreements will end and would require the FSM and RMI to bear additional costs. See appendix IV for a summary of the status of programs and services provided under the programs and services agreements after the agreements end. Previous studies of the FSM and RMI compact trust funds, including a review we conducted in 2007, found that after fiscal year 2023 the funds are unlikely to provide maximum annual disbursements, may provide no disbursements at all in some years, and are unlikely to sustain the funds’ fiscal year 2023 value. Our updated projections for the compact trust funds show similar outlooks. Several potential strategies could improve the compact trust funds’ outlook; some of these strategies could be implemented under the current trust fund agreements, while other strategies may require changing the trust fund agreements. The compact trust fund committees have not yet prepared distribution policies, required by the trust fund agreements, that could assist the countries in planning for the transition to trust fund income. In addition, the committees have not established fiscal procedures for oversight of compact trust fund disbursements as required by the trust fund agreements. Further, the trust fund committees have not yet addressed a potential misalignment between the timing of their annual calculation of the amounts available to disburse and the FSM’s and RMI’s budget timelines, potentially complicating each country’s planning and management. Previous studies of the compact trust funds have found that some yearly disbursements from the funds after 2023 are likely to fall short of the inflation-adjusted amount of annual grant assistance in 2023 and that the funds may provide no disbursement at all in some years. Our 2007 analysis of the compact trust funds projected a wide range of potential balances and found that the funds’ capacity to provide the maximum allowable disbursement would likely decrease over time. In addition, our analysis showed an increasing likelihood that the trust funds would exhaust the C account and be unable to provide any disbursements in the latter years of our projection. Other analyses have similarly found risks of low or zero disbursements and risks to sustainability. Graduate School USA has prepared an annual series of economic reports on each country, including analyses of their compact trust funds. In 2015, an Asian Development Bank report separately analyzed the trust funds. The International Monetary Fund projected the status of the trust funds as part of its biennial FSM and RMI consultations. Our updated projections for the FSM and RMI compact trust funds after 2023 indicate a continued likelihood that, given their balance at the end of fiscal year 2017 and current compact trust fund rules—the baseline scenario—the funds will be unable to provide maximum disbursements (equal to the inflation- adjusted amount of annual grant assistance in 2023) in some years; unable to provide any disbursement at all in some years, with the likelihood of zero disbursement in a given year increasing over time; and unable to maintain the inflation-adjusted value of the compact trust fund after fiscal year 2023. The compact trust funds’ C account—designed as a buffer to protect disbursements from the B account in years when the funds do not earn enough to fund the disbursement—could be exhausted by a series of years with low or negative annual returns. Since current rules do not allow disbursements from the compact trust fund corpus (the A account), exhaustion of the C account would result in zero disbursement in years when fund returns are zero or negative. Thus, there may be no funds available to disburse even if the funds’ A accounts have a balance. As a result of low or zero disbursements, the countries could face economic and fiscal shocks and significant challenges in planning programs and budgets. Our model projects that, given the baseline scenario and a 6 percent net return, the FSM compact trust fund will experience declining disbursements relative to the maximum allowable disbursements; an increasing chance of zero disbursements; and a declining likelihood of maintaining its 2023 balance. See appendix I for a full description of our methodology and appendix V for the baseline results with alternative net returns. Projected disbursements. We project that the FSM compact trust fund will, on average, be able to provide disbursements equal to 82 percent of the maximum allowable disbursement—the inflation- adjusted amount of 2023 annual grant assistance—in its first decade of disbursements. The likely average disbursement falls to 49 percent of the maximum in the next decade and falls further in subsequent decades. In addition, the amount available for disbursement may fluctuate substantially from year to year. Depending on the compact trust fund’s performance in the previous year, disbursements may be higher or lower than the average amount if the balance in the C account is not sufficient to provide additional disbursements. Likelihood of providing zero disbursement. We project a 41 percent likelihood that the FSM compact trust fund will be unable to disburse any funds in 1 or more years during the first decade of trust fund disbursements. This likelihood increases over time, rising to 92 percent in fiscal years 2054 through 2063. Likelihood of maintaining inflation-adjusted 2023 balance. We project a 13 percent likelihood that the FSM compact trust fund will maintain or exceed its inflation-adjusted fiscal year 2023 value in fiscal year 2033. This likelihood decreases in later years. Figure 5 shows our projections of the FSM compact trust fund’s average disbursements as a percentage of maximum disbursement, the likelihood of 1 or more years of zero disbursement, and the likelihood of the fund’s maintaining its inflation-adjusted fiscal year 2023 balance given the baseline scenario and a 6 percent net return. The FSM also maintains its own trust fund separate from the compact trust fund (see app. VI for additional information). We did not independently project the FSM Trust Fund’s future balance or potential disbursements after 2023. Our model projects that, given the baseline scenario and a 6 percent net return, the RMI compact trust fund will experience declining disbursements relative to the maximum allowable disbursements; an increasing chance of zero disbursements; and a declining likelihood of sustaining its 2023 balance. Projected disbursements. We project that the RMI compact trust fund will, on average, be able to provide disbursements nearly equal to the inflation-adjusted amount of 2023 annual grant assistance as defined by the trust fund agreement—the maximum allowable—in its first decade of disbursements. However, the projected disbursements as a percentage of the maximum disbursements decline by about 10 percentage points in each subsequent decade. In addition, the amount available to disburse may fluctuate substantially from year to year. Depending on the compact trust fund’s performance in the previous year, disbursements may be higher or lower than the average amount if the balance in the C account is not sufficient to provide additional disbursements. Likelihood of providing zero disbursement. We project a 15 percent likelihood that the RMI compact trust fund will be unable to disburse any funds in 1 or more years during the first decade of trust fund disbursements. This likelihood increases over time, rising to 56 percent in fiscal years 2054 through 2063. Likelihood of maintaining inflation-adjusted 2023 balance. We project a 41 percent likelihood that the RMI compact trust fund will maintain or exceed its inflation-adjusted fiscal year 2023 value in fiscal year 2033. This likelihood decreases in later years. Figure 6 shows our projections of the RMI compact trust fund’s average disbursements as a percentage of maximum disbursement, its likelihood of 1 or more years of zero disbursement, and its likelihood of maintaining its inflation-adjusted fiscal year 2023 balance given the baseline scenario and a 6 percent net return. The RMI also maintains its own D account separate from the compact trust fund (see app. VI for additional information). We did not independently project the D account balance or potential disbursements from the D account after 2023. We conducted a series of simulations to determine the likely effects of potential strategies for improving the outlook of the FSM and RMI compact trust funds. Prior studies by Graduate School USA, the Asian Development Bank, and the International Monetary Fund examined the effects of three general approaches for improving the trust funds’ outlooks: (1) reducing planned disbursements from the funds, (2) making additional contributions to the funds, and (3) changing the compact trust fund disbursement policies. These prior studies included strategies that would require changing the trust fund agreements to permit disbursements from the A account. To isolate the impact of individual changes on compact trust fund balance and disbursements, we developed and analyzed five potential strategies based on the approaches examined in the prior studies. 1. Annual disbursements are reduced below the maximum allowable disbursement. 2. Additional annual contributions are made to the trust fund in fiscal years 2018 through 2023. 3. The trust fund agreement disbursement policies are modified to limit the annual disbursement to a fixed percentage of the fund’s moving average balance over the previous 3 years, up to the maximum disbursement amount defined by the current trust fund agreement. 4. The trust fund agreement disbursement policies are modified to reduce the amount of the annual disbursement if the compact trust fund’s moving average balance over the previous 5 years is lower than a primary target amount. 5. The trust fund agreement disbursement policies are modified to set the target disbursement as 2.1 percent of the compact trust fund’s balance in fiscal year 2024. The disbursement amount is further decreased if the fund’s moving average balance over the previous 5 years is lower than the primary target balance. Implementing either of the first two potential strategies would not require any changes to disbursement provisions in the existing trust fund agreement, but implementing any of the remaining three strategies may require such changes. In strategies 3, 4, and 5, we analyzed strategies that would permit disbursement from the A account. Disbursing from the A account would require changing the compact trust fund agreements. The agreements can be amended in writing at any time, with mutual consent of the governments. However, the U.S. legislation implementing the amended compacts requires that any amendment, change, or termination of all or any part of the compact trust fund agreements shall not enter into force until incorporated into an act of Congress. All of the potential strategies we analyzed would reduce or eliminate the risk of the compact trust funds experiencing years of zero disbursement. However, all of the potential strategies would require the countries to exchange a near-term reduction in resources for more predictable and sustainable disbursements in the longer term. Appendix VII presents the detailed results of our analysis. Under the compact trust fund agreements, each trust fund committee must develop a distribution policy, with the intent that compact trust fund disbursements will provide an annual source of revenue to the FSM and RMI after fiscal year 2023. The trust fund committees could use distribution policies to address risks to each fund’s sustainability. For example, the committees have the discretion to disburse an amount below the established maximum. Our analysis of potential strategies for improving the funds’ outlook shows that reducing the size of disbursements would improve each compact trust fund’s long-term sustainability. According to interviews with, and documents provided by, the trust funds’ administrator, the committees reviewed presentations in 2016, 2017, and early 2018 from the authors of previous studies and fund managers regarding the likely status of the trust funds after 2023 and have also reviewed options for addressing risks to the trust funds’ disbursements and sustainability, including changes to disbursement provisions in the compact trust fund agreements. However, as of January 2018, according to the trust funds’ administrator, neither committee had developed a distribution policy. Without a distribution policy that provides information about the size of expected disbursements, the FSM and RMI are hampered in their current and ongoing efforts to plan for the potential reduction in U.S. compact assistance after 2023. The compact trust fund committees have not yet established fiscal procedures for compact trust fund disbursements after fiscal year 2023. Each trust fund agreement requires the respective committee to determine the fiscal procedures to be used in implementing the trust fund agreement. The committees are to base their procedures on the compact fiscal procedures agreements, which define the membership and duties of the JEMCO and JEMFAC and single audit report requirements, among other things, unless the parties to the trust fund agreement agree to adopt different fiscal procedures. No compact trust fund disbursements are to be made unless the committee has established such trust fund fiscal procedures. U.S., FSM, and RMI officials are aware of the need to determine the fiscal procedures that will govern oversight of compact trust fund disbursements. Issues related to future oversight of compact trust fund disbursements have been raised for discussion with U.S. representatives on JEMCO and JEMFAC. However, according to an RMI representative on the compact trust fund committee, that committee has not discussed fiscal procedures for the compact trust fund disbursements. In addition, FSM officials noted that they were unsure whether the JEMCO or the compact trust fund committees would approve specific projects. Without fiscal procedures in place, the trust fund committees will not be able to provide disbursements and the United States, the FSM, and the RMI will lack clear guidance to ensure oversight for trust fund disbursements. The timing of the trust fund committees’ calculation of the amounts available for annual disbursement to the FSM and the RMI does not align with the countries’ budget and planning timelines. The amounts available for disbursement in a given fiscal year cannot be determined until each fund’s returns have been determined at the end of the prior year. Further, if the disbursement amounts are calculated from audited fund returns as determined by annual audits required by the trust fund agreements, the amounts may not be determined until as late as March 31, 6 months into the fiscal year for which the disbursement is to be provided. However, both the FSM and the RMI government budget cycles are completed before the annual amounts available for disbursement will be known. As a result, the FSM and RMI would have to budget without knowing the amount to be disbursed, complicating their annual budget and planning processes. See figures 7 and 8 for the FSM and RMI budget timelines for fiscal year 2024, based on their current budget calendars, relative to the dates when the compact trust fund disbursement amounts will be determined on the basis of the funds’ unaudited end-of-fiscal-year balances and of their audited balances. Standards for Internal Control in the Federal Government—which is applicable to the U.S. government but can be adopted as a best practice by nongovernmental entities—states that management should use quality information to achieve the entity’s objectives. For example, as part of using quality information, the entity obtains relevant data from reliable internal and external sources in a timely manner based on the identified information requirements. Given the FSM’s and RMI’s current budget processes, the FSM and RMI will not have accurate and timely information on the amounts that will be available for annual disbursements for each fiscal year. The FSM Secretary of Finance and Administration, a member of the compact trust fund committee, indicated that she is aware of the discrepancy between the timing of the trust fund disbursement calculations and dates in the FSM’s budget and planning cycle and stated that the FSM would raise the issue of this discrepancy as part of its planning for the transition to relying on compact trust fund disbursements. One of the RMI’s representatives on the compact trust fund committee stated that the timing of the disbursement calculations was a challenge and would complicate RMI planning and management. Each trust fund committee received a briefing in 2016 from the trust funds’ administrator that discussed issues associated with the timing of the disbursement calculations. However, as of January 2018, the committees had not determined how they would address this issue. The FSM and RMI did not implement planned budget reductions to address decreasing compact sector grants because of increasing revenue from other sources. FSM officials stated that they did not implement their plan’s planned budgetary reductions due to increasing revenues for the state and national governments. The RMI also did not implement budget reductions but used increased revenue, particularly from fishing fees, to offset the decrement in compact sector grants. FSM and RMI strategic plans in the key sectors of education and health focus on strategic goals and priorities rather than addressing the effect of the 2023 transition on health and education budgets. However, FSM and RMI infrastructure plans discuss funding requirements and potential alternative funding sources. The FSM, the RMI, and the United States have each established bodies to plan to address issues related to the 2023 transition to trust fund income. The FSM has not implemented budget reductions scheduled in its decrement management plan, the FSM-Wide Long-Term Fiscal Framework (Long-Term Fiscal Framework). The FSM’s plan included a firm commitment for a 6 percent reduction in real terms in FSM state expenditures in fiscal year 2014. Two additional 6 percent expenditure reductions were planned for fiscal years 2017 and 2020, but these were contingent reductions that would not be implemented if the FSM states received offsetting revenue to address the reductions. According to FSM national government officials, revenue increases, including growth in revenue from fishing fees, have enabled the FSM to avoid implementing the 2017 contingent 6 percent expenditure reductions, and the further reductions in fiscal year 2020 are not likely to be implemented. FSM officials cited multiple reasons for not implementing the planned reductions: Increasing revenue to the state and national governments. The FSM’s Long-Term Fiscal Framework included a plan to increase the proportion of compact sector grant funding distributed among the FSM states and reduce the proportion retained by the national government. This change in the FSM’s internal compact grant distribution formula reduced the amount of the decrement in compact sector grants received by the states that would have otherwise occurred. The FSM national government’s revenue from fishing fees has increased rapidly in recent years, allowing it to use this revenue in place of compact sector grants. Effect of inflation adjustments on compact sector grants. According to FSM officials, because of inflation adjustments, the nominal value of the compact sector grants has not significantly declined. As a result, the FSM government questions the need for expenditure reductions. In addition to scheduling budget reductions, the FSM’s Long-Term Fiscal Framework included plans to implement unified tax reform measures, which also have not been implemented. However, plans to reduce the national government’s share of compact sector grants and to use surpluses to mitigate the effect of fiscal reforms were implemented. (See app. VIII for a summary of the FSM’s planned actions and their implementation.) As of January 2018, the FSM had not updated the Long- Term Fiscal Framework but had included information updates in its annual budget submittal. The RMI government has not implemented budget reductions scheduled in its decrement management plan. The RMI’s decrement management plan divided proposed budgetary reductions into three periods: fiscal years 2016 through 2017, fiscal years 2018 through 2020, and fiscal years 2021 through 2023. Only the reductions in the first period were to be considered binding, with adjustments in the later periods subject to review during the next 3-year planning cycle. According to RMI government officials, significant growth in fishing fee revenue and growth in ship registry and income tax revenue has minimized the initially anticipated impact of the compact decrements, thereby reducing the need to implement expenditure reductions. RMI officials noted that it expected to continue to use its own revenue in place of compact funds in fiscal years 2019 through 2023. In addition to scheduling the budget reductions, the RMI decrement management plan includes plans to implement new taxes, program fishing fees into the annual budget, reduce subsidies to state-owned enterprises, and reduce compensation to Majuro landowners for the use of their land for utilities. The RMI has programmed a portion of its fishing fee surplus into the annual budget in each fiscal year from 2015 to 2017 but has not implemented other planned actions. (See app. VIII for a summary of planned actions and their implementation.) As of January 2018, the RMI government had not updated its plan and did not intend to do so, according to RMI officials. However, the officials stated that the government has incorporated elements of the plan, particularly its expenditure analysis, into the RMI’s medium term budget and investment framework, a planning and budgeting document submitted to JEMFAC in August 2017. In comments on a draft of this report, the RMI stated that it is developing a long-term fiscal framework in addition to the medium term budget and investment framework. According to the RMI, the long-term fiscal framework will have a 10-year outlook through 2028 and take into account compact decrements and anticipated resources from the compact trust fund and other sources. FSM national and state infrastructure plans provide specific budgetary information to address the fiscal year 2023 transition from compact sector grants to trust fund income, such as funding requirements and sources of funding for planned infrastructure projects in fiscal years 2016 through 2025. The FSM national and state health and education plans generally focus on the national and state health and education departments’ strategic goals and priorities rather than discussing budget changes or new revenue generation strategies to address the possibility of reduced resources after 2023. In addition to preparing sector strategic development plans, the FSM national and state governments issued the 2023 Action Plan in 2014, designed to address fiscal and economic challenges before and after compact sector grant funding ends in fiscal year 2023. In contrast to the FSM Long-Term Fiscal Framework, which committed to specific expenditure reductions and government actions prior to fiscal year 2023, the 2023 Action Plan includes an economic growth strategy that seeks to boost private sector development. The plan addresses economic growth strategies and improved performance in key economic sectors such as tourism, agriculture, and fisheries and identifies the need for the FSM national and state governments to limit expenditure growth in the medium and long terms. The RMI’s infrastructure plan addresses the scheduled cessation of compact sector grant assistance in fiscal year 2023 through a review of potential future budgets, while the RMI’s education and health plans outline strategic goals and priorities. Similar to the FSM’s infrastructure plans, the RMI National Infrastructure Plan reviews budget information to address the fiscal year 2023 transition, such as planned infrastructure investments and potential alternative funding sources for fiscal years 2017 through 2026. The RMI’s national education and health plans primarily focus on goals and objectives to address key challenge areas in health and education over the next few fiscal years and do not discuss specific budget changes for the transition in 2023. Both the FSM and the RMI have formed planning committees and charged them with planning for the fiscal year 2023 transition from compact sector grants to compact trust fund income. In addition, the U.S. Department of State (State) has organized a U.S. interagency planning group to help coordinate U.S. policy related to the transition. In 2016, the FSM national government established a Joint Compact Review and Planning Committee to coordinate FSM planning for the transition from compact sector grants to trust fund income in 2023. The committee is mandated to, among other things, set goals in anticipation of the end of compact grants, develop strategies and alternatives, identify financial assistance sources, analyze economic information, and provide periodic reports to the FSM Congress. The committee first met in May 2017. In September 2017, the committee hired an Executive Director, who in turn hired an economist and Executive Secretary prior to the committee’s February 2018 meeting. As of January 2018, according to FSM officials, the committee had not produced any publicly available products but had collected information from various FSM government agencies. According to the RMI Office of Compact Implementation, the RMI established the Compact Review Commission in late 2016 to plan for the fiscal year 2023 transition from compact sector grants to trust fund income. According to the Office of Compact Implementation, the commission is mandated to review the compact and make recommendations to the cabinet regarding priorities to be addressed for the fiscal year 2023 transition. Specific priorities may include the status of federal programs that will expire in fiscal year 2023, the adequacy of the compact trust fund to provide needed revenue, and other issues relevant to the cessation of compact grant assistance. In January 2018, the RMI Presidential Cabinet appointed a Compact Review Commission Coordinating Committee, consisting of the RMI Ambassador to the United States, the Director of the RMI Office of Compact Implementation, the Secretary of Finance, a private sector representative, and a legal adviser, and directed it to coordinate the commission’s meetings, actions, and reporting. State began holding regular meetings of the Interagency Working Group on the Freely Associated States in February 2017 to provide guidance and oversight for policy concerning the Compacts of Free Association and to coordinate U.S. policy in light of the fiscal year 2023 transition. The group met monthly through the rest of 2017, except in November. The monthly meetings have focused individually on the FSM and RMI, as well as addressed cross-cutting issues such as donor coordination. For example, in March and July 2017, the group’s monthly meetings focused on the FSM and included participation by the U.S. Ambassador and the FSM Ambassador, respectively. Similarly, in April and June 2017, the group’s monthly meetings focused on the RMI and included participation by the U.S. and RMI ambassadors, respectively. According to State officials, the meetings will continue indefinitely on a monthly basis. The U.S. compacts of free association with the FSM and the RMI provided a framework for the United States and the two countries to work toward, among other things, the goal of assisting the FSM and the RMI in their efforts to achieve economic development and self-sufficiency. The end of U.S. compact sector grants in fiscal year 2023 and the beginning of disbursements from the compact trust funds in fiscal year 2024 will mark a key transition in these ongoing efforts, and the FSM and RMI are currently preparing plans for addressing issues associated with the transition to compact trust fund income. The countries’ transition to relying on income from the compact trust funds will likely require significant budgetary choices. However, lacking the trust fund distribution policies required under the trust fund agreements, the FSM and RMI are hampered in their efforts to plan for the potential reduction in U.S. compact assistance after 2023. In addition, without the required fiscal procedures governing trust fund actions after 2023, the trust fund committees will be unable to make disbursements and the United States, the FSM, and the RMI will not have assurance of necessary oversight of trust fund disbursements. Finally, without alignment between the timing of the trust fund committees’ annual calculation of the amounts available for disbursement and the countries’ annual budget cycles, the FSM and RMI will have to plan their budgets for each fiscal year without knowing the amount of the disbursements from the compact trust funds. We are making the following six recommendations to Interior: The Secretary of the Interior should ensure that the Director of the Office of Insular Affairs, as Chairman of the FSM compact trust fund committee, works with other members of the committee to develop a distribution policy for the FSM compact trust fund, as required by the compact trust fund agreement, that takes into account potential strategies that could address risks to the fund’s ability to provide a source of income after fiscal year 2023. (Recommendation 1) The Secretary of the Interior should ensure that the Director of the Office of Insular Affairs, as Chairman of the FSM compact trust fund committee and of the FSM Joint Economic Management Committee, works with other members of the committees to develop the fiscal procedures required by the compact trust fund agreement. (Recommendation 2) The Secretary of the Interior should ensure that the Director of the Office of Insular Affairs, as Chairman of the FSM compact trust fund committee, works with other members of the committee to address the timing of the calculation of compact trust fund disbursements. (Recommendation 3) The Secretary of the Interior should ensure that the Director of the Office of Insular Affairs, as Chairman of the RMI compact trust fund committee, works with other members of the committee to develop a distribution policy for the RMI compact trust fund, as required by the compact trust fund agreement, that takes into account potential strategies that could address risks to the fund’s ability to provide a source of income after fiscal year 2023. (Recommendation 4) The Secretary of the Interior should ensure that the Director of the Office of Insular Affairs, as Chairman of the RMI compact trust fund committee and of the RMI Joint Economic Management and Financial Accountability Committee, works with other members of the committees to develop the fiscal procedures required by the compact trust fund agreement. (Recommendation 5) The Secretary of the Interior should ensure that the Director of the Office of Insular Affairs, as Chairman of the RMI compact trust fund committee, works with other members of the committee to address the timing of the calculation of compact trust fund disbursements. (Recommendation 6) We provided a draft of this report to the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, the Interior, Labor, State, the Treasury, and Transportation; the Federal Communications Commission; the Federal Deposit Insurance Corporation; the Federal Emergency Management Agency; the National Science Foundation; USAID; and the U.S. Postal Service, as well as to the FSM and RMI. We also provided copies of the draft to the administrator of each compact trust fund and to Graduate School USA for their technical review. The Department of the Interior, the U.S. Postal Service, and the FSM and RMI provided official comments, which are reproduced in appendixes IX through XII with, where relevant, our responses. The Departments of Agriculture, Education, Health and Human Services, Labor, State, and Transportation; the Federal Deposit Insurance Corporation; USAID; the RMI; the trust funds’ administrator, and Graduate School USA provided technical comments, which we incorporated as appropriate. The following summarizes the official comments from Interior, the U.S. Postal Service, the FSM, and the RMI, and our responses. Interior concurred with our recommendations and stated that discussions to address them are ongoing within the trust fund committees. In addition, Interior stated that a working group comprising staff from Interior’s Office of Insular Affairs and the Department of State’s Office of Australia, New Zealand and Pacific Island Affairs will present recommended actions related to our recommendations to the trust fund committees in 2018. The U.S. Postal Service stated that, in general, the report includes helpful information on the compact obligations regarding postal services provided to the FSM and RMI. However, the U.S. Postal Service also provided additional information on the reimbursement shortfall for its services since 2002 in the freely associated states. The U.S. Postal Service stated that it recommends that, upon expiration of the programs and services agreements, the FSM and RMI be treated as international postal origin and destination points. The FSM concurred with our recommendations to Interior. In addition, the FSM stated that the programs and services provided by U.S. agencies were essential to the FSM and should continue to the greatest extent possible after 2023. The FSM would like to work with U.S. officials to ensure timely approval of continuing these programs and services. The FSM also noted that we had reported the potential for the FSM compact trust fund to not provide disbursements sufficient to cover the estimated value of expiring federal services in 2002, prior to the signing of the amended compact. Further, the FSM provided additional information regarding its Long-Term Fiscal Framework and summarized ongoing public sector and tax reform efforts and its own contributions to the FSM Trust Fund. The RMI concurred with our recommendations to Interior and provided additional comments regarding the recommendations. The RMI asserted that, absent accountability issues, the maximum annual disbursement amount should be disbursed from the compact trust fund. However, as our report notes, the compact trust fund agreements state the maximum allowable disbursement level and do not establish or guarantee a minimum disbursement level. The RMI also stated that it would prefer that future accountability procedures be based on a new agreement rather than a reshaping of the current fiscal procedures agreement. In addition, the RMI raised the issue of compensation under the tax and trade provision of the original compact as well as the effect of delays in investing the RMI compact trust fund on its current value. We discuss the tax and trade provisions in Appendix VII of our report. The RMI also recommended that amendments to the trust fund agreement should not require action by the U.S. Congress. As our report notes, the U.S. legislation implementing the amended compacts requires that any amendment, change, or termination of all or any part of the compact trust fund agreements shall not enter into force until incorporated into an act of Congress. Finally, the RMI noted that programs and services provided through the amended compacts' implementing legislation (Pub. L. No. 108-188) and the compact programs and services agreement were essential and that the RMI could not replace them by using its own resources. We are sending copies of this report to the appropriate congressional committees and to the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, the Interior, Labor, State, the Treasury, and Transportation; the Federal Communications Commission; the Federal Deposit Insurance Corporation; the Federal Emergency Management Agency; the National Science Foundation; USAID; and the U.S. Postal Service, as well as the President of the FSM and the President of the RMI. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix XIII. We were asked to review issues related to the Federated States of Micronesia’s (FSM) and Republic of the Marshall Islands (RMI) transition from compact grant assistance to relying on income from the compact trust funds. This report examines (1) the use and role of federal funds and programs in the FSM and RMI budgets, (2) projected compact trust fund disbursements and potential strategies to address risks to those disbursements, and (3) FSM and RMI efforts to prepare for the scheduled decrements in compact grant funding and the transition to relying on compact trust fund income. To identify the use and role of federal funds and programs, we reviewed relevant documents and interviewed knowledgeable U.S., FSM, and RMI officials during our site visits to the RMI in July 2017 and in the FSM in July and August 2017. We reviewed U.S. law; the amended compacts and associated programs and services agreements and military use and operating rights agreements with each country; each country’s government and component unit single audit reports for fiscal years 2012 through 2016; and U.S. Region IX reports for fiscal years 2015 and 2016. We analyzed expenditure and funding data in FSM and RMI single audit reports, including their Schedule of Expenditures of Federal Awards, to identify the sources of funds expended by the FSM national and state governments, the RMI national government, and their component units and calculated federal funds as a percentage of each entity’s total resources. We reviewed the single audit reports and found that the auditors did not express any qualified or adverse opinions regarding the information they used to prepare the audits’ Schedule of Expenditures of Federal Awards, which lists the amount and use of federal grants. We concluded that these data are sufficiently reliable for estimating the role of federal programs in the FSM and RMI budgets. To identify the FSM and RMI national government component units and FSM state government component units, we reviewed the websites of, and audit reports from, the FSM Office of the National Public Auditor and the RMI Office of the Auditor-General and confirmed the list of component units we identified with FSM and RMI officials. We also discussed the uses of federal funds in the countries with FSM national and state government officials, RMI government officials, and FSM and RMI component unit representatives during our site visits to the countries. Our portrayal of the role of federal funds in the government and component unit budgets does not capture the value of any noncash goods and services that do not appear in the single audit reports. In addition, it does not capture benefits that some programs provide to individuals, such as U.S. Department of Agriculture rural housing loans and Federal Deposit Insurance Corporation insurance that benefits depositors at the Bank of the Federated States of Micronesia. To determine the legal status of U.S. programs, services, and grants after fiscal year 2023, we analyzed the amended compacts, the compact- related agreements, and U.S. law governing the programs, services, and grants that we identified to determine whether, under current law, they would still be available to the FSM and RMI after the end of that fiscal year. For the programs and services agreement with each country, we reviewed the status of programs and services when the agreements end in fiscal year 2024. Our legal analysis included programs, services, and grants that we identified from the compacts, the amended compacts’ implementing legislation, the military use and operating rights agreements, and the programs and services agreements. We also included in our legal analysis the programs (1) that we identified through the single audit reports and Region IX reports and (2) that were not already identified through our review of the compacts, the amended compacts’ implementing legislation, and the compact-related agreements; and (3) that the single audit reports showed as having expenditures above $200,000 in any year in fiscal years 2012 through 2016 or the Region IX reports identified as providing more than $200,000 in federal funding in fiscal years 2015 or 2016. We prepared an initial list of federal programs based on our review. We then provided our list of programs to the FSM, the RMI, and the U.S. Departments of State and the Interior for their review and updated the list on the basis of information they provided. We prepared a preliminary analysis of the post-2023 status of the programs and funding sources we identified and asked officials of the relevant U.S. agencies to review and comment on the accuracy of the list. As part of this analysis, we contacted officials from the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, the Interior, Labor, State, and Transportation; the Federal Communications Commission; the Federal Deposit Insurance Corporation; the Federal Emergency Management Agency; the National Science Foundation; the U.S. Agency for International Development; and the U.S. Postal Service. We incorporated into our analysis the comments that these officials provided, and we again asked for their review of our analysis before we completed our draft report. Our conclusions are based on a review of current law. Therefore, any changes in the applicable law subsequent to our report but before 2023 may affect the FSM’s and RMI’s eligibility for U.S. programs and funding. In addition, the availability of programs depends on appropriations made for that purpose. Although we took multiple steps to validate our list of programs with the FSM and RMI and the relevant U.S. agencies, our analysis may not have captured all U.S. grants and programs provided in the FSM and RMI. To examine projected compact trust fund disbursements and actions to address risks, we reviewed previous studies of the compact trust funds; the U.S.-FSM and U.S.-RMI compact trust fund agreements; and other governance and reporting documents such as investment policy statements, presentations to the compact trust fund committees, audits, and annual reports. We also interviewed FSM and RMI officials, compact trust fund committee members, authors of the previous studies, and the funds’ administrator, investment advisers and money managers. To project the compact trust funds’ likely income at their current value and under current trust fund rules (i.e., the baseline scenario), we built a Monte Carlo simulation model and performed 10,000 trial runs of projected returns and disbursements over a four-decade time period, using random values for key variables. We used the following key assumptions in our compact trust fund analysis: Compact trust fund balance. We used the unaudited FSM and RMI fiscal year 2017 year-end compact trust fund balances. C account balance. We estimated the C account balance on the basis of the unaudited FSM and RMI fiscal year 2017 year-end balances. To assess the reliability of the unaudited balances, we reviewed the previous years’ audits and confirmed with the trust funds’ Administrator that previous years’ audits had not resulted in any significant differences between the preliminary balances and the final audited balances. We concluded that the unaudited balances were sufficiently reliable as a basis for our projections of future trust fund performance. The March 2018 audited fund balances, released after we completed our analysis, were within $5 of the unaudited fund balances. Amount of future compact trust fund contributions. We based the amounts of future annual U.S. contributions to both trust funds on the inflation-adjusted amounts estimated in the U.S. Department of the Interior’s (Interior) Office of Insular Affairs’ Budget Justifications and Performance Information, Fiscal Year 2018. For the RMI, we assumed that Taiwan would continue to contribute $2.4 million per year to the RMI’s A account each year through 2023 in keeping with Taiwan’s May 2005 agreement with the RMI. Estimated annual grant assistance for fiscal year 2023. We based our estimates of fiscal year 2023 assistance on the inflation-adjusted amounts estimated by the Office of Insular Affairs. The office estimated that the FSM would receive $82 million in annual grant assistance in fiscal year 2023 and that the RMI would receive $36 million, including Kwajalein-related assistance. In keeping with the RMI compact trust fund agreement, we excluded from our analysis grants provided to the RMI under compact section 211(b) for Kwajalein-related assistance, resulting in an estimated $27 million in grant assistance to the RMI under compact section 211 in fiscal year 2023. The actual amount of annual grant assistance in fiscal year 2023 will depend on actual inflation rates in the years preceding 2023. Different assumptions about the inflation rates will result in different estimates of the amount of fiscal year 2023 annual grant assistance. Net rate of return. In the baseline scenario, we present our results based on a 6 percent rate of return after fees are deducted. To select and assess the reasonability of this projected net rate of return, we reviewed the capital market assumptions and projections used by the money managers for the compact trust funds as well as historical market rates of return. However, because projecting the funds’ long- term performance using the current portfolio and economic assumptions has limitations, we also conducted our analyses using different nominal values for the net returns—5 percent, 7 percent, and 8 percent—in each case using a standard deviation of 13 percent. These results are presented in appendix V. We assumed a normal distribution, but we tested the same baseline analyses with a t- distribution and found that a t-distribution did not substantially affect the results. Inflation rate after fiscal year 2023. We applied the 2 percent long- term inflation rate projected by the Congressional Budget Office. To further analyze actions that could address risks to the compact trust funds, we modeled alternative strategies for managing the funds that were analyzed by previous studies of the compact trust funds. We identified previous studies through a literature search and by interviewing cognizant agency and trust fund officials. On the basis of this review, we developed five potential strategies that are representative of the approaches identified in previous studies. These five strategies are examples of many possible strategies, including varying amounts of disbursement reductions, additional contributions, and methods of calculating annual disbursements. We are not recommending any specific strategy. To provide additional information about potential outcomes, we also analyzed another four strategies that assumed a lower amount of additional trust fund contributions, lower disbursement reductions, or a lower percentage of the compact trust fund balance that could be withdrawn (see app. VII). To help ensure that we had appropriately reproduced the methods used in previous studies, we shared our preliminary results for strategy 4, which modeled the Moving Adjustment Rule, and strategy 5, which modeled the Sustainability Adjustment for Enhanced Reliability (SAFER), with the Graduate School USA representatives who had initially prepared these potential strategies. We analyzed each strategy separately to isolate the impact of individual changes in the strategy on compact trust fund balance and disbursements. However, in practice, these individual changes could occur in combination with each other. We again performed the Monte Carlo analysis, using the same key assumptions as in the baseline scenario, to determine the likely effects, relative to the baseline, of five potential strategies representing three approaches: (1) reducing annual compact trust fund disbursements; (2) making additional contributions; (3) and changing the disbursement policies, including strategies that would require changing the trust fund agreements to permit disbursements from the A account. We present the results of this analysis with a 6 percent net return, a standard deviation of 13 percent, and a normal distribution and tested the results with 5 percent, 7 percent, and 8 percent net returns (see app. VII for further details). To summarize and compare our simulation results for the baseline and alternate scenarios, we analyzed the average disbursements in nominal dollars, the average disbursements in comparison with maximum disbursements, the likelihood of 1 or more years with zero disbursement, and the likelihood that the trust funds will maintain their inflation-adjusted value after fiscal year 2023. We calculated the average disbursement in the given time periods by averaging simulated disbursements over 10-year periods (averaging first over 10 years and then over 10,000 simulated cases). We calculated the average disbursement as a percentage of the maximum allowable disbursement by averaging the ratio of each simulated disbursement to the maximum inflation-adjusted allowable disbursement in the given period (averaging first over 10 years and then over 10,000 simulated cases). We calculated the likelihood of zero disbursement by counting cases with 1 or more years of zero disbursement among the 10,000 simulated cases in each 10-year period. We calculated the likelihood that the fund balance will maintain its inflation-adjusted fiscal year 2023 value by counting simulation cases where the simulated balance exceeds or equals its projected inflation- adjusted 2023 balance in the given year. We report the disbursement results averaged by decade for the first 40 years of compact trust fund disbursements—fiscal years 2024 through 2033, fiscal years 2034 through 2043, fiscal years 2044 through 2053, and fiscal years 2054 through 2063—to summarize the overall trend in disbursements. However, depending on market volatility, disbursements during these decades are likely to fluctuate from year to year. While the projected per-decade averages can show long-term trends in the funds’ disbursements and sustainability and provide a comparison of the likely effects of the potential strategies we analyzed, the projected averages do not provide information about the volatility of changes in annual disbursement. We compare the compact trust funds’ projected value with the projected inflation-adjusted fiscal year 2023 value through 2063 in 10- year increments beginning in fiscal years 2033. To document the status of the FSM Trust Fund and the RMI’s D account and their potential use to supplement FSM and RMI resources after 2023, we reviewed information about the FSM laws establishing the FSM Trust Fund, FSM economic reports, and the RMI-Taiwan agreement regarding the D account. We also interviewed FSM and RMI officials. We did not independently verify the FSM’s projections of the future size of, and disbursements from, its trust fund. The information on foreign law or on foreign government operations in this report is not the product of our original analysis, but is derived from interviews and secondary sources. To examine FSM and RMI efforts to prepare for the scheduled compact grant decrements, we reviewed each country’s decrement management plans to determine the FSM’s and RMI’s planned budget reductions and other actions. We then reviewed the FSM’s and RMI’s single audit reports and budget documents and interviewed FSM and RMI officials to determine whether the planned reductions had been implemented. We compared the planned actions to current legislation, single audit reports, or recent reports that discussed the status of FSM and RMI economic and financial reforms. In addition, we interviewed Interior, FSM, and RMI officials to determine whether FSM and RMI decrement management plans had been revisited or updated, why the plans were or were not adhered to, and whether the countries planned any future updates to the plans. We also conducted interviews with U.S. officials from the Department of State, a representative of Graduate School USA, and representatives of the World Bank and the International Monetary Fund regarding each country’s previous and current planning efforts. To assess whether the FSM and RMI strategic plans for the key sectors of health, education, and infrastructure addressed the 2023 transition from compact grants and other U.S. assistance to compact trust fund income, we first obtained the relevant plans from department heads in each key sector of the FSM and RMI national governments and FSM state governments and confirmed our identification of the documents with FSM and RMI officials. We reviewed the plans to determine whether they included any discussion of budget projections, economic or financial reforms, alternative funding sources or other revenue generation strategies, and expenditure cuts or saving strategies for periods before and after fiscal year 2023. We also reviewed the FSM’s 2023 Action Plan and the RMI’s updated Medium Term Budget and Investment Framework to determine whether these documents discussed budget changes to address the 2023 transition. Through our interviews with U.S., FSM, and RMI officials, we also learned about other ongoing planning efforts to address the 2023 transition: the U.S. Interagency Working Group on the Freely Associated States, the FSM Joint Compact Review and Planning Committee, and the RMI Compact Review Commission. Following our interviews, we reviewed and summarized documentation related to the working group’s purpose, meetings, and membership. We also contacted FSM and RMI committee members and officials to obtain additional information on the mandate, membership, and status of the FSM and RMI committees. The information contained in this report on foreign law or on foreign government operations is not the product of our original analysis, but is derived from interviews and secondary sources. We conducted this performance audit from March 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The amended compacts’ implementing legislation authorized and appropriated direct financial assistance to the FSM and the RMI in fiscal years 2004 through 2023, and provided for partial inflation adjustment of the base amount of compact sector grants and trust fund contributions each year. The base amount is partially inflation-adjusted by the percentage that equals two-thirds of the percentage change in the U.S. gross domestic product implicit price deflator, or 5 percent, whichever is less in any 1 year, using the beginning of 2004 as a base. As the base amount of compact sector grants decreases, the trust fund contributions generally increase by an equivalent amount. Figure 9 shows the amount of compact sector grants and trust fund contributions each fiscal year from 2004 through 2023. The cumulative inflation adjustment largely offsets the amount of the decrement, resulting in a relatively steady nominal amount of compact sector grants after inflation adjustments (see fig. 10). However, because the inflation adjustment is not equal to full inflation, the value of compact sector grants continues to decline in real terms. U.S. grants that end in 2023 play a significant role in the budgets of the FSM states and the RMI in the health and education sectors. The colleges of both countries have also relied on compact sector grants but rely even more on Pell grants to support their operation. FSM states rely on U.S. grants scheduled to end in 2023 for the majority of their health and education expenditures. In fiscal year 2016, compact sector grants and the SEG supported 60 percent or more of health expenditures and 82 percent or more of state education expenditures. Table 3 shows the states’ health and education expenditures of compact sector grants and the supplemental education grant (SEG) in fiscal year 2016. In fiscal years 2012 through 2016, compact sector grants and the SEG supported 56 to 99 percent of FSM states’ health expenditures and 82 to 100 percent of FSM states’ education expenditures. Total expenditures (dollars) Amount (dollars) U.S. compact sector, supplemental education, and other grants also supported approximately 76 percent of the average $21 million in annual expenditures of the College of Micronesia–FSM, an FSM government component unit, in fiscal years 2012 through 2016. Compact sector grants and the SEG, each of which end in 2023, supported approximately 15 percent of the college’s annual expenditures. Pell grants, which provide support for education expenses for qualifying students, supported more than half of the college’s annual expenditures. College officials told us that the college would be unable to operate without Pell grants. According to officials from the U.S. Department of Education, the college will remain eligible after 2023 to receive Pell grants that benefit its students as long as such grants are available to institutions and students in the United States (see app. IV). The RMI relies on U.S. grants scheduled to end in 2023 for health and education expenditures. In fiscal year 2016, compact sector and supplemental education grants scheduled to end in 2023 supported approximately 25 percent of RMI health expenditures and approximately 59 percent of RMI education expenditures (see table 4). Kwajalein-related grants increased these percentages to 32 percent for health and 66 percent for education. In total, in fiscal years 2012 through 2016, compact sector grants and the SEG supported approximately 58 percent of RMI education expenditures and 29 percent of health expenditures. During this period, the percentage of education expenditures supported by compact sector and supplemental education grants scheduled to end in 2023 remained relatively steady and the percentage of health expenditures decreased slightly. U.S. compact sector, supplemental education, and other grants also supported approximately half of the average $11.9 million in annual expenditures of the College of the Marshall Islands, an RMI government component unit, in fiscal years 2012 through 2016. Compact sector grants and the SEG, each of which end in 2023, supported approximately 8 percent of the college’s annual expenditures. Pell grants supported about 39 percent of the college’s expenditures. According to officials from the U.S. Department of Education, the college will remain eligible after 2023 to receive Pell grants that benefit its students, as long as such grants are available to institutions and students in the United States (see app. IV). Also in fiscal years 2012 through 2016, compact sector and supplemental education grants scheduled to end in 2023 supported about half of the expenditures of the RMI government component unit, the Marshall Islands Scholarship, Grant, and Loan Board, which provides financial assistance for educational and training opportunities. Kwajalein- related compact grants that do not end in 2023 supported an additional 13 percent of the board’s expenditures. The amended compacts, compact-related agreements, the amended compacts’ implementing legislation, and other U.S. laws provide grants or eligibility for U.S. programs and services for the FSM and RMI. The amended compacts provided compact sector, Kwajalein-related, and audit grants. Under current law, compact sector and audit grants are each scheduled to end in 2023, but the RMI military use and operating rights agreement (MUORA) extended the time frame of Kwajalein-related compact grants for as long as the agreement is in effect. The amended compacts’ implementing legislation provided additional grants, including authorizing a supplemental education grant (SEG), and identified several specific U.S. programs as available to the FSM and RMI. Under current law, the additional grants end in 2023 but the statutory authorizations for some programs identified in Pub. L. No. 108-188 provide for the continued eligibility of the FSM and RMI to receive benefits under the programs. However, after fiscal year 2023, the FSM and RMI will no longer be eligible under current U.S. law for some programs that the SEG replaced. The compact-related programs and services agreements with each country identify additional programs and services that the United States makes available to the FSM and RMI. While these agreements will end in 2024, under current law, some U.S. agencies may continue to provide programs and services similar to those provided in the agreement under other authorities. Based on the status of current law, the FSM’s and RMI’s eligibility for other programs we identified that have been provided under other current U.S. laws will not change after fiscal year 2023. Under current law, compact sector grants provided to the FSM and the RMI under their compact sections 211(a) are scheduled to end in 2023. However, the RMI is scheduled to continue to receive $7.2 million, partially inflation adjusted, related to the U.S. military base in Kwajalein Atoll and provided under section 211(b) of its compact. Under the terms of the RMI MUORA, the United States agreed to provide these Kwajalein- related grants for as long as the MUORA is in effect. The MUORA continues until 2066 and may be extended at the discretion of the United States until 2086. The amended RMI compact provides for $18 million, partially inflation adjusted, in annual payments to the RMI government to compensate for impacts from the U.S. Army Garrison–Kwajalein Atoll. These payments will continue for as long as the MUORA is in effect. Annual compact grants of up to $500,000 (not inflation adjusted) to each country to pay for required annual audits of compact grants are scheduled to end in 2023. See table 5 for a summary of compact sector, Kwajalein- related, and audit grants. The supplemental education grant (SEG) authorized by the amended compacts’ implementing legislation is scheduled to end in fiscal year 2023 and, under current law, FSM and RMI eligibility for most programs that the SEG replaced will not resume after fiscal year 2023. Absent changes to current law, the FSM and RMI will not be eligible after fiscal year 2023 for the following programs that the SEG replaced during fiscal years 2005 through 2023: U.S. elementary and secondary education grant programs, adult education and literacy programs, career and technical education programs, job training programs, and Head Start early education programs. However, under other provisions of current law, qualifying individuals in the FSM and RMI will be eligible after fiscal year 2023 for undergraduate education grants and work-study programs that the SEG replaced. See table 6. Although the programs and services agreements with the FSM and RMI will end in fiscal year 2024, current U.S. law enables U.S. agencies to continue providing some programs and services now provided under the agreements. No current provisions of U.S. law will enable the Federal Emergency Management Agency (FEMA) to provide disaster response funding or enable the Federal Deposit Insurance Corporation to provide deposit insurance or the U.S. Postal Service to provide services to the FSM and RMI after the agreements end. However, the National Weather Service, the U.S. Department of Transportation’s (DOT) Federal Aviation Administration (FAA), and the U.S. Agency for International Development (USAID) could, under other legal authorities, provide services similar to those they now provide under the programs and services agreements. National Weather Service. The programs and services agreements authorize the National Weather Service to fund the operations of weather stations in the FSM and RMI, which it can continue to fund after the end of the Agreements under other authorities, according to Department of Commerce officials. Federal Aviation Administration. The programs and services agreements authorize DOT’s FAA to provide technical assistance in the FSM and RMI, which it can continue to provide after the end of the Agreements under other provisions of current U.S. law. However, DOT officials stated that FAA would require new bilateral agreements with the FSM and the RMI in order for the countries to continue to receive the civil aviation safety services that FAA currently provides under the programs and services agreements. The FAA would also seek reimbursement for any technical assistance it provides to the FSM and RMI. With regard to the civil aviation economic services of the programs and services agreements, DOT officials stated that, while the FSM and RMI could voluntarily decide to allow U.S. air carriers to continue operations in the FSM and RMI, new bilateral agreements would be needed to assure that result. U.S. Agency for International Development. Following a U.S. presidential disaster declaration, FEMA provides the funding for disaster relief and reconstruction, which is programmed through USAID. Under current law, FEMA funds will no longer be available for this purpose once the agreements end; however, USAID will be able to provide foreign disaster assistance funding to the FSM and RMI under the same terms as it provides this assistance to other countries. After the programs and services agreements end, FEMA will be able to support disaster relief efforts only if USAID or the countries request it to do so on a reimbursable basis. In addition, according to State and Interior officials, telecommunications- related services that the two agencies provide to the FSM and RMI under the programs and services agreements will continue as long as the FSM and RMI provide appropriate authorization for such services. Table 7 shows the status after fiscal year 2024 of programs and services currently provided to the FSM and the RMI under the agreements. Additional grants provided to the FSM and the RMI under the amended compacts’ implementing legislation will end in fiscal year 2023, but the countries’ eligibility for programs now provided under that legislation will generally continue under current U.S. law. Grants provided under the amended compacts’ implementing legislation for (1) judicial training in the FSM and the RMI, and (2) agricultural and planting programs on the RMI’s nuclear-affected Enewetak Atoll are scheduled to end. However, under current U.S. law, legal authorities permitting the operation of other programs would remain available to the FSM and RMI after fiscal year 2023. Eligibility under these legal authorities continues either because the amended compacts’ implementing legislation does not specify an ending date or because other provisions in current U.S. law make the FSM and RMI eligible for the program. Programs provided in the amended compacts’ implementing legislation include U.S. Department of Agriculture Rural Utilities Service grant and loan programs; U.S. Department of Education Pell grants for higher education and grants under Part B of the Individuals with Disabilities Education Act for children with disabilities; programs for nuclear-affected areas in the RMI; and additional programs provided by the Departments of Commerce and Labor as well as law enforcement assistance provided by the U.S. Postal Service. See table 8 for a summary of the programs identified in the amended compacts’ implementing legislation and their status as of the end of fiscal year 2023. In addition to being eligible for the programs provided through the compact, its associated agreements, and the amended compacts’ implementing legislation, the FSM and RMI are also eligible for a number of programs under other provisions of current U.S. law. The FSM and RMI have each received funds from the U.S. Department of Agriculture for forestry and rural housing programs, multiple Health and Human Services public health program grants, Interior technical assistance and historic preservation programs, and the DOT FAA airport improvement program, among others. Under current U.S. law, the legal authorities permitting the provision of these programs in the FSM and RMI would not necessarily change after 2023. Table 9 shows the FSM’s and RMI’s eligibility for these additional grants and programs under current law after fiscal year 2023. In order to the test the sensitivity of our compact trust fund projections to assumptions about the future rate of return, we also performed our Monte Carlo analysis using alternate rates of return. We projected the compact trust fund disbursements and balance under current compact trust fund rules on the basis of a 6 percent net return and also estimated the trust fund on the basis of 5 percent, 7 percent, and 8 percent net returns. Higher rates of return would improve the outlook for each compact trust fund. However, even with higher rates of return, our analysis shows a high likelihood that available compact trust fund disbursements will not reach an amount equivalent to maximum disbursements permitted by the compact trust fund agreement (i.e., the inflation-adjusted amount of fiscal year 2023 annual grant assistance, as defined by the trust fund agreements), a continuing risk of zero disbursements, and a decreasing likelihood that the fund will maintain or exceed its inflation-adjusted balance in fiscal year 2023. See tables 10 and 11 for our projections of FSM and RMI compact trust fund disbursements, likelihood of 1 or more years with zero disbursement, and likelihood of maintaining or exceeding its inflation-adjusted fiscal year 2023 value. The FSM and RMI each maintain their own country trust funds separate from the compact trust funds. These country trust funds are also available to provide a source of revenue after compact grants end at the end of fiscal year 2023. We did not independently project the future balance or potential disbursements from the FSM Trust Fund after 2023. The FSM maintains its own trust fund, separate from the compact trust fund, which can provide additional resources after fiscal year 2023 to offset a reduction in resources relative to those made available as of fiscal year 2023. The FSM Trust Fund, established in 1999, has grown rapidly in recent years. In fiscal years 2012 through 2017, the FSM appropriated a total of $73.3 million for contributions to its trust fund. In addition, in 2015, the FSM changed its tax law to allocate 20 percent of revenue collected by the states to state subaccounts within the FSM Trust Fund. Along with investment gains, these appropriations and contributions of tax revenue have increased the FSM Trust Fund’s balance from $8 million at the end of fiscal year 2011 to $115 million as of the end of fiscal year 2017. As of 2017, the FSM proposed to continue adding $10 million annually from national government surpluses into its trust fund, with the aim of achieving a balance of $250 million by fiscal year 2023 and $10 million in annual disbursements. However, as of early 2018, according to FSM officials, the FSM planned to add $15 million per year to the FSM Trust Fund and projected that the fund would have a balance of $275 million by the end of fiscal year 2023. However, like the compact trust fund, the full balance of the FSM Trust Fund is not available for disbursement. Under current FSM law, funds in the FSM Trust Fund may not be withdrawn until fiscal year 2024. In addition, according to FSM officials, the FSM can withdraw only the fund’s earnings and cannot withdraw the inflation-adjusted value of the FSM Trust Fund corpus. The RMI also maintains its own trust fund—the compact trust fund’s D account. Although managed alongside the compact trust fund, the D account is not subject to the same disbursement provisions as the compact trust fund’s A, B, and C accounts. Instead, disbursements from the D account are subject to the provisions of the agreement between Taiwan and the RMI under which Taiwan contributed the $10 million that the RMI used to establish the D account. According to the terms of this agreement, the RMI may withdraw income after consultation with Taiwan but may not withdraw funds from the D account’s $10 million corpus. At the end of fiscal year 2017, the D account had a balance of $15.1 million, with $5.1 million potentially available for use by the RMI. We conducted a series of simulations to determine the likely effects of potential strategies for improving the outlook of the FSM and RMI compact trust funds. Prior studies by Graduate School USA, the Asian Development Bank, and the International Monetary Fund examined the effects of three general approaches for improving the trust funds’ outlooks: (1) reducing planned disbursements from the funds, (2) making additional contributions to the funds, and (3) changing the compact trust fund disbursement policies. To isolate the impact of individual changes on the compact trust fund balance and disbursements, we developed and analyzed five potential strategies based on those examined in the previous studies. Reduced disbursements and additional contributions could occur without changes to the trust fund agreement, but changes to the disbursement policies may require changing the agreements. In strategies 3, 4, and, 5, we analyzed strategies that would permit disbursement from the A account. Disbursing from the A account would require changing the compact trust fund agreements. Table 12 shows the 5 potential strategies we analyzed. We analyzed two potential strategies that could be implemented without changes to the trust fund agreements: reductions in the amount of disbursements and additional contributions to the trust funds. Strategy 1: Annual disbursements are reduced below the maximum allowable disbursement. We analyzed the likely effects of reducing disbursements to an amount 30 percent below the maximum disbursement, relative to the baseline scenario, for both the FSM and the RMI compact trust funds. For the FSM, the average size of the disbursements would be lower in the first 10 years of our projection, fiscal years 2024 through 2033, but greater in later years. For the RMI, the average disbursement size would remain lower than the disbursement amounts we projected using the baseline scenario. Disbursement amounts would remain volatile from year to year if the balance in the C account is not sufficient to provide additional disbursements. For both countries, the risk of zero disbursements would be reduced, but not eliminated, in each decade. For both countries, the likelihood that the funds would maintain or exceed their inflation-adjusted fiscal year 2023 value after fiscal year 2023 would be higher in each decade. Reductions in annual disbursements could be effected by the compact trust fund committees at their discretion, without changes to the compact trust fund agreements. However, reductions in annual disbursements below the maximum amount would require each country to permanently adjust to having fewer resources for their budgets and economies than the compact grants provided. Strategy 2: Additional annual contributions are made to the trust fund in fiscal years 2018 through 2023. We analyzed the likely effects of additional contributions equivalent to 5 percent of each country’s fiscal year 2016 GDP, relative to the baseline scenarios, for both the FSM and the RMI compact trust funds. The average size of the disbursements would be greater. Disbursement amounts would remain volatile from year to year if the balance in the C account is not sufficient to provide additional disbursements. The risk of zero disbursements would be reduced but not eliminated. The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value after fiscal year 2023 would be higher. Additional contributions to the FSM or RMI trust funds could be accepted at the discretion of compact trust fund committees, without changes to the compact trust agreements. However, unless the compact trust fund committees could identify other donors for these contributions, the countries would have to choose to reprogram existing revenues from other uses into compact trust fund contributions. The addition of funds from other donors would have no negative impact on the trust funds’ outlook if other conditions remained unchanged. We analyzed three additional potential strategies that would involve calculating annual disbursements as a percentage of the FSM and RMI compact trust funds’ balance and which would permit disbursement from the A account. Disbursing from the A account would require changing the compact trust fund agreements, necessitating negotiation and agreement between the United States and each country and statutory enactment by the U.S. Congress. In strategy 3, disbursements are calculated as a fixed percentage of the funds’ moving average balance over the previous 3 years. In strategies 4 and 5, disbursements are calculated on the basis of the funds’ moving average balance over the previous 5 years as well as the committees’ determination of the target size for the funds’ balance or disbursements. All three potential strategies would require the FSM and the RMI to exchange a reduction in resources for more predictable disbursements in the longer term. Strategy 3: The annual disbursement is set as a fixed percentage of the fund’s moving average balance over the previous 3 years, up to the maximum disbursement amount defined by the current trust fund agreement. We analyzed the likely effects of limiting annual disbursements to 5 percent of the moving average balance over the previous 3 years, relative to the baseline scenario for the FSM and the RMI compact trust funds. In earlier years, average disbursements from the compact trust funds would be smaller than those in the baseline scenario; in later years, average disbursements would exceed those in the baseline scenario. For the FSM, the average disbursement would start to exceed that in the baseline scenario in the second decade after disbursements begin (fiscal years 2034-2043). For the RMI, the average disbursement would start to exceed that in the baseline scenario in the fourth decade after disbursements begin (fiscal years 2054-2063). Disbursement amounts would be less volatile from year to year than the volatility that could be experienced in the baseline scenario when the balance in the C account is not sufficient to provide additional disbursements. The risk of zero disbursements would be eliminated. The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value after that year would be higher than in the baseline scenario. Strategy 4: The amount of the annual disbursement is reduced if the compact trust fund’s moving average balance over the previous 5 years is lower than a primary target amount. We analyzed the likely effects of implementing this strategy, relative to the baseline scenario for the FSM and the RMI compact trust funds. In the FSM, the average disbursement would be lower than that in the baseline scenario in earlier years but higher than that in the baseline scenario in the fourth decade after disbursements begin (i.e., fiscal years 2054-2063). In the RMI, the average disbursement would be lower than that in the baseline scenario in earlier years but would equal that in the baseline scenario in the fourth decade after disbursements begin (i.e., fiscal years 2054-2063). Disbursement amounts would be less volatile from year to year than the volatility that could be experienced in the baseline scenario when the balance in the C account is not sufficient to provide additional disbursements. The risk of zero disbursements would be greatly reduced but not eliminated. In the FSM, the risk would be 55 percentage points lower than in the baseline scenario in the fourth decade after disbursements begin (i.e., fiscal years 2054-2063). In the RMI, the risk would be less than 5 percent in each decade. The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value after that year would be higher than in the baseline scenario. Strategy 5: The target disbursement is set as 2.1 percent of the compact trust fund’s balance in fiscal year 2024. The disbursement amount is further decreased if the fund’s moving average balance over the previous 5 years is lower than the primary target balance. Our analysis projected the following effects of implementing this strategy relative to the baseline scenario for the FSM and the RMI compact trust funds: For both countries, the average disbursement would be smaller than that in the baseline scenario in the first 3 decades after disbursements begin (i.e., fiscal years 2024-2053) but would exceed that in the baseline scenario in the fourth decade. Disbursement amounts would be less volatile from year to year than the volatility that could be experienced in the baseline scenario between 2024 and 2063 when the balance in the C account is not sufficient to provide additional disbursements. The risk of zero disbursements would be almost eliminated. The likelihood that the funds would maintain or exceed their inflation- adjusted fiscal year 2023 value would be much higher. Figures 11 through 16 compare projected compact trust fund disbursements and fund balances in the baseline scenario with projected disbursements and fund balances for the five selected potential strategies for improving the trust funds’ outlook. The amounts of disbursement reductions and additional contributions varied among the strategies examined in prior studies. To provide additional information about potential trust fund outcomes, we analyzed another four examples of the selected strategies that assumed a lower amount of additional trust fund contributions, lower disbursement reductions, or a lower percentage of the compact trust fund balance that could be withdrawn. Tables 13 and 14 show the results for all 9 analyses. In addition to planning budget reductions in the FSM Long-Term Fiscal Framework (its decrement management plan) and the RMI Decrement Management Plan, the FSM and RMI planned other actions such as tax reforms and subsidy reductions to address the scheduled decrement in compact sector grants. The FSM implemented two of three planned actions and the RMI implemented one of four planned actions. The FSM did not implement unified tax reform measures but implemented a change in the formula for sharing compact sector grants with the FSM states and using planned surpluses to mitigate the effects of fiscal reforms. The RMI did not implement planned new taxes, reductions in subsidies to state- owned enterprises, or reductions in payments to Majuro landowners for the use of their land for utilities. The RMI did program a portion of its fishing fee surplus into the annual budget. As of January 2018, the FSM national government had implemented two of three actions that the FSM Long-Term Fiscal Framework indicated the FSM would take in addition to budget reductions. 1. Implementing unified tax reform measures Not implemented. The FSM Long-Term Fiscal Framework states that substantial effort and progress has been made towards comprehensive tax and revenue reform and that the FSM national and state governments anticipated that the Long-Term Fiscal Framework process would provide further impetus towards tax reform. However, according to FSM officials, two FSM states (Pohnpei and Yap) did not approve the Unified Revenue Act. According to FSM officials, the FSM is currently considering other models for tax reform and plans to revisit the issue in the future. 2. Reducing the national government’s share of compact grants and reallocating it to the FSM states Implemented. According to the Long-Term Fiscal Framework, FSM Public Law 18-12 reduced the national government’s share of fiscal year 2014 compact grants from 10 percent to 5 percent, with the amount of the reduction passed along to the FSM states. In May 2014, FSM Public Law 18-57 further reduced the national government’s share of compact grants to 0 percent and increased the amount of compact grants allocated to the state governments, according to the FSM. 3. Using planned surpluses for actions such as possible contributions to activities that mitigate the effects of fiscal reforms, the FSM’s compact trust fund, retiring debt, or reform costs. Implemented. The FSM national government has made additional trust fund contributions but, according to FSM officials, has made a policy decision to make these contributions to the FSM Trust Fund instead of the compact trust fund. As of January 2018, the RMI national government had implemented one of four other actions that its decrement management plan indicated it would take. 1. Implementing a value-added tax and net profits tax in 2017 Not implemented. Officials from the RMI Economic Policy, Planning, and Statistics Office and Ministry of Foreign Affairs confirmed that tax reform has not been implemented due to political challenges. However, a tax task force has been established to revisit tax revenue reforms. 2. Programming 80 percent of unallocated Marshall Islands Marine Resources Authority fishing fee surplus into the annual budget in fiscal year 2015 and using the remaining 20 percent to develop the fishing industry. Implemented. The RMI programmed a portion of its fishing fees into the annual budget in fiscal years 2015 through 2017—$15.8 million in fiscal year 2015, $26.3 million in fiscal year 2016, and $40 million in fiscal year 2017. Although fishing fees were programmed into the budget, according to RMI’s Office of Compact Implementation, the formula allocating 80 percent of fishing fee revenue into the annual budget and the remaining 20 percent to develop the fishing industry is part of proposed RMI legislation but has not become law. 3. Reducing state-owned enterprise subsidies by 10 percent in fiscal years 2016 and 2018. Not implemented. The RMI national government did not reduce the total amount of state-owned enterprise subsidies by 10 percent in fiscal years 2016 as committed in the 2014 decrement management plan. Audit reports for state-owned enterprises in fiscal years 2015 and 2016 indicate that, while the RMI reduced subsidy amounts for some state-owned enterprises, other subsidy amounts increased and overall subsidies were higher in both fiscal years 2015 and 2016 than in fiscal year 2014. See table 15. for the government’s use of their land for utilities by 20 percent in fiscal years 2016, 2018, and 2021. Not implemented. The RMI national government has not reduced government transfers to Majuro landowners to compensate for the government’s use of their land for utilities due to political challenges, according to RMI officials. RMI Ministry of Finance officials stated that, as of January 2018, there had been no reductions in government transfers to Majuro landowners. According to RMI government officials, the total rent payment bill has in fact increased as utilities in Majuro have expanded. 1. The FSM refers to our testimony in 2002 regarding the potential for the FSM compact trust fund to not provide funds sufficient to cover the estimated value of expiring federal services as early as 2002. 2. The FSM includes a graphic showing the effect of the partial inflation adjustments and the decrement in the compact sector grants. We include a similar portrayal of this analysis in figure 10 in this report. 3. The FSM states that the amount of the decrement in compact sector grants that is used for annual contributions to the FSM compact trust fund should be recorded as an FSM contribution to the fund. However, Section 215 of the FSM compact refers to the annually decreasing amounts provided to the compact trust fund as set forth in Section 216 of the FSM compact as United States contributions to the compact trust fund. 1. The RMI states that, absent accountability issues, the maximum annual disbursement amount should be disbursed from the compact trust fund. However, as our report notes, although the compact trust fund agreements state the maximum allowable disbursement level, they do not establish or guarantee a minimum disbursement level. 2. The RMI states that the 2-year delay in investing the compact trust fund will result in a compounded total loss of $33.6 million by the end of fiscal year 2023. Our 2007 analysis of the trust funds included information about the delays in establishing the trust funds. We did not update our 2007 analysis of the loss in income due to the delay in investing the compact trust fund for this report. 3. The RMI notes that the amended compacts' implementing legislation extended several important federal programs. Appendix IV of this report presents our conclusions, based on our analysis of current law, that the RMI will remain eligible as of the end of fiscal year 2023 for special education programs and for some programs replaced by the supplemental education grant. In addition to the contact named above, Emil Friberg (Assistant Director), Ming Chen, Neil Doherty, Mark Dowling, Reid Lowe, Moon Parks, Shaundra Patterson, and Michael Simon made key contributions to this report. Justin Fisher, Jeff Isaacs, Julie Hirshen, Risto Laboski, Courtney LaFountain, and Jeffery Malcolm provided technical assistance.", "summary": "In 2003, the United States approved amended compacts of free association with the FSM and RMI, providing a total of $3.6 billion in economic assistance in fiscal years 2004 through 2023 and access to several U.S. programs and services. Compact grant funding, overseen by the Department of the Interior, generally decreases annually. However, the amount of the annual decrease in grants is added to the annual U.S. contributions to the compact trust funds, managed by joint U.S.-FSM and U.S.-RMI trust fund committees. Trust fund earnings are intended to provide a source of income after compact grants end in 2023, but GAO and others have previously found that the trust funds may not provide sustainable income. GAO was asked to examine preparations for the transition in 2023. This report examines (1) the use and role of U.S. funds and programs in FSM and RMI budgets, (2) projected trust fund disbursements and potential strategies to address risks to those disbursements, and (3) FSM and RMI plans to prepare for grant decreases and the transition to trust fund income. GAO reviewed compact agreements, audit reports, and U.S. law; modeled trust fund performance under existing conditions and using potential strategies; and reviewed FSM and RMI plans. GAO visited each country and interviewed FSM, RMI, and U.S. officials. The Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) continue to rely on U.S. grants and programs, including several that are scheduled to end in 2023. U.S. compact sector and supplemental education grants, both scheduled to end in 2023, support a third of the FSM's and a quarter of the RMI's expenditures. Agreements providing U.S. aviation, disaster relief, postal, weather, and other programs and services are scheduled to end in 2024, but some agencies may provide programs and services similar to those in the agreements under other authorities. FSM and RMI eligibility for some other U.S. grants and programs is expected to continue after 2023. Disbursements from the compact trust funds face risks that the trust fund committees have not addressed. GAO found that the trust funds are increasingly likely to provide no annual disbursements in some years and to not sustain their value. Potential strategies such as reduced trust fund disbursements or additional contributions from the countries or other sources could help address these risks. Changing the trust fund disbursement policies could also address these risks but may require revising the trust fund agreements with each country. However, the trust fund committees have not prepared distribution policies, required by the agreements, which could assist the countries in planning for the 2023 transition to trust fund income. The committees also have not prepared the required fiscal procedures for oversight of the disbursements or addressed differences between the timing of their annual determination of the disbursement amounts and the FSM's and RMI's annual budget cycles. The FSM and RMI did not implement planned budget reductions to address decreasing compact grants owing to increased revenues from other sources that offset the grant decreases. Current FSM and RMI infrastructure plans address the 2023 transition, while health and education plans focus on strategic goals. Both countries have established new compact planning committees to identify future challenges and develop plans for the 2023 transition to trust fund income. GAO recommends that Interior work with the compact trust fund committees to develop distribution policies and fiscal procedures for the funds and to address disbursement timing. Interior concurred with the recommendations.", "document_type": "gao"}
{"report": "The growth of the “sharing economy” has begun to impact public transportation. DOT describes the sharing economy as a developing phenomenon based on sharing, renting, and borrowing goods and services, rather than owning them. One facet of the sharing economy is shared mobility, meaning the shared use of a motor vehicle, bicycle, or other transportation mode that is often facilitated by requests from users, largely through mobile applications. See figure 1 for examples of shared mobility services available “on demand” through mobile applications. The increased use of ridesourcing services has been particularly noticeable in recent years. Since Uber first initiated ridesourcing services in the U.S. in 2010, such services have become increasingly popular, especially in urban areas. While data on the use of ridesourcing are limited, researchers reported in 2017 that about 21 percent of adults in major U.S. cities had used ridesourcing services, and about a quarter of them used these services on a frequent (weekly or daily) basis. Ridesourcing services offer convenience benefits for riders (see fig. 2, which explains how such services work). Millions of Americans—especially those unable to provide their own transportation due to age, disability or income constraints—rely on public transit to fully participate in society and access vital services. The types of services typically provided by local transit agencies include: rail services, in which vehicles operate along railways. fixed-route bus services, which operate according to regular schedules along prescribed routes with designated stops. paratransit services, which generally speaking are accessible, origin-to-destination transportation services that operate in response to calls or requests from riders. other demand-response services, which are sometimes called dial- a-ride. Local transit agencies have historically contracted out some services, in part to decrease their operating costs. For example, a survey we conducted in 2013 showed that a majority (61 percent) of the 463 responding local transit agencies contracted out one or more services. Services most frequently contracted out included paratransit services for individuals with disabilities and demand-response services. In particular, taxi companies have often been used to fulfill paratransit services and other demand-response services. Within DOT, FTA is responsible for providing grants that support the development of safe, comprehensive, and coordinated public transportation systems, among other things. Specifically, FTA: Annually distributes about $12 billion to support and expand transit systems, according to DOT. Two of these funding sources are Urbanized Area Formula Grants and Formula Grants for Rural Areas. These grant funds go to local transit agencies, but these local transit agencies may in some cases use these funds to procure the services of third parties such as private mobility companies. Ensures that local transit agencies receiving certain federal financial assistance do not discriminate based on race, color, religion, national origin, sex, disability, or age. Furthermore, FTA ensures local transit agencies comply with DOT regulations implementing certain portions of Title VI of the Civil Rights Act of 1964, as amended, (Title VI) and the Americans with Disabilities Act of 1990, as amended, (ADA). Administers the National Transit Database (NTD), which is intended to provide information to the federal government and others on which to base public transportation service planning. All recipients and direct beneficiaries of grants from the urbanized area formula program and rural area formula program are required by statute to submit data to the NTD, such as financial and operating data. FTA’s Office of Research, Demonstration, and Innovation recently launched a new MOD program to further its goals of improving the integration of transportation systems and increasing the accessibility and efficiency of public transit services for riders. According to officials, FTA believes that the U.S. public transportation system will be heavily influenced by the “Mobility on Demand” concept in the future, so has incorporated this concept into its planned research efforts. The MOD program is the agency’s main effort to help local transit agencies to explore emerging shared mobility technologies, in part by partnering with private mobility companies. The MOD program involves several components, including funding projects through the competitive MOD Sandbox grant program. In May 2016, FTA published a notice of funding opportunity and solicitation of project proposals for the MOD Sandbox grant program. In October 2016 FTA announced the selection of 11 projects to receive about $8 million. According to FTA officials, the agency designed the MOD program with several goals in mind, including: Funding those proposed grant projects with the most promise for generating benefits for the respective communities. Helping agencies better understand how such partnerships work in practice to promote emerging on-demand mobility options. Identifying any federal requirements that could impact the ability to provide on-demand mobility services offered through partnerships. Evaluating the extent to which the MOD Sandbox projects achieve their intended outcomes by developing and applying relevant performance metrics. As shown in figure 3 below, local transit agencies nationwide are pursuing partnerships to offer a variety of on-demand services that aim to make access to public transportation more efficient and convenient. The private mobility companies involved in selected partnerships include some well- known companies such as Uber and Lyft, and some lesser-known types of companies such as a bike-share company and technology companies focused on transportation. Selected local transit agencies most frequently partnered with ridesourcing companies (11 projects), while 8 partnership projects included more than one type of private partner. Five of the 22 partnership projects were in FTA’s MOD Sandbox program. Most selected projects (14 of 22) involved on-demand first- and last-mile transportation connections, through which respective local transit agencies aim to increase ridership on their transit systems (see table 1). Addressing the first- and last- mile issue has been identified as an ongoing challenge for many local transit agencies seeking to increase their transit ridership. Research suggests that the easier it is to access a transit system, the more likely people are to use it. Connecting on-demand services for the “first- and last-mile”—which refers to the distances riders need to travel to or from a public transit station or a stop to arrive at their final destination—could improve transit access by effectively extending service beyond the respective fixed-route buses and commuter trains (see fig. 4). To attract riders to use such first- and last- mile services, eight projects provided a discount to pay for a portion of the fare for the ridesourcing ride to access public transit. Figure 5 below shows a selected local agency’s advertisement for such a voucher program. The second most common type of service provided through selected projects was on-demand paratransit service, which could help the respective transit agencies offer eligible riders more convenient options and also help address the high cost of providing such services. More than half of the selected projects (13 of 22) provided on-demand services targeted toward paratransit-eligible riders, either as the primary project goal or to ensure equivalent service for eligible customers. Officials from two local transit agencies told us that by providing more convenient ADA paratransit services—as compared to traditional services that require booking a day or more in advance—these projects in turn produce other benefits. For example, officials from one local transit agency with such a partnership thought their program could really benefit the broader community because the targeted riders could make more spur-of-the- moment decisions to participate in activities such as shopping, work, and church. Also, as we have previously reported, the costs of paratransit services are much more costly to provide than fixed route trips. Some local transit agencies also aimed to improve their public trip planning and ticketing systems, to increase convenience for riders in their communities. Specifically, five selected local agency projects involved early experiments with the Mobility as a Service (MaaS) concept, meaning offering riders a central electronic platform—such as an app—to plan end-to-end trips including booking, ticketing, and paying for any transportation needed to make the trip, both public or private. If fully implemented, MaaS would allow riders to, for example, use one app to view and compare real-time availability of various modes (e.g., a traveler might be directed to a train if one is arriving quickly, or to a ridesourcing vehicle if train service has ended for the night). Riders could tailor their trip to meet their needs and payments could be processed through their phone. Implementing MaaS apps could increase convenience for consumers, and may also increase transit ridership. As an example of an ‘early’ MaaS experiment, Chicago Transit Authority’s MOD Sandbox project seeks to integrate the city’s bike-share system into CTA’s central trip planning and fare payment app, so that riders can more easily pay for a bike-share ride along with their transit trip. Figure 6 shows a sample of a current trip planner and a future MaaS concept. To initiate their on-demand projects, half of selected local transit agencies relied on local funds and not federal funds. Specifically, officials from half of the local transit agencies (8 of 16) indicated that their projects did not use federal funds, with the projects either partially or entirely funded through a local transit agency or local government subsidy, where the transit agency subsidizes or pays the entire cost of the on-demand service. The remaining 7 local transit agencies used federal funds for their projects. For example, the 5 FTA MOD Sandbox projects in our selection received federal funds to support 80 percent of project costs, with the remaining 20 percent of project costs supported through local matching funds. One FTA MOD Sandbox project involved two local transit agencies. Most of the selected projects have not yet been evaluated to determine whether they achieved intended outcomes. However, a few transit officials told us that their agencies’ costs had decreased since initiating the partnerships. For example, an official from one transit agency reported that the on-demand service provided through their partnership had helped them reduce costs for paratransit. Two of the completed partnerships in our review generated insufficient ridership to succeed. The partnerships were widely covered by the press, which transit agency officials believe provides other transit agencies the opportunity to learn from them as well. Specifically, Kansas City’s Bridj project and the Go Centennial project in the city of Centennial, Colorado failed to attract sufficient riders despite the money and time invested by the local transit agencies and their private partners. The transit officials involved indicated that the projects should have incorporated more marketing of the services being offered and allowed more time for riders to adapt to the new on- demand services, an issue which we will further discuss later in this report. In addition, according to some selected local transit agencies and literature, the increase in such partnerships may have negative effects on public transit ridership and on local transit agencies more broadly. For example, as riders become comfortable with the new on-demand options, they may elect to use these transportation modes instead of public transit, thus reducing public transit ridership. In addition to the possible loss of ridership revenue, on-demand services could decrease other transit agency revenues, such as parking fees charged at some transit stations. Further, one researcher that regularly reviews emerging mobility topics discussed the concern that over time, an increase in on-demand services offered could result in inequitable public transit. Specifically, she noted that if on-demand services offered continue to increase, riders may begin to perceive fixed route transit services as inferior to these new services, which could divert riders and revenues away from public transit. Eventually, this could result in two systems: an inferior public transit system and a superior on-demand system for those who can afford it. To provide more information about potential outcomes from such partnerships, DOT officials have commissioned a study to evaluate the outcomes of the MOD Sandbox partnerships and anticipate publishing results in 2019. In collaboration, FTA and DOT’s ITS JPO developed an evaluation framework for each of the 11 funded MOD Sandbox projects. As part of this evaluation, the transit agencies plan to collect information, such as ridership and cost data, to demonstrate how the project has influenced transit rider behavior. ITS JPO plans to use the data to measure the extent to which each project has fulfilled its goals and impacted travel behavior. The study will also include crosscutting analyses and lessons learned for all MOD Sandbox projects. According to DOT officials, FTA is also developing performance metrics to track the projects over time to see the extent to which they promote integrated transportation. FTA’s MOD program is a key effort under way to encourage and better understand transit partnerships. Since first announcing the selected 11 MOD Sandbox projects to receive funding in October 2016, FTA has supported the program through various efforts, and most (10 of 16) selected local transit agencies in our review expressed positive views on the program. Specifically: FTA has provided technical support to participants as the MOD Sandbox projects have progressed. According to FTA officials, FTA has contracted with the SUMC to provide technical assistance to MOD Sandbox grantees. Officials from all six MOD grantees in our selection said that FTA support throughout the grant and planning processes has been helpful. For example, officials from one transit agency indicated that this program shows FTA’s dedication to the idea of shared mobility and enables the grantees to try out new models in a “nurturing environment.” FTA has held quarterly meetings open to all MOD Sandbox participants, including local transit agencies and private mobility companies. According to two private mobility companies in our selection that participated in the MOD Sandbox program, these meetings were a constructive forum where participants could discuss challenges, lessons learned and other issues. Since initiating the MOD Sandbox program, FTA has gathered information from grantees about federal requirements that may pose challenges to implementing transit partnerships. For example, FTA’s MOD Sandbox notice of funding opportunity encouraged grant applicants to identify any regulatory or policy waivers needed to implement proposed projects. According to FTA officials, they received many such waiver requests from applicants, many of which they could not grant. For example, some of the MOD Sandbox grantees’ private partners requested waivers from ADA requirements, which according to FTA officials the agency does not have the authority to waive. FTA officials also clarified that they do not intend to immediately change policies or regulations based on the feedback received through the MOD Sandbox program. Instead, they aim to help MOD Sandbox participants meet requirements and to provide technical assistance to local transit agencies outside of the program. They said that, in the longer term, the agency would consider potential policy and regulatory revisions if needed. Most selected transit agencies (11 of 16) and private mobility companies (10 of 13) indicated that some federal requirements—if applicable to a certain partnership—can impact these partnerships and in some cases, make them more challenging to undertake. Table 2 below shows four categories of requirements cited as having the potential to impact partnerships, along with examples of stakeholder views on their potential impacts. Although some stakeholders identified these requirements as potentially impacting partnerships, they did not agree that the requirements should be waived to facilitate partnerships. For example, officials from two local transit agencies told us that requirements related to providing accessible and equitable transportation are important to maintain even if they could deter partnerships. However, FTA designed the MOD Sandbox grant application process so that the applicant local transit agencies could choose their private mobility partners using a noncompetitive process, bypassing the procurement requirements that normally require a full and open competition. One MOD grantee told us that their ability to bypass a competitive process was helpful and expedited their project planning efforts. As FTA has gained more knowledge about such partnerships, the agency has sought to clarify how some of these requirements apply to such partnerships. For example, in December 2016, shortly after announcing MOD Sandbox grantees, FTA issued documentation clarifying various aspects of transit partnerships, as well as certain federal requirements. FTA issued a “Dear Colleague” letter to local transit agencies which addressed how certain ADA and Title VI requirements apply when a local transit agency enters into a partnership with a ridesourcing company. FTA published a dedicated webpage of frequently asked questions (FAQ) about shared-mobility partnerships. This website supplements subject-specific FAQs already available on FTA’s website that also may apply to these partnerships; it includes FAQs on Civil Rights and ADA requirements. In addition, FTA provides clarifying information to local transit agencies upon request, according to FTA and several local transit agency officials. However, officials from most (14 of 16) selected local transit agencies told us that additional information from FTA would be helpful, especially examples of how local transit agencies are structuring their partnerships to ensure they meet federal requirements. As noted above, FTA has issued various documents for local transit agencies about how federal requirements, such as Title VI requirements, apply to emerging partnerships. Nonetheless, officials from some local transit agencies told us that without examples, they were unclear about how such partnerships could ever meet requirements. For instance, one transit official told us he was unaware FTA has determined that local transit agencies may use ridesourcing companies without requiring that these contractors undergo drug and alcohol testing—the aforementioned “taxicab exception”—if riders are able to select from multiple providers for their on-demand rides. In another example, officials from one agency told us that they had tried to look at the NTD database to find peer local transit agencies with similar on-demand programs to ask these agencies for advice, but could not find any peers using that method. These officials wanted to know how other local transit agencies were dealing with customers without bank cards in their on-demand services. They told us that having more examples from FTA of how various local transit agencies are structuring their transit partnerships to comply with federal requirements could be especially helpful. Selected local transit agencies with ridesourcing partners described approaches that they believe help to ensure compliance with the drug and alcohol testing, ADA, and Title VI requirements, including using a taxi company, a paratransit company, or both. For example, transit officials managing four of the 11 selected projects involving a ridesourcing company told us they had added a taxi or paratransit company as an option for riders to comply with requirements. According to two taxi representatives we interviewed and research studies, taxi companies already have procedures for fulfilling federally-required drug and alcohol tests. Several local transit officials told us that taxi companies usually have call centers and accept cash payments, making it easier to ensure that the services comply with Title VI. In addition, according to taxi representatives and research reports, taxi companies may have experience complying with the ADA since some of DOT’s implementing regulations may already apply to them. Gathering and disseminating more information on partnerships corresponds with best practices for collaboration with external parties identified in prior work by GAO and others. For example, as we have previously reported, if federal agencies can identify and share best practices, this can help the entities that federal agencies oversee—such as local transit agencies in this case—make changes to successfully adapt to changes in the environment. Additionally, a recent industry report argues that local transit agencies seeking to form transit partnerships will strongly benefit from learning directly from peer agencies with relevant experiences in the emerging area. As discussed above, FTA has gathered local transit partnership information from its MOD Sandbox projects. However, the majority of local transit agencies that participate in partnerships are not in the MOD Sandbox program; and many of their projects may already be underway or complete. Gathering information from those local transit agencies would provide FTA with more information about how partnerships are meeting federal requirements. It would also likely provide FTA with more examples to disseminate to all local transit agencies interested in pursuing partnerships to help those agencies structure their partnerships in accordance with federal requirements. Finally, additional information on these partnerships would better position FTA to respond to changes in the transit industry that could impact its own efforts and goals, such as planning for future MOD grants and improving the efficiency of transit services overall. To track its progress toward achieving its goals, such as increasing the efficiency of public transit services, FTA can use data from NTD. According to FTA officials, NTD is its primary source for information and statistics on U.S. transit systems. As we have previously reported, NTD is intended to provide timely, accurate information to help Congress and FTA apportion funding and assess the continued progress of the nation’s public transportation systems. A key goal of the NTD is to gather information from local transit agencies, such as financial and operating data, to inform public transportation service planning. All recipients and direct beneficiaries of grants from the Urbanized Area Formula Program and Rural Area Formula Program—such as local transit agencies— are required to report certain data to NTD. For example, in 2016, over 950 urban transit agencies and others reported into NTD, and FTA encourages transit agencies not receiving urbanized area and rural area grant funds to report voluntarily so that NTD can be more complete. Additionally, according to FTA officials, FTA uses certain NTD data to apportion certain grant funds to local transit agencies nationwide, including data on passenger miles traveled and vehicle revenue miles. Each year, urbanized area and rural area formula grant recipients and beneficiaries are required to submit an NTD package with many different types of data, including: financial information, including operating expenses and funding sources, asset inventory data, such as numbers of transit stations and maintenance facilities, and services supplied, including the number of passenger trips that year, and miles traveled by passengers. To help local transit agencies with this reporting, FTA issues NTD manuals annually that are updated with new information, as needed. These manuals describe how to report all the various NTD data requested, including how to report services that the transit agency provided based on the transportation mode, divided between rail and non- rail, with non-rail including demand response services, potentially provided by private mobility companies. According to FTA officials, some data that local transit agencies would need to report on-demand project data into NTD and to measure project outcomes—such as whether the targeted riders are using the on-demand rides to get to and from transit stations—would be tracked by the private mobility companies involved in the project. For example, to report data about services supplied into NTD, the local transit agency would need certain data such as: the numbers of trips and riders taken, distances traveled in miles, time spent travelling, and the days of the week when the services are offered. In the case of on-demand rides offered through transit partnerships, much of that data would be tracked by the private mobility company and potentially shared with the local transit agency for NTD entry. Although FTA has made some information available that could facilitate these transit partnerships—including updated NTD manuals—local transit agencies in our selection reported the following issues: confusion regarding whether and how to report on-demand service data into NTD, and difficulties gathering data for NTD reporting from ridesourcing companies. According to FTA officials and the most recent NTD manual, transit agencies only report data to the NTD for services provided that meet the statutory definition of public transportation. Under the statute, public transportation means regular, continuing shared-ride surface transportation services that are open to the general public or open to a segment of the general public defined by age, disability, or low income. However, public transportation does not include intercity passenger rail transportation provided by Amtrak, intercity bus service, charter bus service, school bus service, sightseeing service, courtesy shuttle service for patrons of one or more specific establishments, or intra-terminal or intra-facility shuttle services. FTA officials told us that for a transportation service to be considered “shared-ride” the service must have the real possibility of being offered on a shared-ride basis. According to FTA officials, for a transportation service to be “open to the general public” it cannot be limited to a specific group (except those groups specified in the definition), and neither the driver nor passenger can deny another person on board. For example, a service provided by a ridesourcing company in which a passenger or driver can refuse additional passengers would not be considered “open to the general public,” according to FTA officials. Furthermore, FTA officials told us that a time-limited pilot providing transportation service is not considered “regular” and “continuing.” Additionally, FTA officials told us that, even if a transportation service meets the statutory definition of public transportation, the local transit agency may not be required to report the associated data if that agency did not directly provide the transit service. For example, according to FTA officials, whether or not a local transit agency would have to report transportation service provided by a private partner would depend on the contract between the local transit agency and the private partner. Also, according to FTA officials, a local transit agency cannot report data about service provided by a private partner if it is a voucher program, because those services are not considered “shared ride” and thus do not meet the statutory definition of public transportation. If the service provided by the private partner meets the statutory definition of public transportation and is considered a service provided by the local transit agency, then FTA officials told us most services provided through these partnerships should be reported under the Demand Response or Demand Response-Taxi transportation modes. Despite available NTD manuals that discuss the statutory definition of public transportation, officials from most (10 of 16) selected local transit agencies expressed confusion about NTD reporting for on-demand projects, such as about which types of on-demand rides qualify as “public transportation” for NTD reporting purposes and how qualifying rides should be entered into NTD. These officials told us that further clarification is needed from FTA about this issue. For example, three projects in our review offered similar on-demand paratransit rides— through ridesourcing or taxi company partners—but officials from the three local transit agencies involved had different views on whether and how these rides should be entered into NTD. Officials from the first local transit agency told us that they were planning to report these rides into NTD and had met with the FTA officials responsible for maintaining NTD to ask them how to report them. These FTA officials had told them it should theoretically be possible to enter those rides into NTD, but they did not clarify how to do so. Officials from the second transit agency told us that if they extend the dates of their current partnership with two ridesourcing companies, then they will need more clarification from FTA about the information that should be reported into NTD, such as passenger miles traveled. These officials also noted that they already use an extensive process for entering paratransit information into NTD, including tracking vehicle hours and passenger miles of all vehicles used to provide such services. Officials from the third local transit agency told us that they did not intend to report these rides into NTD. In these officials’ opinion, these rides should not be entered into NTD since they do not meet the definition of public transportation in the NTD policy manual. Selected transit agencies in our review seem to be interpreting the information about whether and how to enter data from their partner- provided on-demand services—as outlined in NTD manuals—differently, leading to inconsistencies in whether and how these agencies planned to enter data. For example, one local transit agency’s project offered shared microtransit services on-demand through a technology company partner. In our interview, officials from this local transit agency told us that they intended to report these rides into NTD, but had received unclear and seemingly incorrect advice from the regional FTA staff on how to do so. According to these officials, the regional FTA staff had told them to include these microtransit rides with the agency’s demand-response paratransit rides, since some of the riders of this on-demand service were also qualified for paratransit. The local transit officials told us that they hesitated to report to NTD in the way instructed because it seemed inaccurate. In this local transit agency’s response to follow up questions, the local officials said they were no longer planning to report data on their on-demand service into NTD. We asked FTA officials if this type of service provided by a private partner qualifies as public transportation, and thus should be entered into the NTD by the local transit agency, and FTA officials said it seemed to qualify for entry. In another example, one transit official managing a first- and last- mile voucher project told us that she planned to report these rides into NTD. However, FTA officials told us services provided through voucher programs generally do not meet the definition of public transportation and therefore do not qualify for NTD entry. Federal internal control standards state that agencies should use quality information to achieve the entity’s objectives. To ensure that quality data are used to track progress toward achieving objectives, agencies should obtain relevant data from internal and external sources in a timely manner, according to the standards. Further, the standards state that agencies should use an iterative and ongoing process to identify what information is needed. As changes to the agencies’ objectives occur—or as external events occur that impact such objectives—the standards indicate that agencies should change information requirements as needed to meet these modified objectives. The above examples of local transit agencies’ confusion about NTD reporting requirements raise questions about whether NTD data accurately reflect the status of the U.S. public transportation system, a key goal of the NTD. According to officials, FTA is considering issuing more information clarifying required NTD reporting for on-demand services provided through partnerships. They explained that rather than change any reporting requirements, this new information would clarify how emerging on-demand services fit into current NTD reporting requirements. These officials also told us that local transit officials with questions related to NTD reporting can call an FTA NTD help desk or they can direct their questions to the designated NTD analyst. Officials said that they would consider issuing a document on frequently asked questions about NTD reporting for these partnerships, but that thus far FTA had received few relevant questions from transit agencies. Specifically, FTA officials told us that their NTD office had received relevant questions from two local transit agencies (both of which are in our selection), both about what types of ridesourcing services would be reportable to the NTD. According to FTA officials, they responded to these inquiries by explaining that all services entered into NTD must be shared and meet the statutory definition of “public transportation.” While FTA officials told us that only two local transit agencies had contacted them about NTD reporting confusion, this did not include some other agencies in our selection that had contacted their regional FTA offices for clarification. This raises the possibility that more transit agencies nationwide with such partnerships might have confusion about NTD reporting than the FTA headquarters office was aware of. FTA officials also told us that, in the longer-term, they are considering developing a separate NTD reporting category—or transportation mode— for shared ridesourcing services that qualify as public transportation. However, FTA officials did not commit to taking action on this issue. Without clarified information from FTA on whether services provided through on-demand projects qualify as public transportation, and how to enter data about these services into NTD, some local transit agencies will likely remain confused, potentially leading to inaccurate data in the NTD. Also, according to FTA officials, without accurate NTD data, (1) FTA will not be able to effectively track its own progress toward achieving goals— such as improving the efficiency of transit systems, and (2) the apportionment of certain grant funds to local transit agencies could be affected. Selected local transit agencies reported difficulties obtaining some data from their ridesourcing partners—such as the total miles travelled with passengers on board—and according to some stakeholders, local transit agencies nationwide have faced similar challenges. Some of these data may be needed for NTD reporting but they could also be useful to local transit agencies in tracking the outcomes of their on-demand projects. Specifically, officials from six selected local transit agencies that had partnered with ridesourcing companies had experienced issues obtaining data from them, mostly due to these companies’ concerns about rider privacy and proprietary data. For example, one local transit official told us that she requested, but did not receive, data needed for NTD reporting from a ridesourcing company, including miles travelled with passengers on board. While representatives from most selected private mobility companies we spoke to (11 of 13) expressed no issues with sharing data, representatives from the two large ridesourcing companies did. Specifically, Uber and Lyft representatives said their companies are uncomfortable with sharing riders’ personally identifiable information, such as the exact destination and origin addresses of their ridesourcing trips, with a public entity without riders’ previous consent because they believed the data would be subject to Freedom of Information Act (FOIA) requests. Representatives of two industry associations and a researcher told us that issues gathering data from ridesourcing companies is a broader challenge faced by local transit agencies in such partnerships. However, representatives of the two ridesourcing companies stated that they are working with local transit agencies and FTA to figure out how to provide data to local transit agencies for NTD reporting while still protecting privacy. FTA officials told us they have reached an informal agreement with ridesourcing companies participating in the MOD Sandbox program, including Uber and Lyft, for the collection of one category of data. According to FTA officials, that agreement relates only to certain data needed to assess the ADA equivalent level of service requirement. If the local transit agencies participating in the MOD Sandbox program need additional data for NTD reporting, FTA officials told us it is up to those local transit agencies to obtain it from the ridesourcing companies. In addition, FTA officials told us that local transit agencies partnering with ridesourcing companies outside of the MOD Sandbox program would not benefit from this informal agreement. To help address data collection issues, officials from some (5 of 16) selected local transit agencies suggested that FTA could play a greater role in encouraging ridesourcing companies to provide some minimum level of data needed for NTD reporting. For example, several transit officials suggested that FTA could circulate effective practices for data sharing, such as a template contract between a local transit agency and a private mobility company that includes data sharing obligations. Several transit officials discussed how such additional information from FTA could be helpful for local transit agencies in pursuing or maintaining their partnerships. For instance, officials from one local transit agency argued that FTA information in this area could help the many local transit agencies that are too small to have sufficient market power to get the needed NTD data from ridesourcing companies. The above examples of local transit agencies seeking templates of data sharing agreements suggest that these and other local transit agencies could benefit from more communication from FTA on this issue. If local transit agencies could use such data sharing templates from FTA to gather more complete and accurate data from their ridesourcing partners, this would in turn help ensure the accuracy and completeness of NTD data. As noted above, the internal control standards instruct federal agencies to use quality data. If FTA communicated more information about practices for data sharing, this would assist local transit agencies and also help FTA be better poised to track its overall progress in furthering its goals, including promoting efficient public transit systems. However, FTA officials told us that they do not track information about partnerships that did not receive funding through the MOD Sandbox program, such as details of data sharing agreements, and so could not disseminate examples of how those local transit agency partnership participants are handling data sharing issues. However, local transit agencies with partnerships that are outside of the MOD Sandbox program may still be required to report data into the NTD and could benefit from additional information. FTA officials explained that they want to avoid duplicating the work of other groups that are gathering and sharing information about partnerships. For example, SUMC gathers some information about such partnerships nationwide in a public database and has sponsored conferences to facilitate information sharing about local transit agencies’ experiences with their partnerships. However, SUMC’s public database of partnerships does not include details about how all partnerships are handling data sharing issues. Further, because FTA oversees local transit agencies, the documents that it issues may be viewed as more authoritative than those of a contracted agency such as SUMC. As FTA continues its efforts to address data sharing with the ridesourcing companies involved in the MOD Sandbox program, the agency could also develop broader information on best practices for data sharing agreements—in collaboration with the MOD Sandbox grantees and possibly also with SUMC—and share that information so it would be available for interested local transit agencies. By sharing such gathered information on partnerships, FTA could in turn help transit agencies make sound decisions regarding the data needed from their private mobility partners, and about various options for structuring partnerships to achieve that end. The transportation industry as a whole is rapidly evolving, with more on- demand services being offered, which could increase the use of transit partnerships. According to SUMC, the U.S. is currently experiencing a seismic shift in transportation, as breakthroughs in mobile technology, an influx of new mobility options and changes in travel behavior have significantly altered today’s transportation landscape, a trend likely to accelerate in the years ahead. Most selected local transit agencies (15 of 16) and private mobility companies (12 of 13) agreed that the industry is changing, and some discussed how transit agencies’ roles and operations are changing as a result. For example, officials at five local transit agencies told us that the transit industry is shifting to offer more mobility on-demand services. Some of these stakeholders predicted that as local transit agencies increasingly use contracted services, these agencies will increasingly become “mobility managers” rather than direct service providers. Officials from three agencies said they are already making or planning for this shift. The increasing automation of vehicles is another key industry change that could impact local transit agency operations and partnerships, but the timeframes needed for full automation remain unclear. As we have reported, automated vehicles promise transformative benefits such as reducing crashes and fatalities and increasing mobility, but such vehicles also pose challenges for policymakers, such as assuring safety and addressing data privacy and other issues. We also reported that these technologies are rapidly evolving, but there is no consensus about the time needed for their full deployment. According to a recent study, vehicle automation could result in significant changes to transit agencies’ operations. For example, FTA has reported that automated transit vehicles could be used to address first- and last-mile issues, which could in turn decrease the need for local transit agencies to partner with private mobility companies to fill such gaps. According to several stakeholders and research reports, some automakers and others have started investing in automated vehicle technologies and in private mobility companies in response to the projected rollout of shared automated vehicles in the near future. If these entities continue making such investments, this could help address challenges related to private mobility companies’ long-term sustainability, which could increase such companies’ ability to enter into partnerships. Of the 13 private mobility companies in our review, representatives of 5 told us that they receive significant financial support from an automaker. In addition to a car-share company, recipients of such support included, for example, three technology companies and a bike-share company. Representatives from two of these companies told us that such support helps ensure their long-term sustainability or provides them with the flexibility to try different business models and enter into transit partnerships without worrying about each being profitable. Such investments from well-established companies may also help address some local transit agency concerns about whether some private mobility companies would be reliable partners, thereby increasing partnerships. For example, according to a recent industry report, some transit officials have questioned the long-term financial viability of the ridesourcing business model, citing high driver turnover rates and other factors as concerns. All 16 selected local transit agencies and most private companies (10 of 13) told us that local transit agencies’ constrained budgets will impact transit partnerships, and most transit officials agreed that this would encourage partnerships. For example, officials from one local transit agency told us that they first began researching partnerships several years ago, when they felt compelled to look for other viable alternatives to certain bus routes after a local referendum to pay for increased bus services failed. According to several transit officials, if the current decline in public transit ridership continues, this could increase partnerships. For example, local transit agencies may seek to maintain their transit riders by, for example, offering first- and last-mile connections to make accessing transit services more convenient. Based on GAO analysis of FTA data, overall transit ridership decreased by about 1 percent between 2012 and 2016, but ridership changes varied greatly by metropolitan area. For example, since 2010, some larger metropolitan areas have experienced more significant ridership decreases, such as Los Angeles (over a 9 percent decrease) and Washington, D.C. (over a 9 percent decrease). However, ridership grew by more than 10 percent in several areas, including Seattle (24 percent increase), and Nashville (12.5 percent increase). According to recent reports, it remains unclear if the recent decline in public transit ridership, after a decade or more of growth, represents a long-term change in rider behaviors or a short-term cycle related to factors such as lower gas prices in recent years. Most stakeholders we interviewed agreed that sufficient marketing and outreach to target rider populations is critical for the success of new on- demand services, and this also impacts the overall success of the partnerships. Most selected local transit agencies (12 of 16) and companies (10 of 13) cited marketing as a significant factor impacting new service use. For example, officials at several local transit agencies told us that they dedicated resources for outreach to target riders to ensure these riders understood the new services being offered. One agency advertised its new on-demand taxi services for paratransit-eligible customers through phone calls to customers and residential mailings, and also encouraged the taxi companies involved to separately advertise these services. Even with outreach and marketing to target riders, some potential riders— particularly the elderly and low-income earners—may not be able to easily access some on-demand services. For example, the current ridesourcing model generally requires riders to have a smartphone and a bank card to request a ride, which could exclude some riders. According to recent reports, less than one-third of Americans over age 65 own a smartphone and only 4 percent had used a ridesourcing service as of 2016. However, according to literature, older Americans will be a key demographic for transit providers to target in coming years, since their numbers are projected to grow significantly and some will stop driving their own vehicles in the near future. Reflecting similar concerns, several officials from local transit agencies (4 of 16) told us that it can be challenging for older residents in their communities to learn to use the smartphone apps that are needed to access some on-demand services. According to a 2016 Pew Research Center report, of those surveyed with household incomes greater than $75,000, 86 percent had heard of ridesourcing services and 26 percent had used them. For those surveyed with incomes less than $30,000, however, only 51 percent had heard of these services and 10 percent had used them. According to a recent report, those with lower incomes could particularly benefit from more on-demand services, especially since reliable access to transportation can help people acquire and keep better jobs. Several selected transit and private mobility stakeholders had efforts underway to address such access issues. For example, two local transit agencies had done targeted outreach to senior communities to educate them about using the new services, including instructions for using the smartphone apps. According to transit officials involved, these efforts had increased the use of these on-demand services by elderly riders. In addition, one ridesourcing company offers gift certificates to offer an option for those without bank cards, which can be purchased with cash and used to redeem rides. In another example, staff at a bike-share company said that their company already offers some options for those without bank cards. Staff at a technology company told us they have plans to offer more such payment options in the future. As the sharing economy continues to grow, local transit agencies may increasingly look for opportunities to leverage emerging technologies to extend their services, address first- and last- mile and other issues, and provide additional options for riders by partnering with private mobility companies. Since the sharing economy is a relatively recent phenomenon, FTA has an opportunity to proactively facilitate and share information about ongoing transit partnership projects, including how projects are meeting federal requirements related to accessibility and equity. In addition, FTA could improve the quality of NTD data by advising transit agencies on which on-demand services qualify for NTD entry and how to accurately report about qualifying services. Without clearer instructions on whether and how data from new on-demand services should be reported into NTD, local transit agencies may remain confused, potentially resulting in inconsistent reporting. Further, without more consistent and complete data on partnership activities, including projects that were not funded through the MOD Sandbox program, FTA may lack key information needed to track progress in achieving its goals of promoting more integrated and efficient transit systems. In the absence of a clear statement from FTA about the minimum data needed from private partners for entry into NTD, some local transit agencies will likely continue encountering challenges getting needed data from partners. Finally, absent more sharing of information on partnerships by FTA, including how such partners are addressing data sharing issues, local transit agencies will be poorly positioned to navigate ongoing changes in the transit industry. We recommend that FTA take the following three actions: Gather and publicly share information on transit partnerships, including those that did not receive funding through the MOD Sandbox program, to include examples regarding how various local transit agencies complied with federal requirements—such as procurement, drug and alcohol testing, ADA, and Title VI requirements—while offering new on-demand services in partnerships. (Recommendation 1) Determine which on-demand services qualify as “public transportation” based on the statutory definition and disseminate information to clarify whether and how to report data from such services into NTD. (Recommendation 2) Gather and publically share information on transit partnerships, including those that were not part of the MOD Sandbox program, to include: information on how the local transit agencies and their private mobility company partners are facilitating data sharing, and minimum data needed from a private partner to facilitate NTD reporting. (Recommendation 3) We provided a draft of this report to DOT for review and comment. We received written comments from DOT, which are reprinted in appendix II. DOT concurred with our three recommendations. The department stated that, in line with these recommendations, it will continue its proactive efforts related to the Mobility on Demand program, and continue to share information about public transit partnerships. DOT also provided technical comments, which we incorporated in the report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Transportation and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact Mark Goldstein at (202) 512-2834 or GoldsteinM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Project description From January 2017 through June 2018, LAVTA’s GoDublin Project provided first- and last-mile service for trips that begin and end within the city limits of Dublin, CA. LAVTA paid half of the fare of a ridesourcing ride, up to a maximum of $5.00. The service included a service option for paratransit-eligible riders. The overall goal of the pilot project was to see if rideshare programs reduce congestion and parking issues in Dublin. Lyft Line, Via Mobility Services, Denver South Transportation Management Association, Conduent (formerly Xerox) GoCentennial, a demonstration project that operated from August 17, 2016 through February 17, 2017, was intended to increase rail ridership by providing first- and last-mile Lyft Line rides (microtransit) and accessible transportation service to and from the Denver Regional Transportation District rail station located in Centennial, CO. The service included a transportation option for paratransit-eligible riders. Beginning in September 2017 WMATA’s Abilities Ride program provides riders that are eligible for WMATA’s Metro Access paratransit program the option to use on-demand taxi service for trips that originate and end in WMATA’s Maryland service area at a discounted rate. The Metro Access customer pays the first $5 of the fare; then WMATA pays up to the next $15. For a trip requiring a Wheelchair Accessible Vehicle, WMATA pays an extra $10 to the vendor for that trip. Beginning in December 2017, PSTA’s Mobility on Demand Sandbox project provides same day, on-demand door-to-door service to a small subset of paratransit-eligible customers in Pinellas County, FL. Beginning in February 2016, PSTA’s Direct Connect program provided first- and last-mile service, initially within two pilot zones. PSTA expanded the program to eight zones in Pinellas County in January 2017. As of April 2018, users can travel to or from 24 locations throughout Pinellas County. PSTA pays the first $5 of the ride and the customer pays the rest. The service includes a transportation option for paratransit-eligible riders. Beginning in August 2016, PSTA’s TD Late Shift program has provided service between home and work for lower-income riders from 10:00 pm through 6:00 am when PSTA’s regular service does not operate. The service includes a transportation option for paratransit-eligible riders. MARTA partnered with Uber for a promotional partnership to provide first- and last-mile transportation in 2015, then again after a bridge collapsed on Interstate 85 on March 30, 2017. MARTA currently has informal partnerships with both Uber and Lyft in which they advertise one another’s services. Project description CTA is partnering with the Chicago Department of Transportation and Divvy bike-share to integrate Divvy rentals into Ventra. Ventra is CTA’s central fare payment system that is accessible by Smartphone application, through a Mobility on Demand Sandbox project. CTA expects to launch the updated Ventra app in summer 2018. From October 2016 through June 2018, MBTA operated a pilot program with Uber and Lyft to offer on-demand paratransit service to customers that are eligible for MBTA’s The Ride, MBTA’s regular paratransit service. Once launched in summer 2018, MBTA will partner with local taxis on Curb’s platform to provide on-demand paratransit service to customers that are eligible for MBTA’s The Ride, MBTA’s regular paratransit service. From March 2016 through April 2017 KCATA partnered with Bridj, a company offering microtransit services, to offer riders services within and between two zones around downtown Kansas City, MO during weekday rush hours. The service included a transportation option for paratransit-eligible riders. From May 2017 through April 2018, KCTA partnered with local taxi companies owned by TransDev to provide subsidized on- demand service for paratransit-eligible customers. Customers that are not eligible for paratransit could also use the service, but KCATA did not subsidize the cost of the ride. Rabbit Transit has used demand-responsive service from Uber and Lyft to fill gaps during peak travel periods when the agency’s regular services are running late. King County Metro and Sound Transit will be partnering with Via to provide rides for customers traveling to and from bus and rail stations in the Seattle, WA area as a sub-recipient of the Los Angeles County Metropolitan Transportation Authority’s Mobility on Demand Sandbox partnership. Expected launch of the service is late 2018. King County Metro has dedicated four parking spaces at its Northgate Transit Center Park & Ride to free floating car-share vehicles to increase the number of options for customers to connect to transit, including customers who do not own a personal vehicle. The car-share spaces are also intended to enable more customers to ride transit by increasing parking turnover at this overcrowded lot. King County Metro will be operating a pilot program to provide on- demand first and last mile service to customers within a 2-mile radius of the Eastgate, Northgate, and South Renton park & ride lots. The service also will include a transportation option for paratransit-eligible riders. Expected launch of the service is August 2018. Project description Through its Mobility on Demand Sandbox project, LA Metro will be partnering with Via to provide first- and last-mile rides to and from locations where customers can board an LA Metro bus or train, in an effort to increase transit ridership. LA Metro will provide vehicles that can accommodate customers that need additional assistance or customers in wheelchairs as well as a call center for customers without smartphones. LA Metro aims to launch the service in September 2018. LA Metro partnered with Uber for two weeks in May 2016 to provide rides to and from Metro Expo Line stations. Customers received a $10 discount on these Uber rides. Through the Adaptive Mobility with Reliability and Efficiency (AMORE) Mobility on Demand Sandbox project, the Regional Transportation Authority (RTA) of Pima County, AZ will offer riders the ability to request services from Ruby Ride, a ridesourcing company, via a phone app, for first- and last-mile transportation. According to an RTA official, this project seeks to provide more services to outlying areas, which previously had either infrequent fixed routes or no service. The RTA and Metropia—a technology company involved in the project— also plan to offer riders incentives, such as discounted services, to change their travel behavior, such as changing their travel times to when roads are less busy. The phone app will also include a carpool matching service that will dynamically recommend potential driver/rider combinations to customers. RTA plans to launch this service in fall 2018. The service will include a transportation option for paratransit-eligible riders. From January through June 2018, GoTriangle partnered with TransLoc, a technology company, to provide first- and last-mile Go OnDemand shuttle service (microtransit) in Research Triangle Park and surrounding areas. Riders were able to hail GoTriangle’s shuttle service from their phone or online using the TransLoc Rider app. From June 2017 through June 2019, the Greater Dayton Regional Transit Authority (RTA) is partnering with Lyft and two other providers to provide on-demand rides from designated RTA Connect stops in underserved areas of the Greater Dayton service area to a transfer point where riders can access fixed- route bus service. The on-demand service has replaced fixed- route bus service that was eliminated due to low ridership. Capital Metro partnered with Via Transportation, Inc. (Via) to provide first- and last-mile on-demand microtransit service from June 2017 through June 2018 to an area of Austin with few fixed route options. Riders were able to book rides with Via, whose service has no fixed routes or fixed schedules. The buses used for the project were able to accommodate two wheel-chair riders and up to nine seated occupants. In addition to the contact above, Heather MacLeod (Assistant Director); Jessica Bryant-Bertail (Analyst-in-Charge); Lacey Coppage; Delwen Jones; Terence Lam; Bonnie Pignatiello Leer; Josh Ormond; Oliver Richard; and Kelly Rubin made key contributions to this report.", "summary": "The public transit landscape is changing, as advances in technology have enabled more on-demand mobility services, such as ridesourcing and bike-share services. In response, some transit agencies have started to partner with private mobility companies with the aim of offering public transit riders more efficient and convenient options through on-demand services. FTA supports public transportation systems through a variety of federal grant programs. GAO was asked to review various issues related to such partnerships. This report examines, among other things: (1) the types of partnership projects that selected transit agencies have initiated with private mobility companies and (2) how DOT's efforts and funding and federal requirements may impact such partnerships. GAO interviewed DOT officials and reviewed DOT documents; interviewed 16 local transit agencies and 13 private mobility companies involved in transit partnerships; and reviewed 22 projects initiated by the selected partners, including 5 funded by the Mobility on Demand Sandbox grant program. GAO selected these partners to represent a range of service types and geographic locations; the results are non-generalizable. Some local transit agencies are pursuing partnerships with private mobility companies—including car-share and \"ridesourcing\" companies such as Lyft and Uber, which provide access to a shared vehicle “on demand”—with the aim of offering public transit riders more efficient and convenient service options. Most of the transit partnership projects that GAO selected (14 of 22) involved private partners providing on-demand transportation for the “first- and last-mile” connections to or from public transit stations (see figure). Local transit agencies use first- and last-mile connections to increase their public transit ridership. Other services provided through selected projects included filling transit service gaps in under-served areas. Most selected projects have not yet been evaluated to determine whether they achieved intended outcomes. The Department of Transportation's (DOT) efforts, especially the Federal Transit Administration's (FTA) initiation of the Mobility on Demand Sandbox program, have facilitated partnerships, but confusion about how to meet some requirements and how to report data pose challenges to implementing projects. In October 2016, FTA announced the selection of 11 projects to receive grants and has since provided assistance to the grantees. FTA also issued clarifications about how certain federal requirements—such as those related to the Americans with Disabilities Act of 1990 (ADA)—apply to transit partnerships. However, most selected local transit agencies (14 of 16) said that additional information beyond what FTA has already disseminated, including how agencies have successfully structured partnerships and met federal requirements, would be helpful. Collecting and disseminating such information could help FTA be better positioned to respond to changes in the transit industry that could impact its own efforts and goals, such as planning for future Mobility on Demand grants. In addition, most selected local transit agencies reported confusion related to reporting information about their on-demand projects into the FTA's National Transit Database, including confusion about which on-demand project data would qualify for entry. This confusion has led to possible reporting inconsistencies by some local transit agencies. Ensuring that data contained in the National Transit Database are complete and accurate is important, since according to FTA officials, FTA uses these data (1) to apportion certain grant funds to local transit agencies based on factors such as passenger miles traveled, and (2) to track its progress in achieving goals such as promoting efficient transportation systems, among other things. GAO is making three recommendations including that FTA disseminate information about how partnership projects met federal requirements and how data on partnerships should be entered into the National Transit Database. DOT concurred with the recommendations.", "document_type": "gao"}
{"report": "The attrition among VHA physicians has been of particular concern given that the Health Resources and Services Administration (HRSA) anticipates that by 2025 the national demand for physician services will exceed supply. HRSA’s Office of Rural Health Policy reported, in 2017, that physician shortages were exacerbated in rural areas, where communities struggle to attract and keep well-trained providers. This difficulty has posed a particular challenge for VHA, as approximately one in four VAMCs is located in a rural area. Most physicians providing care at VAMCs are employed by VHA. VHA also supplements the capacity of its employed physician staff by acquiring additional physician services through fee-basis arrangements or contracts. Under fee-basis arrangements, providers are paid a pre- agreed-upon amount for each service provided. Under contracts, physician services may be obtained on a short-term basis; for example, through sole-source contracts with academic affiliates. VAMCs may also use physicians who volunteer their time, who are referred to as work- without-compensation providers. In addition to VHA-employed, contract, and fee-basis physicians, VAMCs often supplement their capacity by using physician trainees, who include medical residents and advanced fellows. In 2016, 135 of the 170 VAMCs had active physician training programs. According to VHA officials, there were 43,768 medical residents who trained at a VAMC in 2016. VHA has been expanding its physician training program, as directed by the Veterans Access, Choice, and Accountability Act of 2014, as amended. In 2017, VHA added 175 physician trainee positions across VAMCs nationwide, including 3 VAMCs that did not have physician trainees prior to this expansion. VHA’s objective is to add 953 additional physician trainee positions to its VAMCs by 2025 in order to improve access and hire additional physicians. Further, VHA officials told us they want to continue to add new positions that would eventually allow all VAMCs access to physician trainees. In our October 2017 report, we found that VHA’s data on physicians who provided care at VAMCs were incomplete. Specifically, we found that VHA had data on the number of mission-critical physicians it employed (more than 11,000) and who provided services on a fee-basis (about 2,800), but lacked data on the number of contract physicians and physician trainees. As a result, VHA did not have data on the extent to which VAMCs used these arrangements and thus, underestimated its physician use overall. Therefore, VHA was unable to ensure that its workforce planning processes sufficiently addressed any gaps in staffing. All six VAMCs included in our review used at least one type of arrangement other than employment for physicians, and five of the six used contract physicians or physician trainees. (See fig. 1.) On average, contract and fee-basis physicians made up 5 to 40 percent of the physicians in a given mission-critical physician occupation at each VAMC in our review. For example, officials from a large, highly complex VAMC told us that, in March 2017, they augmented the 86 employed primary care physicians with eight contract and three fee-basis physicians, which represented about 16 percent of their primary care physician workforce. Further, this VAMC also had about 64 primary care physician trainees providing certain medical services under the supervision of a senior physician. During the course of our work for the October 2017 report, VHA officials told us that its personnel databases were designed to manage VHA’s payroll systems, but that these databases did not contain information on contract physicians or physician trainees. VHA officials told us they were working to include information on physician trainees in a new human resources (HR) database—HR Smart—which at the time of our review, was scheduled to be implemented in 2017. However, these officials were not aware of plans to add information to the database on contract physicians. Instead, VAMC leaders used locally devised methods to identify and track contract physicians, fee-basis physicians, and physician trainees. For example, one VAMC in our October 2017 review used a locally maintained spreadsheet to track its physicians under arrangements other than employment, while another VAMC asked department leaders to identify how many of these provided care within their respective departments. At each of the six VAMCs in our review, we found that department leaders were generally knowledgeable about the total number of physicians that provided care within the departments they managed. However, this locally maintained information was not readily accessible by VHA officials. To address the limitations in VHA’s data, we recommended in our October 2017 report that VHA develop and implement a process to accurately count all physicians providing care at each of its VAMCs, including physicians not employed by VHA. VHA did not concur with this recommendation, stating that it uses other tools for workforce planning. However, a VHA official acknowledged that data sources used for workforce planning may not include all types of contract physicians or work-without-compensation physicians. As we discussed in our prior report, implementing such a systematic process would eliminate the need for individual VAMCs to use their own mechanisms, such as a locally developed and maintained spreadsheet to track its physician workforce, as was done by one VAMC in our prior review. Further, local mechanisms may not be readily accessible to VHA officials engaged in workforce planning, resulting in incomplete information for decision-making purposes. Since our report, VHA officials told us that they have completed implementation of HR Smart, which provides the capability to track every position with a unique position number, and each employee’s full employment history. However, VHA officials told us they do not plan to enhance the capability of HR Smart to track contractors. We continue to believe that having a systematic and consistent process to account for all physicians who provide care across VAMCs, including physicians not employed by VHA, would help address concerns that VHA is unable to identify all physicians providing care at its VAMCs. In our October 2017 report, we found that VHA gave responsibility for determining staffing needs to its VAMCs and provided its facilities with guidance, through policies and directives, on how to determine the number of physicians and support staff needed for some physician occupations. Specifically, VHA provided this guidance for primary care, mental health, and emergency medicine, but lacked sufficient guidance for its medical and surgical specialties, including occupations such as gastroenterology and orthopedic surgery. For these occupations, VHA provided guidance on the minimum number of physicians, but did not provide information on how to determine appropriate staffing levels for physicians or support staff based on the need for care. Specifically, the VHA guidance available at the time set a minimum requirement that VAMCs of a certain complexity level have at least one gastroenterologist and one orthopedic surgeon that is available within 15 minutes by phone or 60 minutes in person 24 hours a day, 7 days a week. VHA guidance did not include information on how to use data, such as workload data, to manage the demand for care or help inform staffing levels for these physician occupations beyond this minimum requirement. Officials from four of the six VAMCs we reviewed for our October 2017 report told us that because they lacked (1) guidance on how to determine the number of physicians and support staff needed, and (2) data on how their staffing levels compared with those of similar VAMCs, they were sometimes unsure whether their staffing levels were adequate. In our October 2017 report, we discussed that VHA had previously established, in 2016, a specialty physician staffing workgroup that examined the relationships between staffing levels, provider workload and productivity, veterans’ access, and cost across VAMCs for its medical and surgical specialties, including gastroenterology and orthopedic surgery. This group’s work culminated in a January 2017 report that found VHA was unable to assess and report on the staffing at each VAMC, as required by the Veterans Access, Choice, and Accountability Act of 2014, because a staffing model for specialty care had not been established and applied across VAMCs. This report made a number of recommendations, including that VHA provide guidance to its VAMCs on what level of staffing is appropriate for its mission-critical physician occupations. However, as we noted in our October 2017 report, VHA leadership had not yet taken steps to develop such staffing guidance. We reported that, according to a VHA official, other priorities were taking precedence and continued work in this area had not yet been approved by VHA leadership. Although VHA officials agreed that further steps should be taken, they did not indicate when these would occur. In our report, we concluded that until VHA issues guidance on staffing levels for certain physician occupations that provide specialty care to veterans, there would continue to be ambiguity for VAMCs on how to determine appropriate staffing levels. To address this, we recommended that VHA develop and issue guidance to VAMCs on determining appropriate staffing levels for all mission-critical physician occupations. VHA concurred with our recommendation and reported it would evaluate and develop staffing guidance for its medical and surgical specialties. Since our report, VHA officials told us that on November 27, 2017, the Executive-in-Charge for VHA signed the specialty care workgroup charter. The primary goal of the workgroup is to develop a specialty care staffing model that will include staffing information for all specialty care. VHA anticipates completing its work and issuing staffing guidance by December 2018. In our October 2017 report, we found that VHA used various strategies to recruit and retain its physician workforce, including providing assistance recruiting for mission-critical physician occupations through the National Recruitment Program; policies and guidance; financial incentives to enhance hiring and retention offers; and a national physician training program. (See table 1.) In our October 2017 report, we found that VHA faced challenges using its strategies for recruiting and retaining physicians. For example, according to VHA officials, budget shortfalls in the Education Debt Reduction Program—which reimburses qualifying education loan debt for employees, including physicians, in hard-to-recruit positions—reduced VAMCs’ ability to offer this recruitment incentive to physician candidates. In addition, the relatively small number of physician recruiters in VHA’s National Recruitment Program—19 recruiters for the 170 VAMCs at the time of our report—limited their ability to understand the particular nuances of some markets, particularly in rural areas. Further, despite VHA’s large and expanding graduate medical training program, VAMCs experienced difficulties hiring physicians who received training through its residency and fellowship programs. VHA did not track the number of physician trainees who were hired following graduation, but officials told us that the number was small in comparison to the almost 44,000 physician trainees educated at VAMCs each year. We found that VAMCs faced challenges hiring physician trainees, in part, because VHA did not share information on graduating physician trainees for recruitment purposes with VAMCs across the system. VHA officials told us that recruitment efforts could be improved by developing and maintaining a database of physician trainees, but said that VHA had no such database. According to VHA officials, information sharing could help both VAMCs in geographically remote locations that do not have a residency program and help identify trainees who want to work at VHA after graduating, but who received no offers from the VAMC they trained at due to the lack of vacancies in their specialty. We also reported in October 2017 that VHA did not have complete information on whether its recruitment and retention strategies were meeting its needs. VHA had gathered feedback on barriers VAMCs face when offering financial incentives to physician candidates through its Education Debt Reduction Program and created a workgroup to look at its overall use of physician retention strategies, although it had not completed a comprehensive review of its recruitment and retention strategies to identify any areas for improvement. As a result, VHA did not have complete information on the underlying causes of the difficulties VAMCs faced or whether its recruitment and retention strategies met its objective of having a robust physician workforce to meet the health care needs of veterans. To address these issues, we recommended that VHA (1) establish a system-wide method to share information about physician trainees to help fill vacancies across VAMCs, and (2) conduct a comprehensive, system- wide evaluation of its physician recruitment and retention efforts, and establish an ongoing monitoring program. VHA concurred with our recommendations, and reported it planned to enhance its personnel database, HR Smart, to include physician trainees. Additionally, VHA said it planned to complete a comprehensive, system-wide evaluation of the physician recruitment and retention strategies. Since our report, VHA reported taking some steps to address these recommendations. Specifically, officials told us they are working to include information in the newly implemented HR Smart database on work-without-compensation employees, such as physician trainees, and anticipate conducting pilot projects at various sites before fully implementing this capability by September 30, 2019. Additionally, officials said that they are in the process of completing a review of physician recruitment and retention incentives. Furthermore, according to VHA officials, beginning in October 2017, VHA’s Office of Workforce Management and Consulting partnered with the Partnered Evidence- based Policy Resource Center—an internal VHA resource center—to evaluate and recommend a systematic approach for allocating workforce management resources, such as the Education Debt Reduction Program. VHA expects to complete its efforts by September 2018. Chairman Dunn, Ranking Member Brownley, and Members of the Subcommittee, this concludes my statement. I would be pleased to respond to any questions you may have. For further information about this statement, please contact Debra A. Draper at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Key contributors to this statement were Janina Austin (Assistant Director), Sarah Harvey (Analyst-in-Charge), Jennie Apter, Frederick Caison, Alexander Cattran, and Krister Friday. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "As the demand for VHA's services grows—due, in part, to increasing demand from servicemembers returning from the United States' military operations in Afghanistan and Iraq and the growing needs of an aging veteran population—attracting, hiring, and retaining top talent is critical to VHA's mission to provide high quality and timely care for the nation's veterans. Physicians—who provide and supervise a broad range of care including primary and specialty care—serve an integral role in VHA's mission. Certain physician types are consistently among the most difficult to recruit and retain, and are thus considered mission-critical by VHA. Over the past two decades, GAO and others have expressed concern about VHA's ability to ensure that it has the appropriate clinical workforce, including physicians, to meet the current and future needs of veterans. This statement is based on GAO's October 2017 report and examines (1) VHA information on how many mission critical physicians provided care at VAMCs, (2) VHA guidance for determining its physician staffing needs, and (3) the strategies VHA used to support the recruitment and retention of physicians at VAMCs, and the extent to which it has evaluated these strategies to determine their effectiveness. For this statement, GAO updated the information from its October 2017 report and obtained information from VHA officials in June 2018 about steps they have taken to implement the 2017 recommendations. The Department of Veterans Affairs (VA) Veterans Health Administration (VHA) continues to face challenges related to physician staffing, recruitment, and retention, though it has begun work to implement recommendations made in GAO's October 2017 report. Specifically, GAO's report found the following: VHA's data on the number of physicians that provided care at VA medical centers (VAMC) were incomplete. GAO found that data were incomplete because they did not include data on the number of contract physicians and contained only limited data on the number of physician trainees—two types of physicians that augment the care provided by physicians employed by VHA. Thus, VHA data underestimated the total number of physicians providing care in its medical centers leaving it unable to ensure that its workforce planning processes sufficiently addressed gaps in staffing. GAO recommended that VHA implement a process to accurately count all its physicians. VHA did not concur with this recommendation, stating that it used other tools for workforce planning. VHA has since implemented a new human resources (HR) database—HR Smart—that has the capability to track each position at its VAMCs. However, VHA officials told us they do not plan to include information on physician contractors in this database. VHA provided VAMCs with guidance on how to determine the number of physicians and support staff needed for some physician occupations, although it lacked sufficient guidance for its medical and surgical specialties. GAO recommended that VHA issue guidance to VAMCs on determining appropriate staffing levels for all physicians. VHA concurred and reported it would develop staffing guidance for its medical and surgical specialties. VHA officials told GAO VHA signed a specialty care workgroup charter November 27, 2017; the primary goal of the workgroup was to develop a specialty care staffing model that would include staffing information for all specialty care. VHA anticipates completing its work and issuing staffing guidance by December 2018. VHA used various strategies to recruit and retain its physician workforce, but had not comprehensively evaluated them to assess effectiveness . Without such an evaluation, VHA did not have complete information on the underlying causes of the difficulties VAMCs face, or whether its recruitment and retention strategies were meeting physician workforce needs. GAO recommended VHA (1) establish a system-wide method to share information about physician trainees to help fill vacancies across VAMCs and (2) conduct a comprehensive, system-wide evaluation of VAMCs' physician recruitment and retention efforts and establish an ongoing monitoring program. VHA concurred and reported it has since taken steps to address the recommendations. For example, VHA's Office of Workforce Management and Consulting has partnered with its Partnered Evidence-based Policy Resource Center to evaluate and recommend a systematic approach for allocating workforce management resources. In addition, VHA has added the capability to track physician trainees to its HR Smart database. VHA expects to complete its efforts by September 2018 and September 2019, respectively.", "document_type": "gao"}
{"report": "The Defense Base Closure and Realignment Act of 1990, as amended, has governed the BRAC process since 1990. The law established the procedures for making recommendations for base closures and realignments and originally required DOD to submit a 6-year force- structure plan and base its closure and realignment decisions on that plan. For the 1991, 1993, and 1995 BRAC rounds, DOD performed a detailed capacity analysis based on extensive data-collection efforts to identify specific bases capable of accommodating additional forces to develop its proposed list of closures and realignments. In 1997, after DOD requested another BRAC round, Congress required DOD to submit a report on, among other things, the need for any additional BRAC rounds and an estimate of the amount of DOD’s excess capacity at the time. In 2001, when Congress authorized a BRAC round to begin in 2005, it required DOD to submit a force-structure plan to cover a 20-year period and an infrastructure inventory with its budget-justification documents for fiscal year 2005 before proceeding with the extensive data gathering efforts and analysis associated with the BRAC process. The submission was also to discuss categories of excess infrastructure and infrastructure capacity. Prior statutes included provisions for us to review DOD’s 1998 and 2004 excess capacity reports, which used a method to estimate excess capacity that was very similar to the method used in its 2017 report. Our 1998 and 2004 reports reviewed DOD’s 1998 and 2004 excess capacity reports, respectively. Our 2013 report assessed the estimating methods used in both the 1998 and 2004 excess capacity reports. In these three previous reports, we concluded that DOD’s methodology to estimate excess capacity had a number of limitations, and thus gave a rough indication that excess capacity existed. Specifically, we identified the following four limitations with the method used in DOD’s 1998 and 2004 reports: Installations were assigned to a single-mission category, yet most installations perform more than one mission. Military services used different metrics to evaluate installations in similar mission categories. DOD used a 1989 baseline that did not take into account any excess capacity or capacity shortfall that may have existed at the time. DOD’s analysis did not consider the possibility that a mission category might have a capacity shortage; mission categories were determined to have either an excess or no excess capacity. DOD agreed that our 2013 report properly highlighted the limitations in DOD’s methodology for estimating excess capacity. At that time, DOD reiterated that the purpose of its methodology is to provide an indication of whether sufficient excess exists to justify authorization of another BRAC round. DOD concluded that only through the BRAC process is it able to determine excess capacity by installation and mission or function in a fair and thorough way. A list of related GAO products is included at the end of this report. DOD’s 2017 infrastructure capacity report addressed or partially addressed the five required elements from section 2815 of the NDAA for Fiscal Year 2016. As shown in table 1, DOD addressed four of the required elements and partially addressed one element. DOD’s report partially addressed the requirement to include a description of the infrastructure capacity required to support the force structure because the report describes only a small portion of the capacity needed. For example, in the case of Air Force large aircraft installations, the needed infrastructure was described in terms of the square yards of apron space needed to support the assigned aircraft, but did not describe other infrastructure needs such as aircraft hangars, maintenance facilities, and administrative space used by squadrons assigned to the installation. Similarly, in the case of Army maneuver installations, the needed infrastructure was described in terms of maneuver acres needed, but did not describe other infrastructure necessary to support assigned units. Consequently, the description of infrastructure needed does not provide DOD and Congress with a complete picture of the infrastructure needed to support the force structure at these major installations. However, as DOD points out in its report to Congress, the analysis performed does not provide the detail necessary to identify specific infrastructure for elimination; instead it provides an indicator of the categories of excess. DOD also stated that this level of detail is only provided through the formal BRAC process. Consequently, without a formal BRAC round, DOD does not have the details necessary to identify the total infrastructure necessary to support its current force structure. Therefore, we are not making any recommendations concerning this reporting requirement. DOD’s excess capacity methodology and analysis has limitations that affect the accuracy and analytical sufficiency of the estimate. Specifically, DOD’s use of a 1989 baseline for excess capacity results in inaccurate estimates of excess capacity; DOD’s methodology included assumptions that were not always reasonable; and DOD’s approach to estimating excess capacity is not always sufficient or implemented consistently across the military departments. DOD noted some of these same limitations in its 2017 infrastructure capacity report. DOD’s use of 1989 data as the baseline for its excess capacity analysis resulted in inaccurate estimates of excess capacity. According to generally accepted research standards, listed in appendix I, the baseline and other data used to support the analysis should be determined to be reliable and valid. Specifically, the baseline should be fully and completely identified and used consistently, where appropriate. In addition, the data limitations should be identified and the effect of these limitations should be fully explained. DOD has also recognized that using 1989 as a baseline did not account for excess capacity that existed in 1989. However, DOD only partially explained the effect of this limitation on its estimate of excess capacity. First, using 1989 as the baseline assumes that the bases and facilities as they existed in 1989 were appropriately sized to support their missions. However, DOD’s 2017 infrastructure capacity report did not provide a rationale for either why 1989 was an appropriate baseline or why the bases and facilities were assumed to be appropriately sized at that time. In fact, as discussed below, DOD has stated that excess capacity existed in 1989, but does not attempt to quantify the amount. Further, in at least one mission category, Marine Corps Bases, DOD acknowledges that it overstated excess capacity because the baseline ratio was based on infrastructure numbers that were not adjusted to recognize the documented shortfalls that existed in 1989. Second, the effects of DOD’s assumptions about the 1989 baseline have not been consistently reported by DOD. DOD has used the same baseline in its three analyses conducted over the past 20 years, yet DOD draws different conclusions concerning how the baseline affects its estimates of excess capacity. For example, DOD concluded in 1998 that excess capacity existed in the 1989 baseline because the majority of realignment and closures took place after 1989; in 2004 that very significant excess capacity existed in the 1989 baseline; and in 2017, in DOD’s infrastructure capacity report, that the 1989 baseline was both properly sized to support assigned missions and forces and included significant excess capacity. Nevertheless, DOD has consistently stated that its estimate of excess capacity is likely conservative because significant excess existed in 1989. DOD also stated that its analysis provides an indicator of the categories where excess might exist and that only through a BRAC round can the department undertake the detailed analysis necessary to make closure and realignment recommendations. Since 1988, DOD has completed five BRAC rounds that have closed a significant number of DOD facilities. In addition, as discussed below, DOD facility standards and requirements have been updated and new weapon systems have been introduced, which can affect the amount and type of infrastructure needed. Consequently, without a definitive measure of the excess that existed in 1989, as well as adjustments in the method to account for the effect of updated facility standards and requirements, and new weapons systems, there is no clear rationale for using 1989 as a baseline year in the estimate of excess capacity provided by DOD’s analysis. Third, during the last 29 years DOD facility standards and requirements have been updated and new weapon systems with greater ranges and capabilities have been developed that have changed the amount and type of infrastructure needed to support DOD’s forces. For example, we recently reported that only 11 of the Navy’s 18 drydocks are configured to perform maintenance on the newer ship and submarine classes like the Ford-class aircraft carrier and Virginia-class submarine. Using such an old baseline, without making adjustments in the method to account for these changes, leads us to conclude that DOD’s results are likely inaccurate. Because DOD continues to use its outdated 1989 baseline we found that DOD’s 2017 excess capacity analysis results in estimates that are likely inaccurate. Without updating the baseline that is used in the methodology to calculate excess capacity across DOD, DOD will not have accurate information for making critical decisions related to investments in infrastructure. Furthermore, Congress will not have accurate information to make fully informed decisions concerning whether and to what extent another BRAC round is needed. DOD’s excess capacity methodology includes assumptions that are not always reasonable, such as assigning installations to only one mission category. According to generally accepted research standards, reasonable assumptions are characterized by being realistic, credible, and accompanied by a statement of their rationale. In addition, these standards also state that assumptions should support a sound analysis (e.g., the assumptions should not skew the results of the analysis or reduce the range of possible outcomes). We previously reported limitations related to DOD’s assumptions when we examined DOD’s excess capacity analyses in 1998, 2004, and 2013. DOD continues to use the same methodology in 2017 that it has previously used to estimate excess capacity; thus, these limitations continue to exist in its methodology in its 2017 report. First, DOD’s approach of assigning an installation to only one mission category treats an installation as if it has only one mission, yet most installations support more than one mission. As a result, only a small portion of an installation’s infrastructure may be considered by DOD’s analysis. For example, in the case of Fort Bragg, North Carolina, which is included in the maneuver base category by the Army, base acres are included in the analysis, but more than 43.8 million square feet of infrastructure is not considered. Similarly, in the case of Naval Base Kitsap, Washington, which is included in the Naval Station category by the Navy, the pier space is considered in the analysis, but the more than 7.5 million square feet of facilities is not considered. In addition, as discussed later in this report, there were instances where the military departments included installations in more than one mission category. Finally, there are several categories that measure capacity in terms of direct labor hours or work- years, but the analysis does not include the actual infrastructure, such as buildings, structures, and linear structures. Consequently, the assumption that each installation is included in one mission category may not be reasonable because only a portion of the infrastructure at the installations is being considered when identifying potential excess capacity. Second, as implemented, DOD’s estimate of excess capacity may be overstated because its methodology did not account for any potential shortfalls in capacity—not having enough infrastructure to support the mission—and did not provide a rationale for this approach in its calculations. As illustrated in table 2, when DOD’s calculation identifies that the proportional capacity is less than the infrastructure capacity for the year being analyzed (i.e., DOD needs less infrastructure than it has), DOD concludes that excess capacity exists and provides a percentage amount of excess capacity. However, when the proportional capacity exceeds the infrastructure capacity for the year being analyzed (i.e., DOD may need more infrastructure), DOD concludes that no excess capacity exists. Moreover, DOD’s calculation provides a zero percentage for excess capacity, rather than a negative percentage that would account for a potential capacity shortfall in its analysis. DOD’s 2017 infrastructure capacity analysis identifies zero percent excess capacity in nearly half (14 of 32) of the installation categories that needed more capacity—included in the analysis, including 8 or 12 Navy installation categories. Because DOD’s methodology uses the excess capacity percentages from the 32 installation categories to compute a weighted average for excess capacity across the department, treating a negative percentage from a mission category as 0.0 percent would increase DOD’s overall excess capacity percentage. DOD officials believe that treating these 14 installation categories as if they have 0.0 percent excess capacity is appropriate because the purpose of the analysis is to identify the categories where excess capacity may exist. In addition, they asserted that treating these categories as if they had a shortfall would assume that infrastructure from 1 of the 18 other installation categories identified as having excess capacity could be used to offset the shortfall when the categories are likely to have different metrics. DOD officials also told us that, from their perspective, no increase does not mean that there is large deficit of infrastructure within a mission category; it just means that the infrastructure to force-structure ratio indicates that the particular category does not have excess. We found, however, 6 installation categories where the force-structure measure exceeds the capacity measure, which indicates that a shortfall exists. In addition, because most installations support more than one mission and have more infrastructure present than the mission category metric measures, including potential capacity shortfall in its analysis could provide DOD and Congress with a more accurate estimate of excess capacity. DOD’s methodology to estimate excess capacity includes assumptions that are not reasonable. Without using assumptions to estimate excess capacity that are considered reasonable (i.e., realistic, credible, and accompanied by a statement of their rationale), DOD’s methodology may overstate its estimate of excess capacity. DOD’s method for estimating excess capacity across the department is not sufficient because it is based on a nongeneralizable sample and therefore its reported estimates cannot be generalized to describe excess capacity across the department. Furthermore, DOD’s sampling method is not always implemented effectively because some of the military departments adjusted the sampling approach. According to generally accepted research standards, the methods used and the analysis should be sufficient for accomplishing the objectives of the study. In addition, the analysis should be executed consistently with the study plan or the described methodology. We found that the calculations performed by DOD in the analysis were generally accurate. First, DOD and the military departments used a nongeneralizable sample of different types of installations to develop an excess capacity estimate. However, a nongeneralizable sample cannot be used to develop a department-wide estimate of excess capacity because this technique is not designed to yield a sound probable statistical estimate. Specifically, when the analysis was first done in 1998, the military departments sorted installations into categories and only included installations that were considered by the departments to be “major installations.” The departments were to assign each “major installation” to only one mission category. The departments were to then calculate the estimated capacity by mission category for both the baseline year, 1989, and the projected force-structure year, 2003. The same approach was used for the 2017 analysis; however, neither the 1998 nor the 2017 analysis provided guidance to the military department concerning what constitutes a “major installation.” This approach for selecting and sorting samples of installations relies on the judgment of each of the military departments, yielding a nongeneralizable sample of installations that vary across the military departments. Consequently, the results from the analysis cannot be used to make inferences about the amount of excess capacity across DOD. Second, the military departments did not follow a consistent approach when calculating excess capacity. Specifically, the DOD method bases its excess capacity estimate on the number of installations in each mission category. However, we found that, in the 2017 analysis, the military departments did not consistently follow the practice of including installations in only one category across the services when the analysis was performed in 2017. For example, we found several installations that were included in more than one category by some of the military departments: In the 2017 analysis, the Air Force included two subcategories under the heading of “Education and Training”: “Flight Training” and “Classroom.” The flight training subcategory included 13 installations and the classroom subcategory included 14 installations. We found that all 13 of the flight training installations were also included as classroom installations. Yet, when the analysis was performed in both 1998 and 2004, the same 14 installations were used, but 8 of the installations were then categorized as being flight training installations and the other 6 installations were categorized as classroom installations. If this previous categorization approach was used in the 2017 analysis, the Air Force estimate of excess capacity would have been about 2 percent lower. In two instances, the Navy included the same installations in both the “Naval Station” and “Air Station” categories and, in one instance, the Navy included a joint base in both the “Naval Station” and “Shipyards” categories. According to a Navy official, these installations were included in both categories because a major mission would have been omitted from the analysis if the bases were included in only one category. This treatment, however, is not consistent with DOD’s methodology. Including the same installation in multiple installation categories may have resulted in double counting of capacity, and thereby affected the resulting estimate of excess capacity for multiple installation categories. Third, the military departments did not consistently account for the joint bases in their excess capacity analysis. In some instances, we found that only the lead military department included the joint base in its analysis. For example, in the case of Joint Base Lewis-McChord, Washington—an Army-led joint base comprising Fort Lewis and McChord Air Force Base—the Army, consistent with its treatment of Fort Lewis in previous excess capacity analyses, included the joint base in its maneuver category. However, the Air Force did not include McChord Air Force Base in its analysis in 2017 although it had in previous years. In these instances where only the lead military department included the joint base in its analysis, the infrastructure associated with the tenant military department was usually left out of the analysis because the metric used by the leading department does not incorporate the same measures of infrastructure and force structure as the tenant department. In the Joint Base Lewis-McChord example, the Army included the base in the maneuver category, which is measured by the ratio of maneuver acres to maneuver battalion equivalents while the Air Force had previously used the ratio of parking apron space to number of aircraft to measure capacity at McChord Air Force Base. Consequently, DOD’s analysis no longer takes into account the infrastructure that supports the flying mission at this joint base. In other instances, we found that both the lead military department and the tenant military department included their portion of the infrastructure in their analyses. For example, for Joint Base Charleston, South Carolina—an Air Force-led joint base comprised of Charleston Air Force Base and Naval Support Activity Charleston—each of the military departments continued to include their portion of the infrastructure in their individual analyses. Consequently, DOD’s analysis accounts for the infrastructure that supports both missions at the joint base. DOD’s method for estimating excess capacity is not always sufficient and is not implemented consistently across the military departments because DOD lacks specific department-wide guidance, according to DOD officials. Specifically, explicit guidance does not exist that clearly defines “major installations,” identifies whether and when it is appropriate to include a facility in more than one category to take into account multiple missions at the facilities, or provides protocols for assessing excess capacity at joint bases. These topics were discussed in meetings with military department officials, but, according to DOD officials, no specific method was identified for department-wide use. Without developing guidance for the military departments, the estimate of excess capacity may not be based on consistent methods across the department, resulting in inaccurate estimates. DOD’s 2017 excess capacity analysis does not have the accuracy and analytical sufficiency to provide Congress with a reasonable estimate of the actual excess capacity within the department. DOD recognizes the limitations of its analysis, specifically noting that the resulting percentages of excess capacity are at best indicators to justify the more detailed analysis of excess capacity provided by a full BRAC analysis. Specifically, DOD used a baseline for the analysis that did not fully take into account changes in infrastructure needs since 1989, used assumptions in its analysis that are not reasonable, and used methods that were not sufficient or implemented consistently. These limitations resulted in excess capacity estimates that do not have the accuracy and analytical sufficiency to support decision making on future BRAC rounds. Without improvements to DOD’s method of estimating excess capacity, DOD is not providing the information that Congress requires to make decisions concerning the management of excess infrastructure capacity within the department. Similarly, DOD does not have the information it needs to appropriately manage its infrastructure capacity and therefore cannot make informed decisions about what it needs to support its mission as land and infrastructure requirements of newer weapon systems are introduced. Moreover, the combined effect of neither DOD nor Congress having the information means that DOD will continue to experience challenges with funding related to its infrastructure and potential excess costs. We are making the following three recommendations to DOD: The Secretary of Defense should ensure that the Assistant Secretary of Defense for Energy, Installations, and Environment reliably updates the baseline used for estimating excess infrastructure capacity. (Recommendation 1) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Energy, Installations, and Environment uses assumptions in estimating excess capacity that are considered reasonable (i.e., realistic, credible, and accompanied by a statement of their rationale). (Recommendation 2) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Energy, Installations, and Environment develops guidance to improve the methods used in the analysis and ensure consistent implementation of DOD’s methodology to produce reliable estimates of excess capacity across the department. The guidance, at a minimum, should clearly define “major installations,” identify whether and when it is appropriate to include a facility in more than one category to take into account multiple missions at the facilities, and provide protocols for assessing excess capacity at joint bases. (Recommendation 3) We provided a draft of this report to the Department of Defense (DOD) for comment. DOD provided written comments, which are reproduced in appendix II. DOD concurred with one recommendation and partially concurred with the other two recommendations. DOD stated that it concurred with our first recommendation, which called for it to reliably update the baseline used for estimate excess infrastructure capacity. Specifically, the department stated that it would review methods to update the baseline for future excess capacity analysis that is undertaken. The department partially concurred with our second recommendation, which called for the department to use assumptions that were considered reasonable (i.e. realistic, credible, and accompanied by a statement of the rationale) in estimating excess capacity. Specifically, the department agreed that its capacity report should lay out any assumptions made and the rationale for each assumption and will ensure that any future capacity report includes that information. The department did not concur, however, that assumptions used in its 2017 infrastructure capacity report were other than reasonable, realistic, or credible. While we are encouraged that the department will lay out any assumptions and the rationale for each assumption in future capacity reports, not all assumptions used in the 2017 analysis were reasonable (i.e. realistic, credible, and accompanied by a statement of the rationale) as outlined in this report. For example, we found that assigning installations to only one mission category was not realistic because most installations support more than one mission. The department partially concurred with our third recommendation that DOD develop guidance to improve the methods used in the analysis and ensure consistent implementation of DOD’s methodology to produce reliable estimates of excess capacity across the department. This guidance, at a minimum, should clearly define “major installations,” identify whether and when it is appropriate to include a facility in more than one category to take into account multiple missions at the facilities, and provide protocols for assessing excess capacity at joint bases. DOD concurred that guidance should precede any future infrastructure capacity review and that such guidance should include definitions and implementation instructions, but the three items identified would not necessarily be applicable for a future analysis. Provided that future DOD guidance addresses all appropriate characteristics for analysis, such guidance would meet the intent of our recommendation. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; and the Assistant Secretary of Defense for Energy, Installations, and Environment. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Table 3 describes the generally accepted research standards, identifies the standards we used in evaluating the quality of the research results conveyed in DOD’s 2017 infrastructure capacity report and provides the rationale for the inclusion and exclusion of each specific standard. Study plan, scope, and objectives follow existing guidance? Do the study scope and objectives fully address the mandated elements? Does the study plan address specified guidance? Team is not aware of any standard guidance for the development of this document. Was the study plan followed? Team is not aware of any study plan that guided the development of this report. Were deviations from the study plan explained and documented? Team is not aware of any study plan that guided the development of this report. Was the study plan updated over the course of the study and the updates explicitly identified in the study and updated study plan? Assumptions and limitations are reasonable and, where appropriate, consistent Are assumptions and limitations explicitly identified? Team is not aware of any study plan that guided the development of this report. Given the judgment required to execute the analyses the assumptions and constraints are key to team’s determination of the accuracy and analytical sufficiency of the report. Are the assumptions reasonable in that they are realistic, credible, and accompanied by a statement of their rationale? Rationale for inclusion in or exclusion from GAO’s review Given the judgment required to execute the analyses, the assumptions and constraints are key to the team’s determination of the accuracy and analytical sufficiency of the report. Team felt that ‘reasonable’ was sufficient and ‘necessary’ was not readily apparent. Do the assumptions support a sound analysis? Given the judgment required to execute the analyses the assumptions and constraints are key to team’s determination of the accuracy and analytical sufficiency of the report. Are the assumptions used in analyses common throughout the study and models? This standard is not needed to answer the objectives of our report. Other standards for study assumptions are more relevant and sufficient for our purposes. Do the assumptions contribute to an objective and balanced research effort? Scenarios and threats are reasonable Did they synthesize the supporting analyses such that it is traceable back to formal guidance? Were the threat scenarios validated and Joint Staff approved and documented? Do scenarios represent a reasonably complete range of conditions? Were the threats varied to allow for the conduct of sensitivity analysis? Methods are sufficient and successfully executed Were the study methods executed consistent with the study plan and schedule? Were the methods and analyses sufficient for accomplishing the objectives presented in the study? Given the judgment required to execute the analyses the methodology is key to determine if DOD accomplishes its objectives. Were the models used to support the analyses adequate for their intended purpose? //Were the calculations used to support the analyses accurate? Baseline and other data used to support the analyses were determined to be reliable and valid? Is the baseline fully and completely identified and used consistently, where appropriate, throughout the various analyses? Rationale for inclusion in or exclusion from GAO’s review Important to ensure the model is designed well in addition to accurate arithmetic calculations. DOD conducted analyses and calculations in the report. DOD report includes the use of baseline data in the underlying analyses. Were data limitations identified and the impact of the limitations fully explained? DOD report uses data obtained from DOD components. Were the data determined to be reliable and valid? Incorporated with V.e below. Were the data reliability and validation process documented? DOD report uses data obtained from DOD components. Were the appropriate data gathered to support the analyses? OSD obtained data from other DOD components and used it to generate the report. Analyses are reasonable Was a verification, validation, and accreditation report that addresses the models and data certification signed by the study director and included in the report? In the context of our engagement, redundant with section II above. Were analytic limitations identified and explained? In the context of our engagement, redundant with section II above. Has each analysis in the study been described? In the context of our engagement, redundant with section II above. Were the analyses clearly explained, documented? The mandate language does not require DOD to include measures of effectiveness in its report. Furthermore, DOD is not required to submit a strategic plan so Government Performance and Results Act requirements are not applicable. Are the MOEs fully addressed in the study? Same rationale cited above. Are the EEAs addressed in the study? Same rationale cited above. Standard used in GAO’s review? Presentation of results support findings Does the report address the objectives? Does the report present an assessment that is well documented and conclusions that are supported by the analyses? Are conclusions sound and complete? We will address conclusionary language in the context of the data used to support it above. Are recommendations supported by analyses? The mandate language does not require DOD to include recommendations and DOD did not include recommendations. Is a realistic range of options provided? Not applicable. DOD’s report does not include range of options for force- structureplans and categorical infrastructure inventory. Are the study results presented in the report in a clear manner? Are study participants/stakeholders (i.e., services and Combatant Commands) informed of the study results and recommendations? In addition to the contact named above, Gina Hoffman (Assistant Director), Tracy Barnes, Ronald Bergman, Patricia Donahue, Kerstin Hudon, Terrance Lam, Amie Lesser, Carol Petersen, Clarice Nassif Ransom, Matt Spiers, Tristan To, and John Wren made key contributions to this report. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Military Base Realignments and Closures: DOD Has Improved Environmental Cleanup Reporting but Should Obtain and Share More Information. GAO-17-151. Washington, D.C.: January 19, 2017. Defense Infrastructure: DOD Efforts to Prevent and Mitigate Encroachment at Its Installations. GAO-17-86. Washington, D.C.: November 14, 2016. Defense Facility Condition: Revised Guidance Needed to Improve Oversight of Assessments and Ratings. GAO-16-662. Washington, D.C.: June 23, 2016. Defense Infrastructure: More Accurate Data Would Allow DOD to Improve the Tracking, Management, and Security of Its Leased Facilities. GAO-16-101. Washington, D.C.: March 15, 2016. Underutilized Facilities: DOD and GSA Information Sharing May Enhance Opportunities to Use Space at Military Installations. GAO-15-346. Washington, D.C.: June 18, 2015. Military Base Realignments and Closures: More Guidance and Information Needed to Take Advantage of Opportunities to Consolidate Training. GAO-16-45. Washington, D.C.: February 18, 2016. Military Base Realignment and Closures: Process for Reusing Property for Homeless Assistance Needs Improvements. GAO-15-274. Washington, D.C.: March 16, 2015. High-Risk Series: An Update. GAO-15-290. Washington, D.C.: February 11, 2015. Federal Real Property: Strategic Focus Needed to Help Manage Vast and Diverse Warehouse Portfolio. GAO-15-41. Washington, D.C.: November 12, 2014. DOD Joint Bases: Implementation Challenges Demonstrate Need to Reevaluate the Program. GAO-14-577. Washington, D.C.: September 19, 2014. Defense Infrastructure: DOD Needs to Improve Its Efforts to Identify Unutilized and Underutilized Facilities. GAO-14-538. Washington, D.C.: September 8, 2014. Defense Infrastructure: Army Brigade Combat Team Inactivations Informed by Analyses, but Actions Needed to Improve Stationing Process. GAO-14-76. Washington, D.C.: December 11, 2013. Military Bases: DOD Has Processes to Comply with Statutory Requirements for Closing or Realigning Installations. GAO-13-645. June 27, 2013. Defense Infrastructure: DOD’s Excess Capacity Estimating Methods Have Limitations. GAO-13-535. Washington, D.C.: June 20, 2013. Military Bases: Opportunities Exist to Improve Future Base Realignment and Closure Rounds. GAO-13-149. Washington, D.C.: March 7, 2013. GAO’s 2013 High Risk Series: An Update. GAO-13-283. Washington, D.C.: February 2013. DOD Joint Bases: Management Improvements Needed to Achieve Greater Efficiencies. GAO-13-134. Washington, D.C.: November 15, 2012. Military Base Realignments and Closures: The National Geospatial- Intelligence Agency’s Technology Center Construction Project. GAO-12-770R. Washington, D.C.: June 29, 2012. Military Base Realignments and Closures: Updated Costs and Savings Estimates from BRAC 2005. GAO-12-709R. Washington, D.C.: June 29, 2012. Military Base Realignments and Closures: Key Factors Contributing to BRAC 2005 Results. GAO-12-513T. Washington, D.C.: March 8, 2012. Excess Facilities: DOD Needs More Complete Information and a Strategy to Guide Its Future Disposal Efforts. GAO-11-814. Washington, D.C.: September 19, 2011. Military Base Realignments and Closures: Review of the Iowa and Milan Army Ammunition Plants. GAO-11-488R. Washington, D.C.: April 1, 2011. GAO’s 2011 High-Risk Series: An Update. GAO-11-394T. Washington, D.C.: February 17, 2011. Defense Infrastructure: High-Level Federal Interagency Coordination Is Warranted to Address Transportation Needs beyond the Scope of the Defense Access Roads Program. GAO-11-165. Washington, D.C.: January 26, 2011. Military Base Realignments and Closures: DOD Is Taking Steps to Mitigate Challenges but Is Not Fully Reporting Some Additional Costs. GAO-10-725R. Washington, D.C.: July 21, 2010. Defense Infrastructure: Army Needs to Improve Its Facility Planning Systems to Better Support Installations Experiencing Significant Growth. GAO-10-602. Washington, D.C.: June 24, 2010. Military Base Realignments and Closures: Estimated Costs Have Increased While Savings Estimates Have Decreased Since Fiscal Year 2009. GAO-10-98R. Washington, D.C.: November 13, 2009. Military Base Realignments and Closures: Transportation Impact of Personnel Increases Will Be Significant, but Long-Term Costs Are Uncertain and Direct Federal Support Is Limited. GAO-09-750. Washington, D.C.: September 9, 2009. Military Base Realignments and Closures: DOD Needs to Update Savings Estimates and Continue to Address Challenges in Consolidating Supply- Related Functions at Depot Maintenance Locations. GAO-09-703. Washington, D.C.: July 9, 2009. Defense Infrastructure: DOD Needs to Periodically Review Support Standards and Costs at Joint Bases and Better Inform Congress of Facility Sustainment Funding Uses. GAO-09-336. Washington, D.C.: March 30, 2009. Military Base Realignments and Closures: DOD Faces Challenges in Implementing Recommendations on Time and Is Not Consistently Updating Savings Estimates. GAO-09-217. Washington, D.C.: January 30, 2009. Military Base Realignments and Closures: Army Is Developing Plans to Transfer Functions from Fort Monmouth, New Jersey, to Aberdeen Proving Ground, Maryland, but Challenges Remain. GAO-08-1010R. Washington, D.C.: August 13, 2008. Defense Infrastructure: High-Level Leadership Needed to Help Communities Address Challenges Caused by DOD-Related Growth. GAO-08-665. Washington, D.C.: June 17, 2008. Defense Infrastructure: DOD Funding for Infrastructure and Road Improvements Surrounding Growth Installations. GAO-08-602R. Washington, D.C.: April 1, 2008. Military Base Realignments and Closures: Higher Costs and Lower Savings Projected for Implementing Two Key Supply-Related BRAC Recommendations. GAO-08-315. Washington, D.C.: March 5, 2008. Defense Infrastructure: Realignment of Air Force Special Operations Command Units to Cannon Air Force Base, New Mexico. GAO-08-244R. Washington, D.C.: January 18, 2008. Military Base Realignments and Closures: Estimated Costs Have Increased and Estimated Savings Have Decreased. GAO-08-341T. Washington, D.C.: December 12, 2007. Military Base Realignments and Closures: Cost Estimates Have Increased and Are Likely to Continue to Evolve. GAO-08-159. Washington, D.C.: December 11, 2007. Military Base Realignments and Closures: Impact of Terminating, Relocating, or Outsourcing the Services of the Armed Forces Institute of Pathology. GAO-08-20. Washington, D.C.: November 9, 2007. Military Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency. GAO-08-121R. Washington, D.C.: October 26, 2007. Defense Infrastructure: Challenges Increase Risks for Providing Timely Infrastructure Support for Army Installations Expecting Substantial Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007. Military Base Realignments and Closures: Plan Needed to Monitor Challenges for Completing More Than 100 Armed Forces Reserve Centers. GAO-07-1040. Washington, D.C.: September 13, 2007. Military Base Realignments and Closures: Observations Related to the 2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007. Military Base Closures: Projected Savings from Fleet Readiness Centers Likely Overstated and Actions Needed to Track Actual Savings and Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29, 2007. Military Base Closures: Management Strategy Needed to Mitigate Challenges and Improve Communication to Help Ensure Timely Implementation of Air National Guard Recommendations. GAO-07-641. Washington, D.C.: May 16, 2007. Military Base Closures: Opportunities Exist to Improve Environmental Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property. GAO-07-166. Washington, D.C.: January 30, 2007. Military Bases: Observations on DOD’s 2005 Base Realignment and Closure Selection Process and Recommendations. GAO-05-905. Washington, D.C.: July 18, 2005. Military Bases: Analysis of DOD’s 2005 Selection Process and Recommendations for Base Closures and Realignments. GAO-05-785. Washington, D.C.: July 1, 2005. Military Base Closures: Observations on Prior and Current BRAC Rounds. GAO-05-614. Washington, D.C.: May 3, 2005. Military Base Closures: Assessment of DOD’s 2004 Report on the Need for a Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May 17, 2004. Military Bases: Review of DOD’s 1998 Report on Base Realignment and Closure. GAO/NSIAD-99-17. Washington, D.C.: November 13, 1998.", "summary": "DOD has used the Base Realignment and Closure (BRAC) process primarily to reduce excess infrastructure capacity, transform the force, and produce cost savings. DOD completed hundreds of base closures and realignments in previous BRAC rounds and intends to work with Congress to address remaining excess capacity. The NDAA for Fiscal Year 2016 required DOD to submit, among other things, a force structure plan and a categorical infrastructure inventory of worldwide military installations. In response, DOD submitted its infrastructure capacity report to Congress in October 2017. The NDAA included a provision for GAO to evaluate DOD's report for accuracy and analytical sufficiency. In this report, GAO evaluates the extent to which (1) DOD's report included the required elements, and (2) DOD's methodology and analysis result in accurate and analytically sufficient information on excess capacity. To conduct this work, GAO reviewed DOD's 2017 report and compared it with the statutory requirements and generally accepted research standards. GAO also interviewed DOD and military service officials. The Department of Defense's (DOD) 2017 infrastructure capacity report addressed four of five required elements from section 2815 of the National Defense Authorization Act (NDAA) for Fiscal Year 2016. Specifically, DOD's report addressed the elements requiring it to submit a force-structure plan, a categorical inventory of worldwide military installations, a discussion of categories of excess infrastructure, and an assessment of the value of retaining certain excess infrastructure. DOD's report partially addressed the element to include a description of the infrastructure capacity required to support the force structure. Specifically, DOD's report did not provide a complete picture of the infrastructure needed. For example, infrastructure at Air Force large aircraft installations was described by square yards of apron space, but did not include other infrastructure needs such as aircraft hangars and maintenance facilities. DOD's excess capacity methodology and analysis has three key limitations that affect the accuracy and analytical sufficiency of the estimate. Specifically: DOD used a 1989 baseline for excess capacity that may lead to inaccurate results. This 1989 baseline does not reflect updates in DOD facility standards and requirements or requirements associated with new weapon systems. DOD's excess capacity methodology includes assumptions, such as not accounting for potential shortfalls—not having enough infrastructure to support the mission—that may not be reasonable. Specifically, when DOD's calculation identifies shortfall in capacity, DOD concludes that no excess capacity exists. As a result, DOD's analysis identifies no excess capacity in nearly half (14 of 32) mission categories. However, most installations support more than one mission and have more infrastructure present than the installation category metric measures. Thus, including potential capacity shortfalls could provide DOD and Congress with a more accurate estimate of excess capacity upon which to base decisions concerning the management of base infrastructure and excess capacity. DOD's method for estimating excess capacity is not always sufficient because the installation selection process does not result in a generalizable sample. Furthermore, DOD's method is not always implemented effectively because the military departments did not follow a consistent approach. According to DOD officials, specific department-wide guidance concerning DOD's methods for selecting installations in its analysis does not exist. Moreover, without developing guidance, the estimate of excess capacity may not be based on consistent methods across the department, resulting in inaccurate estimates. Furthermore, neither DOD nor Congress will have the necessary information to make decisions concerning the management of excess infrastructure capacity across the department. GAO is making three recommendations to DOD to update the baseline; use reasonable assumptions; and develop guidance to improve its methods for estimating excess capacity. In comments on a draft of this report, DOD concurred with one recommendation, partially concurred with two recommendations, and plans to incorporate them in any future capacity analysis.", "document_type": "gao"}
{"report": "To varying extents, Internet content providers—also called “edge providers”—and Internet service providers collect, use, and share information from their customers to enable their services, support advertising, and for other purposes. Many companies describe these and other privacy-related practices in privacy policies, to which consumers may be required to consent in order to use the service. Consumers access such services through a variety of devices, including mobile phones and tablets, computers, and other devices connected to the Internet by wired or wireless means. A nationwide survey that the U.S. Census Bureau conducted for NTIA in 2017 found that 78 percent of Americans ages 3 and older used the Internet. Another nationwide survey that the Pew Research Center conducted in 2018 found that 69 percent of American adults reported that they use some kind of social media platform such as Facebook. No comprehensive federal privacy law governs the collection, use, and sale or other disclosure of personal information by private-sector companies in the United States. Rather, the federal privacy framework for private-sector companies is comprised partly of a set of tailored laws that govern the use and protection of personal information for specific purposes, in certain situations, or by certain sectors or types of entities. These laws include the Fair Credit Reporting Act, which protects the security and confidentiality of personal information collected or used to help make decisions about individuals’ eligibility for such products as credit or for insurance or employment; the Gramm-Leach-Bliley Act, which protects nonpublic personal information that individuals provide to financial institutions or that such institutions maintain; and the Health Insurance Portability and Accountability Act which establishes a set of national standards for the protection of certain health information. In addition, as detailed in this report, FTC addresses consumer concerns about Internet privacy using its broad authority to protect consumers from unfair and deceptive trade practices. We have reported on a variety of Internet privacy concerns in recent years that include the collection and use of data such as people’s Internet browsing histories, purchases, locations, and travel routes, including: Internet of things: In 2017, we found that as new and more devices become connected, they increase not only the opportunities for security and privacy breaches, but also the scale and scope of any resulting consequences. Vehicle data privacy: We found in 2017 that most selected automakers reported limiting their data collection, use, and sharing, but their written notices did not clearly identify data sharing and use practices. Information resellers: In a 2013 report on companies that collect and resell information on individuals, we found that no overarching federal privacy law governs the collection and sale of personal information among private-sector companies, including information resellers. We found that gaps exist in the federal privacy framework, which does not fully address changes in technology and the marketplace. Among the issues we noted were the potential need for changes to privacy controls for web tracking, mobile devices, and other technologies. We recommended that Congress consider strengthening the consumer privacy framework to reflect the effects of changes in technology and the marketplace. Such legislation has not been enacted to date. Mobile device location data: In 2012, we found that, according to privacy advocates, consumers are generally unaware of how their location data are shared with and used by third parties. We recommended that FTC consider issuing guidance establishing FTC’s views regarding mobile companies’ appropriate actions to protect location data privacy. FTC implemented that recommendation in 2013. To guide their privacy practices, many organizations and governments have used the Fair Information Practice Principles. As noted above, these principles—which are not limited to Internet privacy—address the collection and use of personal information, data quality and security, and transparency, among other things, and have served as the basis for many of the privacy recommendations federal agencies have made. The Organisation for Economic Co-Operation and Development developed a version of these principles in 1980 that has been widely adopted and was updated in 2013. In 2000, FTC recommended that Congress enact a consumer Internet privacy statute that would require companies to comply with broad and flexible definitions of the principles, and an FTC commissioner said in a 2014 speech that they are a solid framework and are flexible and effective. While they are principles, not legal requirements, they provide a possible approach for balancing the need for privacy with other interests. Table 1 provides more detailed information about the principles. FTC is primarily a law enforcement agency that, among other responsibilities, currently has the lead in overseeing Internet privacy at the federal level. Specifically, it addresses consumer concerns about Internet privacy, both for Internet service providers and content providers, using its general authority under section 5 of the FTC Act. Section 5, as amended in 1938, prohibits “unfair or deceptive acts or practices in or affecting commerce.” Although the FTC Act generally empowers FTC to take enforcement action, it prohibits FTC from taking action against common carriers such as telecommunication services, airlines, and railroads under certain circumstances. FTC also does not have jurisdiction over banks, credit unions, or savings and loans institutions. Even though the FTC Act does not speak in explicit terms about protecting consumer privacy, the Act authorizes such protection to the extent it involves practices FTC defines as unfair or deceptive. According to FTC, an act or practice is “unfair” if it causes, or is likely to cause, substantial injury not reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers or competition as a result of the practice. FTC has used this “unfairness” authority to address situations where a company has allegedly failed to properly protect consumers’ data. According to FTC, a representation or omission is “deceptive” if it is material and is likely to mislead consumers acting reasonably under the circumstances. For example, the omission of terms in an advertisement would need to be material and likely to mislead consumers in order to be deceptive. FTC applies this “deceptive” authority to address deceptions or violations of written privacy policies and representations concerning data security. FTC’s Bureau of Consumer Protection investigates Internet privacy complaints from various sources, including consumers, other agencies, Congress, and industry, and also initiates investigations on its own. If the bureau has reason to believe that an entity is engaging in an unfair or deceptive practice, it may forward an enforcement recommendation to the commission. The commission then determines whether to pursue an enforcement action, which can include the following: litigating commission-filed administrative complaints before an FTC administrative law judge; filing and litigating complaints in federal district court seeking preliminary and permanent injunctions, monetary redress for consumers or other equitable relief; or referring complaints seeking civil penalties for violations of rules authorizing such penalties or for violations of administrative orders to the Department of Justice (DOJ) and assisting DOJ in litigating those cases (if DOJ does not take action, FTC can pursue the action on its own). FTC’s Internet privacy enforcement cases may be settled without the imposition of civil penalties. Instead, FTC typically enters into settlement agreements requiring companies to take actions such as: implementing reasonable privacy and security programs; being subject to long-term monitoring of compliance with the settlements by outside entities; providing monetary redress to consumers; forfeiting any money gained from the unfair or deceptive conduct; deleting illegally obtained consumer information; and providing transparency and choice mechanisms to consumers. If a company violates an FTC final consent order, the agency can then request civil monetary penalties in court for the violations. In addition, as discussed below, FTC can seek to impose civil monetary penalties directly for violations of certain privacy statutes and regulations such as the statute pertaining to the Internet privacy of children and its implementing regulations. Although FTC can levy civil penalties up to $41,484 per violation, per day, against an entity that violates a trade regulation rule under the FTC Act, it has not promulgated trade regulation rules under section 5 specific to privacy. Although FTC has not implemented its section 5 authority by issuing regulations regarding Internet privacy, it has issued regulations to implement other statutory authorities. Likewise, other federal agencies use regulations to implement the statutes they are charged with administering. The process by which federal agencies typically develop and issue regulations is spelled out in the Administrative Procedure Act (APA). Section 553 of the APA establishes procedures and requirements for what is known as “informal” rulemaking, also known as notice-and- comment rulemaking. Among other things, section 553 generally requires agencies to publish a notice of proposed rulemaking in the Federal Register. After giving interested persons an opportunity to comment on the proposal by providing “data, views, or arguments,” the statute then requires the agency to publish the final rule in the Federal Register. Regulations may be enforced in various ways, for example, by seeking civil penalties for non-compliance. FTC has authority to seek civil penalties, for example, when a company knowingly violates a regulation or, as discussed below, a final consent order. In contrast to the APA section 553 rulemaking process, the rulemaking process that FTC generally must follow to issue rules under the FTC Act is spelled out in the Magnuson-Moss Warranty Act amendments to the FTC Act (Magnuson-Moss). The Magnuson-Moss amendments— enacted in 1975 partly in response to industry opposition to FTC’s trade regulations, and amended in 1980—require additional rulemaking steps beyond APA section 553. For example, Magnuson-Moss requires FTC to publish an advance notice of proposed rulemaking in addition to the notice of proposed rulemaking required by the APA, and to offer interested parties the opportunity for an informal hearing involving oral testimony. FTC has not promulgated any regulations using the Magnuson-Moss procedures since 1980; according to FTC staff, the additional steps required under Magnuson-Moss add time and complexity to the rulemaking process. The Children’s Online Privacy Protection Act (COPPA), enacted in 1998, governs the online collection of personal information from children under the age of 13 by operators of websites or online services, including mobile applications. COPPA required FTC to issue and enforce regulations concerning children’s online privacy and directed FTC to promulgate these regulations using the APA section 553 notice-and- comment rulemaking process. COPPA contained a number of specific requirements that FTC was directed to implement by regulation, such as requiring websites to post a complete privacy policy, to notify parents directly about their information collection practices, and to obtain verifiable parental consent before collecting personal information from their children or sharing it with others. The commission’s original COPPA regulations became effective on April 21, 2000, and amended COPPA regulations took effect on July 1, 2013. According to an FTC staff member, COPPA and FTC’s implementing regulations reflect various principles that are similar to the Fair Information Practice Principles. FCC regulates the telecommunications industry pursuant to the Communications Act of 1934, as amended (Communications Act). FCC follows the APA section 553 notice-and-comment rulemaking process to promulgate regulations implementing the Communications Act. FCC also has an enforcement bureau that pursues violations of its regulations and the Communications Act. The Communications Act establishes separate definitions for “information services” and “telecommunications services” and treats these two types of services differently. Specifically, information services are subject to less regulation by FCC than telecommunications services under the Communications Act. However, FTC is prohibited from regulating telecommunications carriers (a provider of telecommunications services) under the common carrier exemption. Prior to 2015, Internet services were considered information services under the Communications Act, and thus FTC was not prohibited from considering the privacy practices of Internet service providers under its FTC Act authority to protect consumers from unfair and deceptive practices. This changed in 2015 when FCC classified broadband as a telecommunications service, which meant that broadband Internet service providers were considered telecommunications carriers and FCC asserted primary oversight over them. As a result of the reclassification, FTC no longer had jurisdiction over Internet service providers. Once FCC had asserted primary oversight over Internet service providers, FCC promulgated privacy regulations specific to them. However, before the privacy regulations went into effect, Congress repealed them under the Congressional Review Act. In December 2017, FCC reclassified broadband as an information service—reverting Internet service providers’ classification to what it had been prior to 2015. When that reclassification became effective in June 2018, jurisdiction of Internet privacy for Internet service providers was effectively transferred from FCC back to FTC. As a result, FCC currently has limited Internet privacy oversight responsibilities, as shown in figure 1. Perspectives on the benefits of and concerns about the collection and use of consumers’ data from the Internet varied somewhat across stakeholder groups. Various stakeholders we interviewed—including those from academia, industry, and government—said that there should be a balance between the freedom of companies to collect and use consumers’ data needed to provide services and the necessity to protect consumers’ privacy. In general, industry stakeholders highlighted the benefits of data collection and use, such as facilitating innovation, while consumer advocacy groups and other stakeholders emphasized concerns about consumers’ loss of control over their data and their lack of understanding of how companies collect and use their information. Additionally, surveys and other literature that we reviewed on Internet privacy highlighted concerns among consumers. The key benefits of information collection were identified as: Enables certain services. According to two industry stakeholders, the collection and use of consumer data from the Internet enable content providers to provide services. These stakeholders said that sometimes a content provider must collect and use information from consumers to provide the service. For example, a mapping service must collect and use consumers’ current location to provide them with up-to-date directions. Provides low-cost or free services. A representative from a content provider said that revenue from targeted advertising helps allow some content providers’ services to be offered to consumers at little or no charge. Instead of charging a subscription fee, a social media company may be able to provide free service because it uses information that it collects from consumers to target advertisements to users on a customized, user-by-user basis. These ads are targeted to users based on interests they express through their use of social media, among other things. According to a representative from an Internet search engine, using consumer data for targeted advertising may be relatively less important for some kinds of content providers, such as search engines. This company representative said that search engines may use keywords entered for a particular Internet search to provide advertisements relevant to the search. For example, a search for “car insurance” can offer the consumer advertisements from car insurance companies without any additional data from the consumer other than the search’s keywords. Supports innovation and customization. According to some stakeholders, the collection and use of data also benefit consumers through other means such as providing innovative products or customized services. According to a representative from a content provider, the collection of personal information, with consent, for commercial purposes can at times have benefits. The representative said, for example, that collection of images containing identifiable information, like faces, can help in the development of new technologies such as object and facial recognition. According to two content providers, consumers may also benefit from customized services and content. For example, according to a representative from a travel-related company, that company can collect information about a consumer to suggest travel itineraries and suggestions for activities. Additionally, representatives from a consumer advocacy group and a content provider stated that direct-marketing approaches are enabled through data collection. Such marketing approaches allow consumers to receive advertisements that are uniquely tailored to their interests. For example, a consumer that a content provider has identified as being a hiker may receive advertisements for hiking boots. Despite these benefits, public opinion surveys have shown concerns about the collection and use of consumers’ information on the Internet. For instance, recent analyses based on surveys by the Pew Research Center and NTIA showed that the public lacks trust in Internet privacy, a concern that may limit economic activities. NTIA’s survey results show that privacy concerns may lead to lower levels of economic productivity as people decline to make financial transactions on the Internet. According to the NTIA analysis, in 2017, 24 percent of American households surveyed avoided making financial transactions on the Internet due to privacy or security concerns. Consumers NTIA surveyed indicated that their specific concerns were identity theft, credit card or banking fraud, data collection by online services, loss of control over personal information, data collection by government, and threats to personal safety. Stakeholders we interviewed elaborated on some of these concerns: Public disclosure and data breaches. Some stakeholders, including representatives from content providers, said that personal information from the Internet can be publicly disclosed, including through data breaches. An academic and a former FCC commissioner told us that such disclosures are becoming more frequent. Various consumer advocacy groups and state governments continue to report data breaches. This personal information can include financial information such as credit card information, the disclosure of which can result in financial harm to the consumer. It can also include other kinds of sensitive information such as political views or medical conditions, the disclosure of which can cause non-financial harms such as embarrassment or harassment. According to public reports, the 2017 breach of consumer information from Equifax, a credit-reporting agency, resulted in the disclosure of 143 million American consumers’ sensitive information. According to NTIA’s 2017 survey, 45 percent of households surveyed reported major concerns about credit card fraud. Regarding non-financial information, in a recent case FTC alleged that an Internet-based company publicly disclosed patients’ sensitive medical information without their knowledge after patients submitted what they thought were confidential reviews of physicians. According to FTC, these reviews were then publicly posted on the company’s website. Financial and other harms. Stakeholders identified both potential financial and non-financial harms associated with misuse of personal information from the Internet. A former FTC acting chair has said that privacy and data-security incidents can cause injuries that do not only involve financial loss and that it may be difficult to measure this type of non-financial injury. In a February 2018 speech, this former acting FTC chair cited a case that the agency filed involving the misuse of personal information from the Internet that resulted in people losing jobs or job opportunities or being threatened, stalked, and harassed. The acting chair said that in another case, there was evidence that several people committed suicide after their names and other data were disclosed. The commission can, by bringing suit in district court, obtain an order compelling content providers to provide monetary relief to consumers if a data disclosure results in financial harm to a consumer. However, an academic noted that many data disclosures of sensitive information cannot be financially redressed; information can indefinitely persist on the Internet once it is disclosed. Consumers’ lack of understanding. A range of stakeholders we interviewed, including those from industry, said that consumers lack an understanding of how their data are collected and used. Some stakeholders said content providers are insufficiently transparent about how they collect and use data. For instance, content providers’ privacy policies, according to various stakeholders, may contain technical language that is difficult for typical consumers to understand, may be located in a difficult-to-access or inconspicuous part of the content provider’s website, or may be lengthy to the point where it becomes prohibitively difficult for a consumer to set aside enough time to read. Furthermore, according to an academic, companies may have an incentive to intentionally obscure their privacy practices, since clarity could put the companies at a competitive disadvantage. The academic also stated that different privacy policies may apply to different parts of a consumer’s experience on a single website. For example, the academic described how a website may have contracts with third-party vendors for specific services included on the website that consumers use, such as an online shopping cart’s features. The privacy policy for the website and the third-party shopping cart can be separate and unrelated to each other, and consumers may not be aware of this since these policies may never appear to consumers or be hard to obtain. A representative from a consumer advocacy group also mentioned that consumers may be unaware that companies track consumers’ Internet activity in order to target those consumers with customized prices. An academic said that these practices may disproportionately affect people with low computer literacy, as they may not be aware of tracking or know of ways to counteract it. In 2015, we found that the lack of computer and Internet skills is one of the primary barriers people face in using the Internet and that this is a particular problem for certain demographic segments who may lack exposure to or knowledge about computers, such as those of age 65 and older and those with low levels of income and education. Consumer lack of control. Some academics and consumer advocacy groups also identified a lack of control as a concern with respect to Internet privacy—consumers have little or no control over how their information is collected, used, and shared. In a 2015 survey conducted by Pew Research Center, 65 percent of respondents said it is very important to be in control of what information is collected about them. However, according to an academic and a consumer advocacy group we interviewed, privacy policies offer consumers little or no bargaining power, and consumers may be forced to either accept the terms of the policy as written or not use the application or service at all. Furthermore, we recently reported that sometimes consumers’ information is used for purposes that are altogether separate from what those consumers originally anticipated. For example, FTC alleged in an enforcement action that in 2009 and 2010, a company told consumers that it would track the websites they visited in order to provide them with personalized offers, when in fact the company was also transmitting credit card information it collected through such tracking to third parties. The company settled with FTC. We also recently reported on how devices that comprise the Internet of Things pose privacy concerns for consumers, including that information collected by such Internet-connected devices can be used in ways to which the consumer was not given the option to opt out. As discussed above, stakeholders described various types of harm that could result from Internet privacy violations. Regardless of whether violations involve financial or other types of harm, a challenging factor in providing Internet privacy oversight is identifying the responsible parties. A former federal government official with experience in privacy issues said that it frequently is difficult to identify which Internet entity in the chain is ultimately responsible for a privacy-related harm. For example, if a consumer is harmed by the theft of his or her Social Security number, it can be difficult to determine which entity is responsible if multiple entities have suffered data breaches of information systems that contained the Social Security number. In addition to the challenges in identifying responsible parties, the federal government has faced challenges in providing Internet privacy oversight. Our prior work has found that such efforts lack clearly defined roles, goals and performance measures, and that gaps exist in the current privacy framework. We found that during the last decade, FTC filed 101 Internet privacy enforcement actions for practices that the agency alleged were unfair, deceptive, a violation of COPPA, a violation of a settlement agreement, or a combination of those reasons. Most of these actions pertained to first-time violations of the FTC Act for which FTC does not have the authority to levy civil penalties. In those cases where a party violated an FTC regulation or settlement agreement, however, FTC does have the authority to impose civil penalties. The 101 cases—filed between July 1, 2008 and June 30, 2018—involved a variety of products, services, and industries that collect and use personal information from the Internet. During the years for which we examined full-year data, the number of enforcement actions taken per year ranged from 5 in 2010 and 2016 to 23 in 2015. For example, in recent years, FTC took enforcement action against the following entities for alleged conduct that the agency contended violated section 5 or COPPA: a toy manufacturer for collecting personal information from children online without providing direct notice and obtaining their parents’ consent; a computer manufacturer for pre-loading laptops with software that compromised security protections in order to deliver ads to consumers; a mobile ride-hailing business for misrepresenting the extent to which it monitored its employees’ access to personal information about users; a television manufacturer for installing software on its televisions to collect viewing data on 11 million consumers without their knowledge or consent and providing the viewing data to third parties; and a mobile advertising network for deceptively tracking the locations of hundreds of millions of consumers, including children, without their knowledge or consent, to serve them geographically targeted advertising. Of the 101 actions filed during the 10-year period, 51 involved Internet content providers, 21 involved software developers, 12 involved the sale of information or its use in advertising, 5 involved manufacturers, 1 involved an Internet service provider, and 11 involved a variety of different products, such as those provided by rent-to-own companies or certification services. In nearly all 101 cases, companies settled with FTC, which required the companies to make changes in their policies or practices as part of the settlement. FTC levied civil penalties against two of those companies for violating their settlement agreements. Also during this 10-year period, FTC levied civil penalties against 15 companies (a total of $12.7 million) for alleged violations of the COPPA regulations. The COPPA civil penalties ranged from $50,000 to $4 million and the average amount was $847,333. FTC can also seek to compel companies to provide monetary relief to those they have harmed. During this time period, FTC levied civil penalties against companies for violations of consent decrees or ordered monetary relief to consumers from companies for a total of $136.1 million. These payment orders ranged from $200,000 to $104.5 million and the average amount was $17 million. In the majority of these 101 enforcement actions that FTC settled, FTC alleged that companies engaged in practices that were deceptive. Examples of the charges FTC brought include: “Deceptive practices” cases (61 cases): In 2016, FTC alleged that Turn, Inc., an Internet advertising company, continued to track the Internet activities of consumers for targeted advertising purposes after the company had made representations that it would stop doing so. According to FTC, the company led consumers to believe they could turn off such tracking when in fact they were unable to do so. “Unfair practices” cases (4 cases): In 2014, FTC alleged that LeapLab, a data broker, knowingly provided scammers with hundreds of thousands of consumers’ sensitive personal information, including Social Security and bank account numbers. “Unfair and deceptive” practices cases (19 cases): In 2015, FTC alleged that Equiliv Investments, a software developer, lured consumers into downloading its “rewards” application, saying it would be free of malware, when the application’s main purpose was actually to load the consumers’ mobile phones with malicious software to mine virtual currencies for the developer. COPPA and COPPA regulations cases (6 cases): In 2011, FTC alleged that Broken Thumbs Apps, a software developer, had collected information from Internet applications that the developer specifically targeted toward children under the age of 13. FTC’s complaint stated that the company had, among other things, failed to provide notice of what information it collected and how it was used and also had failed to inform parents of these practices and receive their consent as COPPA required. Violation of settlement agreement cases (2 cases): In 2012, Google agreed to pay a $22.5 million civil penalty to settle FTC charges that it misrepresented to users of Apple’s Safari Internet browser that Google would not place tracking cookies or provide targeted ads to those users, violating an earlier settlement agreement between the company and FTC. In 14 of the 101 cases, FTC required companies to be audited by outside entities to monitor compliance with the terms of the settlement. The audit period ranged from 5 years to 20 years, with an average of 17.5 years. As noted above, 2 of the 101 cases involved a violation of FTC settlement agreements. In addition, in March 2018, FTC announced that it is investigating whether Facebook’s privacy practices violate a 2012 Facebook settlement agreement with FTC. In the case that resulted in the 2012 settlement, FTC charged Facebook with deceiving consumers by telling them they could keep their information private, but then allowing it to be shared and made public. Appendix II contains more detailed information about the 101 cases. As stated earlier, in 2015, FCC classified broadband Internet service as a telecommunications service, placing primary oversight of broadband Internet service providers’ privacy practices under FCC’s jurisdiction instead of FTC’s jurisdiction. In 2016, FCC filed a privacy enforcement action against a mobile Internet service provider, alleging, in part, violation of section 222 of the Communications Act and FCC’s Open Internet Transparency Rule. Section 222 requires telecommunications carriers to protect the confidentiality of customers’ proprietary information. In that case, FCC fined Verizon Wireless $1.4 million for failing to disclose that it was inserting “unique identifier headers,” also called “perma- cookies” or “super cookies” (mobile web tracking cookies that users cannot remove), into customers’ Internet traffic over its wireless network. Although the settlement was finalized during the 2015-2017 period when FCC had asserted jurisdiction over the privacy practices of Internet providers, the Verizon Wireless practices occurred prior to the classification of Internet service providers as telecommunications carriers. The investigation therefore did not rely upon FCC’s subsequent assertion of authority over Internet service providers’ privacy practices. In October 2016, after FCC had reclassified broadband as a telecommunications service, the commission issued Internet service provider privacy regulations, asserting its authority under section 222 of the Communications Act. In April 2017, however, Congress repealed these regulations under the Congressional Review Act before they took effect. In December 2017, FCC then reversed its 2015 classification of broadband, and oversight of broadband Internet service providers’ privacy practices reverted to FTC once the decision took effect in June 2018. In explaining the December 2017 decision, FCC’s new chair said that FTC’s privacy oversight approach regarding Internet service providers—using its authority to protect consumers against unfair, deceptive, and anti- competitive practices—had worked well in the past and that this action would “put the nation’s most experienced privacy cop back on the beat.” Under FCC’s new legal approach, it no longer asserts jurisdiction to take enforcement action against Internet service providers for privacy-related matters, including mobile Internet service providers. As part of FTC’s resumption of Internet service provider oversight, FCC and FTC entered into a memorandum of understanding in December 2017 spelling out their roles and responsibilities regarding oversight of these companies. FTC staff said that they regularly communicate with FCC and have an agreement to share Internet privacy complaints. As previously discussed, no federal statute comprehensively and specifically governs Internet privacy across all sectors. FTC oversees some aspects of Internet privacy by using its FTC Act section 5 authority to protect consumers from unfair and deceptive practices. FTC also uses its specific COPPA authority to police the collection and use of personal information from children by online services. Some industry representatives said that FTC’s enforcement has been effective because the agency has expertise and experience in privacy issues and has the flexibility to take enforcement action on a case-by-case basis. In addition, a content provider said that FTC has taken enforcement actions against companies of various sizes in different sectors and has a powerful tool by being able to require companies to be audited by outside entities for up to 20 years. Industry stakeholders we interviewed generally said that “direct enforcement” of a statute is preferable to promulgating and enforcing regulations implementing that statute (which constitutes enforcement of the statute as well). These stakeholders noted several key concerns they believe exist with regulatory versus statutory enforcement of Internet privacy: Regulations can stifle innovation. Two industry stakeholders said that regulations can hinder companies’ ability to innovate. For example, representatives from an Internet service provider said that innovation can stop during the rulemaking process as the industry waits for the regulation to be finalized. Regulations may create loopholes. Representatives from an Internet industry group and a content provider said that regulations can also contain loopholes that can be legally exploited because imprecise language in a regulation may allow a company to legally engage in an action that was originally unforeseen by the regulator. Regulations can become obsolete. Several industry stakeholders said regulations also may become obsolete quickly because the Internet industry is rapidly changing. An Internet industry representative noted that there can be large shifts in the Internet industry from year to year, while it often takes an agency much longer than a year to adopt a rule. Industry stakeholders said the flexibility of FTC’s approach allows FTC to adapt continuously to changing market conditions. Rulemakings can be lengthy. FCC officials said that in some cases, rulemakings can take a long time, especially when the issues are complex and there is no statutory deadline. Our previous work on rulemaking found that length of time required for the development and issuance of final rules varied both within and among agencies. Additionally, while some stakeholders suggested that regulations can clarify acceptable practices, other stakeholders, including from industry and academia, said that enforcement actions can send a similar message. According to both a representative from a content provider and an academic, enforcement actions such as settlement agreements, for example, establish precedents that companies can follow, similar to the way that case law developed by courts provides guidance for companies. Although some industry representatives we interviewed said that FTC’s use of settlement agreements provides companies with guidance, certain trade associations took a different position in a recent case brought before the U.S. Court of Appeals for the Third Circuit, FTC v. Wyndham Worldwide Corp. 799 F.3d 236 (3d Cir. 2015). However, the court did not agree with the associations’ arguments. The case involved an enforcement action against Wyndham Worldwide Corporation where FTC alleged that data security failures led to three data breaches at the company in less than 2 years. The court considered whether FTC could bring an enforcement case involving cybersecurity using FTC’s section 5 “unfair practices” authority and, if so, whether Wyndham had “fair notice” that its specific cybersecurity practices could be deemed “unfair.” A group of companies and the U.S. Chamber of Commerce wrote a friend- of-the-court brief supporting Wyndham, criticizing FTC’s “regulation- through-settlements” approach. The companies argued this approach subjects businesses to “vague, unknowable, and constantly changing data-security standards” and businesses often are unaware of the standards to which they are held until after they receive a notice of investigation from FTC, at which point they must settle or expend considerable resources fighting the agency. Potential Limits on Federal Trade Commission (FTC) Remedies A recently decided federal appeals court case illustrates potential limits on the remedies that FTC can order in an “unfair practices” enforcement proceeding. In this 2018 case, LabMD, Inc. v. FTC, 891 F.3d 1286 (11th Cir. 2018), the U.S. Court of Appeals for the Eleventh Circuit found that FTC could not direct a medical laboratory to create and implement wholesale data-security protective measures as a remedy to the laboratory’s alleged unfair practices. FTC had filed a complaint against LabMD under section 5 of the FTC Act for allegedly committing an unfair act or practice by failing to provide reasonable and appropriate security for personal information on its computer networks. The commission found that LabMD’s inadequate security constituted an unfair act or practice and ordered LabMD to take various actions, including establishing and maintaining a reasonable and comprehensive information security program. On appeal, the Eleventh Circuit ruled that FTC’s order exceeded its authority because it did not prohibit a specific act or practice but instead, mandated a complete overhaul of the company’s data-security program. FTC had argued that the FTC Act gives it broad discretion to prevent unfair or deceptive acts or practices that injure the general public and that FTC had spelled out standards for LabMD to craft a reasonable security program. The court ruled, however, that such a general approach would make it difficult for a reviewing court to determine if LabMD had complied with the order, in the event of a future FTC challenge. company can reasonably foresee that a court could construe its conduct as falling within the meaning of the statute.” A majority of non-industry stakeholders we interviewed identified limitations in the current Internet privacy oversight approach because they view regulations in conjunction with enforcement as being more effective. These stakeholders include all of the former FTC commissioners we interviewed, three of the four former FCC commissioners we interviewed, and representatives from consumer advocacy groups we interviewed. In addition, a former FCC commissioner said that the current Internet privacy oversight approach is limited in part because he viewed regulations applying equally to all players in the Internet ecosystem in conjunction with enforcement as being more effective. A representative from a consumer advocacy group also said that regulations in conjunction with enforcement are essential for effective privacy protection. Some of these stakeholders noted key ways that they believe Internet privacy regulations can provide clarity to industry and consumers, as well as fairness and flexibility in enforcement: Regulations can provide clarity. An Internet industry group representative said that various companies have favorable views of regulations because they can provide clear expectations about what actions are permissible. Similarly, a former congressional staff member with expertise on privacy issues said that some companies have favorable views of regulations because the regulations often provide clearer expectations about what the companies can do. FCC officials said that with respect to telephone privacy provisions of the Communications Act, the telephone industry wanted rules because it sought greater clarity about what it should be doing, what constituted a violation, how to comply, and what behaviors were acceptable. Regulations may promote fairness. Some other stakeholders discussed the ability of regulations to provide fairness. For example, a former federal enforcement official described regulations as creating a fair and consistent oversight regime across the entire industry in a way that case-by-case enforcement actions do not. Another former federal enforcement official said that regulations give companies fair notice of what actions may be violations and thus help those companies avoid surprising or unexpected enforcement. Regulations can be flexible. An academic said that by targeting behaviors and not specific technologies, regulations can be written in such a way that they do not become obsolete. An academic also said that regulations based on broad performance-standards principles can avoid being overly prescriptive. FCC officials also noted that regulations can be amended to adapt to changes in technology often faster than new laws can be enacted. Furthermore, regulations determined to be obsolete can be repealed. FTC staff told us that the agency systematically reviews all of its regulations every 10 years, even though it is only legally required to review its most significant ones, and that the number of FTC regulations has decreased because the agency determined prior ones were obsolete. The Regulatory Flexibility Act requires federal agencies to analyze the effect of their regulations on small entities. Regulations can be a deterrent. FCC officials said that rules can have a deterrent effect on bad practices in the industry or have a role in mitigating the negative effects of bad practices after they occur. They said, for example, that the practice of pretexting (improperly obtaining people’s telephone records) was greatly curtailed by an FCC regulation prohibiting such practices. They also said that rules can foreclose arguments by companies claiming that because no rule was in place, they had no reasonable notice or awareness that they should behave in a particular way. Consumer advocacy groups and other stakeholders, including some former FTC and FCC commissioners, had concerns about the efficacy of an enforcement approach such as FTC’s approach to Internet privacy oversight, which focuses on enforcing a statute rather than implementing regulations. They said that FTC’s enforcement approach limits the ability of the agency to affect companies’ behavior, and that any enforcement activity occurs after the violation, undesirable behavior, harm, or illegal action has already occurred. A former federal enforcement official also said that regulations can prevent companies from engaging in bad practices in the first instance and thus have a preventive effect. A former FCC commissioner said that by the nature of a direct statutory- enforcement approach (as opposed to rulemaking), an agency would only address a harm after it has occurred. As discussed above, for example, data often cannot be removed from the Internet because copies of the data can exist among many bad actors, and it can be difficult to identify the entity responsible for unwanted disclosures. Therefore, it may be more important to avoid such Internet privacy harms from occurring in the first place. Another former FCC commissioner told us that Internet privacy oversight should be returned to FCC because it has APA section 553 notice-and-comment rulemaking authority and considerable enforcement experience. Representatives from consumer advocacy groups said that FTC’s enforcement action has been insufficient because it investigates only a small portion of actual Internet-privacy violations or takes action regarding only the most egregious or outrageous cases that it can win. FTC has also stated in its strategic plan that it focuses on investigating and litigating cases that cause or are likely to cause substantial injury to consumers and that by focusing on practices that are actually harming or likely to harm consumers, FTC can best use its limited resources. Representatives from an Internet association said that FTC’s Internet- privacy enforcement actions should focus on concrete harms. An FTC staff member from the Division of Privacy and Identity Protection said that the agency has been effective with the limited enforcement resources it has available. Furthermore, the staff member said the agency uses no formal written criteria or template to assess individual cases but considers the size and scale of a company’s effect on consumer privacy when deciding whether to take enforcement action. However, a former FTC commissioner told us that the agency needs more resources to effectively oversee Internet privacy. We asked stakeholders whether it was clear under what circumstances FTC will take Internet privacy enforcement action. In response, some stakeholders said that FTC’s enforcement priorities are reflected in its settlement agreements, which provide information that is similar to a body of case law. Individual commissioners also may issue statements explaining their decisions. Two stakeholders also said that FTC’s closing letters, which the agency sends to companies and posts on its website when it closes an investigation without taking enforcement action, may explain its decisions. Other stakeholders said that more guidance would be helpful to provide additional clarity on how the agency uses its Internet privacy enforcement authority. FTC staff and other stakeholders also said that FTC has provided useful Internet privacy guidance. For example, in 2015, FTC published guidance for businesses on complying with COPPA. Various stakeholders we interviewed said that opportunities exist for enhancing Internet privacy oversight. A key component of FTC’s mission, as specified by the FTC Act, is to protect consumers against unfair and deceptive practices. As discussed earlier, some stakeholders believe that FTC’s reliance on its unfair and deceptive practices authority to address Internet privacy issues has limitations. In addition, although the Fair Information Practice Principles provide internationally recognized principles for protecting the privacy and security of personal information, they are not legal requirements and FTC cannot rely on them to define what constitutes unfair and deceptive practices related to privacy and data security. We stated in our 2013 information resellers report that the current U.S. privacy framework is not always aligned with the Fair Information Practice Principles and that these principles provide a framework for balancing the need for privacy with other interests. We found that there are limited privacy protections under federal law for consumer data used for marketing purposes. We said that although the Fair Information Practice Principles call for restraint in the collection and use of personal information, the scope of protections provided under current law has been narrow in relation to: (1) individuals’ ability to access, control, and correct their personal data; (2) collection methods and sources and types of consumer information collected; and (3) new technologies, such as tracking of web activity and the use of mobile devices. Although we recommended in that report that Congress consider strengthening the consumer privacy framework to reflect the effects of changes in technology and the marketplace, this matter for congressional consideration was not specific to Internet privacy or to the oversight authorities of any particular agency or agencies. As noted above, various stakeholders expressed concern about the ability of consumers to control their data and understand how that data are used. These concerns suggest that companies are not always following the Fair Information Practice Principles, such as that companies’ data practices should be transparent, allow consumers the right to access and edit their data, and limit the collection of data to the extent feasible. Those stakeholders who believe that FTC’s current authority and enforcement approach is unduly limited identified three main actions that could better protect Internet privacy: (1) enactment of an overarching federal privacy statute to establish general requirements governing Internet privacy practices of all sectors; (2) APA section 553 notice-and- comment rulemaking authority; and (3) civil penalty authority for any violation of a statutory or regulatory requirement, rather than allowing penalties only for violations of settlement agreements or consent decrees that themselves seek redress for a statutory or regulatory violation. Stakeholders from a variety of perspectives—including from academia, industry, consumer advocacy groups, and former FTC and FCC commissioners—told us that a privacy statute could enhance Internet privacy oversight by, for example, clearly articulating to consumers, industry, and privacy enforcers what behaviors are prohibited, among other things. In addition, a former FCC commissioner said that a new privacy statute could enhance Internet privacy oversight by creating uniform standards for all players in the Internet ecosystem that is focused on the consumer rather than the regulatory legacy of the companies involved (regulations that apply to specific types of companies based on what they are or used to be, such as telecommunications carriers, cable companies, broadcasters, and mobile wireless providers). The former FCC commissioner said that as companies, technologies, and markets change, there is a question about whether existing law should be modernized. In 2015, FTC staff recommended that Congress enact broad-based legislation that is flexible and technology-neutral, while also providing clear rules of the road for companies about such issues as how to provide choices to consumers about data collection and use practices. Some stakeholders suggested that such a framework could either designate an existing agency as responsible for privacy oversight (such as FTC) or create a new privacy-oriented agency. A representative from a consumer advocacy group mentioned that the European Union, for example, has established the European Data Protection Supervisor, an independent data protection authority, to monitor and ensure the protection of personal data and privacy. Similarly, in Canada, the Office of the Privacy Commissioner, an independent body that reports directly to the Parliament, was established to protect and promote individuals’ privacy rights. Some stakeholders also stated that the absence of a comprehensive Internet privacy statute affects FTC’s enforcement. For example, a former federal enforcement official said that FTC is limited in how it can use its authority to take action against companies’ unfair and deceptive trade practices for problematic Internet privacy practices. Similarly, another former federal enforcement official said that FTC is limited in how and against whom it can use its unfair and deceptive practices authority noting, for example, that it cannot pursue Internet privacy enforcement over exempted industries such as common carriers. In addition, a former FCC commissioner said that it is more difficult for FTC to take effective action because its enforcement comes only after a complaint and after an often lengthy review process. The former FCC commissioner also said that without “ex ante” rules (rules that define prohibited activity before it has occurred), there inevitably will be delay, confusion, and lack of knowledge about what is and is not acceptable behavior. In addition, some stakeholders—including a representative from a consumer group, a former federal enforcement official, and a former FCC commissioner—said FTC’s section 5 “unfair or deceptive practices” authority may not enable it to fully protect consumers’ Internet privacy because it can be difficult for FTC to establish that Internet privacy practices are legally “unfair.” For example, under section 5, FTC has charged companies with committing a “deceptive” practice if their privacy policies said they would not collect or use consumers’ personal information but then did so. However, a former congressional staff member said that companies often write broad and vague policy statements, making it difficult for FTC to charge companies with committing deceptive practices. Instead, according to a representative from a consumer advocacy group, FTC would have to show the companies’ actions were “unfair,” which, according to the representative, is legally difficult to establish. We found in our 2017 report on vehicle data privacy that most automakers’ written privacy notices used vague language. Similarly, we found in our 2012 report on mobile device location data that although companies’ policies stated that they shared location data with third parties, they were sometimes vague about which types of companies these were and why they were sharing the data. Some stakeholders said that FTC relies more heavily on its authority to take enforcement action against deceptive trade practices compared with the agency’s unfair trade practices authority. This was confirmed in our analysis of FTC’s Internet privacy enforcement actions discussed previously. However, a representative from a consumer advocacy group said that FTC’s ability to take such action is limited practically to instances where a company violates its own privacy policy—companies generally can collect and use data in any way they want if they include language in their policies asserting their intent to do so. According to a former FCC commissioner, a privacy statute could clarify the situations in which FTC could take enforcement action. Various stakeholders said that there are advantages to overseeing Internet privacy with a statute that provides APA section 553 notice-and- comment rulemaking authority. As discussed above, that provision lays out the basic process by which so-called informal agency rulemaking shall be conducted, namely, publication of proposed regulations in the Federal Register; an opportunity for public comment (written and possibly oral submission of data and views); and publication of final regulations in the Federal Register with an explanation of the rules’ basis and purpose. Also as noted above, Congress imposed additional rulemaking steps on FTC in the Magnuson-Moss Act when FTC is promulgating rules under section 5 of the FTC Act. These additional steps include providing the public and certain congressional committees with advance notice of proposed rulemaking (in addition to notice of proposed rulemaking). FTC’s rulemaking under Magnuson-Moss also calls for, among other things, oral hearings, if requested, presided over by an independent hearing officer, and preparation of a staff report after the conclusion of public hearings, giving the public the opportunity to comment on the report. Finally, Congress made it easier for the public to appeal FTC’s Magnuson-Moss rules by making the agency meet a higher standard when the rules are challenged in court. FTC staff said that these additional steps add time and complexity to the rulemaking process. In congressional testimony in 2010, the then-Director of FTC’s Bureau of Consumer Protection said that “if Congress enacts privacy legislation, the commission agrees that such legislation should provide APA rulemaking authority to the commission.” According to FTC, this testimony was voted on and approved by the commissioners and, therefore, constituted the commission’s official position at the time. Moreover, according to stakeholders, in many cases regulations can be used to implement statutes. Officials from other consumer and worker protection agencies we interviewed described their enforcement authorities and approaches. For example, officials from the CFPB and the FDA, both of which use APA section 553 notice-and-comment rulemaking, said that their rulemaking authority assists in their oversight approaches and works together with enforcement actions. OSHA officials said that the standards that the agency promulgates under its authority specify what employers are required to do to reduce safety and health risks to workers. Such standards lay out the workplace conditions that must be maintained by employers and require that employers implement certain practices, operations, or processes that ensure worker protections. EEOC officials said that regulations are used to guide investigations that establish whether enforcement action is appropriate. CPSC officials said that the agency conducts consumer protection not only by establishing and enforcing mandatory regulations, but also through collaborative actions such as educating industry, developing consensus voluntary safety standards, removing defective products from the marketplace through voluntary corrective actions, and litigating when necessary. In addition, in contrast to FTC’s approach, FCC has APA section 553 notice-and-comment rulemaking authority and has issued regulations implementing section 222 of the Communications Act using that rulemaking authority to protect the privacy of telephone users. Some stakeholders suggested that FTC’s current ability to levy civil penalties could also be enhanced. Currently, FTC can levy civil penalties against companies for violating certain regulations, such as COPPA regulations, or if the company violates the terms of a settlement agreement already in place. According to most former FTC commissioners and some other stakeholders we interviewed, FTC should be able to levy fines for initial violations of section 5 of the FTC Act. An academic told us that the power of an agency to levy a fine is a tangible way to hold industries accountable. Another academic noted, however, that fines may be relatively less effective in industries where there is limited competition because the costs of those fines may be more effectively passed on to consumers in the form of higher prices for services. In addition, some stakeholders said that payments required by FTC orders are not large enough to act as a deterrent and that companies may consider them to be a cost of doing business. There is a growing debate about the federal government’s role in overseeing Internet privacy. In a July 2018 congressional hearing, FTC’s new chair testified that the FTC Act cannot address all privacy and data- security concerns in the marketplace. The chair said, for example, that FTC’s lack of civil penalty authority for violations of the FTC Act reduces its deterrent capability. He also noted the agency lacks authority over non-profits and over common carrier activity, even though those entities and activities often have serious implications for consumer privacy and data security. In November 2018, FTC’s chair testified before Congress and urged Congress to consider enacting privacy legislation that would be enforced by FTC. A majority of the commission has indicated support for APA rulemaking and civil penalty authority for privacy. FTC also held hearings in September, November, and December 2018 to advance the discussion around privacy issues, among other topics, and FTC plans to hold an additional hearing on data security and consumer privacy in February 2019. In a Federal Register notice, FTC announced that it is interested in the benefits and costs of various state, federal and international privacy laws and regulations, including the potential conflicts among those standards. FTC also indicated that it is particularly interested in the efficacy of the commission’s use of its current authority and the identification of any additional tools or authorities the commission may need to adequately deter unfair and deceptive conduct related to privacy and data security. Also in July 2018, an NTIA official announced that NTIA, in coordination with the Commerce Department’s International Trade Administration and National Institute of Standards and Technology, had recently started holding stakeholder meetings to identify common ground and formulate core, high-level principles on data privacy. Regarding the development of the Administration’s approach to consumer privacy, in September 2018, NTIA requested comments on ways to advance consumer privacy while protecting prosperity and innovation. Our 2009 report on a framework for assessing proposals for modernizing the financial regulatory system similarly found that regulators should have the authority to carry out and enforce their statutory missions. We further said that a regulatory system should be flexible and forward looking, allowing regulators to readily adapt to market innovations and changes, including identifying and acting on emerging risks in a timely way without hindering innovation. These factors are useful considerations as the federal government explores how it can better oversee privacy and data security. Having sufficient and appropriate authorities and providing flexibility to address a rapidly evolving Internet environment could better ensure that the federal government can protect consumers’ privacy. Recent developments regarding Internet privacy suggest that this is an appropriate time for Congress to consider comprehensive Internet privacy legislation. Although FTC has been addressing Internet privacy through its unfair and deceptive practices authority, among other statutes, and other agencies have been addressing this issue using industry-specific statutes, there is no comprehensive federal privacy statute with specific standards. Debate over such a statute could provide a vehicle for consideration of the Fair Information Practice Principles, which are intended to balance privacy concerns with the need for using consumers’ data. Such a law could also empower a specific agency or agencies to provide oversight through means such as APA section 553 rulemaking, civil penalties for first time violations of a statute, and other enforcement tools. Comprehensive legislation addressing Internet privacy that establishes specific standards and includes APA notice-and-comment rulemaking and first-time violation civil penalty authorities could help enhance the federal government’s ability to protect consumer privacy, provide more certainty in the marketplace as companies innovate and develop new products using consumer data, and provide better assurance to consumers that their privacy will be protected. Congress should consider developing comprehensive legislation on Internet privacy that would enhance consumer protections and provide flexibility to address a rapidly evolving Internet environment. Issues that should be considered include: which agency or agencies should oversee Internet privacy; what authorities an agency or agencies should have to oversee Internet privacy, including notice-and-comment rulemaking authority and first-time violation civil penalty authority; and how to balance consumers’ need for Internet privacy with industry’s ability to provide services and innovate. We provided a draft of this report to FTC, FCC, and the Department of Commerce for their review and comment. FTC and FCC provided technical comments, which we incorporated as appropriate. The Department of Commerce indicated that it did not have comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the FTC chair, the FCC chair, the Secretary of Commerce, and interested congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or members of your staff have any questions about this report, please contact Alicia Puente Cackley at (202) 512-8678 or cackleya@gao.gov or Mark Goldstein at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix III. For this review, we interviewed staff from agencies with roles in Internet privacy; officials from other consumer- and worker-protection agencies; stakeholders from consumer advocacy groups, industry groups, Internet service providers, and Internet content providers; academics; and former government officials. To obtain a variety of perspectives, we selected Internet service providers that represented different industry sectors and Internet content providers that provide a variety of information and social media services. Academic stakeholders were selected because of their expertise in privacy, consumer protection, and regulatory issues. We also interviewed former Federal Trade Commission (FTC) and Federal Communications Commission (FCC) commissioners who served during the Barack Obama and George W. Bush administrations and are from different political parties. Consumer Financial Protection Bureau (CFPB) Consumer Product Safety Commission (CPSC) Department of Commerce, National Telecommunications and Information Administration (NTIA) Equal Employment Opportunity Commission (EEOC) Federal Communications Commission (FCC) Federal Trade Commission (FTC) Food and Drug Administration (FDA) Occupational Safety and Health Administration (OSHA) The following table identifies 101 Federal Trade Commission (FTC) Internet privacy enforcement actions filed between July 1, 2008 and June 30, 2018 in which the agency alleged a violation of either the Federal Trade Commission Act (FTC Act) or the Children’s Online Privacy Protection Act (COPPA) and implementing COPPA regulations and subsequently entered into a settlement agreement with the target entity. Although some of these cases may involve both Internet data privacy and security issues, this table does not include cases that involved data security issues only. In addition to the contact names above, Andrew Huddleston, Assistant Director; Kay Kuhlman, Assistant Director; Bob Homan, Analyst-in- Charge; Melissa Bodeau; John de Ferrari; Camilo Flores; Erica Miles; Josh Ormond; and Sean Standley made significant contributions to this report.", "summary": "In April 2018, Facebook disclosed that a Cambridge University researcher may have improperly shared the data of up to 87 million of its users with a political consulting firm. This disclosure followed other recent incidents involving the misuse of consumers' personal information from the Internet, which is used by about three-quarters of Americans. GAO was asked to review federal oversight of Internet privacy. This report addresses, among other objectives: (1) how FTC and FCC have overseen consumers' Internet privacy and (2) selected stakeholders' views on the strengths and limitations of how Internet privacy currently is overseen and how, if it all, this approach could be enhanced. GAO evaluated FTC and FCC Internet privacy enforcement actions and authorities and interviewed representatives from industry, consumer advocacy groups, and academia; FTC and FCC staff; former FTC and FCC commissioners; and officials from other federal oversight agencies. Industry stakeholders were selected to represent different sectors, and academics were selected because of their expertise in privacy, consumer protection, and regulatory issues. The United States does not have a comprehensive Internet privacy law governing the collection, use, and sale or other disclosure of consumers' personal information. At the federal level, the Federal Trade Commission (FTC) currently has the lead in overseeing Internet privacy, using its statutory authority under the FTC Act to protect consumers from unfair and deceptive trade practices. However, to date FTC has not issued regulations for Internet privacy other than those protecting financial privacy and the Internet privacy of children, which were required by law. For FTC Act violations, FTC may promulgate regulations but is required to use procedures that differ from traditional notice-and-comment processes and that FTC staff said add time and complexity. In the last decade, FTC has filed 101 enforcement actions regarding Internet privacy; nearly all actions resulted in settlement agreements requiring action by the companies. In most of these cases, FTC did not levy civil penalties because it lacked such authority for those particular violations. The Federal Communications Commission (FCC) has had a limited role in overseeing Internet privacy. From 2015 to 2017, FCC asserted jurisdiction over the privacy practices of Internet service providers. In 2016, FCC promulgated privacy rules for Internet service providers that Congress later repealed. FTC resumed privacy oversight of Internet service providers in June 2018. Stakeholders GAO interviewed had varied views on the current Internet privacy enforcement approach and how it could be enhanced. Most Internet industry stakeholders said they favored FTC's current approach—direct enforcement of its unfair and deceptive practices statutory authority, rather than promulgating and enforcing regulations implementing that authority. These stakeholders said that the current approach allows for flexibility and that regulations could hinder innovation. Other stakeholders, including consumer advocates and most former FTC and FCC commissioners GAO interviewed, favored having FTC issue and enforce regulations. Some stakeholders said a new data-protection agency was needed to oversee consumer privacy. Stakeholders identified three main areas in which Internet privacy oversight could be enhanced: Statute . Some stakeholders told GAO that an overarching Internet privacy statute could enhance consumer protection by clearly articulating to consumers, industry, and agencies what behaviors are prohibited. Rulemaking . Some stakeholders said that regulations can provide clarity, enforcement fairness, and flexibility. Officials from two other consumer protection agencies said their rulemaking authority assists in their oversight efforts and works together with enforcement actions. Civil penalty authority. Some stakeholders said FTC's Internet privacy enforcement could be more effective with authority to levy civil penalties for first-time violations of the FTC Act. Comprehensive Internet privacy legislation that establishes specific standards and includes traditional notice-and-comment rulemaking and broader civil penalty authority could enhance the federal government's ability to protect consumer privacy. Congress should consider developing comprehensive legislation on Internet privacy that would enhance consumer protections and provide flexibility to address a rapidly evolving Internet environment. Issues that should be considered include what authorities agencies should have in order to oversee Internet privacy, including appropriate rulemaking authority.", "document_type": "gao"}
{"report": "The rail industry was one of the first to pioneer private pensions for its employees in the late 19th century, and by the 1930s, these pensions were more developed than in most other industries. However, according to RRB, these private rail pensions had serious defects that were magnified by the effects of the Great Depression. For instance, RRB noted that the plans were generally inadequately financed and that employers could terminate the plans at will. In prior work, we noted that the Railroad Retirement Act of 1937 was enacted at the urging of rail labor and established the national railroad retirement system administered by RRB. The program was to be solely supported by employees and employers of the rail industry through payroll taxes. According to RRB, this system was created separately from Social Security for several reasons. For instance, RRB notes that Social Security—created in 1935—would not begin payments for several years or credit workers for work prior to 1937, while the deteriorating state of private rail pensions called for immediate retirement payments based on prior service. We previously reported that the 1951 amendments to the Railroad Retirement Act of 1937 substantially increased railroad retirement benefits to bring them in line with benefit increases granted to individuals under Social Security, and that a financial interchange was created between the agencies in 1951 to help pay for these increases. RRB annually computes the amounts that SSA would have collected in taxes from rail workers and their employers, and what SSA would have paid in benefits if rail workers had been covered under Social Security, with the net difference transferred between the agencies. The amounts computed under the financial interchange do not necessarily represent the actual RRB benefits paid to rail workers and their beneficiaries. RRB determined that it was due a net transfer from SSA each year since 1958. Financial interchange transfers make up a significant portion of the financing for RRB’s retirement, disability, and survivors benefits. In fiscal year 2016, RRB paid about $12.4 billion in these benefits and collected $5.9 billion in payroll taxes from rail employees and employers. RRB reported that the remainder of its funding for these benefits came from the financial interchange ($4.1 billion), transfers from the National Railroad Retirement Investment Trust ($1.4 billion), income taxes collected on RRB benefits ($758 million), and other funding sources, such as appropriations. The interchange also serves as a vehicle to fund Medicare Part A (Hospital Insurance) benefits for rail workers. The benefits provided by RRB consist of a core-level of benefits that are similar to those available to most workers covered under Social Security, including Medicare. Rail workers also receive a second level of retirement benefits that approximate payments from private pension plans (see table 1). For non-rail workers, Social Security and Medicare benefits are paid from their respective trust funds: Retirement benefits are paid from SSA’s OASI Trust Fund; Disability benefits are paid from SSA’s DI Trust Fund; and Medicare Part A benefits are paid from the Hospital Insurance Trust Fund. The financial interchange is intended to place Social Security’s OASI and DI Trust Funds and HHS’s Hospital Insurance Trust Fund on the same financial footing as if rail workers and beneficiaries were covered under Social Security instead of by RRB. Regarding Social Security, RRB is credited for what it paid beneficiaries, administrative costs involved with paying benefits, and interest for the time between the determination of the interchange amount and its actual transfer. SSA is credited for the amount of payroll and income taxes it would have collected from rail workers and for income taxes that would have been paid by RRB beneficiaries on Social Security equivalent benefits. The net of the five amounts is the amount that is transferred (see fig. 1). A net transfer from SSA to RRB means that rail workers would have been a net draw on SSA’s trust funds if covered under Social Security. RRB calculates the financial interchange amount each year, which is done on a retrospective basis, i.e., the amount is determined for the previous fiscal year. By law, the agencies must complete their determination by June of each year. In keeping with the purpose of keeping the OASI and DI trust funds in the same place as if rail workers were covered under Social Security, RRB determines the retirement and disability benefits that rail workers and dependents would have received if they were covered under Social Security. Specifically, RRB uses railroad earnings data provided by employers to replicate SSA’s benefits calculations. Although the basic retirement and disability benefits that SSA and RRB pay to their beneficiaries are based on the same formulas, there are several eligibility differences between the two programs. For instance, a rail worker may receive unreduced retirement benefits at age 60 after 30 years of work, whereas the earliest most workers covered under Social Security can begin receiving retirement benefits is at age 62. According to RRB officials, even though a 60-year-old railroad worker may be receiving RRB retirement benefits, RRB would not receive credit through the interchange for that individual. Once that individual turns 62, RRB determines the amount of reduced Social Security retirement benefits for which he or she would have been eligible, given the person’s earnings history and Social Security’s benefits rules. According to RRB officials, the agency receives a credit through the interchange for this amount even though the individual is receiving full RRB retirement benefits. To account for these potential differences, RRB officials said that the agency must make calculations for individual RRB cases. Additionally, RRB officials said that in light of the number of RRB cases—nearly 400,000—it is not practical to make these calculations annually for each case. Instead, RRB uses SSA rules to calculate benefits for a subset of RRB cases in which the worker’s Social Security number ends in 30, which approximates a 1-percent sample. The sample size was about 4,000 for fiscal year 2016. Once RRB completes its benefit calculation for each of those cases, it aggregates the result and produces an estimated amount for its entire population of cases (see fig. 2). RRB reported in its annual financial interchange determination report that it was credited $7.2 billion dollars in fiscal year 2016 for the estimated amount beneficiaries would have been paid under Social Security. These expenses represent those that SSA would have incurred to administer benefits had rail workers been covered under Social Security (as opposed to the actual amount RRB spent to administer its programs). These expenses, which SSA would have funded out of its trust funds, include the cost to enroll individuals in its programs and maintain its benefit rolls. RRB calculates the amount of administrative expenses based on unit-cost data provided by SSA. RRB reported that it was credited about $22 million in administrative costs for fiscal year 2016. SSA credits RRB for interest that accrues on the annual financial interchange transfer from the period in time for which it is calculated (the end of the fiscal year on September 30) until the amount is transferred to RRB in June of each year. The interest rates are equal to those SSA earns on its trust funds. RRB reported that it was credited about $163 million in interest for fiscal year 2016. This amount represents the payroll taxes rail employees and employers would have paid into Social Security’s trust funds had workers been covered under Social Security. SSA and RRB generally levy payroll taxes on earnings at the same rate, and RRB officials told us they use payroll data from employers to determine this amount. RRB reported that it credited SSA $2.4 billion for fiscal year 2016. Some RRB beneficiaries pay income taxes on the benefits they receive, and that tax revenue is credited to SSA’s trust funds through the financial interchange. To put the OASI and DI trust funds in the same place as if rail workers were covered under Social Security, RRB credits SSA for the amount of income tax railroad beneficiaries paid on Social Security equivalent benefits. RRB computes this amount using tax data from the Department of the Treasury, and credited about $296 million to SSA for fiscal year 2016. RRB also may adjust calculations on transfers from prior years; for instance, if new income was reported for individuals or if benefit overpayments are discovered for individuals in the sample. The process for determining the financial interchange transfer with HHS— which helps finance Medicare benefits for rail workers—has fewer components than for retirement and disability benefits. Generally, RRB determines the Medicare payroll taxes and income taxes paid by rail workers and transfers this amount, less administrative expenses, to HHS (see fig. 3). RRB estimates how much it collects in Medicare payroll taxes by using payroll data provided by employers for workers whose Social Security numbers end in 30. RRB credited HHS for about $637 million for fiscal year 2016. Overall, the procedures we observed, and which RRB explained and demonstrated, for calculating the financial interchange are consistent with the methodology agreed to by RRB, SSA, and HHS. An annual determination report produced by the three agencies documents this methodology. Additionally, several audits conducted for the RRB Office of Inspector General determined that the methodology is appropriate for achieving the purpose of the financial interchange. Specifically, the audits concluded that the sample used in calculating benefits was representative of RRB’s population of beneficiaries, the formulas used to project the results of the sample on the entire population of beneficiaries were consistent with RRB’s design, and that assumptions made by RRB when carrying out calculations were reasonable. SSA has made a net transfer to RRB through the financial interchange each year since 1958. The cumulative net transfer from the Social Security trust funds to RRB through 2015 was approximately $266 billion in 2016 dollars. Of this amount, transfers related to retirement and survivor benefits comprised about $256 billion and disability benefits accounted for about $10 billion. This trend in transfers is primarily caused by RRB benefit payments exceeding payroll taxes collected as calculated by the interchange, which has been the case each year of the financial interchange, resulting in a net amount owed to RRB from SSA each year (see fig. 4). Based on the data RRB reported, the continuing flow of funds to RRB from SSA has largely been driven by a steadily shrinking number of active workers in the rail industry paying payroll taxes in support of a larger population of beneficiaries. According to RRB data, the number of workers in the rail industry peaked at the end of World War II, when there were almost 1.7 million workers. Since then, this number declined steadily to about 231,000 in 2016. Additionally, the number of beneficiaries has exceeded the number of active workers since 1961. According to RRB data, there was about 1 beneficiary for every 10 workers in 1938; the ratio had increased to 3 beneficiaries for every 10 rail workers in 1951, when the financial interchange was created. By 2016, there were 28 beneficiaries for every 10 workers. Furthermore, RRB officials noted that another factor causing increased fund transfers from SSA to RRB was a series of successive amendments to the Social Security Act which raised benefits immediately while deferring tax increases to pay for the increased benefits. As a result of these two factors, the payroll taxes paid by rail workers have not been sufficient to pay for all of the benefits paid by RRB. Hence, the financial interchange has consistently transferred money from SSA to RRB (see fig 5). According to SSA actuarial estimates, the flow of funds to RRB from SSA is projected to continue. Social Security’s 2017 trustees report projects that the amount of transfers to RRB will continue to grow though at least 2026. Moreover, RRB’s most recent actuarial valuation report estimates that under three employment assumptions—optimistic, moderate, and pessimistic—the number of beneficiaries will continue to exceed the number of rail workers through at least 2088. RRB has collected payroll taxes for HHS since 1966. From 1966 through 2016, RRB reported that it transferred a total of $30 billion in 2016 dollars through the financial interchange to the Hospital Insurance Trust Fund (see fig. 6). RRB takes a number of steps to ensure that the financial interchange amount is accurately calculated each year. For example: Sample verification: To make sure that the financial interchange sample is up to date, RRB staff told us that they query their beneficiary database at the beginning and end of the annual financial interchange calculation to ensure that all beneficiaries who should be part of its sample—those with a Social Security number ending in 30—are included. Those included in the sample can change from year to year, for instance, when new beneficiaries join the retirement rolls or when beneficiaries die. Supervisory review: RRB officials told us that the work of a new employee who calculates the financial interchange is reviewed by another employee until the new employee is determined to be proficient. Error checks: Electronic error checks built into the system RRB uses to calculate the financial interchange help prevent mistakes by flagging erroneous values. These checks alert employees in real time that an incorrect value may have been entered (for example, a benefit amount that exceeds what beneficiaries can receive). Officials also told us that they run similar checks in batches throughout the year to sweep for any potential errors that were not addressed by employees. They noted that they will work with staff to address all potential errors before the financial interchange calculation is finalized. However, RRB’s error checks do not cover all potential erroneous values. High-level review: RRB officials told us that the Chief of Benefit and Employment Analysis and his staff review the results of the interchange calculations and determine if the end result is reasonable compared to projections made earlier in the year, based on actual payroll and beneficiary data. Despite these steps, limitations in RRB’s error checks and its reliance on manual data entry are potential sources of mistakes in financial interchange calculations. The process RRB staff follow in computing benefit amounts for the financial interchange involves manual data entry of earnings data and SSA-equivalent benefits. RRB’s error checks will help identify values that are impossible—such as a benefit amount that exceeds the maximum a beneficiary can receive—but not values that are incorrect but still within the range of possibility. RRB staff demonstrated this scenario for us and acknowledged this as a limitation in their internal controls. Any data entry errors have the potential to result in larger errors in the financial interchange determination. The benefits portion of the financial interchange determination is based on a sample of all cases. Should any errors occur in the sample, they will be magnified when RRB inflates the estimate to arrive at an amount for the entire population of beneficiaries. Additionally, RRB’s process could result in incorrect transfers for years. The sample is chosen in the same way each year—individuals with Social Security numbers ending in 30—so the same cases will remain part of the sample until the individuals leave the rolls. RRB officials told us that they generally only have to do a full set of calculations for new cases or cases in which additional income is detected that affects benefit amounts. RRB officials estimated that about 20 percent of cases in the financial interchange sample each year require a full calculation. For the remainder of cases in the interchange sample, officials said that no annual recomputation is needed. Instead, the previous year’s results are adjusted according to any cost of living increase. If a data entry error is made in one of these cases, RRB may not discover it until the individual leaves the rolls or dies, at which point RRB staff told us they recalculate the individual’s benefit amount. Data sharing between RRB and SSA could reduce the potential for data entry errors, but the two agencies have not recently pursued this option. RRB officials told us that prior to 2008 they used computer code to automatically save data from SSA databases into spreadsheets, where the data could be used for calculating the financial interchange. However, SSA instructed RRB to stop using this method in 2008 because of security concerns about saving this information outside of SSA systems. RRB officials added that this constraint prevents them from developing a more efficient method of data collection that would improve the accuracy and timeliness of benefit calculations for the financial interchange. However, RRB officials said that they have not formally approached SSA in the last several years to discuss potential alternatives for gaining greater access to data. SSA officials said that RRB should follow SSA’s procedures for requesting a data exchange if RRB wishes to revisit this topic. Federal internal control standards state that agencies should use quality information to achieve their objectives. By taking additional steps to obtain data from SSA electronically, RRB can better position itself to ensure that data entered into its systems are correct and that its calculations are free of errors. RRB has limited documentation and does not have formal policies to guide several key aspects of the financial interchange calculation. While we did not identify any actual errors in its calculations, these shortcomings in its controls increase the risk of calculations being carried out inconsistently or incorrectly. The broad steps that RRB takes to determine the amounts of the financial interchange are documented in an annual determination report produced by RRB. They include, for example, the factors used to calculate administrative costs, discussion of adjustments made to calculations from prior years, and descriptions of the formulas used to project the results of RRB’s benefit sample to the population of railroad beneficiaries. However, the agency does not have clear documentation of the detailed steps used by staff to calculate the interchange amounts. A 2010 audit of the financial interchange process conducted for the RRB Office of Inspector General found that documentation of the financial interchange process was insufficient for a knowledgeable third party to replicate without verbal explanation from RRB staff. In response, RRB officials told us that they produced some documentation such as charts showing the workflows for different portions of the process, such as for calculating benefits, payroll taxes, and financial projection—and instructions for staff in RRB’s Bureau of the Actuary for high-level review of the formulas and entries for the final calculation results. However, the documentation did not provide enough detail about the steps staff must take when conducting financial interchange calculations so the process can be followed without additional explanation. For instance, the documentation did not discuss the process by which staff obtain earnings data and enter it into SSA’s benefit calculator, manually enter the results into RRB’s system, or the different alerts that notify staff of potential mistakes and how staff deal with them. Federal internal control standards state that effective documentation provides a means to retain organizational knowledge and mitigate the risk of having knowledge limited to a few personnel, as well as a means to communicate that knowledge as needed to external parities, such as auditors. Written documentation with specific steps for carrying out the financial interchange calculation and using its data system would help RRB ensure that its staff and others could carry out and replicate its process consistently. RRB does not have current or complete documentation related to the computer system it uses to compute the financial interchange. Specifically, RRB officials said that they do not have current documentation such as a manual or data dictionary that would provide information on the data elements in the system, their definitions, descriptions, and range of potential values. They said a data dictionary is not necessary because data are contained in a format in which rows and columns are labeled according to fields and years. However, such labeling does not include documentation, for example, about whether values entered in those fields are allowable. Federal internal control standards state that effective documentation is needed to retain knowledge and prevent knowledge from being limited to a few staff. Even if the data system is relatively uncomplicated, without such documentation, it is difficult for RRB staff and others to fully understand all elements in the system, and it could complicate efforts to make any changes in the future or bring new staff up to speed on the system. RRB does not have written procedures for how to address instances in which staff do not correct potential errors flagged by its computer system. As noted earlier, RRB’s system for calculating the financial interchange will alert staff to potential data entry errors. RRB officials said this system has the ability to allow staff to override the alert in some cases, generally in complex cases, such as when RRB benefits are offset by other public pensions. In these cases, the system does not distinguish between an actual error and instances in which additional work and review are needed because of complex benefit calculations. Staff can override the alert in these cases where there is no actual error, but officials noted that a report of potential errors that is generated by the system would still include these cases, which may be referred back to staff for clarification or correction. If implemented correctly, these procedures could help staff take appropriate action on these complex cases. However, current procedures are not formally documented and officials said they have not considered producing written procedures because they believe the process for addressing alerts is clear. Federal internal control standards indicate that effective documentation assists in management’s design of internal controls and can mitigate the risk that knowledge is limited to a few staff. RRB’s lack of written procedures can make it difficult for staff or reviewers to know if procedures are carried out consistently—such as whether staff appropriately override an error alert—and can create challenges if there is staff turnover. It is important to ensure that all potential errors are addressed correctly given that mistakes in the financial interchange sample can be multiplied when estimating benefit payments for the universe of RRB beneficiaries. According to RRB officials, new employees will have their calculations reviewed until the employees are deemed to be proficient, and calculations by any staff member are subject to review and periodically reviewed for accuracy. Federal internal control standards call for documenting agency procedures. However, RRB does not have a minimum or maximum time established for which it will review the work of new staff, and does not have an overall policy for reviewing staff members’ work after they have been deemed proficient. Officials told us they had not considered setting a policy regarding supervisory review. They added that individualized, on-the-job training is more appropriate for new staff than a formalized process. In the case of current employees, any potential errors would be identified when the case is terminated, at which time all cases are reviewed and recomputed. Additionally, officials said that a formal policy would not increase the number of cases reviewed and potentially constrain their ability to correct new errors as they occur. Nonetheless, without formal policies on supervisory review, RRB cannot reasonably ensure that the work performed by staff is adequately or consistently reviewed for quality. SSA and HHS provide some oversight of the financial interchange process, but do not review case-level calculations. Both agencies approve the results of the financial interchange calculations, but officials from SSA and HHS told us that their oversight is limited to high-level reviews of RRB’s calculations to determine whether results significantly vary from previous years. For instance, staff from SSA’s Office of the Chief Actuary told us that they examine RRB’s payments and revenues against SSA’s benefits paid and payroll taxes collected to determine if there are large or inexplicable changes from year to year, in which case they will ask RRB for additional information to understand the changes. Additionally, RRB officials told us that formulas used in their spreadsheets to calculate the results of the interchange have been reviewed by SSA actuaries. While these actions could help identify larger errors, the agencies will not be able to detect whether errors are made on complex, case-level calculations or if SSA rules are being correctly followed. In response to prior errors in financial interchange calculations, RRB officials told us that SSA reviewed case-level calculations from the 1990s until 2002. SSA officials told us that they have not reviewed cases since then because of resource constraints. A 2009 SSA Office of the Inspector General report recommended that the agency consider increasing its oversight of the process, such as setting a schedule for review of individual cases given the importance of reviews in verifying transfers. However, SSA has not taken action on this recommendation. HHS officials told us that the financial interchange is one of a number of relatively small funding streams and the agency has never had cause to suspect mistakes and has never examined case-level calculations. Federal internal control standards state that agencies should establish and operate monitoring activities to evaluate the results of activities. Without monitoring how calculations are made, SSA cannot reasonably ensure that the transfers it makes or receives with RRB are accurate. In commenting on a draft of this report, HHS raised questions about whether it has the authority to review case-level calculations, but noted in follow-up communication that this issue is currently undergoing legal review at HHS. As a result, HHS officials told us that they would not be able to provide additional clarification at this time. We continue to believe that HHS would be better positioned to ensure that transfers it makes and receives are calculated correctly if it reviews case-level calculations. The financial interchange provides RRB with a significant portion of its funding, and trends in the number of beneficiaries and workers suggest this will continue to be the case in the future. RRB developed a process to calculate the financial interchange amount, and the accuracy of the calculations depends in large part on correct data being manually entered into RRB’s computer system. However, RRB’s current controls do not address some potential sources of error. Having the ability to electronically obtain data from SSA could help reduce the risk posed by data entry errors. Further, RRB has limited written documentation for carrying out aspects of the financial interchange calculation, such as how its computer system is structured, how to address instances when staff override error alerts, and how staff work is reviewed. Without such documentation, RRB puts itself at risk of staff carrying out actions inconsistently, losing operational knowledge when staff leave or retire, and complicating oversight of its operations. Lastly, SSA and HHS increase the risk of errors by not performing case- level reviews of financial interchange calculations. This is especially true for the SSA portion of the interchange, which involves complex calculations performed according to SSA rules. In its role as the administrator of the OASI and DI programs, SSA is best positioned to determine if its rules are properly being applied to financial interchange calculations. The large sums SSA transfers through the interchange— over $4 billion annually—warrant additional oversight to ensure that transfer amounts are correct. We are making a total of eight recommendations, including five to RRB (The Board), two to the Commissioner of SSA, and one to the Secretary of HHS. The Board should work with SSA to explore options for obtaining data electronically and limiting the reliance of the financial interchange process on manual data entry. (Recommendation 1) The Board should produce written documentation on the financial interchange process such that a knowledgeable third party could carry out and replicate its process consistently without further explanation. (Recommendation 2) The Board should produce written documentation of its computer system and its structure, such as a manual for the computer system, and data dictionary to provide information on the data elements in the system, their definitions, descriptions, and range of potential values. (Recommendation 3) The Board should produce written documentation of its procedures for instances when staff override error alerts generated by its computer system. (Recommendation 4) The Board should produce formal policies on how the work of staff performing the financial interchange is reviewed. (Recommendation 5) The Commissioner of SSA should work with RRB to explore options for electronically sharing data and limiting the reliance of the financial interchange process on manual data entry. (Recommendation 6) The Commissioner of SSA should take additional steps to provide oversight of financial interchange calculations at the individual-case level. This could include periodically reviewing a subset of these cases. (Recommendation 7) The Secretary of HHS should, consistent with its existing statutory authority, take additional steps to provide oversight of financial interchange calculations at the individual-case level. If the Secretary concludes that there are limitations in its authority in this area, the Secretary should seek to obtain the necessary additional authority. (Recommendation 8) We provided a draft of this report to RRB, SSA, and HHS for review and comment. In written comments, both RRB and SSA agreed with the recommendations. RRB noted that it will devote the resources needed to improve the written documentation of its procedures and computer system. RRB and SSA also provided technical comments which we incorporated as appropriate. Copies of their written comments are reproduced in appendixes I and II. In written comments, which are reproduced in appendix III, HHS disagreed with the recommendation that it take additional steps to provide oversight of financial interchange calculations at the individual-case level. HHS noted that while in theory it may be a good idea to incorporate such review into the process, it is limited by statute in its ability to oversee how RRB calculates transfers between HHS and RRB. HHS went on to describe a section of the Social Security Act that they noted “pertains more to Supplemental Medical Insurance trust fund draws for administrative costs.” Notably, with respect to HHS, our report does not involve that trust fund, but rather addresses the Hospital Insurance Trust Fund. Although HHS’s comments did not clarify why it believes that this section of law would limit its authority with respect to the Hospital Insurance Trust Fund, it nevertheless asserted that it does apply in this scenario. We reached out to HHS to seek clarification of its comments. For example, we inquired about the applicability of a separate provision of law that would appear to establish a role for HHS to work with RRB to determine financial interchange amounts. Ultimately, HHS did not provide the clarification we sought, instead indicating via email that this recommendation is currently undergoing legal review and that HHS is unable to provide a response to our questions at this time. HHS further stated that it will continue to work on this issue to provide GAO with updates in the future. In light of the uncertainty surrounding HHS’s authority in this area and the fact that HHS declined to respond to our requests for clarification of its legal authority, we have modified our recommendation to reflect the fact that HHS may need to seek additional statutory authority to implement our recommendation, should HHS determine it to be necessary. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Railroad Retirement Board, the Commissioner of the Social Security Administration, and the Secretary of the Department of Health and Human Services. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions, please contact me at (202) 512- 7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in Appendix IV. In addition to the contact named above, Mark Glickman (Assistant Director), Daniel R. Concepcion (Analyst-in-Charge), and Randy DeLeon made key contributions to this report. Additional contributors include David Ballard, Carl Barden, William Boutboul, James Cosgrove, Alexander Galuten, Jennifer Gregory, Sheila McCoy, Jean McSween, Mimi Nguyen, Joseph Silvestri, Almeta Spencer, and Kate van Gelder.", "summary": "RRB collects payroll taxes and administers retirement, disability, and Medicare benefits for rail workers and their families. A financial interchange exists between RRB, SSA, and HHS in order to put the trust funds for these benefits in the same financial position as if Social Security covered rail workers. RRB generally transfers to the Social Security and Hospital Insurance trust funds the taxes that would be collected from rail workers and employers, while SSA provides RRB the benefits that would otherwise be paid directly to rail workers. GAO was asked to review the financial interchange calculation process. This report examines (1) the steps taken to calculate financial interchange amounts, (2) factors that could account for trends in transfers over time, and (3) the extent to which RRB, SSA, and HHS provide oversight to ensure calculations are accurate. GAO reviewed agency policies, procedures, and regulations; observed RRB staff calculating four cases selected for beneficiary type; reviewed data on payment and beneficiary trends; and interviewed agency officials. Established in 1937, the Railroad Retirement Board (RRB) administers retirement and disability benefits for rail workers and their families. A financial interchange between RRB and the Social Security Administration (SSA) was created in 1951, which as GAO previously reported, helped finance RRB benefits as they increased over time to keep pace with growing Social Security benefits to individuals. Through its financial interchange calculation, RRB takes steps each year to estimate the amount of funds that would have flowed in and out of Social Security's trust funds if rail beneficiaries were covered by Social Security instead of RRB. Five key steps go into the annual calculation: RRB is credited for (1) the estimated amount of benefits it would have paid to beneficiaries under SSA rules, (2) administrative costs, and (3) interest accrued on the financial interchange amount. SSA is credited for the revenues it would have received from rail workers if they paid into Social Security; specifically, (4) payroll taxes and (5) income taxes paid on benefits received. The determined net amounts are transferred between the agencies, which since 1958 have been from SSA to RRB each year. RRB received $4.1 billion in fiscal year 2016, almost one-third of the $12.4 billion in retirement and disability benefits it paid that year. The financial interchange was expanded to Medicare in 1965 to facilitate funding of Medicare benefits to rail workers; RRB transfers Medicare payroll taxes collected, income taxes paid on benefits received, and interest, minus administrative costs to the Department of Health and Human Services (HHS). A high ratio of beneficiaries to active railroad workers primarily explains the net transfers from Social Security's trust funds to RRB each year since 1958. Rail employment has fallen steadily since World War II, and the number of beneficiaries has exceeded the number of workers since 1961. RRB had 2.7 beneficiaries for every worker in 2015. As a result, RRB has paid out more in benefits than it has collected in payroll taxes and projects this to continue for the foreseeable future. RRB takes a number of steps each year to ensure the accuracy of its calculations, such as checking that the sample of cases used to estimate benefit payments is complete, reviewing the work of new employees, and using electronic alerts to help prevent staff from entering incorrect information into its computer system. SSA and HHS also conduct high-level reviews of the calculation results to identify any significant changes from one year to the next. However, RRB's process includes manual data entry and its electronic edit checks cannot flag entries that are incorrect but plausible, which could lead to calculation errors. RRB also has limited documentation of its calculation process, and does not have formal policies on how staff should address some potential calculation errors and on how supervisors should review staff work. This is contrary to internal control standards for having quality data and documenting procedures. In terms of SSA and HHS, they do not currently review case-level calculations made by RRB, and cannot reasonably ensure that work used to determine the transfers they made and received is correct. GAO makes eight recommendations, including that RRB create formal policies and improve documentation of its processes, work with SSA to obtain data electronically, and that SSA and HHS increase their oversight. RRB and SSA agreed, while HHS did not, asserting that statute limits its authority; however, HHS continues to review this issue. HHS should seek this authority if it determines it necessary.", "document_type": "gao"}
{"report": "DOD Instruction 1015.10, Military Morale, Welfare, and Recreation (MWR) Programs, establishes policy, assigns responsibilities, and prescribes procedures for operating and managing programs for military MWR programs. Specifically, the policy states that the services are to establish MWR programs in order to maintain individual, family, and mission readiness and that these programs are an integral part of the military and its benefits package. The Office of USD(P&R) oversees DOD’s MWR programs, develops policy, and oversees MWR programs’ funding. DOD’s instruction specifies the purpose of, the funding sources for, and the activities within each of MWR’s three designated program categories—all of which are summarized below in table 1. For a complete listing of the activities by program category, see appendix I. Each service supports MWR programs with a mix of appropriated and nonappropriated funding. According to officials, the services allocate appropriated funding amounts for MWR purposes, which primarily supports Category A and B programs. Nonappropriated funding is government money from sources other than amounts appropriated by Congress and may be generated in a number of ways to support MWR programs. For example, bowling programs, marinas, and golf programs generate nonappropriated funding revenue through participation fees for recreational activities paid by servicemembers and their families. Services must use any nonappropriated funding generated from or associated with MWR programs within their MWR programs. According to DOD Instruction 1015.10, the MWR programs are divided into three distinct categories, two of which also have specific funding targets. According to DOD’s 2016 report to Congress on appropriated funding support for MWR programs, the funding targets are intended to ensure that the services adequately fund MWR programs instead of requiring the servicemembers and their families to pay out of their own pockets for costs that should be borne by appropriated funding. While DOD Instruction 1015.10 establishes minimum funding targets for MWR Category A and B programs, it directs that the basic funding target, regardless of program category, is to use appropriated funding for 100 percent of costs for which they were authorized. While DOD’s Instruction allows the services to use appropriated funding for 100 percent of authorized costs, according to service officials this is generally not possible given budget constraints. Therefore, for MWR Category A mission sustaining programs, the DOD instruction establishes the funding target—stating that DOD is to use appropriated funding amounts for a minimum of 85 percent of total expenditures. For the MWR Category B community support system programs, the DOD instruction establishes the funding target as DOD’s use of appropriated funding amounts for a minimum of 65 percent of total expenditures. For the MWR Category C recreational activities for servicemembers and their families, appropriated funding support should generally be limited because this category has the highest capability of generating nonappropriated funding revenues. The services have annual budget processes for MWR programs that vary based on whether appropriated or nonappropriated funding is being used. For MWR programs supported by appropriated funding, according to officials, the services submit and validate program requirements through DOD’s Planning, Program, Budgeting, and Execution process. DOD and service guidelines for certain MWR programs as well as annual service- issued budget guidance provide input for determining MWR programs’ requirements. Service officials from the Army, the Marine Corps, and the Air Force also stated that they determine program requirements using input from installations and service components, while service officials from the Navy stated that they use a budget model along with performance measures and budget guidance to determine program requirements. The requirements are then submitted to higher level components within the services for review, adjustment, and approval. Once the services validate the requirements, they are provided to the Office of the Secretary of Defense for inclusion in the President’s Budget. Figure 1 provides an overview of the general process the services use to budget for appropriated funding support of MWR activities. Budget processes and authorities for nonappropriated funding, or program-generated revenue, vary by service. Specifically, the services maintain nonappropriated funding budgets and budget approvals at different levels within the service organization. For example, officials stated that Marine Corps and Air Force installations maintain and manage nonappropriated funding generated at their locations while Army and Navy installations submit nonappropriated funding and budgets to a higher level of command, Installation Directorates for the Army and Regions for the Navy, as well as the service headquarters component. The services plan for and manage their nonappropriated funding budgets based on a number of factors, including revenue generated; projected revenues; and the amount, if any, of appropriated funding available. Figure 2 provides an overview of the general process the services use to approve and manage nonappropriated funding generated within the service. Each service uses processes to provide funds for the implementation of its MWR programs. Service officials stated that during program execution the services execute their programs and make adjustments to their budgets based on funding authorized from appropriated funding and nonappropriated funding sources. Commanders have authority over budget implementation and the guidelines and parameters for commanders vary by service. For example, according to Army officials, during the fiscal year Army commanders can change MWR program budgets and have some flexibility to move funding to other non-MWR command priorities. Installations report to the services actual expenditures and income generated, which are included in the services’ annual reports. Figure 3 provides an overview of the general process the services use to provide funding for MWR programs. Each service uses accounting processes for its MWR programs. According to service officials, accounting is handled differently at each service depending on the service’s organizational structure. According to service officials, the Navy and the Marine Corps centrally manage their MWR accounting processes at their service headquarters; the Army manages its accounting process at its headquarters and at the Defense Financial and Accounting Services Nonappropriated Financial Services; and the Air Force manages its accounting process at its Secretariat and at the service components. According to service officials, program managers at the service headquarters and activity level are able to review financial data, such as expenditures and revenues, for MWR programs on a recurring basis. DOD’s Instruction 1015.10 states that the services should identify appropriated and nonappropriated funding accounts in annual budgets, and the services have designated codes to categorize expenditures. Service officials stated they use the codes to report annually to USD(P&R) on MWR programs’ expenditures for both appropriated and nonappropriated funding. The services generally met the funding target for fiscal years 2012 through 2017 for MWR Category A mission-sustaining programs, but did not consistently meet the target for Category B programs that provide community support systems to servicemembers and their families during the same time period. Service officials said they are taking steps to meet the Category B target, such as restoring targeted levels of appropriated funding support in future budget planning. Data indicate that the services are getting closer to meeting the target. However, DOD has not comprehensively evaluated the funding targets, which were established more than 20 years ago, to ensure they currently are appropriate. For MWR Category A mission-sustaining programs, the services generally met the 85-percent target for appropriated funding support. Specifically, the Navy and the Air Force consistently met or exceeded the 85-percent funding target in fiscal years 2012 through 2017, and the Army met or exceeded the target every year except for fiscal year 2012 when it reported that 84 percent of its Category A programs were supported with appropriated funds. The Marine Corps exceeded the minimum funding target for Category A programs in fiscal years 2012 through 2017, but consistently fell below the target with appropriated funding support ranging from 77 percent to 84 percent from fiscal years 2013 through 2016. Table 2 provides additional detail on the extent to which each service met the 85-percent funding target for MWR Category A mission- sustaining programs in fiscal years 2012 through 2017. For MWR Category B community support programs, the services missed the 65-percent target for appropriated funding support with increasing frequency from fiscal years 2012 through 2017. Service officials stated that constrained budgets and competing priorities have made it difficult to allocate the appropriated funding needed to support their programs. However, service officials said they are taking steps to meet the Category B funding target in the future. Specifically, we found that the services collectively missed the funding target over 60 percent of the time from fiscal years 2012 through 2017. All four services missed the funding target in fiscal years 2015 and 2016 with appropriated fund support ranging from 55 to 63 percent. Most recently, in fiscal year 2017 the Army met the 65-percent funding target, but the Navy, the Marine Corps, and the Air Force fell below the 65-percent funding target with appropriated funding support ranging from 60 percent to 62 percent. Although the Air Force did not meet the 65-percent target for fiscal years 2012–2017 citing resource issues, Air Force leadership has increased appropriated funding for the MWR programs each year to help get closer to meeting the Category B funding target. Air Force officials said they plan to continue to increase funding each year so they can meet the target in the future. Table 3 provides additional detail on the extent to which each service met the 65-percent funding target for MWR Category B community support programs in fiscal years 2012 through 2017. The USD(P&R) monitors the services’ compliance in meeting the targets. When a funding target is missed, USD(P&R) officials said a memorandum is sent to the services that asks for a detailed plan on how they will achieve the required level of appropriated funding support for the missed target in the future, and these officials said that each service has provided such a plan when they fell below the 65-percent funding target. In instances when a service does not respond to the initial request for a remediation plan, USD(P&R) officials said a second memorandum is sent notifying the service that they missed the funding target and that they need to submit a plan detailing how they intend to come into compliance. For example, in fiscal year 2015 the Army did not meet the 65-percent funding target for Category B programs. In June 2016, the Assistant Secretary of Defense for Manpower and Reserve Affairs sent the Army a memorandum asking it to submit a plan on how it would meet the target. After not receiving a response, the Assistant Secretary of Defense for Manpower and Reserve Affairs sent the Army a second memorandum in September 2016 that noted the missed target and reiterated the need to submit a plan for achieving compliance with designated funding targets. Following the second memorandum, the Army issued a memorandum in December 2016 stating it would fully fund Category A and B programs to the required targets in fiscal year 2017. Following these communications, in February 2018, the Army sent USD(P&R) its fiscal year 2017 program and metric report showing that it had successfully met the Category A and B funding targets as planned. Service officials said they are taking steps to meet the Category B target, and data from fiscal years 2015 through 2017 indicate that the services are getting closer to meeting it. However, in the prior years when the services have not met appropriated funding targets for Category B programs, officials said that the services have relied on nonappropriated funding as supplemental support to help ensure that such programs continue to operate. Specifically, according to USD(P&R) officials, the services have used nonappropriated funding—that is, revenue generated largely through user fees incurred by servicemembers and their families— to cover MWR program costs for which appropriated funding was authorized. However, the use of nonappropriated funds to cover shortfalls in appropriated funding support for MWR programs has been a long- standing issue about which Congress has previously expressed concern. Specifically, in House Report 104-563, which accompanied H.R. 3230, a bill for the National Defense Authorization Act for Fiscal Year 1997, the House Committee on National Security established the annual DOD Category A and B MWR programs reporting requirement to Congress, after receiving testimony from the services’ MWR managers and noting a disparity in the degree of appropriated funding support afforded these programs particularly in the area of Category A and B programs. While the committee recognized that shortfalls in appropriated funding support for MWR programs requires the use of nonappropriated funding to meet requirements, it also stated that the use of nonappropriated funding resources—soldier, sailor, airman, and Marine money—to subsidize appropriated funding activities should be minimized. While the Army met the Category B funding target for fiscal year 2017, the Navy, the Marine Corps, and the Air Force have each submitted plans and briefed USD(P&R) on how they plan to meet the target in the future. Navy officials said that they acknowledged the Navy’s challenges with meeting the Category B funding target and, as a result, began assessing their Category B programs to eliminate those that had limited use, consolidate some where possible, and implement operational efficiencies. Marine Corps officials indicated that the Marine Corps is committed to preserving valuable MWR programs and restoring appropriate levels of appropriated funding support in future budget planning. Specifically, the Marine Corps plans to readdress appropriated funding levels in the budget planning process in 2019. However, Marine Corps officials noted they may continue to have challenges meeting the 65-percent funding target in fiscal year 2018. Air Force officials said they will continue to advocate for retaining established MWR program funding in the budget process. Air Force officials said that for fiscal years 2014 through 2017, Air Force leadership has increased appropriated funding for the MWR programs each year to help get the Air Force closer to meeting the Category B funding target. DOD has not comprehensively evaluated the funding targets for Category A and B programs, which were instituted more than 20 years ago, to ensure they are appropriate. Standards for Internal Control in the Federal Government recommends that management periodically review policies and procedures for continued relevance and effectiveness in achieving an entity’s objectives. According to USD(P&R)officials, a limited evaluation took place prior to 1995 that resulted in the Category A funding target in DOD’s instruction being changed from 100 percent to 85 percent. USD(P&R) officials said that the Category A appropriated funding target was changed because some of the activities within the category have expenses, such as for the food and beverage elements, that are able to generate revenue and thus not authorized to use appropriated funds. USD(P&R) officials stated that since that time there have been no further evaluations of the Category A or Category B targets and agree that it is time to evaluate the current relevance of the targets. Specifically they noted the considerable changes to the budgeting and funding environment that have taken place in the more than 20 years since the Category A funding target was modified. In addition, officials told us they also agree that it is time to evaluate the relevance of the Category B funding target, which has never been modified. Specifically, officials said that the services’ extended engagement in overseas conflicts and constrained budgets have resulted in an operating environment that is substantially different from the peacetime setting in which the targets were first established. Moreover, Standards for Internal Control in the Federal Government requires management to document internal controls to meet operational needs. Documentation of controls, including changes to controls, is evidence that controls are identified, capable of being communicated to those responsible for their performance, and capable of being monitored and evaluated by an entity. Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel, as well as a means to communicate that knowledge as needed to external parties, such as external auditors. As previously stated, officials stated that the Category A funding target was updated sometime prior to 1995; however, officials did not have any specific documentation related to this change. Furthermore, USD(P&R) officials said the targets were developed so long ago that there is a general lack of information on the funding targets’ origins and that they are not sure of the process or methodology that was used to develop them. The amount of time that has passed since Category A’s target was modified, recent challenges in meeting the Category B target, and the general lack of information on the funding targets’ origins raise concerns about the appropriateness and continued relevance and effectiveness of the targets in achieving MWR programs objectives. Until DOD comprehensively evaluates the appropriateness of current targets for Category A and B programs and, based on its evaluation, documents any changes it makes to its funding targets, DOD cannot be certain that the targets reflect the current operating environment and do not pose undue financial burden on the servicemembers. DOD has established a structure that specifies roles, responsibilities, and procedures for overseeing MWR programs. Specifically, DOD Instruction 1015.10 assigns roles and responsibilities for oversight of MWR programs to the USD(P&R), the Secretaries of the military departments, and the Chiefs of the military services (i.e., the Chiefs of Staff for the Army and the Air Force, the Chief of Naval Operations, and the Commandant of the Marine Corps). In addition, the services’ respective policies assign roles and responsibilities for MWR program oversight to the commander level. Table 4 summarizes the general oversight roles and responsibilities for DOD’s MWR programs. The first level of oversight responsibility for MWR programs is assigned to the USD(P&R). Specifically, responsibilities include the development of department-level policies, program goals, performance measures, funding targets, and the oversight of appropriated and nonappropriated funding and expenditures for all MWR programs. To help ensure consistent quality, USD(P&R) monitors the services’ compliance in meeting minimum MWR funding targets and performance measures. As previously discussed, if a service misses a funding target, USD(P&R) officials said they ask that service to submit a remediation plan that summarizes its intent to meet the target in the future, as USD(P&R) did in fiscal year 2015 when several services missed appropriated funding targets for Category A and B activities. The second level of oversight is assigned to the Secretaries of the military departments who are responsible for designating a central point of contact within their respective service to facilitate MWR programs policy compliance, coordinating with USD(P&R), and establishing funding priorities and strategy for MWR programs. For example, service officials we met with from the military departments said they have designated their respective Assistant Secretary Offices for Manpower and Reserve Affairs as the central point of contact for the services’ MWR programs. The third level of oversight is assigned to the Chiefs of the military services who are responsible for the development of overall goals and uniform quality measures, which could include performance measures, for MWR programs consistent with the performance measures set by DOD in its instruction. For example, the Commander, Navy Installations Command has developed uniform quality measures for the Navy MWR Fitness program based on items such as customer satisfaction, usage rates, and equipment maintenance, among other things. According to officials, these quality measures provide a common tool to measure customer satisfaction and the quality of each installation’s MWR Physical Fitness program. Additionally, these Chiefs are also responsible for helping to ensure MWR programs are resourced with appropriated and nonappropriated funding according to financial categories and for identifying their respective appropriated and nonappropriated accounts in annual budgets to meet DOD funding goals. Service Chiefs are also responsible for ensuring that military installations operate customer-driven MWR programs that are determined locally by market analysis. Lastly, the services’ respective policies assign roles and responsibilities for MWR program oversight to the commander level. Additionally, according to service officials, commanders assist with preparing an annual briefing for USD(P&R) on their MWR programs, which includes initiatives, challenges, program trends, and financial information. For example, in fiscal year 2017, each of the services reported on new initiatives to support MWR programs for servicemembers and their families, some of which are highlighted in table 5. DOD Instruction 1015.10 identifies six broad categories of performance measures that the services use to assess their respective MWR programs. However, these measures do not include measurable goals, which are needed to assess the cost-effectiveness of the 55 activities that currently make up the MWR programs. Specifically, DOD identifies six broad performance measure categories in its instruction and, according to service officials, the services collect and use various types of information within these categories to periodically assess and adjust these activities, as appropriate. Table 6 summarizes the types of information that DOD requires the services to collect across the six categories established in its instruction. In addition to the information that is to be collected across these six broad categories, DOD established separate, more specific performance measures for 2 of the 55 activities—namely, for Physical Fitness and for Library Programs and Information Services. For the Physical Fitness activity, the services are required to submit annual reports to DOD on their compliance with meeting more specific performance measures in a variety of areas such as administrative operations, staff qualifications, facility equipment, and child play areas. Similarly, DOD requires the services to report on a variety of areas related to the Library Programs and Information Services activity, such as library operation plans, customer programs and service, and technology infrastructure. Unlike the broad measures contained in DOD’s Instruction, the specific performance measures DOD established for the Physical Fitness and Library Programs and Information Services activities tell the services exactly what information to collect and report in each performance measure category instead of the services having to develop specific measures on their own. In an effort to better evaluate MWR programs, the services also have efforts underway that include the following to develop specific performance measures for their programs beyond the broad performance measures contained in DOD Instruction 1015.10. Army. Army officials told us that they partnered with the Army Public Health Center to build evidence-based MWR programs. Based on this review, the Army found that Army MWR Community Recreation and Fitness programs have not been formally evaluated as directed by DOD Instruction 1015.10 requirements to measure and assess programs. Additionally, the Army found that, while the Army Office of the Assistant Chief of Staff for Installation Management provides program oversight, it does not possess the capability to conduct program evaluations. According to the results of the Army Public Health Center report issued in June 2017, the Army initiated a three- phase approach for evaluating its MWR programs. The report showed that assessing the evaluability of the Army MWR programs is phase one. According to the Army, these evaluations will enable the Army to validate program outcomes and better position itself to compete for scarce resources. The report also showed that many of the 13 Army MWR programs selected for review do not have direct links between activities and the priority outcomes with behavioral, social, and physical health, and that they do not have sufficient outcomes data that have been consistently collected. Army officials said that phase two will include the development of formal evaluation plans for selected evaluable MWR programs. Lastly, Army officials said that phase three will be the execution of the evaluation for two selected MWR programs, which is on target to be completed by December 2018. While Army officials are learning how to evaluate programs through this partnership with the Army Public Health Center, they said that they have also learned that these endeavors are costly. Officials said that a very modest program evaluation requires approximately $300,000 to $500,000. Army officials also stated that program evaluation requires support and participation by those organizations and people that deliver the programs. Furthermore, according to Army officials, resource reductions at the operational level (garrisons) are increasingly restrictive, preventing them from collecting critical information to support this multiphase effort. Navy. Navy officials said that they use the MWR Enterprise Modeling System, which is based on performance measures that have been developed and routinely reviewed and updated by headquarters, regional, and installation program managers. The MWR Enterprise Modeling System is used as the baseline for the annual MWR performance data call that measures actual program performance against performance standards. Navy officials said that the performance measures provide the business strategy and guidance to ensure efficient, effective and market-driven delivery of programs and services. Marine Corps. Marine Corps officials said they collaborated with the RAND Corporation to provide an analytically rigorous assessment framework to evaluate program performance. The RAND Corporation provided draft measures of performance. Marine Corps officials said that the RAND Corporation also provided a user guide that outlines an evaluation methodology and ensures consistent and standard application. Marine Corps officials said that they are reviewing the draft measures to determine appropriate data collection and have drafted an implementation plan. Specifically, Marine Corps officials said that they plan to brief Marine Corps installations in June 2018 on the performance measures they plan to collect data from, which will begin in fall 2018. Air Force. Air Force officials said that they are building off the work that the RAND Corporation undertook for the Marine Corps and have also started collaborating with the RAND Corporation. The objective of the Air Force study is to develop an evidence-based evaluation framework for MWR programs that identifies immediate and mid-term outcomes that contribute to airman and family readiness and resilience. Specifically, the goal is to provide the Air Force with logic models and performance measures that are tied to each of the programs and services in the MWR portfolio. Air Force officials said they expect to finish this study by June 2018. However, the officials noted that implementing the performance measures will be a challenge since these types of MWR programs are difficult to measure and hard to capture data for. While both the broad and specific measures established by DOD and the services can provide useful context about the status of individual MWR activities, they do not contain measurable goals that service officials could use to compare program results with costs to determine whether an individual activity is cost-effectively operating. Because the services’ efforts to develop specific performance measures are in early stages of development it is too early to determine whether these efforts will result in measurable goals that can be used to assess the cost-effectiveness of the MWR programs. DOD’s Financial Management Regulation specifies that performance measurement should include program accomplishments in terms of outputs and how those outputs effectively meet intended agency mission goals. Further, cost itself can be a performance metric, but should also be combined with an effectiveness measure, such as the percentage of a goal achieved at a level of expected performance, to ensure that the resulting output is cost effective. Additionally, through our prior work on performance measurement, we have reported that performance goals and measures should align with an agency’s goals and mission. However, in reviewing DOD Instruction 1015.10, we found no mention of any goals, mission, objectives, or purpose for the MWR programs. There is one section entitled “policy” in the instruction that included items that resemble goals. Specifically, the instruction stated that MWR programs: 1. are an integral part of the military and benefits package; 2. build healthy families and communities and provide consistently high- quality support services that are commonly furnished by other employers or by state and local governments to their employees and citizens; 3. encourage positive individual values and aid in recruitment and retention of personnel; and 4. promote esprit de corps and provide for the physical, cultural, and social needs; general well-being; quality of life; and hometown community support of servicemembers and their families. USD(P&R) officials who have responsibility for developing MWR program goals acknowledged that these policy items function as strategic goals but were not clearly identified as such in the instruction and also acknowledged that the instruction does not include measurable goals for assessing cost-effectiveness. In addition, USD(P&R) officials said that they are starting a review of DOD Instruction 1015.10 and did not know yet whether they would make any changes to the goals or expand the reporting requirement to include all 55 activities. Until DOD develops performance measures that include measurable goals, DOD officials and other decision makers, such as Members of Congress, may find it difficult to determine whether the MWR programs and the activities that make up the MWR programs are meeting servicemember needs in a cost-effective manner. DOD’s multibillion dollar MWR programs provide a wide range of benefits for servicemembers and their families that ultimately help support military missions and readiness, both in times of war and peace. DOD has established funding targets for providing appropriated funding support for Category A and B MWR programs. However, the funding targets have not been comprehensively evaluated in the last 20 years to determine their current relevance. Until DOD comprehensively evaluates the appropriateness of current funding targets and documents any changes made to the targets, DOD’s funding targets may not reflect the current operating environment, and may be posing an undue burden on the servicemembers. DOD has also not developed performance measures with measureable goals that would allow it to assess the cost- effectiveness of its MWR programs. Without performance measures that include such measurable goals, it will be difficult for DOD and Congress to determine whether the individual activities and overall MWR programs are meeting desired outcomes in a cost-effective manner. We are making the following two recommendations to DOD. We recommend that the Secretary of Defense ensure that the USD(P&R), in consultation with the Secretaries of the military departments, comprehensively evaluate the funding targets for Category A and B MWR programs and document any changes made to the targets and the methodology used. (Recommendation 1) We recommend that the Secretary of Defense ensure that the USD(P&R), in consultation with the Secretaries of the military departments, develop measurable goals for its MWR programs’ performance measures to determine the programs’ cost-effectiveness. (Recommendation 2) We provided a draft of this report to DOD for review and comment. In its comments, DOD concurred with our recommendations and noted actions that it is taking. DOD’s comments are reprinted in their entirety in appendix II. DOD also provided technical comments, which we incorporated into the report as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, the Navy, and the Air Force; the Commandant of the Marine Corps; and the Under Secretary of Defense for Personnel and Readiness. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix III. In addition to the contact named above, Kimberly A. Mayo, Assistant Director; Rebekah Boone; Mae Frances Jones; Felicia Lopez; Stephanie Moriarty; Cynthia Saunders; John W. Van Schaik; Paul Seely; Carter Stevens; and Roger Stoltz made key contributions to this report.", "summary": "DOD's MWR programs provide servicemembers and their families with three categories of programs: Category A (e.g., fitness and libraries), Category B (e.g., camping and performing arts), and Category C (e.g., golf). DOD oversees the percentage of appropriated funding allocated to MWR programs by category and measures the military services' compliance with established funding targets. DOD set the targets at 85 percent for Category A and 65 percent for Category B. DOD did not set a target for Category C since this category has the ability to generate revenue from user fees. House Report 115-200 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 includes a provision for GAO to review DOD' s MWR programs. GAO assessed the extent to which (1) the services have met DOD's established funding targets for each category of MWR programs and DOD has comprehensively evaluated the relevance of its targets, and (2) DOD has oversight structures and performance measures that include measurable goals, including those for cost-effectiveness, by which to review MWR programs. GAO analyzed MWR program information for fiscal years 2012-2017 and compared DOD's MWR policy with guidance for using measures and evaluating goals. The Department of Defense (DOD) established funding targets for two categories of Morale, Welfare, and Recreation (MWR) programs—Category A, which promotes the physical and mental well-being of servicemembers, and Category B, which funds community support systems for servicemembers and their families. These targets are intended to ensure that the military services adequately fund these programs with appropriated funds instead of requiring servicemembers and their families to pay fees out of pocket to cover program costs. However, GAO found the following: In fiscal years 2012-2017, the military services generally met the DOD-set target to provide 85 percent of appropriated funding for Category A programs but not the 65-percent target for Category B programs. Service officials said they are taking steps to meet the Category B target, such as by restoring targeted levels of appropriated funding support in future budget planning. Data GAO reviewed indicate that these steps are helping the services get closer to meeting the target for Category B. DOD has not comprehensively evaluated the targets, established more than 20 years ago, to ensure that they are appropriate. DOD officials said they agree that it is time to evaluate the relevancy of the targets as the current operating environment is fundamentally different than when the targets were established 2 decades ago. Further, DOD officials said that they are unsure of the process or methodology used to originally develop the targets because they have no documentation supporting these decisions. Until DOD comprehensively evaluates the appropriateness of the targets and, based on its evaluation, documents any changes made, it cannot be certain that the targets reflect the current operating environment and do not pose undue financial burden on servicemembers. DOD established oversight structures and performance measures for MWR programs, but has not established measurable goals to assess the cost-effectiveness of the 55 activities that make up MWR programs. DOD's MWR policy identifies six broad performance measure categories for the program. DOD officials responsible for developing MWR program goals acknowledged that DOD's MWR policy does not include measurable goals for assessing the cost-effectiveness of program activities, and do not currently have plans to make any changes to the goals. Service officials told GAO that they collect and use various types of information within the categories to assess specific activities. While both the categories established by DOD and the service-specific efforts provide useful context about the status of individual MWR activities, they do not replace the need for measurable goals that can be used to assess whether the programs are operating cost-effectively. The services are in the early stages of developing more specific performance measures, but it is too early to determine whether these efforts will result in measurable goals that can be used to assess cost-effectiveness. Until DOD develops performance measures that include measurable goals, it cannot ensure that MWR programs meet servicemember needs in a cost-effective manner. GAO recommends that DOD evaluate the funding targets and document any changes needed and develop measurable goals for MWR programs' performance measures. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "According to VA officials and Omaha donor group representatives, two main factors coalesced to become the impetus for the CHIP-IN Act. One factor was an Omaha donor group’s interest in constructing an ambulatory care center that could help address the needs of veterans in the area, given uncertainty about when or whether VA would be able to build a planned replacement medical center. In 2011, VA allocated $56 million for the design of the replacement medical center in Omaha, which had a total estimated cost of $560 million. However, VA officials told us that given the agency’s backlog of construction projects, the replacement medical center was not among its near-term projects. In the meantime, according to VA officials and the Omaha donor group, they discussed a change in the scope of the project— from the original plan of a replacement medical center to a smaller- scope project for a new ambulatory care center—that could potentially be constructed using the existing appropriation of $56 million plus a donation from the Omaha donor group. Another factor was the Congress’s and VA’s broader interest in testing innovative approaches to meeting VA’s infrastructure needs. According to VA officials, the agency was interested in constructing medical facilities in a more expeditious manner and developing legislation that allowed private money to help address VA’s needs. The CHIP-IN Act authorized a total of five pilot projects but did not name any specific project locations. Subsequently, the Omaha donor group applied to participate in the pilot program—with the construction of an ambulatory care center—and VA executed a donation agreement in April 2017. VA may accept up to four more real property donations under the pilot program, which is authorized through 2021. The CHIP-IN Act places certain requirements on donations under the pilot program. VA may accept CHIP-IN donations only if the property: (1) has already received appropriations for a VA facility project, or (2) has been identified as a need as part of VA’s long-range capital planning process and the location is included on the Strategic Capital Investment Planning process priority list provided in VA’s most recent budget submission to Congress. The CHIP-IN Act also requires that a formal agreement between VA and the non-federal entity provide that the entity conduct necessary environmental and historic preservation due diligence, obtain permits, and use construction standards required of VA, though the VA Secretary may permit exceptions. VA entered into an agreement with the Omaha donor group for the design and construction of an ambulatory care center in April 2017—4 months after enactment of the CHIP-IN Act. According to this agreement, which establishes the terms of the donation, the Omaha donor group will complete the design and construction of the facility and consult with VA. The facility will provide approximately 158,000 gross square feet of outpatient clinical functions, including primary care, an eye clinic, general purpose radiology and ambulatory surgery, specialty care, and mental health care. According to VA officials, planning for the facility began in April 2017, after the donation agreement was executed, and the project broke ground in April 2018. This donation agreement includes the mutually agreed- upon design and construction standards, which incorporate both VA’s standards and private sector building standards. The donation agreement also sets the terms of VA’s review of the design and construction documents and establishes escrow operations for the holding and disbursement of federal funds. Upon the Omaha donor group’s completion of the facility (scheduled for summer 2020) and VA’s acceptance, the Omaha donor group will turn the facility over to VA. The total estimated project cost is approximately $86 million. VA is contributing the $56 million that had already been appropriated for the design of the replacement medical facility. The Omaha donor group will donate the remaining approximately $30 million in private sector donations needed to build the facility. As shown in figure 2 and described below, VA officials told us that several offices are involved in various aspects of the CHIP-IN pilot—such as executing the Omaha project, seeking additional partnerships, and establishing the overall pilot program effort. The VA Office of Construction and Facilities Management (CFM) includes its Office of Real Property (ORP) and Office of Operations. ORP has taken a lead role in establishing the pilot program, while CFM Operations has led the execution of the Omaha project. Other VA offices that have been involved at different stages include the Office of General Counsel and the Secretary’s Center for Strategic Partnerships. Within the Veterans Health Administration (VHA), the local medical-center leadership was involved with developing the Omaha project, and the Office of Capital Asset Management, Engineering, and Support (Capital Asset Management Office) has contributed to efforts to identify additional projects. Some of these offices are involved with a steering committee created to implement the CHIP-IN Act (CHIP-IN steering committee). This steering committee met for the first time in September 2018. In 2016, we identified five leading practices for designing a well- developed and documented pilot program: articulating an assessment methodology, developing an evaluation plan, assessing scalability, and ensuring stakeholder communication. (See fig. 3.) These practices enhance the quality, credibility, and usefulness of pilot program evaluations and help ensure that time and resources are used effectively. While each of the five practices serves a purpose on its own, taken together, they form a framework for effective pilot design. VA officials have worked to communicate with relevant stakeholders, but have not yet established objectives, developed an assessment methodology and evaluation plan, or documented how they will make decisions about scalability of the pilot program. In 2016, we reported that clear, measurable objectives can help ensure that appropriate evaluation data are collected from the outset of a pilot program. Measurable objectives should be defined in qualitative or quantitative terms, so that performance toward achieving the objectives can be assessed, according to federal standards for internal control. For example, broad pilot objectives should be translated into specific researchable questions that articulate what will be assessed. Establishing well-defined objectives is critical to effectively implementing the other leading practices for a pilot program’s design. Objectives are needed to develop an assessment methodology to help determine the data and information that will be collected. Objectives also inform the evaluation plan because performance of the pilot should be evaluated against these objectives. In addition, objectives are needed to assess the scalability of the pilot, to help inform decisions on whether and how to implement a new approach in a broader context (i.e., whether the approach could be replicable in other settings). Relevant VA stakeholders have not yet collectively agreed upon and documented overall objectives for the CHIP-IN pilot program, but the stakeholders said they are planning to do so. However, at the time of our review, each of the VA offices we interviewed presented various ideas of what the objectives for the pilot should be, reflecting their varied missions and roles in the CHIP-IN pilot. For example, A senior VHA official said the objectives should include (1) determining whether the CHIP-IN donation partnership approach is an effective use of VA resources and (2) defining general principles for the pilot, including a repeatable process for future CHIP-IN projects. A senior VA official who has been closely involved with the pilot said one objective should be determining how VA can partner with the private sector for future construction projects, whether through donation partnerships or other means. Officials from ORP, who have taken a lead role in establishing the pilot, told us their objectives include identifying the four additional projects authorized by the CHIP-IN Act, developing a process to undertake potential projects, and determining whether a recommendation should be made that Congress extend VA’s CHIP-IN authority beyond the 5-year pilot. ORP officials said they have written some of these objectives in an early draft of plans for the CHIP-IN steering committee, but they have also discussed other objectives that are not yet documented. While the various VA offices involved may have somewhat different interests in the pilot program, developing a set of clear, measureable objectives is an important part of a good pilot design. For example, several VA officials who are involved in the pilot told us that it would be useful for relevant internal stakeholders to collectively agree upon and document overall objectives. ORP officials told us that the newly formed CHIP-IN steering committee will discuss and formalize objectives for the pilot. However, at the time of our review, a draft of these objectives had not been developed and a timeline for developing objectives was not yet established. A discussion of objectives was planned for the steering committee’s first meeting in September but had been rescheduled for the next meeting in October 2018. VA officials told us that they did not immediately move to establish a framework for the pilot program—which would include objectives for the pilot—for various reasons. Some officials said that VA and the Omaha donor group entered into formal discussions shortly after the CHIP-IN Act was enacted, and that their focus at the time was on negotiating and then executing a donation agreement for that particular project. As such, formal efforts to establish the framework for the overall pilot effort were in initial stages at the time of our review. ORP officials also said that the enactment of the CHIP-IN Act was not anticipated at the time CFM was planning and budgeting its resources for fiscal years 2017 and 2018, so work on the pilot had to be managed within available resources, largely as an additional duty for staff. In addition, a senior VHA official said a meeting to agree upon the pilot program’s objectives was needed but had not been held yet, noting that VA has competing priorities and vacancies at the senior executive level. ORP officials said they are now following project management principles in implementing the pilot. As part of this effort, they said that they intend to develop foundational documents for review by the CHIP-IN steering committee—such as a program plan containing objectives—but they have not done so yet. Without clearly defined and agreed-upon objectives, stakeholders within VA may have different understandings of the pilot’s purpose and intended outcomes. As a result, the agency risks pursuing projects that may not contribute to what VA hopes to learn or gain from the pilot. While VA officials are planning to establish objectives as they formalize the CHIP-IN steering committee, at the time of our review these objectives had not been documented and no timeline has been established for when they would be. Without clear, measurable objectives, VA will be unable to implement other leading practices for pilot design, such as determining how to make decisions about scalability. Further, not defining objectives in the near future would ultimately affect VA’s ability to evaluate the pilot and provide information to Congress about its results. We have reported that developing a clearly articulated assessment methodology and a detailed evaluation plan are leading practices for pilot design. The assessment methodology and evaluation plan should be linked to the pilot’s objectives so that evaluation results will show successes and challenges of the pilot, to help the agency draw conclusions about whether the pilot met its objectives. The assessment methodology and evaluation plan are also needed to determine scalability, because evaluation results will show whether and how the pilot can be expanded or incorporated into broader efforts. Given that several VA offices are involved in the pilot’s implementation, it is important for relevant stakeholders to be involved with defining and agreeing upon the assessment methodology and evaluation plan. VA has not yet fully developed and documented either an assessment methodology or evaluation plan for the pilot, but VA officials told us they plan to do so. For example, ORP officials said they intend to collect lessons learned and then evaluate the pilot at its end in 2021 by reviewing this information with relevant stakeholders. However, more specific details for this assessment methodology have not been defined in accordance with this leading practice. For example, we found that ORP has not yet determined which offices will contribute lessons learned, how frequently that information will be collected, or who will collect it. Similarly, details for an evaluation plan have not been defined, including who will participate in the evaluation and how information will be analyzed to evaluate the pilot’s implementation and performance. Now that the CHIP- IN steering committee has met for the first time, this group intends to discuss assessment of the pilot at a future meeting, but it is not clear when that discussion will occur, what leading practices will be considered, and when plans will be defined and documented. According to VA officials, an assessment methodology and evaluation plan have not been developed because, as discussed above, after the CHIP-IN Act was enacted, efforts were focused on negotiating the Omaha donation agreement and then executing that project. As such, formal efforts to establish the pilot through the CHIP-IN steering committee were in initial stages at the time of our review. Further, until VA has agreed- upon and documented objectives for the pilot program, it may be difficult to determine what information is needed for an assessment methodology and how the pilot will be evaluated. Unless VA establishes a clear assessment methodology that articulates responsibilities for contributing and documenting lessons learned, VA may miss opportunities to gather this information from the pilot. For example, while some stakeholders are documenting lessons learned relevant to their roles in the pilot, others are not. Specifically, ORP and CFM Operations are documenting lessons learned, but other VA offices and the Omaha donor group have not, though some told us they would be willing to share lessons learned if asked. Without an assessment methodology, there may also be confusion about who is responsible for documenting lessons learned. For example, a senior CFM official said that the Omaha donor group was compiling lessons learned from the pilot overall and would subsequently share those with VA. However, representatives from the donor group told us they have not been asked to share lessons learned with VA, but they would be willing to do so. When key individuals leave their positions—a situation that has occurred a number of times during implementation of the CHIP-IN pilot—their lessons learned may not be captured. For example, VA officials and donor group representatives told us that two VA officials who were involved in developing the pilot have since left the agency. In addition, stakeholders’ memories of lessons learned may fade unless they record them. Waiting to develop an evaluation plan—which should include details about how lessons learned will be used to measure the pilot’s performance—may ultimately affect VA’s preparedness to evaluate the pilot and provide information to Congress about its results. The purpose of a pilot is to generally inform a decision on whether and how to implement a new approach in a broader context—or in other words, whether the pilot can be scaled up or increased in size to a larger number of projects over the long term. Our prior work has found that it is important to determine how scalability will be assessed and the information needed to inform decisions about scalability. Scalability is connected to other leading practices for pilot design, as discussed above. For example, criteria to measure scalability should provide evidence that the pilot objectives have been met, and the evaluation’s results should inform scalability by showing whether and how the pilot could be expanded or how well lessons learned from the pilot can be incorporated into broader efforts. VA officials have begun to implement this leading practice by considering the pilot as a means of testing the viability of the donation partnership approach; however, plans for assessing scalability have not been fully defined and documented. A senior VA official said scalability is seen as a way to determine if the donation approach or other types of private sector partnerships are a viable way to address VA’s infrastructure needs. Similarly, ORP officials told us they are first considering scalability in terms of whether the CHIP-IN donation approach is an effective or feasible way of delivering VA projects. These officials said scalability will be largely determined by whether all five authorized projects can be executed before authorization for the CHIP-IN pilot program sunsets. For example, if VA can find four additional projects and execute donation agreements before the pilot’s authority expires, then potentially VA could seek congressional reauthorization to extend the program beyond the 5- year pilot. ORP officials are also considering scalability in terms of any changes to the program, such as incentives for donors, that could potentially increase its effectiveness. However, ORP officials explained that scalability may be limited because the types of projects that can be accomplished with the CHIP-IN donation approach may not be the projects that are most needed by VA. Along with other pilot design topics, the CHIP-IN steering committee intends to discuss scalability at a future meeting, but it is not clear when that discussion will occur. Thus, while VA officials have considered what scalability might look like, they have not fully determined and documented how to make decisions about whether the pilot is scalable. Since VA has not defined and documented the pilot’s objectives and its evaluation plans, it may be more difficult to determine how to make decisions about scalability. Considering how the pilot’s objectives and evaluation plans will inform decisions about scalability is critical to providing information about the pilot’s results. For example, at the end of the pilot, VA and Congress will need clear information to make decisions about whether the CHIP-IN donation approach could be extended beyond a pilot program, if any changes could enhance the program’s effectiveness, or if particular lessons learned could be applied to VA construction projects more broadly. Without clear information about scalability, VA may be limited in its ability to communicate quality information about the achievement of its objectives. Such communication is part of the federal standards for internal control. We have reported that appropriate two-way stakeholder communication and input should occur at all stages of the pilot, including design, implementation, data gathering, and assessment. To that end, it is critical that agencies identify who or what entities the relevant stakeholders are and communicate with them early and often. This process may include communication with external stakeholders and among internal stakeholders. Communicating quality information both externally and internally is also consistent with federal standards for internal control. VA has begun to implement this practice, with generally successful communication with the Omaha donor group. While VA has experienced some external and internal communication challenges about the pilot, officials have taken steps to help resolve some of these challenges. External communication. VA officials and representatives from the Omaha donor group generally described excellent communication between their two parties. For example, donor group representatives told us that in-person meetings helped to establish a strong relationship that has been useful in negotiating the donation agreement and executing the project to date. Further, VA officials and donor group representatives said that all relevant stakeholders—such as the donor group’s construction manager, general contractor, and architect, as well VA’s engineer, project manager, and medical center director—were included in key meetings once the Omaha project began, and said that this practice has continued during the construction phase. Although the Omaha donor group reported overall effective relations and communications with VA, donor group representatives noted that additional public relations support from VA would have been helpful. For example, after the CHIP-IN project was initiated in Omaha, the donor group encountered a public relations challenge when news reports about unauthorized waiting lists at the Omaha medical center jeopardized some donors’ willingness to contribute to the project. While donor group representatives said this challenge was addressed when the donor group hired a public relations firm, they also explained that it would be helpful for VA headquarters to provide more proactive public relations support to the local areas where future CHIP-IN projects are located. VA officials stated that they experienced some initial challenges communicating pilot requirements to external entities that are interested in CHIP-IN donation partnerships, but officials said that in response the agency has changed its outreach approach. As discussed below, the donation commitment aspect of the pilot can be a challenge. When interested entities contact VA to request information on the CHIP-IN pilot, VA officials told us they find the entities are often surprised by the donation commitment. For example, two entities that responded to VA’s RFI told us they were not clear about the donation requirement or the expected level of donation, or both. One respondent did not understand the pilot required a donation and would not provide an opportunity for a financial return on investment. Another respondent indicated that when they asked VA for clarification about the expected project’s scope, personnel from a headquarters office and the local VA medical center could not fully answer their questions. VA officials acknowledged these challenges and said they have changed their outreach efforts to focus on certain potential CHIP-IN locations, rather than RFIs aimed at a broader audience. Further, VA officials said that when speaking with potential donors going forward, they plan to involve a small group of officials who are knowledgeable about the pilot and its donation approach. Internal communication. While VA initially experienced some challenges in ensuring that all relevant internal stakeholders have been included in the pilot’s implementation, according to officials, the agency has taken recent steps to address this concern and involve appropriate internal offices. For example, officials from the Capital Asset Management Office said they could have assisted ORP in narrowing the list of potential projects in the RFIs but were not consulted. Later, after revising the marketing approach, ORP reached out to the Capital Asset Management Office and other relevant offices for help in determining priority locations for additional CHIP-IN projects, according to an ORP official. Officials from the Capital Asset Management Office told us that with improved engagement they were able to participate more actively in discussions about the pilot. In addition, initial plans for the CHIP-IN steering committee did not include VHA representation. However, in summer 2018 ORP expanded the planned steering committee to include VHA representatives, a plan that some other VA offices told us is needed to ensure that the pilot addresses the agency’s healthcare needs and that VHA offices are informed about pilot efforts. Based on the experience with the Omaha project, the CHIP-IN donation approach can result in potential cost and time savings—through the leveraging of private-sector funding, contracting, and construction practices—according to VA officials and the Omaha donor group. Regarding cost savings, one VA official stated that using donations makes VA’s appropriated funds available to cover other costs. In addition, based on the experience with the Omaha project, other VA officials told us that a CHIP-IN project can potentially be completed for a lower cost because of practices resulting from private sector leadership. Specifically, VA estimated that the Omaha ambulatory care center would cost about $120 million for VA to build outside of a donation partnership—as a standard federal construction project. Under the CHIP-IN pilot, however, the total estimated cost of the Omaha facility is $86 million—achieving a potential $34 million cost savings. Regarding time savings, CHIP-IN projects can potentially be completed at a faster pace because of the use of certain private sector practices and because projects can be addressed earlier than they otherwise would be, according to VA officials. The use of private-sector building practices can result in cost and time savings in a number of ways, according to VA officials and the Omaha donor group, as follows: The use of private-sector building standards contributed to cost savings for the Omaha project, according to VA officials and donor group representatives. VA and the donor group negotiated a combination of industry and VA building standards. A CFM official told us that using this approach and working with the private sector donor group encouraged the design team to think creatively about the risk assessment process and about how to meet the intent of VA’s physical security standards, but at a lower cost than if they were required to build a facility using all of VA’s building standards as written. For example, when assessing the safety and physical-security risk, the donor group and VA identified a location where two sides of the facility will not have direct exposure to the public or roadway traffic. Prohibiting exposure to roadways on two sides of the facility will mean spending less money to harden (i.e., protect) the facility against threats such as vehicular ramming. According to VA officials, using the combined standards did not compromise security on the Omaha project. Involving the general contractor early on in the design for the Omaha project, an approach VA does not typically take, contributed to both time and cost savings. VA officials told us that engaging the general contractor during the project’s design stage allowed the project to begin more quickly and was also helpful in obtaining information about costs and keeping the project within budget. However, VA officials said that depending on the project and contracting method used, it might not be possible to apply this contracting practice to VA construction projects outside of the pilot program. A private-sector design review method helped to save time. The Omaha donor group used a software package that allowed all design- document reviewers to simultaneously review design documents and then store their comments in a single place. VA officials said this approach was more efficient than VA’s typical review method and cut about 18 weeks from the project’s timeline. VA officials also said use of this software was a best practice that could be applied to VA construction projects more broadly. In addition, the donor group and VA employed fewer rounds of design reviews than VA typically uses; this streamlining also helped to save time during the design process, according to VA officials. Further, VA officials said that the CHIP-IN donation approach can allow VA to address projects more quickly because they are addressed outside of VA’s typical selection and funding process. For example, VA officials told us that because of the agency’s current major construction backlog, using the CHIP-IN donation approach allowed work on the Omaha project to begin at least 5 years sooner than if the CHIP-IN approach had not been used. The Omaha project’s priority was low relative to other potential projects, so that it was unlikely to receive additional funding for construction for several years. For example, one agency official noted that even if the project was at the top of VA’s priorities, there is a backlog of 20 major construction projects worth $5 billion ahead of it—meaning the Omaha project would probably not be addressed for at least 5 years. VA officials also told us that as they consider future CHIP-IN projects, they are looking for other projects that, like the one in Omaha, are needed, but may not be a top priority given available funding and could be moved forward with a private sector donation. In addition, use of the CHIP-IN donation approach and decision to pursue an ambulatory care center contributed to an earlier start on a project to address veterans’ needs. However, as mentioned earlier, VA officials said that future construction projects will be necessary to address some needs that were part of the original replacement medical center plan. A main challenge to establishing pilot partnerships is the reliance on large philanthropic donations, according to VA officials, the Omaha donor group, and RFI respondents. In general, the potential donor pool may not be extensive given the size of the expected donations—in some cases tens or hundreds of millions of dollars—and the conditions under which the donations must be made. For example, as discussed earlier, VA officials said that when interested entities contact them about the pilot, they are often surprised by the donation commitment. When we spoke with two entities that responded to VA’s RFI, one told us that they “could not afford to work for free” under the pilot while another told us that developers are more likely to participate in the pilot if they see an incentive, or a return on their financial contribution. Also, VA officials told us that some potential project locations have not received any appropriations—making the projects’ implementation less appealing to potential donors. The Omaha donor group noted that a VA financial contribution at or above 50 percent of a project’s estimated cost is essential for demonstrating the agency’s commitment and for leveraging private-sector donations. To address challenges involving the philanthropic nature of the pilot, ORP officials told us that VA has tried to identify strategies or incentives that could encourage donor involvement. For example, the CHIP-IN steering committee is considering what incentives might be effective to encourage greater participation. One ORP official told us that such incentives could include potential naming opportunities (that is, authority to name items such as facility floors, wings, or the actual facility), although offering such incentives may require changes in VA’s authority. Further, because it may be difficult to secure donations for larger, more costly projects, some VA officials, donor group representatives, and one RFI respondent we spoke to suggested that VA consider developing less costly CHIP-IN projects—giving VA a better chance of serving veterans by filling gaps in service needs. Other VA officials, however, said they wanted to focus on larger projects because the pilot allows only five projects. Another challenge is that VA generally does not possess marketing and philanthropic development experience. VA officials told us that this makes the inherent challenge of finding donors more difficult. While VA officials have used the assistance of a nonprofit entity that has marketing expertise, they also said that going forward it would be helpful to have staff with relevant marketing and philanthropic development experience to assist with identifying donors. VA officials said this expertise could possibly be acquired through hiring a contractor, but funding such a hire may be difficult within their existing resources. As discussed above, the CHIP-IN pilot presents an uncharted approach to VA’s implementation of projects, and using CHIP-IN has aspects of an organizational transformation in property acquisition for the agency because it leverages donation partnerships and streamlines VA’s typical funding process. We have found that a key practice of organizational transformation includes a dedicated implementation team to manage the transformation process and that leading practices for cross-functional teams include clear roles and responsibilities, and committed members with relevant expertise. VA officials and Omaha donor group representatives acknowledged that a dedicated CHIP-IN team could help focus pilot implementation—and that no such team existed within the agency. ORP officials told us that the newly formed CHIP-IN steering committee would provide the necessary leadership for pilot implementation. They anticipate that a working group will be part of the committee and serve as a dedicated team for the pilot. However, as discussed below, roles and responsibilities have not been defined and staff resource decisions have not been made. Clear and documented roles and responsibilities. Several VA officials told us that responsibility for managing the overall pilot effort had not been assigned, and that they had different interpretations of which office had responsibility for leading the pilot. Some officials identified ORP as the leader, while others thought it was CFM or the Center for Strategic Partnerships. One CFM official told us that a clear definition of responsibilities is needed under the pilot along with a dedicated office or person with the ability to make decisions when an impasse across offices exists. Similarly, a senior VHA official told us that leadership roles and responsibilities for the pilot are not fully understood within the agency, which has made establishing partnerships under the pilot a challenge. For example, both VA officials and Omaha donor group representatives identified the lack of a senior-level leader for the pilot as a challenge and emphasized the need for strong pilot leadership going forward. Now that a CHIP-IN steering committee is being formed to provide pilot leadership, ORP officials intend to discuss committee members’ roles and responsibilities. This discussion was planned for the first committee meeting but was rescheduled for the next meeting in October 2018. ORP officials, however, told us that they do not expect to assign individual members’ roles and responsibilities until a future date. VA officials did not have a timeline for when committee or individual members’ roles and responsibilities would be formally documented. ORP officials said that roles and responsibilities for the pilot have not been defined because after enactment of the CHIP-IN Act, their first priority was to engage the Omaha donor group and negotiate an agreement. Later, after the Omaha project was progressing, ORP officials said they turned their attention to formalizing the pilot program and identifying additional donation partnerships. While it is important to concentrate on completion of individual projects, it is also important to plan for the overall pilot’s implementation—to help ensure that the pilot’s purpose and goals are met and in a timely manner. We have found that clarifying roles and responsibilities is an important activity in facilitating strong collaboration and building effective cross-functional teams. In addition, we have found that articulating roles and responsibilities is a powerful tool in collaboration and that it is beneficial to detail such collaborations in a formal, written document. Committed team members. Various VA offices and staff members have worked on the CHIP-IN pilot in addition to their other responsibilities, but several VA officials told us the resources currently dedicated to the pilot are insufficient. During our review, an ORP official told us that two ORP staff each spent about 4 to 6 hours per week on the pilot, as collateral duties. However, since that time, one of these two staff members has left the agency. A senior VA official told us that ORP and the Center for Strategic Partnerships could each use two to three more dedicated staff members to work solely on the pilot. While one ORP official said that additional staff would likely be assigned after other CHIP-IN projects are identified, a Center for Strategic Partnerships official said a specified percentage of staff time should be dedicated now to identifying potential donors. As mentioned above, VA officials told us they anticipate a working group will be part of the CHIP-IN steering committee and will serve as the dedicated team to implement the pilot. However, VA has not yet documented how it will staff the working group, including how it will obtain the needed expertise within its existing resources. According to one VA official, staff had not been initially dedicated to the pilot because the CHIP-IN Act did not provide resources to fund a dedicated team for the pilot, so VA has needed to implement the pilot within its existing resources. This VA official also told us that they were not certain VA could support a dedicated team with existing resources. Another official indicated that VA would need to consider how to incorporate CHIP-IN into the agency’s operations if the pilot program were expanded beyond the initial pilot and then dedicate needed resources. Dedicating a strong and stable implementation team is important to ensuring that the effort receives the focused, full-time attention needed. Team members with relevant knowledge and expertise. As previously discussed, VA officials told us that it would be helpful for a CHIP-IN team to include stakeholders with certain expertise, such as marketing and philanthropic development experience. In addition, representatives from the Omaha donor group said going forward, proactive public relations expertise is needed from VA headquarters (in particular, for external communications outside of the partnership) to quickly and positively address any incidents that could negatively impact VA’s ability to encourage donor participation in the pilot at the local level. For example, in the event of critical news reports about a local VA facility, such as what occurred in Omaha, donor group representatives said that additional public relations support would be helpful. VA officials also told us that a CHIP-IN team should be a collaborative effort across several offices. Specifically, one senior VA official said a cross-functional team with representation from ORP, CFM Operations, the Center for Strategic Partnerships, VHA, and the Office of Asset Enterprise Management (which has budget and finance expertise) would be useful in focusing and implementing the pilot. Leading practices for cross-functional teams include having members with a wide diversity of knowledge and expertise. Having a dedicated team or working group that consists of committed members with clear roles and responsibilities could assist VA in implementing the CHIP-IN pilot. For example, the working group could focus time and attention on strengthening design of the pilot program as a whole, instead of implementing projects on a piecemeal basis. Further, clearly identifying and documenting roles and responsibilities could help relevant stakeholders define and agree upon pilot objectives as well as an assessment methodology and evaluation plan. In addition, including stakeholders with relevant expertise on the dedicated team may assist VA in identifying viable projects and negotiating partnership agreements more readily. The CHIP-IN pilot is a unique, time-limited opportunity for VA to test a new way of building needed medical facilities by using non-federal funding sources—donors—to leverage federal funds. Though the first project is still under way, stakeholders have already noted benefits of the donation partnership approach, including potential cost and time savings as well as learning about private sector practices that could be applied more broadly to VA construction. However, VA is not yet collecting the information it needs to support decisions by VA or Congress about the pilot. Without a strengthened pilot design—including measurable objectives, an assessment methodology, and an evaluation plan—that can help inform decisions about the scalability of the pilot, it may not be clear to VA and Congress whether the CHIP-IN approach could be part of a longer-term strategy or how lessons learned could enhance other VA construction efforts. While leadership for the pilot had not been previously assigned, a newly formed CHIP-IN steering committee is meant to focus on the pilot’s implementation. Defining and documenting roles and responsibilities for this committee—and identifying the resources needed to effectively implement the pilot—could assist VA in partnering with additional donors and creating new opportunities to meet the urgent needs of veterans. We are making the following three recommendations to VA. The Secretary of VA should ensure that internal stakeholders—such as the CHIP-IN steering committee’s members—agree to and document clear, measurable objectives for the CHIP-IN pilot that will help inform decisions about whether and how to scale the program. (Recommendation 1) The Secretary of VA should ensure that internal stakeholders—such as the CHIP-IN steering committee’s members—develop an assessment methodology and an evaluation plan that are linked to objectives for the CHIP-IN pilot and that help inform decisions about whether and how to scale the program. (Recommendation 2) The Secretary of VA should ensure that the CHIP-IN steering committee documents the roles and responsibilities of its members and identifies available staff resources, including any additional expertise and skills that are needed to implement the CHIP-IN pilot program. (Recommendation 3) We provided a draft of this report to VA for comment. In its written comments, reproduced in appendix I, VA concurred with our recommendations and stated that it has begun or is planning to take actions to address them. VA also provided a general comment on the role of VHA in the CHIP-IN pilot, which we incorporated in our report. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions regarding this report, please contact me at (213) 830-1011 or vonaha@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Cathy Colwell (Assistant Director), Kate Perl (Analyst in Charge), Melissa Bodeau, Jennifer Clayborne, Peter Del Toro, Shirley Hwang, Terence Lam, Malika Rice, Crystal Wesco, and Elizabeth Wood made key contributions to this report.", "summary": "VA has pressing infrastructure needs. The Communities Helping Invest through Property and Improvements Needed for Veterans Act of 2016 (CHIP-IN Act) authorized VA to accept donated real property—such as buildings or facility construction or improvements—through a pilot program. VA has initiated one project in Omaha, Nebraska, through a partnership with a donor group. VA can accept up to five donations through the pilot program, which is authorized through 2021. The CHIP-IN Act includes a provision for GAO to report on donation agreements. This report (1) examines the extent to which the VA's pilot design aligns with leading practices and (2) discusses what VA has learned from the pilot to date. GAO reviewed VA documents, including plans for the pilot program, and visited the Omaha pilot project. GAO interviewed VA officials, the Omaha donor group, and three non-federal entities that responded to VA's request seeking donors. GAO compared implementation of VA's pilot to leading practices for pilot design, organizational transformation, and cross-functional teams. The Department of Veterans Affairs (VA) is conducting a pilot program, called CHIP-IN, that allows VA to partner with non-federal entities and accept real property donations from them as a way to help address VA's infrastructure needs. Although VA signed its first project agreement under the program in April 2017, VA has not yet established a framework for effective design of the pilot program. Specifically, VA's pilot program design is not aligned with four of five leading practices for designing a well-developed and documented pilot program. VA has begun to implement one leading practice by improving its efforts to communicate with relevant stakeholders, such as including external stakeholders in key meetings. However, the VA offices involved have not agreed upon and documented clear, measurable objectives for the pilot program, which is a leading practice. Further, VA has not developed an assessment methodology or an evaluation plan that would help inform decisions about whether or how the pilot approach could be expanded. While VA officials said they intend to develop these items as tasks for the newly formed CHIP-IN steering committee, they have no timeline for doing so. Without clear objectives and assessment and evaluation plans, VA and Congress may have difficulty determining whether the pilot approach is an effective way to help address VA's infrastructure needs. To date, the CHIP-IN pilot suggests that donation partnerships could improve construction projects, but identifying donors and establishing a team for the pilot program have presented challenges. Officials from VA and the donor group for the first pilot project—an ambulatory care center in Omaha, Nebraska—said they are completing the project faster than if it had been a standard federal construction project, while achieving potential cost savings by using private sector practices. However, VA officials said it is challenging to find partners to make large donations with no financial return, and VA's lack of marketing and philanthropic development experience exacerbates that challenge. VA and the donor group agreed that a dedicated team of individuals with relevant expertise could facilitate the pilot's implementation. The new CHIP-IN steering committee could serve this purpose, but it lacks documented roles and responsibilities. Establishing a team with clear roles and responsibilities and identifying both available and needed staff resources could assist VA in partnering with additional donors and creating new opportunities to meet veterans' needs. GAO is recommending that VA: (1) establish pilot program objectives, (2) develop an assessment methodology and an evaluation plan, and (3) document roles and responsibilities and identify available and needed staff resources. VA concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The Economic Classification Policy Committee of the Office of Management and Budget (OMB), Statistics Canada, and Mexico’s Instituto Nacional de Estadistica y Geografia developed NAICS codes as a standard for collecting and analyzing data describing the economies of North American countries. The U.S Census Bureau assigns a 6-digit NAICS code to each industry based on its primary activity that generates the most revenue. The Economic Classification Policy Committee reviews NAICS codes every 5 years for potential revisions to ensure the relevance, accuracy, and timeliness of the classifications. Additionally, SBA uses NAICS codes as the basis for its small business size standards. The Small Business Act authorizes SBA to establish size standards for determining eligibility for federal small business assistance, including contracting preferences. Size standards vary by industry and are generally expressed either as the average number of employees over a 12-month period or the average annual receipts in the previous 3 years. For certain codes, there are more than one size standard. SBA refers to these additional size standards as exceptions. For example, NAICS code 541712 (Research and Development in the Physical, Engineering, and Life Sciences, Except Biotechnology) with a general size standard of 1,000 employees has three exceptions related to aircraft and aircraft engines (1,500 employees), other aircraft parts (1,250 employees), and guided missiles and space vehicles (1,250 employees). The Small Business Jobs Act of 2010 requires SBA to review at least one-third of all size standards during every 18-month period from the date of its enactment and to review all size standards at least every 5 years. SBA has completed the first 5-year review of all size standards. To help ensure that small businesses receive a share of federal procurement contract dollars, Congress has set an annual government- wide goal of awarding not less than 23 percent of prime contract dollars to small businesses. For firms to compete for government contracts set aside for small businesses, these firms have to meet the small business size standard for the procurement and have the capacity to provide the goods and services. ID/IQ contracts provide flexibility in cases where the government cannot determine the exact quantities and required timing for a product or service. We found in 2017 that from fiscal years 2011 through 2015, the proportion of spending by federal agencies on ID/IQ contracts remained stable and accounted for about a third (more than $130 billion annually) of total government contract obligations. Contracting officers may award either a single-award or multiple-award ID/IQ contract to meet procurement needs. Single-award ID/IQ contracts refer to situations when only one contract is awarded under a solicitation and are used in certain circumstances such as when only one contractor is capable of providing the product or service. Multiple-award ID/IQ contracts refer to situations when contracts are awarded to two or more contractors under a single solicitation. The FAR contains policies for using multiple-award ID/IQ contracts and states a preference for multiple-award (rather than single- award) ID/IQ contracts. Contracting officers have the authority to enter into, administer, or terminate contracts and are responsible for assigning the appropriate NAICS code and corresponding size standard to an acquisition. The FAR requires that contracting officers assign the NAICS code that best describes the principal purpose of the acquisition and states that the contracting officer’s assignment of the NAICS code is final unless a person adversely affected by the decision or SBA files an appeal. The FAR states that when selecting the NAICS code, contracting officers are to give primary consideration to the industry descriptions in the NAICS Manual, the product or service description in the solicitation, the relative value and importance of the components of the procurement making up the end item being procured, and the function of the goods or services being purchased. It also notes that a procurement is usually classified according to the component that accounts for the greatest percentage of contract value. In addition to the contracting officer, a number of agency officials and offices provide input on the assignment of NAICS codes to federal contracts during different phases of the acquisition process (presolicitation, pre-award, and award) (see fig. 1). Presolicitation phase. The program office identifies a need and contacts the contracting officer for guidance on developing and preparing key acquisition documents, such as the market research report and acquisition plan. The contracting officer and program office may also seek advice from the small business specialist and assigned PCR. After the approval of the procurement request, the contracting officer and program office work together to revise planning documents as necessary. Also during the presolicitation phase, the contracting officer coordinates with agency small business specialists and SBA’s assigned PCR using a small business coordination form. The contracting officer then publishes the presolicitation notice to summarize proposed contract actions. Pre-award phase. After the approval of the NAICS code, the contracting officer publishes the solicitation, which specifies the assigned NAICS code and corresponding size standard. Award phase. The agency awards the contract and publishes the award notice. Agencies use their contracting writing systems to execute the acquisition life-cycle from planning to contract award and use FPDS-NG to report contract awards. Firms interested in challenging a NAICS code assigned to a solicitation may file an appeal with SBA OHA. OHA was established in 1983 and is responsible for reviewing appeals of NAICS code assignments. OHA also reviews appeals of certain SBA program decisions such as size determinations; eligibility determinations for service-disabled veteran- owned (SDVO) small businesses, women-owned small businesses (WOSB), and economically disadvantaged women-owned small businesses (EDWOSB); and 8(a) business development program eligibility determinations, suspensions, and terminations. Officials at the Army, the Navy, DHS, and HHS stated that contracting officers refer to the FAR when assigning NAICS codes and consider a variety of factors. Additionally, in 2010 the Department of Defense (DOD) disseminated a memorandum to its components, which include the Army and the Navy, reiterating the process for determining the size status of contractors, including the requirement that contracting officers determine the appropriate NAICS code and related small business size standard and include them in solicitations. Although these agencies did not have training that specifically focused on NAICS codes, the training for contracting officers included discussion of NAICS code assignment. Contracting officers at these four agencies cited several factors, including a contract’s scope of work, that are involved in determining the NAICS code for a contract solicitation or an order: Statements of work and market research reports. The contracting officers we interviewed at all four agencies stated that they review the statements of work and assign the code that represents the majority of the work. One contracting officer stated that she also reviews the market research report when assigning the NAICS code. All of the contracting officers we interviewed at the four agencies stated that the market research reports usually include the relevant NAICS code. We found evidence of market research for two of the four contracts that we reviewed and found that the market research reports included the NAICS codes assigned to the contracts. Navy and HHS contracting officers were unable to provide evidence of market research for the contracts included in our review. Navy officials stated that the contracting team conducted market research but was unable to find copies of the documents. The HHS contracting officer stated that he conducted market research for the contract, but did not document it in a market research report. Instead, he noted in the small business coordination form that he reviewed prior or similar acquisitions as part of efforts to locate small business sources. Input from small business specialists. These four agencies’ contracting officers consult with their agencies’ small business specialists when deciding the NAICS code for a contract. Each of the four agencies we reviewed required their contracting officers to complete small business coordination forms prior to issuing solicitations for their agencies. When completing the forms, contracting officers must include the NAICS code designation and the corresponding size standard. Small business specialists must review the form before the contracting officer can issue the solicitation. All four agencies provided small business coordination forms related to the selected contract we reviewed. Additionally, each form included the signature of the small business specialist and listed the NAICS code and size standard, as required. All four of the agencies’ small business specialists we interviewed stated that they rarely disagreed with contracting officers on NAICS code assignments. They also noted that they coordinate with contracting officers on the NAICS code early in the acquisition process, for example, during market research. If they are unable to reach agreement on the code assignment, the specialists can elevate their concerns to the SBA PCR assigned to the office. According to SBA officials, the PCR will examine the research and either concur with the decision or file an appeal to the contracting officer. None of the specialists we interviewed had elevated any concerns to their PCR. Contract writing system requirements. The contracting officers we interviewed at all four agencies stated that they assign a single NAICS code for each solicitation, including for multiple-award contracts, because their contract writing systems and FPDS-NG do not allow them to enter more than one code per contract. While acquisition officials at each agency confirmed that contracting officers can assign only one code per multiple-award contract in their contract writing systems, they noted that contracting officers may list multiple codes for a multiple-award contract in the solicitation. Codes assigned to other contracts. Contracting officers we interviewed at all four agencies stated that if the solicitation is for a recurring contract, they refer to the previously assigned code. Two of the four contracting officers also consider the codes assigned to other contracts within their agencies that consisted of similar work. The purpose of the order. To issue an order under a contract, the purpose of the order must be within the scope of the underlying base contract. The four contracts we reviewed all had one NAICS code. The contracting officers we interviewed at all four agencies stated that if an order did not relate to the base award’s statement of work or NAICS code, they would award the order through another existing contract or award a new contract. We reviewed 10 orders from each of the four selected contracts and found that all 40 of the orders appeared to reflect the purpose of the base award and appeared to relate to the assigned NAICS code. However, the contracting officers we interviewed at two of the four agencies noted some challenges in assigning NAICS codes. They stated that because NAICS code definitions are broad, sometimes more than one code could be assigned to a solicitation. In reviewing the 40 orders associated with the four contracts we selected, we noted that in some instances more than one code could appear to apply to a contract. For example, the purpose of one order was to provide recommendations on design, testing, and evaluation in support of engineering activities. We found that this order could relate to the Research and Development in the Physical, Engineering, and Life Sciences (Except Biotechnology) code that was assigned as well as to the Engineering Services code because both include studies and development using engineering sciences. One contracting officer also noted that assigning the NAICS code is subjective and two different contracting officers could review the same contract and find different codes to be appropriate. We also noted this in reviewing our sample of orders. We found that some orders had similar purposes but were assigned different NAICS codes with different corresponding size standards. For example, as shown in table 1, we found two orders related to the installation of closed-circuit TV systems that had different NAICS codes. Three of the four contracting officers we interviewed stated that there are no unique challenges associated with assigning NAICS codes to ID/IQ contracts compared to other contracts. However, one small business specialist noted that assigning NAICS codes to ID/IQ contracts may be challenging for contracting officers because the statements of work may cover more than one code. One contracting officer we interviewed also stated that it can be challenging to assign NAICS codes to ID/IQ contracts because it is difficult to predict the nature of future orders associated with the base award, especially for research and development contracts. In 2013, SBA issued a rule on assigning NAICS codes to multiple-award contracts that may further clarify code assignment for contracting officers. The purpose of the rule was to implement the Small Business Jobs Act of 2010, which amended the Small Business Act to allow small business set-asides for parts of multiple-award contracts, for orders placed against multiple-award contracts, and for reserving one or more contract awards for small business concerns. The final rule clarifies that if a multiple- award contract consists of discrete categories, contracting officers may assign a different NAICS code and corresponding size standard to each category. Additionally, under the final rule, contracting officers may issue orders under each category as long as the category’s NAICS code matches the order’s NAICS code. SBA officials stated that they developed the rule because contracting officers were unclear on how to assign NAICS codes to orders from multiple-award contracts. Updates to the FAR and FPDS-NG are required to fully implement the portion of SBA’s final rule related to NAICS codes. In a 2016 proposed rule to update the FAR, DOD, GSA, and the National Aeronautics and Space Administration (NASA) proposed changes to implement SBA’s 2013 rule and stated that enhancements to federal data systems were in process. In June 2017, GSA officials told us that updates to FPDS-NG would be required because the system does not currently allow agencies to assign a NAICS code to an order that differs from the code assigned to the base contract. They also told us that GSA was working on a new version of FPDS-NG that would allow contracting officers to assign NAICS codes to orders that differ from the code assigned to the base contract. SBA officials told us that this planned change would be responsive to their rule. As of mid-November 2017, the final FAR rule had not been issued, and updates to FPDS-NG will depend on the final rule. The four agencies we interviewed were aware of SBA’s 2013 final rule and the 2016 proposed update to the FAR, and stated they would apply the guidance in the rule and update their contract writing systems once the FAR update was finalized. Some of the stakeholders we interviewed—three industry groups and five small businesses that had filed NAICS code appeals (appellants)— expressed concern that some contracting officers assign NAICS codes because they want specific size standards, not because they are the most appropriate codes, but several also stated it was difficult to determine how often this occurs. Specifically, the three industry groups and four of the five appellants we interviewed contended that contracting officers in some instances assign NAICS codes that allow them to make an award to a firm that would not be considered a small business under the “appropriate” code. Conversely, an official of one firm we interviewed told us that contracting officers in some instances assign NAICS codes with smaller size standards to limit competition for a contract. Because agencies have a federal mandate to meet small business contracting goals, contracting officers are required to provide maximum practicable opportunity to award contracts to small businesses in support of those goals. The following are specific concerns that industry groups and firms expressed: Ambiguous and overlapping language. An official from one firm told us that the language in the NAICS Manual can be ambiguous and noted overlap in the descriptions of certain codes with different size standards. For example, NAICS codes 541330 (Engineering Services) and 541712 (Research and Development in the Physical, Engineering and Life Sciences except Biotechnology) both include engineering, but have different size standards ($15 million and 1,000 employees, respectively). An official from another firm stated that the broad NAICS code descriptions result in solicitations that describe identical work having different NAICS codes and size standards. One industry group official stated that the practice of assigning a code based on the size standard and not the principal purpose is particularly a concern for research and development, professional services, and construction contracts. The definitions of the NAICS codes for these industries are broad and there is some overlap. For example, the Professional, Scientific, and Technical Services sector (Sector 54) includes research and development, engineering, legal and accounting, and computer systems design services, among other services. The Construction sector (Sector 23) also includes engineering services in addition to housing construction, water and sewer line construction, and plumbing and heating contractors. Preference for incumbent. Officials from two firms we interviewed told us that when recompeting an existing contract, the contracting officer may choose the NAICS code that best positions the incumbent company to compete rather than the code that best represents the work. Officials of one of these firms also stated that they are concerned when the NAICS code assigned to an existing contract that is being recompeted has changed and, in their opinion, the body of work to be performed under the new contract remains the same as the existing contract. Need to select multiple NAICS codes. In addition, one firm we interviewed stated that it is difficult to predict the code that a contracting officer will use for a procurement. Therefore, the firm selects multiple NAICS codes in its SAM entity registration so contracting officers will consider it for a variety of contracts. The other four firms we interviewed also told us that they selected multiple NAICS codes in SAM. As shown in table 2, a hypothetical firm that has 450 employees and revenue of $200 million would be a small business under some NAICS codes and large under other codes. Certain NAICS codes such as 541330 (Engineering Services) have exceptions to accommodate military procurement needs. However, one industry group and some firms stated that it is difficult to determine how often the practice of assigning a code based on the size standard and not the principal purpose occurs. Industry groups and firms also acknowledged that other factors could lead to the assignment of inappropriate NAICS codes. For example, one industry group official stated that human error, not ill intentions, may lead to the assignment of inappropriate codes. In addition, two firms we interviewed cited the inexperience of some contracting officers as a cause. One of these firms also noted that there could be legitimate disagreements about the appropriate NAICS code because individuals can perceive the nature of the work differently, including what is the preponderance of work to be performed. Another industry group official noted that the intended use of NAICS codes is for statistical purposes, not procurement, and as a result, the codes do not always align with procurement needs and the contracting marketplace. OHA officials acknowledged that assigning codes based on size standards may occur, but noted that it is OHA’s role to review the appropriateness of appealed NAICS code assignments, not the contracting officer’s intention behind assigning the code. As discussed in more detail later in this report, the standard for OHA’s review is whether the NAICS code designation was based on clear error of fact or law. When we shared stakeholders’ concerns about the assignment of NAICS codes with officials at the four agencies we reviewed and SBA, officials at three of the five agencies told us that they did not agree with some of the concerns. For example, DHS officials said that some of the observations—particularly the statement that contracting officers may assign the NAICS code that best positions the incumbent company to compete for the contract—were unfair and could be taken out of context. HHS officials told us they did not believe that contracting officers at HHS assign NAICS codes because they want specific size standards. SBA officials also questioned the stakeholders’ statements and pointed to the results of NAICS code appeals as an indication that the practice of assigning NAICS codes based on the size standard was not widespread. In addition, we analyzed the use of NAICS codes from fiscal years 2009– 2016 to determine whether contracting officers used NAICS codes whose size standard increased in 2012 more often than codes whose size standard did not increase. We selected three sectors with size standard increases in 2012 (Sectors 48–49 and 54) for this analysis because these sectors were among the first that SBA reviewed and adjusted. We found that the proportion of obligations and new contracts, respectively, related to NAICS codes with size standards that increased in 2012 remained relatively consistent for Sector 54 and increased for Sectors 48–49 after the size increase. See appendix II for more details. According to OHA officials, OHA expedites NAICS code appeals over other appeals it receives, issuing the decision as soon as practicable because the decision is effectively moot if it is not made before offers are due. They stated that the NAICS code appeal process takes an average of 18 to 30 days to complete, depending on the complexity of the appeal. SBA’s process for NAICS code appeals includes (1) determining if appeals are timely and within OHA’s jurisdiction, (2) determining if the appellant is adversely affected by the assignment, and (3) expediting NAICS code appeals that are accepted. Interested parties filing a NAICS code appeal do not have to follow a particular format, but the appeal must include the following information: the solicitation or contract number; the name, address, and telephone number of the contracting officer; a full and specific statement as to why the NAICS code designation is alleged to be in error, and argument in support of such allegations; and the name, address, and telephone number of the appellant or its attorney. Once an appeal is filed, an administrative judge is assigned to adjudicate it. The judge issues a Notice and Order informing the parties of the filing of the appeal petition, establishing the close of record as 15 days after service of the Notice and Order, and informing the parties that OHA must receive any responses to the appeal petition no later than the close of record. Upon receiving notice of the appeal, the contracting officer must place a hold on the solicitation; inform the public about the appeal and the procedures and deadline for interested parties to submit arguments concerning the appeal; and send OHA copies of the solicitation and inform them of any amendments, actions, and developments concerning the procurement in question. When reviewing NAICS code appeals, the judge first considers whether the appeal is timely and within OHA’s jurisdiction. SBA regulations define timely appeals as those that are filed within 10 calendar days after issuance of the solicitation or amendment to the solicitation affecting the NAICS code. According to OHA officials, because the office has jurisdiction over small businesses only, large businesses cannot file appeals. If the appeal is untimely or outside OHA’s jurisdiction, the appeal is dismissed. If the appeal is not dismissed, OHA officials told us the judge then reviews the NAICS Manual, SBA regulations on size standards, OHA precedent, and the written records to make a final and independent decision. The standard of review is whether the NAICS code designation was based on clear error of fact or law. If there was no clear error of fact or law, OHA will deny the appeal. If it finds a clear error of fact or law, OHA will grant the appeal (see fig. 2). We found that OHA’s process for reviewing NAICS code appeals is generally similar to other types of OHA appeals (see table 3). For example, NAICS code appeals and other SBA appeals generally must be filed by an interested party that has been adversely affected. In addition, NAICS code appeals and some other SBA appeals must be filed within 10 calendar or business days. NAICS code appeals are different from other SBA appeals in that OHA is adjudicating an action taken by a contracting agency as opposed to a determination made by an SBA official. Four of the five firms (appellants) that we interviewed to discuss their experience with NAICS code appeals were generally satisfied with the appeals process. Of the five appellants, four used a legal counsel and expressed general satisfaction with the time frames for filing a NAICS code appeal. Four of the five appellants noted that filing within the 10 calendar days was not a challenge, two of them indicating that they had known about the code for some time because it was included in the agency’s request for information or proposals. Three of the four firms that used a legal counsel also told us the NAICS code filing process was straightforward. However, the remaining appellant said that 10 calendar days was not enough time. In addition, two appellants noted that firms may not file appeals because they are concerned that filing an appeal will affect their ability to receive future awards from the contracting officer. Of the 62 NAICS code appeals filed during calendar years 2014–2016, the majority were dismissed or denied. During this same time period, approximately 1.4 million new federal contracts were awarded, and 284 other types of appeals were filed with OHA. The majority of NAICS code appeals were dismissed, and less than half of the remaining appeals were granted (see fig. 3). Thirty-five appeals were dismissed for procedural reasons. For example, OHA dismissed NAICS code appeals that were not filed before the 10 calendar day deadline. Fifteen appeals were denied, meaning that OHA determined that the NAICS code designation was not based on a clear error of fact or law. Twelve appeals were granted, meaning that OHA determined that the NAICS code designation was based on a clear error of fact or law. We requested comments from DOD, DHS, GSA, HHS, and SBA on a draft of this report. DOD, DHS, and SBA had no comments on the draft report. GSA and HHS provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to DOD, DHS, GSA, HHS, and SBA and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. This report examines (1) what contracting officers consider when assigning North American Industry Classification System (NAICS) codes to federal contracts and the status of efforts to clarify code assignment and (2) stakeholder views on NAICS code assignment and the number and outcomes of appeals filed with the Small Business Administration’s (SBA) Office of Hearings and Appeals (OHA). For our first objective, we reviewed federal laws and regulations related to NAICS code assignment and relevant policies and procedures from the four agencies with the highest indefinite delivery/indefinite quantity (ID/IQ) contract obligations from fiscal years 2011–2015 (the 5 most recent years of Federal Procurement Data System-Next Generation (FPDS-NG) data available when we began our review): Army, Navy, Department of Homeland Security (DHS), and Department of Health and Human Services (HHS). These agencies accounted for approximately $347 billion in obligations and 47 percent of all ID/IQ obligations in fiscal years 2011–2015. To understand how these selected agencies assign NAICS codes to contracts, we reviewed contract documentation, such as acquisition plans and market research documents, for one ID/IQ contract from each of the agencies (see table 4). We selected the four contracts we reviewed based on (1) whether they had small business set-asides, (2) the NAICS code, and (3) the number of orders. We selected contracts to obtain a mix of assigned NAICS codes and corresponding size standards. We selected contracts awarded in fiscal years 2014 and 2015 with codes from NAICS industry Sector 54 (Professional, Scientific, and Technical Services) because this sector accounted for half of the 10 NAICS codes with the highest ID/IQ obligations from fiscal years 2011–2015 (see table 5). We focused on ID/IQ contracts for our contract review because orders for these contracts are ordered after the base contract is awarded, potentially leading to challenges when assigning the NAICS code. We interviewed contracting officers, small business specialists, and SBA procurement center representatives (PCR) associated with each contract. Of the contracting officers who assigned the NAICS codes to the selected contracts, three no longer worked at the agencies. As such, we interviewed the contracting officer currently assigned to the contract. We also interviewed either the small business specialist who reviewed the NAICS code assignment or the specialist currently responsible for the contract or program office. To understand how orders relate to the base awards and their NAICS codes, we reviewed 10 orders from each contract and compared each order’s purposes to the base award purposes and to the NAICS code definition. We selected a mix of (1) orders that had product and service codes different from the codes assigned to the majority of the contract’s orders or did not contain key words contained in the contract’s statement of work and (2) orders that were the top orders in terms of obligations. To determine the status of ongoing efforts to clarify code assignment, we reviewed proposed and final regulatory changes to NAICS code assignment and interviewed officials at SBA and the General Services Administration (the agency responsible for managing the operation, maintenance, and updating of FPDS-NG). For our second objective, to understand stakeholders’ views on NAICS code assignment, we interviewed officials from three industry groups and five firms that filed NAICS code appeals during calendar years 2014– 2016 (the 3 most recent years of data available). We selected three industry groups to interview that were small business trade associations or contracting interest groups with information on their websites about NAICS codes. We interviewed 5 of the 14 firms that filed appeals in calendar years 2014–2016 of NAICS codes in Sector 54 (the sector with the most appeal decisions). We selected these firms to get a variety of results (granted, denied, or dismissed) and focused on firms that had filed multiple appeals or recent appeals. To identify commonly used NAICS codes and commonly used size standards, we analyzed data from FPDS-NG to identify the top NAICS codes by obligations and by number of contracts awarded in fiscal year 2016. To assess whether contracting officers were more likely to use a NAICS code when the corresponding size standard increased, we analyzed fiscal year 2009–2016 obligations and number of contracts awarded for NAICS codes in three sectors with size standards that SBA increased in 2012. We assessed the reliability of the FPDS-NG data we used by electronically testing for missing data, outliers, and inconsistent coding, and by comparing the data on selected contracts to contract documentation we obtained, including the NAICS code and whether or not the contract was an ID/IQ contract. We determined that the data were sufficiently reliable for the purposes of identifying trends in NAICS codes assigned. To understand SBA OHA’s process for reviewing NAICS code appeals, we reviewed federal regulations and interviewed OHA officials. For context, we compared OHA’s process for NAICS code appeals to its processes for other types of appeals. To identify the number and outcomes of NAICS code appeals, we obtained and analyzed SBA’s OHA decisions on NAICS code appeals filed during calendar years 2014–2016. We summarized the year, agency, outcome, and challenged code for each of the decisions in this time period. We conducted this performance audit from October 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based in our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In this appendix, we present analyses of FPDS-NG data on NAICS codes by obligations and number of contracts awarded. Specifically, we analyzed (1) FPDS-NG data for fiscal year 2016 to determine commonly used NAICS codes and size standards and (2) FPDS-NG data for fiscal years 2009 through 2016 to determine whether selected NAICS codes were used more often when the corresponding size standards increased. Tables 6 and 7 contain data on the top 50 NAICS codes by obligations and number of new contracts awarded, respectively, in fiscal year 2016. Tables 8 and 9 contain data on commonly used revenue-based size standards and employee-based size standards by obligations. Tables 10 and 11 contain data on commonly used revenue-based size standards and employee-based size standards by new contracts awarded. Industry stakeholders we interviewed stated that contracting officers may assign NAICS codes because they want specific and usually higher size standards, not because they are the most appropriate codes. We analyzed the use of NAICS codes from fiscal years 2009–2016 to determine whether contracting officers used NAICS codes whose size standard increased in 2012 more often than codes whose size standard did not increase. We selected three sectors with size standard increases in 2012 (Sectors 48–49 and 54) for this analysis because these sectors were among the first that the Small Business Administration reviewed and adjusted. As shown in figures 4 and 5, the proportion of obligations and new contracts, respectively, with NAICS codes where size standards increased in 2012 remained relatively consistent for Sector 54 and increased for Sectors 48–49 after the size increase. In addition to the contact named above, Paige Smith (Assistant Director), Juliann Vadera (Analyst in Charge), Pamela Davidson, Timothy DiNapoli, Suellen Foth, Julia Kennon, John McGrail, Marc Molino, Ifunanya Nwokedi, and Tovah Rom made key contributions to this report.", "summary": "Federal regulations require that contracting officers assign the NAICS code that best describes the principal purpose of the acquisition. SBA's OHA is responsible for reviewing appeals of NAICS code assignments. Questions have been raised about whether agencies assign the appropriate NAICS codes to ID/IQ contracts with multiple task orders. GAO was asked to review several issues related to NAICS codes. In this report, GAO examines (1) what contracting officers consider when assigning NAICS codes to federal contracts and the status of efforts to clarify code assignment and (2) industry views on NAICS code assignment and the number and outcomes of appeals. GAO reviewed policies and procedures of the four agencies with the highest ID/IQ obligations from fiscal years 2011–2015: Army, Navy, Department of Homeland Security (DHS), and Department of Health and Human Services (HHS); reviewed one contract and 10 related task orders at each of the selected agencies and interviewed the related contracting officers; analyzed 2016 federal contracting data to identify commonly used NAICS codes and size standards; interviewed three industry groups and five firms that filed appeals for industry views on NAICS code assignment; and analyzed SBA decisions on NAICS code appeals in 2014–2016. The Department of Defense, DHS, and SBA had no comments on the report. The General Services Administration and HHS had technical comments, which we incorporated as appropriate. Agencies' contracting officers consider various factors in assigning North American Industry Classification System (NAICS) codes to federal contracts, and the Small Business Administration (SBA) issued a rule in 2013 intended to clarify NAICS code assignment. NAICS codes are the basis for SBA's size standards; therefore, the code that the contracting officer assigns determines whether a firm is eligible for federal contracting preferences, such as small business set-asides. The contracting officers GAO interviewed cited several factors that affect their assignment of NAICS codes, including information on the work to be performed and input from agency small business specialists. However, they stated that assigning a NAICS code can be challenging when one or more codes could apply to a contract. In the 2013 rule, SBA clarified that under certain circumstances, contracting officers may assign more than one code to multiple-award contracts. Such contracts are awarded to two or more contractors under a single solicitation and include indefinite delivery/indefinite quantity (ID/IQ) contracts used when quantities and timing are not known at the time of the award. However, updates to the Federal Acquisition Regulation (FAR)—the rules governing the federal government's purchasing process—are required to fully implement SBA's final rule. The agencies GAO interviewed plan to implement this rule after it is adopted into the FAR and they can make necessary updates to their information technology for contracting. This FAR rule-making process is ongoing. Some industry groups and firms GAO interviewed expressed concerns about how contracting officers assign NAICS codes, but SBA's Office of Hearings and Appeals (OHA) dismissed most appeals and denied more than half of the remaining appeals. Some industry groups and firms GAO interviewed expressed concerns that contracting officers may assign NAICS codes based on the size standard (thereby affecting the number of firms that can compete as a small business) and not the work to be performed. However, some also stated it was difficult to determine how often this practice occurs, and OHA officials noted it is the office's role to review the appropriateness of appealed NAICS codes, not the contracting officer's intention when assigning the code. Of the 62 NAICS code appeals that were filed in calendar years 2014–2016, OHA dismissed 35, denied 15, and granted 12 (see fig.). Appeals were dismissed because, among other things, they were untimely or the contracting officer cancelled the acquisition.", "document_type": "gao"}
{"report": "The federal government owns and leases hundreds of thousands of buildings across the country that cost billions of dollars annually to operate and maintain. In recent years, the federal government has taken steps to improve the management of federal real property and address long-standing issues by undertaking several government-wide initiatives and issuing memorandums to the CFO Act agencies. Within the executive branch, OMB and GSA provide leadership in managing federal real property. As the chief management office for the executive branch, OMB oversees how federal agencies devise, implement, manage, and evaluate programs and policies. OMB provides direction to federal agencies by, among other things, issuing policies and memorandums on real property management. In 2012, OMB issued a memorandum that required agencies to move aggressively to dispose of excess properties held by the federal government and more efficiently use real estate assets. This memorandum initially laid out the requirement to “freeze the footprint.” In 2013, OMB issued a memorandum clarifying the Freeze the Footprint policy. This memorandum required agencies going forward to maintain no more than their fiscal year 2012 total square footage of domestic office and warehouse space. The policy required agencies to specifically identify existing properties to be disposed of to offset any new property acquisitions. In March 2015, OMB transitioned from freezing the federal government’s real property footprint to reducing it. Specifically, OMB issued the National Strategy for the Efficient Use of Real Property (National Strategy) to provide a framework to guide agencies’ real property management, increase efficient real property use, control costs, and reduce federal real property. The National Strategy outlined three key steps to improve real property management: (1) freeze growth in the inventory; (2) measure performance and use data to identify opportunities to improve the efficiency of the real property portfolio; and (3) reduce the size of the inventory by consolidating, co-locating, and disposing of properties. OMB also issued the RTF policy which clarified existing policy to dispose of excess properties and promote more efficient use of real property assets. The RTF policy requires agencies to: (1) submit annual Real Property Efficiency Plans (Plan) to GSA and OMB; (2) issue a policy that specifies a design standard for maximum useable square feet by workstation for use in domestic office space; (3) set and specify in their Plans annual reduction targets for their domestic office and warehouse space for a 5-year period; (4) set and specify in their Plans annual reduction targets for domestic owned building properties reported in the Federal Real Property Profile; and (5) continue to not increase the square footage of their domestic inventory of office and warehouse space. Additionally, agencies must identify in their Plans potential projects related to office and warehouse consolidation, co-location, disposal, as well as construction and acquisition efforts. OMB is responsible for reporting the progress of agencies’ efforts in reducing the amount of federal real property space under the RTF policy. GSA has two key leadership responsibilities related to real property management. First, GSA’s Public Buildings Service functions as the federal government’s principal landlord. In this role, GSA acquires, manages, and disposes of federally owned real property for which it has custody and control on behalf of federal agencies that occupy the space. Additionally, GSA leases commercial buildings on behalf of agencies and manages the lease agreements. In these situations, GSA executes an occupancy agreement with a customer agency for each space assignment that is similar to a sublease between GSA and the agency. The occupancy agreement outlines both the financial specifics of the agreement and the responsibilities of GSA and the customer agency. There are certain unique advantages for customer agencies when GSA leases on their behalf. For example, GSA is able to enter into longer-term leases, and agencies can release space back to GSA with 4 months’ written notice if certain conditions are met, relieving the agencies of the cost for the returned space. Second, GSA’s Office of Government-wide Policy is responsible for, among other things, identifying, evaluating, and promoting best practices to improve the efficiency of management processes. In this policy role, GSA provides guidance for federal agencies and publishes performance measures. It also maintains the Federal Real Property Profile, a real property inventory database that contains information on federal real property government-wide. Based on our review of agencies’ 2016 and 2017 Plans, we found that all 24 CFO Act agencies described strategies for reducing office and warehouse space. As previously mentioned, these annual Plans must include all potential projects related to office and warehouse consolidation, co-location, disposal, as well as construction and acquisition efforts. The agencies’ Plans cited consolidation, co-location, and disposal as the primary means to reduce their office and warehouse space, activities mentioned in the National Strategy. Agencies also cited other methods, such as utilizing telework and decreasing the space they allocate per person to achieve space reductions. The space reduction strategies included most often in the Plans we reviewed include the following. Consolidation: All 24 agencies reported planned or ongoing efforts to reduce their space by consolidating their offices or operations. For example, we spoke with officials at HUD, which is in the process of consolidating staff from four offices in the National Capital Region into its 1.12-million square foot headquarters building in Washington, D.C. HUD started by remodeling one floor to create a more open floor plan and intends to apply this design throughout the building. As part of the consolidation project, HUD has reduced the size of some office cubicles from 64 square feet to 56 square feet. (See fig. 1.) HUD leases its space through GSA and estimates that it will be able to return about 175,000 square feet of unneeded space back to GSA once all four offices are closed. At that point, GSA would then bear the cost of the space and work to lease it to another agency or otherwise dispose of it. Once the project is completed, HUD estimated that its headquarters building will accommodate about 500 more personnel (for a total of 3,200) and reduce its annual lease payments by about $11 million. Fifteen of the 24 agencies identified consolidation opportunities outside of their headquarters buildings. For example, the Department of Agriculture (USDA) discussed a consolidation project involving five component agencies in Albuquerque, New Mexico, in its fiscal year 2017 Plan. According to USDA officials, four component agencies occupying nearly 44,500 square feet in one building were to be consolidated into about 34,000 square feet of space in another building already occupied by a different USDA agency. In the prior location, the multiple components spaces’ square footage per person averaged 327, but the proposed consolidation would bring the utilization rate down to 255 square feet per person. USDA estimated that the consolidation project would result in about $238,000 in annual rent cost savings for the four components. Additionally, to enable this consolidation project, the component agency already occupying the building consolidated and vacated about 20,000 square feet, a move that resulted in an annual rental savings of about $500,000. In its fiscal year 2017 Plan, Interior’s Bureau of Reclamation anticipated eliminating 87,000 square feet of office space by consolidating operations from two buildings in Denver, Colorado. Interior estimated that the consolidation will result in a 40 percent reduction in its overall utilization rate to 165 square feet per person and an annual cost savings of about $2.1 million. Co-location: Thirteen of the 24 agencies’ Plans stated that they are exploring or implementing co-location projects to reduce space by merging staff from different components or agencies into another agency’s space. For example, the Social Security Administration (SSA) recently initiated a co-location pilot program with the Internal Revenue Service (IRS) within Treasury to combine SSA field offices with IRS Taxpayer Assistance Centers. Co-location of operations can reduce the overall space required by allowing agencies to share common space such as waiting rooms, an action that can reduce rent and operating costs for the co-located agencies. Since the inception of the 1-year program in January 2017, four IRS offices are participating and have moved into SSA field offices. According to SSA, IRS and SSA staff have adjusted to sharing space and the IRS presence in SSA space has not affected SSA wait times or created security or parking issues. According to an IRS official, IRS employees continue all normal operations from their co-located offices with SSA, including meeting with taxpayers in-person. The official also noted that IRS has extended the terms of its agreement with SSA for an additional year. However, SSA noted that the agencies are still working through customer access issues that could determine whether it would be possible to expand the pilot program and pursue additional co-location opportunities. In another example, according to Interior officials, the U.S. Geological Survey is co-locating staff from Menlo Park, California, to a National Aeronautics and Space Administration facility in the nearby city of Mountain View, California. About 40 percent of the staff will move early in fiscal year 2019, and the U.S. Geological Survey expects the remaining staff to be co- located by the end of 2021. Interior officials estimate that the co- location will result in an overall reduction of 165,000 square feet (about 50 percent of its space) and expects to save about $12 to $14 million in annual rent costs. To help agencies identify potential co-location opportunities and work with other agencies to meet their space requirements, GSA developed and provided agencies access to its Asset Consolidation Tool in fiscal year 2015. This database tool provides agencies with information about federal spaces in their area, including the buildings’ vacancy and utilization rates. Disposal of unneeded space: Thirteen of the 24 agencies reported that they plan to reduce their real property footprint by disposing of unneeded space, including selling or demolishing federal buildings or terminating leases, among other actions. For example, IRS has five tax submission-processing centers that receive all mailed income-tax returns and have warehouses that store the physical tax records. Each of these five processing centers, which include both office and warehouse spaces in multiple buildings, is approximately 500,000 square feet. According to IRS officials, 87 percent of all 2016 individual income-tax returns were filed electronically. As a result, the IRS plans to dispose of three of the five centers by 2024 to align with its reduced need for income-tax return processing and storage space. GSA has the statutory authority to dispose of property for all federal agencies and generally does so on their behalf. In addition, some federal agencies, such as Energy, or departmental components have statutory authority to dispose of buildings and other types of property and are not required to notify or use the services of GSA to complete the disposal. Better utilization of existing space: In their Plans, agencies also reported using tactical tools, such as incorporating space utilization rates into their capital-planning process, to identify opportunities to reduce space. For example, 22 of the 24 agencies reported incorporating office space design standards and agency utilization rates into their processes to identify space reduction opportunities. Agencies set their own space design standards and space utilization rates, which may vary based on agency mission requirements across their components. The RTF policy requires agencies to establish a design standard for the maximum workstation size, which should, at a minimum, be applied to all space renovations and new acquisitions. In addition, GSA has a recommended office space-utilization rate range of 150 to 200 square feet per person. Officials from our case study agencies noted several practices they said were helpful to identify opportunities to better utilize and ultimately reduce their space. For example, Commerce officials described developing a process for identifying and prioritizing space reduction opportunities using a two-factor matrix. Through this process, Commerce plans to target office space with a large number of employees and poor utilization rates (compared to its 170 square foot utilization rate). According to Commerce officials, these situations may offer the most opportunity for space reductions and achieving significant rent and operating cost savings, particularly in high-cost real estate markets. Using this process, Commerce identified the potential for reducing as much as 1.6-million square feet (16 percent) of its total office space within 52 high priority facilities. According to IRS, retirements, hiring freezes, budget reductions, and increased telework have resulted in excess space throughout its portfolio. In fiscal year 2016, IRS started using a Strategic Facility Plan model to help identify space reduction projects. IRS’s objectives include consolidating multiple offices within a metropolitan area, closing outlying buildings, and leveraging telework, mobility, and its attrition rates. This model utilizes a template form to provide a consistent decision-making framework for assessing various options, articulating the rationale for selecting the preferred option, and documenting decisions and concurrence. According to IRS officials, this model has helped IRS to reduce a lot of its space. In 2014, GSA developed and provided agencies with access to the Real Property Management Tool, which can aid agencies that want to more effectively utilize their space. The database tool provides agencies with the capability to comprehensively view their real property portfolio by consolidating data from the assets that agencies directly manage with the assets that GSA manages on their behalf. As such, regardless of whether an agency initiated the action or GSA did so on its behalf, the tool gives an agency the ability to see all of its data, such as on expiring leases, in one place. The tool enables agencies to create individualized analytic reports allowing them to analyze the data in various ways. Teleworking and hoteling: Fifteen of the 24 agencies also described alternate workplace arrangements enabled by information technology, such as telework and hoteling, to help reduce office space. Telework is a work flexibility arrangement under which an employee performs their work responsibilities at an approved alternative worksite (e.g., home). Executive agencies are required to establish policies that authorize eligible employees to telework, determine the eligibility of all employees to participate in telework, and notify all employees of their eligibility. Federal law also requires that agencies consider whether space needs can be met using alternative workspace arrangements when deciding whether to acquire new space. As such, some agencies are eliminating designated offices for staff who primarily telework, a step that can improve space utilization. In a hoteling arrangement, employees use non-dedicated, non-permanent workspaces assigned for use by reservation and on an as needed basis. For example, the Office of Personnel Management implemented a workspace sharing initiative at one of its program offices. Staff who are not physically present in the office 4 or more days per week are required to share cubicles and offices. The Office of Personnel Management estimated that the initiative resulted in a 47 percent office space reduction for the program office. As part of their fiscal year 2016 and 2017 Plans, the 24 CFO Act agencies also described the major challenges they anticipated facing in their efforts to meet their space reduction targets. The agencies most frequently cited the following challenges: Space reduction costs: Twenty of 24 agencies stated that the costs of space reduction projects pose a challenge. Agencies are generally responsible for the up-front costs associated with relocations and tenant improvements, such as acquiring new furniture and renovating existing areas to reduce space or to accommodate more personnel in a smaller area. For example, the Department of Labor (Labor) reported in its fiscal year 2017 Plan that it did not have sufficient funding to implement a space reduction project that would have reduced commercially leased office space by 4,000 square feet. Similarly, the Department of Veterans Affairs’ fiscal year 2017 Plan noted that assuming a limited budget, large scale consolidations would be difficult to achieve. Some agencies have used or report that they intend to use funding from GSA’s Consolidation Activities program to help fund their space reduction projects. According to GSA, from fiscal years 2014 to 2017, GSA’s Consolidation Activities program funded projects that will eliminate 1.4-million rentable square feet from the GSA inventory and reduce agencies’ annual rent payments by $54 million. According to the IRS, GSA’s Consolidation funds have helped the agency reduce about 500,000 square feet of space. IRS officials noted that these funds helped the agency implement larger and more expensive space reduction projects than it would have been able to do otherwise. However, according to officials from several agencies, to use this program, agencies must also contribute funds to the projects. HUD officials stated that they considered applying for project funding through GSA but did not do so because HUD did not have sufficient funds for the agency’s share of project costs. Three of the 24 agencies specifically noted that the cost to clean up environmentally contaminated buildings is a challenge to disposing of excess office and warehouse space. Agencies are required to consider the environmental impact of property disposals. We have previously found that assessments and remediation of contaminated properties can be expensive and complicate the disposal process. Also, agencies are responsible for supervising decontamination of excess and surplus real property that has been contaminated with hazardous materials of any sort. In its fiscal year 2017 Plan, Energy estimated that over 60 percent of its excess buildings require extensive decontamination prior to disposal. Overall, Energy projected that its total liability for environmental clean-up could cost more than $280 billion. Mission delivery: Thirteen of the 24 agencies reported that mission delivery requirements can also affect their ability to reduce space. Agency missions may require office locations in certain areas or require additional space to accommodate activities such as customer interactions. These requirements may preclude disposals or limit opportunities to reduce space. For example, in its fiscal year 2017 Plan, SSA stated that its efforts to reduce space are affected by its mission, which requires offices widely dispersed throughout the country to administer and support its benefit programs, among other things. SSA has about 1,500 office spaces nationwide, most of which require space to accommodate the public. SSA had an overall office space utilization rate of 301 square feet per person, which exceeded GSA’s recommended office space utilization rate range of 150 to 200 square feet per person. USDA’s fiscal year 2017 Plan stated that its missions require office space in rural areas to, among other things, provide program assistance and leadership on food, agriculture, natural resources, rural development, nutrition, and related issues. In its fiscal year 2017 Plan, USDA also observed that the real estate market in rural areas is less competitive than in urban areas because there are fewer rental options, a situation that can also drive up rent costs. As such, USDA noted that these factors may contribute to difficulties identifying disposal opportunities and finding alternate spaces that could allow for more effective space utilization. Employee organization concerns: Ten of the 24 agencies reported that considering employee organizations’ concerns and addressing collective bargaining requirements when reconfiguring space can add time and affect the extent of their space reductions. For example, in its fiscal year 2017 Plan, SSA noted that the agency must meet with three employee unions when revising office space policies or design standards and collaborating with these organizations adds to the project’s implementation timeline. In July 2017, we reported that SSA officials met with employee union groups about the impact of potential changes to its space configuration or usage. Officials said that while the interactions with the union groups were positive—including gaining input on issues such as ergonomics, the security of field offices, and overall implementation—at times, these negotiations caused delays to individual projects and complicated reduction efforts by requiring union buy-in. In addition, Labor reported in its fiscal year 2017 Plan that its collective bargaining agreement and agency mission requirements for offices and work stations do not always enable it to take advantage of the previously discussed GSA Consolidation Funding program as well as GSA’s Total Workplace Furniture & Information Technology program. For example, the Total Workplace Furniture & Information Technology program requires that cubicles and offices must not exceed a specified square footage. However, according to Labor officials, Labor’s Departmental Space Management Regulation requires a certain utilization rate per person which may make it challenging to also stay within the program’s square footage requirements. Workload growth: Eight of the 24 agencies noted that increases in their workload limited their ability to achieve overall agency space reductions. For example, according to the Department of Justice’s fiscal year 2017 Plan, the agency anticipated having to provide additional court rooms to support an increased volume of immigration cases and accommodate the additional immigration judges needed to handle that volume. The Department of Justice estimated that the space needed to accommodate the new judges and additional public areas could add about 155,000 square feet to its portfolio. Also, according to the Department of Health and Human Services’ fiscal years 2016 and 2017 Plans, the Office of Medicare Hearings and Appeals experienced a 30 percent growth in cases and expected 1.2- million new cases annually after 2017. The Department of Health and Human Services projected that the growth in cases and additional staff needed to process the cases required additional field offices, which would increase its total office space square footage. As previously mentioned, agencies are required to set annual square foot reduction targets for domestic office and warehouse space in their annual Plans. According to an OMB official, to help ensure the targets are realistic, agencies are also required to identify the specific projects that will help them to achieve their space reduction targets. According to GSA and OMB officials, agencies submit their Plans, including their reduction targets, and their Plans are reviewed by both GSA and OMB. But each individual agency ultimately establishes its targets based on what it determines to be cost-effective and feasible. Through its Real Property Efficiency Plan template, GSA provides guidance to agencies on what is expected in their annual submissions. Each agency is required to document its internal controls, such as the process for identifying and prioritizing reductions to office and warehouse space and disposal of properties based on return on investment and mission requirements. The identified internal controls should help ensure that an agency’s proposed space reduction projects reflect an efficient use of space and are cost effective. A review of our five case study agencies illustrated some of the different approaches agencies used to determine their reduction targets. For example, several agencies’ targets were based on the total estimated feasible reductions identified by each agency component. In contrast, one agency centrally established a reduction target percentage and then asked its components to develop projects to meet that target. According to case-study agency officials, the agencies considered many factors, including their missions, priorities, component needs, and available budgets, when determining their targets. We found that the number and magnitude of the space reduction projects agencies identified in their fiscal year 2017 Plans varied greatly and were generally proportional to the size of the agency’s real property portfolio. The number of projects identified in agency Plans ranged from as few as 3 projects (the minimum required in the Plans) to nearly 400 projects. The estimated space reductions per project across agencies ranged from about 1,400 to over 94,000 square feet. For example, the Department of Veterans Affairs has a relatively large office and warehouse portfolio of over 28-million square feet. As part of its fiscal year 2017 Plan, the agency reported 320 planned or ongoing projects with an average space reduction of about 1,800 square feet per project. Conversely, the Office of Personnel Management has a relatively small office space portfolio of about 1-million square feet; its fiscal year 2017 Plan identified 4 ongoing or potential projects with an average space reduction of about 6,000 square feet. In fiscal year 2016—the first and only year RTF data were available at the time of our review—the majority (71 percent or 17 of the 24 agencies) reported they achieved reductions in their office and warehouse space even though the agencies had varying success in achieving the individual targets they set for themselves. For example, as shown in figure 2, of the 17 agencies that reduced space, 9 exceeded their targets (i.e., reduced more space than planned); 7 reduced space but missed their target (by anywhere between 2.8 and 96.7 percent); and 1 agency expected to increase in square footage, but reduced space. Whether an agency met its target is not the only indicator of an agency’s success in reducing space. For example, although some agencies missed their targets, they reduced their office and warehouse space by a larger percentage than some agencies that exceeded their targets. Also, the fact that some agencies missed their targets can in part be attributed to setting more aggressive targets than other agencies. Agencies’ fiscal year 2016 targets ranged from a 0.8 percent increase to an 8.4 percent decrease in office and warehouse space. Of the 9 agencies that exceeded their reduction targets, 4 more than tripled their target. As mentioned, agency targets are set by the agency and are a reflection of their unique situation including mission needs and priorities and therefore cannot be generalized across agencies. For example, Energy exceeded its fiscal year 2016 reduction target and reduced 292,140 square feet of space (0.8 percent of its total square footage). However, the Environmental Protection Agency missed its target, which was the second most aggressive target across all the agencies at 7.2 percent of its total square footage; but the agency reduced 174,003 square feet (3.24 percent of its total square footage). Of the three agencies with the most aggressive target reductions—those that ranged between 6.7 and 8.4 percent of their total square footage—only one met its target. Figure 3 shows the extent to which each of the CFO Act agencies met its fiscal year 2016 targets. See appendix II for more detailed information on each agencies’ square footage of space, reduction targets and fiscal year 2016 reductions. Officials from our case study agencies cited a number of factors that influenced whether or not they met their fiscal year 2016 targets, and may also affect their target achievement in subsequent years. Of our five case study agencies, three exceeded their fiscal year 2016 reduction target and two missed their target. Timing and funding: Officials from two case study agencies cited timing as a factor, noting that there is fluidity to the project’s planning, implementation, and disposal process that may not always be within an agency’s control. As a result, space reductions anticipated in one fiscal year may not be realized until a subsequent fiscal year; conversely, some space reduction opportunities may present themselves unexpectedly. For example, according to officials at HUD, which missed its fiscal year 2016 reduction target, some projects take longer than anticipated to start or complete. HUD officials said that their fiscal year 2016 target may have been too ambitious and planned projects were delayed because they were unable to secure sufficient funding. As such, the officials said the agency must carefully select which projects to move forward with in a given fiscal year, but expected to move forward with their delayed, planned projects in the next fiscal year. Energy on the other hand, exceeded its fiscal year 2016 reduction target. Energy officials said that they tend to be conservative in listing potential RTF projects in their Plans. They noted that it takes a long time to dispose of a building and the timing was dependent on the building’s level of contamination, location, size, agency budget, and other factors. As a result, even though the agency may have planned to dispose of a building in a given fiscal year, there were numerous reasons why the project may get delayed. Further, RTF is a long-term effort and should not be judged based on agencies’ progress in their first year. According to an OMB official, it is understood that there may be circumstances in a given year that may hinder agencies from reaching their RTF targets, such as budget constraints or the timing of leases; however, the expectation is that agencies will continue to work toward accomplishing their target in the next year. Accordingly, under RTF, agencies set annual space reduction targets for a 5-year period. Officials from our case study agencies emphasized that the 5-year targets are not static, but rather are subject to annual updates. The RTF policy also acknowledged that changes to mission requirements and the availability of budgetary resources may require modifications to an agency’s targets, particularly in each of the subsequent years. Lastly, given that the RTF policy is still relatively recent, an OMB official noted that agencies are still in the process of learning how to set appropriate targets. Previous space reductions: Officials from three of our case study agencies noted that prior space reductions made during the Freeze the Footprint policy limited their ability to reduce space more aggressively. Though the thrust of Freeze the Footprint was to maintain the fiscal year 2012 size of an agency’s portfolio, agencies started to look more strategically for opportunities to dispose of excess space in their portfolios. The majority of agencies (18 of 24) have been decreasing the square footage of their domestic office and warehouse space since the Freeze the Footprint policy was implemented in 2013. OMB reported that under Freeze the Footprint, agencies achieved a 24.7-million square foot reduction between fiscal years 2012 and 2015. Officials from the IRS, which accounts for 70 percent of Treasury’s real property inventory, noted it has released 2.7-million square feet (approximately 10 percent) in the past 5 years, bringing its total square footage down to 25.3 million. According to officials from three of our case study agencies, a certain amount of space is required to effectively fulfill their missions. As such, the closer agencies get to attaining their optimum footprint, their ability to achieve further space reductions may be limited. In November 2016, GSA put into effect a new standard operating procedure to, among other things, standardize and streamline the process of receiving, reviewing, and documenting agencies’ space release actions. As previously mentioned, GSA’s occupancy agreements for space it leases on behalf of its customer agencies generally allow the agencies to release space back to GSA with as little as 4 months’ notice, if certain conditions are met. This can enable agencies to reduce their space and related rent costs relatively quickly without penalty. As a result of this new process, GSA established a centralized e-mail for agencies to submit their space release requests. The e-mail is maintained at GSA headquarters before it is forwarded to the respective GSA region. GSA also developed a centralized space release tracking spreadsheet to help ensure that all GSA regions were (1) notifying the customer agency of GSA’s determination on whether the space release request was within GSA’s policy, and (2) processing the space release and ceasing rent billings in a timely manner. According to GSA headquarters officials, this new process was implemented to rectify past concerns that space release requests were not centrally tracked, GSA regions may not have been making consistent determinations, and some requests either were missed or were not processed within the appropriate time frames. GSA officials noted that GSA similarly manages all vacant space in federally owned property under its custody and control and in commercial space it leases, and the agency seeks to utilize the space as quickly as possible. GSA has 11 regional offices throughout the country that generally conduct the day-to-day real property management activities for its customer agencies. These responsibilities include acquiring, managing, and disposing of real property, as well as executing, renewing, and terminating leases on behalf of its customer agencies in exchange for a monthly fee for GSA’s services. GSA headquarters officials told us that GSA regional offices track all the occupancy agreements and proactively work with customer agencies to help manage their space needs well before the agreements expire to understand ongoing space requirements. For example, according to GSA headquarters officials, this process includes working with agencies at a strategic level and helping them think about how they can accomplish their space needs and meet their targets 4 to 5 years in advance. GSA headquarters and regional officials noted that the advance planning helps the GSA regional officials integrate agencies’ potential space needs into the work they are already doing in the region as GSA manages the regional inventory as a whole, including managing the amount of vacant space. GSA regional officials told us that they work closely with the agencies in their space consolidation and reduction efforts to minimize the likelihood that GSA would be caught off guard by a release of space. This work enables GSA to develop options for either filling vacant space based on the known needs in the region or developing an alternative plan to effectively utilize the unneeded space. One of GSA’s strategic objectives is to improve the federal utilization of space in order to lower the government’s operational costs. To assess progress, GSA has an agency-wide vacant space performance goal of 3.2 percent for its federally-owned and leased inventory (with a 5 percent goal for federally owned and 1.5 percent goal for leased space). Based on GSA data, the agency has steadily lowered its percentage of vacant space under its custody and control from 3.8 percent in fiscal year 2013 to 3 percent in fiscal year 2016, exceeding its performance goal of 3.2 percent for the first time in 4 years. The vacant space performance goal’s data help GSA evaluate its real property assets and plan for and make investment decisions while meeting its customer’s needs. According to GSA officials, the lower vacant space percentage is a reflection of the agency’s continued focus on working with its customer agencies to: (1) move into federally owned space, when possible; (2) decrease the size of commercially leased space to reduce agency rental costs and overall government reliance on leased space; and (3) dispose of unneeded federally owned assets. However, GSA officials noted that a certain level of vacant space is necessary to meet the space needs of new customers and customers with changing space requirements. According to GSA officials, GSA also tracks and reports annual cost avoidance data for all office and warehouse space reductions. These data include space covered under RTF in federally owned buildings under GSA’s custody and control and commercial space that GSA leases. Cost avoidance is defined as the results of an action taken in the immediate timeframe that will decrease future costs. The government-wide cost avoidance for fiscal year 2016 was $104 million based upon a net 10.7 million square foot reduction to all office and warehouse space. Of the government-wide figure, according to GSA, the total cost avoidance associated with office and warehouse space reductions in federally- owned space under GSA’s custody and control and commercial space GSA leased in fiscal year 2016 was over $75.8 million and 3.1 million square feet. In its cost avoidance calculation, GSA accounts for space returned to it by customer agencies only if there is a net square footage reduction in GSA’s total square footage across all the space that it manages. Similarly, the space returned to GSA does not reduce the federal government’s overall office and warehouse square footage unless GSA disposes of it. However, space that is returned to GSA is reflected as a square footage reduction for the customer agency and contributes toward that agency’s RTF target reduction. According to GSA regional officials, agencies’ requests to return space prior to the end of their occupancy agreements appear to have increased since the implementation of the RTF policy. Thus far, GSA has processes to manage agencies’ space release requests and keep its vacant space to a minimum. However, it is too early to determine how the recent increase in space release requests, in combination with agencies’ continued focus on occupying a smaller footprint and reducing their square footage, will affect: (1) the size of GSA’s inventory of vacant space in the long term, (2) GSA’s regional office workload to manage the requests, and (3) the cost savings for the federal government. We provided a draft of this report to GSA, OMB, Commerce, Energy, HUD, Interior, and Treasury for review and comment. We received technical comments from Energy, which we incorporated, where appropriate. GSA, OMB, Commerce, HUD, Interior, and Treasury did not have comments on our draft report. We are sending copies of this report to the appropriate congressional committees; the Administrator of GSA; the Director of the OMB; the Secretaries of the Departments of Commerce, Energy, HUD, the Interior, and the Treasury; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to determine: (1) the approaches and any challenges the 24 Chief Financial Officers (CFO) Act agencies identified to achieving their Reduce the Footprint (RTF) reduction targets for all their domestic office and warehouse space; (2) the extent to which these agencies reduced space and met their fiscal year 2016 RTF targets; and (3) how the General Services Administration (GSA) manages vacated space that it had leased to these agencies. To obtain background information for all three objectives, we reviewed relevant literature, including laws governing federal real-property management and agencies’ efforts to reduce their real property portfolios and Office of Management and Budget’s (OMB) and GSA’s memorandums and guidance governing the RTF policy. We also reviewed prior GAO and GSA inspector general reports describing agencies’ real-property management and efforts to more efficiently manage their real property portfolios. To determine the approaches used and any challenges faced by the CFO Act agencies in achieving their RTF reduction targets for all their domestic office and warehouse space, we conducted a content analysis of the agencies’ 5-year Real Property Efficiency Plans (Plans) for fiscal years 2016 and 2017. These Plans were obtained directly from each of the agencies. Each Plan describes an agency’s overall strategic and tactical approach in managing its real property, provides a rationale for and justifies its optimum portfolio, and directs the identification and execution of real property disposals, efficiency improvements, general usage, and cost-savings measures. The content analysis of the Plans helped us to understand the approaches agencies used to reduce space, how space- reduction targets were set, and any challenges they experienced in reducing their space. To identify agencies’ approaches to achieving their RTF targets, we reviewed all agencies’ Plans to determine the most frequently mentioned approaches agencies reported using or planned to use to reduce their real-property footprints. As part of their plans, each agency is required to include a section detailing approaches it plans to use to reduce space. While these sections were the primary focus of the analysis, we analyzed the Plans as a whole for any additional mention of agencies’ approaches to reduce space. Based on the frequently identified approaches, codes were developed. An analyst reviewed all the agencies’ Plans and coded the approaches and another analyst reviewed the coding. If there was a disagreement, the two analysts reviewed and discussed until they reached an agreement. As a result of the analysis, five approaches were identified that agencies most frequently reported using or were planning to use to achieve their RTF targets. These five approaches are described in more detail in the report: (1) consolidation; (2) co-location; (3) disposition of unneeded space; (4) better utilization of existing space; and (5) teleworking and hoteling. For the purposes of our report, telework and hoteling were combined because these approaches are often used in combination. For example, agencies can use telework strategically to reduce space needs and increase efficiency by making hoteling (i.e., desk sharing) possible. To identify any challenges agencies faced in achieving their RTF targets, we similarly conducted a content analysis of agencies’ fiscal year 2016 and 2017 Plans. As part of their Plans, each agency included a section describing challenges it faced to reducing space. While these sections were the primary focus of the analysis, we analyzed the Plans as a whole for any additional mention of agencies’ challenges. Based on the frequently identified challenges, codes were developed. An analyst went through all the agencies’ Plans to code the challenges and another analyst reviewed the coding. If there was a disagreement, the two analysts reviewed and discussed until they reached an agreement. As a result of the analysis, we identified the four challenges that agencies most frequently described in their Plans: (1) space reduction costs; (2) mission delivery; (3) employee organization concerns; and (4) workload growth. In our report, we relied specifically on agencies’ fiscal year 2016 and 2017 Plans to provide examples and context for our description of the approaches agencies use and challenges they experience in achieving their RTF targets. However, after these Plans were submitted, agencies reported that the specific details as described in their Plans may in some instances, have changed due to a variety of factors. For our case study agencies, to the extent possible, we have provided updated information from agency officials as of December 2017. We selected five agencies as case studies to inform our first two objectives. We selected the agencies using a variety of considerations such as the diversity in the size of the agency’s domestic office and warehouse portfolio, the extent to which the agency met its fiscal year 2016 RTF targets, the types of real property authorities the agency has, as well as suggestions from GSA and OMB related to agencies’ experiences. Based on these factors, we selected the: (1) Department of Commerce (Commerce); (2) Department of Energy (Energy); (3) Department of Housing and Urban Development (HUD); (4) Department of the Interior (Interior); and (5) Department of the Treasury (Treasury). While our case-study agencies and their experiences reducing their space are not generalizable to all CFO Act agencies, they provide a range of examples of how agencies are implementing the RTF policy. We interviewed officials at the selected agencies as well as GSA and OMB, and reviewed relevant agency real-property management and RTF guidance, to obtain more detailed information about agencies’ RTF approaches, challenges, specific RTF projects, RTF project funding and prioritization, and experiences in meeting their RTF targets. In addition, we visited three office buildings of our case study agencies in Washington, D.C., with ongoing or recently completed RTF projects that illustrated approaches the agencies used to reduce space and met with officials to discuss the projects in more detail. The spaces we visited were the headquarters buildings for Commerce, HUD, and Interior. We selected the buildings based on recommendations from officials at our case study agencies. To determine to what extent agencies reduced their space and met their fiscal year 2016 RTF targets, we analyzed the 24 CFO Act agencies’ data as submitted to GSA on their RTF targets and reported reductions for fiscal year 2016. The office and warehouse square footage reductions are calculated annually using GSA occupancy agreement data and agencies’ self-reported data in GSA’s Federal Real Property Profile. For example, for fiscal year 2016, the space reduction calculations based on these data sources at the end of the fiscal year was compared to the square footage reported in fiscal year 2015. At the time of our review, this was the first and only year of RTF data available as the policy was implemented in March 2015. We conducted a data reliability assessment of the RTF data GSA provided by interviewing GSA officials and reviewing documentation, and concluded the data were reliable for our purposes. We also interviewed officials at GSA and OMB and reviewed relevant documentation to learn more about each agency’s role and the requirements of the RTF policy. We interviewed officials from our selected case-study agencies to obtain supporting documentation and to improve our understanding of how agencies set their RTF targets, agencies’ progress toward those targets, and the approaches used and challenges faced in meeting those targets. We also asked the agency officials for examples of successful practices used to reduce their office and warehouse space. To determine how GSA manages vacated federally owned and commercially leased space that it leases to agencies, we reviewed federal requirements and GSA policies and vacancy data. We conducted a data reliability assessment of GSA’s vacancy and cost avoidance data by interviewing GSA officials and reviewing documentation, and concluded the data were reliable for our purposes. We also interviewed GSA headquarters and regional officials and obtained documentation on how GSA manages space returned by agencies. We conducted this performance audit from April 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. FY 2016- FY 2020 target reduction (118,127) Social Security Administration Missed target and increased in space Department of Health and Human Services (170,147) (520,987) (15,466) (47,946) (56,062) In addition to the individual named above, Maria Edelstein (Assistant Director); Lacey Coppage; Edgar Garcia; Delwen Jones; Catherine Kim (Analyst-in-Charge); Michael Mgebroff; Malika Rice; Kelly Rubin; and David Wise made key contributions to this report.", "summary": "The federal government continues to work to reduce its real property inventory and associated costs. GSA provides space for agencies in government-owned and commercially leased buildings. In 2015, the OMB issued a memorandum requiring the 24 agencies with chief financial officers to reduce their domestic office and warehouse space. These agencies are required to set annual reduction targets for a 5-year time period and update their real property plans annually. GAO was asked to review the implementation of this space reduction initiative. This report discusses: (1) the approaches and any challenges the 24 agencies identified to achieving their reduction targets for all their domestic office and warehouse space; (2) the extent these agencies reduced their space and met their fiscal year 2016 targets; and (3) how GSA manages vacated space it had leased to these agencies. GAO conducted a content analysis of the 24 agencies' real property plans for fiscal years 2016 and 2017 and analyzed agencies' data as submitted to GSA on their targets and reductions for fiscal year 2016, the only year for which data were available. GAO selected five agencies as case studies based on several factors, including size of the agencies' office and warehouse portfolio, agency reduction targets, and fiscal year 2016 reported reductions. GAO reviewed relevant documentation and interviewed officials from GSA, OMB, and GAO's case study agencies. GAO provided a draft of this product to GSA, OMB, and our case study agencies for comment. GAO incorporated technical comments, as appropriate. Most of the 24 agencies with chief financial officers reported to the Office of Management and Budget (OMB) and the General Services Administration (GSA) that they planned to consolidate their office and warehouse space and allocate fewer square feet per employee as the key ways to achieve their space reduction targets. For example, the Department of Agriculture reported it will consolidate staff from five component agencies in two office buildings. When complete, the space allocated per employee will average about 250 square feet down from a high of 420 square feet per employee. In taking these actions, the agencies most often identified the cost of space reduction projects as a challenge to achieving their targets. Agencies cited costs such as for space renovations to accommodate more staff and required environmental clean-up before disposing of property as challenges to completing projects. Some agencies required to maintain offices across the country reported that their mission requirements limit their ability to reduce their space. In fiscal year 2016, 17 of the 24 agencies reported they reduced their space, but had varying success achieving their first-year targets. Of the 17 agencies, 9 exceeded their target and reduced more space than planned, 7 missed their target (by anywhere between 2.8 and 96.7 percent), and 1 reduced space, despite a targeted increase. Agency officials said that it is not unusual for projects to shift to different years and that such shifts could lead to missing targets one year and exceeding them the next. GSA has processes to manage the space vacated by agencies that is leased through GSA. For example, starting in November 2016, GSA started tracking agencies' space release requests centrally to help standardize the process and established an e-mail address to which agencies can submit requests. GSA relies on regional offices to manage real property in their regions and to identify tenants for vacant space or to remove unused space from the inventory. GSA's regional officials said regular monitoring and coordinating with agencies minimizes the likelihood GSA is caught off guard by a return of space. These processes also help them to plan ahead. GSA met its 2016 performance goal to have an annual vacant space rate of no more than 3.2 percent in its federally owned and leased buildings. However, given the recent implementation of the space reduction initiative, it is too early to determine the extent to which agencies will return space to GSA prior to the end of their leases and the effect on GSA's inventory.", "document_type": "gao"}
{"report": "The IG Act establishes OIGs both at select major federal agencies, called establishments, and at some smaller agencies, called designated federal entities (DFE), to conduct oversight of their programs and operations. The IG Act also sets out, among other things, (1) the duties and responsibilities of each IG with respect to the entity within which its office is established; (2) how IGs are appointed, whether by the President with the advice and consent of the Senate, or by the head of the DFE; and (3) the processes for removing an IG. The IG Act established OIGs to be independent and objective units to (1) conduct and supervise audits and investigations relating to the programs and operations of government establishments; (2) provide leadership and coordination and recommend policies for activities designed to promote economy, efficiency, and effectiveness in the administration of and to prevent and detect fraud and abuse in such programs and operations; and (3) provide a means for keeping the head of the agency and Congress fully and currently informed about problems and deficiencies relating to the administration of such programs and operations and the necessity for and progress of corrective action. IGs covered by the IG Act have been granted broad oversight authority, including to conduct, supervise, and coordinate audits and investigations; directly access the records and information related to the applicable agency’s programs and operations; request assistance from other federal, state, and local government agencies; subpoena information and documents; administer oaths when conducting interviews; hire staff and manage their own resources; and receive and respond to complaints from agency employees, whose identities are to be protected. In addition to their duties, responsibilities, and authorities in conducting their oversight work, IGs derive independence through numerous provisions in the IG Act. These provisions include the following: the requirement that IGs be appointed without regard to political affiliation and solely on the basis of integrity and demonstrated ability; the authority to select, appoint, and employ OIG officers and employees, as noted above; the authority of IGs to report violations of law directly to the Department of Justice; the requirement for agency heads to transmit the IGs’ semiannual reports of their activities to Congress without alteration; the authority of IGs to perform any audit or investigation without interference from the agency head or others except under certain conditions specified by the act; and the requirement for the President or the agency head to communicate to Congress the reasons for removing an IG. The IG Act establishes the basis on which an IG is to be appointed; which OIGs are required to have presidentially appointed, Senate confirmed (PAS) IGs; and which are DFE OIGs, with IGs appointed by the heads of the agencies. For the purposes of the IG Act, subject to some specifically enumerated exceptions, the head of the DFE is the DFE’s board or commission, or if an entity does not have a board or commission, any person or persons designated by statute as the head of the DFE. Of the 64 active IG offices established under the IG Act, 32 have PAS IGs and 32 have DFE IGs. Both PAS and DFE IGs are required to be appointed without regard to political affiliation and solely on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations. See table 1 for a list of PAS and DFE agencies as designated by the IG Act. The process for appointing PAS IGs generally has three main steps: (1) President’s selection and nomination, (2) Senate’s evaluation and confirmation, and (3) President’s official appointment. CIGIE assists the White House Office of Presidential Personnel (OPP) in the vetting of candidates for the IG nomination process. According to CIGIE officials, CIGIE’s Candidate Recommendations Panel receives résumés for potential candidates in various ways, including submissions from interested candidates through a link on the CIGIE website. The CIGIE panel also proactively reaches out to potential candidates who members of this panel believe would be good choices for IG positions. According to a CIGIE official, during the prior administration, the panel reviewed résumés from potential IG candidates and sent the résumés of those most qualified to the White House OPP for its process. Under the current administration, the CIGIE panel conducts interviews of potential IG candidates in addition to reviewing résumés, and then refers those candidates that the panel deems the most qualified to the White House OPP. CIGIE’s panel assesses potential candidates’ leadership philosophy and skills, as well as their understanding of the independent, non-partisan role of an IG. PAS IGs may be removed from office by the President, who must communicate the reasons for removal in writing to both Houses of Congress not later than 30 days before the removal. A DFE IG is appointed by the head of the entity in accordance with the applicable laws and regulations governing appointments within that entity. DFE IGs do not require presidential appointment or Senate confirmation. DFE IGs may be removed from office by the agency heads, or for an entity led by a board or a commission, removal requires written concurrence of a two-thirds majority of the board or commission. Similar to the President removing a PAS IG, the head of the entity must communicate the reasons for removal in writing to both Houses of Congress not later than 30 days before the removal. After a PAS IG retires or otherwise leaves office, the Federal Vacancies Reform Act of 1998 (Vacancies Act) instructs the official previously serving as first assistant to the vacant position to perform the duties of that position in an acting capacity, absent other action by the President. For DFE OIGs, acting IGs may be appointed according to laws, regulations, and policies governing appointments for each agency. Neither the IG Act nor the Vacancies Act places limits on the authority of acting IGs (relative to that of officially appointed IGs) to carry out the statutory responsibilities of the IG. However, the IG Act’s requirement for congressional notification prior to removal of a permanent IG does not apply to an acting IG. As of September 30, 2017, there were 12 IG vacancies in the 64 IG Act offices. Over the 10-year period covering fiscal years 2007 through 2016, the total number of IG vacancies varied with a low of 6 total vacancies as of the end of fiscal year 2007 to a high of 11 vacancies as of the end of fiscal years 2009, 2014, and 2016. In addition, some OIGs experienced prolonged continuous vacancies ranging from over 1 year to approximately 6 years. As of September 30, 2017, there were 12 IG vacancies consisting of 10 vacancies in PAS IGs and 2 in DFE IGs, as shown in table 2. Two of these vacancies had presidential nominations that were awaiting Senate evaluation as of September 30, 2017. During fiscal year 2017, four OIGs had an IG position that became vacant: Small Business Administration, Federal Election Commission, Department of Housing and Urban Development, and Tennessee Valley Authority. For the 10-year period from October 1, 2007, through September 30, 2016, the total number of IG vacancies at the ends of the fiscal years ranged from 6 to 11 vacancies, as shown in figure 1. For the PAS IGs, the number of IG vacancies increased from 3 at the end of fiscal year 2007 to 9 at the end of fiscal year 2016. For DFE IGs, the number of IG vacancies ranged from 0 to 4 vacancies at the ends of the fiscal years during the 10-year period. From October 1, 2006, through September 30, 2016, 53 of the 64 IG Act offices experienced vacancies, as shown in figure 2. Of the 32 PAS IGs, 26 experienced at least one vacancy during the 10-year period with the cumulative duration ranging from 25 days to 5 years and 258 days. Of the 32 DFE IGs, 27 experienced at least one vacancy during the 10-year period with the cumulative duration ranging from 13 days to 3 years and 67 days. Of the 26 PAS IGs that had vacancies during the 10-year period from fiscal years 2007 through 2016, 20 experienced at least one vacancy with a cumulative duration of more than 1 year, and for 11 of these IGs the cumulative vacancy period was over 3 years, as shown in figure 3. In addition, 5 of the 20 agencies with a cumulative IG vacancy of 1 year or more were the result of the agency experiencing two or more periods of IG vacancy over the 10-year period. The Department of State experienced the longest period of continuous PAS IG vacancy during the 10-year period, with 5 years and 258 days without a permanent IG. The Department of State IG vacancy began on January 16, 2008, and no nomination was made by the President until June 27, 2013. The nominee was confirmed by the Senate on September 17, 2013, and the vacancy ended on September 30, 2013. The Department of the Interior experienced the second longest PAS IG vacancy during the 10-year period, with 4 years and 273 days without a permanent IG as of the end of fiscal year 2016, and the vacancy remained as of the end of fiscal year 2017. The Department of the Interior IG vacancy began on January 1, 2012. The acting IG was nominated by the President on June 8, 2015. The nomination was received in the Senate and referred to the Committee on Energy and Natural Resources, which held a hearing on October 20, 2015. The nomination was returned to the President on January 3, 2017, under the provisions of a Senate rule that require nominations that are not confirmed or rejected during the congressional session be returned to the President. Once returned, the Senate will not consider the nomination until the President provides the Senate a new nominee. Other PAS IGs experienced several vacancies throughout the 10-year period. For example, the Department of Defense OIG had four periods of vacancy from fiscal years 2007 through 2016, two of them 1 year or longer, and one that began in January 2016 and remained vacant as of September 30, 2016. Of the 27 DFE IG offices that experienced IG vacancies during the 10- year period from fiscal years 2007 through 2016, 12 experienced at least one vacancy with a cumulative duration of more than 1 year as shown in figure 4. In addition, 5 of the 12 agencies with a cumulative IG vacancy of 1 year or more were the result of the agency experiencing two or more periods of IG vacancy over the 10-year period. The U.S. International Trade Commission (USITC) experienced the longest continuous DFE IG vacancy during the 10-year period, with 3 years and 67 days without a permanent IG. The position was filled and the vacancy ended on December 6, 2009. In fiscal year 2011, we reported that the USITC OIG lacked an appointed IG and adequate budget and staff resources for fiscal years 2005 through 2009, which contributed significantly to the OIG’s limited oversight of USITC. We recommended that the Chairman of USITC revise formal orientation information provided to the commissioners to include sections on, among other things, the responsibilities of the Chairman to maintain an appointed IG. USITC implemented these recommendations. The National Archives and Records Administration experienced the second longest DFE IG vacancy during the 10-year period, with 2 years and 190 days without a permanent IG. The vacancy started when the IG was placed on administrative leave, which lasted from September 14, 2012, until August 9, 2014. The National Archives and Records Administration was not able to replace the IG during this time. The position was eventually filled on March 23, 2015. We surveyed the acting IGs and OIG employees who worked under an acting IG among the 64 active OIGs established under the IG Act and asked for their views on the impact that having an acting IG has on an OIG’s ability to carry out its duties and responsibilities. While overall the survey responses indicated that having an acting IG had no impact on the OIGs’ ability to perform their statutory functions, responses varied in areas related to (1) planning and conducting work, (2) interacting with agency management, and (3) managing the OIG and personnel. In addition, a number of survey responses also pointed to challenges or positive outcomes in their experiences of working under an acting IG, and certain permanent IGs provided suggestions for improvements in the IG appointment process. For details on our survey methodology, see appendix I. Acting IGs: When asked whether, during their tenure as acting IGs, the vacancy had a positive impact, negative impact, or no impact on several areas related to the OIG’s ability to plan and conduct work, overall, at least eight of the nine acting IGs indicated that having an acting IG had no impact on the OIG’s ability to plan and conduct work. Table 3 summarizes the responses from the acting IGs related to the OIG’s ability to plan and conduct audit work. One of the nine acting IGs reported that the vacancy had a positive impact on developing comprehensive work plans for audits, investigations, and other OIG work, as well as addressing high-risk and high-priority issues. OIG employees: As shown in figure 5, the estimated percentage of OIG employees who worked under an acting IG who believe this has no impact ranged by question from 49 percent to 69 percent for the areas related to the OIG’s ability to plan and conduct audit work. In contrast, based on our survey results, almost a quarter of the OIG employees believed that working under an acting IG had a negative effect on their OIG’s ability to complete reports and other OIG work products in a timely fashion, issue high-visibility or high-risk reports, and address high-risk and high-priority issues. According to the survey results, from 6 percent to 13 percent of the employees found a positive impact in these areas. We also asked OIG employees to identify any additional challenges, in written comments, that they experienced in relation to their work under an acting IG. Four OIG employees provided responses related to the ability to plan and conduct work, specifically, on the timely completion of reports and other OIG work products, as noted in the following examples of individual comments: “However, seemed to struggle to ‘see the forest through the trees’ and the timeliness (and associated impact) of our work suffered significantly.” “Sometimes it would take longer to get a report out because were a review from the IG.” We also asked OIG employees to identify any positive outcomes or improvements based on their experiences with working under an acting IG. The following are some OIG employee written responses that were received regarding positive outcomes or improvements, which were related to the acting IG’s ability to plan and conduct work. The acting IG came from within the OIG. Thirteen OIG employees provided comments related to the acting IG coming from within the OIG ranks and having expertise in the agency issues, as noted in the following examples of individual comments: “Our acting IG was already a part of our OIG when appointed. Thus, they were already invested in the mission, our offices, and staff.” “The acting Inspector General had significant experience with agency management, and with our office processes and procedures, so products were issued timely.” “A positive is that the acting Inspector General usually comes with a wealth of knowledge about the OIG’s current practices and can hit the ground running to keep things moving along effectively.” “Because of the acting IG’s investigative background as well as his lack of interest in further political appointment I think we actually got more done than under the former and current IG.” Acting IGs: When asked whether, during their tenure as acting IGs, the vacancy had a positive impact, negative impact, or no impact on the OIG’s ability to interact with agency management, seven of the nine acting IGs indicated that there was no impact on the OIG’s ability to interact with the agency. Other acting IGs indicated a positive impact in regard to responsiveness from agency management, meeting with senior agency leadership, responsiveness of agency to recommendations, and timely access to agency documentation. One of the nine acting IGs indicated a negative impact regarding responsiveness of the agency to recommendations, and another saw a negative impact in timely access to agency documentation, as summarized in table 4. While the majority of the acting IGs responded that there was no impact in interactions with agency management, in commenting about challenges faced during their acting IG tenure that affected their ability to carry out their responsibilities, one acting IG commented that agency managers failed several times to disclose relevant information that affected both the results and timeliness of the OIG’s audit work. In addition, one acting IG found that agency officials were more open to recommendations and more supportive of the OIG during the acting IG’s tenure than under the previous permanent IG tenure. OIG employees: As shown in figure 6, we estimate that 63 percent of the OIG’s employees working under an acting IG believed that there was no impact on the responsiveness from agency management and an estimated 65 percent believed that there is no impact on timely access to agency documentation. Based on our survey results, the estimates for positive impact ranged from 7 percent to 9 percent, and approximately 17 percent of the OIG employees believed that working under an acting IG has a negative impact on these two areas. Acting IGs: Responses of the acting IGs regarding their ability to manage the OIG and employees varied by question, as summarized in table 5. For example, regarding employee morale, four of the nine acting IGs indicated that an acting IG leading the office had a negative impact, three indicated that the vacancy had a positive impact, and one indicated that the vacancy had no impact. In written comments included in the survey, three acting IGs provided additional information regarding restructuring the office and developing or changing office policy. Specifically, two acting IGs indicated a reluctance to make changes that could not be easily reversed by an incoming appointed IG or to “shake up the organization” only to experience further changes once an IG was in place. The third acting IG identified constraints as typical for acting officials in making personnel, policy, or organizational changes, especially when the length of the tenure as the acting official is unknown. We also asked the acting IGs if they had faced any challenges during their tenure that affected their ability to carry out their statutory duties and responsibilities. Of the three acting IG respondents who answered “yes,” two provided written responses citing challenges in the area of OIG management and personnel, such as difficulty in promotions and hiring decisions and OIG employee resistance to changes. For example, one acting IG indicated that the acting IG needed to get a special delegation from the agency to approve certain office promotions and hiring decisions. Another acting IG indicated the agency’s Office of General Counsel had to resolve a matter involving an employee who refused to relinquish his or her duties after the acting IG’s decision to reassign the employee. OIG employees: As shown in figure 7, just over 50 percent of the OIG employees working under an acting IG believe that an acting IG had no impact or a positive impact on these two areas. We also estimate that about 36 percent of the OIG employees believed that working for an acting IG negatively affected employee morale and about 23 percent believed that it negatively affected the ability to attract and retain qualified employees. We asked OIG employees to identify any additional challenges they have experienced in relation to their work under an acting IG. Eighty-three employees provided written responses, and 65 of those responses were related to areas that affect the ability to manage the OIG and its personnel, which are summarized below. Strategic planning. Nineteen OIG employees provided comments related to difficulty in strategic planning, as noted in the following examples of individual comments: “An acting IG is a caretaker, someone internal who is expected to maintain the status quo. Therefore, having an acting IG in place for an extended period may have delayed the implementation of reforms or bold changes that would normally be expected from new leadership.” “Internal processes, which may need to be changed, may not change in anticipation of the new leadership.” “Certain decisions such as ‘strategic vision’ or filling high-level positions within the organization may be delayed pending appointment of a permanent IG.” “ are not as willing to make changes at the agency because it may not be what the new IG wants. [Acting IGs] are more stewards of the organization until the new IG arrives.” Uncertainty. Fifteen OIG employees provided comments related to the uncertainty within the OIG, as noted in the following examples of individual comments: “The ability to make long-term decisions is affected due to uncertainty incoming Inspector General will support the decisions made by the acting Inspector General.” “Waiting for a permanent selection and the uncertainty as to the future impact of the person selected is disconcerting. It also negatively affects employee morale and motivation.” “Working under an acting Inspector General creates a climate of uncertainty within the organization . . . . They hesitate to make a decision that would be contrary to the views and/or opinions of the new IG and put them in what they perceive to be a bad light.” “I think the biggest challenges we had were related to employee morale and the direction of the organization as a whole. Employees did not know who was going to permanently lead the organization, or when the decision would be made on this.” Staffing. Twelve OIG employees provided comments related to addressing staffing needs or issues with staffing, as noted in the following examples of individual comments: “There were several difficulties related to meeting human resource needs without the proper authority to make decisions such as removals, promotions and/or bonuses.” “Issues with staffing could not be finalized pending the appointment of a new IG.” “Everyone except a select few in the OIG senior staff was leaving.” Morale. Eight OIG employees provided comments related to morale issues, as noted in the following examples of individual comments: “Promotions were unnecessarily delayed under the acting IG. Not good for morale.” “Certain issues relating to personnel management were left unaddressed or dismissed (i.e., problem managers) morale to dip among staff members.” “The acting IG appeared to have the need to prove to the agency what power they had. This, in effect, caused a great discord amongst not only agency management and OIG, but also between the OIG and the rest of the agency that we are still working to overcome.” Lack of leadership and office structure. Eight OIG employees provided comments related to the lack of leadership and office structure, as noted in the following examples of individual comments: “ management organization was seemingly dysfunctional. In part, because alliances likely to change once permanent IG .” “There isn’t a sense of real structure without IG.” “Lack of guidance on ongoing audits at that time. The acting IG wore too many hats: Acting IG, Assistant IG for Audits, and Assistant IG for Investigations.” Acting IGs are risk-averse pending permanent IG nomination. Two OIG employees provided the following comments related to the pending IG nomination: “I think it’s fair to say, although granted, it is a generalization, that an acting IG is more likely to be tentative and risk-averse than a fully confirmed IG. Also, within the OIG itself, senior staff may likewise be tentative and risk-averse knowing that new leadership is in the wings.” “The acting IGs are always hesitant to make waves . . . . One of them was in the process of being nominated, so didn’t want to do anything that could be seen as controversial or unpopular with staff. It the status quo being continued until a new official is confirmed.” Negatively affects budget discussions. One employee provided the following comment related to budget discussions: “In budget discussions with Congress and the administration, there is no trust that the acting IG understands the will of Congress . . . or has administration support.” We also asked OIG employees to identify any additional positive outcomes or improvements, in written comments, based on their experience from having an acting IG. Sixty-five employees provided written responses, and 12 of those responses related to the acting IG’s ability to manage the OIG and personnel, which are summarized below. Higher morale. Twelve OIG employees provided comments related to higher morale with an acting IG, as noted in the following examples of individual comments: “ scores remarkably higher under .” “The acting IG, a career civil servant, established trusting relationships meant for the long haul with the leadership team and staff, and also members of the overseen agency, and with the Congress. Morale was high and productivity was exceptionally high.” “I believe that the morale and overall quality of work that I witnessed at OIG offices during the tenures of the two acting IGs that I worked for was superior to that of offices that I worked in under one or more Senate-confirmed IGs.” The following summarizes (1) responses from acting IGs, permanent IGs, and OIG employees regarding the impact, if any, of a prolonged vacancy on the OIG’s ability to maintain independence and (2) permanent IGs’ suggestions on how to improve independence. We asked acting IGs if they felt that serving as an acting IG instead of a permanent IG created threats (such as self-interest threat or bias threat) to their independence of mind or independence in appearance, and eight responded “no” and one responded “yes.” The eight acting IGs who responded “no” to independence threats provided additional written comments to explain their answers, as noted in the following examples of individual explanations: “Because I’d been in the office since inception . . . I understood the importance of independence in all aspects.” “I was appointed to carry out the duties and functions of the IG and that is what I did to the best of my abilities. As an OIG employee, independence is always a factor, regardless of position and taking on additional duties and responsibilities did not impact that.” “I stated clearly and repeatedly to agency management and to Capitol Hill stakeholders that I was not interested in seeking the IG nomination on a permanent basis, in order to mitigate any concerns about independence or bias that could arise from seeking an appointment from officials I was charged with auditing/investigating.” “I declined the position of permanent Inspector General, in part to preserve my independence in the face of the potential conflict that could be perceived were I seeking the appointment. Serving in an acting capacity per se creates no threat to independence in fact or in appearance insofar as I am concerned based on my experience.” “Serving as acting IG had no threats to independence.” The acting IG that responded “yes” commented that there may be an appearance of independence problem if the acting IG is lobbying for the permanent position. We also asked the acting IGs if their independence was ever questioned by agency officials or others because of their role. Eight of the nine acting IGs answered “no,” while one acting IG answered “yes” and indicated that an external entity had questioned the independence of the acting IG. The acting IG further commented that certain Members of Congress had questioned the independence of acting IGs. We asked 52 permanent IGs whether they felt that an acting IG is inherently less independent than a permanent IG and whether an acting IG is less independent in appearance. While the majority of permanent IGs who responded did not think that acting IGs are inherently less independent, they did indicate by a similar majority that an acting IG is less independent in appearance than a permanent IG, especially in situations when the acting IGs are applying for the IG positions. Of the 49 IGs who responded to the question of whether an acting IG is inherently less independent, 13 said “yes,” 30 said “no,” and 6 responded that they had no basis for judgment, as shown in figure 8. Of the13 permanent IGs that answered “yes” to the acting IG being inherently less independent, 12 provided written comments as noted in the following examples of individual explanations. An acting IG who is a candidate for position. Six permanent IGs provided comments related to an acting IG who is seeking the permanent position, as noted in the following examples of individual comments: “If the selecting officials (or recommending officials) are also subject to audit or investigation by the acting , and the acting is interested in the permanent position they may actually be influenced to not report aggressively.” “They could be perceived as less independent if they are a candidate for the job and they often are.” “Generally speaking, the position of Inspector General would be a desirable promotion for an acting IG (sometimes the Deputy IG). An acting/Deputy IG, interested in the IG position and striving to impress the agency leadership/White House for consideration of the IG job, could be less aggressive (independent) in an effort to please the ‘hiring official’ (agency head/White House). Agency leaders/White House understand this dynamic, so in order to avoid/minimize any negative reports by the OIG, the agency heads can delay filling IG positions in order to have more ‘control’ over their acting IG.” Lack of Senate confirmation. Three permanent IGs provided comments in this category related to an acting IG having less authority to deal with agency officials and Congress than a permanent IG as the acting IG lacked Senate confirmation, as noted in the following individual comments: “Not having the full backing of the President, nor confirmation of the Senate, does not provide an even playing field when the IG negotiates with PAS agency heads and other PAS or senior level officials.” “First, because the agency knows that the acting IG is only temporarily in that position, the willingness of agency officials (particularly middle management and component leadership) to inappropriately respond to and challenge OIG oversight efforts increases. Second, an acting PAS IG (unlike a confirmed PAS IG) has not been approved for that position by the Senate and therefore doesn’t have that stamp of approval if there is a need to respond to inappropriate efforts by the agency to interfere with the OIG.” “In my experience, discussions between the Dept’s political leaders and the ‘permanent,’ politically-appointed IG (as well as between Congress and that IG) are different—more frank—in substance and tone.” Of the 30 permanent IGs that answered “no” to the acting IG being inherently less independent, 28 provided written comments as noted in the following examples of individual explanations. An acting IG has the same statutory authority as a permanent IG. Eight permanent IGs provided responses related to the acting IG having the same statutory authority as a permanent IG and the OIG structure having independence safeguards, as noted in the following examples of individual comments: “Because of the inherent structure of an OIG, with the independence safeguards that are derived from the IG Act, the Office of Inspector General should continue to be independent even if headed by an acting IG.” “An acting IG has the same independence protections as a ‘permanent IG’.” “ have the same statutory powers as an appointed IG to fulfill their role.” Having a permanent title should not be a factor in independence. Ten permanent IGs provided responses related to a permanent title not being a factor in independence as the acting IGs are held to the same standards and independence is driven by the acting IG’s character and background, as noted in the following examples of individual comments: “Independence is a matter of personal mindset and perceptions drawn by others based on individual/Office actions. Having the permanent title is not a key element required in order for the above to effectively exist.” “An acting IG can carry out his/her responsibilities as independently as a permanent IG; there are no inherent restrictions on their ability/capacity due solely to status. It boils down to the individual involved and their willingness/ability to do so in the context in which they operate.” “The independence resides in the position regardless of whether being occupied by an acting or permanent IG.” “The independence of an IG is largely driven by his or her character, background, and experience.” “Independence is obtained by the characteristics of the individual in the position of Inspector General. Just because the person occupying the position is ‘acting’ does not mean they are not independent.” An acting IG is usually a career OIG employee. Five permanent IGs provided comments related to the acting IG being a career OIG employee and knowing the importance of independence, as noted in the following examples of individual comments: “Career OIG employees place a high value on the independence of the office.” “Generally acting IGs come from within the OIG and have long service in the community and an understanding of and commitment to the role of the IG.” We also asked permanent IGs whether they felt that an acting IG is less independent in appearance than a permanent IG. Thirty of the 49 IGs who responded to this question answered “yes” and 13 answered “no,” as shown in figure 9. Of the 30 permanent IGs who answered “yes” to this question, 27 provided written comments, some of which are summarized below. An acting IG will be less independent in appearance if he or she is seeking the permanent position. Sixteen permanent IGs provided comments related to an acting IG being less independent in appearance if he or she is seeking the permanent position or perceived to be seeking the permanent IG position, as noted in the following examples of individual comments: “There will always be an appearance issue regarding the judgment of an acting IG if that individual is seeking the permanent position.” “There may be an appearance that an acting IG is less independent from the agency, particularly where he or she is seeking to become the permanent IG and needs the endorsement of the agency to move forward. This scenario could create an appearance of, or an actual, conflict of interest.” “If the incumbent aspires to the permanent appointment, I feel the designation as acting Inspector General carries the inherent risk that the incumbent may be vulnerable to political pressures, since the incumbent’s chances of being appointed as the permanent Inspector General may be adversely influenced by sensitive or controversial decisions made during the period that he/she served as acting Inspector General.” “An ‘acting’ may be reluctant to assert independence if the acting believes that he or she may be in the running for the vacant IG job. This may create a conflict under certain facts.” “Unfortunately, if an acting IG is interested in becoming the IG, people who are looking for reasons to find fault with their work can make an argument that they are pulling punches to better their chances of being selected. I don’t think this is true in most cases, but the argument is made.” An acting IG is also perceived as less independent. Six permanent IGs provided comments related to an acting IG being perceived as less independent by Congress, the public, and other organizations, as noted in the following examples of individual comments: “I am aware of at least one instance where the press and certain Members of Congress speculated or implied that an acting IG who wanted to be considered for appointment as the IG was lenient toward the agency.” “Congress and the public . . . have both expressed this concern.” “There is an inherent suspicion that the acting IG will pull his or her punches on audits and inspections in order to get nominated by the agency he is auditing.” “Some judge an acting IG for the actions they take or don’t take through the prism of partisan politics and often unfairly ascribe decisions to the acting IG’s interest in becoming an IG.” Of the 13 permanent IGs who answered “no,” 11 provided written comments, some of which are summarized below. Acting IGs have the same authority as permanent IGs. Three permanent IGs provided comments related to an acting IG having the same authority as a permanent IG, as noted in the following examples of individual comments: “The law doesn’t change and tenets such as independence are the same regardless of whether you are acting or not.” “An acting IG still heads an independent Office of Inspector General and as long as that office continues to act independently, there should be no appearance issue.” “The acting Inspector General has the same authority as a permanent IG.” Acting IGs should be able to perform their work independently. One permanent IG provided the following comment related to an acting IG performing his or her work independently: “I don’t necessarily think an acting IG has an appearance of lack of independence per se. Again, I think it depends on the acting IG, the agency, and the relationship between the OIG and the agency.” We also asked permanent IGs for suggestions on how the independence of the acting IG role could be improved. Although the majority of permanent IGs did not provide specific suggestions, the following summarizes the 12 written responses received: Expedite the appointment process (7 respondents). Make acting IGs ineligible for the permanent position (1 respondent). Establish a legislative solution for filling positions quickly (1 respondent). Specifically, there should be requirements that (1) acting IGs be named within 30 days of vacancy and the IG position filled within a certain amount of time; (2) DFE IG positions be filled within 180 days of a vacancy, and if not, the agency head should be required to report every 30 days to the agency’s oversight committees on the reason for delay; and (3) for PAS IG positions, a candidate should be nominated within 180 days. For visibility, make clear whether the acting IG is under consideration for the permanent position (1 respondent). The administration should do this for a PAS IG, and the agency should for a DFE IG. Extend statutory protection to acting IGs (1 respondent). “The independence of the acting Inspector General role could be improved by extending the same protections mandated for the Inspector General position to the acting Inspector General (as appropriately tailored for the temporary nature of the ‘acting’ role).” Rotate the individuals who will be in the acting IG position (1 respondent). In addition to views on the acting IG’s independence, we asked permanent IGs to provide additional comments and identify any challenges related to the acting IG role and prolonged IG vacancies. Thirty-one written responses were provided for this question, some of which are summarized below. Importance of permanent IGs. Six permanent IGs provided written comments related to the importance of the permanent IG and impediments in the role of acting IGs, as noted in the following examples of individual comments: “Prolonged IG vacancies are never good, and negatively impact the entire IG community and CIGIE because we need fully engaged IGs who can participate in IG and CIGIE business knowing that they will be in the position for the long-term and without wondering when and whether they will be replaced.” “IG vacancies have been allowed to be vacant for years. While the role of an acting IG may be filled successfully, it is important to each agency/department to have a permanent IG who is appointed by the appropriate process.” “Extended vacancies undermine the system of checks and balances.” “I generally believe that it is detrimental for an OIG to have a prolonged IG vacancy with an acting IG. I believe that acting IGs may be disinclined to take necessary agency actions because of their temporary status. In addition, the acting IG is vulnerable to attacks on his or her independence, particularly where he or she is seeking a permanent position and requires the agency’s endorsement.” Effect on strategic planning. Eight respondents pointed out challenges acting IGs face in long-term planning, as noted in the following examples of individual comments: “One of the biggest challenges to an acting IG may be the ability to make long-term plans for the organization.” “A prolonged vacancy creates a leadership gap for the OIG and the entity.” “Acting IGs do not feel empowered to take on new initiatives or projects on behalf of the office, and may feel inhibited in terms of management issues, including hiring.” Authority. Four respondents commented on the need for authority provided by permanent leadership, as noted in the following examples of individual comments: “Regardless of whether the discussion is focused on acting IG positions or any acting leadership position (within Mission or otherwise), there is some level of authority in terms of institutional impact and ability to effect change that comes from knowing those advancing mission have some level of anticipated continuity in service and ability to see things through.” “The acting did a remarkable job at getting the office through a very difficult time, but largely saw as a caretaker. [The acting IG] did not feel comfortable doing the things that I immediately recognized needed to be done. The Office’s work got little traction while the acting was in charge, in part because the Office was without a permanent leader and the agency did not feel compelled to pay attention to OIG recommendations.” “I believe the greatest challenge to anyone in an acting role has more to do with authority than it has to do with independence . . . . I believe it is often difficult for anyone in an acting position to think long-term and make decisions that have long-term implications because they (1) have no idea how long they will be acting and (2) may be overruled or have decisions reversed by a permanent appointee. So I think acting individuals tend to ‘keep the home fires burning’ as well as they can but don’t necessarily think in terms of leading the organization in the direction it needs to go in the future, especially since they don’t know what the future will bring.” OIG morale. Four respondents reported morale problems in OIGs without a permanent IG, as noted in the following examples of individual comments: “Prolonged vacancies in senior leadership positions, whether in an OIG or other government offices, can lead career employees to lose their focus and their dedication to fulfill the mission of the office. When new leadership is finally put into place, it often encounters stiff resistance to any changes because the employees have enjoyed being ‘home alone’.” “The prolonged vacancy at the agency diminished the stature of the office and did not make it an inviting place for experienced oversight staff to want to work.” IG vacancies seen as lack of support. Five respondents reported that prolonged vacancies are seen as a lack of congressional or agency support for the OIG, as noted in the following examples of individual comments: “Prolonged vacancies in the IG position . . . can be viewed by some as a lack of support for the IG oversight mission on the part of the Administration and Congress.” “Any individual serving in any position with the word ‘acting’ in front of it inherently carries less authority than the same individual in the same position serving in a permanent capacity. The longer an IG position is left vacant the greater the appearance that the agency does not want to have an IG providing oversight.” OIG employees’ views on the inherent independence of an acting IG as compared to the independence of a permanent IG are summarized in figure 10. Based on our survey, we estimate that 16 percent of the OIG employees believe that an acting IG is inherently less independent than a permanent IG. Of the employees who responded “yes,” 25 provided written explanations along with their answers, some of which are summarized below. The acting IG may be seeking a permanent position. Eleven OIG employees provided comments related to the acting IG seeking a permanent position, as noted in the following examples of individual comments: “If interested in permanent appointment, there is a risk that acting IG becomes more interested in being liked by and pleasing the agency, thus independence could be impaired.” “An acting Inspector General may be seeking an IG appointment. He/she wants the agency to like him, to support his nomination, and may kowtow to them. This dynamic may result in a ‘don’t rock the boat’ mentality.” “If the acting IG is going to be a candidate for the IG position, and is appointed by the head of the agency, they may stay away from reviewing sensitive issue areas.” The acting IG came from within the OIG. Three OIG employees provided comments related to the acting IG selected from within the OIG having preconceived notions, as noted in the following examples of individual comments: “Our acting Inspector General was previously the IG for Audits and Evaluation. As such, entered the position with substantial preconceived notions about the other directorates. In contrast, our permanent IG came to the position with limited preconceived notions. In the future, it would be better if the Acting IG came from another IG (as opposed to temporarily promoting from within).” “I believe that an acting IG is inherently less independent because he or she has no official term, may either receive an appointment as IG, or be replaced at the discretion of the President.” “Bring in an acting IG from another agency for independence reasons or ensure other acting positions are filled and the acting IG is not performing multiple roles.” Based on our survey, we estimate that 52 percent of the OIG employees believe that an acting IG is not inherently less independent than a permanent IG. Of the 71 employees who responded “no” to this question, 56 provided written explanations, some of which are summarized below. There is no difference between the permanent IG and an acting IG. Eighteen OIG employees provided comments related to the acting IG and permanent IG as having no difference, as noted in the following examples of individual comments: “We saw absolutely no difference in the independence of the acting IG the appointed IG.” “The acting title (as compared to a permanent IG title) is irrelevant. It ALL comes down to the specific individual occupying the position.” “The Inspector General is independent by law. The authority of the position is the same, whether it is filled by an acting IG or a permanent IG. . . . I have not encountered circumstances in which I felt the acting IG was inherently less independent.” “The acting IG at was the Deputy IG who is a strong ethical and principled leader. There was no change to our mission, focus, or independence, nor in our ability to conduct our work. To suggest that, merely because there was an acting IG, independence was inherently compromised is unfounded, bespeaks a lack of understanding of OIG standards and ethics, and is just wrong.” “The acting IG served as any IG would be expected to in the area of independence. No difference there.” An acting IG is independent. Nineteen OIG employees provided comments related to the acting IG’s independence, as noted in the following examples of individual comments: “Based on my experience, both acting IGs were career OIG employees understood and embraced independence.” “I felt the acting IG was very independent and did a fantastic job.” “All persons within the OIG are to be objective and independent, no matter their position.” “ acting IG the same level of independence that is expected of all IG employees.” “ acting IG is as independent as our previous and is not hesitant to report problems and weaknesses to Congress.” An acting IG and permanent IG follow the same independence standards. Six OIG employees provided comments related to the acting IG and permanent IG as having the same independence standards, as noted in the following examples of individual comments: “The acting is subject to the same standards.” “The acting IG is just as important and they adhered to all the laws and regulations as the IG.” “Acting or permanent, they are held to the same standards of independence.” An acting IG position is not less independent. Six OIG employees provided comments related to the acting IG position not being less independent and depending on the individual in the role, as noted in the following examples of individual comments: “Whether an acting IG is able to maintain independence is dependent upon the person holding the position and his or her confidence, strength of character, leadership capabilities and subject matter expertise. The same is true for IGs.” “It depends on the individual. If a particular acting IG is a strong person, who puts aside any desire to pander to the agency head in the hope of being made permanent, there would be no effect on his/her independence.” We also asked OIG employees to identify any additional challenges they experienced in relation to working under an acting IG. Overall, 83 employees provided written responses, and 4 of those responses were additional challenges related to OIG independence, as noted in the following examples of individual comments: “Having worked in OIGs and observed functioning in other OIGs, the acting IG issue seems serious. There are subtle pressures to go along with management. Few acting IGs deliberately decide to compromise their principles, but many seem to wind up doing so.” “Because the acting IG wanted to gain the support of others, was not independent.” “The one challenge I am concerned with an acting IG is if that person has applied for the IG position and will not commit to certain decisions that will negatively impact their opportunity to obtain the permanent position as IG.” We also asked OIG employees to provide suggestions on how the independence of the acting IG role could be improved. The majority of the 25 respondents who provided written comments to this question did not provide suggestions for improving the independence. The comments that provided suggestions are summarized below: Timely appoint an IG (4 respondents). Consult with other CIGIE IGs to help monitor and assess the acting IG based on clear criteria and expectations (1 respondent). Limit the amount of time an acting IG can serve (1 respondent). Bring in an acting IG from another agency for independence reasons or ensure that other acting positions are filled and the acting IG is not performing multiple roles (1 respondent). Prolonged IG vacancies have been the subject of congressional hearings because of the importance of these key oversight positions. Delays in the presidential nomination and Senate confirmation process for all positions filled by this process, including PAS OIGs, have also been the subject of recent academic studies. For example, a recent study that explored the failure of nominations and the delay in confirmation of successful nominations across recent administrations from 1981 to 2014, found that nominations for the IG position had about a 24 percent failure rate. Given that in recent years, certain OIGs have experienced prolonged IG vacancies, especially IGs that require presidential nomination and Senate confirmation, we asked the 52 surveyed permanent IGs to provide comments on their experience with the appointment process and any suggestions for improving the process and minimizing the duration of IG vacancies. Comments were provided by 45 permanent IGs in these areas, including eight suggestions to minimize the duration of IG vacancies, as noted in the following individual comments: “One thing that could be improved an agreement between the , Congress and on a format for information. I was required to provide essentially the same information (with small variations) three times. But the precise formatting and framing of the questions [asked of the nominees] was different in each case, taking time and creating the possibility of inconsistencies.” “A possible suggestion would be to improve the timeliness of the selection, vetting, and confirmation process of IGs, particularly given the current number of vacancies. IGs play a vital role in ensuring that government programs and operations are functioning efficiently and effectively, and greater emphasis on the part of the White House and Congress to nominate and confirm IGs in a timely manner would provide great benefit.” “I believe the process could be improved by streamlining the number of committees involved so that each nominee need only obtain approval from one committee.” “While I worked through the paperwork requirements efficiently, it was a tremendous lift and I wonder if all that is required is necessary and in the form it took. I found a good degree of duplication in what was asked of from the . . . and Senate. I think there are opportunities to streamline with better coordination.” “ a timeline from start to finish would be helpful. I also recommend that Congress prioritize IG confirmations above most other confirmations.” “Faster consideration and vote would be useful.” “The Senate be required to act on IG candidates within 90 days of their nomination by the President.” “Although I think it is very important for any IG to have a strong working relationship with the agency head, it seems inappropriate for the agency head to have a strong voice in selecting the nominee for a residentially appointed, Senate-confirmed IG who is supposed to provide independent oversight of the agency. I suggest changing the process to omit the pre-selection interview with the agency head and substitute instead a pre-nomination courtesy meeting.” We provided a draft of this report to CIGIE for comment and CIGIE shared the draft with the 64 OIGs active under the IG Act. CIGIE and the OIGs at the National Credit Union Administration and U.S. Election Assistance Commission provided written comments, which are discussed below and reprinted in appendixes II, III, and IV, respectively. CIGIE expressed appreciation for the review and analysis efforts that we conducted for the purposes of this report. CIGIE also noted some information regarding the Central Intelligence Agency IG and the Intelligence Community IG, which were outside the scope of our work. CIGIE stated that both IGs are PAS and that the Central Intelligence Agency IG position has been vacant for over 3 years. The National Credit Union Administration OIG stated that while it did not have a vacancy during the 10-year period we reviewed, it agreed that looking at this area to reduce IG vacancies is an important endeavor. The U.S. Election Assistance Commission OIG expressed concurrence with the facts as they pertain to its office and stated that the report will contribute to improving the appointment process for IGs. In addition, CIGIE and the OIGs at the Appalachian Regional Commission, Denali Commission, Department of Commerce, Department of Education, Department of Housing and Urban Development, Federal Deposit Insurance Corporation, General Services Administration, National Reconnaissance Office, and U.S. Election Assistance Commission provided technical comments, which we incorporated as appropriate. The remaining OIGs did not provide comments. We are sending copies of this report to the Executive Director of CIGIE and to the 64 IG Act offices listed in this report as well as interested congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. The objectives of this report were to determine (1) the status of inspector general (IG) vacancies as of the end of fiscal year 2017, and the number and duration of the IG vacancies for fiscal years 2007 through 2016, and (2) the views of the IG community on the impacts, if any, of IG vacancies on the Offices of Inspector General’s (OIG) ability to effectively carry out their duties, including views on independence and permanent IG suggestions for improvements in the appointment process. To address these objectives we included in our scope the 64 active OIGs that were established under the IG Act of 1978, as amended (IG Act). To determine the status of IG vacancies as of the end of fiscal year 2017, we obtained the vacancy data from the 64 OIGs active under the IG Act, and documented any changes for fiscal year 2017. To identify IG vacancies and changes for fiscal years 2007 through 2016, we first obtained vacancy data from the Council of the Inspectors General on Integrity and Efficiency (CIGIE). We interviewed CIGIE personnel to obtain an understanding of issues related to IG vacancies and to discuss the reliability of the vacancy data. Data obtained from CIGIE included the resignation dates of the permanent IGs, vacancy start and end dates, names of the acting IGs, names of newly appointed IGs, and whether each IG was presidentially appointed, Senate confirmed (PAS) or appointed by the head of a designated federal entity (DFE). We also obtained nominations from Congress.gov, which included information on nominated IGs and the status of those nominations. As part of our data reliability procedures, we confirmed the vacancy data with the 64 OIGs established under the IG Act. We reviewed and summarized the IG vacancy data and documented any changes in IG vacancies for fiscal years 2007 through 2016. In 2014, the IG appointment structure for the IGs of the National Security Agency and National Reconnaissance Office was changed from DFE to PAS. For the 10-year period under review, these two OIGs experienced vacancies during both their DFE and new PAS status. However, to avoid duplicating the agencies, we only counted the number and length of vacancies for each agency under the PAS IGs. To obtain the views of the IG community—specifically, permanent IGs, acting IGs, and employees working under an acting IG—on the impact that a prolonged IG vacancy can have on the OIG’s ability to carry out its duties effectively, including any impact on independence, we conducted web-based surveys of 54 IG Act OIGs. These surveys included both multiple choice and open-ended questions for written responses to obtain the views of the IG community on the impacts of vacancies, if any, and views on independence, challenges, and positive outcomes. The surveyed groups were as follows: Fifty-two permanent IGs serving as of August 22, 2017.We used both multiple choice questions and open-ended questions to obtain their views on the impact that an IG vacancy could have on the OIG’s ability to conduct its oversight, including any independence issues presented by acting IG. We also asked the permanent IGs to provide any suggestions for improvements in the appointment process. The survey was administered on the web from August 22, 2017, through September 29, 2017. The survey response rate of permanent IGs was 96 percent: 50 of the 52 permanent IGs completed the survey. Two permanent IGs did not respond to the survey. Nine acting IGs who had served for over 365 days from fiscal years 2014 through 2016. We used both multiple choice questions and open-ended questions to obtain their views on the impact that a prolonged vacancy could have on the acting IG’s ability to carry out his or her duties, including any impact on independence. The survey was administered on the web from August 22, 2017, through September 29, 2017. The survey response rate of acting IGs was 100 percent. While 14 acting IGs met our selection criteria, 4 have either retired or have since left the government and were not surveyed. The National Reconnaissance Office’s acting IG was excluded because of concerns regarding sensitive personally identifiable information. Of the 9 remaining acting IGs, 2 are now permanent IGs but provided responses for their acting IG tenure, which were included with those of the 7 acting IGs. In this report, we refer to all nine as acting IGs. A stratified random sample of 185 OIG employees consisting of 39 Senior Executive Service (SES) employees and 146 non-SES OIG employees, from OIGs with an acting IG in place for over 365 days from fiscal years 2014 through 2016. We used both multiple choice questions and open-ended questions to obtain the employee views about challenges related to working under an acting IG as compared to a permanent IG. The web-based survey was administered from September 11, 2017, through September 29, 2017. We had a weighted survey response rate of 71 percent; 133 of the sample of 185 employees completed the survey. Because we followed a probability procedure based on random selections, our OIG employee sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 10 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Confidence intervals are provided along with each sample estimate in the report. Estimates from the employee survey are generalizable to the population of employees from OIGs that had an acting IG in place for over 365 days from fiscal years 2014 through 2016. To minimize nonsampling errors, and to enhance data quality, we employed recognized survey design practices in the development of the questionnaire and in the collection, processing, and analysis of the survey data. To minimize errors arising from differences in how questions might be interpreted and to reduce variability in responses that should be qualitatively the same, we conducted pretests with permanent IGs, acting IGs, and employees. To ensure that we obtained a variety of perspectives on our survey questions, we randomly selected three permanent IGs, two acting IGs, and two employees for the pretests. Based on their feedback, we revised each survey in order to improve the clarity of the questions. An independent survey specialist within GAO also reviewed a draft of each survey prior to its administration. To reduce nonresponse, another source of nonsampling error, we followed up by e-mail or phone with the IGs, acting IGs, and employees who had not responded to encourage them to complete the survey. We did not survey a total of 10 IG Act OIGs. Nine OIGs were not surveyed because there was no permanent IG in position or the acting IG at the time of our survey did not meet our criteria of serving for more than 365 days from fiscal year 2014 through 2016. Those OIGs were at the U.S. Postal Service, Social Security Administration, Small Business Administration, Office of Personnel Management, National Security Agency, Federal Election Commission, Department of Housing and Urban Development, Department of Energy, and Department of Defense. In addition, one OIG, the National Reconnaissance Office, was not surveyed because of concerns regarding sensitive personally identifiable information. We also performed a two-step content analysis on the open-ended survey responses to summarize key ideas. In the first step, analysts read the respondents’ comments and jointly developed categories for them. In the second step, each open-ended response was coded by one analyst, and then those codes were verified by another analyst. Any coding discrepancies were resolved by the analysts discussing the comments and then agreeing on the code. In some cases, we edited responses for clarity or grammar. Views expressed in the open-ended questions may not be representative of all acting IGs, permanent IGs, or employees on given topics. We did not assess the merits of the individual comments or suggestions provided in response to the open-ended survey questions. We conducted this performance audit from February 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Elizabeth Martinez (Assistant Director), Carl Barden, Jason Kirwan, Christopher Klemmer, Jill Lacey, Won Lee, Yvonne Moss, and Lisa Rowland made key contributions to this report.", "summary": "The IG Act established OIGs to conduct and supervise audits and investigations; recommend policies to promote economy, efficiency, and effectiveness; and prevent and detect fraud and abuse. The Inspector General Empowerment Act of 2016 included a provision for GAO to review prolonged IG vacancies during which a temporary appointee has served as the head of the office. This report addresses (1) the status of IG vacancies as of the end of fiscal year 2017, and the number and duration of IG vacancies for fiscal years 2007 through 2016, and (2) the IG community's views about how IG vacancies impact the OIGs' ability to carry out their duties effectively, including views on the impact on independence. GAO analyzed data related to IG vacancies; interviewed officials from the Council of the Inspectors General on Integrity and Efficiency (CIGIE); and conducted a web-based survey to obtain the views of (1) the 52 permanent IGs serving as of August 22, 2017; (2) 9 acting IGs who had served in OIGs that had vacancies of over 365 days during fiscal years 2014 through 2016; and (3) a stratified random sample of employees in OIGs with IG vacancies of over 365 days during fiscal years 2014 through 2016. Survey response rates ranged from 71 percent to 100 percent. CIGIE and nine OIGs provided technical comments, which were incorporated as appropriate. For the 10-year period covering fiscal years 2007 through 2016, 53 of the 64 IG Act OIGs experienced one or more periods of IG vacancy with the cumulative durations ranging from about 2 weeks to 6 years. Plan and conduct work. Overall, at least eight of the nine acting IGs responded “no impact” for the questions in this area. The estimated percentage of OIG employees who believed that working under an acting IG has “no impact” ranged by question from 49 percent to 69 percent, “negative impact” ranged from about 8 percent to 24 percent, and “positive impact” ranged from 6 percent to 13 percent. Interact with agency management. The responses of seven of the nine acting IGs and 63 percent to 65 percent of OIG employees indicated that an acting IG position had no impact in this area. Approximately 16 percent of the OIG employees believed that there was a negative impact on timely access to documentation, while 7 percent believed that there was a positive impact. Managing OIG and personnel. Four of the nine acting IGs and about 36 percent of OIG employees responded that an acting IG position had a negative impact on employee morale. An estimated 44 percent of employees believed that working under an acting IG had no impact on employee morale while about 10 percent believed it had a positive impact. Four acting IGs also responded that it had a negative impact on office restructuring. With regard to independence, GAO's survey of permanent IGs found that while the majority who responded did not think that acting IGs are inherently less independent, they did indicate by a similar majority that an acting IG is less independent in appearance than a permanent IG, especially when the acting IG is applying for the IG position.", "document_type": "gao"}
{"report": "Border Patrol divides responsibility for southwest border security operations geographically among nine sectors, each with its own sector headquarters. Each sector is further divided into varying numbers of stations. For example, the Tucson sector has divided geographic responsibility across eight stations, seven of which have responsibility for miles of land directly on the U.S.-Mexico border. Stations’ areas of responsibility are divided into zones. Border Patrol refers to “border zones”—those having international border miles—and “interior zones”— those without international border miles. For example, as shown in figure 1, within the Tucson sector, the Sonoita station has only border zones, the Willcox station has only interior zones, and the other stations have a mix of both border and interior zones. According to Border Patrol officials, dividing stations into zones allows sectors to more effectively analyze border conditions, including terrain, when planning how to deploy agents. Zone dimensions are largely determined by geography and topographical features, and zone size can vary significantly. In fiscal years 2011 through 2016, Border Patrol was statutorily required to maintain a minimum of 21,370 full-time equivalent agent positions, but Border Patrol has faced challenges in staffing to that minimum level. As of May 2017, Border Patrol had about 19,500 agents on board. Additionally, in January 2017, an executive order called for the hiring of 5,000 additional Border Patrol agents, subject to available appropriations, and Border Patrol is aiming to have 26,370 agents by the end of fiscal year 2021. The Acting Commissioner of CBP reported in a February 2017 memo to the Deputy Secretary for Homeland Security that from fiscal year 2013 to fiscal year 2016, Border Patrol hired an average of 523 agents per year while experiencing a loss of an average of 904 agents per year. The memo cited challenges such as competing with other federal, state, and local law enforcement organizations for applicants. In particular, the memo noted that CBP faces hiring and retention challenges compared to DHS’s U.S. Immigration and Customs Enforcement (which is also planning to hire additional law enforcement personnel) because CBP’s hiring process requires applicants to take a polygraph examination, Border Patrol agents are deployed to less desirable duty locations, and Border Patrol agents generally receive lower compensation. Border Patrol headquarters, with input from the sectors, determines how many authorized agent positions will be allocated to each of the sectors. According to Border Patrol officials, these decisions take into account the relative needs of the sectors, based on threats, intelligence, and the flow of illegal activity. Each sector’s leadership determines how many of the authorized agent positions will be allocated to each station within their sector. Sector leadership also distributes newly assigned agents—those agents recently hired whom headquarters has assigned to the sector, or existing agents who are being transferred—to specific stations within the sector. Table 1 shows the number of authorized agent positions for each southwest border sector as well as the number of agents who were assigned to each of those sectors, as of May 2017. Once a sector assigns agents to a station, station officials assign agents to a shift. Most agents work 10-hour shifts, which allows for some overlap in time for the outgoing shift to relay key information to the incoming shift. Most agents work 5 days per week with 2 off duty days. Border Patrol has 17 FOBs that are established in forward or remote locations in five of the nine southwest border sectors to sustain Border Patrol operations. According to Border Patrol officials, the primary function of these facilities is to give the Border Patrol a tactical advantage by reducing response time to threats or actionable intelligence. Typically, agents are assigned for 7 days, during which they reside at the FOB and deploy to their assigned duties. FOBs allow agents to be pre-positioned at these locations, which reduces the portion of an agent’s shift that is spent in transit between the station and the patrol location. In addition, these facilities are intended to increase security awareness and presence in the border areas where they are located. FOBs are staffed by Border Patrol agents on temporary duty assignments from their permanent duty station. After their shift, they are normally required to remain at the FOB to rest, prepare for their next shift, and be available, if needed, to respond to operational issues. Figure 2 includes a photo of a FOB in the Rio Grande Valley sector. Five of the nine southwest border sectors—Yuma, Tucson, El Paso, Big Bend, and the Rio Grande Valley—have FOBs, whereas the other four sectors—San Diego, El Centro, Del Rio, and Laredo—do not. Border Patrol operates two types of checkpoints—permanent and tactical—that differ in terms of size, infrastructure, and location. While both types of checkpoints are generally operated at fixed locations, permanent checkpoints—as their name suggests—are characterized by their brick and mortar structures, that may include off-highway covered lanes for vehicle inspection and several buildings including those for administration, detention of persons suspected of smuggling or other illegal activity, and kennels for canines used in the inspection process. Figure 2 shows examples of permanent and tactical checkpoints we observed in the Rio Grande Valley and Tucson sectors, and figure 3 is a map depicting the locations of permanent checkpoints near the southwest border. Border Patrol agents at checkpoints have legal authority that agents do not have when conducting roving patrols away from the border. The United States Supreme Court ruled that Border Patrol agents may stop a vehicle at fixed checkpoints for brief questioning of its occupants even if there is no reason to believe that the particular vehicle contains illegal entrants, and also held that the operation of a fixed checkpoint does not require a judicial warrant. The Court further held that, provided the intrusion is sufficiently minimal so as not to require particularized justification, Border Patrol agents “have wide discretion” to refer motorists selectively to a secondary inspection area for additional brief questioning. In contrast, the Supreme Court held that Border Patrol agents on roving patrol may stop a vehicle only if they have reasonable suspicion that the vehicle contains aliens who may be illegally in the United States—a higher threshold for stopping and questioning motorists than at checkpoints. The constitutional threshold for searching a vehicle is the same, however, and must be supported by either consent or probable cause, whether in the context of a roving patrol or a checkpoint search. Probable cause can include a canine detecting something it is trained to detect (e.g., concealed people, narcotics). Figure 4 shows a Border Patrol canine team inspecting a vehicle at a checkpoint. We have previously reported on topics related to the defense in depth strategy, and specifically on checkpoints. In August 2009, we reported on the measurement of checkpoint performance and the impact of checkpoint operations on nearby communities, among other things related to checkpoints. In that report, we made recommendations to, among other things, strengthen checkpoint design and staffing and improve the measurement and reporting of checkpoint effectiveness, including measuring community impacts. CBP has implemented two of our recommendations from that report—specifically, Border Patrol explored and considered the feasibility of a checkpoint performance model and required that traffic volumes be studied and considered when designing new permanent checkpoints. Appendix I provides details on the status of all six recommendations from that report. We also reported in December 2012 on how Border Patrol manages personnel resources at the southwest border, including aspects of the defense in depth strategy, such as where apprehensions and seizures were occurring relative to the southwest border. That report focused on the Tucson sector—which at the time had the most Border Patrol apprehensions of the nine southwest border sectors—and compared data on agent deployment, apprehensions, and seizures from the Tucson sectors with data for other sectors. According to sector officials, decisions about agent deployment in terms of location and activity are based on multiple factors, including the availability of agents for a given shift, the geography in a station’s area of responsibility, and illegal traffic patterns. For example, when considering the various assignments that need to be filled for a given day, supervisors must take into account agents that are unavailable because they are off duty, on scheduled leave, or are scheduled to attend training. The geography in a station’s area of responsibility can also affect decisions about where to deploy available agents. For example, Border Patrol may have limited access to certain areas because of challenging terrain, limited or poor quality roads, or private ownership. Supervisors also review information about illegal traffic patterns in their areas of responsibility to determine where enforcement operations may be needed. One key factor in how Border Patrol makes deployment decisions at the station level is the overall number of agents available. Officials from all nine southwest border sectors cited current staffing levels and the availability of agents as a challenge for optimal deployment. Nationwide, as of May 2017, Border Patrol had nearly 1,900 fewer agents than authorized and has faced hiring and retention challenges in recent years. As shown in table 1 earlier, eight of the nine southwest border sectors were below their authorized agent staffing levels as of May 2017. As such, resources are constrained and station officials must make decisions about how to prioritize activities for deployment given the number of agents available. Within sectors, some stations may be comparatively more understaffed than others because of recruitment and retention challenges, according to officials. Generally, sector officials said that the recruitment and retention challenges associated with particular stations were related to quality of life factors in the area near the station—for example, agents may not want to live with their families in an area without a hospital, with low- performing schools, or with relatively long commutes from their homes to their duty station. This can affect retention of existing agents, but it may also affect whether a new agent accepts a position in that location. For example, officials in one sector said that new agent assignments are not based solely on agency need, but rather also take into consideration agent preferences. These officials added that there is the potential that new agents may decline offers for stations that are perceived as undesirable, or they may resign their position earlier than they otherwise would to pursue employment in a more desirable location. Supervisors make decisions about how to deploy agents based on the number of agents assigned to a shift who are available to work the shift on a particular day. On any given day, some agents will be off duty, in training, or have annual or sick leave scheduled, thereby reducing the number of agents available for deployment during a shift. To assess how Border Patrol has scheduled and deployed agents across the southwest border sectors, we analyzed the scheduled deployment data that supervisors entered into BPETS for fiscal years 2013 through 2016. Supervisors enter data into BPETS in advance of a shift to track expected time and attendance. Supervisors record work status by indicating whether an agent will be working, off duty, or otherwise not working (for example, on annual leave or scheduled sick leave), and for agents who are working, the supervisors also record an assignment to which the agent is expected to be deployed that day. We analyzed these assignments to determine how agents’ work time was distributed among activities in the following categories: Operations and Patrol refers to frontline activities that involve identifying and apprehending illegal entrants and identifying and seizing contraband. Some specific examples include linewatch, sign cutting, and checkpoint duties. Operational Support refers to activities, such as intelligence gathering or surveillance, that support frontline agents conducting operations and patrol activities. Processing refers to activities that occur after apprehending an individual, including transport, processing, detention, and removal. Legal Support and Litigation refers to activities, such as attending court proceedings, that involve prosecution of apprehended individuals. Training refers to activities that involve providing instruction, attending training, or completing qualification/certification tests. Administrative and Other Non-Enforcement Activities refers to activities other than those above, including public relations, hiring and recruitment, and policy and compliance. Our analysis included time that agents were scheduled to be off duty or on scheduled leave because scheduled time off can affect supervisors’ deployment decisions by reducing the number of agents available on a particular day. As shown in figure 5, agents were unavailable for deployment for a total of 42 percent of time (off duty time, scheduled non-work time, and training), and about 43 percent of agents’ time was scheduled for operations and patrol activities in the field. As an example, this means that a station with 300 total agents—with 100 agents assigned to each of three shifts—would have had on average about 42 of the 100 agents per shift unavailable because of planned time not working (off duty or other scheduled non-work time) or in training. Of the remaining 58 agents, on average, about 43 would have been scheduled to field-based operations and patrol activities, and 15 would have been assigned to other activities. Furthermore, it is important to note that BPETS deployment schedules reflect the scheduled availability and deployment of agents, rather than actual deployment. Actual availability or deployment may have differed because of changes in circumstances or other factors, and supervisors are not required to update BPETS to reflect these deployment changes. For example, an agent who was assigned to patrol the border might do so for part of a shift, but upon apprehending an illegal entrant the agent may spend some or all of the remainder of the shift processing the apprehended individual. According to Border Patrol officials, additional agents in the field may also be pulled from their patrol activities to conduct processing when large groups are apprehended. Border Patrol station officials also make deployment decisions based on the unique geographical factors in their area of responsibility, such as proximity to population centers and access to certain areas (including remote areas where FOBs are located). In addition, whether the station is responsible for the operation of checkpoints is another factor that station officials consider in making decisions about how to most effectively use available agents for operations and patrol activities in the field. In relatively populated areas close to the border, the window of time Border Patrol has to respond to illegal crossings may be shorter than in more remote areas where agents may have more time to apprehend illegal crossers. Thus, proximity to population centers is a factor that officials consider when deciding how many agents to deploy to particular locations within a station’s area of responsibility. In February 2017, we reported that Border Patrol officials said that populated urban environments offer an advantageous setting for illegal entrants because within seconds to minutes these entrants can blend in with the local U.S. community after crossing the border. Therefore Border Patrol has intended to divert illicit cross-border activities into more remote or rural environments, where illegal entrants may require hours or days to reach the nearest U.S. community. For example, El Centro sector officials told us that an outlet mall located at the immediate border posed a threat in terms of the limited time it would take illegal crossers to assimilate into the population. Similarly, officials in one station in the Rio Grande Valley sector identified a town that is very close to the Rio Grande River, and Border Patrol agents must aim to apprehend crossers within a two to three block distance to prevent crossers from blending in with residents of the town. Sector officials generally stated that stations prioritize deployment to areas along the immediate border. Border Patrol may have limited access to certain areas because of land ownership or limited road infrastructure, and this may affect decisions about how to deploy agents (if at all) to these areas. Some sectors consist primarily of privately owned land, and Border Patrol officials must obtain permission from the landowner, or a judicial warrant, to access any private lands further than 25 miles from the border. Border Patrol officials in one sector noted that some landowners do not want Border Patrol on their property. Additionally, the availability and condition of road infrastructure can make it challenging for agents to get to some locations. For example, officials in sectors with mountainous terrain cited challenges related to accessing and patrolling mountainous areas. In particular, officials in the Tucson sector noted that the sector includes seven mountain ranges and estimated that about 20 percent of the 262 miles of land border in the sector are inaccessible by vehicle. As a result, these officials said that agents deployed to those areas patrol by foot, horseback, and air. In some areas where there are terrain and road access challenges, Border Patrol may establish FOBs to facilitate access to areas near the immediate border and enable agents to spend a greater proportion of their shifts on patrol. Border Patrol sector officials in the five sectors that currently operate at least one FOB, as well as officials in one other sector that previously operated a FOB, said that FOBs are beneficial for maximizing patrol time in difficult to reach locations. Assigning agents to these locations on temporary duty assignments reduces the portion of an agent’s shift that is spent in transit between the station and the patrol location. For example, officials in one sector said that the transit time between the station and the FOB is a 5 to 6 hour round trip. Thus, transit to that location could comprise 50 to 60 percent of a shift for agents deployed to that patrol area if they were to report to the station each day prior to beginning their patrol duties. Instead, agents travel between the station and the FOB only as part of the first and last day of their multi-day assignment to the FOB, and on the days in between they are pre- positioned at the FOB to begin patrols at the start of their shift. Although FOBs can help facilitate access to some remote locations, there can also be associated challenges, and therefore, they may not be an effective solution in all cases to improving access to remote areas. For example, officials in one sector noted that Border Patrol had considered establishing a FOB to improve accessibility to that location, but there were challenges to securing the rights to access private property and providing for adequate facilities given that the area of interest did not have infrastructure to supply water to the FOB if it were to be built. In February 2016, the DHS Office of the Inspector General reported that although the challenge of supplying water to FOBs rarely causes Border Patrol to shut down a FOB, it is a frequent problem that often requires additional resources to resolve. Additionally, some remote or difficult to access locations may be located on private or tribal lands, which require Border Patrol to negotiate access and other aspects of FOB operations, or on wildlife refuges, which may have limitations regarding the types of infrastructure or operations in order to preserve the local habitat. Stations that have responsibility for checkpoints in their areas of responsibility consider checkpoint operations in their deployment decisions. Border Patrol’s checkpoints policy includes a recommended minimum number of agents to operate the checkpoint. The nature of a checkpoint—whether it is permanent or tactical—can also affect deployment. Permanent checkpoints are generally intended to be operational most of the time, meaning that stations with responsibility for permanent checkpoints generally assign at least the minimum number of agents to those checkpoints to ensure continuous operation. In contrast, tactical checkpoints are intended to be set up for short-term or intermittent use. Accordingly, a station can make a decision about whether to operate a tactical checkpoint based on a determination of whether it is more effective to staff the checkpoint or whether it is more effective to deploy those agents elsewhere. Stations with responsibility for both the immediate border and interior checkpoints must balance agent deployment across both responsibilities. In contrast, border stations that do not contain checkpoints in their areas of responsibility do not have to distribute agents between checkpoint and patrol activities. Similarly, interior stations that do not have responsibility for the border can prioritize checkpoints. Additionally, for stations with checkpoints, supervisors must determine how many agents, if any, to deploy to the areas around a checkpoint through which illegal entrants or smugglers may travel to circumvent the checkpoint (known as circumvention routes). We reported in August 2009 that Border Patrol policy highlights the need to detect and respond to circumvention activity, but at the time, officials stated that other priorities sometimes precluded positioning more than a minimum number of agents and resources in checkpoint circumvention routes. Similarly, as part of this review, sector officials said checkpoint circumvention routes may not be patrolled at all times because of the need to deploy agents elsewhere, including to the checkpoint itself to meet the minimum number of agents needed to keep the checkpoint operational. According to officials, in some locations, sensors and cameras assist with monitoring traffic in circumvention routes, and when technology detects traffic, agents can be deployed to respond. In our August 2009 report, we reported that checkpoint performance can be hindered by limited staffing at checkpoints. Border Patrol policy recommended the minimum number of agents for checkpoint operation, but sector managers may have had other priorities for staff placement, and thus stations may have only staffed checkpoints—and circumvention routes—with the minimum number of agents. Additionally, as part of that review, we found that design and planning documents for the planned Interstate 19 checkpoint in the Tucson sector did not include an estimate of the number of agents who would be deployed to address circumvention activity at the new checkpoint. We recommended that, in connection with planning for new or upgraded checkpoints, CBP should conduct a workforce planning needs assessment for checkpoint staffing allocations to determine the resources needed to address anticipated levels of illegal activity around the checkpoint. In January 2017, Border Patrol began construction of a new checkpoint facility on U.S. Highway 281 south of Falfurrias, Texas, that will replace the existing checkpoint. The current checkpoint has a maximum of five lanes of traffic, whereas the new checkpoint will have a maximum of eight lanes. Border Patrol provided us an estimate for the number of agents, supervisors, and canine units that are expected to be needed to operate the new checkpoint; however, the information provided lacked supporting details, such as a discussion of what data were collected and how the data were analyzed to determine how many agents would be needed to staff the checkpoint and the surrounding circumvention routes. Given existing staffing constraints, having an accurate workforce planning needs assessment is important to inform future considerations for how to deploy agents to address anticipated levels of illegal activity at and around the checkpoint. Therefore, we continue to believe this recommendation is warranted. Sector officials said they consider intelligence information—such as information about illegal traffic patterns and data on apprehensions and seizures; the types of threats in the area (e.g., illegal border crossing, drug smuggling); and transnational criminal organizations’ tactics, techniques, and procedures—when determining where to deploy available agents. Officials said they also receive information on suspected illegal traffic from community members, and stations may deploy agents to respond. From fiscal years 2013 through 2016, the nine southwest border sectors varied in how they distributed work time scheduled to activities in the six categories previously discussed—(1) operations and patrol, (2) operational support, (3) processing, (4) legal support and litigation, (5) training, and (6) administrative and other non-enforcement—although all the sectors scheduled the majority of agents’ time (between 61 and 77 percent) to operations and patrol activities. As shown in figure 6, the Rio Grande Valley sector scheduled the smallest percentage of agents’ work time to operations and patrol activities (61 percent) and the highest percentage of time to processing (13 percent). As discussed later in this report, the Rio Grande Valley had the highest number of apprehensions out of the nine southwest border sectors from fiscal year 2012 through 2016, thereby affecting the time needed for processing or otherwise attending to apprehended individuals. The scheduling data also show variations in the locations where sectors plan to deploy agents to operations and patrol activities in proximity to the border. Specifically, as shown in figure 7, the sectors ranged from scheduling 34 to 61 percent of operations and patrol time in border zones (for the Big Bend and Rio Grande Valley sectors, respectively) and from 17 to 52 percent of operations and patrol time in non-border zones (for the Del Rio and Big Bend sectors, respectively). In some cases, the data do not include a zone assignment, and sectors varied in what percentage of operations and patrol scheduling assignments did not have a zone assignment. Including a zone assignment is not required by Border Patrol policy, and headquarters and sector officials identified some possible reasons why an assignment may not include a zone. For example, officials said that an agent could be deployed to an activity that has responsibility for multiple zones or no specific zone, such as roving patrol, specialty units (such as an intelligence unit or special operations), or assisting CBP’s Air and Marine Operations. Officials from one sector noted that a zone may not be assigned in the data because supervisors assign them orally when agents arrive at the start of a shift, and this provides supervisors flexibility to make the assignments based on the most up-to-date information about traffic patterns. Border Patrol headquarters officials said that the reasons for variations in border zone deployment are the same as we previously reported in December 2012— specifically, differences in geographical factors among the southwest border sectors (such as varying topography, ingress and egress routes, and land access issues, and structural factors such as technology and infrastructure deployments) that can affect how sectors operate and may preclude closer deployment to the border. Sectors also varied in terms of the proportion of operations and patrol time scheduled for checkpoint-related activities. Across the nine southwest border sectors from fiscal year 2013 through fiscal year 2016, approximately 9.4 percent of agents’ time scheduled for operations and patrol was scheduled for checkpoint activities. However, the number of agent hours scheduled for checkpoint activities—and what percentage of operations and patrol time these hours represent—vary by sector because of differences in factors, such as the number of checkpoints in a sector, the relative size of checkpoints, and the overall number of agents in a sector. For example, as shown in table 2, the El Centro and Big Bend sectors scheduled a similar number of hours to checkpoint-related activities, but these hours represented different percentages of total scheduled operations and patrol activities time—13.9 percent and 21.0 percent, respectively—which partly reflects that the El Centro sector has almost double the number of agents and fewer checkpoints than the Big Bend sector. From fiscal years 2012 through 2016, 33 percent of southwest border apprehensions were made one-half mile or less from the border, and over this time period apprehensions increasingly occurred closer to the border, as shown in figure 8. Specifically, from fiscal years 2012 through 2016, apprehensions one-half mile or less from the border increased from 24 percent to 42 percent. During the same time period, the percentage of apprehensions occurring more than 20 miles from the border steadily dropped, from 27 percent in fiscal year 2012 to 15 percent of all apprehensions in fiscal year 2016. While all nine southwest border sectors exhibited this trend of an increase in apprehensions one-half mile or less from the border and a decrease in apprehensions farther than 20 miles from the border, the Rio Grande Valley sector had the greatest influence on the overall southwest border trend because that sector accounted for almost half (42 percent) of all southwest border apprehensions during this time period. Consistent with the overall trend for southwest border apprehensions in figure 8 above, the percentage of Rio Grande Valley sector apprehensions one-half mile or less from the border increased (from 27 percent in fiscal year 2012 to 48 percent in fiscal year 2016) and the sector’s percentage of apprehensions more than 20 miles from the border decreased (from 30 percent in fiscal year 2012 to 12 percent in fiscal year 2016). Appendix II provides more detailed information about trends in apprehensions by sector for fiscal years 2012 through 2016. According to Border Patrol officials and apprehension data, one key driver for apprehensions occurring closer to the border is the increasing number of apprehensions of children (either unaccompanied or as part of family units) from countries other than Mexico. We have previously reported that CBP officials have attributed high apprehension rates in the Rio Grande Valley sector to the high number of unaccompanied children and adults with children, many of whom turn themselves in to Border Patrol without attempting to evade detection. Officials said children are often told by smugglers to wait in specific locations where agents frequently patrol so that they will be found. According to Border Patrol officials, persons apprehended from Central America are often fleeing violence, and once apprehended they may assert claims for asylum in the United States. As shown in table 3, apprehensions of individuals, particularly children, from Central American countries (specifically, El Salvador, Guatemala, and Honduras) increased, while apprehensions of Mexicans, including children, decreased. In particular, in the Rio Grande Valley sector, the number of children apprehended from El Salvador, Guatemala, and Honduras increased almost tenfold, from 6,869 in fiscal year 2012 to 60,084 in fiscal year 2016. Such apprehensions also increasingly occurred closer to the border. In fiscal year 2016, Border Patrol apprehended 36,882 children from these countries (about 61 percent) one-half mile or less from the border, compared to 1,830 (about 27 percent) in fiscal year 2012. Although other sectors accounted for smaller percentages of overall southwest border apprehensions, all sectors saw notable increases in the percent of apprehensions who were children from Central America and who were apprehended closer to the border. Border Patrol officials said other factors may also have contributed to the change in apprehension patterns, such as changes in where patrols occurred during the time period we analyzed. From fiscal year 2012 through fiscal year 2016, seizure locations remained roughly the same, with between 64 and 70 percent of seizures occurring 10 or more miles from the border each year and between 9 percent and 11 percent of seizures occurring one-half mile or less from the border each year, as shown in figure 9. Trends within individual sectors varied, but unlike with apprehensions, no single sector dominated the proportion of seizures to strongly influence the overall pattern for the southwest border. The greatest number of seizures during the 5 fiscal years occurred in the Tucson, Big Bend, and Rio Grande Valley sectors (34, 19, and 16 percent of all seizures respectively). These sectors each had different distributions of where seizures occurred, as shown in figure 10. In particular, about 1 percent of seizures in the Big Bend sector occurred within 1 mile of the border, compared to 13 percent of seizures in the Tucson sector and 37 percent of seizures in the Rio Grande Valley sector. Appendix III provides more detailed information about trends in seizures by sector for fiscal year 2012 through fiscal year 2016. According to our analysis of Border Patrol data, checkpoints accounted for about 2 percent of apprehensions and almost half of seizures in southwest border sectors. However, determining the extent to which apprehensions and seizures farther from the border are attributable to checkpoints is difficult because of data quality issues that have persisted since we previously reported on checkpoints in August 2009. In that report, we found that Border Patrol had established a number of measures for checkpoint performance to inform the public on program results and provide management oversight, including measures related to apprehensions and seizures at checkpoints and on circumvention routes. However, we reported that information gaps and reporting issues hindered public accountability and that inconsistent data collection and entry hindered Border Patrol’s ability to monitor the need for program improvement. Specifically, we found that a lack of management oversight and unclear checkpoint data collection guidance resulted in the overstatement of checkpoint performance results in agency performance reports, as well as inconsistent data collection practices at checkpoints. For example, officials at some checkpoints were including apprehensions that occurred within a 2.5-mile radius of the checkpoints in their reporting of apprehensions at checkpoints, which led to inconsistent reporting across checkpoints. We reported that the lack of oversight and unclear data collection guidance hindered management’s ability to monitor the need for program improvement. We therefore recommended, among other things, that Border Patrol establish internal controls for management oversight of the accuracy, consistency, and completeness of checkpoint performance data. In response to our recommendations, Border Patrol issued several memoranda in 2009 and 2010 related to the collection of checkpoint data, including guidance intended to distinguish between apprehensions and seizures occurring at checkpoints compared to those occurring in circumvention routes. In particular, these memoranda stated that: “At the checkpoint” is defined as the area including the checkpoint itself and the roadway prior to the checkpoint marked with cones and/or warning signs related to checkpoint operations (which, according to Border Patrol’s checkpoint policy, are to begin on the roadway one-half mile from the checkpoint itself). Apprehensions and seizures occurring at a checkpoint are to be recorded by selecting the appropriate checkpoint location from a dropdown list of landmarks (landmark data field). “Circumvention” is defined as “any deviation from a normally used route of egress in order to avoid detection by a checkpoint,” and if an individual was apprehended while attempting to circumvent a checkpoint, the apprehension is to be recorded by marking a checkbox labeled “Circumvention App?” (There is no data field for seizures that indicates that Border Patrol seized contraband from someone attempting to circumvent a checkpoint, but the seizure can be associated with an apprehension or arrest record for the person carrying the contraband, and the apprehension or arrest record may have the “Circumvention App?” box checked.) However, as discussed below, these memoranda have not fully addressed our recommendation because our analysis indicates that issues persist regarding the accuracy and consistency of data on checkpoint apprehensions and seizures. These issues continue to affect how Border Patrol monitors and reports on checkpoint performance results. According to Border Patrol officials, since the implementation of these memoranda, Border Patrol has reported on apprehensions and seizures at checkpoints based solely on the landmark data field. Specifically, an apprehension or seizure event is reported as having occurred at a checkpoint if the landmark associated with the event corresponds to the landmark for a checkpoint (checkpoint landmark). In September 2016, the Border Patrol Chief testified before a congressional committee that Border Patrol apprehended 8,503 individuals and seized over 75,000 pounds of drugs at checkpoints nationwide in fiscal year 2015, and the officials responsible for overseeing and analyzing the data said that these numbers were generated by determining the number of apprehensions and seizures associated with a checkpoint landmark. Furthermore, CBP’s fiscal year 2018 congressional budget justification noted that measurement of checkpoint activities—such as apprehensions at checkpoints—can gauge checkpoint operational effectiveness and provide insight into the effectiveness of the Border Patrol’s overall national border enforcement strategy. CBP reported in the budget justification that apprehensions at checkpoints ranged from 1.34 to 2.52 percent of nationwide apprehensions across fiscal years 2013 through 2016. To assess Border Patrol’s efforts to implement our August 2009 recommendation and determine the extent to which Border Patrol’s reporting of checkpoint statistics provides accurate information about enforcement actions at and around checkpoints, we analyzed apprehension and seizure data from fiscal years 2013 through 2016. For example, as shown in table 4, an apprehension or seizure event that occurred one-half mile or less from a checkpoint (according to the GPS coordinates of the event) and that was also associated with the nearest checkpoint landmark was considered category 1. Our analysis of Border Patrol data, as shown in table 5, indicates that at least 31,639 apprehensions and 30,449 seizures—those that are in category 1—occurred at checkpoints from fiscal years 2013 through 2016 based on both the GPS coordinates and the landmarks associated with those apprehensions and seizures. These apprehension and seizure events would be considered as occurring “at checkpoint” for Border Patrol reporting purposes because a checkpoint landmark was associated with the event. However, for the 19,759 apprehensions and 1,182 seizures in category 2—which are not included in Border Patrol’s reporting—it is unknown what proportion should be considered “at a checkpoint.” This is because for each of these apprehensions and seizures, the associated landmark does not correspond to the nearest checkpoint landmark, even though the GPS coordinates indicate that these apprehensions and seizures occurred one-half mile or less from a checkpoint location. Border Patrol officials said that one reason why the checkpoint landmark might not be indicated for apprehensions and seizures that occur one-half mile or less from a checkpoint is if the checkpoint is nonoperational at the time. However, our analysis suggests that not all apprehensions and seizures recorded in category 2 would reflect instances of checkpoints being non- operational. For example, about 30 percent of apprehensions that were one-half mile or less from the Falfurrias, TX, checkpoint (4,278 of 14,345 apprehensions) did not use the landmark for that checkpoint. Border Patrol officials in the Rio Grande Valley sector said the Falfurrias checkpoint is rarely closed, so the checkpoint being closed does not fully explain why the relevant checkpoint landmark was not used. Because Border Patrol’s policies do not provide guidance about recording data differently when a checkpoint is operational or nonoperational, it is unclear what proportion of apprehensions or seizures in category 2 reflect inconsistent application of Border Patrol’s guidance versus instances of a checkpoint being nonoperational. There are also inconsistencies in how Border Patrol is recording and reporting on apprehensions and seizures on potential circumvention routes. Events in category 3 appear to have occurred in circumvention routes rather than at checkpoints—they occurred farther than one-half mile from a checkpoint, and thus do not fit Border Patrol’s definition of an apprehension that occurs “at a checkpoint”—but because they are associated with a checkpoint landmark, Border Patrol’s reporting of events at checkpoints includes these apprehensions and seizures. Additionally, officials responsible for compiling checkpoint data said that they have not analyzed the use of the “Circumvention App?” checkbox to separately determine apprehensions that occur around checkpoints. Although the GPS coordinates and associated landmarks suggest that apprehensions in category 4 are not related to checkpoints, there were over 27,000 apprehensions in this category that had the “Circumvention App?” box checked. However, these apprehensions have not been included in statistics related to checkpoints because Border Patrol’s reporting to date has focused on events associated with checkpoint landmarks and has not separately analyzed or reported the number of apprehensions for which the “Circumvention App?” box was checked. In doing so, Border Patrol’s reporting does not differentiate between apprehensions that occurred at versus around a checkpoint. Border Patrol officials agreed that the agency’s policies could better differentiate between these areas and how to record data for events that occur in each location. Examining apprehensions specific to an individual checkpoint further illustrates the inconsistencies in data recorded for checkpoints. Figure 11 shows how apprehensions at and around one checkpoint have been recorded using GPS coordinates and landmarks, in relation to the one- half mile radius around the checkpoint. Border Patrol’s methodology for determining the number of apprehensions and seizures at checkpoints—which counts only apprehensions and seizures associated with checkpoint landmarks—may result in overstating or understating apprehensions and seizures that occurred at checkpoints; however, the precise number of apprehensions and seizures that occurred at checkpoints cannot be determined because of the data inconsistencies noted above. For example, Border Patrol’s reporting—such as in the Border Patrol Chief’s testimony or CBP’s fiscal year 2018 budget justification—may overstate apprehensions at checkpoints by including apprehensions in category 3, while it may understate apprehensions by not including some portion, or all, of the apprehensions in category 2. For the 4 fiscal years of data we analyzed, this means that Border Patrol’s methodology for attributing apprehensions to checkpoints would potentially overstate by 1,746 apprehensions (about 0.1 percent of total southwest border apprehensions) and potentially understate by as many as 19,759 apprehensions (about 1.2 percent of total southwest border apprehensions). Although these numbers represent relatively small percentages of total southwest border apprehensions, they are important for the measurement of checkpoint apprehensions given that Border Patrol has generally reported that about 2 percent of apprehensions occur at checkpoints, and in particular, adding 1.2 percentage points to the reported 2 percent would increase the reported contributions of checkpoints by about 50 percent. Although Border Patrol issued guidance in 2009 and 2010 in response to our recommendation, our analysis demonstrates that this guidance does not provide sufficient clarity on how data are to be recorded, and as a result data quality issues have persisted. For example, Border Patrol’s guidance does not indicate what landmark should be used when an agent apprehends an individual who was attempting to circumvent a checkpoint. Additionally, Border Patrol has not provided sufficient oversight of the accuracy, consistency and completeness of checkpoint data since the guidance was issued. In July 2013, Border Patrol issued a memorandum to establish the Checkpoint Program Management Office (CPMO), and the memorandum tasked CPMO with overseeing checkpoint data quality and accuracy, among other things. However, CPMO was not officially formed until the summer of 2016 when we began this review. Officials noted that while Border Patrol staff had been consistently assigned to oversee checkpoint data as a collateral duty, these assignments were not within an officially formed CPMO and there was no centralized oversight of checkpoint data or performance. The Associate Chief responsible for overseeing CPMO told us he had not been aware of the memorandum establishing CPMO until we requested checkpoint policies as part of this review, and he explained that CPMO had not been formally established under his predecessor at the time of the July 2013 memorandum. In late summer 2016, the Associate Chief formally established CPMO with the two Border Patrol agents who were, at the time, assigned part- time to oversee checkpoints. However, the CPMO establishing memo called for two full-time staff members, and one of the staff assigned to CPMO part-time moved to another position within Border Patrol several months later. The first full-time staff person was assigned to CPMO in January 2017. In March 2017, CPMO officials said they agreed with our findings regarding inconsistent recording of checkpoint data, and they said they have drafted a policy to provide additional guidance, including how to distinguish how data are recorded for apprehensions and seizures that occur at the checkpoint versus around the checkpoint. The Assistant Chief for CPMO, in consultation with sector and data analysis officials, has drafted additional guidance for recording apprehensions and seizures data in a manner that differentiates between events that occurred at versus around checkpoints. According to this official, this guidance will be included in a larger update to Border Patrol’s checkpoint policy because the checkpoint policy was last updated in 2003. Border Patrol officials said they expect the updated checkpoint policy with additional data entry guidance and procedures will be in place by March 2018, following Border Patrol and CBP management review and approval and programming changes to Border Patrol’s data systems. Having quality control procedures in place to accurately document apprehensions and seizures that occur at and around checkpoints is important to enable Border Patrol to measure checkpoint effectiveness and to make better deployment decisions about the extent to which circumvention routes should be staffed. Distinguishing between the locations of apprehensions and seizures, relative to checkpoints, would provide more visibility into illegal traffic patterns at and around checkpoints that can be used for staffing and other resource decisions. Until revised internal control practices are in place, including data collection guidance and sufficient oversight of the recording of the data, our 2009 recommendation that Border Patrol establish internal controls for management oversight of the accuracy, consistency, and completeness of checkpoint performance data remains warranted. As part of our regular follow up on implementation of our recommendations, we will monitor Border Patrol’s progress in issuing and implementing the planned update to its checkpoint policy. In addition to analyzing where apprehensions and seizures occurred, we analyzed marijuana seizure data to determine how seizures that occurred at checkpoints compared to those that occurred at other locations. As shown in figure 12, out of the 30,449 seizures that occurred at checkpoints, at least 12,214 (40 percent) were 1 ounce or less of marijuana seized from U.S. citizens. In contrast, seizures occurring at non-checkpoint locations were more often higher-quantities seized from aliens. For example, more than three-quarters of marijuana seizures at non-checkpoint locations were of over 50 pounds (25,792 out of 33,477 seizures). (Appendix III includes additional detail on the distribution of marijuana seizures by quantity seized.) Border Patrol officials said that the primary purpose of checkpoints is to enforce immigration laws, but agents at checkpoints are also expected to take action when they incidentally encounter violations of other federal laws. In particular, they noted that when a trained canine alerts agents to the presence of a concealed human or substance the canine was trained to detect, agents are required to respond to the alert. Based on the canine alert, agents do not know until they conduct a search of the vehicle what the canine detected (concealed human or illicit substance) or what quantity of a substance might be present—and therefore, agents cannot determine prior to an inspection whether the occupants of the vehicle are travelling with what would generally be considered a personal use quantity of a substance or whether they are carrying larger quantities potentially with the intent to distribute, dispense, or manufacture. Members of state and local law enforcement and business and community groups that we spoke to generally support Border Patrol’s efforts, but some raised concerns about checkpoint operations and the broader defense in depth strategy. Members of all three community groups we met with during our visits to the Rio Grande Valley and Tucson sectors generally supported Border Patrol. Additionally, officials from law enforcement agencies we interviewed generally said they had a positive working relationship with Border Patrol and that Border Patrol has played a role in limiting cross-border illicit activity in their communities. For example, one law enforcement official from the Tucson sector said that the community would be overwhelmed without Border Patrol’s efforts in the area, and another said that without the defense in depth approach, illegal activity would likely be worse, although this latter official noted there can be communication and coordination challenges in working with Border Patrol. Some residents and law enforcement officials we met with in the two sectors we visited said that they support Border Patrol’s use of checkpoints. For example, the leader of one community group said the group’s members viewed checkpoints positively, and members from another group said that some residents in their community believe that their local checkpoint is making the community safer through law enforcement presence. However, Border Patrol’s defense in depth deployment strategy may also result in communities ranging up to 100 miles from the border experiencing effects associated with Border Patrol enforcement actions to interdict illicit cross-border activity. In April 2015, we reported that illicit cross-border activity can negatively affect business and the safety of farms and ranches on or near the border. Although data are limited to support the extent of criminal activity tied to cross-border illegal traffic, available data indicate that cross-border traffic affects areas beyond the immediate border. For example, in fiscal year 2016, 20 percent of all Border Patrol apprehensions and 77 percent of all seizures occurred more than five miles from the border. Therefore, illegal crossers and drug smugglers may sometimes travel near or through communities and private property in areas that are not along the immediate the border, prior to being apprehended by Border Patrol. For example, members of one community group we interviewed said that there are hundreds of illegal crossers and smugglers who attempt to circumvent the local checkpoint by walking through the surrounding ranches. Echoing views from ranchers we interviewed for a December 2012 report, members of one community group we spoke with as part of this review said that they would like to see Border Patrol direct more enforcement efforts at the immediate border to prevent illegal crossers from entering their communities or properties. Officials we interviewed from two sheriffs’ departments in nearby counties said they have heard similar views from residents. Community groups and law enforcement officials we met with as part of this review identified concerns regarding private property damage and public safety resulting from illegal cross border traffic, similar to concerns we have reported in the past. Private Property Damage: Community members have reported damage to private property suspected to have occurred as a result of individuals trying to illegally cross the border or Border Patrol enforcement actions. Border Patrol officials we spoke with in six of nine sectors cited concerns from community residents about illegal crossers and Border Patrol agents traveling on their private property. Additionally, officials from two sheriffs’ departments told us that ranchers in their communities have voiced complaints about damage on their properties resulting from illegal crossers or Border Patrol activity. These concerns are similar to concerns we identified in an April 2015 report, in which we reported that landowners had reported damage to private property—including broken gates, destroyed crops, and injured or lost livestock—as a result of individuals trying to illegally cross the border (see fig. 13). In addition to identifying damage suspected to be caused by illegal crossers, landowners we spoke with as part of that review also reported damage that may have resulted from Border Patrol’s enforcement efforts. We previously reported in April 2015 that some landowners had filed tort claims alleging damage to their property as a result of the conduct of an employee of Border Patrol or any CBP component that was acting within the scope of his or her official duties. Examples of such claims include CBP vehicles crashing through properties and damaging fences, gates, irrigation pipes, and crops. Public Safety: Additionally, according to Border Patrol and local law enforcement officials, illegal entrants and smugglers could pose a public safety risk to communities along the border or further inland. We previously reported in December 2012 that ranchers in the Tucson sector said they were most concerned about safety. Officials from law enforcement agencies that we interviewed as part of this current review said that crime resulting from illicit cross-border activity has affected border communities. In particular, law enforcement officials we spoke with cited drug smuggling (including recruiting juveniles to engage in drug smuggling), home invasions, burglaries, and vandalism. The effects related to public safety and private property associated with Border Patrol’s defense in depth strategy may be felt more acutely in communities near checkpoints; in particular, one of Border Patrol’s stated goals for checkpoints is to deter and disrupt smuggling efforts, and as a result, smuggling traffic may be pushed onto checkpoint circumvention routes, which may pass through these communities. We previously reported in August 2009 that Border Patrol officials acknowledge that this approach can adversely impact communities near checkpoints, and said that sometimes there were not enough agents in place to deter illegal activity or apprehend trespassers in surrounding areas. As noted earlier in this report, this remains true—checkpoint circumvention routes are not always patrolled. We are unable to measure the extent Border Patrol’s defense in depth strategy has affected communities through measures such as crime rates or effects on property values. As part of previous reviews, we have reviewed information related to the impacts of illegal cross-border activity on local communities, including reports of property damage (such as tort claims) and available crime data. As a result, we have previously reported that methodological challenges existed and data were unavailable to substantiate the extent to which illegal border crossings and drug smuggling have affected local communities in terms of public safety and private property damage. In August 2009 we reported that a comparison of community impacts for the time before and after a checkpoint was established would require a complete set of historical data to develop a baseline understanding, before interpreting factors that can change the baseline. However, there are limited data sets for specific geographic areas around checkpoints, with county level data being the smallest possible geographic area, in many cases. For instance, in terms of crime data, officials from one police department in the Tucson sector told us that they did not track criminal activity committed by illegal entrants. In 2011, as part of Border Patrol’s efforts to implement our August 2009 recommendations, Border Patrol requested a study to identify the effects of checkpoints on nearby communities and develop an approach to measure these effects, and this study also noted data limitations that affect conclusions regarding the effects of checkpoints on surrounding communities. Implementing two of our August 2009 recommendations could help Border Patrol collect relevant data to examine the community effects of checkpoint operations specifically and take corresponding actions to respond to ongoing community concerns. In August 2009 we reported that Border Patrol had previously identified performance measures to examine the effect checkpoint operations have on quality of life in the surrounding communities, but the agency was not using these measures. As a result, Border Patrol was hindered in its ability to assess the impact of checkpoints on local communities. We recommended that Border Patrol (1) implement quality of life measures identified by Border Patrol to evaluate the impact that checkpoints have on local communities; and (2) use the information generated from the quality of life measures in conjunction with other relevant factors to inform resource allocations and address identified impacts. Border Patrol agreed with the recommendations but has not yet fully implemented them. In 2010, Border Patrol asked a DHS Center of Excellence, co-led by the University of Arizona and the University of Texas at El Paso, to conduct a study to help address our recommendations. The resulting December 2012 report made several recommendations to Border Patrol on evaluating the impact of checkpoints on local communities using quantitative measures and with maintaining regular contact with the public to elicit opinions on experiences with the checkpoint, both positive and negative. Border Patrol has since reported plans for implementing our recommendations but has revised the estimated completion dates several times. (See appendix I for more information about Border Patrol’s planned actions to address these recommendations.) As discussed later in this report, Border Patrol provides opportunities for members of the community to express concerns related to the defense in depth strategy since our previous review of checkpoint operations in 2009, however, some residents and local law enforcement officials near checkpoints we spoke to for this review remain concerned about the effects checkpoints may have on their communities. Measuring performance, such as quality of life measures related to checkpoints, would give Border Patrol critical information on which to base decisions for improving checkpoint operations. Therefore, we continue to believe that our recommendations remain warranted. Border Patrol uses a variety of methods to collect feedback from community members related to the defense in depth strategy. It receives feedback through direct communication and informal relationships, which are facilitated in part by communication and outreach events organized by sector Border Community Liaison (BCL) programs. Border Patrol initiated the BCL program in April 2011 in an effort to enhance Border Patrol’s relationships with landowners and the community as a whole. According to the July 2012 CBP implementation memo, the BCL program’s function and associated positions are intended to enhance CBP’s interaction with communities and provide a fact-based understanding of community views, concerns, and issues as they relate to CBP. According to Border Patrol officials, sector BCL agents interact with members of the local community to address complaints and also introduce the community to how Border Patrol operates so that there is a better understanding and relationship between Border Patrol agents and the surrounding community. Each sector has its own BCL program designed to address complaints and improve the relationship between Border Patrol agents and the surrounding community, and the efforts within each program range from official events to informal communications. Sector and station BCL programs organize official events such as cook-offs, stakeholder events, and open houses where community members learn about Border Patrol’s activities and have the opportunity to share their concerns. As an example of informal communications, Border Patrol officials from one station in the Rio Grande Valley sector told us that agents and officials make an effort to be very approachable to community members, as demonstrated through actions such as the station’s patrol agent in charge providing a personal cell phone number to local residents to facilitate direct communication. In addition, every southwest border sector uses the Compliments and Complaints Management System (CCMS). The CCMS is a computerized system that allows users to log and track complaints or compliments. The CCMS is meant to identify trends and patterns in community comments to better address complaints and compliments, but Border Patrol officials have questioned its usefulness. Following a pilot program, in January 2017, CCMS became a permanent program to all CBP offices that have interaction with the public. Comments can be entered directly by residents or by Border Patrol officials who have received feedback from the community. According to the memo, CBP also standardized the response time for compliments and complaints entered into the system throughout the agency. Agency officials are to send an acknowledgment of receipt within 5 business days and complete responses within 45 days. Officials from six of nine sectors said they generally preferred the less formal methods of interacting with the community, as discussed above, compared to the CCMS. Some of the reasons they identified included that community members often prefer to speak with an agent instead of inputting their concern into a system, very few complaints or compliments are logged into the CCMS by residents, the system is not user friendly, and it is rarely used for data recall. According to a report generated by Border Patrol headquarters, there were 599 comments entered into the CCMS nationwide in calendar year 2016. Of those, 81 were compliments. Border Patrol takes various actions to respond to community concerns it has identified, including considering the input of local stakeholders when making deployment decisions. For example, officials from the Tucson sector told us that agents engage with ranchers who have game cameras on their properties so station officials can consider the flow of illegal entrants or drug smugglers on their properties when making deployment decisions. Moreover, officials from the Rio Grande Valley sector said that sector and station officials take into account population centers when making deployment decisions to attempt to deploy agents in positions to apprehend entrants prior to reaching population centers because once they enter the general population they are more difficult to detect and apprehend. Additionally, community members and Border Patrol officials told us that agents respond to calls of suspected illegal cross-border activity on private lands. Border Patrol has various mechanisms in place for community members to notify agents of suspected activity. For example, one station in the Rio Grande Valley sector created a mobile phone application and released a limited number of licenses for ranchers and landowners to take a picture if they see suspicious activity and send it directly to Border Patrol. Moreover, landowners in the Rio Grande Valley sector told us that Border Patrol has been responsive to calls when something out of the ordinary has been spotted on private land. We provided a draft of this report to the Department of Homeland Security for their review and comment. In its comments, reproduced in appendix IV, DHS provided an update on planned actions to implement the four open recommendations from our August 2009 report. DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. In August 2009, we reported on and made recommendations regarding the measurement of checkpoint performance and the impact of checkpoint operations on nearby communities, among other things related to checkpoints. In comments provided on our August 2009 report, the Department of Homeland Security (DHS) concurred with those recommendations. This appendix provides additional detail regarding the status of the recommendations from that report, including two recommendations that U.S. Customs and Border Protection (CBP) has implemented. Recommendation 1: Establish milestones for determining the feasibility of a checkpoint performance model that would allow the Border Patrol to compare apprehensions and seizures to the level of illegal activity passing through the checkpoint undetected. Status: Closed – Implemented In August 2009, we reported that the Border Patrol had developed some useful measures of checkpoint performance, but the agency lacked a model or method that would allow the agency to compare the number of apprehensions and seizures made at the checkpoint to the level of illegal activity passing through the checkpoint undetected. The lack of this information challenged the Border Patrol’s ability to measure checkpoint effectiveness and provide public accountability. In 2010, Border Patrol asked a DHS Center of Excellence to study checkpoint performance, including developing a checkpoint performance model, and the DHS Center of Excellence issued its report in December 2012. In June 2013, Border Patrol reported that the agency had considered the checkpoint performance models proposed by the National Center for Border Security and Immigration—the DHS Center of Excellence—but determined it was not feasible to use the proposed models due to cost prohibitions and other factors. This action was responsive to the intent of our recommendation to study the feasibility of a checkpoint performance model, and this recommendation has been closed as implemented. Recommendation 2: Establish internal controls for management oversight of the accuracy, consistency, and completeness of checkpoint performance data. In August 2009, we reported on inconsistencies in the way agents collected and entered performance data into the checkpoint information system. As a result, data reported in the system were unreliable. In October 2009, Border Patrol issued a memorandum specifying which data fields agents should use to indicate that an enforcement activity occurred at a checkpoint (or on a circumvention route, for apprehensions), and in January 2010 Border Patrol issued an additional memorandum on checkpoint data integrity that further specified definitions for “at the checkpoint” and “circumvention.” In subsequent years, Border Patrol officials reported to us that they were taking steps to develop a redesigned checkpoint information system, implement a data oversight procedure, and provide training, and estimated completion dates were revised several times. In its comments on this report (see app. IV), DHS stated that it expects to issue an updated checkpoint policy, including updates on data entry guidance and oversight to address data integrity, by February 28, 2018. As discussed earlier in this report, data quality issues have persisted, and without established internal controls, the integrity of Border Patrol’s performance and accountability system with regard to checkpoint operations remains uncertain. Recommendation 3: Implement the quality of life measures that have already been identified by the Border Patrol to evaluate the impact that checkpoints have on local communities. Implementing these measures would include identifying appropriate data sources available at the local, state, or federal level, and developing guidance for how data should be collected and used in support of these measures. In August 2009, we reported that Border Patrol had identified some measures to evaluate the impact that checkpoints have on local communities in terms of quality of life, but Border Patrol had not implemented the measures. As a result, the Border Patrol lacked information on how checkpoint operations could affect nearby communities. In October 2009, the Border Patrol reported that it was reevaluating its checkpoint performance measures, including quality of life measures. In December 2012, the DHS Center of Excellence completed a study for CBP on checkpoints. This study made several recommendations to Border Patrol on evaluating the impact of checkpoints on local communities using quantitative measures and with maintaining regular contact with the public to elicit opinions on experiences with the checkpoint, both positive and negative. At the time, the Border Patrol noted it intended to develop quantitative measures on community impact, such as on public safety and quality of life, using information collected in the new checkpoint information system it was planning. Border Patrol also noted that it was considering the budgetary feasibility of (1) conducting a survey of checkpoint travelers to gather detailed information about the community and impact metrics that are of highest importance to the public and (2) implementing an expedited lane for regular and pre-approved travelers. In July 2014, the Border Patrol revised the expected completion date for its actions to address this recommendation to March 2015, noting that it planned to request ideas from the field commanders on what the agency could measure that would accurately depict the impact of checkpoints on the community. In June 2015, Border Patrol revised the expected completion date to September 2015. In September 2016, officials from Border Patrol’s Checkpoint Program Management Office said quality of life measures had not been implemented and they were not aware of any plans to develop and implement such measures. In its comments on this report (see app. IV), DHS stated that it expects to establish performance measures related to community impacts by February 28, 2018. As noted earlier in this report, residents and local law enforcement officials near checkpoints we spoke to for this review remain concerned about the effects checkpoints may have on their communities. Measuring performance, such as quality of life measures related to checkpoints, would give Border Patrol critical information on which to base decisions for improving checkpoint operations. Recommendation 4: Use the information generated from the quality of life measures in conjunction with other relevant factors to inform resource allocations and address identified impacts. In August 2009, we reported that while the Border Patrol’s national strategy cites the importance of assessing the community impact of Border Patrol operations, the implementation of such measures was lacking in terms of checkpoint operations. In October 2009, the Border Patrol reported that once it had completed an upgrade of its existing checkpoint data systems and had reevaluated its checkpoint performance measures, the agency would begin using information garnered by these performance measures to inform future resource allocation decisions. This was originally expected to be completed by September 30, 2010, but due to budgetary and other issues, the checkpoint system upgrades were not yet completed as of June 2013. Border Patrol then reported to us in June 2013 that the redesigned and upgraded checkpoint information system was expected to be implemented in September 2014, but this system has not been developed or implemented, and in September 2016, officials from Border Patrol’s Checkpoint Program Management Office stated that they were not aware of any planned or completed actions to address this recommendation. In its comments on this report (see app. IV), DHS stated that it expects to establish performance measures related to community impacts by February 28, 2018, and that these measures will be used to inform resource allocation decisions. As noted earlier in this report, residents and local law enforcement officials near checkpoints we spoke to for this review remain concerned about the effects checkpoints may have on their communities. Measuring performance, such as quality of life measures related to checkpoints, would give Border Patrol critical information on which to base decisions for improving checkpoint operations. Recommendation 5: Require that current and expected traffic volumes be considered by the Border Patrol when determining the number of inspection lanes at new permanent checkpoints, that traffic studies be conducted and documented, and that these requirements be explicitly documented in Border Patrol checkpoint design guidelines and standards. Status: Closed – Implemented In August 2009, we reported that Border Patrol did not conduct traffic studies when designing three recently constructed checkpoints. As a result, we could not determine if the Border Patrol complied with its checkpoint design guidelines to consider current and future traffic volumes when determining the number of inspection lanes at the three checkpoints. In the absence of documented traffic studies, the Border Patrol could not determine if the number of inspection lanes at each of these checkpoints was consistent with current and projected traffic volumes, or if a different number of lanes would have been more appropriate. On October 28, 2009, the Border Patrol finalized an addendum to the Border Patrol Facilities Design Standard, which requires the Border Patrol to acquire, document, and utilize traffic study data collected by the state Departments of Transportation regarding current and projected traffic volumes on roadways where permanent checkpoints are to be constructed. The traffic studies are to be documented by the Border Patrol and utilized as the baseline requirement to determine the number of inspection lanes at new permanent checkpoints, and therefore this recommendation has been closed as implemented. Recommendation 6: In connection with planning for new or upgraded checkpoints, conduct a workforce planning needs assessment for checkpoint staffing allocations to determine the resources needed to address anticipated levels of illegal activity around the checkpoint. In August 2009, we reported that Border Patrol’s checkpoint strategy to push illegal crossers and smugglers to areas around checkpoints—which could include nearby communities—underscores the need for the Border Patrol to ensure that it deploys sufficient resources and staff to these areas. In October 2009, Border Patrol reported that the agency was evaluating its checkpoint policy regarding the establishment of a new checkpoint or the upgrade of an old checkpoint, and checkpoint policy changes would be finalized by September 30, 2010. Border Patrol also reported that checkpoint system upgrades that capture data on checkpoint performance would help management determine future resource needs at checkpoints. In June 2013, Border Patrol reported that due to budget and other issues, the checkpoint system upgrade had not been completed, and the rewritten checkpoint data protocol had not been approved. In June 2013, Border Patrol reported that as part of the checkpoint study conducted by the DHS Center of Excellence, the Center created checkpoint simulation tools that would help inform resource allocations when determining the number of inspection lanes on current or new checkpoints. The Border Patrol agreed with the utility of such a model, but noted that the Border Patrol would need to purchase modeling software—a cost-prohibitive measure in the current budget environment. In the interim, Border Patrol is developing a formal workforce staffing model to identify staffing strategies for all Border Patrol duties. Border Patrol expected to implement this model for checkpoint staffing assignments in fiscal year 2014. However, in July 2014, Border Patrol reported that the Border Patrol’s Personnel Requirements Determination project was still being developed and that process would inform staffing at checkpoints, although the project is not specific to checkpoint staffing needs. As a result, Border Patrol revised its expected implementation date to September 2015. However, according to the Border Patrol official overseeing the project, subsequent changes in leadership and factors unrelated to checkpoints have affected the overall time frames for the Personnel Requirements Determination project. In September 2016, Border Patrol officials reported that the agency’s Personnel Requirements Determination process would not provide information on staffing needs until fiscal year 2017 or 2018. In its comments on this report (see app. IV), DHS stated that it expects to use information from the Personnel Requirements Determination process to determine staffing requirements and address our recommendation by September 30, 2019. Given that local residents continue to express concerns about the impacts of checkpoints on communities, conducting a needs assessment when planning for a new or upgraded checkpoint could help better ensure that officials consider the potential impact of the checkpoint on the community and plan for a sufficient number of agents and resources. This appendix contains additional detail about trends in southwest border apprehensions from fiscal years 2012 through 2016, including trends in the: number of apprehensions by sector, distribution of apprehensions by sector and by distance from the border, distribution of apprehensions by sector and by proximity to checkpoints. From fiscal years 2012 through 2016, Border Patrol apprehended a total of almost 2 million individuals in southwest border sectors. The number of apprehensions over this period rose to a peak in fiscal year 2014, declined in fiscal year 2015, and rose again in fiscal year 2016. Over this 5-year period, about two-thirds of the apprehensions occurred in the Rio Grande Valley and Tucson sectors (42 percent and 23 percent, respectively), and the Rio Grande Valley sector accounted for an increasing percentage of total southwest border apprehensions over this time period (from 27 percent of all southwest border apprehensions in fiscal year 2012 to 46 percent of apprehensions in fiscal year 2016). As shown in figure 14, apprehensions also increased in five other sectors, but the other sectors represented consistently smaller percentages of all apprehensions over the 5-year period. The Secretary of the Department of Homeland Security stated during testimony before the Senate Committee on Homeland Security and Governmental Affairs that apprehensions have dropped sharply since the beginning of 2017. He stated, for example, that Border Patrol apprehended approximately 1,000 unaccompanied alien children in March 2017 (a time of year he noted when apprehensions generally are higher) compared to over 7,000 unaccompanied alien children in December 2016. As noted in this report, apprehensions overall for the southwest border increasingly occurred closer to the border. Table 6 shows the distribution for each sector of apprehensions by distance from the border during fiscal years 2012 through 2016. For fiscal years 2013 through 2016, the percent of apprehensions occurring at checkpoints varied by sector. We assigned each apprehension into one of four location categories based on whether the GPS coordinates for the event occurred close enough to the GPS coordinates for a checkpoint to be considered “at a checkpoint” and whether the event’s landmark corresponds to the nearest checkpoint landmark. Table 7 shows the distribution of apprehensions for each sector by location category during fiscal years 2013 through 2016, and the extent to which apprehensions were identified as checkpoint circumventions based on use of the “Circumvention App?” checkbox. Differences in sector apprehensions at checkpoints could depend in part on the number of checkpoints within a sector, the amount of time checkpoints are operational, and the extent to which sectors consistently apply guidance on how to enter data for apprehensions that are related to checkpoint operations. This appendix contains additional detail about trends in southwest border seizures from fiscal years 2012 through 2016, including trends in the: number of seizures by type of contraband seized, number of seizures by sector, distribution of seizures by sector and by distance from the border, seizures related to Border Patrol checkpoints each available year by sector, and marijuana seizures at checkpoints by quantity seized. Border Patrol seized almost 90,000 prohibited items in southwest border sectors from fiscal year 2012 through fiscal year 2016. Most of these seizures (92 percent) were narcotics, and 87 percent of narcotics seizures were marijuana. The remaining seizures were of firearms, ammunition, currency, or other property. As shown in table 8, the number of seizures on the southwest border generally decreased from fiscal year 2012 to fiscal year 2016, with the exceptions of slight rises in the amount of methamphetamines and heroin seized during this period. The greatest number of seizures during the 5 fiscal years occurred in the Tucson, Big Bend, and Rio Grande Valley sectors (34, 19, and 16 percent respectively). Collectively, these three sectors accounted for 69 percent of southwest border seizures from fiscal years 2012 through 2016. For all southwest border sectors except the Big Bend sector, the numbers of seizures decreased during this 5-year period. For example, the number of seizures in the Tucson sector decreased 12 percent, and the number of seizures in the Rio Grande Valley sector decreased 36 percent during this period. The number of seizures in the Big Bend sector increased 39 percent from fiscal years 2012 through 2016. Figure 15 shows the number of seizures from fiscal years 2012 through 2016 by sector. As noted in this report, the location where seizures occurred remained relatively stable from fiscal year 2012 through fiscal year 2016, with the majority of seizures occurring 10 miles or more from the southwest border. Table 9 shows the distribution of seizures for each sector by distance from the border during fiscal years 2012 through 2016. For fiscal years 2013 through 2016, the percent of seizures occurring at checkpoints varied by sector. We assigned each seizure into one of four location categories based on whether the GPS coordinates for the event occurred close enough to the GPS coordinates for a checkpoint to be considered “at a checkpoint” and whether the event’s landmark corresponds to the nearest checkpoint landmark. Table 10 shows the distribution of seizures for each sector by checkpoint location category during fiscal years 2013 through 2016. Differences in sector seizures at checkpoints could depend in part on the number of checkpoints within a sector, the percent of time checkpoints are operational, and the extent to which sectors consistently apply guidance on how to enter data for seizures that are related to checkpoint operations. Most southwest border seizures were narcotics, and most narcotics seizures were marijuana. As noted in this report, marijuana seizures at checkpoints were often for smaller quantities compared to marijuana seizures at non-checkpoint locations. Table 11 shows that about 67 percent of marijuana seizures at checkpoints were for quantities less than or equal to 1 ounce, whereas the quantities seized at non-checkpoint locations were often larger. For example, more than three-quarters of marijuana seizures at non-checkpoint locations were of over 50 pounds (25,792 out of 33,477 seizures). In addition to the contact named above, Adam Hoffman (Assistant Director), David Alexander, Alana Finley, Eric Hauswirth, Monica Kelly, John Mingus, Sasan J. “Jon” Najmi, Christine San, Adam Vogt, and Tomas Wind made significant contributions to this report.", "summary": "The Border Patrol has primary responsibility for securing the border between U.S. ports of entry. On the southwest border, Border Patrol deploys agents along the immediate border and in areas up to 100 miles from the border as part of a layered approach known as the defense in depth strategy. Immigration checkpoints, generally located between 25 and 100 miles from the border, are one element of this strategy. GAO was asked to review the defense in depth strategy. This report addresses: (1) the factors Border Patrol considers in deploying agents, (2) where apprehensions of illegal crossers and seizures of contraband are occurring, and (3) what data show about how checkpoints contribute to apprehensions and seizures, among other objectives. To answer these questions, GAO analyzed Border Patrol documents and data on apprehensions and seizures from fiscal year 2012 through 2016, visited two southwest border sectors, interviewed officials from the other seven southwest border sectors and Border Patrol headquarters, and reviewed prior GAO work on border security. According to U.S. Border Patrol (Border Patrol), agent deployment decisions are based on factors such as staffing levels and the availability of agents, among other things. As of May 2017, nationwide, Border Patrol had about 1,900 fewer agents than authorized, which officials cited as a key challenge for optimal agent deployment. In recent years, attrition has exceeded hiring (an average of 904 agents compared to 523 agents) according to officials. GAO analyzed scheduling data, including time that agents were scheduled to be not working (for example, off duty or on leave) because these activities can affect deployment decisions by reducing the number of agents available on a particular day. GAO found that agents were available for deployment about 43 percent of the time. From fiscal years 2012 through 2016, Border Patrol apprehended a total of almost 2 million individuals along the southwest border, and these apprehensions increasingly occurred closer to the border, with 42 percent of apprehensions occurring one-half mile or less from the border in fiscal year 2016 compared to 24 percent in fiscal year 2012. One driver for this change is the increasing number of apprehensions of children, whom officials report may turn themselves in to Border Patrol without attempting to evade detection. Meanwhile, over this period, the locations where seizures of contraband occurred remained roughly the same, with the majority occurring 10 or more miles from the border. For fiscal years 2013 through 2016, GAO found that 2 percent of apprehensions and 43 percent of seizures occurred at checkpoints; however, determining the extent to which apprehensions and seizures are attributable to checkpoints is difficult because of long-standing data issues. More apprehensions and seizures may be attributable to checkpoints, but Border Patrol's reporting does not distinguish apprehensions that occurred “at” versus “around” a checkpoint. Border Patrol is drafting guidance to clarify how checkpoint apprehension and seizure data are to be recorded that would respond to a 2009 GAO recommendation to improve the internal controls for management oversight of checkpoint data. GAO also determined that seizures at checkpoints differed from those at other locations. Specifically, 40 percent of seizures at checkpoints were 1 ounce or less of marijuana from U.S. citizens. In contrast, seizures at other locations were more often higher quantities of marijuana seized from aliens. GAO is not making any new recommendations at this time but has previously recommended that Border Patrol establish internal controls for checkpoint data, among other things. DHS concurred with this recommendation and has taken some steps to improve the quality of checkpoint data, but additional actions are needed to fully implement the recommendation.", "document_type": "gao"}
{"report": "RFA requires that federal agencies, including financial regulators, engaged in substantive rulemaking analyze the impact of proposed and final regulations on small entities. If a rule might have a significant economic impact on a substantial number of small entities, regulators are to consider any significant regulatory alternatives that will achieve statutory objectives while minimizing any significant economic impact on small entities. RFA defines “small entity” to include small businesses, small governmental jurisdictions, and certain small not-for-profit organizations. RFA does not seek preferential treatment for small entities. Rather, it requires agencies to use an analytical process that includes identifying barriers to small business competitiveness and seeks a level playing field for small entities. For each draft rule that requires a notice of proposed rulemaking, RFA requires regulators to prepare an initial regulatory flexibility analysis that contains an assessment of the rule’s potential impact on small entities and describes any significant alternatives to reduce the rule’s significant economic impact on small entities while achieving statutory objectives. Following a public comment period, RFA requires regulators to conduct a similar analysis when they promulgate the final rule. If the head of the agency certifies in the Federal Register that the rule would not have a significant economic impact on a substantial number of small entities, agencies do not have to conduct the initial or final analysis. Certifications must include a statement providing a factual basis for the certification. Section 610 of RFA requires agencies to review, within 10 years of a final rule’s publication, those rules assessed as having a significant economic impact on a substantial number of small entities to determine if they should be continued without change, amended, or rescinded (consistent with statutory objectives) to minimize any significant economic impact on small entities. RFA designates certain responsibilities to the Small Business Administration’s Chief Counsel for Advocacy, including monitoring agency compliance with RFA and reviewing federal rules for their impact on small businesses. Executive Order 13272 requires the Small Business Administration’s Office of Advocacy (Office of Advocacy) to provide notifications and training about RFA requirements. The Office of Advocacy published guidance on RFA compliance in 2003 (updated in 2012 and August 2017). For example, the guidance details components regulators should include in their certifications to obtain meaningful public comments, such as a description and estimate of the economic impact. Under EGRPRA, the Federal Reserve, FDIC, and OCC are to categorize their regulations by type and provide notice and solicit public comment on all regulations for which they have regulatory authority to identify areas of the regulations that are outdated, unnecessary, or unduly burdensome. The act also includes requirements on how the regulators should conduct the reviews, including reporting results to Congress. The first EGRPRA review was completed in 2007. The second began in 2014, and the report summarizing its results was submitted to Congress in March 2017. While NCUA is not required to participate in the EGRPRA review, NCUA has been participating voluntarily. NCUA’s assessment of its regulations appears in separate sections of the 2007 and 2017 reports to Congress. Community bank and credit union representatives we interviewed identified three areas of regulations as most burdensome to their institutions: 1. Data reporting requirements related to loan applicants and loan terms under the Home Mortgage Disclosure Act of 1975 (HMDA). 2. Transaction reporting and customer due diligence requirements as part of the Bank Secrecy Act and related anti-money laundering regulations (collectively, BSA/AML). 3. Disclosures of mortgage loan fees and terms to consumers under the Truth in Lending Act and the Real Estate Settlement Procedures Act of 1974 Integrated Disclosure (TRID) regulation. Institution representatives told us they found these regulations were time- consuming and costly to comply with because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes. For example, among the 28 community banks and credit unions whose representatives commented on HMDA-required reporting in our focus groups, 61 percent noted having to conduct additional HMDA-related training. Representatives in most of our focus groups said that they had to purchase or upgrade software systems to comply with BSA/AML requirements, which can be expensive, and some representatives said they have to hire third parties to comply with BSA/AML regulations. Representatives in all of our focus groups and many of our interviews said that the TRID regulations have increased the time their staff spend on compliance, increased the cost of providing mortgage lending services, and delayed the completion of mortgages for customers. However, federal regulators and consumer advocacy groups’ representatives said that benefits from these regulations were significant, such as collecting HMDA data that has helped address discriminatory practices. Staff from Financial Crimes Enforcement Network (FinCEN), which has delegated authority from the Secretary of the Treasury to implement anti-money laundering regulations, told us that the transaction reporting required and due-diligence programs required in BSA/AML rules are critical to safeguarding the U.S. financial sector from illicit activity, including illegal narcotic trafficking proceeds and terrorist financing activities. The Consumer Financial Protection Bureau (CFPB) has taken steps to reduce the burdens for community banks and credit unions associated with the HMDA and TRID regulations. Also, FinCEN has developed several efforts in reducing the reporting requirements from BSA/AML regulations to reduce regulatory burden, such as a continuous evaluation process to look for ways to reduce burden associated with BSA reporting requirements, soliciting feedback through an interagency working group about potential burden, and expanding the ability of institutions to seek a Currency Transaction Report filing exemption when possible. To reduce institutions’ misunderstanding of the TRID regulation, CFPB has published a Small Entity Compliance Guide and a Guide to the Loan Estimate and Closing Disclosure Forms. However, CFPB officials acknowledged that some community banks and credit unions may be misinterpreting the regulation’s requirements. We found that CFPB had not directly assessed the effectiveness of the guidance it provided to community banks and credit unions. Until the guidance is assessed for effectiveness, CFPB may not be able to respond to the risk that small institutions have implemented TRID incorrectly. We recommended that CFPB should assess the effectiveness of TRID guidance to determine the extent to which TRID’s requirements are accurately understood and take steps to address any issues as necessary. CFPB agreed with the recommendations and intends to solicit public input on how it can improve its regulatory guidance and implementation support. One of the ways that financial regulators attempt to address the burden of regulations is during the rulemaking process. For example, staff from the Federal Reserve, FDIC, and OCC all noted that when promulgating rules, their staff seek input from institutions and others throughout the process to design requirements that achieve the goals of the regulation at the most reasonable cost and effort for regulated entities. Once a rule has been drafted, the regulators publish it in the Federal Register for public comment. The staff noted that regulators often make revisions in response to the comments received to try to reduce compliance burdens in the final regulation. Under RFA, financial regulators conduct analyses during the rulemaking process that are intended to minimize economic impact on small entities. However, we found several weaknesses with the RFA analyses, policies, and procedures of six financial regulators— Federal Reserve, OCC, FDIC, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and CFPB— that could undermine the goal of RFA and limit transparency and public accountability. In reviewing 66 certifications by the six regulators, we found that in most (43 of 66) the regulators provided a factual basis and concluded the rule would not apply to small entities or have any economic impact. According to the regulators, these rules included activities in which small entities do not engage, pertained to the regulator’s internal processes, did not create new regulatory requirements, or eliminated duplicative rules. Additionally, regulators concluded in 5 of 66 certifications that the rule would have a beneficial impact on small entities. Other certifications lacked information that would help explain the determination. Specifically, in 18 of 66 certifications, the regulators found the rule would have some economic impact on small entities, but concluded the impact would not be significant for a substantial number of small entities. But the factual basis provided for most of the 18 certifications (across all six regulators) lacked key components the Office of Advocacy and the Office of Management and Budget (OMB) recommended for understanding the analyses regulators used to support their conclusion. Examples include the following: Data sources or methodologies. In 15 of 18 certifications regulators did not describe or did not fully describe their methodology or data sources for their conclusions. Broader economic impacts. The certifications generally did not address broader economic impacts such as cumulative effects, competitive disadvantage, or disproportionality of effects and focused most of the analysis on specific compliance costs. Defining key criteria. Regulators generally did not define the criteria they used for “substantial number” and “significant economic impact” in their certifications. Limited information. Three certifications included none of the Office of Advocacy’s suggested components, such as the number of affected entities, the size of the economic impacts, or the justification for the certification. While many of the regulators’ certification determinations incorporated key components, the weaknesses and inconsistencies we found could undermine the act’s goal. For example, incomplete disclosure of methodology and data sources could limit the public and affected entities’ ability to offer informed comments in response to regulators’ certification assessments in proposed rules. Our review of recent rules in which the agency performed an initial and final regulatory flexibility analysis found that the evaluation of key components—potential economic effects and alternative regulatory approaches—was limited in many cases, although the extent varied by regulator. RFA requires initial and final analyses to include information to assist the regulator, regulated entities, and the public in evaluating the potential impact of rules on small entities. The most important components include the assessment of a rule’s potential economic effects on small entities—such as compliance costs—and the identification and evaluation of alternative regulatory approaches that may minimize significant economic effects while achieving statutory objectives. The evaluations for some rules of economic impact on small entities did not describe or estimate compliance costs. Analyses we reviewed also generally did not evaluate differences in estimated compliance costs for identified alternatives. Five of six regulators did not consistently disclose the data sources or methodologies used for estimating the number of subject small entities or compliance costs. By not fully assessing potential economic effects or alternatives, regulators may not be fully realizing the opportunity to minimize unnecessary burdens on small entities, which is the primary goal of RFA. Five of six regulators have written guidelines that restate statutory requirements for certifications and preparing regulatory flexibility analyses and provide some additional guidance for staff. However, the regulators generally have not developed comprehensive policies and procedures to assist staff in complying with RFA, which may contribute to the weaknesses we identified in some certifications and regulatory flexibility analyses. Federal internal control standards state the importance for agency management to establish through policies and procedures the actions needed to achieve objectives. The extent to which regulators’ guidance included policies and procedures varied. But the guidance generally did not include procedures for evaluating a rule’s potential economic impact on small entities; identifying and assessing regulatory alternatives that could minimize economic impact on small entities; disclosing methodology and data sources; and creating and maintaining documentation that supports findings. By developing policies and procedures that provide specific direction to rulemaking staff, the regulators could better ensure consistent and complete implementation of RFA requirements and more fully realize the RFA goal of appropriately considering and minimizing impacts on small entities during and after agency rulemakings. In our January 2018 report, we recommended that each of the regulators develop and implement specific policies and procedures for consistently complying with RFA requirements and related guidance for conducting RFA analyses. Five agencies generally agreed with this recommendation and one did not provide written comments. Regulators took some actions to reduce burden as part of EGRPRA reviews, but we also identified opportunities to improve analyses and reporting. To conduct the most recent EGRPRA review, the Federal Reserve, FDIC, and OCC sought comments from banks and others and held public meetings to obtain views on the regulations they administer. In the report they issued in March 2017, the regulators identified six significant areas in which commenters raised concerns: (1) capital rules, (2) Call Reports, (3) appraisal requirements, (4) examination frequency, (5) Community Reinvestment Act, and (6) BSA/AML regulations. In the report, these regulators described various actions that could address some of the concerns that commenters raised including: On September 27, 2017, the regulators proposed several revisions to capital requirements that would apply to banks with less than $250 billion in assets and less than $10 billion in total foreign exposure. For example, the revisions simplify capital treatment for certain commercial real estate loans and would change the treatment of mortgage servicing assets. The regulators developed a new Call Report form for banks with assets of less than $1 billion and domestic offices only. In June 2017 and November 2017, the regulators issued additional proposed revisions, effective June 2018, to the three Call Report forms that banks are required to complete. For example, community banks would report certain assets (nonperforming loans not generating their stated interest rate) less frequently—semi-annually instead of quarterly. The regulators proposed raising the threshold for commercial real estate loans requiring an appraisal from $250,000 to $400,000. They also recently issued guidance on how institutions could obtain waivers or otherwise expand the pool of persons eligible to prepare appraisals if suitable appraisers are unavailable. The three regulators also issued a final rule in 2016 making qualifying depository institutions with less than $1 billion in total assets eligible for an 18-month examination cycle rather than a 12-month cycle. Although NCUA is not required to participate in the EGRPRA process, the 2017 EGRPRA report also includes a section in which NCUA describes actions it has taken to address regulatory burdens on credit unions. In the report, NCUA identified five significant areas raised by commenters relating to credit union regulation, including: (1) field of membership and chartering; (2) member business lending; (3) federal credit union ownership of fixed assets; (4) expansion of national credit union share insurance coverage; and (5) expanded powers for credit unions. In response, NCUA took various actions. For example, NCUA modified and updated its field of credit union membership by revising the definition of a local community, rural district, and underserved area, which provided greater flexibility to federal credit unions seeking to add a rural district to their field of membership. NCUA also lessened some restrictions on member lending to small business and raised some asset thresholds for what would be defined as a small credit union so that fewer requirements would apply to these credit unions. One of the limitations in the EGRPRA process is that the statute mandating the process does not include CFPB and thus the significant mortgage-related regulations and other regulations that it administers— regulations that banks and credit unions generally must follow—were not included in the most recent EGRPRA review. The depository institution regulators cannot address these mortgage regulation-related burdens because they no longer have rulemaking authority for certain consumer financial statutes. However, CFPB does have its own processes to assess the burden of regulations it has implemented. For example, section 1022(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires CFPB to conduct a one-time assessment of each significant rule it adopts under federal consumer financial law within 5 years of the rule’s effective date. But CFPB staff told us that they have not yet determined whether certain other regulations that apply to banks and credit unions, such as the revisions to requirements, will be designated as significant and thus subjected to the one-time assessments. During 2017, CFPB launched an internal task force to coordinate and bolster its continuing efforts to identify and relieve regulatory burdens for small businesses, such as community banks, that potentially will address any regulation the agency has under its jurisdiction. However, CFPB has not provided public information on the extent to which it intends to review regulations applicable to community banks and credit unions or provided information on the timing and frequency of the reviews. In addition, it has not indicated the extent to which it will coordinate the reviews with depository institution regulators as part of EGRPRA reviews. Until CFPB publicly provides additional information indicating its commitment to periodically review the burden of all its regulations, community banks, credit unions, and other depository institutions may face diminished opportunities for regulatory relief. In our February 2018 report, we recommended that CFPB issue public information on its plans for reviewing regulations, including information on the scope of regulations, timing and frequency of reviews, and the extent to which the reviews will be coordinated with the other regulators as part of the EGRPRA reviews. CFPB agreed with the recommendation and committed to developing additional plans for reviews of key regulations and publicly releasing such information. In the interim, CFPB stated it intends to solicit public input on how it should approach reviewing regulations. Another limitation in the EGRPRA process conducted by the Federal Reserve, FDIC, OCC, and NCUA was that these regulators did not conduct or report on quantitative analyses during the EGRPRA process to help them determine if changes to regulations would be warranted. Our analysis of the 2017 EGRPRA report indicated that in responses to comments in which the regulators did not take any action, the regulators generally provided only their arguments against taking actions and did not cite analysis or data to support their narrative. EGRPRA does not require the regulators to collect and report on any quantitative data they collected or analyzed as part of assessing the potential burden of regulations. In contrast, executive branch agencies tasked under executive orders to conduct retrospective reviews of regulations generally must collect and analyze quantitative data as part of assessing the costs and benefits of changing existing regulations. Conducting quantitative analysis for retrospective reviews could serve as a best practice for the depository institution regulators. By not performing and reporting quantitative analyses where appropriate in the EGRPRA review, the regulators may be missing opportunities to better assess regulatory impacts, (including identifying the need for any changes or identifying benefits) and making their analyses more transparent to stakeholders. In our February 2018 report, we recommended that the four depository institution regulators develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. The regulators agreed with the recommendation. For example, the Federal Reserve plans to coordinate with FDIC and OCC to identify opportunities to conduct quantitative analyses where feasible during future EGRPRA reviews. NCUA also said it should improve its quantitative analysis. An additional limitation in the EGRPRA process we identified was that the depository institution regulators had not assessed the ways in which the cumulative burden of the regulations they administer may have created overlapping or duplicative requirements. Under the current process, the regulators have responded to issues raised about individual regulations based on comments they have received, not on bodies of regulations. However, congressional intent in tasking regulators with EGRPRA reviews was to ensure they considered the cumulative effect of financial regulations. A 1995 Senate Committee on Banking, Housing, and Urban Affairs report stated while no one regulation can be singled out as being the most burdensome, and most have meritorious goals, the aggregate burden of banking regulations ultimately affects a bank’s operations, its profitability, and the cost of credit to customers. In our February 2018 report, we recommended to the Federal Reserve, FDIC, NCUA, and OCC that as part of their EGRPRA review they develop plans for conducting evaluations that would identify opportunities to streamline bodies of regulation. The regulators generally agreed with the recommendation and said they would work together to identify ways and opportunities to decrease the regulatory burden created by bodies of regulation. In addition, FDIC stated it would continue to monitor the cumulative effects of regulation; for example, through a review of community and quarterly banking studies and community bank Call Report data. Financial regulators took varying approaches to performing retrospective reviews for RFA; additionally, some regulators had not yet developed policies and procedures for conducting and reporting reviews. We assessed section 610 reviews and found that the Federal Reserve, FDIC, and OCC conducted retrospective reviews that did not fully align with RFA’s requirements. Officials at each of the agencies stated that they satisfy the requirements to perform section 610 reviews through the EGRPRA review process. But the requirements of the EGRPRA reviews differ from those of the RFA-required section 610 reviews. For example, the EGRPRA review process relies on public comments to identify rules that may be outdated, unnecessary, or unduly burdensome, while public comments are only one component of section 610 reviews. The Office of Advocacy stated that agencies may satisfy section 610 requirements through other retrospective reviews if these other reviews meet the criteria of section 610. According to an official from the Office of Advocacy, the office has not yet made a determination on whether the EGRPRA review process satisfies those requirements. Although the agencies stated that they fulfill RFA requirements through EGRPRA, without confirming this with the Office of Advocacy, it is possible that they are not meeting RFA section 610 requirements and therefore may not be achieving the small-entity burden reduction that the statute seeks to ensure. In our January 2018 report, we recommended that the Federal Reserve, FDIC, and OCC coordinate with the Office of Advocacy to determine whether the EGRPRA review process satisfies the requirements of section 610 and, if not, what steps should be taken to align the process with section 610 requirements. The Federal Reserve and FDIC generally agreed with this recommendation, and OCC did not provide written comments. Our review of 46 SEC section 610 reviews found that they were conducted late and were not fully consistent with RFA requirements or the Office of Advocacy’s guidance for such reviews. RFA requires rules to be reviewed within 10 years of their publication as final rules, but SEC conducted all but one of its reviews 12 years after the rules were published. The reviews generally lacked substantive analysis, and no rules were amended as a direct result of their section 610 review. The reviews generally provided no evidence of empirical analysis and no data to support the conclusions of the reviews, as recommended by the Office of Advocacy and OMB. In most cases, the reviews lacked a description of whether, or to what extent, the rule was affecting small entities. SEC does not have written policies or procedures for completing rule reviews pursuant to RFA section 610, potentially contributing to the weaknesses we identified (timing and lack of data and analysis to support findings). Therefore, in our January 2018 report, we recommended that SEC develop and implement specific policies and procedures for performing section 610 reviews. SEC generally agreed with the recommendation. SEC also does not publicly disclose the findings or conclusions of its section 610 reviews. Although RFA does not require that agencies publish the results of 610 reviews, the Office of Advocacy recommends that to enhance transparency, agencies should communicate with interested entities about the reviews. Executive orders also highlight public disclosure of retrospective reviews. Lack of public disclosure limits the transparency of the reviews, hindering the public’s ability to hold agencies accountable for the quality and conclusions of their reviews. In our January 2018 report, we recommended that SEC publicly disclose its section 610 reviews, or summaries, with the basis for any conclusions. SEC generally agreed with the recommendation. CFTC and CFPB plan to put procedures in place for section 610 reviews. According to CFTC officials, the agency has not conducted any section 610 reviews in at least the last 10 years. CFPB has not yet been required to conduct any section 610 reviews. Section 610 reviews are required within 10 years of a rule’s publication as a final rule; to date, none of the rules issued by CFPB, which was created in 2010, have met this deadline. In our January 2018 report, we recommended that CFTC and CFPB develop policies and procedures for section 610 reviews that would include documenting analyses and public reporting of results. CFTC and CFPB generally agreed with the recommendation. Chairman Chabot, Ranking Member Velázquez, and members of the Committee, this concludes my statement. I would be pleased to respond to any questions you may have. If you or your staff have any questions about this testimony, please contact Michael E. Clements, Director, Financial Markets and Community Investment, at (202) 512-8678 or clementsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Cody Goebel (Assistant Director), Stefanie Jonkman (Assistant Director), Katherine Carter (Analyst in Charge), Kevin Averyt, Bethany Benitez, Jeremy A. Conley, Pamela R. Davidson, Nancy Eibeck, Andrew Emmons, Courtney L. LaFountain, William V. Lamping, Marc Molino, Lauren Mosteller, Barbara Roesmann, and Jena Y. Sinkfield. Other assistance was provided by Farrah Graham and Tim Bober. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Federal financial regulators must comply with various rulemaking and review requirements, including those in RFA and EGRPRA. These statutes require analyses relating to regulatory burden, small entities, or both. RFA requires analyses of a rule's impact on small entities and alternatives that may minimize any significant economic impact. It also requires agencies to review rules (within 10 years) to determine if the rules should be amended or rescinded. EGRPRA directs specified regulators to review regulations at least every 10 years and identify areas that are outdated, unnecessary, or unduly burdensome on insured depository institutions. This statement is based on findings from GAO's January 2018 report on RFA implementation ( GAO-18-256 ) and February 2018 report on regulatory burden on community banks and credit unions ( GAO-18-213 ). GAO discusses regulatory burdens and how financial regulators address regulatory burdens through the rulemaking process and retrospective reviews. For those reports, GAO's work included reviewing Federal Register notices; regulators' workpapers, policies and procedures; and reports to Congress on EGRPRA reviews. GAO also interviewed more than 60 community banks and credit unions. More than 60 smaller depository institutions told GAO that regulations for reporting mortgage characteristics; reviewing transactions for potentially illicit activity; and disclosing fees, conditions, and mortgage terms to consumers were the most burdensome. Institution representatives said these regulations were time-consuming and costly because the requirements were complex and required reporting that had to be reviewed for accuracy. Financial regulators and others noted these regulations provide various benefits as well, such as preventing lending discrimination or use of the banking system for illicit activity. The Regulatory Flexibility Act (RFA) requires federal agencies to analyze the impact of their regulations on small entities. GAO found several weaknesses with the analyses of six financial regulators—Board of Governors of the Federal Reserve System (Federal Reserve), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), Securities and Exchange Commission, Commodity Futures Trading Commission, and Consumer Financial Protection Bureau (CFPB)—that could undermine the goal of RFA and limit transparency and public accountability. For example, some analyses lacked important information, such as data sources, methodologies, and consideration of broad economic impacts. Evaluations of potential economic effects and alternative regulatory approaches also were limited. Finally, regulators generally lacked comprehensive policies and procedures for RFA implementation. By not developing such policies and procedures, regulators' ability to consistently and effectively meet RFA objectives may be limited. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) and RFA require regulators to conduct retrospective reviews, and GAO found weaknesses. EGRPRA. GAO found limitations in activities regulators undertook for retrospective reviews under EGRPRA. CFPB, which has regulatory authority for a number of consumer financial laws, was not included in the most recent review process. Moreover, as part of their EGRPRA reviews, the Federal Reserve, OCC, FDIC, and the National Credit Union Administration had not conducted and reported analyses of quantitative data nor had these regulators assessed the cumulative effect of regulations. Addressing these limitations in the EGRPRA processes likely would make the analyses they perform more transparent, and potentially result in additional burden reduction. RFA. The issues GAO identified with RFA retrospective reviews (section 610 reviews) included some regulators using the EGRPRA process to fulfill RFA requirements and gaps or weaknesses in analysis and documentation. But EGRPRA requirements do not fully align with RFA's, and it is not clear if the EGRPRA process satisfies the requirements of section 610. Also, regulators generally have not developed policies and procedures for section 610 reviews. By meeting section 610 review requirements, regulators will be in a better position to minimize any significant economic impact of a rule on a substantial number of small entities, as the statute seeks to ensure. GAO made a total of 20 recommendations to the financial regulators in the two reports to improve their policies and procedures and analysis under RFA and in retrospective reviews. The regulators generally agreed with the recommendations.", "document_type": "gao"}
{"report": "DOD, through the Secretary of Defense and the Chairman of the Joint Chiefs of Staff, develops department-wide strategic guidance based on direction from the President and issues this guidance through strategy documents. According to joint doctrine and Chairman of the Joint Chiefs of Staff guidance, combatant commanders use strategy documents as guidance for planning operations. Specifically, combatant commanders translate this guidance into their commands’ campaign and contingency plans. The military services organize, train, equip, and provide forces to the combatant commanders to execute command plans. The combatant commander must make certain the combatant command can execute these plans. PACOM is one of six geographic Unified Combatant Commands of the U.S. Armed Forces. With an area of responsibility extending from the waters off the west coast of the United States to the western border of India, and from Antarctica to the North Pole, PACOM is the primary U.S. military authority in the Pacific. In 2016, PACOM reported that approximately 380,000 U.S. military and civilian personnel were assigned to this area. PACOM describes the 36 nations that comprise the Asia- Pacific region as home to more than 50 percent of the world’s population and 3,000 different languages, several of the world’s larger militaries, and five nations allied with the United States through mutual defense treaties or agreements. PACOM’s commander reports to the President and the Secretary of Defense through the Chairman of the Joint Chiefs of Staff, and is supported by four service component commands: U.S. Pacific Fleet, U.S. Pacific Air Forces, U.S. Army Pacific, and U.S. Marine Forces, Pacific. In President Obama’s speech to the Australian Parliament in November 2011, he stated that after a decade of fighting two wars, the United States was turning its attention to the vast potential of the Asia-Pacific region. The President described the U.S. as a historic Pacific power whose interests are inextricably linked with Asia’s economic, security, and political order. According to a senior administration official, the United States planned to implement a comprehensive, multidimensional strategy in the Asia-Pacific region. PACOM used military strategy documents to implement presidential strategic direction to rebalance efforts to the Pacific. However, according to officials from the Office of the Under Secretary of Defense for Policy, the Joint Staff, and the U.S. Pacific Command there was no single rebalance-specific strategy document. Instead, these officials identified a number of strategy documents published since 2012 that guided activities associated with the rebalance to the Pacific effort. Based on our interviews with U.S. Pacific Command (PACOM) and DOD officials, we focused our review on six strategy documents, issued between 2012 and 2015, that these officials considered relevant and representative of DOD’s previous strategy to implement the rebalance to the Pacific through 2016. The six documents that we reviewed are: Sustaining U.S. Global Leadership: Priorities for 21st Century Defense. DOD issued this document in January 2012. This publication reflected presidential strategic direction to DOD and described the key military missions for which the department would prepare. In describing the security environment, this strategic guidance stated that the United States would, of necessity, rebalance toward the Asia-Pacific region. Quadrennial Defense Review (QDR). According to DOD guidance, the QDR articulates a national defense strategy consistent with the broader government-wide National Security Strategy by defining force structure, modernization plans, and a budget plan allowing the military to successfully execute the full range of missions within that strategy. The 2014 QDR referred to the rebalance to the Pacific as a part of sustaining U.S. presence and posture abroad to better protect U.S. national security interests. National Military Strategy (NMS). The 2015 NMS described how DOD would employ military forces to protect and advance U.S. national interests. The NMS provided focus for military activities by defining a set of military objectives and concepts used by the combatant commanders and others. The 2015 NMS referenced the rebalance to the Pacific as part of a national military objective. The NMS was informed by the QDR. Guidance for the Employment of the Force (GEF). According to joint doctrine, the GEF provides direction to combatant commands for operational planning, force management, security cooperation, and posture planning. The GEF is the method through which the Secretary of Defense translates strategic priorities in the QDR and other strategy documents into direction for operational activities. The GEF is described in joint doctrine as an essential document for combatant command planners as it provides the strategic end states for the deliberate planning of campaign and contingency plans. Joint Strategic Capabilities Plan (JSCP). The JSCP is the primary vehicle through which the Chairman of the Joint Chiefs of Staff directs the preparation of joint plans. The JSCP provides military strategic and operational guidance to combatant commanders for the preparation of plans based on current military capabilities. The JSCP tasks combatant commanders to develop campaign, contingency, and posture plans and translates requirements from the GEF and other guidance into prioritized military missions, tasks, and plans. The JSCP is informed by the GEF and the NMS. PACOM 2015 Theater Campaign Plan (DRAFT) (TCP). Campaign plans, such as PACOM’s TCP, focus on the combatant command’s steady-state or daily activities and operationalize combatant command theater strategies. According to joint doctrine, joint planning draws from tasks identified in the GEF and JSCP and campaign plans should focus on the combatant command’s steady-state activities. These include ongoing operations, military engagement, security cooperation, deterrence, and other shaping or preventive activities. Campaign plans provide the vehicle for linking steady-state shaping activities to the attainment of strategic and military end states. In January 2018, DOD announced its new 2018 National Defense Strategy that cited as the department’s principal priorities the long-term strategic competition with China and Russia. The strategy also stated that concurrently the department would sustain its efforts to deter and counter rogue regimes such as North Korea and Iran, defeat terrorist threats to the United States, and consolidate gains in Iraq and Afghanistan while moving to a more resource-sustainable approach. In February 2018, the Assistant Secretary of Defense for Asian and Pacific Security Affairs notified GAO that although DOD continues to prioritize the Asia-Pacific region, the rebalance to the Pacific is no longer U.S. policy. Six DOD strategy documents that helped guide the rebalance to the Pacific collectively included most of the desired elements of an effective national strategy. We have previously reported that effective national strategies incorporate six characteristics, and their associated desired elements. Table 1 lists desired elements that we adapted from our prior work and tailored toward our review of the six DOD strategy documents. We found these six DOD strategy documents that collectively guided the rebalance to the Pacific included, to varying degrees, 24 of the 31 desired elements we determined as being the most relevant to an effective strategy for the rebalance. For example, as a set, the six strategy documents contained a detailed description of the operating environment in which activities for the rebalance were to take place and included references that described the relationship of the rebalance to the Pacific to other strategies, goals, and objectives. The strategy documents referenced their purposes and, in unclassified and general descriptions, the threats that the strategies were to address including long-range missile threats and weapons of mass destruction. Collectively, the strategy documents referred to selected types of resources needed, such as the deployment of ships and aviation assets, and who would be implementing the strategies. We were, however, unable to find any reference to 7 of the 31 elements in any of the six strategy documents. For example, 2 of the 7 missing elements were: Lack of a documented, consistent definition of the rebalance to the Pacific. Based on our systematic review, we found that none of DOD’s six strategy documents issued from 2012 to 2015 included a definition of the rebalance to the Pacific that described the rebalance’s key terms, major functions, mission areas or activities. Further, DOD officials from the Office of the Under Secretary of Defense for Policy, the Joint Staff, and the U.S. Pacific Command involved in planning and implementing the rebalance to the Pacific were unable to identify a definition for the rebalance to the Pacific in the strategy documents, and consequently could not provide a definition that was in use consistently across the department. During discussions about the absence of a definition, these PACOM officials told us that all PACOM activities were rebalance activities, even activities that were underway before the President’s announcement to rebalance. Senior DOD policy officials referred us to the speeches of senior administration officials given since the President’s 2011 address to derive the definition of the rebalance. However, as noted earlier, after the President’s speech in 2011, there were a number of pronouncements from senior administration officials that varied over time. The lack of consistent attributes to a strategy can make it difficult for policy makers to assess its effectiveness and accountability. Lack of a documented end state for the rebalance to the Pacific. Based on our systematic review, we found that none of DOD’s six strategy documents from 2012 to 2015 identified an end state for the rebalance to the Pacific. Identifying the end state is a desired element associated with establishing goals and objectives for effective strategies and plans. Joint doctrine also states that military planners must know where to look for the guidance to ensure that plans are consistent with national priorities and are directed toward achieving national security goals and objectives. A national strategy that identified the end state of the rebalance could distinguish new efforts from the longstanding U.S. military presence in the region, and the associated increase in resources to support the post-2011 rebalancing. For example, we found a lack of clarity concerning the end state for the rebalance. DOD officials from the Office of the Under Secretary of Defense for Policy, Joint Staff, and PACOM—whom we interviewed because they were involved in planning and implementing the rebalance to the Pacific—said that they were unaware of an end state for DOD’s efforts to rebalance. The same officials told us that there was no foreseeable end state because, as long as the Asia-Pacific region was important to the U.S., the focus would remain on the region. However, officials from different military service components told us that their individual services had an end state for their service-specific activities to support the rebalance. For example, officials from U.S. Army Pacific told us that they had completed their service’s rebalance. They stated that they achieved the end state with the completion of force posture changes and that some efforts supporting rebalancing had begun before rebalancing was inaugurated. In contrast, a Marine Corps official in the Pacific reported there was no end state for rebalancing. According to the official, Marine Corps activities such as posture realignments supported rebalancing, but these longstanding activities were ongoing prior to the President’s announcement to rebalance. Moreover, we found a lack of an awareness of a command-wide end state for rebalancing and coordination among the various military service activities in support of rebalancing. It was unclear how service-defined end states could have been fully integrated or prioritized for funding without a consistent overall end state for DOD’s overall effort. In such instances, a department-wide defined end state could have helped with the allocation of resources because the most important priorities would be known. A clear and consistent definition for rebalance and the identification of an end state, as well as the inclusion of the other 5 missing elements, could have better positioned decision makers to effectively plan, manage, and assess DOD’s progress toward rebalancing efforts to the Pacific. According to DOD officials from the Office of the Under Secretary of Defense for Policy responsible for policy for the rebalance to the Pacific, the speeches by senior administration officials between 2012 and 2015 supplanted the need to identify and document a definition of the rebalance or an end state in a strategy document. However, as noted earlier, these statements included varying descriptions of the strategy and objectives over time. According to a DOD official from an office with department-wide performance management responsibilities, defining the rebalance to the Pacific and identifying the initiative’s strategic objectives, or end state, were both important for establishing accountability and measuring progress. For instance, a definition could have helped those charged with implementation to distinguish activities essential to operationalizing the strategic guidance to rebalance from those activities that were routine or peripheral to that effort. Further, knowing the end state could have helped management make the best use of resources, enable the assessment of progress toward a particular goal, and as described in joint doctrine, facilitate the development of strategic and military objectives. In moving forward in the Asia-Pacific region, considering the identification of strategic end states (one of the desired elements of an effective national strategy that is also discussed in joint doctrine) —as well as the other missing elements— could help position DOD to achieve its objectives in the region. We provided a draft of this report to DOD for review. DOD had no comments. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Under Secretary of Defense for Policy; the commander of the U.S. Pacific Command; the Chairman of the Joint Chiefs of Staff; and the Secretaries of the military departments. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you have any questions about this report or need additional information, please contact me at (202) 512-5431 or RussellC@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II. To determine the extent to which the Department of Defense (DOD) has developed strategy documents to guide the rebalance to the Pacific that include desired elements of an effective national strategy, we conducted a search of the literature, from January 2010 to July 2015, to identify official statements on, guidance for, and studies of DOD’s implementation of the rebalance to the Pacific. We reviewed department guidance, such as Chairman of the Joint Chiefs of Staff instructions and joint publications, to understand DOD’s processes and procedures for developing and disseminating guidance and strategic plans. We also interviewed DOD officials from numerous organizations listed below who were involved with planning, providing guidance or implementing the rebalance to the Pacific to identify DOD’s rebalance efforts and whether a strategy or strategies existed that focused on or included the rebalance. The organizations contacted included: Under Secretary of Defense (Comptroller) and Chief Financial Officer Office of the Deputy Chief Management Officer, Deputy’s Assistant Secretary of Defense for Asian and Pacific Security Affairs Assistant Secretary of Defense for Logistics and Materiel Readiness Assistant Secretary of Defense for Strategy, Plans and Capabilities Director of the Office of the Secretary of Defense Cost Assessment U.S. Marines Corps Forces, Pacific U.S. Pacific Air Forces U.S. Transportation Command Based on these interviews and written responses to questions we submitted to the officials associated with these organizations, officials identified documentation and speeches that they indicated informed DOD organizations about implementing the rebalance. Also, based on this information, we found that there was not a single strategy or plan that provided guidance for or outlined DOD’s implementation of the rebalance to the Pacific. Instead, DOD officials from multiple offices identified a number of strategy documents that guided activities associated with the rebalance to the Pacific, including government-wide documents. Based on our interviews with U.S. Pacific Command (PACOM) and DOD officials, we focused our review on the six selected strategy documents, issued between 2012 and 2015, that these officials considered relevant and representative of DOD’s previous strategy to implement the rebalance to the Pacific. Those six strategy documents are described earlier in the main report. We reviewed and analyzed these six strategy documents to determine whether, as a set, they included the 31 desired elements of the associated key characteristics of an effective national strategy. Our prior work on effective national strategies included examples of desired elements that we adapted and tailored toward our review of DOD strategy documents. We selected 31 desired elements as most relevant to DOD’s rebalance effort and for systematically reviewing DOD’s strategy documents associated with the rebalance. These elements and associated key characteristics are described in table 2 below. To determine whether as a set these strategy documents included the desired elements of an effective national strategy, we reviewed each strategy document using a scorecard method, using the following steps: First, we developed scorecards with a two-level scale of “address” and “did not address.” We used a binary scale of “address” or “did not address” and scored a passage as “address” if it included any part of an element description in order to provide the widest latitude in determining whether the selected passage included the specific element. Also, we used 31 desired elements from the six characteristics to make the comparison because these elements provided more specificity than the broad six characteristics. Second, analysts reviewed all of the selected passages from each strategy document and determined whether they were relevant to understanding the rebalance to the Pacific in order to reach agreement on which passages they would consider in the comparison to the desired elements. The readers agreed upon the inclusion and exclusion of passages before assessing whether these passages included the desired elements. Third, two analysts reviewed the relevant passages in each strategy document related to the rebalance and determined whether or not the passages included the element. The analysts used the scorecards to score each passage. Fourth, upon completion of the independent scoring process for each strategy document, the analysts compared their respective scores and reconciled any differences, thereby reaching a consensus on the final score. As needed, a third analyst facilitated reconciliations where there was a difference in the assessment reached by the individual analysts and documented the consensus results. Lastly, upon completion of scoring, the team compiled and summarized the results. To further corroborate our systematic review of the six strategy documents, we asked officials from DOD organizations responsible for the Asia-Pacific region a standard set of related questions. We asked officials these questions in order to obtain DOD’s perspective regarding the applicability of using the selected desired elements and associated key characteristics in reviewing these specific DOD strategy documents. We conducted this performance audit from July 2015 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, key contributors to this report were Guy LoFaro, (Assistant Director), Pedro Almoguera, Patricia Donahue, Richard Powelson, Paulina Reaves, Michael Shaughnessy, and Stephen Woods. Combating Terrorism: Strategy to Counter Iran in the Western Hemisphere Has Gaps That State Department Should Address. GAO-14-834. Washington, D.C.: September 29, 2014. U.S. Public Diplomacy: Key Issues for Congressional Oversight. GAO-09-679SP. Washington, D.C.: May 27, 2009. Influenza Pandemic: Further Efforts Are Needed to Ensure Clearer Federal Leadership Roles and an Effective National Strategy. GAO-07-781. Washington, D.C.: August 14, 2007. Financial Literacy and Education Commission: Further Progress Needed to Ensure an Effective National Strategy. GAO-07-100. Washington, D.C.: December 4, 2006. Rebuilding Iraq: More Comprehensive National Strategy Needed to Help Achieve U.S. Goals. GAO-06-788. Washington, D.C.: July 11, 2006. Combating Terrorism: Evaluation of Selected Characteristics in National Strategies Related to Terrorism. GAO-04-408T. Washington, D.C.: February 3, 2004. Combating Terrorism: Observations on National Strategies Related to Terrorism. GAO-03-519T. Washington, D.C.: March 3, 2003.", "summary": "In 2011, President Obama announced that the United States would turn its attention to the Asia-Pacific region and make the U.S. presence there a top priority. Rebalancing to the Pacific became strategic guidance that informed military planning. By the end of 2015, DOD published strategy documents that included references to the rebalance to the Pacific or related concepts. In February 2018, the Assistant Secretary of Defense for Asian and Pacific Security Affairs stated that while DOD continues to prioritize the Asia-Pacific region, the rebalance to the Pacific is no longer U.S. policy. DOD has published the 2018 National Defense Strategy, which establishes an objective of maintaining a favorable regional balance in the Pacific region, among other regions. Prior to the change in policy, House Report 114-102 included a provision for GAO to review matters related to the U.S. rebalance to the Asia-Pacific region. GAO evaluated the extent to which DOD developed strategy documents to guide the rebalance to the Pacific that included desired elements of an effective national strategy. GAO analyzed six DOD strategy documents that officials identified as providing guidance for the rebalance to the Pacific to determine whether, as a set, they included desired elements associated with an effective national strategy. DOD had no comments on this report. Department of Defense (DOD) strategy documents that collectively guided the rebalance to the Pacific included most of the desired elements of an effective national strategy. The U.S. Pacific Command (PACOM), which is responsible for the Asia-Pacific region, used DOD strategy documents to implement the President's direction to rebalance to the Pacific, which generally refocused U.S. efforts to that region. PACOM officials told GAO that there was no single rebalance-specific strategy document. Instead, officials identified a number of strategy documents published since 2012 that guided activities associated with the rebalance to the Pacific, including: Sustaining U.S. Global Leadership: Priorities for 21st Century Defense ; Quadrennial Defense Review ; National Military Strategy ; Guidance for the Employment of the Force ; Joint Strategic Capabilities Plan ; and the PACOM 2015 Theater Campaign Plan (DRAFT) . Based on GAO's analysis, DOD's six strategy documents that guided the rebalance to the Pacific included 24 of the 31 desired elements of an effective national strategy. However, two key elements were missing from the group of strategy documents: (1) a definition of the rebalance to the Pacific, and (2) the identification of the overall results desired, or end state, for the rebalance. DOD officials also could not identify a definition for the rebalance to the Pacific in the strategy documents or provide a definition that was used consistently across the department. According to a DOD official with performance management responsibilities, defining the rebalance to the Pacific and identifying the initiative's strategic objectives, or end state, were important for establishing accountability and measuring progress. For instance, a clear definition of rebalance could have helped those charged with implementation to distinguish activities essential to operationalizing the strategic guidance from activities that were peripheral to that effort. Similarly, knowing the end state could have helped management make the best use of resources, enable the assessment of progress, and facilitate the development of strategic and military objectives. In moving forward in the Asia-Pacific region, considering the identification of strategic end states as well as other missing elements could help position DOD to achieve its objectives in the region.", "document_type": "gao"}
{"report": "We and others have identified challenges facing the federal human capital system’s ability to recruit, retain, develop, and engage workers, both today and in the future. For example: Classification system. The General Schedule classification system—which defines and organizes federal positions, primarily to assign rates of pay—has not kept pace with the government’s evolving requirements. Recruiting and hiring. Federal agencies need a hiring process that is applicant friendly and flexible, and meets policy requirements. Pay system. Employees are compensated through an outmoded system that (1) rewards length of service rather than individual performance and contributions, and (2) automatically provides across- the-board annual pay increases, even to poor performers. Performance management. Federal agencies have faced long- standing challenges developing modern, credible, and effective employee performance management systems and dealing with poor performers. Employee engagement. Agencies can improve employee engagement and performance through analysis and sharing of promising practices. Employee engagement is generally defined as the sense of purpose and commitment employees feel toward their employer and its mission. The administration is moving forward with broad efforts to address government-wide human capital challenges, improve government efficiency, and understand how key trends will affect the future of federal work and the workforce. For example, the President’s Management Agenda’s cross-agency priority goal on the 21st century workforce aims to (1) improve employee performance management and engagement, (2) train staff to develop new skills and redeploy human capital resources, and (3) enable simple and strategic hiring practices. In 2018, OPM issued the first Federal Workforce Priorities Report to communicate key government-wide human capital priorities, suggest strategies, and help inform agency strategic and human capital planning. The report identifies changes in the external environment that will likely affect federal human capital management, including the evolving role of workers, changes in technology, employee health, and shifting generational demographics. In addition, OPM is developing a foresight program to help federal agencies navigate emerging strategic workforce challenges and harness potential opportunities. As part of its foresight efforts, OPM has also hosted a series of symposia that provide human capital specialists insight on addressing workforce challenges of the future. We identified key trends in agency operations and attitudes toward work that are affecting how federal work is done and, consequently, the skills and competencies that workers need to accomplish agency missions, as illustrated by figure 1. These trends will require a federal workforce that can better adapt to and leverage constantly evolving technology and mission requirements. They will also require a federal workforce that can effectively collaborate and partner with workers both within and outside of the federal sector to achieve national policy objectives. Technological advances will change the way work is done. Advances in automation, artificial intelligence, robotics, and information and communication technology have the potential to accelerate changes in federal work beyond any past experience, but they also involve risks. Advances in automation and robotics are changing the way that work is done by altering the balance between what tasks are completed by humans and those completed by machines. The federal workforce will need to develop new skill sets and expertise to effectively utilize and manage these technological advances. In 2017, we convened a forum that highlighted several applications of artificial intelligence, many of which could affect agencies and federal work. For example, robots enabled by artificial intelligence could assist patients with medication management and mobility support in clinical settings; developments in automated vehicles could affect work related to government vehicle pools, safety, and transportation management; the use of artificial intelligence in criminal justice and cybersecurity applications could bring benefits but would need to be carefully managed with regard to privacy protection, among other concerns; and the accelerated pace of change associated with artificial intelligence may strain workforce systems’ capacity to train and hire individuals with appropriate skill sets. Technology is also changing human capital management, according to experts we contacted. Experts stated that technology can help improve recruitment efforts, streamline hiring processes, and match employees to tasks. For example, they said that employers can develop mobile apps to make the hiring process easier to navigate and use artificial intelligence to better screen and align applicants with job positions. Experts also stated that employees will need to constantly update their digital literacy to stay current with emerging technology. OPM has also explored the effect of technology on the federal workforce. In February 2018, OPM reported that, in most jobs, certain activities may be automated rather than the entire occupation. OPM also reported that machine assistance may amplify the value of expertise and may increase work capacity by providing employees time to focus on more important work. Further, OPM reported that it is seeking to acquire or develop enterprise technological solutions to improve the analytic capabilities of the federal human capital community. Improved data analytics should help support more informed and evidence-based planning and decision- making. OPM suggested that the technological changes will require agencies to coordinate efforts to (1) fund technological experimentation and pilots; (2) promote acquisition of skills that are not replaced by technology (e.g., creativity, relationship building, and innovation); and (3) engage in strategic foresight activities. Relatedly, OPM, the Office of Management and Budget, and the Department of Defense are developing a plan to identify ways to provide employees impacted by automation with other work, and to identify skills needed in the future. The agencies’ efforts are part of the cross-agency priority goal on the 21st century workforce. Federal work is also being affected by increased use of virtual communication, which provides flexibility in where employees can do their work. In both the workforce-at-large and the federal workforce, the percentage of employees who telework has increased. For example, OPM reported that the percent of eligible employees teleworking increased from 29 percent in 2012 to 51 percent in 2016. We have previously reported that the federal government has increasingly recognized telework as an important human capital strategy that can give employees more work-life balance and help agencies continue operations during emergency events. However, federal agencies also face costs associated with telework, including training staff, ensuring supervisors have the necessary skills to manage remote staff, and overseeing the telework program to ensure compliance and reduce the risk of fraud. In July 2016, we found that OPM provided resources to agencies to help them with their telework programs, but was missing other opportunities to help agencies better identify the net cost savings associated with their telework programs. We recommended that OPM work with the Chief Human Capital Officers Council to provide clarifying guidance on options for developing supporting data for benefits and costs associated with agency telework programs. OPM concurred with the recommendation and in October 2018 provided documentation showing it is developing draft guidance on evaluating work-life programs, including telework. To fully implement this recommendation, it will be important for OPM to finalize and provide this guidance to agencies. An increased reliance on nonfederal partners to achieve policy goals will require new skills and competencies for which agencies will need to identify, recruit, and hire. Increasingly, the federal government works with state and local governments, as well as other partners, to achieve a wide range of policy goals. The federal government uses grants as a tool to achieve national priorities through nonfederal partners, including state and local governments, educational institutions, and nonprofit organizations. Federal grant outlays to state and local governments have generally increased as measured in constant fiscal year 2015 dollars from $230 billion in fiscal year 1980 to $624 billion in fiscal year 2015. We previously reported that a range of skills are needed to manage the various tasks associated with the grants life cycle. For example, the grants workforce needs to notify grant awardees of the general terms and conditions of the grant, including statutory and regulatory requirements. In support of their missions and activities, agencies also use contractors to procure a variety of services and products, including products that cannot be easily and clearly defined in advance and that are difficult to verify after delivery. In addition, agencies use contractors to provide the skills needed to help them manage complex operations. In fiscal year 2017, federal agencies obligated almost $306 billion for service contracts. Contractors can help agencies meet surge capacity needs, among other benefits. However, the Office of Federal Procurement Policy and our prior work have identified risks of overreliance on contractors and the need for increased management attention on certain types of services, such as professional and management support services. In addition to using grants and contractors, Congress has given broad statutory authority across the executive branch to use various open innovation strategies. Open innovation involves using various tools and approaches to harness the ideas, expertise, and resources of those outside an organization to address an issue or achieve specific goals. Our October 2016 report highlighted cases where agencies are using open innovation strategies—such as crowdsourcing and prize competitions—to effectively engage and collaborate with each other, and to leverage knowledge outside the federal workforce to achieve their goals. For example, at the time we found that every 2 years since 2009 the Federal Highway Administration had engaged a broad range of public- and private-sector stakeholders to identify and implement innovative ideas that measurably improved highway construction projects. Federal workers in charge of such open innovation initiatives will need to be able to work in collaborative, cross-cutting environments. To that end, in June 2017, we identified various government-wide and agency-level resources —such as interagency communities of practice and dedicated staff positions—the executive branch has put into place to support effective implementation of open innovation initiatives. Increasing fiscal constraints require agencies to reevaluate and reprioritize what the federal government does, how it does business, and, as appropriate, who conducts its business. The nation is on a long-term, unsustainable fiscal path. We have previously reported that the federal government is spending far more money than it is collecting and is projected to do so going forward. Further, fiscal pressures have already begun to affect the management of the federal workforce, including decisions to hire, retain, train, contract, and collaborate. Without careful attention to strategic and workforce planning and other approaches to managing and engaging personnel, the reduced investments in human capital may have lasting, detrimental effects on the capacity of an agency’s workforce to meet its mission. In May 2014, we identified strategies to help agencies maintain their human capital capacity while facing fiscal constraints. These strategies include strengthening coordination within the human capital community, using enterprise solutions to address shared challenges, and creating more agile talent management to address inflexibilities in the current system. Also, guidance from the Office of Management and Budget directs federal agencies to reconsider priorities, determine how to make trade-offs, and evaluate the potential effects of these decisions. In June 2018, we reported that as federal agencies reexamine their role in carrying out specific missions and programs, they should determine whether the federal government is best suited to provide that service or if it can be provided by some other level of government or sector more efficiently or effectively. Evolving mission requirements challenge agencies to adapt their work and workforces as they respond to policy shifts, technology changes, and resource constraints affecting their work. Our previous work on the Census Bureau (Bureau) highlights this trend. The Bureau is redesigning its approach to the 2020 Census to address rising costs and declining response rates. In May 2017, we reported that the basic design of the enumeration—mail out and mail back of the census questionnaire with in-person follow-up for nonrespondents—has been in use since 1970. However, this traditional design is no longer capable of cost effectively counting the population, and the Bureau has fundamentally reexamined its approach for conducting the 2020 Census. For example, the Bureau is planning to offer households the option of responding to the survey through the internet. The Bureau is also leveraging nonfederal partners and technology to respond to evolving mission requirements. For example, the Bureau plans to enhance its work with nonfederal partners to successfully complete the enumeration, particularly for hard-to-count groups, such as minorities, renters, and young children. In July 2018, we reported that to facilitate this effort, the Bureau plans to hire nearly twice as many partnership specialists as it had planned for the 2010 Census. These partnership specialists will need core relationship-building skills and advanced knowledge of digital media. However, the Bureau faces a significant challenge in hiring staff with these skills because it is operating in a much tighter labor market than it did prior to the 2010 Census. Likewise, the Bureau has had difficulty filling key positions to oversee information technology contracts. In August 2018, we reported that a government program management office is managing the contractor that will integrate all of the Bureau’s key systems and infrastructure for the decennial. However, in June 2018, Bureau officials reported that 33 of the office’s 58 federal employee positions were vacant. These vacancies create risks for the program management office’s ability to oversee contractor cost, schedule, and performance. Changing demographics and shifting attitudes towards work may require new skills to manage a diverse workforce that seeks purpose, autonomy, and career mobility. We found increases in the percentage of federal employees who had a disability, identified as a minority, were veterans, or who held an advanced degree over the past 10 years (see figure 2). This increasing diversity should help provide agencies with the requisite talent and multidisciplinary knowledge to accomplish their missions. While the percentage of federal employees 40 years and older remained relatively flat, the federal workforce had a higher percentage of individuals who are 40 and older compared to the U.S. employed civilian labor force. The federal workforce had a higher percentage of people with a disability, who were veterans, or held an advanced degree (see figure 3). Agencies face a potential risk related to retirement, particularly among the Senior Executive Service (SES). Specifically, we found that retirement rates for SES employees are higher than for all employees, with 7 to 8 percent of SES retiring every year for the past 6 years (see figure 4). Cumulatively, 41 percent of the permanent SES workforce in fiscal year 2012 retired by fiscal year 2017. If turnover is not strategically managed and succession plans are not in place, gaps can develop in an agency’s institutional knowledge and leadership as experienced employees retire. While retirements can aggravate the problem of skill gaps, they also present an opportunity for agencies to realign their workforce with needed skills and leadership levels to better meet existing and newly emerging mission requirements. Based on expert interviews, we also identified shifts in employee attitudes toward work, which present recruiting opportunities and challenges for the federal government. Experts said that employees seek meaningful work (i.e., work that can influence the greater society); autonomy within the workplace (i.e., opportunities to develop creative and innovative solutions to complex problems); control over their work environment (i.e., they want to set a schedule and to work in a location that provides work-life balance); and career mobility, including opportunities for upward mobility (i.e., promotions) and lateral mobility (i.e., opportunities to rotate to different roles or projects within the same agency, a different agency, or outside of government). Related to career mobility, experts said that employees are seeking greater developmental opportunities and would prefer longer-term employment where they can continue to build their skills and train. Experts noted that while employees change jobs more often than in the past, this phenomenon can be a result of employers investing less in employee development, which has led to greater turnover. OPM also recently reported that millennials are known for frequently transitioning from one job to the next. While federal agencies offer unique opportunities to pursue meaningful work, achieve autonomy, and have a healthy work-life balance, experts also highlighted key challenges regarding perceptions surrounding federal work from the potential applicants. These challenges include perceptions that the government is too bureaucratic, federal work lacks innovation and involves maintaining the status quo, federal work is less prestigious than the private sector, and federal workers do not get to see the immediate effect of their work. Officials from federal employee and manager groups believed that furloughs, government shutdowns, pay freezes, and negative rhetoric from elected officials have all contributed to the negative perceptions among potential applicants. For example, from December 22, 2018, to January 25, 2019, a partial government shutdown occurred as a result of a lapse in appropriations affecting some, but not all federal agencies. It was the second multiweek lapse in appropriations causing a government shutdown since 2013 and the longest shutdown in American history. Federal employees at the affected agencies did not receive a paycheck during the government shutdown. Experts we interviewed noted that the perception of job security offered by federal work is attractive to employees. However, prolonged shutdowns may alter this perception and harm the government’s recruitment and retention efforts. Given the changing demographic composition of the federal workforce and shifting attitudes toward work, our analysis suggested that it may be important to select and train managers and supervisors who possess several leadership competencies. These competencies include fostering an inclusive workplace (valuing diversity and individual differences and leveraging these differences to achieve the agency’s mission); team building (inspiring and fostering team commitment, spirit, pride, and trust); interpersonal skills (treating others with courtesy, sensitivity, and respect); and managing conflict (encouraging differing opinions to be expressed and resolving disagreements in a constructive manner). Such competencies can help managers and supervisors develop an agency culture where all employees feel valued, respected, engaged, and able to contribute toward an agency’s mission. In light of trends discussed, we identified actionable strategies that agencies may be able to use to effectively manage the future federal workforce in key talent management areas (see table 1). While these strategies are not an exhaustive list, collectively they suggest basic steps that agencies can take within existing authorities to position themselves to meet their talent needs. Since, in some cases, agencies already use these strategies, focused attention to leadership, culture, and sound management practices can help agencies prepare for the future workforce. For each strategy, we highlight some of the challenges agencies face, actions OPM can take to implement open, related recommendations from our prior work, and practices that may help agencies implement the strategy. These practices are based on our review of related reports, group interviews with federal Chief Human Capital Officers (CHCO), and interviews with selected private organizations and foreign governments. Why Is Aligning Human Capital Strategies Important? Strategic workforce planning aligns an organization’s human capital program with its current and emerging mission and programmatic goals, and develops long-term strategies for acquiring, developing, and retaining staff to achieve programmatic goals. This process—in conjunction with identifying skills and competencies and analyzing gaps— enables the organization to be agile, resilient, and responsive to current and future demographic and technological trends, as well as other demands. These efforts can also help agencies tailor their recruiting programs. In our prior work, we reported that high-performing organizations define what they want to accomplish and what kind of organization they want to be. They then identify and analyze the personnel skills, competencies, numbers, and other factors needed to achieve those objectives. However, these steps are a challenge for agencies that lack the capacity for strategic workforce planning. Consequently, these agencies’ human capital efforts tend to focus on support and transactional activities and compliance with rules and regulations. While these functions are important, successful strategic human capital management requires human capital professionals to integrate human capital strategies with their agency’s core business practices. In addition, high-performing organizations recognize the fundamental importance of measuring both the outcomes of human capital strategies and how these outcomes have helped the organizations accomplish their missions and programmatic goals. Identify existing skills and competencies. In May 2014, we reported that agencies should be aware of existing skills and competencies in their workforce to help inform workforce planning. According to the Department of the Treasury (Treasury) CHCO, establishing a skills inventory can help managers assign the right talent to the right place at the right time. For example, the CHCO told us that during the Puerto Rico debt crisis, Treasury needed to be able to identify the necessary skills to manage the crisis. The agency is now implementing an Integrated Talent Management System to facilitate workforce and succession planning as well as learning and performance management. In May 2014, we recommended that OPM work with the CHCO Council to review the extent to which new capabilities are needed to develop tools that help identify existing skills. OPM agreed and took a number of actions to address this and other related recommendations. For example, OPM developed an action plan template for closing skills gaps that adheres to our selected best practices for project planning. However, as of November 2018, other actions were still needed to fully address this and other related recommendations. Assess gaps in existing and future skills and competencies. With shifting attitudes toward work, technological advances, and increased reliance on nonfederal partners, agencies need to assess whether there are gaps in existing and future skills and competencies. We previously reported that most federal human resources (HR) systems—reflecting the General Schedule classification system—only identify employee skills and competencies by their occupational series, job title, and grade. This level of detail does not adequately address the multidisciplinary nature of modern work. For example, cybersecurity spans many occupational families. Similarly, with technological advances, agencies may need interdisciplinary talent such as workforce specialists in information technology. Agencies may be better able to assess gaps in such talent by defining, developing, and deploying workers based on skills and competencies, not by occupational series. According to the Department of Defense Civilian Human Capital Officer, agencies can assess gaps in skills and competencies through functional communities, in which experienced leaders in areas such as acquisition or financial management define, assess, and determine how to distribute skills and competencies in the workforce. She said that although her department and other agencies have made progress in closing skills gaps, only functional communities themselves can define the skills and competencies needed for current and future work. She also said that a mature functional community can help align workforce planning to agency strategic goals and objectives. In January 2015, we recommended that OPM work with agency CHCOs to (1) establish a schedule specifying when OPM will modify its Enterprise Human Resources Integration (EHRI) database to capture staffing data that it currently collects from agencies through its annual workforce data reporting process; and (2) bolster agencies’ ability to assess workforce skills and competencies by sharing competency surveys, lessons learned, and other tools and resources. In December 2018, OPM released a memorandum outlining plans for a phased, government-wide competency assessment of program and project managers beginning in May 2019. Additionally, in March 2019, OPM reported that it had identified a data source that was more efficient and accurate in identifying staffing gaps than EHRI data. We will continue to monitor OPM’s progress in implementing its planned actions. Monitor progress toward closing skills gaps. We previously reported that the federal government faces skills and competencies gaps in a number of agency-specific and government-wide occupations. One such occupation is in the HR profession. Skills gaps in HR occupations can hamper both strategic and transactional HR activity, exacerbate additional skill gaps, and hinder agencies’ ability to accomplish their missions. For example, our December 2016 report highlighted how the Veterans Health Administration’s limited HR capacity undermined its ability to improve delivery of health care services to veterans. Further, OPM officials said that a challenge to federal hiring efforts is high turnover among HR staff, and one CHCO said her HR staff is not up to date on hiring options. As a result, OPM officials noted that HR offices are missing specialists who understand the agencies’ specific hiring needs and flexibilities. In January 2015, we recommended that OPM (1) work with the CHCO Council to develop a core set of metrics that all agencies should use to close mission-critical skills gaps, among other HR goals; and (2) coordinate with the interagency working group that identified the list of skills gaps to explore the feasibility of collecting necessary information during a CHCO-led review of HR goals. OPM concurred with the recommendation in 2015. In March 2019, OPM stated it had addressed the recommendation by developing a multifactor model consisting of core metrics. This model included quit rates and retirement rates. OPM said that it provides the model to agencies for identifying mission-critical occupations. OPM added that agencies should have the autonomy to determine which human capital metrics are important for achieving their missions. While this is an important step forward, to close the recommendation, OPM needs to provide evidence that agencies are using the multifactor model as a common set of metrics to close mission- critical skills gaps, regardless of other agency-specific metrics. Why Is Acquiring and Assigning Talent Important? To ensure agencies have the capacity to address evolving mission requirements, agencies will need to compete with other sectors to acquire top talent, as well as have the flexibility to reassign existing talent to where they are most needed. This helps ensure the right people, with the right skills, are assigned to the right roles at the right time. According to OPM data, expert interviews, and our previous work, the federal government faces a range of challenges acquiring and assigning talent. These challenges include a lengthy hiring process and negative perceptions of government. In 2017, the average government-wide time- to-hire was 106 days, according to OPM. Candidates do not consider this time frame to be reasonable, according to human capital experts and federal employee and management groups. OPM’s government-wide goal is 80 days. Further, only 42 percent of respondents to the 2017 Federal Employee Viewpoint Survey (FEVS) think their work unit can recruit the right skills. Human capital experts, CHCOs, and OPM officials reported that agencies face challenges (1) matching applicants with job positions best suited to their skills, and (2) moving existing employees with specific skills to address emerging, temporary, or permanent needs across an agency. In the sections below, we highlight actions OPM can take to implement open recommendations from our prior work, and practices agencies can follow to address these challenges by (1) sourcing and recruiting talent, (2) assessing and screening candidates, and (3) assigning employees where needed. Sourcing and recruiting is the process of attracting strong applicants who are prepared to perform successfully on the job. Some practices agencies can use to better source and recruit include cultivating a talent pipeline, highlighting agency mission, recruiting continuously, starting the hiring process early in the school year, reviewing available hiring flexibilities, and writing user-friendly vacancy announcements. Cultivate a diverse talent pipeline. In our prior work, we have noted the importance of active campus recruiting that goes beyond infrequent outreach to college campuses. Active campus recruiting includes developing long-term institutional relationships with faculty, administrators, and students. In addition, OPM guidance emphasizes that agencies should develop an inclusive approach to their talent acquisition strategies. This includes developing strategic partnerships with a diverse range of colleges and universities, trade schools, apprentice programs, and affinity organizations from across the country. Likewise, representatives of consulting firms we interviewed stated they cultivate a talent pipeline by building a brand on campus, developing relationships with college students, and recruiting on campuses for entry- level positions and internship programs. One consulting firm representative said that the firm sends “brand ambassadors” to build relationships with college freshmen and sophomores, and to discuss working in the professional services industry. Another consulting firm representative said that the firm uses social media to develop relationships with students prior to a campus visit. Consulting firm representatives also noted that they expanded their talent pool by visiting technical conferences, veteran groups, and campuses with students of diverse backgrounds. Consulting firm representatives stated that their internship programs are among their most successful practices for cultivating a talent pipeline because the firms can offer full-time positions to rising seniors during the internship. Similarly, CHCOs and federal employee and management group representatives we interviewed noted that internships are important for establishing a pipeline for recruitment. Highlight agency mission. Agencies can help counter negative perceptions of federal work by promoting their missions and innovative work, according to expert and CHCO interviews. For example, the Department of Homeland Security (DHS) provides “Day in the Life” information on its work to promote public awareness of how its everyday tasks tie in with its mission of protecting the United States, according to the DHS CHCO. The DHS CHCO stated that promoting agency mission can be done while cultivating a talent pipeline and assessing applicants’ abilities. For example, the department holds recruitment events where potential candidates can participate in law enforcement-related activities such as fitness testing. The CHCO noted that in addition to promoting homeland security careers, these events help prospective candidates determine if a position is a good fit for them. Recruit continuously and start the hiring process early in the school year. The ability to hire students is critical to ensuring that agencies have a range of experience levels for succession planning and a talent pipeline to meet mission requirements. One of the key challenges agencies face in recruiting students is managing the timing of recruitment. The federal fiscal year begins on October 1—about when private sector firms we interviewed start recruiting on campus. Frequently, however, federal agencies have been unable to hire at this time of year because of the limitations of continuing resolutions. Yet if agencies wait to start the recruiting and hiring process until they receive funding, many graduates will have taken other job opportunities. Agencies can overcome these timing challenges by recruiting continuously and starting the hiring process early in the school year. To recruit continuously, CHCOs from the U.S. Departments of Agriculture and Homeland Security said they advertise funding-conditional positions throughout the year. Similarly, representatives of some consulting firms said they post positions that are contingent on funding and complete the hiring paperwork, among other requirements, for these positions before obtaining federal funding. This has helped navigate the timing of annual appropriations because these organizations can onboard candidates as soon as they receive funding. Representatives of one federal management group also stated that recruiting continuously and starting the hiring process earlier is a good practice even when agencies receive funding in October, since it can reduce stress from cumbersome recruiting and hiring work when a position needs to be filled. Strategically leverage available hiring flexibilities. CHCOs cited the complex competitive examining process as a cause of the lengthy hiring time. This has been a long-standing concern: In our 2002 report on human capital flexibilities, we noted that for many years prior, federal managers had complained that competitive examining procedures were rigid and complex. However, agencies can use a number of additional hiring authorities beyond competitive examining. These authorities can add flexibility to the process and CHCOs expressed a desire for more. However, we previously found that agencies relied on only a small number of available authorities. In fiscal year 2014, 20 hiring authorities were used to make around 90 percent of the new appointments, although agencies used 105 hiring authority codes in total. We recommended that OPM use information from its review of agencies’ use of certain hiring authorities to determine whether opportunities exist to refine, consolidate, or expand agency-specific authorities, and implement changes where OPM is authorized, including seeking presidential authorization or developing legislative proposals if necessary. OPM agreed with our recommendation and has made progress in these areas, although more work is needed. As of July 2018, OPM had started a project to review hiring authority data and to create an inventory of authorities used by agencies. In its July 2018 study on excepted service hiring authorities, OPM identified possible opportunities to streamline authorities and outlined planned actions to promote a more effective and efficient hiring process. As of December 2018, OPM said that it continues to research and examine these streamlining opportunities as part of the broader initiative to modernize federal hiring practices under the President’s Management Agenda. To fully implement the recommendation, OPM needs to complete these efforts and, as appropriate, develop legislative proposals in consultation with the CHCO Council. Write user-friendly vacancy announcements. We previously reported that some federal job announcements were unclear. This can confuse applicants and delay hiring. In July 2018, OPM officials stated that agencies can develop more effective vacancy announcements when hiring managers partner with HR staff. According to OPM, hiring managers can work with HR staff to identify the critical competencies needed in the job, develop a recruiting strategy, and ensure the job announcement accurately and clearly describes the required competencies and experience. To promote collaboration between hiring managers and HR staff, OPM is training agencies on the role of hiring managers in writing vacancy announcements, according to OPM officials. As we reviewed human capital practices in foreign governments, Canadian officials told us that Canada’s Public Service Commission shortened job announcements and reduced the number of qualifications required to apply for most positions. Canadian officials also noted that they simplified their job application portal, which reduced the time to apply for a job. Assessing includes developing and implementing tests, structured interviews, and other evaluations to determine whether candidates are qualified for the position and to gauge their relative levels of knowledge, skills, and abilities. Screening involves reviewing qualified candidates for potential suitability concerns and conducting background investigations. Practices for assessing and screening include using relevant assessment methods, sharing hiring lists, and improving the security clearance process. Use relevant assessment methods and share hiring lists. CHCOs and OPM officials stated that roadblocks to hiring the right skills include issues with assessment methods. Specifically, agencies may use methods that are less relevant for assessing the desired skills or agencies may experience issues incorporating multiple assessments in the hiring process. For example, one CHCO said that her agency uses multiple- choice questions to assess candidates, but essay questions more effectively assess the skills she seeks. OPM issued guidance to agencies on how to use additional assessment methods, including how to rank applicants. Additionally, federal employee and management group representatives said agencies could reduce the time of the assessment process by sharing hiring lists. The Competitive Service Act of 2015 allows agencies to share hiring lists, but agencies have only started to pilot the practice within departments, according to OPM officials. OPM and agencies discussed sharing hiring certificates with the CHCO Council, and OPM is planning virtual training sessions on this topic. However, one federal employee group representative noted that to be consistent with merit principles, agencies may need to refresh the list every 2-to-3 months to give new candidates the opportunity to enter the application pool. In looking at human capital practices in foreign governments, we found that Australian agencies incorporated more relevant assessment methods and shared hiring certificates. According to officials from the Australian Public Service Commission, Australian agencies previously relied on interviews as the main assessment method. However, the Australian Public Service Commission encouraged agencies to use a range of different assessment methods, such as prescreening questionnaires, video interviews, and technical multiple-choice questions. As a result, officials stated that Australian agencies interview fewer but more suitable candidates, which can save time and resources. Also, Australian agencies can hire from a list of candidates that one agency already determined to be qualified in certain skills. Improve the security clearance process. The security clearance process can contribute to onboarding delays, according to CHCOs. For example, at one agency, the CHCO said it takes applicants more than 400 days to receive their security clearances. Also, our previous work found that 98 percent of agencies did not meet the 60-day timeliness objectives for initial secret clearances in fiscal year 2016, an increase of 25 percentage points since fiscal year 2012. In January 2018, we added the security clearance process to our High- Risk List and reported a backlog of more than 700,000 background investigations as of September 2017. In December 2017, we made three recommendations to the National Background Investigations Bureau within OPM. These recommendations included developing a plan for reducing the security clearance backlog, increasing total investigator capacity, and implementing a comprehensive strategic workforce plan that focuses on what workforce and organizational needs and changes will enable the National Background Investigations Bureau to meet the current and future demand for its services. OPM concurred with the recommendations, and officials reported in February 2019 that the National Background Investigations Bureau had taken steps to reduce backlog of pending security clearance investigations to approximately 565,000 and increase the number of investigators to almost 8,700. The National Background Investigations Bureau has also reported publically on the security clearance background investigations, including investigator headcounts, in September 2018, and quarterly on performance.gov. While an important step, OPM needs to complete the workforce plan and identify workforce goals to fully implement the recommendation. The Department of Homeland Security (DHS) CHCO said DHS navigates this challenge by onboarding talented, qualified applicants as soon as possible, then, while waiting for their high-level clearance, assigning them tasks that do not require the clearances. She also said that DHS has issued more interim clearances and has redesignated some positions so they can be held by employees with a lower clearance classification. Our previous work noted that it is important for agencies to be able to place employees where needed, especially since utilizing skills of employees already in the workforce could improve agencies’ ability to meet emerging or temporary mission needs more cost-effectively than hiring employees. Develop a culture of agility. We previously reported that to develop a culture of agility, agencies need to be able to (1) identify the skills available in their existing workforces, and (2) move people with specific skills to address emergency, temporary, or permanent needs within and across the agencies. Agencies can develop a culture of agility to meet mission needs by supporting rotational assignments for employees. For example, the Nuclear Regulatory Commission established an oversight board when it faced a period of downsizing and could not hire externally as a result of contraction within the nuclear industry, according to the agency CHCO. This board helped ensure that employees with the required skill sets were considered first before an approval to hire would be granted. Through its active rotational program and hiring oversight, the commission met its mission amidst the downsizing, according to the agency’s CHCO. Relatedly, Canada and two of the private government contractors we interviewed have used internal job application platforms to promote a culture of agility. Canada’s internal job platform, Career Marketplace, allows all government employees to share profiles and career opportunities, particularly for short-term projects. One company’s representatives said their internal job platform posts openings in different countries and industries across the company. According to these representatives, this company established a culture where supervisors understand that staff work for the entire company, not just a particular unit or program. Another company supplements its internal job platform with tools to recognize employee skills and find opportunities that best fit those skills. Why Is Incentivizing and Compensating Employees Important? Changing mission requirements and technological trends requires the federal government to compete with other sectors for in-demand skill sets, and compensation and incentives are key determinants of where employees choose to work. While federal agencies may struggle to offer competitive compensation for highly skilled workers given fiscal constraints, leveraging existing incentives such as work-life balance programs can help agencies to better compete for top talent even in labor markets where federal pay may not be competitive. While federal agencies may face challenges implementing competitive compensation in certain labor markets, certain benefits and incentives other than pay can help federal agencies better compete in the labor market. However, agencies do not always promote these benefits and incentives as part of a total compensation package, in part because managers are not always aware of the importance of doing so. In the sections below, we highlight practices agencies can use to promote current benefits and incentives, and discuss our open recommendations to leverage existing pay flexibilities. In cases where federal pay may not be competitive, certain benefits and incentives, such as work-life balance programs, tax-exempt health savings plans, and retirement savings plans, could give the government an edge to recruit and retain employees. Some practices agencies can use to leverage these benefits and incentives are as follows. Increase awareness of benefits and incentives, such as work-life programs. In 2017, the majority of federal employees were satisfied with compensation, and employees who participated in work-life programs were satisfied with those incentives (see table 2 and figure 5). However, OPM’s 2018 Federal Work-Life Survey Governmentwide Report found that one of the most commonly reported reasons employees do not participate in work-life programs is lack of program awareness among employees and supervisors. For example, 23 percent of those who did not participate in the employee assistance program said they were unaware of the program services. Some agencies are addressing this issue by advertising and helping employees use available benefits, work-life balance programs, and other resources. For example, the National Science Foundation offers employees many opportunities to learn about existing benefits, according to the foundation’s CHCO. These opportunities include triannual retirement seminars where employees receive personalized retirement estimates, quarterly financial planning seminars where employees receive a free 1-hour consultation, and annual benefit fairs where employees can learn about various health care providers, the work-life programs, and the employee assistance program. Tailor benefits and incentives to employees’ needs. Our analysis of CHCO and expert interviews also found that employees may value different benefits and incentives depending on their stage in life. By better understanding the desires of the workforce at various life stages, agencies can better tailor benefits packages and incentives to their employees. For example, the Social Security Administration’s CHCO said that the agency’s younger workers value work-life and wellness programs, so the agency implemented a health-tracking program and a fitness discount program for all employees. CHCOs also suggested identifying and incorporating the benefits that would be most useful to various groups of employees, such as sabbaticals for midlevel employees or paid parental leave for employees starting families. One CHCO found that her cybersecurity workforce values subsidies for training and additional certifications more than bonus pay. Further, OPM’s 2018 Federal Work-Life Survey Governmentwide Report found that the number of respondents who anticipate adult dependent care responsibilities in the next 5 years (31 percent) is double the number of number of respondents with current adult dependent care needs (15 percent). OPM officials stated in light of this change, agencies may need to provide greater workplace flexibilities and other support services to retain talent. Address barriers to telework. Telework can serve as an important recruitment and retention tool. According to OPM’s 2018 Federal Work- Life Survey Governmentwide Report, 68 percent of employees who telework said they intended to remain at their agencies, compared to 62 percent of those who do not telework. However, our previous work and OPM’s 2018 Federal Work-Life Survey Governmentwide Report found that some supervisors discourage telework despite agency participation goals and that managers may make telework decisions before taking relevant training. In February 2017, we recommended that OPM develop tools to help agencies assess and analyze persistent barriers to telework, including managerial resistance. While OPM disagreed with our recommendation, it took steps consistent with the recommendation. For example, in 2017, OPM administered the first government-wide work-life survey. This survey included questions about a number of work-life programs, including telework, to help identify common barriers to participation in telework, including managerial resistance. Specifically, the survey discussed supervisory perceptions of employees' reported telework participation outcomes, supervisors' confidence to effectively manage telework performance, and key drivers for telework approvals and denials. OPM then provided individualized reports on results to agencies and agency components. OPM also developed and distributed a video tutorial to help agencies analyze their results. In 2019, following receipt and review of documentation from OPM, we determined that these actions will help agencies prioritize ways to improve their telework programs. We then closed the recommendation as implemented. In our review of other countries’ human capital practices, we found that Australia encouraged managers to support telework by passing legislation outlining standards and developing a culture that supports work-life programs. For example, Australia’s Parliament passed legislation outlining standards for work-life programs, but Australian officials also stated that commitment from top management was instrumental in creating a culture that supported work-life programs, including telework. More than 80 percent of respondents to the Australian Public Service employee census reported that their supervisor actively supports work-life programs. It is the policy of Congress that pay for federal workers under the General Schedule (GS) classification system—the pay system covering the majority of federal employees—align with pay for comparable nonfederal workers. However, in 2012, we reported that recent studies comparing the compensation of federal employees to workers in other sectors arrived at different conclusions as to which sector had the higher pay and the size of the pay disparities, in part because each study included different sets of assumptions. When necessary, agencies can use special payment authorities strategically to help ensure pay is competitive. Use special payment authorities strategically. A variety of authorities can help agencies compete in the labor market for top talent, but agencies only use them for a small number of employees. In December 2017, we reported that agencies can tap an array of special payments when they need to recruit or retain experts in engineering, cybersecurity, or other in-demand fields. These payments include, for example, payments for recruitment, retention, or critical positions. We found that agencies reported that these payments were helpful, but few documented their impacts, and OPM had not assessed their effectiveness. Further, we analyzed EHRI data and found that less than 5 percent of employees received payments for recruitment or retention annually in the past 10 years. In December 2017, we recommended that OPM track the effectiveness of special payment authorities, provide guidance and tools to assess their effectiveness, and review and consider ways to streamline approval procedures. OPM partially concurred with the recommendation to track the effectiveness of special payment authorities, saying that agencies are in the best position to take this action. Moreover, in December 2018, OPM stated that it established a baseline to measure changes in the use of special payment authorities over time, and that it is focused on government-wide, mission-critical occupations to help identify trends where there may be recruitment and retention difficulties. OPM is also working with the CHCO Council to administer a survey to agencies to obtain input on possible improvements to special payment authorities and whether agencies have best practices to share on effective use of special payment authorities. OPM officials said that they plan to review approval procedures in 2019 for ways to streamline them; however, they have not yet provided documentation on how this and future reviews will identify ways to streamline the procedures. We will continue to monitor OPM’s actions to implement this recommendation. Why Is Engaging Employees Important? Employee engagement— generally defined as the sense of purpose and commitment employees feel toward their employer and its mission—is important because engaged employees are more innovative, more productive, more committed, more satisfied, and less likely to leave, according to OPM. OPM’s study on engagement and our prior work found that what matters most in improving engagement levels is valuing employees by authentically focusing on their performance and career development. Specifically, our prior work found that the strongest drivers of engagement were similar across age groups and include constructive performance conversations and communication from management, career development and training, inclusion and involvement in decisions affecting employees’ work, and work-life balance. The challenge for agencies, then, is to (1) overcome weaknesses in the performance management process, including rewarding strong performers and dealing with poor performers; (2) create support for an inclusive work environment; and (3) develop and implement strategies for prioritizing training during times of fiscal constraint. In the sections below, we highlight actions OPM can take to implement open recommendations from our prior work and practices agencies can take to improve employee engagement. Experts said that employees desire an environment where they can collaborate with their peers and feel a sense of comradery. In contrast, even a small number of poor performers can negatively affect employee morale and agencies’ capacity to meet their mission, according to CHCOs and our previous work. In the 2017 FEVS, 64 percent of federal employee respondents agreed that their supervisor provides them with constructive suggestions to improve job performance and 31 percent agreed that steps are taken to deal with poor performers. Without effective performance management, agencies risk not only losing the skills of top talent, they also risk missing the opportunity to effectively address increasingly complex and evolving mission challenges. Agencies can make performance management more effective with the following practices. Improve selection and training of supervisors and managers. Agencies can improve employee engagement by having a strong management team that can provide constructive performance conversations and deal with poor performers. This can be done by selecting managers who (1) are inclined toward and interested in supervision, and (2) have the ability to coach staff and provide constructive performance feedback. One way agencies can ensure they are selecting managers who want to manage is to establish a dual career ladder structure, which allows advancement opportunities for employees who have technical skills but are not inclined to manage. Representatives of private consulting firms we interviewed use the dual career ladder and said it helps expand opportunities for employees to move around internally. We recommended in 2015 that OPM determine if promising practices, such as the dual career ladder structure, should be more widely used across government. In November 2018, OPM officials said that the President’s Management Agenda requires agencies to ensure first-line supervisors possess critical leadership competencies within the first year of appointment, either through selection or development. We will continue to monitor OPM’s actions in this area. Agencies can also train managers to ensure they have skills to address poor performance. In February 2015, we reported that supervisors may not possess confidence or experience in having difficult performance conversations, and they may not have skills or training on addressing poor performance. These factors point to the importance of effective selection, assessment, and development of new supervisors, as well as to the importance of providing refresher training for current supervisors. Link agency’s mission and employees’ work. We have previously reported that high-performing organizations create a “line of sight” between individual performance and organizational results by aligning employees’ daily activities with broader results. Further, agencies can motivate and retain employees by connecting them to their agency’s mission, according to human capital experts and federal employee and management group representatives we interviewed. Employee responses to FEVS indicate the federal government appears to be performing well in this area. In 2017, 84 percent of employees knew how their work related to the agency goals and priorities. Several private consulting firms we spoke with connect employees to their missions in various ways. One firm aligns individual performance expectations with the organization’s goal of serving federal clients objectively with the highest caliber of scientific and technical excellence. According to the firm’s representative, this effort has improved employee satisfaction scores. Other firms train employees on the firm’s core values and its clients’ missions. According to the firms’ talent directors, this practice helps keep employees interested in working for the firm. Implement meaningful rewards programs. We have previously reported that high-performing organizations seek to create effective incentive and reward systems that clearly link employee knowledge, skills, and contributions to organizational results. However, agencies sometimes struggle to allocate limited resources between mission requirements and recognition, according to CHCOs and representatives of one federal management group. According to the representatives, some managers may not implement reward programs because they are time intensive, and managers may not understand the importance of reward programs to motivating the workforce. Among 2017 FEVS respondents, 50 percent reported that they were satisfied or greatly satisfied with the recognition received for doing a good job. Further, our November 2018 report highlighted challenges in recognizing employee performance. We noted that approximately one-third of 2017 FEVS respondents agreed or strongly agreed with the statement, “In my work unit, differences in performance are recognized in a meaningful way.” We also found that employees in supervisory roles responded more positively to statements related to rewarding performance than other employees. For example, in 2017, an estimated 69 percent of senior leaders agreed or strongly agreed with the statement. In contrast, an estimated 48 percent of supervisors and an estimated 33 percent of nonsupervisors and team leaders agreed or strongly agreed. Human capital experts and federal employee and management group representatives said that recognizing employees for their contribution to achieving the agency’s mission can be as strong an incentive as money. For example, according to the Social Security Administration CHCO, the agency offers a variety of awards programs. These programs include agency-wide monetary awards that are based on performance ratings, monetary awards that are not based on performance ratings, and nonmonetary awards, some of which are showcased in a virtual ceremony during Public Service Recognition Week. The Social Security Administration also incorporates office-level awards to recognize employee contributions. For example, in some offices, supervisors give “Life Saver” or “You Rock” certificates. Share innovative approaches to performance. In November 2018, we found that opportunities exist to share innovative approaches to performance management. We recommended that OPM work with the CHCO Council to develop a strategic approach for identifying and sharing emerging research and innovations in performance management. Examples of innovations OPM has found include changes in performance ratings models and setting goals that are focused on growth. We also recommended that OPM develop and implement a mechanism for agencies to share promising practices, such as focusing on performance conversations and recognition to increase engagement and performance. OPM agreed with our recommendations and reported that it plans to formalize its processes for sharing emerging research and soliciting views from the CHCOs. We will monitor OPM’s efforts to implement the recommendations. Our analysis of expert interviews found that employees seek autonomy in the workplace, meaningful work, and opportunities to achieve results by developing creative and innovative solutions. Also, experts noted that in some cases, connecting employees to a sense of inclusion and meaning can compensate for the opportunity to make higher salaries in other sectors. Having an inclusive work environment is one practice that can help increase employee involvement in decisions. Increase support for an inclusive work environment. An increasingly diverse workforce can help provide agencies with the requisite talent and multidisciplinary knowledge to accomplish their missions. We previously reported that diversity in the workforce can help address complex challenges and foster innovation and creativity. We also reported that fostering a diverse and inclusive workplace could help organizations reduce costs by reducing turnover, increasing employee retention across demographic groups, and improving morale. To harness diverse talent, agencies need to continue using thoughtful strategies to engage employees. In 2017, almost 70 percent of FEVS respondents stated that supervisors work well with employees of different backgrounds, and about half were satisfied in other areas related to inclusiveness (see table 3). In January 2005, we reported that top management commitment is a fundamental element in the implementation of diversity management initiatives. We’ve also reported on the importance of diversity in the Senior Executive Service (SES) corps. In January 2003, we stated that diversity can bring a wider variety of perspectives to bear on policy development and decision-making that help agencies achieve results. Other practices that can help agencies support an inclusive environment include having a diversity strategy and plan that are developed and aligned with the organization’s strategic plan. Agencies should also involve employees in driving diversity throughout the organization (e.g., implementing mentoring programs or advisory groups). Practices implemented by the United Kingdom (UK) and Australia emphasize the importance of setting an inclusive tone from the top. For example, according to country officials, the UK and Australia designate high-level agency officials to champion a particular government-wide initiative, such as increasing diversity and inclusion, work-life balance, and well-being. In the UK, champions promote the initiatives by blogging or chairing interagency groups of senior civil servants to share best practices, among other activities. Agencies can promote an inclusive work environment by providing employees opportunities to share common interests and involving employees in decisions. Private consulting firms we interviewed help employees feel involved in the organization by sponsoring employee groups where employees can gather around common interests, such as community service, or skill sets, such as cybersecurity or acquisition management. One firm incorporates results of its annual employee survey into its decision-making and modified its career progression trajectory based on feedback from employee focus groups. Agencies can use career developmental opportunities, including training, details, and rotations, to (1) help the workforce develop skills to meet evolving mission requirements, (2) ensure managers are well qualified, and (3) appeal to current and future workers’ desires for career mobility. Some actions OPM can implement and practices agencies can take include prioritizing training and encouraging mobility opportunities. Prioritize training for employees and managers. CHCOs and federal employee and management group representatives said that more can be done to prioritize training, particularly given resource constraints. Further, our past work found that diversity training can help employees develop concrete skills to assist in communicating and increasing productivity. However, in 2017, only 55 percent of FEVS respondents were satisfied with training. In 2012, we recommended that OPM include in its guidance steps and factors agencies should consider when prioritizing training. OPM partially agreed with our recommendation and has taken steps to implement it. In July 2017, OPM officials reported they were gathering information on agencies’ talent development processes, tools, and procedures, and would use the information they gathered to develop criteria for ranking training. We requested an update in December 2018 and will continue to monitor OPM’s actions to implement this recommendation. As an example of agency training efforts, the Social Security Administration has national and regional development programs that offer 12 to 18 months of training and rotations for entry-, mid-, and senior-level employees to strengthen foundational, technical, and leadership knowledge and skills, according to the agency’s CHCO. For example, its Leadership Development Program assigns selected GS-9 through GS-12 employees to developmental assignments in new areas of work, and provides leadership training that broadens their perspective of the agency’s mission. Encourage details, rotations, and other mobility opportunities. According to our group interviews with CHCOs and interviews with human capital experts and federal management groups, upward and lateral mobility opportunities are important for retaining employees. CHCOs also said that in some cases, lateral mobility opportunities such as rotations, details, and opportunities to gain experience in other sectors can help employees gain new skills more cost effectively than training, particularly for rapidly changing skill sets such as those related to the sciences. We previously reported that effective interagency rotational assignments can develop participants’ collaboration skills and build interagency networks. Further, providing supervisory candidates with details or rotational opportunities could help them develop and demonstrate supervisory competencies. Regarding upward mobility, the 2017 FEVS found that only 37 percent of respondents were satisfied with opportunities to get a better job in their organization. Agencies can use details and rotations to meet employees’ desire for mobility, according to our CHCO group interviews and interviews with human capital experts and federal employee and management groups. However, according to OPM data, few federal employees moved horizontally in 2017 (see table 4). Few employees move horizontally because managers are sometimes reluctant to lose employees, according to federal manager group representatives and our previous work. Furthermore, federal budgeting and account structures create disincentives to share resources across agencies. Additionally, barriers to rotations in other sectors may include challenges identifying willing industry partners and addressing concerns regarding conflict of interest and access to sensitive information. Meanwhile, federal employees who have left for another sector must apply competitively to return at a higher level. We have previously made recommendations that could help address these challenges. In 2014, we recommended that OPM review the extent to which new capabilities are needed to promote mechanisms for increasing employee mobility within an agency and government-wide. OPM agreed with the recommendation and since October 2016 has been exploring a pilot project, GovConnect, that tests models for workforce agility that includes cloud-based skill deployment across organizational components and employee-initiated innovation initiatives. In November 2018, OPM officials also stated that the President’s Management Council Interagency Rotations Program offers rotational assignments across agencies. We will continue to monitor OPM’s efforts in this recommendation. In 2015, we recommended that OPM determine if promising practices, such as providing detail opportunities or rotational assignments to managerial candidates prior to promotion, should be more widely used across government. OPM partially concurred with this recommendation and agreed to work with the CHCO Council to explore more government- wide use of rotational assignments. However, OPM noted that agencies already have authority to take these actions. As of October 2018, OPM had not provided us with information regarding how it plans to implement the recommendation. In looking at human capital practices in foreign governments, we found that the UK encourages rotation and promotion opportunities through its developmental programs for entry-, mid-, and senior-level employees. For example, participants in its entry-level program, called Fast Stream, are centrally employed in the UK Cabinet Office. For the first 3 to 4 years, Fast Stream participants rotate among agencies and receive technical training in a specific field, such as accounting, finance, or human capital. While evaluating Fast Stream’s feasibility in the federal workforce, one federal employee group representative emphasized the need to provide career development opportunities to all employees, not just selected program participants. We provided a draft of this report to the Acting Director of OPM for review and comment. OPM provided technical comments, which we incorporated as appropriate. We revised the report to further emphasize how agencies can use work-life programs to recruit, retain, and engage federal employees. We also added the concept of interpersonal skills to our discussion of the leadership competencies needed to manage the future workforce. OPM’s comments also included updates to prior recommendations on enterprise human capital solutions, skills gaps, telework, and special pay authorities. We incorporated these comments as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Acting Director of the Office of Personnel Management, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In this report, we identify (1) key trends affecting federal work and workers, and (2) key talent management strategies agencies can employ to achieve a high-performing federal workforce, given those trends. To address both objectives, we reviewed our own reports as well as those from the Office of Personnel Management (OPM), academia, think tanks, and public opinion organizations related to human capital and the future of work. We also analyzed data from OPM’s Enterprise Human Resources Integration (EHRI) system. EHRI contains personnel action and onboard data for most executive branch and some legislative branch federal civilian employees. We analyzed government-wide EHRI data on demographics, including veterans status; employee movement such as details and transfers; and retirement eligibility. We analyzed 10-year trends from fiscal years 2008 to 2017, the most recent, complete fiscal year of data available at the time of our review. For our analysis of demographic trends, we included permanent, temporary, and term-limited employees. However, we focused on permanent employees in our analysis of personnel movement and retirement eligibility because these employees (1) comprise most of the federal workforce and (2) become eligible to retire with an annuity, for which temporary and term-limited employees are ineligible. To calculate the number of federal civilian employees, we included all onboard staff, regardless of their pay status. Cases with missing values on a variable were excluded from the reported statistics for that variable. To calculate eligibility for retirement within the next 5 years, we computed the date at which the employee would be eligible for voluntary retirement with an unreduced annuity, using length of service, birth date, and retirement plan coverage. Since work schedule does not affect retirement eligibility, we included permanent employees with full-time schedules and part-time, seasonal, and other schedules in these results. We assessed the reliability of the EHRI data through electronic testing to identify missing data, out-of-range values, and logical inconsistencies. We also reviewed our prior work assessing the reliability of these data and corresponded with OPM officials knowledgeable about the data to discuss its accuracy and the steps OPM takes to ensure reliability. On the basis of this assessment, we believe the EHRI data we used are sufficiently reliable for the purpose of describing demographic trends and workforce management challenges facing the federal government. To identify key trends in the workforce and workplace, we analyzed data from the U.S. Bureau of Labor Statistics (BLS) Current Population Survey (CPS) and Federal Procurement Data System – Next Generation, reviewed our prior work, and reviewed reports from OPM and selected think tanks and consulting firms. Key trends in the workforce. To assess key trends in the workforce, we analyzed data from the CPS, a national survey designed and administered jointly by BLS and the Census Bureau. The CPS is a key source of official government statistics on employment and unemployment in the United States, and also contains data on poverty rates, earnings, and labor market demographics. We analyzed 2017 annual averages on age, racial or ethnic minority status, disability status, veteran status, and educational attainment of the U.S. civilian labor force. The CPS uses a probability sample conducted monthly. As with all samples, estimates produced from the CPS are subject to sampling and nonsampling error. Sampling error results from the fact that the samples are one of a large number of random samples that might have been drawn. We followed the BLS technical guidance for estimating the standard errors of annual average totals from CPS data. We used the standard errors to construct 95 percent confidence intervals for each estimate presented in this report. This is the interval that would contain the actual population value for 95 percent of the CPS samples that the BLS could have drawn. All estimates from the CPS presented in this report have a margin of error of plus or minus 4 percentage points or fewer at the 95 percent confidence level. Nonsampling error results from issues such as inability to obtain information about all people in the sample, or the inability or unwillingness of respondents to provide correct information in the self-reporting process. We assessed the reliability of CPS data by reviewing related technical documentation from the BLS website on the concepts and methodology of the CPS, and obtaining BLS feedback on our analysis. We conducted manual data testing for obvious errors and compared selected underlying data to CPS annual reports. We found the data were sufficiently reliable for the purposes of comparing characteristics of the federal workforce to those of the U.S. civilian labor force. Key trends in the workplace. To assess key trends in the workplace, we reviewed our prior work on human capital management and trends in government and the workforce. We also reviewed OPM reports on human capital trends and management, including the 2018 Work-Life Survey Governmentwide Report, 2018 Federal Workforce Priorities Report, and 2016 Federal Employee Benefits Survey Results. We interviewed OPM officials knowledgeable on these topics to better understand the methodology used to obtain report findings, and to understand previous and current efforts to assess federal human capital policies. We also reviewed selected reports from think tanks, public opinion organizations, and consulting firms on workplace trends. For reports used in our analysis, we corresponded with knowledgeable staff to better understand the methodologies used to obtain findings in the report and we assessed the methodologies against our own standards. Service contracts. To describe the size of service contract obligations in fiscal year 2017, we reviewed data from the Federal Procurement Data System – Next Generation. We found the data sufficiently reliable for this purpose based on our review of related documentation. To identify key areas to help agencies manage the workforce, we analyzed employee responses to questions from OPM’s 2017 Federal Employee Viewpoint Survey (FEVS) and spoke with various groups. We interviewed human capital experts, federal employee and management groups, and held moderated group interviews with agency Chief Human Capital Officers (CHCO). Federal Employee Viewpoint Survey. To obtain information on federal employee attitudes toward work and the workplace, we analyzed employee responses to questions from OPM’s 2017 FEVS, the most recent data available at the time of our analysis. The FEVS provides a snapshot of employees’ perceptions about how effectively agencies manage their workforce. The FEVS includes a core set of 84 questions. Agencies have the option of adding questions to the surveys sent to their employees. The 84 questions address the following areas: (1) work experience, (2) work unit, (3) agency, (4) supervisor, (5) leadership, (6) satisfaction, (7) work-life, and (8) demographics. OPM has administered the FEVS annually since 2010. The FEVS is based on a sample of full- and part-time, permanent, nonseasonal employees of departments and large, small, and independent agencies. The total sample size for the 2017 FEVS was 1,139,882 employees and the response rate was 45.5 percent. According to OPM, the 2017 sample size was sufficient to ensure a 95 percent chance that the true population value would be between within 1 percent of any estimated percentage for the total federal workforce. Since each sample could have provided different estimates, we express our confidence in the precision of the FEVS statement estimates using the margin of error at the 95 percent level of confidence. This margin of error is the half-width of the 95 percent confidence interval for a FEVS estimate. A 95 percent confidence interval is the interval that would contain the actual population value for 95 percent of the samples that could have been drawn. For our analysis, we selected FEVS questions related to work unit recruitment, satisfaction with compensation and incentives, management, employee involvement, and career opportunities. We categorized responses into three categories—positive, neutral, and negative, as shown in table 5. In our findings, we included the percent of positive responses to FEVS questions. Neutral responses ranged from 6.7 to 29.3 percent, as shown in table 5 below. To assess the reliability of the FEVS data, we reviewed FEVS technical documentation. On the basis of these procedures, we believe the data were sufficiently reliable for our purposes. Interviews with experts. To identify key strategies for managing a high- performing workforce, we conducted semistructured interviews with 22 experts in the areas of human capital, strategic foresight, and the future of work. See appendix II for a list of experts interviewed. We selected these experts using a nonprobability sample based on our literature review, suggestions from OPM officials and our own human capital experts, and relevance of their expertise to our objectives. We selected experts from a range of organizations to ensure our analysis included a variety of viewpoints. During these interviews, we asked about, among other things, future trends that are likely to affect the federal workforce and innovative practices to recruit and retain a high-performing workforce. We analyzed the interviews using qualitative analysis software to describe employees’ shifting attitudes toward work, and to categorize the practices into key strategies for managing a high-performing workforce. We corroborated these practices with federal human capital experts, CHCOs, and federal employee and management groups, and reflected their input in our report. Interviews with private organizations and foreign governments. To identify examples of human capital practices for managing a high- performing workforce, we conducted semistructured interviews with human capital managers from four private organizations (Noblis, Deloitte, Accenture, and NetImpact Strategies) and officials from three foreign governments (Australia, Canada, and the United Kingdom). We selected the private organizations based on (1) the similarities of their talent pool to that of the federal government, (2) accolades received for being a good place to work, and (3) size of the organization and types of services offered. We selected foreign governments based on (1) similarities to the United States in terms of percent of the labor force in civil service, and (2) the country having recently improved human capital policies or practices, or having been recognized for having human capital practices that positively affect recruitment and retention. In our report, we included examples of human capital practices that managers and officials told us were helpful to improving their organization, and that could feasibly be implemented within the federal government. Interviews with federal employee and management group representatives. We interviewed representatives from federal employee and management groups to assess the feasibility of applying the identified examples to the federal sector, including identifying any opportunities or challenges. We selected employee groups that represented the broadest population of blue- and white-collar federal employees from all 24 Chief Financial Officers Act agencies: the American Federation of Government Employees and the National Treasury Employees Union. We selected the Federal Managers Association due to its representation of federal managers, supervisors, and executives. Group Interviews with CHCOs. We also held two virtual, moderated group interviews with a nongeneralizable sample of CHCOs. We invited 23 CHCOs from the 24 Chief Financial Officers Act agencies; of those, nine were available and participated (see table 6). To ensure the questions were valid and understandable, we pretested the questions with our CHCO and Deputy CHCO. During each group interview, one of our own moderators used a standard set of discussion questions to ask participants to (1) assess the feasibility of specific examples for improving employee recruitment and retention, (2) explain challenges to implementing these examples in specific agencies, and (3) identify other agency examples. At the group interviews, at least two analysts took and reconciled their notes to summarize the results. We reviewed our summaries of the group interviews to identify key themes discussed. When highlighting examples from CHCOs, we provided summaries of the examples to the CHCOs for comment and incorporated technical edits, where appropriate. Because of the dynamics inherent in a group interview setting, we cannot be sure whether the participating CHCOs discussed the same information in the group format with other CHCOs present that they might have discussed in individual interviews without other CHCOs present. We conducted this performance audit from April 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov. In addition to the individual named above, Shannon Finnegan, Assistant Director; Shelby Kain, Analyst-in-Charge; Justine Augeri; Jehan Chase; Arpita Chattopadhyay; Ann Czapiewski; Robert Gebhart; John Hussey; Krista Loose; Meredith Moles; Rachel Stoiko; Jessica Walker, and Edith Yuh made major contributions to this report. James Ashley, Chelsa Gurkin, Elizabeth Hennemuth, and Walter Vance also contributed to the report. Best Practices and Leading Practices in Human Capital Management. https://www.gao.gov/key_issues/leading_practices_in_human_capital_ma nagement/issue_summary. Strategic Management of Human Capital—High Risk Issue. https://www.gao.gov/key_issues/strategic_human_capital_management/i ssue_summary. Federal Workforce: Opportunities Exist for OPM to Further Innovation in Performance Management. GAO-19-35. Washington, D.C.: November 20, 2018. Federal Pay: Opportunities Exist to Enhance Strategic Use of Special Payments. GAO-18-91. Washington, D.C.: December 7, 2017. Federal Hiring: OPM Needs to Improve Management and Oversight of Hiring Authorities. GAO-16-521. Washington, D.C.: August 2, 2016. Federal Workforce: Additional Analysis and Sharing of Promising Practices Could Improve Employee Engagement and Performance. GAO-15-585. Washington, D.C.: July 14, 2015. Federal Workforce: Improved Supervision and Better Use of Probationary Periods Are Needed to Address Substandard Employee Performance. GAO-15-191. Washington, D.C.: February 6, 2015. Federal Workforce: OPM and Agencies Need to Strengthen Efforts to Identify and Close Mission-Critical Skills Gaps. GAO-15-223. Washington, D.C.: January 30, 2015. Human Capital: OPM Needs to Improve the Design, Management, and Oversight of the Federal Classification System. GAO-14-677. Washington, D.C.: July 31, 2014. Human Capital: Strategies to Help Agencies Meet Their Missions in an Era of Highly Constrained Resources. GAO-14-168. Washington, D.C.: May 7, 2014. Federal Workers: Results of Studies on Federal Pay Varied Due to Differing Methodologies. GAO-12-564. Washington, D.C.: June 22, 2012. Government Reorganization: Key Questions to Assess Agency Reform Efforts. GAO-18-427. Washington, D.C.: June 13, 2018.", "summary": "Much has changed since the federal government's employment policies were designed generations ago. Without careful attention to strategic human capital management, the federal government may continue to struggle to compete for workers with the skills needed to address the nation's social, economic, and security challenges. GAO was asked to review issues related to the future of federal work and the workforce. This report identifies: (1) key trends affecting federal work and workers, and (2) key talent management strategies for achieving a high-performing workforce, given those trends. GAO analyzed data from OPM and the Bureau of Labor Statistics, and reviewed reports from GAO, OPM, and selected think tanks. GAO also held group interviews with agency Chief Human Capital Officers, and interviewed human capital experts and representatives of federal labor unions, managers, and executives. Additionally, GAO spoke with private consulting firms and foreign governments regarding human capital strategies that officials said were helpful to improving their organizations. Federal work is changing amid demographic and technological trends (see figure below). Given these trends, key talent management strategies can help agencies better manage the current and future workforce. These strategies are all within agencies' existing authorities: Align human capital strategy with current and future mission requirements. With shifting attitudes toward work, technological advances, and increased reliance on nonfederal partners, agencies need to identify the knowledge and skills necessary to respond to current and future demands. Key practices include identifying and assessing existing skills, competencies, and skills gaps. Acquire and assign talent. To ensure agencies have the talent capacity to address evolving mission requirements and negative perceptions of federal work (e.g., that it is too bureaucratic), agencies can cultivate a diverse talent pipeline, highlight their respective missions, recruit early in the school year, support rotations, and assign talent where needed. Incentivize and compensate employees. While federal agencies may struggle to offer competitive pay in certain labor markets, they can leverage existing incentives that appeal to workers' desire to set a schedule and to work in locations that provide work-life balance. Engage employees. Engaged employees are more productive and less likely to leave, according to the Office of Personnel Management (OPM). Agencies can better ensure their workforces are engaged by managing employee performance, involving employees in decisions, and developing employees. GAO has open recommendations to OPM related to key talent management strategies, including developing a core set of metrics that agencies should use to close mission-critical skills gaps. OPM agreed with most of these recommendations and has made some progress, but additional actions are needed. OPM provided technical comments, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "In fiscal year 2017, the federal government awarded approximately $675 billion in grants to state and local governments. As shown in figure 1, approximately 80 percent of the grant dollars awarded by the federal government in fiscal year 2017 came from the three agencies we reviewed for this report—HHS, USDA, and Education. A range of skills are needed to manage the various tasks associated with the grants lifecycle. For example, during the award phase, grant staff at federal grant-making agencies are to send all grantees a grant award notification that provides details about the grant, including the amount of the award; and the general terms and conditions of the grant, including statutory and regulatory requirements. Figure 2 below illustrates the four distinct phases of the grants lifecycle. Given the billions of dollars in federal grants funding that are awarded every year, effective training could help provide grants managers with the skills and competencies they need to better manage and oversee those dollars. As one example of the importance of rigorous grants management and training, in April 2017 we found that Education grants staff inconsistently documented key required monitoring activities and, as a result, about $21 million in discretionary grants lacked the correct documentation of grantee performance. We recommended that Education establish and implement detailed written supervisory review procedures for official grant files to provide reasonable assurance that grant staff perform and document key monitoring activities. Education officials agreed with the recommendation and said they would develop a department-wide standard operating procedure (SOP) that will, among other things, provide standards for timeliness of documenting key monitoring and administrative activities and require the periodic review of grant files. Officials expect to complete the SOP by September 30, 2018. In 2011, OMB established the Council on Financial Assistance Reform (COFAR), an interagency group of executive branch officials with the stated aim of creating a more streamlined and accountable structure to coordinate financial assistance, including grants. In 2012 and again in fiscal years 2016 and 2017, COFAR identified the need to develop a qualified and professional workforce as one of six priorities to guide its work on grants management reform. According to OMB staff, they disbanded COFAR on June 15, 2017 as part of OMB’s efforts to reduce grants-related requirements once COFAR had recommended policies and actions to effectively deliver financial assistance. COFAR’s recommendations resulted in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, which is intended to improve performance, transparency, and oversight for federal awards. Moving forward, the responsibility of coordinating financial assistance priorities was given to the Chief Financial Officers Council (CFOC), a group of 24 agency chief and deputy chief financial officers that work together to improve financial management in the U.S. government. According to OMB staff, the controller of OMB’s Office of Federal Financial Management is the chair of the CFOC. In addition, OPM is responsible for providing leadership and guidance over federal agency training to ensure the effective promotion and coordination of federal agency training programs and operations. Further, the President’s Management Agenda established “results-oriented accountability for grants” as a cross-agency priority goal to “maximize the value of grant funding by applying a risk-based, data-driven framework that balances compliance requirements with demonstrating successful results for the American taxpayer.” In 2013, we examined grant workforce and training issues and found there were no specific government-wide training requirements for the federal grants workforce. As of June 2018, this continued to be the case. By contrast, there are government-wide training requirements for the acquisitions workforce intended to help ensure its quality and effectiveness. For example, OMB’s Office of Federal Procurement Policy (OFPP) provides government-wide guidance on managing the acquisitions workforce. The Federal Acquisition Institute, which coordinates with the OFPP, promotes the development of the civilian acquisitions workforce. Further, OFPP has developed Federal Acquisition Certification requirements for acquisition professionals serving as contracting staff, contracting officer’s representatives, and program/project managers. Notably, in fiscal year 2017, the federal government spent approximately $166 billion more on grants to state and local governments than it did on federal acquisitions. OMB staff explained that the acquisitions workforce faces more requirements because contracts have more uniform requirements and are specified in law. They stated that grants, on the other hand, are diverse and are established by individual statutes with varying conditions. Our work in the acquisitions area identifies the importance of providing reasonable assurance of an appropriately trained staff through certification. Certification programs are designed to ensure that individuals attain the knowledge and skills required to perform in a particular occupation or role by establishing consistent standards. For example, for the acquisition workforce, OFPP requires a minimum set of career-specific courses, along with education and experience requirements, to obtain certification. To ensure acquisition professionals remain current on acquisition policies and practices, OFPP also requires the acquisition workforce to meet continuing learning requirements. See appendix I for a comparison of training for the federal acquisition workforce versus the federal grants workforce. Education, HHS, and USDA delegate the decision to their various sub- agencies of whether grants employees should obtain professional grants certifications. Of the 11 sub-agencies we reviewed, 3 at HHS—the Centers for Medicare and Medicaid Services Discretionary Grants Office, the Health Resources and Services Administration, and the National Institutes of Health—and 2 at Education—the Office of Special Education and Rehabilitative Services and the Office of Post-Secondary Education—required certification of some of their grants employees. Officials at the remaining 6 sub-agencies offered certification to their grants employees on an optional basis. USDA sub-agency officials said they often recommend the certificate program to their grants employees, and Education’s sub-agency officials at the Office of Elementary and Secondary Education said they nominate staff to take the grants certificate program whom they believe would benefit the office most by receiving the training. While COFAR officials explored the possibility of establishing certification standards for the grants workforce by September 2015, OMB staff said they determined that certification was not the most appropriate course of action for the grants workforce for several reasons including risk management and internal control concerns and the need for a variety of skills for the grants workforce. As previously mentioned, OMB disbanded COFAR in June 2017, and CFOC took over COFAR’s responsibilities. When we spoke with OMB staff in the fall of 2017, they said their focus had shifted from establishing certification standards for the grants workforce to providing guidance on needed competencies and enabling the grants workforce to obtain them. OPM, in consultation with OMB and the CFOC, took several steps to ensure the federal grants management workforce has access to grants management competencies and training. For example, OPM identified grants management competencies that could be used in agency efforts for workforce planning, training and development, performance management, recruitment, and selection. After establishing grants management competencies, OPM officials told us they established the 1109 job series partly because OMB and CFOC staff requested a new grants management job series in response to the increased grant awards and staffing needs created because of the 2009 American Recovery Act. Figure 3 illustrates the timeline of the main steps taken by OPM, OMB, and CFOC over the last decade. In 2008, OPM initiated a government-wide study to identify critical competencies for grants management work. After the government-wide study was completed, OPM issued a memorandum to all federal agencies announcing a grants management competency model that included general competencies such as accountability, writing, and computer skills. OPM also included technical competencies such as grants management, financial analysis, and compliance. In our prior work, we found that grants management competency models can be used to establish an overall framework to guide agencies’ training efforts. Before OPM established the 1109 job series in 2010, no other agency- specific job classification series existed for the many federal employees responsible for carrying out managerial and administrative tasks related to grants, including ensuring compliance with OMB and agency policies and procedures. In the absence of a specific job classification, we reported in 2013 that officials at selected agencies told us they had classified these employees under a variety of other job series that did not focus on grants, such as general, administrative, and subject-matter job titles. According to OPM officials, the agency’s development of the “Position Classification Flysheet for the Grants Management Series (1109)” leveraged the competencies and tasks from the Competency Model for Grants Management and input from federal agencies’ subject matter experts on grants management work.The Flysheet includes a job series definition, a basic job title, general occupational information, and a link to the position classification standard. The 1109 job series manage, supervise, lead, or perform administrative business, policy, and analytical work involving the: (1) management, award, or obligation of funds for grants; (2) competitive or non-competitive evaluation of grants proposals; and/or (3) administration or termination, and/or closeout of grants and/or grants assistance and agreement awards. The work requires knowledge of laws, regulations, rules, policies, procedures, and financial methods to help ensure accountability of the grant funds. As of fiscal year 2016, grant-making agencies reported 2,035 federal employees in the 1109 job series, and HHS reported 38 percent of those employees (see figure 4). We used fiscal year 2016 data to determine the agency-wide numbers of 1109 job series employees because this was the most recent set of full year data available at the time of our analysis. The federal grants workforce also includes a wide range of employees in other non-1109 job series positions. OPM does not collect data on grants workforce employees in these other job series positions as they span a large number of different job series that can vary by agency. Non-1109 employees working on grants typically possess expert knowledge in the specific area necessary to meet a grant’s goals (e.g., announcing the terms and conditions of a grant, recommending potential grantees, and monitoring grantees’ progress in achieving the grants goals). Reflecting the wide variety of federal programs that grants support, these individuals typically possess expertise in a specialized program or subject. A number of factors affect usage of the 1109 job series within agencies. According to OMB staff, various agency employees have told them that many agency employees would rather be classified as a subject matter specialist, such as a scientist, rather than a grants management specialist whose primary tasks are grants management under the 1109 job series. In addition, OMB staff said that some agencies preferred recruiting staff using a more general non-1109 job series classification. OMB staff also said that some agencies indicated their grants workforce employees do not want to be classified as grants specialists because the other job series are more general and are a better fit in terms of the needed subject matter expert skills and duties. We found that one of our selected agencies, Education, does not use the 1109 job series at all because, according to Education sub-agency officials, they require grants employees to have specialized grant program content knowledge in the field of their grant program focus, such as rehabilitation, special education, behavior science, and other areas (e.g., standards and assessments, state accountability systems). The sub- agency officials said that 1109 grants management specialists would not have the specific content knowledge and experience associated with the specific educational grant programs that Education requires. We also found that over 61 percent of HHS grants workforce employees and over 90 percent of the USDA grants workforce was not part of the 1109 job series. OPM officials told us that, in April 2017, they started a government-wide Grants Management Post Classification Implementation Study that may change the Grants Management Classification Flysheet and revalidate the Competency Model for Grants Management Work. OPM officials developed the study after meeting with grant-making agency HHS and will include a survey of the grants management workforce government- wide. OPM officials also stated they are in the final stages of developing and clearing the government-wide survey and anticipate issuing it in the fall of 2018. They said the study will take several additional months to complete because the team must review the results of the government- wide survey and update competencies, job classifications, and compliance policy/requirements. OMB’s role with the grants management workforce includes issuing government-wide guidance and providing a framework that enables agencies to take actions to align their grants training with OMB’s internal control standards. In this role, OMB has taken some actions to provide grants guidance for federal agencies that include the Career Roadmap Report, Career Roadmap Builder, and Grants Training 101. However, we found that almost all of the officials we interviewed at the 11 selected sub- agencies were not familiar with the Career Roadmap Report and Career Roadmap Builder. Additionally, almost all of them did not mention using Grants Training 101 as part of their grants workforce training. OMB, in collaboration with the CFOC, COFAR, and federal awarding agencies, developed the Financial Assistance Career Roadmap Report in June 2017. OMB staff said that the Career Roadmap Report is one vehicle used to address grants training for the federal agency grants workforce. It is a tool for federal agencies to identify and document the competencies needed for successful job performance of federal financial assistance management professionals. According to the CFOC, the competencies and related elements outlined in the Career Roadmap Report are to be used to identify and prioritize training needs for the federal financial assistance management workforce. This is an optional tool for the federal grants workforce and may be customized to reflect an organization’s unique requirements and specifications. That workforce includes the grants management 1109 job series employees, as well as employees performing grants responsibilities as program, finance, and audit experts who are classified under other job series. During the initial development of the Career Roadmap Report, a team consisting of OMB staff and industrial and organizational psychologists collected financial assistance research and documentation from OMB, federal awarding agencies, and OPM. The team analyzed this information to identify foundational competencies and create a draft competency model which OMB reviewed. The team also facilitated two workshops with specialists on financial assistance management to gather feedback on the Career Roadmap Report. Figure 5 below shows the 14 different competencies from the Career Roadmap Report that are divided into two types of competencies: functional and leadership. After the report’s release, CFOC developed and released an interactive version called the Career Roadmap Builder available to the public online. This version allows users to build their own customized financial assistance management Career Roadmap based on their specific mission and needs. To obtain a custom Career Roadmap Report, users complete several steps in the Career Roadmap Builder involving selection of one or more of nine functional competencies; one or more of three job levels (foundational, practitioner, or one of three proficiency levels for each functional competency (basic, intermediate, or advanced); an option to include a leadership competency; and one of three different leadership levels (entry, mid, or senior) and a leadership proficiency rating (basic, intermediate, or advanced). The user then receives a customized report with relevant competencies, career levels, a sample of the associated developmental experiences and recommended training courses. Department-level officials we spoke with at HHS, USDA, and Education were familiar with the Career Roadmap Report. However, almost all of the officials we interviewed at the 11 selected sub-agencies were not aware the Career Roadmap Report was available to them. All but one of the officials we spoke with at four HHS sub-agencies said they were unaware of the Career Roadmap Report and grants management competencies. While USDA’s agency-wide Federal Financial Assistance Committee received a copy of the Career Roadmap Report in August 2017 and discussed it at their monthly meetings, almost all of the officials at the four USDA sub-agencies we reviewed said they had not received it. However, three sub-agency officials were familiar with the report because they had been involved with agency-wide efforts to provide grants management competency support and information. All other USDA sub-agency officials with whom we spoke were unfamiliar with the Career Roadmap Report or the grants workforce competencies. Almost all of the officials we interviewed at three Education sub- agencies were unaware of the Career Roadmap Report. However, one official from one sub-agency was familiar with the Career Roadmap Report as he had been part of the Career Roadmap Report development process. OMB staff stated they publicized the report by sending a “Controller Alert” on July 3, 2017 to agency chief financial officers and to members of the Financial Assistance Committee for E-Government notifying them of its availability and OMB’s future plans to map it to existing training resources, place it on OPM’s website, and develop an online interactive tool including position competencies. However, we found it difficult to locate the “Controller Alert” on the COFC website as it is not located on the same tab where the Career Roadmap Report is published but instead in a news section that users may not know to search. Further, OMB’s “Controller Alert” states that it “does not constitute official guidance or prescribe specific tasks for agencies beyond consideration of appropriate steps to address the issue.” OMB did not issue any official government- wide memorandums to explain that it supported the Career Roadmap Report, or that the report included updated competencies for both the 1109 and non-1109 job series workforce. Our internal control standards state that management should internally communicate the necessary quality information to achieve the entity’s objectives. However, if all levels of an agency are not aware of government grants workforce competencies and guidance, the agency may not be able to ensure that grants workforce employees have the training resources needed to develop and maintain skills to achieve the objectives of grant awards. OMB also worked with federal grant-making agencies, COFAR, and the CFOC to establish Grants Training 101, a set of five online training modules designed to provide federal officials a basic knowledge of grants and cooperative agreements. According to OMB staff, the Grants Training 101 webpage states that the training is not designed to provide detailed administrative, accounting, and audit requirements specific to statutory provisions, agency regulation, and guidance because agencies need to have flexibility in designing grants training programs to meet those grant- specific statutory requirements. OMB staff said they designed the training modules in response to a request from the federal grants community for a government-wide grants management training resource to ensure some level of consistent training among grant-awarding agencies. In addition, OMB staff said it was optional for agencies to incorporate Grants Training 101 into established grants training and that each agency is responsible for the means by which they conduct grants management training. Only one of the agencies we reviewed had plans to include OMB’s Grants Training 101 as part of its grant-training program. HHS officials said they are developing an internal online grants 101 course and plan to incorporate parts of OMB’s Grants Training 101. However, most agency and sub-agency officials we spoke with did not use OMB’s Grants Management 101 as part of their grants workforce training. OMB staff said that Grants Management 101 modules cover the grant lifecycle and the requirements of the Uniform Guidance, and are intended to complement other trainings that agencies provide to their grants managers. OMB staff said that agencies make the decision whether to use the Grants Training 101 modules and can integrate parts of the training modules into their agency- specific training requirements. For example, officials at one of the agencies—Education—stated they cover many of OMB’s Grants Training 101 learning objectives through their cross-cutting grant training program courses as well as sub-agency specific training. Furthermore, OMB staff said that each agency would have to internally monitor grants employees’ completion of the grants training modules. OMB staff told us that OPM initially had the responsibility of hosting the first two modules of Grants Training 101 on the OPM website while the remaining three modules were under development. After these remaining modules were completed, all five of the modules were moved to the CFOC webpage. In addition, OPM was responsible for collecting the Grants Training 101 user and completion data. OMB provided us the Grants Training 101 data which totaled 1,277 users registered between December 2015 and November 2017; however, we found that the data were incomplete due to missing data fields. OMB staff stated that the Grants 101 training website was moved to the CFOC webpage so the general public can access it. The CFOC will not collect data on the access dates, the agency names, or the number of Grants Training 101 users; however, the CFOC will collect data on the number of visitors that go to the Grants Training 101 website. OMB staff also said that agencies can decide to track Grants Training 101 users internally because OMB and the CFOC will not collect specific data on users. In addition, OMB staff said OMB and CFOC have not collected any formal Grants Training 101 feedback from users and have no plans to do so. OMB reported that a total of 175 visitors went on the Career Roadmap Report website between September 2017 and January 2018. Our Standards for Internal Control in the Federal Government advise management to process data into quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis. It further states that management should also evaluate the processed information and revise when necessary so that it can be used to make informed decisions. In addition, our 2004 Human Capital Guide states that it is increasingly important for agencies to be able to evaluate their training and development programs to demonstrate how these efforts help develop employees and improve the agencies’ performance. As part of this approach, the Human Capital Guide also states that assessing training and development efforts should consider feedback from employees. OMB, CFOC, and COFAR devoted time and multiple resources to developing the Career Roadmap Report to identify and document the competencies needed for successful job performance of federal financial assistance management professionals. Obtaining more detailed user information and regular feedback from federal agencies on the usefulness of the Career Roadmap Report and the online Career Roadmap Builder could help OMB and CFOC to evaluate the effectiveness of these grant training tools. In addition, obtaining user information and feedback from federal agencies on the usefulness of Grants Training 101 can also help OMB and CFOC evaluate its effectiveness. In 2004, we issued a framework of principles and key questions that federal agencies can use to ensure that their training and development investments are targeted strategically and are not wasted on efforts that are irrelevant, duplicative, or ineffective. Our framework identifies four components of the training and development process: (1) Planning, (2) Design and Development, (3) Implementation, and (4) Evaluation. Within each component, the guide identifies leading practices and questions for agencies to consider when assessing each of these four components. We compared current grants training practices at the selected agencies and sub-agencies with selected leading training practices from the guide. We found variation among sub-agencies in following those selected training practices. Planning: skills and competencies assessment. In our guide, we stated that effective workforce planning and training begins with a skills and competency assessment. A leading practice under this component is that agencies use an organization-wide knowledge and skills inventory and industry benchmarks to help identify performance problems in their workforces. We stated that workforce planning should entail the collection of valid and reliable data on such indicators as distribution of employees’ skills and competencies. Officials we interviewed at all the selected sub-agencies explained that grants training needs are primarily identified by grants management supervisors or self-identified by grants workforce employees. The training needs are identified on an ad hoc basis during (1) manager evaluations or observations of employee performance, (2) annual and semiannual performance assessments, and (3) employee career individual development plans. When it came to implementing a more rigorous process involving a knowledge and skills inventory or the collection of valid and reliable data, we found varied use among the 3 agencies and 11 sub-agencies with only some employing such a method. The four HHS sub-agencies we reviewed assess new grants workforce employees’ knowledge, skills, and abilities by identifying skills gaps when onboarding new grants workforce employees, through supervisor observation of employee performance, or employee feedback. In fiscal year 2015, USDA’s Food and Nutrition Service (FNS) sub-agency started holding monthly meetings with its Regional Grants Management Division Directors to identify national training needs for its grants management staff. In fiscal year 2017, FNS also conducted a nationwide qualitative survey of its grants employees to identify training gaps and needs. The remaining three sub-agencies we reviewed informally identify skills gaps and training needs through ongoing discussions between supervisors and grants employees and during annual performance evaluations. Officials from Education’s central Learning and Development office stated they issue a department-wide competency assessment and training needs assessment to the various department sub-agencies annually or bi-annually. Officials from Education’s Office of Elementary and Secondary Education sub- agency told us they also conduct their own grants workforce learning needs assessment examining grants tasks, content knowledge, and general skills. Officials at the other two Education sub-agencies told us they assess skills gaps and training needs through ongoing discussions between supervisors and grants employees, supervisor observation of employee performance, and also during annual performance evaluations. Without a formal knowledge and skills inventory or collection of valid and reliable data on the grants workforce’s skills and competencies, some sub-agencies may be limited in identifying performance problems, competency gaps, and training needs in their grants workforce. Design and development: using a mix of approaches, sources, and delivery. Design and Development involves identifying specific training and development initiatives that the agency will use, along with other strategies, to improve individual and agency performance. One of the leading practices under this component is choosing the most appropriate mix of centralized and decentralized management of training programs; internal and external training sources; and training delivery mechanisms (e.g., classroom, computer-based, on the job, etc.). All three agencies provide the majority of their grants training at the sub-agency level. In most cases, the sub-agencies use a mix of training sources and delivery methods in developing and implementing their grants training programs, including identifying training needs and training content, as detailed in appendix III. HHS and USDA primarily use decentralized approaches to grants training while Education uses a hybrid approach of centralized and decentralized grants training. Although there is no overarching grants training program across HHS, the department’s central offices provide topic-specific training to Chief Grants Management Officers (CGMO) within each sub-agency on an ad hoc basis as new grant policies or requirements are developed. CGMOs then decide how to disseminate this information within their respective sub-agencies (e.g., through webinars, teleconferences, or ad hoc trainings). An HHS council comprised of CGMOs also meets on a quarterly or biannual basis to discuss new grants policy and requirements. Further, HHS’s central grants offices are developing a foundational “Grants 101” course to help standardize a baseline of grants knowledge across all of HHS’s sub-agencies, which they expect to complete by November 2018. Currently, the sub- agencies provide the majority of grants-specific training, which focuses on grants topics and mission requirements relevant to their specific areas. USDA’s Office of Chief Financial Officer (OCFO) provides some required training courses across the agency such as suspension and debarment and federal appropriations law training; however, these trainings are not specific to just the grants workforce employees. The sub-agencies provide all grants-specific training. Of the three selected agencies, Education provides the most central office training. For example, Education’s OCFO provides agency-wide training on discretionary and formula grants financial and budgetary courses; Learning and Development provides introductory grant courses; and Risk Management Services provides risk-based grants training covering topics including cost analysis, budgetary review, monitoring grants, and uniform guidance. Additionally, Education’s sub-agencies provide mission- and program-specific grants training to augment the centrally provided trainings. Centralized and decentralized training approaches may present different advantages for agencies and sub-agencies. On the one hand, efficiencies may be achieved by centralizing the design and delivery of some grants training that has widespread applicability throughout the agency. Additionally, if each sub-agency is responsible for implementing its own grants training program, the potential exists for inconsistent grants workforce training across the agency. On the other hand, each sub- agency is able to tailor the training to its own needs when it manages and provides the training itself. In making this decision, it is important for agencies to carefully analyze and consider trade-offs. Implementation: establishing agency-level accountability. Implementation involves ensuring effective and efficient delivery of training and development opportunities in an environment that supports learning. One of the leading training practices under this component is an agency organization that is held accountable, along with the line executives, for the maximum performance of the workforce. According to our Human Capital Guide, there are different ways of ensuring accountability, including establishing clear lines of authority in agency policies, issuing agency-wide guidance to ensure consistency, and establishing a central oversight office, among others. We found variation among the three selected agencies in following this leading training practice with HHS and Education having some agency level of accountability but USDA having less. HHS’ central Office of Grants Policy, Oversight, and Evaluation assigns desk officers to work with sub-agency CGMOs in helping them understand available training resources and needs. HHS also has an Executive Committee for Grants Administration Policy Council that meets quarterly to discuss regulations, policies, and grants administrative requirements. This committee is made up of CGMOs from each HHS sub-agency. HHS describes the roles of officials involved in overseeing grants management in an agency- wide grants policy manual. USDA has not defined roles for central offices to hold them accountable for grants training. While its central OCFO provides some guidance on federal financial assistance policies and grants terms and conditions, and ensures department-wide training requirements are met, USDA has no agency-wide grants training guidance, no agency-wide grants manual, or a central office that oversees grants training at the component level. Education officials stated that the agency has two agency-wide grants policy manuals and some Education offices have roles in overseeing grants training. For example, the central Learning and Development office provides some oversight of employee development, training programs, and providers. Further, Education officials stated that Risk Management Services oversees Education’s licensure training program across the sub- agencies, and OCFO provides agency-wide training on financial management of grants. Holding a central office accountable for grants training can provide agencies with reasonable assurance that training is being delivered efficiently and effectively and that grant staff have sufficient developmental opportunities. In this way, agencies can better ensure the maximum performance of the grants workforce. Evaluation: using data to assess training results. Evaluation involves assessing the extent to which training and development efforts contribute to improved performance and results. A selected leading training practice under this component is the use of performance data (both qualitative and quantitative measures) to assess the results achieved through training and development efforts. The three agencies we reviewed primarily conduct evaluation at the sub- agency level. The sub-agencies vary as to how they carry out their evaluations and few use any quantitative performance measures to determine if training was successful. HHS officials stated the central offices do not measure the effectiveness of training, nor is there centralized information sharing on how well training works. Officials at the HHS sub- agencies we reviewed told us they primarily use informal feedback such as ongoing conversations between employees and supervisors after training completion and supervisor observations of employee performance to determine if grants training is successful. Officials at HHS’ Health Resources and Services Administration also said they receive data regarding employee scores on required grants training courses. Some HHS sub- agencies use an external vendor for some grants training and employees complete a survey at the end of each of these courses, but HHS officials do not see those results. HHS officials rely on employee feedback after training completion to determine if external vendor training is effective. Officials at the USDA sub-agencies we reviewed told us they primarily use informal feedback through supervisory review of employee performance and employee individual development training plans; internal local level reviews and audits of grant processes; and some course completion surveys. Officials at Education’s central Learning and Development office told us they conduct electronic course evaluation surveys. Officials at the Education sub-agencies we reviewed told us they primarily use informal feedback from employees, supervisor observation of an employee’s progress after training, and some course evaluations. While informal, qualitative feedback from employees taking grants training is useful, it is not quantifiable or measurable. Using a balanced approach that reflects feedback from employees as well as organizational results is more effective in terms of evaluating the usefulness of grants training efforts. Many of the issues discussed above regarding following leading training practices stem from limited oversight of the sub-agencies, which we describe in the next section. As previously mentioned, the federal grants workforce consists of employees in the OPM Grants Management Specialist 1109 job series as well as employees in various other OPM job series (referred to as non- 1109s in this report). HHS and USDA both employ 1109s as well as non- 1109s in their respective grants workforces while Education only employs non-1109s. According to HHS, USDA, and Education officials, each sub- agency is responsible for identifying its grants workforce employees and ensuring they receive needed grants training. However, the central offices do not have a reporting mechanism tracking sub-agencies’ grants workforce. After querying each sub-agency, at our request, officials from the three agencies provided us with data on 1109 and non-1109 grants personnel. As figure 6 shows, the majority of grants personnel at the three agencies we reviewed are non-1109 employees. Standards for Internal Control in the Federal Government state that, “Management should demonstrate commitment to recruit, develop, and retain competent individuals.” Furthermore, internal controls state that “management evaluates competence of personnel across the entity in relation to established policies.” Since the agencies we reviewed cannot readily identify their total grants workforce, they have limited ability to evaluate the competence of grants personnel across the entity to ensure they are receiving needed training. Since the three agencies we reviewed do not centrally monitor their sub- agencies’ identification of grants employees, they cannot readily identify the agency’s total grants workforce. Consequently, the selected agencies do not have reasonable assurance that all employees working on grants across their agency are receiving needed grants training and have the necessary knowledge, skills, and abilities to properly manage, administer, and monitor grants. Central offices at HHS, USDA, and Education provide limited oversight of the types of training sub-agencies provide to their grants workforce. Our Human Capital Guide identifies having an agency organization that is held accountable, along with the line executives, for the maximum performance of the workforce as a leading practice. Further, the guide states that the agency’s training organization and line executives should work together to establish control mechanisms to ensure that agency employees successfully complete required and assigned training and development. Additionally, the guide states that agencies must assign authority and delegate responsibility to the proper personnel and establish clear accountability for maximizing workforce performance. However, as mentioned earlier, there is no overarching office responsible at the selected agencies for overseeing the types of grants training sub- agencies provide. Additionally, the central offices at the selected agencies do not evaluate sub-agency grants training efforts. We found variation among the 11 sub-agencies’ grants training programs (as shown in appendix III), which highlights the importance of central office oversight for making sure the training variation is appropriate. As a result of these issues, the selected agencies do not have assurance that grants training provided across the various sub-agencies is sufficient in meeting the needs of the various employees working on grants. Since there is no overarching central office at any of the three agencies we reviewed actively being held accountable for sub-agency grants training programs, HHS, USDA, and Education cannot ensure that all of the sub-agencies working on grants are sufficiently training their grants employees. Without central agency oversight and accountability across sub-agency grants training programs, not all grants employees may be sufficiently trained on grants processes and procedures, which could affect grant oversight in terms of grants employees monitoring grants properly. Given the importance of grants as a tool to achieve federal objectives and the large outlays the federal government makes to fund them each year, it is critical that the people who manage these grants—the federal grants workforce—be well-trained to handle their responsibilities. To help provide training to this workforce, OPM, OMB, and CFOC created grants management competencies, a grants job series, some grants training, and a career roadmap. However, they have not widely publicized the roadmap and some sub-agencies we reviewed were unaware of it. Moreover, OMB and the CFOC are not collecting detailed data on users or feedback, which limits their ability to determine how useful these resources are to the federal grants workforce. The selected agencies varied in following selected leading training practices and they provided limited monitoring and oversight of their sub- agencies’ grants training efforts. Without sufficient monitoring and oversight, the agencies cannot have reasonable assurance that their sub- agencies are sufficiently training their grants workforce so they have the necessary knowledge, skills, and abilities to properly manage, administer, and monitor the billions of dollars that the federal government spends on grants annually. We are making a total of five recommendations, including two to OMB and one to each of the selected agencies in our review. Specifically: OMB’s Office of Federal Financial Management’s Controller (the CFOC chair) should ensure CFOC formally publicizes the Career Roadmap guidance among the 24 CFO agencies through memorandums, briefings, trainings, regular CFOC meetings, or technical assistance and clearly posts its “Controller Alert” on the CFOC website with the Career Roadmap Report. (Recommendation 1) The Director of OMB, working with CFOC, should (1) collect data metrics regularly on the Career Roadmap Builder online tool and Grants Training 101 to determine how widely the resources are being used, and (2) obtain periodic feedback from federal agencies on the usefulness of these tools and any needed improvements. (Recommendation 2) The Secretary of HHS should establish a process to monitor and evaluate HHS’s grants training at the central office level. This process should include (1) a method for identifying all employees working on grants across the agency, and (2) oversight procedures to evaluate the sufficiency of sub-agencies’ grants training efforts including the incorporation of leading practices related to assessing competencies, training approaches, accountability, and training results. (Recommendation 3) The Secretary of USDA should establish a process to monitor and evaluate USDA’s grants training at the central office level. This process should include (1) a method for identifying all employees working on grants across the agency, and (2) oversight procedures to evaluate the sufficiency of sub-agencies’ grant-training efforts including the incorporation of leading practices related to assessing competencies, training approaches, accountability, and training results. (Recommendation 4) The Secretary of Education should establish a process to monitor and evaluate Education’s grants training at the central office level. This process should include (1) a method for identifying all employees working on grants across the agency, and (2) oversight procedures to evaluate the sufficiency of sub-agencies’ grants training efforts including the incorporation of leading practices related to assessing competencies, training approaches, accountability, and training results. (Recommendation 5) We provided a draft of this product to Education, HHS, OMB, OPM, and USDA for review and comment. In written comments reproduced in appendixes IV and V respectively, HHS concurred and Education generally concurred with our findings and recommendations directed at them. Both agencies described the steps they were taking to implement our recommendations. In an email, the Chief Learning Officer said that USDA concurred with our findings and recommendation. In an email, a Management Analyst said that OPM had no comments on the draft report. OMB staff provided us with oral comments stating that the agency partially concurred with our first two recommendations. Specifically, for our first recommendation, OMB generally agreed with our finding that the Career Roadmap guidance should be better publicized. However, OMB believes this is not its responsibility but rather the responsibility of federal agencies. OMB stated that federal agencies could incorporate a method into their improvement plans to ensure that sub-agencies are made aware of the Career Roadmap Guidance. We believe that, as the federal government’s central management agency and developer of the Career Roadmap, OMB has a responsibility for ensuring that federal agencies are aware of the Career Roadmap guidance by formally publicizing it through memorandums, briefings, trainings, regular CFOC meetings, or technical assistance. For the portion of our first recommendation that discusses clearly posting the “Controller Alert,” OMB stated it will look at the alert’s placement on the CFOC website to see if the agency can make it more prominent. We continue to believe that the “Controller Alert” should be easily accessible to anyone visiting the website and should be located on the same page as the Career Roadmap, where it would have greater visibility. For our second recommendation, OMB agreed that user feedback data regarding the Career Roadmap Builder and Grants Training 101 is useful. However, OMB stated that while it will continue to collect data on the number of users, it believes that federal agencies should be responsible for collecting specific, detailed user data if they are using those resources. We continue to believe that OMB and CFOC would benefit from collecting specific, detailed user data on these tools, which they devoted time and multiple resources to developing. Collecting detailed data metrics that go beyond the number of users can help OMB and CFOC to better evaluate the effectiveness of these grants training tools. Additionally, OMB stated the agency is committed to working with CFOC to review the Grants Training 101 module to determine how useful it is and if any improvements or adjustments are needed. All five agencies provided technical comments on the report draft, which we incorporated where appropriate. We are sending copies of this report to the Secretaries of Education, HHS, and USDA and to the Directors of OMB and OPM. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. The Department of Health and Human Services (HHS). HHS is a large agency with 11 sub-agencies administering a wide variety of health and human services that takes a decentralized approach to training its grants workforce. While HHS’ central Assistant Secretary for Financial Resources (ASFR) office provides grant policy and regulatory guidance updates to HHS sub-agencies, ASFR officials said they leave the decision on how to implement grants training to each of those sub-agencies. The selected sub-agencies we reviewed—the Administration for Children and Families, Centers for Medicare and Medicaid Services, Health Resources and Services Administration, and National Institutes of Health—all implement their own grants training programs and procedures. The four sub-agencies at HHS that we reviewed take different approaches in how they implement their respective grants training programs. For example, some sub-agencies require that grant personnel take required courses while others make them optional; some provide internal grants training while others also use the services of an external training vendor; and some require certification while others make it optional. Table 3 highlights some of the grants training programs’ characteristics at the four HHS sub-agencies we reviewed. The Department of Agriculture (USDA). USDA is made up of 29 agencies and offices at more than 4,500 locations across the country and abroad. While its central Office of the Chief Financial Officer (OCFO) provides some guidance on federal financial assistance policies and grants terms and conditions, and ensures department-wide training requirements are met, it, like HHS, leaves the decision on how to implement grants training to each of its sub-agencies. The selected sub- agencies we reviewed—the Food and Nutrition Service, Forest Service, National Institute of Food and Agriculture, and Rural Development—all implemented their own respective grants training programs and procedures. Table 4 highlights some of the grants training programs’ characteristics at the four USDA sub-agencies we reviewed. The Department of Education (Education). Education approaches grants training by combining both centralized and decentralized approaches for its eight principal offices that conduct grant work. Education’s central OCFO offers broad financial grants training such as Oversight of Financial Management of Ed Formula/Discretionary Grants and Discretionary Grant Budget Reviews. Education’s central Learning and Development office offers broad introductory grants training such as Introduction to Grants and Cooperative Agreements, Uniform Administrative Guidance, and Cost Principals. According to Education officials, Education’s Risk Management Services (RMS) offers risk management-based grants training including Discretionary Grants Overview, Conducting a Cost Analysis and Budget Review, Monitoring Grants, Suspension and Debarment, and Risk Assessment and Risk Mitigation. RMS also manages Education’s licensing program and oversees training for new license holders geared towards grants administration. In addition to these central office trainings, each Education sub-agency also provides specific training tailored for its mission as verified by the three Education sub-agencies we reviewed—the Office of Special Education and Rehabilitative Services (OSERS), the Office of Elementary and Secondary Education (OESE), and the Office of Post-Secondary Education. For example, according to Education officials, OSERS trains grant staff on the Individuals with Disabilities Education Act grant application review process, and OESE recently identified a need for and developed and taught a course on improving the grantee communication process. Table 5 highlights some of the grants training programs’ characteristics at the three Education sub-agencies we reviewed. In addition to the contact named above, Tom James (Assistant Director), Jyoti Gupta (Analyst-in-Charge), Benjamin Adrian, Dawn Bidne, Jeff DeMarco, Karin Fangman, Joseph Fread, Robert Gebhart, Shirley Hwang, Serena Lo, Sharon Miller, Meredith Moles, Steven Putansu, Kayla Robinson, Robert Robinson, Cynthia Saunders, Stewart Small, and Dan Webb made key contributions to this report.", "summary": "In fiscal year 2017, the federal government awarded approximately $675 billion in grants to state and local governments. GAO was asked to review the federal grants workforce training. GAO reviewed (1) OPM's, OMB's, and the CFOC's actions to address the grants workforce's training needs; (2) the extent to which grants workforce training at selected agencies is consistent with leading practices; and (3) how selected agencies monitor and oversee training of their grants workforce. GAO selected HHS, USDA, and Education and several of their sub-agencies based on their grants spending and numbers of grants management specialists. GAO reviewed OPM and OMB memorandums and guidance, compared selected agency training practices against leading training practices, and interviewed officials. The Offices of Personnel Management (OPM) and Management and Budget (OMB) and the Chief Financial Officers Council (CFOC) have taken some steps to help ensure the federal grants workforce receives training. For example, OMB worked with the CFOC to issue five basic grants training modules and a “Career Roadmap” for grants managers; however, they did not widely publicize the resources. Many of the officials with whom GAO spoke at selected sub-agencies at the Departments of Health and Human Services (HHS), Agriculture (USDA), and Education (Education) were unfamiliar with the Career Roadmap and made limited use of the training resources. Further, OMB and CFOC do not collect detailed user data or feedback, limiting their abilities to determine the usefulness of these resources. GAO found that sub-agencies at HHS, USDA, and Education vary in following leading training practices for planning, designing, implementing, and evaluating their grants training programs. Additionally, HHS, USDA, and Education could not readily identify grants management specialists—the 1109 job series—or employees in other job series working on grants without querying each sub-agency. These agencies cannot do so because their central offices do not have a reporting mechanism tracking their sub-agencies' grants workforce. Further, agency central offices do not evaluate sub-agency grants training efforts. Without sufficient monitoring and oversight, the agencies cannot have reasonable assurance that their sub-agencies are sufficiently training their grants workforce so they have the necessary knowledge, skills, and abilities to properly manage, administer, and monitor the billions of dollars that the federal government spends on grants annually. GAO is making five recommendations including that OMB, working with the CFOC, should (1) publicize the Career Roadmap and (2) collect data metrics and user feedback on its use. HHS, USDA, and Education should establish processes to centrally monitor and evaluate their grants training, including identifying the grants workforce and ensuring consistency with leading practices. HHS and USDA concurred, Education generally concurred, and OMB partially concurred with our recommendations. OPM had no comments on the report.", "document_type": "gao"}
{"report": "DOD’s policy is to ensure that eligible personnel and their families have access to affordable, quality housing facilities and services consistent with grade and dependent status, and that the housing should generally reflect contemporary community living standards. It is also DOD’s policy to rely on the local private sector as the primary source of housing for servicemembers who are normally eligible to draw a housing allowance, whether unaccompanied or accompanied by family. About a third of eligible servicemembers generally live on an installation, with the rest living in the surrounding local communities. The Assistant Secretary of Defense for Energy, Installations, and Environment (ASD (EI&E)) is the program manager for all DOD housing, whether DOD-owned or privatized. In this capacity, the ASD (EI&E) provides guidance and general procedures related to military housing privatization. One responsibility of ASD (EI&E) is to provide required reports to Congress on privatized military housing projects. However, it is the responsibility of the military departments, rather than ASD (EI&E), to execute and manage privatized housing projects, including conducting financial management and monitoring their portfolio of projects. Each military department has issued guidance that outlines its responsibilities for privatized housing, such as key offices responsible for overseeing privatized housing projects. For each privatized military housing project, developers maintain day-to-day operational decision making and manage each project. The military housing privatization initiative provided DOD with various authorities to obtain private-sector financing and management to repair, renovate, construct, and operate military housing. These authorities included the ability to make direct loans to and invest limited amounts of funds in projects for the construction and renovation of housing units for servicemembers and their families. The projects were generally financed through both private-sector financing and funds provided by the military departments. Specifically, projects obtained private-sector financing by obtaining bank loans and by issuing bonds, which are held by the public. In addition, the military departments provided additional financing. The Army and the Navy generally structured their privatized housing projects as limited liability companies in which the military departments formed partnerships with the developers and invested funds into the partnership. The Air Force generally provided direct loans to the developers. Because privatized housing projects involve budgetary commitments of the federal government, each project was scored at inception by the Office of Management and Budget to determine the amount of funds that needed to be budgeted for that particular project. The number of projects can change over time. For example, a project may be sold, and new projects can be created. As of October 2017, there were 82 privatized military housing projects, each of which can consist of one or multiple installations. The Army has 35 projects, the Navy and Marine Corps together have 15, and the Air Force has 32. Most of these are family housing projects, but the Army and Navy have created a small number of privatized housing projects for servicemembers without families (that is, unaccompanied housing). The military departments have flexibility in how they structure their privatized housing projects, but project structures share certain similarities. For a typical project, a military department leased land to a developer for a 50-year term and conveyed existing homes located on the leased land to the developer for the duration of the lease. The developer then became responsible for leasing renovated and newly constructed homes, giving preference to servicemembers and their families. Each privatized housing project is a separate and distinct entity governed by a series of legal agreements that are specific to that project. These agreements include, among others, an operating agreement, a property management agreement, and an agreement that describes the management of funds in the project, including the order in which funds are allocated within the project. However, while each project is distinct, there are some common elements in how projects invest and utilize funds. Every project takes in revenue, which consists mostly of rent payments. Projects then pay for operating expenses, including administrative costs, day-to-day maintenance, and utilities, among other things. After that, projects generally allocate funds for taxes and insurance, followed by debt payments. Figure 1 shows a typical funding structure for a privatized housing project. In the typical privatized housing project depicted in figure 1, once debt payments are made, funds are allocated to accounts that fund scheduled maintenance. These accounts exist to fund repair and replacement of items such as roofs, heating and cooling systems, and infrastructure. After that, funds are allocated to a series of management incentive fees, such as the property management fee. Finally, the project divides these remaining funds according to a fixed percentage between accounts that fund major renovations and rebuilds on the one hand and go the developer on the other hand. The percentages may vary, but the majority of funds go toward the accounts funding major renovations and rebuilds. DOD’s Defense Travel Management Office annually calculates rent and utility rates for locations across the United States based on estimates of local market conditions, which are then adjusted for an individual’s pay grade and dependency status. These calculations, which can fluctuate from year to year, are then used to determine individual servicemembers’ monthly basic allowance for housing payments. DOD does not require servicemembers, other than certain key personnel and junior unaccompanied personnel, to live on an installation and thus in military privatized housing. Because only about a third of eligible servicemembers generally live on an installation, the basic allowance for housing payment is designed to enable servicemembers to live off-base comparably to their civilian counterparts. Servicemembers pay their rent—whether living on the installation or off—with their basic allowance for housing payments. Therefore, DOD’s privatized housing competes with available housing options in the local market. Active-duty servicemembers are given priority for privatized military housing. However, projects can advertise and lease to tenants other than active-duty servicemembers, including civilians in some cases, generally once occupancy dips below a specific level. For example, the Air Force has approved leasing to other tenants when any given project’s occupancy rate falls below 98 percent. DOD regularly assesses the financial condition of its privatized housing projects through recurring internal reporting by the military departments on each of their projects; however, key data on current financial conditions are not mutually comparable. Moreover, the military departments vary in the extent to which they use measures of future sustainment needs and funding to assess project sustainability. In addition, DOD has not consistently issued required reports to Congress on the financial condition of privatized housing projects in a timely manner. The military departments regularly assess the current financial condition of their privatized housing projects through internal, recurring monthly or quarterly financial reporting. DOD policy requires the military departments to manage their housing, including privatized housing, through financial management and reporting. DOD’s housing manual states that because housing privatization projects create a long-term governmental interest in privatized housing, it is essential that projects be monitored attentively, and that the military departments monitor their portfolios of projects. Specifically, each military department produces—based on information provided by each project—or receives from each project quarterly or monthly reports detailing the financial condition of each individual privatized housing project. Each military department also produces periodic reports on the condition of its portfolio as a whole. These reports include financial measures such as revenue and operating expenses, as well as a measure of the ability to make required debt payments, referred to as debt coverage ratio or debt service coverage ratio. In their assessments, each military department emphasizes somewhat different measures of current financial condition, although each uses debt coverage ratio as a key measure of the current financial condition of privatized military housing projects. Specifically, in its portfolio-wide reports, the Army uses three key performance metrics to measure financial condition—a measure of revenue, net operating income, and the debt coverage ratio. The Air Force also rates projects’ financial condition based on three metrics, but the metrics differ from those used by the Army. The Air Force’s metrics are operating expenses compared with budgets, net operating income compared with the original project plan, and debt coverage ratio. In its portfolio-wide reports, the Navy provides debt coverage ratio as its measure of current financial condition. Regardless of the different metrics used, the military departments rated almost all of the privatized housing projects as having acceptable current financial conditions. Specifically: Army: For the quarter ending June 30, 2017, all 34 Army projects generated enough cash to continue operations and make required debt payments, according to the Army’s portfolio-wide reporting. However, the Army rated 8 family housing and 4 unaccompanied housing projects as below or well below expectations, in terms of current finances. For example, the Army rated the project at Fort Bragg, North Carolina, as being well below expectations, due to occupancy challenges resulting from off-post competition and higher- than-expected expenses. Navy and Marine Corps: For the 6 months ending June 30, 2017, all 16 Navy and Marine Corps projects were generating enough cash to continue operations and make required debt payments, according to the Navy’s portfolio-wide reporting. However, 5 of the 16 projects were on a watch list, due to financial challenges. For example, the Marine Corps’ project comprising Camp Lejeune, North Carolina; Marine Corps Air Station Cherry Point, North Carolina; and Stewart Air National Guard Base, New York was experiencing low occupancy rates due to local market competition, and as such was included on the watch list. Air Force: For the quarter ending June 30, 2017, the Air Force rated 27 of its 32 projects’ current finances as acceptable or exceptional. However, the Air Force rated 2 of its 32 projects as unacceptable, and 3 as marginal, for current finances, according to Air Force portfolio- wide reporting. For example, the Air Force rated the Nellis Air Force Base project in Nevada as having an unacceptable current financial condition as of June 2017. In March 2017, the Office of Management and Budget approved the budgetary scoring of a financial restructuring of the project. In the restructuring, the Air Force reduced the interest rate on the government’s direct loan to the project and extended the loan’s maturity date, redistributed residual project cash flows, and reduced certain returns due to the developer. In another example, the Air Force rated the Air Combat Command II project, which comprises Holloman Air Force Base, New Mexico, and Davis- Monthan Air Force Base, Arizona, as having a marginal current financial condition as of June 2017. Specifically, basic allowance for housing rates for the project were only 85 percent of original expectations, and the project was unable to compensate for that shortfall by controlling expenses. The Office of Management and Budget has approved the budgetary scoring of a financial restructure of the project, including a reduction in the interest rate on the government’s loan to the project and a reduction in certain returns and fees previously owed to the developer. Based on our analysis, data on the current financial condition of privatized housing projects that have been reported by the military departments to ASD (EI&E) and Congress have not been comparable because (1) there are inconsistencies in the calculation of the reported debt coverage ratios, and (2) the data requested have not followed consistent time periods. Debt coverage ratios are a key measure used by the military departments to report on the current financial condition of privatized housing projects, and the measures are also the main financial measure for privatized housing projects that DOD has previously reported to Congress. However, we found the following inconsistencies in the debt coverage ratio data reported to ASD (EI&E): Adjustments made to income for the purposes of calculating debt coverage ratios affect the ratios’ consistency: The expenses that are or are not included in a project’s calculation of the debt coverage ratio are dictated by each project’s business agreements. ASD (EI&E) defines debt coverage ratio as the project’s net operating income— income remaining after all project expenses are paid, but before debt service and depreciation—divided by its required debt payments. However, we found that in practice, projects make various adjustments to net operating income for the purposes of calculating debt coverage ratios. These adjustments may include adding or subtracting from net operating income any of the following: sustainment fund deposits; various types of management fees, including performance incentive fees and asset management fees; certain utility costs; and taxes. Military department officials stated that the debt coverage ratios calculated using these adjustments, while different for different projects, are accurate and appropriate. However, while the calculation methods may be sufficient for any given project, the differences in calculation methods reduce the comparability of the data. Different project accounting methods affect the comparability of debt coverage ratios: Some projects conduct financial accounting based on the amount of cash received or paid during the period (referred to as cash basis accounting), while other projects do so based on when revenue is earned and when expenses are incurred, regardless of when cash is received or paid (called accrual basis accounting). These accounting differences can significantly affect the debt coverage ratio. For example, a cash basis project may have cash on hand to pay its debt obligations, but not enough to cover future expenses that would have been recognized under an accrual project. The specific accounting method used reflects each project’s particular business agreements, but the differences in accounting methods reduce the comparability of the debt coverage ratios across the projects. Moreover, as the program manager for all DOD housing, ASD (EI&E) requested debt coverage ratio data across varying time frames for required reports to Congress on privatized housing projects. Specifically, ASD (EI&E) has alternated between requesting annual average debt coverage ratio data and requesting data as of the end of the reporting period, thus reducing the comparability of the data over time. In instructions for its fiscal year 2014 data collection, the office requested the average debt coverage ratio over the full fiscal year; in instructions for its fiscal year 2015 data collection, it requested data as of the end of the reporting period; and in its fiscal year 2016 data collection, the office again requested data for the average over the full fiscal year. Furthermore, the instructions provided by ASD (EI&E) to the military departments for fiscal year 2015 did not specify the time period of the data to be reported. Therefore, each military department provided a different time period of data in response, further reducing the comparability of the data. Specifically, one of the military departments provided quarterly data, another military department provided data for the full year, and the other military department provided one-month data, according to military department officials. Using data from different time periods not only reduces their comparability, but also can produce a different outlook on a project’s financial condition. For example, we found that debt coverage ratios for a single fiscal quarter can be significantly different from the ratio for the same project for the full fiscal year. In some cases, a quarterly ratio showed insufficient funds to continue operations and make required debt payments, while the full-year ratio showed sufficient funds for that purpose. Conversely, another project’s ratios showed the single quarter as having sufficient funds, but the full year as having insufficient funds. ASD (EI&E) officials stated that data for previous reports were collected by different staff in that office and that the current officials were not sure why the time period for fiscal year 2015 data collection was different from that of the other two fiscal years. Standards for Internal Control in the Federal Government states that management should use quality information and externally communicate the necessary quality information to achieve the entity’s objectives. Information, among other things, should be complete and understandable. This involves processing data into information and then evaluating the processed information so that it is quality information. The standards also state that management should obtain relevant data from reliable sources, which provide data that are reasonably free from error and faithfully represent what they purport to represent. However, in prior reports to Congress, ASD (EI&E) did not clarify the differences in how debt coverage ratios were calculated, resulting in information that lacked full context. Moreover, the information provided by the military departments to ASD (EI&E) and to Congress to conduct their oversight activities has not been consistent and comparable because ASD (EI&E) has not revised its guidance on privatized housing to ensure that data reported to Congress, such as data on debt coverage ratios, are consistent in terms of time periods. Officials in ASD (EI&E) acknowledged that the differences in debt coverage ratio calculation methods and project account methods can affect the comparability of the data. They also noted that in the future they plan to continue the annual time period for data collection and reporting, though they did not identify any additional steps they plan to take to ensure consistent and comparable data. Without contextual information on how the military departments calculate debt coverage ratios—a key measure of the current financial condition of privatized housing projects—and on the effect these differences have on comparing the data across projects, data reported to Congress may not be fully useful in supporting congressional oversight of privatized military housing. Additionally, by revising guidance to ensure that data reported to Congress are comparable (that is, across the same time frames), ASD (EI&E) will provide additional assurance that DOD and Congress will have quality information on which to base decisions regarding privatized housing projects. During the course of our review, we found that the military departments take different approaches in assessing a project’s sustainability (that is, future sustainment needs and funding). Army officials stated that the Army validates project sustainment plans, and is developing, but has not yet implemented, a model to independently assess project sustainability. The Navy validates sustainment plans generated by the developers managing its projects. In addition to reviewing developers’ sustainment plans, the Air Force conducts an independent analysis of each project’s sustainment needs by conducting site tours of each project location and by using its own financial model to forecast sustainment needs, according to Air Force officials. The Air Force then compares its analysis with that of the developer. In most cases, according to Air Force officials, this comparison has shown that the Air Force’s estimates of sustainment needs were greater than the developer’s original estimates, which would require additional sustainment funding beyond what the developer estimated. Moreover, the military departments do not all use measures of future sustainment for their internal portfolio-wide reports on privatized housing projects. Specifically: Army: The Army does not include a measure of future sustainability among the key finance performance metrics it emphasizes in its portfolio-wide oversight reports. The Army tracks the balance of funds for long-term major renovations and rebuilds as compared with expectations, but it does not include a measure of expected future sustainment needs versus funding in its portfolio-wide reports. As of June 2017, seven Army projects had fallen below expectations in current funding levels for long-term major renovations and rebuilds, according to the Army’s portfolio-wide report for the quarter ending June 2017. Navy: In its portfolio-wide reports, the Navy includes a measure of sustainability. Specifically, the reports show modeled surpluses or shortfalls in sustainment funding through the term of each project. As of June 30, 2017, the Navy reported five projects expecting shortfalls in sustainment funding, four of which the Navy anticipated would require project plan modifications to address the shortfalls. Air Force: In its portfolio-wide reporting, the Air Force has adopted measures of long-term financial condition, including measures of future sustainment funding. Specifically, the Air Force gives each project a “long-term outlook” rating. This rating includes measures of projected sustainment funding levels relative to projected needs, among other measures. As of June 30, 2017, the Air Force rated 6 of its 32 projects as having “unacceptable” long-term outlooks, and another 6 as having “marginal” long-term outlooks. For example, the Air Force considered the Air Combat Command II project, which comprises Holloman Air Force Base, New Mexico, and Davis- Monthan Air Force Base, Arizona, to have severely underfunded planned maintenance funds and a projected inability to meet any future needs for major renovations and rebuilds, due to lower-than- expected basic allowance for housing levels. DOD guidance states that because privatization creates a long-term governmental interest in privatized housing, it is essential that projects be attentively monitored. DOD has recognized that a lack of sustainment funding can decrease the desirability of housing over time, thus reducing occupancy and further jeopardizing financial stability. However, DOD has not required the military departments to incorporate measures of future sustainment into their assessments of privatized housing projects. Measures of current financial condition, such as the ability to make debt payments, do not necessarily indicate the ability of a project to fund its sustainment accounts sufficiently to maintain housing quality in the future. A project may generate enough revenue to cover operating expenses and make required debt payments, but the level of projected funding available for planned renovations over the course of the project may still be insufficient, as shown by Navy and Air Force portfolio-wide oversight reports. The Navy and Air Force include measures of future sustainment needs and funding in their portfolio-wide oversight. While Army officials stated that the Army regularly reviews sustainment funding levels, the Army does not include forecasts of future sustainment needs and funding in its portfolio-wide assessment reports because they are not required by ASD (EI&E). Without a requirement to include sustainment measures in their oversight of privatized housing projects, military department officials may choose to review such measures or not. If ASD (EI&E) does not require the military departments to include measures of future sustainment in their assessments of privatized housing projects, the military departments may not consistently incorporate such measures into their portfolio-wide assessments, and therefore the military departments and ASD (EI&E) may not have sufficient oversight of the projects’ future sustainability. ASD (EI&E) officials agreed that such a requirement would help ensure that the military departments are consistent in their oversight of future sustainment. DOD has not consistently provided required reports to Congress in a timely manner, and as a result Congress does not have up-to-date information on the financial condition of privatized housing. Section 2884(c) of Title 10 of the United States Code requires the Secretary of Defense to report semiannually an evaluation of the status of oversight and accountability measures for military housing privatization projects, including, among other things, information about financial health and performance and the backlog of maintenance and repair. DOD provided a report covering fiscal year 2013 to Congress in November 2014, and then did not provide another report, covering fiscal year 2014, until October 2017. ASD (EI&E) officials stated that they have not provided the reports in a timely manner in recent years due to staff turnover and limited resources, as well as efforts to ensure the quality of the data included in the reports. An ASD (EI&E) official stated that DOD is planning to resume timely reporting, with a consolidated report covering fiscal years 2015 and 2016 to be submitted to Congress in the second quarter of fiscal year 2018, and a report covering fiscal year 2017 to be submitted in late fiscal year 2018. Furthermore, in prior reports submitted to Congress, ASD (EI&E) has not reported information on the future sustainment of each privatized housing project. The statute does not require the reporting of information on future sustainability for each project. However, ASD (EI&E) has noted that long- term sustainability has become a priority as projects have completed their initial development periods, and therefore information on future sustainment has become more critical to understanding the projects’ financial health. Standards for Internal Control in the Federal Government states that management should use quality information and externally communicate the necessary quality information to achieve the entity’s objectives. In the past, DOD has not consistently reported on the financial condition of privatized housing projects to Congress and in cases where data were reported, the department focused its reports on measures of current financial health such as debt coverage ratios, which do not provide information about the future sustainment of the projects. An ASD (EI&E) official stated that the office will streamline the report’s narrative while adding additional details to figures as a means to expedite future report submission, but the official did not provide additional details of how future reports will be completed in a more timely fashion. ASD (EI&E) officials also stated that in the past they were focused on the initial implementation phases of the privatized housing projects and are now shifting to focus on sustainment, but they have not provided sustainment information on each project to Congress. ASD (EI&E) officials agreed that it would be beneficial to include information on sustainment in their reports to Congress. If DOD does not take steps to comply with statutory time frames for reporting on the financial condition of privatized housing projects moving forward, decision makers in Congress will not have up-to- date information about financial conditions of projects as they provide oversight of a program that represents a long-term commitment for the department. Furthermore, reporting financial information on the future sustainability of projects will help provide Congress a complete picture of the financial condition of each project. DOD has completed some analysis of the projected effects of recent reductions in the basic allowance for housing on its privatized housing portfolios, but it has not fully assessed the significance of the effects on the future sustainment of each of its privatized housing projects. Moreover, DOD has not identified a course of action to address possible shortfalls resulting from the reductions in the basic allowance for housing. The military departments have also identified a variety of other challenges that could affect the financial condition of their privatized housing projects, including reductions in assigned personnel and the higher-than-expected cost of utility infrastructure. The military departments have identified options to address potential financial challenges to their privatized housing projects, including actions to increase revenue, actions to reduce expenses, and extraordinary measures to improve project financial conditions. According to the military departments, reductions in the basic allowance for housing relative to market rent and utility calculations by the Defense Travel Management Office—a 4 percent reduction as of 2018—will decrease funding for future sustainment and could affect the privatized housing projects’ ability to continue operations and make required debt payments. Specifically, housing developers stated that declines in revenue have already been felt by certain projects, and that any reduction in their ability to sustain the privatized housing projects over the term of their 50-year leases will result in the degradation of the housing, leaving the homes less marketable. Unlike challenges that may affect one or a few projects, the reductions in the basic allowance for housing affect all projects, since basic allowance for housing is a basis for revenue for all of the projects. DOD has established that the amount charged to servicemembers for renting housing on base was equal to their basic allowance for housing rate. Thus, the privatized housing projects were developed with the assumption that they would receive full basic allowance for housing payments as rent, according to officials from each military department. However, at DOD’s request, Congress included provisions in the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 and National Defense Authorization Act for Fiscal Year 2016 that authorized the department to reduce the housing allowance to servicemembers below the Defense Travel Management Office’s typical basic allowance for housing calculations, starting with a 1 percent reduction in 2015 and reaching a 5 percent total reduction by 2019. As of 2018, the department has reduced basic allowance for housing payments by 4 percent. Because of this reduction, the revenue that projects receive from rent payments has decreased at certain projects. However, according to officials representing the military departments, the reductions in the basic allowance for housing will not be the sole reason that any project is struggling. A project may be struggling due to other challenges the military departments identified, examples of which we describe in this report, such as aging utility infrastructure. However, officials representing each military department stated that the reductions will have a compounding effect on projects that are facing other challenges. An August 2015 memorandum issued by ASD (EI&E) directed the military departments to complete a thorough review of their privatized housing portfolios. Additionally, the military departments were to provide a report outlining any effects of changes in the basic allowance for housing on their portfolios. However, the military departments have not fully assessed the effects of the basic allowance for housing reductions. Instead, in response to this memorandum, the military departments completed some analysis on the effects of the reductions in the basic allowance for housing and provided reports outlining the projected effects of the reductions on their privatized housing portfolios. Each military department reported that the reductions in the basic allowance for housing would decrease project revenue, and each provided estimates across multiple scenarios. Specifically: The Army’s September 2015 report projected an average decrease in long-term sustainment accounts of $104 million per project through 2039 based on a 5 percent reduction in basic allowance for housing rates. Out of the 35 projects in the Army’s privatized housing portfolio, the report looked at the 15 projects projected to lose 5 percent or more of their assigned personnel and estimated the funds available to support each project from 2015 until the end of 2039. The Navy’s October 2015 report projected a decrease in long-term sustainment accounts across the portfolio of privatized housing projects of $2 billion based on a 5 percent reduction in basic allowance for housing rates. The report also summarized any projected effects in the first year of reductions on the debt coverage ratio and specified the calendar years when sustainment shortfalls could begin to occur per project. The Air Force’s November 2015 report projected a decrease of $48 million per year across the portfolio based on a 5 percent reduction in basic allowance for housing rates. The report indicated that project ratings could begin to be affected in the same year as the reductions in the basic allowance for housing were implemented, and that funding for long-term sustainment would be diminished. However, DOD does not have the information needed to fully assess the effects of the reductions that began in 2015, because it did not direct the military departments to specify in their reports the significance of the effects of the reductions on each individual project. The August 2015 ASD (EI&E) memorandum directed the military departments to provide reports with a “thorough review,” but it did not specify the inclusion of information that would detail the extent of the effects on the sustainment of each individual project. As a result, the reports did not fully assess specific effects on each project to enable the identification of and response to specific risks. For example, generally, the reports did not include certain information for the full term of all projects, as detailed below: two of the reports did not include information on when deficits related to reductions in the basic allowance for housing will occur per project; two of the reports did not include information on the decrease in the sustainment accounts due to reductions in the basic allowance for housing versus the amount that the project requires for planned sustainment per project; and none of the reports included information on the likely effects of particular sustainment funding deficits (for example, how many units will forgo needed renovations or rebuilds). In addition, the military departments did not identify specific actions in the reports to respond to particular, identified shortfalls for individual projects resulting from reductions in the basic allowance for housing. In its August 2015 memorandum, ASD (EI&E) noted that individual projects may have different solutions to address the effect of the reductions in the basic allowance for housing. The military departments did not outline solutions for each individual project but, as requested by ASD (EI&E), proposed recommendations in their reports to mitigate the overall effects of the reductions in the basic allowance for housing by charging servicemembers the out-of-pocket rate. The out-of-pocket rate reflects a servicemember cost-sharing adjustment that would require the servicemember to pay the amount by which his or her allowance was reduced. However, neither DOD nor the military departments have taken action to address the reports’ recommendations, nor have they determined any other courses of action for individual projects in response to the reductions in basic allowance for housing. While the Army has a policy that would allow individual projects to propose charging servicemembers the out-of-pocket amount, subject to Army approval, the policy states that the Army strongly prefers that projects not charge servicemembers. According to Army officials, none of the projects had done so as of August 2017. Further, according to privatized housing developers representing Army projects, they have not proposed charging the out-of- pocket rate because doing so could result in a reduction in occupancy at that project, as servicemembers would begin to look for other housing. Unlike the Army, the Navy and Air Force do not have a policy that would allow developers to charge the out-of-pocket amount. According to ASD (EI&E), Navy and Air Force officials stated that their lack of policy is based in large part on the fact that servicemembers from all three military departments reside at nearly every installation, and that without having written assurance that the other military departments will also charge the out-of-pocket rate, the Air Force and Navy cannot agree to do so. Standards for Internal Control in the Federal Government states that management should analyze the identified risks to estimate their significance, which provides a basis for responding to the risks, and design responses to the analyzed risks so that risks are within the defined risk tolerance for the defined objective. In its August 2015 memorandum, ASD (EI&E) noted that the reductions in the basic allowance for housing could create shortfalls that in turn could lower the quality of homes in privatized housing communities. However, DOD has not fully assessed the significance of this risk by considering the magnitude of impact, the likelihood of occurrence, and the nature of the risk because, generally, the reports do not include certain information for the full term of all projects, as detailed above. Specifically, DOD has not fully assessed the significance of the risk of the reductions in the basic allowance for housing by considering how the reductions will affect the quality of its housing. If DOD does not fully assess the effects of the reductions in the basic allowance for housing, DOD and Congress will not be fully informed before making decisions that could affect all of the projects. Furthermore, if DOD does not respond to the risk of reduced sustainment funds by designing specific actions, DOD and the military departments may not be well positioned to reduce any risks and meet their objective of providing quality housing for servicemembers. The military departments have identified various challenges that could affect the financial condition and future sustainment of their privatized housing projects. Examples of these challenges include the following: Reductions in assigned personnel at installations have reduced occupancy rates: Information from military department officials shows that the loss of personnel assigned to an installation has reduced occupancy at some projects. Reductions in assigned personnel can occur at an installation because of large-scale troop reductions or the inactivation of units. The decrease in occupancy at some projects has led to revenue and cash flow challenges. For example, Army officials noted that the occupancy rate dropped from about 95 percent to about 70 percent at the Fort Knox project in Kentucky in 2014 when a unit was inactivated. This drop in occupancy resulted in challenges for the privatized housing project because the number and type of housing units originally built were determined on the basis of the unit’s remaining at the installation. Aging utility infrastructure has increased sustainment costs, resulting in reduced cash flows for some projects: According to DOD and officials representing the military departments, the costs of maintaining infrastructure for utilities has reduced cash flows for some projects. In some privatized housing agreements, the military departments transferred responsibility for utility infrastructure to the projects. According to DOD and military department officials, this oversight and maintenance have been more costly than project owners had expected. Air Force officials stated that aging utility infrastructure is not something the projects are equipped to handle because there is not enough revenue in their project structures to cover the costs of maintaining the infrastructure. Air Force officials said that they noticed the challenges related to transferring utility infrastructure in the earlier projects and that they made a decision to stop transferring infrastructure to developers in later projects. Moreover, according to Air Force officials, some project owners are now asking for the military departments to take back the infrastructure. For example, the Air Force agreed to take back some of the gas and electric infrastructure at the Air Force Academy project in Colorado as part of a financial restructuring. Perceived disconnects between basic allowance for housing calculations and market rates: Military department officials and privatized housing developers perceive the Defense Travel Management Office’s basic allowance for housing calculations as challenging because they believe that the calculations are unpredictable and do not always reflect the realities of local markets. Officials in each military department stated that the data used for the calculations sometimes do not accurately reflect the local market surrounding the project. For example, officials from the Navy’s Midwest project noted that the calculation for Millington, Tennessee— an area covered by the Midwest project—was higher than that for the Chicago area of the project in 2014—an area that they felt should have had the higher costs of the two. Additionally, according to Army officials, basic allowance for housing rates fluctuate at certain projects from year to year and do not reflect the local market. For example, the average basic allowance for housing rate for Fort Huachuca in Arizona dropped 11 percent from 2014 to 2015, increased 4.6 percent in 2016, and dropped 9 percent in 2017. Army officials stated that these fluctuations did not match rental costs in the local market. Actual costs of utilities in some locations are not covered by the basic allowance for housing utility rates: Officials representing two military departments stated that the Defense Travel Management Office’s basic allowance for housing calculations do not accurately reflect the actual costs of utilities. According to Army officials, the utility component of the Defense Travel Management Office’s calculations does not cover the actual cost of utilities for project homes at some locations. This difference can result when the surveys for utility costs are from homes in the local community that are not comparable to those on base. For example, in Fairbanks, Alaska—where the Army’s Fort Wainwright/Greely project is located—off-base homes get the majority of their heat from wood stoves that report no cost element to the surveys used by the Defense Travel Management Office. By underreporting or not otherwise adjusting for these costs, according to Army officials, the basic allowance for housing calculations fail to account for the funds necessary to cover the costs of traditional, metered utilities. Unexpected project expenses can reduce cash flows for some projects: Officials representing two military departments stated that unexpected expenses can be a challenge for some projects. These expenses can occur because of unexpected events, such as weather events, environmental damage, or unexpected litigation. For example, the Navy’s Mid-Atlantic project has experienced unexpected expenses related to water intrusion and mold issues and the ensuing litigation, causing fewer funds to flow to the project’s sustainment accounts. There are also expenses for snow removal, hurricanes, and flooding. Navy officials stated that they did not anticipate a lot of sustainment work in the first 5 to 10 years of the projects, but needs have arisen due to these unexpected events. Additionally, according to information from the Navy’s New Orleans project in Louisiana, hurricane and tropical storm damage may drain $1.5 million to $2 million from the project’s sustainment accounts every 3 to 4 years. Determining the amount DOD must budget for a project may affect future expansions or changes to existing projects: Military department officials also noted potential challenges with the way that the Office of Management and Budget will be scoring future projects. Scoring seeks to determine the cost that should be recognized and recorded as an obligation of DOD for budgeting purposes at the time a contract is signed. When the privatized housing initiative began, developers sought private borrowing, knowing that only the government funding would be scored because a 1997 Office of Management and Budget memorandum established that private funds for the projects would not be scored as government participation or activity. However, according to a 2005 Office of Management and Budget memorandum, as of September 30, 2010, new privatized housing projects and expansions to existing projects using the limited liability or corporation approach are subject to traditional scoring rules. These rules require projects proposing the use of a purely private entity to be scored as a private activity, and projects proposing the use of a co-owned limited liability corporation to be scored as government activity. Some military department and developer officials have expressed concern with the uncertainties surrounding future scoring. Specifically, military department officials and developers are concerned that the reversion to traditional scoring will affect any plans for obtaining mid-term loans and any potential expansions or other changes to existing projects. Office of Management and Budget officials stated that any future federal government contributions to privatized housing projects in the form of direct loans or loan guarantees will be fully scored at the value of the loan or loan guarantee. Military department and developer officials have identified various options to address financial challenges such as those previously discussed in this report. These include actions to increase revenues, actions to reduce expenses, and extraordinary measures to improve project financial conditions. As the project manager, the developer may act unilaterally in some cases, and other actions may require approval from the military department, coordination with ASD (EI&E), or notification to the Office of Management and Budget. Although these actions may improve a project’s financial condition, there are limitations, such as the potential to reduce tenant satisfaction and therefore occupancy levels, or costs to the government. The extent to which any of these options will be sufficient to address a particular project’s financial challenges depends on the degree of the financial challenge and the effectiveness of the option. For example, a project may seek to raise revenue by advertising to tenants to increase occupancy, but the response may be insufficient. Likewise, a project may engage in a financial restructuring to return the project to a healthy financial footing, but ongoing low occupancy or unexpectedly high expenses may continue to challenge the project financially. Developers and military departments cited several options for increasing project revenues, including the following examples: Renting to tenants other than active-duty servicemembers: The military departments have the option to increase project revenues by allowing projects to rent to tenants other than active-duty servicemembers. The Navy and Air Force have policies that determine the priority ordering of types of tenants to whom a project can rent. An Army official stated that the Army does not have a department policy, but allows projects to rent to tenants other than active-duty servicemembers based on project agreements. For example, a project may offer to rent to tenant groups in the following order: active-duty personnel, reserve-duty personnel, DOD civilian employees, military retirees, and general public tenants. As of June 2017, 33 of 35 Army privatized housing projects were renting to tenants other than active-duty servicemembers; 14 of 16 Navy and Marine Corps projects were renting to tenants other than active-duty servicemembers; and 28 of 32 Air Force projects were renting to tenants other than active-duty servicemembers. While renting to tenants other than active-duty servicemembers can increase revenue, the usefulness of this action is limited when a project is already operating at a high rate of occupancy or when additional demand is limited. Other steps to increase occupancy: Developers can take other actions to increase project occupancy, to include increased advertising, promotions, or offering rent concessions. While these actions can increase occupancy, advertising adds costs to project operations, and rent concessions lower the per-unit revenue earned for the project. Figure 2 shows an advertisement by a privatized housing project seeking tenants outside of Naval Station Norfolk in Virginia. Charging fees for services: Developers stated that they have considered charging fees for services that had previously been provided free of charge—such as community center rentals and pet fees—as another means of increasing project revenue. However, a developer’s ability to charge fees varies based on project agreements and military department policies. Developers also need to consider potentially negative effects on tenant satisfaction. Developers and military departments cited several options for reducing project expenses, including the following examples: Reducing or eliminating services: Projects can reduce or eliminate project services as a means of reducing operating expenses. Officials have taken these steps at certain Army, Navy, and Air Force projects. For example, Navy officials told us that the developer cut portions of the landscaping program at the Navy’s Midwest project in Illinois, Indiana, and Tennessee and eliminated one 24-hour service desk at the Navy’s Hampton Roads Unaccompanied Housing project in Virginia in order to reduce expenses. While these actions reduce operating expenses, providing reduced or fewer services may make a project less marketable or desirable to tenants and can lead to declines in tenant satisfaction and occupancy. Deferring routine maintenance: In response to financial distress, projects can curtail routine maintenance to realize savings. For example, when Nellis Air Force Base in Nevada was facing cash flow challenges, officials told us that the project curtailed its preventive maintenance program that includes the inspection and repair of heating, ventilation, and air conditioning systems; water heaters; plumbing and plumbing fixtures; roofs; and carpeting. These expense-saving measures help operating costs in the near term, but deferring maintenance can reduce the quality of the housing, reduce tenant satisfaction, and increase expenses over time by reducing the effective life of the items not being maintained. Delaying sustainment: Another option to reduce project expenses is to delay certain sustainment actions. At the Army’s Fort Knox project in Kentucky, officials stated that the sustainment plan initially included the demolition and rebuild of each unit or full renovation of historic units over the 50-year project lease; however, they no longer project that there will be funds to complete those improvements. Instead of full rebuilds, officials stated that they expect to conduct piecemeal renovations. Over time, deferred sustainment can lead to reduced housing quality, in turn reducing occupancy levels and tenant satisfaction, and thereby reducing project revenues. Developers and the military departments can also take various extraordinary measures to improve the financial condition of a project. Extraordinary measures are options that can alter project agreements or project financial arrangements with the military department. These options may require approval from the military department, coordination with ASD (EI&E), or notification to the Office of Management and Budget. Examples of such actions include the following: Retaining and renting excess units: Projects can earn additional revenue by retaining and renting units that were originally slated for demolition. Some project plans included the transfer of existing housing units, deemed in excess of project needs, to the developer with the intention of demolishing them. For retaining and renting excess units to be an option, a project must have some excess units slated for demolition and sufficient demand for their rental. Reducing project scope: Projects may reduce the scope of planned work to reduce potential expenditures or improve the project’s financial state. Reductions in scope may be in the form of the number of units to be built, renovated, or demolished. For example, following the inactivation of a brigade combat team at Fort Knox in Kentucky, the project made plans to eliminate 280 units due to changes in servicemember housing needs from when the project originally started construction. Deferring fees: Developers can defer project fees due to them, such as fees for construction or management services, so that more funds are available for other project needs. Developers agreed to defer fees for several Navy and Air Force projects as a means to ensure adequate funding for the completion of project construction. Projects can defer fees to meet shortfalls in project funding, but the deferral can place additional financial strain on a project, as funds later must be used to repay the deferred fees. Making additional investment contributions: Developers can make additional financial investments in the project to cover underfunded project expenses. For example, Air Force officials stated that developers have made additional financial investments at the Robins Air Force Base I project in Georgia to ensure that the project had sufficient funds to make debt payments. According to officials, the Air Force agreed to the additional investment contributions on the basis that they be repaid from any future excess cash flows. Returning assets: In some instances, project assets can cost the developer more than anticipated due to the expenses necessary to maintain the asset. To alleviate the resulting financial challenges, projects can transfer ownership of the assets back to the military departments. For example, the Air Force took back five historic units from the Robins II project in Georgia that, according to officials, were not financially viable within the project and that the Air Force wanted for purposes other than housing. When assets are returned to a military department, the military department may have to begin budgeting for their costs through its annual budgeting process. Transferring assets: The military department can transfer assets to a project that developers can sell to fund projects. For example, the Navy transferred land and units to the Navy’s Midwest project with the intention that the developer would sell the land and units to supplement project funding. Asset sales can be unreliable funding sources if assets sell for less than the project expected. Financial restructurings: Military departments can seek to financially restructure projects to improve their financial condition. This process requires the military departments to renegotiate project agreements with the developer to improve financial condition. For example, the Air Force recently completed financial restructurings of the Nellis Air Force Base project in Nevada and the Air Combat Command Group II project, which comprises Davis-Monthan Air Force Base in Arizona and Holloman Air Force Base in New Mexico. Air Force and developer officials stated that the Nellis Air Force Base project began to have problems making debt payments because of declines in basic allowance for housing payments associated with falling local rental market prices. For Nellis, the Air Force and the developer negotiated a financial restructuring whereby the Air Force reduced the interest rate on the government’s loan to the project and extended the loan’s maturity date. The Air Force also gave the developer an additional portion of project profits. In exchange, the developer agreed to forgive an outstanding balance of payments due to them. An ASD (EI&E) official stated that financial restructuring agreements may require notification to the Office of Management and Budget, which scores changes to privatized military housing projects. Restructurings can provide relief to projects that are facing imminent default or longer-term sustainment funding shortfalls, but they can also add financial costs to the military department. The ability to financially restructure also may be limited by the willingness of the developer to give concessions during negotiations and the ability to obtain the approvals necessary to complete the restructure. DOD has not clearly defined in its policy the circumstances in which ASD (EI&E), as the DOD-wide housing program manager, should receive advance notice of changes to address financial challenges in privatized military housing projects. In addition, DOD has not defined its risk tolerance levels for achieving its goal of providing quality housing to servicemembers that reflects community living standards—in particular, its tolerance for declining levels of funding for future sustainment that can pose a risk to this goal. The military departments have varied understandings of what changes to privatizing housing projects require notification to ASD (EI&E)—DOD’s program manager for privatized housing. Military department officials provided somewhat differing explanations when asked about the types of project changes that require notification to ASD (EI&E). Specifically: Army officials stated that the Army provides notice any time there is a planned use of or change to a project involving privatized military housing authorities related to government loans and loan guarantees, the leasing of housing units, or government investments in privatized housing projects, as well as any action that requires congressional notification. The Army also notifies the office if a project’s number of units is expanded relative to its approved plan. Navy officials stated that they provide notice any time there is an action that requires congressional notification, any time there are project changes with a potential effect on military housing privatization authorities, any time new projects or project phases are considered, and any changes to a project’s previously approved scope, as well as any time ASD (EI&E) requests notification. Air Force officials stated that notification is required when the military department makes a material change to a project that has a financial or scope effect relative to the details that were originally approved. Officials added that any project changes that require approval from the Office of Management and Budget would require ASD (EI&E) concurrence. Under current DOD housing policy, ASD (EI&E) is required to notify the Office of Management and Budget of any significant changes to privatized housing projects that may require scoring consideration. However, DOD policy does not establish the circumstances in which the military departments should notify ASD (EI&E) of significant project changes, and it does not define which project changes qualify as significant. DOD guidance requires ASD (EI&E) to provide guidance and general procedures relating to housing privatization. An ASD (EI&E) official also told us that the military departments are providing notification of project changes based on limited guidance, and that ASD (EI&E) is conducting oversight on a case-by-case basis. Moreover, Office of Management and Budget officials stated that they will analyze project changes to determine whether an action would constitute a project expansion significant enough to require scoring. Standards for Internal Control in the Federal Government states that management should develop policies that address the entity’s objective to achieve an effective internal control system. In addition, management should obtain and internally communicate the necessary quality information to achieve the entity’s objectives, while communicating quality information down and across reporting lines to enable personnel to perform key roles. Moreover, the standards state that the oversight body receives quality information that flows up from the reporting lines from management and personnel that is necessary for effective oversight of internal control. However, DOD’s guidance does not clearly define the types of project changes for which ASD (EI&E) requires prior notification from the military departments, which could result in ASD (EI&E) not being notified of project changes. ASD (EI&E) has draft guidance on oversight and management of privatized military housing, which would define the circumstances under which military departments should notify ASD (EI&E) of project changes, but officials stated that they have not established a time frame for issuing this policy. An ASD (EI&E) official stated that the policy is being coordinated with the military departments, and this has resulted in delays to its issuance. Without issuing guidance to clearly define and communicate to the military departments the conditions that require notification, the military departments will not be able to consistently fulfill their responsibilities and ASD (EI&E) will not be able to completely fulfill its oversight function. Office of Management and Budget guidance on the preparation, submission, and execution of the federal budget suggests that public- private partnerships such as privatized military housing projects contain some elements of risk to the government. For example, the projects are frequently constructed on government land and they include government financing in the form of direct investments or direct loans. However, the military departments have not defined their risk tolerance levels for privatized housing relative to the program’s objective of providing quality housing that reflects community living standards. Specifically, the Army and Navy have not identified the level of risk they are willing to accept in their ability to fund future sustainment. Army officials stated that the Army is not responsible for taking any actions to restore a project’s financial condition. Navy officials stated that they do not use a risk model, and that one is not required by DOD. The Air Force has not formally defined its risk tolerance levels for future sustainment, but it has identified the circumstances in which projected sustainment funding deficits will cause it to take extraordinary measures—specifically, to seek a financial restructuring of the project. For example, if future planned maintenance is funded at less than 85 percent of estimated needs within the next 5-year period, the Air Force may seek a financial restructuring, according to Air Force officials. Likewise, according to Air Force officials, if planned major renovations and rebuilding are funded at below 30 percent of estimated needs, the Air Force will seek a financial restructuring. Standards for Internal Control in the Federal Government states that agencies need to define risk tolerance relative to their program objectives. Risk tolerance is the acceptable level of variation in performance relative to the achievement of objectives. However, DOD has not required the military departments to define their risk tolerances regarding the future sustainability of the projects. ASD (EI&E) officials told us that they are considering establishing parameters for risk tolerance for the military departments, but have not yet done so. Officials also noted that DOD had been focused on the initial development periods of the privatized housing projects, whereas it is now shifting focus to sustainment as the projects have moved from the initial development stage. Given this focus on sustainment, if the military departments do not define their risk tolerances regarding the future sustainability of their privatized housing projects, they will lack a consistent basis on which to determine when the risks to achieving their objectives require responses, and the nature of those responses. DOD’s ability to maintain quality housing is critical, because housing can affect retention, readiness, and servicemembers’ quality of life. Since Congress provided the department with authorities to do so, DOD has worked with private developers to improve the quality of housing available on military installations. The military departments regularly review the financial condition of their privatized housing projects, but they calculate a basic measure of current financial health—the debt coverage ratio— differently among their projects, which limits the ability of ASD (EI&E), and in turn Congress, to compare project financial health based on this measure without additional information to give the data full context. DOD has also previously reported such information for differing time periods in different reports to Congress, further limiting the data’s usefulness, and has not issued revised guidance on privatized housing to help ensure consistent reporting. The military departments also vary in the extent and manner in which they oversee measures of future sustainment of their privatized housing projects. DOD has not reported measures of future sustainment to Congress, or issued a report on the financial condition of privatized housing projects, since the report covering fiscal year 2014. Without consistent and up-to-date information on the financial condition of projects, DOD and Congress will not be able to conduct informed and effective oversight of the projects. The military departments have identified the reductions in basic allowance for housing as one of the various challenges affecting the financial condition of privatized housing projects. At the request of ASD (EI&E), the military departments have provided analysis on the effects of the reductions on their portfolios, but they have not been required to fully assess the significance of the effects of the reductions on the future sustainment of each of their projects, or identified specific actions to respond to the reductions, as detailed by federal internal control standards related to risk assessment. Without complete assessment of the risks of the reductions in the basic allowance for housing on each project, and developing any appropriate courses of action, DOD and the military departments will not be able to know when to take action to address deficits in the funding of long-term sustainment accounts that could lead to diminishment in the quality of military housing. Additionally, DOD and Congress will not be fully informed of the risks and possible effects before making decisions that affect all of the privatized housing projects—such as approving any further reductions in the basic allowance for housing. The military departments have various options for attempting to improve the financial condition of their privatized housing projects, but some of these options require prior notice to ASD (EI&E). The absence of clearly defined requirements as to when this office should be notified of project changes to address financial challenges has led to varied understandings among the military departments about when notification should occur. Without a clear identification of when ASD (EI&E) should be notified of project changes, the military departments will not have consistent and clear guidance as to when this office needs to be informed prior to an action being taken by a military department regarding its privatized housing projects, and thus, the oversight office may not be fully informed on the projects it intends to oversee. In addition, DOD has not required the military departments to define their tolerances for risk to the goal of providing quality housing to servicemembers in line with community standards, including its ability to fund future sustainment needs. Without doing so, DOD will not have key information needed to determine when the risks to achieving their objectives require responses, or to determine the nature of the responses. We are making a total of eight recommendations to the Secretary of Defense and the Assistant Secretary of Defense for Energy, Installations, and Environment. The Secretary of Defense should ensure that: The Assistant Secretary of Defense for Energy, Installations, and Environment provides additional contextual information in future reports to Congress on privatized military housing to identify any differences in the calculation of debt coverage ratios and the effect of these differences on their comparability. (Recommendation 1) The Assistant Secretary of Defense for Energy, Installations, and Environment revises its existing guidance on privatized housing to ensure that financial data on privatized military housing projects reported to Congress, such as debt coverage ratios, are consistent and comparable in terms of the time periods of the data collected. (Recommendation 2) The Assistant Secretary of Defense for Energy, Installations, and Environment revises its guidance on privatized military housing to include a requirement that the military departments incorporate measures of future sustainment into their assessments of privatized housing projects. (Recommendation 3) The Assistant Secretary of Defense for Energy, Installations, and Environment takes steps to resume issuing required reports to Congress on the financial condition of privatized housing in a timely manner. (Recommendation 4) The Assistant Secretary of Defense for Energy, Installations, and Environment reports financial information on future sustainment of each privatized housing project in its reports to Congress. (Recommendation 5) The Assistant Secretary of Defense for Energy, Installations, and Environment provides guidance directing the military departments to assess the significance of the specific risks to individual privatized housing projects resulting from the reductions in the basic allowance for housing and identify courses of action to respond to any risks based on their significance. (Recommendation 6) The Assistant Secretary of Defense for Energy, Installations, and Environment finalizes guidance in a timely manner that clearly defines the circumstances in which the military departments should provide notification of project changes and which types of project changes require prior notification or prior approval. (Recommendation 7) The Assistant Secretary of Defense for Energy, Installations, and Environment revises its guidance on privatized military housing to require the military departments to define their risk tolerances regarding the future sustainability of their privatized housing projects. (Recommendation 8) We provided a draft of this report for review and comment to DOD and the Office of Management and Budget. We initially made our recommendations to the Assistant Secretary of Defense for Energy, Installations, and Environment. We have updated our recommendations to also include the Secretary of Defense. In written comments, DOD concurred with each of our recommendations and identified actions it plans to take to implement them. DOD’s comments are reprinted in their entirety in appendix III. DOD and the Office of Management and Budget also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Office of Management and Budget. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Brian Lepore at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Senate Report 114-255 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017 included a provision for us to assess the solvency of each privatized military housing project in the United States and the effect of recent changes in basic allowance for housing on long-term project sustainability. This report examines the extent to which the Department of Defense (DOD) has (1) assessed and reported the financial condition of each privatized housing project; (2) assessed the effects of recent reductions in the basic allowance for housing on privatized housing, and identified any other challenges and options to address challenges; and (3) defined notification requirements for project changes and risk tolerances relative to privatized housing goals. For all objectives, we scoped our review to include all privatized housing projects in each military department. We excluded privatized temporary lodging because its financial structure is substantially different than all other privatized housing projects. We reviewed relevant policies and collected information by interviewing officials from the Office of the Secretary of Defense (the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment); the Army (Office of the Assistant Secretary of the Army for Installations, Energy, and Environment, and the Office of the Assistant Chief of Staff for Installation Management); the Navy (Office of the Deputy Assistant Secretary of the Navy for Installations and Facilities, the Commander, Navy Installations Command, and the Naval Facilities Engineering Command); the Marine Corps (Marine Corps Installations Command); and the Air Force (Office of the Deputy Assistant Secretary of the Air Force for Installations, and the Air Force Civil Engineering Center). Additionally, we met with the five leading developers of privatized housing projects: Balfour Beatty, Corvias, Lend Lease, Lincoln Military Housing, and Hunt Companies. We also visited a non-generalizable sample of five privatized housing projects to interview on-site military department officials and tour the housing. For this sample, we selected one or two projects from each of the military departments, emphasizing projects that had identified financial difficulties or were located in close proximity to military department oversight offices. We made site visits to the following areas and installations: Norfolk, Virginia, where we met with officials of the Naval Facilities Engineering Command and visited the Homeport Hampton Roads and Mid-Atlantic Military Family Communities privatized housing projects; San Antonio, Texas, where we met with officials at the Air Force Civil Engineer Center; Las Vegas, Nevada, where we met with officials and visited the privatized housing project at Nellis Air Force Base; Fort Knox, Kentucky, where we met with officials and visited the privatized housing project at the Army’s Fort Knox; and Fort Meade, Maryland, where we met with officials and visited the privatized housing project at Fort Meade. To determine the extent to which DOD has assessed and reported the financial condition of each privatized housing project, we reviewed DOD guidance on the oversight and management of privatized military housing. We also reviewed documentation used by each military department to oversee the financial condition of each of their privatized housing projects, and each of their portfolios as a whole through portfolio- wide oversight reports, monthly and quarterly reports on each privatized housing project, and audited project financial statements from fiscal years 2013 to 2016. We reviewed DOD’s fiscal year 2013 and 2014 annual reports to Congress on privatized housing, as well as data for privatized housing projects from fiscal years 2013 through 2016. We also met with officials involved in the oversight and management of privatized housing in the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment (ASD (EI&E)), and each of the military departments to discuss their oversight and management of the financial condition of privatized housing projects. Additionally, we requested data for each privatized housing project, including audited financial statements, and examined the differences among and within the military departments in determining the solvency of their projects. For each military department, we assessed the number of projects doing financially well and those not doing financially well through correspondence with knowledgeable officials at each military department and found those department-level numbers sufficiently reliable to report the number of projects in each financial category. We compared DOD’s and the military departments’ actions to assess and report on the financial condition of their privatized housing projects with DOD’s housing policy and with standards for quality information in Standards for Internal Control in the Federal Government to determine whether DOD has fully assessed and reported the financial condition of each project. To determine the extent to which DOD has assessed the effects of recent reductions in the basic allowance for housing on privatized housing and identified any other challenges and options to address those challenges, we reviewed DOD guidance on applying reductions in basic allowance for housing to privatized military housing and other DOD documentation on the reductions in basic allowance for housing payments. Specifically, we reviewed the military departments’ reports on the projected effects of the reductions in the basic allowance for housing on their portfolios and quarterly project oversight reports from fiscal years 2016 and 2017. Additionally, we interviewed officials at the Defense Travel Management Office for information on the basic allowance for housing calculations and military department officials for their perspectives on the reductions in basic allowance for housing. We compared the military department reports on the projected effects of the reductions in basic allowance for housing with standards for risk assessment in Standards for Internal Control in the Federal Government to determine whether DOD has fully assessed the effects of the reductions. We determined challenges identified by DOD and the military departments and options to address challenges through interviews with ASD (EI&E) officials, officials from each military department involved with privatized housing, and officials at select installations involved in privatized housing. We also met with officials of five leading privatized housing developers for their perspectives on challenges to their privatized housing and options to address them. Additionally, we reviewed quarterly project oversight reports to identify challenges associated with privatized housing. We reported examples of challenges that were identified by at least two of the three military departments. Additionally, we assessed the number of projects renting to tenants other than active-duty servicemembers by obtaining information from each military department and found those department-level numbers sufficiently reliable to report the number of projects that were renting to these tenants. We reviewed quarterly project oversight reports to identify the options for addressing challenges, and DOD’s policy guidance on privatized housing responsibilities to determine the level of authority needed for the options. To determine the extent to which DOD has defined notification requirements for project changes and risk tolerances relative to privatized housing goals, we reviewed DOD guidance on oversight and management of privatized military housing, interviewed DOD and developer officials responsible for privatized housing, and reviewed DOD documentation. Specifically, we reviewed DOD housing policies and guidance, reviewed military department guidance on overseeing privatized housing, and interviewed military department officials familiar with notification processes for changes to privatized housing projects and approaches to managing risks to privatized housing projects. We also interviewed officials in the Office of Management and Budget familiar with privatized military housing. We compared DOD’s policy guidance on privatized housing responsibilities with standards related to internal communication in Standards for Internal Control in the Federal Government to determine the level of notification needed. We also compared the extent to which DOD has defined risk tolerance for privatized housing with federal internal control standards related to risk assessment. We conducted this performance audit from December 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following is a complete listing of the Department of Defense’s 82 privatized military housing projects, as of October 2017. The projects can consist of one or multiple installations. Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov. In addition to the contact named above, Kristy Williams (Assistant Director), Tracy Barnes, Ronnie Bergman, Timothy Carr, Kelly Friedman, Simon Hirschfeld, Terence Lam, Amie Lesser, Jeffrey Love, Richard Powelson, Nancy Santucci, Mike Silver, and Cheryl Weissman made key contributions to this report. Defense Infrastructure: Army Has a Process to Manage Litigation Costs for the Military Housing Privatization Initiative. GAO-14-327. Washington, D.C.: April 3, 2014. Military Housing: Information on the Privatization of Unaccompanied Personnel Housing. GAO-14-313. Washington, D.C.: March 18, 2014. Military Housing: Enhancements Needed to Housing Allowance Process and Information Sharing among Services. GAO-11-462. Washington, D.C.: May 16, 2011. Military Housing Privatization: DOD Faces New Challenges Due to Significant Growth at Some Installations and Recent Turmoil in the Financial Markets. GAO-09-352. Washington, D.C.: May 15, 2009. Military Housing: Management Issues Require Attention as the Privatization Program Matures. GAO-06-438. Washington, D.C.: April 28, 2006. Military Housing: Further Improvement Needed in Requirements Determination and Program Review. GAO-04-556. Washington, D.C.: May 19, 2004. Military Housing: Better Reporting Needed on the Status of the Privatization Program and the Costs of Its Consultants. GAO-04-111. Washington, D.C.: October 9, 2003. Military Housing: Opportunities That Should Be Explored to Improve Housing and Reduce Costs for Unmarried Junior Servicemembers. GAO-03-602. Washington, D.C.: June 10, 2003. Military Housing: Management Improvements Needed as the Pace of Privatization Quickens. GAO-02-624. Washington, D.C.: June 21, 2002. Military Housing: DOD Needs to Address Long-Standing Requirements Determination Problems. GAO-01-889. Washington, D.C.: August 3, 2001. Military Housing: Continued Concerns in Implementing the Privatization Initiative. GAO/NSIAD-00-71. Washington, D.C.: March 30, 2000. Military Housing: Privatization Off to a Slow Start and Continued Management Attention Needed. GAO/NSIAD-98-178. Washington, D.C.: July 17, 1998.", "summary": "In 1996 Congress provided DOD with authorities enabling it to obtain private-sector financing and management to repair, renovate, construct, and operate military housing. DOD has since privatized 99 percent of its domestic housing. The Senate Report accompanying a bill for the National Defense Authorization Act for 2017 included a provision that GAO review privatized military housing projects and the effect of recent changes in the basic allowance for housing on long-term project sustainability. This report examines the extent to which DOD has (1) assessed and reported the financial condition of each privatized housing project; (2) assessed the effects of recent reductions in the basic allowance for housing on privatized housing; and (3) defined notification requirements for project changes and risk tolerances relative to privatized housing goals. GAO reviewed policies, project oversight reports, and financial statements, and interviewed DOD officials and privatized housing developers. The Department of Defense (DOD) has regularly assessed the financial condition of its privatized housing projects; however, it has not used consistent measures or consistently assessed future sustainment (that is, the ability to maintain the housing in good condition), or issued required reports to Congress in a timely manner. Specifically: Some data used to report on privatized housing across the military services are not comparable. For example, there are inconsistencies among the projects in the measurements of current financial condition (for example, the ability to pay debts and maintain quality housing).These differences have not been identified in reports to Congress. The military departments vary in the extent to which they use measures of future sustainment, and information regarding the sustainment of each of the privatized housing projects has not been included in the reports to Congress. DOD's reporting to Congress has not been timely. DOD is statutorily required to report to Congress the financial condition of privatized housing projects on a semiannual basis, but it has not reported on any fiscal year since 2014. By taking steps to improve the consistency of the information provided and meet the reporting requirement, DOD would provide decision makers in Congress with useful, timely information about the financial condition of the privatized housing projects as they provide required oversight. DOD has not fully assessed the effects of reductions, relative to calculations of market rates for rent and utilities, in servicemembers' basic allowance for housing payments on the financial condition of its privatized housing projects. In August 2015, DOD required the military departments to review their privatized housing portfolios and outline any effects of the reductions. Each military department reported that the reductions would decrease cash flows to their long-term sustainment accounts. However, the reports did not specify the significance of the reductions on each project's future sustainment or identify specific actions to respond to shortfalls at individual projects. If DOD fully assesses the effects of the basic allowance for housing reductions on privatized housing and identifies actions to respond to any risks, DOD and Congress will be better informed to make decisions affecting the projects. DOD has not defined when project changes require prior notice to the Assistant Secretary of Defense for Energy, Installations, and Environment or its tolerance for risk relative to its goal of providing servicemembers with quality housing, including the risk from reduced sustainment funding. Specifically, the military departments had different understandings of when project changes, such as financial restructurings, required prior notice. Additionally, DOD has not required the military departments to define their risk tolerances—the acceptable level of variation in performance relative to the objectives—regarding the future sustainability of the projects. By clearly defining the conditions that require advance notification and developing risk tolerance levels, DOD would have consistent information that would improve its oversight of privatized housing and inform its response to any future sustainment challenges. GAO is making eight recommendations, including that DOD improve the consistency and timeliness of the information reported on the financial condition of its privatized housing projects, fully assess the effects of the reductions in basic allowance for housing on the projects, clarify when project changes require notice, and define tolerances for project risks. DOD concurred with each of our recommendations and identified actions it plans to take to implement them.", "document_type": "gao"}
{"report": "VA has faced a growing demand by veterans for its health care services, due in part to both service members returning from military operations in Afghanistan and Iraq and to the growing needs of an aging veteran population. As part of providing care to millions of veterans, VA is expected to provide a safe environment not only for the veterans, but also for staff and visitors at a diverse makeup of VHA facilities. Although many of these facilities face similar challenges, differences in facilities may require different levels and types of security. For example, medical centers with large numbers of staff, patients, and visitors may require more resources for securing the facility compared to smaller medical centers with fewer people frequenting the facility daily. Some medical centers are located in densely populated urban areas, while others are located in non-urban areas, and their security challenges may differ. For example, facilities in urban areas may be located near busy public roads, making it more difficult to implement physical security enhancements such as barriers or setbacks from the street. Furthermore, some VHA medical centers consist of a single hospital and others may include a campus with many buildings. According to VA officials, these differences can lead to unique security challenges. Medical centers offer different types of services, which can influence the types of security required. For example, officials from multiple medical centers we reviewed told us that emergency rooms and mental health areas experience high levels of security incidents, requiring additional security measures in these areas. VA specifies various physical security requirements for its medical centers. These include physical access control systems, security cameras, silent alarm distress signaling, and perimeter fencing. Furthermore, each VHA facility has its own police department to help deter, detect, defend against, and respond to security threats. See appendix II for more information regarding the roles and responsibilities of VA police departments. See figure 1 for a depiction of a medical center that consists of a campus and a variety of buildings and examples of the physical security elements deployed. To determine the specific countermeasures needed at each facility, VA has a two-part risk management process that begins with VA police assessing a facility’s security risk(s) by conducting “vulnerability assessments” biennially (see fig. 2). VA police at each of VHA’s medical centers report the findings, including recommended countermeasures, to medical center directors. These directors are responsible for developing an action plan in response to the assessments and making decisions about if and how recommended countermeasures will be addressed. Across VA, numerous entities at the headquarters, regional, and local level have some role in carrying out physical security responsibilities. Figure 3 provides an overview of VA components with physical security roles and responsibilities at VHA facilities. At the headquarters level, VA’s Office of Security and Law Enforcement (OSLE), located within VA’s Office of Operations, Security, and Preparedness, develops policies and standards for assessing physical security risks and providing physical security for facilities under VA’s custody and control, including VHA facilities used for providing healthcare services to veterans. VA organizes its system of care into regional networks called Veterans Integrated Service Networks (VISN). Each VISN is responsible for managing and overseeing medical centers within a defined geographic area. However, the primary operational responsibility for VA’s physical security program is at the medical centers themselves, where the medical center directors at each of VHA’s 170 medical centers are responsible for implementing OSLE’s policies and standards and overseeing VHA police activities. Police at each facility conduct the key activities involved in this program, including conducting risk assessments and identifying needed countermeasures. Beyond risk assessment, VA police have additional responsibilities for protecting the safety of medical centers. For information about their additional responsibilities and oversight of their operations, see appendix II. The ISC was established via Executive Order 12977 in 1995 to enhance security at federal facilities. Its mission is to develop standards and best practices. ISC’s Risk Management Process for Federal Facilities, among other things, includes standards for agencies’ facility risk assessment methodologies. This process can help agencies effectively prioritize efforts to protect their facilities. ISC’s process consists of six steps designed to help agencies identify the appropriate protective measures for their facilities, and to ensure their effectiveness. (see fig 4.) ISC’s Risk Management Process is applicable to all buildings and facilities in the United States occupied by federal employees for nonmilitary activities, including special-use facilities. Agencies may customize their implementation of elements of ISC’s standards, such as the countermeasures they determine are appropriate for their facilities or situations. Changes to these elements are to be made as a result of a risk-based analytical process. In December 2016, ISC issued its Agency and Facility Compliance Benchmarks to provide guidance to departments and agencies for ensuring compliance with ISC’s standards. VA’s risk management process does not fully reflect the standards established by ISC shown in figure 4. Although structured differently, we found that VA’s process includes some elements of ISC’s process but is missing other elements, gaps that could result in risks’ not being fully assessed and appropriate countermeasures not being identified. See figure 5. Determine facility security level: ISC’s standard requires that facility security levels (I-V) are to be based on an equal weighting of five factors (mission criticality, symbolism, facility population, facility size, and threats) and the consideration of “intangibles.” According to the ISC, each of these factors is important to quantifying a facility’s attractiveness as a target for adversarial acts and the severity of consequences should such an act occur. VA policy calls for three of the factors to be used in determining a facility’s risk level, which partially reflects the ISC Standard. VA policy indicates that VA police are to identify an “asset risk value” that reflects the expected effect a threat would have to the functioning of VHA facilities and the continued delivery of services. This score is used to calculate an “overall risk value.” The greater the threat a facility faces relative to its physical security posture and the greater the impact on VA operations, the higher the overall risk value. The determination of the overall risk value reflects the ISC’s prescribed use of facility security levels to identify a facility’s level of risk. VA’s policy does not articulate that factors used to determine the overall risk value be equally weighted, nor does it include facility population and facility size as factors. As a result, VA may not be considering all the relevant risk factors that make a facility a more or less desirable target for threats. Identify the facility’s baseline countermeasures: The ISC Standard calls for baseline countermeasures to vary based on facility’s risk level. For example, depending on a facility’s security level and the type of undesirable threat posed, the use of X-ray or magnetometers may be required to screen visitors. Alternatively, agencies are allowed to create templates by facility type. That is, an agency can identify the specific risks posed to particular facility types and customize different sets of countermeasures that can serve as the baseline for those facility types. VA has created templates based on facility types rather than varying its baseline countermeasures relative to a facility’s risk level, which is permissible under the ISC Standard. These templates outline the specific minimum countermeasures for different types of facilities or components of VHA facilities such as medical center pharmacies. VA’s minimum requirements for countermeasures in their facilities were designed to meet the needs of the medical center environment and clientele. Identify and assess risk: ISC has established 33 specific undesirable events that agencies are to use when assessing risks to facilities. Additionally, the ISC requires that an agency’s risk assessment methodology consider three factors—threat, vulnerability, and consequence—in examining these events in order to be credible. Agencies may customize the threats they assess to their specific situations, after having considered the 33 undesirable events. According to ISC officials, agencies are expected to periodically review their list of undesirable events as updates to the standards occur and document determinations and justifications for excluding any undesirable event. VA has identified 8 categories of threats that VA police are to review as part of vulnerability assessments, which includes consideration for threat, vulnerability, and consequence. These threat categories are: 1) assault, 2) physical threats of violence, 3) illegal weapons, 4) suicidal behavior, 5) theft/vandalism, 6) explosive devices, 7) mail-borne hazards, and 8) protection of hazardous materials and narcotics. This listing reflects the ISC Standard that agencies examine risks from undesirable events. However, VA cannot demonstrate how its categories relate to ISC’s 33 undesirable events. According to VA officials, VA originally selected its threat categories in 2001 and updated them in 2009 to the current 8 categories. They told us that officials at the time considered the ISC’s full list of undesirable events and that these eight threat categories were and remain the most prevalent in the health care’s operating environment that represents the majority of VHA facilities. However, officials could not provide documentation of how their eight categories related to ISC’s defined undesirable events and why certain undesirable events appear to be included and others excluded within VA’s policies pertaining to risk management. By not reviewing all the undesirable events identified by the ISC, VA may be overlooking some potential threats present at its facilities. Determine necessary countermeasures: ISC calls for agencies to determine if their baseline countermeasures or templates address a facility’s established risk level following an assessment. ISC has also clarified that its standards allow for countermeasures to be customized to specific facilities and situations. For instance, if the risks from undesirable events at a specific facility are found to be higher or lower than the level of protection afforded by the baseline set of countermeasures, the baseline countermeasures can be changed (up or down) to meet the level of assessed risk. VA policy calls for police at each of VHA’s medical centers to conduct vulnerability assessments biennially. As a part of these assessments, VA police are to recommend countermeasures that represent the best value in terms of providing protection against multiple threats given the existing level of defense or security equipment. This procedure reflects the ISC Standard that necessary countermeasures be identified at the facility level by an agency’s security organization. However, VA policy does not require recommended countermeasures to be related to the baselines established in the templates. This policy is inconsistent with the ISC Standard, which calls for countermeasures to be increased or decreased from the baseline to meet the level of assessed risk. This policy could leave staff, patients, and visitors, as well as property vulnerable to unmitigated risks. Implement countermeasures or accept unmitigated risk: The ISC Standard requires agencies to document decisions, in particular, any decision to reject or defer implementation of countermeasures due to cost (or other factors). The ISC Standard also requires agencies to document the acceptance of risk in these instances and outline alternative strategies considered or implemented, and opportunities in the future to implement needed countermeasures. The ISC Standard notes, in particular, that risks accepted at the facility level may have a bearing on agency-wide risk management efforts and therefore documentation of risk acceptance shall be provided to the headquarters security office. As previously discussed, medical center directors are to determine if and how to implement recommended countermeasures. This reflects the ISC Standard that information from assessments be forwarded to and used by decision makers. However, VA policy does not require the documentation of risk acceptance. That is, VA has no policy requiring its officials to document the rationale for rejected or deferred countermeasures, proposed alternative mitigations, and future planning. Without such a requirement, OSLE does not have full knowledge of the extent of risk acceptance that has occurred or what alternative countermeasures have been pursued. Measure performance: According to the ISC Standard, agencies are to assess and document the effectiveness of their security program through performance measurement and testing. Measures should be based on agency mission goals and objectives. As examples of performance measures, the ISC Standard suggests that agencies could track the number of countermeasures in use or the percentage of facility assessments completed. Moreover, the ISC Standard states that agency- level leadership must communicate its priority and commitment to performance measurement and ensure that the physical security performance measures enhance accountability, prioritize security needs, and justify investment decisions to maximize available resources. VA lacks documented policies or performance measures in place for assessing the effectiveness of its security program, which does not reflect the ISC Standard. VA policy outlines that local medical-facility directors at VHA facilities shall ensure that law enforcement activities (such as vulnerability assessments) are conducted in a legally and technically correct manner, but provides no guidance to ensure uniform measures and processes are being used to assess the performance of security programs. Without a policy that establishes uniform performance measures, VA cannot evaluate the effectiveness of physical security programs being locally implemented across its facilities. According to VA officials, VA’s risk management process was developed before the ISC’s standard for risk management processes was originally issued in 2013. VA officials we spoke with said as a member of ISC they utilize it as a forum for exchanging ideas on best practices and interpreting the standards but it is then up to each agency to determine how best to apply ISC standards. VA officials said that they are currently reexamining their policies but have not reached out to the ISC for assistance. ISC officials told us they are available to act as resource for any agency requesting aid in developing or reviewing risk management processes. VA cannot assure that the differences between its process and the ISC Standard are inconsequential to how it identifies and manages risk at local facilities and across its real property portfolio. According to the ISC Standard, not using an appropriate risk-management process can result in facilities that may either have (1) less protection than needed resulting in inadequate security or (2) more protection than needed resulting in an unnecessary use of resources. This situation might reduce the availability of resources that could be applied elsewhere. For example, although all VHA medical centers have the same mission, variations in location and physical configuration of a facility may create unique risks or risks that are relatively higher or lower in some cases than at other VHA facilities with the same mission. Agencies are expected to manage the effectiveness of program operations in achieving their missions. A range of federal standards and guidance assist agencies improve the accountability and effectiveness of their programs by helping agencies adapt to shifting environments, evolving demands, changing risks, and new priorities. For example, in July 2016, OMB updated guidance to establish management’s responsibilities for enterprise risk management (ERM). ERM is intended to yield an “enterprise-wide,” strategically aligned portfolio view of organizational challenges that provides better insight about how to most effectively prioritize resource allocations to ensure successful mission delivery. More specifically, the guidance discusses both internal control and ERM and how these fit help together to manage agency risks. Additionally, Standards for Internal Control in the Federal Government describes internal control as a process put in place by an entity’s oversight body, management, and other personnel, a process that provides reasonable assurance that objectives related to operations, compliance, and reporting will be achieved, and that serves as the first line of defense in safeguarding assets. Elements within these standards include: holding people accountable for their responsibilities, having effective operations that produce intended results in a manner that minimizes the waste of resources, and using quality information to achieve objectives. However, according to OSLE officials, OSLE does not assess program effectiveness, Instead, officials said that OSLE’s role in overseeing VHA’s risk management process is limited to reviewing the activities of each VHA medical center’s police department’s activities. Specifically, as it relates to the risk assessment process discussed earlier, the OSLE review focuses on whether (1) vulnerability assessments are completed within the required time frame (at least every 2 years); (2) annual physical security surveys that are used to inform the vulnerability assessments are completed and documented, and (3) intruder detection tests are completed. The OSLE inspectors may also spot-check specific areas to determine whether physical security measures that are in place meet VA’s standards. The areas checked are at their discretion and not identified in policy. Findings from these inspections, including any deficiencies identified in physical security, are reported to the medical center director for action. According to OSLE officials, they do not have any authority to ensure deficiencies are corrected and thus generally do not follow up on the status of their findings prior to the next inspection. Although the results of these inspections are stored by OSLE, we did not find that it uses them to identify trends in security deficiencies or track medical centers’ risk levels. OSLE does not assess the medical center’s compliance with VA’s overall risk management process, the extent to which recommended security measures have been implemented, or decisions not to implement security recommendations. Furthermore, OSLE does not collect data that would allow it to know what security deficiencies have been identified across all VHA facilities and the status of recommended countermeasures. Because VHA lacks an oversight strategy that includes these elements, it cannot begin to assess the effectiveness of security at its facilities. The lack of a system-wide oversight strategy is particularly troublesome given the authority and autonomy of medical center directors to determine the appropriate physical security measures needed for their facilities. At the nine medical centers, we found differences in how they implemented the risk management requirements and countermeasures and in how they collected security related data. Without a strategy for system-wide oversight, VA cannot ensure that local physical security-decisions are based on actual risk, are appropriate to protect the facility, and are effective, or whether the variations or the security impact of them are important. Implementing VA’s risk management requirements: A key element of internal controls is having a process in place to hold people accountable and ensure that the agencies’ policies are being implemented as intended. While OSLE’s inspections assess whether the vulnerability assessments were completed, we found that they did not assess the quality of those assessments or whether they aligned with VA’s policy requirements. Specifically, we found differences in how the assessments were done at the nine medical centers we reviewed and that some were not consistently reviewing the full range of threats required by VA policy. For example, none of the vulnerability assessments we reviewed included documentation that all eight of VA’s threat categories were reviewed, and at three locations, no threat categories were documented as reviewed in the assessments. Additionally, in some instances, VA police assessed different threat categories than the required 8 categories. OSLE officials told us that local VHA police have the discretion to review any threats they perceive relevant to their facility; however, they reported that this should be done in addition to the eight threat categories identified in VA guidance. In a decentralized environment such as VA’s, there may be greater risk that VA police will inconsistently apply VA’s risk management process. Furthermore, as discussed earlier, VA has not established performance measures, in accordance with ISC standards, for its risk management process. This, according to the ISC, would help to ensure accountability, prioritize security needs, and justify investment decisions to maximize available resources. Implementing countermeasures: Internal controls guidance speaks to having effective operations that produce intended results in a manner that minimizes the waste of resources. ERM also speaks to the effective and efficient use of resources. We found wide variation in the progress made in implementing countermeasures across the nine locations we reviewed. This variation happens, in part, because of competing priorities and lack of dedicated physical- security budgets. As a result, medical center directors make localized decisions about where they spend their resources. The police force is responsible for identifying appropriate countermeasures, but it is then up to the medical center directors and the managers in the areas for which deficiencies have been identified to implement the corrective actions. All of the medical center directors we interviewed reported weighing decisions to fund infrastructure deficiencies affecting healthcare delivery versus funding physical security projects. For example, one acting director told us that the center needs to repair a leaking roof in its hospice care unit. The director told us that this project, which uses funding from the same pool of money as physical security projects, will be prioritized because it directly impacts the quality of patient care. Officials at the sites we reviewed described varying levels of commitment from medical center directors to prioritize physical security infrastructure projects. Officials at one site said that they currently have difficulty getting the resources they request to implement security countermeasures, but that the same had not been the case at previous medical centers where they worked. Specifically, one official noted that it can be difficult to convince a medical center director to fund security measures designed to protect the site from situations that have not yet occurred, such as countermeasures to improve perimeter security or increase standoff distance for critical areas, which are important parts of prevention for active-shooter type scenarios. One of the key countermeasures medical centers use for physical security is the police force. We noted variations in police staffing at the nine locations we studied. VA policy sets a minimum level for the number of VA police officers who must be on patrol at any given time if certain conditions are met. Some local VHA officials we spoke with said they need to staff above this level because following the minimum staffing level can be problematic when officers are needed to respond to multiple incidents at the same time, such as escorting one patient and responding to a disruptive patient in a different wing of the hospital, officials stated. Officials noted that incidents can be the driving factor for changes. One site we reviewed increased their police presence in the emergency room, in response to a stabbing incident that occurred there. The critical role that police play at these medical centers can be adversely affected, however, because of challenges related to recruiting and retaining law enforcement personnel. All sites we reviewed reported hiring vacancies in their departments, and multiple sites discussed challenges in maintaining any police at the recommended level at their facilities, hindering the ability of the police to respond to multiple incidents. As further described in appendix II, each VHA medical center police force is managed locally, under the control of the medical center director. We also found varying levels of security provided by VA medical centers for their community based outpatient clinics. VA policy does not require a permanent security presence at the community-based outpatient clinics, and medical centers may rely on local police to respond to security incidents. However, some sites we reviewed use contract guards to provide a security presence at outpatient clinic locations, and one site reported completing an effort to staff VA police officers at each of the outpatient clinics under the medical center director’s authority. In the absence of system-wide oversight strategy, VA does not know if these variations in countermeasures are resulting in different levels of security, which may leave some facilities at risk and not be the most strategic use of resources at other facilities. Tracking security deficiencies: The availability of reliable data is essential for assessing the effectiveness of policies and programs and for allowing managers to make sound decisions. In the absence of a VHA- wide strategy and guidance about how to collect data or track deficiencies, individual sites have established their own processes for tracking the status of identified security deficiencies. For example, one of the medical centers in our review reported 15 deficiencies resulting from its assessment, whereas another medical center reported over 540 deficiencies. In reviewing the data further, we found that the numbers may be misleading as to the extent of security concerns, because of the different ways in which the findings were reported. For example, in reporting the results of inspections of information telecommunication and data closets, one location identified a recurring deficiency as one issue, where another location identified a similar deficiency in each closet they inspected resulting in over 200 identified deficiencies. A system-wide oversight strategy could help VA identify what information is needed to assess the effectiveness of its security programs and the impact of varying practices at its facilities. In the past, VA collected system wide information and tracked physical security across medical centers. When VA first started conducting vulnerability assessments in 2010, the assessments were done by a central team directed by OSLE, and the findings were tracked in a central database. In addition, a work group tracked how facilities were meeting VA’s standards and requirements and which countermeasures were getting prioritized and implemented. However, VA officials told us that this database crashed and that the information is no longer accessible. Moreover, the central team was dissolved, and medical center directors became fully responsible for ensuring that vulnerability assessments were conducted. The collection or assessment of data also became the responsibility of local medical centers. Although OSLE has no current plans to re-establish a database, in 2015 the Acting Deputy Under Secretary for Health for Operations Management identified a need for information about the level of security at its facilities. He has directed VISN management to identify gaps between its facilities and VA’s 2015 physical-security design standards. This effort is separate from VA’s risk management process but would be expected to identify some of the same security deficiencies. VISNS are expected to use these results to develop and prioritize projects to bring facilities in line with the current VA physical security standards. VA faces the challenge of providing secure, open, and welcoming medical facilities while providing medical care for nearly 9-million veterans annually. Having a process that incorporates ISC standards is critical to VA and ensuring that it is positioning itself to appropriately protect its facilities. However, until VA reviews its policies against the ISC standards to explore areas where it differs from these standards, it will not be able to ensure that its approach to risk management will yield and has yielded the appropriate security posture relative to the different risks faced by its diverse set of facilities. While not currently required, collaboration with the ISC would be helpful for the VA as it reexamines its risk management process. Additionally, the decentralized nature of VA’s organizational structure can help VHA tailor its programs to local situations. But without a system-wide oversight process, VA cannot assess the overall performance of its security program and whether medical centers are adequately protected. Thus, it may be missing opportunities to leverage resources nationally, or make informed, proactive policy decisions. We are making the following two recommendations to VA: The Secretary of VA should, in collaboration with ISC, review and revise VA’s risk management policies for VHA facilities to ensure VA incorporates ISC standards, as appropriate. (Recommendation 1) The Secretary of VA should develop an oversight strategy that allows VA to assess the effectiveness of risk management programs at VHA facilities system-wide. (Recommendation 2) We provided a draft of this report to the Department of Veterans Affairs (VA) and Department of Homeland Security (DHS) for comment. In written comments, which are reproduced in appendix III, VA agreed with our conclusions and concurred with our recommendations. In its comments, VA stated that it is in the process of updating its vulnerability assessment program and will work with the ISC to ensure VA is in compliance with applicable standards. VA also stated that it will work with the ISC as VA updates its risk management process to ensure it reflects the applicable standards established by the ISC. VA also intends to evaluate its current roles and responsibilities for assessing internal controls for risk management. VA estimates that it will complete these actions by January 2019. VA also provided a technical comment, which we have clarified in the report. DHS provided only technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of the Department of Veterans Affairs; the Secretary of the Department of Homeland Security; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The objectives of our report were to assess (1) the extent that VA’s policies for physical-security risk management reflect elements of federally established risk management standards and (2) VA’s oversight of risk management of physical security at VHA facilities. To help inform our research, we reviewed reports and documentation on physical security. For example, we reviewed prior reports from GAO on the security of federal government facilities and effective program management, as well as documentation from the Department of Homeland Security’s Interagency Security Committee (ISC), including physical security standards it has developed by the ISC. Our review focused on security at medical facilities under the custody control of VHA. To determine how VA policies for physical security risk management reflect key elements of federally established risk management standards, we assessed how VA’s methodologies reflect ISC’s risk management standards. This included reviewing the Risk Management Process for Federal Facilities (the ISC Standard) for assessing physical security and providing recommended countermeasures at federal facilities. We obtained and analyzed VA’s facility-security policies and procedures for a risk management methodology. According to the ISC Standard, agencies’ risk management methodologies should determine facility security level (FSL); identify facility’s baseline countermeasure; identify and assess risk; determine necessary countermeasures; implement protective measures and/or accept risk; and To assess VA’s oversight of risk management of physical security at VHA facilities, we identified and examined oversight and management mechanisms at the national, regional, and local levels, including reporting mechanisms that prioritize or track facility risks or the implementation of countermeasures at VHA facilities. We also reviewed Standards for Internal Control in the Federal Government because internal controls play a significant role in helping agencies achieve their mission related responsibilities using proper oversight mechanisms. To help determine if VA has established an environment in which it can ensure it is achieving its objectives, we reviewed agency documentation, such as vulnerability reports, police inspections, and the tracking reports related to security countermeasure recommendations at a non-generalizable sample of 9 VA medical centers. At these locations, we also conducted semi-structured interviews with facility management, VA police, and union representatives to identify the officials’ approach to physical security. Our findings from our review of the selected medical centers are not generalizable to all VHA facilities, but provide insight into and illustrative examples about risk- management and oversight methodologies at selected facilities. We selected these sites based on a mix of criteria that included: (1) geographic location, including medical centers in various Veteran Integrated Service Networks (VISN), and in cities of different sizes; (2) patient volume, including medical centers with a mix of different levels of patient population; (3) reported security incidents, including locations with high and low levels of reported security incidents ; and (4) patient to incident ratio, including medical centers with high and low ratios of incidents per patient, among other considerations. Based on the selection criteria listed above, the team selected the following nine medical center locations for our review: 1. Bedford, MA 2. Houston, TX 3. Greater Los Angeles 4. Bay Pines, FL 5. Sheridan, WY 6. Washington, D.C. 7. Puget Sound, WA 8. Orlando, FL 9. Louisville, KY Considering the extent to which VA uses its police force in its risk management approach, we also reviewed the lines of authority and oversight for VA police personnel. For example, we identified VA’s police- reporting structures and data-collecting efforts. We conducted this performance audit from September 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions, based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Department of Veterans Affairs (VA) police consist of over 4,000 uniformed police officers in 153 police units across the nation. Each VHA medical center has, in effect, its own police force. Aside from VA’s role in assessing physical security risks, VA police’s day- to-day role at VHA medical centers largely revolves around their law enforcement functions. Specifically, police officers patrol medical center campuses in an effort to deter, detect, defend, and respond to threats to patients and staff. Officers can make arrests for violations of federal law, can confiscate drugs, alcohol or other contraband, and can conduct investigations and collect basic evidence to the extent necessary to determine whether a crime has been committed. In addition, VA police officers might respond to incidents involving disruptive patient behavior— a continual concern for staff at VHA facilities, according to officials from the sites we spoke with. Staff can alert VA police to such incidents through means such as duress alarm systems at their facilities, and at some locations we spoke with, police respond as part of multi-disciplinary teams that try to de-escalate incidents involving disruptive patients. For example, police can be on the Disruptive Behavior Committees at their facilities. These multi-disciplinary committees review incidents involving disruptive patients and can suggest mitigations for future incidents including placing a “flag” on a patient’s record. These flags alert staff to prior concerns with a patient’s behavior and may include instructions for preventative measures such as a requiring the patient to check in with VA police when arriving on campus or requiring the patient to have a police escort while at the facility. VA police at some sites included in our review described challenges officers face when responding to incidents. For example, according to VA police officials, not all incidents involving disruptive patients constitute a violation of the law, limiting the ability of a police officer to intervene. Police officials spoke about trying to de-escalate situations first, before making arrests or physically intervening in an altercation. Furthermore, VA police officers are limited in their authority to engage in certain actions such as pursuing non-federal offenses, investigating crimes off-campus, and carrying service weapons off campus, officials told us. In addition, some VA police we spoke with stated that the Assistant U.S. Attorney’s office is reluctant to prosecute veterans, so the VA police do not have much leeway or leverage in detaining, arresting or pressing charges against patients or visitors. For example, according to VA police officials from one site we spoke with, the Assistant U.S. Attorney declined to prosecute a stabbing incident. As a result the police had to work with the local police to recharge the case and go through the state court for prosecution. As a part of the policing role, police have various reporting responsibilities. For example, police officers are expected to report their daily operational activity into a computerized database called the VA Police System that: (1) documents all criminal activity at the medical centers, (2) records daily incident reporting at each facility in a 24-hour period, and (3) lists all individuals who come into contact with VA police. VA police chiefs at each location use this data to generate a localized Unified Crime Report (UCR) for each campus. Each police chief maintains his or her own UCR, which can include all incidents reported by officers, from petty theft to homicide. VA police are to conduct predictive analysis of crime patterns and adjust patrols or investigative activities accordingly. In addition to recording all activities into the database, VA police are required to report certain incidents (including incidents that are likely to result in national media or congressional attention), to the VA’s Integrated Operations Center through a Serious Incident Report. Police officers are required to report serious incidents as soon as possible, but no later than 2 hours after awareness of the incident. Reportable incidents include, among others, sexual or aggravated assaults and VA police-involved shootings. The Integrated Operations Center staff provides reports and real-time information on these incidents to the Secretary and the VA administrators for their awareness; however, the staffers do not conduct their own investigations into incidents. Officials from the Office of Security and Law Enforcement told us that they have started pulling together internal, monthly rollups of law-enforcement-related serious incident reports. These reports are provided to the VA police chiefs to inform them of serious incidents and provide situational awareness on law enforcement and criminal activity happening at VHA medical centers across the nation. These reports contain law-enforcement sensitive information and are intended for internal VA police use for crime analysis specific to VA law enforcement matters affecting VA campuses and are not to be released to the public or individuals or organizations outside law enforcement. The Office of Security and Law Enforcement (OSLE) develops and issues policies and procedures for physical security, law enforcement, and training activities for VA police. In addition, OSLE and VISN police chiefs share responsibility for the police inspection program described in this report. OSLE does not provide any sort of centralized command over police chiefs or officers, however. This level of oversight and management of VHA police is done through the senior leadership at each local medical center. Police chiefs set the standard- operating procedures for their departments and report to an associate or assistant medical director, who provides daily supervision and approves their performance management appraisals. Medical center directors are ultimately responsible for the hiring of VA police officers and funding their training through VA’s Law Enforcement Training Center. If allegations of police misconduct arise, the local VA police departments, and specifically the police chiefs, are responsible for investigating these claims. According to officials we spoke with, there are multiple methods police misconduct can be reported: directly through the medical center; to the VA Inspector General complaint hotline, or, in some instances, directly to OSLE within VA’s headquarters. OSLE’s Criminal Investigation Division will generally investigate criminal allegations and if appropriate will refer issues to the US Attorney for action. OSLE does not have supervisory authority over the VA police departments, and so any administrative actions must be taken by the local medical center officials. In addition to the individual named above, Maria Edelstein (Assistant Director); William Carpluk; Raymond Griffith; Geoffrey Hamilton; Joshua Ormond; Amy Rosewarne; Friendly Vang-Johnson; and Elizabeth Wood made key contributions to this report.", "summary": "The Veterans Health Administration (VHA is responsible for providing a safe and secure, yet welcoming environment for staff, patients, and visitors at nearly 170 medical centers. These facilities have been the target of violence, threats, and other security-related incidents. Assessing and managing risks a critical element for ensuring adequate physical security at these facilities. GAO was asked to review VA's physical security risk-management policies and practices. This report: (1) assesses how VA's policies for risk management reflect prevailing standards, and (2) evaluates VA's oversight of risk management at VHA medical facilities. GAO compared VA policies to ISC standards; reviewed VA documents; interviewed VA and ISC officials; and assessed risk assessment activities at nine medical centers selected based on factors such as patient and security-incident data and geographical diversity. While not generalizable, these nine locations provide illustrative examples of how VA's policies are carried out. The Department of Veterans Affairs' (VA) risk management policies include some but not all of the elements of standards set by the Interagency Security Committee (ISC). ISC was established via executive order to develop security standards and best practices that federal agencies are to follow when developing and conducting risk assessments. As part of this process, VA's policy identifies minimum countermeasures as called for in ISC's standards. In other areas, VA policy only partially adheres or does not adhere to ISC's standards, for example: Of the five factors ISC calls for when calculating a facility's security level, VA considers three but does not consider a facility's population and size. VA policy does not include performance measures, such as the number of countermeasures in use or the percentage of facility assessments completed; this percentage is a key element of ISC's standards for assessing the effectiveness of an agency's security programs. Officials at VA said that its risk management program was developed prior to the ISC standards' being issued in 2013 and that it is up to each agency to determine how to best apply the standards. Nevertheless, VA officials said they are currently reexamining their policies. Until VA reviews its policies in accordance with ISC standards, its approach to risk management may not yield the appropriate security posture needed to adequately protect its medical centers. VA's oversight activities for risk management do not encompass key aspects of the Standards for Internal Control in the Federal Government and Circular A-123 from the Office of Management and Budget that require agencies to conduct oversight activities to ensure the accountability and effectiveness of agency programs. VA has an oversight process to ensure that biennial assessments of individual facilities' security are completed. However, VA: does not review the quality of medical centers' required risk assessments, does not identify whether countermeasures were implemented appropriately by the medical centers, and does not collect system-wide data to gain an understanding of physical security issues across medical centers. In the absence of a comprehensive VA-wide strategy or guidance that reflects these internal control standards, individual sites have established their own approaches to carrying out VA's risk management policy. For example, the nine sites GAO reviewed conducted their security assessments differently, and none of the assessments indicated that all of the threat categories in VA's policy were reviewed. The lack of a system-wide oversight strategy means that the differences among medical center approaches, along with the security effects of those different approaches, are unknown. Accordingly, VA does not know if its medical centers are adequately protected, and it may be missing opportunities to leverage resources nationally and make better informed, proactive policy decisions. GAO recommends that the Department of Veterans Affairs review and revise its risk management policies to reflect prevailing standards, and develop an oversight strategy to assess the effectiveness of risk management programs at VHA facilities. VA agreed with GAO's recommendations and identified steps to implement them.", "document_type": "gao"}
{"report": "This section provides information on (1) BLM headquarters, state, and field offices; (2) the lifecycle of oil and gas wells; (3) BLM’s bonding regulations; and (4) BLM’s 2012 well review and 2013 bond adequacy review policies. BLM is responsible for issuing leases for private entities to develop oil and gas resources on and under roughly 700-million acres of (1) BLM land, (2) other federal agencies’ land, and (3) private land where the federal government owns the mineral rights. According to BLM, approximately 32-million acres were leased for oil and gas operations at the end of fiscal year 2015. BLM also oversees oil and gas operations on 56-million acres of Indian lands. BLM administers its programs through its headquarters office in Washington, D.C.; 12 state offices; 38 district offices; and 127 field offices. Of these, 10 state offices and 33 field offices manage oil and gas programs, and these are located primarily in the Mountain West, the center of much of BLM’s oil and gas development. BLM headquarters develops guidance and regulations for the agency, and the state, district, and field offices manage and implement the agency’s programs. Because BLM has few acres of land in the eastern half of the United States, the Eastern States State Office, in Washington, D.C., is responsible for managing land in 31 states, and the remaining state offices generally conform to the boundaries of one or more states. Figure 1 shows the boundaries of the 12 BLM state offices. Once operators obtain federal oil and gas leases and drill wells, those wells can be actively producing, inactive, or reclaimed. An orphaned well is a well that BLM determined has no responsible or liable party and for which there is insufficient bond coverage for reclamation. This situation may occur, for example, when an operator has declared bankruptcy. Shut-in and temporarily abandoned wells are examples of types of inactive wells that can become orphaned. Shut-in wells are physically and mechanically capable of producing oil or gas in paying quantities or capable of service use. For example, an operator may put a well in shut- in status if it has not been connected to a sales line or the line is too far away and it is not economical to connect to at this time. Temporarily abandoned wells are another type of inactive well that is not physically or mechanically capable of producing oil or gas in paying quantities but that may have value for a future use. Figure 2 depicts the lifecycle of oil and gas wells overseen by BLM. The Mineral Leasing Act of 1920, as amended, requires that federal regulations ensure that an adequate bond is established before operators begin preparing land for drilling to ensure complete and timely reclamation of the land. Accordingly, BLM regulations require operators to submit a bond to ensure compliance with all of the terms and conditions of the lease, including, but not limited to paying royalties, plugging wells, and reclaiming disturbed land. BLM regulations generally require operators to have one of the following types of bond coverage: individual lease bonds, which cover all of an operator’s wells under one lease, and the minimum amount is set at $10,000; statewide bonds, which cover all of an operator’s leases in one state, and the minimum amount is set at $25,000; or nationwide bonds, which cover all of an operator’s leases in the United States, and the minimum amount is set at $150,000. BLM can accept two types of bonds: surety bonds and personal bonds. A surety bond is a third-party guarantee that an operator purchases from a private insurance company approved by the Department of the Treasury. The operator is required to pay a premium to the surety company to maintain the bond. These premiums can vary depending on various factors, including the amount of the bond and the assets and financial resources of the operator. If operators fail to reclaim the land they disturb, the surety company can either pay BLM the amount of the bond to help offset reclamation costs, or in some circumstances, BLM may allow the surety company to perform the required reclamation. A personal bond must be accompanied by one of the following financial instruments: certificates of deposit issued by a financial institution whose deposits are federally insured, granting the Secretary of the Interior authority to redeem it in case of default in the performance of the terms and conditions of the lease; cashier’s checks; negotiable Treasury securities, including U.S. Treasury notes or bonds, with conveyance to the Secretary of the Interior to sell the security in case of default in the performance of the lease’s terms and conditions; or irrevocable letters of credit that are issued for a specific term by a financial institution whose deposits are federally insured and meet certain conditions. If operators fail to reclaim the land they disturb, BLM will redeem the certificate of deposit, cash the check, sell the security, or make a demand on the letter of credit to pay the reclamation costs. In response to our previous recommendations that BLM develop a comprehensive strategy to improve monitoring agency performance in conducting well reviews and bond adequacy reviews, BLM issued a 2012 well review policy and a 2013 bond adequacy review policy. These policies contain directives for conducting reviews when wells and bonds meet certain criteria. The well review policy directs: that field office officials evaluate every shut-in well at least once every 5 years; that field office officials review all wells that have been inactive for 25 years or longer and that have no anticipated beneficial use by March 29, 2013; that if field office officials determine that there are wells that are not capable of producing oil or gas in paying quantities or have no beneficial use, officials are to send the operator a written order directing the operator to demonstrate that these wells are capable of producing oil or gas in paying quantities or have a future beneficial use, or the operator is to submit plans to reclaim the wells; that each state office submit to BLM headquarters a consolidated annual report recording well reviews; and that the annual report identify the leases that were reviewed and the wells that were reviewed on each lease, and describe what follow-up action the field office official conducting the review performed. The bond adequacy review policy directs: that field offices perform bond adequacy reviews on all bonds at least once every 5 years or whenever a bond review is warranted; that field offices verify and tie all federal wells to their appropriate bond number and enter bond information and bond adequacy review data into AFMSS; that field offices perform adequacy reviews on all bonds using specific instructions and a worksheet that assigns points for three risk factors: (1) status of wells covered by the bond (share of inactive wells, deep wells, and wells with marginal production); (2) operator-specific compliance history; and (3) reclamation stewardship diligence; that if the field office official performing the review determines that the bond amount is insufficient, the official is to take the necessary steps to determine the appropriate bond amount and increase the bond; that if the bond being reviewed is a statewide or nationwide bond, field offices are to review the wells within their field office jurisdiction; and that each BLM state office with an oil and gas program submit a semi- annual bond adequacy review report to BLM headquarters. BLM’s actual costs incurred to reclaim orphaned wells and potential liabilities have likely increased for fiscal years 2010 through 2017 based on our analysis of available information. Precisely how the agency’s actual reclamation costs and potential liabilities have changed is unclear because BLM does not systematically track them at an agency-wide level. BLM headquarters officials we interviewed told us that they did not have any information on actual costs incurred to reclaim orphaned wells and stated that BLM’s data systems were not designed to track incurred reclamation costs. In addition, AFMSS provides a snapshot of orphaned wells as identified at the time that the data are queried and does not provide data for prior time periods. Because BLM headquarters does not record actual reclamation costs incurred at an agency-wide level, we requested documentation for the reclamation costs incurred by 13 selected BLM field offices for fiscal years 2010 through July 2017. This documentation identified about $2.1 million in reclamation costs incurred over this period, or an average of about $267,600 per year by these 13 field offices. We estimate that total actual reclamation costs for all field offices are likely to be higher than this amount as other field offices may have also reclaimed orphaned wells during this period. In January 2010, we found that, for all field offices across the agency, BLM spent about $3.8 million from fiscal years 1988 through 2009, or an average of about $171,500 per year. Comparing the average costs incurred by the 13 selected field offices to the data we previously reported demonstrates that actual total reclamation costs incurred have likely increased since 2010. In addition to actual costs increasing, potential liabilities are also likely to have increased, though BLM does not systematically track information on potential liabilities that might result from an increase in the number of orphaned wells. Potential liabilities include costs that the agency may incur to reclaim wells that operators fail to reclaim. We believe these costs have also increased because the number of known orphaned wells on federal and Indian lands managed by BLM has increased. We identified changes in the number of known orphaned wells since we last reported on this matter in January 2010. In January 2010, we found that BLM had identified and was managing 144 orphaned wells. Over half of those 144 wells (75) were still identified in AFMSS as orphaned as of July 2017, and the total number of identified orphaned wells on federal lands had increased from 144 to 219. Also, BLM officials from the 13 selected field offices identified about $46.2 million in estimated potential reclamation costs associated with orphaned wells and inactive wells that officials deemed to be at risk of becoming orphaned. Also concerning potential liabilities, our analysis of AFMSS data and OGOR production data through September 2016 found that BLM managed about 15,600 inactive wells, of which over 1,000 were inactive for 25 years or more. In contrast, a document provided to us by BLM headquarters indicates 325 wells had been inactive for 25 years or more as of around 2017. This document summarizes data from AFMSS queries conducted by BLM field and state offices at various times from 2013 through 2014 and queries conducted at various times from 2016 through 2017. BLM officials told us that this difference could be because AFMSS reports sometimes return conflicting data since the reports draw from current and historical statuses of wells from both AFMSS and OGOR. We combined AFMSS and OGOR data to identify the number of inactive wells because although BLM records the total number of wells on federal lands over time—a rough indicator of how potential reclamation costs may change—the agency does not systematically record more specific types of wells that may be at higher risk of becoming orphaned, such as inactive wells or wells that have been inactive for 25 years or more. Moreover, we identified inconsistencies between the data and the document provided to us by BLM headquarters summarizing the data. For example, BLM’s summary document did not include one state office, even though the data include that state office as having two wells that were inactive for 25 years or more in 2014. BLM’s summary document states that there had been a reduction in the number of wells that were inactive for 25 years or more between the times of the two data queries. However, because BLM does not systematically track the number of inactive wells, in particular those wells that are at high risk of becoming orphaned, the agency does not know how its potential liabilities may be changing. These liabilities include wells inactive for 25 years or more. Although we were unable to determine the full extent of the increase in BLM’s potential liabilities because BLM does not have the data needed for such an analysis, other factors also suggest such an increase. For example, there has been an increase in oil and gas development on federal lands, and therefore, there is the potential for an increase in the total number of wells on federal lands at risk of becoming orphaned and needing to be reclaimed in the future. BLM’s portfolio of oil and gas wells on federal lands has changed over the years, based on overall trends in the oil and gas industry. According to AFMSS data provided by BLM, the total number of wells on federal lands that are capable of production increased along with rising oil and gas prices, from about 89,600 wells in fiscal year 2010 to peaking to about 94,800 wells in fiscal year 2014. As oil and gas prices declined starting in 2014, the total number of wells capable of production also declined to about 94,100 wells in fiscal year 2016. In addition, declining oil and gas prices (by nearly half from 2010 through 2017) have placed financial stress on oil and gas operators, thereby increasing bankruptcies and the risk of wells becoming orphaned. For example, coalbed methane—natural gas extracted from coal beds—was economical to produce when natural gas prices were higher and thousands of coalbed methane wells were drilled on federal lands. However, coalbed methane production has declined because the spread of shale gas production has driven down natural gas prices. Officials we interviewed in one BLM field office told us that the drop in natural gas prices contributed to an increasing number of bankruptcies for operators of coalbed methane wells. Our analysis of AFMSS data suggests that there were thousands of inactive coalbed methane wells as of October 2017. To the extent that market conditions remain unfavorable for coalbed methane production, BLM’s potential future reclamation costs may increase if any operators of these wells go bankrupt or are otherwise unwilling or unable to pay the full costs of reclamation, leaving these wells orphaned. According to federal internal control standards, management should use quality information, which should be complete, to achieve the entity’s objectives. However, BLM does not systematically or comprehensively track the agency’s actual costs incurred to reclaim orphaned wells and the information necessary to determine potential liabilities, including indicators of potential future reclamation costs, such as the number of inactive wells, orphaned wells, and estimates of reclamation costs for orphaned wells. BLM headquarters officials said that they sometimes check AFMSS to see how many orphaned wells there are, but without doing so systematically and recording the results of these checks, it is not possible to determine how the agency has been making progress in managing the number of orphaned wells. EPAct 2005 requires that the costs of reclaiming orphaned wells be recovered from persons or entities providing a bond or other financial assurance. Without systematically and comprehensively tracking actual reclamation costs incurred and the information necessary to determine potential liabilities including the numbers of orphaned wells and inactive wells over time, BLM cannot ensure that it has sufficient bond coverage or other financial assurances to minimize the need for taxpayers to pay for the costs of reclaiming orphaned wells. The extent to which BLM has implemented its well review policy and bond adequacy review policy is unclear. Specifically, we were unable to fully assess the extent to which BLM’s field and state offices have implemented directives included in these policies because of inconsistent well review information, inaccurate well and bond data in AFMSS, and inadequate monitoring of well and bond policies’ implementation. Inconsistent well review information. We were unable to fully assess the extent to which BLM implemented some directives in the well review policy because the well review information reported by field offices differed across the agency. For example, officials we interviewed at the 13 selected BLM field offices had different understandings of what specific actions constitute a well review, and therefore differed in their understanding of which wells were to be included in the annual reports for documenting well reviews. Specifically, officials from 11 out of 13 selected field offices told us that a well review consisted of actions—such as reviewing a well’s status, conducting a physical inspection, and providing additional notices or letters to the well operator when a well is inactive. Officials in 2 other field offices told us that while they conduct similar actions, they consider the sole action of correcting data on a well’s status to constitute a well review. For example, a BLM official told us that one reported well review was conducted on a well that had been reclaimed in 1986 but that was not noted in AFMSS. The official told us that following this well review, they corrected the well status in AFMSS and noted that this well should not have been on the list of wells to review. While correcting well data helps improve the accuracy of AFMSS, when some offices count such corrections as well reviews and others do not, this variance results in inconsistent information in BLM’s annual well review reports. Such inconsistencies in what counts as a well review may be the result of a lack of clarity in BLM’s well review policy that does not specify what constitutes a well review. Unlike the bond adequacy review policy, which provides instructions to field offices on how to conduct a bond adequacy review and directs field offices to use a specific worksheet to calculate bond adequacy, the well review policy does not contain specific instructions on what actions field offices are to take to conduct a well review, such as how to count reviews or report them. A January 2018 report by the Department of the Interior’s Office of Inspector General (OIG) similarly found that BLM’s well review policy does not specifically outline how to conduct and document reviews of shut-in wells (shut-in wells, as noted earlier, are inactive wells that are physically and mechanically capable of producing oil or gas in paying quantities or capable of service use). Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks; such activities include appropriate documentation of internal control in management directives, administrative policies, or operating manuals. Without developing and communicating specific instructions outlining what actions constitute a well review for annual- reporting purposes, BLM cannot have reasonable assurance that its field offices are conducting and reporting on well reviews in a consistent manner. Inaccurate well and bond data in AFMSS. Our ability to assess the extent to which BLM implemented its well review and bond adequacy review policies was impeded by inaccuracies in certain AFMSS data. BLM officials told us that some of the data in AFMSS on wells and bonds were not reliable. For example, BLM officials told us that there may be discrepancies between the bonds listed in AFMSS and the bonds listed in the Bond and Surety System, which is BLM’s official database for all oil and gas bonds. Officials told us that bonds may be missing from AFMSS because BLM field offices are responsible for manually entering the bond number from the Bond and Surety System into AFMSS. In addition, AFMSS data we reviewed contained other inaccuracies. Specifically, the data we reviewed contained future dates for when wells were completed, or capable of production, when some wells last changed statuses, and when some well reviews were reportedly conducted. BLM officials told us that AFMSS allows users to enter future dates, which can result in inaccurate data. Having inaccurate dates for wells’ statuses and wells’ reviews is problematic because it means it is not possible to assess whether reviews are being conducted as directed by BLM policy. For example, BLM’s well review policy directs field offices to review each shut-in well every 5 years. BLM’s performance against this directive cannot be assessed without reliable information on when wells become shut-in and when well reviews are conducted. In written responses to our request for information, BLM officials stated that AFMSS has some edit checks, but the accuracy of the data entered into AFMSS is dependent on field office officials responsible for data entry. BLM officials stated that AFMSS has some electronic safeguards, such as certain number fields only accepting numbers. In addition, AFMSS has dropdown menus and checkboxes to narrow the parameters of certain data being entered. However, there are no edit checks to prevent field offices from inputting future status dates. In addition, BLM’s data administration and management handbook establishes that data stewards are to, among other things, establish target quality levels, data quality plans (including audits and other quality assurance steps), and certify the quality of the data. BLM officials stated that they have national level AFMSS data stewards and information-technology data stewards. However, BLM officials stated that the agency has not defined AFMSS target quality levels and did not provide any data quality plans. Officials stated that BLM headquarters conducts annual data reviews and will periodically review sample well files to detect data inconsistencies and errors. In addition, BLM officials stated that field offices are responsible for certifying the accuracy of the data they enter into AFMSS, and BLM headquarters is responsible for providing oversight. However, BLM headquarters officials did not provide documentation of any data certifications or data reviews, raising concerns over the extent of this oversight. Under federal standards for internal control, management should design control activities, including control activities used in information processing, to achieve objectives and respond to risks. Examples of such control activities include: conducting edit checks of data entered, accounting for transactions in numerical sequences, and comparing file totals with control accounts. Without taking steps to improve AFMSS data quality, such as by conducting more edit checks and having data stewards certify the quality of the data, BLM cannot have reasonable assurance that management has the accurate information it needs to track whether field offices are conducting well and bond adequacy reviews as intended. In its January 2018 report, the OIG found similar issues related to the accuracy of AFMSS data. Specifically, the OIG found that AFMSS data were unreliable due to inaccurate well status information. The OIG also found that BLM officials update AFMSS manually during a well review or as needed, as opposed to automating the data, meaning that information about the status of individual wells in AFMSS and data used for BLM’s annual well report are not timely. The OIG recommended that BLM develop and implement a quality control process to identify inaccurate or incomplete data in AFMSS. BLM concurred with this recommendation. Inadequate monitoring of well and bond policies’ implementation. BLM headquarters has taken some actions to monitor the implementation of its well and bond adequacy review policies across the agency, but its efforts have been limited, and the agency cannot ensure that its policy directives have been fully implemented. For example, BLM headquarters officials told us that headquarters relies on national well review and bond adequacy review reports to monitor the extent to which field offices are conducting well and bond adequacy reviews. These well and bond adequacy review reports provide some information on how BLM field offices conducted their reviews during a given year, but the reports as previously mentioned above have data limitations and do not consistently record a field office’s progress in meeting the policies overall. For example, annual well review reports list the wells field offices reviewed in a given year, but do not compare this statistic to a list of the wells that each field office should have reviewed. Similarly, field offices’ bond adequacy review reports list the bonds that the field offices reviewed in a given year. However, the reports do not compare the bonds reviewed to a list of bonds each field office should have reviewed. In addition, our analysis of 58 selected bonds reported as reviewed across the 13 selected field offices found that 4 bonds—about 7 percent—were not reviewed, even though field offices had reported that they had conducted the reviews. The bond adequacy review policy directs field offices to review all bonds once every 5 years or whenever a bond review is warranted. Therefore, the bond adequacy review reports on their own provide insufficient information for BLM headquarters to monitor progress about whether field offices are fully implementing the directive. We also identified discrepancies between the annual well review and semi-annual bond adequacy review reports that state offices submitted to BLM headquarters and the information in headquarters’ national summary, which consolidates the state office information. These discrepancies limit the usefulness of the national summary for monitoring the extent to which field offices are conducting well and bond adequacy reviews as directed by the policies. For example, 3 out of 10 state offices reported a different number of bond adequacy reviews completed in their fiscal year 2016 state reports than what was reported in BLM’s fiscal year 2016 national report. Similarly, 6 out of 9 state offices reported a different number of completed well reviews in their fiscal year 2016 state report than what was reported in BLM’s fiscal year 2016 national report. Similarly, the OIG’s January 2018 report found that BLM can only report its progress in reviewing wells that have been inactive for 25 years or more by using field office spreadsheets, coupled with AFMSS data. The report stated that using spreadsheets and AFMSS data have made it difficult, however, for BLM to demonstrate proper oversight. BLM’s headquarters officials had to ask state office officials how many wells had been reviewed and then had to summarize those results in a spreadsheet. The OIG recommended that BLM monitor and track reviews of shut-in wells in a management system. BLM concurred and stated that AFMSS and an update to AFMSS that is under development were the appropriate databases for monitoring and tracking well reviews. Overall, we found that BLM’s current approach to monitoring the agency’s progress in implementing its well and bond adequacy review policies has been limited. We reviewed leading practices for monitoring the implementation of agency policies. These practices call for, among other things: (1) periodically collecting and analyzing data on performance indicators, (2) establishing procedures for ensuring the quality of data on performance indicators, (3) documenting that monitoring plans were executed, and (4) considering performance information in making management decisions. Without taking actions to strengthen its approach to monitoring, such as collecting and analyzing data on performance indicators and ensuring the quality of those data, BLM’s ability to assess the extent to which field offices are reviewing all inactive wells and determining the adequacy of all bonds is limited. According to BLM officials and stakeholders we interviewed, BLM faces several challenges in managing its potential liabilities. In particular, BLM officials and stakeholders told us that one challenge in managing BLM’s potential liabilities was identifying and managing shut-in wells and preventing them from becoming orphaned. Another challenge identified was limited resources and competing priorities in reclaiming orphaned wells. Other challenges to managing BLM’s potential liabilities include difficulties in reviewing nationwide bonds, minimum bond amounts, and operators’ unresponsiveness. BLM officials from 6 of the 20 BLM offices—including headquarters and selected state and field offices—and 2 of the 10 stakeholders told us that one of the challenges that BLM faces in managing its potential liabilities is identifying and managing shut-in wells. As previously mentioned, shut-in wells are inactive wells that are physically and mechanically capable of producing oil or gas in paying quantities or capable of service use. Since shut-in wells may become orphaned and therefore involve BLM resources to reclaim, identifying and managing them is a way for BLM to manage its potential liabilities. BLM’s 2012 well review policy directs field offices to review all shut-in wells on federal and Indian lands every 5 years and to ensure that shut-in wells no longer capable of production are reclaimed. However, operators are generally not required to notify BLM when they place a well in shut-in status. As a result, officials noted that it is difficult for field offices to identify all shut-in wells in order to review them. Officials from one field office told us that identifying when a well becomes shut-in is challenging unless inspectors are able to physically find the well. Even when wells have been identified to BLM as shut-in, some BLM officials at selected field offices said that they have few policy tools to manage shut-in wells. In reviewing the well review policy, we found that it contains certain directives for wells that are temporarily abandoned, including that an operator is to conduct well integrity testing prior to placing a well in temporarily abandoned status and a 30-day limit for how long operators can place wells in temporarily abandoned status without receiving BLM approval. However, the policy contains no similar directives related to testing or limited time frames for placing wells in shut- in status. As a result, BLM may be unable to identify and reduce its inventory of shut-in wells, including wells that have been in shut-in status for an extended period of time. In its January 2018 report, the OIG similarly found that the well review policy does not provide field offices the leverage to make an operator conduct integrity testing since the policy does not have instructions on the method, frequency, and way to proceed with a notice or order. Without having these test results available to them, the report found that BLM staff cannot be certain that an inactive well is environmentally sound and capable of production. The report recommended that BLM develop and implement guidance or update the well review policy to require integrity testing on inactive wells at specific periods. Strengthening the identification and management of shut-in wells could be particularly helpful in managing BLM’s potential liabilities because such wells have represented a large portion of orphaned wells. According to our analysis of AFMSS data, 138 of the 242 orphaned wells BLM manages were in shut-in status prior to becoming orphaned. Moreover, one of these wells had been in shut-in status since 1926. BLM’s Colorado and New Mexico state offices have taken steps to address the challenges associated with shut-in wells becoming orphaned. For example, in September 2016, BLM’s New Mexico state office issued a policy that directed operators to obtain BLM’s approval in order to place a well in shut-in status for more than 90 days and directed the operator to conduct periodic testing to verify that wells that have been inactive for more than 12 consecutive months remain capable of production. Under federal standards for internal control, management should design control activities—such as by clearly documenting internal control in management directives, administrative policies, or operating manuals—to achieve objectives and respond to risks. Without providing greater specificity in current policy or new supplemental guidance to all BLM field offices on how to identify and manage shut-in wells, the agency is at an increased risk of having unidentified shut-in wells, and wells that remain in shut-in status for extended periods of time, leading to increased potential liabilities if such wells become orphaned. BLM officials and stakeholders told us that one of the challenges BLM faces in managing its potential liabilities is limited resources, including staff and funding, and competing priorities. Specifically, officials from 14 of the 20 BLM offices and 3 of the 10 stakeholders told us that BLM field offices have limited staff and therefore prioritize other work, such as processing drilling permits, over conducting well and bond adequacy reviews, which are used to manage potential liabilities. BLM prioritizes processing drilling permits over well and bond adequacy reviews in part because the agency is required by statute to process drilling permits within 30 days of receiving a complete application. BLM headquarters officials told us that processing permits is the agency’s highest priority activity and that they ask field offices for monthly progress reports with projected goals for processing permits within the next 90 days, and compare the offices’ accomplishments to agency targets. BLM headquarters officials told us that prioritizing processing permits increases the workload at the national, state-office, and field-office levels. Officials from one BLM state office told us that other challenges to managing its potential liabilities are staffing limitations and the time it takes to conduct bond adequacy reviews. These state office officials told us that bond reviews can take a long time to complete because some bonds are associated with several hundred wells. Similarly, officials from one field office stated that conducting bond adequacy reviews was time consuming and that they had only one staff member dedicated to conducting the reviews. In 2011, we found that a lack of resources and higher agency priorities were the primary reasons for why many BLM field office officials we interviewed had not conducted well and bond adequacy reviews or did not know the number of reviews they had conducted. In addition, officials from 6 of the 20 BLM offices and 1 stakeholder told us that another challenge BLM faces in managing its potential liabilities is prioritizing funding to reclaim orphaned wells. For example, an official from one state office told us that securing funding to reclaim orphaned wells is a challenge because BLM does not set aside funding to pay for reclamation costs. BLM officials in one field office told us that they had not received funding from BLM headquarters specifically for reclamation in over 10 years, despite managing a growing number of orphaned wells. An official from this field office told us that without dedicated funds from BLM headquarters for this purpose, the field office was unable to reclaim the orphaned wells. In addition, officials from another field office told us that time frames for competing and awarding contracts to perform reclamation work do not coincide with securing funding from BLM headquarters, and that funding has to be obligated by the end of the fiscal year. These officials explained that in one instance, by the time they obtained funding for well reclamation, it was too late to issue a contract for the work. EPAct 2005 requires the establishment of a program to reclaim orphaned, abandoned, or idled oil and gas wells on federal lands. As part of this program, BLM conducts well reviews and bond adequacy reviews. As discussed above, about half of the orphaned wells BLM identified in 2009 were not reclaimed and remained orphaned in 2017, and BLM officials cited funding as the issue. The Project Management Institute, Inc. has established a standard on program management. Under the standard, program resource management planning ensures that all required resources are made available for managers to enable the delivery of benefits for a program. Resource management planning involves identifying existing resources and the need for additional resources. The program manager analyzes the availability of each resource, in terms of both capacity and capability, and determines how these resources will be allocated to avoid over-commitment or inadequate support. Such planning, through a resource management plan, forecasts the expected resources across a program to allow the program manager to identify potential resource shortfalls or conflicts over the use of scarce or constrained resources. The plan is also to describe guidelines for making program resource prioritization decisions and resolving resource conflicts. Based on our discussions with BLM headquarters and field office officials, BLM does not have a resource management plan. For example, when we discussed resources for reclaiming orphaned wells with BLM headquarters officials, they told us that some BLM offices obtain funding from state funds established for reclaiming orphaned wells, but not all offices have been able to access such funds. If unable to secure funding from the states, offices may request funding from BLM headquarters for reclamation, and as mentioned previously, occasionally try to use unexpended funds left at the end of a fiscal year. In its comments on the draft report, Interior noted that BLM engages in annual work planning processes designed to facilitate agency resource allocation decisions. However, BLM overall does not have information on the federal resources needed to reclaim known orphaned wells. Without developing a resource management plan addressing resources needed for conducting well and bond adequacy reviews and reclaiming orphaned wells, BLM cannot have reasonable assurance that it is achieving the program’s objectives. Agency officials and stakeholders cited additional challenges including BLM’s ability to review nationwide bonds, minimum bond amounts, and operator unresponsiveness. Reviewing nationwide bonds. Officials from 10 of the 20 BLM offices told us that they encountered challenges reviewing nationwide bonds because of a lack of coordination between BLM offices. The purpose section of the bond adequacy review policy states that field offices are to review bonds to determine whether the bond amount appropriately reflects the level of potential risk posed by the operator. However, the bond adequacy review policy also states in a directive that if the bond being reviewed is a nationwide or statewide bond, field offices are only to review the wells within their field office. Officials from one field office told us that without insights into an operator’s activities in the jurisdictions of other field offices, bond adequacy reviews do not cover when an operator has been cited with an Incident of Noncompliance or the number of inactive wells the operator may have in other jurisdictions. These field office officials said that it is important to communicate and coordinate with other field offices when there is a need to require an operator to secure a larger bond. For example, to require a well operator to increase the amount of its bond, BLM must show that the operator meets the point system’s threshold in the bond adequacy review’s calculation worksheet. Officials in one state office told us that under a nationwide or statewide bond, an operator might not reach the agency’s threshold for requiring a bond increase based on an operator’s activities in the jurisdiction of one field office but may meet the threshold if BLM’s bond adequacy review assessed all of the operator’s operations within a state or across the nation. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal controls, and having the documentation appear in management directives, administrative policies, or operating manuals. While BLM has documented its policy, the purpose of the policy to ensure that the bond amount appropriately reflects the level of potential risk posed by the operator conflicts with a directive of the policy that offices are only to review wells within their own jurisdiction. Officials told us that BLM is currently revising the bond adequacy review policy. As the agency revises its bond adequacy review policy, BLM has the opportunity to ensure that bond adequacy reviews reflect the overall risk presented by operators. By having the policy ensure that the reviews of nationwide and statewide bonds account for overall operator risk, BLM can have better assurance that it will reduce the likelihood of using taxpayer funds to pay to reclaim orphaned wells. Minimum bond amounts. Officials from 9 of the 20 BLM offices and 1 stakeholder told us that BLM faces challenges related to federal minimum bond amounts that in their opinion are too low. For example, officials from one BLM state office expressed concerns about operators with multiple wells covered by the minimum bond amounts, which the officials believed to be inadequate to cover total potential reclamation costs. Minimum bond amounts were set in the 1950s and 1960s and have not been updated to keep up with inflation. Specifically, the $10,000 minimum for individual bonds was established in 1960, and the bond minimums for statewide bonds ($25,000) and nationwide bonds ($150,000) were established in 1951. If adjusted to 2016 dollars, these amounts would be $63,613 for an individual bond, $189,825 for a statewide bond, and $1,138,952 for a nationwide bond. According to BLM headquarters officials, the agency does not require that operators provide full liability bonds. These officials told us that they believed that most operators would not be able to remain in business if bond amounts were based on estimated total reclamation costs. Operators’ unresponsiveness. Officials from 8 of the 20 BLM offices and 2 stakeholders told us that BLM faces challenges dealing with unresponsive operators when requiring operators to increase bond amounts or issuing Incidents of Noncompliance. For example, officials from one BLM state office told us that operators do not always respond to letters informing them of a requirement to secure an increase in their bond. Officials from another BLM state office told us that the agency can place operators on a noncompliance list prohibiting them from holding leases or conducting operations on federal lands. However, these officials also said that they have seen operators ask relatives to obtain leases in order to circumvent such prohibitions. Officials from one field office told us of one particular instance in which BLM had spent over 7 years attempting to enforce the requirements for reclamation activities. BLM had issued an Incident of Noncompliance, but the operator did not respond and instead reorganized as a separate corporate entity. Subsequently, the operator went bankrupt, requiring BLM to restart the communications process from the beginning with the newly formed entity. BLM officials told us that the agency has very little leverage when companies change their name or reorganize in an attempt to evade performing required reclamation activities. BLM headquarters officials told us that working with operators was a delicate balance, especially when oil and gas prices are down, and BLM field offices would benefit from conducting periodic operator outreach to have an open dialogue with the operators. BLM is responsible for overseeing oil and gas development on federal lands and for balancing the sometimes competing priorities of encouraging oil and gas development, while ensuring that when wells run dry, operators return well sites to their original natural conditions. Federal laws, regulations, and BLM’s own policies call for the agency to take various actions to manage its potential oil and gas well liabilities and reclaim orphaned wells. However, BLM does not systematically or comprehensively track how much the agency has spent to reclaim orphaned wells or information, such as the number of orphaned wells and inactive wells over time, necessary to determine the agency’s potential liabilities. Without systematically or comprehensively tracking information on BLM’s well reclamation costs and indicators of potential future costs, its ability to monitor its progress and plan for its potential liabilities associated with orphaned wells is limited. In addition, implementation of BLM’s well and bond adequacy review policies by the field offices is hampered by officials having different understandings of what constitutes a well review. This variance is because BLM’s well review policy does not outline specific instructions on what actions field offices should take when conducting a well review. This situation results in inconsistent ways of conducting well reviews and annually reporting on them. Without developing and communicating specific instructions outlining what actions constitute a well review for annual-reporting purposes, BLM cannot have reasonable assurance that its field offices are conducting and reporting on well reviews in a consistent manner. Further, inaccuracies in certain AFMSS data, such as the dates that wells last changed statuses, raise questions about the quality of data BLM headquarters uses to determine the extent to which its offices are implementing the well review and bond adequacy review policies. BLM has not taken steps to improve AFMSS’ data quality such as through the use of additional edit checks to prevent field offices from inputting erroneous data or having data stewards certify the quality of the data. Without taking such steps, BLM cannot have reasonable assurance that management has accurate information it needs to track whether field offices are conducting well and bond adequacy reviews as intended. In addition, BLM’s approach to monitoring the implementation of its well and bond adequacy review policies is limited because the reports the agency uses to monitor implementation provide insufficient and at times conflicting information. Without taking actions to strengthen its approach to monitoring, such as collecting and analyzing data on performance indicators and ensuring the quality of those data, BLM’s ability to assess the extent to which field offices are reviewing all inactive wells and determining the adequacy of all bonds will continue to be limited. BLM officials and stakeholders identified several challenges that BLM faces in managing its potential oil and gas well liabilities, including identifying and managing certain inactive wells—specifically wells that are in shut-in status and that have the potential to become orphaned. This problem is because operators are generally not required to notify BLM when they place a well in shut-in status. Without providing greater specificity in current policy or supplemental guidance to all field offices, the federal government may face increased potential liabilities if shut-in wells become orphaned. In addition, BLM faces challenges related to limited resources and competing priorities, such as not setting aside funding to pay for reclaiming orphaned wells. Without developing a resource management plan addressing resources needed for conducting well and bond adequacy reviews and reclaiming orphaned wells, BLM cannot have reasonable assurance that it is achieving the program’s objectives. BLM also faces challenges related to conducting nationwide and statewide bond adequacy reviews because the bond adequacy review policy overall contains conflicting information on how field offices are to review bonds’ adequacy. BLM is currently revising the bond adequacy review policy and has an opportunity to ensure that the reviews of nationwide and statewide bonds reflect operators’ overall risks. We are making the following seven recommendations to BLM: The Director of BLM should systematically and comprehensively track the actual costs BLM incurs when reclaiming orphaned wells and the information, including the number of orphaned wells and inactive wells over time, necessary to determine the agency’s potential liabilities. (Recommendation 1) The Director of BLM should develop and communicate specific instructions on what actions constitute a well review for annual-reporting purposes. (Recommendation 2) The Director of BLM should take steps to improve AFMSS data quality, for example, by conducting more edit checks and by having data stewards certify the quality of the data. (Recommendation 3) The Director of BLM should strengthen its approach to monitoring field offices’ implementation of the well review and bond adequacy review policies, such as by collecting and analyzing data on performance indicators and ensuring the quality of those data. (Recommendation 4) The Director of BLM should provide greater specificity in current policy or supplemental guidance to all BLM field offices on how to identify and manage all shut-in wells. (Recommendation 5) The Director of BLM should develop a resource management plan addressing resources needed for conducting well and bond adequacy reviews and reclaiming orphaned wells. (Recommendation 6) The Director of BLM should, in revising the bond adequacy review policy, ensure that the reviews of nationwide and statewide bonds reflect the overall risk presented by operators. (Recommendation 7) We provided a draft of this report to the Department of the Interior for review and comment. In its comments, reproduced in appendix II, Interior generally concurred with our recommendations. Interior stated that, following GAO’s 2011 report on potential oil and gas well liabilities, BLM implemented comprehensive policies to better manage and minimize the risks of idle and orphaned wells on federal and Indian lands. Interior agreed that there are areas where BLM can improve the accuracy of its data and further reduce the risks associated with idle and orphaned wells. Interior indicated that it will update and improve its existing policies and guidance consistent with the findings and recommendations in our report. In response to our sixth recommendation—that BLM develop a resource management plan addressing resources needed for conducting well and bond adequacy reviews and reclaiming orphaned wells—Interior stated that BLM conducts annual work planning processes which facilitate decisions regarding the allocation of agency resources and requested additional information clarifying how our recommendation fits into or differs from these. We expanded our description of resource management planning and added language regarding BLM’s annual work planning processes to the report. However, we were not able to review the scope or adequacy of BLM’s annual work planning processes as they relate to resource planning for well and bond reviews and reclaiming orphaned wells for this report. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) how BLM’s actual costs incurred to reclaim orphaned wells and potential oil and gas well liabilities have changed, if at all, for fiscal years 2010 through 2017; (2) the extent to which BLM has implemented its 2012 well review and 2013 bond adequacy review policies; and (3) BLM officials’ and stakeholders’ views on what challenges, if any, BLM faces in managing its potential liabilities. To examine how BLM’s actual reclamation costs incurred and potential oil and gas well liabilities have changed, we analyzed data in BLM’s Automated Fluid Minerals Support System (AFMSS) on oil and gas wells on federal and Indian lands, including inactive wells—which represent potential liabilities. We reviewed documentation provided by BLM and compared BLM’s policies and procedures on recording information on actual costs incurred to reclaim orphaned wells and potential liabilities against the information and communication standard outlined in Standards for Internal Control in the Federal Government. We selected and interviewed officials from 13 BLM field offices because, according to fiscal year 2016 data from the Department of the Interior’s Office of Natural Resources Revenue (ONRR) Oil and Gas Operations Report (OGOR) data system we analyzed, these offices were responsible for about 80 percent of all oil and gas wells managed by BLM. In addition, we interviewed officials from the 6 BLM state offices associated with the 13 selected field offices (see table 1). Findings from selected offices cannot be generalized to those we did not include in our review. However, because AFMSS does not contain information on actual costs incurred to reclaim orphaned wells, we obtained documentation of the actual reclamation costs that 13 selected BLM field offices incurred for fiscal years 2010 through July 2017. To analyze these costs, we reviewed purchase orders, invoices, and other documentation for actual reclamation work performed. We also obtained documentation, including spreadsheets with estimated potential reclamation costs that these 13 selected field offices faced as of July 2017. To assess the reasonableness of estimated reclamation costs, we reviewed estimates provided by officials from the selected field offices and compared those to historical actual costs that we previously reported in January 2010. We determined the overall estimated reclamation costs were sufficiently reasonable for providing a sense of the general magnitude of potential costs, though we did not assess the underlying inputs or assumptions used. The information we received is not generalizable to reclamation costs for other BLM offices that we did not review. We also analyzed AFMSS data on the number of wells capable of production on federal lands from fiscal years 2010 to 2016. The AFMSS database provides a snapshot of the time that the data are queried, and so does not include historical data over time. As such, to examine the number of inactive wells on federal and Indian lands and how long these have been inactive, we combined AFMSS data with data from the OGOR data system through September 2016. The Department of the Interior requires monthly OGORs from operators, which document and record the volume of oil and gas produced from wells on federal and Indian lands. From AFMSS, we identified the appropriate population of wells by selecting wells only located on federal and Indian lands, and excluded wells that were on state or private lands. Because we did not find data in AFMSS on how long a well had been in its last recorded status to be reliable, we analyzed production records from the OGOR data system. We also excluded data on wells that were in statuses in which there was no associated potential liability, such as wells pending an application for permit to drill. For each reporting date through September 2016, we aggregated data from multiple well completions to the 10-digit unique well identifier level. We then matched the unique well identifiers in AFMSS to those listed in the OGOR data system to enumerate inactive wells by duration of inactivity. For each reporting date, we designated wells with at least one completion showing non-zero production volumes or in drilling or monitoring status in the OGOR data system as active. We also designated a well as active at a certain date if AFMSS data indicated any of its completions were completed on that date. Otherwise we deemed wells where all completions had zero production reporting on a date as inactive for the corresponding period. In some cases, (i) no OGOR records existed with non-zero production volumes or drilling or monitoring well status and (ii) no AFMSS well completion date was provided, and so we calculated inactivity by using the earliest record date for that well in the OGOR data set. We discussed our methodology for calculating the number of wells with BLM officials. We compared the number of inactive wells from our analysis to those reported in BLM national and state reports to identify data inconsistencies. In addition, we analyzed AFMSS reports, as of July 2017, to analyze data on the number of orphaned wells. To assess the reliability of OGOR and AFMSS data, we reviewed agency documents, met with relevant agency officials, and performed electronic testing by verifying, for example, missing or out-of-range data values. We found the data for the number of inactive wells and how long they have been inactive as well as the data for the number of wells BLM has identified as orphaned to be sufficiently reliable for our purposes. To determine the extent to which BLM has implemented its 2012 and 2013 policies for conducting well reviews and bond adequacy reviews, we reviewed applicable laws and analyzed the well review and bond adequacy review policies. We reviewed information contained in BLM’s well review and bond adequacy review reports for fiscal year 2016 as well as data generated through AFMSS on bonds and wells as of October 2017. We were unable to fully assess BLM’s performance against the directives in the agency’s 2012 well review and 2013 bond adequacy review policies due to limited agency data and documentation as discussed in the report. Specifically, we identified data accuracy and consistency concerns with some of the data elements in the agency’s well review and bond adequacy review reports as well as some AFMSS data on wells and bonds, which we discuss in this report. We performed electronic testing by verifying out-of-range values, such as dates of well reviews conducted that were listed as being in the future. We also interviewed officials from BLM headquarters, the 13 selected field offices, and the 6 associated BLM state offices, to obtain information on the extent to which the selected offices implemented the 2012 and 2013 policy directives. We compared BLM’s procedures detailing how field offices are to count or report a well review as well as procedures for maintaining data quality against the control activities standard outlined in Standards for Internal Control in the Federal Government. We also compared BLM’s procedures for monitoring implementation of policy directives against leading practices for monitoring agency policies. We also reviewed documentation for a random, non-generalizable sample of 62 well reviews and 58 bond adequacy reviews, as reported by the 13 selected BLM field offices, for a total of 120 reviews. A GAO statistician selected a random sample of five well reviews for unique well numbers and five bond reviews of unique bond numbers that the 13 selected field offices had reviewed from the fiscal year 2016 well report and bond adequacy report. Due to variations in field offices’ reporting, some well and bond reviews from prior fiscal years were also included in the random selection. The Farmington field office also did not conduct any bond adequacy reviews in fiscal year 2016, and so we included bond reviews that the field office conducted in fiscal year 2015 in the random selection. In addition, the Pinedale and Rawlins field offices had not conducted any bond adequacy reviews in fiscal year 2016. As a result, we randomly selected additional reviews from fiscal year 2015 for those field offices. The Pinedale, Rawlins, and Colorado River Valley field offices conducted less than 5 bond reviews in each office in that fiscal year, so we selected and reviewed documentation in support of only those reviews they had conducted. We assessed the documentation to determine whether or not field offices conducted reviews and complied with selected directives of the well review and bond adequacy review policies. Information from our documentation reviews is not generalizable to all BLM field offices but provides illustrative examples of the information contained in BLM well and bond adequacy reviews. To examine BLM officials’ and stakeholders’ views on what challenges, if any, BLM faces in managing its potential oil and gas well liabilities, we conducted semi-structured interviews with officials from BLM headquarters, the 13 selected BLM field offices, and the 6 BLM state offices associated with these 13 field offices. In addition, we interviewed or obtained written responses from a standard set of questions from 8 representatives of stakeholder organizations. These representatives were knowledgeable about BLM’s oil and gas well management, and included academic, environmental, industry, and state organizations (see table 2). In addition, we spoke with knowledgeable officials from the Department of the Interior’s Office of Natural Resources Revenue (ONRR) and the Department of the Interior’s Office of Indian Energy and Economic Development, Division of Energy and Mineral Development. To identify knowledgeable stakeholders, we conducted a literature search, reviewed previous GAO reports, and obtained recommendations from BLM officials and stakeholders using a snowball technique in which an initial group of BLM officials and stakeholders we interviewed identified additional contacts to interview. From this list, we selected stakeholders who could provide a range of viewpoints. We generally asked the same questions during each interview but also discussed individual stakeholders’ perspectives, as appropriate. In our interviews, we asked officials and stakeholders what challenges, if any, BLM offices face in managing their potential oil and gas well liability. We also asked what challenges, if any, BLM offices face in conducting well reviews and bond adequacy reviews. To identify the challenges identified most often in the interviews, two analysts developed categories of challenges identified by BLM offices and stakeholders, and each analyst independently determined whether each BLM office and stakeholder had identified challenges that fit into these categories. The two analysts discussed and resolved any differences in their coding. The views of the BLM officials, stakeholders, and other agency personnel we interviewed are not generalizable to BLM officials, similar stakeholders, and other agency personnel who we did not interview. Lastly, we compared how BLM identified and managed certain inactive wells, as well as how it managed nationwide and statewide bonds, against the control activities standard outlined in Standards for Internal Control in the Federal Government and BLM’s resource management practices against certain requirements in the Energy Policy Act of 2005 (EPAct 2005) and leading practices by the Project Management Institute in The Standard for Program Management. We conducted this performance audit from November 2016 to May 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Quindi Franco (Assistant Director), Marie Bancroft (Analyst-in-Charge), Richard Burkard, John Delicath, Cindy Gilbert, Shylene Mata, Celia Mendive, Dan Royer, Barbara Timmerman, Carolyn Voltz, Jack Wang, and Jina Yu made key contributions to this report.", "summary": "In fiscal year 2016, private entities operated about 94,000 oil and gas wells on federal lands overseen by BLM. Once wells cease production, they can become inactive and potentially orphaned if an operator does not perform required reclamation and if an operator's bond is insufficient to cover the expenses. BLM considers oil and gas wells on federal and Indian lands and the associated leased lands as potential liabilities for the federal government because BLM may have to cover the costs of reclaiming well sites. To better manage its potential liabilities, BLM issued well and bond adequacy review policies in 2012 and 2013, respectively. GAO was asked to review how BLM manages its potential oil and gas well liabilities. This report examines, among other things: (1) how BLM's actual costs and potential oil and gas well liabilities have changed for fiscal years 2010 through 2017 and (2) the extent to which BLM has implemented its well and bond review policies. GAO analyzed BLM's policies and data and interviewed BLM officials and representatives from stakeholder organizations. GAO's analysis indicates that the Bureau of Land Management's (BLM) actual costs incurred and potential liabilities for reclaiming oil and gas wells have likely increased for fiscal years 2010 through 2017. However, the full extent of the increase is not known because BLM does not systematically track needed data. Based on GAO's analysis of data obtained from 13 of BLM's 33 field offices that manage oil and gas programs, the average annual reclamation cost was $267,600, an increase compared to the $171,500 annual average across all BLM offices that GAO reported in 2010. Similarly, GAO's analysis of BLM data found that the number of known orphaned wells, those that generally have no responsible or liable parties, for all field offices has increased from 144 in 2010 to 219 as of 2017. However, BLM's database that contains information on oil and gas wells on federal and Indian lands does not collect information on costs incurred or on potential liabilities that might result from an increase in the number of orphaned wells. Under federal internal control standards, management should use quality information to achieve the entity's objectives. Without systematically tracking such information, BLM does not have assurance that it has sufficient bonds or financial assurances to cover the costs of reclaiming orphaned wells. GAO was unable to fully assess the extent to which BLM field and state offices have implemented the agency's policies on reviewing wells and bond adequacy in part because of deficiencies in BLM's monitoring approach. For example, reports BLM headquarters used to monitor field offices' implementation of the policies have limitations. GAO identified discrepancies between the well and bond adequacy review reports that BLM state offices submitted to headquarters and the national summary consolidating states' information. Out of 10 state offices, 3 reported a different number of reviews completed in fiscal year 2016 than what BLM reported in its fiscal year 2016 national summary. Leading practices for monitoring the implementation of agency policies call for taking steps such as collecting and analyzing data on performance indicators. Without strengthening BLM's approach to monitoring, its ability to assess field offices' reviews of all inactive wells and determine the adequacy of all bonds is limited. GAO is making seven recommendations, including that BLM systematically track the agency's actual reclamation costs and potential liabilities and strengthen its approach to monitoring field offices' implementation of the well review and bond adequacy review policies. BLM agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "This section discusses (1) the history and status of the MOX project; (2) the roles of DOE, NNSA, and the contractor in managing and overseeing the MOX project; (3) project management lessons learned; and (4) DOE’s and NNSA’s recurring project management problems. DOE began the MOX project over 20 years ago, in 1997, as part of a strategy to manage the disposition of large quantities of surplus, weapons-grade plutonium no longer needed for defense purposes. This strategy, now undertaken through NNSA’s Plutonium Disposition program, originally planned to dispose of the plutonium through a dual approach—(1) conversion into mixed-oxide fuel and (2) immobilization in glass or ceramic material—but NNSA later cancelled the immobilization approach in favor of the approach for only mixed-oxide fuel. In 1999, DOE awarded a contract to design, construct, and operate a MOX facility to the contractor consortium of Duke, Cogema, Stone & Webster, LLC— now called MOX Services, LLC (MOX Services). In February 2002, NNSA reported to Congress that the construction of the MOX project would begin in fiscal year 2004, with operations set to begin in fiscal year 2007, and cost nearly $1 billion to design and construct. However, as figure 1 shows, construction of the MOX project did not begin until 2007 after DOE formally approved the project’s estimated cost of about $4.8 billion and estimated completion date of September 2016. In December 2008, DOE approved a revised cost estimate for completing construction of the MOX project of $4.9 billion and a 1-month delay in the start of operations to October 2016. From 2009 through 2011, the estimated cost to complete construction of the MOX project remained at $4.9 billion. However, the MOX project’s cost and schedule estimate changed significantly in 2012. That year, at NNSA’s direction to update the estimate, the MOX contractor submitted a proposal to increase the cost of the facility to about $7.7 billion—an increase of about $2.8 billion from the 2008 estimate—with the start of operations delayed by about 3 years, to November 2019. After receiving the MOX contractor’s revised estimate that indicated significant cost increases and schedule delays to the project, NNSA stated in its fiscal year 2014 budget request that pursuing the MOX approach might be unaffordable and proposed to slow down construction while the agency assessed alternative approaches for plutonium disposition. After a series of reviews, DOE ultimately concluded that pursuing an alternative disposition approach—referred to as “dilute and dispose”—could significantly reduce the life-cycle cost of the Plutonium Disposition program, compared with continuing the program using the MOX approach. Following the identification of a potentially less costly approach to plutonium disposition, in February 2016, DOE’s fiscal year 2017 budget request proposed terminating the MOX project in favor of pursuing the dilute and dispose approach. Congress appropriated funding for the MOX project for fiscal years 2017 and 2018 and directed DOE to continue work on the project. In August 2016, DOE issued a revised cost estimate of approximately $17.2 billion to complete construction of the MOX project by 2048. In the face of this significant cost increase, the National Defense Authorization Act for Fiscal Year 2018 authorized the Secretary of Energy to terminate the MOX project if, among other things, he could certify that the remaining life-cycle cost for an alternative option for carrying out plutonium disposition would be less than approximately half of the estimated remaining life-cycle cost of carrying out the MOX project. In May 2018, DOE completed this certification and notified Congress of its intention to terminate construction of the MOX project and to instead pursue the dilute and dispose option. The Secretary of Energy reported that the life-cycle cost estimate was $19.9 billion for the dilute and dispose option compared to $49.4 billion for the MOX project. In October 2018, NNSA terminated the project. Additional information on the history and status of the MOX project is in appendix II. DOE and NNSA are responsible for providing overall direction to, and oversight of, the contractor for the MOX project. The contractor, MOX Services, is responsible for the design, construction, and operation of the MOX facility. DOE. The Office of Project Management participates in a number of the MOX project’s oversight activities. In particular, the office has led independent reviews of the MOX project to validate its cost and schedule estimates and has conducted certification and surveillance reviews of the MOX contractor’s earned value management (EVM) system. NNSA. Subsequent to its establishment in 2000, several NNSA offices have provided overall direction to, and oversight of, the contractor for the MOX project, including the Office of Fissile Materials Disposition and the Office of Defense Nuclear Nonproliferation. In November 2011, after starting to place increased emphasis on improving its management of projects, the newly created Office of Acquisition and Project Management began providing overall direction to, and oversight of, the contractor for the MOX project. In March 2013, the Office of Acquisition and Project Management established the NNSA MOX Project Management Office at the Savannah River Site to lead the onsite project and contract management direction, administration, and oversight of the MOX project. MOX Services. As the contractor for the MOX project, MOX Services is responsible for designing, constructing, and operating the MOX facility. MOX Services has also subcontracted work to complete certain construction activities, such as the fabrication of specific types of equipment, including the complex gloveboxes needed for handling plutonium and the heating, ventilation, and air conditioning systems. Figure 2 depicts the roles of, and interrelation among and between, DOE, NNSA, and the MOX contractor in overseeing the MOX project. According to key practices that we and others have identified for both program and project management, it is important to identify and apply lessons learned from programs, projects, and missions to limit the chance of recurrence of previous failures or difficulties. As such, the use of lessons learned—such as project management lessons learned—is a principal component of an organizational culture committed to continuous improvement. Lessons learned, therefore, serve to communicate knowledge more effectively and to ensure that beneficial information is factored into planning, work processes, and activities. They also provide a powerful method of sharing ideas for improving work processes, facility or equipment design and operation, quality, and cost-effectiveness. Moreover, as we and others have previously found, agencies can learn lessons from an event and make decisions about when and how to use that knowledge to change behavior. Key practices of a lessons-learned process include collecting, analyzing, saving or archiving, and sharing and disseminating information and knowledge gained on positive and negative experiences (see fig. 3). For more than 2 decades, we and others have reported on the recurring nature of the problems affecting DOE’s and NNSA’s ability to manage contracts and projects effectively. Many of these problems have related to DOE’s and NNSA’s struggles with managing projects, such as the MOX project, within their initial cost and schedule estimates, including the following: In 1999, the National Academy of Science’s National Research Council reported that recurring problems with project management had raised questions about the credibility of DOE’s conceptual designs and cost estimates. In a March 2007 report, we found that 9 of 12 major projects we reviewed—including the MOX project—had exceeded their original cost estimates, schedule estimates, or both, principally because of ineffective project oversight and contractor management. In a November 2014 report, the Congressional Advisory Panel on the Governance of the Nuclear Security Enterprise (Augustine-Mies Panel) stated that NNSA’s inability to estimate costs and execute projects according to plan has been a major source of dissatisfaction among the national leadership and had significantly undermined NNSA’s credibility. Further, in April 2015, we found that NNSA has had a long history of identifying corrective actions for problems and declaring them successfully resolved, only to then identify additional actions needed to address the problems. As we found, the recurrence of such problems suggests that NNSA did not have a full understanding of the root causes of its contract- and project-management challenges. Moreover, our 2017 high-risk report found that DOE had taken several important steps that demonstrate its commitment to improving contract and project management, but that DOE’s efforts had not fully addressed several areas where the department continues to have shortcomings. Areas with shortcomings include acquisition planning for major contracts and the quality of enterprise-wide cost information available to DOE managers and key stakeholders. Additional information on our prior work highlighting selected DOE and NNSA project management problems is in appendix III. Prior to 2011, NNSA project staff had failed to recognize and fully resolve certain cost and schedule problems that indicated that the MOX project would not be completed on time or within its approved cost estimates. However, after taking actions to strengthen its project management oversight in late 2010 and 2011, NNSA recognized indicators of a number of problems with the MOX project that contributed to NNSA’s decision to terminate the project. Prior to 2011, NNSA’s staff responsible for overseeing the MOX project failed to recognize and fully resolve certain cost and schedule problems that indicated that the project would not be completed on time or within its approved cost estimates. The NNSA staff responsible for overseeing the MOX project at that time were generally inexperienced in overseeing complex nuclear construction projects. From 2007 through 2011, staff overseeing the MOX project were primarily familiar with large programmatic initiatives and operations but had little experience in managing large, complex first-of-a-kind nuclear construction projects, according to a May 2014 root cause analysis. Although information available to the NNSA staff showed that there were cost and schedule problems that indicated the increasing likelihood that the project would not be completed within its approved total cost estimate of $4.9 billion, the staff did not recognize and fully resolve four key problems. First, information about the contractor’s use of inaccurate rates to estimate the time needed to complete certain construction activities— commonly referred to as unit rates or planned production rates—indicated that the project would not be completed within its approved cost estimate. These rates are used to reflect levels of productivity during construction and to help develop projects’ cost and schedule estimates, including updates to annual forecasted estimates. Following the start of construction in August 2007, the MOX contractor began to experience lower-than-estimated productivity rates for key construction activities, according to the May 2014 root cause analysis report. Despite this issue, the contractor did not incorporate more realistic assumptions regarding the unit and production rates, such as by updating the estimated costs and time needed to complete specific construction activities, when developing the contractor’s annual forecasted estimates of the project’s total cost for 2008 through 2011. MOX contractor representatives told us that the unit rates they used to develop cost and schedule estimates were realistic based on assumptions at that time and that DOE was involved in the development of the unit rates. In addition, the MOX contractor’s representatives told us that expected improvements in unit rates did not materialize because of higher than expected levels of worker turnover. NNSA staff overseeing the project at that time did not recognize that the unit rates for calculating and updating unit rate estimates should be realistic and reflect levels of productivity during construction, as called for in project management principles, or resolve the issues. As a result, the staff did not take action to resolve the MOX contractor’s continued use of unrealistic unit rates that did not reflect actual construction progress being made. Furthermore, NNSA staff did not recognize the extent to which decreased productivity by the contractor created future cost increases and schedule delays or resolve the issue. Consequently, from 2008 to 2011, the MOX contractor continued to use its overly optimistic and unrealistic unit rate estimates when developing its annual forecasted cost estimates. Second, the MOX contractor’s annual forecasted estimates for the project consistently increased from 2008 through 2011, and the level of confidence in those estimates decreased, indicating that the project would not be completed within its approved cost estimate. Beginning in 2008, the MOX contractor submitted an annual update to its forecasted estimate for the project. These estimates increased each year, rising by about $140 million to $280 million annually, with the estimated total project cost increasing from about $4.1 billion in 2008 to about $4.7 billion in 2011 (an increase of about 15 percent). The MOX contractor’s representatives said they attempted to mitigate the increases, such as by identifying cost savings on the project. Additionally, as the May 2014 root-cause analysis report stated, the level of confidence for completing the MOX project within the approved $4.9 billion total project cost estimate declined each year, from an 85 percent likelihood of completing the project within the estimate in 2009 to 45 percent in 2011. Both the annual increases in forecasted estimates and the annual decline in level of confidence illustrated the increasing likelihood that the MOX contractor would not complete the project for $4.9 billion. As a result of inexperience, the NNSA staff overseeing the project at that time did not adequately examine the potential consequences of such cost performance trends over the future schedule and through project completion or resolve the issues. As the May 2014 root-cause analysis report stated, NNSA staff did not fully recognize how the risks and challenges the MOX project faced negatively affected not only the project’s performance but also its cost and schedule. For example, that report found that the staff were unable to determine that there were fundamental problems with completing the MOX project’s design and with maintaining construction efficiency and progress; both of which contributed to schedule delays and cost increases. The May 2014 root- cause analysis report stated that because of inexperience in project management, NNSA staff did not direct the MOX contractor to develop a more realistic and achievable forecasted estimate for the total cost to complete the MOX project until January 2012. Third, information about procuring materials out of sequence and the resulting rework indicated that the project would not be completed on schedule or within its approved cost estimate. According to NNSA officials, the MOX contractor’s method for measuring earned value incentivized the contractor to purchase and procure materials early and, in a number of cases, out of sequence, as this helped demonstrate progress. For example, figure 4 shows outdoor “laydown yards” and an offsite warehouse storing large amounts of commodities, such as pipes and electrical panels, that NNSA officials said the MOX contractor procured earlier than needed. The May 2014 root-cause analysis report stated that between 2007 and 2011, the equipment and material procured out of sequence resulted in the need for rework in some cases because later design changes required changes to the equipment or the need to procure different items, leading to additional costs for the project. The MOX contractor’s representatives told us they disagreed with NNSA’s characterization that they procured material too early. According to the contractor representatives, they purchased materials in support of both the project schedule and planned construction end date of 2016, as well as to achieve the efficiencies through bulk pricing or reduced delivery charges from procuring larger quantities of items or multiple items at the same time. Additionally, the MOX contractor representatives disagreed that they structured the methods for measuring earned value performance to claim earned value in ways that did not reflect actual progress. In particular, the MOX contractor representatives said that NNSA staff were involved in the development of the original methods used for measuring earned value. NNSA staff did not take steps to resolve the issues with the disproportionate value earned by the MOX contractor for purchasing, procuring, and placing certain commodities until 2015 when the MOX contractor revised its methods for measuring earned value. Consequently, the reported commodity installation data based on the MOX contractor’s methods for measuring claimed earned value inflated the amount of progress being made on the construction of the MOX project compared with the amount of work completed. Fourth, information about the use of management reserve funds early in the project indicated that the project would not be completed within its approved baseline. To address cost increases experienced early in the project, the MOX contractor began to use the project’s management reserve funds. A May 2010 surveillance review of the MOX contractor’s EVM system prepared for DOE by an independent contractor identified this issue and concluded that the rate at which the MOX contractor was using its management reserve indicated that it was unlikely that there would be any reserve left to address any risks that were expected to be encountered later in the project. DOE’s June 2011 follow-up review of the MOX contractor’s EVM system found that the MOX contractor was no longer covering cost variances by using management reserve; however, the MOX contractor’s previous use of management reserve to cover cost overruns had resulted in inaccurate, inflated cost performance and understated forecasted cost estimates. The MOX contractor’s representatives told us they disagreed with the premise that the management reserve was used to obscure cost performance. Moreover, they noted that NNSA’s cost-accounting and management staff worked with the contractor on all EVM issues, including the use of management reserve. NNSA staff did not recognize and resolve issues with the contractor’s use of the management reserve to mitigate cost overruns or the effect on the project’s cost performance and forecasted cost estimates in part because, as the May 2014 root cause analysis report stated, the staff possessed little experience in project management. According to project management principles, management reserve should be prevented from being consumed too early so as to ensure that enough reserve remains available to address any problems that may arise late in the project. The inexperienced NNSA staff also did not recognize that certain problems were creating cost overruns because, as stated in the May 2010 surveillance review, the MOX contractor’s use of the management reserve to cover such overruns hid the problems and did not alleviate their root causes. As a result of not recognizing or resolving the MOX contractor’s inappropriate use of the management reserve earlier, NNSA reported inaccurate measurements of cost performance to DOE and other stakeholders. In late 2010 and 2011, DOE began to implement actions to strengthen project management across the department, including NNSA. These actions, which agency officials said were primarily undertaken in response to project management problems we and others had identified, contributed to the steps NNSA began to take to strengthen its project management and oversight of the MOX project. Changes that strengthened NNSA’s oversight of the MOX project included: (1) initiating project peer reviews and (2) making several organizational changes to improve project oversight. These changes to DOE’s and NNSA’s oversight of the MOX project contributed to the decision to terminate the project. First, in its November 2010 update to requirements for capital asset projects, DOE established a requirement to conduct peer reviews at least once a year for large or high-visibility projects with a total project cost of $100 million or greater. The update required peer reviews more frequently for complex projects or those experiencing performance challenges. According to DOE and NNSA officials, they added the requirement in response to a recommendation in our May 2008 report. According to NNSA officials, as a result of this requirement, NNSA began conducting peer reviews of the MOX project in 2011. These reviews led NNSA to identify significant cost and schedule problems at the MOX project and included a number of recommendations to improve project performance. For example, a March 2012 NNSA peer review found that the MOX project’s total cost may have been understated by anywhere from $600 million to $900 million, in part because the contractor’s estimated unit rates and planned production rates were not reflective of the actual performance at that time. Moreover, the peer review found that the estimated completion date of October 2016 was also at risk. As a result, the peer review team recommended, among other things, that the MOX contractor develop an update to its formal cost and schedule estimate. As a result of the findings and recommendations from its peer reviews, NNSA requested and the MOX contractor submitted in September 2012 a proposal that included a revised cost estimate for the MOX project of about $7.7 billion and an estimated completion date of November 2019. In response to the significant cost increases, schedule delays, and project risks captured in the MOX contractor’s updated cost and schedule estimate, NNSA proposed a slowdown of MOX project construction activities in its fiscal year 2014 budget request to begin assessing alternative plutonium disposition strategies. Second, NNSA carried out several organizational changes starting in 2011 that led to improved oversight of the MOX project in some areas and the continued identification of cost and schedule problems. Specifically, NNSA transitioned management and oversight of the MOX project from the Office of Defense Nuclear Nonproliferation to the Office of Acquisition and Project Management, an office newly created in January 2011 to improve project oversight through the application of project management principles. In 2013, the Office of Acquisition and Project Management created the MOX Project Management Office at the Savannah River Site to provide project and contract management oversight for the MOX project. After establishing the MOX Project Management Office, the Office of Acquisition and Project Management sought to better address long- standing staffing challenges. For example, a May 2006 external independent review conducted for DOE found that, among other things, NNSA understaffed the oversight of the MOX project and recommended that DOE acquire sufficient personnel with the proper skills to manage and perform oversight of the project. However, NNSA did not address this issue until after the creation of the Office of Acquisition and Project Management. The Office of Acquisition and Project Management increased the number of staff with specific project management skillsets at the MOX Project Management Office from 20 for fiscal years 2010 to 2012 to 36 (18 federal employees and 18 support service contractors) for fiscal years 2016 to 2018. As a result of the staffing changes, the NNSA MOX Project Management Office strengthened its oversight of the MOX project, which contributed to the identification of additional problems, as described below. Conducted more in-depth assessments of the MOX contractor’s EVM system. After initially certifying the MOX contractor’s EVM system in May 2008, a May 2010 surveillance review of the MOX contractor’s EVM system prepared for DOE by an independent contractor identified a number of issues. The MOX contractor addressed the issues, according to DOE’s June 2011 review, resulting in the recertification of the EVM system at that time. According to NNSA officials, NNSA’s MOX Project Management Office conducted more in-depth assessments of the MOX contractor’s EVM system starting in 2013. These assessments led NNSA staff to identify a number of concerns with the contractor’s EVM system, such as earned value data errors; overstatements of the data on the percentage of work completed in certain areas; and in one instance, about $300 million in known cost growth that was not incorporated into the MOX project’s forecasted estimate of total project cost. According to NNSA officials, in March 2016, the NNSA federal project director requested an in-depth review of the contractor’s EVM system because of the continued identification of issues with the system, and the MOX contractor not adequately addressing them. According to its October 2016 review, DOE’s Office of Project Management identified significant deficiencies representing systematic and material internal control weaknesses and concluded that the MOX contractor’s EVM system could not be relied upon to provide credible and reliable cost and schedule performance data for either the project’s current status or its forecasted cost and schedule estimates. As a result, DOE’s Office of Project Management rescinded the MOX contractor’s EVM system certification because the system was no longer in compliance with the relevant standards. Implemented a more rigorous invoice review process. According to NNSA officials, prior to 2014, NNSA did not have a rigorous process in place to review the contractor’s invoices. The officials said that NNSA staff did not review all invoices and, for the reviews that were completed, they did not always thoroughly examine the details behind the invoices, such as reviewing invoices to verify that costs were allowable under DOE regulations. The NNSA officials told us that as part of their efforts to improve oversight of the MOX contractor’s invoice submissions, NNSA’s MOX Project Management Office staff developed a more rigorous invoice review process that resulted in a September 2014 guide. In addition, the NNSA MOX Project Management Office assigned an additional staff member to (1) help conduct invoice reviews due to the volume of work needed to review the MOX contractor’s invoices and (2) ensure that payments were made within the 14 days generally required by regulation. According to NNSA officials, as a result of the changes implemented by the office, NNSA identified a number of potentially unallowable costs ranging from less than $1,000 to more than $2 million. Reviewed the MOX contractor’s annual incurred costs. NNSA officials said that incurred cost audits were supposed to be conducted at least annually for the MOX project and that the Defense Contract Audit Agency was supposed to conduct the audits. However, these officials explained that due to a significant backlog, the Defense Contract Audit Agency did not complete all of the required audits. In light of the Defense Contract Audit Agency’s significant backlog—as well as a requirement prohibiting the agency from conducting non- defense agency audits—the NNSA MOX Project Management Office arranged to have a third party conduct an audit of the MOX contractor’s fiscal year 2010 incurred costs. This third-party audit identified more than $30 million in potentially unallowable costs. The significant cost and schedule problems that NNSA staff identified after strengthening its oversight of the MOX project contributed to NNSA’s decision to terminate it. Project management principles state that effective project management helps organizations to, among other things, increase the chances of success; resolve problems and issues; and identify, recover, or terminate failing projects. After NNSA’s project peer reviews and the MOX contractor’s proposed update to the project’s cost and schedule estimate showed the significant likelihood of additional cost growth and schedule delays, NNSA proposed slowing down construction of the MOX facility in 2013 and ultimately terminated the project in October 2018. As outlined in DOE Order 413.3B, DOE requires that project management staff document and share project management lessons learned on capital asset projects like MOX but does not require that all project management lessons learned from capital asset projects be documented consistently or shared in a timely manner. Moreover, DOE Order 413.3B does not require the evaluation of the results of corrective actions taken in response to lessons learned that are identified during the course of capital asset projects such as the MOX project to ensure that the problems experienced are resolved department-wide. DOE’s requirements for capital asset projects, as outlined in Order 413.3B, specify that project management lessons learned should be captured—that is, documented—throughout the continuum of a project. According to the order, there are five critical decisions (CD) that structure the life of a project. The CDs, which are summarized in figure 5, include approving: mission need (CD-0); alternative selection and cost range (CD-1); project performance baseline (CD-2); the start of construction or execution (CD-3); and the start of operations or project completion (CD- 4). DOE Order 413.3B requires project staff to submit project management lessons learned to DOE’s Office of Project Management within 90 days of two critical decision points: (1) upfront planning and design lessons learned are to be submitted within 90 days of CD-3 approval and (2) project execution and facility startup lessons learned are to be submitted within 90 days of CD-4 approval. DOE Order 413.3B also requires that lessons learned for capital asset projects be collected, analyzed, and disseminated by project management support offices. These offices consist of DOE or NNSA staff who provide support to federal project directors and are established exclusively to oversee and manage the activities associated with projects. Additionally, DOE Order 413.3B states that the Project Management Risk Committee should support project management activities within DOE by enabling the sharing of lessons learned on a routine basis. DOE and NNSA officials told us that program and project offices document and save project management lessons learned for capital asset projects in different ways. In particular, DOE and NNSA officials told us that peer reviews, which are saved in DOE’s Project Assessment and Reporting System (PARS II) database, are a primary source of project management lessons learned. The officials also said that project management lessons learned are saved through monthly project reports, monthly staff meetings, Project Management Risk Committee meeting notes, and project management workshops and training courses. In addition, DOE and NNSA officials told us that some lessons learned are shared through informal person-to-person discussions that allow lessons learned to be shared among staff. Further, the officials said that they address project management problems identified in lessons learned by making changes to DOE Order 413.3B. In addition, while not required, DOE may capture some lessons learned for projects during the project review process. For example, DOE’s standard-operating procedures for conducting external independent reviews state that the scope of such reviews can include assessing whether project teams are documenting and sharing lessons learned from their projects internally and externally. However, as noted in the standard-operating procedures, this is an example of an area that can be included as part of an external independent review, although there is no requirement to do so. DOE Order 413.3B requires project management lessons learned for capital asset projects to be documented throughout the life of a project but does not specifically require lessons learned to be documented and saved in a consistent manner or shared routinely or in a timely manner. Moreover, the order does not require all corrective actions related to these lessons learned to be evaluated for effectiveness. Although DOE and NNSA use multiple means to document and save lessons learned, we found DOE and NNSA program and project offices do not document and save such lessons consistently so that they are readily accessible by other staff. For example, NNSA uses an internal database to save project management lessons learned for its projects. However, NNSA officials told us that DOE staff outside of NNSA must request access to the database before they can read and examine the lessons learned that are documented and saved in the database. Officials from DOE’s Office of Science told us that their office submits some lessons learned to the PARS II database and maintains some project management lessons-learned reports on a publicly available webpage. A senior official from DOE’s Office of Environmental Management told us that some lessons learned from its projects are sent to its staff through monthly lessons-learned bulletins, but the bulletins are not entered into PARS II. In addition, DOE and NNSA officials said that project staff can enter specific lessons learned gleaned from their project in a lessons- learned repository within PARS II. For example, as of November 2017, PARS II contained 20 entries for project management lessons learned from the MOX project. According to key practices for lessons learned identified by us and the Center for Army Lessons Learned, a central component of a successful lessons-learned process is to ensure that lessons learned are stored in a logical, organized manner. Specifically, as we have previously found, lessons learned should be stored in a manner—such as an electronic database—that allows users to perform information searches using key words and functional categories. Moreover, information in the database should be updated regularly and provide a logical system for organizing information that is easily retrievable and made available to any requester. We have also found that relying on person-to-person discussions to share lessons learned can be problematic because personal networks can dissolve—for example, through attrition or retirement—and informal information sharing does not ensure everyone is benefiting from the lessons that are gleaned. Further, by not documenting and saving all lessons learned (e.g., those shared through person-to-person exchanges), there is also generally no way to ensure the validation of the information shared. This is not consistent with the key practice from the Center for Army Lessons Learned, which states that by documenting and saving project management lessons learned in a logical, organized manner such as an electronic database, lessons learned can be archived, managed, and made available for review by other projects and applied to them at a future date. Because DOE Order 413.3B does not indicate where all project management lessons learned should be documented and saved in a consistent manner, the department cannot ensure that future capital asset projects will be able to take advantage of experiences from past projects. We found that DOE and NNSA did not document all lessons learned in a consistent manner, and DOE officials acknowledged that DOE Order 413.3B does not require documenting or saving lessons learned that are presented through various formal or informal means in a common location. By developing requirements that clearly define how and where all project management lessons learned should be documented and saved to make them readily accessible across the department, such as in a database, DOE—including NNSA—could improve the agency’s existing lessons-learned process. DOE Order 413.3B’s requirements for project management lessons learned do not require that all lessons learned be shared routinely or in a timely manner. In particular, the order does not require that lessons learned be submitted and shared routinely until CD-3—the start of construction. Consequently, DOE and NNSA staff are not required to submit lessons learned during the CD-0, CD-1, and CD-2 phases of a project. These earlier phases, which involve upfront planning and design for the selected project, often occur many years before the approval and start of construction. Notably, both the MOX and Uranium Processing Facility (UPF) projects took about 10 years to reach the start of construction (CD-3) and experienced cost increases and schedule delays. We and others have previously found that lessons learned should be submitted in a timely manner so as to ensure that key information is available to identify and address problems or incorporate successful activities as early and quickly in the process as possible. For example, we found that lessons-learned reports (i.e., reports documenting lessons- learned reviews) should be prepared promptly so that knowledgeable personnel are available to contribute to the reports, important details are recalled accurately, and there are no delays in the dissemination of lessons learned. Moreover, according to the Center for Army Lessons Learned, the guiding principle in executing a sharing strategy for lessons learned is to get the right information to the right person at the right time. Such a strategy can entail developing a process for creating timelines for sharing lessons learned that are tied to the urgency of the information and a means to disseminate that information. Because DOE Order 413.3B does not require lessons learned to be submitted prior to CD-3, the department is limiting its ability to promptly evaluate and address early issues with projects and apply such lessons learned to other projects department-wide. This approach could affect the successful completion of capital asset projects, particularly those that experience prolonged upfront planning and design phases similar to those the MOX and UPF projects experienced. By developing requirements for sharing project management lessons learned from early in the CD phases of projects (i.e., prior to CD-3) routinely and in a timely manner to improve the ability to identify and evaluate problematic practices and positive experiences, DOE—including NNSA—could help improve the success of future capital asset projects and avoid the problems encountered overseeing the MOX project. DOE Order 413.3B does not require the evaluation of the results of corrective actions taken to address project management lessons learned that are identified during the course of capital asset projects such as MOX. According to DOE guidance and statements, officials track whether lessons identified through reviews or other efforts are implemented. For example, according to DOE’s standard-operating procedures for conducting external independent reviews and officials from DOE’s Office of Project Management, DOE staff conducting external independent reviews of projects should assess whether project teams are reviewing and incorporating applicable lessons learned. In addition, DOE project management officials told us that peer review recommendations and the corrective actions to be taken to address them are tracked until the closure of each recommendation. However, DOE has not evaluated whether corrective actions taken have led to the resolution of the problematic practices identified in the lessons learned because DOE Order 413.3B does not require this type of evaluation. According to key practices for lessons learned identified by the Center for Army Lessons Learned and us, a central component of a successful lessons-learned process is to establish a means to ensure that issues are being resolved as intended. The Center for Army Lessons Learned states that while not all issues require a formal process to resolve, there should be a process in place to identify and prioritize the most important things that need to be fixed. For example, this process could entail addressing only those problems that may necessitate the need for department-wide improvements, as some issues may be narrowly focused and be specific to one project or site. The Center for Army Lessons Learned further states that an organization’s ability to change behavior by implementing a lesson is ineffective unless the organization observes changes in behavior and verifies that the lesson is learned. Additionally, we have found that if agency management decides to take action to apply an identified lesson, then it should take subsequent action to observe that the change in behavior actually occurred and collect additional information to verify that the change had the desired effect. Although DOE Order 413.3B does not require DOE to evaluate the effectiveness of corrective actions other than those associated with peer reviews, other DOE orders and guidance require the evaluation of the effectiveness of other types of corrective actions. For example, DOE Order 226.1B requires that DOE’s organizations and contractors implement oversight processes that ensure they evaluate and correct relevant quality assurance problems on a timely basis to prevent their recurrence. In addition, DOE’s order and guide for implementing an effective quality assurance program highlight the importance of undertaking corrective actions to prevent the recurrence of problems, including determining the effectiveness of the corrective actions for significant problems. By developing requirements for evaluating the effectiveness of corrective actions taken in response to project management problems in capital asset projects, particularly those that necessitate the need for department-wide improvements, DOE—including NNSA—could verify that changes made as a result of lessons learned had the intended outcome as the agency does for contractors. DOE and NNSA made changes that strengthened oversight of large capital asset projects. These changes helped NNSA better identify cost and schedule problems affecting the MOX project and contributed to NNSA’s decision to ultimately terminate the project. DOE’s Order 413.3B includes certain requirements for documenting and sharing project management lessons learned. However, the requirements in DOE Order 413.3B do not fully incorporate several key practices for lessons learned. For example, the order does not require that DOE or NNSA document project management lessons learned for capital asset projects consistently or that such lessons learned are shared in a timely manner. By developing requirements that clearly define how and where all project management lessons learned should be documented and saved to make them readily accessible across the department, such as in a database, DOE—including NNSA—could improve the existing lessons- learned process and enable future projects across the department to take advantage of experiences from past projects. In addition, because DOE Order 413.3B does not require lessons learned for capital asset projects to be submitted prior to the start of construction (CD-3), the department is limiting its ability to promptly evaluate and address early issues with projects as well as applying such lessons learned to other projects department-wide. By developing requirements for sharing project management lessons learned from the beginning of a project routinely and in a timely manner to improve DOE’s ability to identify and evaluate problematic practices and positive experiences, DOE—including NNSA—could help improve the success of future capital asset projects and avoid the problems the agency encountered on the MOX project. Moreover, while DOE tracks the implementation of certain project management lessons learned for capital asset projects, DOE Order 413.3B does not require that DOE—including NNSA—evaluate corrective actions identified outside the peer review process and taken in response to lessons identified to verify that the changes made had the desired effect. By developing requirements for evaluating the effectiveness of corrective actions taken in response to project management problems in capital asset projects, particularly those that necessitate the need for department-wide improvements, DOE could verify that changes made as a result of lessons learned had the intended outcome as the agency does for contractors. We are making the following three recommendations to DOE: The Secretary of Energy, in coordination with DOE’s Office of Project Management and NNSA’s Office of Acquisition and Project Management, should develop requirements that clearly define how and where project management lessons learned for capital asset projects should be documented and saved to make them readily accessible across the department. (Recommendation 1) The Secretary of Energy, in coordination with DOE’s Office of Project Management and NNSA’s Office of Acquisition and Project Management, should develop requirements for sharing project management lessons learned for capital asset projects from the beginning of a project (i.e., prior to the start of construction at CD-3) routinely and in a timely manner to improve DOE’s ability to identify and evaluate problematic practices and positive experiences. (Recommendation 2) The Secretary of Energy, in coordination with DOE’s Office of Project Management and NNSA’s Office of Acquisition and Project Management, should develop requirements for evaluating the effectiveness of corrective actions taken in response to project management problems for capital asset projects, with a focus on those lessons that necessitate the need for department-wide improvements. (Recommendation 3) We provided a draft of this report to DOE, NNSA, and MOX Services for review and comment. In written comments, which are reproduced in full in appendix IV, DOE concurred with the report’s recommendations and described actions that it intends to take in response to our recommendations. In response to our first recommendation, DOE intends to issue a policy memorandum by December 2019 and revise DOE Order 413.3B to identify the project management lessons learned repository and outline the kinds of information the repository will collect. In response to our second recommendation, DOE intends to issue a policy memorandum by December 2019 and revise DOE Order 413.3B to collect lessons learned as part of its peer review process. Because DOE Order 413.3B requires that peer reviews for projects of $100 million or greater be conducted once between CD-0 and CD-1, annually between CD-1 and CD-2, at least annually between CD-2 and CD-4, and more frequently for the most complex projects or those experiencing performance challenges, this action is responsive to our recommendation and should help DOE begin to identify lessons learned in a more routine and timely manner. In response to our third recommendation, DOE plans to revise the Project Management Risk Committee charter by assigning it the responsibility to qualitatively evaluate the effectiveness of corrective actions taken in response to project management lessons learned from projects with a total cost greater than $750 million having department-wide implications. We are encouraged that DOE agrees with our recommendation and view this change as a positive first step. However, this action may not fully address the recommendation. For example, the planned action states that the Project Management Risk Committee would evaluate the effectiveness of corrective actions for projects with total costs of $750 million or more, but there may be some lessons learned with applicability department-wide from projects that do not meet this cost threshold. Additionally, DOE’s planned action as described in its response does not discuss who would be responsible for evaluating the effectiveness of corrective actions or a timeline for performing the assessments. The Project Management Risk Committee has typically served as a review group and has not itself performed such evaluations. DOE and MOX Services also provided technical comments, which we incorporated in our report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, the Administrator of NNSA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. Our report examined (1) when the National Nuclear Security Administration’s (NNSA) project management oversight processes recognized cost and schedule problems at the Mixed Oxide Fuel Fabrication Facility (MOX) project and the actions the agency took to address them and (2) the extent to which the Department of Energy (DOE) requires that project management lessons learned from MOX and other projects be documented and shared. To address both objectives, we reviewed relevant documents from DOE, NNSA, and MOX Services, LLC (MOX Services), the contractor constructing the MOX project. We reviewed past reports by GAO and the National Academy of Sciences’ National Research Council to examine previously identified weaknesses in DOE project management, contractor performance, and federal oversight of individual projects, as well as DOE’s efforts to make improvements. We also reviewed DOE reports focused on analyzing the root causes of contract- and project- management issues affecting DOE and NNSA and identifying potential corrective actions and other general improvements. We visited the Savannah River Site to tour the MOX project while it was under construction and interviewed officials from NNSA’s MOX Project Management Office, including the federal project director, and representatives from MOX Services. We also monitored the status of the MOX project. To examine when NNSA’s project management oversight processes recognized cost and schedule problems at the MOX project and the actions the agency took to address them, we identified and reviewed DOE and NNSA documents outlining the agencies’ management and oversight roles and responsibilities and the processes the agencies used to monitor the cost and schedule of the MOX project. We also examined NNSA guidance and memorandums detailing the 2011 transition of oversight responsibilities for the construction of the MOX project from NNSA’s Office of Defense Nuclear Nonproliferation to its Office of Acquisition and Project Management and the effect this change had on NNSA’s efforts to oversee the project. In addition, we reviewed DOE, NNSA, and MOX Services documents, as well as independent reviews and assessments, concerning the performance and status of the MOX project. In particular, we reviewed a May 2014 report prepared for DOE that identified and analyzed the root causes behind the cost increases that affected the MOX project through 2012, after the formal approval of its cost and schedule estimates in 2007. We also reviewed surveillance reviews and a May 2013 assessment of the MOX contractor’s earned value management (EVM) system, which the contractor and NNSA used to monitor project performance and status, including cost and schedule, after construction began. Moreover, we examined project cost and budget information that DOE, NNSA, MOX Services, and others developed—such as the contractor’s September 2012 baseline change proposal and DOE’s August 2016 revised cost and schedule estimate—to determine when they began to identify the MOX project’s cost increases and schedule delays and why such problems might have occurred. We also reviewed reports by GAO and DOE’s Office of Inspector General that identified and discussed cost and schedule problems affecting the MOX project. Additionally, we interviewed officials from DOE and NNSA to discuss how and when they identified the MOX project’s cost and schedule problems. To examine the extent to which DOE requires that project management lessons learned from MOX and other projects be documented and shared, we reviewed DOE’s Order 413.3B, which outlines the primary set of project management requirements governing DOE and NNSA capital asset projects that have a total project cost of greater than $50 million. We also reviewed DOE guidance documents, such as those related to DOE Order 413.3B, to further understand DOE’s suggested approaches for meeting its existing lessons learned requirements. Similarly, we reviewed documents from NNSA and DOE’s Offices of Environmental Management and Science, such as those found in business-operating procedures and standard-operating policies and procedures, to examine how those documents supplement the lessons learned requirements included in DOE Order 413.3B. In addition, we collected examples of capital asset project-management lessons learned from DOE and NNSA, including those from the MOX project, from a variety of sources, such as lessons-learned reports, project peer reviews, entries stored in DOE’s Project Assessment and Reporting System (PARS II) and NNSA’s internal databases, monthly lessons-learned bulletins, and presentations, among others. To better understand lessons learned and their role within project management, we reviewed reports by GAO, the U.S. Army’s Center for Army Lessons Learned, and the Project Management Institute that identify and discuss key practices for lessons learned. We selected these sources because they are widely recognized for key practices on lessons learned. We then compared the project management lessons learned requirements outlined in DOE Order 413.3B against these key practices. We also discussed project management lessons learned requirements and processes with officials from DOE’s Offices of Environmental Management, Project Management, and Science and NNSA’s Office of Acquisition and Project Management. We conducted this performance audit from May 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Timeline of Selected Information and Events Pertaining to the MOX Project Details DOE announced a plan to dispose of surplus, weapons-grade plutonium through a dual approach that would include constructing a facility for the purposes of converting the plutonium into mixed-oxide fuel for use in modified commercial reactors. The initial estimate for the MOX project—that is, not an approved baseline—totaled $1.4 billion, with completion of construction expected to be in September 2004. DOE awarded the contract for designing, constructing, and operating a MOX facility to the consortium of Duke, Cogema, Stone & Webster, LLC—now MOX Services, LLC, or MOX Services. According to a December 2005 DOE Inspector General report, in 1999, an independent team reviewed the MOX contract and warned of the potential for escalating costs because the contractor had no incentives to minimize costs nor penalties for overruns or poor performance. DOE announced that it would construct the MOX project (as well as two other facilities) at the Savannah River Site located in Aiken, South Carolina. A February 2001 independent cost estimate of the MOX contractor’s preliminary cost estimate for the MOX project concluded that it would cost about $2.4 billion to construct and operate it. The independent cost estimate concluded that it would cost about $1.1 billion to construct the facility. The National Nuclear Security Administration’s (NNSA) February 2002 report to Congress on the disposition of surplus defense plutonium at the Savannah River Site concluded that the facility component of the mixed-oxide fuel option identified would cost about $2.2 billion to implement over about 20 years. According to the report, about $1 billion of these costs would be for designing and constructing the facility, with construction being completed during fiscal year 2007. According to DOE’s fiscal year 2004 budget request, a preliminary estimate of the MOX project’s total cost totaled about $1.8 billion. A July 2004 independent review found that the MOX project had experienced a cost increase of about 300 percent for the design and development phase compared to what was preliminarily planned for in 1999, in part to due to a number factors, including design changes and underestimates. Moreover, the report cited the MOX project as an example of a DOE project greater than $500 million that should have had an approved performance baseline many years prior given that it had reached critical decision (CD)-1 approval, or the approval of alternative selection and cost range, in 1997. According to a December 2005 report by DOE’s Office of Inspector General, as of July 2005, NNSA’s not-yet-validated estimate for the design and construction of the MOX project was about $3.5 billion ($2.8 billion for construction). Details In February 2006, DOE’s fiscal year 2007 budget request reported a preliminary estimate for the MOX project totaling about $3.6 billion, but the department reiterated that the estimate would be finalized following the completion of the project’s performance baseline. The request also noted that design costs for the MOX project increased from $243 million to $765 million, primarily due to the decision to fund some design work for gloveboxes and enhanced aqueous polishing during the design phase as opposed to the construction phase and increased design work to adapt the facility to handle and treat several tons of pure plutonium resulting from the cancelation of plutonium immobilization, which would have entailed incorporating plutonium into a corrosion-resistant ceramic matrix and then encasing the immobilized plutonium in glass along with highly radioactive nuclear wastes that already existed at DOE sites, thereby rendering the plutonium as inaccessible and unattractive for reuse in nuclear weapons. However, NNSA canceled this approach in 2002. A July 2006 external independent review of the MOX project’s preliminary cost and schedule estimate projected the MOX project’s total cost to be about $4.7 billion, with the project expected to be completed in April 2016. The review’s estimated total project cost reflected an increase of $352 million over the proposed total project cost of $4.3 billion due to increases in the cost of some construction activities and contingency. In February 2007, DOE’s fiscal year 2008 budget request reported that the revised total cost for the MOX project totaled about $4.7 billion and that the estimate was in the final stages of validation as part of the department’s critical decision process. The request stated that the revised cost was a change from the prior not-yet-validated $3.6 billion estimate in DOE’s fiscal year 2007 budget request, with over 50 percent of the $1.1 billion cost increase attributed to an increase in contingency funds for the project during construction and cold startup. Also in February 2007, responsibility for the MOX contract was officially transferred to the Savannah River Site Office. In April 2007, DOE formally approved a cost estimate, or baseline, for the MOX project of $4.8 billion and start of operations in September 2016. In August 2007, construction of the MOX project began. In May 2008, DOE certified the MOX contractor’s earned value management (EVM) system. A July 2008 independent project review identified a number of concerns, including that only one person was dedicated to the development and upkeep of the MOX project’s procurement status information and that the project’s procurement strategy would require additional procurement and engineering staff to meet future demands. In December 2008, as a result of funding reductions for fiscal year 2008, DOE approved a revised cost estimate for the MOX project of $4.9 billion and a 1-month delay in the start of operations to October 2016. According to a July 2009 report, the MOX contractor’s 2009 annual forecasted estimate for completing the MOX project totaled approximately $4.4 billion, an increase of about $283.8 million from the 2008 annual forecasted estimate. In May 2010, an independent review of the MOX contractor’s EVM system found that the contractor’s performance data could not be used to accurately assess the cost performance of the project, in part because the contractor was inappropriately using management reserve funds to cover cost overruns. The MOX contractor began to implement a number of corrective actions in response to the report’s findings. According to an August 2010 report, the MOX contractor’s 2010 annual forecasted estimate for completing the MOX project totaled approximately $4.6 billion, an increase of about $207.1 million from the 2009 annual forecasted estimate. Details In February 2011, DOE’s Office of Acquisition and Project Management—now the Office of Project Management—changed the overall status of the MOX project from green to yellow, indicating that the project was at risk of breaching its approved cost estimate (i.e., performance baseline). A May 2011 project peer review found that the MOX project faced expected cost growth and would be challenged in identifying approximately $364 million in cost savings necessary to deliver the project at its total project cost (of $4.9 billion). A June 2011 follow-on to the May 2010 independent review of the MOX contractor’s EVM system found that the project was likely to exceed the total project cost by anywhere from $104 million to $699 million, with an estimated most likely cost overrun of $493 million. Nonetheless, DOE recertified the MOX contractor’s EVM system after the MOX contractor completed a number of corrective actions. According to a July 2011 report, the MOX contractor’s 2011 annual forecasted estimate for completing the MOX project totaled approximately $4.7 billion, an increase of about $142.4 million from the 2010 annual forecasted estimate. In January 2012, NNSA directed the MOX contractor to add additional scope for plutonium metal oxidation capability and to include updates to the project’s current cost and schedule projections, with a baseline change proposal due by the end of May 2012. A March 2012 project review found that the MOX project’s cost and schedule baselines had a very low probability of being met, and estimated that the total project cost was likely underestimated by anywhere from $600 to $900 million when compared to the project’s approved total cost of $4.9 billion. The review team recommended that the project should develop an updated and more realistic baseline. Also in March 2012, DOE changed the overall status of the MOX project from yellow to red, indicating that the project was expected to breach its approved cost estimate (i.e., its performance baseline). A July 2012 project peer review found that the MOX project’s likely total project cost would fall within the range of $6.9 billion to $7.3 billion as opposed to the project’s approved total cost of $4.9 billion. In September 2012, the MOX contractor submitted its revised baseline change proposal to update the MOX project’s cost and schedule projections, including additional scope of work that would provide the MOX project with a plutonium metal oxidation capability, referred to as direct metal oxidation. According to the contractor’s proposal, it would cost about $7.4 billion to complete the MOX project without the direct metal oxidation by November 2019. The addition of the direct metal oxidation scope of work would cost an additional $262.3 million, which would be completed in June 2023 after the completion of MOX project and the start-up of operations by November 2019. Details In April 2013, DOE’s fiscal year 2014 budget request proposed a slowdown of construction of the MOX project while NNSA took steps to assess alternative plutonium disposition strategies. According to the request, NNSA cited the increase to the contractor’s total estimated cost for the project and the budget environment as factors in its decision to pursue a slowdown of the MOX project while conducting an assessment of potential alternative plutonium disposition strategies. According to NNSA, a May 2013 estimate prepared by the U.S. Army Corps of Engineers estimated that, not including contractor fee, it would cost $9.4 billion to construct the MOX project by 2024 at an annual funding level of $630 million. According to NNSA, a June 2013 estimate prepared by the MOX contractor estimated that it would cost between $8.5 and $9.7 billion to construct the MOX project, with completion from 2023 to 2032 depending on whether the annual funding level totaled $350 million or $500 million. In September 2013, NNSA estimated it would cost about $10.5 billion to construct the MOX project by 2027 at an annual funding level of $500 million. According to NNSA, a November 2013 estimate prepared by the U.S. Army Corps of Engineers estimated that it would cost from $10 to $11.7 billion to construct the MOX project, with completion from 2026 to 2036 depending on whether the annual funding level totaled $350 million or $500 million. In March 2014, DOE’s fiscal year 2015 budget request stated that ongoing analysis led to the determination that the MOX project would be significantly more expensive than anticipated and concluded that, due to cost increases, the MOX approach was not viable within available resources. The request, therefore, called for placing the facility in cold stand-by so NNSA could further study more efficient options for plutonium disposition. A May 2014 root cause analysis report found that some of the cost drivers that contributed to the MOX project’s cost increases since 2007 included not having sufficiently experienced project teams in place, basing the approved cost and schedule estimates on incomplete front- end planning, not sufficiently developing designs to support the project’s fast-track procurement and construction, experiencing greater than expected inefficient execution of construction activities, not implementing effective corrective actions, and not adequately applying federal oversight to identify and address project performance issues Also in May 2014, the DOE Office of Inspector General reported continuing concerns about the achievability of the estimated cost and completion date for the MOX project. The report also noted that the MOX project no longer had an approved cost and schedule estimate and in light of the project continuing to receive significant funding, recommended that the MOX contractor develop a new cost and schedule estimate. In September 2014, in light of certain insufficient project data, NNSA directed the MOX contractor to conduct a review to determine and validate the work completion status—that is, state of completeness—for all commodities being installed in the MOX project. In December 2014, both the Carl Levin and Howard P. McKeon National Defense Authorization Act for Fiscal Year 2015 and the Consolidated and Further Continuing Appropriations Act, 2015 directed DOE to continue construction and project or program support activities related to the MOX project. However, the National Defense Authorization Act also directed DOE to report on, among other things, alternatives to the MOX project, including cost estimates for each alternative, and how such alternatives would conform to the Plutonium Management and Disposition Agreement. Details In February 2015, DOE’s fiscal year 2016 budget request called for the continued construction of the MOX project, in part because all four congressional committees of jurisdiction directed that construction on the MOX project continue in fiscal year 2015 while NNSA conducted additional cost studies and technology alternative studies. In March 2015, NNSA’s MOX Project Management Office assessed the MOX contractor’s use of level of effort versus the discrete method of earned value and determined a disproportionate use of level of effort—around 56 percent—was masking the performance of the contractor’s discrete work and therefore affecting the accurate measurement of the project’s progress. In April 2015, the Aerospace Corporation completed a report on the MOX project and estimated that the MOX project’s total cost would be about $21.5 billion, with projected completion in 2045 at an annual funding level of $500 million. In June 2015, the MOX contractor finished its completeness verification review and found that it had over-reported on the results of certain commodities being installed in the MOX project. As a result of this review, the MOX contractor revised the amount of earned value claimed for these commodities to address the over-reporting and provide a more realistic accounting of the selected commodities. In February 2016, DOE’s fiscal year 2017 budget request proposed terminating the MOX project in favor of the dilute and dispose option as the path forward for the disposition of the nation’s surplus, weapons-grade plutonium. According to the request, the MOX project was found to be significantly more expensive than anticipated and would require approximately $800 million to $1 billion annually for decades. A May 2016 report prepared for the MOX contractor by High Bridge Associates, Inc., estimated that completing the construction of the MOX project could cost about $5.2 billion and be completed in 10 years, with an annual funding level of about $520 million. In July 2016, the MOX contractor submitted its annual forecasted estimate for completing construction of the MOX project and estimated the total project cost to be about $10 billion, with completion in 2029, with an annual funding level of $350 million. In August 2016, DOE issued an updated performance baseline estimating that it would cost approximately $17.2 billion to complete construction of the MOX project by 2048 assuming an annual funding level of $350 million. DOE further estimated that it would cost about $14.3 billion to complete construction of the MOX project by 2035 assuming an annual funding level of $500 million. In October 2016, DOE rescinded the MOX contractor’s EVM system certification of compliance in response to an August 2016 surveillance review that identified material non- compliances such as the overstatement of earned value and percentage complete. Details A February 2017 report by the U.S. Army Corps of Engineers found that there is likely to be a substantial amount of rework at the MOX project but noted that the magnitude of the likely rework has yet to be determined. The report stated that some of the rework is attributed to design constructability issues as well as procuring, fabricating, and completing work out of sequence. In May 2017, DOE’s fiscal year 2018 budget request reiterated for the second consecutive year, a plan to terminate the MOX project in favor of pursuing the dilute and dispose option for plutonium disposition. Also in May 2017, a DOE Office of Inspector General report stated that NNSA was not aware of the total cost of rework at the MOX project because the time and cost of rework were not definitively tracked prior to fiscal year 2014. In December 2017, section 3121 of the National Defense Authorization Act for Fiscal Year 2018 authorized the Secretary of Energy to terminate the MOX project if, among other things, the Secretary certified that the remaining life-cycle cost for an alternative option for carrying out plutonium disposition would be less than approximately half of the estimated remaining life-cycle cost of carrying out the plutonium disposition approach utilizing the MOX project. In February 2018, DOE’s fiscal year 2019 budget request reiterated for the third consecutive year a plan to terminate the MOX project in favor of pursuing the dilute and dispose option for plutonium disposition. In May 2018, the Secretary of Energy waived existing requirements to continue MOX construction, but the state of South Carolina obtained an injunction in federal district court temporarily blocking the waiver in June, which NNSA subsequently appealed. In October 2018, a federal appellate court granted a stay of the federal district court’s injunction that prohibited termination of the MOX contract and cessation of construction operations. NNSA subsequently issued a notice of termination to the MOX contractor. We have made numerous agency recommendations in prior reports to improve contract and project management in the Department of Energy (DOE) and the National Nuclear Security Administration (NNSA). Some reports contain recommendations for department and agency policies, and others address project management problems for specific projects or also address other agencies besides NNSA. A description of some of our key recommendations, with the status of implementation as of December 2018, is provided below in table 2. For the most up-to-date status of these agency recommendations, see our website: http://www.gao.gov. In addition to the contact named above, Hilary Benedict (Assistant Director), Rodney Bacigalupo, Antoinette Capaccio, Tara Congdon, Pamela Davidson, Richard P. Johnson, Eleni Orphanides, Kevin Remondini, Karen Richey, Sara Sullivan, and Tatiana Winger made key contributions to this report.", "summary": "The MOX project, located at DOE's Savannah River Site in South Carolina and overseen by NNSA, experienced significant cost increases and schedule delays following the start of construction in 2007. After spending nearly $6 billion, NNSA terminated the project in October 2018. While DOE and NNSA have made some recent progress, they have historically struggled to complete, within their original cost and schedule estimates, other major construction projects intended to help maintain the nuclear security complex. GAO was asked to review issues related to oversight of the MOX project. This report examines (1) when NNSA's project management oversight processes recognized cost and schedule problems at the MOX project and the actions the agency took to address them and (2) the extent to which DOE requires that project management lessons learned from MOX and other projects be documented and shared. GAO reviewed agency documents, visited the MOX project, and interviewed DOE and NNSA officials and representatives of the MOX contractor. The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) has strengthened its oversight of the Mixed Oxide Fuel Fabrication Facility (MOX) project since 2011 and, as a result, began recognizing cost and schedule problems. The project, begun in 1997, was intended to dispose of large quantities of weapons-grade plutonium no longer required for national security. Prior to 2011, NNSA's project staff failed to recognize signs that the project would not be completed on time or within its approved cost. An independently conducted analysis, prepared in 2014 in response to a GAO recommendation, determined that NNSA staff did not recognize early problems because they were inexperienced in project management. To strengthen oversight, NNSA in late 2010 and 2011 began actions, such as conducting additional reviews and transferring oversight of the project to a newly established office specializing in project management. NNSA continued to identify the contractor's performance problems, such as the lack of credible, reliable cost and schedule data. These continued problems contributed to NNSA's decision to terminate the project. DOE requires that project staff document and share project management lessons learned on capital asset projects like the MOX project, but not all lessons are to be documented consistently or shared in a timely manner. GAO found that DOE's and NNSA's offices document project management lessons learned differently and that not all of the documented lessons learned are readily accessible to other staff. Additionally, GAO found that DOE does not require that project staff share lessons learned for capital asset projects until the start of construction, which can occur many years after the start of the project. Under key practices, such lessons should be stored in a logical, organized manner, be easily retrievable, and be submitted in a timely manner (see fig.). By developing requirements that clearly define how and where project management lessons learned should be documented and requiring that the lessons be shared in a timely manner, DOE could improve its lessons-learned process and help improve the success of future capital asset projects. Also, for capital asset projects, DOE does not require the evaluation of the results of all corrective actions to respond to lessons learned to ensure that problems are resolved, consistent with key practices. By developing requirements to evaluate the effectiveness of corrective actions, DOE could better verify whether the actions had the intended outcome. GAO is making three recommendations, including that DOE and NNSA develop requirements for defining how and where project management lessons learned for capital asset projects should be documented and shared routinely and in a timely manner, and for evaluating the effectiveness of corrective actions taken in response to lessons learned. DOE agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Our past work has identified progress and challenges in a number of areas related to DHS’s management of the CFATS program including (1) the process for identifying high risk chemical facilities; (2) how it assesses risk and prioritizes facilities; (3) reviewing and approving facility security plans; (4) how it conducts facility compliance inspections; and (5) efforts to conduct stakeholder outreach and gather feedback. DHS has made a number of programmatic changes to CFATS in recent years that may also impact its progress in addressing our open recommendations; these changes are included as part of our ongoing review of the program. In May 2014, we found that more than 1,300 facilities had reported having ammonium nitrate to DHS. However, based on our review of state data and records, there were more facilities with ammonium nitrate holdings than those that had reported to DHS under the CFATS program. Thus, we concluded that some facilities that were required to report may have failed to do so. We recommended that DHS work with other agencies, including the Environmental Protection Agency (EPA), to develop and implement methods of improving data sharing among agencies and with states as members of a Chemical Facility Safety and Security Working Group. DHS agreed with our recommendation and has since addressed it. Specifically, DHS compared DHS data with data from other federal agencies, such as EPA, as well as member states from the Chemical Facility Safety and Security Working Group to identify potentially noncompliant facilities. As a result of this effort, in July 2015, DHS officials reported that they had identified about 1,000 additional facilities that should have reported information to comply with CFATS and subsequently contacted these facilities to ensure compliance. DHS officials told us that they continue to engage with states to identify potentially non-compliant facilities. For example, as of June 2018, DHS officials stated they have received 43 lists of potentially noncompliant facilities from 34 state governments, which are in various stages of review by DHS. DHS officials also told us that they recently hired an individual to serve as the lead staff member responsible for overseeing this effort. DHS has also taken action to strengthen the accuracy of data it uses to identify high risk facilities. In July 2015, we found that DHS used self- reported and unverified data to determine the risk categorization for facilities that held toxic chemicals that could threaten surrounding communities if released. At the time, DHS required that facilities self- report the Distance of Concern—an area in which exposure to a toxic chemical cloud could cause serious injury or fatalities from short-term exposure—as part of its Top-Screen. We estimated that more than 2,700 facilities with a toxic release threat had misreported the Distance of Concern and therefore recommended that DHS (1) develop a plan to implement a new Top-Screen to address errors in the Distance of Concern submitted by facilities, and (2) identify potentially miscategorized facilities that could cause the greatest harm and verify that the Distance of Concern of these facilities report is accurate. DHS has fully addressed both of these recommendations. Specifically, DHS implemented an updated Top-Screen in October 2016 and now collects data from facilities and calculates the Distance of Concern itself, rather than relying on the facilities’ calculation. In response to our second recommendation, in November 2016, DHS officials stated they completed an assessment of all Top-Screens that reported threshold quantities of toxic release chemicals of interest and identified 158 facilities with the potential to cause the greatest harm. As of May 2017, according to ISCD officials, 156 of the 158 facilities submitted updated Top-Screens and 145 of the 156 Top-Screens had undergone a quality assurance review process. DHS has also taken actions to better assess regulated facilities’ risks in order to place the facilities into the appropriate risk tier. In April 2013, we reported that DHS’s risk assessment approach did not consider all of the elements of threat, vulnerability, and consequence associated with a terrorist attack involving certain chemicals. Our work showed that DHS’s risk assessment was based primarily on consequences from human casualties, but did not consider economic consequences, as called for by the National Infrastructure Protection Plan (NIPP) and the CFATS regulation. We also found that (1) DHS’s approach was not consistent with the NIPP because it treated every facility as equally vulnerable to a terrorist attack regardless of location or on-site security and (2) DHS was not using threat data for 90 percent of the tiered facilities—those tiered for the risk of theft or diversion—and using 5-year-old threat data for the remaining 10 percent of those facilities that were tiered for the risks of release or sabotage. We recommended that DHS enhance its risk assessment approach to incorporate all elements of risk and conduct a peer review after doing so. DHS agreed with our recommendations and has made progress towards addressing them. Specifically, with regard to our recommendation that DHS enhance its risk assessment approach to incorporate all elements of risk, DHS worked with Sandia National Laboratories to develop a model to estimate the economic consequences of a chemical attack. In addition, DHS worked with Oak Ridge National Laboratory to devise a new tiering methodology, called the Second Generation Risk Engine. In so doing, DHS revised the CFATS threat, vulnerability, and consequence scoring methods to better cover the range of CFATS security issues. Additionally, with regard to our recommendation that DHS conduct a peer review after enhancing its risk assessment approach, DHS conducted peer reviews and technical reviews with government organizations and facility owners and operators, and worked with Sandia National Laboratories to verify and validate the new tiering approach. We are currently reviewing the reports and data that DHS has provided about its new tiering methodology as part of our ongoing work and will report on the results of this work later this summer. To further enhance its risk assessment approach, in fall 2016, DHS also revised its Chemical Security Assessment Tool (CSAT), which supports DHS efforts to gather information from facilities to assess their risk. According to DHS officials, the new tool—called CSAT 2.0—is intended to eliminate duplication and confusion associated with DHS’s original CSAT. DHS officials told us that they have improved the tool by revising some questions in the original CSAT to make them easier to understand; eliminating some questions; and pre-populating data from one part of the tool to another so that users do not have to retype the same information multiple times. DHS officials also told us that the facilities that have used the CSAT 2.0 have provided favorable feedback that the new tool is more efficient and less burdensome than the original CSAT. Finally, DHS officials told us that as of June 2018, DHS has completed all notifications and has processed tiering results for all but 226 facilities. DHS officials stated they are currently working to identify correct points of contact to update registration information for these remaining facilities. We are currently assessing DHS’s efforts to assess risk and prioritize facilities as part of our ongoing work and will report on the results of this work in our report later this summer. DHS has also made progress reviewing and approving facility site security plans by reducing the time it takes to review these plans and eliminating the backlog of plans awaiting review. In April 2013, we reported that DHS revised its procedures for reviewing facilities’ security plans to address DHS managers’ concerns that the original process was slow, overly complicated, and caused bottlenecks in approving plans. We estimated that it could take DHS another 7 to 9 years to review the approximately 3,120 plans in its queue at that time. We also estimated that, given the additional time needed to do compliance inspections, the CFATS program would likely be implemented in 8 to 10 years. We did not make any recommendations for DHS to improve its procedures for reviewing facilities’ security plans because DHS officials reported that they were exploring ways to expedite the process, such as reprioritizing resources and streamlining inspection requirements. In July 2015, we reported that DHS had made substantial progress in addressing the backlog—estimating that it could take between 9 and 12 months for DHS to review and approve security plans for the approximately 900 remaining facilities. DHS officials attributed the increased approval rate to efficiencies in DHS’s review process, updated guidance, and a new case management system. Subsequently, DHS reported in its December 2016 semi-annual report to Congress that it had eliminated its approval backlog. Finally, we found in our 2017review that DHS also took action to implement an Expedited Approval Program (EAP). The CFATS Act of 2014 required that DHS create the EAP as another option that tier 3 and tier 4 chemical facilities may use to develop and submit security plans to DHS. Under the program, facilities may develop a security plan based on specific standards published by DHS (as opposed to the more flexible performance standards using the standard, non-expedited process). DHS issued guidance intended to help facilities prepare and submit their EAP security plans to DHS, which includes an example that identifies prescriptive security measures that facilities are to have in place. According to committee report language, the EAP was expected to reduce the regulatory burden on smaller chemical companies, which may lack the compliance infrastructure and the resources of large chemical facilities, and help DHS to process security plans more quickly. If a tier 3 or 4 facility chooses to use the expedited option, DHS is to review the plan to determine if it is facially deficient, pursuant to the reporting requirements of the CFATS Act of 2014. If DHS approves the EAP site security plan, it is to subsequently conduct a compliance inspection. In 2017, we found that DHS had implemented the EAP and had reported to Congress on the program, as required by the CFATS Act of 2014. In addition, as of June 2018 according to DHS officials, only 18 of the 3,152 facilities eligible to use the EAP opted to use it. DHS officials we interviewed attributed the low participation to several possible factors including: DHS had implemented the expedited program after most eligible facilities already submitted standard (non-expedited) security plans to DHS; facilities may consider the expedited program’s security measures to be too strict and prescriptive, not providing facilities the flexibility of the standard process; and the lack of an authorization inspection may discourage some facilities from using the expedited program because this inspection provides useful information about a facility’s security. We also found in 2017 that recent changes made to the CFATS program could affect the future use of the expedited program. As discussed previously, DHS has revised its methodology for determining the level of each facility’s security risk, which could affect a facility’s eligibility to participate in the EAP. DHS continues to apply the revised methodology to facilities regulated under the CFATS program and but it is too early to assess the impact on participation in the EAP. In our July 2015 report, we found that DHS began conducting compliance inspections in September 2013, and by April 2015, had conducted inspections of 83 of the 1,727 facilities that had approved security plans. Our analysis showed that nearly half of the facilities were not fully compliant with their approved site security plans and that DHS had not used its authority to issue penalties because DHS officials found it more productive to work with facilities to bring them in compliance. We also found that DHS did not have documented processes and procedures for managing the compliance of facilities that had not implemented planned measures by the deadlines outlined in the plans. We recommended that DHS document processes and procedures for managing compliance to provide more reasonable assurance that facilities implement planned measures and address security gaps. DHS agreed and has taken steps toward implementing this recommendation. DHS updated its CFATS Enforcement Standard Operating Procedure (SOP) and has made progress on the new CFATS Inspections SOP. Once completed these two documents collectively are expected to formally document the processes and procedures currently being used to track noncompliant facilities and ensure they implement planned measures as outlined in their approved site security plans, according to ISCD officials. DHS officials stated they expect to finalize these procedures by the end of fiscal year 2018. We are examining compliance inspections as part of our ongoing work and will report on the results of our work in our report later this summer. In April 2013, we reported that DHS took various actions to work with facility owners and operators, including increasing the number of visits to facilities to discuss enhancing security plans, but that some trade associations had mixed views on the effectiveness of DHS’s outreach. We found that DHS solicited informal feedback from facility owners and operators in its efforts to communicate and work with them, but did not have an approach for obtaining systematic feedback on its outreach activities. We recommended that DHS take action to solicit and document feedback on facility outreach consistent with DHS efforts to develop a strategic communication plan. DHS agreed and implemented this recommendation by developing a questionnaire to solicit feedback on outreach with industry stakeholders and began using the questionnaire in October 2016. Chairman Shimkus, Ranking Member Tonko, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff members have any questions about this testimony, please contact me at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals making key contributions to this work include John Mortin, Assistant Director; and Brandon Jones, Analyst-in-Charge; Michael Lennington, Ben Emmel, and Hugh Paquette. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Thousands of facilities have hazardous chemicals that could be targeted or used to inflict mass casualties or harm surrounding populations in the United States. In accordance with the DHS Appropriations Act, 2007, DHS established the CFATS program in 2007 to, among other things, identify and assess the security risk posed by chemical facilities. DHS inspects high-risk facilities after it approves facility security plans to ensure that the facilities are implementing required security measures and procedures. This statement summarizes progress and challenges related to DHS's CFATS program management. This statement is based on prior products GAO issued from July 2012 through June 2017, along with updates conducted in June 2018 on DHS actions to address prior GAO recommendations. To conduct the prior work, GAO reviewed relevant laws, regulations, and DHS policies for administering the CFATS program, how DHS assesses risk, and data on high-risk chemical facilities. GAO also interviewed DHS officials and reviewed information on DHS actions to implement its prior recommendations. The Department of Homeland Security (DHS) has made progress addressing challenges that GAO's past work identified to managing the Chemical Facility Anti-Terrorism Standards (CFATS) program. The following summarizes progress made and challenges remaining in key aspects of the program. Identifying high-risk chemical facilities. In July 2015, GAO reported that DHS used self-reported and unverified data to determine the risk of facilities holding toxic chemicals that could threaten surrounding communities if released. GAO recommended that DHS should better verify the accuracy of facility-reported data. DHS implemented this recommendation by revising its methodology so it now calculates the risk of toxic release, rather than relying on facilities to do so. Assessing risk and prioritizing facilities. In April 2013, GAO reported weaknesses in multiple aspects of DHS's risk assessment and prioritization approach. GAO made two recommendations for DHS to review and improve this process, including that DHS enhance its risk assessment approach to incorporate all of the elements of consequence, threat, and vulnerability associated with a terrorist attack involving certain chemicals. DHS launched a new risk assessment methodology in October 2016 and is currently gathering new or updated data from about 27,000 facilities to (1) determine which facilities should be categorized as high-risk because of the threat of sabotage, theft or diversion, or a toxic release and (2) assign those facilities deemed high risk to one of four risk-based tiers. GAO has ongoing work assessing these efforts and will report later this summer on the extent to which they fully address prior recommendations. Reviewing and approving facilities' site security plans . DHS is to review security plans and visit facilities to ensure their security measures meet DHS standards. In April 2013, GAO reported a 7 to 9 year backlog for these reviews and visits. In July 2015, GAO reported that DHS had made substantial progress in addressing the backlog—estimating that it could take between 9 and 12 months for DHS to review and approve security plans for the approximately 900 remaining facilities. DHS has since taken additional action to expedite these activities and has eliminated this backlog. Inspecting facilities and ensuring compliance. In July 2015, GAO reported that DHS conducted compliance inspections at 83 of the 1,727 facilities with approved security plans. GAO found that nearly half of the inspected facilities were not fully compliant with their approved security plans and that DHS did not have documented procedures for managing facilities' compliance. GAO recommended that DHS document procedures for managing compliance. As a result, DHS has developed an enforcement procedure and a draft compliance inspection procedure and expects to finalize the compliance inspection procedure by the end of fiscal year 2018. GAO has made various recommendations to strengthen DHS's management of the CFATS program, with which DHS has generally agreed. DHS has implemented or described planned actions to address most of these recommendations.", "document_type": "gao"}
{"report": "As we have previously reported in reviews of health care quality outside of the MHS, health care quality measures are standard, evidence-based metrics designed to assess the extent to which patients receive health care that increases the likelihood of desired health outcomes and are consistent with current professional knowledge. These measures may be used to assess the quality of care in various settings, including hospitals and physician offices. Health care quality measures are intended to (1) inform providers about opportunities for potential improvements in their delivery of care, (2) encourage or incentivize providers to consistently provide high quality care, and (3) inform consumers about which providers are most likely to deliver high quality care. There are broad categories of clinical quality measures that address various aspects of quality of care. See table 1 for a description of these broad categories of quality measures. The data used to calculate the results of health care quality measures can come from a number of different sources. Some measures often require detailed clinical information obtained from patient medical records, such as process measures that indicate whether timely and effective care was provided in a specific situation, for example, or whether stroke patients received clot-dissolving medication appropriately. Other measures are designed to use information on patient demographics and diagnoses that can be obtained from more readily accessible sources, such as claims data or other administrative data that have already been collected for other purposes such as billing. In addition, patients can be asked directly, usually through surveys, to report on their experiences receiving care. The MHS is a complex organization in which responsibility for the delivery of health care is primarily shared among the military services—Army, Navy, and Air Force—and the Defense Health Agency (DHA). The Army, Navy and Air Force medical commands report through their service chiefs to their respective military department Secretaries and then to the Secretary of Defense. DHA reports through the Office of the Assistant Secretary of Defense for Health Affairs and the Under Secretary of Defense for Personnel and Readiness to the Secretary of Defense. The Office of the Assistant Secretary of Defense for Health Affairs manages the Defense Health Program appropriation, which funds the medical and health care programs at the medical commands of the military services. As of fiscal year 2018, most of the MTFs, including military hospitals and clinics, were under the direction and control of the military services, which are responsible for staffing, training, and equipping those MTFs to meet mission requirements. DHA has responsibility for the managed care support contracts through which the MHS administers its purchased care, and DHA also administers several MTFs in the vicinity of Washington, DC. Figure 1 depicts the MHS organizational structure. Recently enacted changes will affect the administration of the MTFs in future years. Most notably, DOD will alter administration of the MTFs, shifting responsibility from the military services to DHA. Section 702 of the National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017) directed DOD to give DHA responsibility for the administration of all MTFs, including budgetary matters, information technology, and health care administration and management. In the conference report for NDAA 2017, Congress stated its intention that the creation of a single agency responsible for all MTFs would improve and sustain readiness, reduce costs, and increase efficiency. DOD has since prepared a series of implementation plans as it works to develop the specific policies and procedures to enable this change to take effect starting October 1, 2018. The most recent plan issued by DOD in June 2018 envisions a 3-year transition to be completed October 1, 2021. For purchased care, DOD contracts with civilian health care contractors to manage its civilian providers on a regional basis. The primary responsibilities of these managed care support contractors include the following: developing civilian provider networks, which include hospitals and ensuring adequate access to health care; referring and authorizing beneficiaries to receive health care; processing health care claims; educating providers and beneficiaries; and conducting utilization management and quality management programs. There have been several generations of multi-year contracts since 1996. In July 2016, DOD awarded its fourth generation of managed care support contracts to two regional contractors, and on January 1, 2018, the MHS began health care delivery under these contracts. According to our review of DOD documents, the MHS uses a structured process to select the measures on its dashboards that are used to assess the quality of direct and purchased care. Specifically, DOD documents state that the core direct care measures that are on the Core Dashboard are selected through the MHS’s performance management system called Partnership for Improvement (P4I), which began in 2015. The documents show that proposals for potential quality measures are developed by work groups that focus on different specialized areas, such as maternity care or mental health. These proposals are reviewed and approved by the Steering Committee for P4I, which develops the list of core quality measures for direct care. The Steering Committee then presents the list of core quality measures to a succession of governance bodies—each of which incorporates representation from the three military services plus DHA—for review and approval. DOD documents indicate that the MHS repeats this process annually as it decides which quality measures to add, drop, or modify for the coming fiscal year from the Core Dashboard. The DOD documents we reviewed lay out a parallel process that the MHS follows to select which purchased care quality measures will be tracked in the Purchased Care Dashboard. A work group that specializes on purchased care issues with representation of DHA and the three military services develops the proposed list of quality measures for the Purchased Care Dashboard. This list is then reviewed and approved by the same succession of governance bodies that decide on the Core Dashboard measures. Officials told us and DOD documents confirmed that the MHS and the purchased care contractors also track additional quality measures that are not included in the Core and Purchased Care Dashboards. For example, MHS clinicians who provide maternity care track a set of measures developed by the National Perinatal Information Center. Similarly, a number of military hospitals report on surgical quality measures to the National Surgical Quality Improvement Program. The MHS also conducts surveys of MHS beneficiaries from which it obtains data for patient experience measures for both direct and purchased care. Additionally, the MHS requires the managed care support contractors that administer the MHS’s networks of civilian providers for purchased care to monitor several different sets of quality measures or indicators, many of which focus on patient safety. These include patient safety indicators, hospital acquired conditions, and serious reportable events. They also analyze measures selected from Hospital Compare and the Healthcare Effectiveness Data and Information Set (HEDIS), some of which correspond to measures included in the Core and Purchased Care Dashboards. While health care systems in the United States can use a variety of measures to assess the quality of care, two of the most widely adopted sets of quality measures include the Hospital Compare measure set developed by Centers for Medicare & Medicaid Services (CMS) for inpatient care and the CQMC measure sets jointly developed by CMS and major private health insurers for outpatient care. Since 2005, CMS has collected results for individual hospitals on a specific list of health care quality measures that are posted on a website known as Hospital Compare. CMS does this to make comparable information on the quality of care provided by different hospitals publicly available. Hospital Compare currently covers more than 4,000 hospitals that participate in the Medicare program. These hospitals supply data to CMS for quality measures of inpatient and emergency department care. These data reflect the care provided to all patients treated at these hospitals, not just those covered by Medicare. Each year CMS goes through a formal process, including receiving input from experts and stakeholders, to review and revise the mix of quality measures that these hospitals are expected to report. The purpose of this review, according to CMS, is to ensure that the set of measures reported on Hospital Compare provides meaningful information for quality improvement while reducing unnecessary administrative burden. Initiated in 2014, the CQMC is a multi-stakeholder voluntary effort focused on quality measure alignment that has developed eight sets of measures for outpatient primary and specialty care, known as the CQMC measure sets. In developing the measure sets, CMS and private health insurers negotiate sets of core measures on which they agree to focus on measuring care quality for certain conditions. Physician specialty societies, employer groups, consumer groups, and regional collaboratives also participate in the negotiations. The CQMC measure sets have been adopted by CMS for Medicare and by 15 major private health insurers for commercial health plans. Additionally, section 728 of the NDAA 2017 directs the MHS to use, to the extent appropriate, these quality measures to assess the quality of direct and purchased care. CQMC documents show that the members of the CQMC intend to continually update these core measure sets as more meaningful measures are developed over time. CMS and the private health insurers plan to expand their application of these measures incrementally, as CMS conducts its annual reviews of Medicare’s quality measures and the insurers update or renew their contracts with different providers. The MHS does not use a common set of measures on its Core and Purchased Care Dashboards to assess the quality of care provided through direct and purchased care. In addition, for both direct and purchased care, the MHS uses measures on its dashboards that assess a more limited range of quality care areas and medical conditions as compared to the Hospital Compare and CQMC measures adopted by Medicare and private health insurers. Although the NDAA 2016 directed the MHS to align its quality measures for direct and purchased care, we found that as of March 31, 2018, the MHS used separate sets of measures on the Core and Purchased Care Dashboards to assess the quality of care delivered in direct and purchased care, respectively. To assess the quality of direct care, the MHS tracks 43 measures on its Core Dashboard, and to assess the quality of purchased care, the MHS tracks 18 measures on its Purchased Care Dashboard. The MHS tracks 8 measures that are the same for both dashboards, leaving 35 measures tracked only on the Core Dashboard for direct care and 10 measures tracked only on the Purchased Care Dashboard for purchased care. (See fig. 2.) According to MHS officials, since launching the P4I performance management system in 2015, the MHS has focused on making systematic improvements in the quality of care across the MTFs in direct care. As a result, the 43 measures they have chosen for the Core Dashboard reflect their priorities for quality improvement within direct care only. In the case of purchased care, MHS officials stated that requiring civilian providers to report on the same 43 measures that are used on the Core Dashboard for direct care would add burden, and the MHS had concerns that this would make civilian providers less likely to participate in purchased care. Instead, the MHS tracks 18 measures on the Purchased Care Dashboard that rely on information sources other than provider reporting, such as claims that the providers submit in the normal course of receiving payment for their services and surveys that the MHS conducts of its beneficiaries. MHS officials explained that they try to minimize the reporting burden for purchased care providers because for most of these civilian providers, eligible MHS beneficiaries represent only a small proportion of their patient population. We also found that for direct care, the MHS uses its quality measures on the Core Dashboard to assess the quality of care delivered to beneficiaries served by individual MTFs, such as hospitals or clinics. However, for purchased care, the MHS uses its quality measures on the Purchased Care Dashboard to assess the quality of care delivered to the beneficiary population served by each contractor’s network as a whole– not the quality of care delivered by individual civilian hospitals, clinicians, or other providers in the network. Specifically: In direct care, the MHS uses the 43 measures on the Core Dashboard to track the quality of care delivered by individual MTFs. For example, on a measure of central line-associated bloodstream infections, the MHS tracks the incidence of such infections by individual MTF and by military service (i.e., the incidence of such infections in Army, Navy and Air Force MTFs). In contrast, in purchased care, the MHS assesses information on the 18 measures on the Purchased Care Dashboard for all beneficiaries in each of the networks administered by the two managed care support contractors. For example, on a measure of the percentage of beneficiaries with diabetes who have their hemoglobin level tested annually, the MHS calculates an overall rate of hemoglobin testing across all the diabetic patients that receive care in each contractor’s network. The beneficiary population-level reporting on quality measures on the Purchased Care Dashboard reflects the nature of the MHS’s relationship with its managed care support contractors for purchased care. Under the terms of the contracts that the MHS has negotiated with the contractors that administer the networks of civilian providers to care for eligible beneficiaries, the contractors bear responsibility for ensuring the quality of care delivered by those providers. While the MHS requires the managed care support contractors to monitor different sets of quality measures or indicators, such as patient safety indicators, hospital acquired conditions, and serious reportable events to identify possible cases of individual patient harm and determine appropriate interventions, the contractors report this information in annual reports to the MHS for their network as a whole, as opposed to reporting on individual providers. Because the MHS largely uses separate measures for direct and purchased care on its dashboards and tracks the quality of care delivered by civilian providers in purchased care in the aggregate rather than individually, the MHS lacks the information it needs to make comparable assessments of the quality of care delivered across the MHS as a whole. This, in turn, limits the MHS’s ability to ensure it has the information needed to determine whether it is achieving the department’s overall strategic goals of providing high quality care across the MHS as a whole and ensuring that beneficiaries receive a consistent level of high quality care regardless of whether that care is delivered in direct or purchased care. Moreover, using a different set of quality of measures on the dashboards for direct and purchased care is inconsistent with section 730 of the NDAA 2016, which directs the MHS to align its measures for direct and purchased care so it can reduce performance variation across the MHS. MHS officials acknowledge in principle the value of using aligned measures to assess quality of care in direct and purchased care, but the officials cited a range of factors that pose challenges to achieving this objective, such as the large number of civilian providers and the lack of common health information technology systems. Based on our review, we found that one way the MHS could have a common set of quality measures for both direct and purchased care, without increasing the reporting burden on civilian providers, would be to use, as appropriate, Hospital Compare and CQMC quality measures. Notably, the MHS states on its website that almost all of the civilian hospitals that are in the contractors’ networks for purchased care already report information on the measures posted on the Hospital Compare website. As a result, there potentially would be no additional burden for these purchased care providers to report information on the Hospital Compare quality measures. Similarly, major health plans report that they have begun implementing the CQMC measure sets in their contracts with physicians, meaning that physicians participating in those plans already report information on CQMC outpatient quality measures. To the extent that those physicians are also in the MHS contractors’ networks for purchased care, the information the physicians report on the CQMC measures could be used by the MHS. We found the MHS is already using some Hospital Compare and CQMC measures for inpatient and outpatient care. There are a total of 76 measures that Medicare and private health insurers report to Hospital Compare and a total of 60 CQMC outpatient measures. Besides the measures used in the Core and Purchased Care Dashboards, MHS also collects 24 of 76 Hospital Compare measures and 10 of the 60 CQMC outpatient measures. For the most part, these measures are not part of the direct and purchased care dashboards that MHS leadership uses to assess the performance of direct and purchased care. Furthermore, MHS officials told us that they have no specific plans to increase the number of measures that the MHS uses from Hospital Compare for inpatient care delivered in its hospitals. In the case of outpatient care, our review of DOD documents shows that the MHS plans on expanding reporting to only 5 more CQMC quality measures, in large part to minimize its reporting burden. We found that the measures the MHS uses on its Core and Purchased Care Dashboards to assess the quality of direct and purchased care address only a limited range of quality areas and medical conditions when compared with the Hospital Compare and CQMC measure sets that are adopted by Medicare and private health insurers. According to the National Quality Forum, which plays a central role in developing and annually reassessing the Hospital Compare measure set and also was consulted in the development of the CQMC measure sets, the measures used to assess quality of care should comprise an appropriate mix of recognized measure types, including outcome measures, process measures, experience of care measures, and cost and structure measures. These measures should cover a broad enough range of measure types and medical conditions so that they provide an accurate overall assessment of the quality of care patients receive. Based on our analysis, Table 2 below shows the limited range of measures on the Core and Purchased Care dashboards used by the MHS to assess inpatient care, as compared to the range of inpatient measures that Medicare hospitals report for Hospital Compare. In general, each of the five types of measures shown in the table below addresses different aspects of health care quality in hospital settings. For direct care, the MHS uses no more than one measure on its Core Dashboard for all of these five measure types except for “Outcome” measures; for purchased care, the MHS does not use any inpatient care measures on its Purchased Care Dashboard. Similarly, based on our analysis, Table 3 below shows the limited range of measures on the Core and Purchased Care Dashboards used by the MHS to assess outpatient care, as compared to the range of outpatient measures that are part of the CQMC measure sets adopted by Medicare and private health insurers. The MHS uses measures on its dashboards that assess fewer clinical focus areas and medical conditions as compared with those measures included in the CQMC measure sets. As with hospital care, the difference is greatest with respect to purchased care. The limitations we found in the quality measures used by the MHS—the relatively narrow range of measures as well as the relatively few measures used across direct and purchased care—reflect the MHS’s priorities in selecting quality measures. In short, the MHS focuses on the value and impact of implementing individual measures, but does not prioritize aligning the measures used across direct and purchased care or expanding the range of medical conditions and quality areas covered in the aggregate by the measures. The MHS’s annual assessment of quality measures focuses only the Core Dashboard measures. For each Core Dashboard measure for which a change is under consideration—such as dropping, modifying, or adding another quality measure to the Core Dashboard—MHS officials apply a standard set of criteria involving both the feasibility of collecting the data needed for that measure and the utility of that measure for addressing a strategic priority or promoting performance improvement. When asked about the potential value of increasing the number of Hospital Compare measures, MHS officials said they need to make a value-based determination of whether the benefits of obtaining results for any given Hospital Compare measure justified the costs of collecting and transmitting the data required for that measure. In discussions about potential measures for the Purchased Care Dashboard, MHS officials also focused on the characteristics of specific measures being considered for inclusion in the dashboard. Because the MHS does not prioritize expanding the range of medical conditions and quality areas covered by common measures across direct and purchased care, the measures the MHS uses provide DOD’s senior health care leadership with an incomplete picture of the quality of care across the MHS. As we have noted, the MHS has reported to the Congress that its DOD health care leaders rely on the Core and Purchased Care Dashboard measures to establish accountability throughout the MHS and identify areas where quality improvement is needed. However, the current approach may not lead to the selection of quality measures for the two dashboards that would enable MHS officials to identify the most critical quality of care issues in the MHS. The lack of that information, in turn, limits the ability of DOD’s senior health care leadership to target their performance improvement efforts most effectively in support of DOD’s overall strategic goals of providing high quality care across the MHS as a whole. The MHS has established performance standards in direct care related to the Core Dashboard measures and has corrective action requirements for MTFs that do not meet the standards. However, the MHS has not established performance standards related to the Purchased Care Dashboard measures for individual civilian providers in purchased care and therefore does not have related corrective action requirements for these providers. As part of its P4I performance management system for direct care, the MHS has established specific performance standards that each MTF must meet in delivering quality care to MHS beneficiaries. These standards—some of which are under development—specify a minimum level of performance that each MTF should achieve related to the Core Dashboard quality measures tracked in direct care. For example, in the case of the HEDIS All Cause Readmission measure on the Core Dashboard, the MHS’s performance standard is that MTFs should have a rate of unplanned acute readmissions within 30 days of an initial hospital admission that is as good as or better than the national 75th percentile. This performance standard is based on the readmission rates that the National Committee for Quality Assurance, the lead entity for that measure, has observed across U.S. hospitals. During regularly recurring governance meetings throughout the year, MHS governance bodies review how MTFs have performed relative to the performance standards for the Core Dashboard measures. Our review found that during these meetings, the governance bodies generally do not examine the circumstances of MTFs that do not perform well on the performance standards related to the Core Dashboard measures. Consequently, DOD’s senior health care leadership within the governance bodies may receive limited information on the challenges faced by low-performing individual MTFs. However, during these meetings, officials from the military services and DHA highlight MTFs that are performing well on the established performance standards, and the officials share best practices and specific strategies used to achieve high performance. We also found that in direct care, the MHS requires MTFs that do not meet the MHS’s performance standards related to its Core Dashboard measures to take corrective actions to improve the quality of care they deliver. The military services—Army, Navy and Air Force—and DHA have been responsible for implementing this requirement. For example, Navy officials explained that they periodically review information collected on the MHS’s Core Dashboard quality measures to analyze areas where MTFs do not meet established performance standards tied to these measures and to oversee MTFs’ efforts to correct these deficiencies. Officials told us that each of the services exercises its discretion to independently develop and implement the corrective actions that the service determines best address the performance issues identified through the use of the MHS’s quality measures. For example, to help reduce the number of Central Line-Associated Bloodstream Infections (CLABSI), the Army began financially awarding MTFs that performed well on the CLABSI measure, whereas the Air Force developed a toolkit to help providers prevent CLABSI. As the MHS moves to transfer administration of the MTFs from the individual military services to DHA as directed by section 702 of the NDAA 2017, the approach for assessing performance and implementing corrective actions is likely to change. The MHS’s recently issued implementation plan as of June 2018 outlines some alterations to the current performance assessment process. Specifically, MTFs will create and submit a performance plan that will be reviewed and approved by DHA. DHA will host monthly review sessions with MTFs to track performance on the plan. MTFs will be evaluated using a set of measures aligned to the Quadruple Aim that will include many but not all of the Core Dashboard measures. The MHS has not established performance standards related to the 18 Purchased Care Dashboard measures for individual civilian hospitals, clinicians, or other providers in purchased care. Instead, the MHS has established performance standards related to the 18 Purchased Care Dashboard measures that MHS officials use to track the performance of each of the two managed care support contractors. According to MHS officials, the MHS does not require the contractors to ensure that each individual hospital, physician, or other provider in these networks meets the performance standards related to the Purchased Care Dashboard measures. For example, in the case of a measure on the use of imaging for low back pain, the MHS has set a performance standard for each managed care support contractor, one that aims at avoiding excessive imaging across the beneficiary population in the contractor’s network. However, officials told us that the information that the MHS collects on the measure—the number of beneficiaries in each of the contractors’ networks who receive imaging services for low back pain—does not indicate the extent to which each individual civilian provider in the contractor networks meets or fails to meet the performance standard. Thus, the information the MHS obtains on the quality measure and its related performance standard does not identify which hospitals, clinicians, or other providers need to improve their performance in order for all beneficiaries to receive the expected level of care quality that the performance standard represents. Because the MHS has not established performance standards related to the Purchased Care dashboard measures for individual civilian hospitals, clinicians, or other providers in purchased care, there are no related requirements for corrective action. Instead, the MHS requires its managed care support contractors to undertake other activities to promote improved quality of care across civilian providers in their networks. These include investigations of quality issues, focused reviews, analyses of Hospital Compare data, and value-based purchasing pilots, as discussed further below. However, our review found that these efforts are not applied comprehensively across all individual purchased care providers. Investigations of Quality Issues. One approach the MHS uses to promote improved quality of care across purchased care providers is to direct its managed care support contractors to investigate whether individual beneficiaries have experienced what the MHS refers to as a quality issue. Potential quality issues are defined by the MHS as any instance when there are indications that a purchased care provider has deviated from what the managed care support contractors deem acceptable standards of professional practice. The contractors can identify these potential quality issues through beneficiary complaints; analyses of patient safety indicators, hospital acquired conditions, and serious reportable events; or by the MHS or contractor staff. Once potential quality issues are identified, they are investigated by a clinician, who reviews the patient’s complete medical record. Based on the clinician’s review of the patient’s medical records, the clinician verifies whether or not a quality issue has occurred and, if so, assigns the quality issue a severity level. To address the quality issue, the managed care support contractors may take a range of steps, including educating the provider, monitoring the provider, notifying the appropriate state or federal bodies, and removing the provider from the MHS’s purchased care provider network. In practice, however, MHS officials said and documents we reviewed show that providers are rarely removed from the network. For example, MHS officials reported that one contractor estimated that one provider was removed from its network over quality issues every 1 to 2 years. Focused Reviews. Another way the MHS uses its managed care support contractors to promote improved quality of care across purchased care providers is through focused reviews. During these reviews, the managed care support contractors review the medical records for a selected patient population to determine the extent to which a specified quality concern is a widespread problem. For example, in 2015 one contractor reviewed the medical records of 96 beneficiaries to determine the frequency of obstetric trauma, an injury related to vaginal deliveries. If a focused review determines that there is a widespread quality problem, the contractor may implement a quality improvement initiative designed to prompt all of its network providers to address that concern, as opposed to targeting specific providers. Analyses of Hospital Compare Data. The MHS also requires the contractors to conduct an annual examination of the performance of hospitals in their networks on the different quality measures reported on Medicare’s Hospital Compare. However, the managed care support contractors have considerable flexibility in deciding how to structure these analyses and how to follow-up on results. Consequently, the two managed care support contractors have adopted different analytical approaches to define and identify hospitals with relatively low performance. For example, the managed care support contractors chose to examine different quality measures and use different criteria to identify hospitals with relatively low performance. In their most recent annual reports issued during 2017, both managed care support contractors indicated that they were considering contacting the lower performing hospitals to prompt remedial action, but because no action had yet occurred, the reports leave open what steps were ultimately taken and how these hospitals responded. Nonetheless, these activities suggest that the managed care support contractors have the ability to use Hospital Compare to analyze and address individual provider performance on a standard set of quality measures. However, the MHS has not specified how this process should proceed, leaving it to the managed care support contractors to decide what and how much they will do in conducting these analyses of individual hospitals. Value-Based Purchasing Pilots. The MHS has recently begun to test different approaches to incentivize purchased care providers to deliver high quality care through several value-based purchasing pilots. For example, in February 2018 the MHS launched a maternity care pilot that pays providers more for better performance on specified quality measures. The pilot also implements a ‘steerage model’ approach that identifies higher performing providers in directories provided to patients by indicating providers as “Gold Stork” or “Silver Stork.” These pilots may provide the MHS another way to influence the quality of care provided by certain subsets of its purchased care providers. MHS officials stated that although DOD has not arrived at specific goals, it plans to expand these pilots to cover around 20 to 25 percent of its purchased care services by 2020. The use of performance standards and corrective action requirements for individual hospitals, clinicians, or other providers who serve MHS beneficiaries is consistent with federal internal control standards for monitoring, which state that management should establish monitoring activities, evaluate the results, and remediate any deficiencies. While the MHS has established performance standards related to its Core Dashboard measures in direct care and has corrective action requirements for MTFs that do not meet those standards, it has not done so for individual civilian hospitals, clinicians, or other providers in purchased care related to its Purchased Care Dashboard measures. Additionally, if the MHS aligned quality measures on the Core and Purchased Care Dashboards at the provider level, the MHS could require its managed care support contractors to monitor the performance of individual civilian providers relative to set performance standards comparable to the ones that the MHS has established for MTFs. This approach would allow the MHS to determine the extent of performance variability, both among individual civilian providers and across MTFs and individual civilian providers. By not establishing consistent performance standards at the provider-level for direct and purchased care and requiring corrective action requirements to ensure that these standards are met by providers in both direct and purchased care, the MHS is limited in its ability to address variation in the quality of care delivered. This further limits the MHS’s ability to ensure that it is achieving the department’s overall strategic goals of providing high quality care across the MHS as whole and ensuring that beneficiaries receive a consistent level of high quality care regardless of whether that care is delivered in direct or purchased care. Congress directed DOD to reduce variation in the quality of care beneficiaries receive through the MHS. DOD has taken important steps towards this goal by identifying a set of core measures that DOD senior health care leadership use to assess quality of care in direct care and another set of measures that they use to assess quality in purchased care. DOD health care leaders rely on these measures on their Core and Purchased Care Dashboards to establish accountability throughout the MHS and identify areas where quality improvement is needed. However, with few exceptions, the MHS uses different measures on its Core and Purchased Care Dashboards to assess the quality of direct and purchased care, making it difficult to determine the extent to which it is ensuring consistent quality across the MHS as a whole. Furthermore, for both direct and purchased care, the MHS uses measures on its dashboards that assess a limited range of quality areas and medical conditions when compared to the widely used quality measure sets adopted by Medicare and private insurers. Without using a broader range of available quality measures available—measures that many purchased care providers already report to CMS and private health insurers—DOD is missing an opportunity to better target the most critical quality of care issues in the MHS. The limitations we identified in the MHS’s Core and Purchased Care Dashboard quality measures reflect the fact that in its annual measure selection process, the MHS does not prioritize aligning the quality measures across direct and purchased care and expanding the range of measures it uses across the two systems of care. Finally, our review shows that while DOD has established performance standards for the core measures in direct care and corrective action requirements for MTFs that do not meet these standards, DOD has not done so for individual purchased care providers. Notably, DOD does not set clear expectations that individual purchased care providers should meet the performance standards related to the quality measures on the Purchased Care Dashboard. Performance standards and related corrective action requirements are critical for holding both MTFs and individual civilian providers accountable for providing quality care. Without consistent standards and related corrective action requirements across the MHS, DOD is limited in its ability to ensure that beneficiaries consistently receive high quality care, regardless of whether they receive that care in the direct or purchased care systems. We are making two recommendations to the Assistant Secretary of Defense for Health Affairs. As MHS governing bodies conduct their recurring reviews of quality measures selected for MHS’s Core Dashboard and Purchased Care Dashboards, the Assistant Secretary of Defense for Health Affairs should direct those bodies to prioritize, as appropriate, the selection of measures that apply to both direct and purchased care at the provider level and that expand the range of quality measure types and medical conditions that are assessed. (Recommendation 1) The Assistant Secretary of Defense for Health Affairs should establish, as appropriate, performance standards related to the Purchased Care Dashboard measures that are consistent with the MHS’s performance standards for direct care; ensure they are applied to individual purchased care providers; and take steps, such as amending its managed care support contracts, if necessary, to require corrective actions to be taken when providers do not meet those standards. (Recommendation 2) We provided a draft of this report to DOD for review, and DOD provided written comments, which are reprinted in appendix I. In its written comments, DOD concurred with both of our recommendations. With regards to the first recommendation, DOD stated that it plans to enhance the process for selecting quality measures that apply to both direct and purchased care; optimize use of data on Hospital Compare to expand the types and medical conditions evaluated; augment their governance reporting structure so that senior leadership can review quality measures included on the Core Dashboard and Purchased Care Dashboard; and implement the CQMC measure sets for outpatient care. Additionally, DOD stated that it has efforts underway to create a library of all quality measures used across direct and purchased care. With regards to the second recommendation, DOD acknowledged the need to strengthen accountability for meeting performance standards that apply to both direct and purchased care providers. It also agreed that measures of individual provider performance in purchased care should be augmented and consistent with measures in direct care, where possible. DOD noted, however, that because it works through managed care support contractors for purchased care, it can hold the contractors accountable for meeting performance standards but cannot currently take action against individual providers based solely on performance. Instead, DOD stated that rather than taking a corrective action approach, it plans to expand its value-based purchasing efforts and incentivize providers that meet and exceed certain quality standards. This raises concerns, as DOD’s current plans to expand its value-based purchasing efforts would only be applicable for between 20 and 25 percent of the services MHS beneficiaries receive from purchased care providers by 2020, as we noted in our report. Without having all providers managed consistently and subject to prompt remediation of deficiencies, DOD is missing an opportunity to improve the quality of purchased care, and it increases the risk that not all beneficiaries will receive a consistent level of high quality care across the MHS. Acknowledging DOD’s comment that it cannot currently take action against individual providers based solely on performance, we have modified our recommendation to clarify that DOD should take the steps it determines are necessary, such as amending its managed care support contracts, to institute corrective action requirements for purchased care providers. We are sending copies of this report to the Secretary of Defense and appropriate congressional committees. The report is also available at no charge on GAO’s website at http://www.gao.gov. If you or your staff has any questions regarding this report, please contact me at (202) 512-7114 or silass@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Rashmi Agarwal, Assistant Director; Eric Peterson Analyst-in-Charge; Muriel Brown; Shaunessye Curry; Michael Erb; Krister Friday; Jacquelyn Hamilton; and Colbie Holderness made key contributions to this report. Defense Health Reform: Steps Taken to Plan the Transfer of the Administration of the Military Treatment Facilities to the Defense Health Agency, but Work Remains to Finalize the Plan. GAO-17-791R. Washington, D.C.: Sep 29, 2017. Health Care Quality: HHS Should Set Priorities and Comprehensively Plan Its Efforts to Better Align Health Quality Measures. GAO-17-5. Washington, D.C.: Oct 13, 2016. VA Health Care Quality: VA Should Improve the Information It Publicly Reports on the Quality of Care at Its Medical Facilities. GAO-17-741. Washington, D.C.: Sep 29, 2017.", "summary": "The National Defense Authorization Act for fiscal year 2016 contains provisions for GAO to review DOD's plans to (1) improve the experience of beneficiaries who receive care through military hospitals and clinics or from civilian providers and (2) reduce variation in the quality of care. In this report, GAO examines (1) measures DOD uses to assess the quality of direct and purchased care, and (2) the extent to which DOD has established performance standards related to the measures and corrective action requirements for providers who do not meet those standards. GAO reviewed the measures in DOD's Core Dashboard for direct care and Purchased Care Dashboard for purchased care. It also reviewed DOD documents and reports to Congress, and interviewed MHS officials, including officials from the Army, Navy, and Air Force. GAO also compared the quality measures DOD uses to those used in Medicare and by private insurers, which have been vetted by multiple stakeholders. GAO assessed DOD's use of performance standards and corrective action requirements in the context of federal internal control standards. The National Defense Authorization Act for fiscal year 2016 (NDAA 2016) directed the Department of Defense (DOD) to align its measures of health care quality used in the Military Health System (MHS) to improve beneficiary experience and reduce variation in the quality of care. GAO reviewed the quality measures DOD identified in March 2017 in response to the NDAA 2016; DOD senior leadership tracks these measures on dashboards to gauge progress on MHS strategic goals. GAO found that DOD does not use a common set of measures on its dashboards to assess the quality of care provided by either military hospitals and clinics—known as direct care—or networks of civilian hospitals and other providers, known as purchased care. (See figure.) As a result, DOD's senior leadership has limited information on the extent to which MHS beneficiaries receive consistently high quality care across the MHS. Furthermore, for both direct and purchased care, DOD uses measures on its dashboards that track a limited range of quality care areas and medical conditions compared to the measures adopted by Medicare and by private health insurers. For example, whereas civilian hospitals report to Medicare information on 11 measures of patients' self-reported experience in hospitals, Military hospitals report only 1 such measure. By using a limited range of quality measures, DOD may not detect key quality issues. Further, when selecting quality measures, the MHS does not prioritize using common measures across direct and purchased care or expanding the range of measures it uses. GAO also found that for direct care DOD has established performance standards and corrective action requirements for military hospitals or clinics that do not meet those standards in direct care. The performance standards indicate the level of performance providers should meet on the various quality measures DOD tracks on its dashboards, and the corrective action requirements instruct providers to take steps to improve care. However, for purchased care, DOD has not established similar performance standards for individual providers. Without consistent performance standards and corrective action requirements, DOD is limited in its ability to address variation in the quality of care delivered and help ensure that its beneficiaries receive consistent high quality care across the MHS. The MHS should (1) prioritize, as appropriate, selecting quality measures common for both direct and purchased care that expand the range of quality areas covered by the measures and (2) establish consistent performance standards and corrective action requirements for direct and purchased care providers. DOD concurred with both recommendations.", "document_type": "gao"}
{"report": "Misconduct can occur in any workplace. When employee misconduct happens, an agency may incur a number of direct and indirect costs depending on how the agency chooses to address misconduct. For the agency, direct costs can mean potentially significant time and resource investments, including investigations, adversarial relationships between management and the employee, costs to the agency as a result of the misconduct committed (e.g., time and attendance or credit card fraud), and reduced employee engagement. The subject-matter experts we interviewed told us that, based on their experiences, the time it takes to address a case of misconduct may range from a couple of weeks to years. The time range depends on whether the employee appeals their case and other factors. Agencies may also incur litigation expenses if an employee decides to appeal an adverse action. While there are costs to addressing misconduct, agencies also incur indirect costs when misconduct goes unaddressed in the workplace. These indirect costs include corrosive effects on other employees’ morale, higher employee turnover, reduced productivity, and lower employee commitment to their work or agency. Indirect costs also include redirecting management’s attention away from achieving the agency’s mission. Employee misconduct in the federal government is regulated by a well- developed body of statutes and regulations as well as decisions from MSPB and U.S. Court of Appeals for the Federal Circuit and Supreme Court. While there is no general definition of the term “employee misconduct” in a statute or government-wide regulation, Standards of Ethical Conduct are prescribed by the Office of Government Ethics at 5 CFR Part 2635 and agencies may also elaborate on types of misconduct in handbooks, tables of penalties (listings of some of the most common offenses with recommended ranges of penalties), and other internal guidance. There is a large body of law by MSPB addressing discipline for employee misconduct in the federal government that contains criteria of various forms of misconduct, such as, “insubordination,” “excessive absence,” and “misuse of government property.” According to OPM officials, there are instances in law and regulation where types of misconduct are referenced concerning appointment into the competitive service. Chapter 73 (Suitability, Security, and Conduct) addresses certain types of misconduct of executive branch employees. Generally speaking, an employee’s violation of an agency’s regulation or policy may cause the agency to take disciplinary or corrective action. Ultimately, if an agency needs to take an adverse action for inappropriate workplace behavior, it must do so “for such cause as will promote the efficiency of the service” as provided for in Title 5, Chapter 75. OPM has also prescribed some regulations on employee responsibilities and conduct. One of the nine Merit System Principles set forth by the Civil Service Reform Act of 1978 that govern the management of the federal workforce states that federal employees “should maintain high standards of integrity, conduct, and concern for the public interest.” According to MSPB, when there is misconduct by a federal employee, management’s goal should be to either persuade the employee to behave properly or to remove the employee if the conduct is serious enough. Moreover, OPM maintains that supervisors have a responsibility to set clear rules and expectations for employees in the workplace. It is imperative that federal agencies manage their workforces effectively, which includes the effective use of discipline when addressing employee misconduct. In addition, employees may be disciplined for conduct that that they knew or should have known was unacceptable. Similarly, federal executive branch employees have a responsibility to adhere to principles of ethical conduct and should avoid any actions that appear to violate the law or ethical standards. Overall, the objective of discipline is to deal with employees who are unwilling or unable to behave properly, and, where management deems it possible and appropriate, correct deficiencies in employee conduct. When management decides to take an action short of removal, discipline can deter misconduct and correct situations interfering with productivity. Conduct-based actions are important tools designed to aid supervisors in maintaining an efficient and orderly work environment. Most agencies are required to adhere to formal, statutorily established guidelines under chapter 75 when taking adverse actions against an employee for misconduct. Chapter 75 of Title 5 includes two subsections that outline the requirements for (1) non-appealable adverse actions such as suspensions of 14 days or less or (2) appealable adverse actions such as reductions in pay or grade, suspensions of more than 14 days, and removals (see figure 1). Subchapter I actions are covered by sections 5 U.S.C. 7501-7504 (Subsection I) and are referred to as “non- appealable actions,” while Subchapter II actions covered by sections 5 U.S.C. 7511-7514 are referred to as “appealable actions” based on whether or not they can be appealed to the MSPB. According to a MSPB report, through the Civil Service Reform Act of 1978 (CSRA), “Congress sought to ensure that agencies could remove employees who engage in misconduct while protecting the civil service from the harmful effects of management acting for improper reasons, such as discrimination or retaliation for whistleblowing.” OPM regulations specify the process agencies must pursue to take adverse actions. These regulations also specify the procedural and appeal rights to which employees facing adverse actions are entitled. According to OPM officials, agency policies usually cover lesser disciplinary actions, such as oral and written reprimands, letters of warning, and letters of counseling. Employees may grieve these actions depending on the agency’s administrative or negotiated grievance processes. According to OPM, agencies may issue these actions without following the procedural requirements for adverse actions under 5 U.S.C. Chapter 75. The procedural rights due to employees subject to adverse actions covered by Chapter 75 are derived both from Chapter 75 and from the U.S. Constitution. In 1985, the U.S. Supreme Court held that tenured or post-probationary public employees who may be terminated only for cause have a constitutional property interest in continued employment and cannot be deprived of their jobs without due process of law. The process that was due in that case was notice of the proposed removal before it occurred and the opportunity to present reasons why the proposed action should not be taken. Chapter 75 and OPM regulations promulgated thereunder establish additional procedural requirements extending to actions other than removal that go beyond what the Due Process Clause of the U.S. Constitution would itself require under current precedent. For example, they require that employees be given advance notice of a suspension or a reduction in pay with the opportunity to respond in writing with supporting affidavits. An agency may take an adverse action under Subchapter I of Chapter 75 only for such cause as will promote the efficiency of the service. When proposing to suspend an employee for 14 days or less, an agency must give the employee advance written notice stating the reasons for the proposed suspension. The agency must also inform the employee of his or her right to review the material which is relied on to support the reasons for the action. The agency must give the employee a reasonable time (no less than 24 hours) to answer orally and in writing, to furnish affidavits and other documentary evidence in support of the answer, and to be represented by an attorney or other representative. Lastly, the agency is to give the employee a written decision with the specific reasons for the suspension on or before the effective date of the action. An employee may challenge a suspension of 14 days or less through an agency administrative grievance procedure, if applicable. If the employee is represented by a union with a collective bargaining agreement (CBA) with the agency that includes an applicable grievance procedure, the employee may challenge the suspension only under the CBA unless the employee is alleging that the suspension was discriminatory. If the employee wishes to challenge the suspension as discriminatory or retaliatory under the EEO laws, the employee may file an EEO complaint with agency followed by a request for a hearing with the EEOC. The employee may also file a complaint with the OSC and then, if necessary, an Individual Right of Action appeal with the MSPB, to assert that the suspension was in retaliation for the employee’s whistleblower activity. If the employee is represented by a union that has a collective bargaining agreement with the agency that includes an applicable negotiated grievance procedure, the employee may only file a grievance under the agency’s collective bargaining agreement. Subchapter II of Chapter 75 addresses steps agencies must follow to take the four adverse actions listed below. These following actions are referred to as appealable adverse actions: suspensions longer than 14 days; reductions in pay; and removals. An agency may take an adverse action under Subchapter II only for such cause as will promote the efficiency of the service. Subchapter II and OPM regulations contain more extensive procedural requirements for removals, reductions in pay or grade, and suspensions of over 14 days. The employee is entitled to at least 30 days advanced written notice of the proposed action, unless there is reasonable cause to believe the employee has committed a crime for which a sentence of imprisonment may be imposed. The notice must state the reasons for the action and inform the employee of their right to review the material on which the reasons stated in the notice are based. Agencies typically provide the material supporting the proposal to the employee with the notice. The proposal is usually prepared by the employee’s supervisor in consultation with human resources and, sometimes, the agency’s legal staff. The agency must give the employee a reasonable amount—no less than 7 days—of official time to review the supporting material, to prepare an answer orally and in writing, and to furnish affidavits and other documentary evidence in support of the answer. According to OPM and MSPB officials, normally the agency designates an official other than the person who proposes the adverse action to review the employee’s response and make the decision. The employee is entitled to be represented by an attorney or other representative, including a union steward if the employee is a bargaining unit member. The employee is entitled to a written decision on or before the effective date specifying the reasons for the decision and advising the employee of any appeal and grievance rights under 5 CFR § 752.405. An employee may challenge discipline under Subchapter II through an agency administrative grievance procedure, if applicable, or by filing a grievance under an applicable CBA. An employee may also appeal adverse actions covered by Subchapter II to the MSPB unless the employee first filed a grievance challenging the action under the CBA. Accordingly, a large number of MSPB decisions address the elements and relative seriousness of various kinds of misconduct. According to OPM, if the employee wishes to challenge an appealable adverse action under subchapter II as discriminatory or retaliatory under the EEO laws, the employee may file a “mixed case” EEO complaint with agency. The agency then issues a final agency decision that may be appealed to the MSPB. An employee affected by an appealable action (removal, suspension for more than 14 days, reduction in pay or grade) who believes that the action was motivated by prohibited discrimination, such as a person’s race, color, religion, sex, national origin, age or disability, may also file a “mixed case” appeal directly with MSPB and raise the discrimination claim in that forum. The employee may seek review of MSPB’s decision on the discrimination claim before the EEOC. If MSPB and EEOC disagree on the discrimination claim and MSPB does not defer to EEOC’s view, then a special panel of the EEOC and MSPB will be convened to resolve the disagreement. When deciding an appropriate penalty for misconduct, agency officials are to make decisions on a case-by-case basis, taking into consideration all relevant circumstances. Deciding officials within the agency should consult the Douglas Factors –12 criteria developed by MSPB to guide such decisions (see appendix II). In the Douglas vs. Veterans Administration decision, MSPB found that a penalty will be sustained as long as “managerial judgment has been properly exercised within tolerable limits of reasonableness.” The list of Douglas Factors is not exhaustive. According to MSPB, weighing all relevant aggravating and mitigating factors and the totality of the circumstances is critical in any disciplinary case. The process agencies use to identify and address employee misconduct is illustrated in figure 2. Agencies may use progressive discipline to help determine which course of action to take when responding to misconduct. OPM officials define progressive discipline as the “imposition of the least serious disciplinary or adverse action applicable to correct the issue or misconduct with penalties imposed at an escalating level for subsequent offenses.” The Douglas factors incorporate the concept of using a lesser penalty in appropriate circumstances. For instance, if an employee commits a first offense, the agency may choose to suspend the employee for 14 days or less. After that, the employee might learn from his or her mistake or correct the action, and not commit another offense, and therefore the agency will not discipline the employee again. However, the President has now prescribed that “supervisors and deciding officials should not be required to use progressive discipline”, and that “the penalty for an instance of misconduct should be tailored to the facts and circumstance.” This will affect how agencies will determine appropriate penalties going forward. Alternatively, if the employee commits the same offense a second time, the agency may choose to suspend the employee for longer, or impose stronger adverse actions, including removal. According to OPM officials, progressive discipline is not defined or required by civil service law, rules or regulations. Chapter 75 provides that an employee with appeal rights who wants to contest an agency decision to remove, suspend for over 14 days, or reduce in pay or grade may appeal the agency’s decision with MSPB. If that employee is a member of a collective bargaining unit, the employee also has the option of pursuing a grievance under negotiated grievance procedures if the appeal has not been excluded from coverage by the collective bargaining agreement. The employee may pursue either option, but not both. The employee may seek review of an arbitrator’s decision before the U.S. Court of Appeals for the Federal Circuit. If the employee is challenging an adverse action within the jurisdiction of the MSPB and also alleged unlawful discrimination before the arbitrator or was prevented from doing so by the negotiated grievance procedure, the employee may appeal the arbitrator’s decision to the MSPB. In addition, the union may appeal an arbitration award concerning a suspension of 14 days or less to the Federal Labor Relations Authority (FLRA) on behalf of the employee. See figure 3 for the collective bargaining unit appeals process for major disciplinary actions. Employees may use several avenues if they elect to appeal adverse actions through the statutory appeals process for such actions (removal, suspension of more than 14 days, and reduction in grade or pay). If the employee believes the disciplinary action was motivated by unlawful discrimination, he or she may file a discrimination complaint with the agency or file an appeal directly with MSPB. If the employee believes the disciplinary action was taken in retaliation for whistleblowing, he or she may choose to file a whistleblower retaliation complaint before deciding to appeal to the MSPB. If the employee or agency does not agree with the decision rendered by a MSPB administrative judge (AJ), he or she may seek review before the full MSPB. See figure 4 for statutory appeals process. We analyzed MSPB’s data and found initial appeals at MSPB generally take from 63 to152 days to render a decision. MSPB has a policy goal of resolving cases by an administrative judge on or before 120 days after the filing of the appeal. An employee or agency can appeal an initial MSPB decision in a process called petition for review (PFR). PFR cases are reviewed by the full MSPB, and range from an additional 99 to 251 days, based on our analysis of the MSPB’s data. The time that it takes to resolve cases at MSPB is consistent for demotions, suspensions of greater than 14 days, and removals. According to MSPB officials, the system is designed to require an individual to choose a path of review to the exclusion of other paths. Depending on the claims raised, there may be multiple levels of review of a single action before multiple fora. However, there is only one hearing at the administrative level; therefore, the timeline to resolve an adverse action appeal can be longer than the initial appeal and PFR. According to MSPB officials, the selected CHCOs, and the subject-matter experts we interviewed, agencies most often make the following errors which may cause MSPB to reverse the adverse action decision: Failure to follow procedures by agency: MSPB may overturn an adverse action decision if the agency did not adhere to the processes set out in statute and regulation. This most often means that the agency did not give the employee a chance to respond to the adverse action charge or did not notify them of their rights to an attorney. Failure to follow procedures by deciding official: An action may be vulnerable to a modification or reversal upon appeal if the deciding official did not fulfill their role appropriately in weighing the evidence through a Douglas Factors analysis. Ex parte communications: A challenge may be overturned if a deciding official gave consideration to any issue not in the proposal letter. Incorrect labeling (or charge): Nothing in law or regulation requires an agency to attach a label to a charge of misconduct. However, if labels are used, they must be proven. An example used by MSPB provides that if an agency uses the label of “theft” as its charge, then the agency must prove that the employee “intended to permanently deprive the owner of possession” of the item in question. Experts told us that MSPB requires agencies to prove all legal aspects of a misconduct label. Federal courts have held that it is impermissible to allow the official who makes the final decision in a removal proceeding to rely on aggravating factors regarding either the alleged offense or the proposed penalty that were not contained in the notice, and to which the employee did not have an opportunity to respond. MSPB is bound by this precedent. Alternative discipline is an approach to address misconduct that is available to agencies in lieu of traditional penalties (e.g., letters of reprimand and suspensions of 14 days or less). According to MSPB, agencies may choose to offer alternative discipline at any stage of the disciplinary process. OPM officials said alternative disciplines tend to be more focused on taking a corrective or remedial response rather than punitive actions against an employee. In a report on alternative discipline, MSPB states that alternative discipline can take many forms and is an effort undertaken by an employer to address employee misconduct using a method other than traditional discipline. As an alternative discipline approach, it is recommended by MSPB that agencies may consider entering into an agreement with an employee. In general, such an approach involves a legally binding written agreement between the employee and the agency addressing an act of misconduct. If the employee violates the agreement, the agency will proceed with additional or more serious forms of discipline, up to and including removal. MSPB also recommends that managers and human resources personnel consult with legal counsel when drafting and implementing an alternative discipline agreement that requires the employee’s consent, adding that it is extremely important for agreements to meet certain legal requirements to form a valid agreement. We compiled a non-exhaustive list of alternative discipline based on a literature review and interviews. Subject-matter experts, including the panel of CHCOs, reviewed this list and they cited benefits and drawbacks to some of the approaches (see table 1). MSPB noted in its 2008 report that the specific alternative discipline approach an agency decides to use should be based on the nature and severity of the misconduct. According to OPM officials, alternative discipline approaches are not appropriate for egregious acts of misconduct or when the employee is remorseless but rather lower level offenses where an employee may show remorse for the misconduct and demonstrate that she or he can be rehabilitated. Egregious acts of misconduct may involve discrimination, reprisal or retaliation, or sexual harassment. Alternative discipline approaches are also not appropriate when the employee’s continued presence in the workplace would pose a threat to the employee or others. On a case by case basis, an agency may decide to provide counseling or additional training as appropriate, depending on the facts and circumstances that address specific acts of minor misconduct. Additionally, agencies have flexibility in using alternative discipline as a final effort before taking formal action such as suspension or removal. However, in its 2008 report, MSPB found that managers had applied alternative discipline approaches ineffectively, resulting in further inefficiencies in the civil service. Specifically, MSPB recommended that managers and human resources personnel consult with legal counsel when drafting and implementing an alternative discipline agreement that requires the employee’s consent, adding that it is extremely important for agreements to meet certain legal requirements to form a valid agreement. CHCOs and subject-matter experts said managers and supervisors should coordinate internally with human resources staff, employee relations, and legal counsel when assessing whether an alternative discipline approach would result in correcting improper behavior and ultimately improve their workforce. Some subject-matter experts we interviewed expressed concern that workforces would view alternative discipline measures as providing opportunities for employees to avoid accountability or encouraging similar negative behaviors from coworkers rather than penalizing the employee more stringently through a formal adverse action process. These subject- matter experts identified community service, buy-outs, involvement in process improvements, and clean-slate agreements as approaches that had this kind of effect. Additionally, some subject-matter experts told us that alternative discipline approaches such as community service and paper suspension agreements could have the unintended effect of benefiting the employee being disciplined. For example, community service may allow the employee to serve the alternative discipline during their scheduled duty time instead of performing their regularly assigned duties. This may require the employee’s co-workers to take on additional work while the employee serves the alternative discipline. Additionally, while a paper suspension limits interruption to work production, it also allows the employee to work in a pay status while carrying out the suspension. According to feedback we received from the CHCOs, some of these alternative discipline approaches were used more often than others and some approaches were more effective at addressing employee misconduct. We did not evaluate how often or the extent to which any of these approaches are used at agencies, nor did we consider the propriety or legality of these approaches. According to the CHCOs and subject-matter experts, agency managers and supervisors may be able to effectively resolve employee misconduct cases through the use of alternative approaches, which can shorten the timeline and simplify the adverse action process in a manner that has the most potential to prevent additional harm to the workplace and avoid the potentially high costs of litigating a misconduct case. Current and former agency officials and subject-matter experts we interviewed told us in interviews that several factors can affect whether and how an agency responds to misconduct. Both agency officials and subject-matter experts told us that supervisors may not report misconduct due to fear that an employee could counter with their own complaint. Several CHCOs and subject-matter experts told us that an agency’s approach to dealing with misconduct can influence how first-line supervisors act. In a recently released MSPB publication that highlighted selected results of its 2016 Merit Principle survey of managers and supervisors about challenges to addressing employee misconduct, 80 percent of managers and supervisors agree to some extent or a great extent that their agency’s culture poses a challenge when attempting to remove an employee for serious misconduct. Additionally, MSPB’s report provided the perspectives of managers and supervisors regarding the factors that affect how agencies address misconduct, including 77 percent of managers/supervisors agree to some extent or a great extent that they do not feel supported by their agencies’ senior leadership in their actions to remove an employee for serious misconduct. 88 percent of managers/supervisors somewhat or strongly agree that some supervisors do not manage their employees’ conduct because the supervisors want to avoid conflict. 64 percent of managers/supervisors agree to some extent or a great extent that they do not fully understand the process to remove an employee for misconduct. MSPB’s 2016 survey findings were consistent with what agency officials and subject-matter experts told us during interviews. Our analysis of OPM data from fiscal year 2006 to 2016 shows that, on average, agencies disciplined approximately 17,000 or less than 1 percent of the federal workforce per year under Subchapter II of Chapter 75. The number of employees who separate from the federal workforce for misconduct under alternative means, such as settlements, is not known and would not be recorded as misconduct in OPM’s EHRI database, according to agency officials and experts. Many of the CHCOs and subject-matter experts we interviewed told us that while data around such cases are not collected government-wide, they believe internal resolutions using alternative approaches to address misconduct occur frequently. According to EHRI data, as the number of probationary employees fluctuated over time, the number of terminations generally followed the same trend. One of the likely reasons for this fluctuation is that probationary employees are more likely to be terminated than career employees who are no longer in a probationary status because probationary employees are not yet subject to the Chapter 75 process protection afforded career employees. Similar to addressing performance issues, it is generally easier to terminate employees for misconduct during the probationary period. As we previously reported, the probationary period is an important management tool to evaluate the conduct and performance of an employee and should be treated as the last step in the hiring process. According to OPM, appropriate actions taken within the probationary period are the best way to avoid long-term problems. Our data analysis of personnel actions against employees for misconduct shows that the most common form of discipline is suspension. In 2016, agencies made 10,249 suspensions, 7,411 removals, and 114 demotions for misconduct (the numbers refer to the number of adverse actions that agencies made in 2016, not the number of employees that received adverse actions; one employee can be suspended multiple times, and each suspension is recorded as a separate personnel action in the employee’s SF-50). The data we analyzed indicated that approximately one-fourth of suspended employees have multiple suspensions. According to OPM officials, third parties such as the MSPB will review whether disciplinary actions are taken “only for such cause as will promote the efficiency of the service” which includes the assessment of the relevant Douglas factors. Figure 5 shows how many suspensions, demotions, and removals took place from fiscal years 2006 to 2016 according to EHRI data. OPM collects data on personnel actions reported by most agencies and stores this information in the EHRI database, but these data could be improved to provide OPM with better information to help agencies address misconduct. Because not all misconduct data are entered into the database, the data presented in this report do not represent the entirety of employee misconduct instances that occur in the federal government. Personnel actions in the EHRI database originate from data that agencies send to OPM through the Standard Form 50 (SF-50), a form that documents personnel actions. OPM officials told us that lesser disciplinary actions such as a letter of reprimand are not documented by an SF-50. Without maintaining comprehensive data regarding the extent and nature of misconduct in the federal government, OPM risks missing opportunities to provide agencies with guidance and other tools, such as targeted training to help agencies better address cases of misconduct. Indeed, better data could help OPM and agencies identify systemic misconduct issues, such as misuse of government property or physical aggression toward a co-worker, as well as emerging problems that benefit from early detection and/or more comprehensive approaches. It should be noted that for the codes that indicate performance or misconduct as the underlying cause for the adverse action, it is not possible to make a clear distinction between whether the action was specifically related to misconduct, performance, or a mix of the two. Therefore, some cases include a mix of employee poor performance and misconduct. OPM officials said they do not have a sense of how frequently agencies use these (and other non-specific) nature of action (NOA) codes for misconduct-related actions. According to OPM officials, by establishing rules in terms of improving the efficiency of the service and the types of actions that will require specific procedures, Congress provided managers with maximum flexibility to pursue adverse actions whenever it would promote the efficiency of the service, whether the underlying impetus was a conduct issue or a failure to perform. OPM officials told us the Guide to Processing Personnel Actions directs agencies to indicate the nature of personnel actions in the EHRI database through the NOA codes. These codes indicate the employee type, the nature of the personnel action to be recorded in EHRI, as well as the underlying cause (e.g., conduct or performance) for the personnel action. OPM performs validity checks on the NOA codes and legal authorities to assure the agencies are compliant with OPM reporting requirements. OPM also periodically reviews agencies’ use of NOA codes and legal authorities in general. The EHRI database does not collect or store the specific type of misconduct—only that the personnel action belongs in the misconduct category. Several CHCOs and subject-matter experts who we interviewed agreed this flexibility is helpful to agencies. For example, officials said that while common types of misconduct exist, such as time-and-attendance infractions, many unique types of misconduct cannot be placed into easily identifiable categories. The officials added that it would be easy for agencies to mislabel misconduct. For instance, OPM officials said that disobeying an agency’s policy or rules could manifest itself in many different ways. Moreover, we found inconsistencies in the data OPM provided. For example, during this review, we initially used stored EHRI data from previous audits for fiscal years 2006 to 2014. We used NOA codes provided by OPM officials to analyze employee misconduct data in the executive branch. When we compared the results of our data analysis for this period to the data OPM provided for the same period, we found their data identified approximately 500 more adverse actions per year. Though we consulted with OPM, we were unable to resolve these differences. OPM officials noted that agencies submit data on a rolling basis and may later correct it, and, some SF-50 forms are filed after the fiscal year ends, so our stored data may not include these actions. According to OPM officials, agencies generally have day-to-day oversight for determining use of NOA codes and legal authorities. Agencies are required to report a valid NOA code and legal authorities that is found in OPM’s Guide to Data Standards. Guidance to agencies for classifying misconduct into the correct nature of action codes is provided in The Guide to Processing Personnel Actions. Although OPM verifies that agencies provide valid NOA codes in their data, they assert that agencies have responsibility for determining which NOA codes to use for each personnel action based on OPM documentation. As we noted in a 2017 report on federal human resources data, OPM developed EHRI to (1) provide for comprehensive knowledge management and workforce analysis, forecasting, and reporting to further strategic management of human capital across the executive branch; (2) facilitate the electronic exchange of standardized human resources data within and across agencies and systems and the associated benefits and cost savings; and (3) provide unification and consistency in human capital data across the executive branch. An important part of OPM’s role is to support federal agencies’ human capital management activities, which includes ensuring that agencies have the data needed to make staffing and resource decisions to support their missions. EHRI data are essential to government-wide human resource management and evaluation of federal employment policies, practices, training, and costs. The ability to capitalize on this information is dependent, in part, on the reliability and usefulness of the collected data. According to Federal Internal Control Standards, management is to obtain relevant data from reliable internal and external sources in a timely manner based on the identified information requirements. More specific guidance from OPM to agencies on which NOA codes to use for misconduct cases will increase confidence in the data, without requiring practitioners to capture and tabulate the type of misconduct. More importantly, enhanced data on the extent and nature of misconduct will improve OPM’s oversight ability and agencies’ ability to target management training and identify specific trends in misconduct. Our analysis of MSPB data found that the most frequent appeal outcome is a settlement. MSPB said settlements often benefit both the agency and the appellant because they manage risk. The officials said that when entering an adverse action appeal with MSPB, both the agency and the appellant face a risk: the agency is at risk of spending time and money for litigation only to, in some cases, have its decision overturned; the appellant is at risk of being removed from his or her position with a permanent mark on his or her record, which may make finding another job difficult. To avoid these outcomes for both parties, an agency may offer the employee a variety of settlement options to incentivize them to willingly leave. Settlement options may include, but are not limited to back-pay for the time that the employee was out of work, but still litigating the appeal; and paying the employee’s attorney fees. OPM notes, on the other hand, that the MSPB’s data might not always reflect voluntary settlements. According to OPM officials, the MSPB has a large caseload and typically strives to induce the agency to settle. OPM officials noted that the pressure to settle cases regardless of merit after the agency has made the determination that discipline is necessary and has gone through the procedure to carry it out may be one of the most significant deterrents to dealing with misconduct or performance under Chapter 75. Figure 6 shows the number of MSPB appeals that were filed from fiscal years 2006 to 2016 that were affirmed, reversed, settled, or dismissed. We also analyzed data from MSPB’s database of appeals cases. MSPB hears appeals from those adverse actions that Congress made appealable under Subchapter II of chapter 75, including suspensions of greater than 14-days, demotions, and removals. These actions can be taken for performance problems as well as misconduct under Chapter 75—MSPB does not differentiate between performance and misconduct in its database. Rather, the agency categorizes its cases by legal authority. Therefore, similar to OPM’s EHRI data, any analysis with MSPB’s data may include performance appeals as well as misconduct appeals under Chapter 75. On the basis of our literature review, as well as interviews with CHCOs and subject-matter experts, we identified key promising practices and lessons learned that can help agencies better prevent and address employee misconduct. These key practices include tables of penalties, engaging employees, making full use of the probationary periods, and maintaining effective lines of communication and collaboration between the human resources office staff, line-level management, and agencies’ legal counsel. Going forward, it will be important for OPM and agencies, in concert with the CHCO Council to examine each of these practices and lessons learned, refine, as appropriate, and share how best to implement these practices. We found that tables of penalties—a list of recommended disciplinary actions for various types of misconduct—though not required by statute, case law, or OPM regulations, nor used by all agencies, can help ensure the appropriateness and consistency of a penalty in relation to an infraction. Further, tables of penalties can help ensure the disciplinary process is aligned with merit principles because they make the process more transparent, reduce arbitrary or capricious penalties, and provide guidance to supervisors. According to the panel of CHCOs and the subject-matter experts we interviewed, a table of penalties may also provide information on the period over which offenses are cumulative, for purposes of assessing progressively stronger penalties. The officials described tables of penalties as a listing of common infractions committed most frequently by agency employees, along with a suggested range of penalties for first, second and third offenses; however, the range of penalties should not be too broad, and the penalties should be progressive, meaning that they increase in harshness with each subsequent offense committed by the employee. The CHCOs and subject-matter experts said a table of penalties should also provide sufficient flexibility in the penalty range (e.g., 1-day to 5-day suspensions for a first offense) to consider mitigating and aggravating factors when considering discipline for misconduct. OPM officials stated that where an agency elects to have a table of penalties, it should serve as a guide in addressing misconduct, noting that it does not serve as a substitute for management’s judgment. According to OPM officials, management must take into account the applicable Douglas Factors, and must consider other appropriate circumstances not covered by the Douglas Factors. Neither OPM nor MSPB provide any written guidance to agencies in developing their tables of penalties. However, OPM officials told us their agency is available to provide assistance upon request to agencies that elect to use a table of penalties. Views on the usefulness of the tables of penalties were mixed among agency officials and subject-matter experts. On the one hand, some agency officials and other subject-matter experts told us the table of penalties can assist agencies in determining an appropriate penalty and ensure consistency of penalty selection from case to case. For that reason, they said the tables can also help ensure the action taken is legally defensible based on past similar cases. MSPB officials told us that they believe table of penalties, which rely on the Douglas Factors, can help human capital practitioners when making decisions about employee misconduct cases. On the other hand, several subject-matter experts and agency officials, including OPM, indicated that table of penalties tend to be too broad in the range of penalties for individual offenses, which they said ultimately limited their usefulness in the decision-making process. OPM officials said their agency does not use a table of penalties nor does it support encouraging agencies to establish tables of penalties. According to OPM officials, where table of penalties exist, they are established at an agency’s discretion and not under OPM’s auspices. OPM officials believe agencies have the ability to address misconduct appropriately without a table of penalties and with sufficient flexibility to determine the appropriate penalty for each instance of misconduct. Further, OPM officials said that agencies that adopt a table of penalties will be required to consider its table of penalties, if applicable, as part of the MSPB’s Douglas Factors analysis which, in their view, imposes an additional condition on the agency’s ability to defend its actions. Finally, OPM said there is no substitute for management judgment and that tables of penalties should not be applied so inflexibly as to impair consideration of other factors relevant to the individual case. In short, tables of penalties, if drafted at an appropriate level of detail and used in conjunction with the Douglas Factors and other case-specific forms of discretion, could provide agencies with reasonable assurance that similar cases of misconduct are addressed with similar penalties as appropriate, and can reduce the risk of inconsistently and potentially unfairly applying remedial measures. Agency officials and subject-matter experts told us that having effective agency policies and programs that set clear expectations around behavior and that engage employees may help reduce the number of misconduct incidents that occur. These policies and programs may also mitigate the damage when an incident does occur. Several subject-matter experts said that agencies should set formal expectations early and reinforce these expectations throughout an employee’s career. To this point, as we discussed in our 2015 report on addressing substandard employee performance, when addressing misconduct agencies should help managers and supervisors take appropriate action if misconduct occurs during an employee’s probationary period. Some subject-matter experts indicated that agencies may also consider conducting more thorough job screening and hiring processes which could help determine if the individual is a good fit for their agency. Specifically, the subject-matter experts mentioned that agencies should take a closer look at a prospective employee’s work history and carefully check references. We also learned from our interviews that, as a deterrent, agencies must clearly communicate that an employee will be held accountable for any acts of misconduct. According to OPM, agencies can mitigate the risks of these difficulties by establishing a well-trained, experienced, and empowered employee and labor relations staff. OPM said these individuals play a crucial role in educating supervisors and managers in taking appropriate and sustainable disciplinary actions. CHCOs and subject-matter experts provided a number of key promising practices that an agency can use to mitigate and address employee misconduct, including: Demonstrating positive conduct at the agency’s senior leadership (tone at the top): Through policies and their own individual actions, senior leaders must exhibit positive workplace behavior as an example to agency employees. Maintaining a good workplace atmosphere: Agencies should take steps to monitor workforce morale and initiate programs that encourage respect and community. Engaging employees by connecting them directly to the agency’s mission: Employees should have a sense of purpose and commitment toward their employer and its mission which can lead to better organizational performance. Making full use of the probationary period for employees: Supervisors should use probationary periods as an opportunity to evaluate an employee’s performance and conduct to determine if an appointment to the civil service should become final. Setting and communicating clear rules and expectations regarding employee conduct: Agencies should set expectations about appropriate conduct in the workplace and communicate consequences of inappropriate conduct at the earliest possible time after on-boarding an employee. Assuring that employees conform to any applicable standards of conduct: Supervisors and managers, with the support of their agencies’ leadership and human resources staff, should train and monitor employee compliance with its stated conduct policies. Maintaining effective lines of communication and collaboration with the human resources office staff, line-level management, and agencies’ legal counsel: Agencies should establish clear lines of communication across relevant offices to ensure misconduct cases are addressed effectively and consistently. Conducting on-going training for supervisors and holding them accountable for addressing misconduct in a timely manner when it occurs: Supervisors should be trained in identifying employee misconduct cases and knowledgeable about the process for addressing such cases. MSPB and OPM officials as well as subject-matter experts said human resources staff and line-level supervisors and managers would benefit from additional training in how to address employee misconduct. The subject-matter experts told us that managers do not receive sufficient training in how to identify and subsequently deal with misconduct in the workplace. Specifically, subject-matter experts told us that many supervisors and managers do not understand the requirements needed to remove an employee for misconduct, including misconceptions about the standard of proof required. Many subject-matter experts repeated observations MSPB made in its 2008 report that without sufficient training managers and supervisors may find it difficult to engage in challenging one-on-one conversations with an employee about misconduct. Agency officials and subject-matter experts also told us that supervisory training varies by agency. Our subject-matter experts said some agencies are more structured and provide staff with training curricula with required timetables to complete, while others rely on staff to self-guide the training they need. We found many agencies contract out specific training or provide learning opportunities to staff on their intranet sites via e-learning tools. Most subject-matter experts said that misconduct training is likely more effective when delivered in-person, due to the broad range of issues related to misconduct. OPM officials told us that supervisors and managers are responsible for observing and enforcing applicable laws in the federal workplace. OPM officials also indicated that training, resource allocation, skills, and knowledge all have a bearing on the administration of the disciplinary process. According to OPM, good communication and partnerships are also critical to processing a solid, sustainable response related to misconduct. OPM guidelines require that agencies provide training when employees make critical career transitions, for instance from nonsupervisory to manager or from manager to executive. Further, OPM’s Supervisory and Managerial Curriculum Framework highlights human resources technical areas and leadership competencies necessary for success. The curriculum framework includes employee and labor relations with supporting learning objectives. OPM has specific regulatory requirements for training and development of supervisors, managers, and executives under 5 CFR § 412.202, including to provide training within 1 year of an employee’s initial appointment to a supervisory position and follow up periodically, but at least once every 3 years, by providing each supervisor and manager additional training on the use of appropriate actions, options, and strategies: improve employee performance and productivity; conduct employee performance appraisals in accordance with agency appraisal systems; and identify and assist employees with unacceptable performance. According to 5 U.S.C. § 4103, it is the responsibility of each agency to train its employees. According to OPM officials, it is not responsible under the CSRA for providing training for the federal workforce. However, while agencies are accountable for providing required training for their supervisors, OPM has a key role in ensuring the training meets the government-wide needs of supervisors. By taking steps to help agencies improve the training they provide supervisors and managers on addressing misconduct, OPM could help those managers ensure they have the knowledge and skills to effectively deal with misconduct in the workplace. For example, OPM could consider the feasibility of developing more in-person training modules designed to provide interactive or role play scenarios around addressing employee misconduct. Furthermore, subject-matter experts said if an agency is not training new supervisors to equip them with the appropriate skills to address misconduct, there may be inconsistencies in how an agency handles misconduct across the agency. Without sufficient training, supervisors and managers may not be addressing misconduct appropriately, if at all. Many of the subject-matter experts we interviewed said that it is important that the primary stakeholders—first-level supervisors and managers and human resources and general counsel offices—collaborate on the agency’s approach to dealing with misconduct. We found agencies vary in how collaboration takes place. For example, some subject-matter experts and CHCOs told us that an agency may choose to handle a case by having their human resources staff and management work closely together. The subject-matter experts we interviewed said this collaboration can sometimes include general counsel staff, if necessary. For example, at EPA, the human resources office collaborates with the office of general counsel and the agency’s Office of Inspector General Office of Investigations (OI). EPA officials told us that their agency’s human resources office, OI, general counsel, and labor relations meet bi-weekly to discuss ongoing misconduct investigations to provide a report of investigations to EPA’s senior management on the facts surrounding allegations of employee misconduct. According to EPA, OI also provides real-time notification whenever OI receives information concerning serious misconduct, before the investigation is completed, so EPA management can take appropriate immediate mitigating steps, should it be necessary. However, OI does not have a role in determining the type of discipline, if any, to be imposed upon the employee, nor does OI have any role in helping to prevent misconduct in EPA’s workplace. We did not obtain data to verify that this process has been successful, but agree that enhanced communication among key stakeholders is important to addressing misconduct. Most of our subject-matter experts told us an agency’s culture and the nature of its work play a significant role in how the agency addresses employee misconduct. For example, several subject-matter experts told us law enforcement and defense-related agencies or other particular jobs where injuries may occur or lives may be at risk often have significantly less tolerance for employee misconduct than other agencies. In addition, OPM officials said that according to MSPB past studies, if an agency views federal employee due process procedural rights as burdensome and restrictive, this may discourage supervisors from addressing misconduct as it occurs. An MSPB report addressed concerns that the culture in many federal agencies prevents them from effectively dealing with problem employees. Many of the subject-matter experts we interviewed indicated that if an agency’s culture is risk averse, it may be less aggressive in pursuing adverse actions, and instead either ignore misconduct or reassign an employee without holding him or her accountable for the misconduct. The process for dismissing an employee for misconduct can be complex and lengthy. However, many of these process challenges can be avoided or mitigated with effective performance management. Supervisors who take performance management seriously and have the necessary training and support to address misconduct can help employees either change their conduct or be subject to removal from the federal workforce. OPM has a role in ensuring that agencies have the tools and guidance they need to effectively address misconduct and maximize the productivity of their workforces. Though OPM already provides a variety of tools, guidance, and training to help agencies address issues related to misconduct, we found opportunities to do more to identify the nature of employee misconduct, improve training tools for managers, and make tools and guidance available for agencies when and where they need it. We are making the following three recommendations to the Director of OPM: The Director of OPM, after consultation with the CHCO Council, should explore the feasibility of improving the quality of data on employee misconduct by providing additional guidance to agencies on how to record instances of misconduct in OPM’s databases. (Recommendation 1) The Director of OPM, after consultation with the CHCO Council, should broadly disseminate to agencies the promising practices and lessons learned, such as those described in this report, as well as work with agencies through such vehicles as the CHCO Council, to identify any additional practices. (Recommendation 2) The Director of OPM, after consultation with the CHCO Council, should provide guidance to agencies to enhance the training received by managers/supervisors and human capital staff to ensure that they have the guidance and technical assistance they need to effectively address misconduct and maximize the productivity of their workforces. (Recommendation 3) We provided a draft of this product to the Acting Chairman of MSPB and Acting Director of OPM for comment. The Acting Chairman of MSPB provided technical comments on the draft. We incorporated these comments, as appropriate. MSPB did not comment on the recommendations. OPM’s Associate Director for Employee Services provided written comments on the draft, and these comments are reproduced in appendix III. In its comments, OPM noted that while we had made many of the changes OPM suggested, the changes still did not reflect all of OPM’s feedback, and also contained what it believed to be inaccurate information and incomplete representations of OPM’s views. To the contrary, we maintain that our report contains accurate factual information and represents the views of OPM that we collected through reviewing documents, interviewing OPM officials, and incorporating OPM’s written feedback. Of our three recommendations, OPM partially concurred with two recommendations, and did not concur with one recommendation. For those recommendations OPM partially concurred with, OPM described the steps it planned to take to implement them. We stand by our recommendations which we maintain would give OPM and Congress better visibility over the extent and nature of employee misconduct in the federal government, as well as help strengthen agencies’ capacity to address misconduct. With respect to OPM’s overall comments, OPM noted that Chapter 75 is a set of procedural requirements that must be met when certain actions are contemplated that would impact an employee’s pay, specifying that it was never intended to encompass or catalogue all forms of action an agency could take to address misconduct. On this issue, we agree with OPM on the purpose of Chapter 75 and noted as much in our description of the statutorily established guidelines and procedures throughout this report. OPM also noted that there is no general statutory definition of misconduct, and that managers need maximum flexibility to pursue adverse actions, whether the underlying impetus is a conduct issue, a failure to perform, or any other reasons related to federal employment. We also agree with OPM on this point, as our report makes clear that, in certain cases, employee performance and misconduct can overlap, conflating the two issues. As indicated in this report, OPM believes a table of penalties creates additional conditions and restrictions on an agency’s ability to address misconduct and does not improve the agency’s ability to address misconduct effectively. Accordingly, OPM does not require or encourage agencies to adopt tables of penalties. Our report recognizes both the pros and cons of an agency having a table of penalties and the circumstances under which they could be effective. However, we believe the use of a table of penalties ensures the appropriateness and consistency of a penalty in relation to the charge. It also ensures merit system principles guide the process by providing penalty transparency, reducing arbitrary or capricious penalties, and serve as a guide for managers and supervisors who deal with these issues. With respect to our recommendations, OPM did not concur with our first recommendation to explore the feasibility of improving the quality of data on employee misconduct by providing additional guidance to agencies on how to record instances of misconduct in OPM’s databases. Specifically, OPM noted that the OPM Guide to Processing Personnel Actions is a thorough resource that has been and continues to be successfully relied upon by agencies to document adverse actions as expressly defined in Chapter 75. We acknowledge OPM’s view that NOA codes were never intended or designed to allow reporting of adverse actions down to the degree of a particular kind of misconduct involved, but we maintain that our recommendation would increase confidence in the data on misconduct and make it more useful to OPM and agencies. Further, OPM’s non-concurrence with this recommendation seems inconsistent with the Administration’s own initiatives, including the May 2018 Executive Order Promoting Accountability and Streamlining Removal Procedures Consistent with Merit System Principles, which was released after OPM commented on our draft report. Specifically, the Executive Order requires all federal agencies, beginning in FY18, and for each fiscal year thereafter, to provide a report to the OPM Director containing detailed data about how it addressed issues of misconduct. For example, agencies will need to report out on (i) the number of civilian employees in a probationary period or otherwise employed for a specific term who were removed by the agency; (ii) the number of adverse personnel actions taken against civilian employees by the agency, broken down by type of adverse personnel action, including reduction in grade or pay (or equivalent), suspension, and removal; and (iii) the number of decisions on proposed removals by the agency taken under chapter 75 of title 5, United States Code, not issued within 15 business days of the end of the employee reply period. We maintain that enhanced data on the extent and nature of misconduct will help strengthen OPM and congressional oversight and better position agencies to address misconduct through management training and other approaches. OPM partially concurred with our second recommendation to broadly disseminate to agencies the promising practices and lessons learned, such as those described in this report, as well as work with agencies through such vehicles as the CHCO Council, to identify any additional practices to help agencies better address employee misconduct. Indeed, the President’s Management Agenda (PMA) for 2018 states, “Aligning and managing the Federal workforce of the 21st Century means spreading effective practices among human resources specialists.” In response to this recommendation, OPM noted that some of the key practices and lessons discussed in this report are already part of OPM’s comprehensive accountability toolkit in addressing employee misconduct across the federal government and are frequently communicated through on-going educational outreach to federal agencies and available on OPM’s website. Specifically, OPM said it will decide which appropriate measures it should take to obtain examples of practices agencies believe are promising and will broadly disseminate any of these practices and lessons learned as identified by OPM. We acknowledge OPM’s existing efforts to develop and disseminate promising practices and lessons learned, and also maintain that OPM should also be open to considering additional practices from other sources. OPM also partially concurred with our third recommendation to provide guidance to agencies to enhance the training received by managers/supervisors and human capital staff to ensure that they have the guidance and technical assistance they need to effectively address misconduct and maximize the productivity of their workforces. In its response, OPM said it will continue to play its statutory role under 5 U.S.C. Chapter 41 and will support agencies on a cross-agency priority goal, which it believes could be read to encompass training, pursuant to the PMA, for example by providing guidance to agencies on training requirements for managers, supervisors and human resources staff. However, OPM notes that it is not responsible under current statute for providing training to the federal workforce. As stated in the report, while agencies are accountable for providing required training for their supervisors, OPM has a key role in ensuring the training meets the needs of supervisors. Further, OPM’s position on this recommendation seems inconsistent with the Administration’s own initiatives, including the May 2018 Executive Order which states that “the OPM Director and the Chief Human Capital Officers Council shall undertake a Government-wide initiative to educate Federal supervisors about holding employees accountable for unacceptable performance or misconduct under those rules,” following any final rules issued pursuant to parameters set in the Order. Indeed, the PMA states, “In order to best leverage the workforce to achieve our mission efficiently and effectively, Government needs to remove employees with the worst performance and conduct violations.” By taking steps to help agencies improve the training they provide supervisors and managers on addressing misconduct, OPM could help those managers ensure they have the knowledge and skills to effectively deal with misconduct in the workplace. OPM also provided technical comments, which we have incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Director of the Office of Personnel Management, the Chairman of the Merit Systems Protection Board, as well as to the appropriate congressional committees and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. You asked us to examine the process for addressing misconduct and to identify any challenges in removing employees for misconduct. Our objectives were to (1) describe the process that agencies are generally required to follow in responding to employee misconduct in the federal service; (2) identify alternative approaches to the formal legal process that agencies can use to respond to misconduct, and assess what factors affect agencies’ responses; (3) describe trends in removals and other adverse actions resulting from misconduct; and (4) identify key steps agencies can take to help them better prevent and address misconduct. To describe the process that most agencies are generally required to follow in responding to employee misconduct in the federal service, we reviewed relevant sections of Title 5 Chapter 75 of the U.S.C. (herein Chapter 75) which contains the statutory process for formally disciplining employees for misconduct and performance. We also reviewed the Civil Service Reform Act and OPM regulations to describe and determine the authority agencies have to address employee misconduct in the federal service, including formal procedural and employee appeal rights. Additionally, we reviewed 5.U.S.C. §§ 7701 and 7702 (herein Chapter 77), which contains the statutory process for employee appeals with the Merit Systems Protection Board (MSPB) subsequent appeals to the Equal Employment Opportunity Commission (EEOC). 5 U.S.C. § 7701(a)-(b); 5 U.S.C. § 7702(b). counted the outcomes of the cases from 2006-2016, by year and in aggregate (e.g. out of the total number of cases, how many were reversed, upheld, mitigated, or settled). For the purpose of our analysis, we used the following nature of action (NOA) code categories in OPM’s EHRI database: (1) codes directly attributed to misconduct; and (2) codes that indicate a mix of misconduct or poor performance. Based on data limitations in both databases, we did not make any evaluative assessments from our data analysis. To identify alternative approaches to the formal legal process, we reviewed documentation provided by the Merit System Protection Board (MSPB) on alternative discipline approaches used by agencies to address employee misconduct. We also reviewed OPM regulations and documents to determine the authority agencies have to address employee misconduct in the federal service, including formal procedural and employee appeal rights. We interviewed current and former practitioners, subject-matter experts, and academics to identify alternative approaches that they were aware of or were commonly used at agencies to address employee misconduct. To develop our list of alternative discipline approaches to addressing employee misconduct, we conducted a literature review and reviewed reports and documents to identify alternative discipline approaches commonly used to address employee misconduct in the federal sector. After compiling our non-exhaustive list of alternative approaches, we contacted our previously interviewed subject-matter experts and asked them to provide their final thoughts or suggestions to our alternative discipline approaches. We included those additional approaches to the list. We interviewed human capital experts from academia, unions, and former and current human resources practitioners. We also interviewed a panel of CHCOs to gain insight into the agency perspective on addressing employee misconduct. To identify CHCO members, we asked the Director of the CHCO council to select CHCOs that have knowledge and experience in addressing employee misconduct. Agency size and mission were also considered as part of the selection process to gain a range of perspectives. Our panel of CHCOs was from the Departments of Commerce, Defense, and Housing and Urban Development, the National Science Foundation, and the Nuclear Regulatory Commission. We also reviewed prior work by MSPB in developing our list of commonly used alternative discipline approaches to employee misconduct in the federal sector. To describe and assess the factors that can affect an agency’s response to employee misconduct, we interviewed: OPM officials and representatives from Employee Services, Human Resources Solutions, Planning and Policy Analysis, and the Office of the Chief Information Officer MSPB officials from the Office of the acting Chairman & Vice Chairman, Office of Information Resources Management, and the Office of Policy & Evaluation; Panel of Chief Human Capital Officers (CHCO) National Treasury Employees Union officials; American Federation of Government Employees officials; Federal Managers Association officials; Individual members of the Federal Employees Lawyers Group; Partnership for Public Service officials; Senior Executives Association officials; and Selected individuals with expertise in human capital management, specifically focused on employee misconduct, from academia and the private sector. We selected our list of interviewees based on GAO’s guidance for selecting experts, the interviewees’ practical experience in applying and practicing administrative law, and for academics in their specific areas of research. To assess the factors that agencies use to deal with employee misconduct, we analyzed the interviewee responses and identified key themes that were common throughout our interviews and, we counted the frequency of those key themes. To describe the trends in removals and adverse actions resulting from misconduct at Chief Financial Officer (CFO) Act agencies, we analyzed OPM’s Enterprise Human Resource Integration (EHRI) data from fiscal years 2006 to 2016. The 24 CFO Act agencies are listed at 31 U.S.C. § 901(b) and include: U.S. Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, Transportation, the Treasury, Veterans Affairs, and State, as well as the U.S. Agency for International Development, Environmental Protection Agency, General Services Administration, National Aeronautics and Space Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management, Small Business Administration, and the Social Security Administration. These agencies account for a very high proportion of the total federal labor force. For reporting purposes, we only provide data on the number of adverse actions rather than use the number of employees subject to an adverse action, because one employee may be subject to more than one adverse action. This can be a result of progressive discipline or could indicate issues related to data reliability. As part of our analysis, we identified all employees subject to each type of adverse action (removal, suspension, and demotion) and quantified the number of similar adverse actions taken against the same person. 5 U.S.C. §§ 7502 and 7512. probationary employees to provide some relative statistics. To show trends in misconduct removals associated with probationary employees, we identified the number of adverse actions taken against probationary employees (overall and by type of action). To determine the trends in employee appeals to MSPB, we analyzed MSPB’s appeals data, on adverse actions taken under Chapter 75 from fiscal years 2006 to 2016. To understand what types of adverse actions are driving appeals to MSPB, we calculated the underlying adverse action for each case by fiscal year of appeal filing. To determine how appeals were resolved by MSPB, we identified the number of appeals that were settled, mitigated, dismissed, reversed, affirmed, or otherwise resolved. We calculated overall trends by fiscal year as well as trends by fiscal year for each type of underlying adverse action. To determine how long the appeals process takes, we calculated the mean time for resolution along with other statistics (minimum, maximum, 25th percentile, 75th percentile) for different types of adverse action. Additionally, because appellants can file a Petition for Review (PFR) to the larger MSPB body, we looked at the time for the initial appeal, the PFR, and the total time from filing through final decision. To assess the reliability of both EHRI and MSPB data, we reviewed past GAO data reliability assessments, interviewed relevant agency officials, and conducted electronic testing to evaluate the accuracy and completeness of the data used in our analyses. We determined the data used in this report to be sufficiently reliable for our purposes, subject to the constraints identified in our report. To identify and provide key promising practices and lessons learned at agencies from encountering and responding to employee misconduct, we conducted a literature review to identify practices and lessons learned associated with employee misconduct in the federal sector. We interviewed officials from OPM, MSPB, the Equal Employment Opportunity Commission (EEOC), and the Office of Special Counsel (OSC), to obtain their perspectives on responding to employee misconduct through alternative approaches. We interviewed officials from the Environmental Protection Agency (EPA) to obtain their perspectives on recent efforts to better coordinate with their Inspector General to address cases of employee misconduct. We also obtained the perspectives of a panel of CHCOs from selected agencies as well as former human capital practitioners and other subject-matter experts with extensive experience working on employee misconduct issues. The Merit Systems Protection Board in its landmark decision, Douglas vs. Veterans Administration, 5 M.S.P.R. 280 (1981), established non- exclusive criteria that supervisors must consider, as appropriate, in determining an appropriate penalty to impose for an act of employee misconduct (“The Douglas Factors”). The following relevant factors must be considered in determining the severity of the discipline: 1. The nature and seriousness of the offense, and its relation to the employee’s duties, position, and responsibilities, including whether the offense was intentional or technical or inadvertent, or was committed maliciously or for gain, or was frequently repeated; 2. the employee’s job level and type of employment, including supervisory or fiduciary role, contacts with the public, and prominence of the position; 3. the employee’s past disciplinary record; 4. the employee’s past work record, including length of service, performance on the job, ability to get along with fellow workers, and dependability; 5. the effect of the offense upon the employee’s ability to perform at a satisfactory level and its effect upon supervisors’ confidence in the employee’s work ability to perform assigned duties; 6. consistency of the penalty with those imposed upon other employees for the same or similar offenses; 7. consistency of the penalty with any applicable agency table of 8. the notoriety of the offense or its impact upon the reputation of the 9. the clarity with which the employee was on notice of any rules that were violated in committing the offense, or had been warned about the conduct in question; 10. the potential for the employee’s rehabilitation; 11. mitigating circumstances surrounding the offense such as unusual job tensions, personality problems, mental impairment, harassment, or bad faith, malice or provocation on the part of others involved in the matter; and 12. the adequacy and effectiveness of alternative sanctions to deter such conduct in the future by the employee or others. The list was not intended to be exhaustive. Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov. In addition to the contact named above, Tom Gilbert, Assistant Director, and Anthony Patterson, Analyst-in-Charge, supervised the development of this report. Isabel Band, Crystal Bernard, Jehan Chase, Sara Daleski, Shirley Jones, Serena Lo, Krista Loose, Amanda Miller, and Kayla Robinson made major contributions to all aspects of this report. Robert Gebhart and Robert Robinson provided additional assistance.", "summary": "Misconduct is generally considered an action by an employee that impedes the efficiency of the agency's service or mission. Misconduct incidents can affect other aspects of employee morale and performance and impede an agency's efforts to achieve its mission. GAO was asked to examine how executive branch agencies address employee misconduct. This report (1) describes the process agencies are required to follow in responding to employee misconduct; (2) identifies alternative approaches to the formal process that agencies can use and assesses what factors affect agencies' responses to misconduct; (3) describes trends in removals and other adverse actions resulting from misconduct; and (4) identifies key practices agencies can use to help them better prevent and address misconduct. To address these objectives, GAO reviewed relevant sections of title 5 of the U.S.C; analyzed MSPB and OPM data, and interviewed, among others, agency officials and subject-matter experts. Chapter 75 of title 5 of the U.S. Code specifies the formal legal process that most agencies must follow when taking adverse actions, i.e., suspensions, demotions, reductions in pay or grade, and removals, for acts of employee misconduct. Chapter 75 details the built-in procedural rights certain federal employees are entitled to when faced with adverse actions. Depending on the nature of misconduct, an agency may use utilize alternative discipline approaches traditionally used in government to correct behavior. Alternative discipline is an approach to address misconduct that is available to agencies in lieu of traditional penalties (e.g., letters of reprimand and suspensions of 14 days or less). An example is a last chance agreement, whereby an employee recognizes the agency's right to terminate him or her should another act of misconduct occur. Based on the data collected by the Office of Personnel Management (OPM), agencies formally discipline an estimated 17,000 employees annually under Chapter 75, or less than 1 percent of the federal workforce, for misconduct. Based on OPM data, in 2016, agencies made 10,249 suspensions, 7,411 removals, and 114 demotions for misconduct. However, because of weaknesses in OPM's data on employee misconduct, which is provided by the agencies, OPM is unable to accurately target supervisory training to address misconduct, and decision-makers do not know the full extent or nature of this misconduct. Key lessons learned can help agencies better prevent and respond to misconduct. For example, tables of penalties provide a list of the infractions committed most frequently by agency employees, along with a suggested range of penalties for each to ensure consistent treatment for similar offenses. However, not all agencies have a table of penalties, including OPM, nor are agencies required by statute, case law or OPM regulations. Subject-matter experts we contacted identified additional promising practices that agencies can use to respond employee misconduct. Some of these are presented below. Agencies are accountable for providing required training to their managers. However, agency officials and subject-matter experts we interviewed said federal managers may not address misconduct because they are unfamiliar with the disciplinary process, have inadequate training, or receive insufficient support from their human resources offices. GAO recommends that OPM, working with the Chief Human Capital Officers Council, (1) take steps to improve the quality of data collected on misconduct; (2) leverage lessons learned to help agencies address misconduct; and (3) improve guidance on training supervisors and human resources staff on addressing misconduct. OPM partially concurred with two recommendations, and disagreed with the first, stating that its guidance has been successfully relied upon by agencies. GAO maintains the action is needed to help strengthen oversight.", "document_type": "gao"}
{"report": "Within DNN, the work of the four selected subprograms—Nuclear Material Removal, HEU Reactor Conversion, Radiological Security, and International Nuclear Security—focuses on efforts to remove and dispose of excess nuclear material from civilian sites worldwide, convert civilian research reactors to the use of non-weapons-useable nuclear fuel, secure radiological materials at their source in the United States and abroad, and improve the security of weapons-useable nuclear material in key countries. The selected subprograms organize their work in programmatic areas which we refer to as components, and under each component the subprograms manage projects. Table 1 below describes the work of each subprogram and the components in which the subprogram organizes its work scope. PMI’s The Standard for Program Management and GAO’s schedule and cost guides identify program management leading practices related to schedule and cost estimating and measuring performance against baselines, as follows: PMI guidelines. According to PMI’s guidelines, programs practice life-cycle management, which involves schedule and financial management throughout the course of the program’s life-cycle phases—program definition, benefits delivery, and closure. In particular, PMI states that in conducting program schedule management, programs use a master schedule that integrates the schedules of program components necessary to achieve the program’s goal. In program financial management, program cost estimates should be clearly defined and should consider the full life- cycle costs of the program. According to PMI, programs should also establish and measure performance against baselines for both schedule and cost. GAO schedule and cost guides. GAO’s schedule and cost guides, which draw from federal organizations and industry, define best practices about the processes needed for the development and management of high-quality and reliable schedule and cost estimates. Similar to PMI’s guidelines, according to the GAO guides, programs should establish and use an integrated master schedule, establish cost estimates that cover the full life cycle of the program, document and define assumptions tailored to the program, incorporate analysis of program risk and uncertainty in schedule and cost estimates, and manage a program’s schedule and cost by measuring against a baseline. The four DNN subprograms we chose for review generally do not use selected leading program management practices to manage schedule and cost. Specifically, at the time of our review, none of the subprograms had schedule and cost estimates that encompassed its entire life cycle, although one subprogram planned to develop such estimates for its recently-extended life cycle. In addition, none of the selected subprograms measure their overall schedule and cost performance against baseline estimates. NNSA officials said that the subprograms had not developed schedule and cost estimates that cover their life cycles and did not measure the subprograms against baselines due, in part, to uncertainty in planning scope and schedules that rely on the cooperation of other countries. DNN also does not require subprograms to have such estimates or to measure performance against schedule and cost baselines. Following these practices, however, would provide NNSA managers and other stakeholders more complete information to evaluate how much the subprograms may cost to achieve their goals, the amount of time they may need to achieve these goals, and their actual versus planned performance. According to leading practices, programs should (1) establish a master schedule that integrates the schedules of program components necessary to achieve the program’s goal, such as specified performance to be achieved over a defined life cycle, (2) determine costs that consider the full life-cycle costs of the program, and (3) measure performance against baselines for both schedule and cost. Figure 2 illustrates the extent to which the selected subprograms have established schedule and cost estimates compared to their planned life-cycle completion dates, if any. The Nuclear Material Removal subprogram had schedule and cost estimates that encompassed all three of its subprogram components through the subprogram’s previously planned completion date of fiscal year 2022. However, the subprogram had yet to update its schedule and cost estimate through its new planned completion date of fiscal year 2027, which was established in May 2017. The subprogram did not have readily available information on performance against its former schedule and cost estimates. Specifically: Schedule. As of April 2017, the subprogram’s schedule, which encompassed all three subprogram components, included 52 ongoing and planned projects with estimated completion dates by the end of fiscal year 2022 for most of these projects to reach a goal to remove or disposition a total of 8,466 kilograms of nuclear material. In May 2017, the subprogram extended its life cycle from fiscal year 2022 to fiscal year 2027 but at the time of our review had yet to update its schedule of planned projects to be completed during fiscal years 2023 through 2027. According to NNSA officials, they extended the subprogram’s life cycle in part because certain projects planned to be completed by fiscal year 2022 were delayed and the subprogram’s work was expanded. Cost. The subprogram had a cost estimate for its planned work through fiscal year 2022 but at the time of our review had yet to update its cost estimate for the overall subprogram through its new planned completion date of fiscal year 2027. Specifically, as of June 2017, the subprogram had a cost estimate of about $595 million, according to our analysis of information provided by the subprogram. This estimate covered the planned work scope of all three subprogram components to be completed during fiscal year 2017 through 2022. The subprogram, however, did not have estimated costs for completing work scope planned during fiscal years 2023 through 2027. According to NNSA officials, as of June 2017, they were developing a cost estimate for the remaining years, although the officials did not specify when the cost estimate would be completed. Measuring performance against baselines. The subprogram did not measure its overall performance against schedule and cost baselines. NNSA reported to Congress in July 2014 that the subprogram planned to remove or disposition approximately 3,000 kilograms of nuclear material by fiscal year 2022 at an estimated cost of about $600 million. However, the subprogram did not track information on its performance against the cost estimate. According to NNSA officials, removal projects have too many uncertain costs. Instead, NNSA officials said that they update the subprogram’s life- cycle cost each year as part of the annual planning for the next fiscal year’s budget request. Until the subprogram develops schedule and cost estimates to support the recently revised life-cycle completion date of fiscal year 2027, it does not have the baselines it needs to measure its overall schedule and cost performance. Although the subprogram did not measure its overall performance against established schedule and cost baselines, according to monthly performance reports, the subprogram baselined and measured the schedule performance of individual removal projects by tracking the difference in number of days between forecasted project completion dates and baseline completion dates. However, the subprogram did not have information that integrated project performance information to provide an overall picture of schedule performance for the entire subprogram. The HEU Reactor Conversion subprogram had schedule and cost estimates that covered the remaining work scope to complete two of three subprogram components by fiscal year 2033 but not for a third component estimated to be completed in fiscal year 2035. The subprogram also did not measure its overall performance against schedule and cost baselines. Specifically: Schedule. The HEU Reactor Conversion subprogram did not have a schedule for the overall subprogram through completion of its life cycle. Instead, the subprogram had a schedule for all work scope planned for the 5-year FYNSP, which included the schedule for the remaining work to complete one of the three subprogram components–Molybdenum 99 (Mo99) efforts. Beyond the FYNSP planning period, the subprogram has an estimated completion date of fiscal year 2033 for a second component—U.S reactor conversions— and has developed a schedule for completion of the component. For the third subprogram component—international reactor conversions— the subprogram estimates a fiscal year 2035 completion date for its remaining work scope to convert or verify the shutdown of 44 international reactors, but it had not developed a complete schedule to meet that date. Specifically, the subprogram’s schedule was not up- to-date for 22 of the 44 international reactors in the subprogram’s planned work scope to support the estimated fiscal year 2035 completion date for these reactors. Instead, in the subprogram’s schedule, these reactors had estimated completion dates by fiscal year 2030. NNSA officials explained that the schedule was not up-to- date for these reactors because the reactors are in countries where the subprogram cannot currently plan or implement the conversions due to limitations in cooperation with these countries. For example, DNN cannot plan the schedule for conversion of reactors in Russia that are in the subprogram’s scope until the United States and Russia resume joint nuclear security activities that the United States discontinued following Russia’s invasion of Ukraine in 2014. NNSA officials said that the 2035 date is their best judgment of the earliest date when the subprogram could complete the conversions or verify certain reactors’ shutdowns based on the assumption that the United States and Russia may resume nuclear security cooperation in the 2020s. Because of the high degree of uncertainty with this date, the subprogram did not update the schedule to reflect the 2035 date, according to the officials. Appendix II provides tables that list the planned reactor and facility projects in the HEU Reactor Conversion subprogram, their locations, and estimated conversion or shutdown completion dates. Cost. The HEU Reactor Conversion subprogram did not have a life- cycle cost estimate for the overall subprogram, but had overall life- cycle cost estimates for two of the three subprogram components. The subprogram had cost estimates that totaled approximately $1.1 billion through fiscal year 2033 and that included the remaining estimated life-cycle costs for the subprogram’s U.S. reactor conversions component and its Mo99 efforts. For the third component—international reactor conversions—the subprogram only estimated costs for the 5-year FYNSP, not through the estimated completion date for the component of fiscal year 2035. According to NNSA officials, developing a cost estimate that includes all remaining international reactor conversions through 2035 would be challenging because the costs for these projects are highly uncertain and vary depending on the willingness of each country to cooperate as well as the unique technical, regulatory, and other factors that vary for each reactor in each country. The subprogram, however, had established estimated life-cycle budgets for completing the conversion or verifying the shutdown of each reactor in its work scope, which could be used, along with other information, to develop a cost estimate for the subprogram component. Measuring performance against baselines. The subprogram did not measure overall subprogram performance against schedule and cost baselines. Specifically, as mentioned above, the subprogram did not have schedule and cost estimates for the overall subprogram that it could use to establish baselines to measure the performance of the overall subprogram. Although the subprogram had life-cycle estimates for its U.S. reactors and Mo99 components, the subprogram did not use these estimates as baselines to measure the overall subprogram components’ performance. The subprogram measured schedule performance of individual projects under its three components against baselines by tracking the difference in number of days and months between forecasted project completion dates and baseline completion dates. However, it did not integrate and roll up the project information to provide an assessment of its overall schedule performance. In addition, the subprogram baselined and measured cost performance of the U.S. High Performance Research Reactor project—which constitutes six of the seven reactors under its U.S. reactor conversions component—by tracking changes in the project’s estimated life-cycle cost. However, the subprogram did not have similar information that tracked changes in cost estimates of other projects under its three components. The Radiological Security subprogram did not have schedule and cost estimates for three components through the subprogram’s planned completion date in fiscal year 2033. The subprogram also did not measure overall subprogram performance against schedule and cost baselines. Specifically: Schedule. The subprogram has an estimated completion date of fiscal year 2033 but did not have an overall schedule that covered its three components for meeting the 2033 date. Instead, the subprogram had a schedule that covered work to be completed under its three components during the 5-year FYNSP (fiscal years 2017 through 2021). Specifically, for two of the three subprogram components— radiological source removal and nonradioisotopic technologies—the subprogram has not established specific work scope and schedules beyond fiscal year 2021 because of uncertainty about the future. For example, according to the subprogram’s director, planning the adoption of nonradioisotopic technologies is uncertain because the timing of when such technologies can be adopted depends, in part, on regulations and international laws, making it challenging for the subprogram to define the scope of work. For the third subprogram component—radiological source protection—the subprogram has an estimated completion date of fiscal year 2033 to reach a total target to secure 4,394 buildings in its inventory of sites worldwide with high- priority radiological sources. However, the subprogram had not developed a schedule of specific projects to be completed beyond the 5-year FYNSP to meet that date and target. NNSA officials said that they are often uncertain when a project will be able to start because it depends greatly on circumstances in each country. Appendix III provides the Radiological Security subprogram’s planned work scope for the radiological source protection component from fiscal years 2017 through 2033. Cost. The Radiological Security subprogram did not have a life-cycle cost estimate for the overall subprogram through its estimated completion date of fiscal year 2033. Specifically, the subprogram had a cost estimate of about $849 million for all three components covering the 5-year FYNSP. However, for two of the three subprogram components—radiological source removal and nonradioisotopic technologies—the subprogram had not developed cost estimates beyond the 5-year FYNSP because, as mentioned above, it had not developed work scope for these components in the out-years. For example, according to the subprogram’s director, the subprogram’s radiological source removal component depends on the voluntary participation of users of radiological sources that register their sources with the subprogram. Therefore, the subprogram cannot estimate the number of sources to be removed in out-years. For the third subprogram component—radiological protection—the subprogram had assumed a stable budget to complete its target to secure 4,394 buildings by fiscal year 2033. However, according to the director of the subprogram, this budget assumption was not intended to be a reliable life-cycle cost estimate. Measuring performance against baselines. As mentioned above, the subprogram did not have schedule and cost estimates for the overall subprogram needed to establish baselines to measure their overall performance. The subprogram, however, baselined and measured the schedule performance of individual projects under its three components by tracking the difference in number of days between forecasted project completion dates and baseline completion dates. The subprogram, however, did not integrate and roll up the project schedule performance information to provide performance information for the overall subprogram. The International Nuclear Security subprogram maintained schedule and cost estimates for the 5-year FYNSP (fiscal years 2017 through 2021) but did not have schedule and cost estimates for work scope in the years beyond the FYNSP. In addition, the subprogram did not measure overall performance against baselines. Specifically: Schedule. The International Nuclear Security subprogram had not established a life-cycle schedule for the overall subprogram or its two component efforts, as it had not identified specific work scope or end- point targets beyond fiscal year 2021 and considers its mission to be enduring (i.e. without an end-date). Instead, the subprogram had only estimated a schedule for work scope in individual countries during the 5-year FYNSP. According to the subprogram director, the subprogram is expected to operate indefinitely and continue as long as nuclear materials exist to improve security in countries possessing such materials. However, the subprogram had not planned project-specific work scope in years beyond the FYNSP because, according to the subprogram director, it is difficult to estimate the subprogram’s likely level of foreign counterpart engagement in individual countries beyond 5 years. Cost. Because it has not identified out-year work scope, the International Nuclear Security subprogram did not have an overall life- cycle cost estimate and only had an estimate of about $530 million for the work to be completed during the 5-year FYNSP period. According to NNSA officials, they have not developed a cost estimate for work scope in the years beyond the FYNSP because assumptions about future work will likely change due to the uncertainty in relationships with partner countries. Measuring performance against baselines. The International Nuclear Security subprogram did not measure performance of the subprogram against schedule and cost baselines. Specifically, as mentioned above, the subprogram did not have the schedule and cost estimates for the subprogram’s life cycle beyond fiscal year 2021 needed to establish baselines to measure its overall performance. In addition, the subprogram did not use its 5-year FYNSP estimates as baselines to measure performance. Instead, the subprogram updates the FYNSP estimates each year in planning the next fiscal year’s budget request. Moreover, unlike the other three subprograms, the International Nuclear Security subprogram did not have project schedule baseline information that could be integrated and rolled up to provide information on the performance of the overall subprogram. In general, NNSA officials explained that uncertainty in planning the selected subprograms’ work scope or schedules, particularly for components with projects that rely on the cooperation of foreign countries, was among the reasons they did not have schedule and cost estimates that covered the subprograms’ life cycles or that went beyond the 5-year required planning period. In addition, according to these officials, DNN senior management does not require subprograms to establish schedule and cost estimates that cover the entire subprogram life cycle and to use these estimates as baselines to measure subprogram performance. However, uncertainty should not prevent these subprograms from establishing more complete or longer-term estimates to account for the time and resources they need to achieve their goals. As mentioned above, without such estimates, the subprograms do not have the baseline information they need to track their performance. According to leading practices, developing reliable schedule and cost estimates can be achieved by following steps that address data limitations and risks and uncertainties for a program. For example, according to the GAO schedule guide, a reliable schedule should reflect all of a program’s activities and recognize that uncertainties and unknown factors in schedule estimates can stem from, among other things, data limitations. In addition, according to the GAO cost guide, the cost-estimating process involves defining and documenting assumptions that are tailored to the specific program, such as about the program’s life-cycle phases, political issues, or technology development. Assumptions should be based on historical data to minimize uncertainty and risk. These same assumptions should also be used to develop the program schedule. For management to make good decisions, the program estimate must reflect the degree of uncertainty so that a level of confidence can be given about the estimate. Accordingly, because assumptions defined for a particular program’s schedule and cost estimate can vary, they should always be inputs to the program’s risk analyses of cost and schedule. Programs use different methods to quantify uncertainty and risk in developing a schedule or cost estimate. DOE’s cost estimating guide describes approaches for programs to incorporate risk and uncertainty in cost estimates such as the use of lower- and upper-bound cost ranges that are developed based on risk analysis. Other NNSA programs use these approaches in developing schedule and cost estimates for highly uncertain, long-term program plans. In particular, NNSA’s Office of Defense Programs develops and reports high- and low-range cost estimates for elements of NNSA’s nuclear weapons modernization programs in part to account for the uncertainty in these long-term program estimates. As mentioned above, such estimates would provide NNSA managers and other stakeholders information to help evaluate resources and compare the costs and benefits of different programs and priorities. Because the selected subprograms do not measure their overall schedule and cost performance against baselines, NNSA managers, stakeholders, and Congress have incomplete information about these subprograms’ actual-versus-planned schedule and cost performance over their duration and are, therefore, at risk of being unable to assess when a subprogram is likely to be completed or whether it will cost more or less than planned. DNN’s 2017 revised policy includes new sections that address leading practices on risk and quality management that all DNN programs and subprograms should follow. NNSA officials said they added these sections based on their review of leading practices in PMI’s The Standard for Program Management and GAO’s Standards for Internal Control in the Federal Government to ensure these leading practices were incorporated and required for DNN programs. Risk management. According to leading practices on risk management, programs should have processes to manage risks, including processes to identify, assess, and respond to risks. In the revised DNN policy, under a new section on risk management, all DNN programs and subprograms are required to prepare risk management plans to help identify, analyze, handle, and monitor risk. For example, a DNN subprogram may identify the risk of schedule slippage due to political constraints in working with foreign countries and could incorporate and monitor that risk in planning. Quality management. According to program management leading practices on quality management, program quality should be continuously monitored. A new DNN policy section on continual improvement requires DNN programs and subprograms to plan and implement methods, such as program evaluations and management assessments, in order to monitor and improve processes. For example, a DNN subprogram may use an independent review by the NNSA Office of Management and Budget to help improve its program management processes, such as how it tracks cost, scope, and schedule. The revised policy also outlines steps for corrective actions to be taken when noncompliance is detected. These steps range from determining the cause of noncompliance to reviewing the effectiveness of corrective actions taken. These new sections added requirements for DNN program management that were not previously documented. For example, in the prior policy, risk management was not a requirement for DNN programs and subprograms. In addition, NNSA officials said that they added the continual improvement section to the revised policy after reviewing PMI’s practices on quality assurance, which they believed would clarify responsibilities regarding management assessments and independent reviews. The revised DNN policy does not address or require leading practices on life-cycle schedule and cost management for DNN programs or subprograms. Specifically, the revised policy does not outline requirements for programs or subprograms to establish life-cycle cost estimates or measure performance against schedule or cost baselines. Instead, the revised policy provides requirements on schedule and cost management limited to the NNSA budgeting process covering the 5-year FYNSP. For example, according to the revised DNN policy, programs and subprograms must conduct program management activities, such as budget formulation, in alignment with anticipated resources in the FYNSP. Additionally, the policy requires programs and subprograms to establish performance measurement data and track cost or schedule performance, but only within the FYNSP. According to leading practices, life-cycle management is important to program management and includes schedule and cost management activities that span the duration of the program. According to PMI, all programs, regardless of length, have life cycles; furthermore, leading practices indicate that activities related to managing the schedule, cost, and scope of a program should be conducted for the life of the program. For example, leading practices call for calculating cost estimates as close to the beginning of a work effort as possible that consider the full program life cycle, and then documenting this baseline to measure performance. According to NNSA officials, the revised DNN policy does not include requirements to practice life-cycle management, including life-cycle schedule and cost management, because officials determined that life- cycle management did not apply to some DNN programs that NNSA officials believe are enduring or continuous. For example, as mentioned above, the director of the International Nuclear Security subprogram said that the subprogram will phase out of certain areas or reduce engagement with certain countries in the future but that it is expected to continue as long as nuclear materials exist and will work to improve security in countries possessing such materials. We disagree that life-cycle program management does not apply to programs or subprograms that may have an enduring mission. Managers need to make informed decisions about whether a program is affordable within the agency’s portfolio. NNSA and DNN should be able to compare DNN’s various programs’ requirements several years beyond its 5-year planning period. According to the GAO cost guide, in developing estimates, programs should define assumptions tailored to the program, such as assumptions about the program’s life-cycle phases. For example, the International Nuclear Security subprogram could take steps to define end-point targets for when it may phase out work in certain areas or countries in the future. In addition, according to the GAO schedule guide, a comprehensive schedule should reflect all of a program’s activities and recognize that uncertainties and unknown factors in schedule estimates can stem from, among other things, data limitations. Moreover, because assumptions themselves can vary, they should always be inputs to program risk analyses of cost and schedule. According to NNSA officials, although the revised policy does not include requirements for life-cycle cost estimating, DNN programs could address this in their individual program management plans. NNSA officials stated that these program management plans for programs and subprograms should be detailed enough to also provide information on how the program will track progress, including by identifying changes to the planned schedule. However, the revised DNN policy does not clearly require DNN programs or subprograms to have program management plans, nor does it specify elements of such plans. Specifically, the revised DNN policy requires each program to develop “program management documentation” that identifies program scope, schedule, and cost during the fiscal year and operating procedures for the fiscal year, but it does not outline similar requirements for the program’s life cycle. In addition, the revised policy does not specify requirements or guidance, such as on cost estimation, for what programs or subprograms are to include in the program management documentation. In contrast, PMI indicates that programs should develop a program management plan that includes plans for program financial management, schedule management, and scope management for all phases of the program’s life cycle. According to NNSA officials, the revised DNN policy is the only directive or documentation that spells out what is needed or required to be included in a program management plan. Although the revised DNN policy does not clearly require DNN programs or subprograms to have program management plans, some DNN programs have developed or are developing such plans. For example, the Global Material Security program, which oversees the Radiological Security and International Nuclear Security subprograms, issued a new program management plan in April 2017. The Global Material Security program management plan requires that each subprogram maintain a 5- year budget for the FYNSP with cost estimates, but it does not require or provide guidance on developing life-cycle schedule or cost estimates. NNSA officials said that DNN underwent a major reorganization of its programs in January 2015, and some of the new program offices are still preparing their program management plans. For example, the Material Management and Minimization program that oversees the Nuclear Material Removal and HEU Reactor Conversion subprograms is still developing its program management plan, according to NNSA officials. In addition, the four selected subprograms had various documented plans, but none fully addressed life-cycle schedule and cost management. Nuclear Material Removal. The subprogram did not have a current program management plan that had been updated since the 2015 reorganization of DNN but instead relied on an older plan that covered a different scope than the scope of the current subprogram. HEU Reactor Conversion. The subprogram did not have a program management plan for the overall subprogram. Instead, the subprogram had project execution plans for its U.S. reactor conversion projects and its Mo99 projects and relied on an outdated document for its international reactor conversion projects. Radiological Security. The subprogram had a program management plan that included requirements for the use of project life-cycle baselines and for conducting cost estimation for the 5-year FYNSP. However, the plan had no requirement for developing a cost estimate for the life cycle of the subprogram and for using such an estimate to measure performance of the overall subprogram. International Nuclear Security. The subprogram had a program management plan that required cost estimating for 1 fiscal year. However, the plan did not include requirements for life-cycle estimates and for using initial or updated baselines to measure performance. NNSA subprogram officials said that they do not have readily available life-cycle cost estimates and baseline measurement data in part because they are not asked to provide it. For example, NNSA officials from the HEU Reactor Conversion subprogram said that they did not have sufficient staff to track performance against initial baselines because it was not a priority for management, although it would be possible to do so if required. One of the stated goals of the revised DNN policy is to facilitate DNN-wide implementation of methods for programs and subprograms to monitor, measure, and improve management processes. However, because the policy does not require more complete information from DNN programs and subprograms on their cost, schedule, and performance against baselines—consistent with leading practices—it is not clear that this policy goal can be achieved. When organizations apply leading program management practices—such as establishing schedules and cost estimates covering their planned life cycles and measuring performance against such baselines—they may be able to enhance their chances of achieving success across a range of programs. However, the four selected DNN subprograms are generally not applying these selected leading practices for life-cycle program schedule and cost management, due in part to the uncertainty and risks in working with international partners. However, methods and approaches exist that allow programs to account for uncertainty and risk in developing schedule and cost estimates for their planned scope of work. Furthermore, while the revised DNN program management policy has incorporated some leading practices, it does not include requirements and guidance for DNN programs and subprograms to practice life-cycle schedule and cost estimating and does not require program management plans that could be the vehicle for DNN programs and subprograms to specify the use of such estimates. Updating the DNN program management policy to include requirements for DNN programs and subprograms to follow leading practices for life-cycle program management would help NNSA ensure that managers, stakeholders, and Congress have better information on how much DNN programs and subprograms may cost to achieve their goals, the amount of time they may need to achieve these goals, and how efficiently and effectively they are actually being executed compared to plans. The NNSA Deputy Administrator for DNN should revise the DNN program management policy to require DNN programs and subprograms to follow life-cycle program management. These requirements should include development of schedule and cost estimates that cover the life cycle of DNN programs and subprograms, use of methods to account for uncertainty and risk in such estimates, use of cost and schedule baselines to measure performance over program and subprogram life cycles, and development of program management plans. (Recommendation 1) We provided NNSA with a draft of this report for its review and comment. In written comments, which are summarized below and reproduced in appendix IV, NNSA neither agreed nor disagreed with our recommendation to revise the DNN program management policy to require DNN programs and subprograms to follow life-cycle program management. However, NNSA stated that it plans to take action in response to the recommendation. In general, NNSA stated that DNN will update its program management policy to formally document current practice and clarify expectations for addressing uncertainty. Specifically, NNSA said it will update the policy to: (1) reflect that life-cycle cost and schedule management should be applied at the project or subprogram level where appropriate, considering the extent of uncertainty impacting scope, potential timelines, and executability; (2) define the methodologies to (a) account for uncertainties where applying these techniques would result in a reasonable range of estimates that would be useful for planning and scheduling purposes or (b) document risk and track actions to reduce uncertainty where applicable; (3) address expectations for assessing cost and schedule performance, commensurate with the level of certainty present at baselining; and (4) address requirements for documenting program management plans. Although we acknowledge NNSA’s plan to update its policy, we have concerns regarding whether its proposed actions will ensure that DNN programs and subprograms effectively follow leading practices for life- cycle schedule and cost management in the future. First, we do not believe that updating the DNN program management policy to formally document current program management practice addresses our recommendation. NNSA’s response suggests that its update to the policy is intended to reflect current DNN program management practices rather than signal a need for corrective action to address the DNN program management limitations we identified. Specifically, as we stated in our report, none of the four subprograms we reviewed had schedule and cost estimates that encompassed the entire life cycle, although one subprogram planned to develop such estimates for its recently-extended life cycle. In addition, NNSA’s proposed update to the DNN program management policy to reflect life-cycle schedule and cost management “where appropriate” is vague, and may give programs and subprograms too much discretion to avoid the requirement. To have an effective requirement on life-cycle program management and to be responsive to our recommendation, NNSA will need to clearly define the criteria for when a program should be exempt from a requirement to follow life-cycle program management. Finally, the meaning of NNSA’s proposed update to the policy to address expectations for assessing cost and schedule performance, commensurate with the level of certainty present at baselining is unclear. Specifically, it is unclear whether NNSA plans to require that DNN subprograms use cost and schedule baselines to measure performance, or whether it plans to exempt programs or subprograms from such practices based on unstated expectations. As we stated in our report, none of the subprograms we reviewed measured their overall schedule and cost performance against baseline estimates. To ensure that DNN subprograms take steps to measure schedule and cost performance against baselines and to be responsive to our recommendation, NNSA will need to define clear expectations for DNN programs and subprograms to follow. NNSA also provided general comments in its written comments regarding DNN program management. First, NNSA commented that DNN currently implements elements of life- cycle program management where appropriate and reasonable. However, according to NNSA, the majority of its international activities operate with an unusually high level of uncertainty regarding potential international cooperation and with limited information on international operations to understand the scope of work required to support useful planning and estimating. In NNSA’s view, the high uncertainty would result in range estimates so broad as to serve no useful purpose, and there is no appreciable cost-benefit to expending resources on such calculations. We recognize that organizations need flexibility to determine when it is appropriate and useful to apply leading practices on life-cycle program management. However, as noted in our report, managers need to make informed decisions about whether a program is affordable within the agency’s portfolio. Without more complete schedule and cost information on DNN subprograms, NNSA managers and other stakeholders have degraded information on the elements of DNN’s portfolio, which may limit their ability to assess and justify the affordability of long-term plans. If NNSA believes that some of DNN’s planned international work scope is too uncertain for subprograms to develop estimates of schedule and cost that cover their life cycles, then NNSA should evaluate whether it is appropriate to identify such work scope in DNN’s long-term plans at all. Second, NNSA commented that no specific requirement exists for DNN programs and subprograms to implement life-cycle cost estimates, and that DNN complies with current requirements. NNSA also commented that the proper application of leading practices recognizes that cost- benefits, as well as the potential usefulness and reliability of estimates, are important considerations. In instances in which uncertainty is extremely high, NNSA stated that focus shifts to disclosure of risks, and the establishment and tracking of actions to reduce the level of uncertainty. According to NNSA’s comments, DNN discloses risks and tracks actions to reduce the level of uncertainty extensively, and this was reflected in the most recent update to the DNN program management policy with the addition of a new section on risk management. NNSA also stated that as uncertainty is reduced, then other principles can be applied where appropriate. We stated in our report that no specific requirement exists for DNN programs and subprograms to implement life-cycle cost estimates. Specifically, we noted that the DNN policy required that program management functions be conducted over the 5-year FYNSP. Therefore, we agree that the DNN subprograms we chose to review complied with current requirements. However, our review was not focused on compliance with requirements but rather on the use of leading or good program management practices. We also noted that NNSA’s stated objectives for the DNN policy include establishing a DNN-wide policy that incorporates leading practices for program management and that facilitates the implementation of methods for programs and subprograms to monitor, measure, analyze, and improve management processes. Leading practices on life-cycle program management are important for an organization to successfully plan the resources it needs to achieve its goals and assess its performance in doing so. DNN’s revised policy did not acknowledge management of the program life-cycle as an essential program management function and did not include any requirements on leading practices on life-cycle schedule and cost management. We agree that risk management processes should be used to monitor risks and track actions to reduce uncertainty. As we stated in our report, the revised DNN policy included a new section on risk management under which all DNN programs and subprograms will be required to prepare risk management plans to help identify, analyze, handle, and monitor risk. However, the new section did not include criteria for DNN subprograms to follow when uncertainty related to risks being monitored is low enough to allow a subprogram to develop life-cycle schedule and cost estimates. We are sending copies of this report to the appropriate congressional committees, the NNSA Administrator, the NNSA Deputy Administrator for Defense Nuclear Nonproliferation, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or oakleys@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report examines the extent to which (1) selected subprograms within the National Nuclear Security Administration’s (NNSA) Office of Defense Nuclear Nonproliferation (DNN) use program management leading practices to manage schedule and cost, and (2) DNN has incorporated program management leading practices in its revised program management policy. To conduct this work, we reviewed 4 selected DNN subprograms. DNN has 4 major programs that manage a total of 13 subprograms (a subprogram is a program managed as part of another program). Specifically, we selected the Nuclear Material Removal and Highly Enriched Uranium (HEU) Reactor Conversion subprograms, which DNN manages under its Material Management and Minimization program. In addition, we selected the Radiological Security and International Nuclear Security subprograms, which DNN manages under its Global Material Security program. We selected these subprograms for review because they had defined start dates, end dates, and/or work scope indicating that they had project-like aspects. These subprograms organize their work in programmatic areas which we refer to as components and under each component the subprograms manage various types of projects, such as projects to remove nuclear material from civilian sites worldwide. We also selected the 4 subprograms because they were not the subject of other ongoing or recently completed GAO reviews. The information we obtained from these subprograms is not generalizable, but we believe that we obtained important insights into DNN’s cost and schedule management of these subprograms. To examine the extent to which the selected DNN subprograms use program management leading practices to manage cost and schedule, we identified selected leading practices by the Project Management Institute (PMI) in The Standard for Program Management and by GAO in its schedule and cost guides. The selected leading practices we identified were the use of a master schedule necessary to achieve a program’s goals, cost estimates that cover the full life-cycle of a program, and schedule and cost baselines to measure performance. We collected and reviewed subprogram planning documents, monthly performance reports, and spreadsheet data on work scope, historical costs, schedules and cost estimates established by the subprograms, and their use of project baselines to measure performance. We also reviewed information the subprograms reported in NNSA’s fiscal year 2017 and 2018 congressional budget justifications. We also interviewed NNSA officials and their contractors who manage the program management information system used by 3 of the 4 subprograms to manage schedule and cost information to understand its capabilities. We interviewed NNSA officials who manage the selected DNN subprograms about the use of these practices and their views on challenges or limitations in using them. We also interviewed representatives at Argonne National Laboratory and Pacific Northwest National Laboratory, which operate projects for the subprograms, to identify how projects develop schedule and cost estimates and pass information on to the subprograms. To assess the reliability of the schedule and cost estimates on the selected subprograms, we interviewed NNSA officials and national laboratory contractors who were knowledgeable about the process followed to develop and update the estimates and the program management information systems used to manage the schedule and cost information and generate reports. We determined that the data were sufficiently reliable for our purposes, which were to report the subprograms’ estimated schedule completion dates and cost estimates, as well as report the fiscal years and subprogram components and projects covered by the subprogram schedule and cost estimates. To examine the extent to which DNN has incorporated leading practices into its revised program management policy, we reviewed DNN’s revised program management policy approved in February 2017. We compared the revised policy to the 2005 version to identify the changes included in the revised policy. We reviewed program management leading practices by PMI in The Standard for Program Management and by GAO in its schedule and cost guides and federal internal control standards. For example, we considered the applicable leading practices on schedule and cost management identified above as well as other practices such as those on risk management, quality management, and development of program management plans. We compared these practices to DNN’s requirements and guidance contained in the revised DNN policy. We interviewed NNSA officials about the development of the new policy and their views on the reasons specific leading practices were included in the revised policy and others were not, as well as challenges DNN’s programs and subprograms face in managing program schedule and cost. We also reviewed program management plans for the 4 selected subprograms and the major programs under which these subprograms operate. We then interviewed NNSA officials from the selected subprograms to determine their involvement in developing the revised DNN program management policy and the status of individual program management plans that were under development at the time of our review. We conducted this performance audit from June 2016 to September 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Office of Defense Nuclear Nonproliferation’s Highly Enriched Uranium (HEU) Reactor Conversion subprogram consists of three components: (1) U.S. research reactor conversions, (2) international research reactor conversions, and (3) Molybdenum 99 (Mo99) efforts, which include international Mo99 isotope production reactor conversions and projects to establish new U.S. non-HEU Mo99 production facilities. The subprogram’s current goal is to convert or verify shutdown of 156 HEU reactors and isotope production facilities and to support the establishment of a domestic, non-HEU-based Mo99 production capability. Tables 2 through 4 below list the U.S. reactor conversions, international reactor conversions or shutdowns, and Mo99 projects in the HEU Reactor Conversion subprogram’s planned scope of work, for each of the subprogram’s three components, as of July 2017. The Office of Defense Nuclear Nonproliferation’s Radiological Security subprogram’s current goal for the radiological source protection component is to upgrade security in 4,394 buildings worldwide by fiscal year 2033. Table 5 shows the estimated number of buildings to be completed each year as of June 2017. Shelby S. Oakley, (202) 512-3841 or oakleys@gao.gov. In addition to the individual named above, William E. Hoehn (Assistant Director), Natalie M. Block, R. Scott Fletcher, Brian M. Friedman, Cindy Gilbert, Jason T. Lee, TyAnn Lee, Duc Ngo, Jeanette Soares, Sheryl Stein, and Sara Sullivan made key contributions to this report.", "summary": "The threat posed by the proliferation of nuclear and radiological weapons remains a pressing national security challenge. DNN implements nuclear nonproliferation programs worldwide. To carry out its mission, for fiscal year 2018 DNN requested an appropriation of about $1.5 billion for its 4 major programs and their 13 subprograms. A House Armed Services Committee report, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to review and assess DNN's project and program management processes and systems. GAO's report examines the extent to which (1) selected DNN subprograms use program management leading practices to manage schedule and cost (2) DNN has incorporated leading practices in its revised program management policy. GAO selected 4 DNN subprograms to review that had defined end dates and/or work scope and that GAO had not recently examined. GAO reviewed documentation on DNN and NNSA's program management policies and practices; reviewed selected leading practices published by PMI and GAO; and interviewed agency officials. The 4 selected subprograms from the National Nuclear Security Administration's (NNSA) Office of Defense Nuclear Nonproliferation (DNN) GAO reviewed generally do not use selected program management leading practices to manage schedule and cost. According to generally recognized leading practices from the Project Management Institute (PMI) and GAO, programs should (1) establish schedules necessary to achieve the program's goal, (2) establish life-cycle cost estimates, and (3) measure performance against schedule and cost baselines. However, none of the DNN subprograms have schedule and cost estimates covering their planned life cycles and none measure performance against schedule and cost baselines. The following figure illustrates the extent to which the selected subprograms have established schedule and cost estimates compared to their planned life cycles. NNSA officials said that the subprograms do not have schedules and cost estimates that cover their life cycles and do not measure performance against baselines, in part, because DNN management does not require such estimates or baseline measurements. The lack of a requirement is consistent with the limitations in DNN's revised program management policy, which does not address leading practices on establishing schedule estimates, estimating life-cycle costs, and measuring against such baselines. According to leading practices, in developing schedule and cost estimates a program should define assumptions tailored to the program such as its life-cycle phases. Updating the DNN policy to include requirements and guidance on cost estimating and tracking performance against schedule and cost baselines could help ensure that NNSA managers and Congress have better information on how much DNN programs and subprograms may cost, the time they may need to achieve their goals, and how effectively they are being executed compared to plans. GAO recommends that DNN revise its program management policy to require DNN programs and subprograms to follow life-cycle program management, such as requiring life-cycle estimates and measuring against baselines. NNSA neither agreed nor disagreed with the recommendation but plans to take action to revise its policy.", "document_type": "gao"}
{"report": "Puerto Rico, which has approximately 3.3 million residents according to U.S. Census Bureau (Census) estimates, is the largest and most populous territory of the United States. As a territory, Puerto Rico is subject to congressional authority, though Congress has granted it broad authority over matters of internal governance—notably, by approving Puerto Rico’s constitution in 1952. Individuals born in Puerto Rico are U.S. citizens and can migrate freely to the states. Puerto Rico and its residents are generally subject to the same federal laws as the states and their residents, except in cases where specific exemptions have been made, such as with certain federal programs. For example, Puerto Rico residents generally have full access to Social Security and unemployment insurance; however, for some programs, such as Medicaid, federal funding in Puerto Rico is restricted as compared to funding in the states. Residents of Puerto Rico are exempt from paying federal income tax on income from sources in Puerto Rico. Residents are required to pay federal income tax on income from sources outside of Puerto Rico. They are also required to pay federal employment taxes, such as Social Security and Medicare taxes, on their income regardless of where it was earned. Puerto Rico residents are also ineligible for certain federal tax credits. Corporations located in Puerto Rico are generally subject to the same federal tax laws as corporations located in a foreign country. Corporations in Puerto Rico are generally exempt from federal taxes on profits except as such profits are effectively connected to a trade or business in the states, and so long as those profits remain held outside of the states. Additionally, these corporations were subject to a withholding tax on certain investment income from the United States not connected to a trade or business. Under the 2017 Public Law 115-97, starting in 2018 U.S. corporations that are shareholders in foreign corporations, such as those organized under Puerto Rico law, generally do not owe tax on dividends received from those foreign corporations. Prior to this law, dividend payments to U.S. corporate shareholders were considered taxable interest for the U.S. parent corporation. Prior to 1996, a federal corporate income tax credit—the possessions tax credit—was available to certain U.S. corporations that located in Puerto Rico. In general, the credit equaled the full amount of federal tax liability related to an eligible corporation’s income from its operations in a possession—including Puerto Rico—effectively making such income tax- free. In 1996, the tax credit was repealed, although corporations that were existing credit claimants were eligible to claim credits through 2005. Puerto Rico’s economy is in a prolonged period of economic contraction. According to data from Puerto Rico’s government, Puerto Rico’s economy grew in the 1990s and early 2000s. However, between 2005 and 2016— the latest year for which data were available as of March 1, 2018—Puerto Rico’s economy experienced year-over-year declines in real output in all but two years, as measured by real gross domestic product (GDP). From 2005 to 2016, Puerto Rico’s real GDP fell by more than 9 percent (from $82.8 billion to $75.0 billion in 2005 dollars). Puerto Rico’s gross national product (GNP) followed a similar pattern over the same period, declining by more than 11 percent from 2005 to 2016 (from $53.8 billion to $47.7 billion in 2005 dollars). Figure 1 shows Puerto Rico’s real GDP and GNP growth rates from 1991 through 2016. The decline in Puerto Rico’s output has, in more recent years, occurred in conjunction with a decline in Puerto Rico’s population. According to Census estimates, Puerto Rico’s population declined from a high of approximately 3.8 million people in 2004 to 3.3 million people in 2017, a decline of 12.8 percent. This population loss closely matched the decline in real output. From 2004 to 2016, Puerto Rico’s real GNP fell by 9.5 percent, while its real GNP per capita increased by 1.6 percent over the same time period. In addition to Puerto Rico’s declining population, the territory also has a lower share of employed persons compared to the United States as a whole. As of 2017, approximately 37 percent of Puerto Rico residents were employed compared to approximately 60 percent for the United States as a whole. Puerto Rico’s employment-to-population ratio reached highs in 2005 and 2006 when it was approximately 43 percent, according to data from the Federal Reserve Bank of St. Louis. According to data from the Bureau of Labor Statistics (BLS), between 2005 and 2017, Puerto Rico’s unemployment rate fluctuated between 10.2 percent and 17.0 percent, with an average of 13.1 percent. During the same period, the nationwide unemployment rate fluctuated between 4.1 percent and 10.0 percent, with an average of 6.5 percent. These factors have combined to leave Puerto Rico with a small and declining labor force. From January 2006 to December 2017—the latest month for which data were available as of March 1, 2018—Puerto Rico’s labor force decreased from approximately 1.4 million persons to 1.1 million persons, according to data from BLS. Puerto Rico’s government has operated with a deficit—where expenses exceed revenues—in each fiscal year since 2002, and its deficits grew over time (see figure 2). Puerto Rico’s governmental activities can be divided among the primary government and component units. Puerto Rico’s primary government provides and funds services such as public safety, education, health care, and economic development. Puerto Rico’s component units are legally separate entities for which its government is nonetheless financially accountable, and provide services such as public transportation, highways, electricity, and water. In fiscal year 2014, the latest for which audited financial data are available, the Puerto Rico government collected $32.5 billion in revenue, of which $19.3 billion was collected by the primary government, and $13.2 billion was collected by the component units. That year Puerto Rico’s government spent $38.7 billion, of which $22.0 billion was spent directly by the primary government, while $16.7 billion was spent by the government’s various component units. The Puerto Rico Electric Power Authority (PREPA), which operates the territory’s electricity generation and distribution infrastructure, represented the largest component unit expenditure in fiscal year 2014. Figures 3 and 4 show a breakdown of expenses for Puerto Rico’s primary government and its component units, respectively. Puerto Rico’s government spending accounts for more than a third of the territory’s GDP. In fiscal year 2014—the latest year for which audited spending data were available as of March 1, 2018—primary government expenditures of $22.0 billion represented 21 percent of the territory’s GDP. Including component spending, total public expenditures were $38.7 billion, which represented 38 percent of the territory’s GDP. By comparison, our prior work has shown that in 2014, total state and local government expenditures represented about 14 percent of GDP for the United States as a whole, excluding territories. Federal government expenditures were 20 percent of GDP for the United States as a whole in 2014. Puerto Rico’s total public debt as a share of its economy has grown over time. In 2002, the value of its debt was 42 percent of the territory’s GDP, and 67 percent of its GNP. Both of these ratios grew over time such that by 2014, Puerto Rico’s total public debt was 66 percent of the territory’s GDP and 99 percent of its GNP. Figure 5 compares Puerto Rico’s total public debt to its GDP and GNP, in both aggregate and per capita. As of the end of fiscal year 2014, the last year for which Puerto Rico issued audited financial statements, Puerto Rico had $67.8 billion in net public debt outstanding, or $68.1 billion excluding accounting adjustments that are not attributed in the financial statements to specific agencies. Of the $68.1 billion, $40.6 billion was owed by Puerto Rico’s primary government, and $27.6 billion was owed by its component units, as shown in figure 6 (these amounts do not sum to $68.1 billion because of rounding). The growth of Puerto Rico’s total debt resulted in greater annual debt servicing obligations. In fiscal year 2002, it cost Puerto Rico $2.7 billion to service its debt, representing about 12 percent of Puerto Rico’s $21.6 billion in total public revenue for that year. By fiscal year 2014, Puerto Rico’s annual debt service cost rose to $5.0 billion, representing just over 15 percent of Puerto Rico’s $32.5 billion in total public revenue for that year. Following years of expenditures that exceeded revenue, and a growing debt burden, in August 2015, Puerto Rico failed to make a scheduled bond payment. Since then, Puerto Rico has defaulted on over $1.5 billion in debt. In June 2016, Congress enacted and the President signed PROMESA in response to Puerto Rico’s fiscal crisis. PROMESA established a Financial Oversight and Management Board for Puerto Rico (Oversight Board), and granted it broad powers of fiscal and budgetary control over Puerto Rico. PROMESA also established a mechanism through which the Oversight Board could petition U.S. courts on Puerto Rico’s behalf to restructure debt. Under federal bankruptcy laws, Puerto Rico is otherwise prohibited from authorizing its municipalities and instrumentalities from petitioning U.S. courts to restructure debt. The Oversight Board petitioned the U.S. courts to restructure debt on behalf of Puerto Rico’s Highways and Transportation Authority and the Government Employees Retirement System on May 21, 2017 and on behalf of PREPA on July 2, 2017. In addition to its debt obligations, Puerto Rico also faces a large financial burden from its pension obligations for public employees. Puerto Rico’s public pension systems had unfunded liabilities of approximately $49 billion as of the end of fiscal year 2015, the most recent year for which data are available. Unfunded pension liabilities are similar to other kinds of debt because they constitute a promise to make a future payment or provide a benefit. Based on interviews with current and former Puerto Rico officials, federal officials, and other relevant experts, as well as a review of relevant literature, the factors that contributed to Puerto Rico’s financial condition and levels of debt related to: (1) Puerto Rico’s government running persistent deficits and (2) its use of debt to cope with deficits. As previously mentioned, Puerto Rico’s government has operated with a deficit in all years since 2002, and deficits grew over time. To cope with its deficits, Puerto Rico’s government issued debt to finance operations, rather than reduce its fiscal gap by cutting spending, raising taxes, or both. Through interviews with current and former Puerto Rico officials; federal officials; experts in Puerto Rico’s economy, the municipal securities markets, and state and local budgeting and debt management; as well as a review of relevant literature, we identified three groups of factors that contributed to Puerto Rico’s persistent deficits: (1) inadequate financial management and oversight practices, (2) policy decisions, and (3) prolonged economic contraction. Some of the factors in these groups may be interrelated. To cope with its persistent deficits, Puerto Rico issued debt to finance operations. In reviewing 20 of Puerto Rico’s largest bond issuances from 2000 to 2017, totaling around $31 billion, we found that 16 were issued exclusively to repay or refinance existing debt and to fund operations. According to ratings agency officials and experts in state and local government, states rarely issue debt to fund operations, and many states prohibit this practice. According to former Puerto Rico officials and experts on Puerto Rico’s economy, high demand for Puerto Rico debt and the Government Development Bank for Puerto Rico (GDB) facilitating rising debt levels enabled Puerto Rico to continue to use debt to finance operations. Puerto Rico issued a relatively large amount of debt, given the size of its population. Based on an analysis of fiscal year 2014 comprehensive annual financial reports of the 50 states and Puerto Rico, Puerto Rico had the second highest amount of outstanding debt among states and territories, while its population falls between the 29th and 30th most populous states. By comparison, California, the state with the largest amount of outstanding debt, is the most populated state. Various factors drove demand for Puerto Rico municipal bonds, even as the government’s financial condition deteriorated. Triple tax exemption: According to a former Puerto Rico official, Federal Reserve Bank of New York officials, and an expert on Puerto Rico’s economy, Puerto Rico’s municipal bonds were attractive to investors because interest on the bonds was not subjected to federal, state, or local taxes, regardless of where the investors resided. In contrast, investors may be required to pay state or local taxes on interest income earned from municipal securities issued by a state or municipality in which they do not reside. Investment grade bond ratings: Puerto Rico maintained investment grade bond ratings until February 2014, even as its financial condition was deteriorating. Credit ratings inform investment decisions by both institutional investors and broker dealers. According to a current Puerto Rico official and an expert on Puerto Rico’s economy, investment grade ratings for Puerto Rico municipal bonds may have driven demand for these securities in the states. Based on interviews with ratings agency officials and a review of rating agency criteria, we found that Puerto Rico may have maintained its investment grade rating for two reasons. First, Puerto Rico could not seek debt restructuring under federal bankruptcy laws, prior to the passage of PROMESA in 2016. According to rating agency officials, bonds with assumed bankruptcy protection tend to rate higher than those without such protection. Second, legal frameworks that prioritize debt service are often viewed as positive for credit ratings, according to rating agency criteria. In the event that the Puerto Rico government does not have sufficient resources to meet appropriations for a given fiscal year, Puerto Rico’s constitution requires that the government pay interest and amortization on the public debt before disbursing funds for other purposes in accordance with the order of priorities established by law. The prior Puerto Rico Governor cited this constitutional provision as providing the authority to redirect revenue streams from certain entities to the payment of general obligation debt. This redirection of revenue streams is commonly known as a clawback. Lack of transparency on its financial condition: Municipal market analysts told us that untimely financial information made it difficult for institutional and individual investors to assess Puerto Rico’s financial condition, which may have resulted in investors not being able to fully take the investment risks into account when purchasing Puerto Rico debt. According to one report, between 2010 and 2016 municipal issuers issued their audited financial statements an average of 200 days after the end of their fiscal years. However, between fiscal years 2002 and 2014, Puerto Rico issued its statements an average of 386 days after the end of its fiscal year, according to our analysis of Puerto Rico’s audited financial statements. Moreover, Puerto Rico had not issued its fiscal years 2015 and 2016 audited financial statements as of March 1, 2018, or 975 and 609 days after the end of those fiscal years, respectively. Estate tax structures: Puerto Rico residents had incentive to invest in municipal bonds issued in Puerto Rico over those issued in the United States because of federal and Puerto Rico estate tax structures. Current and former Puerto Rico officials told us that this incentive drove demand among Puerto Rico residents for bonds issued in Puerto Rico. For federal estate tax purposes, Puerto Rico residents are generally considered non-U.S. residents and non-citizens for all of their U.S.-based property, including investments. Estates of Puerto Rico residents are required to pay the prevailing federal estate tax— which ranges from 18 percent to 40 percent depending on the size of an estate—for any U.S.-based property valued over $60,000. In contrast, prior to 2017, all Puerto Rico-based property was only subject to the Puerto Rico estate tax of 10 percent. Puerto Rico’s estate tax was repealed in 2017. In addition to financing from the municipal bond markets, GDB also provided an intragovernmental source of financing. Prior to April 2016, GDB acted as a fiscal agent, trustee of funds, and intergovernmental lender for the Government of Puerto Rico. GDB issued loans to Puerto Rico’s government agencies and public corporations to support their operations. GDB provided loans to government entities valued at up to 60 percent of GDB’s total assets, as shown in Figure 11. In general, these entities did not fulfill the terms of their borrowing agreements with GDB, while they independently accessed the municipal bond market. Additionally, according to GDB’s audited financial statements, GDB did not reflect loan losses in its audited financial statements until 2014 because it presumed that Puerto Rico’s legislature would repay loans through the general fund or appropriations, as generally required by the acts that approved such loans. Facing non-repayment of public sector loans, GDB took on debt to maintain liquidity. According to GDB documents, repayment of amounts owed to GDB was a main reason for the creation of the Puerto Rico Sales Tax Financing Corporation (COFINA), an entity backed by a new sales tax, through which Puerto Rico issued some of its debt. Though initially intended as a means to repay GDB and other debt, COFINA bonds were also used to finance operations. Through our interviews and an assessment of relevant literature, we identified three potential federal actions that could help address some of the factors that contributed to unsustainable indebtedness in Puerto Rico. Consistent with the provision in PROMESA that was the statutory requirement for this work, we focused on actions that were non-fiscal in nature—that is, actions that would not increase the federal deficit. There are tradeoffs for policymakers to consider when deciding whether or how to implement any policy. For each action, we describe a specific challenge as it relates to debt accumulation in Puerto Rico, identify a possible federal response to the challenge, and describe other considerations for policymakers. To help address the factors that contributed to the high demand for Puerto Rico debt relative to other municipal debt, legislative and executive branch policymakers could further ensure that municipal securities issuers provide timely, ongoing, and complete disclosure materials to bondholders and the public. Specifically, Congress could authorize SEC to establish requirements for municipal issuers on the timing, frequency, and content of initial and continuing disclosure materials. In general, the municipal securities market is less regulated and transparent than other capital markets, such as equity markets. For example, SEC’s authority to directly establish or enforce initial and continuing disclosure requirements for issuers—including those in Puerto Rico—is limited. SEC requires that underwriters (sellers of municipal securities) reasonably determine that issuers have undertaken continuing disclosure agreements (CDA) to publicly disclose ongoing annual financial information, operating data, and notices of material events. However, federal securities laws do not provide SEC with the authority to impose penalties on municipal issuers for noncompliance with CDAs, which may limit any incentive for issuers to comply with SEC disclosure and reporting guidance. As a result, SEC has limited ability to compel issuers to provide continuing disclosure information. As previously discussed, the Puerto Rico government often issued its audited financial statements in an untimely manner, thus failing to meet its contractual obligations to provide continuing disclosures for securities it issued. SEC could not directly impose any consequences on Puerto Rico’s government for failing to adhere to the terms of, or enforce compliance with, the CDAs. Additionally, as previously discussed, municipal market analysts told us that untimely financial information made it difficult for institutional and individual investors to assess Puerto Rico’s financial condition. Timely disclosure of information would help investors make informed decisions about investing in municipal securities and help protect them against fraud involving the securities. These disclosures would be made to investors at the time of purchasing securities and throughout the term of the security, including when material changes to an issuer’s financial condition occur. According to SEC staff, enhanced authority could prompt more municipal issuers to disclose financial information, including audited financial statements, in a timelier manner. For example, SEC staff said that if the agency had required that issuers provide timely financial statements at the time of issuing a municipal security, this may have precluded Puerto Rico from issuing its $3.5 billion general obligation bond in 2014. However, any rulemaking SEC would or could take as a result of enhanced authority would depend on a number of factors, such as compliance with other SEC guidance and related laws. Since this action would apply to all U.S. municipal securities issuers, it has policy and implementation implications that extend well beyond Puerto Rico. For example, establishing and enforcing initial and continuing disclosure requirements for municipal securities issuers could place additional burdens on state and local issuers, and not all municipal issuers use standardized accounting and financial reporting methods. As a result, state and local governments may need to spend resources to adjust financial reporting systems to meet standardized reporting requirements. However, in a 2012 report proposing this action, SEC said it could mitigate this burden by considering content and frequency requirements that take into account, and possibly vary by, the size and nature of the municipal issuer, the frequency of issuance of securities, the type of municipal securities offered, and the amount of outstanding securities. To help address the factors that contributed to the high demand for Puerto Rico debt relative to other municipal debt, Congress could ensure that investors residing in Puerto Rico receive the same federal investor protections as investors residing in states. Specifically, Congress could subject all investment companies in Puerto Rico to the Investment Company Act of 1940, as amended (1940 Act). In recent years, the House and Senate separately have passed legislation that would achieve this action. Certain investment companies in Puerto Rico and other territories— specifically, those whose securities are sold solely to the residents of the territory in which they are located—are exempt from the 1940 Act’s requirements. The 1940 Act regulates investment companies, such as mutual funds that invest in securities of other issuers and issue their own securities to the investing public. It imposes several requirements on investment companies intended to protect investors. For example, it requires that investment companies register with SEC and disclose information to investors about the businesses and risks of the companies in which they invest, and the characteristics of the securities that they issue. It also restricts investment companies from engaging in certain types of transactions, such as purchasing municipal securities underwritten by affiliated companies. According to a former Puerto Rico official, some broker-dealers in Puerto Rico underwrote Puerto Rico municipal securities issuances and investment companies managed by affiliated companies of these underwriters purchased the securities, packaged them into funds, and marketed the funds to investors residing in Puerto Rico. This practice would be prohibited or restricted for investment companies subject to the 1940 Act, as it might result in investment companies not acting in the best interests of their investors. If all Puerto Rico investment companies had been subject to the 1940 Act, they would have been prohibited or restricted from investing in Puerto Rico municipal bonds underwritten by affiliated companies. Also, these investment companies may have further disclosed the risks involved in Puerto Rico municipal bonds to Puerto Rico investors. As a result, demand for Puerto Rico municipal bonds from Puerto Rico investment companies and residents may have been lower had the 1940 Act requirements applied to all Puerto Rico investment companies, and it may have been more difficult for the Puerto Rico government to issue debt to finance deficits. SEC staff told us that industry groups had raised objections to extending the 1940 Act provisions to all investment companies in Puerto Rico. These industry groups noted that, among other things, certain investment companies would have difficulty meeting the 1940 Act’s leverage and asset coverage requirements and adhering to some restrictions on affiliated transactions. However, SEC staff noted that under certain legislation that passed the House or Senate separately, as described above, Puerto Rico investment companies would have three years to come into compliance if they were newly subject to the 1940 Act. Further, under that legislation, after three years, investment companies in Puerto Rico could also request an additional three years to come into compliance. Regarding affiliated company restrictions, SEC has previously waived some requirements for investment companies if they are unable to obtain financing by selling securities to unaffiliated parties with an agreement to repurchase those securities at a higher price in the future, known as repurchase agreements. According to SEC staff, SEC would consider allowing companies in Puerto Rico to enter into reverse repurchase agreements with their affiliates if the 1940 Act applied to them. To help address the factors that contributed to the high demand for Puerto Rico debt relative to other municipal debt, Congress could remove the triple tax exemption for Puerto Rico’s municipal securities. This action would mean that interest income from Puerto Rico municipal securities earned by investors residing outside of Puerto Rico could be taxed by states and local governments, while still being exempt from federal income taxes, similar to the current tax treatment of municipal bond income in the states. As mentioned previously, former Puerto Rico officials and experts in municipal securities told us that the triple tax exemption fueled investor demand and enabled Puerto Rico to continue issuing bonds despite deteriorating financial conditions. Some of the demand for Puerto Rico municipal securities came from certain U.S. municipal bond funds. These funds concentrated their investments in one state to sell to investors within that state, but also included Puerto Rico bonds in their portfolios. Puerto Rico bond yields generally were higher than state bonds yields, according to industry experts. When added to a fund, the higher yields from Puerto Rico bonds would increase the overall return on investment yield of a fund. Modifying the triple tax exemption for Puerto Rico’s municipal securities might result in reduced demand for Puerto Rico’s debt. In response to reduced demand for its debt, Puerto Rico’s government may need to address any projected operating deficits by decreasing spending, raising revenues, or both. According to U.S. Treasury officials, this action could increase the proportionate share of investors in Puerto Rico debt that reside in Puerto Rico, because of reduced demand from investors in the states. In the event of a future debt crisis, this could result in a concentration of financial losses within Puerto Rico. Also, debt financing allows governments to make needed capital investments and provides liquidity to governments, and can be a more stable funding source to manage fiscal stress. Reduced market demand for Puerto Rico’s bonds could make access to debt financing difficult, as the Puerto Rico bond market may not support the Puerto Rico government’s future borrowing at reasonable interest rates, according to Treasury officials. Alternately, a variant of this action would be to retain the triple tax exemption for Puerto Rico debt only for bonds related to capital investments rather than for deficit financing, according to Treasury officials. Various provisions in PROMESA were intended to help Puerto Rico improve its fiscal condition. PROMESA requires that the Oversight Board certify fiscal plans for achieving fiscal responsibility and access to capital markets. The intent of the fiscal plans is to eliminate Puerto Rico’s structural deficits; create independent revenue estimates for the budget process; and improve Puerto Rico’s fiscal governance, accountability, and controls, among other things. From March 2017 to April 2017, the Oversight Board certified the fiscal plans the Government of Puerto Rico developed for the primary government and certain component units, such as PREPA. As a result of the effects of Hurricanes Irma and Maria, the Oversight Board requested that the Government develop updated fiscal plans. Although the Government of Puerto Rico developed and submitted updated fiscal plans, the Oversight Board did not certify them, with the exception of the plan for GDB. Instead, in April 2018, the Oversight Board certified fiscal plans it developed itself, as PROMESA allows. PROMESA also requires the Oversight Board to determine whether or not Puerto Rico’s annual budgets, developed by the Governor, comply with the fiscal plans prior to being submitted to Puerto Rico’s legislature for approval. Technical assistance is another area where the federal government has taken action to help Puerto Rico address its fiscal condition. In 2015, Congress first authorized Treasury to provide technical assistance to Puerto Rico, and has continued to reauthorize the technical assistance, most recently through September 30, 2018. For example, Treasury officials told us that they helped Puerto Rico’s Planning Board develop a more accurate macroeconomic forecast, which should enable Hacienda to develop more accurate revenue estimates and receipt forecasts. Treasury officials also told us that the agency began helping Puerto Rico improve its collection of delinquent taxes—for example, by helping Hacienda develop an office dealing with Puerto Rico’s largest and most sophisticated taxpayers, which are often multinational corporations. With Puerto Rico focused on hurricane recovery efforts, Treasury and the Puerto Rico government are reassessing the types of assistance that Treasury might provide in the future, according to Treasury officials. Current and former Puerto Rico government officials and experts on Puerto Rico’s economy also told us that the federal government could further help Puerto Rico address its persistent deficits through federal policy changes that are fiscal in nature. For example, it could change select federal program funding rules—at a cost to the federal government—such as eliminating the cap on Medicaid funding and calculating the federal matching rate similar to how the rate is calculated in the states. Likewise, the Congressional Task Force on Economic Growth in Puerto Rico (Congressional Task Force), as established by PROMESA, issued a report in December 2016 that recommended changes to federal laws and programs that would spur sustainable long- term economic growth in Puerto Rico, among other recommendations. In addition to federal actions that could address the factors that contributed to Puerto Rico’s fiscal condition and debt levels, the Puerto Rico government plans to take various actions. For example, according to current Puerto Rico officials and the Puerto Rico government’s April 2018 fiscal plan, the government is: Planning to implement an integrated new information technology system for financial management, to include modernized revenue management and accounting and payroll systems. Hacienda officials stated that they are in the process of developing a project schedule for this long-term effort. Developing a new public healthcare model in which Puerto Rico’s government pays for basic services and patients pay for premium services. The government will begin implementing the new healthcare model in fiscal year 2019 and expects to achieve annual savings of $841 million by fiscal year 2023. Collaborating with the private sector for future infrastructure and service projects, including for reconstruction efforts related to Hurricanes Irma and Maria, which it expects will stimulate Puerto Rico’s weakened economy. We also asked Puerto Rico officials about progress made toward addressing many of the factors we identified. However, they did not provide us this information. We provided a draft of this report for review to Treasury, SEC, the Federal Reserve Bank of New York, the Government of Puerto Rico, and the Oversight Board. Treasury and SEC provided technical comments, which we incorporated as appropriate. The Federal Reserve Bank of New York and the Oversight Board had no comments. We received written comments from the Government of Puerto Rico, which are reprinted in appendix II. In its comments, the Government of Puerto Rico generally agreed with the factors we identified that contributed to Puerto Rico’s financial condition and levels of debt. It also provided additional context on Puerto Rico’s accumulation of debt, such as Puerto Rico’s territorial status and its effect on federal programs in Puerto Rico and outmigration. The Government of Puerto Rico also noted that the federal actions we identified to address factors contributing to Puerto Rico’s unsustainable debt levels did not include potential actions that were fiscal in nature or that addressed Puerto Rico’s long-term economic viability. As we note in the report, we excluded fiscal actions from our scope, consistent with the provision in PROMESA that was the statutory requirement for this work. We excluded potential actions that could promote economic growth in Puerto Rico because these actions would address debt levels in Puerto Rico only indirectly and because the Congressional Task Force on Economic Growth in Puerto Rico already recommended actions for fostering economic growth in Puerto Rico in its December 2016 report. We are sending copies of the report to the appropriate congressional committees, the Government of Puerto Rico, the Secretary of the Treasury, the Chairman of the Securities and Exchange Commission, and other interested parties. In addition, this report is available at no charge on the GAO website at http://gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or krauseh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to describe (1) the factors that contributed to Puerto Rico’s financial condition and levels of debt; and (2) federal actions that could address the factors that contributed to Puerto Rico’s financial condition and levels of debt. Consistent with the provision in the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) that was the statutory requirement for this work, we focused on actions that would not increase the federal deficit. For both objectives we interviewed current Puerto Rico officials from several agencies—the Puerto Rico Department of Treasury (Hacienda in Spanish), Government Development Bank for Puerto Rico (GDB), the Puerto Rico Office of Management and Budget (Spanish acronym OGP), Fiscal Agency and Financial Advisory Authority (FAFAA), and the Puerto Rico Electric Power Authority. We also interviewed 13 former Puerto Rico officials that held leadership positions at Hacienda, GDB, or OGP, or a combination thereof. These former officials served between 1997 and 2016 for various gubernatorial administrations associated with the two political parties in Puerto Rico that held the governorship during that period. We also interviewed officials from the U.S. Department of the Treasury (Treasury), the Securities and Exchange Commission (SEC), the Federal Reserve Bank of New York, and the Financial Oversight and Management Board for Puerto Rico (created by PROMESA). Additionally, we conducted another 13 interviews with experts on Puerto Rico’s economy, the municipal securities markets, state and territorial budgeting and debt management—including credit rating agencies—and with select industry groups in Puerto Rico. We selected the experts we interviewed based on their professional knowledge closely aligning with our engagement objectives, as demonstrated through published articles, congressional testimonies, and referrals from agency officials or other experts. To describe the factors that contributed to Puerto Rico’s financial condition and levels of debt, we reviewed our prior work related to Puerto Rico’s financial condition and levels of public debt. We also collected and analyzed additional financial data from Puerto Rico’s audited financial statements for the fiscal years 2002 to 2014, the last year for which audited financial statements were available. To determine how the Puerto Rico government used bond proceeds, we reviewed a nongeneralizable sample of Puerto Rico bonds prospectuses issued between 2000 and 2017 from the Electronic Municipal Market Access database of the Municipal Securities Rulemaking Board. We reviewed literature—including academic reports, congressional hearing transcripts, and credit rating agency reports—that described Puerto Rico’s economy and factors that contributed to Puerto Rico’s levels of debt. We also reviewed credit rating agency reports that described Puerto Rico’s municipal debt and the agencies’ methodologies for rating municipal debt. We also collected and reviewed Puerto Rico government documents related to budget formulation and execution, debt issuance, and financial management. We considered factors to include, but not be limited to, macroeconomic trends, federal policies, and actions taken by Puerto Rico government officials. Our review focused largely, though not exclusively, on conditions that contributed to the debt crisis during those years for which we collected financial data on Puerto Rico, fiscal years 2002 to 2014. Finally, we also conducted a thematic analysis of the summaries of our interviews to identify common patterns and ideas. Although these results are not generalizable to all current and former officials and experts with this subject-matter expertise, and do not necessarily represent the views of all the individuals we interviewed, the thematic analysis provided greater insight and considerations for the factors we identified. To describe federal actions that could address the factors that contributed to Puerto Rico’s financial condition and levels of debt, we reviewed our prior reports and documents from Treasury and SEC, conducted a literature review, and conducted various interviews. Specifically, we met with federal agencies with subject-matter expertise or whose scope of responsibilities related to these actions, as well as with current and former Puerto Rico officials and municipal securities experts. Consistent with PROMESA, we omitted from our scope: (1) actions that could increase the federal deficit (i.e., fiscal options), (2) actions that could be taken by the Puerto Rico government, (3) actions that could infringe upon Puerto Rico’s sovereignty and constitutional parameters, and (4) actions that would imperil America’s homeland and national security. We considered actions that could promote economic growth in Puerto Rico as outside of scope, as they could address debt levels in Puerto Rico indirectly, rather than directly, and because a study issued by the Congressional Task Force on Economic Growth in Puerto Rico already identified actions that Congress and executive agencies could take to foster economic growth in Puerto Rico. We also considered actions that could address Puerto Rico’s unfunded pension liability as outside of our scope. The actions we identified may also help avert future unsustainable debt levels in other territories; however, we did not assess whether and how each action would apply to other territories. We conducted this performance audit from January 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Jeff Arkin (Assistant Director), Amy Radovich (Analyst in Charge), Pedro Almoguera, Karen Cassidy, Daniel Mahoney, A.J. Stephens, and Justin Snover made significant contributions to this report.", "summary": "Puerto Rico has roughly $70 billion in outstanding debt and $50 billion in unfunded pension liabilities and since August 2015 has defaulted on over $1.5 billion in debt. The effects of Hurricanes Irma and Maria will further affect Puerto Rico's ability to repay its debt, as well as its economic condition. In response to Puerto Rico's fiscal crisis, Congress passed the Puerto Rico Oversight, Management, and Economic Security Act (PROMESA) in 2016, which included a provision for GAO to review Puerto Rico's debt. This report describes the factors that contributed to Puerto Rico's financial condition and levels of debt and federal actions that could address these factors. Consistent with PROMESA, GAO focused on actions that would not increase the federal deficit. To address these objectives, GAO reviewed documents and interviewed officials from the Puerto Rico and federal governments and conducted a review of relevant literature. GAO also interviewed former Puerto Rico officials and experts in Puerto Rico's economy, the municipal securities markets, and state and territorial budgeting, financial management, and debt practices, as well as officials from the Financial Oversight and Management Board for Puerto Rico (created by PROMESA). GAO is not making recommendations based on the federal actions identified because policymakers would need to consider challenges and tradeoffs related to implementation. The Puerto Rico government generally agreed with the factors we identified and provided additional information. GAO incorporated technical comments from SEC as appropriate. The factors that contributed to Puerto Rico's financial condition and levels of debt relate to (1) the Puerto Rico government running persistent annual deficits—where expenses exceed revenues—and (2) its use of debt to cope with deficits. Based on a literature review and interviews with current and former Puerto Rico officials, federal officials, and other relevant experts, GAO identified factors that contributed to Puerto Rico's persistent deficits: The Puerto Rico government's inadequate financial management and oversight practices. For example, the Puerto Rico government frequently overestimated the amount of revenue it would collect and Puerto Rico's agencies regularly spent more than the amounts Puerto Rico's legislature appropriated for a given fiscal year. Policy decisions by Puerto Rico's government. For example, Puerto Rico borrowed funds to balance budgets and insufficiently addressed public pension funding shortfalls. Puerto Rico's prolonged economic contraction. Examples of factors contributing to the contraction include outmigration and the resulting diminished labor force, and the high cost of importing goods and energy. Additional factors enabled Puerto Rico to use debt to finance its deficits, such as high demand for Puerto Rico debt. One cause of high demand was that under federal law, income from Puerto Rico bonds generally receives more favorable tax treatment than income from bonds issued by states and their localities. Based on an assessment of relevant literature and input from current and former Puerto Rico officials, federal officials, and other relevant experts, GAO identified three potential federal actions that may help address some of these factors. GAO also identified considerations for policymakers related to these actions. Modify the tax exempt status for Puerto Rico municipal debt. Making interest income from Puerto Rico bonds earned by investors residing outside of Puerto Rico subject to applicable state and local taxes could lower demand for Puerto Rico debt. However, reduced demand could hinder Puerto Rico's ability to borrow funds for capital investments or liquidity. Apply federal investor protection laws to Puerto Rico. Requiring Puerto Rico investment companies to disclose risks with Puerto Rico bonds and adhere to other requirements could lower demand for the bonds. However, this action could also limit Puerto Rico's ability to borrow funds. Modify the Securities and Exchange Commission's (SEC) authority over municipal bond disclosure requirements. SEC could be allowed to require timely disclosure of materials—such as audited financial statements—associated with municipal bonds. Over the past decade, Puerto Rico often failed to provide timely audited financial statements related to its municipal bonds. Timely disclosure could help investors make informed decisions about investing in municipal bonds. However, a broad requirement could place additional burdens on all U.S. municipal issuers, such as the costs of standardizing reporting.", "document_type": "gao"}
{"report": "Mental health disorders affect millions of adults and children in the United States and can range in severity. In 2016, an estimated 4.2 percent of the adult population—more than 10.4 million individuals—were considered to have a serious mental illness based on federal survey data. Individuals with mental illness may reside and receive care in a variety of settings, including inpatient institutional settings, such as public or private hospitals, other residential treatment facilities, or community-based settings. When originally established under the PAIMI Act, state PAIMI programs were required to investigate reports of potential abuse and neglect of individuals with significant mental illness residing in institutional facilities and to protect and advocate the rights of these individuals. Examples of institutional facilities covered under the PAIMI Act include hospitals, nursing homes, and correctional facilities. In 2000, the PAIMI Act was amended to allow certain PAIMI programs to also assist eligible individuals who live in community settings, including their own homes, although programs must still prioritize services for eligible individuals residing in institutional settings. For example, state PAIMI programs assist individuals with abuse, neglect, and rights violation cases in school settings. State PAIMI programs are administered by either state agencies or non- profit organizations that have been designated by the governor of each state to operate a protection and advocacy system. The state PAIMI programs are allotted federal grants through a formula that is based equally on (1) the population in each state, and (2) the population in each state weighted by its relative per capita income. In 2016, state PAIMI program grants ranged from $229,300 to $3,133,536. (See appendix I for allotment by program.) To receive a PAIMI grant, each protection and advocacy organization must submit an annual application, and the PAIMI programs they operate must meet applicable statutory and regulatory requirements. (See table 1.) Approved state PAIMI programs use their grants to protect and advocate for individual clients, such as investigating specific complaints. They may also conduct broader system-level protection and advocacy activities, such as facility monitoring, intended to benefit larger groups of individuals with significant mental illness. These systemic activities, as we refer to them in this report, include efforts to drive changes in policies and practices of the state’s mental health agency, treatment facilities, and other systems, such as school systems, that impact people with significant mental illness. (See table 2.) Each state PAIMI program, with input from the advisory council and governing authority, sets priority goals and short-term, measurable objectives and targets annually as performance benchmarks for the work it plans to conduct. Programs can also revise these benchmarks during the year to align with changing needs. For example, the types of individual cases programs accept and work on may depend on the types of complaints that are received, which may vary over time. SAMHSA administers the PAIMI grants and is responsible for oversight and monitoring of the state PAIMI programs. To oversee the state PAIMI programs, SAMHSA conducts both ongoing reviews of the annual application and performance information submitted by the programs, and periodic, in-depth reviews: Ongoing monitoring activities. PAIMI grant applications are effective for 4-year periods, but programs submit additional grant applications annually to update certain information, such as the program budget and goals. SAMHSA awards PAIMI grants based on criteria such as whether the grantee submitted a statement of annual program priorities, including quantifiable targets and measurable outcomes. In addition to the application, programs must submit key data annually in a program performance report. The performance report must describe a program’s individual and systemic activities, accomplishments, and expenditures during the most recent fiscal year and must include a section prepared by the advisory council. The performance report requires programs to report on both standard measures required of all programs and on progress towards the program-specific priority goals, objectives, and targets. SAMHSA reviews information submitted by the programs annually through grants applications and performance reports, including completing a review checklist and following up with programs with questions. Periodic monitoring. SAMHSA conducts four to five onsite monitoring reviews of state PAIMI programs each year, which officials told us means a given program would be reviewed approximately every 10 years. Programs are reviewed on a rotating basis, but some may be reviewed more frequently if concerns have been identified, according to officials. The onsite monitoring process, which includes an onsite visit and review of program documentation, is intended to monitor program compliance and provide guidance on improving program effectiveness. SAMHSA has procedures for the scope and time frame of the reviews. The eight selected state PAIMI programs reported favorably resolving a majority of individuals’ cases related to alleged abuse, neglect, or rights violations. In addition, these selected programs reported concluding a variety of systemic activities, with a significant focus on monitoring and addressing issues of abuse or neglect at facilities. Through their work with individuals and completion of systemic activities, the selected programs reported meeting a majority of their priority goals and objectives. Selected programs reported favorably resolving about 74 percent of individual cases related to alleged abuse, neglect, or rights violations in fiscal year 2016, on average (see table 3). The remaining 26 percent of cases were reported as withdrawn by the client, closed due to lack of merit, or were not resolved in the individual’s favor. Across the programs there was variation in the percentage of cases resolved favorably, with two of the selected programs reporting half, or less than half, of their cases resolved favorably, and one program reporting nearly 100 percent of cases closed favorably. SAMHSA officials and NDRN staff cited a number of factors that could contribute to the variation, including complexity of the complaint, variation in the programs’ criteria for accepting cases, program resources, or characteristics of the court or state mental health system. For example, SAMHSA officials told us that possible explanations for variation could include a program accepting particularly challenging cases, or a program obtaining additional funding from other nonfederal grants that could provide greater legal staff support in addressing complaints. All eight selected programs reported closing cases in each of the three categories of complaints: abuse, neglect, and rights violations during fiscal year 2016. Five of the eight programs reported that a majority of their cases were related to complaints about rights violations, which occurred in both facility- and community-based settings (see fig. 1). These complaints included denials of legal assistance or privacy rights, employment discrimination, or—the most frequently reported case complaint—failure to provide special education consistent with state requirements. Issues of abuse and neglect of individuals with mental illness were also common. The most frequent complaint reported by the eight selected programs related to neglect was a lack of discharge planning for release from a facility, and for alleged abuse, it was failure to provide appropriate mental health treatment. Program staff reported examples of how state PAIMI programs resolved cases related to abuse, neglect, and rights violations for individuals in institutions and the community: Program staff in California described a rights violation case of a young girl with a mental health disability who was eligible for special education services, but the district placed her in a restricted, segregated school setting where she was restrained multiple times. The program staff negotiated her move to a general education campus with classroom behavior support. The PAIMI program monitored her transition, including ensuring her inclusion in school activities, academic remediation, and social skill development. Program staff in Georgia reported that they were contacted by a woman in a hospital who was overmedicated such that they could not initially understand what she was saying. The staff worked with her hospital treatment team to adjust her medication and the woman became more articulate. In working to address her overmedication, the staff further discovered there were not appropriate discharge plans for her and so they worked to ensure that she was discharged into an appropriate facility. To address individual cases, selected programs reported using a variety of strategies, ranging from administrative actions to legal remedies. Programs reported that the most frequently utilized strategy (used 62 percent of the time in fiscal year 2016) was “short-term assistance”— time-limited advice or counseling, such as assisting a client with preparing a letter or making a phone call to resolve an issue. Selected programs reported using legal remedies about 5 percent of the time in fiscal year 2016. The eight selected programs conducted a range of systemic activities, and reported successfully concluding a total of 367 of these activities in fiscal year 2016 (see figure 2). Facility monitoring was reported as the most frequent systemic activity in fiscal year 2016, comprising about 71 percent of the total systemic activities concluded by the selected programs. The selected programs described a range of activities involving facility monitoring. For example, California reported that the program had an effort focused on monitoring the conditions at selected county jail systems and juvenile halls. As part of that work, the program reported that it released five public reports and worked with counties on policy improvements, such as reducing the use of pepper spray on youth. Another program, Louisiana, reported that staff used to conduct regular monitoring visits to a state’s psychiatric hospital and addressed patient complaints that they heard during these visits. However, with limited resources and other emerging urgent issues at other facilities, the program decided to cease the regular monitoring and now conducts as-needed visits to the hospital in response to specific complaints from the patients or staff. In addition to facility monitoring activities, other systemic activities conducted varied across the selected programs, reflecting differences in their resources and priorities. Some systemic activities—such as class action litigation—take significant time and resources to undertake, and program staff may consider various factors before beginning one. For example, program staff from Indiana told us the program filed a lawsuit alleging restrictive housing of prisoners with significant mental illness that involved 4 years of negotiations. In addition, program staff from Vermont told us after engaging in successful litigation against hospitals that helped reduce unnecessary force, isolation, and coercion tactics, the program re- prioritized and focused on other issues, such as helping individuals integrate into the community from facilities. However, the program recently noticed an increase in force, isolation, and coercion tactics and predicted another shift in focus to once more address those issues. Through their efforts to resolve individual cases and systemic activities, selected programs reported largely meeting the performance benchmarks—priority goals, objectives, and targets—they determine for themselves. For example, the Georgia program reported that to meet its fiscal year 2016 priority goal of protecting individuals with psychiatric disabilities in Georgia from abuse and neglect, its objective was to investigate and advocate to address allegations of abuse and neglect, including suspicious or unexplained deaths and inappropriate treatment or medication issues for people with psychiatric disabilities. The measurable target for this objective was to conduct 50 such investigations. In its performance report for the fiscal year, the program reported that it had completed 51 investigations of allegations of extensive abuse and neglect during the performance year. Overall, the selected programs reported meeting more than 95 percent of their priority goals in fiscal year 2016. While selected programs varied in their priority goals, all had a goal that focused on protecting individuals from abuse, neglect, and rights violations. (See Appendix II for more information about the types of priority goals set by the selected programs.) When objectives were not met, the programs reported, for instance, focusing on other priorities or that an activity was still ongoing and could not be included as part of their performance for the year. Although the eight selected PAIMI programs reported that they largely met their goals, they also reported several overarching challenges to their efforts to do so, such as limited resources, lack of access authority, or delays in access (e.g., to documents, records, or institutions). For instance, the selected programs collectively reported that 617 PAIMI- eligible clients were not served within 30 days due to insufficient funding in fiscal year 2016. Additionally, five selected programs reported delays in access to records. For example, Vermont program staff reported delays in receiving records related to the status of prisoner grievances or medical records, and Texas program staff reported delays and use of significant attorney resources to address facilities that challenge their ability to access records or premises. SAMHSA has controls in place for monitoring the PAIMI programs’ compliance with statutory and regulatory requirements through its ongoing and periodic in-depth monitoring activities. We found evidence that SAMHSA had identified and resolved a variety of compliance issues through these activities. On an annual basis, SAMHSA monitors compliance with statutory and regulatory program requirements by reviewing information reported by the programs through the application and program performance report. (See table 4.) SAMHSA’s project officers review and approve the applications and performance reports submitted by the state PAIMI programs using a checklist developed by the agency that prompts them to record specific information, such as whether there are vacant advisory council seats. Not all areas of compliance are covered by the checklist; however, SAMHSA officials told us that the entire application and performance report are reviewed, and that a project officer’s approval signature on a checklist indicates that potential issues observed during a review have been resolved satisfactorily. In our review of fiscal year 2015 and 2016 documentation, we found evidence that the application and performance report review process helped identify and resolve a range of potential compliance issues. For example, SAMHSA followed up with one program in which the advisory council had failed to meet the threshold of 60 percent of its membership being individuals who have received or are receiving mental health services, or are family members of such individuals. Failing to meet this threshold could raise concerns about whether a program is sufficiently engaging individuals and family members affected by mental illness as required by regulation. In this instance, SAMHSA requested a plan of action to recruit and maintain members to meet the threshold, which the program provided along with updated information that they had successfully recruited an additional member that put the council make-up over the threshold. In another example, SAMHSA followed up with one program that had reported not meeting 3 of 6 objectives and requested a plan of action for reducing the number of unmet objectives. The program subsequently provided information that it had incorrectly categorized some objectives they had met as “not met.” (See table 5.) In addition to the annual application and performance report reviews, SAMHSA officials told us that they use monthly conversations with other federal agencies, referred to as federal partners, to help them identify potential compliance issues. These federal partners oversee federal grants for other populations of people with disabilities made to the protection and advocacy systems that administer the PAIMI program. SAMHSA officials told us that coordination with these federal partners helped identify risks in at least two of our selected programs, Puerto Rico and Oklahoma. For example, one of the federal partners conducted an onsite monitoring visit to Puerto Rico and found several issues with its protection and advocacy system, such as inadequately trained staff and conflicts of interest arising from a lack of independence from the governor’s office. Puerto Rico’s protection and advocacy system failed to develop an adequate corrective action plan to address the federal partner’s findings, leading the federal partner to place the system in restricted—that is, high-risk—status. According to SAMHSA officials, these actions led them to more closely monitor Puerto Rico’s PAIMI program, resulting in the identification of the protection and advocacy system’s failure to comply sufficiently with PAIMI program requirements. For example, SAMHSA found that Puerto Rico’s PAIMI program did not have the capacity to protect and advocate for individuals with mental illness, as required by statute, because they had an insufficient number of attorneys. Furthermore, the federal partner that originally placed Puerto Rico’s protection and advocacy system in restricted status requested that SAMHSA do so as well. As a result, SAMHSA also placed the Puerto Rico PAIMI program in restricted status. In addition to its ongoing monitoring, SAMHSA has procedures to oversee state PAIMI program compliance during its periodic onsite monitoring reviews. When SAMHSA conducts an onsite monitoring review, its procedures specify that officials are to interview program staff, governing board members, and advisory council members; as well as review a sample of case record files and other documentation of program activities. The state PAIMI program is also to submit a detailed set of documentation to support the program’s compliance with statutory and regulatory requirements. Agency officials are to review this information and report back to the programs on any compliance issues or recommendations to improve program processes. In our review of fiscal year 2015 and 2016 documentation for the nine onsite monitoring reviews SAMHSA conducted, we found evidence that this process helped identify and resolve a range of potential compliance issues. For example, SAMHSA found that one program’s bylaws could be misinterpreted to permit lobbying for legislation for PAIMI-eligible individuals using PAIMI funding, when federal law prohibits grants programs from using federal funds to engage in such activity. As a result, the program’s governing board reviewed and modified the bylaws to clearly indicate that PAIMI funds are not to be used for lobbying. As another example, SAMHSA found that one program did not have sufficient documentation to support that the advisory council chair was an individual who had received or was receiving mental health services, or a family member of such an individual, as required by regulations. As a result, the program revised its practice to include having the advisory council chair verify in writing that he or she meets the criteria for serving in the position. (See table 6.) We identified two weaknesses that could be limiting SAMHSA’s oversight of program effectiveness. First, SAMHSA’s PAIMI program monitoring did not consistently record changes to program priority goals, objectives, and targets—collectively, “benchmarks”—made during a performance year, and the agency did not have procedures for examining such changes over time. Second, the agency did not provide timely information to programs on identified deficiencies from onsite monitoring. As of March 2018, SAMHSA was in the process of implementing new processes for its oversight of state PAIMI programs that officials believe will streamline the agency’s monitoring activities. However, these changes may not fully address the weaknesses we identified. We found that SAMHSA did not always record changes programs made to their performance benchmarks and did not have procedures for examining benchmark changes over time. According to federal internal control standards, an agency should evaluate the results of its monitoring—in this case, the information collected regarding benchmark modifications—to determine program performance. In our review of SAMHSA’s oversight of 10 programs for fiscal years 2015 and 2016, we found that SAMHSA did not consistently record program modifications to performance benchmarks. Specifically, we found that four programs appeared to have modified their performance benchmarks during the year—in some cases upward when results exceeded original targets, and in other cases downward when results were lower than original targets. However, these changes were not recorded by SAMHSA reviewers in the review checklists. For instance, one program revised 17 of its 21 targets to closely match the program’s actual results, but these changes were not recorded in the area of the review checklist that prompts the project officer to note if such changes were made. According to SAMHSA officials, in fiscal year 2017, SAMHSA transitioned from paper forms to a web-based system for submission and review of applications and performance reports. Officials told us that under the new system, programs will be required to consult with SAMHSA officials about and submit modifications to performance benchmarks through the system. The system will record and display both the original priority goals, objectives, and targets as approved at the time of the application, as well as any modifications a program submits throughout the year. The system will also record that information over time, providing the ability to review and track program modifications to benchmarks over multiple years. SAMHSA’s new system should improve recording of benchmark changes, however, SAMHSA lacks procedures for examining such changes across years to assess whether the changes could indicate larger performance issues. SAMHSA officials acknowledged that they did not have specific procedures in place directing project officers to examine changes to performance benchmarks across multiple years, but said that other relevant procedures were in place. For example, officials noted that programs are not able to modify benchmarks without approval by SAMHSA project officers. However, without implementing procedures aimed specifically at examining trends in benchmark modifications across years, SAMHSA lacks assurances that its project officers will consistently examine whether a particular program is regularly making changes to benchmarks that may be indicative of a potential performance problem, such as revising its targets downwards over multiple years. We found that SAMHSA generally failed to meet its timelines for producing and providing onsite monitoring review reports to the state PAIMI programs under review during fiscal years 2015 and 2016. This inability to produce and provide onsite monitoring reports to PAIMI programs in a timely manner is inconsistent with SAMHSA’s internal requirements and with federal internal control standards regarding evaluating issues and remediating deficiencies on a timely basis. Specifically, for onsite monitoring reviews, SAMHSA’s procedures specify the agency is to provide an initial report to the reviewed program within 150 days of the onsite visit. However, for eight of the nine monitoring review reports we reviewed for fiscal years 2015 and 2016, SAMHSA provided the report more than a year after the visit. One program that had just received its report at the time of our review told us that it was difficult to plan the necessary changes to its work without an official report with findings and recommendations to help guide them in restructuring their operations. Program staff said they had moved ahead and made some changes but were uncertain whether those changes would be deemed sufficient because of the lack of feedback from the agency. SAMHSA officials told us that they may have missed some deadlines as a result of competing priorities and restricted resources—for example, recently only two of four PAIMI project officer positions have been occupied. Officials reported that the agency was taking steps to streamline the process to make it more efficient and to bring on more staff resources. The officials said that in 2018 SAMHSA planned to shift responsibility for the project officers’ portion of the onsite reviews to a dedicated onsite monitor, which they hoped would expedite the review process. In addition, the agency had taken steps to streamline its onsite monitoring review process, such as by revising and standardizing its reporting template. There are uncertainties with regard to how effective these changes will be in increasing timeliness. For example, the planned efficiencies target some, but not all, of the key components of the reviews. In particular, SAMHSA officials told us that these review process changes do not pertain to the portion of the onsite review that focuses on state PAIMI program compliance with applicable fiscal requirements. Officials noted that the SAMHSA office that conducts the fiscal portion of the review has had staff shortages for the past 16 months and is not able to operate within normal time frames for completing this portion of the report. Without meeting its deadlines for completing its review and providing timely, detailed information and feedback to PAIMI programs, SAMHSA cannot ensure that identified issues are resolved in a timely manner, thus potentially endangering the effectiveness of the programs. Individuals with mental illness can face abuse, neglect, and rights violations in both institutional and community treatment settings, including their own homes. The protection and advocacy services provided by state PAIMI programs play an important role in reducing these serious issues for this vulnerable population. Therefore, it is important to monitor how effective the programs are in addressing such issues. SAMHSA has a number of procedures in place to monitor program compliance with statutory and regulatory requirements, which enable the agency to identify and resolve potential issues with program compliance, and it is taking steps to streamline and improve its compliance oversight. At the same time, the agency’s processes for oversight of program effectiveness could be improved, such as by examining trends in mid-performance changes programs make to their priority goals, objectives, and targets across multiple years. Without such monitoring, SAMHSA may not recognize a pattern of changes that signal larger concerns about that program’s effectiveness. Finally, SAMHSA has not been timely in completing its onsite monitoring reviews or providing the results of these reviews to the programs. Although SAMHSA has plans to make reviews more efficient and to add resources, it is unclear to what extent these steps will resolve the lack of timeliness. We are making the following two recommendations to SAMHSA: The Assistant Secretary for Mental Health and Substance Use should establish procedures to better ensure that mid-performance changes to program priority goals, objectives, and targets are examined across multiple years. (Recommendation 1) The Assistant Secretary for Mental Health and Substance Use should take steps, including the steps it has planned, to ensure onsite reviews are completed and findings are provided to programs on a timely basis. (Recommendation 2) We provided a draft of this report to HHS for comment. In its written comments, HHS concurred with both of our recommendations and indicated that it will examine ways to implement them. HHS’s comments are reprinted in appendix III. HHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. State Protection and Advocacy for Individuals with Mental Illness (PAIMI) programs determine their priority goals each fiscal year to prioritize the work they hope to accomplish. Our analysis of the priority goals reported in the annual program performance reports by eight selected state PAIMI programs found that all programs had at least one priority goal focused on Protection and Civil Rights in fiscal year 2016 (see fig. 3). Access/Discrimination was the next most frequently set priority goal category—with seven of the eight programs establishing these goals. We also reviewed program goal categories from fiscal year 2015 and identified few significant differences between 2015 and 2016. Eight priority goal categories emerged from our analysis: Access/Discrimination: This category refers to issues broadly related to access to services or benefits, and reduction of discrimination, e.g., advocating for access to legal services or elimination of barriers to housing, employment, and education services. Community Integration: This category refers to issues of integrating the individual into community facilities or ensuring they can be independent outside of a facility. Education: This category refers to specific issues related to access or equality in education services. Employment: This category refers to specific issues related to access to employment. Health Care Services: This category refers to specific issues related to access to health care services within the community or state. Housing: This category refers to specific issues related to access to housing. Information/Outreach: This category refers to activities related to distributing publications or performing outreach to individuals. Protection and Civil Rights: This category refers to issues broadly related to rights violations and protection from restraint, seclusion, or other abuse or neglect. In addition to the contact named above, Susan Barnidge, Assistant Director; Hannah Marston Minter, Analyst-in-Charge; Joanna Wu Gerhardt; and Emily Beller Holland made key contributions to this report. Also contributing were Jennie Apter, Muriel Brown, and Emily Wilson.", "summary": "PAIMI grant awards, established by Congress in 1986 and totaling $36 million in 2016, are administered by SAMHSA to support state protection and advocacy programs. PAIMI programs protect and advocate for the rights of individuals with significant mental illness by investigating reports of incidents of abuse and neglect of such individuals in facilities such as hospitals, and in the community, among other activities. The 21st Century Cures Act included a provision for GAO to review the PAIMI programs and their compliance with federal statutory and regulatory requirements. This report examines (1) the outcomes reported by PAIMI programs in selected states, and (2) SAMHSA's oversight of state PAIMI programs, including their compliance with federal requirements. GAO reviewed FY 2015 and 2016 PAIMI program documentation for eight of 57 programs selected for variation in funding amount, geographic location, and other factors. GAO also reviewed relevant SAMHSA policies and procedures and assessed them against federal standards for internal control. The eight selected state Protection and Advocacy for Individuals with Mental Illness (PAIMI) programs GAO reviewed reported a range of positive outcomes from their work on behalf of individuals with mental illness. For example, in fiscal year (FY) 2016, the selected programs reported resolving in the individual's favor 1,772 out of 2,390 cases (74 percent) related to complaints of alleged abuse, neglect, and rights violations. The remaining cases were reported as withdrawn by the client, closed due to lack of merit, or not resolved in the individual's favor. These programs also reported concluding a variety of broader, system-level activities—referred to as systemic activities—intended to benefit groups of individuals with mental illness. These systemic activities resulted in, for example, changes to procedures in mental health institutions and correctional facilities. Source: GAO analysis of 2016 Substance Abuse and Mental Health Services Administration data. | GAO-18-450 The Substance Abuse and Mental Health Services Administration (SAMHSA), which oversees the state PAIMI programs, has a variety of procedures in place to monitor performance and compliance. However, two areas warrant additional attention, as follows: SAMHSA has not consistently examined changes to performance benchmarks—the goals, objectives, and targets that PAIMI programs set annually for their planned work. Programs are permitted to modify these benchmarks, and GAO found that four had done so. A new SAMHSA system implemented in 2017 could improve recording of benchmark changes, but SAMHSA lacks procedures to examine changes across years, which could help identify performance concerns. SAMHSA often failed to complete its periodic, in-depth reviews of programs and to provide findings of identified deficiencies to PAIMI programs on a timely basis. SAMHSA has plans to improve the efficiency of its review process. However, it is unclear the extent to which these plans will resolve the timeliness issues, which could delay resolution of any issues found in the reviews. GAO recommends that SAMHSA take steps to ensure that changes to performance benchmarks are examined over time, and to ensure onsite reviews are completed—and findings are provided to state programs—in a timely manner. The Department of Health and Human Services concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Each state receives an annual LIHTC allocation. Allocating agencies then evaluate developers’ proposals to use tax credits to help develop new or rehabilitate existing housing against their QAPs. The QAPs identify agencies’ priority housing needs and contain selection criteria for awarding credits. In addition to meeting criteria outlined in a QAP, projects awarded tax credits must remain affordable to qualifying households for at least 30 years. The amount of LIHTCs allocating agencies award to a project is primarily based on the project’s eligible basis. The agencies should allocate no more credits than they deem necessary to ensure the project’s financial feasibility through the 10-year credit period. To determine financial feasibility, Section 42 requires allocating agencies to consider the reasonableness of developmental and operating costs, any proceeds or receipts expected to be generated through the tax benefit, and the percentage of credit amounts used for project costs other than the cost of intermediaries such as syndicators (discussed later in this section). Section 42 also requires allocating agencies to evaluate available private financing and other federal, state, and local funding a developer plans to use and adjust the award accordingly. Allocating agencies must review costs to determine the credit amount at three points in time: application (when the proposal is submitted), allocation (when the agency commits to providing credits to a specific project), and placed in service (when the project is ready for occupancy under state and local laws). When a project is placed in service, the developer must submit a final cost certification to the allocating agency. This certification details a project’s total costs and eligible basis. In general, the cost certification must be accompanied by an unqualified audit report from a certified public accountant, conducted in accordance with generally accepted auditing standards. An agency’s QAP (or related documents) may outline policies and procedures for reviewing costs. Once a project is awarded tax credits, developers often attempt to obtain funding for the project by attracting investors willing to contribute equity financing. Developers typically sell an ownership interest in their LIHTC projects in exchange for equity from investors (a process commonly referred to as selling tax credits). The equity contributions (or investments) reduce debt burden on LIHTC projects, making it possible for project owners to offer lower, more affordable rents. Generally, investors buy an ownership interest in a LIHTC partnership (commonly referred to as buying tax credits) to lower their tax liability. Investors in LIHTC projects may invest directly or through intermediaries known as syndicators. Direct investors are typically larger institutional investors, such as banks that have the internal capacity to fund and manage the acquisition, underwriting, and management of the underlying development project. Under the direct investment model, an investor owns a “limited” partner interest in the partnership owning the underlying property, with the developer typically assuming the “general” partner interest (see fig. 1). Alternatively, investors may invest in a fund organized and managed by a syndicator. The syndicator-managed funds are limited partnerships in which investors own the limited partner interest in the fund (upper-tier partnership), with the fund in turn owning the limited partner interest in various property partnerships (lower-tier partnership). The money investors pay for a partnership interest in the fund is paid to associated LIHTC projects as equity financing. Syndicators manage two types of funds: proprietary (or single-investor) funds and multi-investor funds (see fig. 2). In both cases, the syndicator originates potential investments, performs underwriting, and presents the potential investments to investors. Syndicators receive a fee from investors—typically a percentage of the gross equity raised—for their services in establishing, originating, underwriting, and closing on projects for investment funds. This fee is often referred to as an “acquisition fee” or an “upper-tier syndication fee.” The syndicator also may charge a fee to each project partnership in a fund for project-specific legal and accounting costs. This fee is often referred to as a “lower-tier syndication fee.” LIHTC projects typically do not produce income through rents for investors. Rather, investors use the credits to offset their income tax liabilities over the 10-year credit period. As a result, for a LIHTC investment to be financially beneficial to an investor, the present value of 10 years of LIHTCs and any related benefits, such as taxable losses and depreciation, generally must exceed the amount the investor contributes in equity. This consideration, in part, drives the price investors are willing to pay for tax credits. Under normal economic conditions, equity pricing per tax credit has ranged from the $0.80s to mid-$0.90s per $1.00 of tax credit. Projects often require financing in addition to investors’ equity contributions to cover development costs. This gap may be filled by federal, state, local, and private sources—for example, certain HUD grants and loans, state tax credits modeled after the federal program, and mortgage loans without government guarantees. A developer also may defer its developer fee to cover all or a portion of a funding gap. IRS and allocating agencies jointly administer the LIHTC program, with other entities providing additional types of oversight, as follows. IRS administration of the LIHTC program includes developing and publishing regulations and guidance, enforcing taxpayer compliance, and overseeing allocating agencies’ monitoring of taxpayer compliance. The IRS Office of Chief Counsel, with assistance from Treasury’s Office of Tax Policy, develops and publishes regulations and guidance based on requirements in Section 42. In general, IRS collects and reviews information necessary for tax administration, including data on LIHTCs awarded and other information necessary to check the amount claimed on tax returns. According to IRS officials, IRS also regularly communicates with allocating agencies and stakeholders about LIHTC compliance issues and best practices at industry meetings and conferences. IRS relies on allocating agencies to administer and oversee the LIHTC program in states. In addition to awarding credits to qualified projects, allocating agencies are responsible for monitoring LIHTC properties for compliance with program requirements (for example, rent ceilings, tenant income, and habitability). Noncompliance with LIHTC requirements may result in IRS denying claims for the credit in the current year or recapturing (taking back) credits claimed in prior years. Investors and syndicators also monitor projects by performing due diligence in relation to their viability and eligibility for tax credits, in part to ensure they receive the expected tax credits. Although not an administering agency, HUD plays a role in collecting data on the program. Specifically, the agency has to collect information on LIHTC tenant characteristics, as mandated in the Housing and Economic Recovery Act of 2008. Since 1996, HUD voluntarily has collected LIHTC project-level data because of the importance of the credits as a source of funding for low-income housing. HUD also has a role in designating difficult development areas and qualified census tracts. In addition, NCSHA has identified recommended practices to allocating agencies for administering the LIHTC program, including oversight of QAPs and cost verification. The median per-unit cost of the LIHTC projects completed in our 12 selected allocating agency jurisdictions in 2011–2015 was $204,000. The median per-unit cost of new construction projects was about $50,000 higher than for rehabilitation projects ($218,000 compared to about $169,000). For new construction projects, the median per-unit cost was about $38,000 higher in urban areas than in nonurban areas (about $230,000 compared to $192,000). For rehabilitation projects, the median per-unit cost was about $72,000 higher in urban areas than in nonurban areas (about $196,000 compared to $124,000). The development costs we report may be somewhat understated, because the documentation we obtained from allocating agencies did not consistently include the value of all costs—for example, donated land— which we discuss later in this report. As shown in figure 3, the median per-unit LIHTC equity investment was about $147,000 for new construction projects (about 67 percent of the total development cost) and $103,000 for rehabilitation projects (about 61 percent of the total development cost). Other funding sources, such as private loans or state and local programs, made up for differences between project costs and equity investments. We estimated equity investments for the selected projects based on their LIHTC allocations and the reported prices investors paid for the credits. The median credit price increased from about $0.80 in 2011 to about $0.93 in 2015. Although rehabilitation projects generally had lower per-unit costs than new construction, both types of projects had similar proportions of hard and soft costs (see fig. 4). Hard costs (which include land, existing structures, and construction) were roughly 70 percent of new construction and rehabilitation project costs. Costs for acquisition of existing structures were proportionally higher and construction costs proportionally lower for rehabilitation projects than for new construction. Land costs were close in proportion. Soft costs (which include contractor fees, architect and engineer fees, developer fees, and other soft costs such as construction loan financing) were proportionally similar for new construction and rehabilitation projects—roughly 30 percent. In nominal terms, the median per-unit cost of new construction projects increased by about 13 percent during 2011–2015, and the median per- unit cost of rehabilitation projects decreased by about 21 percent. After accounting for inflation, the median per-unit cost for new construction projects increased by about 7 percent (from about $208,000 to $222,000 in 2015 dollars), while the median per-unit cost for rehabilitation projects decreased by about 26 percent (from about $207,000 to $153,000 in 2015 dollars). However, this analysis does not account for changes in the composition of projects that were built (such as size or location). In addition, the overall trends were substantially affected by certain allocating agencies. For example, California accounted for about 24 percent of the new construction projects in our sample. During 2011–2015, the median per-unit cost of California’s new construction projects increased by about 11 percent (about 18 percent in nominal terms), while the median per-unit cost of all other new construction projects in our sample decreased by about 4 percent (in nominal terms, increased by about 2 percent). Additionally, New York City accounted for about 19 percent of the rehabilitation projects in our sample, and the median per-unit cost of its projects declined by about 33 percent (about 32 percent in nominal terms) in 2011–2012. During this same period, the median per-unit cost of all other rehabilitation projects increased by about 13 percent (about 15 percent in nominal terms) but did not show a clear trend in 2011–2015. To provide some context for the project costs and trends discussed above, we compared the annual rates of change for median new construction costs—generally site work, construction materials and labor, and contractor fees—to the annual rates of change in a Bureau of Labor Statistics index for construction costs that tracks price changes for various types of new construction. The median per-unit construction cost of the LIHTC projects (unadjusted for inflation) and the index both increased over the analysis period—by 11 percent and 10 percent, respectively. However, while the index consistently increased annually by an average of about 2 percent, the magnitude and direction of changes for the LIHTC projects varied, increasing by as much as about 8 percent in 2013–2014 and decreasing by about 5 percent in 2014–2015. Figure 6 shows the annual median per-unit construction costs for new construction LIHTC projects and a projected trend if they had increased at the rate of the Bureau of Labor Statistics index beginning in 2011. These results suggest that factors besides the price of construction inputs (such as material, labor, and contractor fees) drove changes in the median cost of LIHTC projects completed during 2011–2015. Project locations and characteristics varied each year, and a number of these factors were associated with per-unit costs, as discussed later. To provide context for our cost analysis, we also examined the feasibility of comparing LIHTC development costs to development costs for market- rate projects. However, we were unable to obtain data on market-rate developments from industry groups we contacted that represented developers and lenders, or from researchers who had conducted similar studies. Additionally, allocating agencies did not consistently maintain key project data—such as gross square footage, number of stories, or construction wages—needed to benchmark LIHTC project costs using a construction cost estimation tool. We discuss these and other data challenges in greater detail later in this report. Nonetheless, several factors provide possible explanations for why construction costs, developer fees, and other soft costs may differ between LIHTC and market-rate projects: Durability. LIHTC project developers may have incentive to use more durable (and potentially more expensive) construction components than they might for market-rate developments. They may seek to limit replacement costs before the end of the 15-year compliance period— after which they may seek additional LIHTCs for rehabilitation or convert units to market-rate. As revenue from tenant rents is generally lower for LIHTC projects than for market-rate projects, and because investors prefer not to refinance during the 15-year compliance period and lower their returns, LIHTC project owners are more limited in their ability to recapitalize aging projects. On the other hand, market forces may encourage market-rate developers to provide higher-grade finishes and amenities than LIHTC developers in some markets. Agency and local requirements. Allocating agencies can use QAP minimum standards and scoring incentives to influence the types of projects developers propose and build. Although these preferences can help achieve a variety of policy priorities, some can increase costs. For example, QAPs may provide developers with incentives to pursue historic preservation projects or require them to add on-site commercial space or amenities such as community rooms. Green building and energy-efficiency standards are also common QAP incentives that can increase development costs, although they may offset some future operating costs through lower utility expenses. Some QAPs also may incentivize urban infill projects on sites that require extensive demolition or environmental remediation, which add to costs. Profit motive. LIHTC projects may be less attractive financially for developers than market-rate projects because they yield lower profits from rental income. Accordingly, allocating agencies allow a developer fee, for which tax credit equity generally pays. For the projects in our sample, developer fees represented about 11 percent of development costs at the median. In comparison, market-rate developers are generally compensated through rental income or from the sale of their developments. Other soft costs. LIHTC projects may have higher soft costs (other than developer fees) compared to market-rate and other types of affordable developments for a number of reasons, including the following: Financing projects through LIHTC equity is a complex process that can result in higher legal, accounting, and syndication fees and can also require developers to hire outside consultants and develop sophisticated internal capacity. LIHTC developers also generally rely on multiple public and private funding sources in addition to tax credit equity to fully finance projects. For example, projects in California used about six funding sources in addition to LIHTC equity, on average. These additional sources can increase legal, accounting, and other fees due to the costs associated with seeking additional sources, writing applications, and complying with further appraisal, audit, and regulatory requirements. Securing additional funding sources also can delay the development process, which may increase land holding and interest expenses. As shown in figure 7, the median per-unit cost of new construction projects across the 12 selected allocating agencies ranged from a low of about $126,000 in Texas to a high of $326,000 in California. The median per-unit cost was less than $200,000 for 4 of the 12 allocating agencies (Arizona, Georgia, Ohio, and Texas); from $200,000 to $300,000 for 6 of the 12 allocating agencies (Florida, Illinois, New York, New York City, Pennsylvania, and Washington); and greater than $300,000 for 2 of the 12 agencies (Chicago and California). Median per-unit costs for rehabilitation projects were lower and varied less than those for new construction projects, ranging from a low of about $107,000 in Illinois to a high of about $258,000 in both Chicago and New York. In all selected allocating agencies, the median per-unit cost for rehabilitation projects was lower than for new construction projects. For example, the median in California was about $184,000, compared to about $326,000 for new construction. For additional details on the cost of rehabilitation projects, see appendix III. As also shown in figure 7, within individual allocating agencies, the cost difference between the least and most expensive project was as little as $104,000 per unit (Georgia) and as much as $606,000 per unit (California). Project costs tended to be clustered around the median for each allocating agency, but were still widely distributed between the 25th and 75th percentiles for some allocating agencies. For example, the difference between the 25th and 75th percentiles was more than $75,000 in half of the locations we reviewed (California, Chicago, Illinois, New York, New York City, and Pennsylvania). Although projects costs were among the highest for the Chicago and New York City allocating agencies, they were within the range of costs for five other cities that had comparable population and density and were in the jurisdictions of other allocating agencies within our sample (see fig. 8). Hard costs as a proportion of total development costs varied among the selected allocating agencies. Agencies’ hard costs ranged from about 66– 76 percent for new construction projects completed in 2011–2015, with soft costs accounting for the remainder (see fig. 9). The proportions of hard and soft costs were generally similar across higher- and lower-cost locations. For example, California had the highest median per-unit cost among selected allocating agencies, but had hard and soft costs (about 67 and 33 percent) proportionally similar to those in Texas (about 68 and 32 percent) and Georgia (about 69 and 31 percent), where median per- unit costs were among the lowest. In relation to hard costs, median per-unit construction costs were highest in Chicago, where construction costs constituted about 72 percent of total development costs (but were about 63 percent elsewhere, on average). In comparison, construction costs in California were just 56 percent of total development costs due to higher land costs (about 12 percent of total development costs, but about 5 percent elsewhere, on average). For soft costs, developer fees and other soft costs (such as construction loan interest and permit fees) varied more widely across the allocating agencies than architect and engineer fees and contractor fees. Developer fees ranged from about 6 percent of development costs in Chicago to about 13 percent of development costs in Florida. Other soft costs similarly ranged from about 7 percent of development costs in Pennsylvania to about 14 percent of development costs in California. In comparison, architect and engineer fees ranged from about 3 percent to 5 percent of development costs, and contractor fees ranged from about 5 percent to 9 percent of development costs. By design, the LIHTC program gives allocating agencies flexibility to address local housing needs and agency priorities through their award processes. As a result, the characteristics of each agency’s LIHTC projects generally can be expected to reflect the real estate conditions, built environment, and populations of the areas they serve. For example, in locations with less density and inexpensive land, low-rise multibuilding developments may be more cost-effective, while in locations with higher density and expensive land, taller single-building developments may be more cost-effective. Therefore, it is important to consider the cost reasonableness of LIHTC developments within the context of local conditions. As previously noted, we developed a regression model to examine the relationship between the cost of developing LIHTC projects and various building, location, and other variables. Our model results indicate that a number of key characteristics were associated with significant increases or decreases in the per-unit costs of LIHTC projects that received tax credit awards from our selected allocating agencies. Differences in the prevalence of these characteristics among the allocating agencies help explain the cost variation among and within them. While our results indicate that these characteristics may have directly or indirectly affected per-unit cost, their specific effects varied by allocating agency, suggesting that our estimates are sensitive to the particular conditions of the locations we sampled. First, construction type (new construction or rehabilitation) and scale (number of units and unit size, measured by number of bedrooms)—were associated with cost, controlling for other characteristics. Construction type. We previously noted that the median per-unit cost for new construction was about $50,000 higher than the per-unit cost for rehabilitation projects, but after controlling for other characteristics, we estimated this difference to be $39,000. New construction projects were more costly than rehabilitation projects because they had higher construction costs (primarily site work, materials, and labor). For perspective, $39,000 represents about 19 percent of the median per-unit cost ($204,000) of projects in our sample. Number of units. In general, we found that per-unit costs decreased as the number of units in a project increased, consistent with economies of scale in construction. Specifically, we estimated that the per-unit cost of projects with more than 100 units was about $85,000 less than projects with fewer than 37 units (see fig. 10). In addition, we estimated that the per-unit cost of projects with 37–50 or 51–100 units was about $31,000 or $56,000 lower, respectively, than projects with fewer than 37 units. However, due to data limitations, our analysis does not account for building type—for example high-rise or low-rise structures—that may have affected per-unit cost. To account for some variation in building type, we compared projects with one or more larger buildings (60 or more units) to projects with more typical building designs. We found that the per-unit cost of projects with larger buildings—which were also taller on average—was about $15,000 more (about 7 percent of the median per- unit cost). This difference may be attributable to specific design requirements of larger and taller structures, such as construction materials and sprinkler systems. Unit size (number of bedrooms). As would be expected when comparing costs on a per-unit basis, we estimated that projects with larger units had higher per-unit costs. We estimated that the per-unit cost decreased by about $2,000 (or about 1 percent of the median per-unit cost) as the number of units with fewer than two bedrooms increased by10 percent. Conversely, the per-unit cost increased by about $3,000 as the number of units with more than two bedrooms increased by 10 percent. Second, we also found that the types of organizations that developed LIHTC projects and the tenants they targeted were associated with per- unit cost, after controlling for other characteristics. Tenant type. We estimated that the per-unit cost of projects targeted to seniors was about $7,000 lower than nonsenior projects (or about 3 percent of the median per-unit cost). Compared to nonsenior projects, units in senior projects generally had less residential square footage (for which we did not control), which may help explain their lower per-unit costs. Target income level. We also estimated that the per-unit costs of projects targeted to predominantly low-income tenants was about $11,000 more than for mixed-income projects (or about 5 percent of the median per-unit cost). Mixed-income projects might be expected to have higher costs as they generate more rent revenue to support higher development costs. But, because LIHTC allocations are calculated based on the ratio of low-income units to total units, predominantly low-income projects receive proportionally more LIHTC equity, which may allow them to support higher development costs. For example, we estimated that projects targeted towards predominantly low-income tenants generated LIHTC equity equal to about 67 percent of development cost, whereas mixed-income project generated LIHTC equity equal to about 50 percent of development cost. Nonprofit participation. Section 42 requires a portion of each state’s tax credit allocation to be set aside for projects involving a qualified nonprofit organization. We estimated that the per-unit cost of these projects was about $15,000 more than projects not in the set-aside (or about 7 percent of the median per-unit cost). Other studies of the LIHTC program have suggested potential explanations for this result. For example, nonprofit organizations may focus more on populations that are more costly to serve, such as special-needs tenants who may require additional or enhanced facilities. Additionally, nonprofit developers may have higher costs because they are often smaller, produce fewer projects, and may need to spend more time and resources on activities such as fundraising and market research, compared to their for-profit counterparts. Third, controlling for other characteristics, we found that a number of geographic and economic variables were associated with cost differences. Location. We estimated that urban locations were associated with a per- unit cost about $13,000 higher than for suburban locations (or about 6 percent of the median per-unit cost), and that per-unit costs in rural areas were not statistically different from suburban areas. Consistent with this estimate, the data in our sample show that per-unit land and construction costs were greater in urban areas than in nonurban areas. In addition, urban projects were more likely to include parking structures, which we found were associated with a per-unit cost increase of about $56,000 in California and Arizona (or about 27 percent of the median per- unit cost), where parking structure data were available. Among these projects, about 98 percent of projects with parking structures were in urban areas. Urban projects were also located in closer proximity to transit, which we found increased per-unit construction costs. In an alternative specification of our model limited to projects near fixed-guideway transit stations, we estimated that the per-unit construction costs of projects that were 0.5 miles or less from a transit station—known as transit-oriented developments—were about $17,000 more than projects that were between 0.5 miles and 1.0 miles from a transit station. Local housing market and economy. As discussed previously, difficult development areas are those with high construction, land, and utility costs relative to area median gross income; qualified census tracts are areas with higher rates of low-income households or poverty rates. We did not find that projects in these areas were associated with cost differences compared to projects outside these areas. However, we found cost differences among projects in difficult development areas and qualified census tracts when we estimated alternative specifications of our model that excluded some geographic, economic, and local housing market variables that may be associated with the areas and tracts. For example, using a model specification that excluded local property values, we estimated that difficult development areas were associated with about a $9,000 increase in per-unit costs. In a separate estimation that excluded poverty rates and some other economic and geographic variables, we estimated that projects in qualified census tracts were associated with a per-unit cost increase of about $18,000 (or about 9 percent of the median per-unit cost). In both cases, the project characteristics of interest (difficult development area or qualified census tract) are likely associated with the excluded variables mentioned, as difficult development areas are characterized by high land costs and qualified census tracts are characterized by high poverty rates, among other factors. In the absence of the excluded geographic or local housing market variables, the estimated influence of these project characteristics is more pronounced. Finally, we found that the presence of federal funding sources in addition to LIHTC were associated with cost differences, after controlling for other characteristics. American Recovery and Reinvestment Act funding. We estimated that projects that received funding through either of two LIHTC programs (Tax Credit Assistance Program or Section 1602 Program) under the American Recovery and Reinvestment Act of 2009 (ARRA) were associated with a decrease of about $13,000 in per-unit costs (or about 6 percent of the median per-unit cost). Projects received ARRA funds during a period of economic recovery, and the relative scarcity of private funds may have motivated developers to pursue less costly projects. Because about 91 percent of projects that received ARRA funds were completed in 2011– 2012, we restricted our ARRA estimate to projects completed in that period. We estimated that soft costs were about $4,000 per unit lower for ARRA projects than for non-ARRA projects. Soft costs, which we previously mentioned were about one-third of total development costs, may have been lower for ARRA projects because proportionately fewer of these projects used tax credit equity to fund development costs. For example, about 30 percent of these projects received ARRA funds entirely in lieu of tax credits. As a result, ARRA projects may have had lower or no tax credit partnership and syndication costs. However, we did not estimate a significant difference in construction costs between ARRA and non-ARRA projects. Rural Development funding. Projects that received at least one Rural Development loan or grant, from the Department of Agriculture, were associated with about a $32,000 decrease in per-unit cost (or about 16 percent of the median per-unit cost). However, projects that received these loans or grants may have had unique characteristics that affected cost. According to an allocating agency official from California—where about 19 percent of the projects we reviewed used at least one Rural Development loan or grant—projects that received these funds may have had lower total development costs because high-cost projects were not financially feasible in some rural areas due to lower rents and less local public funding. In addition, projects to house seasonal farm workers that receive funding from Rural Development’s Section 514/516 Farm Labor Housing programs may lack some amenities—such as in-unit kitchens and bathrooms—that increase costs and are more common in other LIHTC projects. Furthermore, private loans guaranteed through Rural Development’s Section 538 Guaranteed Rural Rental Housing Program are subject to per-unit limits, which may have hindered the feasibility of higher-cost projects. Other federal funding. We also estimated that projects that received HOPE VI funds were associated with about an $18,000 increase in per- unit costs (or about 9 percent of the median per-unit cost). However, the cost increase that we estimated may not have fully captured all additional costs associated with these projects. Several of the 23 HOPE VI projects included in our sample were phases of larger HOPE VI Revitalization Grant projects and may have included only the project costs associated with a smaller portion of a multibuilding development. In addition, some predevelopment expenses associated with the overall grant project, such as the demolition of existing structures and tenant relocation, may not have been included in the cost certifications we reviewed. In contrast to the HOPE VI projects we reviewed, we did not find that projects that received Community Development Block Grant (CDBG) or HOME Investment Partnerships Program (HOME) funds had statistically different per-unit total development costs. However, like HOPE VI projects, CDBG and HOME projects were associated with increases in per-unit construction costs (about $15,000 or $6,000, respectively). The presence of HOME funds also was associated with an increase in per-unit soft costs (about $2,000), while CDBG or HOPE VI funds were not strongly associated with differences in per-unit soft costs. While these sources were associated with cost differences, controlling for other characteristics, the association may not be entirely causal. The use of CDBG, HOME, and HOPE VI funds may have directly increased construction costs, as fund usage can trigger federal prevailing wage requirements. On the other hand, CDBG and HOME funding (for example) may have been used in addition to LIHTC equity to fill funding gaps for projects with particularly high costs. Finally, to examine the relationship our model characteristics had on the per-unit cost of low- and high-cost projects, we compared the characteristics of new construction projects below the 25th percentile for per-unit cost against those above the 75th percentile. As shown in table 1, projects below the 25th percentile generally had a higher proportion of characteristics that were associated with decreases in per-unit cost. These projects were larger, had smaller units, were more often targeted toward seniors, and were located in rural areas. In comparison, projects above the 75th percentile generally had a higher proportion of characteristics associated with increases in per-unit cost (or less of a decrease). These projects were smaller, had larger units, were more often located in urban areas, and were built in more expensive real estate markets, as the following examples illustrate. About 70 percent of the projects below the 25th percentile had either 51–100 units or more than 100 units—which we found were associated with lower per-unit cost—compared to just 46 percent of the projects above the 75th percentile. About 40 percent of the projects below the 25th percentile were senior projects—which we also found were associated with lower per-unit costs—compared to 18 percent for projects above the 75th percentile. About 88 percent of the projects above the 75th percentile were in urban areas—which we found were associated with higher per-unit costs—compared to 71 percent of the projects below the 25th percentile. Allocating agencies used approaches that include cost and fee limits and cost-based scoring criteria to manage project-development costs. A few agencies adopted additional measures such as detailed contractor certifications at project completion to help guard against a risk of fraud involving misrepresentation of contractor costs, but LIHTC policies do not require these enhancements. As shown in table 2, the eligibility requirements and scoring systems that the 57 allocating agencies used to evaluate credit applications generally included approaches that seek to limit development costs or incentivize lower costs. For information on the approaches each of the agencies used, and in what combination, see appendix VI. The types and number of cost-management approaches employed by each agency varied, as illustrated in table 3. More than one-third of the agencies used all four types of cost-management approaches we identified (one or more cost limits, credit allocation limits, fee limits, and cost-based scoring criteria). In contrast, a few agencies used just one type of approach. The number of approaches used by an agency is not necessarily indicative of the effectiveness of its cost management. Additionally, the way that agencies implemented each type of approach varied. The cost-management approaches agencies identified in their QAPs and related documents were as follows. Cost limits. More than two-thirds of the allocating agencies (39 of 57) set limits on the total development cost for each project or set limits on the total eligible basis (or both). Total development cost is the overall cost to develop a project, whereas eligible basis typically includes costs associated with acquisition, construction and rehabilitation, and most soft costs, but excludes costs associated with land, permanent financing, and tax credit syndication. For information on cost limits for each of the 57 agencies, see appendix VI, table 32. Thirty-three agencies set limits on the total development cost for each project. For example, Illinois limited total costs by bedroom type, number of units, and location, based on the agency’s analysis of historical cost data. Ten agencies set cost limits on a project’s eligible basis, and their approaches to these limits varied. For example, two agencies adopted universal eligible basis limits of $250,000 per unit (Pennsylvania) and $300,000 per unit (New York City), whereas most others had multiple limits based on project characteristics such as type (new construction or rehabilitation), number of bedrooms, and location. Six agencies, including Georgia, applied cost limits from a HUD program that insures mortgages for rental housing for moderate- income families. According to Georgia officials, adopting the HUD limits was more cost-effective than developing cost limits based on a market analysis. Credit allocation limits. About two-thirds (34) of the allocating agencies had limits on the amount of LIHTCs available, generally per project or per developer, and the limits varied by type and amount. For information on credit allocation limits for each of the 57 agencies, see appendix VI, table 33. Twenty-nine agencies had allocation limits per project, which included dollar limits (from $500,000 to $2.5 million) and percentage limits (from 10 percent to 60 percent of an agency’s total available credits per project), and two of these agencies also had a per-unit limit. For example, Illinois limited credits per project to the lesser of $1.5 million or 28,500 credits per unit. California limited credits per project to $2.5 million, and Washington limited credits to 10 percent of the agency’s total available credits. Fourteen agencies had credit limits per developer or for the number of projects a developer can sponsor in a given year. One of these agencies also had a per-unit limit. The developer credit limits included dollar limits (from about $1.2 million to $3 million per developer) and percentage limits (from 10 percent to 25 percent of the agency’s total available credits). For example, Pennsylvania limited credits to $1.2 million per developer, and Washington limited developers to 15 percent of the agency’s total LIHTCs and two projects per application round. Another agency limited the number of projects (two) a developer can sponsor in a given year. Fee limits. Fifty-one agencies limited developer fees and 47 also limited contractor fees. The agencies’ approaches to developer and contractor fee limits varied. As for other limits, 14 agencies limited fees for other project team members such as architects. For information on fee limits for each of the 57 agencies, see appendix VI, table 34. Twenty-seven agencies had a flat limit on developer fees based on a percentage of the total development cost (typically 15 percent, although percentages ranged from 8 percent to 20 percent), while two others had dollar caps ($13,000 and $18,000 per unit). Twenty-one agencies set tiered limits for developer fees based on the number of units in or cost of the project. For example, Arizona and Texas based their two- and three-tiered limits on the number of units in a project. Chicago and Illinois had tiered percentage limits based on a project’s development costs. Twenty-five agencies had separate developer fee limits for acquisition costs, ranging from 4 percent to 15 percent, or tiered limits based on development costs. Fourteen agencies set dollar caps on the total fees developers could receive per project, ranging from $1 million to $3.75 million. Twenty-seven agencies also limited fees earned by related-party developers and contractors. For example, Pennsylvania set a related-party developer fee limit (12 percent) lower than its developer fee limit (15 percent). Illinois required related-party developers to reduce their fees by their related general contractor’s profit. Cost-based scoring criteria. A large majority (51) of the allocating agencies used a competitive scoring process that incorporated one or more cost-based criteria to award LIHTCs. For information on cost-based scoring criteria for each of the 57 agencies, see appendix VI, table 35. Twenty-four agencies awarded points to projects with costs under an agency’s limits. For example, Washington awarded points to projects for which the developer fee was below the agency’s limit of 15 percent. Eighteen agencies awarded points to projects with comparatively lower costs. For example, New York City awarded points to projects with costs below the median total development cost of all submitted applications. Eleven agencies awarded points to applications for credit efficiency, which many of the agencies measured by the dollar amount of credits requested relative to the number of units proposed. For example, Ohio awarded a sliding scale of points to projects based on the ratio of the credits requested to the proposed number of units, with lower ratios (representing greater credit efficiency) earning more points. Three agencies’ competitive scoring criteria included penalties for developers with poor past cost performance. For example, they awarded negative points to developers that exceeded cost limits or provided incomplete cost information for previous projects. In addition, 35 agencies included a cost-based criterion in their application scoring tiebreakers. For example, Arizona included a credit efficiency criterion as a tiebreaker. Other cost-related approaches (12 selected agencies). Through our interviews and review of documentation, we also identified several other steps that our 12 selected allocating agencies took to manage LIHTC project costs at application and during construction. Officials from two agencies (Georgia and Ohio) told us that their cost- reasonableness reviews included identifying high-cost outliers. For example, Ohio replaced its total development cost limit with a process for identifying and removing from consideration projects with the highest total development costs compared with other competing applications. Chicago and Florida officials said they required or encouraged a bid process for selecting contractors or subcontractors. Florida officials told us that competitive selection of subcontractors, rather than using related-party subcontractors, provided cost transparency and could lead to lower costs. Similarly, New York City officials told us that nearly all the agency’s LIHTC projects received funds from a city subsidy loan program that can require competitive selection of contractors, and the agency reviewed each contractor bid for cost reasonableness. Illinois required third-party cost reviews of some projects as part of its cost-reasonableness review. Projects with related parties and all rehabilitation projects had to provide a construction cost breakdown completed by an independent third party. Additionally, Georgia’s QAP provided discretion to the agency to require a third-party cost review as needed. According to officials from 11 of the 12 agencies, policies they used to discourage cost increases during construction included restrictions on change orders, such as by requiring agency approval and documenting a project’s cost increases (8 agencies); requiring developers or general contractors to pay for cost increases using contingency funds, profits, or other sources of funding (10 agencies); and penalizing developers for cost increases in future application rounds (5 agencies). Nine of the 12 selected agencies conducted site inspections directly or by a third party to monitor construction progress, ranging from one visit to biweekly site visits. For example, New York officials said they conducted regular and unannounced site visits. Officials from the other 3 agencies said they did not conduct site visits and relied on other public funding partners, private lenders, developers, and syndicators to monitor projects during construction and in some cases, provide monitoring reports for the agency’s review. Although officials from many of the selected allocating agencies acknowledged the importance of managing LIHTC development costs, for the most part agencies have not determined the specific cost effects of their approaches. A June 2016 report by Enterprise Community Partners recognized the complexity of assessing the cost implications of individual agency actions, while also noting that the wide range of agency approaches represented an opportunity for experimentation, innovation, and sharing of leading practices. The report recommended that as agencies establish goals and make changes to QAPs, they should regularly evaluate cost trends and outcomes. But as discussed later in the report, limitations in the cost-related data allocating agencies collect and the format in which they maintain them have hampered such evaluation. While a few allocating agencies have implemented additional cost- certification controls—such as contractor-level certifications—to help address the risk of fraud involving misrepresentation of contractor costs, there are no LIHTC requirements to do so. Rather, allocating agencies oversee costs at project completion by reviewing final developer cost certifications. LIHTC regulations require developers of projects with more than 10 units to submit a cost certification, which includes total project costs and eligible basis, to the allocating agency and for the certification to be audited by a certified public accountant. As illustrated in figure 11, developer cost certifications do not break out specific contractor costs; rather, they aggregate contractor costs into several broad categories. While the extent of fraud in the LIHTC program is not known, federal legal actions involving LIHTC projects in Florida highlight the risk of unscrupulous developers, contractors, and subcontractors inflating costs and obtaining excess program resources for personal financial gain. For example, according to the Department of Justice’s U.S. Attorney’s Office for the Southern District of Florida: Several developers and contractors conspired in a contract inflation scheme affecting numerous LIHTC projects. The scheme involved submitting fraudulently inflated cost information to the allocating agency, resulting in $36 million in excess LIHTCs and federal grants. Seven individuals pled guilty and received sentences that included forfeiture of fraudulently obtained funds and for three individuals, prison time. In another scheme affecting four LIHTC projects, developers working with a related-party contractor and subcontractor submitted fraudulently inflated cost information to the allocating agency. Under a prosecution agreement, the subcontractor has paid $5.2 million in forfeiture and fines. But only a limited number of allocating agencies—5 of the 12 we selected and at least 4 of the remaining 45 agencies—have additional cost- certification controls to help address the risk of fraud involving misrepresentation of contractor costs. These controls are outlined in the agencies’ QAPs. Agencies outside of the 12 we selected for more detailed review could have requirements beyond what appears in their QAPs. However, two national accounting firms with LIHTC practices confirmed that, as of early 2018, a limited number of allocating agencies had implemented controls to address the risk of fraud involving misrepresentation of contractor costs. Of the 12 selected agencies, 4 required general contractor cost certifications, which provide information that can be used to corroborate costs listed in developer cost certifications (see fig. 12). More specifically, Florida and Ohio required general contractor cost certifications for all projects, and Arizona and Georgia required cost certifications only from related-party general contractors. In addition, California required auditors performing developer cost certifications for projects with related parties to audit to the level of the subcontractor. According to one national accounting firm, this may involve examining source documents from subcontractors (such as invoices, fee agreements, contracts, or deeds) to verify consistency with construction line items in the developer cost certification. Among the 45 remaining agencies, Delaware, Kentucky, Michigan, and Missouri had QAPs that required general contractor cost certifications for all projects. None of the 45 agencies’ QAPs cited a requirement for cost certifications for related-party general contractors. Officials from a few of the 12 selected agencies and a LIHTC accounting firm told us that unrelated parties also may present a fraud risk. The LIHTC development community is small in some markets, and unrelated developers and contractors may work together repeatedly. These relationships may pose risks similar to related-party relationships by increasing opportunities to collude in misrepresenting costs. Requiring information beyond the developer cost certification provides greater cost transparency, which may help to deter or detect misrepresentation of costs. Federal LIHTC regulations do not require developers to provide contractor- or subcontractor-level cost information to LIHTC allocating agencies, or for auditors to verify the consistency of these costs with the developer cost certification. As a result, the regulations do not fully address the risk of fraud involving misrepresentation of contractor costs. Federal internal control standards state that management should consider the potential for fraud when identifying, analyzing, and responding to risks. IRS and Treasury officials told us they have not considered implementing changes to the cost-certification requirement and that neither allocating agencies nor industry groups had suggested to them that the existing regulation needed clarification. They suggested that allocating agencies could enhance the requirement at their discretion. In contrast, NCSHA revised its recommended practices for allocating agencies in 2017, advising that agencies should require additional cost certification due diligence for all housing credit developments. According to NCSHA, this additional due diligence may include audits of general contractors—alone or with an additional review of a sampling of subcontractor invoices—to verify consistency with the developer cost certification. However, NCSHA’s recommended practices are voluntary and it remains to be seen how many agencies implement these enhanced measures and in what form. Moreover, NCSHA, a national accounting firm, some developers, and several of the selected allocating agencies told us that additional cost- certification requirements can provide more detailed cost information and help deter fraud by providing more cost transparency to allocating agencies and auditors. Two of these allocating agencies estimated that requiring general contractor cost certifications could increase project costs by about $5,000–$15,000. NCSHA and two other selected agencies noted that additional cost certification requirements would not significantly increase project costs. Under the existing federal cost certification requirement—which stops at the developer level—the vulnerability of the LIHTC program to a known fraud risk is heightened, particularly in states in which allocating agencies have not implemented additional cost certification measures. Data limitations, including inconsistencies among allocating agencies in the collection, definition, and format of key variables, constrain analysis and oversight of LIHTC development costs. While we were able to provide a cost analysis earlier in this report, our analysis was limited to those variables we were able to consistently collect and that were similarly defined across the selected allocating agencies. LIHTC regulations require developers to submit cost certifications to allocating agencies and the agencies to evaluate all sources and uses of funds for each project. However, IRS does not specifically require allocating agencies to collect and report cost-related data that would facilitate programwide assessment of development costs. IRS officials said that doing so would be inconsistent with their authority and role, which is focused on taxpayer compliance rather than program evaluation. As a result, allocating agencies have flexibility in what cost-related data to collect, how to maintain these data, and how to define variables for purposes of program evaluation. Our tax expenditure evaluation guide suggests federal agencies assess (determine and define) what data are needed to evaluate tax expenditures. Without standardized, accessible data on LIHTC development costs, federal agencies and credit allocating agencies cannot rigorously assess the factors that drive costs, the reasonableness of costs, and the efficiency of LIHTCs in producing affordable housing. Currently, no standards exist for collecting and maintaining data related to LIHTC project costs. In conducting our evaluation of LIHTC development costs, we aimed to collect data that would allow us to assess costs associated with federal preferences for LIHTC developments outlined in Section 42; assess costs associated with certain allocating agency preferences, which we identified through a literature review and interviews with selected industry groups; and compare LIHTC development costs to market-rate development costs, a potentially useful step in assessing the reasonableness of project costs as required under Section 42. Comprehensive information about project costs and characteristics is needed to conduct such an evaluation. However, inconsistencies in allocating agencies’ collection or definition of certain variables complicated our efforts to estimate statistical associations with costs, as follows. Developer characteristics. Allocating agencies did not maintain information on developers in a manner that readily permitted classification by for-profit or nonprofit status. We estimated the association between nonprofit status and development costs based on projects that received credits under nonprofit set-asides. A limitation of this approach is that it does not account for projects with nonprofit developers that received credits apart from the set-asides. For example, almost 80 percent of Washington’s projects in our sample had a nonprofit developer, but only 32 percent received credits under the nonprofit set-aside. Additionally, allocating agencies maintained tax identification numbers that would allow them to assess the influence of developer experience or incumbency—that is, how frequently a developer is awarded credits—on costs. But this information was not part of our data set, and we found that alternative variables (such as developer name) were unreliable for purposes of conducting a similar analysis. Tenant type. Allocating agencies identified and defined tenant types differently, partly as a result of their specific QAP priorities. For example, New York defined 39 distinct tenant types and Texas defined 2 (family and elderly). Consequently, we could not standardize tenant types across agencies and estimate associations with development costs, other than for projects targeted to seniors, a population for which there is a specific federal definition. Energy efficiency. Among our 12 selected allocating agencies, only California, Florida, and Texas collected information needed to assess the influence of energy-efficiency features on project-development costs. This information generally took the form of whether a project received a Leadership in Energy and Environmental Design (LEED) certification, a component of which is energy efficiency. Payment of prevailing wages. Some states also may require the payment of prevailing wages (generally, the hourly wage and benefits paid to the majority of workers in a particular area). In addition, certain federal funding sources commonly used as gap financing in LIHTC projects require the payment of prevailing wages. However, the agencies in our sample did not consistently capture information on whether projects paid these wages. Proximity to transit or other amenities. Most of the selected allocating agencies required or awarded points to projects located near certain amenities such as grocery stores, hospitals, or public transit. However, none maintained readily accessible data indicating which completed projects had this characteristic. Therefore, to estimate statistical associations between a development’s proximity to transit and development costs, we merged project address information with federal and local transit data. We were not able to estimate associations between other amenities and development costs. Square footage. Four of the 12 selected allocating agencies independently determined, or provided us with information we could use to calculate, the gross square footage of projects. Construction cost per gross square foot is a commonly used measure in the construction industry and useful for comparing LIHTC project costs to construction industry benchmarks. Additionally, because it encompasses the entire size of the structure, this measure relates project cost to project scale more precisely than other common measures, such as cost per unit and cost per residential square foot. Building type. The selected allocating agencies varied in how they defined and classified building types—such as single-family, multifamily, high-rise, mid-rise, or low-rise. As previously discussed, we classified projects generally based on the number of units and number of buildings they contained because data inconsistencies precluded more precise classifications. Number of residential and nonresidential buildings. All of the selected allocating agencies collected data on the number of residential buildings in each project, but only five collected data on the number of nonresidential buildings. As with gross square footage, this information would allow cost assessments based on a project’s entire physical footprint. Additionally, this information would allow agencies to refine per- unit cost measures by subtracting the cost of nonresidential spaces (for example, community or other common areas) from per-unit cost totals. Primary construction materials. The project documents we reviewed from the selected allocating agencies generally did not include data on the primary construction materials (for example, steel, concrete, brick, or wood). Including this information in data maintained on completed projects would help better explain cost variances between otherwise similar projects (for example, a 3-story building constructed with brick versus a 3-story building constructed with wood). This information is similarly useful for comparing LIHTC project costs to construction industry benchmarks. Number of stories per building. A few agencies, including Arizona, California, and Texas, collected data on the number of stories per building in each of their projects. As previously discussed, development costs may increase for taller structures due to design requirements. As a result, data on the number of stories would facilitate cost comparisons across similar structures and assessment of costs against construction industry benchmarks. Total syndication expenses. As discussed later in this report, none of the selected allocating agencies collected information on total tax credit syndication expenses. This information is necessary for understanding the cost of developing affordable-housing projects with LIHTCs. We also found that the 12 allocating agencies maintained cost-related LIHTC data in a variety of formats, ranging from paper records or electronic files for individual projects to electronic spreadsheets with information on multiple projects, as shown in the following examples. Illinois provided us with scanned copies of paper applications and cost certifications for each project. California provided us with a mix of scanned copies of paper and electronic applications and cost certifications for individual projects. Ohio provided us with a consolidated (or single) electronic spreadsheet containing line-item costs for all projects. This variation made it difficult to efficiently collect the data and put them in a format suitable for analyzing cost trends and drivers. To create a data set suitable for analysis, we manually entered data for 1,356 projects with paper files and consolidated data from spreadsheets using statistical software for 493 projects. Agencies did not collect data using standardized cost categories for analysis. As a result, we met with individual allocating agency officials to define each variable and ensure that we consistently categorized data across the agencies. Some examples of differences in how the data were defined include the following: New York City did not separate construction-related fees from construction costs. As a result, we were not able to compare construction costs for projects in New York City to construction costs for projects from the other 11 allocating agencies. Some allocating agencies—for example New York—did not include a line item for syndication expenses on their cost certifications. On cost certifications without a syndication line item, developers generally are expected to report those costs on the legal or partnership line item. As a result, we were unable to report information on syndication expenses incurred at the project level. Similarly, some allocating agencies’ cost certifications combined line- item costs that others did not. For example, 11 of the selected allocating agencies required developers to separately report general contractor overhead, profit, and general requirements, while 1 (New York City) generally required developers to combine the three costs under one line item. As a result, we had to create broad cost categories and were not able to assess costs at the line-item level. Few of the selected allocating agencies comprehensively or systematically evaluated data to determine the effect of their policies, including their cost-management approaches, on project development costs. Our analysis in the previous sections of this report highlighted ways in which allocating agencies can use and benefit from standardized data, including for project cost assessments. Individual allocating agencies could use data to more effectively identify cost drivers and trends over time. We have discussed how certain project characteristics were associated with higher and lower per-unit development costs. Our analysis illustrates how agency priorities and practices may influence costs, as shown in the following examples. Texas had the lowest median per-unit development costs among the selected agencies and tended to award credits to large garden-style apartments (low, clustered buildings). Georgia also had comparatively lower development costs. The agency funded the highest percentage of senior projects among the selected states (48 percent) and also funded the lowest percentage of urban projects (55 percent). Washington had among the lowest soft costs as a percentage of total development costs. Agency officials told us they used a consolidated application for awarding public funds—including LIHTCs, state tax credits, and HOME funds—that streamlines the application process for developers and reviewers and helps reduce soft costs. California had the highest land costs and soft costs among the selected agencies. The agency prioritized funding projects in job centers (urban areas) and completed projects used six funding sources in addition to tax credit equity, on average. Chicago had the highest construction costs as a percentage of development costs among the 12 selected agencies, and did not have a cap on development costs or eligible basis. Florida had the highest developer fees among the selected agencies. Our analysis showed the median developer fee in Florida was about $2.1 million for projects completed in 2011–2015; the next highest median fee was about $1.5 million (in New York and Texas). The agency’s 2017 QAP set developer fees generally at 16 percent of development costs, one of the highest rates among the selected agencies. In turn, agencies that have identified their cost drivers and trends could look to the experience of other agencies for examples of relevant ways to contain costs. For example, agencies with comparatively high costs— either overall or in particular cost categories—might benefit from considering the cost-management approaches of agencies with lower costs. Syndication expenses represent a significant cost of producing affordable housing with LIHTCs, but complete data on syndication partnerships generally were lacking. As shown in figure 13, syndication expenses include expenses at the upper-tier and lower-tier partnerships of a LIHTC deal. Investors pay for upper-tier expenses in the form of a syndication fee, similar to a load fee paid to a mutual fund manager. The fee covers expenses related to establishing, originating, underwriting, and closing on projects for the investment fund and is paid out of the equity investors contribute to the partnership. As a result, the fee facilitates equity investment in a fund’s LIHTC projects, while also reducing the amount of the equity investment available to each project. At the lower-tier partnership level, a project developer may pay a fee to the syndicator for project-specific legal and accounting expenses. The lower-tier syndication fee is typically less than the upper-tier fee. In a February 2017 report on the role of LIHTC syndicators, we cited an industry stakeholder’s estimate that upper-tier syndication fees for LIHTC funds were 2–5 percent of equity. According to a 2018 report by a national accounting firm, upper-tier syndication fees ranged from 5–8 percent of equity for multi-investor funds closed in recent years. For perspective, 2–8 percent of a $7.6 million investment (the estimated median amount for our 12-agency project sample) is $152,000–$608,000. The accounting firm report also noted that the market for acquiring projects and attracting investor capital is highly competitive. As a result, syndicators may reduce or defer their fees to attract projects and investor capital. IRS regulations require project developers to report syndication expenses on their final cost certifications. IRS officials told us that the regulations require the reporting of all syndication expenses, including upper-tier and lower-tier fees, on the cost certification. They said the regulation helps to ensure that allocating agencies have complete information to assess the financial feasibility of projects, as required under Section 42. Additionally, written guidance for IRS examiners states that syndication costs need to be accounted for, although they are not includable in eligible basis (allowable costs for calculating tax credit awards), to ensure they have not been accumulated with other costs for a line item on the certification. However, our 12 selected allocating agencies did not require developers to report upper-tier syndication expenses on final cost certifications and generally did not have data on these expenses. Allocating agency officials told us that developers generally report costs directly attributable to the project (including lower-tier syndication expenses) on the cost certifications. In explaining their practices, allocating agency officials said they did not consider upper-tier syndication expenses to be project costs because they are not directly incurred by the developer. Some of the officials noted that developers select investors based on the net equity (gross equity minus upper-tier expenses) or net price offered in exchange for the tax credits, and therefore may not be aware of the fees investors pay syndicators. Additionally, accounting firm officials said that if upper-tier expenses were included on the cost certification, they would not be able to access or verify documentation from the upper-tier partnership when auditing cost certifications because the upper- and lower-tier partnerships are separate legal entities. Outside of the cost-certification process, some of the selected allocating agencies said they receive investor letters or other documentation from syndicators that disclose upper-tier syndication expenses. These letters typically state the gross and net equity amounts attributable to each project, or a gross and net credit price offered in exchange for a developer’s credits. Some of the letters we reviewed also detailed the syndicator’s services and related expenses in addition to gross and net equity amounts or credit prices (for example, amounts for investor fees, organizational and offering expenses, acquisition expenses, and reserves and working capital). These examples suggest that information on upper- tier syndication expenses is available and allocable to specific projects. The gap between IRS’s expectations and allocating agencies’ practices developed, in part, because IRS has not clearly communicated expectations to allocating agencies about reporting of upper-tier syndication expenses. None of the documents IRS pointed to—the regulations, Technical Advice Memorandum, or Revenue Ruling previously cited—draw a clear distinction between upper- and lower-tier expenses, leaving the requirement open to interpretation. The documents also do not address issues that developers, allocating agencies, and auditing firms may have in obtaining and reviewing upper-tier fees. Federal internal control standards state that management should externally communicate—to contractors and regulators, among others— the necessary quality information to achieve the entity’s objectives. Without clear communication to allocating agencies on how to report syndication costs, IRS lacks assurance that the cost-certification requirement provides the level of financial transparency and accountability it expects. More complete collection of data on syndication expenses also would help answer key questions in our 2013 tax expenditures evaluation guide, which provides a framework for evaluating the effectiveness of tax expenditures. Examples of questions relevant to syndication expenses include the following: What are the costs of the resources used to generate the tax expenditure’s benefits? The costs of using syndicators cannot be known without disclosure of the upper-tier expenses for which LIHTC investors pay from their equity contributions. Who actually benefits from the tax expenditure? Disclosure of the fees syndicators receive would aid assessment of the benefits received by syndicators in relation to benefits received by other LIHTC program participants. The ability to answer these questions more fully would help Congress assess the costs, benefits, and efficiency of the LIHTC program relative to affordable housing programs that use delivery mechanisms other than tax expenditures. No federal agency monitors or assesses LIHTC development costs, which are key to evaluating the efficiency and effectiveness of the tax credit program. In a July 2015 report on federal oversight of LIHTC, we found that although IRS is the only federal agency responsible for overseeing the LIHTC program, it does not assess the performance of the program. IRS officials said the agency’s role is focused on ensuring taxpayer compliance and that the agency generally does not have the authority or funding to assess the performance of tax expenditures, including LIHTC. Unlike for the LIHTC program, Treasury collects and reports data on the New Markets Tax Credit program, for which Treasury has a more direct administrative role. The Community Development Financial Institutions Fund within Treasury uses its Awards Management Information System and its Community Investment Impact System to collect and report detailed information on New Markets Tax Credit projects, including certain cost and project characteristics data. Treasury produces annual research reports and periodic research briefs using these data. Consistent with a recommendation in our July 2015 report, IRS and Treasury officials said HUD may be better equipped to determine what data should be collected to assess LIHTC performance. Although HUD is the government’s lead housing agency, it currently plays a limited role in collecting and reporting data for the LIHTC program. Specifically, HUD collects and periodically reports information on LIHTC tenant characteristics as mandated by the Housing and Economic Recovery Act of 2008. In addition, since 1996, HUD voluntarily has collected LIHTC project-level data in its LIHTC database. While HUD may have the technological capacity to collect and maintain additional LIHTC data, absent additional authority, the agency does not have access to IRS taxpayer (developers and allocating agencies) data, including cost data. If HUD or another agency were given authority to collect and report on these data, it likely would need additional budgetary resources to carry out this function. Our tax expenditure evaluation guide outlines information Congress could consider when determining which federal agencies should manage the evaluation of tax expenditures. The guide cites statutory requirements that set the expectation that agencies should consider tax expenditures in measuring and communicating progress in achieving their missions and goals. It also states that for tax expenditures without logical connections to program agencies, Treasury may be the most appropriate agency to conduct an evaluation. Historically, IRS and Treasury (the agencies with the authority to oversee the LIHTC program) have devoted few resources to that task. And although HUD has a logical connection to LIHTC as the lead federal housing agency, it does not have oversight authority, access to key data, or existing resources to carry out additional data collection for and assessments of the LIHTC program. Without federal monitoring and assessment of LIHTC development costs, federal agencies and Congress do not have information to assess the tax credit’s efficiency and effectiveness. The LIHTC program plays an important role in addressing the housing needs of low-income renters, but some LIHTC projects have been scrutinized for high or fraudulent development costs. Our analysis provides a broad perspective on development costs across a range of allocating agencies and illustrates the types of insights than can be gained from standardized data on project costs and characteristics. These include identification of cost drivers and trends that may help target cost-management efforts. However, our work also identified shortcomings in program data and administration that hamper oversight and are inconsistent with federal evaluation criteria and internal control standards. Although the LIHTC program represents the largest source of federal assistance for developing affordable housing, Congress has not specifically designated an agency to evaluate the program’s performance. Without a designated entity for collecting, maintaining, and assessing data on LIHTC project costs, federal agencies and Congress lack information needed to oversee billions of dollars in tax expenditures. The current IRS cost-certification requirement for LIHTC projects is limited to aggregated developer costs and does not directly address a known fraud risk. General contractor cost certifications required by some allocating agencies may help deter fraud by providing information that can be used to corroborate developer cost certifications. But because IRS does not require general contractor cost certifications for LIHTC projects, the LIHTC program may be vulnerable to fraud involving misrepresentation of costs. The lack of standards for collecting and maintaining data related to LIHTC project costs has resulted in inconsistent data quality and formats among allocating agencies. In the absence of a federal agency designated to collect data and assess program performance, greater standardization of cost data by allocating agencies would lay a foundation for deeper analysis of cost drivers and cost-management practices by allocating agencies and industry stakeholders. This analysis could be used to help increase the efficiency of the LIHTC program. IRS has not clearly communicated how allocating agencies should collect and review syndication expenses—particularly, upper-tier fees—to meet a regulatory requirement. As a result, information on a significant program cost is not transparent or available to conduct the types of financial assessments IRS expects allocating agencies to perform. Congress should consider designating an agency to regularly collect and maintain specified cost-related data from credit allocating agencies and periodically assess and report on LIHTC project development costs. (Matter for Congressional Consideration 1) We are making a total of three recommendations to IRS: IRS’s Associate Chief Counsel, in consultation with Treasury’s Assistant Secretary for Tax Policy, should require general contractor cost certifications for LIHTC projects to verify consistency with the developer cost certification. (Recommendation 1) To help allocating agencies analyze development cost trends and drivers and make comparisons to other agencies, IRS's Commissioner of the Small Business/Self-Employed Division should encourage allocating agencies and other LIHTC stakeholders to collaborate on the development of more standardized cost data, considering information in this report about variation in data elements, definitions, and formats. (Recommendation 2) IRS’s Associate Chief Counsel, in consultation with Treasury’s Assistant Secretary for Tax Policy, should communicate to credit allocating agencies how to collect information on and review LIHTC syndication expenses, including upper-tier partnership expenses. (Recommendation 3) We provided a draft of this report to IRS, Treasury, and HUD for their review and comment. IRS provided written comments that are reprinted in appendix VII. Treasury and HUD did not provide comments. We also provided a draft to NCHSA for its review and comment. NCSHA provided written comments that are reprinted in appendix VIII. IRS disagreed with our recommendation to require general contractor cost certifications for LIHTC projects. IRS said it was not clear whether the recommendation would uncover and deter misrepresentation of contractor costs. We maintain that requiring general contractor cost certifications would help address this fraud risk by providing greater cost transparency to allocating agencies and auditors. Our report notes that a number of allocating agencies already have similar controls and that the Florida agency began requiring general contractor cost certifications in response to fraudulent contract-inflation schemes that were the subject of federal legal actions. Furthermore, NCSHA’s recommended practices advise allocating agencies to implement additional cost certification due diligence for all LIHTC projects. We believe that general contractor cost certifications should be required to help ensure the efficient and effective use of federal resources programwide. IRS disagreed with the recommendation in our draft report to collaborate with LIHTC stakeholders to develop a framework for the collection of cost- related data. The purpose of this recommendation was to promote creation of more standardized data to help allocating agencies analyze cost trends and drivers and make comparisons to other agencies. IRS said that in the absence of specific authorization, it collects data only to the extent necessary for tax administration, and that collecting LIHTC cost data is not necessary for that purpose. IRS added that without statutory authorization or a tax administration need, any data collection would be a misuse of IRS resources. In response, we modified the recommendation in our final report to give IRS greater flexibility in promoting standardization of LIHTC cost data in ways consistent with its authority. For example, IRS could encourage development of more standardized data in its communications with LIHTC allocating agencies and stakeholders at industry meetings and conferences. Our report recognizes that IRS has not had a role in assessing the performance of tax expenditures. For this reason, our report also states Congress should consider designating an agency to regularly collect and maintain specified cost-related data from allocating agencies and assess and report on LIHTC project-development costs. Finally, IRS disagreed with our recommendation to communicate to allocating agencies how to collect and review information on LIHTC syndication expenses, including upper-tier partnership expenses. IRS said that existing regulations require agencies to collect and evaluate all sources and uses of project funds and that this covers syndication expenses, including upper-tier partnership expenses. IRS said to the extent that we were recommending that it revise regulations, the agency did not necessarily have the authority to mandate how allocating agencies collect syndication expense data. IRS’s response suggests the reporting requirements are clear. However, as stated in our report, the 12 allocating agencies we reviewed and other LIHTC stakeholders did not share IRS’s understanding of the requirement. Consequently, the allocating agencies did not require developers to report upper-tier syndication expenses and generally did not have data on the expenses. In its comments on our report, NCSHA also expressed surprise at IRS’s explanation (see discussion below and app. VII). Finally, our report does not state that IRS should revise its regulations. Rather, it recommends that IRS communicate its requirement to allocating agencies. The wording of our recommendation provides IRS the flexibility to communicate the requirement in whatever way it deems appropriate. As a result, we made no changes to the recommendation. In its comments, NCSHA expressed concerns about our recommendation and matter for congressional consideration about collecting and analyzing LIHTC cost data. NCSHA questioned the cost-effectiveness of requiring consistent data across states and did not believe that cross-state comparisons were critical for evaluating LIHTC. For example, NCSHA said the utility of comparing Hawaii costs to Arkansas costs was not clear. NCSHA also noted LIHTC was designed to give allocating agencies flexibility, including in program design and data collection. We maintain consistent data are important for program management and oversight. While cost drivers in states differ, our report notes that at least one allocating agency has funded a study to compare development costs with neighboring states. While we understand the LIHTC program gives states flexibilities, a more standardized approach to data collection would not restrict allocating agency funding decisions or prevent agencies from collecting data they consider important. Furthermore, consistent data collection would facilitate state and federal evaluations of the cost- effectiveness of a multibillion dollar tax expenditure. NCSHA also expressed concern that Congress might require the data collection but not appropriate funds to implement the mandate. Our report acknowledges that if Congress were to grant an agency the authority to collect and report on LIHTC cost data, that agency likely would need additional budgetary resources to carry out this function. Regarding our recommendation on general contractor cost certifications, NCSHA noted that more allocating agencies were likely to adopt NCSHA’s recommended practices and require or encourage such certifications. However, allocating agencies voluntarily adopt recommended practices, and some agencies may view a general contractor cost certification as unnecessary. NCSHA added that instances of fraud were rare in the 30-year history of LIHTC, and affected agencies had responded in each known instance. We noted in our report that under the existing federal cost certification requirement—which stops at the developer level—the vulnerability of the LIHTC program to misrepresentation of general contractor costs is heightened. And while known instances of fraud schemes (such as the Florida examples cited in our report) may be limited, the true extent of fraud in the program is unknown. Federal internal control standards state that management should consider the potential for fraud when identifying, analyzing, and responding to risks. Requiring general contractor cost certifications for all LIHTC projects could help address this known fraud risk and further strengthen the integrity of the program. Regarding our recommendation on syndication expenses, NCSHA was surprised IRS officials told us LIHTC regulations require reporting of all syndication expenses (including upper-tier expenses) on the project cost certification. NCSHA said it long understood that the cost certification must include only costs paid by the project partnership for the individual property (the developer) and that IRS never communicated otherwise. NCSHA also identified some potential difficulties with collecting and reporting information on upper-tier syndication fees. While our report discusses some similar concerns, it also provides examples of at least two allocating agencies that collect such information. NCSHA’s response further supports our finding of a gap between IRS expectations and allocating agency practices for reporting syndication expenses and underscores the need for IRS to more clearly communicate its expectations on how to collect and review this information. Finally, NCSHA said findings from its recently commissioned study of LIHTC development costs, which had not been released as of August 2018, were generally consistent with cost analyses in our report. NCSHA said its study and other information suggest LIHTC development costs generally were consistent with overall apartment development costs and grew at a similar or slower rate. We believe broad comparisons between LIHTC and non-LIHTC development costs should be viewed with caution. As our report notes, numerous limitations in available LIHTC cost data (among other factors) make it difficult to produce methodologically sound comparisons. If implemented, our recommendations to improve collection and analysis of LIHTC data could help overcome some of these difficulties. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Treasury, the Secretary of Housing and Urban Development, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. The objectives of this report were to analyze (1) development costs for Low-Income Housing Tax Credit (LIHTC) projects completed in 2011– 2015 in selected locations and factors affecting these costs, (2) steps allocating agencies have taken to oversee LIHTC development costs, and (3) factors limiting assessment of LIHTC development costs. We selected 12 credit allocating agencies (representing 10 states and 2 cities) as the focus for key parts of our analysis discussed in more detail later in this appendix: Arizona Department of Housing California Tax Credit Allocation Committee Chicago Department of Planning and Development Florida Housing Finance Corporation Georgia Department of Community Affairs New York City Department of Housing Preservation and Development New York State Division of Housing and Community Renewal Ohio Housing Finance Agency Pennsylvania Housing Finance Agency Texas Department of Housing and Community Affairs Washington State Housing Finance Commission To select these agencies, we ranked all states in order of their credit ceiling amount for 2015 and selected the two highest-ranking states in each of five geographic regions (West, Southwest, Midwest, Southeast, and Northeast). We then selected for review the 12 allocating agencies within those 10 states that administered 9 percent LIHTCs. These allocating agencies accounted for 50 percent of the total 9 percent credit ceiling amount in 2015. To obtain general information for all of our objectives, we interviewed officials from the 12 selected allocating agencies, the Department of Housing and Urban Development (HUD), Department of the Treasury (Treasury), and Internal Revenue Service (IRS). We also interviewed representatives from 10 groups representing allocating agencies, developers, investors, syndicators, and other LIHTC interests, including Affordable Housing Investors Council; Affordable Housing Tax Credit Coalition; Recap Real Estate Advisors; Housing Partnership Network; Enterprise Community Partners; Mortgage Bankers Association; National Association of Home Builders; National Association of State and Local Equity Funds; National Council of State Housing Agencies (NCSHA); and Stewards of Affordable Housing for the Future. Additionally, we interviewed representatives of two national accounting firms— CohnReznick LLP and Novogradac & Company LLP—that have LIHTC practices and have conducted research on the LIHTC program. To analyze the development costs of LIHTC projects completed in 2011– 2015 in selected locations and characteristics associated with project costs, we created and analyzed a database of costs and characteristics for the 1,849 LIHTC projects that submitted final cost certifications to the 12 selected allocating agencies in that period and for which the cost certification was available. We first requested relevant documentation and data from the selected allocating agencies. Specifically, we requested the final cost certification for all projects that received 9 percent LIHTCs and were submitted in 2011–2015. We also included projects for which the selected allocating agencies initially reserved a tax credit allocation but exchanged the allocation for American Recovery and Reinvestment Act of 2009 funds. In addition to cost certifications, we also requested documentation and data that described project characteristics associated with project costs. We determined relevant characteristics to collect through a review of existing housing-agency-sponsored literature on LIHTC project costs. We identified existing literature through a literature search, and we confirmed the completeness of the literature with selected industry groups. The project characteristics we collected from the selected allocating agencies included the following: Address (street, city, state, and zip code) Construction type (new construction or rehabilitation) Income limits for low-income units Number of buildings (residential and non-residential) Number of units (low-income, market-rate, and employee-occupied) Square footage (gross and residential) Structural features (the presence of an elevator, green building certifications, and parking structures) Net tax credit price Tenant type (senior or nonsenior) Unit sizes (number of bedrooms) Year of completion (year final cost certification signed) We used manual data entry and a statistical program to input the project costs and characteristics into individual databases we created for each selected allocating agency. We verified the accuracy of the manual data entries by having a second analyst review the entries of the first analyst. Additionally, a second analyst reviewed the statistical programs we created and a sample of the databases they created to verify their accuracy. After compiling the 12 databases, we compared our list of projects against HUD’s LIHTC database to verify the completeness of our sample. For projects that we determined had been omitted, we requested their documentation and data from the relevant allocating agency, which we then manually entered into our databases and verified in the manner previously described. To perform analyses across all sampled projects, we consolidated the 12 allocating agency databases into one sample-level database. We first interviewed each of the selected allocating agencies to define data elements—including how to treat missing data—and determine the comparability of the data they provided. We also requested additional documentation and data, such as missing project addresses and data elements we identified after our initial data request. Additionally, we interviewed a national accounting firm that specializes in LIHTC cost certifications to further define cost data and learn more about their comparability across allocating agencies. We then categorized project costs into aggregated categories. Line items in cost certifications were not comparable across all selected allocating agencies due to differences in how data were reported. For example, market study costs were listed separately on some cost certifications but aggregated with appraisal costs on others. To improve the comparability of cost data across allocating agencies, we developed and implemented a plan to categorize and consolidate cost data using a statistical program. We developed the plan by reviewing the overlap between the line-item costs we collected. We also reviewed a study of multiple allocating agencies that was conducted by an accounting firm specializing in LIHTC cost certifications and which used a similar methodology to consolidate costs. Based on our plan, we categorized costs into three hard-cost and four soft-cost categories: Construction: Costs related to the direct physical development of the project site and structures. These include change orders; construction trade material and labor (such as electrical, masonry, or roofing); contingencies; demolition; environmental remediation; furniture, fixtures, and equipment; landscaping and fencing; off- site and on-site improvements; other property assets (such as maintenance, office, or playground equipment); prevailing wages; site security (if listed separately from contractor fees); tenant relocation; and utilities during construction. Existing structures: The purchased or appraised value of acquired structures. Land: The purchased or appraised value of acquired or leased land. Architect and engineer fees: Fees for architectural design and supervision and engineer services. Contractor fees: Contractor general requirements, overhead, and profit. Developer fees: Developer overhead and profit. Other soft costs: Costs related to financing, tax credit partnership and syndication, predevelopment, professional services, and other indirect construction activities, as shown in the following examples. These include accounting; agency fees (such as application, reservation, allocation, extension, compliance monitoring, and waivers fees); appraisals; broker fees and closing costs; capital needs assessments; certifications; construction-management fees; project supervision or monitoring; consultant fees; credit reports; environmental reports (such as asbestos and lead-paint tests); green building and energy efficiency design services; impact and utility connection fees; inspections; insurance (such as builders risk, general liability, hazard, and title insurance); surveys; legal fees; loan fees and interest (such as for predevelopment loans, construction loans, bridge loans, and permanent loans); market studies; payment or performance bonds; permits and other local fees; real estate taxes (during construction); soil borings and tests; and title searches and recording. We also collected each project’s total development cost and eligible basis from the cost certification. To isolate development costs, we subtracted from each project’s total development cost all costs associated with prefunded reserves and postconstruction activities, such as marketing and rent-up period operating expenses. We also developed and implemented a plan to consolidate project characteristics data into the sample-level database using a statistical program. We interviewed officials and reviewed documentation from selected allocating agencies about data definitions to determine the comparability of the characteristics data we collected. We then recoded comparable data elements using a standard coding system across all 12 allocating agencies. We conducted verification checks on the programs we created and the final database. To assess the reliability of the project data, we tested each data field for missing values, obvious errors, and outliers—for example, whether per- unit costs were more than two standard deviations from an allocating agency’s average. We communicated some outliers and inconsistencies to relevant allocating agency officials and made corrections to the database as necessary. We concluded that the data were sufficiently reliable for purposes of comparing LIHTC development costs within and across allocating agencies and for examining development cost drivers and trends. As an additional test, we compared summary statistics from applicable data elements in our database to comparable data elements in HUD’s LIHTC database. We found that our data elements did not differ in significant ways from HUD’s. We then merged several additional location characteristics into our database from federal and public statistical sources. We first validated project addresses and then used them to determine the census tract for each project. We then used census tracts to incorporate data from the American Community Survey, including census tract size and population (which we used to calculate population density), median home value, poverty rate, and unemployment rate. Using the census tract, we also identified the Rural-Urban Commuting Area codes classification for each project, which we recoded to categorize each project as rural, suburban, or urban. We also identified whether each project was located in a qualified census tract or difficult development area using the 2017 HUD lists. Lastly, we used geographic information system software and the Department of Transportation’s Fixed-Guideway Transit Network database to identify the distance from each project to the nearest transit station (train and bus rapid transit stations). Before conducting our analyses, we prepared data analysis plans and interviewed selected representatives from industry groups and researchers to inform our efforts. We also clarified data interpretations and limitations with officials from the selected allocating agencies on an as-needed basis. To describe the costs and characteristics of LIHTC projects, we calculated and compared summary statistics for relevant database elements. To account for inflation, we converted all costs to 2015 dollars using the calendar-year, chain-weighted Gross Domestic Product price index. We also normalized costs by dividing the total development cost by the number of units. We then calculated and compared summary statistics for key categories, such as the number and median per-unit cost of new construction projects, and subcategories, such as the number and median per-unit cost of new construction projects in urban areas. We also repeated these analyses for each selected allocating agency. To compare the cost of Chicago’s and New York City’s projects to other urban locations, we calculated and compared their median per-unit costs to costs in five other cities within our 12-agency sample that had comparable populations and densities. Using 2010 Census data, we selected the five densest cities (people per square mile) with populations of 300,000 or more, population densities of 5,000 or more people per square mile, and 10 or more new construction projects completed in 2010–2015. They were Los Angeles, Miami, Philadelphia, San Francisco, and Seattle. To identify all projects within the five selected cities, we matched the three-digit zip code prefixes associated with their U.S Postal Service area (known as a sectional center facility) to the zip codes for sampled projects. To determine the composition of project costs in terms of hard and soft costs, we compared the sum of all hard costs and the sum of all soft costs to the sum of all total development costs by construction type. Hard costs included existing structures, land, and construction costs; soft costs included architect and engineer fees, contractor fees, developer fees, and other costs. We also compared the cost categories (such as construction costs) using the same approach as for hard and soft costs. We then repeated these steps for each selected allocating agency. We also reviewed how LIHTC equity investments differed by construction type. We first calculated the equity investment for each project by multiplying the LIHTC allocation by the net credit price (both adjusted to 2015 dollars). We then calculated and compared the median per-unit equity investment and the percentage of the median per-unit total development cost that it comprised for new construction and rehabilitation projects. To determine how total development costs changed over time, we calculated and compared the median per-unit cost for each year by construction type. We then repeated these steps for each allocating agency to determine how their costs changed over time. We also repeated the sample-level analysis over time excluding California’s projects from the new construction pool and New York City’s projects from the rehabilitation pool because, in both cases, their costs were among the highest, changed sharply in some years, and represented roughly one-fifth of all new construction and rehabilitation projects, respectively. To determine how LIHTC construction costs changed over time relative to a federal index of construction costs, we calculated and compared the annual rates of change in the median per-unit cost of construction and contractor fees for sampled new construction projects to the rates of change in the annual averages for the Bureau of Labor Statistics’ Producer Price Index by Commodity for Final Demand: Construction. This index tracks monthly price changes for construction materials, labor, equipment, and contractor fees. To account for the delay between when construction costs were incurred and projects completed, we compared the annual rates of change for the LIHTC projects to the annual rates of change in the average index value from the prior year. We also used the prior-year rate of change to generate a projection of LIHTC construction costs to determine how the sample trend differed from the index trend. For example, we calculated the projected cost in 2012 by inflating the actual cost in 2011 by the change in the average index value in 2010– 2011. To determine the association between the project characteristics we collected and per-unit development cost, we developed a statistical model and used ordinary least squares regression to estimate the controlled effect of specified characteristics on per-unit cost. For more detail on our statistical model and results, see appendix II. To further describe how project characteristics may have influenced costs, we calculated and compared summary statistics for the model characteristics among new construction projects below the 25th percentile or above the 75th percentile for per-unit cost within each allocating agency. To analyze steps allocating agencies have taken to oversee LIHTC development costs, we reviewed the Qualified Allocation Plans (QAP) and related documents (for example, policy manuals) for all 57 allocating agencies as of 2017. These agencies included all 50 states, the District of Columbia, the 4 U.S. territories that received a LIHTC allocation in 2017 (Guam, Northern Mariana Islands, Puerto Rico, and U.S. Virgin Islands), and the Cities of Chicago and New York. We conducted a structured analysis of the QAPs and related documents to gather information about agencies’ policies and practices for managing and verifying project-development costs. We defined “cost management” as practices allocating agencies used to contain or limit development costs and fees, such as cost limits, credit allocation limits, fee limits, and cost- based scoring criteria. We defined “cost verification” as practices the agencies used to confirm the accuracy of project costs following construction—that is, whether the amount paid equaled the amount billed. To obtain supplementary information on allocating agency approaches to cost management, we interviewed officials and reviewed additional documentation from the 12 selected allocating agencies, identified previously. Through this work, we identified a number of other steps those agencies took to limit LIHTC development costs. While the results of our supplementary work cannot be generalized to all allocating agencies, they provide additional insight into the cost-management approaches and cost-verification requirements of a diverse group of allocating agencies. For further context on cost-management approaches, we reviewed GAO and industry reports that analyzed allocating agency QAPs from prior years. We also interviewed federal officials to obtain information about relevant LIHTC requirements and cost-management practices used in other federal programs that support development of affordable multifamily housing. Specifically, we spoke with IRS and Treasury officials about LIHTC cost-verification requirements and the approaches of allocating agencies to cost management. In addition, we interviewed HUD officials to identify cost-verification practices used in the HOME Investment Partnerships Program and the Federal Housing Administration’s Multifamily Mortgage Insurance programs. To obtain additional information about allocating agency practices and the cost-certification process, we interviewed representatives of NCSHA, CohnReznick LLP, and Novogradac & Company LLP. To analyze factors limiting assessment of LIHTC development costs, we assessed the data we collected from the 12 allocating agencies. We identified and documented the consistency in cost-related variables agencies collected in several key documents and data sources, and how they defined the variables. We documented the formats in which agencies provided and maintained the data we requested and steps we took to standardize and combine data. We compared the variables the agencies collected against federal tax credit allocation priorities outlined in Section 42 of the Internal Revenue Code (Section 42), as well as certain allocating agency priorities. In addition, we reviewed an off-the- shelf software package for cost-estimation to determine what project characteristics were required to calculate estimates with the software, and evaluated the extent to which the selected agencies collected these characteristics. We also reviewed Section 42 and related regulations to ascertain requirements for reporting syndication expenses to allocating agencies and IRS, and interviewed IRS and Treasury officials about these requirements. We interviewed the selected allocating agencies about their practices for collecting and reviewing syndication expense information. We also interviewed CohnReznick LLP and Novogradac & Company LLP about the different fees syndicators charge to investors and developers, and the extent to which these fees are reported to allocating agencies. Finally, we reviewed our prior work on federal oversight of the LIHTC and other tax credit programs. We conducted this performance audit from May 2015 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides an overview of our statistical analysis of factors associated with the cost of producing affordable rental housing supported by the Low-Income Housing Tax Credit (LIHTC). We developed a regression model that explains the costs based on a number of project characteristics and other factors. As described in appendix I, we developed a data set based primarily on information from 12 selected allocating agencies. The data set contains detailed information on 1,849 LIHTC projects with final cost certifications signed in 2011–2015 and provides broad geographic coverage, including urban, suburban, and rural locations. whether a project was located in a qualified census tract or a difficult development area. We augmented these data with information from the American Community Survey and from USDA to enable us to control for certain neighborhood characteristics that may be associated with the cost of developing and constructing LIHTC projects. Table 4 below provides an overview of project costs and some key attributes of projects in our sample and highlights the variation across the allocating agencies. The average total cost per unit in our data set is about $220,000 (in 2015 dollars). The average total cost per unit was greater than $300,000 in California and Chicago and less than $150,000 in Georgia and Texas. Construction costs were greater than or approaching $200,000 in Chicago and New York City and less than $100,000 in Georgia and Texas. Project scale varied across the agencies, reflecting differences in built environments, property costs, and other factors and averaged 66 units and 7.5 buildings. The cost of land and existing structures can be a large component of project development costs. Land costs can scale with project size (an apartment complex of 12 buildings could require twice as much land as a complex of 6 buildings) as well as with underlying market land values. The median land value across all projects was about $400,000, and was more than $1,000,000 in California and Florida. But the median land cost in New York City was about $1, suggesting that land and structures were donated. Given the market values of New York City real estate, total development costs for some New York City projects are likely to be understated when compared to projects in other jurisdictions. The data set includes detailed information on program characteristics (discussed previously) that we used to define explanatory variables. We included the size of projects as defined by total units and placed them in four size categories (fewer than 37 units, 37–50 units, 51–100 units, and more than 100 units). To develop a project-type categorization, we incorporated information on the number of residential buildings. Projects can come in many combinations of building count and building size (number of units). For instance, a 60-unit project could be a single 60-unit building, 10 6-unit buildings, or 30 2-unit buildings. We distinguished projects in which the average building size had at least 60 units (“larger buildings” category) and projects with at least 20 buildings (“many buildings” category). We placed all remaining projects in a large residual category. This category is somewhat independent of size and primarily is meant to distinguish among types of projects that might require specialized construction or project-management skills. We also created variables to provide information on the distribution of units by number of bedrooms within each project. Bigger units, those with more bedrooms, are more costly to build. We created three unit size categories: 0-1 bedroom, 2 bedrooms, and 3 or more bedrooms. We defined the values as shares of total units in the category. For example, if a given project had 80 units, 20 of which had 1 bedroom, 40 of which had 2 bedrooms, and 20 of which had 3 bedrooms, the values for these variables would be 0.25, 0.5, and 0.25 respectively. The values sum to 1 across the categories. We used binary variables to indicate if projects were new construction or rehabilitation. New construction is generally thought to be more expensive than rehabilitation on average, given site work and possible demolition requirements. We also developed variables to indicate if a project was targeted to seniors and if it served low-income tenants exclusively or a mix of low-income and other tenants. We used two variables (yes or no binaries) to indicate if a project was in a qualified census tract or difficult development area. Within the LIHTC program, the size of the credit awarded for a given project may be increased if the project is located in such areas. We also used information on other project characteristics that would affect costs, which we obtained for some, but not all, allocating agencies. For instance, for two agencies we could indicate that the project included parking structures (as opposed to a surface parking lot or stand-alone garage or carports), and for three agencies, that projects were built according to Leadership in Energy and Environmental Design (LEED) standards. A broad set of factors related to local conditions, as well as conditions such as whether project locations are rural or urban, likely influence the costs of developing and building projects. Thus, we also used codes developed by USDA (the Rural-Urban Commuting Area codes) to place each project into rural, suburban, or urban categories. because a given dollar amount of rent represents access to different housing quality in different places. That is, neighborhoods in which rents are high or low may share common characteristics across the country. We also used a series of allocating agency dummy variables and a series of project year dummy variables to control for otherwise unmeasured factors that may be common across projects or conditions in each agency jurisdiction or year, respectively. Many of the explanatory variables in the model are categorical variables, and thus the coefficient estimates presented in the tables in this appendix need to be interpreted in terms of differences from an omitted category. The omitted categories are for project scale, projects with fewer than 37 units; for project type, all projects in which there are fewer than 60 units per building and fewer than 20 residential buildings; for unit size, the 2-bedroom group; for age of housing stock, median year built between 1945 and 1994; for contract rent, neighborhoods in which the median contract rent is between the 25th percentile and median values of the state-wide contract rent; and for geographic area, suburban. Some allocating agencies did not have complete information about whether other program funding, such as funding from Rural Development or ARRA programs, were used for projects. Conceptually, these variables are yes or no binaries. One approach is to add an “unknown” category in addition to the usual yes or no binary. That is, the categorization becomes “known yes,” “known no,” and “unknown.” An alternative approach is to treat missing information as the absence of the characteristic of interest. Using the three-category approach generally yielded virtually identical results to the alternative in which “missing” information was treated as the absence of the characteristic. In general, we used a traditional binary structure. In one case, we kept the three-category structure. Specifically, we created a measure across agencies as to whether projects were targeted solely to low-income tenants or to a mix of low-income and other tenants. In many cases and across many agencies, we were not able to reliably make this determination using information in the data set. For estimation purposes, we included the unknown and known low-income category binary variables and omitted the known mixed-income category. The interpretation of the known low-income category is still the difference from the known mixed-income category. Other variables are binary, indicating the presence of the characteristic (such as if the project used a Rural Development loan or not, or was in a qualified census tract or not). Following Cummings and DiPasquale, we estimated a regression model to explain total development costs per unit—and alternatively, measures of construction costs and soft costs separately—as depending on these project and neighborhood characteristics. We developed a base case model including the variables discussed previously and estimated this model using all 1,849 observations. The pooled sample, because it provides a broad range of conditions and policy responses, can permit a similarly broad view of the influences on LIHTC project costs. At the same time, we wanted to have some idea about how sensitive broad, overall results were to the influence of conditions and policy responses of particular jurisdictions. (We would expect housing market conditions and housing policy responses to differ across agencies.) Thus, we also present the same model estimated on three different subsamples in which the projects of particular allocating agencies were excluded. The pooled sample and subsample results are shown in table 5 later in this appendix. Specifically, we present results on samples excluding projects in California, New York City, and Texas in turn. California had the highest average total cost, highest (observed) land costs, and biggest program in terms of allocation of tax credits and units placed in service. New York City is a completely urban jurisdiction. About 75 percent of its projects were rehabilitation projects (compared to about one-third for the entire sample). More than half of its projects were in neighborhoods in which the median year housing stock was built was 1945 or before (compared to about 15 percent for the entire sample). Texas had the lowest total cost and lowest construction costs and soft costs per unit, with many large, multibuilding projects that may be impractical in some other contexts. It was second to California in allocation of tax credits and units built. Housing conditions in the three jurisdictions and policy options favored by these jurisdictions may not represent conditions and policy options easily available or desirable in other jurisdictions. We also present estimates explaining construction costs per unit and soft costs per unit as alternatives to total costs. The construction cost measure includes costs for site and structure work and fees paid to the building contractor. We defined a broad soft cost measure to include predevelopment costs, financing costs, legal fees, architect and engineer fees, developer fees, and project-level partnership and syndication fees. Some factors may be more associated with the construction-cost component and less associated with the soft cost project-development component, or vice versa. These results are shown in table 6. We also present results using the pooled sample set for three variations of the base specification. The first variation omitted the property value variable. Property values vary within states and metropolitan areas, as well as across the states. We examined the extent the presence of this control affected the influence of other factors. The second variation omitted variables related to neighborhood characteristics. The third variation omitted the variables related to other types of housing support (for example, HOME funds). These results are shown in table 7. received final cost certifications in 2011 and 2012. In table 9 we present results concerning possible cost-related features (parking structures, LEED certification, and developer type) for specific agencies and a subset of projects. We addressed whether our estimates were sensitive to the possibility that observed values for total cost might be artificially low when land or structures were acquired at very low or zero cost. We restricted projects to those in which land and structure costs accounted for at least 1 percent of total development costs and estimated our model on this subsample using both total costs and construction costs as dependent variables. We present our results in table 10. We examined whether the results were sensitive to the form in which some credits were granted in New York City. That is, credits awarded in New York City to many single-building projects appeared to be part of larger neighborhood clusters under common development. In an alternative version, we aggregate project-level information to the level of multibuilding project clusters. We present the results in table 11. Finally, we looked at whether proximity to transit affected project costs. Some allocating agencies may offer incentives for transit-oriented developments—or projects within certain proximity to public transit. These areas may have higher land and construction costs due to higher density and demand within urban environments. Using projects within 2 miles of a transit station and various distance ranges, we estimated the association with per-unit total and construction costs. We present the results in table 12. We used ordinary least squares estimation with heteroscedasticity consistent standard errors. This model allowed us to make statements concerning the association of explanatory factors on project costs, given that other explanatory factors were held constant. As is the case in such models, we generally only can discuss associations between explanatory factors and the cost measure to be explained, and not causality. For example, the use of other sources of government funding may have directly increased construction costs, as fund usage can trigger federal prevailing wage requirements. On the other hand, these other funding sources may have been used in addition to LIHTC equity to fill funding gaps for projects with particularly high costs. Additionally, econometric estimates can be sensitive to model specification, variable definitions, and the omission of variables (for example, due to unavailable data) relevant to the outcome of interest. Because the data used to estimate the model include only LIHTC projects that were placed in service, we cannot make statements about how the costs of developing these projects may compare to other potential LIHTC projects or to projects developed and financed by the private sector. It is probably true that allocating agencies could have selected lower-cost (or higher-cost) projects compared to those actually selected, but whether or not this counterfactual housing would have better served the low-income population is a different question. Our results are presented in tables 5 through 12. Our estimates include allocating agency and project year dummy variables, which are not presented in the tables. The allocating agency dummy variables are agency-specific intercept shifts, given the estimation of common slopes, and largely pick up unexplained deviations from the pooled average costs. The project year dummy variables were estimated to be small and only rarely statistically significant. We also estimated a version in which each agency and project year combination had its own intercept shift, but these results were quite similar. The dependent variable in most cases is total development cost per unit, adjusted for inflation. level. Without California in the sample, per-units costs in the “many buildings” projects indicator were estimated to be more than $10,000 higher than more typical projects, controlling for other characteristics. This amount was estimated to be much smaller and statistically insignificant with California observations. The share of 3-bedroom units was associated with higher cost per unit and was not particularly sensitive to the sample, although the degree to which a higher share of smaller units led to reduced cost per unit was less clear. Costs to develop senior projects were modestly lower, but estimates and statistical significance were sensitive to the agencies included. Projects targeted exclusively to low-income households (most projects) were estimated to be more costly to develop than mixed-income projects. These results were quite sensitive to the presence of projects approved by the New York City allocating agency. More than 40 percent of the mixed-income projects in the entire sample were in New York City. Many of New York City’s mixed-income projects had donated land and might not be comparable from a cost perspective to mixed-income projects in other locations. When we excluded New York City projects, our estimates showed no statistically significant difference in per unit costs for low- and mixed-income projects. Notably, Rural Development loans were associated with sizeable effects on costs (costs were lower). This may be partly due to the types of projects supported by Rural Development loans, such as farm labor housing (which may lack some amenities that can increase costs) and program limits on costs per unit. Projects supported by HOME and CDBG funds were estimated to be more costly to develop, although these differences were not generally statistically significant. The effect of HOPE VI financial support was estimated to be large and statistically significant, but only about 1 percent of projects in the sample were supported with this program. The projects that received financial support from this source might be idiosyncratic, or could include other unobserved characteristics that influence costs. For example, tenant relocation requirements for HOPE VI projects may have contributed to the higher per-unit costs. $15,000. Projects in neighborhoods with low rents (relative to the state distribution) were estimated to be less costly, typically in the range of $20,000–$30,000 per unit. Costs in neighborhoods with higher rents were estimated to be modestly higher, but rarely significant. Older neighborhoods were associated with higher costs per unit, while newer neighborhoods were associated with lower costs per unit, as compared to projects in neighborhoods in which the median year built was between 1945 and 1994 (and controlling for other characteristics). In the pooled sample, estimated magnitudes were about $18,000 higher in older neighborhoods and about $17,000 lower in newer neighborhoods. Table 6 shows that many of the same factors affected total costs, construction costs, and soft costs similarly. For instance, all costs scaled with project size and new construction, and many of the neighborhood effects remained significant. A higher share of 3-bedroom units was associated with higher costs in all cost categories. “Larger buildings” projects had higher total costs and construction costs, but modestly negative and insignificant soft costs. The latter result is consistent with the idea that soft costs scale with the number of units, but not with the size or number of buildings in a project. Projects with Rural Development loans were associated with lower construction and soft costs. For construction costs, the result is consistent with the loans being able to be used for projects characterized by lower- than-average costs of construction. Soft costs may be affected more directly to the extent that Rural Development loans provide a key source of funding that may reduce the difficulty of other project financing efforts. The HOME indicator was associated with modestly significant higher construction and soft costs. Slightly more than one-third of projects across all allocating agencies received HOME funds. Finally, the lower costs associated with senior projects were more statistically significant for soft costs than total costs or construction costs. In table 7, we present model variations that exclude, in turn, particular portions of the base case explanation. Other remaining factors, including those associated with the LIHTC program, may be sensitive to the omitted factors. For instance, the estimated effect of a Rural Development loan may be sensitive to the presence of a rural control variable, or the estimated effect of a location in a qualified census tract may be sensitive to other indicators of neighborhood characteristics. Because the value of land influences the total cost of housing development, we first excluded the home value variable (a measure of variation in property values within and across allocating agency jurisdictions). Estimates of the effect of other neighborhood measures, such as housing stock age and rent quartiles, changed in the absence of the property value measure. The age of housing stock variables were highly significant with and without the inclusion of the property value measure. In the model with the property value measure included, the difference between the estimated cost in an older neighborhood and the estimated cost in a newer neighborhood is about $35,000. That is, the estimated cost in an older neighborhood was about $18,000 more and the estimated cost in a newer neighborhood was about $17,000 less than the estimated cost in in a neighborhood in which the median year built was between 1945 and 1994. In the model with the property value measure excluded, this difference increased to about $50,000, which may reflect the underlying correlation of age of neighborhood and property value that we observe in our data set. For projects in locations in the upper half of the state contract rent distribution, the estimate became much larger and statistically significant at the 1 percent level. poverty rate measure became much smaller, decreasing from about 390 to about 125, and insignificant. In the sample, the 25th percentile poverty rate was about 14 percent, and the 75th percentile value about 37 percent. In the base case, an increase of 23 percentage points represented an increase in total costs per unit of about $9,000, but in the specification without the measure of property value the estimate was about $2,900 (controlling for other characteristics in both specifications). The overall fit, expressed as adjusted R-squared, was reduced from 0.648 to 0.618 in the absence of the property value measure. Compared to the base case, most results were not particularly sensitive to the absence of the neighborhood variables (housing stock age, rent quartiles, and poverty rate). However, the qualified census tract variable became larger (from about $7,000 to about $18,000) and statistically significant in the absence of the neighborhood variables. The property value effect also became somewhat larger, suggesting that costs increased by about $41,000 per unit, compared to $33,000 in the base case, given a change in property value from the first to the third quartile and controlling for other characteristics. The overall fit worsened from 0.648 to 0.627. The omission of the other housing program support variables had very little effect, which is not that surprising given the lack of large effects other than the presence of Rural Development loans. The overall fit, expressed as adjusted R-squared, was reduced from 0.648 to 0.641. Activities funded through nonrefundable tax credits require the entities claiming the credit to have (or expect to have) sufficient federal income tax liability to make the credit desirable. During the 2007–2009 recession, some investors in tax credit-related activities saw reductions in their tax liability. ARRA created the possibility that low-income housing projects could be supported by federal grants that allocating agencies would allocate in much the same manner as they allocated tax credits. Of all LIHTC projects receiving some ARRA support, more than 90 percent had final costs certified in 2011 and 2012. Thus, we examined the effects of ARRA, expressed as a binary indicator of participation, using the same model but with projects restricted to those that were certified in 2011 and 2012. That is, we believe this was the time period for which ARRA was likely to be most relevant and thus any effects likely to be most pronounced. About one-half of the projects in our data for project years 2011 and 2012 received some ARRA support. We present results for total costs, construction costs, and soft costs separately, the motivation being that grant funding may reduce the costs of project finance and syndication relative to the traditional credit-based context (see table 8). Construction costs might be expected to be less directly affected by a change in the project finance regime. In general, the overall results are similar to those presented in table 6. The ARRA indicator is negative and significant in the total and soft cost versions, and negative but insignificant in the construction cost context. The ARRA coefficient was estimated to reduce soft costs by a little more than $4,000 per unit, holding other factors constant. For context, the average soft cost per unit during this time period was about $53,000. nonprofit developers do not expect to earn a return on investment, so they may be able to develop projects at lower cost. Nonprofit and for- profit developers also may select different kinds of projects, so it is possible that nonprofit developers more often pick projects that are more costly in observable and unobservable characteristics. Table 9 provides the results of total cost models estimated using the relevant allocating agency subsamples. In both the parking structure and LEED models, we included categories for missing information. The omitted category is the known absence of parking or LEED construction, respectively. Both of these subsamples were heavily weighted by California projects. The estimated effect of parking structures was quite large and statistically significant at the 1 percent level. Regardless of the true magnitude of the effect, projects in which parking structures were included clearly were likely to cost more. It is unlikely that all projects envision tenants with cars. For those that do, a surface parking option often may be feasible, but when it is not, project costs will be larger. LEED certification was associated with costs of about $19,000 more per unit than other projects, holding other factors constant. LEED projects represent about 18 percent of projects in which LEED status was clearly known. Most LEED projects were new construction, and only about 5 percent of the rehabilitation projects with known LEED status were built to LEED standards. Nonprofit set-aside provisions were associated with an increase in total cost per unit of about $15,000, controlling for other characteristics. Nonprofit set-aside projects had different characteristics from those of projects developed without nonprofit set-asides. For instance, nonprofit set-aside projects typically were smaller, more likely to be in older neighborhoods, less likely to be in low-rent neighborhoods, and less likely to receive Rural Development loans—characteristics we estimated to be associated with increases in total cost per unit. When we estimated the model shown in table 9, but without the set-aside indicator, and multiplied the coefficients by mean values of the explanatory variables calculated separately for each group, we calculated that per-unit costs for projects developed without the set-aside are about $220,000 and the estimated cost for projects developed with the set-aside are about $250,000. As shown in table 9, the fact that we estimated an increase in total cost per unit even while controlling for other factors suggests that unobserved factors may be important. For instance, as mentioned in the body of this report, nonprofit organizations may focus more on populations that are more costly to serve, such as special-needs tenants who may require additional or enhanced facilities. estimations, the fits improved, providing some evidence that the excluded observations introduced some noise to the estimation. In table 11, we examined the effect of aggregating certain projects in New York City. In principle, observations in a regression should be independent from one another. When individual building-level observations appear to be parts of larger projects under common development, this condition is violated. In New York City, it appears that separate tax credit allocations were made to single-building projects in close proximity to other tax credit projects awarded to the same developers at the same time or in consecutive years. For example, three buildings being renovated by the same developer in the same relatively small area could be considered as three separate one-building projects or one three-building project. Clustering the single-building projects as one project for the model made very little difference in the estimates, but led to modest improvements in the overall fit of the model and reduced the number of observations because of the aggregation of projects. We also examined the association between LIHTC costs and the proximity of projects to public transit. Some allocating agencies offered incentives for the production of transit-oriented LIHTC developments— projects within 0.5 mile of a transit station. Research generally describes transit-oriented developments as compact, mixed-use, walkable neighborhoods located near transit facilities. These types of developments are intended to advance other policy goals, such as furthering opportunities for employment. We used the Department of Transportation’s Fixed-Guideway Transit Network database to identify the distance from each project to the nearest transit station (train and bus rapid transit). For this model specification, we restricted our estimates to projects within 2 miles of a transit station because not all transit agencies reported station locations to the Department of Transportation database—making our transit distance variable quite large for some projects. As shown in table 12, while we did not find that projects within 0.5 mile of a transit station had significantly different costs than those between 0.5 and 1 mile (the omitted category), we did find that per-unit construction costs were about $17,000 greater for transit-oriented developments, controlling for other characteristics. Finally, table 13 presents the mean values for our full project sample and base case model. This appendix provides data on the development costs of Low-Income Housing Tax Credit (LIHTC) projects completed in 2011–2015 that received tax credits from 12 selected allocating agencies. Figure 14 shows how median per-unit costs for new construction and rehabilitation projects changed over that period for each allocating agency. Table 14 (new construction projects) and table 15 (rehabilitation projects) break down the median per-unit costs into hard and soft costs and their component parts. Tables 16 and 17 provide data on alternative cost measures—cost per-bedroom and per-square foot—although this information was not available for all 12 allocating agencies. All the cost data in this appendix are presented in 2015 dollars. For additional information on the cost categories we describe, see appendix I. Projects Completed in 2011–2015, for 12 2011 (dollars) 2012 (dollars) 2013 (dollars) 2014 (dollars) 2015 (dollars) Two of the five studies we reviewed used statistical models to identify the association between project characteristics and per-unit cost. The authors of a 2014 study sponsored by several California agencies found that the median per-unit cost (excluding land costs) of 400 new construction projects approved for 4 percent or 9 percent LIHTCs in 2001–2011 was $276,000. Using a regression analysis to control for multiple characteristics, they found a variety of characteristics were associated with differences in per-unit costs. Similar to our results, the authors found that per-unit costs decreased as the number of units increased or as the unit size decreased. Projects with buildings that had four or more stories were also about 10 percent more expensive per-unit. The authors found higher land costs tended to indirectly increase construction costs, because developers responded by building taller and more often included structured parking—another cost driver. Also similar to our results, they estimated that senior projects were less costly than projects targeted to families (by about 18 percent), and projects from nonprofit developers were more expensive than projects from for-profit developers (by about 9 percent). The authors of the California study also reviewed characteristics that we did not. For example, they found that projects with a higher degree of construction quality, durability, and energy efficiency had higher costs. Local factors, such as design review and approval requirements, also added to per-unit total cost. While data limitations prevented the authors from comparing the cost of LIHTC projects to market-rate developments in a conclusive way, they found that the per-unit construction costs of LIHTC projects in their sample were within the 50th and 75th percentile of estimated costs for market-rate projects with similar height, area, location, and wages. The authors of a 2009 study sponsored by the Washington State Department of Commerce reviewed 65 affordable multifamily housing projects, including 41 LIHTC projects that received funding from the state’s Housing Trust Fund in 2003–2009. The average per-unit cost of new construction projects was about $177,000. Similar to our results, about 62 percent of the cost was attributed to construction. Using a regression analysis to control for multiple characteristics, the authors found that projects financed with LIHTCs tended to be larger and more expensive than affordable non-LIHTC projects. Architect fees were most strongly associated with per-unit costs, because architect fees may have approximated the complexity of the projects’ designs. Similar to our results, they found higher costs among urban projects relative to rural ones. In contrast to our results, the authors did not find that per-unit costs decreased as the number of units increased. Rather, for new construction LIHTC projects in urban areas, per-unit construction costs increased as the number of units increased. According to the authors, the cost increases may have been due to amenities associated with larger urban projects, such as structured parking. The authors also noted several characteristics that were not associated with per-unit costs, including the presence of a special needs population or the developer type. The remaining three studies we reviewed compared cost differences among groups, typically by comparing averages between exclusive categories (for example, senior and nonsenior projects). But they did not statistically control for characteristics that may have differed among projects. The authors of a 2016 study sponsored by the Colorado Housing and Finance Authority analyzed 247 LIHTC projects that applied for 4 percent or 9 percent LIHTCs in Colorado in 2011–2016. They found the average per-unit cost of new construction projects increased by about 32 percent during this period to about $258,000 in 2016. The authors noted that the increase may have stemmed from the decreasing size of projects in Colorado and the increasing cost of construction. The authors studied the characteristics of the highest- and lowest-cost projects and stated that only two characteristics (project size and year of application) were consistently different between the groups. For projects that received 9 percent credits, characteristics such as location, developer type, and tenant types did not consistently differ between the highest- and lowest-cost projects. The authors also conducted 25 interviews with architects, consultants, developers, and general contractors, who stated that the most significant contributor to cost increases was higher labor costs due in part to shortages among skilled laborers and federal prevailing wage requirements. In addition, developers stated that while affordable housing developers were more focused on the long-term durability of their projects than market-rate developers, hard costs were generally similar between affordable and market-rate projects. However, soft costs tended to be higher as a result of legal fees associated with LIHTC syndication. The authors of a 2014 study sponsored by the New Mexico Housing Mortgage Finance Agency reviewed cost drivers across 259 new construction projects that received 9 percent LIHTCs in 2006–2013 from multiple allocating agencies—Arizona, Colorado, Nevada, New Mexico, Texas, and Utah. The authors found the average per-unit cost (including reserves) ranged from about $124,000 in Texas to about $199,000 in Colorado. In New Mexico, average per-unit costs generally decreased in 2007–2010 and then increased thereafter through 2013. Similar to our results, the authors found that hard and soft costs comprised about 65 and 35 percent of project costs, respectively, among the states. Although the authors of the New Mexico study did not use a statistical analysis that would have controlled for multiple differences among project characteristics, the authors reported differences in construction costs among several groups. Similar to our results, the authors found slightly lower per-unit construction costs among senior projects compared to nonsenior projects, and that the largest projects (60 units or more) were generally less costly than the smallest projects (30 units or fewer). In contrast to our results, they noted higher per-unit construction costs among rural projects compared to urban projects. Also in contrast to our findings, the authors did not find a difference in the per-unit construction costs of nonprofit and for-profit developers. In a 2013 study, a research intern working for the Minnesota Housing Finance Agency reviewed the costs of 412 affordable housing projects that applied for agency financing in 2003–2012, including 216 LIHTC projects, to determine the extent to which costs changed in response to cost containment strategies. The author found that the average per-unit cost of new construction LIHTC projects in the Minneapolis-St. Paul metropolitan area was about $237,000. Similar to our results and those of the other studies we reviewed, the author estimated that construction costs comprised about 61 percent of LIHTC project costs. Also similar to our findings, the author found that the per-unit cost of all affordable new construction projects generally increased during the sample period while the per-unit cost of rehabilitation projects generally decreased. For LIHTC projects specifically, the per-unit cost decreased by about 8 percent compared to about an 18 percent decrease among non- LIHTC affordable projects in 2003–2012. The author noted that these decreases are important as they coincided with an increased focus by the housing agency on characteristics expected to have increased costs, such as green building standards. The author also noted that the housing agency previously found—in a separate study using its predictive cost model—that construction costs for the agency’s affordable housing projects were about 12 percent higher than estimates for similar market-rate projects in the same geographical area. This appendix provides information on cost-management approaches of allocating agencies, based on our review of qualified allocation plans (QAP) and related documents for 57 agencies as of 2017. The agencies were located in all 50 states, the District of Columbia, the 4 U.S. territories that received a Low-Income Housing Tax Credit (LIHTC) allocation in 2017 (Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands), and two suballocating agencies (Chicago and New York City). See table 29 for the name and location of each agency. We identified four main approaches that agencies used to manage project-development costs: cost limits, credit allocation limits, fee limits, and cost-based scoring criteria. Agencies implemented these approaches in various ways, as shown in table 30. In addition, the types and number of cost-management approaches employed by each agency varied, as shown in table 31. The quantity of approaches used by an agency is not necessarily indicative of the quality or effectiveness of an agency’s cost management, which we were unable to measure. ● - - - - ● ● ● - - ● ● - - - - - ● ● ● ● ● - ● - - - ● - ● - ● - - ● ● - ● ● - ● ● ● ● ● ● ● - ● ● ● ● ● ● - ● ● ● - ● ● ● ● ● - ● ● ● - ● ● ● ● ● ● ● ● ● ● ● ● ● - ● ● ● ● ● The extent of each agency’s practices for each type of cost-management approach also varied, as shown in tables 32–35. In addition to the contact named above, Steve Westley (Assistant Director), Cory Marzullo (Analyst in Charge), Stephen Brown, Heather Chartier, Farrah Graham, Brandon Kruse, John McGrail, John Mingus, Marc Molino, Ed Nannenhorn, Daniel Newman, and Barbara Roesmann made key contributions to this report.", "summary": "LIHTCs encourage private investment in low-income rental housing and have financed about 50,000 housing units annually since 2010.The LIHTC program is administered by IRS and credit allocating agencies (state or local housing finance agencies). The program has come under increased scrutiny following reports of high or fraudulent development costs for certain LIHTC projects. GAO was asked to review the cost-efficiency and effectiveness of the LIHTC program. This report examines (1) development costs for selected LIHTC projects and factors affecting costs, (2) allocating agencies' oversight of costs, and (3) factors limiting assessment of costs. GAO compiled and analyzed a database of costs and characteristics for 1,849 projects completed in 2011–2015 (the most recent data available when compiled) from 12 allocating agencies. The agencies span five regions and accounted for about half of the LIHTCs available for award in 2015. GAO also reviewed the most recent allocating plans and related documents for 57 allocating agencies and reviewed federal requirements. GAO identified wide variation in development costs and several cost drivers for Low-Income Housing Tax Credit (LIHTC) projects completed in 2011–2015. Across 12 selected allocating agencies, median per-unit costs for new construction projects ranged from about $126,000 (Texas) to about $326,000 (California). Within individual allocating agencies, the variation in per-unit cost between the least and most expensive project ranged from as little as $104,000 per unit (Georgia) to as much as $606,000 per unit (California). After controlling for other characteristics, GAO estimates that larger projects (more than 100 units) cost about $85,000 less per unit than smaller projects (fewer than 37 units), consistent with economies of scale. Allocating agencies use measures such as cost and fee limits to oversee LIHTC development costs, but few agencies have requirements to help guard against misrepresentation of contractor costs (a known fraud risk). LIHTC program policies, while requiring high-level cost certifications from developers, do not directly address this risk because the certifications aggregate costs from multiple contractors. Some allocating agencies require detailed cost certifications from contractors, but many do not. Because the Internal Revenue Service (IRS) does not require such certifications for LIHTC projects, the vulnerability of the LIHTC program to this fraud risk is heightened. Weaknesses in data quality and federal oversight constrain assessment of LIHTC development costs and the efficiency and effectiveness of the program. GAO found inconsistencies in the types, definitions, and formats of cost-related variables 12 selected agencies collected. allocating agencies did not capture the full extent of a key indirect cost—a fee paid to syndicators acting as intermediaries between project developers and investors that IRS requires be collected. IRS does not require allocating agencies to collect and report cost-related data that would facilitate programwide assessment of development costs. Further, Congress has not designated any federal entity to maintain and analyze LIHTC cost data. Even without a designated federal entity, opportunities exist to advance oversight of development costs. In particular, greater standardization of cost data would lay a foundation for allocating agencies to enhance evaluation of cost drivers and cost-management practices. Congress should consider designating a federal agency to maintain and analyze LIHTC cost data. GAO also makes three recommendations to IRS to enhance collection and verification of cost data. IRS disagreed with the recommendations and said it lacked certain data collection authorities. GAO maintains the recommendations would strengthen program oversight and integrity and modified one of them to allow IRS greater flexibility in promoting data standards.", "document_type": "gao"}
{"report": "As we reported in June 2017, some immigration court experts and stakeholders have recommended restructuring EOIR’s administrative review and appeals functions within the immigration court system— immigration courts and BIA—and the Office of the Chief Administrative Hearing Officer, to improve the effectiveness and efficiency of the system or, among other things, increase the perceived independence of the system and professionalism and credibility of the workforce. We found that the 10 experts and stakeholders we interviewed generally supported one of the following scenarios for restructuring the immigration court system, all of which would require a statutory change to implement: a court system independent (i.e., outside) of the executive branch to replace EOIR’s immigration court system, including both trial and appellate tribunals; a new, independent administrative agency within the executive branch to carry out EOIR’s quasi-judicial functions with both trial-level immigration judges and an appellate level review board; or a hybrid approach, placing trial-level immigration judges in an independent administrative agency within the executive branch, and an appellate-level tribunal outside of the executive branch. Six of the 10 experts and stakeholders we interviewed supported restructuring the immigration court system into a court independent of the executive branch. Two of the experts and stakeholders we contacted supported a new independent administrative agency within the executive branch. One of the experts and stakeholders supported the hybrid scenario, placing trial-level immigration judges in an independent, administrative agency within the executive branch, and an appellate-level tribunal outside of the executive branch. As we reported in June 2017, experts and stakeholders offered several reasons for each of the proposed scenarios, such as potentially increasing judicial autonomy over courtrooms and dockets; as well as provided reasons against restructuring options, such as that restructuring may not resolve existing management challenges. These reasons for and against each of the scenarios are summarized in table 1 and discussed further below. We are not taking a position on any of these restructuring proposals, or on any of the reasons offered for or against them. We present the information we obtained from the experts and stakeholders to inform policymakers about proposals that have been put forth regarding restructuring the immigration court system. We found in our June 2017 report that experts and stakeholders we interviewed cited several reasons for the proposed restructuring scenarios, as described in table 1 and below. Independence: Six of the 10 experts and stakeholders we interviewed stated that establishing a court system independent (i.e., outside) of the executive branch could increase the perceived independence of the system. For example, 1 of the 10 experts and stakeholders we interviewed explained that the public’s perception of the immigration court system’s independence might improve with a restructuring that removes the quasi-judicial functions of the immigration courts and the BIA from DOJ, because DOJ is also responsible for representing the government in appeals to the U.S. Circuit Courts of Appeals by individuals seeking review of final orders of removal. Another 1 of the 10 experts and stakeholders we interviewed explained that under the existing immigration court system, respondents may perceive, due to the number of immigration judges who are former DHS attorneys and the co-location of some immigration courts with DHS U.S. Immigration and Customs Enforcement’s Office of the Principal Legal Advisor offices, that immigration judges and DHS attorneys are working together. Two of the 10 experts and stakeholders we interviewed also proposed that an immigration court system independent of the executive branch would be less susceptible to political pressures within the executive branch. Experts and stakeholders cited similar independence-related reasons for supporting the administrative agency and hybrid scenarios. Judicial autonomy: Four of the 10 experts and stakeholders we interviewed stated that a court system independent of the executive branch might give immigration judges and BIA members more judicial autonomy over their courtrooms and dockets. For example, 1 of the 10 experts and stakeholders we interviewed stated that immigration judges in an independent court system would be able to file complaints against private bar attorneys directly with the state bar authority instead of filing the complaint with DOJ first, as required for immigration judges acting in their official capacity. EOIR officials explained that while immigration judges cannot directly file a complaint with the state bar authority, EOIR’s Disciplinary Counsel, which is charged with investigating these complaints, can file a complaint with the state bar on behalf of the immigration judge. Workforce professionalism or credibility: Experts and stakeholders also stated reasons why a court system independent of the executive branch might also improve the professionalism or credibility of the immigration court system’s workforce. For example, 1 of the 10 experts and stakeholders we interviewed explained that if the judge career path was improved under a restructuring such that immigration judges were able to advance to more prestigious judgeships, this could assist in attracting candidates to the immigration bench. Regarding the hybrid scenario, 1 of the 10 experts and stakeholders we interviewed noted that this proposal may attract a more diverse and balanced pool of candidates for immigration judge positions. Organizational capacity or accountability: Experts and stakeholders who supported a court system independent of the executive branch also cited enhanced organizational capacity or accountability as a reason for adopting this scenario. One of the 10 experts and stakeholders we interviewed explained that this type of restructuring may allow the immigration court system to improve its organizational capacity by changing the way it staffs its managerial and supervisory positions. For example, this individual explained that instead of placing immigration judges in managerial positions, EOIR could, as an independent court system, more easily attract and fill managerial positions with individuals who have experience in court management and public administration instead of placing immigration judges in these positions. Similarly, this same individual also noted that if the restructured immigration court system was placed within the purview of the Administrative Office of the U.S. Courts, which provides a wide range of support services to the federal judiciary (including administrative, technological and legal services), it could use its expertise in court management to assist with managing the system. In terms of enhancing organizational accountability, 1 of the 10 experts and stakeholders we interviewed explained that an independent court system could also increase the transparency of the performance evaluation system for immigration judges by incorporating feedback from court stakeholders, such as DHS and private bar attorneys, on the judges’ performance as well as increasing the transparency of the process for making complaints against immigration judges. According to this individual, the complaint process for other federal judges is more transparent and the judges are given an opportunity to address the complaint and appeal any decisions that resulted from the complaint. We also found in our June 2017 report that the experts and stakeholders we interviewed cited several reasons against the proposed restructuring scenarios, as described in table 1 and below. Appointment of immigration judges: Two of the 10 experts and stakeholders we interviewed noted that requiring the presidential nomination and Senate confirmation of immigration judges under an independent court system could further complicate and delay the hiring of new judges by making the appointment of additional judges more dependent on external parties. Administrative challenges: Two of the 10 experts and stakeholders we interviewed stated that it may be difficult to establish and administer a court system independent of the executive branch. Specifically, these experts and stakeholders expressed concern that the Administrative Office of the U.S. Courts may be reluctant to assume the vast responsibility of administering a newly created court system. Regarding administrative challenges associated with the establishment of an independent administrative agency, 1 of the 10 experts and stakeholders we interviewed explained that this scenario might be overly complicated to implement since EOIR would need to develop its own administrative functions outside of DOJ. According to another 1 of the 10 experts and stakeholders we interviewed, creating a hybrid court system may further complicate the administration of the immigration court system and potentially result in difficulties for respondents. Procurement of resources: Five of the 10 experts and stakeholders we interviewed expressed the concern that a restructured immigration court system, regardless of the scenario, would not be able to procure sufficient resources outside of DOJ. For example, 1 of the 10 experts and stakeholders noted that a restructured independent court or administrative agency might have less leverage outside of DOJ to compete for resources. Trial level disconnection from the appellate level: One of the 10 experts and stakeholders we interviewed stated that if the hybrid scenario were to be adopted, the trial level may become more disconnected from the appellate level, due to the placement of the immigration courts within the executive branch and the appellate body outside of the executive branch. Resolution of existing management challenges or case backlog: Two of the 10 experts and stakeholders we contacted stated that a court system independent of the executive branch may not address the immigration courts’ management challenges, such as the case backlog. For example, 1 of the 10 experts and stakeholders stated that the immigration court system would likely have a large caseload regardless of how it is structured. We also reported in June 2017 that EOIR could take several actions to address long-standing management and operational challenges and reduce the case backlog. In particular, we identified challenges related to, and made 11 recommendations to improve, EOIR’s workforce planning, hiring, performance assessment, and technology utilization. EOIR generally concurred with our recommendations, and, has initiated actions to address them. Overall, EOIR has fully implemented 1 recommendation but needs to take additional steps to fully implement the remaining 10 recommendations to help strengthen the agency’s management and help reduce the case backlog. Workforce Planning. In June 2017, we reported that EOIR could help address its case backlog and staffing challenges, such as by hiring more immigration judges to meet its authorized number of judges and through better workforce planning and hiring practices. During the course of our review we found that EOIR estimated staffing needs using an informal approach that did not account for long-term staffing needs, reflect EOIR’s performance goals, or account for differences in the complexity of court cases. For example, in developing its staffing estimate, EOIR did not calculate staffing needs beyond the next fiscal year or take into account resources needed to achieve the agency’s case completion goals. Furthermore, we found that, according to EOIR data, approximately 39 percent of all immigration judges were eligible to retire as of June 2017, but EOIR had not systematically accounted for these impending retirements in its staffing estimate. At the time of our review, EOIR had begun to take steps to account for long-term staffing needs, such as by initiating a workforce planning report and a study on the time it takes court staff to complete key activities. However, we found that these efforts did not align with key principles of strategic workforce planning that would help EOIR better address current and future staffing needs. EOIR officials also stated that the agency had begun to develop a strategic plan for fiscal years 2018 through 2023 that could address its human capital needs. We recommended that EOIR develop and implement a strategic workforce plan that addresses key principles of strategic workforce planning. EOIR agreed with our recommendation. In February 2018, EOIR officials told us that they had established a committee and working group to examine the agency’s workforce needs and would include workforce planning as a key component in EOIR’s forthcoming strategic plan. Specifically, EOIR officials stated that the agency had established the Immigration Court Staffing Committee in April 2017 to examine how to best leverage its existing judicial and court staff workload model to address its short- and long-term staffing needs, assess the critical skills and competencies needed to achieve future programmatic results, and develop strategies to address human capital gaps, among other things. In February 2018, EOIR officials stated that the agency replaced this committee, which had completed its work, with a smaller working group of human resource employees charged with addressing the agency’s strategic workforce planning. Additionally, EOIR officials stated that the agency was developing a strategic plan that includes human capital planning as a critical component, which will be used to guide workforce planning for the agency. These are positive steps, but to fully address our recommendation, EOIR needs to continue to develop, and then implement a strategic workforce plan that: (1) addresses the agency’s short- and long-term staffing needs; (2) identifies the critical skills and competencies needed to achieve future programmatic results; and (3) includes strategies to address human capital gaps. Once this strategic workforce plan is completed, EOIR needs to monitor and evaluate the agency’s progress toward its human capital goals. Hiring. Additionally, in our June 2017 report, we found that EOIR did not have efficient practices for hiring new immigration judges, which has contributed to immigration judges being staffed below authorized levels and to staffing shortfalls. For example, in fiscal year 2016, EOIR was allocated 374 immigration judge positions and had 289 judges on board at the end of the fiscal year. EOIR officials attributed these gaps to delays in the hiring process. Our analysis of EOIR hiring data supported their conclusion. Specifically, we found that from February 2014 through August 2016, EOIR took an average of 647 days to hire an immigration judge—more than 21 months. As a result, we recommended that EOIR (1) assess the immigration judge hiring process to identify opportunities for efficiency; (2) use the assessment results to develop a hiring strategy that targets short- and long-term human capital needs; and (3) implement any corrective actions related to the hiring process resulting from this assessment. In response to our report, EOIR stated that it concurred with our recommendation and was implementing a new hiring plan as announced by the Attorney General in April 2017 intended to streamline hiring. Among other things, EOIR stated that the new hiring plan sets clear deadlines for assessing applicants moving through different stages of the process and for making decisions on advancing applicants to the next stage, and allows for temporary appointments for selected judges pending full background investigations. In February 2018, EOIR indicated to us that it had begun to use the process outlined in its hiring plan to fill judge vacancies. The Attorney General also announced in April 2017 that the agency would commit to hire an additional 50 judges in 2018 and 75 additional judges in 2019. In January 2018, EOIR officials told us that the agency had a total of 330 immigration judges, an increase of 41 judges since September 2016. Hiring these additional judges is a positive step; however, EOIR remains below its fiscal year 2017 authorized level of 384 immigration judges based on funding provided in fiscal years 2016 and 2017. Additionally, the Consolidated Appropriations Act, 2018 provided funding for EOIR to hire at least 100 additional immigration judge teams, including judges and supporting staff, with a goal of fielding 484 immigration judge teams nationwide by 2019. To fully address our recommendation, EOIR will need to continue to improve its hiring process by (1) assessing the prior hiring process to identify opportunities for efficiency; (2) developing a hiring strategy targeting short- and long-term human capital needs; and (3) implementing corrective actions in response to the results of its assessment of the hiring process. Performance Assessment. Regarding EOIR’s performance assessment, we reported in June 2017 that EOIR had previously established performance monitoring activities and measures to assess aspects of the immigration courts, but it had eliminated several of these performance assessment mechanisms. EOIR also had goals for some cases it adjudicated, such as respondents in detention, but no longer had goals for most cases, including some cases it had prioritized for adjudication. For example, we found that EOIR did not have performance measures or goals for completing cases in which the respondent is not detained (non- detained cases), which comprised 83 percent of immigration courts’ total caseload from fiscal year 2010 through fiscal year 2015. To help EOIR more effectively monitor its performance and fully evaluate whether the immigration courts are achieving EOIR’s mission, we recommended that EOIR establish and monitor comprehensive case completion goals, including a goal for completing non-detained cases not captured by performance measures, and goals for cases it considers a priority. EOIR agreed with this recommendation and has taken steps to address it. For example, EOIR issued guidance in January 2018 to all immigration court staff that established the agency’s goals for each immigration court in adjudicating cases. In particular, EOIR identified in this guidance a case completion goal for non-detained cases: courts must complete 85 percent of all non-detained removal cases that do not qualify as a “status case” within 1 year of filing of the Notice to Appear (NTA) in court, reopening or recalendaring of the case, remand from the Board of Immigration Appeals, or notification of release from custody. According to this guidance, EOIR has also retained case completion goals for other categories it considers a priority, such as cases in which the respondent is detained and credible fear reviews. In its January 2018 guidance, EOIR stated that it will track these measures and the courts’ performance in meeting them as well as regularly auditing these measures. To fully address this recommendation, EOIR needs to monitor courts’ performance in meeting these goals. In June 2017, we also reported that EOIR collected information on the extent and reasons why immigration judges issue continuances— temporary adjournments of case proceedings until a different day or time—but did not systematically assess these data to identify and address potential operational challenges affecting the immigration courts or areas where immigration judges could benefit from additional guidance or training. An immigration judge may continue a case for good cause shown, such as to allow respondents to obtain legal representation or DHS to complete required background investigations and security checks. Our analysis of continuance records from fiscal year 2006 through fiscal year 2015 showed that the use of continuances had grown over time. Specifically, all types of continuances increased by 23 percent from fiscal year 2006 through fiscal year 2015 and operational continuances, such as those caused by a lack of foreign language interpretation or a video-teleconference (VTC) malfunction, increased by 33 percent over this same time period. We recommended that EOIR systematically analyze immigration court continuance data to identify and address any operational challenges faced by courts or areas for additional guidance or training. EOIR agreed with this recommendation and, in July 2017, issued updated guidance for immigration judges on fair and efficient docket management relating to the use of continuances. For instance, according to this guidance, judges must annotate the case worksheet on disposition of the case with a continuance code describing the reason for the continuance and court staff must ensure that each continuance code is accurately entered into the agency’s case management system for all cases. EOIR also issued guidance in October 2017 updating case continuance codes and their definitions to assist immigration judges in recording this information on the case worksheet. These are positive steps, and analyzing the use of continuances on a systematic basis would give EOIR greater insight into more widespread operational issues that the courts may be facing. To fully address our recommendation, EOIR will need to systematically analyze immigration court continuance data to identify and address any operational challenges faced by courts or areas for additional guidance or training. We also reported in June 2017 that EOIR could improve the reliability of its case management data and reports on case completion times by ensuring that court staff accurately record NTAs in a timely manner. We found that EOIR did not have guidance or data integrity efforts to ensure the timely and accurate recording of NTAs in its case management system, and that at least 16 percent of NTA dates were unreliable. EOIR uses NTA dates to calculate case completion times, which are used to assess court performance. The agency reports this information publicly in DOJ’s Annual Performance Report. We concluded that improving the reliability of NTA data would allow EOIR to provide more accurate information on case completion times to Congress and the public. We recommended that EOIR update its policies and procedures to promote the timely and accurate recording of NTAs. In response to our report, EOIR stated that it partially concurred with our recommendation and stated that it would continue to monitor the timeliness and accuracy of NTA recording, and implement corrective actions as needed. In January 2018, as part of its policy on case completion goals, EOIR also created a goal that 100 percent of all electronic and paper records be accurate and complete. This goal is a positive step, and updating policies and procedures to remind staff about the importance of timely and accurate recording of all NTAs would provide EOIR greater assurance that this goal could be consistently met. To fully address our recommendation, EOIR will need to update its policies and procedures to ensure the timely and accurate recording of NTAs. Technology Utilization. We also made several recommendations to EOIR in our June 2017 report to improve its technology utilization, including the agency’s oversight of the ongoing development of a comprehensive electronic-filing (e-filing) capability—a means of transmitting documents and other information to immigration courts through an electronic medium, rather than on paper. EOIR identified the implementation of an e-filing system as a goal in 2001, but has not, as of April 2018, fully implemented this system. In 2001, EOIR issued an executive staff briefing for an e-filing system that stated that only through a fully electronic case management and filing system would the agency be able to accomplish its goals. This briefing also cited several benefits of an e-filing system, including, among other things, reducing the data- entry, filing, and other administrative tasks associated with processing paper case files; and improving communication with external court stakeholders, such as respondents and attorneys, providing the ability to file court documents from private home and office computers. As we reported in June 2017, EOIR initiated a comprehensive e-filing effort in 2016—the EOIR Court and Appeals System (ECAS)—for which EOIR had documented policies and procedures governing how its primary ECAS oversight body—the ECAS Executive Committee—would oversee ECAS through the development of a proposed ECAS solution. However, we found that EOIR had not yet designated an entity to oversee ECAS after selection of a proposed solution during critical stages of its development and implementation. In our June 2017 report, we recommended that in order to help ensure EOIR meets its cost and schedule expectations for ECAS, the agency identify and establish the appropriate entity to oversee ECAS through full implementation. EOIR concurred and stated that it had selected and convened the EOIR Investment Review Board to serve as the ECAS oversight body with the Office of Information Technology directly responsible for the management of the ECAS program. EOIR officials told us in February 2018 that the board convened in October 2017 and January 2018 to discuss, among other things, the ECAS program. However, as we reported in June 2017, EOIR officials previously told us that the EOIR Investment Review Board was never intended to oversee ECAS implementation due to the detailed nature of this system’s implementation. EOIR has recently provided us with documentation related to its oversight of ECAS, which we are reviewing to help determine the extent to which EOIR has met the intent of our recommendation. Additionally, we recommended in June 2017 EOIR develop and implement a plan that is consistent with best practices for overseeing ECAS to better position the agency to identify and address any risks and implement ECAS in accordance with its cost, schedule, and operational expectations. As of April 2018, EOIR has not indicated that it has developed such a plan. In June 2017 we also reported on ways EOIR could enhance its VTC program. EOIR is authorized by statute to hold immigration removal proceedings through VTC. According to EOIR officials, EOIR largely uses VTC for hearings for detained individuals, including both master calendar and individual merits hearings. We reported in June 2017 that officials from all six of the immigration courts we visited identified challenges related to VTC hearings, including difficulties maintaining connectivity, hearing respondents, exchanging paper documents, conducting accurate foreign language interpretation, and assessing the demeanor and credibility of respondents and witnesses. We further found that EOIR had not, in accordance with best practices, (1) evaluated its VTC program to ensure that it is outcome-neutral, or (2) established a mechanism to solicit feedback and comments about VTC from those who use it regularly to assess whether it meets user needs. Therefore, we recommended that EOIR take three actions to provide further assurances that its use of VTC in immigration hearings is outcome-neutral, including that it collect more complete and reliable data related to its VTC use (e.g., the number of hearings it conducts by VTC) and use the data to assess any effects of VTC on immigration hearings. EOIR partially concurred with these actions and has since taken some steps to implement these recommendations, such as piloting a project to collect data on respondent appeals related to the use of VTC in their cases. Additionally, EOIR officials told us in August 2017 that the agency is studying how to collect more complete and reliable data on the number and type of hearings it conducts through VTC and use these and other data to assess any effects of VTC on immigration hearings. We also recommended that EOIR develop and implement a mechanism to solicit and monitor feedback from respondents regarding their satisfaction and experiences with VTC hearings. EOIR concurred and implemented this recommendation in December 2017 by establishing a mechanism on its public website to solicit open-ended feedback from respondents regarding their satisfaction with VTC hearings, including the audio and visual quality of the hearing. According to EOIR officials, a group of individuals within EOIR’s Office of the Chief Immigration Judge is responsible for monitoring and addressing feedback received through this portal. These efforts should help EOIR ensure VTC hearings it conducts meet all user needs and identify and address technical issues with VTC hearings. Chairman Cornyn and Ranking Member Durbin, this completes my prepared statement. I would be happy to respond to any questions you or the members of the committee may have. If you or your staff have any questions about this testimony, please contact Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Taylor Matheson (Assistant Director), Kathleen Donovan, Sasan J. “Jon” Najmi, Robin Nye, and Erin O’Brien. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "DOJ's EOIR is responsible for conducting immigration court proceedings, appellate reviews, and administrative hearings to fairly, expeditiously, and uniformly administer and interpret U.S. immigration laws and regulations. This statement addresses (1) scenarios that experts and stakeholders have proposed for restructuring EOIR's immigration court system and the reasons they offered for or against these proposals; and (2) how EOIR manages and oversees the immigration courts, including hiring and performance assessment, among other things. This statement is based on a report GAO issued in June 2017, with selected updates conducted through April 2018 to obtain information from EOIR on actions it has taken to address the report's recommendations. GAO's report incorporated information obtained by reviewing EOIR documentation, analyzing EOIR data, and interviewing agency officials and immigration court experts and stakeholders. For the selected updates, GAO reviewed EOIR documentation. In June 2017, GAO reported that some immigration court experts and stakeholders have recommended restructuring the Executive Office for Immigration Review's (EOIR) administrative review and appeals functions within the immigration court system—immigration courts and Board of Immigration Appeals—to improve its effectiveness and efficiency. The 10 experts and stakeholders GAO interviewed stated that they generally supported one of the following scenarios for restructuring the immigration court system, all of which would require a statutory change to implement: a court system outside of the executive branch to replace EOIR's immigration court system, including both trial and appellate tribunals; a new, independent administrative agency within the executive branch to carry out EOIR's quasi-judicial functions with both trial-level immigration judges and an appellate level review board; or a hybrid approach, placing trial-level immigration judges in an independent administrative agency within the executive branch, and an appellate-level tribunal outside of the executive branch. Six of the 10 experts and stakeholders GAO interviewed supported restructuring the immigration court system into a court independent of the executive branch. Experts and stakeholders offered several reasons for each of the proposed scenarios, such as potentially improving workforce professionalism and credibility. They also provided reasons against restructuring options, including that restructuring may not resolve existing management challenges, such as difficulties related to hiring immigration judges. GAO also reported in June 2017 that EOIR could take several actions to address management challenges. EOIR has since taken some steps to address these challenges, but additional actions are needed. For example, GAO found that EOIR did not have efficient practices for hiring immigration judges, which contributed to judges being staffed below authorized levels. EOIR hiring data showed that on average from February 2014 through August 2016, EOIR took more than 21 months to hire an immigration judge. GAO recommended that EOIR assess the immigration judge hiring process to identify opportunities for efficiency. As of January 2018, EOIR had increased the number of its judges but remained below its authorized level for fiscal year 2017. Hiring additional judges is a positive step; however, to fully address GAO's recommendation, EOIR needs to assess its hiring process to identify opportunities for efficiency. In June 2017, GAO also reported on ways EOIR could enhance its video teleconferencing (VTC) program, through which judges conduct hearings by VTC. GAO found that EOIR had not, in accordance with best practices, established a mechanism to solicit feedback and comments about VTC from those who use it regularly to assess whether it meets user needs. GAO recommended EOIR develop and implement such a mechanism. EOIR concurred and implemented this recommendation in December 2017 by establishing a mechanism on its public website to solicit feedback from respondents regarding their satisfaction with VTC hearings. This effort should help EOIR ensure VTC hearings it conducts meet all user needs. In its June 2017 report GAO made 11 recommendations to improve EOIR's hiring process and performance assessment, among other things. EOIR generally concurred with the recommendations, has implemented 1, and reported actions planned or underway to address the remaining 10.", "document_type": "gao"}
{"report": "ARNG is one of two reserve components of the Department of the Army; it has units located in each of the 54 states, territories, and the District of Columbia. The Secretary of the Army is responsible for creating overarching policy and guidance for all of the components of the Army, including ARNG. The Chief of NGB, among other responsibilities, acts as the official channel of communication between the Department of the Army and the 54 states, territories, and the District of Columbia in which ARNG has personnel assigned and is responsible for ensuring that ARNG personnel are accessible, capable, and trained to protect the homeland and to provide combat resources to the Army. During fiscal years 2010 through 2016, ARNG disbursed more than $1.8 billion in financial incentives to bolster its recruiting and retention efforts. The ARNG program, called the Selected Reserve Incentive Program, includes cash bonuses and other payments. The ARNG regulation for Selected Reserve Incentive Programs includes over a dozen sub- categories of cash bonuses, such as those for newly enlisted soldiers, active duty soldiers who join ARNG, and soldiers who re-enlist or extend with ARNG. In addition to cash bonuses, ARNG makes incentive payments as part of the Student Loan Repayment Program. Under this type of incentive, ARNG disburses incentive payments directly to a third party lender. The Director of ARNG is responsible for determining the overall policy for the Selected Reserve Incentive Program and issued the regulation that governs incentive procedures and eligibility criteria for soldiers entering into an incentive agreement. On a periodic basis, ARNG updates the policy for a specific fiscal year through a policy or an education and incentive operational message. These updates, which are intended to help ARNG meet its readiness requirements, can provide instructions on the value and frequency of incentives, as well as directing the targeting of incentives to address a particular skill or unit need. The updates can also direct changes to eligibility requirements in order to enable a soldier to receive an incentive. Each of the 54 states, territories, and the District of Columbia has a state incentive manager in ARNG who provides oversight for authorization, verification, validation, establishment, monitoring, and termination of all incentive payments, including recoupment of incentives. State incentive managers work with recruiting and retention personnel to assist in the use of bonuses. For example, state incentive managers can ensure that the contracts used by recruiting and retention personnel comply with ARNG policy. Additionally, each ARNG unit has personnel who track information on soldier performance, such as attendance, physical fitness, and training. To manage these activities, ARNG uses the Reserve Component Manpower System— an information system that houses manpower readiness data and includes approximately 40 subsystems. A 2008 California National Guard audit revealed that Selected Reserve Incentive Program incentives, including student loan repayments, were being improperly paid to numerous California ARNG soldiers and that some of these cases were results of fraud. In subsequent audits of California ARNG, 17,485 soldiers were identified as having received a bonus or student loan repayment in the period of 2004 through 2010 that was potentially improper and subject to recoupment. By the end of 2016, several follow-on reviews had identified improper incentive payments to more than 1,400 soldiers. These investigations and audits determined that ARNG lacked internal controls over its incentive process. For example, the state incentive manager could authorize and approve an incentive and then forward the payment request to the state’s U.S. Property and Fiscal Office, the office responsible for authorizing payment. To improve the process, in 2010 ARNG established a contract for an Incentive Support Team to, among other things, review soldier incentives. In 2011, ARNG developed a module within the Reserve Component Manpower System called the Guard Incentive Management System. The Guard Incentive Management System was designed to aid in managing the incentive process across all states by providing an online system to track, monitor, and prioritize all incentive cases. The Guard Incentive Management System was also intended to increase oversight through automated notifications and reporting features and to add a budget control mechanism for NGB and the states, among other things. In 2012, ARNG began a phased implementation of the Guard Incentive Management System in each state and territory. ARNG subsequently expanded the Guard Incentive Management System to include the Student Loan Repayment Program. NGB goes through a process before it establishes and collects on a debt. State incentive managers are responsible for ensuring that soldiers receiving incentive payments are satisfying contractual requirements. If the state incentive manager determines that the soldier has violated the contract tied to the incentive payment, the state incentive manager sends a certified letter to the soldier that (1) states the reason the payment may potentially be determined to be improper and (2) lists the steps that the soldier can take to adjudicate the issue. ARNG officials informed us that, if the soldier does not respond to the letter within 45 days, a debt is established in Defense Finance and Accounting Service systems. In response, the soldier may provide documents to address the issue or, should documents already exist, may request that NGB make an exception to policy—a determination by NGB that the circumstances of a soldier’s case merit allowing the soldier to retain the incentive payment. Incentive managers in some states told us that they will assist soldiers in requesting an exception to policy and will sometimes request these exceptions on their behalf in the case of events—such as a reorganization of a state’s ARNG units—that could result in a large number of soldiers not meeting the terms of their incentive contracts. If these steps do not resolve the issue, the soldier can seek recourse through the Army Board for the Correction of Military Records. Once these options are exhausted, the debt is established in Defense Finance and Accounting Service systems. ARNG has implemented internal controls, including automated and manual reviews, to prevent improper incentive payments, and it also reviews its incentive programs on a periodic basis. First, ARNG has implemented the Guard Incentive Management System and expanded its use over time to oversee its incentive contracts through automation. In 2012, ARNG began using the Guard Incentive Management System to manage the life cycles of contracts between ARNG and soldiers for incentives and education entitlements, including those for the Selected Reserve Incentive Program. When a soldier signs a contract with a recruiter or retention officer, the Guard Incentive Management System alerts the state incentive manager that an incentive is ready for review. ARNG has also implemented automated rules in the Guard Incentive Management System—known as monitor rules—that continuously monitor a soldier’s eligibility for an incentive. The system does this by comparing the data it receives from multiple personnel systems against the soldier’s contract. If any issues are found, the Guard Incentive Management System will flag the incentive case for review by the state incentive manager and will stop future payments until the issue is resolved. In California, for example, we observed an incentive manager reviewing a case that had been flagged for violating a monitor rule because the soldier was no longer in the unit stipulated in the incentive contract. The incentive manager told us that the soldier was informed of the situation and that corrective action would be required before any additional payments could be made. If a soldier is deemed ineligible or loses eligibility at any time during this process, the state incentive manager will stop payments and review the case to determine whether the contract needs to be terminated. State incentive managers are also required to verify certain eligibility criteria and personnel documents manually in the Guard Incentive Management System. State incentive managers use checklists to review a soldier’s incentive contract and unit orders to determine eligibility. The Selected Reserve Incentive Program requires that incentive contracts of more than three years be paid out in installments. State incentive managers or their designees are required to manually review each incentive contract before making an anniversary payment. During our site visits, we observed state incentive managers using the Guard Incentive Management System to review whether a soldier was eligible to receive a payment. For example, in Nebraska we observed an incentive manager using the Guard Incentive Management System to verify a soldier’s contract period, unit assignment, and physical fitness test scores, among other items, to confirm the soldier’s eligibility to receive a payment. In Illinois, we observed an incentive manager using the Guard Incentive Management System to verify a soldier’s identity, unit transfer orders, and an eligible student loan before approving a student loan repayment for further review at the national level. We also observed an incentive manager in Illinois reviewing a soldier’s incentive contract, which was being terminated because the soldier had failed to attend required drills. ARNG personnel in each of the states we visited told us that the Guard Incentive Management System provides a strong barrier against soldiers receiving improper payments. The Guard Incentive Management System also tracks and records each user’s actions on each incentive case to provide an audit trail, which we observed in multiple states. In addition to reviews conducted at the state level, ARNG conducts another review of incentive payments using the Guard Incentive Management System. Once a contract has been reviewed at the state level, state incentive managers forward it to the ARNG Incentive Support Team for another review. The ARNG Incentive Support Team has provided assistance to all 54 states, territories, and the District of Columbia, by conducting reviews of 100 percent of incentive payments and terminations, among other things. After the ARNG Incentive Support Team’s review, ARNG officials perform a final review of an incentive payment before it is certified. Specifically, ARNG officials review a random sample of 10 percent of contracts from a batch of incentive payments that the Guard Incentive Management System generates. ARNG officials told us that if 25 percent or more of this 10 percent sample is rejected because it contains errors, all of the contracts in the batch are returned to the ARNG Incentive Support Team or their respective states for additional review. If less than 25 percent are rejected, the individual contracts with errors are returned to the ARNG Incentive Support Team or their respective states for additional review. The remainder of the batch passes ARNG review, and the Guard Incentive Management System generates payment files electronically and transfers them to the Defense Finance and Accounting Service, which disburses funds to the soldiers, as shown in figure 1. Second, ARNG conducts periodic reviews of its incentive program. Specifically, National Guard Regulation 600-7, Selected Reserve Incentive Program—issued in August 2014—classifies incentive programs as a high-risk function that should be evaluated every year to mitigate risks, and that management controls must be evaluated at least once every five years. Each of the six states we visited had either conducted an internal review of its incentive program since 2016 or told us that it had plans to conduct one within the next year. For example, ARNG officials in Nevada had evaluated and certified the internal controls of their incentive program in 2017, and ARNG officials in Delaware told us that they plan to request an external evaluation of their incentive program in 2018. ARNG took steps to address some identified weaknesses to its internal controls for managing soldier incentive contracts, but has not developed and implemented a plan for future significant changes that could affect its internal controls. For example, in October 2015, a previous contract to support the ARNG Incentive Support Team expired, and performance of the follow-on contract was delayed for approximately two years—until September 2017—by actions related to two GAO bid protests. From October 2015 to January 2016, ARNG used a 3-month bridge contract with the previous contractor to provide support and enable the ARNG Incentive Support Team to continue to perform 100 percent reviews. However, in January 2016, the ARNG Incentive Support Team stopped conducting 100 percent reviews of incentive contracts. At that time, according to ARNG officials, ARNG increased their review of incentive contracts from 10 percent to 30 percent to help mitigate the loss of the 100 percent review that the ARNG Incentive Support Team had previously provided. On September 30, 2017, the current contract for the ARNG Incentive Support Team was awarded and according to ARNG officials, the ARNG Incentive Support Team reinstated 100 percent reviews of soldier incentive contracts on December 8, 2017. ARNG also adjusted their review of soldier incentive contracts from 30 percent back to 10 percent. As another example, in April 2017, ARNG issued the fiscal year 2017 Selected Reserve Incentive Program policy. Among other things, the policy changed the eligibility requirement for receiving an incentive payment based on soldier performance on the Army Physical Fitness Test. Under the previous policy, soldiers who failed two consecutive fitness tests would be ineligible to receive an incentive. The fiscal year 2017 policy changed this requirement to two failures during the lifetime of a soldier’s incentive contract, which could be up to six years. According to ARNG officials, approximately 8,000 incentive contracts are affected by this requirement. NGB requires the vendor managing the Reserve Component Manpower System, which includes the Guard Incentive Management System, to update the system with any policy changes. However, ARNG officials told us that they had not updated the Guard Incentive Management System with the fiscal year 2017 policy. Therefore, the system’s automated reviews are unable to check for this eligibility requirement. Additionally, according to ARNG officials, ARNG did not publish official guidance regarding this discrepancy. Instead, ARNG informally discussed with state incentive managers that the fiscal year 2018 policy, once issued, would eliminate this requirement. ARNG officials told us that a separate transition of vendors for the Reserve Component Manpower System that began in 2016 had delayed their ability to update the Guard Incentive Management System with the fiscal year 2017 policy. ARNG had not anticipated that the vendor would be unable to update the Guard Incentive Management System as a result of technical challenges following the transition. ARNG officials also told us that they are currently developing the fiscal year 2018 policy and would update the Guard Incentive Management System with this policy when it is ready. On December 6, 2017, we provided our observations to ARNG on the inability of the Guard Incentive Management System to perform automated monitoring on these 8,000 incentive contracts. According to ARNG officials, on December 7, 2017, they submitted a formal change request to the vendor to incorporate this rule in the Guard Incentive Management System, and they expect the rule to be incorporated in February 2018. ARNG has also taken steps to address unforeseen technical issues that have affected its incentive program. For example, ARNG officials told us that they have implemented several recommendations that were made as part of the Army’s administrative investigation of the transition in vendors managing the Reserve Component Manpower System, of which the Guard Incentive Management System is a component. The investigation determined that ARNG was not positioned to provide sufficient technical oversight of the transition, and in September 2016, the investigation’s report recommended that ARNG, among other things, assign a highly skilled Information Technology subject matter expert to provide oversight of all government and contractor activities related to the Reserve Component Manpower System. ARNG officials also told us they had since assigned this expert and had implemented other recommendations from the investigation, but were not tracking progress on those recommendations. Additionally, ARNG officials told us that, as of October 2017, they were in the process of revising their performance work statement for the current vendor. These revisions may include, among other things, providing other types of technical support and reducing the amount of time that the system would be unavailable to ARNG and others. Finally, ARNG officials told us that they plan to use an existing Information Technology steering committee to provide oversight for the Reserve Component Manpower System; however, these same officials told us that the steering committee had not met from May 2017 through October 2017. While ARNG has taken steps to remedy some technical issues and weaknesses in its internal controls, it has not demonstrated that it has learned from its past experiences by planning for significant changes to its incentive program that could affect its internal controls, such as its information systems not functioning correctly or data related to incentive contracts not being readily updated or available for an extended period of time. These changes include, for example, the next vendor transition for the Reserve Component Manpower System, which is expected to be re- competed in 2020. Additionally, as ARNG continues deployment of the Integrated Personnel and Pay System – Army in 2018, it is anticipated that aspects of the Reserve Component Manpower System will change. Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to significant changes that could affect the entity’s internal control system. Because conditions affecting the entity and its environment continually change, management can anticipate and plan for significant changes by using a forward-looking process to prepare for change. Planning for significant changes— including those cited earlier—requires time and coordination in advance of the changes occurring. However, ARNG officials have been unable to demonstrate their planning efforts to identify, analyze, and respond to any significant changes to ARNG’s internal controls that may arise if, for example, the contract is awarded to a new vendor or as the Reserve Component Manpower System fully interfaces with the Integrated Personnel and Pay System – Army. Without taking action to plan for potentially significant changes to its internal controls for the Reserve Component Manpower System, ARNG is at risk of not being prepared for these changes that could contribute to the potential for making improper payments. The Defense Finance and Accounting Service (DFAS) and the Defense Office of Hearings and Appeals (DOHA) have the authority to waive erroneous incentive debts for ARNG soldiers. DFAS is a DOD component that maintains records of soldiers’ debts and has the authority to waive established debts of $10,000 or less. DOHA, another DOD component, adjudicates waivers for debts of more than $10,000. For established debts, DFAS will notify the soldier that a debt exists and will be collected. In response, the soldier can submit a request to DFAS to waive the debt. DFAS has the statutory authority to waive debts incurred as a result of erroneous payments of up to $10,000 to members of the armed services, including ARNG soldiers. If DFAS denies all or part of the waiver request, it informs the waiver applicant of the right to file an appeal of the denial to DOHA within 30 days. Soldiers can file for a waiver of indebtedness from DFAS for a period of up to 5 years from the date an erroneous payment is discovered. DFAS may not consider waiver applications that it receives after that 5-year period. DOHA has the authority to review waiver cases forwarded by DFAS and to adjudicate appeals from soldiers whose waiver applications have been denied. According to DOHA officials, they review only cases in which (1) the payment has been identified as erroneous, (2) a collection action has been started, and (3) the soldier has been given rights under the Fair Debt Collection Practices Act. DOHA officials told us that they do not have authority over the establishment or collection of a debt or the authority to conduct a hearing for a soldier contesting the validity of a debt. However, DOHA officials told us that they will verify the correctness of the debt before adjudicating a waiver case and may request information from DFAS—such as documentation—including enlistment contracts, payment vouchers, and leave and earnings statements. Additionally, DOHA officials told us that they do not have the authority to adjudicate debts for payments made under the Student Loan Repayment Program—one type of payment under the Selected Reserve Incentive Program—because of their determination that their authority to waive debts for erroneously paid “pay and allowances” as defined in 32 U.S.C. § 716 and 10 U.S.C. § 2774(a) does not apply to payments to lenders for educational expenses. Those cases are reviewed and adjudicated at the discretion of the Secretary of the Army. If DOHA denies a soldier’s waiver application, the soldier may request that DOHA reconsider its decision, which DOHA officials told us is accomplished by an appeals panel of three DOHA attorneys. The decision of this panel is final and ends the waiver of indebtedness adjudication process, as depicted in figure 2. DOD has improved the availability of the documentation that is used to adjudicate waiver cases for soldiers’ debts. DOHA officials told us that adjudication was sometimes delayed because case files lacked documentation. As part of our review of DOHA waiver case files, we found several examples of ARNG cases involving Selected Reserve Incentive Program debts that had been adjudicated between January 2014 and December 2016, in which DOHA adjudicators had to acquire missing information, including documentation, from external sources before adjudicating the case. For example, in one case from Alabama that was adjudicated in 2014, it was 83 days before DOHA officials received the documentation they needed. DOHA officials told us this information included the soldier’s bonus agreement, leave and earnings statements, and transfer orders. In another case from California that was adjudicated in 2016, it took adjudicators 74 days to obtain additional information. DOHA officials told us this information included payment vouchers. DOD’s use of the Guard Incentive Management System has facilitated the availability of documentation needed to adjudicate waiver cases. For example, the system stores incentive payment and eligibility documentation, which may help to reduce delays in the adjudication of waivers associated with missing documentation. Before making an incentive payment, state incentive managers are required to inspect case documentation in the Guard Incentive Management System to validate the payment. During our site visits to selected states, we observed state incentive managers using the Guard Incentive Management System to review documents, such as re-enlistment contracts and unit orders. In several cases, we observed state incentive managers identifying errors in documents, and we observed their ability to correct these documents. For example, in Nebraska we observed a case in which a soldier’s military occupational specialty code in the Guard Incentive Management System was not in line with what was in the incentive contract, because the unit had been reorganized. We then observed a state incentive manager confirming the soldier’s transfer orders and uploading this documentation into the Guard Incentive Management System. Our observations are not generalizable across all states or for all contracts, but they suggest that documentation required to adjudicate waiver cases is now more readily available and will continue to be in the future. DOD also updated its Financial Management Regulation to improve the availability of documentation. DOHA officials told us that DOD had updated the Financial Management Regulation in January 2016. Specifically, Volume 16, Chapter 4, Section 040403 of the DOD Financial Management Regulation instructs applicants to include in their waiver requests (1) copies of all supporting documentation, (2) copies of leave and earnings statements, (3) copies of notifications of personnel actions, and (4) any statements from the applicant in support of the waiver application. DOHA officials stated that this revision should reduce documentation-related delays during their review of future waiver submissions. Additionally, DOHA officials told us that they have taken steps to train DFAS personnel, who are responsible for reviewing waiver applications, in an effort to reduce delays. ARNG has made progress in improving its internal controls since widespread improper payments were identified in California in 2008. By using the Guard Incentive Management System and requiring multiple levels of review before incentives are paid, ARNG may have reduced the likelihood of future widespread improper payments similar to what occurred in California. However, it is important for ARNG to be forward looking in preserving the integrity of its internal controls. ARNG has faced challenges during the transition between vendors managing the system that resulted in the weakening of internal controls, including those built into the Guard Incentive Management System. To its credit, ARNG has taken mitigating actions to prevent improper payments while attempting to address those issues. These challenges, and the need for mitigating actions, could have been prevented if ARNG had identified and prepared in advance for challenges potentially resulting from the vendor transition. If ARNG does not proactively identify, analyze, and plan to respond to significant changes that could affect the internal controls to its incentive program, there is an increased risk that additional weaknesses to its internal controls could emerge and result in an increased likelihood of improper payments. We are making one recommendation to ARNG: The Director of the Army National Guard should develop and implement a plan to identify, analyze, and address any significant changes that could affect internal controls for its Guard Incentive Management System. (Recommendation 1) We provided a draft of this report to ARNG for comment. In its comments, reproduced in appendix I, ARNG concurred with our recommendation and stated that they initiated a project to improve internal control measures as significant changes are made to the Guard Incentive Management System to align the system with policy. ARNG also stated that the project would look at the time required to adjust incentives to effect change within the organization and achieve its strength goals. ARNG expects the project to be completed in August 2018. We believe this action would meet the intent of our recommendation. We are sending copies of this report to the Secretary of Defense, the Chief of the National Guard Bureau, and the Director of the Army National Guard. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9971 or kirschbaumj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Tina Won Sherman (Assistant Director), David Blanding Jr., Vincent Buquicchio, Wesley Collins, Joanne Landesman, Amie Lesser, Jim Melton, and Paul Seely made significant contributions to this report.", "summary": "ARNG provides trained and equipped units ready to defend life and property in the 54 states, territories, and the District of Columbia. In 2011, the Army Audit Agency reported weaknesses in internal controls over soldier incentive payments in the California ARNG that led to some improper payments. DOD initially took actions to recoup some of these payments, but the National Defense Authorization Act for Fiscal Year 2017 allowed for the waiver or other forgiveness of debt. The National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to assess policies and procedures for minimizing and waiving the recoupment of improper payments. This report (1) evaluates the extent to which ARNG has implemented and planned to adjust the internal controls for its Selected Reserve Incentive Program to prevent improper payments and (2) describes which DOD organizations have the authority to waive ARNG incentive debts and steps taken to improve waiver documentation. GAO conducted site visits to six states based on the value of their incentive programs, reviewed documentation used to manage incentive programs, examined incentive debt waiver cases, and interviewed DOD officials. In response to the over $22 million in improper payments the California Army National Guard (ARNG) made in cash bonuses and other soldier incentives from 2004 through 2010, ARNG officials implemented some internal controls to prevent future improper incentive payments. These internal controls include automated and manual checks of soldier incentive contracts to verify soldiers' eligibility for incentive payments. For example, ARNG implemented automated rules in its Guard Incentive Management System—an online system that tracks incentive contracts—to monitor a soldier's eligibility for an incentive by comparing the data received from multiple personnel systems against the soldier's contract. If any issues are found, the Guard Incentive Management System will flag the incentive case for review by state ARNG officials and will stop future payments until the issue is resolved. While these internal controls have improved accountability over soldier incentive payments, ARNG is still in the process of completing further actions. For example, in April 2017, ARNG issued the fiscal year 2017 Selected Reserve Incentive Program policy. However, ARNG did not incorporate changes as a result of this policy into the Guard Incentive Management System to ensure that the automated checks captured these policy changes—including one that affects approximately 8,000 solider incentive contracts, according to ARNG officials. ARNG officials told us that they had not updated the Guard Incentive Management System with this policy because of technical challenges resulting from a transition in vendors for the Reserve Component Manpower System—an information system that houses the Guard Incentive Management System. ARNG officials also told us that they plan to update the Guard Incentive Management System to include the 2017 policy in February 2018. GAO also found that ARNG had not developed and implemented a plan for future significant changes that could affect its internal controls over soldier incentive payments. These changes include, for example, the end of the current vendor contract in 2020 to support the Reserve Component Manpower System and the Army National Guard's migration to the Integrated Personnel and Pay System – Army that is scheduled to occur in 2018. Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to significant changes that could affect an internal control system. Specifically, because conditions affecting an organization and its environment continually change, management needs to anticipate and plan for significant changes by using a forward-looking process to prepare for those changes. Without taking action to plan for such changes, ARNG puts itself at risk of making improper payments in the future. The Defense Finance and Accounting Service and the Defense Office of Hearings and Appeals review and adjudicate requests for waivers of incentive debt. DOD has taken two steps to improve the availability of documentation needed to adjudicate waiver cases. First, DOD has clarified the policy in its Financial Management Regulation on the documentation soldiers are required to provide. Second, officials review documentation in the Guard Incentive Management System before validating an incentive payment, which may reduce delays associated with missing documentation when processing waiver requests. GAO recommends that ARNG develop and implement a plan that identifies, analyzes, and responds to significant changes that could affect internal controls for its Selected Reserve Incentive Program. ARNG concurred with the recommendation and has identified planned actions to address the recommendation.", "document_type": "gao"}
{"report": "NAS is a withdrawal condition within infants that can result from the prenatal use of opioids by pregnant women. Prenatal opioid use occurs when a woman, during the course of her pregnancy, uses an opioid- based medication or substance. Prenatal opioid use can take various forms, including (1) the use of prescriptions for pain management, such as fentanyl and oxycodone; (2) medication-assisted treatment for opioid addiction, such as methadone and buprenorphine; (3) prescription drug misuse or use disorder (such as using an opioid without a prescription, using a different dosage than prescribed, or continuing to use an opioid when it is no longer needed for pain); and (4) illicit opioid use, such as heroin use. These types of prenatal opioid use are not mutually exclusive. A 2014 study found that almost 22 percent of pregnant Medicaid beneficiaries filled a prescription for an opioid during their pregnancy. Medication-assisted treatment—an approach that combines the use of certain medications and behavioral therapy—is generally considered by HHS and medical specialty societies to be the standard of care for treating pregnant women with opioid use disorders, depending on the individual and her circumstances. SAMHSA and several medical specialty societies, including the American College of Obstetricians and Gynecologists and the American Society of Addiction Medicine, have noted that providing medication-assisted treatment during pregnancy prevents complications associated with illicit opioid use, encourages prenatal care, and reduces the risk of obstetric complications. Further, women may use multiple substances in addition to opioids during pregnancy—known as maternal polysubstance use—such as tobacco, alcohol, or anti-depressants, among others. GAO reported in 2015 that the gaps in efforts to address prenatal opioid use and NAS most commonly cited by federal agency officials and experts were related to the treatment of prenatal opioid use and NAS. Agency officials and experts said that there has not been adequate research comparing different types of treatment approaches and that research is needed on how best to treat a pregnant woman with an opioid use disorder so that the treatment is most effective for the woman while offering minimal risk to the fetus. See GAO-15-203. For more information on factors that can affect access to medication- assisted treatment, see GAO, Opioid Addiction: Laws, Regulations, and Other Factors Can Affect Medication-Assisted Treatment Access, GAO-16-833 (Washington, D.C.: Sept. 2016). respiratory distress. There is currently no national standard of care for screening or treating NAS. There have been a few scoring tools developed to screen the infant to determine the appropriate course of treatment. Health care providers predominantly diagnose NAS using the Finnegan Neonatal Abstinence Scoring Tool, which calculates a score based on a variety of central nervous, metabolic, respiratory, and gastro-intestinal symptoms that might be observed. The American Academy of Pediatrics and the American College of Obstetricians and Gynecologists recommend that infants with NAS should not be initially treated with medication, known as pharmacologic treatment. Instead, these organizations recommend starting with non-pharmacologic treatment, which includes placing the infant in a dark and quiet environment, swaddling, breastfeeding, rooming-in with the mother, and providing high-calorie nutrition, among other things. For example, rooming-in—allowing the mother to reside with the infant during the infant’s treatment—may have benefits, such as helping to develop a bond between the mother and infant and to reduce the severity of the infant’s NAS symptoms. Pharmacologic treatment, such as using methadone or morphine, may be necessary only for the relief of moderate to severe signs of NAS. See figure 1 for more information on non-pharmacologic and pharmacologic treatment. HHS has published several guidance and educational resources related to NAS and prenatal opioid use. These documents serve as tools to help stakeholders, including state entities and health care providers, who work with this population. For example, SAMHSA published a clinical report for health care providers in 2016 that provides recommendations to help them when making decisions regarding the evaluation, care, and treatment of women with opioid use disorders and infants with NAS. As of July 2017, SAMHSA is in the process of producing a clinical guide based on this report and expects to publish an updated report later this year. In another example, SAMHSA published a guidance document in 2016 that aims to support the efforts of states, tribes, and local communities in addressing the needs of pregnant women with opioid use disorders and their infants. Among other things, the document includes strategies and guidance to promote care coordination among stakeholders, including child welfare agencies and medical professionals, when treating infants with NAS. (See app. II for a list of federal educational resources related to NAS and prenatal opioid use published by HHS.) As we previously noted, more than 80 percent of NAS cases are paid for by Medicaid, which is a federal-state health care program that finances health care coverage for low-income and medically needy populations, including children and aged or disabled adults. States administer their Medicaid programs within broad federal requirements and according to a state plan approved by CMS, the federal agency within HHS that oversees Medicaid. The Medicaid program allows states to design and implement their programs within certain federal parameters, resulting in more than 50 distinct state-based programs. For example, states generally determine the type and scope of services to cover, set payment rates that different health care providers will receive for various covered services, and pay these providers for claims submitted for services rendered. In addition, states vary in the extent to which they enroll beneficiaries in managed care versus delivering care through the more traditional fee-for-service model. Under a managed care delivery model, states typically contract with managed care plans to provide a specific set of Medicaid-covered services to beneficiaries and pay them a set amount per beneficiary—referred to as capitation payments—to provide those services. Under fee-for-service, Medicaid pays health care providers a fee for each service provided to a Medicaid beneficiary. Medicaid’s Early and Periodic Screening, Diagnostic, and Treatment benefit, which states are required to provide, covers comprehensive health screenings, preventive health services, and all medically necessary treatment and services—for Medicaid eligible-children under the age of 21—to correct or ameliorate health conditions discovered through screenings. According to the literature we reviewed, most infants with NAS in the United States are treated in a hospital setting, often in the neonatal intensive care unit (NICU), which has a relatively high daily cost of care. Stakeholders we interviewed told us that these infants may also be treated in other hospital settings. According to state and perinatal collaborative officials in the four selected states we reviewed, infants diagnosed with NAS begin—and most complete—treatment for the condition in various hospital settings which provide different levels of care: a well newborn nursery (level I), special care nursery (level II), or NICU (level III or IV). For example, according to these officials, most infants with NAS in Vermont are treated in well newborn nurseries, while most infants with NAS in Kentucky and Wisconsin are treated in NICUs. West Virginia perinatal collaborative officials told us that about a third of infants with NAS are treated in well newborn nurseries, while two-thirds receive treatment in either a special care nursery or NICU. According to perinatal collaborative officials and hospital providers in the four selected states, the severity of the infant’s NAS symptoms or the hospital’s capability to treat NAS can determine whether the infant receives care in a nursery or NICU. Health care providers in the four selected states described the general clinical approach for treating infants with NAS. According to these providers, they generally start with non-pharmacologic treatment—for example, swaddling or placing the infant in a quiet, dark room. Health care providers may continue to monitor and assess the severity of the infant’s NAS symptoms using one of the available scoring tools for NAS. If the infant’s symptoms meet or exceed a certain threshold, these providers may initiate pharmacologic treatment by administering morphine or methadone, for example. Some perinatal collaborative officials that we interviewed in the four selected states told us that not all hospitals may have the capability to provide pharmacologic treatment. For example, these officials told us that level I hospitals—hospitals with only well newborn nurseries—in Kentucky and Wisconsin may not provide pharmacologic treatment to infants with NAS because these hospitals may not have the staff expertise to administer the needed medication and monitor the infants who receive it. Instead, these hospitals may transfer infants with NAS who require pharmacologic treatment to hospitals with higher levels of care, such as those with a NICU. Table 1 provides information on the eight selected hospitals in our review that provide NAS services. According to a 2015 study we reviewed, nationwide, infants with NAS who require pharmacologic treatment generally have longer average hospital stays (23 days) compared with infants with NAS who do not require such medication (17 days). Health care providers from our selected hospitals also indicated a similar trend—the average length of hospital stay in calendar year 2016 for infants with NAS who received pharmacologic treatment ranged from 7 to 30 days, while the stays for infants who did not require such medication ranged from 3 to 7 days. Medicaid generally pays for NAS treatment services in our four selected states using a diagnosis-related group (DRG) based payment system, in which hospitals receive a fixed amount for a bundle of services. In general, the DRG-based system used in Medicaid pays for the medical services necessary for treating infants with NAS, such as medication, bed space, and nursing staff, according to CMS officials. CMS officials said that the DRG-based system generally does not pay for professional services, such as physician visits; instead, these services are typically paid under a fee-for-service payment schedule, in which states or contracted managed care plans pay health care providers directly for their services. Officials in our selected states said information on total Medicaid payments for hospital-based NAS services was not readily available. Several DRGs are typically used to bill Medicaid for services provided to infants. However, these codes alone cannot provide an accurate estimate of Medicaid payments for NAS treatment services because the codes are not used exclusively for NAS. For example, according to some health care providers we interviewed, two DRG codes that may be used to bill Medicaid and other payers for NAS treatment services are 791 (prematurity with major problems) and 793 (full term neonate with major problems). However, these codes could be used to bill for over 2,000 diagnoses—for example, pneumonia or measles. One state official said that while they could provide us with information on Medicaid payments for these infants, they could not parse out the costs by diagnosis codes, such as those related to NAS. Thus, estimates of total Medicaid payments based only on DRG codes likely overstate the amount paid for NAS hospital-based services. Officials from two of the four selected states told us that their state has a public health surveillance system that tracks the incidence of infants diagnosed with NAS; however, the surveillance systems do not capture financial information, including Medicaid payments for NAS. At our request, one of the states cross-referenced their surveillance and Medicaid data and estimated that in 2016, their state Medicaid program spent over $22 million to treat 1,565 infants with NAS. While selected states generally could not provide information on total Medicaid payments for infants with NAS, some hospitals in our selected states were able to generate this information at our request using diagnosis codes that they identified as related to NAS from hospital claims data. Six of our selected eight hospitals reported that in calendar year 2016, the average Medicaid payment for treating infants with NAS ranged from about $1,500 to about $20,200 per infant per stay. The wide range in Medicaid payment averages may be because the averages included both infants who did and did not require pharmacologic treatment and because these hospitals treated infants in various settings, such as a nursery or a NICU. The literature we reviewed also had limited information on Medicaid payments for NAS treatment services provided in hospitals. A recent study reported that from 2009 through 2012—the most recent data available at the time of the study—Medicaid payments to hospitals for NAS treatment services increased from about $564 million to $1.2 billion nationwide. While most infants with NAS typically complete treatment in a hospital setting, stakeholders told us that some of these infants may be transferred to a non-hospital setting to complete pharmacologic treatment and continue non-pharmacologic treatment. HHS officials told us that there is not a comprehensive list of facilities that may treat infants with NAS outside of the hospital. Based on information from the stakeholders we interviewed and the literature we reviewed, we identified two types of non-hospital settings available in certain states that treat infants with NAS: (1) outpatient clinics and programs and (2) neonatal withdrawal centers. For the purposes of this report, we defined neonatal withdrawal centers as facilities that can treat infants who are prenatally exposed to drugs, including infants with NAS, within the facility. Outpatient clinics and programs to treat NAS Through stakeholder interviews and the literature we reviewed, we identified examples of outpatient clinics and programs in certain states where infants with NAS can continue pharmacologic treatment after their discharge from the hospital. For example, some stakeholders we interviewed told us about a Neonatal Medical Follow-Up Clinic in Vermont used to follow-up with infants with NAS who have been discharged from the hospital and are being weaned off methadone on an outpatient basis. Hospital providers train the infant’s family on how to administer the infant’s medication at home and provide a referral to the clinic. After hospital discharge, the infant and family have follow-up visits in the clinic every 1 to 2 weeks, during which the family discusses with health care providers the weaning schedule and demonstrate how they administer the infant’s medication. Health care providers told us that they also encourage the family to continue providing non-pharmacologic treatment to the infant. After weaning is complete, the infant continues to follow-up at the clinic every 1 to 2 months until the infant reaches 12 to 18 months of age. Literature we reviewed indicated that other outpatient treatment clinics or programs such as the one in Vermont have been established or considered in other states. Specifically, four studies we reviewed described instances in which infants began their treatment in the hospital but completed their treatment through a dedicated outpatient program in Florida, Ohio, and Pennsylvania. Each study noted that the inpatient-to- outpatient approach can result in a shorter hospital length of stay. For example, one 2015 study found that infants who began treatment in a hospital and completed their treatment in an outpatient setting stayed in the hospital an average of 11 days, compared to infants who completed treatment in the hospital, where the stays averaged about 25 days. However, the studies also noted that the inpatient-to-outpatient approach resulted in a longer overall treatment duration across the two settings. Neonatal withdrawal centers to treat NAS Some stakeholders we interviewed, including health care providers, described examples of neonatal withdrawal centers in two states, where infants with NAS can continue pharmacologic treatment after their discharge from the hospital. Health care providers in these facilities told us that in Washington and West Virginia, some infants with NAS who began treatment in a hospital may be referred to these facilities, where they reside until they complete treatment and are discharged from the facility. These providers explained that in these facilities, the infants are placed in nursery rooms, where health care providers can monitor them and administer and adjust their medication as needed. In addition, nursing staff or other caregivers are responsible for providing continuous non-pharmacologic treatment, and mothers are encouraged to visit and continue this care. For example, health care providers told us that in Washington, two to three infants may share a nursery room where trained caregivers provide them with non-pharmacologic treatment. In West Virginia, health care providers said infants are typically placed in individual nursery rooms where nurses provide them with non- pharmacologic treatment. The rooms in the West Virginia facility are also equipped with a rocking chair to encourage mothers to visit and provide this care as well. Health care providers told us that the facility currently offers one nursery room equipped with a bed to help prepare mothers on what to expect after discharge; they also said that they encourage mothers to spend the night prior to the infant’s discharge from the facility. (See text box below). Treating infants with neonatal abstinence syndrome (NAS) in a neonatal withdrawal center One health care provider from a neonatal withdrawal center told us that the practice of rooming-in helps to facilitate the bond between the mother and infant. He also said that rooming-in allows health care providers to model care for the mothers and for mothers to learn how to care for their infants with NAS. Health care providers told us that the facility currently offers one nursery room equipped with a bed to help prepare mothers on what to expect after discharge and that they encourage mothers to spend the night prior to the infant’s discharge from the facility. One health care provider told us that one mother, after staying overnight with her infant, realized that she was not prepared to take care of her infant and consequently gave up custody of the infant. Because of rooming-in, health care providers were able to ensure that the infant was safe because the mother came to this realization at the facility, rather than alone at home. Although the lack of physical space at the facility currently makes it difficult to accommodate rooming-in for the entire course of the infant’s treatment, these providers noted the importance of this practice and that they are committed to parental involvement when treating infants with NAS at their facility. Figure 2 depicts nursery rooms in the neonatal withdrawal center in West Virginia. Efforts are also underway to open a neonatal withdrawal center in Arizona and Ohio, according to stakeholders we interviewed. Stakeholders we interviewed and the literature we reviewed suggest some limitations as well as benefits of treating infants with NAS in non- hospital settings, including factors to consider in these settings. Health care providers from one of the hospitals we visited in Vermont told us that their hospital is the only one in the state that allows infants with NAS to complete pharmacologic treatment through the Vermont outpatient clinic because they have established the necessary infrastructure to ensure families’ compliance and safe practices at home. These providers said that they worked with one local pharmacy to ensure proper dispensing of the medication. Additionally, these providers measured the amount of medication left over at each follow- up visit with the families. Some state and perinatal collaborative officials told us that neonatal withdrawal centers may not be the best environment to treat infants with NAS because these settings may limit a mother’s access to her infant, since she may not always be allowed to reside with the infant. Such limits, according to officials, do not facilitate bonding between mother and infant. Another state perinatal collaborative official, as well as health care providers and staff, told us that neonatal withdrawal centers may be better for treating infants with NAS because the environment is quieter and less stimulating than hospital settings, such as NICUs. Several studies we reviewed also emphasized that the inpatient-to- outpatient approach requires ongoing coordination, communication, and commitment from multidisciplinary providers, as well as the families. These studies highlighted instances in which these approaches reduced the length of the infants’ stay in a hospital, though the studies emphasized that more work needs to be done to determine whether these are the optimal approaches for infants with NAS, as well as the potential long-term benefits of such approaches. Medicaid pays for NAS treatment services provided in the non-hospital settings we identified in certain states, according to CMS officials and other stakeholders we spoke with, but generally pays for these services separately, in contrast with the single bundled payment paid to hospitals. State officials and health care providers in the non-hospital settings we examined described various ways in which Medicaid covered services they provided to treat infants with NAS. For example: Outpatient follow-up clinic in Vermont. State officials and staff at this facility told us that the Vermont Medicaid program pays for an infant’s outpatient physician visits using a fee-for-service payment schedule. They added that the Vermont Medicaid program also pays for the infant’s medication used in pharmacologic treatment and explained that the pharmacy that dispenses the medication bills Medicaid for these services. Neonatal withdrawal center in Washington. Health care providers at this facility told us that the Washington Medicaid program or their contracted managed care plans pay for physician visits using a fee- for-service payment schedule, noting that the facility decided to stop billing Medicaid for medical supplies because of the low reimbursement. Additionally, these providers suggested that because the facility does not meet the Medicaid standards required for receiving payment for hospital inpatient, nursing, or other covered facility services, the facility is ineligible to receive Medicaid payment for the costs of room and board. These providers said that they receive funding for the cost of these services through state appropriations, foster care payments, city contracts, grants, and private donations. Neonatal withdrawal center in West Virginia. State officials and health care providers at this facility told us that West Virginia pays for NAS services through two mechanisms, depending on whether the infant is in foster care. Specifically, if the infant is in foster care, the facility receives a bundled payment from the state Medicaid program and the Bureau of Children and Families. However, if the infant is not in foster care, the state Medicaid program pays for physician visits using a fee-for-service schedule. Additionally, the facility can receive payment under a per diem rate that is negotiated with state Medicaid managed care plans. The health care providers said that they also receive funding through grants and private donations to help cover the costs of NAS services. Stakeholders we interviewed and literature we reviewed suggest that the costs of treating infants with NAS in non-hospital settings were lower than treating them in hospital settings. However, supporting data and research of the costs in different settings are anecdotal or otherwise limited. For example: Health care providers from the neonatal withdrawal center in Washington told us that their facility could treat infants at a lower average cost per day than could hospitals—at about $700 per infant per day compared to an average cost of about $1,500-2,500 per infant per day in a hospital. These providers said that this cost savings is in part due to their limited staffing of nurses and their ability to leverage specially trained caregivers to provide infants with non-pharmacologic treatment and hands-on care, such as feeding and bathing. These providers also said they use volunteers to help with household duties, such as laundry and replenishing supplies. A health care provider from the neonatal withdrawal center in West Virginia conducted a study that found that the average daily charges per infant were about $400 in their facility, compared to about $2,600 in a special care nursery and $4,000 in a NICU. Two studies we reviewed found that inpatient-to-outpatient treatment approaches reduced hospital costs for NAS treatment; however, these studies were not generalizable and did not account for the duration of treatment across the two settings. Specifically, one study found that an inpatient-to-outpatient treatment approach reduced hospital length of stay by 55 percent—estimated to save hospitals $396 million annually—compared with treatment provided solely in a hospital. The second study found that infants who received care for NAS through an inpatient-to-outpatient treatment approach had an average length of stay of 13 days and cost about $14,000, while an inpatient- only approach had an average length of stay of 25 days and cost about $28,000. The 32 stakeholders we interviewed and the literature we reviewed identified several recommended practices for addressing NAS—that is, treating women with opioid use disorders during pregnancy or treating infants diagnosed with NAS after birth. The most frequently recommended practices were (1) prioritizing non-pharmacologic treatment, such as allowing the mother to reside with the infant during treatment, to facilitate the mother-infant bond; (2) educating mothers on prenatal care, treatment for NAS, and available resources for after an infant’s discharge; (3) educating health care providers on the stigma faced by women who use opioids during pregnancy and on how to screen for and treat NAS; and (4) using a protocol in a hospital or non-hospital setting for screening and treating infants with NAS. These recommended practices are described in more detail below. Volunteer programs to provide non- pharmacologic treatment for neonatal abstinence syndrome (NAS) Some stakeholders told us that some hospitals have established volunteer cuddler programs that train volunteers to help provide some of these non-pharmacologic treatments—-namely, swaddling, feeding, soothing, and coddling infants. However, health care providers at some facilities noted that volunteers are not necessarily available during late shifts. indicated that non-pharmacologic treatment may (1) facilitate the mother- infant bond, (2) reduce the severity of NAS symptoms, (3) reduce the need for pharmacologic treatment, and (4) reduce the length of an infant’s hospital stay. For example, two of the articles we reviewed noted that rooming-in has been shown to help decrease the need for pharmacologic treatment, the number of admissions to the NICU, and the length of an infant’s hospital stay. Additionally, 17 of the stakeholders we interviewed and nine articles we reviewed recommended that mothers be allowed to breastfeed while their infants are treated for NAS, as it helps to build a bond between the mother and infant. Most of these articles also noted that breastfeeding has been shown to reduce the severity of NAS. Educating mothers on prenatal care, treatment for NAS, and resources for after an infant’s hospital discharge. Most stakeholders we interviewed and several of the literature articles we reviewed recommended providing comprehensive, ongoing education to mothers on prenatal care and treatment for NAS and on the resources that are available after an infant’s discharge. (See text box below). The stakeholders and literature indicated that this education may (1) facilitate a non-combative relationship between the mother and health care providers; (2) help to reassure and support the mother, who may feel responsible for the infant’s suffering, in addition to facilitating treatment of NAS; and (3) help the mother understand her infant’s behavior and develop greater confidence in her parenting skills. For example, one article noted that an infant’s withdrawal behavior, such as fisting, back arching, and jaw clenching, may be misinterpreted by the mother as dislike of touch, and that educating mothers on these behaviors can help alleviate feelings of guilt. Education for mothers on prenatal care, treatment for neonatal abstinence syndrome (NAS), and resources for after an infant’s hospital discharge Explaining to the mother during the prenatal period what she can expect when the infant is born to help ensure she understands the effects of and treatment for NAS; Informing the mother about non-pharmacologic treatment techniques that can help reduce the severity of the infant’s NAS symptoms; Modeling good parenting skills, such as demonstrating how to comfort an infant who may be crying inconsolably for hours because of withdrawal; and Informing the mother about contraception for preventing future pregnancies. Educating health care providers on the stigma faced by women who use opioids during pregnancy, and how to screen for and treat NAS. Most stakeholders we interviewed and several of the literature articles we reviewed recommended educating health care providers, including providers who are not addiction specialists, on both the stigma faced by women who use opioids during pregnancy as well as on how to screen for and treat infants with NAS. The stakeholders and literature indicated that this education may: (1) improve care so that mothers with opioid use disorders feel more comfortable seeking and obtaining prenatal care, (2) help health care providers know how to recognize NAS symptoms to help ensure infants receive appropriate treatment, and (3) allow for more consistency among these providers in NAS screening and treatment. For example, 26 stakeholders told us that educating health care providers about stigma is important because provider attitudes affect how and if pregnant women obtain prenatal care and treatment for their opioid use disorders, which can affect the severity of NAS. Additionally, several articles we reviewed noted the importance of educating and training clinicians on how to administer the screening tools used to identify infants with NAS, which helps ensure infants are identified and receive optimal care. Using a protocol for screening and treating infants with NAS. While there is no single national standard of care for screening and treating NAS, most stakeholders we interviewed and several of the literature articles we reviewed recommended that hospital and non-hospital settings use a protocol to screen for and treat infants with NAS. The stakeholders and literature indicated that having a protocol can help: (1) identify infants at risk for NAS, (2) ensure that care is provided consistently, and (3) reduce the length of stay for infants receiving pharmacologic treatment. For example, the stakeholders we interviewed explained that a standard protocol also helps health care providers understand the tools used to assess the severity of NAS; know the types of medication used in treatment, including amounts and duration; and learn how to wean the infant off these medications. Similarly, one article we reviewed noted that infants who were treated at facilities that adopted standard treatment protocols experienced shorter durations of pharmacologic treatment compared with infants who were treated at facilities that did not use a standard protocol. Stakeholders we interviewed and literature we reviewed identified several challenges health care providers face in their efforts to address NAS. The most frequently cited challenges included (1) the use of multiple substances by pregnant women, which can exacerbate NAS; (2) the stigma faced by women who use opioids during pregnancy, which may affect whether they seek prenatal care to address NAS, among other things; (3) hospital staff burden and limited physical capacity to care for infants with NAS; (4) limited coordination of care for mothers and infants with NAS; and (5) gaps in research and data on NAS. These challenges are described in more detail below. The use of multiple substances by pregnant women, which can exacerbate NAS. Most stakeholders we interviewed and some of the literature we reviewed noted that the use of multiple substances by pregnant women, including opioids—referred to as maternal polysubstance use—can be a challenge, and some stated that the use of these substances can exacerbate NAS symptoms. According to the stakeholders, the substances can include methamphetamines, nicotine, alcohol, cocaine, marijuana, benzodiazepines, and Gabapentin. The stakeholders and literature indicated that maternal polysubstance use can lead to multiple conditions in the infant—such as prematurity or Hepatitis C—that can exacerbate NAS symptoms and prolong the length of an infant’s hospital stay. For example, one expert noted that many women with opioid use disorders are also heavy cigarette smokers, and the nicotine typically exacerbates NAS withdrawal symptoms. Additionally, officials from a hospital and non-hospital setting we visited told us that they had developed a separate protocol for treating infants exposed to multiple substances that includes the use of several medications to address the more severe NAS withdrawal symptoms. Stigma faced by women who use opioids which may affect whether they seek prenatal care to mitigate the severity of NAS, among other things. Most stakeholders we interviewed and several of the literature articles we reviewed noted that the stigma faced by pregnant women with opioid use disorders is a challenge in addressing NAS. The stakeholders and literature indicated that stigma may: (1) prevent pregnant women from seeking substance use treatment or prenatal care; (2) prevent them from disclosing their drug use to health care providers during pregnancy; or (3) cause the women to fear punitive effects, such as losing custody of their children, being detained, or losing their jobs. For example, officials from one perinatal quality collaborative told us that these women may fail to seek care because of stigma, which can ultimately make it more difficult for health care providers to build relationships with these women and identify infants at risk for NAS. Hospital staff burden and limited physical capacity to care for infants with NAS. According to most stakeholders we interviewed and some literature we reviewed, staff burden and a limited physical capacity at facilities can pose challenges for addressing NAS. The stakeholders and literature indicated that there is increased burden on staff to care for these infants because they require frequent, personal attention. For example, the stakeholders explained that a hospital may have to increase the number of nurses on duty in order to provide the care the infants need. Health care providers at one hospital said that nurses still struggle to care for infants with NAS, even with additional staff, because these infants are overstimulated, cry, and do not eat or sleep well. As a result, they require much time and one-on-one attention—including cuddling— from nurses. With respect to physical capacity, some stakeholders told us that limited physical capacity can make it difficult to (1) find space in the facility where the infants can be protected from high levels of stimulation and (2) facilitate the mother-infant bond. For example, some stakeholders told us that hospitals may not have a dedicated space for rooming-in, making it more difficult to facilitate bonding between mothers and infants. Limited coordination of care for mothers and infants with NAS. Most stakeholders we interviewed explained that the lack of coordination among health care providers and others for the mother and infant with NAS during the prenatal period, after the infant is born, and following the infant’s discharge can be a challenge. This coordination includes organizing patient care activities and sharing information among health care providers, social workers, and all other participants concerned with the mother and infant’s care. The stakeholders indicated that this lack of coordination can make it difficult for families to get the resources or support they need. (See text box below). For example, some stakeholders told us that women may miss health care visits because of a lack of access to enabling services such as transportation or child care. Limited coordination of care for mothers and infants with neonatal abstinence syndrome (NAS) One expert told us that there is a disproportionate number of infants with NAS born in rural areas. Infants in these areas may be discharged from the hospital without many follow-up services, such as transportation and care coordination. Gaps in research and data on NAS. Some stakeholders we interviewed noted that gaps in research and data on NAS make it challenging to conduct research on the affected population and fully understand the magnitude of the problem. The stakeholders indicated that there are gaps in adequate research and data on (1) the different types of treatment approaches for NAS; (2) the extent and effects of maternal polysubstance use among pregnant women; (3) the long-term effects of prenatal drug exposure, including the effects seen in childhood and adolescence; and (4) the efforts to ensure more consistent provider diagnosis and screening, such as through an improved screening tool. For example, the stakeholders told us that gaps in research and data may contribute to a lack of a national standard of care for screening and treating infants with NAS. According to some stakeholders, this may result in missed opportunities for identifying and treating infants with NAS. Some stakeholders also told us that because of gaps in research on the long- term effects of prenatal drug exposure, there is limited information on the types of services that infants with NAS may need in early childhood. Additionally, some stakeholders noted they found that because NAS was not consistently diagnosed and coded in medical records using diagnosis codes, the condition may be under-reported, and researchers may be limited in their ability to track these infants. In May 2017, HHS published the Protecting Our Infants Act: Report to Congress, which—among other things—presents a strategy that identifies key recommendations related to addressing NAS. Specifically, HHS’s strategy—known as the Protecting Our Infants Act: Final Strategy—made 39 recommendations related to the prevention, treatment, and related services for NAS and prenatal opioid use. Of the 39 recommendations HHS made in its report, we found that 28 of them directly relate to the recommended practices or challenges that we describe above. For example, the Strategy recommends the following: promoting non-pharmacologic treatment, such as rooming-in; providing continuing medical education to health care providers for managing and treating infants with NAS, such as on NAS treatment protocols; conducting research on the long-term effects of prenatal drug exposure so that appropriate services can be developed for infants with NAS; and establishing clear definitions of NAS and standardizing the use of diagnosis codes to collect more meaningful and actionable data on NAS. According to the Strategy, the recommendations will be used to inform planning and policy across HHS. However, HHS does not include any information in the Strategy on how the department and other stakeholders will implement the recommendations. Specifically, HHS does not include in its Strategy the following: the explicit priorities among the numerous recommendations and associated efforts the department has initiated related to NAS; timeframes for partial or full implementation of these recommendations; clear roles and responsibilities for the recommendations, such as the extent to which HHS will need to rely on the medical community and federal and public stakeholders for implementation; and the methods that will be used to assess the department’s progress in implementing any of these recommendations. HHS officials told us that they expect to develop a separate plan to guide implementation of the recommendations and that efforts to develop this plan were likely to begin in July 2017. However, as of September 2017, HHS could not provide any documentation that it had started to develop this implementation plan or establish a timeline for completing the plan; nor was HHS able to provide any information on what the plan may include. Having such a plan in place is important to ensure priorities are known and responsibilities are clear so that agencies and stakeholders can take appropriate action. Federal internal control standards call for agencies to have defined objectives clearly as part of their objective- setting process and to assign roles and responsibilities for achieving these objectives. Objectives defined in specific and measurable terms allow for the assessment of performance toward achieving objectives. Furthermore, leading principles on sound planning we have identified in our prior work call for developing robust plans to achieve agency goals. Until HHS finalizes an implementation plan that includes specific priorities, timeframes, responsibilities, and methods for evaluating progress, it is at risk of not being able to provide reasonable assurance that it can successfully implement these recommendations in a timely manner and assess the effectiveness of its efforts. The rising opioid crisis has caused a significant increase in the number of infants born and diagnosed with NAS, a condition that affects infants and their families, hospitals, and other health care providers who are treating them. The increase in infants born with NAS also increases medical and other treatment costs experienced by the federal government and states. HHS recently published a strategy with key recommendations that have the potential to address some of the challenges related to treating NAS. However, HHS lacks a sound plan for implementing these recommendations. The absence of such planning raises questions about whether and when HHS will be able to implement these recommendations in a timely manner and be able to assess its progress. The Secretary of HHS should expeditiously develop a plan—that includes priorities, timeframes, clear roles and responsibilities, and methods for assessing progress—to effectively implement the NAS-related recommendations identified in the Protecting Our Infants Act: Final Strategy. (Recommendation 1) We provided a draft of this report to HHS for review, and HHS provided written comments, which are reprinted in appendix III. HHS also provided technical comments, which we incorporated as appropriate. In its written comments, HHS concurred with our recommendation to expeditiously take steps to address NAS and re-stated that its Strategy will be used to inform planning and policy across HHS. Specifically, HHS said that as part of its broader initiative to address the opioid crisis, the department will develop and implement a plan—that will include priorities, timeframes, roles and responsibilities, and methods for assessing progress—to address as appropriate and possible, the NAS-related recommendations in its Strategy. HHS also stated that full implementation would be contingent on funding, though it provided no information on how much funding was needed or how the funding would be used. Developing a plan to guide implementation can help the department determine what resources, if any, are needed to implement the recommendations in its Strategy. We are sending copies of this report to the appropriate congressional addressees, the Secretary of Health and Human Services, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at iritanik@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. To address our first three audit objectives to describe care settings for treating infants with neonatal abstinence syndrome (NAS), Medicaid payment for NAS treatment, and the recommended practices and challenges for addressing NAS, we selected 32 stakeholders based on their relevant experience to cover a range of perspectives on NAS. Specifically, these stakeholders included those from site visits we conducted to four states—Kentucky, Vermont, West Virginia, and Wisconsin. We selected these states because they met the following criteria: 1. the state had one of the top 10 highest incidence rates of NAS, according to data from the Centers for Disease Control and Prevention (CDC) for 2013, the most recent year of publicly available data; 2. the state provided variation in United States geographic regions with high rates of NAS, as of 2012; 3. more than 40 percent of births in the state were financed by Medicaid, according to a 2016 Kaiser Family Foundation Medicaid Budget Survey; and 4. the state has a perinatal quality collaborative—a state or multi-state network of teams working to improve health outcomes for mothers and infants—with work related to NAS, which we identified through the American College of Obstetricians and Gynecologists. As part of these site visits, we interviewed (1) officials from each of the four states, including Medicaid officials, Maternal and Child Health Directors, and Women’s Services Coordinators; (2) representatives from the four state perinatal collaboratives; (3) health care providers (including physicians or nurses) from eight hospitals of varying levels of care (two hospitals in each state), which were selected based on recommendations from the state perinatal collaboratives because of the hospitals’ experience treating NAS; and (4) officials from a residential treatment facility in each of the four states that provide prenatal and postpartum care to mothers, which were also selected based on recommendations from the state perinatal collaboratives regarding the facilities’ experience with pregnant women with opioid use disorders and their infants with NAS. In addition to our site visits, we selected 12 additional stakeholders that included health care providers or administrators in non-hospital settings across the United States; officials from medical specialty societies; and experts. Specifically, we spoke with (1) health care providers (including physicians or nurses) or administrators from four non-hospital settings in Arizona, Ohio, Washington, and West Virginia, which were selected based on recommendations from stakeholders we interviewed and on the availability of such settings and their experience treating NAS; (2) health care providers from five medical specialty societies, including the American Academy of Pediatrics, the American College of Obstetricians and Gynecologists, the American Society of Addiction Medicine, MedNAX (a network of physicians that specialize in neonatal care, including NAS treatment), and the National Association of Neonatal Nurses; and (3) three experts, including the authors of published literature we reviewed. We interviewed each of these 32 stakeholders and requested information from stakeholders about treating infants with NAS, including the utilization of available hospital and non-hospital care settings and associated costs of treatment services. For example, we requested protocols for screening and treating infants with NAS from hospital and non-hospital care settings. We reviewed available protocols provided by hospitals and a non-hospital care setting. We also reviewed available information reported by state officials, hospital and non-hospital providers, and state perinatal collaboratives on the utilization of hospital and non-hospital care settings, the facilities’ cost of treating NAS in hospital and non-hospital settings, the lengths of stay for treating infants with NAS, or the amount of Medicaid payments for treating infants with NAS. We discussed the information provided by stakeholders and examined the information for obvious errors. The information obtained from these stakeholders is not generalizable to other states or other hospital and non-hospital settings. In addition, in some cases, stakeholders used different methods to collect the information they reported, including information on Medicaid payments; as a result, the information reported by stakeholders is not directly comparable. Additionally, we interviewed officials from HHS, including those from the Centers for Medicare & Medicaid Services (CMS) and HHS’s Behavioral Health Coordinating Council—which includes officials from the Substance Abuse and Mental Health Services Administration (SAMHSA), the Indian Health Service, the Centers for Disease Control and Prevention (CDC), and the Food and Drug Administration, among others—concerning NAS treatment services, settings of care, Medicaid payment, and recommended practices and challenges related to addressing NAS. We also conducted a comprehensive literature review to identify relevant studies on NAS published in peer-reviewed journals from January 2013 to December 2016. We searched more than 40 databases for research published in relevant peer-reviewed journals, including BIOSIS Previews®, Embase®, Gale Group Health Periodicals Database, MEDLINE®, and New England Journal of Medicine. Key search terms included “neonatal abstinence syndrome,” “neonatal opioid withdrawal syndrome,” and “newborn infants.” After excluding duplicates, we identified and reviewed 325 abstracts. For those abstracts we found relevant, we obtained and reviewed the full study and selected 40 that were relevant to (1) hospital and non-hospital settings and related treatment services for infants with NAS; (2) the costs associated with treating infants with NAS, including Medicaid payments for services in these care settings; or (3) recommended practices and challenges for addressing NAS. We examined the methodologies for each of these studies and interviewed some of their authors. We determined that the studies were sufficiently reliable for our audit objectives. For a complete list of the studies we reviewed, see below. To examine our last audit objective on HHS’s strategy related to addressing NAS, we interviewed agency officials and reviewed agency documents on the agency’s efforts to develop a strategy. Specifically, we interviewed relevant officials from CMS and HHS’s Behavioral Health Coordinating Council concerning their efforts to develop a strategy related to addressing NAS. In reviewing relevant HHS documents, we focused on HHS’s Protecting Our Infants Act Report to Congress, which includes a strategy to address identified gaps, challenges, and recommendations related to NAS and prenatal opioid use. In addition, we reviewed the relevant standards for internal control in the federal government and the relevant criteria from GAO’s body of work on effectively managing performance under the Government Performance and Results Act (GPRA) of 1993 and the GPRA Modernization Act of 2010. Allocco, E., M. Melker, F. Rojas-Miguez, C. Bradley, K. A. Hahn, and E. M. Wachman. “Comparison of Neonatal Abstinence Syndrome Manifestations in Preterm Versus Term Opioid-Exposed Infants.” Advances in Neonatal Care, vol. 16, no.5 (2016). Artigas, V. “Management of Neonatal Abstinence Syndrome in the Newborn Nursery.” Nursing for Women’s Health, vol. 18, issue 6 (Dec. 2014/Jan. 2015). Asti, L., J. S. Magers, E. Keels, J. Wispe, and R. E. McLead. “A Quality Improvement Project to Reduce Length of Stay for Neonatal Abstinence Syndrome.” Pediatrics, vol. 135, no. 6 (2015). Busch, D. W. “Clinical management of the Breast-Feeding Mother-Infant Dyad in Recovery from Opioid Dependence.” Journal of Addictions Nursery, vol. 27, no. 2 (2016). Casper, T. and M. Arbour. “Evidence-Based Nurse-Driven Interventions for the Care of Newborns with Neonatal Abstinence Syndrome.” Advances in Neonatal Care, vol. 14, no. 6 (2014). Chau, K. T., J. Nguyen, B. Miladinovic, C. M. Lilly, T. L. Ashmeade, and M. Balakrishnan. “Outpatient Management of Neonatal Abstinence Syndrome: A Quality Improvement Project.” The Joint Commission Journal on Quality and Patient Safety, vol. 42, no. 11 (2016). Cirillo, C. and K. Francis. “Does Breast Milk Affect Neonatal Abstinence Syndrome Severity, the Need for Pharmacologic Therapy, and Length of Stay for Infants of Mothers on Opioid Maintenance Therapy During Pregnancy?” Advances in Neonatal Care, vol. 16, no.5 (2016). Clark, L. and A. Rohan. “Identifying and Assessing the Substance- Exposed Infant.” MCN in Advance (2015). Demirci, J. R., D. L. Bogen, and Y. Klionsky. “Breastfeeding and Methadone Therapy: The Maternal Experience.” Substance Abuse, vol. 36, no. 2 (2015). Edwards, L. and L. F. Brown. “Nonpharmacologic Management of Neonatal Abstinence Syndrome: An Integrative Review.” Neonatal Network, vol. 35, no. 5 (2016). Gregory, K. E. “Caring for the Infant with neonatal Abstinence Syndrome in a Community-Based Setting.” The Journal of Perinatal & Neonatal Nursing, (2014). Grim, K., T. E. Harrison, and R. T. Wilder. “Management of Neonatal Abstinence Syndrome from Opioids.” Clinics in Perinatology, (2013). Hahn, J., A. Lengerich, R. Byrd, R. Stoltz, J. Hench, S. Byrd, and C. Ford. “Neonatal Abstinence Syndrome: The Experience of Infant Massage.” Creative Nursing, vol. 22, issue 1 (2016). Hall, E. S., S. L. Wexelblatt, M. Crowley, J. L. Grow, L. R. Jasin, M. A. Klebanoff, R. E. McClead, J. Meinzen-Derr, V. K. Mohan, H. Stein, and M. C. Walsh. “A Multicenter Cohort Study of Treatments and Hospital Outcomes in Neonatal Abstinence Syndrome.” Pediatrics, vol. 134, no. 2 (2014). Hall, E. S., S. L. Wexelblatt, M. Crowley, J. L. Grow, L. R. Jasin, M. A. Klebanoff, R. E. McClead, J. Meinzen-Derr, V. k. Mohan, H. Stein, and M. C. Walsh. “Implementation of a Neonatal Abstinence Syndrome Weaning Protocol: A Multicenter Cohort Study.” Pediatrics, vol. 136, no. 4 (2015). Holmes, A. V., E. C. Atwood, B. Whalen, J. Beliveau, J. D. Jarvis, J. C. Matulis, and S. L. Ralston. “Rooming-In to Treat Neonatal Abstinence Syndrome: Improved Family-Centered Care at Lower Cost.” Pediatrics, vol. 137, no. 6 (2016). Jones, H. E., K. Deppen, M. L. Hudak, L. Leffert, C. McClelland, L. Sahin, J. Starer, M. Terplan, J. M. Throrp Jr., J. Walsh, and A. A. Creanga. “Clinical Care for Opioid-Using Pregnant and Postpartum Women: The Role of Obstetric Providers.” American Journal of Obstetrics & Gynecology, vol. 210, issue 4 (2014). Jones, H.E., C. Seashore, E. Johnson, E. Horton, K.E. O’Grady, K. Andringa, M. R. Grossman, B. Whalen, and A.V. Holmes. “Brief Report: Psychometric Assessment of the Neonatal Abstinence Scoring System and the MOTHER NAS Scale.” American Journal on Addictions, (2016). Kraft, W.K., M. W. Stover, and J. M. Davis. “Neonatal Abstinence Syndrome: Pharmacologic Strategies for the Mother and Infant.” Seminars in Perinatology, vol. 40, issue 3 (2016). Krans, E. E., G. Cochran, and D. L. Bogen. “Caring for Opioid Dependent Pregnant Women: Prenatal and Postpartum Care Considerations.” Clinical Obstetrics and Gynecology, vol. 58, no. 2 (2015). Lee, J., S. Hulman, M. Musci Jr., and E. Stang. “Neonatal Abstinence Syndrome: Influence of a Combined Inpatient/Outpatient Methadone Treatment Regimen on the Average Length of Stay of a Medicaid NICU Population.” Population Health Management, vol. 18, no.5 (2015). MacMullen, N. J., L. A. Dulski, and P. Blobaum. “Evidence-Based Interventions for Neonatal Abstinence Syndrome.” Pediatric Nursing, vol. 40, no. 4 (2014). Maguire, D. J., “Mothers on Methadone: Care in the NICU.” Neonatal Network, vol. 32, no. 6 (2013). Marcellus, L. “Supporting Women with Substance Use Issues: Trauma- Informed Care as a Foundation for Practice in the NICU.” Neonatal Network, vol. 33, no.6 (2014). McKeever, A. E., S. Spaeth-Brayton, and S. Sheerin. “The Role of Nurses in Comprehensive Care Management of Pregnant Women with Drug Addiction.” Nursing for Women’s Health, vol. 18, no.4 (2014). Meyer, M. and J. Phillips. “Caring for Pregnant Opioid Abusers in Vermont: A Potential Model for Non-Urban Areas.” Preventive Medicine, vol. 80 (2015). Newnam, K. M. “The Right Tool at the Right Time: Examining the Evidence Surrounding Measurement of Neonatal Abstinence Syndrome.” Advances in Neonatal Care, vol. 14, no.3 (2014). Orlando, S. “An Overview of Clinical Tools Used to Assess Neonatal Abstinence Syndrome.” Journal of Perinatal and Neonatal Nursing, vol. 28, no.3 (2014). Patrick, S.W., M.M. Davis, C.U. Lehman, and W.O. Cooper. “Increasing Incidence and Geographic Distribution of Neonatal Abstinence Syndrome: United States 2009 to 2012.” Journal of Perinatology, vol. 35 (2015). Patrick, S.W., H.C. Kaplan, M. Passarella, M.M. Davis, and S.A. Lorch. “Variation in Treatment of Neonatal Abstinence Syndrome in U.S. Children’s Hospitals, 2004-2011.” Journal of Perinatology, vol. 34, no. 11 (2014). Patrick, S.W., J. Dudley, P.R. Martin, F.E. Harrell, M.D. Warren, K.E. Hartmann, E.W. Ely, C.G. Grijalva, and W.O. Cooper. “Prescription Opioid Epidemic and Infant Outcomes.” Pediatrics, vol. 135, no.5 (2015). Patrick, S.W., R. E. Schumacher, J. D. Horbar, M. E. Buus-Frank, E. M. Edwards, K. A. Morrow, K. R. Ferrelli, A. P. Picarillo, M. Gupta, and R. F. Soll. “Improving Care for Neonatal Abstinence Syndrome.” Pediatrics, vol. 137, no. 5 (2016). Reece-Stremtan, S., and K. A. Marinelli. “ABM Clinical Protocol #21: Guidelines for Breastfeeding and the Drug-Dependent Woman, Revised 2015.” Breastfeeding Medicine, vol. 10, no.3 (2015). Shaw, M. R., C. Lederhos, M. Haberman, D. Howell, S. Fleming, and J. Roll. “Nurses Perceptions of Caring for Childbearing Women Who Misuse Opioids.” The American Journal of Maternal-Child Nursing, vol. 41, no. 1 (2016). Sublett, J. “Neonatal Abstinence Syndrome: Therapeutic Interventions.” The American Journal of Maternal-Child Nursing, vol. 38, no. 2 (2013). Sutter, M. B., L. Leeman, and A. Hsi. “Neonatal Opioid Withdrawal Syndrome.” Obstetrics and Gynecology Clinics of North America, vol. 41, issue 2 (2014). Teague, A. H., A. J. Jnah, and D. Newberry. “Intraprofessional Excellence in Nursing: Collaborative Strategies for Neonatal Abstinence Syndrome.” Neonatal Network, vol. 34, no.6 (2015). Terplan, M., A. Kennedy-Hendricks, and M. S. Chisolm. “Prenatal Substance Use: Exploring Assumptions of Maternal Unfitness.” Substance Abuse: Research and Treatment (2015). Tolia, V. N., S. W. Patrick, M. M. Bennett, K. Murthy, J. Sousa, P. B. Smith, R. H. Clark, and A. R. Spitzer. “Increasing Incidence of the Neonatal Abstinence Syndrome in U.S. Neonatal ICUs.” The New England Journal of Medicine, vol. 372, no. 22 (2015). Wiles, J. R., B. Isemann, L. P. Ward, A. A. Vinks, and H. Akinbi. “Current Management of Neonatal Abstinence Syndrome Secondary to Intrauterine Opioid Exposure.” Journal of Pediatrics, vol. 165, no. 3 (2014). The Department of Health and Human Services (HHS) has published several guidance and educational resources related to neonatal abstinence syndrome and prenatal opioid use. According to HHS, these documents serve as tools to help stakeholders, including state entities and health care providers, and policymakers. Examples of these resources are listed below. Centers for Disease Control and Prevention (CDC), Pregnancy and Opioid Medications Factsheet, accessed June 8, 2017, https://www.cdc.gov/drugoverdose/pdf/pregnancy_opioid_pain_factsheet- a.pdf. CDC Public Health Grand Rounds, Primary Prevention and Public Strategies to Prevent Neonatal Abstinence Syndrome (Atlanta, GA: CDC, last updated August 18, 2016), accessed July 19, 2017, https://www.cdc.gov/cdcgrandrounds/archives/2016/August2016.htm. CDC, Treating for Two: Safer Medication Use in Pregnancy Initiative (Atlanta, GA: CDC, last updated May 5, 2016), accessed June 8, 2017, https://www.cdc.gov/pregnancy/meds/treatingfortwo. Department of Health and Human Services, Opioids: The Prescription Drug & Heroin Overdose Epidemic (Washington, D.C., last reviewed March 24, 2016), accessed June 8, 2017, https://www.hhs.gov/opioids/index.html. Department of Health and Human Services, National Center for Substance Abuse and Child Welfare, Resources & Topics on Neonatal Abstinence Syndrome, accessed June 8, 2017, https://www.ncsacw.samhsa.gov/resources/opioid-use-disorders-and-me dication-assisted-treatment/neonatal-abstinence-syndrome.aspx. Jean Y. Ko. et al., “CDC Grand Rounds: Public Health Strategies to Prevent Neonatal Abstinence Syndrome,” Morbidity and Mortality Weekly Report (Centers for Disease Control and Prevention, March 10, 2017), accessed June 8, 2017, https://www.cdc.gov/mmwr/volumes/66/wr/mm6609a2.htm. National Institute on Drug Abuse, Principles of Substance Abuse Prevention for Early Childhood: A Research Based Guide (last updated March 2016), accessed June 8, 2017, https://www.drugabuse.gov/publications/principles-substance-abuse-prev ention-early-childhood/principles-substance-abuse-prevention-early-child hood. National Institute on Drug Abuse, Substance Use in Women (last updated September 2016), accessed June 8, 2017, https://www.drugabuse.gov/publications/research-reports/substance-use-i n-women/summary. Reddy, Uma M. J. M. Davis, Z. Ren, and M. F. Greene, “Opioid Use in Pregnancy, Neonatal Abstinence Syndrome, and Childhood Outcomes: Executive Summary of a Joint Workshop.” Obstetrics and Gynecology, vol. 130, issue 1 (July 2017). Substance Abuse and Mental Health Services Administration, A Collaborative Approach to the Treatment of Pregnant Women with Opioid Use Disorders. HHS Publications No. (SMA) 16-4978. Rockville, MD: Substance Abuse and Mental Health Services Administration, 2016. Substance Abuse and Mental Health Services Administration, “Advancing the Care of Pregnant and Parenting Women With Opioid Use Disorder and Their Infants: A Foundation for Clinical Guidance,” Rockville, MD: Substance Abuse and Mental Health Services Administration, 2016. Substance Abuse and Mental Health Services Administration, “Methadone Treatment for Pregnant Women.” HHS Publication No. (SMA) 14-4124 (Rockville, MD: Substance Abuse and Mental Health Services Administration, revised 2014). In addition to the contact named above, Rashmi Agarwal, Assistant Director; Amy Leone, Analyst-in-Charge; Melissa Duong; Krister Friday; Jacquelyn Hamilton; Giao N. Nguyen; and Laurie Pachter made key contributions to this report. Drug Control Policy: Information on Status of Federal Efforts and Key Issues for Preventing Illicit Drug Use. GAO-17-766T. Washington, D.C.: July 26, 2017. Medicaid Expansion: Behavioral Health Treatment Use in Selected States in 2014. GAO-17-529. Washington, D.C.: July 21, 2017. VA Health Care: Actions Needed to Ensure Medical Facility Controlled Substance Inspection Programs Meet Agency Requirements. GAO-17-242. Washington, D.C.: February 15, 2017. Highlights of a Forum: Preventing Illicit Drug Use. GAO-17-146SP. Washington, D.C.: November 14, 2016. Opioid Addiction: Laws, Regulations, and Other Factors Can Affect Medication-Assisted Treatment Access. GAO-16-833. Washington, D.C.: September 27, 2016. Drug Enforcement Administration: Additional Actions Needed to Address Prior GAO Recommendations. GAO-16-737T. Washington, D.C.: June 22, 2016. Office of National Drug Control Policy: Progress toward Some National Drug Control Strategy Goals, but None Have Been Fully Achieved. GAO-16-660T. Washington, D.C.: May 17, 2016. Veterans Justice Outreach Program: VA Could Improve Management by Establishing Performance Measures and Fully Assessing Risks. GAO-16-393. Washington, D.C.: April 28, 2016. State Marijuana Legalization: DOJ Should Document Its Approach to Monitoring the Effects of Legalization. GAO-16-1. Washington, D.C.: December 30, 2015. Prescription Drugs: More DEA Information about Registrants’ Controlled Substances Roles Could Improve Their Understanding and Help Ensure Access. GAO-15-471. Washington, D.C.: June 25, 2015. Mental Health: Better Documentation Needed to Oversee Substance Abuse and Mental Health Services Administration Grantees. GAO-15-405. Washington, D.C.: May 12, 2015. Prenatal Drug Use and Newborn Health: Federal Efforts Need Better Planning and Coordination. GAO-15-203. Washington, D.C.: February 10, 2015. Medicare Program Integrity: CMS Pursues Many Practices to Address Prescription Drug Fraud, Waste, and Abuse. GAO-15-66. Washington, D.C.: October 24, 2014. Office of National Drug Control Policy: Office Could Better Identify Opportunities to Increase Program Coordination. GAO-13-333. Washington D.C.: March 26, 2013. Child Welfare: States Use Flexible Federal Funds, But Struggle to Meet Service Needs. GAO-13-170. Washington, D.C.: January 30, 2013.", "summary": "As the opioid crisis has increased in recent years, so has the number of pregnant women who use opioids, which can result in NAS. A recent peer-reviewed study found that cases of NAS have grown nearly five-fold between 2000 and 2012 and that most infants with NAS are covered under Medicaid. The Comprehensive Addiction and Recovery Act of 2016 includes a provision for GAO to examine NAS in the United States and related treatment services covered under Medicaid. This report 1) describes the hospital and non-hospital settings for treating infants with NAS and how Medicaid pays for services, 2) describes recommended practices and challenges for addressing NAS, and 3) examines HHS's strategy for addressing NAS. GAO reviewed HHS documentation and interviewed HHS officials. GAO also conducted site visits to four states—Kentucky, Vermont, West Virginia, and Wisconsin—selected based on several factors, including incidence rates of NAS and geographic variation. GAO interviewed stakeholders from 32 organizations, including health care providers and state officials in the selected states. The prenatal use of opioids or other drugs can produce a withdrawal condition in newborns known as neonatal abstinence syndrome (NAS). Health care providers, state officials, and other stakeholders told GAO that most infants with NAS are treated in the hospital—such as in a neonatal intensive care unit—though some may be referred to a non-hospital setting—such as a neonatal withdrawal center with nursery rooms—to complete their treatment. The table below provides more information on settings for treating infants with NAS and on how Medicaid pays for services in these settings. According to stakeholders GAO interviewed and literature reviewed, there are several recommended practices and challenges associated with addressing NAS. The most frequently recommended practices included prioritizing non-pharmacologic treatment to infants—treatment that does not involve medications—such as allowing the mother to reside with the infant during treatment; educating mothers and health care providers on treatment of NAS, among other things; and using a protocol in the hospital or non-hospital setting for screening and treating infants with NAS. The most frequently cited challenges included the maternal use of multiple drugs—or polysubstance use—as it can exacerbate NAS symptoms; stigma faced by pregnant women who use opioids; hospital staff burden and limited physical capacity to care for infants with NAS; limited coordination of care for mothers and infants with NAS; and gaps in research and data on NAS, such as research on the long-term effects of the condition. In May 2017, the Department of Health and Human Services (HHS) published a strategy document that makes key recommendations to address NAS. The Strategy recommends, for example, that health care providers receive continuing education on managing and treating infants with NAS and promote non-pharmacologic treatment. According to HHS officials, these recommendations will inform planning and policy across the department. However, HHS has yet to determine how and when the recommendations will be implemented, including establishing priorities; the roles and responsibilities of other federal, state, and public stakeholders; implementation timeframes; and methods for assessing progress. HHS officials told GAO that they expect to develop an implementation plan sometime in 2017 but had no timeline for doing so. Without a plan that clearly specifies how HHS will implement the Strategy and assess its progress, the department increases the risk that its recommendations for addressing NAS will not be implemented. HHS should expeditiously develop a plan for implementing the recommendations included in its strategy related to addressing NAS. HHS concurred that it should expeditiously address NAS, but noted implementation of the strategy is contingent on funding.", "document_type": "gao"}
{"report": "Following the terrorist attacks of September 11, 2001, Congress passed the Aviation and Transportation Security Act which created TSA as the federal agency responsible for security in all modes of transportation, including civil aviation. Among its responsibilities, TSA must generally ensure that all passengers and property are screened before being transported on a commercial passenger aircraft. This statute also provided TSA the authority to enter into OTAs. TSA defines an OTA as a set of legally enforceable promises between TSA and another party that is other than a procurement contract, grant, cooperative agreement, lease, or loan. Every agency has inherent authority to enter into contracts to procure goods or services for its own use; however, agencies must receive specific authority to award OTAs. Under these authorities, agencies may develop agreements that do not follow a standard format or include terms and conditions that are typically required when using traditional mechanisms such as FAR-based contracts. Agreements entered into using other transaction authority are not generally subject to certain statutory and regulatory requirements related to government contracting such as the FAR and the terms and conditions of each individual OTA may be tailored to meet the specific situation. For example, OTAs may be fixed-price, cost-reimbursable, or provide that each party bear the costs of their participation. In addition, the length of an OTA is negotiable, with some agreements lasting a few days and others for years. As we reported in 2016, Congress has granted other transaction authority to 11 federal agencies. The statutory authorities for most agencies, however, include some limitations on the use of the agreements, although the extent and type of limitations vary. We found that most of the 11 agencies used OTAs for two purposes: (1) research, development, and demonstration; and (2) prototype development. Three agencies—the Federal Aviation Administration, TSA, and the National Aeronautics and Space Administration—used OTAs for different activities, such as airport security and education and outreach. Only a few agencies, including TSA and the National Aeronautics and Space Administration, have unrestricted authority to award OTAs. We also found that 9 of the 11 agencies had fewer than 90 active OTAs per fiscal year, but that, in contrast, TSA and the National Aeronautics and Space Administration had hundreds, and thousands, respectively. TSA’s Office of Contracting and Procurement established policy and procedures for the use, award, and oversight of OTAs in 2011. Prior to 2011, TSA had no governing policy for OTAs. According to TSA’s policy, which has been revised several times since its inception, OTAs are best suited for situations where: an entity is not a traditional contracting partner, for example, airlines, airport authorities, trade associations, quasi-governmental entities, or research and development organizations; there are cost sharing mechanisms that require the recipient to contribute to the overall cost of the effort; or the recipient must recoup all costs through third-party user-fees. Further, the policy states that OTAs may not be used when the principal purpose of the agreement is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States government. Table 2 identifies some of the key provisions of TSA’s OTA policy. This framework for awarding and overseeing OTAs is similar to those for contracts. Further, according to TSA’s OTA policy, contracting officers who award OTAs must be certified at Federal Acquisition Certification in Contracting Level III and demonstrate possession of a level of experience, responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured business environment of the OTA. From fiscal years 2012 through 2016, TSA reported obligating millions annually through OTAs, which amounted to at least $1.4 billion, or about 13 percent of its overall obligations during this time. Five TSA reimbursement programs used OTAs to partially or fully reimburse airports and law enforcement agencies for the allowable costs associated with TSA security programs such as the design and construction of checked baggage inline systems. These five reimbursement programs accounted for about 99 percent of the $1.1 billion that TSA obligated on OTAs that were awarded during this period. The remaining three non- reimbursement programs accounted for a small amount of obligations and awarded a low number of OTAs for services including intelligence analysis and the development of aviation standards. From fiscal year 2012 to 2016, TSA reported obligating millions annually through OTAs, amounting to at least $1.4 billion, or about 13 percent of its overall obligations through contracts and OTAs. Annual OTA obligations remained fairly stable over this period, except for fiscal year 2013 when obligations spiked and then sharply declined in fiscal year 2014. This spike was driven in large part by the Electronic Baggage Screening Program, which obligated $519 million on 54 OTAs in fiscal year 2013 but obligated only $4 million on one OTA in fiscal year 2014. See table 3 for TSA’s obligations on contracts and OTAs. From fiscal year 2012 to 2016 eight TSA programs used OTAs to meet a variety of mission requirements. Five reimbursement programs used OTAs to partially or fully reimburse airports and law enforcement agencies for the allowable costs associated with TSA security programs. This accounted for about 99 percent of all OTA awards and obligations from fiscal year 2012 to 2016. The remaining three non-reimbursement programs accounted for a small amount of obligations and awarded a low number of OTAs for services including intelligence analysis and the development of aviation standards. See table 4 for the number of OTA awards and obligations by program. For more information on the programs and OTAs we reviewed, see appendix I. The five reimbursement programs awarded numerous OTAs to different airports and law enforcement agencies for similar requirements. These programs each used a class determination and findings that describes the general requirement and other parameters such as a range of possible award amounts or periods of performance. TSA has an OTA template with standard provisions. Terms tailored to the specific airport or law enforcement agency are then provided in the individual OTAs. The following examples illustrate some of the ways TSA has used OTAs to reimburse airports and law enforcement agencies for the costs associated with TSA security programs. The Electronic Baggage Screening Program is an acquisition program that tests, procures, deploys, and maintains checked baggage screening equipment at federalized airports. TSA uses FAR-based contracts to buy things like explosives detection machines and engineering support services. TSA uses OTAs to reimburse airports for the allowable design and construction costs associated with facility modifications needed for installing, updating, or replacing in-line checked baggage screening systems. These systems use conveyor belts to route checked luggage through an explosives detection machine which captures an image of the checked bag to determine if the bag contains any type of threat item including explosives. Agreements generally range in value from $50,000 to $150 million, and the anticipated period of performance can range from 6 months to 3 years, depending on the size and complexity of the project. In one example, TSA entered into an OTA to reimburse the City of Cleveland about $24 million for work at Cleveland Hopkins International Airport for installation of explosive detection systems within the checked baggage screening area. The Law Enforcement Officer Reimbursement Program provides partial salary reimbursement to approximately 325 airports to offset the costs of carrying out aviation law enforcement responsibilities in support of passenger screening activities. Reimbursement is based on an established “not-to-exceed” hourly rate or the actual cost per hour, whichever is lower. Agreements range in value depending on the airport category, the number of checkpoints and law enforcement officers, hours of operation, and availability of funds. The period of performance for these agreements is generally 3 to 5 years. For example, TSA entered into an agreement with the Dallas/Fort Worth International Airport Board that lasted from October 2012 to March 2016 to reimburse the airport about $5.5 million. While the five reimbursement programs awarded numerous OTAs for the same purpose to different airports and law enforcement agencies, the remaining three non-reimbursement programs awarded few OTAs and their use was more varied. Specifically, the Office of Security Policy and Industry Engagement, the Office of Law Enforcement/Federal Air Marshal Service, and the Office of Global Strategies used OTAs for a range of services including intelligence analysis and the development of aviation standards. For example: The Office of Security Policy and Industry Engagement is responsible for developing security policies to reduce the risk of catastrophic terrorist attacks. From fiscal year 2012 to 2016, the office awarded four OTAs. These included two awards to the American Public Transportation Association to meet ongoing requirements for intelligence gathering, public transit information sharing and analysis, and the development of mass transit and passenger rail security practices. The Office of Law Enforcement/Federal Air Marshal Service awarded 13 OTAs to pay for parking for federal air marshals and authorized Law Enforcement Office employees at airports including John F. Kennedy International and Washington Dulles International. However, in September 2016, TSA competitively awarded a contract to manage parking expenses at numerous airports. According to officials, parking requirements for the Office of Law Enforcement/Federal Air Marshal Service will be met through the contract and as a result, existing OTAs for this requirement are being phased out. Other than the parking OTAs, TSA officials noted that the requirements for the seven remaining programs that used OTAs from fiscal year 2012 to 2016 are ongoing and that TSA will continue to use OTAs for the same purposes in fiscal year 2017 and beyond, contingent on available funding. They also noted that they do not anticipate any new uses of OTAs. Our review of 29 OTAs awarded by 8 TSA programs from fiscal years 2012 through 2016 found that the methods used to determine price reasonableness and monitor these OTAs varied based on the complexity of the requirement. Further, for the key areas we reviewed, the OTAs generally met the requirements of TSA’s policy. Nonetheless, TSA’s own 2015 internal compliance review found significant gaps in OTA documentation and reporting. In response to these deficiencies, TSA has taken action to strengthen oversight and compliance with its policy. TSA’s OTA policy requires contracting officers to determine that the price negotiated under the OTA is reasonable and to appoint a COR to provide monitoring and a range of administration tasks to ensure that requirements are satisfactorily delivered. For the 29 OTAs we reviewed, we found that the methods used to determine price reasonableness and provide monitoring varied based on the complexity of the requirement. Approaches to determining price reasonableness ranged from instances where TSA extensively evaluated proposed costs to more straightforward analysis. For OTAs awarded by the Electronic Baggage Screening Program where the requirements for infrastructure design and construction can be complex, the program produces an independent government cost estimate based on design drawings and specifications from the airports which are required to follow TSA’s detailed guidance. The program compares the estimate with the airport authority’s independent bid for the design and construction. Any discrepancies are noted in the technical evaluation, which the contracting officer reviews and documents in the business clearance memorandum. For example, in fiscal year 2016, TSA awarded an OTA for $23 million to the City of Chicago for the recapitalization of the checked baggage resolution area at O’Hare International Airport. Certain proposed costs in the contractor’s bid were higher than TSA’s independent government cost estimate. The contracting officer performed an evaluation of the costs and determined that they were reasonable and that the difference was, in part, the result of the airport having greater familiarity with the existing conditions at the site than TSA’s cost estimators. By contrast, some programs took a more straightforward approach to determining price reasonableness, including cases where the costs were predetermined or not negotiable. For example, the Checkpoint Janitorial and Utilities Program used OTAs as a vehicle for reimbursing airport authorities for the costs of electricity to operate TSA screening equipment and for janitorial services in checkpoint areas. TSA had independently verified electricity prices set by the local power authority. Prices for janitorial services were verified based on the airport’s competitively- awarded janitorial contracts. In one case, TSA entered into an OTA to reimburse the Massachusetts Port Authority for $678,000 for one year. TSA performed price analysis on historical data from agreements dating back to 2008 and reviewed changes to the checkpoint square footage and changes in electrical consumption based on use of new TSA equipment. The airport authority provided documentation verifying electrical rates set by the local power authority that TSA’s contracting officer used to determine fair and reasonable pricing. Janitorial costs were based on TSA’s pro-rated share of the airport’s competitively-awarded janitorial contract and considered to be fair and reasonable based on adequate competition in the commercial market-place. TSA verified the rates each year prior to executing options. COR monitoring similarly varied depending on the complexity of the requirement. For the more complex design and construction projects under the Electronic Baggage Screening Program, COR monitoring was more rigorous than for programs with less complex requirements. According to 2016 guidance, the COR is the primary interface between TSA and the airport and is responsible for performing stakeholder coordination functions. During the design phase, the COR is to review the airport’s design documentation to ensure compliance with TSA’s guidelines and standards in collaboration with TSA subject matter experts. During the construction phase, the COR is responsible for performing ongoing oversight including reviewing invoices prior to payment. For an OTA awarded to the Miami Dade Aviation Department the COR reviews monthly milestone progress status reports as well as weekly status reports prepared by TSA’s site integration contractor highlighting work completed, ongoing activities, and program risks. A contracting official noted that schedule slippage is a big risk for cost reimbursement projects which is mitigated by COR oversight, as well as the ongoing oversight of the site leads. A contracting official also noted that most CORs for these OTAs have DHS certification for program and project management providing them with greater technical and administrative expertise to monitor more complex projects. In one instance on another project with complex requirements under the Advanced Surveillance Program, project monitoring resulted in TSA and the airport working together to contain costs when a project did not go as expected. In fiscal year 2012, TSA awarded an OTA for $7.2 million to the Port Authority of New York and New Jersey for the design, installation and maintenance of a security system, including closed-circuit television cameras and associated software, at John F. Kennedy International Airport. In fiscal year 2013, TSA modified the OTA to add more cameras, thereby increasing the cost of the project to $21 million. However, during installation, the Port Authority experienced several unforeseen issues with the project, including reduced work hours available for unionized labor and asbestos abatement costs. As a result, the Port Authority reassessed its original cost estimate and determined that it was not sustainable. In fiscal year 2017, TSA and the Port Authority agreed to decrease the scope of the project from 751 cameras to 389 cameras to stay within the original $21 million estimate. Starting in fiscal year 2015, four years after it issued its 2011 OTA policy, TSA began to include OTAs in its contract compliance review program. Compliance reviews are conducted quarterly based on a selection of contracts and OTAs awarded in the previous quarter and intended to improve contracting operations, ensure compliance with applicable standards and policies, and identify best practices. Based on the number of findings identified in its review of six OTA actions included in a 2015 quarterly review, TSA commissioned an OTA-specific compliance review in June 2015. The OTA-specific review covered 30 actions with a total value of about $82 million and identified significant gaps in documentation and reporting. For example, 18 of 27 OTAs awarded after TSA’s 2011 policy was issued did not include a determination and findings approving the action. As noted above, this is a key document that describes the rationale for using an OTA instead of a traditional contract and the determination of price reasonableness. The review also found that 18 of 30 files did not document the assignment of a COR to perform oversight and that 20 of 30 FPDS-NG records were incorrect. In response to the findings of the OTA-specific compliance review, TSA implemented a number of actions and has subsequently found improvement in OTAs meeting documentation and reporting requirements. We found that TSA revised the OTA policy to clarify requirements and increased training for contracting officers with OTA warrants. Specifically, to obtain the OTA warrant, contracting officers must complete webinar training and 3 days of classroom training. To maintain the warrant, contracting officers must retake the webinar training every two years. According to TSA contracting officials, all of the 56 contracting officers had completed the new training requirements as of May 2017. In addition, TSA has continued to include OTAs in its quarterly compliance review process. Based on our analysis of TSA’s fiscal year 2016 compliance reviews, we found that TSA reviewed 16 OTAs with a total value of $62 million. In those reviews, 12 of the 16 findings were determined to be low risk. For example, several of the files did not include documentation of COR certification. The remaining four OTAs had findings that were determined to be medium risk. This includes, for example, one case where the OTA period of performance started 5 months before the OTA was signed. None of the OTAs, however, was missing a determination and findings and three had missing or incorrect FPDS-NG entries. Officials noted that their efforts to increase training, oversight, and enforcement of OTA policies and procedures have resulted in increased awareness of reporting requirements and greater compliance. In addition, TSA also recently increased oversight of the COR program to support efficient OTA and contract oversight and administration. A TSA official responsible for the COR program reported that in fiscal year 2017, TSA began to conduct quarterly compliance reviews of the COR program to ensure greater consistency in oversight practices across the agency. According to COR compliance review guidance issued in 2016, the reviews are intended to highlight positive practices, effective management techniques, and identify areas of improvements. Our analysis of data in FPDS-NG showed that issues with incomplete data have been corrected over time, in part due to increased oversight. We compared data reported in TSA’s financial management and accounting systems with data reported in FPDS-NG and found that the percentage of new OTAs reported in FPDS-NG increased from 37 percent in 2012 to 95 percent in 2016. TSA’s policy requires that OTAs be reported in the OTA module within FPDS-NG. The awarding contracting officer has responsibility for accurately entering OTA information, including the value of the award and the period of performance. TSA contracting officials attributed gaps in data in part to the fact that the process for entering OTA data into FPDS-NG is manual, whereas FPDS- NG automatically pulls data for contracts from TSA’s contract writing system. According to officials, OTAs are excluded from the contract writing system due to system limitations and this additional step increases the chance that a contracting officer may forget to enter the data into FPDS-NG or enter it into the system incorrectly. TSA officials noted that they have taken steps to improve the accuracy of the data reported in FPDS-NG by reviewing and verifying entries on a monthly basis in accordance with TSA’s policy. Our review of 29 OTAs also demonstrated that the OTAs generally met the requirements for the key areas of TSA policy that we reviewed. For example, TSA’s policy states that if the OTA will be awarded without competition, the determination and findings must include a discussion of the method for selecting the OTA recipient. None of the OTAs we reviewed was competed because TSA determined that competition was not applicable due to the nature of the requirements. Nonetheless, all the determination and findings included a discussion of the method for selecting OTA recipients, a process that varied by program. For example, the Law Enforcement Officer Reimbursement Program posts a solicitation and selects eligible applicants based on review criteria. By contrast, the Advanced Surveillance Program prioritizes projects using a risk-based matrix that assesses threats, vulnerabilities, and consequences populated with data from 449 airports. Despite improvements, TSA officials acknowledged the need for continued vigilance based on several issues we identified. For example, TSA entered into a “no funding” OTA in 2013 with Signature Flight Support, a commercial fixed-base operator at Ronald Reagan Washington National Airport. A fixed-base operator is an organization granted the right by an airport to provide aeronautical services such as fueling, hangaring, tie-down and parking, aircraft rental, aircraft maintenance, flight instruction, and similar services. Under the agreement, Signature Flight Support collects and remits special security screening and threat assessment fees from airline operators on behalf of TSA, fees that are required due to the airport’s location within a flight restricted zone and special flight rules area. TSA does not obligate funds through the OTA, which primarily establishes the responsibilities and procedures for the fee collection and remittal. Our review found that TSA did not take any action to extend or renew the agreement after it expired in December 2014. However, TSA program officials told us that Signature Flight Support continued to provide the service although an agreement was not in place. When we brought this issue to TSA’s attention, officials agreed the OTA period of performance should have been extended each year. Officials told us that as of October 2017 they anticipate awarding a new OTA for this requirement in the second quarter of fiscal year 2018, more than three years after the OTA expired. In addition to the steps TSA has taken to improve OTA oversight, such as revising its OTA policy and increasing training requirements, TSA officials told us that they will continue to conduct quarterly compliance reviews and monthly data verification in accordance with their policy. We provided a draft of this report to the Department of Homeland Security for comment. The Department provided only technical comments, which we incorporated as appropriate. We are sending copies of this report to the Senate Committee on Homeland Security and Governmental Affairs and the Secretary of the Department of Homeland Security. The report is also available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or woodsw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Purpose: Reimburses airports for the allowable costs related to various airport checked baggage screening projects including the design and construction of checked baggage inline systems and the recapitalization of existing inline systems. Agreements generally range in value from $50,000 to $150 million, and the anticipated period of performance can range from 6 months to 3 years, depending on the size of airport and complexity of the project. TSA rationale for using Other Transaction Agreement (OTA): Airports are owned and operated either by city or county municipalities, airport boards or trusts, or, in some cases as not-for-profit entities. Given that the program requires modifications to airport terminals that are owned by an entity other than the federal government, it is more practical for the airport to oversee and monitor the construction or modifications required for their facilities. Method of selecting OTA recipient: Airports submit applications through the airport’s Federal Security Director—a TSA employee responsible for security operations at federalized airports—including a description of the requirement, schematic design, budgetary cost estimate, and data relating to number of bags processed and airlines served. TSA prioritizes applications using a risk-based model and by considering several factors such as the cost share the airport is willing to assume and the readiness of the airport to begin the project. OTA type: Partial cost share/reimbursement. Depending on the airport’s size, TSA will reimburse 90 or 95 percent of the allowable, allocable and reasonable cost of certain projects. In other types of projects, TSA provides 100 percent reimbursement—for example, for existing systems requiring the correction of security or safety deficiencies. Method of determining price reasonableness: TSA produces an independent government cost estimate based on design drawings and specifications received from the airport and approved by TSA. The estimate is developed using industry standards and is used for evaluating total project cost. When bids are received from the airport, TSA compares the bid amount with the estimate. TSA may conduct further analysis and discussion to ensure that the estimate correctly reflects the scope included in the bid documents. Contracting Officer’s Representative (COR) monitoring: The COR is the primary interface between TSA and the airport and is responsible for performing stakeholder coordination functions. During the design phase, the COR is to review the airport’s design documentation to ensure compliance with TSAs guidelines and standards in collaboration with TSA subject matter experts. During the construction phase, the COR is to monitor project schedule and scope through processes such as weekly and monthly reporting. Purpose: Provides partial reimbursement to approximately 325 airports to offset the allowable costs of carrying out aviation law enforcement responsibilities in support of passenger screening activities. TSA rationale for using OTA: Participants are not traditional contracting partners; most participants must contribute to the cost of providing law enforcement officer support at the checkpoints; and the agreements do not acquire property or services for the direct benefit or use of the government. Method of selecting OTA recipient: The program posts a solicitation to FedBizOpps.gov with eligibility requirements, application process, review criteria, and selection process. Airports as well as state, local, or other public institutions/organizations responsible for commercial airport operations that have incurred law enforcement service costs due to TSA security mandates are eligible. The Federal Security Director—a TSA employee responsible for security operations at federalized airports— along with the Law Enforcement Officer Program Office, Office of Chief Counsel, and the contracting officer, participate in selecting eligible applicants. OTA type: Partial cost reimbursement. Method of determining price reasonableness: OTAs are negotiated to provide reimbursement for law enforcement officer support at an established “not-to-exceed” hourly rate or the actual cost per hour, whichever is lower. The amount of partial reimbursement is based on airport category, the number of checkpoints, hours of operation, and availability of funds. COR monitoring: CORs provide technical direction and day-to-day oversight of the program, work with the airport Federal Security Director to make sure that requirements are being satisfied, and approve invoices prior to payment. Purpose: Provides reimbursement for the allowable costs incurred to design, install, or expand surveillance systems to meet the required views of the local TSA. Project costs generally range from $200,000 to $21 million with an anticipated period of performance ranging from 6 months to 3 years depending on the complexity of the system and facility size. TSA rationale for using OTA: The primary beneficiary of the surveillance equipment is the facility that will take ownership of the system and be solely responsible for its operation. The use of an OTA provides for the facility to manage and perform the work but allows TSA oversight and control over the expenditure of TSA funds. TSA will not benefit directly from the purchase, installation, and operation of the system, so a traditional contract would not be appropriate. Method of selecting OTA recipient: The program prioritizes projects based on a risk-based matrix that assesses threats, vulnerabilities, and consequences based on data from 449 airports. Airports must be willing to complete the project within the required timeframe. OTA type: Cost reimbursement. Method of determining price reasonableness: The program uses a pre-award systems engineering process which culminates in a project evaluation and plan, a comprehensive surveillance assessment of TSA managed areas, and an independent government cost estimate. TSA reviews the cost elements to, for example, validate labor categories, labor hours, materials, and other direct costs based on industry standards and comparison with other projects. The program also uses market research and historical data to inform price analysis. COR monitoring: The COR works with project coordinators to monitor OTA performance and maintains direct contact with the transportation facility and the local TSA representatives. The COR reviews invoices to ensure that the transportation facility (via its contractor) has met all acceptance criteria prior to approval and payment of each invoice. Upon completion of installation and testing, TSA obtains an acceptance report to be signed by the transportation facility authority and major stakeholders including facility representatives, and the responsible TSA Federal Security Director, contracting officer, and COR. Purpose: Provides partial reimbursement to airports, mass transit systems, and state and local law enforcement participants for the allowable costs incurred associated with the operation of the authorized canine teams and explosives storage magazines. Allowable costs that will be reimbursed include handlers' salaries and care for the canines. In turn, the local jurisdiction agrees to a set of responsibilities including using TSA trained canine teams at least 80 percent of their on-duty time in the transportation environment and to maintain a minimum of three certified teams available for around-the-clock incident response. The program reimburses participants up to $50,500 per canine team for allowable costs incurred. The period of performance for these OTAs is up to 5 years. TSA rationale for using OTA: A standard procurement contract is not suitable because the airports, mass transit, and maritime facilities are not owned by TSA, but by airport authorities, and state and local agencies. These entities have the responsibility for the control and oversight of security operations at a specific location, either by having their own law enforcement officers, or using the state or local law enforcement officers. Since TSA does not own the airport or have primary law enforcement responsibility and only provides participants partial reimbursement for the operating costs of the teams, an OTA is warranted. Method of selecting OTA recipient: Transportation authorities and/or local law enforcement entities submit a written request outlining their desire to join the program in which they outline the need for the canine teams within their respective transportation system/s. TSA selects recipients based on a review of the transportation system’s risk profile and the program’s available team openings. OTA type: Partial cost reimbursement. Method of determining price reasonableness: The $50,500 per team stipend only covers a portion of the cost to the participant. There are instances after award that require an additional price reasonableness determination, such as when a participant requests reimbursement for a supply or service that is either unknown to the program or inconsistent with program historical prices for the given supply/service. If the program determines that the item is allocable the program will determine whether it was procured competitively and any facts that may support it being higher than historical prices paid. If the item was not procured competitively, the program will look at current price lists and catalogs for a same or similar item and consult program subject matter experts on their personal knowledge of the item(s) being purchased. COR monitoring: The program assigns a Field Canine Coordinator who is responsible for overseeing the participant’s compliance with the agreement through periodic reporting and assessments. Reimbursement is to be made upon receipt and review of summited expenses by the COR and contracting officer. Purpose: The Checkpoint Janitorial and Utilities program uses OTAs to define the terms and conditions for TSA’s use of checkpoint space in mandated non-leased space at airports and to provide a vehicle for reimbursing the cost of electrical consumption and janitorial services. TSA rationale for using OTA: A procurement contract is not suitable since the airport is a governmental entity, not a commercial vendor. Additionally, airports often contract directly with a utility provider or janitorial company. Method of selecting OTA recipient: Airports request reimbursement for utility costs and janitorial services in mandated non-leased space at TSA security checkpoints. TSA Federal Security Directors who are responsible for security operations at federalized airports confirm the need for reimbursing the cost of utilities and janitorial services at the checkpoint space. These OTAs are not available for competition as the only available source is the airport authority. OTA type: Cost reimbursement. Method of determining price reasonableness: TSA reimburses airports at cost for the costs of electrical consumption by TSA screening equipment located in the checkpoint space based on a cost allocation methodology. TSA reimburses airports for its pro-rata share of the airports janitorial costs per square foot also based on a cost allocation methodology. In the files we reviewed, prices were considered to be fair and reasonable based on documentation verifying the rates set by the local power authority. Costs were considered to be fair and reasonable based on the airports’ competitively-awarded janitorial contracts and rates established by the local utility authority. COR monitoring: Provides technical direction, contractor oversight, and certification of payments. Purpose: The office has an ongoing requirement for intelligence gathering, public transit information sharing and analysis, and development of mass transit and passenger rail recommended security practices. TSA rationale for using OTA: The American Public Transportation Association is a not-for-profit trade association which therefore may not currently have the experience, knowledge, or past performance to support a FAR type contract. Method of selecting OTA recipient: Through market research, TSA determined that the American Public Transportation Association was uniquely capable of meeting requirements. OTA type: Fixed price. Method of determining price reasonableness: In 2014, price was determined to be fair and reasonable based primarily on historical data and prices consistent with the preceding interagency agreement and the office’s independent government cost estimate. In 2016, the program updated the independent government cost estimate based on a quote from the American Public Transportation Association which provided for greater clarity, insight, and definition to the actual costs. Additional market research is planned to determine the best way to fulfill this requirement in the future. COR monitoring: The COR developed a contract management plan which identifies a detailed list of work products and delivery schedule. The expected deliverables are also detailed in the OTA statement of work. Responsibilities of the contractor include developing and managing a project plan; updating the plan as the project evolves; reporting project progress and status via monthly reports; and, participating in TSA- scheduled conference calls, if necessary, to review project progress, identify and discuss issues, and discuss corrective action. Purpose: The Surface Division of the Office of Security Policy and Industry Engagement has a need to maintain railroad police personnel involvement and a liaison relationship with the FBI’s National Joint Terrorism Task Force. The requirement entails the direct employment of intelligence gathering focused on preventing terrorist acts affecting the nation’s passenger and freight-rail infrastructure to facilitate the continuity of communications, liaison, intelligence analysis and information sharing among federal, state, local and railroad industry police/security agencies. TSA rationale for using OTA: A procurement contract is not suitable for this requirement, as the purpose of the action is to not acquire property or services for the direct benefit or use of the United States government. Rather, the requirement entails the direct employment of intelligence gathering focused on preventing terrorist acts affecting the nation’s passenger and freight-rail infrastructure. Method of selecting OTA recipient: Since 2003, the Association of American Railroads has provided the TSA with a railroad police officer charged with collecting and analyzing intelligence information. Market research reveals the Association of American Railroads to be one of two major railway representation groups in the U.S. counting among its membership the seven largest freight and passenger rail carriers in North America. A follow-on agreement with the Association of American Railroads maintains an uninterrupted flow of the critical intelligence necessary in monitoring the safety and security of the nation’s railway infrastructure. OTA type: Fixed price. Method of determining price reasonableness: The program developed an independent government cost estimate based on prices paid under a previous agreement which allows for an inflationary cost adjustment of 3 percent per year and determined the annual funding cost to be fair and reasonable in meeting this requirement. COR monitoring: The COR is responsible for the technical administration and liaison of the agreement and is to review and certify invoices for completeness and accuracy before approving them for payment. As authorized by the FBI, the assigned railroad police officer is to provide a monthly written report that summarizes the activities and accomplishments related to the tasks outlined in the agreement. Purpose: Ronald Reagan Washington National Airport is located within the Flight Restricted Zone and Special Flight Rules Area. As such, the Office of Security Policy and Industry Engagement developed a security program for approved general aviation aircraft operators which requires stringent security measures including requirements for background checks, physical screening of passengers and baggage. Aircraft operators are responsible for reimbursing TSA for the cost of the security screening. TSA requires the use of the airport facility to perform the screening function and a mechanism for the collection of security screening and threat assessment fees from aircraft operators and remittance of those fees to TSA. TSA rationale for using OTA: A procurement contract is not suitable for this requirement because TSA is not acquiring, purchasing, or leasing any product or service. The OTA primarily establishes the responsibilities of the parties and the fee collection and remittal procedures. Method of selecting OTA recipient: TSA determined that Signature Flight Support, as the sole commercial fixed base operator granted the right to operate at Reagan National Airport to provide aeronautical services such as fueling, hangaring, parking, aircraft rental, aircraft maintenance, flight instruction, and similar services—is therefore the only entity capable of providing the facilities and services required to implement this program. OTA type: No funding. Method of determining price reasonableness: Not applicable. COR monitoring: The COR is responsible for providing technical direction and administration. Purpose: The Office of Global Strategies is directed to encourage the development of civil aviation security, and is authorized to furnish to international organizations certain technical expertise and assistance. The office awarded an OTA to the International Civil Aviation Organization—a specialized agency of the United Nations committed to preventing and deterring unlawful interference with international civil aviation—to cover the salaries and benefits for three TSA employees assigned to the organization as senior security advisors. TSA actively participates in the organization’s Aviation Security Panel of Experts, which is responsible for promulgating international security standards. TSA rationale for using OTA: An OTA is best suited for this requirement since the International Civil Aviation Organization is a United Nations specialized agency and TSA is not acquiring any property or services for the direct benefit or use of the United States government. Method of selecting OTA recipient: There are no known alternative sources. OTA type: Fixed price. Method of determining a fair and reasonable price: Both the Program Office and the Contracting Officer solely relied upon historical salaries as previously used with the International Civil Aviation Organization. COR monitoring: The COR reviews and the contracting officer approves all invoices prior to payment. Purpose: TSA has a requirement to obtain parking spaces/permits for Federal Air Marshals during their mission flights for various airports. TSA rationale for using OTA: A procurement contract is not suitable for this requirement as airport parking is not considered a commercial item/service to the public; it is only available to business partners. An OTA allows TSA to participate in an airport’s business partner category. Further OTAs provide a practical vehicle because the airport authority is considered a U.S. state government entity. Method of selecting OTA recipient: TSA conducted market research which found that an OTA with the airport provides a significant cost savings to the government compared with other alternatives. TSA compared the costs of parking as a business partner with the cost of parking at the typical rates at the airport. OTA type: Fixed price. Method of determining a fair and reasonable price: TSA prepared an independent government cost estimate based upon commercial market pricing for airport parking. COR monitoring: TSA will pay the airport the variable fixed rate on a monthly basis. All costs will be invoiced based on actual costs incurred, but not to exceed the OTA amount. To receive payment from TSA, the airport submits one-page invoice to include the quantity used, unit price, and extended prices of the monthly deliverable. The invoice will be reviewed and approved by the COR and contracting officer prior to payment. Purpose: TSA has a need for parking for authorized Office of Law Enforcement Employees at Washington Dulles International Airport. TSA rationale for using OTA: Need for parking can be met more economically with mechanism to directly reimburse Metropolitan Washington Airports Authority. Method of selecting OTA recipient: TSA conducted market research which found that an OTA with the Metropolitan Washington Area Airport authority provides a significant cost savings to the government compared with other alternatives. OTA type: Fixed price. Method of determining a fair and reasonable price: TSA conducted price analysis and found that other available lots are all more expensive, farther away from the airport, and lack the capacity to service 400 people. COR monitoring: Perform surveillance to assure performance and compliance with the terms and conditions of the agreement. Certify invoices to the contracting officer for payment. In addition to the contact named above, Tatiana Winger (Assistant Director), Angie Nichols-Friedman (Analyst in Charge), Peter Anderson, Lorraine Ettaro, Julia Kennon, Carol Petersen, Lindsay Taylor, Westley Tsou, Alyssa Weir, and Robin Wilson made key contributions to this report.", "summary": "TSA is responsible for securing the nation's transportation systems and uses security technologies to screen airline passengers and their luggage to prevent prohibited items from being carried on commercial aircraft. TSA has special authority for using OTAs, which are not subject to certain federal contract laws and requirements. OTAs provide flexibility to help meet mission needs, but potentially carry the risk of reduced accountability and transparency. GAO was asked to examine TSA's use of OTAs. This report addresses: (1) the extent and purposes of TSA's use of OTAs, and (2) how TSA ensures prices are reasonable and how it oversees OTAs. To address TSA's use of OTAs, GAO analyzed data on OTA awards and obligations from the Federal Procurement Data System-Next Generation from fiscal years 2012 to 2016 (the most recent years for which data were available). GAO determined that data were sufficiently reliable to report on TSA's minimum use of OTAs. To examine how TSA prices and oversees OTAs, GAO selected a nongeneralizable sample of 29 OTAs from the 8 TSA programs that awarded them based on program size and OTA value. GAO reviewed relevant documentation, and interviewed contracting and program officials. During fiscal years 2012 through 2016, the Transportation Security Administration (TSA) awarded at least 1,039 other transaction agreements (OTA) and obligated at least $1.4 billion on them. These agreements, which are neither traditional contracts nor grants, were primarily used to reimburse airports and law enforcement agencies for the costs associated with TSA security programs. For example, TSA awarded at least 109 OTAs and obligated at least $783 million from fiscal years 2012 through 2016 to reimburse airports for the allowable design and construction costs associated with installing, updating, or replacing checked baggage screening systems. TSA also used OTAs for intelligence analysis and to offset the costs of providing canines for explosives detection, among other things. TSA Used Other Transaction Agreements to Reimburse Airports for Design and Construction Costs Associated with Checked Baggage Screening Systems For the selected 29 OTAs GAO reviewed, GAO found that the methods TSA used to determine price reasonableness varied depending on the complexity of the requirement. For example, For complex design and construction projects, TSA compared independent government cost estimates with contractor bids. Certified program managers monitored project schedule and scope through site visits and status reports. In contrast, TSA independently verified the rates set by the local power authority when reimbursing some airports for electricity costs to operate TSA screening equipment. GAO also found that TSA has taken action to address prior lapses in oversight, resulting in improved compliance. In 2015, TSA identified significant gaps in OTA file documentation and data reported in the Federal Procurement Data System-Next Generation. TSA took action to address these deficiencies by (1) updating its policy, (2) requiring additional training for contracting officers, (3) instituting monthly data verification, and (4) monitoring compliance through quarterly reviews. GAO's analysis confirmed that the quality of the data had improved between fiscal year 2012 and 2016. Moreover, the 29 OTAs generally met key requirements of TSA's policy that GAO identified. GAO is not making any recommendations in this report.", "document_type": "gao"}
{"report": "According to NRC’s website, the higher the radiation dose, the sooner the effects of radiation will appear, and the higher the probability of death. Radiation doses such as those received by survivors of the atomic bombs in Japan can cause cancers such as leukemia and colon cancer and, if levels are high enough, acute radiation syndrome. The symptoms of this syndrome range from nausea, fatigue, and vomiting to death within days or weeks. In contrast, the effects of low-dose radiation are more difficult to detect. In particular, below about 100 millisieverts (mSv) (10 rem)—the level below which the National Academies of Sciences, Engineering, and Medicine’s (National Academies) 2006 report on radiation and human health considered radiation to be low dose—data do not definitively establish the dose-response relationship between cancer and radiation exposure. In developing and applying radiation protection requirements and guidance for workers and the public—specifically, limits on dose or increased health risk and guidance levels on exposure—EPA, NRC, DOE, and FDA have generally taken the advice of scientific advisory bodies. In particular, they have relied on the advice of the International Commission on Radiological Protection, the National Council on Radiation Protection and Measurements, and the National Academies’ Nuclear and Radiation Studies Board. This advice includes the use of the linear no-threshold model, which assumes that the risk of cancer increases with every incremental increase in radiation exposure. For example, the National Academies published a report in 2006 stating that the balance of evidence from various types of studies tends to favor a simple proportionate relationship between radiation at low doses and cancer risk. According to the National Academies, the availability of new and more extensive data since the publication of its previous report in 1990 strengthened confidence in the 2006 report’s estimates of cancer risk. The advisory bodies have recognized challenges in accurately estimating cancer risks from very low doses of radiation exposure when using the linear no-threshold model. For example, much of the data on health effects of radiation exposure come from non-U.S. populations, such as Japanese atomic bomb survivors. These individuals received a large exposure to radiation over a short period of time (an acute exposure), and there is uncertainty about the extent to which the health effects for these populations can be extrapolated to a U.S. population that is regularly (chronically) exposed to low-dose radiation. Nevertheless, NRC officials told us that, in the absence of convincing evidence that there is a dose threshold below which low levels of radiation are beneficial or not harmful, NRC will continue to follow the recommendations of scientific advisory bodies to use the linear no- threshold model. Similarly, officials from EPA told us that they would consider changing the use of the linear no-threshold model as the basis of their requirements and guidance only if there were a strong recommendation from scientific advisory bodies on radiation protection as well as an endorsement of the change by the National Academies. Under this model, federal regulations set dose limits for radiation exposure that are below the level in the National Academies’ 2006 report on radiation and human health for defining low-dose radiation. For example, NRC’s annual dose limit for members of the public (excluding natural, or background, sources of radiation) from operation of nuclear power plants is a hundredth of the level the National Academies considers low dose. NRC based the dose limit on an advisory body recommendation that the cancer risk to the general public from exposure to radiation should be comparable to the public’s risk from everyday activities, such as taking public transportation. The low-dose radiation limits and guidance that federal agencies have developed and applied vary depending on the settings in which exposure can occur. For example, NRC has established limits on occupational dose that apply to nuclear power-plant workers; these limits are higher than NRC’s annual dose limit for members of the public but are still below the level the National Academies considers low dose. In keeping with advisory body recommendations, NRC also applies the principle that doses should be kept as low as reasonably achievable (ALARA). NRC defines ALARA to mean making every reasonable effort to maintain exposures to radiation as far below dose limits as is practical. At a nuclear power plant we visited as part of our work, representatives told us that under their ALARA plan, the plant set its own dose limit for workers at 40 percent of the NRC’s regulatory limit. Moreover, officials at the plant told us that they have been able to keep exposures below the plant’s own limit by continuously seeking opportunities to reduce unnecessary worker exposure to radiation, such as using robots to perform maintenance work in radiation areas. In contrast to radiation exposure received from nuclear power plants, FDA officials stated that the agency regulates the maximum radiation output of medical equipment, instead of setting limits on the total amount of radiation exposure to patients. According to FDA officials, FDA does not generally have the authority to regulate the total amount of radiation exposure a patient receives from medical imaging equipment. However, in keeping with the principle that radiation exposure should be kept as low as reasonably achievable, FDA encourages voluntary measures by health care providers, such as to investigate and determine whether it is possible to reduce radiation exposure to patients from the use of medical- imaging equipment. From fiscal year 2012 through fiscal year 2016, seven federal agencies obligated $209.6 million for research on the health effects of low-dose radiation, but they did not use a collaborative mechanism to address overall research priorities in this area. DOE and NIH accounted for most of the funding, with DOE obligating $116.3 million and NIH obligating $88.6 million, or about 56 percent and 42 percent of the total, respectively. The five other agencies—NRC, NASA, DOD, EPA, and CDC—obligated the remaining $4.7 million, or about 2 percent of the total. DOE has two offices that have funded research on the health effects of low-dose radiation—the Office of Science and the Office of Environment, Health, Safety and Security—according to funding information DOE provided. The Office of Science established the Low Dose Radiation Research Program in 1998 and funded it through fiscal year 2016. A primary focus of this program was radiobiological research, which examines molecular and cellular responses to radiation exposure. According to DOE’s website for the program, the program provided data and information about the low-dose range of exposure, producing 737 peer-reviewed publications as of March 2012. The Office of Environment, Health, Safety and Security provided funding for epidemiological studies, including studies involving Japanese atomic bomb survivors. NIH has funded and conducted both epidemiological and radiobiological studies on low-dose radiation, according to NIH officials. The officials stated that the studies are conducted through the National Cancer Institute’s internal research program for radiation epidemiology, as well as through NIH’s research programs for external funding of investigator- initiated research. Other institutes of NIH, including the National Institute of Environmental Health Sciences, also fund research related to the health effects of radiation exposure as part of NIH’s overall mission to fund medical research. Among the other agencies that provided some funding to low-dose radiation studies, several provided funding to the Epidemiological Study of One Million U.S. Radiation Workers and Veterans (Million Person Study)—an ongoing study headed by the National Council on Radiation Protection and Measurements. DOE also provided funding for this study. In fiscal years 2012 through 2016, the seven agencies who provided funding for research on health effects of low-dose radiation collectively decreased their annual funding obligations in this area by 48 percent, from $57.9 million in fiscal year 2012 to $30.4 million in fiscal year 2016. DOE accounted for a large portion of this overall decrease in annual funding. Specifically, over this 5-year period, DOE reduced its annual funding obligations for this area of research by 45 percent—from $32.6 million in fiscal year 2012 to $18.0 million in fiscal year 2016. According to DOE, the decrease was primarily due to DOE’s reduction in funding for its Low Dose Radiation Research Program. According to DOE officials, decreases in funding for the program reflected a shift toward bioenergy and environmental research. Similarly, over the 5-year period, NIH’s funding for low-dose radiation research decreased by 48 percent—from $23.1 million in fiscal year 2012 to $12.0 million in fiscal year 2016. NIH officials explained that funding levels for a particular disease or research area can fluctuate depending on several factors, including the number and quality of research proposals submitted and the outcome of NIH’s peer reviews of the proposals, as well as the overall research budget. The seven agencies that funded research on health effects of low-dose radiation for fiscal years 2012 through 2016 collaborated on particular research projects through various mechanisms, including joint funding of individual projects, but they did not use a collaborative mechanism to address overall research priorities. As previously noted, the 2016 report of DOE’s Biological and Environmental Research Advisory Committee provided information about research needs in low-dose radiation and found that further research could decrease uncertainty in predicting cancer risk from low-dose radiation. The report stated that other agencies—including NRC, NIH, EPA, DOD, and NASA—could benefit from the reduction in uncertainty that could be obtained by this research. In our September 2017 report, we recommended that the Secretary of Energy lead the development of a mechanism for interagency collaboration to determine roles and responsibilities for addressing priorities related to research on the health effects of low-dose radiation. We made this recommendation because our previous work has shown that collaborative mechanisms can serve multiple purposes, such as leading interagency efforts to develop and coordinate sound science and technology policies across the federal government. Although collaborative mechanisms differ in complexity and scope, they all benefit from certain key features, such as leadership. We directed this recommendation to DOE for several reasons. In the past, DOE took a leading role in advocating for greater communication and coordination between the fields of radiation biology and epidemiology. In addition, DOE is the federal agency that currently has primary responsibility under the Atomic Energy Act of 1954 for research related to the protection of health during activities that can result in exposure to radiation. DOE is well positioned to lead an effort to ensure that federal agencies have a mechanism for interagency collaboration to address overall research priorities related to low-dose radiation health effects because of the agency’s past experience as a leader in this area of research. Such an effort could help DOE and the collaborating agencies determine roles and responsibilities, including leadership when addressing shared research priorities. DOE did not agree with our recommendation. In particular, DOE stated that EPA and NRC also have legal mandates to research low-dose radiation exposure and that these agencies establish their research priorities in accordance with their respective budget authorities and recommendations from independent advisory bodies. DOE stated that as a result, it would not be appropriate for DOE to lead the development of a mechanism for interagency collaboration. We believe that DOE’s concerns stem from a misinterpretation of our recommendation, and we made several changes to our report and our recommendation to clarify DOE’s role. We noted that we did not recommend that a mechanism for interagency collaboration serve as a replacement for agencies’ legal mandates, budget authorities, and recommendations from independent advisory bodies. Instead, this mechanism would help agencies address shared research priorities. In making our recommendation, we did not specify the coordinating mechanism that agencies should use and instead left it to DOE to lead the development of an appropriate mechanism. We continue to believe that an interagency coordination mechanism for low-dose research is needed and that DOE is in the best position to lead agencies in developing the most appropriate mechanism. Chairman Weber, Ranking Member Veasey, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this statement, please contact John Neumann at (202) 512-3841 or neumannj@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to the report on which this testimony is based include Allen Chan, Kendall Childers, Joseph Cook, Richard Johnson, Cynthia Norris, Josie Ostrander, Amber Sinclair, and Jack Wang. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's September 2017 report, entitled Low-Dose Radiation: Interagency Collaboration on Planning Research Could Improve Information on Health Effects ( GAO-17-546 ). The Department of Energy (DOE), Nuclear Regulatory Commission (NRC), Environmental Protection Agency (EPA), and Food and Drug Administration generally used the advice of scientific advisory bodies to develop and apply radiation protection requirements and guidance for workers and the public in the radiation exposure settings that GAO reviewed. These settings were: (1) the operation and decommissioning of nuclear power plants; (2) the cleanup of sites with radiological contamination; (3) the use of medical equipment that produces radiation; and (4) accidental or terrorism-related exposure to radiation. Specifically, the agencies relied on the advice of three scientific advisory bodies that supported the use of a model that assumes the risk of cancer increases with every incremental radiation exposure. Accordingly, the agencies have set regulatory dose limits and issued guidance to confine exposure to levels that reduce the risk of cancer, while recognizing that scientific uncertainties occur in estimating cancer risks from low-dose radiation. For example, NRC requires nuclear power plants to consider measures for limiting workers' exposure below NRC's regulatory dose limit, such as by using robots for maintenance work in radiation areas. GAO identified seven federal agencies that funded research on low-dose radiation's health effects. In fiscal years 2012 to 2016, DOE, NRC, EPA, and four other federal agencies obligated about $210 million for such research . Although the agencies have collaborated on individual projects on radiation's health effects, they have not established a collaborative mechanism to set research priorities. GAO's previous work has shown that federal agencies can use such mechanisms to implement interagency collaboration to develop and coordinate sound science policies. In the past, DOE took a leading role in this area because DOE provided stable funding and advocated for greater coordination on research on low-dose radiation's health effects. However, since fiscal year 2012, DOE has phased out funding for one of its main research programs in this area. This has created a void in coordination efforts among federal agencies, and no other agency has stepped forward to fill this void. Because of DOE's prior experience as a leader in this area of research and its research responsibility under the Atomic Energy Act of 1954, it could play an important role in helping federal agencies establish a coordinating mechanism for low-dose radiation research. Dollars are in millions and have not been adjusted for inflation Source: GAO analysis of agency data. | GAO-17-546", "document_type": "gao"}
{"report": "This section provides information on oil and gas leasing and development on federally managed lands, lease revenues, lease suspensions, and BLM’s LR2000 database. BLM is responsible for managing approximately 700 million acres of subsurface mineral estate throughout the country, including the acreage it leases to operators for oil and gas development. At the end of fiscal year 2016, about 41,000 oil and gas leases accounted for approximately 28.2 million acres in 32 states, according to BLM data (see app. II for additional details). The Federal Land Policy and Management Act of 1976, as amended, requires the Secretary of the Interior to develop land use plans for public lands. These plans identify federal lands and mineral resources that will be available for oil and gas leasing and development and other activities. The act requires the plans to be revised as appropriate, and BLM generally evaluates plans for potential revisions at least every 5 years. As part of developing or revising land use plans, BLM is required under the National Environmental Policy Act of 1969, as amended, to evaluate likely environmental effects of any decisions in the plan, such as selecting areas for oil and gas development. Generally, Interior prepares an environmental impact statement—a detailed statement of the likely environmental effects of the proposed action—in preparing land use plans. BLM officials said the agency uses the land use plans and environmental impact statements to (1) help develop “reasonably foreseeable development scenarios” to estimate outcomes, such as the number of wells and likely surface disturbance that may occur under the land use plan; (2) identify lands open and closed to leasing; (3) identify resource-protection measures, such as lease stipulations and environmental best management practices; and (4) establish monitoring protocols. With a completed land use plan and its associated environmental impact statement, BLM can offer for lease the mineral rights identified in the plan. The parcels of land that BLM offers for potential leasing and development are nominated by industry and the public or identified by BLM. BLM offers leases through a competitive bidding process and requires a uniform national minimum bid of $2 per acre, due as a one-time payment when a bidder is awarded the lease. If BLM receives any bids on an offered lease, the lease is awarded to the bidder with the highest bid. Since 1992, BLM has offered leases with a 10-year primary term—the initial period of time prescribed in a lease to begin oil and gas development. Operators generally begin oil and gas exploration on leased lands by analyzing available geologic and seismic information and other testing to determine if economically viable oil and gas reservoirs exist. If the findings are positive, the operators may begin efforts to prepare for development, such as completing the environmental studies required to apply for permits to begin lease development activities. For example, operators holding leases for oil and gas development must submit a drilling permit application to BLM and obtain approval before preparing the land and drilling new oil or gas wells. After receiving a permit application, BLM generally communicates with operators until they provide all of the required documents, including necessary environmental information or studies. The Energy Policy Act of 2005 requires BLM to approve or defer permit applications within 30 days of submission by the operator. After such applications are approved, operators may begin development activities, including building roads to the well site, constructing platforms, drilling wells, and constructing additional pipeline transportation necessary to transport the oil and gas to market. BLM has the authority to inspect federal oil and gas sites, including well pads and production facilities, under the Federal Oil and Gas Royalty Management Act of 1982, as amended. According to the agency’s handbook for its inspection and enforcement program, BLM must ensure that oil and gas operations on federal lands are prudently conducted in a manner that ensures protection of the surface and subsurface environment. For issued leases, the operator pays a fixed amount of rent each year until the lease begins producing or expires. Under the Mineral Leasing Act of 1920, as amended, once a federal lease begins producing, the operator pays royalties on the oil and gas it produces in lieu of paying rent. The act sets the royalty rate for competitive leases at not less than 12.5 percent of the amount or value of production. A producing lease remains in effect so long as the operator continues to produce oil and gas in paying quantities. The Office of Natural Resources Revenue, within Interior, is responsible for managing and collecting revenues from operators that produce or extract resources from federal leases. In fiscal year 2016, approximately 164 million barrels of oil and 3.25 trillion cubic feet of gas were produced on federal lands, according to agency data. According to Office of Natural Resources Revenue data, in fiscal year 2016, the federal government collected approximately $1.6 billion in gross revenue from the production of these resources on federal land. The majority of this revenue—nearly $1.5 billion, or 91 percent—came from royalties. The remaining revenue came from bids made on new leases—more than $120 million—and rent for existing leases—more than $20 million. According to agency guidance, specifically the Suspensions of Operations and/or Production Manual, BLM generally uses two types of suspensions for oil and gas leases: (1) suspension of operations or (2) suspension of operations and production. A suspension of operations halts the operations associated with a particular lease, such as drilling or developing a well pad and roads. A suspension of operations and production—the most common type of suspension, according to BLM officials—is broader because it halts both operations and any production of oil and gas. BLM’s guidance also states that a suspension of operations may be granted in cases in which the operator is prevented from operating or producing on the lease for reasons beyond the operator’s control, and a suspension of operations and production may be granted only in the interest of the conservation of natural resources. During either type of suspension, the time remaining in the primary term of the lease is reserved until the suspension is terminated, so that the operator is not penalized for the time the lease is in suspension. According to BLM officials, lease suspensions typically are initiated by the operator but may also be initiated by BLM. BLM guidance states that before an operator can request a suspension, the operator must first demonstrate being hampered in performing some operation or activity on the lease. The operator must submit thorough documentation of the reason for requesting a suspension and should include evidence that activity has been attempted on the lease, such as filing an application for a drilling permit, and that the activity has been prevented by actions beyond the operator’s control. For BLM’s part, according to BLM’s guidance, requests filed less than 30 days prior to the expiration of the lease are considered late and should normally be denied. If a request is filed in a timely manner, BLM is to assess the request and, if the reasons for the request are acceptable and justify a suspension, BLM should approve the request, according to BLM guidance. The state director at each BLM state office is responsible for reviewing and approving requests for lease suspensions; however, BLM’s guidance encourages the delegation of this responsibility to the field manager at the field office with jurisdiction over the lease. According to BLM officials, BLM state offices generally delegate responsibility for monitoring lease suspensions to their field offices. According to BLM officials, LR2000 is a national database that provides internal and external users with access to, among other things, land and mineral use authorizations for oil, gas, and other mineral development; land titles; and other data extracted from case files that support BLM land, mineral, and resources programs. LR2000 contains information on approximately 6 million land and mineral case files. BLM designed the database for use by the oil and gas industry, mining industry, land and mineral title companies, utilities, state and local governments, interest groups, and members of the public that need access to BLM land and mineral case files. The agency has conducted a series of reviews of LR2000 over the last 5 years in an attempt to improve the accuracy of the data in the system, according to BLM officials we interviewed. In particular, the officials informed us that they created a tool, known as Data Flux, to improve the accuracy of the data, and that the tool has helped identify numerous data errors. BLM officials told us that each spring a report is generated using Data Flux that highlights the errors found in LR2000, and BLM state offices are responsible for taking action to address the identified errors for their respective states. These officials also told us that BLM plans to either significantly update or replace LR2000 but has not set a definitive date for doing so. Interior and BLM manage several other databases that contain information about the development and production of oil and gas on federal lands. In prior work, we found weaknesses in how Interior tracks and uses some information in its data systems. Specifically, in July 2010, we reported that BLM’s publicly available data related to protests, or challenges, to lease sales were incomplete or inconsistent, and we recommended that Interior determine and implement an agency-wide approach for collecting protest information that is complete, consistent, and available to the public. BLM agreed with the recommendation and issued guidance to standardize data collection. In addition, we found in July 2016 that Interior could improve the data it collects to help track progress toward its goal of reducing methane emissions from oil and gas operations. We made four recommendations to improve BLM’s reporting of emissions data. The agency generally concurred with all of the recommendations and has implemented two of them. Further, in April 2017, we found that BLM field offices had not effectively used data collected during environmental inspections, which could have enhanced BLM’s ability to assess and mitigate environmental impacts. We recommended that BLM develop guidance and consistently track inspections data, among other things. BLM generally concurred with these recommendations. BLM uses a multistep process to determine whether to suspend oil and gas leases, and this process, according to BLM guidance and officials, typically begins with an operator submitting a suspension request to the appropriate BLM field office. Once the request is received, the cognizant BLM field official—usually a petroleum engineer at the field office— reviews it for completeness and whether the reasons cited meet the suspension criteria established in federal regulations and BLM’s Suspensions of Operations and/or Production Manual. These criteria require that lease suspensions be approved only in the interest of the conservation of natural resources or for circumstances beyond the operator’s control. Officials we interviewed stated that field officials generally have broad discretion in how to apply suspension criteria when considering a request. See figure 1, below, for examples of circumstances for which suspensions can be issued. According to BLM officials, if the field office recommends approving the operator’s request for suspension, the field office is to forward the request to the appropriate BLM state office for final review, as shown in figure 2 below. In cases in which the state office agrees with the field office’s recommendation, the state office is to issue a decision letter to the operator noting the changes to the terms and conditions of the lease. A copy of the letter is also to be sent to the Office of Natural Resources Revenue, if necessary, requesting deferment of rent and royalty payments while the lease is suspended. Conversely, if the field office recommends that the suspension request be denied, the field office is to inform the operator in writing, BLM officials said. According to agency guidance, the operator can appeal the field office’s recommendation to the state office director within 20 days after receiving the notification. The state director then has 10 days to render a decision. If the state director denies the request for suspension, the operator can challenge the decision at the Interior Board of Land Appeals. After the board’s decision, the operator may make additional appeals in federal court. In cases in which a decision is overturned, the state office is to issue a decision letter to the operator that highlights changes in the lease’s terms and conditions. The state office is to record the new terms and conditions in LR2000, notify the Office of Natural Resources Revenue of any rental or royalty payments that are to be deferred, and update the official lease file in the state office. Other affected parties (i.e. any party who is adversely affected by a decision) can also appeal a suspension decision, according to BLM officials. Agency officials stated that BLM field offices are primarily responsible for monitoring the status of lease suspensions they issue to ensure that the conditions for granting the suspension still exist. If the conditions have changed, the field office is to recommend that the lease suspension be terminated and notify the operator. The state office is to terminate the suspension and send a letter to the operator with the updated lease terms and conditions, which should extend the original lease expiration date to reflect the length of the suspension. BLM guidance states that the state office also is to send a copy of the suspension termination letter to the Office of Natural Resources Revenue to alert that office that any rental and royalty payments on hold for the lease should resume. The state office is then responsible for updating LR2000 and the official lease file regarding any new lease terms and conditions, according to BLM officials. A small portion of BLM’s oil and gas leases were suspended as of the end of fiscal year 2016, according to the agency’s LR2000 data, but the reasons for the suspensions were difficult to determine. These data indicated that as of September 2016, about 2,750 of BLM’s approximately 41,000 oil and gas leases were suspended in various locations for various lengths of time. LR2000 did not always contain the reasons for suspensions, which required us to take additional steps to identify the reasons. According to LR2000 data, approximately 2,750 oil and gas leases were suspended at the end of fiscal year 2016. Our analysis of these data showed that the lease suspensions spanned 16 states and accounted for about 3.4 million acres of federally managed land. The data also showed that most of the suspensions were in five Mountain West states: Colorado, Montana, New Mexico, Utah, and Wyoming. These five states accounted for more than 2,350 of the approximately 2,750 recorded lease suspensions and encompassed more than 2.9 million acres of federally managed land (see app. II for additional details). Figure 3, below, provides information on the location of oil and gas leases and recorded suspensions across the United States. Our analysis of LR2000 data showed that, of the approximately 2,750 recorded lease suspensions, about 630 had been in place for less than 3 years, about 1,150 had been in place for 3 years to less than 10 years, about 190 had been in place for 10 years to less than 20 years, about 130 had been in place for 20 years to less than 30 years, and about 650 had been in place for 30 years or more. See figure 4 and appendix III for additional details. BLM’s database, LR2000, did not always contain information on the reasons for oil and gas lease suspensions. BLM officials said that while LR2000 does not have a field to specifically capture the reason for a suspension, and inclusion of this information is not mandatory, the general remarks field could be used for this purpose. Because we found this remarks field was rarely used to capture the reason for suspensions, we reviewed the official lease files for a sample of 48 leases in Montana and Wyoming that were suspended as of September 30, 2016, and we interviewed field office staff for clarification. The reasons for suspensions in this sample generally fell into four broad categories: environmental reviews, delays in reviewing applications for permits to drill, logistical conflicts, and other reasons. Our review of the official lease files for our sample found the following reasons cited for suspensions: Sixteen leases were suspended for large-scale environmental concerns, such as wilderness or wildlife protection areas or environmental reviews that affected large parcels of land. These 16 suspensions had been in effect for approximately 6 years to 38 years. One of these leases was suspended because of a court order that also resulted in suspension of 422 other leases; the leases suspended as a result of this court order accounted for most of the suspensions that had been in place for more than 30 years. Fourteen leases were suspended because BLM required additional time to complete its review of the operator’s drilling permit application. These 14 suspensions had been in effect for approximately 1 year to 13 years. Seven of these 14 suspensions were issued because BLM needed additional time to review the environmental assessments submitted with the drilling permit applications. Eight leases were suspended because they faced logistical conflicts with other surface development, such as mining activities occurring on the lease or adjacent lands. These suspensions had been in effect for approximately 4 years to 25 years. Five leases were suspended for other, short-term reasons, such as weather-related issues or economic conditions, but were recorded in LR2000 as suspended for approximately 22 years to 74 years. We were unable to determine the reasons why the 5 remaining leases were suspended. These leases were recorded as suspended for approximately 28 to 82 years. The agency was unable to provide lease files for 1 of the leases. Field officials said that some of these suspensions may have been issued at the state level, and the officials had no additional information on them. According to Standards for Internal Control in the Federal Government, management should use quality information to achieve the entity’s objectives; quality information may be defined as appropriate, current, complete, accurate, accessible, and provided on a timely basis. BLM does not have quality information on the reasons for suspensions, in part because such reasons are not routinely included in LR2000, and there is no specific data field for them. To obtain this information, BLM officials would have to review the official lease files, as we did, and most of the files were available only in hard copy in BLM state offices. Therefore, the information is not readily accessible across the agency. Field officials we interviewed from one field office said that additional information on reasons for suspension in the database would be helpful in monitoring lease suspensions and in communicating with others, such as management or the public, about suspensions. BLM headquarters officials said they are planning to update or replace LR2000. By including a data field in the update or replacement for LR2000 to record the reasons for suspensions, BLM could better ensure that federal lands are not being inappropriately kept from development—potentially foregoing revenue—or from valuable uses of public lands. BLM uses an informal approach to monitor lease suspensions and does not have procedures in place for monitoring suspensions, which may not ensure consistent and effective oversight. We also found that BLM’s state offices do not always maintain current information on lease suspensions in the official lease files or LR2000, and BLM headquarters and state officials told us they generally do not oversee the monitoring of lease suspensions. Field offices vary in how they monitor lease suspensions, and BLM does not have official agency procedures in place for monitoring, relying instead on an informal approach. We found that the field offices we reviewed differed in the frequency of their monitoring activities for lease suspensions. According to officials we interviewed from these offices: 8 field offices monitor with varying frequency, depending on the 3 field offices monitor rarely. Officials who monitored with varying frequency said that the frequency depends in part on the nature of the suspension. For instance, they said suspensions that involve seasonal protection of wildlife habitat, which can last for several months, typically require relatively little monitoring because the time frames for these suspensions are more clearly defined. In contrast, suspensions involving environmental reviews often require more frequent monitoring because the time frames associated with these suspensions are less definitive and can range from several months to several years. Several of these officials said that their offices have established prompts to alert staff when to conduct monitoring activities. For example, an official from 1 field office told us the office’s staff use handwritten notes to track their lease suspensions. An official from another field office informed us that their office uses an electronic calendar feature to alert staff when to monitor, and several other field office officials reported that they rely on various spreadsheets and emails to remind them when to monitor. Officials from 1 field office also stated that their office uses an estimated end date for every suspension—that is, the date the suspension is expected to terminate—to prompt them to review the current conditions to ensure that the suspension is still warranted. Officials who monitored with varying frequency also said that the frequency depends on the availability of staff for monitoring. These officials said they generally rely on petroleum engineers in their respective offices to monitor lease suspensions because these individuals are normally the most familiar with leases. However, some officials added that staffing limitations, particularly a shortage in petroleum engineers, have hindered their ability to monitor lease suspensions in a timely manner. Several of the field officials we interviewed noted that, in recent years, they have had to rely on other staff or petroleum engineers who were on loan from other field offices because their offices did not have a petroleum engineer on staff. According to two field officials we interviewed, while assistance from other field offices is needed and appreciated, there is invariably a lack of consistency in the knowledge that engineers from other offices have about the lease sites involved. Field officials also said that there have been instances in which petroleum engineers left the agency for the private sector, resulting in a loss of institutional knowledge about certain leases, possibly contributing to lapses in follow-up on particular leases. Officials from offices that rarely or never conduct monitoring also cited problems with staff availability. We reported on human capital challenges at BLM, specifically in hiring and retaining petroleum engineers, in March 2010. We also noted BLM’s human capital constraints in our High-Risk Series update report in February 2011, and we reported on human capital issues at BLM in January 2014 and September 2016. In several of these reports, we recommended that BLM take a number of actions, including using existing authorities and incentives to improve staff retention. BLM generally agreed with these recommendations and has taken action on some, but not all, of these recommendations. Nonetheless, the extent of variability we found, including 3 field offices that monitor rarely or not at all, indicates that allowing individual field offices to determine when to monitor suspensions may not ensure that monitoring takes place. Under Standards for Internal Control in the Federal Government, management should design control activities, such as procedures, to ensure the objectives of the program are achieved. The Office of Management and Budget has also acknowledged the importance of internal guidance documents to channel the discretion of employees, increase efficiency, and enhance the fair treatment of similarly situated parties. Some field officials we interviewed said that procedures to help guide them on monitoring could be beneficial and provide a level of consistency. By developing procedures for monitoring lease suspensions, including when to conduct monitoring efforts, BLM could promote more consistent monitoring to better ensure that lease suspensions in effect are warranted. Officials from BLM’s state offices told us that they do not oversee field office monitoring of suspensions, and we found that they did not always have current or complete information on suspensions. We found that more than three-quarters of the official lease files in BLM state offices we reviewed contained outdated documentation regarding the status of lease suspensions. Specifically, files for 37 of the 48 lease suspensions we reviewed did not contain updated information on whether the lease suspension had been monitored or reviewed since the suspension was initially issued. For example, we reviewed a lease file for a suspension issued in 1949 for economic reasons, but the file only contained information on the suspension issuance and not whether monitoring occurred to assess the economic conditions associated with the lease. Additionally, we discovered that some official lease files were not complete and did not have certain required information, such as letters issuing the suspension. For example, three of the lease files we reviewed were missing required information. We could not verify the reasons these leases were suspended, their current status, or any information concerning monitoring efforts associated with them. Field officials we interviewed did not have any information on these suspensions and said that they may have been initiated by the state office more than 30 years ago. However, BLM state officials were unable to confirm or deny this. For another lease, there was no lease file. Officials in BLM headquarters and state offices said that there is no requirement for them to oversee the field offices’ monitoring activities. However, they said that performing such oversight could help to ensure effective and consistent monitoring of lease suspensions. We also identified some instances in LR2000 where data on suspensions were not up to date. Specifically, 7 of the 48 leases we reviewed were recorded in LR2000 as suspended, but information we received from agency officials indicated that the suspensions were no longer warranted. We later confirmed with state and field officials that none of the 7 suspensions remained in effect. Five of these 7 leases were recorded as being in suspension for 22 years or more for what appeared to be short- term reasons, such as weather-related issues or economic conditions. One Wyoming suspension, for instance, was granted in 1990 because of low oil prices at the time, which made repairing wells uneconomical. While this lease was still recorded as suspended in LR2000 as of September 2016, a termination letter in the lease file indicated that the suspension was terminated in 1991. In another example, a lease was listed in the official lease file as suspended for 3 years because of delays in processing a drilling permit application. When we followed up with field officials about the lease, they informed us that the suspension should have been terminated years ago; however, we found no termination letter in the official lease file maintained by the state office. Field officials speculated that the letter may not have been sent because the case manager had retired and no one in the field office knew to follow up on the lease. Because field officials informed us that these leases were no longer suspended, we confirmed with officials from Interior’s Office of Natural Resources Revenue that payments were being appropriately collected for these 7 leases. Moreover, these data are not available in a standardized report that could be used to help oversee monitoring, such as a report showing the average length or frequency of suspensions. BLM produces standardized reports from LR2000 for other aspects of oil and gas leases, such as when leases have been issued or are set to expire. BLM officials said that a standardized report for lease suspensions could assist headquarters and state officials in conducting oversight of field offices’ monitoring efforts. Standards for Internal Control in the Federal Government state that management should design control activities, such as conducting top- level reviews of actual performance, to ensure the objectives of the program are being achieved. By requiring that management, particularly cognizant headquarters and state office officials, conduct top-level reviews of field offices’ monitoring efforts, as well as top-level reviews of official lease files and databases, BLM could better ensure that lease suspensions in effect continue to be warranted and that information on suspensions is current and complete. Additionally, federal standards for internal control state that management should design control activities, such as developing mechanisms that enforce management’s directives, to achieve the entity’s objectives and address related risks. By developing mechanisms, such as summary reports on lease suspensions, as BLM updates or replaces LR2000, BLM could assist cognizant officials in headquarters and state offices with their oversight of monitoring. The ability of federal agencies to manage their programs effectively depends in part on the information systems the agencies use and the quality of the data within these systems. Over the past several years, BLM has worked to improve the quality of the data in LR2000, including data related to oil and gas lease suspensions. These efforts have helped to improve the accuracy of certain data, but they do not address some constraints of LR2000. In particular, LR2000 does not contain a data field for recording the reasons for suspensions. BLM officials told us that they will upgrade or replace LR2000 in the near future. By including a data field in the update or replacement for LR2000 to record the reasons for suspensions, BLM could better ensure that federal lands are not being inappropriately kept from development—potentially foregoing revenue— or from other valuable uses of public lands. BLM’s ability to effectively manage the program also depends on the establishment of effective internal controls. To date, BLM has not developed procedures for monitoring lease suspensions. By developing procedures for monitoring lease suspensions, including when to conduct monitoring efforts, BLM could promote more consistent monitoring to better ensure that lease suspensions in effect are warranted. Additionally, BLM does not conduct top-level reviews to oversee field offices’ monitoring efforts, and we found instances in which BLM’s information on suspensions was outdated or incomplete. By requiring that management, particularly cognizant headquarters and state office officials, conduct reviews of field offices’ monitoring efforts, as well as official lease files and databases, BLM could better ensure that information on suspensions is current and complete. Finally, BLM does not have mechanisms to provide officials with some key information relevant for oversight, such as when suspensions were last reviewed or the average length and frequency of suspensions. By developing mechanisms, such as summary reports on lease suspensions, as BLM updates or replaces LR2000, BLM could assist cognizant officials in headquarters and state offices with their oversight of monitoring. We are making the following four recommendations to BLM: As BLM updates or replaces its database, the Director of BLM should include a data field to record the reasons for suspensions. (Recommendation 1) The Director of BLM should develop official agency procedures for monitoring oil and gas lease suspensions, including when to conduct monitoring activities. (Recommendation 2) The Director of BLM should require cognizant officials in headquarters and state offices to conduct top-level reviews of field offices’ monitoring of oil and gas lease suspensions, as well as of official lease files and databases to ensure they are current and complete. (Recommendation 3) As BLM updates or replaces LR2000, the Director of BLM should ensure the development of mechanisms, such as standardized summary reports on lease suspensions, to assist cognizant officials in headquarters and state offices with oversight of field offices’ monitoring efforts. (Recommendation 4) We provided a draft of this report to Interior for review and comment. In its comments, reproduced in appendix IV, Interior generally agreed with our findings and recommendations. Interior also outlined plans for addressing the recommendations. Regarding our first recommendation, Interior stated that it agrees that any future database used to track information on oil and gas lease suspensions should include a data field to more explicitly record the reasons for suspensions. Interior also stated that it will develop standardized procedures for monitoring oil and gas lease suspensions, consistent with our second recommendation. These procedures will be instituted agency-wide, according to Interior, and agency policy and handbooks will be updated as needed to implement the procedures. With respect to our third recommendation, Interior stated that it will provide updated guidance and online training to assist the state and field offices in managing, monitoring, and reviewing lease suspensions. These actions are positive steps and may address our recommendation depending on their implementation. Finally, consistent with our fourth recommendation, Interior stated that any future update to or replacement of LR2000 database will include the capability to create standardized reports for oil and gas lease suspensions. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report examines (1) the process the Bureau of Land Management (BLM) uses to determine whether to suspend oil and gas leases; (2) the extent of oil and gas lease suspensions and the reasons for the suspensions of selected leases; and (3) the approach that BLM uses to monitor the status of lease suspensions and the extent to which this approach allows for oversight of such lease suspensions. To examine the process BLM uses to determine whether to suspend oil and gas leases, we reviewed applicable laws, agency documents, and the criteria BLM uses when considering lease suspensions. Specifically, we reviewed BLM’s statutory requirements for granting a lease suspension. We also reviewed BLM’s guidance for reviewing suspension requests—Suspensions of Operations and/or Production Manual––which outlines the process and criteria BLM uses to approve or deny a lease suspension request as well as the process for appealing a suspension decision. We interviewed BLM officials at headquarters, as well as state and field offices responsible for leases in our review, about how they apply these criteria when assessing suspension requests. We also interviewed representatives from the Interior Board of Land Appeals about suspension decisions that are appealed to the board, how these appeals are handled, board decisions that are subsequently appealed, and the process involved with those appeals. To examine the extent of oil and gas lease suspensions and the reasons for the suspensions of selected leases, we analyzed data on lease suspensions from BLM’s Legacy Rehost 2000 System (LR2000) database as of September 30, 2016. We took a number of steps to assess the reliability of suspension data and related fields in LR2000. Specifically, we performed electronic tests to check the extent to which data were complete and within expected ranges. Testing included comparison of data extractions prepared by BLM officials for us against data we downloaded directly from LR2000. We also interviewed BLM officials responsible for managing the system about how data are collected and entered into the system as well as the steps the officials take to help ensure that the data are accurate and complete. We also clarified discrepancies regarding lease suspension data with these officials when necessary. We determined the data were sufficiently reliable to give a high-level summary on suspensions, including information on the number and location of leases, the number in suspension, and suspension length. LR2000 contains information on activities related to an oil and gas lease’s status, among other things. For each lease, we identified the latest record, if any, for actions in fiscal year 2016 and earlier that indicate suspension initiation or termination. We determined that a lease was in suspension if the most recent action related to a suspension indicated that the suspension was initiated. We determined the length of suspension based on the date of that initiation record. We then determined distributions of the numbers of leases recorded as still in suspension in each state as of the end of fiscal year 2016. We also reviewed the official lease files, maintained by BLM state offices, for a nongeneralizable sample of leases recorded as suspended as of September 30, 2016, in Montana and Wyoming to assess their status and the reasons behind the suspensions. We chose these two states because they were among the states with the largest numbers of suspended leases. Montana’s official lease files were electronically maintained and easily accessible, while Wyoming, which had leases recorded as suspended for the longest period of time as of September 30, 2016, maintained hard copy official lease files. Montana and Wyoming collectively represent about 50 percent of all oil and gas leases recorded as suspended. We used the following approaches to select a sample of 48 suspended leases in these states and limited the extent to which we selected multiple leases that were suspended at the same time for the same reason. For Montana leases, we found that only 12 suspension initiation dates were recorded for the leases in suspension as of the end of fiscal year 2016. We therefore randomly selected for review a single lease from those suspended on each of these dates. For Wyoming, the suspension initiation dates were much more dispersed, so we identified groups of 15 or more leases based on a combination of suspension date, similarity of lease numbers, and the field office of jurisdiction. From these groups, we selected 19 suspended leases—each lease was the lease with largest acreage from each field office within its group. There were a number of leases that did not fit into these groups because there were fewer than 15 suspensions on a given date with similar lease numbers, so we selected a single lease file with the largest acreage from each year that was at least 20 years old. This allowed us to review suspensions that have been in effect for a relatively long period of time. This approach resulted in our selection of an additional 17 suspended leases in Wyoming. While our review of suspended lease files is not generalizable to other BLM lease suspensions, our findings provide examples of types of reasons that are cited for lease suspensions. To verify the status of each selected lease, we compared information in LR2000 and the official lease file to information in the Offices of Natural Resources Revenue’s database. The Office of Natural Resources Revenue, within the Department of the Interior, is responsible for collecting rental and royalty payments associated with oil and gas leases. We also interviewed the BLM state and field office officials responsible for the specific lease files we reviewed to obtain additional information about the status of certain lease suspensions and the reasons these suspensions remained in effect. We compared how BLM maintains and verifies its lease suspension information with Standards for Internal Control in the Federal Government for information and communication. To examine the approach BLM uses to monitor the status of lease suspensions and the extent to which the approach provides for oversight, we reviewed agency data, guidance and requirements, and official lease documents. In particular, we reviewed monitoring information in LR2000, BLM’s Suspensions of Operations and/or Production Manual, and monitoring information in the official lease files for our sample of 48 leases recorded as being in suspension as of September 30, 2016. We also interviewed officials from BLM headquarters, as well as BLM’s state offices in Montana and Wyoming and the field offices responsible for the 48 selected leases in our review—a total of 12 field offices, 2 from Montana and 10 from Wyoming. We interviewed officials from 11 field offices about the approaches they used to monitor lease suspensions, including the frequency of monitoring and the staff involved. We also interviewed officials at headquarters and state offices to examine the extent to which these approaches provided for oversight of lease suspensions. We compared BLM’s actions and documentation with agency guidance, federal regulations, and federal standards for internal control for control activities. We conducted this performance audit from September 2016 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Dan Haas (Assistant Director), Karla Springer (Assistant Director), John C. Johnson (Analyst-in-Charge), Richard Burkard, Cindy Gilbert, John W. Hocker, Cynthia Norris, Daniel Purdy, Stuart Ryba, Sara Sullivan, Kiki Theodoropoulos, Barbara Timmerman, Jack Wang, and Khristi Wilkins made key contributions to this report.", "summary": "Oil and gas leases on federal lands generate billions of dollars in rents and royalty payments for the federal government each year, but these revenues can be reduced if leases are suspended (i.e., placed on hold). Questions have been raised about whether some suspensions, particularly those in effect for more than 10 years, may hinder oil and gas production or adversely affect the use of federal lands for other purposes, such as recreation. GAO was asked to review oil and gas lease suspensions on federal lands managed by BLM. This report examines, among other things, (1) the extent of and reasons for such suspensions and (2) the approach BLM uses to monitor the status of lease suspensions. GAO analyzed all data on suspensions in a BLM database and the official lease files for a nongeneralizable sample of 48 leases recorded as suspended in, Montana and Wyoming, which GAO selected based in part on the large number of suspensions these states had. GAO also reviewed BLM documents and interviewed BLM officials. According to data at the end of fiscal year 2016 from the Bureau of Land Management (BLM), a small portion of oil and gas leases were suspended for various lengths of time (as shown below), but the reasons for the suspensions were difficult to determine. During a suspension, the government generally does not collect revenues from the lease. Determining the reasons for suspensions is difficult, in part because BLM does not require the inclusion of this information in its database. To obtain this information, BLM officials would have to review the official lease files, of which many are in hard copy. Under Standards for Internal Control in the Federal Government , management should use quality information to achieve the entity's objectives. BLM field officials GAO interviewed said that additional, more detailed information in the database on reasons for suspensions would be helpful in tracking lease suspensions. By including a data field in the database to record the reasons for suspensions, BLM could better ensure that federal lands are not being inappropriately kept from development—potentially foregoing revenue—or from other valuable uses of public lands. The approach BLM uses to monitor lease suspensions does not ensure consistent and effective oversight because BLM does not have procedures in place for monitoring. BLM state offices generally delegate responsibility for monitoring lease suspensions to their field offices. Officials from 12 selected field offices in two states with relatively large numbers of lease suspensions reported various frequencies in their monitoring of suspensions, ranging from every few months to rarely or not at all. In the absence of BLM monitoring procedures, field officials have discretion in how and when to monitor. By developing procedures for monitoring lease suspensions, including when to conduct monitoring efforts, BLM could better ensure that lease suspensions in effect are warranted. To better ensure that federal lands are not being inappropriately kept from development, GAO is making four recommendations, including that BLM record the reasons for lease suspensions in its database and develop procedures for monitoring suspensions. Interior concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Federal acquisition regulations require certain contractors who do business with the government to maintain acceptable business systems that reduce risk to the government and taxpayer. Contractors may have up to six major business systems that require review. DOD’s acquisition regulation establishes criteria for each of the six types of contractor business systems, which are implemented by the inclusion of certain contract clauses. Where a contract includes these clauses, the contractor’s business systems generally must meet the criteria. Factors such as the type of contract and the dollar value determine whether the clauses are included in a contract (see table 1). In certain cases, the absence of an adequate system may preclude the government from using a particular contract type or may require additional oversight or analysis. For example, the FAR states that: A cost-reimbursement contract may be used only when, among other things, contractors’ accounting systems are adequate for determining costs applicable to the contracts or orders; an adequate accounting system is also required for the use of progress payments. Without an approved purchasing system, contractors may require additional oversight of their subcontracting decisions. Significant deficiencies with contractors’ estimating systems shall be considered during negotiation. Alternatively, an adequate estimating system may reduce the scope of reviews to be performed on individual proposals, expedite the negotiation process, and increase the reliability of proposals. DCMA and DCAA are responsible for providing contracting and audit support to the military departments and are responsible for conducting business system reviews, along with a host of other responsibilities (see table 2). Under DCMA’s November 2013 instruction, the final determination of adequacy for all of the contractor business systems resides with the DCMA administrative contracting officers (ACO). An ACO may have responsibility for all or a portion of a single large business or may be responsible for a number of smaller contractors within a particular region. To help inform their system determinations, an ACO can request that either DCMA or DCAA conduct business system reviews or audits when needed. Among other responsibilities, ACOs are responsible for taking actions to impose consequences when contractors do not comply with business system standards. Throughout the last 10 years, GAO and other accountability organizations have reported on challenges DOD faces when conducting CBS reviews or other critical contracting audits, such as incurred cost audits. Over this time Congress has also taken actions through various NDAAs to initiate changes to the CBS review process. In 2009, the Commission on Wartime Contracting and GAO highlighted significant concerns about how DOD was conducting CBS reviews at that time. For example: The Commission reported that billions of dollars in contingency- contract costs in Iraq and Afghanistan could not be verified by government auditors and that inadequate internal controls over contractor business systems hampered the government’s insight into cost errors and material misstatements. The report highlighted instances where DCMA and DCAA came to different conclusions when reviewing the same contracts and had inadequate resources to complete business system reviews. It also stated that DCMA was not aggressive in motivating contractors to improve their business systems because it accepted corrective action plans as sufficient progress to address deficiencies. The commission made recommendations to address each of these issues. We found issues with independence of auditors, sufficiency of evidence, and incomplete reporting of DCAA’s findings. As result, we made 17 recommendations to DOD to help improve the quality of DCAA’s audits, most of which the agency has implemented. Since then, subsequent GAO and DOD Inspector General (IG) reports have pointed to other issues with the CBS review process and DCAA’s incurred cost audit process. Namely, In November 2011, we found that DCAA could not complete the number of CBS reviews needed to be consistent with its guidelines because it was focused on higher priority areas—such as incurred cost audits—and, as a result, DCMA contracting officers maintained systems’ determinations as adequate even though the systems had not been audited by DCAA in a number of years. Among our recommendations, we proposed that DCMA and DCAA identify options, such as hiring external auditors, to assist in the conduct of CBS reviews until DCAA could adequately fulfill those responsibilities with its own workforce. In July 2014, DOD published a proposal to change the DFARS to allow public accounting firms to perform reviews of accounting, estimating, and material management and accounting systems. According to DPC officials, however, the department’s IG raised concerns about consistency between the proposed change and statutory and regulatory requirements for IG oversight of outside audit services. Further, the private sector expressed concerns that CBS audit criteria did not align with generally accepted accounting principles used in the private sector. As result of these challenges, DOD did not implement the proposed regulation change. In December 2012, we found that DCAA’s backlog of incomplete incurred cost audits was a contributing factor in DOD’s inability to close out contracts in a timely manner. To address this backlog, DCAA began implementing a new, risk-based approach that was expected to shift DCAA’s resources to focus on incurred cost audits involving high-dollar value and high risk proposals. In October 2015, the DOD IG found that DCMA contracting officers did not always comply with requirements to report business system deficiencies and found instances where CBS determinations based on DCAA-led reviews were not reported within required timeframes. The IG concluded that this likely caused delays in correcting significant business system deficiencies and lengthened the time the government was unable to rely on data generated by those business systems. In September 2017, we found that despite efforts by DCAA to reduce the backlog of incurred cost proposals awaiting audit, the agency was not able to meet its goals to eliminate the backlog by fiscal year 2016 and that it was unlikely to meet a revised goal of fiscal year 2018. We recommended that DCAA assess and implement options for reducing the length of time to begin incurred cost audits and establish related performance measures. DCAA concurred with these recommendations and took actions to reduce the time it takes to begin audits. Most recently, in a January 2018 report, the Advisory Panel on Streamlining and Codifying Acquisition Regulations—commonly referred to as the Section 809 panel after the legislative provision that created it— reiterated the importance of business system internal controls. Noting that DOD’s CBS reviews are untimely and inconsistent, the Panel made several recommendations that seek to complete reviews, especially for accounting systems, in a more timely way. Among these recommendations are the use of public accounting firms to supplement the DOD audit workforce, a change to accounting system review standards and criteria, and the development of new guidance for the conduct of business system reviews. During the past 10 years, Congress also enacted three provisions related to improving how DOD conducts business system reviews and incurred cost audits. Specifically, Section 893 of the NDAA for Fiscal Year 2011 directed the Secretary of Defense to initiate a program to improve contractor business systems so that the systems provide timely and reliable information. The NDAA required that this program, among other things, establish requirements for each system and a process for identifying significant deficiencies within systems. It also required that DOD identify those officials responsible for approval and disapproval of a system, and that approval or disapproval of a system would be based on whether the system has a significant deficiency. Further, the law authorized DOD to withhold up to 10 percent of contract progress payments, interim payments, and performance-based payments from certain contracts when systems are disapproved based on a significant deficiency. Contractors that require review—or “covered contractors”—were defined as those subject to the cost accounting standards. Section 893 of the NDAA for Fiscal Year 2017 amended the fiscal year 2011 NDAA provisions by (1) revising the definition of a “covered contractor” to generally mean those with government contracts subject to the cost accounting standards accounting for more than 1 percent of the contractor’s total gross revenue and (2) allowing public accounting firms to conduct contractor business system assessments. Section 803 of the NDAA for Fiscal Year 2018 required DOD to be compliant with certain standards of risk and materiality in the performance of incurred cost audits for its contracts. It also required that DOD use public accounting firms to, among other things, perform a sufficient number of incurred cost audits to eliminate the incurred cost audit backlog by October 1, 2020 and to allow DCAA to allocate resources to higher-risk and more complicated audits. Figure 1 below summarizes these reports and congressional actions related to contractor business system activities over the last decade. Since 2011, DOD has taken actions to (1) clarify the roles and responsibilities of DCMA and DCAA in conducting CBS reviews and consolidate the number of reviews to be performed; (2) clarify how often DOD should conduct CBS reviews; (3) establish what criteria are used to evaluate a contractor’s business system; (4) establish timeframes by which ACOs are to make a determination on the adequacy of the contractors’ business systems; and (5) implement the use of payment withholds for contractors that are found to have significant deficiencies in their contractor business systems. DCMA and DCAA officials noted that these changes were implemented primarily to address the 2011 statutory provisions. Our review of six selected contractors’ business system reviews found that the whole process from the review or audit, to the follow up and resolution, can be lengthy. In three out of six selected cases we reviewed, it took 4 or more years for a contractor’s system to be approved. Prior to 2011, DCAA conducted a series of 10 internal control audits on a cyclical basis, while DCMA performed more targeted testing on three systems. During that time, both DCMA and DCAA could review a contractor’s purchasing or earned value management (EVM) system but would evaluate different aspects of each system. As a result, DCMA and DCAA reviewers could issue deficiency reports based on their separate reviews of the same contractor business systems for the consideration of ACOs. As reported in August 2009 by the Commission on Wartime Contracting, these overlapping reviews led to instances where DCMA and DCAA came to different conclusions about the adequacy of the same business system. To address this issue and clarify roles and responsibilities, in November 2013 DCMA established policies that guide oversight and implementation of the CBS review process, to include approval responsibilities and procedures for the conduct and reporting of reviews. DCMA has separate instructions for each type of contractor business system with the exception of accounting. These separate instructions provide more details about appropriate stakeholders for specific reviews, noting particular functional experts such as offices within DCMA or DCAA that are to lead the conduct of the reviews. DCAA issued a separate memorandum in April 2012 that details changes made to accounting system reviews as a result of changes from the NDAA for fiscal year 2011. Under these revised processes, DCMA now has responsibility for reviewing three contractor business systems and DCAA is responsible for the other three. In all cases, the DCMA ACO makes the final determination on whether a system is approved or disapproved. Further, the revised process consolidated the number of audits that DCAA conducts on the adequacy of the contractor’s accounting system from five separate audits to one comprehensive system audit. According to DCAA, this consolidation was based on a comprehensive reassessment of the processes for assessing accounting systems and combined elements from previous internal control reviews. Figure 2 shows DCMA and DCAA responsibilities before and after the changes implemented from the NDAA for Fiscal Year 2011. The revised DCMA instructions and related DCAA memorandums for the CBS review process also clarified timeframes for how often a contractor’s business system must be reviewed. Generally, each system should be reviewed every 3 years unless the ACO makes a determination that a review is not necessary based on a risk assessment or other factors (see table 3). DOD also revised the DFARS in 2012 to provide definitions for acceptable contractor business systems and established individual DFARS clauses that define the criteria for each of the six business systems. As appropriate, these clauses are included in contracts and generally require the contractor to maintain adequate business systems, allow for the government to withhold payments when systems are found to have significant deficiencies, and list the criteria that the systems must meet. The number of criteria varies by system. For example, the DFARS clause for accounting systems includes 18 criteria used to evaluate system features such as proper segregation of direct and indirect costs, timekeeping, and exclusion of unallowable costs. For EVM systems, a contractor’s system must comply with private, institutional standards and includes procedures that generate timely, reliable, and verifiable reports. To test how DCAA-led audits were being implemented under these new criteria, DCAA began a pilot program in 2014 comprised of a team of dedicated auditors to conduct CBS reviews who, in turn, were to recommend changes in audit plans and other practices. DCAA initially focused on material management and accounting systems audits, then moved to estimating systems, and finally accounting systems. As result of this pilot, DCAA issued new audit guidance for all three systems in 2018, with the latest guidance for accounting system audits issued in October 2018. DCAA officials told us that they are implementing lessons learned from the pilot program and developing training on how to conduct the revised audit plans. The revised DCMA instructions provide timeframes for ACOs to communicate their initial and final determinations to contractors (see textbox) and define the responsibilities of DCMA management and ACOs for confirming significant deficiencies and resolving disagreements between functional specialists and the ACO. Revised Contractor Business System Review Process Timeframes According to the revised contractor business system review process, when significant deficiencies are found: Administrative Contracting Officers (ACO) have 10 days to communicate an initial determination of business system compliance to the contractor under review. The contractor is requested to respond to the letter within 30 days after that to respond to the letter communicating whether or not it concurs with the determination. The ACO issues a final determination 30 days after receipt of the contractor’s response. According to Defense Contract Management Agency (DCMA) officials, data for fiscal year 2017 indicated that 80 percent of final determination letters were issued within this required timeframes. In instances where deficiencies are found, these findings are reviewed by a panel within DCMA to help ensure standards are consistently applied. When there is disagreement between the ACO and functional specialist concerning the nature or severity of deficiencies found, a DCMA board of review may be requested by the ACO to resolve differences and produce a final determination. According to DCMA officials responsible for maintaining business system review policies, differences between functional specialists and contracting officers are generally resolved without the need for a board discussion. These officials said that only a few board discussions have been convened since implementation of the new review structure. Section 893 of the NDAA for Fiscal Year 2011 generally established that DOD be allowed to withhold payments under certain contracts when DOD disapproves one or more of a covered contractor’s business systems. DCMA officials previously had the latitude to withhold a portion of the payments owed to contractors as result of deficiencies identified in their reviews, but were not required to do so. From 2011 through 2013, DOD revised the DFARS and related agency instructions to generally require that ACOs apply a 2 to 5 percent contract payment withholding for a single deficient system and a maximum of a 10 percent withhold when multiple systems are found to have significant deficiencies. ACOs are authorized to reduce the amount being withheld after the ACO determines that the contractor has submitted an adequate corrective action plan and began its implementation. Our review of DCMA and DCAA information indicates that for all the CBS reviews conducted between fiscal years 2015 and 2017, DCMA and DCAA often identified significant deficiencies in three business systems. These were the cost estimating, material management and accounting, and purchasing systems. For example, DCAA identified a significant deficiency in nine of the 12 material management and accounting systems reviewed, while DCMA identified significant deficiencies in 260 of the 330 purchasing systems reviewed (see table 4). Because DCMA and DCAA officials do not maintain historical data on payment withholdings, it is not possible to determine the number of payment withholdings that were implemented over these years as a result of these significant deficiencies. The system used to track the status of systems and payment withholdings, CBAR, is updated by ACOs as corrective actions are completed and payment withholdings are removed, and thus shows only a snapshot in time. Our review of CBAR data from July 2018 found that DOD was withholding payments from 11 contractors with a total collective value of approximately $238 million at that time. One third of these payment withholdings were associated with significant deficiencies found in contractors’ estimating systems. DCMA and DCAA officials we spoke with noted that the withhold provision has led to contractors’ increased response to deficiencies, but they did not have data to determine the extent to which contractors’ responsiveness has increased. Some contractors we spoke with stated that because deficiencies will affect the company’s cash flow, senior management and board members have become more engaged in matters of business system compliance. Our review of six selected contractors’ business system reviews illustrates the challenges in identifying and resolving deficiencies in a timely manner. Overall, our review of these six cases found that it took from 15 months to 5 years or more to resolve deficiencies initially identified by DCAA or DCMA. Factors contributing to the time it took to resolve these issues included contractors submitting inadequate corrective action plans, DCMA or DCAA identifying additional deficiencies in subsequent reviews or audits, and the use of different auditors to conduct the reviews. While the selected cases are not generalizable to all CBS reviews, they do highlight issues that can arise during the process. For example: In one case it took almost 4 years to resolve deficiencies identified in a contractor’s accounting system. In this case, DCAA issued an audit report in July 2014 that found seven significant deficiencies including inadequate monitoring and adjusting of rates the contractor was billing the government. DCMA subsequently issued an initial determination 7 days later disapproving the system, citing three of the seven deficiencies identified by DCAA. In August 2014, the contractor responded by providing a corrective action plan for the three deficiencies DCMA cited. DCMA sent a second determination letter the next month citing two additional deficiencies identified by DCAA. In October, the assigned ACO for the contractor left and new staff was assigned to the review. Ten days later, the contractor submitted a second corrective action plan to address the two deficiencies identified. Disagreement between the ACO and DCAA on the inclusion of the two remaining deficiencies identified by DCAA for the accounting system resulted in a need to convene a board of review by DCMA. The board decided that the two deficiencies would be included in the final determination. This, in turn, delayed issuance of a final determination until mid-December 2014. According to contractor representatives, over the next 3 years, they submitted various corrective action plans that DCMA determined were inadequate to address the deficiencies. Each time, the ACO requested additional information and follow-up DCAA audits to help assess the adequacy of the contractor’s corrective action plans. Eventually the contractor’s accounting system was approved in June 2018. In another case, a contractor’s estimating system has been disapproved for over 5 years. In June 2013, DCAA identified four significant deficiencies in the contractor’s system, including inadequate support for commerciality determinations. As a result, following a final determination of inadequacy, DCMA implemented a payment withhold of 5 percent. In response, the contractor submitted a corrective action plan in September 2013 addressing the deficiencies that was accepted by DCMA and the withhold was reduced to 2 percent. In a follow-up review in July 2014, DCAA identified two new deficiencies, which the contractor corrected. In March 2015 DCAA reviewed the contractor’s forward pricing rate proposal and identified 11 new deficiencies in the estimating system. By August 2015, the contractor had corrected the new deficiencies but the system remained disapproved because the previous four deficiencies remained uncorrected. Finally, in September 2016, DCAA canceled its audit of the estimating system because these four deficiencies remained. According to officials, the contractor was not ready for re-evaluation. At the time of this review the system remains disapproved. In another case, a contractor’s property management system was disapproved for more than 4 years. In November 2013, DCMA reviewed the contractor’s property management system and, according to officials, identified nine significant deficiencies, including those related to missing records and supporting documentation for all contracts. DCMA issued an initial determination of disapproval. DCMA officials stated that they did not receive an adequate response from the contractor for nearly 7 months, and in June 2014, DCMA issued a final determination of system disapproval. The contractor subsequently submitted a corrective action plan in August to address the deficiencies. A DCMA official stated that they re-analyzed the system in November 2014 and found one outstanding issue. According to the official, the DCMA property administrator in charge of the review elevated the issue to the assigned ACO, but received no response. According to contractor representatives, they requested a follow-up review from the DCMA ACO several times from August 2014 to June 2015 but did not receive a response until after June 2015. According to a DCMA official, this was due to resource issues as the review went dormant because the new ACO assigned to the contractor went overseas. The system was reviewed again in November 2017 and the contractor’s system was approved in January 2018. In another case, an audit of a contractor’s estimating system took DCAA 2 years to complete. The DCAA audit began in November 2014. According to contractor representatives, they were initially told that the review would take 9 to 12 months, but a number of different DCAA auditors were assigned to the review over time and each identified different findings which led to a prolonged process. DCMA approved the contractor’s estimating system in December 2016. In another case, a contractor’s estimating system was disapproved for 15 months. In June 2016 DCMA disapproved a contractor’s estimating system due to three significant deficiencies, including one related to performing adequate price and cost analysis on subcontractor proposals. According to contractor representatives, they submitted a corrective action plan, but after submitting the plan DCAA performed an audit of the contractor’s forward pricing rates and identified additional deficiencies. In December 2016 DCMA officials determined that the corrective action plan the contractor provided was not sufficient. DCMA subsequently approved the contractor’s estimating system in September 2017. DCMA and DCAA officials believe the cases we analyzed were not representative of the length of time needed to complete the CBS review process, but could not provide data to support their views because DCMA and DCAA do not track data on the length of time it takes to complete the entire CBS review process (i.e., from the start of an audit or review to the resolution of system deficiencies and final determination). Our review of selected cases was not intended to be projectable to all reviews and audits conducted by DCMA and DCAA, but rather to be illustrative of the challenges that may be encountered during the review process. From the perspective of program and contracting officers, the status of a contractor’s business system may have an impact on both contract award decisions and contract monitoring, but officials stated that they can mitigate the risks associated with a disapproved system. For example, Army and Air Force program officials noted that a contractor leading certain weapon system development and logistics efforts had a deficient cost estimating system. According to the contracting officials, as the government could not rely on the contractor’s proposed costs to use a fixed-price contract, they awarded a fixed-price incentive contract for the program to better monitor the contractor’s cost reporting compared to under a fixed-price contract. DCMA and DCAA do not have a mechanism to monitor and ensure that CBS reviews and audits are conducted in a timely manner. DCAA’s data show that it conducted few business system audits in the past 6 years, due, in part, to the need for it to reduce its backlog on completing incurred cost audits. Looking to the future, DCAA has developed plans for the number of CBS audits it intends to perform over the next 3 years and expects that it will be caught up in conducting the audits for which it is responsible by fiscal year 2022. Successfully executing its plan is dependent on several factors, including the ability to shift resources from conducting incurred cost audits to business systems audits, the use of public accounting firms to perform a portion of the incurred cost audits, and the ability of DCAA auditors to use new audit plans and complete the required audits in a timely manner. For its part, DCMA relies on the offices that perform the reviews of the three systems to maintain the information on the reviews completed and to plan for future reviews, but DCMA headquarters does not centrally track its reviews or whether audits conducted by DCAA are being completed within the timeframes described in policy. DCAA officials acknowledged they have not been able to conduct audits of contractor business systems within the timeframes outlined in DCMA instructions. DCAA officials attributed their inability to do so to the need to conduct higher priority audits—such as incurred cost audits—and staffing constraints. For example, in fiscal year 2017, DCAA initially proposed to perform a total of 76 CBS audits for the three business systems in its purview. However, DCAA completed only nine audits after assessing available resources. Further, DCAA estimates that in fiscal year 2017 it spent approximately 44 percent of its resources addressing incurred cost audits, and 17 percent on other audits such as forward pricing rate agreements. In contrast, only 6 percent of its resources were devoted to business system audits and related activities. Recognizing that it cannot perform all of the required CBS audits in a timely fashion to meet current DCMA policy requirements, DCAA officials told us they focus their audits on business systems they identify as high- risk. To do so, DCAA officials consider factors such as the contractor’s current system status, the contractor size in terms of dollars on contract, the amount of cost-type contracts, organizational changes, audit requests by a DOD contracting officer or an ACO, and the types of deficiencies identified and its impact on cost and schedule. DCAA headquarters officials assess the candidates at an annual DCAA planning meeting to determine which audits can be performed given the level of resources available. DCAA officials told us, however, that the current policy requirement—which generally requires review of the systems every three years—would require DCAA to dedicate substantial resources to CBS audits to maintain currency. As of November 2018, DCAA identified 285 systems that require an audit. DCAA officials stated that a risk based approach to reviewing these systems would provide more value than a routine 3 year cycle. DCAA officials stated they are willing to work with others within DOD to develop risk factors that can be used to determine when a business system needs a review. To better assess and plan future workload, DCAA issued a memorandum in January 2017 to introduce a strategic workload resource initiative that will project workload and resource availability in the out-years. Under this process, DCAA field management teams provide information on workload projections in March, and DCAA executive level officials make workload planning recommendations in June that result in an agency-wide plan. DCAA officials noted, however, that the projection for the second year is less accurate, and as a result, the further out year projections are reviewed every six months with adjustments made as needed. DCAA officials also told us that the planning process is currently being expanded to allow the agency to plan three years out. DCAA officials stated that the fiscal year 2021 plans will be tentatively approved by the end of January 2019 and fiscal year 2022 plans will be approved by June 2019. Based on these planning efforts, DCAA plans to conduct a total of 285 CBS audits from fiscal years 2019 through 2022, including 50 audits in fiscal year 2019 and 104 in fiscal year 2020. It also plans to shift some of the hours previously devoted to incurred cost audits to CBS audits (see figure 3). Our analysis indicates that successfully executing this plan is dependent on several factors, including the ability to shift resources from conducting incurred cost audits to business systems audits, the use of public accounting firms to perform a portion of the incurred cost audits, and the ability of DCAA auditors to use new audit plans and complete the required audits in a timely manner. First, the plan is contingent upon DCAA being able to successfully shift resources from incurred cost audits to CBS audits. According to DCAA data, DCAA plans to shift more than 378,000 hours from incurred cost audits to CBS audits between fiscal years 2018 and 2020. DCAA officials noted, however, that although they have made significant progress in addressing incurred cost audits, the fiscal year 2018 NDAA requires DCAA to have all incurred cost audits performed within 12 months. DCAA officials noted that this means it will have to continue to spend significant resources on incurred cost audits in fiscal year 2019 to meet this legislative requirement. Second, DCAA officials stated that these estimates include the resources that are expected to become available to perform CBS audits as DCAA starts using public accounting firms to perform incurred cost audits. In its October 2018 report to Congress on the progress made to implement Section 803 of the Fiscal Year 2018 NDAA, DCAA estimated that public accounting firms would be able to perform 100 incurred cost audits per year for 2019 and 2020, which would then increase to 200 each year for 2021 through 2025. DCAA further projected, for example, that about 147,500 hours would become available in 2020 based on the proposed plan to use public accounting firms. DCAA officials told us they are in the process of developing a solicitation to contract for these services, which they anticipate releasing in the spring of 2019. Lastly, these plans assume that each audit conducted by DCAA can be completed within an average number of hours based on the experiences of the team that developed the revised audit plans released in 2018. DCAA officials noted that these hours assume that DCAA audit teams will experience some challenges conducting the initial set of audits, but will be able to conduct them in fewer hours as they gain more experience in implementing the new audit plans. DCAA officials told us that, if successful, this plan will enable it to be caught up on CBS reviews by 2022. For the DCMA-led reviews, DCMA relies on its functional offices that perform reviews of their respective systems to monitor the status of CBS reviews, but does not use the information to ensure that all three reviews are conducted within the timeframes established under DCMA’s instructions. The three DCMA functional offices use spreadsheets to manually track reviews their office has completed, and track data on when the next review should be scheduled. Each functional office plans and tracks this data individually. For example, The property management functional office identifies the number of contractor property systems requiring review on a monthly basis, and tracks its progress in completing these reviews. In fiscal year 2018, this functional office completed over 95 percent of the 850 property system reviews required. The EVM system functional office identifies the number of reviews that should be conducted annually. In fiscal year 2018, the office reported completion of 92 percent of the 125 required EVM system reviews. The purchasing functional office uses a rolling process to determine which systems require a review. To do this, the ACO performs a required risk assessment every 3 years to identify whether a full business system review is required and then the purchasing functional office develops a prioritization plan for the systems flagged for review. The exact number of reviews conducted in a single year is dependent upon the risk assessments; however, an official from the purchasing system functional office estimated that their office is staffed to complete approximately 125 reviews per year. The official also noted that they do track to ensure all systems are reviewed in the required timeframes. Officials from the functional offices described to us what information they provide to senior leadership, but DCMA headquarters does not collect or use this information to oversee the CBS review process. For example, a supervisor from the property management functional office told us that the office reports monthly to their supervisors on the status of their reviews and whether they are on schedule, which also serves as a method for requesting additional resources if necessary. EVM system functional officials told us they report the number of planned and completed reviews to a DCMA internal website for senior leadership to review, but did not know what senior leadership does with this information. Purchasing officials said their office provides monthly reports on the status of reviews for specific large contractors, and weekly reports of the number of reviews completed to the agency director and component heads. DCMA headquarters officials stated that they informally share information with ACOs in a variety of ways, including quarterly meetings, but headquarters officials could not provide documentation on how this information is used to monitor and assess whether CBS reviews were being conducted in accordance with the policy timeframes. Further, DCMA officials indicated that they do not formally monitor DCAA’s efforts to complete the audits for which DCAA is responsible. Despite being the agency responsible for issuing the instructions and whose ACOs are responsible for making final determinations of business system compliance, DCMA officials indicated that it is not their responsibility to monitor or assess DCAA’s efforts to complete the reviews in DCAA’s area of responsibility. DCMA and DCAA officials stated, however, that they recently began to hold quarterly meetings, during which time they can discuss CBS issues, including potential revisions to the criteria and timeframes for conducting CBS reviews. But it is uncertain what outcomes will come from this or the extent to which this will contribute to improved management of CBS reviews. According to federal standards for internal controls, an agency should use quality information to help ensure that it achieves its objectives. These internal controls also state that monitoring activities should be conducted to ensure that agency objectives are being met. Developing a mechanism to track and monitor the number of CBS reviews that are outstanding, the risk level assigned to those systems and the resources available to conduct such reviews, would help DCMA and DCAA better manage the CBS review process to ensure that contractor systems that are reviewed and approved in a timely fashion. Section 893 of the Fiscal Year 2017 NDAA amended the CBS provisions of the Fiscal Year 2011 NDAA by revising the statutory definition of a covered contractor and by allowing contractors to use registered public accounting firms to review their business systems in place of DOD’s review. As of November 2018, DOD had not yet proposed regulations to implement these legislative changes, and therefore we were unable to fully evaluate the potential effects of these provisions. The Fiscal Year 2017 NDAA did not provide a specific timeframe for DOD to revise its regulations, but the Director of the Defense Acquisition Regulation Council—who is responsible for promulgating proposed and final rule changes to the DFARS— tasked her staff to draft a proposed rule by March 2017. This deadline was subsequently extended to January 23, 2019. In November 2018, Defense Pricing and Contracting (DPC) officials told us that they now expect to issue the proposed rule for public comment in the third or fourth quarter of fiscal year 2019. DPC officials attributed this delay, in part, to a recent executive order that calls for the reduction and control of regulatory costs, as well as the complexity of having public accounting firms perform CBS reviews. Section 893 of the Fiscal Year 2017 NDAA changed the definition of covered contractors—those contractors that may require CBS reviews— from contractors subject to cost accounting standards to generally only those with contracts subject to cost accounting standards that account for more than 1 percent of their gross revenue. DPC officials stated that DOD may require contractors to self-report on their revenue levels to determine whether the contractor’s systems require review. DPC officials told us, however, that they had not yet considered certain aspects of how contractors may calculate revenues. For example, DPC officials had not yet decided whether revenue should be determined based on specific business segments, or whether it should include international sales revenue. These officials also had not yet decided how many years of revenue should be included in the analysis. Further, DPC officials could not yet estimate the potential effect of implementing this provision on contractors. Based on our analysis of publicly available contractor financial data for the 20 contractors that we reviewed, the lowest percentage of total revenue derived from government contracts was 10 percent. Section 893 of the 2017 NDAA also authorized the use of registered public accounting firms to assess compliance with DOD’s CBS requirements. Under this provision, if a registered public accounting firm certifies that a contractor’s business system meets DOD’s requirements, it would eliminate the need for further review by DOD. Some government acquisition officials we spoke with expressed concerns that would need to be addressed to effectively implement the legislation, including: Ensuring that public accounting firms have sufficient understanding of the processes or regulations to conduct the audits and provide conclusions that DOD could rely upon. Encouraging DCMA and DCAA functional experts and auditors to accept public accounting firms’ findings rather than conduct additional reviews and audits on their own, which would undermine the ability to save both government and contractor resources. Determining the potential for the cost of public accounting firm reviews being passed on to the government through the contracts of the businesses under review. The DPC official responsible for implementing this provision stated that they are aware of these concerns. He also stated that, as a first step in implementation, his office has requested that DCMA and DCAA review the criteria and audit plans used by their staff and identify areas where these criteria and plans could be adjusted to make them more consistent with criteria that public accounting firms use in the private sector. By clarifying DCMA and DCAA’s roles and responsibilities as well as the timeframes for conducting the audits, DOD has improved the CBS review process. But there are still issues that need to be addressed. DCAA acknowledges it is well behind in its efforts to complete the three CBS audits for which it is responsible but believes that it can be caught up by the end of fiscal year 2022 if significantly more resources are available. In addition, DCMA does not monitor progress of either its functional offices or of DCAA against the policies that the six systems each be reviewed generally every 3 years. This is because DOD currently lacks a mechanism based on relevant and reliable information, such as the number of CBS reviews that are outstanding, the risk level assigned to those systems, and the resources available to conduct such reviews, to ensure CBS reviews are being completed in a timely fashion. Such information could help inform more strategic oversight to determine whether the current CBS review process is achieving intended results, or whether additional changes to the timing of or criteria for conducting CBS reviews are needed. As the agency that is responsible for issuing the overarching policies that govern CBS reviews and is ultimately responsible for approving contractor business systems, DCMA is in the best position to lead the effort to develop this mechanism. As each agency is responsible for executing its mission and managing its resources, however, this effort should be conducted in collaboration with DCAA. We recommend that the Director, DCMA, in collaboration with the Director, DCAA, develop a mechanism to monitor and assess whether contractor business systems reviews are being completed in a timely manner. (Recommendation 1) DOD agreed with the recommendation. In an email, a DPC official stated that DCMA and DCAA are collaborating to determine the best way to implement the recommendation. DOD’s comments are reprinted in Appendix I. We are sending copies of this report to the appropriate congressional committees; the Acting Secretary of Defense; the Under Secretary of Defense for Acquisition and Sustainment; the Under Secretary of Defense – Comptroller; the Director, DCMA; the Director, DCAA; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by e-mail at dinapolit@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report were Tatiana Winger (Assistant Director), Emily Bond, Matthew T. Crosby, Suellen Foth, Sameena Ismailjee, Jean McSween, Ramzi Nemo, Miranda Riemer, Christy Smith, Roxanna Sun, Tom Twambly, and Jacqueline Wade.", "summary": "Contractor business systems produce critical data that contracting officers use to help negotiate and manage defense contracts. These systems and their related internal controls act as important safeguards against fraud, waste, and abuse of federal funding. Federal and defense acquisition regulations and DOD policies require that DOD take steps to review the adequacy of certain business systems, but GAO and other oversight entities have raised questions about the sufficiency and consistency of DOD's review process. The National Defense Authorization Act for Fiscal Year 2018 contained a provision for GAO to evaluate how DOD implemented legislation intended to improve its business system review process. Among other things, this report examines (1) the changes DOD made to its review process and (2) the extent to which DOD is ensuring timely business system reviews. GAO analyzed DOD acquisition regulations, policies, and procedures for conducting contractor business system reviews and analyzed data on reviews conducted between fiscal years 2013 and 2018. Since 2011, the Department of Defense (DOD) has implemented several changes to its processes for reviewing contractor business systems—which include systems such as accounting, estimating, and purchasing. Among other changes, DOD clarified the roles and responsibilities of the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA)—the two agencies that are responsible for conducting the reviews; clarified timeframes for business system reviews and established criteria for business systems; and withheld payments from contractors that were found to have significant deficiencies in their business systems. DOD does not have a mechanism to monitor and ensure that these reviews are being conducted in a timely manner. For its part, DCAA has conducted few business system audits since 2013, as it focused its efforts on other types of audits. DCAA plans to significantly increase the number of business system audits over the next 4 years, but its success in doing so depends on its ability to shift resources from other audits; to use public accounting firms to conduct other, non-business system audits; and DCAA staff's ability to execute new audit plans in a timely manner. DCMA relies on the three offices responsible for conducting DCMA-led reviews to manage the reviews, but DCMA does not formally monitor whether these reviews are being conducted consistent with policy nor does it monitor DCAA's efforts to complete the audits for which it is responsible. DCMA is ultimately responsible for approving a contractor's business systems. DCMA currently lacks a mechanism based on relevant and reliable information, such as the number of reviews that are outstanding and the resources available to conduct such reviews, to ensure reviews are being completed in a timely fashion. Such information could help inform more strategic oversight on whether the current review process is achieving its intended results, or whether additional changes to the timing of or criteria for conducting reviews are needed. GAO recommends that DCMA, in collaboration with DCAA, develop a mechanism to monitor and ensure contractor business system reviews are conducted in a timely fashion. DOD concurred with the recommendation.", "document_type": "gao"}
{"report": "The Judgment Fund is a permanent, indefinite appropriation, statutorily created in 1956, available to pay many types of eligible monetary claims that may be judicially or administratively ordered against the U.S. government. The Judgment Fund is also available to pay interest and costs on claims in certain circumstances. Administration of the Judgment Fund has changed substantially since its inception, with varying degrees of control and oversight by Congress, GAO, and Treasury. Originally, the Judgment Fund was limited to paying judgments of less than $100,000, as certified by the Comptroller General and entered by the U.S. Court of Claims (the predecessor to the current U.S. Court of Federal Claims) or a U.S. District Court, as well as authorized interest and costs. In the 1960s, new laws extended the Judgment Fund’s availability to awards and compromise settlements. In the next decade, the Supplemental Appropriations Act, 1977, eliminated the Judgment Fund’s $100,000 payment ceiling, resulting in no upper limit on the amount that could be paid from the Judgment Fund on any particular claim. The General Accounting Office Act of 1996 transferred certification of payments from the Judgment Fund from GAO to Treasury. Since 1996, Treasury has managed the Judgment Fund, including certifying payments. Treasury established Fiscal Service in October 2012, and delegated key Judgment Fund functions to that bureau. Fiscal Service is responsible for, among other things, providing central payment services to federal agencies. Fiscal Service is the primary disburser of payments to individuals and businesses on behalf of federal agencies, including benefit payments made by the U.S. Social Security Administration and the U.S. Department of Veterans Affairs, federal income tax refund payments, and payments to businesses for goods and services provided to the federal government. Annually, Fiscal Service disburses more than a billion payments, with an associated total dollar value of more than $2.4 trillion. Administering the Judgment Fund is among the services that Fiscal Service provides. A federal agency may request payment of a claim from the Fund on its behalf only in instances where funds are not legally available to pay the claim from the agency’s own appropriations or other funding source. Amounts paid from the Fund vary from year to year. Treasury reported that the Fund paid about $3 billion and $4 billion for administrative and litigative claims in fiscal years 2015 and 2016, respectively. Fiscal Service carries out its mission through direct support from its three divisions. The primary focus of the Judgment Fund Branch is to receive and process claims for Judgment Fund payments. As shown in figure 1, the Judgment Fund Branch operates within Fiscal Service’s Financial Services and Operations Division. Fiscal Service only certifies payments of claims from the Judgment Fund when the following four tests have been met: (1) claims are final, (2) claims are monetary, (3) one of the authorities specified in the Judgment Fund statute permits payment, and (4) payment is not legally available from any other source of funds (e.g., claims are only paid from the Judgment Fund when payment is not otherwise provided for in a specific appropriation or by another statutory provision). Generally, federal agencies are not required to reimburse the Judgment Fund. Two exceptions are Judgment Fund payments made pursuant to (1) the Contract Disputes Act of 1978 (CDA) and (2) the Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act). Currently, Treasury produces, and posts on its website, a voluminous spreadsheet—referred to as the Judgment Fund Transparency Report to Congress—when Congress requests it, but is not otherwise required to do so. The spreadsheets are data extracts from JFICS that provide information on the types and amounts of claims and the agencies for which the payments were made. Members of Congress introduced legislative proposals in the recent past related to the Judgment Fund. For example, in the 115th Congress, a bill entitled the Judgment Fund Transparency Act of 2017 (H.R. 1096), as reported (amended) by the Committee on the Judiciary on October 16, 2017, would amend the Judgment Fund statute to require Treasury to post on its website information related to claims on the Judgment Fund. In response to the Committee’s request for Schedules of the Judgment Fund Non-Entity Assets, Non-Entity Costs, and Custodial Revenues prepared in accordance with U.S. GAAP and related information, Treasury provided to the Committee nine “exhibits” that contained selected information on Judgment Fund payments and other related information to answer nine questions in the Committee’s request. We reviewed the Treasury-provided information and found that it did not provide the Schedules of Judgment Fund Non-Entity Assets, Non-Entity Costs, and Custodial Revenues for fiscal years 2010 through 2016, prepared in accordance with U.S. GAAP, and appropriate note disclosures or MD&A to the Committee, as requested. In addition, we identified numerous differences between amounts included in the exhibits provided to the Committee and those reported in Treasury’s (1) unaudited transparency reports, (2) audited Schedules, or (3) audited Financial Statements. For example, we identified differences between administrative and litigative payments for fiscal years 2010 through 2016 reported on Exhibits 1 and 2 - Judgment Fund Administrative and Litigative Payments by Defendant Agency and Fiscal Year and those reported in Treasury’s (1) unaudited transparency reports, (2) audited Schedules, and (3) audited Financial Statements, for all years presented (as shown in tables 1, 2, and 3). Further, we identified numerous differences between financial and nonfinancial information in Treasury’s exhibits and comparable information contained only in the transparency reports. For example, the Committee asked Treasury to disclose the amount of Judgment Fund payments for attorneys’ fees pursuant to the Equal Access to Justice Act (EAJA) for fiscal years 2010 through 2016. In response, Treasury provided Exhibit 8 - Amounts Paid from the Judgment Fund for EAJA Claims by Fiscal Year. We compared total payments for each fiscal year reported in Exhibit 8 with those reported in the transparency reports for the same years and identified differences in payments for principal, attorneys’ fees, and costs, as shown in table 4. We provided Treasury the results of our comparisons and requested explanations for the differences we identified, and Treasury provided explanations for some of them. Subsequently, Treasury officials informed us that they discovered that the exhibits were created in a faulty manner, and rather than expending resources to reconcile and explain the numerous differences we identified, they indicated that Fiscal Service staff would submit new exhibits to the Committee; however, they did not provide a date by which they would do so. Judgment Fund Branch staff further explained that the Committee’s request was a unique request for information that could not be fulfilled with existing standard reports and queries. To respond to the request, Fiscal Service created ad hoc queries of the JFICS database using different instructions for extracting data for the exhibits than those used for creating the transparency reports. The Judgment Fund Branch relied on these ad hoc queries, primarily from JFICS, to prepare the exhibits answering the nine questions included in the Committee’s request. However, according to Judgment Fund Branch officials, the Judgment Fund Branch does not prepare financial statements, such as the Schedules of Non-Entity Assets, Non-Entity Costs, and Custodial Revenues. Rather, its primary focus is receiving and processing claims for Judgment Fund payments. In addition, these officials told us that they could not confirm whether the Judgment Fund Branch worked with the Fiscal Accounting Branch to respond to the Committee’s request or prepare the exhibits provided to the Committee. Treasury’s policy is to ensure and maximize the quality, objectivity, utility, and integrity of the information that it disseminates to the public. This policy directs Treasury bureaus and departmental offices to develop standards for information quality and ensure that the standards are used when disseminating information. The policy also directs that such information be accurate, clear, complete, and unbiased. In addition, policy guidelines specifically state that in situations where public access to data and methods will not occur, especially rigorous checks to analytic results should be applied and documented. According to Fiscal Service officials, this policy applies strictly to information disseminated to the public, and the related procedures in the policy do not apply to information transmitted to federal entities, including Congress. Fiscal Service officials did not provide evidence of a similar policy or procedures for ensuring the quality of the information disseminated to Congress and other federal entities. Fiscal Service officials also did not provide us with documentation indicating that any checks or reviews were performed on the exhibits—in a manner consistent with Treasury’s written policy and review procedures for disseminating information to the public—before Treasury provided them to the Committee. As a result, the exhibits that Treasury provided to the Committee were not responsive to the Committee’s request and are at increased risk that they may contain unreliable information. Accordingly, the Committee lacks important, reliable information needed to effectively oversee Judgment Fund activities, including considering whether enacting new legislation would benefit the American people by ensuring better management of the Judgment Fund. According to Fiscal Service’s documented policies and procedures, payments from the Judgment Fund may be made only upon certification by Fiscal Service. An important step in the claims payment certification process is for the Fiscal Service claims analyst and claims reviewer to confirm that an agency’s claim for payment from the Judgment Fund is not otherwise provided for by another source of funds. This confirmation is necessary to make sure that the Judgment Fund is not used for payments that should be paid directly by the involved agency or another funding source. Another important step in the claims payment certification process is to confirm that the claim is final, meaning that the applicable federal officials have fully resolved the claim’s underlying dispute and the only outstanding issue is payment of the claim. Additionally, Fiscal Service calculates the amount of any interest that may be authorized and initiates action under federal debt collection law to offset any known indebtedness to the United States by the claimant. In the actual “certification” step, Fiscal Service does not review or evaluate the merits of the underlying claim. Payments made by the Treasury Judgment Fund on behalf of agencies are initiated upon the receipt of claim requests that agencies submit to Fiscal Service. These requests must be submitted online through JFICS or by sending completed payment request forms to the Judgment Fund Branch via fax or mail. Claims submitted through JFICS must be accompanied by a FS Form 197, Voucher for Payment, page 2, signed by the claimant, and either a (1) settlement agreement or (2) court order. Claims submitted via fax or mail must contain a (1) FS Form 194, Judgment Fund Transmittal Form; (2) FS Form 196, Judgment Fund Award Data Sheet; and (3) FS Form 197, Voucher for Payment, page 1, and a document that authorizes payment. Upon receipt of mailed or faxed forms, Fiscal Service staff manually enter the data from the submitted forms into JFICS. Fiscal Service staff review the forms for completeness and ensure that each FS Form 194 has been signed by the agency authorizing official. Fiscal Service relies on this signature and the presence of a U.S. government email address on the FS Form 194 as its primary controls for ensuring that a mailed or faxed claim has been authorized by the agency. Fiscal Service also relies on this signature to confirm that the claim is appropriate and is eligible to be paid from the Judgment Fund. For claims entered directly in JFICS by an agency, the agency authorizing official must click on “I agree” on the JFICS certification page to affirm that the claim is authorized by the agency and appropriate for payment from the Judgment Fund. (See fig. 2 for a depiction of the Judgment Fund claims process.) Depending on the claim amount, Fiscal Service staff perform a minimum of two levels of review on Judgment Fund claims, whether the claims are received by fax or mail or directly entered into the JFICS system by agencies. First, the claims analyst reviews the claim to ensure that the agency has provided all of the information necessary to process it. Once the claims analyst determines that all of the information has been provided, the claim is forwarded electronically to the claims reviewer. The claims reviewer performs a secondary review to determine if all the information required has been provided, as well as to ensure that the claims analyst entered the mailed or faxed information into JFICS correctly. Claims for less than $1 million do not require further review and are submitted to the Treasury Disbursing Office for payment. Claims for $1 million or more are subject to management review, and claims for $50 million or more are sent to the Fiscal Service Office of Chief Counsel for review. In connection with its oversight efforts, the Committee requested certain information from Treasury about Judgment Fund financial balances, activities, and other information. However, the information that Treasury provided to the Committee in response to this request did not include Judgment Fund Schedules of Non-Entity Assets, Non-Entity Costs, and Custodial Revenues prepared in accordance with U.S. GAAP, including appropriate note disclosures and MD&A, as requested. Further, Treasury officials stated that the exhibits provided to the Committee were created in a faulty manner, resulting in an increased risk that they may contain unreliable information. Although Treasury directs its bureaus and offices to take steps to ensure the quality of information disseminated to the public, Fiscal Service did not take appropriate steps to ensure that the information it provided to the Committee was responsive and complete. Without sufficient financial and other information, the Committee’s ability to effectively oversee Judgment Fund activities, including considering whether enacting new legislation would benefit the American people by ensuring better management of the Judgment Fund, may be hampered. We are making the following recommendation to Treasury: The Commissioner of the Bureau of the Fiscal Service should take steps to ensure that information provided to Congress undergoes a documented review to ensure the quality and responsiveness of the information provided. (Recommendation 1) We provided a draft of this report to Treasury for review and comment. In written comments, reproduced in appendix IV, Fiscal Service did not concur or nonconcur with our recommendation, but stated that it agreed with our concerns regarding the reliability of information contained in the exhibits provided to the Committee and that a new set of data has been compiled and undergone a documented review to ensure its reliability. We are encouraged by the steps being taken to ensure the reliability of this information, but it is unclear to what extent steps have been, or will be, taken to ensure the quality and responsiveness of other information that may be provided to Congress in the future. We believe that such steps are necessary to help ensure that the Committee has sufficient financial and other information to effectively oversee Judgment Fund activities. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Treasury, the Inspector General of the Department of the Treasury, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9816 or rasconap@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The objectives of our audit were to (1) evaluate the extent to which the information the U.S. Department of the Treasury (Treasury) provided to the House Committee on the Judiciary (Committee) responds to the Committee’s May 2017 request for information about Judgment Fund balances and activities and reconciles to financial information included in annual, audited financial reports and other selected reports and (2) describe the Bureau of the Fiscal Service’s (Fiscal Service) documented procedures and related control activities for processing agency requests for payments from the Judgment Fund, including how Fiscal Service ensures that appropriate agency official approve claims and what reviews are required, if any, to ensure receipt of required documentation. To determine the extent to which the Treasury-prepared information responds to the Committee’s request for information about the Judgment Fund balances and activities, we compared the information provided by Treasury to the Committee with the Committee’s request letter to Treasury. For each item requested by the Committee, we reviewed the information provided by Treasury and determined whether it was responsive to the request. To determine the extent to which the Treasury-prepared exhibits reconcile to information included in annual, audited financial statements and other reports, we compared, and identified any differences between, the Treasury-prepared exhibits and certain information included in the following Treasury reports: unaudited Judgment Fund transparency reports to Congress for fiscal years 2010 through 2016; audited Schedules of Non-Entity Assets, Non-Entity Costs, and Custodial Revenues for fiscal years 2010 through 2013; and audited department-wide Financial Statements for fiscal years 2010 through 2016. To determine the reliability of the financial information contained in the unaudited transparency reports, we reviewed relevant documentation, interviewed knowledgeable agency officials, and conducted basic testing of the data. Based on these efforts, we concluded that the data were sufficiently reliable for the purpose of our reporting objective. In addition, we interviewed Fiscal Service staff to obtain (1) explanations for and reconcile differences we identified based on our comparisons and (2) Treasury’s related policies for reviewing information provided to Congress to ensure its quality and responsiveness. Further, because the Treasury Office of Inspector General (OIG) is currently conducting an audit that includes the Treasury Judgment Fund, we communicated with the OIG staff regarding the OIG’s current audit to ensure no duplication in our audit work. To describe Fiscal Service’s documented procedures and related control activities for processing agency requests for payments from the Judgment Fund, we reviewed Treasury’s standard operating procedures and external user manuals for the application Fiscal Service uses to process claims (the Judgment Fund Internet Claims System (JFICS)). We also observed Fiscal Service staff entering and reviewing Judgment Fund claims in JFICS. In addition, we obtained and reviewed selected independent public accountant (IPA) audit documentation related to processing Judgment Fund claims supporting the IPA’s fiscal year 2017 audit of Treasury’s department-wide financial statements. The U.S. Department of the Treasury (Treasury) provided the House Committee on the Judiciary (Committee) nine exhibits in response to nine questions included in the Committee’s request. Information included in these exhibits and differences we identified based on comparisons of this information with information included in certain Treasury annual audited financial reports and other reports is summarized below. Exhibits 1 and 2 - Judgment Fund Administrative and Litigative Payments by Defendant Agency and Fiscal Year shows, by agency and type of payment, the amounts paid from the Judgment Fund on behalf of federal agencies. We compared information in these exhibits with Treasury’s (1) unaudited Judgment Fund transparency reports to Congress for fiscal years 2010 through 2016; (2) audited Schedules of Non-Entity Assets, Non-Entity Costs, and Custodial Revenues (Schedules) for fiscal years 2010 through 2013; and (3) audited department-wide financial statements (Financial Statements) for fiscal years 2010 through 2016 (see tables 5, 6, and 7). Exhibit 3 - Judgment Fund Collections from Federal Agencies by Fiscal Year presents, by Treasury account symbol, recoveries and reimbursements from federal agencies. Exhibit 4 - Judgment Fund Accounts Receivable from Federal Agencies by Fiscal Year presents, by Treasury account symbol, amounts due from federal agencies for payments made on their behalf. We compared information in Exhibit 3 with the Schedules and information in Exhibit 4 with the Schedules and the Financial Statements for all available fiscal years. Information contained in Exhibits 3 and 4 were not payment related (these exhibits were receipts from agencies and accounts receivable owed by agencies) and therefore could not be traced to the transparency reports. The differences identified based on our comparisons of Exhibit 3 to the Schedules and Exhibit 4 to the Financial Statements are shown in tables 8 and 9, respectively. Exhibit 5 - Judgment Fund Costs Paid by Citation Code and Fiscal Year shows, by fiscal year, amounts paid for each type of citation code. We identified differences in each fiscal year between the total amounts paid as presented in Exhibit 5 and the total amounts contained in the transparency reports (see table 10). Exhibit 6 - Top 25 Attorney Law Firms that Received Payments from the Judgment Fund by Fiscal Year presents, by attorney and law firm, amounts paid for each of the 7 years. Because Treasury has identified this exhibit as containing personally identifiable information protected by the Privacy Act of 1974, we do not present information from Exhibit 6. Exhibit 7 - EAJA Payments to Plaintiffs’ Counsel in Decending Order shows, by attorney and law firm, amounts paid to each related to Equal Access to Justice Act (EAJA) claims. When we compared the exhibit to the transparency reports, we identified differences in the total amounts for all fiscal years (see table 11). Exhibit 8 - Amounts Paid from the Judgment Fund for EAJA Claims by Fiscal Year shows, by cost citation code, amounts paid for principal, attorneys’ fees, costs, and interest for each fiscal year. When we compared Exhibit 8 to the transparency reports, we identified differences in the amounts reported for principal, attorney’s fees, and costs for most fiscal years (see table 12). Exhibit 9 - Major Recipients of Judgment Fund Payments by Fiscal Year presents amounts paid to major recipients (top 25) of payments from the Judgment Fund. Because Treasury has identified this exhibit as containing personally identifiable information protected by the Privacy Act of 1974, information about Exhibit 9 is not presented. In addition to the contact named above, Heather I. Keister (Assistant Director), Anthony Clark, Patrick Frey, Lauren S. Fassler, Nadine Ferreira, Valerie Freeman, James Kernen, Ned Malone, Lisa Motley, and Taya R. Tasse made key contributions to this report.", "summary": "The Treasury Judgment Fund, managed by Fiscal Service, annually pays billions of dollars of claims on behalf of federal agencies. Transparent and reliable information is important for Congress to provide effective oversight of the Judgment Fund. In May 2017, the Committee requested that Treasury provide (1) Schedules of the Judgment Fund for fiscal years 2010 to 2016 prepared in accordance with U.S. GAAP, including appropriate disclosures to answer nine questions, and (2) information on processes and procedures used when paying claims. GAO was asked to review the information that Treasury provided to the Committee. This report (1) evaluates the extent to which the Treasury-prepared information responds to the Committee's request and reconciles to financial information included in annual, audited financial reports and other reports and (2) describes Fiscal Service's documented procedures and related control activities for processing agency claims. To address these objectives, GAO compared the information provided by Treasury to other Treasury reports, conducted interviews with agency officials, and reviewed documented procedures for processing claims. The Department of the Treasury (Treasury) did not provide the House Committee on the Judiciary (Committee) with the information the Committee requested on the Treasury Judgment Fund. Specifically, Treasury did not provide the Committee the Schedules of the Judgment Fund Non-Entity Assets, Non-Entity Costs, and Custodial Revenues that were prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Treasury also did not include appropriate note disclosures or Management's Discussion and Analysis, as requested by the Committee. Rather, Treasury provided nine exhibits containing selected Judgment Fund information to answer nine questions included in the Committee's request. In addition, GAO identified numerous differences between amounts included in Treasury's exhibits and its annual Judgment Fund transparency reports to Congress and certain audited financial reports. GAO requested explanations for these differences, and Treasury provided explanations for some of them. Subsequently, Treasury officials discovered and explained that the exhibits were created in a faulty manner, resulting in an increased risk that they may contain unreliable information. Treasury officials stated that rather than expending resources to further explain differences and reconcile the exhibits with the other information, Bureau of the Fiscal Service (Fiscal Service) staff planned to submit new exhibits to the Committee; however, they did not provide a date by which they would do so. GAO found that Treasury did not take appropriate steps consistent with its existing guidance for disseminating information to the public, such as performing appropriate reviews of information in the exhibits prior to providing them to the Committee, to ensure the quality and responsiveness of the information provided. The lack of reliable information on the Judgment Fund impairs the Committee's ability to provide effective oversight, including considering whether enacting new legislation would benefit the American people by ensuring better management of the Judgment Fund. Fiscal Service has policies and procedures to help ensure that it only certifies payments for awards, judgments, and compromise settlements (claims) from the Judgment Fund that meet the following four tests: (1) claims are final, (2) claims are monetary, (3) one of the authorities specified in the Judgment Fund statute permits payment, and (4) payment is not legally available from any other source of funds (e.g., claims are only paid from the Judgment Fund when payment is not otherwise provided for in a specific appropriation or by another statutory provision). GAO recommends that Fiscal Service take steps to ensure that information provided to Congress undergoes a documented review to ensure the quality and responsiveness of the information provided. Fiscal Service did not concur or nonconcur with the recommendation but agreed with GAO concerns regarding the reliability of information provided to the Committee.", "document_type": "gao"}
{"report": "DOD has used the Global Train and Equip program to provide training, equipment, and small-scale military construction activities intended to build the capacity of partner nations’ military forces to conduct counterterrorism operations. The program was originally authorized under Section 1206 of the 2006 NDAA and has been amended several times. The 2015 NDAA permanently authorized the Secretary of Defense, with concurrence of the Secretary of State, to conduct programs to (1) build the capacity of a foreign country’s national military forces to conduct counterterrorism operations or participate in, or support, ongoing allied or coalition military or stability operations that benefit the national security interests of the United States; (2) build the capacity of a foreign country’s national maritime or border security forces to conduct counterterrorism operations; and (3) build the capacity of a foreign country’s national-level security forces that have among their functional responsibilities a counterterrorism mission in order for such forces to conduct counterterrorism operations. The fiscal year 2017 NDAA repealed Section 2282 of Title 10 of the U.S. Code and created Section 333 of the same title (Section 333). Section 333 authorized DOD to continue providing training and equipment to the national security forces of foreign countries for the purpose of building the capacity of such forces to conduct counterterrorism operations, among other things. The fiscal year 2017 NDAA also contained several administrative and organizational instructions for the management and oversight of DOD security cooperation policy. According to DOD, counterterrorism and stability operations assistance generally consist of security capability projects that fortify a partner nation’s land, sea, or air capability. Projects often provide equipment or training intended to build partner communications, intelligence, surveillance, and reconnaissance capabilities. Figure 1 shows an example of a UH-60 helicopter—a type of equipment that has been provided through Global Train and Equip projects. Presidential Policy Directive 23, published in April 2013, was aimed at strengthening the ability of the United States to help allied and partner nations build their own security capacity. The directive states that U.S. agencies should target security sector assistance where it can be effective. The directive identifies principal goals of, and guidelines for, security sector assistance that highlight the importance of including the following four planning elements in project design and execution: identifying objectives that address partner nation needs; considering partner nations’ capacity to absorb U.S. assistance; integrating assessment, monitoring, and evaluation to provide policymakers, program managers, and implementers with information and evidence necessary to make effective decisions and maximize program outcomes; and anticipating sustainment needs. During the reporting period covered by this review, DOD’s Office of the Assistant Secretary of Defense for Special Operations/Low-Intensity Conflict was responsible for providing policy guidance and oversight of the Global Train and Equip program. The office coordinated with State’s Bureau of Political-Military Affairs and other stakeholders in an interagency process to solicit project proposals annually, in accordance with guidance that DOD revises each year to reflect lessons learned, congressional concerns, and other considerations. DOD 2016 and 2017 guidance implements Presidential Policy Directive 23, requiring that project proposals for the Global Train and Equip program address the four planning elements highlighted in the directive. Figure 2 illustrates the conceptual framework of the project proposal, approval, and implementation processes in 2016 and 2017. According to DOD officials, various elements of the proposal development, review, selection, and notification process occurred simultaneously, as proposal submission and review occurred on a rolling basis and agency-approved projects were notified to Congress in multiple groups throughout each fiscal year. As figure 2 shows, DOD instituted some changes to the proposal development and approval process for projects notified to Congress in 2017. According to DOD officials, for 2017, geographic combatant commands and embassy staff first submitted high-level concepts for review rather than fully drafted project proposals. These concepts were intended to provide information on project objectives for an interagency working group’s review and approval before further resources were committed to developing full proposals. DOD officials told us that the 2017 process remains in place for 2018 and 2019 projects. DOD officials said that in prior years, including 2016, geographic combatant commands and embassy staff were required to draft full proposals without confirmation that DOD and State would approve the proposals for notification to Congress. In 2016 and 2017, DOD and State officials reviewed proposals— approved by the geographic combatant command and ambassador or chief of mission—and selected projects to recommend to the Secretaries of Defense and State. Following approval by the Secretary of Defense, with concurrence from the Secretary of State, DOD prepared and submitted congressional notifications for each project it intended to fund through the program. These notifications summarized project information such as the project’s objectives, the partner nation’s absorptive capacity, the baseline assessment of the recipient unit’s capabilities, and arrangements for the project’s sustainment. Congressional notifications were submitted for each project to the appropriate committees at least 15 days before activities were initiated. According to DOD, project implementation did not begin immediately after the 15-day notification period if congressional staff requested additional time for briefings and for DOD to ensure that the congressional committees agreed with the proposed activities. After congressional notification, DOD’s Defense Security Cooperation Agency assumed responsibility for overseeing the obligation of funds for training and equipment procurement before the end of the relevant fiscal year, while officials from the security cooperation office at U.S. embassies were responsible for coordinating in-country project implementation. DOD planned to conduct assessments of selected projects 12 to 18 months after delivering major project components, to evaluate the extent to which U.S. assistance has contributed to building recipient unit capabilities and the extent to which the partner nation applied its capabilities consistent with the project’s intent. Of the $4.1 billion allocated for Global Train and Equip projects in 2009 through 2017, DOD has obligated approximately $3.7 billion and disbursed $2.5 billion. Table 1 details Global Train and Equip program funding, by fiscal year of appropriation, in 2009 through 2017. As table 1 shows, DOD reported no unobligated balances as of December 2017. Figure 3 details Global Train and Equip allocations in 2009 through 2017, according to the fiscal year in which DOD allocated the funds. As figure 3 shows, allocations averaged about $276 million in 2009 through 2014 and about $827 million in 2015 through 2017. DOD’s allocations for Global Train and Equip activities increased from $675 million in 2015 to about $1.2 billion in 2016 because of an influx of funding from the Counterterrorism Partnerships Fund, which was created in 2015 and authorized to fund Global Train and Equip projects. In addition, in 2015, DOD allocated funds from the European Reassurance Initiative, which also was created that year and authorized to fund Global Train and Equip projects. DOD’s allocations for Global Train and Equip activities for 2017 totaled $635 million. DOD concentrated allocations of Global and Train Equip funding in 2016 and 2017 on projects for Jordan and Lebanon, which received a combined total of $856 million, or 47 percent of total allocations during that period (see fig. 4). In 2016, allocations for projects in Jordan and Lebanon amounted to about $579 million—nearly 50 percent of approximately $1.2 billion in total allocations that year. In 2017, allocations for projects in those countries amounted to about $279 million—44 percent of $635 million in total allocations. For more information about allocations for specific Global Train and Equip projects in 2016 and 2017, see appendix II. DOD’s 2016 and 2017 proposals for Global Train and Equip projects consistently addressed only one of the four security assistance planning elements called for by DOD guidance, but agency officials reported implementing an informal process to improve coverage of these planning elements in 2018 proposals. DOD’s 2016 and 2017 guidance for Global Train and Equip project proposals called for proposal packages to address (1) project objectives, (2) partner nation absorptive capacity, (3) baseline assessments of partner nation capabilities, and (4) project sustainment needs. All 72 proposal packages we reviewed for 2016 and 2017 included project objectives. Slightly more than 30 percent of proposal packages in 2016 and over 80 percent in 2017 included information about partner nations’ absorptive capacity, compared with 19 percent in 2015 (see fig. 5). More than 90 percent of 2016 and 2017 proposal packages included baseline assessments, in contrast to 63 percent in 2015. However, less than three-quarters of proposal packages in 2016 and 2017 included complete sustainment plans, with the percentage that did so declining from 73 percent in 2016 to 68 percent in 2017. Although DOD’s 2016 and 2017 guidance called for proposals to address sustainment planning, it did not provide instructions for doing so when sustainment was not anticipated. According to DOD officials, the department has hired additional staff and developed an informal quality review process to better ensure that proposal packages include all key elements but, as of February 2018, had not documented this process as written policy. Standards for Internal Control in the Federal Government calls for documenting internal control activities aimed at ensuring effective use of resources and documenting in policies an organization’s internal control responsibilities. More complete information about each of the four planning elements—including sustainment costs, even when negligible—would improve DOD’s ability to plan and allocate funding for the program, while formalizing the quality review process would also enable DOD to provide greater consistency in its oversight of project development. We found that DOD included information that addressed project objectives in all 72 proposals for Global Train and Equip projects in 2016 and 2017. We previously reported that all 2015 proposals for the program addressed project objectives. DOD’s guidance notes that it is important for geographic combatant commands and chiefs of mission to produce proposals that include a clear narrative about how the proposed capability-building effort will fit into the theater campaign plans and integrated country strategies and advance U.S. interests. DOD officials from one geographic combatant command noted that 2017 Global Train and Equip project objectives were initially developed at the country level by the Security Cooperation Office and other embassy personnel and were based on theater campaign plans. Each proposal we reviewed from 2016 and 2017 outlined the objectives for the project. For example, one proposal stated that the training and equipment outlined in the proposal would enhance the partner nation’s armed forces’ ability to effectively conduct border security, counterincursion, and other night operations. DOD improved its efforts to include information about partner nations’ absorptive capacity in Global Train and Equip project proposals in 2016 and 2017. Thirty-two percent (13 of 41) of 2016 proposals and 84 percent (26 of 31) of 2017 proposals addressed this planning element. We previously reported that less than 20 percent (10 of 54) of 2015 proposals addressed absorptive capacity. Before 2017, DOD guidance called for project proposals to address absorptive capacity, but the project proposal template did not include a required field for it. However, DOD updated its proposal template in 2017 to include a required field for analyzing and assessing the partner nation’s security forces’ current capability and current performance level in employing the proposed counterterrorism capabilities while serving in the desired counterterrorism role. According to DOD officials, they updated the proposal template to better identify problems with absorptive capacity because of its importance and because it is an area of high congressional interest. DOD assessments of partner nations’ absorptive capacity noted a range of abilities to absorb assistance. For example, DOD assessed one country as having the capacity to immediately employ new equipment once training was completed and assessed another country’s ability to absorb training and equipment as average, noting that previous training had resulted in continuous improvements. DOD officials acknowledged that assessing absorptive capacity has been a consistent challenge. One senior official also noted that pressing national security goals, such as quickly developing the capabilities of strategic partners for ongoing operations, required the U.S. government to assume some risk by supporting a project without fully assessing or documenting a partner nation’s absorptive capacity. We found that 92 percent (66 of 72) of 2016 and 2017 Global Train and Equip proposal packages included baseline assessments, compared with 63 percent (34 of 54) of 2015 proposal packages. DOD’s assessment framework is based on a dual-purpose document that includes portions for assessing the recipient unit’s capabilities at baseline—that is, before a project begins—and after project delivery and implementation. DOD’s 2016 and 2017 program guidance states that a baseline assessment of recipient unit capabilities should be completed prior to submission of each proposal. According to DOD officials, baseline assessments are the primary mechanisms to identify and document the recipient unit’s capabilities at the time the project is proposed and its needs to improve its capabilities to meet its mission. The baseline assessments are intended to be submitted with project proposals and later used for project outcome assessments by assessment teams, policy officials, embassy staff, and other stakeholders. Less than three-quarters of Global Train and Equip proposals included complete sustainment plans in 2016 and 2017, and the percentage of proposals with complete plans declined from 2016 to 2017. While 73 percent (30 of 41) fully addressed this planning element in 2016, 68 percent (21 of 31) fully addressed it in 2017. We previously reported that 76 percent of 2015 proposals included complete sustainment plans. According to DOD’s Global Train and Equip guidance for 2016 and 2017, complete sustainment plans include three elements: (1) an identification of funding sources for project sustainment, (2) an estimate of the annual sustainment costs, and (3) an assessment of the sustainment capability of the partner nation. Most 2016 and 2017 proposals included information about sustainment funding sources and the partner nation’s sustainment capability. However, the percentage of proposals that estimated annual sustainment costs varied: 85 percent of proposals estimated sustainment costs in 2016 and 71 percent of proposals estimated such costs in 2017. DOD officials told us that sustainment costs may not have been documented in some cases if sustainment was not expected to be a significant factor in the proposed project. For example, officials explained that some projects provided assistance, such as ammunition and training, that is expendable and does not require sustainment. Officials also noted that other projects provided assistance that may not have been intended to be sustained. For instance, long-term sustainment would be unnecessary for a project with a discrete objective, such as providing equipment to allow for closer coordination with U.S. and North Atlantic Treaty Organization forces in support of the International Security Assistance Force–Afghanistan. Nevertheless, DOD officials said that when project sustainment is not anticipated, proposals for the projects should explain why sustainment costs are not included. DOD’s 2015 guidance for Global Train and Equip proposals included instructions for addressing sustainment planning when sustainment is not anticipated; however, the guidance for 2016 and 2017 did not include these instructions. Standards for Internal Control in the Federal Government states that internal control activities aimed at ensuring effective use of resources should be clearly documented and that documentation should be readily available for examination. Updating the guidance for Global Train and Equip proposals to include instructions addressing sustainment planning when sustainment is not anticipated would help ensure decision makers’ access to complete information on annual sustainment costs, including costs expected to be negligible. To improve management of the Global Train and Equip program, DOD officials told us that they developed an informal quality review process designed to ensure that proposals in 2018 and subsequent years address required elements. According to DOD officials, this informal process includes the following steps: Interagency “red teams” evaluate each proposal line by line to verify that the proposal is complete. Proposals with missing elements are returned to the drafters for revision and reevaluation. After proposals clear interagency review, senior DOD officials also review the proposals for completeness before approving them. According to DOD officials, the department is developing this process as part of its review and approval of proposals under the new Section 333 authority to build partner capacity and is in the process of hiring staff to support this effort. For example, in February 2018, DOD officials said they had created a position for a full-time contractor who will be based at headquarters and charged with verifying that proposal packages include all required security assistance planning elements. DOD officials told us in February 2018 that they were also soliciting feedback on the process from relevant stakeholders. However, according to the officials, DOD had not yet determined whether to formalize the proposal review process as written policy. According to Standards for Internal Control in the Federal Government, management should document in policies the internal control responsibilities of an organization. Formalizing as written policy its informal process to ensure that proposals address all four required planning elements would enable DOD to provide consistent oversight of Global Train and Equip project development and ensure decision makers have access to complete information about each element. Such information would, in turn, help DOD and State decision makers to ensure the efficient use of funding under the new Section 333 authority. DOD reporting on the achievement of Global Train and Equip project objectives in 2016 and 2017 indicated progress in building partner capacity to combat terrorism and conduct stability operations as well as factors that affected the progress achieved. According to DOD assessment reports and supporting documents, partner nation recipient units’ overall capabilities were greater after implementation of 8 of 21 Global Train and Equip projects, and some of the remaining 13 projects produced some positive results. (See app. III for the number of assessment reports conducted between 2006 and 2015 out of the total number of projects implemented in those years.) DOD documents and officials also identified several factors—including proposal design weaknesses, equipment suitability and procurement issues, partner nation shortfalls, and workforce management challenges—that may have affected the extent to which DOD was able to achieve project objectives. DOD officials described several changes they are making to improve assessments of Global Train and Equip projects. DOD assessment reports for 2016 and 2017, which included baseline and post-implementation assessments of recipient units’ capabilities for 21 Global Train and Equip projects, indicated some progress in building partner capacity. For 8 of the 21 projects, the recipient units’ capability levels were assessed as having increased by at least one rating level after the project’s implementation (see fig. 6). Although the recipient units for the remaining 13 projects were assessed as showing no change in capability levels, the assessment reports for some of these projects described some positive project outcomes. For example, one 2017 assessment report of a project initiated in 2015 found that, while the recipient unit had not yet been integrated into the special operations force (a stated goal of the project), the project had resulted in some increased capacity for the recipient unit. Specifically, the assessment found that the project increased the recipient unit’s capability to support counterterrorism operations while also enhancing command and control capabilities and interoperability. Further, the 2016 assessment report for several related projects in one country found that, although the recipient unit had not increased its overall capability level, the equipment provided by the Global Train and Equip projects had assisted the recipient unit in executing its border security mission. Additionally, the 2016 assessment report for a 2010 project found that, whereas the recipient unit’s overall capability level had not changed, the unit’s abilities to conduct internal defense operations throughout the country had increased as a result of Global Train and Equip assistance. To conduct the assessments, DOD uses a standard framework for evaluating the capabilities and performance of each recipient unit before and after a project has been implemented. For the baseline assessments, DOD rates the recipient unit’s level of capability and performance on a 5- point scale; 1 is defined as the ability to perform some basic tasks to at least a low standard of performance and 5 is defined as the ability to perform most of the advanced tasks for the unit’s missions and to operate almost continuously throughout its assigned area of operations. After project implementation, DOD uses the same 5-point scale to identify any changes in the recipient unit’s level of capability and performance since receiving the assistance. As we have previously reported, these ratings do not represent only the effect of the provision of training and equipment on the recipient unit’s capability and performance, as other factors may contribute to changes in performance level. DOD’s assessment reports and supporting documents, as well as agency officials we interviewed, described several factors that can affect the extent to which DOD is able to achieve Global Train and Equip project objectives. These factors—project design weaknesses, equipment suitability and procurement issues, partner nation shortfalls, and workforce management challenges—are consistent with the challenges noted in our April 2016 report. Project design weaknesses. According to DOD assessment reports, project designs that did not adequately reflect a partner nation’s ability to contribute resources to a project or sufficiently address recipient unit needs and capabilities challenged the achievement of project objectives. For example, DOD’s 2016 assessment of several projects in one partner nation indicated that small-scale construction projects often present problems in achieving objectives. According to the assessment, these problems are largely due to the limited number and capability of construction firms willing to bid on work in remote locations and a dollar ceiling for small-scale projects ($750,000) that often cannot cover all expenses at such sites. The assessment found that relying on a partner nation to provide the additional funds frequently results in the construction not being completed. In addition, DOD’s 2016 assessment report indicated a problem with the adequacy of an airplane spare-parts package provided in some Global Train and Equip projects. The assessment found that the Cessna Caravan spare parts, intended to cover 2 years of maintenance, proved insufficient for high-speed combat flight operations. (See fig. 7 for an example of a Cessna Caravan at a partner nation airbase.) The report also noted that this problem had been identified in other Global Train and Equip projects that included spare-parts packages for Cessna Caravans. The report indicated that the equipment manufacturers determine the package contents without regard to the unique operational and environmental conditions in the receiving partner nation. Equipment suitability and procurement issues. A lack of suitability of equipment provided by Global Train and Equip projects, as well as problems with procuring the equipment, can make it difficult to achieve desired capability-building objectives. For example, a 2017 assessment report of a 2015 project found that size distributions for body armor and helmets were not aligned with the general size requirements—an issue that had been identified in other countries receiving Global Train and Equip assistance. Additionally, the assessment noted that consideration was not given to providing body armor with built-in buoyancy for personnel operating in a maritime environment. Further, the assessment noted that bright orange life jackets were provided as tactical equipment, when a subdued color would have been more appropriate. Moreover, the 2016 assessment report found that equipment procurement issues in a 2012 project caused maintenance problems for the partner country. According to the report, the U.S. Army did not have an existing contract to obtain diesel vehicles from the manufacturer specified in the project proposal and congressional notification and therefore used an existing contract to obtain vehicles from a different manufacturer. The assessment observed that, while delivery of available vehicles provides some value, in this case it created maintenance problems for the partner nation because there was no dealership in the country to provide repairs and spare parts for the vehicles. The assessment found that in such situations it may be best to delay fulfillment until a contract is available to procure vehicles from the specified manufacturer. Partner nation shortfalls. Shortfalls of partner nations, including not using assistance for the envisioned purposes, inability to maintain and sustain equipment, and difficulty in manning and training recipient units, can negatively affect the achievement of project objectives. For example, the 2016 assessment report for a 2015 project found that, although the recipient unit was able to plan and execute more complex operations to combat regional threats, such as Boko Haram, in a professional manner, the assessment team received no evidence that the unit had played more than a minor role in counter–Boko Haram operations. In a separate review of a partner nation’s Global Train and Equip projects, the 2016 assessment found that the recipient unit had difficulties in maintaining weapons in a fully mission- capable status. The assessment found that a number of the unit’s small arms were old and many had warped barrels, making them much less accurate. A 2017 assessment of a 2013 project found that the recipient unit suffered from shortages of junior noncommissioned officers and officers. The unit was also found to have few soldiers in specialty jobs who had received school training. The assessment report acknowledged that certain conditions in the partner nation, such as low levels of education, presented a multitude of problems in ensuring the development and maintenance of national security forces capable of working with, and integrating, a range of modern combat systems. Workforce management challenges. DOD officials indicated that workforce challenges, particularly related to turnover and staffing levels, can inhibit effective project design, program implementation, and oversight. DOD officials acknowledged that staff turnover, an issue that we previously identified, remains a challenge. According to the officials, there is a high degree of institutionalized turnover, particularly among security cooperation officers, at U.S. embassies and to some extent within the geographic combatant commands. As a result, the officials overseeing project implementation may not have been responsible for project development and are less likely to understand the capabilities of the intended recipient units or the capability gaps that could be addressed by equipment and training. DOD officials also told us that they have been challenged to meet programmatic demands with current staffing levels, particularly given the influx of funds appropriated for the Counterterrorism Partnerships Fund in 2015. DOD officials said that the volume of Global Train and Equip projects expanded with the large increase in funding in 2015 and 2016, which stressed the foreign military sales system as well as geographic combatant commands’ ability to plan for, and manage, the program with existing resources. For example, DOD officials said that teams of three staff at geographic combatant commands were managing over three times more funding than in prior years. As a result, staff were unable to maintain consistent levels of due diligence on issues such as ensuring that proposal packages addressed absorptive capacity and sustainment planning. According to DOD officials, negative effects of this inconsistent due diligence included the arrival of equipment not suitable for operations and overestimation of one partner nation’s absorptive capacity, necessitating unplanned training and resulting in project delays. DOD officials said that they are now in the process of acquiring additional staffing to address capacity constraints. DOD officials told us that they are in the process of evaluating the effectiveness of the assessment process conducted in 2016 and 2017 and described a variety of changes that they are making to improve assessments of Global Train and Equip projects. DOD officials acknowledged that baseline and post-implementation assessments, as well as monitoring activities, had been conducted inconsistently in prior years, including for the projects developed and implemented in 2016 and 2017. DOD officials said that staffing constraints were a contributing factor. In March 2017, we also identified some weaknesses in the design of evaluations for Global Train and Equip projects and recommended that DOD develop a plan for improving the quality of these evaluations. While prior laws required DOD to conduct assessments and evaluate the program’s effectiveness, the fiscal year 2017 NDAA requires that DOD maintain a program of assessment, monitoring, and evaluation in support of the agency’s security cooperation programs and activities. Given the requirements for an assessment, monitoring, and evaluation program, and recognizing the importance of improving the assessment processes, DOD officials said they are developing an enhanced assessment process that includes increased staffing dedicated to monitoring and evaluation. For example, DOD officials said that they had hired several full-time contractors to perform key tasks related to monitoring and evaluation. According to the officials, several full-time contractor positions will be located in the various geographic combatant command locations, with responsibilities to develop baseline assessments in coordination with the geographic combatant commands and oversee the quality and completeness of those assessments; write performance indicators and performance plans into every Global Train and Equip project proposal; conduct monitoring and provide reports to the geographic combatant command and to the Defense Security Cooperation Agency on the status of project objectives and performance indicators; and conduct annual, independent evaluations to assess a few Global Train and Equip projects in detail. In addition, DOD officials stated that they had hired a full-time contractor who will be based at headquarters and provide further support for each geographic combatant command and who will be charged with documenting that baseline assessments were completed and conducting quality reviews of assessment-related documents. The Global Train and Equip program is a critical tool for building partner capacity to counter terrorism worldwide, and allocations for the program totaled more than $4.1 billion in 2009 through 2017. DOD has established an interagency process to develop and select Global Train and Equip projects that takes into account four required security assistance planning elements. However, although DOD consistently addressed project objectives in its 2016 and 2017 project proposals, DOD did not consistently address the other three planning elements. In addition, DOD guidance no longer includes instructions for addressing one of these elements, sustainment planning, in proposals for projects for which DOD does not intend or anticipate sustainment. Updating its guidance to include such instructions would help ensure decision makers’ access to complete information on annual sustainment costs, even costs anticipated to be negligible. Moreover, although officials reported having recently developed an informal quality review process designed to ensure that proposal packages address all required planning elements, DOD has not formalized this process as written policy. Formalizing the process would enhance DOD’s ability to provide consistent oversight of project development and to ensure that decision makers have access to complete information about each planning element for proposed projects. This information would, in turn, help DOD and State decision makers ensure the efficient use of funding under the new Section 333 authority to build partner capacity. We are making the following two recommendations to DOD: The Director of the Defense Security Cooperation Agency should update guidance for project proposal packages to require an explanation when sustainment plans are not documented for projects for which sustainment is not intended or anticipated. (Recommendation 1) The Director of the Defense Security Cooperation Agency should formalize as written policy its informal process for ensuring that project proposal packages fully address and document all four required security assistance planning elements. (Recommendation 2) We provided a draft of this report to DOD and State for comment. In its comments, DOD concurred with our recommendations and noted that the Defense Security Cooperation Agency will seek to update guidance for project proposal packages. DOD’s comments are reproduced in appendix IV. State did not provide comments. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Defense and State, and the Director of the Defense Security Cooperation Agency. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-5130 or mazanecb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act (NDAA) for Fiscal Year 2015 contains a provision for GAO to conduct biennial audits of such program or programs conducted or supported pursuant to 10 U.S.C. § 2282 during the preceding 2 fiscal years. This report examines (1) the status of funding that the Department of Defense (DOD) allocated for Global Train and Equip projects in 2009 through 2017; (2) the extent to which DOD addressed security assistance planning elements in project proposals in 2016 and 2017; and, (3) DOD’s reporting on the achievement of Global Train and Equip project objectives and any factors affecting its ability to achieve those objectives. To address these objectives, we analyzed funding data, program guidelines, project proposal documents, and congressional notifications. We discussed the funding data, project proposal process and key elements of project planning, documentation, and assessment with officials from DOD and the Department of State (State); geographic combatant commands in whose areas of responsibility partner nations received 2016 or 2017 assistance—the U.S. Africa Command, the U.S. Central Command, and the European Central Command; and the U.S. embassies in Jordan, Niger, and Uganda. We selected these countries on the basis of their having received a higher proportion of DOD’s allocations for the Global Train and Equip program in fiscal years 2016 and 2017; we also considered factors such as the number of project assessments conducted in each country, the maturity of projects, embassy officials’ project assessment experience, and the countries’ geographic distribution. To identify the status of funding that DOD allocated for Global Train and Equip projects in fiscal years 2009 through 2017, we assessed funding data for 2009 through 2017. DOD provided data on allocations, amounts reallocated, unobligated balances, unliquidated obligations, and disbursements of funds for program activities according to the fiscal year when the funds were appropriated. We analyzed these data to determine the extent to which funds had been allocated, obligated, and disbursed. DOD also provided data on project funding by year of allocation. We used these data to report allocations for Global Train and Equip projects by fiscal year and recipient country. We assessed the reliability of these data by interviewing cognizant agency officials and comparing the data with previously published data. We determined that the data were sufficiently reliable for our purposes. To assess the extent to which DOD addressed key elements of security sector assistance for projects it planned to implement in 2016 and 2017, we analyzed agency documents and interviewed agency officials. We reviewed Presidential Policy Directive 23 on Security Sector Assistance, which identified four key elements to be considered for security sector assistance programs: (1) project objectives that address partner needs, (2) the absorptive capacity of the recipient unit, (3) the baseline capabilities of the recipient unit, and (4) the arrangements for the sustainment of the project. We also reviewed DOD guidance, which requires these elements to be considered in project proposal development. To determine the extent to which DOD addressed these elements in project proposals, we analyzed the content of agency- approved project proposals in 2016 and 2017. Two reviewers independently analyzed 41 proposal packages for 2016 and 31 proposal packages for 2017. The reviewers resolved any disagreements through discussion of the information used to make their independent determinations. We also interviewed State and DOD officials who develop and review proposals, discussing (1) how they use information in the project proposal packages to consider planning elements and (2) other factors they may consider in developing and reviewing proposals. Further, we reviewed congressional notifications DOD developed subsequent to agency approval of Global Train and Equip project to determine the extent to which those documents included information about the four planning elements. With respect to our reporting on support for information about baseline assessments, congressional notifications lay out a standardized assessment framework to be used to assess the effects of projects. This framework includes a baseline assessment that DOD requires to be completed for inclusion in project proposal packages. DOD provided baseline assessments for 38 of 41 project proposals notified to Congress in 2016 and 30 of 31 project proposals notified to Congress in 2017. To evaluate the completeness of the required baseline assessment sections, we compared these 38 baseline assessment documents included in 2016 project proposal packages and 30 baseline assessment documents in 2017 project proposal packages with DOD internal guidance. To assess the completeness of sustainment plans, we used DOD’s Global Train and Equip guidance for 2016 and 2017, which defined complete sustainment plans to include three elements: (1) an identification of funding sources for project sustainment, (2) an estimate of the annual sustainment costs, and (3) an assessment of the sustainment capability of the partner nation. To examine DOD reporting on the achievement of project objectives in 2016 and 2017, we reviewed agency documents and interviewed agency officials. In particular, we analyzed DOD’s annual project assessment reports and supporting documents for 2016 and 2017 as well as the assessment framework handbook. DOD submitted an annual assessment report to Congress in 2016 but was not required to submit an annual assessment report in 2017. As a result, DOD prepared country-level assessments in 2017 but did not compile them and submit them to Congress as it did in 2016. To examine the extent to which DOD’s assessments and supporting documents indicated progress in building partner capacity, we compared baseline assessments of recipient unit capability and performance levels, conducted when projects were proposed, with post-implementation assessments of recipient unit capability levels, conducted after the delivery of program assistance. DOD uses a standard framework for evaluating the capabilities and performance of each recipient unit. Baseline assessments rate the recipient unit’s level of capability and performance before project implementation on a 5-point scale, with 1 defined as the ability to perform some basic tasks to at least a low standard of performance and 5 defined as the ability to perform most of the advanced tasks for the unit’s missions and to operate almost continuously throughout its assigned area of operations. After project implementation, project assessments and supporting documents use the same 5-point scale to rate any changes (positive or negative) in the recipient unit’s level of capability and performance. DOD’s 2016 assessment report and 2017 country-level assessment reports included information on 84 Global Train and Equip projects; of these, 21 projects included both a baseline and a post- implementation assessment of the recipient unit. We relied on DOD’s assessment reports and did not systematically validate the assessment results because it was beyond the scope of this engagement to assess the reliability of the assessments. However, for the purposes of this analysis, we met with DOD and contracted officials responsible for conducting and reviewing project assessments to gather information about their processes for assessing recipient unit capabilities. In addition, we reviewed DOD’s project assessment guidance and their template for conducting project assessments, which was consistently used in the assessments we reviewed. Finally, to examine DOD reporting on factors affecting the achievement of project objectives, we reviewed the assessment reports and interviewed DOD officials responsible for implementing the program, including officials from DOD’s policy guidance and oversight office and its geographic combatant commands; officials at embassies in the three selected countries; and officials at State’s Bureau of Political-Military Affairs. We also considered the factors that we identified as affecting the achievement of project objectives for our 2016 report that considered 2015 project proposals. On the basis of our review of DOD’s assessments and supporting documents and our interviews with agency officials, we grouped the key factors they identified into four categories: (1) proposal design weaknesses, (2) equipment suitability and procurement issues, (3) partner nation shortfalls, and (4) workforce management challenges. We conducted this performance audit from July 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 2 shows the total amount of funding DOD allocated for Global Train and Equip projects in 2016 and 2017 combined. As figure 8 shows, in 2012 through 2017, the Department of Defense (DOD) prepared assessment reports for 31 percent of the projects (82 of 262 projects) it had implemented in 2006 through 2015. These 82 projects account for 28 percent of the nearly $3 billion DOD allocated for the program in those fiscal years. The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 required DOD to assess the results of the Global Train and Equip program; however, DOD was not required to assess a specific number or percentage of projects in each fiscal year. In addition to the contact named above, Drew Lindsey (Assistant Director), Jon Fremont (Analyst-In-Charge), Emily Desai, Reid Lowe, Martin de Alteriis, and Ashley Alley made key contributions to this report. In addition, Chris Keblitis provided technical assistance.", "summary": "The United States has undertaken several efforts, including DOD's Global Train and Equip program, to help foreign partners strengthen their security capacity. Presidential Policy Directive 23 states that agencies should target security assistance where it can be effective and highlights the importance of addressing several planning elements in project proposals. DOD develops proposals, using guidance implementing the directive, and selects projects with the Department of State. The fiscal year 2015 National Defense Authorization Act included a provision for GAO to review the Global Train and Equip program. In this report, GAO examines (1) the status of funding DOD allocated for Global Train and Equip projects in fiscal years 2009 through 2017, (2) the extent to which DOD addressed key security assistance planning elements in project proposals in fiscal years 2016 and 2017, and (3) DOD's reporting on the achievement of Global Train and Equip project objectives and any factors affecting its ability to achieve those objectives. GAO analyzed agency data and program documents and interviewed DOD and State Department officials in Washington, D.C., and at selected combatant commands and embassies. The Department of Defense (DOD) obligated $3.7 billion of $4.1 billion allocated for the Global Train and Equip program in fiscal years 2009 through 2017 to build partner nations' capacity to counter terrorism. DOD increased allocations for the program in 2016, responding to an influx of funding from appropriations to the Counterterrorism Partnerships Fund. As of December 2017, DOD had disbursed about $2.5 billion of the obligated funds. Global Train and Equip project proposals for fiscal years 2016 and 2017 consistently addressed only one of four elements of security assistance planning outlined in Presidential Policy Directive 23 . GAO found all 72 proposals in those years included the first element, project objectives. From 2016 to 2017, the percentage of proposals addressing the second element—absorptive capacity—rose from 32 percent to 84 percent. Most 2016 and 2017 proposals included the third element, baseline assessments, but less than three-quarters included complete sustainment plans, the fourth element. DOD guidance for 2016 and 2017 did not include instructions for addressing project sustainment when sustainment was not anticipated, though the 2017 guidance included instructions for addressing the other three planning elements. According to DOD officials, they have developed an informal quality review process to better ensure that 2018 project proposals address all four planning elements. However, DOD has not formalized this informal process as written policy. Standards for Internal Control in the Federal Government calls for documenting internal control activities and policies. Formalizing the proposal review process would help DOD provide consistent oversight of project development and ensure access to complete information about each planning element, including sustainment needs. Such information is critical in helping decision makers ensure efficient use of funding to build partners' capacity. DOD reporting for 2016 and 2017 indicates progress in building partner capacity to combat terrorism and conduct stability operations as well as factors affecting the progress achieved. According to DOD documents, partner nation recipient units' overall capabilities were greater after implementation of 8 of 21 Global Train and Equip projects, and some of the remaining 13 projects produced some positive results. DOD documents and officials also identified factors—such as equipment suitability and procurement issues—that may have limited the achievement of project objectives. GAO recommends DOD (1) update project proposal guidance to include instructions for documenting sustainment planning and (2) formalize as written policy its informal process for ensuring Global Train and Equip project proposals fully document the four required planning elements. DOD agreed with the recommendations.", "document_type": "gao"}
{"report": "Research has found that girls’ participation in sports has increased dramatically since the passage of Title IX. However, research has also found that progress toward equal sports participation between boys and girls has slowed since 2000, and a participation gap remains between the sexes. We previously reported that federal data from school year 2013- 14 showed that national girls’ participation rates in public high school interscholastic sports remained nearly 10 percentage points lower than boys’ rates. The same data showed that at nearly half of schools, girls’ share of sports participation was less than their share of enrollment by 5 percentage points or more. Within Education, OCR enforces and implements Title IX, which applies at all educational levels, including colleges, universities, and public school districts, with limited exceptions. OCR’s most recent annual report describes its mission as ensuring equal access to education and promoting educational excellence throughout the nation through vigorous enforcement of civil rights laws. OCR’s core activities include responding to civil rights complaints filed by the public and conducting agency-initiated investigations to enforce federal civil rights laws; providing technical assistance to help institutions achieve compliance with the civil rights laws that OCR enforces; and issuing regulations and policy guidance to ensure equal access to educational opportunity. OCR also conducts the Civil Rights Data Collection (CRDC), which collects key information related to civil rights from public elementary and secondary schools and school districts, including information on interscholastic sports and teams offered for boys and girls and their participation. With respect to athletics, Education’s Title IX regulations require schools that offer sports teams to provide equal opportunities for members of both sexes. The regulations, along with OCR guidance, specify key elements OCR considers, among other things, in determining whether schools are offering equal opportunities (see fig. 1). OCR uses the number of participants on a school’s sports teams as a proxy for participation opportunities when determining whether those opportunities are proportionate for boys and girls. Recipients of federal education funds, such as public school districts, bear the responsibility for complying with Title IX. Districts are required to designate an employee to coordinate efforts under Title IX, and to make this Title IX coordinator visible. In 2014, we recommended OCR clarify and disseminate information on the roles and responsibilities of these Title IX coordinators. In response, during fiscal year 2015, OCR issued several pieces of Title IX guidance, including a Dear Colleague letter delineating the specific requirements and duties of coordinators, in addition to a letter to coordinators and a Title IX resource guide, which includes guidance on monitoring compliance in athletics. This guide states that the Title IX coordinator should work closely with many different members of the school community, including athletics administrators. Regarding athletics, it recommends tools that Title IX coordinators can use to encourage equal opportunities in athletics, which include evaluating whether there is unmet interest in a particular sport and comparing expenditures on boys’ and girls’ sports teams as an indicator of benefits provided to those teams. The majority of public high schools assessed some aspects of their sports programs over the past 2 years to encourage equal opportunities for boys’ and girls’ sports teams, according to our nationally generalizable survey of athletics administrators. Specifically, the estimated percentage of schools assessing key athletic resources provided to these teams ranged from 63 percent of schools assessing travel opportunities to 76 percent assessing uniforms (see fig. 2). In our interviews with eight athletics administrators, we heard a variety of approaches to assessing these resources. For example, when scheduling practice times and competitions, five athletics administrators said that they scheduled a boys’ competition only if they could also schedule a girls’ competition. Four athletics administrators described watching practices, inspecting equipment to identify when it needed replacement, or replacing equipment as their coaches requested it. Four athletics administrators said that coaches can sometimes influence the distribution of resources. For instance, one athletics administrator noted that in the past, his school had unequal facilities for boys’ baseball and girls’ softball, stemming in part from the boys’ baseball coach being a stronger advocate for his team. However, these athletics administrators generally described working with the coaches to ensure that resource allocation did not create inequalities. Most schools reported using a mix of public and private funds to support their athletic programs. An estimated 75 percent of public high schools received public funding (state or local) for their sports programs; for some individual sports or school athletics programs, public funding may be the primary funding source. We estimate that about 52 percent of schools that received public funding monitored or directed its use to help encourage equal resources for boys’ and girls’ teams. OCR’s Title IX Resource Guide encourages Title IX coordinators to periodically review expenditures on male and female athletic teams as part of their review of resources. At four schools, athletics administrators told us that they paid attention to the actual resources girls and boys received rather than focusing on expenditures, and three of these administrators explained there could be valid reasons for spending differences. For example, one athletics director said that both boys’ and girls’ hockey teams at his school participated in annual tournaments, but the girls preferred a tournament that did not require a hotel stay, so it was less expensive. In addition, we estimate that about 81 percent of public high schools had at least one booster club and, according to our survey, an estimated 51 percent of these schools monitored or directed the club to encourage equal opportunities. Among the eight athletics administrators we interviewed, relationships with booster clubs varied. For instance, some issued booster club guidelines and approved their purchases in advance, while others had no oversight of booster club expenditures. For example, one athletics administrator told us that he provides booster club presidents with written guidelines and approves purchases to make sure they do not create a Title IX compliance issue. Another athletics administrator’s school had recently undergone negotiations to obtain access to booster club expenditure records for the first time so that they could regularly review those expenditures. OCR has stated in compliance decisions, and OCR officials confirmed to us in interviews, that it considers resources provided through the use of private funds, including booster funding, in assessing whether schools are providing equivalent resources to teams of each sex. An official from a national association representing athletics administrators stated that administrators who take the association’s Title IX trainings are often surprised to learn they should monitor or direct booster club spending to help ensure equal opportunities. In addition to assessing the various school and booster club resources provided to boys’ and girls’ teams, some schools recently took steps to gauge student interest in specific sports as a means of encouraging equal opportunities, according to our survey. For example, we estimate that 40 percent of schools surveyed students about their sports interests over the last 2 school years and 25 percent added or changed their sports offerings based on requests from the underrepresented sex in their school’s sports program (see fig. 3). An estimated 31 percent of schools had not recently used any of these tools, or did not know if they had used the tools, to gauge student interest. And, according to our analysis of Education’s data, 60 percent of schools had one sex underrepresented by more than 5 percent in their sports programs in school year 2013-14. OCR guidance states that where one sex is underrepresented in sports, schools can demonstrate they are providing equal participation opportunities by using multiple indicators to identify, among other things, whether the sports currently offered meet student interest. OCR guidance also states that in its investigations the agency determines on a case-by-case basis whether sports participation numbers at a school are disproportionate, and whether the school is taking sufficient steps to accommodate the athletic interests and abilities of both girls and boys. In addition, OCR guidance describes tools that schools and school districts can use to assess for themselves whether action is needed to address any underrepresentation, or to otherwise encourage equal athletic opportunities. According to the guidance, these efforts should be led by the school district’s Title IX coordinator. About 51 percent of athletics administrators were either not aware of or not supported by their Title IX coordinator, according to our survey. Specifically, we estimate that 40 percent of athletics administrators– serving about 6,110 schools and 5 million students–were unaware of a Title IX coordinator in their school district and that an additional 12 percent were aware of their Title IX coordinator but received little to no support from them (see fig. 4). We also found that almost all of the athletics administrators who were not aware of having a Title IX coordinator were in a district that had, in fact, designated one. Specifically, when we matched athletic administrators’ survey responses with OCR’s data and extrapolated to the population overall, we estimated that 99 percent of the athletics administrators who were not aware of a Title IX coordinator in their district were in a school district that had listed a coordinator in school year 2013-14. Further, an estimated 26 percent of athletics administrators wanted additional guidance or assistance related to encouraging equal opportunities for boys and girls, according to our survey. Given the significant number of athletics administrators who reported being unaware of or unsupported by their Title IX coordinators, our survey results raise questions as to whether Title IX coordinators—whom school districts must designate and make visible in accordance with Title IX regulations—are familiar with and using OCR’s guidance on their role and responsibilities. This guidance states that the Title IX coordinator should support and work closely with members of the school community, including athletics administrators, to ensure compliance with Title IX. When asked about these survey results, officials from an association for Title IX coordinators and for other related administrators told us that they were not surprised that a number of athletics administrators were not aware of or supported by their Title IX coordinator, because the results are consistent with what they hear when interacting with their members across the country. Based on these interactions, these association officials said they have observed that there is often a separation between athletics and other school departments, and that Title IX coordinators without an athletics background may be reluctant to engage in oversight of that department. Based on their experiences providing training to Title IX coordinators, these association officials also said that Title IX coordinators’ familiarity with Title IX requirements has improved somewhat since the release of OCR’s 2015 guidance delineating their role and responsibilities, but their familiarity with these requirements is still generally low, particularly with respect to athletics. In these officials’ opinion, this lack of understanding is due in part to the complex and wide-ranging nature of Title IX and to the lack of resources for training in many school districts. These and other subject matter specialists we interviewed said that other potential factors contributing to athletics administrators’ lack of awareness of their Title IX coordinator included high turnover among athletics administrators and myriad responsibilities of staff in both roles. When Title IX coordinators do not work closely with athletics administrators, as OCR guidance suggests they do, they may miss opportunities to make those administrators aware of tools the guidance recommends that could help advance equal opportunities. In addition, OCR guidance recognizes that the most serious Title IX violations tend to occur in districts without a supportive Title IX coordinator. OCR officials said that they had learned from their complaint investigations and compliance reviews that some athletics administrators were not working with their districts’ Title IX coordinators. However, these officials said they did not know the extent to which Title IX coordinators themselves were aware of and using the tools recommended in their guidance because, outside of these enforcement activities, OCR generally does not collect information on Title IX coordinators’ knowledge of or activities related to the guidance. Standards for internal control in the federal government state that agencies should both obtain quality information from and communicate quality information to external parties to help achieve the agency’s objectives and address risks. In OCR’s case, its objectives include ensuring schools actively encourage equal opportunities for boys and girls as articulated in Education’s Title IX regulations and OCR guidance, and risks include violations of Title IX that have not resulted in formal complaints. Absent better information on Title IX coordinators’ awareness and use of Title IX guidance, OCR may not have a complete picture of school districts’ ongoing efforts to encourage equal opportunities, challenges they encounter in doing so, and successful strategies that might be shared with a broader audience. Collecting and analyzing this information could enable OCR to target its communication to Title IX coordinators, and further encourage them to work with athletics administrators on ensuring equal athletic opportunities. The number of participation opportunities schools offered, as well as student interest in those opportunities and in working with specific coaches at the school, were top factors that encouraged interscholastic sports participation among public high school students, according to our survey of public high school athletics administrators. We estimate that over 70 percent of athletics administrators viewed the number of interscholastic athletic participation opportunities at their school as encouraging boys and girls to participate in high school sports (see fig. 5). Our 2017 report on high school sports access and participation found that in school year 2013-14, public high schools overall offered the same number of sports and teams for boys and girls. Of the nine subject matter specialists we interviewed for this report, six described specific knowledge of factors that encourage or discourage participation in high school sports. All six of these subject matter specialists agreed that opportunity is an important factor affecting student participation, especially for girls; several specialists also said that the continued participation gap shows that girls do not have access to an equal number of roster spots on teams as boys. For example, one researcher, as well as a representative of a national association of athletics administrators, suggested that one reason the gap between boys and girls persists is that schools do not offer girls’ sports with roster sizes equivalent to popular boys’ sports, such as football. One of the eight athletics administrators said that this was the case at her school, noting that none of her girls’ teams came close to the size of the football teams. The gap may be particularly acute for minority girls, according to one subject matter specialist. Our 2017 report on public high school sports access and participation found that, for both boys and girls, fewer students attended high minority and high poverty schools that offered sports, compared to students at other schools, and these schools had lower participation rates when they did offer sports. We estimate that over 75 percent of athletics administrators viewed the level of student interest in the sports offered by their school as encouraging participation in their school’s teams. Several subject matter specialists agreed that offering sports that align with students’ specific interests is an important aspect of providing meaningful opportunities, but a few also noted that some schools fail to consider which sports most interest their female students. We estimate that 70 percent or more of athletics administrators viewed student interest in working with certain coaches as a factor that encouraged participation at their school. As explained by one researcher, coaching quality plays a large role in encouraging high school sports participation and a good coach can pull students into a sport and keep them participating. Alternatively, another researcher noted that less qualified or inexperienced coaches depress participation. These views are consistent with our work, in which we reported that the quality of coaching is a key factor in maximizing the positive effects of sports participation on students’ personal development. In addition, research shows that the state of athletic facilities can also affect a student’s choice to participate in high school sports, and a few athletics administrators and subject matter specialists we interviewed also cited this as a factor. For example, one study found that proximity to sports facilities was a factor predicting children’s participation in team sports. Another study found that student participation in interscholastic sports is higher at schools with more sports facilities compared with schools that have few sports facilities. A few of the subject matter specialists and one athletics administrator made similar observations about the relationship between facilities, participation, and inequity. For example, the athletics administrator said that at his high school, baseball and softball participation has decreased because their athletic facilities are located off campus, requiring additional travel for both students and parents for practices and games. Additionally, representatives from two advocacy groups noted that parents may have concerns related to school sports facilities, particularly for the safety of their daughters. For example, one said that some schools have girls’ teams practice in off-campus facilities, sometimes in unsafe neighborhoods, without offering transportation. The other said parents may be concerned when fields are insufficiently lit or their daughters come home late from practices. We found no clear consensus in our survey of athletics administrators regarding factors that tend to discourage students from participating in sports, and the eight athletic administrators we interviewed had mixed views on the subject. That said, the most frequently mentioned factors that were perceived to discourage participation (representing an estimated 15-35 percent of athletic administrators) were (1) competing responsibilities, (2) lack of access to athletic feeder programs, (3) the perceived benefits of joining club teams, and (4) participation costs to the student. Competing responsibilities. Over one-quarter of athletics administrators cited students’ competing responsibilities as discouraging participation in public high school sports. This could include a range of responsibilities, including schoolwork, other school activities, and family obligations. Among the athletic administrators we interviewed, one noted that many students at his magnet school were more focused on academics than athletics. A few cited examples of competing responsibilities that were tied to family resources. For example, two said that many of their students have jobs and family responsibilities that prevent them from participating in sports. One of these administrators said that his school’s student population largely comes from lower-income families, and many are juggling jobs; in response, the school changed practice schedules to better match students’ availability, which has made it easier for more students to participate. Lack of access to athletic feeder programs. Some athletics administrators also mentioned a lack of access to athletic feeder programs—club or community-based youth sports programs that train younger children before they enter high school—as discouraging participation in sports at their public high schools. In addition, a few of the eight athletics administrators we interviewed saw this lack of access as being closely related to community or family resources. Two of these administrators, who worked in lower-income schools, reported that younger children in their area have very little access to community or club sports and that students who do not have previous exposure to sports may lack the skills to participate at the high school level. One of these administrators also said that having more community youth sports might increase student interest in playing at the high school level. A third athletics administrator said that feeder programs help drive participation in high school sports. In his school’s competitive environment, students trying out for sports for the first time when they get to high school are, in most cases, likely to be cut from the team. He added that he has found that family income is a major contributing factor to children’s ability to begin training early, which puts lower income students at a disadvantage. His point was echoed in one research study that found that as family income increases, boys and girls tend to enter organized sports at a younger age. Perceived benefits of joining club teams. Athletics administrators also mentioned the presence of club teams that students may choose over school teams as discouraging participation in public high school teams. This may be particularly true for higher-income students, as competitive travel and club teams—which parents and students may see as offering higher-caliber coaching, more specialized training, and greater opportunities to compete against elite athletes—can be quite expensive. Several subject matter specialists we interviewed cited this as an issue that affects high school sports participation. Further, a few of the high school athletics administrators we interviewed observed decreased student participation at their schools due to the presence of club teams. One athletics administrator from the Southwest explained that participation is weaker for his school’s Olympic sports, such as swimming, due to competition from club sports. He noted that at his high school, this phenomenon makes it more difficult to recruit other students because the school teams become less competitive. Another athletics administrator from the Midwest explained that at his high school, the presence of club sports disproportionally depressed girls’ participation in high school sports. In particular, he said the popularity of club girls’ volleyball in the winter reduced participation in his girls’ basketball teams. Participation costs. The cost to students of participating in athletics was also mentioned by some athletics administrators as discouraging participation in public high school teams. The subject matter specialists and athletics administrators we interviewed had mixed views on the effect of costs on student participation. Among the subject matter specialists, two said that the increasing prevalence of fees in high school sports programs is threatening participation by lower-income students. One athletics administrator agreed, saying that in the past he has dissuaded his school district from charging participation fees for this reason. Another said that his school does not charge fees, but students could still be discouraged by the fundraising required for “extras” such as team t-shirts. In contrast, one subject matter specialist said that it is typically higher-income schools that charge students fees to participate in sports, and therefore fees do not generally affect students in lower-income schools. In addition to the four most commonly cited barriers from our survey, several research studies noted that cultural expectations around family responsibilities and gender roles may also discourage some student groups more than others. For example, one study found that Hispanic girls quit sports to take care of younger siblings at higher rates than their white peers. This and another study noted that students from recent immigrant families may also be discouraged from participating in sports because of different cultural expectations around prioritizing sports, and girls may be additionally affected by expectations around gender roles. For example, it found that immigrant parents are more likely than non- immigrant parents to believe that boys are more interested in sports than girls, and that 75 percent of immigrant sons were involved with organized or team sports compared with 43 percent of immigrant daughters. Similarly, a study of sports involvement among East African immigrant girls found that those the researchers interviewed face social barriers to participation, such as peer criticism, parents’ fears of interactions with male athletes, and lack of parental support. Several of the subject matter specialists and athletics administrators with whom we spoke made similar observations around cultural expectations. One suggested that differences in sports participation among immigrant communities may stem from the opportunities to play sports in the family’s country of origin, noting that the United States is unique in tying sports teams to its academic institutions. Officials from two advocacy organizations, one of which advocates for the Hispanic community, noted that some Hispanic families expect daughters to come home after school to help care for their siblings. This can interfere with participating in after-school activities. In addition, one athletics administrator we interviewed, whose school serves a predominantly Hispanic community, commented that his coaches have seen girls from this community quit sports teams on several occasions due to family responsibilities. One of the advocacy organization officials added that schools wanting to improve participation among Hispanic girls should, for example, consider more creative scheduling to allow these students to attend practices. While sports participation for girls has risen dramatically over the last 45 years, a significant gap still remains between boys and girls in public high school sports. Our findings suggest that the reasons for this gap are varied and complex, and according to our survey, at many schools, athletics administrators are not aware of or do not receive support from their Title IX coordinator. OCR’s guidance suggests that uninvolved Title IX coordinators are associated with serious Title IX violations, but OCR does not collect information about coordinators’ level of involvement with districts and schools outside of its complaint investigations and compliance reviews. Better information about Title IX coordinators’ awareness and use of OCR’s guidance could help OCR support schools’ and districts’ efforts to provide equal opportunities in their sports programs. The Department of Education’s Assistant Secretary for Civil Rights should determine the extent to which Title IX coordinators at the K-12 level are aware of and using the tools recommended in OCR’s existing guidance and any barriers preventing their use of this guidance, and use this information in OCR’s efforts to encourage them to work with athletics administrators on ensuring equal athletic opportunities. (Recommendation 1) We provided a draft of this report to Education for review and comment. Education provided written comments that are reproduced in appendix III, as well as technical comments that we incorporated, as appropriate. In its written comments, Education stated that it partially concurs with our recommendation that OCR determine the extent of K-12 Title IX coordinators’ knowledge and use of tools in its existing guidance and use this information in its efforts to encourage them to work with athletics administrators to help ensure equal athletic opportunities. Specifically, Education stated that when OCR conducts investigations in response to complaints it would look for opportunities to examine whether K-12 Title IX coordinators were aware of, and using, the tools in OCR’s guidance. Education also said that when OCR engages in technical assistance activities, it will encourage Title IX coordinators to work with athletics administrators to encourage equal opportunities. Education also said that it will consider our recommendation during its frequent reviews of the agency’s communications practices. We agree that these are important first steps in helping ensure that Title IX coordinators are working with athletics administrators and otherwise fulfilling their responsibilities to encourage equal opportunities. However, given our finding that about half of public high school athletics administrators were unaware of or unsupported by their Title IX coordinator, we continue to believe the systemic approach we recommend is necessary. The activities that OCR described in its response are predicated on a complaint being filed or technical assistance being requested. This narrow approach means that OCR will likely not learn the full extent to which K-12 Title IX coordinators are unaware of or not using the tools in OCR’s guidance. It also means that its reviews of the agency’s communication practices may be hampered by incomplete information on how best to encourage Title IX coordinators to use these tools and work with athletics administrators to ensure equal opportunities. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Education, and other interested parties. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff should have any questions about this report, please contact me at 617-788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The objectives of this study were to examine: (1) what measures public high schools and athletics administrators have taken to encourage equal athletic opportunities for boys and girls, and (2) what factors affect boys’ and girls’ participation levels in public high school sports programs. To address these objectives, we used a variety of methods, including a web- based survey of public high school athletics administrators; follow-up interviews with eight survey respondents; reviews of federal law, regulations, and guidance; and interviews with federal officials at the Department of Education (Education) and with subject matter specialists. To obtain school-level perspectives on factors that affect boys’ and girls’ participation levels in public high school sports programs and approaches schools and athletics administrators have used to encourage equal athletic opportunities, we designed and administered a survey to athletics administrators at a generalizable, stratified random sample of public high schools in the United States. The survey included questions about what sports and levels of competition the school offered for each sex, how many boys and girls participated in sports in school year 2015-16, and factors that encourage and discourage girls’ and boys’ sports participation at the school. The survey also included a variety of questions related to the school’s and athletics administrator’s activities to encourage equal opportunities in the prior 2 years, challenges they faced in encouraging equal opportunities, sources of guidance on Title IX, booster club structures and oversight, and data they maintained on funding and expenditures. In addition, it included a question on whether, to the athletics administrator’s knowledge, their school district had a Title IX coordinator. Our population of interest for the survey was athletics administrators at public high schools. In terms of the schools, we defined our target population as public schools offering at least one high school level grade (9, 10, 11, or 12) that appeared in both Education’s Common Core of Data (CCD) and Civil Rights Data Collection (CRDC) for the 2013-14 school year, were located in the 50 states and the District of Columbia, and indicated in the CRDC that they offered interscholastic sports. We excluded schools that were listed as closed or not operational according to the school year 2015-16 CCD, as well as single-sex schools and schools located in U.S. territories. We also obtained the most current school contact information from the school year 2015-16 CCD. We originally selected a stratified random sample of 813 from a population of 15,330 schools in our sampling frame. However, we ultimately excluded 26 schools from our original population and sample because they had closed, did not serve high school grades, or did not offer interscholastic sports, and thus were not considered eligible for our survey. In addition, we found schools in the population and sample that shared sports programs and athletics administrators, effectively reducing the population by 10 schools and the sample by 3 schools for purposes of our survey. This resulted in a sample of 784 schools from the eligible population of 15,294. We stratified this sample based on school type (charter or traditional), concentration of minority students (low = 0-25 percent, mid = 26-74 percent, high = 75-100 percent), locale type (urban, suburban, or rural), and participation rates of male and female students in school year 2013- 14. This created 24 strata as noted in table 1. For the participation rate strata, we calculated each school’s male and female students’ participation rates using data from the school year 2013-14 CRDC. Participation rates were defined as the number of sports participants of that gender divided by the number of enrolled students of that gender, and these rates were then compared to determine which gender had higher participation: females or males. We placed schools with equal participation rates for males and females into the “Females” participation category because, given the overall higher participation rates for boys, schools with both equal participation rates and higher rates for girls are rarer. We chose these strata to ensure schools with the stratum characteristics were included in the sample. The total sample size of n=813 was inflated for an expected 60 percent response rate, and we distributed the sample across the strata for workload and analysis considerations. The sample size in table 1 optimizes for some groups, while controlling the distribution across the 24 strata. Specifically, we calculated the Neyman optimal sample size that resulted in an overall 5 percent margin of error for an attribute estimate. We allocated samples across strata to achieve precision goals at two levels: overall population percentage estimates with margins of errors within plus or minus 5 percentage points, and subpopulation percentage estimates (i.e. school type, minority level, locale, or participation group) with margins of errors within plus or minus 10 percentage points, both at the 95 percent confidence level. Additionally, we ensured a minimum sample of 10 schools in every stratum. Based solely on the constraint of an overall margin of error within plus or minus 5 percentage points, some reporting groups were expected to have margins of errors that were less than 10 percentage points without the need of additional explicit constraints. For other reporting groups, we implemented constraints so that the designed margin of error was within plus or minus 10 percentage points. Specifically, we included the following constraints for margins of error of attribute estimates with 95 percent confidence intervals within each reporting group, for a realized response rate of 60 percent: margins of error within plus or minus 5 percentage points overall, within plus or minus 10 percentage points for urban schools, within plus or minus 10 percentage points for high minority schools, within plus or minus 10 percentage points for charter schools. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we expressed our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Unless otherwise noted, all percentage estimates in this report have confidence intervals within plus or minus 7.7 percentage points. For other estimates, the confidence intervals or margins of error are presented along with the estimates themselves. We took several steps to minimize non-sampling error. We used several methods to identify the names and email addresses of the athletics administrators for our selected sample of schools. In some states, the high school associations had directories we used to obtain this information. For those that did not, we searched the school’s website or called the school or district. We administered the survey from June through early September 2017. To obtain the maximum number of responses to our survey, we sent e-mails to the principals of the schools in the sample prior to the survey’s launch, asking them to support and encourage their athletics administrator to complete the survey. We also worked with the National Federation of State High School Associations to have the state associations e-mail their members and encourage them to participate in the survey. Finally, we sent direct reminder emails to nonrespondents and contacted nonrespondents over the telephone. We took additional steps to minimize non-sampling errors, including pretesting draft instruments and using a web-based administration system. During survey development, we met with officials from national groups representing high school activities associations and athletics administrators and held discussion groups with nine athletics administrators to explore the feasibility of responding to the survey questions. We then pretested the draft instrument from April through May 2017 with five athletics administrators in public high schools that were diverse across a range of characteristics, such as region, school type and locale, and minority enrollment. In the pretests, we asked about the clarity of the questions and the flow and layout of the survey. A survey specialist independent of the project team within GAO also reviewed a draft of the questionnaire prior to its administration. Based on feedback from the pretests and the independent review, we made revisions to the survey instrument. To further minimize non-sampling errors, we used a web- based survey, which allowed respondents to enter their responses directly into an electronic instrument. Using this method automatically created a record for each respondent in a data file and eliminated the errors associated with a manual data entry process. Despite these efforts, like most surveys, our survey had nonresponse. Specifically, the weighted response rate was 42 percent. Survey nonresponse raises the possibility that those athletics administrators who did respond to the survey may not be representative of the intended population, due to nonresponse bias. We carried out a nonresponse bias analysis and identified three potential factors that may have been related to athletics administrators’ propensity to respond: school concentration of minority students, school size, and region. In order to adjust for the potential nonresponse bias, we adjust the sampling weight with a nonresponse adjustment to form a final weight. Data analyzed using the final, nonresponse-adjusted sampling weight is assumed to be missing at random, given the nonresponse adjustments, and therefore unbiased for the intended population. We used response propensity weighting class adjustments based on a model that included the variables identified in the nonresponse bias analysis. We conducted our analysis using survey software that accounted for the sample design and weighting. To gain further insights into factors that encourage or discourage participation in sports, schools’ efforts to encourage equal opportunities, and the role of the Title IX coordinator, we conducted follow-up interviews with 8 athletics administrators, chosen from the 105 who had responded to our survey as of late August and indicated that they were willing to participate in a follow-up discussion on their responses. Specifically, we selected respondents to obtain diversity in their responses to a few key survey questions, as well as certain characteristics of their schools. In making our selections, we considered their responses to survey questions on: their awareness of their Title IX Coordinator, activities their schools conducted within the last two years to encourage equal opportunities for boys and girls in sports, and whether the school maintains expenditure data on sports and their willingness to share these data. We identified school characteristics with the data sources used to create our survey sampling frame. The characteristics we considered to further narrow our selection were: school type (charter or traditional), school locale (urban, suburban, or rural), concentration of minority students (low-, mid-, or high-minority). Additionally, we reviewed open-ended responses in the survey to determine if there were answers that necessitated additional discussion or clarification (see table 2). In our interviews with the athletics administrator at each school, which we conducted by phone, we asked officials to describe their relationship with their Title IX coordinator, familiarity with Title IX requirements overall, and their familiarity with state and local guidance, specifically. We also asked them to describe their efforts to encourage equal opportunities in sports and the nature of challenges they have faced in doing so. In addition, we asked them about funding sources and their use of expenditure data, the role of booster clubs, and the role of outside funding. For each school where the athletics administrator reported that they had expenditure data, we requested a copy of these data. We obtained expenditure data from three schools. In some cases we obtained additional documentation such as booster club guidelines, processes for adding school sports, and participation data. Because we selected the schools for follow-up interviews judgmentally and only conducted eight interviews we cannot generalize our findings about their policies, practices, and challenges. To understand the requirements for providing equal athletic opportunities in public high schools and how Education’s Office for Civil Rights (OCR) monitors and supports public school districts in meeting these requirements, we reviewed Title IX of the 1972 Education Amendments (Title IX), Education’s Title IX regulations, and related guidance documents. We also interviewed OCR and other Education officials. In addition, we reviewed selected research studies that provided context and insight into factors affecting high school sports participation. To obtain additional context and insights, we selected and interviewed subject matter specialists, including researchers and officials from advocacy groups and associations. We selected these subject specialists so that, together with the athletics administrators we surveyed and interviewed, they would provide a variety of perspectives on factors that affect boys’ and girls’ participation in high school sports and approaches schools use to encourage equal athletic opportunities. The researchers and officials we interviewed were located at: the Institute for Research on Women and Gender and the Sport, Health, and Activity Research and Policy Center at the University of Michigan, the Tucker Center for Research on Girls and Women in Sport at the University of Minnesota, the Department of Recreation, Sport and Tourism at the University of Illinois, National Women’s Law Center, Women’s Sports Foundation, National Interscholastic Athletics Administrators Association National Federation of State High School Associations, and Association of Title IX Administrators. We conducted this performance audit from February 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Bill MacBlane (Assistant Director), Lauren Gilbertson and Jamila Jones Kennedy (Analysts-in- Charge), Christina S. Cantor, MacKenzie Cooper, Jill Lacey, Benjamin Sinoff, Andrew Stavisky, Sonya Vartivarian, and Khristi Wilkins made key contributions to this report. Also contributing to this report were James Bennett, Deborah Bland, Barbara Bovbjerg, Randy De Leon, Holly Dye, David Forgosh, Amy MacDonald, and Sheila R. McCoy. K-12 Education: High School Sports Access and Participation. GAO-17-754R. Washington, D.C.: September 14, 2017. Child Welfare: Federal Agencies Can Better Support State Efforts to Prevent and Respond to Sexual Abuse by School Personnel. GAO-14-42. Washington, D.C.: January 27, 2014. K-12 Education: School-Based Physical Education and Sports Programs. GAO-12-350. Washington, D.C.: February 29, 2012.", "summary": "Research has found that sports participation yields many benefits for youth. Girls' participation in sports has increased dramatically since the passage of Title IX in 1972, but is still lower than for boys. Further, investigations by OCR, which enforces and implements Title IX, have highlighted instances of disparities in the resources provided to girls' and boys' teams. GAO was asked to review how public high schools encourage equal athletic opportunities. This report examines (1) measures public high schools and athletics administrators have taken to encourage equal athletic opportunities for boys and girls, and (2) factors that affect boys' and girls' participation levels in public high school sports programs. GAO conducted a nationally generalizable probability survey of athletics administrators at 784 public high schools. GAO interviewed nine subject matter specialists selected to provide a range of perspectives. GAO also reviewed relevant federal laws, regulations, and guidance and interviewed OCR officials. According to GAO's nationally generalizable survey of athletics administrators, public high schools recently took various measures to encourage equal opportunities for boys and girls in sports. For example, a majority assessed resources such as equipment, travel opportunities, and facilities that they provided to girls' and boys' teams and some schools took steps to gauge student interest in specific sports as a means of encouraging equal opportunities, according to GAO's survey. Education's Office for Civil Rights (OCR) guidance indicates that Title IX coordinators—which school districts are required to designate and make visible per regulations for Title IX of the 1972 Education Amendments (Title IX)—should work closely with athletics administrators to determine whether action is needed to address any underrepresentation, or to otherwise encourage equal athletic opportunities. However, GAO estimates that 51 percent of athletics administrators either were unaware of or unsupported by their Title IX coordinator, according to the survey (see figure). These findings raise questions as to whether Title IX coordinators are familiar with and using Education's guidance. Officials from an association for Title IX coordinators said this lack of communication with athletics administrators may be related to some Title IX coordinators' limited understanding of Title IX and athletics. OCR officials said that they did not know the extent to which Title IX coordinators are working with their athletics administrators to encourage equal athletic opportunities because Education generally does not collect this information. Better information on Title IX coordinators could help Education support school districts' efforts to encourage equal sports opportunities for girls and boys. The factors that most affect boys' and girls' participation in public high school sports are the number of, and interest in, participation opportunities offered, according to GAO's survey and interviews with nine subject matter specialists. Though the survey provided no clear consensus on factors that discourage students from participating in sports, athletics administrators most often perceived students' competing responsibilities as discouraging participation. GAO is recommending that OCR determine the extent of K-12 Title IX coordinators' knowledge and use of tools in its existing guidance and use this information in its efforts to encourage them to work with athletics administrators to help ensure equal athletic opportunities. Education partially concurred, stating it would consider GAO's recommendation in its complaint investigations, technical assistance activities, and communication practice reviews.", "document_type": "gao"}
{"report": "During the 2016 presidential campaign, a Secret Service detail was to be activated once a candidate for the Office of the President or Vice President requested protection, met the requirements for major candidate status (e.g., entered at least 10 state primaries), and received authorization by the Secretary of Homeland Security after consultation with an advisory committee. Under the direction of the Secretary of Homeland Security, the Secret Service is authorized to provide protection for spouses of major presidential and vice presidential candidates within 120 days of the general presidential election. There is no statute that addresses the protection of candidates’ children during the campaign. During the 2016 presidential campaign, the Secret Service provided protection for certain children of candidates at the request of the President. According to Secret Service officials, the Secret Service has historically provided protection for individuals not specifically identified in statute when directed by the President. In connection with the 2016 presidential campaign, the Secret Service provided protection for 12 individuals—4 presidential candidates, 2 vice presidential candidates, and 6 of the candidates’ family members. Figure 1 below shows the dates of protection through Election Day, November 8, 2016. Secret Service protective operations have evolved over the years. Originally, protection involved special agents serving as bodyguards. Protection now includes not only special agents in close proximity to the protected individual, but also advance security surveys of locations to be visited, coordination with state and local law enforcement entities, and analysis of present and future threats. Site surveys and threat assessments help the Secret Service determine the resources and assets needed to accompany each candidate and other individuals protected during the presidential campaign. These resources and assets, among other things, generally include: special agents who provide 24/7 protection while on detail; advance teams who provide site security; Explosive Ordnance Disposal and other technical support personnel (e.g., counter-surveillance and counter sniper personnel); magnetometer screening capabilities; and protective intelligence personnel who investigate threats. Federal law provides for agencies to pay for or reimburse transportation and lodging expenses for their employees when they are traveling on official business. It further directs the General Services Administration (GSA) to issue regulations governing this travel. The FTR issued by GSA is applicable to Secret Service special agents’ transportation and use of hotel rooms when traveling during presidential campaigns to protect candidates and their family members. Transportation. According to the FTR, coach-class service is to be utilized unless an agency determines that an exception is warranted. For example, an exception may be granted to allow a special agent to use business class accommodations when the protected individual is doing the same and security demands warrant it. In the case of presidential campaign travel, the Secret Service may also accompany protected individuals aboard chartered aircraft. The Secret Service reimburses campaign committees for the seats occupied by its special agents. In 1977, we were asked to review the Secret Service’s reimbursement method, and in that decision stated that GAO did not object to the method used by the Secret Service as long as it was used consistently and the amount reimbursed did not exceed the first-class airfare. Lodging and other use of hotel rooms. The Secret Service utilizes hotel rooms for various purposes when protecting a candidate. The purpose of the room dictates the authority the Secret Service relies on to authorize payment and the related requirements. Hotel rooms used exclusively for special agent overnight sleeping facilities are governed by the FTR. The FTR allows agencies to pay for lodging based on per diem allowances set by GSA for the applicable location and date or the actual expenses of the travel. Actual expense allowance, which can be in excess of the per diem rate, is permitted for a variety of reasons, such as costs escalating due to special events (e.g., sporting events or disasters) or because of mission requirements. However, the maximum amount that an employee may be reimbursed under the actual expense allowance method is limited to 300 percent of the applicable per diem rate. The Secret Service also utilizes hotel rooms for operational purposes. For example, the Secret Service may use a room as a command center or reserve rooms adjacent to the protected individual to better secure the individual. In addition, to meet operational security demands, the Secret Service may require a certain number of special agents to stay in the particular hotel that the protected individual is staying and within certain proximity to the individual. The legal authorities the Secret Service relies on to pay for these kinds of rooms do not limit how much the agency can pay. The Secret Service’s travel expenses for the 12 individuals protected during the 2016 presidential campaign totaled approximately $58 million, according to our analysis of Secret Service data. Travel expenses included airfare, vehicle rentals, hotel rooms, meals and incidental expenses, and baggage charges for special agents accompanying protected individuals. The $58 million in travel expenses was used by the Secret Service to support 3,236 travel stops made by the 12 protected individuals throughout the presidential campaign. The breakdown of these expenses and number of travel stops by campaign committee and protected individual are shown in figure 2 below. Of the $58 million the Secret Service incurred in 2016 presidential campaign travel expenses, $17.1 million was for reimbursements to the 4 campaign committees for 2,548 chartered aircraft flights. In the case of campaign travel, Secret Service special agents often fly with protected individuals on aircraft chartered by the campaign committees. The Secret Service reimburses the campaign committees for the number of seats occupied by special agents on board each charter flight. Figure 3 below shows the amount and number of flights for which the Secret Service reimbursed each of the campaign committees. We reviewed special agents’ lodging expenses while accompanying individuals protected during the 2016 presidential campaign on 40 randomly selected overnight trips. Our review found that (1) for most trips—30 of 40—the documented hotel expenses were within GSA per diem lodging rates, (2) the Secret Service generally followed its policy of requiring a lodging variance (i.e., waiver) for any hotel rooms exceeding the GSA lodging rate for that location, and (3) the Secret Service did not exceed the maximum amount allowed for lodging for these trips. The Secret Service required field offices responsible for booking hotel rooms to request and submit a waiver for any room that may exceed the designated GSA lodging rate by any amount. Our review of the receipts for hotel room expenses incurred by the Secret Service found that each trip involved multiple special agents staying in multiple rooms. Specifically, of the 40 trips we reviewed, 30 included hotel rooms that were within GSA lodging rates and 9 included hotel stays exceeding the GSA lodging rate. The Secret Service was unable to locate a hotel bill for 1 trip and we therefore were unable to determine the rate paid for that trip. In accordance with Secret Service policy, special agents submitted waivers to the agency’s Logistics Resource Center (LRC) for all 9 hotel stays exceeding the GSA lodging rate. According to LRC officials, before approving a waiver, they generally wanted to know how many alternative hotels were contacted, whether any hotels were available at or below the GSA lodging rate, and whether staying at a hotel at or below the GSA lodging rate would incur additional expenses that would negate the savings. For example, if a rental vehicle would be required, use and parking of the vehicle may have resulted in total costs that exceeded the price of the more expensive hotel. According to LRC officials, in order to spend travel money judiciously, some special agents stayed at hotels nearby the protected individual’s hotel that had rates at or closer to the GSA lodging rate. Under the FTR’s actual expense reimbursement method, agencies may pay up to 300 percent of the applicable total GSA per diem allowance— the GSA established rates for (1) lodging and (2) meals and incidental expenses—for an employee’s daily expenses. However, the agency is to subtract any allowance granted for meals and incidental expenses from the total, with the remainder being available for lodging. DHS and Secret Service policy, however, restricts the 300 percent actual expense allowance for lodging to 300 percent of the GSA lodging rate only. Consistent with DHS and Secret Service policy, none of the hotel rates paid exclusively for lodging in the 40 trips we reviewed exceeded the applicable GSA lodging rate by more than 300 percent. As a result, we determined that the Secret Service’s expenditures for lodging for the trips we reviewed were consistent with its policies and applicable regulations. As discussed earlier, as part of their mission to protect presidential candidates, Secret Service special agents frequently accompany candidates on chartered aircraft provided by the presidential campaigns. The Secret Service is to later reimburse the candidate’s campaign committee for the cost of having special agents fly on those planes. The Secret Service’s policy for determining the amount to reimburse has been used since at least 1977. Under this policy, the Secret Service is to pay the lower of two applicable fares when reimbursing the campaign committees for special agents’ travel on chartered aircraft flights. Specifically, according to the policy the Secret Service is to compare the lowest commercially available first-class airfare for a flight segment (one airport to another airport) to the pro rata fare of the charter (total charter cost divided by the number of passengers). The Secret Service is then to reimburse the campaign committee for the lower of the two fares. The following text box includes an example of the pro rata fare calculation. In July 2015, an attorney from the law firm representing the Hillary for America Committee sent Secret Service Financial Management Division (FMD) officials an e-mail stating that in their view, the reimbursements for special agents’ seats should be the pro rata fare based on an FEC regulation. In response, in August 2015, the Secret Service’s Office of the Chief Counsel made a decision to agree with the interpretation of this law firm. As a result, the Secret Service ceased to adhere to its longstanding reimbursement policy and agency officials were directed to use the pro rata calculation method for reimbursing all campaigns for agent airfares. Consequently, the Secret Service did not conduct the comparison between first-class and pro rata fares during the 2016 presidential campaign. Instead, the Secret Service solely paid the pro rata fare to the campaign committees. In March 2016, in response to a congressional inquiry about presidential campaign charter flight reimbursements, the Office of the Chief Counsel determined that its August 2015 decision was a mistake. Specifically, the Office recognized that the FEC regulation at issue did not apply to the Secret Service’s use of chartered aircraft. According to the Office of the Chief Counsel, they notified an official in the Office of Protective Operations, which collects submissions for reimbursements from the protected individual or the related campaign committee. However, the Office of the Chief Counsel did not notify LRC, which is to obtain the first- class airfares for comparison from the Secret Service’s travel agency. Further, the Office of the Chief Counsel was uncertain but believed FMD, which issues payments for the flights, was notified. FMD officials told us that they were not notified. As a result, the Secret Service continued to reimburse the campaign committees the pro rata fares for the remainder of the 2016 political campaign (i.e., through mid-November 2016). Despite being aware of the error for eight months before the end of the 2016 presidential campaign that the pro rata fare should be compared to the lowest available first-class airfare, the Office of the Chief Counsel did not ensure the agency reverted to its long standing policy. During this 8 month period, the Secret Service accompanied protected individuals on 1,671 (66 percent) of the 2,548 total campaign-related flight segments. As a result of solely reimbursing the pro rata fare instead of reimbursing the lower of the pro rata fare versus the lowest commercially available first- class airfare, we estimate based on our sample of 650 flight segments that the Secret Service overpaid the 4 campaign committees at least $3.9 million for special agents’ seats on chartered aircraft. Federal agencies are generally required to try to collect on debts— including overpayments—they determine are owed to them. A federal debt or claim is any amount of funds that has been determined by an appropriate official of the federal government to be owed to the United States. It includes, without limitation, overpayments. Under the federal debt collection authorities as provided in 31 U.S.C. chapter 37, federal agencies are required to try to collect on claims arising out of their activities. However, they have the authority to compromise (i.e., accept less than full value) claims, or suspend or end collection, such as when the cost of collecting the claim is likely to be more than the amount recovered. In response to our finding that the Secret Service had overpaid for travel on chartered aircraft, Secret Service officials told us in February 2018 that they planned to take action to determine the overpayment amounts and seek refunds from the campaign committees. In light of the problems we discuss in appendix II regarding information on aircraft flights provided by the campaign committees and available historical data on airfares, Secret Service officials told us they were attempting to calculate the overpayments and would weigh the feasibility and costs of collecting refunds. However, as of April 2018, the Secret Service lacked specific plans, timeframes, and milestones for calculating the amounts of overpayments to the campaign committees and making key decisions on how and the extent to which the Secret Service will proceed with collections. Making such determinations can help ensure the Secret Service is complying with applicable federal law and recovering funds that could be used to support its protective operations or deposited into the general fund of the United States Treasury as appropriate. According to Secret Service officials, the decision to change the reimbursement calculation method in August 2015 was inconsistent with the Secret Service’s directive on policy revisions. Specifically, the Secret Service’s directive on policy revisions states that the “responsible office”—FMD in this case—is accountable for ensuring policies are current and accurate. In addition, this office is to review, research, and revise the policy, if such a revision is deemed necessary. Further, all significantly affected offices and divisions of the Secret Service, including members of the Secret Service’s Executive Resources Board, are to be provided the opportunity to read and comment on the changes, among other required actions. See figure 4 for a summary of key steps in the Secret Service’s policy creation, revision, and issuance process. According to Secret Service officials, however, the process outlined in the directive on policy revisions was not followed in August 2015. As a result, the decision to change the reimbursement calculation method was not fully vetted or reviewed by all members of the Secret Service’s Executive Resource Board as would be required under the directive on policy revisions. According to agency officials and confirmed in communications we reviewed, the Office of the Chief Counsel misinterpreted the regulation and directed that the erroneous interpretation be followed. The official leading FMD at the time, who was in the role on a temporary basis, adhered to the Office of the Chief Counsel’s interpretation of the regulation because the matter was legal in nature. Agency officials further added that the increased operational tempo (i.e., heavy workload) at the time may have resulted in a failure to adhere to the Secret Service’s directive on policy revisions. An important role within the Secret Service’s policy creation and revision process is the directives control point. The directives control point is to help develop and implement policy that is clear, enforceable, and effective. In addition, the directives control point provides guidance for filing, structuring, and organizing policy instruments. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Control activities are the policies, procedures, techniques, and mechanisms that enforce management’s directives to achieve the entity’s objectives and address related risks. Secret Service officials stated that the agency could better ensure that its existing directive for policy revisions is followed by requiring that its directives control point be notified of any legal advice or direction proposed by the Office of the Chief Counsel that could modify or amend agency policy. By requiring—in policy and practice—that the Secret Service’s directives control point be notified when the Office of the Chief Counsel provides advice to offices that is likely to result in policy changes, the Secret Service could better ensure that operational changes inconsistent with existing policy are not made without the full consideration of all affected parties. Moreover, it could reduce errors and the potential for unnecessary costs associated with decisions that do not go through the required review process. Secret Service policy requires that protected individuals—and by extension their campaign committees—seeking reimbursement for special agents on chartered aircraft flights to submit an invoice with the following information: (1) Name, address, and bank account information for the protected individual. (3) Date(s) of charter. (4) Itinerary by flight segment (the three letter airport code should be provided for the departure and arrival airports for each segment). (5) Total aircraft cost per flight segment. (6) Total number of passengers for each flight segment (to include seats occupied by the Secret Service). (7) Total number of seats occupied by the Secret Service for each flight segment. The policy also requires that if an invoice is incomplete or inaccurate that it should be returned to the protected individual within seven days of receipt for completion or correction. We found that 20 of the 76 invoices submitted to the Secret Service during the 2016 presidential campaign had incomplete or inaccurate information, and therefore should have been returned to the protected individual, or the related campaign committee. The 76 invoices included 2,548 flight segments. Information for 558 (22 percent) of the flight segments was incomplete or inaccurate. However, the Secret Service did not return any invoices to the four candidates or their campaign committees during the 2016 presidential campaign, according to Secret Service officials. Specifically, we found the following instances of incomplete and inaccurate information in the charter flight invoices provided by the campaign committees on behalf of protected individuals to the Secret Service: Airport Code: The Hillary for America Committee submitted two invoices containing two flight segments missing an airport code. The Carson America Committee submitted one invoice that did not clearly show the destination airport for seven flight segments and one invoice with three flight segments missing an airport code. The Donald J. Trump for President Committee submitted 12 invoices for then- candidate Trump with 336 flight segments missing an airport code. Only a city name with multiple possible airports was listed, leaving it unclear which airport was used. For example, in several instances “New York, NY” was listed, which could be LaGuardia Airport or JFK International Airport. Total Cost or Passengers: The Donald J. Trump for President Committee submitted 4 invoices for flights taken by Vice Presidential Candidate Mike Pence with 210 flight segments which did not include the total cost or the total number of passengers for each flight segment. The total cost and number of passengers are necessary to verify the pro rata cost of the flight segment. Double Billing: The Donald J. Trump for President Committee double-billed the Secret Service for three flight segments taken on March 1, 2016 resulting in a cumulative overpayment of approximately $21,000 by the Secret Service for these segments. Other Errors: The invoices for the Hillary for America Committee had 1 (less than 1 percent) of 1,317 flight segments with a mathematical error; the Donald J. Trump for President Committee had errors on 16 (2 percent) of 965 flight segments; and the Bernie 2016 Committee had errors on 29 (18 percent) of 159 flight segments. These 46 flight segments with mathematical errors resulted in a net Secret Service underpayment to the campaign committees of approximately $63,000. According to Secret Service officials, although these errors were made by the campaign committees, Secret Service officials failed to detect the errors. Per the Secret Service’s reimbursement policy, it is the responsibility of the special agents overseeing the protected individual’s travel to review the invoices to ensure they include the required information and the provided information is accurate. The policy further states that absent complete and accurate information, the invoices are to be rejected for correction prior to reimbursement. Based on our review of the invoices, the special agents verified the dates of the flights and number of special agents on board the flight segments included in the invoices, but did not, for example, reject invoices that did not contain the three letter airport code or total number of passengers. According to Secret Service officials, the incomplete invoices should have been rejected, but were not because of the operational tempo associated with the presidential campaign. As discussed earlier, operational tempo was also a rationale provided by Secret Service officials for why they did not adhere to the directive on policy revisions. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives, such as compliance with policies. In addition, the standards suggest that agency management should evaluate excessive pressure on personnel and help personnel fulfill their assigned duties. To help ensure that the Secret Service is adhering to its travel policies, the Secret Service may need to assess its existing control activities and determine how they can be enhanced to address the fast- paced operational tempo of presidential campaigns. Further, according to FMD officials, when invoices marked certified reached FMD for payment, it was assumed by FMD that the invoices had been certified as complete and accurate, as indicated by the signature of a special agent or an authorized certifying officer. Secret Service policy does not assign responsibility for verifying the accuracy of the pro rata fare and checking that flight segments have not already been billed. Additionally, for three of the four campaign committees, the Secret Service had no assurance when paying the pro rata fare that it was being charged its share correctly since it did not receive copies of the charter companies’ invoices. Specifically, the Secret Service relied on invoices created by the campaign committees for reimbursement purposes without supporting receipts, invoices, or other documentation to verify the charges against. According to Secret Service officials, only the Hillary for America Committee forwarded copies of invoices from the charter companies it used, allowing the Secret Service to verify the accuracy of the amounts billed. The Secret Service policy on reimbursement of chartered aircraft flights does not require that copies of charter company invoices or receipts be forwarded by the protected individual or their campaign committee. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Such activities include proper execution of transactions (e.g., assuring that only valid transactions are entered into) and controls over information processing (e.g., comparing charter flight invoices to the amounts billed to the Secret Service by the campaign committees). Secret Service officials agreed that the accuracy of flight segment details and costs should be verified prior to reimbursing for charter flights. In addition, they further agreed that responsibility for verifying the accuracy of the pro rata fare and checking that flight segments have not already been billed should be assigned. They also agreed that the Secret Service should require the charter companies’ invoices to verify that the campaign committees are correctly charging the Secret Service for its share of the total flight cost. Without updating its charter aircraft reimbursement policy, the Secret Service does not have reasonable assurance that correct payments will be made. These changes include: (1) assigning responsibility for verifying that all calculations done by the campaign committees on behalf of the protected individual are accurate, (2) requiring a secondary review process to confirm the accuracy of charter flight costs prior to making payment, and (3) requiring that copies of charter companies’ invoices be provided to ensure that the reported pro rata costs are accurate prior to reimbursement. In response to our finding, in February 2018 the Secret Service began drafting an initial version of proposed policy changes, consistent with its directive on revising policy. Specifically, Secret Service officials started initial policy research and began reviewing and drafting the policy, consistent with step two of their policy revision process (see figure 4). However, several additional steps remain to be completed before the planned changes are implemented. Until the Secret Service completes all the necessary steps to update its charter aircraft reimbursement policy, it remains at risk for making incorrect payments. Secret Service’s charter aircraft reimbursement policy does not specify whether its travel agency is to include taxes when identifying the lowest available first-class airfare. As discussed earlier, Secret Service is to pay the lower of two applicable fares (lowest available first-class fare, and the pro rata fare) when reimbursing the campaign committees for special agents’ travel on chartered aircraft flights. The Secret Service obtains the lowest available first-class airfare from its travel agency. LRC officials initially told us that the Secret Service’s travel agency had been including taxes in the lowest available first-class airfare. However, after inquiring with the travel agency, an LRC official learned that taxes had not been included. After further discussion with us, Secret Service officials told us that taxes should be included. Including taxes can make the difference between a first-class airfare being less or more expensive than the pro rata fare for a charter flight, therefore dictating which fare the Secret Service should reimburse the protected individual and campaign committee. For example, if a pro rata fare costs $1,000, and the lowest available first-class airfare (without taxes) is $950, then the lower fare is the first-class airfare. However, if the lowest available first-class airfare (with taxes) is $1,050, then the lower fare is the pro rata fare. The Secret Service’s policy on reimbursement of special agents’ seats on chartered aircraft also lacks important details to ensure that its travel agency can accurately identify the lowest available first-class airfares and make accurate reimbursements. The policy requires the protected individual to provide the Secret Service the 3-letter airport code for the departure and arrival airports for each flight segment for which it is seeking reimbursement. However, it does not specify that the 3-letter airport code needs to be the International Air Transport Association (IATA) code and not the Federal Aviation Administration (FAA) code. Airports in different countries can have the same IATA and FAA codes. Providing the FAA code can result in the Secret Service’s travel agency identifying the wrong airport when determining the lowest first-class airfare for a travel segment since the travel agency searches IATA codes. For example, when we asked the Secret Service’s travel agency to research the lowest available first-class airfare for campaign travel segments based on the reported destination codes in campaign committee invoices the travel agency identified “SGJ” as Sagarai, Papua New Guinea based on the IATA code. However, SGJ is the FAA code for the Northeast Florida Regional Airport. Similarly, another reported destination code in a campaign committee’s invoice, LOM, is the FAA code for Wings Field Airport, Pennsylvania and is also the IATA code for Lagos de Moreno, Colombia. Since the travel agency searches on the basis of IATA codes, using FAA codes that are designated as foreign destinations in the IATA system can result in confusion for the travel agency when identifying the lowest available first-class airfare for a flight segment. Secret Service officials told us that they had not considered specifying whether the lowest first-class airfares should include taxes since the Secret Service had been using the same representative at its travel agency since 1986 to identify the lowest available first class fare. They said they assumed that their representative knew the policy through practice. Also, Secret Service officials told us that they were not aware of the difference between IATA and FAA codes. Secret Service officials agreed that the reimbursement policy should be revised to make it clear that taxes are to be included when the Service’s travel agency identifies the lowest available first-class airfare when determining the correct reimbursement amount, and that protected individuals are to provide the IATA code for airports. Standards for Internal Control in the Federal Government states that management should internally and externally communicate the necessary information to achieve the entity’s objectives and that effective information and communication are vital for an entity to achieve its objectives. The Secret Service could better ensure that its travel agency is able to identify the lowest commercially available first-class airfare for comparison to the pro rata fare by updating its charter aircraft reimbursement policy to specify that (1) taxes are to be included in the lowest commercially available first-class airfare, and (2) protected individuals’ invoices include the IATA airport codes for arrival and departure airports. In response to our finding, in February 2018 the Secret Service started to draft an initial version of proposed changes to its charter aircraft reimbursement policy, consistent with its directive on revising policy. Secret Service officials were in the process of conducting initial policy research, reviewing, and drafting the policy, consistent with step two of their policy revision process (see figure 4). However, the Secret Service needs to complete several additional steps before the planned changes go into effect. Until then, the Secret Service remains at risk of not correctly identifying the lowest applicable airfare. The Secret Service plays a vital role in protecting our nation’s leaders, including presidential and vice presidential candidates, and their family members. During the 2016 presidential campaign, for the trips we reviewed, the Secret Service generally followed its internal policies and federal regulations governing payment for lodging costs incurred while protecting candidates. However, due to an erroneous legal decision in August 2015, the Secret Service did not follow its reimbursement policy for chartered aircraft during the campaign. By not adhering to its policy, the Secret Service overpaid campaign committees at least an estimated $3.9 million dollars for charter flights. Until the Secret Service determines the amounts owed and how it will proceed with seeking repayment from the various campaign committees, these funds will not be recovered by the federal government. Further, in making the erroneous legal decision in August 2015, the Secret Service did not adhere to its directive on policy revisions. The decision to effectively change a policy was not fully vetted, reviewed, or communicated in accordance with the directive. This was largely due to the lack of a requirement to notify the directive control point when legal decisions are made that can result in policy changes. This could result in similar policy changes not being reviewed in the future. Finally, presidential campaigns create a fast-paced operational tempo at the Secret Service, and according to agency officials, this tempo contributed to their failure to comply with travel policies during the 2016 presidential campaign. Until Secret Service evaluates the pressure caused by this tempo and implements appropriate mechanisms, it cannot ensure that agency officials responsible for travel reimbursements are complying with policy during presidential campaigns. In addition, Secret Service’s charter aircraft reimbursement policy does not assign primary and secondary reviews of invoices provided by campaign committees. The policy also does not require that campaign committees and the agency’s travel agency provide all the information necessary to verify the accuracy of the invoices. Without these requirements, Secret Service may continue to reimburse campaign committees incorrect amounts. We are making the following five recommendations to the Director of the Secret Service. Consistent with the federal debt collection authorities as provided in 31 U.S.C. chapter 37, the Director should complete the process of calculating the amounts of its overpayments to the campaign committees for special agents’ seats on chartered aircraft during the 2016 presidential campaign, and determine how it should proceed with respect to collecting on identified debts. (Recommendation 1) To help ensure that the agency’s existing directive on policy revisions is followed, the Director should require in policy and practice that the directives control point be notified when the Office of the Chief Counsel provides advice to offices that is likely to result in policy changes. (Recommendation 2) The Director should assess its existing control activities and implement appropriate mechanisms to help ensure compliance with the agency’s travel cost policies during presidential campaigns. (Recommendation 3) The Director should update the charter aircraft reimbursement policy to assign the offices responsible for verifying that all calculations done by the campaign committees are accurate, and require a secondary review process prior to making payment. (Recommendation 4) The Director should update the charter aircraft reimbursement policy to specify that protected individuals are to provide IATA codes and copies of the charter companies’ invoices, and that the Secret Service’s travel agency is to provide lowest available first-class airfares that include taxes. (Recommendation 5) We provided a draft of this report for review and comment to DHS, GSA, and FEC. DHS provided written comments, which are reproduced in appendix III. In its comments, DHS concurred with our recommendations. DHS also stated it had taken or planned to take actions to address all five of our recommendations. In addition, after we provided this report to DHS for comment, Secret Service provided us documentation, including a revised travel policy, highlighting actions they have taken to address our recommendations. We will review the documentation and take steps to close the recommendations in the future, as appropriate. DHS and FEC provided technical comments, which we incorporated as appropriate. GSA and FEC did not provide written comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 1 day from the report date. At that time, we will send copies to the Secretary of Homeland Security, Administrator of the General Services Administration, and Staff Director of the Federal Election Commission. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report addresses the U.S. Secret Service’s (Secret Service) 2016 presidential campaign travel expenses and payment of those expenses. Specifically, our objectives were to examine the following questions: (1) How much did the Secret Service incur in transportation, lodging, and other travel-related expenses when providing protection during the 2016 presidential campaign? (2) To what extent did the Secret Service reasonably assure that payments and reimbursements for travel-related protection expenses were made in accordance with applicable laws, regulations, and policies during the 2016 presidential campaign? To determine how much the Secret Service incurred in travel-related expenses, we obtained expense data from the Secret Service for each of the individuals protected for the 2016 presidential campaign. In total, the Secret Service protected 12 individuals associated with 4 campaign committees (see table 1 below). We analyzed the travel expenses for each of these protected individuals to determine the total travel expenses incurred by the Secret Service for each campaign committee and for the 2016 presidential campaign as a whole. Travel expenses include those captured by the Secret Service under object class 21—travel and transportation of persons. Object class 21 expenses include airfare, vehicle rentals, hotel rooms, meals and incidental expenses, and baggage charges for special agents accompanying protected individuals. Additionally, we determined the amount of the total travel-related expenses that were reimbursements to the campaign committees—all of which were for special agents’ seats on campaign chartered aircraft. To assess the reliability of the Secret Service’s expense data, we discussed with the Secret Service officials how the data are entered and maintained in the Secret Service’s official financial system of record— Travel Manager, Oracle, PRISM, Sunflower system—which is used to track operating and travel expenses, among other things. We also reviewed the data for any obvious errors and anomalies. We compared the data to the invoices the Secret Service received from the campaign committees seeking reimbursements in order to verify the amounts the campaigns were reimbursed. Further, we compared the Secret Service’s reimbursement data to data the campaign committees reported to the Federal Election Commission (FEC) on payments they received from the Secret Service. As a result, we determined that the expense data were sufficiently reliable for reporting the Secret Service’s total travel expenses, expenses broken out by campaign committee and protected individual, and the portion of expenses that were reimbursements to the committees. To determine the number of travel stops made by the campaign committees for which the Secret Service provided protection, we used data from the Secret Service’s Agent Manpower Protection System. To assess the reliability of these data, we reviewed responses provided by the Secret Service on how the data are entered and maintained in the system. We further matched a sample of the travel stops data to hotel bills for those stops. As a result, we determined that the data on travel stops were sufficiently reliable for reporting the total number of travel stops made during the campaign and number of stops per campaign committee. To determine whether the campaign committees charged the Secret Service appropriate rates for the use of candidate-owned assets, we tried to identify whether any portion of the Secret Service’s reimbursements to the campaign committees were for the use of candidate-owned assets. Candidates flew on various types of charter aircraft, including jets and helicopters. Pursuant to law and FEC regulations, campaign committees must report and maintain certain information regarding the use of these aircraft. However, this information was not sufficient for us to determine whether aircraft for which the Secret Service provided reimbursement were owned by candidates. Further, the Secret Service does not collect information about a campaign’s use of candidate-owned assets, including aircraft. We contacted all four campaign committees using various methods, including email, phone, and in-person visits to identify reimbursements received for candidate-owned assets, but none of the committees responded to our questions. As a result, we were unable to determine whether any portion of the Secret Service’s reimbursements were for the use of candidate-owned assets. To determine the extent to which the Secret Service’s payments and reimbursements for travel-related protection expenses were made in accordance with applicable laws, regulations, and policies, we analyzed the Secret Service’s lodging payments and charter aircraft reimbursements. Of the 962 overnight trips taken during the 2016 presidential campaign, we randomly selected 40—10 for each of the presidential candidates—to assess the Secret Service’s compliance with (1) its internal policy requiring a waiver when a hotel room exceeds the General Services Administration (GSA) per diem rate by any amount, and (2) provisions of Federal Travel Regulation (FTR) that limit hotel spending to 300 percent of the GSA rate. To determine the GSA per diem lodging rate, we reviewed the GSA rates applicable on the date of the hotel stay and for that location. If the amount of the room exceeded the GSA rate we identified whether the Secret Service had a waiver for the trip and also checked whether the amount paid exceeded the maximum amount available for lodging under Department of Homeland Security (DHS) and Secret Service policy and under the FTR. The time and effort associated with collecting trip bills from many field offices were primary considerations in determining the number of candidates’ trips to review. The Secret Service’s retention of hotel bills is decentralized; that is, the field office responsible for the geographic area where the protective operation occurs retains hard copies of the bills. Although the results of our analysis are not generalizable to all overnight trips taken during the 2016 presidential campaign, it provided us insight to the Secret Service’s compliance with its lodging policy and the FTR. With regard to whether the Secret Service reimbursed the four campaign committees the correct amounts for special agent travel on campaign chartered aircraft, we compared the Secret Service’s payments to the committees to our estimate of what the Secret Service would have paid had its own charter aircraft reimbursement policy been followed. We determined the Secret Service did not use the correct reimbursement method throughout the 2016 presidential campaign. To determine whether the Secret Service followed its directive on the review and approval of policy changes, we compared the steps required to effect a change in policy to the steps taken by the Secret Service when its reimbursement method was altered. To estimate whether and, if so, by how much the Secret Service overpaid the campaign committees for special agents’ seats on chartered aircraft flights based on the reimbursement policy change mentioned above, we selected a generalizable stratified random sample of 650 flight segments from the 2,318 flight segments taken from November 1, 2015 through the end of the 2016 presidential campaign that had an identifiable airport. Appendix II provides further technical details on the statistical methods we used. To determine whether the Secret Service should try to collect on the overpayments to the campaign committees, we reviewed relevant federal authorities, including 31 U.S.C. chapter 37. To determine whether the Secret Service followed its policy with regard to accepting and reviewing chartered aircraft invoices, we compared all 76 invoices submitted by the four campaign committees to the agency’s policy requirements for invoice completeness and accuracy. Further, we used Standards for Internal Control in the Federal Government to assess whether the Secret Service’s requirements for charter aircraft invoices, and the review of the invoices, are specific enough to help ensure that the Secret Service is making correct reimbursements for charter aircraft flights. We conducted this performance audit from April 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To estimate whether and, if so, by how much the U.S. Secret Service (Secret Service) overpaid the campaign committees for special agents’ seats on chartered aircraft flights, we selected a generalizable stratified random sample of flight segments from campaign invoices sent to the Secret Service. Specifically, we selected 650 flight segments from the 2,318 flight segments taken from November 1, 2015 through the end of the 2016 presidential campaign that had an identifiable airport. We stratified the population of 2,318 flight segments into 11 mutually exclusive strata by campaign (Trump, Clinton, Sanders, and Carson) and three size categories based on the number of special agents that indicated being on board a flight. We chose to stratify based on the number of special agents on board to minimize the variance of the total cost within each stratum in an attempt to gain statistical efficiency in the sample design. The sample size of 650 flight segments was based primarily on available resources to have the Secret Service’s travel agency extract cost data from the airfare database. We allocated the sample of 650 flight segments to the 11 strata using proportional allocation within each campaign. We then adjusted the allocation in each stratum in an attempt to match a Neyman allocation method that would minimize the variance of an estimate of total cost. We randomly selected the allocated sample size of flight segments within each of the 11 strata. For each of the 650 flight segments selected in the sample, we obtained two measures of the lowest first-class airfare from the Secret Service’s travel agency, one with fees and taxes and one without (base fare). This was due to some confusion at the Secret Service about whether taxes and fees should be included when determining the lowest first-class airfare. We then compared these first-class airfares to the individual fare (i.e., the pro rata fare) paid by the Secret Service to the campaign committees. We classified a flight segment as overpaid if the lowest first-class airfare was less than the pro rata fare paid by the Secret Service. To determine the total amount of overpayment per flight segment, we multiplied the difference between the pro rata fare paid by the agency and the lowest first-class airfare by the number of Secret Service special agents on board the flight. We assigned flight segments that were classified as not overpaid a total overpaid value of zero. From our sample of 650 flight segments, we identified 295 flights for which the Secret Service overpaid a total of about $1.5 million. To estimate the proportion of overpaid flight segments and the total amount overpaid by the Secret Service for all 2,318 flight segments in the population from which we sampled, we weighted the sample results by the inverse of the probability of selection based on the stratified sample design. We used estimation methods appropriate for a stratified random sample design and generated 95 percent confidence intervals for each estimate. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that each of the confidence intervals in this report will include the true values in the study population. The weighted percentage estimates of the full population from our sample have margins of error at the 95 percent confidence level of plus or minus 4 percentage points or fewer and the estimate of the total amount overpaid by the Secret Service has a relative error of plus or minus 12 percent of the estimate or less. Based on these results, we estimate that total overpayments in the population of 2,318 flight segments from November 1, 2015 through the end of the campaign would be at least $3.9 million. We estimate that the Secret Service overpaid invoices for about 49 percent (+/- 4 percentage points) of the flight segments. The estimated $3.9 million represents the lower bound of the 95 percent confidence interval of the estimated total dollar amount overpaid based on our sample. The lower bound represents relative error of about 12 percent. In addition to the contact named above, Joseph P. Cruz (Assistant Director), Lisa Canini, Jeffrey Fiore, Chad Johnson, Janet Temko-Blinder, and Jonathan Tumin made key contributions to this report. Also contributing to this report were David Alexander, Jim Ashley, Dominick Dale, Eric Hauswirth, John Mingus, and Carol Petersen.", "summary": "The Secret Service incurs millions of dollars in travel expenses to provide security during the fast-paced operational tempo of a presidential campaign. In connection with the 2016 presidential campaign, the Secret Service provided protection for four presidential candidates, two vice presidential candidates, and six of the candidates' family members. GAO was asked to review the Secret Service's travel-related expenses for the 2016 presidential campaign. This report examines (1) how much the Secret Service incurred in travel-related expenses, and (2) the extent to which travel-related payments and reimbursements were made in accordance with laws, regulations, and policies. GAO analyzed Secret Service data to determine the travel expenses incurred by the agency for the 2016 presidential campaign. GAO also randomly selected 40 overnight trips to assess the Secret Service's compliance with provisions of its lodging policies and the Federal Travel Regulation. GAO analyzed the Secret Service's payments to campaign committees to determine whether committees were reimbursed the correct amounts for charter flights. The U.S. Secret Service's (Secret Service) travel expenses during the 2016 presidential campaign totaled approximately $58 million. Of the $58 million, $17.1 million was for reimbursements to the four campaign committees for chartered aircraft flights. In the case of campaign travel, Secret Service special agents often fly with protected individuals on aircraft chartered by the campaign committees. The Secret Service reimburses the campaign committees for the number of seats occupied by special agents on board each charter flight. For the 40 overnight trips GAO reviewed, the Secret Service generally followed its policies and regulations for lodging payments. However, GAO found that the agency overpaid the campaign committees at least an estimated $3.9 million when reimbursing them for special agents' seats on charter flights. Since at least 1977, the Secret Service's policy has been to pay the lower of two fares when reimbursing campaign committees for special agents' travel on chartered aircraft flights. Specifically, the Secret Service is to pay the lower of the following two fares: the lowest commercially available first-class airfare, or the pro rata fare—the cost of the agent's seat on the charter flight calculated by taking the total cost of the charter divided by the number of passengers on board. However, during the 2016 presidential campaign, Secret Service officials misinterpreted a Federal Election Commission regulation, and as a result, did not conduct the comparison. Instead, the Secret Service solely paid the pro rata fare to the campaign committees. Eight months before the end of the 2016 presidential campaign, Secret Service officials determined the interpretation was erroneous, but did not ensure the agency reverted to its long standing policy. During these 8 months, 66 percent of all campaign-related flights with special agents on board were taken. Federal agencies are generally required to collect on debts that have been determined by an appropriate official of the federal government to be owed to the United States. Debts include overpayments. Pursuing debt collection, however, will require the Secret Service to calculate the specific amount it overpaid to the campaign committees and determine how to proceed with seeking repayment from the various committees, as appropriate. GAO is making five recommendations, including that the Secret Service should (1) calculate its overpayments to the campaign committees for special agents' seats on chartered aircraft flights, and (2) determine how it should proceed with respect to collecting on identified debts. The Department of Homeland Security concurred with the recommendations and identified actions underway to address them.", "document_type": "gao"}
{"report": "Puerto Rico is the most populous U.S. territory with approximately 3.3 million residents. Puerto Rico and its residents are generally subject to the same federal laws as the states and their residents, except in cases where specific exemptions have been made, such as with certain federal programs. Individuals born in Puerto Rico are U.S. citizens and can migrate freely to the states. On September 20, 2017, Hurricane Maria, a category 4 storm, devastated Puerto Rico and left nearly all its residents without potable running water and electricity. In addition, the existing infrastructure for cellular and wireless service was rendered virtually useless, hampering communication. Four months after Hurricane Maria, more than a third of Puerto Rico’s energy customers remained without power. The lack of power and communication impeded residents’ ability to return to work. According to the Federal Emergency Management Agency (FEMA), rebuilding will take years. PROMESA established a Financial Oversight and Management Board for Puerto Rico (Oversight Board), and granted it broad powers of fiscal and budgetary control over Puerto Rico. The Oversight Board is comprised of seven members appointed by the President of the United States from a list of recommendations from House and Senate Leadership and one ex- officio member designated by the Governor of Puerto Rico. PROMESA also established a mechanism through which the Oversight Board could petition U.S. courts on Puerto Rico’s behalf to restructure debt. Under Puerto Rico law, the Puerto Rico Planning Board (Planning Board) has the legal responsibility of developing an economic outlook and a detailed analysis of the economy, including gross domestic product (GDP), and producing an annual Economic Report to the governor and to the legislature. The Planning Board Chairperson releases GDP measures only after approval from the governor’s office, according to Planning Board officials. The Department of Commerce’s Bureau of Economic Analysis (BEA) produces economic accounts statistics that enable government and business decision-makers, researchers, and the American public to follow and understand the performance of the nation’s economy. To do this, BEA collects source data, conducts research and analysis, develops and implements estimation methodologies, and disseminates statistics to the public. BEA calculates GDP for the United States, including for the territories of American Samoa, Guam, the U.S. Virgin Islands and the Commonwealth of the Northern Mariana Islands. Since 2009 the Department of the Interior’s Office of Insular Affairs has reimbursed BEA for estimating and publishing GDP for these territories. This office carries out the administrative responsibilities of the Secretary of the Interior and the Assistant Secretary for Insular Areas by coordinating federal policy for these territories, but does not for Puerto Rico. Census in cooperation with the Department of Labor’s Bureau of Labor Statistics (BLS) produces the Current Population Survey (CPS), which provides statistics on work, earnings, and education. CPS is one of the oldest, largest, and most well-recognized surveys in the United States, according to Census. In addition to being the primary source of monthly labor force statistics, the CPS is used to collect data for a variety of other studies that provide information on economic and social well-being factors. The CPS does not collect or report data for Puerto Rico or any of the other U.S. territories. Census also produces the American Community Survey (ACS). It is an ongoing survey that provides national information on a yearly basis that includes information for the States, as well as for Puerto Rico. The ACS includes data on jobs and occupations, educational attainment, veterans, whether people own or rent their homes, and other topics. Information from the survey generates data that help determine how more than $675 billion in federal and state funds are distributed each year. DOL’s Wage and Hour Division (WHD) administers the wage, hour, and child labor provisions of the Fair Labor Standards Act of 1938 (as amended) that sets the minimum wage and overtime pay standards applicable to most U.S. workers. The Fair Labor Standards Act (FLSA) requires employers to compensate employees who are covered by the act and not specifically exempt from its provisions, at least federal minimum wage (currently $7.25 per hour) and with premium pay (at one- and-one-half the regular rate) for overtime hours worked in excess of 40 hours in a workweek. There are a number of exemptions from the requirements of the FLSA. For example, employees working in a “bona fide executive, administrative, or professional capacity” (EAP) are not entitled to premium pay for overtime. The FLSA was enacted to address problems associated with substandard working conditions by, in part, establishing a floor on wages and a ceiling on hours, beyond which the employer is required to pay extra wages. With a requirement for overtime pay, employers would either have to hire more workers or assume extra wage costs in order to achieve the same amount of work. Employees would be assured additional pay to compensate them for the burden of a workweek in excess of 40 hours. The Minimum Wage Study Commission of 1981 justified the EAP exemption in part because these employees are associated with higher base pay, higher promotion potential, and greater job security than most of the U.S. labor force. For employers and employees, the practical effects of the exempt employee classification can be important. An exempt employee may be required to work as many hours as it takes to complete a task. Although this may be more than 40 hours per week, the employee will not be entitled to overtime pay. Thus, an exempt financial manager may be required to work 60 hours a week and be paid a set weekly salary. On the other hand, a nonexempt bookkeeper may be required to work 60 hours per week, but must be paid for 20 hours of overtime, in addition to a set weekly salary. The FLSA authorizes DOL to define EAP exemptions. Balancing the competing interests of expanding exemptions and restricting them, DOL regulations establish specific tests that must be met before an employee may be classified as an EAP and exempt from overtime. In general, there are three tests: Salary Basis Test. The employee must be paid on a salary basis, rather than an hourly basis. This means that the employee must be paid at least the guaranteed amount, regardless of the number of hours actually worked and the quality or quantity of worked performed. Salary Level Test. The employee must meet a minimum salary level that indicates managerial or professional status. Duties Test. The employee must have duties and responsibilities associated with an exempt EAP position. In 2003, DOL reviewed the regulations for EAP exemptions in response to a GAO recommendation. Based on its review, in 2004 DOL increased the minimum “salary level” threshold for an employee to be exempt from receiving overtime pay to $23,660. In May 2016, DOL again updated minimum the salary level threshold for EAP employees to be exempt from receiving overtime pay to $47,476 in the 2016 Overtime Rule (see fig. 1). In July 2015, DOL proposed updating the overtime regulations relating to the EAP exemption, and published a notice of proposed rulemaking. After receiving approximately 294,000 comments, the Secretary of Labor published the final rule on May 23, 2016 (2016 Overtime Rule). The major changes included increasing the salary level threshold from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) and providing an automatic update to the salary level every 3 years. DOL estimated that about 4.2 million EAP employees in the states would become newly entitled to overtime pay under the revised salary level threshold. At the time of publication, the 2016 Overtime Rule would have applied to Puerto Rico; however, on June 30, 2016, prior to the rule’s effective date of December 1, 2016, PROMESA was enacted which, in part, delayed the applicability of this rule to Puerto Rico. Prior to the 2016 Overtime Rule going into effect, several states and various business groups challenged the rule in the Federal District Court of the Eastern District of Texas. On November 22, 2016, this court issued a nationwide preliminary injunction preventing DOL from implementing and enforcing the 2016 Overtime Rule for the duration of the case. In the interim, the 2004 Overtime Rule salary level threshold for EAP employees of $23,660 remained in effect. In July 2017, DOL published a Request for Information to gather additional information to begin the rulemaking process to replace and update the overtime regulations. In August 2017, the district court determined that the 2016 Overtime Rule was unlawful and ordered it invalidated. In October 2017, DOL filed a motion to appeal that ruling with the Fifth Circuit Court of Appeals. In November 2017, DOL filed a motion to stay the appeal pending the outcome of its rulemaking, and the Fifth Circuit granted this motion. DOL’s comment period for the Request for Information ended on September 25, 2017, and the agency currently is reviewing submissions. DOL plans to publish a Notice of Proposed Rulemaking on the salary level threshold for EAP employees in October 2018. Meanwhile, the 2004 Overtime Rule continues to remain in effect as of today, while the appeal and rulemaking are pending. In addition to FLSA, workers and employers in Puerto Rico may be subject to various other federal, Puerto Rican, and local labor laws or regulations depending on eligibility, exemptions, and other limitations. In some cases, including sick leave, vacation leave, mandatory meal period, weekly day of rest, and maternity leave, these laws may be more generous to workers than federal law, according to Puerto Rico Department of Labor officials. Sick leave. Non-exempt employees in Puerto Rico are entitled to accrue at least 1 day of paid sick leave after working at least 130 hours per month. Vacation leave. Non-exempt employees in Puerto Rico are entitled to accrue paid vacation after working at least 130 hours per month. Non- exempt employees hired before January 26, 2017, are entitled to a minimum monthly vacation leave accrual rate of one-and-a-quarter days. Non-exempt employees hired on or after January 26, 2017, are entitled to a minimum monthly vacation leave accrual rate of a half- day during the first year of service; three-quarters of a day after the first year of service up to the fifth year of service; 1 day after the fifth year of service up to the fifteenth year of service; and one-and-a- quarter days after the fifteenth year of service. However, in the case of Puerto Rico resident employers who have less than 12 employees, the minimum monthly vacation leave accrual rate is a half-day. Mandatory meal period. Non-exempt employees in Puerto Rico are entitled to a mandatory meal period between the third and sixth consecutive hour of work. In general, any employer that employs or allows an employee to work during the meal period is required to pay said period or fraction thereof at a pay rate equal to twice or one and one-half times the regular pay rate, as applicable. Weekly day of rest. Non-exempt employees in Puerto Rico are entitled to a mandatory weekly day of rest for every six consecutive days of work. Work performed during the day of rest is considered overtime and requires extraordinary compensation, regardless of the total number of hours that the non-exempt employee worked in the preceding 6 days. Maternity leave. Pregnant women in Puerto Rico are entitled to paid maternity leave 4 weeks before and 4 weeks after childbirth. Working mothers may opt to take only 1 week of pre-natal leave and extend post-natal leave up to 7 weeks. Women who adopt a child 5 years old or younger are entitled to 8 weeks of maternity leave. The Tax Reform Act of 1976 created the possessions tax credit to assist Puerto Rico and other insular areas in obtaining employment-producing investments. The credit effectively reduced federal taxes on income earned by qualifying U.S. corporations from operations in U.S. insular areas. However, the credit was repealed in 1996, but existing claimants were allowed to continue to use the credit during a 10-year phaseout period ending in 2006. In 2006, we reported that U.S. corporations claiming the credit dominated Puerto Rico’s manufacturing sector in the late 1990s and that after the tax credit began to phase out in 1996, the activities of these corporations decreased significantly. Puerto Rico Planning Board (Planning Board) data show that Puerto Rico has been in an economic decline for more than a decade. From 2005 to 2016, Puerto Rico’s GDP decreased by over 9 percent, after adjusting for inflation. Beginning in 2006, Puerto Rico’s economy experienced declines in real output in 9 of the next 11 years, as measured by real GDP (see fig. 2). While we have concerns about the precision of the Planning Board’s real GDP measure from year to year, as discussed later, we are confident in the downward direction of growth. Puerto Rico officials described the economic contraction as a downward spiral, where negative economic growth spurred outmigration by skilled workers, leading to decreased tax revenue and thereby increasing public debt per capita. This, in turn, they said decreases new investment and the cycle repeats. Five Main Factors that Contributed to Puerto Rico’s Economic Condition In May 2018, GAO reported on five main factors it identified through discussions with officials and experts and a review of literature. The factors were: Outmigration and diminished labor force. Some experts tied Puerto Rico’s negative economic growth to a steady decline in its population and labor force since 2005. According to Census data, Puerto Rico’s aging population means there are proportionally fewer individuals of working age. Regulatory challenges of doing business in Puerto Rico. Some experts cited the high cost to businesses of complying with Puerto Rico’s regulations, such as the permitting process for new businesses, and federal laws, such as the minimum wage law. High cost of importing goods and energy. Many of the goods used by businesses in Puerto Rico must be imported, significantly increasing their costs and in turn the cost of doing business. Petroleum, the main source of electronical energy generation, is a good whose high cost was particularly consequential to Puerto Rico’s economic struggles, according to Puerto Rico government officials, experts, and a literature reviews. Phaseout of the possessions tax credit. The loss of the tax credit was been cited by some as a potential cause of Puerto Rico’s economic decline since 2006; however, there was no consensus as to the magnitude. Banking and housing struggles. Puerto Rico’s banks have struggled and several have closed. Puerto Rico’s housing prices peaked in 2009, but fell 25 percent by January 2017, according to Federal Housing Finance Agency data. In our May 2018 report examining the Puerto Rico debt crises, we spoke with officials and experts, and conducted a literature review, and identified five main factors contributing to Puerto Rico’s current economic condition: outmigration and a diminished labor force; regulatory challenges of doing business in Puerto Rico; the high cost of importing goods and energy; the phaseout of the possessions tax credit; and banking and housing struggles (see sidebar). Puerto Rico was already experiencing a long economic contraction when Hurricane Maria made landfall in September 2017. Previous U.S. natural disasters, such as Hurricane Katrina in the Gulf Coast, have had significant adverse impacts on the economies of the affected regions, including significant outmigration. Immediately following Hurricane Katrina, the Gulf Coast experienced a number of challenges to its economy including a rise in unemployment; an increase in outmigration and decrease in housing units; a decline in state tax revenue; and a decline in imports and exports. Puerto Rico may experience similar challenges. For example, a February 2018 Federal Reserve Bank of New York press briefing on the impact of Hurricanes Maria and Irma characterized the 4 percent local job losses in Puerto Rico as substantial. Further, the briefing indicated that the true economic cost may be understated because some workers who are still employed likely suffered a drop in income, there may be unmeasured effects on the informal economy, and the value people place on quality of life issues are not measured. The substantial damage to the territory also accelerated outmigration and will likely worsen its economic condition. A January 2018 report from the Puerto Rico government identified the 2017 hurricanes as having a significant impact on the economy and projected that the population will decline by 10 percent over the next 2 years and could decline by nearly 20 percent over the next 5 years as people leave the island due to poor economic conditions. Initial data from the U.S. Bureau of Transportation Statistics show that 92,284 more people flew out of Puerto Rico with one- way tickets than flew into Puerto Rico in October 2017, the first full month after Hurricane Maria. That number represents a 255 percent increase over similar statistics in August 2017 and a 1,195 percent increase over October 2016 (see fig. 3). By December 2017, 17,281 more people flew out of Puerto Rico with one-way tickets than flew into Puerto Rico. This is 149 percent increase over similar statistics for December 2016. While the extent to which citizens of Puerto Rico may return to the territory is unclear, the initial outmigration could prolong negative economic growth. Outdated methods for measuring GDP make it difficult for the Puerto Rico government to fully analyze specific economic needs and develop long- range plans. There is no federal statistical measure of Puerto Rico’s GDP. The U.S. Census’ Economic Census of Island Areas provides some limited insights into Puerto Rico’s economic performance by industry, including revenue, payroll, employee count, and inventories. The Economic Census of Island Areas is updated every 5 years, but does not include total GDP. Instead, each year, BEA calculates GDP for four other territories and is reimbursed by the Department of the Interior’s Office of Insular Affairs for the estimation and publication of this information. In contrast, Puerto Rico’s Planning Board calculates GDP, but its methods are outdated and therefore unreliable, as they do not provide a precise measure of economic activity. Specifically, a 2011 White House Task Force Report examining Puerto Rico’s economic challenges found the Planning Board’s methods were outdated because they did not follow the same standards used for the rest of the United States. The Task Force also found that the methodology was not in line with modern statistical techniques, resulting in a less precise measure of Puerto Rico’s economic activity. Accurately calculating GDP is necessary to adequately measure total output of goods and services in Puerto Rico. GDP is also useful in measuring productivity and conducting monetary policy, and may be used to develop and apply appropriate policies for promoting economic growth. For example, a reliable and timely measure of GDP helps government officials calculate more accurate projections of tax revenue. The Planning Board’s method for calculating GDP does not effectively adjust for inflation because, the methodology uses a fixed-weighted index method that assumes the structure of the economy—what is being produced and prices of what is being produced relative to each other—is roughly constant over time. Further, the Planning Board is using this method to report inflation adjusted GDP based on the prices in a 1978 “market basket”—a fixed set of goods and services that people buy for day-to-day living. The Planning Board then uses 1954 as the reference year in its inflation adjustment to report GDP based on the price of goods and services. Consequently, the Planning Board’s real GDP measure may not be accurately adjusted to reflect current purchasing patterns and inflation in the prices of purchased products. BEA provides Puerto Rico’s Planning Board with some support in its calculation of GDP, but does not verify the accuracy of the calculation. In response to the 2011 White House Task Force findings, BEA began providing technical assistance and support to the Planning Board in updating its methods to adjust GDP for inflation and developed a report with recommendations for updating economic accounts. BEA found that the Planning Board’s methods did not comply with the internationally agreed upon standards for compiling measures of economic activity. Officials said that BEA was helping the Planning Board update its methods; however, a change in the level of communication slowed the update from 2013 through 2014. As a result, the Planning Board continued to use the same outdated methods. In January 2017, the Planning Board and BEA signed an agreement to modernize Puerto Rico’s economic accounts and align them with international guidelines. The agreement also tasked the Planning Board with providing deliverables in regular intervals beginning in spring 2017, including publication of alternative estimates of GDP that implement steps towards modernization. BEA officials told us that they are providing support to the Planning Board, and Planning Board officials told us they are working on updating the methodology. However, as of March 2018, the Planning Board had not yet produced all of the agreement deliverables, including publication of alternative GDP estimates. Given the impact of Hurricane Maria, it may be challenging for Puerto Rico to modernize its GDP measures. Planning Board officials told us in August 2017 that they were working to update their GDP methodology, so that it is similar to the one used by BEA, and that they would be updating to a 2007 “market basket.” Board officials said the new GDP figures were expected to be completed in December 2017. Their release was delayed in the aftermath of Hurricane Maria, but officials said they now expect to release GDP measures using the new methodology in summer 2018. Officials added that they plan to continue publishing GDP measures using the old methodology along with the new one for trend comparisons. The Planning Board and BEA estimated the cost to the Puerto Rico government to modernize its GDP measure is $2 million — including staff time and computing infrastructure. A 2016 bi-partisan Congressional Task Force on Economic Growth in Puerto Rico (2016 Congressional Task Force) recommended BEA calculate GDP for Puerto Rico as it does for the states and other territories, and BEA’s long-term goals include this objective. Further, in February 2018, the Financial Oversight and Management Board for Puerto Rico recommended that the Governor of Puerto Rico support efforts to implement the Congressional Task Force recommendation. BEA officials told us one of the agency’s long-term goals is calculating GDP for Puerto Rico and they have discussed including Puerto Rico in its reporting of GDP. Officials noted that including Puerto Rico in GDP reporting would require additional funds similar to reimbursements it received for the other four territories’ calculations. BEA’s mission is to promote a better understanding of the entire U.S. economy by providing the most timely, relevant, and accurate economic accounts data in an objective and cost-effective manner. BEA has provided technical assistance and support for 6 years; however the Planning Board has not yet modernized its methods to report a reliable GDP measure, and BEA has not included Puerto Rico in its reporting efforts. Federal standards for internal control state that management should use quality information to achieve the entity’s objectives. The lack of a federal GDP measure for Puerto Rico makes it difficult to make reasoned policy recommendations, adds uncertainty around issues affecting Puerto Rico’s economy, and makes it more difficult to identify fiscal and economic recovery plan priorities. Without modernized GDP methods, it remains difficult to compare Puerto Rico’s GDP with the rest of the United States and the other four territories for which BEA calculates GDP. Finally, without such a measure of GDP, federal policy makers and private investors must rely on various and sometimes unreliable data sources to try to establish common facts about Puerto Rico’s economic condition—an impediment in reaching consensus, engaging in meaningful policy discourse, and investment. Federal labor statistics for Puerto Rico are incomplete because the Current Population Survey (CPS) does not include Puerto Rico and four other U.S. territories, and the American Community Survey (ACS) primarily provides data on population and housing, rather than labor. PROMESA recognized this and recommended that Census consider the feasibility of including Puerto Rico, and the other territories in the CPS. Specifically, PROMESA suggested that Census conduct a study to determine the feasibility of expanding data collection to include Puerto Rico and the other four U.S. territories in the CPS and if necessary, request the funding required to conduct this feasibility study as part of its budget submission to Congress for fiscal year 2018. Census officials told us they estimate a feasibility study including all of the U.S. territories will cost $1.1 million in fiscal year 2018, but did not request funding. The 2016 Congressional Task Force also recommended that BLS and Census take reasonable steps to include the territories. Federal standards for internal control state that management should use quality information to achieve the entity’s objectives. CPS data are intended to provide a comprehensive body of labor data that can be used to keep the nation informed about the economic and social well-being of its people, but Census and BLS are unable to report on the economic and social well-being of a segment of the nation and its people. Census officials told us they are concerned about unduly burdening Puerto Rico citizens with data collection efforts that would provide state level estimates. However, Census has not studied the feasibility of including Puerto Rico in the CPS, which would inform officials’ decision on whether to include Puerto Rico and the other territories in the CPS. By conducting such a study, Census would better understand the tradeoffs of including or continuing to omit Puerto Rico from CPS, including the extent to which it can be considered in public policy decisions, such as the 2016 Overtime Rule. Our estimates suggest that a larger percentage (about 4.5 percent) of Puerto Rico’s total workforce would have been affected by the Overtime Rule than the states (about 2.6 percent), based on our analysis of ACS data and DOL’s analysis of CPS data. Specifically, DOL’s analysis estimated that of 159.9 million wage and salary workers in the states, about 4.2 million (or about 2.6 percent) might be directly affected by the 2016 Overtime Rule. In our analysis of the Overtime Rule for Puerto Rico, we estimated that about 47,250 (about 4.5 percent) of 1.06 million wage and salary workers in Puerto Rico would have been directly affected (see fig. 4). The lack of data from CPS on Puerto Rico and the effects of Hurricane Maria hinder our ability to fully assess the potential effect of the 2016 Overtime Rule on Puerto Rico. Instead, we used data from the 2015 5- year ACS to estimate the impact of the Overtime Rule on Puerto Rico. The ACS employment data lack multiple variables available in the CPS; hence, we were limited in what we could estimate. For example, DOL’s estimate for the states included the wealth transfer from employers to employees, which is important for understanding the economic effects of the 2016 Overtime Rule. We do not provide similar insights because of the difference in variables in the ACS and CPS. (See table 2 in appendix I for the differences between our analysis and that of DOL.) Additionally, DOL estimated the effect the Overtime Rule would have on the probability that a worker had multiple jobs, but the limitations of the data we used kept us from performing this analysis. Our analysis estimates that the impact of the 2016 Overtime Rule in Puerto Rico would have been largely concentrated in four industries: education and health services, wholesale and retail trade, public administration, and financial activities. We estimated that in these four industries about 76 percent (about 36,000) of our approximate 47,250 total workers would have been directly affected (see table 1). The largest directly affected industry, education and health services, makes up about 43 percent (about 20,000) of this total. Depending on how employers respond to an increase in the overtime threshold, the effect of amending the overtime regulations could vary across employees. Similar to employers in the states, employers in Puerto Rico could respond to changes in the overtime regulations based on the current employee’s salary and work schedule by: 1) making no changes, 2) paying overtime, 3) raising salaries, or 4) adjusting hours worked (see fig. 5). In its analysis of the impact of the 2016 Overtime Rule in the states, DOL estimated the largest impact would be an aggregate transfer of income from employers to employees, which would be seen as a positive for some employees (e.g., increased pay, fewer hours for same pay, or new hires) and a negative for others (e.g., employers in our facilitated discussion groups said they would have layoffs, move employees from salaried to hourly, or lower benefit amounts). While we were unable to conduct a full impact analysis identical to DOL’s because of data limitations, we held facilitated discussion groups, to gain insight into how employers would have responded if the 2016 Overtime Rule was implemented in Puerto Rico. Views reported by participants in these groups may not be representative of all Puerto Rico employers, but they provide illustrative examples of the types of steps employers might have taken if the 2016 Overtime Rule were implemented. Employers in 2 of our 10 discussion groups said they would make staff adjustments by increasing the salary of some employees while, in some cases, minimizing the role of others. However, employers in 9 of our 10 of our discussion groups said they might also need to convert the remaining employees to part-time or hourly work, reduce their hours, or lay them off. “We have 125 exempt employees. The rule change would impact our labor costs a lot. We would need to minimize employees/hours to reduce the labor costs. We may adjust our contribution to medical plans to make up for the increased labor costs.” “With the new rule, half would need to be paid overtime or increase salary. This would leave us not enough flexibility to cover the hours or operation.” “We have a total of 850 employees. About 8 would be affected by the change. Of those 8, 3 we would boost their salary; the others will be switched to hourly. This may affect their benefits.” Through these facilitated discussion groups, we also learned that employer responses to the 2016 Overtime Rule may differ by industry. Employers in 3 of 10 industry discussion groups said they would be able to absorb some of the higher costs associated with an increase in the Overtime Rule threshold. For example, some manufacturers told us it would not be difficult for their businesses to absorb these additional costs, particularly if the salary threshold was at a somewhat lower level. Similarly, some hotel employers told us they would be able to absorb costs associated with the change across their many hotel locations, but others said they may not be able to assimilate the threshold increase. Hospital employers who participated in our facilitated discussion groups told us they have lower margins and face threats of closure even without the threshold increase. Some restaurant and hotel employers who participated in our facilitated discussion groups said they may be unable to pass associated increased labor costs to consumers; some would have to require exempt workers to work longer hours and reduce the number of full time employees or hours (see sidebar). Employers could respond by adjusting staff if the 2016 Overtime Rule goes into effect, but the impacts to employers may be limited and the workforce could benefit from the 2016 Overtime Rule change according to our interviews with 1 economist and 1 labor group official. One economist suggested that instead of having two employees who work 60 hours each, an employer might hire a third employee so that each works 40 hours. Additionally, this economist said an increase to the threshold would not be as burdensome to business, because employee wages have risen above the current overtime salary threshold. One labor group representative suggested that the 2016 Overtime Rule would have a minimal impact because very few workers in Puerto Rico earn enough to meet the 2004 salary threshold. Further, one economist said that under the current threshold, workers work excessive hours and do not have the same bargaining power. An increased overtime threshold would improve these dire working conditions. Specifically, this economist said that implementing the 2016 Overtime Rule would encourage firms to hire more workers, provide employees with more bargaining power, and help prevent worker exploitation. One economist said implementing the 2016 Overtime Rule only in the states could increase the wage differential between Puerto Rico and in turn increase outmigration from Puerto Rico. One member of the Puerto Rico Economic Administration said that if Puerto Rico were to have a lower threshold than the U.S. mainland the effects might be worse than those caused by the increased labor costs of implementing the higher threshold. Another economist said that while hours may be adjusted or layoffs may occur immediately following implementation of the Overtime Rule, these impacts would not be a major concern within 3 to 4 years. Puerto Rico has long been experiencing severe economic challenges and its default on over a billion dollars of debt payments since 2015 has focused the need for attention to this territory. As Puerto Rico officials were in the process of taking action to update their methodology for reporting inflation-adjusted GDP, Hurricane Maria exacerbated the territory’s economic challenges. FEMA estimates that it may take years for Puerto Rico to recover. The lack of accurate economic and comprehensive labor data hinders policymaking, including a determination of the potential impact of changes to the overtime regulations. To help address Puerto Rico’s economic challenges now and in the future, the federal government and investors need updated and reliable data. Going forward, having BEA include Puerto Rico in its calculation of GDP would provide federal and local authorities, as well as businesses and investors, with reliable data on Puerto Rico’s economic condition that can be directly compared with the United States and other territories. BEA’s long-term goals include measuring Puerto Rico’s GDP, but having reliable data now would help address significant economic challenges in the short term. Likewise, studying whether including Puerto Rico in the Current Population Survey is feasible would allow DOL and other policymakers to be better positioned to fully consider the cost of including the territory against the implications of exclusion. We are making a total of three recommendations, including two to Commerce and one to DOL. Specifically: The Secretary of Commerce should ensure that the Bureau of Economic Analysis includes Puerto Rico in its reporting on gross domestic product, as it does for four other U.S. territories. (Recommendation 1) The Secretary of Commerce, in cooperation with DOL’s Bureau of Labor Statistics, should conduct a study on the feasibility of including Puerto Rico in its reporting of the Current Population Survey. (Recommendation 2) The Secretary of Labor, in cooperation with the Commerce’s Census Bureau, should conduct a study on the feasibility of including Puerto Rico in its reporting of the Current Population Survey. (Recommendation 3) We provided a draft of the report to the Government of Puerto Rico, the Department of Commerce (Commerce), and the Department of Labor (DOL) for review and comment. In written comments that are reproduced in appendix IV, Commerce agreed with the recommendations made to it. In an email, DOL’s Deputy Assistant Secretary for Policy stated that the agency did not have any comments on the report. In addition, Commerce and the Government of Puerto Rico provided technical comments, which we incorporated into the report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Government of Puerto Rico, the Secretary of the Department of Commerce, the Secretary of the Department of Labor, and other interested parties. In addition, this report is available at no charge on the GAO website at http://gao.gov. If you or your staff have any questions about this report, please contact Cindy Brown Barnes at (202) 512-7215 or Oliver Richard at (202) 512- 8424.You may also reach us by e-mail at brownbarnesc@gao.gov or richardo@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Our review addressed: (1) the economic conditions in Puerto Rico as of the end of 2016; and (2) the potential effects of implementing the 2016 Overtime Rule on Puerto Rico’s economy. To evaluate the current economic conditions in Puerto Rico quantitatively, we analyzed (1) data from the Puerto Rico Planning Board’s (Planning Board) Statistical Appendix for the Governor that includes data on Puerto Rico’s gross domestic product (GDP) from 1990 through 2016 and (2) passenger data for Puerto Rican airports for years 2016 and 2017 from the Bureau of Transportation Statistics (BTS). To analyze the real GDP of Puerto Rico from 1990 through 2016 and Puerto Rico GDP by industry for 2016, we relied on data from the Planning Board’s Statistical Appendix for the Governor. We interviewed Planning Board officials responsible for producing the annual GDP estimates to understand how the data were prepared and any limitations to the data, and concluded that the while we have concerns over the precision of real GDP data, they were sufficiently reliable for our purposes of determining the direction of growth. To analyze the flow of passengers through Puerto Rican airports before and after Hurricane Maria, we relied on the BTS’ monthly passenger data for 2016 and 2017 as accessed through Diio Mi: Market Intelligence for the Aviation Industry. Diio Mi is a private contractor that provides online access to U.S. airline financial, operation, and passenger data. We reviewed the relevant documentation of the dataset and previous GAO reports and found the dataset sufficiently reliable for our purposes. To assess the potential effects of the 2016 Overtime Rule on Puerto Rico quantitatively, we analyzed and reported data from the American Community Survey (ACS) for calendar year 2015, because DOL used 2015 data in its impact analysis of the Overtime Rule on the states. The ACS is a national survey designed and administered by the Census Bureau (Census), and it contains data on individual earnings. Since 2005, the ACS has also included the Puerto Rico Community Survey (PRCS) which extends the survey through Puerto Rico. Our data set selection process included interviews with current and former agency officials as well as review of dataset documentation such as data handbooks, data dictionaries, and guidance on the different versions of data available. The ACS is conducted annually with estimates based on 1-year and 5-year data with benefits and drawbacks for each version. The 1-year ACS is updated the earliest and gives the most current data; however, according to Census’ guidance on the different ACS samples, it also contains the smallest sample size and is more appropriate for analyzing large populations than small ones. The 5-year ACS is the most reliable data, according to Census’ ACS guidance, as it includes the largest population size, which can be used to analyze small populations; however, the 5- year ACS is the least current version of the data. Additionally, while the 2015 5-year ACS data were not the most recent available, we used them because the Department of Labor (DOL) used 2015 data in its impact analysis of the 2016 Overtime Rule for the states. Based on these benefits and limitations, we chose to use the 2015 ACS 5-year estimates. Estimates produced from ACS data are subject to sampling error. For all of our estimates we weighted observations based on the individual weight. We compared our estimates of values derived from our weighting procedures to those published by the DOL and found them to be consistent. In addition to estimates, we generated standard errors or the margin of error for the 95 percent confidence interval, and report them with estimates in figures and tables. Based on our data checks, reviews of documentation and interviews with agency officials, we found the ACS data to be sufficiently reliable for our purposes. In addition to the quantitative data collected, we reviewed relevant federal laws, regulations, court documents, agency guidance, and internal controls related to the 2016 Overtime Rule, labor in Puerto Rico, and federal statistical measures for Puerto Rico. Additionally, we reviewed previous GAO reports on Puerto Rico and its economy. We interviewed DOL and Commerce officials at the national level. We interviewed Puerto Rican government officials to better understand current economic conditions and the statistical measure used to reflect the economic conditions. We interviewed representatives of national and Puerto Rican employer and labor organizations to gain their perspectives on the impact of the 2016 Overtime Rule and the condition of the economy. We conducted 10 facilitated group discussions with Puerto Rican employers in the manufacturing, restaurant, hotel, hospital, and professional services industries. These are some of the industries that employ the largest number of people in Puerto Rico and are among the most likely to be impacted by the 2016 Overtime Rule. Employers were selected to represent both large and small business perspectives in each industry. Views reported by participants in these groups are not representative of those of all Puerto Rico employers and for that reason are not generalizable. We also interviewed four economists, identified from prior work and interviews with agency officials, industry groups, and labor groups as having expertise relating to the 2016 Overtime Rule or the Puerto Rico economy, regarding the economic conditions of Puerto Rico and the potential economic impacts of the 2016 Overtime Rule. For our analysis of the effects of the 2016 Overtime Rule on Puerto Rico, we mirrored the analysis conducted by DOL for the impacts of the rule on the United States. While the methodologies are similar, the DOL analysis used the Current Population Survey (CPS) data that do not include Puerto Rico. The ACS data we use serves a similar role; however, we made a few adjustments to the analysis in light of available data. Specifically, in the ACS, there is no variable identifying whether the individual works an hourly job. In order to simulate the removal of hourly workers from the sample, we randomly assign hourly worker designation to the same proportion of the population that are classified as hourly workers in DOL’s analysis (41.01 percent). A few assumptions are associated with this manipulation: 1) We are assuming that the proportion of the population that works an hourly job in Puerto Rico is similar to that of the 50 states, and 2) when we perform industry and region analyses, we assume the same hourly worker proportion across all industries and regions. Additionally, in its final rule, DOL analyzes the impact of the 2016 Overtime Rule on individual worker’s propensity to work multiple jobs; the ACS does not identify workers employed in multiple jobs and we could not perform this analysis. Also, the CPS data contain several variables on the number of hours worked that allowed DOL to analyze who likely works overtime on a regular basis. While the ACS includes a variable indicating the usual number of hours worked per week over the past year, we found it does not capture the schedule fluctuations as accurately as the CPS variables. As such, we do not calculate the dollar amount transfers from employers to employees and dead weight losses, or the loss in economic efficiency from the rule that DOL shows in its analyses. To the extent possible, we used DOL’s methodology to determine the potential effect of the 2016 Overtime Rule in Puerto Rico. However, due to data limitations there were some ways in which our approach differed from the approach used by DOL. In DOL’s analysis, the sample includes only the workers covered by its regulation. We adapt the sample to match the DOL’s analysis as follows: 1) remove military personnel, unpaid volunteers, self-employed individuals, clergy and other religious workers, and federal employees, 2) remove blue-collar workers and workers paid hourly; and 3) remove workers who are categorized under occupation and industry codes that are generally exempt under other exemptions. For consistency, our analysis makes the same adjustments to our sample that DOL makes in its analysis. Since we use the 2015, 5-year ACS data, we first put all wages into 2015 levels using ACS defined variables. Next, we inflate from 2015 to 2017 levels using the calendar year consumer price index (CPI-U). Just as in DOL’s analysis, we do not know whether any specific worker satisfies the duties test of the 2016 Overtime Rule, so we follow the same steps DOL took in its final rule. These steps include using DOL’s probabilities that specific job codes meet the duties test and assigning the probability to individual workers using the gamma distribution with the shape parameter alpha was set to the squared quotient of the sample mean divided by the sample standard deviation, and the scale parameter beta was set to the sample variance divided by the sample mean. Additionally, DOL explicitly removes certain industries and occupations from the sample and we follow its methodology exactly to remove these. Finally, to estimate the population that would have been affected by the 2016 Overtime Rule, we limit the sample to only those above the 2004 overtime salary threshold ($23,660) and below the 2016 salary threshold ($47,476) just as DOL did in its analysis. DOL’s estimates for industries and regions use different groupings than those provided in the ACS; however, since the ACS variables use the same coding but, a finer level, we can recreate the variables used in DOL’s analysis. For example, we used Census guidance on converting 2012 industry codes to create a major industry variable from the ACS industry codes. Similarly, to compare our estimates to DOL estimates by region, we take the ACS data, which is reported state-by-state, and put it into larger regions, such as “Northeast.” We conducted this performance audit from September 2016 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 3 shows how different populations of workers would be affected by applying alternative overtime thresholds in Puerto Rico. For our analysis, in order to more closely replicate Department of Labor’s (DOL) design, we use the same alternative salary thresholds DOL analyzed in its final rule, which are defined as follows: Alternative 1: Inflate the 2004 Level - takes the 2004 overtime threshold and inflates it to fiscal year 2015 dollars using the consumer price index. This method leads to an overtime threshold of $570 per week or $29,640 per year. Alternative 2: 2004 Methodology - uses the 2004 final rule and updates it with data from the third quarter of 2015. This method leads to an overtime threshold of $596 per week or $31,015 per year. Alternative 3: Kantor Long Test - is based on a 1958 Report and Recommendations on Proposed Revision of Regulations, Part 541, by Harry S. Kantor. This methodology uses data collected on actual salaries paid to executive, administrative, or professional (EAP) employees grouped by geographic region, industry group, number of employees, and city size. DOL then used the long-duties test such that no more than about 10 percent of exempt EAP employees in the lowest-wage region, lowest-wage industry, smallest establishment group, or smallest city group will fail to meet the test. This method leads to a threshold of $684 per week or $35,568 per year. Alternative 4: 40th Percentile of Full-time Salaried Workers (Nationally) - takes all full-time salaried workers in the United States and calculates the 40th percentile of their wages. This method leads to a threshold of $972 per week or $50,544 per year. Alternative 5: Kantor Short Test - is also based on the Kantor method described in the third alternative, but uses the methodology associated with the short-duties test instead of the long-duties test. To do this, DOL took the $684 per week of the Kantor Long Test and inflated it by the average percent wage difference between the long and short test from 1949 through 1975 (149 percent). Multiplying $684 per week by 149 percent yields a Kantor Short Test threshold of $1,019 per week or $52,984 per year. Alternative 6: Inflate 1975 Short Test Level - takes the 1975 short- duties test salary level and inflates it to fiscal year 2015 dollars. This leads to a threshold level of $1,100 per week or $57,205 per year. The following tables show how the Department of Labor’s (DOL) analysis of the 2016 Overtime Rule in the United States using the analysis of Current Population Survey (CPS) data compares to our analysis using the American Community Survey (ACS) data. This analysis was conducted to support using ACS data as an alternative to CPS data. The methodologies used in our analysis and the DOL analysis are similar, but some adjustments were made to our analysis to attempt to replicate the DOL’s analysis of CPS data because variables were missing from the ACS data. Between the slightly different methodologies and different data sets, we expect the estimates to be of similar magnitudes, but not necessarily identical. The results indicate that our adjustments to the methodology and use of a different data yield similar results and add validity to our estimates for Puerto Rico. In addition to those named above, Kimberley Granger and Seyda Wentworth, Assistant Directors; Amber Yancey-Carroll, Analyst-in- Charge; Pedro Almoguera and Michael Naretta made key contributions to this report. Also contributing to this report were Jeffrey Arkin, David Blanding, David Chrisinger, Sarah Gilliland, Robin Marion, Jonathan S. McMurray, Sheila R. McCoy, Thomas Moscovitch, Dominic Nadarski, Mimi Nguyen, Karissa Robie, Benjamin Sinoff, Almeta Spencer, Amy Sweet, Anjali Tekchandani, Rosemary Torres Lerma, and Kathleen van Gelder.", "summary": "Puerto Rico, the largest and most populous territory of the United States, is subject to congressional authority, although it has broad authority over matters of internal governance. After it defaulted on over $1.5 billion in public debt since 2015, Congress passed PROMESA to establish federal oversight of fiscal affairs. This debt crisis coincided with DOL finalizing the 2016 Overtime Rule, which was invalidated in federal court and is being appealed. PROMESA included a provision for GAO to assess the rule's impact on Puerto Rico and examine its economic condition. This report (1) examines the economic conditions in Puerto Rico as of the end of 2016, and (2) assesses the potential effects of applying the 2016 Overtime Rule to Puerto Rico. GAO analyzed 1990-2016 economic data and replicated DOL's impact analysis of the 2016 Overtime Rule using 2015 ACS data, the same year used by DOL in its analysis. GAO also reviewed federal laws, regulations, court documents, agency guidance, and criteria related to the federal overtime rule; facilitated group discussions with employers in Puerto Rico from industries most likely to be impacted by the rule; and interviewed relevant stakeholders and labor groups. Unreliable economic and limited labor data make conditions in Puerto Rico difficult to evaluate. Puerto Rico Planning Board data show that from 2005 to 2016 Puerto Rico's gross domestic product (GDP), a principal economic indicator, decreased by over 9 percent, after adjusting for inflation, and the devastation brought by Hurricane Maria in 2017 has worsened economic conditions. While the overall downward trend is reliable, GAO found that the Planning Board uses outdated methods to calculate GDP, which results in unreliable data from year to year and can make it difficult for policymakers to fully analyze specific economic needs and develop long-range plans. The Bureau of Economic Analysis (BEA), within the U.S. Department of Commerce (Commerce), does not calculate GDP for Puerto Rico, as it does for the other U.S. territories. For 6 years, BEA has provided technical support to the Planning Board to update its methods and Planning Board officials described plans to do so, but its methods remain outdated. A 2016 Congressional Task Force recommended that BEA calculate Puerto Rico's GDP, and BEA considers it a long-term goal; however, BEA has not taken steps to do so. Further, Puert Rico has limited labor statistics because it is not included in the Current Population Survey (CPS), which is produced by Commerce's Census Bureau (Census) and Department of Labor's (DOL) Bureau of Labor Statistics (BLS). CPS provides detailed information about employment, such as hours of work and earnings. The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) suggested that Census conduct a study to determine the feasibility of expanding data collection to include Puerto Rico. Census officials said that they estimated the cost of such a study but have not yet conducted it. Census officials also cited concerns with data collection burdens. However, without CPS data on Puerto Rico, policymakers are limited in estimating the full economic impact of different policy changes. For example, DOL did not have the data needed to include Puerto Rico in its assessment of the economic impact of DOL's 2016 Overtime Rule. Conducting such a study would help policymakers consider the tradeoffs of including Puerto Rico in the CPS. GAO used a different dataset—American Community Survey (ACS)—to assess the potential effects of applying the 2016 Overtime Rule, which would have increased the salary level threshold from $23,660 to $47,476 at which executive, administrative, and professional workers would not be eligible for overtime pay. GAO estimated that about 47,250 of 1.06 million workers in Puerto Rico would be affected—that is, they would become eligible for overtime pay. In response to a salary level threshold increase, employers from selected industries in Puerto Rico told GAO that they might increase certain workers' salaries, but cut overtime hours for other workers, and adjust the number of staff. An economist and a labor group official said that employers could respond by adjusting the number of staff or their hours, but the impacts to employers may be limited and the workforce could benefit. In 2017, a federal district court invalidated the 2016 Overtime Rule and the overtime salary threshold remains at $23,660, but that decision is currently on appeal. GAO recommends that BEA include Puerto Rico in its reporting on GDP and that Census and BLS study the feasibility of including Puerto Rico in the CPS. Commerce agreed with our recommendations and DOL did not have any comments on the report.", "document_type": "gao"}
{"report": "Since January 2017, the Navy has suffered four significant mishaps at sea that have resulted in serious damage to Navy ships and the loss of 17 sailors (see figure 1). Three of the four at sea mishaps that have occurred—two collisions and one grounding—have involved ships homeported overseas in Yokosuka, Japan. Appendix II provides a summary of major mishaps for Navy ships at sea in fiscal years 2009 through 2017. The Navy currently has 277 ships, a 17 percent reduction from the 333 ships it had in 1998. Over the past two decades, as the number of Navy ships has decreased, the number of ships deployed overseas has remained roughly constant at about 100 ships; consequently, each ship is being deployed more to maintain the same level of presence. We reported in September 2016 that the Navy, along with the other military services, had been reporting persistently low readiness levels. The Navy attributes these, in part, to the increased deployment lengths needed to meet the continuing high demand for its aircraft carriers, cruisers, destroyers, and amphibious ships. For example, the deployment lengths for carrier strike groups had increased from an average of 6.4 months during the period of 2008 through 2011 to a less sustainable 9 months for three carrier strike groups that were deployed in 2015. In 2016, the Navy extended the deployments of the Harry S Truman and Theodore Roosevelt Carrier Strike Groups to 8 and 8.5 months, respectively. In addition, the Navy has had to shorten, eliminate, or defer training and maintenance periods to support these high deployment rates. These decisions have resulted in declining ship conditions across the fleet and have increased the amount of time required for the shipyards to complete maintenance on these ships. Lengthened maintenance periods, in turn, compress the time that ships are available for training and operations. As we previously reported, to help meet the operational demands using its existing inventory of ships, the Navy has assigned more of its surface combatants and amphibious ships to overseas homeports. Since 2006, the Navy has doubled the percentage of the fleet assigned to overseas homeports. In 2006, 20 ships were homeported overseas (7 percent of the fleet); today, 40 ships are homeported overseas (14 percent of the fleet) in Japan, Spain, Bahrain, and Italy; and an additional destroyer will be homeported in Yokosuka, Japan in 2018 (see figure 2). According to the Navy, homeporting ships overseas is an efficient method for providing forward presence and rapid crisis response. Our prior work confirms that having ships homeported overseas provides additional presence, but it comes at a cost. For example, we found in May 2015 that homeporting ships overseas results in higher operations and support costs than homeporting ships in the United States. In addition, the operational schedules the Navy uses for overseas-homeported ships limit dedicated training and maintenance periods, resulting in difficulty keeping crews fully trained and ships maintained. In fact, the primary reason that Navy ships homeported overseas provide more deployed time than ships homeported in the United States is that the Navy reduces their training and maintenance periods in order to maximize their operational availability. Ships homeported overseas do not operate within the traditional fleet response plan cycles that apply to U.S.-based ships. Since the ships are in permanent deployment status during their time homeported overseas, they do not have designated ramp-up and ramp- down maintenance and training periods built into their operational schedules (see figure 3). Navy officials told us that because the Navy expects these ships to be operationally available for the maximum amount of time, their intermediate and depot-level maintenance are executed through more frequent, shorter maintenance periods or deferred until after they return to a U.S. homeport—generally after 7 to 10 years overseas. In May 2015, we also found that high operational tempo for ships homeported overseas limits the time for crew training when compared with training time for ships homeported in the United States. Navy officials told us that U.S.-based crews are completely qualified and certified prior to deploying from their U.S. homeports, with few exceptions. In contrast, the high operational tempo of ships homeported overseas had resulted in what Navy personnel called a “train on the margins” approach, a shorthand way to say there was no dedicated training time set aside for the ships so crews trained while underway or in the limited time between underway periods. We found that, at the time of our 2015 review, there were no dedicated training periods built into the operational schedules of the cruisers, destroyers, and amphibious ships homeported in Yokosuka and Sasebo, Japan. As a result, these crews did not have all of their needed training and certifications. We recommended that the Navy develop and implement a sustainable operational schedule for all ships homeported overseas. DOD concurred with this recommendation and reported in 2015 that it had developed revised operational schedules for all ships homeported overseas. However, when we contacted DOD to obtain updated information for this testimony, U.S. Pacific Fleet officials stated that the revised operational schedules for the cruisers and destroyers homeported in Japan were still under review and had not been employed. As of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews homeported in Japan had expired, and over two-thirds of the expired certifications—including mobility-seamanship and air warfare—had been expired for 5 months or more. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since our May 2015 report. The Navy’s Surface Force Readiness Manual states that the high operational tempo and frequent tasking of ships homeported overseas requires that these ships always be prepared to execute complex operations and notes that this demand for continuous readiness also means that ships homeported overseas should maintain maximum training, material condition, and manning readiness. With respect to the material condition of the ships, we found in May 2015 that casualty reports—incidents of degraded or out-of-service equipment—nearly doubled over the 2009 through 2014 time frame, and the condition of overseas-homeported ships decreased even faster than that of U.S.-based ships (see figure 4). The Navy uses casualty reports to provide information on the material condition of ships in order to determine current readiness. For example, casualty report data provide information on equipment or systems that are degraded or out of service, the lack of which will affect a ship’s ability to support required mission areas. In 2015, Navy officials acknowledged an increasing number of casualty reports on Navy ships and a worsening trend in material ship condition. They stated that equipment casualties require unscheduled maintenance and have a negative effect on fleet operations, because there is an associated capability or capacity loss. In our May 2015 report, we recommended that the Navy develop a comprehensive assessment of the long-term costs and risks to its fleet associated with the Navy’s increasing reliance on overseas homeporting to meet presence requirements; make any necessary adjustments to its overseas presence based on this assessment; and reassess these risks when making future overseas homeporting decisions. DOD concurred with this recommendation, but, as of August 2017, it has not conducted an assessment, even though it has continued to increase the number of ships homeported overseas. In the early 2000s, the Navy made several changes to its process for determining the size and composition of ship crews that may contribute to sailor overwork and create readiness and safety risks. These changes were intended to drive down crew sizes in order to save on personnel costs. However, as we reported in May 2017, these changes were not substantiated with analysis and may be creating readiness and safety risks. With fewer sailors operating and maintaining surface ships, the material condition of the ships declined, and we found that this decline ultimately contributed to an increase in operating and support costs that outweighed any savings on personnel (see figure 5). The Navy eventually reassessed and reversed some of the changes it had made during this period—known as “optimal manning”—but it continued to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload—both of which may be leading to sailors being overworked. Additionally, we found that heavy workload does not end after ships return to port. Crews typically operate with fewer sailors while in port, so those crew members remaining must cover the workload of multiple sailors, causing additional strain and potential overwork. In 2014, the Navy conducted a study of the standard workweek and identified significant issues that could negatively affect a crew’s capabilities to accomplish tasks and maintain the material readiness of ships, as well as crew safety issues that might result if crews slept less to accommodate workload that was not accounted for. The Navy study found that sailors were on duty 108 hours a week, exceeding their weekly on-duty allocation of 81 hours. This on-duty time included 90 hours of productive work—20 hours per week more than the 70 hours that are allotted in the standard workweek. This, in turn, reduced the time available for rest and resulted in sailors spending less time sleeping than was allotted, a situation that the study noted could encourage a poor safety culture. Moving forward, the Navy will likely face manning challenges, especially given its current difficulty in filling authorized positions, as it seeks to increase the size of its fleet by as much as 30 percent over its current size. Navy officials stated that even with manpower requirements that accurately capture all workload, the Navy will be challenged to fund these positions and fill them with adequately trained sailors at current personnel levels. Figure 6 shows the Navy’s projected end strength and fleet size. In our May 2017 report, we found that the Navy’s guidance does not require that the factors it uses to calculate manpower requirements be reassessed periodically or when conditions change, to ensure that these factors remain valid and that crews are appropriately sized. We made several recommendations to address this issue, including that the Navy should (1) reassess the standard workweek, (2) require examination of in- port workload, (3) develop criteria to reassess the factors used in its manpower requirements process, and (4) update its ship manpower requirements. DOD concurred with our recommendations, stating that it is committed to ensuring that the Navy’s manpower requirements are current and analytically based and will meet the needs of the existing and future surface fleet. As of August 2017, DOD had not yet taken any actions to implement these recommendations. We believe that, until the Navy makes the needed changes, its ships may not have the right number and skill mix of sailors to maintain readiness and prevent overworking its sailors. To address its persistently low readiness levels, the Navy began implementing a revised operational schedule in November 2014, which it referred to as the optimized fleet response plan. This plan seeks to maximize the employability of the existing fleet while preserving adequate time for maintenance and training, providing continuity in ship leadership and carrier strike group assignments, and restoring operational and personnel tempos to acceptable levels. The Navy’s implementation of the optimized fleet response plan—and readiness recovery more broadly—is premised on adherence to deployment, training, and maintenance schedules. However, in May 2016, we found that the Navy was having difficulty in implementing its new schedule as intended. Both the public and private shipyards were having difficulty completing maintenance on time, owing primarily to the poor condition of the ships after more than a decade of heavy use, deferred maintenance, and the Navy’s inability to accurately predict how much maintenance they would need. We reported that in 2011 through 2014 only 28 percent of scheduled maintenance for surface combatants was completed on time and just 11 percent was completed on time for aircraft carriers. We updated these data for the purposes of this testimony to include maintenance availabilities completed through the end of fiscal year 2016 and found continued difficulty completing maintenance on time for key portions of the Navy fleet (see figure 7): Aircraft Carriers (CVNs): In fiscal years 2011 through 2016, maintenance overruns on 18 of 21 (86 percent) aircraft carriers resulted in a total of 1,103 lost operational days—days that ships were not available for operations—the equivalent of losing the use of 0.5 aircraft carriers each year. Surface Combatants (DDGs and CGs): In fiscal years 2011 through 2016, maintenance overruns on 107 of 169 (63 percent) surface combatants resulted in a total of 6,603 lost operational days—the equivalent of losing the use of 3.0 surface combatants each year. Submarines (SSNs, SSBNs, and SSGNs): In fiscal years 2011 through 2016, maintenance overruns on 39 of 47 (83 percent) submarines resulted in a total of 6,220 lost operational days—the equivalent of losing the use of 2.8 submarines each year. Navy officials are aware of the challenges faced by both the public and private shipyards and have taken steps to address the risks these pose to maintenance schedules, including hiring additional shipyard workers and improving their maintenance planning processes. However, Navy officials have told us that it will take time for these changes to bring about a positive effect. For example, as of May 2016, data on the public shipyards’ workforce showed that 32 percent of all employees had fewer than 5 years of experience. According to Navy officials, this workforce inexperience negatively affects the productivity of the shipyards, and it will take several years for them to attain full productivity. In September 2016, we found that although DOD has stated that readiness rebuilding is a priority, implementation and oversight of department-wide readiness rebuilding efforts did not fully include key elements of sound planning, and the lack of these elements puts the overall rebuilding efforts at risk. The Navy states that its overall goal for readiness recovery is to reach a predictable and sustainable level of global presence and surge capacity from year to year. The Navy identified carrier strike groups and amphibious ready groups as key force elements in its plan for readiness recovery and had set 2020 for reaching a predictable and sustainable level of global presence and surge capacity by implementing the optimized fleet response plan. However, we found in 2016 that the Navy faced significant challenges, such as delays in completing maintenance and emerging demands, in achieving its readiness recovery goals for carrier strike groups and amphibious ready groups, and projections show that the Navy will not meet its time frames for achieving readiness recovery. As a result, we recommended that DOD and the services establish comprehensive readiness goals, strategies for implementing them, and associated metrics that can be used to evaluate whether readiness recovery efforts are achieving intended outcomes. DOD generally concurred with our recommendations and, in November 2016, issued limited guidance to the military services on rebuilding readiness; it has also started to design a framework to guide the military services in achieving readiness recovery but has not yet implemented our recommendations. The Navy has since extended its time frame for readiness recovery to at least 2021, but it still has not developed specific benchmarks or interim goals for tracking and reporting on readiness recovery. Navy officials cited several challenges to rebuilding readiness, chief among them the continued high demand for its forces, the unpredictability of funding, and the current difficulty with beginning and completing ship maintenance on time. In January 2017, the President directed the Secretary of Defense to conduct a readiness review and identify actions that can be implemented in fiscal year 2017 to improve readiness. DOD and Navy officials told us that, as part of this readiness review, the Navy prioritized immediate readiness gaps and shortfalls. These officials added that this review would guide the Navy’s investment decisions in future budget cycles, with the intention to rebuild readiness and prepare the force for future conflicts. However, high demand for naval presence will continue to put pressure on a fleet that is already stretched thin across the globe. Looking to the future, the Navy has plans to grow its fleet by as much as 30 percent, but it has not yet shown the ability to adequately man, maintain, and operate the current fleet. These readiness problems need to be addressed and will require the Navy to implement our recommendations—particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges. Chairmen Wilson and Wittman, Ranking Members Bordallo and Courtney, and Members of the Subcommittees, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. If you or your staff have questions about this testimony, please contact John Pendleton, Director, Defense Capabilities and Management at (202) 512-3489 or pendletonj@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Suzanne Wren, Assistant Director; Steven Banovac, Chris Cronin, Kerri Eisenbach, Joanne Landesman, Amie Lesser, Tobin McMurdie, Shari Nikoo, Cody Raysinger, Michael Silver, Grant Sutton, and Chris Watson. Over the past three years, we issued several reports related to Navy readiness cited in this statement. Table 1 summarizes the status of recommendations made in these reports, which contained a total of 11 recommendations. The Department of Defense generally concurred with all of these recommendations but has implemented only one of them to date. For each of the reports, the specific recommendations and their implementation status are summarized in tables 2 through 4. The Navy defines a class A mishap as one that results in $2 million or more in damages to government or other property, or a mishap that resulted in a fatality or permanent total disability. We analyzed data compiled by the Naval Safety Center for fiscal years 2009 through 2017 to provide a summary of major Navy mishaps at sea (see table 5). Report numbers with a C or RC suffix are Classified. Classified reports are available to personnel with the proper clearances and need to know, upon request. Department of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017. Military Readiness: Coastal Riverine Force Challenges. GAO-17-462C. Washington, D.C.: June 13, 2017. (SECRET) Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18, 2017. Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-841. Washington, D.C.: September 7, 2016. Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016. (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May 2, 2016. Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports. GAO-15-329. Washington, D.C.: May 29, 2015. Military Readiness: Navy Needs to Assess Risks to Its Strategy to Improve Ship Readiness. GAO-12-887. Washington, D.C.: September 21, 2012. Force Structure: Improved Cost Information and Analysis Needed to Guide Overseas Military Posture Decisions. GAO-12-711. Washington, D.C.: June 6, 2012. Military Readiness: Navy Needs to Reassess Its Metrics and Assumptions for Ship Crewing Requirements and Training. GAO-10-592. Washington, D.C.: June 9, 2010. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Since January 2017, the Navy has suffered four significant mishaps at sea that resulted in serious damage to its ships and the loss of 17 sailors. Three of these incidents involved ships homeported in Japan. In response to these incidents, the Chief of Naval Operations ordered an operational pause for all fleets worldwide, and the Vice Chief of Naval Operations directed a comprehensive review of surface fleet operations, stating that these tragic incidents are not limited occurrences but part of a disturbing trend in mishaps involving U.S. ships. This statement provides information on the effects of homeporting ships overseas, reducing crew size on ships, and not completing maintenance on time on the readiness of the Navy and summarizes GAO recommendations to address the Navy's maintenance, training, and other challenges. In preparing this statement, GAO relied on previously published work since 2015 related to the readiness of ships homeported overseas, sailor training and workload issues, maintenance challenges, and other issues; GAO updated this information, as appropriate, based on Navy data. GAO's prior work shows that the Navy has increased deployment lengths, shortened training periods, and reduced or deferred maintenance to meet high operational demands, which has resulted in declining ship conditions and a worsening trend in overall readiness. The Navy has stated that high demand for presence has put pressure on a fleet that is stretched thin across the globe. Some of the concerns that GAO has highlighted include: Degraded readiness of ships homeported overseas : Since 2006, the Navy has doubled the number of ships based overseas. Overseas basing provides additional forward presence and rapid crisis response, but GAO found in May 2015 that there were no dedicated training periods built into the operational schedules of the cruisers and destroyers based in Japan. As a result, the crews of these ships did not have all of their needed training and certifications. Based on updated data, GAO found that, as of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews based in Japan—including certifications for seamanship—had expired. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since GAO's May 2015 report. The Navy has made plans to revise operational schedules to provide dedicated training time for overseas-based ships, but this schedule has not yet been implemented. Crew size reductions contribute to sailor overwork and safety risks: GAO found in May 2017 that reductions to crew sizes the Navy made in the early 2000s were not analytically supported and may now be creating safety risks. The Navy has reversed some of those changes but continues to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload—both of which have contributed to some sailors working over 100 hours a week. Inability to complete maintenance on time: Navy recovery from persistently low readiness levels is premised on adherence to maintenance schedules. However, in May 2016, GAO found that the Navy was having difficulty completing maintenance on time. Based on updated data, GAO found that, in fiscal years 2011 through 2016, maintenance overruns on 107 of 169 surface ships (63 percent) resulted in 6,603 lost operational days (i.e., the ships were not available for training and operations). Looking to the future, the Navy wants to grow its fleet by as much as 30 percent but continues to face challenges with manning, training, and maintaining its existing fleet. These readiness problems need to be addressed and will require the Navy to implement GAO's recommendations—particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges. GAO made 11 recommendations in prior work cited in this statement. The Department of Defense generally concurred with all of them but has implemented only 1. Continued attention is needed to ensure that these recommendations are addressed, such as the Navy assessing the risks associated with overseas basing and reassessing sailor workload and factors used in its manpower requirements process.", "document_type": "gao"}
{"report": "This section describes the (1) Kansas City site’s role in providing nonnuclear parts and components, and (2) current and planned nuclear weapons stockpile life extension and alteration efforts that drive workload. The Kansas City site is NNSA’s primary site for procuring or producing nonnuclear parts and components, providing over 80 percent of the parts and components that compose a typical nuclear weapon. The Kansas City site interacts with a number of other NNSA sites that comprise the nuclear security enterprise to support the nuclear weapons stockpile. For example, NNSA’s design laboratories develop precise parts or component specifications or requirements to which production sites, such as the Kansas City site, must conform in procuring or producing these items for use in the nation’s nuclear weapon stockpile. Figure 1 depicts how sites in the nuclear security enterprise interact with each other to design, produce, procure, and assemble nonnuclear components. Components procured or produced by the Kansas City site range from simple items such as nuts and bolts to more complex components such as radars, arming and firing mechanisms, and critical nuclear safety devices meant to prevent accidental detonation. The site delivers approximately 100,000 parts annually, according to our previous report. According to Kansas City site contractor documents, the primary mission of the site is keeping the nation’s nuclear stockpile safe, secure, and reliable by delivering mission-critical mechanical, electrical, and engineered material components and services. NNSA and the Department of Defense (DOD) jointly manage LEPs and Alts under a multi-step process known as the phase 6.X process (see fig. 2). Phase 6.4 of this process, or the production engineering phase, involves activities to adapt designs for production and prepare production facilities, including the Kansas City site. For example, according to a senior NNSA official, activities to adapt designs could include updating product specifications to make parts easier to produce, changing or refining tester limits, and substituting among commercial off-the-shelf parts. The B61-12 LEP and W88 Alt 370 are currently in phase 6.4 (production engineering) of this process and are approaching production. Other LEP efforts are in earlier phases. NNSA describes its plans to meet nuclear weapons stockpile life extension and alteration goals in two key documents that also describe NNSA’s operations and budget estimates for implementing these plans. These documents, which NNSA updates annually, constitute NNSA’s nuclear security budget materials. First, the Stockpile Stewardship and Management Plan is NNSA’s formal means of communicating to Congress information on modernization and operations plans and budget estimates over the following 25 years. Second, NNSA’s annual justification of the President’s budget provides program information and budget estimates for the following 5 years. This 5-year plan is called the Future-Years Nuclear Security Program (FYNSP), and the budget estimates in this plan reflect amounts approved by the Office of Management and Budget. These estimates align with those presented for the first 5 years included in the Stockpile Stewardship and Management Plan. According to the Fiscal Year 2018 Stockpile Stewardship and Management Plan, NNSA and its nuclear security enterprise are conducting a substantial level of activity to ensure the continued credibility of the nation’s nuclear weapons stockpile. Specifically, in fiscal year 2018 NNSA was executing three nuclear weapons LEPs and one major Alt, which are described in table 1. In addition, the 2018 Nuclear Posture Review calls for NNSA to resume a program to replace the W78 warhead in fiscal year 2019; produce a low- yield submarine launched ballistic missile warhead, known as the W76-2; and consider options for providing a nuclear warhead for a potential sea- launched cruise missile. According to NNSA officials and contractor representatives, NNSA developed an early production planning roadmap for implementing the Nuclear Posture Review in late 2018. The conference report accompanying DOE’s fiscal year 2019 appropriations act directed the agency to spend a specified amount on the W78 warhead replacement and W76-2 efforts. Projected workload for the Kansas City site has increased significantly, based on NNSA’s stockpile plan changes from 2012—when the new modern facility was built—to the 2018 stockpile plan update. A comparison between the 2012 and 2018 plans shows that the start of full production for the B61-12 LEP and the W88 Alt were delayed by approximately 2 years, and their completions were delayed by 3 years from initial schedule estimates in 2012. The 2018 plan also accelerates production of the W80-4 LEP by approximately 5 years. Figure 3 below shows the change in the full production timelines for key weapons systems. Using an enterprise risk management approach, the Kansas City site determined that this change in production schedule represented a significant challenge that needed to be better understood and regularly monitored. NNSA contractor representatives at the Kansas City site developed a strategy for analyzing workload to better understand the enterprise risk and ensure the site’s ability to provide an adequate supply of nonnuclear components under variable requirements scenarios. Specifically, in 2015, the Kansas City site increased the frequency of using its “what-if” approach that models standard production work and allows for an in-depth review of labor, equipment, and material capacity information, according to contractor representatives at the Kansas City site. This analytic capability is intended to help ensure that the site contractor can accurately predict future workload demand across multiple scenarios representing different production requirements. Contractor representatives update the model every quarter to reflect the current hardware schedules; testing requirements; and nuclear weapon scope, production quantities, and schedules. These representatives use the model to develop hourly staffing, equipment, and other capacity-related forecasts and plans. For example, contractor representatives evaluate capital equipment capacity quarterly for multiple programs, with a primary focus on equipment that is at or above a two-shift capacity. However, according to these representatives, this approach has not been in place long enough to allow comparison of historical data with forecasts from the model to assess their accuracy. According to site contractor documents and representatives, forecasting data from the what-if models project that, under the 2018 plans, the full- time equivalent workload for production of nonnuclear parts and components will continue to increase annually through 2020. Specifically, the number of production and administrative staff at the time of the relocation to the new facility in 2014 was almost 2,500, based on needs at that time. However, the fiscal year 2018 updates, based on “what-if” capacity analyses, now show that the headcount will need to almost double, growing to more than 4,900 administrative and production staff by 2020. For example, according to 2018 “what-if” capacity analyses prepared by site contractor representatives, personnel dedicated exclusively to two efforts—the B61-12 LEP and W88 Alt 370—will double from 251 full-time equivalents needed in fiscal year 2018 to over 500 during fiscal years 2020 through 2022, as shown in figure 4. Full-time equivalent reflects the total number of regular straight-time hours (i.e., excluding overtime or holiday hours) worked by employees divided by the number of compensable hours applicable to each fiscal year. Annual leave, sick leave, and compensatory time off and other approved leave categories are considered to be “hours worked” for purposes of defining full-time equivalent employment. In this figure, the full-time equivalents reflect workload forecasts for hourly production staff only for the B61-12 LEP and W88 Alt 370. NNSA officials and contractor representatives at the Kansas City site have identified and begun to mitigate several management challenges to meeting the forecasted workload for known future production requirements, but they face uncertainties about future workload demands. Specifically, current mitigation efforts should help the site meet currently forecasted increased workload and capacity demands, according to NNSA analysis and consistent with the program plan included in the Fiscal Year 2018 Stockpile Stewardship and Management Plan. However, the February 2018 Nuclear Posture Review, the results of which were not fully reflected in the Fiscal Year 2018 Stockpile Stewardship and Management Plan, may change requirements and add to the site’s workload because it calls for additional weapons efforts. Kansas City site contractor representatives have identified management challenges that could affect the site’s ability to meet forecasted future workload increases based on 2018 analyses and its Enterprise Risk Management process, and NNSA officials agreed with the challenges the contractor representatives identified. These management challenges include ensuring that the site has (1) sufficient production and administrative office space, (2) up-to-date production equipment, (3) a sufficient workforce with necessary security clearances, (4) capable and reliable external suppliers, and (5) complete weapons designs early enough in development to minimize production changes and delays. The Kansas City site has identified strategies to mitigate the effects of each of these management challenges and has begun taking steps to implement these strategies. NNSA’s Enterprise Modeling and Analysis Consortium NNSA’s Enterprise Modeling and Analysis Consortium is composed of NNSA site representatives and program representatives from NNSA’s Defense Programs offices and is a principal source for NNSA model- informed analytics for decisions about stockpile stewardship program management, policy, and implementation. The consortium conducts modeling based on common data sets and assumptions of current and planned stockpile plans, design alternatives, commodity requirements, and nuclear security enterprise capacity. One of the consortium’s projects includes analyzing the nuclear security enterprise’s capacity to execute the nuclear weapon production program of record to identify any important issues or bottlenecks within or between sites. NNSA analysis concludes that current mitigation efforts initiated at the Kansas City site should support currently planned increased workload and an increased capacity to achieve the 2018 workload forecast. Specifically, according to analyses conducted by NNSA’s Enterprise Modeling and Analysis Consortium, the Kansas City site’s operations will be stressed above current capacity for multiple consecutive years in the future, and current mitigation efforts should reduce risk associated with the elevated workload. In addition, NNSA Kansas City Field Office and headquarters officials said that they have high confidence in the ability of the Kansas City site to forecast and manage infrastructure and staffing needs at the site to support currently planned nuclear weapon stockpile life extension needs over the coming decades. In particular, NNSA’s recent annual performance evaluation reports—which document the contractor’s overall performance for a fiscal year—show that the Kansas City site contractor has delivered the vast majority of hardware on time, within budget, and in a safe and secure environment. Kansas City site officials indicated that ensuring adequate production and administrative office space at the site is a management challenge because the current facility is too small to accommodate future workload. Specifically, forecasted workload demand has grown significantly since the modern facility was built in 2012. The new facility, which accommodates both production and administrative staff, replaced a deteriorating World War II-era facility that was much larger and had significant maintenance and operations costs, according to site contractor representatives. For example, according to NNSA documents, the move reduced the footprint of the site’s production activities from about 3 million square feet to 1 million square feet. According to site contractor representatives, the modern facility was designed to be more flexible in accommodating changes in the production line. For example, equipment can more easily be removed or installed at any location in the facility, to accommodate increased workload, because there is ready access to electrical, ventilation, or other necessary hookups and connections. Figure 5 shows a photo of the new facility. The Kansas City site has identified that it needs an additional 250,000 square feet of production space in 2019 and ultimately a total of an additional 400,000 square feet to support the forecasted workload and associated staff increase. To mitigate the challenge of insufficient production and administrative space to support the forecasted increase in production staff, Kansas City site officials told us they are pursuing multiple short- and long-term strategies. With respect to production space, under the short-term plan the Kansas City site is pursuing a temporary lease of commercial space to allow for the offsite storage of unclassified materials that are currently at the production facility. According to site contractor representatives, this new lease would free up production space at the main site. Further, the site submitted a request to NNSA for leasing an additional 250,000 feet of production space—an increase of almost 30 percent over current production space in the modern facility. Kansas City site contractor representatives stated that the cost of this lease will be based on competitive offers, and they expect the lease to be awarded by summer 2019. With respect to administrative office space, the site has leased more than 150,000 square feet of space since 2014 for the short term at a cost of more than $3.5 million per year. Under the long-term plan, expected to take a minimum of 5 years to implement, the site will complete an analysis of alternatives and submit a combined office and production space expansion project plan to NNSA, which will determine final costs and timelines. Currently, the mission need statement for the project indicates the need for over 400,000 square feet of additional production and administrative space to accommodate the planned increased workload for known production and supporting administrative requirements—an increase of roughly 50 percent over current leased production space. According to Kansas City site contractor representatives, at this early stage, costs would be based on the current Kansas City site lease of $43 per square foot, or roughly $17 million per year. This long-term plan would include space for approximately 1,200 administrative personnel. Kansas City site contractor representatives told us in September 2018 that, depending on the selected long-term solution, the short-term leases for administrative space could either be terminated or modified into long- term arrangements. In 2017, we reported in our high risk list update that federal agencies have not demonstrated that they have the capacity to reduce their reliance on costly leases, particularly high-value leases—defined as $2.85 million and above per year in lease costs—where owning properties would be less costly in the long run. In particular, we reported that the General Services Administration had not implemented our 2013 recommendation to develop a strategy to increase ownership of investments for a prioritized list of high-value leases where ownership would be less expensive in the long run. The Kansas City site’s plans for significantly expanding its production and office space underscores the challenges that exist in meeting these space needs while at the same time limiting overall reliance on costly leases. NNSA and its contractor at the Kansas City site have identified challenges in ensuring that the plant has up-to-date production equipment. Recapitalizing equipment was not a significant part of the move to the new modern production facility, according to site contractor representatives. Information from NNSA’s Master Asset Plan 2017, for example, states that most of the equipment used for producing nonnuclear parts and components at the Kansas City site is nearing or past the end of its useable life—defined as 15 years. Specifically, as shown in figure 6 below, 39 percent of the equipment at the Kansas City site is from 6 to 15 years old, and 27 percent is 16 years old or more, according to the plan. Much of the oldest equipment is located in functional areas used for machining, refurbishment, and dismantlement operations, or for production functions using rubber and plastics. The oldest piece of equipment still maintained is more than 60 years old. In addition to age-related challenges, officials at the Kansas City site identified equipment challenges regarding capacity, based on an equipment workload forecast analysis performed in 2015. For example, according to this forecast, starting late in calendar year 2019, demand for vibration- and shaker-test equipment will become consistently greater than existing capacity, requiring additional equipment. To address these challenges, Kansas City site contractor representatives stated that they evaluate equipment needs across the facility at least annually, based on production and maintenance schedules. The representatives then develop a master list of equipment requests— weighted for risk, age and condition of existing equipment, and whether an external supplier can provide the functional need, among other factors—and ranked according to current and future business needs, according to these officials and contractor representatives. NNSA officials at the Kansas City site and senior contractor representatives then review the master list to determine priorities for equipment purchases. Site contractor representatives are developing a 10-year equipment strategy, expected to be completed in December 2019, to sharpen focus on the future needs of the production facility to support capacity and capability, according to NNSA officials at the Kansas City site. Budgets for equipment procurements at the Kansas City site vary from year to year and are subject to change. According to Kansas City site contractor representatives, the site is regularly adjusting and communicating its equipment needs to reflect the results of equipment evaluations to ensure that the funding NNSA will request for equipment procurement is adequate. For example, according to Kansas City site contractor representatives, the site originally received $4.5 million in fiscal year 2018 to fund planned equipment procurements and received an additional $13.4 million from NNSA in April 2018 to move fiscal year 2019 work scope into fiscal year 2018. The remaining funding available is $11.6 million, which covers the remaining fiscal year 2019 work scope. Site plans for fiscal year 2018 specifically included capital equipment replacement and upgrades needed for parts assembly, electronics and fabrication, and non-destructive testing of nonnuclear parts and components. For fiscal year 2019, planned procurements include equipment for testing of parts and components, rubber- and plastics-related production, precision milling, machining and welding, paint and heat treatment, fabrication, and chemical processing. NNSA officials at the Kansas City site stated that planned budgets for fiscal years 2019 through 2023— which currently include $8 million in equipment procurements and $2 million for area modifications for each of the 5 years—are subject to adjustment based on ongoing evaluation of site equipment needs. These estimates could change, depending on the outcome of the 10-year equipment strategy, according to NNSA Kansas City site officials and contractor representatives. In addition to new equipment procurements, the Kansas City site has developed other mitigation plans also focused on equipment capacity risks. For example, these plans include options such as better allocating equal workload amongst similar equipment, and additional batching of material, according to Kansas City site officials. The batching of material processed by a certain set of equipment increases efficiencies because it consolidates material into larger portions, which minimizes inefficiencies associated with starting and stopping the equipment multiple times, according to NNSA contractor representatives. Kansas City site officials and contractor representatives have identified three management challenges in ensuring the site can achieve a sufficient contractor workforce to meet forecasted future workload: (1) retention of existing staff, (2) recruiting skilled staff in a competitive job market, and (3) obtaining security clearances for new staff in a timely manner. To address these challenges, the site has been taking actions to retain existing staff, hiring and recruiting hundreds of new staff, and working to speed the security clearance process, according to site contractor representatives. Kansas City site contractor representatives said that retaining existing staff is challenging because the majority of the workforce falls into either of two categories: (1) recent, younger hires who have a high attrition rate, or (2) staff eligible to retire. More than half (53 percent) of all staff have 5 years or less of service working at the site (see fig. 7). In addition, approximately 32 percent of the Kansas City site’s contractor staff are eligible to retire. Figure 8 shows the distribution of staff by age at the Kansas City site, with the highest number in their late 50s and the next highest number in their late 20s. According to Kansas City contractor representatives and NNSA documents, site strategies for retaining newly hired and retirement-eligible staff include improvements in rewards and recognition programs, along with an emphasis on pay for performance. Contractor representatives also noted that the site offers telecommuting from a home office for those approved, flexible work hours—such as working 9-hour days to allow for a day off every 2 weeks—and flexible work options, including part-time employment. To better retain retirement-eligible staff the site has also created talking points to better prepare managers to discuss retirement and delayed retirement, covering topics such as the potential for reduced hours or returning to work after retirement, consistent with certain restrictions and policies. Because of these steps, according to Kansas City contractor representatives, many retirement-eligible staff are electing to continue to work; projected retirements are less than 20 percent of those eligible for retirement, based on actual retirement data for years 2013 to 2017. For example, although an employee may be eligible to retire at age 55 with at least 25 years of service, contractor representatives we interviewed noted that most retirements on average are at age 62 with 30 years of service. Kansas City site contractor representatives we interviewed have identified a management challenge in recruitment because of a gap between the critical technical skills needed at the site and those available in the local labor market. In particular, they cited high demand for skilled labor in the Kansas City area and low unemployment in the labor market at 4 percent, which can make it difficult to fill positions. Contractors at the site said that filling skilled positions can take an average of 58 days and that certain positions, such as electrical engineers and toolmakers, are particularly difficult to fill. Kansas City site contractors noted that they have taken actions to mitigate this challenge. These actions, which contractor site representatives have characterized as largely successful, include participation in and development of university relations programs, involvement in research and development partnerships and consortiums, recruitment from area trade schools and technical schools, and expanding the market area in which the site searches for recruits. For example, contractors noted the site’s participation in a service academy career conference in San Diego, California, in August 2018. They also said they are considering ways to recruit skilled positions that are in high demand, such as toolmakers, by offering to cover relocation expenses for newly hired workers. They further noted that the site maintains an internship program and has plans to double the number of interns, from 35 in 2018 to 71 in 2019, as a strategy to increase talent in critical areas. According to Kansas City site contractor representatives, the site increased the total number of contractor staff by about 65 percent in a 4- year period, from 2,492 in August 2014 to 4,134 in August 2018, and is expected to continue to increase to nearly 5,000 staff by August 2019. Figure 9 shows the change in number of Kansas City site staff during the last fiscal year for which data are complete, and the reasons for the changes, as reported to us by site contractor representatives. To meet forecasted workload increases, the site plans to continue to increase staff in each year through 2020, with the numbers of planned annual hires ranging from 800 to more than 1,000 staff, according to site contractor representatives. Obtaining Timely Security Clearances for New Staff Kansas City site officials identified a challenge in obtaining appropriate, high-level security clearances for new staff on a timely basis. Contractor representatives we interviewed noted that 100 percent of staff who directly contribute to the design, disposition, fabrication, inspection, scheduling, and protection of products and services related to nuclear weapons require a Q clearance. They further noted that the large majority of support functions also require a Q clearance. As we reported in March 2018, the National Background Investigation Bureau had a backlog of more than 700,000 investigations as of February 2018. As we reported, this backlog was caused in part by two 2015 breaches of Office of Personnel Management personnel records. We designated the government-wide personnel security clearance process as a high-risk area in January 2018. Of this national backlog, 3,609 were investigations of Q applicants. As of April 2018, over 790 Kansas City site personnel were awaiting Q clearances, according to Kansas City site contractor representatives. According to these representatives, historically, the Bureau took 80 days, on average, to investigate most Q applicants prior to the 2015 breaches; however, as of February 2018, the Bureau took 316 days, on average, to do so. According to Kansas City site contractor representatives, the Bureau is not projecting normal operations until late 2019 or early 2020. From fiscal year 2017 through March 2018, 778 Q clearances were granted for the Kansas City site, with an average of 335 days at the Bureau and another 27 days at NNSA to make a final determination. According to site contractor representatives, these long wait times may contribute to less than full employee utilization at the site. For example, they noted that fully cleared staff are able to perform roughly 38 percent more productive work than uncleared staff, and that difference amounts to approximately 695 direct labor hours of productive work per person in a year. The Kansas City site is taking steps to mitigate the challenges associated with the Bureau’s backlog. For example, the site is hiring hourly production factory staff well in advance of the full production schedule for the B61-12 and W88 Alt 370 weapons systems in fiscal year 2019, in part to ensure these staff will be cleared in time to meet workload demands, according to site contractor representatives. Site contractor representatives told us that they have also worked to expedite the issuance of clearances by working with local Office of Personnel Management officials on interviews for clearance cases. In addition, the site has worked to ensure that new staff can be trained and productive while awaiting clearances. Specifically, according to contractor representatives, the site has established segregated training space for uncleared workers; created security plans and escorting practices that allow uncleared staff supervised access into secure areas to perform unclassified work, where possible; and temporarily converted some production space into areas where uncleared staff can perform unclassified hand assembly work. In addition, the Kansas City site has requested 339 interim Q clearances, 267 of which had been approved, as of January 2018. DOE’s order that establishes requirements for processing and granting security clearances allows for interim security clearances to be issued under exceptional circumstances and when such action is clearly consistent with agency and national interests. DOE considers interim clearances to be temporary measures pending completion of the investigation, which must be in process when the interim clearance is granted. As of September 2018, less than 1 percent of interim clearances approved for the Kansas City site had been cancelled once full investigations were completed, according to site contractor representatives. Kansas City site contractor representatives identified challenges regarding the site’s monitoring and management of external suppliers’ capacity and skills, and other challenges—such as ensuring that suppliers are willing to establish long-term partnerships with the Kansas City site— that could affect supply chain risk. Since the site procures about 65 percent of its nonnuclear components from external suppliers, these management challenges are highly important, according to site contractor representatives. For example, disruption to the established supply chain due to insufficient capacity, skills, or a supplier’s decision not to do business with the Kansas City site can result in production delays. According to Kansas City site contractor representatives, delays in such instances are possible because site contractor representatives would need to take additional time to either replace the lost supplier or develop its own production line to produce the parts in-house at the Kansas City site. To help mitigate challenges regarding the site’s overall monitoring and management of suppliers’ capacity, skills, and other risks, the Kansas City contractor representatives said that they developed two key analytic tools. These tools are a Supplier Capacity Analysis Tool, developed in 2018, and a Supplier Overall Risk Tool, which has been evolving since 2015, according to these representatives. According to Kansas City site officials, contractor representatives use these analytical tools to evaluate over 230 suppliers on a quarterly basis and to evaluate the top 39 suppliers monthly. The evaluations assess factors such as operational performance and financial health, whether a supplier is the sole commodity supplier, and a supplier’s willingness to partner with the site. To help mitigate supplier capacity risks, the site develops plans, using information from the supplier evaluations, to ensure sufficient external supplier capacity, according to Kansas City site contractor representatives. For example, Kansas City site contractor representatives used the supplier capacity analysis tool to identify capacity gaps for at- risk commodities, including machine parts, and to develop gap-closure plans, according to these contractor representatives. As a result of these plans, contractor representatives certified two new suppliers and entered into agreements with several other suppliers to provide reserve capacity. In addition, NNSA’s Enterprise Modeling and Analysis Consortium conducted alternate analysis on the Kansas City site’s workload capacity that corroborated the Kansas City site’s conclusion that mitigation steps being taken at the Kansas City site, including ensuring adequate external supplier capacity, should address increased workload concerns. To help mitigate risks regarding suppliers’ skills in working with the Kansas City site, site contractor representatives also said that the site has taken steps to help train new suppliers. For example, site contractor representatives perform multiple on-site training exercises within the first 6 months of new supplier relationships. These exercises educate the suppliers on purchase order requirements, terms, drawing definitions, and quality expectations using a documented, comprehensive, nine-step process, according to site contractor representatives. To help mitigate risks regarding suppliers’ willingness to establish long- term partnerships with the Kansas City site, site contractor representatives told us that they have begun taking steps to encourage and foster long-term partnerships with suppliers. According to these representatives and a study NNSA conducted of lessons learned from an essentially complete warhead life extension program, facilitating effective supply chains for the nuclear enterprise requires enduring business relationships with suppliers of commercial off-the-shelf components. Because specifications for weapons components and materials are exacting and quantities required are frequently low, many potential suppliers are reluctant to expose themselves to the risk of production for a niche market, according to Kansas City site officials and contractor representatives. To mitigate reluctance to partner with the Kansas City site, contractor representatives stated that the site has developed points of contact with each supplier. These points of contact work toward establishing and maintaining a collaborative partnership in which production forecasts are routinely shared and performance metrics are discussed to foster continuous improvement when needed. In addition, Kansas City site contractor representatives stated that the site is taking steps to develop relationships with other sites to address site- wide challenges regarding supplier evaluations, which can contribute to risks such as lower efficiency and effectiveness and higher costs. The site is taking this action in response to a July 2018 DOE Office of Inspector General (OIG) report that identified the potential duplication of supplier evaluations among NNSA sites, including the Kansas City site, resulting in lower efficiency and effectiveness, and higher costs. The OIG report noted that the need to minimize duplication of efforts will become even more important when considering the additional demands on production related to upcoming weapon refurbishment efforts, which are expected to increase the number of supplier quality auditors needed by the Kansas City site. The OIG recommended that to maximize efficiencies and effectiveness, NNSA should work with contractors, including the Kansas City site, to assess ways to improve the efficiency of supply chain management activities, among other things. Steps the Kansas City site has taken in response to this OIG report include establishing a point of contact with Sandia National Laboratories, which is leading an overarching effort across the nuclear security enterprise to address duplication concerns, according to site contractor representatives. In addition, a December 2018 report to the President by DOD, in consultation with other agencies, identified supply chain risks in the government’s manufacturing and defense industrial base, including at DOE and NNSA sites, and recommended that DOE establish an Industrial Base Analysis and Sustainment program to address risks within the energy and nuclear sectors. According to NNSA officials at the Kansas City site, they are still determining how it will respond to this recommendation. With increasing concurrency of production forecasted, Kansas City contractor representatives have identified challenges regarding their need to minimize weapons design changes during production, which in the past contributed to cost increases and schedule delays for the W76-1 life extension. According to Kansas City contractor representatives and NNSA officials, at least two general weapons design issues can contribute to overall schedule pressure at the Kansas City site. For example, delays due to design changes intended to make parts easier to produce can exacerbate schedule delays by compressing the overall weapons refurbishment schedule. In addition, design changes are undertaken for other reasons, such as in response to weapons testing results. First, according to NNSA’s B61-12 program manager, even though both design laboratories and production site team members advocate for the design changes that make parts easier to produce, the enterprise-wide impact of these changes late in the design process may, as site contractor representatives noted, impact the LEP’s schedule and may require more resources and plant/vendor capacity to meet the schedule. According to this official, given the resource demands of simultaneously occurring major weapons refurbishments, such as the B61-12 and W88 Alt 370, schedule impacts can be magnified and have caused justifiable concern with leadership at NNSA, the design laboratories, and the Kansas City site. Second, Kansas City site officials expressed concern that some component design requirements continue to change late in the production development phase, sometimes because of test results, which creates tension between improving the design and stabilizing production requirements and processes in preparation for full-scale production. Kansas City site officials stated that such design changes pose an ongoing management challenge. Specifically, time lost because of design delays in the earlier stages of weapons’ design and development often needs to be recovered later, during time allotted for production, to meet established delivery schedules, according to Kansas City site officials. Such delays have triggered the need for schedule recovery plans at the Kansas City site in the past. In response to the concerns, NNSA has led several mitigation steps to address schedule risk as both the B61-12 and W88 Alt 370 enter the final stages before full production begins, according to NNSA’s B61-12 program manager. For example, NNSA revised its baseline change process for the B61-12 and W88 Alt 370 to require all changes, including production-related changes, to be reviewed, according to NNSA’s B61-12 program manager. Specifically, NNSA implemented a change management board with several tiers for review and approval of proposed design changes based on the type of change, and potential impact to program milestones, cost, and risk. Varying levels of required review and approval, depending on the change, can include NNSA production and design agency officials, senior site managers, B61-12 or W88 Alt 370 project officers, or other senior managers at DOD and NNSA. The intent, according to this official, is to screen all the changes and determine if they are really needed and when, and if site-wide resources and schedules can support the changes. In addition, Kansas City site contractor representatives said that they have developed management strategies to help mitigate production- related impacts of design changes, such as adding work shifts to increase production output. For example, an August 2017 analysis by Kansas City site contractor representatives shows the use of three shifts—both partial and full shifts—to meet workload demand in multiple functional areas, including production of cables, high voltage assembly, encapsulation and welding, arming and firing mechanisms, machining, and environmental and pressure laboratories. Using additional shifts can help the Kansas City site recover from schedule delays that might result from late design changes, according to site contractor representatives. Moreover, lessons learned from the W76-1 LEP—which will complete production in 2019— are helping to improve coordination between production sites and design agencies, specifically through increased coordination earlier in the weapon development process, according to Kansas City site contractor representatives. While current efforts to mitigate the challenges Kansas City site contractor representatives have identified are expected to help address the site’s anticipated future workload, as discussed previously, this workload could further increase if certain 2018 Nuclear Posture Review policy statements, based on nuclear weapons stockpile studies now underway in response to the review, result in changes to production requirements. For example, the Nuclear Posture Review called for modifying existing sea-launched ballistic missile warheads to provide a low-yield option; advancing a program to replace the W78 Intercontinental Ballistic Missile warhead by 1 year; the study of a sea-launched, nuclear-armed cruise missile; and sustaining the B83 strategic nuclear bomb past its currently planned retirement date. NNSA and DOD are developing studies and implementation plans for the 2018 Nuclear Posture Review, but it is too soon to know to what extent these studies and plans may affect the Kansas City site. One early indication of how implementing the 2018 Nuclear Posture Review may affect the Kansas City site is that, according to the Fiscal Year 2019 Stockpile Stewardship and Management Plan, concurrent production of the W80-4 LEP and the W78 replacement LEP is now expected to extend into the 2030s. In addition, the 2019 plan anticipates that alts may be needed to sustain the B83, if the weapon system remains in the stockpile for long enough. We concluded in an April 2017 report that the new Nuclear Posture Review comes during a particularly challenging decade for NNSA’s nuclear modernization efforts, as the agency plans to simultaneously execute at least four nuclear LEPs along with major construction projects, such as efforts to modernize NNSA’s uranium and plutonium capabilities. We further concluded that NNSA’s modernization budget estimates for fiscal years 2022 through 2026, which reflected past program plans, may exceed the funding levels programmed for modernization in future budgets, raising affordability concerns. Moreover, we concluded that NNSA had not addressed a projected “bow wave” of future funding needs—that is, an impending and significant increase in requirements for additional funds—or the mismatch between potential funding needs and potential funding available even before the Nuclear Posture Review was completed. We recommended that NNSA include an assessment of affordability of NNSA’s portfolio of modernization programs in future versions of the Stockpile Stewardship and Management Plan—for example, by presenting options NNSA could consider to bring its estimates of modernization funding needs into alignment with potential future budgets. NNSA did not explicitly agree or disagree with our recommendation, but we will continue to monitor any action NNSA takes in response to the recommendation. In addition to addressing affordability concerns, NNSA has been advised to stabilize long-term workload at operating sites. A congressional advisory panel examining the governance of the nuclear security enterprise issued a report in November 2014 recommending, among other things, actions intended to stabilize long-term workload at operating sites. In particular, it recommended that NNSA, working with DOD, create a long-term operating plan to support the nation’s warhead modernization strategy; it further specified that this plan should be designed to create a relatively stable, long-term workload. The panel’s report stated that a stable baseline of design, engineering, and production is needed to make effective use of the available capabilities in the weapons complex, provide the basis for sizing and modernization of the weapons complex, and identify potentially conflicting demands on available capabilities. While NNSA has taken some actions in response to this recommendation, an expert panel concluded in March 2018 that NNSA’s overall response had been inadequate and called for NNSA to develop, among other things, an integrated strategic plan for the entire nuclear security enterprise. The panel concluded that, given NNSA’s expected increase in workload across the nuclear weapons complex, and the new 2018 Nuclear Posture Review uncertainties, NNSA’s ongoing implementation of this and other recommendations made by the Panel over the next several years will take on additional importance. We provided a draft of this report to NNSA for its review and comment. NNSA provided technical comments, which we incorporated into this report, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Administrator of the National Nuclear Security Administration, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. The Senate committee report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision for us to review the Kansas City site’s staffing plans and capabilities to meet national security requirements. Our report examines (1) workload forecasts for the Kansas City site since 2012, and (2) management challenges the Kansas City site has identified for achieving the forecasted workload and actions the site has taken to mitigate these challenges. To examine workload forecasts for the Kansas City site since 2012, we visited the site, obtained and reviewed workload documents, and interviewed officials from the National Nuclear Security Administration’s (NNSA) Kansas City site office and headquarters offices, and NNSA contractor representatives at the site. In particular, we obtained information on the Kansas City site forecasted workload based on fiscal years 2012 and 2018 Stockpile Stewardship and Management Plans (SSMP), comparing full production schedules, including upcoming B61-12 Life Extension Program (LEP) and W88 Alteration (Alt) 370 work. Because the design and capacity of the modern production facility, completed in 2012, was based largely on the 2012 SSMP and previous plans, we used this as the baseline plan. We then compared nuclear weapons systems LEP and Alt schedules in the 2012 SSMP with the 2018 SSMP because Kansas City contractor representatives told us that plans and associated workload had changed significantly by 2018. In addition, we reviewed Kansas City contractor information provided by the “what-if” capacity analyses tool, including graphs and charts depicting workload for each weapons system undergoing LEPs or Alts. Whenever possible, we validated or corroborated contractor-forecasted data on workload and facility capacity by reviewing other sources such as NNSA’s Enterprise Modeling and Analysis Consortium analysis and conclusions and SSMP information. To examine management challenges the Kansas City site has identified for achieving the forecasted workload, and any actions the site has taken to mitigate these challenges, we visited the Kansas City site, obtained and reviewed documentation, and interviewed NNSA and contractor officials who identified management challenges in five areas: ensuring that the site has (1) sufficient production and administrative office space, (2) up-to-date production equipment, (3) a sufficient workforce, (4) capable and reliable external suppliers, and (5) complete weapons designs early enough in development to minimize production changes and delays. We selected these five areas for review based on NNSA officials’ and contractor representatives’ identification of such challenges as being the most significant at the Kansas City site. To corroborate information on management challenges and associated mitigation action(s) provided by the Kansas City site, we conducted interviews with additional sources, reviewed alternative documentation or analyses, and obtained examples of the specific action(s) being taken, when available. For example, regarding the first management challenge of ensuring adequate production and administrative office space, we reviewed Kansas City site information, including information on space in the modern facility, the mission needs statement for expanding the site’s space, and NNSA budget justifications for fiscal years 2018 and 2019. We also obtained information on short- and long-term plans for meeting forecasted workload demands. Regarding the second management challenge—ensuring it has up-to- date production equipment—we reviewed Kansas City site information and information from an alternative source. Specifically, we reviewed NNSA’s 2017 Master Asset Plan, which provided additional information and alternate analyses concerning the age of the Kansas City site’s production equipment. Regarding the third management challenge— ensuring a sufficient, capable, and security-cleared workforce—we reviewed both site-level information and information from other sources, including from NNSA and the Department of Energy (DOE). For example, we reviewed NNSA’s Fiscal Year 2018 Stockpile Stewardship and Management Plan, which also includes workforce information and analyses. In addition, we asked the Kansas City site contractor representatives and NNSA officials for additional clarification and detail concerning the management challenges and mitigation actions, as well as specific examples to support their statements. For issues related to the clearance process, we contacted DOE officials to obtain information on DOE supplemental guidance for interim clearance mitigation steps. To confirm the accuracy of staffing-related information provided by Kansas City site contractor representatives, we obtained information from these representatives on how the site performed certain calculations, such as determining the change in number of Kansas City site staff; number of Kansas City site staff, by years of service; and distribution of Kansas City staff, by age. We reviewed the various formulas Kansas City contractor representatives used in preparing its analyses in order to understand the logic used in making these determinations. Furthermore, we validated that these calculations were accurate by independently performing the calculations to see if our results matched the site’s results. For information concerning the fourth management challenge—ensuring capable and reliable external suppliers—we interviewed a senior NNSA headquarters official overseeing NNSA’s Enterprise Modeling and Analysis Consortium, which conducted alternate analyses on the Kansas City site’s workload capacity, equipment, and workforce. The Consortium corroborated the Kansas City site’s conclusion—that mitigation steps being taken at the Kansas City site should address increased workload concerns. Regarding the fifth and last management challenge—ensuring complete weapons designs early in development to ensure that production changes and delays are kept to a minimum—we reviewed the W76 lessons learned report, which also describes design completion issues affecting the Kansas City site. In addition, we interviewed NNSA’s B61 program manager to obtain additional perspective on design-related challenges facing upcoming B61-12 refurbishments. We conducted this performance audit from November 2017 to April 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Allison B. Bawden, (202) 512-3841 or bawdena@gao.gov. In addition to the individual named above, Jonathan Gill (Assistant Director), Christopher Pacheco (Analyst in Charge), and Sophia Payind made significant contributions to this report. Also contributing to this report were Elizabeth Dretsch, R. Scott Fletcher, Thomas Gilbert, Richard Johnson, Cynthia Norris, Jeanette Soares, and Sara Sullivan.", "summary": "Modernization of the nation's nuclear stockpile depends on timely procurement and production of nonnuclear parts and components. Such parts and components make up over 80 percent of the items in a nuclear weapon. The Kansas City site procures or produces most of these parts, under NNSA oversight. In fiscal year 2012, the site completed construction of a modern production facility. The new facility was expected to accommodate rising future workload demands, based on the forecasts that were current in 2012, according to Kansas City site contractor representatives. The Senate committee report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the Kansas City site's staffing plans and capabilities to meet national security requirements. This report examines (1) workload forecasts for the site since 2012, and (2) management challenges the site has identified for achieving the forecasted workload, and actions the site has taken to mitigate these challenges. GAO reviewed NNSA and contractor documents from 2012 through 2018 relevant to workload changes, and associated workload capacity, including information on infrastructure, equipment, and business processes—as well as personnel data. GAO also interviewed NNSA program and field officials and contractor representatives. Workload forecasts have significantly changed at the National Nuclear Security Administration's (NNSA) primary site for procuring or producing nonnuclear parts and components of nuclear weapons since the site's modern production facility was built in 2012. Specifically, workload projections made by the contractor operating the site, known as the Kansas City National Security Campus (Kansas City site), has increased significantly from forecasts used in planning the site's new production facility. More recent forecasts show that to meet workload requirements, production and administrative staff will need to almost double by 2020 compared to 2014 levels. For example, workload to modernize the B61-12 and W88 weapons systems will double during fiscal years 2020 through 2022. According to NNSA officials and contractor staff, the site has identified and begun to mitigate management challenges to meeting future workload, including: Ensuring sufficient production and office space. Because the current space is not sufficient for the increase in projected workload, the site is leasing additional space until long-term solutions, currently in planning, can be implemented. Updating production equipment. To update aging production equipment, the site is developing a 10-year equipment strategy, among other things. Retaining and recruiting a sufficient workforce. The site has offered rewards and benefits to retain existing staff, about a third of whom are eligible to retire. It is also recruiting skilled new staff in tight labor markets and seeking to expedite security clearances for them. Ensuring adequate external supplier capacity. The site procures about 65 percent of its nonnuclear components from external suppliers. The site is assessing capacity and risk of existing suppliers and developing new ones. Current mitigation efforts should help the site meet currently planned increased workload and capacity demands, according to contractor and NNSA analyses. However, the February 2018 Nuclear Posture Review—conducted by the Department of Defense under the direction of the President to determine the role of nuclear weapons in the nation's security strategy—may change requirements and add to the site's workload in ways not yet fully known because studies and plans in response to the review are not fully complete.", "document_type": "gao"}
{"report": "In the United States, election authority is shared by federal, state, and local officials, and election administration is highly decentralized and varies among state and local jurisdictions. Congressional authority to regulate elections derives from various constitutional sources, depending upon the type of election. Federal election laws have been enacted that include provisions pertaining to voter registration, protecting the voting rights of certain minority groups, and other areas of the elections process. States regulate various election activities, including some requirements related to these federal laws, but generally delegate election administration responsibilities to local jurisdictions. Congress has passed legislation in major functional areas of the voting process. For example, HAVA includes a number of provisions related to voting equipment and other election administration activities, including, for instance, requiring at least one voting system equipped for persons with disabilities at each polling place in federal elections. After HAVA was enacted, Congress appropriated more than $3 billion for the EAC to distribute to states to make election administration improvements, such as the replacement of punch card and mechanical lever voting equipment. In addition to HAVA, federal laws have been enacted in other areas of the voting process. For example, the Voting Rights Act of 1965, as amended, contains, among other requirements, provisions designed to protect the voting rights of U.S. citizens of certain ethnic groups whose command of the English language may be limited. In accordance with the act, covered states and jurisdictions must provide written materials—such as ballots or registration forms—in the language of certain “language minority groups” in addition to English, as well as other assistance, such as bilingual poll workers. The responsibility for the administration of elections resides at the state and local levels. States regulate various election activities, such as absentee and early voting requirements and Election Day procedures, but generally delegate election administration responsibilities to local jurisdictions. Some states have mandated statewide election administration guidelines and procedures that foster uniformity in the ways local jurisdictions conduct elections, including the types of voting equipment used. Other states have guidelines that generally permit local election jurisdictions considerable autonomy and discretion in the way they run elections. Although some states bear some election costs, including those associated with voting equipment, local jurisdictions generally pay for most aspects of election administration. Unless states require otherwise, local jurisdictions generally have discretion over activities such as training election officials and, in most states, over the selection and purchase of voting technology. Among other things, local election officials register eligible voters; design ballots; educate voters on how to use voting technology; provide information on the candidates and ballot measures; arrange for polling places; recruit, train, organize, and mobilize poll workers; prepare and test voting equipment for use; and count ballots. States have established alternatives for voters to cast a ballot other than at the polls on Election Day, including absentee voting and early voting. All states and the District of Columbia have provisions allowing voters to cast their ballots before Election Day by voting absentee, with variations on who may vote absentee, whether the voter needs to provide an excuse for requesting an absentee ballot, and the time frames for applying for and submitting absentee ballots. Some states also permit registered voters to apply for an absentee ballot on a permanent basis so that those voters automatically receive an absentee ballot in the mail prior to every election without providing an excuse or reason for voting absentee. In addition to absentee voting, some states allow early in- person voting. In general, early voting allows voters from any precinct in the jurisdiction to cast their vote in person without providing an excuse, before Election Day either at one specific location or at one of several locations. Further, three states and a number of local election jurisdictions in other states conduct vote-by-mail elections, wherein ballots are automatically sent to every eligible voter. For in-person voting on Election Day, election authorities subdivide local election jurisdictions into precincts. Voters generally cast their ballots at the polling places for the precincts to which they are assigned by election authorities. In addition, some states provide jurisdictions the discretion to allow voters to cast their ballots at vote centers, which are polling places at which any registered voter in the local election jurisdiction may vote on Election Day, regardless of the precinct in which the voter resides. Within the polling place, poll workers check in voters and determine their eligibility to vote by verifying their registration using voter lists or poll books—a list of individuals eligible to vote within the voting precinct or local jurisdiction. After checking the voters in, poll workers direct them to a voting booth to mark their electronic or paper ballots, and then voters submit the ballots for counting. The manner in which votes are cast and counted can vary depending on the voting method and technology employed by the jurisdiction. Following the close of the polls on Election Day, election officials and poll workers complete steps such as securing equipment and ballots, transferring paper ballots or electronic records of vote counts to a central location for counting, and determining the outcome of the election. Votes counted include those cast on Election Day, absentee ballots, early votes (where applicable), and valid provisional ballots. While preliminary results are available usually by the evening of Election Day, the certified results are generally not available until a later date. The EAC has responsibility for developing the voluntary voting system guidelines and overseeing the testing and certification of voting systems based on these guidelines. The EAC works in conjunction with NIST and the Technical Guidelines Development Committee (TGDC) to develop the voluntary guidelines. According to the EAC, these guidelines are a set of specifications and requirements against which voting systems, including hardware and software, can be tested to receive a certification from the EAC. According to NIST, the guidelines are intended to ensure that federal testing provides assurance to state and local election officials that the voting systems meet a defined set of requirements. The EAC testing and certification program verifies that voting systems comply with basic functionality, accessibility, and security capabilities established by the voluntary guidelines. Typically, voting system vendors submit their systems to the EAC for testing and certification and the systems are evaluated by EAC-accredited voting system test laboratories against the guidelines. These laboratories make recommendations regarding certification to the EAC. According to the EAC, an EAC-certified voting system means that the voting system has been tested by a federally accredited test laboratory and complies with the guidelines. According to the EAC, prior to its establishment and the creation of its voluntary voting system guidelines, the first set of federal voluntary Voting System Standards were adopted in 1990 by the Federal Election Commission. The National Association of State Election Directors voluntarily assumed the role of accrediting voting system test laboratories and certifying voting systems to the federal standards. In 2002, the Federal Election Commission adopted a new version of the federal standards. After the EAC’s creation, in 2005, the EAC developed and adopted the third iteration of federal standards, in accordance with HAVA, and the standards were renamed the Voluntary Voting System Guidelines (VVSG). This third iteration of federal voting system guidelines was referred to as the 2005 VVSG or VVSG 1.0, as it is called today. According to the EAC, VVSG 1.0 increased security requirements for voting systems and were intended to expand access, including opportunities to vote privately and independently, for individuals with disabilities. In 2006, the National Association of State Election Directors terminated its voting system testing program and subsequently, in 2007, the EAC launched its own testing and certification program. In March 2015, a fourth iteration of the voluntary guidelines was adopted by the EAC, referred to as VVSG 1.1. According to the EAC, VVSG 1.1 clarified the guidelines to improve testability by testing laboratories, among other updates, and focused on areas that could be improved without requiring significant changes to the testing and certification process. In January 2016, the EAC adopted an implementation plan for VVSG 1.1 whereby all new voting systems being tested for certification would be required to be tested against the VVSG 1.1 beginning on July 6, 2017. As of November 2017, no voting systems have been certified using VVSG 1.1. The EAC, NIST, and TGDC are in the process of developing the next iteration of the voluntary guidelines (known as VVSG 2.0), and these guidelines are expected to be issued in late summer 2018. Typically, a lag exists between when guidelines are issued and when they are used for testing and certification. EAC officials stated that it has generally taken about 18 months before the guidelines are ready for use for testing voting systems. This is due in part to the need for the voting system test laboratories to be reaccredited to test to the new voluntary guidelines by the EAC. According to EAC officials, after the guidelines are approved for use, it typically takes 2 to 4 years before voting system vendors can develop voting systems that are ready for testing and certification. Participation in the EAC testing and certification program is voluntary. Each state determines its own standards for voting systems in statute or administrative regulation, which can be based on the voluntary guidelines established by the EAC. Specifically, most states require some level of participation in the EAC testing and certification program as mandated by their state laws or regulations. As of December 2017, 13 states require federal certification of their voting systems, 24 states and the District of Columbia require testing by a federally accredited laboratory or require testing to federal voting system standards, and 13 states have no federal requirements. Some states have their own voting system standards and conduct their own testing and certification to these standards, either in addition to or as an alternative to the federal voluntary guidelines. Vendors that want to supply their voting systems to local jurisdictions and states must comply with state requirements. See appendix II for federal certification and testing requirements by state, including the associated statutes and regulations we reviewed. According to our analysis of the predominant type of equipment used to process the largest number of ballots during the 2016 general election, jurisdictions using optical/digital scan equipment represented the largest estimated share of the population nationwide, followed by jurisdictions using direct recording electronic (DRE) equipment. Specifically, on the basis of our local election jurisdiction survey, we estimate that jurisdictions with about 63 percent of the population nationwide used optical/digital scan equipment as their predominant voting equipment during the election, while jurisdictions with an estimated 32 percent of the population nationwide used DREs. Jurisdictions with less than 1 percent of the population nationwide used paper hand-counted ballots. See figure 1. Within the optical/digital scan equipment category, the most widely used model of optical/digital scan equipment was the precinct count optical/digital scan, with jurisdictions having an estimated 46 percent of the population nationwide using it as their predominant voting equipment. Figure 2 shows the predominant types of voting equipment that were used by jurisdictions during the 2016 general election, broken out by model of equipment used. While many jurisdictions predominantly used one type of voting equipment, some reported using multiple types. Jurisdictions may choose to use more than one type of equipment as a means to process different types of ballots such as absentee or provisional or to provide accessibility options for voters with disabilities. Overall, we estimate that jurisdictions with about 59 percent of the population nationwide used only one type of equipment during the 2016 general election, while jurisdictions with about 37 percent of the population nationwide used multiple types of equipment during the election. Jurisdictions that used two types of equipment are estimated to have about 30 percent of the population nationwide, while those that used more than two types of voting equipment had approximately 6 percent of the population nationwide. See figure 3 for the types of voting equipment used. According to results from our survey of local election jurisdictions, jurisdictions monitored the performance of their voting equipment during the 2016 general election through a variety of methods, such as equipment testing, performance measurement and tracking of malfunctions, and postelection audits and recounts. Such monitoring can provide information to jurisdictions about how their equipment is functioning and help ensure the accuracy of the outcomes of elections and address any identified issues or problems. Results from our survey of local election jurisdictions indicate that the extent to which jurisdictions tested their voting equipment varied by test type. Key types of voting equipment testing include acceptance testing, logic and accuracy testing, and parallel testing. Acceptance testing verifies that new equipment or any equipment that has been outside election administrators’ control (e.g., for repair) conforms to the purchase agreements and is identical to equipment that was tested and certified by state or federal testing organizations. According to our local jurisdiction survey results, jurisdictions with an estimated 49 percent of the population nationwide conduct acceptance testing of their equipment. Logic and accuracy (also known as functional or readiness) testing is performed in advance of an election to determine whether voting equipment will function properly, such as displaying the correct ballot, collecting votes, and tabulating results. Parallel testing is performed on Election Day by running test votes cast with known results, then comparing the actual and expected results. Of these two types of testing, according to our local jurisdiction survey results, logic and accuracy testing was the most widely performed type of testing as jurisdictions with 99 percent of the population nationwide conducted such testing for the 2016 general election. Jurisdictions with an estimated 37 percent of the population nationwide conducted parallel testing. According to our local jurisdiction survey results, jurisdictions monitored the performance of their predominant voting equipment during the 2016 general election using a variety of measures. Accuracy of the equipment in counting votes was tracked, measured, or assessed by jurisdictions having an estimated 87 percent of the population nationwide. Another widely monitored aspect of voting equipment performance was the accuracy of the equipment in recording voter selections before counting— jurisdictions with 78 percent of the population nationwide tracked, measured, or assessed that aspect. Overvotes and undervotes were also widely used measures, with jurisdictions having about 63 and 64 percent of the population nationwide, respectively, tracking, measuring, or assessing those measures. According to the results of our local jurisdiction survey, most jurisdictions did not experience extensive or widespread errors or malfunctions with their equipment during the 2016 general election. We estimate that jurisdictions with 93 percent of the population did not experience equipment errors or malfunctions on a “somewhat” or “very” common basis during the election. Of those that did experience equipment errors or malfunctions of some type on a “somewhat” or “very” common basis, the error or malfunction most frequently encountered was jams or misfeeds. We estimate that this error or malfunction was experienced on a “very common” basis by jurisdictions with about 1 percent of the population nationwide and on a “somewhat common” basis by jurisdictions with about 3 percent of the population nationwide. The next most frequent error or malfunction experienced as a “very” or “somewhat” common occurrence was that equipment response was sluggish or slower than acceptable, which was experienced by jurisdictions with an estimated 3 percent of the population nationwide. State and local election officials also determined how their voting equipment performed and verified election results by conducting postelection audits and recounts. According to 35 out of 46 respondents to our state survey, the state election agency or local election jurisdictions in their states conducted postelection audits or targeted recounts of results from the 2016 general election. On the basis of our local jurisdiction survey, we estimate that jurisdictions with approximately 45 percent of the population nationwide conducted postelection audits or targeted recounts. Among jurisdictions of different size, large jurisdictions had a higher estimated share of their population within jurisdictions that conducted postelection audits or recounts than did medium or small jurisdictions. Specifically, jurisdictions with 82 percent of the population within large jurisdictions conducted postelection audits or recounts. In contrast, an estimated 55 percent and 37 percent of the population within medium and small jurisdictions, respectively, was represented by jurisdictions that conducted postelection audits or recounts. According to the results of our local election jurisdiction survey, jurisdictions using the two main types of voting equipment (DRE or optical/digital scan) experienced mostly similar benefits as a result of using their respective type of predominant equipment. Table 1 shows the top benefits experienced by jurisdictions according to the type of predominant voting equipment used. In addition to the benefits mentioned above, jurisdictions experienced other benefits associated with using their respective type of predominant voting equipment. For example, jurisdictions that had an estimated half or more of the population within jurisdictions using each of the different types of voting equipment also experienced the following benefits from using their equipment: Jurisdictions predominantly using DREs: accessibility for individuals with disabilities or impairments, timely election night reporting, ease of presenting lengthy ballots in a clear and understandable way, protection and preservation of votes cast against potential non- cybersecurity related threats, and customer support and problem resolution assistance from vendor. Jurisdictions predominantly using optical/digital scan equipment: timely election night reporting, ease of troubleshooting or resolving equipment malfunctions during Election Day, preventing or alerting voters of any overvotes or undervotes before ballot is cast, ability to facilitate a postelection audit, security of equipment against outside electronic hacking or intrusion, and ease of conducting routine maintenance. Jurisdictions also experienced challenges while using their predominant voting equipment, although to a lesser extent overall than they experienced benefits. Table 2 shows the top challenges experienced by jurisdictions according to the type of predominant voting equipment used. The next most frequently experienced challenges by jurisdictions were the following (estimates with the values for the 95 percent confidence intervals are shown in parentheses): Jurisdictions predominantly using DREs: cost to maintain voting equipment (an estimated 12 percent; 6, 19); cost to operate voting equipment (8 percent; 3, 14); and ease of conducting routine maintenance (7 percent; 2, 14). Jurisdictions predominantly using optical/digital scan equipment: cost to operate voting equipment (an estimated 11 percent; 7, 15); preventing or alerting voters of any overvotes or undervotes before ballot is cast (9 percent; 2, 23), and ease of connectivity with other election administration systems (e.g., voter registration, election night reporting) (9 percent; 2, 23). On the basis of our local election jurisdiction survey, we estimate that jurisdictions with approximately 96 percent of the population nationwide were very satisfied or generally satisfied with the performance of their predominant voting equipment during the 2016 general election. Specifically, we estimate that jurisdictions with approximately 70 percent of the population nationwide were very satisfied with their voting equipment’s performance and 26 percent were generally satisfied (see fig. 4). Jurisdictions with about 2 percent of the population nationwide were generally dissatisfied or very dissatisfied with the performance of their predominant voting equipment. When comparing satisfaction with the performance of their predominant voting equipment used in the 2016 general election against the performance of their predominant equipment used in the 2012 general election, we estimate that jurisdictions with 67 percent of the population nationwide were just as satisfied with their equipment’s performance in 2016 as in 2012, while 16 percent reported they were more satisfied (see fig. 5). Among jurisdictions that used different predominant types of equipment, jurisdictions that predominantly used optical/digital scan equipment that were more satisfied with their equipment’s performance in 2016 had a larger estimated share of their population (20 percent) compared to jurisdictions that predominantly used DRE equipment (4 percent). On the basis of our review of literature and studies, interviews with election subject matter experts, and analysis of our local election jurisdiction and state surveys, we identified four key factors and related issue areas within them that jurisdictions and states consider when deciding whether to replace voting equipment. After considering the factors, jurisdictions may decide to replace their equipment or continue using their existing equipment. The four key factors we identified are: (1) the need for voting equipment to meet federal, state, and local voting system standards and requirements; (2) the cost to acquire new equipment and availability of funding; (3) the ability to maintain equipment and receive timely vendor support; and (4) the overall performance and features of voting equipment. In our local election jurisdiction and state surveys, we asked election officials to rate issue areas related to each of these factors as to how important they were when determining whether to replace voting equipment and then rank the issue areas in terms of which were “most important” in making the determination. Analysis of the results of our surveys indicates that the 24 issue areas within the four factors vary in their relative importance to jurisdictions and states when determining whether to replace voting equipment. The need for voting equipment to meet applicable federal, state, and local voting system standards and requirements is a factor considered by local election jurisdictions and states when determining whether to replace equipment. At the federal level, HAVA generally requires that voting equipment be accessible to individuals with disabilities. As discussed earlier, HAVA also established the EAC which developed and maintains the voluntary guidelines that voting equipment can be tested against to receive federal certification. In turn, many states have established requirements that voting equipment be federally certified or meet some or all of the standards established by the federal guidelines. According to election subject matter experts we spoke with, in addition to federal requirements and standards, some states have imposed additional requirements that voting equipment must meet or satisfy such as having the capability to present all ballot issues and candidates on one page or presenting ballots in multiple languages, for example. We identified four issue areas related to this factor. Figure 6 shows the importance local jurisdictions and state election officials attributed to the various issue areas within this factor when determining whether to replace voting equipment. For example, the need for equipment to meet state and local requirements and standards was considered “very important” by jurisdictions with 87 percent of the population nationwide and as one of the three “most important” issue areas overall by jurisdictions with 36 percent of the population nationwide. Among the states, this issue area was considered as “very important” by 18 out of the 25 states that indicated having a role in determining whether to replace voting equipment and as one of the three “most important” issue areas overall by 7 out of the 25 states. According to election subject matter experts we spoke with, the costs to acquire new equipment and the availability of funding to pay those costs is a key factor that jurisdictions and states consider when determining whether to replace voting equipment. Acquiring new voting equipment involves a variety of costs and expenses. For example, in addition to the cost of the equipment itself, there can be other associated costs, such as training for poll workers and elections staff on the new equipment and voter outreach and education about the change in equipment, that may be incurred as existing equipment is replaced. These related acquisition and transition costs and expenses are incurred by the jurisdictions and states, which in turn must obtain or allocate resources to cover those costs. We identified four issue areas related to this factor. Figure 7 shows the importance local jurisdictions and state election officials attributed to these issue areas when determining whether to replace voting equipment. For example, the availability of state and local funds was considered “very important” by jurisdictions with 62 percent of the population nationwide and as one of the three “most important” issue areas overall by jurisdictions with 18 percent of the population nationwide. Among the states, this issue area was considered as “very important” by 20 out of the 25 states that indicated having a role in determining whether to replace voting equipment and as one of the three “most important” issue areas overall by 9 out of the 25 states. Given the importance of funding for the acquisition of new voting equipment and the assistance federal HAVA grants have previously provided, we asked states and jurisdictions additional questions in our surveys about their funding practices and the extent to which they have HAVA grant funds remaining to acquire voting equipment. The results from our surveys provided the following additional information about these issues: Use of local and state funding sources for acquisition of new voting equipment: On the basis of our local election jurisdiction survey, we estimate that, among various potential funding sources, jurisdictions with 79 percent of the population nationwide obtain funds to acquire new voting equipment through local general funds or budgets as a direct appropriation. Additionally, we estimate that jurisdictions with 43 percent of the population nationwide use state financial assistance or cost sharing as a source of funds for new equipment. According to the results from our state survey, states have different levels of involvement in providing funds for the acquisition of voting equipment. Over half (24) of the 46 states that responded to our survey indicated that they do not provide any financial assistance or cost sharing to local jurisdictions for equipment acquisition, while 11 indicated that they cover all acquisition costs. Eight states indicated that their state provides some financial assistance or cost sharing with local jurisdictions for equipment acquisition, while 2 states indicated a different type of involvement in funding the acquisition of voting equipment, such as covering only the costs of acquiring accessible voting equipment. Availability of HAVA funds: On the basis of our local jurisdiction survey, we estimate that jurisdictions with 10 percent of the population nationwide had HAVA funds remaining to apply toward the acquisition of new voting equipment, with jurisdictions representing 6 percent of the population only having enough HAVA funds to acquire a portion of the equipment needed. Additionally, we estimate that jurisdictions with 42 percent of the population nationwide had no HAVA funds remaining while jurisdictions with 46 percent of the population did not know whether they had any HAVA funds remaining. Impact of lack of HAVA funds: Among jurisdictions that did not have any HAVA funds remaining or only enough to buy a portion of the equipment needed, jurisdictions with an estimated 36 percent of the population indicated that the lack of HAVA funds had affected their decisions regarding the replacement of voting equipment. Further, jurisdictions with an estimated 57 percent of the population in this subgroup (of jurisdictions that indicated that the lack of HAVA funds affected their replacement decisions) delayed the replacement of voting equipment while jurisdictions with 25 percent of the population in this subgroup were not able to acquire the equipment that would best meet their needs. The ability of local election jurisdictions and states to maintain voting equipment and receive timely vendor support is a factor considered when determining whether to replace equipment, particularly as the equipment ages. Election subject matter experts we spoke with noted the importance of access to replacement parts for existing voting equipment as something jurisdictions and states may consider when determining whether to replace equipment. Without adequate access to replacement parts and technical service, either from vendors or supplied by in-house expertise, it can be difficult for jurisdictions and states to maintain their current equipment at a satisfactory level. We identified five issue areas related to this factor. Figure 8 shows the importance local jurisdictions and state election officials attributed to these issue areas when determining whether to replace voting equipment. For example, the sufficiency of vendor support and problem resolution was considered “very important” by jurisdictions with 81 percent of the population nationwide and as one of the three “most important” issue areas overall by jurisdictions with 7 percent of the population nationwide. Among the states, this issue area was considered as “very important” by 15 out of the 25 states that indicated having a role in determining whether to replace voting equipment but no state considered it as one of the three “most important” issue areas overall. The overall performance and features, both of the existing voting equipment and of potential replacement equipment, is also a factor considered by local election jurisdictions and states when determining whether to replace voting equipment. For example, jurisdictions and states may consider the age of their current equipment and how well it is performing, as well as how its performance compares to that of new equipment available for acquisition. In addition, according to elections literature we reviewed and election subject matter experts we spoke with, jurisdictions and states may also take into account specific features new voting equipment can provide that might better meet their needs. The desired features may vary from jurisdiction to jurisdiction depending on specific needs and circumstances, but such features may include an enhanced ability to process a high volume of absentee ballots, capability to present ballots in multiple languages, or ease for poll workers to set up and for voters to use, for example. We identified 11 issue areas related to this factor. Figure 9 shows the importance local jurisdictions and state election officials attributed to these issue areas when determining whether to replace voting equipment. For example, the overall performance of the voting equipment was considered “very important” by jurisdictions with 83 percent of the population nationwide and as one of the three “most important” issue areas overall by jurisdictions with 20 percent of the population nationwide. Among the states, this issue area was considered as “very important” by 18 out of the 25 states that indicated having a role in determining whether to replace voting equipment while 4 out of the 25 states considered it as one of the three “most important” issue areas overall. Given the potential challenges local election officials have identified with using aging or outdated equipment, in our local election jurisdiction survey we asked jurisdictions when they first used their predominant voting equipment. Based on their responses, we estimate that jurisdictions with over half of the population nationwide used predominant voting equipment in the 2016 general election that was first deployed between 2002 and 2006 (see fig. 10) Jurisdictions with the next largest estimated share of the population (28 percent) used equipment that was first deployed between 2012 and 2016. The five local election jurisdictions we selected to include in our review either replaced their voting equipment between 2012 and 2016 or plan to replace their equipment in time for the 2020 general election. We selected these jurisdictions to obtain variation in, to the extent possible, population of jurisdiction, type of voting equipment replaced and selected, and state involvement in selecting and funding voting equipment replacement, among other factors. Table 3 summarizes information related to voting equipment replacement across the five selected jurisdictions. These jurisdictions illustrate varying approaches that localities have used or are using to replace their voting equipment based on their specific needs, circumstances, and resources. For example, Los Angeles County, California. The county has a large and diverse electorate and is in the process of self-designing its own voting system, which is expected to consist of ballot marking devices that produce paper ballots to be tallied on central count digital scanners. County officials stated that the current design concept for the new equipment is intended to provide greater flexibility in administering elections, provide a more user-friendly and accessible voting experience, enhance accuracy and auditability, and could potentially lower costs for system upgrades if developed as planned. For example, according to officials, the ballot marking device is intended to provide the ease of use of a touch screen interface, which would incorporate features such as scrolling and tapping that are familiar to voters who use mobile devices, and will include a headset, tactile keypad, and other devices for voters with disabilities. It would also allow the county to have ballots with multiple formats and a large number of races. The county’s process for developing and deploying its new voting equipment began in 2009 and has five phases—(1) public opinion and stakeholder baseline research, (2) establishment of voting system guiding principles, (3) system design and engineering, (4) manufacturing and certification, and (5) phased implementation. According to officials, the county has taken a user-centered approach to the design of the new voting equipment that prioritizes the specific needs and expectations of the voters. The county is currently in the manufacturing and certification phase and reported that about $19 million has been expended to develop the new voting equipment as of December 31, 2017. County officials told us they plan to retain ownership of the intellectual property rights of the new voting equipment so that the system remains publicly owned and not proprietary like traditional vendor equipment. The county plans to pilot the new equipment in some early voting locations in 2019 and fully roll it out in 2020. Travis County, Texas. The county began its efforts to design its own voting equipment based in part on findings and recommendations from an election study group it convened in 2009. In 2012, it developed a concept for a DRE with a voter-verified paper audit trail that centered on system security, auditability, and the use of commercial off-the-shelf technology. In September 2017, the county announced that it had decided to no longer pursue building the voting equipment because the proposals it received from vendors and other organizations for developing key components of the equipment were not sufficient to build a complete voting system, among other reasons. According to county officials, the county plans to acquire either DREs or ballot marking devices with precinct count digital scanners from a voting system vendor with the goal that whatever equipment it acquires incorporates some of the key features it had intended for its self-designed equipment. For example, officials stated that the new equipment must produce printed paper records that can be tallied and connected with electronic voting records through an automated process and allow for third party verification of results and better postelection audits. They noted that they are prepared to work with vendors to customize existing equipment to meet the county’s requirements if needed. County officials estimate that the new equipment will cost about $16 million and stated that acquisition will be funded through local bonds. The county issued a request for proposals for the equipment in November 2017 and plans to have it in place for the 2020 election. Anne Arundel County, Maryland. In 2016, the county replaced its DREs with a system in which voters manually mark paper ballots and insert them into precinct count digital scanners which then count them. Maryland requires the use of uniform voting equipment in polling places statewide and the state and counties each pay 50 percent of the costs of acquiring equipment. In 2007, Maryland enacted a law that prohibited the use of a voting system unless the State Board of Elections (SBE) determined that the system provides a voter-verifiable paper record, thereby requiring the state’s DREs to be replaced. According to Maryland SBE officials, state law specifically required the purchase of precinct count scanners so the board did not consider other types of voting equipment. The SBE issued a request for proposals for the new voting equipment in July 2014 and four vendors responded. The board formed an evaluation committee to analyze the technical and financial details of the proposals, and according to officials, the committee hosted a public demonstration to collect feedback on the equipment under consideration and worked with the University of Baltimore to perform usability and accessibility testing on the equipment. The SBE decided to lease rather than purchase the equipment for a number of reasons. For example, officials said that leasing provided increased flexibility to update or replace equipment more frequently and had lower upfront costs. According to SBE officials, the current payment to the vendor for leasing the digital scan equipment statewide is approximately $1.1 million per quarter. SBE and Anne Arundel County officials stated that deployment of the new equipment in the 2016 general election went smoothly with no significant challenges. The state contracted with a third party vendor to conduct a postelection audit of the 2016 general election by using independent software to tally all digital ballot images. The audit confirmed the accuracy of the election results. According to SBE officials, the new equipment’s ability to capture and store digital images of the ballots made this type of audit possible. Anne Arundel County officials stated that the ability to conduct such an audit is one of the main benefits of the new equipment. Lafayette County, Florida. Lafayette County has a small population and, in 2016, replaced its precinct count optical scan equipment with precinct count digital scan equipment. The county formed a consortium with 11 other counties in the state to help acquire its new equipment. According to the county’s Supervisor of Elections, having the consortium approach state officials as a group helped secure HAVA funds to help the counties purchase the voting equipment. In addition, he stated that being a part of the consortium helped the counties negotiate a lower price for their equipment than what they could have obtained individually because they pooled their purchases and acquired a higher volume of machines. According to the Supervisor of Elections, the consortium decided to purchase precinct count digital scanners from the same vendor the counties had used before because county staff were familiar with the vendor and equipment, among other reasons. He stated that the total cost to purchase Lafayette County’s new voting equipment was about $70,000. The Supervisor of Elections said that the digital scanners have features that were an improvement over the county’s previous optical scan equipment. For example, he told us that the new scanners have more robust security features, such as locking panels, seals, and a requirement for a passcode to access the system. He also noted that the scanners digitally capture and store ballot images. The Supervisor of Elections and the two poll workers we interviewed stated that deployment of the new voting equipment went smoothly and the county did not experience any challenges because the new and previous equipment are both precinct count scanning systems. According to the Supervisor of Elections, a postelection audit that was conducted, in which the county manually tallied ballots from a randomly selected race and precinct, found that the results were accurate. Beaver County, Utah. Beaver County has a small population and previously used DREs with a voter-verified paper audit trail. In 2014, Beaver County began conducting vote-by-mail elections and replaced its DREs with central count digital scan equipment to support this change. County officials said that, in 2014, they verbally requested proposals for the new equipment from their current vendor and an elections services company that the county had employed in 2012 to provide training, systems testing, and other support for elections. According to the Deputy Clerk, the county requested proposals from these two entities because county officials were familiar with them and were not aware of other vendors that might submit proposals. Officials stated that the county received a proposal from the elections services company, and selected the company because it was the only bid received and the equipment the company sold met the county’s needs and was federally certified. The county reported that the cost to purchase the equipment was about $46,000. Officials said that they are very satisfied with the performance of the new voting equipment. They noted that conducting vote-by-mail elections and using central count scanners allow them to administer elections from one location on Election Day, which requires less time and resources than having to manage multiple polling places. Officials also stated that the new digital scanners are able to count a high volume of ballots in a short period of time. According to officials, the county conducted two postelection audits for the 2016 general election—one required by the state and another that the county initiated. They reported that both audits validated the election results. See appendix V for additional details about voting equipment replacement in our five selected jurisdictions, including the factors that influenced their decisions to replace voting equipment; selection, acquisition, and implementation of their equipment; and perspectives on the process. On the basis of our survey of state election officials and interviews with officials from selected voting system vendors and subject matter experts—representatives from nongovernmental research and other organizations involved in the field of election administration—we found that these stakeholders have varying perspectives on how the current Voluntary Voting System Guidelines (VVSG 1.0 and VVSG 1.1) and their associated testing and certification processes facilitated or posed challenges to the replacement and development of voting equipment. The states we surveyed and the other selected stakeholders we interviewed primarily had experience with VVSG 1.0. As discussed earlier, the VVSG 1.1 were issued in March 2015, but due to the time it generally takes to implement updates to new guidelines, including developing testing programs, among other things, no systems had been certified under this version of the guidelines as of November 2017. One vendor’s system underwent partial testing using VVSG 1.1 but the vendor withdrew the system before the testing was completed. States and selected vendors and subject matter experts provided varying perspectives on how aspects of the current voluntary voting system guidelines and their associated testing and certification processes facilitate the replacement and development of voting equipment. Generally, stakeholders indicated that the guidelines and processes provide assurance that new equipment meets certain requirements, provide guidance for equipment developers, provide a model for state standards, and provide cost savings for states that do not have to duplicate federal testing. For example, 15 of the 26 state survey respondents said the guidelines provide assurance that new voting equipment meets baseline requirements related to security, functionality, usability, accessibility, and privacy. One of these 15 state respondents noted that if the EAC certified voting equipment against the federal guidelines, he believes it meets the highest election standards and also meets requirements set by his state. Another of these 15 state respondents noted that voting equipment that has been tested using the federal guidelines and certified by the EAC will have a higher level of reliability than equipment that has not met these guidelines or been certified by the EAC. Subject matter experts from one nongovernmental organization noted that states that establish their own voting system standards often use the federal guidelines as a base to help develop their standards because the federal guidelines have comprehensive requirements and are well vetted. Experts from another nongovernmental organization said that the guidelines establish a standard for voting equipment features and performance, which may help small jurisdictions that want to acquire new voting equipment but may not have the expertise to independently evaluate the equipment. Further, officials from most of the vendors we interviewed agreed that the federal standards serve as effective baseline requirements. For example, officials from five of the seven vendors we interviewed said that when they are developing voting systems, the federal guidelines help them define the baseline standards that their systems should meet, and five of the nine subject matter experts said the federal guidelines provide baseline requirements. Further, 4 of the 26 state survey respondents indicated that the current voluntary guidelines help reduce the costs and resources needed for states to test and approve new voting equipment. For example, one of the 4 state respondents reported that states do not have to rely on their own voting system testing laboratories for all aspects of the testing and certification of new voting equipment to meet state requirements because most of the testing and certification relevant to state requirements has already been done by EAC-accredited testing laboratories and the EAC. The official noted that this allows the states to do less testing, which could save them money. The states we surveyed and selected vendors and subject matter experts we interviewed also reported that aspects of the current voluntary voting system guidelines and their associated testing and certification processes could pose challenges to the replacement and development of voting equipment in a number of ways. Specifically, some stakeholders indicated that aspects of the guidelines and processes could discourage innovation in equipment development, could limit the choices of voting equipment on the market because the testing and certification processes take too long, and could be costly for states and vendors. For example, officials representing three of the seven vendors we interviewed said the current federal guidelines may discourage innovation for new voting equipment because they are too specific or overly prescriptive. Officials from one of these three vendors said the current guidelines require a specific oval size on the ballots, prescribing how tall and wide the oval should be. Instead of such requirements, the officials said they would like the guidelines to be more performance-based and state, for example, that voters should be able to successfully mark a ballot a specified percentage of the time. Further, officials from another vendor said that the current guidelines are generally written for the purpose of testing and certifying end-to-end voting systems rather than system components such as ballot marking devices, which are generally developed by smaller vendors. As a result, according to this vendor, smaller vendors may face challenges getting new technology certified and into the market. EAC officials stated that they recognize that the current guidelines should be more flexible because specificity may limit innovation and they believe the updates to the VVSG 2.0 should help address this issue. In addition, some stakeholders said they believed that the voluntary guidelines and associated testing and certification processes take too long, and thus limit the choices of voting equipment on the market and make it difficult to make improvements to existing equipment. For example, officials from 8 of the 27 state survey respondents and three subject matter experts said the guidelines and their respective processes limit the number of voting systems that are available for acquisition. Three of the 8 states and three subject matter experts said, in their view, the EAC testing and certification process takes too long. In addition, according to one subject matter expert, if a jurisdiction wants to make changes to its existing voting equipment, such as incorporating new software, it can be a difficult and lengthy process to certify the modified equipment, and in some cases the entire system must be recertified. Also, an official from one vendor said that the federal certification processes are complicated, onerous, and time-consuming and they discourage vendors from making modifications to their voting systems even though the modifications might improve the systems. EAC officials said they have heard from stakeholders that the certification process takes too long but stated that this perception was more accurate in the years immediately following the EAC’s issuance of the VVSG 1.0 in 2005. They said that if voting equipment has been modified and is ready for testing and there are no significant problems encountered during the testing, certifying modifications should take a few weeks to a few months to complete and full system testing and certification of new systems should take about 6 to 9 months. Further, officials from 4 of the 27 states that responded to our survey said the EAC testing and certification process can be costly. One state election official said that the cost of certification may discourage vendors from developing new systems and pursuing EAC certification for their systems, which could limit their ability to sell or supply their systems to state and local election jurisdictions. In addition, this state election official noted that costly federal certification of voting systems has limited the voting equipment choices for election officials. Further, officials from one vendor said that they submitted a new voting system for EAC testing and certification and spent over $12 million before they learned that there were significant issues with getting their system certified. According to EAC officials, this was an uncommon occurrence that resulted from the vendor submitting a system that needed additional work and was not ready for certification. The vendor decided to withdraw its system from the testing and certification process. Shortly after the adoption of VVSG 1.1 in March 2015, the EAC, in conjunction with NIST and the TGDC, began work to develop the next iteration of the guidelines, VVSG 2.0, and anticipates issuing the new version in late summer 2018. The EAC, NIST, and the TGDC have taken actions to develop VVSG 2.0 that may address some of the issues with the earlier iterations of the guidelines that were raised by stakeholders. For example, they have established goals to guide the VVSG 2.0 development process, established working groups to inform the guidelines, and developed VVSG 2.0 high-level principles and guidelines. According to the EAC and NIST, in August 2014, the Future VVSG Working Group, which consisted of officials from state and local election offices, technical experts in such areas as security and disability, and voting system vendors, among others, began work which culminated in the creation of 12 goals to guide the development efforts for the voluntary guidelines. One goal, for example, states that the guidelines’ requirements should be performance based and technology neutral. The goal statement further elaborates that the guidelines should be free from detailed descriptions of any technology, and that the guidelines should be functional in nature so that they can more easily be redefined as technology changes. Another development goal states that the voluntary guidelines and its testing and certification processes should not impose unanticipated cost burdens onto organizations. These goals are designed to address some of the issues with the current voluntary guidelines identified by the stakeholders we interviewed as posing challenges to the replacement and development of voting systems, such as discouraging innovation because they are too specific and discouraging vendors and other voting system developers from pursuing EAC certification for their systems because the process is potentially costly. After the 12 goals for the voluntary guidelines were developed, the EAC and NIST established a new process for developing the next guidelines that is intended to allow for broader and more transparent stakeholder involvement than prior guidelines’ development efforts. This new process brings stakeholders together through a working group structure to develop the guidelines. According to the EAC, the previous process did not fully allow for stakeholder input or effectively leverage stakeholder expertise in developing the guidelines because comments on the guidelines were solicited from the Standards Board and external stakeholders after most of the work had been done. In 2015, the EAC and NIST established seven working groups to obtain feedback and input from stakeholders early in the voluntary guidelines development process. According to the EAC and NIST, the four constituency and three election cycle working groups were created as a public/private partnership to inform the development of the guidelines and are composed of state and local election officials, representatives from the federal and private sectors, members of standards bodies, EAC committee members, academic researchers, and other interested parties. The working groups are led by EAC and NIST staff, and have more than 600 participants across the seven groups. EAC and NIST officials stated that they have informed election officials and other stakeholders about opportunities to participate on these working groups to share their ideas. The four constituency working groups represent areas related to human factors (accessibility and usability), cybersecurity, interoperability, and testing and are charged with developing guidance or other deliverables related to these four areas. For example, one objective for the human factors working group is to identify gaps or issues with current accessibility and usability requirements for voting. The election cycle working groups—focused on pre-election, election, and postelection activities—develop process models related to election activities. For example, an objective for the election working group is to identify the necessary functionality of election systems needed to administer early voting and Election Day activities. The work by these seven working groups will help inform the development of the voluntary guidelines’ requirements. Table 4 shows the seven working groups and their respective responsibilities. Some of the stakeholders we interviewed participate in these working groups. For example, officials from six of the seven voting system vendors we contacted said they have a representative on one or more of the constituency working groups. Generally, these six vendors said the working groups are a positive feature of the voluntary guidelines’ development process. For example, officials from one vendor said they have been encouraged by the amount of collaboration on the working groups, and officials from another vendor said it is beneficial that vendors are part of the working groups because they bring experience and expertise with designing and developing various types of voting systems. In August 2017, the TGDC adopted high-level principles and supporting guidelines for the VVSG 2.0. These principles and guidelines are intended to provide system design goals and broad descriptions of the functions that make up a voting system, in contrast to the VVSG 1.1 which focused more on device- or system-specific requirements. The VVSG 2.0 will be supplemented by requirements consisting of technical details voting system vendors can use to design devices that meet the new guidelines. The supplemental requirements will also detail test assertions for how the accredited test laboratories will validate that a system complies with the requirements. One of the VVSG 2.0 principles, for example, is that ballots and vote selections should be presented in a clear, understandable way so that they can be marked, verified, and cast by all voters. The corresponding guidelines for this principle focus on ballots being perceivable, operable, and understandable. For example, the guideline for perceivable ballots notes that default voting system settings for displaying ballots should work for the widest range of voters and allow voters to adjust settings and preferences to meet their needs. Another VVSG 2.0 principle is that the voting system should be designed to support interoperability, including having voting devices that can interface with each other. The corresponding guidelines for this principle include using standard data formats and commercial off-the-shelf devices if they meet applicable requirements. According to NIST officials, one goal of the interoperability working group is to develop guidance that will enable election equipment and interfacing software to interoperate more easily and “speak the same language.” NIST officials stated that this goal is intended to allow vendors to build and certify system components instead of a full voting system. These principles are designed to help address some of the issues reported by stakeholders, such as the impact of prescriptive requirements for ballot designs on vendor innovation and the challenges encountered with component certification under the current voluntary guidelines. Further, officials from the EAC told us that one key change with the VVSG 2.0 is that the EAC commissioners no longer have to approve changes to the supplemental requirements and test assertions, which will instead be vetted by the EAC’s Board of Advisors and Standards Board. EAC officials noted that this allows for greater flexibility to make improvements to the requirements and testing process, including making changes in response to technological advancements. Additionally, depending on the situation, the new voluntary guidelines are intended to allow for more streamlined testing and certification processes. For example, EAC officials said that under the new guidelines, if there are modifications that have been made to a voting system that has already been certified, the changes can be tested without having the entire voting system go back through the testing and certification process. According to EAC officials, the next steps in the VVSG 2.0 development process are to share the high-level principles and guidelines with the EAC’s Board of Advisors and Standards Board for further vetting, provide the public the opportunity to comment on them, and provide them to the EAC commissioners for approval. Specifically, before final adoption of the guidelines, both boards are to review and submit comments and recommendations regarding the guidelines to the commissioners. EAC officials anticipate that the EAC boards will likely review and pass resolutions in support of the principles and guidelines in April 2018. Following the board reviews, there will be a 90-day period for public comment on the VVSG 2.0, as required by HAVA. The EAC hopes that the time it typically takes to respond to public comments will be shorter than for prior voluntary guidelines, due to the extensive feedback and comments received and considered by the working groups during the development phase. EAC officials anticipate that the EAC commissioners will vote on the VVSG 2.0 principles and guidelines in August or September 2018, and the VVSG 2.0 will be issued after they are approved. According to EAC and NIST officials, the working groups have begun developing the supplemental requirements for the new guidelines. They said that the requirements are expected to be drafted by the summer of 2018 and test assertions for most voting systems are expected to be developed by the summer of 2019. EAC officials noted that it will likely take 12 to 24 months after the EAC commissioners approve the new guidelines before they are ready for use. EAC officials plan to submit to the EAC commissioners a range of recommended dates to consider for implementation. They added that in developing these dates, including when vendors will be required to test new equipment against the updated guidelines, they must consider various factors such as the time voting equipment vendors will need to build their new equipment to VVSG 2.0, and reaccreditation of voting system test laboratories to ensure they can test to VVSG 2.0. Because of the lag between when the guidelines will be issued and when they will be used for testing and certification, EAC officials stated that it is unlikely that systems will be certified in time to be ready for use in the 2020 election. However, these officials noted that they are available to meet with vendors that would like to start developing equipment based on the new guidelines. We provided a draft of this report to the EAC, NIST, and election offices in the five local election jurisdictions that we selected and their respective states for review and comment. The EAC, two jurisdictions, and two states provided technical comments, which we incorporated in the report as appropriate. NIST, three jurisdictions, and three states indicated that they had no comments in e-mails received from March 1 through March 23, 2018. We are sending copies of this report to the EAC, NIST, election offices in the five selected local jurisdictions and their respective states that participated in our research, appropriate congressional committees and members, and other interested parties. In addition, this report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions, please contact Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VI. This report addresses the following questions: 1. What types of voting equipment did local election jurisdictions use for the 2016 general election, and what are jurisdiction perspectives on equipment use and performance? 2. What factors are considered when deciding whether to replace voting equipment and what approaches have selected jurisdictions taken to replace their equipment? 3. What are selected stakeholders’ perspectives on how federal voting system guidelines affect the replacement and development of voting equipment, and what actions has the Election Assistance Commission (EAC) taken to update the guidelines? For our first objective, we conducted a web-based survey of officials from a stratified random sample of 800 local election jurisdictions nationwide to obtain information from the jurisdictions on the voting equipment used during the 2016 general election and perspectives on equipment use and performance. In total, we received 564 completed questionnaires for a weighted response rate of 68 percent. We surveyed the officials about the types of voting equipment they used, various characteristics of the equipment used, their perspectives on the benefits and challenges they experienced while using the equipment, and how satisfied they were with its performance during the election. Overall, there are 10,340 local election jurisdictions nationwide that are responsible for conducting elections. States can be divided into two groups according to how they delegate election responsibilities to the local election jurisdictions. One group is composed of 41 states that delegate election responsibilities primarily to counties. We also included the District of Columbia in this group of states. However, even within this group there are some exceptions to how election responsibilities are delegated. For example, there are no counties in Alaska, so the state groups all of its Boroughs and Census Areas into four election regions; and 6 states—Illinois, Maryland, Missouri, Nevada, New York, and Virginia—delegate responsibilities to some cities independently from counties. The group of 41 states and the District of Columbia contains about one-fourth of the local election jurisdictions nationwide. The other group is composed of 9 states that delegate election responsibilities to subcounty governmental units, known by the U.S. Census Bureau as Minor Civil Divisions (MCD). This group of states contains about three- fourths of the local election jurisdictions nationwide. The categorization of the 50 states and the District of Columbia by how election responsibilities are organized is as follows (states in bold delegate election responsibilities to some cities independently from counties): County-level states: Alabama, Alaska (four election regions), Arizona, Arkansas, California, Colorado, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming MCD–level states: Connecticut, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, Rhode Island, Vermont, and Wisconsin While 27 percent of election jurisdictions nationwide are in states that delegate election responsibilities primarily to counties, according to the 2010 Census, 89 percent of the U.S. population lived in these states. The U.S. population distribution between the two state groups is shown in table 5. The sampling unit for our survey was the geographically distinct local election jurisdiction at the county, city, or MCD level of local government (or, in Alaska, the election region). We constructed our nationwide sample frame of all local election jurisdictions using 2010 decennial Census data and information on local jurisdictions from state election office websites. Census population data were available for all counties, county equivalents, and MCDs. To obtain a representative sample that included a mix of both rural and non-rural jurisdictions, we used a two-level stratified sampling method in which the sample units, or jurisdictions, were broken out into rural and non-rural strata. To do this, we used the U.S. Department of Agriculture’s Economic Research Service’s Rural-Urban Continuum Code (RUCC) system which classifies counties into a nine-category continuum based on their characteristics and location relative to metropolitan areas. The RUCC continuum coding scheme is shown in table 6. To assign a continuum code to each local election jurisdiction, we matched the RUCC county code to each county in the population frame. Cities that are independent local election jurisdictions and spread geographically across one or more counties received the lowest numbered code among the counties which contain them (i.e., most urban). For independent cities that administer their own elections but are contained geographically within a single county, the city received the code assigned to the county. Where necessary, the parent state’s 2010 decennial Census report was checked to make sure all counties that included part of the independent city were identified. MCDs in New England and the Midwest received the code of the parent county that contained them. For our sampling purposes, the rural stratum was defined as all local election jurisdictions with an RUCC code of 7, 8, or 9. The non-rural stratum was defined as all local election jurisdictions with a code of 1, 2, 3, 4, 5, or 6. Of the 10,340 local election jurisdictions nationwide, 70 percent were classified as non-rural while 30 percent were classified as rural. We selected a two-level stratified sample of 800 local election jurisdictions. Using the RUCC codes, we allocated 600 sampling units, or jurisdictions, to the non-rural stratum and 200 to the rural stratum. To obtain a sample that also reflected the population distribution across jurisdictions nationwide, we used the population of the local election jurisdiction as the measure of unit size and selected the sample units within each stratum with probability proportionate to population of the local election jurisdiction, without replacement. We used jurisdiction population size, rather than the number of eligible or registered voters, because these Census data were readily available for all counties and MCDs nationwide. Because the sample was selected with probability proportionate to population size, any jurisdiction (county or MCD) with more than about 225,000 people was selected with certainty. Table 7 shows the breakout of jurisdictions by population size, the total population within each size grouping, and the number of jurisdictions sampled. After selecting the units to be included in our survey sample, we obtained contact information for the chief election official within the jurisdictions selected. To do this, we first collected contact information for local election jurisdictions from state election office websites and other publicly available sources. We then called the jurisdiction offices directly to confirm the accuracy of the information and the appropriate official and e- mail address to which the survey URL and the respondent’s login information for the questionnaire should be sent. We launched our web- based local election jurisdiction survey on March 27, 2017, and made it available to respondents to complete online through July 14, 2017. Log in information to the survey was e-mailed to the chief election official of each sampled jurisdiction. Between April 4, 2017, and July 10, 2017, we conducted follow-up with nonrespondents by phone and e-mail. During this follow-up, we learned that some MCDs in Minnesota contract with their respective counties to carry out election administration responsibilities, including those concerning the use of voting equipment. In these cases, we reassigned and sent the questionnaire for the particular MCD to the appropriate county election official for completion. Finally, we adjusted the sampling weights to compensate for nonresponse using weighting classes within each stratum that were based upon population size of the jurisdictions. All sample surveys are subject to sampling error—that is, the extent to which the survey results differ from what would have been obtained if the whole population had been observed. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. As each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval. This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that each of the confidence intervals based on our web-based survey includes the true values in the sample population. In addition to the reported sampling errors, the practical difficulties of conducting any survey may introduce other types of errors, commonly referred to as nonsampling errors. For example, differences in how a particular question is interpreted, the sources of information available to respondents, or the types of people who do not respond can introduce unwanted variability into the survey results. We took numerous steps in questionnaire development, data collection, and the editing and analysis of the survey data to minimize nonsampling errors. For example, to inform the development of our questionnaire, we reviewed existing reports and studies about voting equipment and elections, such as those by various national public policy research organizations and professional associations of state and local officials involved in election administration, as well as previous GAO surveys and work related to this issue area. In addition, we interviewed election subject matter experts and representatives from organizations in the field of election administration and voting equipment to obtain their views and perspectives on potential issues and subject areas to consider covering in our questionnaire. We also pretested the draft questionnaire by telephone with officials in 4 local election jurisdictions (3 counties and 1 MCD) of various sizes in 4 states and had the draft questionnaire reviewed by two election experts. We used these pretests and reviews to further refine our questions, develop new questions, clarify any ambiguous portions of the questionnaire, and identify any potentially biased questions, and made revisions, as necessary. Further, during our analysis of the responses, we found that due to a higher level of nonresponse by very small jurisdictions of 2,500 persons or less, some national-level estimates that included responses from jurisdictions of all sizes had wider than desired confidence intervals. To improve the precision of these national-level estimates, we subsequently excluded the very small jurisdictions of 2,500 persons or less from our analysis. Computer analyses were conducted to identify any inconsistencies in response patterns or other indications of questionnaire response errors. All computer syntax was peer reviewed and verified by separate programmers to ensure that the syntax had been written and executed correctly. Unless noted otherwise, the point estimates we report are national-level point estimates representing the experiences, views, and opinions of all local election jurisdictions nationwide with populations greater than 2,500. We also provide some point estimates for jurisdiction population subgroups, such as large jurisdictions (greater than 100,000 persons), medium jurisdictions (25,001 to 100,000 persons), and small jurisdictions (2,501 to 25,000 persons), and jurisdictions that used a particular type of voting equipment, in cases where statistically significant differences exist between the subgroups that may be of interest. The jurisdictions we surveyed were selected with probability proportionate to population size, so rather than expressing the point estimates in terms of the percentage of jurisdictions nationwide that had a specified characteristic, we express the point estimates for the survey responses in terms of the percentage of the population nationwide that resides within jurisdictions that had a specified characteristic. Similarly, in instances where we report point estimates for jurisdiction subgroups, we express the point estimate in terms of the percentage of the population that resides within jurisdictions of that respective subgroup that had a specified characteristic. For our second objective, we used our local election jurisdiction survey as described above to obtain information from jurisdictions about the factors they consider when determining whether to replace their voting equipment. In addition to the local election jurisdiction survey, we also conducted a web-based survey of the state-level election offices in the 50 states and the District of Columbia about issues pertaining to the states’ role in selecting and acquiring voting equipment, including the factors considered when determining whether to replace voting equipment. In total, we obtained 46 responses (a 90 percent response rate). We took the same steps to develop the state questionnaire as we did in developing the local election jurisdiction questionnaire described above. We conducted pretests of our draft state questionnaire by telephone with election officials of 4 states with varying election system characteristics such as type of voting equipment used, population size, use of federal voting equipment certification processes, and age of equipment, among other characteristics. We also had the draft questionnaire reviewed by two election experts. We used these pretests and reviews to help further refine our questions, develop new questions, clarify any ambiguous portions of the survey, and identify any potentially biased questions, and made revisions, as necessary. Prior to fielding our state survey, we contacted the secretaries of state or other responsible state-level officials, as well as officials from the District of Columbia, to confirm the contact information for the director of elections or comparable official for their respective state. We launched our web-based state survey on April 6, 2017, and made it available to respondents to complete online through May 19, 2017. Log-in information to the survey was e-mailed to directors of elections or comparable officials. Between April 12, 2017, and May 16, 2017, we conducted follow- up with nonrespondents by phone and e-mail. The total number of responses to individual questions may be fewer than 46, depending upon how many respondents were eligible or chose to respond to a particular question. For example, survey respondents who indicated that their state did not have a role in determining whether to replace voting equipment were directed to skip all subsequent questions related to the factors considered when determining whether to replace equipment. Because this survey was not a sample survey, there are no sampling errors. However, the practical difficulties of conducting any survey may introduce nonsampling errors. For example, differences in how a particular question is interpreted, the sources of information available to respondents, or the types of people who do not respond can introduce unwanted variability into the survey results. We included steps in both the data collection and data analysis stages for the purpose of minimizing such nonsampling errors. For example, we examined the survey results and performed computer analyses to identify inconsistencies and other indications of error. Where these occurred, survey respondents were contacted to provide clarification and the response was modified to reflect the revised information. A second, independent analyst checked the accuracy of all computer analyses. The scope of this work did not include verifying states’ survey responses with local election officials. For additional perspectives and context on the factors considered by jurisdictions and states when replacing voting equipment, we also used our reviews of existing reports and studies about voting equipment and elections and interviews with election subject matter experts, including representatives from nongovernmental research and other organizations involved in the field of election administration and voting equipment. For our review of existing reports and studies, we reviewed literature covering the period from 2005 through 2017 including general news, trade and industry articles, association and nonprofit publications, and government reports related to voting system technology, specifically on the replacement and development of voting systems and voting system standards or guidelines. For our interviews, we identified and selected nine subject matter experts based on our review of reports and studies on voting equipment, their expertise and work in this area, and recommendations from these and other researchers. These subject matter experts represented the following organizations: (1) Brennan Center for Justice, (2) National Conference of State Legislatures, (3) National Association of Secretaries of State, (4) National Association of Counties, (5) National Association of State Election Directors, (6) Verified Voting, (7) Kennesaw State University Center for Election Systems, (8) Center for Election Innovation and Research, and (9) Election Data Services, Inc. The information we obtained from these experts cannot be generalized; however, these experts provided additional perspectives and information on the factors considered by jurisdictions and states when replacing voting equipment. In addition, we interviewed election officials from five local jurisdictions— Los Angeles County, California; Travis County, Texas; Anne Arundel County, Maryland; Lafayette County, Florida; and Beaver County, Utah— that replaced their voting equipment between 2012 and 2016 or plan to replace their equipment in time for the 2020 general election to learn about the approaches and practices they used and obtain their perspectives on the replacement process. We selected these jurisdictions to reflect variation in, to the extent possible, population of jurisdiction, type of voting equipment replaced and selected, state involvement in selecting and funding voting equipment, and particular practices used to replace equipment (e.g., self-designing equipment, leasing equipment), among other factors. For each jurisdiction, we interviewed—on site or by phone—local election officials, state election officials in the jurisdiction’s state, and individuals who have served as poll workers at the jurisdiction’s polling locations if applicable. While these five jurisdictions are not representative of all local election jurisdictions nationwide that replaced or plan to replace their voting equipment, they provide examples of various approaches for replacing voting equipment and perspectives on key issues with replacing equipment. We corroborated various information we obtained through these interviews by reviewing relevant state statutes and documentation that these jurisdictions provided to us, such as postelection reports, voting system studies, expenditure summaries, and solicitations for vendor proposals to provide voting equipment and services. To address objective 3, we used responses to our survey of state election officials and interviews with seven selected voting system vendors, the nine selected subject matter experts mentioned above, and officials from the EAC and National Institute of Standards and Technology (NIST) to obtain perspectives on how federal voting system guidelines and their associated testing and certification processes affect the replacement and development of voting equipment. We obtained perspectives on the most recent federal voluntary voting system guidelines (Voluntary Voting System Guidelines, versions 1.0 and 1.1) because they are currently being used to federally test and certify voting systems. We selected the seven voting system vendors based on the prevalence of jurisdictions’ use of their equipment, and to obtain variation in the type of voting system manufactured, such as optical scanners and direct recording electronic voting equipment, and whether systems were federally certified, under test to be certified, or not certified. We also wanted to include a company that plans to enter the voting system market and potentially submit its product for federal certification. Based on these criteria, we selected the following voting equipment vendors—Dominion Voting Systems, DFM Associates, Election Systems and Software, Everyone Counts, Hart InterCivic, Open Source Election Technology Institute, and Unisyn Voting Solutions. To determine the actions taken or planned by the EAC to update the federal voluntary voting system guidelines, we reviewed EAC and NIST documents and interviewed officials from the EAC and NIST about these actions. We also interviewed the seven selected voting system vendors about their involvement, if any, in updating the guidelines and their perspectives on these actions. The perspectives of the seven voting system vendors and nine subject matter experts are not generalizable but provide examples of views on the federal guidelines and their associated testing and certification processes from a range of stakeholders. We conducted this performance audit from June 2016 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We reviewed state statutes and regulations as of December 2017 regarding the testing and certification of voting systems to describe the extent to which state laws and regulations reference federal voting system certification or testing standards and the extent to which states require the use of these standards. As shown in table 8 below, we grouped the state laws into three categories for the purposes of this report: (1) requires full federal certification; (2) requires testing by a federally accredited laboratory and/or testing to federal voting system standards; and (3) no federal requirements. Category 2 includes states that use some aspect of the federal testing and certification program but do not require full certification. A number of states in this category require both testing by a federally accredited laboratory and testing to federal standards, but we included in this category states that had either requirement in state law or regulation. Category 3 includes some states that utilize the federal certification or testing standards to some extent but that do not require certification or testing to meet federal standards by law or regulation. We then sent our categorization to state officials in the 50 states and the District of Columbia and incorporated changes that we received from those officials. To determine the types of voting equipment local election jurisdictions used for the 2016 general election, jurisdiction perspectives on equipment use and performance, and the factors jurisdictions consider when deciding whether to replace voting equipment, we conducted a web- based survey of officials from a stratified random sample of 800 local election jurisdictions nationwide. In total, we received 564 completed questionnaires for a weighted response rate of 68 percent. The questions we asked in our survey are shown below. Our survey was composed of closed- and open-ended questions. In this appendix, we include all survey questions and results of responses to the closed-ended questions; we do not provide information on responses provided to open- ended questions. The tables below represent the estimated percentages of the jurisdictions’ responses to the closed-ended questions. The estimates we report are rounded to the nearest percentage point and are national-level point estimates representing the experiences, views, and opinions of all local election jurisdictions nationwide with populations greater than 2,500. Because our estimates are from a generalizable sample, we express our confidence in the precision of our particular estimates as 95 percent confidence intervals which are also provided in the tables. As the jurisdictions we surveyed were selected with probability proportionate to population size, rather than expressing the point estimates in terms of the percentage of jurisdictions nationwide that had a specified characteristic, we express the point estimates for the survey responses in terms of the percentage of the population nationwide that resides within jurisdictions that had a specified characteristic. For a more detailed discussion of our survey methodology, see appendix I. Question 1 (open-ended question): What is the name, title, telephone number, and e-mail address of the primary person completing this questionnaire so that we may contact someone if we need to clarify any responses? The Election Assistance Commission’s (EAC) Voluntary Voting System Guidelines, Version 1.1, defines commercial off-the-shelf (COTS) products as software, firmware, devices, or components that are used in the United States by many different people or organizations for many different applications other than certified voting systems and are incorporated into the voting system with no manufacturer- or application- specific modification. Examples of COTS components include hardware that can be purchased commercially (e.g., tablet devices, scanners, printers, memory cards or chips, etc.) and integrated as part of voting equipment. The next series of questions asks about your jurisdiction’s integration of COTS components into voting equipment that was acquired from a vendor or self-designed by your jurisdiction. For the purpose of questions 30-36 (the next 7 questions), the term “voting equipment” refers only to the equipment your jurisdiction used to cast and count votes. Question 58 (open-ended question): If you have any additional comments concerning any of the topics covered in this questionnaire, please use the space below. To obtain information on the types of voting equipment used in the 2016 general election and the factors states consider when deciding whether to replace voting equipment, we conducted a web-based survey of state- level election offices in the 50 states and the District of Columbia. The questions we asked in our survey of state election offices are shown below. Our survey was composed of closed- and open-ended questions. In this appendix, we include all survey questions and results of responses to the closed-ended questions; we do not provide information on responses provided to open-ended questions that required manually entered text responses. The tables below represent the frequencies of state responses to the questions. We received surveys from 46 states (a 90 percent response rate), while 5 states did not respond. However, the total number of responses to individual questions may be fewer than 46, depending upon how many states were eligible or chose to respond to a particular question. For a more detailed discussion of our survey methodology, see appendix I. Question 1 (open-ended question): What is the name, title, telephone number, and e-mail address of the primary person completing this questionnaire so that we may contact someone if we need to clarify any responses? Question 46 (open-ended question): If you have any additional comments concerning any of the topics covered in this questionnaire, please use the space below. The five local election jurisdictions we selected to include in our review— Los Angeles County, California; Travis County, Texas; Anne Arundel County, Maryland; Lafayette County, Florida; and Beaver County, Utah— used varying approaches in replacing their voting equipment. Election officials in these jurisdictions and in their respective state election offices provided a range of perspectives on their experiences and the replacement process. Los Angeles County is the most populous local election jurisdiction in the nation. It currently uses hand-marked paper ballots that are tallied using central count optical scan equipment, which has been in place since 2003. Prior to 2003 and dating back to 1968, these same ballots were used for its punch card voting system. The county is in the process of self-designing its own voting system, which is expected to consist of electronic ballot marking devices (BMDs) that produce paper ballots to be tallied on central count digital scanners, and plans to fully implement it in 2020. According to county officials, the overall performance and features of the county’s voting equipment and the need for the equipment to meet potential state and local requirements were among the key factors that influenced the county’s decision to begin the process of replacing its optical scan system. County election officials stated that while the county’s current voting equipment is reliable, accurate, and familiar to voters, the design and the age of the equipment do not offer the technical and functional flexibility necessary to continue to accommodate potential state regulatory changes and the growing and increasingly diverse county electorate. For example, officials stated that the current equipment may not be able to effectively accommodate state mandates that may require changes to ballot formats or length. Specifically, officials said that state legislation enacted in 2015 requires many cities within Los Angeles County to consolidate their elections with the county’s by 2022, and as a result, the number of races and measures on the ballot may exceed the 12-page capacity that the current equipment can accommodate. They also noted that the technical limitations of the equipment present challenges to providing voters with greater voting options, such as early voting or the use of vote centers on Election Day, and features that enhance accessibility and ease of use. The county has developed a design concept and specifications for its new voting equipment and is in the process of soliciting and selecting vendors to manufacture it. It has acquired several functional prototypes of the current design for the new equipment and has outlined the planned in- person voting process using this equipment, as shown in figure 11. According to county officials, the equipment specifications and in-person voting process have not been finalized and continue to be refined. County officials stated that the current design concept for the new equipment is intended to provide greater flexibility in administering elections, provide a more user-friendly and accessible voting experience, enhance accuracy and auditability, and could potentially lower costs for system upgrades if developed as planned: Greater flexibility for administering elections. According to county election officials, the new equipment is designed to provide more flexibility for administering elections and to respond to changing legislative provisions on conducting elections. For example, the California Voter’s Choice Act, which was enacted in September 2016, generally authorizes Los Angeles County to conduct vote center elections beginning in 2020 if certain conditions are met. Officials stated that the proposed new equipment is expected to facilitate the use of vote centers because it would have the capability to electronically retrieve a voter’s ballot regardless of the precinct in which the voter is registered. They also noted that the BMD would allow the county to have ballots with multiple formats and a large number of races. A more user-friendly and accessible voting experience. County election officials stated that the BMD is intended to provide the ease of use of a touch screen interface, which would incorporate features such as scrolling and tapping that are familiar to voters who use mobile devices. The BMD would also allow voters to select from English or the 11 other languages the county plans to support and is designed to include accessibility devices, such as a headset and tactile keypad for voters with vision impairments and other disabilities. Voters would be able to make their selections and cast their paper ballot without having to handle the ballot. Officials stated that these features are expected to allow voters with special needs to use the same equipment as all other voters and cast their votes independently and privately. The county’s proposed design also includes an interactive sample ballot which voters can access from their computers or mobile devices to pre-mark their vote selections, convert to a Quick Response (QR) code, and then scan into the voting equipment to populate their ballots. Officials stated that this feature may help reduce lines by decreasing the time it takes for voters to mark their ballots once they reach the BMD. Enhance accuracy and auditability. The new voting equipment is designed to record vote selections on paper in human readable text. County officials stated that this is expected to more clearly capture voter intent than manually marked ballots, reduce the time and resources needed by county staff to interpret voters’ intent, and increase the accuracy of election results and public trust in the voting process. Officials stated that the new equipment is also expected to improve the county’s auditing capabilities. For example, the digital scanner is designed to allow the county to efficiently audit the results of individual races and measures, including conducting risk-limiting audits in which a specified number of ballots cast for a particular race are reviewed to confirm the election result for that race. According to officials, the county’s current equipment tallies ballots by precinct and does not keep an electronic record of the specific votes cast on individual ballots. As such, it provides the capability of auditing the results by precinct but not individual races at the ballot level. Easier and less costly upgrades. According to county officials, the design of the voting equipment is intended to be modular so that key components can be replaced individually. Officials stated that this is intended to allow the county to more easily update equipment and incorporate technological advances because it will be able to swap out components if more affordable, better technology becomes available on the market. Officials said that the cost of replacing equipment parts is expected to be lower than with traditional voting systems. Los Angeles County’s Voting Systems Assessment Project (VSAP) was established by the Registrar-Recorder/County Clerk in 2009 to help guide the development and acquisition of the county’s new voting equipment. According to county election officials, the VSAP has taken a user- centered approach to the design of the new voting equipment that prioritizes the specific needs and expectations of the voters and incorporates the requirements of county election administrators. Officials also stated that they sought to have a transparent design process that included voter input and participation to help promote public confidence in the new voting equipment. The project has five phases—(1) public opinion and stakeholder baseline research, (2) establishment of voting system guiding principles, (3) system design and engineering, (4) manufacturing and certification, and (5) phased implementation. The county is currently in the manufacturing and certification phase. Officials reported that about $19 million has been expended to develop the new voting equipment as of December 31, 2017. Officials also stated that after the new system is certified, an additional $49 million in state funds from the Voting Modernization Bond Act of 2002 will be available to the county. Table 108 describes the VSAP phases, their associated expenditures and funding sources, and examples of key actions taken or planned in each phase. County officials told us they plan to retain ownership of the intellectual property rights of the new voting equipment so that the system remains publicly owned and not proprietary like traditional vendor equipment. The county also plans to use an open source technology framework wherein the source code for the system software is available for review and use by other election jurisdictions and entities by license. According to county election officials, this will allow other jurisdictions to, for example, have similar systems manufactured for their use. Officials stated that having the county own the system design on behalf of the public and using an open source software model are expected to provide greater flexibility for any jurisdictions using the software to cost-effectively make modifications to the equipment and adapt it to their varying needs and requirements. For example, jurisdictions would no longer be limited to relying on a single manufacturer if they would like to make an enhancement to the equipment or replace parts. Officials noted that there is currently no licensing model or institutional framework in use for a publicly owned elections system. However, they stated that open source technology solutions in other industries have been successfully implemented and administered, and the county’s new system software could potentially be licensed and administered in a similar manner. In addition, county officials stated that they have outlined a clear business plan in the Request for Proposal (RFP) and during various information sessions with vendors which officials believe will help incentivize them to participate in building the system without potentially owning the equipment or its intellectual property rights. Specifically, officials noted that vendors would primarily receive revenue from the services they would provide, such as building the equipment and software platform and providing ongoing maintenance and support, rather than from selling the equipment itself. County officials stated that implementing the new voting equipment and moving to vote center elections in 2020 are changes to administering elections for the county that will require a substantial educational and informational effort. Officials noted that they have involved numerous stakeholders throughout the VSAP process to help effectively prepare for these changes and plan to allocate resources to educate voters and train poll workers. Some of these efforts are already underway. For example, the county has posted information and videos on the planned new voting equipment and process on the VSAP website and has been using the BMD prototype for public demonstrations and internal training on the new voting process. Travis County currently uses direct recording electronic (DRE) equipment without a voter-verified paper audit trail (VVPAT), which has been in place since 2001. The county also has conducted vote center elections since 2011. Starting in 2009, the county took steps to design and build its own equipment, including developing a concept for a DRE with a VVPAT that centered on system security and auditability. In September 2017, the county decided to no longer pursue building the voting equipment and plans to purchase equipment from a vendor. The county plans to have the new equipment in place for the 2020 election. According to county officials, the overall performance and features of the county’s voting equipment was the primary reason for deciding to begin the process of replacing its DREs. In 2009, the Travis County Clerk convened an Election Study Group to assess the county’s current equipment and make recommendations for future equipment. This group was composed of 45 members representing election officials and workers, advocacy organizations, voters with disabilities, computer security experts, academics, and other segments of the community. According to the report that the group issued, most members expressed confidence in the way Travis County conducted elections and in the accuracy of its current equipment. However, they also expressed concerns over the equipment’s age and the lack of a paper trail, which they said decreased voter trust in the system and increased the risk of election equipment tampering. The group noted that the Travis County Clerk’s Office’s use of safeguards and security and testing procedures beyond those required by law helped minimize the risk of tampering. The report recommended that the county move toward using equipment that offers an electronic count and paper record as soon as an alternative that met the county’s requirements became available. The Election Study Group outlined 19 key requirements that Travis County’s new equipment should meet. The requirements included, for example, producing a paper voting record that can be verified by the voter and be used to independently, transparently, and efficiently reconcile an electronic tally in an audit or recount; allowing voters with special needs to vote using the same equipment as other voters; enabling early voting and the use of vote centers; and having reasonable purchase, operational, and system upgrade costs. The group found that no equipment on the market in 2009 met the needs of the county and, as a result, the county began exploring options to design its own equipment. Officials stated that this effort was also intended to provide an alternative to the current vendor model that could reduce maintenance costs and annual licensing fees that are incurred with proprietary systems. In 2012, the county Clerk convened a group of election administrators, usability experts, and academic experts in computer science and statistics, and through a series of discussion sessions, developed the concept for the county’s new system, which they named STAR (Secure, Transparent, Auditable, and Reliable) Vote. STAR-Vote was designed to be centered around a DRE that produces verifiable and auditable paper records. At the polling place, voters would make their selections on a DRE device with a commercial off-the-shelf (COTS) tablet, which would also be equipped with an auditory interface for visually impaired voters and other features to assist individuals with special needs. The voters’ selections would be encrypted and stored on the internally networked DRE devices, and voters would also receive a printed paper record with their choices. After reviewing the paper record and confirming their selections, voters would feed the paper record into a ballot box scanner to cast their vote. Once the polls closed, the devices storing the votes would be transported to receiving stations, where voting data are transmitted for electronic tabulation. The paper records would be available for audit or recount purposes. In addition, county officials stated that the equipment’s proposed encryption technology was designed to potentially allow for the following features without revealing any individual’s vote: Voters would receive a receipt that was attached to their paper records at the polling place and could go online after Election Day and use a code on the receipt to verify that their ballots had been cast and counted. Third parties, such as the League of Women Voters or political parties, could access encrypted voting data to verify that the results the county had reported matched vote totals they had independently derived from the data. The county could conduct risk-limiting audits to verify the consistency between the electronic and printed vote records and test the accuracy of the reported election outcomes. Audits could be conducted on individual ballots or races if needed. In June 2015, the county issued a Request for Information for STAR-Vote to solicit input on the design, development, implementation, and maintenance of the equipment. Based on information gathered from the request, it issued an RFP in October 2016 to solicit proposals from voting system vendors and others for the development and implementation of key components of the equipment for in-person voting. The county also issued a Statement of Intent for the equipment to inform interested parties of the county’s planned approach for the long-term management and support of STAR-Vote. According to these documents, the county planned to own the intellectual property rights for the equipment and provide open source software for its system to the elections community under a licensing agreement, which would allow other jurisdictions to use similar equipment. The Statement of Intent described the formation of a nonprofit organization to manage and support STAR-Vote and sought $25 million in funding from interested parties to complete the development of the open source software components, support the organization’s operating budget for the first 5 years, and provide a cash reserve. The county planned to use these funding commitments and local budget appropriations to develop, build, and deploy the equipment. In September 2017, the county announced that it had decided to no longer pursue developing and building STAR-Vote. The county stated that it received 12 proposals in response to the RFP but they were not sufficient to build a complete voting system. According to county officials, none of the proposals included the election management system for the equipment that would handle ballot definition and the tallying of results, among other related tasks. In addition, officials stated that they received limited responses to their solicitation for financial commitments in the Statement of Intent and thus lacked the necessary funding to develop and build the equipment. Officials noted that the open source software platform they had envisioned was seen by voting equipment vendors as a low-revenue business model in the current elections marketplace. They added that potential participants in a STAR-Vote entity may not have had a clear concept of how its business model might work, which they said was perhaps due to the county’s more limited focus on this aspect when they were initially designing the system. Given these obstacles and the age of the county’s current equipment, the county decided that it needed to move toward acquiring more immediately deliverable voting equipment through a voting system vendor. The county has incorporated some of the features of STAR-Vote into its requirements for new voting equipment. According to county officials, the county plans to acquire either DREs or ballot marking devices with precinct count digital scanners because, in their view, they are accurate (e.g., prevent voter errors, such as overvotes or stray marks on the ballot, and minimize questions about voter intent), allow individuals with disabilities to vote on the same equipment as other voters, support vote center elections, and offer fast reporting of election results. The county also plans to require that its next voting equipment have the following features: A voter-verified, paper list of choices for recount purposes. County officials stated that the equipment must produce printed paper records that can be tallied and connected with electronic voting records through an automated process. This electronic connectivity would allow paper-ballot recounts to be conducted on individual races. Security features that include support for third party verification of results and better postelection audits. According to county officials, the equipment they acquire must allow for third parties to independently verify reported election results and must support risk- limiting audits. Officials stated that they believe there is or will be equipment on the market in the near future that could support these features. They noted that they are also prepared to work with vendors to customize existing equipment to meet the county’s requirements if needed, acknowledging that such additions may increase expenses or require additional time to recertify parts of the voting system. County officials estimate that the new equipment will cost about $16 million and stated that acquisition will be funded through local bonds. County officials said they would like to have the new equipment in place for the 2020 election, which would require them to start deploying it no later than May 2019. The county issued an RFP for the system in November 2017, and officials stated that they plan to assemble a group of stakeholders similar to those who participated in the 2009 Election Study Group, as well as the individuals who designed STAR-Vote, to help evaluate the proposals received. Officials noted that their current equipment is functioning and robust, but that the new equipment must be deployed before the current equipment begins to degrade. In addition, they stated that the May 2019 implementation date is the latest possible date in order to allow sufficient time to educate voters and train county staff and election judges on the new equipment before using it in the 2020 election. Anne Arundel County had used DREs without a VVPAT since 2004 and replaced its equipment in 2016 with a system in which voters manually mark paper ballots and insert them into precinct count digital scanners which then count them. Maryland requires the use of uniform voting equipment in polling places statewide and the state and counties each pay 50 percent of the costs of acquiring equipment. In our state survey, Maryland officials reported that the state determines when voting equipment is to be acquired and selects the type and model of voting equipment that local jurisdictions use. According to the Maryland State Board of Elections (SBE) and Anne Arundel County Board of Elections officials, the need for voting equipment to meet state requirements, the overall performance and features of the equipment, and the ability to maintain the equipment were among the key factors that influenced the state’s decision to replace its equipment. Specifically, in 2007, Maryland enacted a law that prohibited the use of a voting system unless the SBE determined that the system provides a voter-verifiable paper record, thereby requiring the state’s DREs to be replaced. SBE officials said that the passage of the new law was driven primarily by a push from voting advocates to move to new equipment that used paper ballots and provided a verifiable paper trail. Although the law was enacted in 2007, state funding for the new equipment was not available until 2014 due to budgetary constraints. While the change in state law was the main reason for replacing its voting equipment, both SBE and Anne Arundel County officials noted that the state’s previous DRE equipment was nearing the end of its life cycle and various problems had begun to occur more frequently. For example, SBE officials said that nonresponsive touch screens and battery unit failures became more common with the equipment used in the state. In addition, Anne Arundel County officials stated that while their equipment generally performed satisfactorily, some of the touch screens had begun to degrade and develop calibration issues, which resulted in the appearance of incorrectly recording voters’ selections. In addition, county officials said that the equipment could no longer support certain software or security updates, and replacement parts were challenging to acquire. According to SBE officials, state law specifically required the purchase of precinct count scanners so the board did not consider other types of voting equipment. The SBE issued an RFP in July 2014 and four voting system vendors submitted proposals. The SBE formed an evaluation committee to analyze the technical and financial details of the proposals. According to SBE officials, the committee’s members included a state official with expertise on voting systems, a county election director, a county technical specialist, and election experts and researchers, among others. Anne Arundel County election officials stated that the SBE also established various subcommittees to solicit input from county officials as the state made its selection. They said that relevant local elections staff members were involved in the selection process and that in their view, the process had worked well. According to SBE officials, in addition to assessing the vendors’ proposals, the evaluation committee worked with the University of Baltimore to perform usability and accessibility testing on the equipment under consideration. The committee also hosted a public demonstration to collect feedback on such areas as ease of use and confidence that votes were accurately cast. Officials stated that after conducting its assessment of the equipment, the committee presented its findings to the SBE, and in October 2014, the board selected the voting equipment to be acquired based on the committee’s recommendation. Maryland requires equipment to be certified by the EAC and the SBE before use in the state. The selected equipment had been certified by the EAC in July 2014 and was certified by the SBE in December 2014. As part of the certification process, the SBE tested the equipment to ensure that it met requirements in the Maryland elections code, including simulating primary and general elections using ballots typically used by jurisdictions in the state, and reviewed the findings from the public demonstration and usability testing performed during the selection process. The SBE decided to lease rather than purchase the equipment for a number of reasons. Specifically, SBE officials said that leasing provided increased flexibility to update or replace equipment more frequently and had lower upfront costs. In addition, the state did not want to buy new equipment until the implementation of updated federal guidelines. Under the current contract to lease the digital scan equipment, payments are made to the vendor on a quarterly basis. According to SBE officials, the current payment to the vendor for leasing the digital scan equipment statewide is approximately $1.1 million per quarter. SBE officials said that the process to acquire new equipment is inherently challenging, but in their view, the process generally went well. Knowing what type of equipment the state needed to acquire simplified the process and reduced the number of proposals that officials needed to review. Nevertheless, they noted that the process took more of their time and resources than they had anticipated, which presented challenges because the state was holding elections during the same time period it was selecting and acquiring the equipment. However, the SBE met its goal of implementing the new equipment by 2016. SBE and Anne Arundel County officials stated that deployment of the new equipment in the 2016 general election went smoothly with no significant challenges. The officials said they took a number of steps to help ensure a successful rollout. For example, SBE officials said that they established a strong project management team and hired contractors to assist with tracking progress toward key deadlines; drafting policies, procedures, and training manuals; and testing equipment and sending it to the counties. Anne Arundel County officials said that they hired about 40 temporary staff to assist with deploying the new equipment and other tasks during the general election. In addition, they stated that the county conducted extensive election judge training and held mock elections using the new equipment. The officials noted that with the new paper-based system, the county needed to recruit and train more election judges compared to past elections to hand out ballots, show voters how to operate the equipment, and handle provisional voting. The two election judges we interviewed stated that the training they received was very comprehensive and effectively prepared them for Election Day. Both SBE and Anne Arundel County officials stated that additional voter education efforts would have been beneficial. According to SBE officials, the SBE had developed plans for a statewide multimedia effort to educate voters on the new equipment but did not receive funding to implement it. A scaled down effort was carried out instead, which included demonstrating voting equipment at meetings and fairs around the state, producing local media news stories, and posting a video on the SBE’s website on how to use the new equipment. SBE and Anne Arundel County officials stated that the more limited voter education efforts might have contributed to longer lines on Election Day in some polling places because many voters were unfamiliar with the equipment and some had questions or needed assistance with using it. However, these officials noted that voter wait times were not a widespread or significant issue during the general election. The two election judges we interviewed stated that some voters needed help inserting their ballots into the scanner, but observed that voters generally appeared to find the new equipment easy to use. They also noted that some voters commented that paper ballots provided them with reassurance with regards to the security of their vote. SBE and Anne Arundel County officials said that the equipment itself performed satisfactorily in the 2016 general election with only minor problems. For example, state officials said that the scanners jammed occasionally, but this was easily resolved by elections personnel. In addition, most polling locations in the state were allocated only one scanner, so some jurisdictions with two-page ballots, such as Anne Arundel County, experienced lines because of the length of time it took for voters to scan their ballots. Anne Arundel County officials plan to analyze voter registration data to help determine the number of scanners needed at each polling place and share the information with the SBE to help inform allocations for future elections. More generally, SBE officials noted that the new system has less equipment to manage—about 2,600 digital scan units compared to the approximately 18,000 DRE units used statewide in prior elections—so there is less pre-election testing and postelection maintenance that has to be done, saving time and labor for the state and counties. The state contracted with a third party vendor to conduct a postelection audit of the 2016 general election by using independent software to tally all digital ballot images. The audit confirmed the accuracy of the election results. According to SBE officials, the new equipment’s ability to capture and store digital images of the ballots made this type of audit possible. Anne Arundel County officials stated that the ability to conduct such an audit is one of the main benefits of the new equipment. Lafayette County has a small population and, in 2016, replaced its precinct count optical scan equipment with precinct count digital scan equipment. The county formed a consortium with other counties in the state to help acquire its new equipment. According to the county’s Supervisor of Elections, the cost to acquire new equipment and availability of funding and the need to meet state requirements were among the key factors that influenced the county’s decision to replace its voting equipment. He stated that Lafayette County’s optical scanners were approximately 15 years old but were generally in good condition and performed satisfactorily in prior elections. County officials had planned to replace the county’s aging voting equipment by 2018 or 2020, but decided to replace it in 2016 because of the opportunity to join a consortium of counties that formed to acquire new equipment, which the Supervisor stated helped secure funding for and lower the costs of purchasing the equipment. In addition, the Supervisor of Elections said that, to comply with state law, the county needed to acquire a paper ballot system with a BMD to replace the DRE it had used for voters with disabilities. Specifically, as of July 2008, Florida law required all voting in the state to be done using mark-sense paper ballots, which are generally counted using optical or digital scanners, except for voting by individuals with disabilities. Current state law requires jurisdictions to use these paper ballots for accessible voting by 2020. As such, according to the Supervisor of Elections, part of the impetus for acquiring new voting equipment was to replace the county’s DRE to meet the 2020 deadline in the law. The Supervisor of Elections stated that Lafayette County is a small county and does not have much purchasing power. He said that Lafayette County and other small counties in the state formed a consortium to lobby the state for assistance and to leverage their collective purchasing power. The 12-county consortium was established in a 2015 meeting that was attended by county election officials, the Florida Deputy Secretary of State, and the vendor that supplied the counties’ previous voting system. According to the Lafayette County Supervisor of Elections, the consortium decided to purchase precinct count digital scanners from the same vendor the counties had used before because county staff were familiar with the vendor and equipment, and the cost for the equipment was lower than similar equipment from another vendor that some counties in the consortium had considered. In addition, the Supervisor of Elections stated that the digital scanners have features that were an improvement over the county’s previous optical scan equipment. For example, he stated that the new scanners have more robust security features, such as locking panels, seals, and a requirement for a passcode to access the system. He also noted that the scanners have touch screens that flip up and are back-lit, which are easier for voters and poll workers to read and more clearly identify overvotes. Further, he stated the scanners digitally capture and store ballot images. The two Lafayette County poll workers we interviewed confirmed that the new equipment more clearly identified overvotes for them and for voters than did the previous equipment. According to the county’s Supervisor of Elections, having the consortium approach state officials as a group helped secure HAVA funds to help the counties purchase the voting equipment. In addition, he stated that being a part of the consortium helped the counties negotiate a lower price for their equipment than what they could have obtained individually because they pooled their purchases and acquired a higher volume of machines. While the consortium negotiated as a unit, each county has an individual contract with the vendor. The Supervisor of Elections stated that the total cost to purchase Lafayette County’s new voting equipment—which included seven digital scanners, seven BMDs for voters with disabilities, and various system components—was about $70,000. The equipment was acquired primarily with HAVA funds, although he noted that the county allocated about $12,000 in local funds to purchase three additional BMDs. A memorandum of agreement for funding and purchasing the equipment was signed by Lafayette County and the state in November 2015 and, according to the Supervisor of Elections, the equipment was acquired in late 2015 and first used in the March 2016 primary election. The Supervisor of Elections and the two poll workers we interviewed stated that deployment of the new voting equipment went smoothly and the county did not experience any challenges because the new and previous equipment are both precinct count scanning systems. The Supervisor noted that the voting process remained the same for the voter, so extensive voter education efforts were not needed. He stated that Lafayette County did not experience any equipment malfunctions during the November 2016 general election, and a postelection audit that was conducted, in which the county manually tallied ballots from a randomly selected race and precinct, found that the results were accurate. Beaver County has a small population and previously used DREs with a VVPAT. In 2014, Beaver County began conducting vote-by-mail elections and replaced its DREs with central count digital scan equipment to support this change. According to Beaver County officials, the overall performance and features of the equipment and the ability to maintain the equipment were among the key factors in their decision to replace the county’s equipment. Officials stated that the county had been using DREs since 2005 and that by 2013, they had come to the conclusion that the equipment was not very efficient or user-friendly for administering elections. For example, the Deputy Clerk stated that it was time consuming to both set up the equipment and tally the votes, which required collecting and uploading the memory component from each of the DREs. She also noted that the operating software for the equipment’s election management system had become out-of-date and did not have a user-friendly interface. According to the Deputy Clerk, this made it difficult for staff to navigate without detailed training, which was time consuming and costly. In addition, county election officials said that they were unsure about future maintenance and system upgrade costs and decided it would be more cost-effective to spend funds on purchasing new voting equipment rather than on upgrades to equipment with which they were not very satisfied. In 2013, the county decided to begin conducting vote-by-mail elections the following year and to acquire new equipment to support this change. According to county officials, this decision was due to the performance of their DREs and a desire to reduce costs and increase the efficiency of administering elections, among other reasons. Officials said that because the county was moving to vote-by-mail elections and DREs would no longer be needed for each precinct, the county would instead acquire central count scanners designed to count the mail-in ballots it would receive at the county elections office. According to Beaver County officials, the main individuals involved in the process to select and acquire the county’s new voting system included the current Beaver County Clerk, Deputy Clerk, a county information technology official, and the previous county clerk, among others. When the county started the process in 2013, the state had not initiated any efforts to help local jurisdictions acquire new equipment. As such, both Utah and Beaver County election officials said that the state was aware of the county’s decision to replace its equipment but was not involved in the selection and acquisition process. County officials stated that they wanted to acquire central count scanners to support conducting vote-by-mail elections and a BMD for in-person voting at the elections office for individuals with disabilities. Officials said that, in 2014, they verbally requested proposals from their current vendor and an elections services company that the county had employed in 2012 to provide training, systems testing, and other support for elections. According to the Deputy Clerk, the county requested proposals from these two entities because county officials were familiar with them and were not aware of other vendors that might submit proposals. Officials said that the county received a proposal from the elections services company, and selected the company because it was the only bid received and the equipment the company sold met the county’s needs and was federally certified. They stated that one of the challenges they experienced as a small county looking to purchase equipment was that vendors were not actively marketing to them. In addition, the Deputy Clerk noted that she had limited elections and information technology experience when the county started the selection process. However, she said that the election services company was familiar with Utah’s elections code and federal voting system requirements, helped negotiate with the vendor to acquire the new equipment, and educated county staff on the equipment. Beaver County reported that the cost to purchase the equipment—two central count digital scanners, a BMD, and associated system components—was about $46,000. Local funds were used to purchase the scanners and HAVA funds were used to purchase the BMD. According to Beaver County officials, county commissioners approved the procurement of the equipment in spring 2014 and it was first used in the June 2014 primary elections. Beaver County officials stated that they deployed the new equipment in 2014 because it was more manageable to conduct such a transition during a non-presidential election year. They noted that they needed to educate the public about both voting by mail and the new voting equipment. Officials stated that the county used local newspaper ads, social media posts, and direct mailings to provide information on these changes. Officials also posted information on the county’s website and allowed people to observe logic and accuracy testing of the equipment. They noted that educating the public on the new voting method and equipment in smaller elections during 2014 and 2015 helped voters become more comfortable with what to expect for the presidential election in 2016. County officials said that they are very satisfied with the performance of the new voting equipment. They noted that conducting vote-by-mail elections and using central count scanners allow them to administer elections from one location on Election Day, which requires less time and resources than having to manage multiple polling places. Officials also stated that the new digital scanners are able to count a high volume of ballots in a short period of time. They said that, for the November 2016 general election, the vote tallying was completed within an hour of the polls closing, which allowed the county to report results quickly. However, one challenge they experienced was that the new equipment’s data format for election night reporting of results to the state was not compatible with the state’s reporting system. To address this issue, county officials reformatted the data to produce a report that could be uploaded into the state’s system, but cautioned that this may not be feasible for larger jurisdictions. According to officials, the county conducted two postelection audits for the 2016 general election—one required by the state and another that the county initiated. For the state audit, the county hand counted 1 percent of total ballots from a randomized list. In addition, the county conducted its own audit by running all ballots on its other digital scanner to compare results. According to officials, both audits validated the election results. In addition to the contact named above, Tom Jessor (Assistant Director), David Alexander, Carl Barden, Chuck Bausell, Brett Fallavollita, Sally Gilley, Christopher Hatscher, Eric Hauswirth, Richard Hung, Jill Lacey, Serena Lo, Jan Montgomery, Heidi Nielson, Shannin O’Neill, Claire Peachey, Jeff Tessin, and Johanna Wong made significant contributions to this report. We gratefully acknowledge the substantial time and cooperation of the state and local election officials, and stakeholders and experts whom we interviewed.", "summary": "Much of the voting equipment acquired with federal funds after the enactment of the Help America Vote Act in 2002 may now be reaching the end of its life span, and some states and local election jurisdictions—which number about 10,300 and generally have responsibility for conducting federal elections—have or are considering whether to replace their equipment. GAO was asked to examine voting equipment use and replacement. This report addresses (1) the types of voting equipment jurisdictions used for the 2016 general election and their perspectives on the equipment; (2) factors considered when deciding whether to replace equipment and replacement approaches in selected jurisdictions; and (3) stakeholder perspectives on how federal voting system guidelines affect replacing and developing equipment. GAO surveyed officials from a nationwide generalizable sample of 800 local jurisdictions (68 percent weighted response rate) and all 50 states and the District of Columbia (46 responded) to obtain information on voting equipment use and replacement. GAO also interviewed officials from (1) five jurisdictions, selected based on population size and type of voting equipment used, among other things, to illustrate equipment replacement approaches; and (2) seven voting system vendors, selected based on prevalence of jurisdictions' use of equipment, type of equipment manufactured, and systems certified, to obtain views on federal voting system guidelines. These interviews are not generalizable, but provide insights into jurisdictions' and vendors' experiences. Local election jurisdictions primarily used optical scan and direct recording electronic (DRE), also known as touch screen, equipment during the 2016 general election and were generally satisfied with voting equipment performance. Specifically, on the basis of GAO's nationwide generalizable survey of local election jurisdictions, GAO estimated that jurisdictions with 63 percent (from 54 to 72 percent) of the population nationwide used optical or digital scan equipment as their predominant voting equipment during the election, while jurisdictions with 32 percent (from 23 to 41 percent) of the population nationwide used DREs. In addition, the survey results indicated that accurate vote counting and efficiency of operation were top benefits experienced by jurisdictions for both types of equipment, and storage and transportation costs were a top challenge. Further, GAO estimated that jurisdictions with 93 percent (from 88 to 96 percent) of the population nationwide did not experience equipment errors or malfunctions on a very or somewhat common basis and jurisdictions with 96 percent (from 94 to 98 percent) of the population were very or generally satisfied with the performance of their equipment during the 2016 general election. GAO identified four key factors that jurisdictions and states consider when deciding whether to replace voting equipment—(1) need for equipment to meet federal, state, and local voting system standards and requirements; (2) cost to acquire new equipment and availability of funding; (3) ability to maintain equipment and receive timely vendor support; and (4) overall performance and features of equipment. When replacing equipment, the five jurisdictions GAO selected for interviews used varying approaches based on their specific needs and resources. For example, Los Angeles County, California, which has a large and diverse electorate, is self-designing its own voting equipment and, according to officials, has incorporated a user-centered approach that prioritizes the needs and expectations of its voters. Lafayette County, Florida, which has a small population, joined a consortium of other small counties to help obtain funding and pool purchasing power to replace its equipment. The state election officials we surveyed and the seven selected voting system vendors we interviewed, among other stakeholders, had varying perspectives on how the current voluntary federal voting system guidelines affected the replacement and development of voting equipment. These guidelines can be used to test and certify equipment to verify that it meets baseline functionality, accessibility, and security requirements. The stakeholders we surveyed or interviewed generally indicated that the guidelines and their associated testing processes provide helpful guidance for equipment developers, cost savings for states that do not have to duplicate federal testing, and assurance that certified equipment meets certain requirements. However, some of these stakeholders stated that aspects of the guidelines could discourage the development of innovative equipment and limit the choices of voting equipment on the market. The Election Assistance Commission (EAC), which is responsible for developing the federal guidelines, is updating them with stakeholder input and plans to issue a new version in late summer 2018. GAO incorporated technical comments provided by the EAC and election officials from the selected local jurisdictions and their respective states as appropriate.", "document_type": "gao"}
{"report": "A homeowner can build home equity immediately by making a down payment on their home, assuming the down payment is not financed separately as a loan. Throughout the life of a mortgage, homeowners can continue to build equity (1) by making regular mortgage payments to reduce the principal amount outstanding, (2) by making additional payments to further reduce the principal amount outstanding, and (3) through appreciation in their home’s value. Additionally, the components of a mortgage (discussed below) may affect the pace of home equity building. Throughout this report, for the purposes of illustrating home equity building, we assumed that a home’s value remained unchanged from the time of the loan origination. However, home values are highly contingent on market conditions and other factors that are beyond a homeowner’s control. For example, although homes can appreciate in value, homes also can depreciate in value, which can have a negative effect on homeowners’ equity. Homeowners also could lose money on their home if they sold it shortly after purchasing because principal reduction in the initial years of a mortgage is relatively small and the benefit of any home value appreciation would be limited. Additionally, selling a home incurs transaction costs, such as realtor commissions. To avoid losing money on a home sale, homeowners would need to sell their home at an amount higher than their purchase price plus transactions costs. For example, if a homeowner buys a home for $250,000 (all fees included) and plans to sell it 3 years later, assuming transaction costs of 10 percent (or $25,000), the homeowner would have to sell the home for at least $275,000 to break even, meaning an annual appreciation in home value of more than 3 percent. If the home’s value did not appreciate at that rate, or depreciated, the homeowner would lose money on the sale. The majority of American families achieve homeownership by taking out a loan—a mortgage—to cover at least some of the purchase price. The primary components of a mortgage loan are the following: Term (duration). The most common term is 30 years. According to the Urban Institute, the 30-year fixed-rate mortgage represented approximately 90 percent of the fixed-rate purchase mortgages (that is, not for refinancing an existing mortgage) originated every month from January 2010 through July 2017, and 15-year fixed-rate purchase mortgages represented about 6 percent. Down payment. Most mortgage lenders require borrowers to make a down payment (of 3 percent or more of the purchase price, depending on the mortgage) that is applied to the purchase price of the home. A down payment also helps a borrower build home equity, assuming the down payment is not financed as a separate loan. Interest rate. Lenders charge borrowers a percentage of the mortgage amount, in exchange for providing funds to buy a home. An interest rate can be fixed or adjustable for the life of the mortgage (adjustable-rate mortgage or ARM). Because a fixed-rate mortgage’s interest rate does not change regardless of prevailing rates, a borrower’s payments for principal and interest remain the same for the life of the mortgage. In contrast, an adjustable-rate mortgage’s interest rate, for which the initial interest is generally lower than for a fixed-rate mortgage, will adjust at agreed-upon intervals. As a result, adjustable-rate mortgage payments can increase or decrease depending on the changes in interest rates and terms of the loan. Payment frequency and amount. Payments are generally made on a monthly basis. Fixed- and adjustable-rate mortgages generally have fully amortizing payment schedules—that is, the regularly scheduled payments will fully pay down the principal and interest over the life of the mortgage, with the amounts allocated to reducing principal and interest changing over time (see fig. 1). The U.S. markets for single-family housing finance include a primary market, in which lenders make (originate) or refinance mortgage loans, and a secondary market, in which mortgage loans are purchased from lenders and packaged into securities—known as mortgage-backed securities—that are sold to investors. The federal government participates in the primary and secondary mortgage markets. In the primary market, federal agencies provide homeownership assistance programs and products intended for increasing access to and affordability of homeownership. Relevant federal agencies and a government-sponsored enterprise that provide homeownership assistance and their primary housing-related policy goals include the following: Department of Housing and Urban Development provides housing assistance to low-and moderate-income families and promotes urban development. Federal Housing Administration (FHA) seeks to broaden homeownership, strengthen the mortgage marketplace, and increase access to credit by providing mortgage insurance. Public and Indian Housing helps ensure safe, decent, and affordable housing through programs such as housing choice vouchers. Community Planning and Development seeks to develop viable communities and provide decent housing and a suitable living environment through block grant assistance. Department of Veterans Affairs assists service members, veterans, and eligible surviving spouses of veterans to become homeowners through guaranteeing and issuing (in limited circumstances) mortgages for home purchases. Rural Housing Service (RHS), which is an agency within USDA, insures and guarantees housing loans for home purchases, repair, and rental housing development. Federal Home Loan Banks help provide liquidity to each bank’s member financial institutions to support housing finance and community investment. FHLBank members include commercial banks, thrifts, and credit unions. FHLBanks provide 10 percent of their earnings for affordable housing programs, including grants for affordable housing for households with incomes at or below 80 percent of the area median. Federal homeownership assistance programs can be categorized in terms of the products or services they offer or the mechanisms they use. The categories include mortgage guarantees and insurance, down- payment assistance, vouchers, and direct loans (discussed in more detail later in this report). In addition to these categories of homeownership assistance, tax expenditures, such as exclusions, exemptions, deductions (including the mortgage interest deduction), credits, deferrals, and preferential rates, can promote homeownership. For example, homeowners can take advantage of tax deductions (by choosing to itemize deductions on their tax returns) to help lower their taxable income. Taxpayers who itemize deductions may deduct qualified interest they pay on their mortgage. Taxable income may be reduced by the amount of interest paid on first and second mortgages of up to $750,000 for homes purchased generally after December 15, 2017. Additionally, taxpayers generally may deduct up to $10,000 for state and local taxes, including property taxes paid by homeowners on their homes. Participation in the secondary mortgage market occurs through the following entities: Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are government-sponsored enterprises (enterprises)—congressionally chartered, for-profit, shareholder-owned companies. They are the two largest participants operating in the secondary mortgage market. Generally, Fannie Mae and Freddie Mac purchase mortgage loans that meet certain criteria for size, features, and underwriting standards—known as conforming loans—from lenders. In purchasing loans, the enterprises provide market liquidity, so lenders can provide more loans to borrowers. Ginnie Mae. Ginnie Mae is a wholly-owned government corporation. Ginnie Mae guarantees the timely payment of principal and interest on mortgage-backed securities supported by pools of loans backed by government-insured mortgages, including mortgages insured by FHA, VA, and USDA. In a process called underwriting, mortgage lenders evaluate the creditworthiness of potential borrowers in making mortgage loans, among other things. Amid concerns that risky mortgage products and poor underwriting standards contributed to the recent housing crisis, Congress included mortgage reform provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank Act generally requires lenders to determine consumers’ ability to repay home mortgage loans before extending credit and provides a presumption of compliance with the ability-to-repay requirement for qualified mortgages. The ability-to-repay regulations set forth lenders’ responsibilities to determine a borrower’s ability to repay a residential mortgage loan, and special payment calculation rules apply for loans with balloon payments, interest only payments, or negative amortization. The regulations require lenders to make a reasonable and good faith determination of a consumer’s reasonable ability to repay a loan. The regulations establish a safe harbor and a presumption of compliance with the ability-to-repay rule for certain qualified mortgage loans (QM). The rule generally prohibits loans with negative amortization, interest-only payments, or balloon payments from being qualified mortgages, and limits the points and fees a lender may charge borrowers on a qualified loan. The regulations establish general underwriting criteria for qualified mortgages. For example, under QM requirements borrowers generally cannot exceed a maximum monthly debt-to-income ratio of 43 percent, unless the loan is eligible for sale to an enterprise. If a mortgage loan meets the requirements of a QM loan, it is eligible for the safe harbor and the lender is deemed to have complied with the ability-to-pay requirement unless the loan is a higher priced mortgage loan. A higher priced mortgage loan that otherwise meets the definition of a QM is presumed to have complied with the ability-to-pay requirements, but the presumption can be rebutted if the consumer proves that the lender did not make a good faith and reasonable determination of the consumer’s ability to repay. Additionally, federal mortgage insurance is included in the determination of whether an FHA-insured loan is a higher priced mortgage loan. Existing federal homeownership assistance programs use features and mechanisms that can have equity-building effects, but the programs are not specifically designed to accelerate equity building. The programs can assist homeowners to build equity over time by providing access to homeownership, but the programs do not have an explicit focus on accelerating the ongoing pace of paying down the loan principal faster than a 30-year fixed-rate mortgage. Rather, the overall focus of the programs is on providing affordable access to homeownership, according to officials of relevant agencies and entities and based on their mission goals. For example, the goal of FHA’s mortgage insurance program is to facilitate access to affordable mortgages for home buyers who might not be well-served by the private market. FHA implements this goal by providing insurance to lenders to facilitate access to mortgage financing for lower-income home buyers. See table 1 for examples of federal homeownership assistance programs, by major program types and potential for affecting equity building, either at a point in time or throughout the life of a mortgage. Federal mortgage insurance and guarantee programs increase market liquidity, which ultimately expands access to homeownership. The federal government commits to pay part or all of a loan’s outstanding principal and interest loss to a lender or other mortgage holder if the borrower defaults. Because they obtain insurance or a guarantee against the possibility of loss from borrower default, lenders are more willing to provide loans to borrowers who might not otherwise be served by the private market, allowing more homeowners—particularly lower-income borrowers—an opportunity to build home equity. FHA offers mortgage insurance and RHS and VA provide loan guarantees. For example, FHA will insure loans with a down payment as low as 3.5 percent from most borrowers, and conventional mortgages will allow down payments as low as 3 percent. FHA-insured loans also have more lenient credit requirements that particularly benefit minority households and first-time home buyers who might otherwise find it difficult or more expensive to take out a mortgage. Among federal mortgage insurance programs, FHA has the highest volume of mortgages insured. Federal and federally mandated programs that provide funding for grants and loans for down-payment assistance can have equity-building effects. Although accelerated equity building is not the policy goal of these programs, down-payment assistance can lower the barrier to homeownership for some lower-income home buyers so that the equity-building effects of homeownership can accrue. Examples of programs include the following: HUD’s HOME Investment Partnership Program is a block grant program that provides funding to states and localities to be used exclusively for affordable housing activities to benefit low-income households. Funds can be used for down-payment assistance for eligible low-income home buyers. According to HUD data, more than 75 percent of low-income home buyers who have received assistance from the HOME program have used HOME funds for purchasing a home (which includes down-payment assistance) since the program’s inception in 1992, directly contributing to homeowner equity building. HUD’s Community Development Block Grant (CDBG) program also provides funding to eligible states and localities for community and economic development efforts, including housing assistance. Eligible uses of home-buyer assistance include grants for down payments and closing costs. In fiscal year 2016, CDBG funds provided direct housing assistance for down payment and closing costs to 2,483 households. FHLBanks contribute funding to the Affordable Housing Program (AHP), which can provide grants for down-payment assistance through either the AHP competitive or set-aside program. Member financial institutions of the FHLBanks can apply for the set-aside funds and then distribute the funds as grants to eligible households. Set-aside grants may be no greater than $15,000 per household, and at least one-third of the FHLBanks’ annual set-aside allocation must be used for eligible first-time home buyers. According to FHFA, the FHLBanks funded about $77 million for down-payment or closing-cost assistance in 2016 (almost 90 percent of total set-aside program funding). The down-payment assistance grants have an immediate equity-building effect. RHS and HUD administer self-help grant programs that provide opportunities for very-low and low-income home buyers to purchase subsidized homes: Program participants help construct homes in exchange for subsidies, including down-payment assistance. RHS officials told us that the home buyer’s labor serves as a down payment for the home, providing the home buyer with equity at the time of purchase. RHS’s program also includes a subsidized interest rate determined by the home buyer’s income, as well as a 33-year mortgage duration that can be extended up to 38 years, to reduce the monthly mortgage payment and make the loan as affordable as possible. HUD officials raised concerns about the extent to which down-payment assistance promotes home equity building. For example, some mortgages with down-payment assistance can be associated with higher delinquency rates. Specifically, HUD officials pointed to data indicating that FHA has experienced higher loan delinquency rates for loans with down-payment assistance. As with any homeownership-assistance programs or mortgages, the potential for home equity building requires a homeowner to sustain and pay down the mortgage. In addition to down-payment assistance, HOME, CDBG, and AHP funds can be used for buying down the mortgage interest rate. Interest-rate buy-downs have accelerated equity-building effects throughout the life of the mortgage because a higher proportion of monthly mortgage payments are applied to the mortgage principal. However, agency and enterprise officials and housing experts with whom we spoke said the down payment is the biggest barrier to homeownership, and in the current environment of low interest rates, buy-downs of interest rates are not common. In addition to federal programs, some state housing finance agencies also provide down-payment assistance grants and loans that have accelerated equity-building effects. For example, the Minnesota Housing Finance Agency provides a monthly payment loan (in addition to the mortgage) of up to $12,000 to be used for down payments or closing costs. The monthly payment loan has an interest rate equal to the rate on the borrower’s first mortgage, and the loan can be paid back over a 10-year period. According to Minnesota Housing Finance Agency officials, by making payments directly on the monthly payment loan, the borrower is effectively accelerating equity building on that part of the home purchase because of the shorter term compared to a 30-year mortgage. HUD’s Housing Choice Voucher Program provides assistance in helping a homeowner pay for monthly mortgage and other homeownership expenses, which facilitate homeownership and equity building. Vouchers are administered locally by public housing agencies, but not all public housing agencies participate in the program. A home buyer would have to apply for a housing choice voucher with a participating public housing agency to use the funding for a mortgage instead of rent. First- time homeowners who meet income limits and receive homeownership counseling can qualify for the program. The payment assistance generally continues as long as the family resides in the home, and the maximum term for the assistance is 15 years if the home purchase is financed with a mortgage longer than 20 years. According to HUD, about 11,000 homeowners were receiving assistance from the Homeownership Voucher Program as of September 2017, about 0.5 percent of all vouchers. RHS and VA both offer direct loans for home purchases to eligible borrowers who may otherwise be unable to obtain financing in the private marketplace, providing access to homeownership and equity building. RHS offers direct loans to borrowers in rural areas with incomes of generally not more than 80 percent of the area median income. Loan funds can be used to build, repair, renovate, or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities. RHS provided 7,089 direct loans for single-family homes in fiscal year 2016. VA provides direct home loans to eligible Native American veterans to finance the purchase, construction, or improvement of homes on federal trust land, or to refinance a prior direct loan to reduce the interest rate. According to VA, 13 direct loans were provided to Native Americans in fiscal year 2016. Borrowers have options to accelerate equity building that include obtaining shorter-term mortgages, making more frequent or additional payments, or choosing a mortgage product available in the private mortgage market designed to accelerate equity building. These options accelerate equity building by affecting the key components of a mortgage—term (duration), down payment, interest rate, or payment frequency or amount. The advantages of building equity faster can include using home equity as a financial cushion in emergencies, like unexpected medical expenses. However, there are trade-offs to these options, such as higher monthly payments for shorter-term mortgages. Additionally, stakeholders identified key trade-offs and considerations in introducing new products and mechanisms for accelerating home equity building that could affect the success of the products or mechanisms. Home buyers and homeowners may take actions on their own to accelerate home equity building. For example, home buyers can choose a 15- or 20-year mortgage rather than a 30-year mortgage. The shorter- term product will increase the relative pace of equity building. In July 2017, almost 6 percent of all new purchase mortgage originations were for 15-year fixed-rate mortgages, according to the Urban Institute. However, shorter-term loans may present trade-offs for borrowers, which we discuss later in the report. Homeowners also can make extra mortgage payments to further reduce the principal balance, which can accelerate equity building and shorten the mortgage term. For example, according to our analysis, a homeowner making an extra monthly payment of $100 on a 30-year fixed-rate mortgage for $225,000 would accelerate equity building and reduce the mortgage duration by more than 4 years (see fig. 2). Homeowners generally have the flexibility to make extra payments at their discretion and could discontinue the extra payments at any time if they need the funding for other priorities. Homeowners also can refinance their mortgage to take advantage of lower interest rates, shorter mortgage terms or both. Lower-interest and shorter-term loans can help build equity faster. About 27 percent of mortgage refinances were for 15-year fixed-rate mortgages in October 2017, according to enterprise data reported by FHFA. However, refinancing (similar to purchase loans) incurs transaction costs (see table 2). A lender may offer low- or no-cost refinancing, but likely would charge a higher interest rate in exchange for lowering or eliminating fees. Additionally, other payments might be required at closing (which would be out-of-pocket expenses unless they were financed), including upcoming mortgage insurance and property taxes. Also, homeowners who refinance to take advantage of lower interest rates could extend their mortgage term or choose to cash out some of the existing home equity, thereby eliminating the potential for accelerated equity-building effects in refinancing. See figure 3 for a comparison of how different refinancing options can affect home equity building. The Wealth Building Home Loan (WBHL) is a relatively new private- sector mortgage product that incorporates a number of features specifically designed to accelerate equity building (see fig. 4). The WBHL, which has been offered commercially on a limited basis for about 3 years, has shorter mortgage terms (15 or 20 years), can have a fixed or adjustable rate, and allows the interest rate to be bought down. A lower interest rate would allocate a greater portion of each monthly payment to reduce mortgage principal and also reduce the amount of the monthly payments. Moreover, the WBHL allows for no down payment (including allowing the financing of closing costs). The no down-payment feature is designed to facilitate access to homeownership. According to lenders we spoke with who offer WBHLs, allowing for no down payment is the key feature that distinguishes the WBHLs from standard 15- or 20-year mortgage loans available in the private-sector mortgage marketplace. Consistent with what we heard from lenders, officials from Fannie Mae and Freddie Mac told us loans that do not require a down payment generally are not available in the private-sector mortgage marketplace. Additionally, because of the low or no down-payment features, lenders we spoke with who offer WBHLs typically require private mortgage insurance, which is provided by a major mortgage insurer. As shown in figure 4, the monthly mortgage payments of a WBHL can increase substantially, compared with the payments of a 30-year fixed- rate mortgage. Some lenders we interviewed offer WBHLs with the option to buy down the interest rate, and some require a minimum buy-down. One lender requires borrowers to pay 2 points (or 2 percent of the mortgage loan amount), which buys down one-half of a percentage point of the interest rate. Another lender offers a 15-year loan with an option to pay 3 points to buy down the interest rate to 1.75 percent for the first 7 years. Rates increase to 5 percent for the remaining 8 years. The lender also offers a 20-year loan with the option to pay 2 points to buy down the interest rate to 2.99 percent for the first 7 years. Rates increase to 5.25 percent for the remaining 13 years. Although the option to buy down the interest rate has been advanced as a feature that accelerates equity building, some lenders we interviewed said that borrowers tend to pay the minimum required points only, because borrowers generally prefer to pay as little cash as possible at loan origination. Additionally, some lenders and other stakeholders have said that, in a low interest-rate environment, the incentive for borrowers to buy down the mortgage interest rate is greatly reduced. Another mortgage product that we identified during our review—the Fixed-Payment Cost-of-Funds Index (Fixed-COFI) Mortgage—has been proposed by two economists, but has not yet been offered by private- sector lenders. This type of mortgage is intended to provide another option for consumers that encourages equity building and limits exposure for borrowers and lenders to interest rate fluctuations. The Fixed-COFI would allow borrowers with little or no money down to obtain an adjustable-rate mortgage that features a fixed monthly mortgage payment and an equity savings account. Funds in the equity savings account could be used to pay down the mortgage principal, thereby accelerating home equity building. According to the economists of this proposed product, the low to no down-payment feature may help individuals with little to no savings access homeownership, particularly those who live in high-cost areas where the rent payment is comparable to a mortgage. In addition to the borrower’s fixed monthly payments, the Fixed-COFI mortgage also would determine how the borrower’s fixed payments would be allocated, including to the equity savings account. The borrower’s fixed monthly payment would be fully amortizing and be calculated based on prevailing rates for a 30-year fixed-rate mortgage at the time of loan origination. But the interest portion of the payment due to the lender would be separately calculated each month, based on a rate derived from COFI plus a gross margin to account for lenders’ costs and insurance risk premiums. Each month, the difference between the borrower’s fixed payment and interest due the lender based on the COFI rate plus a gross margin would determine if any funds from the borrower’s payment would be added to the equity savings account. The funds allocated to the equity savings account are designed to be used to pay down the principal. However, the ways in which the home equity funds could be used to pay down mortgage principal depend on the terms of each loan. If the home equity account were depleted, lenders might cover any payment shortfalls and seek insurance reimbursements. In addition, the accelerated equity-building effect of the Fixed-COFI mortgage product would rely on the historical difference between the COFI rate and 30-year fixed rate (see fig. 5). If the difference between the rates narrowed, the savings allocated to the equity savings account would lessen, and equity-building effects would be reduced. That is, in months in which the COFI rate plus the gross margin was lower than the 30-year fixed rate used to calculate the monthly payments, the difference between the COFI-based and fixed amounts would be deposited into a home equity savings account. In months in which the fixed payment would not cover the interest payment (because the COFI rate plus the gross margin is higher than the 30-year fixed rate used to calculate the fixed monthly payment), funds could be withdrawn from the equity savings account to cover any shortfall. If the equity savings account had a zero balance, the lender could seek an insurance payout. According to the economists, some details of the Fixed-COFI contract can be modified for different rules concerning refinancing and savings. For example, a borrower and a lender can agree to how and when funds in the home equity savings account could be applied to pay down the mortgage principal. However, the Fixed-COFI mortgage contract would place limits on a borrower’s options to refinance—for instance, only in the case of the loss of a job—because it is designed to protect borrowers and lenders from fluctuations in interest rates. If interest rates drop significantly, benefits from the rate decrease for a borrower with a Fixed-COFI mortgage would be limited as compared with the benefits of a borrower with a 30-year fixed-rate mortgage who refinances. For example, the additional savings from lower interest rates for the borrower with a Fixed-COFI mortgage could only be used to pay down the mortgage principal. In contrast, although refinancing has costs, borrowers with a traditional 30-year fixed-rate mortgage would be able to refinance to take advantage of the lower rate and reduce their monthly payment. They could use the resulting difference in monthly payments from the new, refinanced loan to pay down mortgage principal, build up savings, or for any other purposes. For some homeowners, building home equity faster can provide financial benefits. Home equity can serve as a financial asset to fund retirement, education expenses, or absorb financial emergencies like the loss of a job. All else being equal, having more home equity also can help sustain homeownership through a downturn in the housing market. For example, default rates are generally higher for loans with higher loan-to-value (LTV) ratios. Although some accelerated equity-building options are designed to be originated with high LTV ratios (in some cases exceeding 100 percent), the accelerated equity-building effect can lower the LTV ratio at a faster pace than for a 30-year fixed-rate mortgage. As shown in figure 6, according to our analysis, LTV ratios can converge after about 5 years for a 15-year fixed-rate mortgage with a high LTV and a 30-year fixed-rate mortgage with a higher down payment. More specifically, in about 5 years a 15-year fixed-rate loan with an LTV ratio of 103 percent at origination will reach the same LTV ratio as a 30-year fixed-rate loan with an LTV ratio of 80 percent at origination. Borrowers under both mortgage scenarios would have accrued close to 30 percent equity in about 5 years, assuming no change in the home’s value. Lenders and proponents of accelerated equity building with whom we spoke said that having substantial equity in a home provides more options for remediation in the event the homeowner encounters difficulties making mortgage payments. For instance, a lender with whom we spoke said that having more equity in a home provides a borrower with a better opportunity to refinance to get a better interest rate and also extend their loan term, both of which would lower their monthly payment. Two lenders with whom we spoke also said that accelerated equity-building options can provide financial discipline and serve as a forced savings mechanism by, for example, paying additional principal on the mortgage. In addition, proponents of accelerated equity building have suggested that homeowners with more equity at stake may have more incentive to stay in their home because they have more invested in the home. In addition to building equity, borrowers with shorter-term mortgages or those opting to make extra payments on 30-year mortgages would reduce overall loan expenditures—relative to the interest they would pay on a 30- year loan (see fig. 7). However, the overall higher mortgage payments can make these options less affordable for lower-income borrowers or limit financial flexibility, as discussed below. Accelerated equity-building products, such as a 15-year fixed-rate mortgage or a WBHL, may not be accessible for all borrowers, partly due to tighter credit requirements. Officials from a state housing finance agency told us that minimum credit score requirements for some WBHLs limit access for borrowers with lower credit scores, which includes many lower-income borrowers. For example, a private mortgage insurer for WBHLs requires a minimum credit score of 680, compared with the minimum for the state housing finance agency of 640 for 30-year fixed- rate mortgages. The average score for WBHLs insured by the private mortgage insurer is 749. Moreover, requirements for a minimum debt-to-income ratio may also limit lower-income borrowers’ ability to access WBHLs or 15-year fixed- rate loans. According to a private mortgage insurer, the average income of borrowers for WBHLs it insures is 177 percent of county median income. As mentioned previously, the QM rule generally requires home buyers to have a debt-to-income ratio of 43 percent or less. As we previously reported, although QM regulations are not expected to significantly affect the overall mortgage market, some researchers have estimated that QM regulations could adversely affect certain lower- income home buyers, particularly those living in high-cost areas. The higher monthly payments of shorter-term loans can result in debt-to- income ratios significantly above the 43 percent limit, as illustrated in table 3. In areas where housing costs are high, research suggests that lower- income home buyers are more likely to have high debt-to-income ratios. Higher monthly payments for accelerated equity-building mortgages could make some of these borrowers ineligible for those types of loans, or essentially limit those borrowers to significantly smaller loans, as discussed in the following section. The biggest barrier to homeownership is affordability, which includes having enough savings for a down payment as well as sufficient monthly income to sustain a mortgage, according to agency officials and stakeholders with whom we spoke. For example, 53 percent of adults were unable to save any money in 2016 and 13 percent of adults had difficulty paying their bills at least once in 2016 because of income volatility, according to the Federal Reserve. For the same loan amount, the monthly payments of a 15-year mortgage can be more than 40 percent greater than the monthly payments of a 30-year mortgage, depending upon the current market interest rates. The higher monthly payments may make shorter-term loans unaffordable for many low- income home buyers or leave borrowers with less discretionary income to cover other obligations, including paying off higher-interest debt, putting some of them at greater risk of defaulting on monthly mortgage payments. The higher monthly payments of shorter-term loans thus reduce homeowners’ financial flexibility. In contrast, experts and stakeholders highlighted the greater flexibility a 30-year mortgage affords homeowners, including for situations where individuals may experience instability or fluctuations in their income. For example, though some home buyers may have adequate income over the course of a year to afford monthly mortgage payments, fluctuations in monthly income can affect a homeowner’s ability to sustain a higher monthly mortgage payment. However, a 30-year fixed-rate mortgage may enable a homeowner to make additional payments to build equity faster and still maintain a lower monthly payment than a 15-year mortgage. As shown in the scenario in figure 7 above, a homeowner could pay off a 30-year mortgage in 15 years by making additional monthly payments. The higher monthly payment required of a shorter-term mortgage can reduce a home buyer’s purchasing power. As seen in table 4, a longer- term mortgage allows for a substantially higher home purchase price for the same monthly payment for principal and interest. Borrowers are likely to qualify for smaller loan amounts for shorter-term mortgages because of the effect of the higher monthly payments (of shorter-term mortgages) on their debt-to-income ratio. Some proponents of accelerated equity-building loans advertise that the monthly payment amounts of shorter-term and 30-year fixed-rate mortgages are comparable, with minimal loss in purchasing power. This might be the case if the loan amount for the shorter-term mortgage were less than the loan for the 30-year fixed-rate mortgage, as illustrated in table 4. However, determining loss of purchasing power based on the monthly payments of two mortgages with different loan amounts may not provide an equivalent comparison. Shorter-term mortgages can reduce lifetime wealth. This is because the difference between the higher monthly payments and the monthly payments of a 30-year mortgage could have been invested elsewhere to produce a higher return—assuming an individual has the financial knowledge and discipline to invest the funds. The higher required monthly payments of a 15-year mortgage can ensure a larger investment in home equity. However, some research suggests that, depending on market conditions and the risk appetite of a homeowner, purchasing a house with a 30-year fixed-rate mortgage can provide a higher lifetime return on investment compared to a 15-year fixed-rate mortgage because the difference between the monthly payments can be invested at a rate of return that likely would be higher than the difference in mortgage interest rates between 30- and 15-year mortgages. In addition, homeownership may not always be the most effective means of building household wealth. For example, in some circumstances individuals may achieve greater household wealth through renting rather than buying a home. Individuals for whom rental payments would be less than mortgage payments for a comparable home can invest the difference and build greater wealth—if the return on their investment exceeded the return associated with the appreciation of the value of a home. However, factors such as an individual’s financial literacy and risk tolerance, and overall market conditions can affect the success of any investment strategy, including investing in a home or in any alternatives. For lenders, shorter-term mortgages generally reduce credit risk—the likelihood of loss with default—compared with longer-term loans. In addition, lenders with whom we spoke said that borrowers choosing shorter-term loans (such as WBHLs) generally have good credit and high incomes, further reducing credit and default risk. However, market uncertainties related to the lack of a secondary market and performance data could limit lenders’ willingness to offer accelerated equity-building products. Products like WBHLs are not currently eligible for purchase by Fannie Mae and Freddie Mac. According to Fannie Mae and Freddie Mac, WBHLs are not currently traded in the secondary mortgage market because of factors such as the low volume of transactions and the high LTV ratio. Lenders with whom we spoke who offer WBHLs generally have been holding the loans in their own portfolio, which can expose them to credit risk and interest-rate risk. Some of the lenders told us they only offer adjustable-rate WBHLs, to reduce interest-rate risk. But homeowners could experience a rate shock when the interest rate adjusts. For example, according to our analysis, if a WBHL for $250,000 adjusted the interest rate after 7 years, the monthly payment could increase by more than $200 (13 percent). The rate adjustment also might increase credit risk for lenders, because some borrowers then might be less able to sustain the monthly payments. Some lenders may be unwilling to take on these risks, which could limit the availability of accelerated equity-building mortgages in the market. However, lenders with whom we spoke have been exploring options to sell loans that have “seasoned”—for example, after the LTV ratio of the loan reached 97 percent—on the secondary market. Mortgages with LTV ratios of 96.5 percent or more (those that have 3.5 percent or less in down payment) also would be ineligible for some federal guarantee programs. Generally, high-LTV loans have a greater risk of default, and lenders with whom we spoke who offer WBHLs all require private mortgage insurance for those loans. Lenders and private mortgage insurers may price WBHLs at a premium—for example, through higher fees, interest rates, or insurance premiums—to account for the risk, which may add to the costs of monthly payments and make these mortgages less affordable for some borrowers. Because WBHLs are new (introduced in 2014) to the marketplace, there are not enough data on loan performance to adequately assess payment delinquency and default risk. The number of lenders currently offering WBHLs is limited. According to the American Enterprise Institute, about $100 million of WBHLs have been originated since 2014. Mortgage insurers with whom we spoke provided a similar estimate. Lenders told us that the performance of their WBHLs is strong but may not offer a meaningful indicator of future performance if the loans were to become more widely available (because WBHLs currently tend to attract less-risky borrowers). According to lenders and housing experts with whom we spoke, performance data on similar loans, such as fixed-rate 15-year mortgages, cannot be readily used to project performance for WBHLs because WBHLS are not strictly comparable (they have higher LTV ratios). Stakeholders, including agency officials, also identified key trade-offs and considerations in introducing new products and mechanisms to accelerate equity building, such as how product complexity and reduced market liquidity could affect the success and the costs to borrowers of the products or mechanisms. These trade-offs and considerations apply to proposed products such as the Fixed-COFI as well as to actions or mechanisms for accelerating equity building, such as making mortgage payments on a biweekly basis and paying off a percentage of the loan principal in a shorter term (such as financing 20 percent of the principal in 5 years). Some stakeholders said that new products that have unfamiliar or complex features, such as the Fixed-COFI mortgage’s underlying adjustable rate and equity savings account, could be difficult for lenders, borrowers, and investors to understand, which could limit the promotion and adoption of such products. In addition, administering new products or mechanisms to accelerate equity building could have additional complications, such as how to schedule and credit biweekly payments. For example, lenders or servicers may not have a structure in place to properly credit additional payments on a biweekly basis and may hold the extra payment until the end of the month, negating the accelerated equity- building effect of the extra payment. Moreover, a few stakeholders said that lenders or servicers may charge additional fees for processing biweekly mortgage payments. Stakeholders and agency officials also noted that any new mortgage product would not (at least initially) be eligible for securitizing and trading in the secondary market. As a result, a new product would not be as liquid as current products securitized and sold in the secondary market by Fannie Mae or Freddie Mac, such as 30-year fixed-rate mortgages. Because of the lack of market liquidity for new products, lenders may charge a premium, making the products less affordable for lower-income borrowers. We provided a draft of this report to HUD, FHFA—and FHFA also provided copies to Fannie Mae and Freddie Mac, FHLBanks, Agriculture, and VA for their review and comment. HUD, FHFA, FHLBanks, and Agriculture provided technical comments on the report draft, which we incorporated where appropriate. We are sending copies of this report to appropriate congressional committees, the Secretary of HUD, the Director of FHFA—who provided copies to the President and Chief Executive Officer of Fannie Mae and the Chief Executive Officer of Freddie Mac, the President of the FHLBank of Des Moines (coordinating for the FHLBanks), the Secretary of Agriculture, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or GarciaDiazD@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report describes (1) how federal homeownership assistance programs affect home equity building, and (2) options, including private- sector mortgage products, through which borrowers can accelerate home equity building and the trade-offs of these options for both borrowers and lenders. We define accelerated equity building as any mortgage product or feature that accelerates the pace of principal reduction on a mortgage debt, relative to a 30-year fixed-rate mortgage. We used the 30-year fixed-rate mortgage as our point of comparison because it is the most common type of mortgage product and represents the market standard. To describe how federal homeownership assistance programs affect home equity building, we reviewed relevant federal statutes, regulations, and agency program policies and guides and other resources to identify relevant homeownership assistance programs from the Departments of Housing and Urban Development (HUD), Veterans Affairs (VA), and Agriculture (USDA); and Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (collectively, the enterprises). We reviewed prior GAO reports on federal homeownership assistance programs and the U.S. housing finance system. We also reviewed relevant academic papers and literature discussing homeownership and equity building. We interviewed agency and enterprise officials to discuss the relevant homeownership assistance programs and policy goals, including the extent to which products or mechanisms used in the programs affect or accelerate home equity building, and the role of the secondary mortgage market in providing market liquidity for new mortgage products. In addition to federal agencies and the enterprises, we interviewed officials from two state housing finance agencies. Some stakeholders we interviewed recommended the two state housing agencies because the agencies likely placed a greater focus on accelerating home equity building. To describe the options (or mortgage products) borrowers have to accelerate home equity building, including any trade-offs, we used databases such as ProQuest and searched for and reviewed papers and literature published from 2007 to 2017 by individuals who discussed options to accelerate home equity building. We also attended two housing conferences and met with housing experts and stakeholders from academia, housing advocacy organizations, and industry, including mortgage lenders and insurers, selected because they made proposals to increase homeownership or build home equity faster, wrote on homeownership issues, were recommended by government officials, or were involved in providing mortgage products designed to accelerate equity building. From interviews with industry stakeholders and housing conferences we attended, we identified two products: (1) the Wealth Building Home Loan (WBHL), which has been introduced in the marketplace, and (2) the Fixed-Payment Cost-of-Funds Index (COFI) Mortgage, which has been proposed but is not currently offered by any lenders. We reviewed and analyzed relevant academic papers and literature on the advantages and trade-offs of options to accelerate equity building. We also conducted interviews with academics, experts, industry stakeholders (including mortgage lenders and insurers), and organizations to discuss advantages and trade-offs of accelerated equity-building products, and the role of the secondary market in providing market liquidity for new mortgage products. We selected academics, experts, and industry stakeholders and organizations who proposed accelerated equity-building mortgage products, had written on homeownership and wealth building issues, or whom officials of federal agencies and the enterprises or our other interviewees recommended. We also attended housing conferences, which provided additional suggestions for publications to review and academics and stakeholders to interview. Furthermore, to illustrate methods to accelerate home equity building and compare the effects of different mortgage products on home equity building, we developed hypothetical mortgage scenarios. For the mortgage scenarios, we used Excel’s payment function to calculate the amortization schedule of the mortgages in our hypothetical scenarios. The payment function is a standard formula that calculates monthly payment schedules based on inputting interest rate, number of payment periods over the life of a mortgage, and the present value of the mortgage. The scenarios we developed were only several possible scenarios out of the many that we could have chosen. We identified specific mortgage features in papers and literature by individuals who proposed mortgage products designed to accelerate home equity building. For illustration purposes, we used an average of the monthly interest rates published in Freddie Mac’s Primary Mortgage Market Survey for September and October 2017, as well as current market rates advertised by private mortgage lenders, to inform our selection of interest rates for our scenarios. We conducted this performance audit from January 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides regional data on equity building that we obtained from CoreLogic. CoreLogic is a publicly traded company that provides data, analytics, technology, and services related to the mortgage industry, among other things. The data in figure 8 show the percentage of homeowners in each state who have 20 percent equity or less in their homes. The level of home equity can be affected by a number of factors, including the age of the loan, the amount of principal paid down, and home market values. We did not assess the reliability of CoreLogic’s data. In addition to the contact named above, Andrew Pauline (Assistant Director), Kun-Fang Lee (Analyst in Charge), Steve Brown, Raheem Hanifa, Jeff Harner, Jill Lacey, Barbara Roesmann, Jessica Sandler, MaryLynn Sergent, Jena Sinkfield, Anne Stevens, and Jim Vitarello made key contributions to this report.", "summary": "The federal government has a number of programs to help increase access to affordable homeownership for first-time buyers and lower-income households, including programs that provide guarantees for certain types of mortgages and funding that can be used for down-payment assistance. Generally, homeowners can build home equity by making payments on a mortgage to reduce the outstanding principal (assuming home value does not depreciate). Recently, there has been interest in mortgage products that accelerate home equity building. GAO was asked to explore options for building equity through homeownership. This report discusses (1) how federal homeownership assistance programs affect home equity building; and (2) options, including private-sector mortgage products, through which borrowers can accelerate home equity building and the trade-offs of these options for both borrowers and lenders. GAO analyzed relevant laws and program guidance of federal homeownership assistance programs. GAO attended housing conferences and interviewed relevant federal and state agency officials, academics, and industry stakeholders, including mortgage insurers and lenders, to identify existing and proposed accelerated equity-building products and mechanisms and to better understand the benefits and trade-offs of accelerated equity building. GAO also developed examples of mortgage scenarios to illustrate the trade-offs of accelerated equity building. Federal agencies provided technical comments, which were incorporated where appropriate. Federal homeownership assistance programs generally are not designed to accelerate equity building (home equity is the difference between the value of a home and the amount owed on a mortgage). For example, programs that offer grants for down-payment assistance can provide a one-time boost to home equity. However, these programs are not specifically designed to accelerate equity building—that is, increasing the pace of paying off principal more quickly than would be the case with a 30-year fixed-rate mortgage. Instead, the focus of federal programs is on providing affordable access to homeownership, including through grants, loans, and mortgage insurance or guarantees. For instance, federal mortgage insurance programs help provide market liquidity by protecting lenders from losses, in turn increasing access to credit and homeownership, and ultimately, the opportunity for equity building for home buyers. Borrowers have options to accelerate equity building that include obtaining shorter-term mortgages, making more frequent or additional payments, or choosing a mortgage product designed to accelerate equity building. For example, a mortgage product introduced by private lenders in 2014—the Wealth Building Home Loan (WBHL)—has features designed to accelerate equity building, including shorter terms (15 or 20 years) and the option to buy down the interest rate. The product also allows for no down payment. However, these products have trade-offs, including the following: Shorter-term loans build home equity (in terms of principal reduction) at a faster rate, but require higher monthly payments (see fig.). Payments for a 15-year fixed-rate mortgage can be more than 40 percent higher than for a 30-year fixed-rate mortgage. Higher payments may make mortgages less affordable or limit access for lower-income borrowers. For example, higher payments may result in a higher debt-to-income ratio for some home buyers, which may prevent them from qualifying for a mortgage unless they buy a less expensive home. In contrast, all else equal, loans with a shorter term generally have reduced credit risk—the likelihood of a home buyer defaulting on a mortgage—for lenders. Note: Monthly mortgage payments do not include property tax or any type of insurance. Interest rates used are generally consistent with market rates in September and October 2017.", "document_type": "gao"}
{"report": "Since the 1960s, the percentage of individuals with mental illness being treated in a hospitalized setting has decreased dramatically in an effort to move care away from institutional settings into a wider range of community-based treatment. This process, known as “deinstitutionalization,” has been driven in part by limited funding available for mental health services, changes in treatment philosophy, and medical advancements. According to a 2015 Federal Bureau of Investigation (FBI) publication, one result from this shift is that local police departments have had to meet the growing needs of individuals suffering mental health emergencies (e.g., a schizophrenic episode), and are often the first source of assistance in helping to arrange treatment for these individuals. Similarly, the IACP reports that police officers often have to “manage situations that result from a history of mental health policy and legislative decisions made by federal and state governments.” According to the IACP, law enforcement officers—generally local police—may then find themselves serving in a role similar to that of a social worker in attempting to locate treatment services for such individuals. The IACP also reports that such increasing interactions may result in individuals with mental illness being arrested and placed in jail, rather than receiving treatment from mental health facilities. This can result in a cycle of arrest, imprisonment, and recidivism for such individuals. In addition, interactions between law enforcement officers and individuals with mental illness have the potential to escalate into violence. In recent years, a number of professional organizations and advocacy groups such as IACP, the Police Executive Research Forum (PERF), the National Alliance on Mental Illness, and Council of State Governments Justice Center (CSG JC) have researched and advocated for different approaches that may reduce the likelihood of violent encounters or help officers connect the individuals they encounter with proper treatment services. In addition, DOJ’s Bureau of Justice Assistance (BJA), within its Office of Justice Programs, has created a compendium of existing information and research in the field of state and local law enforcement responses to individuals with mental illness. Federal law enforcement officers and agents may interact with individuals displaying signs of mental illness in a number of different types of incidents while performing their various missions, such as protecting federal property or officials or when apprehending subjects of an investigation. Figure 1 provides one example of a possible incident an officer or agent might experience and the response options available. Generally, when federal officers and agents encounter individuals displaying signs of mental illness—and there is no evidence of a federal crime—they may refer them to local law enforcement or health care providers to assess their mental health and determine whether they need further health care. If local providers determine that such care is needed, it is generally provided through a voluntary or involuntary commitment to a local mental health services provider. One exception to this is for correctional officers and other staff within BOP, as these staff interact with individuals with a diagnosed mental illness as part of their daily duties in ensuring a secure prison environment. BOP pre- designates all inmates entering its institutions and assigns initial mental health and medical screen assignments. Throughout an inmate’s incarceration, BOP’s psychologists, psychiatrists, and qualified mid-level practitioners can determine a new mental health care level following a review of records and a face-to-face clinical interview. Under section 504 of the Rehabilitation Act of 1973, as amended, discrimination on the basis of disability in federally funded and federally conducted programs and activities is prohibited. A person with a disability includes anyone who has a physical or mental impairment that substantially limits one or more major life activities, has a record of such impairment, or is regarded as having such an impairment. DHS and DOJ both currently have efforts underway, in various stages of development, to have their components review their existing policies, guidance, and training in response to departmental guidance on addressing individuals with disabilities and obligations under section 504. Pursuant to departmental guidance, after completing their reviews, components are to determine areas that could be enhanced. Within DHS, components have been asked to report on the status of their efforts to DHS’ Office for Civil Rights and Civil Liberties (CRCL). Within DOJ, the Office of the Deputy Attorney General (ODAG) is overseeing components’ efforts. In addition, the 21st Century Cures Act requires the Attorney General to provide direction and guidance for the following by December 13, 2017: “Programs that offer specialized and comprehensive training, in procedures to identify and appropriately respond to incidents in which the unique needs of individuals who have a mental illness are involved, to first responders and tactical units of—(A) Federal law enforcement agencies; and (B) other Federal criminal justice agencies, such as and the Administrative Office of the United States Courts, and other agencies that the Attorney General determines appropriate.” “The establishment of, or improvement of existing, computerized information systems to provide timely information to employees of Federal law enforcement agencies, and Federal criminal justice agencies to improve the response of such employees to situations involving individuals who have a mental illness.” According to the DHS and DOJ law enforcement officers and agents we interviewed, they are not positioned to diagnose any specific mental health condition that an individual might have, as they are not trained mental health professionals. However, responding to incidents involving individuals with mental illness can be challenging for multiple reasons, including determining whether the person is suffering from a mental illness or from another issue, such as drug addiction, and communicating with the person, for example, when a person may be suffering from delusions. These officers and agents face these challenges while also being responsible for ensuring their own safety and that of others in the area. Some of the common challenges officers and agents identified during our discussion groups follow. Identifying Whether an Individual Has a Mental Illness Some officers and agents in our group discussions stated that when encountering individuals displaying erratic behavior (e.g., rapid or nonsensical speech, paranoid or delusional statements), it can be difficult to determine if that behavior is attributable to a mental illness or the influence of drugs. Specifically, Border Patrol agents—who are broadly responsible for preventing the illegal entry or exit of people and goods at places other than ports of entry—stated that determining whether someone has a mental illness or is experiencing other issues is challenging and may be complicated by language barriers. Border Patrol agents may at times encounter large groups of people attempting to cross the border at one time and thus have limited time to make that determination. ATF officers—who may encounter individuals with a mental illness who are targets of an investigation—commented that incidents may involve an individual who could suffer a mental illness (treated or untreated), or be under the influence of alcohol or drugs. Unless the individual discloses his or her condition, or family or friends are there to explain the condition, officers would not know the cause of the individual’s behavior. They explained that if mental health information about a suspect is known in advance of an operation, officers can adjust their approach; however, they told us that most of the time they do not know if someone has a mental health condition and how it might present itself. Similarly, an FBI police officer—who may encounter individuals displaying signs of mental illness if those individuals enter an FBI office—told us that it can be challenging to deal with an individual who is acting erratically, not knowing precisely whether the behavior is attributable to a mental illness, and there may be limited time available to address an individual posing a safety risk. BOP corrections officers also echoed this challenge. They said that despite having back-up mental health staff on call, their initial reaction to an inmate exhibiting some type of erratic behavior has to be fairly quick to secure the safety of the staff and other inmates. Officers and agents across components and departments made clear that they are not mental health professionals or psychologists and, as such, are charged with responding to the behaviors that are exhibited to secure the scene. Communicating with Individuals with a Mental Illness Some of the officers and agents in our discussion groups stated that communicating effectively with someone exhibiting signs of a mental illness and understanding what he or she may be going through or how he or she sees reality can be challenging. One officer told us that trying to make individuals who may have a mental illness understand that their reality is not everyone else’s reality is particularly challenging. This was very difficult, for example, for Secret Service Uniformed Division officers who explained that they encounter individuals when providing security along the White House fence and for FPS officers, who often encounter individuals displaying signs of mental illness near or in federal buildings that they are assigned to protect. As the Secret Service officers explained, even if individuals exhibit delusional behavior, so long as they have not broken any laws, then they are free to be near protected federal venues and the officers are limited in any actions they can take. One officer, discussing the challenges in speaking with someone with a mental illness who may be experiencing delusions, stated that the person is “wholeheartedly convinced that what he or she perceives is the true reality.” Officers and agents who we met with in CBP reported that they rely on common sense to dictate appropriate action and use reasonable efforts to protect themselves and others. They noted that additional training on communicating effectively with individuals suffering from mental illness could be beneficial. The challenges noted above in identifying causes of erratic behavior or effectively communicating with individuals with a mental illness can make it difficult for officers to resolve a tense situation or apprehend an individual (if necessary) as securely or peacefully as possible. For example, Border Patrol agents stated that ensuring that such encounters are resolved safely for the individuals involved and other members of the public is their biggest challenge. It might require removing someone in distress from a group of individuals that he or she may be traveling with or keeping him or her calm. When someone is in an extreme state of panic, emotional distress, or anger, officers try to remove the person from the group to prevent a potential incident from escalating quickly. Operating with Limited Access to Mental Health Resources Officers and agents also stated that a limited number of mental health professionals available within their components or through local agencies can pose a challenge in helping persons with mental illness receive necessary treatment. As such, they must rely on state and local entities in the area (e.g., law enforcement, hospitals) to provide assistance for individuals. Federal Air Marshals—who provide protection at airports and other transportation modes—we spoke with explained that since they do not have holding facilities to secure individuals with mental illness, they are reliant on local law enforcement and mental health professionals to manage an incident. Officers and agents highlighted the importance of maintaining close relationships with state and local partners and added that trained mental health professionals provide an excellent resource. In addition, officers and agents in some discussion groups noted there may be training offered by state or local agencies related to understanding and responding to individuals with mental illness that could be leveraged by federal agencies. Officers and agents reported, however, that it can be difficult for the components to find the time and resources to send officers to the trainings. According to USMS officers— who provide security at federal courthouses and oversee transport of federal prisoners—this is particularly challenging in small offices where there may be very few staff. Frequently Encountering the Same Individuals Another common challenge noted in discussion groups was that officers and agents repeatedly encounter the same individuals with mental illness. Officers and agents explained that they can sometimes apprehend individuals who are creating a disturbance, but these individuals often cannot be charged with a federal crime. As such, following the apprehension, the officers and agents release these individuals to local or state authorities who may transport them to local providers for a mental health evaluation. Typically, if the local providers determine a commitment is necessary, they will hold these individuals at a hospital or clinic for up to 72 hours. According to the officers and agents in our discussion groups, many of these individuals return after they are released and the officers and agents encounter them time and again, with very little that they can do to provide these individuals with assistance. According to the officers and agents, incidents involving frequent encounters with the same individuals can take time away from performing other important activities. Secret Service Uniformed Division officers told us they repeatedly encounter the same individuals with mental illness and know some of these individuals very well. For example, Secret Service officers stated that when performing their duties in patrolling the grounds of the White House, they have had frequent encounters with a woman who believes she has family members living in the White House. The officers have turned her away from the scene on multiple occasions, but she continues to return. All of the law enforcement components in our scope offer training directly, receive training through FLETC, or are developing some training on responding to incidents involving individuals with mental illness. Agency and FLETC training includes courses on communication, de-escalation, and suicide prevention (related to federal inmates). Since these components have varying missions and operational needs and interact with the public in different capacities, the nature and scope of this training, as well as the number of courses and the duration of courses offered varies. For example, BOP’s staff—including food service workers and nurses, as well as correctional officers—have daily contact with inmates with mental illness and can act as “first responders” when situations merit. According to BOP officials, training is offered to all staff in all of its institutions on mental health and working with the mentally ill, along with courses on communication, de-escalation, suicide prevention, and use of force. As another example, ATF’s agents told us they have less routine contact with individuals with mental illness, but ATF offers a course to its agents on de-escalation concepts and tactics, which addresses responding to incidents involving individuals with mental illness, as well as crisis intervention training to its cadre of crisis negotiators. Further, some of the components’ training is mandatory and offered annually through class instruction or online portals. These courses may be offered to new hires or available to tenured officers. In addition, some components’ training courses are delivered as stand-alone sessions, while others may be modules within a larger course exploring other law enforcement topics. Three DHS operational components in our scope, in addition to FLETC, offered some type of training specifically for their officers and agents. Another one (TSA) has training in development as of October 2017, on topics related to responding to incidents involving individuals with mental illness. FLETC explained that it provides basic training to all DHS law enforcement officers through one of three basic program categories— Center Basic, Center Integrated Basic, and Agency Specific Basic—which vary in length. Two Center Basic training programs include a 2-hour module titled Managing Abnormal Behavior, which covers how to identify common signs of mental disorders (among other things) and how to handle people exhibiting abnormal behavior. Specifically, this module examines basic human behavior that may be classified as abnormal, differentiates between mental disorders, and also covers physical and organic causes that may be related to abnormal behavior with the appropriate officer responses. In addition, FLETC informed us that it has developed scenario-based training in these programs, allowing the officers or agents to develop decision-making skills in situations involving people exhibiting abnormal behavior. See appendix II for more information on FLETC’s training programs. U.S. Secret Service Training We observed Secret Service training on Protective Intelligence Questioning for First Line Officers, which is offered to Uniformed Division Officers. The course instructor played the role of three different individuals with schizophrenia, bipolar disorder, and sociopathic personality disorder and trained agents on interacting and interviewing subjects who attempt to breach the White House fence. In addition to this module provided to all DHS agents and officers, the components in our review also offer or are preparing component-specific training courses. Table 2 lists illustrative examples of DHS training. In addition, TSA has developed a mandatory course entitled Awareness Training on Mental Health Conditions to be delivered in the classroom and through scenarios and exercises during fiscal year 2018. This course is designed to introduce Federal Air Marshals to the fundamentals of predominant mental disorders, such as schizophrenia or psychosis. All of the DOJ components in our review provide some type of training to their officers on topics related to responding to incidents involving individuals with mental illness—as illustrated in Table 3. The law enforcement components within our scope at DHS and DOJ have policies or guidance in place that addresses responding to incidents involving individuals with mental illness. Some components’ policies or guidance specifically addresses mental illness, while others touch on the issue as part of larger policies on other topics (such as use of force)—as illustrated in Table 4. DHS Efforts to Review Policies, Guidance, and Training DHS has guidance in place to help ensure that its components have policies and training that ensure their alignment with section 504 of the Rehabilitation Act. In 2013 and 2015, respectively, DHS issued a directive and implementing instruction to its components intended to strengthen compliance with section 504. These documents required DHS components to conduct a self-evaluation and prepare a component plan identifying any policies or practices that may result in a qualified individual with a disability being excluded from participation in, or being denied the benefits of, a program or activity. Department of Homeland Security (DHS) Component Self-Evaluation Tool The self-evaluation tool that DHS’s Office of Civil Rights and Civil Liberties developed requires components to—among other things—describe whether there is an established policy ensuring equal treatment for individuals with disabilities, how the component’s personnel and procedures ensure that individuals with disabilities are treated in a nondiscriminatory manner, and the component’s process for providing auxiliary aids and services to ensure effective communication. The tool also provides examples of interactions in the areas of customer service, security, and custody activities that would likely be compliant, or possibly noncompliant, with section 504 of the Rehabilitation Act. In 2016, DHS’s CRCL office issued guidance and a self-evaluation tool to DHS components on the steps to take in performing the self-evaluation of their facilities, programs, policies, and practices (to include training). The guidance also addresses the development and execution of the components’ plans intended to remedy any areas deemed insufficient in permitting individuals with disabilities—including mental illness—to participate fully in the components’ programs and activities. Disability Access Coordinators, who are representatives from each component charged with overseeing their components’ responses to DHS Rehabilitation Act guidance, are leading the components’ efforts in conducting the self-evaluations. CRCL set a deadline for components to submit all self-evaluations to CRCL for review by the end of August 2017. As of September 2017, all five components had submitted self- evaluations. CRCL officials explained that as they review self- evaluations, they are looking to see if policies or training for law enforcement officers’ and agents’ responses to individuals with mental illness have been identified or otherwise addressed. If not, the officials indicated that they will request the components identify and address this topic in their plans for aligning with Rehabilitation Act guidance. The remaining steps in CRCL’s effort to review and comment on component plans as of September follow: December 31, 2017: CRCL provides comments to components on the content of their self-evaluations. February 28, 2018: the components develop and submit their draft plans for aligning with the Rehabilitation Act guidance. April 30, 2018: CRCL reviews and provides comments on the components’ draft plans. May 31, 2018: the components address CRCL’s comments and submit their final plans for alignment with Rehabilitation Act guidance for approval. DOJ Efforts to Review Policies, Guidance, and Training DOJ has directed components to review and implement guidance on addressing individuals with disabilities—including mental illness—and obligations under section 504. Specifically, in January 2017, DOJ’s then- Deputy Attorney General issued a memo with attached guidance directing components to review their policies and training and, where necessary, modify or develop policies and training to implement legal requirements and principles related to section 504. This guidance identified, among other things, DOJ’s law enforcement components’ legal obligations under section 504 as well as the policies and procedures that components must have so that officers and agents can anticipate and plan for encounters with members of the public with disabilities. For example, the guidance states that law enforcement components must train officers and agents on different types of commonly encountered disabilities; how to identify, without medical or psychological training, analysis, or diagnosis, common characteristics and behaviors most often associated with disabilities; and appropriate responses to the challenges that an encounter with a member of the public with a disability may present. Training for officers and agents in effective communication with members of the public with a mental illness is explicitly referenced in the guidance as well. To date, officials from DOJ’s Office of the Deputy Attorney General (ODAG)—who are overseeing the components’ efforts—have maintained communication with the components to confirm that they have begun reviewing their policies and training to identify any deficiencies or necessary enhancements pursuant to the January 2017 guidance. During the course of our review and in part due to our inquiries, in the fall of 2017, ODAG notified the components that they should complete their reviews by December 2017. ODAG also notified the components that they should begin implementing any new policies or training identified by September 2018. In addition, a provision of the 21st Century Cures Act—section 14025— requires DOJ to provide direction and guidance to federal law enforcement agencies and federal criminal justice agencies on training programs and improved technologies related to responding to individuals with mental illness, by December 13, 2017. ODAG officials told us that the January 2017 guidance addresses the requirement to provide direction and guidance on training for the DOJ components, but acknowledged that it does not respond to all of the requirements for the Attorney General under section 14025 of the 21st Century Cures Act. In particular, section 14025 requires the Attorney General to provide direction and guidance to federal law enforcement agencies and federal criminal justice agencies beyond DOJ in the areas of specialized and comprehensive training programs to identify and respond to individuals with mental illness. Section 14025 also calls for direction and guidance on the establishment and improvement of computerized information systems to provide timely information related to situations involving individuals with mental illness. As a result of our questions about whether such efforts would be developed, on December 7, 2017, DOJ sent a letter from the Principal Deputy Assistant Attorney General for the Office of Justice Programs to federal law enforcement partners outlining resources available for federal law enforcement when considering training or procedures appropriate for their missions. Specifically, DOJ sent the letter to executive officers within DOJ, DHS, the Administrative Office of the United States Courts, and other executive departments that DOJ deemed appropriate. Some examples of resources that the letter highlights include (1) the Police- Mental Health Collaboration Toolkit, which provides resources to assist law enforcement agencies in partnering with mental health providers (and is discussed later in this report) and (2) a forthcoming “roadmap” planned for release in 2018 that the Office of Justice Programs and BJA are developing that will help law enforcement agencies as they plan for engagement with mental health entities. Of the six stakeholders in the field of law enforcement-mental health we interviewed, all six considered the Crisis Intervention Team Model to be a leading practice and five considered the Co-responder Model to be a leading practice—see Figure 2. These practices are typically implemented at local and state law enforcement agencies. Nevertheless, certain aspects and associated benefits could be considered in other settings, such as federal law enforcement operations. In addition, stakeholders cited four key tools that may assist law enforcement agencies in responding to individuals with mental illness. These tools can include training guides, summary reports, or model policies, among other things, as shown in table 5. DHS and DOJ law enforcement components generally leveraged information from knowledgeable parties within their departments on efforts to respond to incidents involving individuals with mental illness. To enhance information sharing among DHS components, CRCL has implemented an interagency collaboration mechanism. Specifically, CRCL officials reported that since June 2016 they have led monthly coordination conference calls with component Disability Access Coordinators to collaborate on their respective efforts to complete their self-evaluations. According to the Disability Access Coordinators, these sessions have provided a forum to share ideas and lessons learned across the DHS components. In addition, according to CRCL officials, once their office receives the components’ self-evaluations and plans, it aims to disseminate information on lessons learned and effective practices to all the components. Coordination efforts to leverage information also exist within DOJ. Specifically, through the efforts to review policies and training under the January 2017 guidance and provisions of the 21st Century Cures Act discussed earlier, DOJ’s components have reported taking efforts to collaborate with one another and share information on training, best practices and lessons learned. For example, officials from ATF reported holding meetings with other components to discuss their efforts to implement the January 2017 guidance. Additionally, BJA officials told us they took part in the ODAG’s working group in early 2016 when the then-Deputy Attorney General’s January 2017 guidance was in development. Along with BJA, this ODAG working group included DOJ’s law enforcement components and other offices within the department. The working group provided a forum to advise ODAG in developing the January 2017 guidance and discuss issues surrounding disabilities, which involved responses to individuals with mental illness. BJA officials told us that they provided to components a compendium of all its resources available to assist law enforcement’s response to incidents involving individuals with mental illness. BJA officials said they later took the most promising of these and folded them into its Police-Mental Health Collaboration Toolkit. Further, BJA officials told us that they make all of the resources it develops, including the Toolkit, publicly available on the BJA website. According to the officials, these resources are available for all law enforcement agencies, including federal entities, to review and consider implementing as they deem appropriate. In addition to these online resources, which facilitate information sharing, BJA is also planning to release a national CIT curriculum in 2018 that will serve as a resource that can be tailored to reflect mental health training and collaboration under development or underway at the local level. The Office of Justice Programs is supporting a partnership between the IACP and a research organization to deliver the curriculum to law enforcement agencies. In addition, BJA—as one of DOJ’s grant-making entities—is standing up the National Training and Technical Assistance Center to Improve Law Enforcement Responses to Individuals with Mental Health Disorders and Intellectual and Developmental Disabilities. BJA officials reported that in September 2017, BJA selected the awardee to design and operate the center. Once the center is operational, it will benefit state, local, and tribal law enforcement entities. In addition, BJA envisions that the center will facilitate better collaboration between law enforcement agencies and their mental health partners. A BJA official also acknowledged that the center could serve as an additional resource for federal law enforcement agencies to consult as they review their trainings, policies, and guidance relevant to responding to incidents involving individuals with mental illness. We provided a draft of this report to DOJ and DHS for their review and comment. The departments did not provide us with formal written comments, but did provide technical comments, which we incorporated as appropriate. We are also sending this report to the appropriate congressional committees and members. In addition, this report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions, please contact Diana Maurer at (202) 512-8777 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made significant contributions to this report are listed in appendix III. This report addresses the following key questions: (1) What challenges, if any, do federal law enforcement officers at selected Department of Homeland Security (DHS) and Department of Justice (DOJ) components face when responding to incidents involving individuals with mental illness? (2) What type of training, policies, and guidance, if any, are in place at selected DHS and DOJ components to prepare federal law enforcement officers for responding to incidents involving individuals with mental illness? (3) What leading practices or tools have relevant stakeholders cited for effective responses to incidents involving individuals with mental illness, and how have DHS and DOJ components leveraged information from other knowledgeable parties? We focused our review on the training, policies, and guidance put forth by the DHS and DOJ components listed in table 6 below because they comprise nearly all of the federal law enforcement officers in these agencies. To identify challenges that federal law enforcement officers and agents at our selected DHS and DOJ components face when responding to incidents involving individuals with mental illness, we held discussion groups of six to eleven agents or officers within each component in our scope. We worked with officials at each component to identify officers and agents with varied tenures and experiences. We held semi-structured in- person and telephone discussion groups using a script and set of questions. Discussion groups are not designed to provide generalizable or statistically reliable results; they are instead intended to generate in- depth information about the reasons for the discussion group participants’ attitudes on specific topics and to offer insight into their concerns. During the discussion groups, we asked officers and agents what challenges they face when responding to incidents involving individuals with mental illness, among other topics. We moderated each discussion to keep participants focused on the specified issues within discussion time frames. Participants identified challenges when we explicitly asked them to do so, or during the course of the discussion. We took detailed notes on each discussion and documented the perspectives participants raised in each discussion group. We then summarized the information collected and identified common themes. Because our questions were open-ended and designed to allow participants to discuss any challenges they may have experienced, we cannot determine whether the absence of a particular concern or challenge by a group of officers or agents is an indication that they did not experience the concern or that they did not raise it when asked broadly about the topic. While these participants’ perspectives cannot be generalized to their entire component or all law enforcement components, their views provided insights into the challenges federal law enforcement officers and agents face when responding to incidents involving individuals with mental illness. We have relied on the observations gathered during these discussion groups to answer this reporting objective as the officers and agents are uniquely positioned to speak to their experiences, and any challenges they face, responding to incidents involving individuals with mental illness. To identify the training, policies, and guidance in place, we reviewed documents from each of our selected law enforcement components, when available, to examine their nature and scope. We further reviewed information on the duration, requirements, and delivery mechanism of the training. We then summarized and verified this training information with each component through email documentation. For the policies, we reviewed the documentation to determine whether it was specific to responding to incidents involving individuals with mental illness or whether mental illness was contained within a larger directive. We also reviewed 2018 budget justification documents for each component in order to identify changes in staffing levels or training plans that might be related to officers’ and agents’ response to incidents involving individuals with mental illness. We also interviewed officials responsible for the development or delivery of training, policies, or guidance from the components in our scope to gather additional information that could help prepare federal law enforcement officers and agents to respond to incidents involving individuals with mental illness. In addition, since section 504 of the Rehabilitation Act of 1973, as amended, prohibits discrimination on the basis of disability, which includes mental illness, in federally funded and federally conducted programs and activities, we took steps to understand the section’s applicability to federal law enforcement operations. Specifically, we reviewed departmental guidance related to section 504 and reviewed the selected components’ documentation of efforts to review their training, policies, and procedures in accordance with that guidance. We also interviewed officials from the departmental offices overseeing these component efforts—DHS’s Office of Civil Rights and Civil Liberties (CRCL) and DOJ’s Office of the Deputy Attorney General (ODAG). To identify leading practices or tools stakeholders cited for effective law enforcement responses to incidents involving individuals with mental illness, we used a multi-stage process Specifically, we: 1. conducted a search of databases, such as ProQuest and Scopus, and organizational websites, such as those from the Council of State Governments, Justice Center (CSG JC) and Police Executive Research Forum (PERF), to identify published work related to law enforcement responses to individuals with mental illness that had been published on or after January 1, 2007 (the last 10 years). 2. reviewed the 96 published research papers and articles that our initial search yielded and then refined our selection criteria to include only those that were literature reviews, meta-analyses, or summary papers published by academics, think tanks and advocacy groups, or government agencies. We reviewed summary articles rather than all the primary research articles to balance breadth, depth, and efficiency. After refining our search, there were 16 documents that met our selection criteria. 3. reviewed the 16 to identify any potential leading practices. We determined that a practice was potentially leading if it was found in at least one of the remaining 16 articles and was a law enforcement – mental health program. Using these criteria, we identified two potential leading practices. 4. asked individual and organizational stakeholders to validate whether these were leading practices and to identify any additional leading practices that we might have missed. In order for us to consider an independent researcher as a stakeholder, the individual needed to have (a) authored or co-authored at least 2 of the 16 documents that met our search criteria as outlined earlier and (b) been recommended by another stakeholder. These criteria yielded two independent researchers from whom to solicit views. In order for us to consider an organization as a stakeholder, the organizations needed to have either (a) conducted research on law enforcement responses to individuals with mental illness; (b) administered law enforcement- mental health collaborative programs; or (c) launched a national campaign on law enforcement responses to individuals with mental illness. After reviewing the websites of organizations that potentially met these criteria, we selected four organizations from which to solicit views. In addition, we selected individuals within the organizations as knowledgeable stakeholders if they were either (1) recommended by another stakeholder; or (2) managed a law enforcement-mental health program or national campaign. As a result of these steps, we identified and interviewed six stakeholders (two independent researchers and four organizations) to gather their broad views of the dynamic between law enforcement and individuals with mental illness; to obtain their observations of any practices or tools, such as training guides or reports that have been used to enhance officer response; and to provide feedback on leading practices. The six selected stakeholders were: Amy Watson, Ph.D.: Professor at the Jane Addams College of Social Work, University of Illinois at Chicago. Melissa Reuland, M.S.: Research Fellow at the Police Foundation and Senior Research Program Manager at Johns Hopkins School of Medicine, Department of Psychiatry. Council of State Governments, Justice Center (CSG JC): a national nonprofit organization that serves policymakers at the local, state, and federal levels from all branches of government. It aims to provide practical, nonpartisan advice and consensus- driven strategies, informed by available evidence, to increase public safety and strengthen communities. International Association of Chiefs of Police (IACP): a professional association for law enforcement, representing more than 30,000 members in more than 150 countries. IACP aims to advance the law enforcement profession through advocacy, outreach, education, and programs. National Alliance on Mental Illness: a national grassroots mental health organization dedicated to building better lives for the millions of Americans affected by mental illness. Police Executive Research Forum (PERF): an independent research organization that seeks to identify best practices on issues such as reducing police use of force; developing community and problem-oriented policing; and evaluating crime reduction strategies. After reaching out to each researcher and organization, we then sent a follow up written request to each of them to attempt to achieve consensus on whether or not the two practices we identified through our search—the Crisis Intervention Team (CIT) Model and the Co-responder Model— should be considered leading. We also took note of any tools they mentioned and probed further to understand their origins and intent. We confirmed with all six of the selected stakeholders that the CIT Model met our definition of leading practice and confirmed with five out of the six stakeholders that the Co-responder Model met our definition. Some stakeholders also identified other practices as leading; however, none of those practices had at least two other stakeholders confirm it as a leading practice. In addition, to determine how DOJ and DHS components leverage information from other knowledgeable parties, such as experts, associations, or colleagues in other components, we reviewed relevant documentation on these efforts, as available. We also interviewed agency officials from the components in our scope who are responsible for the development or delivery of training or policies. We conducted this performance audit from February 2017 through February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform an audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. FLETC provides basic training to all Department of Homeland Security (DHS) law enforcement officers through one of three basic program categories, which vary in length, described as follows: Center Basic is a FLETC training program category in which personnel from various agencies are provided with the critical competencies of a specific job, job series, or a group of closely related job series. FLETC provides all instruction. Training is offered in three basic training programs: Criminal Investigator Training Program, Uniformed Police Training Program and the Land Management Police Training Program. Center Integrated Basic is a FLETC training program category that provides entry-level law enforcement officers or direct law enforcement support personnel from a single partner organization with the core competencies of a specific job series or a group of closely related job series. FLETC provides all common and basic core foundational instruction (i.e., firearms, physical techniques, etc.). This category of training includes eight specific programs. Agency-Specific Basic is a training program category designed to provide entry-level law enforcement officers or direct law enforcement support personnel with instruction necessary to meet a single agency’s mission-specific basic training needs. Generally, Agency- Specific Basic courses precede or follow a Center Basic training program, with partner organizations providing the majority of the instruction. Agency-Specific Basic covers an additional 59 training programs. In addition to the contact named above, Joy A. Booth (Assistant Director) and Adam Couvillion (Analyst-in-Charge) managed this assignment. Kisha Clark, Eric Hauswirth, Gina Hoover, Susan Hsu, Candace Silva- Martin, Michael Silver, Janet Temko-Blinder, and Adam Vogt made key contributions to this report.", "summary": "Law enforcement encounters with individuals with mental illness may require special training and skills and can sometimes involve volatile situations, risking tragic injuries or even death. The 21st Century Cures Act includes a provision for GAO to review the practices that federal first responders, tactical units, and corrections officers (for the purposes of this study, “law enforcement officers and agents”) are trained to use in responding to incidents involving individuals with mental illness. This report addresses (1) challenges that federal law enforcement officers and agents face; (2) applicable training, policies, and guidance; and (3) existing leading practices, relevant tools, and efforts to leverage information. GAO selected the five DHS and five DOJ law enforcement components (e.g., Secret Service, Federal Bureau of Investigation) that represent the largest concentration of law enforcement officers within the two departments. GAO reviewed the training, policies, and guidance in place, as well as efforts to enhance them, and discussed these matters with knowledgeable officials. In addition, GAO held discussion groups with a nongeneralizable sample of law enforcement officers and agents, selected through component contacts, to discuss their perspectives. GAO also reviewed studies on law enforcement responses to individuals with mental illness to help identify leading practices and tools and interviewed stakeholders, selected through a structured process, to obtain their perspectives. Law enforcement officers and agents from the Departments of Homeland Security (DHS) and Justice (DOJ) cited a number of challenges in our discussion groups related to their response to incidents involving individuals with a mental illness. All of the federal law enforcement components in GAO's review either offer, receive, or are developing some form of training to their law enforcement officers and agents that addresses responding to incidents involving individuals with a mental illness. Further, all components have relevant policies or guidance in place, and all are undertaking efforts to enhance their practices in accordance with departmental guidance. Since DHS and DOJ components have varying missions and operational needs and interact with the public in different capacities, the nature and scope of training, as well as the number and duration of courses offered in response to individuals with mental illness varies; however, they generally include elements focusing on de-escalation and communication. In addition, DHS and DOJ both have efforts underway to have components review their training and policies under departmental guidance and plan to begin implementing any changes by 2018. Stakeholders cited leading practices and tools for effective law enforcement responses, and DHS and DOJ components have generally leveraged information from other knowledgeable parties. For example, the Crisis Intervention Team approach involves training selected law enforcement officers on mental health topics and dispatching those officers on mental-health related calls. While models like this are typically used by state and local law enforcement agencies, their benefits could be considered in other settings such as federal law enforcement. DHS and DOJ officials are also using collaborative mechanisms within their departments, such as conference calls and working groups with officials, that have helped them leverage information from knowledgeable parties. In addition, DOJ's Bureau of Justice Assistance (BJA), which supports programs and initiatives in the areas of law enforcement, among other activities, has developed and makes publicly available resources such as its Police-Mental Health Collaboration Toolkit. BJA also is working to stand up a national training and technical assistance center to improve law enforcement responses to people with mental illness. While aimed at state, local, and tribal law enforcement, a BJA official also acknowledged that the center could serve as an additional resource for federal law enforcement agencies to consult as they review relevant trainings, policies, and guidance on this topic.", "document_type": "gao"}
{"report": "Investments in federal IT have the potential to make agencies more efficient in fulfilling their missions by reducing costs and improving operational efficiencies. Each year, the federal government invests approximately $90 billion in IT, with about 75 percent reportedly spent on operating and maintaining existing systems. However, as we have previously testified, federal IT investments have too frequently failed or incurred cost overruns and schedule slippages while contributing little to mission-related outcomes. As a result, the federal government has spent billions of dollars on failed and poorly performing IT investments. These investments have often suffered from ineffective management of project planning, requirements definition, and program oversight and governance tasks. Accordingly, in February 2015, we added improving the management of IT acquisitions and operations to our high-risk list—a list of agencies and program areas that have a higher potential for fraud, waste, abuse, and mismanagement, or are in need of transformation. In introducing this high risk area, we specifically noted that agencies spend a significant portion of their budgets on the operations and maintenance of IT systems and need to effectively manage these investments in order to ensure they continue to meet agencies’ needs and deliver value. We issued an update to our high-risk report in February 2017 and noted that, while progress has been made in addressing the IT acquisitions and operations high-risk area, significant work remains to be completed, including establishing action plans to modernize or replace obsolete investments. In addition, over the last 3 decades, Congress has enacted several laws to assist agencies and the federal government in managing IT investments. For example, Congress enacted the Clinger-Cohen Act of 1996 to assist agencies in managing their investments. This act requires OMB to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by federal agencies and report to Congress on the net program performance benefits achieved as a result of these investments. Further, in December 2014, Congress enacted Federal Information Technology Acquisition Reform provisions (commonly referred to as FITARA) as a part of the Carl Levin and Howard P. ‘Buck’ McKeon National Defense Authorization Act for Fiscal Year 2015. The act requires OMB, among other things, to develop standardized performance metrics, including for cost savings and cost avoidances, and to submit quarterly reports to Congress on cost savings and reductions in duplicative information technology investments. More recently, recognizing the challenges in modernizing government IT systems, in December 2017, Congress enacted the Modernizing Government Technology Act as part of the National Defense Authorization Act for Fiscal Year 2018. This law authorizes all covered agencies to establish an IT system modernization and working capital fund to, among other things, transition legacy systems to commercial cloud computing and other innovative commercial platforms and technologies using agency reprogrammed funds. The act also establishes a Technology Modernization Fund administered by the Administrator of General Services, in consultation with the CIO Council, which will provide funds to federal agencies for modernization efforts. As of March 2019, the board that oversees the Technology Modernization Fund had awarded $60.87 million to four projects that plan to migrate or deploy systems to cloud services. Specifically, GSA’s project, which received an award of $20.65 million, is intended to expedite the completion of a new software as a service solution for the agency’s payroll and work schedule and leave management within 2 years. The Department of Housing and Urban Development’s project, which received an award of $20 million, is expected to accelerate the migration of five of the agency’s most critical business systems from an on-premise mainframe database to the cloud within the next 2 years. Energy’s project, which received an award of $15.2 million, is intended to help the agency move 45 separate on-premise email systems to the cloud within the next 3 years. Agriculture’s project, which received an award of $5 million, is intended to help the agency migrate 10 applications to a shared services cloud platform model. One approach to improving the government’s management of IT services is through cloud computing. As mentioned previously, cloud computing is a means for enabling on-demand access to shared pools of configurable computing resources (e.g., networks, servers, storage applications, and services) that can be rapidly provisioned. More specifically, purchasing IT services through a cloud service provider enables agencies to avoid paying for all the computing resources that would typically be needed to provide such services. This approach offers federal agencies a means to buy services more quickly and possibly at a lower cost than building, operating, and maintaining these computing resources themselves. According to NIST, cloud computing offers federal agencies a number of benefits: On-demand self-service. Agencies can, as needed, provision computing capabilities, such as server time and network storage, from the service provider automatically and without human interaction. Broad network access. Agencies can access needed capabilities over the network through workstations, laptops, or other mobile devices. Resource pooling. Agencies can use pooled resources from the cloud provider, including storage, processing, memory, and network bandwidth. Rapid elasticity. Agencies can provision the resources that are allocated to match what actual resources are needed according to demand. This is done by scaling resources up or down by adding or removing processing or memory capacity, or both, according to demand. Measured service. Agencies can pay for services based on usage. This allows agencies to monitor, control, and generate reports, providing greater transparency into the agency’s use of cloud services. As noted in NIST guidance, cloud service providers have established three types of service models that are offered to consumers: Infrastructure as a service. The service provider delivers and manages the basic computing infrastructure of servers, software, storage, and network equipment. The consumer provides the operating system, programming tools and services, and applications. Platform as a service. The service provider delivers and manages the infrastructure, operating system and programming tools and services, which the consumer can use to create applications. Software as a service. The service provider delivers one or more applications and all the resources (operating system and programming tools) and underlying infrastructure to run them for use on demand. NIST has also defined four types of cloud deployment models, including: Private cloud. Service is set up specifically for one organization, although there may be multiple customers within that organization and the cloud may exist on or off the customer’s premises. Community cloud. Service is set up for organizations with similar requirements. The cloud may be managed by the organizations or a third party and may exist on or off the organization’s premises. Public cloud. Service is available to the general public and is owned and operated by the service provider. Hybrid cloud. Service is a composite of two or more of the three deployment models (private, community, or public) that are bound together by technology that enables data and application portability. According to NIST guidance, these deployment models impact the number of consumers and the nature of other consumers’ data that may be present in the cloud environment. A public cloud should not allow a consumer to know or control other consumers of a cloud service provider’s environment. However, a private cloud can allow for ultimate control in selecting who has access to a cloud environment. Community clouds and hybrid clouds allow for a mixed degree of control and knowledge of other consumers. Additionally, the cost for cloud services typically increases as control over other consumers and knowledge of these consumers increase. In December 2010, OMB made cloud computing an integral part of its 25 Point Implementation Plan to Reform Federal Information Technology Management. The plan called for the development of a government- wide strategy to hasten the adoption of cloud services. To accelerate the shift, OMB required agencies to identify three systems to migrate to cloud services, create a project plan for migration, and migrate all three systems by June 2012. In February 2011, OMB issued the Federal Cloud Computing Strategy, as called for in its 25-point plan. The strategy provided definitions of cloud services; benefits of cloud services, such as accelerating data center consolidations; a decision framework for migrating services to a cloud environment; case studies to support agencies’ migration to cloud services; and roles and responsibilities for federal agencies. For example, the strategy states that NIST’s role is to lead and collaborate with federal, state, and local government agency CIOs, private sector experts, and international bodies to identify standards and guidance and prioritize the adoption of cloud services. Subsequently, in December 2011, OMB established the Federal Risk and Authorization Management Program (FedRAMP), a government-wide program to provide joint authorizations and continuous security monitoring services for cloud services for all federal agencies. GSA initiated FedRAMP operations, which the agency referred to as initial operational capabilities, in June 2012. In 2012, OMB began requiring agencies to evaluate each investment, or components or systems within the investment, for cloud services, regardless of the overall life-cycle stage of the investment. Agencies were required to report the status of each investment’s evaluation as part of the annual budget submission, as noted in OMB’s annual capital planning guidance. Specifically, OMB required agencies to select an option regarding whether they had evaluated a cloud alternative and chosen a cloud alternative with a particular cloud deployment model or indicate that they had not yet evaluated the investment for cloud services. Starting in fiscal year 2018, OMB revised the options that agencies were to select from and required agencies to select an option regarding whether the investment, or a portion of the investment, was leveraging cloud computing, or indicate that cloud computing had not been considered for the investment. In 2012, OMB began requiring agencies to report associated cloud spending, as called for in its annual capital planning guidance. For fiscal years 2015 through 2018, OMB’s capital planning guidance required agencies to report their total cloud spending at the agency level based on the cloud deployment model, rather than by individual investment. Starting in fiscal year 2019, OMB will require agencies to report total cloud spending by investment and use the Technology Business Management Framework. The Framework provides a cost taxonomy for agencies to use to manage the cost, quality, and value of their IT services. Specifically, agencies will be required to use a standard set of cost categories to group IT spending, including cloud-related spending. This new model is intended to increase the granularity in reporting of agency IT budget and spending data. In addition, in May 2017, the administration established the American Technology Council to help transform and modernize federal IT and how the government uses and delivers digital services. The President is the chairman of this council, and the Federal CIO and the United States Digital Service Administrator are among its members. Subsequently, in December 2017, the American Technology Council issued a Report to the President on Federal IT Modernization and made eight cloud computing-related recommendations that are relevant to the focus of our review. For example, the report recommended that OMB issue two data calls to agencies in order to: (1) obtain a list of agency in- progress and pending projects for cloud migration; and (2) have agencies identify systems that have not yet migrated due to perceived or encountered difficulties. Based on the information provided, OMB would then assist agencies in making transition plans and work to remove obstacles in order to accelerate cloud adoption. In addition, the report recommended that OMB take action to update its guidance related to cloud computing and revise the Federal Cloud Computing Strategy that was previously issued in 2011. According to staff in OMB’s Office of E-Government and Information Technology, OMB has taken action to address these recommendations. For example, the staff reported that the two data calls were issued in December 2017 and staff are currently reviewing the information provided by agencies in response. In addition, OMB issued its draft strategy revision, the 2018 Federal Cloud Computing Strategy, for comment on September 24, 2018. This proposed Cloud Smart policy outlines a strategy for agencies to adopt cloud solutions that streamline transformation and embrace modern capabilities. According to the draft strategy, Cloud Smart focuses on equipping agencies with the tools needed to make informative technology decisions in accordance with their mission needs. In addition, the draft strategy indicates that OMB intends to leverage private-sector solutions to provide the best services to the American people. The strategy also notes that the CIO Council and Chief Financial Officer Council are to work with OMB, GSA, DHS, and other federal entities to develop a work plan of actions and targeted policy updates that are to be delivered over the next 18 months. For more information about the current status of each of these eight cloud recommendations, as reported by OMB, please see appendix II. During the past several years, we reported on federal agencies’ efforts to implement cloud services, and on the progress that oversight agencies have made to help federal agencies in those efforts. For example, in July 2012, we reported that the seven federal agencies we reviewed had made progress in meeting OMB’s requirement to implement three cloud services by June 2012. Specifically, the seven agencies had implemented 21 cloud services and spent a total of $307 million for cloud computing in fiscal year 2012—about 1 percent of their total IT budgets. In addition, while all seven agencies had submitted plans to OMB for implementing cloud solutions, all but one plan were missing key required elements. We made 14 recommendations to the seven agencies to develop planning information, such as estimated costs and legacy IT systems’ retirement plans for existing and planned services. The agencies generally agreed with, and implemented, 13 out of 14 of our recommendations. In September 2014, we reviewed the efforts of the same seven federal agencies again and found that each of them had implemented additional cloud services subsequent to our July 2012 report. In particular, the total number of cloud services implemented by the seven agencies had increased by 80 services, from 21 to 101. The seven agencies’ reported spending on cloud services had also increased by $222 million, from $307 million in 2012 to $529 million in 2014. However, this relatively small increase in cloud spending was attributed, in part, to the fact that these agencies had not considered cloud services for 67 percent of their investments. Accordingly, we recommended that the seven agencies assess their IT investments for suitability for cloud services. The agencies generally agreed with our recommendations and 6 of the agencies (Agriculture, DHS, GSA, HHS, SBA, and State) implemented all of our recommendations. Further, in April 2016, we identified 10 key practices that federal and private-sector guidance noted should be included in service-level agreements in a contract when acquiring IT services though a cloud services provider. However, our review of five agencies’ (Defense, DHS, HHS, Treasury, and VA) cloud service contracts found that not all 10 key practices were included in these contracts. We therefore made recommendations to OMB to include all 10 key practices in future guidance to agencies. We also recommended that the five agencies incorporate these key practices as their contract and service level agreements expire. The agencies generally agreed with our recommendations and, to date, Defense and DHS have taken action to implement the recommendations. More recently, in April 2017, we highlighted the results of a forum, convened by the Comptroller General on September 14, 2016, to explore challenges and opportunities for CIOs to improve federal IT acquisitions and operations—with the goal of better informing policymakers and government leadership. Thirteen current and former federal agency CIOs, members of Congress, and private-sector IT executives who participated in the forum noted challenges with agency operations that could be addressed by migrating more services to the cloud. In their view, this approach would offer agencies a means to buy the services faster and possibly at a lower cost than through the traditional methods of building and maintaining systems. In addition, forum participants noted the importance of federal agencies’ IT procurement offices and processes evolving to align with new technologies, as agencies are not always set up to take advantage of cloud services. Lastly, forum participants said that, as the federal government is expected to increase its purchase of IT as a service with the move toward cloud computing, more oversight is needed to ensure that appropriate contracts are in place and appropriate oversight of performance occurs. The16 selected agencies reported making progress in implementing cloud services—namely, they established guidance for assessing investments for cloud services, performed those assessments, and implemented cloud services for their investments. However, the extent of these agencies’ progress varied. Specifically, 10 of the 16 agencies established guidance for assessing all new and existing investments for cloud services, while six agencies did not. In addition, while these agencies had assessed the majority of their investments for cloud services planned for fiscal year 2019, 12 agencies had not completed an assessment of 10 or more IT investments for cloud services. Lastly, 10 of the agencies reported a percentage increase in the use of cloud services from fiscal year 2016 through fiscal year 2019, while two agencies reported no percentage change and four agencies reported a decrease during this 4-year period. OMB’s Cloud First policy, issued in February 2011, requires each agency’s CIO to implement a cloud service whenever there is a secure, reliable, cost-effective option to do so. Further, subsequent OMB capital planning guidance, issued in 2014, requires agencies to evaluate each investment, or components or systems within the investment, for cloud services, regardless of the overall life-cycle stage of the investment. While OMB’s guidance is not specific on how agencies should conduct these evaluations, GAO’s Information Technology Investment Management framework notes that organizations should have documented policies and procedures for the management oversight of IT investments, including the selection of investments and the evaluation of information technologies that have the potential to improve the organization’s business. Ten of the 16 agencies we reviewed had established guidance in accordance with OMB’s requirement to assess new and existing IT investments for suitability for cloud services, as of August 2018. In particular, all 10 agencies’ guidance required assessments of cloud service suitability for both new and existing IT investments. However, the remaining six agencies did not have such comprehensive guidance in place. Rather, the guidance either required assessments of new or existing systems for cloud services but not both, or the guidance had not yet been established. Specifically, Labor’s and SSA’s guidance required assessments of new investments for cloud services but did not address assessments of existing investments. In addition, Energy’s guidance required assessments of existing systems but not new acquisitions. Further, three agencies (Education, HHS, and Transportation) had not established guidance for assessing investments for cloud services. The results of our analysis of agencies’ guidance on assessing IT investments for cloud services are shown in figure 1. Agency officials in the Office of the CIO at the six agencies provided a variety of reasons for why they did not have guidance for assessing all investments for cloud services. Specifically, Labor officials reported that they had not included legacy applications in their guidance because not all applications should or could be migrated to the cloud. In addition, SSA officials reported that they were planning to assess all existing systems for cloud services, but had not determined a time frame for this review. Further, Energy officials reported that, while the agency was following OMB’s Cloud First policy, it would need to establish guidance for assessing new investments for cloud services; however, a date for doing so had not been determined. Transportation officials reported that they believed their guidance on managing cloud computing efforts was consistent with OMB’s Cloud First policy and stated that they had no plans to develop additional guidance. However, our review of the agency’s guidance found that it did not include any information regarding the assessment of investments for cloud services. Instead, the guidance only required that investments intending to use cloud services provide procurement and other cost information as part of the business case and use specified language in contracts with cloud service providers. Therefore, we believe that the guidance is not consistent with OMB’s guidance requiring agencies to assess investments for cloud services. Education officials reported that they were in the process of finalizing a policy and hoped to have it completed by the end of the year. In addition, HHS officials reported that they had explored developing some guidance regarding cloud services, but had not established any plans to do so. As previously discussed, assessing all new and existing IT investments to determine whether they are suitable for cloud services is an important component of OMB’s Cloud First policy. Until the six identified agencies update or establish guidance for assessing both new and existing investments for cloud services, they will not be positioned to ensure adequate implementation of OMB’s Cloud First policy. Further, these agencies increase the risk that they will not be able to take advantage of cloud services to improve operational efficiencies and minimize costs. As noted previously, OMB’s fiscal year 2016 IT capital planning guidance requires agencies to evaluate each investment for cloud services and report the status of this evaluation as part of the annual budget submission. Specifically, agencies were to respond to a question regarding whether they had selected cloud services for the investment, or components or systems within the investment, or, for example, report that the investment had not yet been assessed for cloud services. OMB publicly reports agencies’ responses to this question on the IT Dashboard. As of October 9, 2018, the 16 agencies in our review reported on the IT Dashboard that they had completed cloud assessments for 84 percent of their IT investments (5,180 out of a total of 6,157) planned for fiscal year 2019. Of these, two agencies (GSA and State) had completed an assessment of all investments. However, 12 agencies had not completed an assessment of 10 or more IT investments for cloud services. Table 1 lists the number of IT investments at the 16 selected agencies for fiscal year 2019 that had been assessed for cloud services. The table also shows the number and percentage of investments that remained to be assessed. Officials in the Office of the CIO at the 12 agencies provided a variety of reasons for why they had not assessed all investments for cloud services. For example, Agriculture officials reported that 21 of their 53 investments did not need assessments because the investments were not suitable for cloud services. The officials said they intended to update the IT Dashboard to reflect this change. Further, these officials stated that they planned to assess the remaining 32 investments by April 30, 2019. Defense officials reported that the agency was in the process of adjusting its cloud strategy that was issued in January 2018 and intends to address investments that have not yet been evaluated. However, the officials stated that they had not established time frames for the evaluations. In addition, DHS officials reported that they were in the process of implementing their guidance and putting in place a new process for identifying planned acquisitions based on the phase in the acquisition life cycle. However, the officials had not identified a time frame for when the new process would be finalized or when all assessments of the investments would be completed. Justice officials reported that, as they began the budget process, the agency planned to look at performing additional assessments of investments for cloud services. However, the officials provided no time frames for when these assessments would be completed. In addition, SSA officials stated that the agency planned to perform an assessment of current investments for cloud services. However, the officials reported that they had not established a time frame for completing these assessments. Further, Treasury officials reported that, while the agency had established a process for assessing investments for cloud services, it did not set specific dates for when the assessments were to be conducted. These officials reported that they only conducted a cloud assessment if the agency determined that it would replace, redevelop, or retire an investment. However, Treasury’s guidance is not consistent with OMB’s requirement that agencies conduct an annual assessment of all investments, regardless of the overall life-cycle stage of the investment. Many of the 16 agencies in our review have made progress in implementing cloud services by establishing guidance for assessing investments for cloud services and performing assessments. Even agencies that lacked formal guidance for performing an assessment have made progress in increasing the use of cloud services when the assessment was completed. Nevertheless, 12 agencies still need to assess a large number of their investments. Until these agencies assess their investments that have yet to be evaluated for cloud services, they may not know which investments are likely candidates for migration to cloud services. Moreover, these agencies will not be positioned to take advantage of operational efficiencies, cost savings, and other benefits from the use of cloud services. As of October 9, 2018, the 16 agencies in our review reported on the IT Dashboard that 11 percent of their IT investments were projected to use cloud services for fiscal year 2019—an increase of 3 percentage points from fiscal year 2016 to fiscal year 2019. In addition, 13 out of the 16 agencies reported that they planned to increase their use of cloud services, in some cases, by as much as 20 percentage points or more, between fiscal years 2018 and 2019. Table 2 lists the percentage of the selected agency IT investments that used cloud services for fiscal years 2016 through 2018 and are projected for 2019. (For additional details on the number of cloud investments and the total investments reported by each of the selected agencies for fiscal years 2016 through 2019, see appendix III.) In addition, while the majority of agencies made progress in implementing cloud services between fiscal years 2016 and 2019, the extent of agencies’ progress varied. Specifically, 10 of the 16 agencies reported an increase in the use of cloud services, with the percentage of increase varying from up to 10 percentage points to 20 or more percentage points. For the remaining six agencies, two reported no change in the percentage of investments using cloud services and four reported a decrease in the overall percentage of cloud usage. Figure 2 shows the breakdown in the range of percentage point changes in the use of cloud services for agency investments for fiscal years 2016 through 2019, as reported on the IT Dashboard. Officials in the Offices of the CIO, and Office of Information Technology, at the six agencies that reported no change or a decrease in their cloud investment percentages during this 4-year period provided a variety of reasons for why this was the case, or had no comments regarding the lack of change in their cloud investment percentages. Specifically, Energy officials reported that the agency had not shown an increase in the percentage of its cloud investments due to an IT portfolio optimization effort designed to consolidate the agency’s cloud investments. According to the officials, this optimization effort was designed to reduce the total number of these investments during the 4-year period. As a result, this optimization effort affected the overall percentage of cloud investments. As for Labor, its officials did not offer any comments regarding the lack of an increase in cloud use during this period. In addition, Defense, DHS, and Education officials reported that staff in their agencies had inconsistently applied the definition of cloud computing, which had led to differences in identifying and reporting the number of cloud investments within their agencies during this period. Further, DHS officials noted that the ongoing addition, combination, completion, and cancellation of investments had contributed to the fluctuation in the number of cloud investments within their agency. Finally, VA officials reported that their cloud identification processes were maturing during this period and, as such, had resulted in different cloud investment counts. Some of the inconsistencies reported by agencies regarding the types of investments that they identified as being cloud investments may also be a result of OMB’s changes to its guidance during this 4-year period. Specifically, OMB changed how agencies were required to report their use of cloud services in fiscal year 2018, and revised the options that agencies were to select from in order to identify and report the use of cloud services for each investment. Going forward, several agencies reported that they intended to continue making progress in their implementation of cloud services beyond fiscal year 2019. For example: Education officials reported that the agency expected to increase cloud use significantly in 2019 and beyond due to an IT services contract award that is to support the migration of the agency’s primary hosting infrastructure to the cloud. DHS officials reported that the agency had set aggressive goals for acquiring cloud services. Toward this end, the agency had initiated a cloud steering group and created a team with staff from all components. In addition, the officials reported that they planned to consolidate space in one data center and eliminate another data center, which would allow the agency to accelerate its migration to the cloud. Justice officials reported that they expected to increase spending on cloud services as the agency completed ongoing initiatives in 2019. In addition, the officials reported that they anticipated migrating the majority of the agency’s unclassified data to the cloud in the next few years. VA officials reported that the agency planned to migrate at least 350 applications to the cloud by 2024. Agencies’ efforts to acquire additional cloud services and take advantage of improved efficiencies and cost savings should help to further improve their management of IT acquisitions and operations. The 16 agencies in our review made progress in implementing cloud services. Specifically, the 16 agencies reported that their spending on cloud investments had increased by over $1 billion between fiscal years 2015 and 2018 for investments with total life-cycle costs of $1 million or more. Nevertheless, the agencies reported that factors such as inconsistent tracking of spending data, along with confusion in interpreting OMB guidance, impacted the accuracy of their reported cloud spending data. In addition, 13 of the 16 agencies provided savings data indicating that they had saved hundreds of millions of dollars on cloud services, but agencies reported that they had problems with tracking this data. Further, six agencies reported that they had reinvested cloud savings into other IT modernization efforts or other improvements to IT services. OMB requires agencies to report spending on cloud services. Specifically, OMB’s annual capital planning guidance for fiscal years 2015 through 2018 required agencies to report their total cloud spending on the IT Dashboard, although it did not require the information to be reported by investment. While the selected agencies’ reporting on the IT Dashboard indicated that their percentage of total spending on cloud services generally remained constant during fiscal years 2015 through 2017. Specifically, the 16 agencies reported on the IT Dashboard that approximately 3 percent of their total IT spending each fiscal year during this period was spent on cloud services. For fiscal year 2018, agency-reported cloud spending through March 2018 was at 2 percent. Table 3 identifies the percentage of the selected agency spending on cloud services for fiscal years 2015 through 2018, as reported on the IT Dashboard. (For additional details on total agency cloud spending and total IT spending reported by each of the selected agencies for fiscal years 2015 through 2018, see appendix IV.) However, the breakdown in spending by investment for cloud services with $1 million or more in life-cycle costs that the 16 agencies provided to us, showed that their spending on cloud investments had increased during fiscal years 2015 through 2018, and beyond (agencies generally submitted data on planned spending for one or more fiscal years beyond 2018). Specifically, the agencies’ provided data showed that total cloud spending for these investments was approximately $1.38 billion in fiscal year 2017—an increase of over $1 billion since fiscal year 2015. In addition, the 16 agencies’ data indicated that they plan to spend over $3.2 billion on cloud services in fiscal year 2018 and beyond for these investments. Table 4 summarizes the information provided to us on a breakdown of the 16 selected agencies’ total spending for investments with $1 million or more in life-cycle costs for cloud services, from fiscal years 2015 through 2018 and beyond through fiscal year 2024, that was submitted to us. (For a list of the investments that have spent $1 million or more in life-cycle costs for cloud services, provided by each of the 16 selected agencies for fiscal year 2018, see appendix V.) Officials in the Office of the CIO at all of the agencies in our review identified three factors that could affect the completeness of the cloud spending data provided to us and on the IT Dashboard: (1) spending data were not consistently tracked; (2) different methods were used to calculate cloud spending costs; and (3) interpreting changes in OMB and related guidance created confusion regarding what spending data should be tracked. Spending data were not consistently tracked. Defense officials reported, for example, that the agency had only begun tracking cloud spending in fiscal year 2016 and, therefore, spending data were not available for fiscal year 2015. In addition, VA officials reported that they were in the process of maturing their tracking of cloud spending data and, therefore, the agency did not have spending data available for the majority of their investments prior to fiscal year 2019. Further, Justice officials reported that the agency had been challenged to track cloud costs because the costs are based on fluctuating usage, rather than a flat rate. Different methods were used to calculate cloud spending costs. Some agencies reported that the data they provided to us included costs for items such as power usage and staff full-time equivalents, while other agencies told us that they only provided contract costs. In addition, some agency officials noted that they included in the provided spending figure, the additional costs for migrating the application to cloud services, while other officials said that these costs had not been included in their spending totals. Interpreting changes in OMB and related guidance created confusion regarding what spending data should be tracked. Agencies noted that OMB made changes to its guidance since 2015, including clarifications to the definition of cloud computing, changes to the definition and scope of cloud services and cloud spending, and changes to the guidance regarding what applicable costs should be included in spending totals—all of which created confusion regarding what investments and what costs should be tracked for cloud services. Defense officials also reported that the agency misinterpreted the NIST definition of cloud computing, and, as a result, Defense misreported that certain IT investments were using cloud services, when these investments were not using these services. Defense officials reported that the agency had corrected this issue but it affected the total cloud spending reported during this period and led to the decrease in spending noted. Based on our review of these factors reported by the 16 selected agencies, we identified issues with the completeness of the reported cloud spending data. Specifically, these factors increase the likelihood that all costs associated with spending on cloud services may have been incompletely captured by the 16 selected agencies in our review. As a result, agencies’ reported total cloud spending on the IT Dashboard and the data provided to us is likely underreported. Staff in OMB’s Office of E-Government and Information Technology stated that agencies have previously reported challenges in breaking out cloud costs, particularly when the cloud acquisition is part of a larger contract. Given these challenges, the staff acknowledged that agency- reported cloud spending data are underreported and stated that the IT Dashboard reflects only a fraction of actual federal spending on cloud services. However, the staff stated that OMB’s changes to its guidance, beginning in fiscal year 2019, should help to improve the reporting of cloud spending data. Specifically, beginning in fiscal year 2019, agencies will be required to report total cloud costs by investment, per OMB’s IT capital planning guidance, and use the Technology Business Management framework. Having complete data on spending for cloud services is critical in order to ensure that agencies can provide effective management and oversight of their cloud use, and that OMB and lawmakers can hold CIOs accountable for the performance of these cloud investments. The changes to OMB’s guidance for fiscal year 2019 provide a key improvement for ensuring that agencies establish more consistent processes for reporting on cloud- spending and should help agencies improve the completeness of the cloud-spending data that they report to OMB. Since 2013, OMB has required agencies to report quarterly on their total savings and cost avoidances from implementing OMB’s IT reform initiatives, including savings realized from the migration to cloud services. Specifically, agencies are required to report actual and planned savings from implementing these initiatives in a quarterly submission and identify which implementation of an OMB initiative resulted in the reported savings. Despite this, in the reporting mechanism, agencies can only associate specific savings with certain OMB initiatives, a list that does not include the migration to cloud services. Standards for Internal Control in the Federal Government emphasizes that management should track the actual performance of key initiatives in order to ensure that these activities are meeting plans, goals, and objectives, and in doing so, management should use quality information. Thirteen of the 16 agencies in our review provided savings data to us for at least one cloud investment with life-cycle costs of $1 million or more for cloud services during fiscal years 2014 through 2018. In total, the 13 agencies’ provided data showed that they had accrued approximately $291 million in savings or cost avoidances using cloud services since 2014. In addition, the agencies’ data indicated that they planned to save at least $150 million in fiscal year 2018 and beyond (agencies generally submitted data on planned savings for one or more fiscal years beyond 2018). However, agency officials from the 13 agencies stated that, while they were able to provide some savings data, these data are only tracked on an ad hoc basis for certain cloud investments. In addition, officials from three agencies (Defense, State, and SSA) stated that they could not provide savings data for any of their cloud investments. As a result, the 16 agencies were unable to provide savings or avoidance data for 411 out of 488 investments (84 percent) that we reviewed. Table 5 shows, for the selected agencies in our review, the breakdown in total agency savings and cost avoidances for fiscal years 2014 through 2018 and beyond for investments with $1 million or more in life-cycle costs for cloud services. Officials in the Office of the CIO at the 16 agencies identified three factors that impacted their efforts to provide data on savings or cost avoidances for cloud computing investments: (1) savings data were not systematically tracked or were hard to track; (2) deploying or migrating systems to the cloud had resulted in no cost savings; and (3) OMB does not require agencies to identify savings associated with cloud services as part of reported savings. Savings data were not systematically tracked or were hard to track. Defense, Treasury, and VA officials reported that their investment management systems did not have the capability to track cloud savings or avoidance data. In addition, GSA officials reported that, while their system had the capability to track cost savings data, the agency did not capture and track realized cloud savings in a consistent format. GSA officials stated that they were in the process of implementing the Technology Business Management Framework, which they expected would improve the collection of these data. However, the officials did not identify a time frame for when this framework was to be implemented. Education officials reported that the agency did not provide cost savings data for those investments where cost savings targets had not been established or anticipated. SBA officials reported that investments with two cloud providers had only been recently made so the agency could not yet make a reasonable assessment of savings. Further, Agriculture officials reported that the agency had a hard time tracking the savings from certain investments because the process for formulating the overall agency budget was different than the process for determining savings from cloud implementation. State officials reported that they were in the process of developing the capability to collect and track savings data from using cloud services but did not have any reliable data to provide during our review. In addition, Energy officials reported that their agency intended to establish review processes in the coming year to ensure that costs, cost savings, and cost avoidances were tracked for all cloud investments. As part of this process, the agency intended to work closely with its components to ensure that there was a consistent application of definitions for cloud spending and savings. However, the officials did not identify a specific time frame for when the agency expected the new process to be completed. Lastly, HHS officials reported that the agency did not expect to track cost savings beyond the FITARA requirements. FITARA requires the reporting of savings associated with two OMB initiatives—data center consolidation and PortfolioStat. However, per M-13-09, OMB requires agencies to report savings associated with all of its initiatives. As such, HHS’s tracking of savings is not consistent with OMB’s guidance. Deploying or migrating systems to the cloud resulted in no cost savings. Treasury officials reported that their agency had not realized any cost savings from the migration of certain investments because the acquisition of cloud services either had allowed the agency to purchase additional capabilities that the previous system did not have, or the agency had continued to operate the previous system at the same time as the new cloud system for a period of time. In addition, Commerce officials reported that their agency had not realized any cost savings for some investments because acquiring cloud services required that new business and performance requirements be put in place, which resulted in no overall savings for these investments. Further, DHS and SSA officials reported that a number of their investments were new applications that were developed and deployed in the cloud. As such, there were no costs from a prior system that could be compared with the costs to maintain the new system using cloud services; thus, there were no associated cost savings or avoidances. OMB does not require agencies to identify savings associated with cloud services as part of reported savings. Officials from Agriculture, Justice and Transportation noted that, while OMB requires agencies to report savings, current reporting instructions do not specifically require the identification and reporting of cloud savings as a separate category of cost savings and avoidance. In this regard, OMB’s guidance requires agencies to identify which OMB initiative resulted in the reported savings, but the available options for agencies to choose from do not include cloud services. Accordingly, officials from these agencies stated that they either reached out to their components to try and collect this information or had to review their investments to determine whether there were any cloud savings, to be able to provide this information to us. Based on our review of the factors that impacted the selected agencies’ efforts to provide savings data, we identified issues with the completeness of the savings data. Specifically, challenges identified by the selected agencies in systematically tracking savings data, and the lack of a specific OMB requirement to report savings associated with cloud services, increase the likelihood that all savings associated with cloud services may have been incompletely captured by the agencies that provided these data. As a result, agencies’ reported cloud savings data on the IT Dashboard and the data provided to us is likely underreported. Staff in the Office of E-Government and Information Technology stated that, while agencies are required to report total savings related to OMB initiatives, the format is left to agency discretion. In addition, OMB staff confirmed that agencies do not have to specifically identify savings related to cloud computing unless they choose to do so. OMB staff further said that they do not require a specific format for reporting savings in order to minimize the burden on agencies in reporting this information. While OMB’s effort to minimize the reporting burden on agencies is appropriate, the lack of an explicit requirement to identify reported savings associated with cloud services has contributed to agencies not consistently tracking these savings. In addition, while OMB has taken steps to ensure more accuracy and granularity in agency reporting of cloud investment spending data in fiscal year 2019, there has not been a corresponding effort to ensure better reporting of cloud savings data. As a result, OMB and Congress may not have sufficient data to see the results of key initiatives, like Cloud Smart, and understand whether agencies are achieving savings using cloud services. Since 2013, OMB has required agencies to report on the savings resulting from implementation of its key IT reform initiatives. Although OMB does not provide the means for agencies to explicitly identify cloud- related savings, it is nevertheless important for agencies to take steps to fully track savings and cost avoidances from cloud computing acquisitions in order to ensure effective oversight and management of these initiatives. However, until OMB establishes a specific cloud savings reporting requirement, and until these agencies establish a consistent and repeatable mechanism to track these savings and cost avoidances, the agencies may lack sufficient information on the results of cloud acquisitions to date and the data necessary to make decisions regarding future cloud acquisitions. In 2017, Congress enacted what is known as the Modernizing Government Technology Act, which authorized covered agencies to establish an IT system modernization and working capital fund. This fund was to be used to, among other things, transition legacy IT systems to commercial cloud computing and other innovative commercial platforms and technologies using agency reprogrammed funds or amounts made available to the IT working capital fund through discretionary appropriations. Regardless of the extent of agencies’ processes for tracking savings obtained from using cloud services, officials in the Office of the CIO at six agencies in our review (Education, GSA, Labor, SBA, SSA, and Treasury) reported that they have reinvested these savings into other IT modernization efforts or other improvements to IT services. For example: Education officials reported that $498,000 in fiscal year 2018 cloud savings was used to modernize the agency’s network infrastructure in order to provide increased multipath bandwidth and software that automatically routes traffic if network issues occur. GSA officials reported that the agency used the savings from replacing the agency’s legacy on-premises email program with a cloud-based email system to implement a modern enterprise collaboration platform, email, and document storage system. According to the officials, the move to the cloud helped improve the agency’s flexibility (the new system is accessible from any device, at any time, and from any location), productivity, and cost-effectiveness. As part of this effort, the officials reported that the savings were managed using the agency’s working capital fund. Labor officials reported that their agency is using savings and cost avoidances to partially fund an initiative to consolidate cloud services within the agency in order to provide future secure cloud services and establish an enterprise contract vehicle to obtain cloud services. The officials noted that this investment is intended to allow the agency’s components to leverage a cloud authority to operate, obtain competitive pricing for, and establish communications to cloud service providers. In addition, Labor officials reported that the agency has established a working capital fund that is to be used to manage the savings from cloud and shared services. SBA’s CIO reported that the agency reinvested $7.8 million in savings from efforts to consolidate data centers to the cloud toward the implementation of other enterprise-wide modernization efforts. In addition, the agency had used the savings for the deployment and migration of additional applications to cloud services. Specifically, the CIO reported that the savings were used to design and architect cloud services, roll out the agency’s update of key operating system and office applications, decommission obsolete data center assets, reduce overlapping technologies, and enhance security and compliance capabilities with new enterprise tools and network monitoring. In addition, the CIO stated that, by using the savings from the data center consolidation, SBA has been able to undertake all of the agency’s cloud modernization efforts with no additional budgeted funding. We have previously reported that significant work remains to ensure that agencies improve their management of IT acquisitions and operations, including modernizing or replacing obsolete IT investments. It is encouraging that several agencies have reinvested savings from cloud initiatives into other IT modernization efforts and, in some cases, have taken advantage of working capital funds authorized by Congress to do so. Having complete information on the savings or avoidances that result from cloud initiatives and using those savings to further IT modernization efforts is critical to ensuring the transformation of IT services across the federal government in the future. Officials from 15 of the 16 agencies in our review reported that they had realized several significant benefits from the adoption of cloud services, ranging from improvements in the delivery of IT services to increasing the efficiency of operations and systems. In addition, the 15 agencies noted that certain key practices enabled them to realize these benefits through the successful implementation of cloud services. These practices included establishing new governance planning activities and policies, reorganizing the management of agency IT resources, and having executive leadership involved to help drive acquisition efforts. Officials in charge of cloud services at 15 of the 16 agencies in our review reported that they had identified five significant or notable benefits as a result of acquiring cloud services. Specifically, the 13 agencies reported that they had improved customer experiences through better design and performance of business systems and customer websites. In addition, all 15 agencies reported that they were able to procure more flexible and scalable IT resources, and reduce the cost of provisioning infrastructure and managing services. Table 6 lists the five significant or notable benefits reported by the 15 agencies and the number of agencies that reported each benefit. The discussion that follows the table provides examples of each of the five agency-reported benefits from the acquisition of cloud services. Officials in the Office of the CIO at the 15 agencies reported that acquiring cloud services had allowed them to procure IT resources that were more flexible and scalable than the prior legacy infrastructure. For example, officials in Labor’s Office of the CIO reported that they had acquired cloud services to address seasonal demands for system processing. By eliminating the need to purchase additional servers and other equipment that would go unused during the rest of the year, Labor officials reported that cloud services allow the agency to scale resources up during these periods of increased processing and then scale the resources back down when the excess capacity is no longer needed. In addition, officials in DHS’s Office of the CIO reported that, in 2012, they had acquired software as a service for the agency’s virtual desktop solution. This new service provided six agency components access to virtual secure desktop operating systems and applications. By eliminating the need for users to be physically present in a specified location in order to perform work activities, DHS officials reported that cloud services had improved the ability to quickly respond to the agency’s mission needs and provided teleworking capabilities. In addition, the officials reported that the solution streamlined the process of provisioning network access between agency components and other external agencies. Officials in the Office of the CIO at the 15 agencies reported that acquiring cloud services had allowed them to procure more cost-effective options for provisioning IT infrastructure and managing IT services. For example, officials in Education’s Office of the CIO reported that, by migrating the Institute of Education Sciences’ data center to the cloud in 2014, the agency had saved approximately $3.3 million in cost avoidances annually for the last 3 years from not having to pay prior data center hosting charges. In addition, Education officials reported that the agency had saved $11.6 million between fiscal years 2013 and 2018 by eliminating contractor website hosting. In addition, officials in Energy’s Office of the CIO reported that the agency saved $900,000 in fiscal years 2013 to 2014 by transitioning to a cloud- based platform for managing IT services, such as asset management. Acquiring the software and platform as a service reduced or eliminated the costs of administering the agency’s on-premise legacy infrastructure and associated software licensing fees. Officials in the 15 agencies’ Offices of the CIO reported that acquiring cloud services had allowed them to streamline or improve systems and automate business processes and other functions. For example, officials in State’s Office of the CIO reported that the agency had previously relied on paper-based and manual processes for completing employee requests for, among other things, leave, training, personal identification cards, and other general services. By acquiring software and platform as a service, State implemented an electronic application that replaced over 800 paper forms used to make these requests, without the time and cost of developing an application themselves. As a result, the officials reported that they estimate the application has saved more than 50,000 hours of staff time since its deployment by streamlining the request process, automatically populating common data fields, and improving support options. In addition, officials in Treasury’s Community Development Financial Institutions Fund reported that their office acquired software as a service, which will enable them to reduce the number of legacy systems related to awards management from 17 to 2. These legacy systems had required staff to enter the same data in different systems and manually complete certification work tasks. By automating many of the manual review and compliance processes, the officials reported that the office saved approximately 650 staff hours in 2017. Officials in the Office of the CIO at 13 agencies reported that acquiring cloud services had allowed their agencies to improve system design and usability, which helped to enhance their customer service. For example, VA officials reported that they had deployed a website in the cloud, Access to Care, which included detailed data on the wait times and quality-care metrics at local hospitals. Doing so enabled veterans to be able to make better decisions about their health care options. By acquiring cloud services, VA officials reported that they had developed and deployed the new Access to Care website in approximately 30 days, incorporating information from 130 components of VA’s electronic health records system that were previously available on disparate legacy websites into one website. Further, the officials reported that the new website increased the transparency of health care information for the veteran community, empowered veterans, and promoted competition for health care services. In addition, a Defense official from the Army’s Total Ammunition Management Information System reported that the office had acquired infrastructure as a service in order to improve the processing and reporting of ammunition requests that the Army receives from users worldwide. Defense staff reported that, previously, they had received complaints from customers regarding system pauses and delays when entering requests for ammunition and generating reports due to legacy infrastructure. Defense officials stated that using infrastructure as a service improved system processing and reporting times—from minutes to seconds—by providing scalable technology resources that can meet worldwide performance demands. As a result, customers can more quickly enter their orders into the system. Officials in the Office of the CIO at nine agencies reported that acquiring cloud services had allowed them to achieve greater levels of mission assurance by streamlining security resources and improving backup capabilities that were not available previously. For example, officials at Defense’s North American Aerospace Defense Command and U.S. Northern Command reported that they had acquired cloud services for the Situational Awareness Geospatial Enterprise system in order to improve mission assurance and address Defense cybersecurity requirements. According to the officials, cloud services improved mission assurance by allowing them to more quickly correct problems such as malware and the loss of network connectivity in order to ensure the near continuous availability of data from different access points. In addition, the system required extensive storage and backup capabilities due to the need to ensure the system’s data were available continuously from different access points. The officials reported that the acquisition of cloud services has reduced the costs required to maintain continuous backup and storage capabilities. They added that the system also complies with Defense requirements that investments use an approved cloud service provider. In addition, the officials said acquiring cloud services has provided the capability to scale resources, as needed, to meet demands during special events, such as the State of the Union address and the World Series, which require additional security. Further, Federal Transit Administration officials reported that migrating two systems to the cloud had allowed the agency to enhance system security by managing access to the systems through a single portal rather than managing access to each system individually. As a result, the officials reported that they were able to shift some responsibilities of systems security management to the cloud vendor, which reduced the number of security risks and consolidated the number of security tools used. Further, according to the officials, an additional benefit is that users are required to only remember a single password rather than different passwords required for the multiple systems. Separately, from information provided by the 15 selected agencies, we identified nine cloud computing investments that illustrate the variety of examples of benefits that had been realized by these agencies from the acquisition of cloud services. Table 7 identifies these investments and additional details regarding the nature and sources of the benefits achieved from them are profiled in appendix VI. In addition to the examples of significant benefits reported from acquiring cloud services, officials at the 15 agencies reported that six key practices had enabled them to realize these benefits through the successful implementation of cloud services. For example, 12 agencies reported that they implemented new governance planning activities, policies, or processes in order to help ensure that cloud acquisition efforts were managed enterprisewide. In addition, 12 agencies reported that they had reorganized the management of agency IT resources to help increase operational efficiency. Further, six agencies reported that having executive leadership involved in driving the acquisition or sponsoring efforts to use cloud services was critical for the successful adoption of cloud services across the agency. Table 8 lists these key practices and the number of agencies that reported each key practice, ranked by the number of agencies reporting the practice. In addition, many of these six key practice areas identified by agencies are consistent with requirements outlined in FITARA and recommendations from our prior work made to agencies to address longstanding issues with the management of IT acquisitions and operations. Specifically, we previously have noted the importance of strengthening the authority of CIOs, improving the portfolio review process and the transparency of major investment data, ensuring the use of incremental development methodologies, and updating human capital plans. Officials in the Office of the CIO at 12 agencies reported that they had implemented new governance activities or drafted new policies and processes to help ensure the successful implementation of cloud services. For example, SSA officials reported that they had drafted several new policies to simplify the management of cloud resources and provide better oversight for new cloud service acquisitions. Specifically, the officials reported that the new policies established a request-and- approval governance process to address which staff can initiate cloud solutions and what types of projects can receive funding. In addition, Energy officials reported that they had formalized policies and governance processes on how to perform cloud migrations, including establishing a documented, repeatable process to help offices migrate to cloud services more efficiently. Further, Treasury officials reported that they had focused on strengthening cloud-governance activities, including planning and identifying requirements, because changes to enterprise cloud systems may impact multiple programs. As a result, these officials reported that they had implemented a cross-cutting steering committee to help better plan and assess the impact of changes to enterprise cloud systems that support multiple programs. Officials in the Office of the CIO at 12 agencies reported that they had modified their procurement and contract oversight practices in order to accommodate the differences in how cloud services are acquired from traditional acquisitions. For example, Commerce officials emphasized the importance of developing standardized requirements to ensure that when bureaus award contracts, they use standardized language. The officials stated that these requirements help to ensure that contracts with cloud service providers are comprehensive, legally adequate, and include specific details regarding all of the activities the agency will need the contractor to perform. In addition, officials of the U.S. Trustee Program at Justice reported that they had used existing project and financial management resources to monitor the use of cloud services and associated spending to help control costs and ensure the accuracy of cloud vendor charges. For example, the officials reported that the program used the cloud vendor’s administrative and business intelligence tools to create reports to verify cloud charges. Also, Labor officials reported that they had worked with the agency’s acquisition team to ensure the agency is only billed for its actual cloud usage. This required the agency to transition from a fixed-price contract model to a time and materials-based contract model, which included a clause that limited the maximum costs the agency would have to pay for cloud services. Officials in the Office of the CIO at 12 agencies reported that they had taken several steps to address changes in workforce needs for managing cloud services. Specifically, these officials reported that they had conducted inventories of staff skills, transitioned staff into new roles, and ensured that staff acquired training. For example, VA officials reported that they had conducted a staff skills inventory to identify future IT workforce training needs and transition staff from managing legacy technologies to managing cloud services. In addition, Energy officials reported that they were preparing staff to transition from managing data center resources to managing the agency’s service level agreements with cloud providers. The officials reported that moving to cloud services allowed staff to spend more time improving existing applications and identifying other efforts to innovate IT services rather than managing on- premise infrastructure. Further, a Defense official lead for cloud computing in the Navy’s Office of the CIO reported that the Navy had developed an enterprise cloud working group consisting of key members from major offices and security groups to help determine the appropriate training and certification needs for staff and to conduct training seminars. In addition, SBA officials said that the agency took advantage of a contract option offered by the cloud vendor to acquire free cloud classes and training, thereby avoiding the need to spend approximately $380,000 on training. Office of the CIO officials at 12 agencies reported that acquiring cloud services had led them to change how they organized and managed the agency’s IT resources. For example, GSA officials reported that they had transitioned from letting individual components within the agency acquire their own application to using an enterprise approach in which software as a service applications are acquired and made available to the entire agency. As a result, the officials reported that this approach allows the agency to further optimize their software purchases and improve their monitoring and tracking of software application usage enterprise-wide. In addition, officials at the Agricultural Research Service reported that acquiring software as a service had promoted opportunities to share customizations of the acquired software between Agriculture’s components rather than having each component develop a separate customization. Specifically, these officials reported that they were able to take a software feature developed by another Agriculture component and implement it for their customer service portal, rather than having to develop it themselves. Lastly, Education officials reported that they were in the process of beginning an assessment to consolidate the agency’s existing cloud services across federal and commercial environments. The officials said that they hoped to reduce the number of commercial cloud providers used from twenty-five to eight, and to consolidate two of the agency’s cloud environments into a single environment within the next 3 years. Office of the CIO officials at eight agencies reported that they were able to streamline the management of IT security by leveraging cloud services. For example, SBA officials reported that they used security tools from their cloud vendor in order to meet DHS’s requirements for continuous diagnostics and mitigation and improve the agency’s security posture. The officials reported that they had performed a requirements analysis and found that, compared to acquiring costly hardware solutions to manage this capability internally, their existing cloud vendor provided security capabilities that actually exceeded DHS’s recommended continuous diagnostics and mitigation requirements. As a result, SBA adopted the cloud vendor’s security tools and avoided $300,000 in initial hardware purchases, as well as subsequent hardware technology refreshes every 3 years. In addition, GSA officials reported that choosing a FedRAMP-approved cloud service provider had expedited the agency’s adoption of cloud services. Specifically, the agency did not have to visit and review each vendor’s facility as part of the vendor approval process, which shortened the time frame needed to approve a system for use. The officials also reported that using cloud services streamlined the deployment process for new systems because using a cloud platform that had previously been granted the authority to operate allowed the agency to avoid undertaking a separate authorization process, which saved time and resources. Officials in the Office of the CIO at six agencies reported that having executive leadership involved in driving acquisitions or sponsoring efforts to use cloud services was critical to the successful adoption of cloud services across the agency. For example, SBA officials reported that their agency CIO’s commitment to acquiring cloud services and the deputy CIO’s attendance at daily cloud meetings were critical for the successful adoption of cloud services at the agency. Similarly, Energy officials reported that the agency had established a team with representatives from offices of the CIO, chief financial officer, and chief acquisition officer, to coordinate IT expenditures, including cloud investments, across the agency. Further, Defense officials from the U.S. Transportation Command reported that establishing a cloud center of excellence team that reported directly to the Commander of U.S. Transportation Command had empowered the team to engage directly with users to help break down barriers that might impact the migration to cloud services. In addition, the officials said that the team helped streamline the processes—specifically, the design, contracting, funding, transition planning, and implementation processes—necessary for the successful migration of all of the command’s systems to the cloud. Since 2011, when OMB began requiring agencies to adopt a Cloud First strategy, agencies have made progress in implementing cloud services and, in doing so, have saved hundreds of millions of dollars and realized notable benefits. However, six agencies still lack guidance for assessing IT investments for cloud services and 12 agencies still have not performed assessments for a number of their IT investments. In addition, all of the agencies in our review do not have sufficient mechanisms or approaches to track and report the savings data associated with these cloud initiatives. Although agencies have reported spending $1 billion or more on cloud services in just the past 2 years, and identified hundreds of millions of dollars in related savings, these figures are not consistently reported. To its credit, beginning in fiscal year 2019, OMB will require more accuracy and granularity in how agencies report cloud investment spending data. However, there has not been a corresponding effort to improve the reporting of cloud savings data. An important aspect to the success of key OMB cloud initiatives, like Cloud Smart and the associated drive for greater agency adoption of cloud services, will be the ability for key stakeholders to access complete information on the savings that agencies are achieving under these efforts. We are making a total of 35 recommendations—1 recommendation to OMB and 34 recommendations to the 16 agencies in our review. The Director of the Office of Management and Budget should require agencies to explicitly report, at least on a quarterly basis, the savings and cost avoidance associated with cloud computing investments. (Recommendation 1) The Secretary of Agriculture should ensure that the CIO of Agriculture completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 2) The Secretary of Agriculture should ensure that the CIO of Agriculture establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 3) The Secretary of Commerce should ensure that the CIO of Commerce establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 4) The Secretary of Defense should ensure that the CIO of Defense completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 5) The Secretary of Defense should ensure that the CIO of Defense establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 6) The Secretary of Education should ensure that the CIO of Education establishes guidance on assessing new and existing IT investments for suitability for cloud computing services, in accordance with OMB guidance. (Recommendation 7) The Secretary of Education should ensure that the CIO of Education completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 8) The Secretary of Education should ensure that the CIO of Education establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 9) The Secretary of Energy should ensure that the CIO of Energy updates the agency’s guidance on assessing IT investments for suitability for cloud computing services to include a requirement to assess new acquisitions for these services. (Recommendation 10) The Secretary of Energy should ensure that the CIO of Energy completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 11) The Secretary of Energy should ensure that the CIO of Energy establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 12) The Secretary of Health and Human Services should ensure that the CIO of HHS establishes guidance on assessing new and existing IT investments for suitability for cloud computing services, in accordance with OMB guidance. (Recommendation 13) The Secretary of Health and Human Services should ensure that the CIO of HHS completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 14) The Secretary of Health and Human Services should ensure that the CIO of HHS establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 15) The Secretary of Homeland Security should ensure that the CIO of DHS completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 16) The Secretary of Homeland Security should ensure that the CIO of DHS establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 17) The Attorney General of the United States should ensure that the CIO of Justice completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 18) The Attorney General of the United States should ensure that the CIO of Justice establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 19) The Secretary of Labor should ensure that the CIO of Labor updates the agency’s guidance on assessing IT investments for suitability for cloud computing services to include a requirement to assess existing investments for these services. (Recommendation 20) The Secretary of Labor should ensure that the CIO of Labor completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 21) The Secretary of Labor should ensure that the CIO of Labor establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 22) The Secretary of State should ensure that the CIO of State establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 23) The Secretary of the Treasury should ensure that the CIO of Treasury completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 24) The Secretary of the Treasury should ensure that the CIO of Treasury establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 25) The Secretary of Transportation should ensure that the CIO of Transportation establishes guidance on assessing new and existing IT investments for suitability for cloud computing services. (Recommendation 26) The Secretary of Transportation should ensure that the CIO of Transportation completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 27) The Secretary of Transportation should ensure that the CIO of Transportation establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 28) The Secretary of Veterans Affairs should ensure that the CIO of VA completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 29) The Secretary of Veterans Affairs should ensure that the CIO of VA establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 30) The Administrator of General Services should ensure that the CIO of GSA establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 31) The Administrator of the Small Business Administration should ensure that the CIO of SBA establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 32) The Commissioner of the Social Security Administration should ensure that the CIO of SSA updates the agency’s guidance on assessing IT investments for suitability for cloud computing services to include a requirement to assess existing investments for these services. (Recommendation 33) The Commissioner of the Social Security Administration should ensure that the CIO of SSA completes an assessment of all IT investments for suitability for migration to a cloud computing service, in accordance with OMB guidance. (Recommendation 34) The Commissioner of the Social Security Administration should ensure that the CIO of SSA establishes a consistent and repeatable mechanism to track savings and cost avoidances from the migration and deployment of cloud services. (Recommendation 35) We provided a draft of this report to OMB and the 16 agencies for their review and comment. In response, 14 agencies provided comments stating that they agreed with our recommendations; one agency stated that it agreed with one recommendation but disagreed with another; and two agencies did not state whether they agreed or disagreed with the recommendations. In addition, multiple agencies provided technical comments, which we incorporated into the report, as appropriate. The following 14 agencies agreed with our recommendations: In written comments from Commerce, Education, Energy, HHS, DHS, State, Transportation, VA, and GSA, these agencies stated that they agreed with the recommendations directed to them. In addition, each of the agencies indicated that it planned, or already had begun taking actions, to address the recommendations. The agencies’ comments are reprinted in appendixes VII through XV, respectively. In emails received from Agriculture’s Director of Strategic Planning, Policy, Egovernment and Audits in the Office of the CIO on February 11, 2019, and from Justice’s Audit Liaison Specialist in the Internal Review and Evaluation Office on February 15, 2019, both of these departments stated that they agreed with our recommendations. In written comments from Labor, the department stated that it agreed with our recommendations. The department also described actions taken to address our recommendation that it update its guidance on assessing IT investments for suitability for cloud computing services to include a requirement to assess existing investments for these services. Specifically, Labor stated that it had taken steps to ensure that its agencies included an assessment of cloud computing suitability as they moved forward with their investments and that this process had been integrated into Labor’s budget process. We followed up with the department and obtained a copy of Labor’s guidance. However, in examining this guidance, we found it to be the same as what Labor had previously provided to us during the course of our audit. Further, as we mentioned earlier regarding our analysis of the department’s guidance for assessing investments for suitability for cloud services, Labor had required existing investments that were already using cloud services to migrate to the department’s new consolidated cloud environment; however, it did not require existing systems not using cloud services to be assessed for these services. Without receiving any additional information from the department that supported its actions to address our recommendation prior to this report’s issuance, we believe our recommendation to Labor is still appropriate. The department’s comments are reprinted in appendix XVI. In written comments from SBA, the agency agreed with our recommendation. Also, in additional comments sent by a GAO liaison in the Office of Congressional and Legislative Affairs via email on March 11, 2019, SBA provided updated information regarding the benefits that the agency had realized from using cloud services for its system that was profiled in appendix VI of the draft report. Specifically, SBA officials in charge of the system provided a revised list of realized benefits from the cloud services. However, the officials did not provide any supporting documentation regarding the revised benefits; therefore, we were not able to validate the revised list of benefits prior to the issuance of this report. As a result, we removed the profile from the report in order to be consistent with our methodology for reporting examples of systems that had realized benefits from the acquisition of cloud services, and notified SBA of this decision. SBA’s comments are reprinted in appendix XVII. I) Application and Service Migration to DOL Cloud, version 1.5 (March 2018). report. However, during further discussion with SSA officials in charge of the system on January 17, 2019, the officials confirmed that the agency had not yet identified all of the potential benefits related to the use of cloud services as a result of a change in their vendor solution. Thus, we removed the profile from our report in order to be consistent with our methodology for reporting examples of systems that had realized benefits from the acquisition of cloud services, and notified SSA of this decision. SSA’s comments are reprinted in appendix XVIII. One agency agreed with one recommendation and disagreed with a second recommendation: Defense provided written comments in which it agreed with our recommendation to complete an assessment of all IT investments for suitability for migration to a cloud computing service. However, the agency did not agree with our recommendation that it establish a mechanism to track savings and cost avoidances from the migration and deployment of cloud services. Specifically, Defense stated that it did not agree with our recommendation because there was no standard, consistent way to capture such savings or cost avoidance. The department stated that it would work with OMB on whether or how to collect such information, and, if practical, report such information in accordance with OMB guidance. However, as we noted in our report, for the past 6 years, OMB has required agencies to report on savings and cost avoidances from implementing IT reform initiatives, including savings realized from the migration to cloud services. Tracking savings and cost avoidances for cloud initiatives is important in order to ensure that Defense is effectively managing and overseeing its cloud initiatives. In addition, it is essential that OMB and Congress have sufficient data to see the results of Defense’s cloud initiatives and understand whether the department is achieving savings using cloud services. Consequently, we believe our recommendation to track savings and cost avoidances from the migration and deployment of cloud services is still warranted. The department’s comments are reprinted in appendix XIX. Finally, we received comments via email from Treasury’s Supervisory IT Specialist in the Office of the CIO on February 22, 2019, and OMB’s Liaison to GAO on February 25, 2019. In these comments these two agencies did not state whether they agreed or disagreed with the recommendations that we directed to them. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Director of the Office of Management and Budget, the Secretaries and agency heads of the departments and agencies in this report, and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov. If you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix XX. Our objectives for this engagement were to (1) evaluate selected agencies’ progress in implementing cloud services, (2) review the extent to which selected agencies have increased spending on cloud services and achieved cost savings or avoidances, and (3) describe examples of cloud investments with significant or notable benefits that have been identified by selected agencies. For this review, we selected a sample of agencies based on the size of their total information technology (IT) budget for fiscal year 2017. Specifically, we categorized each of the 24 Chief Financial Officers Act agencies by the size of its IT budget: large (more than $3 billion), medium ($1 billion to $3 billion), and small (less than $1 billion), as reported on the Office of Management and Budget’s (OMB) IT Dashboard These agencies were the Department of Agriculture (Agriculture), Department of Commerce (Commerce), Department of Defense (Defense), Department of Education (Education), Department of Energy (Energy), Department of Health and Human Services (HHS), Department of Homeland Security (DHS), Department of Justice (Justice), Department of Labor (Labor), Department of State (State), Department of Transportation (Transportation), Department of the Treasury (Treasury), Department of Veterans Affairs (VA), General Services Administration (GSA), Small Business Administration (SBA), and Social Security Administration (SSA). OMB, IT Dashboard, 2017 (https://itdashboard.gov). To address the first objective, we obtained and analyzed IT Dashboard data related to the 16 selected agencies’ use of cloud services for fiscal years 2016 through 2018, and their projected use in 2019. We chose to begin with fiscal year 2016 because we had previously reported on federal agencies’ use of cloud services through fiscal year 2014 and fiscal year 2015 data was not available. Specifically, the Dashboard includes agency responses to a cloud-related question from OMB’s capital planning guidance. The question asks whether a cloud alternative was evaluated for the investment, or components or systems within the investment. We reviewed agency responses that were submitted for fiscal years 2016 through 2019 as part of the annual budget submission process in order to determine whether a specific investment was using cloud services. During this 4-year period, OMB made changes to the options that agencies were required to choose from which indicated whether an investment was using cloud services. For OMB’s capital planning guidance for fiscal years 2016 and 2017, we selected responses that indicated that the agency “had evaluated a cloud alternative and chose a cloud alternative” with a particular cloud deployment model. In addition, for OMB’s capital planning guidance for fiscal years 2018 and 2019, we selected responses that indicated the “investment or a portion of the investment is leveraging cloud computing”. We then determined the total number of investments using cloud services and calculated the percentage of investments using these services based on the total number of reported investments by each agency for each fiscal year. To ensure the accuracy and completeness of the selected agencies’ data on the use of cloud services, we downloaded this data from the IT Dashboard on October 3, 2017, March 7, 2018, and October 9, 2018. We took this step because agencies may update their data on a quarterly basis throughout the fiscal year. In addition, we presented the results of our analysis to officials in charge of cloud services within the Office of the Chief Information Officer (CIO) at each selected agency. We asked these officials to verify the completeness and accuracy of this data and provide any updates as appropriate. Officials at all 16 agencies confirmed the total number of investments using cloud services for fiscal years 2016 through 2018 and their projected use for fiscal year 2019. Based on these steps, we determined that these data were sufficiently reliable to report on agencies’ progress in using cloud services. In addition, we compared each selected agency’s cloud guidance to OMB’s Cloud First guidance. We interviewed Office of the CIO officials in charge of cloud services at each agency regarding their guidance. In addition, we interviewed OMB staff from the Office of E-Government and Information Technology regarding its guidance. Because of the wide variety of responses and documents we received from the agencies related to their guidance for assessing investments for cloud computing services, we conducted a content analysis of the information in order to determine compliance with OMB’s guidance. In doing so, team members individually reviewed agencies’ responses and documents and assigned them to various categories and subcategories. Team members then compared their categorization schemes, discussed the differences, and reached agreement on the final characterization of compliance with OMB guidance. In cases where agencies provided multiple policies or documents, we followed up to clarify which portions were considered by the agency to support the requirement to assess all investments for cloud services. In analyzing whether the agencies’ guidance on assessing investments for cloud services met OMB criteria, we assessed whether the guidance clearly identified a requirement for evaluating both new and existing investments for cloud services. Agencies found to not have guidance which clearly defined the assessment process were evaluated as such for one of two reasons: either the agency’s formal guidance did not completely address our assessment criteria or the agency’s guidance had not yet been established or finalized. In analyzing whether agencies had met OMB’s requirement to evaluate each investment for cloud services, we assessed the number of investments that had completed assessments based on the fiscal year 2019 budget submission. Agencies found not to have met the requirement were evaluated as such if the agency had 10 or more investments that had not yet been evaluated for cloud services. We set this threshold based on a reasonable interpretation of the intent of OMB’s guidance requiring assessments of all investments. For our second objective, we obtained and analyzed IT Dashboard data related to the 16 agencies’ spending on cloud services for fiscal years 2015 through 2018. We chose to begin with fiscal year 2015 because we had previously reported on federal agencies’ spending on cloud services through fiscal year 2014. Agencies report actual spending costs by fiscal year on the IT Dashboard as part of the next fiscal year reporting. To determine actual cloud spending costs for each fiscal year, we used agency spending data reported each subsequent fiscal year (from fiscal years 2017 through 2018) as of October 5, 2018. In addition, we administered a data collection instrument to each of the 16 agencies to obtain and analyze spending and savings data by the 16 selected agencies for fiscal years 2014 through 2018 and plans for future planned costs. We requested that these agencies provide spending and savings data broken down by investment, as OMB only requires federal agencies to report total spending by cloud deployment model on the IT Dashboard, and agencies were not required to identify whether any reported savings were cloud-related. This instrument was administered from November 2017 to January 2018. In the data collection instrument, we asked the selected agencies to complete information on each of their cloud investments, including the title of the application or system leveraging cloud, the cloud deployment and service models, and the associated cloud spending and net cloud savings or avoidances from fiscal year 2014 through fiscal year 2018 and beyond, as agencies generally submitted data on planned spending for one or more fiscal years beyond 2018. Due to the varied scale of cloud implementation efforts ongoing at these agencies, we asked agencies to only provide all applications, systems, or investments leveraging cloud with total life-cycle costs of $1 million or more. We also asked agencies to provide spending and savings or cost avoidances figures in whole numbers in order to avoid errors in rounding numbers when we calculated the reported figures in millions. We took the following steps to help ensure the reliability of the data we collected. First, to minimize errors that might occur from respondents interpreting our instrument differently from our intended purpose, we reviewed the data collection instrument with agency officials who would be completing the instrument during meetings in October and November 2017. Second, we reviewed the completed spreadsheets to identify missing data or other errors, and consulted with our data quality expert about these issues as appropriate. All agencies completed the data collection instrument by May 2018. For those agencies that provided rounded (rather than exact) spending or savings figures, we recalculated the data into whole numbers and confirmed our calculations with the agencies. In addition, one agency broke down its savings data into savings and cost avoidances; we combined these reported figures for each investment and, after consultation with a GAO data subject matter expert, confirmed with all the other agencies in our review that their information on savings also included cost avoidances. We also reviewed the associated notes regarding agencies’ qualifications of the provided data and followed up with agency officials to clarify the responses as appropriate. These notes included information on whether certain spending or savings data were unavailable, whether certain costs were excluded from the spending information provided to us or whether there were other qualifications of the provided data. Lastly, we presented the results of our analysis of IT Dashboard data and the data obtained from the data collection instrument to each of the selected agencies between June and August 2018. We asked the agencies to verify the completeness and accuracy of these data and provide any updates as appropriate. All 16 agencies provided updated information regarding the list of investments using cloud services with life- cycle costs of $1 million or more and six agencies (Agriculture, Commerce, Justice, Transportation, Treasury, and VA) provided updated information related to spending and savings for these investments, which we have incorporated as appropriate. Based on the measures we took to ensure the reliability of the data provided by the agencies and reported on the IT Dashboard, we determined that the data were sufficiently reliable for the purpose of this report. For the third objective, we obtained and reviewed available documentation discussing examples of cloud computing investments reported by the selected agencies as having produced notable benefits and key practices that ensure the effort was successful. We also interviewed officials from the Office of the CIO and other components in charge of cloud services regarding these benefits. In order to develop our list of questions for these meetings, we first conducted research to identify the range of benefits that could be achieved from acquiring cloud services. We reviewed OMB, GSA, and CIO Council cloud guidance; our prior work; and key leading cloud practices from GSA’s Federal Cloud Computing Center of Excellence. Based on this work, we developed a list of seven key areas of benefits: (1) improving efficiency and operations; (2) promoting agility and responsiveness; (3) achieving business growth; (4) reducing cost; (5) meeting regulatory requirements; (6) enhancing customer experience; and (7) ensuring mission outcomes. During meetings with agency officials in the Office of the CIO and other components in charge of cloud services, we asked officials whether they had identified any significant or notable benefits in these seven areas. As these seven areas might not represent all potential benefits, we also asked officials to describe any additional benefits not included in these areas. In addition, as part of these meetings, we asked officials from the Office of the CIO at each selected agency to identify up to three examples of investments that benefited from the acquisition of cloud services. We asked agencies to exclude examples of email deployments to the cloud to ensure a wider variety of examples of investments with benefits. Fifteen of the 16 agencies in our review identified at least one or more examples of cloud investments that had produced significant or notable benefits, while one agency—HHS—reported that it did not have any such examples because it did not have any completed migration efforts. Because of the open-ended nature of the 15 agencies’ responses to our questions, we conducted a content analysis of the information we received in order to identify and summarize the benefits and key practices that were identified by the 15 agencies. We reviewed the benefits and key practices reported by the agencies and grouped them using the seven key benefit areas that our prior research had identified. We discussed the groupings of the reported benefits, and reached agreement on these categories. We grouped the benefit categories together based on commonalities such as purpose, impact, and capabilities, and summarized the benefits reported. Based on discussion, we confirmed a list of benefits and key practices and totaled the number of agencies that reported each of these. In addition, to select systems or investments to profile, we reviewed the 34 examples provided by the 15 agencies and narrowed the list to 11 examples. We selected these examples using the following factors: the type of system, whether the system supported the mission or business operations of the agency or component, and the availability of information related to the benefits achieved from acquiring cloud services. In doing so, we sought to have a mix of systems that provided mission critical services to the agency or the public, illustrated a range of cloud computing benefits, and included detailed information on the benefits achieved from using cloud services. In technical comments received on a draft of this report, two agencies provided new information regarding the use of cloud services for their systems that were profiled in appendix VI of the draft report. Based on the additional information provided by the two agencies, we determined there was no longer sufficient detail regarding what benefits were realized for these systems. Therefore, we removed the two agencies’ profiled examples from the report in order to be consistent with our methodology for reporting examples of systems that had realized benefits from the acquisition of cloud services. We then notified both agencies of this decision. We conducted this performance audit from September 2017 to April 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In May 2017, the Administration established the American Technology Council to help transform and modernize federal IT and how the government uses and delivers digital services. Subsequently, in December 2017, the American Technology Council issued a Report to the President on Federal IT Modernization and made eight cloud computing- related recommendations that are relevant to the focus of our review. Table 9 outlines the cloud-related recommendations contained in the report and the current status of these recommendations as of July 2018, according to Office of Management and Budget (OMB) staff from the Office of E-Government and Information Technology. The Office of Management and Budget (OMB) requires federal agencies to evaluate each investment, or components or systems within the investment, for cloud services, regardless of the overall life cycle stage of the investment. Agencies are required to report the status of each investment’s evaluation as part of the annual budget submission, as noted in OMB’s annual capital planning guidance. Table 10 lists the total number of investments using cloud services and the total number of all IT investments for fiscal years 2016 through 2019 for 16 selected agencies, as reported on the IT Dashboard as of October 9, 2018. The Office of Management and Budget (OMB) requires federal agencies to report total cloud spending based on the cloud deployment model as part of the annual budget submission, as noted in OMB’s annual capital planning guidance for fiscal years 2015 through 2018. Table 11 lists the total agency-reported cloud spending and total IT spending for fiscal years 2015 through 2018 for the 16 agencies in our review, as reported on the IT Dashboard as of October 5, 2018. Sixteen selected agencies provided us with information on their investments related to spending on cloud services of at least $1 million or more in life-cycle costs. Table 12 identifies the investments for fiscal year 2018 that these agencies submitted to GAO as of October 2018. This list includes the name of the investment, the cloud deployment model, and the cloud service model. The following nine cloud investment profiles illustrate the variety of benefits that the selected agencies in our review had realized from the acquisition of cloud services. These profiles describe the cloud investment, costs, key benefits, and the savings or avoidances associated with implementation of cloud services. In addition, the profiles detail how, among other things, the acquisition of cloud services enabled the agency to overcome previous challenges with legacy systems and acquire more cost-effective, efficient, and responsive IT resources in order to meet mission needs. Each year, the Department of the Treasury’s (Treasury) Bureau of Engraving and Printing prints billions of dollars—referred to as Federal Reserve notes—for delivery to the Federal Reserve System. According to the Chief of the Bureau of Engraving and Printing’s Office of Enterprise Solutions, in October 2012, the bureau’s CIO deployed an enterprise resource planning system to the cloud to improve efficiency and operations, and enhance the availability, security, and performance of its systems that manage the daily business activities of the bureau. Previously, the bureau had used 16 separate IT legacy systems that were facing technological obsolescence and required heavy customization using old programming languages. Officials in the bureau reported that they spent time updating and maintaining the hardware and software for these systems to minimize downtime that led to the need for staff to work overtime and decreased customer satisfaction with the system. In addition, the legacy systems were not integrated and certain tasks were performed manually, including data entry, aggregation, and product quality checks. Further, the legacy systems lacked robust data validation features; thus, database administrators had to spend time making corrections to data submitted by users. By moving to the cloud, the bureau replaced the 16 systems with software as a service that required no customization. As a result, officials in the bureau reported that the bureau was able to significantly improve its operations and decision making. Further, officials stated that the bureau’s use of software as a service enabled it to procure cloud services which helped to ensure that the new system had increased availability, performance, and security to prevent delays and downtime in operations. The bureau also implemented features to improve data entry to reduce user errors. Figure 3 provides a summary of Treasury’s cloud acquisition. Acquiring software as a service improved operations and production decisions. According to Bureau of Engraving and Printing officials, by consolidating the bureau’s 16 legacy systems with a single system in the cloud, the bureau made significant improvements to its operations through automation, improved data quality, and increased availability, performance, and security. Specifically, acquiring software as a service enabled the bureau to purchase capabilities that its previous systems did not have. By doing so, this eliminated some manual data entry and improved the bureau’s ability to, among other things, automate production decisions which allowed users to focus on more critical tasks. For example, bureau staff reported that now they enter data from monthly Federal Reserve Bank orders into the Manufacturing Support Suite to determine the denominations and quantities of currency to produce, along with what banks will receive it. In addition, the new system uses current production times and data to determine when to replenish existing inventory and supplies, such as ink and paper, in order to prevent operational delays and downtime. Furthermore, staff stated that they now make compliance decisions using automated alerts and triggers, which help to prevent the release of products that do not meet bureau standards. According to bureau officials, the bureau has also improved data quality and reduced the amount of time that database administrators have to spend correcting errors. For example, when users enter data into the system, real-time data validation checks prevent common errors and prompt users to make corrections before submission. In addition, staff stated that the bureau implemented bureau-specific data checks, including which accounts could be associated with item categories and cost centers, which has reduced user errors and improved the reliability of the data. Finally, the bureau has improved system availability, security, and performance by acquiring software as a service. For example, bureau officials stated that they selected a FedRAMP-approved provider and established service level agreements with the provider to help ensure system availability, security, and performance, including disaster recovery capabilities that were not available for the legacy systems. In addition, bureau staff said that they no longer need to update and maintain IT software and hardware, which has saved time and resources, and decreased system downtime. The Department of Transportation’s (Transportation) Federal Transit Administration provides financial and technical assistance to local public transit systems, including buses, subways, light rail, commuter rail, trolleys and ferries. According to the Federal Transit Administration IT Director, in October 2014, the National Transit Database was migrated to the cloud in order to improve customer experience, mission assurance, agility and responsiveness. Previously, the legacy database had several challenges, including the use of obsolete technology, poor usability, and problems with data accuracy. In addition, developing new functionality for the legacy system was a lengthy process, which decreased the ability of developers to respond to other user needs. By transitioning to the cloud, the Federal Transit Administration established a centralized access portal for users, which consolidated systems, eliminating the need to remember multiple passwords for external users, and added a single sign on feature for internal users. Staff in the Federal Transit Administration also reported that they improved the database’s user interface by implementing improved system validation functionality for transit data. In addition, the cloud provided software developers with tools to develop functionality quicker to help improve the database’s responsiveness to user needs. Figure 4 provides a summary of Transportation’s cloud acquisition. Automating validation features improved customer experience. According to Federal Transit Administration officials, by moving to the cloud, developers established automated validation features which use historical data to identify outliers and prevent potential user data entry errors. Officials reported that analysts previously performed manual data validation to ensure the accuracy of customer-entered data. The new cloud version of the National Transit Database uses historical data to identify errors and leverages cross-form data validation for the current reporting year, which has reduced the time it takes to validate the data. Faster development methods improved the responsiveness to user needs. According to Federal Transit Administration officials, with the deployment to the cloud, the agency adopted faster development processes, which led to more frequent releases of functionality. For example, the database’s developers regularly receive requests from transit customers for enhancements that would traditionally take longer to implement in the prior legacy environment. By leveraging the cloud framework and improved Agile development procedures, officials reported that developers can now engage users earlier to make adjustments based on their feedback, thereby focusing more directly on meeting business needs. The General Services Administration (GSA) helps federal agencies build and acquire office space, products and other workspace services, and oversees the preservation of historic federal properties. According to GSA’s Chief Data Officer, in 2015, GSA began developing an enterprise platform pilot program, Data to Decisions, in order to improve the agility, responsiveness, efficiency, and operations of the agency’s data analytics capabilities. Previously, GSA’s data analytics operations had redundancy and overlap, including similar contracts and data sources, negatively affecting data sharing efforts across the agency. Subsequently, in October 2015, GSA’s CIO, Chief Data Officer, and Chief Technology Officer moved the program to the cloud while consolidating existing contracts to create a centralized web portal. GSA officials reported that the new portal provides new data analytics capabilities for staff to use in generating analyses to advise decision makers at the agency and across other federal agencies, while also saving staff time in producing these analyses. For example, the centralized web portal allows the agency’s 400 data practitioners to, among other things, build data models, understand business operations through analytics and visualizations, and publish dashboards and reporting. Figure 5 provides a summary of GSA’s cloud acquisition. Providing analytical capabilities and tools to the federal government improved the management of resources. According to GSA officials in the Office of the CIO, cloud deployment has enabled the sharing of data and other analytical tools across the federal government to help agencies better manage their resources and create efficiencies in data management. For example, previously, agencies did not have access to detailed data regarding agency-owned and GSA-managed property in their asset portfolios. By moving to the cloud, GSA officials reported that they developed two tools called the Real Property Management Tool and the Asset Consolidation Tool. These tools were deployed to between 30 and 40 federal agencies, which enabled these agencies to identify potential opportunities to consolidate their building properties or co-locate office spaces to help save resources. Specifically, the tools provided dashboards that showed expiring leases and occupancy agreements, as well as excess and underutilized space. Further, the program provided data to federal agencies that were not previously available. By doing so, officials said that smaller agencies did not have to invest in their own data analytics capabilities or acquire additional staff resources for data analytics. Flexible and scalable technology addressed an increased demand for data services. According to GSA officials in the Office of the CIO, as the program has expanded its data analytics capabilities, program usage has grown over time. In particular, in 2018, of the program’s 7,200 users, more than 80 percent were from federal agencies other than GSA. Cloud deployment has allowed GSA to easily scale resources to manage changes in user traffic and enabled agency personnel to focus on the mission rather than managing a data center to respond to these changes in demand. For example, in 2017, GSA officials said that they sent out a notice to approximately 1 million federal employees who had completed its annual tenant satisfaction survey notifying them that the survey’s results were available. As a result, several thousand users tried to access the report on the program’s portal, affecting the program’s operations. Officials said that the agency was able to scale up the portal’s resources and capabilities to handle the demand and then scale the resources back once user traffic returned to normal levels. The Department of Veterans Affairs (VA), among other duties, administers a variety of benefits and services that provide financial and other forms of assistance to veterans, their dependents, and survivors. According to the Deputy Assistant Secretary for Enterprise Program Management, in March 2016, the VA CIO deployed the Vets.gov web portal to the cloud in order to improve veterans’ customer experience and scale resources to meet demand. Previously, VA officials reported that they had experienced challenges with its legacy websites. Specifically, the websites were not designed using federal government web standards, including browser compatibility and accommodations for the needs of individuals with disabilities. In addition, the websites required users to remember several sets of login information to access many features on approximately 500 websites. By moving to the cloud, VA officials stated that the agency has been able to better address veterans’ needs by consolidating access to over 500 of the agency’s websites for benefits and services. The new easier, mobile- friendly web portal requires only one login for all 500 websites, and incorporates features for users with disabilities, such as blind veterans. Further, the program was able to scale up the portal’s resources to meet the increased demand for online benefits and services, while adopting a design approach that better incorporated the needs of veterans and delivered functionality more quickly. In November 2018, the Vets.gov cloud platform became the building block for the agency’s new homepage at VA.gov. Figure 6 provides a summary of VA’s cloud acquisition. Consolidating website access to benefits and services and incorporating veterans’ feedback improved customer service to veterans and reduced costs. According to VA officials in the Office of the CIO, by moving to the cloud, VA has worked to improve veterans’ access to benefits and services through its websites in several key areas. For example, Vets.gov is intended to be mobile-friendly and work on any computing device with a compliant web browser, avoiding the need to install separate software to apply for benefits. In addition, officials stated that the agency intends the portal to be easier for veterans to search for services. For instance, VA had previously developed an application to help veterans schedule medical appointments but VA officials reported that veterans could not easily locate the application after searching across multiple VA websites. In addition, VA officials stated that the agency was also able to reduce costs because, in moving to the cloud, Vets.gov cost the agency 85 percent less than it would have cost to build a traditionally hosted service with the same features. VA also retired a legacy application, which saved an estimated $1 million in annual contract costs. Scalable technology and a faster veteran-centered development approach increased agility and responsiveness. According to VA officials in the Office of the CIO, moving to the cloud allowed VA to acquire more flexible and scalable technologies in order to scale resources up and down to meet demand, while incorporating a faster, more user-friendly design approach. For example, after its launch, officials said that Vets.gov received a spike in the number of veterans that chose to submit online applications for healthcare, which the agency was able to handle by scaling up resources to meet the spike in demand. In addition, VA officials reported that the agency adopted a design approach in the cloud that, among other things, allowed it to adopt Agile methods to more quickly deliver releases. For example, based on feedback, VA incorporated mobile friendly design features—40 percent of Vets.gov users access benefits and services through a mobile device. Officials said that the agency has made efforts to focus on the needs of veterans first by using an iterative design approach that incorporates user feedback into the design process so that no features in the portal are deployed without a final usability test with a veteran. VA officials also reported that using the cloud has allowed the agency to deploy new features as soon as they are ready, in small incremental daily releases. Further, the officials noted that VA developers have worked with veterans on the portal’s healthcare claims status tracker. Specifically, veterans can access the status of their healthcare claims that may be experiencing a backlog in processing, along with an estimated decision date. Lastly, officials reported that by incorporating an online application, Vets.gov reduced the number of paper-based healthcare applications submitted by veterans. In fiscal year 2018, users submitted over 750,000 digital forms for benefits through Vets.gov. The Department of Justice’s (Justice) U.S. Trustee Program (USTP) is responsible for overseeing the administration of bankruptcy cases and private trustees within the United States. According to USTP’s Chief Technology Officer, in June 2016, executives in the Program, including the CIO, decided to migrate USTP’s operations to the cloud to meet regulatory requirements, reduce costs, and improve agility, efficiency, and responsiveness. Officials said that their office had conducted an evaluation and determined that, in order to fulfill OMB’s mandate to consolidate agency data centers, USTP would have to spend at least $1 million for an on-premise consolidation. Officials reported that USTP also faced challenges with having adequate backup capabilities and implementing new technological solutions due to its legacy computing environment and the time it took to purchase and install new hardware and software. Subsequently, in March 2017, the Program moved its operations to the cloud and avoided the cost of consolidating its data centers. In addition, officials in USTP said that the move to the cloud helped them address backup issues, and speed up the development and testing of new applications. Figure 7 provides a summary of Justice’s cloud acquisition. Avoiding an on-premise data center consolidation and streamlining IT operations reduced costs. According to USTP officials, by moving to the cloud, their office avoided at least $1 million in costs, while resolving internal performance issues, and streamlining the management of its contracts. Specifically, officials said that USTP shut down 1 of its 2 data centers and reduced its server inventory from 140 to 75 and the number of vendors from 21 to 9. In addition, the office eliminated an estimated 50- 70 monthly IT staff hours dedicated to resolving backup issues. Flexible technology resources sped up the development of functionality. According to USTP officials, acquisitions of new technology previously took several months because of the time needed to estimate requirements and wait for officials to purchase and install hardware and software. By moving to the cloud, USTP officials stated that the intention is to be able to develop and test new applications faster, and determine their viability, with minimal time and costs. Specifically, officials reported that they have set up a cloud test lab to better understand system requirements by scaling up and down resources as needed and experimenting with new capabilities. In addition, while USTP’s legacy monitoring solution required consulting assistance and took months to implement, officials noted that they were able to set up a similar solution in the cloud within 1 week. The Department of Homeland Security (DHS) collaborates with a variety of agencies and organizations to share information related to homeland security. According to the program’s Service Operations Manager, DHS’s CIO migrated the Homeland Security Information Network to the cloud in July 2017 in order to improve the system’s availability and operational efficiency, while reducing costs. Officials stated that, previously, the agency had faced challenges in ensuring the system’s redundancy and deploying new network enhancements quickly. This was due to the costs and time frames associated with acquiring new infrastructure and maintaining and upgrading current infrastructure. In addition, the agency was not able to quickly develop and deploy new capabilities to meet user needs. By moving to the cloud, officials stated that the agency was able to implement a disaster response capability and improve the system’s operational efficiency, while also establishing more efficient environments for software development and testing. In addition, the agency was able to shut down an existing data center, which achieved cost savings of at least 30 percent from hosting the network in the data center. Figure 8 provides a summary of DHS’s cloud acquisition. Acquiring infrastructure as a service improved system availability and operational efficiency. According to DHS officials in the Office of the CIO, migrating to the cloud has improved the system’s availability and operational efficiency, which cost less money than the prior hosting solution. For example, acquiring infrastructure as a service provided increased redundancy over the old solution and has helped to ensure the network remains continuously available for daily operations and emergency response. The officials stated that, previously, the agency had not been able to implement a disaster recovery capability because it would cost over $1.5 million to build and maintain a second active network environment. Moving to the cloud enabled the agency to implement this capability for significantly less cost. In addition, officials in the CIO’s office said that the acquisition of infrastructure as a service has enabled the agency to improve the operational efficiency of the system. For example, network managers can easily stand up new virtual hardware, networking, and storage capabilities, or make changes to existing infrastructure, in less than a day. Officials said that, previously, it used to take staff several months to make these changes manually. This allows network managers to respond very rapidly to changes in user demand, particularly if there are emergencies or natural disasters, and then scale down resources during non-use periods. For example, officials said that managers scaled up resources to support first responders from federal, state, and local governments to share weather, response and recovery information during Hurricanes Harvey, Irma, and Jose, and the West Coast wildfires. In addition, the officials noted that network managers now have access to the latest virtual hardware and the agency does not have to pay for hardware refreshments. Flexible technology resources strengthened the development of functionality. According to DHS officials in the Office of the CIO, moving to the cloud enabled the agency to very inexpensively build multiple environments in the system for software development, testing, and production, which has improved the development and deployment of new services. Software developers now have consistent and standardized environments, which helps to reduce the risk of errors and security vulnerabilities, as well as configuration issues. DHS officials stated that all of these issues would previously require staff time and funding to resolve. The developers can also now use automation tools to deploy new code from development into production more quickly to help meet user needs for new functionality. In addition, officials noted that cloud providers are constantly adding new services that users can leverage to do their work more efficiently, without the time and cost of the agency having to develop or procure this capability separately. The Department of Agriculture’s (Agriculture) U.S. Forest Service manages 193 million acres of federal land in order to sustain the health, diversity, and productivity of the nation’s forests and grasslands for present and future generations. According to the Acting Assistant Forest Service CIO for Natural Resources and Environment, in August 2017, the Forest Service began deploying a new enterprise content management and electronic records management system, called Pinyon, to the cloud to help improve operations and the management of electronic records. The move also addressed federal requirements related to electronic records management. Officials stated that, previously, the Forest Service relied on a shared storage drive for enterprise content management. Officials reported that this drive was highly proprietary, slow, unreliable, and a security vulnerability because it could not be easily maintained. In addition, officials reported that the shared storage drive was on the verge of failure because the vendor no longer supported and upgraded the system. By acquiring two software as a service solutions for enterprise content and electronic records management, officials said that the Forest Service was able to quickly deploy a new system with only some limited software customization for the integration of the two solutions. The Forest Service completed this in two phases; officials deployed the enterprise content management solution in August 2017 and the electronic records management solution began deployment in August 2018. Officials reported that they plan to fully deploy the system by December 2018. Figure 9 provides a summary of Agriculture’s cloud acquisition. Acquisition of software as a service improved operations. According to Forest Service officials in the Office of the CIO, by acquiring software as a service, the Forest Service was able to implement new enterprise content management capabilities and collaboration tools quickly without the costs and risks associated with software development. Officials said that, previously, users did not have capabilities for managing their own content such as setting permissions, granting access privileges to documents, or easily managing different document versions. In addition, officials noted that users relied heavily on email to collaborate on daily work activities as other collaboration tools were not available. By acquiring software as a service, officials said that the Forest Service was able to quickly implement enhanced workflow and document management capabilities and add new tools for collaboration, which has increased staff productivity. Furthermore, acquiring software as a service allowed the Forest Service to integrate their new system with Agriculture’s electronic authentication system, which the agency could not previously accomplish with the legacy system. By integrating these systems, Forest Service officials said that the agency has increased the accessibility of the Forest Service’s information by allowing staff to securely access files regardless of physical location. Going forward, officials in the Forest Service said that they are exploring other features and capabilities offered by the cloud vendor to help better meet mission needs. For example, the Forest Service regularly collaborates with a variety of other agencies, state and local governments, educational institutions and other organizations on issues related to managing federal lands and responding to natural disasters, such as wildfires. Officials noted that the Forest Service hopes to use shared virtual workspaces and other collaboration tools to engage these partners. In addition, by acquiring software as a service, Forest Service officials said that they have ensured that there is a system in place that the vendor will automatically upgrade with new enhancements, capabilities, and the latest technology. For example, in order to meet new federal cybersecurity requirements, Forest Service officials said that they have been able to work with the cloud vendor to ensure the vendor incorporates software changes to meet these requirements. Flexible and scalable technology enhanced the management and storage of electronic records. According to Forest Service officials in the Office of the CIO, by moving to the cloud, the Forest Service was able to acquire new storage capabilities that are easily scalable as its volume of electronic records grows over time. Officials said that, previously, the Forest Service used both paper-based records and a shared storage drive for storing work documents and other operational records. Paper- based records were stored in file cabinets and warehouses while the shared storage drive maintained approximately 320 million files and 250 terabytes of data. In addition, the agency previously used tape backups for the shared storage drive. By moving to the cloud, officials in the Forest Service said that they gained unlimited storage and electronic backup capabilities. Further, Forest Service officials said the new system is intended to be able to easily scale up storage resources as needed for the digitization of its paper-based records and handle the future volumes of electronic records. In addition, by acquiring software as a service, officials in the CIO’s office reported that the Forest Service was able to meet the federal requirement for electronic records management more than a year before the December 2019 deadline, which the prior shared drive could not meet. The Department of Commerce’s (Commerce) National Oceanic and Atmospheric Administration works to understand and predict changes in climate, weather, oceans, and coasts, and shares that knowledge and information with others. According to Commerce’s Acting Chief Information Officer, in September 2017, the National Oceanic and Atmospheric Administration’s CIO and National Weather Service leadership decided to deploy its public weather websites to the cloud in order to improve the agility and responsiveness of these websites in a cost-effective manner. Officials stated that, previously, in 2016, as a result of Hurricane Matthew, hundreds of millions of web requests led to failures with the program’s on-premise infrastructure, causing websites to become unavailable to the public for a period of time. Subsequently, in September 2017, prior to the landfall of Hurricane Irma, officials stated that the agency launched its weather cloud content delivery network. This new network is intended to ensure the availability of weather-related information, while avoiding the additional expenses for infrastructure that would likely go unused during normal business operations. Figure 10 provides a summary of Commerce’s cloud acquisition. Increased service availability ensured the public’s timely access to extreme weather-related information. According to National Oceanic and Atmospheric Administration officials, the deployment of the weather cloud content delivery network in September 2017 helped websites handle the web requests for data on Hurricanes Irma and Maria by scaling up the resources needed to handle the increased requests. Normally, the weather websites receive approximately 26 million daily web requests from the public. However, officials noted that the number of requests increases dramatically during adverse weather events, such as hurricanes. For example, officials said that in August 2017, the websites began experiencing delays because of the high volume of hurricane- related requests from Hurricane Harvey—including approximately 218 million web requests on August 31, 2017 alone. After deployment to the cloud in September 2017, officials reported that over the course of two days, the weather cloud content delivery network successfully scaled up its resources and handled approximately two billion web requests received through the administration websites. On-demand capabilities decreased costs. According to National Oceanic and Atmospheric Administration officials, by acquiring software as a service, it avoided the cost of expanding existing on-premise infrastructure to handle sudden surges in demand that only last a short period of time, as well as associated maintenance costs. Officials said that the program can now scale up the resources supporting the weather cloud content delivery network whenever it anticipates an adverse weather event that would lead to greater demand for website information. The Department of Defense’s (Defense) U.S. Transportation Command (USTRANSCOM) provides common user and commercial air, land, and sea transportation, as well as terminal management and air refueling, in support of the military’s deployment, employment, sustainment, and re- deployment efforts. USTRANSCOM’s Chief of Cyber Operations and Readiness Division reported that in January 2017, the USTRANSCOM Commander made the decision to migrate all of the command’s systems to the cloud in order to improve mission assurance, agility, responsiveness, efficiency, and operations. Officials reported that, previously, the command had experienced a massive power outage affecting the availability of approximately 25 legacy systems that lacked the capability to quickly recover from network failures. In addition, officials noted that the command’s system, used to manage world-wide moves of Defense personnel property, was not user-friendly, and was difficult to maintain because the agency built the system using waterfall software development methods. Lastly, officials said that the command had largely relied on manual reporting activities that took numerous staff hours to produce to make financial, operational, planning, and support decisions. By beginning to transition to the cloud in January 2018, USTRANSCOM officials said that the command is in the process of ensuring its systems are secure and continuously available, and is developing capabilities to improve the usability of its legacy systems. In addition, officials reported that the command is streamlining its tracking and reporting mechanisms to allow users to automatically generate key reports, which will give decision makers access to more current and accurate information to help improve program operations. USTRANSCOM officials said that executive sponsorship is absolutely critical for migrating to the cloud to overcome culture change by bringing together people throughout the enterprise. In addition, the command’s cloud center of excellence team facilitates the command’s adoption of cloud by, among other things, training users and addressing governance issues. Figure 11 provides a summary of Defense’s cloud acquisition. Incorporating automated recovery from network failures and streamlining security increased mission assurance. According to USTRANSCOM officials, by moving the command’s network to the cloud, the command has been able to design and build its new network with higher levels of availability. For example, officials said that if a network segment becomes unavailable, the cloud technology has the capability to automatically reroute traffic to help reduce the amount of delay that users experience. In addition, officials reported that developers have been working to automate several hundred security checks that are part of Defense’s security technical implementation guides by implementing a repeatable, automated process instead of doing manual checks. Officials noted that, previously, manually checking of the status of configurations would take hundreds of man hours to complete. Eventually, the command anticipates that automation will save these hours of manual checks. The command plans to implement the new capability in May 2019. Replacing a legacy system with a cloud-based system developed using Agile software development methodologies will enhance the shipment of personnel property. According to USTRANSCOM officials, moving to the cloud has assisted the command by replacing the legacy system that manages moves of Defense personnel property, like household goods, with a mobile prototype built in the cloud. Officials reported that the legacy system currently uses a variety of commercial products that are difficult to maintain and do not efficiently address the command’s complex business processes for personnel property moves, all of which affects the usability of the system. Currently, the command is using Agile software development methodologies to reengineer its business processes to develop a solution that is mobile and user-friendly. The new mobile prototype is intended to allow personnel to request access in order to manage the moves of certain household goods. Officials reported that the command initially planned to deploy the prototype in June 2018 but deployment was delayed and a new date had not yet been identified. Automating reporting and tracking mechanisms will help eliminate manual processes. According to USTRANSCOM officials, the command is in the process of automating its processes for reporting and tracking cargo shipments utilizing cloud technologies. Currently, the command employs manual processes to track and monitor a variety of its cargo shipments. For example, officials reported that five analysts typically spend one day compiling a status report that details delays with food shipments for Defense military exercises and operations. In addition, analysts currently have to query up to 11 Defense and commercial carrier systems to compile a report on high-priority shipments across the combatant commands. Officials noted that these analysts often experience delays getting access to timely information and must also resolve conflicting information in various transportation systems. However, with the transition to cloud services, officials in USTRANSCOM reported that analysts will have the capability to automatically generate reports based on defined criteria, such as shipment method or destination, and use data feeds that officials can continuously update. By developing phase one of the system in the cloud in fiscal year 2018, officials reported that they will be able to monitor delays in a shipment and immediately take action to change the mode of transportation or source shipments from alternate suppliers. The command plans to release the full operational capability in fiscal year 2020, which, officials noted, will give authorized users near real-time access to shipment information, including estimates of whether a shipment will arrive on time. In addition to the individual named above, the following staff made key contributions to this report: Dave Powner (Director), Dave Hinchman (Assistant Director), Chris Businsky, Nancy Glover, Valerie Hopkins (Analyst-in-Charge), Sandra Kerr, James MacAulay, Jamelyn Payan, and Priscilla Smith.", "summary": "Cloud computing enables on-demand access to shared computing resources providing services more quickly and at a lower cost than having agencies maintain these resources themselves. In 2012, OMB began requiring agencies to assess all IT investments for cloud services. GAO was asked to review agencies' reported use of cloud services. This report discusses selected agencies' progress in implementing cloud services, the extent to which those agencies increased cloud service spending and achieved savings or cost avoidances, and examples of agency-reported cloud investments with notable benefits. GAO selected 16 agencies to review based on their fiscal year 2017 IT budgets and analyzed their use of cloud services, associated spending and savings data, and guidance for assessing investments for these services. GAO interviewed agency officials in charge of cloud services and reviewed pertinent documents to identify acquisitions with notable benefits. GAO also interviewed OMB staff about their agency's role in federal cloud computing and related OMB guidance. The 16 agencies GAO reviewed made progress in implementing cloud computing services (cloud services)—namely, they established assessment guidance, performed assessments, and implemented these services—but the extent of their progress varied. To encourage cloud service acquisition, the Office of Management and Budget (OMB) began requiring agencies to assess all information technology (IT) investments for cloud services. However, only 10 of the 16 agencies reviewed had established assessment guidance. In addition, while the agencies assessed the majority of their planned fiscal year 2019 IT investments for cloud services, 12 agencies had not completed an assessment of 10 or more investments. Nevertheless, 10 of the agencies reported increasing their use of cloud services between fiscal years 2016 through 2019 (see figure). Six agencies noted that inconsistent reporting of cloud investments and investment consolidation impacted their reported percentage. Further, the 16 agencies reported that they had increased their cloud service spending since 2015 and 13 of the 16 agencies had saved $291 million to date from these services. However, these agencies identified issues in tracking and reporting cloud spending and savings data, including not having consistent processes in place to do so. Agencies also noted that OMB guidance did not require them to explicitly report savings from cloud implementations and, therefore, they had to specifically collect this data to meet GAO's request. As a result of these identified issues, it is likely that agency-reported cloud spending and savings figures were underreported. Officials from 15 of the 16 agencies reported that they had identified significant benefits from acquiring cloud services, including improved customer service and the acquisition of more cost-effective options for managing IT services. In addition, these agencies identified nine cloud investments that, among other things, enhanced the availability of weather-related information, facilitated collaboration and information sharing among federal, state, and local agencies related to homeland security, and provided benefits information to veterans, as examples of systems that realized these benefits. One agency reported that it had not realized benefits because it did not have any completed migration efforts. GAO is making one recommendation to OMB on cloud savings reporting, and 34 recommendations to the 16 agencies on cloud assessments and savings. Fourteen agencies agreed with all recommendations, OMB and one agency neither agreed nor disagreed, and one (Defense) agreed with one recommendation but not the other. GAO continues to believe its recommendation to the department is appropriate.", "document_type": "gao"}
{"report": "ARPA-E’s typical funding announcement and award selection process begins with the agency hiring a program director responsible for identifying a gap in energy technology research and developing a program to fill that gap. ARPA-E is required by statute to achieve its goals through energy technology projects that, among other things, accelerate transformational technological advances in areas that industry on its own is not likely to undertake because of technical and financial uncertainty, while also ensuring that its activities are coordinated with, and do not duplicate the efforts of, programs and laboratories within DOE and other relevant research agencies. ARPA-E’s efforts to identify existing energy technology research gaps and to design a program to address those gaps involve research; consultation with scientific experts, including a workshop with outside experts; and internal discussions within ARPA-E. From this process, program directors develop funding opportunity announcements that describe the technical requirements specific to each program’s technology area that applicants have to meet, as well as the four standard criteria that ARPA-E uses to guide its merit selection process. Following the issuance of a funding opportunity announcement, ARPA-E employs the following multi-stage process to merit review applications, make funding award decisions, and monitor projects: Concept paper. Applicants initially submit a 4- to 7-page abstract of their projects. Scientific experts from government, industry, and academia serve as reviewers. Full application. After reviewing concept papers, ARPA-E encourages some applicants to submit full applications. Full applications are generally quite extensive, requesting information on the technical and financial aspects of the proposed project, among other things. ARPA-E officials we interviewed noted that these applications are frequently more than 100 pages and can take 30 to 45 days for the applicant to develop. Full applications are reviewed against the selection criteria by leading scientific experts in the relevant field and assigned numerical scores. Reply to reviewer comments. After reviewing a full application, reviewers provide comments and questions to the applicants, who then have the opportunity to respond. Selection. A three- to four-person panel, chaired by the relevant ARPA-E program director, considers the reviewers’ comments and numerical scores and recommends applications for an award. The final decisions on which applicants to select for award negotiations are made by the selecting official, usually the Director of ARPA-E. Award negotiations. Once selections are made, ARPA-E program directors work closely with selectees to negotiate the terms and conditions of their award. These negotiations include, among other things, developing a project plan with technical milestones that are to be met during the 2 to 3 years that the award is being funded, a budget and management plan, and an intellectual property and data management plan. Funds are awarded once negotiations regarding the terms and conditions of the award are concluded. ARPA-E seeks to complete negotiations regarding the terms and conditions of an award within approximately 100 days of sending a letter notifying an applicant that they have been selected for award negotiations. Selectees may be allowed to begin spending money to start work on their projects up to 90 days prior to the completion of award negotiations. However, these expenditures are made with the risk that applicants may not be reimbursed if award negotiations are unsuccessful and ARPA-E does not fund the award. Monitoring. ARPA-E monitors and supports the projects it funds through quarterly reviews and site visits. At any point during the award, ARPA-E may decide whether to continue or terminate the project based on whether agreed-upon project milestones are being met. In 2017, DOE developed and implemented a new review process to assess DOE financial assistance for new work against the current administration’s priorities, including financial assistance for which ARPA- E had already made award selections. DOE reviewed and approved ARPA-E’s opportunities for financial assistance on a rolling basis from May to September 2017, and nearly all were approved to proceed. The formal review of DOE financial assistance officially began on May 4, 2017, when DOE’s Chief of Staff issued a memorandum stating that funding opportunity announcements and determinations of non- competitive financial assistance would be reviewed to ensure consistency with the administration’s priorities. According to the memorandum, DOE agencies that award financial assistance—referred to in this report as funding organizations—were to provide information about each competitively selected funding announcement and determination of non- competitive financial assistance by May 15, 2017. This information included, for example, a brief description of the financial assistance, the number and amount of planned awards, and the technology readiness level of the projects being funded. DOE Office of Management officials told us that the agency’s financial assistance review lasted through September 2017, as some DOE organizations continued to submit new financial assistance for review, but that the review was largely completed by August 10, 2017. However, while the formal review of DOE financial assistance began in May, award negotiations for ARPA-E-funded projects were suspended nearly 1 month earlier. Specifically, according to ARPA- E officials, DOE’s Deputy Chief of Staff verbally directed ARPA-E on April 6, 2017 to stop all ongoing award negotiations. Figure 1 shows the timeline of DOE’s review of ARPA-E financial assistance. Pursuant to the DOE Chief of Staff’s May 4th memorandum, ARPA-E and other DOE funding organizations submitted the requested information to the DOE review team, which was coordinated and facilitated by the Director of DOE’s Office of Management. Other members of the financial assistance review team included DOE’s acting Chief Financial Officer; deputy assistant secretaries, chiefs of staff, and senior advisors at several DOE funding organizations; and members of the department’s congressional affairs and public affairs staff. According to DOE Office of Management officials we interviewed, the review team assessed the department’s financial assistance against five criteria: Whether the financial assistance was statutorily mandated; Whether the financial assistance was described in congressional Whether the financial assistance was consistent with administration priorities, as identified in budget documents and other statements from the President and Secretary of Energy, among other things; What technology readiness level the financial assistance was intended to fund; and Whether the technology encompassed by the project was already being funded by the private sector or others. DOE Office of Management officials stated that the review team did not use the above criteria to assign quantitative scores to evaluate the department’s financial assistance; instead, the team collaboratively discussed each opportunity for assistance. In most cases, the review team was able to reach consensus on whether the financial assistance aligned with the administration’s priorities. DOE Office of Management officials also noted that they met with ARPA-E leadership to obtain additional information about ARPA-E financial assistance on three occasions during the course of the review. ARPA-E officials said that, in addition to those three meetings, they provided written information to address questions received from the review team and to provide additional context regarding ARPA-E financial assistance. In total, DOE’s review team assessed 6 ARPA-E fiscal year 2017 or prior- year funding opportunity announcements for which applicants had been selected for award negotiation, 7 fiscal year 2017 announcements in the earlier stages of the merit review and selection process, 2 fiscal year 2017 announcements that had not yet been released, and 17 opportunities for financial assistance where ARPA-E funded renewals or new work under a determination of noncompetitive financial assistance. According to DOE Office of Management officials, the review team worked as quickly as possible to review all of DOE’s financial assistance to minimize potential disruptions for recipients and DOE’s funding organizations. Once the review team approved an opportunity for financial assistance, DOE funding organizations were allowed to resume work, DOE Office of Management officials told us. Figure 2 shows the total cumulative funds for ARPA-E financial assistance approved by the review committee at various stages in the review. For example, as shown in Figure 2, the review team approved roughly $158.3 million (55.6 percent) of ARPA-E’s proposed financial assistance on May 18, 2017, 3 days after the deadline for DOE funding organizations to submit information to the review team. The remaining proposed financial assistance was approved in several stages from June through August 2017. As of August 25, 2017, all of ARPA-E’s competitively selected funding opportunity announcements, renewals, and determinations for noncompetitive financial assistance, where selectees had been selected for negotiation, were approved by the review team, representing roughly $265 million, or 93.1 percent, of all ARPA-E funding reviewed by the team. DOE Office of Management officials also stated that the financial assistance review team made a decision early in the course of the review to honor all existing DOE commitments to fund new work. These officials said that this extended to commitments made to entities that had been selected for award negotiations, even though the department does not officially commit to providing funds until such negotiations are completed and the award is finalized. However, according to ARPA-E selectees we interviewed, this message was generally not communicated to them, which led to uncertainty about whether their projects would be funded. In contrast, the review team recommended that the DOE Chief of Staff cancel ARPA-E’s Facsimile Appearance to Create Energy Savings funding announcement, which had accepted full applications but had not selected any applicants for award negotiation. This opportunity would have funded the development of advanced information technology that could allow for three-dimensional digital representation of a person in a room nearly indistinguishable from the person being there in real life, which might allow for increased telecommuting. DOE Office of Management officials told us that the review team reached this recommendation in part because this technology was already being funded by the private sector. As of November 2017, DOE Office of Management officials said the review team had cancelled 3 other DOE funding announcements as a result of the review. According to information we collected, DOE’s review of ARPA-E financial assistance, as part of the DOE-wide review process, did not require the President to send a special message under the Impoundment Control Act. Specifically, the delay in obligating ARPA-E funds for financial assistance examined through DOE’s review process was for programmatic reasons. DOE officials explained that the purpose of the review was to ensure that the agency’s financial assistance aligned with the priorities of the current administration. According to the 10 ARPA-E selectees we interviewed, DOE’s financial assistance review process created uncertainty, which led to a variety of impacts—the most frequently cited of which were potentially delayed project timelines and difficulties staffing project teams. Selectees told us that they received little communication from ARPA-E during the review process, and they indicated that additional information about review timelines and potential effects on their awards would have helped them manage some of the uncertainty they experienced during the review process. DOE Office of Management officials said the fiscal year 2017 review process helped to better identify and coordinate future financial assistance department-wide on crosscutting issues. DOE is conducting the fiscal year 2018 review process prior to publicly issuing funding announcements. As a result, DOE Office of Management officials said, the delays and uncertainty that selectees experienced in fiscal year 2017 should be reduced. In our structured interviews with ARPA-E selectees, the most frequently cited impact of the uncertainty caused by DOE’s financial assistance review was the potential need to delay project timelines. All of the ARPA- E selectees we interviewed told us that they might need to extend their project timelines because of uncertainty caused by DOE’s review. Four of these selectees noted that the delay caused by DOE’s review could cause additional, cascading delays in their timelines. For example, 1 selectee we interviewed said that it would need to re-issue a hiring announcement it had publicized prior to the review because the review prevented it from hiring someone. In addition, the selectee would need to resubmit the hiring announcement to the university and state human resources departments for approval, which could take months to process. Another selectee said that it missed 2 months of a 3-month planting season because it could not start project work, and had the delay lasted any longer, the selectee would have missed an entire year of data collection on the project. Selectees also cited challenges to staffing project teams as a result of the uncertainty caused by the review. Selectees stated that delays caused by the review affected their ability to hire team members they had planned to hire based on their original schedule, as potential members moved on to other projects or took different jobs. For example, 9 selectees told us that they delayed hiring new project team members while DOE’s review was occurring. Four selectees we interviewed said that they had difficulty retaining staff during the review process. For example, 1 selectee had to lay off 2 of the company’s 15 staff members because of the delay in receiving funding, and several other staff members left voluntarily. Furthermore, the selectee said laying off these staff members resulted in an increase in the company’s unemployment taxes, which was expensive for a small-sized company. Four other selectees that we interviewed said they had to assign existing project team members to other funded work or general activities because they could not begin work on their ARPA-E project until they received funding. Selectees we interviewed cited additional impacts associated with the uncertainty caused by DOE’s financial assistance review. These impacts included: Delaying equipment purchases. Four selectees reported that they had to delay purchasing important equipment needed to execute their project. One selectee noted that the delay caused by the review was long enough that price quotes it had received from equipment sellers expired, and that prices could increase in later quotes. Changes to project scope. Two selectees told us that they might need to limit the planned scope of their projects to be able to complete them in the proposed timeline. For example, 1 selectee said its project involves helping to scale up three to four different technologies a year, which it might not be able to do if it has to adhere to its initial timeframes. Loss of advantage against potential competitors. Four of the selectees we interviewed said that the delay may have caused their technology to fall behind their potential competitors in some way. For example, 1 selectee noted that it was working in a competitive environment for its technology, with ongoing efforts in multiple countries, and reported that its project might have fallen behind others’ efforts as a result of delays associated with DOE’s review. However, 4 other selectees said that the review was not likely to cause any loss of competitiveness. Impacts on external project partners. Three selectees noted that DOE’s review caused uncertainty for partners on their projects, including partners that provide external funding. For example, 1 selectee told us that private investors in its technology area are most active in the fall and that its project team might not be able to seek a second round of funding if it could not demonstrate the necessary technical results of the project by then. Impacts on pre-award spending reimbursements. One selectee reported that it had to cease certain pre-award spending. The selectee said that it spent roughly $10,000 on equipment and 150 hours of labor prior to DOE’s financial assistance review, but it could not submit invoices for these expenditures to ARPA-E while the review was ongoing and would not be able to if its project was ultimately not approved. Furthermore, the selectee said that even if the award was approved, the delay might result in expenditures falling outside the 90-day window of allowable pre-award expenditures, which would require obtaining approval from ARPA-E to be reimbursed. Selectees we interviewed also stated that they received little communication from ARPA-E during the review, which contributed to the uncertainty about the status of their projects. Specifically, 6 of the selectees said that they would have liked additional information from ARPA-E on a variety of topics related to the review. For example, 4 selectees said they would have liked additional information about the review timeline and when it was planned to be completed. One of these selectees told us that a written document from ARPA-E indicating a rough time frame and next steps would have helped facilitate better planning for their project team. Two selectees we interviewed wanted additional information about whether they could renegotiate their timelines once the review was completed. Three selectees told us that they would have liked additional information about whether the review would cause them to lose their funding. ARPA-E officials we interviewed told us that they made three separate requests to DOE’s Deputy Chief of Staff to learn what they could communicate to selectees about the April 6, 2017, verbal order and the review process. ARPA-E officials told us that they were directed by the Deputy Chief of Staff not to communicate with selectees about the verbal order until receiving guidance from his office. ARPA-E developed proposed language to share with selectees but did not receive approval from the Deputy Chief of Staff to distribute it. DOE Office of Management officials we interviewed told us that they did not issue guidance to ARPA- E or other DOE funding organizations about how the organizations should communicate with selectees during the review. In contrast to its fiscal year 2017 review, DOE began its 2018 financial assistance review in August 2017, prior to publicly issuing funding announcements. On August 10, 2017, DOE’s Office of Management sent an email to DOE funding organizations directing them to submit descriptions of their proposed financial assistance by September 8, 2017. Because the review will occur prior to publicly issuing funding opportunity announcements, and thus before any recipients apply or are selected, DOE Office of Management officials said the delays and uncertainty that selectees experienced in fiscal year 2017 should be reduced. DOE Office of Management officials told us that—aside from changing the timing of its 2018 financial assistance review—the review team’s membership and evaluation criteria will be largely the same as for the fiscal year 2017 review. The officials said that they discussed the review process with senior leaders in DOE’s funding organizations to help ensure that they understood the priorities, expectations, and steps of the review process. The officials also told us that the review team developed additional guidance to clarify certain issues that arose during the fiscal year 2017 review. This additional guidance included: On August 17, 2017, funding organization managers were informed that continuation awards—those where the activity is presently being funded—would be exempt from submission to the review team and can continue to move forward. On August 29, 2017, funding organizations were informed that they should identify financial assistance that falls under one of seven crosscutting research issue areas. According to DOE Office of Management officials we interviewed, a key benefit of the fiscal year 2017 review process was that the review team noticed that DOE had several funding announcements at multiple funding organizations related to these areas. DOE’s funding organizations may be able to coordinate to issue a consolidated funding announcement in these crosscutting research issue areas, to ensure efforts are complementary and not duplicative. Furthermore, DOE Office of Management officials we interviewed said that knowing which funding organizations are funding work in these areas will support DOE meetings on crosscutting issues. We provided a draft of this report for review and comment to the Secretary of Energy. DOE provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the individual named above, Chris Murray (Assistant Director), Perry Lusk (Analyst-in-Charge), Antoinette C. Capaccio, John Delicath, Justin Fisher, Kimberly McGatlin, Dan Royer, Tind Shepper Ryen, Lauren G. Sherman, and McKenna Storey made key contributions to the report.", "summary": "ARPA-E provides funding for research to overcome long-term and high-risk technological barriers in developing energy technologies. Since 2009, ARPA-E has awarded approximately $1.3 billion to universities, public and private companies, and national laboratories to fund energy research projects. Starting in May 2017, DOE began reviewing its financial assistance department-wide, including ARPA-E's, to determine if it met the administration's priorities. GAO was asked to examine this review process as it pertained to ARPA-E. This report describes (1) how DOE implemented the financial assistance review process; and (2) the perspectives of ARPA-E selectees on the impacts of the review process. GAO reviewed documents and interviewed officials at ARPA-E and DOE's Office of Management, which coordinated the review. GAO also interviewed a nonprobability sample of 10 of the 68 ARPA-E award selectees whose financial assistance was evaluated under the review. GAO identified selectees to interview based on representation across ARPA-E's recipient types, including universities, private companies, and national laboratories, among other criteria. While the views of selectees GAO interviewed cannot be generalized to all affected ARPA-E selectees, they provide illustrative examples of the effects of DOE's review. The Department of Energy (DOE) developed and implemented a new process to review its financial assistance to ensure that all new work funded by the department—including by DOE's Advanced Research Projects Agency-Energy (ARPA-E)—was consistent with the current administration's priorities. The review process covered funding opportunity announcements as well as certain other types of financial assistance. New awards were delayed until the review of the underlying financial assistance opportunity was completed. DOE reviewed and approved ARPA-E's financial assistance on a rolling basis from May through September 2017, and nearly all ARPA-E financial assistance was approved. DOE Office of Management officials met with ARPA-E officials on several occasions to discuss their review of ARPA-E financial assistance. DOE officials GAO interviewed said they wanted to complete the review as quickly as possible to minimize effects on DOE programs. GAO determined that the delay was not reportable under the Impoundment Control Act. The Impoundment Control Act requires the President to notify Congress if an agency wants to withhold the obligation of funds. GAO has separately informed Congress of an impoundment of $91 million in funds that were not allocated to any financial assistance awards, and was not related to DOE's review process. According to the 10 ARPA-E project selectees GAO interviewed, DOE's financial assistance review process created uncertainty, which led to a variety of project impacts. The impacts most commonly cited by selectees included potentially delayed project timelines, as well as difficulties in staffing their project teams, among other impacts as shown below. DOE officials GAO interviewed said that they are reviewing DOE financial assistance in fiscal year 2018. DOE officials said that a key benefit of the fiscal year 2017 review process was an opportunity to better identify and coordinate future financial assistance department-wide on crosscutting issues. However, DOE plans to review fiscal year 2018 financial assistance prior to issuing funding opportunity announcements to the public, and thus before any recipients apply or are selected. As a result, DOE officials said, the uncertainty that ARPA-E selectees experienced during the fiscal year 2017 review process should be reduced. GAO is not making any recommendations. DOE provided technical comments, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "As we found in our May 2018 report, in terms of how they meet their IEA 90-day reserve obligations, most other IEA members differ from the United States in two basic ways. First, as of December 2017, most other IEA members rely at least in part on private rather than public reserves to meet their obligations. As of December 2017, 18 of the 25 IEA members that met their 90-day reserve obligation and had a formal process for holding and releasing reserves relied entirely or in part on private reserves to meet their obligations. Specifically, based on IEA data as of December 2017, these 18 countries met their 90-day reserve obligations through private reserves and either had no public reserves or had public reserves of less than 90 days. Unlike the 18 countries that rely at least in part on private reserves, as of December 2017, the United States and 6 other IEA members met the 90-day reserve obligation exclusively through public reserves. The second way other IEA members differ from the United States is that most hold at least a third of their reserves as petroleum products, according to a 2014 IEA report. Holding petroleum products can be advantageous during certain disruptions because such reserves can be directly distributed to consumers, whereas crude oil must first be refined and turned into products, adding response time. In contrast, more than 99 percent of the SPR (665.5 million barrels as of March 2018) is held as crude oil. Because of the large U.S. refining sector, crude oil from the SPR can be domestically refined into petroleum products to meet demand. As we found in our May 2018 report, DOE has not identified the optimal size or the potential need for additional petroleum product reserves for the SPR. In 2016, DOE completed a long-term strategic review of the SPR after its last comprehensive examination had been conducted in 2005. The 2016 review examined the expected benefits of several SPR sizes, but it did not identify an optimal size and was limited in several ways. In particular, in the review, DOE did not fully consider recent and expected future changes in market conditions, such as the implications of projected fluctuations in net imports or the role of the private sector in responding to supply disruptions. Recent changes have contributed to SPR and private reserves reaching historically high levels on a net imports basis. These changes are expected to continue to evolve— according to government projections, the United States will become a net exporter in the late 2020s before again becoming a net importer between 2040 and 2050. In February 2005, we found that agencies should reexamine their programs if conditions change. Without addressing the limitations of its 2016 review and periodically performing reexaminations in the future, DOE cannot be assured that the SPR will be sized appropriately into the future. In May 2018, we recommended that DOE (1) supplement its 2016 review by conducting an additional analysis that takes into account, among other things, the costs and benefits of a wide range of different SPR sizes and (2) take actions to ensure that it periodically conducts and provides to Congress a strategic review of the SPR. DOE partially agreed with the first recommendation and stated that it will conduct an additional analysis to assess the purpose, goals, and objectives of the SPR, taking into account private sector response, oil market projections, and any other relevant factors, that will lead to an evaluation of possible optimal sizes of the SPR in the future. DOE agreed with the second recommendation. DOE has also not fully identified whether additional regional petroleum product reserves should be part of the SPR. The Quadrennial Energy Review of 2015 recommended that DOE analyze the need for additional or expanded regional product reserves by undertaking updated cost- benefit analyses for all of the regions of the United States that have been identified as vulnerable to fuel supply disruptions. In response, DOE studied the costs and benefits of regional petroleum product reserves in the West Coast and Southeast Coast, though it did not finalize or publicly release these studies. Nevertheless, the draft studies concluded that a product reserve in the Southeast would provide significant net economic benefits to the region and the United States, particularly in the event of a major hurricane, while further analyses are needed to determine the potential benefits of a reserve on the West Coast. According to DOE officials, the agency has no plans to conduct additional studies. Without completing studies on the costs and benefits of regional petroleum product reserves, DOE cannot ensure that it and Congress have the information they need to make decisions about whether additional regional product reserves are needed. In our May 2018 report, we recommended that DOE conduct or complete such studies. DOE disagreed with this recommendation, though we continue to believe that conducting these analyses will provide Congress with needed information. As we found in our May 2018 report, DOE has taken steps to account for the effects of congressionally mandated oil sales in its plans for modernizing the SPR, though DOE’s current plans, developed in 2016, are based on information largely developed prior to recent congressionally mandated sales of an additional 117 million barrels of oil. According to DOE documents, the SPR modernization program is focused on a life extension project to modernize aging infrastructure to ensure that the SPR will be able to meet its mission requirements for the next several decades. The project’s scope of work has undergone several revisions since its inception in response to changing conditions and requirements, according to the agency. DOE has estimated that the SPR’s modernization will cost up to $1.4 billion, and according to officials, the agency had spent $22 million as of the end of February 2018. According to DOE officials, in March 2018, DOE commenced a study— the SPR post-sale configuration study targeted for completion in October 2018—to examine potential future reserve configurations and to account for the effects of congressionally mandated sales on the reserve and its modernization. Information from the study will inform DOE’s updates to the SPR’s modernization plans, according to DOE officials. Although the SPR had a design capacity to hold 713.5 million barrels of oil, in January 2017, the SPR held 695 million barrels. As shown in figure 2, congressionally mandated sales will cause excess storage capacity to grow to 308 million barrels or more by the end of fiscal year 2027— meaning that about 43 percent of the SPR’s total design capacity to store oil would be unused. In its ongoing SPR post-sale configuration study, DOE plans to explore some options to use potentially excess SPR assets, such as spare storage capacity. In withdrawing oil to meet congressionally mandated oil sales currently in place (290 million barrels through fiscal year 2027), DOE could close at least one SPR site based on our analysis of projected excess storage capacity. For example, if DOE were to close the smallest SPR site, Bayou Choctaw in Louisiana, the agency could also explore selling the connected pipeline and marine terminal, which are currently being leased to a private company. DOE could also consider leasing excess storage capacity to other countries so that they could store oil at the SPR. DOE had not entered into any such leases with other countries and had not considered such leases as of May 2018 because, according to DOE, the SPR has historically lacked capacity to store additional oil. DOE had not proposed any of these options or explored the revenue the agency could generate by selling or leasing these assets. However, according to DOE officials, the agency will examine the feasibility of such options in the ongoing SPR post-sale configuration study. In the course of our work, we also identified other options for handling potentially excess SPR assets that DOE was not planning on examining as of May 2018, largely because DOE did not have the authority to pursue them, according to agency officials. First, DOE could explore leasing storage capacity to private industry. U.S. oil production has generally increased over the last decade. As a result, the private sector may want to lease excess SPR capacity, which may be cheaper than above-ground storage, according to a representative of a private company we interviewed. Fees for doing so could help defray SPR storage or maintenance costs. However, agency officials told us that the Energy Policy and Conservation Act gave DOE authority to lease underutilized storage to other countries but not to the private sector. Second, if Congress determines that the SPR holds oil in excess of that needed domestically, DOE could explore selling contingent contracts for the excess oil rather than selling the oil outright. Australian and New Zealand officials told us that such contracts would help their countries meet their IEA 90-day reserve obligations. Australian officials told us that they have discussed this option with DOE. Currently the United States and Australia have agreed, through an arrangement, to allow Australia to contract for petroleum stocks located in the United States and controlled by commercial entities. While the arrangement does not cover government-owned oil in the SPR, if it did, based on our analysis, DOE could generate up to approximately $15 million if Australia purchased the maximum allowable amount of oil specified in an arrangement through contracts for excess SPR oil in 2018. However, although the Energy Policy and Conservation Act allows DOE to lease underutilized storage to other countries, DOE lacks the authority to sell contracts for the oil and does not plan to seek this authority, according to DOE officials. DOE officials told us that they did not plan to examine these options. According to DOE’s real property asset management order, the agency is to identify real property assets that are no longer needed to meet the program’s mission needs and that may be candidates for reuse or disposal. Once identified, the agency is to undertake certain actions, including determining whether to dispose of these assets by sale or lease. As part of its SPR post-sale configuration study, DOE plans to determine whether it is appropriate to close SPR facilities, and the relative benefit of any closures would be informed by potential lease revenues from maintaining sites so they could be leased, according to agency officials. However, as mentioned previously, we identified other options for handling potentially excess SPR assets that DOE was not planning to examine in its study. Although DOE does not currently have the authority to implement these options, according to officials, examining their potential use, including possible revenue enhancement, could inform Congress as it examines whether it should grant such authority. Without examining a full range of options in the SPR post-sale configuration study, DOE risks missing beneficial ways to modernize the SPR while saving taxpayer resources. In May 2018, we recommended that in completing its ongoing SPR post-sale configuration study, DOE should consider a full range of options for handling potentially excess assets and, if needed, request congressional authority for the disposition of these assets. DOE agreed with this recommendation. Finally, as DOE takes steps to plan for the SPR’s modernization, ongoing uncertainty regarding the SPR’s long-term size and configuration have complicated DOE’s efforts. Congress has generally set the SPR’s size by mandating purchases or sales of oil. DOE officials told us they do not know whether Congress will mandate additional sales over the next 10 years or whether other changes may be required to the configuration of the reserve. Any additional congressionally mandated sales would require DOE to again revisit its modernization plans and assessments of the potential uses of any excess SPR assets. Oil market projections also have implications for the future of the SPR. The United States is projected to become a net exporter by the late 2020s and would then no longer have a 90-day reserve obligation, but it is projected to return to being a net importer between 2040 and 2050. These projected fluctuations could affect the desired size of the SPR in the future. Such uncertainties create risks for DOE’s modernization plans, as DOE may end up spending funds on facilities that later turn out to be unnecessary should Congress ultimately decide on a larger- or smaller-sized SPR than DOE anticipates. In May 2018, we suggested that Congress may wish to consider setting a long-range target for the size and configuration of the SPR that takes into account projections for future oil production, oil consumption, the efficacy of the existing SPR to respond to domestic supply disruptions, and U.S. IEA obligations. In conclusion, we found that given the constrained budget environment and the evolving nature of energy markets and their vulnerabilities, it is important that DOE endeavor to ensure that the SPR is an efficient and effective use of federal resources. Chairman Upton, Ranking Member Rush, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. If you or your staff members have any questions about this testimony, please contact Frank Rusco, Director, Natural Resources and Environment, at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this testimony included Quindi Franco (Assistant Director), Nkenge Gibson (Analyst-in- Charge), Philip Farah, Ellen Fried, Cindy Gilbert, Gregory Marchand, Celia Mendive, Patricia Moye, Camille Pease, Oliver Richard, Dan Royer, Rachel Stoiko, and Marie Suding. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Over 4 decades ago, Congress authorized the SPR—the world's largest government-owned stockpile of emergency crude oil—to reduce the impact of disruptions in supplies of petroleum products. Since 2015, Congress has also mandated sales of SPR oil to fund the modernization of SPR facilities and other national priorities. DOE manages the SPR, whose storage and related infrastructure is aging, and has plans to modernize its facilities. As a member of the International Energy Agency, the United States is obligated to maintain reserves equivalent to at least 90 days of the previous year's net imports (imports minus exports). As of March 2018, the SPR held about 665 million barrels of crude oil, about 138 days of net imports. This testimony highlights GAO's May 2018 report on the SPR, including the extent to which (1) DOE has identified the optimal size of the SPR, and (2) DOE's plans for modernizing the SPR take into account the effects of congressionally mandated crude oil sales. GAO reviewed DOE's documents and studies and interviewed agency officials. The Department of Energy (DOE) has not identified the optimal size of the Strategic Petroleum Reserve (SPR). In 2016, DOE completed a long-term strategic review of the SPR after its last comprehensive examination was conducted in 2005. The 2016 review examined the benefits of several SPR sizes, but it did not identify an optimal size and was limited in several ways. In particular, in the review, DOE did not fully consider recent and expected future changes in market conditions, such as the implications of projected fluctuations in net imports or the role of the private sector in responding to supply disruptions. These changes have contributed to SPR and private reserves reaching historically high levels on a net imports basis. These changes are expected to continue to evolve, and according to government projections, the United States will become a net exporter in the late 2020s before again becoming a net importer between 2040 and 2050. GAO has found that agencies should reexamine their programs if conditions change. GAO recommended that DOE supplement its 2016 review by conducting an additional analysis, and take actions to ensure the agency periodically conducts a strategic review of the SPR. DOE generally agreed with these recommendations. DOE has taken steps to account for congressionally mandated sales of SPR crude oil in its $1.4 billion modernization plans for SPR's infrastructure and facilities. However, DOE's current plans, developed in 2016, are based on information largely developed prior to recent congressionally mandated sales of an additional 117 million barrels of oil. According to DOE officials, the agency began a study in March 2018 to assess the effects of these sales on the SPR's modernization. However, GAO reported that this study was not examining a full range of options for handling any excess SPR assets that may be created by currently mandated sales or any additional sales that may be mandated in the future, inconsistent with an agency order on real property asset management that calls for identifying excess assets. For example, according to officials, DOE does not currently have the authority to lease unused storage capacity to the private sector, and DOE was not planning to examine this option. If authorized, leasing unused SPR storage capacity could generate revenues that could help offset the costs of modernization. GAO recommended that DOE should consider a full range of options for handling potentially excess assets and, if needed, request congressional authority for the disposition of these assets. DOE agreed with this recommendation. GAO made four recommendations, including that DOE (1) supplement the 2016 review by conducting an additional analysis, (2) ensure it periodically reexamines the SPR, and (3) consider a full range of options for handling potentially excess assets. DOE partially agreed with the first recommendation and agreed with the other two recommendations.", "document_type": "gao"}
{"report": "Colleges are a unique and diverse sector, varying from small, private schools in rural environments to large public schools in major cities. As of the 2015-2016 school year (the most recent available data), there were approximately 4,000 degree-granting colleges in the United States. In addition to educating students in classrooms, many colleges also manage a number of related business operations, such as dormitories, scientific research facilities, hospitals, performing arts centers, athletic venues, child care facilities, transportation systems, and agricultural facilities. These various roles and responsibilities increase the complexity of emergency preparedness efforts. DHS has developed a national approach to emergency preparedness by setting a national preparedness goal and outlining activities for achieving it. This approach is designed to apply across all levels of government and sectors of the economy—including colleges, as well as local, state, and federal governments—and to prioritize collaboration among these entities. The National Preparedness Goal identifies activities to prevent, protect against, mitigate, respond to, and recover from threats and hazards and recognizes that preparedness is a shared responsibility of the whole community. The National Incident Management System (NIMS), which was developed by DHS’ Federal Emergency Management Agency (FEMA), operationalizes the goal by providing a guide with advice for government and nongovernmental entities for managing emergencies, including identifying a common vocabulary and processes for responding to emergencies. For example, NIMS establishes a standardized approach for communicating information during emergencies and outlines a leadership structure for managing emergencies, called an “Incident Command System,” so that the various entities responding to an emergency can operate seamlessly. DHS, DOJ, and Education all develop and disseminate emergency preparedness resources in line with their respective missions. Other agencies, such as the Department of Health and Human Services and the National Weather Service, also produce information that can help with colleges’ emergency preparedness efforts. College offices responsible for emergency preparedness efforts and the number of staff assigned to such efforts varied among the 18 selected colleges we interviewed and generally received some input from other members of the campus community. According to guidance for emergency planning from DHS’ Federal Emergency Management Agency (FEMA), emergency preparedness staff are generally responsible for tasks such as developing emergency plans, communicating and updating those plans, and taking a lead role during an actual event. College officials we spoke with said that their schools generally designated a lead office for emergency preparedness efforts. This lead office ranged from a dedicated emergency preparedness office at some colleges to offices that had non-emergency preparedness responsibilities as well, such as offices of public safety, student affairs, or facilities. About half of the officials responsible for emergency preparedness efforts at the 18 selected colleges we interviewed also spent time on other types of responsibilities that were not specific to emergency preparedness, such as health and safety issues. State agency officials and representatives from a college emergency preparedness association we spoke with also noted that emergency managers at colleges often “wear many hats,” or have limited time to devote to emergency planning, which makes their jobs more difficult. College officials often said balancing competing priorities was challenging. For example, an official at one college told us that if his school had more staff it could expand outreach efforts to students and faculty and design specific actions for a wider range of emergencies. In addition to having a lead office, most of the 18 colleges reported convening advisory committees or teams from the campus community to help develop or revise emergency preparedness plans. For example, one official at a large public university with over 36,000 students told us emergency plans are reviewed by an emergency response committee comprised of representatives from the business office, student housing, faculty, and the provost, among others. An official from another college reported that, while some campus community members played a less active part in developing the emergency plan, they were still responsible for understanding their roles and responsibilities in the event of an emergency. According to FEMA’s guidance for emergency plans, there are benefits to using a team approach. For example, the campus community is more likely to follow a plan if members have been involved in developing it because of a sense of shared ownership (see text box.) Two College Emergency Managers’ Descriptions of Emergency Preparedness Efforts On the day a campus police officer was shot and killed, several of the members of the campus leadership, including myself (the emergency manager) and chief of police, were off campus. Fortunately, many people on campus have been trained to manage a significant event because college leadership had placed a strong emphasis on emergency preparedness, including succession planning. When something occurs it is important to have a team that has practiced together and can provide leadership even if some key individuals are not on campus at the time. Hurricane Irma was 340 miles across, wider than the states of Florida and Georgia in some places. We were on the “dirty side” of the hurricane, just to the east of the eye. We were relieved that the damage on our campuses was not worse. Because of our actions before the storm—such as removing loose items like traffic cones and signage and tying down large equipment— we minimized the damage. College officials we interviewed described preparations for a range of emergencies and used a variety of tools to communicate and practice their plans (see text box). Officials we interviewed at all 18 colleges said their school developed “all hazards” emergency plans, which means the plans are designed to address a range of emergencies while prioritizing those that are most likely to affect their campus. This “all hazards” approach is supported by federal emergency preparedness principles as outlined in NIMS. Most college officials we spoke with said they prioritize at least one type of natural disaster that could occur in their geographical area, as well as manmade threats like active shooters. Most of the college officials reported talking with state or local partners or using some type of risk assessment tool or similar analysis to prioritize specific types of emergencies. College officials sometimes described this process as prioritizing emergencies that either occur more frequently, or are likely to have a significant effect on the college if they were to occur. For example, several officials at selected colleges said their schools prioritized active shooter events—even though they occur relatively rarely—because of incidents at other colleges or the potential effects on the community if such an event were to occur. A college’s specific characteristics can also inform its emergency plan. For example, officials from two colleges said their schools serve as research institutions and may need to take extra steps to secure scientific infrastructure in an emergency. Two officials described emergency preparedness efforts related to the physical location of their campus, such as bordering a body of water or being adjacent to an airport. Two College Emergency Managers’ Descriptions of Responding to Emergencies We knew that the hurricane was likely to hit other parts of our state badly, but we were not overly concerned that the hurricane would hit us directly. I came to work that morning and there were 20 buses on campus by our football field. We are an evacuation center but someone had forgotten to tell us that they were sending us 1,100 evacuees. Where were we going to put 1,100 people? These are the types of events that you plan for and hopefully you never have to implement those plans, but that day we had to do it. It took us about 4 or 5 hours between the time the buses showed up to when we had prepared the gymnasium with cots that were provided by the American Red Cross and food for the evacuees. The evacuees were here for 3 days. Our administrative staff slept on cots in our offices so that we were on campus the whole time the evacuees were here. Prior to the rally, we set up cameras in the area and arranged for additional security through mutual aid agreements with other police departments. We also convened in a nearby meeting room to monitor the situation. The situation turned violent very suddenly. At first, a couple hundred students and other individuals were in the area peacefully. Then a more rowdy group convened and within 15 minutes of their arrival, bottles were flying through the air and windows were being broken. I looked down for just a moment, then looked up again and a generator was on fire. We tried very hard to continue with the event because we believe in free speech, but safety became a concern and we had to cancel. It was very stressful and hard to watch. We were worried about the safety of our students. College officials we interviewed also outlined a variety of methods to communicate with the community in the event of an emergency and to conduct emergency drills. Officials we interviewed at the 18 selected colleges most commonly described using college websites, text messages, or mass email alerts to communicate emergency preparedness information to the campus community (see text box). Officials at several colleges also said they developed more detailed applications that students and faculty could download to their electronic devices for up-to-date emergency preparedness information. Two College Emergency Managers’ Descriptions of Emergency Communications Within minutes of the shooting, an alert was sent utilizing multiple channels including texts, email, message boards, web, desktop and voice messages. This serves two functions; it provides redundancy of delivery and also considers the different information receiving preferences of the community. Emergency messages, at a minimum, provide what happened, where it happened, and what action needs to be taken. Updates are sent when there is new information. It is recommended that during an emergency you communicate at least every 30 minutes. It is also important to ensure that correct up to date information is available, since inaccurate rumors can spread quickly through social media. Twitter helped us amplify our messages. We wrote these messages quickly, while doing many other things, so that the community could have information as soon as possible including about areas to avoid for safety reasons. After the fact, the messages also provided a time- stamped record of the events and the campus response to those events. About half of the colleges also told us that they offer training to communicate emergency preparedness information to specific groups such as students, faculty, and administrators. For example, an official at one college told us the college has targeted outreach to faculty by developing specific trainings that cover specific issues, such as what to do when classes are disrupted or a building is no longer accessible, for example, as the result of a weather event. Officials from several colleges also said they communicate emergency preparedness information during new student orientation. Several college officials acknowledged that engaging students can be challenging, and some officials said they address this challenge by making presentations or printed and online materials as engaging as possible. Emergency Preparedness Drills and Exercises College officials we interviewed also said their colleges practice and test emergency preparedness plans by conducting drills and exercises at least once a year. Most officials from the 18 selected colleges said they conducted evacuation drills, such as fire drills; a few officials said they conducted more time-intensive activities such as “tabletop exercises” (i.e., sessions in which officials meet to discuss their roles during a specific type of emergency). For example, a large public college conducted a tabletop exercise to simulate a hypothetical weather event that damaged a dormitory. One official at a large university also described how the college uses emergency preparedness principles to manage non- emergency events such as sports events in order to practice their plans. College emergency managers said that buy-in from a college’s top leadership was very important for promoting emergency preparedness efforts and increasing campus involvement. For example, one official described top leadership buy-in as the “guiding light” for the campus community. Another official said the president of his college made it mandatory for all executive staff to attend emergency preparedness trainings, which demonstrated his commitment to emergency planning and preparedness. When such support is lacking, officials said it is often difficult to engage students and faculty. For example, one college official told us that his college’s previous president viewed emergency preparedness as bothersome and a burden. The lack of support limited the type of drills that could be conducted on campus, the official said. Another official at a private 4-year school explained that his college could not participate in the “The Great ShakeOut” program because the drill fell outside of the allowable hours when drills were permitted to occur to avoid any conflicts with classroom instruction time. Officials at most of the 18 selected colleges stated that they relied on either their local or state partners, or both, for advice, questions, or to obtain resources for emergency preparedness. These partners were also the first responders for colleges experiencing emergencies and may include local and state police and fire departments, hospitals, and emergency management offices. Coordinating with partners is a key component of the federal emergency preparedness principles, as outlined in the National Preparedness Goal and NIMS. Most of the officials we spoke with at our selected colleges said they work with partners in their local community, such as police, fire, and emergency management departments or local public health agencies, in preparing for emergencies. For example, one official at a large public university described a mutual aid agreement with its local emergency management department, which allows his school access to the county’s radio communication system in the event of an emergency. The specific nature of local partnerships often varied based on factors such as the size of the college and the surrounding community. For example, we heard from some state, college, and association representatives that some smaller colleges did not have very extensive police or security departments, and therefore, relied heavily on local police departments when emergencies occurred. While coordination often involved planning for how a community could help a college in the event of an emergency, college and emergency preparedness association officials also described instances in which large universities in small towns had more emergency preparedness resources than the town and were therefore the ones offering help. For example, one large university in a part of the country prone to tornadoes offers shelter to town residents and employs emergency response coordinators to help individuals quickly find shelter. Officials also said interpersonal relationships play a big part in deciding to whom they reach out. Most of the college officials with whom we spoke highlighted the importance of their interpersonal relationships with local and/or state law enforcement or emergency management officials and in some cases, attributed these relationships to having previously worked in local or state law enforcement or emergency management. For example, one college official told us that his former role as a local police chief has made it easy to identify and maintain contacts with local police, fire, and emergency medical services and to include them in all campus drills and exercises. College officials also described partnering with state agencies to develop their emergency plan and identify roles in the event of an emergency, adhere to state requirements, or obtain resources (see text box). Officials at about half of the 18 selected colleges described working with state law enforcement entities to, for example, obtain information about emerging threats, or involve state officials in drills and exercises to practice their colleges’ emergency plans. About half of the college officials also described cases in which they were required by state law or regulation to complete certain college-specific emergency preparedness activities, such as developing an emergency operations plan, although officials from a college emergency preparedness association noted that state requirements related to college emergency preparedness vary widely. In addition to describing requirements from state emergency management agencies, officials from several public colleges described emergency preparedness requirements from the head office of their state’s college system. Other officials said that their state did not have any requirements specific to emergency preparedness at colleges. States sometimes also provided resources for colleges’ preparedness efforts. Officials at most of the 18 colleges we contacted said that they received some state written guidance, training, or technical assistance that was either specifically tailored to colleges, or was designed for various entities including colleges. For example, Colorado has an online school safety center that disseminates emergency preparedness resources and offers technical assistance. An official from the Kansas Board of Regents told us the Board’s staff helps to facilitate a new emergency preparedness community of practice led by colleges, and an official from the state’s Division of Emergency Management said they hold general emergency preparedness trainings in which colleges may participate. In addition to supports from local and state government, officials at most of the selected colleges reported that they received support or assistance from college emergency preparedness associations. For example, these associations host conferences and conduct studies on emergency preparedness. Three College Emergency Managers’ Descriptions of Working with Community Partners Informal networks were essential. People who know each other will help each other. I have a friend in the state police department and requested his assistance with security for the evacuation center. The state police provided approximately 10 troopers to assist the campus police officers. Some evacuees brought their pets with them, so the county office of emergency management activated its animal shelter resources and positioned an animal shelter on campus. Someone brought a 4-foot iguana. What do you do with an iguana? The group that was being destructive moved back and forth between campus and the city, so we communicated and coordinated a lot with community partners. We work together on a daily basis, so the communication that night was seamless. We also had a member of the local police department in our emergency management headquarters during the event, which was very helpful. In the days leading up to Hurricane Irma, statewide briefings were held twice a day with a variety of emergency personnel in the room, including local police and fire chiefs, mayors, power companies, communications personnel, and the state emergency management department. Everyone had already discussed how we would work together in the event of an emergency, so the conversation focused on coordinating specific actions. For example, we are a state system of technical colleges with many tractor-trailer drivers on campus. We were asked to deploy those drivers to deliver supplies to various state and FEMA locations around the state. In addition to managing emergencies for the college, I am also the mayor of one of the local towns and those responsibilities dovetail nicely. Responding to emergencies never becomes second nature, but it’s nice to know that when something natural or manmade strikes, there are systems, people, and assets in place. One of the reasons that the system works so well now is because frameworks like NIMS were put in place after Hurricane Katrina. Various sub-agencies within DHS, DOJ, and Education are involved in developing and providing emergency preparedness resources for colleges (see fig. 1). These three agencies use a variety of methods to provide resources, such as written guidance, webinars, and individual technical assistance (see fig. 2). The content of these resources ranges from general emergency management information to guidance specifically tailored to schools (see text box). Agency officials we interviewed said federal agencies have specific areas of expertise as it relates to college emergency preparedness. For example, DHS’ FEMA provides broad emergency preparedness information and tools and DOJ approaches emergency preparedness through a law enforcement and public safety perspective. Education’s role includes the work of its Federal Student Aid office, which approaches emergency preparedness by issuing relevant guidance, providing technical assistance, and enforcing compliance with the Clery Act. Federal officials noted that colleges can have differing needs when it comes to emergency preparedness, based on their size, funding, and current threats. As a result, agency officials said they strive to provide tailored resources when possible. For example, DHS officials said that the Campus Resilience Program is building a website portal that will include a menu of FEMA resources tailored to colleges’ needs, including a downloadable self-assessment of risk and vulnerability. This new program is meant to expand on a similar pilot program that operated from 2013 to 2016; officials expect it to be accessible to schools midway through fiscal year 2018. Education and DOJ officials said that college officials have recently been requesting information and assistance with demonstrations and large events on campus. Specifically, the DOJ-funded National Center for Campus Public Safety (NCCPS) publicized a “For Official Use Only” report on maintaining safety and order on campuses during protests and demonstrations, which was produced by DHS and DOJ. According to NCCPS tracking records, 325 colleges and other parties requested this guidance from January through August 2017. Additionally, agencies have developed resources based on current events, including webinars in response to a series of severe hurricanes in fall 2017. Examples of Federal Resources for Colleges’ Emergency Preparedness Efforts National Incident Management System: The Department of Homeland Security’s (DHS) Federal Emergency Management Agency (FEMA) provides general emergency management resources through its National Incident Management System (NIMS) and Incident Command System (ICS). FEMA officials have also helped produce some college-specific resources within NIMS and ICS, such as a guide for NIMS implementation for colleges, and courses tailored to college officials, including a course titled “Multi-Hazard Emergency Management for Higher Education.” National Center for Campus Public Safety (NCCPS): Funded by the Department of Justice (DOJ), NCCPS maintains a website with a library of resources and training for colleges, and distributes a weekly electronic newsletter to officials who request to be on the distribution list. NCCPS also staffs research associates who answer email requests from college officials. Readiness and Emergency Management for Schools (REMS) Technical Assistance Center: Administered by the Department of Education (Education), the center includes a community of practice, and links to federal resources and training. The REMS Center addresses emergency preparedness for both K-12 schools and colleges; according to officials, the center devotes approximately 20 percent of its resources to emergency preparedness for colleges. 2013 Guide for Developing High-Quality Emergency Operations Plans for Institutions of Higher Education: Developed by Education, DOJ, DHS, and other agencies, this is an overall guide for colleges as they develop their emergency plans. Assistance related to Clery Act components on emergency preparedness: Offices within Education provide guidance (such as the Handbook for Campus Safety and Security Reporting) and assistance with calls to the Campus Safety and Security Help Desk. Examples of Federal Resources for Colleges’ Emergency Preparedness Efforts Campus Resilience Program: As part of this program, the Office of Academic Engagement, within DHS, leads the National Seminar and Tabletop Exercise Series for Institutions of Higher Education, a series of campus-based events where college officials discuss their roles during a simulated emergency situation. DHS officials collaborate with officials from DOJ and other agencies to conduct these events. In 2016, the tabletop exercise focused on responding to campus violence. Campus Liaison Program: Federal Bureau of Investigation (FBI) Campus Liaison Agents, comprised of both Special Agents and Task Force Officers on the Joint Terrorism Task Forces in FBI field offices, provide information, training, exercises, and response capabilities to campus public safety officials. Research and reports on manmade threats: Agencies have published reports on manmade threats applicable to higher education settings, such as the 2010 report “Campus Attacks: Targeted Violence Affecting Institutions of Higher Education,” which was a collaborative among the FBI, Education, and Secret Service. Most of the federal agency officials we interviewed said they were generally aware of resources produced by other federal agencies and reported that collaboration is based on relationships formed through prior collaborative efforts, such as the White House-initiated effort to produce emergency preparedness guidance for colleges in 2013. For example, Education officials described being contacted by their colleagues at other agencies with questions or requests, and DHS and DOJ officials said they frequently cross-promote each other’s resources. Further, various agencies have advisory boards and committees to inform their agency- specific initiatives, such as the DHS Homeland Security Academic Advisory Council, which includes officials from other agencies. However, some agency officials shared potential issues with information sharing. For example, one official said he continues to encounter federal offices that have emergency preparedness resources of which he was unaware, indicating there are continued opportunities for increased collaboration. There is currently no systemic way for federal agencies to share information about resources for college emergency preparedness. Federal officials have established an interagency working group, “Federal Partners in School Emergency Management and Preparedness” that currently focuses on resources for K-12 schools, and Education officials said it plans to expand its focus to include colleges, perhaps by fall 2018. Most federal agency officials we spoke with said having an interagency working group focused on colleges would be useful, for example, to ensure that officials are aware of all available resources across the federal government. Officials from the selected 18 colleges cited mixed levels of awareness regarding federal resources on emergency preparedness developed specifically for them. For example, officials at all 18 colleges said they were aware of FEMA resources focused on general emergency preparedness, such as NIMS. However, we found that college emergency managers were less frequently aware of college-specific resources produced or funded by Education, DOJ, and others. Specifically, college emergency managers at almost half of the selected schools said that they were unaware of each of the following key resources: the 2013 Guide for Developing High-Quality Emergency Operations Plans, the NCCPS website, or Education’s Readiness and Emergency Management for Schools (REMS) Technical Assistance Center website. In addition, the college officials with whom we spoke sometimes requested the federal government develop specific resources without realizing these resources already exist. For example, one college official described wanting resources on how to manage active shooter and weather-related emergencies, although several agencies currently fund or provide such resources. Additionally, another college official who generally accessed federal resources through DHS suggested that the agency develop tailored guidance for colleges beyond NIMS, without realizing that a NIMS guide for colleges exists on Education’s REMS website. Federal officials and representatives from college emergency preparedness associations have also observed gaps in awareness of federal resources among college officials and have acknowledged it as a challenge. For example, one agency official said that every time she goes to a conference, she finds more college officials who have not heard of key federal resources, signaling a continued need for more outreach. A needs assessment funded by DOJ also found that awareness of federal resources may be an issue. Further, NCCPS staff conducted a survey among colleges to assess the level of engagement these schools have with entities such as FBI Campus Liaison Agents, and told us they found about half of colleges—especially private colleges—are unaware of the federal entities included in the survey. This limited awareness among some schools is occurring despite federal agencies’ efforts to disseminate resources and engage with the higher education community. Agencies publicize resources through electronic mailing lists (i.e., listservs), social media, conferences, websites, direct outreach, and college emergency preparedness associations. For example, Education’s Office of Safe and Healthy Students, which publishes its resources on its REMS website, publicizes these resources through social media. DHS publicizes its Campus Resilience Program at conferences. Other agency officials we spoke with said they also use conferences as opportunities to increase school officials’ awareness of federal resources, and they partner with college emergency preparedness associations to publicize their resources. NCCPS includes information on various resources in its weekly e-newsletter. Additionally, following up on the results of the NCCPS survey on colleges’ engagement with FBI Campus Liaison Agents discussed above, NCCPS staff have discussed the results with the FBI Program Manager of the Campus Liaison Program so the FBI can improve engagement with colleges. Officials from colleges, college emergency preparedness associations, and federal agencies we interviewed identified several factors, such as colleges’ staffing resources dedicated to emergency preparedness and the nature of the professional networks used by their emergency managers, that may lead officials to be less familiar with college-specific federal resources on emergency preparedness: Without full-time emergency preparedness staff, colleges, particularly small colleges, must prioritize the most urgent tasks, and thus, officials reported not having enough time to research available federal resources. Representatives from college emergency preparedness associations also said that, in their experience, larger schools were more likely to be aware of federal resources than private and smaller colleges. College emergency managers we spoke with often have backgrounds in local or state emergency preparedness or law enforcement or have networks comprised of local or state officials. These managers often said they learned about federal resources through their more general local and state emergency preparedness networks. As a result, they were more frequently aware of general FEMA resources applicable to these localities versus resources specifically designed for colleges. In particular, college officials we contacted were more likely to report seeking information from DHS than from Education or DOJ. Some college officials may be uninterested in learning about additional resources provided by the federal government, especially if they receive resources from states, localities, or college emergency preparedness associations or potentially in cases where campus leadership does not prioritize emergency preparedness. While agency officials and representatives from college emergency preparedness associations said that federal agencies have made strides in publicizing their resources to a population of college officials that can be challenging to reach, and expressed desire to increase awareness, we identified potential gaps or missed opportunities in their dissemination approaches, including: Agencies commonly publicize new resources through their existing listservs and social media accounts. While these dissemination strategies are effective for alerting colleges already connected to federal agencies, they are less likely to reach additional colleges not already subscribed to these distribution lists. For example, a REMS official reported that the REMS listserv includes approximately 1,000 officials from colleges and related associations. Given that approximately 4,000 colleges were operating in the 2015-2016 school year, according to Education data, most colleges do not receive these electronic communications. In addition, DHS officials told us that one of their college emergency preparedness distribution lists includes representatives from college emergency preparedness associations and state college and university systems, but is not designed to include individual colleges unless they request to be included. Agencies also often publicize their efforts at conferences, but these conferences may miss some colleges, especially some smaller colleges with fewer resources with which to send college officials, according to several agency and college emergency preparedness association officials. As a result, colleges that can afford to send officials to these conferences may already be more informed than colleges not in attendance. In reviewing various federal websites, we found some lists of resources that did not include key federal resources, or included web links that directed visitors to other agencies’ resources that were out of date. For example, one federal website included a list of resources related to emergency planning for colleges, but did not list the NCCPS website among these resources, even though it is a key resource focused on the topic. Another federal website for college emergency preparedness did not include a link to Education’s REMS website, which was specifically developed for school emergency preparedness. Further, this same resource included a link to another Education webpage that was empty of content and had not been updated since 2015. When federal emergency preparedness websites are out of date or incomplete, federal agencies miss opportunities to provide accurate, up-to-date information about their resources and initiatives and those of their partner agencies, and may contribute to colleges’ gaps in awareness about these resources. We heard from several college officials that they would like direct outreach from the federal government. Agencies do not generally distribute information directly to all colleges, especially those not previously signed up for listservs or other distribution services. However, Education has email contact information for the official at every college who reports campus crime statistics to the agency, which may be a natural entry point for federal agencies to disseminate information on emergency preparedness to all colleges. As discussed above, agency officials do not have a systematic method for notifying each other about their resources for colleges. This could limit officials’ ability to cross-publicize each other’s resources; an important activity given that some colleges we contacted only seek information from one agency or website and were unaware of resources from others. According to federal standards for internal control, in communicating information to achieve their objectives, agencies should consider appropriate methods of communication with their external audience (in this case, college emergency managers). Relatedly, these standards also state that agencies should communicate with each other on necessary information for achieving their objectives. Limited awareness of federal resources may result in colleges unnecessarily focusing their limited time and resources on developing strategies or information that federal agencies have already addressed, or advancing preparedness efforts that are not fully informed by federal agencies’ expertise. Emergency preparedness is a vital and challenging task for the higher education community. Various sub-agencies within three key federal agencies—DHS, DOJ, and Education—provide a number of resources for colleges, but over the course of our review, we found that colleges were sometimes unaware of key federal resources that could assist them in meeting their important emergency preparedness needs. The breadth of many colleges’ responsibilities beyond education—such as housing students, running research facilities, and operating hospitals—increases their exposure to risks. Being underprepared in the face of an emergency could dramatically increase both human and economic consequences, not only for the colleges themselves, but also for the larger communities to which they are connected. Emergency preparedness is a shared responsibility and colleges bear some responsibility for learning about federal resources that can assist them in protecting their students and staff. However, striking an appropriate balance between meeting colleges’ main mission—educating students—and other equally important responsibilities, such as emergency preparedness, can be difficult, especially given resource constraints. While federal agencies also face resource constraints, supporting the safety of college community members is an important part of the missions of DHS, DOJ, and Education. These agencies have developed a variety of resources intended to support colleges in their emergency preparedness efforts, but colleges are not always aware of these resources. This problem is exacerbated by federal agencies’ choice of dissemination methods, which could miss a large portion of college emergency managers, and because federal agencies have missed opportunities to cross-promote each other’s resources. Unless federal agencies address these issues, they will continue to miss opportunities to more effectively communicate important information to colleges, particularly those that may be harder to reach, such as smaller schools. The planned interagency working group on emergency preparedness for colleges may offer an opportunity to systematically explore areas in which communication and connection between colleges and federal agencies can be improved, while leveraging and improving existing agency relationships. We are making a total of three recommendations—one to each of the three agencies in our review—to improve awareness of federal resources for emergency preparedness among colleges. Specifically: The Secretary of Education, in collaboration with other agencies through the planned interagency working group or another mechanism, should identify further opportunities to more effectively publicize resources to reach additional colleges. (Recommendation 1) The Secretary of Homeland Security, in collaboration with other agencies, through the planned interagency working group or another mechanism, should identify further opportunities to more effectively publicize resources to reach additional colleges. (Recommendation 2) The Attorney General, in collaboration with other agencies through the planned interagency working group or another mechanism, should identify further opportunities to more effectively publicize resources to reach additional colleges. (Recommendation 3) We provided a draft of this report to Education, DHS, and DOJ for each agency’s review and comment. All three agencies agreed with our recommendations or described steps they would take to implement them. Education’s written comments are reproduced in appendix I and DHS’ written comments are reproduced in appendix II. DOJ did not provide written comments. DHS and DOJ provided technical comments. We incorporated changes based on their comments into the report, as appropriate. Education stated that the agency is always interested in increasing utilization by colleges of the emergency management resources that the Department and other federal agencies develop. It also stated that the planned interagency working group would be a very appropriate and effective vehicle for increasing utilization of these resources, and that it will consider that group or other mechanisms to identify further opportunities to publicize resources to colleges. DHS concurred with our recommendation to the agency and said that it would continue to collaborate with its partners to further publicize resources available to colleges. It also highlighted several of the Department’s current and planned resources for its related Campus Resilience Program. DOJ did not provide written comments, but stated that it agreed with our recommendation to the agency. Officials stated that they would outline steps for addressing the recommendation in future communications. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Attorney General of the United States, the Secretary of Education, and the Secretary of Homeland Security. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in Appendix III. In addition to the individual named above, Janet Mascia (Assistant Director), Barbara Steel-Lowney (Analyst-in-Charge), Shilpa Grover, and Vernette Shaw made key contributions to this report. Also contributing to this report were: Susan Aschoff, Rachael Chamberlin, Jessica Moscovitch, Jessica Orr, Mimi Nguyen, Deborah Bland, Benjamin Sinoff, Sheila McCoy, Jean McSween, Lori Rectanus, and Sarah Veale.", "summary": "Colleges and other postsecondary schools must plan for various potential emergencies, ranging from natural disasters to violence. A number of federal agencies, including DHS, DOJ, and Education, offer resources to support these efforts. GAO was asked to review colleges' awareness of these resources. This report examines how (1) selected colleges prepare for emergencies, and (2) federal agencies support college emergency preparedness efforts, including the extent to which selected colleges reported awareness of federal resources. To answer these questions, GAO interviewed officials from a non-generalizable sample of 18 colleges selected for diversity in size, type, and location. GAO also interviewed officials from three states (Colorado, Kansas, and Virginia) in which some of these schools operated. The states were selected to represent varied approaches to supporting colleges' emergency preparedness efforts. GAO also reviewed federal emergency preparedness resources, agency written responses, applicable federal laws, and federal internal control standards, and interviewed federal officials and representatives from several associations recommended by agency officials. Emergency managers at 18 colleges across the country told GAO that their efforts to prepare for emergencies involved working with the campus community to develop, communicate, and practice plans, as well as working with state and local partners. Campus community members who are involved often include personnel from offices such as public safety, student affairs, or facilities. Officials at all 18 colleges reported developing emergency plans addressing a range of potential events—an approach consistent with federal emergency management principles. To publicize plans, officials often reported using websites, text messages, or presentations to the campus community. Colleges also reported practicing plans through drills. College officials noted that buy-in from the college president and other top campus leaders was critical to their efforts; several officials reported struggling to obtain such support. Most officials also said they coordinate with local or state partners such as police and relied on these partners for advice or to obtain emergency preparedness resources. The Departments of Homeland Security (DHS), Justice (DOJ), and Education (Education) offer a variety of emergency preparedness resources to colleges (see figure). However, officials GAO interviewed at 18 colleges described mixed awareness of federal resources, especially those specifically tailored to colleges, despite federal efforts to publicize these resources in a variety of ways. Federal officials and other stakeholders acknowledged this mixed awareness and identified potential causes, such as college emergency managers having networks comprised of local officials who are more likely to know about federal resources for local agencies versus those for colleges, or some college officials devoting limited time to researching federal resources for various reasons. DHS, DOJ, and Education all publicize their resources through electronic mailing lists, websites, or other methods, but GAO identified missed opportunities in their dissemination approaches. For example, the electronic mailing list for one key resource may reach the approximately 1,000 officials from colleges subscribed, but may miss at least 3,000 additional schools. GAO also found two federal agency websites that did not include key resources from other federal agencies. Federal internal control standards state that agencies should consider the most appropriate methods for communicating with their external audiences. By identifying opportunities to improve dissemination, federal agencies may increase their ability to effectively communicate important information to colleges. GAO recommends that DHS, DOJ, and Education work together to identify opportunities to more effectively publicize emergency preparedness resources to colleges. All three agencies concurred with the recommendations or described actions to implement them.", "document_type": "gao"}
{"report": "A consumer reporting agency is a person or entity that assembles or evaluates consumer credit information or other consumer information for the purpose of furnishing consumer reports to others. This includes companies that compile and store electronic files of consumer information, which they then sell to other businesses and organizations that use the information to assess or evaluate creditworthiness. Furnishing of information by creditors and others to CRAs is voluntary, as federal law generally does not require such reporting, and information compiled on individual consumers can vary among the CRAs. A lender uses the information provided to determine whether to offer credit to an individual, the rate of interest to be assigned to the loan, and other terms of the contract. In addition, a growing number of entities use information provided by CRAs to help make decisions about individuals’ credit worthiness when determining eligibility for insurance, housing, or employment, among other things. Information from CRAs can also be used for other purposes, such as to identify potential customers with specific characteristics for new credit card accounts. CRAs may provide a variety of verification services to government and private sector organizations. For example, Equifax provides income and employment verification services using information collected from employers. Equifax, TransUnion, and Experian—the three major CRAs—also leverage information they collect from organizations, such as financial institutions, utilities, cell phone service providers, public records, and government sources, to offer identity verification services. Other entities, including federal agencies, use identity verification when they enroll new applicants for benefits and services. In addition, the IRS uses identity verification to ensure that individuals who want to access prior year tax returns are the legitimate filers of those returns. With regard to identity verification, CRAs typically use information they collect to generate questions that federal agencies and other entities can use to test applicants’ knowledge of information in their credit file. These questions and answers are typically the basis for identity proofing—the process of comparing evidence from an individual with a trusted source of data to verify that the individual is who they claim to be. The evidence generally consists of information or documentation that only the legitimate individual should know or have access to. For example, a driver’s license, passport, knowledge of recent financial transactions, and biometric information are all considered relatively strong evidence that the individual is who they say they are. Although there is no commonly agreed-upon definition, the term “data breach” generally refers to an unauthorized or unintentional exposure, disclosure, or loss of an organization’s sensitive information. This information can include PII, such as Social Security numbers, or financial information, such as credit card numbers. A data breach can occur under many circumstances and for many reasons. It can be inadvertent, such as from the loss of an electronic device, or deliberate, such as from the theft of a device. A breach can also occur as a result of a cyber-based attack by a malicious individual or group, agency insiders, foreign nation, terrorist, or other adversary. Data breaches have occurred at all types of organizations, including private, nonprofit, and federal and state entities. The loss or unauthorized disclosure of information in a data breach can lead to serious consequences and can result in substantial harm to individuals, private sector organizations, and the federal government. Examples of harmful results include: loss or theft of resources, including money and intellectual property, and identity theft; inappropriate access to and disclosure, modification, or destruction of sensitive information; harm to national security; use of computer services for unauthorized purposes or to launch an attack on other computer systems; damage to networks and equipment; loss of privacy, emotional distress, or reputational harm; loss of public confidence; and high costs to remediate the effects of the breach. Cyber criminals seeking access to sensitive information, such as PII, typically use a variety of readily available software tools to carry out attacks. These tools can be used to intercept and capture data as they are transmitted, exploit known vulnerabilities in commercially available software, and facilitate e-mail phishing techniques for gaining unauthorized access to systems and information. Attackers often use similar techniques and tools, making it difficult to distinguish one attacker from another. When custom-built tools are used, an attacker may rely on unique methods or display other telltale signs that can be used for identification; such tools are usually used when a target’s defenses justify them. Off-the-shelf tools are usually enough to conduct a successful attack that allows an attacker to steal data, bring systems down, or gain further access to systems and resources. Attackers often begin with network-scanning programs, which are used to map the layout of a targeted network and determine the location of data repositories that may contain information of interest. Some scanners are designed to scan only a single networked computer, extracting as much data about that system as possible. Others can scan Internet addresses across the web to identify potential targets by determining whether they are using a version of software that is vulnerable to an attack. Once a target has been identified, the attacker will generally attempt to gain access to the system or network without leaving any indication of who they are or from where they launched their attack. This is commonly accomplished using tools that mask the attacker’s origin by using the Internet address of another computer from another location. While an investigator can sometimes use forensic tools to trace the original Internet address, often this leads to misleading information. Attackers use additional tools and techniques to gain unauthorized access to systems and data on the target network and to transfer stolen data back to the attacker’s own computer system. One such technique is to leverage the access rights gained on the originally compromised system to get further access into other servers on the network. To do this, an attacker can use standard, off-the-shelf tools for navigating systems and managing information that blend in with normal network activity. For example, encryption can be used to hide the transfer of sensitive information from one server to another or out of the network entirely. This enables the attacker to continue probing for more repositories of information and stealing copies of that information without being detected by the targeted network’s system administrators. CRAs have been subject to federal regulation since the passage of the Fair Credit Reporting Act in 1970. Currently, FTC and BCFP are the two federal agencies with primary oversight responsibilities for CRAs. FTC was given responsibility for administratively enforcing CRAs’ compliance with the Fair Credit Reporting Act at the time of enactment. As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act), BCFP was given authority to enforce a number of federal consumer financial laws, including the Fair Credit Reporting Act. BCFP also has begun exercising supervisory authority over certain larger participants in the credit reporting market. FTC has authority, subject to certain exceptions, to investigate any organization that maintains consumer data and to bring enforcement actions for violations of laws that concern the protection of consumer information. FTC also exercises enforcement authority over CRAs through the Gramm-Leach-Bliley Act and the related “Safeguards” and “Privacy Rules.” The Fair Credit Reporting Act promotes the accuracy, fairness, and privacy of information collected or used to help make decisions about individuals’ eligibility for credit, insurance, employment, housing, or other benefits. CRAs that compile credit histories and other personal information into consumer reports must adhere to the act’s provisions for ensuring the accuracy and permissible uses of such information. The Gramm-Leach-Bliley Act requires that federal financial regulators and FTC establish standards and protections to ensure the security and confidentiality of customer information. These standards and protections must be implemented by companies of all sizes that are engaged in financial activities, including Equifax and all other CRAs. Further, the act requires financial institutions to protect the security of customers’ personal information. As part of its implementation of the Gramm-Leach-Bliley Act, FTC issued the “Safeguards Rule”, which requires financial institutions develop, implement, and maintain a comprehensive information security program to keep information about a customer of a financial institution secure and confidential. In addition to developing their own safeguards, companies covered by the rule are responsible for requiring their affiliates and service providers to implement and maintain safeguards to protect customer information in their care. In determining whether it should take enforcement action against a company for a violation of data security provisions, FTC considers a number of factors, including whether a company’s data security measures are commensurate with the company’s size. FTC does not have supervisory authority to examine CRAs for compliance with the Federal Trade Commission Act; therefore, the agency typically must rely on its enforcement authority after an incident has occurred. Finally, FTC enforces Section 5 of the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” FTC officials told us that failing to properly protect consumer data can be considered an unfair or deceptive act or practice. In 2010, the Dodd-Frank Act gave BCFP enforcement authority over all CRAs and certain other persons for violations of most provisions of the Fair Credit Reporting Act; certain provisions of the Gramm-Leach-Bliley Act; and for unfair, deceptive, or abusive acts or practices under sections 1031 and 1036 of the Dodd-Frank Act. BCFP has taken enforcement actions against CRAs for violations of the Fair Credit Reporting Act and for deceptive practices. In 2012, BCFP also extended its supervisory authority to include larger CRAs—that is, those with more than $7 million in annual receipts from consumer reporting activities. BCFP staff review certain of these larger CRAs on an ongoing basis, and BCFP staff said that their recent examinations of CRAs have focused on compliance with Fair Credit Reporting Act requirements related to accuracy and resolving consumer disputes. BCFP has also examined CRAs subject to the BCFP’s supervisory authority for compliance with other Fair Credit Reporting Act requirements, including those related to ensuring the accuracy of information in consumer reports, furnishing information only to those with a permissible purpose, and compliance with the consumer dispute process. BCFP also has supervisory authority over some aspects of the Gramm- Leach-Bliley Act. For example, BCFP examines larger CRAs for whether they restrict the sharing and disclosure of nonpublic personal information to third parties. BCFP does not have supervisory or enforcement authority over the “Safeguards Rule” enacted by FTC as part of the agency’s implementation of the Gramm-Leach-Bliley Act. Finally, BCFP has authority to examine larger CRAs for any unfair, deceptive, or abusive acts or practices and to bring enforcement actions against CRAs of all sizes for such acts or practices. According to BCFP staff, in some cases, a CRA could commit an unfair, deceptive, or abusive act or practice or violation of other applicable law in connection with its data security practices. We have previously made recommendations to agencies regarding the protection of PII, and proposed Matters for Congressional Consideration in areas where laws could be enhanced. For example, in our recent report on data oversight at the Centers for Medicare and Medicaid Services (CMS), we recommended that the agency ensure that all third parties that receive CMS data have clear requirements for the protection of that data, that CMS properly oversee the implementation of those requirements, and that the agency ensure identified issues are remediated. Additionally, our recent report on the oversight of students’ PII at the Department of Education included seven recommendations for better protection of student PII and for improving department policies to meet federal privacy guidelines. All of these recommendations currently remain open while the agencies take actions to address them. In addition to recommendations for agencies, we have proposed two Matters for Congressional Consideration related to data protection. In 2008, we reported that the Privacy Act and E-Government Act of 2002 may not adequately ensure that consumers are notified in the event of a breach by federal agencies and that existing laws could better ensure that consumers are aware of what PII federal agencies collect and how they use it. Based on this finding, we suggested that Congress consider amending applicable laws to ensure that all PII collected by federal agencies is protected and that its use is limited to the stated purpose of the collection. With regard to data collected by private entities, in 2013, we reported that existing federal laws provide consumers with only limited protection for data that is collected and used for marketing purposes. Consequently, we asked Congress to consider strengthening the current consumer privacy framework to reflect the effects of changes in technology and the marketplace while also ensuring that any limitations on data collection and sharing do not unduly inhibit the economic and other benefits to industry and consumers that data sharing can accord. In March 2017, unidentified individuals discovered the presence of a known vulnerability in software running on Equifax’s online dispute portal that could be used to obtain access to the system. In May of that year, attackers exploited the vulnerability and began to extract data containing PII from Equifax’s information systems. According to Equifax, the attackers used a number of techniques to disguise their exploit of the Equifax systems and the database queries they conducted. On July 29, 2017, Equifax discovered the breach and reported that it took actions to address the factors that allowed the attackers to successfully gain access to its network. Further, the company reported that it took steps to identify, notify, and provide support to individuals who were potentially impacted by the breach. Equifax has stated that, on March 10, 2017, unidentified individuals scanned the company’s systems to determine if the systems were susceptible to a specific vulnerability that the United States Computer Emergency Readiness Team had publicly identified just 2 days earlier. The vulnerability involved the Apache Struts Web Framework and would allow an attacker to execute commands on affected systems. Equifax officials stated that, as a result of this scanning, the unidentified individuals discovered a server housing Equifax’s online dispute portal that was running a version of the software that contained the vulnerability. Using software they obtained from an unknown source and that was designed to exploit the vulnerability, the unidentified individuals subsequently gained unauthorized access to the Equifax portal and confirmed that they could run commands. No data was taken at this time. According to Equifax officials, beginning on May 13, 2017, in a separate incident following the initial unauthorized access, attackers gained access to the online dispute portal and used a number of techniques to disguise their activity. For example, the attackers leveraged existing encrypted communication channels connected to the online dispute portal to send queries and commands to other systems and to retrieve the PII residing on the systems. The use of encryption allowed the attackers to blend in their malicious actions with regular activity on the Equifax network and, thus, secretly maintain a presence on that network as they launched further attacks without being detected by Equifax’s scanning software. Equifax officials added that, after gaining the ability to issue system-level commands on the online dispute portal that was originally compromised, the attackers issued queries to other databases to search for sensitive data. This search led to a data repository containing PII, as well as unencrypted usernames and passwords that could provide the attackers access to several other Equifax databases. According to Equifax’s interim Chief Security Officer, the attackers were able to leverage these credentials to expand their access beyond the 3 databases associated with the online dispute portal, to include an additional 48 unrelated databases. After reviewing system log files that recorded the attackers’ actions, Equifax officials determined that the attackers then ran a series of queries in an effort to try to extract PII from the databases they had located. Altogether, the attackers ran approximately 9,000 queries, a portion of which successfully returned data containing PII. As before, Equifax officials stated that the attackers were able to disguise their presence by blending in with regular activity on the network. After successfully extracting PII from Equifax databases, the attackers removed the data in small increments, using standard encrypted web protocols to disguise the exchanges as normal network traffic. The attack lasted for about 76 days before it was discovered. Figure 1 depicts an analysis of how the attackers gained access into Equifax’s systems and exploited vulnerabilities. Equifax’s assessment of the data breach began with actions it took to identify that it was being attacked as well as subsequent actions to block the intrusion. Equifax officials stated that, on July 29, 2017— approximately 2.5 months after the attackers began extracting sensitive information on May 13, 2017—security personnel conducting routine checks of the operating status and configuration of IT systems detected the intrusion on the online dispute portal. As reported by Equifax, a network administrator conducting routine checks of the operating status and configuration of IT systems discovered that a misconfigured piece of equipment allowed attackers to communicate with compromised servers and steal data without detection. Specifically, while Equifax had installed a device to inspect network traffic for evidence of malicious activity, a misconfiguration allowed encrypted traffic to pass through the network without being inspected. According to Equifax officials, the misconfiguration was due to an expired digital certificate. The certificate had expired about 10 months before the breach occurred, meaning that encrypted traffic was not being inspected throughout that period. As a result, during that period, the attacker was able to run commands and remove stolen data over an encrypted connection without detection. Equifax officials stated that, after the misconfiguration was corrected by updating the expired digital certificate and the inspection of network traffic had restarted, the administrator recognized signs of an intrusion, such as system commands being executed in ways that were not part of normal operations. Equifax then blocked several Internet addresses from which the requests were being executed to try to stop the attack. Equifax reported that, on July 30, 2017, after its information security department observed additional suspicious activity continuing to occur, the online dispute portal was taken offline. The next day, the Chief Security Officer, in coordination with internal stakeholders, informed the Chief Executive Officer of the attack on the portal. To further assess the scope of the breach and identify its causes, Equifax began an investigation to identify the vulnerabilities that had been exploited to steal PII from its systems. Concurrent with this effort, company officials stated that they also began examining the data repositories that had been accessed to try to determine how much data had been taken and how many individuals were potentially impacted. According to Equifax officials, the investigation took place between August 2 and October 2, 2017, with the help of an external cybersecurity consultant. Equifax officials stated that the company’s investigation was facilitated by the use of electronic logs that had not been damaged or erased by the attackers on the affected systems. These logs recorded commands that were issued by the attackers throughout the attack, such as commands to retrieve or display the contents of data repositories. By examining the logs, Equifax worked to reconstruct the sequence of specific actions that the attackers had taken and, consequently, determine what specific data had been compromised. In addition to initiating its internal investigation, on August 2, 2017, the company notified the Federal Bureau of Investigation of the breach. Based on its cybersecurity consultant’s analysis and recommendations following the breach, Equifax determined that several major factors had facilitated the attackers’ ability to successfully gain access to its network and extract information from databases containing PII. Specifically, Equifax officials told us that key factors that led to the breach were in the areas of identification, detection, segmentation, and data governance: Identification. According to Equifax officials, the Apache Struts vulnerability was not properly identified as being present on the online dispute portal when patches for the vulnerability were being installed throughout the company. After receiving a notice of the vulnerability from the United States Computer Emergency Readiness Team in March 2017, Equifax officials stated that they circulated the notice among their systems administrators. However, the recipient list for the notice was out-of-date and, as a result, the notice was not received by the individuals who would have been responsible for installing the necessary patch. In addition, Equifax officials stated that although the company scanned the network a week after the Apache Struts vulnerability was identified, the scan did not detect the vulnerability on the online dispute portal. Detection. As reported by Equifax officials, an expired digital certificate contributed to the attackers’ ability to communicate with compromised servers and steal data without detection. Specifically, while Equifax had installed a tool to inspect network traffic for evidence of malicious activity, the expired certificate prevented that tool from performing its intended function of detecting malicious traffic. The certificate had expired before May 2017, meaning that traffic was not being inspected throughout the breach. Segmentation. Because individual databases were not isolated or “segmented” from each other, the attackers were able to access additional databases beyond the ones related to the online dispute portal, according to Equifax officials. The lack of segmentation allowed the attackers to gain access to additional databases containing PII, and, in addition to an expired certificate, allowed the attackers to successfully remove large amounts of PII without triggering an alarm. Data Governance. Data governance includes setting limits on access to sensitive information, including credentials such as usernames and passwords. According to Equifax officials, the attackers gained access to a database that contained unencrypted credentials for accessing additional databases, such as usernames and passwords. This enabled the intruders to run queries on those additional databases. In addition to these four broad categories, Equifax officials noted one other factor that also facilitated the breach. Specifically, the lack of restrictions on the frequency of database queries allowed the attackers to execute approximately 9,000 such queries—many more than would be needed for normal operations. According to Equifax’s public filings, including its annual 10-K filing submitted to the Securities and Exchange Commission in March 2018 and its notice of 2018 annual meeting and proxy statement, following the 2017 incident, Equifax undertook a variety of remediation efforts to address the factors identified in their investigation. Equifax officials responsible for coordinating the response to the incident stated that, once the company identified how the attackers were able to gain unauthorized access to company systems and remove sensitive data, it took measures to address the internal factors that led to the breach. The measures were intended to better protect the company’s infrastructure from future disruptions, compromises, or failures. We did not independently assess Equifax’s efforts to address the identified factors. Specifically, Equifax officials stated that system-level remediation measures were implemented to address the factors that led to the breach. For example, to work toward addressing concerns about identifying vulnerable servers, Equifax reportedly is implementing a new management process to identify and patch software vulnerabilities and confirm that vulnerabilities have been addressed. Also, to help ensure that detection of malicious activity is not hindered in the future, Equifax officials said they have developed new policies to protect data and applications and implemented new tools for continuous monitoring of network traffic. Further, in an effort to improve segmentation between devices that do not need to communicate, Equifax officials stated that they have implemented additional controls to monitor communications at the external boundary of the company’s networks and added restrictions on traffic between internal servers. Finally, to help address data governance issues, the officials said they were implementing a new security controls framework and tighter controls for accessing specific systems, applications, and networks. In addition to these measures, Equifax stated that they implemented a new endpoint security tool to detect misconfigurations, evaluate potential indications of compromise, and automatically notify system administrators of identified vulnerabilities. Further, Equifax officials reported that the company has implemented a new governance structure to regularly communicate risk awareness to Equifax’s board of directors and senior management. The new structure requires the company’s Chief Information Security Officer to report directly to the Chief Executive Officer. Officials said this should allow for greater visibility of cybersecurity risks at top management levels. Following the shutdown of its online dispute portal, Equifax took steps to identify what data had been lost and the number of individuals affected so that it could fulfill its responsibility to notify affected individuals. To develop its estimate of the number of individuals affected by the data breach, Equifax stated that it recreated the attackers’ database queries on a separate system that could run the queries at high speed, allowing Equifax to generate its estimate in a relatively short period of time. Equifax staff then worked to reconstruct queries against the data tables to identify which queries had successfully extracted data and which individuals were associated with that data. However, as is commonly experienced with large breaches, Equifax faced challenges in determining exactly how many individuals were affected. According to Equifax officials, much of the stolen data consisted of incomplete records without full sets of identifying information. Some data sets included information that could be matched to more than one known individual. Subsequently, Equifax officials stated that they compared these data sets with information in the company’s internal databases that were not impacted by the data breach to make matches with known identities. For example, Equifax took partial records that did not include all fields and ran an analysis to determine whether Social Security numbers and names included in the records could be matched with those in Equifax’s core credit reporting databases. In addition, Equifax performed analyses to remove duplicates and to determine whether a person could be linked to incomplete records based on Social Security numbers. After Equifax completed its initial analysis of the datasets, it estimated that approximately 143 million U.S. consumers had been affected by the breach. Moreover, Equifax’s initial analysis, reported on September 7, 2017, indicated that multiple types of PII had been compromised, including individuals’ names, Social Security numbers, birth dates, addresses, and driver’s license numbers. Because many of the records were incomplete, not all of the types of PII had been compromised for all affected individuals. In addition, Equifax determined that credit card numbers for approximately 209,000 consumers and certain dispute documents, which had included PII for approximately 182,000 consumers, had been accessed. These documents contained PII associated with specific items from dispute cases that were submitted to Equifax as evidence supporting disputes they filed about the accuracy of their credit reports, such as utility bills. Equifax made two revisions over time to its estimate of affected individuals. First, in late September 2017, Equifax determined that it had incorrectly concluded that one of the attackers’ queries had not returned any data. After additional analysis, including a determination that the query had, in fact, allowed the attackers to access PII from approximately 2.5 million additional U.S. consumers, Equifax revised the number of affected individuals from 143 million to 145.5 million on October 2, 2017. Second, on March 1, 2018, Equifax stated that it had identified approximately 2.4 million U.S. consumers whose names and partial driver’s license information were stolen. The newly identified individuals were based on names and partial driver’s license information contained in a data table that Equifax had not previously identified as including individuals compromised in the breach. According to Equifax officials, Equifax’s original investigation had not identified these individuals because their names and partial driver’s license information were not stolen together with their Social Security numbers. To identify as many potentially affected individuals as possible, Equifax contracted with a third-party data source that had access to a driver’s license database and mapped the partial driver’s licenses to an Equifax database containing Social Security numbers. According to Equifax officials, some of the individuals within this group of 2.4 million were already included in the previous total of 145.5 million affected individuals, while others were not. As of August 2018, Equifax had not determined exactly how many of the 2.4 million individuals were included in the previous total of 145.5 million. On September 7, 2017, after Equifax had determined the extent of the breach and developed a remediation plan for potentially impacted consumers, the company provided written notification to all U.S. state attorneys general regarding the approximate number of potentially affected residents in each state and its plans for consumer remediation. The notification included steps individuals could take to determine if they were affected by the breach and to help protect against misuse of their personal information. The company also issued a press release to the public providing information about the breach and the types of PII that had been compromised. Further, the press release issued on September 7, 2017, stated that the company had set up a dedicated website to help individuals determine if their information might have been stolen in the breach. In addition, Equifax improved the search tool it had developed to help U.S. consumers determine if they were impacted and expanded its call center operations. However, the website experienced several technical issues, including excessive downtime and inaccurate data. Equifax officials acknowledged these shortcomings and said they took measures to address them, including improving the stability of the website and accuracy of the information it provided. Additionally, Equifax reported that it would provide several services to all U.S. consumers, regardless of whether their information had been compromised, free of charge for one year. Those services included credit monitoring, individual copies of Equifax credit reports, notification of changes to credit reports, a credit “lock” allowing individuals to prevent third-parties from accessing their Equifax credit report, identity theft insurance covering certain expenses related to the process of recovering from identity theft, and a Social Security number monitoring service that would scan suspicious websites for an individual’s Social Security number. These services were offered to consumers from September 7, 2017, until January 31, 2018, when Equifax announced a new service called “Lock & Alert.” This new service allows consumers to use their smartphone or computer to lock and unlock their Equifax credit report. Equifax announced that it was making this service available to all consumers at no cost. After Equifax announced the data breach, federal customer agencies took a variety of actions based on their responsibilities and how the breach affected their operations. Specifically, the agencies that were customers of the company’s services conducted independent assessments of the company’s security controls, revised their own identity proofing processes, and made changes to their contracts with Equifax, among other activities. Equifax did not ask the Department of Homeland Security (DHS), which is the central agency that responds to cyber incidents across the federal government, to assist in responding to the breach. Nevertheless, the department took the step of reminding federal agencies of the importance of correcting the software vulnerability that led to the breach. In addition, the oversight agencies, BCFP and FTC, began taking actions to investigate the breach and inform the public. IRS, SSA, and USPS—large agencies that were major customers of Equifax at the time of the breach—assessed the potential impact of the breach to their own operations as well as to the operations of their consumers. For example, these agencies assessed the technical impact of the breach on their own systems that rely on Equifax services to determine whether the breach could have compromised the integrity of their identity proofing processes. While there was no breach of agency systems or information, they also sought to determine which of their customers were directly affected by the breach, recognizing that those individuals could be at heightened risk of identity fraud. Information security officials we spoke to at IRS, SSA, USPS, and DHS expressed concern about how the breached data could be used to compromise sensitive information or fraudulently procure government services, even from agencies that are not direct customers of Equifax. Representatives of IRS, SSA, and USPS noted that they responded to the breach independently of other agencies, because they said it was unclear whether any single federal agency had responsibility for coordinating government actions in response to a breach of this type in the private sector. According to the three agencies, their actions included the following: Identified affected individuals. Due to concerns about the potential for fraud using the stolen data, IRS and SSA both obtained from Equifax a list of the individuals affected by the Equifax breach. The agencies then used these lists to identify which of their own customers were affected and to look for potential instances of identity fraud affecting those customers. Performed independent assessments of Equifax security controls. According to information security officials at IRS, SSA, and USPS, the agencies independently conducted site visits at Equifax’s data center in Alpharetta, Georgia, where they reviewed the company’s security controls. According to SSA officials, their agency’s review assessed compliance with the baseline set of controls required by the National Institute of Standards and Technology for systems determined to pose a moderate level of risk. SSA officials stated that they shared the results of their assessment with IRS, the Office of Management and Budget, House Ways and Means Social Security Subcommittee, and the Senate Committee on Finance. USPS officials said they reviewed both physical security and cybersecurity controls at Equifax’s data centers in Alpharetta, Georgia and St. Louis, Missouri locations. IRS officials said they also conducted a security assessment at Equifax’s Alpharetta data center, as well as a separate review of physical security and cybersecurity controls at the company’s St. Louis, Missouri site. The officials of all three agencies said that their reviews did not uncover any major new problems, but did identify a number of lower-level technical concerns that they required Equifax to address. Modified contracts with Equifax. IRS and SSA made changes to contracts they had with Equifax to require prompt notification of any future breach, among other things. According to officials from both agencies, Equifax did not directly notify major federal customers of the 2017 breach prior to its public announcement because its contracts with these agencies required notification only of breaches directly involving the systems that provided services to the federal government. SSA officials stated that it was important to update the agency’s contract to require Equifax to promptly notify SSA of any data breach, regardless of which of the company’s systems it may affect. IRS officials stated that a similar change was made to their contract with Equifax for credit reporting services. The contract change also required the company to notify IRS within one hour after a breach is discovered, rather than within the previous time frame of 24 hours. In addition, according to the officials, cybersecurity language in the IRS’s contract was modified to ensure better implementation and oversight of technical security controls. Communicated with the public and affected individuals. IRS made public announcements about the impact of the breach, noting that the agency did not expect the breach to have any impact on taxpayers’ ability to securely file tax returns. SSA issued a public blog post reminding consumers about steps they could take to protect their Social Security numbers. Made changes to agency identity-proofing procedures. Following its assessment, IRS updated its internal cybersecurity contractor requirements and controls related to incident handling. Further, upon completing its assessment, USPS initiated discussions with the National Institute of Standards and Technology to determine risks associated with the knowledge-based verification questions it had been using with Equifax’s identity-proofing service. USPS subsequently changed its process, removing certain knowledge- based verification questions and adding a procedure whereby customers receive a code in the mail that they can use to verify their mailing addresses. Canceled a short-term contract with Equifax. Before the Equifax breach, Equifax was the incumbent contractor at IRS for taxpayer identity and verification services. In June 2017, prior to the discovery of the breach, IRS began a new acquisition for these services by issuing a request for quotations to three CRA vendors (including Equifax and Experian) holding contracts under the federal supply schedule. IRS selected Experian as offering the lowest-priced, technically acceptable quotation, for issuance of a fixed-price task order and establishment of a blanket purchase agreement. Equifax filed a bid protest on July 5, 2017 with GAO challenging the IRS’s evaluation of Experian’s quotation. As described elsewhere in this report, Equifax discovered the breach on July 29 and, after investigating it, announced the breach on September 7. On September 29, during GAO’s consideration of the protest, IRS awarded Equifax a short-term, sole-source contract for $7.25 million to cover its need for the identity and verification services during the time frame needed to resolve the protest. IRS considered these services “critical” that “cannot lapse.” However, following the completion of its breach-related security assessments, IRS issued Equifax a stop-work order to suspend its performance under the short- term, sole-source order. GAO denied Equifax’s protest on October 16, 2017 and IRS proceeded with the task order issued to Experian for the taxpayer identity and verification services. In its role as the center for federal information security incident prevention and response, DHS offers services to assist federal agencies in preparing for potential cyber incidents, maintaining awareness of the current threat environment, and dealing with ongoing breaches. Under a Presidential directive, DHS is also responsible for assisting public- and private- sector critical infrastructure owners and operators in preparing for, preventing, protecting against, mitigating, responding to, and recovering from a cyber incident. In September 2017, shortly after the Equifax breach was publicly announced, DHS contacted the company to offer its professional services related to forensic analysis and breach response. However, according to officials at both organizations, Equifax notified DHS officials that the company had already retained professional services from a private cybersecurity consultant and, thus, declined assistance from DHS. According to Equifax officials, the company informed regulators about the data breach on September 7, 2017—when the general public was notified. FTC announced that it was investigating the Equifax breach, and Equifax stated in its annual report that several governmental agencies, including FTC and BCFP, were continuing to investigate events related to the breach. BCFP staff told us that, immediately following notification of the breach, they participated in conference calls with Equifax to learn more about the breach. According to the officials, their calls with Equifax focused on ensuring consumers were provided with accurate information about the breach and what they could do to protect themselves. Equifax officials told us that they also informed FTC, the Securities and Exchange Commission, various states’ attorneys’ general, and the Financial Services Information Sharing and Analysis Center, that it had suffered a breach. Shortly after Equifax’s public announcement of the breach, BCFP released a blog post on the top 10 ways that consumers could protect themselves in the wake of the breach. Suggestions included regularly reviewing credit reports, checking credit card statements, and changing passwords for all financial accounts. In addition, BCFP posted on its website actions consumers could take to protect themselves against fraud or identity theft, including freezing credit and placing fraud alerts. BCFP staff told us that, while the agency posts information to its website, it does not provide individual legal assistance to consumers. Nevertheless, the staff said that consumers can file a complaint with BCFP if they are experiencing issues related to a CRA. BCFP staff added that they received a large volume of consumer complaints following the Equifax breach. BCFP staff said they use such complaints as one factor to prioritize future supervisory examinations, as well as investigations and enforcement actions. In October 2017, BCFP also began conducting targeted data security and cybersecurity examinations. Specifically, in addition to assessing whether the CRAs’ data security practices and policies constitute violations of federal consumer financial law, BCFP began assessing risks to consumers posed by potential cybersecurity lapses and to markets for consumer financial products and services. BCFP staff said that whether BCFP continues to conduct CRA cybersecurity examinations will depend on whether they identify the issue as a priority through future examination prioritization processes. Similarly, FTC released a statement to consumers with information about the breach, such as when it occurred and the types of data compromised. The statement also included guidance on steps consumers could take to help protect their information from being misused. For example, FTC encouraged individuals to visit Equifax’s website to find out whether their information may have been exposed, provided links to obtain a free credit report, and offered other information about credit freezes and fraud alerts. On June 25, 2018, eight state banking regulators issued a consent order requiring Equifax to address various data security issues. The order included several areas of concern, including general information security, internal audits, and board and management oversight. More specifically, the order required Equifax, the board, or its audit committee to, among other things: provide a written risk assessment that identifies foreseeable threats and vulnerabilities to the confidentiality of PII; establish a formal and documented internal audit program that is capable of effectively evaluating information technology controls; improve the oversight of its information security program; improve oversight and documentation of its critical vendors; improve standards and controls for supporting the patch management function; and enhance oversight of IT operations as it relates to disaster recovery and business continuity functions. Under the consent order, Equifax was required to submit a list of all remediation projects planned, in process, or implemented to the state regulatory agencies by July 31, 2018. We provided a draft of this report to BCFP, DHS, FTC, IRS, SSA, USPS, and Equifax for comment. SSA and USPS provided written responses expressing appreciation for the opportunity to review the draft report. The SSA and USPS responses are reprinted in appendices II and III, respectively. In addition, BCFP, DHS, FTC, IRS, SSA, USPS, and Equifax provided technical comments orally and via email, which we have incorporated, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 29 days from the report date. At that time, we will send copies to the appropriate congressional committees, Equifax, and to the Acting Director of the Bureau of Consumer Financial Protection; the Chairman of the Federal Trade Commission; the Secretary of the Department of Homeland Security; the Commissioners of the Internal Revenue Service and Social Security Administration; and the Postmaster General of the United States. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.We are sending copies of this report to In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Nick Marinos at (202) 512-9342 or marinosn@gao.gov, or Michael Clements at (202) 512-8678 or clementsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. Our objectives were to (1) summarize the events regarding the 2017 Equifax breach and the steps taken by the company to assess, respond to, and recover from the incident and (2) describe the actions that federal customers and oversight agencies took in response to the breach. To address the first objective, we obtained and assessed documentation generated in response to the breach. Specifically, we analyzed the results of security assessments conducted by Equifax and its cybersecurity consultant following the breach, which included information about how the attacker gained access to Equifax’s systems and the specific vulnerabilities that were exploited. This documentation included the report summarizing the results of the consultant’s forensic analysis of Equifax systems and the consultant’s recommendations to Equifax to address the factors that led to the breach. We also reviewed Equifax’s relevant public filings to the Securities and Exchange Commission and statements it provided to the public and shareholders, which included information about the data breach and the company’s efforts for remediation. Further, we conducted a site visit to the Equifax data center in Alpharetta, Georgia, to interview knowledgeable officials, such as the interim Chief Security Officer and other officials knowledgeable about how Equifax stores and processes data, and observed physical security measures. In addition, to clarify details of the breach and the steps that Equifax took, we interviewed officials at Equifax who were responsible for coordinating reviews conducted following the breach. Specifically, we interviewed the interim Chief Security Officer and government relations employees, who were responsible for coordinating Equifax’s interaction with federal agencies in response to the incident. We did not independently assess Equifax’s information security controls or the steps the company took to address identified factors that contributed to the ineffective implementation of those controls. Specifically, the scope of our report was to report on actions taken by Equifax and agencies in response to the breach. Consequently, the information in this report is based on public filings and announcements as well as information provided to us by the company. We did not reach conclusions regarding the adequacy or efficacy of Equifax’s security measures. To address the second objective, we selected three major federal agencies, Internal Revenue Service (IRS), Social Security Administration (SSA), and United States Postal Service (USPS), which were Equifax’s largest federal customers at the time of the breach. We initially identified these customer agencies by reviewing public reports following the breach that identified federal agencies that were major Equifax customers at the time. We also interviewed Equifax officials responsible for managing government accounts to confirm that these three agencies were the only large-scale federal customer agencies that interacted with Equifax following the breach. Other federal agencies also have contracts with Equifax for a variety of services; we did not conduct audit work for this engagement at any other agencies because we narrowed our selection criteria to the largest federal agencies that used Equifax’s services to conduct their identity-proofing processes. Subsequently, we analyzed documentation from IRS, SSA, and USPS to describe the relevant actions these agencies took in response to the breach, as well as documentation regarding oversight by BCFP and FTC, which are the federal agencies with primary oversight responsibilities over CRAs. Specifically, we reviewed relevant laws and BCFP guidance on data security examinations. In addition, we spoke with BCFP and FTC officials about their actions in response to the data breach and reviewed their websites for information provided to consumers. We also selected and reviewed contracts between Equifax and each of the three selected agencies—IRS, SSA, and USPS—to determine what changes were made to services, such as identity-proofing solutions, provided by Equifax to federal agencies as a result of the breach. The contracts we reviewed were the ones identified by IRS, SSA, and USPS as contracts with Equifax for credit reporting or identity-proofing services. Further, we conducted interviews with agency officials at BCFP, FTC, DHS, IRS, SSA, and USPS to determine what actions customer and oversight agencies took in response to the breach. The officials we interviewed were responsible for conducting their agencies’ security assessment of Equifax at the time of the data breach. These included officials at each agency that had a role in responding to the Equifax breach, such as investigators at the oversight agencies and information security officials at the federal customer agencies. To address both objectives, and to identify how federal requirements apply to credit reporting agencies, we analyzed relevant federal laws to determine the responsibilities of agencies and their contractors. Specifically, we reviewed the following laws: Dodd-Frank Wall Street Reform and Consumer Protection Act; Fair Credit Reporting Act; Privacy Act of 1974; and E-Government Act of 2002. We conducted this performance audit from November 2017 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individuals named above, John de Ferrari and John Forrester (assistant directors); Tina Torabi (analyst-in-charge); Bethany Benitez, Chris Businsky, Kavita Daitnarayan, Nancy Glover, Andrea Harvey, Thomas Johnson, David Plocher, Tovah Rom, Rachel Siegel, and Winnie Tsen made key contributions to this report.", "summary": "CRAs such as Equifax assemble information about consumers to produce credit reports and may provide other services, such as identity verification to federal agencies and other organizations. Data breaches at Equifax and other large organizations have highlighted the need to better protect sensitive personal information. GAO was asked to report on the major breach that occurred at Equifax in 2017. This report (1) summarizes the events regarding the breach and the steps taken by Equifax to assess, respond to, and recover from the incident and (2) describes actions by federal agencies to respond to the breach. To do so, GAO reviewed documents from Equifax and its cybersecurity consultant related to the breach and visited the Equifax data center in Alpharetta, Georgia, to interview officials and observe physical security measures. GAO also reviewed relevant public statements filed by Equifax. Further, GAO analyzed documents from the IRS, SSA, and USPS, which are Equifax's largest federal customers for identity-proofing services, and interviewed federal officials related to their oversight activities and response to the breach. In July 2017, Equifax system administrators discovered that attackers had gained unauthorized access via the Internet to the online dispute portal that maintained documents used to resolve consumer disputes (see fig.). The Equifax breach resulted in the attackers accessing personal information of at least 145.5 million individuals. Equifax's investigation of the breach identified four major factors including identification, detection, segmenting of access to databases, and data governance that allowed the attacker to successfully gain access to its network and extract information from databases containing personally identifiable information. Equifax reported that it took steps to mitigate these factors and attempted to identify and notify individuals whose information was accessed. The company's public filings since the breach occurred reiterate that the company took steps to improve security and notify affected individuals. The Internal Revenue Service (IRS), Social Security Administration (SSA), and U.S. Postal Service (USPS)—three of the major federal customer agencies that use Equifax's identity verification services—conducted assessments of the company's security controls, which identified a number of lower-level technical concerns that Equifax was directed to address. The agencies also made adjustments to their contracts with Equifax, such as modifying notification requirements for future data breaches. In the case of IRS, one of its contracts with Equifax was terminated. The Department of Homeland Security offered assistance in responding to the breach; however, Equifax reportedly declined the assistance because it had already retained professional services from an external cybersecurity consultant. In addition, the Bureau of Consumer Financial Protection and the Federal Trade Commission, which have regulatory and enforcement authority over consumer reporting agencies (CRAs) such as Equifax, initiated an investigation into the breach and Equifax's response in September 2017. The investigation is ongoing. GAO is not making recommendations in this report. GAO plans to issue separate reports on federal oversight of CRAs and consumer rights regarding the protection of personally identifiable information collected by such entities. A number of federal agencies and Equifax provided technical comments which we incorporated as appropriate.", "document_type": "gao"}
{"report": "Key elements of strategic planning include establishing long-term goals and strategies for how those goals are to be achieved. Specifically for managing Coast Guard acquisitions, we have noted that a long-term plan that includes acquisition implications would enable tradeoffs to be addressed in advance, which leads to better informed choices and makes debate possible before irreversible commitments are made to individual programs. Without this type of plan, decision makers do not have the information they need to better understand and address an agency’s long-term outlook. Similarly, according to the Office of Management and Budget’s capital planning guidance referenced by the Coast Guard’s Major Systems Acquisition Manual, each agency is encouraged to have a plan that justifies its long-term capital asset decisions. This plan should include, among other things, (1) an analysis of the portfolio of assets already owned by the agency and in procurement, (2) the performance gap and capability necessary to bridge the old and new assets, and (3) justification for new acquisitions proposed for funding. In June 2014, we found that the Coast Guard—a component within the Department of Homeland Security (DHS)—did not have a long-term fleet modernization plan that identified all acquisitions needed to meet mission needs over the next two decades within available resources. Without such a plan, the Coast Guard repeatedly delayed and reduced its capabilities through its annual budget process and did not know the extent to which it could meet mission needs and achieve desired results. We recommended that the Coast Guard develop a 20-year fleet modernization plan that identifies all acquisitions needed to maintain the current level of service and the fiscal resources necessary to build the identified assets. DHS agreed with our recommendation but it has not yet approved a 20-year plan. Further, in July 2018, we found the Coast Guard continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan, which is congressionally mandated and submitted to Congress annually. Coast Guard officials told us the Capital Investment Plan reflects the highest priorities of the department and that trade-off decisions are made as part of the annual budget process. However, the effects of these trade-off decisions, such as which acquisitions would take on more risk so others can be prioritized and adequately funded, are not communicated in the Capital Investment Plan to key decision makers. Over the years, this approach has left the Coast Guard with a bow wave of near-term unfunded acquisitions, negatively affecting recapitalization efforts, and limiting the effectiveness of long-term planning. As a result of this planning process, the Coast Guard has continued to defer planned acquisitions to future years and left a number of operational capability gaps unaddressed that could affect future operations. We recommended that the annual Capital Investment Plans reflect acquisition trade-off decisions and their effects. DHS concurred with this recommendation and plans to include additional information in future Capital Investment Plans to address how trade-off decisions could affect other major acquisition programs. According to Coast Guard officials, the Coast Guard plans to implement this recommendation by March 2020. Examples of other fleet modernization plans include the Navy’s annual naval vessel construction plan (also known as the Navy’s long range shipbuilding plan), which reflects the quantity and categories of assets that the Navy needs to buy as well as the total number of assets in operation for each year. While we found in March 2006 that the Navy faced challenges associated with its long range shipbuilding plan, we also observed that such a plan is beneficial in that it lays out a strategic approach for decision making. In October 2016, NOAA—which is within the Department of Commerce—approved a fleet plan that is intended to identify an integrated strategy for long-term recapitalization, including acquisition of up to eight new ships. In March 2017, NOAA indicated that long-term recapitalization of the NOAA fleet requires an annual, stable funding profile on the order of its fiscal year 2016 appropriations—about $80 million. NOAA noted that it will continue to proceed on schedule, as laid out in its fleet plan, or make adjustments based on available funding. Our prior work has repeatedly found that successful acquisition programs start with solid, executable business cases before setting program baselines and committing resources. A sound business case requires balance between the concept selected to satisfy operator requirements and the resources—design knowledge, technologies, funding, and time— needed to transform the concept into a product, such as a ship. At the heart of a business case is a knowledge-based approach—we have found that successful shipbuilding programs build on attaining critical levels of knowledge at key points in the shipbuilding process before significant investments are made (see figure 1). We have previously found that key enablers of a good business case include firm, feasible requirements; plans for a stable design; mature technologies; reliable cost estimates; and realistic schedule targets. Without a sound business case, acquisition programs are at risk of experiencing cost growth, schedule delays, and reduced capabilities. In September 2018, we found the Coast Guard did not have this type of sound business case when it established the cost, schedule, and performance baselines for its polar icebreaker program in March 2018. This was primarily due to risks in four key areas: Technology. The Coast Guard intends to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies—which include the integrated power plant and azimuthing propulsors— prior to setting baselines. As a result, the Coast Guard does not have full insight into whether these technologies, which we believe are critical technologies and merit such an assessment, are mature. Without a technology readiness assessment, the Coast Guard is potentially underrepresenting technical risk and increasing design risk. Cost. The cost estimate that informed the program’s $9.8 billion cost baseline—which includes lifecycle costs for the acquisition, operations, and maintenance of three polar icebreakers—substantially met our best practices for being comprehensive, well-documented, and accurate, but only partially met best practices for being credible. The cost estimate did not quantify the range of possible costs over the entire life of the program, such as the period of operations and support. As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program. Schedule. The Coast Guard’s planned delivery dates of 2023, 2025, and 2026 for the three ships were not informed by a realistic assessment of shipbuilding activities, but rather were primarily driven by the potential gap in icebreaking capabilities once the Coast Guard’s only operating heavy polar icebreaker—the Polar Star— reaches the end of its service life (see figure 2). The Polar Star’s service life is estimated to end between fiscal years 2020 and 2023. This creates a potential heavy polar icebreaker capability gap of about 3 years, if the Polar Star’s service life were to end in 2020 and the lead polar icebreaker were to be delivered by the end of fiscal year 2023 as planned. If the lead ship is delivered later than planned in this scenario, the potential gap could be more than 3 years. The Coast Guard is planning to recapitalize the Polar Star’s key systems starting in 2020 to extend the service life of the ship until the planned delivery of the second polar icebreaker (see figure 3). Further, our analysis of selected lead ships for other shipbuilding programs found the icebreaker program’s estimated construction time of 3 years is optimistic. An unrealistic schedule puts the Coast Guard is at risk of not delivering the icebreakers when promised and the potential gap in icebreaking capabilities could widen. Design. The Coast Guard set program baselines before conducting a preliminary design review—a systems engineering event that is intended to verify that the contractor’s design meets the requirement of the ship specifications and is producible—which puts the program at risk of having an unstable design, thereby increasing the program’s cost and schedule risks. Although the Coast Guard set the program baselines prior to gaining knowledge on the feasibility of the selected shipbuilder’s design, it has expressed a commitment to having a stable design prior to the start of lead ship construction. This is consistent with shipbuilding best practices we identified in 2009. To address these four areas and other risks, we made six recommendations to DHS, Coast Guard, and the Navy in our September 2018 report. DHS concurred with all six recommendations and identified actions it planned to take to address them. In its October 2016 fleet plan, NOAA indicated the need to construct up to eight new ships by 2028 to maintain its capabilities for at-sea requirements. Ensuring a sound business case for each acquisition will be important as NOAA moves forward. Given the Navy’s experience in shipbuilding, agencies have partnered with the Navy to take advantage of its expertise. For example, in April and September 2018, we found examples of how the Coast Guard had leveraged the Navy’s resources and acquisition approaches when acquiring the polar icebreakers, including: Establishing an integrated program office and potentially using funding from both organizations. In 2016, in response to a congressional report, the Navy and the Coast Guard established an integrated program office to acquire the icebreakers for Coast Guard operations. This relationship was officially memorialized through three memorandums in 2017. Given potential plans to fund the polar icebreaker program with both Navy and Coast Guard appropriations, the Navy and the Coast Guard had a memorandum of agreement with a budgeting and financial management appendix. In September 2018, however, we found that the Coast Guard and the Navy interpreted the meaning of “cost overruns” differently in the context of their agreement. We also found that the agreement itself did not address how the Coast Guard and the Navy plan to handle any cost growth stemming from changes to the scope, terms, and conditions of the detail design and construction contract. We recommended that the Coast Guard, in collaboration with the Navy, revise the agreement to clarify and document how cost growth in the polar icebreaker program, including changes in scope, will be addressed between the two organizations. The Coast Guard concurred with this recommendation and plans to update the agreement by March 2019. Establishing an integrated ship design team. The ship design team includes Coast Guard and Navy technical experts who develop ship specifications based on the polar icebreaker program’s operational requirements document. The ship design team is under the supervision of a Coast Guard ship design manager, who provides all technical oversight for development of the polar icebreaker’s design. Leveraging Navy cost estimating and contracting functions. With input from the integrated program office and ship design team, Navy cost estimators developed the polar icebreaker program’s cost estimate, which informed the program’s cost baselines and affordability constraints. In addition, the Navy plans to award the polar icebreaker’s detail design and construction contract under the Navy’s contracting authority and use a tailored DHS acquisition process. Supplementing the DHS acquisition process with the Navy’s gate review process. Coast Guard and Navy agreed to manage the polar icebreaker program using a tailored acquisition approach that supplements DHS acquisition decision event reviews with additional “gate” reviews that were adopted from Navy’s acquisition processes. The gate reviews allow both Coast Guard and Navy leadership to review and approve key documents before proceeding to the acquisition decision events. Each acquisition decision event is also overseen by acquisition oversight board with members from both the Coast Guard and the Navy (see figure 4). By collaborating with the Navy, the Coast Guard is leveraging the Navy’s experience in ship design, cost estimating, contracting, and other shipbuilding processes. This partnership may allow the Coast Guard to more efficiently manage the polar icebreaker program. In March 2017, NOAA indicated that it had partnered with the Navy through an interagency agreement to leverage the Navy’s acquisition expertise for Auxiliary General Purpose Oceanographic Research Vessels, which will be the basis for a new class of NOAA ships. In April 2018, the Navy released the request for proposal for the preliminary contract design of this new class of ships. When acquiring multiple quantities of a product, agencies generally have several options for contracting mechanisms. Annual contracting, which can be considered the typical method, refers to awarding a contract for one year’s worth of requirements. Annual contracting allows for the use of options for subsequent requirements. Options give the agency the unilateral right to purchase additional supplies or services called for by the contract, or to extend the term of the contract. Besides annual contracting with options, agencies may also be able to choose among other contracting mechanisms—multiyear contracting and “block buy” contracting, which are discussed in more detail below. Multiyear contracting allows agencies to acquire known requirements for up to 5 years under a single contract award, even though the total funds ultimately to be obligated may not be available at the time of contract award. Before DOD and Coast Guard can enter into a multiyear contract, certain criteria must be met. Table 1 provides some of the multiyear contracting requirements for DOD and the Coast Guard. Multiyear contracts are expected to achieve lower unit costs compared to annual contracts through one or more of the following sources: (1) purchase of parts and materials in economic order quantities, (2) improved production processes and efficiencies, (3) better utilized industrial facilities, (4) limited engineering changes due to design stability during the multiyear period, and (5) cost avoidance by reducing the burden of placing and administering annual contracts. Multiyear procurement also offers opportunities to enhance the industrial base by providing contractors a longer and more stable time horizon for planning and investing in production and by attracting subcontractors, vendors, and suppliers. However, multiyear procurement entails certain risks that must be balanced against the potential benefits, such as the increased costs to the government should the multiyear contract be changed or canceled and decreased annual budget flexibility for the program and across an agency’s portfolio of acquisitions. In February 2008, we found that it is difficult to precisely determine the impact of multiyear contracting on procurement costs. For example, for three multiyear procurements (Air Force’s C-17A Globemaster transport, the Navy’s F/A-18E/F Super Hornet fighter, and the Army’s Apache Longbow helicopter), we identified unit cost growth ranging from 10 to 30 percent compared to original estimates, due to changes in labor and material costs, requirements and funding, and other factors. In some cases, actual costs for the multiyear procurement were higher than original estimates for annual contracts. We noted that we could not determine how cost growth affected the level of savings achieved, if any, because we did not know how an alternative series of annual contracts would have fared. Although programs using annual contracts also have unit cost growth, it is arguably more problematic when using multiyear contracting because of the up-front investments and the government’s exposure to risk over multiple years. Block buy contracting generally refers to special legislative authority that agencies seek on an acquisition-by-acquisition basis to purchase more than one year’s worth of requirements, such as purchasing supplies in economic order quantities. Unlike multiyear contracting, block buy contracting does not have permanent statutory criteria and, therefore, can be used in different ways. We have previously analyzed several cases where block buy contracts were considered or used and have not found evidence of savings. For example: In September 2018, we found that for the polar icebreaker program, the Navy gave offerors an opportunity to provide the estimated savings that the government could achieve if it were to take a “block buy” approach in purchasing the ships or purchasing supplies in economic order quantities. The Navy told us that they did not receive any formal responses from industry on potential savings from block buys or economic order quantities. In April 2017, we found that the Navy’s Littoral Combat Ship contracts’ block buy approach could affect Congress’s funding flexibility. Specifically, the block buy contracts provided that a failure to fully fund a purchase in a given year would make the contract subject to renegotiation, which provides a disincentive to the Navy or Congress to take any action that might disrupt the program because of the potential for the government to have to pay more for ships. In February 2005, we found that the Navy believed that a block-buy contract contributed to increased material costs for the Virginia class submarine. Under this block-buy contract, subcontracts for submarine materials were for single ships spread over several years. According to the Navy, this type of acquisition approach did not take advantage of bulk-buy savings and incurred the risk that funding will not be available in time to order the material when needed. Based on our prior work, it is important for agencies to consider multiple factors such as estimated savings, the stability of the requirements, quantities required, and potential contract terms and conditions before committing to a contracting mechanism approach. In conclusion, as the Coast Guard and NOAA continue investing taxpayer dollars to modernize their fleets, they could benefit from the lessons learned from prior recapitalization and acquisition efforts. It is important for agencies to develop strategic and comprehensive approaches for managing their respective portfolios so that future requirements and capability gaps can be addressed in a timely manner. For each acquisition within their portfolios, agencies should ensure that they have established a sound business case before committing significant resources. Additionally, leveraging the Navy’s resources and expertise in shipbuilding, such as by establishing integrated teams, could be beneficial by helping agencies be more efficient. Finally, when it comes to contracting mechanisms, factors such as estimated savings and program risks should be assessed before committing to a particular approach. Chairman Sullivan, Ranking Member Baldwin, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions. If you or your staff have any questions about this statement, please contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Rick Cederholm, Assistant Director; Peter Anderson; Laurier Fish; Kurt Gurka; Claire Li; and Roxanna Sun. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Both the Coast Guard—a component of the Department of Homeland Security (DHS)—and the Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) are investing significant resources to recapitalize their aging fleets of ships. Ensuring that the Coast Guard and NOAA maintain their ships and address potential capability gaps is vital for protecting national security and scientific interests. This statement summarizes lessons that GAO has identified from its prior reviews of Coast Guard and Navy acquisitions, which can be applied to the Coast Guard's and NOAA's shipbuilding efforts. Specifically, this testimony provides information on, among other things, (1) long-term strategic planning for acquisitions, (2) the need for a sound business case, and (3) the leveraging of the Navy's acquisition resources and shipbuilding expertise. In its prior work, GAO reviewed Coast Guard and Navy programs and interviewed officials. For this testimony, GAO obtained publicly available information on NOAA's ship acquisition efforts. GAO has found that acquisition programs can benefit from long-term strategic planning that identifies how tradeoff decisions would affect the future of the acquisition portfolio. In July 2018, GAO found the Coast Guard continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan. As a result of this planning process, the Coast Guard has continued to defer planned acquisitions to future years and left a number of operational capability gaps unaddressed. Incorporating the use of a long-term strategic plan and additional tradeoff discussion into the Capital Investment Plan could lead to more informed choices before irreversible commitments are made. GAO's prior work has also found that acquisition programs should start with solid business cases before setting program baselines and committing resources. At the heart of a business case is a knowledge-based approach—successful shipbuilding programs build on attaining critical levels of knowledge at key points in the shipbuilding process before significant investments are made (see figure). In September 2018, GAO found the Coast Guard did not have this type of sound business case when it established the program baselines for its polar icebreaker program in March 2018 due to risks in technology, design, cost, and schedule. For example, the Coast Guard's planned delivery dates were not informed by a realistic assessment of shipbuilding activities, but rather were primarily driven by the potential gap in icebreaking capabilities once the Coast Guard's only operating heavy polar icebreaker reaches the end of its service life. Agencies have partnered with the Navy to take advantage of its resources and shipbuilding expertise, including the Coast Guard when acquiring the polar icebreakers. For example, in September 2018, GAO found that the Coast Guard and the Navy had established an integrated program office and a ship design team. These teams provided input to Navy cost estimators, who developed the polar icebreaker program's cost estimate. GAO has previously recommended that the Coast Guard develop a 20-year fleet modernization plan, reflect acquisition trade-off decisions in its annual Capital Investment Plans, and address risks to establish a sound business case for its polar icebreakers acquisition. DHS concurred with these recommendations and is taking steps to implement them.", "document_type": "gao"}
{"report": "VA is responsible for providing a variety of services to veterans and their families (i.e., spouses and children), including health care, disability compensation, and vocational rehabilitation. Within the department, VHA oversees the delivery of health care services, including primary care, specialized care, and related medical and social support at its more than 1500 medical facilities located throughout the country. As of fiscal year 2016, about 9 million veterans were enrolled in the VA health care system, with almost 7 million patients receiving services at its medical facilities each year. VHA relies on VistA—its health information system—to assist in the daily operations of providing health care to patients. VistA began operation in 1983 as the Decentralized Hospital Computer Program. In 1996, the department changed the name of the system to the Veterans Health Information Systems and Technology Architecture—VistA. The system is comprised of more than 200 different software applications, including 17 pharmacy applications; 11 laboratory applications; 10 eligibility, enrollment, and registration applications; and 12 financial management applications. Most VistA applications are based on an architecture that links servers and personal computer workstations at VA facilities. VistA also has interfaces with applications within other VA systems, as well as selected systems of other federal agencies (e.g., DOD health information systems used to treat injured service members) and private care providers and pharmacies. VistA was developed based on the collaboration of staff in the VA medical facilities and VHA IT personnel, with the intention of providing a system that would meet the clinicians’ needs. Specifically, clinicians and IT personnel in the various medical facilities collaborated to define the system’s requirements and, in certain cases, carried out its development and implementation. In this regard, staff at a medical center could develop and implement applications at the local level to facilitate the potentially different functions at each location. This approach has resulted in about 130 different instances, or variations, of the system being used throughout the department’s medical facilities. VA has made numerous enhancements to the functionality of VistA since 1983. A significant example is the release in 1996 of the Computerized Patient Record System (CPRS), a graphical user interface that enabled the department to provide an individual electronic health record for each VA patient. Specifically, CPRS enables clinicians to enter, review, and continuously update information connected with a patient. Among other things, clinicians can order lab tests, medications, diets, radiology tests, and procedures; record a patient’s allergies or adverse reactions to medications; request and track consults; enter progress notes, diagnoses, and treatments for each encounter; and enter discharge summaries. Another example of the enhancements made to VistA was the department’s implementation of an imaging capability (VistA Imaging) at all of the medical facilities. This capability enabled multimedia data, such as radiology images, to be linked to a patient’s electronic medical record. VistA contains a comprehensive, integrated, electronic health record for each patient that is viewable by all of the department’s clinicians at all of its medical facilities, thus eliminating the need for paper medical records. This capability has been key to the department’s efforts over the last 20 years to share electronic medical records with DOD, and with its work to achieve interoperability, which enables different information systems or components to exchange information and to use the information that has been exchanged. Nevertheless, even with the enhancements and modifications made to VistA over time, the system is more than 30 years old and has become increasingly difficult and costly to maintain. One reason VistA is difficult and costly to maintain is that the system is programmed in the MUMPS programming language, a language for which there is a continually dwindling supply of qualified software developers, according to the department. In 2015, an independent assessment of health IT at VA, conducted by the MITRE Corporation, raised questions regarding the lack of any clear advances made during the past decade with VistA and the increasing amount of time needed for VA to release new capabilities. The study also noted that the standards and terminology used by VistA do not enable interoperability across the multiple systems within VA, or between the department and non-VA facilities, including private sector providers and DOD. Given the concerns identified, the study recommended that VA assess the cost versus benefits of various alternatives for delivering modernized capabilities, such as COTS electronic health record systems, open source systems, and the continued development of VistA. Since 2001, VA has pursued four efforts to modernize VistA. These efforts—HealtheVet, the integrated Electronic Health Record (iEHR), VistA Evolution, and the Electronic Health Record Modernization (EHRM)—reflect varying approaches that the department has considered to achieve a modernized health care system over the course of nearly two decades. The modernization efforts are described as follows. In 2001, VA undertook its first VistA modernization project, the HealtheVet initiative, with the goals of standardizing the department’s health care system and eliminating the approximately 130 different systems used by its field locations at that time. HealtheVet was scheduled to be fully implemented by 2018 at a total estimated development and deployment cost of about $11 billion. As part of the effort, the department had planned to develop or enhance specific areas of system functionality through six projects, which were to be completed between 2006 and 2012. Specifically, these projects were to provide capabilities to support VA’s Health Data Repository and Patient Financial Services System, as well as the Laboratory, Pharmacy, Imaging, and Scheduling functions. In June 2008, we reported that the department had made progress on the HealtheVet initiative, but noted issues with project planning and governance. In June 2009, the Secretary of Veterans Affairs announced that VA would stop financing failed projects and improve the management of its IT development projects. Subsequently in August 2010, the department reported that it had terminated the HealtheVet initiative. In February 2011, VA began its second VistA modernization initiative, the iEHR program, in conjunction with DOD. The program was intended to replace the two separate electronic health record systems used by the two departments with a single, shared system. In addition, because both departments would be using the same system, this approach was expected to largely sidestep the challenges that had been encountered in trying to achieve interoperability between their two separate systems. Initial plans called for the development of a single, joint iEHR system consisting of 54 clinical capabilities to be delivered in six increments between 2014 and 2017. Among the agreed-upon capabilities to be delivered were those supporting laboratory, anatomic pathology, pharmacy, and immunizations. According to VA and DOD, the single system had an estimated life cycle cost of $29 billion through the end of fiscal year 2029. However, in February 2013, the Secretaries of VA and DOD announced that they would not continue with their joint development of a single electronic health record system. This decision resulted from an assessment of the iEHR program that the secretaries had requested in December 2012 because of their concerns about the program facing challenges in meeting deadlines, costing too much, and taking too long to deliver capabilities. In 2013, the departments abandoned their plan to develop the integrated system and stated that they would again pursue separate modernization efforts. In December 2013, VA initiated its VistA Evolution program as a joint effort of VHA and OI&T that was to be completed by the end of fiscal year 2018. The program was to be comprised of a collection of projects and efforts focused on improving the efficiency and quality of veterans’ health care by modernizing the department’s health information systems, increasing the department’s data exchange and interoperability with DOD and private sector health care partners, and reducing the time it takes to deploy new health information management capabilities. Further, the program was intended to result in lower costs for system upgrades, maintenance, and sustainment. According to the department’s March 2017 cost estimate, VistA Evolution was to have a life cycle cost of about $4 billion through fiscal year 2028. Since initiating VistA Evolution in December 2013, VA has completed a number of key activities that were called for in its plans. For example, the department delivered capabilities, such as the ability for health providers to have an integrated, real-time view of electronic health record data through the Joint Legacy Viewer, as well as the ability for health care providers to view sensitive DOD notes and highlight abnormal test results for patients. VA also initiated work to standardize VistA across the 130 VA facilities and released enhancements to its legacy scheduling, pharmacy, and immunization systems. In addition, the department released the enterprise Health Management Platform, which is a web- based user interface that assembles patient clinical data from all VistA instances and DOD. Although VistA Evolution is ongoing, VA is currently in the process of revising its plan for the program as a result of the department recently announcing its pursuit of a fourth VistA modernization program (discussed below). For example, the department determined that it would no longer pursue additional development or deployment of the enterprise Health Management Platform—a major VistA Evolution component— because the new modernization program is envisioned to provide similar capabilities. In June 2017, the VA Secretary announced a significant shift in the department’s approach to modernizing VistA. Specifically, rather than continue to use VistA, the Secretary stated that the department plans to acquire the same electronic health record system that DOD is implementing. In this regard, DOD has contracted with the Cerner Corporation to provide a new integrated electronic health record system. According to the Secretary, VA has chosen to acquire this same product because it would allow all of VA’s and DOD’s patient data to reside in one system, thus enabling seamless care between the department and DOD without the manual and electronic exchange and reconciliation of data between two separate systems. According to the VA Secretary, this fourth VistA modernization initiative is intended to minimize customization and system differences that currently exist within the department’s medical facilities, and ensure the consistency of processes and practices within VA and DOD. When fully operational, the system is intended to be the single source for patients to access their medical history and for clinicians to use that history in real time at any VA or DOD medical facility, which may result in improved health care outcomes. According to VA’s Chief Technology Officer, Cerner is expected to provide integration, configuration, testing, deployment, hosting, organizational change management, training, sustainment, and licenses necessary to deploy the system in a manner that meets the department’s needs. To expedite the acquisition, in June 2017, the Secretary signed a “Determination and Findings,” for a public interest exception to the requirement for full and open competition, and authorized VA to issue a solicitation directly to the Cerner Corporation. According to the Secretary, VA expects to award a contract to Cerner in early 2018, and deployment of the new system is anticipated to begin 18 months after the contract has been signed. VA’s Executive Director for the Electronic Health Records Modernization System stated that the department intends to deploy the new system incrementally to its medical facilities. Each facility is expected to continue using VistA until the new system has been deployed at that location. VA expects that the new system will be implemented at all VA medical facilities within 7 to 8 years after the first deployment. Figure 1 shows a timeline of the four efforts that VA has pursued to modernize VistA since 2001. For iEHR and VistA Evolution, the two modernization initiatives for which VA could provide contract data, VA obligated approximately $1.1 billion for contracts with 138 different contractors during fiscal years 2011 through 2016. Specifically, the department obligated approximately $224 million and $880 million, respectively, for contracts associated with these efforts. Of the 138 contractors, 34 performed work supporting both, iEHR and VistA Evolution. The remaining 104 contractors worked exclusively on either iEHR or VistA Evolution. Funding for the 34 contractors that worked on both iEHR and VistA Evolution totaled about $793 million of the $1.1 billion obligated for contracts on the two initiatives. Obligations for contracts awarded to the top 15 of these 34 contractors (which we designated as key contractors) accounted for about $741 million (about 67 percent) of the total obligated for contracts on the two initiatives. The remaining 123 contractors were obligated about $364 million for their contracts. The 15 key contractors were obligated about $564 million and $177 million for VistA Evolution and iEHR contracts, respectively. Table 1 identifies the key contractors and their obligated dollar totals for the two efforts. Additionally, we determined that, of the $741 million obligated to the key contractors, $411 million (about 55 percent) was obligated for contracts supporting the development of new system capabilities, $256 million (about 35 percent) was obligated for contracts supporting project management activities, and $74 million (about 10 percent) was obligated for contracts supporting operations and maintenance for iEHR and VistA Evolution. VA obligated funds to all 15 of the key contractors for system development, 13 of the key contractors for project management, and 12 of the key contractors for operations and maintenance. Figure 2 shows the amounts obligated for each of these areas. Further, based on the key contractors’ documentation for the iEHR program, VA obligated $102 million for development, $65 million for project management, and $10 million for operations and maintenance. For the VistA Evolution Program, VA obligated $309 million for development, $191 million for project management, and $64 million for operations and maintenance. Figure 3 shows the amounts obligated for contracts on the VistA Evolution and iEHR programs for development, project management, and operations and maintenance. In addition, table 2 shows the amounts that each of the 15 key contractors were obligated for the three types of contract activities performed on iEHR and VistA Evolution. Industry best practices and IT project management principles stress the importance of sound planning for system modernization projects. These plans should identify key aspects of a project, such as the scope, responsible organizations, costs, schedules, and risks. Additionally, planning should begin early in the project’s life cycle and be updated as the project progresses. Since the VA Secretary announced that the department would acquire the same electronic health record system as DOD, VA has begun planning for the transition from VistA Evolution to EHRM. However, the department is still early in its efforts, pending the contract award. In this regard, the department has begun developing plans that are intended to guide the new EHRM program. For example, the department has developed a preliminary description of the organizations that are to be responsible for governing the EHRM program. Further, the VA Secretary announced in congressional testimony in November 2017 that the Executive Director for the Electronic Health Records Modernization System will report directly to the department’s Deputy Secretary. In addition, the department has developed a preliminary timeline for deploying its new electronic health record system to VA’s medical facilities, and a 90-day schedule that depicts key program activities. The department also has begun documenting the EHRM program risks. Beyond the aforementioned planning activities undertaken thus far, the Executive Director stated that the department intends to complete a full suite of planning and acquisition management documents to guide the program, including a life cycle cost estimate and an integrated master schedule to establish key milestones over the life of the project. To this end, the Executive Director told us that VA has awarded program management contracts to support the development of these plans to MITRE Corporation and Booz Allen Hamilton. According to the Executive Director, VA also has begun reviewing the VistA Evolution Roadmap, which is the key plan that the department has used to guide VistA Evolution since 2014. This review is expected to result in an updated plan that is to prioritize any remaining VistA enhancements needed to support the transition from VistA Evolution to the new system. According to the Executive Director, the department intends to complete the development of its plans for EHRM within 90 days after award of the Cerner contract, which is anticipated to occur in early 2018. Further, beyond the development of plans, VA has begun to staff an organizational structure for the modernization initiative, with the Under Secretary of Health and the Assistant Secretary for Information and Technology (VA’s Chief Information Officer) designated as executive sponsors. It has also appointed a Chief Technology Officer from OI&T, and a Chief Medical Officer from VHA, both of whom are to report to the Executive Director. VA’s efforts to develop plans for EHRM and to staff an organization to manage the program encompass key aspects of project planning that are important to ensuring effective management of the department’s latest modernization initiative. However, the department remains early in its modernization planning efforts, many of which are dependent on the system acquisition contract award, which has not yet occurred. The department’s continued dedication to completing and effectively executing the planning activities that it has identified will be essential to helping minimize program risks and guide this latest electronic health record modernization initiative to a successful outcome—one which VA, for almost two decades, has been unable to achieve. We provided a draft of this product to VA for comment. Via email, a liaison in VA’s Office of Congressional and Legislative Affairs stated that the department appreciated the opportunity to comment on the draft report and provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, the Under Secretary for Health, the Chief Information Officer, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov If you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. The objectives for this study were to (1) identify the efforts that the Department of veterans Affairs (VA) has undertaken to modernize VistA, including key contractors, contract costs, and expected contractor activities and (2) to determine the department’s current plans for, and progress to date, in modernizing VistA. To address the first objective, we reviewed VA’s prior budget submissions, in addition to VistA Evolution planning documentation, such as the VistA 4 Product Roadmap, VistA 4 Life Cycle Cost Estimate, VistA Evolution Integrated Master Plan, and VistA Evolution Business Case. We also reviewed meeting minutes for the VistA modernization projects and prior GAO work on efforts to modernize VistA. To determine the contractors, costs, and expected contractor activities for these efforts, we requested data from VA’s Office of Information and Technology (OI&T) and the Veterans Health Administration (VHA) on all contracts, related obligations, and expected activities for the HealtheVet program for fiscal years 2001 through 2010; the integrated Electronic Health Record (iEHR) program for fiscal years 2011 through 2013; and the VistA Evolution program for fiscal years 2014 through 2016. Neither OI&T nor VHA was able to provide contract data related to the HealtheVet program. The department stated that it could not verify any HealtheVet contractors receiving payments because the time frame for the effort falls outside the record retention required by regulations. According to the Federal Acquisition Regulation, government agencies are required to retain contract records for 6 years after the final payment. VA provided contract data for the iEHR and VistA Evolution programs, which included contractor names, obligated amounts of funding, and descriptions of the work that the contractors were to perform. OI&T provided such data for fiscal years 2011 through 2016 and VHA provided data for fiscal years 2012 through 2016. VHA program officials told us that they were unable to provide contract data prior to 2012. In addition, we did not request contract data subsequent to fiscal year 2016 because that is the last fiscal year for which data for a full year were available at the time that we performed our analysis. We assessed the reliability of the contract data we received by reviewing it for missing elements and outliers. We then met with officials responsible for VistA-related contracting to address questions about any missing data and outliers, as well as to obtain additional information about how the data were developed. Further, we supplemented the data by using additional information received from VA and the Federal Procurement Data System. We determined that the data were sufficiently reliable for the purposes of our reporting objective. To determine the key contractors, we first identified all of the contractors that worked on both the iEHR and VistA Evolution modernization efforts. We subsequently ranked the contractors according to the total dollars obligated for contracts that each contractor had been awarded. Further, we designated the top 15 ranked contractors, in terms of dollars obligated, as key contractors. These 15 key contractors received contracts that accounted for about two-thirds of the funds obligated to VistA modernization contracts from fiscal year 2011 through 2016. We then analyzed the information provided from VA on the work to be performed by these key contractors to identify obligations made for contracts to provide different types of work supporting the two modernization initiatives, including systems development, project management, and operations and maintenance. We then calculated the funds that were obligated to each of the key contractors for the types of work performed. To determine current plans for modernizing VistA, we reviewed draft program schedules, organization charts, Congressional testimonies of the VA Secretary, a White House press conference transcript, departmental press releases, and the department’s justification for awarding a non- competitive contract for a commercial off-the-shelf electronic health record system. To determine the progress achieved on the current efforts, we obtained documentation, such as draft schedules and organization charts, and met with program officials in VA’s Electronic Health Record Modernization program office to obtain updated information on the efforts. We conducted this performance audit from September 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. David A. Powner, (202) 512-9286 or pownerd@gao.gov. In addition to the contact named above, Mark Bird (assistant director), Eric Trout (analyst in charge), Chris Businsky, Vern Cumarasegaran, Nancy Glover, Paris Hawkins, Jacqueline Mai, Jennifer Stavros-Turner, Christy Tyson, and Charles Youman made key contributions to this report.", "summary": "VA operates the largest health care delivery system in America and VistA is essential to helping deliver the health care services and ensure the quality of health care received by the nation's veterans and their dependents. The system has been in operation for more than 30 years, is costly to maintain, and does not readily support VA's need to electronically exchange health records with the Department of Defense and private health care providers. VA has pursued initiatives to modernize VistA, using government contractors to support its efforts. In June 2017, VA announced a new effort to purchase a commercial solution to replace VistA. GAO was requested to review VA's prior and current efforts to modernize VistA. This review determined (1) VA's efforts to modernize VistA, including key contractors, contract costs, and expected contractor activities and (2) VA's current plans for modernizing VistA and the progress that has been achieved to date. To conduct its study, GAO reviewed VA documentation and its prior work and requested and obtained data on contracts, related obligations, and expected contractor activities for previous efforts. GAO also obtained documentation on plans for VA's current modernization efforts and progress made on the efforts, and interviewed VA officials. GAO has made recommendations to VA aimed at improving its prior modernization efforts. The department concurred with the recommendations and generally took responsive actions. GAO is making no recommendations at this time. VA provided technical comments on this report, which were incorporated as appropriate. The Department of Veterans Affairs (VA) has, since 2001, pursued four separate initiatives to modernize its health information system—the Veterans Health Information Systems and Technology Architecture (VistA). These efforts—HealtheVet, the integrated Electronic Health Record (iEHR), VistA Evolution, and the Electronic Health Record Modernization (EHRM)—reflect varying approaches that the department has considered to achieve a modernized health system over the course of nearly two decades (see figure). This latest effort, the EHRM program, is to include the adoption of the same commercial electronic health record system that the Department of Defense is in the process of acquiring. VA obligated about $1.1 billion to 138 different contractors that worked on iEHR and VistA Evolution (the two efforts for which VA could provide contract data) during fiscal years 2011 through 2016. Funding for the 34 contractors that worked on both efforts totaled about $793 million of the $1.1 billion obligated for contracts on the two initiatives. The top 15 of the contractors that worked on the two efforts (key contractors) accounted for approximately $741 million—$411 million for the development of new system capabilities, $256 million for project management activities, and $74 million for operations and maintenance for iEHR and VistA Evolution. VA has begun planning for the transition from VistA Evolution to EHRM. However, the department is still early in its efforts and has begun developing plans that are intended to guide the new EHRM program. According to the EHRM Executive Director, the department intends to complete development of its plans for EHRM within 90 days after awarding the contract for its new system, which is planned to occur in early 2018. VA has also begun to staff the EHRM program's leadership positions. The department's dedication to completing and effectively executing the planning activities that it has identified will be essential to helping minimize program risks and expeditiously guide this latest electronic health record modernization initiative to a successful outcome—which VA, for almost two decades, has been unable to achieve.", "document_type": "gao"}
{"report": "According to State and USAID, the Northern Triangle countries of El Salvador, Guatemala, and Honduras (see fig. 1) have a history of police corruption and gross violations of human rights. For example, State’s Guatemala 2016 Human Rights Report describes human rights abuses by the police, including arbitrary and unlawful killings, abuse, and mistreatment. Agencies also described a number of factors that challenge police forces in the Northern Triangle, including a culture of impunity and limited partner nation capacity to address these challenges. Many U.S. agencies implement assistance to civilian police in El Salvador, Guatemala, and Honduras, with State’s INL being the primary source of funding. Federal law generally prohibits the use of foreign assistance funds for police training, but Congress provided several exceptions including for training in internationally recognized standards of human rights, the rule of law, anti-corruption, and the promotion of civilian police roles that support democracy. Accordingly, as part of USAID’s broader security sector reform assistance efforts, the agency provides some police training, which often includes training on community policing practices. DOD generally is not authorized to train civilian police and focuses on building the capacity of its military and other national security counterparts. However, under its authority to build the capacity of foreign security forces for various purposes, DOD has provided a limited amount of training for civilian police and military units that provide civilian security in El Salvador, Guatemala, and Honduras. For example, several U.S. agencies, including DOD, have delivered training to the Joint Group Cuscatlán in El Salvador, an interagency task force that includes police; and to the Special Response Intelligence and Security Group in Honduras (commonly called TIGRES, its acronym in Spanish), which, according to State, is an elite, vetted unit within the Honduran National Police, specializing in high-risk tactics. State, USAID, and DOD deliver training in a variety of ways, including through the agencies’ own subject matter experts, interagency agreements with other U.S. agencies, and contracts with nongovernment implementing partners. For example, USAID has contracts and cooperative agreements with corporations, universities, and nongovernmental organizations to implement assistance projects that include training of police in El Salvador, Guatemala, and Honduras. State’s INL uses contracts to procure the services of nongovernment implementing partners and interagency agreements to partner with several other U.S. government agencies and components, including DHS and DOJ, to implement police assistance and training. State’s ILEA program also funds a network of police training academies, including one located in San Salvador, El Salvador (see fig. 2). Global, regional, and country-specific strategies outlining U.S. policy in El Salvador, Guatemala, and Honduras all include objectives to professionalize police. For example, the 2017 National Security Strategy of the United States of America includes an objective to support local efforts to professionalize police in the Western Hemisphere. The U.S. Strategy for Central America—a primary document outlining U.S. policy in El Salvador, Guatemala, and Honduras—also includes an objective specifically to “professionalize civilian police.” In addition, government- wide Integrated Country Strategies outlining U.S. goals for fiscal year 2014 through 2017 efforts in El Salvador, Guatemala, and Honduras include police professionalization objectives. For example, the Integrated Country Strategy for Guatemala for fiscal years 2016 and 2017 includes an objective to strengthen professionalism through training for law enforcement. Consistent with these objectives, DOD, State, and USAID have planned and delivered training aimed at professionalizing police in El Salvador, Guatemala, and Honduras. First, while DOD’s primary responsibility is to train its military counterparts, DOD country campaign plans for each of the three Northern Triangle countries include tasks related to professionalizing security forces, which would pertain to police they may train. For example, the plan for Guatemala for fiscal years 2016 and 2017 includes conducting professional development courses to improve skills to enhance partner nation security forces. During fiscal years 2014 through 2017, DOD delivered training to security forces, including a limited number of police participants, and officials told us that all DOD training delivered to security forces was intended to professionalize those forces. Second, our analysis of project documents associated with 22 State and USAID police assistance efforts in El Salvador, Guatemala, and Honduras implemented during fiscal years 2014 through 2017 found that 21 of the projects included objectives to professionalize police. For example, agreements between the DHS’s U.S. Customs and Border Protection and State’s INL for each of the three Northern Triangle countries have an objective to assist in the development of professional border security through police training. Similarly, USAID officials noted the police training incorporated in their broader assistance efforts consistently includes elements to professionalize those forces, and we found examples of such training incorporated in documents for each of the 8 USAID projects we reviewed. In line with these objectives, State and USAID implementing partners delivered training to professionalize police from all three Northern Triangle countries. For example, DOJ’s Drug Enforcement Administration delivered tactical training on the use of firearms to police in El Salvador (see fig. 3). Agencies have established few objectives to provide human rights training to police in El Salvador, Guatemala, and Honduras either in government-wide strategies for the countries or in police assistance project work plans. Federal standards for internal control state that management should set objectives or other internal control mechanisms to meet an entity’s mission, strategic plan, and goals. In the case of police training, global, regional, and country-specific strategies note the importance of a professional police force that respects human rights, and some cite risks associated with police forces lacking these attributes. For example, U.S. national security strategies associated with fiscal years 2014 through 2017 state that respect for human rights is an important aspect of U.S. national security strategy. At the regional level, the U.S. Strategy for Central America states that all security cooperation will emphasize respect for human rights. Further, the government-wide Integrated Country Strategies for El Salvador, Guatemala, and Honduras for fiscal years 2014 through 2017 emphasize the importance of promoting respect for human rights. Despite the consistent, government- wide emphasis on the importance of promoting respect for human rights, government-wide strategies and police assistance project documents include few objectives specifically to provide human rights training to police in El Salvador, Guatemala, and Honduras. First, government-wide country strategies contain few objectives to provide human rights training to police. Of the three current government- wide Integrated Country Strategies for El Salvador, Guatemala, and Honduras, only the document for El Salvador contains an objective to provide human rights training to police (see table 1). Officials from INL, the State bureau responsible for achieving the human rights police training objective for El Salvador, noted that efforts related to this objective have focused on institutionalizing human rights training through the country’s police academy. State officials did not know why the strategy for Honduras for fiscal years 2016 and 2017 lacked such an objective while the strategy for fiscal years 2014 through 2016 included one. Similarly, officials did not know if the officials who drafted the Integrated Country Strategy for Guatemala for fiscal years 2016 and 2017 had considered including an objective to train police in human rights. Second, police assistance project documents also vary in the extent to which they include objectives or other internal control mechanisms to ensure human rights content is incorporated in police training. Further, agencies also vary in the extent to which they included respect for human rights in police training delivered during fiscal years 2014 through 2017. DOD has not established specific objectives to train police on human rights, but internal control mechanisms, such as written policies, have helped ensure that training DOD delivers to police consistently incorporates content on respect for human rights, according to agency officials. As mentioned previously, DOD primarily provides training for partner nation militaries and national security forces and does not have strategic objectives specific to training civilian police. Nonetheless, the U.S. Southern Command (SOUTHCOM)—whose area of responsibility includes El Salvador, Guatemala, and Honduras—uses a written policy to require that all SOUTHCOM-sponsored operational and intelligence training provided to security forces contain a human rights component. Further, in fiscal year 2017, DOD’s Global Train and Equip Program consolidated some types of assistance DOD had previously used to provide training for foreign security forces in El Salvador, Guatemala, and Honduras. The legal authority for this program requires that projects executed under the authority include elements that promote observance of and respect for the law of armed conflict, human rights and fundamental freedoms, the rule of law, and civilian control of the military. DOD officials explained that based on these requirements, human rights training was either imbedded in or provided as a component of all DOD training delivered to security forces, which they stated generally focused on operational or tactical topics. We reviewed agendas for training that DOD officials identified as having included police participants, and found such content. For example, the agenda for a 4.5-day training on the legal aspects of combatting terrorism delivered by DOD’s Defense Institute of International Legal Studies to Salvadoran security force participants, among whom were 12 civilian police, included at least 5 hours of training on human rights topics such as international law and the proper use of force. While USAID has established few specific objectives or other internal control mechanisms to include human rights content in police training, according to USAID officials, training delivered to police in El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017 included content on respect for human rights. Our analysis of project documents related to the eight USAID projects that officials identified as including police assistance in fiscal years 2014 through 2017 found that two projects included objectives to provide police training specifically on human rights. For example, the USAID-funded Rights and Dignity Project for El Salvador included an objective to provide human rights training to several security sector entities, including the country’s national police. For a third project, USAID used an internal control mechanism to ensure human rights related content was included in police training. In this instance, the terms and conditions of USAID’s cooperative agreement included technical direction to the implementer that substantive instruction should address issues of gender-based violence, a human rights concern pertinent in the recipient countries. The remaining five USAID projects included no objectives or other internal control mechanisms to ensure that human rights content was incorporated. USAID officials explained that project documents did not include specific objectives to provide police training on respect for human rights because USAID projects generally have broader goals that are not specific to training police. Despite having few specific objectives or other internal control mechanisms intended to ensure that police training includes human rights content, USAID officials told us that USAID-funded police training delivered in fiscal years 2014 through 2017 consistently included such content. For example, according to these officials, training on community policing constituted a significant portion of police-related assistance in El Salvador, Guatemala, and Honduras, and USAID’s civilian policing policy guidance identifies respect for human rights as a core component of its community policing curriculum. Further, USAID officials posted in El Salvador, Guatemala, and Honduras, noted that police training delivered in each country incorporated human rights precepts. For example, in Honduras, USAID officials said the agency’s efforts included training police on human rights issues specifically to improve police engagement with vulnerable populations such as women and members of the lesbian, gay, bisexual, and transgender community. In addition to the information provided by USAID officials we spoke with, we reviewed reports from USAID’s implementing partners that contained information about police training delivered in fiscal years 2014 through 2017, some of which noted content related to human rights. For example, one implementing partner reported on providing training that included content on human rights, ethics, and the proper use of force. USAID officials told us that the decision to include training on respect for human rights is based on a series of factors, including USAID staff discretion, and noted that an internal control mechanism would help ensure that officials consistently consider the extent to which content related to respect for human rights would be appropriate to include in police training. State has not established specific objectives or other internal control mechanisms to ensure police training incorporates content promoting respect for human rights. We reviewed documents related to 14 INL- funded projects for El Salvador, Guatemala, and Honduras that officials identified as including assistance for police and that were implemented in fiscal years 2014 through 2017. None of the project documents we reviewed for the 14 INL-funded projects included police training objectives or other internal control mechanisms related to human rights. Officials explained that they do not have specific objectives to provide training on respect for human rights because they have designed objectives with a broader focus, such as to reduce insecurity and corruption. However, they agreed that establishing internal control mechanisms specific to human rights could help ensure training includes such content as appropriate. Although State has not established objectives or other internal control mechanisms to ensure that human rights content is included in police training, State officials told us that some INL-funded police training includes such content. For example, the ILEA program offers training that includes human rights content, such as its Human Rights course. However, ILEA and other INL-funded training implementers also offer training of a technical nature, such as first responder training and crime scene management, which may not warrant inclusion of human rights content. Officials also explained that because training content is developed and maintained by INL’s implementing partners, INL could not readily provide detailed information on the content of the training delivered to police. These officials said that the implementing partners, such as ILEA and other U.S. agencies, could provide more specific information on the content of INL-funded training. Our analysis of ILEA training delivered to police from El Salvador, Guatemala, and Honduras during fiscal years 2015 through 2017 found that 84 of 189 courses (or 44 percent) focused on or included content related to human rights. For example, the ILEA Human Rights course included content on fundamental human rights and relevant issues and challenges in participants’ countries. The ILEA Human Trafficking and Child Exploitation course included human rights content related to minority rights and vulnerable populations. Officials explained that some training, such as courses on crime scene management and other courses on topics of a technical nature, may not warrant the inclusion of content related to human rights. Absent objectives from State to deliver training to promote respect for human rights, officials from 10 key DHS and DOJ offices that implement INL-funded police training noted various extents to which respect for human rights is included in police training they deliver. For example, officials from DOJ’s Bureau of Alcohol, Tobacco, Firearms, and Explosives noted that they have delivered training on topics such as post- blast investigations and the eTrace firearms tracing system that does not warrant the inclusion of content related to respect for human rights. Officials from DHS’s U.S. Customs and Border Protection noted that police training they deliver, such as on conducting highway checkpoints, does not specifically address respect for human rights but contains best practices grounded in respect for human rights. Officials from 1 of the 10 offices we contacted—DOJ’s International Criminal Investigative Training Assistance Program—noted that all INL-funded police training that it delivered included a human rights component. While there is no requirement that all State- and USAID-funded police training include human rights content, these agencies consistently emphasize the importance of building police and other security forces that respect human rights. By establishing specific objectives in government- wide strategies or project-specific work plans or other internal control mechanisms, such as written policies, State and USAID could help ensure that police training incorporates human rights content, or continues to do so, as appropriate. Further, without such objectives or internal control mechanisms, it may be difficult for these agencies to account for the extent to which implementing partners include human rights content or to assess progress being made with respect to partner nation police forces’ respect for human rights—a key goal of U.S. strategy in Central America. While DOD and USAID training for recipients in the Northern Triangle may include police participants, police training is not a primary element of DOD and USAID assistance in El Salvador, Guatemala, and Honduras. Neither agency collects data in relation to a specific indicator on police training. Nonetheless, both agencies gather some information regarding civilian police they have trained. DOD’s primary security assistance objectives in El Salvador, Guatemala, and Honduras pertain to partner nation militaries; thus the agency does not collect data in relation to specific police training indicators. Nevertheless, information on training participants from civilian institutions such as police forces is available, according to DOD officials. For example, DOD officials identified civilian police participants from El Salvador and Guatemala who participated in DOD’s Defense Institute of International Legal Studies training events during fiscal year 2013. Further, the Foreign Military Training report tracks DOD training and includes participants’ units, which can be used to identify police and other civilian trainees. For instance, the report for fiscal years 2014 and 2015 identifies a 3-month counterdrug course delivered in fiscal year 2014 to 200 members of the elite Honduran police unit, the TIGRES. DOD also included police participants in courses primarily attended by military officials. For example, the report for fiscal years 2016 and 2017 indicated 3 members of the Salvadoran National Police attended a fiscal year 2016 course titled “Countering Transnational Threats in the Americas,” along with at least 20 military officials. USAID’s assistance in El Salvador, Guatemala, and Honduras consists of broader security sector reform efforts that include, but do not focus on, police training. Hence, USAID does not have indicators to specifically track police training. Consequently, officials explained that the level of detail that implementing partners reported on police training would vary project by project and would most likely be found in project-level reporting submitted by implementing partners. We reviewed quarterly and annual reports for USAID projects we included in our analysis and found examples of various levels of detail regarding the number of police trained. For example: In reporting on efforts to improve security in Honduras by increasing the capacity of community members and police, the implementing partner of USAID’s Convive! project noted that they had delivered training on community policing to 447 officers from April 2016 to June 2017. The implementing partner of USAID’s Security and Justice Sector Reform project in Guatemala reported holding workshops to build investigators’ capacity to gather information, write reports, and plan operations in a way that respects human rights, but the implementing partners’ reports did not specify the number of participants in those workshops. USAID’s implementing partner for its Justice Sector Strengthening project in El Salvador submitted a report on activities during October through December 2017 noting that they had (1) trained 150 officers in the fundamentals of community policing and (2) supported workshops on human rights, ethics, and the proper use of force for 113 officers. State is responsible for tracking progress toward a key indicator related to training police in El Salvador, Guatemala, and Honduras. Objective 3.1 of the U.S. Strategy for Central America is to “Professionalize Civilian Police,” and a related indicator is the “number and percentage of civilian police trained by INL.” However, INL officials in Washington, D.C., told us that while they collect data for certain types of police training, such as training provided through the ILEA program, they do not have reliable information readily available on the total number of police trained through INL-funded projects. INL collects some information on the number of police trained through efforts that it funds. For instance, officials from INL’s ILEA program were readily able to provide us with data showing that the program had provided 252 training courses to more than 1,600 police participants from El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017 (see table 2). In response to our request for information about INL’s fiscal year 2014 through 2017 police training efforts delivered through implementing partners other than ILEA, INL officials told us that they did not have readily available data on the number of police trained in El Salvador, Guatemala, and Honduras. They noted that they could ask INL staff at the U.S. embassies in those countries to manually compile data related to fiscal year 2017 training events, but that it would take officials months to produce similar data for prior fiscal years. After we narrowed our data request to fiscal year 2017 training events only, data we received in April 2018 from the embassies indicated that about 8,400 police—about 3,000 from El Salvador, 4,600 from Guatemala, and 800 from Honduras—received training from ILEA, the Colombian National Police Training program, U.S. agency trainers, and other INL-funded implementing partners. However, our analysis found that the data State provided were unreliable in that they did not include training delivered by some implementing partners or align with other training data provided to us by implementing partners. For example: First, fiscal year 2017 data from INL in El Salvador included INL- funded training delivered by Colombian police and two nongovernment implementing partners but no training delivered by U.S. government implementing partners. However, State and DOJ officials in Washington, D.C., told us that DOJ’s Drug Enforcement Administration and Federal Bureau of Investigation had delivered INL-funded courses to Salvadoran police during fiscal year 2017. Second, INL officials at the U.S. embassy in Guatemala told us that the training data they provided excluded training delivered by DOJ’s Federal Bureau of Investigation and the Miami-Dade Police Department. These officials assured us that more complete data associated with additional police training activities did exist, but they stated that they did not include these data because doing so would have required them to collect and compile data from several different sources—a difficult and time-consuming effort. Third, data from INL officials at the U.S. embassy in Honduras were similarly unreliable in that they did not align with training data we collected from implementing partners. For example, embassy data indicated there were 6 police participants of a training provided by DOJ’s Drug Enforcement Administration in Honduras, but DOJ reported that 34 Honduran police participated in the same training. Fourth, data from all three embassies included information about ILEA training that did not align with the data we received directly from the ILEA program. Officials from the U.S. embassy in Guatemala acknowledged that the ILEA data they had provided to us were likely unreliable. Officials from the ILEA program noted that they provide data on the number of police trained directly to headquarters INL officials who may have a need for such information. INL officials at the U.S. embassies in the Northern Triangle agreed the fiscal year 2017 data they provided to us may be unreliable in that the data are incomplete and may be inconsistent with data available from implementing partners. Despite acknowledging the information they provided had problems with reliability, INL officials told us that they would use a similar process to compile data for reporting progress related to the U.S. Strategy for Central America indicator on the number and percentage of civilian police trained by INL. In May 2018, State and USAID issued the first report to Congress on results of that strategy, which included data on the number of civilian police from El Salvador, Guatemala, and Honduras that INL trained during fiscal year 2017. Although INL officials told us that they used the same process to provide data to us in April 2018 and to compile data for the May 2018 report, we found the two sets of data differed. INL officials explained that these discrepancies were because State included training delivered to additional types of police and by more training implementers in its May 2018 report than they included in the data provided to us in April 2018. Despite identifying reasons for these discrepancies, INL officials acknowledged their data collection process is decentralized and agreed that improvements could be made in the availability and reliability of the data on the number of police trained. Moreover, INL noted challenges collecting these data. Specifically: INL officials from U.S. embassies in the Northern Triangle responsible for collecting police training data noted that a large number of implementing partners deliver training, which makes collecting data more difficult. These officials told us they are beginning to use a smaller number of institutions, such as local police academies, where implementing partners deliver INL- funded training. Officials believe this change has helped improve the reliability of their data on police training because a greater portion of the training is delivered through a small number of institutions, making it easier for implementing partners to track participation. However, the officials also noted that processes such as reviewing travel orders to find U.S. trainers who had visited the country and requesting data from individual implementing partners are still routinely employed to compile training data when such data are requested. INL officials in Washington, D.C., where police training data are aggregated for reporting purposes, told us that it is difficult to compile reliable information in a timely manner. This is because embassies use unique processes and systems to collect information on police training events and the data collected are not systematically consolidated within the individual embassies or centrally at INL headquarters. Further, they explained that following the establishment of the U.S. Strategy for Central America State received increased funding for police training efforts, particularly in fiscal year 2016. Although they used some of these funds to provide more training, they told us that INL was not fully prepared to implement proper internal control mechanisms to help ensure the collection of reliable data. According to these officials, this shortcoming was exacerbated by a worldwide hiring freeze for State that precluded INL from employing additional staff at the affected embassies to assist with data collection and analysis. INL officials stated that they recognize that effective data collection is a necessary element of high quality monitoring and evaluation. For that reason, in September 2017, the INL office for Western Hemisphere Programs contracted a private firm to conduct data collection and develop a data management system for INL efforts throughout the hemisphere, including those related to police training. INL officials told us they intend to extend the contract for the optional second year and are considering the potential need to procure additional contractor services to continue the effort after that. INL officials said that the contractors have made some progress toward the goals set forth in the contract but acknowledged that it is early in the process and that data reliability challenges remain. For example, according to agency officials, in June 2018, contractors were still developing a broad set of indicators related to INL efforts in the Western Hemisphere and had begun the process of collecting data related to some of them in June 2018. Further, the contractors reported that as of March 2018 they had yet to build a data management system or produce training materials and reporting templates for data collection. Readily available and reliable data allow managers to make informed decisions and evaluate an entity’s performance. Without such information, INL cannot accurately assess the number of police trained in the Northern Triangle—a key indicator in the U.S. Strategy for Central America. Further, it may be difficult to fully assess the extent to which training is having the desired effect. State, USAID, and DOD have established plans and taken action to support the ability of partner nations to sustain police training, including training on promoting respect for human rights. INL’s Sustainability Guide defines sustainability as the ability of host-country partners and beneficiaries to take complete responsibility for the foreign assistance programming, and maintain or improve program outcomes and impacts beyond the life of the program and U.S. government funding. Government-wide and funding agency guidance discusses the importance of sustainability for police assistance. According to Presidential Policy Directive 23 on Security Sector Assistance, a principal goal is to help partner nations build sustainable capacity to address common security challenges. Guidance from agencies that fund police training—including State, USAID, and DOD—also stresses the importance of sustainability in assistance for police. For example, State’s INL Guide to Police Assistance notes that police assistance projects should emphasize sustainable, institutional capacity building to achieve maximum effect. In line with such guidance, country-level and agency strategic and project documents have established objectives related to sustaining police training. For example, the Integrated Country Strategy for Guatemala for fiscal years 2014 through 2016 has an objective to assist the government in establishing, training, and maintaining anti-gang investigative units. Agency police training project documents also address sustainability. For example, the interagency agreement between INL and DHS’s U.S. Customs and Border Protection to enhance border security and build capacity in Honduras aims to create a trained law enforcement unit that is sustained by local resources. To enhance the sustainability of police training programs, agency officials identified various activities they undertake, including the following: Training-the-trainer. State’s INL Guide to Police Assistance states that train-the-trainer models can create a sustainable training program, and officials from multiple agencies told us that they use train-the-trainer programs to sustain police training. For example, the INL-funded Gang Resistance Education and Training program is a regional training program that trains police officers to teach children and young adults to resist the pressures to join gangs or engage in other risky behaviors. According to INL, this police training program has certified over 1,171 regional police officers as teachers and taught more than 211,000 at-risk youth in Central America. Developing policy or guidance. Officials from USAID stated that helping partner nations develop policy or guidance for law enforcement can help strengthen institutions and make police training more sustainable. For example, a USAID project in El Salvador supported the development of a new use-of-force policy that was adopted by the national police. Further, USAID supported the dissemination of the new policy by distributing 10,000 copies, training police instructors who subsequently taught the policy to other officers, and holding workshops on human rights, ethics, and the proper use of force. Supporting police academies. The ability of partner nations to incorporate and institutionalize training in their own police academies is among the most significant determinants of sustainability, according to U.S. officials from several agencies. For example, State officials said they try to incorporate curriculum from U.S. training into the law enforcement academies’ training curriculum in partner nations. They said doing so has a more lasting effect than individual training events and leads to the host government paying for the training going forward. In El Salvador, USAID developed community policing training in conjunction with the civilian national police that, according to officials, is now administered to every new police officer in the country at the country’s National Academy of Public Security (see fig. 4). At the same institution, INL supported the development of online training that includes a human rights component. According to INL officials, the Salvadoran police were planning to make the online training a yearly continuing education requirement for the entire police force. Continuing engagement. Officials from various agencies told us that continuing engagement with participants helps sustain police training, whether through additional training, on-the-job mentorship, or service requirements for receiving training. For example, the ILEA academy in San Salvador provides a list of alumni to the U.S. Embassy San Salvador and encourages implementing partners to follow up with these alumni, according to officials. The San Salvador academy also plans to develop an online alumni portal for engaging with past participants in order to sustain training. Building relationships. Building relationships—both within and across countries—between partners’ law enforcement agencies and rule of law institutions can help sustain police training, according to officials from multiple agencies. For example, in 2013, DOD’s Defense Institute of International Legal Studies conducted border security training in El Salvador that included military, police, and civilian officials. The training focused on improving El Salvador’s interagency cooperation and enhancing respect for human rights. To build and sustain relationships across countries, DOJ’s Federal Bureau of Investigation holds an annual training conference that brings together vetted police units from various partner nations, according to officials. Developing civil society. Officials from both State and USAID told us that police reform efforts are more sustainable if there are parallel civil society organizations that can advocate for accountability from police and other law enforcement institutions. USAID works with civil society and community organizations to track police abuses, including human rights violations. Officials said that external monitoring can promote the transparency, accountability, and effectiveness of the police. For example, USAID’s Justice, Human Rights, and Security Strengthening project in Honduras seeks to build the capacity of civil society organizations to advocate for vulnerable groups and victims of human rights abuses. Civilian police forces that protect human rights are essential to functioning democracies, and U.S. agencies recognize that it is important to include respect for human rights in training provided to partner nation security forces, including police. The need to bolster respect for human rights among security forces is specifically emphasized in assistance strategies for El Salvador, Guatemala, and Honduras—three countries with notable histories of human rights violations by security forces, according to State and USAID. However, unlike DOD, which has written policies requiring the inclusion of human rights content in its training, State and USAID have few such formal mechanisms to ensure human rights content is appropriately included. Creating internal control mechanisms, such as objectives or directives to training implementing partners, would help ensure that State- and USAID-funded police training is consistent with U.S. government and agency priorities in including content related to respect for human rights as appropriate. Such control mechanisms would also enable the agencies to better account for implementing partners’ related activities. In addition, State lacks a standardized process to readily compile reliable data on the total number of police trained through INL-funded programs in the Northern Triangle countries. Without such data, State cannot reliably report on progress toward the U.S. Strategy for Central America and thus cannot accurately assess the efficacy of such training. Addressing these two gaps—establishing internal control mechanisms related to human rights training content and improving police training data—would better position State to assess the outcomes of such training, the results of which could inform future funding and sustainment decisions. We are making a total of three recommendations, including two to State and one to USAID: The Secretary of State should ensure that the Bureau of International Narcotics and Law Enforcement Affairs (INL) designs internal control mechanisms to ensure human rights content is included in INL-funded police training for El Salvador, Guatemala, and Honduras as appropriate. (Recommendation 1) The Secretary of State should ensure that the Bureau of International Narcotics and Law Enforcement Affairs (INL) develops and implements a process to collect more reliable data on the number of police trained through INL-funded efforts in El Salvador, Guatemala, and Honduras. (Recommendation 2) The Administrator of USAID should design internal control mechanisms to ensure human rights content continues to be included in USAID-funded police training for El Salvador, Guatemala, and Honduras as appropriate. (Recommendation 3) We provided a draft of this product, which included three recommendations, to DHS, DOD, DOJ, State, and USAID for comment. State provided written comments, which we have reprinted in appendix II, concurring with our two recommendations to the agency. In response to the first recommendation, State noted that INL intends to amend templates for relevant implementing documents to address human rights as appropriate. In response to the second recommendation, State commented that, partly in response to our report, INL is developing specific indicators related to INL-funded police training. USAID also provided written comments, which we have reprinted in appendix III, concurring with our recommendation, and detailed two related policy revisions it intends to implement in response. State, DHS, and DOD provided technical comments, which we incorporated as appropriate. DOJ reviewed the report but did not provide comments. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Defense, Homeland Security, Justice, and State; and the USAID Administrator. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7141 or GroverJ@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Senate Report 115-125 accompanying the National Defense Authorization Act for Fiscal Year 2018 includes a provision for us to report on various aspects of U.S. police training efforts in El Salvador, Honduras, and Guatemala. In this report, we examine, for the Northern Triangle, (1) the extent to which U.S. agencies have established objectives for and delivered training to professionalize police, including promoting respect for human rights; (2) the extent to which agencies have collected data related to police training indicators; and (3) the actions U.S. agencies have planned and undertaken to support the ability of partner nations to sustain police training. To address these objectives, we reviewed government-wide and agency strategies, guidance documents, project documents such as work plans, and reports from the U.S. Departments of State (State) and Defense (DOD), and the U.S. Agency for International Development (USAID). We focused on State and USAID because officials identified them as the primary funders of police training in El Salvador, Guatemala, and Honduras. While DOD primarily provides assistance to military and other national security entities, we included DOD in our analysis because some of the training funded by the agency includes police participants. We included police training implemented by the Departments of Justice (DOJ) and Homeland Security (DHS) when their training efforts were funded by State, DOD, and USAID, but not separate efforts funded by DOJ and DHS. In addition to reviewing documents, we conducted fieldwork in El Salvador and interviewed agency officials in Honduras; Guatemala; and Washington, D.C., who oversee and conduct police training. To determine the extent to which U.S. agencies have established objectives for and delivered training to professionalize police, including promoting respect for human rights, we reviewed agency documents and assessed them against federal standards for internal control, which state that management should set objectives or other control mechanisms to meet an entity’s mission, strategic plan, and goals. Our analysis included U.S. global, regional, and country-specific strategies such as government- wide Integrated Country Strategies and DOD country security assistance plans for El Salvador, Guatemala, and Honduras. Officials from DOD, State, and USAID told us that all agency-funded classroom training delivered to police in El Salvador, Guatemala, and Honduras is done to professionalize those forces, of which training to promote respect for human rights may be one element. We also reviewed documents from DOD, USAID, and State about police assistance efforts implemented during fiscal years 2014 through 2017 that agencies identified as projects that included assistance for police in El Salvador, Guatemala, and Honduras. Specifically, we reviewed 22 projects—14 funded by State and 8 funded by USAID—that the agencies identified as including assistance for police. The projects and documents we identified for each agency are as follows: We reviewed DOD strategic plans covering assistance for El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017 and found that they did not contain objectives to specifically train police. DOD officials confirmed that security assistance they provide is focused on military recipients and that they had no projects to specifically provide assistance to civilian police. Thus, we determined that no DOD projects would be included in our review of project documents to identify objectives related to training to professionalize police. USAID provided a list of USAID-funded efforts in El Salvador, Guatemala, and Honduras implemented during fiscal years 2014 through 2017. Among the projects were eight with funds used for police training, which we included in our review. USAID provided work plans for six of the eight projects. For the remaining two projects, USAID did not identify similar project work plans, so we identified alternative documents to use for our analysis. For one of them, we used a progress report submitted to USAID by the contractor that included a project work plan specifically for fiscal year 2016. For the other, we used a final evaluation report that included the objectives of the project. State identified efforts funded by its Bureau of International Narcotics and Law Enforcement Affairs (INL) in El Salvador, Guatemala, and Honduras implemented during fiscal years 2014 through 2017. Because INL assistance generally includes police among target recipients of assistance, we requested project documents for all of the efforts State identified. We worked with State officials to identify project documents that included work plans or other summaries that identified objectives for these State- funded efforts. Ultimately, State provided documents for 19 projects. Based on our review of those documents, we determined 5 of the projects should not be included in our review for one or more of the following reasons: They (a) were not implemented during fiscal years 2014 through 2017, (b) did not provide assistance to police, or (c) did not have sufficient documentation provided by State to conduct our analysis. Among State efforts excluded from our scope due to insufficient documentation is State-funded training provided through the Colombian National Police. For the 14 projects that we included in our scope, we used documents such as work plans for our analysis of objectives. For each of the 22 USAID and State police assistance projects we reviewed, we analyzed related project documents, such as work plans or reports, to identify objectives or other internal control mechanisms related to police professionalization, including promoting respect for human rights. To do so, we assessed these documents using definitions we developed based on our analysis and discussions with agency officials, as follows: We defined “police” as civilian—not military—police, as well as other civilian law, customs, and maritime forces. We defined “training” as classroom-style training and workshops, not including mentoring or technical assistance. We defined “objective” as any statement containing the words goal, objective, aim, intent, we will, or other statements with actionable items aimed at reaching an end state. We defined “professionalize” in line with agency officials’ descriptions of the term, using related words such as professionalism, professional competence, or capacity building. We defined “promotion of respect for human rights” to specifically include the phrase human rights or elements of human rights as defined in agency documents, such as the proper use of force and minority rights, and the United Nations Universal Declaration of Human Rights. The project documents for the 22 projects in our scope were independently reviewed by two analysts. The analysts discussed and resolved any disagreements in their initial determinations about the extent to which project documents included relevant objectives or other internal control mechanisms. With respect to our reporting on the extent to which training incorporated content to professionalize police, agencies lack a formal definition of what types of training constitute police professionalism. To better understand what types of training we should consider to be training to professionalize police, we interviewed officials at U.S. agencies that fund and execute police training in El Salvador, Guatemala, and Honduras. Officials at agencies that fund and implement such training consistently described all training delivered to police to be training intended to professionalize recipients. Thus, for the purpose of this report, we defined training to professionalize police as all training provided to police and determined that all three agencies had delivered such training. With respect to reporting on the extent to which training incorporated content related to human rights, we spoke with implementing partner officials and analyzed documents on police training, such as training agendas and course catalogs. To determine the extent to which training delivered by State’s International Law Enforcement Academies program (hereafter referred to as ILEA) incorporated content related to human rights, we requested data from the program on the courses it provided to participants from El Salvador, Guatemala, and Honduras during fiscal years 2014 through 2017. We then analyzed the descriptions in fiscal years 2015, 2016, and 2017 course catalogs and embassy cables related to 189 training courses the ILEA program reported to have delivered to participants from El Salvador, Guatemala, and Honduras during fiscal years 2015 through 2017. For our analysis, we defined training to promote respect for human rights as training specifically addressing human rights or elements of human rights as defined in agency documents, such as the proper use of force and minority rights, and the United Nations Universal Declaration of Human Rights. If such human rights content was specified in the title or description of the course, we determined that the course included content related to human rights. To determine the extent to which agencies have collected data on police training indicators, we analyzed agency documents to identify indicators related to police training and assessed related data against federal internal control standards, which call for agencies to have readily available, reliable data to track progress toward goals. Specifically, we analyzed regional and country-specific strategies and the project documents described above to identify indicators directly related to objectives to provide police training. We identified, and agency officials confirmed, one key indicator in the U.S. Strategy for Central America for which State is responsible for collecting police training data. Specifically, objective 3.1 of the strategy is to “Professionalize Civilian Police,” and a related indicator is the “number and percentage of civilian police trained by INL.” That national strategy assigns State responsibility for tracking that indicator. We asked State to provide us with fiscal year 2014 through 2017 information related to the indicator. To assess the reliability of the data on participants of ILEA training events, we reviewed documents and interviewed cognizant officials about the ILEA Global Network, the program’s online system used to record all courses and participants receiving training provided by ILEA. For example, we determined that the ILEA program has (1) established and documented a process—described with clear steps in a user guide—to input accurate data and (2) periodically reviews the quality of that data. We determined that the data on ILEA training participation are sufficiently reliable for reporting on the number of police trained. Beyond the ILEA data, INL initially responded to our data request by explaining the difficulties in providing the requested information and suggesting they could provide a more limited set of data. We modified our request to include only fiscal year 2017 data, which were compiled separately for El Salvador, Guatemala, and Honduras by the responsible INL staff at the U.S. embassy in each country. We then interviewed cognizant officials and compared the data State provided in April 2018 with information that (a) we received from implementing partners, including U.S. agencies, and (b) was reported in State’s May 2018 progress report on results of the U.S. Strategy for Central America. We determined that State does not have readily available, reliable data on the total number of police trained, which we report as a finding. To determine actions U.S. agencies have planned and undertaken to support the ability of partner nations to sustain police training, including training to promote respect for human rights, we spoke with agency officials about related activities and analyzed project planning documents and reporting related to police assistance. Using this information, we determined the types of actions U.S. agencies had planned or undertaken and discussed these categories with agency officials to confirm that the categories accurately reflected agency actions. We conducted this performance audit from October 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Jennifer Grover, (202) 512-7141 or GroverJ@gao.gov. In addition to the contact named above, Biza Repko (Assistant Director), Drew Lindsey (Assistant Director), Kathryn Bolduc (Analyst-in-Charge), Ashley Alley, David Dayton, Martin de Alteriis, Gretta Goodwin, Dawn Locke, Stevenson Ramsey, James Reynolds, Cary Russell, and Brian Wanlass made key contributions to this report. Neil Doherty also provided technical assistance.", "summary": "Several U.S. agencies train police in the Northern Triangle countries of El Salvador, Guatemala, and Honduras, where corruption and human rights abuses have traditionally plagued civilian police forces. State, the primary agency responsible for foreign police assistance, allocated about $37 million to train police in these countries from appropriations for fiscal years 2014 through 2017. Although it is not a focus of their efforts, DOD and USAID also train police in the Northern Triangle. Senate Report 115-125 includes a provision for GAO to report on various aspects of U.S. police training efforts in the Northern Triangle. In this report, GAO examines, among other objectives, the extent to which U.S. agencies have (1) established objectives for and delivered training to professionalize police, including promoting respect for human rights, and (2) collected data related to police training indicators. GAO analyzed agency data and project documents, including for 22 State and USAID-funded projects implemented during fiscal years 2014 through 2017 that agencies identified as including assistance for police. GAO also conducted fieldwork in El Salvador and interviewed agency officials in Honduras; Guatemala; and Washington, D.C., who oversee and conduct police training. Agencies have established objectives and delivered training to professionalize police in Central America's Northern Triangle but have not consistently done so to promote police respect for human rights. U.S. strategies include objectives to professionalize police, and the Departments of State (State) and Defense (DOD) and U.S. Agency for International Development (USAID) have delivered related training (see figure). These strategies also highlight the importance of police respect for human rights, but agencies have few objectives or other control mechanisms to ensure police receive related training. For instance, none of the 14 State projects and 2 of the 8 USAID projects that GAO reviewed had such objectives. Officials said this is because objectives were designed to be broader in focus. DOD also does not have objectives but has other control mechanisms to ensure its training includes human rights content. Federal standards for internal control call for managers to establish control mechanisms consistent with priorities. Without them, it may be difficult for State and USAID to ensure that training supports agencies' goals to promote police respect for human rights. DOD, State, and USAID collect information on police training, but State lacks readily available, reliable data on the number of police trained—a key indicator in the U.S. Strategy for Central America . State's data are not readily available because, according to officials, the process to track training is decentralized and data are not consolidated. Further, GAO found State's fiscal year 2017 police training data to be unreliable because, among other reasons, the data did not include training delivered by some implementers. Officials noted that State did not have sufficient internal control mechanisms and staff in place to collect data as it expanded police training in the Northern Triangle. Without such data, State cannot accurately assess its efforts in Central America. To improve oversight of police training in the Northern Triangle, State and USAID should design control mechanisms to ensure human rights content is included as appropriate, and State should improve police training data. State and USAID concurred.", "document_type": "gao"}
{"report": "EEOICPA, as amended, generally provides compensation to employees of Energy under Part B, and under Part E, to its contractors, involved in the production of U.S. nuclear weapons and who developed illnesses related to their exposure to radiation and other toxins at Energy facilities. During and shortly after World War II, the United States sponsored the development, production, and testing of nuclear weapons. It used a network of facilities which eventually expanded into a complex of as many as 365 industrial sites and research laboratories throughout the country that employed more than 600,000 workers. Some of the production sites were owned by Energy or its predecessor agencies, and in many instances contractors managed operations at the facilities. Workers used manufacturing processes that involved handling dangerous materials and were often provided inadequate protection from exposure, although protective measures have increased over time. Because of national security concerns, they also worked under great secrecy, were unknowingly exposed to toxic materials, and often given minimal information about the materials they handled and the potential health consequences of exposure to them. In some cases, the extent of the potential negative effects of the toxins may not have been fully understood at the time of workers’ exposure. EEOICPA, as amended, consists of two compensation programs, Part B and Part E. The Part B program generally provides for $150,000 to eligible current or former employees or their survivors, as well as coverage of future medical expenses associated with certain radiogenic cancer, chronic beryllium disease, and chronic silicosis. Part E provides compensation to current or former contractors, subcontractors, or eligible survivors of up to $250,000 for wage loss and impairment, as well as coverage of medical expenses. Under certain circumstances, eligible claimants may receive compensation under both Part B and Part E. Under Part E, a contracted Energy employee or survivor can file a compensation claim, typically with a DOL district office (see fig. 1). Once a claim is filed, a DOL claims examiner develops the claim and ultimately recommends its approval or denial. To recommend an approval, the claims examiner must determine that the claimant was a current or former employee of an Energy contractor at a given Energy facility and that they were exposed to a toxic substance at that facility. Additionally, the examiner must find that it is at least as likely as not that the exposure was a significant factor in aggravating, contributing to, or causing a covered illness, and that the exposure was related to employment at an Energy facility. One of the resources used by the claims examiner is the Site Exposure Matrices (SEM), an online database of information on worksites, toxic substances, and associated illnesses. If the claims examiner determines that a claim meets all conditions, he or she recommends that DOL’s Final Adjudication Branch approve the claim. The Final Adjudication Branch then reviews the recommendation and issues a final decision. If the claimant provides new evidence before a final decision is reached, the Final Adjudication Branch may return the claim to the district office for additional development or issue a reversal. DOL provides some assistance to claimants as claims are adjudicated, such as assistance that may be required to develop facts pertinent to the claim, customer service activities, and information available in hard copy and on DOL’s website. However, it is generally the claimant’s responsibility to establish entitlement to compensation under the law. If a claim is denied, claimants are informed of several options, one of which is requesting that DOL reopen the claim. Claims can be reopened any time after the Final Adjudication Branch has issued a final decision, either as a result of a claimant request or agency action (see fig. 2). There is no limit to the number of times a claimant may request a reopening, though the claimant must either submit new evidence or identify a change in a relevant program policy when submitting such a request. Reasons for reopening can include an update to the SEM, new medical evidence, or new evidence of covered employment, among others. Moreover, a claimant may request reopening for each of multiple illnesses or conditions. When a claimant requests a reopening, DOL will review the request and either grant or deny the reopening, depending on DOL’s assessment as to whether there is sufficient evidence to warrant reopening. When a reopening request is granted, DOL vacates the previous final decision and submits the claim for readjudication. In addition, DOL may also reopen groups of related claims. When DOL announces new evidence linking toxins to illnesses, it can also announce plans to reopen groups of claims potentially affected by the new evidence. In these instances, DOL announces the criteria for reopening, which may involve specific substances or worksites, and provides reopening instructions for claims examiners. For example, Circular 15-04, issued in 2014 (now superseded) informed claims examiners that the substance trichloroethylene had been linked to kidney cancer and that previously denied Part E kidney cancer claims could be reopened. DOL officials previously told us that such steps are limited to instances in which a relatively large number of claims are potentially affected. DOL claims examiners use the SEM to help determine workers’ eligibility for Part E compensation. DOL created this web-based database which organizes and communicates information on the toxic substances workers were potentially exposed to at specific Energy worksites, certain buildings at the worksites, and while doing specific jobs at the worksites. As of May 2018, the SEM included information on 16,461 toxic substances and 129 former and current sites. It also cross-references the toxic substances with diseases for which there is an established link. In general, the SEM contains only causal links that are based on epidemiological studies, and for which there is medical and scientific consensus. The SEM provides a basis for exposure information, but is not the sole source of information considered by claims examiners during adjudication (see fig. 3). The SEM is publically available online and continually updated as new exposure data are obtained. According to a 2016 DOL document, there have been at least 656 revisions to the SEM since 2013. New links are primarily drawn from a database of hazardous toxins and associated diseases—known as Haz-Map—formerly maintained by the National Library of Medicine. According to DOL officials, as new links are added to Haz-Map, they are also added to the SEM. In 2010, we reported that DOL’s efforts to update the SEM were not subjected to independent outside review to provide assurance that the SEM is comprehensive and scientifically sound. In 2013, the Institute of Medicine evaluated the scientific rigor of the SEM in response to a request from DOL. Its report noted that some examples of causal links to diseases were missing from the SEM and questioned the SEM’s exclusive dependence on Haz-Map as its source for disease and causal information. The report also identified Haz-Map’s lack of peer review as a key limitation. Specifically, the report noted that Haz-Map lacked adequate oversight or content review by external, independent experts; relied heavily on sources that were not peer-reviewed, such as textbooks; and included references that were not easily accessible and were difficult to check, making quality assurance and technical review difficult. In addition, the report suggested that other sources be considered for inclusion in the SEM. By law, the Advisory Board is tasked with providing specific categories of technical advice to the Secretary of Labor regarding Part E of EEOICPA. These categories are: (1) the SEM; (2) medical guidance for claims examiners on weighing the medical evidence of claimants; (3) evidentiary requirements for certain claims related to lung disease; and (4) the work of certain experts, namely, industrial hygienists and consulting physicians and their reports. The Advisory Board has subcommittees aligned with these categories (see fig. 4). The Advisory Board charter provides for 12 to15 members and for 2-year terms for these members. Furthermore, applicable provisions of the Federal Advisory Committee Act’s implementing regulations require that Advisory Board membership be fairly balanced. Accordingly, its members have included representatives of the medical, scientific, and claimant communities. The Advisory Board is authorized until 2024. The Office of the Ombudsman for EEOICPA is an independent office within DOL. It was established by the National Defense Authorization Act of 2005, to provide information to address the concerns of claimants and potential claimants relating to EEOICPA, among other responsibilities. The Office of the Ombudsman submits an annual report to Congress that summarizes the number and types of complaints, grievances, and requests for assistance that it has received during the year. The report also includes an assessment of the most common difficulties encountered by claimants and potential claimants each year. The Secretary of Labor is required to provide a written response and must agree or disagree with specific issues raised in the report. In addition, the Office of the Ombudsman hosts and attends outreach events to assist claimants. The Office of the Ombudsman may not make decisions on claims nor act as an advocate for claimants. Based on the most recently reopened claims from calendar years 2012 through 2017, DOL reopened more than 7,000 claims filed by contracted Energy employees. DOL subsequently approved compensation for 69 percent. The remaining claims were denied (13 percent), still awaiting a final decision (2 percent), closed (2 percent), deferred (less than 1 percent) or had some other outcome (15 percent). (See fig. 5). Claims with other outcomes refer to claims for which at least one claimed illness was approved while the others were denied or deferred. Among those more than 7,000 claims, DOL initiated most of the reopenings (80 percent) itself, with fewer reopenings initiated by claimants. Regardless of a claim’s previous status of approved or denied, outcomes after reopening varied by who initiated the reopening. A higher percentage of reopenings initiated by DOL were approved (73 percent, or 4,236 of 5,831 claims) than reopenings initiated by claimants (53 percent, or 758 of 1,432 claims). (See table 1.) Officials at DOL and the Office of the Ombudsman said that DOL-initiated reopenings are more likely to be approved because, in deciding to reopen claims, DOL had already determined there was sufficient evidence to warrant reopening. In addition, DOL-initiated reopenings primarily involve large groups of claims, according to DOL officials. They said that many DOL-initiated reopenings are triggered by the establishment of cohorts of claims for radiation-related cancer or by DOL bulletins or circulars about new evidence linking toxins and specific illnesses at Energy worksites. (For a list of DOL bulletins and circulars associated with reopenings, see app. II.) In these situations, DOL officials said claims examiners manually review all previously denied claims that could be affected. Of the more than 7,000 reopened claims for contracted Energy employees from 2012 through 2017, more than 6,000 had been previously denied versus receiving another outcome. When reopened, whether initiated by DOL or claimants, most (70 percent, or 4,307) were approved (see table 2). In addition, as with all claims, a higher percentage of previously denied claims were approved (75 percent) if reopened at DOL’s initiative compared to those reopened at claimants’ initiative (52 percent). DOL officials provided data showing that most of the claims reopened from 2012 through 2017 that were subsequently denied compensation had common reasons, including insufficient medical evidence, ineligible survivors, or maximum benefits already met (see table 3). According to Office of the Ombudsman officials, some claims may have been denied as a result of claimants not understanding the evidence required for a reopening. These officials also said that claimants experience ongoing challenges at different stages of the adjudication process, including reopening, with regard to evidence required to support their claim. In the 2015 Annual Report to Congress, the Ombudsman noted claimants’ concerns about the reopening process. In particular, the Ombudsman found that DOL’s written communication with claimants requesting additional evidence or informing them of the final decision did not clearly explain what specific evidence was needed or why previously submitted evidence was deemed insufficient. In its 2016 annual report, while the Office of the Ombudsman acknowledged DOL’s efforts to ensure that decisions on claims are adequately reasoned and documented, and found that some recently issued decisions show improvement, it also found some variation in decision quality among claims examiners. Furthermore, consistent with its 2015 report, it also found that some claimants encounter challenges during the reopening process with written communication that is not clear on the evidence needed to reopen a claim. Our prior work also found deficiencies in the quality of a sample of DOL’s written communication with claimants and recommended that all claimant correspondence for Recommended and Final Decisions receive supervisory review. In that report, we noted that DOL’s own monitoring also indicated that some of the letters were not always clear about the evidence needed. Moreover, a recent review by DOL’s Office of the Solicitor of 77 denied reopening requests found shortcomings in the quality of some decision letters. These included the lack of a clear explanation for the denial, discussion of medical evidence submitted by the claimant, and discussion of why evidence submitted by the claimant was considered insufficient to warrant a reopening. Office of the Ombudsman officials told us that some claimants resubmit the same evidence they provided previously. This is due, in part, to claims examiners not acknowledging that they received and reviewed evidence when it was initially submitted, or to decision letters not explaining why the evidence submitted was not sufficient, according to Ombudsman officials. Consequently, claimants do not know what specific additional evidence may be needed and their claims may not be reopened and/or approved for compensation, these officials said. Failure to establish causation between exposure and illness and insufficient medical evidence are the two most common reasons why claimant-initiated reopenings are denied. In its written response to the 2015 report by the Office of the Ombudsman, DOL stated it was undertaking a review of its website and printed material to improve communication with claimants. DOL also stated that in 2015 it began providing training to claims examiners to improve the quality of written letters to claimants, including better explanation of what additional evidence would be needed to reopen a claim. DOL stated that improved communication would address claimants’ confusion and would allow staff to serve claimants on specific issues. As of July 2018, DOL officials said they have taken a number of steps to assist claimants and improve communication with them. For example, DOL conducts workshops for claimants’ Authorized Representatives covering such topics as the evidence needed to support a claim and how to request a reopening. DOL officials also said, in 2016, program officials visited all district offices to provide training on topics such as writing effective letters using reader-friendly language. Officials said that they continually review printed material and are currently updating the website to provide more concise information on the claims process, including how to request reopening of a claim. In addition, DOL officials stated that they recently hired a training analyst to update claimant resources posted to the website and to develop additional training for claims examiners. Officials said that the analyst will also develop a methodology for assessing the effectiveness of the training. Assessing the effectiveness of training represents an opportunity for DOL to address claimants’ concerns about the clarity of written correspondence they receive on claim evidence. According to Standards for Internal Control in the Federal Government, management should conduct ongoing monitoring and externally communicate the necessary quality information to achieve the entity’s objectives. These standards also require management to periodically evaluate its methods of communication so that it has the appropriate tools to communicate quality information. In addition, the EEOICPA Procedure Manual states that claims examiners must ensure that written decisions are clear, concise, and well-written with language that clearly communicates the necessary information. An assessment of DOL’s training which considers claimant concerns could help DOL better understand why some claimants remain confused about the reopening process and do not submit evidence key to supporting their claim. Until then, the agency will be unable to determine whether its training has resulted in improving communication with claimants and to target future training resources effectively. The Advisory Board in 2016 and 2018 recommended DOL incorporate additional, peer-reviewed data sources on the links between toxic substances and illnesses catalogued in the SEM, but while DOL previously agreed that doing so would be useful, it has not yet added all the sources recommended by the Advisory Board. According to Advisory Board members, incorporating these additional sources would enhance the SEM by making it more comprehensive and scientifically sound. The Advisory Board’s work on the SEM began at its first meeting in April 2016 with the creation of a subcommittee on the SEM (see fig. 6). The subcommittee reviewed the scientific soundness of the SEM and in October 2016 the Advisory Board provided one of two related recommendations to DOL that addressed the scientific soundness of the SEM’s data on toxic substances and diseases. At its October 2016 meeting, the Advisory Board recommended DOL incorporate 13 additional information sources created by other agencies or entities into the SEM. This recommendation was consistent with the Institute of Medicine’s recommendation to DOL in its 2013 report on the SEM. In September 2017, DOL responded to this recommendation, noting that certain additional sources identified by the Institute of Medicine might be useful. In its response, DOL asked the Advisory Board to narrow its list of 13 databases to those that would be most relevant, noting that DOL found that some of these sources were not relevant to occupational exposure, were redundant, or contradicted other sources. DOL also requested the Advisory Board’s advice on how the recommended sources could be used in the SEM. In January 2018, the Advisory Board made its second recommendation regarding the scientific soundness of the SEM’s data on toxic substances and specific diseases by identifying three priority information sources from the 13 originally recommended in October 2016 (see table 4). According to DOL, the Haz- Map has included one of these three sources—the monographs on human carcinogens of the International Agency for Research on Cancer—since the Haz-Map was first published in 2002, and included in the SEM since approximately 2006. According to DOL, the International Agency for Research on Cancer is recognized as the world’s most authoritative resource for information on human carcinogens and an important source of information for populating health effect data in SEM, given its assembled expertise and the scientific veracity of its publications. Its incorporation in the SEM has prompted reopenings of affected claims. DOL officials said Advisory Board members may have been unaware of this earlier incorporation of data in the SEM. In its response to DOL, however, the Advisory Board stated that it continued to believe that incorporation of all of the information sources originally recommended by the Institute of Medicine would be useful. The Advisory Board’s recommendations on incorporating additional peer- reviewed information sources in the SEM were consistent with the earlier report of the Institute of Medicine, which found that these additional data sources generally follow a systematic methodology, reflect peer review, provide more information on linkages between toxic substances and specific diseases, and could enhance the scientific soundness of the SEM. The three information sources that the Advisory Board recommended for inclusion in the SEM in January 2018 provide information on toxic substances and their health effects, and all are peer-reviewed. The Environmental Protection Agency’s Integrated Risk Information System contains information on 511 chemicals and provides fundamental scientific information used to develop human health risk assessments. The National Toxicology Program’s Report on Carcinogens currently lists 248 substances, agents, and mixtures that are known or reasonably anticipated to cause cancer in humans. The International Agency for Research on Cancer, part of the World Health Organization, is considered the authoritative source for information on cancer, according to officials of the National Academies of Sciences, Engineering, and Medicine. In August 2018, DOL responded to the Advisory Board’s recommendation regarding these three potential additional data sources. DOL’s response noted that it uses relevant data from the International Agency for Research on Cancer in claims adjudication, including updates to these data. Regarding the other two data sources, however, DOL declined the recommendation. While noting that these two sources include voluminous and complex data, DOL also noted that the Advisory Board did not offer its own analyses of either the credibility or the scientific reliability of the materials in these databases, and DOL did not think it appropriate to add the databases’ information on health effects to the SEM in the absence of any rigorous and comprehensive investigations by the Advisory Board. DOL’s response also noted that it would consider additional input should the Advisory Board be in a position to offer more specific guidance regarding the content of data sources that would be applicable and appropriate to the administration of the program. Contracted Energy employees who carried out the nation’s nuclear weapons production were often unaware of the extreme personal hazards they faced while serving their nation and learned of the risk only when they were later stricken by illness caused by exposure to toxins. It is imperative their claims for compensation be given the attention and care needed to fairly administer this compensation program. The most scientifically up-to-date information should be used to determine the health effects of various toxic substances, and claimants should be assisted in their efforts to meet statutory requirements for claims. Despite DOL efforts to improve the quality of written communication to claimants, some claimants continue to be confused about the evidence needed to successfully reopen and support their claim. DOL letters that clearly communicate what evidence is needed to support a claim could provide claimants with the opportunity to better understand the reopening process while minimizing the frustration of having their claim repeatedly denied and assuring a fair consideration of such claims. We are making one recommendation: The Secretary of Labor, in conducting any assessment of its staff training designed to improve clarity of communication with claimants, should ensure that the assessment considers claimants’ challenges with understanding DOL’s written communications on the evidence needed to successfully reopen or otherwise support a claim. We provided a draft of this product to the Department of Labor (DOL) for comment. In its comments, reproduced in appendix III, DOL neither agreed nor disagreed with our recommendation to ensure that the assessment of staff training considers claimants’ challenges regarding the evidence needed to successfully reopen or otherwise support a claim. However, DOL acknowledged that it plans to focus its staff training efforts on a variety of needed training topics, including improving the quality of written communications. DOL further noted that its recently hired training analyst will be responsible for, among other things, designing assessment measures to gauge the quality of training and the effect it has improving the overall quality of claim outcomes. We continue to encourage DOL to design its assessment so that it considers claimants’ challenges in understanding the evidence needed. DOL also provided technical comments, which we incorporated as appropriate. In addition, we provided relevant report sections to the Office of the Ombudsman, members of the Subcommittee on the Site Exposure Matrices of the Advisory Board on Toxic Substances and Worker Health, and officials of the National Academies of Sciences, Engineering, and Medicine for their technical comments and incorporated them, as appropriate. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from its issue date. At that time, we will send copies of this report to the appropriate congressional committees; the Secretary of Labor; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or gurkinc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. We examined (1) the number of compensation claims for illnesses resulting from exposure to toxins that were reopened by the Department of Labor (DOL) and their final outcome; (2) the extent to which an advisory board on toxic substances and worker health reviewed and advised DOL on the scientific soundness of DOL’s database on toxins and their potential links to occupational diseases, and DOL’s response. To address our objectives, we: 1. Reviewed relevant federal laws, regulations and guidance; 2. Requested summary data from 2012 to 2017 from DOL related to the reopening process, including claims assessed for reopening, claims actually reopened, and outcomes for reopened claims and, for claims denied after being reopened, the reasons for denial; 3. Reviewed DOL program documents; 4. Reviewed recommendations of the Advisory Board on Toxic Substances and Worker Health (Advisory Board) submitted to DOL from October 2016 to January 2018, and DOL’s responses to those recommendations, as well as Advisory Board minutes and other documentation; 5. Interviewed DOL officials; members of the Advisory Board on Toxic Substances and Worker Health; officials of the National Academies of Sciences, Engineering, and Medicine; and a representative of an advocacy group. We conducted this performance audit from September 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Review of Federal Laws, Regulations, and Guidance We reviewed relevant federal laws, including the Energy Employees Occupational Illness Compensation Program Act of 2000 (EEOICPA), the National Defense Authorization Act of 2015, National Defense Authorization Act for Fiscal Year 2005, and the Federal Advisory Committee Act, as well as relevant federal regulations. In addition, we reviewed relevant guidance, including the Federal Energy Employees Occupational Illness Compensation Program Act Procedure Manual, as well as relevant Energy Employees Occupational Illness Compensation Program Act Bulletins and Circulars. Analysis of DOL Data on Reopened Claims and Subsequent Decisions To address our first objective, we obtained and analyzed data from DOL’s Energy Compensation System from January 1, 2012 through December 31, 2017. We selected 2012 as the first year of our review period because the program transitioned to a new data system that year, and 2017 as the last year to obtain the most recent data available at the time of our review. We obtained and analyzed data for the following types of claims: Claims reviewed for reopening. We analyzed the data DOL provided on claims that it reviewed for reopening, that is, claimant requests for reopening (claimant-initiated reopenings), and claims identified by DOL for potential reopening (DOL-initiated reopenings). The total claims DOL reviewed for reopening was 10,652. All claims actually reopened: We obtained the aggregate number of all claims that were reopened. These claims totaled 8,234. We also obtained data for each individual claim, including reopening request date, reopening request type, reopening date, original final decision type, and outcome type. The reopening request type indicates whether the claim was claimant- or agency-initiated. The original final decision type refers to the final decision when the claim was originally adjudicated. The outcome type refers to the subsequent final decision following reopening. Most recently reopened claims: As we did for all reopened claims, we obtained aggregate data on all the most recently reopened claims. These claims totaled 7,263. By using the most recently reopened claims, we were able to examine one claim for each claimant, to provide a consistent unit of analysis, given that claimants can have multiple claims at one time, and there is no limit on the number of times they can request reopening of their claims. We also obtained data on each individual claim that included the same categories as those listed above for all reopened claims. We assessed the reliability of the data obtained by (1) reviewing existing information about the data and the system that produced them, and (2) interviewing agency officials knowledgeable about the data. We determined that the data were sufficiently reliable for purposes of providing information on the number of claims for illnesses resulting from exposure to toxins that DOL reopened since 2012 and the outcome. However, there was one limitation to the data obtained: according to DOL officials, the Energy Compensation System does not allow a particular final decision to be linked to a particular reopened claim, given that claims may be reopened multiple times and may be filed for multiple conditions. As a result, DOL officials queried the system to match the final decision issued most recently after the reopening as the basis of the provided data. DOL officials explained that the data system’s codes used to record final decisions do not reflect the full complexity of a case, and reflect the fact that claims may be filed for multiple conditions. To illustrate this, figure 7 depicts a hypothetical example of a claimant requesting reopening of claims for three conditions (emphysema, hearing loss, and bladder cancer) that had been denied previously. The code assigned to the final decision, although appropriate, does not reflect the full complexity of the claims’ history. In the example below, given that there were three initial reopening requests for different conditions, a new reopening request for one of these conditions (hearing loss), and two subsequent final decisions, it is unclear from the coding in DOL’s system which final decision corresponds to which reopening request. We reviewed DOL summary tables on claims data to analyze the most recently reopened claims from January 1, 2012 through December 31, 2017. To assess the outcomes of these claims, we examined both the initial and subsequent final decisions. We first grouped DOL final decisions into categories (see table 4). We decided to develop an “Other” category so that claims with both approvals and denials would be grouped together. Claimants can have multiple medical conditions and when they receive a final decision, some medical conditions may be approved while others are denied. Claims with such mixed outcomes are coded in the Energy Compensation System as “Approved and Denied Only” or “Approved, Denied and Deferred Only.” The code “Approved, Denied and Deferred Only” refers to claims where a final decision has been rendered on claims for some illnesses—approving at least one and denying at least one—while a decision for at least one other claimed illness is deferred for further development until it is ready for a final decision. We then analyzed the initial and the subsequent final decisions. To address our first objective, we reviewed certain program documents. Specifically, we reviewed selected Accountability Reviews, which are conducted by the Division of Energy Employees Occupational Illness Compensation to monitor the quality of claims adjudication. According to program officials, these reviews serve as a quality control tool and regularly examine whether decisions on claims were supported as well as issues such as payment accuracy. They may also occasionally include other issues, including issues related to the reopening process. In addition, we reviewed a review of reopening requests that were denied conducted by the DOL Office of the Solicitor in 2017. Additionally, we reviewed information related to reopened claims in the annual reports of the Office of the Ombudsman for calendar years 2012 through 2015, and DOL’s responses to the reports for calendar years 2013 through 2015. Review of Advisory Board Recommendations, DOL Responses, and Other Documents To address our second objective, we reviewed all recommendations that the Advisory Board made to DOL about the Energy Employees Occupational Illness Compensation Program Act of 2000, in order to identify those recommendations related to the scientific soundness of the Site Exposure Matrices (SEM), and DOL’s responses to these recommendations. Specifically, we reviewed the eight recommendations made by the Advisory Board in October 2016, and DOL’s response in November 2017; the three recommendations made by the Advisory Board in June 2017, and DOL’s response in March 2018; the seven overarching recommendations made by the Advisory Board in April 2017, and DOL’s response in September 2017; and the ten recommendations made by the Advisory Board in January 2018, all of which referred back to previous recommendations, in some cases revising the previous recommendation. We also reviewed DOL’s responses to these recommendations in August 2018. In addition, we reviewed the Advisory Board’s charter and minutes from selected meetings of the full Advisory Board and from the Subcommittee on the Site Exposure Matrices. In addition, in order to understand the Advisory Board’s recommendations about the Site Exposure Matrices, we reviewed a report on the scientific rigor of the SEM, Review of the Department of Labor’s Site Exposure Matrix Database (Washington, D.C.: The National Academies Press, 2013). DOL asked the Institute of Medicine to review the SEM database and its underlying source of toxic substance–occupational disease links. To review the SEM, the Institute of Medicine formed an ad hoc committee of experts in occupational medicine, toxicology, epidemiology, industrial hygiene, public health, and biostatistics, who conducted an 18-month study to review the scientific rigor of the SEM. To address both objectives, we interviewed DOL officials and others with relevant knowledge or experience of the Energy Employees Occupational Illness Compensation Program Act of 2000. Specifically, we interviewed officials of DOL’s Division of Energy Employees Occupational Illness Compensation about topics including the reopening process, how data about reopened claims are stored in the information system, reviews of specific reopened claims, and DOL’s response to recommendations of the Advisory Board. We also interviewed officials of DOL’s Office of the Ombudsman for EEOICPA about topics such as claimants’ concerns about the reopening process and about the SEM. In addition, we interviewed officials of the National Academies of Sciences, Engineering, and Medicine, who facilitated the work of the committee that produced the report, Review of the Department of Labor’s Site Exposure Matrix. We asked the officials about topics such as the process used to recruit experts for the review, the report’s methodology, the report’s approach to scientific rigor, and the report’s recommendations. Additionally, we interviewed members of the Advisory Board on Toxic Substances and Worker Health’s Subcommittee on the Site Exposure Matrices, who represent the medical, scientific, and claimant communities. We asked the Advisory Board members about topics such as their review of the SEM and the priorities, if any, that they considered in doing so; their approach to scientific rigor and scientific soundness; and their recommendations to DOL. Finally, we interviewed a representative of the Alliance of Nuclear Workers Advocacy Groups about topics that included the challenges, if any, that claimants experience regarding reopened claims and use of the SEM, and the Advisory Board’s recommendations to DOL. Energy Employees Occupational Illness Compensation Program Act Bulletins Associated with Part E Reopenings 1. Department of Labor, EEOICPA Bulletin 12-01, Chronic Lymphocytic Leukemia (CLL) as Radiogenic Cancer under the Energy Employees Occupational Illness Compensation Program Act (EEOICPA), March 7, 2012. 2. Department of Labor, EEOICPA Bulletin 13-02, Systematic Review of Denied Part E Cases, February 21, 2013. 3. Department of Labor, EEOICPA Bulletin 16-01, Criteria for Establishing Causation for Asthma Claims Under Part E of the Energy Employees Occupational Illness Compensation Program Act (EEOICPA), s, October 26, 2015. 4. Department of Labor, EEOICPA Bulletin 16-02, Presumptions Available for Accepting Chronic Obstructive Pulmonary Disease (COPD) Under Part E of the Energy Employees Occupational Illness Compensation Program Act, December 28, 2015. 5. Department of Labor, EEOICPA Bulletin 16-03, Instructions for Use of the Direct Disease Linked Work Processes (DDLWP) in the Site Exposure Matrices (SEM) under Part E of the Energy Employees Occupational Illness Compensation Program Act (EEOICPA), July 11, 2016. Energy Employees Occupational Illness Compensation Program Act Circulars Associated with Part E Reopenings 1. Department of Labor, EEOICPA Circular 13-06, Review of Denied Bladder Cancer Cases under Part E. (Superseded by Procedure Manual Chapter 15), February 21, 2013. 2. Department of Labor, EEOICPA Circular 13-12, Review of Denied Ovarian Cancer Cases under Part E. (Superseded by Procedure Manual Chapter 15), August 29, 2013. 3. Department of Labor, EEOICPA Circular 15-04, Review of Cases Involving Exposure to TCE and the Development of Kidney Cancer. (Superseded by Procedure Manual Chapter 15), November 1, 2014. 4. Department of Labor, EEOICPA Circular 15-05, Occupational Exposure Guidance Relating to Asbestos. (Superseded by Procedure Manual Chapter 15), December 17, 2014. 5. Department of Labor, EEOICPA Circular 17-04, Rescind Post 1995 Toxic Exposure Guidance, February 2, 2017. 6. Department of Labor, EEOICPA Circular 18-01, Idiopathic Disease Diagnosis, December 6, 2017. In addition to the contact named above, Meeta Engle (Assistant Director), Chris Morehouse (Analyst-In-Charge), and LaToya King made key contributions to this report. Also contributing to this report were Susan Aschoff, James Bennett, Joseph Cook, Sheila R. McCoy, Jean McSween, Alex Galuten, David Perkins, Tim Persons, Benjamin Sinoff, Almeta Spencer, and Jerome Sandau. Energy Employees Compensation: DOL Generally Followed Its Procedures to Process Claims but Could Strengthen Some Internal Controls. GAO-16-74. Washington, D.C.: March 10, 2016. Energy Employees Compensation: Additional Independent Oversight and Transparency Would Improve Program’s Credibility. GAO-10-302. Washington, D.C.: March 22, 2010. Energy Employees Compensation: Actions to Promote Contract Oversight, Transparency of Labor’s Involvement, and Independence of Advisory Board Could Strengthen Program. GAO-08-4. Washington, D.C.: October 26, 2007. Energy Employees Compensation: Adjustments Made to Contracted Review Process, But Additional Oversight and Planning Would Aid the Advisory Board in Meeting Its Statutory Responsibilities. GAO-06-177. Washington, D.C.: February 10, 2006.", "summary": "For decades, Energy, its predecessor agencies, and contractors employed thousands of employees in hazardous work in nuclear weapons production, exposing many employees to toxic substances. The Energy Employees Occupational Illness Compensation Program, administered by DOL, provides compensation for illnesses linked to exposures. Since 2004, DOL has provided about $4.4 billion to eligible employees and their survivors. GAO was asked to review aspects of the claims process for contracted employees. GAO examined (1) the number and outcome of compensation claims for illnesses resulting from exposure to toxins that DOL has reopened since 2012, and (2) the Advisory Board's advice to DOL on the scientific soundness of its database on toxins and illnesses, and DOL's responses. GAO analyzed DOL claims data for 2012—when a new data system was introduced— through 2017 and assessed their reliability. GAO reviewed relevant federal laws and DOL procedures, and Advisory Board documents and interviewed DOL officials, Advisory Board members, experts, and a claimant advocate. The Department of Labor (DOL), from 2012 through 2017, reopened more than 7,000 compensation claims by contracted workers with illnesses resulting from exposure to toxins at Department of Energy (Energy) worksites. Of these reopened claims, 69 percent were approved for compensation (see figure). Claims can be reopened for various reasons, including new information on toxic substances and associated illnesses or new evidence provided by a claimant. According to DOL's Office of the Ombudsman officials, some claims may have been denied as a result of claimants not understanding the evidence required to support their claim. Moreover, the Ombudsman's two most recent reports in 2015 and 2016 found DOL's letters to claimants requesting additional evidence or informing them of the final decision did not clearly explain the specific evidence needed or why previously submitted evidence was deemed insufficient. GAO's previous work also found deficiencies in the quality of a sample of DOL's written communication with claimants. DOL has provided training to claims examiners on how to write clearly in correspondence and plans to assess the training. The assessment is an opportunity for DOL to better understand why some claimants remain confused about needed evidence and could help DOL target its training resources more effectively. The Advisory Board on Toxic Substances and Worker Health (Advisory Board) recommended in 2016 and 2018 that DOL incorporate additional sources of information on toxic substances and associated illnesses into the database it uses to help determine eligibility for claims compensation. While DOL noted that certain additional data sources might be useful, it has not added all of the recommended data sources. The Advisory Board was created to provide technical advice to DOL on its database, among other things. GAO recommends that DOL ensure any assessment of its staff training efforts considers claimants' challenges with understanding DOL's communications on evidence for claims. DOL neither agreed nor disagreed with the recommendation except to note that it plans to focus its training on such topics as quality of written communications and assess its training efforts.", "document_type": "gao"}
{"report": "The BSA established reporting, recordkeeping, and other AML requirements for financial institutions. Regulation under and enforcement of BSA involves several federal agencies. FinCEN is responsible for administering the BSA and has authority for enforcing compliance with its requirements and implementing regulations, including through civil money penalties. FinCEN issues regulations under BSA and delegated BSA/AML examination authority for banks to the federal banking regulators. The federal banking regulators have issued their own BSA regulations that require banks to establish and maintain a BSA/AML compliance program. The federal banking regulators may take enforcement actions for violations of BSA/AML requirements. They may also assess civil money penalties against financial institutions and individuals independently, or concurrently with FinCEN. Both federal and state agencies oversee money transmitters. FinCEN has delegated examination authority for BSA compliance for money transmitters to the Internal Revenue Service (IRS). Money transmitters must register with FinCEN and provide information on their structure and ownership. According to Treasury, in all states except one, money transmitters are required to obtain licenses from states in which they are incorporated or conducting business. All banks and money transmitters are required to establish an AML compliance program that includes policies, procedures, and processes which, at a minimum, must provide for (1) a system of internal controls to ensure ongoing compliance, (2) a designated individual or individuals responsible for managing BSA compliance (BSA compliance officer), (3) training for appropriate personnel, and (4) independent testing for BSA/AML compliance. Additionally, as of May 11, 2018, banks and certain other financial institutions are required to implement appropriate risk-based procedures for conducting ongoing customer due diligence. Banks must also have policies and procedures for opening accounts and verifying the identity of each customer and monitoring transactions and reporting suspicious activity. Finally, banks and money transmitters must comply with certain reporting requirements, including the following: CTR: A bank must electronically file a CTR for each transaction in currency—such as a deposit or withdrawal—of more than $10,000 SAR: Banks are required to electronically file a SAR when a transaction involves or aggregates at least $5,000 in funds or other assets, and the institution knows, suspects, or has reason to suspect that the transaction meets certain criteria qualifying as suspicious. Remittances can be sent through money transmitters and banks, among other organizations. International remittances through money transmitters and banks may include cash-to-cash money transfers, international wire transfers, some prepaid money card transfers, and automated clearinghouse transactions. If a remittance sender’s bank does not have a direct relationship with the remittance recipient’s bank, the bank-to-bank transfer scenario becomes more complicated. In such cases, one or more financial institutions may rely upon correspondent banking relationships to complete the transaction. A typical remittance sent through a bank may be in the thousands of dollars, while the typical remittance sent by money transmitters is usually in the hundreds of dollars. Historically, many consumers have chosen to send remittances through money transmitters due to convenience, cost, familiarity, or tradition. Money transmitters typically work through agents—separate business entities generally authorized to, among other things, send and receive money transfers. Money transmitters generally operate through their own retail storefronts, or through grocery stores, financial services outlets, convenience stores, and other retailers that serve as agents. Figure 1 shows one type of common money transmitter transaction known as cash-to-cash transfer. Remittances from the United States are an important source of funds for our case-study countries—Haiti, Liberia, Nepal, and Somalia. The Organisation for Economic Co-operation and Development identified these countries as fragile states because of weak capacity to carry out basic governance functions, among other things, and their vulnerability to internal and external shocks such as economic crises or natural disasters. In our February 2018 report, we found that money laundering risk is high in the Southwest border region because of the high volume of cash transactions, the number of cross-border transactions, and foreign account holders. Our nationally representative survey found that many Southwest border banks may be engaging in derisking. Nationally, our econometric analysis suggested that counties that were urban, younger, had higher income, or had higher money laundering-related risk were more likely to lose branches. Money laundering-related risks were likely to have been relatively more important drivers of branch closures in the Southwest border region. In February 2018, we reported that money laundering risk is high in the Southwest border region because of the high volume of cash transactions, the number of cross-border transactions, and foreign account holders, according to bank representatives, federal banking regulators, and others we spoke with. Cash transactions increase the BSA/AML compliance risk for banks because the greater anonymity associated with using cash results in greater risk for money laundering or terrorist financing. Our review of data on banks’ CTR filings confirmed that bank branches that operate in Southwest border region counties handled more large cash transactions than bank branches elsewhere. Specifically, in 2016, bank branches in Southwest border region counties filed nearly 30 percent more CTRs, on average, than bank branches in comparable counties elsewhere in their same state, and about 60 percent more than those in other high-risk counties outside the region. Similar differences occurred in 2014 and 2015. We also reported that cross-border transactions are at a higher risk for money laundering because international transfers can present an attractive method to disguise the source of funds derived from illegal activity. Southwest border banks cited foreign account holders as another type of high-risk customer for money laundering and terrorist financing. These types of customers are prevalent in the Southwest border region, examiners said, and can create challenges for banks to verify and authenticate their identification, source of funds, and source of wealth. The volume of high-risk customers and cross-border transactions can lead to more intensive account monitoring and investigation of suspicious transactions, Southwest border bank representatives said. Performing effective due diligence and complying with customer identification requirements for higher-risk customers and transactions can be more challenging because banks might need specialized processes for higher- risk customers and transactions than for those that are lower risk. Southwest border bank representatives we spoke with said addressing these compliance challenges can also require more resources for monitoring high-risk customers and investigating suspicious transactions. For example, in 2016, bank branches in the Southwest border region counties filed three times as many SARs, on average, as bank branches operating in other counties within Southwest border states and about 2.5 times as many SARs, on average, as bank branches in other high-risk financial crime or drug trafficking counties in nonborder states. These differences in SAR filings showed a similar pattern in 2014 and 2015. In February 2018, we found that most Southwest border banks reported terminating accounts for reasons related to BSA/AML risk. Based on our survey results, from January 1, 2014, through December 31, 2016, we estimated that almost 80 percent of Southwest border banks had terminated personal or business accounts for reasons related to BSA/AML risk. The most common reasons related to BSA/AML risk Southwest border banks reported for terminating accounts were the filing of SARs associated with the accounts, the failure of the customer to respond adequately to requests for information as part of customer due diligence processes, and the reputational risk associated with the customer type (an estimated 93 percent, 80 percent, and 68 percent, respectively). Of the high-risk businesses for money laundering and terrorist financing that we identified in our survey, cash-intensive small businesses (for example, retail stores, restaurants, and used car dealers) were the most common type of business accounts that Southwest border banks reported terminating accounts for reasons related to BSA/AML risk. Over 70 percent of Southwest border banks reported terminating these accounts. A majority of Southwest border banks and banks that did not operate in the Southwest border region (non-Southwest border banks) reported limiting or not offering accounts to certain types of businesses considered high risk for money laundering and terrorist financing, particularly money services businesses and foreign businesses. The most common reason (cited by 88 percent of Southwest border banks) for limiting, or not offering, an account to these types of businesses was that the business type fell outside of the bank’s risk tolerance—the acceptable level of risk an organization is willing to accept around specific objectives. Similarly, 69 percent of Southwest border banks cited the inability to manage the BSA/AML risk associated with the customer (for example, because of resource constraints) as a factor for limiting, or not offering, accounts. Similarly, the most common reason that non-Southwest border banks reported limiting, or not offering accounts, to certain types of businesses considered high risk for money laundering and terrorist financing was that the customer type fell outside of the bank’s risk tolerance. Further, in February 2018 we found that the second most common reason—cited by 80 percent of Southwest border banks—for limiting, or not offering, accounts to certain types of businesses considered high risk for money laundering and terrorist financing, was that the customer type drew heightened BSA/AML regulatory oversight—behavior that could indicate derisking. For example, representatives from one Southwest border bank explained that they no longer offer accounts to money services businesses because they want to be viewed from a good standpoint with their regulator. They added that banking for these types of customers is very high risk for the bank with very little reward. Another bank that operates in the Southwest border region explained that rather than being able to focus on their own BSA/AML risk assessment and the performance of accounts, they feel pressured to make arbitrary decisions to close accounts based on specific concerns of their examiners. Several Southwest border bank representatives also described how recent BSA/AML law enforcement and regulatory enforcement actions have caused them to become more conservative in the types of businesses for which they offer accounts. In addition, while banks may terminate accounts because of SAR filings as a method to manage money laundering and terrorist financing risk and to comply with BSA/AML requirements, some of these terminations may be related to derisking. For example, some Southwest border bank representatives we spoke with for our Southwest border report, as well as other banks and credit unions we spoke with in a February 2009 review, told us that they have filed SARs to avoid potential criticism during examinations, not because they thought the observed activity was suspicious. Non- Southwest border banks also commonly cited the inability to manage risk associated with the customer type and heightened regulatory oversight as reasons for limiting, or not offering, accounts. Counties in the Southwest border region have been losing bank branches since 2012, similar to national and regional trends, as well as trends in other high-risk financial crime or drug trafficking counties that are outside the region. In February 2018, we found that most of the 32 counties (18 counties or nearly 60 percent) comprising the Southwest border region did not lose bank branches from 2013 through 2016, but 5 counties lost 10 percent or more of their branches over this time period (see top panel of fig. 2). Those 5 counties are Cochise, Santa Cruz, and Yuma, Arizona; Imperial, California; and Luna, New Mexico. Within those counties we identified as having the largest percentage loss of branches, sometimes those losses were concentrated in smaller communities within the county (see bottom panel of fig. 2). For example, Calexico in Imperial County, California, lost 5 of its 6 branches from 2013 through 2016. In Santa Cruz County in Arizona, one zip code in Nogales accounted for all of the branch losses in the county from 2013 through 2016, losing 3 of its 9 branches. More generally, branch losses varied substantially across different zip codes in a county (see for example bottom panel of fig. 2). In other instances, counties that lost a relatively small share of their branches contained communities that lost a more substantial share—for example San Ysidro in San Diego County lost 5 of its 12 branches (about 42 percent) while the county as a whole lost only 5 percent of its branches from 2013 through 2016. Based on our analysis, counties losing branches in the Southwest border region tended to have substantially higher SAR filings, on average, than Southwest border region counties that did not lose branches. That is, counties that lost branches from 2013 through 2016 had about 600 SAR filings per billion dollars in deposits, on average, and counties that did not lose branches had about 60 SAR filings per billion dollars in deposits, on average (see fig. 3). The econometric models we developed and estimated for our February 2018 report generally found that demographic and money laundering- related risk factors were important predictors of national bank branch closures. In general, our results suggested that counties were more likely to lose branches, all else equal, if they were (1) urban, had a higher per capita personal income, and had a younger population (proportion under 45); or (2) designated as a HIFCA or HIDTA county, or had higher SAR filings. We termed the latter three characteristics (HIFCA, HIDTA, and SAR filings) “money laundering-related risk factors.” Our results were consistent with those demographic characteristics associated with the adoption of mobile banking. As such, our results were consistent with the hypothesis that mobile banking is among the factors leading some banks to close branches. The most urban counties were about 22 percentage points more likely to lose one or more branches over the next year than the most rural counties. A county with 70 percent of the population under 45 was about 9 percentage points more likely to lose one or more branches over the next year than a county with half the population under 45. A county with per capita income of $50,000 was about 7 percentage points more likely to lose one or more branches over the next year than a county with per capita income of $20,000. Money laundering-related characteristics of a county were also important predictors of branch closures in our models. HIDTA counties were about 11 percentage points more likely to lose one or more branches over the next year than non-HIDTA counties (the effect in HIFCA counties is less significant statistically and smaller in magnitude). A county with 200 SARs filed per billion dollars in bank deposits was about 8 percentage points more likely to lose one or more bank branches over the next year than a county where no bank branch had filed a SAR. Money laundering-related risk factors were likely to have been relatively more important drivers of branch closures in the Southwest border region because it had much higher SAR filings and a larger share of counties designated as HIDTAs than the rest of the country. More generally, given the characteristics of Southwest border counties and the rest of the United States, our models suggested that while demographic factors have been important drivers of branch closures in the United States overall, risks associated with money laundering were likely to have been relatively more important in the Southwest border region. Southwest border bank representatives we interviewed told us they considered a range of factors when deciding whether or not to close a branch. Nearly half of the Southwest border bank representatives we spoke with (4 of 10), mentioned that BSA/AML compliance costs could be among the factors considered in determining whether or not to close a branch. In March 2018, we found that money transmitters serving Haiti, Liberia, Nepal, and especially Somalia reported losing bank accounts or having restrictions placed on them, which some banks confirmed. As a result, some money transmitters relied on nonbanking channels, such as cash couriers, to transfer remittances. All of the 12 money transmitters we interviewed at the time reported losing some banking relationships in the last 10 years. Some money transmitters, including all 4 that served Somalia, said they relied on nonbanking channels, such as moving cash, to transfer funds, which increased their operational costs and exposure to risks. Further, in our interviews some banks reported that they had closed the accounts of money transmitters because of the high cost of due diligence actions they considered necessary to minimize the risk of fines under BSA/AML regulations. Treasury officials noted that despite information that some money transmitters have lost banking accounts, Treasury saw no evidence that the volume of remittances was falling or that costs of sending remittances were rising. All 12 money transmitters we interviewed for our March 2018 report stated that they or their agents had lost accounts with banks during the last 10 years. All 4 Somali money transmitters and many agents of the 2 Haitian money transmitters we spoke with reported they had lost some bank accounts, and 2 of the 4 Somali money transmitters reported losing all bank accounts. Additionally, all 4 large money transmitters that process transfers globally (including to our case-study countries of Haiti, Liberia, and Nepal) also reported that their agents had lost accounts. Almost all of the money transmitters said they also faced difficulties in getting new accounts. While some money transmitters said the banks that closed their accounts did not provide a reason, in other cases, money transmitters said the banks told them that they had received pressure from regulators to terminate money transmitter accounts. As a result of losing access to bank accounts, several money transmitters, including all of the Somali money transmitters, reported that they were using nonbanking channels to transfer funds. In some cases the money transmitter was forced to conduct operations in cash, which increased the risk of theft and forfeitures and led to increased risk for agents and couriers. Nine of the money transmitters that we interviewed reported they rely on couriers or armored trucks to transport cash domestically (to the money transmitter’s main offices or bank) or, in the case of Somalia, internationally. Money transmitters reported they use cash couriers either because the money transmitter or their agents had lost bank accounts or because it was cheaper to use armored trucks than banks to move funds. Money transmitters we interviewed reported increased costs associated with moving cash and bank fees. Two of the money transmitters we spoke to stated that they did not have options other than to pay any fees the bank required due to the difficulty in finding new bank accounts. Money transmitters with access to bank accounts reported that bank charges for services had in some cases doubled or tripled, or were so high that it was less expensive to use a cash courier. For example, some money transmitters stated that their banks charged a monthly fee for compliance-related costs that ranged from $100 a month to several thousand dollars a month. Most of the banks we interviewed for our March 2018 report expressed concerns about account holders who are money transmitters because they tended to be low-profit, high-risk clients. Most of the banks we interviewed that serve money transmitters stated that BSA/AML compliance costs have significantly increased in the last 10 years because they had to hire additional staff and upgrade information systems to conduct electronic monitoring of all transactions processed through their system. Some banks indicated in our survey and interviews that the revenue from money transmitter accounts was at times not sufficient to offset the costs of BSA/AML compliance, leading to terminations and restrictions on money transmitter accounts. A few banks we interviewed stated that they do not allow money transmitters to open accounts because of the BSA/AML compliance resources they require. Banks also expressed concerns over the adequacy of money transmitters’ ability to conduct due diligence on the money transmitter’s customers. A few banks we interviewed expressed concern that they would be held responsible if, despite the bank carrying out due diligence, authorities detected an illicit transaction had been processed through the bank on behalf of a money transmitter. In our March 2018 report, we found that Treasury officials reported remittances continue to flow to fragile countries even though money transmitters faced challenges. Through engagement with money transmitters and banks, Treasury found some evidence of money transmitter bank account closures. However, according to Treasury officials, World Bank estimates of remittance flows show that the volume of international transfers from the United States has continued to increase. At the same time, World Bank data indicate that the global average cost of sending remittances has continued to decrease. Citing these trends, and anecdotal evidence from Treasury’s engagement with banks, the officials stated that there were no clear systemic impacts on the flow of remittances from closures of money transmitter bank accounts and correspondent banking relations. Treasury officials acknowledged that such closures can be a significant challenge for money transmitters that serve certain regions or countries, including Somalia. Further, Treasury officials said they were aware that some Somali money transmitters resorted to nonbanking channels by carrying cash overseas. They noted that although physically moving cash is risky, it is not unlawful. Additionally, Treasury officials stated that the use of cash couriers to remit funds had not been a concern for regulators because this practice had not increased the remittance fees that money transmitters charge their consumers. Remittance senders in the United States who remit to our case-study countries reported that they frequently used money transmitters and had not encountered major difficulties in sending remittances. Senders told us that they generally preferred using money transmitters over other methods because money transmitters were cheaper than banks and were quicker in delivering the funds than other methods. In addition, money transmitters were often more accessible for recipients collecting the remittances because the money transmitters had more locations than banks in recipient countries. However, some remittance senders told us that they were unable to send large amounts of money through money transmitters. In February 2018 we reported that to address concerns about derisking, FinCEN and the federal banking regulators had taken actions including issuing guidance to banks and conducting some evaluations to assess the extent to which derisking is occurring. However, the actions regulators had taken to address concerns raised in their BSA/AML regulatory reviews were limited in scope (for example, they focused primarily on the burden resulting from the filing of CTRs and SARs) and had not evaluated all factors that may influence banks to derisk or close branches. Moreover, in March 2018 we found that Treasury could not assess the effects of money transmitters’ loss of banking access on remittance flows because existing data did not allow Treasury to identify remittances transferred through banking and nonbanking channels. In February 2018, we reported that FinCEN and the federal banking regulators responded to concerns about derisking on a national level by issuing guidance to banks and conducting some evaluations within their agencies to understand the extent to which derisking is occurring. The guidance issued by regulators was aimed at clarifying BSA/AML regulatory expectations and discouraging banks from terminating accounts without evaluating risk presented by individual customers or banks’ abilities to manage risks. The guidance generally encouraged banks to use a risk-based approach to evaluate individual customer risks and not to eliminate entire categories of customers. Some of the guidance issued by regulators attempted to clarify their expectations specifically for banks’ offering of services to money services businesses, including money transmitters. For example, in March 2005, the federal banking regulators and FinCEN issued a joint statement on providing banking services to money services businesses to clarify the BSA requirements and supervisory expectations as applied to accounts opened or maintained for this type of customer. The statement acknowledged that money services businesses were losing access to banking services as a result of concerns about regulatory scrutiny, the risks presented by these types of accounts, and the costs and burdens associated with maintaining such accounts. The agencies issuing these guidance documents told us they took some steps to assess the effect of their guidance on bank behavior. For example, Treasury officials said that Treasury periodically engaged with banks and money transmitters on an ad hoc basis to learn their views and gain insight into their concerns. According to Federal Reserve officials, anecdotal information suggested that some money transmitters lost bank accounts after FinCEN and federal banking agencies issued the joint guidance in 2005, and that outcome was contrary to the regulators’ intent. To address concerns about the guidance, according to these officials, Treasury held several public discussions on money transmitter account terminations. In addition to issuing guidance, FDIC and OCC took some steps aimed at trying to determine why banks may be terminating accounts because of perceived regulatory concerns. For example, in January 2015, FDIC issued a memorandum to examiners establishing a policy that examiners document and report instances in which they recommend or require banks to terminate accounts during examinations. From January 2015 through December 2017, FDIC officials stated that examiners had not documented any recommendations or requirements for account terminations. In 2016, OCC reviewed how the institutions it supervises develop and implement policies and procedures for evaluating customer risks as part of their BSA/AML programs and for making risk-based determinations to close customer accounts. OCC focused its review on certain large banks’ evaluation of risk for foreign correspondent bank accounts. This effort resulted in OCC issuing guidance to banks on periodic evaluation of the risks of foreign correspondent accounts. The federal banking regulators also met with residents and businesses in the Southwest border region to discuss concerns about derisking in the region. Treasury and the federal banking regulators also participated in a number of international activities related to concerns about the decline in the number of correspondent banking and money services business accounts. For example, FDIC, OCC, and the Federal Reserve participate in the Basel Committee on Banking Supervision’s Anti-Money Laundering/Counter Financing of Terrorism Experts Group. Recent efforts of the group involved revising guidelines to update and clarify correspondent banking expectations. Treasury leads the U.S. engagement with the Financial Action Task Force—an intergovernmental body that sets standards for combating money laundering, financing of terrorism, and other related threats to the integrity of the international financial system—which has issued guidance on correspondent banking and money services businesses. Executive orders encourage and legislation requires FinCEN and the federal banking regulators to review existing regulations to determine whether they should be retained, amended, or rescinded, among other things. Retrospective reviews of existing rules help agencies evaluate how existing regulations are working in practice. Recent presidents have directed agencies to evaluate or reconsider existing regulations. In addition to the executive orders, the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) requires federal banking regulators to review the regulations they prescribe not less than once every 10 years and request comments to identify outdated, unnecessary, or unduly burdensome statutory or regulatory requirements. In February 2018, we reported that FinCEN and the federal banking regulators had all participated in retrospective reviews of different parts of the BSA/AML regulations. For example, FinCEN officials told us that they review each new or significantly amended regulation to assess its clarity and effectiveness within 18 months of its effective date. As part of fulfilling their requirements under EGRPRA, the federal banking regulators— through the Federal Financial Institutions Examination Council (FFIEC)— have also participated in retrospective reviews of BSA/AML regulations. As part of the 2017 EGRPRA review, FFIEC received several public comments on BSA/AML requirements, including increasing the threshold for filing CTRs, the SAR threshold, and the overall increasing cost and burden of BSA compliance. FinCEN officials and the federal banking regulators stated that the agencies are working to address the BSA- related EGRPRA comments—particularly those related to CTR and SAR filing requirements—through the BSA Advisory Group (BSAAG). However, the actions FinCEN and the federal banking regulators took related to derisking were not aimed at addressing and, if possible ameliorating, the full range of factors that influence banks to engage in derisking, in particular banks’ regulatory concerns and BSA/AML compliance efforts. Further, the actions regulators took to address concerns raised in BSA/AML retrospective reviews focused primarily on the burden resulting from the filing of CTRs and SARs, but these actions did not evaluate how regulatory concerns may influence banks to engage in derisking or close branches. Federal internal control standards call for agencies to analyze and respond to risks to achieving their objectives. Further, guidance implementing executive orders states that agencies should consider conducting retrospective reviews on rules that unanticipated circumstances have overtaken. In February 2018, we concluded that without assessing the full range of BSA/AML factors that may be influencing banks to derisk or close branches, FinCEN, the federal banking regulators, and Congress would not have the information they need to determine if adjustments are needed to ensure that the BSA/AML regulations and their implementation are achieving their regulatory objectives in the most effective and least burdensome way. In March 2018, we found that Treasury could not assess the effects of money transmitters’ loss of banking access on remittance flows because existing data did not allow Treasury to identify remittances transferred through banking and non-banking channels. Recent efforts to collect international remittance data from banks and credit unions did not include transfers these institutions make on behalf of money transmitters. Since these data collection efforts are designed to protect U.S. consumers, the remittance data that banks and credit unions report are limited to remittances individual consumers send directly through these institutions. Additionally, as of the first quarter of 2018, about half the states (24) adopted reports to collect remittance data from money transmitters and of these, 12 states had made it mandatory to report remittance data by destination country. However, these data do not distinguish money transmitters’ use of banking and nonbanking channels to transfer funds. Finally, we found that while Treasury has a long-standing effort to collect information on travelers transporting cash from U.S. ports of exit, this information did not identify cash transported for remittances. We concluded that without information on remittances sent through banking and nonbanking channels, Treasury could not assess the effects of money transmitter and foreign bank account closures on remittances, especially shifts in remittance transfers from banking to nonbanking channels for fragile countries. Nonbanking channels are generally less transparent than banking channels and thus more susceptible to the risk of money laundering and other illicit financial transactions. Additionally, while risks associated with shifts of remittances to nonbanking channels may vary by country, these risks are likely greater for fragile countries, such as Somalia, where the United States has concerns about terrorism financing. The collective findings from our work indicate that BSA/AML regulatory concerns have played a role in banks’ decisions to terminate and limit accounts and close branches. However, the actions taken to address derisking by the federal banking regulators and FinCEN and the retrospective reviews conducted on BSA/AML regulations had not fully considered or addressed these effects. As a result, in our February 2018 report, we recommended that FinCEN and the three banking regulators in our review—FDIC, the Federal Reserve, and OCC— jointly conduct a retrospective review of BSA/AML regulations and their implementation for banks, focusing on how banks’ regulatory concerns may be influencing their willingness to provide services. In their written responses, the Federal Reserve, FDIC, and OCC agreed to leverage ongoing interagency work reviewing BSA/AML regulations and their implementation for banks to address our recommendation. GAO requested comments from Treasury, but none were provided. A lack of data on remittances sent through banking and nonbanking channels limits the ability of Treasury to assess the effects of money transmitter and foreign bank account closures on remittances, in particular shifts of remittances to non-banking channels for fragile countries. Therefore, in the March 2018 report we recommended that Treasury assess the extent to which shifts in remittance flows from banking to non-banking channels for fragile countries may affect Treasury’s ability to monitor for money laundering and terrorist financing and, if necessary, should identify corrective actions. GAO requested comments from Treasury, but none were provided. Chairman Luetkemeyer, Ranking Member Clay, and members of the Subcommittee, this concludes my statement. I would be pleased to respond to any questions you may have. If you or your staff have any questions about the issues related to access to banking services along the Southwest border in this testimony or the related report, please contact Michael E. Clements, Director, Financial Markets and Community Investment, at (202) 512-8678 or clementsm@gao.gov. For questions about the issues related to remittance flows to fragile nations in this testimony or related report, please contact Thomas Melito, Managing Director, International Affairs and Trade, at (202) 512-9601, or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Lawrance Evans, Jr. (Managing Director), Stefanie Jonkman (Assistant Director), Mona Sehgal (Assistant Director), Christine McGinty (Analyst in Charge), Kyerion Printup, Madeline Messick, and David Dayton. Other staff who made key contributions to the reports cited in the testimony are identified in the source products. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "In recent years, some Southwest border residents and businesses reported difficulty accessing banking services, including experiencing bank account terminations and bank branch closings in the region. In addition, the World Bank and others have reported that some money transmitters have been losing access to banking services with depository institutions. This statement is based on findings from GAO's February 2018 report on access to banking services along the Southwest border ( GAO-18-263 ) and March 2018 report on the effects of derisking on remittance flows to fragile countries ( GAO-18-313 ). GAO discusses (1) the extent to which banks are terminating accounts and closing branches in the Southwest border region, (2) the extent to which money transmitters serving selected fragile countries are facing banking access challenges, and (3) actions relevant U.S. agencies have taken to respond to these challenges. For those reports, GAO surveyed more than 400 banks, developed an econometric model on the drivers of branch closures, and conducted case studies on four countries to assess the effects of derisking on remittances flows. “Derisking” is the practice of depository institutions limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering or other criminal activity such as financing to terrorist groups. In its February 2018 report, GAO found that money laundering risk is high in the Southwest border region because of the high volume of cash transactions, the number of cross-border transactions, and foreign account holders. According to GAO's nationally representative survey of banks, an estimated 80 percent (+/- 11) of Southwest border banks limited or did not offer accounts to customers that are considered high risk for money laundering because the customers drew heightened Bank Secrecy Act/anti-money laundering (BSA/AML) oversight—behavior that could indicate derisking. Nationally, GAO's econometric analysis suggested that counties that were urban, younger, had higher income, or had higher money laundering-related risk were more likely to lose branches. In March 2018, GAO found that money transmitters (businesses that facilitate global money transfers) serving Haiti, Liberia, Nepal, and especially Somalia— countries it identified as fragile—all reported losing bank accounts or having restrictions placed on them during the last 10 years. As a result, 9 of the 12 money transmitters GAO interviewed, including all 4 that served Somalia, reported using channels outside the banking system (hereafter referred to as nonbanking channels), such as transporting cash to transfer funds, and that this increased their operational costs and exposure to risks. Furthermore, some banks GAO interviewed reported that they closed the accounts of money transmitters because of the high cost of due diligence actions they considered necessary to minimize the risk of fines under BSA/AML regulations. Department of the Treasury (Treasury) officials noted that despite information that some money transmitters have lost bank accounts, Treasury saw no evidence that the volume of remittances was falling or that costs of sending remittances were rising. To address concerns about derisking, Treasury and federal banking regulators (the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation), have taken actions including issuing guidance to banks and conducting some evaluations to assess the extent to which derisking is occurring. While agencies were engaged in BSA/AML regulatory reviews, these were limited in scope and had not evaluated how regulatory concerns may influence banks to engage in derisking or to close branches. Without assessing the full range of BSA/AML factors that may be influencing banks to derisk or close branches, Treasury, the federal banking regulators, and Congress do not have the information needed to determine if BSA/AML regulations and their implementation can be made more effective or less burdensome. Moreover, in March 2018 GAO reported that Treasury could not assess the effects of money transmitters' loss of banking access on remittance flows because existing data did not allow Treasury to identify remittances transferred through banking and nonbanking channels. Nonbanking channels are generally less transparent than banking channels and thus more susceptible to the risk of money laundering and terrorism financing. GAO made five recommendations in the two reports: to Treasury and the federal banking regulators to conduct a retrospective review of BSA/AML regulations and their implementation, and to Treasury to assess shifts in remittance flows to nonbanking channels. Banking regulators agreed with the recommendations. GAO requested comments from Treasury, but none were provided.", "document_type": "gao"}
{"report": "First, I will discuss our 2015 report on guidance processes at USDA, Education, HHS, and DOL, specifically (1) how these agencies decide whether to issue regulations or guidance and (2) the extent to which they adhere to OMB requirements and internal controls when developing guidance. Agency guidance documents, even though they are not generally legally binding as regulations or statutes are, can have a significant effect, both because of their volume and because of their potential to prompt changes in the behavior of regulated parties and the general public. Guidance generally serves different purposes than those of regulations. Agencies also issue regulatory guidance that sets forth a policy on a statutory, regulatory, or technical issue, or an interpretation of a statutory or regulatory issue—as illustrated in figure 1 below. The processes by which agencies issue guidance and regulations are governed by statutes, executive orders, and agencies’ policies and procedures, with the aim of greater transparency and public participation, enhanced oversight, and reduced regulatory burdens. Agency officials considered a number of factors before deciding whether to issue guidance or undertake rulemaking. Among these factors at the four agencies included in our analysis, a key criterion was whether officials intended for the document to be binding (in which case they issued a regulation). OMB’s Office of Information and Regulatory Affairs (OIRA) staff concurred that agencies understood what types of direction to regulated entities must go through the regulatory process. Officials from all four agencies also told us that they understood when guidance was inappropriate and when regulation was necessary. They said that they consulted with legal counsel when deciding whether to initiate rulemaking or issue guidance. For example, HHS’s Administration for Community Living officials told us that they considered a number of factors, including whether the instructions to be disseminated were enforceable or merely good practice. Specifically, when Administration for Community Living officials noticed that states were applying issued guidance related to technical assistance and compliance for the state long-term care ombudsman program differently, they decided it would be best to clarify program actions through a regulation. Officials believed that a regulation would ensure consistent application of program requirements and allow them to enforce those actions. They issued the proposed rule in June 2013 and the final rule in February 2015. In another example, officials at USDA’s Food and Nutrition Service told us that the decision to issue guidance or undertake rulemaking depended on (1) the extent to which the proposed document was anticipated to affect stakeholders and the public, and (2) what the subagency was trying to accomplish with the issued document. The agencies used guidance for multiple purposes and differed in the amount of guidance they issued. The purposes of guidance included explaining or interpreting regulations, clarifying policies in response to questions or compliance findings, disseminating suggested practices or leadership priorities, and providing grant administration information. Guidance documents provide agencies valuable flexibility to help regulated agencies comply with agency regulations, and address new issues and circumstances more quickly than may be possible using rulemaking. Guidance documents that meet OMB’s definition of “significant” are subject to the regulatory practices and requirements established by OMB. OMB defines a significant guidance document as guidance with a broad and substantial impact on regulated entities. An economically significant guidance document is a significant guidance document that may reasonably be anticipated to lead to an annual effect on the economy of $100 million or more, among other factors. Guidance that does not fall under the definition of “significant” is not subject to the OMB Bulletin, and those guidance procedures are left to agency discretion. The four agencies we reviewed considered few of their guidance documents to be significant. As of February 2015, agencies listed the following numbers of significant guidance documents on their websites: Education, 139; DOL, 36; and USDA, 34. We were unable to determine the number of significant guidance documents issued by HHS. All four agencies told us that they did not issue any economically significant guidance. OIRA staff told us they accepted departments’ determinations of which types of guidance meet the definition of significant guidance. Agencies also varied in the amount of guidance they issued, ranging from 10 to more than 100 documents issued in a single year. Agency officials said that mission or the types of programs administered can affect the number of guidance documents issued. For example, officials from DOL’s Bureau of Labor Statistics told us they rarely issue guidance—about 10 routine administrative memorandums each year related to the operation of two cooperative agreement statistical programs. In contrast, DOL’s Occupational Safety and Health Administration officials told us they have regularly issued guidance to assist with regulatory compliance, and could easily produce 100 new or updated products each year to provide guidance to regulated entities. We found opportunities for agencies to improve regulatory guidance processes by strengthening compliance with OMB requirements for significant guidance and the use of management controls for producing their guidance documents. In 2015, we made 11 recommendations to USDA, HHS, DOL and Education to better ensure the adherence to OMB requirements for approval and public access of regulatory guidance, to strengthen the use of internal controls in guidance processes, and to improve the usability of websites with online guidance, three of which remain open. USDA, DOL and Education have addressed recommendations concerning strengthening the application of management controls—internal controls—and improving their websites to ensure the public can easily find, access, and comment on online guidance. These recommendations for HHS remain open as well as an additional recommendation concerning developing written procedures for agency approval of written guidance. These actions would help to ensure appropriate review and use of these documents, and both could also facilitate opportunities for affected parties and stakeholders to provide feedback on those documents. We found that agencies did not always adhere to OMB requirements for significant guidance. The OMB Final Bulletin for Agency Good Guidance Practices establishes standard elements that must be included in significant guidance documents and directs agencies to (1) develop written procedures for the approval of significant guidance, (2) maintain a website to assist the public in locating significant guidance documents, and (3) provide a means for the public to submit comments on significant guidance through their websites. Education and USDA had written procedures for the approval of significant guidance as directed by OMB. While DOL had written approval procedures, they were not available to the appropriate officials, and DOL officials noted that they required updating. HHS did not have any written procedures. We found that Education, USDA, and DOL consistently applied OMB’s public access and feedback requirements for significant guidance, while HHS did not. We also found opportunities for agencies to improve access to their guidance. In April 2015, we found that subagencies used different strategies to disseminate guidance and all relied primarily on posting the guidance on their websites. USDA, DOL, and Education posted their significant guidance on a departmental website as directed by OMB; at that time HHS did not, but has since posted such a page on its website in response to our recommendation. On their websites, agencies used several approaches —including organizing guidance by audience or topic and highlighting new or outdated guidance—to facilitate access. However, we identified factors that hindered online access, including long lists of guidance and documents dispersed among multiple web pages. Opportunities also exist for agencies to use the web metrics they already collect to improve how guidance can be accessed. All agencies and their subagencies that we studied collected web metrics, and many used them to evaluate online guidance dissemination. However, many of these subagencies did not use metrics to improve how they disseminated guidance through their websites. Beyond their websites, subagencies found other ways to disseminate and obtain feedback on issued guidance, including focus groups, surveys, and direct feedback from the public at conferences, webinars, and from monitoring visits. For guidance that does not meet OMB’s definition of significant, we found opportunities for agencies to improve guidance development, review, evaluation, and dissemination processes by strengthening their adherence to internal controls. Wider adoption of these practices could better ensure that agencies have internal controls in place to promote quality and consistency of their guidance development processes, and to ensure that guidance policies, processes, and practices achieve desired results, and prevent and detect errors. We recommended that agencies strengthen their application of internal controls to guidance practices by adopting practices, such as: Determining Appropriate Level of Review to Manage Risk: Most subagencies in our study managed risk by determining appropriate levels of review. Agencies face multiple risks when going through the guidance production process, such as legal challenges that issued guidance is asserting binding requirements without having gone through the rulemaking process. Agencies can manage risk by involving agency management in decisions to initiate guidance, prioritize among proposed guidance, and determine the appropriate level of review prior to issuance. Maintaining Written Policies and Procedures for the Production of Nonsignificant Guidance: Most subagencies we reviewed did not have written procedures for the production of non-significant guidance. Written procedures for guidance initiation, development, and review help ensure that actions are taken to address risks and enforce management’s directives when an agency is developing regulatory guidance. Documented procedures are an important internal control activity to help ensure that officials understand how to adequately review guidance before issuance. Ensuring Communication during the Guidance Development and Review Process: Most subagencies we reviewed had methods to ensure communication during the guidance development and review process. Communication procedures provide an opportunity for subagencies to get feedback from agency management, other federal agencies, and the public before the guidance issues. For example, officials told us that they conferred with other affected subagencies or federal departments to ensure consistency of their guidance during the development of guidance. Regularly Evaluating Whether Issued Guidance is Effective and Up to Date: Almost half of the subagencies we reviewed regularly evaluated whether issued guidance was effective and up-to-date. Agencies benefit from procedures to continually reassess and improve guidance processes. Without a regular review of issued guidance, agencies can miss the opportunity to revisit whether current guidance could be improved and thereby provide better assistance to regulated entities and grantees. Prior studies have indicated that agencies typically issue a larger number of regulations during the transition from the end of one presidential administration to the beginning of the next administration, relative to comparable periods earlier in the administration, a phenomenon often referred to as “midnight rulemaking.” The Edward “Ted” Kaufman and Michael Leavitt Presidential Transitions Improvements Act of 2015 included a provision requiring us to review final significant regulations promulgated by executive departments during the 120-day presidential transition periods (September 23 through January 20) at the end of Presidents Clinton, Bush, and Obama’s administrations and compare them to each other and to regulations issued during the same 120-day period in nontransition years since 1996. Among other objectives, we assessed the extent to which there was variation in (1) the number of regulations and their characteristics, such as the types of rulemaking procedures agencies used; and (2) agencies’ reported compliance with procedural requirements for promulgating the regulations, such as requirements in the Congressional Review Act (CRA). CRA was enacted to better ensure that Congress has an opportunity to review and possibly disapprove regulations, in certain cases, before they take effect. During the transition periods at the end of each of the three administrations we reviewed, agencies published more economically significant and significant final regulations relative to comparable time periods earlier in each administration (see figures 2 and 3). In particular, the Clinton, Bush, and Obama administrations published on average roughly 2.5 times more economically significant regulations during transition periods than during nontransition periods. But agencies more often, relative to nontransition periods, provided the public an opportunity to influence the development of the transition-period regulations by providing advanced notice of their issuance in the Unified Agenda, and opportunities to comment on proposed regulations before they were finalized. In their published regulations, agencies generally reported complying with four of five procedural requirements for promulgating regulations during both transition and nontransition periods–the Regulatory Flexibility Act (RFA), the Small Business Regulatory Enforcement Fairness Act (SBREFA), the Paperwork Reduction Act (PRA), and the Unfunded Mandates Reform Act of 1995 (UMRA). These laws require agencies to consider the impact of regulations on small entities, impose additional requirements on the Environmental Protection Agency and the Occupational Safety and Health Administration to obtain input from small entities for rulemaking efforts that are expected to have a significant economic impact on a substantial number of small entities, require all agencies to minimize the burden on the public of information collections, and require agencies to prepare an assessment of the anticipated costs and benefits for any regulation that includes a federal mandate requiring nonfederal parties to expend resources without being provided funding to cover the costs, respectively. Agencies reported complying for nearly all economically significant regulations and the majority of significant regulations with these four laws. Agencies less often complied with one or more CRA requirements. Over 25 percent of economically significant regulations did not comply with the CRA (see figure 4). We estimated that 15 percent of significant regulations published across all periods reviewed failed to meet at least one of the CRA requirements we reviewed. The most common CRA deficiency for economically significant regulations was agencies’ failure to provide Congress the required time to review and possibly disapprove regulations, which we had also identified as a deficiency in previous work. Among the most active regulatory agencies for economically significant regulations, the Departments of Health and Human Services and Transportation had higher rates of noncompliance than the government-wide percentages for both the transition and nontransition periods we reviewed. However, noncompliance was not limited to these two agencies; 17 of the 23 agencies that published economically significant regulations during the periods we reviewed had at least one noncompliant regulation. Though agencies are responsible for complying with CRA, OMB is responsible under Executive Order 12866 for oversight of agencies’ rulemaking, consistent with law, and reviews regulations before publication, which provides an opportunity to identify and help agencies avoid potential noncompliance. Economically significant regulations for which OMB completed its review within 3 months before the planned effective date were at high risk of not complying with CRA, thus increasing the risk that agencies would not provide Congress with the required time for its reviews. We recommended that OMB, as part of its regulatory review process, identify economically significant regulations at potential risk of not complying with CRA and work with agencies to ensure compliance. OMB staff did not take a position agreeing or disagreeing with the recommendation. One of the common themes in our work over several decades is the need for transparency of the regulatory review process and opportunities for increasing public participation and congressional oversight. The potential effects of guidance underscore the need for consistent and well- understood processes for the development, review, dissemination, and evaluation of guidance. Further, we found that while there were increased opportunities for public participation for regulations promulgated at the end of Presidents’ terms, there are increasing instances of noncompliance with delay requirements under the Congressional Review Act. Ensuring that agencies consistently provide Congress with the required time to review, and possibly disapprove regulations, is important throughout a President’s term, and particularly following a presidential transition when Congress typically has a larger number of regulations to potentially review. Improvements made in transparency of the rulemaking process benefit not only the public, but congressional oversight. Chairman Gowdy, Ranking Member Cummings, and Members of the Committee, this concludes my prepared statement. Once again, I appreciate the opportunity to testify on these important issues. I would be pleased to address any questions you or other members of the Committee might have at this time. For questions about this statement, please contact me at (202) 512-2660 or nguyentt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony were Tim Bober, Tara Carter, Colleen Corcoran, Robert Cramer, Alix Edwards, Shirley A. Jones, Heather Krause, Barbara Lancaster, Michael O’Neill, and Andrew J. Stephens. Federal Rulemaking: OMB Should Work with Agencies to Improve Congressional Review Act Compliance during and at the End of Presidents’ Terms. GAO-18-183. March, 13, 2018. Regulatory Guidance Processes: Treasury and OMB Need to Reevaluate Long-standing Exemptions of Tax Regulations and Guidance. GAO-16-720. September 6, 2016. Regulatory Guidance Processes: Selected Departments Could Strengthen Internal Control and Dissemination Practices. GAO-15-368. April 16, 2015. Regulatory Guidance Processes: Agencies Could Benefit from Stronger Internal Control Practices. GAO-15-834T. September 23, 2015. Federal Rulemaking: Agencies Could Take Additional Steps to Respond to Public Comments. GAO-13-21. December 20, 2012. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Congress has often asked GAO to evaluate the implementation of procedural and analytical requirements that apply to agencies' rulemaking and guidance processes. The importance of improving the transparency of those processes, including providing public participation and sufficient oversight, is a common theme throughout GAO's body of work on federal regulation. Based on GAO's prior work, this testimony addresses: (1) the extent to which USDA, Education, HHS, and DOL adhered to OMB requirements and internal controls when developing regulatory guidance, and (2) agencies' compliance with the CRA for regulations promulgated during presidential transitions. Agencies GAO reviewed—Departments of Agriculture (USDA), Education (Education), Health and Human Services (HHS), and Labor (DOL) did not consistently adhere to Office of Management and Budget (OMB) requirements and internal controls when developing regulatory guidance, as GAO reported in 2015. Unlike regulations, regulatory guidance is not generally legally binding and is subject to different requirements for regulatory oversight. Agencies weighed various factors when they determined whether to issue guidance. The agencies GAO reviewed issued different amounts of guidance for various purposes, such as explaining plans for implementing regulations. Agencies found few of their guidance documents to be “significant,” guidance with a broad and substantial impact on regulated entities. USDA and Education had written procedures for the approval of significant guidance as directed by OMB; DOL's procedures needed updating and to be distributed to appropriate agency officials; HHS did not have any. GAO found that USDA, Education, and DOL consistently applied OMB's requirements for public feedback and access, for example public access to guidance through websites, while HHS did not. Agencies can better ensure consistent application of review processes and public access to significant guidance through better adherence to OMB requirements. GAO also found opportunities for agencies to improve adherence to internal controls for guidance that did not meet OMB's definition of “significant.” For example, most subagencies GAO reviewed did not have written procedures for the production of guidance and about half did not regularly evaluate whether issued guidance was effective and up-to-date. Adherence to these internal controls could promote quality and consistency in guidance development processes. GAO found that agencies did not consistently comply with the Congressional Review Act (CRA) for regulations promulgated during the 120-day presidential transition periods (September 23 through January 20), as defined by the Presidential Transitions Improvements Act of 2015. GAO reported that during the transition from the end of one presidential administration to the next, the Clinton, Bush, and Obama administrations published on average roughly 2.5 times more economically significant regulations during transition periods than during nontransition periods; increases are typical during transition periods. For these regulations, agencies more frequently provided advanced notice to the public, thus providing the public opportunities to influence the development of these transition period regulations before they were finalized. In their published regulations, agencies generally reported complying with four of five procedural requirements for promulgating regulations during both transition and nontransition periods. Agencies are required to 1) assess the impact of regulations on small entities, 2) minimize the burden that information collections impose on the public, 3) assess the costs and benefits of regulations that include federal mandates, and 4) for certain agencies, obtain direct input from small entities during rulemaking. Also, a fifth requirement, agencies must comply with CRA, which provides Congress an opportunity to review and possibly disapprove regulations before they take effect. Agencies less often complied with CRA, during both transition and nontransition periods. The most common deficiency was agencies' failure to provide Congress the required time to review regulations, which GAO has also identified as a deficiency in previous work. In the April 2015 report on regulatory guidance, GAO made eleven recommendations to USDA, Education, HHS, and DOL to ensure adherence to OMB requirements and applicable elements of internal controls. Three of these recommendations to HHS remain open: 1) to develop written procedures for the approval of significant guidance, 2) strengthen application of internal controls over guidance processes, and 3) improve its website. In the March 2018 report on rulemaking at the end of presidents' terms, GAO recommended OMB, as part of its regulatory review process, identify economically significant regulations at risk of not complying with the CRA and work with agencies to ensure compliance. OMB staff did not agree or disagree with the recommendation.", "document_type": "gao"}
{"report": "In the United States, both FRA and FTA regulate rail transportation safety. FRA oversees safety of railroads operating on what is known as the general system, a network of standard gage track over which goods may be transported and passengers may travel. This system includes freight railroads, which typically own their own tracks and locomotives, transporting products among states and regions. FRA also oversees safety of intercity passenger and commuter railroads that operate over tracks owned by freight railroads and other entities. FTA oversees safety of rail transit systems that typically serve individual metropolitan areas, using track not shared with freight and other passenger trains. Rail transit includes a variety of modes, such as heavy and light rail, streetcars, automated guideways, cable cars, and others. Rail transit is an important component of the nation’s transportation network, particularly in large metropolitan areas. Rail transit systems provided over 4.4 billion passenger trips in 2016. “Heavy rail” systems in large cities account for much of the total rail transit activity, including 88 percent of passenger trips in 2016. According to FTA, 61 rail transit systems within 28 states, the District of Columbia, and Puerto Rico are subject to safety oversight by one of the 31 agencies in FTA’s state safety oversight program (see fig. 1). The states have long played a central role in conducting safety oversight of rail transit systems. The Intermodal Surface Transportation Efficiency Act of 1991 required, among other things, that states with rail transit operators designate an agency to oversee the safety of those systems, known as a state safety oversight agency. In overseeing state safety agencies, FTA designed the program as one in which FTA, states, and rail transit operators collaborate to ensure the safety and security of rail transit systems. However, limitations have been identified in the state safety oversight program. In 2006, we reported on some state safety agency challenges in overseeing rail transit safety. Specifically, we found many of the state safety agencies lacked enough qualified staff and adequate levels of training to meet their responsibilities. In a 2009 hearing before the Subcommittee on Highways and Transit of the House Committee on Transportation and Infrastructure, then Secretary Ray LaHood of the Department of Transportation discussed some of the weaknesses under the current state safety oversight program and introduced a public transportation safety legislative proposal. In 2010, various bills were introduced in both houses of Congress that would have provided FTA with various enforcement mechanisms and with the authority to issue safety regulations. Additionally, the bills would have required the Secretary to establish a federal certification program for employees and contractors who carry out a state public transportation safety program. In the 112th Congress, the Senate amended a House bill to include a public transportation safety provision, which eventually became section 20021 of MAP-21, the federal public transportation safety program. MAP-21 enhanced FTA’s authority to oversee the safety of rail transit, potentially addressing some of the weaknesses identified by various stakeholders. Specifically, MAP-21 established a comprehensive Public Transportation Safety Program, which continues to rely on state safety agencies to monitor rail transit systems’ safety operations. MAP-21 required that, within 3 years of the effective date of a final state safety oversight program rule, each eligible state have in place a state safety oversight program certified by FTA. An eligible state must, among other things, establish a state safety agency and determine, in consultation with FTA, an appropriate staffing level for this state agency that is commensurate with the number, size, and complexity of the rail transit systems within the state. Additionally, a state safety agency must be financially and legally independent from any rail transit system it oversees and have investigative and enforcement authority with respect to the safety for its rail transit systems, among other things. Each eligible state has until April 15, 2019, to receive FTA approval of its state safety oversight program, or else FTA will be prohibited from obligating certain federal financial assistance to any entity in the state that is otherwise eligible to receive that federal financial assistance. After that approval, state safety agencies will be evaluated for continued compliance with FTA regulations a minimum of once every 3 years through a triennial review process. According to FTA, these requirements represent a dramatic increase in federal expectations for state safety oversight and for the rail transit industry. MAP-21 also established a state safety oversight grant program, offering federal funding to states for their state safety activities. FTA’s Office of Transit Safety and Oversight administers the state safety oversight program. Freight and passenger railroads have played a transformational role in the development of America and continue to be an important part of the economy. The general railroad system consists of a vast network of operations (see fig. 2). The $60 billion freight rail industry is operated by seven Class I, and hundreds of smaller, railroads. In addition, about 40 railroads move passengers, which carry greater than 670 million passengers per year. The federal government has long provided regulatory oversight of railroad safety, both passenger and freight, that operate on the general system. The Interstate Commerce Commission, the first federal regulatory commission in U.S. history, was established in 1887 to regulate interstate commerce by rail. The Commission’s safety functions were transferred to FRA, which was created by the Department of Transportation Act in 1966. In its role as federal regulator and overseer of railroad safety, FRA prescribes and enforces railroad safety regulations and conducts research and development in support of improved railroad safety and rail transportation policy. FRA utilizes safety inspectors and specialists, primarily covering five safety disciplines, to review and enforce compliance with these regulations. FRA’s safety disciplines are track, signal, and train control; motive power and equipment; operating practices; and hazardous materials. Following several fatal rail accidents between 2002 and 2008, the Rail Safety Improvement Act of 2008 was enacted, the first authorization of FRA’s safety programs since 1994. This act directed FRA to, among other things, issue new safety regulations for different aspects of railroad safety, such as hours of service requirements for passenger railroad workers, positive train control implementation, track inspection rules, and safety at highway-rail grade crossings. FRA’s Office of Railroad Safety administers the agency’s safety program. Rail transportation is a relatively safe way to transport people and products though serious incidents continue to occur on railroads and rail transit. According to an analysis of DOT’s Bureau of Transportation Statistics data by the American Public Transportation Association, travel by rail transit is far safer than automobile travel. From 2000-2014, for instance, there were 6.53 and 0.33 fatalities per billion passenger-miles traveled in cars or light trucks and rail transit, respectively. Within rail travel, the fatality rates on both railroads and rail transit operators have remained similar in recent years. Further, the rate of accidents and incidents—including collisions and derailments—also do not appear to differ substantially between railroads and rail transit in recent years. Nevertheless, serious incidents continue to occur on railroads and rail transit, posing safety risks to passengers, railroad employees, and the public. For example, in June 2009, two WMATA trains collided, resulting in 52 injuries and 9 deaths. A smoke incident on WMATA’s Metrorail system in January 2015 also resulted in the death of 1 person and injured over 90. In a 10-month period from May 2013 to March 2014, the Metro- North commuter railroad, which serves New York and Connecticut, was involved in five accidents that resulted in the death of 6 people and 126 injured. In June 2016, two BNSF Railway freight trains collided near Panhandle, Texas, resulting in the death of three crew members. Incidents such as these have prompted investigations into both the causes and contributing factors of the specific accidents as well as broader rail safety oversight. FRA has a more centralized safety oversight program for railroads, while FTA is implementing changes to the rail transit oversight program, established in federal statute, which relies on states to monitor and enforce safety. Key characteristics of both programs include: (1) the establishment of safety regulations, (2) inspections and other oversight activities, such as audits and investigations, based on those regulations, and (3) enforcement mechanisms to ensure that safety deficiencies are addressed (see fig. 3). FRA has developed extensive railroad safety regulations over decades. FRA’s railroad safety regulations include requirements governing track design and inspection, grade crossings, signal and train control, mechanical equipment including locomotives, and railroad-operating practices including worker protection rules. For example, FRA’s regulations for track and equipment include detailed, prescriptive minimum requirements, such as formulas that determine the maximum allowable speeds on curved track. Many of FRA’s rail safety regulations establish minimum safety requirements, though railroads can apply for waivers. As FRA updates its safety regulations, it has proposed more performance-based regulations in recent years. Many of FRA’s current safety regulations specify the behavior or manner of compliance that railroads must adopt, such as inspecting each locomotive at least every 92 days. Performance-based regulations, however, specify a desired outcome rather than a behavior or manner of compliance. For example, FRA’s recent rulemaking to amend its passenger equipment safety regulations proposes performance-based crashworthiness and occupant protection requirements, rather than explicit targets or tolerances. According to FRA, establishing performance requirements in these areas would allow a more open rail market that incorporates recent technologies. FTA is currently assessing the need for rail transit safety regulations, having been provided the authority to issue safety regulations in 2012. Since MAP-21 was enacted, FTA has finalized regulations implementing the public transportation safety program authorized by statute. These include regulations that establish rules for FTA’s administration of a comprehensive safety program to improve rail transit safety as well as updated regulations governing state safety oversight of rail transit. In addition to its public transportation safety program regulations, FTA also has regulations governing its drug and alcohol testing program. MAP-21 also authorized FTA, for the first time, to issue rail transit safety regulations, which would establish minimum safety performance requirements for rail transit operators, as part of its requirement to develop a National Public Transportation Safety Plan. FTA initiated a regulatory development effort after the passage of MAP-21, which included a compilation and evaluation of existing transit safety standards, guidance, and best practices from the federal government, states, industry, and other sources. After the evaluation, FTA issued a report that concluded there was limited documentation or evidence of the effectiveness of these existing rail transit safety standards. The report included recommendations that are intended to enable FTA to undertake further data-driven, risk-based analysis of rail transit safety performance and the applicability and effectiveness of the identified safety standards. FTA is also currently analyzing specific focus areas to determine any areas that should be addressed by federal safety regulations. For example, FTA is studying the need for regulations related to rail transit vehicle crashworthiness. Since no federal rail transit safety regulations that establish minimum safety performance requirements for rail transit operators currently exist, rail transit operators are subject to different safety standards, depending largely on what voluntary standards they have chosen to adopt, according to American Public Transportation Association officials we spoke with. The American Public Transportation Association, for instance, has issued a variety of rail transit safety standards, addressing various aspects of the industry including operations, training, and inspections. In addition, states vary in the extent to which they have regulations for rail transit operators. For example, officials from the California Public Utilities Commission noted that it has issued a variety of safety regulations applicable to rail transit operators within the state of California to improve safety of rail operations. Both FRA and FTA have mechanisms to gather the input of stakeholders—including rail operators, labor unions, industry associations, and others—when considering development of safety regulations. In developing most of its safety regulations, FRA seeks input from stakeholders through its Railroad Safety Advisory Committee. In 1996, FRA established this committee to develop new regulations through a collaborative process, with the rail community working together to create mutually satisfactory solutions to safety issues. FTA is collaborating with stakeholders as it assesses the need for rail transit safety regulations. More specifically, FTA’s research partner, the Center for Urban Transportation Research, established a working group to collaborate with industry stakeholders to inform the safety regulations development process. FTA also solicited comments from industry stakeholders on its compilation of existing rail transit safety standards. More broadly, FTA also has a Transit Advisory Committee for Safety, which provides information, advice, and recommendations to FTA on safety matters. FRA fulfills its mission, in part, through safety compliance audits and inspections, and investigations. FRA ensures compliance with its safety regulations through inspections, using a staff of railroad safety experts, inspectors, and other professionals assigned to eight regional offices across the nation. For example, to determine a railroad’s compliance with FRA safety regulations, inspectors examine track, equipment, signal devices, employee actions, and procedures and review maintenance and accident records. Additionally, 31 states have rail safety programs that partner with FRA. Under this approach, FRA enters into agreements with states to allow state inspectors to participate in investigative and surveillance activities concerning federal railroad safety laws. State inspectors who participate in this program submit inspection reports to FRA. More broadly, FRA’s inspections are guided by a risk-based model. Under this approach, FRA focuses its inspections on locations that, according to the data-driven model, are likely to have safety problems. Like other operating administrations within DOT, FRA has relatively few resources for overseeing railroads, compared with the size of the general system. The risk-based model is designed to help FRA target the greatest safety risks. FRA has begun utilizing automated inspections as well. In particular, according to FRA, new imaging technologies have the potential to better inspect track for cracks in the rail that could lead to breakage as well as measure the track’s geometry to ensure that rails are positioned to meet standards. To further promote safety in railroad operations, FRA conducts accident investigations. Separate from investigations conducted by NTSB, FRA investigates select railroad accidents to determine root causation, and any contributing factors, so that railroad properties can implement corrective actions to prevent similar incidents in the future. Resources for railroad safety oversight activities have increased in recent years. FRA was appropriated about $218 million in fiscal year 2017, an increase over the approximately $187 million it received in fiscal year 2015, for safety and operations, which funds FRA’s personnel, including inspectors, and safety programs. According to FRA, Congress provided FRA with increased funding in recent years for the purpose of increasing staffing related to specific safety issues, such as trespasser prevention and passenger rail safety. As part of this effort, FRA has hired additional inspectors, going from 347 inspectors in fiscal year 2013 to over 360 currently, out of the nearly 930 total full-time equivalent staff. FRA officials told us, as we have reported in the past, that it can be difficult to recruit, train, and certify qualified inspectors in a timely manner, especially in certain areas of expertise. Further, according to FRA, its inspectors have the ability to inspect less than 1 percent of the general system annually. Though FTA now has more robust inspection authorities, states will continue to conduct front-line rail transit safety oversight activities. MAP- 21 provided FTA with new authorities to inspect, audit, and investigate practices at rail transit agencies, including safety practices, while also preserving the role of state safety agencies to monitor rail transit systems’ safety operations. According to FTA officials, any federal inspections of rail transit operators are intended to supplement a state safety agency’s oversight activities, except where FTA assumes temporary, direct oversight of a rail transit system from an inadequate state safety agency. FTA officials told us that establishing a nationwide safety inspection program at the federal level is inconsistent with the statutory framework of the state safety oversight program and with congressional intent, which contemplates preserving the primary role of state safety agencies in providing direct safety oversight of rail transit systems. The officials also noted that the state-based approach to rail transit safety oversight is valuable because states are generally closer to, and more familiar with, rail transit operators. To date, FTA has utilized its new inspection authorities only on WMATA’s rail system. As part of oversight activities, some state safety agencies have conducted inspections of the rail transit systems they oversee, though they were not required to do so, according to FTA officials we spoke with. To strengthen states’ abilities to conduct oversight activities, FTA has recommended that state safety agencies develop risk-based inspection programs. Further, to ensure the independence of state safety agencies, these agencies cannot receive funding from the rail transit entities they oversee. Resources for FTA’s rail transit safety oversight administrative expenses have remained relatively stable in recent years, though more are needed, according to FTA. Since fiscal year 2012, FTA’s appropriations for administrative expenses, which funds FTA personnel and support activities including the Office of Transit Safety and Oversight, has increased $14 million, to about $113 million in fiscal year 2017, according to FTA. However, for several years, FTA has averaged about 508 total full-time equivalent staff agency-wide, and a little over 30 safety staff in the Office of Transit Safety and Oversight. According to FTA, the Office of Transit Safety and Oversight has been under-resourced since it was established in response to new safety authority provided in MAP-21. For fiscal year 2018, FTA requested in their submission for the President’s Budget proposal funding to hire up to an additional 20 positions for various lines of safety work. FRA’s and FTA’s oversight activities also include regular audits of, and communication with, the rail operators under their oversight. Given finite resources and large rail networks, FRA and FTA audit rail operators’ own inspections rather than conducting comprehensive federal inspections. More specifically, FRA inspectors, and state safety agencies in FTA’s oversight program, regularly examine records of rail operators’ internal inspections to identify safety deficiencies. Officials from FRA, FTA, and five rail stakeholders we spoke with told us that FRA and FTA rail safety oversight programs also rely on collaboration and communication between rail operators and regulators to ensure safety. For example, regular meetings between FRA and railroad staff to discuss safety trends and industry developments are important to ensuring safety, according to officials we spoke with from FRA and the railroads. FRA specialists and inspectors participate, with representatives of railroad labor and management, in the implementation of voluntary safety programs. For example, FRA sponsors the Confidential Close Call Reporting System, a voluntary, confidential program allowing railroads and their employees to report accident and incident “close calls.” According to FRA officials, voluntary programs such as this increase industry awareness of railroad safety and engagement with it. FTA also collaborates with state safety agencies as rail transit safety issues arise, according to FTA officials, using federal oversight and enforcement authorities as a “back-stop” against the oversight of state safety agencies. Additionally, according to officials we spoke with from FTA and two rail transit operators, state safety agency staff meet with rail transit operators regularly, using knowledge of local operating conditions to help ensure safety. FRA uses a variety of tools, including civil penalties, to resolve safety issues. While some safety issues are resolved informally through discussion and collaboration between FRA and railroads, as noted above, some defects identified during inspections are classified as violations and subject to financial penalties. More specifically, when railroads do not resolve issues in a timely manner or identified defects are serious, FRA has the authority to cite violations and assess civil penalties, against either railroads or individuals. Further, as authorized by law, FRA negotiates settlements with railroads and other entities subject to its safety jurisdiction to resolve claims for civil penalties. In fiscal year 2016, FRA assessed over $11.8 million in civil penalties against railroads. According to FRA, fiscal year 2016 was the second year in a row that it took steps to increase penalty amounts paid by railroads, as part of a continued effort to increase consequences for violations that negatively affect safety. To ensure the safety of rail transit systems, states will continue to be the primary enforcers of safety requirements, according to FTA officials, though FTA now has more enforcement tools. MAP-21 preserved the role of state safety agencies as the primary enforcement body for rail transit. FTA has now required that state safety agencies have enforcement authorities sufficient to compel action from rail transit entities to address safety deficiencies. Though no specific authorities are required, FTA has suggested that a variety of mechanisms could be appropriate, such as the ability to remove deficient equipment from service or assess fines. According to FTA, this requirement is designed to overcome a long- standing vulnerability in state safety oversight, which allowed safety deficiencies to remain for long periods of time. MAP-21 and the FAST Act also provided FTA with more options for enforcement when rail transit operators are found to be out of compliance with safety requirements. In particular, FTA can withhold federal funding for rail transit operators or direct a rail transit operator to use federal funding for a specific purpose. Additionally, after FTA assumes temporary direct oversight of an inadequate state safety agency, FTA can withhold federal funds from the state until the state safety oversight program has been certified. To date, FTA has utilized this authority only with the states responsible for safety oversight of WMATA’s rail system. In February 2017, FTA announced that it would withhold 5 percent of fiscal year 2017 urbanized area formula funds from Maryland, Virginia, and the District of Columbia until a new state safety oversight program is certified for WMATA’s rail system. This action built upon FTA’s determination that WMATA’s state safety agency was ineffective at “providing adequate oversight consistent with prevention of substantial risk of death or personal injury.” FRA and FTA also have the authority to directly intervene in rail operations. In particular, both FRA and FTA can suspend the service of rail operators in response to certain safety concerns. Additionally, FTA can assume direct safety oversight of a rail transit operator if FTA determines the state safety oversight program is not adequate, among other things. In response to safety incidents on WMATA’s rail system, FTA assumed temporary and direct safety oversight of WMATA in October 2015, as previously noted. FRA and FTA’s approaches to their rail safety oversight missions each have strengths and limitations, including how the agencies develop safety regulations, conduct inspections, and carry out enforcement. Compared to FRA’s long-standing role in providing safety oversight over railroads, FTA is in the process of implementing significant changes to its program for rail transit safety oversight after being granted new authorities in MAP- 21 and the FAST Act. With respect to regulations, FRA’s extensive and well-established safety regulations are a strength. FTA has made some progress toward developing appropriate safety regulations, such as identifying subjects for potential regulatory action. With respect to inspections, FRA’s use of a risk-based approach to distributing inspection resources is a strength. FTA has sought to address previously identified deficiencies in state safety oversight by recommending that state safety agencies develop risk-based inspection programs. FTA, though, has not provided states guidance for these efforts. With respect to enforcement, FRA’s use of its enforcement authorities is a strength. FTA is also implementing new statutory requirements that state safety agencies have enforcement authorities but does not have a process or methodology to evaluate the effectiveness of these enforcement practices. Extensive and well-established safety regulations are a strength of FRA’s safety oversight program based on studies we reviewed and discussions with rail operators and stakeholder organizations. According to NTSB, FRA’s railroad safety regulations are an important and effective part of its oversight program. Our previous work reported that according to stakeholders, the Railroad Safety Advisory Committee provides a collaborative environment where stakeholders in the rail community work with FRA to identify issues and proposals for safety standards and regulations that improved the quality of railroads’ safety initiatives and fostered a greater level of compliance with safety regulations. This is consistent with views of stakeholders we spoke with, who characterized FRA’s safety regulations as a strength. An industry association told us that FRA’s regulations promote safety by helping to ensure that no operator falls below a minimum threshold for safe operations, while a rail operator told us that federal regulations help to standardize the operating environment and prevent a patchwork of various state regulations. Four stakeholders also characterized the Railroad Safety Advisory Committee, which plays a large role in crafting FRA’s railroad safety regulations, as effective and inclusive. However, based on studies we reviewed and discussions with rail operators’ and stakeholders’ organizations, FRA faces limitations in its efforts to regulate safety across railroad systems that differ from one another and sometimes change more quickly than the federal regulatory process. Five railroad operators and an industry association told us that some of FRA’s safety regulations do not account for differences in railroads or innovation in safety practices, with three railroad operators stating that this approach requires the extensive use of waivers for particular regulations. Further, two railroad operators and a rail transit operator we spoke with stated that additional federal regulations are needed to provide minimum baseline requirements in specific areas of railroad safety such as medical fitness for duty. In 2014, NTSB also found that FRA needs to do more to regulate particular safety issues including medical fitness for duty and signal protection. FRA officials acknowledged that time and resources are two of the primary challenges that the agency faces when developing safety regulations but also noted additional ways in which the agency can require railroads to adopt safety practices. FRA officials described the process of creating or significantly amending a regulation as involving years of work, even before the agency commences with the process of drafting a rule. The officials also noted that the agency has additional tools to compel railroads to adopt safety practices. For example, FRA officials discussed the use of compliance agreements, in which railroads can have fines reduced in exchange for adopting safety measures that go beyond what FRA regulations require. FRA officials are considering the use of performance-based regulations as they update their safety regulations. As noted above, FRA’s proposed regulations regarding passenger equipment safety incorporates performance -based safety requirements, rather than explicit safety targets or tolerances. FRA has promulgated performance-based regulations about the implementation of positive train control, a communications-based system designed to prevent certain types of train accidents, as well as system safety programs that set general safety parameters and thresholds by which successful performance is governed. FRA’s consideration of performance-based regulations is in line with federal guidance. OMB’s Circular A-4 states that performance standards “are generally superior to engineering or design standards because performance standards give the regulated parties the flexibility to achieve regulatory objectives in the most cost-effective way.” Additionally, under Executive Order 12866, agencies should (to the extent permitted by law and where applicable) identify and assess alternative forms of regulation and specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt. However, as the language of OMB’s Circular A-4 and Executive Order 12866 suggest that performance-based regulations are not always feasible, studies of performance-based regulations find that as with any other form of regulation, performance-based standards have trade-offs. FRA officials told us that under certain circumstances, performance- based regulations are appropriate for issues regarding design, maintenance, operation, and technology-driven safety requirements. FRA officials we spoke with did not think performance-based standards are appropriate for areas that require standardization. One example is track safety standards, where the need for different operators to use the same equipment precludes a performance-based approach that allows railroads to meet requirements through different means. FRA officials added that a key aspect of the success of performance-based regulations concerns how railroads demonstrate compliance. This concern is consistent with other studies of performance-based regulations, which find that these regulations are most appropriate when regulators have capacity to measure and monitor performance. Though FTA has made progress assessing the state of rail transit safety standards, a limitation of FTA’s rail transit safety oversight program is the lack of federal rail transit safety regulations, which may contribute to inconsistent safety practices across the rail transit industry, according to studies we reviewed and discussions with rail operators and stakeholder organizations. NTSB reported that the structure of FTA’s oversight process leads to inconsistent practices, inadequate standards, and marginal effectiveness. In addition, a 2016 DOT OIG report found that because FTA’s safety standards are voluntary, they are unenforceable. In 2012, FTA gained the authority to issue safety regulations, though it has not done so yet, and NTSB and other stakeholders we spoke with indicated that the lack of such federal safety regulations is a weakness in federal rail transit safety oversight. Despite differences across rail transit systems, there is value in establishing federal rail transit safety regulations, according to stakeholders from all categories of those we interviewed, including a state safety agency, three rail transit operators, a railroad operator, and two industry associations. Some stakeholders identified specific areas that would benefit from federal rail transit regulations. For example, two rail transit agencies called for federal regulations to address operator fatigue. Some of these officials stated that federal rail transit safety regulations could help ensure safety by establishing clear and consistent minimum standards. Officials from a rail transit entity and an industry association stated that voluntary standards are not enough to ensure that transit entities will adopt appropriate safety measures. According to our analysis, a past study, and stakeholders we spoke with, FTA’s ability to develop and implement performance-based regulations is limited by its lack of capacity to collect and analyze rail safety performance data. In 2017, DOT OIG found that data limitations of FTA’s National Transit Database results in limited safety performance criteria in FTA’s National Public Transportation Safety Plan. Further, two rail transit entities as well as a state safety agency we spoke with stated that they face challenges in analyzing data due to either the size of their systems or their capacity. FTA officials told us that they need more data to inform their decisions regarding whether to establish rail transit safety regulations, and also added that a limitation to their ongoing assessment of potential areas for rail transit safety regulation is the concern about public disclosure of safety data provided to FTA and its potential use in private litigation. According to FTA officials, they need more information to do a comprehensive evaluation of efficacy of current safety standards and practices. As required by the FAST Act, FTA has entered into an agreement with the National Academies of Sciences, Engineering, and Medicine, to conduct a study to evaluate whether it is in the public interest to withhold from federal or state court proceedings any information collected by DOT through its public transportation safety program oversight activities. The National Academies of Sciences is expected to complete this study in 2018. FTA is taking positive steps toward developing safety regulations that may address inconsistent safety practices across rail transit operators. FTA officials stated that the agency is considering issuing rail transit safety regulations and also employs additional tools to compel rail transit entities to adopt safety measures. As noted above, FTA is currently studying whether federal regulations are appropriate for specific areas of rail transit safety. Executive Order 12866 and OMB’s Circular A-4 direct federal agencies to consider performance-based regulations when developing regulations. Further, as the Transportation Research Board recently reported, any decision to use performance-based regulations “must take into account the regulator’s own ability to enforce and motivate compliance (through methods such as auditing and field inspections) as well as the capacity of regulated entities to meet their obligations.” FTA officials noted that they are actively engaged with members of the Transportation Research Board in reviewing and discussing these recent findings related to safety regulations for high-hazards industries. In January 2017, FTA issued its National Public Transportation Safety Plan, which FTA officials noted is one component of their transit safety standard development program. According to FTA officials, the plan identifies a list of issue areas that the agency is currently studying to determine whether national regulations are needed. FTA officials also stated that the plan includes “voluntary standards,” which are intended to put the industry “on notice” that federal safety regulations may be proposed in those areas. FTA officials stated that they view the National Public Transportation Safety Plan as iterative and more easily updated compared with official regulations. Additional tools that FTA officials stated the agency employs in its approach to safety oversight include general directives as well as the requirements associated with FTA grants. Based on our assessment and studies we reviewed, a strength of FRA’s safety oversight program is its risk-based approach to distributing inspection resources, which may serve as an example for FTA and state safety agencies. According to NTSB, FRA’s qualified inspectors are a strength of its oversight program. To help target these inspectors to the areas of highest risk, FRA developed the National Inspection Plan, which includes a quantitative model for allocating inspection resources in a way that tries to minimize railroad accidents. This model utilizes data including: (1) accident and incident data that railroads are required to report, (2) data from FRA inspection activity, and (3) information on railroad activities such as train miles and other data. Based on our assessment of FRA’s model, we believe that it can be an appropriate and useful tool for directing its inspection resources based on risk because it relies on statistical methods commonly used to predict the risk of a violation for regulated entities. While we did not review FRA’s entire modeling process, nor did we validate the results it generates, we do believe that FRA’s approach to using these statistical models as a key part of its inspection program is appropriate. However, a potential limitation of FRA’s inspection program is the flexibility granted to individual inspectors and whether the manner and extent to which inspectors implement this discretion may be inconsistent with the risk-based National Inspection Plan. FRA’s National Inspection Plan provides guidance for inspectors about how much time they should spend inspecting individual railroads. According to FRA officials, FRA inspectors have considerable flexibility to deviate from the National Inspection Plan based on their judgment regarding where to more effectively use their resources. FRA officials stated that situations arise that call for deviations in planned inspections. For example, a particular railroad may experience a serious accident and therefore require more oversight from FRA. According to FRA officials, regional offices make these decisions based on their understanding of emerging issues. Inspectors are expected to know their region and decide which locations to go to, and are in part evaluated based on these decisions. When a region’s record of total inspection time spent on a particular railroad differs from the National Inspection Plan by more than 5 percent, the region’s leadership submits an explanation to FRA’s Office of Railroad Safety. This practice, if not monitored, could allow inspectors to deviate from the data-driven model results in ways that undermine the goal of the National Inspection Plan to deploy FRA’s limited resources efficiently and based on risk. However, FRA officials told us that flexibility for individual inspectors is important, and that FRA is continuously monitoring the model’s performance and making changes as appropriate. Further, OECD’s Best Practice Principles for Regulatory Policy note that it is important to ensure “that sufficient flexibility is left to enforcement and inspection officials to adapt their response in proportion to the facts on the ground.” A strength of FTA’s approach to rail transit safety oversight is that it is working to overcome weaknesses in state oversight of rail transit identified in our prior work and stakeholders we spoke with. For example, FTA has noted that in the past some state safety agencies lacked sufficient oversight authorities. To now be certified by FTA, state safety agencies must demonstrate that they have authority to review, approve and oversee the implementation of rail transit operator’s safety plans. Additionally, we have found, and FTA has also noted, that some state safety agencies would benefit from more training and additional staff. To now be certified by FTA, state safety agencies must be capable of directly hiring and developing staff and contract support, as well as have a training plan for certain staff. Though FTA is seeking to implement stronger safety oversight activities, a limitation of its program is that state safety agencies have not received the guidance and support necessary to develop effective inspection programs. FTA does not currently plan to conduct widespread inspections itself and recommends that state safety agencies develop risk-based inspection programs. According to FTA, states have discretion to establish their inspection programs in accordance with their program standards, and are not required to actually conduct inspections as the method of verifying rail transit operators’ compliance with safety rules. However, direct observation, audits, and performance indicator tracking are useful methods for an oversight agency in assessing a regulated entity’s safety culture. Officials we spoke with from selected state safety agencies say that they have received little guidance from FTA on what their risk-based inspection programs should look like. In the materials FTA provided to states, it said that it intends to provide guidance to states on risk-based inspections but did not provide us with a plan or timeline for doing so. Without guidance from FTA, state safety agencies may not develop effective risk-based inspection programs and thus not use their resources efficiently. Effective risk-based inspection programs are particularly important given state safety agencies’ limited resources. We have reported in the past that some state safety agencies lack sufficient resources, including training and staff. Officials from two rail transit operators and all four industry associations we spoke with stated that state safety agencies continue to have limited resources and capacity. Several state safety agencies we spoke with rely on contractors or employees with other responsibilities besides oversight of rail transit to meet their increased oversight responsibilities and achieve certification from FTA. Federal standards for internal control as well as leading practices for regulatory inspections state that agency objectives, including those related to inspections and enforcement, should be clearly communicated. Specifically, federal standards for internal control require that management communicate the necessary quality information to achieve the agency’s objectives. Additionally, the OECD’s Best Practice Principles for Regulatory Policy recommends that governments ensure clarity of rules and processes for enforcement and inspections and clearly articulate rights and obligations of officials. According to OECD, the frequency of inspections and the resources employed should be proportional to the level of risk. A strength of FRA’s safety oversight program is that the agency has and utilizes clear enforcement authority, according to NTSB and stakeholders we spoke with. As previously discussed, FRA has several enforcement tools available when inspectors find that railroads are noncompliant with applicable regulations, including civil penalties, individual liability, compliance orders, and emergency orders. According to NTSB, this array of specific enforcement tools helps ensure safety deficiencies are addressed by railroads. FRA officials also told us that the process of adjudicating civil penalties provides a forum for FRA and railroad officials to meet to discuss safety issues. Four rail operators also told us that FRA’s authority to issue civil penalties is necessary to ensure railroads’ compliance with regulations. However, a potential limitation of FRA’s approach to enforcement is that it is difficult to quantify the effectiveness of FRA’s civil penalties. FRA has reported that it cannot determine whether observable safety improvements are directly attributable to discrete civil penalties or whether the amount of civil penalties has any effect on safety. We have reported in the past about the challenges of determining the effect of penalties on compliance in tax policy, though we also noted that, despite these challenges, some analyses likely would be useful for better understanding the effect of penalties on compliance. FRA also reported, though, that according to the judgments of its inspectors, issuing civil penalties yields observable improvements in safety practices and compliance with the law. Further, according to FRA, though it does not quantify the impact of civil penalties, FRA monitors railroad responses to its enforcement activity and adjusts its oversight as necessary. More broadly, civil penalties are not meant, by themselves, to ensure railroad safety. Instead, FRA reported that it uses its entire regulatory regime as a whole to try and ensure safety. FRA officials also noted that the agency has additional tools, apart from civil penalties, to compel railroads to adopt safety practices. A strength of FTA’s rail transit safety oversight is that it seeks to improve historically weak state safety agency enforcement authorities, as described in our previous report as well stakeholders we spoke with. FTA requires state safety agencies to adopt enforcement authorities that are sufficient to enable states to compel action from rail transit agencies to address identified deficiencies. FTA has also communicated to states that it is focusing its evaluation of each state’s enforcement authorities in two major areas: ensuring that the state can carry out its primary responsibility for rail transit safety in response to (1) an imminent threat to public safety on the rail transit system and (2) a lack of action or non- compliance from the rail transit operator in carrying out certain safety plans. FTA has provided states with examples of the enforcement authorities and policies state safety agencies could establish to address these specific concerns. Authorities to address imminent safety threats may include the authority to suspend rail transit agencies’ operations, inspect and remove deficient equipment or system infrastructure from service, or issue an order requiring the rail transit agency to correct an unsafe condition prior to placing equipment or infrastructure back into passenger service. FTA has also provided state safety agencies with examples of authorities to address a lack of action or cooperation by the rail transit operator, including the authority to withhold or redirect funds, levy civil or criminal fines or penalties, and a formal citation or ticketing program. Though federal law requires that state safety agencies have enforcement authorities over the safety of the rail transit entities they oversee, a limitation of FTA’s approach is that FTA has not developed a method to evaluate the effectiveness of states’ enforcement practices. Certified state safety agencies will be evaluated for continued compliance with FTA regulations every 3 years. This triennial review process (for rail transit safety) seeks to ensure that states are effectively carrying out their responsibilities. While FTA officials told us that they will evaluate state safety agencies’ enforcement during the triennial reviews, FTA has not developed a process or methodology to evaluate whether state enforcement authorities and practices as a whole are effective. Without a method for determining the effectiveness of state safety agencies’ enforcement, FTA may not have the information needed to identify ineffective safety enforcement. As a result, deficiencies may remain for long periods of time, potentially contributing to safety incidents. Federal standards for internal control maintain that agency managers should perform a range of practices that would facilitate the establishment of a system to monitor the effectiveness of agency activities, which in the context of FTA’s mission includes the effectiveness of its rail transit safety oversight. Agency managers should define objectives clearly to enable the identification of risks, establish activities to monitor performance measures and indicators, and externally communicate the necessary quality information to achieve the entity’s objectives. Internal control standards further stipulate that agency managers should perform monitoring activities regarding their internal control system and evaluate the results. To do so, federal standards for internal control state that agency managers should monitor ongoing operations and effectiveness, evaluate the results of this monitoring, and identify any changes that need to be made to achieve improvement in agency operations. The effectiveness of state safety agency enforcement is especially important because questions have been raised about the efficacy of FTA’s own enforcement mechanisms, including its ability to withhold funds from and assume direct control over safety oversight for a rail transit entity. Rail transit operators and industry association representatives we spoke with stated that FTA’s authority to withhold funding from states is overly punitive, and two stakeholders said the FTA needs more precise tools. Officials from an industry association added that withholding funds can be counterproductive, as most state safety agencies are already underfunded and understaffed. FTA officials pointed to examples in which the agency successfully supported state safety agencies in compelling action from rail transit agencies as evidence that the state safety oversight model, in which FTA backs up state safety agencies, is effective. Additionally, officials from numerous state safety agencies and others questioned whether FTA has the capacity to effectively assume direct safety oversight of rail transit operators. FTA has not assumed direct safety oversight of any rail transit operators outside of WMATA, and FTA officials noted that they intend to continue supporting state safety agencies in their oversight wherever possible. The approaches to rail safety oversight utilized by FRA and FTA each have strengths and limitations. However, FTA’s program is currently in transition as the agency implements new authorities and responsibilities provided in federal law. Though FTA has made progress by evaluating existing rail transit safety standards and providing some guidance to states as part of the certification process, limitations in FTA’s approach may still hinder the success of the state-based rail transit safety oversight program. Given the looming 2019 deadline for state safety oversight programs to achieve FTA certification, FTA can improve its efforts to implement its new rail transit safety oversight program. In particular, without guidance from FTA on how to develop and carry out risk-based inspection programs, state safety agencies may not use limited resources efficiently, risking that important safety issues will go undetected. Further, without a method for how it will monitor the effectiveness of states safety agencies’ enforcement, FTA will lack the information needed to identify ineffective state enforcement, which risks allowing safety deficiencies to remain for long periods of time. By providing this additional guidance and direction to the state safety agencies, FTA would help ensure that states are able to effectively identify and resolve rail transit safety issues. We are making the following two recommendations to FTA: The Office of Transit Safety and Oversight should create a plan, with a timeline, for developing guidance for state safety agencies about how to develop and implement a risk-based inspection program. (Recommendation 1) The Office of Transit Safety and Oversight should develop and communicate a method for how it will monitor the effectiveness of the enforcement authorities and practices of state safety agencies. (Recommendation 2) We provided a draft copy of this report to DOT, NTSB, and WMATA for review and comment. In written comments, reproduced in appendix I, DOT agreed with both our recommendations. DOT also provided technical comments, which we incorporated as appropriate. In e-mails, NTSB and WMATA provided technical comments, which we incorporated as appropriate. NTSB noted that we do not discuss the role of system safety initiatives, such as safety management systems, in the FRA and FTA rail safety oversight programs. We agree with NTSB that system safety concepts are increasingly influencing the FRA and FTA approaches to rail safety oversight but, as NTSB also noted, both FRA and FTA lack finalized regulations codifying their approaches to system safety initiatives. Because the extent of rail entities’ implementation of these initiatives varies and is not complete we did not include an assessment of the strengths and limitations of those initiatives in our scope. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Transportation, Chairman of NTSB, General Manager of WMATA, and the appropriate congressional committees. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Individuals who made key contributions to this report are listed in appendix II. In addition to the contact named above, Steve Cohen (Assistant Director); Kyle Browning (Analyst in Charge); Melissa Bodeau; Lacey Coppage; Serena Lo; Sean Miskell; and Josh Ormond made key contributions to this report.", "summary": "In 2012 and 2015, DOT was provided with additional authority to oversee the safety of rail transit. Within DOT, FTA is now implementing this authority. The DOT's Office of Inspector General has reported, though, that FTA faces challenges in carrying out its enhanced safety oversight. FRA, also in DOT, has long carried out safety oversight of freight, intercity passenger, and commuter railroads. GAO was asked to review various rail safety and oversight issues, including the differences between FRA's and FTA's rail safety oversight programs. This report examines (1) key characteristics of FRA's and FTA's rail safety oversight programs and (2) strengths and limitations of FRA's and FTA's rail safety oversight programs. GAO assessed FRA's and FTA's information about rail safety oversight activities against guidance from the Office of Management and Budget, leading practices developed by the transit industry, and federal standards for internal control. GAO also interviewed stakeholders, including rail operators chosen based on mode, size, and location. The Department of Transportation's (DOT) Federal Railroad Administration (FRA) and Federal Transit Administration (FTA) carry out different approaches to rail safety oversight. FRA has a more centralized safety oversight program for railroads, while FTA's program for oversight of rail transit safety largely relies on state safety agencies to monitor and enforce rail transit safety, as established in federal statute. Key characteristics of both programs include: (1) safety regulations, (2) inspections and other oversight activities, and (3) enforcement mechanisms to ensure that safety deficiencies are addressed (see figure). There are strengths and limitations to FRA's and FTA's approaches to their safety oversight missions, including how the two agencies develop safety regulations, conduct inspections, and carry out enforcement. The National Transportation Safety Board has reported, and stakeholders GAO spoke with generally agreed, that strengths of FRA's rail safety oversight program include its safety regulations, its risk-based inspection program, and its enforcement authorities. FRA also has potential limitations in its oversight framework, though, such as difficulty evaluating the effectiveness of its enforcement mechanisms. FTA has made some progress implementing changes to the rail transit safety program. However, FTA has not provided all the necessary guidance and support to states' safety agencies to ensure they develop appropriate and effective rail transit safety inspection programs. In particular, FTA has not provided states with guidance on how to develop and implement risk-based inspection programs. Though FTA has said that it will develop such guidance, it does not have a plan or timeline to do so. Without guidance from FTA on how to develop and carry out risk-based inspections, state safety agencies may not allocate their limited resources efficiently, and important safety issues may go undetected. In addition, FTA has not developed a process or methodology to evaluate whether state safety agency enforcement authorities and practices are effective. Without clear evidence that state safety agencies' enforcement is effective, states and FTA may not be able to compel rail transit operators to remedy safety deficiencies. As a result, deficiencies may remain for long periods, potentially contributing to safety incidents. GAO recommends that FTA (1) create a plan, with timeline, for developing risk-based inspection guidance for state safety agencies, and (2) develop and communicate a method for how FTA will monitor whether state safety agencies' enforcement practices are effective. DOT agreed with our recommendations. DOT, NTSB, and WMATA provided technical comments that we incorporated as appropriate.", "document_type": "gao"}
{"report": "The U.S. government engages with the governments of other countries in the Western Hemisphere through various inter-American organizations including the OAS, PAHO, IICA, and PAIGH. According to State, the OAS is the primary inter-American political forum through which the United States engages with other countries in the Western Hemisphere to promote democracy, human rights, security, and development. PAHO serves as the Regional Office for the Americas of the World Health Organization, the United Nations agency on health. IICA supports agricultural development and rural well-being through technical cooperation and the execution of agricultural projects throughout the hemisphere. PAIGH specializes in regional cartography, geography, history, and geophysics and has facilitated the settlement of regional border disputes. According to U.S. agency officials, the organizations’ regional knowledge and technical expertise make them effective implementing partners for projects serving U.S. national interests and priorities throughout the hemisphere. Member states collectively finance these organizations by providing assessed and voluntary contributions (see table 1). For each organization, its member states’ assessed contributions are intended to finance the organization’s regular budgets, which generally cover the organization’s day-to-day operating expenses, such as facilities and salaries. Member states also finance certain OAS, PAHO, and IICA activities and projects through voluntary contributions. According to U.S. officials, the United States provides voluntary contributions to the OAS, PAHO, and IICA primarily through assistance agreements for specific projects from State, USAID, HHS, and USDA. The Institute of Internal Auditors (IIA) provides the framework for international organizations to oversee funds such as the assessed contributions provided by member states to OAS, PAHO, IICA, and PAIGH. The institute’s authoritative guidance, International Standards for the Professional Practice of Internal Auditing, includes mandatory performance standards that describe the nature of internal audit activities and provide criteria for evaluating these activities. Organizations are required to subscribe to these IIA standards, according to PAIGH officials and OAS, PAHO, and IICA documents. Assistance agreements are a critical tool the U.S. government uses to achieve important national objectives. As we have previously reported, effective oversight and internal control are important to provide reasonable assurance to federal managers and taxpayers that assistance agreements are awarded properly, recipients are eligible, and federal funds are used as intended and in accordance with applicable laws and regulations. State, USAID, HHS, and USDA oversee funds provided to OAS, PAHO, and IICA through assistance agreements using monitoring activities such as financial and performance reports. Within each of these agencies, various bureaus and offices are responsible for awarding and managing assistance agreements to these inter-American organizations, including State’s Office of Weapons Removal and Abatement in the Bureau of Political-Military Affairs, USAID’s Office of U.S. Foreign Disaster Assistance, HHS’s Centers for Disease Control and Prevention and its Food and Drug Administration, and USDA’s Animal and Plant Health Inspection Service. The documentation of these monitoring activities as called for by federal standards for internal control enables the agencies to determine the effectiveness of the agreement activity. We found that the strategic goals of the four inter-American organizations are predominantly aligned with the high-level strategic goals for the Western Hemisphere documented by State, USAID, HHS, and USDA. According to officials, the agencies all consider U.S. strategic goals when deciding which projects to fund at OAS, PAHO, and IICA. State, USAID, HHS, and USDA have goals for foreign assistance to the Western Hemisphere, as shown in table 2. For example, four of the five goals in State and USAID’s Joint Strategy correspond with goals at the OAS, IICA, and PAIGH. U.S. agencies, on an ongoing basis, evaluate each inter- American organization to ensure U.S. and organization goals are aligned. Officials from all four agencies provided examples of how they help to ensure alignment of U.S. strategic goals when funding projects at OAS, PAHO, and IICA. State: According to State officials, State created an Annual Performance and Budget Review process in 2014 specifically to review entities, such as the OAS, that receive voluntary contributions funded through the International Organization and Programs account. This process examines performance of State-funded activities relative to those activities from the previous year and the extent to which the activities advance U.S. priorities and objectives. State officials further noted that the Annual Performance and Budget Review helps inform State’s decision-making on what to include in the following year’s budget request. For example, during the 2016 review for the OAS Development Assistance Program, State reported the program’s significant activities, funds expended, and achievements such as training government officials on successful small business policies in the United States. USAID: According to USAID officials, USAID’s project design and approval policies and procedures ensure that all USAID-funded activities are linked to applicable U.S. and USAID strategies. USAID’s agency guidance requires, at a minimum, that each project or activity must be formally approved in writing by the relevant Mission Director or Principal Officer for a given program. Officials stated that this approval memo and supporting documentation address a number of planning considerations, including how the proposed activity aligns with broader strategies. Furthermore, officials stated that USAID’s lawyers review project approval documentation prior to final approval and verify that the activity complies with all applicable statutes, regulations, and policies. HHS: According to HHS officials, HHS engages with PAHO on its Biennial Work Plans, which are operational planning instruments that PAHO uses to identify activities that it can implement within each of its member states. HHS officials noted that they use PAHO’s Biennial Work Plan to strengthen U.S. approaches on issues of common concern and to advance U.S. priorities within the region. According to HHS officials, proposals for technical cooperation projects are required to correspond to one of the technical priorities in PAHO’s strategic plan for 2014–2019 and to be aligned with the HHS global strategy and U.S. priorities. USDA: USDA officials said that they compare the U.S. strategic goals with IICA’s goals and objectives when they formulate project proposals with IICA to ensure that the projects are aligned with U.S. priorities for the region. Additionally, USDA officials told us that USDA helped shape and influence IICA’s recent 10-year strategic plan, ensuring that IICA’s strategic objectives were closely aligned with U.S. strategic goals. OAS, PAHO, IICA, and PAIGH have established mechanisms for overseeing their use of assessed and voluntary contributions, such as external auditors and internal audit boards as required by IIA standards. State and USDA have directly supported these oversight mechanisms. OAS, PAHO, IICA, and PAIGH have oversight mechanisms, as shown in table 3. The four organizations follow the internal control standards of the IIA, codified in the International Standards for the Professional Practice of Internal Auditing, according to PAIGH officials and OAS, PAHO, and IICA documents. All four organizations have internal and external auditors, as required by these standards. Furthermore, OAS, PAHO, and IICA have additional oversight mechanisms, such as anti-fraud policies and program evaluation processes. The officials we interviewed from State, USAID, HHS, and USDA expressed confidence in the four organizations’ management of their assessed and voluntary contributions. All four organizations document the status of their financial and internal control activities in audit reports posted on their public websites. For example, the OAS Office of the Inspector General’s April 2017 Annual Report included an update on its five ongoing audits and investigations. The report also outlined progress made against prior recommendations. U.S. agency officials support budget and administrative subcommittees in three of the four organizations and promote the participation of U.S. experts on independent audit committees, as shown in table 4. For example, according to officials, State plays a significant role in promoting policies on oversight and accountability at the four organizations through formal engagement in deliberations and decision-making of each organization’s governing body and through informal engagement with other member states and the secretariat by recommending best practices in governance, management, and oversight. State and USDA are also directly involved in implementing some of the additional oversight mechanisms at the organizations. For example, a USDA official serves as a member of IICA’s Audit Review Committee. Additionally, an IICA official told us the United States was involved in defining IICA’s Convention and Rules of Procedure for its governing bodies, which established the requirement for internal and external auditing. According to State officials, the United States led efforts to strengthen oversight at several of the organizations under review in recent years, such as advocating for the creation of an ethics officer position at PAHO, proposing language to strengthen the authority and independence of the OAS’s Office of the Inspector General, and encouraging the creation of audit committees at both organizations. In addition, State has played a lead role in supporting the ongoing reform of the OAS administration, which includes improved oversight and accountability, according to officials from the OAS and the U.S. Mission to the OAS. We reviewed 12 selected assistance agreements that the four U.S. agencies awarded to OAS, PAHO, and IICA that were active during calendar years 2014 through 2016, and found that two agencies did not consistently include all key monitoring provisions in their agreements. While HHS and USAID implemented applicable guidance by including all key monitoring provisions in their agreements, USDA and State did not do so. USDA and State agency officials did not explain why USDA and State did not include these monitoring provisions in their agreements. However, State has since taken corrective action to ensure that they are included in future agreements, according to State officials. Applicable agency guidance calls for agencies to conduct monitoring activities as part of their oversight of their agreements. Each of the four agencies has established agency-specific guidance that outlines the monitoring activities for assistance agreements. In some cases, the agency-specific guidance may mandate additional monitoring activities beyond those called for in applicable federal regulations, such as risk assessments. For example, State’s guidance calls for the creation of a monitoring plan. Federal standards for internal control require that agencies include in agreements all key provisions delineating the parties’ responsibilities. For the 12 agreements we reviewed, the number of total key monitoring provisions per agreement varied—including within one agency—depending on when the agency issued and updated its guidance relative to when the agreements were approved. Federal standards for internal control call for agencies to document internal controls, transactions, and significant events. Specifically, internal control standards state that agency management should include internal control activities (e.g., monitoring activities) in policies or directives for transactions such as assistance agreements. For the 12 assistance agreements we reviewed, USDA and State did not include provisions implementing 6 of the 55 total (11 percent) applicable monitoring activities required by applicable guidance to carry out required monitoring activities (see table 5). State took corrective action in 2015 by issuing a standard operating procedure. USDA: USDA did not include 4 of the 13 key monitoring provisions implementing the applicable guidance for the three USDA agreements we reviewed (see table 6). Two of the agreements and supporting documentation each included all four key applicable monitoring provisions. However, Agreement 2 in the table did not include 4 of the 5 monitoring provisions in the agreement or work plan, which documents the monitoring provisions. The agreement partially included performance goals, because it included objectives for the agreement’s activities, but did not include time frames to complete all of the activities. The USDA grant official did not explain why the work plan did not adhere to applicable federal regulations when it was drafted and approved. State: State did not include 2 of the 21 key monitoring provisions implementing the applicable guidance for the three State agreements we reviewed (see table 7). Two of the agreements and supporting documentation we reviewed included the 7 monitoring provisions implementing the requirements in the applicable agency guidance. However, one agreement awarded in 2012 did not include 2 of the provisions: a risk assessment and a monitoring plan. That office that awarded this agreement took corrective action in 2015 by issuing a standard operating procedure requiring that risk assessments and monitoring plans accompany its grants and cooperative agreements. USAID: USAID included both key monitoring provisions implementing the applicable guidance for the three USAID agreements we reviewed (see table 8). USAID’s Automated Directives System 308, Standard Provisions for Cost-Type Awards to Public International Organizations contains two key monitoring provisions for agreements. USAID incorporated the monitoring provisions nearly verbatim into the agreements we reviewed, using templates from this guidance for required terms and conditions. HHS: HHS included the 15 monitoring provisions implementing the applicable guidance for the three HHS agreements we reviewed (see table 9). None of the agencies provided us with full documentation to demonstrate their adherence to the required monitoring activities called for in all of their agreements that we reviewed, including the previously mentioned key monitoring provisions that we reviewed. State and HHS have taken corrective actions to address the gaps we found in documentation for the agreements we reviewed. Agency officials told us that they use these monitoring documents, such as financial and progress reports, to inform future budgetary and programmatic decisions. Therefore, they may lack information needed to make such decisions if they do not have access to complete monitoring documentation. According to federal standards for internal control, each agency is to include key monitoring provisions as part of its agreements. In the individual assistance agreements, the agencies specify the requirements to fulfill these activities, such as requiring financial reports on a quarterly basis or including specific information in performance reports. Grants officers at times, if they deem it necessary or appropriate, include additional monitoring provisions requiring activities beyond those required by the applicable guidance, such as site visits. Federal standards for internal control call for agency management to design monitoring activities, such as financial and performance reporting, so that all transactions are completely and accurately recorded. Recording these activities maintains their relevance and value to management in controlling operations and making decisions. Without access to complete monitoring documentation, the agencies risk weakening the effectiveness of these controls. None of the four U.S. agencies had full documentation of all of the monitoring activities required by their agreements we reviewed (see table 10). The agencies did not have full documentation of monitoring activities for 9 of the 12 agreements we reviewed. For the 42 monitoring activities identified across all of the individual agreements, the four agencies did not have full documentation of 18 of the activities (43 percent). However, State took corrective action in May 2017 to address its gaps in documentation, and according to HHS officials, the Food and Drug Administration addressed its gap in documentation by implementing its agreement monitoring program in fiscal year 2018. USDA did not have full documentation of any of the 10 monitoring activities we identified (see table 11). USDA demonstrated that it had partially documented 2 of the 10 monitoring activities (20 percent) by providing us with some, but not all, quarterly performance reports. For one of the agreements, USDA had no documentation of the monitoring activities for that agreement. For its other two agreements, USDA did not have full documentation of the required monitoring activities. USDA officials did not explain why they did not have full documentation. Without full documentation of the required monitoring activities, USDA may not have the information it needs to make appropriate budgetary and programmatic decisions. USAID did not have full documentation of 2 of the 11 total monitoring activities (18 percent) we identified across the three agreements we reviewed (see table 12). USAID had partial documentation of those 2 monitoring activities. For example, USAID provided us with some, but not all, records such as financial reports required by the terms of the monitoring activities in the agreements. According to USAID officials, the agencies’ lack of complete monitoring documentation was in part due to agency officials not following some of their agency’s requirements for managing agreement documents, such as placing all documents in a shared document management system. For example, for one of the agreements we reviewed, USAID officials stated that they stored some agreement documentation electronically—such as modifications, correspondence with the agreement recipient, and quarterly financial reports—but primarily maintained paper files. USAID officials told us they use the monitoring documents of these agreements, such as financial and progress reports, to inform future budgetary and programmatic decisions. For example, according to USAID officials, USAID uses monitoring documents to identify and address potential project delays or other “red flags.” For one of the agreements we reviewed, USAID officials stated these monitoring reports also assist them in determining whether to award additional funds and establish new indicators in subsequent agreements. Without full documentation of the required monitoring activities, USAID may not have the information it needs to make appropriate budgetary and programmatic decisions. State did not have full documentation for 5 of the 16 monitoring activities (31 percent) we identified across the three agreements we reviewed (see table 13). However, State had partial documentation of 4 of those 5 monitoring activities. For example, State had some, but not all, records such as standard reporting metrics, required by the terms of the monitoring activities in one of the agreements. State did not have documentation of one of the monitoring activities (site visits). According to State officials, the agency’s lack of complete monitoring documentation was in part due to agency officials not following some of the agency’s requirements for managing agreement documents, such as placing all documents in a shared document management system. For example, according to State officials, for one of the agreements we reviewed, the grants officer mistakenly had saved site visit reports and similar documents to personal folders because the officer did not know how to use State’s grant document storage system. As a result, neither the current grants officer nor other State officials could retrieve these documents. In May 2017, after awarding the agreements we reviewed, State took corrective action by issuing the Federal Assistance Directive to establish internal guidance, policies, and procedures for all domestic and overseas grant-making bureaus, offices, and posts within the department when administering federal financial assistance. The directive notes that State implemented a grant management system for domestic and overseas grants to resolve its “significant deficiency in the management of Federal financial assistance.” In addition, the directive indicates that officials from State’s Bureau of Administration, Office of the Procurement Executive, Federal Assistance Division will evaluate compliance with risk assessment requirements and review documentation for selected agreements each fiscal year. One of the stated purposes of these reviews is to mitigate risk by strengthening management and oversight of awards, including grants. According to a State Office of Inspector General report, State should complete the full deployment of this system for overseas grants in fiscal year 2019. HHS did not have full documentation of 1 of the 5 applicable monitoring activities (20 percent) we identified across the three agreements we reviewed (see table 14). HHS had partial documentation of the semiannual progress report activity for one of its agreements, required by the terms of its agreement. HHS officials did not explain why they did not have full documentation for this monitoring activity. HHS had full documentation of all applicable monitoring activities for the other two agreements we reviewed. According to agency officials, the Food and Drug Administration, which administered one of the HHS agreements we reviewed, has taken corrective action to evaluate its agreement documentation and address deficiencies. According to HHS officials, the Food and Drug Administration developed a pilot program intended to provide an additional layer of oversight to ensure adherence to the terms of each agreement. Under the pilot, officials said, a grant monitoring specialist reviews the agreement documentation and monitoring reports to identify agreements that need additional assistance. According to HHS officials, the Food and Drug Administration implemented this program in fiscal year 2018 and will eventually include all Food and Drug Administration agreements. U.S. assistance agreements for projects with inter-American organizations further U.S. strategic goals in the Western Hemisphere, but State, HHS, USAID, and USDA did not consistently include all key monitoring provisions as part of their assistance agreements or demonstrate that they had full documentation of monitoring activities for the agreements we reviewed. Of these four agencies, USAID and USDA have not taken corrective actions. Monitoring the implementation of U.S. assistance agreements and fully documenting the results of such monitoring are key management controls to help ensure that U.S. agreement recipients use federal funds appropriately and effectively. The agencies risk weakening the effectiveness of these controls by not including all key monitoring provisions called for by applicable agency guidance. Further, if the agencies do not have full documentation of the agreements’ required monitoring activities, they may not be able to effectively manage federally funded projects that support U.S. strategic goals. In addition, agencies may not have all the information they need to make budgetary and programmatic decisions. We are making a total of three recommendations: one to USAID and two to USDA. The USAID Administrator should ensure that USAID officials have full documentation of required monitoring activities in agreements with inter- American organizations. (Recommendation 1) The Secretary of Agriculture should ensure that USDA includes all key monitoring provisions specified by applicable guidance as part of agreements with inter-American organizations. (Recommendation 2) The Secretary of Agriculture should ensure that USDA officials have full documentation of required monitoring activities in agreements with inter- American organizations. (Recommendation 3) We provided a draft of this report for comment to State, USAID, HHS, and USDA. USDA concurred with our recommendations in an e-mail. In its written comments, reproduced in appendix IV, USAID stated that it has policies, procedures, and training in place for the officials who manage these agreements. In response to our recommendations, USAID stated that it will issue an agency notice to remind all such officials of these responsibilities, including the requirement to maintain complete files for each agreement. State and HHS did not provide formal comments. They did provide technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of the U.S. Agency for International Development, the Secretary of Health and Human Services, and the Secretary of Agriculture. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-9601, or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Congressional requesters asked us to review several issues related to the Organization of American States (OAS), the Pan American Health Organization (PAHO), the Inter-American Institute for Cooperation on Agriculture (IICA), and the Pan-American Institute of Geography and History (PAIGH). In this report, we (1) assess the extent to which the organizations’ strategic goals align with those of U.S. agencies; (2) examine how the organizations oversee the use of their funds and the extent to which U.S. agencies have supported those efforts; (3) assess the extent to which U.S. agencies included key monitoring provisions as part of their assistance agreements; and (4) assess the extent to which U.S. agencies had documentation of monitoring activities, including those called for by these provisions. To address the first objective, we gathered documentation and interviewed officials from the four U.S. agencies and the four organizations to determine the U.S. strategic goals for foreign assistance to the Western Hemisphere and the goals of the four organizations. According to Department of State (State) and U.S. Agency for International Development (USAID) officials, the strategic document that underpins their foreign assistance priorities for the region is The Department of State’s Bureau of Western Hemisphere Affairs’ and USAID’s Bureau for Latin American and Caribbean Affairs’ Joint Regional Strategy. Department of Health and Human Services (HHS) officials said that HHS’s relevant strategic document is The Global Strategy of the U.S. Department of Health and Human Services. U.S. Department of Agriculture’s (USDA) strategic goals for foreign assistance, according to officials, are outlined in the United States Department of Agriculture Strategic Plan FY2015–2018. The OAS outlined its strategic goals in the Comprehensive Strategic Plan of the Organization, adopted on October 31, 2016. PAHO’s goals are laid out in Strategic Plan of the Pan American Health Organization 2014–2019. IICA’s strategic document is the IICA 2010–2020 Strategic Plan, which took effect in October 2010. PAIGH’s strategic document is the Declaration and Guide for the Pan American Agenda 2010-2020. We compared the strategic goals articulated by the four organizations against U.S. strategic goals to assess the extent to which the organizations’ goals contribute to U.S. interests in the region. We then interviewed officials from the four agencies and reviewed relevant documentation on efforts they undertake to ensure that U.S.-funded activities align with U.S. strategic goals. To address the second objective, we reviewed documentation of the organizations’ internal control mechanisms and confirmed our findings with the organizations. We identified mechanisms to include policies, directives, rules, practices, and organizational structures that can have an oversight role in the use of the organizations’ funds. We also interviewed officials from State, USAID, HHS, and USDA to discuss their support of these mechanisms. To address the third objective, we identified 60 active assistance agreements that these agencies oversaw with OAS, PAHO, and IICA during calendar years 2014 through 2016 and selected a nongeneralizable sample of 12 agreements, three each from State, USAID, HHS, and USDA. To determine which agreements we would review for each agency, we selected the three agreements with the lowest, median, and highest dollar value. If any of an agency’s agreements supported the same country or activity or were for one-time projects such as seminars, we selected the next appropriate agreement based on dollar value. For these selected agreements, we then identified the applicable agency guidance for monitoring activities in the agreements, which we define as all documents related to each agreement provided to us by the agencies, such as monitoring reports. The number of key monitoring provisions varied—even within each agency—depending on when agency guidance was issued and updated relative to when the agreements were approved. USDA did not have applicable internal agency-specific guidance for monitoring of assistance agreements at the time it awarded the agreements we reviewed; thus, with USDA’s input, we used the applicable sections of the Code of Federal Regulations, which together have five key monitoring provisions for agreements. However, USDA approved two of the agreements in 2012 and the third agreement in 2016, and this third agreement was subject to an amended version of the Code of Federal Regulations, which added an additional provision for performance goals. State’s four applicable grants policy directives have seven key monitoring provisions for agreements that were applicable at the time the agreements we reviewed were approved. USAID’s Standard Provisions for Cost-Type Awards to Public International Organizations (PIOs): A Mandatory Reference to ADS Chapter 308 has two key monitoring provisions for agreements: audits and records, and the organization’s adherence to their rules. HHS’s grants policy has five key monitoring provisions for grant documentation. We identified key monitoring provisions for agencies to include as part of agreements to ensure oversight of the use of funds, such as financial and progress reports. For the 12 agreements in our sample, we analyzed the assistance agreements from the four agencies, and then determined the extent to which the agencies’ agreements included key monitoring provisions implementing monitoring activities called for by applicable agency guidance. We did not include subsequent amendments to these 12 agreements in our review of key monitoring provisions. We interviewed officials from State, USAID, HHS, and USDA (1) to confirm we were applying the appropriate federal or agency guidance and (2) to discuss instances in which the agreements did not include key monitoring provisions. To address the fourth objective, we reviewed the 12 selected assistance agreements and guidance to identify specific required monitoring activities, such as financial and program reports, site visits, and other forms of oversight. The agreements specify the requirements for these activities such as requiring financial reports on a quarterly basis. For these 12 agreements, we reviewed all the documentation provided to us by the agencies, then determined the extent to which the agencies had full documentation of key monitoring activities as specified in the assistance agreements, including those called for by key monitoring provisions, as well as those called for by guidance when the monitoring provisions were absent. We did not include subsequent amendments to these 12 agreements in our review of monitoring activities. We interviewed officials from State, USAID, HHS, and USDA to discuss instances in which the agency did not have full documentation of key monitoring activities. We also discussed how State, USAID, and HHS agency officials manage their agreement documentation and use the information in the agreements’ required monitoring documentation. We conducted this performance audit from July 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Organization of American States (OAS), Pan American Health Organization (PAHO), the Inter-American Institute for Cooperation on Agriculture (IICA), and the Pan-American Institute on Geography and History (PAIGH) have established mechanisms for overseeing their use of funds. Tables 15–18 show the mechanisms (oversight policies and oversight committees and organizations) for each of these inter-American organizations, as confirmed by the organizations’ officials. To oversee the execution of their agreements, the Department of State (State), the U.S. Agency for International Development (USAID), the Department of Health and Human Services (HHS), and U.S. Department of Agriculture (USDA) are to conduct monitoring activities called for by applicable federal regulations or agency guidance and document these provisions in assistance agreements as called for by federal standards for internal control. We identified key monitoring provisions implementing the applicable agency guidance for State, USAID, HHS, and the applicable regulations for USDA, as shown in table 19. For both the agency guidance and the federal regulations, those listed are the ones that were in effect when the agreements in our sample were approved. Some of the agency guidance and regulations have since been amended or superseded. In addition to the contact named above, Pierre Toureille (Assistant Director), Julia Jebo Grant (Analyst-in-Charge), Leslie Stubbs, and Paul Sturm, Alana Miller, and Shirley Min made key contributions to this report. In addition, David Dayton, Martin de Alteriis, Neil Doherty, Jeff Isaacs, and Alex Welsh provided technical assistance.", "summary": "The United States is a member of the OAS, PAHO, IICA, and PAIGH, which promote democracy, health care, agricultural development, and scientific exchange. GAO was asked to review U.S. assistance to these four organizations. In this report, GAO (1) assesses the extent to which the organizations' strategic goals align with those of U.S. agencies; (2) examines how the organizations oversee the use of their funds and the extent to which U.S. agencies have supported those efforts; (3) assesses the extent to which U.S. agencies included key monitoring provisions as part of assistance agreements; and (4) assesses the extent to which U.S. agencies had documentation of monitoring activities, including those called for by these provisions. GAO analyzed documents and interviewed officials from State, USAID, HHS, USDA, and the organizations. GAO also analyzed a nongeneralizable sample of 12 of the 60 assistance agreements that were awarded by State, USAID, HHS, and USDA to OAS, PAHO, and IICA and were active during calendar years 2014 through 2016. For each agency, GAO selected three agreements with the lowest, median, and highest dollar value. GAO found that strategic goals of the Organization of American States (OAS), the Pan American Health Organization (PAHO), the Inter-American Institute for Cooperation on Agriculture (IICA), and the Pan-American Institute of Geography and History (PAIGH) are predominantly aligned with the strategic goals of the Department of State (State), the U.S. Agency for International Development (USAID), the Department of Health and Human Services (HHS), and the U.S. Department of Agriculture (USDA). For example, IICA's strategic goals of a productive agricultural sector, enhancing agricultural development, and food security are aligned with USDA's foreign assistance goals. State, USAID, HHS, and USDA fund activities in the form of assistance agreements (e.g., grants and cooperative agreements) with OAS, PAHO, and IICA, which in 2016 totaled $32 million. According to agency officials, the agencies employ mechanisms to ensure that these agreements align with U.S. strategic goals. OAS, PAHO, IICA, and PAIGH have established mechanisms for overseeing their use of funds, such as external auditors, internal audit boards, and anti-fraud and ethics policies. State and USDA have directly supported these mechanisms. For example, State engaged in the selection process for OAS's Inspector General. GAO's review of 12 selected assistance agreements found that USDA included no financial or performance monitoring provisions in one of its agreements and that State did not include two key monitoring provisions in one of its agreements, called for by applicable guidance. GAO found that the remaining 10 agreements it reviewed contained all key monitoring provisions and that State has since taken corrective action. GAO found that U.S. agencies did not have full documentation of 18 of the 42 monitoring activities required by the 12 assistance agreements GAO reviewed (see table). For example, USDA did not have full documentation, such as for financial reports, of any of its 10 required monitoring activities and USDA officials did not explain their lack of documentation. USAID officials explained that their lack of full documentation was due, in part, to grant officers not always following their document management policies. State and HHS have since taken corrective action. If an agency does not have full documentation of monitoring activities, it may lack information needed to make appropriate budgetary and programmatic decisions. GAO recommends that (1) USDA ensure inclusion of all monitoring provisions as part of agreements and (2) USAID and USDA ensure full documentation of monitoring activities. USDA and USAID concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Since the mid-2000s, DOD and the military health system have worked to decrease trauma-related morbidity and mortality by improving trauma care in DOD’s military treatment facilities and by conducting research on providing trauma care. As part of these efforts, the Army established the JTS DCOE, which serves to provide advice on trauma care across the military. The JTS DCOE performs several functions to improve trauma care, including overseeing the DOD Trauma Registry (DODTR)—a database that captures trauma data from the time servicemembers are injured on the battlefield to when they are treated by providers in the United States. The JTS DCOE uses DODTR data to conduct performance improvement activities and to identify gaps in medical capabilities to direct ongoing and future combat casualty care research, trauma skills training, and combat casualty care. The JTS DCOE also provides data from the registry to collaborating military and civilian personnel conducting medical research. managing the development, monitoring, and review of Clinical Practice Guidelines (CPGs). These guidelines, developed by subject matter experts using data from DOD’s trauma registry, are created to inform medical professionals of best practices based on medical evidence, with a goal of minimizing inappropriate variation in medical practice and improving care for trauma injuries, specifically when military servicemembers are deployed. The development of CPGs is an ongoing process that takes place during times of war and peace, according to DOD officials. developing and providing training curriculum for first responders to trauma-related injuries. The JTS DCOE seeks to identify lessons learned from trauma care that can be used as part of this training, to help improve the medical readiness of trauma care providers. To create a formalized, consistent trauma system across DOD, the NDAA required that a new JTS be operated under the direction of DHA. DHA officials expect to begin initial operation of the new JTS in July 2018. Additionally, DOD plans to realign the existing JTS DCOE and its current functions under DHA. Section 707 (a)(2) of the NDAA required DOD to submit an implementation plan to Congress for the new JTS in June 2017, 180 days after the NDAA was enacted. The NDAA also includes a provision for us to review DOD’s plan within 180 days after DOD submitted it to Congress, and for DOD to implement the new JTS 90 days after we submit our review. The NDAA required that the new JTS and DOD’s implementation plan include the following four elements: 1. serve as the reference body for all trauma care provided across the 2. establish standards of care for trauma services provided at military 3. coordinate the translation of research from DOD’s centers of excellence into standards of clinical trauma care, and 4. coordinate the incorporation of lessons learned from trauma education and training partnerships pursuant to section 708 of the NDAA into clinical practice. The implementation plan submitted by DOD to Congress on August 7, 2017 includes a description of the four elements required by the NDAA. It also provides an overview of the implementation activities, including realigning the U.S. Army’s current Joint Trauma System Defense Center of Excellence to become part of the new system within DHA. Although the implementation plan includes the four required elements, neither it nor DOD’s supplemental planning documents prepared to date fully incorporate leading practices, which we have previously identified. These leading practices, such as the establishment of goals and the identification of strategies to achieve those goals, play an important role in enabling an organization to achieve its objectives. We found that DOD’s planning documents, prepared to date, incorporate only some of the leading practices. (See table 2). DOD officials acknowledged that the agency’s plans are presently incomplete because this process is ongoing. They stated that DOD is continuing to plan for implementing all four elements of the JTS— including efforts to incorporate leading practices. DOD’s planning documents that have been prepared to date and our assessment of each of the four elements are described below. DOD’s planning documents incorporate goals associated with this element, but only include partial information about the strategies, associated risks, and plans to assess progress. Without including more complete information about plans to serve as a reference body for trauma care, it is unclear how well prepared DOD is to implement this element. Goals: According to a planning document, DOD has two goals for JTS to serve as a reference body: 1) consolidating disparate trauma registries into the DODTR. According to DOD officials, there are currently about 70 disparate registries, some of which collect trauma-related information for various entities across DOD. 2) developing a common trauma lexicon—a dictionary of common trauma care terminology to assist in the assessment of trauma-related injury data. Strategies: In addition to defining goals, the documents also include some strategies to achieve those goals, such as specific actions that DOD plans to take and target dates for accomplishing these actions. For example, the documents outline plans to take action to define key terms such as “preventable death,” “non- survivable injury,” “potentially survivable injury,” and others by a target date of July 2018. The documents also identify DHA as the lead office within DOD that is responsible for executing and achieving this action. The planning documents do not yet fully reflect the strategies needed to accomplish these goals. For example, although the documents discuss actions and milestones associated with goals for this element, they do not yet provide complete information on the resources and costs needed for implementation. The documents state that DHA will conduct an organizational analysis to determine what organizational structure, staffing needs, and other resources are needed for implementation at a later date. They also state that funding levels for DHA’s operation of the DODTR will be based on the existing JTS DCOE funding levels. However, another planning document indicates that the infrastructure for the DODTR’s existing host network—operated by the United States Army Institute of Surgical Research—would be insufficient to support the planned JTS and DODTR expansion, and that integrating even a single additional registry or component of a registry into the DODTR would require an adjustment to the funding for the system. Given that the planned activities for the new JTS would require an expansion beyond the scope of the current JTS DCOE responsibilities and activities, additional planning for equipment and network support costs may be necessary to ensure that the new JTS has sufficient resources to meet its goals. Risks: The planning documents identify risks that could affect the JTS’s ability to serve as a trauma reference body, but the documents do not yet specify how DOD plans to assess or respond to these risks. For example, although one of the planning documents identifies potential shortfalls in the DODTR host network’s ability to support an increased number of users—which are expected as the various disparate registries are consolidated—none of the documents yet address the estimated impact of this risk on DOD’s goals or how it plans to respond to the risk. Not planning for assessing and responding to risks could increase the likelihood that they become problematic, and negatively affect DOD’s goal for the JTS. Plans to Assess Progress: The planning documents do not yet fully indicate how DOD plans to assess progress made towards the goals for consolidating registries or developing a lexicon of common trauma terms, as would be consistent with leading practices. The documents include a description of a baseline for performance related to DOD’s goal to develop a lexicon of common trauma terms, but they do not yet include plans to monitor the progress made towards this goal or to assess the results of monitoring. Additionally, the documents do not yet establish a performance baseline, a system to monitor progress, or a plan to assess the results of monitoring for DOD’s other goal for this element—to consolidate registries into the DODTR. Without a fully-developed system for assessing the implementation’s progress—practices which are consistent with federal internal control standards for risk assessment—DOD may be unable to determine progress toward the goals it has identified for this element. DOD’s planning documents incorporate goals and plans to assess progress, but do not yet fully incorporate leading practices related to strategies and risks. Goals: According to the documents, DOD’s goal for this element is twofold: 1) to develop, publish, and assess standards of care in DOD’s CPGs. 2) to determine if the CPG development process can be improved. DOD publishes CPGs to provide trauma care providers with recommended practices for the provision of care, based on available evidence. According to DOD documents, the CPGs minimize variations from evidence- based best practices, which help to save lives. Strategies: DOD’s planning documents describe how the new JTS will continue to produce, update, and monitor adherence to CPGs and designates JTS as the office that is primarily responsible for leading these efforts. Although DOD’s planning documents include information needed for the JTS to establish standards of care through CPGs, they do not yet fully reflect the strategies necessary to achieve DOD’s goal. DOD officials indicated that the new JTS will develop, publish, and assess CPGs using the same process used by the existing JTS DCOE. DOD officials told us that CPGs are currently reviewed on an annual basis and updated once every two years, on average. According to DOD officials, this frequency exceeds standards established by leading civilian organizations. Once updated, officials disseminate CPGs by posting them on a website, sharing them with DOD officials responsible for training trauma care providers, and discussing them at weekly conference calls on combat casualty care. Officials also told us that the existing JTS lacks authority to require that trauma care providers adhere to recommendations made in CPGs. In addition, DOD’s planning documents acknowledge that the existing process lacks sufficient mechanisms to ensure timely updates and effective dissemination, but do not yet indicate what plans are needed to make improvements in these areas. Without additional planning to improve mechanisms for CPG development and dissemination, DOD faces uncertainty regarding the new JTS’s ability to ensure that the CPGs it produces are up to date and effectively disseminated to military trauma care providers, which may ultimately impact the trauma care that it provides. Risks: The planning documents identify risks associated with the development and dissemination of trauma care CPGs, such as an inconsistent process for dissemination. However, they do not yet include information on determining the potential effects of these risks, nor do they include how DOD expects to respond, which are both leading practices for risk assessment and are consistent with federal internal control standards. Without additional planning, DOD may not be fully prepared to address risks related to updating and disseminating CPGs. Plans to Assess Progress: The planning documents include detailed information about how DOD uses performance measures for each CPG to assess progress in provider adherence to trauma care standards. The documents also establish a baseline for provider performance, a system for ongoing performance monitoring, and a process for evaluating the results of monitoring—performance measurement activities that can help the department track progress towards the goal it has established for this element. One of the planning documents provides a general overview of how DOD plans to coordinate the translation of research from its centers of excellence—including the JTS DCOE and other trauma care centers of excellence—into trauma care standards, but the planning documents have yet to incorporate any of the four leading practices, including goals, strategies, risks, or plans to assess progress. According to DOD officials, the current JTS DCOE routinely translates research into trauma care standards by creating and updating these standards to incorporate the findings and results of relevant research. DOD officials also told us the current JTS DCOE routinely interacts with the various DOD organizations responsible for trauma-related research, such as by holding weekly discussions on trauma care issues. Officials stated that they do not expect these interactions to change as the JTS DCOE transitions to the new JTS. However, the planning documents do not yet provide any detail about how these interactions will inform clinical standards. Without including detailed information in the planning documents on how DOD expects to coordinate the translation of research into trauma care standards, it is unclear whether the JTS will be fully prepared to ensure that clinical standards are up-to-date and based on the most relevant evidence from research. This is critical to ensuring the effectiveness of the trauma care provided. The planning documents for this element do not yet incorporate any of the four leading practices, including goals, strategies to achieve goals, risks, or plans to assess progress. Officials indicated that planning for the implementation of this element will be incomplete until DOD establishes the new Joint Trauma Education and Training Directorate responsible for establishing these partnerships. Section 708 of the NDAA states that DOD may enter into partnerships with civilian trauma centers to provide trauma care providers with maximum and continuous exposure to a high volume of critically injured patients. According to DOD officials, planning for incorporating lessons learned will begin after the directorate reaches initial operating capacity, which they anticipate in 2018. DOD officials also told us that the JTS will collaborate with the directorate for trauma education and training partnerships, once it is established, to plan the translation of relevant lessons learned into clinical practice. Because planning for this element is still incomplete, it is unclear whether DOD will be prepared to use information from these clinical partnerships to improve the effectiveness of the trauma care it provides to injured service members. In an effort to reduce preventable deaths and disabilities due to trauma, and as required by the NDAA, DOD is planning for the implementation of its new JTS. Specifically, the department has submitted its implementation plan to Congress as required and has developed other supplemental planning documents that describe how it plans to address the four required elements of the new system. Incorporating these elements is a critical step for DOD as it works to improve trauma care consistently across the military health system. Although the NDAA requires that DOD begin implementation in 2018, DOD’s planning is ongoing, and its planning documents do not fully incorporate leading practices that can help ensure the success of its efforts. As it moves forward, DOD has the opportunity to update its efforts and planning documents to fully incorporate these leading practices. By not doing so, DOD may be missing an opportunity to ensure that its efforts to implement a new JTS are effective and to help reduce trauma-related deaths and injuries across the military. To fully implement the four required elements of the new Joint Trauma System, the Director of the Defense Health Agency should fully incorporate leading practices—including establishing goals, planning strategies to achieve goals, identifying and addressing risks, and assessing progress—in its planning to guide implementation efforts. (Recommendation 1) We provided a draft of this report to DOD for comment. DOD provided written comments, which are reprinted in appendix I, and technical comments, which we incorporated as appropriate. In its written comments, DOD concurred with our recommendation to fully incorporate leading practices in its planning to guide JTS implementation efforts. DOD’s written comments also referred to technical concerns regarding the timeliness of its updates to clinical practice guidelines. Specifically, the comments indicate that DOD updates these guidelines more frequently than standards established by leading civilian organizations. Our report includes a description of DOD’s processes for developing and updating these guidelines, including the frequency of the updates, and we added a statement regarding DOD officials’ comparison of this frequency to civilian standards. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact above, Will Simerl (Assistant Director), Carolyn Garvey (Analyst-in-Charge), Sarah Sheehan, Jennie Apter, and Jacquelyn Hamilton made key contributions to this report.", "summary": "Traumatic injury is a major cause of death and disability in the military, but improved trauma care has the potential to improve these outcomes. DOD has worked to improve trauma care over time, such as by establishing a Joint Trauma System Defense Center of Excellence to examine trauma care and share best practices. To improve trauma care across DOD, the NDAA for Fiscal Year 2017 directed DOD to establish a new JTS within DOD's Defense Health Agency. The NDAA requires that the new JTS include four specified elements, and also required DOD to submit to Congress an implementation plan that included the four elements. The NDAA also included a provision for GAO to review DOD's planning for the new JTS. GAO assessed whether the implementation plan includes the four required elements and the extent to which DOD's planning efforts to date reflect leading practices from prior GAO work, such as identifying goals and strategies to achieve those goals. To conduct its work, GAO assessed DOD's implementation plan and other supplemental planning documents identified by DOD, and interviewed DOD officials. The Joint Trauma System (JTS) implementation plan submitted to Congress by the Department of Defense (DOD) in August 2017 includes a description of the four elements required by the National Defense Authorization Act (NDAA) and an overview of implementation activities. For example, it indicates how the Army's current JTS Defense Center of Excellence will become part of DOD's new JTS. However, the plan and other supplemental planning documents prepared to date do not fully incorporate leading practices for planning as identified by prior GAO work. GAO has previously found that implementation plans incorporating these leading practices—goals, strategies to achieve goals, risks that can affect goals, and plans to assess progress toward goals—help ensure organizations achieve their objectives. For each of the four required elements, GAO found that these leading practices either were partially incorporated or had not been incorporated: Element 1—Serve as the reference body for all trauma care provided across the military health system. DOD documents include specific goals, such as consolidating data from multiple trauma registries. They also include some strategies to achieve the goals, such as identifying lead offices and time frames to complete specific actions. However, the documents provide limited details on actions DOD plans to take, and do not indicate how DOD plans to address risks or assess its progress. Element 2—Establish standards of care for trauma care services. DOD documents include a goal to develop, publish, and assess clinical practice guidelines that serve as standards of trauma care. These documents also describe how the new JTS will continue to produce, update, and monitor adherence to the guidelines. However, they do not fully indicate plans to address risks, such as ensuring effective dissemination. Element 3—Coordinate the translation of research from DOD centers of excellence into standards of clinical trauma care. DOD planning documents do not incorporate any leading practices for this element. DOD officials told GAO that clinical standards incorporate relevant research and that officials responsible for trauma care standards routinely interact with officials responsible for research. Officials expect this practice to continue under the new JTS. Element 4—Coordinate the incorporation of lessons learned from trauma education and training partnerships into clinical practice. DOD planning documents do not incorporate any leading practices for this element. According to officials, DOD must first establish a separate directorate responsible for partnerships with civilian trauma centers before determining how to incorporate lessons from partnerships into the new JTS. According to DOD, the JTS implementation plan is a general overview of implementation activities, and planning efforts are ongoing. By not fully incorporating leading practices in its planning documents, DOD may be missing opportunities to ensure that the JTS is effectively implemented, to provide more effective trauma care across the military, and to help reduce trauma-related deaths and disabilities. GAO recommends that DOD incorporate leading practices in its planning to guide implementation efforts. DOD agreed with the recommendation.", "document_type": "gao"}
{"report": "Check-off programs are designed to expand the market for a given agricultural commodity, such as eggs, pork, or highbush blueberries, through generic promotion, research, and consumer and industry information. A check-off program is meant to expand the demand for a commodity rather than for any particular brand or producer. Although some state, regional, and local check-off programs that have existed for over 70 years may be voluntary, federal programs are mandatory. Many commodity groups prefer mandatory programs to address the free rider problem—that is, producers, handlers, processors, importers, or others in the marketing chain who do not pay into a check-off program but benefit economically from voluntary programs that others have funded. After Congress authorized the Cotton Research and Promotion Act of 1966, the first federally mandated agricultural check-off program and board—for cotton—was created. Over the next three decades, Congress authorized the creation of an additional 11 commodity programs and their respective boards. The 12 programs and boards created under the authority of individual stand-alone legislation adhere to the specific requirements as set forth in their respective authorizing legislation. The passage of the Commodity Promotion, Research and Information Act of 1996 (generic legislation) gave USDA the authority to establish additional commodity check-off programs and boards. Since then, 10 additional boards were created based on this generic legislation. Those boards are subject to the requirements set forth in the generic legislation. (See table 1 for the year established and authorizing legislation for all 22 check-off programs.) To create a check-off program, industry groups first identify the need for such a program and then negotiate among themselves to agree on a basic program framework. The framework includes the rate of assessment and the various program activities to be undertaken, such as promotion, advertising, research, and providing information to consumers and industry. Additionally, each industry proposes regulations to USDA for the structure of the board that will carry out these activities. Because each industry has unique characteristics, a different board structure is appropriate for each check-off program. The boards vary in size, geographic representation, and types of individuals who are board members—that is, producers, processors, handlers, importers, public representatives, or others in the marketing chain. USDA, in consultation with the industry, then develops regulations to define how the program will be operated, how the funds will be collected, and how compliance with the authorizing legislation will be maintained, among other things. The check-off programs must be approved by a majority of producers— and in some cases processors, importers, and handler—subject to the assessments. To gain approval, a referendum must be held either before check-off program operations begin within some specified time after assessments are first collected, depending on the authorizing legislation. To fund a check-off program, producers, handlers, processors, importers, or others in the marketing chain are assessed for each unit of the commodity sold, produced, or imported. For example, for each 30-dozen cases of eggs sold, a producer is assessed $0.10. These funds go to the American Egg Board. The boards are to use assessments for the research, promotion, and consumer and industry information activities as well as for reimbursing AMS for its oversight costs. In 2016, total assessments collected for the 22 check-off programs ranged from $0.6 million for the popcorn check-off program to $332.1 million for the dairy check-off program (see table 2). To facilitate oversight, AMS breaks the 22 check-off programs into four of the agency’s commodity areas: (1) Cotton and Tobacco—the cotton check-off program; (2) Dairy—the dairy and fluid milk check-off programs; (3) Livestock, Poultry, and Seed—the beef, egg, lamb, pork, sorghum, and soybean check-off programs; and (4) Specialty Crops—the Christmas tree, Hass avocado, highbush blueberry, honey, mango, mushroom, paper and packaging, peanut, popcorn, potato, processed raspberries, softwood lumber, and watermelon programs. AMS has a functional committee for the check-off programs, which comprises a chair and the deputy administrators from the four AMS commodity areas and meets quarterly. The functional committee reports to the AMS Associate Administrator and was established to increase coordination and promote best practices and consistency across the 22 check-off programs. Additionally, the four commodity area directors and other senior agency officials meet weekly to discuss any issues that have arisen and to discuss any necessary policy changes. AMS marketing specialists are responsible for the day-to-day oversight of the check-off boards and for ensuring that board decisions and operations are carried out in accordance with applicable legislation and regulations. Each check-off program has a designated AMS marketing specialist serving as the primary overseer of all check-off program activities. (Fig. 1 shows AMS’s oversight structure for the check-off programs.) As part of their oversight duties, marketing specialists review and approve board budgets, contracts, promotional activities, board policies, and bylaws, among other activities. Every 3 years, marketing specialists also are to conduct management reviews that assess each of the 22 check-off boards’ internal controls intended to determine whether there is reasonable assurance that the boards are in compliance with statutes, regulations, and the board’s and AMS’s policies and procedures. AMS management reviews are to include reviews of check registers, contract and subcontract samples, assessments collected, and travel reimbursements, among other items. AMS’s Guidelines for AMS Oversight of Commodity Research and Promotion Programs, most recently updated in September 2015, is designed to facilitate the application of legislative and regulatory provisions of the check-off programs and promote consistency in AMS’s oversight of the 22 check-off programs. These guidelines, which pertain to AMS as well as board members and board staff, are not intended to cover the daily responsibilities of board operations or AMS’s oversight. Instead, the guidelines provide broad information on AMS’s expectations for how boards should operate and how AMS will oversee the programs in activities such as budget approval, contracts, financial accountability, referendum, and investments, among other items. In March 2012, USDA OIG released a report on AMS’s oversight of check-off programs. The work was initiated by the OIG after a 2010 investigative report, conducted at the request of the AMS Administrator, identified the possibility of weak oversight controls over the check-off boards. The 2012 report included two recommendations for AMS to develop and implement (1) standard operating procedures that provide detailed instructions for performing oversight activities to address all areas listed in the agency’s guidelines and (2) guidance for conducting periodic internal reviews of program area operations to ensure the enforcement of AMS’s guidelines. AMS agreed with the two recommendations and planned to implement them with a variety of actions, as discussed below. AMS has responded to recommendations for improving oversight made in the OIG’s 2012 report, particularly by developing and implementing standard operating procedures and conducting internal reviews of AMS check-off program oversight. However, AMS does not provide consistent oversight across check-off programs in some areas; specifically, it does not routinely review check-off program subcontracts during its management reviews, conduct follow-up on management review recommendations, ensure that financial assurances are included in annual audits, or ensure that check-off boards share information with assessment payers on program websites. In conducting their oversight of the check-off programs, senior agency officials and marketing specialists said they face challenges because of increased use of social media, the absence of an information system for tracking approvals, and complex Freedom of Information Act (FOIA) requests for some programs, which may delay the completion of some oversight priorities. The OIG’s 2012 report included two recommendations that AMS has since implemented: to develop and implement (1) standard operating procedures and (2) guidance for conducting periodic internal reviews of its oversight activities. In August 2013, AMS developed and implemented its standard operating procedures, which provide marketing specialists with more detailed guidance on the various oversight activities that are outlined in the agency’s program guidelines. The standard operating procedures cover a range of oversight activities, including budget review, contract review, advertising and promotional materials review, and financial and internal control oversight. Included in the more detailed guidance are various checklists that marketing specialists can use to itemize the requirements that boards must meet in a variety of areas. For example, the budget review checklist includes a list designed to ensure that budgets conform to law and contain, among other items, accurate sums and categories, as well as clearly listed administrative expenses. According to senior agency officials and marketing specialists, the standard operating procedures have assisted AMS in providing consistency across the 22 commodity check-off programs, have helped ensure that oversight responsibilities are carried out, and have provided documentation of specific duties for new marketing specialists. In response to the OIG’s second recommendation, AMS has developed and implemented guidance for conducting internal reviews of its oversight of check-off programs. Internal reviews are conducted by AMS’s Management and Analysis Program group to evaluate whether the AMS commodity areas that oversee check-off programs employ controls that provide reasonable assurance that the check-off programs are meeting legislative and regulatory requirements. According to an AMS directive, internal reviews of each of the four AMS commodity areas are to be conducted on a rotating basis. An AMS internal review of the Cotton commodity area was completed in November 2014, an internal review of the Specialty Crops commodity area was completed in September 2015, and an internal review of the Dairy commodity area was competed in May 2017. According to officials in the Management and Analysis Program, the Livestock, Poultry, and Seed commodity area internal review began in May 2017. The Cotton internal review found the program to provide reasonable assurance that the boards were complying with legislative requirements and that the oversight controls were adequate and functioning as intended. The Specialty Crop internal review found that the commodity area was fulfilling its oversight responsibilities but also found opportunities to strengthen control practices, including ensuring consistent and timely application in its use of checklists and tracking management reviews to ensure that they are completed and issued in a timely manner. As a result, the Specialty Crop commodity area implemented changes to its use of checklists and agreed to complete management reviews in a timely manner. The Dairy internal review found opportunities to strengthen oversight, primarily with regard to management reviews and recordkeeping. As a result, according to senior agency officials, the Dairy commodity area has implemented changes to its management review and recordkeeping processes. We identified four areas in which AMS does not provide consistency in its oversight across its check-off programs: (1) review of subcontracts, (2) follow-up on recommendations made to check-off boards, (3) ensuring that independent financial audits contain statements of assurance, and (4) ensuring that information is available on program websites for assessment payers (i.e., transparency). Subcontracts. The 2012 OIG report found that AMS did not recognize in its guidelines for check-off programs that its oversight role extended to monitoring subcontracts. Following the release of the OIG report, AMS updated the guidelines to respond to the OIG finding. Under the 2015 AMS guidelines, marketing specialists are to review a sample of subcontractor expenses during their management reviews. However, we found that AMS did not similarly update its standard operating procedures for the check-off programs and that these reviews are not being done consistently across programs. We found that the marketing specialist for one of the eight programs we reviewed chose a sample of subcontracts for the management review and documented this selection in the management review report. Marketing specialists for three of the programs said they reviewed subcontracts only if the sample of primary contracts that were part of the management review included subcontracts. Marketing specialists for the other four programs said they did not review subcontracts. Two marketing specialists we interviewed said they do not select a sample of subcontracts because check-off boards are responsible for overseeing and monitoring subcontracts. Senior agency officials and marketing specialists also noted that they review and approve all promotional materials regardless of whether any material is from a contract or subcontract. Senior agency officials also said that the contracting process differs among the various check-off boards and may cause confusion about what is considered a subcontract for purposes of a management review. For example, the cotton board contracts with Cotton Inc. to carry out the program’s research and promotion activities; Cotton Inc. may, in turn, contract with entities to carry out those research and promotion activities—considered a cotton board subcontract. This is in contrast to processes of other boards, such as the honey board, which can directly contract with entities to carry out research and promotion activities; those contractors may, in turn, subcontract duties. In addition, the potential exists for subcontract costs to total hundreds of thousands of dollars. A 2010 OIG investigative review found that a subcontractor of one check-off board used subcontracts to pay employees unauthorized bonuses of about $302,000. Without revising its standard operating procedures for check-off programs to recognize that each management review is to include a sample of subcontracts for review, AMS’s ability to prevent misuse of subcontract funds is impaired. Recommendation follow-up. Under AMS’s guidelines and standard operating procedures, marketing specialists are to ensure that corrective actions are taken by the boards in a timely manner if a matter is recommended in the management review, conducted every 3 years. For example, the standard operating procedures state that the board has 30 calendar days from the receipt of the management review report to respond to the findings by formal letter and that follow-up should include appropriate documentation of the corrective actions taken. The 2012 OIG report found that there was little consistency among AMS commodity areas regarding the reporting of management review results and follow- up procedures. Four of the check-off programs we reviewed obtained written confirmation from boards about how they intended to address issues identified during management reviews consistent with the standard operating procedures; three others did not obtain written confirmation, but said they obtain any check-off board plans for remediation via less formal means, such as via e-mails or during board meetings. The management review for the eighth program did not contain any recommendations. According to marketing specialists we interviewed, the follow-up process to ensure that boards have taken corrective actions is also informal—a specialist learns how management review recommendations have been implemented by attending board and committee meetings. Senior agency officials verified that AMS has no mechanism for tracking follow- up with check-off boards to ensure that they have taken corrective actions. Under federal internal control standards, management should remediate identified internal control deficiencies on a timely basis and, with oversight from the oversight body, monitor the status of remediation efforts so that they are completed on a timely basis. Without establishing a mechanism for documenting and tracking follow-up with check-off boards on the implementation of management review recommendations, AMS has no assurance that it is consistently monitoring the status of corrective actions. Senior agency officials said that having a formal method to track and follow up on management review recommendations would allow them to identify trends, best practices, and similar emerging issues among the check-off programs. Independent financial audits. Each year, each check-off board is required by law to hire an independent audit firm to conduct an audit of the board’s financial statements in accordance with generally accepted government auditing standards. This audit helps to ensure compliance with legislative, regulatory, and policy directives. AMS guidelines direct marketing specialists to review the annual financial audits to determine whether the auditor identified any misuse of board funds and if the audit adequately addressed whether (1) funds were discovered to be used for influencing government policy or action, (2) the board adhered to the AMS investment policy, (3) internal controls over funds met auditing standards, (4) funds were used only for projects and other expenses authorized in a budget approved by USDA, and (5) funds were used in accordance with AMS guidelines. The standard operating procedures state that AMS is to ensure that audits contain these five statements of assurance, and they state that the audit firm is to express an opinion on the financial statements of the board and include a report on internal controls and compliance with applicable laws and regulations. The 2012 OIG report found that none of the independent audit reports included the five statements of assurance for the 18 check-off boards reviewed. In our sample, audit reports for four of the eight programs included the five statements of assurance. For two of the programs in our sample, the engagement letters, which document the agreed-upon terms of the audit, contained all five assurances, but the audit reports did not contain the five assurances. For the remaining two programs in our sample, neither the engagement letters nor the audit reports contained all five assurances, but senior agency officials said that the AMS marketing specialists for those two programs ensured that these assurances were adequately addressed during pre- and post-audit meetings. According to marketing specialists we interviewed for those two programs, audits following government auditing standards incorporate the requirements and are fulfilled by a general statement that boards were in compliance with laws and regulations. However, the 2012 OIG report found that an independent auditor did not include the specific assurances because the auditor was not asked to perform such work and only minimal adjustments would be needed to provide for those assurances. Without ensuring that its annual independent financial audits include the five statements of assurance as outlined in the standard operating procedures, AMS will have less certainty that check-off funds are not subject to waste, fraud, or mismanagement. Transparency. According to the Business Roundtable and the Organisation for Economic Cooperation and Development’s principles of corporate governance, a strong disclosure regime that promotes transparency is central to stakeholders being able to access regular, reliable, and comparable information. As check-off programs use assessment money collected from stakeholders of the commodity being promoted, AMS’s guidelines state that both transparency and oversight of the check-off funds are critical. Moreover, AMS’s guidelines state that annual budget summaries should be posted on the check-off board’s website and that three additional documents are either to be on the website or otherwise made available: (1) the bylaws and policy statements, (2) annual reports, and (3) the independent economic evaluation of effectiveness. Four of the eight check-off programs in our sample posted all four documents on the programs’ websites. All eight check-off programs posted their annual reports online. Four of the check- off programs, however, did not post to their websites at least one of the remaining documents—the budget summary, bylaws, or independent economic evaluation. Marketing specialists we interviewed said that boards would supply information not included on the websites if an assessment payer requested such information, which is consistent with AMS guidelines. Board executives we interviewed from those programs that do not post all four documents on their websites also said that they would supply the information to assessment payers if contacted. Senior AMS officials also said that there are stakeholders who may not have computers or access to the Internet and may therefore request information via postal mail. Industry organization representatives we interviewed said that transparency of how funds are used and the effectiveness of the programs are important to their members. One industry organization representative we interviewed said that, although some stakeholders may not use the Internet, posting information on how assessments are being used, such as the information provided in annual reports, is useful for stakeholders and builds trust among check-off boards and stakeholders. Posting information on the boards’ websites could convey information to stakeholders who have access to the Internet at a low cost. Without including in the guidelines and standard operating procedures that all four key check-off board documents (i.e., bylaws and policy statements, annual reports, and independent evaluations of economic effectiveness) should be posted on a check-off program’s website, AMS may be missing an opportunity to ensure that some assessment payers have access to information on program operations and effectiveness. AMS officials identified ongoing challenges in check-off program oversight. In particular, AMS marketing specialists and senior agency officials identified three challenges: (1) the increase in some check-off boards’ use of social media, (2) the absence of an information system to track approvals, and (3) complex and time-consuming FOIA requests for some programs. Because of competing priorities, some oversight duties may be delayed as a result. Increase in boards’ social media efforts. According to marketing specialists, four of the eight check-off programs have seen a significant increase in the boards’ use of social media, which has been a challenge in terms of both workload and the need for additional AMS guidance because the specialists must approve the social media content. Marketing specialists for the other four programs said that the check-off programs they oversee have not yet increased their social media presence enough to make it a challenge for workload. Senior agency officials and marketing specialists agreed that oversight of the check-off programs requires a significant amount of time and effort that has been made more complicated since some check-off programs began using social media. For example, a marketing specialist for one check-off program approved over 3,000 items, including social media for promotional and research materials, in a 6-month period. According to this marketing specialist, depending on the complexity of the item needing approval, there could have been dozens of communications between the specialist and the check-off board staff. In addition, marketing specialists and senior agency officials said that because social media is constantly evolving, AMS has needed to reevaluate its guidance to boards for social media. The senior agency officials acknowledged that the duties of marketing specialists are demanding and that they are working to find ways to provide support to marketing specialists. Senior agency officials said that this is challenging because the boards must reimburse AMS for oversight costs, so any additional personnel would be paid for through check-off assessments. Also, AMS established a social media committee made up of marketing specialists who have drafted social media guidance for the boards to follow. Technology. Tracking the numerous promotional and research approvals can be a challenge for some AMS marketing specialists because of the absence of an information system to track approvals. According to two marketing specialists, during busy times, they may be handling more than 20 requests for approvals a day. While marketing specialists for two of the check-off programs we reviewed said that the use of approval tracking software, paid for by the respective check-off boards, has made their oversight function more efficient, other marketing specialists said that they must rely on e-mail messages to organize the status of approvals. Marketing specialists who have tracking software said that they can quickly see the status of any approval at any given time; further, check-off board staff can also use the software to prioritize approvals. One marketing specialist said that, although she had developed a system for organizing e-mails, a tracking system used by both AMS and the board would ensure that oversight activities would not be delayed and could expedite the approval process. Senior agency officials said that it would be helpful if each marketing specialist had this software but that the check-off boards would need to pay for this expense. FOIA requests. Responding to complex FOIA requests about check-off programs has been a challenge, according to senior agency officials, marketing specialists, and board executives of four of the eight programs we reviewed. Some requests do not take many resources to fulfill, but others take significant time and money. For example, to respond to a FOIA request, board staff and marketing specialists must identify pertinent documents; review them to ensure that there is no proprietary or sensitive information; and, as needed, involve the board’s legal counsel or third-party businesses. According to senior agency officials, in one case, a FOIA request resulted in the check-off board and AMS providing approximately 10,000 documents to the requester. AMS estimates that in fiscal year 2016, for the Livestock, Poultry, and Seed commodity area programs, it cost the agency about $182,000 and more than 2,700 hours to fulfill FOIA requests. For the same period for the Dairy commodity area programs, AMS estimates that it cost over $365,000 and about 6,600 hours to fulfill FOIA requests. Because AMS is reimbursed for its oversight costs, the funds to cover FOIA-related costs come directly from check-off assessments. These cost estimates do not include check-off board staff resources utilized to fulfill FOIA requests. Senior agency officials said that there are legal constraints on the types of individuals and organizations that they can request cover fees associated with document retrieval under FOIA. Independent economic evaluations of the effectiveness of check-off programs, conducted at least every 5 years, have generally shown a positive benefit to those who pay assessments. The evaluations we reviewed varied both in the methods used to conduct the analysis and how information was reported and revealed certain methodological limitations. According to senior agency officials as well as the economists who conducted the evaluations, the variations are in part due to the differences in check-off board resources. We found that AMS does not consistently document its review of independent economic evaluations and has no criteria established for determining what makes for a credible methodology and results. The Federal Agriculture Improvement and Reform Act of 1996 requires check-off boards to (1) fund independent economic evaluations of the effectiveness of their promotion activities every 5 years, (2) submit the evaluation to USDA, and (3) make the results available to the public. Check-off boards, through a request for proposals process, contract for independent economic evaluation to determine the effectiveness of promotion activities. The law does not specify how an independent economic evaluation should be completed, and AMS does not offer any guidance on the methodologies to use, the types of information to include, or how the results of such an evaluation are to be presented. AMS guidelines, which are available to the check-off boards, state that evaluations: (1) have a credible methodology, (2) articulate shareholder returns, and (3) present the results in a non-technical manner. The eight independent economic evaluations of check-off programs we reviewed focused on benefit-cost ratios (BCR) and returns on investment (ROI). While BCRs and ROIs are slightly different, they both measure the financial gain or loss generated from the costs of implementing a program. In both cases, economists use economic, industry-specific models to determine the benefits or economic gains from the check-off programs by isolating the impacts of program promotion dollars from other variables, such as competing products or changes in consumer income. For example, some models include the effects of changes in the prices of substitute food products, which may affect the demand for commodities. The model used in the evaluation for the beef check-off program, for instance, includes prices for both chicken and pork, as an increase in the price of chicken or pork could lead to an increase in the consumer demand for beef, regardless of check-off program activities. Other variables that may affect demand include changes in (1) consumer buying habits, (2) consumer income, and (3) government policy. These variables can either increase or decrease the demand for commodities despite the activities of check-off programs. Evaluation models may also include variables that affect the supply of a commodity, such as increased prices that send signals to farmers to increase production. Although it is difficult to capture, some commodity evaluation models also model increases in yields and acreage to determine how much the agricultural research portion of a check-off program affects the supply of the commodity. Increased supply as a result of agricultural research expenditures can also increase producer benefits and economic gains, but according to the sorghum and cotton evaluations, many of these gains cannot be immediately or directly measured. For the eight check-off programs we reviewed, the BCRs and ROIs ranged from 2.14 to 17.40. In other words, for every dollar invested in the check-off programs, the programs returned from $2.14 to $17.40 in revenue to assessment payers (see table 3). However, it is important to note that the results of the independent economic evaluations should not be compared across check-off programs because of differing methodologies, differing data, and differing demands for the products, according to economists we interviewed. Economists we interviewed and literature we reviewed suggested that although the results of an independent economic evaluation may appear large, the amount invested in promotion activities is small compared to the total value of industry sales. Therefore, the overall impact of promotion activities on the market may be small. Program referenda largely show that most assessment payers approve of check-off programs, but not all types of assessment payers may feel that they share equally in the benefits that are found through the independent economic evaluations, according to economists we interviewed. The studies we reviewed report either average or marginal measures of effectiveness, such as a BCR. Some economists we interviewed, both those who have conducted the evaluations we reviewed and those who did not, said that these types of studies do not address the level of ROIs across the distribution of check-off program payers or how much more larger-sized assessment payers receive in returns from their investment in the check-off program as compared to smaller-sized ones. This view was confirmed by representatives we interviewed from some of the industry organizations, who indicated that their members would prefer to better understand what they receive for their investment at the farm level. In addition, one economist we interviewed said that assessment payers may be skeptical of the results of independent economic evaluations of program effectiveness because while the costs are tangible, the benefits of the programs are not. That is, the producers cannot see what portion of their revenues is directly attributable to check-off program activities. The independent economic evaluations we reviewed were conducted using different methodologies and reported different information. According to senior agency officials, evaluations likely vary because legislation does not include any details on how evaluations should be completed and the amount of resources that each check-off board has available to devote to evaluations varies. Nearly all of the economists we interviewed said that it would be useful to have minimum standards for information that should be included in the evaluations. Some independent economic evaluations used different types of models and data to estimate the benefits and costs to assessment payers. For example, for the egg and honey check-off commodity models, the evaluation used two separate types of methodologies to estimate increases in demand because of the programs’ promotional activities. Some other independent economic evaluations in our sample, such as for cotton and fluid milk, used multi-market models that incorporated components for substitute products, the foreign sector, and the government sector. Some independent economic evaluations, such as the beef evaluation, measured a marginal BCR and others measured an average benefit-cost ratio. The cotton and sorghum evaluations performed an analysis of how increases in yields, acreage, and production because of the research portion of the check-off programs affected the supply of the commodities. The independent economic evaluations also examined different time periods in their analyses, depending on the available data (see table 3). For example, the egg evaluation covered the period of 2007 through 2010, and the fluid milk evaluation covered 1995 through 2012. In addition to having different methodologies to calculate benefits and costs, information and analyses included in the independent economic evaluation reports also varied among the eight programs we reviewed. For example, the beef check-off evaluation includes a section on the optimal allocation of funds to domestic activities of the program, which is not included in any other report. Seven of the eight evaluation reports had a conclusions section. One of the evaluation reports included a recommendations section, while others did not. Although the law does not specify information required to be included in the independent economic evaluations, representatives from one industry organization we interviewed said that having the information in a consistent format could help ensure that stakeholders could compare information from one evaluation to the next for a given check-off program. The independent economic evaluations provided useful information to key stakeholders and the general public, but we found that they also included a number of caveats and limitations. Some of these limitations resulted from the nature of a commodity or program itself and others from the modeling procedures used. According to economists we interviewed and senior agency officials, the law is not prescriptive about how evaluations are to be conducted, and the boards differ in the amount of resources available to devote to the evaluations. If, for example, a board has limited resources available for an evaluation, there may not be funds available to purchase a certain set of data. For the sample of eight evaluations we reviewed, these limitations included the following: Data limitations: A number of the independent economic evaluations had data limitations. For example, one independent economic evaluation (highbush blueberry check-off program) lacked either wholesale or retail price data for its demand model, and another (sorghum check-off program) lacked program data as it had only been in existence for 5 years when the evaluation was performed. All of the economists we interviewed who had completed the eight evaluations we reviewed said that data are a challenge when conducting the evaluations either because such data do not exist or the check-off boards do not have the resources to buy the data. Not discounting the BCR to present value: The cotton check-off evaluation was the only one in our sample with a methodology that discounted the BCR to present value to account for the time value of money. Discounting a program’s benefits and costs to present value transforms gains and losses occurring in different time periods to a common unit of measurement. Not accounting for spillover effects: Some independent economic evaluations did not include the spillover effects—the cross- commodity impact of promotion—on related markets, though some, such as the cotton evaluation, did account for spillover effects on competing commodities. If spillover effects pertain to a commodity, failure to account for these effects could overstate the benefits of a program and cause an upward bias in computing the BCR. Not adjusting models for structural changes: Some independent economic evaluations did not adjust models for structural changes in the industry over time. While some independent economic evaluations we reviewed, such as those for the honey and beef check-off programs, did use data or methods that accounted for changes in market structure over time, others did not. For example, for the pork check-off program, some hog farms have specialized in a single phase of production, and have encountered substantial gains in productivity because of technology over the past several decades, but the independent economic evaluation did not reflect this. Failure to correct for such structural change, if applicable to a commodity, can lead to incorrect modeling and misleading policy implications. AMS’s standard operating procedures acknowledge that each check-off program varies in size and scope; therefore, the amount of resources each program can devote to an independent economic evaluation varies. Smaller programs may have independent economic evaluations that reflect the realities of program scope, financial capability, and data availability. Our discussions with the economists who conducted the evaluations that we reviewed confirmed that this is the case. They said that the smaller programs are able to devote fewer resources to independent economic evaluations; therefore, the economist conducting an evaluation may not be able to complete all of the analysis that could be completed for a larger program that is able to pay for more complex analysis. According to senior agency officials, in some instances, a broader evaluation is not necessary because of the emphasis and goals of the program. In addition, the resources a board is able to devote may vary from evaluation to evaluation. For example, one economist said that he worked with a board that wanted a more comprehensive evaluation than was previously done. The new evaluation model included additional data over a longer period of time, which ultimately led to an increased ROI. In addition to ensuring that independent economic evaluations are conducted every 5 years and encouraging boards to make them available to assessment payers, AMS’s standard operating procedures state that marketing specialists should ensure that independent economic evaluations (1) have a credible methodology and results, (2) articulate shareholder benefits, and (3) present results in a non-technical manner. To verify that these three directives are met, the standard operating procedures state that marketing specialists may consult with agency economists. They are directed to document verification in writing. Outside of any agency review, there is no requirement that independent economic evaluations be peer reviewed. A National Academies report states that peer review is characterized, in part, as being a documented, critical review of assumptions, calculations, and methodology, performed by a person with technical expertise in the subject matter to be reviewed who is independent and external of the work being reviewed. The report further states that the peer, to the extent possible, should have sufficient freedom from funding considerations to ensure that the work is impartially reviewed. According to senior agency officials, AMS economists meet this definition; and their review of the independent economic evaluations can be considered peer review. Officials said that the economists on staff critically review the evaluations; they all have PhDs in economics and are independent as they do not work directly with the check-off programs except for reviewing the evaluations. Three of the four AMS commodity areas—Cotton and Tobacco, Dairy, and Specialty Crops—utilized an AMS economist to review the independent economic evaluations and document that review. Senior agency officials said that the Livestock, Poultry, and Seed commodity area has an AMS economist review the independent economic evaluations but does not document that review. According to senior agency officials, the Livestock, Poultry, and Seed commodity area has relied on informal reviews of the evaluations by an economist, which are orally presented to the director of the commodity area. Further, the economists who completed the eight independent economic evaluations we reviewed indicated that although their preference is to have the evaluations peer reviewed, this is not always possible because of time constraints and other priorities. One economist said that the board he worked with included a contractual requirement that the independent economic evaluation be peer reviewed. Because the Livestock, Poultry, and Seed commodity area does not document its reviews of independent economic evaluations, only four of the eight check-off programs in our sample had documented reviews of the evaluations. All four of the documented reviews ensured that the independent economic evaluations had a credible methodology and results and articulated shareholder benefits, as stated in the standard operating procedures. However, only two of these four check-off programs included in their documented review whether results were presented in a non-technical manner, as also stated in the standard operating procedures. Further, the internal reviews did not use standard criteria to determine whether the independent economic evaluations had a credible methodology or results, which is important because, as noted earlier, the evaluations we reviewed varied in their methodology and we found that they had certain limitations. Although check-off programs are not subject to the guidelines in the Office of Management and Budget’s Circular A-94, the circular provides general guidance for conducting analyses to help federal agencies efficiently allocate resources through well-informed decision making. For example, Office of Management and Budget Circular A-94 establishes key elements of an economic analysis, including (1) a statement of the objective and scope of the analysis, (2) an identification of alternatives, (3) an analysis of the economic effects, (4) a sensitivity analysis, and (5) adequate documentation and transparency. Conducting and documenting reviews of independent economic evaluations using criteria can be useful. For example, in 2014, a senior agency official found several inconsistencies in a check-off program independent economic evaluation. The senior agency official assigned an AMS economist and marketing specialist to work with the evaluator to revise econometric models to more accurately capture the activities of the check-off program. According to the official, if the independent economic evaluation had not been reviewed, benefits of the program would have been understated and would have misled those paying into the check-off program. Without developing criteria by which AMS can assess the methodology and results of independent evaluations and document those assessments to ensure that the standard operating procedures are met, the agency’s assessments of independent economic evaluations may be inconsistent across check-off programs and misleading to agency officials, check-off boards, and assessment payers. AMS oversees commodity check-off programs that conduct research and promotion activities to strengthen 22 commodities’ position in the marketplace. The agency has taken steps to improve oversight activities based on recommendations in USDA OIG’s 2012 report, but it continues to face challenges in other oversight activities. For example, AMS has not consistently reviewed subcontracts during its management reviews. Without revising its standard operating procedures for check-off programs to recognize that management reviews should include a sample of subcontracts for review, AMS’s ability to prevent misuse of subcontract funds is impaired. In addition, AMS has not consistently followed up on recommendations made to check-off boards, although its guidelines and standard operating procedures state that marketing specialists are to ensure that corrective actions are taken by the boards in a timely manner if a matter is recommended in a management review. Without establishing a mechanism for documenting and tracking follow-up with checkoff boards on the implementation of management review recommendations, AMS has no assurance that it is consistently monitoring the status of corrective actions. Moreover, AMS has not ensured that independent financial audits contain statements of assurance as called for in the agency’s program guidelines or standard operating procedures. Without ensuring that its annual independent financial audits include the five statements of assurance outlined in the standard operating procedures, AMS will have less certainty that check-off funds are not subject to waste, fraud, or mismanagement. Further, although principles of corporate governance state the importance of transparency for stakeholders, AMS has not ensured that certain information, such as budget summaries and program evaluations, are presented on check-off program websites and has not included in its guidelines or standard operating procedures that certain information should be included on program websites, although the agency’s program guidelines recognize that transparency of check-off funds is critical. Without including in the guidelines and standard operating procedures that key check-off board documents are to be posted on the check-off program’s website, AMS may miss the opportunity to ensure that some assessment payers have access to information on program operations and effectiveness. Finally, check-off boards are meeting legislative deadlines by completing independent economic evaluations of effectiveness every 5 years; however, the evaluations vary and have certain methodological limitations. Without developing criteria by which AMS can assess whether evaluations have a credible methodology and results and documenting those assessments, the assessments may be inconsistent across check- off programs and misleading to agency officials, check-off boards, and assessment payers. We are making the following five recommendations to the Administrator of the Agricultural Marketing Service: The Administrator of AMS should revise the standard operating procedures for AMS’s check-off programs to state that management reviews include a sample of subcontracts for review. (Recommendation 1) The Administrator of AMS should establish a mechanism for documenting and tracking follow-up with check-off boards on the implementation of management review recommendations. (Recommendation 2) The Administrator of AMS should ensure that annual independent audits include the five statements of assurance as outlined in the standard operating procedures. (Recommendation 3) The Administrator of AMS should include in the guidelines and standard operating procedures that key check-off board documents, such as bylaws and policy statements, annual reports, and independent evaluations of economic effectiveness are posted on the check-off programs’ websites. (Recommendation 4) The Administrator of AMS should develop criteria by which to assess the methodology and results of independent evaluations and document those reviews to ensure that the standard operating procedures are met. (Recommendation 5) We provided a draft of this report for review and comment to USDA. An auditor with AMS’s Management and Analysis Program responded via e- mail on October 24, 2017, that the agency generally agreed with our findings and recommendations. We are sending copies of this report to the appropriate congressional committees, the Secretary of Agriculture, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the individual named above, key contributors to this report included Thomas M. Cook (Assistant Director), Rose Almoguera, Kevin S. Bray, Barbara El Osta, Cindy Gilbert, Holly Halifax, Khali Hampton, Dan Royer, Holly Sasso, Sheryl Stein, and Kiki Theodoropoulos.", "summary": "“Got milk?” and “Pork: The Other White Meat” are examples of advertising campaigns undertaken by 2 of the 22 federal agricultural research and promotion programs, commonly known as commodity check-off programs. These programs, funded by a fraction of the sale of each unit of a commodity, are led by boards consisting of industry members appointed by the Secretary of Agriculture. The programs conduct research and promotion activities to strengthen a commodity's position in the market. In 2016, check-off funds totaled over $885 million. By law, funds cannot be used for lobbying or disparaging other commodities, among other things. AMS has primary responsibility for overseeing the check-off programs. GAO was asked to review AMS's oversight of the check-off programs. This report examines (1) the extent to which AMS has addressed previously identified weaknesses in its oversight and (2) how the effectiveness of the programs has been evaluated and what the results have indicated. GAO selected a sample of 8 such programs—selected, in part, based on total funds collected—and reviewed laws, regulations, and agency guidance. GAO interviewed agency officials, check-off board executives, and economists. The U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS) has improved its oversight of check-off programs since USDA's Office of Inspector General (OIG) made recommendations in a 2012 report. In response to two OIG recommendations, AMS developed and implemented standard operating procedures, which outline specific oversight responsibilities of AMS, and began to conduct internal reviews of its oversight functions. However, GAO found that AMS does not consistently review subcontracts—a legal agreement between a contractor and third party—or ensure that certain documents are shared with stakeholders on program websites. Subcontracts. Under AMS's 2015 guidelines for check-off programs, which cover broad oversight activities, staff are to review a sample of subcontracts during agency reviews of program operations. However, AMS did not revise its standard operating procedures to match its guidelines with this responsibility, and GAO found that AMS reviewed subcontracts for only one check-off program in its sample of eight. Without revising the standard operating procedures to include a review of subcontracts, AMS's ability to prevent misuse of funds is impaired. Transparency. According to leading business principles, transparency is central to stakeholders' access to regular, reliable, and comparable information. However, GAO found that four of the eight check-off programs reviewed posted all key documents, such as budget summaries and evaluations of effectiveness, to program websites. GAO found that AMS's guidelines state that budget summaries should be posted on program websites, while the other key documents are to be available on the website or otherwise made available to stakeholders. Agency officials said that boards would supply documentation if contacted by a stakeholder. Industry representatives GAO interviewed said that transparency of how funds are used and the effectiveness of programs are important to their members. Without including in its guidelines and standard operating procedures that all key documents should be posted on a check-off program's website, AMS may miss an opportunity to ensure that stakeholders have access to information on program operations and effectiveness. Independent economic evaluations of the effectiveness of check-off programs, required by law to be conducted every 5 years, have generally shown positive financial benefits. For the eight evaluations GAO reviewed, benefits ranged from an average of $2.14 to $17.40 for every dollar invested in the programs. However, the evaluations varied in the methods used and had certain methodological limitations. For example, some evaluations did not account for the effects of promotion from competing commodities, which could overstate the programs' benefits. AMS's standard operating procedures state that the agency should review the evaluations to ensure that there is a credible methodology, among other things; however, AMS did not consistently document reviews of the evaluations or have criteria by which to review the evaluations. Without developing criteria to assess the methodology and results of evaluations, the agency's assessments of independent economic evaluations may be inconsistent across check-off programs and misleading to stakeholders. GAO is making five recommendations, including that USDA revise its standard operating procedures to include the review of subcontracts, include key documents on check-off program websites, and develop criteria to assess evaluations. USDA generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Statutory and Executive requirements assert broad principles and require agencies to consider alternative ways of regulating and preferred regulatory designs, such as performance standards rather than means- based design standards. Further, these requirements and directives urge agencies to consider alternative approaches to eliciting compliance, such as alternative reporting methods or delaying compliance dates. The Regulatory Flexibility Act (RFA) requires federal agencies to examine the impact of proposed, final, and existing rules on small businesses, small organizations, and small governmental jurisdictions, and to solicit the ideas and comments of such entities for this purpose. Among other requirements, the RFA requires that agencies consider regulatory alternatives that accomplish the stated objectives of a proposed rule while minimizing any significant impact on small entities. However, the RFA does not mandate any particular outcome in rulemaking. Executive Order 12866 (E.O. 12866), issued in 1993, promotes a regulatory philosophy and set of principles that, to the extent permitted by law and where applicable, encourages agencies to assess costs and benefits of their proposed and final regulations. It also directs agencies to consider available regulatory alternatives in all regulations, including the alternative of not regulating, and generally select those alternatives that maximize net benefits, to the extent permitted by statute. Alternatives to direct regulation include providing economic incentives to encourage the desired behavior (such as user fees or marketable permits) or providing information upon which choices can be made by the public. If an agency determines that direct regulation is necessary, the Executive Order directs the agency, to the extent feasible, to specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt. Subsequent executive orders across administrations have reaffirmed this philosophy and these principles. Circular A-4, issued by OMB in 2003, provides guidance and best practices to federal agencies for determining the potential effects of new regulations. A-4 directs agencies to consider a number of regulatory alternatives, including market-oriented approaches rather than direct controls, performance standards rather than design standards, informational measures, and different compliance dates and enforcement methods, among others. The RFA, specific statutes, and multiple executive orders have also emphasized the importance of regulatory lookbacks, also referred to as retrospective reviews, in which agencies evaluate how existing regulations work in practice: Statutory requirements: The RFA’s Section 610 requires agencies to review all regulations that have or will have a significant impact on small entities within 10 years of the publication of the rule to determine whether such rules should be continued without change, or should be amended or rescinded, consistent with the stated objectives of applicable statutes, to minimize impacts on small entities. Congress also established other requirements for agencies to review the effects of regulations issued under specific statutes, such as the Clean Air Act. Executive Order 13771, issued in January 2017, requires executive agencies to identify at least two existing regulations to be repealed whenever they publicly propose or otherwise promulgate a new regulation, unless prohibited by law. Agencies must also annually provide their best approximation of the total costs or savings associated with each new regulation or repealed regulation to OMB. Finally, the order requires that the total incremental cost of all new regulations, including the savings for regulations that have been repealed, be no greater than zero for fiscal year 2017, unless otherwise required by law or consistent with advice provided in writing by the OMB Director. Executive Order 13777, issued in February 2017, requires agencies to designate an agency official as its Regulatory Reform Officer. Regulatory Reform Officers oversee the implementation of regulatory reform initiatives to ensure that agencies effectively carry out regulatory reforms, consistent with applicable law. Agencies must also establish Regulatory Reform Task Forces to evaluate existing regulations and make recommendations regarding their repeal, replacement, or modification, consistent with applicable law. When agencies determine that they may need to regulate, they generally have multiple regulatory designs available to achieve their objectives. Agencies are directed by statute and Executive requirements to assess alternatives to regulatory action—including not issuing new regulations— and different ways of regulating. Available regulatory designs range from prescriptive regulations that specify the adoption of a certain technology or action to designs that generally provide regulated entities with more discretion and options for compliance, and in some instances hybrid designs that incorporate both prescriptive and less prescriptive elements. Alternatives to prescriptive regulations provide regulated entities with greater flexibility. For example, performance-based regulations require a certain outcome but allow regulated entities discretion to determine how they will achieve that outcome, while market-based regulations use tradeable permits or fees to influence behavior. Table 2 highlights the regulatory designs identified through our literature review and corroborated by subject matter specialists and agency officials. The table includes selected examples of applicable regulations implemented by our case study agency subcomponents. Statutes give agencies varying degrees of discretion to consider multiple designs as they develop regulations to meet their objectives. In some instances, Congress directs agencies by statute to implement specific regulatory designs. For example, the Occupational Safety and Health Act directs the Occupational Safety and Health Administration (OSHA), when promulgating a standard, to either (1) adopt existing scientific and industry consensus standards for workplace health and safety, or (2) explain why the standard adopted by the agency better protects workers than the national consensus standard. In addition, requirements dealing with exposures to toxic materials must be formulated in the terms of “objective criteria and the performance desired” whenever practicable. The Clean Air Act provides EPA’s Office of Air and Radiation (OAR) with varying degrees of discretion to consider different regulatory designs when developing its regulatory programs. For example, the Clean Air Act gave the office broad authority to establish a tradable emissions allowance system—commonly referred to as cap and trade—with a market-based design for its Acid Rain Program, but to promulgate specific prescriptive regulations for the National Emission Standards for Hazardous Pollutants program. Officials at selected agencies reported a general preference for less prescriptive regulations in accordance with E.O. 12866, Circular A-4, and other Executive requirements, which encourage agencies to consider less prescriptive regulatory design options for achieving their objectives. For example, DOT officials told us that, when choosing among regulatory design options, they prefer performance-based regulations over means- based regulations. Officials from DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) told us that performance-based regulations—as implemented for classifying and packaging hazardous material—allow them to accommodate innovations among regulated entities, adapt to technological advances, and promote the competitiveness of U.S. firms in global markets without having to subsequently revise the regulations. The following examples illustrate how some selected subcomponents have (1) encouraged the development of less prescriptive design options for new regulatory programs, and (2) updated or replaced existing regulations to incorporate more flexible designs. Developing trainings to encourage less prescriptive designs: Two selected subcomponents produced training materials to promote the consideration of all options for designing effective regulation, including less prescriptive regulations where appropriate. EPA’s Office of Enforcement and Compliance Assurance developed a workbook and supplemental training course that present principles and tools to help rule drafters consider the relative effectiveness of different designs for achieving regulatory objectives, including how the degree of prescriptiveness can either promote or hinder compliance. The Federal Aviation Administration’s (FAA) “Performance-Based Regulations Training” course uses real world examples and team exercises to teach rule drafters (1) the concepts that inform performance-based designs, (2) the relationship between prescriptive and less prescriptive regulatory approaches, and (3) considerations for developing and assessing performance-based regulations. Updating or replacing existing regulations to incorporate flexible designs: FAA’s 2016 airworthiness standards for small airplanes replaced some prescriptive design requirements with more flexible performance-based standards. Agency officials told us that they expect the new regulation will improve safety and cost-effectiveness (such as by reducing compliance costs) while facilitating future technological innovations. Animal and Plant Health Inspection Service (APHIS) officials told us that increased international demand for cattle exports put pressure on their inspection infrastructure and prompted them to replace their formerly prescriptive standards with performance-based regulations that officials described as more flexible and easier to adapt to changing circumstances. Food Safety and Inspection Service (FSIS) officials told us that their Hazardous Analysis and Critical Control Points (HACCP) Rule represented a shift from FSIS’s traditional means-based regulations (which mandated specific food production standards) to a mixed performance- and management-based regulatory program (which monitors food safety plans and production outcomes). Despite a general preference for less prescriptive designs among selected agencies, officials from nine selected subcomponents told us that their regulatory objectives sometimes required a prescriptive regulation or that in some instances regulated entities expressed a preference for prescriptiveness. Mine Safety and Health Administration (MSHA) officials told us that their regulations were often necessarily prescriptive to implement and enforce the mine health and safety standards required by statute. For example, based on data from the National Institute for Occupational Safety and Health, MSHA determined that requiring more frequent respirable dust sampling for mining occupations known to have high dust levels and requiring the use of certain monitoring devices to measure respirable coal dust exposure are necessary to limit exposure to respirable coal mine dust and thus reduce occupational lung diseases. Bureau of Industry and Security (BIS) officials told us that their export licensing regulations are necessarily prescriptive to narrowly target specific items as unacceptable for export due to national security or commercial sanctions against certain countries. Food and Drug Administration (FDA) officials told us that, while they try to achieve a balance between prescriptive and less prescriptive regulatory designs, in some instances prescriptive regulations are the only means of ensuring public health and safety. Officials from EPA’s Office of Chemical Safety and Pollution Prevention (OCSPP) told us that, when given non-prescriptive regulatory options, small businesses generally prefer prescriptive regulations with clear compliance requirements to minimize uncertainty. An EPA OAR official told us that, during the update of a recent regulation on refrigerants, the agency considered including a provision allowing operators of pollutant-emitting facilities the option to either (1) set a corporate-wide budget for leaks covering all facilities, or (2) comply with a prescriptive regulation for individual appliances susceptible to leakage. Based on feedback from regulated entities and EPA enforcement officials, who voiced a need for predictability and ease of monitoring, EPA officials said that they ultimately chose to promulgate the more prescriptive regulation instead of the more flexible, but challenging to implement, corporate-wide approach. Ten selected subcomponents incorporated multiple design elements into their regulations—what we refer to as hybrid designs—that offer more flexibility or, conversely, more clarity to meet the needs of different regulated entities. PHMSA officials told us that their special permits programs for hazardous materials and pipelines allow regulated entities the flexibility to determine their own means of satisfying transportation safety requirements if they achieve the same level of safety prescribed by regulation. FAA officials told us that most of their safety standards are necessarily prescriptive to ensure clarity and uniformity. However, they said that they often encourage the use of multiple designs in their rulemakings that allow for both performance-based and means-based regulations—as with the 2016 airworthiness standards for small airplanes. OSHA officials told us that they provide employers with multiple options for achieving regulatory compliance that incorporate both prescriptive and less prescriptive design elements. For example, OSHA’s health standards regulating crystalline silica exposure among construction site workers provides employers both a performance- based option (which allows regulated entities discretion in determining how to meet permissible exposure limits), and a means-based option (in which regulated entities implement specified exposure mitigation measures for designated tasks). FDA and FSIS have both implemented voluntary programs to promote the adoption of practices among regulated entities that align with the agencies’ regulatory objectives. FSIS encourages regulated food facilities to develop voluntary food defense plans as a means of mitigating potential health hazards and strengthening food safety. FDA officials told us they issued voluntary food labeling standards for raw fruits and vegetables to assist in establishing an industry standard, and achieved 80 percent compliance among regulated entities. All selected agencies told us their processes for drafting regulations incorporated internal discussions to consider available regulatory design options. For example, Employee Benefits Security Administration (EBSA) officials told us that the agency’s process encourages rule drafters to solicit input from internal and external stakeholders to inform the consideration of all possible regulatory design options available to achieve statutory objectives. BIS officials told us that proposals for broadly applicable regulations—including available design options—are discussed and vetted with multiple stakeholders, including (1) BIS subcomponent officials, (2) Office of General Counsel staff, (3) agency engineers, and (4) external technical advisory committees. However, some selected subcomponents’ processes for drafting proposed regulations also included documentation of identified design options for achieving objectives and assessments of risk or enforcement and compliance implications of identified design options. These practices for identifying and assessing regulatory designs are described in the following examples. Documenting the assessment of design options for achieving regulatory objectives: EPA uses an Analytical Blueprint to identify the range of regulatory design options considered throughout the Action Development Process (ADP)—the agency’s process for developing and responding to public comments on new regulatory proposals. FSIS officials told us that rule drafters develop an “options paper” to identify and assess alternative approaches to achieving regulatory objectives based on multiple inputs, including (1) data analyses, (2) subject matter expertise, and (3) stakeholder feedback. FAA officials told us that rule-drafting groups discuss regulatory design options when developing a Rulemaking Action Plan and present these alternatives in briefing documents to the principal agency managers, referred to as “principals briefs.” FDA officials told us that rule-drafting groups generally develop a concept paper or other summary document to determine the optimal means of achieving a regulatory goal, including considerations of multiple design options. Assessing the risk associated with identified regulatory design options: Three selected subcomponents incorporated assessments of risk into their rule-drafting procedures. DOT’s Rulemaking Requirements direct agency officials to “consider, to the extent reasonable, the degree and nature of the risks posed [by agency action]” and “how the agency action will reduce risks to public health, safety, and the environment” per Executive Order 12866. EPA’s ADP specifies that Analytic Blueprints identify, assess, and discuss the risk management implications of proposed regulatory design options. USDA’s Regulatory Decisionmaking Requirements direct rule drafters to conduct a comparison of risks for regulatory design options and provide a description of the level of uncertainty and unknowns associated with each design. Assessing the enforcement and compliance implications of identified regulatory design options: An official from FSIS told us that representatives from its Office of Field Operations or Office of Investigation, Enforcement, and Audit often participate in rule-drafting groups to provide an enforcement perspective. A BIS official told us that rule drafters solicit informal feedback from enforcement officials to ensure the practicability of regulatory standards during both the development of prospective regulations and the initial implementation of new regulations. EPA’s procedures require that enforcement officials participate in EPA’s ADP rule-drafting groups for rules involving “precedent-setting policy implications” and “extensive cross-agency participation,” and EPA officials told us that enforcement officials also are often involved in the drafting of other rules. Further, EPA Office of Enforcement and Compliance Assistance’s training and guidance materials encourage rule drafters to incorporate compliance principles—such as clarity, consistency, and transparency—into their decision making and consider how regulatory design choices can influence later compliance and need for enforcement. Considering compliance and enforcement implications while making regulatory design decisions is important because agency officials stated that different design choices have implications for future compliance and enforcement resources. For example, PHMSA officials told us they create an implementation plan for any proposed regulation with an expected impact on enforcement resources. Officials from OSHA and EPA Office of Land and Emergency Management (OLEM) told us that management-based regulations— such as OSHA’s Process Safety Management requirements for oil refineries and chemical facilities and OLEM’s Risk Management Program for facilities that use hazardous chemical substances—can be resource-intensive to enforce because of the greater technical expertise needed to review highly individual and technical plans among heterogeneous regulated entities to ensure compliance. An EPA OAR official told us that the design of its cap-and-trade system— tradeable allowances that require regulated entities to monitor and report their emissions to EPA—limits the need for enforcement resources to only those entities that do not comply with monitoring, reporting, and allowance-holding requirements. When regulations are promulgated, agency officials must determine how they will promote compliance with their regulations and deter noncompliance. Agencies generally have the flexibility to tailor their compliance and enforcement strategies to encourage voluntary compliance and inform regulated entities of regulatory requirements. Agency officials decide on the appropriate mix of compliance assistance together with monitoring and enforcement efforts to achieve regulatory outcomes. Based on our review of relevant academic literature, there are multiple tools available to agencies to elicit compliance, although agencies traditionally use two tools to achieve their objectives. The first, compliance assistance, helps regulated entities understand and meet regulatory requirements. For example, an agency may consider providing assistance through educational materials and outreach to promote compliance among regulated entities. The second, the use of monitoring, enforcement, and data reporting, ensures that regulations are followed and deters noncompliance. Agencies may also supplement these traditional approaches with options that provide more accommodating and flexible opportunities to promote compliance among regulated entities, such as developing cooperative programs or providing onsite consultation services. Table 3 identifies some of the options by which agency officials may accomplish their regulatory goals. As described in table 3, agencies use compliance assistance tools, such as education and consultation, to ensure that regulated entities understand regulatory requirements and provide examples of how to comply. One way that agencies do this is by providing regulatory guidance to regulated entities in the forms of Frequently Asked Questions, tools, or factsheets. We reported in 2015 that agencies used a wide variety of guidance to interpret new regulations and clarify policies in response to questions or compliance findings. However, we have also recommended that selected agencies could further help regulated entities comply, and agencies have implemented those recommendations by offering further clarifications and guidance. The selected subcomponents that we reviewed employed a variety of compliance assistance activities. For example: FSIS provides compliance guidance and makes training materials available to its regulated entities, such as meat, poultry, and egg product plants, and maintains help desks to provide technical assistance to its regulated community. BIS holds domestic and international seminars, provides online and in-person trainings, responds to inquiries submitted online, issues industry advisory opinions, and works with other federal agencies to provide immediate error alerts to filers using their Automated Export System. FDA provides web-based, in-person, and telephone education and outreach; hosts webinars, public meetings, and stakeholder meetings; and posts training videos and blogs. For example, the agency established a central source of information for questions related to its 2011 Food Safety Modernization Act rules, programs, and implementation strategies. Regulatory agencies also engage in enforcement activities such as inspections, monitoring reported data, and issuing fines when noncompliance is identified. The selected agencies we reviewed reported using criteria such as data, compliance history, and trends in noncompliance to identify risks and more efficiently target enforcement activities. For example: OSHA conducts two types of inspections—“un-programmed” and “programmed”—to target resources for the 8 million workplaces it regulates. Un-programmed inspections respond to specific complaints or injuries, while programmed inspections target resources towards specific high-risk industries and employers. FSIS officials analyze noncompliance trends for its food safety process control regulations at meat, poultry, and egg processing facilities and send inspection officials “early warning” alerts when the establishments they inspect reach certain noncompliance rates. APHIS’s Animal Care program uses its Risk Based Inspection System to conduct more frequent and in-depth inspections at facilities with a higher risk of animal welfare concerns, and fewer at those that are consistently compliant. The system uses criteria, such as past compliance history and the seriousness of documented noncompliance, to determine minimum inspection frequencies for licensed and registered facilities. The selected agencies also reported supplementing traditional compliance assistance and enforcement approaches with other tools, including: Cooperative programs: OSHA uses multiple cooperative programs to recognize employers who have introduced health and safety initiatives at their worksites that exceed requirements. OSHA’s Voluntary Protection Program rewards employers that exceed worker safety requirements through an exemption from routine inspections while they maintain their status in the program. Participating employers are reevaluated every 3 to 5 years. OSHA uses its Challenge Program to partner successful employers as mentors for employers who are attempting to improve their safety and health programs. The Centers for Medicare and Medicaid Services’ (CMS) Skilled Nursing Home Facilities Value Based Purchasing Program is authorized to use incentive payments to recognize nursing homes that exceed minimum standards of quality. Onsite consultation services: OSHA works with state governments to provide onsite consultation services to small- and medium-sized businesses. These consultations assist employers to identify potential hazards and improve their injury and illness prevention programs. MSHA offers compliance assistance and outreach through “walk and talks” during which MSHA inspectors and education outreach staff provide mine operators and miners with information on hazardous tasks and conditions, as well as offer best practices to prevent accidents, injuries, and fatalities. Voluntary disclosures: FAA implements a number of voluntary reporting programs. For example, its Flight Operational Quality Assurance program allows commercial airlines and their employees to anonymously report incident information. The agency then uses this information to monitor trends and target resources. BIS encourages parties who believe they may have violated its export regulation to self-disclose. Officials then review the disclosure to determine if a violation has occurred and to identify the appropriate corrective action. BIS views a self-disclosure as an indicator of a party’s intent to comply with its requirements. EBSA’s Voluntary Fiduciary Correction Program and Delinquent Filer Voluntary Correction Program encourage voluntary compliance by allowing plans and plan fiduciaries to self-correct certain violations and by offering relief from higher civil penalty assessments. Third-party certification: EPA OCSPP’s formaldehyde emissions rules require foreign and domestic wood mills to receive a third party certification that certain wood products meet defined standards. EPA must approve the third parties that certify the products. Agencies generally have flexibility in making decisions on and allocating resources for a mix of compliance assistance and enforcement strategies. However, some selected agencies reported that statutory requirements, programmatic constraints, and changing priorities affected how they allocated resources for compliance and enforcement activities. For example: MSHA must prioritize available resources to fund inspections because they are required by law to inspect every underground mine four times a year and every surface mine twice each year. Once those resources have been allocated for inspection, any additional resources may then be used for compliance related activities. FSIS’ allocation of resources is similarly constrained because it is statutorily required to be present at every meat, poultry, and egg product facility whose product enters into commerce in order for the facility to operate. APHIS is programmatically constrained in allocating resources between enforcement and compliance assistance because another federal department enforces some of their promulgated regulations, and thus determines compliance resources and approaches. The agency’s Agricultural Quarantine Inspection program inspection activities are performed by Customs and Border Protection within the Department of Homeland Security. The type and behavior of regulated entities also affects selected agency decisions on strategies to achieve compliance. The characteristics of regulated entities—such as the hetero- and homogeneity of the regulated community and frequency of interaction with agency officials—may inform agency compliance assistance and enforcement resource decisions. Some of the selected agencies described frequent interaction with regulated entities that were homogeneous or easily identified. As a result, officials said it is easier for their agencies to ensure that regulated entities are aware of applicable requirements, and that there may be less need to invest in compliance assistance. For example, the operators of the pipelines PHMSA regulates are a small and well known community. Similarly, FSIS inspectors must be present at each meat, poultry, or egg products facility, at frequencies determined by the type of operation being conducted, for it to function. MSHA inspects a fixed number of mines, and its inspectors are often onsite; however, MSHA officials stated that some mines are better at complying with health and safety standards than other mines. In contrast, large and heterogeneous communities present different needs and considerations that may inform agencies’ compliance assistance and enforcement resource decisions. When regulated entities are less likely to engage with inspectors or other federal officials, agencies’ decisions on allocating resources to ensure all regulated entities understand requirements and to elicit voluntary compliance are important. As previously discussed, OSHA regulates and monitors a large and diverse community of regulated entities. EBSA monitors approximately 685,000 private retirement plans and 2.2 million health plans, and similar numbers of other welfare benefit plans. CMS regulates more than 15,000 large and small nursing home facilities across the country. In contrast to its pipeline-related regulations, PHMSA also regulates a broad spectrum of transportation operators and hazardous materials, requiring a different approach to disseminating information and providing outreach. At the selected agencies we reviewed, agency officials told us that the main objective of their regulatory enforcement efforts is to achieve compliance with regulatory requirements. The selected agencies we reviewed took different approaches to achieve compliance, and used compliance and enforcement tools to escalate pressure to get regulated entities to comply. For example, FDA officials told us that when the agency identifies noncompliance, it may not immediately sanction a regulated entity. Rather, the agency may begin with a meeting or call with the regulated entity to address the noncompliance, and gradually implement more serious regulatory compliance measures (such as a negative inspection report or warning letter) or even seek an injunction from the relevant court(s) if it cannot resolve the noncompliance. APHIS also uses a range of compliance assistance activities to promote compliance and reserves its enforcement authority for the most serious situations and noncompliance. For example, APHIS officials told us it offers facilities struggling to maintain compliance the opportunity to work with trained compliance specialists to develop options and plans to promote future compliance. PHMSA officials told us the agency uses the Systems Integrity Safety Program as a non-adversarial tool that provides compliance assistance to regulated entities not currently in compliance. They said that the agency generally will not initiate enforcement actions against regulated entities enrolled in this program, but will pursue them if there are violations that PHMSA believes to be willful, and where a safety violation presents an imminent hazard. Despite a common objective to elicit compliance, selected agency approaches to resource allocations for compliance and enforcement differ. While some agencies consider allocations for compliance and enforcement to implement each individual regulation, others allocate resources across regulations and regulatory programs. For example, Labor allocates compliance assistance and enforcement resources for individual regulations depending on multiple factors, such as the nature of the regulation and underlying subject matter. In contrast, EPA allocates resources across regulations, programs, and regions. Its Office of Enforcement and Compliance Assurance works with each regional office to allocate enforcement and compliance assistance resources for the various programs across EPA. In addition, certain agencies we reviewed distinguish between compliance assistance and enforcement activities, while others view these activities as a joint effort. For example, EBSA allocates its resources between benefits advisors, who provide compliance assistance, and their enforcement staff. Conversely, OSHA inspectors provide compliance assistance to regulated entities in addition to their enforcement roles, supplementing onsite outreach and education provided by compliance assistance specialists located in regional offices. To appropriately allocate their enforcement and compliance resources, selected agencies we reviewed also collect and review data to identify noncompliance trends. For example: OSHA uses collected data to identify national and local special emphasis programs to highlight specific workplace health and safety issues as the focus of targeted outreach and enforcement efforts. EBSA’s national office annually establishes enforcement priorities— and shifts resources to respond with new emphases—through its guidance outlined in its Enforcement Program Operating Plan. In preparing this guidance, EBSA assesses current enforcement activities, identifies recent enforcement trends, analyzes available information regarding industry activities and areas of noncompliance, and reviews current policy considerations to identify possible areas of potential risk within the employee benefit plan industry. EPA officials told us they use their National Enforcement Initiatives to prioritize resources to compliance concerns that are particularly entrenched or problematic. Further, EPA initiated its Next Generation Compliance (NextGen) strategy to structure regulations and permits with new monitoring and information technology, expanded transparency, and innovative enforcement activities. NextGen was designed to increase transparency and real time information made possible by electronic reporting and advanced monitoring, and allows the agency and its stakeholders the opportunity to experiment with innovative approaches. Furthermore, EPA stated that it and its stakeholders are better able to identify and solve environmental issues, and address large regulated communities with approaches that go beyond traditional single facility inspections and enforcement. Transparency and availability of data are important to promoting compliance and achieving regulatory objectives. The selected agencies that we reviewed have made efforts to make compliance and enforcement information more transparent and accessible to the public, including: All the Labor subcomponents we reviewed made efforts to make data and information more publically accessible. MSHA developed online compliance tools that allow the public to monitor a mine’s compliance with key safety and health standards by providing a broad range of mine safety and health data, including information about mine inspections, accidents, injuries, illnesses, violations, employment, production totals, and air sampling. One of these tools is the “Rules to Live By Calculator,” which focuses on the 49 safety standards most often associated with fatal mining accidents and serious injuries. EPA’s Enforcement and Compliance History Online (ECHO) database provides integrated compliance and enforcement data for over 800,000 regulated facilities on air emissions, surface water discharges, hazardous waste, and drinking water systems. The database includes EPA, state, local, and tribal environmental agency compliance and enforcement records that are reported into national databases. ECHO also incorporates EPA environmental data sets to provide additional context for analyses. CMS created a “Nursing Home Compare” website to assist consumers in comparing information about nursing homes. The website contains detailed information on the quality of care and staffing information for more than 15,000 Medicare- and Medicaid- participating nursing homes including a five-star scale of quality ratings of overall and individual performance on health inspections, quality measures, and hours of care provided per resident by staff performing nursing care tasks. While agency officials receive feedback on their regulations during rulemaking, they also have opportunities to receive feedback during implementation of the regulation and as part of later retrospective review efforts. In 2007 and 2014, we reported on retrospective reviews of individual regulations, which agencies use to evaluate how existing regulations work in practice. As mentioned previously, two executive orders issued in 2017 also emphasize the importance of retrospective review, and officials from two agencies told us that they are currently examining their regulatory evaluation processes in response to these directives. To supplement retrospective review efforts, officials told us that they collect feedback from both internal and external stakeholders on the effectiveness of their regulatory design and enforcement decisions. This feedback may occur during rulemaking or during implementation, and might prompt changes. For example: EPA officials told us they provide opportunities for regulated entities to give feedback, and that they may reconvene the initial Regulatory Working Group for a rule if they heard complaints or concerns. At DOT, FAA officials told us they collect feedback about potential needs to update or change rules through requests for exemptions and through their various advisory committees. According to PHMSA officials, advisory committee inputs or petitions are two ways they evaluate the success of their regulations. MSHA officials told us that in response to comments received during rulemaking, they changed their rule on proximity detection systems for continuous mining machines, which protects miners from being struck by such machines. MSHA initially proposed specifying certain requirements for a technology but used a performance-based approach in its final rule. This experience subsequently informed MSHA’s proposed design for its new rule for proximity detection systems for mobile machines, in which the agency proposed a performance standard from the outset of the rulemaking. A BIS enforcement official told us that his office requested a revision to an existing regulation that was difficult to enforce because it did not provide clear requirements for how companies could determine when a government-identified “red flag”—a party on BIS’ Unverified List— could be resolved. BIS received similar feedback from advisory committees and revised the regulation for clarity. According to APHIS officials, they evaluate the effectiveness of their compliance and enforcement activities by tracking compliance rates under the Animal Welfare Act and through feedback from their regulated entities. USDA officials also stated that interactions with inspectors and listening sessions provide the department’s agencies with feedback. Selected agency officials cited concerns about changing the design of established regulatory programs and the resources required for the rulemaking process. Two of our selected agencies mitigated these concerns by piloting new regulatory designs. USDA implemented an ongoing project—the HACCP Inspection Models Project—to assess the viability of applying potential performance-based regulations to ensure food safety at hog and poultry processing facilities. After assessing inspection findings for the poultry pilot project and in response to public comments on the program, they ultimately determined that the regulation should be broadened to additional facilities. FAA used feedback from pilot studies, in which more than 30 public-use airports participated, to inform a proposed rule for Airport Safety Management Systems. Agencies also typically have flexibility to continue to change and adjust their compliance and enforcement strategies in response to feedback and evaluation without going through the rulemaking process to amend a final regulation. As previously mentioned, agencies assess the effectiveness of their enforcement and compliance efforts by collecting data to target their enforcement efforts. In addition, selected agencies identified evaluations of their enforcement and compliance efforts, including: DOL’s Chief Evaluation Office officials told us they work with Labor components to (1) develop and implement research studies, (2) address how collected information is used to assess effectiveness, and (3) support data analysis to inform management decision making. For example, the office worked with OSHA to pilot changes to issuing and following up citations to increase employer responsiveness. The study, which began in 2015, found that employers who were part of the new citation process, which included elements such as a handout during inspections, postcard reminders, and a follow-up call, were 3.9 percentage points more likely to engage with OSHA. EPA’s Office of Enforcement and Compliance Assistance wrote a guide for EPA managers and staff on their integrated strategic approach to effectively eliciting compliance, focusing on compliance assistance, incentives, monitoring, enforcement, and other tools. EPA has also conducted research on what makes a regulation more likely to be complied with and identified principles and tools to aid in writing more effective regulations. For example, EPA directs rule drafters to use clear and objective regulatory requirements and applicability criteria, to structure regulations to make compliance easier than noncompliance, and to leverage regulated entities and/or third parties to assess compliance and prevent noncompliance. It also encourages agency officials to leverage accountability and transparency through e-reporting to government and public access to data on websites. According to PHMSA officials, they developed formal enforcement goals, strategies, and metrics after reviewing leading practices for enforcement, including reviewing the compliance strategies at other DOT subcomponents. They analyzed data to identify commonalities between violations that are causal to incidents, as well as those that increased the severity of incidents. They also reviewed enforcement data to identify guidance that needs to be improved, provide feedback to inspectors, and ultimately provide ideas for improved rulemaking and regulatory design. Selected agencies responded differently when they identified continued widespread noncompliance through their evaluations or monitoring of compliance data. Some agencies told us they view a record of noncompliance as a fault in the regulation and may update their regulatory design, while others may change compliance strategies. FSIS officials told us they use enforcement data to analyze the effectiveness of their regulations, and may make changes to their regulations based on trends in noncompliance. According to PHMSA officials, they analyze enforcement data in several ways, including identifying regulations with the highest rates of noncompliance to understand weaknesses in individual regulations. MSHA officials told us that when an Inspector General audit found that its enforcement actions were not strong enough for repeat violators, the agency updated its Pattern of Violations regulation to better attain compliance. Conversely, OSHA officials told us that they view persistent noncompliance or workplace injuries and illness as indicating a need to revisit and readdress how compliance assistance is being provided and enforcement applied, rather than as a reason to adjust the regulation. EPA officials told us that they will update an existing regulation to solve an ongoing compliance problem only as a last resort due to the large resource investment required and disruption to regulated entities to adapt to changes in regulatory design. We built upon current statutory and executive requirements and selected agencies’ current practices to identify key considerations to strengthen agency processes for regulatory design and enforcement decisions. As agency officials craft regulations, they are guided by high-level statutory requirements, economic principles in executive orders, and OMB directives and resources. In accordance with those directives, our selected agencies have implemented varied practices to facilitate their regulatory design and enforcement decisions. Based on our review of those directives and the selected agencies’ processes, as well as academic and practitioner research, past IG work and our own past work, and existing criteria and resources for federal managers, we identified key considerations for regulatory design and compliance to aid decision makers in designing—or redesigning—their regulations and determining how best to elicit compliance. The following key considerations for regulatory design and compliance in figure 1 are intended to serve as a resource to supplement existing directives and guidance. We identified these considerations to bridge the gap between high-level directives and current agency practices. These considerations can provide criteria for decision makers to identify, assess, and evaluate options for achieving their regulatory objectives. Further, we have offered elements for each consideration as concrete questions that agencies can ask themselves as they design their regulatory approaches to elicit compliance within statutory authority and available resources. Not all considerations are applicable in every instance. We recognize there are tradeoffs inherent in any choice, but we believe that these key considerations can strengthen agency decision making, resulting in more informed designs, plans for evaluations, and ongoing changes to compliance and enforcement approaches. We provided a draft of this report to the Secretaries of Agriculture, Commerce, Health and Human Services, Labor, and Transportation, the Administrator of the Environmental Protection Agency and the Director of the Office of Management and Budget for comment. The Departments of Agriculture, Health and Human Services, and Labor and the Environmental Protection Agency provided technical comments that were incorporated as appropriate. The Departments of Commerce and Transportation and the Office of Management and Budget did not provide comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretaries of Agriculture, Commerce, Health and Human Services, Labor, and Transportation; the Administrator of the Environmental Protection Agency; the Director of the Office of Management and Budget; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or krauseh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. You asked us to review how agencies make key decisions related to regulatory design, compliance and enforcement, and updating of regulations. This report describes how selected agencies report (1) making decisions on regulatory designs among available options, (2) making decisions to designate resources among available compliance and enforcement activities, and (3) evaluating those decisions, and also identifies (4) key considerations for decision makers related to regulatory design and enforcement. To describe agency experiences and decisions regarding regulatory design and compliance and how they evaluate those decisions, we reviewed regulatory processes at 6 departments and 13 subcomponents within those departments. To illustrate a wide range of regulatory designs and resulting compliance activities, we selected the six executive branch departments—excluding the Department of Defense—that promulgated the most significant regulations between September 1, 2011 and August 31, 2016. These departments were the United States Departments of Agriculture (USDA), Commerce (Commerce), Health and Human Services (HHS), Labor (Labor), and Transportation (DOT), and the Environmental Protection Agency (EPA). Among other inputs, the selected departments were also among those that most often promulgated regulations that were anticipated to affect small entities (such as small businesses, nonprofits, and governments) during the same time period. We used reginfo.gov to identify the number of significant regulations. We assessed the reliability of those data by reviewing relevant documentation, interviewing knowledgeable agency officials, and electronically and manually testing the data for missing values, outliers, and invalid values, and we found the data to be sufficiently reliable for the purpose of identifying selected departments. The experiences of these selected executive branch departments are illustrative and nongeneralizable. From these departments, we selected subcomponents for nongeneralizable case studies. These subcomponents were selected based on information provided by department officials engaged in regulatory activities on their departmental subcomponents’ use of a variety of regulatory designs and any experience making changes to their regulatory design or compliance strategies based on new information (such as evaluations) or new circumstances (such as evolving technologies or changes in agency resources for compliance). We also asked department officials about subcomponents’ use of compliance activities other than traditional compliance assistance and enforcement. To further inform our selection of subcomponents, we reviewed past Inspector General and our own work on types of regulatory designs and compliance strategies. We did not include independent regulatory agencies in our scope as they are not subject to directives from the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs. Furthermore, many independent agencies promulgate and administrate financial regulations, which present different considerations and have been the focus of other work we performed. In reviewing enforcement strategies used by agencies, we did not review federal regulatory programs for which enforcement has been delegated to states or localities. To illustrate how our selected agencies make decisions regarding regulatory design and compliance and how they evaluate those decisions, we reviewed agency written procedures and interviewed department and subcomponent officials on their practices for making these decisions. To develop themes and examples from our documentary and testimonial evidence, we analyzed information from relevant documents and interviews to identify and confirm common patterns as well as differences across selected agencies. These experiences illustrate how the selected agencies currently make these decisions, the outcomes of those decision- making processes, and their evaluation practices. To identify key considerations for decision makers related to regulatory design and enforcement, we reviewed existing criteria documents, including (1) elements of the Regulatory Flexibility Act; (2) applicable executive orders and guidance such as Executive Order 12866 and OMB Circulars A-4, A-11, and A-123; and (3) resources for federal managers, and leading practices we had previously reported on for enterprise risk management. To ensure that our considerations incorporated applicable academic and government research and findings we conducted a literature review. Our literature review incorporated searches of several academic, literature, and government sources—including bibliographic databases such as ProQuest, Scopus, Academic OneFile, Public Affairs Information Service, and LexisNexis—for articles or studies published from January 2011 through August 2016. The team searched for articles using several combinations of relevant key words such as: “regulatory design,” “regulatory structure,” “regulatory compliance,” and “regulatory enforcement.” We then identified the articles that were relevant to our objectives based on the independent review of two team analysts. In addition, we searched our own and selected federal Inspector General websites for any reports relevant to our objectives. These searches were not meant to be a comprehensive search of all available literature on the topic, but rather conducted to identify relevant work to inform our identification of key regulatory design and enforcement considerations for decision makers. We developed a data collection instrument for each of the academic and government literature search sources and our own reports. To analyze and summarize the results of the academic literature search, two analysts independently reviewed each relevant record in the search results to document information that was relevant to our objectives and to identify key themes to inform our key considerations. We reviewed all relevant articles and reports and summarized information in the data collection instrument that related to the following topics: regulatory design; regulatory design principles; enforcement and compliance; enforcement and compliance principles; regulatory or subject matter area; and general observations that were relevant to the engagement’s objectives. In addition, we reviewed the annotated citations and references in selected articles to identify additional articles to include in the literature review and ensure that we were not omitting key literature related to regulatory design and enforcement. After applying identified criteria—including key practices and elements of those practices—to decision making about regulatory design and compliance, we obtained input on those considerations with officials from our selected agencies and with subject matter specialists. We initially selected and interviewed relevant specialists based on the results of our literature review (i.e., the authors of relevant articles or books included in our review). Based on suggestions from those individuals, we expanded our list of specialists and conducted a second round of interviews, ultimately speaking with 14 specialists. These considerations were also refined by the current practices and approaches of the selected agencies we reviewed. We conducted this performance audit from August 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Heather Krause at (202) 512-6806 or krauseh@gao.gov. In addition to the contact named above, key contributors to this report were Tim Bober, Assistant Director, Alexandra Edwards, Danny Berg, and Travis Hill. In addition, John Hussey, Timothy Guinane, Andrea Levine, Kayla Robinson, Robert Robinson, and Cynthia Saunders provided key assistance.", "summary": "Within the limits of their statutory authority, agencies may design their regulations in different ways to achieve intended policy outcomes. Agencies also decide how they will promote compliance with their regulations and ensure that regulated entities are informed of regulatory requirements. GAO was asked to review how agencies make regulatory design and enforcement decisions. This report describes how selected agencies report (1) making decisions on regulatory designs among available options, (2) making decisions to designate resources among available compliance and enforcement activities, and (3) evaluating those decisions, and also identifies (4) key considerations for decision makers related to regulatory design and enforcement. To describe how agencies make and evaluate these decisions, GAO reviewed regulatory processes and spoke with officials at six executive departments—the Departments of Agriculture (USDA), Commerce, Health and Human Services (HHS), Labor (Labor), and Transportation and the Environmental Protection Agency (EPA)—based on volume of significant rulemaking, and 13 subcomponents within those departments. To identify key considerations for regulatory decision makers, GAO reviewed existing criteria, including statutory and Executive requirements, conducted a literature review, and obtained input on identified considerations with subject matter specialists. GAO is not making any recommendations in this report. USDA, HHS, Labor, and the EPA provided technical comments that were incorporated as appropriate. Agencies have multiple available regulatory designs. Selected agency processes for choosing among them are informed by statutory and Executive requirements, regulatory objectives, and statutory discretion. Officials reported a preference for “performance” designs that establish an outcome but allow flexibility in how to achieve it, but stated that in some cases their objectives could require use of more prescriptive “design-based” regulations that specify a certain required technology or action. Officials at all selected agencies stated that they discuss potential regulatory designs internally, but some agency processes also included practices such as documentation of identified design options and assessments of the options' risks and enforcement implications. Selected agencies used multiple tools and approaches for allocating resources to elicit compliance. Agencies generally have flexibility to use a mix of tools, including providing compliance assistance to help regulated entities understand requirements, and monitoring and enforcement through inspections. Selected agency processes to allocate compliance resources vary, and agencies reported using collected data to target enforcement resources to address risks. Selected agencies supplemented feedback on effectiveness of their regulatory design and enforcement approaches with evaluations, which agency officials said could prompt changes. When agencies identify noncompliance, selected agencies may update their regulation or their compliance strategy. GAO identified key considerations to strengthen agency decisions related to regulatory design and enforcement (see figure). These build on current directives, academic research, and the experiences of selected agencies and are intended to serve as a resource for decision makers in designing—or redesigning—their regulations and determining how best to elicit compliance.", "document_type": "gao"}
{"report": "EPA states that one goal of the RFS is to reduce greenhouse gas emissions. Specifically, the RFS is designed to reduce these emissions by increasingly replacing petroleum-based fuels with biofuels that have lower associated greenhouse gas emissions released throughout their lifecycle. Some of these greenhouse gas emissions are directly released at each stage of a fuel’s lifecycle, which, for biofuels, includes the emissions associated with growing the feedstock, transporting it, converting it to a biofuel, distributing the biofuel, and burning it in an engine. Other emissions are released indirectly through broad economic changes associated with increased biofuel use, such as changes in land use. The lifecycle greenhouse gas emissions from biofuels cannot be directly measured, so they are estimated using mathematical models that account for greenhouse gas emissions at each stage of the lifecycle. These models—in particular, Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation model—have been used by researchers for nearly 30 years. However, the complexity of estimating the lifecycle emissions associated with biofuels and the sensitivity of the models to assumptions limit the precision of the modeled results. The RFS established statutory greenhouse gas reduction requirements for specific types of biofuels. These types can be grouped into two broad categories—conventional biofuels and advanced biofuels—defined by the amount of reduction they are required by statute to achieve in lifecycle greenhouse gas emissions relative to the 2005 emissions baseline for gasoline or diesel. Conventional. Conventional biofuels from new facilities must achieve greenhouse gas emissions at least 20 percent lower than traditional petroleum-based fuels, which include gasoline and diesel. The dominant conventional biofuel produced to date is corn-starch ethanol. Advanced. Advanced biofuels must achieve lifecycle greenhouse gas emissions at least 50 percent lower than traditional petroleum-based fuels. Advanced biofuels may include a number of fuels, including fuels made from algae or sugar cane, but the category excludes ethanol derived from corn starch. This category includes the following subcategories: Biomass-based diesel: biodiesel or renewable diesel that has lifecycle greenhouse gas emissions at least 50 percent lower than traditional petroleum-based diesel fuels. Cellulosic: renewable fuel derived from any cellulose, hemicellulose, or lignin that is derived from renewable biomass and has lifecycle greenhouse gas emissions at least 60 percent lower than traditional petroleum-based fuels. The RFS established statutory requirements for the amount of biofuels that must be blended into gasoline. These amounts increase from 9 billion gallons in 2008 to 36 billion gallons in 2022. The RFS sets statutory volume requirements for each type of biofuel based on the categories described above, but EPA can waive those requirements and establish its own, if warranted. From 2010 through 2013, EPA used its waiver authority each year to reduce the volume requirement for cellulosic biofuel while keeping the total volume requirement for all biofuels at the statutory level. Starting in 2014, EPA set lower volume requirements for all advanced biofuels and lower total biofuel blending requirements. EPA cited, among other things, inadequate domestic supply as a reason for the waivers. Since 2014, the gap between RFS requirements for advanced biofuels and EPA requirements after waivers were issued has increased. Figure 1 compares RFS statutory volumes for various types of biofuels with volumes that EPA established using the waiver authority. In 2018, the biofuel used most often to comply with the RFS has been conventional ethanol derived from corn starch. As we reported in 2016, production of cellulosic and other advanced biofuels has not progressed as initially expected under the RFS. Although, as we reported, advanced biofuels are technologically well understood, current production is far below the volume needed to meet the statutory targets for these fuels. For example, the cellulosic biofuel blended into transportation fuel in 2015 was less than 5 percent of the statutory target of 3 billion gallons. Given current production levels, most experts we interviewed told us that advanced biofuel production cannot achieve the statutory targets of 21 billion gallons by 2022. The shortfall of advanced biofuels is the result of high production costs, despite years of federal and private research and development (R&D) efforts. The federal government has supported R&D related to advanced biofuels through direct research and grants in recent years, with the focus of this R&D shifting away from cellulosic ethanol, an advanced biofuel that is not fully compatible with current vehicle engines and fuel distribution infrastructure, and toward other biofuels that are compatible with this infrastructure. Even before the establishment of the RFS, ethanol was used as an additive in gasoline. It serves as an oxygenate, to prevent air pollution from carbon monoxide and ozone; as an octane booster, to prevent early ignition, or “engine knock;” and as an extender of gasoline stocks. In purer forms, it can also be used as an alternative to gasoline in automobiles specially designed for its use. Approximately 99 percent of blended gasoline consumed in the United States is “E10”—a blend of gasoline with up to 10 percent ethanol. The use of ethanol as an oxygenate is linked to the demise of a petroleum derivative known as methyl tertiary butyl ether, or MTBE. MTBE had been used as an octane booster since the late 1970s, and was used in later years to fulfill the oxygenate requirements set by Congress in the 1990 Clean Air Act amendments. According to a report by the Congressional Research Service, MTBE contaminated drinking water, and about half of the states passed legislation to ban or restrict its use. Although MTBE was not restricted by federal law, gasoline refiners sought a substitute because of concerns over potential liability. To replace MTBE, refiners switched to ethanol. Congressional Research Service, MTBE in Gasoline: Clean Air and Drinking Water Issues (updated Apr. 14, 2006). Five states passed and put into effect ethanol mandates similar to the RFS—Hawaii, Minnesota, Missouri, Oregon, and Washington. In Minnesota, Missouri, and Oregon these mandates required 10 percent of blended gasoline to be ethanol, while Washington required 2 percent ethanol in gasoline and Hawaii required that 85 percent of fuel sold in the state must contain 10 percent ethanol. Minnesota was the first to put an ethanol mandate into effect—in May 2003. Hawaii followed with an effective date of April 2006. The Missouri, Oregon, and Washington mandates were put into effect in 2008. Louisiana, Montana, and Pennsylvania also passed laws requiring ethanol blending mandates, but these mandates have not gone into effect because in-state ethanol production volumes have not reached levels required to trigger them. The federal government has supported the development of a domestic biofuels industry not only through the RFS but also through tax credits. The Energy Tax Act of 1978, among other things, provided tax incentives designed to stimulate the production of ethanol for blending with gasoline. These blending incentives were restructured as part of the Volumetric Ethanol Excise Tax Credit (VEETC) in 2004. In 2009, we found that the VEETC and the RFS may have been duplicative with respect to their effects on ethanol consumption. We and others found that the VEETC was no longer stimulating additional ethanol consumption. The blending incentives in the VEETC expired in December 2011. There are also federal tax incentives to promote the production and use of advanced biofuels. These include the Biodiesel Income Tax Credit, which provides a $1 per-gallon tax credit for producers of certain forms of biodiesel or renewable diesel. Separately, the Second Generation Biofuel Producer Tax Credit provided advanced biofuel producers a tax credit of up to $1.01 per gallon of advanced biofuel produced and used domestically. Evidence from studies, interviews with experts, and our analysis suggest that the nationwide RFS was likely associated with modest price increases outside of the Midwest. Likely variations in these gasoline price effects depended, in part, on state-by-state variation in the costs to transport and store ethanol. For example, the Midwest was already producing and blending ethanol, so it had lower transportation costs and had already built necessary storage infrastructure. Other regions began blending ethanol later as rising volumes of ethanol required under the RFS forced more ethanol into the system and as states began blending ethanol. These states incurred new transportation and storage infrastructure costs, which likely resulted in higher gasoline prices compared to those in the Midwest states or states that had not yet begun to blend ethanol. Overall, it is likely that as the expanded blending requirements of the RFS caused non-Midwestern states and localities to begin blending ethanol, these states and localities experienced increased gasoline prices of a few cents per gallon compared to what they otherwise would have been. According to the experts we interviewed as well as the studies we reviewed, the RFS likely caused small changes in retail gasoline prices that varied by region. The experts, stakeholders, and studies identified two main ways in which the RFS may have affected prices. Specifically, the RFS may have (1) increased transportation and storage costs in regions outside the Midwest, and, (2) caused an initial increase in refining investment costs that over the long term reduced refining costs for gasoline. The RFS may have affected retail gasoline prices by increasing transportation costs in certain regions. Retail gasoline consists of two components—ethanol and blendstock, which is the petroleum-based gasoline that ethanol is blended with to make retail gasoline. Currently, blendstock and ethanol are typically transported in different ways. Blendstock can be shipped via pipeline, which is the most cost-efficient method of transporting fuel. However, ethanol is more corrosive and cannot be shipped in pipelines currently used for blendstock; as a result, it must be transported using costlier methods, such as rail, barge, and tanker truck. Ethanol is produced primarily in the Midwest, where most corn is produced. According to the studies we reviewed, this means that Midwest gasoline retailers, being closer to the supply of ethanol, may have been able to charge consumers lower prices for retail gasoline relative to non- Midwest gasoline retailers because of their lower transportation costs for ethanol. Similarly, higher transportation costs outside of the Midwest may have resulted in higher prices of retail gasoline in those regions. Figure 2 illustrates U.S. ethanol production in 2005, before the RFS became effective. In addition, the RFS may also have affected retail gasoline prices by increasing storage costs in certain regions. Because ethanol is more corrosive than blendstock, it must be stored differently. According to one study we reviewed, ethanol was being blended into gasoline in many locations in the Midwest prior to the establishment of the RFS. As a result, the Midwest already had the infrastructure needed to store ethanol. According to another study, in some places outside of the Midwest ethanol was typically not being blended into gasoline prior to the establishment of the RFS, and therefore costly infrastructure changes, such as installing different seals and gaskets in tanks, were needed so that retailers could store blended gasoline. For example, the California Energy Commission estimated the costs of such infrastructure changes to be approximately $60 million in California. Unlike transportation costs, the costs of infrastructure changes were incurred just once, according to industry stakeholders we interviewed; therefore the effect of such costs on retail prices would be expected to have diminished over time. The cost of producing retail gasoline depends in part on the costs of its two components. The RFS may have affected the costs of blendstock and ethanol in various ways, and according to the experts we interviewed, past GAO work, and the studies we reviewed, these costs may have contributed to changes in gasoline prices. Blendstock. The RFS may have initially increased both refiners’ costs to produce blendstock compatible with ethanol blending and the costs of shipping and storing such blendstock; however, these costs may have decreased over time. More specifically, the RFS may have initially increased refiners’ costs because refiners had to change their configuration to produce a lower octane blendstock to accommodate ethanol blending. Many experts we interviewed stated that producing blendstock with a lower octane level required costly changes to refinery infrastructure and processes. However, according to these experts and stakeholders, since ethanol is relatively high in octane, blending ethanol into retail gasoline allows refiners to produce blendstock with a lower octane level. As a result, according to many of the experts we interviewed, after the initial investment by refineries to switch to the lower octane blendstock, refiners could produce that blendstock at lower cost. This would have led to higher initial costs but lower long-term costs once infrastructure costs had been capitalized. The higher initial cost is consistent with our past work in which we noted that shipping more types of blendstocks—the result of a proliferation of blendstocks adopted by states and localities to meet Clean Air Act standards—increases the costs of shipping and storing blendstocks at terminals for distribution to retail sellers. As a result, according to one expert familiar with our past work, as ethanol blending spread further and further away from the production center in the Midwest states, there were more types of blendstocks in the pipeline and storage terminals, which would have increased costs. This expert said that over the longer run and once ethanol blending had expanded to encompass the majority of gasoline sold in the United States, this effect would have disappeared because virtually all the blendstock flowing through the pipeline and storage system would be compatible with blending ethanol. Ethanol. It is unclear whether the RFS increased or decreased the cost of ethanol. One source we reviewed indicated that the RFS may have increased the cost of ethanol by increasing demand for corn, which would drive up the price of corn. On the other hand, one expert we spoke to stated that the RFS may have decreased the cost of ethanol in the long term by providing incentives for producers to invest in more efficient ethanol production processes, which would lower production costs over time. However, it is unclear what the longer-term effects of ethanol blending on gasoline prices have been. We believe this is because once all locations had made the infrastructure investments and most gasoline blendstock produced was consistent with blending ethanol then there would be two continuing effects: (1) the transportation and blending costs of ethanol, which would tend to push retail prices higher and depend on the distance traveled and the modes of transport, and (2) the lower cost of producing lower octane blendstock. The former effect might dominate for locations far from the production source of ethanol and for which more costly modes of transport were used while the lower blendstock costs might dominate for locations close to the production source of ethanol, those that have low transportation costs, or both. However, the data available to us do not allow us to test this long-term effect. We studied the effects of ethanol blending mandates in the five states that had such mandates prior to and including 2008; these mandates are similar to but preceded the RFS ethanol blending mandates on retail gasoline prices. We found that these state mandates were associated with gasoline price decreases in the two Midwestern states we evaluated and price increases in three non-Midwestern states. Specifically, during the period we studied, when the ethanol mandates in Minnesota and Missouri were in effect, our model estimates that, all else remaining equal, retail gasoline prices were lower by approximately 8 and 5 cents per gallon in these states, respectively, than they would have been without the mandates. By contrast, when the ethanol mandates in Hawaii, Oregon, and Washington were in effect, our model estimates that, all else remaining equal, retail gasoline prices were higher by approximately 8, 2, and 6 cents per gallon in these states, respectively, than they would have been without the mandates. These results are consistent with what other studies and experts found about the effects of blending ethanol with gasoline. Our model provides an indicator of the types of effects that the RFS likely had on retail gasoline prices as the increasing ethanol blending targets of the RFS began to push ethanol into more gasoline markets. Specifically, we can infer from the model that the RFS was associated with a modest gasoline price decrease in Midwest states. According to one expert familiar with our analysis and with the blendstock pipeline and storage system, expanding the volumes of lower octane feedstocks to the Midwest states would have the effect of reducing refining production costs because refiners serving the Midwest could do larger runs of lower octane blendstock and therefore benefit from economies of scale in refining runs. In addition, this would also have the effect of reducing pipeline and storage costs for blendstocks because larger volumes of lower octane blendstock could be shipped northward from the refining center in the Gulf of Mexico states to the Midwest. Larger volumes of uniform blendstock during pipeline shipping reduce costs compared to smaller shipments because different blendstocks intermix at the point they interface in a pipeline, and these mixed blendstocks either have to be downgraded and sold for less or pulled out entirely and re-refined to meet existing fuel standards. Conversely, we can infer from the model that the RFS was associated with modest gasoline price increases in states further from the Midwest producers as increasing ethanol targets caused those states to begin blending ethanol for the first time and for which more refining capacity had to convert to produce lower octane feedstock and ship it to more locations, thereby initially raising refining, pipeline, and storage costs as discussed previously in this report. The results of our analysis are also generally consistent with other work that examined the effects of different state ethanol-blending requirements on gasoline prices. For example, some states and localities started blending ethanol before the RFS made it effectively mandatory when these states and localities banned MTBE, an additive that increased the oxygen content of the fuel. When MTBE was banned, ethanol was typically added in its place. The one peer-reviewed study we identified that estimated the effects of the MTBE ban on gasoline prices found that in locations required to blend ethanol because of state MTBE bans, retail gasoline prices increased by 3 to 6 cents per gallon in non-Midwestern states, with larger price increases during times of high ethanol prices relative to crude oil prices. This study also found that retail gasoline prices in the Midwest may not have changed. While our own analysis, other studies we reviewed, and experts we spoke to cannot estimate precise price effects of the RFS on retail gasoline, we believe that collectively the evidence points to likely effects that varied by geographic region and that as RFS blending requirements rose and more and more non-Midwestern states and localities adopted ethanol blending, it is likely they saw modest increases in retail gasoline prices on the order of several cents per gallon. Conversely, as more and more states and localities blended ethanol and more refiners began producing larger runs of lower octane blendstock, the costs of acquiring this blendstock likely fell, and because Midwestern states had very low transportation costs for ethanol, their gasoline prices likely fell. Most of the experts we interviewed generally agreed that to date the RFS has likely had a limited effect, if any, on greenhouse gas emissions. Further, the RFS is unlikely to meet the greenhouse gas emissions reduction goals envisioned for the program through 2022. Regarding the RFS and greenhouse gas emissions to date, experts noted that the effect has been difficult to assess precisely and we found disagreement among some experts about whether the effect has been positive or negative. However, most experts agreed that the effect—whether an increase or decrease—has likely been limited. Regarding meeting RFS greenhouse gas emission reduction goals through 2022, as we reported previously, although advanced biofuels, such as cellulosic ethanol, achieve greater greenhouse gas reductions than conventional biofuels, such as corn- starch ethanol, the latter are likely to continue to account for most of the biofuel blended into domestic transportation fuels under the RFS because they are economical to produce while most advanced biofuels are not. Of the 13 experts we interviewed, 10 generally agreed that the RFS has likely had a limited effect, if any, on greenhouse gas emissions to date. However, these experts said that the effect is difficult to assess precisely, and they disagreed on whether the limited effect has been positive or negative. Specifically, the experts commenting on the topic were roughly evenly split between increases or decreases in greenhouse gas emissions, with some saying there were negligible effects. Experts we interviewed said that the effect that the RFS has had on greenhouse gas emissions is difficult to assess precisely because it involves complex factors that are challenging to quantify, including the lifecycle emissions associated with biofuel use. The RFS’s reliance on corn-starch ethanol to fill biofuel mandates has limited the ability of the RFS to reduce greenhouse gas emissions. Specifically, as we reported in November 2016, most of the biofuel blended to date has been conventional corn-starch ethanol, which has a smaller potential to achieve greenhouse gas reductions compared with advanced biofuels. Because of this, several experts we interviewed for the November 2016 report raised concerns about the extent to which the RFS has achieved its design of reducing greenhouse gas emissions. Furthermore, because the RFS has not been responsible for all of the ethanol used in the United States since the program took effect, not all greenhouse gas reductions associated with ethanol use have been the result of the RFS. More specifically, most experts agreed that ethanol use was historically driven, in part, by favorable market conditions and other policies, including state biofuel mandates, ethanol tax credits, and the phaseout of MTBE as an oxygenate for gasoline. Most experts we interviewed said they believed that the RFS had some effect on biofuel production by creating a guaranteed market for biofuels. Although experts’ views differed on the amount of ethanol that would have been produced without the RFS, most of them said that ethanol production capacity would likely be lower today if the RFS had not helped to establish markets. For example, four experts and one industry stakeholder representative that we interviewed hypothesized that if the RFS were repealed, refiners would continue to blend ethanol into fuel, although two experts and one stakeholder representative acknowledged that less ethanol would probably be blended without the RFS. In contrast, one expert indicated that the RFS provides a safety net for the ethanol industry but that this safety net may not be needed anymore. In addition, according to EPA officials, the vast majority of the corn-starch ethanol used to date has been produced by so-called grandfathered plants—plants in operation or under construction before a certain date— that have been exempt from RFS emissions reductions requirements. The grandfathered plants have likely limited the ability of the RFS to achieve greenhouse gas emissions reductions, but this effect has likely changed over time. Early on, when a higher percentage of grandfathered ethanol plants used coal as an energy source and had older technologies, EPA estimates indicated that ethanol from such plants produced more greenhouse gas emissions than petroleum-based gasoline. However, most of the experts we interviewed told us that over time grandfathered plants have upgraded technology to remain economically competitive and have converted to natural gas as an energy source, resulting in industry- wide efficiency improvements that reduce greenhouse gas emissions. These experts indicated that such upgraded plants do not likely have significantly different emissions than the newer plants subject to RFS emissions reductions requirements. Little quantitative information is available to compare the difference between greenhouse gas emissions associated with grandfathered plants and those associated newer plants. Finally, experts we interviewed disagreed on whether ethanol produced today generally complies with the RFS statutory requirement to reduce lifecycle greenhouse gas emissions by 20 percent relative to those of petroleum-based gasoline, which affects the extent to which the RFS has influenced greenhouse gas emissions. Of the 11 experts commenting on the topic, approximately half said that ethanol produced today likely met the 20 percent RFS greenhouse gas reduction requirement. Most of these experts pointed to recent lifecycle analysis studies. Recent studies have found that, relative to petroleum-based gasoline, corn-starch ethanol could reduce lifecycle emissions by 19 to 48 percent. While there are limitations and uncertainty associated with all lifecycle analyses, most experts we interviewed said that the models used for lifecycle analyses have improved over time and can provide reasonably accurate estimates of certain components of direct lifecycle greenhouse gas emissions, such as emissions associated with the energy used for farming and for producing the biofuel in a plant. Of the roughly half of experts who said that corn-starch ethanol likely does not meet the RFS greenhouse gas reduction requirements, almost all pointed to the potential for indirect emissions associated with biofuel production and use. Indirect emissions are complex to estimate and a source of uncertainty in lifecycle estimates, but including them could offset emissions reductions. These indirect emissions can be produced as the result of broad economic changes associated with increased biofuel use, including the following: Indirect land use change. Indirect land use change occurs when using agricultural land to grow biofuel feedstocks causes the conversion of previously nonagricultural lands in the United States and elsewhere in the world to maintain world agricultural production of food, feed, and fiber. Fuel market effects. Though difficult to quantify, expanded biofuel use may lead to an unintended increase in the global use of transportation fuel and more greenhouse gas emissions, according to most of the experts saying that corn-starch ethanol does not meet greenhouse gas reduction requirements. For example, increasing biofuel use in one part of the world could increase the relative supply of petroleum in other parts of the world, thereby lowering petroleum prices and increasing use of petroleum products there. In November 2016 we reported that, with the exception of biomass-based diesel, production of advanced biofuels was far below the volume needed to meet the statutory targets for these fuels (see fig. 3). For example, we reported that the cellulosic biofuel blended into transportation fuel in 2015 was less than 5 percent of the statutory target of 3 billion gallons. We found in another November 2016 report that the shortfall was the result of high production costs, despite years of federal and private R&D efforts. With regard to future advanced biofuel production, most experts we interviewed for the November 2016 report told us that such production cannot achieve the statutory targets of 21 billion gallons by 2022 because the investments and development required to make these fuels more cost-effective, even in the longer run, were unlikely in the investment climate at the time. Factors affecting this included the magnitude of investment and the expected long time frames required to make advanced biofuels cost competitive with petroleum-based fuels. Because the bulk of greenhouse gas emissions reductions were to come from such advanced biofuels, the expected emissions reductions have also not occurred. As mentioned previously, EPA uses RINs to regulate compliance with the RFS. Refiners or importers of transportation fuel in the United States are known as “obligated parties” and must submit RINs to EPA. The number of RINs that an obligated party must submit to EPA is proportional to the volume of gasoline and diesel fuel that it produces or imports and depends on the volumes of biofuel that must be blended with transportation fuels during the following calendar year as set by EPA. In accordance with EPA guidelines, a biofuel producer or importer assigns a unique RIN to a gallon of biofuel at the point of production or importation. When biofuels change ownership (e.g., are sold by a producer to a blender), the RINs generally transfer with the fuels. When a gallon of biofuel is blended or supplied for retail sale, the RIN is separated from the fuel and may be used by the obligated party to demonstrate compliance with the RFS or may be traded, sold, or held for use in the following year. Some vertically integrated refiners own blending operations, so they generate RINs that they can use to demonstrate compliance because they also blend their own fuel. Other refiners do not blend their own fuel and must purchase RINs to demonstrate compliance. The latter are called merchant refiners. Since biofuels supply and demand can vary over time and across regions, a market has developed for trading RINs. If a supplier has already met its required share and has supplied surplus biofuels for a particular biofuel category, it can sell the extra RINs to another entity or it can hold on to the RINs for future use. An obligated party that faces a RIN deficit can purchase RINs to meet its obligation. In our March 2014 report on petroleum refining, we noted that the RFS had increased compliance costs for the domestic petroleum refining industry or individual refiners. We reported that, according to the U.S. Energy Information Administration, corn-based ethanol RIN prices were low—from 1 to 5 cents per gallon from 2006 through much of 2012— because it was generally economical to blend up to or above the level that the RFS required. However, in 2013, prices for these RINs increased to over $1.40 per gallon in July before declining to about 20 cents per gallon as of mid-November. Several stakeholders told us at the time that this increase in RIN prices was primarily due to RFS requirements exceeding the capability of the transportation fuel infrastructure to distribute and the fleet of vehicles to use biofuels, a situation referred to as the blend wall. EPA officials told us at the time that high corn prices, which made ethanol more expensive relative to gasoline, also contributed to higher RIN prices during this period. A refiner we spoke with at the time attributed the decline in RIN prices in the second half of 2013 to EPA’s statements expressing its desire to address the blend wall. In our report, we noted that while the RFS applies to all refiners in the same way, the effect of the rise in RIN prices may depend on each refiner’s situation. Figure 4 shows historical RIN prices for conventional, advanced, and biodiesel RINs. Since our March 2014 report, corn-starch ethanol RIN prices have experienced periods of volatility. One expert stated that this is because ethanol prices have become tied with biodiesel prices since the RFS has required levels above the 10 percent blend wall. EPA officials agreed that once the 10 percent blend wall was reached, ethanol RIN prices have often risen to the price of biodiesel RIN prices. More specifically, biodiesel RIN prices are strongly affected by expectations about whether the biodiesel tax credit will be allowed to expire, which has often happened. In fact, EPA has at times explicitly taken the existence of the biodiesel tax credit into account when making rulings related to the RFS. As a result, both biodiesel RIN prices and ethanol RIN prices experience volatility. In general, ethanol RIN prices have closely tracked biodiesel RIN prices for the last 5 years. As we noted in our March 2014 report on petroleum refining, prices for RINs reflect several factors, including the cost of renewable fuels compared with the petroleum fuels they displace and the stringency of annual blending requirements. One expert we spoke with during the course of the audit work for this report stated that uncertainty about the future of the RFS has also affected RIN prices. Three experts and three industry stakeholders we interviewed spoke directly about the effect of RINs on retail fuel prices. All three experts stated that if RINs have any effect on prices it is small, while two of those experts also asserted that it was possible that RINs had no effect on prices at all. These experts argued that in a perfectly competitive fuel market, the blendstock refiners increase the price of blendstock because they know that they will need to pay for the RINs. At the same time, the retail gasoline blenders are able to save costs related to ethanol because of the value they receive for selling the RINs. In practice, according to experts, the market may not be perfectly competitive, so it is possible that RINs add from 1 to 10 cents to the retail price of gasoline in some parts of the country. One industry stakeholder also expressed the opinion that RINs would have little to no effect on retail gasoline prices, citing the same argument. Two industry stakeholders indicated that RINs would increase retail gasoline prices, although they did not specify by how much. These stakeholders argued that RINs represent the cost of producing retail gasoline; because ethanol has historically had a higher cost per mile than gasoline (though not per gallon), the RINs would represent this increased cost and would be reflected in retail gasoline prices. An EPA analysis found that RIN prices did not have a significant impact on retail fuel prices and concluded that any expected impact would be very small. For retail gasoline, EPA made the same argument as experts and stakeholders cited above. Although oil refineries and importers are the entities that are obligated to demonstrate compliance with the RFS, not all of them produce blended fuels. Thus, these entities cannot earn RINs themselves and need to purchase them on the RIN market. Our past work, as well as EPA analysis, has identified several issues of concern with RINs, including possible fraud in the market and concerns about the effect on small refiners, price volatility, and the point of obligation. Fraudulent RINs. As we reported in our November 2016 report on the RFS, some experts we spoke with at the time identified reducing RIN fraud and price volatility as a federal action that could incrementally encourage investment in advanced biofuels. Specifically, these experts said that a lack of transparency in the RIN trading market has led to an increased risk of fraud and increased volatility of RIN prices. Because RINs are essentially numbers in a computerized account, there have been opportunities for fraud, such as double counting RINs or generating RINs for biofuels that do not exist. For example, in our March 2014 report on petroleum refining we reported that EPA had issued several notices of violation alleging that five companies generated invalid RINs without producing qualifying renewable fuels. EPA officials told us that, since that time, EPA has made additional notices of violation, although many pertain to actions taken prior to March 2014. Since the start of the RFS, EPA has alleged that approximately 382,524,480 RINs are invalid. Furthermore, obligated parties that inadvertently purchase fraudulent RINs lose the money spent to purchase them, must purchase additional RINs to meet their obligations, and face additional costs. This has a disproportionate effect on small refiners, according to our November 2016 report. Whereas large obligated parties—in particular, vertically integrated refiners that typically own blending operations—can generate RINs by blending fuel, small refiners do not blend fuel, must purchase their RINs on the market to meet their obligations, and are therefore more likely to be adversely affected by fraudulent RINs. To address concerns over these issues, EPA established an in-house trading system called the EPA Moderated Transaction System (EMTS). EPA officials believe that this system provides significant capabilities over prior reporting tools used to implement the RFS, allowing enforcement to more quickly identify potential RFS violations versus entry errors that were common with pre-EMTS RFS reporting. EPA officials also informed us of a voluntary quality assurance program intended to provide obligated parties a program to ensure that RINs entering commerce are valid. However, EPA has maintained that verifying the authenticity of RINs is the duty of obligated parties. Distribution of compliance costs. In our March 2014 report on petroleum refining, we reported that, according to EPA, refiners experience the same compliance costs regardless of whether they are vertically integrated refiners or merchant refiners that purchase RINs for compliance. However, we also reported that the views of several stakeholders differed from EPA’s. In that regard, in a 2011 study, the Department of Energy reported that the degree to which a small refiner can actively blend refinery production with biofuels could contribute greatly to the economic hardship incurred from complying with the RFS. We noted that, while the RFS applies to all refiners in the same way, effects of rising or falling RIN prices may vary depending on each refiner’s situation. According to several stakeholders we interviewed at the time, RFS compliance had been most difficult for merchant refiners, because they did not blend their own fuel and had to purchase RINs from others, increasing their costs of compliance. Price volatility. Similarly, according to the experts we interviewed for our November 2016 report on the RFS, price volatility in RIN markets had adversely affected small refiners in particular and led to uncertainty among investors. While most RINs are bought and sold through private contracts registered with the EMTS, as we mentioned previously, RINs are also traded in markets. Some experts that we interviewed for the November 2016 report told us that price volatility may have been due, in part, to nonobligated parties speculating in these markets. Such price fluctuations introduced uncertainty for small refiners about the costs of compliance with the RFS because they had to purchase their RINs on the market. Placement of the point of obligation. In our November 2016 report on the RFS, we reported that according to some experts, blenders should be the obligated parties instead of importers and refiners. According to some of these experts, when EPA designed the RFS, it placed the obligation for compliance on the relatively small number of refiners and importers rather than on the relatively large number of downstream blenders in order to minimize the number of obligated parties to be regulated and make the program easier to administer. However, these experts told us that obligating refiners and importers has not worked to incentivize investors to expand infrastructure to accommodate higher ethanol blends. One expert we spoke with stated that because blenders are either retailers or sell to retailers, blenders would be better situated to pass RIN savings along to consumers. This in turn might encourage demand for higher ethanol blends and incentivize infrastructure expansion. Some experts told us at the time that EPA should make RIN market trading more open and transparent like other commodity markets, which could reduce the potential for fraudulent RIN activities and reduce RIN price volatility. EPA has taken some actions to address these issues. Specifically, EPA officials we interviewed for this report told us that EPA publishes a variety of aggregated information on its website each month to promote market transparency, including RIN generation and use, available RINs, RIN prices and trade volumes, RIN holdings, and small refinery exemption information. According to these officials, EPA also requires all RIN trades to be entered into EMTS from both the buy and sell sides, and only finalizes a transaction in the system if the buy and sell sides match. EPA officials said that transparency of aggregated RIN data helps the market function more efficiently and minimizes price volatility; however, they acknowledged that many factors contribute to RIN prices and RIN price changes, and it is impossible to attribute such changes to any single factor. Furthermore, according to EPA officials, the memorandum of understanding on RIN market manipulation that EPA has entered into with the Commodity Futures Trading Commission will also help make RIN markets more open and transparent. Finally, EPA officials stated that in response to a recent White House direction, EPA is currently drafting a regulatory proposal to implement market reforms and additional transparency measures to prevent price manipulation in the RIN market. According to EPA officials we interviewed for this report, EPA received several petitions requesting that it consider changing the point of obligation from refiners and fuel importers to fuel blenders. In November 2017, EPA denied the petitioners’ request. In the denial, EPA said that it does not expect a benefit of increased use of biofuels as a result of changing the point of obligation. Furthermore, it is EPA’s position that changing the point of obligation could increase the complexity of the RFS program and would likely disrupt both the RFS program and the fuels market. By law, small refineries were exempted from the RFS through compliance year 2010, and 24 small refineries were granted an exemption for compliance years 2011 and 2012. Beginning with the 2013 compliance year, small refineries have been able to petition EPA annually for an exemption from their RFS obligations. EPA states on its website that EPA may grant the extension of the exemption if EPA determines that the small refinery has demonstrated disproportionate economic hardship. According to EPA officials, the statute directs EPA to consult with the Department of Energy, and to consider the department’s Small Refinery Study and “other economic factors” in evaluating small refinery exemption petitions. EPA conducts its review of small refinery petitions on a case-by- case basis and applies these statutory criteria to its evaluations. According to EPA’s website, EPA’s decision to grant an exemption has the effect of exempting the gasoline and diesel produced at a refinery from the percentage standards, and the exempted refinery is not subject to the requirements of an obligated party for fuel produced during the compliance year for which the exemption has been granted. For the first few years, EPA data show that EPA granted roughly half of petitions; however, starting in compliance year 2016, the number of exemptions granted increased significantly. In compliance year 2016, EPA received 20 petitions and granted 19, with the final petition still pending. In compliance year 2017, EPA received 37 petitions and granted 29, with 1 declared ineligible or withdrawn and the remaining 7 still pending. The data show that this increase in granted exemptions correlates to an increase in estimated exempted volumes of gasoline and diesel, with the exempted amounts increasing from 3.07 billion gallons in compliance year 2015 (equivalent to an estimated 290 million RINs) to 13.62 billion gallons in compliance year 2017 (equivalent to an estimated 1,460 million RINs). To put these volumes into context, EPA data show that the total renewable volume obligation for compliance year 2015 was 17.53 billion gallons and for compliance year 2017 it was 18.91 billion gallons. We provided a draft of this report to the Departments of Agriculture and Energy, and to the Environmental Protection Agency, for review and comment. USDA, DOE, and EPA provided technical comments, which we incorporated where appropriate. USDA also provided written comments, which are reproduced in appendix IV. In summary, USDA expressed concerns in three areas. First, USDA disagreed with GAO’s conclusion that the RFS has had a limited effect, if any, on reducing greenhouse gas emissions. USDA asserts that scientific research shows significant effects on greenhouse gas emissions from blending ethanol into the nation’s fuel supply, based on the greenhouse gas benefits of ethanol produced using current technologies relative to gasoline. The objective of our work was to address the effect to date on greenhouse gas emissions that has been specifically attributable to the RFS, not whether blending ethanol into the nation’s fuel supply has effects on greenhouse gas emissions. We report that the RFS is not the only reason that ethanol is used in the fuel supply, and that ethanol would have been produced and used in the United States, even without the RFS. For example, as we noted in the report, ethanol blended into gasoline provides benefits as an oxygenate, to prevent air pollution from carbon monoxide and ozone; as an octane booster, to prevent early ignition, or “engine knock;” and as an extender of gasoline stocks. As a result, not all greenhouse gas reductions associated with ethanol use have been the result of the RFS. Drawing conclusions about the broader impact of ethanol on emissions generally was not our objective and is not appropriate for a report examining the impact of the RFS. Second, USDA criticized our methodology, which reported experts’ views on the effect of the RFS on greenhouse gas emissions. USDA stated that this methodology, by design, could not arrive at a consensus and did not synthesize the latest research. We chose our methodology, which relied on expert views supplemented by relevant reported research, because of its ability to yield more extensive, informative, and supportable answers to our objective than a narrower literature review, as suggested by USDA. More specifically, we reviewed much of the literature on this subject, and used the literature, along with referrals from other experts and recommendations from the National Academy of Sciences for prior GAO work, to assist in selecting experts whose expertise included knowledge of the relevant and most recent research on the issue. We selected respected experts representing all perspectives to span the disciplines required to answer our objective and to guard against drawing biased conclusions. Those experts were aware of all research, even that with conclusions contrary to their own. The studies that USDA cites do not represent a wide range of perspectives; they represent the views of a few studies focused specifically on the lifecycle emissions of ethanol. In addition, as we indicate, the perspectives we obtained from industry stakeholders were not used to support our findings on the effects of the RFS on greenhouse gas emissions, as USDA implies. Rather, stakeholders’ views were used to inform some of our examples and corroborate some aspects of the experts’ views—we attribute information to the stakeholders in these instances. The consensus we found among experts representing diverse perspectives was that the RFS has likely had a limited effect on greenhouse gas emissions to date and that the program is unlikely to meet its future greenhouse gas emissions reduction goals. Third, USDA commented that our conclusion that the RFS likely had modest impacts on gasoline prices should be augmented by a discussion of the volatility of gasoline prices. USDA’s comments appear to imply that the changes in prices we found are even smaller or less impactful on consumers because overall gasoline prices are themselves volatile. This is not an accurate interpretation of what we found. For example, increased prices in non-Midwest states represent additional expenditures on gasoline and consequent reductions in other household spending. Because a discussion of historic gasoline price volatility does not have bearing on the effect of the RFS on prices, we are not including it. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Secretaries of Agriculture and Energy; the Administrator of the Environmental Protection Agency; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. To determine what is known about the effect that the Renewable Fuel Standard (RFS) has had to date on 1) retail gasoline prices in the United States and 2) greenhouse gas emissions, we conducted semistructured interviews with 18 experts with expertise on these topics. Of the 18 experts we interviewed, 7 discussed the effect that the RFS has had on retail gasoline prices. Thirteen discussed the effect that the RFS has had on greenhouse gas emissions, though one expert declined to be identified. Two of the experts commented on the effect of the RFS on both prices and emissions. The specific areas of expertise varied among the experts we interviewed, so not all of the experts commented on all of our interview topics. The experts we interviewed for each topic are listed below. Dr. Antonio Bento, University of Southern California Dr. John M. DeCicco, University of Michigan Dr. Jason Hill, University of Minnesota Dr. Stephen Kaffka, University of California, Davis Dr. Madhu Khanna, University of Illinois Dr. Lee Lynd, Dartmouth College Dr. Steve McGovern, PetroTech Consultants, LLC Dr. John Miranowski, Iowa State University Dr. GianCarlo Moschini, Iowa State University Dr. Richard Plevin, University of California, Berkeley Dr. Wallace E. Tyner, Purdue University Dr. Michael Wang, Argonne National Laboratory One expert we interviewed declined to be identified. This appendix describes the econometric model we developed to estimate the effect of the state ethanol mandates on retail gasoline prices, provides the results, and discusses limitations. In order to develop evidence of the likely effects of the Renewable Fuel Standard (RFS) on the incremental adoption of ethanol blending by states as RFS targets grew, we developed an econometric model to analyze the effect state ethanol mandates on retail gasoline prices. Specifically, we analyzed how state policies mandating certain levels of ethanol blending in retail gasoline affected retail gasoline prices in those states. We obtained retail gasoline price data from the Oil Price Information Service. The data identified the simple average price across each state for each grade of fuel—regular grade gasoline, midgrade gasoline, premium gasoline, and diesel. There also exist local fuel specifications, on top of state policies. Price data are only available at the state level, and we are not able to identify directly the effect of local fuel policies on prices. We therefore included controls that represent the percentage of retail stations in the state that are affected by the local specifications. To reduce distortion from dissimilar regulations and outliers, we did not include prices (1) from the state of California and (2) for products other than regular-grade gasoline. Therefore, the data we used for our analysis comprised prices collected from 49 states and the District of Columbia for the period of 2001 through 2010, for a total of 6,000 observations. Over the period 2001 through 2010, retail gasoline prices are highly correlated across states over time. Specifically, to illustrate, we ran a simple regression model of retail gasoline prices on year-month (fixed- effect) controls. The results show that over 90 percent of the variation in retail gasoline prices over time across states is explained by these simple year-month controls. This suggests nationwide factors explain much of the variation in retail gasoline prices across states over time. The available data are not sufficiently rich to allow us to reliably disentangle the separate effects on retail gasoline prices of various nationwide factors, such as, perhaps, changes in crude oil prices, demand for gasoline, and the roll-out of the RFS. Hence, below, we examine instead the (incremental) effect on state-level retail gasoline prices of state ethanol mandates that are effective at a time when the RFS was requiring relatively low levels of ethanol blending nationwide. Our dependent variable in the model was the monthly average after-tax retail price in dollars per gallon of regular-grade gasoline. Our model included a variety of explanatory variables, including state ethanol mandates, other state and local ethanol policies and fuel specifications, and the Petroleum Administration for Defense District (PADD)-level gasoline inventory-sales ratios and refinery capacity utilization rates. State ethanol mandates. The variables of interest in the model were indicators for state ethanol mandates; the state ethanol mandate indicator variables take the value of one for any month in which that state has an effective ethanol mandate and take a value of zero otherwise. The mandates ranged in the percentage of ethanol they required to be blended into gasoline, from approximately 10 percent in Minnesota, Missouri, and Oregon to 2 percent in Washington, with Hawaii having a unique requirement that 85 percent of fuel sold in the state must contain 10 percent ethanol. Other state ethanol policies. We used as controls indicators for several other state ethanol policies to shed light on how these policies may have affected retail gasoline prices. Specifically, we controlled for state fleet requirements to use ethanol; direct ethanol incentives that reduce the cost of ethanol per gallon of fuel, such as tax credits or rebates; ethanol production incentives; and ethanol consumption incentives. Production incentives included financial incentives to produce ethanol, such as grants or payments to build or operate an ethanol plant or to grow ethanol feedstock. Consumption incentives included financial incentives to sell or use ethanol, such as grants or tax incentives to upgrade fueling infrastructure to sell ethanol or a tax credit to stations selling ethanol. We also controlled for state methyl tertiary butyl ether (MTBE) bans, as ethanol was the primary substitute that could be used in place of MTBE. Local-level fuel specification requirements. We controlled for local- level fuel specification requirements, such as the gasoline type, RVP levels, and oxygenated fuel requirements. Volume of inventory of gasoline relative to the volume of sales of gasoline. We used as a control the ratio of finished motor gasoline stocks to the sales of motor gasoline. This variable indicates when supply is high relative to demand and vice versa. Refinery capacity utilization rate. We controlled for refinery operable utilization rate, which represents the utilization of crude oil distillation units. This variable represents the balance between supply volume and costs of production. Both this variable and the inventory- sales ratio have been found to be endogenous in past work. State gas taxes. We control for the level of state gas taxes using data from the Department of Transportation’s Federal Highway Administration. Fixed effects. We used a set of indicator variables to account for fixed effects associated with time and individual states. Specifically, we used a set of state fixed effects to account for persistent differences between states, such as transportation costs of fuels to that state. Each model also included year-month fixed effects—one for each month in the data—to control for nationwide events, as well as state-calendar month fixed effects to allow seasonality to vary by state. Our model can be written as follows: 𝑦𝑦𝑠𝑠𝑠𝑠𝑠𝑠= 𝛽𝛽0 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑦𝑦 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 +(𝑆𝑆𝑆𝑆𝑅𝑅𝑆𝑆𝐸𝐸𝑠𝑠×𝑒𝑒𝑅𝑅ℎ𝑎𝑎𝑎𝑎𝑒𝑒𝑎𝑎𝑎𝑎𝑎𝑎𝑅𝑅𝑎𝑎𝑎𝑎𝑅𝑅𝑒𝑒𝑠𝑠𝑠𝑠𝑠𝑠)′𝛽𝛽1 ′ 𝛽𝛽3+𝛼𝛼𝑠𝑠𝑠𝑠+ 𝛾𝛾𝑠𝑠𝑠𝑠 𝑦𝑦𝑠𝑠𝑠𝑠𝑠𝑠 is the dependent variable in our model; namely, the average after-tax price per gallon of regular grade gasoline at state 𝑒𝑒 in month 𝑎𝑎 and year 𝑅𝑅. 𝑆𝑆𝑆𝑆𝑅𝑅𝑆𝑆𝐸𝐸𝑠𝑠×𝑒𝑒𝑅𝑅ℎ𝑎𝑎𝑎𝑎𝑒𝑒𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑅𝑅𝑒𝑒𝑠𝑠𝑠𝑠𝑠𝑠 is a vector of interaction terms, where 𝑆𝑆𝑆𝑆𝑅𝑅𝑆𝑆𝐸𝐸𝑠𝑠 is a vector of dummies for each state with a mandate—Hawaii, Minnesota, Missouri, Oregon, or Washington—and 𝑒𝑒𝑅𝑅ℎ𝑎𝑎𝑎𝑎𝑒𝑒𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑅𝑅𝑒𝑒𝑠𝑠𝑠𝑠𝑠𝑠 an indicator that is equal to 1 for all months that an ethanol mandate is effective for that state, and zero otherwise. 𝐹𝐹𝑅𝑅𝑅𝑅𝑅𝑅𝑠𝑠𝑠𝑠×𝐹𝐹𝐹𝐹𝐸𝐸𝐹𝐹𝑅𝑅𝐸𝐸𝐹𝐹𝑆𝑆𝑠𝑠𝑠𝑠𝑠𝑠 is a vector of interaction terms where 𝐹𝐹𝑅𝑅𝑅𝑅𝑅𝑅𝑠𝑠𝑠𝑠 is a measure of the proportion of gas stations in a state likely affected by various fuel regulations in a given year, and 𝐹𝐹𝐹𝐹𝐸𝐸𝐹𝐹𝑅𝑅𝐸𝐸𝐹𝐹𝑆𝑆𝑠𝑠𝑠𝑠𝑠𝑠 is a 𝑋𝑋𝑠𝑠𝑠𝑠𝑠𝑠 is a vector of remaining control variables, including state 𝛼𝛼𝑠𝑠𝑠𝑠 is a set of state-calendar month fixed effects to account for 𝛾𝛾𝑠𝑠𝑠𝑠 is a set of month-year fixed effects to account for time-varying vector of indicator variables equal to one in those months that a state is subject to fuel regulations related to RVP levels, boutique fuels, reformulated gasoline, and oxygenated fuel. gasoline tax in cents per gallon, inventory sales-ratio, refinery utilization rate, and indicator variables for other state ethanol policies, including effective MTBE bans, fleet requirements, direct incentives, production incentives, and consumption incentives. permanent differences in a state’s average gasoline prices across months. factors affecting average gasoline prices for all states, such as fluctuations in crude oil prices. 𝜀𝜀𝑠𝑠𝑠𝑠𝑠𝑠 is an error term that is clustered by state. Our model assumes that after controlling for time-variant factors, the timing of state ethanol mandates going into effect is not correlated with unobserved time-variant factors that affect gasoline prices. When this assumption is satisfied, then our model may estimate the effect of state mandates on gasoline prices. Since ethanol mandates go into effect at different times—in 2003 (Minnesota), 2006 (Hawaii), and 2008 (Missouri, Oregon, Washington)—our quasi-experiment introduces variation in ethanol mandates across time and across states. We are able to address many concerns about omitted variable bias by including detailed state- calendar month fixed effects and month-year fixed effects. We estimate that all else remaining equal, when the ethanol mandates in the Midwestern states of Minnesota and Missouri were in effect, retail gasoline prices in those states were lower by approximately 8 and 5 cents, respectively, than they would have been without the mandates. We also estimate that all else remaining equal, when the ethanol mandates in Hawaii, Oregon, and Washington were in effect, retail gasoline prices in those states were higher by approximately 8, 2, and 6, cents, respectively, than they would have been without the mandates. The variables used in the model to control for effects other than ethanol mandates had the expected directional effect on price or else were not significant (using a 5 percent significance level). Our controls for the boutique fuel blends and the state gasoline taxes were significant and positive, suggesting that states with more stringent fuel specifications and higher gasoline taxes have a higher after-tax gasoline price. The estimated effect for refinery utilization rate is negative and statistically significant, suggesting that fuel prices decrease with refinery utilization rates because higher supply decreases prices. Although we might expect that fuel prices would decrease with the inventory/sales ratio because this indicates that supply is high relative to demand, it is also possible that when inventories are below a critical threshold, prices will rise regardless of how high inventories are relative to sales, as has been seen in prior work, so the positive coefficient in our model has precedent. See Kendix and Walls, “Oil industry consolidation and refined product prices: Evidence from US wholesale gasoline terminals” Energy Policy, vol. 38 (2010), pp. 3498-3507. Estimated coefficient -0.0071 (0.011) -0.0027 (0.015) -0.0034 (0.012) 0.0072 (0.015) (0.0085) Percentage of gasoline stations in the state selling fuel with less than 9 lbs. Reid vapor pressure (RVP) 0.070 (0.11) Percentage of gasoline stations in the state selling fuel with at least 9 lbs. RVP (0.040) Percentage of gasoline stations in the state selling boutique fuel 0.14*** (0.037) Percentage of gasoline stations in the state selling reformulated gasoline (0.45) Percentage of gasoline stations in the state selling oxygenated fuel 0.0029 (0.018) 0.0028 (0.092) (0.00050) 1.87*** (0.11) Legend: * = parameter estimate significance less than 10 percent; ** = parameter estimate significance less than 5 percent; *** = parameter estimate significance less than 1 percent. We tested alternate specifications, such as the following: Including different subsets of the explanatory control variables in the model. Treating the inventory/sales ratio and the refinery utilization rate as endogenous. Using pre-tax prices by subtracting state gasoline taxes from after-tax prices rather than including taxes as a control variable. Our results, including the magnitude and directional impact of the various state ethanol mandates, were not meaningfully affected across such specification tests. Our analysis had a number of limitations as listed below. We did not directly estimate the effect of the RFS on prices. The policy was nationwide and there are no reliable state-level data with which to measure state-level ethanol gasoline blend rates as the RFS was implemented over time. However, there is no reason to believe that other states that incrementally adopted the blending of ethanol as a result of increasing RFS targets would have experienced different effects. There may be some endogeneity in the timing of the adoption of the ethanol mandates. These policies are likely easier to pass through state legislatures when corn or ethanol prices are lower than oil or gasoline prices or when gasoline prices are high, but given that the effective dates are usually several years after the laws are enacted, this actual effective timing should be exogenous. We believe the state-level ethanol regulation data are comprehensive, but some regulations may not appear in the data. In our analysis, we include controls for ethanol mandates as well as several other types of ethanol incentives and fuel specification requirements. These variables control for the effects of related ethanol policies as well as variations in the cost of producing retail gasoline. We are certain that all state ethanol mandates were included in the model. However, our model may not perfectly control for all other regulations that could affect retail gasoline prices. Some control variables were not available at the state or monthly level. For example, some controls, such as the refinery capacity utilization rate, were available at the regional level only, so we had to parse out the regionally aggregated observations accordingly. As in any model, there is the possibility of misspecification or bias. Inappropriate assumptions about the functional form of the model, failure to deal with endogenous variables, or exclusion of relevant variables could also cause our estimated effects to deviate from the true effects. Some amount of this bias is present in almost all regression results, although the amount may not be very large. In addition to the contact named above, Karla Springer (Assistant Director), Stuart Ryba (Analyst in Charge), Luqman Abdullah, Benjamin Adrian, Jaci Evans, Ellen Fried, William Gerard, Cindy Gilbert, Anne Hobson, Jordan Kudrna, Joe Maher, Caroline Prado, Oliver Richard, Rachel Rhodes, Dan Royer, Barbara Timmerman, and William D. Walls made key contributions to this report.", "summary": "Congress established the RFS in 2005 and expanded it 2 years later. The RFS generally mandates that transportation fuels—typically gasoline and diesel—sold in the United States contain increasing amounts of biofuels. In addition, the RFS is designed to reduce greenhouse gas emissions by replacing petroleum-based fuels with biofuels expected to have lower associated greenhouse gas emissions. The most common biofuel currently produced in the United States is corn-starch ethanol, distilled from the sugars in corn. EPA uses RINs associated with biofuels blended with petroleum-based fuels to regulate compliance with the program. In 2014, GAO found that refiners' costs for complying with the RFS had increased, and in 2016, GAO found that greenhouse gas emissions are unlikely to be reduced to the extent anticipated because production of advanced biofuels—which reduce greenhouse gas emissions more than corn-starch ethanol—has not kept pace with the yearly increases or the target of 21 billion gallons by 2022 called for by the statute. GAO was asked to review additional issues related to the effects of the RFS. This report examines what is known about (1) the effect the RFS has had to date on retail gasoline prices in the United States and (2) the RFS's effect on greenhouse gas emissions and whether the RFS will meet its goals for reducing those emissions. The report also provides information about RINs. To address the likely effects of the RFS on gasoline prices, GAO reviewed studies and interviewed experts and industry stakeholders, and conducted a statistical analysis of state ethanol mandates that were similar to the mandates of the RFS. GAO selected the experts based on their published work and recognition in the professional community. GAO selected stakeholders representing a range of perspectives, including stakeholders from the renewable fuels, petroleum, and agricultural industries, as well as from environmental groups. Because the RFS was implemented on a nationwide basis at the same time that other factors, such as the global price of crude oil and domestic demand for retail gasoline, were affecting retail gasoline prices across the nation, it is not possible to directly isolate and measure the effect the RFS had on gasoline prices nationwide given data available to GAO. Instead GAO developed and extensively tested an econometric model that estimated the effects on retail gasoline prices of state ethanol mandates. These state mandates are similar to the RFS but were put in place voluntarily by states before the RFS led to widespread ethanol blending in every state. This model estimated how ethanol mandates affected gasoline prices in these five states. These estimates suggest the RFS likely had effects in states that did not have state-wide mandates. These states incrementally blended ethanol because of the increasing volumes of ethanol required to be blended nationally by the RFS. Regarding the RFS's effect on greenhouse gas emissions, GAO interviewed 13 experts in government and academia. GAO selected these experts based on their published work, prior GAO work, and recommendations from other experts. During the course of the work, GAO gathered information on the topic of RINs through interviews, a review of relevant literature, and prior GAO work. GAO makes no recommendations in this report. In commenting on a draft of this report, USDA disagreed with GAO's finding that the RFS has had a limited effect on greenhouse gas emissions, citing research on the effects of ethanol on reducing emissions generally. GAO reported on the specific effects of the RFS on emissions. USDA also criticized GAO's methodology using experts' views. GAO employed that method to reach consensus among those with a range of perspectives. DOE and EPA did not comment on the draft report. Effect on prices. Evidence from studies, interviews with experts, and GAO's analysis suggest that the nationwide Renewable Fuel Standard (RFS) was likely associated with modest gasoline price increases outside of the Midwest and that these price increases may have diminished over time. Variations in these gasoline price effects likely depended, in part, on state-by-state variation in the costs to transport and store ethanol. For example, the Midwest was already producing and blending ethanol when the RFS came into effect, so that region had lower transportation costs and had already invested in necessary storage infrastructure. Other regions began blending ethanol later to meet the RFS's requirements, thereby incurring new transportation and storage infrastructure costs that resulted in gasoline prices that were several cents per gallon higher than they otherwise would have been. In addition, experts told GAO that the RFS caused an initial increase in refining investment costs that, over the long term, reduced refining costs for gasoline. Specifically, once all locations had made the infrastructure investments and most gasoline blendstock produced was consistent with blending ethanol then there would be two continuing effects: (1) the transportation and blending costs of ethanol, which would tend to push retail prices higher and depend on the distance traveled and the modes of transport, and (2) the lower cost of producing lower octane blendstock. The former effect might dominate for locations far from the production source of ethanol and for which more costly modes of transport were used, while the lower blendstock costs might dominate for locations close to the production source of ethanol and/or those that have low transportation costs. GAO's analysis of the effect that state ethanol mandates had on gasoline prices also showed gasoline price effects that differed in the Midwest and elsewhere. Specifically, during the period GAO studied, when the ethanol mandates in Minnesota and Missouri were in effect, all else remaining equal, retail gasoline prices were lower by about 8 and 5 cents per gallon in these states, respectively, than they would have been without the mandates. In contrast, when the ethanol mandates in Hawaii, Oregon, and Washington were in effect, GAO's model showed that retail gasoline prices were higher by about 8, 2, and 6 cents per gallon, respectively, than they would have been without the ethanol mandates. These results suggest that the RFS likely had gasoline price effects in other states that did not have state-wide ethanol mandates but that incrementally began blending ethanol as a result of increasing RFS requirements that by around 2010 had led to almost all gasoline sold in the United States being blended with 10 percent ethanol. Effect on greenhouse gas emissions. Most of the experts GAO interviewed generally agreed that, to date, the RFS has likely had a limited effect, if any, on greenhouse gas emissions. According to the experts and GAO's prior work, the effect has likely been limited for reasons including: (1) the reliance of the RFS to date on conventional corn-starch ethanol, which has a smaller potential to reduce greenhouse gas emissions compared with advanced biofuels, and (2) that most corn-starch ethanol has been produced in plants exempt from emissions reduction requirements, likely limiting reductions early on when plants were less efficient than they are today. Further, the RFS is unlikely to meet the greenhouse gas emissions reduction goals envisioned for the program through 2022. Specifically, GAO reported in November 2016 that advanced biofuels, which achieve greater greenhouse gas reductions than conventional corn-starch ethanol, have been uneconomical to produce at the volumes required by the RFS statute so the Environmental Protection Agency (EPA) has waived most of these requirements (see figure). Renewable identification numbers. EPA uses renewable identification numbers (RINs) to regulate industry compliance with RFS requirements for blending biofuels into the nation's transportation fuel supply. In GAO's March 2014 report on petroleum refining, GAO noted that the RFS had increased compliance costs for the domestic petroleum refining industry or individual refiners. GAO reported that corn-based ethanol RIN prices had been low—from 1 to 5 cents per gallon from 2006 through much of 2012—but in 2013, RIN prices increased to over $1.40 per gallon in July before declining to about 20 cents per gallon as of mid-November 2013. Since the March 2014 report, corn-ethanol RIN prices have experienced more periods of volatility. Most experts and stakeholders GAO interviewed recently stated that RINs had either a small effect on prices or no effect on prices, though a few disagreed. Finally, GAO's past work, as well as EPA analysis, has identified several issues of concern with RINs, including possible fraud in the market and concerns about the effect on small refiners, price volatility, and the point of obligation.", "document_type": "gao"}
{"report": "PTC systems are required by law to prevent certain types of accidents or incidents. In particular, a PTC system must be designed to prevent train- to-train collisions, derailments due to excessive speed, incursions into work zone limits, and the movement of a train through a switch left in the wrong position. While railroads may implement any PTC system that meets these requirements, the majority of the railroads are implementing one of four types of systems. PTC’s intended safety benefits can be fully achieved nationwide when all required railroads have successfully installed PTC components, tested that these components work together and the systems function as designed, and are interoperable with other host and tenant railroads’ PTC systems that share track. Interoperability means the locomotives of any host railroad and tenant railroad operating over the same track segment will communicate with and respond to the PTC system, allowing uninterrupted movements over property boundaries. Interoperability is critical to PTC functioning properly given the complexity of the rail network in the United States. In much of the country, Class I railroads function as hosts for Amtrak and commuter railroads. For example, one of the seven major Class I railroads reports that 24 tenant railroads operate over its PTC-equipped tracks, including freight, Amtrak, and commuter railroads. A notable exception to this is the Northeast Corridor, which runs from Washington, D.C., to Boston, Massachusetts, which Amtrak predominantly owns and over which 6 freight and 7 commuter railroads operate as tenants. PTC implementation involves multiple stages to achieve full implementation, including planning and system development, equipment installation and testing, system certification, and full deployment, including interoperability. Each railroad must develop an FRA-approved PTC implementation plan that includes project schedules and milestones for certain activities, such as equipment installation. The equipment installation stage involves many components, including communication systems; hardware on locomotives and along the side of the track (called “wayside equipment”); and software in centralized office locations as well as onboard the train and along the track. Railroads are required to report quarterly and annually to FRA on the railroad’s PTC implementation status relative to the implementation plan. A railroad can also revise its implementation plan to reflect changes to the project, which then must be reviewed and approved by FRA. In addition, railroads must demonstrate that the PTC system is deployed safely and meets functional requirements through multiple stages of testing. Before initiating testing on the general rail system, railroads must submit a formal test request for FRA approval that includes, among other things, the specific test procedures, dates and locations for testing, and the effect the tests will have on current operations. The multiple stages of PTC testing include: Laboratory testing: locomotive and wayside equipment testing in a lab environment to verify that individual components function as designed. Field testing: includes several different tests of individual components and the overall system, such as testing of each locomotive to verify that it meets functional requirements and field integration testing—a key implementation milestone to verify that each PTC component is integrated and functioning safely as designed. Revenue service demonstration (RSD): an advanced form of field testing in which the railroad operates PTC-equipped trains in regular service under specific conditions. RSD is intended to validate the performance of the PTC system as a whole and to test the system under normal, real-world operations. Interoperability testing: host and tenant railroads that operate on the same track must work together to test interoperability to ensure each railroad can operate seamlessly across property boundaries. Almost all of the 40 railroads currently required to implement PTC must demonstrate interoperability with at least one other railroad’s PTC system. Using results from field and RSD testing, combined with other information, host railroads must then submit a safety plan to FRA for approval. We have previously reported that these safety plans are about 5,000 pages in length. Once FRA approves a safety plan, the railroad receives PTC system certification, which is required for full implementation, and is then authorized to operate the PTC system in revenue service. According to FRA officials, the FRA may impose conditions to the PTC safety plan approval as necessary to ensure safety, resulting in a conditional certification. Railroads may receive a maximum 2-year extension from FRA past the December 31, 2018, deadline if they meet six criteria set forth in statute. Specifically, railroads must demonstrate, to the satisfaction of FRA, that they have: (1) installed all PTC system hardware consistent with the total amounts identified in the railroad’s implementation plan; (2) acquired all necessary spectrum consistent with the implementation plan; (3) completed required employee training; (4) included in a revised implementation plan an alternative schedule and sequence for implementing the PTC system as soon as practicable but no later than December 31, 2020; (5) certified to FRA that they will be in full compliance with PTC statutory requirements by the date provided in the alternative schedule and sequence; and (6) for Class I railroads and Amtrak, initiated RSD or implemented a PTC system on more than 50 percent of the track they own or control that is required to have PTC. For commuter and Class II and III railroads, the sixth statutory criterion is to have either initiated RSD on at least one territory required to have operations governed by a PTC system or “met any other criteria established by the Secretary,” which FRA refers to as “substitute” criteria. FRA is responsible for overseeing railroads’ implementation of PTC, and the agency monitors progress and provides direct assistance to railroads implementing PTC. For example, FRA officials provide technical assistance to railroads, address questions, and review railroad-submitted documentation. FRA has a national PTC director, designated PTC specialists in the eight FRA regions, and a few additional engineers and test monitors responsible for overseeing technical and engineering aspects of implementation and reviewing railroad submissions and requests. In anticipation of the upcoming implementation deadline, in May 2017, FRA began to send notification letters to railroads it determined were at risk of both not meeting the December 31, 2018, implementation deadline and not completing the requirements necessary to qualify for an extension. FRA identified “at-risk” railroads by comparing a railroad’s hardware installation status to the total hardware required for PTC implementation, according to the railroad’s implementation plan. FRA has increased the “at-risk” threshold percentage over time as the deadline approaches. See table 1. FRA has additional oversight tools, which include use of its general civil penalty enforcement authority for failure to meet certain statutory PTC requirements. FRA has used this authority in 2017 and 2018 to assess civil penalties against railroads that failed to comply with the equipment installation milestones, the spectrum acquisition milestones, or both, that the railroads had established in their implementation plans for the end of 2016 and 2017. As part of our body of work on PTC, we found that railroads face numerous PTC implementation challenges and made recommendations to FRA to improve its oversight of implementation. Specifically, in 2013 and 2015 we found that many railroads were struggling to make progress due to a number of complex and interrelated challenges, such as developing system components and identifying and correcting issues discovered during testing. Most recently, we found in March 2018 that FRA had not systematically communicated information or used a risk- based approach to help railroads prepare for the 2018 deadline or to qualify for an extension. We also found that many railroads were concerned about FRA’s ability to review submitted documentation in a timely manner, particularly given the length of some required documentation such as safety plans and FRA’s limited resources for document review. In March 2018, we recommended FRA identify and adopt a method for systematically communicating information to railroads and use a risk-based approach to prioritize its resources and workload. FRA agreed with our recommendations. As of June 30, 2018, many railroads reported that they remain in the equipment installation and field-testing stages, which are early stages of PTC implementation. However, since we last testified in March 2018, railroads have made progress on equipment installation. Based on our analysis of the 40 railroads’ reported status as of June 30, 2018, about half of the railroads have completed equipment installation, and many others are nearing completion of this stage. Specifically, three-quarters of the 40 railroads reported being more than 90 percent complete with locomotive equipment installation. Similarly, nearly three-quarters of railroads that must install wayside equipment reported being more than 90 percent complete. The remaining one-quarter of railroads are among those designated by FRA as at-risk of both not meeting the end of 2018 implementation deadline and not completing the requirements necessary to qualify for an extension. Specifically, in August 2018, FRA identified 9 railroads—all commuter railroads—as at-risk, fewer than the 12 railroads FRA had previously designated as at risk in its June 2018 letters to railroads. Since we last testified, most commuter railroads reported slow progress with testing, especially with RSD, while Class I railroads and Amtrak have reached later stages of testing. Notably, all 7 Class I freight railroads and Amtrak reported having initiated field testing and entering RSD as of June 30, 2018. We reported in 2013 and 2015 that Class I railroads and Amtrak have been conducting PTC implementation activities for longer than commuter railroads, which has likely factored into their advanced progress. However, commuter railroads and Class II/III railroads have progressed more slowly. For example: Laboratory and initial field testing: 19 of 28 commuter railroads reported having initiated this testing as of June 30, 2018, 6 more commuter railroads than the 13 we previously reported as having initiated field testing as of September 30, 2017. Additionally, 2 of 4 Class II/III railroads reported having initiated testing as of June 30, 2018. RSD testing: 8 of 28 commuter railroads reported initiating RSD testing as of June 30, 2018, 2 more commuter railroads than the 6 we previously reported as having entered RSD testing as of September 30, 2017. No Class II/III railroads reported having initiated RSD. As noted earlier, unless a commuter or Class II/III railroad receives approval for using substitute criteria, the railroad must initiate RSD, a final stage of PTC testing, on at least one territory by December 31, 2018, to qualify for an extension. Railroad representatives reported that they continue to face many of the same challenges we have previously identified. For example, in response to our questionnaire to all 40 railroads implementing PTC, 14 reported challenges with PTC vendors and contractors, which we originally reported on in 2015. One railroad noted that, because its contractor manages PTC projects across the country with the same deadline and requirements, it can be difficult for all railroads to get the resources they need from their contractor. We previously reported that there are a limited number of vendors available to design PTC systems, provide software and hardware, and conduct testing. For example, we reported in 2015 that, according to railroad industry representatives, there were two vendors for the onboard train management computer and three vendors for the wayside equipment. Likewise, we previously reported that railroads face software challenges, and noted that railroads had concerns with the number of defects identified during software testing, since these take time to address. In response to our questionnaire, 11 railroads reported encountering challenges related to maturity of the PTC software systems, such as working through software bugs or defects during testing. In June, July, and August 2018, FRA held three PTC symposiums that were attended by representatives from all 40 railroads and that focused on the extension process and substitute criteria, PTC testing, and safety plans, respectively. FRA’s June 2018 symposium covered information consistent with our March 2018 recommendation that the agency adopt a method for systematically communicating information related to the requirements and process for an extension to railroads. Specifically, FRA presented information on the procedures for requesting and obtaining FRA’s approval for an extension to implement PTC beyond the December 2018 deadline including FRA’s review process. FRA also clarified that for railroads eligible to use substitute criteria, initiating field testing was one approach that could potentially qualify as substitute criteria, rather than initiating RSD. Representatives we interviewed from the railroads that participated in the symposiums found them to be helpful and some railroads reported that the information presented led them to adjust their approach to meeting the December 2018 deadline. For example, one railroad representative we spoke to said that until the symposium, he was unaware that using field testing as substitute criteria was a potential option. Some railroads we met with also told us they are re-evaluating what activities and documentation need to be revised and submitted to FRA before the December 2018 deadline based on the information presented at the symposiums. For example, representatives from one railroad we met with said that FRA officials encouraged them to update their PTC implementation plan right away with current equipment installation totals, to ensure consistency across all required documentation by the end of 2018. A couple of railroads noted that the information presented at the symposiums clarified many questions and would have been beneficial to know a year or two earlier in the implementation process. In addition, in recent months FRA has continued to provide assistance to railroads and has taken a series of steps to better prepare railroads for the 2018 deadline. These steps include meeting regularly with individual railroads and developing approaches intended to help many railroads meet the requirements necessary for a deadline extension. For example, representatives from one commuter railroad said agency officials have been willing to share lessons learned, clarify requirements, and review draft documentation to provide informal feedback. More than three-quarters of railroads (32 of 40) reported to us that they plan to apply for an extension. However, FRA officials noted that with the exception of possibly one or two railroads, they anticipate that all railroads will likely need an extension. As of September 2018, most railroads have not submitted their request for an extension. A railroad must demonstrate that it has met all of the criteria to qualify before it may formally request an extension, and as previously discussed, many railroads remain in the early stages of PTC implementation. Of the eight railroads that anticipate reaching full implementation by December 31, 2018, five have conditionally certified safety plans; one has submitted its safety plan for review; one plans to submit its safety plan to FRA in fall 2018 for certification; and one did not specify when it would submit its safety plan for certification. Of the 32 railroads that intend to apply for an extension, half reported that they plan to use substitute criteria to qualify, including 12 commuter and 4 Class II and III railroads. Moreover, three-quarters of the commuter and Class II and III railroads that plan to use substitute criteria (12 of 16) intend to apply to use their initiation of field testing or lab testing as substitute criteria. Figure 1 depicts the stage of PTC implementation railroads at least expect to reach by December 31, 2018, to be in compliance, based on railroads’ responses to our July-August 2018 questionnaire. Although FRA has recently made clear that it is authorized to grant extensions based on initiating field testing or other FRA-approved substitute criteria, this approach defers time-intensive RSD testing into 2019 and beyond. In March 2018, we testified FRA officials told us that moving from the start of field testing to the start of RSD can take between 1 and 3 years, and has averaged about 2 years for those railroads that have completed that stage. We also testified that FRA officials believe that most railroads underestimate the amount of time needed for testing. FRA officials told us that they do not consider railroads that are approved for an extension under substitute criteria to be necessarily at a higher-risk of not completing PTC implementation by 2020. However, in light of these time estimates and the unknown challenges that railroads may face during testing, railroads that are in the early field-testing stage moving into 2019 could face challenges completing PTC implementation by the extended December 2020 deadline. Railroads further behind in PTC implementation may need to apply for an extension due to factors such as compressed implementation schedules, as well as the time needed for FRA approvals. For example, representatives from one commuter railroad said they hope to reach RSD before the December 31, 2018, deadline, but that it would be difficult to meet the extension requirements, apply for, and receive an extension given the volume of paperwork FRA will be receiving at the end of the year. Instead, the railroad plans to submit an extension request using substitute criteria consisting of field testing in order to be in compliance at the end of the year. Such an approach involves first applying for and receiving approval for substitute criteria and then formally requesting an extension and submitting supporting documentation to FRA before the end of the year. Entering RSD prior to the deadline could be difficult given that FRA officials told us they have advised railroads to allow at least a month for FRA’s review of test requests, which must be approved prior to initiating field testing and RSD. Additionally, for some railroads further along in PTC implementation, particularly Class I freight railroads, interoperability is a key remaining hurdle for full implementation by the end of 2018, and railroads expect this challenge to persist in the future. The two Class I railroads we interviewed noted that ensuring all tenant railroads are PTC-equipped, tested, and interoperable is a primary reason the railroads plan to request an extension. One of these host railroads also reported that it has little ability to influence its tenants’ progress with PTC implementation. Across all 40 railroads, 8 reported current or anticipated challenges working with tenant or host railroads, or both, to plan and conduct testing to ensure interoperability. Moreover, given that few railroads have reached the interoperability testing stage, the challenges railroads may face in this stage remain unclear. For example, some railroads we interviewed noted it is unknown how much time and effort will be required to work through interoperability issues during testing to ensure the system’s reliability. One railroad association stated that interoperability is, and will continue to be, a substantial challenge for metropolitan areas with dense and complex rail networks with several host-tenant relationships. For example, according to one commuter railroad, 14 different freight and commuter railroads will need to interoperate in the Chicago area. FRA’s already substantial workload is expected to increase as railroads continue to submit documentation necessary for extensions and continue PTC implementation activities. FRA is focused on ensuring railroads are in compliance through the December 2018 deadline—whether via an extension or by completing implementation. While FRA officials report that they anticipate almost all railroads will likely request an extension, only one—a Class I railroad—had submitted an application for an extension as of early September 2018. FRA will need to review and approve all related documentation associated with each extension request and make a determination within 90 days, meaning if a railroad were to submit its extension request on December 31, 2018, FRA would have until the end of March 2019 to approve or deny the railroad’s extension request. In addition to extension requests and supporting documentation, many railroads will also be submitting to FRA: requests for substitute criteria, test requests to initiate field testing or RSD, revisions to PTC implementation plans, and PTC safety plans. To help manage the forthcoming influx of documentation, FRA officials have offered to review draft documentation, such as substitute criteria requests and test requests, and have advised railroads to take FRA’s review times into account prior to submitting required documentation. FRA officials told us that in trying to manage their workload, they initially told railroads they did not have time to review draft submittals. However, they found that taking the time to conduct draft reviews ultimately led to higher quality formal submittals and accelerated the overall review process. In addition, FRA officials said that their goal is to not delay any railroad that is ready to move into testing, and that they advised railroads to build 30–45 days for test request reviews into their project schedules. Despite these efforts, railroads remain concerned about the agency’s ability to manage the PTC workload in the coming months and beyond 2018. For example, 9 of the 40 railroads identified FRA’s resources and review times as a challenge leading up to the December 2018 deadline. Based on similar concerns, in March 2018, we recommended FRA develop an approach to prioritize the allocation of resources to address areas of greatest risk as railroads work to complete PTC implementation. FRA has acknowledged the railroads’ concern given the surge of submissions requiring FRA approval in 2018 and has reported the agency is reallocating existing expertise and expanding the PTC workforce through training, expanding contracts with existing support contractors, and initiating one additional contract to provide technical support. For example, FRA officials told us that they reallocated resources to shift PTC Specialists’ responsibilities to focus exclusively on testing-related activities because their involvement is critical for the testing stage. Although FRA has taken steps to provide key extension information to railroads and help ensure railroads’ compliance with PTC deadlines, uncertainty remains, particularly in regard to FRA’s enforcement strategy if railroads are noncompliant with the statute, such as if railroads were to fail to apply for an extension by the deadline. Representatives from all railroads implementing PTC we met with told us that FRA’s planned enforcement approach for any railroad that fails to meet the requirements for an extension beyond 2018 is unclear. FRA officials told us they have shared the range of applicable civil penalties with railroads for years, but that any policy decisions about how potential fines will be levied for non- compliant railroads is a policy decision that has not yet been made. In addition, it is also unclear how the agency would approach enforcement for railroads that have a host or tenant operating on their tracks that has not completed implementation or met the requirements necessary for an extension. FRA officials said that the goal of enforcement is to help bring all railroads into compliance and that they would have to look at the specific circumstances for any host-tenant issues before assessing a fine. In conclusion, almost all railroads will likely request an extension beyond 2018, which will require FRA approval and, for many railroads, substitute criteria requests that may result in approximately a third of railroads remaining in the early stages of PTC implementation at the start of 2019. However, given that almost no railroads have submitted extension requests, it is unlikely we will know how many railroads will be granted an extension by the December 31, 2018 deadline. Although FRA has reported taking some actions in response to our March 2018 recommendation that they better prioritize resources, FRA resources and review times remain a significant concern. These issues, combined with the ongoing implementation, testing, and interoperability challenges that a number of railroads reported to us, raise questions as to the extent FRA and the railroad industry are poised for full PTC implementation by December 31, 2020. Chairman Denham, Ranking Member Capuano, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Susan Fleming, Director, Physical Infrastructure at (202) 512- 2834 or FlemingS@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Susan Zimmerman (Assistant Director); Katherine Blair; Greg Hanna; Delwen Jones; Emily Larson; Joanie Lofgren; SaraAnn Moessbauer; Maria Wallace; and Crystal Wesco. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Forty railroads including Amtrak, commuter, and freight railroads are currently required by statute to implement PTC, a communications-based system designed to slow or stop a train that is not being operated safely. PTC must be interoperable, meaning trains can operate seamlessly on the same PTC-equipped track, including “tenants” that operate on track owned by another “host” railroad. Although the deadline for PTC implementation is December 31, 2018, railroads may receive a maximum 2-year extension to December 31, 2020, if they meet certain statutory criteria. GAO was asked to review railroads' PTC implementation progress. This statement discusses (1) railroads' implementation progress and FRA's steps to assist them and (2) how railroads and FRA plan to approach the 2018 and 2020 deadlines. GAO analyzed railroads' most recent quarterly reports covering activities through June 30, 2018; sent a brief questionnaire to all 40 railroads; and interviewed officials from FRA and 16 railroads, selected in part based on those identified as at-risk by FRA. As of June 30, 2018, many railroads remained in the early stages of positive train control (PTC) implementation—including equipment installation and early field testing. About half of the 40 railroads implementing PTC reported that they are still installing equipment, though many are nearing completion. However, with the exception of the largest freight railroads—known as Class I—and Amtrak, most railroads reported less progress in later implementation stages, especially revenue service demonstration (RSD), an advanced form of field testing that is required to fully implement PTC. Of the 28 commuter railroads required to implement PTC, 19 reported initiating field testing, but only 8 reported initiating RSD. The Federal Railroad Administration (FRA) recently clarified the criteria railroads must meet to qualify for a 2-year extension past the December 31, 2018, PTC implementation deadline. To receive an extension, railroads must meet 6 statutory criteria. For the sixth criterion, commuter and smaller freight railroads are authorized to either initiate RSD on at least one track segment or use FRA-approved substitute criteria. FRA clarified these and other requirements at three PTC symposiums hosted for railroads in summer 2018. For example, FRA officials said that for railroads eligible to use substitute criteria, initiating field testing instead of RSD was one approach that could potentially receive FRA's approval. FRA's actions are consistent with GAO's March 2018 recommendation that the agency communicate to the railroads the requirements and process for an extension. Most railroads anticipate needing an extension, leaving substantial work for both railroads and FRA to complete before the end of 2020. Thirty-two of 40 railroads reported to GAO that they, or the railroad which owns the track on which they operate, will apply for an extension. Sixteen commuter and smaller freight railroads reported planning to apply for an extension using substitute criteria, and of these, 12 intend to apply for substitute criteria based on early testing such as field testing. Though substitute criteria are authorized in law, this approach defers time-intensive RSD testing into 2019 and beyond. In addition, railroads expressed concerns with the time and effort involved with interoperability testing—a key remaining hurdle for railroads such as Class I railroads that are further along with implementation. Further, railroads expressed concern that FRA's workload will markedly increase as railroads submit requests for extension approvals. FRA has acknowledged concerns about the pending surge of submissions and has taken recent steps to help manage the forthcoming influx of documentation, such as reallocating resources. Nonetheless, given that as of early September 2018, only 1 railroad—a Class I railroad—had applied for an extension, it remains unclear how many extension requests FRA will receive or what FRA's enforcement strategy will be for noncompliance with the statute, such as for railroads that fail to apply for an extension by the deadline. In addition, challenges related to PTC implementation and FRA's resources raise questions as to the extent FRA and the railroad industry are poised for full PTC implementation by December 31, 2020. In March 2018, GAO recommended FRA take steps to systematically communicate extension information to railroads and to use a risk-based approach to prioritize agency resources and workload. FRA has taken some steps to address these recommendations, such as recently communicating and clarifying extension requirements to all railroads during three symposiums, and GAO will continue to monitor FRA's progress.", "document_type": "gao"}
{"report": "DHS’s National Protection and Programs Directorate leads the country’s effort to protect and enhance the resilience of the nation’s physical and cyber infrastructure. The directorate includes the Office of Infrastructure Protection, which leads the coordinated national effort to reduce risk to U.S. critical infrastructure posed by acts of terrorism. Within the Office of Infrastructure Protection, ISCD leads the nation’s effort to secure high-risk chemical facilities and prevent the use of certain chemicals in a terrorist act on the homeland; ISCD also is responsible for implementing and managing the CFATS program. The CFATS program is intended to ensure the security of the nation’s chemical infrastructure by identifying high-risk chemical facilities, assessing the risk posed by them, and requiring the implementation of measures to protect them. Section 550 of the DHS Appropriations Act, 2007, required DHS to issue regulations establishing risk-based performance standards for chemical facilities that, as determined by DHS, present high levels of risk, to include vulnerability assessments and the development and implementation of site security plans for such facilities. DHS published the CFATS interim final rule in April 2007 and Appendix A to the rule, published in November 2007, lists 322 chemicals of interest and the screening threshold quantities for each. According to DHS, subject to certain statutory exclusions, all facilities that manufacture, store, ship, or otherwise use chemicals of interest above certain threshold quantities and concentrations are subject to CFATS reporting requirements. However, only those facilities subsequently determined to present a high level of security risk are subject to the more substantive requirements of the CFATS regulation as described below. The CFATS regulation outlines a specific process for how ISCD is to administer the CFATS program. A chemical facility that possesses any of 322 chemicals of interest in quantities that meet or exceed a threshold quantity and concentration is required to complete what is called a Top- Screen survey using ISCD’s Chemical Security Assessment Tool (CSAT) system. CSAT is a web-based application through which owners and operators of chemical facilities provide self-reported information about the facility. The Top-Screen is an on-line survey whereby the facility is to provide DHS various data, including the name and location of the facility and the chemicals, quantities, and storage conditions at the site. ISCD uses a risk-based approach to evaluate chemical facilities of interest that are required to report under CFATS and determine whether these facilities are high-risk and therefore subject to further requirements under the regulation. More specifically, ISCD’s risk assessment methodology calculates risk scores—based on facility-supplied information in the Top-Screen survey, among other sources, and taking into account vulnerability, potential consequences, and threat of a terrorist attack—and uses these scores to determine which facilities are high-risk. Those facilities deemed high-risk are then placed into one of four risk- based tiers (Tier 1 through Tier 4). Tier 1 represents the highest risk. A facility not designated as high-risk is not subject to additional requirements under the CFATS regulation. If ISCD determines that a facility is high-risk (Tier 1–4), the facility must then complete and submit to ISCD a Security Vulnerability Assessment and one of two types of security plans—a Site Security Plan or an Alternative Security Program—which describes the existing and planned security measures to be implemented in order to be in compliance with the applicable risk-based performance standards. Facilities determined to be Tier 3 or 4 also have an option to submit an expedited security plan under the CFATS Expedited Approval Program. To meet risk-based performance standards, covered facilities may choose the security programs or processes they deem appropriate so long as ISCD determines that the facilities achieve the requisite level of performance on each of the applicable areas in their existing and agreed-upon planned measures. Prior to approving a facility’s security plan, ISCD inspectors conduct an authorization inspection at the facility to verify and validate that the content listed in their plan is accurate and complete; that existing and planned equipment, processes, and procedures are appropriate and sufficient to meet the established requirements of the risk-based performance standards; and to assist the facility in resolving any potential gaps identified. After the facility’s security plan is approved, the facility enters into the CFATS compliance cycle, which includes regular and recurring compliance inspections. ISCD inspectors conduct compliance inspections to ensure the existing and planned security measures identified in a facility’s approved security plan continue to be implemented fully; the equipment, processes, and procedures described in the security plan are appropriate and sufficient to meet the established performance standards; and the required corrective actions have been implemented and are sustainable. This compliance inspection includes a verification of other data provided to ISCD, including the Top-Screen. If, through a compliance inspection, ISCD determines a facility has not fully implemented security measures as outlined in its approved security plan, ISCD is to provide the facility with written notification that clearly identifies the deficiencies in the plan and will work with the facility toward achieving full compliance or, if warranted, take enforcement action. Figure 1 illustrates the CFATS regulatory process. In response to our prior recommendations, ISCD has taken action to strengthen its processes for verifying the accuracy of data it uses to identify high-risk chemical facilities. In July 2015, we found that ISCD used self-reported and unverified data to determine the risk categorization for facilities that held toxic chemicals that could threaten surrounding communities if released. At the time, ISCD required that facilities self- report the Distance of Concern—an area in which exposure to a toxic chemical cloud could cause serious injury or fatalities from short-term exposure—as part of its Top-Screen methodology. In our report, we estimated that more than 2,700 facilities with a toxic release threat misreported the Distance of Concern and recommended that ISCD (1) develop a plan to implement a new Top-Screen to address errors in the Distance of Concern submitted by facilities, and (2) identify potentially miscategorized facilities that could cause the greatest harm and verify that the Distance of Concern these facilities reported is accurate. ISCD has addressed both of these recommendations. In response to the first recommendation, ISCD implemented an updated Top-Screen survey in October 2016 and now collects data from facilities and conducts more accurate modeling to determine the actual area of impact (formerly called the Distance of Concern), rather than relying on the facilities’ calculation. In response to the second recommendation, ISCD officials reported in November 2016 that they reassessed all facility Top-Screens that reported threshold quantities of chemicals posing a toxic release threat, and identified 158 facilities with the potential to cause the greatest harm. In April 2018, ISCD officials reported that all of these facilities have since been reassessed using updated Top-Screen information and, where appropriate, assigned a risk tier. In addition, in October 2016, ISCD implemented a quality assurance review process whereby ISCD officials manually check and verify the accuracy of facility self-reported Top-Screen information used in identifying potential high-risk facilities. The objective of ISCD’s review process is to evaluate the information provided by a chemical facility in order to recommend approval or rejection of a submitted Top-Screen for accuracy prior to issuing a letter notifying the facility of its risk tier designation. According to ISCD, all Top-Screens undergo a quality assurance review with two exceptions: (1) a facility that registers through CSAT for the first time and submits a Top-Screen identifying zero chemicals of interest on site and which does not identify an exclusion; or (2) a facility that possessed a chemical of interest in the past but subsequently submits a follow-up Top-Screen for redetermination identifying they no longer possess the chemical of interest and after ISCD validates the removal of the chemical of interest. When a Top-Screen submission is rejected, ISCD sends a letter notifying the facility of the rejection and requesting that a revised Top-Screen be submitted. In addition, according to ISCD, they contact facilities prior to a Top-Screen rejection to ensure the facility understands the required updates and to discuss the potential reporting error. As of February 2018, a total of 1,956 Top-Screen submissions (across 1,799 unique facilities) were rejected as part of this quality assurance review process since implementing the updated Top-Screen survey in October 2016, according to ISCD data. According to ISCD, the majority of these Top-Screens were rejected due to common reporting errors, such as misreporting the flammability hazard rating for a chemical of interest subject to a release security issue or not reporting transportation packaging when a chemical of interest is identified as being subject to a theft or diversion security issue. ISCD Revised Its Risk Assessment Methodology to More Accurately Identify and Assign Tiers to High-Risk Chemical Facilities Since we last evaluated it in 2013, ISCD took action to enhance the CFATS program’s risk assessment methodology—used to determine whether covered chemical facilities are high-risk and, if so, assign them a risk-based tier—by incorporating changes to address prior GAO recommendations, as well as the findings of an ISCD-commissioned peer review conducted in 2013, among other efforts. In April 2013, we found that DHS’s risk assessment approach did not consider all of the elements of threat, vulnerability, and consequence associated with a terrorist attack involving certain chemicals. Our work showed that DHS’s CFATS risk assessment methodology was based primarily on consequences from human casualties, but did not consider economic consequences, as called for by the NIPP and the CFATS regulation. We also found that DHS’s approach was not consistent with the NIPP because it treated every facility as equally vulnerable to a terrorist attack regardless of location or on-site security. In addition, DHS was not using threat data for 90 percent of the tiered facilities—those tiered for the risk of theft or diversion—and using 5-year-old threat data for the remaining 10 percent of those facilities that were tiered for the risks of release or sabotage. We recommended that ISCD (1) review and improve its risk assessment approach to fully address each of the elements of threat, vulnerability, and consequence, and (2) conduct an independent peer review after enhancements to the risk assessment approach were complete. Partly in response to our findings and recommendations, from 2013 through 2016, ISCD conducted a multiyear effort to review and improve the CFATS program’s risk assessment approach and tiering methodology with the primary goal of improving the identification and appropriate tiering of high-risk chemical facilities. Among these efforts was an ISCD- commissioned peer review of the CFATS tiering methodology conducted in 2013 by the Homeland Security Studies and Analysis Institute (HSSAI). HSSAI’s final report summarized the findings of the peer review and included a list of 44 recommendations for ISCD to implement in its efforts to improve and revise the CFATS risk assessment and tiering methodology. ISCD undertook a risk assessment improvement project to implement most of the recommendations described in the 2013 HSSAI final report; these efforts included, for example, convening advisory board meetings with experts drawn from across industry, academia, and government to review and make additional recommendations on the proposed improvements to the CFATS risk assessment methodology and associated tools and processes. The result of these efforts is an updated, “second generation” risk assessment approach and tiering methodology that addresses both of our prior recommendations and almost all of the recommendations described in the 2013 HSSAI final report. Specifically, with regard to our recommendation that DHS enhance its risk assessment approach to incorporate all elements of risk, ISCD worked with Sandia National Laboratories to develop and evaluate a model to estimate the economic consequences of a chemical attack. In addition, among other enhancements, the updated risk assessment methodology incorporates revisions to the threat, vulnerability, and consequence scoring methods to better cover the full range of chemical security issues regulated by the CFATS program. Additionally, with regard to our recommendation that DHS conduct a peer review after enhancing its risk assessment approach, DHS conducted peer reviews and technical reviews with government organizations and facility owners and operators, and worked with Sandia National Laboratories to verify and validate the CFATS program’s revised risk assessment methodology which was completed in January 2017. In addition, as of May 2018, ISCD has considered, implemented, or is in the process of implementing updates that address 39 of the 44 recommendations in the HSSAI peer review of the original CFATS risk assessment methodology. According to ISCD, DHS must undertake a rulemaking to update the CFATS regulation and to obtain public comment on any proposed changes to implement the remaining recommendations. These relate to possible changes in how or to what extent the CFATS program regulates the treatment of certain chemicals of interest, chemical weapons and their precursors, and other fuels or fuel mixtures. Implementation of the Revised Risk Assessment Methodology Is Nearly Complete Beginning in October 2016, ISCD notified chemical facilities that were not new to the CFATS program—that is, all facilities that had previously submitted a Top-Screen and had reported chemicals of interest above the threshold quantity and concentration on their most recent Top-Screen—to submit a revised Top-Screen in CSAT 2.0 so that they may be re- assessed using ISCD’s revised risk assessment methodology. As of February 2018, a total of 29,195 chemical facilities were assessed using ISCD’s revised risk assessment methodology, with 3,500 (or 12 percent) of these facilities designated as high-risk (i.e., assigned to tiers 1 through 4). The total of 29,195 chemical facilities includes 26,828 facilities that were previously assessed using the original risk assessment methodology and an additional 2,367 facilities new to the CFATS program, as shown in figure 2. Of the 3,500 tiered facilities, 265 were new to the CFATS program; 889 were not new to the program, but were previously not tiered and were reassessed as high-risk and assigned a tier; and 1,345 were previously tiered but were reassigned to a different tier. Also, 430 facilities that were previously tiered were no longer tiered. As of May 2018, ISCD had pending risk assessments for an additional 241 chemical facilities that were not new to the CFATS program but were not previously tiered. ISCD officials did not provide an estimated target completion date for these pending risk assessments, noting that completing the assessments is highly dependent on the facilities providing the necessary Top-Screen information. According to ISCD, there are four main drivers of the changes in facility tiering that resulted from implementing the second-generation risk assessment methodology: facilities placed in a lower tier due to implementation of revised consequence scoring methods that more accurately account for the impact of quantities of the chemicals subject to theft/diversion security issues; facilities placed in a higher or lower tier for chemicals of interest due to improvements to the distribution of population in consequence modeling for chemicals subject to release-toxic and release- flammable security issues; increases in the number of facilities tiered for select chemical weapon precursors due to the implementation of revised consequence scoring methods that more accurately account for the impact of certain chemicals of interest; and changes in tiering due to newly reported increases, decreases, and modifications of chemical holdings. Since 2013, ISCD has reduced its backlog of unapproved site security plans and increased the number of conducted compliance inspections. As discussed earlier, in order to approve a facility’s site security plan, ISCD inspectors conduct an authorization inspection at the facility to verify and validate that the content listed in their plan is accurate and complete; that existing and planned equipment, processes, and procedures are appropriate and sufficient to meet the established requirements of the risk-based performance standards; and to assist the facility in resolving any potential gaps identified. After the facility’s security plan is approved, the facility enters into the CFATS compliance cycle and is subject to a compliance inspection. In 2013, we calculated that it could take from 7 to 9 years to review and approve the approximately 3,120 site security plans submitted by facilities that had been designated as high-risk but that ISCD had not yet begun to review. In 2015, we found that ISCD had made improvements to its processes for reviewing and approving site security plans and substantially reduced the time needed to approve remaining site plans to between 9 and 12 months. Our analysis of ISCD data since our 2015 report showed that ISCD has made substantial progress conducting and completing compliance inspections. Specifically, our analysis showed that ISCD has increased the number of compliance inspections completed per year since ISCD began conducting compliance inspections in 2013. For the 2,466 high-risk facilities with an approved site security plan as of May 2018, ISCD had conducted 3,553 compliance inspections. Table 1 shows the number of conducted compliance inspections from fiscal year 2014 to May 2018. ISCD officials project they will conduct fewer compliance inspections in fiscal year 2018 than in fiscal year 2017 due to two reasons. First, ISCD officials stated the program made progress resolving the backlog of facilities that required compliance inspections in fiscal years 2016 and 2017 when it conducted over 2,600 compliance inspections. Second, ISCD officials stated that the program’s revised risk assessment approach and continued outreach efforts have resulted in an increase in the number of identified facilities with chemicals of interest. As a result, ISCD officials stated they project an increased number of authorization inspections and fewer compliance inspections in fiscal year 2018 and 2019 as new facilities enter the program. ISCD increased the number of compliance inspections conducted from fiscal years 2014 to 2017 and less than 1 percent of compliance inspections during this period resulted in a determination that a facility was not in compliance. During a compliance inspection, if an inspector finds that a facility is noncompliant with its security plan, the CFATS regulation authorizes ISCD to take enforcement action, such as issuing an order for corrective action to the facility. Of the 3,553 compliance inspections ISCD conducted between fiscal year 2014 and May 2018, ISCD issued two corrective actions—both to Tier 4 facilities—because these facilities were not in compliance with their approved site security plan. Specifically, during the compliance inspection of one facility, which was determined to be high-risk based on both the release and theft/diversion security issues, ISCD found that the facility’s site security plan did not identify several existing or planned measures to secure the facility’s chemicals of interest. For example, the facility’s site security plan did not identify measures to monitor restricted areas or potentially critical targets within the facility against a theft or release attack. In addition, while the facility’s site security plan identified a chain link fence and an alarm on a gate to a secure cage that houses the chemicals of interest, ISCD inspectors found no evidence of either. During the compliance inspection of the second facility, which was determined to be high-risk based on the theft and diversion security issue, ISCD inspectors were unable to verify if the facility’s intrusion detection system was properly functioning and that an individual not employed by the facility may have had access to the facility’s chemicals of interest without a proper background check. Both of these facilities took actions to implement the measures identified in their site security plan and were later found to be in compliance with their site security plans. ISCD officials attribute the low number of corrective actions the program has issued to the program’s collaborative approach of working with facilities to ensure compliance. For example, of the two facilities ISCD found to be in noncompliance, ISCD conducted a compliance assistance visit with both facilities to provide assistance. In addition to compliance assistance visits, ISCD officials stated that the program has other collaborative tools, such as the CFATS Help Desk, to help ensure facility compliance. ISCD continues to implement changes that are intended to enhance compliance inspections. For example, ISCD officials stated the program continues to conduct preinspection phone calls with facilities to help them prepare for compliance inspections. In addition, ISCD officials stated they developed and provided supplemental guidance in fiscal year 2017 on steps ISCD inspectors need to take during a compliance inspection. ISCD’s supplemental guidance includes, among other things, best practices and lessons learned for conducting inspections and reporting items identified by the inspections. ISCD officials stated they plan to incorporate this supplemental guidance into their compliance inspection standard operating procedures in the third quarter of fiscal year 2018 and to update their compliance inspection handbook in the fourth quarter of 2018. In addition to updating its guidance for inspectors, ISCD has taken steps to improve the efficiency of compliance inspections. For example, ISCD continues its outreach efforts to chemical facilities on the inspection process. As part of these efforts, ISCD published guidance for facilities on steps to take to prepare for the compliance inspection, including information on the appropriate personnel and documentation that should be made available during the inspection. Finally, ISCD increased the number of compliance assistance visits with facilities to better prepare them for inspections. Representatives from 9 of the 11 industry associations we spoke with told us that ISCD’s communication with facilities had improved the efficiency of compliance inspections and increased the ability of facilities to comply with the risk-based performance standards. We accompanied inspectors on two separate compliance inspections to observe how the inspections were carried out and how inspectors used the risk-based performance standards to determine compliance. For example, during the compliance inspection of a facility identified as high- risk based on the theft and diversion security issue, we observed facility personnel and ISCD inspectors discussing the preinspection phone call ISCD had conducted to assist the facility in preparation for their compliance inspection. This discussion included confirmation that the facility communicated with the local fire and police departments and had requested their presence at the inspection. In addition, we observed the inspectors analyzing the facility’s emergency response plan to determine whether the facility’s plans were consistent with the applicable risk-based performance standards. We also observed the inspectors subsequently interviewing local fire and police department officials that were present during the inspection to validate statements made by the facility and to confirm that both entities received the facility’s emergency plan. We accompanied the inspectors and facility personnel on a tour of the facility where inspectors observed existing measures the facility used to protect the chemicals of interest, including the facility’s fencing barrier. We also observed inspectors testing security measures, including the facility’s access controls put in place to prevent unauthorized personnel gaining access to the chemicals of interest. At the other compliance inspection we observed, the facility personnel and ISCD inspectors confirmed a preinspection phone call to prepare the facility for the inspection. This phone call included a discussion of the appropriate training records and contract documentation that inspectors needed to confirm compliance with the applicable risk-based performance standard. During the inspection, we observed that the facility made this documentation and the appropriate personnel available to answer ISCD inspector questions on the security training the facility held during the prior year. We also observed inspectors verifying that existing measures, such as the facility’s fence barrier, were still present and not compromised with breaches. In addition, we observed the inspectors testing key cards to the building that housed the chemicals of interest to ensure the cards prevented unauthorized access. Finally, we observed inspectors requesting a demonstration of how the facility’s chemicals of interest are delivered to the facility and what controls were in place to monitor third-party contractors during delivery of chemicals of interest. We also discussed the compliance inspection process with representatives from trade associations that represent facilities covered by CFATS and considered high-risk. Representatives from 7 of the 11 trade associations that we spoke with stated that ISCD’s implemented changes have improved the compliance inspection process since the program’s inception. Specifically, representatives from three trade associations stated that ISCD inspectors’ efforts to increase communication with facilities, including preinspection phone calls and compliance assistance visits, have increased the ability of facilities to ensure they are compliant with their approved site security plan. However, representatives from 3 of the 11 trade associations we spoke with also noted some issues with the compliance inspection process. Specifically, officials from these 3 associations stated that ISCD inspectors inconsistently apply the risk-based performance standards relative to the measures the facilities implemented. Some of this inconsistency may be due, in part, to the flexibility inherent in the risk- based performance standards which give facilities the discretion or latitude to tailor security based on conditions and circumstances. For example, the amount and type of chemicals of interest may vary by facility, so some facilities may require additional security measures be put in place to ensure protection of these chemicals. In addition, facilities vary by geographic location, which may affect the measures the facility needs to implement to protect the chemicals of interest from potential theft or diversion. DHS officials stated that they believe any perceived inconsistency is due to the flexibility in application of the risk-based performance standards and the variety of facility conditions that contribute to the appropriateness of different security measures. Officials explained that, for example, inspectors would likely recommend that a large campus-type facility not invest in a perimeter fence line but instead utilize asset-based barriers to satisfy the performance standards. Officials noted that facilities can choose to employ security measures which best fit their specific situation and can request that inspectors provide multiple options for their consideration. ISCD developed its performance measure methodology for the CFATS program in order to evaluate security changes made by high-risk chemical facilities, but the methodology does not measure the program’s impact on reducing a facility’s vulnerability to an attack. In 2015 we found that while ISCD’s performance measure for the CFATS program was intended to reflect security measures implemented by facilities and the overall impact of the CFATS regulation on facility security, the metric did not solely capture security measures that are implemented by facilities and verified by ISCD. We recommended that DHS develop a performance measure that includes only planned security measures that have been implemented and verified. In response to our finding and recommendation, ISCD’s performance measure requires that ISCD officials verify that planned measures have been implemented in accordance with the approved site security plan (or alternative security program) by compliance inspection or other means before inclusion in the performance measure calculation. ISCD has since decided to develop a new methodology and performance measure for the CFATS program. In 2016, ISCD began development of an approach called the guidepost-based site security plan scoring methodology. ISCD officials stated they plan to use the methodology to evaluate the security measures a facility implemented from initial state— when a facility submits its initial site security plan—to the facility’s approved security plan, according to ISCD officials. Officials stated that once implemented, the methodology’s resulting performance measure will be maintained internally and, if approved, may be used to satisfy the program’s reporting requirements consistent with the Government Performance and Results Act (GPRA) and included in DHS’s Annual Performance Report. The methodology organizes a facility’s security measures based on five guideposts. Using the five guideposts as a framework, the security measures a facility reports in its site security plan are evaluated by ISCD under the applicable guidepost to determine the level of security performance. For example, the plan contains a question on whether a facility has a perimeter fence barrier and if so, what type, such as a chain link fence, metal fence, or vinyl fence. ISCD uses the facility’s responses to assign a numerical value that indicates the level of security performance for the type of fence a facility uses as a perimeter barrier. The scores of the five guideposts are then aggregated and the resulting score represents the site security plan score for a facility. Officials stated that a facility’s site security plan score is developed when the facility submits its initial site security plan and again when ISCD approves its site security plan and the facility has completed the CFATS inspection process. ISCD officials stated the purpose of the methodology is to measure the increase in security attributed to the CFATS program and stated that the methodology is not intended to measure risk reduction. As a result, the methodology and resulting performance metric do not reflect the program’s impact on reducing a facility’s vulnerability to an attack. While ISCD officials stated the program is exploring how to use the site security plan scores of a facility, this methodological approach may provide ISCD an opportunity to begin assessing how vulnerability is reduced and, by extension, risk is lowered, not only for individual facilities but for the program as a whole. The NIPP calls for evaluating the effectiveness of risk management efforts by collecting performance data to assess progress in achieving identified outputs and outcomes. The purpose of the CFATS program is to ensure facilities have security measures in place to reduce the risks associated with certain hazardous chemicals and to prevent these chemicals from being exploited in a terrorist attack. A measure that reflects risk reduction may include how the CFATS inspection process measures the reduction of one element of risk— vulnerability—of high-risk facilities to a terrorist attack. ISCD officials stated that challenges exist with incorporating vulnerability into the measure’s methodology, such as how to accurately measure a facility’s vulnerability to an attack before the facility started the CFATS inspection process. We recognize challenges ISCD might face in incorporating vulnerability into its scoring methodology. In our prior work, we acknowledged that assessing the benefits of a program—such as reducing a high-risk facility’s vulnerability to an attack—is inherently challenging because it is often difficult to isolate the impact of an individual program on behavior that may be affected by multiple other factors. However, ISCD could take steps to evaluate vulnerability reduction resulting from the CFATS compliance inspection process. For example, because facilities conduct their own vulnerability assessments when developing their site security plan for submission to ISCD, ISCD could establish a vulnerability baseline score when it evaluates a facility’s security measures during its initial review of the facility’s plan. ISCD could then use this baseline score as the starting point for assessing any reduction in vulnerability that ISCD can document that has occurred as a result of security measures implemented by the facility during the compliance inspection process. As the CFATS program continues to mature and ISCD begins its efforts to assign scores to facility site security plans, incorporating assessments of reductions in vulnerability at individual facilities and across the spectrum of CFATS facilities as a whole would enable ISCD to better measure the impact of the CFATS compliance inspection process on reducing risk and increasing security nationwide. We found over 200 chemicals covered by CFATS that may not be included in the chemical inventory information that officials told us they rely on to prepare for and respond to incidents at chemical facilities. ISCD shares some CFATS information with state and local officials, including access to CFATS facility-specific data via a secure portal; however, this portal is not widely used at the local level by first responders and emergency planners. First responders and emergency planners may not have the necessary information to prepare for and respond to incidents at high-risk chemical facilities regulated by the CFATS program. As mentioned earlier, on April 17, 2013, about 30 tons of ammonium nitrate fertilizer—containing a CFATS chemical of interest—detonated during a fire at a fertilizer storage and distribution facility in West, Texas killing 15 people, including 12 first responders, and injuring more than 260 others. This event, among others, prompted the President to issue Executive Order 13650 to improve chemical facility safety and security in coordination with owners and operators. The Executive Order established a Chemical Facility Safety and Security Working Group and included directives for the working group to, among other things, improve operational coordination with state, local, and tribal partners. The working group created a federal plan of action consisting of actions to improve the safety and security of chemical facilities. One key element of this plan focused on the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA), which was intended to encourage and support emergency planning efforts at the state and local levels. In accordance with EPCRA, state and local entities, such as Local Emergency Planning Committees (LEPCs)—consisting of representatives including local officials and planners, facility owners and operators, first responders, and health and hospital personnel, among others—were created. These LEPCs were designed to (1) prepare for and mitigate the effects of a chemical incident and (2) ensure that information on chemical risks in the community is provided to first responders and the public. The working group acknowledged there was a need to share data with representatives of these state and local entities to enable them to identify gaps and inconsistencies in their existing information that could reveal previously unknown risks in their communities. For facilities subject to EPCRA requirements, this data is to include, among other things, information about chemicals stored or used at the facility for which facilities are required to submit an emergency and hazardous chemical inventory form to these state and local entities. The working group’s federal plan also included a DHS commitment to share certain CFATS data elements with first responders, state agencies and LEPCs to help communities identify and prioritize risks and develop a contingency plan to address those risks while acknowledging that access to certain sensitive portions of CFATS data will remain restricted to officials with a “need-to-know” so as to appropriately balance security risks. In our interviews with 15 LEPCs—whose jurisdictions include 373 high- risk chemical facilities regulated by the CFATS program—we found that officials rely on information reported on EPCRA chemical inventory forms to prepare for and respond to incidents at CFATS facilities. These officials may not have sufficient information to respond to emergencies at CFATS facilities because EPCRA reporting requirements may not cover some of the chemicals covered under the CFATS program. Specifically, we analyzed the chemicals covered by both CFATS and EPCRA’s reporting requirements and found there are over 200 CFATS chemicals of interest that, depending upon state reporting guidelines, may not be covered by EPCRA reporting requirements. Several of these chemicals may require specific response techniques to minimize the risk of injury or death to first responders and the surrounding community. For example, in the event of fire, aluminum powder, a chemical not subject to EPCRA reporting requirements but regulated under CFATS, produces flammable gases when in contact with water and requires responders to instead use a dry chemical or sand to extinguish the fire. Based on our analysis of tiered CFATS facilities, we estimate that about 32 percent of these high- risk facilities possess at least one chemical that may not be covered by EPCRA reporting requirements. In addition, we found these LEPCs may lack information on the CFATS facilities in their jurisdictions. Specifically, officials representing 11 of the 15 LEPCS we interviewed said they were not aware of which facilities in their jurisdiction were regulated by the CFATS program. Of these 11 LEPCs, officials from 8 LEPCs stated it would be very helpful or critical to know this information and officials from 2 LEPCs stated it would be somewhat helpful. According to these officials, this information would assist LEPCs, some of which have hundreds of facilities in their jurisdiction, to prioritize the most significant facilities for additional planning or scheduling of drills and exercises. Additionally, officials representing 5 LEPCs stated they were not aware of the differences between CFATS chemicals of interest and those chemicals subject to EPCRA reporting requirements. These LEPC officials stated that, among other things, it is critical to have a comprehensive understanding of all chemicals at a facility and that this information is very important for emergency responders to be aware of when responding to an incident. Consistent with the CFATS Act of 2014, ISCD is to play a role in ensuring that first responders and emergency planners are properly prepared for and provided with the situational awareness needed to respond to security incidents at high-risk chemical facilities. While the CFATS Act of 2014 does not specifically require that information be shared directly with first responders, ISCD has taken steps to share CFATS information with state and local officials to help ensure that first responders are prepared to respond to such security incidents. These steps include, among other things, ensuring that facilities are developing and exercising an emergency plan to respond to security incidents internally and with assistance of local law enforcement and first responders. Planning and training are important to ensure that facility personnel, onsite security, law enforcement, and first responders are ready to respond to external and internal security incidents. Additionally, these planning activities and relationships with first responders can assist in reducing the impact of these incidents. According to ISCD officials, to verify compliance with this requirement, ISCD inspectors validate facility outreach to first responders, such as local law enforcement and fire departments, through review of facility documentation, including emails with first responders, records of drills, and logs of meetings and tours, or through direct contact with the local first responders by the inspection team. In addition, the Executive Order 13650 working group sought to, among other things, strengthen community planning and preparedness and ensure that first responders and emergency planners are aware of the risks associated with hazardous chemicals in their communities. Included was a goal to increase information-sharing with communities that are near chemical facilities. In a May 2014 report, this working group identified certain information, including the name and quantity of chemicals at a facility, as the most helpful to first responders and emergency planners. This information is intended to enable emergency planners to conduct an analysis to identify gaps and inconsistencies in their existing information that could reveal previously unknown risks in their communities. ISCD has taken action to ensure first responders and emergency planners have access to CFATS data. For example, in response to Executive Order 13650, ISCD shares CFATS data through the Infrastructure Protection (IP) Gateway. This online portal contains critical infrastructure data and analytic tools, including data on covered CFATS facilities, for use by federal officials, state, local, tribal, and territorial officials, and emergency response personnel. CFATS data available in the IP Gateway includes, among other things, facility name, location, risk tier, and chemicals on-site and is accessible to authorized federal and other state, local, tribal, and territorial officials and responders with an established need-to-know. The IP Gateway provides these officials and responders access to CFATS facility-specific information that may be unreported on EPCRA chemical inventory forms. This CFATS facility-specific information can help ensure these groups are properly prepared to respond to incidents at high-risk chemical facilities in their jurisdictions. While the IP Gateway is a mechanism for sharing names and quantities of chemicals at CFATS high-risk facilities with first responders and emergency planners, we found it is not widely used by officials at the local level. ISCD told us that in May 2018 they published three revised fact sheets and included information on the IP Gateway in presentation materials that officials told us was intended to increase promotion and use of the IP Gateway. However, according to DHS, there are 14 accounts categorized at the local level whose access to the IP Gateway layer includes the names and quantities of chemicals at CFATS facilities. A local account indicates the individual with access is a county- or city- level employee or contractor. Additionally, while not generalizable to all LEPCs, officials representing 7 of the 15 LEPCs we interviewed were not aware of the IP Gateway and officials representing 13 of the 15 LEPCs stated that they do not have access to CFATS information within the IP Gateway. Of the 13 officials that reported they did not have access, 11 said that it would be helpful or critical to have access for several reasons. Specifically, officials representing these LEPCs stated that this information would assist them to better prepare and respond to incidents and help emergency planners prioritize the most critical sites among the thousands of facilities that they oversee. According to DHS officials, their outreach plan, developed in March 2015, specifically addresses regular engagement with LEPCs, among other groups. However, these officials acknowledged that information may not be reaching some state and local officials due to a number of factors, including the large number of LEPCs and first responders across the country, and changes in the level of LEPC activity and personnel over time. While we recognize these challenges, providing first responders and emergency planners access to CFATS facility-specific information, including the name and quantity of chemicals at a facility, can help ensure these groups are properly prepared to respond to incidents at high-risk chemical facilities in their jurisdictions. The NIPP states that agencies should share actionable and relevant information across the critical infrastructure community—including first responders and emergency planners—to build awareness and enable risk-informed decision making as these stakeholders are crucial consumers of risk information. Additionally, the 2015 Emergency Services Sector-Specific Plan, an Annex to the 2013 NIPP, further calls for engaging with local emergency planning organizations, such as LEPCs, to enhance information-sharing and analytical capabilities for incident planning, management, and mitigation between stakeholders. The IP Gateway is one way through which ISCD can share CFATS facility-specific information, including the name and quantity of chemicals at high-risk facilities with first responders and emergency planners. As discussed earlier, although ISCD is not required to share CFATS facility-specific information directly with first responders, this information is critical to prepare for and respond to incidents at high-risk chemical facilities and to protect them and their communities from injury or death. By exploring ways to improve information-sharing of CFATS facility-specific data, such as promoting wider use of the IP Gateway among first responders and emergency planners, DHS will have greater assurances that the emergency response community has access to timely information about high-risk chemical facilities. DHS, through ISCD, has made improvements to the CFATS program. ISCD has taken action to strengthen its processes for verifying the accuracy of data it uses to identify high-risk chemical facilities, revised its risk assessment methodology to more accurately identify and assign high-risk chemical facilities to tiers, and has nearly completed its efforts to apply this new methodology to facilities covered by CFATS. Furthermore, ISCD has conducted an increased number of compliance inspections and continues to make changes to improve the efficiency of the inspection process. While ISCD has developed a new methodology and performance measure for the CFATS program in order to evaluate security changes made by high-risk chemical facilities, we found that the methodology and metric do not reflect the program’s impact on reducing a facility’s vulnerability to an attack. ISCD may have an opportunity to explore how reductions in vulnerability at individual facilities resulting from the CFATS compliance inspection process could be used to develop an overall measure of the performance of the CFATS program in reducing risk and increasing security nationwide. Such a measure would be consistent with the NIPP, which calls for evaluating the effectiveness of risk management efforts by collecting performance data to assess progress in achieving identified outputs and outcomes. Moving forward, ISCD could also take additional actions to ensure information about high- risk chemical facilities is shared with first responders and emergency planners. During our review, we found that local emergency responders may not have the information they need to adequately respond to incidents at CFATS facilities; a situation that could expose them and their communities to potentially life-threatening situations. While the IP Gateway is a mechanism for sharing names and quantities of chemicals at high-risk facilities with first responders and emergency planners, we found it is not widely used by officials at the local level. The NIPP states that agencies should share actionable and relevant information across the critical infrastructure community—including first responders and emergency planners—to build awareness and enable risk-informed decision making, as these stakeholders are crucial consumers of risk information. By improving information-sharing with first responders and emergency planners, such as promoting access to and wider use of the IP Gateway, DHS will have greater assurances that the emergency response community has access to timely information about high-risk chemical facilities that could help protect them from serious injury or death. We are making the following two recommendations to DHS: The Director of ISCD should incorporate vulnerability into the CFATS site security scoring methodology to help measure the reduction in the vulnerability of high-risk facilities to a terrorist attack, and use that data in assessing the CFATS program’s performance in lowering risk and enhancing national security. (Recommendation 1) The Assistant Secretary for Infrastructure Protection, in coordination with the Director of ISCD, should take actions to encourage access to and wider use of the IP Gateway and explore other opportunities to improve information-sharing with first responders and emergency planners. (Recommendation 2) We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are reproduced in full in appendix I, and technical comments, which we incorporated as appropriate. In its comments, DHS concurred with both recommendations and outlined efforts underway or planned to address them. Regarding the first recommendation that ISCD should incorporate vulnerability into the CFATS site security scoring methodology to help measure the reduction in the vulnerability of high-risk facilities and use that data to further assess the CFATS program’s performance in lowering risk and enhancing national security, DHS concurred but noted that developing a system that could numerically evaluate vulnerabilities will be challenging. DHS stated that implementing the recommendation would likely require, among other things, revising the regulatory language describing CFATS vulnerability assessments and updating tools used to gather them, potentially creating a significant burden on both industry and government. DHS added that its new proposed performance metric, described earlier in this report, demonstrates the enhancement to national security resulting from the CFATS program and, by extension, the program’s impact on vulnerability and overall risk. As stated earlier, we recognize challenges ISCD might face in incorporating vulnerability into its scoring methodology. In our prior work, we acknowledged that assessing the benefits of a program—such as reducing a high-risk facility’s vulnerability to an attack—is inherently challenging because it is often difficult to isolate the impact of an individual program on behavior that may be affected by multiple other factors. However, in order to fully implement this recommendation, ISCD needs to consider steps it can take to evaluate vulnerability reduction resulting from the CFATS compliance inspection process without revisions to the regulation or by creating a significant burden on both industry and government. We noted, for example, that ISCD could establish a vulnerability baseline score when it evaluates a facility’s security measures during its initial review of the facility’s site security plan. ISCD could then use this baseline score as the starting point for assessing any reduction in vulnerability that ISCD can document that has occurred as a result of security measures implemented by the facility during the compliance inspection process. As the CFATS program continues to mature and ISCD begins its efforts to assign scores to facility site security plans, incorporating assessments of reductions in vulnerability at individual facilities and across the spectrum of CFATS facilities as a whole would enable ISCD to better measure the impact of the CFATS compliance inspection process on reducing risk and increasing security nationwide. Regarding the second recommendation that the Office of Infrastructure Protection and ISCD take actions to encourage access to and wider use of the IP Gateway and explore other opportunities to improve information- sharing with first responders and emergency planners, DHS stated that it has various outreach activities underway, among other information- sharing efforts, to either directly share or ensure that high-risk chemical facilities are sharing CFATS information with first responders and emergency planners. DHS added that, to continue these efforts and to encourage better utilization of the IP Gateway, it will ensure contact is made with LEPCs representing the top 25 percent of CFATS high-risk chemical facilities no later than the end of the second quarter of fiscal year 2019. While the outreach and information-sharing efforts DHS described are a step in the right direction, in order to fully implement this recommendation it is critical that the intent of any actions taken is to ensure that all first responders and emergency planners with a need-to- know are provided with timely access to CFATS facility-specific information in their jurisdictions. This information should include the name and quantity of chemicals at a facility so as to help these groups be properly prepared to respond to incidents at high-risk chemical facilities and to minimize the risk of injury or death to first responders and the surrounding community. Furthermore, it is important that these actions are focused on ensuring that this CFATS facility-specific information is shared with first responders and emergency planners representing the entirety of CFATS facilities determined to be high-risk, not just those that represent the top 25 percent of CFATS high-risk facilities. We are sending copies of this report to the Secretary of Homeland Security, the Under Secretary for the National Protection Programs Directorate, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (404) 679-1875 or CurrieC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II. In addition to the contact named above, John Mortin (Assistant Director), Hugh Paquette (Analyst in Charge), Chuck Bausell, Kristen Farole, Michele Fejfar, Brandon Jones, Tom Lombardi, Mike Moran, Rebecca Parkhurst, and Claire Peachey made significant contributions to this report.", "summary": "Facilities that produce, use, or store hazardous chemicals could be targeted or used by terrorists to inflict mass casualties, damage, and fear. DHS established the CFATS program to assess the risk posed by these facilities and inspect them to ensure compliance with DHS standards. DHS places high-risk facilities in risk-based tiers and is to conduct inspections after it approves their security plans. Under the CFATS Act of 2014, authorization for the CFATS program expires in January 2019. GAO assessed the extent to which DHS has (1) enhanced the process for identifying high-risk facilities and assigning them to tiers, (2) conducted facility inspections and measured facility security, and (3) ensured that information is shared with emergency responders to prepare them for incidents at high-risk facilities. GAO reviewed DHS reports and data on compliance inspections and interviewed DHS officials. GAO also obtained non-generalizable information from 11 trade associations representing chemical facilities regarding DHS outreach and from 15 emergency planning committees about their awareness of CFATS and the chemicals it covers. Since 2013, the Department of Homeland Security (DHS) has strengthened its processes for identifying high-risk chemical facilities and assigning them to tiers under its Chemical Facility Anti-Terrorism Standards (CFATS) program. Among other things, DHS implemented a quality assurance review process to verify the accuracy of facility self-reported information used to identify high-risk facilities. DHS also revised its risk assessment methodology—used to assess whether chemical facilities are high-risk and, if so, assign them to a risk-based tier—by incorporating changes to address prior GAO recommendations and most of the findings of a DHS-commissioned peer review. For example, the updated methodology incorporates revisions to the threat, vulnerability, and consequence scoring methods to better cover the full range of security issues regulated by CFATS. As of February 2018, a total of 29,195 facilities—including all 26,828 facilities previously assessed and 2,367 facilities new to the program—were assessed using DHS's revised methodology. DHS designated 3,500 of these facilities as high-risk and subject to further requirements. DHS has also made substantial progress conducting and completing compliance inspections and has begun to take action to measure facility security but does not evaluate vulnerability reduction resulting from the CFATS compliance inspection process. In 2013, GAO found that the backlog of chemical facility security plans awaiting review affected DHS's ability to conduct compliance inspections, which are performed after security plans are approved. Since then DHS has made progress and increased the number of completed compliance inspections. As of May 2018, DHS had conducted 3,553 compliance inspections. DHS has also begun to update its performance measure for the CFATS program to evaluate security measures implemented both when a facility submits its initial security plan and again when DHS approves its final security plan. However, GAO found that DHS's new performance measure methodology does not measure reduction in vulnerability at a facility resulting from the implementation and verification of planned security measures during the compliance inspection process. Doing so would provide DHS an opportunity to begin assessing how vulnerability is reduced—and by extension, risk lowered—not only for individual high-risk facilities but for the CFATS program as a whole. DHS shares some CFATS information, but first responders and emergency planners may not have all of the information they need to minimize the risk of injury or death when responding to incidents at high-risk facilities. Facilities are currently required to report some chemical inventory information, but GAO found that over 200 CFATS chemicals may not be covered by these requirements. To improve access to information, DHS developed a secure interface called the Infrastructure Protection (IP) Gateway that provides access to CFATS facility-specific information that may be missing from required reporting. However, GAO found that the IP Gateway is not widely used at the local level. In addition, officials from 13 of the 15 Local Emergency Planning Committees—consisting of first responders and covering 373 CFATS high-risk facilities—told GAO they did not have access to CFATS data in the IP Gateway. By encouraging wider use of the IP Gateway, DHS would have greater assurance that first responders have information about high-risk facilities and the specific chemicals they possess. GAO recommends that DHS take actions to (1) measure reduction in vulnerability of high-risk facilities and use that data to assess program performance; and (2) encourage access to and wider use of the IP Gateway among first responders and emergency planners. DHS concurred with both recommendations and outlined efforts underway or planned.", "document_type": "gao"}
{"report": "FCC has not evaluated Lifeline’s performance in meeting program goals but, as we found in May 2017, has taken recent steps toward evaluation. According to GAO’s Cost Estimating and Assessment Guide, to use public funds effectively the government must meet the demands of today’s changing world by employing effective management practices and processes, including the measurement of government program performance. In the past, FCC has called for program evaluations to review the administration of universal service generally, including Lifeline, but has not completed such evaluations. For example, FCC specified that it would review USAC 1 year after USAC was appointed as the permanent administrator to determine whether the universal service programs were being administered effectively. This review, which was planned to have been completed by 1999, was never done. In 2005, FCC awarded a contract to the National Academy of Public Administration to study the administration of the USF programs generally, examine the tradeoffs of continuing with the current structure, and identify ways to improve the oversight and operation of universal service programs. However, we reported in May 2017 that FCC officials stated FCC subsequently terminated the contract and the study was not conducted. In March 2015, we found that FCC had not evaluated Lifeline’s effectiveness in achieving its performance goals of ensuring the availability of voice service for low-income Americans, while minimizing the burden on those who contribute to the USF. We recommended, and FCC agreed, to conduct a program evaluation to determine the extent to which Lifeline is efficiently and effectively reaching its performance goals. Our May 2017 report raised additional questions about Lifeline’s effectiveness in meeting its program goals. For example, we reported that: FCC did not know how many of the 12.3 million households receiving Lifeline as of December 2016 also have non-Lifeline phone service (for which they pay out of pocket) along with their Lifeline benefit. Without knowing whether participants are using Lifeline as a primary or secondary phone service, we concluded that it is difficult for FCC to determine whether it is achieving the program’s goal of increasing telephone subscribership among low-income consumers while minimizing the USF contribution burden. FCC revamped Lifeline in March 2016 to focus on broadband adoption and generally phase out phone service, in part because FCC recognized that most eligible consumers have phones without Lifeline and to also close the “digital divide” of broadband adoption between low-income households and the rest of the country. However, broadband adoption rates have steadily increased for the low-income population absent a Lifeline subsidy for broadband. We found that at least two companies operating in a total of at least 21 states had begun offering in-home non-Lifeline broadband wireline support for less than $10 per month to individuals that participate in public- assistance programs, such as SNAP or public housing. The offered rate of these providers’ own low-income broadband service of $10 per month was less expensive than FCC’s broadband reasonable- comparability cost benchmark of approximately $55 per month, which Lifeline subscribers would be paying for a similar level of service. Our May 2017 report also found that FCC has recently taken some steps toward evaluating Lifeline’s performance in meeting program goals. Specifically, in the 2016 Lifeline Modernization Order, FCC instructed USAC to hire an outside, independent, third-party evaluator to complete a program evaluation of Lifeline’s design, function, and administration. The order stipulated the outside evaluator must complete the evaluation and USAC must submit the findings to FCC by December 2020. As FCC expects Lifeline enrollment to increase as the program is expanded to include broadband service, this expansion could carry with it increased risks for fraud, waste, and abuse, as was the case with past expansions of the program. Completing the program evaluation as planned, and as we recommended in 2015, would help FCC determine whether Lifeline is meeting its stated goals of increasing telephone and broadband subscribership among low-income consumers, while minimizing the burden on those who contribute to the USF. In our May 2017 report we found that FCC and USAC have established financial controls for Lifeline, including obtaining and reviewing information about billing, collecting, and disbursing funds. They have also developed plans to establish other controls, such as establishing a national eligibility verifier (National Verifier) for Lifeline providers to determine the eligibility of applicants seeking Lifeline service. However, as discussed in our May 2017 report, we found that weaknesses remain, including the lack of requirements to effectively control program expenditures above approved levels, concerns about the transparency of fees on customers’ telephone bills, and a lack of FCC guidance that could result in Lifeline and other providers paying inconsistent USF contributions. To address these concerns, we recommended the Chairman of FCC (1) require Commissioners to review and approve, as appropriate, spending above the budget in a timely manner; (2) require a review of customer bills as part of the contribution audit to include an assessment of whether the charges, including USF fees, meet FCC Truth-in-billing rules with regard to labeling, so customer bills are transparent, and appropriately labeled and described, to help consumers detect and prevent unauthorized changes; and (3) respond to USAC requests for guidance and address pending requests concerning USF contribution requirements to ensure the contribution factor is based on complete information and that USF pass-through charges are equitable. FCC generally agreed with those recommendations. In addition, we found that USAC’s banking practices for the USF result in oversight and accountability risks that FCC has plans to mitigate. Specifically, FCC maintains USF funds—whose net assets as of September 2016 exceeded $9 billion—outside of the U.S. Treasury pursuant to Office of Management and Budget (OMB) advice provided in April 2000. OMB had concluded that the USF does not constitute public money subject to the Miscellaneous Receipts Statute, 31 U.S.C. § 3302, a statute that requires that money received for the use of the United States be deposited in the Treasury unless otherwise authorized by law. As such, USF balances are held in a private bank account. However, subsequent to this OMB advice, in February 2005 we reported that FCC should reconsider this determination in light of the status of universal service monies as federal funds. As discussed in our May report, according to correspondence we received from the FCC Chairman’s Senior Legal Counsel, as of March 2017, FCC had decided to move the funds to the Treasury. FCC identified potential benefits of moving the funds to the Treasury. For example, FCC explained that having the funds in the Treasury would provide USAC with better tools for fiscal management of the funds, including access to real- time data and more accurate and transparent data. According to FCC, until the USF is moved into the Treasury, there are also some oversight risks associated with holding the fund in a private account. For example, the contract governing the account does not provide FCC with authority to direct bank activities with respect to the funds in the event USAC ceases to be administrator of the USF. After we raised this matter with FCC officials during the course of our review, beginning in November 2016, FCC sought to amend the contract between USAC and the bank to enable the bank to act on FCC instructions independently of USAC in the event USAC ceases to be the administrator. However, as of May 2017, the amended contract had not yet been signed. While FCC has put in place a preliminary plan to move the USF funds to the Treasury, as well as plans to amend the existing contract with the bank as an interim measure, several years have passed since this issue was brought to FCC’s attention without corrective actions being implemented. Further, under FCC’s preliminary plan, it would not be until next year, at the earliest, that the funds would be moved to the Treasury. In May 2017, while reviewing a draft of this report, a senior FCC official informed us that FCC experienced some challenges associated with moving the funds to the Treasury, such as coordinating across the various entities involved, which raised some questions as to when and perhaps whether the funds would be moved. Until FCC finalizes and implements its plan and moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized. As a result, in our May 2017 report, we recommended that the Chairman of FCC take action to ensure that the preliminary plans to transfer the USF funds from the private bank to the Treasury are finalized and implemented as expeditiously as possible. FCC agreed with this recommendation. FCC and USAC have implemented controls to improve subscriber eligibility verification, such as implementing the NLAD database in 2014, which helps carriers identify and resolve duplicate claims for Lifeline- supported services. However, as discussed in our May 2017 report, our analysis of data from 2014, as well as our undercover attempts to obtain Lifeline service, revealed significant weaknesses in subscriber eligibility verification. Lifeline providers are generally responsible for verifying the eligibility of potential subscribers, but we found that their ability to do so is hindered by a lack of access to, or awareness of, state eligibility databases that can be used to confirm eligibility prior to enrollment. For example, not all states have databases that Lifeline providers can use to confirm eligibility and some providers with whom we spoke were unaware of databases that were potentially available to them. These challenges might be overcome if FCC establishes a National Verifier, as it plans to do nationwide by the end of 2019, to remove responsibility for verifying eligibility from the providers. Additionally, since USAC was not maintaining and providing information to providers about these databases, we recommended they maintain and disseminate an updated list of state eligibility databases available to Lifeline providers that includes the qualifying programs those databases access to confirm eligibility, to help ensure Lifeline providers are aware of state eligibility databases and USAC audits of Lifeline providers can verify that available state databases are being utilized to verify subscriber eligibility. FCC agreed with the recommendation. For our May 2017 report, to identify Lifeline subscribers who were potentially ineligible to participate in the program, we tested the eligibility of subscribers who claimed participation in Medicaid, SNAP, and Supplemental Security Income (SSI) using NLAD data as of November 2014. We focused our analysis on these three programs because FCC reported in 2012 that these were the three qualifying programs through which most subscribers qualify for Lifeline. We compared approximately 3.4 million subscribers who, according to information entered in NLAD, were eligible for Lifeline due to enrollment in one of these three programs to eligibility data for these programs. On the basis of our analysis of NLAD and public-assistance data, we could not confirm that a substantial portion of selected Lifeline beneficiaries were enrolled in the Medicaid, SNAP, and SSI programs, even though, according to the data, they qualified for Lifeline by stating on their applications that they participated in one of these programs. In total, we were unable to confirm whether 1,234,929 subscribers out of the 3,474,672 who we reviewed, or about 36 percent, participated in the qualifying benefit programs they stated on their Lifeline enrollment applications or were recorded as such by Lifeline providers. If providers claimed and received reimbursement for each of the 1.2 million subscribers, then the subsidy amount associated with these individuals equals $11.4 million per month, or $137 million annually, at the current subsidy rate of $9.25 per subscriber. Because Lifeline disbursements are based on providers’ reimbursement claims, not the number of subscribers a provider has in NLAD, our analysis of NLAD data could not confirm actual disbursements associated with these individuals. Given that our review was limited to those enrolled in SNAP or Medicaid in selected case-study states, and SSI in states that participated in NLAD at the time of our analysis, our data results are likely understated compared to the entire population of Lifeline subscribers. These results indicate that potential improper payments have occurred and have gone undetected. We plan to refer potentially ineligible subscribers identified through our analysis for appropriate action as warranted. Our undercover testing, as discussed in our May 2017 report, also found that Lifeline may be vulnerable to ineligible subscribers obtaining service and the testing found examples of Lifeline providers being nonresponsive, or providing inaccurate information. To conduct our 21 tests, we contacted 19 separate providers to apply for Lifeline service. We applied using documentation fictitiously stating that we were enrolled in an eligible public-assistance program or met the Lifeline income requirements. We were approved to receive Lifeline services by 12 of the 19 Lifeline providers using fictitious eligibility documentation. We also experienced instances during our undercover tests where our calls to providers were disconnected, and where Lifeline provider representatives transmitted erroneous information, or were unable to provide assistance on questions about the status of our application. For example, one Lifeline provider told us that our application was not accepted by the company because our signature had eraser marks; however our application had been submitted via an electronic form on the provider’s website and was not physically signed. While our tests are illustrative and not representative of all Lifeline providers or applications submitted, these results suggest that Lifeline providers do not always properly verify eligibility and that applicants may potentially encounter similar difficulties when applying for Lifeline benefits. As described above, these challenges might be overcome if FCC establishes a National Verifier, as it plans to do nationwide by the end of 2019, to remove responsibility for verifying eligibility from the providers. FCC and USAC have implemented some mechanisms to enhance oversight of Lifeline providers, as discussed in our May 2017 report, but we found that remaining gaps could allow noncompliance with program rules. For example, in July 2014, FCC took additional measures to combat fraud, waste, and abuse by creating a strike force to investigate violations of USF program rules and laws. According to FCC, the creation of the strike force is part of the agency’s commitment to stopping fraud, waste, and abuse and policing the integrity of USF programs and funds. Similarly, in June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules. However, we found FCC and USAC have limited oversight of Lifeline provider operations and the internal controls used to manage those operations. The current structure of the program relied throughout 2015 and 2016 on over 2,000 Eligible Telecommunication Carriers (ETC) to provide Lifeline service to eligible beneficiaries. These companies are relied on to not only provide telephone service, but also to create Lifeline applications, train employees and subcontractors, and make eligibility determinations for millions of applicants. USAC’s reliance on Lifeline providers to determine eligibility and subsequently submit accurate and factual invoices is a significant risk for allowing potentially improper payments to occur, and under current reporting guidelines these occurrences would likely go undetected and unreported. Federal internal control standards state that management retains responsibility for the performance and processes assigned to service organizations performing operational functions. Consistent with internal control standards, FCC and USAC would need to understand the extent to which a sample of these internal controls are designed and implemented effectively to ensure these controls are sufficient to address program risks and achieve the program’s objectives. We identified key Lifeline functions for which FCC and USAC had limited visibility. For example, we found instances of Lifeline providers utilizing domestic or foreign-operated call centers for Lifeline enrollment. When we asked FCC officials about Lifeline providers that outsource program functions to call centers, including those overseas, they told us that such information is not tracked by FCC or USAC. With no visibility over these call centers, FCC and USAC do not have a way to verify whether such call centers comply with Lifeline rules. FCC and USAC have limited knowledge about potentially adverse incentives that providers might offer employees to enroll subscribers. For example, some Lifeline providers pay commissions to third-party agents to enroll subscribers, creating a financial incentive to enroll as many subscribers as possible. Companies responsible for distributing Lifeline phones and service that use incentives for employees to enroll subscribers for monetary benefit increase the possibility of fictitious or ineligible individuals being enrolled into Lifeline. Highlighting the extent of the potential risk for companies, in April 2016 FCC announced approximately $51 million in proposed fines against one Lifeline provider, due to, among other things, its sales agents purposely enrolling tens of thousands of ineligible and duplicate subscribers in Lifeline using shared or improper eligibility documentation. To test internal controls over employees associated with Lifeline for our May 2017 report, we sought employment with a company that enrolls individuals to Lifeline. We were hired by a company and were allowed to enroll individuals in Lifeline without ever meeting any company representatives, conducting an employment interview, or completing a background check. After we were hired, we completed two fictitious Lifeline applications as an employee of the company, successfully enrolled both of these fictitious subscribers into Lifeline using fabricated eligibility documentation, and received compensation for these enrollments. The results of these tests are illustrative and cannot be generalized to any other Lifeline provider. We plan to refer this company for appropriate action as warranted. As stated above, these challenges might be overcome if FCC establishes a National Verifier, as it plans to do nationwide by the end of 2019, to remove responsibility for verifying eligibility from the providers. In addition, in May 2017, we made two recommendations to help address control weaknesses and related program-integrity risks. Specifically, we recommended that FCC establish time frames to evaluate compliance plans and develop instructions with criteria for FCC reviewers how to evaluate these plans to meet Lifeline’s program goals. We also recommended that FCC develop an enforcement strategy that details what violations lead to penalties and apply this as consistently as possible to all Lifeline providers to ensure consistent enforcement of program violations. FCC generally agreed with these recommendations. In conclusion, Lifeline’s large and diffuse administrative structure creates a complex internal control environment susceptible to significant risk of fraud, waste, and abuse. FCC’s and USAC’s limited oversight of important aspects of program operations further complicates the control environment—heightening program risk. We are encouraged by FCC’s recent steps to address weaknesses we identified, such as the 2016 order establishing a National Verifier, which, if implemented as planned, could further help to address weaknesses in the eligibility-determination process. We also plan to monitor the implementation status of the recommendations we made in May 2017. Chairman Johnson, Ranking Member McCaskill, and Members of the Committee, this concludes my prepared remarks. I would be happy to answer any questions that you may have at this time. For further information regarding this testimony, please contact Seto J. Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony are Dave Bruno (Assistant Director), Scott Clayton (Analyst-in-Charge), and Daniel Silva. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Created in the mid-1980s, FCC's Lifeline program provides discounts to eligible low-income households for home or wireless telephone and, as of December 2016, broadband service. Lifeline reimburses telephone companies that offer discounts through the USF, which in turn is generally supported by consumers by means of a fee charged on their telephone bills. This testimony is based on GAO's May 2017 report and discusses steps FCC has taken to measure Lifeline's performance in meeting goals; steps FCC and USAC have taken to enhance controls over finances, subscribers, and providers; and any weaknesses that might remain. For the May 2017 report, GAO analyzed documents and interviewed officials from FCC and USAC. GAO also analyzed subscriber data from 2014 and performed undercover tests to identify potential improper payment vulnerabilities. The results of this analysis and testing are illustrative, not generalizable. In its May 2017 report GAO found the Federal Communications Commission (FCC) has not evaluated the Lifeline program's (Lifeline) performance in meeting its goals of increasing telephone and broadband subscribership among low-income households by providing financial support, but it has recently taken steps to begin to do so. FCC does not know how many of the 12.3 million households receiving Lifeline as of December 2016 also have non-Lifeline phone service, or whether participants are using Lifeline as a secondary phone service. FCC revamped Lifeline in March 2016 to focus on broadband adoption; however, broadband adoption rates have steadily increased for the low-income population absent a Lifeline subsidy for broadband. Without an evaluation, which GAO recommended in March 2015, FCC is limited in its ability to demonstrate whether Lifeline is efficiently and effectively meeting its program goals. In a March 2016 Order, FCC announced plans for an independent third party to evaluate Lifeline design, function, and administration by December 2020. FCC and the Universal Service Administrative Company (USAC)—the not-for-profit organization that administers the Lifeline program—have taken some steps to enhance controls over finances and subscriber enrollment. For example, FCC and USAC established some financial and management controls regarding billing, collection, and disbursement of funds for Lifeline. To enhance the program's ability to detect and prevent ineligible subscribers from enrolling, FCC oversaw completion in 2014 of an enrollment database and, in June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules. Nevertheless, in its May 2017 report, GAO found weaknesses in several areas. For example, Lifeline's structure relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility. This complex internal control environment is susceptible to risk of fraud, waste, and abuse as companies may have financial incentives to enroll as many customers as possible. On the basis of its matching of subscriber to benefit data, GAO was unable to confirm whether about 1.2 million individuals of the 3.5 million it reviewed, or 36 percent, participated in a qualifying benefit program, such as Medicaid, as stated on their Lifeline enrollment application. FCC's 2016 Order calls for the creation of a third-party national eligibility verifier by the end of 2019 to determine subscriber eligibility. Further, FCC maintains the Universal Service Fund (USF)—with net assets of $9 billion, as of September 2016—outside the Department of the Treasury in a private bank account. In 2005, GAO recommended that FCC reconsider this arrangement given that the USF consists of federal funds. In addition to addressing any risks associated with having the funds outside the Treasury, FCC identified potential benefits of moving the funds. For example, by having the funds in the Treasury, USAC would have better tools for fiscal management of the funds. In March 2017, FCC developed a preliminary plan to move the USF to the Treasury. Until FCC finalizes and implements its plan and actually moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized. In its May 2017 report, GAO made seven recommendations, including that FCC ensure plans to transfer the USF from the private bank to the Treasury are finalized and implemented expeditiously. FCC generally agreed with all the recommendations.", "document_type": "gao"}
{"report": "This section discusses DOE’s use of management and operating (M&O) and non-M&O contracts, DOE’s contracting structure, and federal and DOE requirements for oversight of contractors’ subcontract management. Since World War II, DOE and its predecessor agencies have depended on the expertise of private firms, universities, and others to carry out federal research and development work and to manage and operate government-owned facilities. DOE relies on contracts to accomplish most of its work. DOE mainly uses M&O contracts, which are agreements under which the government contracts for the operation, maintenance, or support, on its behalf, of a government-owned or government-controlled research, development, special production, or testing establishment wholly or principally devoted to one or more of the major programs of the contracting federal agency. DOE and other agencies with sufficient statutory authority and the need for contracts to manage and operate their facilities may use the M&O form of contract; however, according to DOE, it is the only agency using such contracts. According to the DOE Acquisition Guide, DOE generally requires that the M&O contractors be subsidiaries of their corporate parents, dedicated to performance at the specific location, and supported by performance guarantees from their corporate parents. According to DOE officials, in fiscal year 2016, DOE obligated nearly $21 billion on 22 M&O prime contracts—about three-quarters of its total contract obligations for that year. DOE also used non-M&O contracts for some contracts that were active in fiscal year 2016. For example, DOE used non-M&O contracts for the Mixed Oxide Fuel Fabrication Facility (MOX) construction project at the Savannah River Site in South Carolina, for construction and cleanup at the Hanford Site in Washington State, and for cleanup at the Oak Ridge Reservation in Tennessee. Figure 1 shows the site or project, and contract type, for the 24 largest DOE prime contracts as of fiscal year 2016, in our selection. DOE uses a variety of contract types for its M&O and non-M&O contracts, including cost-reimbursement contracts, time-and-materials contracts, and fixed-price contracts. Under cost-reimbursement contracts, the government reimburses a contractor for allowable costs incurred, to the extent prescribed by the contract. Cost-reimbursement contracts are considered high risk for the government because the government agrees to reimburse the contractors allowable costs, regardless of whether the work is completed. The DEAR states that cost-reimbursement plus award fee contracts are generally the appropriate contract type for M&O contracts, but agencies can choose among a number of different contract types for M&O contracts. A time-and-materials contract provides for acquiring supplies or services on the basis of direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, profit, and actual cost for materials. According to DOE’s General Guide to Contract Types for Requirements Officials, this type of contract can fulfill a special need that no other contract type can serve, but it places a heavy burden on technical personnel to perform surveillance to preclude inefficiency or waste, and there is no positive profit incentive for a contractor to control costs. Under fixed-price contracts, the government and contractor agree on a firm pricing arrangement that is subject to adjustment only according to the terms of the contract, and the contractor generally must deliver the product or service for that price. A contractor, for purposes of this report, is a party that has signed a contract with DOE (known as a prime contract), while a subcontractor is a party that has signed a contract with a DOE contractor (or another subcontractor). For example, a contractor may enter into a subcontract to obtain access to a specific set of skills or services that it may not possess, such as construction expertise, equipment services, or technology support. According to the FAR and the DEAR, contractors may subcontract with affiliates or parties to their prime contract under certain circumstances. Subcontracts with M&O contractor affiliates for performance of contract work itself—as distinguished from the purchase of supplies and services needed in connection with the performance of work—require DOE authorization and may involve an adjustment of the contractor’s fee. If the contractor seeks authorization to have some part of the contract work performed by a party to the contract, and the party’s performance of the work was a factor in the negotiated fee, DOE would normally require (1) that the party perform such work without fee or profit; or (2) an equitable downward adjustment to the M&O contractor’s fee, if any. DOE’s oversight of contractors’ subcontract management generally falls into three broad categories: (1) reviewing subcontract costs, including conducting certain subcontract audits, to ensure that subcontract costs are appropriately charged to prime contracts; (2) reviewing and approving contractor business systems, including contractor accounting and purchasing systems, to ensure validity of data and sufficiency of subcontract oversight policies and procedures; and (3) performing subcontract consent reviews to consider, among other things, whether the contractor is complying with contract provisions and assuring against conflicts of interest, such as close working relationships or ownership affiliations between the contractor and subcontractor, which may preclude free competition or result in higher prices. The DOE OIG and other federal agencies or external audit organizations conduct periodic incurred cost audits and assessments of DOE’s prime contracts. The purpose of incurred cost audits is to determine whether such incurred costs are reasonable; applicable to the contract; determined under generally accepted accounting principles and cost accounting standards applicable in the circumstances; and not prohibited by the contract, statute, or regulation. For its M&O contracts, the contractors’ own internal audit staff performs incurred cost audits under a process known as the “cooperative audit strategy.” Under this strategy, each M&O contractor’s internal audit organization is responsible for performing periodic operational and financial audits, assessing the adequacy of management control systems, and conducting an audit of its own incurred cost statements. Each year, the DOE OIG performs an assessment of incurred costs for the 10 M&O contractors that incurred and claimed the most costs that year, according to the DOE OIG’s audit manual. For the remaining M&O contractors, the OIG performs assessments based on risk. These assessments do not follow standards for independent third-party audits; rather, they follow standards for review-level engagements, which are substantially narrower in scope than an audit. These assessments consist of determining whether the contractor’s internal audits complied with professional standards and could be relied upon; the contractor conducted or arranged for audits of its subcontractors when costs incurred were a factor in determining the amount payable to a subcontractor; and the contractor adequately resolved any questioned costs and internal control weaknesses affecting allowable costs that had been identified in prior reports and reviews. For non-M&O prime contracts, DOE has generally relied on the Defense Contract Audit Agency (DCAA), an independent third party, to audit contractors’ incurred costs that they invoiced to DOE. However, resource issues at DCAA have delayed audits and led to a backlog of prime contract audits. Further, the National Defense Authorization Act for Fiscal Year 2016 prohibited DCAA from providing nondefense audit support until DCAA addressed its backlog of incurred cost audits at the Department of Defense. To try to address its audit backlog that accumulated as a result of DCAA’s delays, DOE has used independent public accounting firms, expanded internal audit functions, and relied more heavily on invoice reviews and OIG audits and assessments. However, in February 2015, DOE’s OIG reported that at the time of that report, these methods were not completely effective and did not meet audit standards in some cases. DCAA has since resumed performing audits for civilian agencies. However, while DCAA has made some progress in reducing its backlog of audits, it did not meet its initial goal of eliminating the backlog by fiscal year 2016, and as we found in September 2017, DCAA officials stated that they were unlikely to meet the agency’s revised goal by the end of fiscal year 2018. According to the DEAR, each of DOE’s M&O contracts should include a clause that requires the contractor to conduct or arrange for audits of its subcontractors’ incurred costs when costs incurred are a factor in determining the amount payable to the subcontractor to ensure that subcontract costs are allowable. This subcontract audit requirement includes cost-reimbursement and time-and-materials type subcontracts. This requirement is also included in some of DOE’s large non-M&O contracts, including the seven non-M&O prime contracts in our selection. According to DOE headquarters officials, they included this requirement in the non-M&O contracts because of the large dollar amount of the prime contracts. The DOE OIG, DCAA, or other entities generally include information about the status of required subcontract audits in their audits and assessments of the prime contracts. In March 2017, we found that DOE generally completed audits or assessments of contractors’ incurred costs after DOE had reimbursed the contractors for the costs for DOE’s M&O and non-M&O contracts, including those contractors’ subcontract costs. If, as a result of these audits or assessments, DOE detects fraud or other improper payments— such as reimbursements for costs determined to be unallowable under the contract—DOE will question these costs and work with the contractor to resolve them. Sometimes, this can result in DOE recovering funds. DOE’s oversight of business systems includes oversight of accounting systems and purchasing systems. With regard to accounting systems, under the FAR, agency contracting officers are required to obtain information concerning the adequacy of the contractors’ accounting systems prior to determining whether a prospective contractor is responsible with respect to the contract. Under the FAR, the adequacy and suitability of these systems affects the quality and validity of the contractor data, including subcontract data, on which the government relies to oversee the contractors’ performance. DOE grants approval of the accounting system through headquarters-level reviews, local office reviews, or external audits of the system. With regard to purchasing systems, under the FAR, DOE should review and approve contractors’ purchasing systems, including their procurement policies and procedures. If the contractor does not have an approved purchasing system, the contracting officer is required to approve all cost-reimbursement, time-and-materials, and labor-hour subcontracts (among other types) above the simplified acquisition threshold. According to DOE headquarters officials, an approved purchasing system signifies that the contractor’s purchasing policies and practices are efficient and provide adequate protection of the government’s interests, including the contractor’s ability to award some subcontracts without the need to seek review and consent by the local DOE contracting officers. Local contracting officials use a formal contractor purchasing system review or a combination of other monitoring techniques to grant or extend approval of the contractor’s purchasing system. DOE monitors contractors’ compliance with subcontracting requirements primarily by providing consent to the contractors to award certain subcontracts. DOE determines the subcontracts that require consent prior to award with criteria the agency develops for each prime contract, such as subcontract dollar value and type of contract. Under the FAR, agencies should consider whether a proposed subcontract is appropriate to the risks involved and consistent with current policy when conducting a consent review. DOE officials told us that they generally use these reviews to ensure that the contractor’s accounting and purchasing systems are continuing to operate as intended and that the contractor is following its policies and procedures, including policies to safeguard against conflicts of interest, such as issues precipitated by shared ownership interests. Under the FAR, where consent is required, the consenting official must give particularly careful and thorough consideration to potential conflicts of interest, such as where close working relationships or ownership affiliations between the contractor and subcontractor may preclude free competition or result in higher prices. For subcontracts that are subject to a consent review, the contractor submits a package of information to the local DOE contracting officer. The contracting officer either provides consent or raises issues that the contractor must address before awarding the subcontract. According to DOE documents we reviewed, the package typically includes summary information such as: what the contractor is buying, the type of contract to be used (i.e., cost-reimbursement, fixed-price), who the subcontract will be awarded to, a general description of the scope of work, a summary of the basis for making the award, documentation that shows the contractor conducted a cost and price analysis prior to award and that the contractor adhered to its internal policies and procedures, and conflict of interest determinations and mitigations. In fiscal year 2016, 28 entities were party to DOE’s 24 largest prime contracts. Specifically, DOE awarded 15 prime contracts to contractors composed of groups of two to five entities and awarded the remaining nine of the 24 prime contracts in our selection to contractors composed of a single entity. Our review found that 11 of the 28 participating entities were parties to multiple prime contracts. The prime contracts in which these 11 entities participated represented about 69 percent, or $19.3 billion, of DOE’s total prime contract obligations in fiscal year 2016. Figure 2 shows the relationships among the 11 entities that are parties to multiple prime contracts included in our selection. For example, Battelle Memorial Institute and Bechtel National, Inc. each were party to six prime contracts, based on ownership information DOE provided. It can be difficult to track changes in the ownership of entities that are parties to the prime contracts to understand the entities’ relationships, if any. Our review found that changes in ownership of the parties to six of the 24 prime contracts in our selection occurred prior to fiscal year 2016 but were not reflected in the information DOE provided to us. Therefore, our analyses do not reflect the modified ownership information. The fact that one entity could be party to multiple prime contracts and could acquire other entities that are parties to prime contracts complicated our ability to understand the relationships among them. AECOM—which was identified as a party to three prime contracts in our selection—acquired URS Corporation in 2014, and URS had previously acquired Washington Group International in 2007. This resulted in AECOM becoming a party to the Lawrence Livermore National Security, LLC; Washington River Protection Solutions, LLC; Los Alamos National Security, LLC; and Battelle Energy Alliance, LLC, prime contracts, making AECOM a party to seven of the contracts in our selection. However, the documents DOE provided show it as a party to three of the contracts in our selection. Our review of contractor Lawrence Livermore National Security, LLC’s website showed that BWX Technologies, Inc. split from the Babcock and Wilcox Company in 2015 and replaced it as a party to the contract, making BWX Technologies party to four of the prime contracts in our selection rather than the three reported in DOE’s documents. These changes in ownership occurred prior to fiscal year 2016, the time period we reviewed, but the changes were not reflected in the ownership information DOE provided to us for these prime contracts. Such acquisitions can also complicate DOE’s review of contract proposals. For example, in August 2016, NNSA awarded the contract for the management and operation of the Nevada National Security Site to Nevada Site Science Support and Technologies Corporation. The contractor identified itself as a wholly owned subsidiary of Lockheed Martin. However, after awarding the contract, the NNSA contracting officer was notified that the awardee had been acquired in its entirety by Leidos Innovations Corporation prior to the award. According to NNSA, the request for proposals required offerors to disclose ownership changes that occur during the proposal process, but NNSA was not notified about the ownership change until after the proposal had been awarded. Once the Nevada Site Science Support and Technologies Corporation’s ownership changed from Lockheed Martin to Leidos, its proposal was not compliant with the requirements and NNSA rescinded the award. The 24 contractors in our selection reported obligating funds to more than 169,000 subcontracts to about 23,000 different entities in fiscal year 2016. Contractors subcontracted more than $6.9 billion, an amount equivalent to nearly 30 percent of DOE’s obligations to its prime contracts in fiscal year 2016. The extent to which contractors obligated funds to subcontracts in fiscal year 2016 varied widely, from 13 percent of prime contract obligations to 83 percent, as shown in table 1. The contractors in our selection reported that they awarded about 54 percent, or about $3.7 billion, of their subcontract obligations in fiscal year 2016 as fixed-price contracts and 46 percent, or about $3.2 billion, as cost-reimbursement contracts, cost-reimbursement contracts with no fee earned, or time-and-materials contracts. See figure 3 for the distribution of subcontract obligations by type. We found that in fiscal year 2016, at least 24 of the 28 entities that were parties to the prime contracts were also subcontractors to the prime contracts in our selection. Specifically, these 24 entities held nearly 3,000 subcontracts with fiscal year 2016 subcontract obligations totaling about $927 million. Table 2 shows the parties to prime contracts that also held subcontracts in fiscal year 2016. Further, we found that, in some cases, entities held subcontracts on the specific prime contracts to which they were a party. As discussed previously, subcontracting to an entity that is also a party to the prime contract is allowable under the FAR and DOE regulations. Figure 4 shows the 15 contractors that obligated funds in fiscal year 2016 to subcontracts with parties to their prime contracts. For example, UT Battelle, LLC—the contractor for the Oak Ridge National Laboratory prime contract in fiscal year 2016—had 416 active subcontracts with two parties to that prime contract (University of Tennessee and Battelle Memorial Institute). UT Battelle, LLC obligated more than $34 million for subcontracts to these two entities in fiscal year 2016. In another example, Savannah River Remediation, LLC, the liquid waste contractor for the Savannah River Site, had 30 active subcontracts with three parties to that prime contract (AECOM, Inc.; Bechtel National, Inc.; and CH2M Hill Constructors, Inc.). The contractor obligated about $12 million for subcontracts to these three entities in fiscal year 2016. For more information about the relationships among DOE’s prime contracts, parties to the prime contracts, and subcontractors, see an interactive graphic at https://www.gao.gov/products/GAO-19-107. Each of the 24 prime contracts in our selection required contractors to conduct or arrange for audits of their subcontractors’ incurred costs for certain subcontract types, including cost-reimbursement and time-and- materials contracts, among others. Contracting officers at DOE’s local offices are responsible for overseeing contractors and for ensuring, among other things, that both DOE and the contractor comply with the terms of the prime contract. However, officials from DOE’s local offices have not always ensured that contractors completed the required subcontract audits. DOE relies on the contractors’ subcontract audits to identify unallowable subcontract costs. As previously discussed, the DOE OIG, DCAA, or third parties complete incurred cost audits or assessments of DOE’s prime contracts, which generally report on the extent to which the contractor has completed required audits of subcontract costs. We requested the reports for the two most recent incurred cost audits or assessments that the DOE OIG or third parties conducted, as of February 2018, for the prime contracts in our selection to determine whether contractors had conducted required subcontract audits for the period covered by the reports. In response to our request, the 24 contractors provided a total of 43 reports, 11 of which were audit reports and 32 of which were assessment reports: Twenty contractors provided both requested reports. Three contractors provided only one report each that had been completed. One contractor did not provide the two requested reports because of pending litigation. Of the 43 incurred cost assessment and audit reports we reviewed, 21 reports indicated that contractors had not audited more than $3.4 billion in costs incurred by subcontractors over the 10-year period covered by the reports. These reports documented various reasons that the subcontracts had not been audited, including that a contractor did not appropriately recognize that time-and-materials subcontracts needed to be audited, or that a contractor relied on internal controls or a non-audit procedure to meet subcontract audit requirements. For example, an April 2013 assessment by the DOE OIG found that subcontractor costs of more than $12 million incurred over a 4-year period for two multi-year time-and-materials contracts had not been audited by the contractor, as required by its prime contract, because the local DOE office did not submit a request to DCAA to perform the audits due to the DCAA backlog. In another example, a March 2014 DOE OIG assessment found that a contractor did not conduct required audits of $155 million in subcontract costs incurred during 1 fiscal year because the contractor believed its internal controls met the intent of the requirement to conduct the subcontract audits. Some audit or assessment reports we reviewed included some questioned subcontract costs. For example, in an assessment for fiscal year 2013, the DOE OIG reported that an M&O contractor’s internal audit department performed audits of 78 subcontracts for 30 different subcontractors and questioned nearly $900,000 in subcontractor costs incurred from fiscal year 2009 through fiscal year 2013. As of June 2016, most of the questioned amount had been resolved, and the remaining amount—about $7,900—was deemed unallowable and applied against an invoice from the contractor. In another assessment of an M&O contractor for fiscal year 2013, the DOE OIG questioned subcontract costs identified by the contractor of more than $725,000, with about $8,000 ultimately deemed unallowable. We have previously found that DOE sometimes negotiates questioned costs with its contractors to settle on an amount—potentially lower than the amount initially questioned— ultimately deemed unallowable. Although the amounts of unallowable costs in these examples are small, DOE does not know the full extent of unallowable subcontractor costs that it has reimbursed because required subcontract audits were not always conducted. For some contractors, the issue of unaudited subcontract costs is long- standing and extensive. For example, DOE documents show that, at the time of our review, one contractor had never completed an adequate audit of its subcontractors’ incurred costs over the 16 years of the prime contract period, although its prime contract with DOE requires such audits. In June 2016, the contractor placed the value of its unaudited subcontracts at more than $1.3 billion. This amount included some subcontracts that were closed without being audited, meaning the work had been completed and the final costs under the prime contract had been paid. DOE has been working with the contractor since 2013 to implement corrective actions to resolve the issue; in October 2018, DOE officials told us they reached an agreement with the contractor to complete current audits and address the backlog. We identified three key differences in how contractors and DOE’s headquarters and local office officials interpreted the subcontract audit requirements included in the prime contracts we reviewed that contributed to DOE not always ensuring that contractors audited their subcontractors’ incurred costs. Specifically: Extent of subcontracts that must be audited. We identified differing interpretations of whether the prime contract required contractors to audit all cost-reimbursement and time-and-materials contracts. Specifically, some contractors told us that they had developed risk- based approaches to selecting subcontracts for audit based on thresholds, such as the amount of the subcontract. However, using such a strategy could exclude significant subcontract costs from audit. For example, according to an April 2012 DOE OIG audit, one contractor increased its subcontract audit threshold from $1 million to $15 million in annual incurred costs, thereby excluding from audit nearly $343 million in subcontract costs incurred during fiscal years 2008 and 2009. In its report, the DOE OIG questioned whether the contractor’s subcontract audit strategy provided sufficient audit coverage to ensure that DOE did not pay unallowable costs. In that case, the DOE OIG found that the audit strategy, which was supposed to be based on DCAA requirements, did not meet a key DCAA requirement to audit incurred costs of at least one-third of all subcontracts under $15 million at least once every 3 years. Definition of an audit. Some contractors used invoice reviews in place of audits to meet the requirement. As discussed previously, DOE documents showed that one contractor had never completed an adequate audit of its subcontractors’ incurred costs over the 16 years of the contract. According to contractor representatives, the term “audit” was not defined in their contract, and therefore they performed detailed subcontractor invoice reviews instead of conducting subcontract audits to meet the requirement. DOE found that these invoice reviews did not meet generally accepted government auditing standards. Responsibility for arranging for audits if DCAA is unable to conduct audits. Some contractor representatives we interviewed reported that their subcontracts remained unaudited as a result of the DCAA backlog. Representatives from one contractor told us that they believed that they were not responsible to conduct the audits if DCAA was unable to do so, and another said that they tried to engage a third-party auditor to conduct the audits themselves, but their subcontractor would not allow the third-party auditor to access their records despite specific language establishing the contractor’s responsibilities for audits. Differences in the interpretation of the subcontract audit requirements have continued to occur because DOE has not clearly defined—in guidance or other documents—how these contract requirements should be met, which could eliminate confusion about which subcontracts should be audited, how an audit is defined, and how to meet subcontract audit requirements if DCAA is unable to conduct the audit. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives so that external parties can help the entity achieve its objectives and address related risks. Until DOE clearly defines how contractors should meet subcontract audit requirements, contractors may not perform subcontract audits as intended and unallowable costs may not be identified or recouped. In addition, we found that audits or assessments of a contractor are usually not conducted immediately after the fiscal year in which funds are spent, partly because of the availability of DCAA staff or third-party auditors to complete the work. Our review of the 43 audit and assessment reports identified reports covering 7 fiscal years that were audited or assessed 6 or more years after the fiscal year in which the costs were incurred; more than $557 million in subcontract costs in those fiscal years had not been audited as required by the prime contracts. The Contract Disputes Act of 1978 imposes a 6-year statute of limitations for the government to seek recovery of unallowable costs that could be identified through subcontract audits, so it is important for audits to be completed in a timely manner. We also found that local offices’ efforts to monitor contractors’ completion of subcontract audits have not ensured that contractors have completed required subcontract audits and that those audits are completed in a timely manner. Officials from the local offices said their approaches for overseeing whether contractors performed required subcontract audits included reviewing and approving the contractors’ internal audit plans, reviewing monthly or quarterly reports from the contractors’ internal audit departments, or reviewing the contractors’ internal audits and reviews of subcontractors’ costs. Additionally, several DOE officials from the local offices said they relied on the DOE OIG and external auditors’ assessments and audits of the contractor to monitor the status of subcontract audits, even though these assessments and audits may be infrequent. Federal internal control standards state that management should implement control activities through policies, such as by documenting such policies in the appropriate level of detail, to allow management to effectively monitor the control activity. These standards state that policies may be further defined through procedures, including the timing of when a control activity occurs, to help personnel implement the control activities for their assigned responsibilities. However, we found that DOE headquarters has not issued documented procedures or guidance that requires local offices to monitor the contractors’ progress in completing the required audits or to specify the time period during which an audit must be completed. Without such procedures or guidance, unallowable costs may go unidentified beyond the 6-year period set by the Contract Disputes Act, preventing DOE from identifying and recovering unallowable costs. In addition to ensuring that contractors conduct required audits of subcontract costs, DOE must meet other requirements to ensure its contractors are effectively overseeing subcontracts, specifically by approving contractors’ accounting and purchasing systems and performing consent reviews to monitor subcontracting actions. With respect to approval of contractors’ accounting and purchasing systems, DOE generally ensures that reviews and approvals of these systems occur, but the frequency of some accounting system reviews varies. With respect to performance of consent reviews to monitor subcontracting actions, most subcontracts are not reviewed by DOE, and we found that while DOE’s local officials could independently review available information on ownership to assist them with their assessment of contractors’ identification of potential conflicts of interest in the consent review process, they generally do not. Further, DOE’s thresholds for conducting consent reviews are inconsistent and there is no requirement to reevaluate the thresholds. In addition, DOE’s annual contractor performance evaluations do not explicitly measure its contractors’ performance in managing or overseeing subcontracts. Under the FAR, federal agencies are to determine the adequacy and suitability of contractors’ accounting systems. The adequacy and suitability of these accounting systems affects the quality and validity of the contractor and subcontractor data upon which the government must rely for its management and oversight of the contractor and contract performance. DOE local contracting officers responsible for the prime contracts in our selection stated that they rely on contractor accounting system approvals to help them determine the contractor’s suitability to appropriately place and manage subcontracts. The FAR provides that the contractor’s accounting system should be adequate during the entire period of contract performance, but does not specify a minimum frequency for performing accounting system reviews. According to interviews with local DOE officials and our review of documentation they provided, DOE may grant accounting system approval through headquarters-level reviews, local office reviews, or external audits of the accounting system. Headquarters-level reviews occur at a level above the local office, such as through NNSA’s Office of Management and Budget. In addition, the contracting officers or other subject matter experts at DOE’s local offices can conduct the reviews of the accounting systems themselves or employ an external audit organization, such as DCAA, to conduct the reviews. DOE conducted at least one review of the accounting systems used for each of the 24 prime contracts in our selection: eight accounting systems were reviewed through headquarters-level organization reviews, nine were reviewed by local offices, and seven were reviewed through external audits. DOE headquarters officials said that no method for review is considered more rigorous or preferred over another, and it is left to the discretion of the contracting officers at DOE’s local offices to determine which method to use. According to our review of documents from DOE’s local offices and interviews with DOE officials from the local offices, 22 of the 24 prime contracts in our selection had approved accounting systems in fiscal year 2016. Contracting officers from the local DOE offices responsible for oversight of the two prime contracts for which there was no approved accounting system for fiscal year 2016 told us that they maintained oversight of the contractors’ accounting systems through mechanisms other than the traditional review and approval process. Specifically: Local DOE officials responsible for oversight of one prime contract, which was awarded in December 2000, told us that they did not have to review or approve the contractor’s accounting system at the local level after the contract was awarded because the contractor’s corporate office was required to have an approved accounting system to enter into its contract with DOE. The officials were not sure whether an approval of the corporate accounting system had been performed since 2000, but DCAA was scheduled to perform a review of the system in late 2018. In a 2017 letter to the DOE local office, DCAA stated that its review of the accounting system was delayed due to staffing issues, and it was the agency’s opinion that the contractor’s internal audits and reviews demonstrated that the contractor was adhering to the criteria of an adequate accounting system. A local official responsible for oversight of another prime contract stated that they had not approved the contractor’s accounting system because it was adopted from the site’s former contractor. The officials told us the former contractor’s accounting system had already been approved and no additional review or approval was necessary. Officials at DOE headquarters agreed that the use or transfer of an existing DOE-approved accounting system satisfies the review requirement. According to the officials responsible for overseeing this prime contract, the local office annually reviews and approves the contractor’s Financial Management System Plan, which would identify any major planned enhancements and upgrades to the current financial management systems and subsystems, including the accounting system. In addition to differences in how accounting system approvals were conducted, local DOE officials said there are differences in the frequency of the contractor accounting system reviews and approvals across local offices. Some accounting systems are approved only at the time the prime contract is awarded, while others are approved annually, on a 3- year cycle, or only if there are major changes to the accounting system. DOE headquarters officials we interviewed said that the frequency of reviews and approvals was determined on a contract-by-contract basis, and for the prime contracts for which the accounting system was approved at the time of contract award, the officials were unaware of what might necessitate an additional review. Figure 5 shows the frequency of accounting system approvals for the 24 prime contracts in our selection as of fiscal year 2016. The DOE Acquisition Guide states that the creation and maintenance of rigorous business, financial, and accounting systems by the contractor is crucial to ensuring the integrity and reliability of the cost data used by DOE officials. Further, the FAR provides that the contractor’s accounting system should be adequate during the entire period of contractor performance. In addition, DOE headquarters officials said that periodic reviews and approvals of the accounting systems are important to ensuring these requirements are met. However, there is wide variation in the frequency of these reviews, in part because DOE has not reviewed the differences in the frequency of its accounting system approvals and whether the basis for these differences is appropriate. Prime contracts can last for decades, so many years may pass without further review of the adequacy of the accounting systems. For example, local officials responsible for overseeing a prime contract with an accounting system that was approved at the time the contract was awarded said that the approval occurred 12 years ago, and they had questions about the adequacy of the system. DOE officials said that they do not have guidance to help contracting officers at local offices determine the appropriate frequency for reviewing accounting systems’ adequacy. Instead, local DOE contracting officers that oversee each prime contract have discretion to determine the manner and frequency of reviews based on their knowledge of the contractor. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, including by clearly documenting internal control in management directives, administrative policies, or operating manuals. When reviews are infrequent, or it is unclear when a review should be conducted, subsequent changes to the accounting system may not be promptly evaluated and DOE may not have adequate assurance that contractors’ accounting systems can be relied upon. By reviewing the differences in the frequency of its accounting system reviews and approvals and developing guidance that provides criteria to determine the appropriate frequency of such reviews, DOE could better ensure that adequate accounting systems are in place during the entire period of the contract. Under the FAR, the federal agency should maintain a sufficient level of surveillance to ensure that the contractor is effectively managing its purchasing program. Each of the contractors for the 24 prime contracts in our selection had an approved purchasing system in fiscal year 2016. If a local DOE contracting officer determines that a contractor does not have an approved purchasing system, under the FAR, the office should review and decide whether to approve (i.e. consent to) all cost- reimbursement type subcontracts and unpriced actions for fixed-price subcontracts that exceed the simplified acquisition threshold of $150,000 prior to award. Under the FAR, the contractor is to continue to seek approval for every proposed subcontract that meets these criteria until the issues with the purchasing system that led to the withdrawal of approval are resolved and the system is again approved. Our review of subcontract information provided by DOE’s contractors indicates that, without an approved purchasing system, more than 6,600 of the subcontracts that were active in fiscal year 2016 would have required review and approval prior to award, according to the existing simplified acquisition threshold. According to DOE officials at local offices and headquarters, DOE contracting officers may use a formal contractor purchasing system review or a combination of surveillance and other monitoring techniques to grant or extend approval of a contractor’s purchasing system. DOE headquarters officials told us that the variation in the source and method of purchasing system reviews is intentional to allow the local offices to meet the requirement in a way that works best for their location and contractor, and that the most important aspect of the purchasing system review is the ongoing surveillance of the system. Contracting officers from DOE’s local offices told us they had approved the purchasing system for each of the 24 prime contracts in our selection in a variety of ways: Seven local offices approved contractors’ purchasing systems based on the local contracting officer’s knowledge of the contractor’s work; Six local offices relied on the results of a peer review program; Five local offices considered the results from a combination of internal and external audits and reviews (including peer reviews); Four local offices performed a formal purchasing system review but did not provide specifics as to the source of information, such as internal or external audits or peer reviews; and Two local offices relied on the results of external audits. One of the contractors in our selection of 24 prime contracts, Bechtel National, Inc., had a DOE-approved purchasing system for the construction of the Hanford Waste Treatment and Immobilization Plant at the Hanford Site in Washington State, which was subsequently withdrawn for a 3-month period in 2018. Specifically, in fiscal year 2018, the Defense Contract Management Agency (DCMA) performed a review of the contractor’s corporate purchasing system and identified a number of significant deficiencies—such as inadequate advance notice of subcontract awards, missing subcontractor disbarment disclosures, and general documentation issues with the contractor’s procurement files— that resulted in Bechtel National, Inc.’s corporate purchasing system being disapproved until the identified deficiencies could be resolved. DOE officials said they lifted the restrictions on the contractor in October 2018 following DCMA’s validation that Bechtel National, Inc. implemented the required updates to its purchasing system and procedures. In June 2018, DOE headquarters officials told us they encouraged the local offices to focus on the use of a peer review program to review and approve purchasing systems. NNSA officials further explained that they expected the peer reviews would encourage contractors to remain diligent in the administration of their systems. As a part of this new approach, DOE headquarters officials told us that local officials will be required to assess the need for a purchasing system review every 3 years, and if the local office did not conduct a review, then a peer review would be required at least every 6 years. According to DOE’s November 2018 updated peer review handbook and officials responsible for the handbook, the peer review program is DOE’s preferred method for conducting purchasing system reviews and is now mandatory for DOE’s M&O contracts at least every 6 years and for non- M&O contracts, with a contract length of 5 years or less, at the 3-year mark. NNSA headquarters officials stated that they expect all of their local offices to use the peer review program to assess contractors’ purchasing systems going forward, regardless of the type of contract. According to documents provided by DOE headquarters and local offices, as of July 2018, contractors for 18 of the 24 prime contracts in our selection participated in the peer review program, and six did not participate, including two NNSA contractors. Figure 6 shows the date of the most recent peer review for the 24 prime contracts in our selection, as of July 2018. According to contracting officers and headquarters officials we interviewed, DOE’s local offices use subcontract consent reviews to monitor contractors’ compliance with subcontracting requirements. In addition, local officials told us that they use these reviews to review and assess any reported potential conflicts of interest on the part of the contractor and subcontractors. However, we found that local DOE officials generally do not request additional information on ownership to independently ensure contractors are mitigating these conflicts, nor do they routinely make use of various databases available to government employees that report ownership information for many government contractors. In addition, local offices conduct a limited number of consent reviews for subcontracts, based on a dollar threshold that varies among local offices, which makes it difficult for DOE to ensure that local offices have sufficient visibility into contractors’ subcontracting actions. According to local DOE officials we interviewed, subcontract consent reviews are the primary control method used to monitor contractors’ compliance with subcontracting requirements. Under the FAR, in conducting a consent review, agencies should consider whether a proposed subcontract is appropriate to the risks involved and consistent with current policy. Specifically, local DOE officials told us that they use the consent reviews to monitor contractors’ accounting and purchasing systems between formal reviews of these systems; as well as to monitor their compliance with policies and procedures for subcontracting, including ensuring that subcontracts are awarded competitively, are of appropriate types, and that the contractor adheres to requirements to safeguard against conflicts of interest. According to officials we interviewed, local DOE contracting officers often receive a notice from the contractor of its intention to solicit subcontracted work and, if the proposed subcontract value exceeds an agreed-upon dollar threshold, contracting officers typically will review a consent package from the contractor before the final award of the subcontract. The contractor is to obtain DOE’s consent to the proposed action before proceeding. NNSA’s local offices have a standard consent checklist that directs the contracting officer to consider certain factors before granting consent for the contractor to issue a particular subcontract. These factors include the contractor’s past performance, whether the solicitation for subcontracted work was appropriately competed, the type of subcontract selected, and whether the proposed prices are reasonable for the intended work, among other things. In comparison, individual DOE local offices generally use consent checklists they develop. These checklists have similar review topics to the NNSA checklist, but the specific items and formats vary. According to DOE officials we interviewed, subcontract consent reviews are DOE’s only opportunity to review subcontract pricing and to ensure best value for the government before the contractor awards the subcontract. Furthermore, because fixed-price subcontracts do not have the same audit requirements as cost-reimbursement subcontracts, these consent reviews may be the only opportunity for DOE to review the cost and pricing of fixed-price subcontracts to be awarded by the contractor. As mentioned previously, the contractors for the 24 prime contracts in our selection awarded 54 percent of their fiscal year 2016 subcontract obligations as fixed-price subcontracts, and these contracts may be awarded to parties to the prime contract, subject to certain conditions. DOE contracting officials we interviewed noted a number of ways in which consent reviews have helped them oversee contractors’ compliance with subcontracting requirements. For example, an official described one case in which the contractor was proposing a cost-reimbursement subcontract for items that could have been purchased more favorably under a fixed- price contract. The consent package did not support why the contractor chose the more costly contract type, so the contracting officer denied consent and asked the contractor to review and reissue the solicitation. In another example, the contractor had to renegotiate a subcontract before award, after the contracting officer identified inherent safety concerns in the description of the proposed work upon review of the consent package. DOE requires certain provisions to be included in the prime contracts that require both DOE and the contractor to safeguard against personal and organizational conflicts of interest. Among other things, these contract provisions include requirements from the FAR that prohibit former officials of a federal agency from accepting compensation from a contractor within a year of awarding a contract to that contractor; prohibit contractors from soliciting, accepting, or attempting to accept any kickbacks; and generally prohibit federal agencies from subcontracting with debarred entities. All of the local DOE officials we interviewed said they rely on the contractor to identify and mitigate potential conflicts by including these requirements in contract clauses in their subcontracts and in the contractor’s internal policies and procedures. Headquarters and local DOE officials said they rely on the consent review process to ensure that contractors are following these policies and procedures, and that contractors identify and mitigate subcontract ownership conflicts, such as those that may occur in connection with subcontracts to related parties. If the contractor has identified a conflict of interest in connection with a proposed subcontract, the consent package checklists we reviewed request the contractor to also include in the package either a simple conflict of interest disclosure statement, which would include steps the contractor claims to have taken to mitigate the conflict, or a conflict of interest analysis conducted by the contractor. In both cases, the contracting officer is expected to check that the information is included in the package, but no additional action or assessment by local DOE contracting officers is required. Local DOE officials performing consent reviews told us that subcontracting with related parties is their main concern when assessing conflicts of interest; however, they generally did not independently assess information on subcontractor ownership during their reviews, beyond the information that the contractor reported. Information on subcontractor ownership could alert local contracting officers to potential conflicts of interest, such as preferential treatment in the awarding of subcontracts to parties of the prime contract, and could help DOE to determine if the mitigation plan included in the consent package is adequate to address the potential conflict of interest. However, local DOE officials told us that they generally do not request or review subcontractor ownership information in available databases when reviewing proposed subcontracts because there is no requirement to do so. (See appendix III for a description of data systems available to DOE officials that may contain relevant ownership information about existing contractors or entities.) Local DOE officials told us they have identified instances, through their consent reviews, in which the contractors’ reporting of potential conflicts of interest was inadequate. For example, DOE officials reviewing consent packages at a local office noticed that a number of subcontracts were awarded to a single company. The officials subsequently determined that the contractor’s former president was currently sitting on the board of the subcontracting company, but the contractor had not disclosed this information during the consent review process. According to DOE officials, this case is currently under review. In addition, according to a Department of Justice press release, an employee of one contractor created an entity and then, on behalf of the contractor, ensured that a multimillion-dollar subcontract was awarded to the new entity, and this employee received payments under the subcontract from May 2011 to April 2016. The subcontractor did not disclose this conflict of interest while working for the contractor. As previously discussed, contractor ownership can be complicated, with complex relationships between and among entities. Further, contractor ownership may change over time through various mergers and acquisitions. These relationships and changes can make it difficult for DOE to monitor contractors’ ownership, such as in the previously discussed example in which an awardee did not notify NNSA of an ownership change prior to contract award as required by the request for proposals. In this case, NNSA would have been unable to identify or mitigate potential conflicts of interest in connection with the owner, had the contracting officer not been notified separately of the change in ownership. Nevertheless, according to officials from DOE’s local offices, because DOE is not a party to the subcontracts, agency officials generally do not maintain or request subcontractor ownership information beyond the information that contractors provide during consent reviews. Although DOE has the right to access information about the subcontractors’ costs and performance—through contract clauses that generally allow DOE to request and review information relevant to costs and performance under the prime contract, including the costs and performance of subcontractors as well as through multiple databases available to government employees—officials stated there is no requirement for contracting officers to request or search such information during reviews. According to DOE headquarters officials, depending on the type of prime contract, the government may request direct access to subcontractor records as required. For example, DOE officials from one local office told us that they have access to the contractor’s subcontract information through a direct link to the contractor’s internal restricted network, but they do not routinely access the network to review ownership information. Like data available through other databases, these internal data maintained by the contractors have the potential to be useful to local officials during consent reviews for identifying the risks imposed by potential conflicts of interest between parties to the prime contract and potential subcontractors. Federal internal control standards state that management should identify, analyze, and respond to risks related to achieving the defined objectives, such as analyzing identified risks to estimate their significance, which provides a basis for responding to the risks. As noted above, local officials said that their main concern when assessing conflicts of interest is the contractor subcontracting with related parties. However, local DOE officials told us that they generally do not request or review subcontractor ownership information because there is no requirement to do so. By requiring contracting officers to independently review subcontractor ownership information as part of consent reviews and assess potential conflicts of interest, DOE would have better assurance that contractors are adequately identifying and mitigating organizational conflicts of interest. Although consent reviews have the potential to provide contracting officers with important information on the contractor’s compliance with requirements, the number of reviews conducted by local offices each year varies due to different thresholds at each location. DOE headquarters and local officials told us the numbers of consent reviews conducted by local offices are based on dollar-amount thresholds or other criteria established by the local DOE offices, and these criteria vary among DOE locations. According to DOE officials, consent review thresholds vary for a number of different reasons. For example, a senior agency official and some local DOE officials said that small staff sizes and other oversight responsibilities may limit the number of consent reviews that contracting officers conduct. DOE guidance recommends that when establishing the threshold for consent reviews, the contracting officer should aim to review enough subcontracts annually to provide the local office with sufficient visibility into subcontracting actions without being overly burdensome on either the contractor or the federal staff. The consent review thresholds for the 24 prime contracts in our selection varied widely, and contracting officers performed few reviews for some prime contracts. For example, as shown in table 3, one local office set its subcontract consent threshold at $250,000, which led the local contracting officer to review about 175 consent packages in a year, and another set the threshold at $25 million, which led the local office to review 1 consent package in a year. Local DOE officials told us that most subcontracts are not subject to consent reviews because they fall below the consent threshold. One of the prime contracts with a $25 million consent threshold is held by Bechtel National, Inc., the contractor constructing the Hanford Waste Treatment and Immobilization Plant. As previously discussed, Bechtel National, Inc.’s purchasing system was disapproved for a 3-month period in fiscal year 2018 and, during that time, the contracting officer was required to review and consent to all subcontracts above $250,000. A DOE official told us that the local office reviewed 48 subcontract consent packages during this time period, and the office would not have reviewed any if the purchasing system had not been disapproved. In some cases, DOE contracting officers have adjusted the consent review thresholds during the contract period based on concerns they have identified with subcontracts that the contractor awarded. For example, one local office had concerns that the subcontractor was not disclosing potential conflicts of interest to the contractor and, therefore, the contractor did not mitigate these conflicts of interest. As a result, the contracting officers reduced the consent threshold to increase the number of consent packages they reviewed until they could be certain the contractor was managing subcontracting risks adequately. According to the local DOE officials, part of the reason they did not identify the deficiencies sooner was that high thresholds resulted in the local officials conducting few consent reviews. In another example, a DOE contracting officer from a different local office lowered the consent review threshold in 2017 due to documentation issues—such as files with inadequate documentation to explain or justify proposed prices—as well as the contractor not sending a subcontract to the local office for approval, as required. Local DOE officials told us they requested a peer review of the contractor to see if this was a systemic issue, and they reduced the consent threshold to send a message to the contractor that DOE expected the contractor to improve its subcontracting practices. For more than half of the contracts in our selection, thresholds for required consent reviews have not been reevaluated since the contracts were awarded because, according to DOE officials, there has not been a requirement to do so. Federal internal control standards state that management should design control activities to achieve objectives and respond to risks. As discussed in the examples above, without an appropriate number of subcontract reviews, deficiencies, such as inadequate documentation, have persisted. By requiring contracting officers to periodically reevaluate the thresholds for consent reviews, DOE may be able to better ensure that local offices have sufficient visibility into contractors’ subcontracting actions to ensure that proposed subcontracts are appropriate to the risks involved and consistent with current policy and sound business judgment. After we provided our preliminary results from our review of the consent review process to DOE headquarters officials, the officials told us they planned to reevaluate consent thresholds as part of the peer review process described above, with respect to purchasing system reviews. NNSA headquarters officials stated that they would implement a similar change to its process, based on DOE’s guidance, once DOE implements its changes in the November 2018 update. However, we reviewed the November 2018 update and found that it did not include a requirement to reevaluate consent thresholds as part of the peer review process. According to local DOE officials and documents provided, DOE develops Performance Evaluation and Measurement Plans at the beginning of each fiscal year to establish expectations for contractor performance and to describe how the local office will evaluate the contractors’ performance against those expectations. According to DOE guidance, the plans provide a standard to assess whether the contractors are meeting the mission requirements and performance expectations for goals stipulated within the contracts. In addition, according to DOE guidance, the plans should describe the incentives available, such as award fees, and the methodology for determining the amount of incentives earned by the contractor for the year, based on the evaluation of the contractor’s performance. In general, Performance Evaluation and Measurement Plans we reviewed included goals and performance criteria. Goals are the broad, high-level categories and benchmarks that local DOE officials use to assess the contractor’s annual performance and reflect what local officials consider most important in the contractor’s performance. Performance criteria, also included in the plans we reviewed, refer to the elements officials should consider when reviewing to determine whether the contractor has met the goals. Not all performance criteria need to be met for a contractor to show adequate performance toward a goal. None of the fiscal year 2016 Performance Evaluation and Measurement Plans for the 24 prime contracts we reviewed included goals explicitly related to subcontractor management, and only 3 of the 24 plans included performance criteria that were related to the contractor’s management of subcontractors. According to DOE officials, there is no requirement to include specific goals or performance criteria related to subcontractor management in these plans because the contractor is responsible for completing the scope of work in the prime contract, regardless of whether it was performed by the contractor or a subcontractor. The fiscal year 2016 Performance Evaluation and Measurement Plans we reviewed for 18 of the 24 prime contracts in our selection included a goal for effective and efficient business operations, which includes the contractor’s accounting and purchasing systems. DOE headquarters officials stated that they would expect any subcontract management issues that affected the scope, schedule, or cost of the contract to be identified and addressed within this goal. However, of the three plans that included performance criteria on subcontract management, none of the criteria were included under the business operations goal, as DOE officials said they would have expected. Rather, these performance criteria were included under goals such as “project performance and technical issue resolution” or a “special emphasis area.” The fiscal year 2016 Performance Evaluation and Measurement Plans we reviewed did not reflect the expectations DOE headquarters officials described to us that subcontract management would be reflected in the business operations goal of contractor evaluations, and the plans do not acknowledge the importance of subcontract management and oversight, particularly in light of the high percentage of contract obligations— frequently for cost-reimbursement contracts—that subcontractors ultimately execute. As we mentioned above, contractors in our selection subcontracted out nearly 30 percent of their fiscal year 2016 obligated funds, making subcontract management a key part of the contractors’ work. According to DOE guidance, DOE should use performance-based management as a strategic contract management tool to plan for, manage, and evaluate contractor performance under the prime contract and to align performance with costs. A March 2018 study of NNSA’s M&O contractors and a February 2019 GAO report on DOE performance measures found that performance evaluations tend to be subjective and do not focus on potentially important areas, such as the contractors’ cost performance. The Deputy Secretary of Energy also issued a statement in September 2018 noting the importance of properly incentivizing performance as part of contract management to ensure that the most important performance measures are identified and that incentives are appropriately aligned to those measures. However, the plans we reviewed do not reflect the importance of subcontract management because there is no requirement to include assessments of the contractors’ management of its subcontractors in the plans. By requiring that explicit performance criteria that assess the contractors’ management of subcontractors be included as part of the annual Performance Evaluation and Measurement Plans, DOE would have more reasonable assurance that the agency is emphasizing the importance of subcontract management and providing contractors an additional incentive to properly manage their subcontractors. Contracting officers at DOE’s local offices are responsible for, among other things, ensuring that contractors complete required subcontract audits. DOE’s headquarters and local offices have taken some steps to ensure that contractors comply with their subcontracting requirements. However, differences in how contractors, local DOE offices, and DOE headquarters offices interpret subcontract audit requirements and perform subcontract audits persist because DOE has not clearly defined—in guidance or other documents—how these requirements should be met. Until DOE clarifies which subcontracts should be audited, how an audit is defined, and how to meet subcontract audit requirements if DCAA is unable to conduct the audit, contractors may not perform subcontract audits as intended and unallowable costs may not be identified or recouped. Additionally, DOE’s local offices did not always ensure that contractors audited their subcontractors’ incurred costs for cost- reimbursement and time-and-materials subcontracts as required because DOE headquarters has not issued documented procedures or guidance that requires local offices to monitor contractors’ progress in completing the required subcontract audits in a timely manner. Without such procedures or guidance, unallowable costs may go unidentified beyond the 6-year limitation period of the Contract Disputes Act, preventing DOE from recovering those costs. In addition, the timing of contractor accounting system reviews differs among DOE’s local offices. DOE has not reviewed the differences in the frequency of the reviews and whether the basis for these differences is appropriate, nor provided guidance that includes criteria to determine the frequency of reviews. By reviewing the differences in the frequency of its accounting system reviews and approvals and developing guidance that includes criteria to determine the appropriate frequency of such reviews, DOE acquisition officials could better ensure that adequate accounting systems are in place during the entire period of the contract. DOE uses consent reviews to ensure that other subcontracting requirements are met, including that subcontracts are appropriate to the risks involved and that there are appropriate safeguards related to personal and organizational conflicts of interest. Nevertheless, DOE generally does not independently request or review subcontractor ownership information or assess potential conflicts of interest related to ownership between contractors and subcontractors as part of their consent reviews—beyond information disclosed by the contractor— because there is no requirement to do so. Recent criminal investigations into conflicts of interest, local offices’ own findings of unreported conflicts, and the complex ownership relationships among contractors and subcontractors that we identified emphasize the need for oversight in this area. By establishing such a requirement, DOE would have better assurance that contractors are adequately identifying and mitigating conflicts of interest. DOE’s local offices set thresholds to determine which subcontracts to review. The thresholds often are set at the beginning of the contract and are not reevaluated because there is no requirement to do so. We observed a small number of instances in which DOE local offices decreased thresholds after identifying concerns during consent reviews. We were encouraged that DOE intended to incorporate evaluation of consent review thresholds in their peer review process as part of their planned update to their guidance, but upon subsequent review, the guidance did not contain the requirement. By requiring local offices to periodically reevaluate consent review thresholds, DOE and NNSA acquisition officials may be able to better ensure that local offices have sufficient visibility into contractors’ subcontracting actions to ensure that proposed subcontracts are appropriate and consistent with current policy. Finally, DOE uses Performance Evaluation and Measurement Plans to establish expectations for contractor performance, including performance criteria, used to evaluate contractor performance. However, few of the plans we reviewed included explicit goals or performance criteria related to subcontract management because there is no requirement to do so. By requiring inclusion of explicit performance criteria for assessing the contractors’ management of subcontractors in these plans, DOE and NNSA acquisition officials would have more reasonable assurance that the agency is emphasizing the importance of subcontract management and providing contractors an additional incentive to properly manage their subcontractors. We are making the following six recommendations to DOE: The Director of the DOE Office of Acquisition Management should clearly define—in guidance or other documents—which subcontracts should be audited, how an audit is defined, and how to meet subcontract audit requirements if DCAA is unable to conduct the audit.(Recommendation 1) The Director of the DOE Office of Acquisition Management should develop documented procedures or guidance that requires DOE’s local offices to monitor the contractors’ progress in completing required subcontract audits in a manner that ensures unallowable costs can be recovered within the 6-year limitation period in the Contract Disputes Act. (Recommendation 2) The Director of the DOE Office of Acquisition Management should review the differences in the frequency of DOE’s accounting system reviews and approvals and develop guidance that includes criteria to determine the appropriate frequency of such reviews for prime contracts. (Recommendation 3) The Director of the DOE Office of Acquisition Management should require local officials to independently review subcontractor ownership information as part of DOE consent reviews and assess potential conflicts of interest to ensure contractors are mitigating them. (Recommendation 4) The Director of the DOE Office of Acquisition Management should require local offices to periodically reevaluate consent review thresholds. (Recommendation 5) The Director of the DOE Office of Acquisition Management should require contracting officers to include assessments of the contractors’ management of subcontractors as part of annual Performance Evaluation and Measurement Plans, as appropriate. (Recommendation 6) We provided a draft of this report to DOE for comment. In our draft report, we made twelve recommendations—each of our six current recommendations was made to both DOE and NNSA. In response to DOE’s comments, we consolidated our original twelve recommendations into six recommendations addressed to DOE. We did so with the understanding that NNSA follows DOE guidance and would develop supplemental guidance, as needed, to implement these recommendations. With regard to the remaining six current recommendations, DOE partially concurred with five of the recommendations and did not concur with one of the recommendations. DOE’s written response is reproduced in appendix IV. In addition, DOE provided technical comments which we incorporated as appropriate. DOE did not concur with our fourth recommendation to require local officials to independently review subcontract ownership information as part of DOE consent reviews and assess potential conflicts of interest to ensure contractors are mitigating them. In response to the recommendation, DOE said that it plans to issue guidance emphasizing the importance of contracting officers’ reviewing contractors’ disclosure and mitigation of issues created by potential conflicts of interest or ownership affiliations between contractors and subcontractors, and NNSA plans to evaluate the need for additional action upon issuance of the guidance. DOE officials said they rely on the consent review process to ensure that contractors identify and mitigate subcontract ownership conflicts as required, such as those that may occur in connection with subcontracts to related parties. Local DOE officials told us they have identified instances, through their consent reviews, in which the contractors’ reporting of potential conflicts of interest was inadequate. Furthermore, we have identified several recent high-profile incidents that have involved fraudulent activity by subcontractors related to conflicts of interest that were not disclosed to DOE. DOE officials—including those in local offices—have access to several databases and other sources of information that would allow them to independently verify ownership information that could allow the local offices to identify potential conflicts of interest that were not disclosed. We continue to believe that requiring local officials to independently review subcontractor ownership information as part of consent reviews and assess potential conflicts of interest could provide DOE with greater assurance that the contractors are identifying and mitigating conflicts of interest. In response to our other five recommendations, DOE stated that it partially concurred with each. For each recommendation, DOE said that it would review existing regulations, procedures, guidance, or contract provisions and assess the need for supplemental guidance. We believe that DOE’s plans to further examine the issues raised in our report is a positive step toward resolving the issues; however, we believe that the actions called for in our recommendations remain valid and that DOE could more efficiently resolve the issues by proceeding to implement those actions. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, the Administrator of the National Nuclear Security Administration, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. To address our objectives, we reviewed relevant laws, regulations, and guidance, including the Federal Acquisition Regulation (FAR); the Department of Energy Acquisition Regulation (DEAR); Department of Energy (DOE) policies and guidance on contract management and subcontract oversight; and individual prime contracts to identify requirements that explicitly apply to subcontracting, including DOE’s roles and responsibilities and requirements for the contractor. We also reviewed relevant documentation and interviewed officials from DOE and the National Nuclear Security Administration (NNSA), as well as representatives of DOE’s largest prime contracts and officials from the local DOE offices that oversee these prime contracts. To identify the entities that participated in DOE’s largest prime contracts, the extent to which they subcontracted their work, and the entities that participated in those subcontracts during fiscal year 2016, we reviewed a list of all DOE prime contracts active in that year provided by DOE headquarters officials. That list included information about prime contract type, total prime contract value, fiscal year 2016 obligations, and DOE’s local offices responsible for overseeing the contractors. We selected fiscal year 2016 for review because it was the most recent fiscal year for which complete data were available at the start of our review. DOE’s total prime contract obligations for fiscal year 2016 were $28.2 billion. We determined that an appropriate threshold for establishing our selection would be all single prime contracts for which DOE obligated at least $300 million (about 1% of all contract obligations) in fiscal year 2016, and this resulted in a list of 24 prime contracts that represented about $23.6 billion in obligations, or about 84 percent of DOE’s fiscal year 2016 prime contract obligations. The resulting selection of 24 prime contracts consisted of both management and operating (M&O) and non-M&O prime contracts from the three major program offices within DOE: NNSA, Office of Science, and Office of Environmental Management. We took several steps to determine the reliability of the prime contract data provided by DOE, including interviewing agency officials and reviewing individual prime contract documents, as well as verifying, through contractor and local office interviews, the amount of funds obligated to the prime contract in fiscal year 2016. We determined that the data provided by DOE on the prime contracts, in terms of prime contract obligations in fiscal year 2016, were sufficiently reliable for identifying DOE’s largest prime contracts. To identify the parties to DOE’s largest prime contracts, we reviewed documents and statements the DOE local offices provided about the parties to each of the 24 prime contracts in our selection. For consistency, we used only the information local DOE officials provided about prime contract ownership, either from their direct statements or from the prime contract documents they provided as our source for the information, although we observed that in some cases more recent ownership information was available through the contractors’ websites. In addition to the documents and statements officials from DOE’s local offices provided, we also reviewed contractors’ websites and information from the parties’ websites about acquisitions and mergers to better understand the complicated relationships among all of the contractors and the parties to the prime contracts. Because of changes in entity ownership or the structure of these prime contracts, more entities than we identified in our analysis may be parties to these prime contracts. To identify the subcontractors to the 24 prime contracts in our selection, we requested and reviewed data from the 24 contractors about their active subcontracts in fiscal year 2016. Each contractor provided data on their subcontracts that were $10,000 or more and that were active in fiscal year 2016, including: the subcontractor’s name, Dun & Bradstreet’s Data Universal Numbering System (DUNS) number, location of subcontractor’s office, total award amount, total obligated amount for fiscal year 2016, type of subcontract, contract award date, and contract term. There were some cases in which the contractors did not provide all of the requested subcontract data, or the data provided were not clear, such as the meaning of the type of subcontract. To resolve these issues, we conducted contractor-specific follow-up requests to either collect the missing information, identify the reasons that information was not available, or to clarify data they provided. We were able to collect missing information and clarify the data with two exceptions. First, many contractors did not have DUNS numbers for all of their subcontractors and therefore we did not use this identifier in our analyses. Second, contractor Brookhaven Science Associates, LLC did not track the obligated dollar amount for fiscal year 2016 for its active subcontracts. As a result, we were not able to include it in our analysis of the dollar amount of subcontracted funds, and we indicated that this analysis was therefore based on 23 of the 24 prime contracts in our selection. We took several steps to determine the reliability of the subcontract data provided by the contractors, including requesting and reviewing information from each of the contractors about the systems used to capture the data, and we determined that the information was sufficiently reliable to use in analyses of subcontract information from these 24 contractors in fiscal year 2016. We identified the amount of funds subcontracted, the number of subcontracts, and the number of unique entities subcontracted to during fiscal year 2016. We also identified the amount subcontracted for each contractor by type of subcontract, as defined in the FAR: (1) fixed-price; (2) cost-reimbursement; (3) cost- reimbursement, no-fee; and (4) time-and-materials. In addition, we used the names of the subcontractors to identify any cases in which a party to the prime contract was also a subcontractor to any of the prime contracts in our selection. We used shortened versions of the parties’ names to perform the matching between parties to the prime contract and subcontractors. For example, the party to the Battelle Energy Alliance, LLC prime contract—Battelle Memorial Institute—was shortened to “Battelle,” and we included any subcontract that included the word “Battelle” in its name in our match list. This allowed us to identify a conservative estimate of the number of parties who were also subcontractors in fiscal year 2016. However, this analysis would not have identified any cases in which the subcontractor was a party to the prime contract but had a different name. To develop graphical representations of (1) figure 2, Entities That Were Party to More than One of the 24 Largest Department of Energy Prime Contracts, Fiscal Year 2016 (which explores ownership relationships between parties and prime contracts) and (2) figure 4, Selected Department of Energy Contractors That Awarded Subcontracts to Parties to Their Prime Contract, Fiscal Year 2016 (which explores contracting relationships between prime contracts and subcontractors that were also parties), we performed the name-matching exercise described in the previous paragraph to first structure the data and then develop graphical prototypes using the UCINet network analysis tool, including its NetDraw graphics tool, which were then further refined for GAO publication. For each of the static representations, the graphics juxtaposed two sets of entities in columnar format: (1) for the party-prime contract graphic, we arrayed parties to two or more prime contracts in the first column of entities and the prime contracts in which these parties had ownership in a second column, and (2) for the prime contract-party as subcontractor representation, we arrayed the prime contracts in the first column and the subcontractors who were also parties to their prime contract in the second column. Lines between parties and prime contracts in the first graphic represented the presence of an ownership relationship. The parties were sized according to the number of contracts that the entity was a party to, and the contracts were sized according to the number of parties to that contract. Lines between prime contracts and parties as subcontractors in the second graphic represented the value of subcontracts between the two, with the lines taking on one of four weights corresponding to dollar value ranges. To examine the extent to which DOE ensured that the 24 contractors in our selection audited subcontractors’ incurred costs and met other requirements for subcontract oversight, we developed a structured interview and a request for data and documents, which we administered to representatives of the 24 prime contracts in our selection and to DOE officials at local offices who were responsible for the oversight of the contractors. To develop the list of requested documents and structured interview questions, we reviewed the FAR, DEAR, DOE policies and guidance, and individual prime contracts to identify both DOE’s roles and responsibilities and requirements for the contractor regarding subcontracting. From these sources, we confirmed that the review of subcontract costs, including subcontract audits and DOE access to subcontractor records, was a key requirement and identified two other broad categories that covered the requirements we identified for DOE and the contractor related to subcontracting: (1) the review and approval of contractor business systems, including the accounting and purchasing systems; and (2) DOE’s approval of subcontracts through consent reviews, which are intended to assess the contractors’ adherence to subcontracting requirements and provide assurance against conflicts of interest, including personal and organizational conflicts, and issues with kickbacks, foreign influence, and disbarment. We designed the structured interview questions and document requests to identify how DOE officials met subcontract oversight requirements. We pretested the structured interview questions and document requests at three of DOE’s local offices that included both M&O and non-M&O prime contracts from three major program offices—the Hanford Site in Washington State, Lawrence Livermore National Laboratory, and Pacific Northwest National Laboratory—and made changes to the request for documents and the interview guide as appropriate. We then conducted the structured interviews with DOE’s local officials responsible for oversight of the 24 contractors in our selection, including contracting officers, and with representatives from the 24 contractors during February, March, and April 2018. We also collected documents that addressed DOE’s oversight of the contractors’ management of subcontracts, including, as of February 2018, the two most recent incurred cost audits or assessments of the prime contract—which spanned the 10-year period from 2007 to 2016—the contract management plans, annual contractor performance reviews, peer reviews, and information about the subcontractors and entities that were parties to the prime contracts. We conducted a content analysis of DOE and contractor officials’ responses provided through the structured interview process and on the data and documentation we received, and we summarized the extent to which DOE ensures that contractors were auditing subcontractors’ incurred costs and meeting other requirements for subcontract oversight. We conducted this performance audit from May 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 4 provides information on the Department of Energy’s (DOE) 24 largest prime contracts in fiscal year 2016, including the name of the site or project, the name of the contractor, entities that were party to the prime contract, and the amount obligated on the contract in fiscal year 2016. Local DOE officials provided information on parties to the prime contract, either from direct statements or from the prime contract documents. We used information DOE provided as our source for the information in the table, although we observed that in some cases more recent information was available through the contractors’ websites or other sources. There are several key federal data systems that include information on Department of Energy (DOE) contractors. Additionally, DOE has internal systems that include information on contractors. These data systems are available to federal employees and can be used to differing extents to identify information about contractor ownership. In addition to the contact named above, Hilary Benedict (Assistant Director), Kathy Pedalino (Analyst in Charge), Caitlin Dardenne, and Jeffrey (Chris) Wickham made key contributions to this report. Also contributing to this report were Enyinnaya David Aja, David Dornisch, Farrah Graham, Richard P. Johnson, Cynthia Norris, Dan Royer, and Tatiana Winger.", "summary": "DOE, including NNSA, is the largest federal civilian contracting agency, spending about 90 percent of its appropriations on contracts with companies, universities, and others for federal research and development, engineering, and production. DOE headquarters and local offices oversee contractors’ activities, including their management of subcontracts. GAO was asked to review contracting at DOE, including the use of subcontractors. This report examines, for fiscal year 2016, (1) the parties that participated in DOE’s largest prime contracts and the extent to which they subcontracted their work; (2) the extent to which DOE ensured that those contractors audited subcontractors’ costs, as required; and (3) the extent to which DOE ensured that contractors met other subcontract oversight requirements. GAO reviewed DOE’s fiscal year 2016 data and documents, analyzed regulations, and interviewed federal officials and contractor representatives for DOE’s 24 largest fiscal year 2016 prime contracts. In fiscal year 2016, 28 entities participated in the Department of Energy’s (DOE) and its National Nuclear Security Administration’s (NNSA) 24 largest prime contracts, which totaled $23.6 billion of DOE’s fiscal year 2016 obligations. The contractors awarded about $6.9 billion (nearly 30 percent) of those obligations to thousands of subcontractors. Further, multiple companies, universities, and other entities can join together to bid on a contract (i.e., become a “party to” a contract). GAO’s review of data about these contracts and subcontracts identified complex ownership relationships among the contractors and subcontractors. For example, GAO found that almost all of the 28 parties to the prime contracts in its review were also subcontractors to some prime contracts, holding a total of nearly 3,000 subcontracts with fiscal year 2016 obligations totaling about $927 million (see figure). GAO found that it can be difficult to track changes in the ownership of parties to the contracts and to understand the relationships between parties. DOE and NNSA did not always ensure that contractors audited subcontractors’ incurred costs as required in their contracts. GAO’s review of 43 incurred-cost assessment and audit reports identified more than $3.4 billion in subcontract costs incurred over a 10-year period that had not been audited as required, and some subcontracts remained unaudited or unassessed for more than 6 years. Completing audits in a timely manner is important because of a 6-year statute of limitations to recover unallowable costs that could be identified through such audits. DOE headquarters has not issued procedures or guidance that requires local offices to monitor contractors to ensure that required subcontract audits are completed in a timely manner, consistent with federal standards for internal control. Without such procedures or guidance, unallowable costs may go unidentified beyond the 6-year limitation period of the Contract Disputes Act, preventing DOE from recovering those costs. DOE and NNSA perform several reviews to ensure that contractors meet other subcontract oversight requirements. For example, DOE’s local offices review proposed subcontracts to ensure they are awarded consistent with policies related to potential conflicts of interest. However, local officials do not independently review information on subcontractor ownership because doing so is not required, although such information could alert officials to potential conflicts of interest. By requiring contracting officers to independently review subcontractor ownership information, DOE and NNSA would have better assurance that contractors are adequately identifying and mitigating organizational conflicts of interest. GAO is making six recommendations, including that DOE develop procedures that require local offices to monitor contractors to ensure timely completion of required subcontract audits, and require local DOE officials to independently review subcontractor ownership information to identify potential conflicts of interest. DOE partially concurred with five of GAO’s six recommendations but did not agree to independently review subcontractor ownership information. GAO maintains that the recommended actions are valid.", "document_type": "gao"}
{"report": "This section presents information on the Superfund program and the stages of the cleanup process, the relationship between federally recognized tribes and the federal government, the laws and policies that govern EPA’s consultation with federally recognized tribes regarding Superfund cleanup actions, and EPA’s administration of the Superfund program. CERCLA established the Superfund program to clean up contaminated sites to protect human health and the environment from the effects of hazardous substances. Under CERCLA, potentially responsible parties are liable for conducting or paying for the cleanup of hazardous substances at contaminated sites. Under the Superfund program, EPA and potentially responsible parties can undertake two types of cleanup actions: removal actions and remedial actions. Removal actions are usually short-term cleanups for sites that pose immediate threats to human health or the environment. Remedial actions are generally long- term cleanups—consisting of one or more remedial action projects—that aim to permanently and significantly reduce contamination; these actions can take a considerable amount of time and money, depending on the nature of the contamination and other site-specific factors. The Superfund process begins with the discovery of a potentially hazardous site or notifications to EPA regarding the possible release of hazardous substances that may threaten human health or the environment. EPA delineates the Superfund remedial cleanup process in nine phases: 1. Preliminary Assessment and Site Investigation. EPA’s regional offices may discover sites with releases of hazardous substances or potential for releases of hazardous substances, or such sites may come to EPA’s attention through notifications—either reports from state agencies or citizens. As part of this first phase of the process, EPA’s regional offices use a screening system called the Hazard Ranking System to guide decision making and, as needed, to numerically assess the site’s relative potential to pose a threat to human health or the environment. 2. NPL Site Listing Process. EPA may propose sites that score at or above an established level for listing on the NPL. EPA regions submit sites to EPA headquarters for possible listing on the NPL based on a variety of factors, including the availability of alternative state or federal programs that may be used to clean up the site. Sites that EPA proposes to list on the NPL are published in the Federal Register. After a period of public comment, EPA reviews the comments and makes final decisions on whether to list the sites on the NPL. 3. Remedial Investigation and Feasibility Study. EPA or a potentially responsible party will generally begin the remedial cleanup process for an NPL site by conducting a two-part study of the site: (1) a remedial investigation to characterize site conditions and assess the risks to human health and the environment, among other actions and (2) a feasibility study to evaluate various options to address the problems identified through the remedial investigation. 4. Record of Decision. At the culmination of the remedial investigation and feasibility study, EPA issues a record of decision that identifies EPA’s selected remedy for addressing the contamination. A record of decision typically lays out the planned cleanup activities for each operable unit of the site. 5. Remedial Design and Remedial Action. EPA or a potentially responsible party plans the implementation of the selected remedy during the remedial design phase, and then, in the remedial action phase, EPA or a potentially responsible party carries out one or more remedial action projects. 6. Construction Completion. EPA generally considers the construction to be complete for a site when all physical construction at a site is complete, including actions to address all immediate threats and to bring all long-term threats under control. 7. Post-Construction Completion. The potentially responsible party or the state generally conducts operation and maintenance to maintain the remedy, such as operating a groundwater extraction and treatment system. EPA generally performs reviews of the remedy at least every five years to evaluate whether it continues to protect human health and the environment. 8. NPL Deletion. EPA may delete a site, or part of a site, from the NPL when the agency and the relevant state authority determine that no further site response is needed. 9. Site Reuse and Redevelopment. EPA works with communities to ensure that site cleanups are consistent with the site’s future use and to make sure sites or portions of sites are used safely. The federal government recognizes Indian tribes as distinct, independent political communities that possess certain powers of self-government and sovereignty. As of January 9, 2019, there were 573 federally recognized Indian tribes. The federal government has a government-to-government relationship with Indian tribes, so EPA works directly with tribes. The federal government also has a trust responsibility to Indian tribes and their members based on treaties, federal laws, and court decisions. In addition, treaties between tribes and the federal government may reserve rights to a tribe that could be affected by a proposed EPA action. For example, an NPL site may contaminate fish or wildlife that a tribe has a treaty right to fish or hunt. EPA guidance notes that certain types of EPA actions, namely those that are focused on a specific geographic area, are more likely than others to have potential implications for treaty-protected natural resources. CERCLA includes a requirement for EPA to consult with Indian tribes in certain circumstances regarding cleanup actions at Superfund sites. Specifically, under CERCLA, EPA is required to treat tribes substantially the same as states with regard to consultation on remedial actions on lands for which an Indian tribe has jurisdiction, among other things. In addition to this CERCLA requirement, the following government-wide and agency policies apply when EPA consults with tribes regarding cleanup actions at Superfund sites: Executive Order 13175 (2000). Directs agencies to have an accountable process to ensure meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications. EPA policies and guidance EPA Policy for the Administration of Environmental Programs on Indian Reservations (1984). Sets forth principles to guide EPA in dealing with tribal governments and responding to the problems of environmental management on reservations in order to protect human health and the environment. EPA Policy on Consultation and Coordination with Indian Tribes (2011). Provides a general, agency-wide policy for consultation and coordination with tribes in cases in which EPA actions and decisions may affect tribal interests. EPA developed this policy in response to Executive Order 13175 and a 2009 presidential memorandum on tribal consultation. The policy notes that EPA submits annual progress reports to the Office of Management and Budget (OMB) on the status of its consultation actions pursuant to this 2009 presidential memorandum. This policy provides guiding principles for consultation, outlines a four- phase process for conducting consultation, and establishes the roles and responsibilities for specific EPA officials. Some EPA regional offices have their own specific guidance for consulting with tribes that include the elements of EPA’s agency-wide consultation policy, but may include more specific guidelines. For example, Region 2’s consultation guidance includes a list of specific subjects to include in notification letters to tribes. EPA Policy on Environmental Justice for Working with Federally Recognized Tribes and Indigenous Peoples (2014). Affirms EPA’s commitment to provide federally recognized tribes and indigenous peoples in the United States fair treatment and meaningful involvement in EPA decisions that may affect their health or environment. EPA Guidance for Discussing Tribal Treaty Rights (2016). The guidance states that it is intended to enhance EPA’s consultations in situations where tribal treaty rights may be affected by a proposed EPA action. EPA Memorandum on Considering Traditional Ecological Knowledge During the Cleanup Process (2017). Provides direction to improve the Superfund decision-making process to ensure EPA considers a tribe’s traditional ecological knowledge when tribes willingly provide such information. EPA Memorandum on Consideration of Tribal Treaty Rights and Traditional Ecological Knowledge in the Superfund Remedial Program (2017). Provides recommendations for regional Superfund Remedial Program staff to consider when (1) evaluating tribal treaty rights and treaty-protected resources in program implementation and (2) considering traditional ecological knowledge during the cleanup process when the information is freely provided by the tribe or tribes with interests at the site. EPA’s 10 regional offices are responsible for carrying out many of the implementation and management responsibilities for NPL sites, and are guided by the Superfund Program Implementation Manual, as well as CERCLA, CERCLA’s implementing regulations, supplementary guidance, and agency policy. The Superfund Program Implementation Manual states that its purpose is to provide overarching program management priorities, procedures, and practices for EPA’s Superfund remedial and removal programs, providing a link between EPA’s strategic plan and Superfund program internal processes, among other things. Further, the manual includes definitions for Superfund program accomplishments and outlines processes for planning and tracking accomplishments through milestones, including site-wide milestones specific to how the agency manages the release of hazardous substances (e.g., human exposure under control). Using its SEMS and TCOTS data systems, EPA tracks NPL sites that are on tribal property or that affect federally recognized Indian tribes, as well as the agency’s efforts to consult with Indian tribes regarding cleanup decisions at NPL sites. SEMS is EPA’s primary database to track Superfund program accomplishments and milestones and to answer Superfund-related questions from Congress, federal and state agencies, and the public. SEMS is EPA’s primary system for Superfund data collection, reporting, and tracking and serves as the Superfund program’s data management system for accomplishment planning and tracking. According to the Superfund Program Implementation Manual, EPA regional staff are to input data into SEMS regarding planned or actual accomplishments, and EPA headquarters staff are to use SEMS data as the basis for tracking, managing, and reporting on the performance of the Superfund program. SEMS is the system of record for NPL site data, including information on tribes that have an interest in the site. We looked at three of the variables SEMS uses for tracking sites that are located on tribal property or that affect tribes: On tribal property. This variable indicates whether the release of hazardous materials is on Indian country and any other land owned by an Indian tribe or an Alaska Native entity. NAI. This variable identifies sites that may be of interest to one or more Native American entities whose members or land would be directly affected by the release of hazardous materials. Associated tribe. This variable identifies the specific Indian entity or entities associated with a site with NAI. TCOTS tracks information about potential future tribal consultation opportunities and serves as a repository for consultation-related documents for active consultations for all EPA programs, including Superfund. EPA uses TCOTS to (1) track current and forecasted consultation, (2) publicize current EPA consultation opportunities for tribal governments, and (3) provide reports to OMB, as called for in the 2009 presidential memorandum on tribal consultation. EPA data identifying NPL sites that are located on tribal property or that affect tribes are not reliable. Specifically, EPA data identifying sites that are on tribal property, sites that have NAI, and the tribes that have interest in NAI sites are not accurate or complete based on our reviews of agency data and interviews with EPA officials. EPA data identifying NPL sites that are on tribal property are not accurate. EPA headquarters officials told us that the SEMS data variable for identifying sites “on tribal property” may not always accurately identify whether NPL sites are located on tribal property. Because EPA officials told us that the agency’s data regarding NPL sites on tribal property may not be accurate and provided explanations for why these data are unreliable, we did not evaluate these data to determine the total number of inaccuracies. EPA officials we interviewed provided a number of reasons why the agency’s data regarding NPL sites located on tribal property may not be accurate: First, EPA officials told us that some site location information was inaccurately transposed during maintenance of the former database of record used prior to adopting SEMS, and that these errors, in some cases, carried over to SEMS. According to these officials, the transposed information resulted in some sites appearing in the incorrect geographic hemisphere (i.e., sites located in the western hemisphere appeared to be located in the eastern hemisphere in the incorrectly transposed data). These officials told us that they have worked over the past year to correct these errors and to verify the accuracy of site coordinates. Second, EPA officials told us that accurately documenting which sites are on tribal property can be complicated due to difficulties identifying tribal property boundaries and evolving site boundaries. For example, tribal property boundaries may be difficult to establish without reviewing land titles and other documents. Further, EPA officials told us they use the best available data to identify tribal property but there are limitations in that data. In addition, EPA officials we interviewed told us that site boundaries can be difficult to define or change over time. For example, an agency official told us NPL sites may not have clearly delineated boundaries until after the remedial investigation is complete and the full extent of contamination has been determined. Further, the official said that site boundaries may change during the cleanup process or during post-cleanup reviews if EPA discovers new or more widespread contamination. According to EPA headquarters officials, EPA regional officials are responsible for tracking changes to site boundaries in their respective regions, but specific information on the location of site boundaries is not documented in SEMS. Additionally, for one site—the Tar Creek site in Oklahoma (Region 6)—EPA’s publicly-available information states that there are no clear site boundaries. One EPA regional official we interviewed told us that he was not aware of guidance for regions regarding changing tribal property information in circumstances in which site boundaries change to include land that is tribal property. Additionally, EPA officials told us that regional offices may be inconsistent in how they determine site boundaries. EPA released recommended practices for collecting geospatial data for Superfund sites in 2017 that included guidance for determining and documenting NPL site boundaries. Further, in May 2018, EPA provided national standards intended to provide a uniform method for collecting, documenting, and managing geospatial information for Superfund sites, including information identifying site boundaries. Third, EPA headquarters officials stated that EPA checks the accuracy of these data infrequently. Headquarters officials told us there are several standardized automated reports that officials at the headquarters and regional levels can use to review SEMS data and identify quality issues, including quality issues in the variables for NAI and the associated tribes. However, these reports do not contain the on tribal property variable, and SEMS currently does not have the ability to run automated checks of site proximity to tribal property based on location data. Officials told us that they review the on tribal property data periodically outside of these reports; however, EPA currently lacks a regular review process for these data. Under federal standards for internal control, management should use quality information to achieve the entity’s objectives. Quality information is appropriate, current, complete, accurate, accessible, and provided on a timely basis. In addition, under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by conducting reviews at the functional or activity level. According to EPA officials, data identifying NPL sites that are on tribal property may not be accurate for a number of reasons. Because SEMS automated reports do not contain the on tribal property variable, EPA regions cannot regularly conduct quality reviews of information in SEMS on tribal property using those reports. Without a regular review process to ensure the quality of SEMS data identifying sites on tribal property and the ability to use automated reports to check the accuracy of on tribal property data in SEMS, EPA does not have reasonable assurance that regional officials have accurately identified sites on tribal property. EPA data identifying which sites have NAI are inaccurate and incomplete, based on our reviews of the data. We found three types of errors in these data. First, we found that SEMS did not include some sites with known tribal interest as having NAI. Second, we found some sites that EPA identified in SEMS as having NAI when there was no tribal interest. Third, we found that EPA regional officials inconsistently used the NAI variable in SEMS when there was no longer tribal interest in a site. SEMS does not include some NPL sites with known tribal interests as having NAI. We found nine sites with tribal interest that EPA did not identify as having NAI in SEMS. For six of these sites, EPA regional officials told us that they knew the sites were of interest to one or more tribes, even though they were not identified as having NAI in SEMS. For example, we found that EPA Region 10 had invited the Cow Creek Band of Umpqua Tribe of Indians to consult regarding the Black Butte Mine site, but the site was not identified as having NAI in SEMS. For two additional sites, following our request to review the SEMS data, officials from Region 4 contacted tribal officials in their region to inquire about their potential interest in NPL sites and found that the Eastern Band of Cherokee Indians had interest in two sites in North Carolina not previously identified as having NAI: Barber Orchard and Benefield Industries. EPA designated both sites as ready for their intended use—meaning that construction of the remedy had been completed—in 2011 and 2014, respectively. For the remaining site, EPA officials in Region 5 stated that they learned of tribal interest in the Petoskey Manufacturing Company Groundwater site when the Little Traverse Bay Bands of Odawa Indians contacted them in December 2017, after coverage of the site’s contamination hazards on the local news. SEMS incorrectly includes some sites as having NAI when no tribal interest exists. When responding to our request to verify the accuracy of data in SEMS, EPA regional officials identified 10 sites that were incorrectly included in SEMS as having NAI when there was no actual tribal interest. For example, officials from Region 4 stated that they removed the NAI designation from three sites because the sites are situated more than 100 miles from the nearest federally recognized tribe’s property and the officials were not aware of any tribal interest in the sites. Similarly, EPA regional officials determined that two other sites—Eielson Air Force Base in Region 10 and Seneca Army Depot in Region 2—were incorrectly identified as having NAI. These officials told us that these sites should not have been designated as NAI because no tribes had expressed interest in either site. EPA inconsistently identified sites with prior NAI in SEMS. We found that EPA regional officials inconsistently used the NAI variable in SEMS when tribes were no longer interested in a site. For example, Region 2 officials stated that they maintained the NAI designation for the Hooker Hyde Park site in order to preserve the historical record after EPA identified that the Seneca Nation of Indians no longer had an interest in the site. Conversely, Region 8 officials indicated that they removed the NAI designation for the Arsenic Trioxide site when it was determined that the relevant tribe no longer had interest in the site. Based on our review of EPA guidance and data provided by EPA officials, we identified several possible reasons that the agency’s data for identifying tribal interests are not accurate or complete. One possible reason that NAI data in EPA’s SEMS may be inaccurate and incomplete is because EPA’s guidance for making NAI determinations is unclear, resulting in EPA regional officials inconsistently determining and documenting sites with NAI. EPA’s Superfund Program Implementation Manual, which provides guidance to EPA regional officials for identifying sites as having NAI, contains one sentence regarding how EPA regional officials are to determine when to designate a site as having NAI. The manual states that EPA regional officials should designate NAI in SEMS when a site “may be of interest to tribes whose members or land are directly affected” by the release of hazardous materials from the site, but the manual does not specify criteria EPA regional officials should consider for determining what constitutes NAI. For example, the manual does not specify whether ancestral lands, areas where tribes have treaty rights, or areas otherwise of interest to a tribe but that are not tribal property should be considered in making this determination. It also does not specify what types of tribal interests to consider. However, officials from tribes we interviewed for our case studies told us that tribal interests in NPL sites may be related to a variety of factors, including contamination potentially affecting tribal members living in or around the contaminated area or land where the tribe has treaty hunting or fishing rights. Furthermore, EPA’s Superfund Program Implementation Manual does not specify whether officials should remove the NAI designation if officials determine tribes no longer have interest in a site. In the case of the Petoskey Manufacturing Company Groundwater site in Michigan, EPA Region 5 officials we interviewed told us that they were uncertain as to whether they should identify the site as having NAI, because they were unsure if the level of the tribe’s interest was significant enough. EPA officials we interviewed provided additional reasons for the lack of accuracy and completeness in the agency’s data regarding sites with NAI. EPA headquarters officials told us they periodically, but infrequently, review SEMS data on Superfund sites identified as having NAI. In addition, EPA officials told us that, in some cases, they did not identify sites as having NAI where there was tribal interest or incorrectly identified sites as having NAI when no tribal interests were involved due to errors. Additionally, some regional officials expressed that identifying NAI can be complicated by the fact that tribes may have interest in sites not located near their current property due to historical interest or treaty rights. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control in management directives, administrative policies, or operating manuals. Although EPA has documented guidance, it is not clear about how EPA officials should make determinations about designating sites as having NAI. Without clear guidance to regional offices on how to determine whether sites have NAI—including criteria to assist regions in determining when a site should be designated as having NAI in the SEMS database and how, if at all, to adjust the NAI data for sites that no longer have tribal interest—EPA does not have reasonable assurance that its data on tribes that may be affected by hazardous releases at NPL sites are accurate or complete. EPA data do not accurately or completely identify the tribes that have interest in the sites that EPA identified as having NAI. Specifically, through reviewing EPA’s data with officials in each region, we found examples of sites that EPA indicated as having NAI but that (1) did not identify any tribes with an interest in the sites, (2) did not identify all tribes with an interest in the sites, and (3) incorrectly identified tribes associated with a site. SEMS does not include tribes for all sites. We found eight sites with NAI for which EPA did not identify an interested tribe in SEMS. For these eight sites, EPA officials added the tribes’ names prior to sending us the data. SEMS does not include all tribes that have an interest in some sites. We identified eight sites for which EPA did not identify in SEMS all the tribes that had interest in the site. For example, for the Smurfit Stone Mill Frenchtown site in Missoula, Montana, EPA data listed the Confederated Salish and Kootenai Tribes of the Flathead Reservation as having an interest in the site. However, after speaking with EPA Region 8 officials, we learned that the Kalispel Indian Community of the Kalispel Reservation also has an interest in the site but could not be included in SEMS because the tribe resides in the state of Washington, and the site is located in Montana. In providing technical comments on a draft of this report, EPA identified a ninth site, the St. Louis River site, for which an additional tribe should be added to the data in SEMS. SEMS incorrectly identified an interested tribe associated with one site determined to have NAI. For the Velsicol Chemical Corporation site in Michigan, EPA identified in SEMS the interested tribe as the Sault Ste. Marie Tribe of Chippewa Indians, when the actual interested tribe was the Saginaw Chippewa Indian Tribe of Michigan. Additionally, in providing technical comments on a draft of our report, EPA also made corrections to the tribes originally listed for the Tar Lake site and clarified the tribe originally listed for the St. Louis River site. EPA officials we interviewed told us that a possible reason for the inaccuracies in the data regarding the tribe or tribes interested in NPL sites that have NAI is that, until recently, regional officials could not enter the names of additional tribes to a SEMS site record that was created in the agency’s previous database of record. In addition, officials from two EPA regions told us that they could not record tribes as having an interest in a site when the tribe is headquartered in a state other than the state address on file for the site. EPA headquarters officials told us they submitted a request in August of 2017 to have the issue resolved and that, as of April 2018, the issue had been corrected and that regions can now add additional tribes, or tribes from other states outside of the state where the site is headquartered. Officials told us that prior to the correction in SEMS, officials at the headquarters level could manually enter data to record the names of additional tribes with NAI in a site or identify tribes interested in a site that reside in states other than the state in which the site is located. EPA does not have reliable data on the agency’s consultation with tribes regarding NPL sites. Additionally, based on our analysis of EPA data and related documentation, as well as discussions with officials from EPA and Indian tribes, we found that EPA officials more frequently coordinated informally with tribes than conducted consultation. EPA does not have reliable data on the NPL sites at which it has conducted tribal consultation. According to data in TCOTS, consultation had occurred or was projected to occur at 18 sites since EPA’s consultation and coordination policy went into effect in 2011. However, TCOTS data are incomplete and did not include records for 7 NPL sites where, based on our interviews with EPA regional officials and a review of agency documents, we determined that consultation had occurred since 2011. One possible reason that EPA data on consultation with tribes are incomplete is that the agency’s guidance regarding what constitutes consultation, and therefore is to be recorded in TCOTS, is unclear. EPA officials told us they consider consultation a specific, formal interaction that involves government-to-government interaction between tribal governments and senior EPA officials, such as Regional Administrators, and generally happens at major decision points or at the request of a tribe. Several EPA officials we interviewed clarified that the majority of day-to-day interaction with tribes do not require consultation and are less formal coordination efforts. EPA’s 2011 consultation policy provides a broad definition of consultation and makes specified program and regional officials responsible for determining when consultation may be appropriate, but the policy does not provide specific criteria for regions to use to determine if consultation with a tribe should be considered. The policy initially states that it is EPA’s policy to “consult on a government-to- government basis with federally recognized tribal governments when EPA actions or decisions may affect tribal interests.” According to the policy, the broad scope of consultation contemplated by the policy creates “a large number of actions that may be appropriate for consultation.” To provide “a general framework from which to begin the determination of whether any particular action or decision is appropriate for consultation,” the policy provides a list of general EPA activity categories, including Superfund response actions. However, the policy does not provide any further guidance on the circumstances under which consultation should be considered. For example, it does not specify any particular points in the Superfund process at which consultation should be considered or any further detail on what tribal interests should be considered when determining if tribal interests are affected. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control in management directives, administrative policies, or operating manuals. Although EPA has documented guidance about consulting with tribes, it does not provide clear direction to regions about the circumstances under which the agency should consider consulting with tribes during the Superfund process. Without clarifying guidance on tribal consultation to clearly identify the circumstances under which the agency should consider consulting with tribes, EPA does not have reasonable assurance that regions are applying the consultation policy consistently and uniformly. In addition, EPA regional officials do not consistently document invitations to consult with tribes in TCOTS, which could result in incomplete or inaccurate data on EPA consultation with tribes. EPA headquarters officials told us that invitations to consult should be entered in TCOTS, because the database has a specific field for this information. Officials we interviewed from EPA Regions 6 and 10, the two regional offices that combined manage nearly half of Superfund sites that EPA identified as having NAI, told us that they do not document all invitations to consult in TCOTS. Specifically, an official we interviewed from Region 6 told us that consultation invitations that were not made in writing are generally not entered into TCOTS, and an official from Region 10 told us that officials in the region would not document invitations to consult that did not lead to actual consultation. In providing technical comments on our draft report, EPA noted that Region 10 now documents all invitations to consult with tribes in the TCOTS database. Although EPA headquarters officials told us that invitations to consult should be entered in TCOTS, agency guidance does not direct officials to do so. EPA has developed guidance on key points in the Superfund process at which regional officials should document consultation if it occurs, but this guidance does not direct regional officials to document invitations to consult in TCOTS. Moreover, officials we interviewed from 6 of EPA’s 10 regional offices were unaware of this guidance. An EPA headquarters official we interviewed told us that EPA regional officials may be unaware of this guidance because EPA has not conducted annual training regarding documenting tribal consultation and has decided to offer the training on an as-needed basis. This guidance identifies five decision points in the Superfund process at which EPA regional officials should, at a minimum, document any associated consultation with tribes in TCOTS, outlined in figure 1 below. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control in management directives, administrative policies, or operating manuals. By developing or revising guidance to clearly direct regional officials to document all invitations to consult with tribes in the TCOTS database and providing the guidance to those officials, EPA would have greater assurance that its regional offices are accurately and consistently documenting invitations to consult and that the data that EPA provides to OMB regarding agency consultations with tribes are accurate and complete. Based on our analysis of EPA data and documentation, as well as interviews with EPA and tribal officials, we found that EPA more frequently coordinated informally with tribes regarding cleanup decisions at NPL sites than conducted consultation with tribes. Consultation between EPA and tribes, as defined in EPA’s 2011 tribal consultation policy, is relatively infrequent compared to less-formal coordination efforts. For example, officials from the Kalispel Indian Community told us that consultation is reserved for instances in which regular communication and coordination is not working. Additionally, EPA officials in Region 8 told us that most of their day-to-day interactions with tribes are considered coordination, and that consultation only occurs at key decision points in the Superfund process. Most EPA regional officials we interviewed as part of our case studies stated that consultation was relatively infrequent. At the same time, these officials stated that they frequently coordinate with tribes during the Superfund cleanup process. Additionally, EPA’s policy says that tribal officials may request consultation with the agency. Tribal officials we interviewed as part of our case studies expressed varying levels of satisfaction with EPA’s coordination and consultation efforts, as well as with EPA’s cleanup decisions overall. In the case of the General Motors Central Foundry site in Massena, New York, officials we interviewed from the Saint Regis Mohawk Tribe told us that they were dissatisfied with the consultation and the remedy at the General Motors Central Foundry site. Specifically, tribal officials stated that they were dissatisfied with EPA’s decision to install a permanent cap over an industrial landfill at the site, rather than removing all of the waste, to address the contamination at the site. Officials from the tribe told us that they felt EPA was disregarding the tribe’s health and safety concerns at the site. EPA acknowledged in its amended record of decision for the site that the tribe only partially agreed with the remedy; however, EPA notes that they took some steps to revise the remedy to address the tribe’s concerns. For example, the amended record of decision was created in part, due to tribal opposition, and includes a contingency remedy that expands the scope of the amended decision to include removal of contaminated soil located on the tribe’s property rather than on-site treatment. In other cases, officials of some tribes told us that the working relationship with their local EPA region was good and that coordination had been effective. For example, officials from the Pueblo of Laguna reported that communication and coordination with EPA region 6 regarding the cleanup of the Jackpile-Paguate Superfund site in Laguna Pueblo, New Mexico, was effective, and that the EPA remedial project manager for the site had been responsive to the tribe’s needs. EPA has taken various actions to address the unique needs of tribes when making cleanup decisions at NPL sites. These actions include efforts to minimize tribal members’ exposure to contaminants and limit potential damage to tribal archeological sites. For example: EPA Regions 1 and 10 took steps to protect tribal cultural resources at NPL sites. EPA officials we interviewed from Region 1 told us that at one site, regional officials rerouted and improved roads used to remove contaminated materials to minimize the impact of cleanup activities’ on historically significant cultural resources. In addition, EPA officials we interviewed from Region 10 told us that they coordinated with tribal cultural resource program officials to ensure that tribal officials were present during excavation work at the Midnite Mine site in Wellpinit, Washington, to observe and ensure that EPA was taking appropriate measures to protect sites that are culturally important to the tribe. EPA Region 2 officials revised risk assessments at an NPL site. Because of concerns about the potential health impacts to the Saint Regis Mohawk Tribe, EPA Region 2 officials revised the risk assessment for a site with polychlorinated biphenyl contamination to more accurately reflect the typical exposure of tribal members. EPA’s revised hazard exposure assessment for the General Motors Central Foundry site assumed a higher rate of exposure to contaminants for tribal members, given that they, on average, live on the reservation longer than an adult non-tribal member may live in the same place for most of his or her life. Specifically, EPA’s exposure estimate was based on an exposure duration of 64 years for an adult tribal member and an exposure duration of 30 years for adult non-tribal member. EPA Region 9 incorporated tribal information into risk assessments for some NPL sites. EPA officials we interviewed from EPA’s Region 9 office told us about several sites where they had considered tribal members’ heightened exposure to contamination. For example, at one site, officials told us they worked closely with tribal officials to gather data on tribal members’ uses of vegetation and tribal game consumption. These EPA officials stated that they used these data to develop risk assessment plans that were sensitive to unique tribal needs. EPA officials we interviewed also provided examples of the use of traditional ecological knowledge at some NPL sites. Traditional ecological knowledge sometimes represents unique tribal needs. For example, EPA officials we interviewed described instances in which a tribe provided EPA with selected information about their traditional hunting sites and their traditional use of plants, and EPA was able to use this information when developing risk assessments and standards for safe consumption of fish and wildlife. For example, officials in EPA Region 9 told us that a tribe shared information with them about how tribal members hold reeds in their mouths as part of traditional basket making practices. These officials reported that after learning of the tribe’s use of such reeds, the agency considered this information when determining how to evaluate contamination in the area where the reeds grow. EPA and tribal officials told us that, for confidentiality reasons, some tribes may be reluctant to share some traditional ecological knowledge; however, headquarters and EPA regional officials told us that this was relatively infrequent and that, in these situations, EPA was able to work with the tribe to find ways to use more general information to inform decisions regarding Superfund cleanups. EPA has policies and procedures for consulting with tribes when its actions and decisions at NPL Superfund sites may affect tribal interests. To carry out these policies and procedures, EPA must be able to identify when its actions and decisions may affect a tribe. The agency has developed two systems—SEMS and TCOTS—that it uses to identify and track sites that are on tribal property or that affect tribes, and the agency’s efforts to consult with affected tribes, respectively. However, based on our analysis of some of the data in these systems, these data are not reliable. Data on sites that are on tribal property are not accurate, and there is no regular, standardized review process officials can use to review the quality of these data. Without developing such a review process, EPA will not have reasonable assurance that regional officials have accurately identified the sites that are on tribal property. Additionally, data on sites that have NAI are not accurate or complete due, in part, to unclear guidance for how regions should determine whether a site has NAI. Clarifying guidance to regional offices on how to determine whether sites have NAI can help provide EPA reasonable assurance that its data on tribes that are directly affected by hazardous releases at NPL sites are accurate and complete. Moreover, we found that the data tracking consultation with tribes at NPL sites were unreliable, and may not contain all invitations to consult. Clarifying guidance to clearly identify the circumstances under which the agency should consider consulting with tribes could improve the quality of EPA’s data on consultation, and could help ensure EPA regions are applying the consultation policy consistently and uniformly. In addition, explicitly directing regional officials to document all invitations to consult with tribes, regardless of whether further consultation results after the invitation, would provide EPA greater assurance that its regional offices are accurately and consistently documenting invitations to consult, and that the data that EPA provides to OMB regarding tribal consultations are accurate and complete. We are making the following four recommendations to EPA: The Director of EPA’s Office of Superfund Remediation and Technology Innovation should develop a regular review process to ensure the quality of SEMS data identifying NPL sites on tribal property and revise automated reports used to check the accuracy of SEMS data to include on tribal property data. (Recommendation 1) The Assistant Administrator of EPA’s Office of Land and Emergency Management should clarify guidance to regional offices on how to determine whether sites have NAI, including by adding criteria for when a site should be designated as having NAI in the SEMS database and how, if at all, to adjust SEMS data if a tribe is no longer interested in a site. (Recommendation 2) The Director of EPA’s Office of Superfund Remediation and Technology Innovation should clarify agency guidance regarding tribal consultation for the Superfund program to clearly identify the circumstances under which the agency should consider consulting with tribes. (Recommendation 3) The Assistant Administrator of EPA’s Office of International and Tribal Affairs should develop or revise existing guidance to clearly direct regional officials to document all invitations to consult with tribes in the TCOTS database and provide the guidance to those officials. (Recommendation 4) We provided a copy of this report to EPA, the Confederated Salish and Kootenai Tribes of the Flathead Reservation, the Kalispel Indian Community of the Kalispel Reservation, the Little Traverse Bay Bands of Odawa Indians, the Mashpee Wampanoag Tribe, the Pueblo of Laguna, the Saint Regis Mohawk Tribe, the Spokane Tribe of the Spokane Reservation, and the Wampanoag Tribe of Gay Head (Aquinnah) for review and comment. EPA generally agreed with our recommendations, and their comments are reproduced in appendix IV. EPA also provided technical comments, which we incorporated as appropriate. The Confederated Salish and Kootenai Tribes of the Flathead Reservation and the Pueblo of Laguna also provided written comments (reproduced in appendixes V and VI) and technical comments, which we incorporated as appropriate. The Kalispel Indian Community of the Kalispel Reservation, the Little Traverse Bay Bands of Odawa Indians, the Mashpee Wampanoag Tribe, the Saint Regis Mohawk Tribe, the Spokane Tribe of the Spokane Reservation, and the Wampanoag Tribe of Gay Head (Aquinnah) did not comment on our report. EPA concurred with our recommendation to develop a regular review process to ensure the quality of SEMS data identifying NPL sites on tribal property and revise automated reports used to check the accuracy of these data. EPA stated that during the course of our work on this report, SEMS tribal data was reviewed for quality control and corrections were made to the existing data. In addition, EPA’s Office of Superfund Remediation and Technology Innovation plans to create a schedule to review tribal data in SEMS and disseminate tribal data to Superfund regional coordinators annually for their quality assurance review starting in March 2019. EPA generally agreed with our recommendation to clarify guidance to regional offices on how to determine whether sites have NAI, including by adding criteria for when a site should be designated as having NAI in SEMS and how, if at all, to adjust SEMS data if a tribe is no longer interested in a site. EPA noted that there are a variety of circumstances under which a tribe may have interest in a site, and the agency plans to identify relevant criteria in the Superfund Program Implementation Manual that may be used to support the decision of whether or not to apply the NAI indicator. Additionally, the agency plans to create a headquarters and regional workgroup to review and update tribal data collected in SEMS. The workgroup will provide guidance to clarify the NAI determination, including identifying criteria for designating a site NAI, and identifying a process to update SEMS when a tribe is no longer interested in a site, as needed. EPA plans to complete this no later than October 2019. EPA concurred with our recommendation to clarify agency guidance regarding tribal consultation on Superfund sites to clearly identify the circumstances under which the agency should consider consulting tribes. In its letter, EPA pointed out that our original recommendation did not specify that the recommendation was about guidance regarding tribal consultation on Superfund sites, so we adjusted the language of the recommendation accordingly. EPA plans to issue a memo to the regions that clarifies circumstances under which regions may consider tribal consultation for the Superfund program no later than March 2020. EPA concurred with our recommendation that it should develop or revise existing guidance to clearly direct regional officials to document all invitations to consult with tribes in the TCOTS database and provide the guidance to those officials. EPA is planning four actions to respond to this recommendation: (1) issuing a memorandum from the Office of International and Tribal Affairs to EPA Regional Administrators on the importance of following EPA’s Tribal Consultation and Coordination Policy and documenting consultation actions into TCOTS, estimated to occur in January 2019; (2) issuing a monthly TCOTS report to Deputy Assistant Administrators and Regional Assistant Administrators on the status of consultations recorded in TCOTS, starting in January 2019; (3) initiating trainings specifically targeted to EPA's Regional Superfund staff on when and how to document consultation actions in TCOTS, estimated to begin in February or March 2019; and (4) conducting training on tribal consultation topics, with a specific emphasis on entering consultation information into TCOTS, beginning in March or April 2019. In their comments on our report, the Confederated Salish and Kootenai Tribes of the Flathead Reservation noted that our report is thorough and provides valuable insight into EPA’s policies and procedures for tribal consultation at NPL sites. The tribe provided some additional detail on the Smurfit Stone Mill Frenchtown case study which we incorporated as appropriate. The tribe also noted that they had interest in a site not identified by EPA as having NAI, the Anaconda Aluminum Co. Columbia Falls Reduction Plant site. In response, we added this site to our list of NPL sites known to be on or affecting tribal land, shown in appendix I. The Pueblo of Laguna commented that while the scope of the report was limited, the Pueblo appreciated GAO’s efforts to study EPA’s tribal consultation practices. The Pueblo emphasized their belief that EPA’s duty to consult with tribes should be an active one, not a passive one, and presented three associated comments. First, the Pueblo believes EPA should affirmatively consider offering consultation at each stage of the Superfund process beginning with preliminary investigation and site assessment. Second, the Pueblo believes EPA should continue to contact potentially interested tribes throughout the life of an NPL site, even if the tribe had not expressed interest at a previous stage of the process to ensure that newly interested tribes are identified. Finally, the Pueblo believes EPA should document all offers to consult, including ones made orally. The Pueblo provided comments and edits on the Jackpile-Paguate Mine case study in their letter, which we incorporated. The Pueblo also provided technical comments on the report, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Administrator of the Environmental Protection Agency, the Chairman of the Confederated Salish and Kootenai Tribes of the Flathead Reservation, the Chairman of the Kalispel Indian Community of the Kalispel Reservation, the Chairman of the Little Traverse Bay Bands of Odawa Indians, the Chairman of the Mashpee Wampanoag Tribe, the Governor of the Pueblo of Laguna, the Chiefs of the Saint Regis Mohawk Tribe, the Chairwoman of the Spokane Tribe of the Spokane Reservation, the Chairwoman of the Wampanoag Tribe of Gay Head (Aquinnah), and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix VII. This appendix provides information on the site-wide cleanup status of National Priorities List (NPL) sites with known Native American Interest (NAI), as of December 2017. We worked with the Environmental Protection Agency (EPA) to correct inaccuracies in the Superfund Enterprise Management System (SEMS) data identifying sites as having NAI, and we identified 87 NPL sites—74 sites on the NPL, 8 deleted from the NPL, and 5 proposed for addition—known to have NAI. In addition, in providing technical comments on the draft of this report, the Confederated Salish and Kootenai Tribes of the Flathead Reservation identified one additional site, bringing the total to 88 NPL sites known to have NAI. Of these 88 sites known to have NAI out of the total 1,785 NPL sites that were proposed, final, or deleted as of December 2017, many have reached site-wide milestones that EPA uses to track the cleanup status of NPL sites. EPA measures four site-wide milestones, including one that measures the progress in the Superfund process and three that describe the management of the release, such as human exposure under control: 1. Construction completion. Indicates that the physical construction of the remedy EPA has selected to address the contamination is complete. 2. Human exposure under control. Measures the incremental progress EPA achieved in controlling unacceptable exposures to people at a site. A site may achieve this measure by reducing the level of contamination, preventing people from contacting the contaminants in-place, or controlling activities near the site (e.g., by reducing the potential frequency or duration of exposure of people to contaminants). 3. Groundwater migration under control. Assesses whether groundwater contamination is below protective, risk-based levels or, if not, whether the migration of contaminated groundwater is stabilized and there is not unacceptable discharge to surface water and monitoring will be conducted to confirm that affected groundwater remains in the original area of contamination. EPA only uses this in sites with known past or present groundwater contamination. 4. Site-Wide Ready for Anticipated Use. All cleanup goals that may affect current and reasonably anticipated future land uses of the site have been achieved, so that there are no unacceptable risks and all institutional or other controls have been put in place. Table 1 below shows the site-wide cleanup status, according to EPA, of the 83 sites on or deleted from the NPL with known NAI. This table provides data on site-wide milestones obtained from EPA’s SEMS database, as well as a brief overview of each site using information from publicly available EPA documents, the EPA website, and additional information provided by EPA officials. Table 2 below lists the 5 sites with known NAI that EPA has proposed for the NPL. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Salt Chuck Mine site is an inactive former gold, silver, copper, and palladium mine on Prince of Wales Island in southeast Alaska. Operations at the site were suspended in 1941. The site includes abandoned mine workings and mine mill equipment. Contaminants include polychlorinated biphenyls (PCBs), copper, lead, and arsenic. In 2011, EPA started a remedial investigation of the upland and adjacent marine areas to evaluate potential risk to human health and the environment. The investigation was completed in March 2018, and EPA determined that there are currently no unacceptable human health risks identified for the site and that ecological risks are limited to copper in marine sediment in areas used for tailings disposal. The Tucson International Airport Area site comprises a 10-square-mile area in and next to Tucson, Arizona. The site includes the Tucson International Airport, portions of the Tohono O'Odham Indian Reservation, residential areas of Tucson and South Tucson, and the Air Force Plant #44 Raytheon Missile Systems Company. Former aircraft and electronics manufacturing activities, fire drill training activities, and unlined landfills have contaminated groundwater and soil with volatile organic compounds, metals and PCBs. Remedial activities include: groundwater pumping and treatment, soil removal, and soil vapor extraction. Groundwater cleanup actions, operation and maintenance activities, and site monitoring are ongoing. As of July 2018, EPA reports that water treatment systems have significantly reduced the groundwater plume size and chemical concentrations in groundwater. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 4,400-acre Iron Mountain Mine site near Redding, California produced iron, silver, gold, copper, zinc and pyrite. Though mining operations were discontinued, underground mine workings, waste rock dumps, piles of mine tailings, and an open mine pit remain at the site. Much of the acidic mine drainage is channeled into the Spring Creek Reservoir. About 70,000 people use surface water within 3 miles of the mine as their source of drinking water. The installation and operation of a full- scale neutralization system, capping of areas of the mine, and the construction and operation of a retention reservoir to collect contaminated runoff for treatment have significantly reduced acid and metal contamination in surface water at the site. Site investigations and cleanup are ongoing. The 3.2-acre Celtor Chemical Works site, located on the Hoopa Valley Indian Reservation, is the location of a former ore concentrating facility that processed sulfide ore. Wastes from the operations and processed ore generated acidic runoff and elevated metal concentrations in the soils throughout the site. The Trinity River flows along the site boundary and is the only local fish source for the Hoopa Indians. Cleanup included off- site disposal of contaminated materials; backfilling and contouring land; and revegetation and diversion of springs away from contaminated areas. After cleanup, EPA took the site off the NPL in 2003. According to EPA officials, in 2016, additional waste was discovered at the site, resulting in additional remedial investigation to determine the nature and extent of contamination. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Leviathan Mine is an abandoned open-pit mine near Markleeville, California, on the eastern slope of the Sierra Nevada Mountains at an elevation of 7,000 feet. The site is drained by Leviathan and Aspen Creeks, which are tributaries to the East Fork of the Carson River, a major western Nevada water supply source. The mine operated intermittently between 1863 and 1962. In the early days of mining, copper sulfate was mined from the property and utilized for processing silver ore at the Comstock Mines in Virginia City, Nevada. According to EPA officials, mine operations were originally underground, but surface mining of sulfur ore began in the 1950s. These officials told us that, mining operations disturbed and exposed existing mineral-rich rock and soil, which produced residual mine waste rock. Surface runoff from snowmelt and precipitation become contaminated by contact with the mineral-rich rock and associated waste rock. Officials told us that water capture and treatment plants at the site have improved the quality of downstream surface water and watershed health. These officials also noted that site assessment and cleanup is ongoing. The 150-acre Sulphur Bank Mercury Mine site near Clearlake Oaks, California, is an abandoned open pit mercury mine located on the shoreline of Clear Lake. This mine operated intermittently between 1865 and 1957 and mined sulphur and mercury. Former mining activities at the site contaminated soils, sediment, and surface water with mercury and arsenic. Approximately 2 million cubic yards of mine wastes and tailings remain on the mine site. Mercury contaminates lake sediment and is bio-concentrated in the food web of Clear Lake. The levels of mercury in fish from the lake led the State to issue an advisory to limit consumption of local fish. Clear Lake is also a drinking water source for 4,700 people. Cleanup has included erosion control, soil removal from residential yards, and surface water diversion. After immediate actions to protect human health and the environment, site investigations and long- term cleanup planning are ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Bonita Peak Mining District site consists of 48 historic mines or mining-related sources of contamination in unincorporated parts of Colorado. Historic mining operations have contaminated soil, groundwater, and surface water with heavy metals. Additionally, ongoing releases of metal-contaminated water and sediment are occurring within the Mineral Creek, Cement Creek, and Upper Animas River drainages in San Juan County, Colorado. EPA and other stakeholders conducted a remedial investigation and feasibility study in 2017. Ongoing cleanup activity includes an interim water treatment plant to treat acid mine drainage and management of non-hazardous sludge. EPA plans to use the remedial investigation to determine further cleanup options at the site. The 890-square-mile Idaho National Engineering Laboratory site is located near Idaho Falls, Idaho. The site consists of a number of major facilities that contribute contaminants to and draw water from the Snake River Plain Aquifer. One of these facilities is a National Reactor Testing Station built by the Atomic Energy Commission in 1949 to build, test, and operate various nuclear reactors, fuel processing plants, and support facilities. Site activities also led to the discharge of liquid wastes to several unlined ponds and an earthen ditch. The site includes contaminated soil, sludge, and groundwater that contain hazardous chemicals, heavy metals, and radioactive constituents. The site is divided into several cleanup areas to better address site cleanup. Remedy construction has been completed in several of these areas, and remedial design and construction are underway at the remaining areas. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Also known as the Coeur d’Alene Basin Cleanup, the Bunker Hill Mining and Metallurgical Complex site is located in northern Idaho and eastern Washington, in one of the largest historical mining districts in the world. The site spans 1,500 square miles and includes 166 miles of rivers. Mining operations began in the area in 1883 and continue today. Historical mining and milling methods led to disposal of tailings in rivers and streams, which resulted in the spread of contaminants throughout the floodplain of the South Fork Coeur d’Alene River. Smelter operations also resulted in emissions and piles of waste rock. Soil, sediment, groundwater, and surface water are contaminated with heavy metals such as lead, which pose serious risks to people and the environment. Since 1983, EPA and its partners have made progress in cleaning up contamination, including cleaning some mine and mill sites, and establishing waste repositories to securely contain contaminated soil to reduce impacts to people and the environment. Site remediation is ongoing. The 2,530-acre Eastern Michaud Flats Contamination site near Pocatello, Idaho, consists of two phosphate ore processing facilities that began operations in the 1940s. One facility continues to produce solid and liquid fertilizers using phosphate ore, sulfur, air, and natural gas. The other produced elemental phosphorus for use in a variety of products from cleaning compounds to foods. Cleanup at this facility is largely located within Fort Hall Indian Reservation boundaries. Operations at both plants contaminated groundwater and soil with metals including arsenic, lead, and cadmium. Cleanup includes capping contaminated soils, extraction and containment of contaminated groundwater, and groundwater monitoring. Site cleanup began in 2010 and is ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Cherokee County Superfund site is a former mining area in southeast Kansas covering about 115 square miles. It is part of a larger regional mining area known as the Tri-State Mining District, where more than 100 years of mining for lead and zinc created piles of mine tailings covering more than 4,000 acres. The mine tailings contaminated groundwater with lead, zinc, and cadmium. Millions of cubic yards of mine tailings are present at the surface, in addition to impacted soils, surface water, sediment, and groundwater. Several cleanup activities have been completed and others are underway. Site- wide, nearly 3 million cubic yards of mining wastes have been remediated on nearly 2,000 acres, more than 700 residential yards have been remediated, and more than 500 homes have been supplied with a clean, permanent source of drinking water. Otis Air National Guard Base and Camp Edwards together form Joint Base Cape Cod, a 22,000-acre property used for military training activities since 1911. It is the sole source aquifer for 200,000 year-round and 500,000 seasonal residents of Cape Cod. Parts of the aquifer have been contaminated by fuel spills, training activities, waste disposal, and other past activities at the base. Cleanup of a portion of the site is managed by the U.S. Air Force, which is addressing the sources of and groundwater contamination primarily on Otis Air National Guard under the authority of Superfund. Contaminated areas were the result of chemical and fuel spills, fire training activities, landfills, and drainage structures. Since 1984, when contaminants were first detected in monitoring wells, numerous investigations and cleanups have been undertaken and completed. Currently, nine groundwater plumes are undergoing extraction and treatment. The Air Force’s land use control program ensures that groundwater remedies are protective until cleanup levels are met. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Creese and Cook Tannery site is located in Danvers, Massachusetts. Leather tanning operations took place on-site from about 1903 through the 1980s. Solid tanning wastes were disposed of in two landfills at the site. Liquid waste was discharged to the Crane River until 1975 and later to sewers, while sludge waste was deposited in an on-site lagoon system. Operations led to contamination of surface and subsurface soils with tannery wastes, and contaminants, particularly arsenic, exceed state health-based standards in multiple locations. In 2012 EPA conducted a removal of contaminated surface soil and disposed of this soil off- site. EPA issued a proposed cleanup plan for the site in October 2018. The New Bedford harbor is an 18,000-acre urban estuary with sediment highly contaminated with PCBs and heavy metals. From the 1940s until EPA banned the production of PCBs in the 1970s, two manufacturing facilities improperly disposed of industrial wastes containing PCBs, contaminating the harbor bottom for about 6 miles from the Acushnet River into Buzzards Bay. After extensive testing of water quality, harbor sediment, air quality, and locally caught fish and shellfish, EPA concluded that the PCBs in the sediment posed a serious risk to human health and the environment. EPA has placed restrictions on fishing, shellfishing and lobstering in and around the harbor. EPA has addressed approximately 450,000 cubic yards of contaminated sediment in the upper harbor as of April 2017 and plans to dredge and dispose of over 200,000 cubic yards of contamination from the lower harbor. According to EPA, the site cleanup will require an additional 5 to 7 years and significant funding to finish. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Loring Air Force Base site is located in Limestone, Maine. Loring Air Force Base was one of the first to be designed and built to accommodate high-speed aircraft, and construction ended in 1953. Activities at the site, including maintenance of jet engines, generated waste oils, recoverable fuels, spent solvents and cleaners. These wastes contaminated soil, groundwater, surface water, and sediment at a number of areas across the former base. Cleanup activities include relocation of contaminated soil, bioremediation of groundwater, and capping of disposal areas. The Air Force is leading the site cleanup until goals have been achieved. The Air Force is conducting operation and maintenance and long-term monitoring activities. The 25-acre Eastland Woolen Mill Superfund site is located in the Town of Corinna, Maine. Prior to closing in 1996, the mill manufactured dyed wool and blended woven fabric. The dyeing operation utilized various chemicals, including dyes and dye-aids that reportedly contained biphenyl and chlorinated benzene compounds. Liquid wastes were discharged to the ground beneath mill buildings until 1977. As a result, soil and bedrock underlying the mill were contaminated with chlorinated benzene compounds. Long-term cleanup and environmental monitoring are ongoing. In 2012, EPA completed a partial deletion action to remove 80% of the land area from NPL designation and facilitate reuse. EPA completed the second Five-Year Review in 2015. The Eastern Surplus site is a 5 acre area in Meddybemps, Maine. From 1946 through the early 1980s, the Eastern Surplus Company, a retailer of army surplus and salvage items, operated on the site. Facility operations contaminated soil and groundwater with hazardous chemicals, including volatile organic compounds and calcium carbide. After immediate actions to protect human health and the environment, remediation activities included excavating soils, extracting and treating contaminated groundwater, and disposing of gas cylinders. Operation and maintenance activities and monitoring are ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Velsicol Chemical Corporation produced various chemical compounds and products at its 54-acre plant in St. Louis, Michigan, from 1936 through 1978. Products included the fire retardant polybrominated biphenyl and the pesticide DDT. To address contamination on-site, Velsicol agreed to construct a slurry wall around the former plant and put a clay cap over it. The Pine River, which borders the former main plant site on three sides, was significantly contaminated. In response, the state of Michigan issued a no-consumption advisory for all fish species. Over 670,000 cubic yards of DDT-contaminated sediment were removed and disposed of off-site in an approved landfill. DDT levels in fish have been reduced by more than 98 percent. In the early 2000s, studies showed the slurry wall and clay cap at the main plant site were failing to keep contamination out of the river. In response, EPA and Michigan's Department of Environmental Quality (MDEQ) launched a remedial investigation and feasibility study at the main plant site and concluded that soil and groundwater were contaminated. In June 2006, EPA selected a remedy that included a comprehensive cleanup of the main plant site and a residential soil cleanup. During the residential cleanup, EPA excavated and disposed of 50,000 tons of contaminated soil at an off-site landfill. Currently, EPA and MDEQ are completing a remedial investigation in the Pine River downstream of the former chemical plant property. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Allied Paper, Incorporated/Portage Creek/Kalamazoo River site affects Kalamazoo, Michigan, 80 miles of the Kalamazoo River (from Morrow Dam to Lake Michigan), and 3-mile stretch of Portage Creek. Paper mill properties, riverbanks and floodplains have been contaminated with PCBs. EPA has removed contaminated materials from the site, cleaned and restored 7 miles of the Kalamazoo River and banks and capped 82 acres worth of contaminated materials. In the portions of the site where cleanup has concluded, EPA conducts maintenance activities and monitors groundwater. For two areas contaminating the river that have not yet been cleaned up, EPA has decided on cleanup plans and has taken actions to prevent migration of contamination to the Kalamazoo River or Portage Creek. EPA has decided on cleanup plans for approximately a portion of the 80 mile stretch of the Kalamazoo River and Portage Creek that require remediation. The Petoskey Manufacturing Company, or PMC, contained a die casting plant from the 1940s and a painting operation from the mid- to late-1960s. Disposal of spent solvents and paint sludge onto the ground outside the PMC building contaminated soil and groundwater at the site with volatile organic compounds. Contaminated groundwater reached a nearby municipal well that provided drinking water to city residents. The city replaced the contaminated well with a new groundwater source. Currently, EPA and Michigan Department of Environmental Quality are evaluating the site for potential vapor intrusion issues into condominiums built on top of the former PMC source area. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Grand Traverse Overall Supply was a commercial laundering and dry cleaning facility opened in 1953. Activities at the site between 1955 and 1968 included construction of a dry well and seepage lagoons to collect waste. In 1977 the facility began discharging waste to the sewer. A year later, the Michigan Department of Environmental Quality discovered groundwater contaminated with volatile organic compounds such as trichloroethylene and perchloroethlyene that impacted at least 10 wells, including one that supplied water to an adjacent elementary school. Contaminated wells were abandoned and new wells drilled. Waste lagoons were drained and filled with gravel, and the contaminated soils around the dry well and on-site barrels of waste sludge were removed in the 1970s. In providing technical comments on a draft of this report, EPA officials told us that remedial actions at the site began with soil removal activities around 2009, and that a groundwater pump and treat system was installed in 2012 and improved in 2015. These officials told us the site is expected to reach cleanup goals within approximately 5 years. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Northwestern Leather Company operated a tannery on the 75-acre Cannelton Industries Incorporated site in Sault Sainte Marie, Michigan from 1900 to 1958. A portion of the site is located within the 100-year floodplain of the St. Mary's River. Waste disposal operations contaminated soils, sediment and the river with heavy metals, including chromium, lead, cadmium, arsenic and mercury. EPA’s initial long-term remedy for the site included the excavation and consolidation of contaminated waste material, soils, and river sediment into an on-site landfill, collection and treatment of groundwater, groundwater monitoring, and land use restrictions for the landfilled area. In commenting on a draft of our report, EPA officials told us the remedy was amended to include excavation and removal of contaminated soil and tannery waste and other waste materials from portions of the site, Construction of these remedies took place in 1999. In 2006 and 2007, additional dredging operations removed 40,000 cubic yards of contaminated sediment, about 500,000 pounds of chromium and 25 pounds of mercury from Tannery Bay and nearby wetlands. Subsequent sampling in 2014 showed mercury or chromium in Tannery Bay and an adjacent wetland. In providing technical comments on a draft of this report, officials noted that 2016 sampling also showed mercury in Tannery Bay surface water and adjacent wetland. EPA is reviewing the current monitoring requirements and protocols, as well as the cleanup goals. The monitoring portion of the operations and maintenance plan will be revised based on EPA's findings. EPA officials told us that the agency has initiated a partial deletion of the site from the NPL to enable reuse of some remediated site areas. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 200-acre Tar Lake site in Mancelona Township, Michigan was an iron works facility from 1882 through 1945. Disposal of tar waste contaminated soil and groundwater with hazardous chemicals, including tar waste and creosote. Cleanup activities included excavation and disposal of tar and contaminated soils, and groundwater extraction and treatment. After initial cleanup, operation and maintenance activities are ongoing. EPA has conducted several 5-year reviews of the site’s remedy. EPA did additional sampling at the site in 2011 and 2012 and identified the need for additional soil excavation and expansion of the groundwater treatment system. In providing technical comments on a draft of this report, EPA officials told us that additional cleanup will begin in 2020 and last several years. EPA has deleted part of the site from the NPL. The Torch Lake site is located on the Keweenaw Peninsula in Michigan. The site includes several areas ranging in size from about 10 acres to more than 200 acres. Copper mining activities in the area from the 1890s through 1969 produced mill tailings that contaminated lake sediment and the shoreline. Cleanup included covering 800 acres of slag piles and tailings with soil and vegetation, and long-term monitoring of Torch Lake. After cleanup, operation and maintenance activities are ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Minnesota Chippewa Tribe, Minnesota (Grand Portage Band and Fond du Lac Band); Lac du Flambeau Band of Lake Superior Chippewa Indians; Sokaogon Chippewa Community, Wisconsin. The St. Louis River site is located at the west end of Duluth, Minnesota, and includes several areas of land next to the St. Louis River, several boat slips, and a wide section of the river known as Spirit Lake. The site overall has been divided into two smaller sites, both managed by the state of Minnesota. The first area, known as the St. Louis River/Interlake/Duluth Tar (SLRIDT) site includes 255 acres of land, boat launch ramps and bays of the St. Louis River. From the 1890s through 1962, a variety of industrial plants operated at the site, including a coking plant, and tar and chemical plants. The second site, U.S. Steel comprises 500 acres of land and 200 acres of the St. Louis River. The area was contaminated by a steel mill that operated on-site between 1916 and 1981. Operations at both sites contaminated soil and underwater sediment with hazardous chemicals, including solid wastes, PCB liquids and drums. The sites are currently in different phases of cleanup. Cleanup of the land portion of the SLRIDT was substantially completed by 2001, and cleanup of the contaminated sediment by 2010. However, in its most recent 5-year review, the Minnesota Pollution Control Agency noted several smaller areas of contaminated materials that will require additional cleanup. U.S. Steel conducted multiple cleanups at their site since the 1990s and many of the actions required by EPA’s record of decision have been completed. However, in its most recent 5-year review, the Minnesota Pollution Control Agency concluded that while some cleaned-up areas continue to be protective of human health and the environment, some areas of the site are not protective. EPA officials also told us that the U.S. Steel site has also contaminated a part of the St. Louis River known as Spirit Lake. According to these officials, the cleanup of Spirit Lake, including associated tribal consultation, is planned through a partnership led by EPA’s Great Lakes National Program Office. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Minnesota Chippewa Tribe, Minnesota (Leech Lake Band) The 125-acre St. Regis Paper Company site is located within the external boundaries of the Leech Lake Band of Ojibwe Indian Reservation in Cass Lake, Minnesota. The wood-treatment facility operated from the 1950s through the 1980s using creosote and pentachlorophenol (PCP). The facility’s operations contaminated soil and groundwater with hazardous chemicals, including PCP, dioxin and polycyclic aromatic hydrocarbons (PAH). Remedies put in place include water treatment and soil containment. Subsequent assessment demonstrated unacceptable potential risks from groundwater and surface soil contamination. EPA proposed a cleanup plan in March 2016 to address soil contamination in residential areas. EPA has determined there are no current unacceptable human risks. The 300-square-mile Anaconda Company Smelter site is near Anaconda, Montana. Anaconda operated a large copper concentrating and smelting operation on the north side of Warm Springs Creek until about 1901. Around 1902, ore processing and smelting operations began at a separate facility that is included in the site. Operations at the Anaconda Smelter ceased in 1980 and the smelter facilities were dismantled soon thereafter. More than a century of milling and smelting operations resulted in high concentrations of arsenic, lead, copper, cadmium, and zinc in groundwater and surface water. Cleanup included testing and remediation of domestic wells, removal of waste from the nearby community, construction of nearly 1,000 acres of wetland, and 30,000 feet of stream restoration. Operation and maintenance activities are ongoing in areas where cleanup is complete. In other areas, cleanup is still in progress. EPA has determined that remedies that have been completed are protective of human health and the environment. Where remedies are not complete, access is controlled to prevent human exposure to waste. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Anaconda Aluminum Co. Columbia Falls Reduction Plant site is located two miles northeast of Columbia Falls in Flathead County, Montana. The site includes approximately 960 acres north of the Flathead River, a fishery that includes the federally designated, threatened bull trout and the federally sensitive westslope cutthroat trout. From 1955 through 2009, an aluminum smelting plant operated at the site, and produced significant quantities of hazardous wastes as a byproduct of the aluminum smelting process. The types of hazardous wastes produced at the site are known to contain cyanide compounds that can leach into groundwater. In 1988, EPA requested a site investigation that revealed that there were high concentrations of polycyclic aromatic hydrocarbons at the site, primarily in soils and sediments, and that there had been a release of cyanide to groundwater and surface water; both of these findings were attributed to activities at the former smelting plant. The remedial investigation and feasibility study of the site is in progress, and the results of the investigation will determine cleanup needs and identify potential cleanup options at the site. The Silver Bow Creek and Butte Area site is in Butte, Montana, and includes 26 miles of stream and streamside habitat. Since the late 1800s, mining wastes have been dumped into streams and wetlands near mining operations. These activities contaminated soil, groundwater, and surface water with heavy metals. From 1988 to 2005, EPA completed several removal actions to clean up areas around former smelter sites, mine waste dumps, railroad beds, stream banks and channels, and residential yards to address immediate human health and environmental risks. Operation and maintenance, sampling, and monitoring actions are ongoing. EPA agreed to future cleanup work at the site in January 2018, including removal of contaminated soils, removal of sediment and floodplain waste, and construction of stormwater basins and sedimentation bays. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Milltown Reservoir Sediments site near Missoula, Montana includes about 540 acres in the Clark Fork River and Blackfoot River floodplain and 120 miles of the Clark Fork River upstream of the Milltown Dam and Reservoir, which are located at the confluence of the Clark Fork and Blackfoot Rivers. From the 1860s until well into the 20th century, mineral- and arsenic-laden waste from mining activities in the region flowed into the Clark Fork River. As contaminated sediment and mine- mill waste moved downstream, about 6.6 million cubic yards of sediment accumulated behind the Milltown Dam. Mining activities and the downstream transport of mining- related wastes contaminated sediment, surface water, and groundwater with heavy metals. Remedy construction began in 2006, much of the site has been cleaned up, and remedy construction is underway to address remaining contamination. The site’s long-term remedy includes construction of a bypass channel at the reservoir; removal of contaminated reservoir sediment; off-site disposal and use of contaminated sediment as vegetative cap material; removal of the Milltown Dam; continuation of a replacement water supply program and implementation of temporary groundwater controls until the Milltown aquifer recovers; and long-term monitoring of surface and groundwater. Remedy construction is ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 438-acre Barber Orchard site in Haywood County, North Carolina, includes the area where Barber Apple Orchard operated from 1908 through 1988. Facility operations resulted in contaminated groundwater and soil. Contaminants include arsenic, lead, and pesticides such as DDT, aldrin, and dieldrin that can be found in groundwater or soils on residential properties built on the former orchard. EPA removed soil in contaminated areas and, in a 2011 proposed cleanup plan proposed long- term monitoring of contaminated groundwater with the expectation that soil remediation will positively affect groundwater contamination. EPA has determined that the contaminated groundwater does not currently threaten people living and working near or on the site. EPA officials told us that in 2004, the town of Waynesville extended its municipal water system throughout the Orchard, and since the completion of the soil cleanup in 2011, new homes have been constructed within the boundaries of the Orchard. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 3.5-acre Benfield Industries site in Waynesville, North Carolina, includes the area where Benfield Industries mixed and packaged materials bought in bulk for resale in smaller amounts from 1971 through 1983. The facility handled and stored paint thinners, solvents, sealants, cleaners, de-icing solutions and wood preservatives. Between 1990 and 1992, EPA conducted the remedial investigation and feasibility study using federal funding. The cleanup included excavating and washing contaminated soil, biotreating contaminated slurries, and placing the cleaned soil and slurry in excavated areas. Following soil treatment, EPA graded and planted seed. According to EPA officials, a groundwater extraction system was installed and was operated between 2001 and 2007. However, a 2007 report concluded that it was no longer an effective groundwater remedy, and that monitored natural attenuation may be a more effective remedy. Consequently, EPA shut down the system in June 2007. Agency officials told us the agency recently completed a pilot scale treatability study in which chemicals were injected into the subsurface to destroy residual wood preservatives that were adversely impacting groundwater quality. According to EPA, the agency will be using the information gained from this treatability study in the forthcoming remedial design. The Homestake Mining Company site in Cibola County, New Mexico includes a former uranium mill demolished from 1993 through 1995 and the impacted portions of the underlying groundwater aquifers. Uranium milling operations began at the site in 1958 under a license issued by the Atomic Energy Commission. Site operations and seepage from two tailings impoundments contaminated soil and groundwater with hazardous chemicals including uranium, selenium, radium-226, radium-228, thorium-230 and nitrate. Nearly 4.5 billion gallons of contaminated water have been removed and 540 million gallons of treated water have been injected into the aquifer. An average of 2 feet of contaminated soil was removed from the mill area and placed in the tailings impoundments. Cleanup is ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 125-acre United Nuclear Corporation site near Gallup, New Mexico, includes a former uranium ore tailings disposal area and processing mill that operated from 1977 through 1982. The facility processed uranium ore using a combination of crushing, grinding and acid- leach solvent extraction methods. Milling produced acidic slurry of ground rock and fluid tailings. Disposal of about 3.5 million tons of tailings took place in on-site impoundments. Facility operations contaminated soil and groundwater. Surface reclamation stabilized the mill tailings and protected the Rio Puerco from contamination spills. However, EPA notes that groundwater treatment has been difficult due to low groundwater recharge rates and extraction wells proved to accelerate movement of contaminated water rather than contain it. Consequently, EPA installed additional extraction wells in 2010. Cleanup activities and monitoring are ongoing. The 70-acre Prewitt Abandoned Refinery site is located near Prewitt, New Mexico. The refinery operated between 1938 and 1957. Refinery operations contaminated soil and groundwater with hazardous chemicals including asbestos and lead. Potentially responsible parties removed the refinery and other site structures; however, scattered demolished structures, foundations and exposed fill remained on-site. The remedy for surface soil is complete. The remedy for subsurface soil and water continues to be protective in the short term; however, EPA could not determine if the remedy is protective of human health and the environment in the long term, and the agency recommends new evaluations to characterize the quantity, composition and extent of various contaminants and exposure pathways at the site. EPA further recommends the evaluation of an alternative cleanup plan to enhance protectiveness at the site. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 58-acre North Railroad Avenue Plume site is a contaminated groundwater plume in Española, New Mexico. The Norge Town laundromat and dry cleaning operation contaminated groundwater with tetrachloroethylene, trichloroethylene, cis-1,2- dichloroethylene and trans-1,2- dichloroethylene. The contaminated groundwater aquifer is the sole-source drinking water aquifer for the residents of City of Espanola and, the Pueblo of Santa Clara, as well as individual water supply wells near the site. The remedy consists of enhanced on-site bioremediation. The areas targeted for cleanup are the source area, soils with high contaminant levels, and contaminated shallow groundwater. EPA indicated that the remedy has reduced contamination in shallow groundwater but has not been effective in the deep aquifer; consequently, EPA initiated additional analysis in 2015. The Jackpile-Paguate Uranium Mine site is located on the Pueblo of Laguna, New Mexico, reservation and consists of three former leases. The former leaseholder, Anaconda Minerals Company, mined and operated a uranium mine at the site from 1952 through 1982. Out of a total of 7,868 leased acres, 2,656 acres were disturbed by mining. This disturbance originally included three open pits, 32 waste dumps and 23 sub-grade ore stockpiles, 4 topsoil stockpiles, and 66 acres of buildings and roads. Mining operations detrimentally affected surface water with hazardous chemicals in quantities sufficient to support listing onto the EPA National Priorities List for Superfund cleanup. Atlantic Richfield is currently undertaking the remedial investigation and feasibility study at the site. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) EPA officials told us that the Carson River Mercury site extends over more than a 130-mile length of the Carson River, beginning near Carson City, Nevada, and extending downstream to the Lahontan Valley. Contamination at the site is a legacy of the Comstock mining era of the late 1800s, when mercury was imported to the area for processing of gold and silver ore. The site includes mercury-contaminated soils at former mill sites; mercury contamination in fish and wildlife; and mercury contamination in waterways adjacent to the mill sites, including the water, sediment, and adjacent floodplain of the Carson River, Lahontan Reservoir, Carson Lake, Stillwater Wildlife Refuge, and Indian Lakes. Following excavation and removal of mercury- contaminated tailings and soils from the site to protect human health and the environment, site investigations and cleanup planning are ongoing. The Hooker (Hyde Park) site is located in Niagara Falls, New York. The 15-acre area was used for the disposal of about 80,000 tons of waste, some of it hazardous material, from 1953 through 1975, resulting in sediment and groundwater contamination with hazardous chemicals, including Aroclor 1248, chloroform, phenol, benzoic acid and chlorendic acid. Cleanup included establishment of a drain system around the landfill; treatment of liquids leaching from the landfill; capping of the landfill; and removal of contaminated soils and sediment. Site construction finished in 2003. EPA has determined that, since cleanup, the site no longer poses a threat to nearby residents or the environment. Long- term groundwater treatment and monitoring are ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The General Motors (Central Foundry Division) site is located near Massena, New York. General Motors operated an aluminum diecasting plant on the site beginning in1959 and used PCBs in the manufacturing process through 1980. Contamination resulted from General Motors’ waste disposal practices. Completed cleanup actions include the installation of a cap on an industrial landfill to prevent the surface flow of contaminants and reduce potential air exposure from contaminants; dredging of the St. Lawrence River and placement of a cap on remaining sediment; remediation of two inactive lagoons; and creation of a 150-foot landfill setback along the border with the Saint Regis Mohawk reservation. The final significant cleanup is a 10-million- gallon industrial lagoon. EPA has conducted three 5-year reviews at the site and the owner is actively marketing the property for re-use or redevelopment. The Peter Cooper site in Gowanda, New York, was the location of an animal glue and industrial adhesive manufacturing factory. Contamination was caused by the improper disposal of wastes derived from chrome-tanned hides. The waste material has been shown to contain elevated levels of chromium, arsenic, zinc, and several organic compounds. Remedial activity for the landfill contained more than 8 million tons of waste and included capping the landfill, putting in a gas venting system, and controlling leachate. A retaining wall prevents contaminants from reaching Cattaraugus Creek. Site investigations and cleanup are complete, and monitoring is ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Onondaga Lake site includes a 4.6-square-mile lake bordering the City of Syracuse, New York, and four nearby towns and villages. The site also includes seven major and minor tributaries and upland sources of contamination from a 285-square-mile drainage basin. Onondaga Lake has been the recipient of industrial and municipal sewage discharges from the site for more than 100 years. Contaminants include chlorinated benzenes, mercury, and PCBs. Between 1998 and 2018 EPA selected cleanup remedies for several areas within the site. Cleanup activities include removing chlorobenzene from existing wells, cleaning storm drainage systems, construction of a lakeshore barrier wall, and groundwater collection and treatment systems. Site investigations and cleanup activities are ongoing in several areas of the site, including the Lower Ley Creek and Willis Avenue areas. The Cayuga Groundwater Contamination site covers about 4.8 square miles extending from Auburn to Union Springs, New York. The site is the former location of a facility where General Electric Company and its partners manufactured semiconductors. The site includes residential properties mixed with farmland, woodlands, and commercial areas. Contaminated groundwater at the site contains volatile organic compounds that are potentially harmful contaminants that easily evaporate in the air. EPA conducted a remedial investigation and feasibility study to determine the sources, nature, and extent of site contamination and to evaluate remedial alternatives. Remediation will depend on the characteristics identified, but will include bioremediation for the most contaminated area as well as natural processes to reduce the level of contamination to meet groundwater standards. EPA is requiring periodic collection and analyses of groundwater samples to verify that the level and extent of contaminants is declining. EPA is deferring a decision on how to clean up the groundwater in Area 3, and intends to further investigate that area prior to issuing a final cleanup decision. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Eighteen Mile Creek site consists of contaminated sediment, soil, and groundwater along approximately 15 miles of creek in Niagara County, New York. The site has a long history of industrial use dating to the 19th century. Contamination, including PCBs and heavy metals, spans two areas: Eighteen Mile Creek corridor and the creek sediment to Lake Ontario. Possible sources of the contamination include releases from hazardous waste sites, industrial or municipal wastewater discharges, and disposal practices of manufacturers around the creek. EPA has demolished five contaminated residential properties and relocated the residents, completed the remedial investigation and issued a record of decision for the creek corridor in 2017, and is currently conducting the remedial investigation in the length of the river to Lake Ontario. The approximately 145-acre Wilcox Oil Company site in Bristow, Oklahoma includes the inactive and abandoned Lorraine and Wilcox Oil Refineries, which operated from approximately 1915 through 1963. The main components of the refinery included a skimming plant, cracking unit, and redistillation battery with a vapor recovery system and continuous treating equipment. Refinery operations contaminated soil and sediment and left behind refinery waste material such as oil waste and sediment skimmed from crude oil, and potentially lead. Planning and implementation of the site’s remedial investigation and feasibility study is ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 200-acre Hudson Refinery site housed an oil refinery from 1922 until 1982. The site included aboveground storage tanks, wastewater treatment impoundments, separators, stained soils, a land treatment unit, and loose and friable asbestos-containing material. Refinery operations contaminated soil, groundwater, surface water, and sediment. The site’s long-term remedy, selected in 2007 and amended in 2010, included removal of asbestos-containing materials, coke tar, and scrap metal; soil and waste excavation with off-site disposal; excavation, stabilization, and off-site disposal of sediment from waste ponds and sumps; treatment of surface water from ponds with contaminated sediment; groundwater monitoring; and institutional controls, among others. Cleanup construction started in early 2010 and finished in October 2010. Operation and maintenance activities and monitoring are ongoing. The 160-acre Oklahoma Refining Company site in Cyril, Oklahoma contained an oil refinery operated by several different owners until 1984. Site operations contaminated soil, sediment, surface water, and groundwater with PAHs, volatile organic compounds, and metals. Long- term remedies included bioremediation; stabilization; neutralization, containment, and treatment of surface water and groundwater; and on-site disposal of excavated materials in a hazardous waste landfill. Remediation was completed in 2001 on the southern part of the site. Removal of hazardous waste was completed in 2006. EPA is currently evaluating long-term cleanup activities on the northern portion of the site. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Tar Creek site is located in Ottawa County, Oklahoma. According to EPA, the site itself has no clearly defined boundaries, but consists of areas within Ottawa County impacted by historical mining wastes. The site is part of the larger Tri-State Mining District that consists of historical lead and zinc mining areas in northeast Oklahoma, southeast Kansas, and southwest Missouri. The site first came to the attention of the State of Oklahoma and EPA in 1979, when water began flowing to the surface near Commerce, Oklahoma from underground mine areas, through abandoned boreholes. This surface discharge flowed into Tar Creek, and soon other discharge locations were observed near Tar Creek and the abandoned mining town of Douthat and Quapaw. As a result, Tar Creek and Beaver Creek were significantly impacted. EPA has defined five areas to focus on: surface water and groundwater; waste in residential areas that causes high blood lead levels in children; chemicals found in an office and laboratory complex; piles of mine and milling waste and smelter waste; and sediment and surface waters in seven watersheds within three states and nine tribal areas. Remedial efforts include plugging abandoned wells to prevent contamination of aquifers, cleanup of public areas and residences, removal of mining chemicals, and relocating mining waste on the surface. The Quapaw Tribe has led remedial efforts on portions of tribally owned properties located within Tar Creek. Cleanup is ongoing. The 61-acre Tulsa Fuel And Manufacturing site in Collinsville, Oklahoma, is the location of a former zinc smelter and lead roaster that operated from 1914 through 1925. Historical operations contaminated soil, sediment, and surface water with hazardous materials including zinc and lead. EPA selected a cleanup plan for the site that included on-site consolidation and capping of soil, sediment and waste material. Construction of the remedy began in August 2014 and is now completed. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The McCormick and Baxter Creosoting Company site is a former creosote wood treating facility located on the east bank of the Willamette River in Portland, Oregon. The company was founded in 1944 and continued operations until October 1991.This site is located within the Portland Harbor Superfund site, but was not included in the January 2017 Portland Harbor record of decision. The site encompasses approximately 41 acres of land and an additional 23 acres of contaminated river sediment. Site investigations confirm releases of wood- treating chemical compounds to soils, groundwater, and sediment. Remedial investigations identified three plumes of contaminated groundwater migrating toward surface waters. Completed cleanup activities include demolition of the McCormick and Baxter plant; soil excavation, treatment, and disposal; upland soil capping; installation of a subsurface barrier wall; contaminant recovery; construction of a multi-layer sediment cap in the Willamette River; monitoring and engineering; and institutional controls. Construction of site remedies finished in September 2005. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Taylor Lumber and Treating operated a wood-treating plant at the site near Sheridan, Oregon, from about 1946 until 2001. EPA found that wood-treating chemical spills, including creosote and pentachlorophenol, contaminated soil, roadside ditches, and groundwater at the site. In response, EPA constructed an underground slurry wall as part of the remedy beneath the wood-treating area to contain and extract the most contaminated groundwater to maintain hydraulic control within the barrier wall. The final cleanup included excavation of contaminated soils from 5 upland acres and from adjacent ditches flowing to the South Yamhill River; replacement of an existing asphalt cap in the wood-treating area with a new low permeability asphalt cap overlaying the underground slurry wall; disposal of material from stockpiled soil storage cells off-site; and upgrades to the storm water conveyance systems. EPA completed final cleanup in 2008. The property is now owned and operated by a private company, which has ongoing obligations related to property use restrictions, operations, and maintenance on the property. EPA conducted its second 5-year review in 2017. The 4.2-acre Harbor Oil Incorporated site is located in Portland, Oregon, in an industrial area adjacent to Force Lake. A waste oil recycling facility currently operates on the site. Past site operations included a tank truck cleaning business, which was destroyed by a fire in 1979 that ruptured five 20,000-gallon aboveground used oil tanks. Site activities, the fire, and a large oil spill in 1974 contaminated soil, sediment and groundwater with metals, oil, pesticides, and PCBs. EPA ordered a previous operator to empty, clean, and dismantle a tank containing petroleum wastes. Remedial investigations determined that contamination does not pose an unacceptable risk to human health or the environment; therefore, no further cleanup is required. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 10-acre Gould, Incorporated site in Portland, Oregon housed a lead smelter and lead oxide production facility from 1949 until 1981. Site activities included on-site disposal of about 87,000 tons of battery casings and discharge of about 6 million gallons of acid into a nearby lake, which resulted in contaminated soils and lake sediment. EPA transferred the contaminated soils and sediment into a lined containment area at the site as part of the cleanup. EPA monitored groundwater at the site to determine if historic wastes adversely impacted shallow groundwater at the site. Based on this data, in 2000, EPA determined that no further groundwater cleanup actions were necessary. Groundwater monitoring near the containment area continues to ensure that the containment area has no adverse impact. The North Ridge Estates site is a residential subdivision 3 miles north of Klamath Falls, Oregon that is contaminated with asbestos as a result of the improper demolition of approximately 80 1940s-era military barracks buildings. Asbestos-containing materials and soil are being removed from the old military barracks site during three seasons of cleanup from 2016 through 2018. Additional contamination at the nearby Kingsley Firing Range, also part of the site, will be investigated and completed at a later time. According to EPA, cleanup and restoration will be completed by the end of 2018. The 76-acre Formosa Mine site is located on Silver Butte in Douglas County, Oregon. The site was originally mined for copper and silver from about 1910 through1937. The abandoned mine discharges millions of gallons of acid rock drainage and toxic metals into the upper reaches of Middle Creek and South Fork Middle Creek every year. These discharges have contaminated surface water, groundwater, soil, and sediment with heavy metals. EPA is currently designing the remedy for all mine-impacted material on the surface and will address risks to surface and groundwater separately. The remedy for surface contamination consists of excavating, contouring, or capping various areas to prevent leaching during precipitation events. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Portland Harbor site includes portions in the Willamette River and about 12 river miles upstream of the Willamette River in and around Portland, Oregon, that have been contaminated from decades of industrial use. Areas of the site housed manufactured gas plants, a pesticide manufacturing facility, and boat maintenance facilities, among other industrial uses. Water and sediment at the site are contaminated with many hazardous substances, including PCBs, PAHs, dioxins/furans, pesticides, and heavy metals. The harbor is an international portal for commerce, and dozens of industries within the site provide economic sustainability to the community. The Lower Willamette is also a popular area for recreation, including fishing and boating. The river provides a critical migratory corridor and rearing habitat for salmon and steelhead, including endangered runs of steelhead and chinook. The area also holds great importance to several tribes as a natural and cultural resource. EPA issued its record of decision in January 2017 and finished its baseline sampling plan in December 2017. The record of decision specifies the remedy selected, which is designed to reduce risks to human health and the environment to acceptable levels and actively remediate (using dredging, capping, enhanced natural recovery, and monitored natural recovery) on 394 acres of contaminated sediment and 23,305 lineal feet of river bank. This final remedy is estimated to cost approximately $1.05 billion and take about 13 years to complete. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Black Butte Mine site is located near Cottage Grove, Oregon. Mercury mining from the late 1880s through the late 1960s included extracting ore from the mine, crushing it on-site, roasting it in kilns to volatilize the mercury, and bottling and shipping the mercury. Mining operations, tailings piles left at the site, and erosion from Furnace Creek contaminated soil, sediment, surface water, and groundwater with mercury and other toxic metals. EPA and its contractors are working in the Furnace Creek area of the site to excavate mine tailings and contaminated soils/sediment for safe disposal in an off-site repository. Removing the mine tailings will reduce mercury leaking into Furnace Creek and reduce the potential for mercury leaching into groundwater. Site investigations for the long-term cleanup are under way. The Newport Naval Education/Training Center site was used by the U.S. Navy as a refueling depot from 1900 through the mid-1970s. The site encompasses 1,063 acres on the west coast of Aquidneck Island in Portsmouth, Middletown, and Newport, Rhode Island. The site includes multiple areas of contamination, including a landfill, a fire training area, a former shipyard, and five tank farms. The areas contain varying degrees of groundwater contamination. The Navy is the lead agency for site investigation and cleanup. Site cleanup has included installation of a soil cover, use of a groundwater pump and treat system, and removal of contaminated debris. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Centredale Manor Restoration Project site is located in North Providence, Rhode Island, where the main “source area” consists of about 9 acres down the Woonasquatucket River, south to the Lyman Mill Dam, and includes the restored Allendale Dam. The site was a chemical production and drum reconditioning facility from the 1940s to the 1970s that resulted in the release of dioxin and other contamination. Past site operations led to chemicals released directly to the ground, buried and emptied directly into the river. This resulted in contamination of soil, groundwater, surface water and sediment in the adjacent river and downstream ponds. A major fire in 1972 destroyed most structures at the site. Residential apartments were constructed at the site in the late 1970s and early 1980s and still occupy the site. To address immediate risks, EPA conducted several activities including fencing the site, capping contaminated soil, and reconstructing Allendale Dam. EPA developed the cleanup plan, with amendments, in 2012. EPA, the state of Rhode Island, and potentially responsible parties agreed in July 2018 on a plan to clean up contamination at the site. The Whitewood Creek site covers an 18-mile stretch of Whitewood Creek in Lawrence, Meade, and Butte counties in South Dakota. Since the 1870s, gold mining operations in the area included the discharge of millions of tons of mine tailings into the creek. These mine tailings settled along the Whitewood Creek floodplain, contaminating soil, groundwater, and surface water with heavy metals. EPA excavated 4,500 cubic yards of contaminated soil from residential yards, disposed of contaminated soil, and established institutional controls and surface water monitoring. EPA took the site off the Superfund program’s National Priorities List in 1996 when cleanup finished and affected counties restricted future development in impacted areas. Surface water monitoring is ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 360-acre Gilt Edge Mine site is located about 6.5 miles east of Lead, South Dakota. The primary mine disturbance area encompasses a former open pit and a cyanide heap-leach gold mine, as well as prior mine exploration activities from various companies. Mining and mineral processing at the site began in 1876 and early gold miners developed extensive underground workings that wind through the central portion of the site. There was also some surface mining. Historical operations at the site contaminated surface water and groundwater with acidic heavy-metal-laden water. In 1986, mine owners commenced development of a large-scale open pit, cyanide heap leach gold mine operation. In the late 1990s, site owners abandoned the site and their responsibilities to address acidic heavy-metal-laden water generated from the exposed highwalls of the three open mine pits and from the millions of cubic yards of acid-generating spent ore and waste rock. Investigation and cleanup activities at the site are ongoing. Interim remedies are currently in place for the water treatment, Lower Strawberry Creek, and Ruby Gulch Waste Rock Dump; and remedial action construction is in progress for the primary mine disturbance area. The Lower Duwamish Waterway site is a 5-mile segment of the Duwamish, Seattle, Washington’s only river. The river flows between residential areas as well as through the industrial core of Seattle into Elliott Bay. The waterway has served as Seattle’s major industrial corridor since the early 1900s, resulting in sediment contaminated with toxic chemicals from industrial practices, stormwater runoff, and wastewater. EPA has also found contamination in fish and shellfish, including PCBs, arsenic, polycyclic PAHs, dioxins, and furans. As a result, consumption of resident fish and shellfish, and contact with contaminated sediment pose a risk to human health. EPA signed the record of decision in 2014 that includes plans to clean up about 177 acres in the waterway, including dredging, capping, and natural sedimentation. By the end of 2015, 50 percent of PCB contamination in the river bottom was removed through these early action cleanups. Cleanup and monitoring activities are ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 340-acre Naval Undersea Warfare Engineering Station site is located on a peninsula 15 miles west of Seattle. Site activities included torpedo maintenance, fuel storage, welding, painting, carpentry, plating, and sheet metal work. Site activities and waste disposal practices contaminated soil, sediment and groundwater with hazardous chemicals, including 1,4-Dioxane, chromium, and vinyl chloride. The site’s long-term cleanup remedy included demolition of the plating shop building; removal and disposal of contaminated soil and sediment; removal of underground storage tanks; long-term monitoring of groundwater, sediment and shellfish; institutional controls; and phytoremediation to treat contaminated landfill soil. Remedy construction took place between 1995 and 2000. Site operation and maintenance activities, and site monitoring, are ongoing. Four sites on the NPL are part of the 586-square-mile Hanford Nuclear Reservation near Richland, Washington, where waste was created as a by-product of producing plutonium from 1943 through1987. The 25- square-mile Hanford 100-Area site, also referred to as the River Corridor, is focused on cleanup of contamination that originated from nine nuclear reactors. Cooling water contaminated with radioactive and hazardous chemicals was discharged into both the adjacent Columbia River and on-site infiltration cribs and trenches. Site operations also included burying contaminated solid wastes on-site. These activities contaminated soil and groundwater with radioactive constituents, heavy metals, and other hazardous chemicals. Contaminants have been addressed by demolishing buildings, removing contaminated soil, and employing pump and treat systems for contaminated groundwater, among others. EPA has selected eight interim remedies for the 100-Area and remedial investigations are under way to support selection of final cleanup remedies. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Four sites on the NPL are part of the 586-square-mile Hanford Nuclear Reservation near Richland, Washington where waste was created as a by-product of producing plutonium and other nuclear materials for nuclear weapons from 1943 through 1987. The 79-square-mile 200-Area site is located 17 miles north-northwest of Richland, Washington. The 200-Area site is located in the center portion of the Hanford site, known as the Central Plateau, and contains former chemical processing plants and waste management facilities. During processing activities, massive quantities of carbon tetrachloride were discharged into the ground. Site activities also included processing, finishing and managing nuclear materials, including plutonium. About 1 billion cubic yards of solid and diluted liquid wastes (radioactive, mixed, and hazardous substances) were disposed in trenches, ditches, and in an on-site landfill. About 1,000 facilities and structures were built to support processing activities which contaminated soil, groundwater and surface water with hazardous chemicals and radioactive constituents. Thousands of containers and drums holding radioactive waste were placed in burial grounds. Remedial investigations, removal actions, and remedy design and construction are under way for more than 800 waste areas at the site. Cleanup actions included decontamination and demolition of contaminated structures; treatment of contaminated soil; excavation and off-site disposal of drummed wastes; institutional controls; and natural attenuation of groundwater contaminants. According to EPA, a remedy for one of the large canyon-type buildings is about halfway complete and is awaiting investigation and remediation of surrounding waste sites before it can be completed. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Four sites on the NPL are part of the 586-square-mile Hanford Nuclear Reservation near Richland, Washington where waste was created as a by-product of producing plutonium and other nuclear materials for nuclear weapons from 1943 through 1987. The 56 square mile Hanford 300 Area site was home to fuel manufacturing operations at Hanford as well as experimental and laboratory facilities. The 300-Area site includes an unlined liquid disposal area north of the on-site industrial complex area, landfills, and miscellaneous disposal sites associated with operations at the industrial complex. The 300-Area site contains about 27 million cubic yards of solid and diluted liquid wastes mixed with radioactive and hazardous wastes in ponds, trenches, and landfills. The areas used for liquid discharges had no outlets; therefore, liquids percolated through the soil into the groundwater and the Columbia River. Cleanup actions completed to date include decontamination and demolition of contaminated structures; natural attenuation of groundwater contaminants; and disposal of building rubble, contaminated soil, and debris. Remedy construction has been completed in several areas of the site and remedial investigations, removal actions, and remedy design and construction are under way at the remaining areas. Four sites on the NPL are part of the 586-square-mile Hanford Nuclear Reservation near Richland, Washington where waste was created as a by-product of producing plutonium and other nuclear materials for nuclear weapons from 1943 through 1987. Waste areas in the 120-square-mile Hanford 1100-Area site include a landfill, drains, underground tanks and a sand pit where as many as 15,000 gallons of waste battery fluids may have been disposed. Past site activities and waste disposal practices contaminated soil and groundwater with heavy metals and hazardous chemicals such as PCBs and trichloroethene. Remedial activities include off-site disposal of PCB-contaminated soils, capping of the landfill, and establishing continuing institutional controls to prevent future exposure and contamination from buried asbestos.Following cleanup, EPA deleted the site from the NPL in 1996. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 300-acre Jackson Park Housing Complex site is located in eastern Kitsap County, about 2 miles northwest of Bremerton, Washington. From 1904 through 1959, the facility operated as a Navy ammunition depot and included ordnance, manufacturing, processing, and disassembly. Residual ordnance powders were disposed of by open burning. Hazardous dust deposited on floors during ordnance handling was washed into floor drains that led into Ostrich Bay. The site also included incinerators; paint, battery, and machine shops; and a boiler plant. Site activities contaminated surface water and soil with hazardous chemicals and heavy metals. The site’s long-term remedy included installation of a soil and vegetation cover over contaminated soil, shoreline stabilization, implementation of a shellfish sampling program, and signs along the shoreline to notify local residents of any harvest restrictions. Site cleanup also included the removal and off-site disposal of wooden pilings from abandoned Navy structures, excavation and disposal of contaminated soil, establishment of an environmental monitoring program, and subsurface placement of oxygen-releasing chemicals. Remedy construction began in 2000 and is ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 53-acre Old Navy Dump/Manchester Laboratory site is located north of Manchester, Washington, along the western shore of Clam Bay in Puget Sound. Federal ownership of this site started in 1898 with the U.S. Army. In 1924, the entire site was transferred to the U.S. Navy. From the 1940s through the 1960s, the Navy used the site primarily for construction, repair, maintenance, and storage of submarine nets and boats, but also used the site for firefighter training and as a dump for wastes generated at the site. Former firefighter training activities contaminated soil with dioxins and petroleum hydrocarbons. The Navy also dumped demolition debris and industrial waste, including asbestos, into a former tidal lagoon, contaminating soil, sediment, seep water, and shellfish in Clam Bay with PCBs and metals. Clam Bay has been used primarily for recreational shellfishing and is a known habitat for the bald eagle and chinook salmon, a threatened species under the Endangered Species Act. In the early 1970s, EPA and the National Oceanic and Atmospheric Administration (NOAA) acquired portions of the property. The site is currently occupied by an EPA analytical laboratory and a NOAA fisheries research laboratory. The Army Corps of Engineers established in the third 5-year review in 2014 that the remedy at this site is protective of human health and the environment. Operation and maintenance activities and monitoring are ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 83-acre Pacific Sound Resources site, formerly known as the Wyckoff West Seattle Wood Treating facility, is located on the south shore of Elliott Bay on Puget Sound in Seattle, Washington. A wood-treating facility operated at the site between 1909 and 1994. Wood-preserving operations used creosote, pentachlorophenol, and various metal-based solutions of copper, arsenic, and zinc. Daily operations, as well as spills, leaks and storage of treated wood products resulted in soil and groundwater contamination. Direct discharge or disposal of process wastes and waste transport were the most likely sources of contamination to marine sediment. Over half of the site is located in either intertidal or subtidal lands. Cleanup actions included the placement of subtidal and intertidal caps over the 58-acre marine sediment area, including placement of at least 5 feet of cap material in the intertidal zone; dredging and removal of contaminated sediment for off-site disposal; and removal of marine pilings for off-site disposal. Construction of long-term cleanup remedies concluded in 2005 and, following cleanup, operation and maintenance activities, including periodic groundwater monitoring, are ongoing. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Wyckoff Company / Eagle Harbor Superfund site is on the east side of Bainbridge Island in Central Puget Sound, Washington. The site was used for creosote wood treatment for more than 85 years, according to the Washington Department of Ecology. Environmental investigations revealed extensive contamination— including creosote, mercury, and other metals—in soils, groundwater, and in the sediment on the bottom of Eagle Harbor. EPA reports that extensive cleanup actions have been completed at the site, including operating a groundwater extraction and treatment system since 2012, capping sediment on more than 70 acres of Eagle Harbor, and hauling away contaminated soils and debris. Further cleanup actions are needed in the soil and groundwater at the former wood treatment facility and in adjacent beach sediment. In 2016 EPA released a proposed plan for additional cleanup actions at the site and, after a public comment period, divided the work into two cleanup decisions. The first was issued in May 2018 and the second is planned for issue near the end of 2018. The 10-acre Pesticide Lab site is an active agricultural research laboratory located at the Yakima Agricultural Research Laboratory in Yakima, Washington, and has been in operation since 1961.The site is leased by the U.S. Department of Agriculture (USDA). Wastes from the formulation, mixing, and storage of pesticide were discharged into a septic tank disposal system at the site from 1965 through 1985. USDA addressed cleanup under the Resource Conservation and Recovery Act. The site has been cleaned up and is no longer a threat to human health. Long-term monitoring is not required because cleanup left no contaminants of concern on the site. EPA deleted the site from the NPL in 1993. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The 92-acre Hidden Valley Landfill site is located in Puyallup, Washington. The site contains a former landfill and gravel pit that operated from 1967 through 1985. The landfill accepted liquids, solids, industrial wastes, and heavy metal sludge. Waste disposal activities contaminated groundwater with hazardous chemicals and heavy metals. The site’s long-term remedy included covering the waste with an impermeable barrier, collecting landfill gases, controlling surface water and soil erosion, and minimizing the lateral and vertical movement of contaminated groundwater. Remedy construction took place in 2000. Landfill gas and groundwater monitoring are ongoing. The Tulalip Landfill site, located within the boundaries of the Tulalip Indian reservation, is a former landfill located between Marysville and Everett, Washington. The site consists of a 147-acre landfill and 160 acres of wetlands. The Seattle Disposal Company operated the landfill from 1964 until 1979. The landfill received an estimated 3 million to 4 million tons of commercial and industrial waste. In 1979, landfill operators closed the landfill, added a soil cover, and constructed a perimeter barrier berm. However, insufficient grading of the soil cover resulted in poor drainage and allowed precipitation to collect and eventually infiltrate the landfill surface. As a result, the landfill contaminated groundwater, surface water and sediment with metals, pesticides, PCBs and polycyclic aromatic hydrocarbons. EPA’s interim remedy for the landfill included capping the landfill and installing a landfill gas collection and treatment system, among other actions. EPA continued the interim remedy for the landfill and included institutional controls for the wetlands, such as placing and maintaining signs to warn of potential risk from harvest and consumption of resident fish and shellfish. The tribe is responsible for maintenance of the remedy, inspections, and sampling at the site. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Harbor Island is a 420-acre manmade island in Elliott Bay in Seattle Washington. The site includes the entire island and associated sediment. Built in the early 1900s, the island housed businesses that conduct commercial and industrial activities, including oil terminals, shipyards, rail transfer terminals, cold storage, and lumberyards. Site operations contaminated groundwater, sediment and soil with lead, PCBs, arsenic, mercury, and other contaminants. Remedial activities include removal and treatment of contaminated soil, treatment of groundwater, removal of approximately 6,000 creosote treated piles, and dredging sediment. Most portions of the site have been cleaned up and are undergoing long- term monitoring. The Commencement Bay, Near Shore/Tide Flats site is located in the City of Tacoma and the Town of Ruston at the southern end of Puget Sound in Washington. The site encompasses an active commercial seaport and includes 12 square miles of shallow water, shoreline, and adjacent land, most of which is highly developed and industrialized. EPA found widespread contamination of the water, sediment, and upland areas at the site and has divided the site into seven areas being managed as distinct cleanup sites. As part of this cleanup, EPA has remediated 2,436 properties with the worst contamination, restored 11 acres of shallow marine habitat, and restored 70 acres of estuarine habitat. The site’s long-term remedy includes demolishing remaining buildings and structures, excavating soil and slag from the five most contaminated source areas on the site, depositing demolition debris in an on-site containment facility, and monitoring the impacts of cleanup on groundwater and off-shore marine sediment. Investigations and remedy construction are ongoing at the site. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Midnite Mine is an inactive former uranium mine in the Selkirk Mountains of eastern Washington. Located within the reservation of the Spokane Tribe of Indians, the mine was operated from 1955 until 1981. The site includes two open pits, backfilled pits, a number of waste rock piles, and several ore/protore stockpiles. The site contamination has resulted in elevated levels of radioactivity and heavy metals mobilized in acid mine drainage, both of which pose a potential threat to human health and the environment. The site drains to Blue Creek, which enters the Spokane Arm of Franklin D. Roosevelt Lake. Contaminated water emerging below the waste rock and ore piles is currently captured for treatment in an on-site treatment system. Cleanup includes consolidation of mine waste rock, protore, and contaminated soils; backfilling these materials in lined pits; covering these pits to prevent water infiltration; and ongoing water treatment. According to EPA, significant cleanup is planned to occur between 2017 and 2024. The 40-acre Lockheed West Seattle site is located in Elliott Bay near the mouth of the West Waterway in Seattle, Washington. The site includes about 7 acres of aquatic tidelands owned by the Port of Seattle and 33 acres of state-owned aquatic lands. Historic industrial practices at the former shipyard contaminated sediment with hazardous chemicals, including PCBs, dioxins, and furans. Industrial activities generated considerable quantities of sandblast grit and other industrial waste that discharged to sediment and accumulated beneath dry docks and shipways. The Lockheed Martin Corporation, as the potentially responsible party for the cleanup, will remove contamination from a 40-acre area in the northwest corner of the mouth of the West Waterway and north of the Port of Seattle’s Terminal 5. An estimated total of 167,000 cubic yards of contaminated material will be removed over the course of the cleanup. According to EPA, the cleanup was to begin in 2018 and is anticipated to be completed in the spring of 2019. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Makah Reservation Warmhouse Beach Dump is located within the Makah Indian Reservation at the northwest tip of the Olympic Peninsula in Washington. The site includes a former open dump on top of a ridge about 3 miles northwest of Neah Bay and two streams that originate within the dump and flow to East Beach and Warmhouse Beach. Municipal and household solid and hazardous wastes were disposed of at the dump from the 1970s until 2012. Elevated levels of metals, perchlorate and PCBs have been found in soil at the dump and in the sediment of both creeks. Mussels at the beach also contain elevated concentrations of lead; however, EPA has not determined whether this is from the dump or creeks. EPA is in the remedial investigation stage of the cleanup. Bremerton Gas Works is a former manufactured gas plant located about a mile and a half north of downtown Bremerton, Washington. It occupies about 2.8 acres of property along the Port Washington Narrows in Puget Sound. Two species of fish that are listed as threatened under the Endangered Species Act (steelhead trout and chinook salmon) live near the site. This portion of Puget Sound is used as a sport and commercial fishery, as well as for subsistence fishing by the Suquamish Indian Tribe. EPA is in the early stages of the cleanup process, conducting the remedial investigation and feasibility study, which EPA expects to complete in spring 2019. The Hamilton/Labree Roads Groundwater Contamination site is located about 2 miles southwest of Chehalis, Washington. According to EPA, past site activities included spilling and dumping tetrachoroethene in Berwick Creek and burying drums and other containers of assorted hazardous chemicals on-site. The release at the site has contaminated soil, sediment, groundwater, and surface water. EPA’s selected interim remedy includes rerouting Berwick Creek around contaminated areas, thermally treating tetrachoroethene-contaminated soil and sediment, and treating contaminated groundwater. Remedial design is under way. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) Penta Wood Products site is located in the town of Siren in Burnett County, Wisconsin. A wood treatment facility operated at the site from 1953 until 1992, and used pentachlorophenol (PCP) to treat wood posts and telephone poles. Facility operations contaminated soil and groundwater with PCP and arsenic. During cleanup, EPA removed about 28 storage tanks containing liquid and sludge. Also, 43,000 gallons of a PCP/oil mixture and sludge were disposed of off-site. The treatment building was demolished and contaminated soil was cleaned on-site or disposed of off-site. Cleanup was completed in 2000, and operation and maintenance activities and monitoring are ongoing. In September 2014, the State of Wisconsin took over operations and maintenance activities at the site. Tribe or tribes with known interest in the site (CC) (HEUC) control (GWMUC) use (SWRAU) The Ashland/Northern States Power Lakefront site is located on the shore of Chequamegon Bay, which is part of Lake Superior, in northern Wisconsin. The site consists of several properties, including those owned by Northern States Power Co. of Wisconsin, Canadian National Railroad and the city of Ashland. 16 acres of contaminated lake sediment just off-shore are also part of the site. The near-shore portion of the site was formed by the placement of fill consisting of sawdust, wood, and wood waste; demolition debris; and other waste materials. Contaminants including tar, oil, PAHs, volatile organic compounds, and metals have been found in sediment, groundwater, and soil. Contamination has also been found in an adjacent residential area. Because groundwater is contaminated at levels of health concern, two artesian wells have been closed as a precautionary measure. Access to a portion of the bay and shore is restricted for boats and swimmers because when sediment is agitated, oil and tar can be released causing a slick to form. Cleanup at the site is ongoing and is being overseen by the Wisconsin Department of Natural Resources and EPA. Phase 1,soil and groundwater cleanup under portions of the site was completed in 2016. This entailed removing contaminated soil, covering the area with clean material, and installing barriers to stop groundwater from migrating. Phase 2, the full-scale wet dredge in the Chequamegon Bay, was completed in 2018. EPA is conducting the first five-year review of the site. In providing technical comments on a draft of this report, the Confederated Salish and Kootenai Tribes of the Flathead Reservation identified this additional site. Site Overview Blackbird Mine is located 25 miles west of the town of Salmon in the Salmon-Challis National Forest in east- central Idaho. Cobalt, silver, and copper ore were extracted from underground and open-pit mining operations. Contaminated soil, sediment and tailings were released from the mine site during high water flows from thunderstorms and snowmelt. Acid rock drainage and leachate from the mining tunnels, waste piles, and tailings contaminated soil, sediment, surface water, and groundwater with heavy metals such as copper, cobalt, and arsenic. Affected surface waters include Blackbird Creek, the South Fork of the Big Deer Creek, Big Deer Creek, and Panther Creek. Since 1995, cleanup actions have collected contaminated runoff water in the mine area and treated it for copper and cobalt. Cleanup actions have also stabilized waste-rock piles at the mine. Remedy construction is complete except for determining whether to divert Bucktail Creek. Post-construction monitoring of these cleanup activities is ongoing. Since the early 1900s, General Electric operated a large- scale industrial facility that manufactured and serviced power transformers, defense and aerospace materials, and plastics, and used numerous industrial chemicals at its Pittsfield facility. Years of PCB and industrial chemical use, and improper disposal, led to extensive contamination around Pittsfield, Massachusetts as well as down the entire length of the Housatonic River, which is approximately 150 miles from its source on the East Branch in Hinsdale, Massachusetts and flows through Connecticut into Long Island Sound. After testing groundwater, river sediment, soil, and wildlife, EPA determined that the contamination needed to be addressed and that the greatest concern in the area is the possibility of direct contact or ingestion of PCB contamination. Since 1977, there has been a ban on fishing and consumption of fish from areas of the Housatonic River. These restrictions will remain in place until PCB levels decrease. Data are collected to ensure that the current restrictions protect human health. EPA collects information regarding PCBs in fish and shellfish. In addition to PCBs, other industrial compounds present at the site pose an unacceptable risk to people and the environment. Site Overview The Smurfit-Stone Mill Frenchtown site is located 11 miles northwest of Missoula, Montana. The 3,200-acre site formerly housed a pulp mill that operated from 1957 through 2010. The core industrial footprint of the mill site covers about 100 acres, and there are more than 900 additional acres containing a series of unlined ponds used to store treated and untreated wastewater from the mill, as well as sludge recovered from untreated wastewater. The site also includes landfills used to dispose of solid wastes, including general mill refuse and asbestos. Various hazardous substances were used or produced on-site, including bleaching chemicals that produced dioxins and furans that may have been released into the environment. A screening investigation by EPA determined that the site’s primary contamination sources include four sludge ponds, an emergency spill pond, an exposed soil pile adjacent to a landfill, a wastewater storage pond, and a soil land farming area. The results of the investigation will determine cleanup needs and identify potential cleanup options at the site. The Anaconda Copper Mine site covers more than 3,400 acres of the Mason Valley, near the city of Yerington, Nevada. Portions of the site are owned by a company, while other areas are public lands managed by the U.S. Bureau of Land Management. Nevada Department of Environmental Protection and EPA have conducted several emergency removal actions at the site to address immediate concerns. Remedial investigations and feasibility studies will be conducted to determine the extent of contamination and potential cleanup options for other areas at the site. Site Overview The Lower Fox River, located in northeastern Wisconsin, begins at the Menasha and Neenah channels leading from Lake Winnebago and flows northeast for 39 miles to where it discharges into Green Bay and Lake Michigan. The Fox River Natural Resource Damage Assessment / Polychlorinated Bisphenyls Releases site addresses releases caused by operations of several pulp and paper mills that, during the 1950s and 1960s, routinely used PCBs in their operations that resulted in contamination of the river. Samples from the site also indicate the presence of polycyclic aromatic hydrocarbons resulting from manufactured gas plant processes co-mingled or underneath the PCB contamination. Approximately 270,000 people live in the communities along the river. 2018 is the 10th year of dredging in the Lower Fox River, and EPA estimates 450,000 cubic yards of PCB- contaminated sediment will be removed before the end of the year. In addition, about 2.1 acres of sediment will be capped and 179 acres will be covered with sand. EPA plans to oversee a second 5 year review in 2019. This report (1) examines the extent to which the U.S. Environmental Protection Agency (EPA) has reliable data identifying National Priorities List (NPL) sites that are located on tribal property or that affect tribes, (2) examines the extent to which EPA has reliable data on the agency’s consultation with tribes and (3) describes what actions, if any, EPA has taken to address the unique needs of tribes when making decisions about cleanup actions at NPL sites. To examine the extent to which EPA has reliable data identifying NPL sites that are located on tribal property or that affect tribes, we reviewed relevant provisions of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 as amended and policies and guidance regarding EPA’s identification and clean-up of NPL sites. We obtained and evaluated EPA data from the Superfund Enterprise Management System (SEMS) on proposed, final, and deleted NPL remedial sites that have tribes associated with them or that EPA has designated as having Native American Interest (NAI). We limited our review to examining proposed, final, and deleted NPL sites because they represent sites with the highest national priority due to the significance of releases, or threatened releases, of hazardous substances. EPA also indicated whether such sites may be located within 10 miles of known tribal property by comparing the sites’ coordinates to the tribal geographic location as recorded in publicly available EPA data. We also obtained information about whether a site was considered a federal facility because other federal agencies may have different consultation policies than EPA. We did not determine whether EPA has information about consultation with tribes for sites considered federal facilities. EPA initially identified 265 NPL Superfund sites that were on tribal property, had NAI, had a tribe or tribes with potential interest in the site, or may have been within 10 miles of tribal property. We then worked with EPA headquarters officials and each regional office to perform data quality checks and identify any errors or omissions, in order to develop a revised list of a total of 87 NPL sites—of which 11 were federal facilities— known to affect tribes or to be located on tribal property. As an example of the data quality checks, officials from each EPA regional office reviewed the list of sites for their respective regions and made corrections to the sites’ designation as having NAI or tribes with interest in the sites. As another example, we compared data from EPA’s Tribal Consultation Opportunity Tracking System (TCOTS) database with the list of sites EPA provided us and determined that a tribal consultation had occurred for a site that EPA had not identified as having NAI. We checked with officials from the appropriate EPA regional office and they told us that the site should have been designated as having NAI, so we added it to our list. We also interviewed officials from EPA’s headquarters and regional offices to better understand the agency’s management, use, and the reliability of these data. In providing comments on a draft of this report, the Confederated Salish and Kootenai Tribes of the Flathead Reservation identified an additional site that was not included in EPA’s data, which we reviewed with EPA and added to our list of NPL sites known to be on tribal property or that affect tribes, bringing the total to 88 sites. We recognize that there may be additional sites at which there is tribal interest but determined that the data were sufficiently reliable to provide information on NPL sites known to be on tribal property or that affect tribes, and to select six sites for nongeneralizable case studies for our work. We did not select case studies from sites located on federal facilities because federal agencies may have different tribal consultation policies. For the case studies, we selected sites based on geographic diversity, and in order to represent sites that have been listed since the publication of EPA’s tribal consultation policy in 2011. We also selected sites that had at least two assessments or inspections performed according to EPA data so the tribes would have sufficient information to share with us about their experiences. In one of the case studies, we had to change to a different site from the same region when the tribe associated with the site we had initially selected did not wish to participate. We chose a replacement site in the same EPA region that was at a similar point in the cleanup process as the site we originally selected. To examine whether EPA has reliable data regarding its consultation with tribes about NPL sites, we reviewed EPA-specific guidance that applies to tribal consultation on NPL sites. We evaluated data from EPA’s TCOTS, reviewed related agency documentation, interviewed knowledgeable agency officials, and compared TCOTS data with other information EPA provided. Specifically, we compared data from TCOTS with information that officials from EPA headquarters and each EPA region provided to us regarding consultation for each of the nonfederal sites that had NAI. In order to determine the frequency with which EPA consults with tribes on cleanup actions of NPL sites, we examined and compared available data on consultation from the TCOTS system with other information provided by EPA in light of EPA’s consultation guidance. We also interviewed officials from EPA and selected tribes from our six nongeneralizable case studies regarding consultation. While we selected case studies based on nonfederal NPL sites EPA has identified as being on tribal property or affecting tribes, our interviews with tribal and EPA officials covered a broader range of sites and included officials’ views about any Superfund activities in which they had been involved. For each case study, we requested information documenting EPA’s consultation with tribes as well as any materials that demonstrated whether and how agency decisions took into account unique tribal needs associated with the site. We also conducted semi-structured interviews with officials from the tribe or tribes involved at each of our case study sites, as well as EPA regional officials for the region in which the site is located. We visited the Jackpile-Paguate Uranium Mine site and conducted interviews with tribal officials in person. We evaluated EPA and tribal officials’ experiences with consultation at our selected case study sites based on EPA’s consultation policies. To describe what actions EPA has taken to address the unique needs of tribes when making decisions about cleanup actions at NPL sites, we interviewed EPA officials from the regional offices associated with our selected case study sites about consultation regarding our case study sites, as well as at other NPL sites that affect tribes in their region. We also conducted semi-structured interviews with tribal officials who had consulted or coordinated with EPA regarding each of the selected sites in our review. We asked the tribes to describe the effects of the site on any unique needs such as subsistence fishing and gathering, and whether EPA has explored or addressed these needs during the agency’s cleanup actions. We conducted this performance audit from May 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To analyze examples of consultation and better understand the tribal perspective on consultation with the Environmental Protection Agency (EPA), we conducted six nongeneralizable case studies of final or proposed National Priorities List (NPL) sites with Native American Interest (NAI). We selected these case studies on the basis of geographic diversity and in order to represent sites that have been listed since the publication of EPA’s tribal consultation policy in 2011. For each of these case studies, we collected documentation and interviewed the relevant tribal and EPA regional officials. Figure 2 provides an overview of these case studies. According to EPA, the Creese and Cook Tannery site is located on the Crane River in Danvers, Massachusetts. According to an October 2018 proposed cleanup plan, several businesses operated at the site, including leather tanneries that operated from the late 1800s until the early 1980s and a former railroad station. Use of arsenic and chromium at tanneries resulted in these chemicals contaminating soil at the site. Other soil contaminants include dioxins, furans, and polycyclic aromatic hydrocarbons from railroad operations, combustion, and use of asphalt pavement. In the mid-1980s, the Massachusetts Department of Environmental Protection conducted an initial investigation to determine the nature and extent of contamination and evaluate the potential remedial options under state law. The department then reviewed and approved, pursuant to state law, a plan for excavation of the waste and its placement in a containment cell. EPA began investigations in 2010 and found arsenic in surface soils. As a result, in 2012 EPA removed 450 tons of contaminated soil from the site. EPA conducted six site assessments, including an archaeological assessment, and placed the site on the NPL in 2013. The site is in the early stages of the cleanup process. The feasibility study for the site was completed in September 2018, and EPA issued a cleanup proposal for comment in October 2018. According to information provided by EPA, the site has not yet reached any Superfund site-wide milestones because the remedial action has not begun. EPA officials stated that both the Mashpee Wampanoag Tribe and Wampanoag Tribe of Gay Head (Aquinnah) have expressed interest in the site due to possible adverse impacts on significant cultural resources in the contaminated area. EPA officials told us they notified both tribes of the site concurrently with notification to the Massachusetts Historical Commission in August 2014. In a consultation response form dated September 2014, the Mashpee Wampanoag Tribe indicated that the cleanup has the potential to have adverse effects on historical or cultural resources important to the tribe and requested that the tribe be notified prior to any archaeological activity on-site, and that they be provided any archaeological assessment documents. The National Historic Preservation Act requires federal agencies to take into account the effects of their undertakings on historic properties, including properties to which Indian tribes attach religious and cultural significance. According to EPA Region 1 officials, they are consulting with both tribes under the act. EPA sent an archaeological survey to the tribes in June 2017. Officials from the Mashpee Wampanoag Tribe indicated that they agree with the survey’s findings and required that consultation continue. EPA officials told us that the Wampanoag Tribe of Gay Head (Aquinnah) did not comment on the assessment. Both tribes have asked EPA to inform them of cleanup status for the site and share any reports. EPA officials told us they were consulting with both tribes under section 106 of the National Historic Preservation Act. Officials also told us that EPA will negotiate a memorandum of understanding with both tribes once the final cleanup is selected, if it is determined that the selected remedy will have an adverse effect on any resources that are eligible for the National Register of Historic Places. With regard to coordination, both tribes noted that resource constraints prevent their further involvement with the site cleanup process. Officials from the Wampanoag of Gay Head (Aquinnah) tribe indicated that EPA has been available for discussions if the tribe raises an issue. The General Motors (Central Foundry Division) site is located on the St. Lawrence River in Massena, New York, adjacent to the Saint Regis Mohawk Tribe’s reservation. According to an EPA document, General Motors operated an aluminum die casting plant on the site beginning in 1959 and used polychlorinated biphenyls (PCB) in the manufacturing process through 1980. EPA found contamination in soils and industrial lagoons on the General Motors site property, in groundwater, in the St. Lawrence and Raquette Rivers, in Turtle Cove, and in soils and sediment within the Saint Regis Mohawk reservation. After General Motors’ bankruptcy, ownership of the site was transferred to a trust. This General Motors site was placed on the Superfund NPL in September 1983. According to information provided by EPA, the cleanup of the General Motors site is ongoing, with the last substantial cleanup of the Remedial Design and Remedial Action phase focused on a 10-million-gallon industrial lagoon. To date, contractors have dredged sediment in the St. Lawrence River, Turtle Cove, and Raquette River systems. EPA officials told us that, in addition to these dredging activities, they have completed other significant cleanup work, including installation of a groundwater collection system, installation of a multi-layer cap on the industrial landfill on-site, and demolition of the 1-million-square-foot factory building, EPA officials stated that consultation with the tribe led to excavating a portion of the industrial landfill in order to establish a 150-foot buffer between a landfill on the site and the tribe’s reservation. EPA declared human exposure to contaminants at the site under control in 2008. EPA officials told us there is no requirement to consult with tribes to determine that site-wide milestones have been reached, and that the Saint Regis Mohawk Tribe was not consulted regarding the designation of human exposure under control. Tribal officials do not agree with this determination and stated that EPA has not asked the tribe for any input on this measure. EPA officials responded that while EPA did not consult with the tribe on the human exposure under control environmental indicator, they coordinated extensively with the tribe with respect to cleanup status, strategy, and site-wide milestones prior to making the designation. Tribal officials noted concern regarding contamination of tribal property and the effect on subsistence fishing in the St. Lawrence River and tribal member health. The Saint Regis Mohawk Tribe is concerned that PCB contamination from the site is airborne and affecting the health of tribal members. Further, the tribe is concerned that PCB accumulation in fish tissue results in fish that are unsafe to eat in the quantities typically consumed by tribal members who rely on subsistence fishing. See figure 3 below for a fish consumption advisory issued by the tribe because of PCB contamination concerns. Tribal officials also told us the tribe is concerned that PCBs may be transferred through breast milk, exposing future generations to the contamination. Tribal officials told us that tribal members also complain of a strong odor emanating from the site, and have advocated for the tribe to take a more active role in the site cleanup. According to EPA, the agency sent an official consultation letter to the tribe in 2011, as directed by EPA’s 2011 Policy on Consultation and Coordination with Indian Tribes. Consultations with the tribe focused on the tribal role in the cleanup process at the General Motors (Central Foundry Division) site, as well as the Alcoa Aggregation and Reynolds Metals sites, which also affect the tribe. EPA officials told us they have responded to tribal concerns, in part, by agreeing to a stricter treatment threshold for maximum allowable PCB contamination (10 parts per million instead of 500 parts per million), based on the tribe’s objection to the originally-proposed plan. EPA officials also told us that they have responded to tribal concerns by adopting practices to mitigate air contamination during response activities, such as minimizing the size of excavation areas to reduce potential exposure and wetting contaminated soils before removal. EPA officials told us that coordination with the tribe began in the 1980s, and that the region coordinates extensively with the Saint Regis Mohawk Tribe. Additionally, these officials told us that, through annual meetings with tribes in the region and periodic visits to individual tribes, they coordinate with all tribes in the region, including the Saint Regis Mohawk Tribe, at least once a year. In technical comments provided in response to the draft of this report, EPA officials told us that the Saint Regis Mohawk Tribe has been treated as a support agency, equivalent to the state of New York, since 1995, and that the tribe has been asked to concur on all records of decision for the site as early as 1990, though they have not always concurred. Tribal and EPA officials have differing perspectives on the effectiveness or utility of consultation. Saint Regis Mohawk Tribe officials noted that they have met repeatedly with EPA over the years but the consultation has felt perfunctory and like a “box checking exercise.” Tribal officials stated that EPA did not consider their input as seriously as General Motors’ input, and they believe that EPA is over-reliant on the initial research conducted by scientists from the company, and has not sufficiently considered updated and independent research. Saint Regis Mohawk tribal officials noted that EPA did not recognize tribal members’ stronger reliance on the environment and exposure to contamination. The tribe also provided us with examples of less formal coordination with EPA, including a letter from EPA responding to tribal officials’ requests for additional air monitoring at the site. EPA Region 2 officials stated that consultation with the Saint Regis Mohawk Tribe has become more extensive and sophisticated since the issuance of the 2011 tribal consultation policy. The region held a consultation with the tribe in 2011 to address coordination with the tribe about three Superfund sites. In a summary of that consultation, EPA noted that they will take steps to further the tribe’s partnership role with respect to the three sites by providing as much time and opportunity as feasible for consultation, consistent with the mutual desire to move the cleanups forward expeditiously; continuing to share, for advance review, drafts of pertinent documents; consulting with the tribe prior to taking actions or implementing decisions that may affect the tribe’s interests; inviting tribal officials to technical meetings where potentially responsible parties and other trustees are present; and informing the tribe of the results of meetings or substantive decisions with any potentially responsible party. Further, EPA officials noted that they cannot fulfill some requests made by the Saint Regis Mohawk Tribe; however, EPA officials stated that tribal activism led to a more stringent 10 parts-per- million treatment threshold for PCBs on the site, rather than the originally proposed 500 parts-per-million standard. EPA also provided documentation of less-formal coordination with the tribe, including correspondence regarding approaches to addressing the tribe’s concerns of PCB air impacts during cleanup. According to information provided by EPA, the PMC Groundwater site is located in a former industrial area on the shores of Lake Michigan’s Little Traverse Bay in Petoskey, Michigan. PMC was established in 1946 as a small fabricating and painting business that later produced parts for the automotive industry until 2000. During this period PMC improperly disposed of solvents used in plant operations, contaminating groundwater and Petoskey’s municipal well with volatile organic compounds and inorganic contaminants. According to EPA officials, the agency has gone through several rounds of cleanups at PMC Groundwater. EPA initially listed the PMC Groundwater site on the NPL in 1983. The City of Petoskey completed construction of a new municipal water source in 1996. EPA began cleanup in 1999 and declared the site as ready for anticipated use in 2007; the site was subsequently redeveloped with condominiums. In the site’s 2014 5-year review, EPA noted that the remedies they had put in place, including excavation and off-site disposal of contaminated soil, installation and operation of a system to remove volatile organic compounds from subsurface soil, and a groundwater monitoring plan, were protective of human health and the environment in the short term, but that an effective long-term remedy would require additional steps. According to EPA officials, EPA is conducting a remedial investigation and feasibility study to determine the nature and extent of soil and groundwater contamination, which is expected to be completed in 2019. According to EPA officials, in 2016, EPA fieldwork indicated that trichloroethene concentrations exceeded acceptable levels under some condominiums’ slab foundations, and in 2017, EPA conducted an emergency removal action to address the intrusion of the vapors. Little Traverse Bay Bands of Odawa Indians officials told us the tribe’s interest in the site is due to potential exposure of tribal members and the effects on nearby surface waters. Tribal members rely on subsistence fishing in the Bear River in close proximity to the site. These officials also told us the tribe also conducts commercial fishing in Lake Michigan. Tribal members residing in Petoskey relied on the contaminated municipal well. Additionally, tribal officials told us that they want to understand the status of the site because they may be interested in future land acquisitions in the area and the U.S. Department of the Interior may not be willing to take contaminated land into trust for the tribe. According to tribal officials, the tribe contacted EPA officials in 2017 when local news reported vapor intrusion issues into condominiums built on the site. Neither tribal officials nor EPA have found any indication of previous consultation or coordination for the site. Since the tribe’s initial contact, EPA officials have shared relevant information and spoken with the tribe regarding the site. EPA officials told us that representatives from the tribe attended a public meeting about the site in June 2018 and that EPA is in close contact with an official from the tribe and will provide him with reports as appropriate. According to EPA and tribal officials, EPA has not consulted with the tribe about the site. With respect to coordination, tribal officials told us that they were satisfied with EPA’s response following the tribe’s initial contact. EPA officials told us that the tribe is aware that consultation is available if the tribe desires it, and officials will coordinate with the tribe. EPA officials stated that the relationship with tribes in the region has evolved considerably since the 1990s and that coordination with tribes in the region has improved. According to information provided by EPA, the Jackpile-Paguate Uranium mine is a 2,656-acre site located on the Pueblo of Laguna, New Mexico, about 40 miles west of Albuquerque. Anaconda Copper Mining and The Anaconda Company, predecessors to the Atlantic Richfield Company, moved more than 400 million tons of rock within the mine between 1952 and 1982 area in addition to 25 million tons of uranium ore off-site for additional processing. Mining operations contaminated surface water with hazardous substances. Additionally, according to a report by the U.S. Department of Health and Human Services, people living in villages near the site could be exposed to contamination through radioactive materials from the site being used in home construction, or through contact with mine contaminants suspended in air or present in dust blown or tracked from the mine. Reclamation of the mine began in 1990 and was closed out in June 1995; however, EPA was not involved in the initial reclamation prior to the site being listed on the NPL. Figure 5 is a photograph of Gavalon Mesa, one of the major mining areas at the site, and erosion typical to a previously reclaimed area. EPA listed the site on the NPL in 2013. EPA officials conducted four assessments at the site. The site is currently in its remedial investigation and feasibility study stage, and the site has not met any site-wide milestones. The site is located within the boundaries of the Pueblo of Laguna’s reservation. Pueblo of Laguna officials stated that the site impacted the Pueblo in several ways, including radon contamination in homes due to use of contaminated mining debris in home construction, contamination of water sources, and dust from mining operations reaching homes and gardens. EPA officials stated that neither EPA nor the Pueblo of Laguna have initiated consultation for the Jackpile-Paguate Uranium Mine under the 2011 consultation policy. EPA consulted with the tribe for the site in 2009, which resulted in a memorandum of understanding (MOU) to facilitate coordination in performing removals and site assessments for the site. According to EPA officials, once the remedial investigation and feasibility study is complete, they will seek to consult with the tribe before making a decision about cleanup goals. EPA officials noted that the agency has consistently coordinated with the tribe, including regular briefings to the tribe and working closely with the tribe’s Environmental and Natural Resources Department since EPA became involved at the site. In addition, the tribe is a support agency for the site—which means EPA must provide the tribe substantial and meaningful involvement in the initiation, development, and selection of the remedial action at the site. The Pueblo has a Superfund support contract with EPA to facilitate its support agency work helping EPA perform oversight of the response work, and reviewing and commenting on EPA documents, according to EPA officials. Pueblo officials told us that they have been satisfied with the coordination for the site, and they prefer that coordination be face-to-face when possible. Officials told us that consultation requires a senior EPA official to present in person to the Pueblo Council, and all other interactions are considered coordination. According to the Pueblo, coordination with EPA has been effective, in part, because EPA acknowledges that site contamination extends beyond the mine lease boundaries. EPA officials told us that they are in frequent communication with the Pueblo. EPA officials noted that they hold regular briefings with tribal officials, as well as through routine electronic and phone communication. EPA officials noted that coordination with the tribe early in the Superfund cleanup process facilitates their work. For example, since the site is on tribal property, EPA worked with the Pueblo to gain site access to investigate the extent of the contamination. According to information provided by EPA, the Smurfit Stone Mill- Frenchtown site is a 3,200-acre area located northwest of Missoula, Montana. The site was originally a pulp mill operated from 1957 through 2010. It includes more than 900 acres of unlined ponds that were used to store wastewater effluent from the mill, as well as sludge recovered from untreated wastewater. Contamination includes dioxins and furans produced through bleaching of pulp, as well as PCBs. EPA proposed to add the site to the NPL in 2013 and is evaluating public comments on the proposal before making a final decision. EPA negotiated an administrative settlement agreement and order on consent in 2015 with three potentially responsible parties to conduct a remedial investigation and feasibility study at the site. EPA officials told us that these parties have completed several site tasks contributing to the remedial investigation and feasibility study for the site. Both the Confederated Salish and Kootenai Tribes of the Flathead Reservation and the Kalispel Indian Community of the Kalispel Reservation (hereafter Kalispel or Kalispel Indian Community) have interest in the site. Officials from the Confederated Salish and Kootenai Tribes of the Flathead Reservation stated that their interest in the site is drawn from the Hellgate Treaty of 1855. According to these officials, the site is located on land where the tribes retain treaty hunting, fishing, and gathering rights in portions of the Clark Fork River that are potentially contaminated by the site. The two tribes are concerned about adverse health impacts on tribal members due to exposure through consumption of fish from near and downstream from the site and ensuring that tribal cultural and historical resources are protected during cleanup activities. Officials from the Kalispel Indian Community believe that contaminants from the site and throughout the watershed have reached its reservation in Northeast Washington. These contaminants may affect tribal members’ nutrition and exercise of their culture. The tribe would like EPA to sample for contamination from Smurfit Stone Mill further down the Clark Fork River to the areas where the Kalispel have interest. According to EPA officials, EPA has not consulted with the tribes but has coordinated with the natural resource trustees, which include the Confederated Salish and Kootenai Tribes, and told us they have also coordinated with the Kalispel Indian Community. EPA officials told us that coordination with the Kalispel Indian Community differs from coordination with the Confederated Salish and Kootenai Tribes because the Kalispel do not have treaty rights at the site. Region 8 notified the Confederated Salish and Kootenai Tribes about the site in 2014, but told us they did not send corresponding notification to the Kalispel Indian Community because they had not been identified as having tribal interest during the preliminary assessment and site investigation. EPA officials told us the reason they have not yet consulted with the tribes under the 2011 policy is that the site is still being characterized. According to officials from the Confederated Salish and Kootenai Tribes, they were first informed of the site by the Missoula County Water Quality district in 2012. Officials from this tribe told us that in December 2012, they sent a letter to the state Governor supporting NPL listing for the site, and also indicated their support of NPL listing to EPA when responding to a Federal Register notification indicating EPA’s intent to add the site to the NPL. EPA officials told us that the agency wants to improve communication with the tribes by scheduling quarterly calls, site visits, and offering opportunities to review and comment on documents produced during the remedial investigation process. Officials from the Confederated Salish and Kootenai Tribes have been dissatisfied with the extent of coordination with EPA. Specifically, they told us that EPA has not provided the tribes with sufficient information to engage in the cleanup process in a meaningful way. For example, officials stated EPA did not involve them when EPA entered into the administrative settlement agreement and order on consent to conduct the remedial investigation and feasibility study. Tribal officials told us that this experience is inconsistent with other Superfund sites where EPA has given the tribes greater opportunity for meaningful input. EPA officials told us they coordinated with the interested tribes through communications with the natural resources trustees in the region as a whole. EPA officials told us that they officially notified the tribes about the site after the preliminary assessment and site investigation, and that they typically do not issue a trustee notification letter or invite tribes to consult until after EPA completes a preliminary assessment. Officials told us that the Confederated Salish and Kootenai Tribes was notified at the same point as other natural resource trustees, and that this was sufficiently early to allow for meaningful input because it occurred prior to any major decisions. According to Kalispel tribal officials, coordination with EPA has been limited. Kalispel tribal officials told us that they have faced some difficulties coordinating with EPA about the site because they are located in EPA Region 10, while the site is managed by EPA Region 8. One tribal official we spoke with expressed that he felt EPA may be trying to exclude the Kalispel Indian Community from cleanup decisions at the site. For example, this official told us that the tribe had requested that EPA Region 8 extend their water sampling area further downstream on the Clark Fork River to determine the extent of releases from the site, but that EPA issued its sampling plan without taking the tribe’s concerns into account. However, these officials told us that they are developing their relationship with EPA region 8. They also told us that coordination with EPA is valuable, and that they consider consultation as a tool to be employed when coordination is insufficient. Region 8 officials acknowledged the letter from the natural resource trustees requesting a stronger role in decision-making and highlighted improvements EPA has made to communication. Further, officials cited several actions to demonstrate their commitment to working with the tribes: evaluating the berms at the site, as the Confederated Salish and Kootenai Tribes requested; evaluating contamination’s impact on tribal health through fish consumption patterns; and responding in writing to natural resource trustee letters. However, EPA considers the role of the Kalispel Indian Community in the cleanup to be different because that tribe does not have treaty rights within the site boundaries. EPA officials stated that they keep the tribe informed of meetings and invite them to site visits. Figure 6 shows the berms during a high-water event in 2011 and a portion of a berm indicated to be in poor condition by the work plan for the remedial investigation and feasibility study in 2017. The Midnite Mine site is a former open-pit uranium mine located in eastern Washington state on the Spokane Indian Reservation, near Wellpinit, Washington. According to information from EPA, Dawn Mining Company and Newmont USA Limited operated an open-pit uranium mine intermittently between 1955 and 1981. During mining operations, over 33 million tons of rock was blasted and excavated to access uranium ore. The waste was dumped in piles, used to fill mine pits, or spread on the surface. About 2.4 million tons of ore and near ore-grade rocks were also stockpiled at the mine in anticipation of later processing. The former mine site includes approximately 350 acres directly affected by mine operations, as well as affected groundwater, surface water, and sediment. Hazardous substances released at the site as a result of mining include numerous metals and radio-nuclides. Key contaminants of concern that EPA identified in the human health risk assessment for the site include uranium, radium, lead, and manganese. According to EPA, construction of the remedies is currently under way for the site. EPA listed the site on the NPL in 2000 and performed the remedial investigation and feasibility study from 1998 through 2006. In 2012, the potentially responsible parties and the United States agreed to a consent decree that required the potentially responsible parties to develop a design for and implement the remedial action at the site. No site-wide milestones have been met. According to tribal officials, the Spokane Tribe of Indians is interested in the effect of contamination from the site on subsistence hunting and fishing, particularly elk and rainbow trout, respectively. Tribal officials stated that contamination from the mine flows into Blue Creek, which impacts the tribe’s ability to conduct traditional practices such as sweat lodges. Tribal officials stated their ultimate goal would be for the site to be sufficiently clean for wildlife to safely live on the site, for fish to thrive in water adjacent to the site, and for the tribe to resume its traditional hunting and gathering activities in the area. EPA consulted with the Spokane Tribe of Indians in June 2013 regarding a potential change to water treatment practices. Tribal officials stated the tribe is pleased that the new water treatment plant will operate year-round and will discharge treated water via a pipe into Lake Roosevelt, which is a larger body of water with less direct impact on the tribe’s natural resources. In addition, tribal officials stated that EPA invited the tribe to consult at other times but the tribe did not think it was necessary. Tribal officials told us that their coordination with EPA has resulted in more consideration of the natural resources and hopefully a fuller remediation of the site. For example, EPA applied the tribe’s more stringent water quality standards to discharge from the site, which EPA supported by providing technical assistance to the tribe during the development and approval processes. Spokane tribal officials stated that during the Remedial Investigation and Feasibility Study phase, EPA’s program manager offered to consult with the tribe at various points, which the tribe declined because the tribe felt they had sufficient interactions with EPA. The Superfund cleanup process has been a learning process for tribal officials but, overall, the tribe is pleased with the result and the open exchange of information with EPA. Speaking generally, EPA officials noted that the 2011 consultation policy has had a positive effect on the frequency of consultation with tribes in the region. The policy has led Superfund remedial project managers to more routinely invite tribes to consult. In addition to the individual named above, Barbara Patterson (Assistant Director), Emily Norman (Analyst-in-Charge), Matthew Bond, John Delicath, Justin Fisher, Andrew Furillo, Jeanette Soares, Ruth Solomon, Sara Sullivan, and Kiki Theodoropoulos made significant contributions to this report.", "summary": "Superfund is EPA's principal program to address sites with hazardous substances, and some of the most seriously contaminated of these sites are listed on the NPL. Many of these sites can affect Indian tribes or their land. EPA has a policy to consult with tribes when EPA actions or decisions may affect tribal interests, including on cleanup of NPL sites that are on tribal property or that affect tribes. GAO was asked to analyze NPL sites that are on tribal property or that affect tribes and EPA's consultation with tribes at these sites. This report: (1) examines the extent to which EPA has reliable data identifying NPL sites that are located on tribal property or that affect tribes, (2) examines the extent to which EPA has reliable data on the agency's consultation with tribes regarding NPL sites, and (3) describes the actions EPA has taken to address the unique needs of tribes when making decisions about cleanup actions at Superfund sites. GAO reviewed laws and policies, assessed EPA data on NPL sites, and interviewed EPA and tribal officials about cleanup actions and consultations at six non-generalizable NPL sites selected in part for their geographic diversity. The Environmental Protection Agency (EPA) does not have reliable data identifying National Priorities List (NPL) sites that are located on tribal property or that affect tribes. Specifically, EPA collects data on whether sites are on tribal property or have Native American Interest (a data variable indicating sites where tribal members or tribal land would be directly affected by the release of hazardous substances), as well as which tribes are associated with NPL sites. However, EPA's data are not always accurate or complete for a number of reasons. For example, EPA can have difficulty identifying some tribal property boundaries, and NPL site boundaries may evolve as the site is investigated and remediated. EPA does not have a regular review process for its data on whether an NPL site is on tribal property. In addition, EPA's guidance for determining whether a site has Native American Interest is unclear, and regions may not interpret it consistently. Without improving its review process and clarifying its guidance, EPA will not have reasonable assurance that its data on tribes that are affected by NPL sites are accurate or complete. EPA consults with tribes when actions at an NPL site may affect tribal interests, but the agency does not have reliable data on its consultations with tribes. Data from EPA's system for tracking consultation did not include documentation of some consultations that GAO confirmed had occurred. One possible reason that EPA data are incomplete is that the agency's policy is unclear on which interactions are considered consultation and are therefore to be documented in EPA's system of record, which is not consistent with federal standards for internal control. EPA's policy provides a broad definition of consultation and specifies which staff are responsible for determining when consultation may be appropriate. However, the policy does not provide further guidance on the circumstances under which consultation should be considered. For example, it does not specify any specific points in the hazardous substance cleanup process at which consultation should be considered or provide further detail on which tribal interests should be considered when determining if tribal interests on NPL sites are affected. Without clarifying guidance to clearly define circumstances under which consultation with tribes should be considered, EPA cannot have reasonable assurance that it is applying its consultation policy consistently. EPA has taken various actions to address the unique needs of tribes when making decisions about cleanup actions. These actions include minimizing tribal members' exposure to contaminants because of tribal lifestyle (e.g., greater consumption of local fish and game) and limiting potential damage to culturally important sites. For example, EPA officials said that at one site, they altered the design and route of the roads used to remove contaminated materials to minimize the impact of cleanup activities' on cultural resources. EPA also published a memorandum in 2017 with recommendations on considering tribes' traditional ecological knowledge in the cleanup process if tribes offer it. GAO is making four recommendations to EPA, including that it take actions to improve the data it collects and to clearly define circumstances under which consultation with tribes should be considered. EPA generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "“Backdoor Authority” or “Backdoor Spending” These are similar but not identical terms for spending authority and permanent appropriations. Backdoor authority and backdoor spending are colloquial phrases for budget authority that Congress has provided in laws other than appropriations acts. This includes contract authority and borrowing authority, as well as entitlement authority. Entitlement authority is a type of permanent appropriation. It refers to the authority to make payments for which budget authority is not provided in advance by appropriation acts to any person or government if, under the provisions of law containing such authority, the U.S. government is legally required to make such payments. The terms backdoor authority and backdoor spending refer to the process by which federal money “goes out the door.” Annual appropriations are said to go out the “front door” as the annual appropriations cycle provides a regularly- scheduled forum where Congress may exercise oversight over spending. Other appropriations are said to go out the “back door” as they do not go through the annual appropriations process. For the purposes of this report, our definition of spending authority and permanent appropriations includes the five types of budget authority described in figure 1. We are defining spending authority as budget authority made available through laws other than annual appropriation acts. Also, we are defining a permanent appropriation as budget authority to incur obligations and make payments that is available permanently by law without further legislative action. A permanent appropriation may have been made available through an annual appropriations act or through laws other than the annual appropriations acts. We are including both in our inventory based on the intent of the request for developing our inventory. For some accounts, Congress provides spending authority and permanent appropriations to allow agencies the flexibility to spend fee revenue without further legislative action. Specifically, Congress has authorized some agencies to establish working capital funds—a type of intragovernmental revolving fund—in which an agency may deposit fees from federal, and sometimes nonfederal, customers for performing administrative services, or the sale of government products, within their statutory authority. For example, in addition to appropriations and reimbursements from federal agencies, the Department of Energy (DOE) has a working capital fund with the authority to collect funds. Those collections are then made available for DOE expenses necessary for the maintenance and operation of common administrative services for economy and efficiency, such as office space and communication services. This and other working capital funds operate as a self- supporting entity conducting business-like activities for the agency. Spending authority and permanent appropriations may be subject to further restrictions from Congress. For example, in one or more annual appropriations acts, Congress could restrict the use of some or all of the budget authority, thereby using the annual appropriations process to control the use of spending authority and permanent appropriations. For example, the U.S. Department of Agriculture (USDA) has a permanent appropriation which states that 10 percent of all receipts from the use and occupancy of national forest system lands during each fiscal year are available for maintaining roads and trails within the national forests. In past annual appropriations acts, Congress has limited that permanent appropriation by transferring all funds made available for that fiscal year to the General Fund of the Treasury. Those funds are then unavailable for obligation unless appropriated once again. In fiscal year 2017, the federal government’s total outlays were almost $4 trillion of which about $2.5 trillion was in outlays for mandatory spending. Mandatory spending, also known as direct spending, refers to budget authority provided in laws other than appropriations acts and the outlays that result from such budget authority. Medicare is an example of a program that is funded by mandatory spending. Discretionary spending, on the other hand, refers to budget authority that is provided in and controlled by appropriations acts. During the annual appropriations process, Congress may choose to appropriate the amount in the President’s budget request, increase or decrease those levels, eliminate proposals, or add other programs. For example, most defense and education programs are funded with discretionary spending. As shown in figure 2, mandatory spending as a share of all federal spending grew from about 51 percent in fiscal year 1997 to about 63 percent in fiscal year 2017. Another form of federal spending is net interest, which is primarily interest paid on debt held by the public. While the majority of the accounts in our inventory have mandatory budget authority, not all mandatory spending fits our definition of spending authority and permanent appropriations. For example, while annually appropriated entitlement programs—such as the Supplemental Nutrition Assistance Program—are provided for in annual appropriations acts, they are treated as mandatory spending because the authorizing legislation entitles beneficiaries to receive payment or otherwise obligates the government to make a payment. As annually appropriated entitlements are subject to the annual appropriations process, they did not meet our definition of spending authority and permanent appropriations. Conversely, not all spending authority and permanent appropriations are mandatory spending. For example, our inventory includes permanent appropriations made available in annual appropriations acts. The increase in mandatory spending, and corresponding increase in spending authority and permanent appropriations, has long-term implications for the nation’s fiscal outlook overall, including the growing federal debt. The growth in mandatory spending drove federal spending that outpaced revenue growth in fiscal year 2017 and, absent policy change, is projected to continue to do so in the future given the aging population and rising health care costs and their relation to large federal budget accounts funding programs, such as Social Security and Medicare. Sequestration—cancellation of budgetary resources under a presidential order—was first established in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) to control the deficit. BBEDCA, as amended, requires OMB to calculate the reduction to budgetary resources required each year to reduce the deficit by at least an additional $1.2 trillion, over a 10 year period. A percentage reduction, or sequestration rate (calculated by OMB), is applied to nonexempt (subject to sequestration) accounts to achieve the total reduction amount required for the fiscal year. The sequestration rate varies from year to year based on a formula outlined in BBEDCA. The annual reduction amount OMB calculates is split evenly between the defense and nondefense functions. The calculated amount is then allocated between discretionary appropriations and mandatory spending in each function in proportion to the share of total spending within the function. Prior to BBEDCA, the Congressional Budget and Impoundment Control Act of 1974 (CBA) attempted to limit the creation of new contract authority and authority to borrow. In 1990, Congress further sought to limit spending authority by establishing controls over discretionary spending and a system of controls over legislative changes in mandatory spending. The Budget Enforcement Act of 1990 (BEA) amended both CBA and BBEDCA. In addition to establishing dollar limits for total annual appropriations, BEA contained a “pay-as-you-go” provision requiring that any legislation that reduced taxes or expanded mandatory spending programs be offset by mandatory spending cuts or revenue increases. This provision was to be enforced through sequestration of nonexempt mandatory spending programs at the end of the congressional session. Both the discretionary limit and “pay-as-you-go” rules were extended through fiscal year 2002 and were not subsequently reauthorized. In 2010, the Statutory Pay-As-You-Go Act of 2010 reinstated a version of the “pay-as-you-go” requirement. The act provided that if the net effect of mandatory spending and revenue legislation enacted in a year increases the deficit, then a sequestration of nonexempt mandatory spending will occur to eliminate the increase. The Budget Control Act of 2011 (BCA) further amended BBEDCA and revived sequestration as a budgetary enforcement mechanism to reduce the deficit. BCA established the Joint Select Committee on Deficit Reduction (Joint Committee). The Joint Committee was tasked with proposing legislation to reduce the deficit. Such legislation was not proposed or enacted, which triggered the sequestration process provided in section 251A of BBEDCA, known as the Joint Committee sequestration. BBEDCA currently requires a sequestration of mandatory spending in each year through fiscal year 2027 and a reduction of discretionary spending limits in fiscal years 2020 and 2021. A sequestration of discretionary spending could still occur in any year through fiscal year 2021 if Congress and the President enact appropriations that exceed discretionary spending limits established by BBEDCA. As of September 2018, the President has ordered the sequestration of mandatory spending in each year since fiscal year 2013, and the sequestration of discretionary appropriations in fiscal year 2013. The amount of spending authority and permanent appropriations reported government-wide grew 88 percent, from fiscal years 1994 through 2015 adjusted for inflation. Specifically, in fiscal year 2015, approximately $3.2 trillion was reported, compared with approximately $1.2 trillion in fiscal year 1994 ($1.7 trillion in fiscal year 2015 dollars, see figure 3). Although the total reported amount of spending authority and permanent appropriations increased over time, the changes for each authority type varied when comparing fiscal years 1994 to 2015 (see figure 4). Reported budget authority grew for three of the five authority types—permanent appropriations, offsetting collections, and contract authority—in fiscal year 2015, as compared to fiscal year 1994. For example, about $2.6 trillion permanent appropriations were reported in fiscal year 2015, up from approximately $982.5 billion in fiscal year 1994 ($1.5 trillion adjusted for inflation to 2015 dollars). Generally, the reported amount of permanent appropriations increased gradually, with the biggest growth occurring in fiscal year 2008. Borrowing authority decreased, and agencies reported no use of monetary credits or bartering at any time during fiscal years 1995 through 2015. Table 1 provides comparisons between reported budget authority in fiscal years 1994 and 2015 for all authority types. The amount of budget authority is not necessarily indicative of the prevalence of spending authority and permanent appropriations since the amount of budget authority in different accounts can vary by billions of dollars. From fiscal years 1995 through 2015, agencies had 1,089 authorities in 902 budget accounts. We previously reported on the use of 670 authorities in 540 budget accounts in fiscal year 1994. In comparing fiscal years 1994 to 2015, we found that the number of accounts with permanent appropriations and offsetting collections increased while contract and borrowing authority decreased. Figure 5 summarizes the number of accounts with each type of authority over the years. The overall growth in spending authority and permanent appropriations is driven primarily by permanent appropriations growth. Entitlement programs, such as Medicare and the Social Security Administration’s (SSA) Old-Age and Survivors Insurance and Disability Insurance programs, are funded through permanent appropriations, and are a significant proportion of budget authority in our inventory, as discussed below. Since many spending authorities and permanent appropriations provide agencies budget authority based on program use and eligibility, demographic and program demand changes can affect the amount of budget authority. For example, since the Old-Age and Survivors Insurance and Disability Insurance programs administer benefits based on eligibility requirements and statutory formulas, the amount of budget authority used for the programs increases as more people become entitled. Higher income levels result in higher average benefit amounts and cost of living adjustments increase monthly benefit amounts for current beneficiaries. Other factors affected the growth in the use of spending authority and permanent appropriations to a lesser extent. Enactment of new authorities. From 1995 to 2015, 329 new authorities for spending authority and permanent appropriations were enacted. For example, the Housing and Economic Recovery Act of 2008 granted the Department of the Treasury (Treasury) the authority to purchase any obligations and other securities issued by government-sponsored enterprises, such as Fannie Mae. According to the act, Treasury was authorized to use this authority until December 31, 2009, with certain actions permitted after that date. This authority resulted in $200 billion in permanent appropriations reported in both fiscal years 2008 and 2009, and another $46 billion in fiscal year 2013. Amendment of existing authorities. Some existing authorities were amended to allow for increased use—permanently or temporarily. Some authorities have amounts specified by statute—such as maximum amounts the agency can use or set amounts that the agency can charge users. For these authorities, increases in the use of an authority may be attributed to enacted increases in the specified amounts. For example, the National Flood Insurance Fund reported an increase of $878 million in offsetting collections in 2012 after legislation increased the annual limitation on premium increases for certain insurance premiums. Increased use of spending authority and permanent appropriations, at agency’s discretion. Other authorities did not experience statutory changes, but agencies increased the use of the authorities at their discretion to meet program needs. When no maximum amount is specified as a limit on the agency’s authority, variation in use is due to agency discretion in response to circumstances. For example, the Federal Deposit Insurance Corporation’s (FDIC) Deposit Insurance Fund account began reporting increased offsetting collections for amounts assessed against depository institutions insured by FDIC, in fiscal years 2009 and 2010. The reported collections increased to highs of $26.5 billion in fiscal year 2009 and $57.3 billion in fiscal year 2010, after reported budget authority levels of $2.2 billion in fiscal year 2006. According to an agency official and as stated in the FDIC’s 2009 Annual Report, this increase primarily resulted from its adoption of the Deposit Insurance Fund Restoration Plan and the prepayment of future risk-based deposit insurance assessments by depository institutions to provide FDIC with the necessary liquidity to resolve failed depository institutions during the financial crisis. A FDIC official stated that the Deposit Insurance Fund Restoration Plan addressed the need to return the Deposit Insurance Fund to its mandated minimum reserve ratio of 1.15 percent of estimated insured deposits. Events other than legislative or agency actions. Programs may experience increased fee revenue, penalty payment, or use of the authority for circumstances that do not involve legislative or agency action. For example, the United States Coast Guard’s Maritime Oil Spill Programs account reported $743 million in permanent appropriations in fiscal year 2010 after receiving transfers from the Oil Spill Liability Trust Fund to assist with cleanup after the 2010 Deepwater Horizon oil spill. Amounts from the Oil Spill Liability Trust Fund are available to fund federal response activities in the event of an oil spill or imminent threat of an oil spill on navigable waters of the United States. In the case of the 2010 Deepwater Horizon oil spill, the Coast Guard was authorized to obtain one or more advances from the Oil Spill Liability Trust Fund, as needed to address costs associated with federal activities in response to the oil spill, with up to a maximum of $100 million for each advance. As a result of the growth of spending authority and permanent appropriations from fiscal years 1994 through 2015, more budget authority is available to agencies that does not require them to await congressional action to incur obligations. For example, USDA has the authority to use its portion of the fee for Agricultural Quarantine Inspection without congressional action. The majority of spending authority and permanent appropriations reported in fiscal year 2015 was concentrated in large agencies and budget accounts that fund entitlement programs such as Social Security and Medicare. The Department of Health and Human Services (HHS) reported the highest use of spending authority and permanent appropriations. HHS also had the most accounts in the list of top 10 accounts in fiscal year 2015. This is a change since fiscal year 1994 when SSA reported using the most spending authority and permanent appropriations. Together, in fiscal year 2015, the top three agencies— HHS, SSA, and Treasury—comprised three quarters of the total government-wide spending authority and permanent appropriations (see figure 6). HHS reported the largest amount of spending authority and permanent appropriations in fiscal year 2015 with about $979 billion, or about 30 percent. (See appendix III for a list of budget authority use by agency for fiscal year 2015.) HHS’s largest three accounts in our inventory all fund Medicare. SSA, which oversees the Old-Age and Survivors Insurance program, the Disability Insurance and Supplemental Security Income programs, as well as the Special Benefits for Certain World War II Veterans program, reported about $920 billion or about 28 percent of total spending authority and permanent appropriations. Programs administered by HHS and SSA continue to show spending increases largely as a result of the aging of the population and increasing health care costs. Treasury reported the third highest amount of spending authority and permanent appropriations, about $542 billion, the majority of which is for interest on debt held by the public and intragovernmental debt. These agency usage patterns are echoed when analyzing spending authority and permanent appropriations by account. The 10 largest accounts represented about 72 percent of spending authority and permanent appropriations in fiscal year 2015, as shown in table 2. All of these are permanent appropriations, except for the Postal Service’s Postal Service Fund account which is an offsetting collection that includes revenue for mail services. Seven of the 10 accounts fund entitlement programs. Similar to the fiscal year 2015 data for all spending authority and permanent appropriations, HHS, SSA, and Treasury reported the greatest use of permanent appropriations in fiscal years 2015, 2005, and 1994 (see figure 7). HHS reported the highest dollar amount of permanent appropriations for the first time in fiscal year 2006, likely due to rising health care costs. Permanent Appropriations Budget authority to incur obligations and make payments that is available permanently by law without further legislative action. Contract authority is concentrated, with only five agencies having this authority from fiscal years 1995 through 2015. Four of these agencies used the authority, while one agency—the Judicial Branch; Courts of Appeals, District Courts, and Other Judicial Services—has the authority, but did not use it. The Department of Defense (DOD) and the Department of Transportation (DOT) were the two agencies that reported the largest percentages of dollar amounts of contract authority in fiscal years 1994 and 2015, as well as 2005 (see figure 8). This figure shows three of the four agencies that reported contract authority in our timeframe. One other agency, the Department of Housing and Urban Development, used contract authority in fiscal year 2007. Contract Authority Authority to incur obligations in advance of appropriations, including collections sufficient to liquidate the obligation or receipts. It is unfunded, and a subsequent appropriation or offsetting collection is needed to liquidate the obligations. From fiscal years 1994 through 2015, 15 agencies reported the use of borrowing authority of varying amounts and an additional two agencies had unused borrowing authority. Since 1995, seven accounts reported receiving new borrowing authority across five different agencies including the Department of Commerce and DOT. USDA reported the largest dollar amount of borrowing authority in most years, including fiscal years 1994, 2005, and 2015, which represented 73 percent, 82 percent, and 60 percent of each fiscal years’ total borrowing authority, respectively (see figure 9). USDA’s large share of the total borrowing authority, and most of the overall variability in our borrowing authority data throughout our timeframe, is for the Commodity Credit Corporation Fund. The fund reported about $7.8 billion or 60 percent of government-wide borrowing authority in fiscal year 2015. The Commodity Credit Corporation has authority to borrow funds to carry out its programs, which include providing income and price support to agricultural producers, payments for conservation practices on farms, assistance in the development of international agricultural markets, and international feeding programs. Some of the primary drivers of its borrowing authority variability are legislation, changes in commodity yields and price, weather disasters, and market conditions, according to a USDA official. The Railroad Retirement Board (RRB)—which administers a retirement benefit program similar to Social Security for railroad workers and their families—began reporting borrowing authority in fiscal year 1996 and reported the second largest borrowing authority amount in fiscal year 2015. The Railroad Social Security Equivalent Benefit account reported between about $3 billion and $4 billion per year through 2015. The Tennessee Valley Authority reported borrowing authority periodically during our time frame, reporting a high of $3.1 billion in fiscal year 2003. For more information on the top five accounts for the use of borrowing authority, see appendix IV. The text box below provides additional information on the Tennessee Valley Authority account and a Department of Commerce account. Examples of Different Accounts with and Uses of Borrowing Authority Tennessee Valley Authority, Tennessee Valley Authority Fund. The Tennessee Valley Authority is a corporate agency that provides electricity for business customers and local power companies in parts of seven southeastern states. The agency is authorized to issue and sell up to $30 billion of bonds, notes, and other debt instruments at any one time to assist in financing its power program. The proceeds from these bonds are authorized for the construction, acquisition, enlargement, improvement, or replacement of electrical power facilities and other purposes authorized by the Tennessee Valley Authority Act of 1933. Department of Commerce, Public Safety Trust Fund. The Middle Class Tax Relief and Job Creation Act of 2012 (the Act) created the First Responder Network Authority (FirstNet), an independent authority within the Department of Commerce’s National Telecommunications and Information Administration (NTIA) and required it to establish a nationwide, interoperable public-safety broadband network. In order to provide initial funding for FirstNet, NTIA was authorized to borrow up to $2 billion from the Treasury to implement the program. The Act required NTIA to reimburse Treasury, without interest, from funds deposited into the Public Safety Trust Fund.47 U.S.C. § 1427. A couple of accounts had temporary spikes in the use of borrowing authority from fiscal years 1994 through 2015. Specifically, the Department of Labor’s Unemployment Trust Fund had several years of increased use of borrowing authority, with a high of $26.2 billion in fiscal year 2010. As we have reported, the recession that occurred during 2007 through 2009 sharply increased the number and duration of claims for unemployment benefits. The National Credit Union Administration’s Central Liquidity Facility, which was created to improve the general financial stability of credit unions by serving as a liquidity lender to credit unions experiencing unusual or unexpected liquidity shortfalls, reported borrowing authority for the first time in our inventory in the amount of $19.4 billion in fiscal year 2009. The Central Liquidity Facility is authorized by statute to borrow, from any source, an amount not to exceed 12 times its subscribed capital stock and surplus. The majority of agencies had offsetting collections authority. Offsetting collections authority generally authorizes agencies to collect fines, charge fees, or charge for permits among other uses. These functions have a number of applications across the government. Since fiscal year 1995, 129 accounts received new offsetting collections authority. We did not rank the top agencies that used offsetting collections because we, and the agencies when asked, were unable to reliably subtract collections from federal sources or refunds of prior paid obligations. The text box below provides examples of accounts with offsetting collections authority. Examples of Different Accounts with and Uses of Offsetting Collections Department of Transportation (DOT), Motor Carrier Safety Operations and Programs. The Unified Carrier Registration Act of 2005 tasked DOT with establishing and implementing the Unified Carrier Registration System to serve as a repository of information on, and identification of, all foreign and domestic motor carriers, motor private carriers, brokers, freight forwarders, and others required to register with DOT. DOT is authorized to collect fees associated with the system, including registration and filing fees, and may use collected funds for these activities without further appropriation. Environmental Protection Agency, Damage Assessment and Restoration Revolving Fund. Under the Oil Pollution Act, responsible parties for a vessel or a facility from which oil is discharged are liable for, among other things, damages for injury to, destruction of, loss of, or loss of use of, natural resources. The Oil Pollution Act authorizes certain departments and agencies, such as the Department of the Interior, designated by executive order as a “trustee for natural resource damages” to recover such damages, and retain and use the funds without further appropriation to reimburse or pay costs incurred by the trustee with respect to the damaged natural resources. For the limited purpose of the Deepwater Horizon Oil Spill, the Environmental Protection Agency was also designated a trustee. The premiums are placed into a revolving fund, which is available without further appropriation, to pay claims. Department of Defense (DOD), Working Capital Fund, Defense Wide. DOD’s working capital fund is used to charge for goods and services provided to the military services and other customers. In addition to any funds appropriated to the working capital fund, the working capital fund may also collect funds from providing services or procuring supplies, or through the sale and disposal of DOD property. Funds are available without further appropriation. 33 U.S.C. § 2706(f); see also, 33 U.S.C. § 2702; 40 C.F.R. § 300.600. Six agencies have the authority to use monetary credits or bartering, but none of these agencies reported using this authority from fiscal years 1995 through 2015. These are the same agencies that we reported in 1996—the Departments of the Interior and State, DOE, DOD, USDA, and the Tennessee Valley Authority. OMB staff said that monetary credits are used infrequently government-wide, and that agencies are not required to record this type of authority separately in the budget. When we asked, no other agencies reported having monetary credits or bartering authority. The text box below provides examples of accounts that are authorized to use monetary credits or bartering. Monetary Credits or Bartering Monetary credits or bartering are used by agencies having the authority to make purchases by giving the seller credits or something other than money in dollar amounts reflecting the purchase price. The holder of credits may apply them later to reduce an amount owed to the government in other transactions. Examples of Different Accounts with Monetary Credits or Bartering Authority Department of State, Embassy Security, Construction, and Maintenance. The Department of State is authorized to exchange property or property interest for the use of diplomatic and consular establishments in foreign countries or in the United States. The Department of State is authorized to receive payment in any form, or in kind, to cover damage to or destruction of diplomatic or consular property abroad. Department of Defense (DOD), Operations and Maintenance, Army National Guard. DOD is authorized to acquire logistic support, supplies and services for the armed forces deployed outside the United States from specified governments and international organizations. Supplies or services of equal value may be exchanged to facilitate these transactions. 10 U.S.C. § 2344; see also 10 U.S.C. § 2341. The majority of spending authority and permanent appropriations authorities were exempt from sequestration in fiscal year 2015. This is a reversal from fiscal year 1994, when the majority of spending authority and permanent appropriations authorities were subject to sequestration. Congress first established exemptions to sequestration in the 1980s when BBEDCA was enacted and has amended them since then. To determine the requisite percentage reduction to nonexempt budgetary resources pursuant to BBEDCA, OMB must define the sequestrable base, which is the total of nonexempt budgetary resources within each function. BBEDCA directs OMB to calculate a sequestration consistent with special rules and exemptions described by law. OMB provides guidance to agencies for implementing sequestration, and is also required under BBEDCA to report to Congress its calculations and other estimates at various stages. We worked with OMB to classify by OMB’s sequestration designation the agencies’ spending authority and permanent appropriations authorities that were in our inventory, as shown in table 3. Each authority in our inventory is assigned a designation, which defines how the authority is treated when sequestration is in effect. As shown in table 4, in fiscal year 2015, 57 percent of spending authority and permanent appropriations authorities were exempt from sequestration, and therefore were not subject to this budgetary enforcement mechanism for helping to control the deficit. This is a 20 percentage point increase since fiscal year 1994. Correspondingly, the proportion of spending authority and permanent appropriations authorities that were subject to sequestration decreased 35 percentage points from fiscal year 1994 to fiscal year 2015. The proportion of authorities that was partially subject to sequestration increased from 4 percent in fiscal year 1994 to 11 percent in 2015. Designations were not available for 11 percent of the authorities in our inventory, due to methodological differences with OMB data explained in appendix I. None of the authorities in our inventory were classified as optionally sequestrable and two were classified as sequestrable/906. The sequestration procedures established under BBEDCA were designed to serve as a budget enforcement mechanism and thereby reduce the federal budget deficit. Under current law, sequestration applies to mandatory spending through fiscal year 2027. Our finding that the majority of the agencies’ spending authority and permanent appropriations authorities in our inventory are exempt from sequestration is consistent with our prior work on mandatory sequestration. In 2016, we reported that the majority of mandatory spending authority was exempt from sequestration. Since spending authority and permanent appropriations permit agencies to obligate budget authority without further congressional action, when these authorities are exempt from sequestration, agencies can continue to use these authorities without reductions when sequestration is in effect. We provided a draft of this report and the online dataset to the Director of OMB for review and comment. OMB staff provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, the Director of the Office of Management and Budget, the secretaries and agency heads of the departments and agencies in our review, and other interested parties. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Tranchau (Kris) T. Nguyen at (202) 512-6806 or nguyentt@gao.gov, or Julia C. Matta at (202) 512-4023 or mattaj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Our objectives were to (1) identify and analyze federal budget accounts with spending authority and permanent appropriations, including the statutory references for the authorities, changes in the number of accounts and dollar amounts since fiscal year 1994, and other relevant information; and (2) describe whether the identified accounts are subject to or exempt from sequestration or subject to any special sequestration rules or limitations. This report is an update to our previous report that covered spending authority and permanent appropriations using financial data from fiscal years 1985 through 1994. For this report, we analyzed data from fiscal years 1995 through 2015, the most recent year for which data were available when we began our work. We are also providing an online dataset of our inventory of accounts with spending authority and permanent appropriations on our public website at https://www.gao.gov/products/GAO-19-36. For the purposes of this report, we are defining spending authority as budget authority made available through laws other than annual appropriations acts. We are defining a permanent appropriation as budget authority to incur obligations and make payments that is available permanently by law without further legislative action. A permanent appropriation may have been made available through an annual appropriations act or through laws other than the annual appropriations acts. A similar but not identical term for spending authority and permanent appropriations is “backdoor authority”—a colloquial phrase for budget authority that Congress provided in laws other than annual appropriations acts. This includes contract authority and borrowing authority, as well as entitlement authority and the outlays that result from that budget authority. The term “spending authority and permanent appropriations” indicates the authority to make obligations and expenditures without further action from Congress. For purposes of this report, spending authority and permanent appropriations include five types of budget authority: contract authority, authority to borrow, monetary credits or bartering, permanent appropriations, and offsetting collections. For more detail on the definitions and the inclusions and exclusions for our inventory of accounts and our reasoning, see appendix II. To identify and analyze accounts that used spending authority and permanent appropriations during this time frame, we used the Office of Management and Budget’s (OMB) MAX A-11 Data Entry system (MAX). MAX is a computer system used to collect and process most of the information required for preparing the President’s budget for the federal government. Agencies develop their budget information and enter the data into MAX. The data undergo rigorous review by OMB. MAX contains numerous edit checks to help ensure data consistency. Thus, we found the data to be sufficiently reliable for our purposes of identifying our initial inventory of accounts. We used the Program and Financing Schedule’s Budgetary Resources line number descriptions in OMB Circular A-11—OMB’s guidance to agencies for preparing and submitting budget information—to select line numbers in MAX that align with our definition of spending authority and permanent appropriations. We reviewed each line number’s description to confirm it met the definition of spending authority and permanent appropriations. We also confirmed with OMB staff our understanding of changes to the line numbers over the years, as well as our approach to implementing exclusions. MAX does not have specific line numbers for monetary credits or bartering—agencies report use of monetary credits as cash equivalents in the budget. This is a broader category than just monetary credits. OMB staff said that agencies are not required to report monetary credits elsewhere. Therefore, we are unable to identify agencies’ use of monetary credits in MAX data. The table below summarizes the line numbers we analyzed while building our inventory of accounts by authority type. To avoid double counting, we did not include lines that represent totals. For example, line 6300 was not in our scope for fiscal years 1995 through 1998 because it represented total appropriations. However, line 6300 is in our scope for years when it represented reappropriations, which is a form of permanent appropriations that would be included in our scope. For offsetting collections, we included line numbers labeled in MAX as discretionary or mandatory. Although discretionary spending generally refers to outlays from budget authority that is provided in and controlled by appropriations acts—which would not be spending authority and permanent appropriations—OMB staff said this distinction does not always apply in MAX data. This is partly because, prior to fiscal year 1999, the Program and Financing Schedule did not distinguish between mandatory and discretionary offsetting collections. Although distinct line numbers for mandatory and discretionary collections were added, the designation in MAX is not always correct, according to OMB staff. For fiscal years 1995 through 1998, lines 6800 to 6885 could represent discretionary or mandatory offsetting collections. Starting with fiscal year 1999, OMB reported discretionary and mandatory collections separately in the Program and Financing Schedule. Discretionary collections were reported on lines 6800 to 6885, and mandatory collections on lines 6900 to 6985. In later years, the numbers changed but the distinction between the two remained. If any dollar amount was reported in MAX on any of the selected lines for any year from fiscal years 1995 through 2015, we included the account in our initial inventory. Many accounts reported budget authority amounts for more than one line number. In other words, they used different types of spending authority and permanent appropriations, or had multiple uses of the same authority. To the extent possible, we implemented the exclusions described in appendix II into the data, resulting in our initial inventory of accounts. We compared the accounts and authorities identified in our 1996 report with our MAX data for our initial inventory of accounts. We found five accounts that were in the 1996 report but not the MAX data, which still had active budget authority reported in the fiscal years 2013, 2014, or 2015 budgets. We reviewed these for potential inclusion in our inventory and included three authorities. To learn more about the accounts in our initial inventory, we developed a data collection instrument (or worksheet) to send to the agencies. After our review and final agency verification, the results from the worksheets became our final inventory of accounts as shown in our online dataset. We took the following steps for collecting and reviewing agency information. We asked that the agencies review the data for accounts for which they have responsibility. We asked them to confirm or correct account information that we obtained from MAX and, if applicable, from the 1996 report. If information was unavailable from the 1996 report, we asked agencies to provide it. We asked agencies to review the basic account descriptors (e.g., account names and numbers), MAX line number(s), budget authority type (which we determined based on the line number description), source of offsetting collections (if applicable), and a statutory reference and enactment year for each authority. We used our 1996 report to identify accounts that may have authority to use monetary credits or bartering, and asked those agencies to confirm this information. We asked agencies to identify any accounts that have authority to use monetary credits or bartering, and to include the source of the monetary credits or bartered items, and identify their value in dollars. We asked agencies to identify any additional accounts that have spending authority and permanent appropriations that were not presented in the worksheet because they were not identified through MAX. We confirmed or corrected information in each agency’s completed worksheet and updated our inventory accordingly. We excluded accounts from our inventory if we determined that the authority for the account did not meet the definition of spending authority and permanent appropriations. When possible, we reviewed the President’s Budget Appendix to confirm corrections from the agencies. For some authorities, such as certain offsetting collections, we relied on the agency’s description of whether the account included nonfederal sources to make our decision about inclusion in our inventory. We had discussions with agencies, as needed, to agree on the presentation of the account information and statutory references. As described above, to compile our inventory and provide statutory references providing the authorities, we primarily relied on the MAX database and information agencies provided to us. While we made every attempt to confirm the information provided by agencies and provided agencies opportunities to review the information on their accounts, in some cases we included authorities for which neither we nor the agency could determine a statutory reference because we could not rule out the use of spending authority and permanent appropriations. We note that authorities and the statutes providing them can change over time. Our inventory of accounts should therefore not be used as a substitute for original legal research. For some accounts, agencies identified errors in the MAX budget authority or other fields. We updated our inventory if the agency provided documentation, such as a SF-133, Report on Budget Execution and Budgetary Resources. We did not make changes to the budget authority classifications. For some authorities, we reported no budget authority in certain fiscal years, but MAX contained a budget authority amount. If an account had spending authority and permanent appropriations in only certain years, but reported other budget authority on the same lines that did not meet our definition, we only reported dollar amounts for the spending authority and permanent appropriations, when possible. The changes described above were only applied to our inventory data and not to the MAX database. From our final inventory, we selected examples of accounts to highlight in the text boxes in our report. We made these selections based on the following criteria: variety of size of agencies, the authority was used sometime from fiscal years 2013 to 2015 (with exception of monetary credit or bartering authority), different examples of how the budget authority was used, and large or easy to understand programs. There are several factors that affect our reported total spending authority and permanent appropriations. In working with agencies, we were unable to parse out the amounts of budget authority that do not meet our definition. Therefore, our reported budget authority amounts likely overstate the amount of spending authority and permanent appropriations used during the time period of our analysis. Although some agencies informed us that certain offsetting collections contained collections from federal sources—which would not be considered spending authority and permanent appropriations—we could not reliably subtract the federal sources from all accounts covered in our inventory. While we excluded any account lines that the agencies reported consisted only of collections from federal sources, we did not exclude account lines for which we and the agencies could not reliably separate collections from federal sources from offsetting collections amounts that meet our definition of spending authority and permanent appropriations. As a result, our total budget authority amount for offsetting collections (and our overall totals) contains budget authority which does not meet our definition of spending authority and permanent appropriations. The budget authority amounts for offsetting collections may also include some amounts that consist of refunds of prior paid obligations. While we excluded any account lines that the agencies reported consisted only of refunds of prior paid obligations, we did not exclude account lines for which we and the agencies could not reliably separate refund amounts from offsetting collections amounts that meet our definition of spending authority and permanent appropriations. Additionally, our budget authority amounts include sequestered and rescinded amounts, which are usually negative in the MAX database. Sequestered and rescinded funds are not generally available to agencies, and therefore do not represent spending authority and permanent appropriations. Some agencies may have reported sequestered amounts in various budget authority lines in MAX, which we cannot reliably identify. Therefore to consistently include these amounts, we retained all sequestration-related lines. As a result of this inclusion, our totals are decreased by the negative sequestered amounts. Further, when budget authority amounts were totaled for each agency, some agency totals were negative. These negative values were generally small enough that they did not affect the overall percentages, so we removed them from our rankings of top agency users of permanent appropriations and borrowing authority. Our inventory includes authorities that may have expired or been repealed during the time period of our analysis, even if the account is still active. We also did not examine whether Congress subsequently restricted or rescinded the agency’s ability to use all or a portion of its spending authority and permanent appropriations. We did not review annual appropriations acts or other legislation to identify the extent to which authorities in our inventory were restricted or rescinded. To note the statutes providing spending authority and permanent appropriations for the identified accounts, we used the worksheets— described above that were provided or corrected by the agencies—to collect and review the statutory references and enactment years for each account and type of authority. We reported only the earliest identifiable year of enactment for the statute providing the authority. There are some instances where budget authority data are reported for years prior to the enactment year for an account’s authority in our data. This may be stemming from a variety of factors, including repeal of earlier enacted authorities coupled with newly enacted authorities, and challenges identifying original enactment dates when sections of the U.S. Code were recodified. In other instances, neither we nor the agency could determine a statutory reference because of the age of the data, because the account or agency no longer exist, or other reasons. These authorities are included in our inventory because we could not rule out the use of spending authority and permanent appropriations. These accounts are categorized in our online dataset as either (1) the agency could not provide this information—we identified a potentially applicable statutory reference—or (2) the statutory reference could not be determined. To determine whether the identified accounts are subject to or exempt from sequestration, or subject to any special sequestration rules or limitations, we used datasets provided by OMB to identify the sequestration designation for accounts in our final inventory. Sequestration designations include sequestrable, partially sequestrable, exempt, optionally sequestrable, and sequestrable/906. OMB generates the data annually through a government-wide data collection exercise to calculate the sequestration percentage and reductions by account as part of a report required under the Joint Committee process. For authorities that did not have a sequestration designation in OMB’s data but did report actual budget authority in fiscal years 2013, 2014, or 2015, we asked OMB to provide additional sequestration designation information. Authorities that OMB did not classify, or for which it could not provide additional information, have “None” listed as the sequestration status in our final inventory. The primary dataset we used includes accounts with mandatory budget authority in fiscal year 2015 and the corresponding sequestration designation. However, to identify the sequestration designation for accounts in our final inventory with offsetting collections authority that OMB categorized as discretionary spending, we used the fiscal year 2013 sequestration dataset. The fiscal year 2013 dataset was the most recent available for which sequestration occurred for discretionary spending when we began our work, and we used fiscal year 2015 data to match the end year of our inventory data. We assessed the reliability of the sequestration datasets based on interviews with OMB staff. OMB staff told us that the data must pass a series of automated checks, and are reviewed at several points by OMB staff. Thus, we found the data to be sufficiently reliable for the purpose of identifying the sequestration status of the accounts in our final inventory. We confirmed the definition of each sequestration designation with OMB. In some cases, because of differences in the scope of the data that OMB collected for Joint Committee reports, a sequestration designation was not available. For some of those authorities, OMB provided a designation based on information collected from agencies. We compared the sequestration designation data from our 1996 report to the designations in fiscal year 2015 or 2013, as applicable to analyze changes over time. We combined data from the worksheets confirmed by the agency into a single dataset to create our final inventory of accounts. We also added the dollar amounts from MAX to create the final dataset we used for analysis in the report. To combine our data, we had to make several decisions to help eliminate double-counting and to simplify the supplemental data that accompanies this report. We have provided a final inventory dataset—which includes the agency accounts and related budget information, statutory references, enactment years, and sequestration designation—online as a supplement to this report. Table 6 lists the variables and definitions used in our online data. We analyzed the final combined dataset for trends and compared it with the 1996 report. In some cases, we adjusted the fiscal year 1994 dollars for inflation. Once the inventory of accounts was finalized and we completed our review, each agency received a statement of facts to review, which summarized the final inventory information for their agency. Agencies that have examples of accounts highlighted in our report received those excerpted examples that are specific to their agencies for review and comment. We provided OMB the draft report and online data for review and comment. We conducted this performance audit from March 2016 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides additional details on how we defined spending authority and permanent appropriations for the purpose of this report and how we applied the definition to decide which accounts to include or exclude from our inventory. We are defining spending authority as budget authority made available through laws other than annual appropriation acts. Also, we are defining a permanent appropriation as budget authority to incur obligations and make payments that is available permanently by law without further legislative action. A permanent appropriation may have been made available through an annual appropriations act or through laws other than the annual appropriations acts. We are including both in our inventory based on the intent of the request for developing our inventory. Spending authority and permanent appropriations permit obligation and expenditures without further action from Congress. These include permanent appropriations, contract authority, borrowing authority, offsetting collections, and monetary credits or bartering, all of which are defined in table 7. In building our inventory of accounts with spending authority and permanent appropriations authority, we made categorical decisions on what to include and exclude. We included authorities that met our definition of spending authority and permanent appropriations, as described above in table 7. A particular type of offsetting collections— collections from nonfederal sources that were enacted for the first time in an appropriations act—does not meet our definition, but nonetheless permits obligation and expenditure without further action from Congress, and therefore falls within the purview of this request. We included these authorities in our inventory and included a variable to identify them in our online dataset. Certain types of budget authority do not meet our definition of spending authority and permanent appropriations, as described in table 8. Table 9 lists total spending authority and permanent appropriations reported by agency in fiscal year 2015. We listed the 24 agencies in the Chief Financial Officers Act of 1990 as amended, Legislative Branch and Judicial Branch entities, and Executive Office of the President and other entities. We did not include monetary credits or bartering in this table given no agencies reported use of this authority in fiscal year 2015. The tables below list the accounts reporting the largest amounts of budget authority for permanent appropriations, contract authority, and borrowing authority in fiscal year 2015. We did not rank the agencies that reported the largest amounts of offsetting collections because we, and the agencies, when asked, were unable to reliably subtract collections from federal sources or refunds of prior paid obligations. Agencies did not report using monetary credits or bartering in fiscal year 2015. In addition to the contacts named above, Janice Latimer (Assistant Director), Lisa Motley (Assistant General Counsel), Lindsay Swenson (Analyst-in-Charge), Michael Bechetti, Shari Brewster, Charles Culverwell, Ann Marie Cortez, Erika Huber, Susan J. Irving, John Mingus Jr., Katherine D. Morris, Cynthia Saunders, Albert Sim, and Stewart Small made key contributions to this report.", "summary": "Congress can provide budget authority to federal agencies and programs through the annual appropriations process. It can also provide budget authority through laws other than annual appropriations acts, or through permanent appropriations that permit the agency to obligate budget authority without further congressional action. Analysis of these authorities helps provide Congress with visibility into spending authority that is not considered during the annual appropriations process. GAO was asked to update its 1996 report that had provided an inventory of accounts with spending authority and permanent appropriations for fiscal years 1985 through 1994. This report discusses (1) federal budget accounts with spending authority and permanent appropriations, including the statutory references for the authorities, changes in the number of accounts and dollar amounts since fiscal year 1994, and other relevant information; and (2) whether the identified accounts are subject to or exempt from sequestration, or subject to any special sequestration rules or limitations. GAO also is providing an online dataset of the inventory of accounts with spending authority and permanent appropriations on GAO's public website at https://www.gao.gov/products/GAO-19-36 . GAO analyzed Office of Management and Budget (OMB) budget data to identify accounts with spending authority and permanent appropriations. GAO reviewed data through fiscal year 2015 because that was the most recent data available when GAO began its work. GAO reviewed agency information to confirm data and statutory authority. Agencies also reviewed and verified the final data for their accounts. For the sequestration designation, GAO analyzed OMB data for fiscal years 2013 and 2015--the most recently completed years for which sequestration occurred and OMB identified designations when GAO began its work. GAO provided a draft of this report and the online dataset to the Director of OMB for review and comment. OMB staff provided technical comments, which GAO incorporated as appropriate. A total of $3.2 trillion in spending authority and permanent appropriations was reported in fiscal year 2015; an increase of 88 percent from fiscal year 1994 adjusted for inflation in fiscal year 2015 dollars. Fiscal year 1994 was the last year included in GAO's prior work. For the purposes of this report, spending authority and permanent appropriations is budget authority provided to agencies through laws other than annual appropriations acts or available permanently by law without further legislation. These authorities include permanent appropriations, contract authority, borrowing authority, offsetting collections, and monetary credits or bartering. Permanent appropriations were the primary driver of the increase in spending authority and permanent appropriations. Offsetting collections authority--which includes certain fees, fines, and penalties--also grew. Agencies reported no use of monetary credits or bartering. a Permanent appropriations fund federal entitlement programs, such as Medicare, administered by the Department of Health and Human Services (HHS), and the Social Security Administration's (SSA) Old-Age, Survivors, and Disability Insurance program. These programs are a significant proportion of reported budget authority in GAO's inventory of accounts in fiscal year 2015. These programs continue to show spending increases largely as a result of the aging population and rising health care costs and are projected to continue to increase in the future. In fiscal year 2015, 7 of the 10 accounts reporting the largest dollar amounts of spending authority and permanent appropriations funded entitlement programs. Three agencies comprised three quarters of the total government-wide spending authority and permanent appropriations in fiscal year 2015. HHS reported the largest amount of spending authority and permanent appropriations with $979 billion, or about 30 percent--mainly from Medicare. HHS overtook SSA and reported the highest dollar amounts of permanent appropriations for the first time in fiscal year 2006. SSA reported $920 billion, or about 28 percent of total spending authority and permanent appropriations--mainly from its Old-Age and Survivor's Insurance program and the Disability Insurance program. The Department of the Treasury reported the third largest amount--$542 billion, or about 17 percent--the majority of which is for interest on debt held by the public and intragovernmental debt. This interest dropped as a percentage of permanent appropriations since fiscal year 1994, due to lower interest rates that allow the government to borrow money more cheaply. However, interest rates are predicted to rise in the long term, which would increase the net interest costs on the debt. The second largest reported budget authority type was offsetting collections--a total of $421 billion in fiscal year 2015, more than double the fiscal year 1994 amount, adjusted for inflation. The Postal Service reported the largest use of offsetting collections authority in fiscal year 2015 in its Postal Service Fund, which includes revenue from mail services. Sequestration--cancellation of budgetary resources under a presidential order--is a process established in statute which helps to enforce spending limits and thereby control the deficit. In fiscal year 2015, 57 percent of spending authority and permanent appropriations authorities were exempt from sequestration, up from 37 percent in fiscal year 1994. This means that fewer of these authorities were subject to this budgetary enforcement mechanism in fiscal year 2015.", "document_type": "gao"}
{"report": "Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act), when state capabilities and resources are overwhelmed and the President of the United States declares an emergency or disaster, the governor of an affected state can request assistance from the federal government for major disasters or emergencies. The Stafford Act aims to provide a means of assistance by the federal government to state and local governments in responding to a presidentially declared major disaster or emergency. A governor’s request for the President to declare a major disaster or emergency is required to be based on a finding that the situation is of such severity and magnitude that effective response is beyond the capabilities of the state and the affected local governments and that federal assistance is necessary. Additionally, under the Economy Act, a federal agency may request the support of another federal agency, including DOD, without a presidential declaration of a major disaster or an emergency. This act permits one federal agency to request goods and services from another federal agency provided that, among other things, the service is available and cannot be obtained more cheaply or conveniently by contract. In July 2016, the White House issued the Presidential Policy Directive on United States Cyber Incident Coordination (hereafter referred to as PPD- 41) to establish principles governing the federal government’s response to cyber incidents involving government or private sector entities. Subsequently, in December 2016, the Department of Homeland Security issued an updated National Cyber Incident Response Plan that outlines domestic cyber-incident response coordination and execution among federal; state, territorial, and local governments; and the private sector. Overall coordination of federal incident-management activities is generally the responsibility of the Department of Homeland Security. DOD supports the lead federal agency in the federal response to a major disaster or emergency. When authorized to provide support to civil authorities for domestic emergencies, DOD may provide capabilities and resources— such as military forces (including the National Guard under Title 10 and Title 32, U.S. Code), DOD civilians, and DOD contractors—through DSCA. DOD components can also provide support to civil authorities under separate authority. For example, under Executive Order 12333, the National Security Agency, as an element of the intelligence community, is authorized to provide technical assistance and cooperation to law enforcement and other civil authorities not precluded by applicable law. In an effort to facilitate DSCA across the nation and at all organizational levels, DOD has assigned responsibilities within the Office of the Secretary of Defense (such as the Assistant Secretary of Defense for Homeland Defense and Global Security); the Chairman of the Joint Chiefs of Staff; various combatant commanders, such as the NORTHCOM and the U.S. Pacific Command (PACOM) Commanders; and the Chief of the National Guard Bureau, among others. A combatant command is a unified or specified command with a broad continuing mission under a single commander established and designated by the President, through the Secretary of Defense and with the advice and assistance of the Chairman of the Joint Chiefs of Staff. DOD’s Assistant Secretary of Defense for Homeland Defense and Global Security is the principal civilian advisor responsible for homeland defense, DSCA, and cyber for the department. This official is to develop policies, conduct analysis, provide advice, and make recommendations on homeland defense, DSCA, emergency preparedness, and cyberspace operations within the department. The Chairman of the Joint Chiefs of Staff advises the Secretary of Defense on the effects of requests for DSCA on national security and identifies available resources for support in response to DSCA requests. NORTHCOM and PACOM provide support to civil authorities at the federal, state, and local levels, as directed. Further, CYBERCOM synchronizes the planning for cyberspace operations in coordination with other combatant commands, the military services, and other appropriate federal agencies. In August 2017, DOD initiated the process to elevate CYBERCOM from a subunified command to a unified combatant command. According to DOD, this elevation “will help to streamline command and control of time-sensitive cyberspace operations by consolidating them under a single commander with authorities commensurate with the importance of those operations and will ensure that critical cyberspace operations are adequately funded.” Additionally, a dual-status commander could serve as an intermediate link between the separate chains of command for state and federal forces and is intended to promote unity of effort between federal and state forces to facilitate a rapid response during major disasters and emergencies. DOD did not develop a comprehensive plan; instead, the department submitted a collection of separate documents that addressed some, but not all six statutorily required elements (hereafter referred to as DOD’s Section 1648 report). Table 1 lists each of the required elements and shows our determination of the extent to which the elements were addressed in DOD’s Section 1648 report. DOD officials agreed that their submission was not a comprehensive plan. These officials told us they developed a report that they believed would address the required elements of the legislation and articulate the department’s comprehensive work to prepare for supporting civil authorities in response to a cyber incident with plans, policies, guidance, among other things. Specifically, DOD’s Section 1648 report is a collection of separate documents that, according to DOD, outline core federal, state, local, and private sector roles and responsibilities; summarize plans for coordination at all levels of government and across sectors in the event of a cyber incident; and prescribe the roles and responsibilities of the active and reserve components. As noted in the table above, DOD’s Section 1648 report addressed two of the six elements required by the statute–to provide (1) descriptions of the roles, responsibilities, and expectations of federal, state, and local authorities and (2) a description of legislative and administrative actions necessary to carry out its plan to support domestic cyber incident response efforts. Specifically, DOD’s Section 1648 included copies of the PPD-41 and the Department of Homeland Security’s National Cyber Incident Response Plan. Both of these documents provide general descriptions of the roles, responsibilities, and expectations of federal, state, and local authorities. For example, the National Cyber Incident Response Plan was developed to articulate the roles and responsibilities, capabilities, and coordinating structures that support how the nation responds to and recovers from significant cyber incidents posing risks to critical infrastructure. DOD’s Section 1648 report also included a description of administrative actions that the department believed were necessary to carry out its plan to support domestic cyber incident response efforts. Specifically, according to the report, DOD had drafted a directive type memorandum to provide supplementary policy guidance, assign responsibilities, and detailed procedures for providing defense support for cyber incident response. This memorandum was signed and issued by DOD subsequent to the department submitting its Section 1648 report to Congress. DOD officials also acknowledged that there were incorporating cyber into all aspects of policy, doctrine, and guidance. In the report, DOD stated that the department believed current authorities were sufficient and did not recommend any legislative actions. DOD partially addressed three of the six elements required by the statute—to provide (1) descriptions of the roles, responsibilities, and expectations of the active and reserve components of the armed forces; (2) the department’s plans for coordination with heads of other federal agencies and state and local governments; and (3) a list of exercises previously conducted that are used in the formulation of the plan. DOD’s Section 1648 report includes a copy of DOD Directive 3025.18, Defense Support of Civil Authorities, which establishes DSCA policy and provides guidance for the execution and oversight of DSCA, as an appendix. This directive includes a section that identifies roles and responsibilities of DOD components such as the Joint Staff, the combatant commands, and the military departments, among others. However, we have previously reported that DOD’s guidance does not clearly define the department’s roles and responsibilities. For example, we found inconsistency on which combatant command would be designated the supported command and have the primary responsibility for providing support to civil authorities during a cyber incident. Consequently, as noted in appendix I, we recommended that DOD issue or update guidance that clarifies roles and responsibilities for relevant entities and officials to support civil authorities in a domestic cyber incident. However, key DOD documents such as DOD Directive 3025.18, DOD’s Section 1648 report, and the Directive Type Memorandum issued in June 2017 do not clarify roles and responsibilities of DOD components, liaisons, and personnel who DOD had previously assigned coordination roles and responsibilities for supporting civil authorities. As a result, there is still uncertainty about these roles and responsibilities within the department. For example, disagreement still exists among officials in the department regarding whether NORTHCOM and PACOM (as the geographic combatant commands) or CYBERCOM, which according to command officials maintains the department’s existing inventory of cyberspace command and control capabilities, is the supported command in a cyber incident requiring civil support. DOD officials acknowledged to us that there are a number of planning and guidance documents that need to be updated to clarify roles and responsibilities. Until DOD clarifies the roles and responsibilities of its key entities for cyber incidents, as we recommended, department leaders and components will continue to experience uncertainty about the roles and responsibilities of different components and commands in providing support to civil authorities in the event of a significant cyber incident. In an effort to describe the department’s plans for coordination with heads of other federal agencies and state and local governments, DOD’s Section 1648 report provided information on the department’s role in supporting a whole-of-government approach during a significant cyber incident. Specifically, DOD included copies of PPD-41, the Department of Homeland Security’s National Cyber Incident Response Plan, and DOD’s Department of Defense (DOD) Significant Cyber Incident Coordination Procedures. These documents recognize that the department coordinates with other federal agencies (and state and local governments, as appropriate) through the Cyber Response Group and the Cyber Unified Coordination Group that were consistent with PPD-41. According to PPD-41, the Cyber Unified Coordination Group is the primary method for coordinating between and among federal agencies responding to a significant cyber incident, as well as for integrating private sector partners into incident response efforts. While DOD’s Section 1648 report recognizes the role and value of these two groups, these groups have limited coordination opportunities with state and local governments. For example, the Cyber Response Group is a national-level policy coordination group composed of federal department and agencies (i.e., does not include state and local governments). Also, the Cyber Unified Coordination Group is an ad-hoc group that is convened in response to a significant cyber incident and will not include state and local governments unless it is required by the scope, nature, and facts of a particular significant cyber incident. In addition, the report did not identify any plans for coordinating with heads of other federal agencies and state and local governments, as required by the statute. DOD guidance and joint doctrine state that, among the defense coordinating officers’ multiple responsibilities, they are supposed to develop and promote relationships with federal, state, tribal, and local governmental and non-governmental organizations, and with private sector entities in the assigned Federal Emergency Management Agency (FEMA) region. However, DOD’s Section 1648 report did not identify how the defense coordinating officers, their supporting elements, or other DOD components that coordinate with civil authorities—including state and local governments—plan to coordinate in preparation to provide support of DSCA activities. We are not making a recommendation on this issue because we previously recommended that DOD issue or update guidance that clarifies roles and responsibilities for DOD components—such as for the defense coordinating officers and their supporting elements—to support civil authorities in response to a domestic cyber incident. DOD’s Section 1648 report also includes a list of cyber civil support exercises that DOD conducted over the last 3 years. However, this list was incomplete because DOD did not include all exercises where DOD components provided support to civil authorities in a cyber incident. For example, the report did not include NORTHCOM’s 2015 exercises—Vista Host and Vista Code. These two exercises examined planning assumptions, potential resource requirements, and roles and responsibilities associated with cyber-related defense support to civil authorities operations. By not including this information in this one-time report, DOD missed an opportunity to provide Congress more complete information about exercises that the department is conducting to prepare itself and commands to support civil authorities for a cyber incident within the United States. During our review of DOD’s Section 1648 report, we also found that the department had yet to conduct a command and control (i.e., operational- level) exercise focused on providing support to civil authorities in a cyber incident—a gap acknowledged by officials from NORTHCOM, PACOM, and CYBERCOM. According to these officials, the exercises identified in the Section 1648 report focused on strategic–level decisions (e.g., Cyber Guard 16 Legal and Policy table top exercises) or tactical-level actions (e.g., Cyber Guard 16). CYBERCOM officials told us that they believe that Cyber Guard is a tier 1 exercise. However, a 2015 DOD Cyber Strategy implementation document stated that while Cyber Guard is a valuable “whole-of-nation” scenario, its focus is much more tactical in nature and that the department needed another tier 1-level exercise. Similarly, officials from both DHS and DOD acknowledged that Cyber Guard was a tactical-level exercise. As previously discussed and identified in appendix I, we previously recommended that DOD conduct a tier 1 exercise to prepare its forces in the event of a disaster with cyber effects. CYBERCOM officials told us the command is currently planning an internal staff exercise to address our recommendation to exercise its forces at the operational-level of leadership. However, an internal staff exercise (i.e., an exercise that does not exercise command-and-control relationships with other combatant commanders) will not be consistent with DOD guidance that states tier 1 exercises are designed to prepare national-level organizations and combatant commanders and staff at the strategic and operational levels to integrate a diverse audience in highly complex environments. We maintain our position that Cyber Guard in its current form is not a tier 1 exercise that would enable the department to achieve its DOD Cyber Strategy goal of exercising its DSCA capabilities in support of the Department of Homeland Security (DHS) and other agencies, including state and local authorities. We continue to believe that DOD should conduct a tier 1 exercise to improve the department’s planning efforts to support civil authorities in a cyber incident. DOD’s Section 1648 report did not address one of the six required elements—to provide a plan for internal DOD collective training activities that are integrated with exercises conducted with other agencies and state and local governments. Instead, the department provided a classified list of planned exercises for 2017 that, according to officials, have training value for cyber incident response. Officials from ODASD (HDI/ DSCA) and ODASD (Cyber Policy) told us that DOD does not train for DSCA. Rather, the department trains and exercises its forces to conduct military missions and can apply the knowledge and experience from these activities to support civil authorities when requested and approved. The officials emphasized that, while exercises generally test whether DOD forces have learned training, in the case of DSCA exercises are a key training tool. While exercises may have training value, DOD did not provide information on existing DSCA-related training efforts within the department—such as on NORTHCOM’s DSCA course offered to officials from DOD and other federal agencies. Specifically, according to NORTHCOM officials, the command’s DSCA course focuses on training senior military officers, DOD civilians, and their staff to ensure DOD’s readiness to support its homeland defense and civil support missions. The officials explained that this course introduces participants to national, state, local, and DOD statutes, directives, plans, command and control relationships, and capabilities with regard to disaster and emergency response. By not including this information in this one-time report, DOD missed an opportunity to provide Congress more complete information about training that the department is conducting to prepare itself and commands to support civil authorities for a cyber incident within the United States. In addition, during our review, we found that DOD had not met the training requirements outlined in PPD-41, which was included in DOD’s Section 1648 report. Specifically, the policy directive requires federal agencies, including DOD, to update cyber incident coordination training to incorporate the tenets of PPD-41 by December 2016 and to identify and maintain a cadre of personnel qualified and trained in the National Incident Management System and unified coordination to manage and respond to a significant cyber incident. According to the PPD-41, the overarching document guiding DOD’s Section 1648 report, these personnel would provide necessary expertise to support tasking and decision making by a Cyber Unified Coordination Group. In addition, DOD’s Significant Cyber Incident Coordination Procedures require the Chairman of the Joint Chiefs of Staff, through the National Military Command Center, to maintain a list of senior DOD officials from specified organizations that could represent DOD during a Cyber Unified Coordination Group and who are trained in the National Incident Management System. As of August 2017, DOD officials acknowledged the department had not updated its cyber incident coordination training to incorporate the tenets of PPD-41. Joint Staff officials told us they have staff qualified and trained in the National Incident Management System; however, the officials were unable to provide us a list of senior officials from DOD organizations that could participate in a Cyber Unified Coordination Group that had been trained in the National Incident Management System. An official from the Office of DOD Principal Cyber Advisor acknowledged the Joint Staff is not tracking personnel who have been qualified and trained in the National Incident Management System, as required by the DOD Significant Cyber Incident Coordination Procedures. Consequently, it is unclear whether senior DOD officials who may be asked to participate in a Cyber Unified Coordination Group will be trained in the National Incident Management System. Until DOD updates its cyber incident response training and maintains a list of senior DOD officials from organizations who could represent DOD during a Cyber Unified Coordination Group and who are trained in the National Incident Management System, the department will not be in compliance with PPD- 41 and may not have the personnel with expertise to manage and respond to a significant cyber incident. DOD recognizes that a disruptive, manipulative, or destructive cyberattack could present a significant risk to U.S. economic and national security and that the department must be prepared to support civil authorities in all domains—including in cyberspace. While DOD addressed some of the required elements set forth in Section 1648, the report submitted does not highlight the full scope of the department’s planning and preparation efforts to support civil authorities in response to a cyber incident. We are not making recommendations on these issues because we have previously made recommendations in areas where the Section 1648 report did not contain complete information. However, without complying with the training requirements outlined in PPD-41 and the DOD Significant Cyber Incident Coordination Procedures, the department cannot reasonably ensure it has the personnel with expertise to manage and respond to a significant cyber incident. Taking action to improve the areas we have highlighted should help DOD sustain the progress it has already made. With the President’s decision to elevate CYBERCOM to a unified combatant command, such actions will also help as DOD continues to plan to support civil authorities in response to a cyber incident and where CYBERCOM has a significant role. We are making the following two recommendations to DOD: The Assistant Secretary of Defense for Homeland Defense and Global Security, in coordination with the Chairman of the Joint Chiefs of Staff and other appropriate DOD components, should update the department’s cyber incident coordination training to incorporate the tenets of PPD-41. The Chairman of the Joint Chiefs of Staff should maintain a list of senior DOD officials from organizations that could represent DOD during a Cyber Unified Coordination Group and that are trained in the National Incident Management System. We provided a draft of our report to DOD for review and comment. In its written comments, DOD partially concurred with our first recommendation and concurred with the second. DOD’s written comments are reprinted in their entirety in appendix IV. DOD partially concurred with our recommendation to update the department's cyber incident coordination training to incorporate the tenets of PPD-41. In its response, DOD acknowledged the need to continue its emphasis on cyber incident coordination training and states that the department is wholly committed to updating the appropriate training as part of its formal after action reviews during each exercise and training event. DOD stated that it prepares for cyber incidents by exercising interagency roles and responsibilities, and command and control within a cyber threat scenario. While these exercises emphasize the development of comprehensive cyber incident response plans and seek to foster cyber incident coordination, DOD did not identify any specific exercise or training event in which the department will incorporate the tenets of PPD- 41. Accordingly, we continue to believe that our recommendation is warranted. As we reported and DOD acknowledged, Cyber Guard is a tactical-level exercise that would not fully incorporate all DOD components that would participate in a unified cyber response consistent with PPD-41. DOD would meet the intent of our recommendation by conducting one or more cyber incident exercises that incorporate the tenets of PPD-41 into command and control (i.e., operational-level) relationships across all relevant commands and not just across CYBERCOM. DOD concurred with our recommendation that the Joint Staff maintain a list of senior DOD officials from organizations who could represent DOD during a Cyber Unified Coordination Group and who are trained in the National Incident Management System. DOD stated that the Joint Staff will ensure that senior DOD personnel are familiar with the National Incident Management System, or advised by personnel that are, prior to representing the department during a Cyber Unified Coordination Group. The department also plans to re-emphasize these efforts as part of its onboarding process for newly assigned senior leaders, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Assistant Secretary of Defense for Homeland Defense and Global Security, the Chairman of the Joint Chiefs of Staff, and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9971 or kirschbaumj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix V. During our review of the Department of Defense’s (DOD) Section 1648 report, we followed up on three recommendations from our recent reports that could improve the department’s planning and processes for supporting civil authorities in a cyber incident. Table 2 summarizes the status of these recommendations. SEC. 1648. COMPREHENSIVE PLAN AND BIENNIAL EXERCISES ON RESPONDING TO CYBER ATTACKS. (a) COMPREHENSIVE PLAN OF DEPARTMENT OF DEFENSE TO SUPPORT CIVIL AUTHORITIES IN RESPONSE TO CYBER ATTACKS BY FOREIGN POWERS.— (1) PLAN REQUIRED.— (A) IN GENERAL.—Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall develop a comprehensive plan for the United States Cyber Command to support civil authorities in responding to cyber attacks by foreign powers (as defined in section 101 of the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1801)) against the United States or a United States person. (B) ELEMENTS.—The plan required by subparagraph (A) shall include the following: (i) A plan for internal Department of Defense collective training activities that are integrated with exercises conducted with other agencies and State and local governments. (ii) Plans for coordination with the heads of other Federal agencies and State and local governments pursuant to the exercises required under clause (i). (iii) A list of any other exercises previously conducted that are used in the formulation of the plan required by subparagraph (A), such as Operation Noble Eagle. (iv) Descriptions of the roles, responsibilities, and expectations of Federal, State, and local authorities as the Secretary understands them. (v) Descriptions of the roles, responsibilities, and expectations of the active components and reserve components of the Armed Forces. (vi) A description of such legislative and administrative action as may be necessary to carry out the plan required by subparagraph (A). (2) COMPTROLLER GENERAL OF THE UNITED STATES REVIEW OF PLAN.—The Comptroller General of the United States shall review the plan developed under paragraph (1)(A). Our objective was to determine the extent to which the Department of Defense’s (DOD) Section 1648 report submission addressed the statutorily required elements. To determine the extent to which DOD’s Section 1648 report addressed the statutorily required elements, we analyzed the text of DOD’s Section 1648 report. To conduct our analysis of DOD’s Section 1648 report, two of our analysts analyzed the text of the Section 1648 report and assessed the extent to which the report addressed the six elements required by the statute. The analysts assessed each element in the report as “fully addressed,” “partially addressed,” or “not addressed.” If the Section 1648 report addressed all aspects of the required element, the analysts determined that DOD had “fully addressed” the element. If the report addressed some aspects of a required element, but not all, the analysts determined that DOD had “partially addressed” the element. If the report did not address any aspects of a required element, the analysts determined that DOD “did not address” the element. A third independent analyst reviewed the initial determinations and assessed whether they were accurate. For further information, we met with relevant officials from DOD components—such as from the Office of the Assistant Secretary of Defense for Homeland Defense and Global Security, including the Office of the Deputy Assistant Secretary of Defense for Homeland Defense Integration and Defense Support of Civil Authorities and the Office of the Deputy Assistant Secretary of Defense for Cyber Policy; the Joint Staff; U.S. Northern Command (NORTHCOM); U.S. Pacific Command (PACOM); U.S. Cyber Command (CYBERCOM); and the National Guard Bureau. We also interviewed Department of Homeland Security officials to obtain clarifying and supporting information on the process by which the department plans and prepares for a cyber incident requiring civil support. In the cases in which the analysts determined that the plan did not address some aspects of a required element, they discussed their preliminary analyses with officials from the Office of the Assistant Secretary of Defense for Homeland Defense and Global Security to seek additional information. Additionally, DOD officials offered clarification regarding the Defense Support of Civil Authorities process, DOD roles and responsibilities in civil support, and information on ongoing initiatives. We conducted this performance audit from May 2017 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Tommy Baril (Assistant Director), Tracy Barnes, David Beardwood, Pamela Davidson, Ashley Houston, Gabrielle Matuzsan, and Spencer Tacktill made key contributions to this report. Defense Civil Support: DOD Needs to Identify National Guard’s Cyber Capabilities and Address Challenges in Its Exercises. GAO-16-574. Washington, D.C.: September 6, 2016. Civil Support: DOD Needs to Clarify Its Roles and Responsibilities for Defense Support of Civil Authorities during Cyber Incidents. GAO-16-332. Washington, D.C.: April 4, 2016. Civil Support: DOD Is Taking Action to Strengthen Support of Civil Authorities. GAO-15-686T. Washington, D.C.: June 10, 2015. Homeland Defense: DOD Needs to Address Gaps in Homeland Defense and Civil Support Guidance. GAO-13-128. Washington, D.C.: October 24, 2012. Homeland Defense: DOD Can Enhance Efforts to Identify Capabilities to Support Civil Authorities during Disasters. GAO-10-386. Washington, D.C.: March 30, 2010. Homeland Defense: DOD Needs to Take Actions to Enhance Interagency Coordination for Its Homeland Defense and Civil Support Missions. GAO-10-364. Washington, D.C.: March 30, 2010.", "summary": "The Presidential Policy Directive on United States Cyber Incident Coordination states that significant cyber incidents are occurring with increasing frequency impacting public and private infrastructure in the United States. Section 1648 of the National Defense Authorization Act for Fiscal Year 2016 included a provision that DOD develop a comprehensive plan for CYBERCOM to support civil authorities in responding to cyberattacks by foreign powers against the United States. Section 1648 also included a provision that GAO review DOD's plan. This review assesses the extent to which DOD's Section 1648 report addressed the statutorily required submission elements. To conduct this work, GAO assessed DOD's Section 1648 report against the elements outlined in the statute. GAO also discussed the Section 1648 report with DOD policy, Joint Chiefs of Staff, combatant commands, and military service officials. The Department of Defense (DOD) did not develop a comprehensive plan for U.S. Cyber Command (CYBERCOM); instead, the department submitted a report consisting of a collection of documents that fully addressed two of the six statutorily required elements; partially addressed three elements; and did not address the sixth element on DOD training activities. Legend: ○ Did not address: Submission does not include required element. GAO also found that, in addition to not addressing the training element in the report, DOD had not ensured that staff are trained as required by the Presidential Policy Directive on United States Cyber Incident Coordination or DOD's Significant Cyber Incident Coordination Procedures, which were included DOD's Section 1648 report. Taking action to improve these areas should help DOD sustain progress it has already made. With the President's decision to elevate CYBERCOM to a unified combatant command, such actions will also help as DOD continues to plan to support civil authorities in response to a cyber incident and where CYBERCOM has a significant role. GAO has previously recommended that DOD take actions on elements of the Section 1648 report that were partially addressed. GAO is making two new recommendations that DOD update cyber incident coordination training and maintain a list of officials trained in the National Incident Management System. DOD concurred with maintaining a list of trained officials and partially concurred on updating cyber training. GAO continues to believe the updating recommendation is warranted.", "document_type": "gao"}
{"report": "Enacted in November 2001, the Aviation and Transportation Security Act (ATSA) established TSA as the primary federal agency responsible for implementing and overseeing the security of the nation’s civil aviation system. In accordance with ATSA, TSA is to ensure that all passengers and property transported by commercial passenger aircraft to, from, or within the United States are adequately screened. Among other things, TSA is responsible for ensuring that for all flights and flight segments originating in the United States, such screening takes place before boarding and is carried out by a federal government employee except as otherwise permitted in statute. Pursuant to TSA-established policies and procedures in effect at about 440 airports at which TSA performs, or oversees the performance of screening operations (i.e., TSA-regulated airports), all passengers, their accessible property, and their checked baggage are to be screened prior to entering the sterile area of the airport or boarding the aircraft. Among other things, these procedures generally provide that passengers pass through security checkpoints where their person, identification documents, and accessible property are screened by Transportation Security Officers (TSO). In this report, we examine six countermeasures specific to aviation security—passenger prescreening (Secure Flight), checkpoint screening, checked baggage screening, explosives detection canines, BDA, and FAMS. An overview of these countermeasures is provided below and figure 1 depicts an illustrative example of the process by which an aviation passenger may encounter these selected countermeasures. Passenger Prescreening (Secure Flight): TSA uses its Secure Flight prescreening program to match passenger information against federal government watch lists and other information to assign each passenger to one of three risk categories—high risk, low risk, or unknown risk—that either corresponds to the level of screening they will experience at the checkpoint or may deny them an opportunity to board the aircraft. The program requires U.S.- and foreign-flagged commercial aircraft operators traveling to, from, within, or overflying the United States, as well as U.S. commercial aircraft operators with international point-to-point flights, to collect certain information from passengers—such as full name, gender, and date of birth—and transmit that information electronically to TSA. The Secure Flight program then identifies passengers’ risk levels by matching them against federal government watch lists—for example, the No Fly List, comprised of individuals who should be precluded from boarding an aircraft, and the Selectee List, comprised of individuals who should receive enhanced screening at the passenger security checkpoint. Passengers identified as matching the No Fly List, for example, are precluded from obtaining a boarding pass and proceeding through the screening checkpoint. For passengers matching the Selectee List, air carriers must mark their boarding passes accordingly so TSA can identify them for enhanced screening. In 2010, TSA began using risk-based criteria to create additional lists for Secure Flight screening, which are composed of high-risk passengers who may not be in the Terrorist Screening Database but whom TSA has determined should be subject to enhanced screening procedures. TSA also began conducting watch list matching against an Expanded Selectee List in order to designate more passengers who are known or suspected terrorists as selectees for enhanced screening. In addition, as part of TSA Pre✓™—a 2011 initiative to preapprove passengers for expedited screening—TSA uses Secure Flight to screen passengers against several lists of preapproved low-risk travelers. Passengers determined to be eligible for TSA Pre✓™ are identified as such on their boarding passes. Checkpoint Screening: TSA screens individuals and property at airport screening checkpoints to deter and prevent the carriage of any unauthorized or prohibited items on board an aircraft or into the airport sterile area. In general, passengers undergo one of three types of checkpoint screening, based on the Secure Flight determinations shown on boarding passes—standard screening, enhanced screening for selectees, and expedited screening for low-risk passengers. Standard screening typically includes passing through a walk-through metal detector or advanced imaging technology (AIT) machine, which identifies objects or anomalies on the outside of the body. Passengers may also be subject to a pat down if they are screened by the AIT or walk-through metal detector and the equipment alarms. Standard screening also typically includes X-ray screening for the passenger’s accessible property. During X-ray examination of the property, TSOs review the X- ray images, and if potential prohibited items are detected, the property will be manually inspected and screened with an explosives trace detection (ETD) machine to identify any traces of explosives material. Enhanced screening generally includes, in addition to the procedures applied during a typical standard screening experience, a pat-down and an explosives trace detection or physical search of the interior of the passenger’s accessible property, electronics, and footwear. Expedited screening typically includes walk-through metal detector screening and X-ray screening of the passenger’s accessible property, but unlike in standard screening, travelers do not have to, among other things, remove their belts, shoes, or light outerwear. Checked Baggage Screening: TSA inspects passengers’ checked baggage to deter, detect, and prevent the transport of any unauthorized explosive, incendiary, or weapon onboard an aircraft. Checked baggage screening is accomplished through the use of explosives detection systems (EDS)—which use X-rays with computed tomography technology to automatically measure the physical characteristics of objects in baggage and trigger an alarm when objects that exhibit the physical characteristics of explosives are detected—and ETD machines, which use chemical analysis to manually detect traces of explosive materials’ vapors and residue. At airports with EDS, EDS machines are generally employed for primary screening of checked baggage while ETD machines are used for secondary screening to help resolve questions raised by EDS screening. At airports without EDS machines, ETDs are used as the primary method for screening checked baggage. Explosives Detection Canines: TSA’s National Explosives Detection Canine Team Program trains, deploys, and certifies explosives detection canine teams in order to deter and detect the introduction of explosive devices into U.S. transportation systems. Each canine team consists of a handler paired with a canine trained in explosives detection. The canine handlers are generally either a state or local law enforcement officer (LEO) or a TSA employee. Two types of LEO teams and two types of TSA-based teams were trained to operate in the aviation environment during fiscal year 2015. First, TSA explosives detection canine teams patrol terminals, curbside areas, and other airport environments while TSA passenger screening canine teams primarily search for explosives odor on passengers in airport terminals. Second, LEO aviation teams patrol airport terminals, curbside areas, and sterile areas while LEO multimodal teams operate in the airport environment and screen air cargo but also operate in mass transit and maritime environments. Behavior Detection and Analysis: TSA’s BDA program employs behavior detection officers (BDO) at passenger screening checkpoints to identify potential threats by observing individuals for certain behavioral indicators—behaviors indicative of stress, fear, or deception. These behavioral indicators include, for example, assessing the way an individual swallows or the degree to which an individual’s eyes are open. According to TSA, these verbal and nonverbal cues and behaviors may indicate mal-intent, such as the intent to carry out a terrorist attack, and provide a means for TSA to identify passengers who may pose a risk to aviation security and refer them for additional screening. During this referral screening, if passengers exhibit additional such behaviors, or if other events occur, such as the discovery of a suspected fraudulent document, BDOs are to refer these passengers to a LEO for further investigation. In fiscal year 2015, the program deployed BDOs primarily in teams of two at passenger screening checkpoints. However, TSA officials reported that in the summer of 2016, the agency began taking steps to integrate BDOs into the TSO workforce by assigning BDOs to the travel document checker position and other positions at passenger screening checkpoints where they are able to observe and interact with passengers in the performance of their screening duties. U.S. Federal Air Marshal Service: FAMS deploys federal air marshals on passenger flights to detect, deter, and defeat hostile acts targeting U.S. air carriers, airports, passengers, and crews. In accordance with ATSA, as amended, TSA is authorized to deploy federal air marshals on every passenger flight of a U.S. air carrier and is required to deploy federal air marshals on every such flight determined by the Secretary of Homeland Security to present high security risks, with nonstop, long- distance flights, such as those targeted on September 11, 2001, considered a priority. One of FAMS’s top priorities is to deploy air marshals on flights that have a known or suspected terrorist on board. When FAMS assigns air marshals to cover such flights, it refers to these flights as special mission coverage assignments. TSA uses a risk management strategy—referred to as “layers of security”—whereby TSA simultaneously deploys a mix of screening and other security countermeasures to deter and detect threats. TSA deploys countermeasures in varying combinations at each airport based on available resources, specific security concerns, and the airport’s risk category, among other things. Since the terrorist attacks of September 11, 2001, TSA has implemented and added countermeasures, and refined security procedures in response to specific attacks or threats— such as the liquid explosives plot in 2006. Figure 2 depicts examples of this progression, illustrating the addition or enhancement of certain TSA countermeasures over the years. TSA collected fiscal year 2015 data on the effectiveness of four of the six countermeasures we selected—passenger prescreening, checkpoint screening, checked baggage screening, and explosives detection canines—in detecting or disrupting threats to passenger aviation security. TSA assesses this effectiveness differently for each of these four countermeasures. For example, TSA assessed the effectiveness of its passenger prescreening countermeasure in detecting passengers that may pose a threat to aviation security by measuring the percentage of airline passenger records vetted through its Secure Flight system and the number of high-risk passengers identified. In contrast, TSA assessed the effectiveness of its canine program in detecting and disrupting potential security threats by measuring canine-handler team performance during their annual certification tests as well as covert scenario-based tests called short notice assessments (SNA). Some of the effectiveness data TSA has for fiscal year 2015 are of limited reliability and TSA is taking steps to improve this information. For instance, we reported in September 2016 that checkpoint and checked baggage screening effectiveness data from TSA’s Aviation Screening Assessment Program (ASAP) Advantage covert tests conducted in fiscal year 2015 were not reliable. Specifically, TSA found that TSOs performed more poorly in ASAP tests conducted by an independent contractor than in the same tests conducted by local TSA personnel at the same airports. This raised questions about the validity of ASAP tests conducted by local TSA personnel and indicated that TSA’s fiscal year 2015 ASAP pass rates likely showed a higher level of TSO performance in screening for prohibited items than was actually the case. In response to this issue, and to provide ongoing quality assurance for field-based covert testing results, in April 2016, TSA began deploying headquarters- based covert testing teams in both the checkpoint and checked baggage screening environments. TSA officials stated that comparing the results of field- and headquarters-based tests provides TSA with a useful indication of whether or not the field-based covert testing results are valid. In another example, we determined that fiscal year 2015 SNA data were not reliable for the purpose of reporting explosives detection canine teams’ covert testing pass rates. Specifically, in the course of our review we found that these data included duplicate entries and errors, and TSA officials stated that the results of an unknown number of SNAs may not have been recorded. Further, we found that TSA’s data collection process for SNA results that were recorded lacked procedures to ensure that manually entered data were accurate and complete. To address these data limitations, canine program officials stated that a new process was implemented in October 2016 to incorporate SNA results directly into the Canine Website System—a central electronic management database for various canine program data. According to these officials, this new process will better ensure that SNA data are complete, accurate, and reliable for use by program officials and TSA leadership in evaluating the effectiveness of the program. Appendix II presents specific fiscal year 2015 effectiveness data for the four selected countermeasures for which TSA had effectiveness information. During fiscal year 2015, TSA did not collect data on the effectiveness of two of the six countermeasures we selected—FAMS and the BDA program—in detecting and disrupting threats to aviation security. For FAMS, TSA officials explained that it is very difficult to empirically measure the effectiveness of federal air marshals and the program has no efforts underway to collect such data. We discuss this issue later in this report. For the BDA Program, we reported in November 2013 that TSA had not demonstrated that BDOs could consistently identify the behavioral indicators and, further, that decades of peer-reviewed, published research on the complexities associated with detecting deception through human observation also called into question the scientific basis for TSA’s behavior detection activities. As a result, we recommended that TSA limit future funding for the agency’s behavior detection activities until TSA can provide scientifically validated evidence that demonstrates that behavioral indicators can be used to identify passengers who may pose a threat to aviation security. DHS did not concur with the recommendation but has since reduced funding for the BDA Program and taken steps to begin to assess program effectiveness. For example, in 2014 TSA revised its list of behavioral indicators and contracted for a literature review to identify additional sources of evidence supporting these indicators. However, in July 2017, we reported that in our review of all 178 sources TSA cited in support of its revised list, we found that 98 percent (175 of 178) did not provide valid evidence applicable to the specific indicators TSA identified them as supporting. Based on our findings, we continue to believe that TSA should limit future funding for the agency’s behavior detection activities until TSA can provide valid evidence that demonstrates that behavioral indicators can be used to identify passengers who may pose a threat to aviation security, as we recommended in our November 2013 report. Table 1 identifies whether TSA has information on the effectiveness of the six selected countermeasures in detecting and disrupting threats to aviation security during fiscal year 2015, the data limitations we identified, and steps TSA officials have taken to improve this effectiveness information. Some of TSA’s fiscal year 2015 data indicate countermeasure effectiveness while other data highlight vulnerabilities in the agency’s ability to detect and disrupt threats to aviation security. For example, for the passenger prescreening countermeasure, TSA officials reported that in fiscal year 2015, TSA’s Secure Flight program vetted 100 percent of the more than 816 million records of passengers who flew into, out of, over, or within the United States, and on U.S.-flagged aircraft operating internationally point-to-point. In addition, for the checkpoint and checked baggage countermeasures, TSA uses Annual Proficiency Reviews (APR) to evaluate TSOs’ skill in performing various checkpoint and checked baggage screening functions, such as pat downs of passengers, bag searches, and use of explosives detection equipment. In 2015, the average rate at which TSOs passed all APR component tests on the first try was nearly 95 percent. On the other hand, some fiscal year 2015 effectiveness data indicate vulnerabilities. For example, results from covert testing conducted by TSA’s OOI during fiscal year 2015 indicate vulnerabilities in the checkpoint and checked baggage screening systems. Specific details about OOI’s test results are omitted because the information is classified. While TSA has methods to measure its effectiveness in detecting and disrupting threats, the agency has no such methods to measure progress toward its goal of deterring attacks on the U.S. aviation system. TSA officials have cited the deterrent effect of various countermeasures— including FAMS, canine teams, BDOs, and AIT machines—but does not have information on the deterrent effect of any of these countermeasures. For example, TSA officials explained that canine teams that patrol airports—searching unattended bags and unattended vehicles, among other activities—provide a deterrent presence at airports, but officials noted that they do not have any data on these canines’ deterrent effect. Most notably, with regard to FAMS, TSA officials explained that one of the primary security contributions and a key aspect of the FAMS’s mission is to deter attacks. However, FAMS officials explained that they do not have information on FAMS’s deterrent effect because it is difficult to model, measure, and quantify. TSA officials in multiple offices explained that this difficulty applies not just to FAMS, but also to other TSA countermeasures with an intended deterrent effect. OMB and GAO have acknowledged the difficulty in measuring the effect of deterrence programs, but have identified options to overcome these challenges. OMB guidance recognizes that programs with a deterrence or prevention focus can be difficult to measure and suggests that proxy measures that are closely tied to the outcome can be used to determine how well a deterrence process is functioning. We have similarly acknowledged such methodological challenges and identified alternate evaluation methods that could be helpful to agencies, such as using simulations. TSA could, for example, develop theoretical game scenarios and have testers simulate would-be attackers’ decisions when attempting to carry out an attack on the aviation system. Officials with CREATE—a DHS-funded research center—told us that they have conducted some conceptual research on the value of deterrence and believe it would be possible to assess TSA’s deterrent effect by, for example, allowing covert testers to choose their method of attack. Such an assessment could provide TSA with insights regarding which countermeasures a would-be attacker might choose to avoid in various scenarios. In a March 2016 report prepared for TSA, CREATE analyzed a prospective risk-based security initiative TSA had begun developing and highlighted the need for further research into deterrence including the need to model the economic value of deterrence. CREATE officials explained that they highlighted this issue because in a resource constrained environment, optimizing TSA’s deterrent effect may be a more cost effective solution to aviation security threats than focusing solely on detection and interdiction. A senior official with CPER stated that the office believes there is value in pursuing further research regarding deterrence and noted that the office had included a request for funding to study deterrence in its fiscal year 2017 expenditure plan, but the request was on hold due to limited funding. In accordance with GPRA, as updated by the GPRA Modernization Act, agencies are to establish performance measures to assess progress toward goals. Measuring performance allows organizations to track the progress they are making toward their goals and gives managers critical information on which to base decisions for improving their progress. For example, they can use performance information when developing strategies, allocating resources, identifying problems, and taking corrective action. TSA officials told us that developing a means to assess TSA’s deterrent effect would be difficult and require a multi-year effort but having such a means would be helpful. For example, TSA’s prior Chief Risk Officer told us that TSA’s countermeasures deter nefarious actors from attempting an attack on an aircraft, but better understanding this concept will be critical to TSA in its transition into a more holistic, system-wide approach to aviation security. Additionally, a senior ORCA official explained that a better understanding of the deterrent effect of TSA countermeasures could help TSA optimize use of its resources. For example, this official noted that there may be a point at which adding additional federal air marshals has diminishing returns in terms of deterrence and better understanding FAMS’s deterrent effect could help TSA identify that point. This official further stated that developing a method to assess deterrence for this purpose would be challenging but feasible. In the absence of any systematic or methodological approach to assessing TSA’s deterrent value, TSA officials have relied on theories of causality and limited evidence available from U.S. intelligence sources. For example, FAMS officials cited the fact that there has not been a hijacking on a U.S. carrier since 2002 as evidence of FAMS’s deterrent effect, but had no specific evidence to support FAMS’s contribution to this outcome. In another example, ORCA officials noted that a 2014 article in an online magazine published by al-Qaeda encouraging would-be- attackers to avoid airports with a certain countermeasure provided evidence of its deterrent value. These observations may provide limited insight into TSA’s deterrent effect, but developing a method to systematically assess the deterrent effect of TSA’s security efforts would better position TSA to improve progress toward its goal—deterring attacks on the U.S. aviation system. In 2014, TSA’s ORCA began using a Risk and Trade Space Portfolio Analysis Tool (RTSPA) to analyze the security effectiveness of alternate combinations of some aviation security countermeasures for the purpose of informing TSA acquisition and deployment decisions. RTSPA provides a means for TSA to model its security effectiveness in different scenarios. For example, the tool could be used to compare the security effectiveness of a theoretical airport screening checkpoint with canines to that of a checkpoint modeled without canines. According to ORCA officials, they developed RTSPA to assess security effectiveness tradeoffs among countermeasures that they believed would most benefit from the detailed quantitative analyses that the tool provides, rather than across TSA’s entire system of aviation security countermeasures. Specifically, TSA officials explained that RTSPA is designed to analyze tradeoffs among checkpoint screening countermeasures—including canine teams and BDOs—and checked baggage screening, but was not developed to analyze tradeoffs among other countermeasures TSA deploys. For example, ORCA officials told us that the tool was not developed to analyze crew vetting or FAMS because understanding the security tradeoffs of these countermeasures, while important, does not require the use of such a resource intensive tool like RTSPA. In addition, RTSPA does not account for the full system of aviation security countermeasures, including countermeasures such as hardened cockpit doors and Federal Flight Deck Officers—flight crew members authorized and trained to use firearms. ORCA officials further explained that in 2014, when initially developing the tool, they also developed comparable countermeasure cost data to allow for cost- effectiveness comparisons among countermeasures. However, ORCA officials report that they subsequently stopped analyzing cost tradeoffs because they believed other TSA offices could conduct such analysis. In the last two years, TSA officials have used the results of RTSPA analyses to inform some resource tradeoff decisions. For example, ORCA officials told us that in 2015, TSA leadership used the results of a RTSPA analysis when considering options for improving overall security effectiveness at airports that did not have AIT machines. Specifically, TSA used RTSPA to consider the level of risk and potential risk mitigation value of alternative security measures at these airports. TSA officials report that this RTSPA analysis contributed to TSA’s decision to deploy 146 additional AIT machines to such airports. In another example, ORCA officials noted that in early 2017, they used RTSPA to analyze options for resolving checked baggage alarms, taking into consideration the relative risks of military-grade explosive materials and homemade explosive devices. TSA officials stated that their use of RTSPA has been limited to date because it is still a relatively new tool. However, ORCA officials told us that they expect use of the tool’s analysis to grow as the agency increasingly seeks to use analytic tools to inform acquisition and deployment decisions. As such, ORCA officials plan to update RTSPA and expand its analytical capabilities. TSA does not have any efforts underway to systematically evaluate the potential cost and effectiveness tradeoffs across the full aviation security system. Although TSA’s use of RTSPA to identify effectiveness tradeoffs among selected countermeasures provides some such information, the tool’s analyses are limited and the tool is not designed to offer a system- wide view of effectiveness. When we asked TSA’s prior Chief of Staff about any such efforts, he stated that TSA had not systematically evaluated cost and effectiveness tradeoffs because TSA’s aviation security system is constantly evolving to meet emerging threats, and assessing a system in flux is challenging. However, he told us that such an analysis would be helpful. DHS policy and TSA’s strategic plan call for the systematic evaluation of the costs and effectiveness of TSA’s chosen mix of aviation security countermeasures. Specifically, DHS’s 2010 Policy for Integrated Risk Management calls on components, including TSA, to evaluate the performance of risk management strategies it decides to implement. In the case of TSA, TSA’s chosen mix of aviation security countermeasures represents TSA’s current risk management strategy. The policy further establishes that components should develop and analyze alternative strategies to manage risks by considering the projected costs, benefits, and ramifications of each alternative. In addition, TSA’s current Strategic Plan establishes the goal of increasing efficiency and operational effectiveness through disciplined processes and dynamic resource management. One of the stated outcomes associated with this goal is the ability to effectively optimize resource allocation to strike a balance of costs, benefits, and risk. In addition, it was the stated objective of ORCA’s predecessor—the Office of Security Capabilities (OSC)—to develop and implement a comprehensive tradeoff analysis across the security system to inform investment decisions. OSC’s strategic plan further states that such an analysis would include a full set of strategic choices TSA should consider when determining how to respond to a threat or making an investment decision, helping to determine which alternatives provide the greatest risk mitigation value for each dollar spent. A senior ORCA official explained that while there is a need for a system- wide tradeoff analyses, RTSPA alone may not be the right tool for this. This official explained that TSA may not require detailed quantitative analyses from a resource-intensive tool such as RTSPA to understand the effectiveness tradeoffs among all aviation security countermeasures, and a portfolio of tools of varying precision and depth could be used to obtain a system-wide view. This official noted that developing TSA’s capability for system-wide tradeoff analysis would be challenging and require a multi-year effort. However, RTSPA could serve as a useful starting place for a more comprehensive system-wide analysis. For example, TSA could build upon ORCA’s past efforts to analyze the comparative cost effectiveness of countermeasures and its experience isolating the security effectiveness contributions of individual countermeasures. Without a systematic analysis of the cost and effectiveness tradeoffs across aviation security countermeasures TSA is limited in its ability to achieve its stated goal of optimizing resource allocation and striking a balance of costs, effectiveness, and risk across the system. In an environment of constrained resources and continuing threats to aviation security, producing such analysis could assist TSA leadership in targeting its limited resources to achieve the greatest system-wide risk mitigation value for each dollar spent. Since the terrorist attacks of September 11, 2001, TSA has spent billions of dollars on a range of aviation security programs with the goal of detecting, disrupting, and deterring threats. However, TSA does not have a complete understanding of the contributions these programs are making to this goal. Specifically, TSA has some information on how well it can detect and disrupt threats and is taking steps to improve this information, but does not have information on its ability to deter attacks—a key component of TSA’s goal. For example, in fiscal year 2015, TSA spent approximately $800 million on FAMS—a program with a focus on deterring attacks on aircraft—yet the agency has no information on its effectiveness in doing so. While we and OMB have acknowledged the difficulty in measuring deterrence, we have also suggested options to overcome these challenges. Further, in accordance with GPRA, as updated by the GPRA Modernization Act, agencies are to assess the effectiveness of their programs and leading practices established in GAO’s prior work stress the importance of agencies tracking progress toward goals. Developing a method to assess the deterrent effect of aviation security countermeasures would better position TSA to improve progress toward a key goal—deterring attacks on the U.S. aviation system. Since September 11, 2001, TSA has added countermeasures and refined security procedures in response to specific attacks or threats, but has not systematically evaluated its chosen combination of aviation security countermeasures as called for in DHS policy and TSA’s strategic plan. Specifically, TSA does not have any efforts underway to evaluate the potential cost and effectiveness tradeoffs across the full aviation security system because, according to a senior TSA official, the aviation security system is constantly evolving in response to emerging threats, and assessing a system in flux is challenging. However, it is using a model— known as RTSPA—that could serve as a useful starting place for a more comprehensive system-wide analysis. Developing and implementing a means to systematically evaluate the potential cost and effectiveness tradeoffs across aviation security countermeasures would better position TSA to achieve its stated goal of optimizing resource allocation and striking a balance of costs, effectiveness, and risk. In an environment of constrained resources and continuing threats to aviation security, producing such an analysis could assist TSA leadership in targeting its limited resources to achieve the greatest system-wide risk mitigation value for each dollar spent. We recognize that developing these analytical methods will be a difficult undertaking that may take years to achieve. Nonetheless, as TSA improves the reliability and extent of its countermeasure effectiveness data, the agency will also improve its ability to perform system-wide cost and effectiveness tradeoff analyses. In this high threat environment, it is essential that TSA determine how to allocate its finite resources to best position the agency to detect, disrupt and deter threats to aviation security. We are making the following two recommendations to TSA: 1. The Administrator of TSA should explore and pursue methods to assess the deterrent effect of TSA’s passenger aviation security countermeasures; such an effort should identify FAMS—a countermeasure with a focus on deterring threats—as a top priority to address. (Recommendation 1) 2. The Administrator of TSA should systematically evaluate the potential cost and effectiveness tradeoffs across countermeasures, as TSA improves the reliability and extent of its information on the effectiveness of aviation security countermeasures. (Recommendation 2) We provided a draft of this report to DHS for review and comment. The department’s letter is included in appendix III. In its comments, DHS generally concurred. DHS also provided technical comments, which we incorporated as appropriate. With regard to our first recommendation that TSA explore and pursue methods to assess the deterrent effect of its passenger aviation security countermeasures, DHS concurred, noting that this may require proxy or output measures and assumptions about potential adversary choices. DHS also concurred with our second recommendation that TSA systematically evaluate the potential cost and effectiveness tradeoffs across countermeasures. In its comments, DHS stated that TSA will continue efforts to improve both its analysis of information related to security effectiveness and its cost information, leading to better informed cost-benefit decisions for individual countermeasures. To address the intent of our recommendation, TSA will need to evaluate the costs and effectiveness of individual aviation security countermeasures and then use this information to systematically evaluate the potential cost and effectiveness tradeoffs across countermeasures. We will continue to monitor TSA’s efforts in addressing these recommendations. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7141 or GroverJ@gao.gov. GAO staff who made key contributions to this report are listed in appendix IV. As part of this review, we analyzed TSA’s fiscal year 2015 cost data for six selected aviation security countermeasures—passenger prescreening (Secure Flight), checkpoint screening, checked baggage screening, explosives detection canines, the Behavior Detection and Analysis (BDA) program, and the U.S. Federal Air Marshal Service (FAMS). We selected these six passenger aviation security countermeasures because they involved direct interaction with passengers, their belongings, or their personal information and are largely operated and funded by TSA. We determined that TSA can generally identify the fiscal year 2015 direct costs to TSA of the six passenger aviation security countermeasures that we reviewed, as shown in Table 2. TSA generally does not budget or track costs by countermeasure, but is able to identify most direct costs from their financial management system. For those passenger aviation security countermeasures that align with TSA’s budget categories, such as FAMS and passenger prescreening, TSA can run a single report to obtain the direct cost information. However, for those countermeasures that do not align with TSA’s budget categories, such as checkpoint screening and checked baggage screening, TSA is able to run multiple reports and use estimation based on their staffing model to estimate the direct costs. The Transportation Security Administration (TSA) collected fiscal year 2015 data on the effectiveness of four of the six countermeasures we selected—passenger prescreening, checkpoint screening, checked baggage screening, and explosives detection canines. These data show mixed results with some data indicating TSA countermeasure effectiveness and other data highlighting vulnerabilities. Below, we describe what TSA knows about the fiscal year 2015 effectiveness of these four countermeasures in detecting or disrupting threats to passenger aviation security. TSA uses its Secure Flight prescreening program to match passenger information against federal government watch lists and other information to assign each passenger to one of three risk categories—high risk, low risk, or unknown risk—that either corresponds to the level of screening they will experience at the checkpoint or may deny them an opportunity to board the aircraft. Since TSA began implementing Secure Flight in 2009, the passenger prescreening program has changed from a program that identifies passengers as high risk solely by matching them against federal government watch lists—for example, the No Fly List, comprised of individuals who should be precluded from boarding an aircraft, and the Selectee List, comprised of individuals who should receive enhanced screening at the passenger security checkpoint—to one that uses additional lists and risk-based criteria to assign passengers to a risk category. Specifically, Secure Flight now identifies passengers as high risk if they are matched to watch lists of known or suspected terrorists or other lists developed using certain high-risk criteria and as low risk if they are deemed eligible for expedited screening through TSA Pre✓™—a 2011 initiative to preapprove passengers for expedited screening—or through the application of low-risk rules. Secure Flight identifies passengers as unknown risk if they do not fall within the other two risk categories. To separate passengers into these risk categories, TSA utilizes lists in addition to the No Fly and Selectee Lists, and TSA has adapted the Secure Flight system to perform risk assessments, a system functionality that is distinct from both watch list matching and matching against lists of known travelers. At airport checkpoints, those passengers identified as high risk receive enhanced screening, passengers identified as low risk are eligible for expedited screening, and passengers identified as unknown risk generally receive standard screening. Passengers matched to the No Fly List or the Centers for Disease Control and Prevention’s Do Not Board List—a list which includes individuals who pose a significant health risk to other travelers and are not allowed to fly—are considered highest risk, and thus are not to receive boarding passes, and should not be allowed entry into the sterile area. Figure 3 illustrates this passenger prescreening process. TSA officials reported that the percentage of passengers vetted and the number of high-risk passengers identified by Secure Flight demonstrate the effectiveness of this passenger prescreening program. Specifically, TSA data indicate that in fiscal year 2015, Secure Flight vetted 100 percent of the over 816 million records submitted for passengers who flew into, out of, over, or within the United States, and on U.S.-flagged aircraft operating internationally point-to-point. Of these, TSA identified 15,383 (0.002 percent of passenger records vetted) as confirmed matches to watch lists. Specifically, in fiscal year 2015, TSA identified 9,639 passengers as expanded selectees, 5,019 passengers on the Selectee List, and 725 passengers on the No Fly List. In September 2014, we reported that TSA collects and regularly reviews data on the number of passengers identified by the Secure Flight system as potential matches to the No Fly, Selectee, and Expanded Selectee Lists. However, we found that TSA did not measure the extent to which Secure Flight was missing passengers who were actual matches to these lists—false negatives. We recommended that TSA establish such measures. In response, in August 2016, TSA contracted with a third party to conduct an independent assessment of the effectiveness of the Secure Flight automated vetting system including whether Secure Flight identifies the matches it should (i.e., how well the system minimizes false negatives). TSA officials expect this assessment to be complete at the end of calendar year 2017. TSA ensures that all individuals and accessible property are screened as part of its checkpoint screening process to deter and prevent the carriage of any unauthorized explosive, incendiary, weapon, or other prohibited items on board an aircraft or into the airport sterile area—in general, an area of an airport that provides passengers access to boarding aircraft and to which access is controlled through the screening of persons and property. Ordinarily, screening of accessible property at the screening checkpoint begins when an individual places accessible property on the X-ray conveyor belt or hands accessible property to a Transportation Security Officer (TSO). As shown in figure 4, TSOs then review images of the property running through the X-ray machine and look for signs of prohibited items. If a TSO identifies a potential prohibited item, the accessible property will be manually inspected and screened with an explosives trace detection (ETD) machine to identify any traces of explosives material. The passengers themselves are typically screened via a walk-through metal detector or an advanced imaging technology (AIT) machine—often referred to as a full-body scanner—and passengers generally have the option to request screening by a pat down if they do not wish to be screened by these technologies. Passengers will also be subject to a pat down if they are screened by a walk through metal detector or the AIT and the equipment alarms (in order to resolve the alarm). TSOs use several screening technologies in order to screen passengers and carry-on bags for prohibited items. For more information on the specific screening technologies deployed at the checkpoint in fiscal year 2015, see Table 3. In fiscal year 2015, TSA collected data on the effectiveness of checkpoint screening by testing TSOs, screening technology (e.g., the AIT and X- ray), and the checkpoint screening system as a whole (i.e., the combination of TSOs and technology). TSA collected fiscal year 2015 data on the effectiveness of its TSO workforce in detecting or disrupting threats to aviation security at the checkpoint in three ways: (1) annual proficiency review (APR) of TSOs, (2) threat-image projection (TIP) testing, and (3) Aviation Screening Assessment Program (ASAP) Advantage covert tests. Annual Proficiency Reviews. APRs evaluate TSOs’ skill in performing the various checkpoint and checked baggage screening functions and all TSOs must successfully complete the required APR component tests related to their job function on an annual basis as a condition of employment with TSA in their capacity as a screener. Components of the APR focused on checkpoint screening specifically included tests that evaluate TSOs’ ability to identify prohibited items on an X-ray machine and tests that evaluate whether TSOs can perform various practical skills such as pat downs, bag searches, and use of explosive trace detection technology. In calendar year 2015, TSA conducted roughly 150,000 APR component tests focused on checkpoint screening. Table 4 provides descriptions of these component tests. Threat Image Projection (TIP) Testing. TSA’s TIP testing system displays fictional threat items, such as guns or explosives, onto X-ray images of actual passengers’ carry-on bags to test TSOs’ ability to identify prohibited items in a live operational environment. TSOs operating the X-ray machine at the checkpoint are monitored to see if they positively identify the threat image and call for the bag to be searched. TSA officials report that they use TIP images on a daily basis to monitor TSOs’ ability to identify prohibited items, aid in keeping them focused and attentive, and keep their skills sharp in identifying items they do not routinely see. TSA requires airport personnel to conduct TIP tests and upload monthly results data into TSA’s national database. In September 2016, we reported that TSA’s TIP data from fiscal year 2009 through 2014 was incomplete as TSA could not provide TIP scores for every airport during this period. Specifically, during fiscal year 2013, nearly 14 percent of airports failed to report any TIP data. TSA officials also acknowledged that, in addition to the airports that did not report any TIP data for a year or more at a time, other airports may have reported only partial TIP results data during this same time frame. We recommended that TSA officials at individual airports submit complete TIP results to the TSA national database as required and, further, that TSA analyze national TIP data for trends that could inform training needs and improve future training and TSO performance assessments. TSA concurred with our recommendations and is taking steps to address them. Specifically, a new TIP Operations Directive was implemented in October 2016 to disseminate procedures for performance data collection and submission to improve TIP data. According to agency officials, the number of non-compliant airports decreased during fiscal year 2016. However, since these improvements occurred during fiscal years 2016 and 2017, fiscal year 2015 TIP data remained incomplete and unreliable for the purposes of assessing TSO’s effectiveness at identifying TIP images. Therefore, we do not present fiscal year 2015 TIP test results in this report. Aviation Screening Assessment Program (ASAP) Advantage Testing. To measure TSO performance nationwide in fiscal year 2015, TSA used standardized ASAP covert tests conducted by local TSA testers at each airport. ASAP tests focused on checkpoint screening were designed to assess the operational effectiveness of TSOs in identifying and preventing prohibited items, such as knives, guns, or simulated improvised explosive devices, from being taken through the checkpoint by testers. In fiscal year 2015, TSA conducted 5,213 ASAP covert tests on checkpoint screening at 170 airports. TSA hired a contractor in fiscal year 2015 to independently conduct ASAP standard scenario tests at 40 airports to assess the validity of TSA testing results at those airports. When comparing the contractor’s results to the local TSA testers’ results, TSA found moderate to significant differences in the two sets of test results for most of the 40 airports. According to TSA officials, TSOs generally performed more poorly in the ASAP tests conducted by the independent contractor personnel when compared to the ASAP testing conducted by the local TSA personnel—indicating that pass rates for tests conducted by local TSA personnel were likely showing a higher level of TSO performance than was actually the case. TSA officials reported that the differences in test results have led them to question the extent to which the ASAP tests accurately measure TSO performance. As a result, we do not present the fiscal year 2015 ASAP test results in this report. To address this validity issue, in April 2016, TSA officials reported that they began using both headquarters-based covert testing teams composed of headquarters-based TSA employees and field-based covert testing teams composed of local testers in both the checkpoint and checked baggage screening environments at all airports. Both headquarters-based and field-based teams conduct the same scenario- based covert tests that were previously conducted as part of ASAP testing. TSA officials stated that comparing the results of these separate tests has provided TSA with a way to gauge the validity of its test results. TSA officials reported that the effectiveness of checkpoint screening technology in fiscal year 2015 is best described by each type of machine’s detection standard—the specified rate of detection each technology is required to achieve in identifying explosives or prohibited items. Specific details about TSA’s detection standards are omitted because the information is classified. Prior to acquiring and deploying a potential new screening technology, TSA conducts testing to evaluate whether potential technologies can effectively achieve the detection standards required by TSA, among other things. Once technology is deployed in the airport environment, TSA policy requires at least daily calibration testing of each individual piece of technology deployed at the checkpoint—AIT machines, walk through metal detectors, ETDs, and X-ray machines, among others—to ensure the technology is functioning properly and able to achieve the required detection standards. For example, each day when the screening checkpoint opens, TSOs must ensure that AIT machines successfully complete an image quality verification, a calibration test, and an operational test process before they are cleared for screening operations. TSA policy requires that TSOs record the results of these tests in logbooks and, further, that any screening equipment that does not pass daily testing be immediately taken out of service. In fiscal year 2015, TSA collected data on the effectiveness of its checkpoint screening system as a whole—including both screening technology and TSO performance—through Red Team covert testing conducted by TSA’s Office of Inspection (OOI). In fiscal year 2015, TSA conducted numerous Red Team covert tests on checkpoint screening at a random sample of U.S. airports. During passenger checkpoint testing, each team of inspectors carries threat items, such as simulated explosive devices, through the passenger checkpoint. If the TSO identifies the threat item during screening, the inspector identifies him or herself to the TSO and the test is considered a pass. If the TSO does not identify the threat item, the inspector proceeds to the sterile area of the airport and the test is considered a failure. According to TSA, these tests are designed to approximate techniques that terrorists may use in order to identify vulnerabilities in the people, processes, and technologies that comprise the aviation security system. In addition to OOI’s Red Team testing, in fiscal year 2015 the Department of Homeland Security (DHS) Office of Inspector General (OIG) also conducted covert tests of certain TSA checkpoint operations at 8 U.S. airports that use AIT machines to screen passengers. According to the DHS OIG, the objective of the tests was to determine the effectiveness of TSA’s AIT, automated target recognition software (which displays a box around anomalies on a generic outline of a body), and checkpoint screener performance in identifying and resolving anomalies and potential security threats at airport checkpoints. The results of both the OOI Red Team and the DHS OIG’s covert tests are omitted because the information is classified. TSA inspects passengers’ checked baggage to deter, detect, and prevent the transport of any unauthorized explosive, incendiary, or weapon onboard an aircraft. Checked baggage screening is accomplished through the use of explosives detection systems (EDS)—which use X- rays with computed tomography technology to automatically measure the physical characteristics of objects in baggage and automatically trigger an alarm when objects that exhibit the physical characteristics of explosives are detected—and explosives trace detection (ETD) machines, in which TSOs swab baggage and use chemical analysis to manually detect traces of explosive materials’ vapors and residue. Generally, a checked baggage screening system at airports with EDS includes a three-level screening process. First, EDS machines perform automated screening. If the EDS machine determines that a checked bag requires additional screening, it sends an alarm to a TSO who performs a secondary inspection known as On-Screen Resolution by reviewing an image of the contents of the bag on a computer monitor. If the TSO cannot resolve the alarm using on-screen resolution tools and determines a physical bag search is necessary, the bag goes to the Checked Baggage Resolution Area where a TSO performs a manual inspection of the bag assisted by an ETD machine. At the end of fiscal year 2015, TSA had 1,717 EDS machines deployed at 263 airports. At airports without EDS, which are typically smaller airports, ETD machines are the primary method for manually screening checked baggage. At the end of fiscal year 2015, TSA had 2,291 ETD machines deployed at all 437 commercial (i.e., TSA-regulated) airports for primary or secondary screening of checked baggage. TSA officials estimate that 25 percent of total TSO time is spent on checked baggage screening, and in fiscal year 2015, this would be the full-time equivalent of approximately 11,000 of TSA’s roughly 45,000 TSOs conducting checked baggage screening. In fiscal year 2015, TSA collected data on the effectiveness of its checked baggage screening by testing screening personnel (i.e., TSOs), screening technology (EDS and ETD machines), and the checked baggage screening system as a whole (i.e., the combination of TSOs and technology). In fiscal year 2015, TSA collected data on the effectiveness of its TSO workforce in detecting or disrupting threats to aviation security in the checked baggage environment through its APR evaluations and ASAP Advantage covert tests. Annual Proficiency Reviews (APR). As discussed above, APRs evaluate TSOs’ skill in performing the various checkpoint and checked baggage screening functions. Components of the APR focused on checked baggage screening include tests that evaluate TSOs’ ability to resolve EDS machine alarms using the appropriate tools and practical skills such as bag searches and the use of ETD technology. In calendar year 2015, TSA conducted nearly 35,000 APR component tests specific to the checked baggage screening environment. Table 5 provides descriptions of these component tests. Aviation Screening Assessment Program (ASAP) Advantage. In fiscal year 2015, TSA used standardized ASAP covert tests conducted by local TSA testers at each airport to measure TSO performance in both the checkpoint and checked baggage environments. Tests focused on checked baggage screening were designed to assess the operational effectiveness of TSOs in identifying and preventing a threat object concealed in a checked bag from being cleared for loading onto a passenger aircraft. In fiscal year 2015, TSA conducted 1,859 ASAP covert tests on checked baggage screening at 225 airports. TSA began deploying headquarters-based covert testing teams in fiscal year 2016 to provide a means to validate the results of covert tests conducted by local TSA testers for both checkpoint and checked baggage screening. However, unlike in the checkpoint environment, the contractor did not perform ASAP covert testing on checked baggage screening during fiscal year 2015. When we compared fiscal year 2016 headquarters-based and field-based pass rates for covert testing of checked baggage screening, we found discrepancies that indicate covert tests conducted by local field-based TSA testers on checked baggage may not be reliable in accurately portraying TSO performance. Additionally, TSA officials stated that they cannot be certain these data are reliable. As a result, we do not present ASAP Advantage data in this report. As with checkpoint screening technology discussed above, TSA officials reported that in fiscal year 2015, technology deployed at airports for checked baggage screening was calibrated and tested daily to ensure that it was operating as intended. According to TSA officials, these daily tests help to ensure that its screening technologies are meeting the detection standards they were designed to achieve. TSA officials reported that any equipment found not to meet required detection standards was immediately taken out of service. As described above, OOI also conducted Red Team covert testing on checked baggage screening at airports with EDS machines in fiscal year 2015. Specific details about TSA’s detection standards and the results of OOI’s covert tests are omitted because the information is classified. Through its National Explosives Detection Canine Team Program, TSA trains, deploys, and certifies explosives detection canine teams in order to deter and detect the introduction of explosive devices into U.S. transportation systems. Each canine team consists of a handler— generally either a state or local law enforcement officer (LEO) or TSA employee—paired with a canine trained in explosives detection. As of September 2015, TSA had 692 canine teams deployed to 88 airports across the United States. These teams were composed of four types of canine teams trained to operate in the airport environment: TSA explosives detection canine (EDC) and Passenger Screening Canine (PSC) teams as well as LEO aviation and multimodal teams. Table 6 shows the number of canine teams by type deployed in the airport environment as of September 2015 and describes their roles and responsibilities. In fiscal year 2015, TSA collected data on the effectiveness of its canine teams in detecting or disrupting threats to aviation security through its annual certification evaluation process and short notice assessments (SNA)—covert tests conducted to assess canine teams’ operational effectiveness in detecting and responding to possible explosives. Annual Certification Evaluations. TSA’s annual evaluations assess whether canine teams meet the explosives detection certification standards established by the program. Following initial training, new canine teams must demonstrate certain critical skills in order to be certified to work in their home operating environment. After initial certification, all TSA canine teams are evaluated on an annual basis to maintain certification. Canine teams that fail their annual evaluation are decertified and limited to training and operating as a visible deterrent until they successfully complete the annual evaluation and are recertified to conduct screening. To achieve EDC certification, canine teams must demonstrate their ability to detect hidden explosive training aids across a specified number of areas, a certain percent of the time. After passing this conventional evaluation, PSC teams undergo further testing in different locations within the sterile area of an airport. To achieve PSC certification, canine teams must successfully identify an explosives-carrying target/decoy in a specified number of search areas. In fiscal year 2015, TSA conducted 673 EDC annual certification evaluations and 116 PSC evaluations. The fiscal year 2015 first-time pass rates for EDC and PSC canine teams has been designated as sensitive security information and thus cannot be included in a public report. Short Notice Assessments. TSA conducts covert testing of canine teams to measure their effectiveness in detecting and responding to explosives odor during normal operations. These covert tests, known as SNAs, are conducted using one of four scenarios chosen to match a canine team’s primary area of operations—an unattended bag, unattended vehicle, cargo screening, and passenger screening. Field Canine Coordinators—TSA officials that administer SNAs—are responsible for debriefing participants after the assessment, determining if corrective actions are necessary, and officially documenting outcomes. We assessed the reliability of SNA results in fiscal year 2015 and determined that the data were not reliable for the purpose of reporting overall pass rates. Specifically, we found duplicate entries and errors in the data. In addition, we found that fiscal year 2015 data on pass rates may be incomplete since the results of some SNAs may not have been subsequently recorded in TSA’s system. Further, TSA’s process of manually recording SNA results in fiscal year 2015 lacked procedures to ensure that data entered into TSA’s system were accurate and complete. To address these data limitations, canine program officials stated that a new process was implemented in October 2016 to incorporate SNA results directly into the Canine Website System—a central electronic management database for various canine program data. According to these officials, this new process will better ensure that SNA data are complete, accurate, and reliable for use by program officials and TSA leadership in evaluating the effectiveness of the program. In addition to the contact named above, Maria Strudwick (Assistant Director), Chuck Bausell, Claudia Becker, Bryan Bourgault, Bruce Crise, Dominick Dale, Brianna Dieter, Michele Fejfar, Eric Hauswirth, Susan Hsu, James Kernen, and Tom Lombardi made key contributions to this report.", "summary": "Since the attacks of September 11, 2001, TSA has spent billions of dollars on aviation security programs. However, recent attacks involving aircraft and airports in other countries underscore the continued threat to aviation and the need for an effective aviation security program. GAO was asked to review TSA's passenger aviation security countermeasures. This report examines the extent to which TSA has (1) information on the effectiveness of selected passenger aviation security countermeasures and (2) systematically analyzed the cost and effectiveness tradeoffs among countermeasures. GAO reviewed TSA documentation on the effectiveness of six passenger aviation security countermeasures in fiscal year 2015—the most recent year for which data were available. GAO selected these countermeasures because they involve direct interaction with passengers, their belongings, or their personal information, and are largely operated and funded by TSA. GAO also reviewed TSA documents and interviewed TSA officials regarding efforts to systematically analyze cost and effectiveness tradeoffs across countermeasures. The Transportation Security Administration (TSA) has data on the effectiveness of some, but not all of its passenger aviation security countermeasures. Specifically, TSA has data on passenger prescreening, checkpoint and checked baggage screening, and explosives detection canines. Further, TSA is taking steps to improve the quality of this information. However, it does not have effectiveness data for its Behavior Detection and Analysis (BDA) program and the U.S. Federal Air Marshal Service (FAMS). For BDA—a program to identify potential threats by observing passengers for behaviors indicative of stress, fear, or deception—in July 2017, GAO reported that (1) TSA does not have valid evidence supporting most of its behavioral indicators, and (2) TSA should continue to limit future funding for its behavior detection activities until it can provide such evidence. For FAMS—a program that deploys armed law enforcement officers on certain flights at an annual cost of about $800 million for fiscal year 2015—officials reported that one of the primary security contributions is to deter attacks. However, TSA does not have information on its effectiveness in doing so, nor does it have data on the deterrent effect resulting from any of its other aviation security countermeasures. While officials stated that deterrence is difficult to measure, the Government Performance and Results Act of 1993, as updated, provides that agencies are to assess the effectiveness of their programs. Further, the Office of Management and Budget and GAO have suggested approaches for measuring deterrence. Developing such methods for TSA countermeasures, especially for an effort such as FAMS in which the primary goal is deterrence, would enable TSA to determine whether its substantial investment is yielding results. TSA has a tool to compare the security effectiveness of some aviation security countermeasures, but has no efforts underway to systematically evaluate potential cost and effectiveness tradeoffs across all countermeasures. In 2014, the agency developed a tool to analyze the security effectiveness of alternate combinations of some countermeasures for the purpose of informing acquisition and deployment decisions, but does not have a tool to assess such tradeoffs across the entire system of countermeasures. TSA officials explained that the aviation security system is constantly evolving, and assessing a system in flux is challenging. However, DHS policy and TSA's strategic plan call for the systematic evaluation of costs and effectiveness of TSA's chosen mix of aviation security countermeasures. Without such an analysis, TSA is not well positioned to strike an appropriate balance of costs, effectiveness, and risk. This is a public version of a classified report that GAO issued in August 2017. Information that TSA deemed classified or sensitive security information, such as the results of TSA's covert testing and details about TSA's screening procedures, have been omitted. GAO recommends that TSA (1) explore and pursue methods to assess the deterrent effect of TSA's passenger aviation security countermeasures, with FAMS as a top priority to address, and (2) systematically evaluate the potential cost and effectiveness tradeoffs across aviation security countermeasures. DHS concurred with these recommendations.", "document_type": "gao"}
{"report": "Geographic shifts in the veterans’ population, changes in health care delivery, an aging infrastructure, and limited stakeholder involvement affect VA’s efforts to align its services and real property portfolio to meet the needs of veterans. For example, there has been a shift over time from inpatient to outpatient care. This shift will likely result in underutilized space once used for inpatient care. In such instances, it is often difficult and costly for VA to modernize, renovate, and retrofit these older facilities. In June 2017, VA reported that its facility inventory includes 430 vacant or mostly vacant buildings that are, on average, more than 60 years old, and an additional 784 buildings that are underutilized. The historic status of some VA facilities adds to the complexity of converting or disposing of them. In 2014, VA reported holding 2,957 historic buildings, structures, or land parcels—the third most in the federal government after DOD and the Department of the Interior. In some instances, it may be more expensive to renovate than to demolish and rebuild outdated facilities. In other cases, however, there may not be an option to demolish if these buildings are designated as historic. For example, planning officials at four medical facilities in our review told us that state historic preservation efforts prevented the VA from demolishing vacant buildings, even though these buildings require upkeep costs and pose potential safety hazards. (See fig. 1.) VA has also encountered challenges to its facility alignment efforts, in part, because it has not consistently followed best practices for effectively engaging stakeholders. VA may align its facilities to meet veterans’ needs by expanding or consolidating facilities or services. Stakeholders— including veterans; local, state, and federal officials; Veterans Service Organizations; historic preservation groups; VA staff; and Congress— often view changes as working against their interests or those of their constituents, especially when services are eliminated or shifted from one location to another. We found that VA has not consistently engaged with stakeholders, and, in some cases, this inconsistency resulted in adversarial relationships that reduced VA’s ability to better align facilities with the needs of the veteran population. In our April 2017 report, we recommended that VA improve stakeholder communication guidance and evaluate its efforts. VA agreed with our recommendations and outlined a plan to implement them. Two of the planning processes VA uses to align its facilities—VA’s Strategic Capital Investment Planning (SCIP) and the VA Integrated Planning (VAIP)—have limitations. VA relies on the SCIP process to plan and prioritize capital projects system-wide, but SCIP’s limitations—including subjective narratives, long timeframes, and restricted access to information—undermine VA’s ability to achieve its goals. For example, the time between when planning officials at VA medical facilities begin developing the SCIP narratives and when they are notified that a project is funded has taken between 17 and 23 months over the past 6 fiscal-year’s SCIP submissions. (See fig. 2.) As such, VA routinely asks its facility planners to submit their next year’s planned project narratives before knowing if their project submissions from the previous year have been funded. An official from the office that oversees SCIP told us that the timing of the budgeting process, which is outside VA’s control, contributes to these delays. While these aspects are outside of VA’s control, VA has chosen to wait about 6 to 10 months to report the results of the SCIP scoring process to the medical facilities. This situation makes it difficult for local officials to understand the likelihood that their projects will receive funding. A VA official said that for future SCIP cycles, VA plans to release the scoring results for minor construction and non-recurring maintenance projects to local officials earlier in the process. At the time of our review, however, the official did not have a time frame for when VA would do this. Although VA acknowledges many of these limitations, it has taken little action in response. Federal standards for internal control state that agencies should evaluate and determine appropriate corrective action for identified limitations on a timely basis. If VA does not address known limitations with the SCIP process, it will not have reasonable assurance that SCIP can be used to accurately identify the capital necessary to address VA’s service and infrastructure gaps. In our April 2017 report, we recommended that VA address identified limitations to the SCIP process, including limitations to scoring and approval, and access to information. VA concurred with the recommendation to the extent the limitations were within its control. While VA has taken some actions, the recommendation remains open. The VAIP process produces a market-level health services delivery plan for each Veterans Integrated Service Network (VISN) and a facility master plan for each medical facility. VA has estimated the entire process to create plans for VISNs and facilities to cost $108 million when fully complete. However, the VAIP process’s facility master plans assume all future growth in services will be provided directly through VA facilities. This assumption is not accurate given that (1) VA obligated about $10.1 billion to purchase care from non-VA providers in fiscal year 2015 and (2) VA can provide care directly through its medical facilities or purchase health care services from non-VA providers through both the Non-VA Medical Care Program (referred to as “care in the community” by VA) and clinical contracts. The Office of Management and Budget’s acquisition guidance notes that investments in major capital assets should be made only if no alternative private sector source can support the function at a lower cost. In our April 2017 report, we recommended that VA assess the value of the VAIP’s facility master plans as a facility-planning tool, and based on conclusions from the review, to either (1) discontinue the development of VAIP’s facility master plans or (2) address the limitations of VAIP’s facility master plans. VA concurred with the recommendation, and in August 2017, VA noted that it has discontinued its VAIP facility master plans while VA pursues a national realignment strategy, after which it plans to adjust its future facility master plans to incorporate pertinent information, including care in the community realignment opportunities. As Congress evaluates proposed legislation for disposing of or realigning VA property, it may wish to consider seven elements DOD relied on as it developed its recommendations for the BRAC Commission. Establish goals for the process. The Secretary of Defense emphasized the importance of transforming the military to make it more efficient as part of the 2005 BRAC round. Other goals for the 2005 BRAC process included fostering jointness among the four military services, reducing excess infrastructure, and producing savings. Prior rounds focused more on reducing excess infrastructure and producing savings. Develop criteria for evaluating closures and realignments. DOD proposed selection criteria, which were made available for public comment via the Federal Register. Ultimately, Congress enacted the final BRAC selection criteria in law with minor modification and specified that four selection criteria, known as the “military value criteria,” were to be given priority in developing closure and realignment recommendations. Further, Congress required that the Secretary of Defense develop and submit to Congress a force structure plan that described the estimated size of major military units needed to address probable threats to national security for the 20- year period beginning in 2005, along with a comprehensive inventory of global military installations. In authorizing the 2005 BRAC round, Congress specified that the Secretary of Defense publish a list of recommendations for the closure and realignment of military installations inside the United States based on the statutorily-required 20-year force structure plan and infrastructure inventory, and on the final selection criteria. Estimate costs and savings to implement closure and realignment recommendations. To address the cost and savings criteria, DOD developed and used the Cost of Base Realignment Actions (COBRA) model, a quantitative tool that DOD has used since the 1988 BRAC round to provide consistency in potential cost, savings, and return-on-investment estimates for closure and realignment options. We found the COBRA model to be a generally reasonable estimator for comparing potential costs and savings among alternatives. (See fig. 3.) As with any model, the quality of the output from COBRA was a direct function of the data DOD included in the model. Also, DOD’s COBRA model relied to a large extent on standard factors and averages and did not represent budget quality estimates that were developed once BRAC decisions were made and detailed implementation plans were developed. Nonetheless, the financial information provided important input into the selection process as decision makers weighed the financial implications—along with military value criteria and other considerations—in arriving at final decisions about the suitability of various closure and realignment options. Establish an organizational structure. The Office of the Secretary of Defense emphasized the need for joint cross-service groups to analyze common business-oriented functions. For the 2005 BRAC round, as for the 1993 and 1995 rounds, these joint cross-service groups performed analyses and developed closure and realignment options in addition to those developed by the military departments. Our evaluation of DOD’s 1995 BRAC round found that few cross- service recommendations were made, in part because of the lack of high-level leadership to encourage consolidations across the departments’ functions. In the 1995 BRAC round, the joint cross- service groups submitted options through the military services for approval, but few were approved. The number of approved recommendations that the joint cross-service groups developed significantly increased in the 2005 BRAC round. This increase was, in part, because high-level leadership ensured that the options were approved not by the military departments but rather by a DOD senior- level group, known as the Infrastructure Steering Group. As shown in figure 4, the Infrastructure Steering Group was placed organizationally on par with the military departments. Establish a common analytical framework. To ensure that the selection criteria were consistently applied, the Office of the Secretary of Defense, the military departments, and the seven joint cross- service groups first performed a capacity analysis of facilities and functions. Before developing the candidate recommendations, DOD’s capacity analysis relied on data calls to hundreds of locations to obtain certified data to assess such factors as maximum potential capacity, current capacity, current usage, and excess capacity. Then, the military departments and joint cross-service groups performed a military value analysis for the facilities and functions based on primary military value criteria, which included a facility’s or function’s current and future mission capabilities, physical condition, ability to accommodate future needs, and cost of operations. Develop BRAC oversight mechanisms to improve accountability for implementation. In the 2005 BRAC round, the Office of the Secretary of Defense for the first time required the military departments to develop business plans to better inform the Office of the Secretary of Defense of the status of implementation and financial details for each of the BRAC 2005 recommendations. These business plans included: (1) information such as a listing of all actions needed to implement each recommendation; (2) schedules for personnel relocations between installations; and (3) updated cost and savings estimates by DOD based on current information. This approach permitted senior-level intervention if warranted to ensure completion of the BRAC recommendations by the statutory completion date. Involve the audit community to better ensure data accuracy. The DOD Inspector General and military department audit agencies played key roles in identifying data limitations, pointing out needed corrections, and improving the accuracy of the data used in the process. In their oversight roles, the audit organizations, which had access to relevant information and officials as the process evolved, helped to improve the accuracy of the data used in the BRAC process and thus strengthened the quality and integrity of the data used to develop closure and realignment recommendations. For example, the auditors worked to ensure certified information was used for BRAC analysis and reviewed other facets of the process, including the various internal control plans, the COBRA model, and other modeling and analytical tools that were used in the development of recommendations. We identified two key challenges that affected DOD’s implementation of BRAC 2005 and would need to be addressed for VA to adopt a BRAC- like process for its asset and infrastructure review. Some transformational-type BRAC recommendations required sustained senior leadership attention and a high level of coordination among many stakeholders to complete by the required date. Implementation of some transformational BRAC recommendations—especially those where a multitude of organizations had roles to play to ensure the achievement of the goals of the recommendation—illustrated the need to involve key stakeholders and effective planning. For example, the Defense Logistics Agency committed sustained high-level leadership and included relevant stakeholders to address implementation challenges faced with the potential for disruptions to depot operations during implementation of the BRAC consolidation recommendation. To implement the BRAC recommendations, the agency had to develop strategic agreements with the services that ensured that all stakeholders agreed on its plans for implementation, and had to address certain human capital and information technology challenges. Large number of actions and interdependent recommendations complicated the implementation process. The large number and variety of BRAC actions presented challenges during implementation. The BRAC 2005 round had more individual actions (813) than the four prior rounds combined (387). The executive staff of the Commission told us that it was more difficult to assess the costs and the amount of time for the savings to offset the implementation costs since many of the recommendations contained multiple interdependent actions, all of which needed to be reviewed. Specifically, many of the BRAC 2005 recommendations were interdependent and had to be completed in a sequential fashion within the statutory implementation period. In cases where interdependent recommendations required multiple relocations of large numbers of personnel, delays in completing one BRAC recommendation had a cascading effect on the implementation of other recommendations. Specifically, DOD had to synchronize the relocations of over 123,000 people with about $24.7 billion in new construction or renovation. Commission officials told us that in prior BRAC rounds each base was handled by a single integrated recommendation. However, in BRAC 2005, many installations were simultaneously affected by multiple interconnected BRAC recommendations. Given the complexity of interdependent recommendations, the Office of the Secretary of Defense required the military departments and defense agencies to provide periodic updates on implementation challenges and progress. Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes our prepared statement. We are happy to answer any questions related to our work on VA’s efforts to align its medical facilities and services or on DOD’s BRAC process. If you or your staff members have any questions concerning this testimony, please contact David Wise at (202) 512-2834 or wised@gao.gov regarding federal real property, or Brian Lepore at (202) 512-4523 or leporeb@gao.gov regarding the BRAC process. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Keith Cunningham, Assistant Director; Gina Hoffman, Assistant Director; Tracy Barnes; Jeff Mayhew; Kevin Newak; Richard Powelson; Malika Rice; Jodie Sandel; Eric Schwab; Amelia M. Weathers; and Crystal Wesco. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "VA operates one of the largest health care systems in the United States, utilizing more than 6,000 federally owned and 1,500 leased buildings. DOD has repeatedly applied the BRAC process to reduce the amount of unneeded property that it owns and leases and to save billions of dollars that could be applied to higher priority defense needs. This statement is based on GAO's April 2017 report related to VA facility alignment ( GAO-17-349 ) and numerous GAO reports related to the BRAC process as summarized in a June 2011 testimony ( GAO-11-704T ) and a March 2012 testimony ( GAO-12-513T ). This statement addresses (1) the factors that affect VA's facility alignment and the extent to which VA's capital-planning process facilitates the alignment of facilities with the veterans' population, and (2) the key elements and challenges affecting DOD and the Commission in BRAC 2005. Detailed information on our scope and methodologies for this work can be found in these published products, cited throughout this testimony. Geographic shifts in the veterans' population, changes in health care delivery, aging infrastructure, and limited stakeholder involvement affect the Department of Veterans Affairs' (VA) efforts to align its services and real property portfolio to meet the needs of veterans. For example, a shift over time from inpatient to outpatient care will likely result in underutilized space once used for inpatient care. Further, the historic status of some VA facilities adds to the complexity of converting or disposing of them. In such instances, it is often difficult and costly for VA to modernize, renovate, and retrofit these older facilities. GAO reported that two of the planning processes VA uses to align its facilities—VA's Strategic Capital Investment Planning (SCIP) and the VA Integrated Planning (VAIP)—have limitations that undermine VA's efforts to achieve its goals. Specifically: VA relies on the SCIP process to plan and prioritize capital projects, but VA routinely asks its facility planners to submit their next year's planned project narratives before knowing if their previous submissions have been funded. The overlapping budget cycle, which is outside of VA's control, combined with other SCIP limitations—including subjective narratives, long time frames, and restricted access to information—make it difficult for VA to rely on SCIP to accurately identify the capital necessary to address its service and infrastructure gaps. VA concurred that it needs to address SCIP limitations that are within its control, as GAO recommended; VA has made some progress in implementing the recommendation has made some progress in implementing the recommendation.\\ The VAIP process is estimated to cost $108 million and to produce market-level service delivery plans and facility master plans. However, the VAIP master plans incorrectly assume that all future growth in services will be provided directly through VA facilities without considering alternatives, such as purchasing care from the community. GAO recommended that VA consider discontinuing the VAIP facility master plans pending an assessment of their value as a facility-planning tool. VA agreed with the recommendation and is implementing it while pursuing a national realignment strategy.. Key elements of the Department of Defense's (DOD) 2005 Base Realignment and Closure (BRAC) process could benefit VA's asset and infrastructure review. The key elements included: (1) establishing goals for the process, (2) developing criteria for evaluating closures and realignments, and (3) establishing an organizational structure to develop closure and realignment options. GAO identified key challenges that affected DOD's implementation of BRAC 2005 and the results achieved; these challenges would need to be addressed if VA is to successfully apply the process. These challenges included: (1) large, complex recommendations required sustained senior leadership's attention and a high level of coordination among many stakeholders, and (2) the large number of actions that depend on each other for successful implementation. In the April 2017 report, GAO made recommendations related to capital planning and stakeholder involvement. VA concurred with the recommendations to the extent that they were within its control and has started making improvements.", "document_type": "gao"}
{"report": "The Freedom of Information Act establishes a legal right of access to government information on the basis of the principles of openness and accountability in government. Before FOIA’s enactment in 1966, an individual seeking access to federal records faced the burden of establishing a “need to know” before being granted the right to examine a federal record. FOIA established a “right to know” standard, under which an organization or person could receive access to information held by a federal agency without demonstrating a need or reason. The “right to know” standard shifted the burden of proof from the individual to a government agency and required the agency to provide proper justification when denying a request for access to a record. Any person, defined broadly to include attorneys filing on behalf of an individual, corporations, or organizations, can file a FOIA request. For example, an attorney can request labor-related workers’ compensation files on behalf of his or her client, and a commercial requester, such as a data broker who files a request on behalf of another person, may request a copy of a government contract. In response, an agency is required to provide the relevant record(s) in any readily producible form or format specified by the requester, unless the record falls within a permitted exemption that provides limitations on the disclosure of information. Appendix II includes a table describing the nine specific exemptions that can be applied to withhold information that, for example, is classified, confidential commercial, privileged, privacy, or falls into one or several law enforcement categories. Various amendments have been enacted and guidance issued to help improve agencies’ processing of FOIA requests, including: The Electronic Freedom of Information Act Amendments of 1996 (e- FOIA amendments) strengthened the requirement that federal agencies respond to a request in a timely manner and reduce their backlogged requests. The amendments, among other things, made a number of procedural changes, including allowing a requester to limit the scope of a request so that it could be processed more quickly and requiring agencies to determine within 20 working days whether a request would be fulfilled. This was an increase from the previously established time frame of 10 business days. The amendments also authorized agencies to multi-track requests— that is, to process simple and complex requests concurrently on separate tracks to facilitate responding to a relatively simple request more quickly. In addition, the amendment encouraged online, public access to government information by requiring agencies to make specific types of records available in electronic form. Executive Order 13392, issued by the President in 2005, directed each agency to designate a senior official as its chief FOIA officer. This official was to be responsible for ensuring agency-wide compliance with the act by monitoring implementation throughout the agency and recommending changes in policies, practices, staffing, and funding, as needed. The chief FOIA officer was directed to review and report on the agency’s performance in implementing FOIA to agency heads and to Justice in such times and formats established by the Attorney General. (These are referred to as chief FOIA officer reports.) The OPEN Government Act, which was enacted in 2007, made the 2005 executive order’s requirement for agencies to have a chief FOIA officer a statutory requirement. It also required agencies to include additional statistics in their annual FOIA reports, such as more details on processing times and the agency’s 10 oldest pending requests, appeals, and consultations. The FOIA Improvement Act of 2016 addressed procedural issues, including requiring that agencies: (1) make records available in an electronic format if they have been requested three or more times; (2) notify requesters that they have a maximum of 90 days to file an administrative appeal, and (3) provide dispute resolution services at various times throughout the FOIA process. This act also created more duties for chief FOIA officers, including requiring them to offer training to agency staff regarding FOIA responsibilities. The act also revised and added new obligations for OGIS, and created the Chief FOIA Officers Council to assist in compliance and efficiency. Further, the act required OMB, in consultation with Justice, to create a consolidated online FOIA request portal that allows the public to submit a request to any agency through a single website. In responding to requests, FOIA authorizes agencies to utilize one of nine exemptions to withhold portions of records, or the entire record. Agencies may use an exemption when it has been determined that disclosure of the requested information would harm an interest related to certain protected areas. These nine exemptions (described in appendix II) can be applied by agencies to withhold various types of information, such as information concerning foreign relations, trade secrets, and matters of personal privacy. One such exemption, the statutory (b)(3) exemption, specifically authorizes withholding information under FOIA on the basis of a law which: requires that matters be withheld from the public in such a manner as to leave no discretion on the issue; or establishes particular criteria for withholding or refers to particular types of matters to be withheld; and if enacted after October 28, 2009, specifically refers to section 552(b)(3) of title 5, United States Code. To account for agencies use of the statutory (b)(3) exemptions, FOIA requires each agency to submit, in its annual report to Justice, a complete listing of all statutes that the agency relied on to withhold information under exemption (b)(3). The act also requires that the agency describe for each statute identified in its report (1) the number of occasions on which each statute was relied upon; (2) a description of whether a court has upheld the decision of the agency to withhold information under each such statute; and (3) a concise description of any information withheld. Further, to provide an overall summary of the statutory (b)(3) exemptions used by agencies in a fiscal year, Justice produces consolidated annual reports that list the statutes used by agencies in conjunction with (b)(3). As previously noted, agencies are generally required by the e-FOIA amendments of 1996 to respond to a FOIA request within 20 working days. Once received, the request is to be processed through multiple phases, which include assigning a tracking number, searching for responsive records, and releasing the records response to the requester. Also, FOIA allows a requester to challenge an agency’s final decision on a request through an administrative appeal or a lawsuit. Agencies generally have 20 working days to respond to an administrative appeal. Figure 1 provides a simplified overview of the FOIA request and appeals process. In a typical agency, as indicated, during the intake phase, a request is logged into the agency’s FOIA tracking system, and a tracking number is assigned. The request is then reviewed by FOIA staff to determine its scope and level of complexity. The agency then sends a letter or email to the requester acknowledging receipt of the request, with a unique tracking number that the requester can use to check the status of the request. Next, FOIA staff (noncustodian) begin the search to retrieve the responsive records. They conduct a search if the agency’s records are centralized or route the request to the appropriate program office(s), or do both, as warranted. This step may include requesting that the custodian (owner) of the record search and review paper and electronic records from multiple locations and program offices. Agency staff then process the responsive records, which includes determining whether a portion or all of any record should be withheld based on FOIA’s exemptions. If a portion or all of any record is the responsibility of another agency, FOIA staff may consult with the other agency or may send (“refer”) the document(s) to that other agency for processing. After processing and redaction, a request is reviewed for errors and to ensure quality. The documents are then released to the requester, either electronically or by regular mail. Responsibility for the oversight of FOIA implementation is spread across several federal offices and other entities. These include Justice’s OIP, NARA’s OGIS, and the Chief FOIA Officers Council. These oversight offices and the council have taken steps to assist agencies to address the FOIA provisions. Justice’s OIP is responsible for encouraging agencies’ compliance with FOIA and overseeing their implementation of the act. In this regard, the office, among other things, provides guidance, compiles information on FOIA compliance, provides FOIA training, and prepares annual summary reports on agencies’ FOIA processing and litigation activities. The office also offers FOIA counseling services to government staff and the public. Issuing guidance. OIP has developed guidance, available on its website, to assist federal agencies by instructing them in how to ensure timely determinations on requests, expedite the processing of requests, and reduce backlogs. The guidance also informs agencies on what should be contained in their annual FOIA reports to Justice’s Attorney General. The office also has documented ways for federal agencies to address backlog requests. In March 2009 the Attorney General issued guidance and related policies to encourage agencies to reduce their backlogs of FOIA requests. In addition, in December 2009, OMB issued a memorandum on the OPEN Government Act, which called for a reduction in backlogs and the publishing of plans to reduce backlogs. Further, in August 2014 and December 2015, OIP held best practices workshops and issued guidance to agencies on reducing FOIA backlogs and improving timeliness of agencies’ responses to FOIA requests. The OIP guidance instructed agencies to obtain leadership support, routinely review FOIA processing metrics, and set up staff training on FOIA. Overseeing agencies’ compliance. OIP collects information on compliance with the act by reviewing agencies’ annual FOIA reports and chief FOIA officer reports. These reports describe the number of FOIA requests received and processed in a fiscal year, as well as the total costs associated with processing and litigating requests. Providing training. OIP provides a full suite of FOIA training for agency FOIA professionals. This training gives instruction on all aspects of FOIA and is designed for all levels of professionals. For example, the office offers an annual training class that provides a basic overview of the act, as well as hands-on courses about the procedural requirements involved in processing a request from start to finish. In addition, it offers a seminar outlining successful litigation strategies for attorneys who handle FOIA cases. OIP also provides agencies customized training upon request. Preparing annual reports. Every year, OIP prepares three major reports for the public, the President, and/or Congress. The first report, Summary of Annual FOIA Reports, is a summary of the information contained in the annual FOIA reports that are prepared by each of the federal agencies subject to the FOIA. The report also provide a statistical breakdown of the government’s overall FOIA administration. The second report, Summary of Agency Chief FOIA Officer Reports, is a summary of the annual chief FOIA officer reports and an assessment of agencies’ progress in administering FOIA. This report summarizes government-wide efforts to improve FOIA in five key areas of FOIA administration, and it individually scores each agency on several milestones tied to these efforts. The third report, the Justice FOIA Litigation and Compliance Report, which is directed to Congress and the President, describes Justice’s efforts to oversee and encourage government-wide compliance with FOIA, and includes a list of, and information about, FOIA matters in litigation. NARA’s OGIS was established by the OPEN Government Act of 2007 as the federal FOIA ombudsman tasked with resolving federal FOIA disputes through mediation as a nonexclusive alternative to litigation. OGIS’s responsibilities include reviewing agencies’ policies, procedures, and compliance with the statute; identifying methods to improve compliance; and educating its stakeholders about the FOIA process. The 2016 FOIA amendments required agencies to update response letters to FOIA requesters to include information concerning the roles of OGIS and agency’s FOIA public liaisons. As such, OGIS and Justice worked together to develop a response letter template that includes the required language for agency letters. In addition, OGIS, charged with reviewing agency’s compliance with FOIA, launched a FOIA compliance program in 2014. OGIS also developed a FOIA compliance self- assessment program, which is intended to help OGIS look for potential compliance issues across federal agencies. The Chief FOIA Officers Council is co-chaired by the Director of OIP and the Director of OGIS. Council members include senior representatives from OMB, OIP, and OGIS, together with the chief FOIA officers of each agency, among others. The council’s FOIA-related responsibilities include: developing recommendations for increasing FOIA compliance and disseminating information about agency experiences, ideas, best practices, and innovative approaches; identifying, developing, and coordinating initiatives to increase transparency and compliance; and promoting the development and use of common performance measures for agency compliance. The 18 agencies selected for our review are charged with a variety of operations that affect many aspects of federal service to the public. Thus, by the nature of their missions and operations, the agencies have responsibility for vast and varied amounts of information that can be subject to a FOIA request. For example, the Department of Homeland Security’s (DHS) mission is to protect the American people and the United States homeland. As such, the department maintains information covering, among other things, immigration, border crossings, and law enforcement. As another example, the Department of the Interior’s (DOI) mission includes protecting and managing the nation’s natural resources and, thus, providing scientific information about those resources. Table 2 provides details on each of the 18 selected agencies’ missions and the types of information they maintain. The 18 selected agencies reported that they received and processed more than 2 million FOIA requests from fiscal years 2012 through 2016. Over this 5-year period, the number of reported requests received fluctuated among the agencies. In this regard, some agencies saw a continual rise in the number of requests, while other agencies experienced an increase or decrease from year to year. For example, from fiscal years 2012 through 2014, DHS saw an increase in the number of requests received (from 190,589 to 291,242), but in fiscal year 2015, saw the number of requests received decrease to 281,138. Subsequently, in fiscal year 2016, the department experienced an increase to 325,780 requests received. In addition, from fiscal years 2012 through 2015, the reported numbers of requests processed by the selected agencies showed a relatively steady increase. However, in fiscal year 2016, the reported number of requests processed by these agencies declined. Further, figure 2 provides a comparison of the total number of requests received and processed in this 5-year period. Among other things, the FOIA Improvement Act of 2016 and the OPEN Government Act of 2007 call for agencies to (1) update response letters, (2) implement tracking systems, (3) provide FOIA training, (4), provide records online, (5) designate chief FOIA officers, and (6) update and publish timely and comprehensive regulations. The 18 agencies that we included in our review had implemented the majority of the 6 selected FOIA requirements. Specifically, 18 agencies updated response letters, 16 agencies implemented tracking that was compliant with requirements for people with disabilities 18 agencies provided FOIA training for agency staff 15 agencies provided records online, 13 agencies designated chief FOIA officers, and 5 agencies published their updated FOIA regulations by the required due date, and 8 agencies did so after the due date. Figure 3 summarizes the extent to which the 18 agencies implemented the selected FOIA requirements. Beyond these selected agencies, Justice’s OIP and OMB also had taken steps to develop a government-wide FOIA request portal that is intended to allow the public to submit a request to any agency from a single website. The 2016 amendments to FOIA required agencies to include specific information in their responses when making their determinations on requests. If part of a request is denied, for example, agencies must inform requesters that they may seek assistance from the FOIA public liaison of the agency or OGIS, file an appeal to an adverse determination within a period of time that is not less than 90 days after the date of such adverse determination; and seek dispute resolution services from the FOIA public liaison of the agency or OGIS. Among the 18 selected agencies, all had updated their FOIA response letters to include this required information. Various FOIA amendments and guidance call for agencies to use automated systems to improve the processing and management of requests. In particular, the OPEN Government Act of 2007 amended FOIA to require that federal agencies establish a system to provide individualized tracking numbers for requests that will take longer than 10 days to process and establish telephone or Internet service to allow requesters to track the status of their requests. Further, the President’s January 2009 Freedom of Information Act memorandum instructed agencies to use modern technology to inform citizens about what is known and done by their government. In addition, FOIA processing systems, like all automated information technology systems, are to comply with the requirements of Section 508 of the Rehabilitation Act of 1973 (Rehabilitation act (as amended)). This act requires federal agencies to make their electronic information accessible to people with disabilities. Each of the 18 selected agencies had implemented a system that provides capabilities for tracking requests received and processed, including an individualized number for tracking the status of a request. Specifically, Ten agencies used commercial automated systems, (DHS, EEOC, FDIC, FTC, Justice, NARA, NASA, NTSB, Pension Benefit Guaranty Corporation, and USAID). Three agencies developed their own agency systems (State, DOI, and TVA). Five agencies used Microsoft Excel or Word to track requests (Administrative Conference of the United States, American Battle Monuments Commission, Broadcasting Board of Governors, OMB, and U.S. African Development Foundation). Further, all of the agencies had established telephone or Internet services to assist requesters in tracking the status of requests; and they used modern technology (e.g., mobile applications) to inform citizens about FOIA. For example, the commercial systems allow requesters to submit a request and track the status of that request online. In addition, DHS developed a mobile application that allows FOIA requesters to submit requests and check the status of existing requests. However, while 16 agencies FOIA tracking systems were compliant with requirements of Section 508 of the Rehabilitation Act (as amended), two agencies—TVA and DOI—had systems that were not compliant. According to TVA officials, the agency does not have a 508 compliance certification. DOI officials stated that its FOIA system will undergo 508 compliance testing but did provide a date for completion of the testing. Having systems that are compliant with Section 508 of the Rehabilitation Act (as amended) is essential to ensure that the department’s electronic information is accessible to all individuals, including those with disabilities. The 2016 FOIA amendments require agencies’ chief FOIA officers to offer training to agency staff regarding their responsibilities under FOIA. In addition, Justice’s OIP has advised every agency to make such training available to all of their FOIA staff at least once each year. The office has also encouraged agencies to take advantage of FOIA training opportunities available throughout the government. The 18 selected agencies’ chief FOIA officers offered FOIA training opportunities to staff in fiscal years 2016 and 2017. For example: Twelve agencies provided training that gave an introduction and overview of FOIA (the American Battle Monuments Commission, Broadcasting Board of Governors, EEOC, Justice, FDIC, FTC, NARA, Pension Benefit Guaranty Corporation, State, TVA, U.S. African Development Foundation, and USAID). Four agencies offered training for their agencies’ online FOIA tracking and processing systems (DOI, EEOC, NTSB, and Pension Benefit Guaranty Corporation). Five agencies provided training on responding to, handling, and processing FOIA requests (DHS, DOI, EEOC, Justice, and State). Seven agencies offered training on understanding and applying the exemptions under FOIA (the Broadcasting Board of Governors, EEOC, FDIC, FTC, Justice, State, and U.S. African Development Foundation). Four agencies offered training on the processing of costs and fees (EEOC, Justice, NASA and TVA). Memorandums from both the President and the Attorney General in 2009 highlighted the importance of online disclosure of information and further directed agencies to make information available without a specific FOIA request. Further, FOIA required online access to government information and required agencies to make information available to the public in electronic form for four categories: agency final opinions and orders, administrative staff manuals and staff instructions that affect the frequently requested records. While all 18 agencies that we reviewed posted records online, only 15 of them had posted all categories of information, as required by the FOIA. Specifically, 7 agencies—the American Battle Monuments Commission, the Pension Benefit Guaranty Corporation, and EEOC, FDIC, FTC, Justice, and State—had, as required, made records in all four categories publicly available online. In addition, 5 agencies that were only required to publish online records in 3 categories—the Administrative Conference of the United States, Broadcasting Board of Governors, DHS, OMB, and USAID— had done so. Further, 3 agencies that were only required to publish online records in two of the categories—U.S. African Development Foundation, NARA, and TVA—had done so. The remaining 3 agencies—DOI, NASA, and NTSB—had posted records online for three of four required categories. Regarding why the three agencies did not post all of their four required categories of online records, DOI officials stated that the agency does not make publicly available all FOIA records that have been requested three or more times, as it does not have the time to post all such records that have been requested. NASA officials explained that, while the agency issues final opinions, it does not post them online. NTSB officials said they try to post information that is frequently requested, but they do not post the information on a consistent basis. Making the four required categories of information available in electronic form is an important step in allowing the public to easily access to government documents. Until these agencies make all required categories of information available in electronic form, they cannot ensure that they are providing the required openness in government. In 2005, the President issued an executive order that established the role of a chief FOIA officer. In 2007, amendments to FOIA required each agency to designate a chief FOIA officer who shall be a senior official at the assistant secretary or equivalent level. Of the 18 selected agencies, 13 agencies have chief FOIA officers who are senior officials at the assistant secretary or equivalent level. The assistant secretary level is comparable to senior executive level positions at levels III, IV, and V. Specifically, State has designated its Assistant Secretary of Administration, Bureau DOI and NTSB had designated their Chief Information Officers; Administrative Conference of the United States, Broadcasting Board of Governors, FDIC, NARA, and U.S. African Development Foundation have designated their general counsels; Justice, NASA, TVA, and USAID designated their Associate Attorney General, Associate Administrator for Communications, the Vice President for Communications, and the Assistant Administrator for the Bureau of Management, respectively; and DHS designated its Chief Privacy Officer. However, 5 agencies—American Battle Monuments Commission, EEOC, Pension Benefit Guaranty Corporation, FTC, and OMB—do not have chief FOIA officers who are senior officials at the assistant secretary or equivalent level. According to officials from 4 of these agencies, the agencies all have chief FOIA officers and officials believed they had designated the appropriate officials. Officials at FTC acknowledged that the chief FOIA officer position is not designated at a level equivalent to an assistant secretary but a senior position within the agency. However, while there are chief FOIA officers at these agencies, until the chief FOIA officers are designated at the Assistant Secretary or equivalent level, they will lack assurance regarding the necessary authority to make decisions about agency practices, personnel, and funding. FOIA requires federal agencies to publish regulations in the Federal Register that inform the public of their FOIA operations. Specifically, in 2016, FOIA was amended to require agencies to update their regulations regarding their FOIA operations. To assist agencies in meeting this requirement, OIP created a FOIA regulation template. Among other things, OIP’s guidance encouraged agencies to: describe their dispute resolution process, describe their administrative appeals process for response letters of denied requests, notify requesters that they have a minimum of 90 days to file an include a description of what happens when there are unusual circumstances, as well as restriction on agencies’ abilities to charge certain fees when FOIA's times limits are not met; and update the regulations in a timely manner (i.e., update regulations by 180 days after the enactment of the 2016 FOIA amendment). Five agencies in our review—DHS, DOI, FDIC, FTC, and USAID— addressed all five requirements in updating their regulations. In addition, seven agencies addressed four of the five requirements: the Administrative Conference of the United States, EEOC, Justice, NARA, NTSB, Pension Benefit Guaranty Corporation, and TVA did not update their regulations in a timely manner. Further, four agencies addressed three or fewer requirements (U.S. African Development Foundation, State, NASA, and Broadcasting Board of Governors) and two agencies (American Battle Monuments Commission and OMB) did not address any of the requirements. Figure 4 indicates the extent to which the 18 agencies had addressed the five selected requirements. Agencies that did not address all five requirements provided several explanations as to why their regulations were not updated as required: American Battle Monuments Commission officials stated that while they updated their draft regulation in August 2017, it is currently unpublished due to internal reviews with the commission’s General Counsel in preparation for submission to the Federal Register. No new posting date has been established. American Battle Monuments Commission last updated its regulation in February 26, 2003. State officials noted that their regulation was updated 2 months prior to the new regulation requirements but did not provide a specific reason for not reissuing their regulation. As such, they explained that they have a working group reviewing their regulation for updates, with no timeline identified. State last updated its regulation on April 6, 2016. NASA officials did not provide a reason for not updating their regulation as required. Officials did, however, state that their draft regulation is with NASA’s Office of General Counsel for review. NASA last updated its regulations on August 11, 2017. Broadcasting Board of Governors officials did not provide a reason for not updating their regulation as required. Officials did, however, note that the agency is in the process of updating its regulation and anticipates it will complete this update by the end of 2018. The Broadcasting Board of Governors last updated its regulation on February 2, 2002. OMB officials did not provide a reason for not updating the agency’s regulation as required. Officials did, however, state that due to a change in leadership they do not have a time frame for updating their regulation. OMB last updated its regulation on May 27, 1998. The chief FOIA officer at the U.S. African Development Foundation stated that, while the agency had updated and submitted its regulation to be published in December 2016, the regulation was unpublished due to an error that occurred with the acknowledgement needed to publish the regulation in the Federal Register. The regulation was subsequently published on February 3, 2017. The official further noted that when the agency responds to FOIA requests, it has not charged a fee for unusual circumstances, and, therefore, agency officials did not believe they had to disclose information regarding fees in their regulation. Until these six agencies publish updated regulations that address the necessary requirements, as called for in FOIA and OIP guidance, they likely will be unable to provide the public with required regulatory and procedural information to ensure transparency and accountability in the government. The 2016 FOIA amendments required OMB to work with Justice to build a consolidated online FOIA request portal. This portal is intended to allow the public to submit a request to any agency from a single website and include other tools to improve the public’s access to the benefits of FOIA. Further, the act required OMB to establish standards for interoperability between the consolidated portal and agency FOIA systems. The 2016 FOIA amendments did not provide a time frame to develop the portal and standards. With OMB's support, Justice has developed an online portal. In this regard, Justice’s OIP officials stated that the National FOIA Portal provides the functionality required by FOIA, including the ability to make a request to any agency and the technical framework for interoperability. According to OIP officials, in partnership with OMB, OIP was able to identify a dedicated funding source to operate and maintain the portal to ensure its success in the long term, with major agencies sharing in the costs to operate, maintain, and fund any future enhancements designed to improve FOIA processes. The first iteration of the National FOIA Portal launched on Justice’s FOIA.gov website on March 8, 2018. The 18 selected agencies in our review had FOIA request backlogs of varying sizes, ranging from no backlogged requests at some agencies to 45,000 or more of requests at other agencies. Generally, the agencies with the largest backlogs had received the most requests. In an effort to aid agencies in reducing their backlogs, Justice’s OIP identified key practices that agencies can use. However, while the agencies reported using these practices and other methods, few of them managed to reduce their backlogs during the period from fiscal year 2012 through 2016. In particular, of the four agencies with the largest backlogs, only one— NARA—reduced its backlog. Agencies attributed their inability to decrease backlogs to the increased number and complexity of requests, among other factors. However, agencies also lack comprehensive plans to implement practices on an ongoing basis. The selected agencies in our review varied considerably in the size of their FOIA request backlogs. Specifically, from fiscal year 2012 through 2016, of the 18 selected agencies 10 reported a backlog of 60 or fewer requests, and of these 10 agencies, 6 reported having no backlog in at least 1 year. 4 agencies had backlog numbers between 61 and 1,000 per year; and 4 agencies had backlogs of over 1,000 requests per year. The four agencies with backlogs of more than 1,000 requests for each year we examined were Justice, NARA, State and DHS. Table 3 shows the number of requests and the number of backlogged request for the 18 selected agencies during the 5-year period. Over the 5-year period, 14 of the 18 selected agencies experienced an increase in their backlogs in at least 1 year. By contrast, 2 agencies (Administrative Conference of the United States and the U.S. African Development Foundation) reported no backlogs, and 3 agencies (American Battle Monument Commission, NASA and NARA) reported reducing their backlogs. Further, of the 4 agencies with the largest backlogs (DHS, State, Justice, and NARA) only NARA reported a backlog lower in fiscal year 2016 than in fiscal year 2012. Figure 5 shows the trends for the 4 agencies with the largest backlogs, compared with the rest of the 18 agencies. In most cases, agencies with small or no backlogs (60 or fewer) also received relatively few requests. For example, the Administrative Conference of the United States and the U.S. African Development Foundation reported no backlogged requests during any year but also received fewer than 30 FOIA requests a year. The American Battle Monuments Commission also received fewer than 30 requests a year and only reported 1 backlogged request per year in 2 of the 5 years examined. However, the Pension Benefit Guaranty Corporation and FDIC received thousands of requests over the 5-year period, but maintained zero backlogs in a majority of the years examined. PBGC received a total of 19,120 requests during the 5-year period and only reported a backlog of 8 requests during 1 year, fiscal year 2013. FDIC received a total of 3,405 requests during the 5-year period and reported a backlog of 13 requests in fiscal year 2015 and 4 in fiscal year 2016. The four agencies with backlogs of 1,000 or more (Justice, NARA, State, and DHS) received significantly more requests each year. For example, NARA received between about 12,000 and 50,000 requests each year, while DHS received from about 190,000 to 325,000 requests. In addition, the number of requests NARA received in fiscal year 2016 was more than double the number received in fiscal year 2012. DHS received the most requests of any agency—a total of 1,320,283 FOIA requests over the 5- year period. The Attorney General’s March 2009 memorandum called on agency chief FOIA officers to review all aspects of their agencies’ FOIA administration and report to Justice on steps that have been taken to improve FOIA operations and disclosure. Subsequent Justice guidance required agencies to include in their chief FOIA officer reports information on their FOIA request backlogs, including whether the agency experienced a backlog of requests; whether that backlog decreased from the previous year; and, if not, reasons the backlog did not decrease. In addition, agencies that had more than 1,000 backlogged requests in a given year were required to describe their plans to reduce their backlogs. Beginning in calendar year 2015, these agencies were to describe how they implemented their plans from the previous year and whether that resulted in a backlog reduction. In addition, Justice’s OIP identified best practices for reducing FOIA backlogs. The office held a best practices workshop on reducing backlogs and improving timeliness. The office then issued guidance in August 2014 that highlighted key practices to improve the quality of a FOIA program. OIP identified the following methods in its best practices guidance. Utilize resources effectively. Agencies should allocate their resources effectively by using multi-track processing, making use of available technology, and shifting priorities and staff assignments to address needs and effectively manage workloads. Routinely review metrics. Agencies should regularly review their FOIA data and processes to identify challenges or barriers. Additionally, agencies should identify trends to effectively allocate resources, set goals for staff, and ensure needs are addressed. Emphasize staff training. Agencies should ensure FOIA staff are properly trained so they can process requests more effectively and with more autonomy. Training and engagement of staff can also solidify the importance of the FOIA office’s mission. Obtain leadership support. Agencies should ensure that senior management is involved in and supports the FOIA function in order to increase awareness and accountability, as well as make it easier to obtain necessary resources or personnel. Agencies identified a variety of methods that they used to address their backlogs. These included both the practices identified by Justice, as well as additional methods. Ten agencies maintained relatively small backlogs of 60 or fewer requests and were thus not required to develop plans for reducing backlogs. However, 2 of these 10 agencies, who both received significant numbers of requests, described various methods used to maintain a small backlog: PBGC officials credit their success to training, not only for FOIA staff, but all Incoming personnel, while also awarding staff for going above and beyond in facilitating FOIA processing. Pension Benefit Guaranty Corporation has incorporated all the best practices identified by OIP, including senior leadership involvement that supports FOIA initiatives and program goals, routine review of metrics to optimize workflows, effective utilization of resources and staff training. According to FDIC officials, their overall low backlog numbers are attributed to a trained and experienced FOIA staff, senior management involvement, and coordination among FDIC divisions. However, FDIC stated the reason for the increase in backlogs in fiscal year 2015 was due to increased complexity of requests. The 4 agencies with backlogs greater than 60 but fewer than 1,000 (EEOC, DOI, NTSB, and USAID) reported using various methods to reduce their backlogs. However, all 4 showed an increase over the 5-year period. EEOC officials stated that they had adopted practices recommended by OIP, such as multi-track processing, reviewing workloads to ensure sufficient staff, and using temporary assignments to address needs. However, EEOC has seen a large increase in its backlog numbers, going from 131 in fiscal year 2012 to 792 in fiscal year 2016. EEOC attributed the rise in backlogs to an increase in requests received, loss of staff, and the complex and voluminous nature of requests. DOI, according to agency officials, has also tried to incorporate reduction methods and best practices, including proactively releasing information that may be of interest to the public, thus avoiding the need for a FOIA request; enhanced training for its new online FOIA tracking and processing system; improved interoffice collaboration; production of monthly reports on backlogs and of weekly charts on incoming requests, to heighten awareness among leadership; and monitoring trends. Yet DOI has seen an increase in its backlog, from 449 in fiscal year 2012 to 677 in fiscal year 2016, an increase of 51 percent. DOI attributed the increase to the loss of FOIA personnel, an increase in the complexity of requests, an increase in FOIA-related litigation, an increase in incoming requests, and the fact that staff have additional duties. Officials at NTSB stated that the board utilized contractors and temporary staff assignments to augment staffing and address backlogs. Despite the effort, NTSB saw a large increase in backlogs, from 62 in fiscal year 2012 to 602 in fiscal year 2016. Officials stated that the reason for the increase was an increased complexity of requests, including requests for “any and all” documentation related to a specific subject, often involving hundreds to thousands of pages per request. According to USAID officials, the agency conducts and reviews inventories of its backlog and requests to remove duplicates and closed cases; groups and classifies requests by necessary actions and responsive offices; and initiates immediate action. In addition, USAID seeks to identify tools and solutions to streamline records for review and processing. However, its backlog numbers have continually increased, from 201 in fiscal year 2012 to 318 in fiscal year 2016. USAID attributes that increase to an increase in the number of requests, the loss of FOIA staff, an increased complexity and volume of requests, competing priorities, and world events that may drive surges in requests. Of the four agencies with the largest backlogs, all reported taking steps that, in some cases, included best practices identified by OIP; however, only NARA successfully reduced its backlog by the end of the 5-year period. Justice officials noted that the department made efforts to reduce its backlog by incorporating best practices. Specifically, OIP worked with components within Justice through the Component Improvement Initiative to identify causes contributing to a backlog and assist components in finding efficiencies and overcoming challenges. The chief FOIA officer continued to provide top-level support to reduction efforts by convening the department’s FOIA Council to manage overall FOIA administration. In addition, many of the components created their own reduction plans, which included hiring staff, utilizing technology, and providing more training, requester outreach, and multitrack processing. However, despite these efforts, the number of backlogs steadily increased during the 5-year period, from 5,196 in fiscal year 2012 to 10,644 in fiscal year 2016, an overall increase of 105 percent. Justice attributes the increase in backlogs to several challenges, including an increase in incoming requests and an increase in the complexity of those requests. Other challenges that Justice noted were staff shortages and turnover, reorganization of personnel roles, time to train incoming staff, and the ability to fill positions previously held by highly qualified professionals. NARA officials stated that one key step NARA took was to make corrections in its Performance Measurement and Reporting System. They noted that this system previously comingled backlogged requests with the number of pending FOIA requests, skewing the backlog numbers higher. The improvements included better accounting for pending and backlogged cases, distinguishing between simple and complex requests, and no longer counting as “open” cases that were closed within 20 days, but not until the beginning of the following fiscal year. In addition, officials also stated that the FOIA program offices have been successful at working with requesters to narrow the scope of requests. NARA also stated that it was conducting an analysis of FOIA across the agency to identify any barriers in the process. Officials also identified other methods, including using multi-track processing, shifting priorities to address needs, improved communication with agencies, proactive disclosures, and the use of mediation services. NARA has shown significant progress in reducing its backlog. In fiscal year 2012 it had a backlog of 7,610 requests, which spiked to 9,361 in fiscal year 2014. However, by fiscal year 2016, the number of backlogged requests had dropped to 2,932, even though the number of requests received more than doubled for that fiscal year. However, NARA did note challenges to reducing its backlog numbers, namely, the increase in the number of requests received. State developed and implemented a plan to reduce its backlog in fiscal year 2016. The plan incorporated two best practices by focusing on identifying the extent of the backlog problem and developing ways to address the backlog with available resources. According to State officials, the effort was dedicated to improve how FOIA data were organized and reported. Expedited and ligation cases were top priorities, whereas in other cases a “first in, first out” method was employed. Even with these efforts, however, State experienced a 117 percent increase in its backlog over the 5-year period. State’s backlog doubled from 10,045 in fiscal year 2014 to 22,664 in fiscal year 2016. Among the challenges to managing its backlog, State reported an increase in incoming requests, a high number of litigation cases, and competing priorities. Specifically, the number of incoming requests for State increase by 51 percent during the 5-year period. State has also reported that it has allocated 80 percent of its FOIA resources to meet court-ordered productions associated with litigation cases, resulting in fewer staff to work on processing routine requests. This included, among other efforts, a significant allocation of resources in fiscal year 2015 to meet court-imposed deadlines to process emails associated with the former Secretary of State, resulting in a surge of backlogs. In 2017 State began an initiative to actively address its backlogs. The Secretary of State issued an agency-wide memorandum stating the department’s renewed efforts by committing more resources and workforce to backlog reduction. The memo states new processes are to be implemented for both the short- and long-term, and the FOIA office has plans to work with the various bureaus to outline the tasks, resources, and workforce necessary to ensure success and compliance. With renewed leadership support, State has reported significant progress in its backlog reduction efforts. DHS, in its chief FOIA officer reports, reported that it implemented several plans to reduce backlogs. The DHS Privacy Office, which is responsible for oversight of the department’s FOIA program, worked with components to help eliminate the backlog. The Privacy Office sent monthly emails to component FOIA officers on FOIA backlog statistics, convened management meetings, conducted oversight, and reviewed workloads. Leadership met weekly to discuss the oldest pending requests, appeals, and consultations, and determined needed steps to process those requests. In addition, several other DHS components implemented actions to reduce backlogs. Customs and Border Protection hired and trained additional staff, encouraged requesters to file requests online, established productivity goals, updated guidance, and utilized better technology. U.S. Citizenship and Immigration Services, National Protection and Programs Directorate, and Immigration and Customs Enforcement increased staffing or developed methods to better forecast future workloads ensure adequate staffing. Immigration and Customs Enforcement also implemented a commercial off-the-shelf web application, awarded a multimillion-dollar contract for backlog reduction, and detailed employees from various other offices to assist in the backlog reduction effort. Due to efforts by the Privacy Office and other components, the backlog dropped 66 percent in fiscal year 2015, decreasing to 35,374. Yet, despite the continued efforts in fiscal year 2016, the backlog numbers increased again, to 46,788. DHS attributes the increases in backlogs to several factors, including an increase in the number of requests received, increased complexity and volume of responsive records for those requests, loss of staff and active litigation with demanding production schedules. One reason the eight agencies with significant backlogs may be struggling to consistently reduce their backlogs is that they lack documented, comprehensive plans that would provide a more reliable, sustainable approach to addressing backlogs. In particular, they do not have documented plans that describe how they will implement best practices for reducing backlogs over time, including specifying how they will use metrics to assess the effectiveness of their backlog reduction efforts and ensure that senior leadership supports backlog reduction efforts, among other best practices identified by OIP. While agencies with backlogs of 1,000 or more FOIA requests are required to describe backlog reduction efforts in their chief FOIA officer reports, these consist of a high-level narrative and do not include a specific discussion of how the agencies will implement best practices over time to reduce their backlog. In addition, agencies with backlogs of fewer than 1,000 requests are not required to report on backlog reduction efforts; however, the selected agencies in our review with backlogs in the hundreds still experienced an increase over the 5-year period. Without a more consistent approach, agencies will continue to struggle to reduce their backlogs to a manageable level, particularly as the number and complexity of requests increase over time. As a result, their FOIA processing may not respond effectively to the needs of requesters and the public. FOIA requires agencies to report annually to Justice on their use of statutory (b)(3) exemptions. This includes specifying which statutes they relied on to exempt information from disclosure and the number of times they did so. To assist agencies in asserting and accounting for their use of these statutes, Justice instructs agencies to consult a running list of all the statutes that have been found to qualify as proper (b)(3) statutes by the courts. However, agencies may also use a statute not included in the Justice list, because many statutes that appear to meet the requirements of (b)(3) have not been identified by a court as qualifying statutes. If the agency uses a (b)(3) statute that is not identified in the qualifying list, Justice guidance instructs the agency to include information about that statute in its annual report submission. Justice reviews the statute and provides advice to the agency, but does not make a determination on the appropriateness of using that statute under the (b)(3) exemption. Based on data agencies reported to Justice, during fiscal years 2010 to 2016, agencies claimed 237 statutes as the basis for withholding information. Of these statutes, 75 were included on Justice’s list of qualifying statutes under the (b)(3) exemption (see appendix III for a list of these statutes). Further, we identified 140 additional statutes that were not identified in our 237 statutes claimed by agencies during fiscal years 2010 to 2016, but have similar provisions to other (b)(3) statutes authorizing an agency to withhold information from the public (see appendix IV for a list of these additional statutes). We found that the 237 statutes cited as the basis for (b)(3) exemptions during the period from fiscal years 2010 to 2016 fell into 8 general categories of information. These categories were (1) personally identifying information, (2) national security, (3) commercial, (4) law enforcement and investigations, (5) internal agency, (6) financial regulation, (7) international affairs, and (8) environmental. Figure 6 identifies the eight categories and the number of agency-claimed (b)(3) statutes in each of the categories. Of the 237 (b)(3) statutes cited by agencies, the majority—178—fell into 4 of the 8 categories: Forty-nine of these statutes related to withholding personally identifiable information including, for example, a statute related to withholding death certificate information provided to the Social Security Administration. Forty-five statutes related to the national security category. For example, one statute exempted files of foreign intelligence or counterintelligence operations of the National Security Agency. Forty-two statutes were in the law enforcement and investigations category, including a statute that exempts from disclosure information provided to Justice pursuant to civil investigative demands pertaining to antitrust investigations. Forty-two statutes fell into the commercial category. For example, one statute in this category related to withholding trade secrets and other confidential information related to consumer product safety. The remaining 59 statutes were in four categories: internal agency functions and practices, financial regulation, international affairs, and environmental. The environmental category contained the fewest number of statutes and included, for example, a statute related to withholding certain air pollution analysis information. As required by FOIA, agencies also reported the number of times they used each (b)(3) statute. In this regard, 33 FOIA-reporting agencies indicated that they had used 10 of the 237 (b)(3) statutes more than 200,000 times. Of these 10 most-commonly used statutes, the single most-used statute (8 U.S.C § 1202(f)) related to withholding records pertaining to the issuance or refusal of visas to enter the United States. It was used by 4 agencies over 58,000 times. Further, of the 10 most-commonly used statutes, the statute used by the greatest number of agencies (26 U.S.C § 6103) related to the withholding of certain tax return information; it was used by 24 FOIA-reporting agencies about 30,000 times. By contrast, some statutes were only used by a single agency. Specifically, the Department of Veterans Affairs used a statute related to withholding certain confidential veteran medical records (38 U.S.C. § 7332) more than 16,000 times. Similarly, EEOC used a statute related to employment discrimination on the basis of disability (42 U.S.C. § 12117) more than 10,000 times. Table 4 shows the 10 most-used statutes under the (b)(3) exemption, the agency that used each one most frequently, and the number of times they were used by that agency for the period covering fiscal years 2010 through 2016. The OPEN FOIA Act of 2009 amended FOIA to require that any federal statute subsequently enacted must specifically cite paragraph (b)(3) of FOIA to qualify as a (b)(3) exemption statute. Prior to 2009, a federal statute qualified as a statutory (b)(3) exemption if it (1) required that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (2) established particular criteria for withholding or referred to particular types of matters to be withheld. According to statements by the sponsor of the legislation during the Senate debate, (b)(3) statutory exemptions should be clear and unambiguous, and vigorously debated by Congress before they are enacted into law. In response to the amendment, in 2010, Justice released guidance to agencies stating that any statute enacted after 2009 must specifically cite to the (b)(3) exemption to qualify as a withholding statute under FOIA. Further, the guidance encouraged agencies to contact Justice with questions regarding the implementation of the amendment. In our review of the 237 (b)(3) statutes claimed by agencies during fiscal years 2010 through 2016, 21 of these statutes were initially enacted and 82 were amended after 2009. Of the 21 statutes initially enacted after 2009, 9 cited (b)(3). Further, of the 82 statutes amended, 9 cited (b)(3). While reflecting provisions of law authorizing or requiring the withholding of agency information from the public, the number of these statutes not having a reference to the (b)(3) exemption is evidence of the OPEN FOIA Act’s uneven impact on the establishment of statutory FOIA exemptions. As previously noted, FOIA requires federal agencies to provide the public with access to various types of information that can contribute to the understanding of government operations. One of these areas has related to the 2008 financial crisis, in which the Emergency Economic Stabilization Act of 2008 played a significant role in stabilizing the federal financial system. The act initially authorized $700 billion to assist financial institutions and markets, businesses, and homeowners through TARP, although that authorization was later reduced to $475 billion. Treasury, which was given authority under the act, established the Office of Financial Stability to carry out the program’s activities. These activities included injecting capital into key financial institutions, implementing programs to address problems in the securitization markets, providing assistance to the automobile industry, and offering incentives for modifying residential mortgages. In addition, federal financial regulators— FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency—each played a key role in regulating and monitoring financial institutions. Following the law’s enactment, in certain periods from 2008 through 2014, three corporations—AIG, GM, and Ally—received federal financial assistance that amounted to 50 percent or more ownership by the federal government. The actions with regard to TARP subsequently led to the Treasury and the three financial regulatory agencies receiving FOIA requests for government records related to the three corporations. Specifically, the Federal Reserve Board, FDIC, the Office of the Comptroller of the Currency, and Treasury received 166 FOIA requests for information about these three corporations from September 2008 through January 2014. The requests asked for various agency records related to the corporations, for example, records related to Treasury’s stewardship and oversight of AIG and its subsidiaries; records related to the Federal Reserve Board and Ally specific to the individual submitting the FOIA request’s review; records concerning GM’s contract with the Stillwater Mining Company; and all communications between the Office of the Comptroller of the Currency and AIG from June 2007 through March 2009. Of the 166 requests, 88 were processed as full grant, partial grant, or full denial; 34 were withdrawn by the requester; 24 were closed because the agency responded that it had no records regarding the requests; and 20 fell into other disposition categories. Table 5 summarizes the disposition/resolution of the FOIA requests that each of the four federal agencies received relating to information on AIG, GM and Ally for certain periods from September 2008 to January 2014 (the time frame for which the government held 50 percent or more of the corporations’ common stock), and the type of disposition used most often to close the requests. The 18 agencies we reviewed had fully implemented half of the six key FOIA requirements and the vast majority of agencies implemented two additional requirements. However, 5 agencies published and updated their FOIA regulations in a timely and comprehensive manner. Fully implementing FOIA requirements will better position agencies to provide the public with necessary access to government records and ensure openness in government. Selected agencies varied considerably in the size of their backlogs. While 10 reported a backlog of 60 or fewer requests, 4 had backlogs of over 1,000 per year. Agencies identified a variety of methods that they used to address their backlogs, including practices identified by Justice, as well as additional methods. However, the selected agencies varied in the success achieved for reducing their backlogs. This was due, in part, to a lack of plans that describes how the agencies will implement best practices for reducing backlogs over time. Until agencies develop plans to reduce backlogs, they will be limited in their ability to respond effectively to the needs of requesters and the public. We are making a total of 24 recommendations to 16 agencies in our review. Specifically: The Secretary of the American Battle Monuments Commission should designate a chief FOIA officer at the assistant secretary level or equivalent. (Recommendation 1) The Secretary of the American Battle Monuments Commission should update and publish comprehensive FOIA regulations that include requirements established by law and Justice guidance. (Recommendation 2) The Chief Executive Officer and Director of the Broadcasting Board of Governors should update and publish comprehensive FOIA regulations that include requirements established by law and Justice guidance. (Recommendation 3) The Secretary of DHS should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 4) The Secretary of DOI should ensure its FOIA tracking system is compliant with Section 508 requirements. (Recommendation 5) The Secretary of DOI should provide frequently requested records online. (Recommendation 6) The Secretary of DOI should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 7) The Chair of EEOC should designate a chief FOIA officer at the assistant secretary level or equivalent. (Recommendation 8) The Chair of EEOC should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 9) The Chairman of the FTC should designate a chief FOIA officer at the assistant secretary level or equivalent. (Recommendation 10) The Attorney General of the United States should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 11) The Archivist of the United States should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 12) The Administrator of NASA should update and publish comprehensive FOIA regulations that describe dispute resolution services, and notifies requesters of the 90 days for appeals. (Recommendation 13) The Administrator of NASA should provide agency records of final opinions online. (Recommendation 14) The Chairman of NTSB should provide frequently requested records online. (Recommendation 15) The Chairman of NTSB should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 16) The Director of OMB should update and publish comprehensive FOIA regulations that include requirements established by law and Justice guidance. (Recommendation 17) The Director of OMB should designate a chief FOIA officer at the assistant secretary level or equivalent. (Recommendation 18) The Director of Pension Benefit Guaranty Corporation should designate a chief FOIA officer at the assistant secretary level or equivalent. (Recommendation 19) The Secretary of State should update and publish comprehensive FOIA regulations that describe dispute resolution services, and notifies requesters of the 90 days for appeals. (Recommendation 20) The Secretary of State should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 21) The President of TVA should ensure its FOIA tracking system is compliant with section 508 requirements. (Recommendation 22) The Administrator of USAID should take steps to develop and document a plan that fully addresses best practices with regards to reduction of backlogged FOIA requests. (Recommendation 23) The President of the U.S. African Development Foundation should update and publish comprehensive FOIA regulations that inform a requester of limited unusual circumstances fees. (Recommendation 24) We requested comments on a draft of this report from the 21 agencies included in our review. Of the 16 agencies to which we made recommendations, 9 agencies agreed with all of the recommendations directed to them; 1 agency agreed with two and disagreed with one recommendation; 2 agencies disagreed with all of the recommendations; and 4 agencies did not state whether they agreed or disagreed with our recommendations. In addition, 5 agencies to which we did not make recommendations stated that they had no comments on the report. Multiple agencies also provided technical comments, which we have incorporated, as appropriate. The following 9 agencies agreed with our recommendations: In emails received from the American Battle Monuments Commission and the Broadcasting Board of Governors, the two agencies stated that they agreed with the recommendations in our report. In written comments, reprinted in appendix V, DHS stated that it concurred with our recommendations. Regarding the recommendation to designate a chief FOIA Officer, the department stated that it had delegated the full authority and responsibility of DHS’s FOIA operations and programs to the chief privacy officer. The department asserted that its chief privacy officer is the equivalent of an assistant secretary, as required, because the official is appointed by the Secretary under 6 U.S.C § 142 without Senate confirmation in accordance with the Appointments Clause to the U.S. Constitution. Further, the department stated that the chief privacy officer position meets the senior executive service standard under 5 U.S.C § 3132(a)(2) and, accordingly, is comparable to a senior executive level position. Thus, the department believes it is already in compliance with the requirement to designate a chief FOIA officer at the assistant secretary level or equivalent. For the reasons that it cited, DHS requested that GAO consider this recommendation to be resolved and closed. Based on our analysis of the additional information that the department provided to explain the senior executive level position of the chief privacy officer, we are in agreement with DHS regarding the position’s equivalency to an assistant secretary within the department. Accordingly, we have removed this recommendation from our report. Concerning the second recommendation, to develop and document a plan that fully addresses practices with regard to the reduction of backlogged requests, DHS stated that it plans to initiate a department- wide compliance assessment of FOIA operations to identify the components with the most significant backlog problems and the “root causes” for these problems. The department said it then intends to develop a proposed plan for backlog reduction. In written comments, reprinted in appendix VI, Justice stated that it agreed with our recommendation and will develop a plan to address its backlog of FOIA requests to the fullest extent possible. Justice added that, in fiscal year 2017, it was able to improve all of its processing times and close all 10 of the department’s oldest requests, appeals, and consultations, thus, reducing the overall age of its backlog. In written comments, reprinted in appendix VII, NARA stated that it is currently working to develop and document a plan that is intended to fully address best practices to reduce its backlog of FOIA requests, as we recommended. The agency said it expects to complete its plan by the end of December 2018. In written comments, reprinted in appendix VIII, NASA said that it concurred with our two recommendations. With regard to the first recommendation, the agency stated that it is currently working to update its FOIA regulations, and that the revisions are to include the 90-day appeal rights, as well as describe requesters’ rights to obtain dispute resolution services from NASA’s FOIA public liaisons and OGIS. With regard to the second recommendation, the agency stated that it is currently working to identity subject matter areas on which the department can reach final opinions as interpreted under FOIA. The agency added that, upon identification, it will begin posting final opinions online. In written comments, reprinted in appendix IX, State concurred with our two recommendations and, accordingly, noted that it is currently working to update its FOIA regulations and evaluate methods to improve its backlog reduction efforts. In written comments, reprinted in appendix X, USAID stated that it concurred with our recommendation and will develop a formal plan that delineates currently employed best practices to reduce its FOIA backlog. In comments provided via email, the United States African Development Foundation’s General Counsel concurred with our recommendation. The foundation stated that it will take steps to update its FOIA regulations. This is to include, informing requesters about limited unusual circumstances fees, and publishing the updated regulation in the Federal Register. One agency agreed with two recommendations, and disagreed with one other recommendation: In written comments, reprinted in appendix XI, DOI concurred with the recommendation to make its FOIA tracking system Section 508- compliant and stated that it is currently testing its system for compliance. The department also concurred with the recommendation that it provide frequently requested records online. However, the department did not concur with our recommendation to develop and document a plan that fully addresses best practices for the reduction of backlogged FOIA requests. The department stated that, in Justice’s OIP guidance, the creation of a formal backlog reduction plan only applies to agencies with more than 1,000 backlogged requests in a given year. The department said that DOI did not fall into this category and, therefore, was not required to develop such a plan. Although DOI’s existing backlog of FOA requests did not meet the threshold identified in Justice’s guidance, the department, nonetheless, experienced a 51 percent increase in backlogged FOIA requests from fiscal years 2012 to 2016. Thus, having a plan and practices for reducing backlogged requests could help the department ensure that its backlog remains manageable, and that DOI is effectively positioned to respond to the needs of requesters and the public. Accordingly, we believe that our recommendation to develop a plan that addresses best practices to reduce the backlog is still warranted. In addition, 2 agencies disagreed with our recommendations: In written comments, reprinted in appendix XII, the Pension Benefit Guaranty Corporation disagreed with our recommendation that it designate a chief FOIA officer at the assistant secretary level or equivalent. The agency said it does not have assistant secretary positions. The agency added that it believes its current chief FOIA officer’s position is equivalent to the assistant secretary level and that this official is an appropriate designee. We disagree that the current chief FOIA officer’s position is equivalent to the assistant secretary level. However, the Pension Benefit Guaranty Corporation’s General Counsel position is at a level that is equivalent to an assistant secretary. As such, assigning the position to the General Counsel could help ensure that the chief FOIA officer has the necessary authority to make decisions about agency practices, personnel, and funding. As such, we believe our recommendation is still warranted. In written comments, reprinted in appendix XIII, TVA disagreed with our recommendation to ensure that its FOIA tracking system is compliant with Section 508 of the Rehabilitation Act. The agency stated that, based on the January 18, 2017, revised Section 508 standards, its current FOIA tracking system meets the standard related to having a user interface, but does not meet the criteria for accessibility of electronic content. The agency added that, the current single user of its system does not require accessibility accommodations; thus, it would be an undue burden for the agency to make the system comply with the Section 508 requirements. While TVA’s current FOIA system does not require accessibility accommodations and, in the agency’s view, would be unduly burdensome to modify, as the agency undertakes further modernization of its IT systems and software, it should ensure that its FOIA system is compliant with Section 508 requirements. Accordingly, we stand by our recommendation to the agency. Further, 4 agencies did not state whether they agreed or disagreed with the report, although 2 of them offered other comments: In emails received from EEOC and NTSB, the agencies did not agree or disagree with the draft report. EEOC offered technical comments, which we incorporated, as appropriate, while NTSB said it had no comment. In written comments, reprinted in appendix XIV, FTC acknowledged that its chief FOIA officer is not at the assistant secretary level. FTC also noted that it is a small agency in which there are no position titles of assistant secretary-level or equivalent. Further, the agency stated that it believes its chief FOIA officer holds a sufficiently senior position (associate general counsel) with the necessary authority to fulfill the functions of the chief FOIA officer. Nevertheless, FTC stated that it would take our recommendation (to designate a chief FOIA officer at the assistant secretary level or equivalent) under advisement. Although FTC is a small agency and does not have positions at the assistant secretary level, we disagree that the current chief FOIA officer’s position is sufficiently senior to fulfill the functions required of this position. However, assigning the chief FOIA officer position to the General Counsel, or an equivalent level position, could help ensure that the chief FOIA officer will have the necessary authority to make decisions about the agency’s practices, personnel, and funding for the implementation of FOIA. As such, we believe our recommendation is still warranted. In comments provided via email from its GAO liaison, OMB stated that it does not have a position in its organization with the specific title of assistant secretary. However, the agency noted that, on March 7, 2018, the OMB Director designated the OMB General Counsel to serve as the agency’s chief FOIA officer. According to OMB, the chief FOIA officer reports to the Director. Based on the documentation received, we are in agreement with OMB that the position of General Counsel is equivalent to an assistant secretary within the department. Accordingly, we consider this recommendation to be closed. The remaining 5 agencies to which we did not make recommendations stated that they did not have any comments on our report. These agencies were: the Administrative Conference of the United States, FDIC, the Federal Reserve Board, OCC, and Treasury. We are sending copies of this report to the Secretaries of the American Battle Monuments Commission, Homeland Security, Interior, State, and the Treasury; the Attorney General of the United States; the Archivist of the United States; the Comptroller of the Currency; Administrators of the National Aeronautics Space Administration and United States Agency for International Development; Board of Governors of the Federal Reserve System; Chairmen of the Administrative Conference of the United States, Equal Employment Opportunity Commission, Federal Deposit Insurance Corporation, and National Transportation Safety Board; Chief Executive Officer and Director of the Broadcasting Board of Governors; Directors of the Office of Management and Budget and Pension Benefit Guaranty Corporation; the Presidents of the Tennessee Valley Authority, and United States African Development Foundation, and the Acting General Counsel for the Federal Trade Commission. In addition, this report is available at no charge on the GAO website at http://www.gao.gov If you or your staff have questions about this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix XV. Our objectives were to determine (1) determine the extent to which agencies have implemented selected Freedom of Information Act (FOIA) requirements; (2) describe the methods established by agencies to reduce backlogged requests and the effectiveness of those methods; (3) identify any statutory (b)(3) exemptions that have been used by agencies as the basis for withholding (redacting) information; and (4) determine what FOIA requests, if any, agencies received and processed that related to entities that received government assistance during the 2008 financial crisis. To address the first and second objectives, we selected 18 agencies to review based on the number of FOIA requests received, the sizes of FOIA backlogs, and the average time of processing FOIA requests for fiscal years 2012 through 2016. We also chose the agencies to represent a range of sizes (by number of employees)—large (10,000 or more), medium (1,000 to 9,999), and small (999 or fewer). Large agencies selected were the Departments of Homeland Security, Justice, State, and the Interior; the National Aeronautics and Space Administration, and the Tennessee Valley Authority. Medium agencies were the National Archives and Records Administration, the Federal Deposit Insurance Corporation, the Equal Employment Opportunity Commission, the Broadcasting Board of Governors, the U.S. Agency for International Development, and the Federal Trade Commission. Small agencies were the National Transportation Safety Board, the American Battle Monuments Commission, the Pension Benefit Guaranty Corporation, the U.S. African Development Foundation, the Office of Management and Budget, and the Administrative Conference of the United States. For our first objective, to determine the extent to which agencies had implemented FOIA requirements, we examined six FOIA requirements outlined in the FOIA Improvement Act of 2016 and the OPEN Government Act of 2007. These requirements were for agencies to (1) update response letters, (2) implement tracking systems, (3) provide FOIA training, (4), provide records online, (5) designate chief FOIA officers, and (6) update and publish timely and comprehensive regulations. For these six requirements, we reviewed (1) agencies’ FOIA regulations to determine if they included updates from the 2016 FOIA amendments and 2007 OPEN Government Act; and if they were updated by the required deadline; (2) agencies’ FOIA systems to determine if the systems provided individualized tracking numbers for requests that will take longer than 10 days to process, if agencies’ established telephone or Internet service to allow requesters to track the status of their requests; (3) if agencies’ had designated a chief FOIA officer and what position they held within the agency; (4) if agencies chief FOIA officers provided annual FOIA training opportunities to agency staff; (5) if agencies had appropriately updated response letters in compliance with the 2016 FOIA amendments; and (6) if agencies were providing electronic documents publicly available online and posting frequently requested documents as required by the 2016 FOIA amendments. Since we selected a nonprobability sample of FOIA reporting agencies, the results of this analysis are not generalizable to all FOIA reporting agencies. In addition, we also reviewed the requirement for the development of a government-wide FOIA request portal and met with Office of Management and Budget (OMB) officials, and Department of Justice (Justice) officials in the Office of Information Policy (OIP) to the discuss the status of development. Further, we met the Chief FOIA Officers Council, OIP, and National Archives and Records Administration’s (NARA) Office of Government Information Services (OGIS) to determine what, if any, actions they have taken to assist agencies with not violating the provisions of FOIA. For our second objective, to determine the methods established by agencies to reduce backlogged requests and the effect of those methods, we reviewed agency documentation to evaluate if the selected agencies had developed methods for reducing backlogged FOIA requests. We identified requirements for agencies to produce backlog reduction plans and determined if agencies developed such plans as required. We analyzed agencies’ FOIA.gov data to determine if there was a correlation between the presence of a backlog reduction plan and a reduction in backlog numbers. We compared a set of identified best practices for reducing backlogs with agency procedures to determine the extent to which the best practices are used. In addition, we interviewed agency officials to determine the reasons for changes in agency backlog numbers and what actions they are taking to reduce backlogs or implement reduction plans. The results of this analysis are not generalizable to all FOIA reporting agencies. For our third objective, to identify statutory (b)(3) exemptions that have been used by agencies as the basis for withholding information, we developed a catalog of (b)(3) statutes that agencies previously have used to withhold information in FOIA records. To do that, we retrieved all data on agency use of (b)(3) statutes that were readily accessible on Justice’s FOIA.gov website. The data on FOIA.gov are for fiscal years 2008 to 2016; however, Justice acknowledged that data prior to 2010 were not available on FOIA.gov for all agencies. Therefore, we reviewed data for fiscal years 2010 to 2016. In total, there were 117 distinct agencies that provided annual report data for at least 1 fiscal year, and that were represented in fiscal years 2010 through 2016. We developed a catalog by extracting information from the aggregate of agency annual FOIA reports that report, among other things, usage of (b)(3) statute, including the statute’s citation and the number of times the statute was to used withhold information in a fiscal year. To assess the reliability of the data we retrieved from FOIA.gov, we supplemented our analysis with interviews of FOIA officials in Justice’s OIP on steps they have taken to ensure the consistency of data in FOIA.gov on agencies’ use of (b)(3) statutes. Our analysis did not include assessing the reliability of (b)(3) statute data submitted by agencies— Justice guidance states it is the responsibility of each agency to ensure quality data in their reports. We also electronically tested the data by identifying outliers, missing values, and syntactical discrepancies. We found the data to be sufficiently reliable for purposes of our reporting objective. To facilitate our analysis, we refined our catalog listing of agencies’ use of (b)(3) statutes by developing a standardized statute notation assigned to each agency-used statute in our list. Specifically, our standardization of agency-used statutes consisted of removing any typographical errors, ensuring statutes were noted in a consistent U.S. Code format and referred to existing U.S. Code section, and verifying the existence of each statute through legal research, as well as standardizing any current notations of the statute such as those transferred within the U.S. Code by later legislation. If no current notation existed, then that statute was listed as is, such as “15 U.S.C. § 80a-30(c)”, which was used by an agency, and repealed during our review period. No replacement notation could be found. For some U.S. Code statutes, we standardized statutes to an entire section or subsection to reference nondisclosure provisions that contain a description of the type of information withheld by that statute. Further, for some U.S. Code statutes that agencies used as a range of statutes, such as 7 U.S.C. §§ 7411-7425, we determined whether the range contained a single or multiple (b)(3) statute section(s) and developed a standardized statute for each (b)(3) section to assign the original agency statute. In some cases, where agencies used a smaller ranger of statutes, such as 21 U.S.C. §§ 1903-1905, we retained the notation and assigned a standardized version of the range to the original agency-used statute range. Additionally, for some U.S. Code statutes that agencies used that contained two (b)(3) statutes, such as 26 U.S.C. §§ 6103 and 6105, we developed a standardized statute for each (b)(3) section to assign the original agency statute. For those agency-used statutes that could not be immediately standardized or seemed to be noted in error, we either assigned that statute to a related section (or sections) containing a nondisclosure provision, retained the notation and assigned a standardized version of the statute to the original agency-used statute, or removed that statute from our catalog. For example, an agency claimed 15 U.S.C. § 7301 as a (b)(3) statue; however, the statute was a purpose section and 15 U.S.C. § 7306 was the only related nondisclosure provision in that chapter or subchapter of the Code. Therefore, § 7301 was assigned to the standardized citation § 7306. Each standardized statute was counted as one single statute, regardless of the number of sections it represented, resulting in a total of 237 statutes. Following our standardization exercise, we developed descriptions of each statute’s subject matter. We also compared our standardized statutes list to Justice’s list of qualified statutes to identify those statutes that qualified if a court has approved of the statute as being a (b)(3) statute. Next, we classified these statutes into 10 general categories based on their descriptions. To determine usage of (b)(3) statutes by agencies, we calculated the number of times an agency used original agency-used statutes and assigned those numbers to its associated standardized statute in our catalog. In cases where an agency appeared to cite multiple statutes, such as 26 U.S.C. §§ 6103 and 6105, we counted the statutes separately if we determined they were different. For example, if an agency used 26 U.S.C. §§ 6103 and 6105 500 times during fiscal years 2010 to 2016, we would assign that number to each standardized statute in our catalog to ensure that 26 U.S.C. § 6103 and 26 U.S.C. § 6105 each received 500 as the number of times used. We compiled and sorted these data to obtain information on which agencies were using the statute, which agency used it the most, and the approximate number of times the statute was used by an agency. To identify which statutes qualified as a (b)(3) exemption under the OPEN FOIA Act of 2009, we determined the date of the most recent legislative action for each standardized statute by identifying the dates of enactment and the most recent amendments of the statutes. We then identified those statutes enacted or amended after 2009 and we determined if they cited FOIA’s paragraph (b)(3) by including a citation to 5 U.S.C. 552(b)(3) or “paragraph (b)(3) of section 552 of title 5, United States Code,” or a similar citation that includes a reference to paragraph (b)(3). To identify any additional statutes that the reviewed agencies did not claim during fiscal years 2010 to 2016, we developed another catalog of statutes that have similar provisions as other (b)(3) statutes that authorize an agency to withhold information from the public. Specifically, we utilized various sources to compile our list of statutes, including annual Justice reports on statutes determined by courts to constitute a (b)(3) statute, the National Institute of Standards and Technology’s Guide for Mapping Types of Information and Information Systems to Security Categories, and two external nongovernmental organizations (American University Washington College of Law and ProPublica). In addition, we separately searched the U.S. Code for the keyword “552(b)(3)” using Lexis Nexis, to identify any additional statutes for our catalog. However, this additional catalog does not serve as an definitive or comprehensive list of (b)(3) statutes available for agencies to claim. Specifically, FOIA gives agencies broad discretion in deciding whether they can withhold information on the basis of a statute. For example, FOIA allows for agencies to assert a federal statute under the (b)(3) exemption if that statute establishes particular criteria or refers to particular types of matters to be withheld. Therefore, the statutes we identified may undercount the total number of exemptions available to agencies. For our fourth objective, to determine the number and types of FOIA requests related to private corporations that received funds under the Troubled Assess Relief program (TARP), we reviewed the Department of Treasury’s (Treasury) Monthly Reports to Congress (October 2008 and November 2014) and prior GAO reports relating to TARP. We identified the corporations that received TARP funds and the federal agencies that received FOIA requests related to these corporations by reviewing Treasury’s monthly reports for the time period in which Treasury held 50 percent or more common stock in corporations that were under the TARP agreement. We also reviewed prior GAO reports on TARP to verify the corporations and time period. In addition, we met with Treasury officials to verify the entities and time period. The three corporations that received TARP funds were American International Group, General Motors, and Ally. The agencies that received FOIA requests about these corporations were Treasury, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, and the Office of the Comptroller of the Currency. We met with these agencies to identify their involvement in providing assistance to companies related to TARP. Next, we reviewed FOIA requests received by these four agencies during the period in which Treasury owned at least 50 percent or more common shares in the corporations. We reviewed the FOIA requests to determine the resolution of the request and the length of time it took the agency to respond. Lastly, we interviewed agency officials to better understand if and how FOIA requests were received and processed. We conducted this performance audit from January 2017 through June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Freedom of Information Act (FOIA) prescribes nine specific categories of information that are exempt from disclosure. These exemptions are described in the table below. Table 7 describes 237 (b)(3) exemption statutes used by FOIA reporting agencies during fiscal years 2010 through 2016 and indicates whether that statute has been found by a court to qualify as a (b)(3) exemption. Specifically, the Department of Justice, in its oversight role, identified 78 statutes that courts have ruled qualify as a (b)(3) statute. During fiscal years 2010 through 2016, when responding to FOIA requests, agencies used 75 of these statutes as the basis for withholding information. Table 8 identifies 140 additional statutes outside of our agency used catalog that we did not identify as used by agencies during our fiscal year 2010 through 2016 review period. These statutes have similar provisions to other (b)(3) exemption statutes, authorizing an agency to withhold information from the public. In addition to the contact named above, Anjalique Lawrence (assistant director), Lori Martinez (analyst in charge), Gerard Aflague, Melina Asencio, David Blanding, Kami Brown, Christopher Businsky, Caitlin Cusati, Haley Dunn, Elena Epps, Rebecca Eyler, Nancy Glover, James Andrew Howard, Saida Hussain, Robert Letzler, Lee McCracken, Carlo Mozo, Brian Palmer, David Plocher, Di’Mond Spencer, Sukhjoot Singh, Henry Sutanto, and Priscilla Smith made key contributions to this report.", "summary": "FOIA requires federal agencies to provide the public with access to government records and information based on the principles of openness and accountability in government. Each year, individuals and entities file hundreds of thousands of FOIA requests. In the last 9 fiscal years, federal agencies subject to FOIA have received about 6 million requests. GAO was asked to review federal agencies' compliance with FOIA requirements. Our objectives, among others, were to (1) determine the extent to which agencies have implemented selected FOIA requirements; (2) describe the methods established by agencies to reduce backlogged requests and the effectiveness of those methods; and (3) identify any statutory exemptions that have been used by agencies as the basis for withholding (redacting) information from requesters. To do so, GAO selected 18 agencies based on their size and other factors and assessed their policies against six FOIA requirements. GAO also reviewed the agencies' backlog reduction plans and developed a catalog of statutes that agencies have used to withhold information. All 18 selected agencies had implemented three of six Freedom of Information Act (FOIA) requirements reviewed. Specifically, all agencies had updated response letters to inform requesters of the right to seek assistance from FOIA public liaisons, implemented request tracking systems, and provided training to FOIA personnel. For the three additional requirements, 15 agencies had provided online access to government information, such as frequently requested records, 12 agencies had designated chief FOIA officers, and 12 agencies had published and updated their FOIA regulations on time to inform the public of their operations. Until these agencies address all of the requirements, they increase the risk that the public will lack information that ensures transparency and accountability in government operations. The 18 selected agencies had backlogs of varying sizes, with 4 agencies having backlogs of 1,000 or more requests during fiscal years 2012 through 2016. These 4 agencies reported using best practices identified by the Department of Justice, such as routinely reviewing metrics, as well as other methods, to help reduce their backlogs. Nevertheless, these agencies' backlogs fluctuated over the 5-year period (see figure). The 4 agencies with the largest backlogs attributed challenges in reducing their backlogs to factors such as increases in the number and complexity of FOIA requests. However, these agencies lacked plans that described how they intend to implement best practices to reduce backlogs. Until agencies develop such plans, they will likely continue to struggle to reduce backlogs to a manageable level. Agencies used various types of statutory exemptions to withhold information when processing FOIA requests during fiscal years 2010 to 2016. The majority of these fell into the following categories: personally identifiable information, national security, law enforcement and investigations, and confidential and commercial business information. GAO is making recommendations to 16 agencies to post records online, designate chief FOIA officers, update regulations, and develop plans to reduce backlogs. Nine agencies agreed with the recommendations, 1 both agreed and disagreed, 2 disagreed, and 4 neither agreed nor disagreed. GAO continues to believe the recommendations are valid.", "document_type": "gao"}
{"report": "Under TRICARE, beneficiaries may obtain health care through DOD’s system of military hospitals and clinics, referred to as military treatment facilities (MTF), or from civilian providers. DHA uses managed care support contractors to develop networks of civilian providers, referred to as network providers, to serve all TRICARE beneficiaries in geographic areas called Prime Service Areas. The contractors also perform other customer service functions, such as processing claims and assisting beneficiaries with finding providers. Each TRICARE region within the United States has a managed care support contractor. In July 2016, DOD awarded its fourth generation of TRICARE managed care support contracts. The new contracts reduced the number of TRICARE regions from three (North, South, and West) to two (East and West). On January 1, 2018, the TRICARE program began health care delivery under these contracts. Prior to January 1, 2018, TRICARE’s non-Medicare-eligible beneficiary population could obtain care through three basic health plan options— TRICARE Prime (managed care), TRICARE Standard (fee-for-service), and TRICARE Extra (preferred provider organization)—that varied by enrollment requirements, choices in civilian providers, and whether there were established access standards. Beginning January 1, 2018, the TRICARE Standard and Extra options were terminated and TRICARE Select, a self-managed, preferred provider option, was established. (See table 1.) Beneficiaries using the TRICARE Standard and Extra options as of December 31, 2017, were automatically enrolled in TRICARE Select on January 1, 2018. Beneficiaries are allowed to change their plan at any time prior to January 1, 2019, after which they will only be able to change plans during an annual open enrollment season or within a certain time period following a qualifying life event. In August 2017, DOD estimated that over 2 million beneficiaries will be enrolled in TRICARE Select, which is approximately the same number of beneficiaries who used the TRICARE Standard option. According to DOD, approximately 66 percent of these beneficiaries resided in a Prime Service Area—where networks of civilian providers have been established. In addition to establishing the TRICARE Select option and making other TRICARE program changes, the NDAA 2017 required DOD to develop an implementation plan for TRICARE Select that includes seven specific elements. These elements are, in part, intended to ensure beneficiaries’ access to care under the TRICARE Select option, and they require DOD to ensure that at least 85 percent of the beneficiary population under TRICARE Select is covered by the network by January 1, 2018 (Element A); ensure access standards for appointments for health care that meet or exceed those of high-performing health care systems in the United States, as determined by the Secretary (Element B); establish mechanisms for monitoring compliance with access standards (Element C); establish health care provider-to-beneficiary ratios (Element D); monitor on a monthly basis complaints by beneficiaries with respect to network adequacy and the availability of health care providers (Element E); establish requirements for mechanisms to monitor the responses to complaints by beneficiaries (Element F); and establish mechanisms to evaluate the quality metrics of the network providers established under section 728 (of the NDAA 2017) (Element G). The TRICARE Select implementation plan DOD submitted to Congress included the seven specific elements mandated by the NDAA 2017. Specifically, the implementation plan described the upcoming changes to the TRICARE benefit and included individual sections outlining DOD’s approach for implementing each of the required elements. For example, for element A—ensure that at least 85 percent of the beneficiary population under TRICARE Select is covered by the network by January 1, 2018—DOD described, among other things, how the regional contractors will identify geographic areas with concentrations of TRICARE Select beneficiaries and how they will establish a sufficient provider network to serve that population. We also found that the implementation plan reflected most of the leading practices for sound strategic management planning as identified by our prior work. (See table 2.) These leading practices suggest that strategic planning documents include the following: (1) a mission statement, (2) goals, (3) strategies to achieve goals, (4) plans to assess progress, and (5) identification of challenges and risks. For example, DOD’s implementation plan clearly articulated a mission statement, which is “to ensure beneficiaries receive the right level of care, at the right time, delivered by the right provider.” Additionally, for six of the mandated elements, DOD’s implementation plan outlined the goal, strategies to achieve the goal, and how DOD will assess progress. (See elements A, B, C, D, E, and F in table 2.) This information is supplemented by contract documents that require specific plans and data reports from the managed care support contractors. For example, for element A—ensure that at least 85 percent of the beneficiary population is covered by the network— each managed care support contractor is required to submit monthly performance reports that show that a sufficient number of providers in primary and specialty care are available to meet access requirements. While DOD’s implementation plan addressed many of our leading practices, there were instances where some of the leading practices were only partially addressed or not addressed at all. For example, none of the mandated elements incorporated the leading practice related to identifying the challenges and risks that could affect the success of the element. Element G, Evaluation of Quality Metrics, Remains under Development We also found that the implementation plan partially addressed or did not address the leading practices related to strategies or plans to assess progress for element G—establish mechanisms to evaluate the quality metrics of the network providers. The plan stated that DOD is reviewing the required set of core quality performance metrics and will implement a subset of these performance measures that can be used in future contracts. However, the plan did not include several strategic details such as (1) the process that DOD will use to determine the metrics, (2) the criteria and resources that are needed to select the subset of these performance measures, and (3) how DOD will assess progress and evaluate future metrics. DOD officials told us that a workgroup of departmental officials—including those from DHA and the TRICARE Regional Offices and representatives of the military service branches— with expertise in health care quality are evaluating the metrics for inclusion in the subset of measures based on criteria such as availability of data, the size of the population affected, and resources needed; developing a work plan and time frames to analyze the metrics that are (1) already being reported, (2) not being reported but data are available, and (3) not being reported and require data solutions in order to track information; and making preliminary recommendations on which measures to adopt and which to consider for future adoption. DOD officials explained that some of the details of their approach to the mandated elements had not been finalized when they were completing the implementation plan, including some of the details for element G, which continues to be a work in progress. They added that they were under tight time constraints with competing priorities. They explained that they had to plan for the implementation of TRICARE Select while concurrently transitioning to new managed care support contracts, which had to be modified to incorporate this new health plan option. Therefore, while DOD officials were developing the TRICARE Select implementation plan, they had to determine the specific program requirements for this option and modify the contracts to account for these changes. Leading Practice on Challenges and Risks May Be Captured through Contract Oversight Mechanisms We also found that DOD’s implementation plan did not address the leading practice related to recognizing the challenges or risks to success for any of the seven elements. This practice ensures that an organization considers any external factors that could significantly affect the achievement of its goal. For example, for element A—ensure that at least 85 percent of the beneficiary population is covered by the network—the implementation plan did not address what challenges and risks the contractors might experience in establishing this network. For example, one of the two managed care support contractors stated that it did not have data on the beneficiaries who had sought coverage under TRICARE Standard and Extra as these beneficiaries did not have to enroll in these health plan options. Thus, the contractor explained that it was difficult to establish a baseline for calculating the 85 percent network coverage required for TRICARE Select. The other managed care support contractor told us that specific challenges included negotiating provider discounts in certain areas, identifying which providers participated in the past, and balancing the composition of the network between primary and specialty care. However, DOD officials told us that they considered and planned for the challenges and risks associated with certain elements—including establishing a monitoring and remediation process to help ensure contractors meet the 85 percent network coverage requirement—even though this was not described in the plan. DOD officials explained that their approach to the implementation plan was to create a strategic overview rather than a detailed work plan. These officials also told us that details and time frames related to the mandated elements are captured in contract documents, such as those that establish the managed care support contractors’ reporting and planning requirements. Although these contract documents do not specifically address challenges and risks for each element, officials stated that they have oversight mechanisms in place that allow them to address any challenges faced by these contractors, thereby mitigating any potential risks. For example, DHA officials told us that the managed care support contractors provide status updates on their network expansion progress at weekly transition meetings with DHA and at biweekly meetings with the TRICARE Regional Offices. DHA officials told us that the TRICARE contracts have specific expansion goals and deadlines, such as requiring that 50 percent of network providers are in the system 120 days prior to the start of health care delivery. Given that both TRICARE Select and the new TRICARE contracts were implemented on January 1, 2018, it is too early to determine whether this approach will be sufficient to deal with any upcoming challenges and risks. Our review of element B—ensure access standards for appointments for health care that meet or exceed those of high-performing health care systems in the United States, as determined by the Secretary—noted that the approach described in the implementation plan differs from the approach that DOD intends to use. The implementation plan states that the access standards for TRICARE Select will mirror those of TRICARE Prime, DOD’s managed care option, and that DOD will continue to compare these standards with those of high-performing U.S. health care systems. However, DOD officials told us in interviews that the access standards for TRICARE Select will be developed by each managed care support contractor and approved by DOD. This approach is outlined in contract documents, which state that the contractors are required to develop access-to-care plans that detail how they will ensure access standards that meet or exceed those of high-performing health care systems in the United States. DOD officials told us that they did not intend to suggest in the plan that the TRICARE Prime access standards would be applied to TRICARE Select. Instead, these officials explained that they meant that the access standards for TRICARE Select would be evaluated with the same tools as the access standards for TRICARE Prime. DOD officials further stated that they did not include information about the managed care support contractors proposing their own access standards because they were still developing the approach to this element when the implementation plan was submitted. DOD officials told us they decided on this approach because there is no national model for preferred provider organization access standards, and therefore they did not want to be prescriptive about the access standards for this option. However, as a result of this approach, there is the potential that the managed care support contractors for the East and West regions could be using two different sets of access standards for TRICARE Select. Standards for internal control in the federal government state that management should externally communicate the necessary information to achieve the entity’s objectives. Because the implementation plan does not reflect DOD’s current approach, Congress may be lacking important information, including what responsibilities the contractors have in terms of providing access to care, impeding its ability to provide oversight. On January 1, 2018, DOD implemented significant changes to the TRICARE program, which provides health care to millions of beneficiaries worldwide. One of these changes is the establishment of a new preferred provider option—TRICARE Select—intended to modernize the TRICARE benefit and improve beneficiaries’ access to care. While DOD’s implementation plan for this new option addressed all of the elements that were required, time constraints along with competing priorities impeded DOD’s ability to fully develop its approach for some elements, which are being addressed through other oversight efforts. Furthermore, although one of TRICARE Select’s primary goals is to improve access to care, DOD’s implementation plan does not reflect how access standards will be established. Without the most current information, it will be difficult for Congress to determine whether the department is achieving its mission of ensuring that beneficiaries receive the right level of care, at the right time, delivered by the right provider. We recommend that the Secretary of Defense direct the Assistant Secretary of Defense (Health Affairs) to provide written documentation of DOD’s approach to developing and approving the TRICARE Select access standards, as well as the final access standards, to Congress. (Recommendation 1) We provided a draft of this report to DOD for comment. In its written comments, which are reproduced in Appendix II, DOD concurred with our recommendation. DOD stated that it will provide written documentation about the TRICARE Select access standards to Congress by June 30, 2018. DOD did not provide technical comments. We are sending copies of this report to the Secretary of Defense and appropriate congressional committees. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or at draperd@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix II. This appendix provides additional information regarding six elements identified by our prior work as leading practices for strategic management planning to establish a comprehensive, results-oriented framework. (See table 3.) In addition to the contact named above, Bonnie Anderson (Assistant Director), Daniel Klabunde (Analyst-in-Charge), and Karen Belli made key contributions to this report. Also contributing were Jacquelyn Hamilton and Elizabeth T. Morrison.", "summary": "DOD offers health care services to approximately 9.4 million eligible beneficiaries through TRICARE, DOD's regionally structured health care program. In each of its regions, DOD uses contractors to manage health care delivery through civilian provider networks, among other tasks. The NDAA 2017 made several changes to the TRICARE program, including the establishment of a new preferred provider network health plan option called TRICARE Select. The NDAA 2017 also required DOD to develop an implementation plan for TRICARE Select that addresses seven specific mandated elements on access to care, beneficiary complaints, and quality metrics for network providers. The NDAA 2017 included a provision for GAO to review the implementation plan. This report examines the extent to which DOD's implementation plan addressed the mandated elements. GAO evaluated DOD's implementation plan using leading planning practices identified in GAO's prior work and standards for internal control. GAO examined program policies, procedures, and contracts and interviewed DOD officials and TRICARE regional contractors. The Department of Defense's (DOD) TRICARE Select Implementation Plan addressed the seven specific elements mandated by the National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017). These elements are Element A: ensuring that at least 85 percent of the TRICARE Select beneficiary population is covered by the network by January 1, 2018; Element B: ensuring access standards for health care appointments; Element C: establishing mechanisms for monitoring compliance with standards for access to care; Element D: establishing health care provider-to-beneficiary ratios; Element E: monitoring complaints by beneficiaries with respect to network adequacy and health care provider availability; Element F: establishing requirements for mechanisms to monitor the responses to complaints by beneficiaries; and Element G: establishing mechanisms to evaluate the quality metrics of the network providers. GAO also assessed the implementation plan against leading practices for sound strategic management planning and found that it incorporated many of the practices, such as establishing goals, strategies to achieve goals, and plans to assess progress. However, a few of the leading practices were only partially incorporated or not incorporated at all. For example, the implementation plan did not always fully address the leading practice that planning documents include strategies to achieve goals and plans to assess progress. DOD officials explained that some of the details of their approach to the elements had not been finalized when they were completing the implementation plan. These officials added that their approach to the implementation plan was to create a strategic overview, and that some of the details are contained in contract documents and monitored through their oversight responsibilities. Furthermore, GAO's assessment of the plan's elements found that the approach outlined in the implementation plan for ensuring access standards for health care appointments (Element B) is different from the approach DOD intends to use. The plan noted that DOD will use the access standards for TRICARE Prime—a managed care option—for TRICARE Select. However, DOD officials told GAO that the contractors are responsible for developing their own access standards, which DOD must approve. These officials added that DOD did not include information about the contractors proposing their own access standards because DOD was still developing its approach to this element when the plan was submitted. Because the implementation plan does not reflect DOD's current approach, Congress may not have the information it needs about the contractors' responsibilities for providing access to care, impeding its ability to provide oversight. GAO recommends that DOD provide written documentation of its approach for developing and approving the TRICARE Select access standards, as well as the final access standards, to Congress. DOD agreed with GAO's recommendation.", "document_type": "gao"}
{"report": "The goal of SNAP, formerly known as the federal Food Stamp Program, is to help low-income individuals and households obtain a more nutritious diet by supplementing their income with benefits to purchase allowed food items. The federal government pays the full cost of the benefits and shares the responsibility and costs of administering the program with the states. The overarching rules governing SNAP are set at the federal level. Accordingly, FNS is responsible for promulgating program regulations and ensuring that state officials administer the program in compliance with program rules. FNS officials in seven regional offices assist headquarters officials in this oversight work. FNS also determines which retailers are eligible to accept SNAP benefits for food purchases and investigates and resolves cases of retailer fraud. The states, or in some cases counties, administer the program by determining whether households meet the program’s eligibility requirements, calculating monthly benefits for qualified households, and issuing benefits to participants on an electronic benefit transfer (EBT) card. States are also responsible for investigating possible violations by benefit recipients and pursuing and acting on those violations that are deemed intentional. Intentional program violations include acts of fraud, which involve obtaining something of value through willful misrepresentation. Eligibility fraud involves individuals making false or misleading statements in order to obtain benefits, including statements about household composition, household expenses, and income. Failing to report changes to household circumstances that may affect benefits can also result in eligibility fraud under certain circumstances. When recipients are certified for SNAP, state agencies assign them to a reporting system for notifying the state of certain changes. These changes include when they have a change of address, both in-state or out-of-state. Some systems require recipients to report within a certain period of time of the change occurring, often within 10 days. Other reporting systems– including simplified reporting – require recipients to submit reports periodically. Households subject to reporting on a periodic basis must generally submit reports not less often than once every 6 months. One type of eligibility fraud is dual participation, in which a recipient receives benefits in more than one state in the same month. Another type of SNAP fraud is trafficking, in which benefits are exchanged for cash or non-food goods and services. Trafficking may occur when recipients collaborate with retailers who pay cash for SNAP benefits. For example, a retailer might allow a recipient to charge $100 on his or her EBT card and then pay the recipient $50 instead of providing food. Trafficking also occurs when a recipient exchanges an EBT card and the corresponding Personal Identification Number (PIN) for cash or non-food goods or services (e.g., rent or transportation) from another individual. According to a September 2012 USDA Office of Inspector General (OIG) report, the magnitude of program abuse due to recipient fraud is unknown because states do not have uniform ways of compiling such data. OIG recommended that FNS determine the feasibility of creating a uniform methodology for states to calculate their recipient fraud rate. In 2014, FNS responded that it would be infeasible to implement the recommendation as it would require legislative authority mandating significant state investment of time and resources in investigating, prosecuting, and reporting fraud beyond current requirements. States must adhere to various federal requirements for detecting SNAP recipient fraud, conducting investigations, and providing due process prior to disqualifying recipients from participating in the program. The household is responsible for repaying ill-gotten or misused benefits. States may generally retain 35 percent of the fraudulent benefits they recover, and the rest are returned to the federal government. The use of data analytics enables the discovery and communication of meaningful patterns in data so that states can determine which potential SNAP fraud cases to review in detail. States have access to various types of data in their case management systems, including recipient-provided information and benefits data collected throughout the SNAP eligibility determination process. Other information sources available to states include transaction data collected by EBT processors, data from previous fraud investigations, and third-party data from other government agencies or commercial vendors (see fig. 1). Data-analytics activities can include a variety of techniques to prevent and detect fraud, including data matching and data mining. Data matching is the large scale comparison of records and files to detect errors or incorrect information. It can be used to verify information provided by recipients or detect unreported changes. Data mining is the use of automated computer algorithms to detect otherwise hidden patterns, correlations, or anomalies within large data sets indicative of potential fraud, thus assisting programs in recovering these dollars (see fig. 2). Federal laws and regulations require states to conduct certain data matches when an application for benefits is submitted and other times to verify an individual’s reported employment and immigration status, as well as to ensure the information provided is not for an individual who is incarcerated, deceased, or disqualified from the program (see table 1). GAO’s Fraud Risk Framework identifies the following leading practices to help managers effectively use data to mitigate the likelihood and impact of fraud (see table 2). While these leading practices can help managers design and implement effective data-analytic tools and techniques to prevent and detect potential fraud, as discussed in the Fraud Risk Framework, these techniques alone may not be sufficient to ensure that ineligible individuals do not fraudulently enroll in a program or receive benefits. As a result, managers may need to combine data-analytics activities with additional controls as part of their efforts to combat fraud, in a strategic, risk-based manner. A relatively large number of SNAP households made purchases outside their home state, as allowed under the SNAP statute, but the total dollar value of out-of-state purchases was small compared to SNAP purchases overall, according to our analysis of FNS SNAP transaction data. We identified approximately 5.5 million households that made out-of-state SNAP purchases in fiscal year 2017. In comparison, FNS reported that the monthly average number of SNAP households was approximately 21 million in fiscal year 2017. Out-of-state purchases made up approximately 3 percent of all SNAP benefits in fiscal year 2017, with a total dollar value of about $2 billion (see fig. 3). Out-of-state purchases may occur for different reasons, one of which may be because a recipient lives on or near a state border, and regularly shops across the state line. For example, District of Columbia recipients spent about half of their SNAP benefits out of state in fiscal year 2017. All District of Columbia residents are in close proximity to both Maryland and Virginia, which are no more than approximately 7 miles from any point in the District. In general, about a third (34 percent) of households nationwide with out-of-state purchases spent $50 or less on those purchases in fiscal year 2017. See Appendix II for a detailed listing of out- of-state purchases by state. Out-of-state purchases may also indicate potential program violations, including eligibility fraud or trafficking. However, because out-of-state purchases are permitted, analysis of additional household and transaction information is generally needed to identify potential fraud, as discussed below. Of out-of-state transactions, purchases in a state that did not border the recipient’s home state (non-border state) made up approximately 1 percent of all SNAP benefits in fiscal year 2017, as shown in figure 3 above. There were 2.2 million SNAP households that made at least one purchase in a non-border state in fiscal year 2017, and the percent of SNAP benefits spent in a non-border state in that year ranged between approximately 0.6 percent and 1.9 percent. In fiscal year 2017, states whose SNAP recipients spent the highest percentage of their SNAP benefits in non-border states included Colorado, Hawaii, Montana, North Dakota, and Rhode Island. Overall, we found that for fiscal year 2017, less than 0.5 percent of households in our three selected states spent all their SNAP benefits for the entire fiscal year in a non-border state (see table 3). Use of benefits in stores that are a long distance from a recipient’s residence for extended periods of time, such as purchases exclusively in non-border states over multiple months, could be an indicator of program violations, including eligibility fraud. The total value of SNAP transactions by households in our three selected states that made all purchases in non- border states in fiscal year 2017 was approximately $1.9 million. These purchases represent about 0.1 percent of all SNAP benefits for fiscal year 2017 in the three selected states. When SNAP benefits are used in a non-border state over an extended period of time, this could indicate possible intentional program violations such as an unreported move and other household changes that could impact eligibility. SNAP officials we interviewed said that in some cases a recipient may delay reporting a move if they are enrolled in SNAP in a state with a lower barrier to entry to the program. At the same time, the rules around reporting a move and residency may make it difficult to determine when a recipient has violated program rules. Recipients are not required to immediately report a move in some cases due to simplified reporting rules that allow a recipient to report household changes only periodically, generally every 6 months. Also, officials we interviewed in the three selected states told us that there are no set time limits for a SNAP recipient to reside in a new state before the former state revokes the recipient’s residency. For example, a recipient may be out of state for an extended period of time for personal reasons, such as helping a relative, but still intend to reside in the state where they are enrolled in SNAP. In that case, according to state officials, the recipient would not necessarily need to report a move and may not be violating program rules. In addition to the program violations related to an unreported move, use of SNAP benefits in a non-border state over extended periods of time could bring into question whether a recipient is also enrolled in SNAP in another state (i.e., dual participation). Also, it may indicate changes in the household that could impact eligibility, including questions about whether a recipient is earning unreported income in the state where they are using their benefits. While state SNAP agencies stated that they conduct data matching meant to detect dual participation and unreported income, states also noted challenges with these matches. State agencies told us that they use the PARIS system to detect possible dual participation, and both NDNH and the Work Number to identify recipient income. However, challenges officials cited in using these systems included lags in the data provided, and additional work required to confirm data. The use of data analytics to review recipient transaction data may help states identify suspicious household activity more easily than with data matching alone given the challenges associated with these systems. In addition, data analytics may be another tool to help states identify suspicious activities in a timely manner. Given the possibility for eligibility fraud or other program violations, we plan to refer the households that our data analysis identified as spending all benefits in a non-border state to their respective state SNAP agencies for further investigation. Based on our analysis of fiscal year 2017 transaction data in the three selected states, we found that SNAP households without out-of-state purchases were generally just as likely to have made the types of purchases that may indicate trafficking of benefits as households with out- of-state purchases. Overall, we found that approximately 2 percent of all households in the three selected states, including both households that shopped out-of-state and those that shopped in state only, had a high number of purchases potentially indicative of SNAP trafficking. However, for two selected states, there was little to no difference in the percentage of households with this activity when we compared households that only shopped in their home state and households that shopped out-of-state. For one state, a greater percentage of households that shopped out-of- state had purchases indicative of SNAP trafficking, but households in this state also had different shopping patterns in general, as discussed below. In addition, for households that shopped out-of-state, few of the transactions we flagged as indicators of potential trafficking occurred outside the home state. Although we found that rates of trafficking indicators were generally similar between households that shopped out- of-state and those that only shopped in their state of residence, the analysis of transaction data for other factors may allow states to identify households at risk of trafficking and make them a higher priority for investigation. Our prior work reported on the benefits of SNAP transaction data analysis for this purpose. Specifically, we found that for North Dakota and Washington, households that made one or more purchases out of state had similar rates of purchases flagged for potential trafficking compared to households that shopped only in their home state. This held true both for households that only shopped in border states, as well as for households that shopped in non-border states (see table 4). For example, 1.4 percent of Washington SNAP households that only shopped in their home state had purchases resulting in 20 or more trafficking flags in fiscal year 2017, and 1.8 percent of Washington households that also shopped in border states had 20 or more trafficking flags. For Washington households that also shopped in non-border states, 1.5 percent made purchases resulting in 20 or more flags. Our analysis of District of Columbia households identified higher rates of potential trafficking indicators for households that shopped out-of-state, compared to the other two selected states. Specifically, 1.4 percent of District of Columbia SNAP households that only shopped in their home state had purchases resulting in 20 or more trafficking flags in fiscal year 2017, and 5.7 percent of households that also shopped in border states had 20 or more trafficking flags. For District of Columbia households that also shopped in non-border states, 8 percent made purchases resulting in 20 or more flags. However, the difference in rates for District of Columbia trafficking indicators may reflect the different shopping patterns of its households when compared to other states. As stated previously, District of Columbia households made about half of their SNAP purchases out-of- state, which is a significantly higher amount compared to any other state. And all District of Columbia households are in close proximity to the bordering states of Maryland and Virginia, approximately 7 miles or less. Also, a small percentage of District of Columbia households shopped only in their home state in fiscal year 2017—approximately 7 percent of all households reviewed. In comparison, approximately 62 percent of North Dakota households, and 76 percent of Washington households made all purchases in their home state. For the households in North Dakota and Washington that shopped out-of- state in fiscal year 2017, we found that most transactions indicating potential trafficking occurred in the recipient’s home state rather than out- of-state (see fig. 4). District of Columbia households were the exception and most transactions indicating potential trafficking occurred in the recipient’s home state or in a border state. However, the pattern of trafficking flags also aligns with where District of Columbia SNAP recipients tend to shop, given that approximately half of their SNAP purchases were made in border states in fiscal year 2017. While we identified households in selected states with out-of-state purchases that indicated potential trafficking, identifying such households required additional data analysis of factors beyond purchase location. Analysis of additional data elements may allow states to better identify potential trafficking requiring investigation. We found out-of-state purchase information alone is of limited benefit to identify SNAP households that may be engaged in trafficking. Officials we interviewed in all seven of the states we selected for review of use of data analytics reported conducting federally required data matching to verify information provided by households when they initially apply or recertify for SNAP benefits. Federal law and regulations require states to conduct certain data matches when determining SNAP eligibility, including matches that provide information on people who may be incarcerated, deceased, or disqualified from receiving SNAP benefits due to intentional program violations. The five databases that state SNAP agencies are required to conduct matches against when determining SNAP eligibility are the Department of Health and Human Services’ (HHS) National Directory of New Hires, the Social Security Administration’s (SSA) Prisoner Verification System, SSA’s Death Master File, U.S. Citizenship and Immigration Services’ Systematic Alien Verification for Entitlements and FNS’s Electronic Disqualified Recipient System (eDRS). As we previously reported, state SNAP agencies use data matching to obtain information about households’ income, verify information provided by households, or identify potential discrepancies. Specifically, agencies are required to verify household data electronically by matching their data with specific government sources and have the option to match against additional data sources. In addition to the required data matching, officials we interviewed in all seven selected states also reported conducting other data matching with a range of internal and external data sources. These matches used information from federal, state, and commercial data sources on earned income from employment or self-employment or unearned income from other government benefit programs. According to state officials, these sources included Unemployment Insurance information from state workforce agencies, the PARIS file from HHS, and The Work Number, a commercial verification service. Other sources that could be used include Old-Age, Survivors, and Disability Insurance income information and Supplemental Security Income information from multiple data matches with the SSA. In addition to verifying applicants’ initial eligibility, data matching can identify changes in key information that could affect continued eligibility. Beyond data matching, officials in all seven selected states said that they had access to EBT reports notifying them of suspicious transactions, although the type and frequency of use of these reports varied. For example, while some state officials said that they manually generated reports on an ad hoc basis, other state officials said that they had automated reports that they received and reviewed on a weekly or monthly basis. As we previously reported, automating data analytics tests can allow agencies to monitor large amounts of data more efficiently than with manual tests. Furthermore, officials in all seven selected states reported that they had examined out-of-state transactions to some extent. Some states had access to out-of-state reports as part of their suite of EBT reports but did not review them often, while other states automatically received alerts if households consistently used benefits out of state over a certain extended period of time, such as 70 or 90 days. For example, officials from Massachusetts told us that they flag certain transactions to help ensure recipients comply with the state’s residency requirements for eligibility. Specifically, after a client spends their benefits out of state for 70 days or more, the state agency will send a letter asking the client to prove they are still a Massachusetts resident. Officials generally reported that tracking out-of-state transactions was most useful for finding potential dual participation—a household receiving benefits in two or more states. Officials we interviewed in five of seven selected states reported conducting further, more sophisticated data analytics involving data mining—the active and recurring monitoring of EBT transactions using algorithms to detect and flag transactions that indicate potential recipient fraud, often on a real-time or near real-time basis. For example, officials told us that these states—the District of Columbia, Massachusetts, Mississippi, Washington, and Wisconsin—examined a range of indicators of potential recipient fraud. Some of the five selected states automated their data mining to monitor data for potential fraud indicators on a continuous, real-time basis. In addition to data mining, some of these five states reported using other more advanced data analytics techniques, including mapping analysis and a form of predictive analysis to identify SNAP purchases that could indicate trafficking. For example, officials in the District of Columbia reported using location mapping to identify households that spent their benefits long distances from home. Officials we interviewed in Wisconsin reported developing an automated check intended to flag particular types of case characteristics indicative of potential fraud. According to the Wisconsin officials, if a particular case is flagged, a caseworker must follow up and provide extra scrutiny before the case can move forward in the eligibility process. As we previously reported, certain types of predictive data analytics can increase the effectiveness of anti-fraud programs by identifying particular types of potentially fraudulent behavior. Officials we interviewed in the five selected states that reported conducting additional data analytics—the District of Columbia, Massachusetts, Mississippi, Washington, and Wisconsin— employed more of GAO’s leading practices for data analytics than the two states that used data matching alone—New Mexico and North Dakota. Organizational and leadership support. The five states with more sophisticated data analytics techniques all reported to us that they had organizational and leadership support for those activities. GAO’s leading practices state that to be effective, data-analytics initiatives need support across the program and, in particular, from program managers. Officials in these states cited support from executive and legislative state leadership for the use of data analytics to combat SNAP recipient fraud. For example, officials in Wisconsin reported that the governor’s office worked to centralize the agency’s data- analytics activities and support infrastructure to improve business processes. Officials in Mississippi told us that the state’s executive leadership fully supports the use of data to combat SNAP recipient fraud and that the state legislature in 2017 passed a law to assist in the identification of waste, fraud, and abuse. Pursue external data. These states also reported to us that they were able to obtain external data necessary for their data analytics activities. For example, officials in Mississippi told us that they interface with an array of data sources, including the National Accuracy Clearinghouse, the state Department of Employment Security, and the state Department of Education, among others. GAO’s leading practices state that using data from other federal agencies or third-party sources can help managers identify potential instances of fraud. As we mentioned previously, the states that reported conducting additional matching beyond that required by federal law and regulation also reported using an array of federal, state, and third-party sources for these data matches. Consider program rules or previously encountered schemes. These five states also reported that they considered program rules and known or previously encountered fraud schemes to help design their data analytics practices, another of GAO’s leading practices for data analytics. These leading practices note that by using information on previously encountered fraud schemes or known fraud risks, managers can identify signs of fraud (i.e., red flags) that may exist within their data. For example, two states reported that they change their data analytics techniques in response to changing patterns of fraud. All five selected states that reported conducting additional data analytics practices beyond data matching cited a number of associated advantages, including increased efficiency and effectiveness of their anti- fraud efforts. Automating fraud detection. All five states reported that data analytics provided the advantage of automating the detection of potentially fraudulent activity. For example, officials in Mississippi noted that a new investigation management system implemented in their state would use algorithms to detect potential fraud and automatically generate flags, whereas in the past they had to examine transactions manually. Financial savings. Four states reported that data analytics had the advantage of financial savings through the collection of overpayments and the closure of cases. For example, officials in Washington said that its data matching activities saved millions of dollars through the closure of cases. Officials in Mississippi reported that its overpayment collections increased $2 million since moving to a new investigation management system a few years ago that incorporates more data analytics techniques. Prioritizing and enhancing investigations. Four states reported that data analytics helped them prioritize and enhance fraud investigations. For example, officials in Washington said that they had a system in place that used an algorithm to rank each fraud referral based on a number of factors and moved higher-risk referrals to the top of the list of investigations. Officials in Wisconsin said that they combined eligibility, transaction, and retailer data and analyzed it to produce a prioritized list of individuals who appeared most likely to have trafficked at a specific retailer, allowing them to focus their investigative resources on cases most likely to be fraud. Preventing fraud. Finally, two states reported that data analytics had the advantage of improving the return on investment of anti-fraud activities through the prevention of fraud before it occurs. For example, officials in Wisconsin estimated that data analytics has helped them prevent a large proportion of fraud before it occurs, thereby improving the cost-benefit of their anti-fraud practices. Officials in Mississippi noted that data analytics can be an effective deterrent. Officials we interviewed in all seven selected states reported a range of organizational and resource challenges that either prevented them from using more advanced data analytics techniques or made their current data analytics practices difficult to implement. Quantifying benefits of data analytics. Officials we interviewed in two states said it was challenging to quantify the benefits of data analytics, therefore resulting in a lack of sound evidence for supporting the utility of this type of work. For example, officials in Washington reported that it was difficult to conduct a cost-benefit analysis of data analytics because of the challenge of quantifying how often fraud is prevented before it occurs. Officials in Wisconsin reported that it attempted to measure future savings from fraud prevention but that there is no guidance for how to determine these savings. Obtaining organizational support. Officials in two states reported that it was challenging to obtain sufficient organizational support for conducting data analytics. For example, officials in North Dakota reported that they could not say how much support exists in the state government to pursue additional resources for data analytics. Those in the District of Columbia noted that it is sometimes difficult to convince certain employees of the need for data analytics to detect fraud. Appearing to criminalize legitimate use. Officials in three states said that a challenge to using more advanced data analytics was that it could appear to profile recipients or make it appear to the general public and to policy-makers that certain legitimate uses of SNAP benefits, such as using benefits out-of-state, were not allowed. For example, Washington tracked the number of replacement EBT cards as a possible indicator of fraud, but officials said that there were many cases in which the client had legitimate reasons for needing a high number of replacement cards, such as mental health issues or homelessness. Washington officials further noted the challenge of using demographic data in a predictive model, reporting that it puts them at risk of profiling even though it can be helpful. For example, when they examined recipients with high balances on their EBT cards, demographic information provided an explanation. In particular, elderly individuals were being frugal with their benefits. Dealing with changing patterns of fraud. Officials we interviewed in three states said that a challenge to using data analytics was dealing with changing patterns of fraud. They said that the characteristics of transactions that may indicate potential fraud are constantly changing as fraudulent actors change their tactics in response to state enforcement. For example, officials in Mississippi said that recipients committing fraud might change from high-dollar to low-dollar transactions, in which case the state would need to adjust its monitoring accordingly. Obtaining necessary data. Officials we interviewed also reported challenges with obtaining data needed to conduct data analytics. Officials in three states said that simplified reporting presents a challenge to using data analytics to detect potential recipient fraud. Specifically, simplified reporting made it challenging to use certain information as potentially indicative of fraud because recipients are not required to report certain changes—for example, a move out of state—until it is time for them to recertify for benefits. In addition, officials in three states reported a challenge in verifying necessary data in order for them to be considered reliable for use. For example, Massachusetts reported that one of the biggest challenges of developing investigative leads through data analytics is that not all data are considered equally reliable. For SNAP, FNS guidance defines some data matches as “verified upon receipt” if the match is with a primary or original source of the data (such as information on a government benefit provided by the administering agency, such as SSA). Eligibility workers can use this information without taking additional steps to verify that the data are accurate, according to FNS guidance. In contrast, data from a secondary source, defined in the guidance as not being verified upon receipt, require additional verification before the state agency can take action on an eligibility determination. High costs and resource demands. Officials in six selected states cited the high costs and resource demands of using advanced data analytics techniques. For example, officials we interviewed in North Dakota, which conducted only data matching, said that they lacked the funding and staff resources to use more advanced techniques. Officials we interviewed in New Mexico noted that they lacked the staff resources to use data analytics. Officials from North Dakota said that they had the option to procure a data analytics tool, but said that the costs were prohibitively high. Officials in Wisconsin, which was employing more data analytics, said that they were not able to purchase access to a third-party data source using SNAP funding alone, and that they had to seek funding from another federal program in order to afford these efforts. FNS provided individualized assistance and training to several states across the country to build their capacity for data analytics on SNAP, consistent with several of GAO’s leading practices. FNS provided assistance through grants, pilot projects, and training at conferences. The pilot projects also informed FNS’s early efforts to help states improve their fraud prevention, detection, and investigation processes using data analytics. Specifically, in recent years, FNS’s assistance to states has aligned with 4 of the 10 leading practices for data analytics identified by GAO in its Fraud Risk Framework. In fiscal years 2014 through 2017, FNS conducted a 10-state pilot project to identify and test promising practices in state fraud prevention and detection. As part of the project, each participating state received training and technical assistance in the use of data analytics, in addition to a review of its business processes. For example, officials from Utah, who participated in the pilot, said that FNS provided training to them on mining social media data. The officials added that the timing of the training was excellent because the state was beginning to build its capability for data analytics on its own. They said that their data analytics team has incorporated what they learned during the pilot and use various data analytic techniques every month. As a result, according to officials, the state’s overpayment collections increased. In fiscal years 2014 and 2015, FNS awarded nine Recipient Trafficking Prevention Grants and five Recipient Integrity Information Technology Grants to a total of 13 states, some of which funded training and staff to perform SNAP data analytics. For example, in fiscal year 2014, Kentucky received a grant to purchase and receive training on an analytic tool with the ability to analyze data and capture posts coming from various social media sites. In fiscal year 2015, Alaska received a grant that included 3 months of training related to the installation of the state’s new fraud case management system that, among other things, would provide real-time data and automate manual processes to detect fraud and track cases. According to Alaska’s grant application, this would allow the state to devote more time to investigations, prosecutions, recoupment, and analysis and increase the number of completed investigations. State officials we interviewed said that they also gained data analytics knowledge and skills from other states at conference workshops. For example, officials from North Dakota told us that they attended a conference presentation in which officials from another state discussed a performance measure that is designed to assess the savings associated with detecting SNAP fraud. FNS has provided grant funding and training to some states to help them combine data from different databases within the state to facilitate SNAP data analytics. For example, FNS’s fiscal year 2015 information technology grants helped five states develop centralized data systems and consolidate data from multiple outdated systems. Nevada received a grant to fund the acquisition of a new data system that, according to its grant application, would combine the state’s data on known SNAP fraud cases with transaction data and third-party data sets. The data on known fraud cases would be used to continuously refine data analyses to identify similar anomalies and patterns in the transaction data. Maine used its grant to acquire a new investigation case management system that consolidates data from multiple systems in a centralized repository. Similarly, New Jersey received a grant to acquire new computer systems that, according to its grant application, will integrate SNAP case management system data with data from several of the state’s data systems, allowing investigators to perform analyses in real time. In addition to the grants, in fiscal year 2016, FNS sponsored a 5-day course on fraud detection that demonstrated how states could combine eligibility data with transaction and other data to identify potential fraud. Officials from six states participated. FNS has provided grants to assist some states in accessing and using external sources for data matching. For example, in fiscal year 2014, FNS provided recipient trafficking prevention grants to three states—Florida, Nevada, and Ohio—to update the systems that they use to match their SNAP recipients and those that have been disqualified in the state with FNS’s national database of disqualified recipients. According to FNS, each grantee state planned to use the funds to link its system with FNS’s database through the web rather than using a “batch” processing system, which will allow them to match data on applicants at the time of application or recertification rather than at specific intervals after eligibility is determined. Florida officials mentioned in the related grant proposal that using the state’s current batch processing system meant that other states did not have real-time access to information about the state’s disqualified recipients, thereby potentially increasing the chance of an ineligible individual receiving benefits. In addition, FNS administered a grant on behalf of OMB, which funded a pilot program for five southeastern states to develop the National Accuracy Clearinghouse (NAC), a data sharing system that allows participating states to identify applicants who are receiving benefits in the partnering states in near-real time. According to one state official, a primary benefit of the NAC is that it enables each participating state to match data on individual beneficiaries across five states without having to connect to five different states’ computer systems. One member of the NAC consortium from Florida said that the ability to match in near-real time is helpful because the data available in the PARIS system is older and would only identify individuals potentially receiving benefits in multiple states months after they have occurred, rather than at the time of application. As we have previously reported, data on benefit receipts is updated quarterly in PARIS. FNS has funded pilot projects, training, and grants to assist some states in developing their capacity for data mining to identify potential fraud. FNS’s 10-state pilot to test advanced data analytics techniques included the use of data mining, among other data analytic techniques. One of the techniques involved mining recipient transaction data for households that had shopped at disqualified retailers to develop a prioritized list of retailers and recipients to investigate. According to state officials we interviewed in Wisconsin, the technique automated a time and labor intensive process that state analysts had previously performed manually. The pilot project also used other data mining techniques to develop profiles of recipients who commit fraud. For instance, in Utah, the data analysis showed that they are more likely to have multiple replacement EBT cards and make more purchases from small stores than other recipients. At the end of the pilot, FNS sponsored a training course that included detailed instruction on data mining. Although past efforts by FNS have been limited to some states and encouraged some leading practices, more recently, in May 2018, FNS released a SNAP Fraud Framework that provides more comprehensive guidance to help states adopt all of GAO’s 10 leading practices for data analytics. Specifically, FNS’s SNAP Fraud Framework provides a collection of examples, promising practices, and procedures to help state agencies with the prevention and detection of SNAP fraud that encompass all 10 data analytics leading practices from GAO’s Fraud Risk Framework. (For a comparison of the practices in the two frameworks, see appendix III.) According to FNS officials, the SNAP Fraud Framework is meant to take a holistic, integrated approach to fraud, including data analytics, but they recognize that states differ in their readiness to adopt analytics. The framework’s data analytics section provides a range of approaches, examples, case studies, and methods that allow all states to begin embedding analytics into their processes. FNS officials reported that they began conducting outreach to state officials about the framework in the summer of 2018. FNS officials said that they are also considering using grant funds to assist states with the implementation of components of the framework. Furthermore, FNS officials said that some of the potential technical assistance may include showing states how to develop their own analytic tools. FNS has also developed a maturity assessment to evaluate each state’s capacity to implement the various components of the fraud framework. It includes a state’s use of data analytics for fraud detection and investigations, and its learning and development opportunities for stakeholders who use the results of data analytics, such as investigators, hearing officials, and court officials. According to FNS officials, FNS’s regional offices will conduct maturity assessments as part of management reviews by the end of fiscal year 2018. Although FNS has assisted some states in developing their data analytic capabilities, the methods it has used to do so were meant to reach only a limited number of states. Specifically, much of FNS’s direct assistance to states came in the form of pilot projects, competitive grants, or conferences. According to officials, FNS is in the early stages of promoting states’ use of data analytics for SNAP fraud prevention and detection, and its efforts have focused on assessing the current capacity of states to use data analytics and determining analytic practices that are effective. Furthermore, FNS’s efforts generally had specific end dates and did not provide ongoing assistance to reach a broader group of states and provide them with the knowledge and tools to develop and maintain their data analytics efforts. (See table 5 for more information on the reach of FNS’s direct assistance efforts.) Although FNS provided some training on using data analytics, it was not conducted on a recurring basis, and state officials we interviewed expressed concerns about their access to information on successful data analytics approaches. Officials we interviewed in five of our seven selected states said that they attended FNS conferences that provided training in data analytics and participated in regional discussions on the topic; however, these events were provided occasionally and limited to states within the region. State officials said that participating in conferences in which they could learn from other states’ experiences was particularly helpful, and they wanted more opportunities to do so. State officials also told us that it would be beneficial if FNS took a more active role in disseminating states’ successful practices, particularly with regard to data analytics. Further communications about data analytics would be consistent with federal internal control standards that call for agencies to communicate necessary quality information to external parties in order to achieve the agency’s objectives. Federal agencies can support external parties, such as state agencies, in achieving the federal agency’s objectives by sharing information on effective practices used by the program or other external parties. Furthermore, officials we interviewed in selected states most frequently cited high costs and resource demands as a challenge to using advanced data analytics techniques. Although FNS has provided some financial support to state efforts, officials in two states that we reviewed told us that they were not always able to sustain efforts beyond the life of the FNS pilot or grant. For example, officials we interviewed from Wisconsin said that FNS’s contractor for the 10-state pilot, in an effort separate from the contract, developed a tool that identified SNAP purchases made from disqualified SNAP retailers. Although the state officials found the tool to be highly efficient because it could sift through large amounts of data, the tool was only available to the state for a fee, which they said it could not afford. Similarly, officials from Washington told us that as part of a recipient trafficking prevention grant, the state was able to hire two investigators to detect potential SNAP fraud that may be occurring via social media. However, according to state officials, the state was unable to maintain the effort after the grant ended. In our prior work on establishing data analytic programs to address fraud, we noted that one way to handle resource challenges is to identify opportunities that leverage a program’s existing capabilities. In September 2016, GAO convened a forum of data-analysis experts to discuss considerations for entities establishing and refining data analytics programs, during which the costs of such programs were raised. Panelists, which included officials from FNS, noted that in developing a data analytics program, an entity should consider ways of leveraging resources throughout the entity. For example, panelists suggested that an entity could improve its data analytics group by combining a data warehouse from one department with existing statistical software from another and incorporating it with its current fraud-prevention system. The forum also suggested that a data analytics group should look across the agency to find staff that may have an interest or experience in working with data. Panelists noted that such efforts may be improved by seeking staff from a diverse set of positions and perspectives, including auditors, evaluators, investigators, and attorneys. Similarly, some state officials we interviewed shared creative ways to leverage existing resources. For example, officials from Florida and Wisconsin stated that they were able to leverage recovered funds from other programs to purchase access to a commercial database that matches eligibility data for individuals across related programs. In Mississippi, officials said that they used SNAP transaction data to identify individuals living out of state and then determine whether those individuals were ineligible for both SNAP and other assistance programs. By combining data and analyses across two programs, the state officials said that they were able to close more cases and significantly increase cost savings. However, other state officials noted that leveraging resources, especially data, poses challenges that states will need to learn how to resolve. Specifically, some states reported facing problems sharing data across different systems and with restrictions on sharing sensitive personal information. For example, officials representing four states from the American Association of SNAP Directors (AASD) told us that, for states to leverage data, SNAP states’ data systems need to be integrated across states. However, in their view, the cost of integration may exceed the benefits from integrating the data. In addition, state officials said that in order to leverage personal data, some states as well as programs in the same state will need to reach agreements that define how data will be extracted and used while protecting privacy. For example, a Wisconsin official told us that its data analytics group has difficulty acquiring data across programs within the state because of confidentiality and privacy rules as well as the difficulty of reaching data-sharing agreements with other programs. Moving forward, FNS’s SNAP Fraud Framework, combined with its maturity assessment, will form the core of FNS’s efforts to assist states with data analytics in a broad-based, systematic manner. According to FNS officials, the agency will be conducting outreach to states about the fraud framework and assessing both states’ capacities in data analytics and barriers to gaining the necessary knowledge and tools for developing and maintaining those efforts. To ensure that SNAP funds are used for the purposes for which they were intended, both the federal government and state agencies should have appropriate controls for detecting and addressing fraud. The use of data analytics, such as mapping and predictive analysis, may help SNAP agencies increase program integrity and improve administrative efficiency. Data mining and data matching techniques can help identify potential SNAP fraud, and predictive models can help identify characteristics of SNAP traffickers. Our use of analytics on SNAP out-of- state transaction data from three selected states identified only slight differences between those households who shopped out of state and those who did not, suggesting that analyses of other data elements that have been shown to be indicative of potential trafficking may allow states to better identify potential trafficking and, thereby, better target resources. Although FNS has efforts underway to promote the use of data analytics to improve SNAP fraud detection through its fraud framework and maturity assessment, officials in our selected states cited challenges with accessing and maintaining needed resources such as staff, technology, and tools. While these challenges may limit states’ ability to implement data analytics, some of our selected states have successfully overcome such challenges to implement or enhance data analytics programs. For example, two states described leveraging recovered funds and reinvesting them to combat fraud. Another state leveraged transaction data across two programs, resulting in financial savings and enhanced collections, which could be reinvested to combat fraud. As FNS conducts outreach to help states implement its fraud framework and uses its maturity assessment to assess states’ anti-fraud capabilities, it has an opportunity to regularly assist states with adopting advanced data analytic techniques. Based on the experiences described by state officials, finding ways that states can leverage existing resources to improve their data analytic capabilities may be an important part of any solution. In its role as the federal oversight agency, FNS is in a position to collect and widely disseminate information about those states that have built support for data analytics and leveraged existing resources to implement or expand their data analytics programs to states seeking such examples. With wider dissemination of these examples of state successes, all state SNAP agencies could be better positioned to enhance their own efforts to identify and address SNAP fraud. Building on ongoing efforts, the Administrator of FNS should develop and implement additional methods to widely distribute information to state agencies on an ongoing basis about successful efforts to adopt data analytics and strategies to leverage existing data, technology, and staff resources to enhance data analytics. (Recommendation 1) We provided a draft of this product to the U.S. Department of Agriculture for comment. In oral comments on September 14, 2018, FNS officials from SNAP’s Program Accountability and Administration Division and the Deputy Associate Administrator for SNAP agreed with our recommendation. They noted that they have been moving in the general direction of this recommendation and would build on current efforts to address it but noted that state readiness and technical capabilities are limiting factors in the adoption of data analytics. FNS also provided technical comments, which were incorporated into the report as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to relevant congressional committees, the Secretary of Agriculture, the FNS Administrator, and other relevant parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact us at (202) 512-7215 or LarinK@gao.gov or (202) 512-6722 or BagdoyanS@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to the report are listed in appendix IV. The objectives of this report were to review the following: (1) the extent to which SNAP households in selected states are making out-of-state purchases that may indicate potential recipient fraud; (2) the extent to which selected states are using data analytics—including those applied to out-of-state transactions—to find potential SNAP recipient fraud, and what advantages and challenges, if any, have they experienced doing so, and (3) how FNS has assisted states in implementing leading practices for data analytics for fraud detection. To address these objectives, we primarily focused on federal and state SNAP recipient anti-fraud work since the beginning of fiscal year 2015—the period which follows our August 2014 report on SNAP recipient fraud. We reviewed relevant federal laws, regulations, program guidance, and reports, and we interviewed FNS officials in headquarters and all seven regional offices to address all three objectives and obtained relevant documentation. To assess the extent that SNAP households in selected states made out- of-state purchases that may indicate potential recipient fraud, we analyzed all out-of-state purchase data nationwide and we analyzed transaction data for SNAP households in the District of Columbia and two states–North Dakota and Washington. We selected these states as they were among the top states for out-of-state spending in a non-border state in fiscal years 2015 and 2016, the two most recent years’ of SNAP data available when we started this review. We obtained SNAP transaction data from FNS for all participating households in the three selected states, and analyzed fiscal year 2017 data for households that spent all their benefits in a non-border state in that year. We also analyzed fiscal year 2017 data for all households in these three states for purchases that may indicate trafficking, based on common suspicious transaction types. We tested the transaction data for ten different suspicious transaction types that have been used by FNS and state SNAP officials to identify potential trafficking. While the transactions we flagged for potential trafficking in our three selected states are generally deemed potential indicators of fraud by SNAP officials, there could also be legitimate reasons for these purchases and they do not prove trafficking. For that reason, our analysis focused on households with a greater frequency of questionable purchases in fiscal year 2017 indicating potential trafficking—specifically purchases that resulted in 20 or more trafficking flags. We assessed the reliability of SNAP transaction data used in analyses through review of related documentation, interviews with knowledgeable officials, and electronic testing of the data, and found them to be sufficiently reliable for our purposes. To determine how selected state agencies are using data analytics to identify potential SNAP recipient fraud, we interviewed officials from seven state SNAP agencies about their efforts. We obtained related documentation when available. We selected the District of Columbia, Massachusetts, Mississippi, New Mexico, North Dakota, Washington, and Wisconsin to reflect a range of experiences based on the percentage of non-border state transactions, receipt of related technical assistance, geographic region, and FNS’s reports on their capacity to conduct data analysis. We interviewed state SNAP agency officials who oversee anti- fraud practices in each of our seven selected states. During each interview, we collected information on each state’s data analytics activities and whether they have implemented leading practices for data analytics from GAO’s Fraud Risk Framework. We also discussed the advantages and challenges of using data analytics. While information from these seven state SNAP agencies is non-generalizable, it provided illustrative examples of agencies’ efforts to use data analytics. To determine the degree to which FNS has assisted states in developing the use of data analytics, we reviewed grant documentation FNS awarded to states to help prevent recipient trafficking or improve technology used to improve program integrity. We also reviewed the terms of work for a contract FNS awarded to a private consulting firm to conduct a pilot project with 10 states during fiscal years 2014-2017, as well as reports delivered by the contractor detailing the results of the work. In addition, we reviewed a guide to data analytics that FNS developed for a 5-day training session in August 2016, as well as the data analytics “maturity assessment” questionnaire that is intended for FNS regions to use to assess the capacity of the states. We also obtained and reviewed FNS’s SNAP Fraud Framework and Supplementary Materials that was released in May 2018. After developing an inventory of how FNS has assisted states in assessing and developing its data analytic capacity, we analyzed FNS’s actions with respect to GAO’s set of leading practices for data analytics from GAO’s Fraud Risk Framework and GAO’s standards for internal control. We also analyzed FNS’s SNAP Fraud Framework to assess the degree to which it addressed GAO’s leading practices on how to use data analytics to detect, prevent, and investigate SNAP fraud. Unless specified, we reviewed only data analytic activities that occurred since the beginning of fiscal year 2015, which marks the end of our previous analysis of FNS’ anti-fraud activities concerning the SNAP program. To obtain FNS’ views, we interviewed SNAP program officials at both headquarters and at each of SNAP’s seven regional offices. To obtain a broader perspective on the use of data analytics across states, we interviewed officials representing the American Association of SNAP Directors (AASD) and the United Council on Welfare Fraud (UCOWF). AASD representatives included officials from the SNAP anti-fraud units for California, New York, Tennessee, and Texas. UCOWF representatives included officials from Florida, Louisiana, and Utah. In addition, we interviewed the Deputy Executive Director of American Public Human Services Association, AASD’s parent organization, and officials representing USDA’s Office of Inspector General. We conducted this performance audit from May 2017 through October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence we obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In fiscal year 2017, the share of SNAP benefits spent out of state varied by state from approximately 1 percent to 13 percent, with most out-of- state purchases made in a border state. States whose SNAP recipients had the highest percent of out-of-state purchases included Delaware, District of Columbia, Idaho, Nebraska, New Mexico, Rhode Island, South Dakota, Tennessee, Vermont, and West Virginia. All of these states made at least 5 percent of total purchases out of state. The states with the lowest percent of out-of-state spending by SNAP recipients included Alaska, California, Florida, Hawaii, Michigan, and Texas (see fig. 5). Detailed information on out-of-state spending by SNAP recipients, by state, is also provided in table 6 below. In May 2018, FNS released a fraud framework that provides guidance to help states adopt all of GAO’s leading practices for data analytics. The table below compares guidance in FNS’s SNAP Fraud Framework to the leading practices in GAO’s Fraud Risk Framework. In addition to the contacts named above, the following staff members made key contributions to this report: Danielle Giese and Philip Reiff, Assistant Directors; Celina Davidson and Lara Laufer, Analysts-in- Charge; Camille A. Keith; Kelly Snow; and Daren Sweeney. Also contributing to this report were Susan Aschoff, James Bennett, Alexander Galuten, James Murphy, Almeta Spencer, and Shana Wallace.", "summary": "The federal government provided $64 billion in SNAP benefits in fiscal year 2017 to help approximately 42 million low-income individuals purchase food. SNAP is administered by FNS in partnership with states. To help reduce the risk of improper receipt or use of SNAP benefits, states use data analytics, including data matching and data mining, to identify patterns or trends indicative of potential fraud in SNAP purchases. Based on concerns about potential SNAP benefit trafficking across state lines, GAO was asked to review out-of-state transactions and states' efforts to combat such fraud. This report examines (1) the extent to which SNAP households in selected states made out-of-state purchases that may indicate potential fraud, (2) the advantages and challenges selected states have experienced in using data analytics to identify potential fraud, and (3) how FNS has assisted states in implementing leading practices for data analytics. GAO analyzed fiscal year 2017 data on SNAP purchases for North Dakota, Washington, and the District of Columbia, which had large percentages of non-border out-of-state purchases and interviewed FNS officials and officials in these states as well as in Massachusetts, Mississippi, New Mexico, and Wisconsin about their use of data analytics compared with leading practices. Supplemental Nutrition Assistance Program (SNAP) recipients are allowed to spend their benefits outside their state of residence, and GAO's analysis of fiscal year 2017 SNAP data in three selected states found that overall about 2 percent of households made purchases, both in state and out-of-state, potentially indicative of trafficking—the prohibited exchange of benefits for cash or nonfood goods or services. Also, GAO found little difference in potential trafficking behaviors between households that made one or more purchases out-of-state and those that shopped only in their home state. Officials in all seven states GAO reviewed said they conducted data matching. Officials in five of these states stated that they use more sophisticated data analytics including data mining to help identify potential fraud (see figure). These officials cited advantages to using more sophisticated analytics to automate fraud detection and prioritize cases, allowing them to focus investigative resources on cases most likely to involve fraud. For example, officials in Mississippi reported that overpayment collections increased $2 million since the state incorporated more data techniques into its fraud detection efforts. However, officials in all seven selected states cited factors such as high cost, resource demands, data limitations and organizational support as challenges that affect their ability to use or maintain more advanced data-analytics techniques. The U. S. Department of Agriculture's Food and Nutrition Service (FNS) has helped some states adopt certain leading practices for data analytics, but its current outreach is limited. FNS has provided assistance to some states through pilot projects, grants, and training, but, beyond a recently issued guide, FNS has done little to disseminate information more broadly about successful efforts to adopt data analytics. FNS officials said they are in the early stages of promoting data analytics for SNAP fraud prevention and detection, and their efforts have focused on assessing the current capability of states to use data analytics and determining analytic practices that are effective. State officials GAO interviewed said that training provided was helpful but expressed concern about their access to information on successful data analytic approaches. Disseminating information to states on successful strategies could help states address challenges. GAO recommends that FNS more widely disseminate information to states about successful strategies used by states to adopt data analytics. FNS agreed with this recommendation.", "document_type": "gao"}
{"report": "We found in our March 2018 report that, from September 2012 through September 2017, parties accused of patent infringement filed 524 petitions with the Patent Trial and Appeal Board challenging the validity of 359 distinct patents under the CBM program, resulting in rulings against about one-third of these patents. The average monthly number of CBM petitions fluctuated during this period and tapered off over time (see fig. 1). Specifically, during this 5-year period, an average of more than 9 petitions per month were filed under the CBM program, but this average rate declined to fewer than 5 per month in the last fiscal year, with no petitions filed in August or September 2017. Stakeholders we interviewed suggested several possible reasons for the decline in CBM petitions, including recent decisions from the U.S. Court of Appeals for the Federal Circuit and U.S. Supreme Court that clarified which patents are eligible for CBM review; that CBM petitioners successfully targeted the lowest-quality business method patents— patents that should not have been issued because they did not meet the patentability requirements—in the early years of the program, and now those patents have been eliminated; and that owners of business method patents are more wary of asserting their intellectual property through infringement lawsuits and risking its invalidation. Some stakeholders expressed concern about multiple petitions being filed against the same patent. Specifically, stakeholders have suggested that petitioners are, in some cases, using the CBM program and the inter partes review program as tools to increase costs borne by patent owners, and in the case of the CBM program, as a tool to delay district court proceedings. In addition, some stakeholders asserted that this manner of use of the administrative proceedings authorized by the AIA amounts to harassment. However, our analysis of petition data showed that the vast majority of patents challenged under the CBM program were challenged once or twice. Stakeholders we interviewed outlined several reasons why petitioners may file more than one petition against a single patent. For example, the board limits the number of pages that a petitioner may use to submit prior art and arguments for invalidity and therefore some petitioners might file more than one petition so they can present all of their art and arguments at once. Overall, through September 2017, the Patent Trial and Appeal Board had completed reviews of 329 of the 359 patents challenged under the program, and for about one-third of these patents the board ruled at least some challenged patent claims unpatentable. Data on petition outcomes are open to different interpretations depending on how they are presented. For example, under the CBM program, board judges ruled some or all of the patent claims considered at trial unpatentable in 96.7 percent of the petitions for which they issued a final written decision from September 2012 through September 2017. On the basis of this statistic, the board could seem to invalidate the majority of the patents it reviews, as noted by some stakeholders. However, this outcome is predictable given the criteria for accepting, or instituting, a CBM trial—a judge panel will institute a petition to the trial phase if it is “more likely than not” that at least one of the claims challenged in a petition is unpatentable—which tips outcomes for instituted petitions toward rulings of unpatentability. In addition, board judges do not issue final written decisions for all petitions that enter the trial phase because the parties often reach a settlement before the final written decision. When taking into account all of the CBM petitions that had an outcome as of September 30, 2017, board judges ruled some or all of the claims considered at trial unpatentable in 35.6 percent of the cases. We found in our March 2018 report that the Patent Trial and Appeal Board has completed all trials under AIA-authorized proceedings within statutorily directed time frames, according to board data, and the board has taken steps to review issues that could affect the consistency of its trial proceedings and decisions and to engage with stakeholders to improve its proceedings. Board officials we interviewed told us the timeliness of decisions to institute a trial and of final written decisions has not been a concern in the 5 years that the board has operated. According to board officials, as of November 2017, two AIA trials—one under the inter partes review program and one under the CBM program—have been extended, for good cause, past the typical 1-year time limit between the institution decision and the final written decision, as allowed by statute. The Patent Trial and Appeal Board has decision review processes that help ensure trial decisions are reviewed as appropriate, but the board cannot ensure the consistency of its trial decisions because it does not have guidance for reviewing the decisions or the processes that lead to them. For trials still in progress, board officials told us there are several ways management gets involved in reviews—including reviews of ongoing trials if and when a paneled judge raises any issue deserving of management attention. Such issues are brought to the attention of the chief judge or other members of the board’s management team and are acted upon at their discretion. Board officials also told us that a separate internal review process has evolved over time, whereby a small group of board judges, in consultation with board management, seeks to ensure decision quality and consistency by reading a large number of draft AIA trial decisions and giving feedback or suggestions to authoring judges prior to issuance. In addition, the board reviews any AIA trial decisions that are appealed to the U.S. Court of Appeals for the Federal Circuit and the appeals court subsequently reverses or remands. Finally, board officials told us that the board has begun to increase the number of trial decisions considered for precedential and informative designations as part of its efforts to ensure the consistency of trial decisions. Taken together, the board’s review processes help ensure that board trial decisions are reviewed in some manner. However, because the board does not have documented procedures for how to review decisions for consistency, the board cannot fully ensure the consistency of the decisions or the processes that lead to them. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks. Such control activities include clearly documenting internal control in a manner that allows the documentation to be readily available for examination. The documentation may appear in management directives, administrative policies, or operating manuals. We recommended that the Director of USPTO develop guidance, such as documented procedures, for judges reviewing the Patent Trial and Appeal Board’s decisions and the processes that lead to the decisions. USPTO agreed with our recommendation and stated that it has begun taking actions to address it. In addition, to improve various aspects of its trial proceedings, the board has taken several steps to engage with stakeholders. USPTO’s strategic plan states that the board should expand outreach to stakeholders by providing opportunities for interaction and updates on board operations and other important issues. The board has done so through several types of public outreach efforts, including participating in roundtables, webinars, and judicial conferences, among other activities. The board has made several changes to policies and procedures based on stakeholder feedback gathered through these mechanisms. Stakeholders we interviewed for our March 2018 report generally agreed the CBM program has reduced litigation involving business method patents because the CBM program allows these patents to be more easily challenged than in district courts, and many stakeholders said there is value in maintaining some aspects of the program. Stakeholders told us that fewer business method patent lawsuits are filed and that existing lawsuits are often dropped after patents have been through the CBM program. However, stakeholders also noted that the Supreme Court’s 2014 decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l has contributed to the reduced number of business method patent lawsuits. Stakeholders told us that the CBM program has made it riskier to assert business method patents because, compared with district court, the program offers a cheaper and more efficient way for alleged infringers to challenge a patent’s validity. In addition, according to stakeholders, patent owners are more focused on asserting business method patents that are higher quality and less vulnerable to challenge either under the CBM program or based on the Supreme Court’s decision in Alice; these are patents that describe a technological invention that is not abstract and implemented on a generic computer. Stakeholders we interviewed generally agreed the effects of the CBM program on innovation and investment have been minimal or mostly positive. More specifically, stakeholders told us that the CBM program is good for overall innovation and investment in financial technologies in that the program eliminates overly broad (non-specific), low-quality patents. Stakeholders told us they believe the existence and assertion of overly broad patents is bad for innovation, in part because defending against alleged infringement is expensive and time-consuming, even under the CBM program. Assertion of overly broad, unclear, or otherwise low-quality patents acts much like a tax on investment, according to stakeholders. Stakeholders also told us that removing such patents from the marketplace promotes innovation because it prevents these patents from blocking new innovation. According to stakeholders, innovation is represented by the quality of the patents issued rather than the quantity. A large number of patents in a technology space, according to stakeholders, can make it difficult to innovate within that crowded space. Most stakeholders told us there was value in maintaining aspects of the CBM program, including the ability to challenge patents at the Patent Trial and Appeal Board on all four patentability requirements—subject matter; novelty; non-obviousness; and clarity and specificity. Stakeholders we interviewed pointed to inconsistencies in how federal courts interpret subject matter eligibility and clarity requirements, in particular. Stakeholders said that the federal courts and jurors do not necessarily have the expertise to interpret requirements for subject matter eligibility and clarity, and that the technically trained Patent Trial and Appeal Board judges were better suited to make patentability determinations on these grounds. Stakeholders generally agreed that the ability to challenge a patent’s validity on subject matter eligibility grounds remains important, although there was not broad agreement among stakeholders regarding how far that ability should extend beyond business method patents. Some stakeholders said subject matter eligibility challenges were important for a wider scope of patents than just business methods because concerns about subject matter eligibility that apply to business method patents extend to software-related patents in general. Similarly, stakeholders told us that patent clarity problems exist beyond business method patents. Chairman Issa, Ranking Member Johnson, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this statement, please contact John Neumann, Director, Natural Resources and Environment at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Rob Marek (Assistant Director), Michael Krafve, and Cynthia Norris. Additional staff who made key contributions to the report cited in this testimony are identified in the source product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's March 2018 report, entitled U.S. Patent and Trademark Office: Assessment of the Covered Business Method Patent Review Program ( GAO-18-320 ). From September 2012 through September 2017, entities facing patent infringement lawsuits filed 524 petitions challenging the validity of 359 patents under the U.S. Patent and Trademark Office's (USPTO) covered business method (CBM) program, resulting in decisions against about one-third of these patents. The CBM program provides entities facing infringement lawsuits an opportunity to challenge the validity of a business method patent by demonstrating that it did not meet requirements for patentability. Business method patents focus on ways of doing business in areas such as banking or e-commerce. The rate of filing petitions over this period has fluctuated but has generally declined since 2015, and none were filed in August or September 2017. USPTO has taken several steps to ensure the timeliness of trial decisions, review past decisions, and engage with stakeholders to improve proceedings under the program: Timeliness: USPTO regularly informs relevant parties about paperwork requirements and due dates throughout trials. According to program data, as of September 2017, all 181 completed trials were completed within statutorily required time frames. Decision review: USPTO has taken several steps to review its decisions and has monitored the rate at which the Court of Appeals for the Federal Circuit affirms or reverses them. However, USPTO does not have guidance, such as documented procedures, for reviewing trial decisions, or the processes leading to decisions, for consistency. Without guidance, such as documented procedures, USPTO cannot fully ensure that it is meeting its objective of ensuring consistency of decisions. Stakeholder engagement: USPTO judges have engaged with stakeholders by participating in public roundtables and webinars, and attending judicial conferences, among other things. Stakeholders GAO interviewed generally agreed that the CBM program has reduced lawsuits involving business method patents in the federal courts. While many stakeholders favored maintaining aspects of the program, there was not strong consensus among stakeholders for how future trials should be designed.", "document_type": "gao"}
{"report": "The section presents information on (1) water utilities and water operators, (2) federal and state roles in overseeing and assisting water utilities, and (3) federal and state roles in workforce development. Water utilities provide drinking water and wastewater services, including drinking water treatment and distribution and wastewater collection, treatment, and discharge. Figure 1 shows the processes for treating and distributing drinking water and for collecting, treating, and discharging wastewater, which are overseen by water operators. Fresh water is pumped from wells, rivers, streams, or reservoirs to water treatment plants, where it is treated and distributed to customers. Wastewater travels through sewer pipes to wastewater treatment plants where it is treated and returned to streams, rivers, and oceans. Water utilities are organized differently depending on the city or community they serve. For example, drinking water service may be provided by one utility, and wastewater service may be provided by a separate utility, or a single utility may provide both services. Regardless of the configuration, a utility can be owned and managed by a municipality, county, independent district or authority, private company, or not-for-profit water association, among others. Utilities may serve a city and neighboring area, a county, or multiple counties. As of January 2016, there were about 52,000 drinking water and 16,000 wastewater utilities in the United States. These water utilities vary widely in the number of people they serve, but the majority of water utilities in the United States serve fewer than 10,000 people. Water utilities employ a broad range of workers, including water operators; engineers; customer service representatives; accountants; legal support; and skilled technical occupations, such as electricians, machinists, and instrument technicians. It is difficult to find an estimate of total workforce at water utilities, but BLS reported that as of December 2016 employment in industries related to water utilities—including local government utilities (both water and energy utilities); water, sewage, and other systems; and water and sewer system construction—totaled 478,700. A study commissioned by the American Water Works Association estimated that 55 percent of water utility employees are water operators; of the remainder, 20 percent work in customer service and metering, and 25 percent work in administration of various kinds. The number of water operators at individual water utilities depends partly on the size of the population the utility serves. Large utilities may have dozens of water operators supported by a staff of customer service representatives, electricians, instrument technicians, machinists, and plumbers. In contrast, utilities in rural communities may have a single water operator who is sometimes tasked with additional duties. Water operators at drinking water utilities run the equipment, control the processes, and monitor the plants that treat water to make it safe to drink. Water operators at wastewater utilities do similar work to remove pollutants from domestic and industrial wastewater before it is reused or released into a receiving body of water. Many duties of water operators are technical and water operators need knowledge, skills, and abilities in science, technology, engineering, and mathematics (STEM). The list of academic competencies described in the DOL Water and Wastewater Competency Model for employment in the drinking water and wastewater industry includes calculating averages, ratios, proportions, and rates; translating practical problems into useful mathematical expressions; and understanding biology, chemistry, and physics. Water operators need to be able to prepare chemicals and confirm chemical strength, adjust chemical feed rates and flows, and understand software and equipment used for industrial process control, such as supervisory control and data acquisition software and systems. (See fig. 2). Industry representatives we interviewed told us that as drinking and wastewater treatment processes become more technologically advanced, water operators increasingly will need to have more advanced technical skills. Water operators must meet specialized certification requirements, which are overseen by state regulators. A number of 2-year and 4-year colleges offer programs across the country that provide training for individuals seeking certification as water operators. For drinking water operators, regulations under the Safe Drinking Water Act establish minimum standards for certifications. Each state must implement a water operator certification program that meets the requirements of these guidelines or that is substantially equivalent to these guidelines. The Clean Water Act does not have similar minimum requirements for wastewater operators, and certification standards are established by the states. Accordingly, there is no single standard national certification. Even though there has been an industry effort to harmonize the certification requirements across states for both drinking water and wastewater operators, reciprocity of certification between different states remains limited. EPA regulates water utilities under the Safe Drinking Water Act and the Clean Water Act. Under the Safe Drinking Water Act, EPA establishes and enforces standards for public water systems, including drinking water utilities, that generally limit the levels of specific contaminants in drinking water that can adversely affect public health; attaining and maintaining these levels typically requires water treatment. Under the Clean Water Act, EPA regulates discharge of pollutants from point sources such as municipal and industrial wastewater treatment plants, and stormwater discharges from industrial facilities and municipal sewer systems. EPA’s Office of Enforcement and Compliance has established national enforcement goals and works with state and tribal governments and other federal agencies to enforce the nation’s environmental laws, including the Safe Drinking Water Act and Clean Water Act. EPA authorizes most states to have primary enforcement responsibility— “primacy”—for the Safe Drinking Water Act, if the state meets certain requirements. Similarly, EPA authorizes most states to operate their own clean water discharge permitting program (also called primacy) in lieu of the federal program if the state program meets certain requirements. EPA regulations require states to have inspection programs for drinking water utilities—called sanitary surveys—to maintain their primacy. EPA regulations also require states to conduct periodic compliance inspections of wastewater utilities. These inspections support EPA’s monitoring of compliance with the Safe Drinking Water Act and Clean Water Act. EPA provides states with guidance for evaluating the utilities. Inspections of drinking water utilities include eight areas of review: water sources, treatment plants, distributions systems, finished water storage, pumping facilities, monitoring plans and treatment records, management and operations, and water operator compliance with certification requirements. The inspections also function as an opportunity for state agencies to educate drinking water operators about proper monitoring and sampling procedures and to provide technical assistance. The goal of the inspections is to ensure that the utility can supply safe drinking water. For wastewater utilities, the inspections are more narrowly focused on monitoring the utilities’ compliance with their Clean Water Act obligations. The goals of the wastewater utility inspections include identifying and documenting noncompliance and gathering evidence to support enforcement actions. States receive federal funding for infrastructure projects and technical assistance under the Clean Water Act and Safe Drinking Water Act. EPA provides annual funding to states through its Drinking Water and Clean Water State Revolving Fund programs. States use this funding to support water infrastructure projects and to provide assistance to communities. Specifically, portions of a state’s annual EPA funding may be used for implementation of, among other things, capacity development and water operator certification programs. Under the Safe Drinking Water Act, states are required to implement water operator certification programs, and EPA is required to withhold 20 percent of a state’s Drinking Water State Revolving Funds if the state fails to do so. Under the Clean Water Act, states may use their Clean Water State Revolving Funds to provide assistance to any qualified nonprofit entity, to provide technical assistance to owners and operators of small- and medium-sized publicly owned wastewater treatment utilities to, among other things, help them achieve compliance with the act. Water utilities in rural communities also receive funding and technical assistance provided by USDA’s Rural Utilities Service. The Rural Utilities Service provides funding for drinking water and wastewater infrastructure projects in rural communities. The Rural Utilities Service is one of three agencies under Rural Development—a USDA mission area focused on improving the economy and quality of life in rural America by providing financial programs to support essential public facilities and services such as drinking water and sewer systems, housing, health care, emergency service facilities, and electric and telephone service. The Rural Utilities Service’s Water and Environmental Programs provide loans, grants, and loan guarantees for drinking water, sanitary sewer, solid waste, and storm drainage facilities in rural areas. The Rural Utilities Service also provides funding for technical assistance to rural water utilities through a contract with the National Rural Water Association and grants to other nonprofit organizations. Workforce development in the United States is driven by a variety of private and public investments in workforce education and development. Under the Workforce Innovation and Opportunity Act, the federal government has programs, administered primarily by DOL and Education, that provide a combination of education and training services to help job seekers obtain employment. Through these programs, DOL provides grants to states to provide funding for employment and training programs. Although the public workforce system receives federal funds, states may choose to add their own funding, and most of the system’s services for businesses and job seekers are delivered at the state and local levels. In implementing the Workforce Innovation and Opportunity Act, enacted in 2014, each state is to have a state-level workforce development board that develops strategies for providing outreach to individuals and employers and identifies in-demand industries. Helping ensure that the workforce system focuses on regional and local economies, each state is divided into one or more workforce areas, led by a local workforce development board. The local boards are responsible for, among other things, analyzing the employment needs of employers and the workforce development activities (including education and training) in the region. According to DOL, workforce boards are also responsible for determining how many American Job Centers are needed in their area, where these centers will be located, and how they will be operated. There are about 2,500 American Job Centers across the United States that offer many resources under one roof. The typical center serves individuals seeking employment. Centers also work with employers to assess hiring needs; find qualified candidates, including veterans; connect to training options for new and current employees; and provide other workforce-related assistance. Data available from BLS suggest that the workforce replacement needs for water operators are similar to workforce replacement needs nationwide across all occupations. However, little information is available about the current and future effects of any unmet workforce needs on utilities’ abilities to comply with the Safe Drinking Water Act and Clean Water Act. BLS projections suggest that the workforce replacement needs for water operators are similar to workforce replacement needs nationwide across all occupations. BLS uses survey estimates and economic models to project future employment in specific occupations; the latest such projections are for the 10-year period from 2016 through 2026. BLS intends its projections to capture the long-run trend, direction, and growth of the labor force rather than to predict precise outcomes in specific years. As of October 2017, the most recent projections indicate that the replacement needs for water operators—resulting from retirement or other separations—are relatively similar to the projected national annual average of replacement needs across all occupations (8.2 percent versus 10.9 percent, respectively). BLS projects that there will be an annual average of 9,200 job openings for water operators between 2016 and 2026. It also projects a slight decline in overall employment for water operators because of increasing automation at water utilities; this decline contrasts with total employment across all occupations, which is projected to increase by an annual average of 1,151,850 jobs. On average, for years during this the 10-year period, BLS projects that about 8 percent of water operator jobs will be filled by workers replacing those who are separating from the occupation, and about 92 percent will be filled by workers staying in the water operator occupation. In comparison, over the same period for workers across all occupations, a projected annual average of about 1 percent of jobs will filled because of growth, about 11 percent by workers replacing those separating from their occupation, and about 88 percent by workers staying in their occupation from the previous year. (See fig. 3.) BLS tracks growth and workforce replacement projections for the water operator occupation, but not for water utilities; however, the water operator position is concentrated at publicly and privately owned drinking water and wastewater utilities. BLS estimates from May 2016 (the latest data set with data by type of employer) show that about 77 percent of water operators were employed by local governments—this percentage represents those employed at water utilities owned by cities and municipalities. Water, sewage, and other systems employed about another estimated 12 percent of water operators, which are primarily in privately owned drinking water and wastewater utilities. The remaining water operators (about 11 percent) were employed in state government or in various other private industries, such as waste treatment and disposal (e.g., solid waste, among other things). BLS data indicate that the median age of water operators in 2016 was slightly older than the national median age of the workforce across all occupations. BLS does not collect information on tenure, retirement age, or retirement eligibility of workers; however, the 2016 Current Population Survey shows that 24.7 percent of water operators were age 55 or older, compared with 22.7 percent of the total U.S. workforce. The data also show that in 2016, the median age for water operators was 46.4, compared with the median age across all occupations of 42.2. Industry reports from 2008 to 2010 included retirement eligibility estimates of as high as 30 to 50 percent of the water utility workforce. However, industry representatives we interviewed told us that many workers postponed retirement during the recession that began in December 2007, thus reducing the industry’s hiring needs. The representatives added that retirements may increase as the overall U.S. economy continues to expand. In addition, industry representatives said that workers in the water industry tend to have a long tenure in their jobs, often working several years past the earliest age at which they meet the requirements for full retirement. In addition to water operators, larger water utilities employ a broad range of workers, including skilled workers, such as electricians and machinists, as described above. While BLS does not provide employment projections specific to water utilities for these occupations, it does provide national employment projections for these occupations that can be illustrative. The future demand for such workers—as represented by projected job growth and occupational separations rates—is shown in table 1. BLS defines the growth rate as the estimated percentage change in the projected number of jobs added or lost in a U.S. occupation or industry over a given period. The occupational separations rate is the sum of the projected percentage of workers exiting the labor force because of retirements or other reasons (“labor force exit rate”) and the projected percentage of workers transferring to different occupations (“occupational transfer rate”). Higher than average growth rates for the electrical and plumbing occupations, as well as higher occupational separations rates than the water operator occupation, suggest that the water industry will need to compete with other employers in faster-growing sectors, such as construction, for workers in these high-demand occupations. Little is known about whether unmet workforce needs are affecting water utilities’ overall abilities to comply with the Safe Drinking Water Act and Clean Water Act. At a national level, neither the water utilities’ industry associations nor EPA has analyzed whether there is a relationship between unmet workforce needs and compliance problems. Some water utility industry associations have analyzed projected employee retirement eligibility and employee turnover, but these studies did not analyze the potential effect of these retirements on utilities’ operations. The 2010 Water Sector Workforce Sustainability Initiative study sponsored by the Water Research Foundation and the American Water Works Association provides the most recent, broad industry evaluation of workforce challenges at water utilities. That study outlined projected workforce challenges caused by impending retirements and shifting demographics in the U.S. labor market, but it did not address specific operational impacts related to those retirements. Similarly, the American Water Works Association’s annual benchmarking surveys collect data on utilities’ water and wastewater regulatory compliance rates; however, the association does not analyze whether there is a relationship between retirement eligibility and regulatory compliance. Water utilities and industry associations have some planned and ongoing work to learn more about workforce needs at water utilities. For example, representatives from one of the selected large utilities that we interviewed told us that a group of 16 large water utilities are informally working together to address workforce challenges and have proposed a major applied research project with the objectives of (1) exploring in greater depth the specific occupations, skills, and career pathways that can bridge the water sector’s looming employment gap; (2) clarifying the range of water jobs available at a regional level; (3) identifying the potential pools of labor to fill these positions; and (4) exploring new development strategies to equip workers with the skills they need. Additionally, the Water Environment and Reuse Foundation is participating in an international Workforce Skills of the Future project to analyze future work scenarios and their impact on the water sector and develop recommendations for how the sector can prepare for and accommodate new capabilities and future skills in the water sector. The utilities we interviewed had experienced compliance problems with the Safe Drinking Water and Clean Water acts and some difficulties in hiring certified water operators and other skilled workers. In our interviews with representatives of selected water utilities, the representatives reported that they had experienced some difficulties in hiring operators but that those difficulties had not had an effect on their utilities’ compliance with the Safe Drinking Water Act or Clean Water Act to date. However, the representatives from 6 of the 11 selected utilities reported that their difficulties in replacing workers had resulted in a greater use of overtime to meet workload demands. We reviewed EPA compliance violation data for the selected utilities and found that all of the utilities had at least one violation of either the Safe Drinking Water Act or Clean Water Act within the last 10 years; however, it was not possible to determine whether workforce challenges contributed to these violations. The violations represented a range of issues including exceeding the maximum contaminant levels in drinking water; failing to conduct regular monitoring of drinking water quality or to submit monitoring results in a timely fashion to the state agency or EPA; violating public notification requirements, which require systems to alert consumers if there is a serious problem with their drinking water; and failing to issue annual Consumer Confidence Reports. According to EPA officials, utilities may have violations for a number of reasons, including equipment breakdowns or impaired quality of source water, which makes water treatment more difficult. Because the compliance data is not specific enough to indicate the source of the problem, it was not possible for us to independently verify whether the compliance violations were linked to utilities’ difficulties in replacing workers. EPA relies on states to inspect utilities and ensure compliance with requirements under the Safe Drinking Water and Clean Water acts. EPA’s inspection guidance—for both drinking water sanitary surveys and wastewater compliance inspections—advises states to examine the adequacy of water utilities’ workforces—that is, the quality and quantity of staff operating and maintaining drinking water and wastewater facilities. EPA requires states to report some inspection information, including whether there are management issues at a utility. EPA officials told us that, on the basis of their conversations with state regulators, they believe states are collecting information about workforce adequacy during state inspections of drinking water utilities. For wastewater utilities, EPA officials stated that in the course of conducting an on-site inspection, inspectors will ask plant managers and staff questions about staffing and should note concerns in their inspection reports. EPA officials said that collecting workforce information at the state level is beneficial for the states and the drinking water utilities so that they can take steps to implement strategies to address the utilities’ workforce needs. The officials said state regulators can find patterns in utilities’ compliance reporting data that alert them to the likelihood that a utility is experiencing operational issues, such as losing a certified water operator. In those instances, an EPA official told us, state regulators work with the utility to help identify solutions, such as locating a nearby water operator who can contract with the utility on a part-time basis until it can hire a permanent water operator. EPA officials further stated that they believe state regulators are using the workforce information to help build capacity at drinking water utilities and prioritize training. However, the EPA inspection guidance that states currently use in conducting sanitary surveys for drinking water utilities and compliance inspections of wastewater utilities outlines criteria for evaluating existing workforce issues but does not address workforce issues that could affect utility operations, and potentially compliance, in the future. The guidance contains suggested assessment criteria that focus on whether there is an adequate number of qualified staff in the existing workforce to perform the work required. For example, the guidance for drinking water utilities states that the utility should have enough personnel to enable continuous operation of the treatment plant at all times and that staff should be able to perform operations and maintenance tasks regularly with little or no overtime hours. The inspection guidance does not contain similar questions that focus on whether there will be an adequate number of qualified staff in the future workforce to perform the work required. According to our December 2003 report, strategic workforce planning focuses on developing of long-term strategies for acquiring, developing, and retaining an organization’s total workforce to meet the needs of the future. In that report, we stated that while agencies’ approaches to workforce planning will vary, there are five key principles that strategic workforce planning should address irrespective of the context in which the planning is done. These principles include: determining the critical skills and competencies that will be needed to achieve current and future programmatic results, and developing strategies that are tailored to address gaps in number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies. According to our interviews with selected utilities, five of the six large utilities had conducted workforce planning, while none of the small utilities had conducted such planning. By amending its inspection guidance with questions on strategic workforce planning—such as any potential gaps in critical skills and strategies to address any gaps in the number of water operator positions to meet the needs of the future—EPA could ensure that such information is available for states to assess future water utility workforce needs. Information on future workforce needs could help the states and water utilities identity potential workforce issues and take action as needed. According to EPA officials, they have not considered amending inspection questions but have heard that future workforce issues are a concern to the states and the industry and said that making such changes could be helpful to develop workforce strategies that address the specific needs of a state or regional area. Representatives from selected utilities that we interviewed reported using a mix of various approaches to meet their workforce needs. However, the selected large utilities reported ongoing hiring challenges with skilled technical workers such as machinists, electricians, and pipefitters. The representatives from the selected utilities reported that by using various approaches, they were generally able to hire water operators, but they faced some challenges in doing so. The number of water operator vacancies at each of the six selected large utilities in the spring of 2017, as reported by the utilities’ representatives, ranged from 2 to 60, representing a range of about 2 to 15 percent of the utilities’ water operator workforces. Only one of the five selected small utilities had a water operator vacancy in the spring of 2017. That utility had 1 vacancy among its workforce of 44 water operator positions. When we asked representatives of selected large utilities for their top three recruitment approaches for water operators, their responses included advertisements on their own websites, “word of mouth,” advertising with professional water organizations, partnering with a local technical college, and use of general-purpose websites (not owned by the utility or a professional water organization). Similarly, responses from representatives of selected small utilities included “word of mouth,” local newspapers, advertisements through professional water organizations, advertisements on general- purpose employment websites, and outreach to the local veterans’ office. We also asked the representatives of the selected large and small utilities about various water operator recruitment approaches described to us by association representatives or noted in industry publications. These approaches included recruiting from other states, working with local workforce boards and American Job Centers, establishing formal apprenticeships, reaching out to recruit veterans, and partnering with local technical and postsecondary schools. The representatives of large utilities reported that they used some of the approaches to varying degrees, but none of these representatives reported using all of them. The two most commonly used approaches of the selected large utilities (4 of the 6) were a partnership with one or more local community colleges to offer water treatment education, followed by reaching out to recruit veterans (3 of the 6). Representatives of one of the large utilities said they also had a partnership with a high school. Representatives of another large utility indicated that although they had access to local trade schools, the schools did not provide good candidates for the utility’s jobs. Representatives of one large utility said that the utility recruits out of state to find water operators with at least a minimum set of qualifications and a license because it lacks a local pool of water operators from which it can recruit. However, representatives of another large utility indicated that many water operators do not like to move from one state to another, and therefore it is difficult to recruit in other states. Representatives of the selected large utilities were divided about whether a national standard certification for water operators would help with worker availability or recruiting. For example, one utility’s representatives said that a national standard certification would not help in recruitment, while representatives of another indicated that a uniform, transferable skill set, as represented by a national certification, would be helpful. Representatives of the five selected small utilities reported that they generally had not used the various recruiting approaches about which we inquired. For example, according to their representatives, none of the small utilities recruited out-of-state water operators, in part because they preferred to recruit locally or they would not be able to attract such water operators with the relatively low compensation they could offer. In contrast to larger utilities, representatives of four of the selected small utilities told us they did not have a partnership with a trade school or a community college to offer water treatment education for various reasons, including filling key needs elsewhere and a lack of focus on water education at the technical college. Selected utilities reported ongoing challenges hiring water operators and other skilled workers. Representatives of all six selected large utilities told us that they had attempted to hire water operators during the past 5 years and, with one exception, they described hiring water operators as “somewhat difficult.” Reasons they described for this difficulty included a lack of candidates with a STEM background, a distaste for shift work among younger employees, the lack of a local pool of candidates, and low pay. Representatives of three of the selected large utilities said hiring to replace departing water operators had been a problem in the past, but there was no consensus among the three on whether the problem was increasing, decreasing, or staying about the same. The utility that indicated the problem was decreasing cited two steps it had taken to address it: expanding its geographical search and improving its internal training program. Five of the selected large utilities reported that replacing retiring water operators was currently a problem, and three of them indicated that it could become one over the next 5 years for reasons such as water operators having to perform rotating shift work and fewer qualified candidates than in the past. The percentage of water operators eligible to retire over the next 5 years, compared to the total number of water operator positions in the six large utilities, ranged from a low of 100 out of 507 (about 20 percent) to 68 out of 136 (50 percent), the representatives told us. Representatives of selected small utilities generally reported challenges recruiting and hiring certified water operators. Representatives of four of the five selected small utilities noted that replacing retiring water operators could become a problem over the next 5 years; these representatives often cited an inability to compete with larger utilities on compensation for certified water operators, in particular. Some representatives told us that, although they would have preferred to hire certified water operators for some of their vacancies, they often decided to hire and train an entry-level person, for whom there was less competition regarding compensation. Small utilities were roughly split regarding whether retirements had increased or remained about the same. Representatives of two small utilities told us that, over the past 5 years, the number of water operators retiring each year increased, but representatives of the other three reported that the number remained about the same. Representatives of two small utilities told us they have no water operators eligible for retirement during the next 5 years, and representatives of the other three small utilities reported that the number of water operators eligible to retire compared to the total number of water operator positions was, respectively, 2 of 6, 3 of 8, and 4 of 44. A representative of only one of the five small utilities reported difficulties recruiting skilled workers in professions other than water operators, and those professions are administrative and bookkeeping. Skilled Technical Occupations Considerable attention has been given in recent years to the question of whether the U.S. economy has a shortage of workers in skilled technical occupations—occupations that require a high level of knowledge in a technical area but do not require a 4-year college degree. The National Academies of Sciences, Engineering, and Medicine convened a committee to examine the coverage, effectiveness, flexibility, and coordination of the policies and programs that prepare Americans for skilled technical jobs. The committee organized a national symposium, held in June 2015, bringing together researchers, industry representatives, policymakers, and other stakeholders involved in technical workforce education and training. The committee’s report, issued in 2017, contained many findings including: (1) the United States is experiencing, and will continue to experience, imbalances in the supply of and demand for skilled technical workers in certain occupations, industry sectors, and locations; (2) the nature of the problem differs across sectors and locations; (3) these imbalances arise from multiple sources; (4) the evidence suggests that, as a nation, the United States is not adequately developing and sustaining a workforce with the skills needed to compete in the 21st century. Representatives of the selected large utilities reported that, outside of water operators, the positions most difficult to fill are for other skilled workers such as machinists; electricians; pipefitters (also called “steamfitters”); and heating, ventilating, and air conditioning mechanics. The representatives of those utilities said that, in their experience, the number of young adults interested in the skilled technical occupations is decreasing. A representative of one small utility noted that it is difficult for trade schools and community colleges to offer courses in occupations for which student interest is declining. Because of projected reductions in the supply of such workers as the “baby boom” generation continues to retire over the next decade, the drinking water and wastewater industry has been one of many that have cited the “skills gap” and the need for a “pipeline” of future workers as developing problems as they attempt to fill vacancies caused by retirements. Representatives of some of the large utilities and industry associations we interviewed said that there are difficulties in filling certain skilled worker positions, particularly when local economic factors—including competition from other sectors such as construction—make it difficult to hire skilled technical workers if the local economy is near or at full employment. The five federal agencies we reviewed—EPA, USDA, Education, DOL, and VA—have programs that can assist utilities with their workforce needs in several ways, including through guidance, funding, and training. The selected utilities that we interviewed accessed federal programs to help meet their workforce needs in some instances. Key programs in EPA, USDA, Education, DOL, and VA can assist utilities with workforce needs in the ways described below. EPA has several programs that can provide funding, through the states, for technical assistance to help water utilities meet their workforce needs. For example, EPA’s national Training and Technical Assistance for Small Systems competitive grant provides, on average, $12 million per year to give managerial and financial training to utilities, particularly small utilities. Additionally, officials stated that between 1997 and 2012, EPA provided $134 million to help utilities train their water operator workforce and enable their water operators to gain certification through the Operator Certification Expense Reimbursement Grants program; however, this program ended in 2012. EPA’s Public Water System Supervision Grant program provides grants to states for activities to implement drinking water regulations—activities that have included providing technical assistance to utilities, such as training to operators to ensure they are knowledgeable about the best operation and treatment practices. In addition, states may use up to 10 percent of the funding they receive for the Drinking Water State Revolving Fund allotment for specified program management activities, including the development and implementation of water operator certification programs. In addition to funding technical assistance, EPA has assisted in efforts to attract new employees to the drinking water and wastewater industry. For example, in 2010 EPA partnered with the American Water Works Association and the Water Environment Federation to highlight the need for qualified professionals to enter the drinking water and wastewater industry. As part of those efforts, EPA produced a set of videos called “Water You Waiting For?” to encourage high school and vocational technical school students to consider employment in the industry. EPA officials also told us that based on industry requests, EPA has taken the lead in coordinating with other federal agencies to help develop a pool of potential certified water operators. EPA has also collaborated with DOL, USDA, and VA to assist drinking water and wastewater utilities in meeting their workforce replacement needs. For example, in 2009, EPA worked with DOL and industry groups to develop a competency model for the water sector, which was updated in 2016. The model defines the necessary knowledge, skills, and abilities for prospective water professionals and can be used by educational institutions and industries to encourage prospective job seekers to consider a career in the water and wastewater industry by helping job seekers develop a career pathway and associated training and career advancement strategies that meet industry skill needs. EPA has also entered into memorandums of understanding with USDA and VA, as discussed below. In 2011, USDA and EPA signed a memorandum of agreement to support a series of activities to help small water and wastewater systems face the challenges of aging infrastructure, increased regulatory requirements, workforce shortages, increasing costs, and declining rate bases. Part of that agreement focused on the water industry workforce. Among other things, USDA and EPA agreed to develop strategies for overcoming challenges specific to recruitment and retention of small utility water operators and to promote the use of contract water operators to fill workforce gaps in rural communities. As part of this effort, USDA and EPA also agreed to focus on the sustainability of rural utilities by coordinating activities and financial assistance resources to increase the technical, managerial, and financial capacity of rural drinking water and wastewater systems nationwide. This resulted in the development of a training workshop, the Sustainable Rural and Small Utility Management Initiative—”Workshop in a Box”—that covers a variety of topics, including some related to evaluating workforce needs. USDA reported that in fiscal year 2016, the technical assistance providers conducted more than 100 workshops, with at least one in each of the 50 states and Puerto Rico. USDA’s Rural Utilities Service provides technical assistance to small rural utilities through two programs: Technical Assistance and Training grants and the Circuit Rider program. The Technical Assistance and Training grants provide funds to private nonprofit organizations to help communities with water or wastewater systems by providing free technical assistance and training for rural water operators, other water utility staff and managers, and water utility board members. In fiscal year 2016, 24 nonprofit organizations received funding totaling about $20 million to provide technical assistance to rural water utilities. In addition, under the Circuit Rider program, the Rural Utilities Service contracts with the National Rural Water Association to provide staff in each of the 50 states who offer technical assistance on day-to-day operational, managerial, and financial issues. Specifically, according to the National Rural Water Association, staff known as “circuit riders” work on site with rural water utility personnel to troubleshoot problems, evaluate alternative technological solutions, recommend operational improvements, assist with leak detection, respond to natural disasters and other emergencies, and provide hands-on training, among other things. In fiscal year 2016, USDA provided about $16 million for the Circuit Rider program. DOL provides funding to states to operate the public workforce system under the Workforce Innovation and Opportunity Act. Under this act, DOL funds American Job Centers, where potential employees can seek information on job openings. Employers, such as industries or utilities, can notify the centers of the need for applicants, and the centers can then refer potential applicants to the industry. In addition, if requested to do so by industry associations or companies, DOL can work with them to develop registered apprenticeship programs through DOL’s Office of Apprenticeship. As of September 2017, 24 water utilities across the country were training new employees through registered apprenticeships that combined structured learning with on-the-job training with an assigned mentor. (See app. II for a list of apprenticeships in the water industry that are registered with DOL’s Office of Apprenticeship.) In addition, the National Rural Water Association recently developed a registered apprenticeship program for rural utilities. According to DOL officials, the program began in Indiana on August 10, 2017, and as of September 7, 2017 two additional states—California and Colorado—were expected to join the apprenticeship program. In addition to funding under the Workforce Innovation and Opportunity Act, between 2011 and 2014, DOL awarded $1.9 billion in capacity- building grants to community colleges through the Trade Adjustment Assistance Community College and Career Training grant program. Grantees identified in-demand industries and sectors in their proposals and were required to partner with workforce boards. At least seven grantee colleges proposed to develop or upgrade programs of study related to water and wastewater utilities. For example, Salina Area Technical College (Kansas) developed an environmental technology associate’s degree program focusing on water quality and wastewater treatment management. Through multiple grant programs, Education provides funding for states and community and technical colleges, including a number of community and technical colleges that offer programs to prepare individuals for careers in the drinking water and wastewater industry. Examples of such colleges include Kirkwood Community College (Iowa), Moraine Park Technical College (Wisconsin), and Bay College (Michigan). According to agency documentation, three funding mechanisms can be used to fill the training and employment needs of the water and wastewater industry: Funding under the Perkins Act is available for state agencies and eligible local educational agencies and postsecondary education providers. Funding under the Adult Education and Family Literacy Act is available to state agencies and eligible providers for, among other things, integrated education and training, which is a service approach that provides adult education and literacy activities concurrently and contextually with workforce preparation activities and workforce training for a specific occupations. The Rehabilitation Act of 1973 provides funding for training and job placement services for individuals with disabilities through state vocational rehabilitation agencies. According to agency documentation, from fiscal years 2013 through 2016, nationwide in this program, 40 to 50 program participants per year obtained employment as operators in the drinking water and wastewater industry. secondary and postsecondary education students who elect to enroll in career and technical education programs. The Adult Education and Family Literacy Act provides funds to states, which grant these funds to eligible providers to assist adults in, among other things, becoming literate or achieving proficiency in English, obtaining the knowledge and skills necessary for employment and self-sufficiency, and completing a secondary school education. The Rehabilitation Act of 1973 provides funding to states for vocational rehabilitation services, such as counseling, job training, and job search assistance to eligible individuals with disabilities, with emphasis on individuals with significant disabilities. These programs are delivered through American Job Centers. improve employment opportunities for veterans with disabilities. According to the memorandum of understanding, veterans represent a major recruiting opportunity for water utilities. According to the EPA and VA memorandum of understanding, prior military experience gives veterans an understanding of teamwork, discipline, and personal accountability that can make them excellent employees in these fields. In addition, many veterans already have technical skills and training that are directly transferrable to careers in the drinking water and wastewater industry. EPA also worked with VA to create Military Occupational Specialty equivalent job descriptions for water-related military jobs to show how they equate to civilian water utility jobs. Under the memorandum with EPA, VA receives referrals of open positions from the water and wastewater industry and disseminates the information to disabled veterans who are looking for jobs. According to a VA official, over the past 5 years, the VA estimated sharing nearly 5,500 water utility job leads with its 56 regional offices and the National Capital Region Benefits Office. VA tracks the number of disabled veterans who have been rehabilitated to employment, but it does not track the number of disabled veterans who take jobs at water utilities. Strategies under the Workforce Innovation and Opportunity Act In implementing the Workforce Innovation and Opportunity Act, states are required to incorporate specified strategies in their state plans, including the following: Career pathways strategies help job seekers obtain education and job experience leading to a career. Career pathways strategies align and integrate education, job training, counseling, and support services to help individuals obtain postsecondary education credentials and employment in in- demand occupations. Sector partnership strategies engage related groups of stakeholders (including employers) in the workforce system. Such strategies organize multiple employers and key stakeholders, such as education and training programs, in a particular industry into a working group that focuses on the shared goals and human resources needs of that industry. working with DOL to identify standard workforce competencies and working with workforce investment boards in each state to integrate and fund training initiatives for the water utility industry; and working with Education to develop training requirements for the water utility industry. Representatives of the American Water Works Association told us that they had not provided tools or outreach to utilities to help them act on some of these recommendations, such as working with local workforce investment boards. In our interviews with selected utilities, we heard that there is variation in whether the utilities have accessed federal programs to help meet their workforce needs. Representatives from four of the selected small utilities we interviewed said they use training programs offered by the National Rural Water Association to train the water operators they hire. A representative from one small utility stated that his utility needed the National Rural Water Association to provide ongoing training for new operators. The representative also stated that the National Rural Water Association’s circuit riders helped the utility resolve problems that arose, which precluded the need for the utility to pay for expensive private services. Circuit riders can help small utilities resolve a range of problems, including assisting with leak detection and responding to natural disasters and other emergencies. Representatives from two of the selected large utilities and two of the selected small utilities told us that they had used the American Job Centers to recruit potential workers. Representatives of those utilities described differing experiences in using their local job centers, with representatives from one large utility stating that the job center was a good resource for them while representatives from another large utility stated that they were not able find the type of candidates they wanted (such as those with a STEM background). Representatives of other selected utilities stated that they have not used the centers either because they were not familiar with the centers’ services or they did not believe that using the job centers would be beneficial for them. Get Into Water! The Colorado Department of Labor and Employment and the Colorado Workforce Development Council jointly awarded funding to plan a sector partnership strategy for the drinking water and wastewater industry. The funding provided by Colorado was part of federal Workforce Investment Act funds provided to the state for sector partnership strategies. The initiative, called “Get Into Water!” involved four counties in the Denver metro region. Although the drinking water and wastewater industry was not among the top three industries in those counties, a study of the region’s drinking water and wastewater utilities identified workforce challenges and opportunities in the region. The initiative, which was active between 2009 and 2011, developed entry-level training courses to introduce high school students and adults to career opportunities in the drinking water and wastewater industry. One of the programs that was developed—at Emily Griffith Technical College—remains active after the conclusion of the initiative. One of the selected large utilities that we interviewed was involved in a sector partnership strategy called “Get Into Water!” funded by the Colorado Department of Labor and Employment and the Colorado Workforce Development Council. The funding provided by Colorado was a part of federal Workforce Investment Act funds provided to the state for sector partnership strategies. None of the other selected large or small utilities reported taking part in a federally funded sector partnership strategy. One of the selected large utilities we interviewed used DOL’s registered apprenticeship program as a way to recruit and hire water operators. It also used the apprenticeship to cover plumbers. None of the other selected large utilities had registered apprenticeship programs for water operators. Representatives from some of the selected large utilities stated that they did not use registered apprenticeships because of the expense of meeting the apprenticeship rules—particularly having to pay almost the market rate to an apprentice, who may not be fully productive for the first few years on the job. Representatives from some of the selected small utilities stated that they did not need an apprenticeship program because of their small size or lack of openings. The selected utilities used various methods to recruit veterans, including working with state and local veterans offices, job fairs, and coordinating with local military installations. Four of the selected large and small utilities we interviewed sought to hire veterans, but none of them sought employees through the VA’s disabled veterans program. DOL noted that American Job Centers offer additional ways to recruit and hire veterans, including the Jobs for Veterans State Grants program, which funds Disabled Veteran Outreach Program specialists and Local Veterans’ Employment Representatives. Representatives from one of the large utilities stated that although it did not have a program specifically for recruiting veterans, it periodically sent its employees to talk to groups of veterans about the nature of its work and how to navigate the civil service hiring process. Having an adequate number of trained and qualified employees, particularly water operators, is key to the safe operation of the nation’s water utilities. Water utilities face an upcoming wave of retiring baby boomers, similar to other industries in the economy. Federal programs offer many resources that, if accessed, have the capability to support and supplement—but not replace—utilities’ individual and collective efforts to recruit for difficult-to-fill positions. EPA has coordinated efforts with DOL and other federal agencies that can help utilities and industry groups identify ways for utilities to access federal programs. EPA’s inspection guidance documents recognize the importance of utilities having an adequate number of capable and qualified staff, and state regulators appear to be capturing some information on utilities’ existing workforce capacity and using this information to target technical assistance to utilities in need. However, EPA’s inspection guidance to states does not address future workforce issues that may affect utility operations. By adding questions to its inspection guidance documents on strategic workforce planning—such as the number of positions needed in the future, skills needed in the future, and any potential gaps in water operator positions—EPA could help ensure this information is available for states to assess future workforce needs. Information on future workforce needs could help states and utilities identity potential workforce issues and take action as needed. The Assistant Administrator for Water should direct EPA’s Office of Water to amend its Safe Drinking Water Act and Clean Water Act inspection guidance documents to add questions on strategic workforce planning topics—such as the number of positions needed in the future, skills needed in the future, and any potential gaps in water operator positions. (Recommendation 1) We provided a draft of this product to EPA, USDA, Education, DOL, and VA for comment. Education, DOL, and VA provided technical comments, which we incorporated as appropriate. In a written response, USDA indicated that it did not have comments and generally agreed with the report findings and content. EPA provided written comments, reproduced in appendix III, in which it generally agreed with our findings and provided comments regarding the conclusions and recommendation. While EPA generally agreed with our findings, the agency stated that the report does not highlight some factors that differentiate water and wastewater sector workforce needs from the workforce needs of all occupations. EPA stated that, for example, the location of the drinking water system or wastewater treatment plant can significantly impact the owner’s ability to recruit and retain certified operators. We examined workforce needs in terms of projected growth and occupational separations rates as reported by BLS. We did not specifically assess the impact of geographic location. However, in our discussion of responses from selected small utilities, we outline some of the particular challenges facing small water utilities, which are typically located in more rural areas. We describe, for example, that representatives of small utilities often cited an inability to compete with larger utilities on compensation for certified water operators. With regard to our recommendation, EPA stated that it generally agrees with the recommendation with respect to sanitary surveys of public water systems. It further stated that EPA’s Office of Ground Water and Drinking Water is in the process of updating the sanitary survey guidance manual How to Conduct a Sanitary Survey of Drinking Water Systems – A Learner’s Guide. EPA noted that they will add questions related to workforce needs to the “Utility Management” section and anticipates finalizing the update by the summer of 2018. For compliance monitoring inspections under the Clean Water Act National Pollutant Discharge Elimination System (NPDES) program, EPA did not agree or disagree with the recommendation, but stated that inspectors may be limited in the information related to workforce planning they can assess and provide because there is no corollary to the Water System Management and Operation element of sanitary surveys in the NPDES compliance inspections. EPA stated that where the agency identifies studies or documents on adequate staffing of wastewater facilities, its Office of Enforcement and Compliance Assistance will incorporate that information into its existing guidance documents for inspectors. While we recognize that the sanitary surveys and NPDES compliance inspections have different goals, as we noted in the report, inspectors currently ask plant managers and staff questions about staffing, and we believe that there is an opportunity to ask additional questions about future staffing needs. In addition, we note that EPA already highlights the need for adequate staff in its compliance inspection guidance. By amending the compliance inspection guidance to instruct inspectors to also ask about future workforce issues, EPA would be emphasizing the fact that ensuring a trained workforce and continuity of operations is important for complying with NPDES permits. We are sending copies of this report to the appropriate congressional committees, the Administrator of EPA, the Secretary of Agriculture, the Secretary of Education, the Secretary of Labor, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact us at (202) 512-3841, gomezj@gao.gov or (202) 512-7215, brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) what is known about workforce needs at water utilities compared with workforce needs nationwide and any effects of potential unmet workforce needs on the utilities’ abilities to comply with the Safe Drinking Water Act and the Clean Water Act; (2) what approaches selected water utilities have used to manage their workforce needs and challenges they have faced in managing those needs; and (3) in what ways, if any, key federal programs can assist water utilities with their workforce needs. To examine what is known about workforce needs at water utilities compared with workforce needs nationwide, we assessed and summarized data on workforce replacement rates provided by the Department of Labor’s Bureau of Labor Statistics (BLS) and examined projected retirement rates provided by industry studies. We focused on projections of workforce turnover from 2016 to 2026 and estimates of employee retirement eligibility published from 2008 to 2016, the most recent data available to us. Because BLS estimates of workforce replacement needs do not distinguish between workers who retire and workers who permanently leave an occupation for other reasons, it was not possible to isolate retirements from other separations. We identified two relevant BLS survey programs—the Occupational Employment Statistics program (May 2016) and the Current Population Survey (2016)—and one BLS projection program, the Employment Projection Program (2016-2026). To assess the reliability of BLS survey data, we reviewed relevant documentation and information from BLS staff for the most recent data available for the two relevant BLS survey programs. Through the Occupational Employment Statistics program, BLS conducts a mail survey in May and November of each year to collect data on wage and salary workers in nonfarm establishments. It uses these data to produce employment and wage estimates for about 800 occupations. BLS publishes relative standard errors to account for sampling errors in Occupational Employment Statistics survey estimates. All Occupational Employment Statistics estimates in this report are presented along with their 95 percent confidence level. The Current Population Survey is a monthly survey of households conducted by the U.S. Census Bureau for BLS. It is a sample survey of 60,000 eligible households representing the civilian noninstitutional population ages 16 and older in the 50 states and the District of Columbia. The basic monthly survey gathers demographic characteristics of people in each sampled household and information to determine whether they are employed, unemployed, or not in the labor force. The survey collects information on workers’ occupations and ages. The Current Population Survey estimates presented in this report are subject to sampling error. To account for this error, we present all Current Population Survey estimates in this report along with their 95 percent confidence intervals. Data that would allow us to calculate true sampling errors were not specifically provided by the Current Population Survey. Instead, we followed Current Population Survey guidance to estimate sampling errors. We used generalized variance functions, parameters, and factors published by the Current Population Survey to calculate approximate standard errors and confidence intervals. As a result, the confidence intervals presented in this report provide a general order of magnitude and are approximations of the true sampling errors. To assess the reliability of BLS projections, we reviewed relevant documentation and information from BLS staff for the most recent projections available and reviewed the BLS employment projections in the Occupational Outlook Handbook. The Handbook includes employment projections developed by BLS’ Employment Projections program; BLS develops its projections from statistical and econometric models, combined with subjective analysis, and designs these projections to provide a focused analysis of long-term trends based on a set of assumptions. The models and analyses BLS uses to develop the projections assume historical relationships and behavior will continue to hold over the projection period; however, there is inherent uncertainty about whether historical trends will continue into the future. BLS employment projections rely on assumptions about demographics, fiscal policy (including tax policies and government spending), and macroeconomic conditions over the 10-year projection period. For example, the BLS projections assume that the economy will be at full employment in the last year of the period (e.g., 2026). BLS notes, however, that fluctuations in the business cycle are not foreseeable over a decade. Therefore, BLS employment projections should be considered as likely outcomes, but subject to the accuracy of the underlying assumptions. We determined that the BLS survey and projection data were sufficiently reliable for purposes of our objective. To determine what data and information were available on workforce needs from industry, we reviewed reports and interviewed officials from industry associations, including the American Water Works Association, the Water Environment Federation, the National Rural Water Association, the Rural Community Assistance Partnership, the National Association of Clean Water Agencies, and the National Association of Water Companies. We identified a number of relevant industry studies, including three surveys published by the American Water Works Association between 2015 and 2017: the 2016 State of the Water Industry Report, Benchmarking Performance Indicators Water and Wastewater: 2015 Survey Data and Analyses Report, and Benchmarking Performance Indicators Water and Wastewater: 2013 Survey Data and Analyses Report. To assess the reliability of the industry studies, we reviewed their scope and methodology. We determined that although the industry estimates were not generalizable, the studies were sufficiently reliable for illustrating industry perspectives on workforce planning. To review the effects of potential unmet workforce needs on water utilities’ abilities to comply with the Safe Drinking Water Act and the Clean Water Act, we selected a sample of 11 water utilities—6 large and 5 small—based on geography, size, and indications of hiring challenges in the past. We included both large and small utilities in our selection based on our initial interviews with industry representatives that suggested that large utilities and small utilities experienced different challenges. To select the large utilities, we compiled a list of cities that were mentioned in interviews and other communications with industry groups, and in EPA documents, as experiencing difficulty replacing retiring workers or having put in place programs to train and recruit new workers. We then divided the list of cities geographically among the four Census regions—West, Midwest, Northeast, and South—and tallied the number of times each city was mentioned. In the West and South regions, we selected the city with the greatest number of mentions. In the Midwest and Northeast regions, each of the cities had only one mention, so we selected the largest city within each region. For each of these four cities we then identified the drinking water and wastewater utilities for the city. One of the cities had separate drinking water and wastewater utilities, while the other three cities had one utility that provided both drinking water and wastewater services. We also included the water utility for a fifth city because early in our research we conducted a site visit to that city and conducted an interview with the local water utility. To select the small utilities, we reached out to the National Rural Water Association and the Rural Community Assistance Partnership for suggestions on utilities to interview. The National Rural Water Association provided us with a list of 10 small water and wastewater utilities from 6 states. We divided the list of cities among the four Census regions. In the West region, one utility was recommended. For the Midwest, Northeast, and South regions, we selected utilities from cities with populations less than 10,000. In the South region, we selected a second city in order to bring the total number of small utilities up to five. One of the small utilities that we contacted was not able to participate in an interview with us but instead referred us to a nearby utility. That utility served a population less than 30,000, which for the purposes of this report we included in the category of small water utilities. Table 2 shows the locations and sizes of the 11 utilities we interviewed. We asked officials of the selected utilities whether workforce challenges had affected their abilities to comply with the Safe Drinking Water Act and the Clean Water Act at their utilities or whether they anticipated such effects in the future. The information from those interviews is not generalizable to the national population of water utilities; it was intended to provide illustrative examples of any difficulties water utilities were experiencing in complying with the Safe Drinking Water Act and the Clean Water Act that they attributed to workforce challenges. We also obtained EPA data on compliance with the Safe Drinking Water Act and the Clean Water Act for the selected utilities. We have previously reviewed the quality of EPA compliance data for the Safe Drinking Water Act. Specifically, we have interviewed EPA officials and reviewed EPA data reliability assessments, a 2017 OIG report on the reliability of data in EPA’s Safe Drinking Water Information System (SDWIS), data verification reports, and our past reports on the reliability of the data in SDWIS. According to these recent EPA assessments, the EPA OIG report, and our January 2006 and June 2011 reports, some of the data in SDWIS are not complete. We also interviewed an EPA official and reviewed documentation on compliance data for the Clean Water Act. We determined that although the data are incomplete, they were useful to provide a rough indication of whether selected water utilities had any Safe Drinking Water Act or Clean Water Act compliance violations over the past 10 years (between 2007 and 2016). To describe the approaches that selected water utilities have used to manage their workforce needs and the challenges they have faced in managing those needs over the past 5 years (from 2012 through 2016), we spoke with utility officials, during the interviews described above, to learn about their hiring and retirement numbers, challenges in managing workforce needs, and approaches for hiring staff. The information from those interviews is not generalizable to the national population of water utilities; it was intended to provide illustrative examples of any difficulties water utilities were experiencing in complying with the Safe Drinking Water Act and the Clean Water Act that they attributed to workforce challenges. To describe how key federal programs can assist water utilities with their workforce needs, we conducted background research and initial interviews with federal officials. We identified five federal agencies that conduct activities or provide funding related to the water utility workforce: EPA, USDA, Education, DOL, and VA. We interviewed officials with these agencies about current or past federal programs and policies related to water utilities’ workforce needs. We did not attempt to identify all programs that can provide assistance to water utilities for workforce planning or recruitment, but we determined based on interviews at the five federal agencies that we had identified the programs for which these activities were a primary purpose or likely use. Additionally, we interviewed representatives from the selected utilities we contacted to determine whether and how they had used various federal programs or assistance to augment other planning and recruitment strategies and what problems, if any, they had in using the programs. The information from those interviews is not generalizable to the national population of water utilities but provides illustrative examples of how, if at all, water utilities are using federal programs to help with workforce planning and recruitment. We conducted this performance audit from September 2016 to January 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 3 provides a list of apprenticeships in the water industry that are registered with the Department of Labor’s (DOL) Office of Apprenticeship. As of September 7, 2017, DOL reported that 24 utilities across the country were training new employees through registered apprenticeships that combined structured learning with on-the-job training with an assigned mentor. In addition to the contacts named above, Susan Iott (Assistant Director), Betty Ward-Zukerman (Assistant Director), Darnita Akers, Mark Braza, Caitlin Cusati, Alex Galuten, Tom Gilbert, Gina Hoover, Rich Johnson, Cynthia Norris, Rhiannon Patterson, Sarah Sullivan, and Paul Wright made key contributions to this report.", "summary": "Safe operation of the nation's water utilities depends on access to a qualified workforce, particularly certified water operators. Industry reports have cited high rates of retirement eligibility and raised concerns about the water industry's ability to fill job openings. GAO was asked to review workforce needs within the drinking water and wastewater industry. This report describes (1) what is known about workforce needs at water utilities compared with workforce needs nationwide and effects of potential unmet workforce needs on the utilities' compliance with the Safe Drinking Water Act and Clean Water Act; (2) approaches used by selected utilities to manage their workforce needs and challenges they have faced in managing those needs; and (3) ways in which federal programs can assist water utilities with workforce needs. GAO reviewed workforce projections, relevant laws and regulations, agency documents, and industry studies and interviewed federal, local, and industry officials. GAO also conducted semi-structured interviews with a nongeneralizable sample of 11 water utilities, selected by size, location, and indications of workforce needs. Projections from the Department of Labor's Bureau of Labor Statistics (BLS) suggest that workforce replacement needs for water operators are roughly similar to workforce needs nationwide across all occupations; however, little is known about the effects of any unmet needs on compliance with the Safe Drinking Water Act and the Clean Water Act. BLS has projected that 8.2 percent of existing water operators will need to be replaced annually between 2016 and 2026. Although BLS projections are intended to capture long-run trends, rather than to forecast precise outcomes in specific years, this predicted replacement rate is roughly similar to the predicted rate of 10.9 percent for all workers across the U.S. economy. Limited information is available to determine whether retirements, or other workforce needs, are affecting drinking water and wastewater utilities' ability to comply with the Safe Drinking Water and Clean Water acts. At a national level, neither the water utilities' industry associations nor the Environmental Protection Agency (EPA) has analyzed whether there is a relationship between unmet workforce needs and compliance problems. EPA relies on states to inspect utilities to ensure compliance with the acts. EPA's inspection guidance documents, for both drinking water and wastewater, advise states to examine the quality and quantity of staff operating and maintaining water utilities. However, the guidance does not advise states to examine future workforce needs. GAO has found that future workforce needs can be identified through strategic workforce planning, which involves developing long-term strategies for acquiring, developing, and retaining staff to achieve program goals. By adding questions to EPA's inspection guidance on strategic workforce planning, such as the number of positions needed in the future, EPA could help make this information available for states to assess future workforce needs. Information on future workforce needs could help states and utilities identity potential workforce issues and take action as needed. Representatives from 11 selected water utilities reported that by using various approaches, they were generally able to meet their current workforce needs but faced some challenges in doing so. Representatives from the selected utilities said that they recruit operators using word of mouth, websites, newspapers, and partnering with local technical schools. However, representatives from small utilities said that even with these approaches, they had difficulty hiring certified operators and instead hired and trained entry-level employees. Additionally, representatives from large utilities said they face difficulties in recruiting skilled workers, such as electricians and mechanics, part of a larger national pattern. Five federal agencies that GAO reviewed—EPA and the Departments of Agriculture (USDA), Labor (DOL), Education, and Veterans Affairs (VA)—have programs or activities that can assist utilities with their workforce needs in several ways, including through guidance, funding, and training. EPA has worked with DOL and industry groups to develop a water-sector competency model to support industry training and with VA to help place disabled veterans in water industry jobs. In addition, USDA funds personnel who travel to rural utilities to provide hands-on assistance through its Circuit Rider program. Four of five small utilities GAO interviewed said they used this program and other USDA technical assistance for training operators. GAO recommends that EPA add strategic workforce planning questions, such as the positions and skills needed in the future, to its inspection guidance documents. EPA generally agreed with GAO's recommendation as it related to drinking water, but neither agreed nor disagreed regarding wastewater. GAO believes the entire recommendation should be implemented.", "document_type": "gao"}
{"report": "Over the years, we have issued several reports on fragmentation, overlap, and potential for duplication among federally funded employment and training (E&T) programs and identified areas where inefficiencies might result. This report, like our prior work, uses the following definitions: Fragmentation refers to circumstances in which more than one federal agency (or more than one organization within an agency) is involved in the same broad area of national need and opportunities exist to improve service delivery. Overlap occurs when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve their goals, or target similar beneficiaries. Duplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries. During the 1990s, we issued a series of reports that documented program overlap among federally funded E&T programs and identified areas where inefficiencies might result. For example, we found that program overlap might hinder people from seeking assistance and frustrate employers and program administrators. In 2000 and 2003, we identified federally funded E&T programs for which a key program goal was providing E&T assistance. In our most recent report in 2011, we identified 47 E&T programs and found that 44 of them overlapped with at least one other program in that they provided similar services to a similar population. We also found that due to the American Recovery and Reinvestment Act of 2009 (Recovery Act), both the number of—and funding for—federal E&T programs had increased since our 2003 report, but little was known about the effectiveness of most programs because only five programs had conducted impact evaluations. Our guide on identifying and reducing fragmentation, overlap, and duplication notes that determining whether fragmentation and overlap exist among programs is a key step in identifying opportunities to improve efficiency and effectiveness of programs. In some cases, it may be appropriate or beneficial for multiple agencies and programs to be involved in the same programmatic or policy area due to the complex nature or magnitude of the federal effort. However, our guide states that it is also important to use the results of existing or new evaluations of identified programs to assess options to reduce or better manage negative effects of fragmentation, overlap, and duplication, such as inefficient use of program funds. Enacted in July 2014, WIOA repealed and replaced the Workforce Investment Act of 1998 (WIA). WIOA placed greater emphasis on aligning and integrating workforce programs, which are administered primarily by the Departments of Labor (DOL) and Education (Education), with support from the Department of Health and Human Services (HHS) and other agencies. For example, under WIOA, DOL and Education review and approve 4-year strategic plans for states’ workforce development systems. WIOA also requires certain programs and encourages other programs to be available through centralized service delivery points referred to as American Job Centers. In addition, WIOA requires that DOL and Education collaborate to implement a common performance accountability system for six core programs, which presents agencies with an opportunity to align definitions, streamline performance indicators, and integrate reporting across these programs. Since our 2011 inventory of federal E&T programs, which focused on fiscal year 2009, both the Great Recession and one-time funding made available under the Recovery Act have ended. Recovery Act funds were provided to help preserve and create jobs and promote economic recovery, among other purposes. With the end of the recession, the unemployment rate has substantially declined. The rate increased from 4.6 in 2007 to a peak of 9.6 in 2010 before declining to 4.4 in 2017 (see fig.1). WIOA encourages DOL, Education, HHS, and other relevant federal agencies to conduct program research and evaluation. For example, WIOA requires DOL to publish a plan every 2 years that describes the research, studies, and multistate project priorities of DOL concerning employment and training for the following 5-year period. This includes a provision that the plan be consistent with certain purposes, including the purpose of aligning and coordinating core programs with other partner programs provided through American Job Centers. In addition to WIOA requirements, we have also previously reported that each federal agency should require its major program components to prepare annual and multiyear evaluation plans and to update these plans annually. The planning should take into account the need for evaluation results to inform program budgeting, reauthorization, agency strategic plans, program management, and responses to critical issues concerning program effectiveness. These plans should include an appropriate mix of short- and long-term studies to produce results for short- or long-term policy or management decisions. To the extent practical, the plans should be developed in consultation with program stakeholders. Furthermore, leading organizations, including the American Evaluation Association and the National Academy of Sciences, emphasize the need for research programs to establish specific policies and procedures to guide research activities. In addition to planning for formal evaluation, Standards for Internal Control in the Federal Government emphasize the importance of managers routinely assessing the results of their actions, for which evaluation is a potential tool. The number of federal E&T programs has decreased since our last report on them in 2011. For fiscal year 2017, we identified 43 programs, four fewer than we reported in 2011. The number decreased because more programs were eliminated or defunded (6) than added (2). For example, in 2014, the Workforce Innovation and Opportunity Act (WIOA) eliminated at least four of our identified E&T programs. This included 1) DOL’s Veterans’ Workforce Investment Program, 2) Education’s Grants to States for Workplace and Community Transition Training for Incarcerated Individuals, 3) Education’s Migrant and Seasonal Farmworkers Program, and 4) Education’s Projects with Industry program. In addition, Congress did not appropriate funds for Education’s Tech Prep Education State Grants in fiscal year 2011 and DOL’s Community Based Job Training Grants programs in fiscal year 2010, according to agencies’ budget documents. We also identified two additional E&T programs through interviews with agency officials and a related GAO report: 1) Department of Veterans Affairs’ (VA) Compensated Work Therapy, and 2) Department of Defense’s (DOD) Job Training, Employment Skills Training, Apprenticeships, and Internships. For changes in the program list from our 2011 review to our current review, see appendix II. The 43 programs we identified in fiscal year 2017 are fragmented across nine federal agencies, as programs were in 2011 (see fig. 2). Our survey results showed that the federal government obligated nearly $14 billion to the E&T components of its programs in fiscal year 2017, a decrease of about $5.4 billion or 30 percent, adjusting for inflation, from the amount in our 2011 review (which reported fiscal year 2009 obligations). According to our analysis of survey data, much of the decrease in E&T obligations can be explained by the expiration of Recovery Act funding. For example, two-thirds of the Recovery Act funding designated for E&T programs went to four DOL programs that received a combined $3.8 billion in Recovery Act appropriations. From fiscal year 2009 to fiscal year 2017, the combined E&T obligations for these four programs decreased by $4.7 billion, or 58 percent. Of the 31 E&T programs that reported E&T obligations in our survey, eight programs were responsible for more than $11 billion, or 82 percent of the total in fiscal year 2017. Their shares of 2017 E&T obligations ranged from 5 percent for DOL’s Wagner-Peyser Act Employment Service to 21 percent for Education’s State Vocational Rehabilitation Services Program (see fig. 3). Among these eight programs responsible for the vast majority of E&T obligations, all must be included in state plans required under WIOA, except for DOL’s Job Corps, VA’s Vocational Rehabilitation and Employment, and HHS’ Temporary Assistance for Needy Families (TANF). In addition, all but DOL’s Job Corps and VA’s Vocational Rehabilitation and Employment are state-administered. For complete data on reported changes in E&T obligations between fiscal years 2009 and 2017, for the 29 programs that provided estimates in both years, see appendix III for numbers adjusted for inflation and appendix IV for unadjusted numbers. The number of people served by E&T programs also declined, from 24 million to 11 million individuals in the most recent year for which data were available, or a 56 percent decrease from the number reported in the 2011 report. Two of DOL’s E&T programs—the Wagner-Peyser Act Employment Service and the WIOA Adult Program—accounted for the majority of this decrease, dropping by 8 million and 4 million, respectively. Participation in certain programs, for example, Wagner-Peyser Act Employment Service and WIOA Adult Program, changed markedly as the economy improved, suggesting that enrollment is highly sensitive to economic conditions. Since we last reviewed these programs in 2011, the U.S. economy has improved and the unemployment rate dropped by 53 percent (see fig. 4). DOL officials said these factors could have reduced the demand for certain E&T services. Unemployment is an important driver of demand for some, but not all, E&T programs. For example, demand for certain employment and training services, such as vocational rehabilitation, may be relatively insensitive to economic conditions. In addition, technology has the potential to change workforce needs in certain industries, leading to workers who need retraining. In addition, DOL officials told us that under WIOA a new definition of program participant, effective in 2016, that primarily impacted the number of participants reported for Wagner- Peyser Act Employment Service, WIOA Adult Program, and WIOA National Dislocated Worker Grants. The 43 E&T programs generally overlap in that they provide similar services to similar populations, according to our survey analysis (see table 1). In our survey, almost all of the 43 programs reported providing employment counseling and assessment services as well as job search or job placement activities (39), job readiness training (38), and job referrals (37). The least commonly provided service selected from our list of service categories–high school completion or equivalency assistance–was provided by over half (26) of the programs. Through our survey, eight of the 43 programs reported serving the general population (that is, a relatively broad target) and the remaining 35 reported serving a narrower target population, such as Native Americans (8), veterans and transitioning servicemembers (7), or youth (5)., Our survey analysis shows overlap in services exists among programs serving the general population as well as among those serving each specific target population. Specifically, a majority of programs targeting the general population, Native Americans, and youth reported providing many of the same services. For example, all of the five youth programs reported providing similar E&T services, such as employment counseling and assessment and job readiness training (see fig. 5). For more information on services provided by programs serving selected target populations, see appendix VI. Many of the E&T programs targeting specific populations are fragmented across multiple agencies. For example, four agencies administer the eight Native American E&T programs and three administer the seven programs for veterans (see table 2). Other includes older workers, women, and unemployed and underemployed residents of solid and hazardous waste-impacted neighborhoods. According to VA officials, VA’s Vocational Rehabilitation and Employment program serves individuals with a service connected disability and VA’s Compensated Work Therapy program serves individuals enrolled in Veterans Health Care and does not require a service connected disability. Overlap among program services may have benefits, but it may also suggest opportunities for coordination or efficiencies in service delivery. Overlap may be beneficial in 1) helping program participants with specific needs better access E&T services, 2) providing more tailored or intensive support services, or 3) achieving higher quality outcomes for specific populations than would be achievable from their use of a more broadly targeted program. For example: A 2015 study funded by DOL on services provided to veterans through the public workforce system in Texas found that veterans who received intensive services from DOL’s Disabled Veterans’ Outreach Program Specialist or Local Veterans’ Employment Representative staff subsequently had higher earnings than veterans who did not, although these same veterans may have been eligible for similar services provided by other programs to the general population. A 2017 study funded by the U.S. Department of Agriculture (USDA) on its Supplemental Nutrition Assistance Program (SNAP) E&T— which helps participants who are eligible to receive nutrition assistance from the federal government better access E&T services —found that program participants also received support services, such as child care vouchers and transportation assistance. Participants said these services were important to their participation in the E&T program and helped those with specific needs better access E&T services. However, when multiple programs overlap or are fragmented, there is also a risk that program administrators may not make efficient use of available resources if they do not coordinate their efforts. Without careful coordination, programs may not fully leverage mutual benefits or participants may find administrative requirements burdensome or redundant. For example: A 2018 GAO report on USDA’s SNAP E&T program found that 20 states’ SNAP E&T programs did not partner with workforce agencies to provide E&T services. States that do not fully leverage resources available through the workforce development system may miss opportunities to serve a greater number of SNAP E&T participants and provide a wider variety of services. GAO recommended the administrator of the Food and Nutrition Service take additional steps to assist states in leveraging available workforce development system resources. A 2017 study funded by DOL on American Job Centers found that customers became frustrated filling out applications in what they viewed as redundant paperwork requirements for multiple programs with varying eligibility criteria. In response to our survey of agency officials for the 43 E&T programs, almost all (38) reported taking at least one action to manage fragmentation, overlap, and/or potential duplication. Common actions included providing program guidance and technical assistance, coordinating participant services (e.g., co-locating services or co-enrolling participants), and effectively managing grants (see table 3). Our survey analysis showed that of 43 E&T programs, 31 across eight agencies reported taking at least one action to manage fragmentation. In addition, 38 programs across all nine agencies reported taking at least one action to manage overlap. For example, to address fragmentation and overlap, officials representing seven programs within DOL and Education reported in our survey that they participated in interagency workgroups to share information and to facilitate cross-agency communication to coordinate services. Likewise, VA reported that the agency and DOL updated their interagency technical assistance guide to better align the agencies’ veteran E&T programs. (See table 4.) Program officials reported that their actions were motivated by a variety of factors, including their own assessments, legal requirements such as those in WIOA, and audit recommendations. They attributed some of their actions to their assessment of the potential for duplicative services, or to promote streamlined administration. For example: In 2014, DOL released updated guidance to administrators of its Disabled Veterans’ Outreach Program to encourage coordination with its Wagner-Peyser Act Employment Service program to help ensure that the two programs were not providing similar services to veterans. Education reported that its data collection and reporting system integrates data from the State Vocational Rehabilitation Services Program and State Supported Employment Services Programs. Likewise, Education reported that its monitoring and technical assistance guide addresses both the State Vocational Rehabilitation Services Program and the State Supported Employment Services Program. In addition, DOL and other agencies reported taking actions that are either required or encouraged by federal law in order to manage fragmentation and overlap. For example: DOL officials reported that since WIOA was enacted in 2014, DOL, Education, and HHS have jointly issued directives and guidance to help states implement and administer WIOA, such as guidance on developing their required state strategic plans. Also under WIOA, DOL and Education have issued joint regulations and established common data definitions and joint data collection instruments to align performance reporting for WIOA six core programs. Agencies with E&T programs targeted toward Native Americans reported that tribes’ use of authorized plans to integrate employment, training, and related services programs can help manage fragmentation and overlap. The potential scope of such plans (referred to as 477 plans), which had been originally authorized in 1992, was increased via legislation in 2017 to include programs with more purposes. With an authorized plan in place, tribes can integrate certain federal funds received by the tribe and coordinate employment, training, and related services across multiple programs that serve the tribe. In December 2018, 12 agencies signed a memorandum of agreement intended to set forth the basic functions and relationships of those agencies in the funding and oversight of tribal 477 plans and to facilitate coordination and collaboration between the agencies. Agencies have also taken actions to improve collaboration across multiple E&T programs based on our recommendations or on internal audits. For example: In 2011, we recommended that the Secretaries of DOL and HHS work together to develop and disseminate information that could facilitate further progress by states and localities in increasing administrative efficiencies in E&T programs, such as state initiatives to consolidate program administrative structures and state and local efforts to co- locate E&T programs at one-stop centers. In response, DOL and HHS took a number of steps, including issuing a January 2015 study focused on identifying and documenting potentially promising practices in coordinating Temporary Assistance for Needy Families (TANF) and WIA services at the state and local levels. In 2012, we found that the interagency handbook used by DOL and VA to coordinate E&T services for veterans did not include, for example, incorporating labor market information into rehabilitation plans. In 2015, as GAO recommended, these agencies revised the interagency handbook by outlining how VA and DOL staff should coordinate efforts to provide veterans with labor market information when developing employment and training objectives and assist them in selecting training and credentialing opportunities as a part of their rehabilitation plans. In 2012, EPA’s Office of Inspector General conducted an audit of its Environmental Workforce Development and Job Training Cooperative Agreements program which concluded that, absent internal controls, the program was at risk for duplication with other E&T programs. To mitigate that risk, the lead program administrator now provides other federal agencies a list of program applicants to ensure that no applicant is receiving funds for the same purposes outlined in the Environmental Workforce Development and Job Training program application. While most programs reported taking action to manage fragmentation or overlap, officials from five programs reported in our survey that they had taken no action. Officials from four of these programs reported that no action was necessary because their program offered a unique service or served a specialized population. While we did not further review the need for coordination among these programs and others, they nonetheless reported one or more services in common with others serving the same population. In addition, while unique aspects may be protective to some extent against the risk of duplication, unique features may not necessarily reduce the risk of overlap or need for coordination. For example, DOD officials stated that apart from its Job Training, Employment Skills Training, Apprenticeships, and Internships program, they were not aware of any other federal program that allows servicemembers to participate in job training, including apprenticeships and internships, beginning up to 6 months before their service obligation is completed. DOL officials confirmed that its Transition Assistance Program does not offer job training to service members, but it does, like the DOD program, offer pre-separation employment services and counseling. VA also noted in its technical comments that servicemembers who meet Vocational Rehabilitation and Employment eligibility criteria may, with DOD permission, receive these job training services as part of their rehabilitative program and that it partners with DOD to train transitioning servicemembers as veterans’ services representatives. We did not further review the need for coordination among these or other programs that reported no action, but absent a more complete evaluation, it is not possible to assess whether these programs have taken sufficient steps to address overlap. Regarding duplication, 14 programs reported no action either to detect it or to prevent it. Agencies administering E&T programs did not consistently have information on results to know how well their actions to manage program fragmentation and overlap were working. DOL officials told us that they generally had not assessed the actions they reported in our survey to manage overlap, fragmentation, and potential for duplication, but noted that the agency has begun an implementation study of WIOA that will include examining state and local efforts to increase program coordination and collaboration. DOL expects the final report will be completed in fall 2019, and agency officials said it is coordinating with other agency partners. Asked about efforts made by specific programs to manage overlap and fragmentation, other agency officials said they had assessed results of these efforts in some cases, but not others. For example, VA officials told us that in 2016 they started tracking referrals between its Vocational Rehabilitation and Employment Program and DOL’s programs targeted to veterans to help ensure participants were obtaining labor market information from DOL programs. In contrast, in the case of integrating multiple E&T programs targeted toward Native Americans, HHS officials reported that the agency has not made specific efforts to assess the effectiveness of plans first provided for in 1992 which might reduce administrative burden by allowing tribes more flexibility to combine E&T services funded by multiple federal agencies. GAO’s guide on fragmentation and overlap states it is important to use the results of existing or new evaluations of identified programs to assess options to reduce or better manage negative effects of fragmentation, overlap, and duplication, such as inefficient use of program funds. For example, evaluation and other periodic reviews could help identify ways to address (1) gaps in information on how multiple programs are serving the employment and training needs of specific populations, such as Native Americans, youth, and refugees, or (2) the extent to which they have implemented practices to manage unwanted effects of fragmentation and overlap and improve coordination and efficiency. Agencies reported completing additional impact studies since our 2011 review, but evaluations examining their programs’ effects have generally been confined to a single program and/or specific target populations. Four of the nine agencies in our review reported that they had completed at least 13 impact studies since 2011 of individual programs that measured effectiveness in terms of outputs and outcomes. (See appendix VII for a list of these studies.) DOL officials told us that programs tend to be evaluated individually for their effectiveness in achieving individual goals and objectives rather than for collective effects or performance. DOL officials said that they perform some research covering multiple programs in preparation for conducting program impact or effectiveness studies, but that the related findings tend to be more descriptive in nature. They also cited plans to use common measures developed under WIOA to look at outcomes across the core programs. Some agencies have sponsored studies that focus on populations served by multiple programs, including customer experience with receiving services from multiple programs, and an early snapshot of the extent of state-level coordination in implementing WIOA. Specific examples of studies that reviewed issues related to implementing multiple programs include: A 2015 Mathematica study funded by HHS of WIOA-funded programs that included numerous efforts state level administrators could undertake to improve coordination among the programs, including exchanging more information on strategies and methods used by each program to address obstacles that impede coordination. A 2015 Rand Corporation study funded by DOD that examined employment support programs for reservists and recommended assessing the costs and benefits of streamlining the current program line-up to reduce any redundancies. A 2017 study by IMPAQ International funded by DOL that identified areas where customer service in WIOA job centers could be improved, such as streamlining enrollment and registration procedures and providing more information about the full array of services at the centers. However, of the six completed studies we identified that examined more than one E&T program, only one study assessed how any coordinated or integrated activities benefited the population served. We found no similar studies conducted on the effects of multiple programs targeted toward other populations, such as Native Americans, youth, or refugees. VA officials told us that it is important that reviews of E&T programs for specific population take into account the complex needs of that population to understand when there is a need for involvement of multiple programs. For example, officials said that special populations such as homeless veterans require a breadth of unique services that may not available through a single program or by programs serving the general population. Further, as programs more commonly work together, learning about the programs’ collective impact may be as important as studying the programs’ individual results. DOL officials told us that DOL, HHS, and Education tend to independently create their evaluation plans for employment and training services. After WIOA was enacted, these agencies formed the WIOA Evaluation Workgroup with the intent of establishing greater collaboration among federal agencies on E&T program evaluation. DOL E&T programs make up over a third of all federal E&T programs, and some of these programs under WIOA coordinate or align their services with programs administered by other agencies. DOL officials told us WIOA Evaluation Workgroup members interacted with staff from other agencies, such as USDA, who administered E&T programs to encourage their participation. The workgroup met for the first time in September 2017. After the initial meeting, according to DOL officials, the agencies dissolved the group because they concluded that the topic of WIOA-related evaluation could be covered through existing periodic interagency meetings. However, DOL officials told us that these efforts do not focus on evaluation across programs. In addition, the DOL agency-wide evaluation plan for fiscal year 2018—issued in September 2018—does not list evaluations focused primarily on cross-program coordination or collaboration, nor does it address potential overlap and fragmentation among its E&T services. Since 2013, DOL has not published a 5-year strategic research plan for E&T programs. In our 2011 review of DOL’s research and evaluation program for its E&T programs, we recommended that DOL develop a mechanism to enhance the transparency and accountability of its E&T research by consulting other key federal agencies and involving advisory bodies or other entities outside DOL. In 2010, the Employment and Training Administration (ETA), the division with lead responsibility for DOL’s E&T programs, began a series of meetings with a panel of outside experts to develop a 5-year research plan. This strategic research plan set the research agenda for E&T programs by identifying and prioritizing what research and evaluations would be initiated over the following 5 years. Before finalizing its research agenda, DOL obtained broad input from federal officials at Education and HHS and a range of other key stakeholders, such as officials in local and state government and academics from the workforce community. In May 2013, DOL submitted to Congress and posted on its website a 5-year strategic research plan for its E&T programs which covered program years 2012 to 2017. In contrast to the broad consultation and public exposure that characterized past strategic planning for E&T research, in recent years DOL has instead relied on an internal process to set its research and evaluation priorities for its E&T programs and publishes only an agency- wide evaluation plan that is shorter-term and developed for a different purpose. Specifically, ETA develops an annual learning agenda that officials indicated highlights its research priorities, ideas, and proposed studies. Officials stated that the E&T learning agenda is provided for consideration with other agency-wide agendas in developing an annual evaluation plan for all of DOL. While DOL’s annual evaluation plan and the results of its evaluations are posted publicly through its website and submitted to the relevant congressional committees, the learning agendas, including those for E&T programs, are internal documents, and DOL does not release them to the public. The DOL-wide evaluation plan that is published presents neither a strategy for E&T evaluation nor plans for any evaluation to be initiated more than a year in the future. The fiscal year 2018 DOL-wide evaluation plan discusses only research to be initiated during the next year (fiscal year 2019) and lists studies that remain in progress from previous years. Rather than project longer-term research needs, the plan’s main purpose, according to DOL officials, is to comply with specific appropriations language. DOL officials told us that the list of proposed studies in the learning agendas may not ultimately appear in the annual evaluation plan because they are not near-term priorities for the agency-wide plan. DOL’s fiscal year 2018 agency-wide plan describes initiation of four studies—two on apprenticeship, one on strategies to prevent improper unemployment insurance payments, and another on potential effects of application fees for certain ETA programs. WIOA requires that DOL publish a plan every 2 years that describes “the research, studies, and multistate project priorities of the Department of Labor concerning employment and training for the 5-year period following the submission of the plan.” DOL officials told us that it is complying with this requirement by providing ETA’s annual learning agendas to be included in DOL’s overall evaluation plan. However, the resulting agency- wide plan falls short of meeting best practices for robust strategic planning. As we have previously reported, these practices include: Preparing annual and multiyear evaluation plans and updating these plans annually to take into account the need for evaluation results to inform program budgeting, reauthorization, agency strategic plans, program management, and responses to critical issues concerning program effectiveness. Including an appropriate mix of short- and long-term studies to produce results for short- or long-term policy or management decisions. Developing plans in consultation with program stakeholders to help agencies ensure that their efforts and resources are targeted at the highest priorities and to create a basic understanding among the stakeholders of the competing demands that confront most agencies. A 2010 internal DOL memo stated that such a plan can guide the development of research and evaluation projects and be a valuable tool for the broader workforce research community. Furthermore, leading organizations, including the American Evaluation Association and the National Academy of Sciences, emphasize the need for research programs to establish specific policies and procedures to guide research activities. For example, a 2016 American Evaluation Association guide stated that having annual and multi-year evaluation plans is useful in guiding program decision-making in such areas as program management and budgeting, and responding to issues concerning program effectiveness. Finally, Standards for Internal Control in the Federal Government state more broadly that program managers may need to conduct periodic assessments to evaluate the effectiveness of their actions. These may include but are not limited to formal evaluations. However, without a long-term evaluation plan developed in consultation with key stakeholders, DOL may not learn whether its actions to improve E&T program coordination and integration are working, and thus may continue undertaking activities that are not leading to desired results. With the enactment of WIOA in 2014, steps were taken toward aligning employment and training programs and ensuring greater cross-agency coordination. Since then, agencies and programs have reported taking a range of actions to increase coordination among E&T programs and manage fragmentation and overlap. However, without knowing whether these actions are working to improve program coordination and integration, agencies may persist in activities that are ineffective, fail to expand those that work, or ignore unintended consequences. Further, the lack of evaluation focused on program coordination has resulted in a void of information on programs’ collective impact. Without strategically planning the use of evaluation resources, DOL and other agencies will not learn efficiently about whether their efforts to coordinate the programs have been successful and what impact the newly coordinated programs are having, collectively, on their shared objectives. We are making the following recommendation to DOL: The Secretary of DOL should develop and publish a multi-year strategic research plan for evaluation of its employment and training programs that includes assessing the completeness and results of efforts to coordinate among E&T programs to address overlap and fragmentation. In developing this plan, DOL should also consult with other federal agencies and key stakeholders on ways to address gaps in information on how multiple programs are serving the employment and training needs of specific populations, such as Native Americans, youth, and refugees. (Recommendation 1) We provided a draft of this report for review and comment to the Departments of Agriculture, Defense, Education, Health and Human Services, Interior, Justice, Labor, and Veterans Affairs, and to the Environmental Protection Agency. We received formal written comments from DOL and VA that are reproduced in appendix VIII and IX. In addition, DOL, Education, HHS, Interior, USDA and VA provided technical comments which we incorporated into the report as appropriate. EPA, DOD, and DOJ did not have any comments. DOL agreed with our recommendation that it develop and publish a multi- year strategic research plan for evaluation of its E&T programs consistent with the purpose of aligning and coordinating these programs. DOL stated that it actively plans and makes public the research and evaluation topics for these evaluations, but it did not identify a timeline or measures it would take to augment these basic steps. We recommended that DOL consult with other federal agencies and key stakeholders in developing a strategic research plan that assesses the completeness and results of efforts to coordinate among E&T programs to address overlap and fragmentation. Consultation should include ways to address gaps in information on how multiple programs are serving the employment and training needs of specific populations, such as Native Americans, youth, and refugees. DOL stated that it will consult with stakeholders regarding the employment and training needs of specific populations. VA commented that such reviews of E&T programs for specific populations should take into account the complex needs of the population being served and the breadth of needed services. We agree that any such reviews should address how the collection of programs is serving each population’s needs. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix X. This appendix discusses our scope and methodology for our three research objectives examining (1) how participation in and obligations for federal employment and training programs have changed since our 2011 report, (2) the extent to which employment and training programs continue to provide similar services to similar populations, and examples of potential effects, and (3) the extent to which agencies have taken actions to address previously identified fragmentation and overlap among the programs and lessons learned. The sections below discuss the methods we used to address each of the three objectives. In addition to these methods, we reviewed relevant federal guidance and other program documents; and interviewed federal agency officials at headquarters offices. The focus of this review was how employment and training services are coordinated among programs specifically designed to deliver such services. As such, our scope excluded some programs that offer or finance employment and training services, but for which this is not a program objective (for example, student loan programs, which focus primarily on enhancing access to postsecondary education). Similarly, we focused on programs that deliver direct service rather than tax expenditures, which may finance or incentivize similar services through tax benefits. To address all of our objectives, we compiled a list of employment and training programs by starting with the 47 programs administered by nine federal agencies that were identified in our prior work. We updated the original list by asking federal agency officials to provide the current status of previously identified programs and identify any new ones that might meet our criteria. As in our 2011 review, we included programs for which objectives cited in the Catalog of Federal Domestic Assistance (CFDA) covered: enhancing the specific job skills of individuals in order to increase their identifying job opportunities, and/or helping job seekers obtain employment. We also searched the CFDA electronically in February 2018 to identify any additional programs that met our inclusion criteria. To conduct an electronic text search of the CFDA database, we used 12 search terms used in GAO-11-92. These included: We excluded any programs that met one or more of the following criteria: Program objectives do not explicitly include helping job seekers enhance their job skills, find job opportunities, or obtain employment. Program does not provide employment and training services itself (e.g., it provides financial support to other employment and training programs, or subsidizes the cost of employment through tax credits). Program is small or is a component of a larger employment and training program, such as a pilot or demonstration program. Programs that are economic development programs that aim to increase job opportunities but do not provide services to individuals to enhance their job skills, identify job opportunities, or find employment. Programs that aim to achieve broad workforce-related goals, such as increasing educational opportunities for minority individuals in particular fields or improving the status of and working conditions for wage-earning women, but do not provide employment or training services themselves. Education programs that fund student loans for educational expenses, initiatives for student recruitment and retention, or other student support services. Programs that support training for training providers, such as vocational rehabilitation specialists, or other programs that support job-specific training for individuals who are already employed. Two analysts independently reviewed the list of 211 programs identified in the list generated from the 2018 CFDA search against the inclusion and exclusion criteria described above. To reach concurrence on the programs list, the analysts compared their lists and reached agreement on which to include. If the analysts were undecided about including a program, another analyst was consulted. We also reviewed other GAO reports published since 2011 that provided a more in-depth review of employment and training programs to identify any additional programs that met our three inclusion criteria. As a result of that process, we identified three programs that met our criteria and added them to our list. It is important to note that the number of programs identified will vary with the definition used, and applying any definition can require subjective judgment. After evaluating all identified potential programs, we determined that 46 employment and training (E&T) programs met all criteria to be included in our audit. Once our determinations were made, we sent emails to agency liaisons asking them to confirm the list of programs to be included in and excluded from our review, and to provide the names and contact information for the officials who would be responsible for completing our planned survey. Agencies confirmed our final inclusion and exclusion decisions. After administering our survey, we excluded DOD’s Troops to Teachers Program because the program generally focused on teacher quality rather than E&T services. We also excluded DOD’s Hiring Heroes Program because DOD officials told us the program does not receive a specific appropriation and is a small program that is part of DOD’s larger effort to encourage the employment of servicemembers and veterans. After we administered our survey, DOL officials clarified that the Women in Apprenticeship and Nontraditional Occupations (WANTO) program was not a sub-program under the Registered Apprenticeship Program, but rather a discrete program. We sent a survey to WANTO program officials. At the end of this process, we confirmed that 43 programs met our definition and should be included in our review. We generally maintained consistency with decisions made in our 2011 review. To address all of our objectives, we administered a survey to program officials that included questions about services provided, budgetary information, and participants served. In addition, we included questions asking agency officials to confirm or correct program objectives and eligibility and beneficiary requirements listed in the CFDA. We also included questions about agencies’ actions to manage overlap and fragmentation. We conducted two pretests with VA to ensure (1) our questions were clear and unambiguous, (2) terminology was used correctly, (3) the survey did not place an undue burden on agency officials, (4) the information could feasibly be obtained, and (5) the survey was comprehensive and unbiased. To assess the reliability of the data provided by agencies, we asked officials to identify the databases and information sources they used to respond to our survey questions and any limitations of the data they provided. We then discussed with agency officials any identified data limitations and, if unresolved issues remained, annotated the data, as appropriate. We also identified responses that appeared to be inconsistent or outliers, such as instances in which participants increased as funds declined, and submitted them to agencies for verification. From April to August 2018, we emailed the surveys to agency officials as an attached Microsoft Excel form that they could return electronically. All of the 45 surveys were completed and returned. Because this was not a sample survey, it has no sampling errors. However, the practical difficulties of conducting any survey may introduce errors, commonly referred to as nonsampling errors. For example, difficulties in interpreting a particular question, sources of information available to respondents, or entering data into a database or analyzing them can introduce unwanted variability into the survey results. We took steps in developing the surveys, collecting the data, and analyzing them to minimize such nonsampling error. For example, to minimize difficulties interpreting a particular survey question, we incorporated the suggestions from an independent reviewer to add explicit instructions for how to use the pull-down menus and consistently phrased requests for information. We reviewed the completed surveys and clarified information with agency officials, as needed. We further reviewed the survey to ensure the ordering of survey sections was appropriate and that the questions within each section were clearly stated and easy to comprehend. To reduce nonresponse, another source of nonsampling error, we sent out email reminder messages to encourage officials to complete the survey. In reviewing the survey data, we performed automated checks to identify inappropriate answers. We further reviewed the data for missing or ambiguous responses and followed up with agency officials when necessary to clarify their responses. On the basis of our application of recognized survey design practices and follow-up procedures, we determined that the data were of sufficient quality for our purposes. In terms of agency actions to manage overlap and fragmentation and to detect/prevent duplication, we followed up with select agencies to better understand what prompted the actions they took and the lessons they learned from evaluating those efforts. We did not conduct a legal analysis to confirm the various characterizations of the programs in this report, such as information on their budgetary obligations, services provided, target population, eligibility criteria, or program goals. Instead, all such program information in this report is based on our survey results, as confirmed by agency officials. Further, we did not review agencies’ financial reporting systems or audit the figures provided to us. We reviewed fiscal year 2019 budget documents to determine if they could be used to verify data provided by the agencies, but they did not consistently contain the program-level details needed. Instead, to help mitigate reliability limitations that might have accompanied agency reports, we asked agencies to identify the data source of reported budgetary information and to list any data limitations. To address our second objective to identify areas of overlap among E&T programs, we reviewed information reported by federal agency officials in our survey. We used the definition of overlap established in GAO’s prior work: overlap occurs when two or more programs provide at least one similar service to a similar population. After reviewing survey responses regarding the primary population groups served by the 43 programs and the services they provided, we categorized programs according to the primary population group served and identified programs within each category that provided similar services. We did not focus on the effects of potential duplication, which occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries. GAO has not previously identified duplication in federal E&T programs, and our objectives in this engagement focused on overlap and fragmentation previously identified in these programs. We categorized programs based on the type of program participant served according to program objectives and program eligibility criteria listed in the CFDA. Then, we verified these categorizations with agency officials. In categorizing programs by target population, we used the following categories: 1) general population, 2) dislocated workers or trade-impacted workers, 3) migrant and seasonal farm workers, 4) Native Americans (in this report, the term Native Americans refers to American Indians and Native Hawaiians), 5) people with physical or mental disabilities, 6) prisoners or ex-offenders, 7) refugees, 8) veterans or transitioning servicemembers, 9) youth, and 10) older workers, women, and unemployed and underemployed residents of solid and hazardous waste-impacted neighborhoods (collectively, other). We also categorized the VA’s Vocational Rehabilitation and Employment program with other programs that target veterans, but noted that the program serves veterans with a service-connected disability. To address our second and third objectives, we also reviewed GAO reports and agency funded research published since 2011. We used these sources, in part, to illustrate effects of overlap and fragmentation among E&T programs and provide examples of actions agencies have taken to address our prior findings or recommendations. To address our second research objective, we reviewed this literature to identify examples of documented effects of overlap and fragmentation among these programs, including positive effects (e.g., to fill a gap or complement an existing program) and negative effects (e.g., inefficient use of resources or confusion among individuals). To address our third research objective, we conducted a literature search of agency- sponsored research on E&T programs and ultimately determined that six of these studies were sufficiently rigorous and appropriately scoped to include in our review. To identify studies on coordination and collaboration of federally-funded programs, we conducted a literature search through ProQuest. Our initial search terms included “federal employment and training” and “coordination” or “collaboration,” “overlap,” and “fragmentation”. We also reviewed these studies to assess the extent to which agencies had evaluated actions to manage overlap and fragmentation. In addition, our survey asked program officials about whether an impact study had been completed since 2011 to evaluate program performance with regard to E&T activities and, if so, to provide a citation for at least one of these studies. An impact study assesses the net effect of a program by comparing program outcomes with an estimate of what would have happened in the absence of the program. This type of study is conducted when external factors are known to influence the program outcomes, in order to isolate the program’s contribution to the achievement of its objectives. Program officials provided 16 citations of what they believed to be impact studies. Of the 16 cited studies, we determined that 13 can accurately be described as impact studies. To make this assessment, we reviewed the methodology section of each study. We conducted this performance audit from September 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following table is a list of federal employment and training programs using as a baseline programs identified in our most recent prior report (GAO, Multiple Employment and Training Programs: Providing Information on Colocating Services and Consolidating Administrative Structures Could Promote Efficiencies, GAO-11-92 (Washington, D.C.: Jan. 13, 2011)). We also reviewed the Catalog of Federal Domestic Assistance (CFDA) to ensure that programs met our selection criteria and to identify new programs. We did not conduct an independent legal analysis to verify the information provided about the programs described in this appendix, such as information on their status. For a description of our methodology, see appendix I. Appendix IV: Change in Federal Employment and Training Obligations in Nominal Values *Program name from 2011 review was updated based on information confirmed by agency officials. Appendix V: Estimated Number of Program Participants Who Received Federal Employment and Training Services *Program name from 2011 review was updated based on information confirmed by agency officials. In addition to the contact named above, Betty Ward-Zukerman (Assistant Director), Sheranda Campbell (Analyst-in-Charge), Camille Henley, Joel Marus, David Perkins, and Jill Yost made key contributions to this report. Also contributing to this report were Amy Anderson, Stephen Betsock, Caitlin Croake, Alex Galuten, Kristen Jones, Benjamin Licht, Mimi Nguyen, James Bennett, David Blanding, Elizabeth Mixon, Steven Putansu, Monica Savoy, Paul Schearf, Ardith Spence, Almeta Spencer, Kathleen van Gelder, and John Yee.", "summary": "Federally funded employment and training (E&T) programs help job seekers enhance their job skills, identify job opportunities, and obtain employment. In 2011, GAO identified overlap and fragmentation among E&T programs administered by nine federal agencies. The Workforce Innovation and Opportunity Act (WIOA) was enacted in 2014, in part, to improve coordination and integration among these programs. This report examines (1) how the number of and obligations for federal E&T programs have changed since GAO's 2011 review, (2) the extent to which E&T programs continue to provide similar services to similar populations and examples of potential effects, and (3) the extent to which agencies have taken actions to address previously identified fragmentation and overlap among E&T programs and what agencies have learned about the results. To address these objectives, GAO surveyed E&T program administrators, reviewed relevant reports and studies, and interviewed federal agency officials. The number of federal employment and training (E&T) programs and program obligations have declined since GAO's 2011 report. In that review, GAO identified 47 E&T programs and found that 44 had overlap with at least one other program in that they provided similar services to a similar population. In fiscal year 2017, the most recent year data are available, GAO identified 43 E&T programs, or 4 fewer than in 2011 (see figure). From fiscal year 2009 to 2017, federal agencies' annual obligations for E&T programs decreased from about $20 billion to $14 billion. GAO analysis of survey data found the decrease in obligations was largely due to the expiration of funding from the American Recovery and Reinvestment Act of 2009, which had provided additional funding for selected E&T programs during and after the Great Recession. Survey results from federal administrators of the 43 E&T programs show that the programs continue to span nine agencies and generally overlap by providing similar services, such as employment counseling and assessment services (39 of 43) and job readiness training (38 of 43). Further, programs targeting a specific population, such as Native Americans, veterans, or youth, also provided similar services. In some cases, such overlap may be appropriate or beneficial, but it may also suggest opportunities for greater efficiency. Almost all (38 of 43) E&T programs reported at least one action to manage fragmentation or overlap, such as co-locating services and sharing information. However, the agencies were not able to consistently provide information on the results of these actions and few evaluations encompassed multiple programs. Among studies GAO identified, six examined more than one E&T program, but only one assessed how any coordinated activities benefited the population served. None of the six studies focused on Native Americans, youth, or refugees. The Workforce Innovation and Opportunity Act (WIOA) encourages agencies to conduct evaluations, and specifically requires the Department of Labor (DOL) to publish a 5-year plan describing certain E&T priorities, consistent with the purpose of aligning and coordinating certain programs. While DOL reported it took some steps, it continues to lack a strategic plan for E&T evaluations over a multi-year period. As a result, DOL does not know whether actions to manage overlap are successful. GAO recommends that DOL, in consultation with other federal agencies, develop and publish a multi-year strategic plan for its evaluations of employment and training that includes assessing the completeness and results of efforts to coordinate among E&T programs. DOL agreed with our recommendation.", "document_type": "gao"}
{"report": "The Employee Retirement Income Security Act of 1974 (ERISA) contains various provisions intended to protect the interests of plan participants and beneficiaries in workplace retirement plans. These protections include requirements related to reporting and disclosure, participation, vesting, and benefit accrual, as well as plan funding. For example, ERISA requires plans to provide plan participants with a summary plan description, including information on their rights under ERISA, periodic benefit statements, and upon request, a copy of the annual report including a financial statement, according to DOL. ERISA sets fiduciary standards that generally require workplace retirement plan funds to be handled prudently and in the sole interest of participants. ERISA also establishes certain requirements related to plan termination. ERISA does not require employers to provide workplace retirement plans, but those that do must comply with applicable requirements and standards. The Internal Revenue Code (IRC) provides favorable tax treatment for workplace retirement plans that meet certain qualification requirements set out in the IRC. For example, employees are generally not taxed on contributions made on their behalf but instead are taxed on benefits received. Several federal agencies play a role with respect to U.S. workplace retirement plans. Responsibility for enforcing ERISA is shared by DOL, Treasury, and PBGC. Treasury, through IRS, is primarily responsible for enforcing the IRC. The mission of DOL’s Employee Benefits Security Administration (EBSA) is to assure the security of retirement, health, and other workplace-related benefits of U.S. workers and their families. DOL administers Title I of ERISA, which includes the fiduciary standards and disclosure and reporting requirements. To carry out its responsibilities, EBSA issues regulations in these and other areas, and conducts programs and initiatives to assist and educate workers, plan sponsors, fiduciaries, and service providers on their rights and obligations under ERISA. EBSA also issues guidance and field assistance bulletins to assist plan sponsors and plan fiduciaries with managing retirement plans. For instance, in 2014, EBSA issued Field Assistance Bulletin (FAB) 2014-01 to assist fiduciaries of terminating DC plans in fulfilling their obligations under ERISA to locate missing participants and properly distribute their account balances. EBSA also maintains an outreach program employing approximately 100 benefits advisors throughout the country in 13 field offices. The program offers services to educate U.S. workers, beneficiaries, and plan sponsors about their rights and obligations under federal employee benefit laws, and helps individuals obtain retirement benefits that have been improperly denied. Under Title II of ERISA and subsequent amendments to the IRC, IRS issues and enforces rules that plans must meet to be qualified for preferential tax treatment. IRS also enforces certain provisions in Title I of ERISA regarding participation, vesting, benefit accrual, and minimum funding. IRS’ mission is to help U.S. taxpayers understand and meet their tax responsibilities and to enforce the law with integrity and fairness. To help achieve its mission, IRS issues tax regulations and other guidance to help taxpayers comply with the IRC. IRS guidance provides detailed and technical explanations of tax laws for professional tax preparers as well as taxpayers. IRS also manages a number of initiatives, programs, and systems to enforce federal tax law and assist taxpayers that are related to our review of unclaimed retirement accounts. For example, to assist taxpayers, IRS adopted a Taxpayer Bill of Rights in 2014 to provide a better understanding of taxpayers’ rights under the IRC. IRS also periodically publishes a strategic plan for a given period that outlines how it will improve service to taxpayers and enforce the law. To help ensure that taxpayers are paying the correct amount of tax due and to identify discrepancies, IRS’ Automated Underreporter Program matches taxpayer income and deductions submitted on information returns by third parties against amounts reported by taxpayers on their individual income tax returns. IRS also assists taxpayers and payors with information about federal tax withholding obligations. To assist taxpayers with foreign accounts, since 2003 IRS has offered an Offshore Voluntary Disclosure Program. This program provides a way for taxpayers with previously undisclosed income and undisclosed offshore accounts that need to be reported to contact IRS and resolve their tax matters. IRS also assists sponsors that administer qualified retirement plans through a number of systems and programs. For example, IRS offers assistance to plan sponsors through the Employee Plans Compliance Resolution System, which helps sponsors of qualified plans remedy operational and form mistakes made in the course of administering a retirement plan and avoid plan disqualification. IRS also forwards letters to missing individuals on behalf of private individuals or government agencies for a “humane purpose” when there is no other way to relay the information to the individual. Between 1994 and 2012, IRS forwarded letters through a letter forwarding program on behalf of entities that control assets that may be due a taxpayer, such as from sponsors of qualified plans that are attempting to locate missing participants. Title IV of ERISA created PBGC as a U.S. government corporation to provide plan termination insurance for certain DB plans that are unable to pay promised benefits. For example, when a PBGC-insured single- employer DB plan fails, PBGC trustees the plan and pays benefits up to statutory limits. PBGC also oversees the voluntary (“standard”) termination of fully funded PBGC-insured single-employer DB plans to ensure participants will receive the benefits to which they are entitled. As part of the standard termination process, PBGC’s Missing Participants Program connects participants—missing when the plan closes out—to their retirement benefits, in part by maintaining a centralized, online database the public can use to find lost retirement benefits. SSA provides retirement benefits to eligible individuals under the federal Social Security Old Age and Survivors’ Insurance program (Social Security). Although SSA does not oversee workplace retirement plans, SSA maintains data that are reported to IRS by plans using Form 8955- SSA on separated participants with vested but undistributed benefits. When individuals claim Social Security benefits, SSA may provide them with a “Potential Private Pension Benefit Information” notice that indicates they may be entitled to a retirement benefit through a past employer. DOL reported that in 2014 there were just over 639,000 DC plans and nearly 43,500 DB plans in the United States. These plans were sponsored by individual employers (i.e., private single-employer plans) and provided benefits to nearly 118 million participants. When a qualified plan terminates—whether it is a DB or DC plan—federal law requires plan participants to immediately be 100 percent vested in all accrued benefits (to the extent funded in the case of a DB plan) regardless of the vesting schedule in the plan document, according to IRS. A plan sponsor is required to distribute assets from a terminated plan as soon as administratively feasible, but generally within 1 year after plan termination. For terminated DC plans, such as 401(k) plans, participants generally receive the full amount of their vested account balance upon plan termination, according to IRS. When an employee separates from an employer but still has vested savings in a qualified defined contribution retirement plan, the plan can, under certain conditions and without the participant’s consent, transfer accounts out of the plan—commonly referred to as a “forced transfer.” Before the Economic Growth and Tax Relief Reconciliation Act of 2001 was enacted, ongoing DC plans could, in the absence of participant instructions, distribute balances of $5,000 or less by paying them directly to the participant, referred to as a “cash-out.” This law sought to protect participants’ retirement savings by requiring ongoing plans that have a cash-out limit that exceeds $1,000 (up to $5,000), in the absence of participant instructions and subject to certain notice requirements, to transfer balances that exceed $1,000 (up to $5,000) to an individual retirement account (IRA), preserving their tax-preferred status. Terminating plans are subject to different requirements. Fiduciaries of terminating plans are obligated to search for missing participants, to notify them of the termination and pending distribution of benefits before transferring participants’ unclaimed accounts to an IRA or elsewhere, according to DOL guidance. The guidance further provides that fiduciaries of terminating plans who are unable to locate missing participants may also be permitted to transfer accounts belonging to missing participants, without consent, to a federally-insured bank account or to a state’s unclaimed property fund. This occurs if the plan fiduciary cannot find an IRA provider to accept a direct rollover distribution for a missing participant or otherwise determines not to roll over the distribution to an IRA, for some other compelling reason. For tax reporting purposes, transfers made to a bank or a state unclaimed property fund are generally subject to income taxation, according to the guidance. This contrasts with rollovers to IRAs in which transferred retirement savings remain tax- favored. Plan sponsors are generally required to withhold 20 percent of the account balance on transfers to a bank or state unclaimed property fund and will send the withheld amount to Treasury to be used toward any potential taxes due on the distribution. In the United States, employee and employer contributions and investment earnings in a qualified retirement plan are generally not taxed as income until the employee receives the benefit. For example, employees participating in a 401(k) plan can generally elect to have their employer contribute a portion of their compensation to their account on a pretax basis. This deferred compensation (commonly referred to as a pre- tax elective contribution by IRS) is not subject to income tax withholding, and employees are not required to report it as wages on their individual U.S. tax returns at the time of the contribution. In addition, employers can provide matching or non-elective contributions to an employee’s 401(k) account; these matching or non-elective contributions are generally tax- deductible by the employer and employees also are not required to report these contributions as wages on their U.S. tax returns or pay income tax on these contributions at the time the contributions are made. Distributions from a qualified DC plan in the United States made to participants, including those who have separated from their employer, may be treated differently for tax purposes, depending on the nature and timing of the distribution. For example, a direct rollover, in which money is transferred directly from one qualified workplace retirement plan or IRA to another eligible retirement plan or IRA, is not taxable at the time of the rollover but should be reported on the participant’s federal tax return. By contrast, a distribution that is not rolled over is generally taxable income in the year in which it is received by the participant, according to IRS. Foreign workplace retirement plans are generally not tax-qualified under the IRC or covered by ERISA, according to IRS officials and tax experts with whom we spoke. They are, however, generally subject to the regulatory structure in place in the country where the retirement plan exists. Foreign workplace retirement plans that cover U.S. individuals may be subject to certain provisions of the IRC and other federal laws governing reporting and taxation of these retirement assets, as well as any applicable income tax treaties between the United States and the foreign country (see more about these treaties below). The extent to which U.S. individuals are subject to U.S. income tax on the contributions and earnings accruing in their foreign workplace retirement account depends on the specific characteristics of the plan. For example, according to tax experts with whom we spoke, many foreign workplace retirement plans qualify as employees’ trusts, and the taxation of contributions and earnings from these plans are governed by section 402(b) of the IRC. According to IRS, as long as the foreign retirement plan is determined to be an employees’ trust, the U.S. individual must include on their U.S. tax return contributions to the trust if the contributions are not subject to a substantial risk of forfeiture (vested). In addition, IRS officials said contributions that become vested after the year of contribution are taxable in the year of vesting, and earnings are taxable when distributed. Some foreign workplace retirement plans may include investments in a Passive Foreign Investment Company (PFIC), which, according to one tax preparer with whom we spoke, are investments in foreign mutual funds, hedge funds, or other kinds of pooled investments not incorporated in the United States. A U.S. individual who is a shareholder of a PFIC may be subject to annual reporting requirements and a high income tax rate on certain distributions. U.S. individuals who participate in a foreign workplace retirement plan also may be subject to income tax on any distribution they receive from their plan during the current tax year. Depending on the circumstances, U.S. individuals also may be subject to income tax on certain distributions they have not actually received, such as transfers of assets between or within foreign workplace retirement plans, if they are in “constructive receipt” of (or otherwise have income inclusion with respect to) the funds. In addition, U.S. individuals who pay foreign income taxes on distributions from their foreign workplace retirement plans may be eligible to claim a foreign tax credit on their U.S. tax return. U.S. Income Tax Treaties with Other Countries One objective of tax treaties is to provide taxpayers some relief from having to pay taxes in both the United States and a foreign country on the same income—referred to as “double taxation”—without creating opportunities for tax evasion or avoidance. Treaty provisions generally apply to both countries that have signed the treaty. A U.S. resident who receives income from a treaty country may be entitled to certain treaty benefits—credits, deductions, exemptions, or reductions in the rate of tax—on the taxes owed to that foreign country. Similarly, residents of the foreign country may be entitled to treaty benefits on their U.S. taxes on income from U.S. sources. However, with certain exceptions, tax treaties generally do not reduce the U.S. tax liability of U.S. residents. As of October 2017, the United States had a network of 57 comprehensive income tax treaties covering 66 countries, according to Treasury. U.S. individuals are subject to U.S. income tax on their worldwide income, and this could include contributions and earnings within and distributions from a foreign workplace retirement plan. However, tax treaty provisions may reduce foreign income taxes owed by U.S. individuals who receive income sourced from a treaty country; for example, through the use of credits, deductions, exemptions, or tax rate reductions. (See appendix I for more information on how IRS recommends taxpayers review tax treaties.) According to IRS and Treasury, almost all U.S. tax treaties also contain what is known as a “saving clause,” which IRS describes as a way to preserve or “save” the right of each country to tax its own residents (and in the case of the United States, its citizens) as if no tax treaty were in effect. As a result, these treaties do not generally reduce the U.S. income tax for U.S. individuals, unless an exception applies. In February 2016, Treasury issued a revised U.S. Model Income Tax Convention (i.e., model treaty), which is the baseline text the agency uses when it negotiates tax treaties. Depending on the outcome of the treaty negotiations, the final treaty with a particular foreign country may or may not include language from the model treaty. According to IRS, the Foreign Account Tax Compliance Act (FATCA) and IRC section 6038D are important developments in U.S. efforts to combat tax evasion by U.S. individuals holding accounts and other financial assets offshore, which may have implications for U.S. individuals who have foreign retirement accounts. FATCA generally requires foreign financial institutions to provide information to IRS regarding foreign financial accounts held by U.S. taxpayers. IRC section 6038D generally requires U.S. individuals to report to IRS their foreign financial assets that exceed a certain threshold. Beginning in July 2014, U.S. entities were required to withhold 30 percent on certain payments to a foreign financial institution unless the institution has entered into an agreement with IRS regarding FATCA reporting or is in a jurisdiction that is treated as having an Intergovernmental Agreement (IGA) in effect. However, FATCA regulations exempt foreign financial institutions from reporting on retirement accounts that meet certain requirements. Treasury has entered into IGAs with other countries to assist with implementing FATCA that may also provide an exemption for foreign financial institutions reporting of certain retirement accounts. This exemption does not exist under IRC section 6038D, which requires individuals, including U.S. citizens, to report their foreign retirement accounts on IRS Form 8938 if they meet certain regulatory thresholds. For example, unmarried U.S. individuals living abroad must file if the total value of their specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year. The U.S. Department of State (State) estimates that as of April 2015, 8.7 million U.S. citizens lived abroad. (See appendix II for other estimates.) Income data published by IRS for 2011 suggest that a majority of U.S. taxpayers who earned income from foreign sources likely owed little federal income tax because their reported adjusted gross income was relatively low due to tax credits and exemptions available to taxpayers on foreign-earned income. IRS estimated that in 2011 over 449,000 returns were filed by taxpayers reporting foreign-earned income and just over 445,000 of these returns reported using the foreign-earned income exclusion. We previously reported that for tax year 2011, taxpayers claiming the foreign-earned income exclusion had higher average income ($163,450) than the average Form 1040 filer ($58,706), and about 45 percent of those taxpayers had an adjusted gross income of less than $10,000. These data reflect that some taxpayers were able to exclude all or most of their foreign-earned income in calculating their adjusted gross income. We also reported that taxpayers claiming the foreign- earned income exclusion had lower average U.S. tax rates than all Form 1040 filers. Participants in U.S. workplace retirement plans face challenges managing unclaimed accounts accumulated over the course of their careers. We previously reported that some 401(k) plan participants find it difficult to keep track of their savings, particularly when they change jobs, because of challenges with consolidation, communication, and information. First, we found that individuals who accrue multiple accounts over the course of a career may be unable to consolidate their accounts by rolling over savings from one employer’s plan to the next. Second, maintaining communication with a former employer’s plan can be challenging if companies are restructured and plans are terminated or merged and renamed. Third, key information on lost accounts may be held by different plans, service providers, or government agencies, and participants may not know where to turn for assistance. As one witness testified to the ERISA Advisory Council in 2013, it is not uncommon for former employees to have difficulty locating a previous employer. Existing reporting and disclosure requirements directed at plan sponsors can provide participants who separate from their employer information about their accounts via multiple disclosures. However, plan sponsors have no automatic way to keep participants’ contact information up to date, nor do they have ways to ensure that separated participants will respond to their communications. Many participants rarely read the notices they receive. We conducted a review of private sector pension plan notices in 2013, and found that participants were interested in information about their individual benefits, which could reasonably include information about a pending distribution of their unclaimed account. Due to the large number of participant notices, we found participants struggled with what they must or should read. When participant notices are ineffective, accounts can become lost or unclaimed and eventually shrink or disappear entirely, diminishing a source of income in retirement. For example, accounts with a balance of $1,000 or less can be cashed out of a plan without participant consent; account balances can be reduced by tax withholding and early distribution taxes, or conditionally forfeited by the plan sponsor until the participant emerges to make a claim. Accounts with balances under $5,000, and sometimes those with larger balances, can be forcibly transferred to an IRA, where the account balances may decrease over time as the fees outpace low investment returns, as we reported in our prior work. In 13 of the 19 forced-transfer IRA scenarios we considered in 2014, a $1,000 account balance was reduced to zero within 30 years. DOL has also uncovered tens of thousands of participants of retirement age with unclaimed accounts that remained in their plans who were not receiving the retirement income they were due. Although DOL has provided guidance to plan sponsors of terminated DC plans about locating missing participants and unclaimed accounts, DOL has not provided similar guidance to ongoing plans. DOL officials told us that they are conducting investigations of steps taken by ongoing plans to find missing participants under their authority to oversee compliance with ERISA’s fiduciary requirement that plans be administered for the exclusive purpose of providing benefits. Plan sponsors are required to send notices to participants in a variety of circumstances, such as to obtain direction before making a distribution. However, the communication is not always successful, and may result in a mailing to an out-of-date address. With the absence of guidance, it is not clear to sponsors of ongoing DC plans how they should satisfy requirements to notify participants when participant addresses are out of date. Undeliverable mail is the main indicator for identifying a participant as missing, according to third-party administrators (TPA), who help manage missing participant issues for plan sponsors. However, DOL officials told us a recent pilot investigation found that some ongoing plans send notices that were returned undeliverable but then fail to follow-up with any search process. In contrast, if participants in a terminated plan do not respond to a notice, plan sponsors need to take certain steps, at a minimum, to locate the participant or a beneficiary. According to our analysis of stakeholder interviews, in some circumstances plan sponsors may be considering a participant to have been “notified,” even when the mail used to notify them was returned undeliverable. Executives at one firm that conducts missing participant searches told us that for an average client, 7 to 10 percent of mail will be returned undeliverable, which means communication was unsuccessful, potentially leaving participants without notification of changes to the plan or potential distributions or transfers. It also is not clear how ongoing plan sponsors should arrange for paying to obtain updated addresses of participants with unclaimed accounts. Because search costs are not all paid from plan assets, finding missing participants can be an additional business expense for plan sponsors. Once an account is force-transferred out of the plan to an IRA, the account may be charged a $65 annual search fee by the IRA provider, as we reported one provider did in 2014. Plan sponsors are permitted to pay only reasonable plan administration expenses, although they may charge expenses associated with a specific participant to that participant’s account. To reduce costs for its plan sponsor clients, representatives at one TPA told us that it will generally try to cash out accounts in ongoing plans under $1,000 immediately, before an address becomes obsolete. DOL audit findings also show that ongoing plans have challenges staying in touch with missing participants and paying them their benefits when due. DOL officials told us that in a recent DOL pilot investigation of 50 large DB plans, they found tens of thousands of separated participants who were entitled to benefits but were not receiving them. They told us that between 1 and 7 percent of all participants could be missing and not receiving letters from the plan, depending on the industry. They said their investigations found databases with missing names, addresses, and Social Security Numbers, and data they suspected were unreliable, such as participants named “Jane Doe” or with birth dates listed as “1/1/1900.” DOL enforces the fiduciary standards of ERISA, which require plan fiduciaries to act solely in the interest of plan participants and their beneficiaries, for the exclusive purpose of providing benefits to them, among other things. After plan termination, plan fiduciaries must distribute all plan assets as soon as administratively feasible, which could create an urgent need for plan sponsors to find participants. DOL officials said that part of their enforcement role is examining how plans are maintaining good records and what plans are doing to find and communicate with participants—officials are aware that additional guidance indicating what is expected of plan fiduciaries would be helpful. PBGC has recently published a final rule which expands its Missing Participants Program to cover most terminated DC plans, and DOL intends to revisit its guidance within that context. At that time, DOL will have an opportunity to also provide guidance to ongoing DC plan sponsors on their obligations under ERISA to prevent, search for, and pay costs associated with missing participants. By doing so, DOL can provide plan sponsors with better tools to manage unclaimed accounts and help ensure that future DOL investigations do not also uncover ongoing DC plans with substantial numbers of participants not receiving benefits to which they are entitled. Based in part on our discussions with IRS and our review of ERISA Advisory Council documentation, when a plan sponsor cashes out an unclaimed account and sends the money to the participant address it has on file, the address may be obsolete. As a result, the participant may not include the distribution in his or her taxable income for the year because the participant may not have received the payment from the plan sponsor or be aware of the transfer. According to an IRS publication on tax withholding for plan sponsors, a 20 percent income tax withholding generally is mandatory on amounts distributed from the plan that are not rolled over directly into another qualified plan or an IRA. However, our findings that some participants may not actually receive these distributions raise questions about whether withholding should be required in situations when it is reasonable to believe distributions will not be received by the participants. Misconceptions exist regarding how and when IRS will credit tax withholding toward a taxpayer’s tax liability. For example, two TPAs told us they believed that IRS will credit tax withholding on cashed-out accounts to the tax liabilities of missing participants. One industry representative we interviewed in 2013 told us that he withheld taxes when he could not find a participant because he believed the withholding would cause IRS to make the participant aware of the account. According to DOL bulletins issued in 2004 and 2014, some plan sponsors were using 100 percent withholding—in effect transferring the entire account to IRS— under the assumption that the withheld amounts would be matched and applied to a participant’s tax liabilities. DOL bulletins clarified it was not an appropriate distribution option for plan sponsors. Table 1 shows a variety of approaches to tax withholding. However, according to IRS, none of the tax withholding strategies automatically reduces the tax liability of the account holder. IRS officials told us that the agency does not routinely credit federal tax withholding to a taxpayer’s current federal tax liability unless the taxpayer has made a claim. Retirement accounts with small balances are most vulnerable to the tax consequences of tax withholding by plan sponsors. We previously reported that in the absence of participant instructions, accounts with a balance of $1,000 or less can be cashed out of the tax-deferred plan environment by plan fiduciaries without the separated participant’s consent. From 2004 to 2013, separated participants left more than 13 million accounts of $1,000 or less in workplace retirement plans with an aggregate value of $1.2 billion, according to SSA. Withholding taxes on balances of $1,000 or less at the time of distribution may result in participants paying taxes twice on the account. IRS told us that missing participants generally have up to 3 years to become aware of and claim the withheld amounts for them to be credited towards their tax liability. However, missing participants who claim their account after 3 years may again pay federal income tax on the account balance, although IRS officials said they thought such a scenario would be rare. (See fig. 1). IRS has not issued specific guidance clarifying the withholding requirements that apply to distributions from unclaimed accounts in situations in which the participant may be unlikely to receive the distribution. By reviewing the issue of distributions to participants with unclaimed accounts, including reviewing the IRC in this context, IRS may be able to issue guidance on applicable tax withholding and other tax requirements with respect to such accounts. The Taxpayer Bill of Rights states that taxpayers are entitled to clear explanations of the tax laws in IRS publications and notices, and federal internal control standards require agencies to communicate effectively with external stakeholders to help achieve agency goals. U.S. participants already facing the challenge of finding a small account transferred without their consent may discover, when the account is located, 20 percent of their account eliminated by taxes. Without an IRS review of this issue and subsequent guidance, questions may remain about withholding from distributions in situations where the participant may be missing. Under IRS’ letter forwarding program, between 1994 and 2012 plan sponsors could ask IRS to use IRS’ most current address on file to forward a letter with information about an account to a missing plan participant. However, in 2012 IRS modified the service and no longer forwards letters on behalf of qualified retirement plan sponsors attempting to locate plan participants. According to the 2013 Report of the ERISA Advisory Council on Locating Missing and Lost Participants, the letter forwarding program was a popular alternative for plan sponsors when email and U.S. mail proved ineffective at contacting separated participants. Executives at one large record keeper told us the letter forwarding program provided very important assistance for locating missing participants, noting that few individuals are going to ignore correspondence from IRS. Although the letter forwarding program never notified the plan sponsor as to whether or not the letter reached the intended recipient, executives at one TPA characterized the program as effective. In addition, they said the fact that it was sponsored by IRS and sanctioned by DOL gave plan fiduciaries confidence that they were acting prudently. Missing participant search services and their value vary widely today, based on industry representatives we interviewed. For example, representatives of one search firm told us they charged $1.25 for a search. However, an executive at a TPA firm told us another firm charged $35 for a Social Security Number-based search, which reliably connected with participants. PBGC estimates the cost of a commercial locator service to be $40 per search. Industry stakeholders told us that the steps currently required by existing guidance do not provide a straightforward way to send a letter about an unclaimed account to a missing plan participant. They described benefits that only IRS can provide through this service, such as the likelihood recipients will open a letter from IRS and the confidence fiduciaries have using an IRS- sponsored program. We discussed with IRS officials the commensurate fees charged in the private sector for missing participant searches and we discussed the variety of services and associated costs currently available. According to OMB Circular A-123, agencies and individual federal managers must take systematic and proactive measures to develop and implement appropriate, cost-effective management controls for results- oriented management. IRS has always charged a user fee for the letter forwarding program, and the fee has not changed since 1994. IRS officials told us resource constraints led them to revise the letter forwarding program. While IRS management controls will need to ensure that a program expansion is cost-effective, by reinstating the letter forwarding program for plan participants in a cost-effective manner, IRS can help support the retirement security of separated plan participants and plan sponsor efforts to meet their obligations under the IRC and ERISA. Certain information U.S. workers receive on unclaimed workplace retirement accounts based on data reported to IRS by plan sponsors is not reliable because plan sponsors are not updating the data over time as required. SSA maintains data on vested, unpaid retirement benefits left behind in workplace retirement plans by separated participants in its pension benefit record database. The information, including the name of the plan, the value of the benefit, and the contact information of the plan administrator, is reported by plan administrators to IRS, and IRS provides it to SSA. When an individual retires and claims Social Security benefits, SSA sends the individual a Notice of Potential Private Pension Benefit Information. The notice informs the recipient that they may have an unclaimed retirement account from a former employer and suggests that they may want to make an effort to determine whether or not the benefit actually does exist. SSA mails about 90,000 notices to new Social Security claimants each month. Separated participants can often find that no benefit exists, according to DOL and SSA documentation and stakeholders we interviewed. A TPA executive also told us separated participants are not always able to determine what happened to their accounts. IRS and SSA have a memorandum of understanding (MOU) in place establishing their agreements for collecting and managing these data. In the MOU, IRS and SSA agree to pursue improvements to the reporting process. The MOU states that, where appropriate and consistent with IRS directives, IRS will assess penalties under the IRC on plan sponsors who fail to file Form 8955-SSA according to instructions. The agencies have also agreed to contact and receive information from filers as necessary and appropriate to follow up regarding missing, incomplete, or incorrect information requested on the form. According to the Form 8955-SSA instructions, plan sponsors are required to report when benefits previously reported are paid, and therefore no longer due, to plan participants. Such updates allow the pension benefit record database at SSA, used to generate the Notice of Potential Private Pension Benefit Information, to reflect the fact that those benefits are no longer due. IRS officials said the data can be inaccurate because plan sponsors are not consistently reporting distributions, resulting in erroneous records of accounts accumulating in the database (see fig. 2). An executive at one TPA told us that plan sponsors generally remember to put participant names on Form 8955-SSA, but often fail to take the names off after benefits are paid. According to the TPA executive, if there are 1,000 names on the list of separated participants with vested benefits in the plan, 999 will have been paid by the time they receive the notice from SSA. Nonetheless, participants will generally inquire about a benefit when they receive the SSA notice because it is from the government, and they trust the notice and think the money is there, according to one TPA with whom we spoke. IRS officials told us that enforceable penalties can be imposed on plan sponsors for not including all required information on the form. The IRS website lists four possible actions related to incorrectly filing Form 8955- SSA that are subject to a penalty; however, a failure to report distributions is not on the list. IRS officials said if the agency were to add the failure to report distributions to the list the penalty would likely encourage some sponsors to update the data as required. IRS officials told us they do not currently know which plans are not reporting distributions. The Notice of Potential Private Pension Benefit Information leaves the responsibility for determining whether a benefit exists up to the participant and the agencies do not ask the participant for the results of their inquiries. SSA includes a note at the bottom of the notice encouraging new retirees to contact DOL with complaints, but the participant is not asked to follow up with IRS or SSA to identify plans associated with inaccurate data. Having this information would help IRS select plans to audit in order to update and improve the quality of data in SSA’s pension benefit record database. SSA could modify the notice participants receive to encourage them to inform IRS if they determine the information on the notice to be erroneous. DOL benefits advisers, who field calls from inquiring individuals after they receive a notice about a potential benefit that no longer exists, also have information on plans that may not be reporting distributions to separated participants on Form 8955-SSA as required. DOL officials told us they would need a formal MOU in place to facilitate such information sharing. Figure 3 illustrates these possible options for identifying plans not reporting distributions as required. Standards for internal control in the federal government state that agencies should communicate quality information externally so that external parties can help agencies achieve their objectives. Although IRS and SSA have agreed in the MOU to work together to promote efforts to improve internal controls, they are not collaborating to improve the likelihood that the Notice of Potential Private Pension Benefit Information will correspond to an actual benefit in the future. While IRS has authority over implementing and enforcing the Form 8955-SSA reporting requirements, IRS officials do not have access to SSA’s pension benefit record database to update records. IRS officials told us at one point they discussed with SSA a possible project that would allow plan sponsors to update all the records associated with their plan at once. SSA officials told us they could collaborate with IRS to update the data in the pension benefit record database. By working together, IRS and SSA can increase the likelihood that the Notice of Potential Private Pension Benefit Information corresponds to actual workplace retirement benefits in the future. U.S. individuals who participate in foreign retirement plans can face a number of challenges with tax reporting requirements on their retirement savings. According to IRS officials and tax preparers with whom we spoke, these challenges are greater for U.S. individuals who live and work abroad full time than for corporate executives on temporary assignment in a foreign country. Individuals sent abroad for limited times by their employer often remain as participants in their employer’s U.S. workplace retirement plan and do not need to participate in a foreign workplace plan. According to IRS officials and tax professionals with whom we spoke, many of these executives may have tax filing assistance made available to them by their company, further reducing their reporting burden. Individuals who work in a foreign country may be forced to participate in a mandatory foreign retirement plan, depending on the country and the rules governing residency, according to officials with whom we spoke in our case study locations. In these instances, according to IRS officials, the individuals have no choice but to comply with U.S. tax reporting rules on their foreign retirement accounts. Those who live abroad long-term due to family or personal ties naturally accumulate foreign assets and savings, such as foreign retirement accounts. Tax preparers in all five case study locations we reviewed, as well as IRS officials, indicated that preparing a U.S. tax return for a participant in a foreign retirement plan is more complex than preparing a comparable U.S. tax return that does not include foreign assets. We were told that attempting to categorize a foreign retirement account for tax reporting under the IRC can be challenging because such accounts may be reported as one of several different designations that may or may not be eligible for tax-deferral in the United States. This contrasts with U.S. individuals participating in U.S. retirement plans that meet the criteria for tax-qualified status under the IRC, who generally receive a Form W-2 Wage and Tax Statement that automatically deducts retirement account contributions from gross wages. In addition, participating in a foreign retirement plan can initiate a complex set of U.S. reporting requirements on retirement assets, such as participants having to report contributions and earnings or having to file additional forms and schedules for their retirement account, which is typically not required of taxpayers with U.S.- based retirement plans. IRS officials told us that the onus is on U.S. individuals who participate in foreign retirement plans to comply with these complex reporting requirements. As a result, these participants often need to turn to expert tax preparers to prepare their U.S. tax return even if they ultimately do not have to pay taxes. Statutory changes on reporting foreign assets have further affected U.S. individuals who participate in foreign retirement plans. Stakeholders told us that reporting requirements under the Foreign Account Tax Compliance Act (FATCA) can increase the cost of tax preparation for U.S. individuals who participate in foreign retirement plans. For example, according to IRS guidance, these participants in foreign retirement plans must gather and examine monthly retirement account statements, convert the account balance to U.S. dollars, and determine if the total value of the account at the end of the year or anytime during the year caused the individual’s total asset value to exceed the reporting threshold. If the total assets meet the reporting threshold, the participant must report the value of their retirement account even if they are no longer contributing to the account. In contrast, participants in U.S. plans generally are not required to report the value of their U.S. workplace retirement accounts under FATCA or IRC section 6038D, according to IRS. We were also told of other consequences of FATCA for U.S. individuals abroad, such as a reduction in available financial services, as some banks refuse to do business with U.S. individuals because of FATCA’s reporting requirements. Lastly, once an individual decides to change jobs in a foreign country, transferring foreign retirement savings can be difficult. For example, in several of the case study locations we reviewed foreign officials and tax preparers told us that plans automatically transfer a retirement account to a different account within the plan or to a location outside the plan when an employee separates from their employer, which can have U.S. tax implications. Stakeholders said that existing U.S. tax law does not provide these participants with tax-deferral if they transfer their foreign retirement savings from one foreign workplace retirement plan to another—a benefit granted to U.S. participants in qualified U.S. retirement plans who make such transfers. This condition may act as a disincentive for U.S. individuals abroad to consolidate foreign retirement accounts and can cause challenges when individuals change jobs or are required by their retirement plan or employer to transfer their account. While IRS has issued guidance providing information regarding foreign assets and pensions, IRS officials told us that the guidance is not specific on how foreign workplace retirement plans should be treated under the IRC, nor does it provide guidance for specific countries. One source of guidance is Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, which discusses special tax rules for U.S. citizens and resident aliens who work abroad or who have income earned in foreign countries. Another source of guidance in the International Tax Gap Series describes how foreign pensions and annuity distributions are taxed. While both guidance sources provide taxpayers with some information on how to report foreign assets, neither describes in detail how taxpayers are to determine if their foreign workplace retirement plan is eligible for tax deferred status, or how to account for contributions, earnings, or distributions on their annual U.S. tax return, particularly whether and when contributions and earnings should be taxed as income. IRS also directs taxpayers to review tax treaties, if applicable, for provisions related to pensions, but IRS officials told us these treaties can vary from country to country and said that they can be difficult for non- experts to understand. For example, Treasury officials told GAO that the tax treaties for two of the five case study locations we selected have pension clauses and certain provisions that apply to U.S. residents of those countries saving for retirement that afford some tax protection. However, Treasury officials said that two of our other case study locations have treaties that do not provide tax protections for U.S. individuals on their foreign retirement accounts (one of our case study locations does not have an income tax treaty with the United States.) Tax preparers and IRS officials we spoke with indicated that it is difficult for U.S. individuals to know how to correctly apply tax treaty provisions to their foreign workplace retirement savings. In addition, these IRS officials and other retirement experts said a U.S. individual abroad without expertise in the IRC and tax treaties would have difficulty reporting their foreign retirement account correctly. Existing IRS guidance does not alleviate the confusion faced by U.S. individuals who participate in foreign retirement plans. Confusion regarding how to report foreign retirement accounts to IRS on a U.S. tax return or elsewhere is inconsistent with U.S. taxpayers’ rights, as described in the Taxpayer Bill of Rights, to pay no more than the correct amount of tax and to know what they need to do to comply with tax laws. (Government Service and Social Security), pensions and other similar remuneration beneficially derived by a resident of a Contracting State in consideration of past employment shall be taxable only in that State. (Government Service and Social Security), annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State. The term “annuities” as used in this paragraph means a stated sum paid periodically at stated times during a specified number of years or for life, under an obligation to make the payments in return for adequate and full consideration (other than services rendered).” Disagreement exists among the professional tax preparers with whom we spoke about the correct method for reporting foreign retirement accounts on a U.S. tax return. IRS officials told us that U.S. tax law generally does not recognize foreign retirement plans as tax-qualified and IRS does not recognize any retirement accounts outside the United States as having tax-qualified status. IRS officials we spoke to said that only plans meeting the specific requirements of 401(k) or other requirements describing retirement plan qualification may achieve tax-qualified status in the United States. As a result, according to IRS guidance, U.S. individuals participating in foreign workplace retirement plans generally cannot deduct contributions to their account from their income on their U.S. tax return. This is true even if the retirement account is considered a tax- deferred retirement account in the country where the individual works, and even if the account is similar in nature to those found in a U.S.-type retirement plan, such as a 401(k) plan. IRS officials told us that it should generally be unnecessary to file a foreign retirement account as a Passive Foreign Investment Company (PFIC) if the foreign retirement plan is covered by a tax treaty with the United States, but acknowledged that some tax advisors in foreign countries advise their U.S. clients to consider their interest in such plans as an investment in a PFIC. For example, in one of the case study locations we reviewed, a tax preparer said that he advises U.S. individuals who participate in such plans to report their foreign retirement account as a PFIC in their U.S. tax filing, and that contributions and earnings are subject to be taxed at the higher tax rate generally applicable to PFICs. Other tax preparers we spoke to in that location said that this is a matter of some discussion among tax preparers and that they reported retirement plans as an employees’ trust. The National Taxpayer Advocate told us that receiving incorrect tax advice from a foreign tax preparer may not be a sufficient mitigating circumstance to avoid penalties for reporting a foreign retirement account incorrectly on a tax return. While reasonable reliance on a tax professional with respect to the details of a return is generally a mitigating circumstance for errors on a return, according to the National Taxpayer Advocate, tax preparers in other countries are usually not considered qualified preparers by IRS. U.S. taxpayers who file an incorrect tax return can lose money by accruing penalties. IRS officials told us that individual taxpayers are responsible for understanding their filing requirements and for determining how to correctly file their tax returns, regardless of whether they live in a foreign country or the United States. In its mission to help taxpayers meet their tax responsibilities, IRS could issue guidance concerning how U.S. individuals are to correctly report their foreign retirement assets. The Taxpayer Bill of Rights states that as part of the right to a fair and just tax system, taxpayers have a right to expect that system to consider circumstances that affect their ability to provide timely information. IRS officials told us they had been considering issuing improved guidance in some areas pertaining to the taxation of foreign retirement accounts. However, without clearer specific guidance from IRS describing how to correctly report foreign retirement assets on a U.S. tax return, U.S. individuals who participate in foreign workplace retirement plans continue to run the risk of filing incorrect returns due to confusion over how to properly classify and report their accounts. Clarifying how U.S. individuals who participate in foreign workplace retirement plans should report their retirement assets on their annual U.S. tax return will help ensure these taxpayers can meet their tax reporting obligations. Federal law requires U.S. individuals to report specified foreign financial assets, including any applicable retirement and pension accounts they own, if these assets, in the aggregate, are above the regulatory threshold. Similarly, the Report of Foreign Bank and Financial Accounts (FBAR) requires information with respect to foreign accounts above a certain amount. As a result, U.S. individuals who participate in foreign retirement plans may need to hire tax preparers to prepare returns in compliance with these U.S. laws, and, according to tax preparers with whom we spoke, the cost for having a complete tax return professionally prepared for an individual holding a foreign retirement account ranges from $1,800 to as high as $16,000. Determining how a foreign retirement account should be reported is time consuming even for experts. Tax preparers must prepare multiple items, including the tax return itself, and additional schedules and forms pertaining to the retirement account, according to the preparers with whom we spoke. For example, Form 3520 may be required if the account is being reported as a foreign trust. In addition to preparing tax forms, one tax preparer we spoke to said that preparers may have to spend time trying to obtain other documents necessary to prepare a U.S. tax return, for example, detailed retirement account statements. Since the implementation of IRC section 6038D, individuals have increased exposure to penalties, and failure to report a foreign retirement account when required may bring significant financial penalties, even if no taxes were due on the retirement account in question. For example, according to the IRS website, failure to report foreign financial assets on Form 8938 as required may result in a penalty of $10,000 and an additional penalty of up to $50,000 for continued failure to report after IRS sends the individual a notification of failure to report. As a result of this reporting requirement, U.S. individuals who participate in workplace retirement plans abroad may incur substantial costs to correctly file their returns and risk diminishing their retirement security if they fail to correctly report their foreign retirement assets. Even in cases where the individual owes no U.S. tax, tax preparation can costs thousands of dollars. Three tax preparers and representatives of one investment firm that provides pension advice with whom we spoke noted that even if a U.S. individual who participates in a foreign workplace retirement plan did not ultimately owe any taxes, they are required to report their foreign retirement assets under both FATCA and FBAR. Tax preparers in four of our case study locations as well as in the United States mentioned FATCA’s requirements as an added challenge when reporting foreign retirement accounts on U.S. tax returns. Additionally, one investment industry association representative we interviewed said that FATCA casts a wide net and that many “accidental Americans” and U.S. individuals abroad were challenged to comply with its requirements. Some of the tax preparers we spoke with said many individuals taking steps to come into tax compliance as a result of FATCA may happen to have U.S. citizenship but may never have lived or worked in the United States as adults. The National Taxpayer Advocate told us that the high cost of tax preparation amounted to an “advanced penalty” for U.S. individuals who live abroad. In a written testimony to Congress in 2015, she stated that FATCA has created unique challenges for U.S. taxpayers abroad and presented evidence in Volume 1 of the Taxpayer Advocate Service Fiscal Year 2016 Objectives Report to Congress that there was little evidence that foreign filers are any more likely to be non-compliant than taxpayers in the general taxpayer population. The National Taxpayer Advocate specifically identified concerns with FATCA as an area of focus in the Fiscal Year 2016 Objectives Report to Congress, and stated that taxpayers’ rights to a fair and just tax system, and to pay no more than the correct amount of tax, are being adversely affected by FATCA. IRS officials we spoke with indicated they are aware of the difficulties some taxpayers are experiencing with these reporting requirements, but said the agency is required to implement the law. They also said that retirement accounts are usually the primary asset for individuals abroad and that from an individual enforcement perspective, these reporting requirements help to ensure a “line of sight” year over year on participants’ foreign pension arrangements. IRS officials expressed concern that unless U.S. individuals are required to report foreign retirement accounts via Form 8938, they will seek to avoid proper reporting on their tax returns when distributions are made. IRS officials told us they have had extensive conversations about providing a possible exemption from reporting requirements under IRC section 6038D for certain U.S. individuals in foreign countries. IRS decided the ability to review a taxpayer’s foreign retirement data each year through filing a Form 8938 would allow regulators to evaluate whether contributions, earnings, and distributions were being identified and reported accurately. IRS officials stated that the agency’s goal is to build a database with Form 8938 information on individual taxpayers with foreign assets. IRS officials told us that, unlike individuals, foreign financial institutions in many countries are exempt from reporting retirement accounts under FATCA. IRS officials said this is because such foreign retirement accounts are typically at low risk for tax evasion and Treasury officials told us that the exemption for foreign financial institutions was provided to reduce burden on such institutions. This sentiment was echoed by foreign government officials and retirement experts abroad, who said a retirement account is generally at low-risk for tax evasion both because governments regulate retirement accounts and individuals attempting to evade taxes through a retirement account would have to wait many years before seeing any benefit. With respect to IRC section 6038D, according to IRS officials and Form 8938 instructions, if a fair market value is not readily available for a foreign workplace DB plan, it does not have to be included in the taxpayer’s calculation of the aggregate foreign assets used to determine whether the taxpayer meets the threshold to file Form 8938. If other foreign financial assets, in the aggregate, exceed the threshold, IRS officials said an individual must list their DB plan on Form 8938, but may list a zero balance if no distributions have been made. Given that IRS does not always require reporting of foreign retirement plans on Form 8938 if the plans cannot be readily valued, providing a broader exemption for other types of workplace plans or for other appropriate circumstances from the calculation of the foreign asset threshold could help ease the reporting burden on U.S. individuals. This would assist those individuals who hold most of their wealth in the form of foreign retirement savings in other types of workplace retirement plans, to avoid potentially high penalties that could diminish their retirement savings. IRS has not systematically analyzed data from Form 8938 on foreign retirement accounts owned by U.S. individuals. As a result, they may not have evidence showing the effect of these reporting requirements on U.S. individuals who participate in foreign workplace retirement plans, for instance, how many enforcement actions related to retirement accounts resulted from filing Form 8938. Without IRS systematically analyzing Form 8938 data on foreign retirement accounts owned by U.S. individuals, the agency will continue to lack an understanding of how these accounts change over time and if they are definitively low-risk for tax evasion. Understanding the effects of these reporting requirements can provide IRS with information to consider whether IRS could offer individuals some form of exemption from reporting on their foreign retirement accounts. Currently, there is no way for IRS to clearly distinguish different types of accounts being reported on Form 8938. To do so would require the Form 8938 to be revised in order to allow taxpayers to clearly specify that the account being reported is a foreign retirement account or pension. In addition, U.S. individuals participating in foreign workplace retirement plans, many of whom count their retirement savings as their primary financial asset, according to IRS officials, will continue to be caught up in IRS’ enforcement efforts aimed at catching tax evaders. These U.S. individuals may continue to face potentially high tax preparation fees to complete the filing of Form 8938 and may be liable for penalties for failure to report foreign retirement accounts that may pose little or no risk for tax evasion. IRS officials told us that U.S. individuals who participate in foreign workplace retirement plans may not realize that a routine transfer of their foreign retirement assets within plans or from one plan to another should be reported as a taxable event, resulting in an incorrect filing and/or potential penalties. Changing jobs and transferring, or “rolling over” retirement savings to another qualified retirement plan is generally a tax- protected transaction for participants in U.S.-based retirement plans. However, IRS officials told us that a U.S. individual who participates in a foreign retirement plan may owe U.S. taxes for similar transfers within or between foreign workplace retirement plans. Retirement plans in some countries routinely initiate administrative transfers of a participant’s retirement savings between accounts within the plan, to the employee’s new plan, or to a designated institution outside the plan when the participant separates from their employer, according to officials in several of our case study locations. However, IRS officials told us the IRC does not recognize foreign retirement plans as tax-qualified plans, and because these plans are not able to meet the criteria for qualification, tax-deferred transfers or rollovers may not be possible unless a tax treaty provides otherwise. IRS generally considers routine administrative transfers of retirement assets that occur between or within foreign retirement plans to be distributions to the participant and therefore taxable income. According to IRS officials with whom we spoke, the transfer of retirement assets within or between plans implies that the participant has some access to and control over their retirement funds. Tax preparers and regulators in three of our case study locations told us that such transfers routinely take place (see appendix III). In these situations, IRS officials told us that deferring taxes on retirement contributions and earnings under IRC section 402(b) pertaining to foreign trusts would no longer be applicable because that section of the IRC does not cover transfers—only contributions and earnings within a given foreign trust. Instead, according to IRS officials, the transfer would generally constitute a “constructive receipt of funds” by the participant and would be reportable and taxable. As a result, a U.S. individual who participates in a foreign retirement plan could owe U.S. tax on the entire amount of their retirement savings when they separate from their employer and their account is transferred to another account within the plan or to a different workplace retirement plan (see fig. 4). Treasury officials said they have been aware of this issue for some years, having discussed it in multiple negotiations with other countries, and have taken steps to incorporate a solution in U.S. model income tax conventions dating as far back as 1996.Treasury officials told us that the 2016 U.S. Model Income Tax Convention includes a clause that would generally exempt from U.S. income tax such transfers if they qualify as tax-deferred transfers under the laws of the other country. According to Treasury officials, few of the treaties currently in force address this issue and many countries do not have tax treaties with the United States. 2016 U. S. Model Income Tax Convention Language Would Exempt Certain Transfers of Foreign Retirement Assets from Taxation The Department of the Treasury developed the U. S. Model Income Tax Convention to be the starting point for negotiating tax treaties with other countries. Language in an actual treaty results from that negotiation and therefore may not include this language. According to Department of the Treasury officials, few treaties currently contain this language. “2016 United States Model Income Tax Convention, Article 17, Paragraph 2(b) Where a citizen of the United States who is a resident of ______ is a member or beneficiary of, or participant in, a pension fund established in _____, the United States may not tax the income earned by the pension fund as income of the individual unless, and then only to the extent that, it is paid to, or for the benefit of, that individual from the pension fund (and not transferred to another pension fund established in _______ in a transfer that qualifies as a tax-deferred transfer under the laws of _______).” IRS officials told us that if no treaty exists between the United States and the country where the U.S. individual is participating in a foreign workplace retirement plan, or the treaty does not specify how to treat these transfers, there is generally no form of transfer that will receive U.S. income tax-deferral. In these situations, IRS officials said, there is no way that the plan can structure the transfer to prevent the U.S. individual who is transferring assets within or between foreign plans from receiving a distribution and being subject to tax liability. Even in cases where a tax treaty is in place, the treaty may not provide special treatment for the transfer of retirement assets. This would be the case in at least two of the five case study locations we examined, where despite a tax treaty in place, we were unable to identify any provisions that address these types of transfers. In these cases, according to IRS, the U.S. individual must fall back on the IRC, which does not provide tax-deferral on such transfers. As a result, a U.S. individual who participates in a foreign workplace plan would lose any tax-deferrals on the transfer. IRS officials and tax preparers told us that the transfer issue can cause tax consequences for holders of foreign retirement assets, but one tax preparer we spoke with noted that U.S. tax laws were not written with foreign retirement plans in mind. As a result, tax preparers said it can be difficult to determine how to report foreign workplace retirement assets under the IRC, making routine administrative transactions costly for U.S. individuals who participate in these plans. They said this is because some or all of the account balance may be subject to tax and retirement account asset growth would be lower due to the loss of tax-deferral. Each time retirement assets are transferred, the transfer may be viewed as a distribution, and new contributions and growth could be subject to tax and a loss of tax-deferral. IRS officials also told us that the potential taxation of transfers between foreign plans may cause some individuals to avoid consolidating foreign retirement accounts. Renegotiating a tax treaty can be time consuming and, according to Treasury officials, is unlikely to happen based on one issue, such as the transfer of retirement savings abroad. Treasury officials in the Office of Tax Policy said that the agency’s approach to address these transfers would be to evaluate the issue on a treaty-by-treaty basis. However, this approach may not provide relief because there is no guarantee the country negotiating a treaty with the United States will agree to include provisions for transferring retirement savings on a tax-deferred basis. In order to provide more immediate relief, these Treasury officials said Congress could pass legislation that would allow routine account transfers between two foreign workplace retirement plans in the same country to be free from U.S. tax if that country has a tax treaty with the United States. However, they cautioned that such efforts should be focused on foreign retirement plans that have already been examined by Treasury, for example, through the process of negotiating a tax treaty or as defined in FATCA IGAs, in order to avoid creating a tax evasion loophole. For example, foreign workplace retirement plans could be defined as those recognized by an existing tax treaty or other plans as deemed appropriate by Treasury’s Office of Tax Policy. According to Treasury officials, transfers within or between such plans in the same country could be protected from unnecessary taxation by, for example, modifying Section 402(b) or other provisions of the IRC. Officials said that without legislation, U.S. individuals who participate in foreign workplace retirement plans must follow current law, which does not provide tax- deferral for transfers within or between foreign plans, even those that may be eligible for tax-deferred contributions and earnings in the foreign jurisdiction. However, by changing the IRC, Congress can ensure that U.S. individuals who participate in foreign workplace retirement plans can consolidate their accounts in a tax-deferred manner without being taxed on the entire balance when their account is transferred. Plan participants in the current workplace retirement plan environment can accumulate multiple retirement accounts and possibly lose track of them over their careers. The shift to DC plans and the mobility of the American workforce have led to an increase in the number of workplace retirement accounts, with many workers having multiple accounts over the course of their careers. Yet currently, with millions of small retirement accounts left behind by participants with previous employers, plan sponsors are experiencing challenges locating missing participants. DOL has agreed to evaluate the possibility of convening a taskforce to consider the establishment of a national pension registry, in part to address the difficulty of linking missing participants to their former accounts. However, until this effort brings results or another comprehensive solution to unclaimed accounts emerges, there are a variety of improvements federal agencies may make in the short term to help eliminate the inefficiencies in the current system that may reduce participants’ retirement savings. Since DOL audit findings show that ongoing plans have challenges staying in touch with missing participants, and DOL has provided guidance on missing participants for terminating DC plans, providing such guidance for ongoing DC plans will help ensure that separated participants will receive information about their benefits. In addition, IRS guidance on tax withholding does not address distributions of small unclaimed accounts sent to nonresponsive participants that are not always received by those participants. Some stakeholders mistakenly believe that IRS automatically credits all taxes withheld from such distributions toward taxes due. Following IRS guidance, plans generally withhold taxes on cash-outs from such accounts that the participant may not receive. By reviewing the issue of distributions made to participants who are unlikely to receive them, IRS has an opportunity to issue guidance clarifying the applicable tax withholding requirements in those situations. IRS also has the potential to offer a service that delivers letters that participants are likely to open, is trusted by plan fiduciaries, and can help connect missing participants with their benefits. IRS was forwarding fewer than 50 letters at a time for plan sponsors at no charge, but decided to stop forwarding letters about unclaimed accounts in 2012. IRS can consider again helping connect participants with unclaimed accounts using the letter forwarding program. Lastly, IRS and SSA can take steps to address situations in which sponsors fail to update data to reflect payment of retirement accounts, rendering the data unreliable. Under the existing agreement between IRS and SSA with respect to the Form 8955- SSA data, the agencies can take steps to ensure participants have a more reliable source of information on their benefits in the future. U.S. individuals who work abroad and participate in a foreign workplace retirement plan face challenges with reporting their accounts. Managing such accounts can be costly as individuals use expensive tax preparers for reporting their foreign retirement savings to IRS. These U.S. individuals are required to pay taxes on their worldwide income, but can become caught in a web of complex U.S. tax requirements governing how they report their foreign workplace retirement savings. By providing guidance on how to appropriately report foreign workplace retirement accounts, IRS can help U.S. individuals comply with these requirements and minimize their reporting burden. IRS can also initiate a systematic analysis of Form 8938 data on foreign retirement accounts owned by U.S. individuals. Such data would help IRS gain a better understanding of how these accounts change over time, and to determine if they pose a low-risk for tax evasion. The outcome of this analysis could allow IRS to consider offering these individuals an exemption from reporting requirements on their foreign retirement accounts, further easing the burden U.S. individuals face reporting their foreign retirement assets. Lastly, transferring accounts between foreign retirement plans can have negative tax consequences that threaten the ability of U.S. individuals abroad to save for retirement. Congress may wish to consider whether it can assist U.S. individuals who participate in foreign workplace retirement plans by permitting these individuals to transfer their retirement savings to a different account within the plan or to another foreign workplace retirement plan on a tax-deferred basis when they change jobs or separate from their foreign employer. Doing so would permit these U.S. individuals in foreign workplace retirement plans to receive the tax-deferred benefits available to other U.S. plan participants who reside in the United States and who participate in qualified retirement plans. We are making the following matter for congressional consideration. Congress should consider legislation modifying the Internal Revenue Code to allow routine account transfers within the same foreign workplace retirement plan or between two foreign workplace retirement plans in the same country to be free from U.S. tax in countries covered by an existing income tax treaty that provides for favorable U.S. tax treatment of foreign workplace retirement plan contributions. We are making a total of seven recommendations, including one to DOL, five to IRS, and one to SSA. a. The Secretary of Labor should issue guidance on the obligations under ERISA of sponsors of ongoing plans to prevent, search for, and pay costs associated with locating missing participants. (Recommendation 1) b. The IRS Commissioner should review taxation issues relating to distributions involving incorrect participant addresses and uncashed benefit checks and clarify for the public the Internal Revenue Code’s requirements in these circumstances. (Recommendation 2) c. The IRS Commissioner should consider revising the letter forwarding program in a cost-effective manner to again provide information on behalf of plan sponsors on unclaimed retirement accounts to participants. (Recommendation 3) d. The IRS Commissioner should clarify how U.S. individuals are to report their foreign retirement accounts. The clarification could include addressing how these accounts should be designated and how the taxpayer should report contributions, earnings, and distributions made from the account. (Recommendation 4) e. The IRS Commissioner should systematically analyze data reported through Form 8938 filings on foreign retirement accounts owned by U.S. individuals with the goal of developing an evidence-based understanding of how these accounts change over time and what level of risk these accounts pose for tax evasion. To assist with this analysis, IRS should consider revising Form 8938 to more clearly distinguish between retirement accounts and other types of accounts or assets being reported by taxpayers under current reporting requirements. (Recommendation 5) f. The IRS Commissioner should take steps to improve the likelihood that the Notice of Potential Private Pension Benefit Information corresponds to actual retirement benefits in the future, for example, by working with the Social Security Administration as necessary. (Recommendation 6) g. The Social Security Administration Commissioner should take steps to improve the likelihood that the Notice of Potential Private Pension Benefit Information corresponds to actual retirement benefits in the future, for example, by working with IRS as necessary. (Recommendation 7) We provided a draft of this report to the Department of Labor, the Department of the Treasury, the Internal Revenue Service, the Social Security Administration, the Pension Benefit Guaranty Corporation, and the U.S. Department of State. DOL, Treasury and IRS, and PBGC provided technical comments, which we have incorporated where appropriate. DOL, IRS, SSA, and PBGC also provided formal comments, which are reproduced in appendices IV, V, VI, and VII, respectively. State did not have any comments. DOL agreed with our recommendation that additional guidance may be helpful to aid plan sponsors and plan fiduciaries of ongoing plans in meeting their existing fiduciary obligations to search for missing participants and to pay benefits. SSA agreed with our recommendation to take steps to improve the likelihood that the Notice of Potential Private Pension Benefit Information corresponds to actual retirement benefits in the future, for example, by working with IRS as necessary. In its written comments, IRS stated that it generally agreed with the report and its findings. IRS specifically cited that the report identifies several challenges for participants to manage their retirement savings, such as updating former employers with address changes to continue receiving information about retirement plan accounts with former employers and responding to former employers regarding retirement plan accounts. IRS also stated that U.S. individuals participating in foreign retirement plans often do not know how to correctly report foreign retirement accounts and associated income due to complex federal requirements and treaty provisions governing the taxation of foreign retirement accounts. This recognition by IRS of the complex federal requirements and treaty provisions governing the taxation of foreign retirement accounts is in line with GAO’s concerns about U.S. individuals with foreign workplace retirement accounts having trouble with routine account transfers within the same foreign workplace retirement plan or between two such plans in the same country. We have asked Congress to consider modifying the Internal Revenue Code to allow routine account transfers within the same foreign workplace retirement plan or between two foreign workplace retirement plans in the same country to be free from U.S. tax in countries covered by an existing income tax treaty that provides for favorable U.S. tax treatment of foreign workplace retirement plan contributions. Congress’ ability to modify the Internal Revenue Code in such a way can help U.S. individuals participating in foreign workplace plans to better save for retirement by allowing them to consolidate accounts in a tax- deferred manner without being taxed on the entire balance when their account is transferred. IRS agreed with two of our recommendations to improve the management of retirement savings. Specifically, IRS agreed to review taxation issues relating to distributions involving incorrect participant addresses and uncashed benefit checks and to clarify for the public the Internal Revenue Code’s requirements in these circumstances. We believe that IRS’ consideration of this recommendation and any subsequent actions the agency takes to clarify the issue will help to address questions about tax withholding from distributions in situations where the participant may be missing or where a distribution check remains uncashed after a period of time. IRS also agreed to work to improve the likelihood that the Notice of Potential Private Pension Benefit Information corresponds to actual retirement benefits in the future, and agreed to take steps to ensure that the data reported on Form 8955-SSA are accurate and to advise plan sponsors of any changes to reporting these data. We commend IRS for recognizing the importance of addressing this issue for taxpayers and for its willingness to take steps to ensure the accuracy of data reported by plans in the United States on vested benefits belonging to separated employees. Lastly, IRS agreed with our recommendation to clarify how U.S. individuals are to report their foreign retirement accounts, which could include how the taxpayer should report contributions, earnings, and distributions made from the account. We encourage IRS to take the necessary steps to dispel any confusion U.S. individuals may have over how to properly classify and report their foreign retirement accounts on a U.S. tax return—such clarification should help ensure that these taxpayers can meet their tax reporting obligations. IRS disagreed with two of our recommendations, citing the limited number of IRS staff and resources needed for the agency to implement these recommendations. First, IRS disagreed with our recommendation to consider revising the letter forwarding program in a cost-effective manner to again provide information on behalf of U.S. plan sponsors on unclaimed retirement accounts to participants. IRS commented that the IRS address of record for a participant would likely be of no greater value than addresses available through alternatives such as commercial locator services. However, our report does not cite the accuracy of IRS addresses, but rather other benefits that make a program revision worth considering, specifically the likelihood that individuals will open IRS correspondence, and the trust DOL places in the service as way for plan fiduciaries to meet their obligations. IRS also stated that the limited number of IRS staff and resources impact the feasibility of reinstating this program for plan participants. GAO continues to believe that expanding the letter forwarding program would be beneficial, and we encourage IRS to consider cost-effective ways to do so. IRS also disagreed with our recommendation to analyze data provided through Form 8938 filings on foreign retirement accounts owned by U.S. individuals with the goal of developing an evidence-based understanding of how these accounts change over time and what level of risk these accounts pose for tax evasion. Our recommendation further stated that IRS should consider revising Form 8938 to assist with this analysis. In its comments, IRS did not disagree with this recommendation on its merits; IRS only cited a lack of resources to implement the recommendation. Specifically, IRS noted that although the modification to the Form 8938 suggested in this recommendation may seem minor, systemically collecting and analyzing the data would require resources beyond those currently available to IRS. However, as we describe in the report, IRS indicated to us that they already collect foreign account filing data through the Form 8938 and that the current reporting requirements help the agency to “keep a line of sight” on U.S. individuals’ foreign pension arrangements. IRS told us that without such data being reported, U.S. individuals with foreign retirement accounts may seek to avoid proper reporting on their tax returns when distributions are made. However, without agreeing to take steps to analyze these data reported by taxpayers, the question remains why IRS continues to collect such information—which we show in the report to present a substantial reporting burden on taxpayers—if the agency has no plan to analyze the data in order to make an informed decision about the risk for tax evasion that such accounts present. It is also unclear to us how IRS would maintain a line of sight on foreign retirement accounts belonging to U.S. individuals without analyzing the data reported by taxpayers on such accounts. While we recognize that resource limits can impede an agency from taking on additional work and projects, we continue to believe that when staff and resources become available, IRS should modify the form and conduct a systematic analysis of these data—data that current law requires taxpayers to report—in order to assess the risk of tax evasion that foreign retirement accounts pose. Without such an analysis, IRS will have no basis to reach an evidence-based understanding of how these accounts change over time and what level of risk they pose for tax evasion. Further, as we have shown in the report, this reporting can be costly for U.S. individuals and could potentially lead to a decrease in their retirement savings. Without such an analysis by IRS, U.S. individuals who own foreign retirement accounts will continue to face these substantial reporting burdens without the knowledge that the data they are required to provide will be put to good use by the federal government. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Labor, Secretary of the Treasury, Commissioner of Internal Revenue, Director of the Pension Benefit Guaranty Corporation, Acting Commissioner of the Social Security Administration, the Secretary of State, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VIII. IRS advises U.S. taxpayers to review tax treaty provisions carefully to better understand how to report their foreign income, including the distribution of savings from foreign retirement accounts. IRS specifically advises taxpayers to read the residency article in a tax treaty to find any special rules pertaining to reporting and taxing foreign income, including distributions from foreign workplace retirement plans. When deciding whether a tax treaty applies to a taxpayer, the taxpayer should first identify their tax residency (Article 4 under most treaties). According to IRS, a taxpayer’s residency determines how treaty articles on pensions and annuities will be applied and taxpayers should use the domestic laws of each country to identify residency. If, after applying the domestic law of each country, the taxpayer determines they are a resident of both countries, the tiebreaker rules of the applicable treaty are applied to determine residency based on the country in which the taxpayer has closer personal and economic relations, the country of habitual abode for the taxpayer, or the country in which the taxpayer is a national, according to IRS. If none of the above tiebreaker rules apply, the treaty generally provides that residency will be decided by the competent authorities of each country upon request by the taxpayer. Taxpayers are also advised to read all the protocols of the treaty to see if the residency rules have been amended by a later protocol. As a general rule, according to IRS, the pension/annuity articles of most tax treaties allow the country of residence (as determined by the residency article) to tax the pension distribution or annuity under its domestic laws, unless the tax treaty provides an exception to that rule. According to IRS, some treaties, for example, provide that the country of residence may not tax amounts that would not have been taxable by the other country if the individual was a resident of that country. There also may be special rules for lump-sum distributions. If the taxpayer is a U.S. citizen, IRS guidance provides that they also may need to refer to the “saving clause” (typically found in Article 1) for special rules that allow the United States to tax income in some cases as if the treaty had not entered into force. Researchers and federal officials have identified a range of estimates for U.S. citizens living outside the United States. (See fig. 5). The U.S. Department of State (State) estimates that as of April 2015, 8.7 million U.S. citizens live abroad. Table 2 shows estimates of the number of U.S. citizens living abroad by geographic area that State’s Bureau of Consular Affairs recently released to the Federal Voting Assistance Program. We gathered the information in this appendix for each case study location by reviewing relevant documentation, publicly available research and reports, and interviewing relevant stakeholders, including government officials, plan sponsors, and service providers. We did not conduct an independent legal analysis to verify the information provided about the laws or regulations in the locations we selected for this study. Instead, we relied on appropriate secondary sources and interviews with relevant officials to support our work. We provided this information to appropriate officials in each case study location for their confirmation. In the five case study locations we reviewed, participants, including U.S. individuals working in those locations, stay connected to their foreign workplace retirement savings through centralized institutions, direct contact with plans or government agencies, or through public pension registries. The low prevalence of unclaimed retirement accounts that we found in these locations is likely due, in part, to participants using these mechanisms to stay connected to their retirement savings. In two of the five locations we reviewed, Australia and Switzerland, plans transfer dormant accounts belonging to separated employees to a centralized institution that is actively monitored by regulators. These accounts generally remain within these institutions until claims for benefits are made by the participant. For example, Swiss officials told us that in the event of a change of employment, the pension scheme (i.e., plan) of an insured person (i.e., participant) transfers the accumulated assets on behalf of that person to the pension scheme of the new employer. Vested benefits institutions are used to hold the assets when a person ceases to be subject to occupational benefits (workplace retirement) plans owing to termination of employment, e.g. in connection with a career break or being laid off. In these cases, the pension scheme mandatorily transfers the assets to a vested benefits institution. This procedure ensures that the accumulated assets remain blocked in the pension cycle until the insured person joins a new pension scheme or an insured event occurs (old age, disability, or death). Once the person recommences employment and thus becomes subject to mandatory occupational benefits plans again, the termination benefits must be transferred by the vested benefits institution to the new pension scheme. If the pension scheme member or insured person does not become re-employed, the vested benefits institution keeps the assets until an insured event occurs (retirement, disability, or death). Further, if a separated employee fails to inform their former plan that they have a new employer, the participant’s former plan automatically transfers the account after 6 months and within 2 years to the Substitute Occupational Benefit Institution. This institution is a non- profit entity that the Swiss federal government commissioned in 1985; it works closely with the Swiss federal government to maintain Swiss retirement assets for participants and is charged with certain governmental responsibilities. For retirement assets transferred to the Substitute Occupational Benefit Institution, account balances are not merely preserved until claimed or transferred, but grow according to returns on Switzerland’s central fund investments. Figure 6 describes how accounts of separated employees in Switzerland are transferred to designated locations when they become dormant or unclaimed. Swiss plans also transfer accounts belonging to separated employees to the employee’s new plan once they receive instruction from the employee. This transfer along with account transfers to the Substitute Occupational Benefit Institution or a vested benefits institution, such as a bank or insurance company, contributes to the low prevalence of lost retirement accounts in Switzerland because participants do not accumulate multiple retirement accounts with different plans when changing jobs throughout their career. In Australia, plans (also referred to as schemes or super funds) transfer unclaimed super accounts belonging to lost members (e.g., separated employees) to a centralized government institution, the Australian Taxation Office (ATO). These accounts generally remain within the ATO until claims for benefits are made by the member. While their money is being held by the ATO it earns interest at the consumer price index rate. In three of the five locations GAO reviewed—Canada, Hong Kong, and the UK—the participant’s former employer’s plan maintains dormant accounts until claimed or transferred to a new plan. For example, in Hong Kong, according to its retirement schemes (plan) regulator, the Mandatory Provident Fund Schemes Authority (MPFA), whenever employees, including U.S. individuals working in Hong Kong, change to a new employer, they need to open a new Mandatory Provident Fund (MPF) “contribution account” under the MPF scheme in which the new employer participates to accumulate MPF contributions in respect of the new employment. If an employee who has ceased employment with an employer does not take action to transfer the benefits accrued from the previous employment to the new “contribution account” with their new employer’s scheme (i.e., plan) or a “personal account” in an MPF scheme of the employee’s choice, their former employer’s scheme will automatically transfer their accumulated MPF benefits from the contribution account to a personal account within the original scheme for continuous investment. Government officials told us that MPF schemes keep the benefits of the scheme members (i.e., plan participants) within the scheme until the scheme member returns to make a claim or to issue instructions to transfer benefits in the account to another MPF scheme. The MPFA advises scheme members that failing to consolidate the MPF benefits accumulated from previous employments can result in accumulating multiple MPF accounts that can be difficult to manage—this can result in accounts becoming lost over time. To address this challenge, the MPFA conducts regular publicity programs and publishes pamphlets reminding scheme members that when they change employers they should consolidate the benefits under the previous employment to any existing personal accounts or to the new contribution account under the MPF scheme of their new employer. In two of the five locations we reviewed—Australia and Switzerland— plans are required to regularly report to regulators on unclaimed accounts, missing participants, and account transfers made for separated employees, including those made on behalf of U.S. individuals. For example, in Australia, plans are required to communicate information on unclaimed accounts to the ATO. Specifically, every 6 months plans are required to identify and report members who meet the definition of “lost” and unclaimed accounts considered “uncontactable or inactive” to the ATO. Further, plans are also required to transfer unclaimed accounts to the ATO when certain unclaimed super money criteria are met. In Switzerland, before the end of January each year, occupational benefits institutions and institutions that manage vested benefits accounts or policies are required to report to the 2nd Pillar Central Office all persons for whom assets were held in December of the previous year. Plans in two of the locations we reviewed provide separated participants information on account transfers that can help them stay connected to their retirement savings. For example, in Hong Kong, MPF schemes (plans) provide a transfer statement to members once the transfer of benefits to another MPF scheme is completed. The MPF scheme that receives the transfer must, as soon as practicable after receiving the transferred benefits, provide the member written notice confirming the transfer and stating the monetary value of those benefits. In Switzerland plans must regularly contact their participants and if unable to do so, must inform the 2nd Pillar Central Office, who will try to reestablish contact between the plan and their participants. Participants in three of the five locations we reviewed can access information on their retirement accounts by contacting a government agency. According to government and retirement plan officials in Australia, participants can access their retirement account details by logging onto the myGov platform, which is a secure way to access government online services. Participants, including U.S. individuals, who have registered online via myGov and have their personal accounts linked to ATO online services can view their retirement accounts online and can claim their money at any time. For those that choose not to register for myGov, they can use the Departing Australia Superannuation Payment online service to claim their super funds once they have departed Australia and their visa has ceased to be in effect. In Hong Kong, MPFA officials told us that scheme members seeking information on their personal accounts or on unclaimed retirement benefits with any MPF scheme (plan) can approach MPFA to request a search of the Personal Accounts Register or Unclaimed Benefits Register, respectively. The MPFA’s website includes instructions for initiating these inquiries. In Switzerland, government officials told us that participants, including U.S. individuals, can directly contact the 2nd Pillar Central Office, which can locate all the institutions holding vested benefits on the participant’s behalf. In two of the five case study locations, Australia and the UK, participants can access information on their retirement accounts by using pension registries or other government supported services. For example, in the UK, the government provides all participants, including U.S. individuals with a UK retirement account, access to the Pension Tracing Service to help them locate their lost retirement accounts. The UK government has also established other organizations and services to help participants locate their lost retirement accounts. The Pensions Advisory Service is an independent organization that is funded by the UK government. Officials told us that the service was implemented because retirement accounts and pensions in the UK had become excessively complicated. The service sometimes receives questions from participants living abroad, such as in the United States, or from U.S. individuals living in the UK. Service officials told us that it is particularly challenging for these foreign participants to know how to repatriate their retirement benefits and to locate missing retirement accounts. Government officials told us that the UK government is committed to ensuring that members of the public can access good-quality, free-to-client, impartial financial guidance and debt advice which is currently provided by three different organizations. These officials said that a bill was introduced in June 2017 that would set up a new single financial guidance body to provide guidance and information on all matters relating to occupational and personal pensions. Officials said they expect that this single financial guidance body to go live no earlier than October 2018. The UK government is also currently developing a new pension online tool, the Pensions Dashboard. The dashboard is being developed as a joint project between the UK government and the country’s retirement industry; 17 of the UK’s largest pension firms developed a prototype demonstrating that the technology for the dashboard works. The goal of the dashboard is to allow participants to log into one portal to locate all of their pension data, including information on the value and the location of different retirement savings accumulated throughout their career. Currently, a UK ID verification system is available to UK residents to review their tax bills and other financial information online, and officials are considering permitting participants to use this system with proper credentials to access the dashboard. In time, UK government officials said that the dashboard may replace the UK’s Pension Tracing Service, but not for many years. Other officials added that they are uncertain whether the dashboard will include all plans. One concern is that many lost accounts may be with old defined benefit plans or small defined contribution plans that do not have online systems that can be integrated into the dashboard. As a result, some of the plans most likely to have lost participants may also be the least likely to participate in the dashboard. Charles Jeszeck, (202) 512-7215 or jeszeckc@gao.gov. In addition to the contact named above, Tamara Cross (Assistant Director), Ted Burik (Analyst-in-Charge), Ted Leslie, and Jessica Rider made key contributions to this report. Also contributing to this report were Susan Aschoff, James Bennett, Amy Bowser, Sherwin Chapman, Sarah Cornetto, Brian James, Kristy Kennedy, Jonathan McMurray, Sheila McCoy, Jennifer Lutzy McDonald, Dan Meyer, Mimi Nguyen, Amrita Sen, Deborah Signer, Andrew Stephens, Walter Vance, Kathleen Van Gelder, Adam Wendel, and Seyda Wentworth.", "summary": "Saving for retirement can be difficult. However, when participants lose their workplace retirement accounts when they change employers or participate in a workplace retirement plan abroad they can encounter additional challenges in securing adequate retirement savings. GAO was asked to review steps federal agencies might take to assist participants with these challenges. This report examines key challenges U.S. participants face with: (1) unclaimed retirement accounts in the United States, and (2) complying with U.S. tax reporting requirements on their foreign retirement savings. GAO reviewed relevant federal laws and regulations, and reviewed selected tax treaties. GAO interviewed stakeholders in the United States and in Australia, Canada, Hong Kong, Switzerland, and the United Kingdom—chosen because these locations host relatively large populations of U.S. individuals and have well-developed workplace retirement systems. Plan participants in the United States face challenges after they change jobs, including not receiving communications from their plan sponsor and being vulnerable to unforeseen tax consequences that can result in a loss of retirement savings. GAO previously reported that when participants leave savings in a plan after separating from a job, the onus is on them to update former employers with their new address and to respond to their former employer's communications. GAO found that although an employer may incur costs searching for separated participants, there are no standard practices for the frequency or method of conducting searches. GAO reported that from 2004 through 2013, over 25 million participants in workplace plans separated from an employer and left at least one retirement account behind, despite efforts of sponsors and regulators to help participants manage their accounts. Department of Labor (DOL) officials told GAO that some sponsors do not search for participants when disclosures are returned as undeliverable. DOL has issued guidance on searching for missing participants for some plans that are terminating, but guidance does not exist on what actions DOL expects ongoing plan sponsors to take to keep track of separated participants. A key element of DOL's mission is to protect the benefits of workers and families. However, without guidance on how to search for separated participants who leave behind retirement accounts, sponsors may choose to do little more than remove unclaimed accounts from the plan when possible, and workers may never recover these savings. Stakeholders told GAO that U.S. individuals who participate in foreign workplace retirement plans face challenges reporting their retirement savings for tax purposes because of complex federal requirements governing the taxation of foreign retirement accounts and a lack of clear guidance on how to report these savings. For example, stakeholders told GAO it is not always clear to U.S individuals or their tax preparers how foreign workplace retirement plans should be reported to the Internal Revenue Service (IRS) and the process for determining this can be complex, time-consuming, and costly. In the absence of clear guidance on how to correctly report these savings, U.S. individuals who participate in these plans may continue to run the risk of filing incorrect returns. Further, U.S. individuals in foreign retirement plans also face problems transferring retirement savings when they switch jobs. In the United States, transfers of retirement savings from one qualified plan to another are exempt from U.S. tax. However, foreign plans are generally not tax-qualified under the Internal Revenue Code, according to IRS officials, and such transfers could have tax consequences for U.S. individuals participating in foreign retirement plans. Officials from the Department of the Treasury (Treasury) told GAO that a change to the U.S. tax code could improve the tax treatment of transfers between foreign retirement plans that Treasury has already examined. Without action to address this issue, U.S. individuals may not consolidate their foreign retirement accounts or may have to pay higher U.S. taxes on transfers than taxpayers participating in qualified plans in the United States, threatening the ability of U.S. individuals to save for retirement abroad. GAO recommends Congress consider addressing taxation issues affecting the transfer of retirement assets between plans within the same foreign country. GAO is making seven recommendations, including that DOL issue guidance to help ongoing plan sponsors search for separated participants, and that IRS issue guidance to clarify how U.S. individuals should report foreign retirement savings to the IRS. The agencies generally agreed with GAO's recommendations. IRS disagreed with two of GAO's recommendations.", "document_type": "gao"}
{"report": "CMS operates the FFM consistent with PPACA and relevant HHS regulations. In plan year 2015, 37 states relied on the FFM. The remaining 14 states, including the District of Columbia, operated their own state-based marketplaces. According to published HHS figures, the FFM accounted for about 76 percent, or approximately 8.8 million, of plan selections made via marketplaces from November 15, 2014, through February 22, 2015. Overall, we found that about 8.04 million applicants selected a plan, effectuated enrollment, and received coverage with an associated subsidy for plan year 2015. We discuss these 8.04 million applicants later in this report. More than half of the 8.8 million plans in plan year 2015 were applicants who did not have a plan via the FFM in plan year 2014, which was the FFM’s first year. Of the 8.8 million total plans, 87 percent qualified for an APTC with an average APTC of $263 per application per month. All marketplaces, including the FFM, are required by PPACA to verify applicant information to determine eligibility for enrollment and income- based subsidies, if applicable. Marketplaces, among other things, must check for Medicaid eligibility before determining eligibility for qualified health plans; validate an applicant’s SSN, if one is provided, by comparing with SSA records; verify citizenship, status as a U.S. national, or lawful presence by comparing with SSA or DHS records, respectively; and verify household income and family size by comparing with tax-return data from the IRS, as well as data on Social Security benefits from SSA. If the information the applicant provided on the application does not match the information contained in the data source, or if a data source is not available to verify the information, the FFM generates an inconsistency. The FFM then sends a notification to the applicant, who generally has 90 days to present satisfactory documentary evidence to resolve the inconsistency, and grants the applicant conditional eligibility if the applicant is otherwise qualified. While waiting for supporting documentation, the FFM attempts to review and resolve the inconsistency, which can include looking for obvious errors on the application. The FFM will generally categorize inconsistencies as expired if the applicant was not able to provide the supporting documentation to resolve the inconsistency within the allotted time frame and the FFM was not able to resolve the inconsistency. Depending on the type of inconsistency and availability of data sources, an applicant with an expired inconsistency may have his or her coverage terminated, or the applicant’s subsidy amount may be recalculated based on the trusted source information or eliminated. In other circumstances, the applicant’s situation may change such that no additional action is required by the FFM to address the inconsistency. These inconsistencies are categorized as overcome by events (OBE) and can include situations where the application changes to a non-financial-assistance application or another inconsistency has expired. Inconsistencies that the FFM cannot resolve, expire, or categorize as OBE remain open. We previously made recommendations to improve the FFM’s enrollment and eligibility-verification process. Specifically, in 2016, we made eight recommendations, including that CMS consider analyzing outcomes of the verification system, take steps to resolve inconsistencies related to SSNs, and conduct a risk assessment of the potential for fraud in marketplace applications. HHS concurred with our recommendations. In 2017, we made 10 recommendations to HHS involving the annual reporting of APTC improper-payments estimates, improving control activities related to eligibility determinations, and calculations of APTC based on incomes and family sizes. HHS concurred with 7 of the recommendations and neither agreed nor disagreed with the remaining 3 recommendations, which related to improving control activities for verifying identities of individuals, preventing duplicate coverage of individuals receiving minimum essential coverage through their employers, and verifying household incomes and family sizes. As of November 2017, HHS has not provided us with documentation to support the implementation of recommendations made in 2016 or 2017. As a result, the 18 recommendations remain open. Our analysis of plan year 2015 FFM enrollment and eligibility data identified a small percentage—about 1 percent—of enrollments that were potentially improper or fraudulent because they had an unresolved issue related to citizenship, status as a national, or lawful presence, or to SSN, or were reportedly deceased. The presence of an unresolved data- matching inconsistency could indicate that an enrollment is potentially improper or fraudulent because an unresolved inconsistency indicates that the FFM could not verify information provided by the applicant. When a data-matching inconsistency is generated, HHS regulations require that the applicant provide supporting documentation generally within 90 days to resolve the inconsistency. If the applicant does not provide requested documentation within the time frame and the FFM cannot otherwise verify the information provided by the applicant, the inconsistency may be expired, which could lead to termination from coverage or a recalculation or elimination of subsidy amounts based on the trusted data source information, depending on the type of inconsistency. In addition, in our prior undercover work, we were able to obtain and maintain coverage for fictitious applicants by submitting fictitious or no documents to resolve a data-matching inconsistency. Our undercover work has also previously shown that the FFM did not verify the authenticity or accuracy of the documents we submitted to resolve inconsistencies. As part of our current analyses, we did not independently verify the instances where the FFM resolved inconsistencies when applicants provided the requested documentation during this engagement. However, if the FFM did not corroborate information on applicant-provided documentation with the appropriate agency, some applicants with resolved data-matching inconsistencies may have received coverage with an associated subsidy potentially improperly or fraudulently. Most of the about 8.04 million applicants who received coverage with an associated subsidy in plan year 2015 provided information that allowed the FFM to verify an applicant’s status as a U.S. citizen or national, or lawfully present in the United States. Nevertheless, the FFM did identify some inconsistencies related to citizenship, status as a national, or lawful presence. The FFM flags applicants as having an inconsistency if they attested to being a citizen but their status as a citizen could not be verified—for example, because their SSN and other information does not match SSA records—or they attest to an eligible immigration status but their lawful presence could not be immediately verified. Specifically, based on our analysis of enrollment data provided by CMS, the FFM initially identified approximately 88 percent of about 8.04 million applicants as a U.S. citizen or national, or lawfully present in the United States. The FFM identified the remaining approximately 961,000 applicants (12 percent), as having inconsistencies related to citizenship, status as a national, or lawful presence. The FFM was able to obtain information from the DHS SAVE program to address some inconsistencies related to citizenship, status as a national, or lawful presence, but issues with applicant-provided information precluded the FFM from querying all of the inconsistencies. The FFM queried DHS SAVE records for about 242,000 of the 961,000 applicants with inconsistencies (25 percent), but we were not able to identify queries for about 719,000 (75 percent). See figure 1 below for a comparison of FFM inconsistencies related to citizenship, status as a national, or lawful presence to DHS SAVE records. We found that the FFM could not query these 719,000 applicants mostly because of the quality of information submitted by applicants. Specifically, many of the applicants the FFM could not query were missing information such as immigration numbers that the DHS SAVE program requires. For example, we found applicants who provided their name and date of birth but did not provide an immigration number, which prevented the FFM from using the DHS SAVE program to verify citizenship or lawful presence status. Such cases required the FFM to request supporting documentation from the applicant. After the initial comparison to the DHS SAVE program, the FFM attempts to resolve remaining inconsistencies by first looking for obvious errors and then by using additional documentation requested from the applicant. See figure 2 below for an overview of inconsistencies related to citizenship, status as a national, or lawful presence that remained unresolved (i.e., open), as of December 31, 2015. As shown in figure 2, CMS addressed some, but not all, inconsistencies. Specifically, about 43,000 inconsistencies related to citizenship, status as a national, or lawful presence (less than 1 percent of total applicants) remained in an open status as of December 31, 2015. An open status indicates that CMS was unable to resolve or obtain documentation to clarify the issues that led to the inconsistency. In some cases, an inconsistency generated late in the year may have remained open but, according to CMS officials, would have carried forward and generated a new inconsistency for plan year 2016. Inconsistencies that remained open because they were not resolved within the required time frame represent potentially improper or fraudulent applicants who retained coverage without providing sufficient supporting documentation to resolve their inconsistency. However, the number of potentially improper or fraudulent applicants may be understated since we only took into consideration those with inconsistencies in an open status and not applicants with expired inconsistencies who may have continued to receive coverage and had subsidies paid to issuers on their behalf before CMS was able to terminate their coverage and subsidies. To examine steps taken by the FFM when processing inconsistencies related to citizenship, status as a national or lawful presence, we selected a nongeneralizable sample of 15 of the 961,000 applicants that the FFM identified. For 13 out of the 15, the FFM verified the applicant’s information through supporting documentation or DHS SAVE and resolved or expired the inconsistency in accordance with its standard operating procedures, or the FFM categorized the applicant as OBE because of an application update that made the inconsistency no longer relevant. We did note that in 2 of the 13 cases, the FFM did not perform a DHS SAVE program query to corroborate the supporting documentation. However, this was not required at the time the applicants enrolled, which was prior to June 2015 when CMS established that procedure. In the remaining cases, the FFM did not verify the applicants’ information in plan year 2015, but the applicants received coverage beyond the 95- day inconsistency-resolution period. For example, in one case we found that the applicant obtained multiple policies for different periods during the year without ever providing sufficient information to verify his or her status as a U.S. citizen or national, or being lawfully present in the United States. As a result, the applicant was able to obtain coverage for two- thirds of the coverage year. According to CMS, this inconsistency was carried over to plan year 2016, when the inconsistency was expired and the applicant’s coverage was terminated. Most applicants for plan year 2015 who received coverage with an associated subsidy submitted SSNs and other information that matched SSA records, and the FFM identified SSN inconsistencies for most of the applicants whose information did not match SSA records. As shown in figure 3, our analysis found that over 96 percent of applicants (7.74 million out of about 8.04 million) submitted information that was consistent with SSA records, but about 139,000 (1.7 percent of total applicants) did not. The other 166,000 applicants (2.1 percent) did not provide an SSN on their application. Of the approximately 139,000 applicants (1.7 percent) whose information did not match SSA records in our analysis, we found that the FFM identified an SSN inconsistency for about 109,000 (1.4 percent of total applicants). The FFM did not designate the remaining applicants whose information did not match SSA records in our analysis (about 31,000 of 139,000 applicants) as having an SSN inconsistency for plan year 2015, indicating that the FFM did not flag the applicant’s information as not matching SSA records. The FFM may not have flagged an applicant’s information for plan year 2015 as not matching SSA records if the applicant’s information matched SSA records at the time of enrollment but the applicant later changed his or her name with SSA. The FFM did not address all SSN inconsistencies for plan year 2015. Specifically, about 33,000 of the 109,000 applicants for whom the FFM identified an SSN inconsistency for plan year 2015 (less than 1 percent of total applicants) had an open SSN inconsistency only (see fig. 4). An open SSN inconsistency may indicate a potentially improper or fraudulent enrollment because it indicates that the FFM did not verify the applicant’s identity information but the applicant retained coverage. Applicants may have had open SSN inconsistencies in plan year 2015 because the FFM did not take steps to actively resolve SSN inconsistencies at that time. In some cases, an inconsistency generated late in the year may have remained open but, according to CMS officials, would have carried forward and generated a new inconsistency for plan year 2016. According to CMS officials, the FFM did not actively take steps to resolve SSN inconsistencies in plan year 2015 primarily because the FFM could not update SSNs in the data system at the time, as discussed in more detail later in this section. We previously reported that open SSN inconsistencies are indicators of potentially fraudulent applications. Specifically, we reported that we had successfully enrolled and received coverage with an associated subsidy in plan year 2015 for eight undercover identities that either did not provide an SSN or had an invalid Social Security identity. Further, HHS regulations state that the FFM must follow its standard inconsistency procedures if it is unable to validate an individual’s SSN through SSA. To address this issue we recommended that CMS design and implement procedures to resolve SSN inconsistencies. In May 2017, CMS established written procedures for verifying SSNs with documents submitted by applicants, as discussed in more detail later in this report. The remaining applicants with an SSN inconsistency for plan year 2015 had either a resolved SSN inconsistency (14,000 applicants) or an SSN inconsistency that was expired or OBE (62,000 applicants). Although the FFM was not actively resolving SSN inconsistencies in plan year 2015, according to CMS officials, most applicants with an SSN inconsistency also had an inconsistency related to citizenship, status as a national, or lawful presence, and documentation submitted to resolve those inconsistencies may also resolve SSN inconsistencies. For example, according to CMS officials, if an applicant submitted a Social Security card to the FFM, an SSN inconsistency could be resolved based on that documentation. If an inconsistency related to citizenship, status as a national, or lawful presence expired, the FFM automatically expired the SSN inconsistency, according to CMS procedures. According to CMS officials, the FFM closed SSN inconsistencies as OBE if no action needed to be taken on the inconsistency because it was no longer relevant to the application, such as in cases where the applicant corrected his or her SSN on the application. To examine steps taken to verify SSNs and process SSN inconsistencies, we reviewed a nongeneralizable sample of 15 applicants of the 139,000 applicants who received coverage with an associated subsidy in plan year 2015 whose information did not match SSA records in our analysis. In 3 of the 15 cases, additional information provided by CMS indicates that the FFM verified that the SSN on the application was correct. Specifically, in two of the cases, our analysis found that the applicant’s information did not match SSA records but the FFM verified the applicant’s information and did not generate an SSN inconsistency. As previously discussed, the FFM may not have identified an SSN inconsistency if the applicant’s information matched SSA records at the time of enrollment but the applicant later changed his or her name with SSA. In both of these cases, we found that the applicant’s date of birth matched SSA records but the name did not, indicating that the applicant may have changed his or her name. In the third case, the FFM resolved the SSN inconsistency in plan year 2015 when the applicant submitted a Social Security card showing the same name and SSN as the application. In 5 of the 15 cases, the applicant had an SSN inconsistency in plan year 2015 that was not resolved. Specifically, in two of the five cases, the SSN inconsistency expired when an inconsistency related to citizenship, status as a national, or lawful presence was expired, in accordance with CMS procedures. In one case, the SSN inconsistency remained open because, as previously noted, the FFM did not take direct action to resolve SSN inconsistencies in plan year 2015, according to CMS officials. In two cases, the SSN inconsistency was OBE. According to CMS officials, an inconsistency status may be changed to OBE when the inconsistency no longer needs to be addressed as a result of changes to the application, such as when an applicant updates information on his or her application or the application changes to a non-financial-assistance application. CMS officials did not specify what circumstances resulted in the status of these two SSN inconsistencies being changed to OBE; however, one of the applicants had a subsequent health-insurance policy that did not provide financial assistance. We found that in 5 of the 15 cases, the FFM either resolved an SSN inconsistency in plan year 2015 when the applicant submitted a Social Security card or did not generate an SSN inconsistency for plan year 2015 because the applicant had provided a Social Security card in plan year 2014, but information on the applicant-provided Social Security card did not match information in CMS’s data system. CMS officials did not indicate that the FFM had verified the name and SSN on the applicant- provided Social Security cards in these five cases with SSA records. The SSN on applicant-provided documentation may not have matched the SSN in CMS’s data because, as discussed previously, system limitations existed prior to March 2017. Specifically, even if the FFM received a Social Security card to resolve an inconsistency, the FFM did not reflect this change in CMS’s data system because the system did not have the capability to modify or update SSN information at the time, according to CMS officials. For example, if an applicant mistyped his or her SSN, the inconsistency may have been subsequently resolved if the applicant submitted a Social Security card, but CMS’s data system would continue to reflect the incorrect SSN that had been originally submitted. Finally, we found that in 2 of the 15 cases, the FFM resolved the SSN inconsistency in plan year 2015 or the FFM did not generate an SSN inconsistency in 2015 because it resolved an SSN inconsistency in plan year 2014, but information provided by CMS did not support the resolution of the SSN inconsistency. Specifically, in one case in which the FFM resolved an SSN inconsistency for plan year 2015, we could not determine how the SSN inconsistency was resolved because, according to CMS officials, the applicant did not provide documentation of his or her SSN. In another case, the FFM automatically reenrolled an applicant for plan year 2015 without an SSN inconsistency after identifying an SSN inconsistency in plan year 2014 because, according to CMS officials, the applicant submitted a passport to resolve a citizenship inconsistency. While submission of a U.S. passport can be used to verify citizenship, CMS procedures do not permit using a passport to resolve an SSN inconsistency, and the applicant’s passport did not contain an SSN. Because the applicant did not provide any other documentation to resolve the SSN inconsistency in plan year 2014 and the FFM did not generate an SSN inconsistency in plan year 2015, even though the applicant’s information did not match SSA records, we could not determine whether CMS’s data system reflects the correct SSN for this applicant. According to CMS officials, having an incorrect SSN on the application does not affect eligibility, since having an SSN is not a requirement for eligibility. However, as previously discussed, resolving data-matching inconsistencies without corroborating information with the appropriate agency puts the FFM at risk of approving potentially fraudulent or improper applications for subsidized coverage. We identified approximately $59 million in APTC for plan year 2015 associated with the applications of the 14,000 applicants who provided SSNs and other information that did not match SSA records and had a resolved SSN inconsistency. The $59 million may include APTC associated with applicants whose SSN inconsistencies were resolved without sufficient documentation, applicants who had SSN inconsistencies that were resolved based on applicant-submitted documentation that does not match the SSN in CMS’s data system, and applicants whose SSN inconsistencies were resolved appropriately. We identified $112 million in APTC associated with the applications of applicants who did not have an SSN inconsistency flagged in plan year 2015, although some information did not match SSA records in our analysis. We could not associate APTC subsidies with individual applicants because applications may include more than one person. Further, inaccurate SSNs in CMS’s system potentially impede the IRS’s ability to reconcile APTC. The IRS is responsible for processing tax returns to determine the final amount of PTC to which taxpayers are entitled and for recovering APTC overpayments. To enable the IRS to reconcile APTC, PPACA requires marketplaces to report certain information on individuals with marketplace coverage, including the name, address, and taxpayer-identification number—an SSN in cases where the individual has one—to the IRS. The IRS compares information provided by the marketplace on the APTC paid to issuers on taxpayers’ behalf to the amount for which taxpayers qualify based on actual household income and family size reported on their tax returns. In March 2017, system functionality upgrades were completed and deployed to enable the FFM to modify or update SSNs, according to CMS officials. In addition, as noted previously, CMS established procedures in May 2017 for verifying SSNs with documents submitted by applicants. These procedures require the FFM to take steps to update and verify SSNs by (1) obtaining documentation of the SSN or processing previously received SSN documents, (2) entering the SSN shown on documentation into CMS’s data system, and (3) trying to verify the newly entered or corrected SSN with SSA records. Further, the procedures direct the FFM to escalate cases for CMS review if the SSN cannot be verified, or documentation submitted to verify the SSN matches the information originally provided by the applicant that could not be verified with SSA records, as this may indicate potential fraud. We did not independently verify that the procedures have been implemented because the changes occurred outside the scope of our review; however, if properly implemented, these changes may help reduce the risk that potentially improper or fraudulent applicants could obtain subsidized coverage by helping to ensure that SSNs are appropriately verified and corrected in CMS’s data system. We found relatively few indicators that reportedly deceased individuals received coverage with an associated subsidy during plan year 2015. Specifically, we identified about 19,000 out of the approximately 7.74 million applicants who provided SSNs and other information that matched SSA records (about 0.24 percent) who received coverage with an associated subsidy on or after the date listed in the full death file as their date of death. HHS regulations state that in the case of termination of coverage due to death, the last day of enrollment in a qualified health plan through the FFM is the date of death. However, the FFM did not always terminate the enrollment of individuals through the exchange as of the date reported in the full death file as their date of death. Specifically, we found that the coverage for about 2,000 of the 19,000 reportedly deceased individuals ended on their reported date of death, but the remaining approximately 17,000 received or maintained coverage with an associated subsidy—APTC or CSR, which the federal government pays to issuers on behalf of enrollees—after their reported date of death (see fig. 5). Most insurance policies associated with reportedly deceased applicants began when they were alive and continued after their deaths, but in some cases the date of submission of the application for coverage occurred after the individual’s reported date of death. Specifically, through our analysis, we found about 14,000 (82 percent) of the 17,000 policies that continued beyond the applicant’s reported date of death began while the individual was alive (see fig. 6). However, the remaining policies began after the applicant’s reported date of death, including about 1,000 policies (5 percent) for which the applicant reportedly died after the application was submitted but before coverage started and about 2,000 policies (13 percent) in which the applicant died before the application was submitted. We identified about $23.0 million in APTC—which the federal government pays to issuers on behalf of enrollees—after the date of death of the applicant associated with the 17,000 policies that started or continued after the applicant’s reported date of death, of which about a fifth (about $4.7 million) was associated with the 2,000 policies of applicants who were reported as deceased before their application was submitted. We could not determine the portion of APTC associated with each individual on a policy or the extent to which the total APTC amount would have changed if the policy had been terminated as of the reportedly deceased individual’s date of death. As previously discussed, taxpayers who choose to have APTC must reconcile the amount of APTC paid to issuers on their behalf with PTC they are eligible for on their income-tax returns. Therefore, the final PTC amount may differ from the amount of APTC paid to issuers because changes in circumstances, such as the death of an enrollee, may affect the amount of PTC for which an enrollee is eligible. We did not determine the extent to which APTC paid on behalf of reportedly deceased individuals was reconciled with PTC for which these individuals were ultimately eligible as the reconciliation process was outside the scope of our review. However, we previously found that not all individuals correctly filed their federal income-tax returns, as required, and the federal government is missing opportunities to recover overpayments of APTC as part of the reconciliation process. As a result, APTC overpayments that the federal government improperly provides to issuers on behalf of deceased enrollees may not be fully recovered through the reconciliation process. In the majority of cases in which the applicant reportedly died before the application was submitted (about 1,700 out of 2,000 policies), we found that the FFM had automatically submitted the application to reenroll the applicant. We reviewed five sample cases in which the date of the application submission occurred after the individual’s reported date of death. For all five cases, the individual had received coverage with an associated subsidy in plan year 2014 and the FFM automatically reenrolled the individual for plan year 2015 after the reported date of death. According to additional information provided by CMS officials, the federal government paid APTC to issuers on behalf of all five of these individuals in plan year 2015 after their reported date of death. Deceased individuals may receive coverage with an associated subsidy beyond their reported date of death—or the FFM may automatically reenroll deceased individuals after their reported date of death—because the FFM does not always identify applicants as deceased after their initial enrollment in a qualified health plan. The FFM checks applicants’ information against SSA’s full death file to identify reportedly deceased individuals before enrolling them for coverage and subsidies. However, we previously found that the FFM does not conduct periodic checks during the year to determine whether any individuals have subsequently died. Further, according to CMS officials, the FFM does not recheck the full death file before automatically reenrolling applicants for subsequent plan years or reverify information, but rather only rechecks income, to help encourage individuals to maintain enrollment in coverage from one year to the next and align with the process for individuals with employer- sponsored health insurance. HHS regulations require marketplaces to periodically examine certain available data sources to identify changes— such as the enrollee’s death—to determine whether individuals receiving coverage with an associated subsidy remain eligible. CMS does not always identify deaths of enrollees in time to terminate enrollment through the exchange as of the date of death or to prevent automatic reenrollment, because CMS relies on third parties, such as family members, to report the death of an enrollee to the FFM. The FFM has procedures in place for individuals to report an enrollee’s death in order to remove the enrollee from coverage. We reviewed a nongeneralizable sample of 15 of the 17,000 reportedly deceased individuals who received coverage with an associated subsidy after the date reported in the full death file as their date of death, including the five cases we reviewed in which the FFM automatically reenrolled the individuals after their reported date of death. In 8 of the 15 sample cases we reviewed, a family member or other individual contacted the FFM and reported the enrollee’s death. In two of these cases, the individual reporting the death did not provide sufficient documentation of the death, as required by CMS. In three cases, the FFM received notification and a death certificate to verify the death, but did not terminate the policy as of the date of death. The FFM did not receive the death certificates for two of the three cases until 2016—after the 2015 plan year had ended. In the other case, the deceased individual received coverage and subsidies for 3 months in 2015 after the reported date of death but the FFM did not receive the death certificate to verify the death until almost 2 months after the coverage was terminated. We could not determine the reason the individual’s coverage had been terminated. According to CMS officials, in plan year 2015, the FFM received notification of policy termination and policy end dates from plan issuers but did not always receive information on the reason coverage was terminated. When the FFM does not receive sufficient notification of a death, the policy may be terminated by the issuer for nonpayment, according to CMS officials. According to HHS regulations, when individuals stop paying their premiums, such as in the case of death, there is a 3-month grace period, after which the individuals’ policies would be terminated for failure to pay premiums retroactively to the last day of the first month of the grace period. For example, as shown in figure 7, if an individual dies on February 15 and the premium for the policy is not paid for months after the individual’s death, the individual would enter a 3-month grace period covering March, April, and May. The issuer would terminate the policy for nonpayment on May 31, with a policy end date set retroactively to March 31—the last day of the first month of the grace period. As a result, in cases in which the policy for a deceased individual is not paid for months occurring after the individual’s date of death, the deceased individual may still receive subsidized coverage for 1 full month after the month of death. However, deceased individuals may receive subsidized coverage beyond the end of the first month after their date of death if the policy is not terminated by the issuer for nonpayment of premium. According to CMS officials, the plan issuer may continue to report a deceased individual as covered if the premium continues to be paid. For example, another individual may be authorized to make payments on the policy, such as a spouse who is also covered by the policy. We identified instances in which policies continued beyond the end of the first month after the date of death reported in the full death file, with some policies continuing until the end of the plan year. In 7 of our 15 sample cases—including one case in which the applicant was automatically reenrolled for plan year 2015 after his reported date of death in October 2014—the policy continued for more than 1 complete month in 2015 after the individual’s reported date of death. In four of the seven sample cases in which coverage continued beyond the end of the first month after the individual’s death, the policy also covered the deceased individual’s spouse. In other instances, an individual may have set up payments covering future months prior to death. For example, in the case in which the applicant had been receiving coverage with an associated subsidy in 2014 and was then automatically reenrolled for plan year 2015 after his reported date of death in October 2014, the individual received subsidized coverage for the entirety of plan year 2015. According to CMS officials, the individual may have set up automated payments to pay the premium. We recommended in July 2017 that CMS assess and document the feasibility of approaches for periodically verifying individuals’ continued eligibility by working with other government agencies to identify changes in life circumstances that affect APTC eligibility, such as death, that may occur during the plan year and, if appropriate, design and implement these verification processes. The agency agreed with the recommendation and stated that it was exploring approaches to identify enrollees who may be deceased and should therefore be unenrolled from coverage. Effectively addressing this recommendation is necessary to help ensure that the FFM does not provide coverage with associated subsidies to deceased individuals. However, as of September 2017, CMS officials could not confirm whether the approaches CMS was exploring would include rechecking the full death file prior to automatically reenrolling individuals. Without rechecking the full death file prior to automatic reenrollment to identify individuals who died during the plan year, the FFM remains at risk of providing coverage to deceased individuals, potentially for prolonged periods of time following their deaths, and of paying APTC to issuers on their behalf that may not be fully recovered through the reconciliation process. Effective implementation of PPACA eligibility and enrollment provisions is a complex undertaking. As subsidies for insurance coverage through the FFM cost billions of dollars to the federal government annually, effective controls to ensure that only qualified applicants receive subsidized coverage under the act are especially important. For plan year 2015, the FFM generally verified citizenship, status as a national, or lawful presence and SSN information appropriately, with few indications that individuals received coverage with an associated subsidy fraudulently or improperly. However, in some instances, applicant-submitted documentation used to verify applicant information did not match CMS data. CMS has taken steps since 2015 to improve verification of applicant information, including taking steps to improve verification of SSNs using documentation submitted by applicants and adding capability to modify or update SSNs in its data system. These procedures and system upgrades, if properly implemented, should help improve verification of applicant SSNs that initially did not match SSA records. Further, while relatively few enrollees reportedly died prior to or during plan year 2015, some individuals received or maintained coverage with an associated subsidy after their reported deaths and some individuals were automatically reenrolled for the 2015 plan year after their reported death. The FFM checks the full death file prior to initial enrollment, but does not recheck the full death file to identify enrollee deaths during the plan year or prior to reenrolling individuals for the following plan year. Without processes to identify the deaths of enrollees in a timely manner, including prior to reenrollment for the following plan year, CMS is at risk of providing additional months of subsidized coverage improperly with related costs to the federal government. In 2017, we recommended that CMS assess the feasibility of approaches for periodically verifying changes, such as death, that affect eligibility for subsidies. Implementing our 2017 recommendation, and taking the additional step of assessing whether to check the full death file prior to automatically reenrolling individuals for the following plan year, could help ensure the FFM is not paying APTC on behalf of deceased individuals, especially for prolonged periods following their deaths. As part of its efforts to assess and document the feasibility of approaches to identify the deaths of enrollees that may occur during the plan year, the Administrator of CMS should specifically assess and document the feasibility of approaches—including rechecking the full death file—to identify the deaths of individuals prior to automatic reenrollment for subsequent plan years and, if appropriate, design and implement these verification processes. (Recommendation 1) We provided a draft of this product to HHS for comment. In its written comments, which are reprinted in appendix II, HHS concurred with our recommendation. HHS also provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of CMS, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The objective of this review was to examine the extent to which indications of potentially improper or fraudulent enrollments exist in the federally facilitated marketplace’s (FFM) application, enrollment, and eligibility-verification process for the 2015 enrollment period. To identify indications of potentially improper or fraudulent enrollments in the FFM’s application, enrollment, and eligibility-verification process, we reviewed relevant federal statutes, Department of Health and Human Services (HHS) regulations, and Centers for Medicare & Medicaid Services (CMS) policies for plan year 2015. We also met with CMS officials that oversee enrollment into the FFM. In addition, we obtained and analyzed eligibility and enrollment data for applicants enrolled from November 15, 2014, through December 31, 2015, and identified about 8.04 million applicants with an associated subsidy who effectuated enrollments in plan year 2015. For the purposes of this report, we define applicants receiving coverage with an associated subsidy as applicants receiving coverage in plan year 2015 with an associated advance premium tax credit (APTC) or Cost Sharing Reduction (CSR). The number of applicants receiving coverage with an associated subsidy and the amount of associated subsidies identified through our analysis may differ from the number of applicants who ultimately received subsidized coverage and the amount of subsidies received. In addition, we obtained and analyzed information on inconsistencies associated with these applicants as of December 31, 2015. We focused our analyses on three areas based on the eligibility and verification requirements the FFM must use to determine whether individuals are eligible to enroll and maintain coverage. Specifically, we identified and analyzed data for applicants receiving coverage with an associated subsidy (1) with inconsistencies related to citizenship, status as a national, or lawful presence; (2) whose information, including Social Security number (SSN), did not match the Social Security Administration’s (SSA) records, and (3) who were reportedly deceased. Applicants who had inconsistencies related to citizenship, status as a national, or lawful presence. To review applicants with inconsistencies, we used data from the Department of Homeland Security’s (DHS) Systematic Alien Verification for Entitlements (SAVE) system. Specifically, we obtained queries made by the FFM from November 15, 2014, through December 31, 2015, and compared them to approximately 961,000 applicants the FFM identified as having inconsistencies related to citizenship, status as a national, or lawful presence. For the purposes of this report, we considered applicants with open inconsistencies related to citizenship, status as a national, or lawful presence, or SSN, to be potentially improper or fraudulent. However, the number of potentially improper or fraudulent applicants may be understated since we did not take into consideration applicants with expired inconsistencies who may have continued to receive coverage and had subsidies paid to issuers on their behalf before CMS was able to terminate their coverage and subsidies. Applicants whose information, including SSN, did not match SSA’s records. To identify applicants whose personal information— name, date of birth, or SSN—did not match SSA’s records, we used the SSA Enumeration Verification System (EVS) from November 16, 2016, through December 29, 2016, and SSA’s Affordable Care Act (ACA) batch file from March 2017. Specifically, we processed the approximately 7.9 million applicants who provided an SSN of the about 8.04 million total applicants through SSA EVS and the SSA ACA batch file and analyzed the output codes to determine whether the information matched SSA’s records. To determine whether the FFM had also identified an SSN-related inconsistency, we compared the SSA EVS analysis results to the FFM eligibility information. Although having an SSN is not a condition of eligibility, we consider applicants with open SSN inconsistencies to be potentially improper or fraudulent because open SSN inconsistencies indicate that the FFM was not able to verify the applicant’s identity information, but the applicant retained coverage. Applicants who were reportedly deceased. To identify applicants who were reportedly deceased prior to or during plan year 2015, we compared the approximately 7.74 million applicants whose information matched SSA records of the about 8.04 million total applicants in the eligibility and enrollment data to the SSA full death file from June 2016. We matched records using the SSN, name, and date of birth. We limited our review to those applicants already verified through SSA EVS. We considered applicants to be potentially improper or fraudulent if they received or maintained coverage with an associated subsidy after the date reported in SSA’s full death file as their date of death. To determine the reliability of the data used in our analysis, we performed electronic testing to determine the validity of specific data elements in the FFM and other federal data files that we used to perform our work. We also interviewed officials responsible for their respective databases, and reviewed documentation related to the databases and literature related to the quality of the data. On the basis of our own testing and our discussions with agency officials, we concluded that the data elements used for this report were sufficiently reliable for our purposes. For reporting purposes, we present the results of our data-matching analyses as approximate whole numbers. To review the results of our matches, we selected a nongeneralizable sample of 45 applicants that contained 15 cases with inconsistencies related to citizenship, status as a national, or lawful presence; 15 cases where the applicant SSN information did not match SSA 15 cases where the applicant’s information matched the SSA full death file. For all 45 cases, we requested and reviewed copies of available supporting documentation from CMS. Our review of applicant cases provides illustrative examples, and the results are not projectable to the entire population of applicants to the FFM. As discussed above, we focused our analyses on three areas. We did not perform analyses using independent data sources to verify other types of information required for applicants to enroll in qualified health plans and qualify for subsidies, which we have discussed in previous GAO reports. Specifically, we did not perform analysis on the following: Income. Internal Revenue Service (IRS) household income information is necessary in determining subsidy amounts, but can be up to 2 years old. Due to the age of the data, there may be discrepancies between applicants’ attested information and what the marketplace obtains through the federal data services hub (data hub). According to HHS regulations and CMS guidance, if electronic data are unavailable or an applicant’s attestation of projected annual household income is more than 10 percent below the annual household income as computed using available data sources, the marketplace must follow inconsistency-resolution procedures. These procedures will accept differences of up to 20 percent of an applicant’s attested income from what CMS is able to recalculate using supporting documentation. Residency. Individuals must intend to reside in the state in which they are applying for coverage and are not required to have a fixed address in the state. The marketplace can accept self-attestation unless the information provided by the applicant is not reasonably compatible with other information provided by the applicant or in the records of the marketplace. HHS has recently stated that its previous assessments of available sources did not identify any comprehensive data source for verifying residency. However, we previously reported that CMS did not document an evaluation of available external sources to determine the quality, relevance, and reliability of the data, and recommended that it do so. Incarceration. Individuals must not be incarcerated (unless incarcerated while awaiting disposition of charges). We have previously reported that there are many challenges associated with using incarceration data, including the risk of false positives. We conducted this performance audit from November 2015 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, the following staff members made key contributions to this report: Philip Reiff, Assistant Director; Colin Fallon; Suellen Foth; Kristen Juskiewicz; Maria McMullen; Madeline Messick; James Murphy; Ariel Vega; Erin McLaughlin Villas; and Elizabeth Wood. Stated Health-Insurance Marketplaces: Three States Used Varied Data Sources for Eligibility and Had Few Indications of Potentially Improper Enrollments. GAO-17-694. Washington, D.C.: September 7, 2017. Improper Payments: Improvements Needed in CMS and IRS Controls over Health Insurance Premium Tax Credit. GAO-17-467. Washington, D.C.: July 13, 2017. Patient Protection and Affordable Care Act: Results of Enrollment Testing for the 2016 Special Enrollment Period. GAO-17-78. Washington, D.C.: November 17, 2016. Patient Protection and Affordable Care Act: Results of Undercover Enrollment Testing for the Federal Marketplace and a Selected State Marketplace for the 2016 Coverage Year. GAO-16-784. Washington, D.C.: September 12, 2016. Patient Protection and Affordable Care Act: Most Enrollees Reported Satisfaction with Their Health Plans, Although Some Concerns Exist. GAO-16-761. Washington, D.C.: September 12, 2016. Patient Protection and Affordable Care Act: Final Results of Undercover Testing of the Federal Marketplace and Selected State Marketplaces for Coverage Year 2015. GAO-16-792. Washington, D.C.: September 9, 2016. Patient Protection and Affordable Care Act: CMS Should Act to Strengthen Enrollment Controls and Manage Fraud Risk. GAO-16-29. Washington, D.C.: February 23, 2016. Patient Protection and Affordable Care Act: Preliminary Results of Undercover Testing of the Federal Marketplace and Selected State Marketplaces for Coverage Year 2015. GAO-16-159T. Washington, D.C.: October 23, 2015. Patient Protection and Affordable Care Act: IRS Needs to Strengthen Oversight of Tax Provisions for Individuals. GAO-15-540. Washington, D.C.: July 29, 2015. Patient Protection and Affordable Care Act: Observations on 18 Undercover Tests of Enrollment Controls for Health-Care Coverage and Consumer Subsidies Provided under the Act. GAO-15-702T. Washington, D.C.: July 16, 2015. Patient Protection and Affordable Care Act: Status of CMS Efforts to Establish Federally Facilitated Health Insurance Exchanges. GAO-13-601. Washington, D.C.: June 19, 2013.", "summary": "The Patient Protection and Affordable Care Act (PPACA) offers subsidized health-care coverage for qualifying applicants. States may operate their own health-care marketplaces or rely on the FFM, maintained by CMS. In PY 2015, 37 states relied on the FFM and over 8 million plan selections were made through the FFM. PPACA represents a significant fiscal commitment for the federal government, which pays subsidies to issuers on participants' behalf. GAO was asked to examine enrollment into the FFM for PY 2015, the most current data available at the time of GAO's review. This report examines the extent to which indications of potentially improper or fraudulent enrollments existed in the FFM's application, enrollment, and eligibility-verification process for the 2015 enrollment period. GAO reviewed relevant federal statutes, regulations, and policies for PY 2015 and interviewed CMS officials. GAO analyzed eligibility and enrollment data for about 8.04 million applicants in PY 2015 to identify applicants (1) who had a citizenship, status as a national, or lawful presence inconsistency; (2) whose information did not match SSA records; or (3) who were reportedly deceased. GAO also reviewed a nongeneralizable sample of 45 applicants to more fully understand verification processes. A small percentage—about 1 percent—of plan year (PY) 2015 enrollments were potentially improper or fraudulent. These applicants had unresolved inconsistencies related to citizenship, status as a national, lawful presence, or Social Security number (SSN), or received coverage while reportedly deceased, according to GAO's analysis of federally facilitated marketplace (FFM) eligibility and enrollment data. To verify applicant information, such as citizenship, status as a national, or lawful presence, and SSNs, the FFM uses data from the Department of Homeland Security (DHS) and Social Security Administration (SSA), among other sources. When an applicant's information does not match the available data sources, the FFM generates an inconsistency, and the FFM should take steps, such as requesting applicant documentation, to resolve it. Having an SSN is not a condition of eligibility; however, unresolved inconsistencies could indicate that an enrollment is potentially improper or fraudulent. The FFM did not actively resolve SSN inconsistencies for PY 2015, but the Centers for Medicare & Medicaid Services (CMS) has since completed system upgrades and established procedures for verifying SSNs with applicant-provided documentation, according to CMS officials. Note: Some applicants may be included in more than one category. GAO found that applicants or enrollees may have received or maintained coverage with an associated subsidy after their reported death because the FFM did not always identify individuals as deceased in a timely manner, such as prior to automatic reenrollment. CMS relied on third parties, such as family members, to report the death of an enrollee to the FFM, but did not always receive adequate notification to verify the death. According to CMS officials, CMS is exploring approaches to identify enrollees who may be deceased and should therefore be unenrolled from coverage. The FFM checks applicants' information against death information from SSA before initial enrollment but does not recheck death information prior to reenrollment. According to CMS officials, the FFM does not reverify information, other than income, when automatically reenrolling applicants to help encourage individuals to maintain enrollment in coverage from one year to the next. Without rechecking SSA death information prior to automatic reenrollment, the FFM remains at risk of providing subsidized coverage to deceased individuals with related costs to the federal government. GAO recommends that CMS assess and document the feasibility of approaches to identify the deaths of individuals prior to automatic reenrollment. HHS concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "DHA requires the military services and NCR to categorize adverse medical events by severity, using seven categories defined by the Agency for Healthcare Research and Quality (AHRQ), ranging from unsafe condition to death. (See table 1.) MTF personnel must enter all adverse medical events in DHA’s JPSR system, which was implemented in June 2011 in response to a statutory mandate for the MHS to establish a patient care error reporting and management system. The JPSR system is intended to provide ways to facilitate the self-reporting, collection, and aggregation of adverse medical event data across the MHS. The system includes prompts for information about factors that may have contributed to the event, such as medication or equipment, as well as the assignment of a severity category. From 2013 through 2016, the total number of reported adverse medical events in the JPSR system increased from over 76,000 to about 108,000. When analyzing adverse medical events, DHA groups the data into three categories—near miss, no harm, and harm. The highest increase was in the near miss category (about 36,000 to 56,000) while the other two categories increased to a lesser extent. According to an internal DHA publication, a higher increase in near miss events alongside a decrease in harm and no harm events is considered a positive trend because it shows that more potential adverse medical events are being detected before they reach the patient. (See fig. 1.) The most severe types of adverse events are called sentinel events. In March 2015, DOD issued a memo that revised its previous definition of a sentinel event, which was an unexpected occurrence involving death or serious physical or psychological injury or risk. The revised definition states that a sentinel event is a patient safety event (not primarily related to the natural course of the patient’s illness or underlying condition) that results in death, permanent harm, or severe temporary harm. The revised definition also added a list of events outlined by the Joint Commission and the National Quality Forum that go beyond those that result in unexpected death or serious physical or psychological harm to the patient. (See app. I for the revised definition of sentinel events.) From 2013 through 2016, DHA’s data showed an increase in the total number of reported sentinel events—both medical and dental—from 121 to 319. Medical sentinel events approximately doubled from 101 to 206, while dental sentinel events increased more than fivefold from 20 to 113. (See fig. 2.) The sharp increase in events in 2015 may have been influenced by DHA’s revised definition of sentinel events as well as the Army’s inclusion of dental events that meet sentinel event criteria. A DHA internal publication also noted that a culture shift in patient safety reporting could have contributed to this increase. As with all adverse medical events, MTF personnel must enter sentinel events into the JPSR system; however, sentinel events have additional reporting requirements that must be met within specified time frames. For example, DHA policy requires MTF officials to report sentinel events to their respective military service or NCR within 24 hours after they become aware of the event. (See fig. 3, step 1.) MTFs also must report to and comply with sentinel event reporting requirements established by the Joint Commission. These requirements include the development and submission of an RCA report for each sentinel event to identify the causal and contributory factors associated with the event as well as the corrective actions needed to prevent future incidents. The military services and NCR submit copies of their RCA reports to DHA, which rates the corrective actions included in each RCA report as stronger, intermediate, or weaker based on an estimation of their effectiveness. (See fig. 3, step 2.) DHA uses commercial process improvement software called TapRooT to assist with the development of RCA reports, and DHA requires all MTFs to use a methodology for its RCA reports that is currently supported by this software. Additionally, once the Joint Commission approves an RCA report and its associated corrective action plan, it may require the preparation of an MOS report that assesses the corrective actions 4 months after an RCA report is submitted to determine whether the implementation of corrective actions and outcome measures was successful. Unlike RCA reports, these reports are only required for selected sentinel events as determined by the Joint Commission. DOD’s March 2015 memo that revised the definition of sentinel events contained an additional requirement for the military services and NCR to submit copies of reports on the implementation of corrective actions to DHA. (See fig. 3, step 3.) DHA officials told us that MTFs could submit their MOS reports to meet this requirement. For this report we use the term MOS report when referring to this requirement. Responsibility for the delivery of care in the MHS is shared among the Office of the Assistant Secretary of Defense (Health Affairs), DHA, the military service medical commands, and NCR’s medical directorate. MTFs are currently under the direction and control of the Army Medical Command, the Navy Bureau of Medicine and Surgery, and the Air Force Major Commands. MTFs within the NCR are under the direction and control of the NCR medical directorate, which reports to DHA. (See fig. 4.) The NDAA 2017 included a provision that requires the Director of DHA to be responsible for the administration of every MTF beginning October 1, 2018. This responsibility includes budgetary matters, patient safety activities, information technology, and health care administration and management, among other things. As part of the patient safety activities, DHA officials will assume responsibility for adverse medical event reporting. As required, DHA submitted initial plans to Congress in both March and June 2017 about how it plans to implement its new responsibilities. In September 2017, we reported that DHA’s plans summarize its new roles and responsibilities at a high level and that a significant amount of work remained to complete the implementation plan. On March 30, 2018, DOD submitted an additional implementation plan and stated that its final implementation plan will be completed by June 30, 2018. Policies established by the military services and NCR for reporting adverse medical events are developed to implement DOD’s policies— which tend to be broad—and may include additional requirements specific to their branch of military service. However, we found that aspects of these policies do not consistently align with DOD’s policies, including the definitions for adverse medical events and sentinel events, as well as requirements for entering events into the JPSR system. (See table 2.) Definition of adverse medical event. The Navy uses DOD’s definition of an adverse medical event—which includes events that may or may not result in harm to the patient. However, the Army, Air Force, and NCR defined this term more narrowly, to include only an event that causes actual harm to the patient. While the difference in these definitions could potentially result in the underreporting of events, officials from all four of the MTFs we visited told us that the discrepancy does not have much of an impact because the individuals who report these events—MTF personnel—are unlikely to be aware of the difference and likely follow the broader DOD definition. Policy on entering events in the JPSR system. Only NCR’s policy states that adverse medical events should be entered into the JPSR system. However, Army, Navy, and Air Force officials as well as officials from one MTF we spoke with stated that they record all adverse medical events in the JPSR system even though their policies do not require it. Policy on reviewing adverse medical events. NCR and Air Force policies, which align with DOD’s policy, require a review of an adverse event that is based on whether there is harm to the patient. In contrast, Army and Navy policies do not require that an adverse medical event be reviewed on the basis of whether there is harm to the patient, but they do require the event to be reviewed for the level of severity and probability of recurrence. However, Navy officials told us that reviewing an event for severity includes an assessment of harm to the patient even though this is not clearly stated in their policy. Additionally, all of the MTF officials we interviewed said that the JPSR system requires them to review an adverse medical event on the basis of whether there is harm to the patient and to assign a harm scale category. Memorandum that revised the definition of a sentinel event. Only the Army’s draft policy aligned with DOD’s March 2015 revised definition of sentinel events. However, MTF officials from the other military services and NCR told us that even though the revised definition was not in their policies, they were aware of the memo and were using this definition. Memorandum that requires the military services and NCR to submit copies of their reports on the implementation of corrective actions to DHA. The Army’s draft policy that aligned with DOD’s revised definition of sentinel events also included a section requiring the submission of these reports to DHA. The policies of the other military services and NCR do not include this requirement. However, officials from the other military services we interviewed told us that they are aware of this requirement and are submitting MOS reports to meet this requirement. NCR officials told us that they are aware of this requirement but have not begun submitting these reports. In March 2017, DOD’s senior military medical leadership published operating principles to guide the implementation of specific MHS requirements outlined in the NDAA 2017. One of the operating principles to guide the transition of MTF administrative responsibilities to DHA requires DHA to create all health care policies for the direct care system (the MTFs) to ensure greater consistency and eliminate duplicative governance. As a result, the military services and NCR will no longer be establishing their own policies. According to DHA officials, the transition for DHA to be the single policy writer for MTFs will take time, and policies issued by the military services and NCR will remain in place until they are superseded by revised DHA policies. DHA officials are in the process of updating the department’s patient safety policy through the Patient Safety Improvement Collaborative, a working group that includes patient safety representatives from all of the military services, NCR, and DHA. However, as of January 2018, DHA officials were uncertain as to when this effort would be complete. We found that the process used by the military services, NCR, and DHA to track sentinel events is fragmented. (See fig. 5.) Similar to all other types of adverse events, DHA requires that sentinel events be recorded in the JPSR system. However, DHA officials told us there are additional follow-up reports and associated deadlines for sentinel events that go beyond the JPSR system’s current tracking capabilities, and as a result, officials from each of the military services and NCR told us they track sentinel events in their own tracking record outside of the JPSR system. Officials told us the military services and NCR receive reports about sentinel events from their MTFs via email, which are then entered in their respective internal tracking records and reported to DHA via email. DHA then enters and tracks the sentinel events in its own internal tracking record. DHA officials told us that they do not believe that all sentinel events are being entered in the JPSR system, and that the JPSR system does not currently have the capability to pull sentinel event data for tracking purposes. As a result, the same sentinel events are entered and tracked in two separate tracking records—DHA’s tracking record and the tracking records maintained by the military services or NCR. In a similarly fragmented process, MTFs email RCA reports—a requirement for sentinel events—separately to their respective military services or NCR, which then emails them to DHA. Although DHA requires MTFs to use a methodology currently supported by the TapRooT system to complete their RCA reports, DHA officials told us the TapRooT software is not compatible with most MTFs’ computer systems, and as a result, MTFs do not share RCA reports through this system. Instead, they told us MTFs use the methodology from the TapRooT system to prepare the RCA report as a standalone document. Officials told us MTFs then email the RCA reports to their military service or NCR, which notates the RCAs in their respective internal tracking record. The military services and NCR email the RCA reports to DHA, which notates the reports in its own internal tracking record. Because the process used by the military services, NCR, and DHA to track sentinel events and RCA reports is fragmented, DHA officials told us they must rely on their reconciliation process to ensure they have complete information. Specifically, on a monthly basis, DHA officials email separate spreadsheets of DHA’s sentinel event records to each of the military services and NCR requesting confirmation of reported sentinel events and the status of overdue RCA reports, among other information. DHA officials acknowledged that their reconciliation process is inefficient and told us that their full-time employees and contractors spend an average of 80 hours per month working on it. Additionally, officials told us that sometimes information about sentinel events and RCA reports is lost or not effectively communicated due to complexities related to routing the email submissions and to turnover in the contract staff who track and reconcile this information. The cooperation of the military services and NCR is key to this process because officials told us that DHA currently has no authority to compel a response from these entities, although this may change with the transition of MTF administrative responsibilities to DHA. DHA officials told us they sometimes do not receive a response to their emails, and in these cases, DHA assumes concurrence. In an effort to improve the reconciliation process and compliance with RCA report submission requirements, DHA officials told us that they developed a new tool called the Comprehensive Analysis Progress Tracker for all three military services and NCR. DHA officials told us this tracker shows the full cycle of each sentinel event, including which RCAs are overdue, and is available on the MHS internal website. DHA officials told us that this tracker, launched in October 2017, replaced the previous system of separate monthly reconciliation emails with individual spreadsheets for each military service and NCR. In January 2018, DHA officials told us they began using this tracker at monthly Patient Safety Improvement Collaborative meetings and will use it during monthly check-ins with the military services and NCR to discuss delayed or missing items. However, the military services and NCR cannot directly edit the Comprehensive Analysis Progress Tracker. As a result, DHA officials told us that the military services and NCR will continue to use email to submit their sentinel events and RCA reports as well as any corrections or additional information needed for the tracker, which may perpetuate previous inefficiencies. Despite DHA’s efforts to reconcile its information on sentinel events and RCA reports, we identified discrepancies and missing information in its tracking record. We found that the sentinel events in all of the military service and NCR tracking records matched DHA’s tracking record except for those of the Navy. Specifically, DHA had a record of 19 sentinel events that the Navy did not have for 2013 through 2016. DHA officials were not sure of the reason for the discrepancy between their tracking record and the Navy’s, but told us that sometimes sentinel events are reported to DHA and later determined to not be reportable, and DHA is not given the updated status of the event. Navy officials told us that although they initially reported these 19 events as sentinel, the Joint Commission informed the Navy that it did not consider these events to be sentinel after reviewing the Navy’s submission. Navy officials told us that they determined these events also did not meet other sentinel event criteria per DHA’s revised definition, which goes beyond the definition used by the Joint Commission. Further, Navy officials told us they informed DHA that these events had been deemed non-sentinel by the Joint Commission, and DHA’s tracking record subsequently noted this. However, DHA did not remove the events from its tracking record. We found discrepancies in the number of RCA reports when comparing DHA’s internal tracking record to the military services’ and NCR’s internal tracking records. In some instances, we found that DHA had more RCA reports in its tracking record than the military services or NCR for reported sentinel events, and in other instances, DHA had fewer RCA reports in its tracking record than the military services or NCR: DHA had more RCA reports in its internal tracker than in the Army’s internal tracker for 2015 (2 more) and 2016 (1 more). DHA had fewer RCA reports than the Air Force in 2013 (3 less), 2014 (2 less), 2015 (13 less), and 2016 (1 less). Additionally, DHA had fewer RCA reports for reported sentinel events for NCR in 2015 (1 less) and 2016 (18 less). Officials with the military services and NCR told us they did not know why there were differences between their tracking records and those of DHA. However, Army and NCR officials offered potential reasons for these differences. Army officials told us that they may have fewer RCA reports than DHA because they recently transitioned their sentinel event and RCA tracking record from a spreadsheet format to a database, and some reports may not have been copied into the database. NCR officials told us their tracking record may not match DHA’s tracking record because an MTF may submit only one RCA report to DHA that covers multiple similar sentinel events, so DHA may have fewer reports documented in its internal tracking record. For some reported sentinel events, we found that the required RCA reports had not been recorded in any tracking record for the Army, NCR, or DHA. (See table 3.) Army and NCR officials told us that they did not know why they did not have a record of an RCA report for every sentinel event in their internal tracking record. However, these officials explained that there are a number of potential reasons that RCA reports could be missing, including insufficient MTF staff to carry out these activities, and MTF officials’ confusion about the revised definition of a sentinel event. DHA officials told us that they did not know the reasons for the discrepancies between the tracking records for the military services, NCR, and DHA or for the missing RCA reports. Specifically, DHA officials did not know whether these reports were completed but not submitted to DHA or were not completed at all. They told us that they rely on the cooperation of the military services and NCR to submit these reports and cannot enforce the requirement, although this may change with the transition of MTF administrative responsibilities to DHA. Because of these discrepancies and missing RCA reports, DHA lacks critical information about why a sentinel event may have occurred and what actions, if any, MTFs should take to prevent similar incidents in the future. We have previously reported that when fragmentation or overlap exists, there may be opportunities to increase efficiency. In particular, our prior work identified management approaches that may improve efficiency and effectiveness, including implementing process improvement methods and technology improvements. As MTF patient safety responsibilities are transitioned to DHA, the fragmented tracking process may hamper DHA’s ability to efficiently and effectively monitor sentinel events and RCA reports, potentially leading to missed opportunities for systemic improvements. As of September 2017, DHA had received 27 MOS reports for the 319 sentinel events that were reported in 2016. However, DHA does not know how many reports it is missing because its efforts to reconcile information for these reports have been limited. Prior to January 2018, DHA did not include MOS reports as part of its reconciliation process for sentinel events and RCA reports. However, in January 2018, DHA officials told us they added MOS reports to their new monthly reconciliation process using the Comprehensive Analysis Progress Tracker. While this tracker displays the total number of MOS reports DHA has received, it does not display whether individual reported sentinel events have an associated MOS report. Without this information, DHA may be unable to identify which MOS reports are missing. DHA officials told us that they may revise the Comprehensive Analysis Progress Tracker to follow up on MOS reports associated with specific sentinel events in the future. DHA’s efforts to identify which MOS reports are missing are further impeded by the military services’ and NCR’s inconsistent tracking efforts. Specifically, the military services and NCR have been tracking the submission of their MOS reports in different ways or not at all. Army officials had told us that the completion of MOS reports was noted in their internal tracking record for sentinel events and RCAs. Army officials subsequently told us that as of January 2018, they began tracking whether MOS reports were submitted to DHA in the notes section of their internal tracking record. Navy officials told us they indicated the due date of the MOS report and the date of its submission to DHA in their internal tracking record for sentinel events and RCA reports. Air Force officials told us they indicated in their internal tracking record for sentinel events and RCA reports the date that the MOS report was sent to DHA. However, they told us the Air Force’s process for tracking and submitting MOS reports to DHA has been inconsistent, and they plan to revise it in the future. NCR officials told us they did not track the completion of MOS reports or their submission to DHA. Because of these issues, DHA may not be able to fully reconcile its information for individual MOS reports or identify the reports it is missing, impeding its ability to obtain complete information on the effectiveness of MTFs’ corrective action plans. This is inconsistent with federal internal control standards, which require management to identify and respond to risks to achieve its objectives, and for management to use quality information to achieve its objectives. The requirement in DOD’s memo to submit reports on the implementation of corrective actions is unclear, which may also impact DHA’s ability to ensure that it is receiving these reports for all sentinel events. DHA officials told us that MTFs could meet this requirement by submitting copies of their MOS reports. According to the Joint Commission’s guidance, the Joint Commission assigns MOS reports on an ad hoc basis, depending on the sentinel event, RCA report, and corrective actions, and as a result, an MOS report is not necessarily required for each sentinel event. DHA officials told us that they intended to obtain a report on the implementation of corrective actions for every sentinel event, and they believed that an MOS report was required and thus would be reported for every sentinel event, similar to RCAs. However, DHA officials told us that they learned from the military services and NCR at the January 2018 Patient Safety Improvement Collaborative meeting that an MOS report was not required for every sentinel event and that DHA’s requirement for submitting reports on the implementation of corrective actions was unclear. Specifically, DHA officials told us the military services and NCR told DHA that the 2015 memo did not state when the reports on the implementation of corrective actions are required by DHA. For example, the memo did not state whether DHA requires this report for a reported sentinel event and RCA when the Joint Commission does not. DHA’s unclear requirement is inconsistent with internal control standards, which require management to review policies for continued relevance and effectiveness in achieving the entity’s objectives. Under the current policy, DHA cannot be sure it is receiving all reports on the implementation of corrective actions—such as MOS reports—as it intended, and therefore, it may be missing important information on the effectiveness of MTFs’ implementation of their corrective actions that could be used to help inform broader system-wide improvements. DHA officials told us that they expect to clarify this requirement in DHA’s update to its patient safety policy. We found that DHA has introduced several system-wide patient safety improvement initiatives informed by data on adverse medical events from the JPSR system and data on sentinel events from DHA’s tracking database, including the following: DHA’s Partnership for Improvement. In January 2015, DHA established an MHS-wide information technology system called the Partnership for Improvement. The Partnership for Improvement collects data from MTFs and assesses MTF performance on approximately 38 health care measures that were established by a committee of MHS officials and designed to improve readiness, population health, and quality of care as well as control costs. Three of these measures focus on patient safety—central line-associated bloodstream infection, unintended retained foreign object, and wrong site surgery. To track these measures, DHA officials told us that they created an associated performance dashboard, including acceptable ranges for each measure, to provide visibility into MHS, military service-, and NCR-level performance. The dashboard is available to all MHS users on the system website and allows MTF leaders and staff to review MTF-level performance data. DHA officials conduct quarterly system-wide performance assessments on these measures. DHA officials told us they use the data on this dashboard to determine what is improving and where to make changes. Officials from each of the military services, NCR, and each of the MTFs we visited told us they are aware of the Partnership for Improvement and its associated dashboard and that they review the data to assess their performance. Publications on Patient Safety. DHA produces several types of publications using adverse medical event and sentinel event data that officials told us are generally distributed to MTFs through the military services and NCR, including the following. Patient Safety Data Snapshot. This monthly publication contains an overview of adverse medical event and sentinel event data, trends across the MHS, and short descriptions of sentinel events that have been reported in the system in the same month. Additionally, this publication may include reports of medical product deficiencies, or materials that have been determined to be or are suspected of being harmful, defective, deteriorated, or unsatisfactory because of malfunction or design. Annual patient safety report. This yearly publication provides a retrospective status update on MHS patient safety initiatives and in- depth adverse event and sentinel event trend analysis, system-wide and by military service. Content includes trends in adverse events reported in JPSR, sentinel events, and RCAs, including information on weaker, intermediate, and stronger corrective actions. This report also describes progress on Partnership for Improvement measures system-wide and by military service and NCR, the culture of patient safety, and collaboration across DHA, the military services, and NCR. The report also details online resources for MHS officials. Focused review. According to officials, focused review publications are produced three times a year, and the topics are related to adverse medical events and associated follow-up data provided to DHA as determined by data and performance trends. For example, in September 2016, the publication included an explanation of the basic components of an RCA, including their associated corrective actions and factors DHA considers when determining if they are stronger, intermediate, or weaker. This publication included 2013 through 2016 system-wide data, such as the number of RCAs submitted, the most common root cause categories, and the proportion of RCAs with stronger, weaker, or no corrective actions. The publication also included an example of a decrease in occurrences of wrong-site surgery accompanied by an improvement in RCAs with stronger corrective actions, common pitfalls in conducting high-quality RCAs, and recommendations to conduct better RCAs. Patient safety alerts. DHA uses these publications to inform the MHS about immediate hazards, and officials told us they produce these publications on an as-needed basis. For example, a July 2016 report was focused on unintended retained foreign objects during surgery, specifically, pieces of gloves. The publication described recent occurrences of retained pieces of gloves, glove selection best practices, tips for preventing unintended retention, and corrective actions when retention occurs. Global Trigger Tool. The Global Trigger Tool is a new tool for collecting adverse medical event data by selecting a sample of medical charts that was implemented MHS-wide as of September 2017. Unlike traditional methods to detect adverse events, the Global Trigger Tool does not focus on voluntary reporting and tracking of adverse medical events. Instead, a team of three reviewers managed by DHA uses the tool methodology to retrospectively examine a random selection of patient medical charts at a facility over time to identify “triggers” (or clues) that may lead to an adverse medical event. The 53 triggers include events such as a patient fall or readmission to the emergency department within 48 hours of treatment. If a trigger is discovered, the medical chart is further reviewed to determine if an adverse event occurred. After the Global Trigger Tool review is complete, the contractor is able to provide facility leaders with rates of harmful adverse events per 1,000 patient days and per 100 admissions. Results from the tool are intended to aid MTFs in understanding the true frequency of harm events and in identifying systemic issues that contribute to patient safety events. All inpatient MTFs across the MHS will use the tool, and implementation began in 2017. The Global Trigger Tool has just begun to provide data to the MTFs, and DHA officials told us that 6 to 12 months of data is recommended before the tool can be used to make improvements. Sentinel Event and Root Cause Analysis (SERCA) tool. In October 2017, DHA released a dashboard called the SERCA tool, which DHA officials told us will allow all MTF patient safety leaders to share lessons learned in the course of sentinel event follow-up in real time. The SERCA tool displays sentinel event and RCA data from DHA’s internal tracking record reported by the military services and NCR. It is intended to provide quick, online access to sentinel event trends MHS-wide and at the military service, NCR, and MTF levels. The SERCA tool is also intended to facilitate sharing of lessons learned and best practices based on sentinel events and RCAs in a single platform. DHA officials told us that individuals with access to the system will be able to see a breakdown of corrective actions submitted by other MTFs for a particular type of sentinel event and whether these corrective actions were rated as stronger, intermediate, or weaker by DHA. DHA officials told us that for now, they will allow the military services and NCR to determine who has access to the system. Officials from two military services and NCR told us that they have access to this tool and are responsible for granting access to their MTFs. One MTF we visited told us they have access to this tool. However, it is too early to evaluate how the SERCA tool will be used to make improvements. Each year, thousands of adverse medical events are reported at MTFs. Tracking and conducting follow-up on these events is crucial for officials to learn from and prevent these events in the future. As DHA assumes administrative responsibility for all MTFs, its role in ensuring that sentinel events—the most serious type of adverse medical events—are reported and tracked and that required follow-up is conducted will become increasingly critical. However, the current fragmented and inconsistent tracking process across the military services and NCR has impeded the efficiency of DHA’s efforts to ensure DHA has complete information about sentinel events and RCA reports. Furthermore, DHA cannot ensure that it is receiving all reports on the implementation of corrective actions, such as MOS reports, and does not know how many reports it is missing for a number of reasons, including those related to policy, tracking, and reconciliation efforts. Collectively, all of these information gaps impair DHA’s ability to fully understand the types of sentinel events that are occurring in its MTFs, the corrective actions that have been implemented, and whether these actions have been effective. This information is essential to prevent adverse medical events from occurring in the future and to ensure that the care provided by MTFs is safe and effective. We are making the following two recommendations to the Assistant Secretary of Defense (Health Affairs): Ensure DHA improves as appropriate the systems and processes used by the military services, NCR, and DHA to track sentinel events and RCA reports and require the military services and NCR to communicate with DHA the reasons RCA reports are not completed for reported sentinel events. (Recommendation 1) Ensure DHA clarifies its requirement that reports on the implementation of corrective actions, such as MOS reports, should be completed and submitted to DHA, and to work with the military services and NCR to develop a standard system to help DHA consistently track and reconcile information about individual reports. (Recommendation 2) DOD provided written comments on a draft of this report, including technical comments, which we incorporated as appropriate. In its written comments, which are reprinted in appendix II, DOD concurred with both of our recommendations. In response to our first recommendation, DOD acknowledged that its current tracking efforts for sentinel events and RCAs are fragmented, inefficient, and unreliable. DOD stated that in the future, it envisions a single system to track and monitor sentinel events, RCAs, and corrective action implementation plan reports. A single system would eliminate the fragmentation associated with tracking these reports and the need for a cumbersome reconciliation process, potentially improving the completeness and reliability of DHA’s patient safety data as well as its ability to identify and implement system-wide improvements. In response to our second recommendation, DOD stated that it will clarify the difference between an MOS report, which may be required by the Joint Commission, and a corrective action implementation plan report, which will always be required by DOD for reported sentinel events. DOD explained that when an MOS report is required by the Joint Commission, this report will satisfy DOD’s requirement. However, when the Joint Commission does not require an MOS report for a sentinel event, DOD will require a corrective action implementation plan report. DOD stated that it expects the revised policy to be signed in late summer 2018 and in effect by October 1, 2018—the date that DHA is to assume responsibility for the administration of all MTFs. We are sending copies of this report to the Secretary of Defense and appropriate congressional committees. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or at draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix III. In a March 2015, the Assistant Secretary of Defense for Health Affairs issued a memorandum about improving the sentinel event and root cause analysis (RCA) reporting processes. This memorandum also revised DOD’s definition of sentinel events, which previously stated that a sentinel event is an unexpected occurrence involving death or serious physical or psychological injury or risk. The revised sentinel event definition is a patient safety event (not primarily related to the natural course of the patient’s illness or underlying condition) that reaches a patient and results in death, permanent harm, or severe temporary harm. This revised definition also includes additional types of events outlined by the Joint Commission and the National Quality Forum. (See table 4.) DOD described the following sentinel events that are outlined by the Joint Commission: Suicide of any patient receiving care, treatment, and services in a staffed around-the clock care setting or within 72 hours of discharge, including from the hospital’s emergency department. Unanticipated death of a full-term infant or discharge of an infant to the wrong family. Abduction of any patient receiving care, treatment, and services. Any elopement (unauthorized departure) of a patient from a staffed around-the-clock care setting (including the emergency department), leading to death, permanent harm, or severe temporary harm to the patient. Destruction of red blood cells transfusion reaction involving administration of blood or blood products that have major blood group incompatibilities. Rape, assault (leading to death, permanent harm, or severe temporary harm), or homicide of any patient receiving care, treatment, and services while on site at the hospital. Invasive procedure, including surgery, on the wrong patient, at the wrong site, or that is the wrong (unintended) procedure. Unintended retention of a foreign object in a patient after an invasive procedure. Severe neonatal excess of bilirubin (bilirubin >30 milligrams/deciliter). Prolonged fluoroscopy with cumulative dose >1,500 rads to a single field or any delivery of radiotherapy to the wrong body region or >25 percent above the planned radiotherapy dose. Fire, flame, or unanticipated smoke, heat, or flashes occurring during an episode of patient care. Any maternal death or severe maternal or morbidity occurring during or after birth (24 hours). In addition to those named above, key contributors to this report were: Bonnie Anderson, Assistant Director; Danielle Bernstein, Analyst-in- charge; Jacquelyn Hamilton; Elizabeth T. Morrison; Vikki Porter; and Helen Sauer.", "summary": "Adverse medical events are unintended incidents that may harm a patient. Serious adverse medical events, called sentinel events, have specific follow-up requirements. The National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017) requires DHA to assume the military services' administrative responsibilities, such as adverse medical event reporting, for all MTFs beginning October 1, 2018. The NDAA 2017 included a provision for GAO to examine the reporting and resolving of adverse medical events in the military health system. Among other objectives, this report reviews (1) the extent to which sentinel events and RCA reports are tracked and DHA ensures it has received complete information, and (2) the extent to which DHA ensures it has received MOS reports. GAO examined relevant policies; analyzed the most current available data on sentinel events from 2013 through 2016; and interviewed officials with DHA, the military services, and four MTFs selected for variety in military service, size, and geographic location. GAO found that the process for tracking the most serious adverse medical events, called sentinel events, and their root cause analysis (RCA) reports are fragmented, impeding the Defense Health Agency's (DHA) ability to ensure that it has received complete information. Unlike other adverse medical events, sentinel events—which may result in severe harm or death—have additional reporting requirements that must be met within specified time frames. For example, military treatment facility (MTF) officials must develop RCA reports, which identify causal factors and corrective actions for sentinel events. However, because the database that DHA uses to collect information on adverse medical events does not currently have the capability to track this information, the military services (Army, Navy, and Air Force) and DHA each maintain their own tracking records for sentinel events and RCA reports. Due to these fragmented tracking efforts, DHA reconciles its information on sentinel events and RCA reports through monthly emails to the military services—a time-consuming, inefficient process. DHA officials emphasized that this process relies on the military services' cooperation because DHA does not currently have the authority to compel their responses. Moreover, despite DHA's reconciliation efforts, GAO identified discrepancies and missing information in DHA's tracking record. As a result, DHA lacks critical information about why a sentinel event may have occurred and what actions, if any, MTFs should take to prevent similar incidents in the future. Recently, DHA replaced its previous system of emails with a new tracker tool that can be accessed on the military health system website. However, the new tracker does not allow the military services to make edits, and as a result, any corrections or additional information must be submitted to DHA via email, which may perpetuate previous inefficiencies. GAO found that DHA cannot ensure that it is receiving all reports on the implementation of corrective actions identified in RCA reports as required by a March 2015 memo. DHA officials stated that MTFs could meet this requirement by submitting copies of their measures of success (MOS) reports, which may be required by the Joint Commission, a hospital accrediting organization. As of September 2017, DHA had received 27 MOS reports for the 319 sentinel events that were reported in 2016. However, DHA does not know how many reports it is missing because MOS reports are not required for every sentinel event, and DHA did not began reconciling its information for these reports until January 2018, when it implemented its new tracker tool. Furthermore, GAO found that the new tracker tool documents the aggregate number of MOS reports received and does not indicate whether individual sentinel events have an MOS report, impeding DHA's ability to identify which reports are missing. This issue is compounded by the fact that the military services either track MOS reports in different ways or not at all, and military service officials said that DHA's requirement for MOS report submission is not clear. DHA officials stated that they expect to clarify this requirement in their update to the patient safety policy. Because it is unable to ensure it has received all reports on the implementation of corrective actions, DHA could be missing important information that could be used to help inform broader, system-wide patient safety improvement efforts. GAO recommends that the Assistant Secretary of Defense (Health Affairs) ensure DHA (1) improve tracking of sentinel events and RCA reports, and (2) clarify its requirements for submitting reports on the implementation of corrective actions and consistently track and reconcile individual reports. DOD agreed with these recommendations.", "document_type": "gao"}
{"report": "IRS’s budget declined by about $658 million (5.5 percent) between fiscal years 2013 and 2018 (see fig. 1). Furthermore, full-time equivalents funded with annual appropriations declined by 10,876 (12.7 percent) between fiscal years 2013 and 2018. The President’s fiscal year 2019 budget request was $11.135 billion. This amount is less than the fiscal year 2000 level for IRS, after adjusting for inflation. IRS requested an additional $397 million to cover implementation expenses for the Tax Cuts and Jobs Act over the next 2 years and received $320 million for implementation pending submission of a spend plan, which IRS provided in June 2018. IRS officials said the majority of the money would be directed toward technological updates. IRS uses multiple channels to provide customer service to taxpayers, as follows: Telephone service. Taxpayers can contact IRS assistors via telephone to obtain information about their accounts throughout the year or to ask basic tax law questions during the filing season. Taxpayers can also listen to recorded tax information or use automated services to obtain information on the status of refund processing as well as account information such as balances due. During fiscal years 2013 through 2017, IRS received an average of about 107 million calls from taxpayers each year, according to IRS data. Correspondence. Taxpayers may also use paper correspondence to communicate with IRS, which includes responding to IRS requests for information or data, providing additional information, or disputing a notice. IRS assistors respond to taxpayer inquiries on a variety of tax law and procedural questions and handle complex account adjustments, such as amended returns and duplicate filings. IRS tries to respond to paper correspondence within 45 days of receipt; otherwise, such correspondence is considered overage. In fiscal year 2017, about 35 percent of the nearly 17.5 million pieces of correspondence IRS received was overage, down from approximately 47 percent of 20.8 million pieces of correspondence in fiscal year 2013. Minimizing overage correspondence is important because delayed responses may prompt taxpayers to write again, call, or visit IRS Taxpayer Assistance Centers (TAC); each of which lead to additional costs. Additionally, IRS is required to pay interest on refunds owed to taxpayers if it did not process amended returns within 45 days. Online services. IRS’s website is a low-cost method for providing taxpayers with basic interactive tools to check their refund status or balance due, make payments, and apply for plans to pay taxes due in scheduled payments (installment agreements). Taxpayers can use the website to print forms, publications, and instructions and can use IRS’s interactive tools to get answers to tax law questions without calling or writing to IRS. IRS data show that total visits to IRS’s website in fiscal year 2017 were about 500 million. In-person services. Face-to-face assistance remains an important part of IRS’s service efforts, particularly for low-income taxpayers. Taxpayers can receive face-to-face assistance at one of about 370 IRS TACs or at thousands of sites staffed by volunteer partners during the filing season. At TACs, IRS representatives provide services including answering basic tax law questions, reviewing and adjusting taxpayer accounts, taking payments, authenticating ITIN applicants, and assisting IDT victims. Based on IRS data, nearly 3.3 million taxpayers visited an IRS TAC in fiscal year 2017. At sites staffed by volunteers, taxpayers can receive free return preparation assistance as well as financial literacy information. In fiscal year 2017, nearly 3.6 million taxpayers had their returns prepared at volunteer sites, according to IRS data. Systemic verification is one element of IRS’s Return Review Program, its primary system to detect fraud and noncompliance. The Return Review Program is a platform that runs individual tax returns through a set of rules and models to detect potential taxpayer fraud and other noncompliance. During systemic verification, IRS checks information that taxpayers report on their returns against W-2 data in order to verify wage and withholding information and identify discrepancies. We previously reported that the wage information that employers report on the W-2 had not been available to IRS until after it issued most refunds. In an effort to address issues such as refund fraud and improper EITC payments, Congress enacted the Protecting Americans from Tax Hikes Act of 2015, which included provisions that took effect in 2017. The act required employers to submit W-2s to the Social Security Administration (SSA) by January 31, which is about 1 to 2 months earlier than in prior years. SSA then provides W-2 data to IRS for verifying employee wage and withholding data on tax returns. The act also required IRS to hold refunds for all taxpayers claiming the EITC or ACTC until February 15. Now that IRS has earlier access to W-2 information, IRS is using it to conduct additional verification checks before issuing billions of dollars in potentially fraudulent refunds. IRS issues individual taxpayer identification numbers (ITIN) to certain non-U.S. citizens who have federal tax reporting or filing requirements and do not qualify for SSNs. The Protecting Americans from Tax Hikes Act required taxpayers that filed a U.S. federal tax return containing an ITIN to renew the number if the ITIN was not used on at least one tax return in the past 3 years or it was issued prior to 2013 and contained certain middle digits. IRS reported that it deactivated approximately 12.4 million ITINs in 2017 and notified affected taxpayers via mail and public notices. If affected taxpayers did not renew their ITINs either before filing or in conjunction with filing, their refunds may have been delayed. The Tax Cuts and Jobs Act made a number of significant changes to the tax law affecting both individuals and corporations. For example, for individual taxpayers, for tax years 2018 through 2025, tax rates were lowered for nearly all income levels, some deductions from taxable income were changed (personal exemptions were eliminated while the standard deduction was increased), and certain credits, such as the child tax credit, were expanded. For individuals with business income reported on their tax return (pass-through entities), effective tax rates can be reduced with a 20 percent deduction of qualified business income. For corporate filers, the tax rate was changed from a range between 15 and 35 percent to a flat rate of 21 percent, and the corporate alternative minimum tax was eliminated. IRS must take action to make the necessary changes to process tax returns in 2019 and to help taxpayers understand the new law and its effect on their tax obligations. For example, IRS has planned and begun conducting outreach to employees, employers, and industry associations encouraging employees to reassess their withholdings in light of changes the law made to deductions and credits that may affect tax liability and withholding for a large number of taxpayers. IRS’s telephone, online, and in-person services generally improved during the 2018 filing season compared to prior years. However, timeliness in responding to written correspondence declined from last year. Our prior recommendations could help IRS better manage its correspondence performance and develop a comprehensive customer service strategy to improve its efforts. During the 2018 filing season, IRS slightly improved its telephone level of service—the percentage of callers seeking and receiving live assistance—and reduced wait times (see fig. 2). From January 1 through April 21, 2018, IRS estimated that it answered 80 percent of calls seeking live assistance, which is a slight increase from about 79 percent for the same period last year, and reduced the average caller’s wait time to speak to an assistor from 6.5 to 5.1 minutes. This marks the third year of measured improvements since IRS reached a low of 37.5 percent level of service in 2015 with a 23.1-minute average wait time. IRS officials attributed the improvements to decreased telephone call volume and sufficient staff levels to meet the demand for service. IRS expected its level of service for the entire fiscal year 2018 to be 75 percent, which is similar to fiscal year 2017 when IRS achieved a 77.1 percent level of service. Total call volume to IRS taxpayer service lines has declined by about 43 percent since 2013 (see fig. 3). IRS officials attributed the decline in call volume to several factors, including targeted media campaigns to ensure taxpayers had the information they needed to prepare and file their tax returns prior to the filing season, fewer attempts by callers to re-dial multiple times after receiving busy signals or disconnects or abandoning the call after long wait times, and moving calls inquiring about balances due and installment payments to the compliance division, which, according to IRS data, accounted for approximately 2 million calls in the 2018 filing season. The percentage of calls that IRS assistors have answered since 2013 has generally increased, while calls answered by automated services has generally decreased. IRS officials attributed the decrease in automated calls answered to discontinuation of the e-file personal identification number (PIN) automated retrieval service in June 2016, along with a decrease in callers using the Where’s My Refund automated service. In December 2014, we recommended that IRS systematically and periodically compare its telephone service to the best in business to identify gaps between actual and desired telephone performance. In response, IRS benchmarked its telephone service, measures, and goals to comparable agencies and companies in an internal 2016 study. IRS projected that achieving an 83 percent level of service would optimize its balance between wait-time, disconnects, and assistor availability. However, officials told us in June 2018 that they are adjusting this projection based on new services and procedures introduced since the 2016 study. The study also recommended exploring using new technology, including email, online chat, and telephone call-back features as well as establishing regularly scheduled follow-up benchmarking. In March 2018, IRS officials told us they are implementing some of the recommendations from the study, including requesting funding to implement a customer call- back feature. IRS is also developing new methods of monitoring and reporting service performance across telephone, online, and in-person channels to identify changes in taxpayer behavior and better adapt to their needs. IRS telephone performance data for 2018 were unavailable from November 2017 until March 2018. IRS officials explained that IRS was upgrading the Enterprise Telephone Data System—IRS’s official source for all data related to its toll-free telephone performance measures—to a more current version. Before IRS completed the upgrade, the system crashed. Due to the system outage, IRS was unable to publish its reports on telephone performance. IRS officials told us that while the system remained offline, they could still monitor daily call demand and staff resources, which they used to develop an estimated level of service to monitor telephone performance. Once the system was operational, IRS recovered and validated the data, confirming that the data they used while the system was offline were sufficiently accurate. In addition, IRS replaced the approximately 15-year-old telephone equipment it uses for answering taxpayer calls because of ongoing failures that contributed to poor service. For example, at times the assistor could hear the customer speaking, but the customer could not hear the assistor. The new equipment will enable future service improvements such as a call-back feature so customers will not have to wait on the line for a response. IRS completed the upgrades as planned in June 2018. Because the same staff answer telephone calls and respond to correspondence, IRS has continued to struggle to balance competing demands for maintaining quality telephone level of service with timely responses to written correspondence. Between October 1, 2017 and April 21, 2018, IRS received over 9 million pieces of correspondence. IRS staff focus on answering the telephones during the filing season, so they have less time to respond to correspondence, resulting in inventory and processing time increases. As it had in prior years, IRS directed staff to focus on correspondence early in December 2017 and January 2018 to reduce the inventory before the filing season. However, through April 21, 2018, the overage rate of correspondence—the percentage of cases generally not processed within 45 days of receipt by IRS—was 36.8 percent compared to 26.4 percent at the same time last year. To improve the management of taxpayer services, in 2015 we recommended that the Secretary of the Treasury update the Department of the Treasury’s (Treasury) performance plan to include overage rates for handling taxpayer correspondence as a part of Treasury’s performance goals. To implement this recommendation, we suggested that Treasury include this performance measure as part of a comprehensive customer service strategy. Treasury neither agreed nor disagreed with our recommendation, and as of June 2018, it had not included correspondence overage rates as a performance goal in its performance plan. We continue to believe that this recommendation is valid. IRS established its new online account service in November 2016 and taxpayer use of this service has increased since then. The online account service was unavailable to new users between mid-October and early December 2017 because of a security breach at Equifax, the service IRS used to verify users’ identities. In September 2017, Equifax announced that criminals had exploited a vulnerability in its systems and obtained personally identifiable information on 145.5 million individuals, including names, SSNs, birth dates, addresses, and in some cases, driver’s license information. IRS suspended its online account service, eventually re- activating it when it replaced Equifax’s identity verification service with another provider. IRS’s online account allows taxpayers to view their IRS account balance (including the amount they owe for tax, penalties, and interest), take advantage of various online payment options, and access the Get Transcript application where taxpayers can obtain copies of their prior tax returns. Despite these challenges, use of IRS’s online account has increased since its launch. Between January 1, 2018 and April 30, 2018, total unique users of the online account reached over 1 million compared to 327,000 for the same period in 2017 when the service was newly launched. In addition, taxpayers increasingly used the online account to access payment options, including payment agreements. For example, taxpayers made four times as many payments using the online account to access Direct Pay, IRS’s online payment option, between January 1 and April 30, 2018 compared to the same period last year. IRS experienced a separate online service disruption prior to the 2018 filing season. Tax professionals could not access e-services between September and October 2017 because of an IRS delay in a scheduled upgrade to the system and improvement to the security of the application. This service is used by tax professionals to conduct transactions, including applying for authorization as an e-file provider. As a result of this delay, tax professionals were unable to use this key service during a critical planning period prior to the filing season, shortening the amount of time available to complete the necessary actions before filing season. Despite this delay, IRS officials told us that more than 60,000 tax professionals were able to complete their transactions in preparation for the 2018 filing season. Finally, IRS launched a redesigned website in August 2017 to make it easier to use and find information. Website use during the 2018 filing season showed the greatest year-to-year increase over the past 5 years (see fig. 4). From January 1 through April 21, 2018, visits to irs.gov increased by about 24.2 percent compared to the same period last year (from 311.4 million to 386.9 million). During that same period, total page views increased by about 50.4 percent (from 1.27 billion to 1.91 billion). In-person visits to IRS’s Taxpayer Assistance Centers (TAC) have declined since IRS began requiring appointments for in-person service in 2016. During the 2018 filing season (January 1 through April 21, 2018), IRS served 1 million taxpayers at the TAC locations compared to about 1.3 million during the same period in 2017. However, IRS officials reported that, between January 1 and April 30, 2018, over half of the approximately 1.6 million taxpayers requesting an appointment had their questions resolved on the telephone and did not need an appointment. IRS policy mandates that, under special circumstances, taxpayers who arrive at a TAC without an appointment receive service if staff members are available, even when the assistors do not have appointment openings. Officials acknowledged that not all taxpayers receive service if they walk in because there are not always assistors available. As of April 30, 2018, IRS served nearly 63,000 taxpayers during the 2018 filing season under an exception to the required appointment process. IRS officials noted that the lines at TACs have shortened in recent years, which they attribute to the appointment system and services available through the telephone. Nationwide, 5.8 percent of taxpayers waited over 30 minutes for assistance between January 1 and April 21, 2018, compared to 5.6 percent during the same period in 2017, according to IRS data. Service improved compared to the same period for 2013 to 2016 when between 27 and 33 percent of taxpayers waited over 30 minutes for assistance. To improve the appointment process, in 2018 IRS developed the Field Assistance Scheduling Tool, which helps IRS manage appointments at the TACs and monitor availability and demand. IRS expects to add to this tool by developing reporting capabilities for managing staff availability and appointments, including the capability to measure the time lapse between when a taxpayer calls to schedule an appointment and the actual appointment. According to IRS officials, by using the tool’s current capabilities, they identified the need to recruit and train nearly 100 employees from other areas of IRS to support increased demand at 27 TAC locations near the end of the filing season. IRS also provided alternative options for in-person taxpayer services. In January 2017, IRS opened four co-locations with the Social Security Administration (SSA). During the 2018 filing season, 708 taxpayers received in-person service at these co-locations as of April 21, 2018. In May 2018, IRS officials said they were working to open an additional co- location with SSA. In addition, IRS added six virtual assistants—kiosks that provide video calling to an IRS assistor—to the 31 existing terminals across the United States. We have made several recommendations for IRS to improve its customer service. In December 2012, we recommended IRS develop a strategy to improve telephone and correspondence service. While IRS has taken steps toward implementing related recommendations, including the telephone benchmarking study mentioned earlier, IRS has not completed the actions we recommended, including (1) outlining a comprehensive strategy that defines appropriate levels of correspondence service and wait time and (2) listing specific steps to manage service based on an assessment of time frames, demand, capabilities, and resources. However, IRS officials told us in June 2018 that they had begun drafting a customer service strategy that they expected to complete by September 2018. We will assess this strategy once it is issued. Additionally, in December 2011 and April 2013 we made recommendations that call for IRS to develop a long-term strategy for providing and improving web-based services to taxpayers. In June 2018, officials in the Office of Online Services stated that they do not have a specific strategy that outlines their long-term vision for increasing online services and web offerings. Rather, they rely on IRS’s fiscal year 2018–2022 Strategic Plan to provide that vision. The fiscal year 2018– 2022 Strategic Plan includes objectives related to expanding digital options for taxpayers and professionals to interact efficiently with IRS, and developing additional self-assistance and correction tools for enhanced online account capabilities. However, this plan is at a high level and does not include business cases for new online services that describe the potential benefits and costs of the projects, timelines and a prioritization of proposed projects. In July 2018, IRS officials provided additional documentation that we are reviewing to assess the steps being taken to develop a long-term strategy to improve web services for taxpayers. IRS started the filing season on January 29, 2018, approximately 1 week later than it has in recent years to ensure the security and readiness of processing systems and to assess the potential impact of recently passed tax laws on 2017 tax returns. IRS also extended the filing deadline by 1 day after a system outage occurred on tax day, April 17, 2018, that prevented IRS from processing electronically filed returns. Taxpayers were able to prepare and submit returns electronically during the day; but a flaw in the mainframe prevented data from being accepted and released for processing. IRS officials said the problem was caused by a hardware issue in a 1.5 year old mainframe subcomponent and was not related to IRS applications or any of the agency’s legacy computer systems. The system failure affected a number of electronic applications, including Direct Pay and the online account service, and delayed return processing until the end of the day. IRS officials said that the agency recovered the system without data loss and worked with software companies to coordinate their transmission of returns that were held earlier in the day. These officials said the agency was able to process all returns submitted electronically by the end of the day. Neither the system issue nor the later start had a significant effect on returns processing during the filing season. As of April 20, 2018, IRS had processed 130.48 million returns, compared to 128.85 million by the same time last year. IRS experienced several additional challenges during the 2018 filing season, including multiple pieces of legislation affecting individual tax returns that passed soon before the beginning of the filing season or after it had begun, as well as issues hiring and redistributing work responsibilities in some IRS processing facilities. Disaster relief. On September 29, 2017, Congress passed a law which provided tax relief related to retirement plan distributions and casualty losses for people affected by Hurricanes Harvey, Irma and Maria. The law allowed storm victims to deduct disaster losses on their 2017 returns or on amended 2016 returns. On February 9, 2018, Congress extended these benefits to certain taxpayers affected by wildfires in California. The President also issued major disaster declarations for many areas affected by the hurricanes and wildfires, allowing IRS to use its authority to postpone certain tax-related deadlines under the Robert T. Stafford Disaster Relief and Emergency Act. The laws also offered other forms of tax-relief—such as hardship distributions from employer-sponsored retirement plans. To address issues resulting from disaster-related legal changes, IRS issued press releases and public notices informing taxpayers of tax- relief options; postponed various filing and payment deadlines for individuals and businesses affected by disasters; ensured that sites offering in-person taxpayer assistance in Puerto Rico, Florida, and Texas were open and developed special products to support these sites in dealing with affected taxpayers; and adapted procedures to accommodate disaster-relief efforts. IRS officials also said they corresponded with taxpayers they thought were eligible for new disaster relief benefits as a result of legal changes put in place. The officials told us that as of May 26, 2018, the agency had assisted 37,000 taxpayers seeking live telephone assistance and worked or closed 6,196 amended returns and 8,847 correspondences related to Hurricanes Harvey, Irma, and Maria. Tax Cuts and Jobs Act. While many of the provisions included in the Tax Cuts and Jobs Act will not affect filing until the 2019 filing season, a few changes affected filing in 2018. For example, the threshold to claim the medical expense deduction was temporarily lowered, allowing individuals to claim deductions for medical expenses totaling more than 7.5 percent of their adjusted gross income for tax years 2016 and 2017. Also, provisions similar to those described above were implemented for certain qualified federally declared disasters that occurred in 2016. The law passed shortly before the start of the filing season and IRS had to recall, revise, and re-issue more than 100 products that had already been published. In addition, several provisions affecting business filers presented processing challenges during the 2018 filing season. For example, IRS made changes to its forms to address fiscal year filers whose earnings will be taxed at different rates for 2017 and 2018 (referred to as blended rate) and developed forms and instructions for filers whose returns involve the foreign earnings of foreign subsidiaries of U.S. companies. Officials told us they processed returns subject to the blended rate provision manually and held returns affected by the foreign earnings provision until they completed necessary programming changes for the systems to process them in accordance with the new law. As of May 18, 2018, the agency was holding 2,265 affected individual and business returns. IRS officials said they completed the programming required to process all of these returns automatically by July 2, 2018. However, depending on when IRS completes processing these returns, it may need to pay interest on some refunds. IRS officials said they do not expect many of the held returns affected by the foreign earnings provision to claim refunds. Extension of expired tax provisions. On February 9, 2018, after some taxpayers had already filed their 2017 taxes, Congress extended to 2017 a number of temporary tax provisions that expired at the end of 2016. These provisions include deductions for qualified tuition and related expenses and the ability to deduct premiums for mortgage insurance as interest. Testifying before Congress, the Acting Commissioner of IRS described the extensions as a major processing challenge and said this is the only time the agency has been required to implement retroactive tax extensions after the beginning of a filing season. To address the extensions, IRS officials told us they reprogrammed systems to accept taxpayer claims related to these retroactively extended provisions; recalled, revised, and re-released more than 50 already published products; and held 5,624 individual returns while necessary programming changes were made to ensure proper processing. IRS faced challenges in two of its five paper processing centers related to hiring and redistributing work responsibilities. The center in Ogden, UT experienced issues related to changes in work assigned to the site while the center in Austin, TX experienced ongoing hiring difficulties. Despite these challenges, IRS officials reported that the agency was able to meet all of its target dates for processing returns and issuing refunds. Ogden. To realize cost savings from the decrease in paper filing as a result of increased electronic filing, IRS began to consolidate its paper processing centers in 2018. As part of this plan, IRS moved some individual paper return processing to its facility in Ogden. This facility had not processed individual returns since 2000 and IRS officials told us that the lack of recent experience with this kind of work caused processing to fall behind targets. For example, as of March 2, 2018, Ogden had missed IRS targets for return processing time by between 14 and 15 days, depending on the form type. Officials told us the agency had reintroduced Ogden to the work gradually, by assigning fewer returns to the site in the first year; nevertheless, the site still experienced delays. For example, as of March 2, Ogden had processed 10.6 percent of the 202,000 returns expected, while the processing centers in Fresno, CA and Kansas City, MO had processed 98.5 percent (723,000 out of 734,000) and 98.2 percent (545,000 out of 555,000) of their expected returns respectively on the same date. IRS minimized the effects of these delays on overall processing by transferring returns initially sent to Ogden to the Kansas City location, which enabled IRS to meet its overall processing goals. Later in the filing season, processing at Ogden had improved, but still had not reached IRS’s goal for the site. For example, as of May 11, 2018, Ogden was at approximately 73 percent of schedule, having processed 716,000 out of 977,000 scheduled returns. IRS officials said that responding to changes in work flows is a normal aspect of processing across all locations, but noted that the agency continued to monitor the situation in Ogden and learn from the experience to guide future consolidation efforts. Austin. This processing facility, slated for closure in 2024, also experienced processing delays. As we reported in 2017, and as IRS officials told us again this year, IRS was unable to hire enough personnel to process paper tax returns at this site, which may be due to low unemployment rates in the area. IRS officials told us Austin planned to hire 567 employees by early March to transfer data from paper returns to an electronic format, but had only been able to hire 142 people, or 25 percent of that target. IRS officials told us the position was perceived as undesirable in a low-unemployment environment. The officials said they had addressed the issue by (1) moving resources as needed within the service center and (2) transferring returns to the Kansas City facility for processing. IRS identified more potential fraud and noncompliance through February 15, 2018, than it had by the same time last year. In its second year of receiving earlier W-2 data from SSA to match against returns, IRS identified a larger number of potentially fraudulent or noncompliant returns claiming the EITC or ACTC prior to issuing refunds—340,000 compared to 162,000 at the same point in 2017. IRS also reduced the percentage of returns for which it was unable to verify wage information to 13 percent, compared to 58 percent in 2017. IRS officials told us this was, in part, a result of receiving 224 million W-2s by February 15 compared to 214 million by the same time in 2017. Having more W-2 data available earlier also allowed IRS to better target its selection of returns for review, helping to reduce taxpayer burden and IRS workload. For example, IRS had excluded 10,000 returns from review as of February 15, 2018, compared to 3,000 during the same time in 2017. In addition, IRS improved its ability to identify potentially false and fraudulent returns for returns with EITC or ACTC—including those for which it did not have W-2 data at the time of identification—by developing two new filters that automated some aspects of the manual review process used in 2017. IRS developed the new filters based on cases of confirmed fraud identified through systemic verification in 2017 and selected returns with characteristics that are more likely to be fraudulent or noncompliant. The filters select returns for review among those reporting information that does not match corresponding W-2 data and that IRS could not verify because it did not have W-2 data at the time of selection. Last year, IRS identified 12,000 cases of confirmed fraud from the 162,000 cases it selected for review. IRS officials told us that they do not have final data at this time, but that they anticipate they will confirm more cases of fraud and noncompliance in 2018 as a result of these filters. Returns with refunds not claiming EITC or ACTC benefits are also subject to systemic verification as well as additional fraud filters. However, for returns not claiming these benefits, IRS does not hold refunds when it is unable to verify wages reported by the taxpayer unless the returns are selected by other fraud filters for review. As we reported in January 2018, IRS cannot verify information reported for more than half of returns submitted early in the filing season prior to issuing refunds because it receives W-2 information throughout the filing season. In 2017 and 2018, IRS received and processed the majority of W-2s by mid- to late- February. In addition, IRS verified most wage information on returns submitted in mid-February as being accurate. IRS verified that accurate wage information was reported on 77 percent of returns not claiming the EITC or ACTC submitted between February 9 and 15, 2018, representing $10.91 billion in refunds. However, IRS does not have data available early in the filing season that would help it better identify which returns are potentially fraudulent or noncompliant. As a result, IRS issues refunds for a large percentage of returns without the EITC or ACTC that cannot be verified against W-2 data prior to February 15. For example, among 2017 returns without EITC or ACTC, IRS was unable to verify 91 percent of returns submitted before January 25, 2018— representing $4.27 billion in refunds; and 60 percent of returns submitted prior to February 15—representing $29.27 billion in refunds. IRS has the authority to hold refunds for these returns (as it does for returns that do claim the EITC or ACTC) until any date deemed necessary to make inquiries, determinations, and assessments in conjunction with those determinations. However, IRS officials told us that IRS has not held those refunds because of the volume of existing cases, challenges of processing large numbers of refunds on a single day, and other costs to the agency, such as inquiries from taxpayers about their refunds. In January 2018, we recommended that IRS study the benefits and costs of the refund hold and consider modifying it based on the study results. For example, IRS could hold refunds for taxpayers not claiming EITC or ACTC and release the refunds once it has the W-2 data available and has verified the wage information. IRS officials reiterated that the potential of verification to detect more fraud and noncompliance is limited by delays caused by filing extensions and use of paper W-2s—which are transcribed at SSA before being transmitted to IRS. For example, IRS had not received any paper W-2 data for tax year 2017 by the February 15 refund hold date. IRS is continuing to study systemic verification’s potential, and is working to identify additional fraud and noncompliance by beginning to match non-wage income reported by taxpayers against data reported on Forms 1099-MISC by companies or individuals that paid the taxpayer miscellaneous income. The Protecting Americans from Tax Hikes Act also contained a number of provisions relating to individual taxpayer identification numbers (ITIN). The provisions required IRS to deactivate (1) all ITINs issued prior to 2013 and (2) all ITINs not used at least once during the 3 most recent consecutive tax years. As of February 26, 2018, IRS said it had deactivated 14.7 million ITINs, approximately 12.4 million of those in 2017 and an additional 2.3 million in 2018. Following this initial round of deactivations, ITIN renewal requests have been significantly lower than IRS anticipated. IRS expected it would receive 1.3 million renewal applications by the end of 2018 for ITINs that expired in 2017. However, by April 21, 2018, IRS had only received 23 percent (297,825 of 1.3 million) of the expected renewals. IRS officials said they based their renewal projections on a computation assuming that all ITINs with middle digits 78 and 79—which were issued 16 or more years prior to their deactivation and were the first set of older ITINs to be deactivated—would be renewed. However, the actual renewal rate in 2017 was only 60 percent for these ITINs. IRS officials said the agency used actual renewal data to revise its renewal estimate for the remaining ITINs issued prior to 2013 and containing certain middle digits that will be deactivated. Based on these new estimates, IRS will accelerate the completion date for deactivation of older ITINs. To address the changes included in the Tax Cuts and Jobs Act, in January 2018 IRS established the Tax Reform Implementation Office (TRIO), a central office that coordinates implementation efforts. IRS officials said that the 2017 tax law will affect all IRS divisions and responsibilities. Each of the 119 provisions in the Tax Cuts and Jobs Act that fall under IRS responsibility has been assigned to one of IRS’s four business divisions—Wage and Investment, Large Business and International, Small Business/Self-Employed, and Tax-Exempt and Government Entities—each of which will be responsible for planning and executing the assigned provisions. In addition to TRIO, IRS also established the Tax Reform Executive Steering Committee and the Tax Reform Implementation Council (TRIC), described below: Tax Reform Implementation Office (TRIO). TRIO principally consists of executive-level IRS employees and coordinates efforts by each business operating division to revise and develop forms, instructions, tools, and guidance and to execute programming changes, communications, and training initiatives required to implement the individual provisions of the Tax Cuts and Jobs Act. The office is intended to monitor the implementation action plans of each business division and ensure risks associated with implementation efforts are captured and addressed. TRIO has developed an integrated project plan to track critical implementation activities identified by the business divisions and discussed by TRIC (described below). Personnel can access the project plan and update it with accomplishments and milestones. Tax Reform Executive Steering Committee. TRIO reports to the Executive Steering Committee, which includes IRS’s Acting Commissioner, Deputy Commissioners, Treasury officials, and heads of offices. The steering committee serves as a forum to provide leadership guidance, direction, and advice on implementation activities for the Tax Cuts and Jobs Act. Tax Reform Implementation Council (TRIC). TRIC consists of representatives from business divisions and functional units—such as Information Technology (IT) and Communication and Liaison—that are performing implementation activities. The group first met on February 8, 2018, and meets weekly to discuss activities, concerns, and needs that might involve other IRS divisions. The meetings are also a forum to discuss accomplishments and deadlines. Figure 5 illustrates TRIO’s role in coordinating the various changes IRS expects to make. To implement the Tax Cuts and Jobs Act, IRS’s Human Capital Office (HCO) estimated that the agency will need to hire and train staff to fill approximately 1,100 positions requiring a variety of competencies and provide additional training on tax law changes for current employees. HCO will be responsible for recruiting and hiring these new employees and ensuring they have the needed skills and HCO will play a key role in training them. It is HCO’s mission to provide human capital strategies and tools for recruiting, hiring, developing, retaining, and transitioning a highly skilled and high-performing workforce to support IRS’s mission. TRIO and other senior IRS officials acknowledged that HCO’s role in implementing the new tax law is as valuable as other supporting stakeholders, such as IT. Nevertheless, HCO did not initially have representation in TRIC, as did IT and other essential operational support units. TRIC meetings provide a forum not only for the business operating divisions directly implementing the provisions of the Tax Cuts and Jobs Act to discuss and coordinate needs and activities, but for supporting stakeholders to understand the status of implementation efforts as well as future expectations and needs. HCO officials said that when the formation of TRIO was first announced, they contacted TRIO leadership to request that HCO have representation. However, they were told that the purpose of the group was to discuss the tax law itself, not hiring or other human resources matters affected by the law. In our discussions with IRS officials, they told us that HCO has an informal liaison to TRIO, participates in the executive steering committee, and has existing human resource partners in the business operating divisions, and that additional HCO representation in tax law implementation—including the weekly TRIC calls—was not necessary. However, a senior HCO official told us that it would be beneficial for HCO to participate in the weekly TRIC meetings to stay abreast of current developments and future plans and share relevant timelines and processes related to hiring and training. Participation will help HCO to manage its operations more strategically, for example, by planning for training required ahead of the 2019 filing season. Based on our discussions with IRS officials about HCO’s role in tax law implementation, in June 2018, HCO began participating in the weekly TRIC calls. HCO’s participation will likely help IRS make more informed decisions concerning implementation of major tax law changes. It will also position HCO to proactively understand human capital needs and timelines across the agency and to hire and train personnel at the appropriate times. At the same time, IRS will also be better positioned to improve its management and strategy for executing implementation plans while also fulfilling the agency’s mission. IRS officials identified a number of challenges associated with implementing the Tax Cuts and Jobs Act: Scope of changes. To implement 119 provisions of the Tax Cuts and Jobs Act, IRS will need to (1) interpret the law; (2) create or revise nearly 500 tax forms, publications, and instructions; (3) publish guidance and additional materials; (4) reprogram 140 interrelated return processing systems; (5) hire additional staff and train its workforce to help taxpayers understand the law and how it applies to them; and (6) conduct extensive taxpayer outreach. IRS officials stated that these provisions will require extensive changes relevant to both individual and business filers and affect all areas of IRS. Complex and extensive nature of changes. According to IRS officials, many of the revisions are complex and interrelated and require central coordination and oversight. While IRS has to make changes to its products every year, many of the changes needed to implement the Tax Cuts and Jobs Act are more extensive than usual and affect some of the forms with which taxpayers are most familiar. For example, all Form 1040 products—the forms and instructions for individual tax return filing—will be changed in accordance with the law. One-year time frame. IRS officials told us that implementing the Tax Cuts and Jobs Act in 1 year will be challenging. Officials said the agency is using implementation of the Patient Protection and Affordable Care Act as a general guide for its current efforts, but noted this earlier legislation was less expansive. IRS was responsible for 47 provisions of the Patient Protection and Affordable Care Act and had multiple years to implement some of its provisions, including those officials identified at the time as the most challenging. Implementing individual provisions of the Tax Cuts and Jobs Act involves multiple, dependent actions. For example, IRS cannot determine the changes it will need to make to various tax forms until it has interpreted the law and cannot reprogram its return processing systems until those forms are changed. To complete necessary changes in time for the 2019 filing season, IRS has used overtime and compensatory hours. For example, according to IRS officials, as of May 26, 2018, IRS had used 1,749 overtime hours to make changes to forms and publications, between two and three times as many overtime hours as it did in the entirety of fiscal years 2016 or 2017. In addition, the agency delegated authority to approve requests for work to a larger group of managerial staff and temporarily reassigned existing staff to assist with time-sensitive changes to tax forms and publications. In March 2018, IRS also made a request for direct hiring authority, which would allow the agency to hire IT staff more quickly. While this authority could be helpful to fill specific positions more timely, IRS officials explained that these staff will require training on tax processing procedures. According to a senior IRS official, as of June 2018 the Office of Personnel Management had not yet authorized this request. IRS has taken a number of steps to implement time-sensitive provisions of the new law. IRS officials noted that while some provisions of the Tax Cuts and Jobs Act are retroactive or relevant to the 2018 filing season, most will not take effect until the 2019 filing season. As part of the planning process, IRS determined when various provisions of the law would become relevant and acted to release information on the provisions with the earliest relevance first. For example, IRS released new withholding tables and associated guidance; revised the form and online withholding calculator that taxpayers use to provide information to employers about the amount of tax that employers should withhold from their wages; and provided guidance on the transition tax on untaxed foreign earnings of foreign subsidiaries of U.S. companies, a new section of the Tax Cuts and Jobs Act that changes how business income is calculated and tax is paid for the 2018 filing season. IRS is continuing to revise its forms and issue guidance in advance of the 2019 filing season. We provided a draft of this report to the Internal Revenue Service for review and comment. IRS provided written comments, which are reproduced in appendix I. In its written comments, IRS generally concurred with our findings and noted a concern regarding interpretation of correspondence overage data. IRS said that the overage rate we report is based upon the open inventory at the end of the fiscal year. We clarified the basis of the overage rate in our report. However, we believe the total that IRS cites in its letter could also be misinterpreted in that it does not represent the total overage inventory; rather it is a total for the last week of the fiscal year. IRS tracks the overage correspondence rate on a weekly basis, which can vary somewhat during the year given fluctuations in correspondence receipts and staff availability to respond, but is relatively consistent throughout the year. Therefore, the overage rate at the end of the fiscal year provides a basis for assessing IRS’s annual performance in responding to written correspondence. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Treasury, the Acting Commissioner of Internal Revenue, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or lucasjudyj@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix II. In addition to the contact named above, Tom Gilbert (Assistant Director); Erin Saunders Rath (Analyst-in-Charge); Shea Bader; Jacqueline Chapin; Jehan Chase; Kirsten B. Lauber; Regina Morrison; Robert Robinson; and Sarah Wilson made significant contributions to this report.", "summary": "During the tax filing season, generally from January to mid-April, IRS processes over 100 million individual tax returns and provides telephone, correspondence, online, and in-person service to tens of millions of taxpayers. In 2018, IRS had to begin taking steps to implement major tax law changes passed in what is commonly referred to as the Tax Cuts and Jobs Act that affect both individuals and businesses. GAO was asked to review IRS's performance during the 2018 filing season and its efforts to implement the Tax Cuts and Jobs Act. GAO assessed IRS's (1) performance providing service to taxpayers and processing individual tax returns and (2) early efforts to implement the Tax Cuts and Jobs Act. GAO analyzed IRS documents and data and interviewed IRS officials. The Internal Revenue Service (IRS) generally improved its customer service during the 2018 filing season compared to prior years and managed multiple return processing challenges. For the third year in a row, IRS improved its telephone service by answering 80 percent of calls seeking live assistance and reducing wait times to about 5 minutes, as of the end of the 2018 filing season. This compares to 37.5 percent of calls answered with an average wait time of about 23 minutes during the 2015 filing season. Taxpayer use of online services also increased, including irs.gov and its online account tool for taxpayers to view their balances due. However, answering taxpayer correspondence remains a challenge—IRS was late responding to about 37 percent of correspondence as of the end of the 2018 filing season compared to about 26 percent at the same time in 2017. In 2015, GAO recommended that the Department of the Treasury (Treasury) include timeliness in handling taxpayer correspondence as part of its performance goals, but as of June 2018 Treasury had not done so. Overall, despite multiple challenges including mid-filing season changes to tax law and a computer system failure, IRS met its processing targets for individual tax returns. In 2018, IRS began taking steps to implement significant tax law changes from Public Law 115-97—commonly referred to by the President and many administrative documents as the Tax Cuts and Jobs Act. To implement the changes, IRS established a centralized office to coordinate implementation across IRS offices and divisions. IRS officials cited the broad scope and complexity of the changes—which will require extensive changes to tax forms, publications, and computer systems—along with the 1 year time frame as key implementation challenges. Although IRS has taken steps to address these challenges, such as developing a project planning tool, GAO found that the new coordination office did not initially fully include the Human Capital Office (HCO), the division responsible for managing the agency's workforce. Based on GAO's discussions with IRS officials, representatives from HCO now attend weekly coordination meetings discussing and planning the tax law changes. Involving HCO in these discussions will better position IRS to hire new employees and train them and the existing workforce. It will also help HCO better understand training requirements and staffing needs ahead of the 2019 filing season. Because HCO is now attending the weekly meetings, GAO is not making a related recommendation. In addition, GAO believes that its 2015 recommendation to Treasury to include timeliness in handling correspondence as part of its performance goals, which Treasury neither agreed or disagreed with, is still valid. IRS generally concurred with GAO's findings but noted concerns with interpreting the percentage of correspondence considered “overage” (more than 45 days old). GAO clarified its report but notes that while the open inventory of overage correspondence at the end of the fiscal year is not representative of total overage items for the year, the overage rates are relatively consistent throughout the year.", "document_type": "gao"}
{"report": "DOD first took steps to establish a CMO role in May 2007, when it designated the Deputy Secretary of Defense as the department’s CMO. Subsequently, Congress included a provision in the NDAA for Fiscal Year 2008 to codify the Deputy Secretary of Defense as the DOD CMO, establish a new position known as the Deputy Chief Management Officer (DCMO) to assist the Deputy Secretary, and name the Under Secretaries of the military departments as CMOs of their respective organizations. The military departments also established DCMO positions to assist the CMOs with overseeing their business operations. In addition, the NDAA for Fiscal Year 2009 required the secretary of each military department to establish an office of business transformation and develop business transformation plans, with measurable performance goals and objectives, to achieve an integrated management system for the business operations of each military department. Further, DOD’s guidance states that the DOD DCMO should coordinate with the military department CMOs to identify and exchange information necessary to facilitate the execution of the Deputy Secretary of Defense’s responsibilities in his role as the DOD CMO. In October 2008, DOD issued Department of Defense Directive 5105.82 to assign the authorities and responsibilities of the DCMO. Among other duties, the DCMO was responsible for recommending methodologies and measurement criteria to better synchronize, integrate, and coordinate the business operations of the department and advising the Secretary of Defense on performance goals and measures and assessing progress against those goals. For a full list of the DCMO authorities and responsibilities identified in DOD Directive 5105.82, see appendix II. In December 2016, Congress initially established the standalone CMO position to be effective on February 1, 2018 in section 901(c) of the NDAA for Fiscal Year 2017. In December 2017, Congress repealed and replaced this provision in the NDAA for Fiscal Year 2018 and later added additional responsibilities and functions in the John S. McCain NDAA for Fiscal Year 2019. Table 1 summarizes key CMO statutory authorities and responsibilities, and appendix II provides a more detailed comparison of these authorities and responsibilities. In November 2007, we reported on key strategies for implementing CMO positions. We developed these strategies based on our work, in which we (1) gathered information on the experiences and views of officials at four organizations that rely on chief management officials and (2) convened a forum to gather insights from individuals with experience and expertise in business transformation, federal and private sector management, and change management. The forum brought together former and current government executives and officials from private business and nonprofit organizations to discuss when and how a CMO or similar position might effectively provide the continuing, focused attention essential for integrating key management functions and undertaking multiyear organizational transformations. Our work identified the following six key strategies: Define the specific roles and responsibilities of the CMO position. Ensure that the CMO has a high level of authority and clearly delineated reporting relationships. Foster good executive-level working relationships for maximum effectiveness. Establish integration and transformation structures and processes in addition to the CMO position. Promote individual accountability and performance through specific job qualifications and effective performance management. Provide for continuity of leadership in the CMO position. In February 2018, DOD formally established the position of the CMO and an office in support of the CMO (OCMO). In establishing the office, the Secretary of Defense stated that all resources and personnel (military, civilian, and contractor) assigned within the existing DCMO office were to transfer to the OCMO. Generally, the department has been focused on updating organizational structures and strengthening the OCMO’s data capabilities, as described below. Despite its efforts to establish and restructure the OCMO, DOD has not fully addressed three key issues related to the CMO’s statutory authorities and responsibilities, including: (1) how the CMO will exercise the authority to direct the military departments; (2) how the CMO will exercise oversight of the DAFAs; and (3) which responsibilities, if any, will transfer from the CIO to the CMO. The Secretary of Defense has charged the CMO with leading DOD’s enterprise business operations and with unifying business management efforts across the department and other responsibilities as set forth in section 132a of title 10, United States Code. Moreover, the NDAA for Fiscal Year 2019 directed the Secretary of Defense, acting through the CMO, to reform DOD’s enterprise business operations across all organizations and elements of the department with respect to any activity relating to civilian resources management, logistics management, services contracting, or real estate management. Fulfilling these responsibilities depends, in part, on the CMO’s visibility into the business operations of all components of the department, including the military departments, as well as the ability to identify and execute DOD-wide business reforms, including those that may affect the military departments. Congress addressed the issue of the CMO’s relationship to the military departments in section 132a, which authorizes the CMO, subject to the authority, direction, and control of the Secretary of Defense and Deputy Secretary of Defense, to direct the secretaries of the military departments and the heads of all other elements of DOD on matters for which the CMO has responsibility under the statute. DOD leadership has provided some guidance regarding the CMO’s responsibilities for efforts that are department-wide and therefore involve the military departments. For example: In a May 2017 memorandum, the Deputy Secretary of Defense directed all DOD components to conduct a thorough review of business operations throughout the department and to propose initiatives that drive increased effectiveness in pursuit of greater efficiency. The memorandum identified the DCMO as the lead for this effort and tasked the DCMO with integrating all initiatives. All responsibilities and authorities assigned to the DCMO were transferred to the CMO on February 1, 2018. More recently, in May 2018, DOD issued its FY 2018-FY 2020 National Defense Business Operations Plan (Plan), which states that the CMO is personally responsible for overseeing implementation of business reforms. The Plan further establishes, and gives the CMO responsibility for carrying out, a strategic objective to improve and strengthen business operations through a move to DOD-enterprise or shared services and reduce administrative and regulatory burden. However, DOD leadership has not determined how the CMO will exercise this authority in instances where the military departments have concerns or disagree with decisions that the CMO makes. In our discussions with the Army, Navy, and Air Force’s CMO offices, officials from each military department explained that they frequently met with the CMO and were involved in discussing business operation initiatives with potential for implementation across multiple military departments. According to these officials, these discussions were collaborative and the CMO did not have to exercise his authority to direct the services. However, we found two instances in which the lack of a determination as to how the CMO is to direct the business-related activities of the military departments led to questions about the respective roles and authorities of the CMO and the military departments as they relate to business reform. In one case, officials from the military departments questioned the CMO’s authority to make binding decisions; in the other, the military departments sought to pursue reform activities without CMO involvement and oversight, even though the CMO has responsibility for leading DOD’s enterprise business reform efforts. First, officials told us that in a July 2018 meeting of the Reform Management Group (RMG) the CMO approved a decision to consolidate DOD’s contract writing systems into a single system. According to OCMO officials, the effort to move to a single contract writing system would increase data visibility, lessen or eliminate redundant contracting needs, provide for greater management insight, and increase the buying power of the department. However, officials told us the military departments, which had voiced concerns about moving to one consolidated system in a previous RMG meeting, expressed reservations. Specifically, a DOD official who participated in the RMG meetings told us the military departments cited a concern about loss of individual authorities and requirements, among other issues. Several DOD officials we spoke with described the RMG meeting as the first time the question of the CMO’s authority to make decisions for enterprise-wide business reform and to direct the military departments had been raised at an RMG meeting. According to officials who were present at the meeting, participants discussed whether the RMG is a voting body and what authority the CMO has to make unilateral decisions for the RMG. When we spoke with officials about this matter in January 2019, they said this question was still unresolved. Second, the Secretaries of the Army, Navy, and Air Force, in a December 10, 2018 memorandum to the Secretary of Defense, requested the Secretary direct the military departments to jointly review organizations, activities, processes, and procedures that might be reformed or restructured to enhance lethality and readiness or reduce cost. While the departments asked for support the Secretary deemed appropriate from the Joint Staff, the Office of the Secretary of Defense, and others, it did not request support or involvement from the CMO. Further, the memorandum stated that the military department secretaries envision a process where they would make recommendations directly to the Secretary. However, the memorandum made no mention of CMO involvement in the review, notwithstanding Congressional, Secretary of Defense, and Deputy Secretary of Defense direction that calls for the CMO to oversee DOD’s business reform efforts. Without a determination by the Secretary or Deputy Secretary of Defense about how the CMO is to direct the business-related activities of the military departments, the CMO’s ability to lead DOD’s reform of its enterprise business operations and to direct the military departments may be limited, potentially leading to fragmented business reform efforts. DOD’s 19 defense agencies and eight DOD field activities are intended to perform many of DOD’s business operations, including consolidated supply and service functions such as human resources services, on a department-wide basis. We have previously identified numerous instances of fragmentation, overlap, and duplication and have recommended actions to increase coordination or consolidation to address related inefficiencies that affect the DAFAs. For example, in September 2018, we reported that there is fragmentation and overlap within the DAFAs that provide human resources services to other defense agencies or organizations within DOD. Our September 2018 report on the DAFAs also found that DOD does not comprehensively or routinely assess the continuing need for its DAFAs. GAO-18-592. DOD was statutorily required to periodically review the services and supplies each DAFA provides to ensure there is a continuing need for each, and that the provision of services and supplies by each DAFA, rather than by the military departments, is more effective, economical, or efficient (See 10 U.S.C. § 192 (c)). Since 2012, DOD has relied on existing processes, such as its annual budget process, to fulfill this review requirement. However, DOD did not provide sufficient evidence that these processes satisfy the statute. For example, while DOD reviews the DAFAs during the budget process, it does not specifically review the provision of services by the DAFAs rather than the military departments. that provide shared business services for the department, as designated by the Secretary or Deputy Secretary of Defense. In January 2018, the Deputy Secretary reported to Congress that the Secretary of Defense formally identified the Pentagon Force Protection Agency and Washington Headquarters Services (WHS) as the DAFAs that provide shared business services, and directed that they would fall under the authority, direction, and control of the CMO. However, both of these organizations had already been identified as providing shared business services and aligned under the previous DCMO. In addition, the Deputy Secretary’s January 2018 report to Congress did not explain why these two DAFAs, but not others, were designated as providing shared business services. In the January 2018 report to Congress, the Deputy Secretary of Defense also stated that, under his direction, the DCMO and Director of CAPE were leading defense reform work that would result in recommendations on, among other things, any required organizational changes. According to DOD’s report, such changes would include the designation of, and oversight arrangements for, other DAFAs providing shared business services that require CMO oversight. The recommendations were expected in late summer 2018. However, when we asked OCMO officials for a status update in November 2018, they acknowledged that they had not yet conducted the review. In November 2018, OCMO officials told us they had recently begun a review of the DAFAs but had not designated any additional DAFAs as providing shared business services. OCMO officials explained that the DAFAs were prioritized for review, with WHS being selected to be the first reviewed. The review will assess what role WHS performs and how efficiently it is performing that role, and will compare WHS performance to commercial benchmarks, according to OCMO officials. As of January 2019, officials said they expected to complete the review of WHS on February 16, 2019. According to officials, the next DAFAs to be reviewed will be DLA, the Defense Finance and Accounting Service, and the Defense Information Systems Agency. In addition, OCMO officials said that they plan to conduct a review of business functions performed in multiple DAFAs to identify opportunities to consolidate shared services for greater efficiency. For example, because WHS performs some human resource functions, as do certain other DAFAs, the OCMO is assessing how human resources management can be improved across the department. OCMO officials indicated they expect additional DAFAs to be identified as shared business services as a result of this review. Additionally, officials said they expect that the review will be completed in January 2020, but have not determined when or how the Secretary of Defense will designate additional DAFAs as providing shared business services. They have also not determined what those decisions would mean for the OCMO’s management of its responsibility to provide direct authority, control, and direction over those DAFAs. In section 921 of the John S. McCain NDAA for Fiscal Year 2019, Congress also expanded and codified the CMO’s authority over the DAFAs by requiring the Secretary of Defense, acting through the Under Secretary of Defense, Comptroller, to direct the head of each DAFA specified by the Secretary for the purpose of section 921, to transmit its proposed budget for enterprise business operations for a fiscal year to the CMO for review, beginning in fiscal year 2020. Section 921 further provides that the CMO shall submit a report to the Secretary containing the CMO’s comments and certification of whether each proposed budget achieves a required level of efficiency and effectiveness for enterprise business operations, consistent with guidance for budget review established by the CMO. Under section 921, the Secretary of Defense has discretion to determine which DAFAs’ proposed budgets are subject to CMO review. In November 2018, OCMO officials told us that the Secretary of Defense had not yet designated any DAFAs as required to submit their budgets for review. However, they stated that the OCMO is working with the DOD Comptroller to determine how the DAFA budget review will be conducted. They also said that they have hired consultants under an existing blanket purchase agreement contract to assist with developing a methodology for this review. OCMO officials told us they believed they would be ready to conduct the required review by fiscal year 2020, as required by the statute. However, it is unclear whether this review will result in a determination of which DAFAs are required to submit their proposed budgets for review. Until the Secretary of Defense makes a determination regarding the CMO’s relationship to the DAFAs, including whether additional DAFAs should be identified as providing shared business services and which DAFAs will be required to submit their proposed budgets for CMO review, the CMO’s ability to effectively oversee and streamline the DAFAs’ business operations may be limited. As described in table 1 of this report, section 910 of the NDAA for Fiscal Year 2018 provided that, effective January 1, 2019, the CMO would assume certain responsibilities for business systems and management that were formerly performed by the CIO. Section 903 of the John S. McCain NDAA for Fiscal Year 2019 clarified this provision by amending the statute (10 U.S.C. § 142) which established and provides responsibilities for the DOD CIO. However, in July 2018, DOD officials told us no formal action had been taken to determine which, if any, responsibilities would transition or to assess the resource impact this would have on both offices because they had concerns about the statutory requirement and how it would affect IT management at the department. For example, CMO officials expressed the belief that all IT roles and responsibilities should be consolidated under one position. We have previously found that having department-level CIO responsibilities performed by multiple officials could make the integration of various information and technology management areas, as envisioned by law, more difficult to achieve. The CMO told us in July 2018 that he had begun engaging informally with Congress to discuss the department’s concerns about the transition of certain responsibilities from the CIO to the CMO, and that he would engage further once the newly confirmed CIO felt prepared to join those discussions. However, in November 2018, the Acting CMO told us that the OCMO was still exploring all of the authorities that Congress had provided, and, as such, felt that further engagement with Congress was premature at this point. The Acting CMO added that she and the CIO had worked out an informal agreement regarding which areas they would each manage, but did not identify specific tasks that would transfer to the CMO or provide any details of this agreement. At the same time, OCMO officials acknowledged in November 2018 that the OCMO had not conducted an analysis to determine which responsibilities should formally transfer or what resource ramifications, if any, this transfer would have on both offices. Without an analysis to help DOD determine which duties should transfer from the CIO to the CMO, including identifying any associated resource impacts, DOD will remain reliant on this informal agreement. Such reliance could cause confusion within the department about who is responsible for key IT functions. Moreover, section 3506 of title 44, United States Code states that in similar circumstances, where a CIO is designated for DOD and for each military department, the respective duties of the CIOs shall be clearly delineated. In part because the issues identified above have not been resolved, DOD agreed that it does not have department-wide guidance, such as a chartering directive, that fully and clearly institutionalizes the CMO position by articulating how all of the CMO’s authorities and responsibilities are to be operationalized. The department has issued several documents that refer to some of the CMO’s authorities and responsibilities, but these documents were issued as the CMO’s role under the statute was evolving, and none of them, either individually or collectively, encompass all of the CMO’s current authorities and responsibilities. For example: DOD Directive 5105.82 (Oct. 17, 2008) established the responsibilities and authorities of the DCMO. These responsibilities included, among others, advising the Secretary of Defense on performance goals and measures and assessing progress against those goals; and ensuring that strategic plans, performance goals, and measures were aligned with, and assured accountability to, DOD strategic goals. However, this document is now outdated—for example, it assigns the DCMO responsibilities related to the Defense Business Transformation Agency, which an OCMO official agreed no longer exists. Moreover, the directive does not reflect the additional authorities and responsibilities for the CMO position that are delineated in section 132a of title 10, United States Code, as amended. Table 3 at appendix II summarizes all authorities and responsibilities included in this directive. Secretary of Defense Memorandum (Feb. 1, 2018) established the CMO position and outlined its authorities and responsibilities consistent with section 132a of title 10, United States Code. The authorities and responsibilities outlined in this memorandum align closely with those specified for the CMO in the statute, but the memorandum does not explain how these authorities and responsibilities are to be operationalized. For example, this memorandum does not address how the CMO will interact with other DOD organizations, such as the military departments, as DOD traditionally has done through its chartering directives. Table 4 at appendix II summarizes authorities and responsibilities included in Secretary of Defense memorandums. Secretary of Defense Memorandum (July 12, 2018) addressed the CMO’s role in supporting the Deputy Secretary of Defense on enterprise management and performance accountability. According to this memorandum, the CMO supports the Chief Operating Officer to ensure all DOD leaders are unified and aligned across all assigned responsibilities and functions, through strong management practices, integrated processes, and best value business investments, and to support the Deputy Secretary of Defense in his capacity as the department’s Chief Operating Officer. However, the CMO’s responsibilities in supporting the Deputy Secretary of Defense as the Chief Operating Officer outlined in this memorandum are not specified by any other relevant guidance documents. CMO Action Memorandum (July 27, 2018) responded to the Secretary’s February 1, 2018 memorandum and restated several of the CMO’s authorities and responsibilities, consistent with 132a of title 10, United States Code, and provided information on the plans to restructure the OCMO and to establish the CMO Action Group. The Secretary of Defense’s July 12, 2018 Memorandum directed the Deputy Secretary of Defense to provide amplifying guidance on CMO responsibilities and authorities emanating from statute as well as delegating additional discretionary authorities or responsibilities to the CMO. Issuance of this amplifying guidance would be consistent with one of the key strategies we identified for implementation of a CMO position— clearly defining roles and responsibilities of the position and communicating them throughout the organization. In November 2018, however, officials told us that they expected the CMO vacancy to delay progress on codifying any decisions on the CMO’s statutory and discretionary authorities in a chartering directive. Additionally, in November 2018, a senior OCMO official stated that the office needed to complete its reorganization prior to the department issuing updated guidance. Until the Deputy Secretary of Defense resolves the issues previously discussed and issues guidance (such as a chartering directive) to codify the CMO’s authorities and responsibilities and specify how those are to be operationalized, questions regarding the extent of the CMO’s authority and responsibility are likely to persist, preventing a shared understanding across the department of the CMO’s role. Further, the lack of guidance could affect the ability of the department to make progress in conducting necessary business reforms—one of three key priorities identified in the 2018 National Defense Strategy. DOD has made progress in implementing some of the authorities and responsibilities Congress has provided the CMO. However, DOD has not resolved several key issues that limit its ability to implement all statutory authorities and responsibilities. Specifically, DOD has yet to resolve key issues, such as how the CMO will exercise authority to direct the military departments and exercise direction and control over DAFAs that provide shared business services. Additionally, without analyzing the authorities and responsibilities that will transfer from the CIO to the CMO and the resource impact, if any, those new responsibilities will have on the OCMO, DOD risks creating confusion within the department about which official is responsible for key information technology functions. While DOD has issued several documents delineating some of the CMO’s authorities and responsibilities, the department does not currently have formal and current guidance, such as a DOD chartering directive, that institutionalizes all the CMO’s authorities and responsibilities. Considering the evolution of the CMO’s authorities and responsibilities since the position was created, guidance that fully encompasses all CMO authorities and responsibilities and explains how they are to be operationalized could help to institutionalize and sustain the position beyond the tenure of the current acting CMO. We are making the following four recommendations to the Secretary of Defense: The Secretary of Defense should ensure that the Deputy Secretary of Defense makes a determination as to how the CMO is to direct the business-related activities of the military departments. (Recommendation 1) The Secretary of Defense should ensure that the Deputy Secretary of Defense makes a determination regarding the CMO’s relationship with the DAFAs, including whether additional DAFAs should be identified as providing shared business services and which DAFAs will be required to submit their proposed budgets for enterprise business operations to the CMO for review. (Recommendation 2) The Secretary of Defense should ensure that the CMO and CIO conduct an analysis to determine which responsibilities should transfer from the CIO to the CMO, including identifying any associated resource impacts, and share the results of that analysis with the Congress. (Recommendation 3) The Secretary of Defense should ensure that the Deputy Secretary of Defense, on the basis of the determinations regarding the CMO’s statutory and discretionary authorities, codify those authorities and how they are to be operationalized in formal department-wide guidance. (Recommendation 4) We provided a draft of this report to DOD for review and comment. In its written comments, which are reproduced in Appendix III, DOD concurred with our recommendations and described ongoing and planned actions to address them. We are sending copies of this report to the Acting Secretary and Acting Deputy Secretary of Defense, the Acting DOD Chief Management Officer, the DOD Chief Information Officer, the Director, Cost Assessment and Program Evaluation, and appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. To examine the extent to which DOD has implemented the authorities and responsibilities of its Chief Management Officer (CMO) position and issued guidance communicating within the department the authorities and responsibilities of the position, we reviewed related laws and key documents such as memorandums issued by the Secretary of Defense that outline some of the CMO’s authorities and responsibilities. To understand the authorities and responsibilities that Congress and DOD have assigned to this position, we reviewed section 901 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017, which initially created the CMO position effective February 1, 2018; section 910 of the NDAA for Fiscal Year 2018, which codified and expanded the CMO’s authorities and responsibilities; and section 921 of the John S. McCain NDAA for Fiscal Year 2019, which further expanded the CMO’s authorities and responsibilities. We reviewed DOD’s August 2017 Report to Congress and its April 2018 National Defense Business Operations Plan. We also reviewed our November 2007 report on key strategies for implementing CMO positions. To understand ongoing actions to implement the authorities and responsibilities given to the CMO position, we interviewed DOD’s former CMO, who served from February to November 2018, as well as the current acting CMO and the chiefs of the five directorates or their representatives within the Office of the CMO (OCMO) in July 2018, to understand the responsibilities of these directorates. We also met with the nine reform teams charged with implementing initiatives to, among other things, move DOD toward an enterprise-wide, shared-service model. Additionally, we reviewed documentation from the reform teams to understand what business operation reform initiatives the CMO has prioritized and what progress has been made to implement and monitor these initiatives. To understand key initiatives DOD is pursuing to improve its business operations and how it monitors implementation of those initiatives, we attended demonstrations of DOD’s cost management framework and its reform team portal. We also met with an official from DOD’s Cost Assessment and Program Evaluation (CAPE) Office to gain additional insights on oversight of the reform teams from one of the co- chairs on the Reform Management Group. Additionally, we reviewed documentation from the OCMO containing personnel numbers and funding levels to determine the level and type of resources available to the CMO to assist in carrying out his responsibilities. To understand how the CMO collaborates with other DOD entities to lead business operation reform and how the responsibilities of the CMO and Chief Information Officer (CIO) may change, we met with officials from the Office of the DOD CIO. To understand how the CMO is interacting with and influencing the military departments’ business operations, we met with officials from the Army, Air Force, and Navy CMO and CIO offices. We performed our work under the authority of the Comptroller General to conduct evaluations to assist Congress with its oversight responsibilities. We conducted this performance audit from February 2018 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Elizabeth A. Field, (202) 512-2775 or fielde1@gao.gov. In addition to the contact named above, Sally Newman (Assistant Director), Tracy Barnes, Margaret Best, Arkelga Braxton, William Carpluk, Timothy DiNapoli, Michael Holland, Chad Johnson, Kristi Karls, William Lamping, Ned Malone, Jared Sippel, Susan Tindall, Sarah Veale, and Lillian Yob made key contributions to this report.", "summary": "DOD spends billions of dollars each year to maintain key enterprise business operations intended to support the warfighter, including systems and processes related to the management of contracts, finances, the supply chain, and support infrastructure. The 2018 National Defense Strategy identified reform of DOD's business practices as one of DOD's three strategic goals. GAO has previously reported that weaknesses in these business operations have resulted in inefficiencies and billions of dollars wasted. GAO has also identified the need for a CMO with significant authority and experience to focus concerted attention on DOD's long-term business transformation efforts. Congress initially established such a position in the National Defense Authorization Act for Fiscal Year 2017. This report evaluates the extent to which DOD has implemented its CMO position and issued guidance to communicate within the department the authorities and responsibilities of the position. GAO analyzed the statutory authorities and responsibilities assigned to the CMO position and evaluated DOD's actions to implement them. The Department of Defense (DOD) has taken steps to implement its Chief Management Officer (CMO) position which has been given the responsibility for managing DOD's business operations; however, unresolved issues remain for DOD to fully institutionalize the CMO's authorities and responsibilities. DOD has restructured the Office of the CMO (OCMO) to more closely align with the CMO's statutory authorities and responsibilities. Further, the OCMO is working to strengthen its data capabilities and has hired a Chief Data Officer and formed a Data Management and Analytics Steering Committee. Additionally, OCMO officials told us they are establishing cost baselines for each of DOD's major business functions. However, DOD has not fully addressed three key issues related to the CMO's authorities and responsibilities: The CMO's authority to direct the military departments on business reform issues . The law gave the CMO authority to direct the secretaries of the military departments on matters over which the CMO has responsibility. However, DOD has not determined how the CMO will exercise this authority, particularly when there is disagreement between the departments and the CMO. The CMO's oversight responsibilities of the Defense Agencies and DOD Field Activities (DAFAs) . The CMO is responsible for exercising authority, direction, and control over the designated DAFAs that provide shared business services—those business functions, such as supply chain and logistics and human resources operations, that are provided across more than one DOD organization. However, DOD has not determined how the CMO will exercise this authority, such as which DAFAs will submit their proposed budgets for CMO review. Transfer of responsibilities from the Chief Information Officer to the CMO. Under the law, the CMO will exercise responsibilities relating to business systems and management that previously belonged to the Chief Information Officer. However, DOD has not determined which, if any, responsibilities will transition from the Chief Information Officer to the CMO or assessed the impact of such a transition on associated resources. In part because these issues remain unresolved, DOD agreed that it does not have department-wide guidance that fully and clearly articulates how the CMO's authorities and responsibilities should be operationalized. Making determinations on the three unresolved issues and issuing guidance would help ensure a shared understanding throughout the department of the CMO's role in leading DOD's enterprise-wide business reform efforts. GAO is making four recommendations, including that DOD should address each of the three unresolved issues that impede its progress in institutionalizing statutory authorities and responsibilities, and issue guidance, such as a chartering directive that addresses how the CMO's authorities should be operationalized. DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "DOD Instruction 4151.20, Depot Maintenance Core Capabilities Determination Process, requires the military services to apply a methodology to determine their core capability requirements—that is, to identify what core capabilities are required and what workload would be necessary to enable them to sustain these core capabilities at the depots. DOD’s instruction also requires the military services to determine the estimated cost of workloads to sustain the core capability requirement. The instruction describes a series of mathematical computations and adjustments that the military services are required to use to compute their core capability requirements, and to identify the projected workload needed to support these requirements. Specifically, the instruction requires that the military services identify the weapon systems required to execute the Chairman of the Joint Chiefs of Staff’s strategic and contingency plans, which, among other things, guide the use and employment of the military forces across all geographic regions and sustain military efforts over different durations of time. After the systems are identified, the military services compute annual depot maintenance capability requirements for peacetime, in direct labor hours, to represent the amount of time they will regularly take to execute required maintenance. A military service may adjust calculated direct labor hours to address redundant capability requirements that are so similar to one another that they share common base repair processes. DOD tracks core capability requirements using the following two metrics: direct labor hours, each of which represents 1 hour of effort directly allocated to a category of work; and work breakdown structure categories, which bundle types of work according to weapon systems and equipment. DOD uses work breakdown structure categories to organize data on its various core capability requirements and workloads, as well as to manage and report on its core capabilities. There are 10 first-level work breakdown structure categories, and these in turn are broken down into second-level subcategories, which are the major elements that make up the system or equipment in the first-level category. Figure 1 shows the 10 first-level categories of DOD’s work breakdown structure. For the full work breakdown structure, see appendix IV. Finally, the instruction requires the military services to provide a reason for all projected shortfalls, strategies to mitigate the effects of each projected shortfall, and actions taken by the services to rectify any projected workload or capability shortfall. A projected shortfall exists if a military service does not expect to have sufficient workload to sustain the required level of capability that has been identified. For example, an armed service may have identified 10,000 direct labor hours of core capability requirements for ground vehicles, but have only 4,000 hours of projected depot maintenance work for ground vehicles—resulting in a projected workload shortfall of 6,000 hours. In 2012 DOD submitted its first biennial core report to Congress, and we found that DOD did not provide sufficient explanations when reporting on the military services’ shortfalls in core capability requirements. In 2014 DOD submitted its second biennial core report to Congress, and we found that DOD did not have accurate and complete data in the report. In 2016 DOD submitted its third biennial core report to Congress, and we found (1) data errors; (2) inaccurate inter-service workload across the military services due to lack of coordination in reporting this information; (3) inconsistent calculations or display of workload shortfalls across the military services; and (4) inconsistent calculations of the estimated cost of planned workload across the military services. We made recommendations to address each issue. Further, we identified additional information that could increase the report’s transparency, and we suggested that Congress consider amending section 2464 to include additional elements to increase the transparency of future biennial core reports. Consistent with our recommendations, Congress amended section 2464 and added additional reporting requirements. We discuss DOD’s actions to address our specific recommendations to improve the completeness of its 2018 Biennial Core Report later in this report. In the 2018 Biennial Core Report, DOD and the military services addressed 8 of 10 required reporting elements, as shown in table 1 and discussed in more detail below. According to department officials, the department did not address two of the elements because changes to its guidance and processes for developing the 2018 report resulted in the 2016 and 2018 reports not being directly comparable. DOD officials stated that they plan to address these two elements in the 2020 Biennial Core Report. To address reporting elements 1 and 2, the military services presented their respective requirements and projected workloads in direct labor hours and associated costs, using the work breakdown structure. Table 2 shows DOD’s reported direct labor hours for the depots’ core requirements, as well as projected maintenance workloads and costs of workloads to sustain core requirements by military service. The military services presented core requirements and workloads, down to the second-level subcategories, to address reporting element 7. This structure represents all of the sub-specialties required to maintain core depot-level capabilities across the 10 categories of the work breakdown structure. For example, the aircraft category is broken down into 7 second-level subcategories: rotary, vertical/short take-off and landing, cargo/tanker, fighter/attack, bomber, unmanned systems, and aircraft engines. The Army, Navy, and Air Force also identified the items they placed into the “Other” category to address reporting element 9. The Marine Corps did not place any core requirements in the “Other” category in the 2018 Biennial Core Report and therefore was not required to address this reporting element. Specifically: The Army identified requirements associated with items such as air conditioners, food service hygiene equipment, chemical defense equipment, and water purification; The Navy identified requirements associated with specialty aircraft and aircraft components that are common across multiple platforms; and The Air Force identified requirements associated with specialty items such as surveillance aircraft, missile components, and communications/electronic equipment that do not fall under other distinct work breakdown structure subcategories. The military services each identified projected shortfalls at the first- and second-levels of the work breakdown structure (elements 3 and 4), reasons for those shortfalls (element 3), and mitigation plans for the projected shortfalls (element 3). This includes—in some cases— leveraging excess core capabilities in one workload category to mitigate projected shortfalls in another category (elements 5 and 8). Specifically: Army: The Army reported a total projected shortfall of about 2.9 million direct labor hours, as shown in table 3. It identified projected shortfalls in 5 of the 10 first-level work breakdown structure categories, and in 13 of the 33 second-level categories. The Army identified a number of reasons for these projected shortfalls. Army officials stated that these reasons generally contributed to shortfalls across the various work breakdown categories. They also noted the challenge of calculating shortfalls based on comparing current workloads with predicted workloads that were based on potential future Army strategies. The Army identified the following specific reasons for shortfalls: DOD’s updated defense planning scenarios increased the Army’s equipment requirements. These additional requirements resulted in a greater total core depot requirement for the Army, which in turn contributed to projected shortfalls. The Army noted that DOD’s most recent Future Years Defense Program lacked sufficient depot maintenance funding (that is, money to pay for direct labor hours) to meet core capability requirements. The Army cited newly established software depot maintenance requirements as one of the reasons for its shortfall. Specifically, DOD updated requirements for reporting depot resources associated with upgrading and maintaining software in weapon systems. According to the Army’s 2018 core report submission, the Army previously determined this requirement based on the number of people assigned to the Army’s software sustainment activities. However, the Army revised its methodology for calculating its software sustainment workload to reflect actual workload, not just the number of people conducting the work. After identifying projected shortfalls, officials used that information to determine how best to close gaps and mitigate risks in future implementation. Specifically, the Army is currently working to move software-related direct labor hours from contractor to military sources, which will help the Army mitigate—that is, shrink—its projected shortfall by fiscal year 2020. The Army reported that it plans to mitigate many of its projected core shortfalls by using skill sets similar to those required for maintaining a core capability in repairing equipment for foreign militaries. Officials stated that the Army plans to hire and train maintenance personnel to conduct maintenance work associated with the foreign military sales program. This workload will also assist the Army in meeting its core capability requirements for Army systems, increasing the total projected workload, and decreasing estimated shortfalls. Additionally, the Army identified mitigations for specific shortfalls—for example, replacing old generators with a new system by fiscal year 2025 will mitigate its shortfall in support equipment. Navy: The Navy reported that it did not project an overall shortfall, nor did it project any shortfalls at the first- or second-level of the work breakdown structure, and therefore it did not provide mitigation plans. Navy and OSD officials noted that the Navy and the department differ regarding the definition of software sustainment. Specifically, a Navy official stated that the service views software sustainment as an engineering function, not a depot maintenance function. This official observed that while the Navy believes software sustainment to be critical to maintaining its weapon systems, it believes that managing software sustainment as depot maintenance is not the most effective approach for the Navy. As a result, the Navy did not report any software core capability requirement or projected workload for fiscal year 2019. OSD defined software maintenance and reporting requirements in its guidance requesting data from the military services for the biennial core report. In spite of differing perspectives between OSD and the Navy, OSD accepted the Navy’s core report submission, in which the Navy reported no core software maintenance capability requirements. Marine Corps: The Marine Corps reported that it did not project a total shortfall, but did project a shortfall of 82,971 direct labor hours in one second-level subcategory—that is, construction equipment—that falls in the ground vehicle first-level category. The Marine Corps identified a rationale and mitigation plan for its projected shortfall in construction equipment. The Marine Corps reported that general factors affecting maintenance workload and funding contributed to the shortfall, including: (1) After drawdowns from Iraq and Afghanistan, the Marine Corps repaired equipment to a desired level of combat effectiveness in line with current mission requirements and available resources. This led to fewer current maintenance needs and therefore reduced core maintenance workloads, creating projected shortfalls in some skill sets; and (2) The Marine Corps made changes to its force structure, which led to having more equipment in inventory, less equipment in use, and therefore less required maintenance. This created a shortfall in the skill set for construction equipment. To address this shortfall, the Marine Corps plans to use the excess workload in amphibious vehicles to mitigate the projected shortfall in construction equipment. Marine Corps officials stated that these second-level subcategories involve similar, tracked vehicles, which can be maintained using the same skill set. Air Force: The Air Force reported that it did not project a total shortfall, but did project shortfalls within the work breakdown structure, as shown in table 4. The Air Force identified projected overall shortfalls in 1 of the 10 first-level work breakdown structure categories, and in 7 of the 33 second-level work breakdown structure categories. The Air Force identified reasons and provided detailed explanations, as well as mitigation plans, for each projected shortfall. For example, it projected a shortfall in rotary workload according to Air Force officials because of staffing and supply issues with HH-60 Pave Hawk maintenance at Corpus Christi Army Depot. According to these officials, these maintenance issues have resulted in the Air Force’s using more contracted depot maintenance work on the HH-60 Pave Hawk in order to meet demand. As a result of the more extensive contracting of maintenance, planned workload at Corpus Christi Army Depot has been reduced, thereby creating a projected shortfall. The Air Force, Army, and Navy formed a team to address this projected shortfall. Air Force officials stated that contracts are being reduced and that they expect to resolve the maintenance issues before the 2020 Biennial Core Report. To address its projected shortfall in tactical missiles, the Air Force plans to identify Letterkenny Army Depot as the Technology Repair Center for this requirement, as the workloads are small in volume and the Letterkenny Army Depot can meet this requirement. In addition, the Air Force projected an overage of about 176,000 direct labor hours in strategic missiles. The Air Force believes that its projected workload in strategic missiles will allow it to maintain capability to repair tactical missiles—an area in which it projects a shortfall of about 42,000 direct labor hours. According to Air Force officials, the electronics on these two types of missiles are very similar and require the same skill set. DOD in the 2018 Biennial Core Report did not address progress made in implementing mitigation plans from the prior core report (element 6), nor did they address the degree to which projected workload reported in the prior core report was executed (element 10). According to Office of the Assistant Secretary of Defense for Logistics and Materiel Readiness (OASD L&MR) officials, they did not address these elements because the elements require DOD to compare information in the 2018 Biennial Core Report with information in the 2016 Biennial Core Report. Since DOD updated its guidance and processes for developing the 2018 Biennial Depot Core Report—in response to new statutory requirements and our prior recommendations—a meaningful comparison was not possible in the 2018 Biennial Core Report, according to OSD and military service officials. Additionally, DOD did not fully provide mitigation plans in its 2016 Biennial Core Report, as we reported in 2016. Therefore, DOD was unable to provide progress reports on 2016 mitigation plans. DOD officials told us that they plan to use the 2018 Biennial Core Report as a baseline for future biennial core reports, which will allow them to address elements 6 and 10. Specifically, they stated that they plan to provide progress reports on the mitigation plans they identified in the 2018 Biennial Core Report. Additionally, officials stated their intent to provide a comparison of the fiscal year 2019 projected workload reported in the 2018 Biennial Core Report with the actual workload for fiscal year 2019 contained in the 2020 Biennial Core Report. DOD’s 2018 Biennial Core Report is generally complete in that it lacks any obvious errors and aligns with supporting information provided by the military services. Specifically, unlike previous biennial core reports, data submissions provided to DOD by the military services are identical to the data in the 2018 Biennial Core Report, and there are no transposition errors. Further, based on our review of the services’ submissions to OSD, data and other information provided by the military services were accurately and appropriately included in DOD’s 2018 Biennial Core Report. Finally, our analysis of the report and the military services’ submissions did not identify errors in the summation of the data. DOD’s focused efforts in 2017 and 2018 to develop better guidance and procedures assisted in improving the completeness of DOD’s 2018 Biennial Core Report—in part, according to DOD officials, due to our prior recommendations. Specifically, in 2017 the OASD L&MR began drafting new guidance to identify required depot maintenance core capabilities and the associated workloads needed to sustain those capabilities. This guidance was finalized and issued by the Office of the Under Secretary of Defense for Acquisition and Sustainment in May 2018. Officials from OASD L&MR and the military services told us that they used the methodology in this new guidance to complete the 2018 Biennial Core Report in late 2017 and early 2018. Officials told us that our prior recommendations, based on our reviews of the 2012, 2014, and 2016 biennial core reports, served to guide DOD’s update of its guidance and procedures. The changes made by Congress to section 2464 were also incorporated into DOD’s new guidance to ensure compliance with the 10 reporting elements, as we previously discussed. During the course of our review, we found that DOD had addressed all of the recommendations from our prior reports on the 2012, 2014, and 2016 Biennial Core Reports. First, in our review of the 2012 Biennial Core Report, we found that DOD did not include explanations for each identified projected shortfall. We recommended that DOD include in its biennial core report to Congress detailed explanations for why the military services did not have the workloads to meet core maintenance requirements for each projected shortfall identified in the report. Officials with OASD L&MR said that the May 2018 updated version of DOD Instruction 4151.20 was revised to require the submission of a detailed rationale for any and all shortfalls, and a plan to either correct or mitigate the effects of the shortfalls. The instruction states further that the detailed rationale and plan will identify the reason for the shortfall; contain a strategy to mitigate the effects of the shortfall (for example, specific transferrable workload, transfer of private- sector workload); and include actions to rectify any capability or workload shortfalls, including a description of planned capital investment, timing, and planned workarounds until the new capabilities or workloads are available. DOD’s 2018 Biennial Core Report as previously discussed provided rationales for shortfalls. Second, in our review of the 2014 Biennial Core Report, we found that some data were incomplete. We recommended that DOD review its processes and implement needed improvements to help ensure accuracy and completeness. In response to this and our other prior recommendations, DOD updated DOD Instruction 4151.20 to include additional steps and more controls that ensure more complete and accurate data submissions. According to OSD officials, changes to the guidance included deleting data fields unrelated to core requirements; streamlining and clarifying reporting instructions; ensuring that service submissions be reviewed and approved by general, flag, or senior executive service officials; determining the weapon systems or other platforms that are in the Chairman of the Joint Chiefs of Staff strategic and contingency plans; addressing inter-service workloads; having the worksheet automatically calculate shortfalls; and defining “software” and “software maintenance.” Most recently, in our review of the 2016 Biennial Core Report, we found (1) data errors; (2) inconsistent capture of inter-service workloads across the military services; (3) inconsistent calculations or transpositions of projected workload shortfalls across the military services; and (4) inconsistent calculations of the estimated cost of projected workloads across the military services. We recommended that DOD update its guidance—in particular DOD Instruction 4151.20—to require future biennial core reports to include instructions to the reporting agencies on how to (1) report additional depot workloads performed that have not been identified as core requirements; (2) accurately capture inter-service workloads; (3) calculate projected shortfalls; and (4) estimate the cost of projected workloads. DOD took steps to address each of these issues. Specifically, DOD did the following: Issued guidance stating that the total adjusted core capability requirements and the total projected public-sector depot maintenance workloads both reflect core workloads, as well as workloads that have not been identified as sustaining core. Developed and provided to each of the military services a worksheet on which to submit their projected inter-service workloads. OSD also held a meeting with all of the military services to resolve any discrepancies between their respective submissions. Created worksheets with formulas to automatically calculate the projected shortfalls at the subcategory level of the work breakdown structure for each service. Issued updated guidance to indicate that the estimated costs of the projected workloads to sustain the core capability requirements were to be included. According to OSD officials, these estimates are developed in accordance with financial management regulations and then applied to the estimated core sustaining workloads for each work breakdown structure, thereby providing a common baseline and process. In meetings with OSD and the military services, officials offered ideas for possible changes in future reports, such as including additional information on inter-service workloads to increase congressional visibility regarding coordination on depot maintenance across the military services. Additionally, OSD officials noted that they were considering the inclusion of additional information in future reports on how costs of projected workloads are calculated. Information on this is provided in DOD Instruction 4151.20, but not in its biennial core report. According to OSD officials, the department plans to consider these and other proposed changes from the military services and other stakeholders to its biennial core reporting process and supporting guidance. Given that DOD has made considerable progress by improving both the completeness of the 2018 Biennial Core Report and its guidance on the development of the report, we are not making recommendations at this time. We provided a draft of this report to DOD for comment. DOD provided technical comments, which we included as appropriate. We are sending copies of this report to appropriate congressional committees, the Secretary of Defense, and the Secretaries of the Military Departments. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Diana Maurer at (202) 512-9627 or maurerd@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Appendix I: Complete Text of 10 U.S.C. § 2464(d) (d) Biennial core report. Not later than April 1 of each even-numbered year, the Secretary of Defense shall submit to Congress a report identifying, for each of the armed forces (except for the Coast Guard), for the fiscal year after the fiscal year during which the report is submitted, each of the following: 1. The core depot-level maintenance and repair capability requirements and sustaining workloads, organized by work breakdown structure, expressed in direct labor hours. 2. The corresponding workloads necessary to sustain core depot-level maintenance and repair capability requirements, expressed in direct labor hours and cost. 3. In any case where core depot-level maintenance and repair capability requirements exceed or are expected to exceed sustaining workloads, a detailed rationale for any and all shortfalls and a plan either to correct or mitigate the effects of the shortfalls. 4. Any workload shortfalls at any work breakdown structure category designated as a lower-level category pursuant to Department of Defense Instruction 4151.20, or any successor instruction. 5. A description of any workload executed at a category designated as a first-level category pursuant to such Instruction, or any successor instruction, that could be used to mitigate shortfalls in similar categories. 6. A description of any progress made on implementing mitigation plans developed pursuant to paragraph (3). 7. A description of core capability requirements and corresponding workloads at the first level category. 8. In the case of any shortfall that is identified, a description of the shortfall and an identification of the subcategory of the work breakdown structure in which the shortfall occurred. 9. In the case of any work breakdown structure category designated as a special interest item or other pursuant to such Instruction, or any successor instruction, an explanation for such designation. 10. Whether the core depot-level maintenance and repair capability requirements described in the report submitted under this subsection for the preceding fiscal year have been executed. In 1984 Congress passed legislation limiting the private contracting of certain core logistics functions. This law required the Department of Defense (DOD) to maintain a logistics capability to ensure a ready and controlled source of technical competence and resources. In 1988 Congress codified this law, as amended, at section 2464 of title 10 of the U.S. Code. While section 2464 has been amended multiple times since then, the requirement for DOD to maintain a core logistics capability that is government-owned and government-operated has persisted. In 2011 Congress added a requirement for DOD to provide a biennial core report. Most recently, in fiscal year 2018 Congress added additional elements that DOD is required to address in its biennial core reports. Among other things, changes to the statute are illustrated in figure 2 below. Section 2464(d) of Title 10 of the United States Code requires the Department of Defense (DOD), among other things, to submit to Congress a biennial report providing information on its core depot-level maintenance and repair capability requirements and workload. Specifically, section 2464(d) identifies 10 elements that DOD must address for each of the armed services (except for the Coast Guard) in its biennial report concerning depot-maintenance requirements and workload. Section 2464 also requires us to review DOD’s report for compliance with section 2464 and assess the completeness of the report. DOD submitted its most recent biennial core report to Congress on May 23, 2018. To determine the extent to which the DOD 2018 Biennial Core Report complies with section 2464(d), we analyzed the text of the report and obtained supporting information on DOD’s process to determine its core maintenance capability for fiscal year 2019. Two GAO analysts independently reviewed DOD’s report to determine the extent to which it addressed each element required by the statute. All initial disagreements between the two GAO analysts were discussed and resolved through consensus. For the military services, when the report explicitly included all parts of the required reporting element, we determined that DOD “addressed” the element. When the report did not explicitly include any part of the element, we determined that DOD “did not address” the element. If the report included some aspects of an element, but not all, then we determined that DOD “partially addressed” the element. We compared the types of information and data provided by each of the military services with the data that the Office of the Secretary of Defense (OSD) included in the 2018 Biennial Core Report, to assess consistency. We also discussed our preliminary analyses with OSD and military service officials to gain additional insight into their analysis and efforts to address the statutory requirements. To assess the report’s completeness, we obtained and analyzed the fiscal year 2019 data used in compiling DOD’s 2018 Biennial Core Report, including core capability requirements and projected sustaining workload expressed in direct labor hours and cost and other information, such as workload shortfall explanations. We compared the reporting agencies’ submissions with the reporting template in DOD Instruction 4151.20 in order to determine the extent to which the reporting agencies submitted the information required by DOD’s instruction, and we identified any inconsistencies or errors. In order to determine whether these data and information were complete, we performed a number of data check steps to identify transposition inconsistencies or errors, and we discussed our analyses with OSD and military service officials. These steps included (1) reviewing each military service’s submission to verify that it had consistently calculated and reported the direct labor hours identified as the total adjusted requirements and the workload needed to sustain depot maintenance core capability requirements; and (2) reconciling the information in the report against each military service’s submission, for accuracy. However, as in the past reviews of DOD’s biennial core reports, we did not assess the reliability of the underlying data provided by the military services for the 2018 DOD Biennial Core Report. The team also met with OSD and reporting agency officials responsible for overseeing the data collection and preparing the data submissions, to obtain clarification and understanding of the content of the submissions, as well as to discuss the department’s guidance and processes used to collect the data for the report. Lastly, we reviewed DOD’s actions to address our prior recommendations that were targeted at improving the completeness of DOD’s biennial report. We conducted this performance audit from May 2018 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix IV: Category Levels from the Department of Defense’s (DOD) Depot Maintenance Core Capability Worksheet Work Breakdown Structure Category 1. Aircraft 1.2 Vertical/Short Takeoff and Landing 2. Diana Maurer, (202) 512-9627 or maurerd@gao.gov. In addition to the named contact above, John Bumgarner, Assistant Director; Thomas Gosling, Assistant Director; Pat Donahue, Amie Lesser, Shahrzad Nikoo, Bethann E. Ritter Snyder, Walter Vance, Cheryl Weissman, and Melissa Wohlgemuth contributed to this report.", "summary": "DOD uses both military depots and contractors to maintain its complex weapon systems and equipment. Recognizing the depots' key role and the risk of overreliance on contractors, section 2464 of title 10 of the U.S. Code requires DOD to maintain a core logistics capability that is government-owned and operated, involving a combination of personnel, facilities, equipment, processes, and technology. Section 2464 requires DOD to provide a Biennial Core Report to Congress that addresses 10 reporting elements, including information on its core capability requirements and projected workload for the next fiscal year. Section 2464 includes a provision that GAO review DOD's Biennial Core Reports for compliance and completeness. In reviewing the 2018 Biennial Core Report, GAO assessed the extent to which DOD's report (1) addressed the 10 reporting elements required by section 2464(d), and (2) is complete. GAO reviewed and analyzed relevant legislation, DOD guidance, and the 2018 Biennial Core Report, and met with DOD and military service officials to discuss the processes used to develop the information in DOD's 2018 Biennial Core Report. In its 2018 Biennial Core Report, the Department of Defense (DOD) addressed 8 of 10 reporting elements. Specifically, DOD reported, by military service, its: depot maintenance workload required to sustain core maintenance capability requirements, based on contingency planning scenarios; projected fiscal year 2019 depot maintenance workloads; and projected fiscal year 2019 shortfalls (i.e., insufficient workload to sustain the required level of capability) and rationales and mitigations for those shortfalls. The Army reported a projected workload for fiscal year 2019 that would meet about 84 percent of its identified core capability—a shortfall of 2.9 million direct labor hours (see figure). The Army identified numerous reasons—such as newly established software depot maintenance requirements—for its shortfalls. Furthermore, the Army presented mitigation plans for its shortfalls, such as moving software-related work from contractor to military sources. The other services did not report overall shortfalls, but some services reported shortfalls associated with specific types of work. For example, the Air Force reported a shortage associated with the repair of tactical missiles. As a mitigation plan, the Air Force stated that it plans to use workload associated with repairing strategic missiles to maintain this capability, since the electronics on the two types of missiles are very similar and require the same maintenance skill set. DOD did not address two required reporting elements—progress in implementing mitigation plans from the 2016 biennial core report, and the degree to which projected workload reported in the 2016 biennial core report was executed. According to DOD officials, changes in its guidance and processes for developing the 2018 report resulted in the 2016 and 2018 reports not being directly comparable. However, DOD officials stated that they plan to address these two elements in the 2020 Biennial Core Report. DOD's 2018 Biennial Core Report is generally complete, in that it lacks obvious errors and aligns with supporting information provided by the services. DOD's concerted efforts to implement better guidance and procedures—in part, according to DOD officials, by implementing GAO's prior recommendations from 2012, 2014, and 2016—assisted in improving the completeness of the report.", "document_type": "gao"}
{"report": "The HCV program, administered by HUD, subsidizes housing costs for low-income households in the private rental market. Because HUD provides HCV assistance directly to the household, participants are able to find their own housing, including single-family homes, townhouses, and apartments. If the household moves out of the unit, it can move with continued assistance to another private rental unit. PHAs administer the HCV program at the local level, while HUD administers funding and furnishes technical and professional assistance to PHAs in planning, developing, and managing the program. Approximately 2,200 PHAs across the country administer the voucher program on HUD’s behalf, managing day-to-day operations in the HCV program, including the application and voucher distribution processes, as well as housing inspection and approval. PHAs are responsible for ensuring that rents are reasonable, determining households’ eligibility, calculating and periodically redetermining households’ incomes and rental payments, and making subsidy payments to landlords. In addition, PHAs perform basic program functions, such as establishing and maintaining a waiting list, processing tenant moves, conducting landlord and tenant outreach, and reporting to HUD. Local PHAs determine the eligibility of households, approve applications, and distribute vouchers. In general, to be eligible to participate in the HCV program, households must have very low incomes—that is, incomes not exceeding 50 percent of the area median income. Moreover, at least 75 percent of new voucher program participants must have extremely low incomes, not exceeding 30 percent of the area median income. Once a household is approved by a PHA to participate in the program and finds a rental unit, that household pays 30 percent of its monthly income, after certain adjustments, toward rent. The remaining portion of the rent is paid through the HUD-subsidized voucher. PHAs can pay subsidies to cover between 90 percent and 110 percent of the fair market rent for their areas. The HCV application and rental process is displayed in figure 1. The following applies in the HCV application process: Households seeking to enter the HCV program may wait years for their local PHA to announce an open application period. PHAs may establish waiting lists if the number of applicants to the program exceeds available vouchers, and may close the waiting list if it contains more households than the PHA can assist in the near future. Therefore, prospective applicants in some locations can wait years for a local PHA to determine the eligibility of those already on the waiting list—and provide vouchers to eligible individuals—before reopening waiting lists to new applicants. During open application periods, applicant households may encounter processes and requirements that vary amongst PHAs. Applying for a voucher from a local PHA may take place in person or online, while PHAs may determine an applicant’s priority to receive a voucher by varying methods, such as a random lottery amongst all applicants, or on a first-come-first-serve ordering of when applicants applied. Moreover, PHAs can establish local preferences for selecting applicants from their waiting lists. For example, PHAs may give preference to a household that (1) is homeless or living in substandard housing, (2) is paying more than 50 percent of its income for rent, or (3) has an older-adult household member. Regardless of methods to determine eligibility, apply for, and obtain a voucher within the HCV program, it is free to participants. When an open application period ends and before determining household eligibility, PHAs may initially put applicant households on a waiting list. Because the demand for vouchers may exceed the supply available to the local PHA, households that have already waited to apply to the program may also wait years to receive a determination of eligibility and receive a voucher. After receiving a voucher, households must find eligible private- market rental housing within a limited time frame. A PHA will make contact with and issue a voucher to a household that is determined to be eligible and is subsequently selected from the waiting list. Households receiving vouchers use them to subsidize their rents in private apartments or houses available in the rental market. Households must find housing quickly—generally within 60 days— unless the PHA grants an extension. In some cases, PHAs direct voucher holders to websites dedicated to rentals in the HCV program, where private landlords list available units. When a voucher-holding household finds a unit that it wishes to occupy—and reaches an agreement with the landlord over the lease terms—the PHA inspects the dwelling and determines whether the rent requested is reasonable. To be eligible, a rental unit must meet HUD minimum housing-quality standards, and must provide an acceptable level of health and safety. After the unit is inspected and deemed eligible, the household signs a contract with HUD, and both HUD and the household sign contracts with the landlord. The contract stipulates that the PHA will make the housing-assistance payment to the landlord and the household will pay the difference between the housing-assistance payment and the rent. Landlord participation in the HCV program is free, and landlords do not pay to maintain compliance with the program. Moreover, the HCV program provides for the use of vouchers across locations. Once a household receives a voucher, it may use the voucher in any location in which a PHA administers the voucher program, as long as it remains eligible. Reported fraud schemes against program participants—including prospective applicants, individuals on waiting lists, current voucher holders, and landlords providing rental units—can occur at each point in the HCV application and rental process, according to program officials and our analysis of FTC complaint data. On the basis of our reviews of fraud alerts issued by PHAs and complaints submitted to the FTC, the type of fraud that participants, including older adults, may encounter depends on where they are in the process and whether they are landlords or renters. Fraudsters perpetrate reported schemes in a variety of ways, such as through in-person impersonation of PHA staff or by manipulating telephone numbers to convince landlords to make unnecessary payments. Reported types of fraud schemes and when they could potentially occur in the HCV application and rental process are displayed in figure 2. As shown in figure 2, various reported fraud types can be carried out against HCV participants. While some fraud types are specific to the HCV program, participants may also be victims of general rental-housing fraud. The reported fraud types, which we identified through interviews with PHAs and others and through an analysis of PHA fraud alerts and Consumer Sentinel complaints, include the following: Waiting-List Placement Fraud. In online or in-person settings, fraudsters may claim they can provide a voucher, place applicants onto a waiting list, or move individuals to a higher position on the waiting list. In exchange, fraudsters may request a payment, or may request information (such as name, credit-card number, and e-mail address) that may put participants at risk of credit-card fraud or identity theft. Waiting lists maintained by PHAs may open infrequently, and program application processes and requirements vary from location to location. Reported fraud schemes may take advantage of applicant unfamiliarity with program rules, and target those seeking to enter the program or awaiting a voucher. Rental-Advertisement Fraud. Because they rent in the private market, voucher holders are susceptible to online rental-fraud schemes. Those who place online rental advertisements may request wire transfers from prospective renters to secure fake rentals, or steer potential renters to suspect credit-reporting services that offer commissions to the scammers or realtor services that charge users a onetime or recurring monthly fee. Side-Payment Fraud. Officials from PHAs and other organizations characterized side payments as two distinct activities—alternatively, as landlord fraud against tenants on one hand, and mutually beneficial agreements between tenants and landlords on the other. In exchange for property rental or successful inspection, landlords or building inspectors may fraudulently request additional payments or pressure participants for other favors from voucher holders. Landlords may ask tenants for a monthly payment above the agreed rent, or may require HCV participants to pay for utilities when not required to in their rental agreement. For example, a Midwest PHA we interviewed reported being aware of coercive demands by landlords for side payments or sexual favors in exchange for a rental unit. Side payments may also be a mutual arrangement between landlord and voucher holders. For example, voucher holders may make a payment above their monthly rent—in violation of program rules—and in exchange the landlord agrees not to report that there are unauthorized occupants living in the unit, again in violation of program rules. A West Coast PHA we interviewed characterized most side payments it is aware of as mutual agreements of this type. Security-Deposit Fraud. Because they rent in the private market, voucher holders may encounter fraudsters advertising a rental and requiring a security deposit from one or several prospective renters even if there is no rental unit available or only one of the prospective renters will ultimately obtain the rental. Program-Compliance Fraud against Landlords. Fraudsters may take advantage of landlord unfamiliarity with HCV program rules. In calls to HCV program landlords, fraudsters mask their phone number with that of the local PHA, and direct the landlords to make a credit-card payment over the phone to purchase materials or to make a payment in order to remain in compliance with program rules. An overwhelming majority of surveyed PHAs did not report awareness of any occurrences of most fraud types that could affect HCV program participants, while those that were aware of fraud against participants reported few instances, according to our survey results and interviews. We surveyed a nationally representative sample of PHAs representing approximately 1.9 million households. We inquired about incidents occurring within their area of jurisdiction from spring 2016 through spring 2017. We asked about fraudsters promising placement onto or a higher place on a waiting list, selling vouchers, stealing security deposits, or offering suspect credit-report services; voucher holders and landlords engaging in side payments; and landlords and building inspectors illegally soliciting favors. Apart from incidents of side payments (discussed in detail below), on the basis of PHA responses to our survey we estimate that between 3 and 10 percent of all PHAs with 1,000 or more vouchers were aware of any occurrences of the types of fraud schemes included in our survey (see fig. 3). Further, when PHAs were aware of such fraud schemes, most reported between 2 to 5 cases in their local area of jurisdiction from spring 2016 through spring 2017. Our other sources of evidence were consistent with our survey results. For example, we interviewed officials with two PHA associations—representing approximately 1,900 total PHAs—about fraud against HCV participants (other than side payments). The associations reported that they were unaware of widespread instances of these types of fraud against participants. PHAs were much more likely to report awareness of incidents of side payments than the other types of fraud included in our survey, according to our analysis of survey responses. As noted above, side-payment fraud involves agreements—mutual or compelled—in which the voucher holder pays additional rent or other payments to the landlord in return for benefits, to secure a rental, or to avoid eviction. On the basis of survey responses, we estimate that 41 percent of all PHAs with 1,000 or more vouchers were aware of incidents of side payments in the prior year, as shown in figure 3 above. Of PHAs reporting side payments, we estimate that the vast majority (93 percent) were aware of 1 to 10 instances of side payments in the prior year (spring 2016–spring 2017), with most reporting between 2 and 5 incidents in the past year. Further, we estimate that 7 percent were aware of 11 or more instances in the prior year. Officials from all eight PHAs we interviewed similarly told us that they were aware of side payments, but some said that participants rarely report cases of side payments to them. Because violation of HVC rules could result in termination of a lease or loss of voucher for the recipient, it is possible that side payments are not always reported to PHAs. Two experts providing legal services to low-income individuals said that, in regard to fraud affecting HCV participants, landlord requests for side payments is relatively more common than other types of fraud. In addition, a current voucher holder told us about personal experiences involving requests for such payments by landlords, but also said that he or she had not experienced any other types of fraud. In response to our open-ended survey question on other fraud not specifically mentioned in the survey, three PHAs in two regions reported variations of a type of fraud that intends to convince landlords that they are not in compliance with HCV rules, and that they must make a payment over the phone. Although this type of fraud was not included explicitly in our survey and is therefore not included in figure 3 above, in survey comments one West Coast PHA and two PHAs in the Southeast reported instances of this type of fraud. In open-ended survey comments, a West Coast PHA reported being aware of two attempts of similar fraud, in which fraudsters called landlords and asked them to make a credit-card payment over the phone to maintain program compliance. Similarly, two southeastern PHAs also reported being aware of instances of similar fraud schemes in the last year, although neither provided the number of cases reported to them. Furthermore, another West Coast PHA that was not included in our survey issued an online alert about scammers calling landlords, masking their actual phone number with the PHA’s phone number, and stating that in order for the landlord to maintain program compliance, the landlord must make a credit-card payment over the phone to purchase a program manual. In an interview, officials from this PHA reported being aware of 36 attempts of this fraud type against landlords from September 2015 to April 2017. According to PHA officials, fraud schemes generally have not targeted older-adult HCV participants. In survey responses, a limited number of PHAs reported fraud against older adults. For example, we estimate that of PHAs reporting awareness of side-payment schemes, very few PHAs (about 8 percent) were aware of instances in which landlords targeted older adults in side-payment requests. Moreover, an official from one PHA we interviewed stated that because older adults are likely to have advocates helping them to find housing, they are less likely than other HCV participants to be victims of fraud. Similarly, one expert providing legal services to older adults in the HCV program indicated that project- based participants—who rent units only in specific buildings—are more likely than HCV participants to be targets of in-person fraud because they are located in identifiable properties. Several PHAs issued fraud alerts about schemes against participants, but officials at PHAs we interviewed about some of the alerts told us that incidents of these fraud types were limited. Specifically: A Midwestern PHA issued an alert about an individual promising a voucher for a fee and meeting victims in person to receive payment. In a follow-up interview, PHA officials stated that, in total, they received five to seven reports about this fraud. Each of these cases occurred while the PHA’s waiting list was open in 2015. A nearby PHA also reported that when its waiting list was open in 2011, an individual with fake PHA credentials fraudulently took payment from individuals and promised to move them to the top of the waiting list. The PHA was aware of 10 individuals who were victims of the fraud, and estimated that they each paid about $200 to the perpetrator. A West Coast PHA issued an alert about a website charging applicants to submit a program application. However, in an interview the PHA reported awareness of only one case over the last 3 years of fraud committed by outside parties against voucher participants. Although instances of fraud against HCV participants reported to PHAs appear relatively rare, participants who provide personal information to unknown individuals are still at risk for identity theft, according to some experts we interviewed. Two identity-theft experts stated that credit-card fraud is likely if individuals enter payment information in unverified sites. Furthermore, one expert stated that low-income individuals can be targets for identity theft because fraudsters can use stolen identities with low credit scores to obtain high-interest loans that they do not intend to pay off. In covert testing using undercover tools and techniques, we found no indicators of fraud in rental advertisements posted online, and few indicators of fraud in commercial websites offering information to participants about the HCV program. Through our online covert testing, we found no indicators of potential fraud in 350 advertisements—selected using a random-selection methodology—posted in online marketplaces across six cities. On the basis of an academic study of online fraud schemes on rental marketplaces and information provided by PHAs, we developed a list of indicators of potential fraud. These indicators include requests for a wire transfer of security deposit or first month rent without offering to provide an in-person viewing of the property, or requesting an up-front or monthly side-payment agreement as a condition of rental. In searches of one rental website, we came across a small number of advertisements that initially appeared to contain an indicator of potential fraud—specifically, links to a website for specialized realtor services; covert testing of that link did not find further indicators of potential fraud. None of the 26 commercial websites we covertly tested contained text explicitly stating that they would place or move someone up a waiting list for a fee. Further, in e-mail correspondence with every website, we asked whether they could help place us on a waiting list. Some website operators never replied and some stated they could not do so, with none agreeing to place us on a list. However, some websites used HUD’s Equal Housing Opportunity logo, which might make them appear to be associated with official government programs, while others requested payment for suspect services and products. For example: One PHA fraud alert specifically named one of the websites we tested covertly, and indicated that the website fraudulently offered to submit an application for the HCV program for a onetime registration fee. Our covert testing found that this website displayed HUD’s Equal Housing Opportunity logo, and charges a fee for a “guide” about the voucher program, but at the time of our testing the website did not offer to submit an application for a fee. Payment to the website resulted in access to a guide and online forum containing a list of open PHA waiting lists for the HCV program and links to publicly available PHA websites. One website we covertly tested requested payment for an e-book guide to assist with the HCV application process. We made payment but never received the e-book. One website subject to covert testing stated that landlords in the HCV program may deny or refuse to rent to a potential tenant based on his or her credit-report information, and referred us to a suspect website offering credit reports. The website claimed to offer a “free credit report” and requested personal information including a Social Security number and credit-card number. As part of our covert testing, we provided a credit-card number. We also entered all zeroes as a Social Security number on the site, prompting the site to state that it could not provide us with a credit report, as we had not provided a valid Social Security number. Despite that fact, the site charged our credit card a recurring payment. In a phone call, a representative of the website stated that, in the terms-of-use for the website, users are informed that they must explicitly request that recurring payments be terminated or that those payments would continue. HUD regulations and guidance and PHA informational materials pertinent to fraud primarily focus on protecting the HCV program rather than protecting participants from fraud committed by external parties. For example, where the regulations mention fraud explicitly, it is generally in relation to mitigating program violations by owners and voucher program participants, recovering program losses from fraud, and assessing participants, applicants, and owners for participation or continued participation in the program. Apart from requiring that PHAs inform participants about a prohibition against side payments to landlords (a program rule violation), HUD’s antifraud guidance, as outlined in the Housing Choice Voucher Program Guidebook, generally focuses on preventing fraud against the program, as opposed to fraud against participants. For example, an applicant misrepresenting income and assets to obtain an HCV voucher and a landlord bribing a PHA employee to approve substandard rental housing are types of program fraud. See figure 4 for examples of HCV program- related fraud listed in the guidebook. Education and outreach requirements for PHAs specified in the HCV guidebook largely focus on providing adequate public notice of waiting-list openings; an oral briefing when the PHA selects a family to participate in the program; and a written briefing packet for participants, which must include a variety of subjects related to program administration, leasing a unit, and family obligations. Consistent with the guidebook, written or online briefing materials from the eight PHAs we interviewed mention various types of program violations. All but one specifically state that side- payment agreements between landlords and tenants are prohibited, which, as discussed above, can be viewed as both fraud affecting the participant and against the program. HUD directs PHAs to inform participants that landlord–participant side payments are prohibited. HUD provides guidance on how a PHA should handle a situation in which the landlord is collecting side payments. If the PHA finds that the landlord is collecting side payments, the PHA must notify the landlord to immediately cease collecting these payments and require repayment to the tenant of the full amount collected. The PHA must determine whether the landlord also collected side payments from other participants and follow up to require repayment. The amount can be repaid by offsetting the amount due against future housing-assistance payments. At its discretion, the PHA may terminate the housing-assistance payments contract with the landlord immediately, even if the landlord has repaid amounts due the tenant, but the PHA must cancel the contract if the landlord fails to repay. Although not required, several PHAs we visited or contacted voluntarily provided informational materials to program participants that included targeted messages and alerts notifying them of certain housing- assistance fraud by outside parties, such as voucher-sale fraud, or fraud involving being placed on or moved up a waiting list. For example, in program briefing documents given to participants, a northeastern PHA warns participants of housing-assistance scams, and specifically advises participants not to pay to, among other things, (1) be placed on or be moved up a waiting list or (2) receive an HCV voucher or voucher extension; a different northeastern PHA advises HCV participants not to give their voucher to anyone, including the apartment owner, agent, or property manager; and not to give any money to the apartment broker, owner, or agent until the PHA approves the selected apartment; and a West Coast PHA advises HCV applicants and participants to be aware of fraud, particularly schemes that require a payment to file an application or to move up a waiting list. In addition, PHAs share best practices that could include these and other issues. For example, two industry associations representing approximately 1,900 PHAs provide mechanisms for PHAs to share information and best practices about HCV administration and issues affecting HCV program participants and their communities. Both regularly hold conferences, meetings, and other events that provide a venue for members to discuss relevant issues. In addition, one of these associations has published reports on issues affecting older adults and connecting housing and community services, among other issues, while the other published a report on issues related to rental reform proposals. We provided a draft of this report for review and comment to HUD, FTC, the Consumer Financial Protection Bureau, the Department of Health and Human Services, and the U.S. Postal Service. We received e-mails from HUD, the Consumer Financial Protection Bureau, and the Department of Health and Human Services in which liaisons to GAO for those agencies stated they had no comments on the report. We received technical comments from FTC and the U.S. Postal Service, which we incorporated in the report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Housing and Urban Development, the Federal Trade Commission, the Director of the Consumer Financial Protection Bureau, the Secretary of Health and Human Services, and the Postmaster General of the U.S. Postal Service. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-6722 or shear@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. In this report, we describe (1) the types of reported fraud schemes committed against Housing Choice Voucher (HCV) participants (including older adults), awareness by Public Housing Agencies (PHA) and other relevant organizations of fraud incidents and how often they occur, and indicators of such schemes online; and (2) antifraud regulations, guidance, and informational materials, if any, that the Department of Housing and Urban Development (HUD) and PHAs have in place to identify and mitigate fraud against program participants. To address our first objective we used a variety of methods (see fig. 5). Details on our use of these methodologies are described below. Some PHAs issue online alerts and post these on their websites to inform HCV applicants and participants about potential fraud schemes. We initially identified PHA fraud alerts by performing online searches about fraud in the HCV program. We then developed a structured search method for identifying additional fraud alerts. To do this, in 2016 and 2017, we searched fraud alerts issued by a nongeneralizable sample of 60 PHAs; in total, 20 PHAs published 22 alerts about fraud affecting HCV applicants and participants on their websites. We identified our nongeneralizable sample of 60 PHAs using 2015 fourth- quarter Picture of Subsidized Households data from HUD, which contain information on subsidized housing units by several types of programs including the HCV program. The initial population contained PHAs ordered by total number of HCV program vouchers available. We selected our sample of PHAs based on those with the most vouchers. We reviewed consumer complaint data from the Federal Trade Commission’s (FTC) Consumer Sentinel database from calendar years 2011 through 2016. The date range of the data represents the most- recent years available at the time of our request. Our review of the data focused on complaints related to the HCV program and companies that offer rental housing services. We assessed the reliability of the data by interviewing officials and reviewing related documentation and found the data sufficiently reliable for the purposes of our reporting objectives. We developed several categories for reviewing complaints based on criteria on fraud schemes affecting HCV program applicants and participants. To develop an initial list of categories, we selected a subsample of the first entries in the data and independently created categories that could be used to categorize the complaints in the subsample. On the basis of this methodology, we identified a set of defined coding categories, which were as follows: 1. HCV-specific fraud, 2. housing-related fraud (HCV not mentioned), 3. housing-related fraud involving the purchase of foreclosed property, 4. housing-related credit-report fraud, 5. housing-related fraud requesting electronic wire transfer of funds, 6. HCV-specific complaints where fraud is not mentioned or the nature of 7. housing-related complaints where fraud is not mentioned or the nature of fraud is unclear, and 8. complaints not related to the scope of the engagement. We also separately coded whether the subject matter of each complaint specifically affected an older adult. We applied a two-person data-coding process to ensure intercategorization reliability. FTC delivered the data to us in batches organized along search terms we provided. For several of the initial batches we received, as a first step in the coding process, a coder categorized each complaint into one of the categories above, and simultaneously identified any complaints that contained relevant housing- related or HCV-related fraud types that we had not already discovered. As a second step, a reviewer assessed a nonrandomized sample of the data to determine whether coding was correct, and whether the coder had identified any previously unknown fraud types in the batch. We repeated this process for three of the five batches that we received, and reviewed over 600 total complaints. Upon finding no new fraud types in the coded data, we ceased analysis and did not code the remaining two batches we received, which we deemed to contain complaint categories unlikely to reveal new types of fraud. We also interviewed PHA officials from eight PHAs (selected using a methodology discussed below). Additionally, we reviewed an academic study describing fraud against prospective renters in online marketplaces, which allowed us to identify several fraud types that could be used against HCV participants searching for rental units. The study used crawling and automated interaction to identify fraud types. We interviewed an author of the study to clarify research techniques. We assessed that the individual was sufficiently independent. Our methodological specialist assessed the study, and found its conclusions to be sufficiently valid and reliable for our purposes. We conducted a web-based survey with a nationally representative stratified random sample of executive directors overseeing PHAs. In the survey, we asked PHA executive directors and their staffs to provide information on known fraudulent activities by fraudsters or impersonators, fraudulent activities by landlords and building inspectors, and any other information on fraudulent activities adversely affecting HCV program applicants and participants from spring 2016 through spring 2017. We administered our survey from April to May 2017. Estimated percentages of the responses for all closed-ended questions from the survey are included in appendix II. We identified the population of PHA executive directors using 2015 fourth-quarter Picture of Subsidized Households data from HUD, which contain information on subsidized housing units by several types of programs including the HCV program. The Picture of Subsidized Households data also contain the percentage of households using these programs by factors such as age, income, and disability. We assessed the reliability of the data for use as our sampling frame by reviewing technical documentation, conducting electronic testing, and interviewing officials who oversee the data system; we found the data sufficiently reliable for our purposes. Our initial population list contained a total of 2,243 PHA executive directors, and our sample contained 278 PHA executive directors. We stratified the population by size of PHAs as follows: We drew (1) a certainty sample of 83 executive directors who oversaw at least one PHA with 5,000+ vouchers (“large” PHAs) and (2) a probability sample of 195 executive directors who oversaw at least one PHA with 1,000–4,999 vouchers (“medium” PHAs). For purposes of discussion, we refer to the experiences of PHAs in our analysis, although our sampling unit was the executive directors of the PHAs. To formulate our survey questionnaire on the types of fraud potentially adversely affecting HCV program applicants and participants, we conducted research on the topic of fraud by interviewing PHA officials, reviewing fraud alerts publicly posted on the Internet by large PHAs, and reviewing consumer complaint data. On the basis of the results of our research, we developed our survey questionnaire to include questions on external fraud such as (1) fraudsters or impersonators promising placement on a voucher waiting list, (2) fraud offering higher placement on voucher waiting lists, (3) fraud offering fake vouchers, (4) fraud offering suspect credit-report services, (5) landlords requiring prohibited side payments, (6) illegal solicitation of favors by landlords and building inspectors, and (7) illegal solicitation of rental-unit security deposits by landlords. We pretested our survey instrument with four PHAs located in Maryland, Michigan, Ohio, and Virginia. We revised our questionnaire language and format based on input received by officials in these four PHAs in order to improve the clarity of the questions. An independent survey specialist within GAO also reviewed a draft of the questionnaire prior to its administration; it is available in appendix II. We administered a web-based questionnaire accessible through a secure server. When we completed the final survey questions and format, we sent an e-mail announcement of the survey to 278 PHAs in April 2017. The PHA points of contact were notified that the questionnaire was available online and were given unique passwords and usernames. We sent follow-up e-mail messages twice in May 2017 to those who had not yet responded. We contacted remaining nonrespondents by telephone, beginning in May 2017. The questionnaire was available online until mid- May 2017. We obtained a weighted overall response rate of 84 percent, and the response rate by stratum was 86 percent for our first stratum (“large” PHAs) and 83 percent for our second stratum (“medium” PHAs). Because we followed a probability procedure on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 10 percentage points). This interval would contain the actual population value for 95 percent of the samples we could have drawn. Confidence intervals are provided along with each sample estimate in the report. All survey estimates presented in this report are generalizable to the population of large and medium PHAs, or to either the population of large PHAs or medium PHAs analyzed separately. Unless otherwise noted, estimates for the full population of large and medium PHAs have a margin of error for a 95 percent confidence interval within +/-4.5 percentage points or less. Unless otherwise noted, estimates for the medium PHAs analyzed separately have a maximum margin of error for a 95 percent confidence interval of +/-5.4 percentage points or less. Unless otherwise noted, estimates for the large PHAs analyzed separately have a maximum margin of error for a 95 percent confidence interval of +/-4.5 percentage points or less. Some questions had too few respondents to generate reliable estimates. In these cases, we report the raw frequencies of respondents to our survey. To minimize nonsampling errors, and to enhance data quality, we employed recognized survey design practices in the development of our survey questionnaire and in the collection, processing, and analysis of the survey data. To minimize errors arising from differences in how survey questions might be interpreted and to reduce variability in responses that should be qualitatively the same, we conducted pretesting of our survey questionnaire; see discussion on pretesting above. To reduce nonresponse, a source of nonsampling error, as mentioned above we followed up by e-mail and by telephone with PHAs who had not responded to the survey to encourage them to complete it. To analyze open-ended comments provided by those responding to the survey, we conducted a content analysis for the purpose of identifying fraudulent activities against HCV program participants not addressed in our survey questionnaire. We analyzed open-ended responses to identify fraud types not directly addressed in our survey. We identified two additional types of fraud. One type of fraud involved fraudsters posing as PHA officials, calling landlords to convince them to make unnecessary payments. This type of fraud against landlords is discussed in the report. The other type of fraud identified was not related to participation in the HCV program, and so is not discussed in the report. As part of our site visits, we interviewed officials from eight PHAs located in three U.S. regions. On the East Coast, we interviewed officials with the New York City Department of Housing Preservation and Development, the New York City Housing Authority, and New York State Homes and Community Renewal. In the Midwest, we interviewed officials with the Cuyahoga Metropolitan Housing Authority, the Detroit Housing Commission, and the Flint Housing Commission. On the West Coast, we interviewed officials with the Housing Authority of the County of San Bernardino and the Housing Authority of the City of Los Angeles. We identified our interviewee selection on the basis of ensuring geographical representation, budgetary considerations, metropolitan cities with a large population, PHAs’ issuance of fraud alerts, PHA size—large, medium, and small, PHA in states with a large number of older adults, and consideration for overlap of other GAO ongoing work in the area of the HCV program. Our sample of PHA interviewees is nongeneralizable. Moreover, we interviewed an HCV voucher holder about the voucher holder’s knowledge of fraud against participants. We also interviewed government and nongovernment officials and others based on their knowledge and expertise on the topic of fraud in general; fraud education campaigns; fraud adversely affecting HCV program applicants and participants; fraud affecting older adults; or identity theft. Specifically in reference to government agencies, we interviewed officials from the U.S. Federal Trade Commission (FTC), the Consumer Financial Protection Bureau, the U.S. Postal Inspection Service, and the Department of Health and Human Services about fraud types and about practices used by federal agencies to inform the public about fraud- related issues. We also interviewed officials from the HUD Office of Inspector General (OIG) about any past or ongoing work related to the scope of our reporting objectives. For our interviewee selection, we considered recommendations from other organizations such as PHAs and legal-assistance organizations and reviewed prior GAO work on the issue of older-adult financial exploitation. We also considered organizations’ characteristics in terms of fraud prevention or work performed in assisting potential fraud victims. These characteristics include whether the organization has an investigative unit that may have data on fraud schemes, posts fraud alerts on its Internet websites, has data on fraud cases, collaborates with other groups on fraud awareness, has a fraud or complaint hotline, works on fraud prevention and provides support to victims of fraud, or works with vulnerable populations including low-income individuals or the older-adult population on social or legal issues. On the basis of an academic study about fraud in online rental marketplaces (discussed above) and PHA-provided information, we developed a list of indicators of potential fraud that might appear in online advertisements. We used covert tools and techniques to test a nongeneralizable sample of advertisements posted on commercial websites commonly used by HCV voucher holders and landlords for rental property listings, counting advertisements as potentially fraudulent if the originator of the advertisement did any of the following: Requested a wire transfer of security deposit or first month’s rent, or both, without offering to provide an in-person viewing of the property. For example, the person who posted the advertisement might state that the rental is available, but that the person is currently not in the country. Provided a link to a suspect credit-report site within the advertisement or subsequent correspondence. While requiring a credit report is a normal part of the rental process, fraudsters may post a fake rental advertisement and redirect victims to a credit-score company. If the victim pays for the credit score, the credit-score company will pay the fraudster a commission. Stated in correspondence that the rental unit is no longer available, but recommended a suspect site providing rental search, broker services, or monthly payments toward purchase of a foreclosed property. Requested an up-front or monthly side-payment agreement as a condition of rental. Included an e-mail address directly in the text of the ad. According to one academic expert on fraud, it was rare to see a legitimate advertisement poster embed an e-mail address in a post, because most people do not want to expose that information on the Internet. Advertisements or correspondence containing an indicator of fraud do not necessarily reveal the presence of a fraud scheme. For example, the presence of an e-mail address directly in the text of an advertisement may also indicate that the advertisement was posted by a realtor service. We selected 6 geographically diverse cities nationwide for covert testing of online rental advertisements. To generate a list of cities for possible selection, we identified cities containing the 20 PHAs with the largest number of HCV vouchers. We identified one commonly used online housing-rental marketplace for the general public and another online rental marketplace specifically dedicated to HCV rentals. We then determined the total number of advertisements available across the two rental websites in those cities. We used the following criteria to select cities for covert testing: From the 20 cities described above, we selected 3 cities with the most available advertisements across the two online rental marketplaces. From the 20 cities described above, we selected 2 cities where a nearby PHA had closed its HCV waiting lists in the last half of 2016. Outside of the 20 cities described above, we also selected 1 city with a large number of available advertisements where we had previously completed a site visit. In each metropolitan area selected for covert testing, we identified relevant online rental marketplaces operating in the area. We then used a random-selection methodology to identify advertisements for testing from amongst all current advertisements on each marketplace. In total, we responded to 350 advertisements. On sites specifically dedicated to HCV rentals, we generally sampled from among all current ads. On sites featuring a mix of private rental ads, we developed a list of search keywords and sampled only among ads that explicitly stated that they would accept an HCV voucher. By e-mail, we contacted the originator of each of the 350 advertisements we covertly tested and engaged in correspondence. To determine the extent of detected potential fraud in online sites, we covertly tested websites identified as offering information or assistance with the HCV program; note that this methodology is distinct from that described above to covertly test advertisements. To discover sites for investigation, we performed web searches with a variety of relevant search terms using two popular search engines. We clicked through the first few pages of each set of search results, and collected the names of commercial sites that appeared either within search results or in ads accompanying the results. Finally, we entered the address of each of the websites we found into a separate search portal. This search portal suggests possible competitor and similar websites for the target website; we added websites discovered through this method to our list of websites for investigation. In total, we tested 26 websites. If the website requested a payment of any kind, we made the payment. We also corresponded with each website, asking explicitly whether it could place us on an HCV waiting list. To address our objective regarding antifraud regulations, guidance, and informational material, if any, that HUD and PHAs have in place to identify and mitigate potential fraud against program participants, we reviewed HUD regulations on the HCV Program and the Section 8 Management Assessment Program. These regulations outline the requirements for PHAs to perform education and outreach on the HCV program. We also reviewed HUD’s HCV Program Guidebook. This guidebook provides direction to PHAs administering the HCV Program on informing applicants about program-related fraud. We also reviewed written or online briefing materials for participants developed by the eight PHAs we interviewed. These briefing materials must include a variety of subjects, related to program administration, leasing a unit, and family obligations. We conducted this performance audit from May 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work from January 2017 to July 2017 in accordance with investigative standards prescribed by the Council of the Inspectors General on Integrity and Efficiency. To determine awareness of incidents of fraud schemes among PHAs, we conducted a web-based survey to a nationally representative sample of executive directors overseeing Public Housing Agencies (PHA) from April 2017 to May 2017. We solicited input on executive directors’ familiarity with and awareness of fraud schemes against U.S. Housing and Urban Development (HUD) Housing Choice Voucher (HCV) Program applicants and participants. We distributed the survey to 278 PHAs, of which 233 (84 percent) responded. We stratified the population by size of PHA as follows: (1) a certainty sample of 83 executive directors who oversaw at least one PHA with 5,000+ vouchers (“large” PHAs); and (2) a probability sample of 195 executive directors who oversaw at least one PHA with 1,000–4,999 vouchers (“medium” PHAs). Results of our survey are generalizable to the entire population of large and medium PHAs. For a more-detailed discussion of our survey methodology, see appendix I. The results of our survey provide the input of PHA executive directors and their staffs at the time they completed the survey in April and May 2017. The questions we asked in our survey are presented below. Our survey comprises seven top-level, fixed-choice questions; three subquestions for each “yes” response to top-level questions; and one open-ended question. In this appendix, we include all survey questions, and the estimated percentages for the responses to the top-level questions. Because of the limited number of respondents answering “yes” to the top- level survey questions, we could not generate reliable estimates for the survey subquestions; therefore we present only raw frequency counts for all subquestions except those corresponding to survey question 5 where we present both estimated percentages and raw frequency counts for those responses. In our survey open-ended question, we asked PHA executive directors to provide information on fraudulent activities affecting HCV program participants other than those covered by the seven fixed-choice questions. This element was our attempt at identifying fraud types not directly addressed in our survey. While we are not providing the responses to the open-ended question, our analysis of those responses identified two additional types of fraud. One type of fraud involved fraudsters posing as PHA officials, calling landlords to convince them to make unnecessary payments. The other type of fraud identified was not related to participation in the HCV program, and so is not discussed in the report. Tables 17–23 below present results for PHAs that responded “yes” to question 5. Because of the number of respondents answering “yes” to question 5, we were able to generate reliable estimates for question 5 subquestions and present both estimates and raw frequency counts. In addition to the contact named above, Kathy Larin (Director), Tonita Gillich (Assistant Director), Scott Hiromoto (Analyst-in-Charge), Maurice Belding, Yue Pui Chin, Colin Fallon, Dennis Fauber, Maksim Glikman, Ronald La Due Lake, Jill Lacey, Won Lee, Robert Letzler, Barbara Lewis, Olivia Lopez, Maria McMullen, Anna Maria Ortiz, Sabrina Streagle, Adam Windram, and Helina Wong made key contributions to this report. Also contributing were Marcus Corbin, Cory Marzullo, Wayne McElrath, Josephine Perez, Samuel Portnow, and Paul Schmidt.", "summary": "With the goal of providing safe, decent, affordable housing, HUD provides rental assistance to low-income households through its HCV program, administered locally by approximately 2,200 PHAs around the country. In fiscal year 2016, the HCV program received approximately $20 billion in funding and provided rental assistance to approximately 2.4 million households. Local demand in the program may exceed voucher supply, and individuals may wait years before receiving a voucher. After receiving a voucher, participants have a limited amount of time to secure a rental. Accordingly, PHAs have issued alerts about criminals targeting program participants with fraud schemes, such as by claiming to offer admission to the program for a fee. This report describes (1) the types of reported fraud schemes against HCV participants, including older adults, PHAs' awareness of such schemes and their frequency, and indicators of such schemes online; and (2) HUD's and PHAs' antifraud regulations, guidance, and information related to fraud risks affecting program participants. GAO reviewed online fraud alerts and consumer complaint data from calendar years 2011 to 2016; conducted a generalizable survey of PHA officials about their awareness of fraud against participants; interviewed agency officials and experts; and conducted online covert tests of 350 rental ads and 26 commercial websites. GAO visited eight PHAs, selected based on size and location, among other factors. GAO is not making recommendations in this report. HUD had no comments on a draft of this report. Public Housing Agencies (PHA) have reported various types of fraud schemes against Housing Choice Voucher (HCV) participants, including older adults, but were aware of limited instances of such schemes. Similarly, GAO identified few potential indicators of these schemes in online covert testing of rental ads and websites. According to GAO's analysis of fraud alerts and complaint data, the type of fraud participants may encounter—such as waiting-list, rental, and side-payment fraud—depends on where they are in the HCV process and whether they are applicants, voucher holders, or landlords, as shown in the figure below. For example, side-payment fraud involves agreements—mutual or compelled—in which the voucher holder pays additional rent or other payments to the landlord for benefits, for example to secure a rental or avoid eviction. According to GAO's survey of PHAs representing approximately 1.9 million households, PHAs reported few incidents of the various fraud types, although side-payment fraud, a program violation, was noted most frequently. Specifically, GAO estimates that while 41 percent of PHAs were aware of instances of side-payment fraud in the prior year, most reported 2 to 5 incidents in the prior year. In addition, 3 to 10 percent of PHAs were aware of instances of the other types of fraud GAO identified. GAO's online covert testing also found few indicators of potential fraud. For example, some websites requested payment for information about the HCV application process, but none explicitly offered to do something prohibited by program rules, such as placing someone on a waiting list for a fee. The Department of Housing and Urban Development's (HUD) and PHAs' antifraud regulations, guidance, and information largely focus on efforts to protect the HCV program. For example, PHAs are required by HUD to inform families of program-related fraud and abuse, including the prohibition against side payments. In addition, GAO found that several PHAs voluntarily provide targeted messages to participants about fraud schemes by outside parties. Through industry associations, PHAs have mechanisms through which they share best practices that could include these and other issues.", "document_type": "gao"}
{"report": "In 2017, about 2,250 general acute care hospitals in the United States were located in areas that met FORHP’s definition of rural; these rural hospitals represented approximately 48 percent of hospitals nationwide and 16 percent of inpatient beds. These hospitals were spread across the 84 percent of the United States land area that FORHP classified as rural, and served the 18 percent of the United States population that lived in these areas. While there are significant differences across rural areas and populations, as a whole they differ from their urban counterparts in several ways. For example, rural areas have the following characteristics: Higher percentage of elderly residents. In 2014, 18 percent of the population was aged 65 or older in rural counties, compared with 14 percent in urban counties. Higher percentage of residents with limitations in activities caused by chronic conditions. In 2010-2011, 18 percent of adults in rural counties had limitations in activities caused by chronic health conditions, compared with 13 percent in large, central urban counties. Lower median household income. In 2014, the median household income in rural counties was approximately $44,000, compared to $58,000 in urban counties. Rural areas have also experienced several changes in recent years that have exacerbated these differences. For example, according to research by the United States Department of Agriculture, rural areas have experienced the following changes: Decreasing population. From 2010 through 2015, the population in rural areas declined, on average, by 0.07 percent per year, while the population in urban areas increased, on average, by 0.9 percent per year. Slow employment growth. From 2010 through 2015, rural employment grew at 0.8 percent per year, less than half that of urban areas (1.9 percent per year). Rural hospital closures are not a recent phenomenon. For example, we previously reported that between 1985 and 1988, 140 rural hospitals closed—approximately 5 percent of the rural hospitals in 1985. The large number of closures in the 1980s was preceded by a change in how Medicare paid hospitals. Specifically, in 1983, Medicare’s inpatient prospective payment system was created, whereby predetermined rates were set for each Medicare hospital discharge. The intent was to control Medicare costs by giving hospitals financial incentives to deliver services more efficiently and reduce unnecessary use of inpatient services by paying a hospital a predetermined amount. However, one consequence of the new payment system was that some small, rural hospitals experienced large Medicare losses and increased financial distress. Partially in response to the number of rural hospital closures, FORHP was established in 1987 to, among other things, advise the Secretary of HHS on the effects of current and proposed policies on the financial viability of small rural hospitals and on access to and quality of health care in rural areas; establish and maintain a clearinghouse for information on rural health coordinate rural health activities within HHS; and administer grants and other instruments to fund activities to improve health care in rural areas. HHS officials identified several rural-specific HHS payment policies and programs as providing key financial support to rural hospitals, and in turn, rural residents’ access to hospital services. These key HHS payment policies and programs may be placed into three categories: (1) Medicare rural hospital payment designations; (2) rural grants, cooperative agreements, and contracts, and (3) new approaches in rural health care delivery and payment (see table 1). Medicare rural hospital payment designations. CMS administers five rural hospital payment designations, in which rural or isolated hospitals that meet specified eligibility criteria receive higher reimbursement for hospital services than they otherwise would have received under Medicare’s standard payment methodology. A rural hospital may qualify as a Critical Access Hospital, Sole Community Hospital, or Medicare Dependent Hospital—each of which has different eligibility criteria and payment methodologies. With the exception of Critical Access Hospitals, rural hospitals may also qualify as Low Volume Hospitals and Rural Referral Centers, in which eligible hospitals receive additional payments or exemptions. The largest of the five designations is the Critical Access Hospital program, which represented 56 percent of rural hospitals in 2017 and pays eligible small, rural hospitals based on their reported costs (instead of the standard rates under the inpatient prospective payment system). (See app. I, table 2, for a description of each of the five Medicare rural hospital payment designations.) CMS was unable to provide estimates of the additional Medicare payments rural hospitals received from each designation in 2017. According to CMS officials, CMS generally does not model the amount of additional Medicare payments resulting from rural hospital payment designations, except in years when there is a related payment policy change going through rulemaking. Rural grants, cooperative agreements, and contracts. FORHP administers multiple grant programs, cooperative agreements, and contracts that provide funding and technical assistance to rural hospitals. The largest of these is the Medicare Rural Hospital Flexibility grant program, in which FORHP provides funds to states to support Critical Access Hospitals to stabilize their finances, foster innovative models of care, and support other improvement activities. In 2017, 45 states received $25 million in Flex grants. FORHP officials noted that they can provide information to help states determine how to best target Flex grant funds, as there is not enough funding to financially assist all Critical Access Hospitals that are at risk of closing. (See app. I, table 3, for a description of the rural grants, and cooperative agreements and contracts identified by HHS officials.) New approaches in rural health care delivery and payment. CMS’s Center for Medicare & Medicaid Innovation (Innovation Center) tests new ways to deliver and pay for health care—including some focused on rural areas—with the goal of reducing spending and preserving or enhancing the quality of care for beneficiaries enrolled in Medicare, Medicaid, and the Children’s Health Insurance Program. As of June 2018, the largest of these rural models and demonstrations was Medicare’s Accountable Care Organization Investment Model. Groups of providers in rural and underserved areas participating in this model, potentially including small hospitals, agree to be held accountable for the cost and quality of care to their Medicare patients. The model tests providing pre-paid shared savings as an incentive for providers in rural and underserved areas to form Accountable Care Organizations and for these organizations to transition to arrangements with greater accountability for financial performance. For fiscal years 2012 through 2018, $96 million had been obligated to organizations participating in the model. Forty-five Accountable Care Organizations were participating in this model as of 2018. (See app. I, table 4, for a description of the new approaches in rural health care delivery and payment identified by HHS officials.) In addition to the HHS payment policies and programs specifically targeting rural areas, HHS officials also identified broader payment policies and programs that they stated can provide key support to rural hospitals and rural residents’ access to hospital services. These HHS payment policies and programs may be placed in four categories: Medicare and Medicaid base payments. These consist of the standard payments for hospitals services. Medicare and Medicaid uncompensated care payments. Both Medicare and Medicaid provide multiple types of additional payments to support hospitals that incur costs for services provided to uninsured and other low-income individuals for which the hospitals are not fully compensated. Medicare also provides bad debt payments to hospitals to reimburse them for a portion of Medicare’s beneficiaries’ unpaid deductibles and coinsurance, as long as the hospital makes a reasonable effort to collect the unpaid amounts. Other targeted HHS payment policies and programs. HHS administers other targeted payment policies and programs that support specific types of providers and areas, including, but not limited to, rural hospitals and areas. In particular, the Health Resources & Services Administration, an HHS agency, administers a drug discount program targeted at certain hospitals and other safety net providers. In addition, CMS administers bonus payments for certain physician services provided to Medicare beneficiaries in areas with a shortage of health professionals. State Innovation Models Initiative. The Center for Medicare & Medicaid Innovation’s State Innovation Models aim to achieve better quality of care, lower costs, and improve health for the population of the participating states or territory. Some states’ plans include testing new delivery and payment models specifically targeting rural areas. HHS monitors rural hospitals’ financial viability and rural residents’ access to hospital services, primarily by funding rural health research centers that track rural hospital closures and study rural residents’ access to hospital services. To monitor rural hospitals’ financial viability, HHS funds and conducts several activities: Tracking rural hospital closures and monitoring profitability. The North Carolina rural health research center, a FORHP-funded rural health research center, tracks rural hospital closures and monitors rural hospitals’ profitability and other financial indicators. North Carolina’s researchers identify rural hospital closures through a multi- party agreement with FORHP, the American Hospital Association, and the National Rural Health Association, each of which alerts the research center once one learns about a closure. Research center staff then confirm the closure and ascertain whether the hospital converted to another facility type by searching the hospital website and calling a community leader, such as the mayor. The North Carolina rural health research center publishes a list of rural hospital closures since 2010 on its website. It also publishes reports on rural hospitals’ profitability, including the extent to which profitability varies by rural hospitals’ characteristics, and how rural hospitals’ profitability compares to the profitability of their urban counterparts. Monitoring Critical Access Hospitals’ financial indicators. The North Carolina rural health research center, through its role as part of the Flex Monitoring Team, develops and monitors various financial indicators for Critical Access Hospitals. Using the hospitals’ Medicare cost reports, the research center currently monitors 22 financial indicators under 6 domains—profitability, liquidity, capital structure, revenue, cost, and utilization. These financial indicator data are available to every Critical Access Hospital through an online tool that also helps those hospitals compare their financial performance to peer hospitals. The Flex Monitoring Team also publishes state-level summary data on Critical Access Hospitals’ finances that are available on its website. HHS also reviews and estimates the financial effect of policy changes on rural hospitals. In particular, FORHP officials review proposed and final rules for Medicare, Medicaid, and the Affordable Care Act’s health insurance exchanges to identify concerns from a rural health perspective. Drawing on the research it funds, FORHP officials may suggest policy modifications to CMS, such as exempting certain Medicare rural hospital designations from a proposed policy change. In addition to FORHP officials’ review, as required by statute, CMS conducts regulatory impact assessments that estimate the effect of policy changes on payments to hospitals, including small rural hospitals, and publishes key results as part of proposed and final rules. For example, as part of the fiscal year 2018 final rule on Medicare payment for hospital inpatient services, CMS estimated that the expiration of the Medicare Dependent Hospital designation would have decreased the payments to rural hospitals with that designation by 0.9 percent, or approximately $119 million. Subsequent to the final rule, the Medicare Dependent Hospital and Low Volume Hospital designations were both extended. To monitor rural residents’ access to hospital services, HHS relies on research conducted by the FORHP-funded research centers. Examples of recent research on rural residents’ access to hospital services conducted by FORHP-funded research centers include the following: Research on rural residents’ access to hospitals. In 2018 the North Carolina rural health research center published an analysis of populations in rural counties without access to an acute care hospital or other types of primary care facilities. North Carolina’s researchers estimated that about 4.4 million rural residents currently live in a county without an acute care hospital. Research on access to specific hospital services. The Minnesota rural health research center conducted a body of research on declining access to obstetric services in rural counties. These researchers found that between 2004 and 2014, the percent of rural counties without hospital obstetric services increased from 45 to 54 percent, through a combination of hospital and obstetric-unit closures. Research on options for ensuring rural residents’ access after a hospital closure. The Iowa rural health research center published a summary of currently available options for ensuring rural residents’ access to hospital services after a hospital closure, and additional policy options under consideration. The National Advisory Committee on Rural Health and Human Services, a 21-member citizens’ panel of nationally recognized rural health experts that advises HHS, also examined this topic, with a focus on alternative models to preserve rural residents’ access to emergency care in light of the recent surge in rural hospital closures. The committee noted that payments and grants to support rural hospitals were largely effective and stabilized rural hospital financial operations until 2013, when a new wave of rural hospital closures began. The report included recommendations regarding the design of alternative models, including that HHS seek public comments on the use of a combination of geographic distance and demographic or social determinants of health when setting eligibility criteria. To supplement the monitoring by FORHP-funded research centers, FORHP officials also track recent rural developments and reports from rural health stakeholders. FORHP officials said this monitoring adds a qualitative component to the quantitative research conducted by research centers. In particular, these activities often provide the first notice of a rural hospital closure or pending closure, and also help track changes to the status of former hospitals over time. HHS uses the results of its monitoring activities on rural hospitals’ financial viability and rural residents’ access to inform related research, primarily conducted by HHS-funded research centers, and to determine future areas of research. For example, the North Carolina rural health research center has used the list of rural hospital closures it compiles and its monitoring of profitability to conduct research on predictors of rural hospitals’ financial distress. In addition, FORHP officials stated that, based on this monitoring, they have added topics to research centers’ agendas for subsequent years to gather more information on regulatory changes identified in its review of policy changes. Each year, specific research projects for the rural health research center are selected jointly by the center directors and FORHP. Topics are selected to have a timely impact on policy debates and decisions at both federal and state levels. Examples of added topics include North Carolina’s research on the financial importance of the Sole Community Hospital and Low Volume Hospital designations and Iowa’s research on the engagement of rural providers in Accountable Care Organizations. HHS has also used the results of its monitoring activities to update the types of services offered by certain grants and create new cooperative agreements for technical assistance. Specifically, for fiscal year 2016, FORHP officials updated the list of activities that Rural Health Network Development Planning grantees can spend funds on to include implementing innovative solutions to alleviate the loss of local services and enhance access to care in communities that have or are at risk of losing their local hospital. According to FORHP officials, the addition of this activity to the scope of the grant led to 11 of the 47 applicants from fiscal years 2016 and 2017 to come from rural communities with a recent rural hospital closure or perceived risk of closure. As another example, in response to increased funding, in 2018 FORHP announced a new cooperative agreement to provide targeted in-depth assistance to vulnerable rural hospitals within communities struggling to maintain health care services. The awardee of the Vulnerable Rural Hospitals Assistance Program must work with vulnerable hospitals and their communities on ways to ensure hospitals and communities can keep needed care locally, whether it is with a more limited set of services provided by the hospital, or by exploring other mechanisms for meeting community health care needs. FORHP disseminates the results of this research and successful rural health grants and other projects by funding cooperative agreements to maintain clearinghouses of information about rural health issues. These clearinghouses were originally designed to efficiently disseminate research findings from rural health research centers to the public and to help rural communities identify opportunities and information to provide better healthcare to their residents. According to one of these clearinghouses, since then, the focus has grown to developing evidence- based resources on rural health to share what works in rural communities, including toolkits and case studies. Our analysis of data from the North Carolina rural health research center and CMS shows that, from 2013 through 2017, 64 of the approximately 2400 rural hospitals in the United States closed. These 64 rural hospital closures represented the following: More than twice the number of rural hospitals that closed during the prior 5-year period. From 2008 through 2012, 31 rural hospitals closed (see fig. 1). More than the share of urban hospitals that closed. The 64 rural hospital closures from 2013 through 2017—approximately 3 percent of all rural hospitals in 2013—exceeded the 49 urban hospital closures during the same time period—approximately 2 percent of all urban hospitals in 2013. More than the number of rural hospitals that opened. The 42 rural hospitals closed from 2014 through 2016 exceeded the 3 rural hospitals opened during the same time period. Approximately half of the rural hospitals that closed from 2013 through 2017—47 percent—ceased to provide any type of services. The remaining hospitals that closed during this period converted to other facility types, providing more limited or different services, such as urgent care, emergency care, outpatient care, or primary care. Our analysis of data from the North Carolina rural health research center and CMS shows that rural hospitals with certain characteristics—including those located in the South—accounted for a disproportionate share of the 64 closures that occurred from 2013 through 2017. Geography. Rural hospitals located in the South represented 38 percent of the rural hospitals in 2013, but accounted for 77 percent of the rural hospital closures from 2013 through 2017 (see fig. 2). Texas, one southern state, represented 7 percent of the rural hospitals in 2013, but accounted for 22 percent of the rural hospitals closures from 2013 through 2017. Medicare rural hospital payment designations. Medicare Dependent Hospitals – one of three Medicare rural hospital payment designations in which hospitals were eligible to receive a payment rate other than standard Medicare inpatient payment rate – were disproportionately represented among hospital closures. Specifically, Medicare Dependent Hospitals represented 9 percent of the rural hospitals in 2013, but accounted for 25 percent of the rural hospital closures from 2013 through 2017. Rural hospitals that did not receive one of these three Medicare rural hospital payment designations also represented a disproportionate share of the closures (see fig. 3). In addition, hospitals designated as Low Volume Hospitals had a disproportionate share of the rural hospital closures. Ownership. For-profit rural hospitals represented 11 percent of the rural hospitals in 2013, but accounted for 36 percent of the rural hospital closures from 2013 through 2017 (see fig. 4). According to literature we reviewed, hospitals with for-profit status had a higher probability of financial distress and were more likely to close. For example, a 2017 study found that for-profit hospitals were more than twice as likely to experience financial distress relative to government- owned and non-profit hospitals from 2000 through 2013. Bed size. Rural hospitals with between 26 and 49 inpatient beds represented 11 percent of the rural hospitals in 2013, but accounted for 23 percent of the rural hospital closures from 2013 through 2017. Critical Access Hospitals have 25 acute inpatient beds or less and make up a majority of the rural hospitals, but were less likely than other rural hospitals to close. FORHP officials identified the Critical Access Hospital payment designation – in which Medicare pays designated hospitals based on their costs – paired with the related Medicare Rural Hospital Flexibility grant program as the most effective HHS payment policy and program to support rural hospitals’ financial viability and rural residents’ access to hospital services. According to literature we reviewed and stakeholders we interviewed, rural hospital closures were generally preceded and caused by financial distress. In particular, rural hospitals that closed typically had negative margins which made it difficult to cover their fixed costs. For example, one 2016 study found that rural hospitals that closed from 2010 through 2014 had a median operating margin of -7.41 percent in 2009. In contrast, rural hospitals that remained open during the same time period had a median operating margin of 2.00 percent in 2009. In addition, there is evidence that for-profit hospitals have been more sensitive to changes in profitability and more likely to experience financial distress, which could explain the disproportionate number of closures among rural hospitals with for-profit ownership type. The literature we reviewed and stakeholders we interviewed identified multiple factors that likely contributed to increased financial distress and closures among rural hospitals. One such factor was a decrease in patients seeking inpatient care at rural hospitals due to the following: Increased competition for the small volume of rural residents. Rural residents may choose to obtain services from other health care providers separate from the local rural hospital, for example from an increasing number of federally qualified health centers or newer hospital systems outside of the area. The competition for the small volume of rural residents between rural hospitals and other health care providers potentially increased due to the shift to paying for value instead of volume, and technology changes. This increased competition for a small volume of rural residents could explain disproportionate closures among hospitals receiving the Low Volume Hospital Medicare payment designation, hospitals that by definition have a low Medicare volume and that research has found have lower margins than other rural hospitals. In addition, representatives from the American Hospital Association told us that technological advances have allowed more services to be provided in outpatient settings. For example, changes in health care technology have expanded the provision of outpatient surgical procedures. Declining rural population. The years 2010 through 2016 marked the first recorded period of rural population decline. According to literature we reviewed and stakeholders we interviewed, the recent population decline in rural areas was likely associated with the recent decline in rural residents seeking inpatient services. Another factor highlighted by literature we reviewed and stakeholders we interviewed as contributing to rural hospitals’ increased financial distress was across-the-board Medicare payment reductions. Rural hospitals are sensitive to changes to Medicare payments because, on average, Medicare accounted for approximately 46 percent of their gross patient revenues in 2016. A 2016 study found that Medicare Dependent Hospitals’ operating margins decreased each year from 2012 through 2014, which could explain the disproportionate number of closures among the Medicare Dependent Hospital payment designation. The literature we reviewed and stakeholders we interviewed highlighted the recent Medicare payments cuts as contributing to rural hospital closures, which included the following: Reductions in nearly all Medicare reimbursements. Under sequestration – the cancellation of budgetary resources under presidential order implemented pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985, as amended – each fiscal year since 2013, nearly all Medicare’s budget authority is subject to a reduction not exceeding 2 percent, which is implemented through reductions in payment amounts. According to stakeholders we interviewed, these payment reductions have contributed to negative margins for rural hospitals. Reductions in Medicare bad debt payments. Under the Middle Class Tax Relief and Job Creation Act of 2012, Medicare bad debt reimbursements for hospitals were reduced beginning in fiscal year 2013. According to stakeholders, Medicare bad debt cuts have been one of the most important factors contributing to the recent increase in rural hospital closures. The literature we reviewed and stakeholders we interviewed also identified factors that likely strengthened the financial viability of rural hospitals. Chief among these factors was the increased Medicaid eligibility and enrollment under the Patient Protection and Affordable Care Act. A 2018 study found that Medicaid expansion was associated with improved hospital financial performance and substantially lower likelihood of closure, especially in rural markets and counties with large numbers of uninsured adults before Medicaid expansion. Another 2017 study found that from 2008-2009 and 2014-2015 the drop in uninsured rates corresponded with states’ decisions to expand Medicaid on or before January 1, 2014. The increase in Medicaid coverage and decline in uninsured were both largest in the small towns and rural areas of those expansion states. Additionally, our analysis of data from the North Carolina rural health research center and CMS shows that from 2013 through 2017, rural hospitals in states that had expanded Medicaid as of April 2018 were less likely to close compared with rural hospitals in states that had not expanded Medicaid (see fig. 5). We provided a draft of this report to HHS for comment. The Department provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, the Administrator of Health Resources & Services Administration, the Administrator of CMS, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Officials from the Department of Health and Human Services (HHS) identified several rural-specific HHS payment policies and programs as providing key support to rural hospitals, and in turn, rural residents’ access to hospital services. These key HHS payment policies and programs may be placed into three categories: Medicare rural hospital payment designations (table 2); Rural grants, cooperative agreements and contracts (table 3); and New approaches in rural health care delivery and payment (table 4). In addition to the contact named above, Greg Giusto (Assistant Director), Alison Binkowski (Analyst-in-Charge), George Bogart, Zhi Boon, Leia Dickerson, Krister Friday, Mike Hoffman, Peter Mann-King, Beth Morrison, Vikki Porter, Merrile Sing, and Chris Woika made key contributions to this report.", "summary": "Research has shown that hospital closures can affect rural residents' access to health care services and that certain rural residents—particularly those who are elderly and low income—may be especially affected by rural hospital closures. This report describes (1) how HHS supports and monitors rural hospitals' financial viability and rural residents' access to hospital services and (2) the number and characteristics of rural hospitals that have closed in recent years and what is known about the factors that have contributed to those closures. GAO reviewed documents and interviewed officials from HHS and HHS-funded research centers; analyzed data compiled by HHS and an HHS-funded research center, with a focus on 2013 through 2017—the most recent year with complete data; reviewed relevant literature; and interviewed experts and stakeholders. GAO identified hospitals as rural if they met the Federal Office of Rural Health Policy's definition of rural. GAO provided a draft of this report to HHS for comment. The Department provided technical comments, which GAO incorporated as appropriate. The Department of Health and Human Services (HHS) administers multiple payment policies and programs that provide financial support for rural hospitals and funds research centers to monitor closures and study access. Among the payment policies administered by HHS are special payment designations for rural hospitals in which rural hospitals that meet certain criteria receive higher reimbursements for hospital services than they otherwise would receive under Medicare's standard payment methodology. HHS-funded research centers monitor rural hospitals' profitability and other financial indicators, and study access to facilities and specific services. HHS uses the results of monitoring activities to inform future areas of research and disseminate information. GAO's analysis of data from HHS and an HHS-funded research center shows that 64 rural hospitals closed from 2013 through 2017. This represents approximately 3 percent of all the rural hospitals in 2013 and more than twice the number of closures of the prior 5-year period. GAO's analysis further shows that rural hospital closures disproportionately occurred in the South, among for-profit hospitals, and among hospitals that received the Medicare Dependent Hospital payment designation, one of the special Medicare payment designations for rural hospitals. According to literature GAO reviewed and stakeholders GAO interviewed, rural hospital closures were generally preceded and caused by financial distress. In particular, rural hospitals that closed typically had negative margins that made it difficult to cover their fixed costs. According to these sources, financial distress has been exacerbated in recent years by multiple factors, including the decrease in patients seeking inpatient care and across-the-board Medicare payment reductions. In contrast, according to the literature GAO reviewed and stakeholders GAO interviewed, rural hospitals located in states that increased Medicaid eligibility and enrollment experienced fewer closures.", "document_type": "gao"}
{"report": "Public school choices typically include charter schools and magnet schools, as well as local-level options to transfer or choose among traditional public schools. CTE schools may provide an additional option for students seeking to develop or expand their employment opportunities, often in lieu of preparing for post-secondary education. Education, as well as national organizations that advocate on behalf of tribes, has noted that the flexibility associated with these options can also allow for increased tribal control and oversight of education for Indian students, and create opportunities to integrate knowledge, language, culture, and other aspects of Indian identity into the classroom, regardless of the type of school. Charter schools accounted for 6 percent of all public schools in school year 2015-16 (the school year with the most recent enrollment data available). As of that year, 43 states and the District of Columbia had enacted legislation to permit public charter schools, according to Education. The availability of magnet schools also differs across states and districts given that, in some cases, these schools are intended to eliminate, reduce, or prevent racial isolation in areas with substantial numbers of minority group students, according to Education’s Magnet Schools Assistance Program. In school year 2015-16, magnet schools accounted for 3 percent of all public schools. CTE schools are less common, representing 1 percent of all public schools in 2015-16. Approximately 505,000 Indian students attended K-12 public schools in school year 2015-16, representing 1 percent of all public school students, according to CCD data. The majority attended traditional public schools (see fig. 1). In addition to the half a million Indian students attending public schools, approximately 45,000 attended BIE schools in school year 2015-16, according to BIE enrollment data. BIE administers 185 schools on or near Indian reservations in 23 states. BIE schools are predominantly in rural communities, serve mostly low-income students, and receive almost all of their funding from federal sources. Students attending BIE schools generally must be members of federally recognized tribes, or descendants of members of such tribes, and reside on or near federal reservations. Indian students attend public schools in settings ranging from large urban areas to remote rural areas. According to CCD data, in school year 2015- 16, 58 percent of Indian students attended public schools in rural areas, while 42 percent attended public schools in urban areas (see fig. 2). Every 4 years, Education conducts the National Indian Education Study to provide in-depth information on the educational experiences and academic performance of Indian students in 4th and 8th grade. The study differentiates between public schools in which 25 percent or more of the students are Indian, public schools in which less than 25 percent of the students are Indian, and BIE schools. Data from the 2015 iteration, most recent available, showed that Indian students attending BIE schools consistently had the lowest math and reading scores in 8th grade, while Indian students attending public schools with lower percentages of Indian students consistently performed the best in these subjects (see fig. 3). Few areas with high percentages of Indian students had options other than traditional public schools, according to our analysis of Education data for school year 2015-16. Of the 451 school districts with high percentages of Indian students in our analysis, 84 percent (378 districts) had only traditional public schools. The remaining 16 percent (73 districts) had at least one BIE school, charter school, magnet school, or CTE school. The most common option was a BIE school (see fig. 4). Among districts that had only traditional public schools, about three-quarters of them had more than one school. The presence of a school choice option or more than one traditional school in a given location does not mean that a given school is necessarily available to all Indian students in the area. This may be because of school-level factors such as enrollment caps, eligibility requirements, or grade levels offered, and environmental factors, such as limited transportation options. Indian students attend school in both urban and rural areas, though nearly all school districts with high percentages of Indian students were located in rural areas—99 percent compared to 1 percent located in urban areas. In addition, as shown in figure 5, school districts with high percentages of Indian students were generally located near tribal lands, and half of the 451 districts were located in Oklahoma. In these districts, there were a total of 119 BIE schools, 28 charter schools, 6 magnet schools, and 24 CTE schools. Most of the districts that had at least one charter, magnet, or CTE school were located in Arizona and New Mexico. See appendix II for detailed maps of the options available in school districts with high percentages of Indian students in select regions of the country. There are several reasons why there may be few public school options in districts with high percentages of Indian students. As previously noted, nearly all of these districts are in rural areas. Experts said there are often not enough students in rural areas to justify adding schools beyond the traditional public schools or BIE schools that already exist, and rural school districts can face challenges recruiting and retaining qualified teachers. We have also reported on how limited broadband internet access and poor road conditions on tribal lands can affect educational opportunities for Indian students in rural areas regardless of the type of school they attend. As previously noted, we also analyzed Education data from the 100 school districts with the largest number of Indian students. Some of these districts were located in large urban areas and a majority had at least one other option in addition to traditional public schools (see fig. 6). Of these 100 districts, 62 offered at least one option other than a traditional public school, with the most common option being charter schools (see fig. 7). With regard to the individual schools within the 100 districts with the largest number of Indian students, we found that 75 percent of the schools were concentrated in just 15 school districts. These 15 districts had the largest overall student enrollments and were in urban areas such as New York City, Los Angeles, and Albuquerque. As shown in figure 8, the majority of charter, magnet, and CTE schools were located in these 15 largest districts. In contrast, nearly all BIE schools were located in the 85 other districts. As noted previously, BIE schools are predominantly in rural areas, and serve students who reside on or near Indian reservations. Though school districts in urban areas offered more school choice options than school districts in non-urban areas, experts said Indian students in urban areas sometimes feel isolated in their schools and communities. They noted that Indian students often account for a small percentage of all students in large urban districts and their schools are less likely to have curricula that reflect their cultural identity or provide instruction on Native languages. In the 15 largest of the 100 districts in our analysis, Indian students represented less than 5 percent of all students in each district and in some cases represented as few as 0.2 percent. In the 46 urban school districts in the 100 districts with the largest number of Indian students, just 3 districts had an Indian student enrollment greater than 25 percent. Even when Indian students had more school choice options, there was no consistent enrollment pattern across districts with large numbers of Indian students. In about a quarter of the districts that had at least one charter school, Indian students enrolled in charter schools in similar percentages as non-Indian students. In the remaining districts, enrollment patterns varied. For example, in one school district near Boise, Idaho and another near Fairbanks, Alaska, Indian students attended charter schools at higher percentages than their peers by 60 percentage points and 6 percentage points, respectively. Whereas, in other districts, such as one district near Flagstaff, Arizona and another near Salt Lake City, Utah, Indian student enrollment in charter schools was lower than their peers by 18 percentage points and 6 percentage points, respectively. Similarly, Indian student enrollment in magnet schools varied across the 17 districts with those schools. In 10 of these districts, Indian students attended magnet schools at lower percentages than non-Indian students. For example, in one district near Sault Ste. Marie, Michigan and another district near Broward County, Florida, Indian student enrollment in magnet schools was lower than their peers by 12 percentage points and 3 percentage points, respectively. In the other 7 districts, Indian students attended magnet schools at higher percentages than non-Indian students. For example, in one district near Stockton, California and another near Minneapolis, Minnesota, Indian student enrollment in magnet schools was higher than their peers by 17 and 9 percentage points, respectively. Whether Indian students enrolled in different types of schools could be a function of local differences in school choice and could be influenced by the extent to which these schools offered curricula that reflect Indian languages, cultures, or histories. Experts with whom we spoke said that in some areas, tribes have more control over education for Indian students, which can increase the tribe’s ability to influence curricula and accountability metrics to help meet Indian students’ academic and non- academic needs. Experts further noted that many districts with high percentages of Indian students are located near tribal lands, which can offer Indian students living there greater access to culturally-relevant curricula and instruction in Native languages than their peers in urban locations. In 2015, the National Indian Education Study reported that in schools where Indian students represented at least one-quarter of the students, a higher percentage of Indian students reported knowledge of their heritage or reported they received instruction in Native languages compared to peers attending schools with lower percentages of Indian students. Several tribal leaders and experts in Indian education said that access to culturally-relevant curricula and language instruction is crucial to strengthening, rebuilding, and sustaining Indian cultures and communities. In addition, experts noted that tribes sometimes seek to operate or oversee schools for Indian youth. For example, Oklahoma allows federally recognized tribes to authorize charter schools. In other states with charter school legislation, experts told us that tribes often must work through state charter school authorizers if they wish to open charter schools. BIE officials and Indian education experts also said that areas with BIE schools offer opportunities for tribes to exercise more control over education by converting the school from BIE-operated to tribally- operated. One tribal leader said the tribe was exploring this option in order to increase the tribe’s autonomy over its students’ education. Education has federal-level program offices that provide support to states and school districts related to school choice generally and Indian education specifically. Education recently finalized changes to its Charter Schools Program that will give priority to grantees seeking funding opportunities that would specifically serve the educational needs of Indian students. Finally, some urban school districts with large numbers of Indian students have district-level offices designed to work directly with Indian students and their families and to liaise between the school district and nearby tribes. Access to these resources, among other things, may help Indian students and families select a school that will best meet the student’s academic and non-academic needs, according to Indian education experts we interviewed. We provided a draft of this report to the Department of Education (Education) for review and comment. We also provided a copy to the Department of the Interior’s Bureau of Indian Education (BIE). Education’s comments are reproduced in appendix III. Education also provided technical comments, which we incorporated as appropriate. In its written comments, Education suggested that, given the eligibility requirements to attend BIE schools, it is possible for Indian students to have greater access to educational choice than their non-Indian peers in some areas. This observation is consistent with the findings of our report, which showed that in school districts with high percentages of Indian students and school options, the most common option was a BIE school (see fig. 4). However, 84 percent of these districts offered only traditional public schools. Nearly all of these districts were located in rural areas and, as we reported, have few school options. Education expressed concern that our analysis does not appropriately reflect the full spectrum of education choice options available to Indian students, particularly private schools. They stated it would be helpful to understand how we determined that Education’s Private School Universe Survey (PSS) was not reliable for the purposes of mapping specific locations of private schools. We clarified our rationale in appendix I. Specifically, according to Education’s PSS survey documentation, the PSS was based on a sample of private schools, not the universe. The official in Education’s National Center for Education Statistics (NCES) who is responsible for the PSS told us that the PSS sample contained only about half of the private schools in the nation, which would not allow for comprehensive mapping of private schools. We further explored using the broader list of private schools from which Education draws the PSS sample. The PSS documentation shows that about 30 percent of this list (more than 10,000 entities) were not private schools. We confirmed this information with the same NCES official, who explained that entities that are not private schools are filtered out through NCES’s survey process. Based on our review of the PSS survey documentation and methods and our interviews with cognizant NCES officials, we determined that it would not be possible to use PSS data to comprehensively and accurately map the locations of these private schools nationally or in specific areas with large Indian student populations. However, as we indicated in the draft report on which Education commented, the PSS contains information on a large number of private schools and we determined that it can provide reliable data for some variables other than the specific locations of private schools, including the total number of students attending private schools disaggregated by race and ethnicity. As discussed, we used the PSS for such purposes in this report. In its comments, Education also encouraged us to further explore specific examples of school options that have a mission to address the unique educational needs of Indian students. We reviewed several relevant studies as part of our work, including some related to the sources Education suggested. However, an in-depth review of specific examples was outside the scope of our work. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Education, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines the public school choice options located in areas with large populations of American Indian and Alaska Native students, collectively referred to as Indian students. To conduct this work, we analyzed the Department of Education’s (Education) national data on K-12 public schools from the Common Core of Data (CCD) for school year 2015-16 (the most recent available). Education’s National Center for Education Statistics administers the CCD survey annually to collect a range of data from all public schools and districts in the nation, including student demographics (e.g., race or ethnicity) and school characteristics (e.g., school type, such as a charter or magnet school). State educational agencies supply these data for their schools and school districts. We determined the data we analyzed were sufficiently reliable for the purposes of this report by reviewing documentation, conducting electronic testing, and interviewing officials from Education’s National Center for Education Statistics. To inform all aspects of our work, we interviewed federal officials from Education, the Bureau of Indian Education (BIE), and the White House Initiative on American Indian and Alaska Native Education. We interviewed or received input from representatives from several organizations that represent or advocate on behalf of Indian students and tribes, such as the National Indian Education Association, the National Advisory Council on Indian Education, the National Congress of American Indians, and the Tribal Education Departments National Assembly. We also heard from some tribal leaders who provided non-generalizable perspectives on Indian education, school choice, and academic achievement. We met with academic subject matter experts, as well as other relevant nonfederal organizations, such as ExcelinEd, the National Alliance for Public Charter Schools, and the U.S. Conference of Catholic Bishops, to discuss issues related to school choice for Indian students. We focused our analyses on two subsets of public school districts with large Indian student populations, as follows: 1. Public school districts in which Indian students accounted for 25 percent or more of all students in the district. We refer to school districts that met this threshold as having a “high percentage” of Indian students. It is consistent with Education’s definition of a “high- density” school for Indian students which the agency uses in its National Indian Education Study. 2. The top 100 public school districts by number of Indian students enrolled. We refer to school districts that met this threshold as having the “largest number” of Indian students. This threshold allowed us to examine school choice in areas where large numbers of Indian students live, but may not represent a high percentage of all students. Education has similarly reported CCD data for the 100 public school districts with the largest number of students enrolled. The CCD collects data on public school type in two ways: 1. Schools are categorized as regular public schools, special education schools, career and technical education schools, or alternative/other schools based on the school’s curriculum or population served. See table 1 for definitions for each of these categories. 2. In addition to the above categories, schools can have additional statuses, which are not mutually exclusive. These statuses include magnet school, charter school, and virtual school. See table 2 for definitions for each of these school statuses. Because the CCD collects public school type data in two ways, we sorted schools based on the combination of school types and statuses to develop distinct categories for our analysis. Table 3 outlines the combinations of CCD school type and status, along with the corresponding category we used in our analysis. For reporting purposes, we used the term “traditional school” in place of “regular school” to be consistent with our prior reports on K-12 education issues that analyzed the CCD and other Education datasets. In addition to the school types listed above, we included BIE schools in our analysis because they may provide a unique school option in some areas with large populations of Indian students. Data on the location of BIE schools were captured in the 2015-16 CCD. BIE also provided us with enrollment data for its schools, which we reviewed to determine that the presence of BIE schools did not affect our analysis of Indian student enrollment in other types of schools. We focused our analysis on (1) traditional public schools, (2) charter schools, (3) magnet schools, (4) career and technical education schools, and (5) BIE schools. Traditional public schools provided a baseline from which to compare other school choices in a given school district. We referred to the other four school types as “school choice options” collectively. We considered a school district as having school choice options if the district included at least two schools in total, and offered at least two of the five school types in our analysis. We compared school districts with school choice options to school districts that had only traditional public schools. In school districts with high percentages of Indian students, there were no schools that reported having both charter and magnet school status. In the 100 school districts with the largest number of Indian students, there were 6 school districts that reported a total of 17 schools as having both charter and magnet status. This did not affect our analysis of school districts with school choice options because each of those 6 districts had at least one additional school that had only charter status and at least one additional school that had only magnet status in school year 2015-16. We excluded special education schools, alternative/other schools, and schools flagged as state-operated juvenile justice facilities from our data analysis because those schools limited enrollment and could not be classified as a choice. We did not consider virtual schools in our analysis because, as defined in the CCD, these schools generally do not have a physical facility, which limits the ability to ascribe a virtual school to a specific location or school district. Similar limitations would apply to studying homeschooling or non-public online educational options, which are not captured in the CCD. We also excluded schools that were reported closed, inactive, or not yet opened in 2015-16. As noted previously, we focused our analyses on (1) school districts with high percentages of Indian students and (2) the 100 school districts with the largest number of Indian students. In school year 2015-16, there were 453 school districts with high percentages of Indian students. However, in our analysis we found one school district with a high percentage of Indian students that did not offer any traditional, charter, magnet, career and technical education, or Bureau of Indian Education schools, and one school district that offered one magnet school, but no other schools. We excluded these two districts from our analysis because they did not offer any choice as described above. After excluding these two districts, there were 451 school districts with high percentages of Indian students in our analysis. In total, and after accounting for overlap among school districts that had both high percentages and large numbers of Indian students, our analysis included 259,033 students—51 percent of all Indian students attending public schools in school year 2015-16—across 504 school districts. We did not consider private schools in our analysis. Education collects biennial data on private schools through its Private School Universe Survey (PSS), which we determined was a reliable dataset for describing aggregate data on the total number of Indian students that attended private schools in school year 2015-16. However, we determined the data were not sufficiently reliable for analysis of the specific locations of private schools. Unlike the CCD which captures data on the universe of public schools, the PSS is based on a sample of private schools, according to Education’s PSS survey documentation. The official in Education’s National Center for Education Statistics (NCES) who is responsible for the PSS told us that the PSS sample captured only about half of the private schools in the nation. We further explored using the broader list of private schools from which Education draws the PSS sample, however the PSS documentation showed that this list contained more than 10,000 entities—or 30 percent of the entire list—that were not private schools. We confirmed this information with the same NCES official. Based on our review of the PSS documentation, as well as our discussions with cognizant NCES officials, we determined that it would not be possible to use the PSS data to comprehensively and accurately map the locations of these private schools nationally or in specific areas with large Indian student populations. To analyze school choice options in school districts with large Indian student populations, we analyzed all relevant schools within the public school district’s geographic boundary regardless of the administrative school district it was assigned to in the CCD. This allowed us to account for all public schools and BIE schools in a given area that could be an option for Indian students. It was necessary because, for example, charter schools or BIE schools are sometimes recorded in the CCD as their “own district,” i.e., separate from the public school district for a given area because of the local public school administrative structure. We further examined school choice based on a school district’s location in urban and rural areas. The CCD collects location data using classifications ranging from large cities to remote rural areas. For analysis, we collapsed these classifications into two categories, consistent with Education’s analyses: (1) urban areas, i.e., locations classified as cities or suburbs, and (2) rural areas, i.e., locations classified as towns or rural. This appendix contains maps of selected regions of the country to provide a more in-depth view of the school choice options available in school districts in which American Indian and Alaska Native students accounted for 25 percent or more of all students in the district. In addition to the contact named above, Bill Keller (Assistant Director), David Watsula (Analyst-in-Charge), Susan Aschoff, James Bennett, Deborah Bland, Connor Kincaid, Jean McSween, John Mingus, James Rebbe, and Leanne Violette made key contributions to this report. Private School Choice: Requirements for Students and Donors Participating in State Tax Credit Scholarship Programs. GAO-18-679. (Washington, D.C.: September 18, 2018). Broadband Internet: FCC’s Data Overstate Access on Tribal Lands. GAO-18-630. (Washington, D.C.: September 7, 2018). Native American Youth: Involvement in Justice Systems and Information on Grants to Help Address Juvenile Delinquency. GAO-18-591. (Washington, D.C.: September 5, 2018). High Risk: Agencies Need to Continue Efforts to Address Management Weaknesses of Federal Programs Serving Indian Tribes. GAO-18-616T. (Washington, D.C.: June 13, 2018). Private School Choice: Federal Actions Needed to Ensure Parents are Notified about Changes in Rights for Students with Disabilities. GAO-18-94. (Washington, D.C.: November 16, 2017). Tribal Transportation: Better Data Could Improve Road Management and Inform Indian Student Attendance Strategies. GAO-17-423. (Washington, D.C.: May 22, 2017). School Choice: Private School Choice Programs Are Growing and Can Complicate Providing Certain Federally Funded Services to Eligible Students. GAO-16-712. (Washington, D.C.: August 11, 2016). Indian Affairs: Bureau of Indian Education Needs to Improve Oversight of School Spending. GAO-15-121. (Washington, D.C.: November 13, 2014). Indian Affairs: Better Management and Accountability Needed to Improve Indian Education. GAO-13-774. (Washington, D.C.: September 24, 2013).", "summary": "Education refers to school choice as the opportunity for students and their families to create high-quality, personalized paths for learning that best meet the students' needs. For Indian students, school choice can be a means of accessing instructional programs that reflect and preserve their languages, cultures, and histories. For many years, studies have shown that Indian students have struggled academically and the nation's K-12 schools have not consistently provided Indian students with high-quality and culturally-relevant educational opportunities. GAO was asked to review K-12 school choice options for Indian students. This report examines the public school options located in areas with large Indian student populations. GAO used Education's Common Core of Data for school year 2015-16 (most recent available) to analyze public school choice in (1) school districts in which Indian students accounted for 25 percent or more of all students (i.e., high percentages of Indian students) and (2) the 100 school districts with the largest number of Indian students. GAO also interviewed federal officials, relevant stakeholder groups, and tribal leaders to better understand school choice options for Indian students. Few areas provide American Indian and Alaska Native students (Indian students) school choice options other than traditional public schools. According to GAO's analysis of 2015-16 Department of Education (Education) data, most of the school districts with Indian student enrollment of at least 25 percent had only traditional public schools (378 of 451 districts, or 84 percent). The remaining 73 districts had at least one choice, such as a Bureau of Indian Education, charter, magnet, or career and technical education school (see figure). Most of these 451 districts were in rural areas near tribal lands. Rural districts may offer few school choice options because, for example, they do not have enough students to justify additional schools or they may face difficulties recruiting and retaining teachers, among other challenges. Some of the 100 school districts with the largest number of Indian students were located in large urban areas, such as New York City, and the majority (62) offered at least one option other than a traditional public school, according to GAO's analysis. The most common option was a charter school. However, because Indian students often account for a small percentage of all students in these districts, Indian education experts GAO interviewed said that the schools are less likely to have curricula that reflect Indian students' cultural identity or provide instruction on Native languages—things that tribes and experts consider crucial to strengthening, rebuilding, and sustaining Indian cultures and communities. Also, even when Indian students had more options, no consistent enrollment patterns were evident. Whether Indian students enrolled in different types of schools could be a function, in part, of differences in state school choice laws and the extent to which these schools offered curricula that reflect Indian languages, cultures, or histories, according to Indian education experts. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "There are three main types of U.S. commercial fishing vessels: catcher vessels that catch fish and deliver them to shore for processing; tender vessels that purchase and transport fish from catcher vessels and resupply fishers with food, fuel, and other necessities; and fish processing vessels that both catch and process fish at sea. Commercial fishing vessels are also characterized by the type of fishing gear used, such as trawl nets, seine nets, gill nets, traps and pots, dredges, and hook and line. The targeted fish species determines the type of vessel and gear that fishers use in their operations. A commercial fishing vessel may participate in multiple fisheries, using various fishing gear, as needed. The Magnuson-Stevens Fishery Conservation and Management Act, as amended, provides for the conservation and management of fishery resources within the federal waters of the United States. The act defines “commercial fishing” to mean fishing in which the fish harvested, either in whole or in part, are intended to enter commerce or enter commerce through sale, barter, or trade. This act also created eight regional fishery management councils, which are responsible for preparing fishery management plans and setting annual catch limits for the fisheries within their areas of authority. NOAA’s National Marine Fisheries Service, under authority delegated from the Secretary of Commerce, provides support for regional fishery management councils and approves and implements fishery management plans and plan amendments. Figure 1 illustrates the eight fishery management councils. Under federal statute, commercial fishing vessels are categorized as uninspected vessels and the Coast Guard generally does not have the authority to inspect the vessels during construction or regular maintenance. However, the Coast Guard is authorized to inspect all other commercial vessels such as freight, offshore supply, passenger, tank, and towing vessels. Through the inspection process, the Coast Guard ensures that a vessel’s structure is suitable, that equipment and accommodations are maintained in an operating condition consistent with safety of life and property conventions, and that the vessel complies with applicable marine safety laws and regulations. Safety issues aboard commercial fishing vessels have been a long- standing concern. Various studies identified the problems and considered possible solutions to improve commercial fishing safety, but implementing improved safety recommendations were largely left to the vessel owner’s discretion. Following the loss of entire commercial fishing vessel crews during the mid-1980s, Congress passed the Commercial Fishing Industry Vessel Safety Act of 1988, which required safety improvements and examination of commercial fishing vessels for safety equipment. The act also instructed the Secretary of Transportation to conduct a study of the safety problems on fishing industry vessels and make recommendations on whether a vessel inspection program should be implemented. In 1991, the National Research Council conducted this study, which included a comprehensive assessment of commercial fishing vessel safety and identified a range of issues, including vessel fitness, and safety and survival equipment, among other things. The Council found that developing casualty rates was hampered by the absence of reliable data on the number of fishing vessels, vessel material condition, exposure variables, and other factors. The Council recommended a holistic approach to fishing vessel safety, including establishing vessel and equipment standards as well as the development of a database to evaluate alternatives and monitor results. The Council stressed, however, the importance of balancing the anticipated benefits of a safety program with any costs that might be imposed through implementation. The Council also noted that classification costs would be borne principally by vessel owners and that the costs could be significant for individual vessel owners. Congress established classification requirements to address the construction and maintenance of fish processing vessels in 1988, and applied classification requirements to all types of commercial fishing vessels more broadly in 2010 and 2012 under the Coast Guard Authorization Act of 2010 and the Coast Guard and Maritime Transportation Act of 2012. In addition to classification requirements, Congress also established other requirements to improve vessel safety. For example, commercial fishing vessels that are 79 feet or longer, built after July 1, 2013, are required to have an assigned load line. A load line indicates the point where the waterline should reach when a vessel is properly loaded. Assignment of a load line, and issuance of a load line certificate, is conditional on the structural efficiency and satisfactory stability of the vessel, and on provisions provided for protection of the vessel and crew. As part of a load line certification, a vessel’s seaworthiness is assessed by evaluating a vessel’s watertight integrity, stability, and loading capacity. A vessel’s stability booklet, prepared as part of a stability assessment, instructs operators on how to distribute weight across a vessel to prevent capsizing under different operating conditions. Figure 2 illustrates legislation and policy that addresses commercial fishing vessel construction and maintenance from 1988 to 2016. Classification requirements differ by commercial fishing vessel type and length and are only applicable to vessels built after certain dates, as seen in table 1. To address safety on older commercial fishing vessels, the 2010 and 2012 acts also directed the Secretary of Homeland Security to develop an alternate safety compliance program for commercial fishing vessels that are at least 50 feet in length, built before July 1, 2013, and are 25 years or older. The Coast Guard drafted requirements for the program but, according to the Coast Guard, this program would have required a new rulemaking effort, and it suspended the effort in July 2016. At that time, the Coast Guard developed an Enhanced Oversight Program—through policy and its existing authorities—that focuses on older, non-classed commercial fishing vessels that may pose a greater risk of vessel and crew member loss. In addition, in January 2017, the Coast Guard issued a list of voluntary safety initiatives and good marine practices and encouraged vessel owners to implement these initiatives on all non- classed vessels where possible and reasonable. The Coast Guard is also currently working on aligning its existing regulations on commercial fishing vessels with the classification requirements introduced in the 2010 and 2012 acts. Through the classing process, classification societies, such as the American Bureau of Shipping (ABS), Det Norske Veritas Germanischer Lloyd (DNV GL), and RINA, address aspects of the vessel’s design, structural integrity, reliability and function of major systems, and accident prevention. Classification societies (1) establish and maintain standards for the construction and classification of vessels and offshore structures; (2) supervise construction in accordance with these standards; and (3) carry out regular surveys of vessels in service to ensure the compliance with these standards. Once a vessel is “classed” with a certificate indicating that it meets a minimum level of safety and quality, the vessel is subject to periodic inspection to verify that it continues to meet the applicable rules of the issuing classification society, or risks losing its classification certificate, which could prevent the vessel from operating legally. Figure 3 illustrates the classification process for vessel design, construction, and maintenance. Of the 39 U.S. fishing vessels classed by three societies, as shown in table 2, at least 29 are fish processing vessels. Although commercial fish processing vessels built or converted after July 27, 1990, are required by U.S. law to be classed, the law permits a vessel to be exempted from this and other statutory requirements under certain conditions. Few commercial fish processing vessels have an active class certificate. Older U.S. fish processing vessels—most of which operate off of the coast of Alaska—generally fall under the Coast Guard’s Alternative Compliance and Safety Agreement Program, which is implemented pursuant to exemption authority provided under law. Under this program, vessel owners apply with the Coast Guard for an exemption from classing and load line requirements so long as the vessel meets improved safety standards provided for under the program. Several different federal agencies play a role in overseeing and promoting commercial fishing vessel safety: Coast Guard: The only military service within the Department of Homeland Security (DHS), search and rescue activities and marine safety activities number among the Coast Guard’s primary missions. As part of the safety activities, the Coast Guard performs mandatory safety inspections, conducts accident investigations, and promotes accident prevention involving vessels at sea. In 2015, the Coast Guard also began performing mandatory examinations of safety equipment onboard commercial fishing vessels. The Coast Guard records all interactions with vessels, including commercial fishing vessel accidents, in the Marine Information for Safety and Law Enforcement database. Coast Guard regulations require vessel operators to report a marine casualty involving damage to the vessel or other property; injury or loss of life; or harm to the environment. The Coast Guard is also responsible for enforcing fishery management laws and regulations. National Institute for Occupational Safety and Health (NIOSH): As part of the Department of Health and Human Services’ Centers for Disease Control and Prevention, NIOSH is responsible for conducting research and making recommendations for new or improved work- related safety and health standards. For example, it has recommended that all fishing vessel operators conduct monthly safety drills as required by federal regulation; heed weather forecasts and avoid fishing in severe sea conditions; and maintain watertight integrity by examining and monitoring the hulls of their vessels. NIOSH maintains a Commercial Fishing Incident Database, which mostly is comprised of data on fishing industry fatalities abstracted and coded from reports of Coast Guard investigations of marine casualties. National Transportation Safety Board (NTSB): NTSB investigates commercial fishing vessel accidents that involve the most significant damage and loss of life. NTSB conducts investigations (sometimes in parallel with the Coast Guard) to determine the probable cause of vessel accidents and issues safety recommendations aimed at preventing future accidents. For example, with regard to commercial fishing vessels NTSB recommends regularly conducting safety drills as well as proper training in stability and firefighting, and wearing a flotation aid at all times while working on deck. National Marine Fisheries Service: National Marine Fisheries Service uses fishery observers and at-sea monitors to collect data from U.S. commercial fishing vessels to monitor federal fisheries, assess fish populations, set fishing quotas, and inform fishery management practices. Under federal regulations, fishing vessels that may carry a fishery observer as part of a required or voluntary observer program generally must pass a Coast Guard commercial fishing vessel safety examination and be issued a safety decal. Further, under federal regulations, fishery conservation and management measures must, to the extent practicable, promote the safety of human life at sea, and should minimize or mitigate safety impacts where practicable. The Coast Guard investigated 2,101 commercial fishing vessel accidents between 2006 and 2015 that were identified as occurring in federal waters. While the number of accidents in 2015 was greater than the number reported in 2006, the number of injuries and fatalities declined over the same 10-year period. We could not assess the number of accidents, injuries, and fatalities by fishery due to limitations with the Coast Guard’s data. In addition, we were unable to calculate the rates of commercial fishing vessel accidents, injuries, and fatalities because reliable data on certain information needed to do so—including the total number of vessels that are actively fishing and the fishery or region in which the vessel operates—are either not maintained or are not collected by the Coast Guard or other federal agencies. Between 2006 and 2015, the Coast Guard investigated 2,101 commercial fishing vessel accidents that occurred in federal waters. Coast Guard data indicates that the numbers of accidents generally increased through 2013 before falling slightly over the next two years, but remains above the level experienced in 2006. Of those, the Coast Guard investigated 193 serious marine incidents—those resulting in death, injury, or significant property damage, or involving environmental damage in federal waters. Figure 4 shows the number of commercial fishing vessel accidents and serious marine incidents that occurred in federal waters for 2006 through 2015. From 2006 through 2015, 598 of 2,101 commercial fishing vessel accidents in federal waters resulted in an injury and/or fatality. These accidents resulted in a total of 507 injuries and 182 fatalities over this period. Coast Guard data indicate that the number of injuries and fatalities have been declining since 2012, and 2015 figures are substantially below the levels reported in 2006, as seen in figure 5. Due to limitations with the Coast Guard’s data, we were unable to portray numbers of accidents, injuries, or fatalities by fishery located in a specific geographic location. Although we identified the area in which each commercial fishing vessel accident occurred, using latitudinal and longitudinal information included in the Coast Guard’s database, we could not reliably assign each accident, injury, or fatality to a fishery managed by interstate marine fisheries commissions or fishery management councils—entities which manage fishery resources in state and federal waters, respectively. National Marine Fisheries Service officials stated that even though an accident that occurred in an area of federal waters that falls within a jurisdiction of a particular council, the vessel may not have been participating in a fishery managed, either solely or in part, by that council. Data on a vessel’s intended fishery on the day of the accident provides accurate information on the intended area in which a vessel should be operating. Assigning a commercial fishing vessel accident to a specific fishery management council on a solely geographic basis—without consideration of the vessel’s targeted fishery—could overestimate the prevalence of accidents in a council jurisdiction. While the Coast Guard’s database includes a field for a vessel’s fishery, these data were not collected for the majority of commercial fishing vessel accidents between 2006 and 2015. An official in the Coast Guard’s Office of Investigations and Analysis stated that data on a vessel’s fishery is not required in order to complete an accident investigation and, therefore, may not be collected. Federal internal control standards establish that management should obtain relevant, accurate data from reliable sources in a timely manner, and recommend that agencies’ management use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. The lack of complete and reliable data on the vessel’s fishery in the Coast Guard’s database hinders efforts to assess whether particular fisheries experience higher numbers of accidents, injuries or fatalities than others. Such information would benefit the Coast Guard’s analysis of commercial fishing vessel accidents, injuries, and fatalities because information on a vessel’s fishery can be used for a regional analysis of these events. The Coast Guard and other federal agencies do not collect data on the total number of vessels that are actively fishing—those that are operating, landing, and selling catch—and we found that existing data on the population of commercial fishing vessels are not sufficiently reliable to calculate rates of commercial fishing vessel accidents, injuries, and fatalities. Data on the total number of commercial fishing vessels actively catching and processing fish are necessary to determine rates—the ratio of the number of accidents, injuries, and fatalities that occurred compared to the total number of active commercial fishing vessels. These rates, if based on reliable data, would establish trend information on the number of accidents involving commercial fishing vessels. While the Coast Guard collects some data on commercial fishing vessels that operate in federal waters—including a vessel’s length and construction date—data on the population of the active U.S. commercial fishing vessel fleet are not reliably known. The Coast Guard’s National Vessel Documentation Center maintains a registry of valid certificates of documentation—that indicate that a vessel is registered with the Coast Guard and is greater than 5 net tons—for commercial fishing vessels that operate in federal waters. However, even when the Coast Guard could identify the number of documented vessels, we found the data they provided were unreliable for determining the total number of commercial fishing vessels that are actively fishing. For example, a senior Coast Guard official estimated that more than 20 percent of the vessels documented in 2015 were not actively fishing and may not be operational or otherwise not in use. As part of vessel registration, the Coast Guard collects information on a vessel’s length and date of construction. Other data, however, such as the fishery located in a specific geographic location in which a vessel operates, are not collected. Data on key characteristics of the total number of commercial fishing vessels actively fishing—including vessel length, age, and fishery or region of operation— would provide additional information when analyzing rates of commercial fishing vessel accidents, injuries, and fatalities. Other federal agencies involved in the commercial fishing vessel industry also do not collect data on the total number of active U.S. commercial fishing vessels. Having a national count of federally-permitted commercial fishing vessels can be used, in part, to help determine the number of commercial fishing vessels that are actively fishing. Federal permits are required for commercial fishing vessels that fish in certain fisheries and, according to officials from the National Marine Fisheries Service, these fishing permits are issued by NOAA’s regional offices and each regional office manages its own data. National Marine Fisheries Service officials stated that they are developing a national count of federally-permitted commercial fishing vessels, but a competing priority delayed this effort and noted it will recommence in the coming year. However, just because a vessel has a permit, it does not mean it is an active vessel, and additional data on vessel activity—such as information from log books, fish tickets, and fishery observers—is needed to identify vessels that are actively fishing. Similarly, a statistician from NIOSH—the federal agency that maintains data on commercial fishing fatalities and is responsible for conducting research and making recommendations for the prevention of work-related injury and illness—stated that he has encountered challenges estimating the total size of the active U.S. commercial fishing fleet because the majority of commercial fishing vessels are state-registered, and comprehensive data on the number of state-registered vessels are not available. Coast Guard officials acknowledged that they do not collect data on a state-registered vessel, unless the Coast Guard has been in contact with the vessel. Officials from the Coast Guard and the National Marine Fisheries Service agreed that it is important to calculate rates to assess the number of commercial fishing vessel accidents, injuries, and fatalities. At present, however, no particular federal agency has collected or calculated the national number of active commercial fishing vessels—those that are fishing and selling their catch—or the region and fishery in which these vessels operate. Once a reliable count of the number of active commercial fishing vessels is established, rates can be calculated by other characteristics such as the fishery or fisheries in which a vessel operates or vessel length. These rates would provide further insight into commercial fishing vessel accidents, injuries, and fatalities, including the percentage of vessels that are involved in an accident in a specific region or the percentage of accidents that involve vessels of a certain length such as, for example, vessels greater than 79 feet in length. Federal internal control standards establish that management should obtain relevant data from reliable sources in a timely manner, and recommend that agencies’ management use quality information to make informed decisions. The Coast Guard and the National Marine Fisheries Service are collecting data that could be used to develop an estimate of the total number of commercial fishing vessels that are actively fishing, however, each agency is taking a different approach, in part, because they are doing so for different purposes. Specifically, the Coast Guard collects data on commercial fishing vessels and the National Marine Fisheries Service collects data on permits for federally-managed fisheries, as well as other data on fishing activities. These data can be used, in part, to help determine the number of commercial fishing vessels that are actively fishing. In addition to the Coast Guard and the National Marine Fisheries Service, an agency, such as NIOSH—that is involved in commercial fishing vessel safety—could benefit from information derived from these ongoing efforts. Without such information, Congress and the agencies will lack important data needed to accurately assess the factors that contribute to commercial fishing vessel accidents, injuries, and fatalities. Establishing a mechanism—such as a working group—to coordinate efforts and collect reliable data on the number of active vessels and key characteristics, such as vessel age and length, would allow the agencies to do so in an efficient manner. We were able to obtain limited data on the costs of classification because only a total of six classed vessels have been built and builders and owners were reluctant to provide data on costs which they consider to be proprietary. Classification society representatives, vessel owners, and builders we interviewed agreed, however, that constructing and maintaining classed commercial fishing vessels will increase ownership costs, due, in part, to the fees charged by classification societies, the requirement to use certified materials and equipment, and annual maintenance surveys, among other costs. Despite the uncertainty as to how much classification will increase total ownership costs, vessel builders and owners stated that the potential costs associated with classing have contributed to reduced orders for new vessels and other changes. All stakeholders we interviewed—classification society representatives, vessel owners, and builders—stated that classing will increase ownership costs. These stakeholders identified the following additional costs associated with constructing a classed commercial fishing vessel: naval architect fees for vessel design; additional builder engineering costs associated with finalizing classed classification society review of key equipment drawings and certification of equipment manufacturing; increased builder costs to construct vessel to classification society- approved design; additional supervision and testing during vessel construction; additional classification society design reviews and surveys, as needed, during vessel design and construction; and stability assessments and load line assignment. However, we were able to obtain only limited data on these costs as (1) few vessels have been constructed and classed by the societies included in our review and (2) the owners/operators and builders of these classed vessels are reluctant to share the associated cost documentation, considering it proprietary. Only six vessels have been constructed and classed since July 2013, when expanded classification requirements took effect. Two of these vessels—one tender and one catcher—were classed because they were subject to the July 2013 expanded classification requirements; the remaining four vessels were factory processors, which have been required to meet classification society standards since July 1990. All of the classed vessels constructed since July 2013 are greater than 130 feet in length and are owned by companies that own and operate multiple fishing vessels, with the exception of the tender vessel which is 67 feet long and owned and operated by a non-profit organization. Commercial Fishing Vessel Vessel type: Trawler (catcher or catcher/processor) Fleet length: 40-500 feet or longer Trawlers fish for pollock, cod, sole, rockfish, shrimp, and other species by towing funnel- shaped nets behind them in which the catch is trapped by the forward movement of the boat. Depending on the desired catch, trawlers tow the nets in very shallow waters up to a depth of about 6,500 feet along the seafloor. Large, offshore factory trawlers can also process their catch on board. Freezer trawlers are outfitted with a refrigerating plant and freezing equipment. Two builders, located in the Gulf of Mexico and Pacific regions, provided quotes on classification society fees and a construction bid; another builder provided an estimate of the costs associated with designing and constructing a classed vessel approximately 90 feet in length. Collectively, this information indicates that the additional costs could range from approximately $300,000 to $1.2 million above the total construction cost of a vessel not built to these standards. In general, vessel builders, owners, naval architects, marine safety experts, academics, and other experts we spoke with provided widely varying estimates on the impact that classification may have on vessel construction costs, though many suggested a range of 10 to 30 percent. In contrast, representatives from one classification society stated that shipbuilders who currently build other ships to classification requirements have stated estimates of 2.5 to 5 percent in overall construction costs would be needed to construct a classed fishing vessel. We could not, however, independently assess the accuracy of these claims. With regard to classification society fees, classification society representatives stated that the fees they charge for vessel design approval and surveys conducted during the construction of a classed commercial fishing vessel vary depending on the complexity of the vessel’s design, as well as the builder’s level of expertise in constructing classed vessels. These fees typically account for 1.0 to 1.5 percent of the costs to design and construct a classed vessel. A builder on the West Coast provided us a quote from one of the classification societies of approximately $136,000 for design reviews and construction surveys for a $2 million, 58-foot commercial fishing vessel, or about 7 percent of the vessel’s total construction costs. Another builder in the Gulf of Mexico stated that constructing a 90-foot commercial fishing vessel generally costs him approximately $2.3 million, but constructing the same vessel with classification requirements would incur approximately $195,000 in additional classification fees, about 8 percent of construction costs. A vessel owner who owns and operates two catcher vessels off the coast of Alaska and is currently constructing a 300-foot factory processing vessel estimated that classification fees for vessel design and construction would likely amount to $300,000—approximately 0.4 percent—of the vessel’s $70 million total purchase price. These fees included an initial review of the vessel’s design and, generally, the review of one set of drawing revisions. If a builder needs to resubmit the vessel’s design to the classification society for another review, each submission could be subject to additional fees. Representatives from both ABS and DNV GL explained that the fees they charge do not account for additional design and oversight services that might be necessary during the construction process, especially if this is the first time that the vessel builder has constructed a classed vessel. Vessel owners and builders told us that other costs associated with constructing a classed commercial fishing vessel include the use of certain materials, such as steel, and key equipment, such as generators and the engine, which may be more costly to purchase from the manufacturer since the items must be certified by the classification society. As part of classing, surveyors from classification societies are required to certify the fabrication and/or assembly of certain materials and key equipment prior to installation on the vessel. For example, two individuals—a vessel owner and someone with years of experience working in the commercial fishing industry—provided documentation that showed that two types of class certified equipment—generators and engines—cost approximately 6 to 16 percent more than the same, non- certified equipment. DNV GL representatives estimated that, in total, the class-certified materials and key equipment can cost an additional $20,000-$30,000 more than the cost of non-certified equipment. Vessel owners we interviewed stated that they may incur additional costs to maintain a classed commercial fishing vessel over the vessel’s lifetime. These costs include fees paid to classification society surveyors to conduct annual surveys—required as part of regular class maintenance— as well as periodic surveys—more extensive surveys generally required every 5 years—on the vessels. Representatives from one classification society estimated that, depending on size, age, and condition, the fees for fishing vessel annual surveys can range between $1,500 and $5,000, while the fees for periodic surveys can range between $6,000 and $25,000. Classification society representatives stated that the high end of the fees for periodic surveys are influenced by the fact that many owners choose to perform major maintenance, upgrades, and modifications at the same time, which increases the overall survey items and, therefore, the cost. Owners we interviewed stated that in addition to these annual survey fees, they are required to pay for the surveyor’s travel costs as well as any necessary repairs the surveyor identifies. Those vessel owners we interviewed estimated that the annual maintenance costs for a classed commercial fishing vessel—including fees, travel costs, and repairs—could range from $28,000 to as much as $150,000. For example, an invoice we received from one vessel owner totaled over $70,000. More than one-third of the total cost was due to fees for periodic, annual, and equipment surveys. The majority of the remaining costs were associated with the purchase and installation of new machinery and repairs made to the vessel, as well as travel expenses paid to the classification society. Vessel owners we interviewed, or received correspondence from, provided examples of potential challenges that arise when maintaining classed vessels, such as annual surveys being scheduled at a time or location that interferes with fishing operations; the unavailability of classification surveyors at a convenient location; and the time to obtain classed materials or equipment to be delivered before an emergency repair can be completed. One owner noted that he once waited 2 weeks and paid three times more to replace three square feet of classification society-certified steel. However, ABS representatives stated that vessel owners have a 6-month window to meet their annual survey requirement, and stated that ABS generally has two surveyors working in Alaska at any given time and the society is open to adding more surveyors in Alaska as needed. Similarly, DNV GL representatives stated that to mitigate the cost and time associated with surveyors’ travel, the society has begun to use networked or stand-alone electronic devices to record certain non-major classing inspections. Several industry representatives noted that some of the additional costs associated with constructing and maintaining classed vessels may be partially offset by decreased insurance premium costs and improved vessel resale value for vessel owners. Coast Guard officials we interviewed similarly noted that classed vessels may command a higher resale price. However, marine insurance underwriters we interviewed stated that prior claim history—not classification—is the key factor that influences insurance premiums for commercial fishing vessels. One of the underwriters added that owners of classed commercial fishing vessels might actually pay higher insurance premiums than owners of non- classed vessels because hull and machinery claims for classed vessels would likely be more expensive to repair. With regard to whether a classed commercial fishing vessel has a higher resale value, we spoke to some vessel owners who stated that the maintenance costs associated with owning a classed vessel would actually deter them from purchasing an existing classed vessel. Many of the stakeholders we spoke with told us that classing and its associated costs have and will continue to change aspects of the commercial fishing business, including profitability and construction of new vessels. Several stakeholders stated that their ability to absorb the additional costs due to classing is dependent on the relative health of the fishing businesses involved. Vessel owners we interviewed in less profitable regions and fisheries, such as the shrimp fishery in the Gulf of Mexico and the groundfish fishery in the North Atlantic, believed that their businesses will be adversely impacted by the increased construction costs associated with classing. One vessel owner, whose small-scale commercial fishing operation in the Gulf of Mexico employs approximately 40 individuals and operates 3 vessels, estimated that constructing a vessel to meet classification society standards would increase overall construction costs by 30 percent, an amount she believes that she cannot absorb as shrimp prices are sensitive to the international market. While vessel owners in more profitable regions and fisheries believed that their businesses could absorb the increased construction costs associated with classing, one owner whose family has fishing operations in 10 different fisheries, some of which are profitable and some that are less so, noted that the addition of a newly constructed classed vessel to his fleet—which he estimated cost about 35 percent more due to classing requirements—was still a sound business decision on his part since the vessel will operate in the more profitable North Pacific fishery. However, he added that his family would not incur similar costs to construct a new classed vessel to operate in the scallop industry, in which they also have business operations. Another issue that arose in our discussions with stakeholders was that the perception of the increased cost associated with constructing a classed commercial fishing vessel—regardless of what the actual cost increase may be—appears to be affecting vessel owners’ decisions to purchase new vessels. Among the 13 vessel builders we interviewed, 9 builders stated that classification requirements and their perceived costs have contributed to a significant reduction in orders for new commercial fishing vessels, regardless of vessel length. One builder noted that he reduced the number of employees from nearly 100 to less than 50 workers and began constructing other vessels, such as tug boats, in addition to commercial fishing vessels to keep his remaining employees employed. One industry representative stated that owners, especially those with smaller operations in less profitable fisheries, may find it cost prohibitive to recapitalize their vessel or fleet. Similarly, vessel owners stated that they will likely choose to continue operating their aging vessels or choose to close their business in lieu of purchasing new classed vessels. Other vessel owners stated that they would either consider, or already have chosen, to purchase and update an older commercial fishing vessel instead of constructing a new classed vessel. For example, one vessel owner we interviewed, whose family has fished commercially along the Gulf of Mexico for 150 years, stated that the new classing requirements for commercial fishing vessels have resulted in several businesses rebuilding older vessels, where a new vessel is constructed around the original keel of an older vessel that is not subject to classing requirements. Another vessel owner we interviewed, whose family also has a history in commercial fishing, told us that he and other members of his family would like to build several new vessels to add to their already sizable fleet, but have decided not to do so because of the perceived costs associated with the classing process. Instead, this vessel owner commented that some members of his family recently purchased two wrecked commercial fishing vessels and intend to construct a new vessel using the wrecked vessel’s 40-year-old keel. Industry trade representatives also voiced concerns that when owners choose to recapitalize their vessels, classing requirements could encourage owners to purchase smaller vessels to avoid classification requirements. For example, one builder we interviewed offers a design for a 45 to 49 foot crab vessel, which, because of its size, would not be subject to classification requirements. The builder explained that the vessel would be shorter than other vessels operating in the Bering Sea and could be less safe for the crew onboard in the event of an accident. Further, naval architects we interviewed stated that they know of vessel owners who have begun to seek new commercial fishing vessels less than 50 feet in length. Federal agency officials tasked with overseeing the commercial fishing industry, as well as industry representatives, academics, builders, and owners we interviewed, agreed that classing provides some benefits and could contribute to overall vessel safety by providing independent and ongoing oversight to ensure quality and seaworthiness during the design and construction of the vessel, as well as through annual maintenance surveys. At the same time, however, vessel owners we interviewed noted that overall vessel safety can also be improved by instituting other safety measures or design approaches. As shown in figure 6, classification addresses vessel design, construction, and maintenance, but training, safety and lifesaving equipment, environmental, and other factors also contribute to commercial fishing vessel safety. As one industry trade representative explained, classing commercial fishing vessels is another approach for improving industry safety by ensuring key systems aboard the vessel are in good, working order, thereby potentially breaking the chain of events leading to a major catastrophe at sea, such as a vessel sinking. According to a representative for a larger commercial fishing company, vessel owners benefit from the oversight provided by classification society surveyors during the construction process. Classification society surveyors provide another set of eyes and the perspective of a third party. An owner of a large commercial fishing business stated that vessel owners who do not maintain their classed vessels, and thereby jeopardize the lives of their crew, risk losing their vessel’s classification certificate, which, in turn, will prevent them from operating the vessel legally. Overall, commercial fishing industry representatives supported the requirement that commercial fishing vessels with factory processors onboard be classed because of the risks these vessel owners face with such a large number of factory workers—who are not mariners—working onboard. Most vessel owners that we interviewed or received written documentation from, however, did not support classification for smaller commercial fishing vessels—especially those operated by individual owners with small crews. To illustrate that different factors contribute to commercial fishing vessel safety, we collected data on fishing vessel accident claims from two U.S.- based marine insurance underwriters that insure commercial fishing vessels. While our findings are not generalizable to all insurance claims made between 2013 and 2016, we found that protection and indemnity claims, which cover liability for bodily injury and third-party damage— accounted for nearly two-thirds of insurance claims for these two underwriting companies. Hull and material claims also comprised a significant number of overall insurance claims over the period. These claims can be made as a result of physical loss of or damage to the vessel, including equipment, engines, and machinery. Figure 7 shows the number and types of claims for 2013 through 2016 from two marine underwriting companies we interviewed. One vessel owner we interviewed stressed the importance of safety training so crew members are capable of using lifesaving equipment when it is needed. She referred us to a Coast Guard analysis of fishing vessel casualties occurring from 1992 to 2010 that found fatalities from water exposure might have been prevented if personal floatation devices or survival suits had been used. In its analysis, the Coast Guard found that 32 percent of all fatalities between 1992 and 2010 resulted from crew falling overboard, being pulled overboard by equipment, or diving from the vessel. Other vessel owners who operate in the Gulf of Mexico stressed several safety measures, such as: requiring vessel crew members to undergo routine drug testing; requiring vessel crew members to wear personal floatation devices when working on deck; requiring all commercial fishing vessels that use a winch to hoist catch from the ocean to install either a guard or emergency shut-off mechanism; and mandating skills-based training and testing of safety procedures for each vessel crewmember, not just the individual in charge of the vessel, as the law currently requires. Commercial fishing industry representatives and vessel owners we interviewed also stated that stability assessments and load line assignments—which are required for fishing vessels built after July 1, 2013, that are 79 feet or longer—may provide safety benefits comparable to classification. A load line indicates the point where the waterline should reach when a vessel is properly loaded. As part of a load-line certification, a vessel’s seaworthiness is assessed, which involves the completion of stability documentation, providing the operator with instructions for safely loading and operating the vessel. Load line requirements cover some of the same items as classification rules, such as pre-construction review and approval of plans by the assigning authority, weathertight and watertight integrity, and periodic inspections to verify proper maintenance and ensure that modifications to the vessel do not compromise seaworthiness. The alternative-to-class approach provides some flexibility and potential cost savings to vessel owners compared to classification, but we did not identify a builder who has constructed a vessel using this approach. The Coast Guard has not issued regulations or guidance to clarify how the alternative-to-class approach will be implemented, which increases uncertainty on how key steps in the process should be conducted. The Coast Guard Authorization Act of 2015 created an alternative-to- class approach for vessels at least 50 feet and not more than 79 feet in length built after February 8, 2016. Under the alternative-to-class approach, a commercial fishing vessel is designed to standards equivalent to classification society standards. For example, the alternative-to-class approach requires a stability assessment and an assigned loading mark (or load line) certification that construction is in accordance with design, and written stability and loading instructions that are provided to the owner or operator to ensure a robust hull and weathertight and watertight integrity. As such, the structural strength of the vessel’s hull, reliability and function of major systems—including propulsion and steering—and watertight integrity of the vessel are expected to be comparable to a classed vessel. However, the alternative- to-class approach provides some flexibility to builders and owners in how to do so, as shown in figure 8. The alternative-to-class approach provides additional flexibilities to builders and owners and potentially reduces compliance costs compared to classing a new vessel. Examples of the flexibilities and potential drawbacks the alternative-to-class approach offers include the following. It enables a marine surveyor of an organization accepted by the Secretary of Homeland Security, rather than a classification society representative, to verify that the vessel’s construction meets design requirements and to conduct inspections. Coast Guard officials told us that such individuals need to be licensed by an organization, such as the Society of Accredited Marine Surveyors or the National Association of Marine Surveyors, to be deemed qualified by the Coast Guard. It reduces inspection requirement from annually to at least twice every 5 years, and according to Coast Guard officials, the alternative-to- class approach does not impose requirements for disassembly and inspection of propulsion machinery, generators, electrical systems, pumps, and piping. It requires owners to maintain records to demonstrate compliance with the alternative-to-class approach, which may be burdensome for some vessel owners. However, our interviews with commercial fishing stakeholders and our analysis raised several questions as to how certain aspects of the alternative-to-class approach will be implemented. For example, stakeholders raised a number of questions about state licensing requirements for naval engineers and architects, including whether licenses issued in one state would be recognized by other states. One naval engineer in the North Pacific told us that he had to secure an engineering license to do work for a client in another state, despite holding the same license in his home state. Coast Guard officials did not believe that differences in state licensing requirements should be an issue. Coast Guard officials explained that although each state may have different licensing requirements, one professional society sets the technical standards for professional engineers and that these common standards apply across all states. Despite this, it is not certain if individual states will recognize other states’ engineering licenses. Table 3 highlights our analysis of the key issues raised by industry stakeholders during the course of our review. Although Coast Guard officials believe that the legislation clearly outlined the requirements for this approach, numerous open questions exist regarding implementation of the alternative-to-class approach, as depicted in table 3. The Coast Guard has not yet issued regulations or guidance concerning the alternative-to-class approach. Coast Guard officials noted they are still in the process of developing a final rule to implement earlier legislation, including the Coast Guard Authorization Act of 2010, as amended by the Coast Guard and Maritime Transportation Act of 2012. At the time of our review, Coast Guard officials acknowledged they were uncertain when this rule would be finalized. These officials stated that any effort to promulgate rules for the 2016 alternative-to-class approach will not start until after the final rule regarding the 2010 and 2012 acts is issued. However, Coast Guard officials noted they were considering developing a policy letter to provide some additional guidance on implementing the alternative-to-class approach, but provided no timeframe for doing so. The Coast Guard is responsible for implementing the alternative-to-class statute, but questions remain regarding how this implementation will be achieved. While the 2016 legislation did not require the Coast Guard to promulgate guidance or regulations for the alternative-to-class approach, regulations are one of the primary tools federal agencies use to implement law and policy. The general process by which federal agencies develop and issue regulations allows the public an opportunity to provide information to agencies on the potential effects of a rule or to suggest alternatives for agencies to consider prior to publication of the final rule. Federal internal control standards recommend that agency management communicate with both internal and external stakeholders the necessary quality information, such as regulations describing procedures to be followed to comply with the alternative-to-class legislation, to achieve objectives. Without specific written procedures—either in the form of regulations or guidance—the Coast Guard cannot ensure consistent implementation of the alternative-to-class approach. Since the late 1980s, Congress had undertaken efforts to improve commercial fishing vessel safety, including establishing classification requirements for all three types of commercial fishing vessels—catchers, tenders, and processors—and, most recently, establishing an alternative- to-class approach as a less-prescriptive option for smaller vessels. Accurate data collected by the Coast Guard during incident investigations—such as the fishery in which the vessels operate— is necessary to understand which fishing vessels are involved in accidents. In addition, reliable data on the total number of commercial fishing vessels that are actively fishing and information on key vessel characteristics—including vessel age, length, and its fishery—is necessary to calculate rates and establish trend information for commercial fishing vessels involved in accidents. Without such information, Congress, the Coast Guard, and other federal agencies— such as NIOSH—will not be able to assess the factors that contribute to commercial fishing vessel accidents, injuries, and fatalities. While the costs of classification cannot be reliably measured, industry stakeholders perceive the potential costs associated with classing— regardless of what the actual costs are—as impacting the commercial fishing industry, including reduced orders for new vessels, and the continued operation of aging vessels, and the loss of income for commercial fishers. The alternative-to-class approach provides greater flexibility and potential cost savings to owners of smaller commercial fishing vessels. While not required to do so, the Coast Guard has not issued guidance or promulgated regulations to clarify aspects of the alternative-to-class approach. However, the absence of timely regulations or guidance has contributed to confusion among the commercial fishing industry and increases the risk of potentially inconsistent implementation of the alternative-to-class approach. We are making a total of six recommendations, including four to the Commandant of the Coast Guard, one to the Director of NIOSH, and one to the Assistant Administrator for Fisheries for the National Marine Fisheries Service: The Coast Guard should ensure that the data it collects during commercial fishing vessel incident investigations, including the fishery in which the commercial fishing vessel is involved, is accurately captured. (Recommendation 1) The Coast Guard should form a working group with NIOSH and the National Marine Fisheries Service to determine an efficient means to establish a reliable estimate of the population of commercial fishing vessels actively fishing, landing, and selling their catch; the fishery in which a vessel operates; and key vessel characteristics including, but not limited to, vessel age and length. (Recommendation 2) Once reliable data are available, the Coast Guard, or another agency identified by the working group, should assess the rates of commercial fishing vessel accidents, injuries, and fatalities to determine whether certain factors—including vessel length and region of operation, among other things—affect these rates. (Recommendation 3) The Coast Guard should issue regulations or guidance to clarify and implement the alternative-to-class approach. (Recommendation 4) NIOSH should form a working group with the Coast Guard and the National Marine Fisheries Service to determine an efficient means to establish a reliable estimate of the population of commercial fishing vessels actively fishing, landing, and selling their catch; the fishery in which a vessel operates; and key vessel characteristics including, but not limited to, vessel age and length. (Recommendation 5) The National Marine Fisheries Service should form a working group with the Coast Guard and NIOSH to determine an efficient means to establish a reliable estimate of the population of commercial fishing vessels actively fishing, landing, and selling their catch; the fishery in which a vessel operates; and key vessel characteristics including, but not limited to, vessel age and length. (Recommendation 6) We provided a draft of this product to the Departments of Homeland Security; Health and Human Services; and Commerce to respond on behalf of the Coast Guard, NIOSH, and NOAA, respectively for review and comment. The Departments of Health and Human Services and Commerce concurred with the recommendation directed to their components. The Department of Homeland Security concurred with three of the four recommendations. The departments’ written comments are reprinted in appendixes III-V, respectively, and summarized below. We also sent a draft of this product to NTSB for their review and comment. The departments and NTSB also provided technical comments, which we incorporated as appropriate. The Department of Homeland Security concurred with our recommendation to ensure that the data the Coast Guard collects during commercial fishing incident investigations, including the fishery in which the vessel is involved, is accurately captured. It noted that the Coast Guard will reemphasize the need to collect fishery data as part of its training programs and qualification requirements of its investigators. Additionally, it stated that the Coast Guard will consider adding additional data fields within its Marine Information for Safety and Law Enforcement database to improve the accuracy of the data collected. The Departments of Homeland Security, Health and Human Services, and Commerce concurred with our recommendations directed to them to form a working group to establish a reliable estimate of the population of commercial fishing vessels, the fishery in which the vessel operates, and key vessel characteristics. The Department of Homeland Security noted that neither the Coast Guard nor the National Marine Fisheries Service have access to data for fisheries within economic zones managed by the states. As such, the Department of Homeland Security recommended that the (1) working group be established at the regional level and (2) regional fisheries management councils coordinate with individual states to collect needed data and, in turn, provide that data to the Coast Guard and the National Marine Fisheries Service. Additionally, the Department of Health and Human Services stated that NIOSH will assist in identifying ways to establish comprehensive vessel counts, which could include engaging state agencies. The agencies’ comments reflect the complexity of and need to capture reliable data of the size and characteristics of the commercial fishing vessel fleet. Determining the working group’s membership, structure, roles and responsibilities is an essential first step to doing so. Regardless of the working group’s structure, it will be important to ensure that the data collected is done in a manner that allows it to be aggregated and analyzed in various ways, including at the national level. The Department of Homeland Security did not concur with our recommendation that the Coast Guard assess the rates of commercial fishing vessel accidents, injuries, and fatalities to determine whether certain factors—such as vessel length and region of operation—affect these rates. The Coast Guard stated that it had limited resources and capabilities to conduct such assessments and noted that NIOSH studies marine incidents to identify causal factors in fishing vessel casualties, which could more effectively determine casualty rates. We agree that NIOSH has, and can, play an important role in identifying commercial fishing fatalities and regional risk factors, but such assessments typically focus on fatalities in specific fisheries, and generally did not consider such factors as vessel length or whether the vessel has been classed. Further, the Coast Guard is the agency responsible for developing and enforcing regulations related to commercial fishing vessel safety, including classification requirements and the alternative-to-class approach. As such, the Coast Guard’s office of Investigations and Casualty Analysis leads the agency’s investigation program to promote safety, protect the environment, and prevent future accidents. As part of its efforts, this office has previously analyzed data on commercial fishing vessel accidents. While we continue to believe that our recommendation is appropriately targeted to the Coast Guard, we acknowledge that the working group could determine that another appropriate agency other than the Coast Guard is better positioned to conduct this analysis. As such, we have revised our recommendation to provide more flexibility to the agencies in determining how best to meet the intent of our recommendation. The Department of Homeland Security concurred with our recommendation that the Coast Guard issue regulations or guidance to clarify and implement the alternative-to-class approach. It noted that the Coast Guard is in the process of developing a more formal policy on best practices and expectations of the industry and implementing guidelines consistent with the intent of the legislation, which it hopes to complete by December 31, 2018. We also provided a draft of this report to the three classification societies we included in our review—ABS, DNV GL, and RINA—for their review and comment. ABS and DNV GL provided technical comments, which we incorporated as appropriate. We are sending copies of the report to the appropriate congressional committees. We are also sending a copy to the Secretary of Homeland Security, the Secretary of Health and Human Services, the Chairman of the National Transportation Safety Board, the Secretary of Commerce, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. Should you or your staff have questions, please contact me at (202) 512- 4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. Other selected countries that, like the United States, are members of the Organization for Economic Cooperation and Development and have sizeable commercial fishing industries have established requirements for designing, constructing, and—in some instances—maintaining commercial fishing vessels to classification society standards, as described in table 4. This report evaluates the costs and benefits of classing commercial fishing vessels. Specifically, we assessed (1) what is known about the numbers and rates of commercial fishing vessel accidents, injuries, and fatalities; (2) what is known about the costs to construct and maintain classed commercial fishing vessels built since July 2013 and the effects of classing on vessel builders and owners; (3) the benefits associated with classing commercial fishing vessels; and (4) how the alternative-to- class approach compares with building and maintaining commercial fishing vessels to classification society standards. To assess what is known about the numbers of commercial fishing vessel accidents, injuries, and fatalities, we collected and analyzed data from the Coast Guard’s Marine Information for Safety and Law Enforcement database on commercial fishing vessel investigations for calendar years 2006 through 2015 to identify the number of vessel accidents and/or injuries or fatalities. We also collected relevant Coast Guard data on enforcement actions and boardings. To assess the reliability of the data, we reviewed related documentation, spoke with knowledgeable agency officials, and performed electronic testing for obvious errors in accuracy and completeness. Using latitudinal and longitudinal information collected during the Coast Guard’s investigation of each commercial fishing vessel accident, we determined where the accident occurred and limited our analysis to those accidents that involved U.S. vessels and occurred between 3 nautical miles and 200 nautical miles from shore, an area that is generally referred to as U.S. federal waters. In the instances of Texas, Puerto Rico, and the Gulf coast of Florida, we used the area between 9 nautical miles and 200 nautical miles from shore, which is consistent with federal waters for those states. We found errors in the longitudinal and latitudinal data and could not match commercial fishing vessel accidents to an accurate location for 243 observations; we excluded these observations from our analysis. Overall, we determined that the data were sufficiently reliable for reporting the overall number of accidents, injuries, and fatalities over this time period. We attempted to separate the data by fishery management council region and interstate marine fisheries commission—regional partners of the National Oceanic and Atmospheric Administration (NOAA) that ensure sustainable fishery management throughout the United States—using the longitudinal and latitudinal boundaries of each region and commission. However, we found that the geographic location in which each accident occurred is not sufficiently reliable for determining the region or fishery in which a commercial fishing vessel operates. For example, the geographic location of an accident does not necessarily signify that the commercial fishing vessel was engaged in one of the fisheries managed by the regional council. In addition, according to National Marine Fisheries Service officials, the three interstate commissions work almost entirely on issues pertaining to shared fishery resources within the boundaries of their respective states and generally do not manage fishing activity in federal waters, so we could not reasonably assign an accident in federal waters to a region managed by one of these interstate commissions. We also collected and analyzed data from the National Institute for Occupational Safety and Health’s (NIOSH) Commercial Fishing Incident Database on commercial fishing fatalities for calendar years 2006 through 2015 to identify causes of commercial fishing vessel fatalities over this period. To assess the reliability of the data, we reviewed related documentation, spoke with knowledgeable NIOSH officials, and performed electronic testing for obvious errors in accuracy and completeness. We determined that the data were sufficiently reliable for the purposes of reporting the number of fatalities over time. We also examined reports from the National Transportation Safety Board (NTSB) investigations of commercial fishing vessel accidents for calendar years 2006 through 2015, which include some of the most serious accidents, to describe what NTSB identified as the probable causes of these accidents. To identify rates of commercial fishing vessel accidents over time, we requested data from the Coast Guard on the population of commercial fishing vessels that were actively catching, landing, and selling their catch. We collected Coast Guard data on the number of commercial fishing vessels from 2006 to 2015 with a valid certificate of documentation, which indicates that the vessel is registered with the Coast Guard and is greater than 5 net tons. We also contacted NIOSH and NOAA to discuss the ways, if any, that these agencies have estimated the size of the active commercial fishing vessel fleet for their studies or programs. After contacting the Coast Guard, NIOSH, and NOAA for the purpose of collecting data on the total number of active U.S. commercial fishing vessels, we determined that we could not identify sufficiently reliable data about the size of the active U.S. commercial fishing vessel fleet for 2006 through 2015 for the purposes of our analysis. These data reliability problems precluded us from calculating rates of accidents, injuries, or fatalities over this period. We interviewed officials from the Coast Guard, NIOSH, and NSTB regarding the investigations and analyses they have conducted on commercial fishing vessel accidents and recommendations they have made to improve safety on board these vessels. We also interviewed officials from NOAA’s National Marine Fisheries Service to discuss the roles and responsibilities of the regional fishery management councils and interstate marine fisheries commissions. To assess what is known about the costs to construct and maintain classed commercial fishing vessels built since July 2013 and the effects of classing on vessel builders and owners, we collected data on the costs associated with constructing and maintaining classed commercial fishing vessels from vessel builders and owners willing to share this information. Specifically, we analyzed (1) classification society design review fees quoted to two vessel builders located in the Gulf of Mexico and Pacific regions and other documentation these builders provided, including a construction bid; (2) another vessel builder’s cost estimate for constructing a 90 foot long classed commercial fishing vessel to be used in the Gulf of Mexico shrimp industry; and (3) documentation provided by one vessel owner and another individual with extensive experience in the commercial fishing industry including the cost of various engines and generators—class and non-class certified—that could be installed during the construction process. We compared the quotes for these generators and engines to determine the cost differential between class and non- class certified equipment. The findings based on these data are not generalizable, but they do provide insight into the additional costs associated with constructing a classed commercial fishing vessel. In addition, we conducted interviews and discussion sessions with stakeholders in the commercial fishing industry to obtain the perspectives of vessel owners and/or operators, vessel builders, and commercial fishing organizations. Specifically, we interviewed 13 vessel builders, and 36 vessel owners and/or operators from across the United States, including both those with large and small businesses. We also interviewed representatives from 4 commercial fishing trade organizations that represent fisheries in Alaska and the Bering Sea, the Gulf of Mexico, the Pacific Ocean, and the Mid and North Atlantic Ocean. To ensure we captured many different perspectives, we held three discussion sessions with stakeholders in the commercial fishing industry, inviting interested parties to attend, including vessel owners and builders; trade organization representatives; and naval architects, at locations across the country, including Garden Grove, California; New Orleans, Louisiana; and Seattle, Washington. In total, 39 individuals involved in the commercial fishing industry attended one or more of these discussion sessions. From the testimonial information we collected through these interviews and discussion sessions, we identified common themes, including the impact of classing on vessel builders and owners. We also interviewed representatives from the three predominant classification societies in the United States—American Bureau of Shipping (ABS), Det Norske Veritas Germanischer Lloyd (DNV GL), and RINA to discuss fees they charge as part of the classification process. We interviewed three marine underwriters who insure commercial fishing vessels off the coast of the Gulf of Mexico, Pacific Ocean, and the Atlantic Ocean to discuss how classification affects insurance premiums. To assess the benefits associated with classing commercial fishing vessels, we obtained the perspectives of vessel owners and/or operators, vessel builders, and commercial fishing trade organizations, and classification societies during the interviews and discussion sessions described above. The information obtained from interviews and discussion sessions cannot be generalized to all vessel builders, owners, or operators; however, the information provides important insights on the experiences of these groups. We also spoke with representatives from ABS, DNV GL, and RINA, as well as marine safety experts, naval architects, academics who study commercial fishing vessel safety, and marine underwriters in fishing industries off the coast of the Gulf of Mexico, the Pacific Ocean, and the Atlantic Ocean. From these interviews and discussion sessions, we identified common themes. We also reviewed Coast Guard and NIOSH studies related to improving commercial fishing vessel safety and the benefits each found with respect to classing commercial fishing vessels or improved accident outcomes. We collected data on the number of insurance claims submitted by commercial fishing vessel owners from 2013 through 2016 to two of the three marine underwriting companies we interviewed—who were willing to share this information—to determine the number of hull and machinery claims and the number of protection and indemnity claims that these companies processed over the period. The findings based on these data are not generalizable, but they illustrate the types of insurance claims made by commercial fishing vessel owners. To evaluate how the alternative-to-class approach compares with building and maintaining commercial fishing vessels to classification society standards, we collected and reviewed relevant statutes, documentation of Coast Guard rulemaking efforts, regulations, policies and guidance, as well as classification society rules and standards. We compared the requirements of the alternative-to-class approach with the steps associated with classification to determine the similarities of both approaches. We interviewed cognizant officials from the Coast Guard to discuss the current policies and regulations in place to address commercial fishing vessels and how an alternative-to-class approach will be implemented. We also interviewed representatives from classification societies—including DNV GL, ABS, and RINA—and commercial fishing vessel owners and operators, naval architects, builders and marine underwriters to discuss both approaches. We also collected information on commercial fishing vessel classification requirements from a non- generalizable sample of comparison countries that, like the United States, are members of the Organization for Economic Cooperation and Development and have sizeable fishing industries. Specifically, we selected Canada, Denmark, Spain, and the United Kingdom, represented among countries with the largest fishing harvests over 2010-2014, according to country data reported by the United Nations’ Food and Agriculture Organization. We collected and reviewed documentation of relevant requirements for the United States and each selected country and discussed the requirements with officials from the selected countries. We present this analysis in appendix I. We conducted this performance audit from June 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact above, Diana Moldafsky, Assistant Director; Laura Jezewski; Pedro Almoguera; Deanna Burns; Lorraine Ettaro; Danielle Giese; Laura Greifner; Kristine Hassinger; Ramzi Nemo; LeAnna Parkey; Erin Stockdale; Robin Wilson; and Ellen Wolfe made key contributions to this report.", "summary": "Commercial fishing has one of the highest death rates of any industry in the United States. Fishing vessels that are at least 50 feet long and were built after 2013 are required by law to be built and maintained to rules developed by a classification society, a process known as classing. Congress created an alternative-to-class approach in 2016, allowing certain size vessels to be designed and built to equivalent standards in lieu of classing. The Coast Guard Authorization Act of 2015 included a provision for GAO to review the costs and benefits of classing commercial fishing vessels. This report assesses (1) known numbers and rates of commercial fishing vessel accidents, injuries, and fatalities; (2) what is known about the costs, effects, and benefits of constructing and maintaining classed vessels; and (3) how the alternative-to-class approach compares with classing. GAO collected data on vessel accidents, injuries, and fatalities; interviewed vessel owners, builders, classification societies, Coast Guard, and other agencies; and studied classing costs. The Coast Guard, the only military service within the Department of Homeland Security (DHS), investigated 2,101 commercial fishing vessel accidents between 2006 and 2015 that occurred in federal waters; however, because there are no reliable data on the total number of commercial fishing vessels that are actively fishing, rates of accidents, injuries, and fatalities cannot be determined. Agencies, such as the Coast Guard, keep records of accidents, but without reliable data on active vessels, trend information cannot be determined. The Coast Guard and the National Marine Fisheries Service have separate efforts to collect data that could be used to develop an estimate of active commercial fishing vessels, but each agency is taking a different approach to do so. These and other agencies agreed that it is important to calculate rates to assess commercial fishing vessel accidents, injuries, and fatalities. Establishing a mechanism—such as a working group—to coordinate efforts and collect reliable data on the number of active vessels and key characteristics, such as vessel age and length, would allow the agencies to do so in an efficient manner. While data on the costs to design, construct, and maintain classed vessels are limited, vessel owners, builders, and classification societies agree that classification increases costs and told GAO that the perceived costs of classing may affect vessel owners' decisions to purchase new vessels to avoid classification requirements. However, they also agree that classification is one of many factors that contribute to safety. The alternative-to-class approach is more flexible than classing—for example, in its use of marine surveyors to verify vessel construction. Industry stakeholders and GAO's analysis, however, identified numerous questions and uncertainties regarding implementation of the approach, including licensing requirements for naval engineers and architects. The Coast Guard has not issued regulations or guidance to address these issues on the alternative-to-class approach due, in part, to its ongoing efforts to issue regulations to implement safety-related legislation enacted in 2010 and 2012. However, without specific written procedures—either in the form of regulations or guidance—the Coast Guard cannot ensure consistent implementation of the alternative-to-class approach. Among GAO's recommendations, the Coast Guard and other agencies should form a working group to collect reliable data on the number of active fishing vessels. The Coast Guard should also issue regulations or guidance to address questions about the alternative-to-class approach. The agencies generally concurred with the recommendations, but DHS did not concur that the Coast Guard assess vessel accident rates. GAO revised this recommendation to allow the Coast Guard or another appropriate agency to do the assessment.", "document_type": "gao"}
{"report": "The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), as amended, defines FEMA’s role during disaster response and recovery. One of the principal programs that FEMA operates to fulfill its role is the PA program. PA is a complex and multistep grant program administered through a partnership between FEMA and states, which pass these funds along to eligible local grant applicants. Thus, PA entails an extensive paperwork and review process between FEMA and the state based on specific eligibility rules that outline the types of damage that can be reimbursed by the federal government and steps that federal, state, local, territorial, and tribal governments as well as certain nonprofit organizations must take in order to document eligibility. The complexity of the process led FEMA to re-engineer the PA program, which FEMA has referred to as its “new delivery model.” FEMA began testing the new delivery model at select disaster locations in 2015, in preparation for implementing it nationwide for all new disasters. On September 12, 2017, FEMA announced that the new delivery model would be used in all future disasters unless determined infeasible in a particular instance. The process begins after FEMA determines that the applicant meets eligibility requirements. FEMA then works with the state and the applicant to develop a project worksheet describing the scope of work and estimated cost. Once FEMA and the applicant agree on the damage assessment, scope of work, and estimated costs, the PA grant obligation is determined. After FEMA approves a project, funds are obligated—that is, they are made available—to the state recipient, which, in turn, passes the funds along to applicants. Applicants may appeal project decisions if they disagree with FEMA’s decisions on project eligibility, scope of damage, or cost estimates. Appealable decisions can occur at various times during the PA grant process, including during project closeout as long as they meet applicable time limits. Figure 2 summarizes the first- and second-level appeals process under FEMA’s PA program. The first-level appeals process begins after FEMA makes its determination on a project for PA grant assistance. Within 60 days of receiving FEMA’s initial determination, the applicant must file an appeal through the state to the relevant FEMA regional office. The state must forward the appeal and a written recommendation to the relevant FEMA regional office within 60 days. In reviewing the first-level appeal before forwarding it to FEMA, the state has discretion to support or oppose all or part of the applicant’s position in the appeal. Under the Stafford Act, the FEMA regional office shall render a decision within 90 days from the date it received the first-level appeal from the state. The PA appeals process can take longer if regional officials issue a request for information (RFI) to the applicant or request technical advice from subject-matter experts. According to a senior PAAB official, a regional office may issue an RFI or seek technical advice when an applicant’s appeal is incomplete, lacks referenced documentation, or raises additional eligibility concerns. The regional office may issue multiple RFIs prior to rendering a final decision on an appeal. Within 90 days following the receipt of the requested additional information or following expiration of the period for providing the information, FEMA is to notify the state in writing of the disposition of the appeal. Regional Administrators are responsible for authorizing a final decision on a first-level appeal. A decision may result in an appeal being granted, partially granted, or denied. An appeal is considered granted when FEMA has approved the relief requested by the applicant as part of the appeal. An appeal is considered partially granted when FEMA has approved a portion of the relief requested by the applicant. An appeal is considered denied when FEMA has decided not to approve the relief requested by the applicant. If the regional office is considering denying or partially granting a first appeal, it must issue an RFI to provide applicants with a final opportunity to supplement the administrative record (i.e., the documents and materials considered in processing a first-level appeal), which closes upon issuing a first-level appeal decision. According to a senior PAAB official, this process adds additional time to first-level appeal processing, but ensures that FEMA has considered all relevant and applicable documentation. The applicant may file a second-level appeal through the state within 60 days of receiving a first-level appeal decision. The second-level appeal must explain why the applicant believes the original determination is inconsistent with law or policy and the monetary amount in dispute. The state then has 60 days to provide a written recommendation to FEMA. In reviewing the second-level appeal, just as with the first-level appeal, the state has discretion to support or oppose all or part of the applicant’s position in the appeal. The FEMA Assistant Administrator for Recovery or the PA Division Director through a delegation of authority shall render a decision within 90 days of receipt of the second-level appeal from the state. All second-level appeal decisions are posted to FEMA’s website, so applicants can review the previous decisions. As is the case with first-level appeals, the PA appeals process can take longer if PAAB officials request additional information or technical advice on an appeal. These requests must also include a date by which the information must be provided. According to a senior PAAB official, RFIs are seldom issued for second-level appeals because the administrative record is closed after a decision is rendered on a first-level appeal. Similarly, this official told us that technical advice is rarely sought for second-level appeals because such issues are typically explored during the first-level appeal process. Within 90 days following the receipt of the requested additional information or following expiration of the period for providing the information, FEMA is to notify the state in writing of the disposition of the appeal. FEMA’s response to a second- level appeal is the last and final agency decision in the appeals process. Located within the Recovery Directorate, PAAB maintains overall responsibility for administering and overseeing FEMA’s PA appeals program. Among other things, PAAB is responsible for ensuring that all appeal decisions are issued within regulatory timelines by developing and maintaining SOPs; arranging for supplemental staff support as needed; providing regular updates for both first- and second-level appeal decisions through a range of communications; and providing training to certify PA program staff on appeals processing. PA program appeals staff in each of FEMA’s 10 regional offices are responsible for processing first-level appeals, while PAAB staff in FEMA’s Headquarters office are responsible for processing second-level appeals. Accordingly, each regional office is required to follow FEMA’s Directive, Manual, and Regional SOP for processing first-level appeals, consistent with those established for second-level appeals. FEMA regional offices are also required to forward all incoming second-level appeals to PAAB. In addition, regional office staff must, within 3 business days of receiving a first-level appeal from a state, provide an electronic copy of the appeal to the PAAB via FEMA’s shared workspace SharePoint site. As noted in FEMA’s Recovery Directorate Appeals Manual, this step enables PAAB staff to identify and track appeals issues and trends in development across all FEMA regions. The roles and responsibilities for both first-and second-level appeals are defined in FEMA’s SOPs. For example, certified appeals analysts are responsible for reviewing incoming appeals for completeness, researching and drafting appeal decisions, and generating RFIs. Lead appeals analysts are the first-line reviewers of appeal decisions and RFIs, and provide guidance on PA program and policy issues, coordinate appeals assignments, and review work of appeals analysts. Further, appeals coordinators are responsible for receiving incoming appeals, tracking the processing of those appeals, updating the appeal status, and processing other appeals-related correspondence and reports. We have identified a number of issues related to FEMA’s management of the PA appeals program in our prior audit work, as has DHS’s OIG. In our 2008 review of FEMA’s administration of the PA program following Gulf Coast Hurricanes Katrina and Rita, we identified challenges related to applicants’ experience with appeal processing delays and that FEMA often did not make decisions on appeals within the 90-day statutory time frame. Other challenges identified were that FEMA did not inform some applicants of the status of their appeal, or, in some cases, assure them of the independence of the FEMA officials making appeal decisions. Specifically, some applicants perceived there to be a conflict of interest because the PA program staff responsible for reviewing appeals was the same staff that had made the PA project decision that was being appealed. We did not make recommendations to FEMA to address these challenges in our 2008 review, but rather described the challenges as part of the status of overall Gulf Coast hurricane recovery efforts. In 2011, DHS’s OIG conducted a review of FEMA’s PA appeals process and made a number of recommendations aimed at improving aspects of the process, including the timeliness of appeals processing, appeals staffing, and the accuracy of appeals data. As in our 2008 review, the OIG identified appeal processing delays occurring at both FEMA regional offices and at headquarters. For example, the report found that appeals were left open for long periods of time and that some regional offices as well as FEMA headquarters took more than 90 days to issue a decision on first- and second-level appeals. Further, the OIG review found that staffing approaches employed by individual regional offices contributed to processing delays and varying processing timeframes. For example, the management and processing of first-level appeals varied by FEMA regional office in that some regional offices assigned staff specifically to review appeals, while other offices assigned staff to appeals processing as part of their other responsibilities within the PA Program, such as determining eligibility for PA assistance. Further, second-level appeals were processed by various offices within FEMA headquarters, and FEMA had not established guidelines to complete work within a specific timeframe. Moreover, the OIG review found inaccuracies with FEMA’s system for tracking appeal processing times for second-level appeals, resulting in unreliable information being reported to FEMA management regarding compliance with the 90-day statutory time frame. Lastly, the OIG reported that some applicants had been unable to obtain information on the status of their appeals and that FEMA did not provide meaningful feedback to resolve applicants’ inquiries. Our review of FEMA data that track first- and second-level appeals showed weaknesses in the agency’s data quality practices that affect program oversight. For example, we found that FEMA regional offices do not track first-level appeals data consistently or update this data regularly, resulting in missing data entries. Further, we found that FEMA’s appeal tracking process does not ensure data quality, limiting FEMA’s ability to use the data for making decisions on and improvements to the PA appeals process. During our review, we discussed with FEMA officials the discrepancies we found with these appeals data. FEMA officials acknowledged these data quality issues and provided us with corrected data to address these discrepancies for our analysis in this report. Our analysis of the corrected FEMA data showed that, between January 2014 and July 2017, FEMA received over 1,400 first- and second-level appeals with amounts in dispute totaling about $1.5 billion. Across all years, first- level appeals accounted for the majority of appeals, though the number of appeals fluctuated widely each year. Over the same period, only a small percentage of first-and second-level appeals were processed within the 90-day statutory time frame. To administer and oversee the PA appeals program, FEMA collects and tracks information on first- and second-level appeals. Based on FEMA’s SOP, the agency uses this information to identify trends throughout the appeals process and identify areas in need of improvement. Specifically, PAAB uses two Excel spreadsheets for collecting and analyzing first- and second-level appeals data. The spreadsheet for collecting second-level appeals data is updated and maintained by PAAB, while the spreadsheet for first-level appeals is based on input from FEMA’s 10 regional offices. Based on our detailed review of the spreadsheets, they contain numerous data fields on the status and outcomes of first-level appeals, such as the date the regional office received the appeal, the date an RFI was issued, the date the Regional Administrator signed the decision, the amounts being disputed by the applicant, and keyword information regarding the subject of the appeal. PAAB requests that regional offices update appeal information in the first- level appeal spreadsheet as changes occur on an appeal. PAAB then uses this data to assess trends in regional office appeals processing, which it includes in various performance and other internal reports that are shared with FEMA management and used to monitor the program. According to PAAB officials, such information provides valuable support to PAAB as well as the PA program by sharing information about filings, progress, and PA program decision making. However, while PAAB’s tracking efforts help maintain visibility over and provide some monitoring of the appeals processing, we found that data fields for first-level appeals were not consistently reported or updated and that PAAB has no processes to ensure the quality of these data. As a result, data on first- level appeals may not have the accuracy needed for effective reporting and oversight efforts. Our review of first-level appeals data showed that, between January 2014 and July 2017, regional offices did not consistently report first-level appeal information for a number of the key data fields in the PAAB first- level appeal tracking spreadsheet. Specifically, we found missing entries for the majority of the spreadsheet’s 50 data fields. For example, we found that about one-third of the time, regional offices had not completed the data field for amounts being disputed by the applicant for pending appeals or indicated whether or not money was in dispute in the appeal. We also found that the regional offices had generally not entered the date that the regional appeal staff had completed an initial review of the appeal—99 percent of entries were missing for this field. In another example, the data field that captures keywords was missing in over 33 percent of data entries. PAAB officials told us that keywords are an important tool for understanding the root causes of an appeal. Further, we found a number of missing data entries for key dates for one regional office in particular. Specifically, this office had not recorded entries for any of the data fields related to key dates in the appeal process, such as the date the first-level appeal was assigned to an appeals analyst, the date the appeal was reviewed by the Regional Administrator, and the date the first-level appeal decision was sent to and received by the applicant. PAAB officials told us that PAAB uses these dates to calculate appeal processing times as part of its effort to evaluate trends in appeal information and identify potential areas for improvement, including timeliness. However, officials from this regional office told us the office does not consistently update information in the PAAB first-level appeal tracking spreadsheet and does not consider it a priority. Rather, the office considers the actual processing of first-level appeals a priority. In addition, our analysis of first-level appeals data also showed that there was limited standardization of recording entries within fields. For example, officials in one of the three regional offices in our review told us that, in some instances, they combine first-level appeals that involve direct administrative costs and record them as a single appeal. However, the other two regional offices in our review told us they do not combine individual appeals that involve direct administrative costs. Rather, they count each as a separate appeal. The lack of standardization in the way appeals are counted could result in some types of appeals being over- or under-reported. More specifically, these inconsistencies may affect PAAB’s ability to compare appeal processing capacity between regional offices and accurately report the regions’ performance. PAAB officials acknowledged inconsistencies in first-level appeals reporting, but noted that under FEMA’s SOP, the regional offices are responsible for entering first-level appeal information. According to PAAB officials, this responsibility is emphasized during training sessions with appeal staff. However, we found that FEMA has no automated data entry checks for information the regions enter into PAAB’s first-level appeal tracking spreadsheet and does not monitor data fields for missing or conflicting data. Regional offices do not have a means for electronically uploading first-level appeal information to PAAB and must manually input data into the spreadsheet. PAAB’s process then simply confirms receipt of the information through an email exchange with the regional office staff who manually input the information. PAAB officials told us that they rely on regional office appeal staff to confirm and validate the first-level appeals data that are provided to PAAB for internal reporting. However, PAAB has no independent and consistent method of verifying the accuracy of the appeals data reported to it by the regional offices. PAAB officials also noted that there is no systematic process or method to identify these errors and generate an error report. Moreover, another limitation that we identified in the spreadsheet used by the regional offices is that it is not clear what blank data fields represent— that is, whether data does not exist or whether data that exists were not recorded. PAAB officials acknowledged that blank data fields in the first- level appeal tracking spreadsheet created reporting challenges, such as whether the data field was not applicable to a particular appeal, the appeal staff for a particular region did not collect this information, or existing information was not recorded. We also identified a number of other data entries that were erroneously recorded as first-level appeals. Specifically, the information entered related to requests for adjustments to PA project funding and should not have been entered into the tracking spreadsheets as appeals. Standards for Internal Control in the Federal Government advises management to process data into quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis. Additionally, management should evaluate processed information, make revisions when necessary so that the information is quality information, and use the information to make informed decisions. By developing and implementing processes and procedures to ensure a uniform and consistent approach for tracking first-level appeals data and better integrating regional trackers with PAAB’s own first-level appeals tracker, PAAB will have greater assurance that it is collecting the comprehensive and complete appeals processing performance information it needs from the regional offices. Further, by identifying data discrepancies and other anomalies in its data queries and the resulting datasets, PAAB may be able to identify overall weaknesses in its data recording process, thereby allowing it to more accurately report on first-level appeals information. Without obtaining quality appeals data, FEMA will not be able to identify existing gaps in its appeals information and address areas in need of improvement, such as meeting statutory timeframes. After we shared our concerns about the appeals data with FEMA officials, they corrected the errors in their data and provided us a corrected data set to use for our analysis in this report. Based on our analysis of this corrected data we determined that, from January 2014 to July 2017, FEMA received over 1,445 first- and second-level appeals with amounts in dispute totaling about $1.5 billion. Across all years, first-level appeals accounted for the majority of appeals, though the number of appeals fluctuated widely between years. (See figure 3.) FEMA officials told us that the number of appeals they received has varied year to year and that increases or decreases in appeals are largely a function of the number of and severity of disaster events. That is, the greater the number of disasters declared and the more extensive the damage, the greater the number of PA program grants FEMA may issue to applicants, which in turn, may affect the likelihood that an applicant will appeal a FEMA decision regarding a grant. FEMA issued a decision on 953 of the appeals it received between January 2014 and July 2017. As shown in table 1, another 349 appeals were pending and awaiting a decision as of July 2017. The remaining 143 appeals were withdrawn by the applicant during the appeals process. Our analysis of the corrected FEMA data also found that, for appeals received between January 2014 and July 2017, total first- and second- level pending and decided appeals involved amounts in dispute totaling over $1.3 billion (excluding the 143 appeals that were withdrawn by the applicant during the appeals process). As shown in figure 4, at least a third of both first-and second-level pending and decided appeals (35 percent and 44 percent, respectively) involved amounts in dispute that ranged from $1 to $99,999. Less than 10 percent of both first- and second-level pending and decided appeals (9 percent and 8 percent, respectively) did not involve monetary amounts in dispute. In rendering a final decision on an appeal, FEMA can grant, partially grant, or deny the appeal. Our analysis showed that FEMA granted nearly a third of the 779 first-level appeals filed, awarding applicants over $85 million. As shown in figure 5, FEMA also partially granted about 19 percent of first-level appeals filed, which involved amounts in dispute totaling over $63 million. Further, figure 5 shows that over one-third of the 174 second-level appeals were either granted or partially granted. Specifically, FEMA granted about 26 percent of second-level appeals filed, awarding over $43 million, while the agency partially granted about 7 percent of second-level appeals filed, involving amounts in dispute totaling almost $19 million. Our analysis of the corrected FEMA appeal data showed that, on average, FEMA took more than three times the 90-day statutory time frame to process an appeal, which includes rendering a decision. Specifically, for first- and second-level appeals that FEMA received between January 2014 and July 2017 and that FEMA decided during the same period, FEMA’s average processing time was 297 days. The processing time for decided first-level appeals averaged 293 days, while the processing time for decided second-level appeals averaged 313 days. Further, as shown in figure 6, only a small percentage of decided first-and second-level appeals (9 and 11 percent, respectively) were processed within the 90-day statutory time frame. For pending appeals, we found that, at the time of our analysis in July 2017, FEMA had taken on average, more than three times the 90-day statutory time frame for rendering decisions. Specifically, as of July 2017, FEMA had not rendered a decision on 349 appeals, which had an average processing time of 299 days. As of July 2017, the processing time for pending first-level appeals averaged 306 days, while the processing time for pending second-level appeals averaged 267 days. Figure 7 shows the ranges of processing times as of July 2017 for both first-and second level pending appeals. Officials from PAAB and the three regional offices in our review acknowledged that they experienced challenges processing appeals within the 90-day statutory time frame. They told us that issuing RFIs to the applicant can contribute to lengthy processing delays. According to PAAB officials, issuing an RFI may contribute to long processing periods if the information relates to a complex appeal—for example, an appeal involving multiple engineering issues. An appeal decision can also be delayed if FEMA issues an RFI because an applicant submitted incomplete documentation to support an appeal. Under FEMA regulation, these requests do not count against processing times and the 90-day time frame in which FEMA can render a decision on an appeal. However, our analysis of the corrected FEMA data showed that FEMA exceeded its statutory time frames even when it did not issue an RFI. Specifically, between January 2014 and July 2017, FEMA issued an RFI in about 59 percent—or 560—of the 953 first- and second-level appeals for which it rendered a decision. In 48 percent (267) of those decided appeals, FEMA had issued the RFI after the 90-day time frame had elapsed. FEMA did not issue RFIs for about 41 percent (393) of decided first- and second-level appeals. In 78 percent (305) of those appeals, FEMA’s processing time still exceeded the 90-day statutory time frame. State emergency management officials from five of our six selected states told us that they experienced long wait times for first- and second-level appeal decisions and that FEMA rarely processed appeals within the 90- day time frame required by statute. State emergency management officials further told us that such delays adversely affect applicants, such as municipalities and localities, which may wait prolonged periods to resolve project eligibility and costs related to rebuilding efforts. Delays in FEMA’s decision making may also result in additional costs to both the state and the applicant, according to these officials. For example, the state may pursue funding from an applicant if FEMA decides to deobligate funds from the applicant for PA projects that have already been completed. As discussed earlier in this report with respect to the PA process, FEMA may do this if it finds that the applicant did not meet certain PA project requirements. In these instances, the applicant may appeal FEMA’s decision, but the state may need to begin administrative proceedings against the applicant to recover or offset the deobligated funds. One state emergency manager told us that some applicants withdrew their appeals because of the prolonged delays in receiving a final decision. According to state emergency management officials, delays in FEMA’s appeal decisions can create significant challenges for local government entities, such as counties and school districts. Officials from one state provided an example of a rural school district that sought PA funding to bus displaced children who had been left homeless from damage caused by Hurricane Irene. According to relevant federal and state documents these officials provided us, these children had been moved to shelters outside of their school district and needed transportation to be able to attend school. The school district applied to FEMA for transportation costs associated with hiring an additional bus driver to bus the children to the schools in the district. FEMA denied the school district’s request, based on its interpretation of the Stafford Act and the eligibility of costs related to emergency public transportation. The district subsequently filed a first-level appeal in November 2015. FEMA took over a year to issue a decision and, in December 2016, denied the district’s first-level appeal. State management officials told us that incurring these unanticipated transportation costs while waiting for FEMA to decide the appeal has a major effect on the school district and the community as a whole, and can lead to the elimination of school programs or staff. The school district subsequently filed a second-level appeal in February 2017. FEMA denied the appeal in August 2017. State emergency management officials we interviewed provided an additional example wherein a small town had applied for PA grant funding to rebuild a retaining wall and roadway following damage caused by Hurricane Irene. According to relevant federal and state documents officials provided us, the overflowing banks of a tributary caused a retaining wall, which protected a nearby roadway, to wash away. The roadway, which provided access to residential properties near the tributary, was significantly damaged, due to the overflow. The town requested funding to repair the roadway and to replace and extend the retaining wall another 250 feet beyond the original wall in order to protect the roadway from future flood events. FEMA approved the PA funding to repair the roadway. However, FEMA denied the town’s application for PA assistance to extend the wall beyond its original length. In doing so, FEMA concluded that the proposed work was ineligible for assistance because it significantly changed the retaining wall’s predisaster configuration and that such a change constituted an improved project, making it ineligible under FEMA regulations and policy. The town then filed a first-level appeal in April 2014. More than 2 years later—in June 2016—FEMA denied the town’s first-level appeal, upholding FEMA’s original determination. The town subsequently filed a second-level appeal in September 2016. Over a year later, PAAB was still reviewing the appeal. FEMA has taken a number of steps to improve its management of the appeals process and respond to issues raised by us and the DHS OIG related to processing delays. As we presented earlier in this report, our 2008 review, and DHS’s subsequent 2011 OIG review, identified a number of organizational and procedural issues related to processing delays, staff independence, and communications with applicants. Responding to these issues, FEMA created the PAAB within the Recovery Directorate at FEMA Headquarters in late 2013, adding an auditing component to the Branch in 2014. PAAB then established a core of full-time staff at FEMA headquarters that were specifically assigned to process second-level appeals. At the same time, through the Recovery Directorate, each of FEMA’s 10 regional offices was assigned full-time staff for processing first-level appeals. Prior to PAAB, second- level appeals were processed by various offices within FEMA headquarters, while the management and processing of first-level appeals varied by FEMA regional office. Some regional offices assigned staff specifically to review appeals, while other offices assigned staff to appeal processing as part of their other responsibilities within the PA Program, such as determining eligibility for PA assistance. In standing up PAAB, FEMA also established an SOP that describes the organizational structure of PAAB, as well as its responsibilities and the roles of its staff. The SOP also addresses procedures related to PAAB’s responsibility for managing the entire PA appeals program. These responsibilities include reporting on appeal processing performance, providing training to appeals staff, and identifying PA appeal process and policy improvements. FEMA later issued a regional SOP that included procedures to help regional offices reduce the number of appeals that exceeded statutory time frames. These procedures reflected an ongoing effort to leverage internal resources when regional offices exceed processing capacity. Specifically, a regional office can submit a request to PAAB for assistance from analyst staff from other regions or from PAAB to assist with processing first-level appeals. PAAB may then temporarily assign an appeals analyst from PAAB or from another regional office to assist the regional office making the request. For example, one regional office official told us his office had requested assistance with 10 first-level appeals and PAAB was able to accommodate the request by assigning 8 of the 10 appeals to another region for processing. According to a senior PAAB official, this procedure allows FEMA to maximize use of its national appeal processing capacity. As of October 2017, PAAB had transferred 77 appeals from overwhelmed regional offices to those with capacity to process additional appeals. Further, FEMA procedures now require that a conflict check be performed to determine whether the analyst was involved with a PA project determination that is substantively related to the appeal. If a conflict is identified, options include disqualifying the appeals analyst from working on the appeal, or requesting the appeal be transferred to another regional office or PAAB for processing. State emergency management officials from five of the six states in our review told us that they believed that issues related to the independence of appeals staff had been addressed and were no longer an issue. PAAB also took steps to improve communication with applicants by creating an online second-level appeal tracking spreadsheet—accessible through the Internet—intended to provide applicants with information on the status of second-level appeals. The spreadsheet includes, among other things, the date the appeal was received by FEMA headquarters, the date that an RFI was sent to the applicant, whether the appeal was “under review,” whether a final decision had been granted, and the date any final decision was signed. FEMA also took steps to increase its staffing levels. In January 2015, FEMA’s Recovery Directorate completed a workforce analysis and determined that additional appeals analysts were needed to address capacity issues that were resulting in growing inventories of first-level appeals. At the time, FEMA concluded that, in addition to its 23 on-board appeals analysts, an additional 29 appeals analysts were needed to support the existing, as well as anticipated, appeal inventory increases across FEMA’s 10 regional offices. The Recovery Directorate requested and was subsequently authorized the additional appeals analyst positions, which, when filled, would provide the PA appeal program with a total of 52 first-level appeals analysts. With the exception of Region I, FEMA planned to provide each of the remaining 9 regional offices with at least 1 additional appeals analyst. Regional offices with the heaviest workloads, such as Region II and Region IV, would be allocated more appeals analysts. FEMA took steps to fill these positions over the next 2 years, and by June 2017, FEMA had filled 47 of the 52 positions. Despite efforts to improve its management of the appeals process, FEMA faces a backlog of both first- and second-level appeals among the three selected FEMA regional offices as well as PAAB. According to officials in PAAB and the three regional offices in our review, workforce challenges contribute to delays in processing PA appeals, even with the improvements described above. PAAB and the three regional offices in our review identified the following workforce challenges that contributed to PA appeal processing delays. Staff vacancies, inexperience, and turnover: Despite FEMA’s efforts to increase its appeals analyst staffing level—an effort that began in 2015—two of the three regional offices in our review had a number of vacancies for these positions through June 2017. PAAB and regional officials told us that such vacancies, which occurred over a prolonged period, contributed to appeal processing delays. FEMA data on appeals analyst staffing show that FEMA took nearly 2 years to fill the additional appeals analyst positions across its 10 regional offices. For example, in 1 of the regional offices in our review, 3 of the 8 appeals analyst positions were vacant through 2016 and were not filled until July 2017. Further, officials in this regional office told us that the current staffing level of 8 appeals analysts was inadequate to keep pace with the region’s increasing appeal inventory. Similarly, 6 of PAAB’s 11 appeals analyst positions were vacant from August 2015 to October 2016. By July 2017, PAAB had filled all but 2 appeals analyst positions. PAAB officials told us the appeals analyst staffing level consisting of 52 positions was a preliminary estimate and that this staffing level has not been adequate in regions with heavy workloads and appeal inventories. PAAB officials also acknowledged the potential benefits of having an appeals analyst staffing plan, but stated that they are not yet prepared to update the workforce assessment for PAAB and the regional offices, nor do they have plans to do so until full staffing is achieved. These officials also told us that they are still working to achieve the staffing levels developed in 2015 and are taking steps to address staffing challenges through more targeted hiring and use of career ladder positions. Further, PAAB staffing data showed that almost half of PAAB’s staff had less than 1 year of experience. PAAB officials told us that prior vacancies and a large number of inexperienced staff have contributed to processing delays and second-level appeal backlogs. PAAB officials also told us that retaining trained appeals analysts has been challenging due to limited career advancement opportunities within the appeals analyst position. These officials told us that although not required, individuals who typically apply for an appeals analyst position possess a law degree, and that once hired, some of them apply for attorney positions within PAAB or in various offices within FEMA or DHS. For example, PAAB staffing data showed that within 18 months of being hired by PAAB, four PAAB appeals analysts applied for and were subsequently hired as attorney-advisors within PAAB or other FEMA departments. Then those appeals analyst positions were vacant until the next round of hiring. Regional officials told us it has been challenging to find qualified applicants with the specialized skillset of an analyst position. They told us that, ideally, an appeals analyst should be an expert in the PA program and possess a nuanced understanding of the legal issues associated with the program’s requirements. Regional officials told us that, because of this specialized skillset, they look to recruit PA appeals analysts from other FEMA regional offices who may have an interest in relocating or are seeking a promotion. However, while recruiting appeals analysts from other regions may assist individual offices, it does not address FEMA’s goal of achieving its staffing levels. Delays in training appeals staff: FEMA requires that PA appeals analysts undergo a certification course that includes 3 days of training on processing appeals. The appeals analyst certification course, delivered through PAAB, covers both procedural steps of processing appeals as well as the policy and legal issues raised by the PA program, and ensures that trainees can prepare a well- written appeal response. After completing the course, an analyst in training must pass a test to demonstrate proficiency in reviewing and analyzing appeals and preparing appeal decisions. To this end, the analyst must analyze a mock appeal—based on facts similar to those presented in a previously decided appeal— and draft an appeal decision. FEMA policy states that only certified staff can serve as appeals analysts and must be recertified every 2 years. However, some appeals analysts in the regional offices in our review had not yet undergone the certification process, but were nonetheless working in an appeals analyst capacity under the supervision of certified analysts. PAAB procedures also state that a trainee analyst cannot assume work on an appeal without being supervised by a certified analyst. For example, in one regional office, four of the office’s nine appeals analysts had been working in their positions for between 6 months to a year before they received appeals analyst certification training. According to regional officials, this increased the supervisory workload on the remaining five appeals analysts within the region and the lack of timely training and certification of appeals analysts affect the efficient processing of appeals and can lead to delays in FEMA issuing appeal decisions. Deployment of appeals staff to disaster response: According to PAAB officials, while PA appeals analysts are considered “dedicated” positions, these analysts can be deployed at any time to provide assistance on a disaster, such as working with grant applicants to document damages or assisting applicants in developing project proposals to request PA grants. Officials from two of the three FEMA regional offices in our review told us that these deployments contributed to processing delays because, given limited resources, assigning staff to continue work on the appeal is not always possible. In one regional office, five of the nine PA appeals analysts were deployed in late 2016 to do recovery work related to damage from Hurricane Matthew. These deployments lasted approximately 30 to 90 days and left the regional office understaffed. Further, one regional office official told us that maintaining continuity in processing an appeal can be difficult for those analysts who are deployed because they must pick up where they left off on their assigned appeals upon their return. A senior PAAB official told us that regional appeals analyst staff have been deployed to assist with response and recovery efforts as a result of the catastrophic damage from Hurricanes Harvey, Irma, and Maria. As a result, these analysts have not been available to process first-level appeals. This official further told us that PAAB staff, including analyst staff—while not deployed—have been assigned to support disaster operations. For example, one staff member was assigned to support site inspector training, while two others were assigned to stand National Response Coordination Center watch. Further, one staff member was assigned to support training and contract review functions and the remaining staff members were assigned as call takers for the PA Grants Manager and Grants Portal hotline. To help overcome staffing shortages, according to FEMA documents, all three regional offices in our review staffed assistance from PAAB at various times during the past 2 years. However, officials from two of the three regional offices in our review told us that, based on their experiences, requesting staff from PAAB or other offices had a number of limitations. Specifically, because the originating regional office is ultimately responsible for the appeal, its staff must continue to oversee the appeal, including such responsibilities as tracking the appeal, corresponding with the applicant and the state as needed, and reviewing and approving the appeal decision. One regional office official told us that this arrangement was not helpful and only added an additional layer of complexity that delayed processing. Another regional official told us that the quality of the borrowed staff’s work was not consistent. This official further stated that, because offices are not able to select the analysts that would be assigned to work on their appeals, he was reluctant to use staff from other regional offices. According to leading human capital practices, the key to an agency’s success in managing its programs is sustaining a workforce with the necessary knowledge, skills, and abilities to execute a range of management functions that support the agency’s mission and goals. Achieving such a workforce depends on having effective human capital management through developing human capital strategies. Such strategic workforce planning includes the agency assessing current and future critical skill needs by, for example, analyzing the gaps between current skills and future needs, and developing strategies for filling the gaps identified in workforce skills or competencies. Standards for Internal Control in the Federal Government also states that agencies should continually assess their needs so that they are able to obtain a workforce that has the required knowledge, skills, and abilities to achieve their organization’s goals. Further, as we have previously reported in our work on strategic workforce planning, such staffing assessments should be based on valid and reliable data. However, FEMA has not developed a workforce staffing plan to identify hiring, training, and retention needs of appeals staff across PAAB and the regional offices. PAAB officials told us that they are still working to achieve the staffing levels developed in 2015 and are taking steps to address staffing challenges related to retention through more targeted hiring and use of career ladder positions. In the absence of a workforce plan for the PA appeals staff, FEMA will likely continue to experience workforce challenges including vacancies in key appeals analyst positions, appeals staff turnover, training delays, and understaffing due to disaster deployment. These challenges will likely continue to contribute to delays in FEMA’s processing and issuing first- and second-level PA appeals decisions. FEMA officials have acknowledged the importance of establishing goals and measures to assess the performance of the PA appeals program. In particular, for fiscal year 2016, FEMA’s Recovery Directorate established two performance goals for PAAB’s processing of second-level appeals. The first goal was aimed at reducing the inventory of second-level appeals by 20 percent. The second goal was aimed at processing at least 30 percent of second-level appeals received in 2016 within 90 days of receiving the appeal, in order to comply with FEMA statutory time frames. FEMA internal documents showed that these two performance goals were intended to reduce the second-level appeal inventory, and, at the same time, promote a standard of timely second-level appeal processing for PAAB. According to PAAB officials, various factors beyond PAAB’s control prevented PAAB from meeting these performance goals. These factors included an unanticipated surge in the number of second-level appeals in 2016, as well as increased vacancies due to staff turnover in PAAB analyst positions in 2016. Recognizing these factors, PAAB developed a revised goal that focused on the number of appeals an analyst could process per month. According to PAAB officials, focusing the revised goal on analyst production controlled for external factors that tended to affect overall processing, such as surges in appeal submissions and staff turnover. PAAB officials told us that their proposed production goal was not accepted by the Recovery Directorate for 2016, but that PAAB adopted the revised goal for individual performance plans for PAAB appeals analyst staff. In contrast, although first-level appeals represent the majority of FEMA’s appeal inventory, FEMA has not developed goals and measures to assess the performance of first-level appeals processing across regional offices. PAAB collects various data from all 10 regional offices on first- level appeals, such as the number of first-level appeals being processed, as well as processing timeliness (i.e., appeals that exceeded time limits) and key words that can help identify various appeal subject-matter categories. PAAB then aggregates this data, which it publishes on a quarterly and weekly basis in internal reports that it shares with FEMA management. However, FEMA has not established goals to assess performance against the information that PAAB collects. According to FEMA officials, while the Recovery Directorate established goals and measures for second-level appeals, it is not responsible for developing goals and measures to assess performance within the regional offices. These officials told us further that some Regional Administrators have established goals and measures for first-level appeals within their regional offices, while others have not. For management to effectively monitor a program, Standards for Internal Control in the Federal Government state that it should create goals and measures to determine if a program is being implemented as intended. In addition, the quality of the program’s performance should be assessed over time and monitoring efforts should be evaluated to assure they help meet goals. Further, Congress enacted the GPRA Modernization Act of 2010 (GPRAMA) to focus and sustain attention on agency performance and improvement by requiring that federal agencies establish outcome- oriented goals and measures to assess progress towards those goals. Specifically, agencies, like DHS, are required to monitor progress towards the achievement of goals, report on that progress, and address issues identified. Without consistent performance measures across FEMA regional offices to help assess progress and identify deficiencies in appeals processing, DHS and its subcomponent agencies like FEMA may have difficulty providing accurate reporting on the effectiveness of current efforts to process first-level appeals and on the factors that contribute to ongoing appeal processing delays. Although FEMA has made efforts to improve its management of the PA appeals process, these efforts have been hampered by a number of issues including weaknesses in FEMA’s appeals tracking data and its ability to ensure the quality of this data. FEMA corrected its appeals data for purposes of this report once we pointed out data discrepancies, but FEMA does not have a process to ensure data quality issues are permanently addressed. As a result, these weaknesses will persist. By implementing procedures to consistently track appeals data and ensure the quality of these data, FEMA will be in a better position to accurately report on appeal processing performance and make informed decisions about the appeals process. FEMA also faces a variety of workforce challenges that have contributed to appeals processing delays. These challenges include staffing vacancies, lack of experienced staff, high rates of staff turnover, delays in training appeals staff, and the deployment of appeals analysts for disaster response, all of which have contributed to processing delays. Addressing these challenges by identifying the hiring, training, and retention needs of its appeals offices through strategic workforce planning could help FEMA better position itself to reduce its appeals backlog and better respond to PA appeals. Further, although FEMA has established goals and measures for its second-level appeals processing, it has not done so for first-level appeals. By establishing goals and measures to assess the performance of its first-level appeals process, DHS and FEMA will be able to better evaluate the efficiency and effectiveness of its efforts to reduce the PA appeal backlog and improve appeal processing times. We are making the following four recommendations to FEMA: The Assistant Administrator for Recovery should design and implement the necessary processes and procedures to ensure a uniform and consistent approach for tracking first-level appeals data to better integrate regional trackers with PAAB’s own first-level appeals tracker. (Recommendation 1) The Assistant Administrator for Recovery should design and implement the necessary controls to ensure the quality of the first-level appeals data collected at and reported from the regional offices to PAAB. (Recommendation 2) The Assistant Administrator for Recovery should develop a detailed workforce plan that documents steps for hiring, training, and retaining key appeals staff. The plan should also address staff transitions resulting from deployments to disasters. (Recommendation 3) The Assistant Administrator for Recovery should work with Regional Administrators in all 10 regional offices, to establish and use goals and measures for processing first-level PA appeals to monitor performance and report on progress. (Recommendation 4) We provided a draft of this report to the Secretary of the Department of Homeland Security and the Administrator of the Federal Emergency Management Agency for review and comment. DHS provided written comments, which are reproduced in appendix II. In its comments, DHS concurred with our recommendations and described actions planned to address them. FEMA also provided technical comments, which we incorporated as appropriate. Additionally, we provided excerpts of the draft report to state emergency management officials in the selected six states we included in our review. We incorporated their technical comments as appropriate. Regarding our first recommendation, that FEMA design and implement the necessary processes and procedures to ensure a uniform and consistent approach for tracking first level-appeal data, DHS stated that FEMA’s PAAB will develop guides and checklists for the regions to ensure data uniformity and consistency and that PAAB will update its data review process, and develop additional content highlighting the importance of data integrity and accuracy. DHS estimated that this effort would be completed by July 31, 2018. Regarding our second recommendation, that FEMA design and implement the necessary controls to ensure first-level appeal data quality, DHS stated that PAAB will include content within the certified appeal analyst training highlighting the importance of data integrity and that first- level appeal data will be reviewed by PAAB on a quarterly basis. DHS estimated that this effort would be completed by February 28, 2019. Regarding our third recommendation, that FEMA develop a detailed workforce plan for hiring, training and retaining key appeals staff, DHS stated that by December 31, 2018, PAAB will produce a workload flow assessment on second-level appeals staffing and determine whether appeal timeliness issues still exist. If PAAB determines that significant response timeliness issues on second-level appeals still exist after most PAAB appeal analyst staff have at least one year of experience, a detailed PAAB workforce plan will be completed and finalized by December 31, 2019. PAAB will also complete an assessment of first-level appeal inventory and timeliness issues. If PAAB determines that significant regional response inventory and timeliness issues on first-level appeals still exist, FEMA will create a working group to prepare a detailed regional workforce plan. DHS estimated that this effort would be completed by December 31, 2019. Regarding our fourth recommendation that FEMA work with Regional Administrators to establish and use performance goals and measures for processing first-level appeals, DHS stated that PAAB has begun developing a methodology for establishing, measuring, and reporting on first-level appeals processing goals and performance progress, and that PAAB would work with the regions to complete and finalize this methodology. DHS estimated that this effort would be completed by August 31, 2018. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we are sending copies of this report to the Secretary of Homeland Security and interested congressional committees. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or bawdena@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report reviews aspects of the Federal Emergency Management Agency’s (FEMA) management of the Public Assistance (PA) appeals process. The objectives of this review were to determine: (1) the extent to which FEMA ensures quality in its data on appeals and what FEMA data show about its appeals inventory and timeliness for appeals decisions; (2) what steps FEMA has taken to improve its management of the appeals process and what challenges, if any, remain; and (3) the extent to which FEMA has developed goals and measures to assess the appeal program’s performance. To address the first objective, we obtained and analyzed data from FEMA on all first- and second-level appeals that the agency received between January 2014 and July 2017. For first-level appeals, FEMA provided us data on appeals received between January 1, 2014, and July 12, 2017, while FEMA provided us data on second-level appeals received between January 1, 2014, and July 6, 2017. We focused on this time frame because it contained the most complete and available data on each type of appeal at the time of our review. We identified various discrepancies in the first-level appeals data, which we discussed with knowledgeable FEMA staff. Examples of these discrepancies, which we present in this report, included missing data, erroneous data entries, and inconsistent recording of data. In response to our discussions, FEMA provided us with corrected data to address the identified discrepancies. After obtaining the corrected data, we concluded the appeals data from FEMA were sufficiently reliable to provide information on PA appeals that we present in this report. We also obtained and analyzed FEMA policies and procedures related to tracking appeals data, such as FEMA’s policies and procedures related to regional offices, and evaluated them using Standards for Internal Control in the Federal Government. We analyzed the corrected data to determine FEMA’s appeal inventory— that is, the number of first-and second-level appeals that were pending and decided, including any amounts in dispute or amounts awarded, and appeal outcomes for appeals that FEMA decided. From the total number of appeals received, we excluded four second-level appeals that had been remanded or rescinded. We determined the processing times for first- and second-level decided appeals by calculating, for each appeal, the number of calendar days between the date that FEMA received the appeal and the date that FEMA rendered a decision on the appeal. We then calculated the average number of calendar days to determine average processing times for first- and second-level decided appeals. We determined the processing time for pending first-level appeals by calculating, for each appeal, the number of calendar days between the date FEMA received the appeal and July 12, 2017. Similarly, we determined the processing time for pending second-level appeals by calculating, for each appeal, the number of calendar days between the date FEMA received the appeal and July 6, 2017. We then calculated the average number of calendar days to determine average processing times for pending first-and second-level appeals. We compared processing times for first- and second-level appeals against FEMA’s 90-day statutory time frame to determine the number of calendar days by which FEMA exceeded the time frame. We also determined the number of first- and second-level appeals in which FEMA issued an RFI and those in which FEMA did not issue an RFI. For the first- and second-level appeals in which FEMA issued an RFI, we compared the date the appeal was received to the date that FEMA issued the RFI. We used the first RFI in cases where FEMA issued multiple RFIs. We then determined whether FEMA had issued the RFI within 90 calendar days. For the first- and second-level appeals in which FEMA did not issue an RFI, we compared the date the appeal was received to the date that FEMA issued a decision. We then determined whether FEMA had issued a decision after 90 calendar days. We also obtained and analyzed FEMA policies and procedures and program directives governing appeal data collection and evaluated them against Standards for Internal Control in the Federal Government. To address the first and second objectives, we also administered semistructured interviews to officials from 3 of FEMA’s 10 regional offices (Regions II, IV, and VI) with the highest number of first- and second-level pending appeals. We asked these officials about their efforts to process and track appeals, what improvements had been made regarding how PA appeals are processed, as well as what challenges they believed remained in processing PA appeals since 2013.To select these offices, we obtained data from FEMA on first- and second-level appeals that were pending a decision, as of October 31, 2016. Collectively, these appeals represented 69 percent of all pending first- and second-level appeals FEMA had received as of October 31, 2016. We focused on this time frame because it contained the most recent data for selecting FEMA regional offices at the time of our review. To obtain additional perspective on what, if any, challenges remain in FEMA’s management of the appeals process, we also interviewed state emergency management officials in six states (two states in each of the corresponding 3 FEMA regional offices). (See table 2.) The information obtained from the FEMA regional offices and the state emergency management offices cannot be generalized nationwide. However, the information obtained from these officials provides insight into the issues FEMA encountered during the appeal process. To additionally address the second objective, we reviewed our past report and Department of Homeland Security Inspector General reports on the PA appeals program. We also reviewed FEMA documentation, such as policy directives, internal staffing requests, appeals analyst position descriptions, and other internal memoranda. We used these sources to identify what steps FEMA had taken to improve its management of the appeals process since 2013. We also used this information to supplement our understanding of the challenges the Public Assistance Appeals Board (PAAB) and regional officials raised during our interviews discussed above. To address the third objective, we analyzed a series of FEMA internal performance reports issued between November 29, 2013, and February 15, 2017. Developed by PAAB and provided to FEMA management on a quarterly basis, these reports included aggregate information on PA appeals inventory, such as the number of first- and second-level pending appeals, the number of appeals processed within statutory timeframes, the number of pending appeals that are beyond the statutory timeframe, and common appeal issues based on keywords entered by analysts responsible for processing appeals. We also analyzed internal documents, such as briefs and newsletters, which provided detail on specific appeal decisions as well as the status of the appeals inventory. Further, we analyzed FEMA’s Strategic Plans for fiscal years 2008 to 2013 and fiscal years 2014 to 2018 to identify objectives, measures, and overall agency-wide goals. We assessed the information in these documents against leading practices in measuring agency performance and against federal standards for internal control. For all three objectives, we reviewed relevant legislation and FEMA standard operating procedures that govern both FEMA headquarters and regional offices. We also interviewed officials in PAAB and FEMA’s Recovery Directorate. In addition to the contact named above, Brenda Rabinowitz (Assistant Director), Anthony Bova (Analyst-in-Charge), Joseph Fread, and Sherrice Kerns made key contributions to this report. Jehan Chase, Chris Currie, Robert Gebhart, Chris Keisling, Donna Miller, Kathleen Padulchick, Amanda Parker, Erik Shive, and Walter Vance also provided assistance.", "summary": "In both 2016 and 2017, 15 separate U.S. disasters resulted in losses exceeding $1 billion each. FEMA provides PA grants to state and local governments to help communities recover from such disasters. If applicants disagree with FEMA's decision on their PA grant application, they have two chances to appeal: a first-level appeal to be decided by the relevant FEMA regional office and, if denied, a second-level appeal to be decided within FEMA's Recovery Directorate. Each is subject to a 90-day statutory processing timeframe. GAO was asked to review FEMA's appeals process. This report examines: (1) the extent to which FEMA ensures the quality of its appeals data and what these data show about PA appeals inventory and timeliness; (2) what steps FEMA has taken to improve its management of the appeals process and what challenges, if any, remain; and (3) the extent to which FEMA developed goals and measures to assess program performance. GAO analyzed FEMA policies, procedures, and data on appeals and interviewed officials from headquarters and from regional offices with the highest number of pending appeals. GAO also spoke to state officials from the two states within each of the three regions with the highest number of pending appeals. Weaknesses in the quality of Federal Emergency Management Agency's (FEMA) Public Assistance (PA) appeals data limit its ability to oversee the appeals process. For example, FEMA's data are inaccurate and incomplete because regional offices do not consistently track first-level appeals and FEMA does not have processes to ensure data quality. When GAO discussed these weaknesses with FEMA officials, they acknowledged them and provided GAO with corrected data for January 2014 through July 2017. GAO's analyses of the corrected data show fluctuations in the appeal inventory from year to year depending on the number of disasters declared and delays in processing. For example, as shown in the figure, only 9 percent of first-level and 11 percent of second-level appeals were processed within the 90-day statutory timeframe. FEMA has taken steps to improve its management of the appeals process—including issues that GAO and the Department of Homeland Security's Office of Inspector General identified in 2008 and 2011. For example, FEMA increased its appeal staffing levels and developed standard operating procedures. Despite these efforts, FEMA continued to face a number of workforce challenges that contributed to processing delays, such as staff vacancies, staff turnover, and delays in training. FEMA has not developed a workforce staffing plan to identify hiring, training, and retention needs across its headquarters and regional offices, though FEMA officials acknowledge the potential benefits of having such a plan and stated that they are focused on filling vacancies. In the absence of a workforce plan, FEMA will continue to experience workforce challenges that could further contribute to delays in processing appeals. FEMA has not established goals and measures for assessing first-level appeals processing performance, but has done so for second-level appeals. FEMA views establishing these first-level goals and measures as the responsibility of its regional offices. Without goals and measures, FEMA is limited in its ability to assess the efficiency and effectiveness of its overall appeals process and identify and address weaknesses that may lead to delays in making appeal decisions. GAO is making four recommendations, including that FEMA implement a consistent approach for tracking appeals and ensuring data quality, develop a workforce plan, and develop measurable goals for processing first-level appeals. FEMA concurred with all four recommendations.", "document_type": "gao"}
{"report": "The Social Security Administration’s (SSA) Disability Insurance (DI) and Supplemental Security Income (SSI) programs are the two largest federal programs providing cash assistance to people with disabilities. The DI program, established in 1956, provides monthly payments to working-age adults (and their dependents or survivors) who are unable to work due to a long-term disability. The SSI program, established in 1972, is a means-tested income assistance program that provides monthly payments to adults or children who are aged, blind, or have other disabilities and whose income and assets fall below a certain level. Individuals with low incomes and assets who also have a sufficient work history may qualify for the DI and SSI programs concurrently. In this case, the individual’s SSI payment is generally offset by the amount of the DI payment. In fiscal year 2016, according to SSA, about 10.8 million disabled workers and their family members received about $143 billion in DI benefits, and an estimated 8.2 million individuals received almost $59 billion in SSI benefits (of those, 2.6 million received SSI in addition to DI or Old-Age and Survivors benefits). Although DI and SSI have different purposes and target populations, the disability criteria for adults are the same for both programs. To be considered eligible for either program as an adult, a person must have a medically determinable physical or mental impairment that (1) has lasted or is expected to last for at least a continuous period of 1 year or result in death, and (2) prevents them from engaging in any substantial gainful activity (SGA). The disability decision-making process includes five sequential steps (see fig. 1). First, SSA determines if a claimant is working and screens out (denies) claimants who earn over a specified amount. Second, SSA determines whether the claimant has an impairment severe enough to significantly limit his or her ability to do basic work activities and expected to last more than 12 months or result in death, and denies claimants who do not meet these criteria. At the third step, SSA determines whether a claimant’s impairment meets or is equivalent to an impairment listed in SSA’s Listings of Impairments. If a claimant “meets” or “equals” one of the listed impairments, they are allowed benefits. If not, SSA proceeds to the last two steps and assesses whether a claimant, given their impairment, can do their past work (step four) or other work that exists in significant numbers in the national economy (step five). Over time, more of SSA’s disability decisions have been made at the last two steps in the process, which require more judicial discretion than decisions made at steps 1 through 3, according to SSA. In 2000, 29 percent of decisions were made at steps 4 and 5, according to an SSA report. By 2014, nearly half—49 percent—of all decisions were made at these steps. To apply for benefits, a claimant must file an application online, by telephone, or mail, or in person at a local Social Security office. If field office staff determine that the claimant meets the nonmedical eligibility criteria, they forward the claim to the appropriate state Disability Determination Services (DDS) office. DDS staff—generally a team comprised of disability examiners and medical consultants—review medical and other evidence provided by the claimant, obtaining additional evidence as needed, and make the initial disability determination. In fiscal year 2016, SSA received more than 2.5 million disability claims. If the claimant is not satisfied with this determination, in most states he or she may request a reconsideration of the decision within the same DDS office. If the claimant is dissatisfied with the reconsideration, he or she may request a hearing before an administrative law judge (ALJ). In one of several initiatives to improve the disability determination process, SSA has eliminated the reconsideration step of the process in 10 states, allowing the claimant to appeal the initial decision directly to an ALJ. In fiscal year 2016, claimants appealed more than 698,000 decisions to the hearings level, and SSA issued more than 637,000 dispositions (including allowances, denials, and dismissals). (See fig. 2). Within SSA’s Office of Disability Adjudication and Review (ODAR), there are approximately 1,500 ALJs who are located in 166 hearing offices across the country, as well as at five National Hearing Centers. In general, cases are randomly assigned to ALJs within the area each hearing office serves, in the order in which the requests for a hearing are received. The ALJ reviews the claimant’s file, including any additional evidence the claimant submitted after the initial determination, and generally conducts a hearing. At the hearing, the ALJ may hear testimony from the claimant, medical experts on the claimant’s medical condition, and vocational experts regarding the claimant’s past work and jobs currently available in significant numbers in the national economy. The majority of claimants are represented at these hearings by an attorney or nonattorney representative, such as a professional disability representative, relative, or social worker. If the claimant is not satisfied with the ALJ decision, he or she may request a review by SSA’s Appeals Council, which is the final administrative appeal within SSA. The Appeals Council may grant, deny, or dismiss a request for review. If it agrees to review the case, the Appeals Council may uphold, modify, or reverse the ALJ’s decision, or it may remand the case back to the ALJ to hold another hearing and issue a new decision. In fiscal year 2016, the Appeals Council reviewed more than 154,000 ALJ decisions and remanded 13 percent of them. Hearings-level backlogs and processing times have increased between fiscal years 2010 and 2016. The number of annual requests for a hearing before an ALJ peaked in fiscal 2011, and declined in each subsequent year, through fiscal year 2016. Despite this decline, SSA has not been able to keep pace with the demand, in terms of dispositions— the number of cases the agency decided or dismissed—in each of those years after 2010 (see figure 3). By the end of fiscal year 2016, SSA reported there were about 1.1 million pending cases. Average processing times for hearings-level decisions also increased during this same time period, from 426 days to 543 days. During these years, the number of ALJs declined, along with the number of case dispositions per month. For example, SSA reported it employed 1,356 ALJs in fiscal year 2013, and these judges had an average of 48 case dispositions per month. In fiscal year 2015, 1,265 judges had an average of 44 case dispositions per month. Also during this time period, SSA reduced its reliance on senior attorney adjudicators (SAA) to make fully-favorable, on-the-record decisions (that is, decisions in which a hearing is not necessary because the documentary evidence alone supports a decision that is fully favorable to the claimant). According to SSA, its backlog will be eliminated when the national average processing time for a hearing decision is 270 days. In January 2016, SSA issued a plan to achieve this goal by the end of fiscal year 2020. However, in its fiscal year 2018 performance plan, SSA set a goal for processing hearings decisions in 600 days (up from a target of 485 days in fiscal year 2010). SSA reported that the increase in average processing times is due to the increase in the number of pending cases. Since SSA generally processes cases in the order in which they are received, they focus on the oldest cases first, which increases the average processing time for closed cases. The role of ALJ was created by the Administrative Procedure Act, which was enacted in 1946 to ensure fairness and due process in federal agency proceedings involving rulemaking and adjudications. ALJs serve in a number of executive branch agencies, although SSA employs the vast majority. ALJs preside and make decisions at formal adjudicatory proceedings. One of the primary goals behind the creation of the ALJ position is to ensure that judges can conduct hearings free from influence or coercion from the agency. Although ALJs are hired by and serve as employees of executive branch agencies like SSA, the Office of Personnel Management (OPM) is responsible for the initial examination, certification for selection, and implementation of the three levels of basic pay of ALJs. As part of its responsibilities, OPM sets the minimum qualifications for ALJs, which are that they generally must be licensed attorneys with a minimum of 7 years of experience in litigation and/or administrative law and pass the competitive examination. The Administrative Procedure Act gave ALJs qualified decisional independence, with some oversight from agencies. Decisional independence means that ALJs can make decisions independently. Federal law also excludes ALJs from performance evaluations and generally requires that disciplinary actions against ALJs be for good cause established and determined by the Merit Systems Protection Board (MSPB). While ALJs have qualified decisional independence, they must follow their agency’s policies and procedures when making decisions. The Administrative Procedure Act also authorized agencies to review ALJ decisions. If SSA determines that an ALJ has not followed its policies and procedures, it can issue a directive to the ALJ to comply and, if that is unsuccessful, bring a disciplinary action before the MSPB. Allowance rates varied across administrative law judges from fiscal years 2007 through 2015. We defined the “allowance rate” for each judge as the number of claims in which a judge granted the claimant Disability Insurance (DI) and/or Supplemental Security Income (SSI) benefits divided by the total number of decisions issued by the judge (excluding claims that were dismissed). We analyzed about 3.3 million decisions made by administrative law judges on adult Social Security disability appeals over this period. The average allowance rate across judges fell 15 percentage points over this period—from a peak of 70 percent in 2008 to 55 percent in 2015—but the range in allowance rates across judges remained fairly constant (see fig. 4). Specifically, the range—the difference between judges with high allowance rates (those at the 95th percentile) and judges with low allowance rates (at the 5th percentile)—was 55 percentage points over this period. This variation in allowance rates persisted, but fell modestly over time, even when we used multivariate statistical methods to hold constant a variety of factors related to the disability appeals process. These factors included characteristics of claimants, judges, and hearing offices, as well as other factors such as the unemployment rates in a claimant’s state, that could otherwise explain differences in allowance rates. Specifically, for the years 2007 through 2015 combined, our analysis estimated that the allowance rate would vary by 46 percentage points for a typical claim, depending on the judge who heard the case. For example, we estimated that the allowance rate for a typical claim heard by a judge with low allowance rates would be 42 percent, compared to 88 percent for a judge with high allowance rates. This estimated range fell from 50 percentage points in 2007 to 45 percentage points in 2015 (see fig. 5). (Appendix I describes this statistical analysis in more detail.) Allowance rates also varied across hearing offices during the same time period, but this variation was considerably smaller than the variation across judges in every year. The estimated range across the entire period was 19 percentage points across hearing offices (see fig. 6), compared to a 46 percentage-point estimated range across judges. Accounting for differences in allowance rates across offices ensured that the variation across judges did not reflect characteristics of their offices (such as the types or severity of disability claims received by their offices). SSA officials noted that the variation in allowance rates we observed across judges was not surprising, nor was the modest narrowing in this range over time. Administrative law judges usually hear complex appeals that may not be clear-cut allowances or denials. As a result, according to SSA officials, given judges’ decisional independence, different judges could look at cases with similar fact patterns and circumstances and come to different conclusions. At the same time, officials also pointed to several factors potentially related to the modest narrowing in the range of allowance rates. First, they noted that SSA started conducting quality assurance reviews of a random sample of allowances in 2011— previously, such cases were not reviewed. In addition, they said that Social Security’s disability programs and administrative law judges were under increased public and Congressional scrutiny following a high-profile fraud case in 2011 involving a judge and an attorney representative. Further, officials said that the expanding use of electronic case files and data analytics within SSA made it possible for the agency to enhance monitoring of decision-making and share this information with judges. Finally, while SSA cannot direct judges to decide cases in a particular way, officials suggested that some judges may have “self-corrected” their approach to decision-making, given all of these factors. Our multivariate analyses had some limitations, but it provides more information than simple comparisons in allowance rates across judges. For example, the SSA data we used for this analysis do not include a measure of the severity of a claimant’s impairment or their remaining ability to work, which could help explain why one claim with a particular impairment was allowed while another was denied. The data also do not include a standardized measure for the nature of claimants’ prior work (such as the skill level or extent of physical labor), which is also relevant for the disability decision. Nevertheless, our multivariate analysis enabled us to compare allowance rates across judges and hearing offices for typical claims. In addition, SSA’s practice of assigning cases randomly to judges makes it more likely that the remaining variation we found across judges reflects the unique effect of having a particular judge hear a case, rather than other factors. As a result, even though we could not account for all factors that could explain differences in allowance rates, random assignment increases the chances that such factors were similar across all of the cases heard by individual judges. Although variation in allowance rates persisted across judges, even after controlling for certain factors, many of the factors we identified had meaningful associations with the chance that a claimant was allowed benefits. These factors represent criteria in SSA’s disability decision- making process, such as the claimant’s age, impairment, prior work, and education. We also identified factors that did not have such associations. Certain claimant characteristics—such as older ages or certain impairments—were associated with higher allowance rates. Age: Claimants’ chances of being allowed benefits increased with age, even holding constant other factors. For example, a 55-year-old claimant was allowed benefits at a rate 4.3 times higher than a typical 35-year-old claimant. This association is consistent with Social Security’s vocational guidelines, which are generally more lenient for older claimants. As part of SSA’s five-step process to determine eligibility for adult disability benefits, SSA uses a set of rules to evaluate how a claimant’s age, education, and work experience affect their remaining capacity for work. SSA’s criteria vary across four primary age groups—45-49, 50-54, 55-59, and 60 and older. The criteria are less stringent for claimants in older age groups than they are for younger claimants, because the rules assume that individuals at older ages may be less able to transition to other work. Impairment: Certain impairments were also strongly associated with the chance of being allowed benefits (see fig. 7). For example, claimants with primary impairments recorded in SSA’s data of heart failure or multiple sclerosis were allowed benefits at rates 4.2 and 5 times higher, respectively, than typical claimants with asthma. From fiscal years 2007 through 2015, the allowance rates for claimants with heart failure or multiple sclerosis were 78 and 80 percent, respectively, compared to 44 percent for asthma. Critical or terminal case: Claimants with critical or terminal cases were allowed benefits at a rate 1.4 times higher than a typical claimant without a critical or terminal case. Critical and terminal cases are cases that require special processing, such as a terminal illness or a veteran with a 100-percent permanent and total disability compensation rating. Prior work: Claimants reporting shorter work histories (4 years or less in the last 15 years before applying for disability benefits) were allowed at a rate 0.8 times as high as a typical claimant with 10 or more years of work history. As expected, given the nature of the work requirements for the DI program, the association with prior work history was stronger for that program than for the SSI program. College education: Claimants who reported having a college-level education or higher were approved at a slightly higher rate (1.1 times higher) than a typical claimant with a high-school education. SSA officials suggested that this association could be an indirect measure of the severity of a claimant’s impairment, a factor for which we did not have data. They said that individuals with higher levels of education often have higher incomes and, therefore, may be less likely to forego their income to apply for disability benefits, were it not for the severity of their disability. Claim type: DI claimants were allowed at a rate 1.7 times higher than a typical SSI claimant. Across judges, the average allowance rate for DI claimants (67 percent) was higher than for SSI claimants (52 percent) from fiscal years 2007 through 2015, with the allowance rate for claimants applying concurrently for DI and SSI benefits falling in between (58 percent). Other Participants in the Disability Appeals Process Claimants who had appointed a representative to present their case, or had a medical expert testify at their hearing, were associated with a greater chance of being allowed benefits, but the presence of a vocational expert had the opposite association. Claimant representative: Similar to findings in our prior work, claimants who had a representative—either an attorney or a nonattorney representative—were allowed at a rate 2.9 times higher than a typical claimant with no representative. SSA officials stated that representatives may have a screening process for potential clients, and under SSA’s fee structure, representatives are paid only if the claimant is awarded benefits. As a result, representatives may tend to take cases they believe will be successful. Officials also stated that a representative can help the claimant by ensuring that the medical evidence and other records are fully developed and help the claimant present their case at a hearing. From fiscal years 2007 through 2015, most claimants (77 percent) had an attorney representative, and 12 percent had a nonattorney representative. Expert testimony: Claimants whose hearings involved testimony from a medical expert were allowed at a rate 1.6 times higher than a typical claimant without a medical expert present. Medical experts include physicians, psychologists, and other types of medical professionals who provide impartial, expert opinion evidence for an ALJ to consider when making a decision about disability. SSA officials said that the association of medical experts with an increased chance of allowance is expected, given that judges are required to seek the testimony of a medical expert in certain cases, for example, when the judge is considering allowing benefits because the claimant’s impairment may be medically equivalent to one in SSA’s Listing of Impairments. In other cases, involving a medical expert is generally at the judge’s discretion. From fiscal years 2007 through 2015, 12 percent of decisions involved a medical expert. The presence of a vocational expert had the opposite effect— claimants with a vocational expert testifying were allowed at a rate 0.8 times as high as claimants without a vocational expert testifying. Vocational experts provide objective, expert opinion evidence to the ALJ, primarily at the last two steps of the disability decision-making process where SSA considers whether claimants can do their prior work or transition to other work available in the national economy. Although involving a vocational expert is generally at a judge’s discretion, SSA officials said that they were not surprised by this result, because vocational experts are usually called upon at the final two steps in the disability decision-making process. At that point, claimants had already not been allowed benefits at an earlier step because their impairment(s) did not meet or were not equivalent to an impairment in SSA’s listings. From fiscal years 2007 through 2015, most hearings (85 percent) involved a vocational expert. Judges with certain characteristics, such as those appointed in earlier years, were associated with a greater chance of allowing benefits. Appointment cohort: A claimant whose claim was heard by a judge appointed between 1995 and 1999 was allowed at a rate 1.5 times higher than a typical claim heard by a judge appointed after 2010. SSA officials said that, since 2010, they have changed the way they train and mentor new judges, and introduced new tools to help provide a standardized decision-making template. As a result, SSA officials said, more recently hired ALJs may be more aware of agency policies and procedures. Certain characteristics of hearing offices and other factors also were associated with higher chances of allowance. For example: Hearing type: Claimants whose hearings were held in person were allowed at a slightly higher rate (1.1 times higher) than a typical claimant with a hearing conducted remotely using videoconference technology. This is equivalent to a 2.8 percentage-point higher probability of being allowed benefits for a claimant whose hearing was held in person, compared to an otherwise typical claimant whose hearing was conducted by videoconference. However, we did not seek to estimate the causal impact of videoconferences on allowance rates, and so did not design our analysis to account for all factors that could affect this relationship. Rather, we accounted for the use of videoconferences solely to further ensure that circumstances were similar across the judges and offices we analyzed. Expanding video service delivery is a key goal for SSA, including plans to partner with other agencies, such as the Department of Veterans Affairs, to increase the number of available video hearing sites beyond those already available at hearing offices and the five National Hearing Centers. Year of decision: Claimants whose appeals were decided in earlier years were associated with a greater chance of being allowed benefits. While this trend is similar to the raw change over time shown in figure 4, our multivariate analysis showed that this change held even for claimants in similar circumstances. For example, claimants who received decisions in 2007 were allowed at a rate 2.0 times higher than a typical claim in 2015. This is consistent with other studies that have found trends of lower allowance rates in recent years. Factors Not Associated with Differences in Allowance Rates Some factors were not meaningfully associated with allowance rates when holding other factors constant. Workload measures: Workload and productivity measures at the hearing office and judge level were not meaningfully associated with allowance rates. This includes the annual percentage of cases that were backlogged (that is, awaiting a judge’s decision for more than 270 days) at each hearing office, as well as the annual number of dispositions (decisions plus dismissals) each judge issued. This may suggest that judges’ decisions to allow or deny cases are not significantly influenced by the number of cases before them, similar to findings in prior research. Hearing office type: We found no meaningful differences in allowance rates between similar claims heard at one of SSA’s National Hearing Centers or a traditional hearing office, after holding constant other factors (including whether the hearing was held by videoconference). SSA has five National Hearing Centers, which hear cases from across the country by videoconference in order to reduce backlogs in certain hearing offices. Economic characteristics: The unemployment and poverty rates in the claimant’s state at the time of the ALJ decision were not associated with allowance rates. Higher unemployment rates can result in increased applications for Social Security disability benefits because workers with impairments that could qualify them for the program who experience job loss may find it more difficult to become re-employed during periods of high unemployment and apply for benefits. However, the impact on allowance rates in the research we reviewed is mixed. SSA has employed a range of efforts to monitor the accuracy and consistency of hearings decisions, but it lacks performance measures to report publicly on these efforts. SSA’s current strategic plan includes an objective to “improve the quality, consistency, and timeliness” of its disability decisions; however, all of the hearings-level measures supporting this objective are related to timeliness. In a previous report, we developed nine attributes of performance goals and measures based on previously established GAO criteria, as well as relevant federal laws and performance management literature. One key attribute states that an agency’s suite of performance measures should be balanced to cover various priorities. In addition, each measure should cover a priority such as quality, timeliness, and cost of service. However, because SSA’s performance measures do not fully reflect its goals, the overall success of SSA’s efforts in this area may be limited. SSA previously had performance measures related to hearings-level accuracy, which used data from ALJ peer reviews. These measures were discontinued in fiscal year 2009, when the ALJs conducting the reviews were reassigned to hearing cases. By comparison, SSA continues to have a measure for accuracy at the initial decision-making level (see table 1). SSA officials stated that they have no plans to add new performance measures related to the accuracy and consistency of hearings decisions to the strategic plan. They said that while they collect and monitor a wide variety of workload and performance measures for day-to-day operations, they have to select a few, representative measures that are meaningful to stakeholders and represent agency-wide efforts to achieve its goals. They stated that the current performance measures meet these requirements. Although SSA officials said the agency does not publicly report performance measures related to the accuracy and consistency of hearings decisions, they said that SSA uses internal performance measures related to hearings decisions. However, these internal measures to monitor quality and consistency of hearings decisions have limitations and are not shared with the public. Regional chief judges—who oversee the hearing offices and judges within each of SSA’s 10 regions— and others told us that they use a measure known as the “agree rate” to help monitor the quality of a judge’s decisions. This measure is based on the number of cases that have been appealed to the Appeals Council by the claimant or representative as a request for review. The agree rate reflects the percentage of cases in which the Appeals Council—the final level of appeals within SSA—concluded that the ALJ’s decisions were supported by substantial evidence and contained no error of law or abuse of discretion. However, the agree rate has some limitations. For example, as noted earlier, it does not reflect the accuracy of ALJ decisions that the claimant did not appeal. SSA’s Office of the Inspector General (OIG) found that this measure provided information on less than one-quarter of all ALJ dispositions and it is not representative of the ALJ’s entire workload because it is based only on Appeals Council reviews of appealed cases. In addition, a March 2017 SSA OIG report found that SSA has not maintained historical data on agree rates, limiting the agency’s ability to analyze agree rate trends. SSA uses other internal measures to track consistency. For example, SSA developed an internal early monitoring system that tracks 22 metrics of ALJ performance to identify outliers. For example, three of these metrics (average number of dispositions a judge issues per day, agree rate, and allowance rate) have “alarm thresholds” to indicate when an ALJ’s metrics fall outside of a given threshold. Based on these findings, SSA may conduct a focused quality review (a type of quality assurance review) to ensure the judge’s decisions complied with SSA policies, or follow up with the regional chief judge to determine if additional policy guidance or training is needed. Although these internal measures are helpful for management to monitor and improve accuracy and consistency, without sharing this or similar information publicly, SSA lacks accountability for improving the quality of hearings-level decisions. In addition, federal internal control standards state that management should externally communicate the necessary quality information to achieve objectives, including to external stakeholders such as Congress and the public. Further, given the persistent variation in allowance rates, SSA may be missing an opportunity to provide the public with information on the results of its efforts to improve the accuracy and consistency of disability decisions. SSA provides training and tools to all ALJs and initiates disciplinary actions where needed, as part of its efforts to monitor and improve accuracy and consistency. SSA also conducts multiple quality assurance reviews, but some of these reviews may overlap and SSA has not evaluated them. Training, Tools, and Policy Guidance ALJs receive ongoing training and guidance from several sources, including through judicial trainings, mentoring, and policy memorandums. In 2006, SSA implemented a three-phase training program for new ALJs, which includes training on core competencies as well as a formal mentoring program in which new ALJs are paired with experienced ALJs for regular sessions over a nine-month period. Regional managers, judges, and stakeholders we spoke with had positive feedback on the training SSA provides to judges. For example, officials from one stakeholder group told us that they believe training had created more consistency in allowance rates. SSA’s chief judge also issues guidance memorandums to clarify policies related to the hearings process. For example, in July 2013, SSA issued a memorandum establishing expectations for the instructions judges provide to decision writers, who are SSA staff who prepare the draft decisions. SSA officials said that they issued the memorandum in response to an ALJ who was providing low- quality instructions to decision writers and SSA realized it had not provided formal guidance on the topic. In addition, ALJs also receive quarterly continuing education training and have a library of reference materials and on-demand video courses to use as needed. SSA also uses internal metrics and provides electronic tools to judges to monitor and improve accuracy and consistency. Regional chief judges regularly review management information (MI) reports and develop strategies, such as recommending training, to address identified issues. Beginning in 2011, SSA established an electronic tool called “How MI Doing?”, which allows ALJs to compare their productivity and timeliness metrics to hearing office, regional, or national metrics. The tool also provides data on the agree rate for each judge as well as the hearing office, regional, and national agree rates. Using this tool, judges can also learn the reasons any prior decisions have been remanded, and access on-demand training pertaining to that reason. Regional chief judges we spoke with generally found “How MI Doing?” to be a helpful tool, although SSA does not track judges’ usage and has not formally evaluated its effectiveness. In addition, SSA established the electronic Bench Book (eBB), which is designed to assist users with documenting, analyzing, and making consistent and accurate decisions on hearings-level adult disability cases. However, the SSA OIG recently recommended that SSA evaluate eBB and determine whether to continue it. Regional chief judges we spoke with provided mixed feedback on the use of eBB and its usefulness for ALJs. In fiscal year 2016, nearly 500 ALJs (about one- third) used eBB. In June 2017, SSA officials said that while no formal evaluation of eBB was conducted, they recently received approval to proceed with plans to replace eBB with a similar tool as part of updates to SSA’s case management system. SSA also addresses identified issues with the accuracy and consistency of hearings decisions by taking disciplinary actions, as needed. SSA can take non-disciplinary or disciplinary action to address performance concerns. Non-disciplinary actions include training and counseling (known as “collegial conversations”). Another non-disciplinary action is a written directive, which SSA can issue to individual judges to improve performance on workload, scheduling or policy compliance. From 2007 through 2016, SSA issued about 1,330 such directives. Nearly all (95 percent) were issued to improve timeliness, while about 2 percent were issued to improve policy compliance. If an ALJ’s conduct or performance does not change or becomes more egregious, SSA continues with progressive discipline including reprimand or seeking disciplinary action from the Merit Systems Protection Board, such as short- or long-term suspension or removal. From 2007 through 2016, there were 98 reprimands, 34 proposed suspensions, and 16 proposed removals, according to SSA. SSA conducts various quality assurance reviews to improve accuracy and consistency. SSA officials stated that the agency has been enhancing its quality review efforts since 2009. Since then, it has added five types of quality assurance reviews that are conducted by three additional offices within SSA (see fig. 8). SSA added quality assurance reviews for various reasons. For example, in 2009, SSA’s regional staff under the Office of the Chief Administrative Law Judge began conducting regional inline quality reviews, which involve assessing the extent to which hearing office staff are processing cases and preparing them for hearings in accordance with SSA policy, as well as the policy compliance and legal sufficiency of the draft decision. SSA added this review to enhance its reviews of decisions before they are issued, in an effort to reduce remands. Also in 2009, SSA’s Office of Quality Review began conducting disability case reviews to provide feedback on decision-making accuracy to ALJs. In addition, in 2010, SSA created the Division of Quality under the Appeals Council, a unit focused on conducting reviews on a regular basis of decisions that claimants did not appeal. Prior to 2010, SSA generally only reviewed decisions that claimants appealed through the Appeals Council. While these quality assurance reviews have somewhat different focuses—for example, some assess aspects of how a case was processed while others review the accuracy of the decisions—they overlap in two key ways. According to prior GAO work, overlap occurs when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries. Some of SSA’s quality review efforts fit the description of overlap in that they have similar goals and review similar cases. For example: Similar goals: Several of the reviews have similar goals (see table 2). For example, two of the four entities conducting reviews—the Appeals Council’s Division of Quality and staff in SSA’s 10 regional offices— both review decisions for policy compliance before those decisions go into effect (known as pre-effectuation reviews). While one review looks at the judge’s decision and the other looks at the draft decision prior to the judge’s review and approval, according to officials and documents we reviewed, these reviews share similar goals: to guide training and provide feedback to judges. In addition, all the reviews are designed to assess compliance with SSA policy. Similar cases: SSA’s five quality assurance reviews look at similar cases, and could potentially include the same cases (see table 3). SSA takes some steps to prevent assessing the same claim in multiple quality assurance reviews. Officials told us that, in conducting focused quality reviews (conducted after the decision is final), they exclude cases that were reviewed in a pre-effectuation review. However, they said that the Division of Quality does not know whether cases it has selected were also subject to a regional inline quality review. They said that additional efforts to prevent multiple reviews of a case are manual in nature, and thus there is still the potential for claims to be reviewed more than once. Further, SSA officials said they did not see a need to prevent multiple reviews of a case, in particular, because some reviews are conducted before the decision is final and others are conducted after the decision is final. SSA officials stated that opportunities exist to improve coordination across offices conducting quality assurance reviews. We found that several offices coordinated their work in some cases. For example, SSA’s Division of Quality and Office of Quality Review participate in a multi- office workgroup that addresses such issues as policy compliance across the initial and hearings levels of the disability process. In addition, they have also worked together on several studies, including a one-time quality review of 454 claims that were denied at the initial determination level, but were allowed as fully favorable at the hearings level. The Office of Quality Review also reviews the content of selected training for judges. In addition, the Division of Quality provided some initial input when the regional inline review effort was being designed. Prior GAO work has found that enhanced coordination can help to reduce overlap and improve efficiency. Effective October 1, 2017, SSA created a new deputy commissioner-level component, the Office of Analytics, Review and Oversight. This agency reorganization moved six oversight offices into the new component, including the Division of Quality and Office of Quality Review. Officials said the new component will create opportunities for improved coordination between these six offices. While this reorganization creates the opportunity for SSA to assess many of its quality assurance reviews, the regional quality review staff will not be included in the new office, and it is too early to tell how this reorganization will help manage the overlap between SSA’s various quality assurance reviews. In addition, SSA has struggled to sustain all of its quality assurance reviews due to competing demands for the staff who perform them. For example, SSA placed regional inline quality reviews on hold in September 2016 and again in December 2016, because officials said that the agency needed staff to complete pending decisions before a change in the medical listings for mental impairments took effect in January 2017. Decisions not completed before the new listings took effect would have to be redone. Also, the Office of Quality Review curtailed its Disability Case Reviews in fiscal year 2016 to help prepare the oldest cases for hearings. As a result, only the Appeals Council’s review of appealed ALJ decisions (requests for review) and the Division of Quality’s quality assurance reviews were active in 2016. Even as SSA has added quality assurance reviews, it has not systematically evaluated the efficiency and effectiveness of all the reviews to determine the extent to which they may be overlapping or complementary. We found that reviews conducted by the four entities have resulted in similar findings, raising questions about the efficiency of these reviews. For example, during the same 3-year period (fiscal years 2013 through 2015), quality reviews conducted by all four entities found problems with judges’ assessment of a claimant’s ability to perform work- related tasks, known as a residual functional capacity assessment. In addition, all four entities found problems with the evaluation of medical opinion evidence. Moreover, SSA has not conducted a cost-benefit analysis of the five reviews. Officials said that there are no definite plans to do so, although they may consider conducting such an analysis in the future. We found that costs for the quality assurance reviews conducted in fiscal year 2015 were at least $23.7 million, and in fiscal year 2016 were at least $11.7 million (see table 4). By evaluating the quality assurance reviews to determine the extent to which each is needed to monitor and improve accuracy and consistency, SSA would be better positioned to meet its goals within its resources. In addition, SSA continues to develop and implement initiatives aimed at improving hearing decisions, without evaluating the potential for overlap with existing quality assurance reviews. For example, as part of its backlog reduction plan known as the Compassionate And Responsive Services (CARES) plan, SSA is using computer algorithms for natural language processing to analyze the text of disability decisions and flag potential errors. Although the agency is piloting this effort in the Appeals Council before expanding it to hearing offices, it did not conduct a cost- benefit analysis. SSA officials said that natural language processing could be used to identify cases for further review, similar to its current selective reviews, and that decision writers could use the tool to conduct their own reviews of their draft decisions. SSA officials said that they do not anticipate much overlap between the use of natural language processing and OAO’s pre-effectuation reviews. However, there could be potential for overlap with regional inline reviews, which also review decisions drafted by decision writers. Federal internal control standards state that management should implement control activities through policies. Periodically reviewing policies, procedures, and related control activities for continued relevance and effectiveness in achieving objectives and addressing related risks can help agencies meet this standard. SSA’s disability programs provide more than $200 billion in benefits for tens of millions of Americans annually, making it one of the largest components of the nation’s social safety net. The hearings and appeals level of the disability decision-making process is particularly important because about one in three people receiving Social Security disability benefits are granted benefits at this level. Given the number of people and the dollars at stake, it is crucial that claimants are treated fairly and their applications are evaluated accurately and consistently across the country, at all levels of the program. Some of the variation in allowance rates that we found across judges may be expected, given the complexity of the cases and judges’ decisional independence. However, the persistent variation we observed over time, even after accounting for various factors that could otherwise explain allowance rates, might warrant additional attention. SSA is rightly focusing on oversight of judges, but our work suggests that the agency’s emphasis on timeliness over accuracy in its public metrics and the potential overlap in its quality assurance efforts may offer opportunities for improving the accuracy and consistency of hearing decisions. First, this amount of variation in allowance rates underscores the need for SSA to measure and hold itself accountable for accuracy and consistency. However, without sharing performance information on the accuracy and consistency of its hearings-level decisions, such as the rate at which the Appeals Council agrees with a judge’s decisions, SSA may not be providing the public with adequate information on progress toward its objective to improve the quality, consistency, and timeliness of its disability decisions. Developing a set of performance measures that includes the accuracy and consistency of hearings decisions will help ensure the overall success of the program. Second, SSA has not systematically considered how each of its quality assurance reviews helps the agency meet its objective to improve the quality of hearings-level decisions. Although the planned consolidation of multiple oversight and quality review offices is a positive step, it will be important for SSA to consider the usefulness of the information yielded by each quality assurance effort, as well as the costs associated with conducting the effort. Evaluating the efficiency and effectiveness of quality assurance activities can help ensure that SSA is using its resources for maximum benefit toward its objective to improve the quality, consistency, and timeliness of its disability decisions. We are making the following two recommendations to SSA: The Commissioner of SSA should develop a set of public performance measures, to include accuracy and consistency, as well as timeliness, of administrative law judges’ (ALJ) disability decisions. SSA could consider whether existing quality review or monitoring efforts could provide suitable data for such measures. (Recommendation 1) The Commissioner of SSA should systematically evaluate the efficiency and effectiveness of its quality assurance reviews and take steps to reduce or better manage any unnecessary overlap among them to ensure strategic use of resources. Such steps could include enhancing collaboration where reviews overlap or only conducting the reviews that are most efficient and effective in achieving agency goals for improving accuracy and consistency of ALJ disability decisions. (Recommendation 2) In commenting on a draft of this report, SSA agreed with our two recommendations to (1) establish public performance measures for the accuracy and consistency of administrative law judges’ decisions, and (2) systematically evaluate its various quality assurance reviews and take steps to reduce or better manage any unnecessary overlap among them. SSA stated that it would address both recommendations as part of a comprehensive assessment and refinement of its oversight roles and processes. SSA made several other comments about one of our conclusions and our analysis of variation in administrative law judge allowance rates, which we discuss below. SSA also provided technical comments, which we incorporated into the report as appropriate. In its comments, SSA described its evolving oversight activities at the hearings level, including providing policy guidance and training for judges, capturing and utilizing data to gain a better understanding of trends and challenges, and implementing additional oversight review processes, all of which we discussed in our report. SSA’s comments acknowledged that our report describes the steps that the agency has taken to improve oversight, but disagreed with our conclusion that SSA emphasizes timeliness over accuracy. Our final report clarifies that we came to this conclusion based on a review of the performance measures the agency shares with the public in its annual strategic plan and performance reports. As we state in the report, SSA has employed a range of efforts to monitor the accuracy and consistency of hearings decisions, but it lacks performance measures to report publicly on these efforts. Regarding our analysis of variation in ALJ allowance rates, SSA raised a concern about our finding (on page 26 of the final report) that claimants whose hearings were held in person were slightly more likely (by about 2.8 percentage points) to be allowed benefits than a typical claimant with a hearing held by videoconference. SSA cited its own internal analysis, which found a small (0.6 percentage-point) difference in allowance rates between in-person and videoconference hearings after controlling for a number of factors. It is not surprising, however, that our estimates are somewhat different, since SSA’s internal analysis differs from ours in several ways. The primary purpose of our statistical analysis was to isolate variation in allowance rates due to the unique judge or hearing office assigned to each claim. To do this, we developed a multilevel model using 9 years of data that controls for judge, hearing office, and claimant-level factors associated with allowance rates. On the other hand, SSA’s analysis was specifically designed to look at the difference in allowance rates between in-person and video hearings. SSA’s analysis also covered a shorter, more recent period of time (part of fiscal year 2015, fiscal year 2016, and part of fiscal year 2017), than our study (fiscal years 2007 through 2015). Additionally, the version of the model SSA cited in its comments included hearings held in person or by videoconference only in regular hearing offices, whereas our analysis included hearings held in National Hearing Centers as well as regular hearing offices and controlled for the type of hearing office. These differences notwithstanding, we agree with SSA that the estimated model- adjusted difference in allowance rates between in-person and videoconference hearings in both GAO’s and SSA’s analyses could potentially be explained by unmeasurable factors. In addition, SSA noted that our measure of variation in judge decisions focused on allowance rates at the extremes of the distribution. Given that our charge was to explore the extent of variation in allowance rates across judges, we believe it was appropriate and important to measure the range of allowance rates between judges with high allowance rates (at the 95th percentile) and those with low allowance rates (at the 5th percentile). This would be more conservative than an approach that looks at allowance rates across all judges, including potential extreme values; and more nuanced than an approach that looks at the number of judges whose allowance rates are higher or lower than a given threshold. Further, our analysis shows that unadjusted allowance rates at the 95th percentile declined over the period of our analysis, from a high of 96 percent in fiscal year 2008 to 82 percent in fiscal year 2015. We saw a comparable decline in allowance rates after applying our multivariate model. To provide additional context, our report figures also show the middle of the distribution (the 25th and 75th percentiles), as well as the average allowance rates. We have also added information to our report further describing this middle range. Finally, SSA noted that our analysis was not weighted by the number of determinations a judge made, suggesting that judges who decided very few claims, for example, could affect the range in allowance rates or the trends. As we show in Appendix I, Table 7, only 2.3 percent of the judges in our study population heard fewer than 250 claims per year. This group of judges had an unadjusted allowance rate of 61.9 percent, very similar to the allowance rate among judges who heard 500-699 claims per year (61.6 percent). Furthermore, the statistical methods we used to estimate the distributions of allowance rates (multilevel models) adjust the estimates for judges with fewer claims by weighting them more heavily toward the overall approval rate. This mitigates against judges with smaller caseloads, and therefore higher sampling variation, from contributing overestimated allowance rates that might have inflated our estimated variation across judges. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Commissioner of Social Security, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to assess (1) the extent to which allowance rates vary across administrative law judges, and any factors that are associated with this variation, and (2) the extent to which the Social Security Administration (SSA) has processes to monitor the accuracy and consistency of hearings decisions. To answer these objectives, we reviewed SSA policies and procedures related to administrative law judge (ALJ) disability hearings and decisions; manuals and documents describing SSA’s case processing systems for each level of SSA’s disability decision-making process, and guidance and training provided to judges for making disability decisions. We interviewed SSA officials in several offices within the Office of Disability Adjudication and Review (ODAR), including the Office of the Chief Administrative Law Judge and the Office of Appellate Operations, as well as conducted semi-structured interviews with Regional Chief Administrative Law Judges in each of SSA’s 10 regions. We also observed administrative law judge hearings in one of SSA’s five National Hearing Centers, in Falls Church, Virginia, (hearings in these offices are conducted by videoconference), as well as in two of SSA’s regular hearings offices, in Washington, D.C., and Seattle, Washington. The purpose of these observations was to gain a better understanding of the hearings process in practice, and to inform our scope and methodology for this study. We selected these sites, which are not generalizable to the population of all hearing offices, for a number of reasons, primarily: (1) to observe hearing offices in different geographic locations and observe both in-person and video teleconference hearings, and (2) to select sites at which a cross-section of cases with different types of disabilities and impairments were available. We attended hearings involving both adult and child claimants with a mix of physical and mental impairments. This appendix is divided into three parts. The first describes our data sources and analysis of allowance rates across judges and associated factors, the second describes our multivariate statistical model, and the third describes our work related to our second research objective on SSA’s processes to monitor the accuracy and consistency of hearings decisions. For this objective, we analyzed data from two primary sources from fiscal years 2007 through 2015: SSA’s administrative data systems for the initial and hearings levels of the disability decision-making process, and the agency’s personnel data system. We also obtained other SSA administrative data on staffing levels and numbers of pending cases in each hearing office. Finally, we obtained data on state poverty and unemployment rates from the U.S. Census Bureau and the Bureau of Labor Statistics, respectively. To analyze information on all adult disability decisions made by administrative law judges from fiscal years 2007 through 2015—the most current data available at the time of our analysis—we compiled claims data from several SSA administrative data systems. These data contained information on the outcomes of the disability decisions and the characteristics of claims associated with each decision. Specifically, the information was drawn from the following systems: 831 File and Structured Data Repository: The 831 File pertains to the initial and reconsideration level of the disability determination process, within the state Disability Determination Services (DDS). Data on claimant characteristics we used from this system include the date of the claimant’s initial application for benefits and the claimant’s self-reported years of education. We also received a limited set of data captured from the claimant’s disability application in SSA’s electronic case folder system (Structured Data Repository), including the number of years a claimant reported being employed out of the 15 years before becoming disabled. Case Processing and Management System (CPMS): This system pertains to the hearings level and was our primary source of information on hearing outcomes, claim, and claimant characteristics. Specifically, this system provided information on claim type (i.e., Disability Insurance, DI; Supplemental Security Income, SSI; or concurrent claim); the outcome of the claim (i.e., dismissed, allowed, or denied) and the date the decision was made; the unique identification number of the administrative law judge (ALJ) who made the decision; whether a medical expert or vocational expert attended the hearing; whether the claimant was represented; the hearing office where the claim was decided and the type of hearing office (i.e., hearing office or National Hearing Center); the claimant’s date of birth; the primary impairment at the time of the hearing level; the presence of a secondary impairment; and whether the case was classified as being a critical case—that is, a case requiring special processing, such as a terminal illness. We used case identifiers to link the information from each of these databases that pertained to each disability decision we analyzed. We obtained data from SSA’s Federal Personnel and Payroll System (FPPS) database on all administrative law judges who were employed by the agency at any time during the period from January 1, 2005, through December 31, 2015. We obtained information on each judge, such as their date of appointment as an ALJ and the type of appointment (regular career appointment or non-permanent); service computation date; and prior position titles within SSA, if any. We obtained summary-level data, as of January 2017, from SSA on staffing levels (numbers of ALJs, decision writers, and other support staff) at each hearing office for each fiscal year in our study period (fiscal years 2007 through 2015) from SSA’s Payroll Operational Data Store system. We also obtained data on the numbers of cases left pending at the end of each fiscal year (including the number of cases pending for more than 270 days). SSA provided those data from a management information report that uses CPMS data. We used publically available estimates of state poverty rates for each year in our analysis (calendar years 2007 through 2015) from the U.S. Census Bureau’s American Community Survey (ACS). We considered using estimates at the county level but that approach had limitations. First, we would have been limited to using 3-year or 5-year estimates for all counties, because 1-year ACS estimates are only available for areas with populations of 65,000 or more. Second, the Census Bureau cautions against using estimates for particular time periods that do not align with the periods of its estimates. Although using state-level estimates reduced the geographic precision of the estimates, we gained precision by having annual estimates and the ability to measure potential variation in poverty rates over narrower time intervals. We also used publically available estimates of state unemployment rates in calendar years 2007 through 2015 from the Bureau of Labor Statistics’ Local Area Unemployment Statistics data. This variable allowed us to control for labor market conditions over time. SSA constructed custom files for GAO from several SSA datasets in response to our data requests. We assessed the reliability of the data used in our analyses through electronic testing, analyzing related database documentation, examining the SAS code used by SSA to construct the custom files, and working with agency officials to reconcile discrepancies between the data and documentation that we received. We determined that the 831, Structured Data Repository, and CPMS data on ALJ decisions and claimant characteristics and the FPPS data on ALJ appointments were sufficiently reliable for the purposes of describing the extent of variation in the outcomes of ALJ decisions. We also determined that SSA’s data on pending caseloads and ALJ and decision writer staffing, by year and hearing office, were sufficiently reliable for the purpose of describing hearing office characteristics. Finally, we determined that ACS data on state poverty rates and BLS data on state unemployment rates were sufficiently reliable for the purposes of describing these state economic characteristics. Our analyses of ALJ decisions excluded various types of decisions from the CPMS data because they were out of scope for our research objectives (e.g., child cases, non-disability cases, or cases that were decided by SSA staff who were not ALJs) or were not typically randomly assigned to judges. We selected cases that should have been assigned randomly to judges, according to SSA policy, because that random assignment made it more likely that variation in allowance rates across judges in our multivariate analysis reflects the unique causal effect of having a particular judge hear a case, rather than other factors that also vary across judges. Our exclusion criteria were similar to those used by an internal SSA study of ALJ allowance rates, conducted in 2017. We excluded cases that were: Dismissed. Cases can be dismissed for reasons not related to the merits of the case and that are usually beyond the ALJ’s control—for example, the claimant’s failure to file a timely request or to appear at the scheduled hearing (without good cause), or the claimant’s death before the hearing. In addition, data on key factors for these cases, such as the claimant’s impairment, were missing. From fiscal years 2007 through 2015, 1,007,526 claims (16 percent of all claims) were dismissed. Made “on the record” and not randomly assigned to judges. While most appeals are decided after an ALJ hearing, ALJs and senior attorney adjudicators (SAA) have the authority to issue on-the- record decisions. These are decisions where a hearing is not necessary because the documentary evidence alone supported a fully favorable decision. SSA has created screening criteria, such as the claimant’s age (50 and older) and specific impairments, to help identify possible on-the-record decisions earlier in the process. ALJs and SAAs can also issue on-the-record decisions for cases involving critical need, and claimants and their representatives can request that the ALJ or SAA issue an on-the-record decision. These cases are not assigned randomly to judges. From fiscal years 2007 through 2015, 716,574 claims (11 percent of all claims) were on-the-record decisions, although SSA has issued fewer on-the-record decisions in more recent years. Issued for children. We excluded claimants younger than 18 at the date of the initial application. We also excluded claimants with missing or invalid age values. From fiscal years 2007 through 2015, 492,158 claims (8 percent of all claims) were for people under 18 or with missing or invalid age values. We excluded child cases from our analysis because they involve different evaluation criteria. Remanded back to a judge from SSA’s Appeals Council (or federal court). These cases represent decisions that were corrected after an order from the Appeals Council or a federal court after the original ALJ’s decision. In these cases, judges are often addressing a narrow set of issues identified in the remand order. Remanded cases are also not assigned randomly to judges, since the Appeals Council generally sends them back to the judge who originally issued the decision. However, SSA’s Office of the Inspector General (OIG) in 2017 found that about half of the remanded cases in its sample were assigned to a different ALJ than the original ALJ. From fiscal years 2007 through 2015, 293,971 claims (less than 5 percent of all claims) were remands. Made by senior attorney adjudicators who were not administrative law judges. We excluded decisions made by SAAs. SSA implemented a program in 2007 whereby SAAs located in hearing offices across the country could issue fully favorable on-the- record decisions. According to SSA, this allowed ALJs to focus on cases that are more complex or require a hearing. From fiscal years 2007 through 2015, 227,133 claims (4 percent of all claims) were decided by SAAs. Appeals of continuing disability reviews (CDR). These cases represent decisions about whether or not to continue benefits for claimants who were previously found eligible for the program. As such, they involve different evaluation criteria. From fiscal years 2007 through 2015, 245,862 claims (4 percent of all claims) were appeals of CDRs. Non-disability cases. These cases include Social Security retirement and survivor benefit decisions. We excluded such cases because they involve different evaluation criteria from disability claims and represent a small minority of decisions at the hearings level. From fiscal years 2007 through 2015, 25,293 claims (less than 0.5 percent of all claims) were for non-disability cases. Decided by judges with limited experience. We excluded cases decided by judges within the first year (365 days) after their appointment as an ALJ, as calculated by the difference between their date of appointment and the date of the decision on each claim. We excluded these decisions to help ensure that variation we identified in allowance rates was not due to the judges’ more limited experience deciding Social Security disability claims. From fiscal years 2007 through 2015, 574,307 claims (approximately 9 percent of all claims) were decided by judges with limited experience. In total, our exclusion criteria reduced the number of records analyzed by about half. Specifically, out of a universe of about 6.3 million records, our study population included about 3.3 million decisions. Nevertheless, the overall allowance rate for our study population over fiscal years 2007 through 2015 was 62 percent, very close to the overall allowance rate for the entire population of claims during this period, which was 64 percent. We calculated allowance rates by dividing the number of favorable decisions by the total number of decisions (both unfavorable and favorable). We calculated allowance rates for different units of analysis: Overall, by program type (Disability Insurance, Supplemental Security Income, and concurrent) and by year and for all years and program types pooled together, At the judge level, by year and for all years pooled together, and At the hearing office level, by year and for all years pooled together. When analyzing our data at the case level, we identified whether the case was favorable or unfavorable to the claimant (that is, whether the claimant was allowed benefits or not). We did not include cases that were dismissed in our study population for two reasons. First, as discussed above, these cases can be dismissed for reasons not related to the merits of the case, and without a review of the medical evidence. Second, SSA’s data on dismissed cases are limited, partially because cases are dismissed without a review of medical evidence. For example, the impairment code from the hearings-level decision was missing for virtually 100 percent of dismissed cases. For concurrent claims—those in which an individual is applying for Disability Insurance (DI) and Supplemental Security Income (SSI) benefits—we considered a case an allowance if the claimant was approved for either or both programs. Our classification of allowances for concurrent cases differs from SSA’s usual practice (although a 2017 internal study of ALJ allowance rates used the same method as ours). SSA officials said they usually allow the SSI decision to “control” the overall outcome of the case. That is, SSA classifies a concurrent claim as an allowance if the SSI decision is an allowance, regardless of the outcome for the DI claim. Officials said that they chose this method primarily for convenience. This results in a different classification of some cases in which the SSI claim was denied but the DI claim was allowed. In such cases, the claimant is receiving a benefit as a result of their concurrent disability claim but would be classified in SSA’s data as a denial. However, the resulting differences in the number of allowances is very small—less than 4,000 claims over fiscal years 2007 through 2015— and the different definitions did not substantively affect allowance rates in any year. SSA policy states that cases are generally assigned on a “first in, first out” basis, meaning that cases are assigned to judges in the order in which they are received. Administrative law judges are assigned cases on a rotational basis, with the oldest case in the backlog given to a judge who most recently decided a case. Therefore, as noted in prior research, the initial assignment of cases to judges is random (conditional on applying at a given hearing office at a given time). Judges do not select their cases, nor are claimants able to request another judge after one is assigned. Claimants are generally assigned to hearing offices based on their ZIP code, although some claimants in hearing offices with higher numbers of pending claims may be transferred to one of SSA’s five National Hearing Centers. In those cases, hearings are conducted by videoconference rather than in person, as is traditionally done in SSA’s regular hearing offices. However, the claimant may opt out of a video conference hearing within 30 days of receiving a written notice acknowledging the request for a hearing. There are some exceptions to the “first in, first out” rule, such as cases that are likely to be dismissed or decided on the record (without a hearing) and critical cases (including terminal illness cases and veterans who have a 100-percent permanent and total disability compensation rating). However, as discussed previously, we have excluded all major categories of exceptions but critical cases from our analyses, and included a variable to identify critical cases in our analyses. SSA’s disability decision-making process includes five sequential steps, and one part of our analysis was to determine the step at which each decision was made. In consultation with SSA officials, we used a code in CPMS—called the regulation basis code—to assign each claim to a particular step. Each claim in CPMS has between one and four regulation basis codes, depending on whether the claim was for a single program (DI or SSI), or a concurrent claim for both. We assigned each claim to one of the five steps in SSA’s disability decision-making process, based on its regulation basis code. Each regulation basis code is associated with one of five steps. Therefore, if a claim had just one regulation basis code, we assigned it to the corresponding step. If a claim had more than one regulation basis code, we used a series of decision rules to select the most appropriate step. Specifically, claims for a single program have up to two regulation basis codes listed, and we used the code that matched the outcome of the case and/or the latest step. We used a similar method for concurrent claims. We found that approximately 19 percent of all allowances occur at step 3, when SSA determines whether a claimant’s impairment meets or is equivalent to an impairment listed in SSA’s Listing of Impairments. Most (80 percent) of all allowances are made at the final step (step 5), when SSA determines whether the claimant can do any work in the national economy, given the limitations of their impairment and their age, education, and work experience. Nearly a third (28 percent) of denials are made at step 4, where SSA determines whether the claimant can do their past work, and 62 percent of denials are made at step 5. There are some differences between DI claims and SSI claims in the distribution of allowances and denials over the five steps. SSI allowances occur at step 3 to a greater extent than DI allowances, while SSI denials occur at step 5 to a greater extent than DI denials (see table 5 below). We developed our multivariate statistical analyses in consultation with GAO statisticians, economists, and social scientists and SSA officials and experts. Our analysis was also informed by a comprehensive review of the literature pertaining to judicial decision-making and, in particular, adjudication for SSA’s disability programs. Specifically, we reviewed more than 90 potentially relevant peer-reviewed academic journal articles, government reports, and nonprofit association and think tank white papers. We selected 39 of these studies or reports for a detailed review of the scope and methodology, key factors or variables used in any empirical analyses, and other relevant findings. We also reviewed relevant SSA Office of the Inspector General (OIG) reports and consulted with SSA and OIG officials, and reviewed prior GAO reports that modelled judicial outcomes. Our statistical model included variables that are either direct or approximate measures for: (1) claimant characteristics that represent criteria used in the disability decision-making process, (2) judge characteristics, (3) other participants in the decision-making process, (4) SSA administrative characteristics, and (5) economic characteristics of the claimant’s state. Our analysis was purely statistical, in that we did not conduct the legal analysis needed to reach conclusions about what legal factors might have affected a judge’s decision or whether the decision that was reached in any particular case was correct. Similarly, we are not making any predictions about the likely or correct outcome of future individual decisions. Each case is unique in both its facts and circumstances and must be examined on its own merits. We included factors that represent criteria used in decision-making process, such as the type of claim (DI, SSI, or concurrent) and the claimant’s age, years of education (grouped into equivalent levels: less than high school, high school, some college, and college or higher), and primary impairment. We included factors related to the judge’s employment as an ALJ, such as the year appointed as a judge, the type of appointment (whether they had a career or temporary, non-permanent assignment), and any prior work history at SSA (specifically, whether they were an attorney or held another position prior to being appointed as an ALJ). Other participants in the decision-making process We included factors that represent other participants in the decision- making process, such as the claimant’s use of an attorney or non- attorney representative, or the testimony of a medical or vocational expert at the hearing. Our prior work has shown, for example, that claimants who were represented by an attorney or a person who is not an attorney (such as a relative or professional disability representative) were more likely to be allowed disability benefits than claimants who had no representative. We included factors related to SSA’s administration of its disability programs, such as the hearing office in which the claim was decided, whether the claim was heard in one of 10 states that do not have a reconsideration step between the initial state-level Disability Determination Service decision and a hearing before an ALJ, and the percentage of pending cases at the hearing office that were pending for more than 270 days (SSA’s definition of a “backlogged” case). Finally, we assessed economic characteristics of the state in which the claimant resided because some prior research suggests that such factors may be associated with disability application and allowance rates. Specifically, we analyzed: The unemployment rate in the claimant’s state as of the year of each decision in our analysis, from the Bureau of Labor Statistics’ Local Area Unemployment Statistics data. We selected this factor in order to account for the labor market conditions where claimants live. The poverty rate in the claimant’s state as of the year of each decision in our analysis, from the Census Bureau’s American Community Survey (ACS). The primary goal of our analysis was to isolate variation in allowance rates due to the unique judge or hearing office assigned to each claim by controlling for multiple factors that could otherwise affect this variation. Some variation in allowance rates across judges and hearing offices could reflect the distribution of other factors that are correlated with allowances. For example, judges who hear disability cases in regions of the country with higher obesity rates—a known risk factor for disability— may appear to have higher allowance rates than those in regions with low obesity rates. Because judges’ decisions to allow benefits may be related to this or other factors, simple univariate comparisons of allowance rates across judges may reflect characteristics of the cases that judges hear. To help isolate the potential unique effects of judges, we used multilevel, multivariate statistical models that held constant various factors that could have been associated with allowance rates. We held constant variables available in SSA and other public data sources that were relevant to the claim appeals process, in order to estimate the amount of potential residual variation across judges. The data we assembled had a multilevel structure, with applications for disability benefits clustered within the same judges and hearing offices. Judges were associated with multiple hearing offices, because judges sometimes decided cases in multiple hearing offices during the period of our analysis. For example, judges could travel to more remote sites to hear cases on a part-time basis. The data and outcome of interest suggested that a multilevel or mixed logistic regression model would adequately reflect the data generation process. We developed a mixed model that represented the grouping variables—judge, hearing office, and primary diagnosis code—with random intercepts, similar to prior research. We modeled group variation with random effects primarily for parsimony. Modeling group variation with fixed effects would have required estimating several thousand explicit parameters, one for each group level, which would have consumed many degrees of freedom. Estimating the amount of variation across groups then would have required interpreting many contrasts between pairs of fixed effect estimates. In contrast, modeling group variation using random effects allowed us to represent the variation with probability distributions and a small number of summary (hyper) parameters, such as the standard deviation of the judge random effect. Substantively, random effects accurately represented the SSA policy of randomly assigning judges to cases in our study population, using a “first in, first out” method. Moreover, we modeled variation across judges and hearing offices as random, which implies that we seek to make inferences about a larger, hypothetical population of judges and hearing offices that could exist if we replicated the study in the future. This seems appropriate, because the application review process could be repeated across many new judges and hearing offices in the future. We do not seek to make inferences limited to the judges and hearing offices at the particular time we assembled data. We held constant case, judge, and hearing office characteristics using covariates with fixed parameters. The smaller number of parameters associated with these covariates made a fixed effects approach easier to apply and interpret. We assumed that the covariate effects did not vary across groups, so that only the model’s intercept varied randomly. We had no prior expectation that specific covariate effects should have varied across groups. Moreover, increasing the number of random effects would have increased the complexity of the model and could have made it hard to estimate computationally. We viewed the covariates primarily as controls for isolating variation across judges and offices. We did not attempt to build a comprehensive model that correctly specified how all of the covariates were causally ordered and related to each other and the probability of an allowance. As a result, our estimates of these parameters may not be consistent with those obtained from a more comprehensive modeling effort, or from analyses designed to estimate the causal effects of particular variables, such as the use of videoconferences. In the body of the report, we present alternative explanations and provide context to avoid interpreting the covariate effects as with a high degree of causal certainty. For example, we note that claims with legal representation may have higher approval rates if representatives accept claims with greater merit and, therefore, a greater chance of compensation. Below, we test alternative model specifications for covariates where the causal ordering may be ambiguous, in order to avoid biasing estimates of the judge and office parameters of primary interest. Certain variables and parameters were applied across multiple versions of the model (described below). Let Y denote the allowance or denial decision for claimant i at any step of the appeals process, with Y = 1 if the ALJ allowed the claim and 0 otherwise. Each model took a typical hierarchical generalized linear form for a binary outcome: The probability of allowance, π, was a function of covariate vectors measuring characteristics of claims, Xijo, characteristics of the ALJs assessing those claims, Xjo, and characteristics of the hearing offices where the decision occurred, X. Claimants were clustered in j = {1, 2, … , J} judges, and judges were clustered in o = {1, 2, …, O} offices. g is the inverse logistic link function. We included normally distributed random effects, ε(.), for each judge, office, and the claimant’s primary diagnosis, indexed by diagnosis codes d = {1, … , D}. Random effects allowed the intercept for each group, α(.) = α + ε(.), to vary around the population average intercept, α, as a function of the group’s variance, σ(.): To make interpretation and computation easier, we classified all continuous covariates into substantively meaningful categories, and set the omitted reference categories to the sample modes. This transformation implied that the random effect variance, σ(.), described variation across judges and offices for a claim that had the modal value of all other covariates in the model and sample. The reference claim remained constant across models fitted to different subsamples, in order to make inferences about a claim that was typical for the study population. The center of the data at the modes, α, may not necessarily correspond to an actual claim. For example, all judges do not practice at the modal hearing office, and the modal age for the study population may not be typical for claims made in the modal office. Nevertheless, rescaling facilitates estimation and interpretation of the model, because all inference can be done on α and α(.) directly, using the random effect variance, σ(.), without transformation. This allowed us to concisely describe variation in allowance rates for a hypothetical, typical claim in the joint covariate distribution. In the body of this report, we summarized variation across judges and offices, holding constant other covariates at their sample means, using the estimated distribution of group intercepts scaled in logits: To describe variation across groups on the probability scale, we estimated the quantiles bounding the middle 50 and 90 percent of the group density on the logit scale and then transformed them using the inverse logistic function, g. This reference case does not represent a feasible claim, because the means of the categorical covariates are just the sample proportions. However, this approach complements the centering of the sample, which allows the group variance parameters, σ(.), to represent variation across groups for a feasible reference case at the sample modes. We fit a sequence of models using different covariates and subsamples, listed below. Fitting several models allowed us to assess how simplifying assumptions, such as ignoring the step at which ALJs made allowance decisions, affected our results. This approach also assessed the stability of estimates across multiple runs of the computational model estimation methods. We describe the substantive meaning of the covariates above, and give their exact measurement when reporting results in table 7 below. Model 1: Intercepts Only Model 2: Add Covariates (Unemployment and poverty vary at the state level, not at the office level, but we include them with the office covariates for simplicity.) Model 3: Claims Decided at Steps 4 or 5 We estimated Model 2 for only those claims decided at steps 4 or 5, according to each claim’s Regulation Basis Code. In these last two steps of the sequential disability decision-making process, the judge determines whether claimants retain the ability to perform their past work or other work in the national economy, given the limitations of their impairment and their age, education, and work experience. SSA officials provided methods to map these codes to steps of the appeals process. Estimating the model for decisions at steps 4 or 5 allowed all parameters to vary at these steps versus all steps in the pooled sample. For example, diagnosis may be less strongly associated with allowances at step 5 than at step 3, while the claimant’s age may be more strongly associated. Models 4-6: Stratify by Year of Decision and Claim Type To assess how the amount of variation across judges and offices has changed over time, we estimated Model 2 separately for each year of decision, claim type, and the cross-classification of these variables. Stratified models allowed all parameters to vary across claim types and years. Model 7: Exclude Potentially Endogenous Covariates We excluded covariates from Model 2 that may not be exogenous to the probability of approval. These include representation by an attorney or other person and the presence of a medical or vocational expert. Claims with legal representation may have higher approval rates if representatives tend to accept claims with greater merit and, therefore, a greater chance of compensation. (Representatives typically receive a share of their client’s benefits as compensation.) According to SSA officials, medical and vocational experts may be more likely to testify at a hearing, depending on the judge’s expected ruling on the case. Although judges generally have discretion about whether to involve medical and vocational experts, judges are required to seek the opinion of a medical expert in certain cases. For example, a judge must have a medical expert provide an opinion if the judge is considering allowing benefits because the claimant’s impairment may be medically equivalent to one in SSA’s Listing of Impairments. Excluding these covariates avoids potentially biasing estimates of the judge and office parameters of primary interest. We provide the estimated distributions of allowance rates across judges, hearing offices, and primary diagnoses, holding all other covariates at their means, in table 6 below. Each row in the table lists results for one specification of the model described above. We derived quantiles of the distributions across groups with the data and estimated model parameters, using the methods above. The standard deviations of the allowance rates on the logit scale are explicit parameters in the model and were directly estimated with the fixed coefficients. We used these distributions to describe variation across judges, offices, and diagnoses in the body of this report and in figures, where we interpret the results in more detail. Table 7 below provides estimated odds-ratios of allowances for the factors other than judge, hearing office, and diagnosis in our primary model of ALJ allowance rates (Model 2 above), along with sample distributions and raw allowance rates. We used the primary model to support our findings in the body of this report, where we interpret the results below in more detail. Our model included variables that are measures or approximate measures for (1) claimant characteristics that represent criteria used in the disability decision-making process, (2) judge characteristics, (3) other participants in the decision-making process, (4) SSA administrative characteristics, and (5) economic characteristics of the claimant’s state. The interpretation of the odds ratio for a particular variable depends on whether the variable is a dummy variable or a categorical variable. For dummy variables, a statistically significant odds ratio that is greater/less than 1.00 indicates that claimants with that characteristic are more/less likely to be allowed than claimants without it. For categorical variables, a statistically significant odds ratio that is greater/less than 1.00 indicates that claimants in that category are more/less likely to be allowed than the claimants in the reference category. For objective 2, we reviewed relevant federal laws, regulations, and documentation, and collected testimonial evidence from SSA officials to describe and evaluate the processes that SSA uses to monitor hearing decisions, detect variation, and improve accuracy and consistency. We interviewed SSA officials at different levels, including officials at headquarters, regional, DDS, and field office levels. We reviewed documents such as SSA’s Hearings, Appeals, and Litigation Law (HALLEX) manual, policy memoranda issued by the Chief Administrative Law Judge, monitoring and quality assurance reports, user manuals and guides for electronic tools, SSA OIG reports, and descriptions of processes that are under development. We assessed these monitoring efforts against federal internal control standards and our management and evaluation guide for assessing fragmentation, overlap, and duplication in government programs. We also reviewed SSA’s annual performance plans from fiscal year 2006 through fiscal year 2017 to identify performance measures the agency has established to improve the accuracy and consistency of its hearings decisions. We evaluated the current performance measures using key attributes of performance measures used in prior GAO work and federal internal control standards. In addition to interviews with agency officials, as described above, we also interviewed officials from organizations representing judges, disability claimants, and representatives to obtain their perspectives on SSA’s efforts to monitor and improve accuracy and consistency. In addition to the individual named above, Erin M. Godtland, Assistant Director; Rachael Chamberlin, Analyst-in-Charge; Dana Hopings, LaToya King, Stephen Komadina, Rhiannon Patterson, and Jeff Tessin made significant contributions to the report. In addition, Daniel Bertoni, Deborah Bland, David Chrisinger, Melinda Cordero, Holly Dye, Bill Egar, Alex Galuten, Benjamin Licht, Serena Lo, Mimi Nguyen, Samuel Portnow, Sheila McCoy, and Shana Wallace made valuable contributions.", "summary": "Individuals who do not agree with the initial decision on a claim for Social Security disability benefits can ultimately appeal the decision by requesting a hearing before one of SSA's approximately 1,500 administrative law judges. However, the rate at which these judges have allowed benefits has varied, raising questions about the reasons for this variation. GAO was asked to review aspects of SSA's oversight of judges' decisions. This report examines (1) to what extent allowance rates vary across administrative law judges, and factors associated with this variation; and (2) the extent to which SSA has processes to monitor the accuracy and consistency of hearings decisions. GAO developed a statistical model to analyze SSA data on adult disability decisions made by administrative law judges from fiscal years 2007 through 2015, the most current data available at the time of GAO's analysis; reviewed relevant federal laws, regulations, and agency documents; and interviewed SSA officials and chief judges in SSA's 10 regions, as well as officials from organizations representing judges, disability claimants, and claimant representatives. Allowance rates—the rate at which Social Security Administration (SSA) administrative law judges allowed disability benefits to be paid when claimants appealed—varied across judges, even after holding constant certain characteristics of claimants, judges, hearing offices, and other factors that could otherwise explain differences in allowance rates. Specifically, GAO estimated that the allowance rate could vary by as much as 46 percentage points if different judges heard a typical claim (one that was average in all other factors GAO analyzed). SSA officials said that this level of variation is not surprising, given the complexity of appeals and judicial discretion. Nonetheless, the variation declined by 5 percentage points between fiscal years 2007 and 2015 (see figure), a change officials attributed to enhanced quality assurance efforts and training for judges. GAO also identified various factors that were associated with a greater chance that a claimant would be allowed benefits. In addition to characteristics related to disability criteria, such as the claimant's impairment and age, GAO found that claimants who had representatives, such as an attorney or family member, were allowed benefits at a rate nearly 3 times higher than those without representatives. Other factors did not appear related to allowance rates, such as the percentage of backlogged claims in a hearing office. SSA has various reviews to monitor the accuracy and consistency of hearings decisions by administrative law judges, but some of these reviews may overlap and SSA has not systematically evaluated them. Specifically, SSA conducts five types of quality assurance reviews of hearings decisions, several of which have similar goals and may look at similar claims. SSA has not evaluated the efficiency or effectiveness of these reviews, despite spending at least $11 million on them in fiscal year 2016. Moreover, the agency has struggled to sustain all of its quality reviews due to competing priorities—two of the five reviews were curtailed in 2016 because SSA reassigned staff to help expedite claims decisions. By evaluating which quality assurance reviews are most effective and efficient in improving accuracy and consistency, SSA would be better positioned to meet its goals within its resources. GAO is making two recommendations, including that SSA systematically evaluate its quality assurance reviews and take steps to reduce or better manage any unnecessary overlap among them. SSA concurred and plans to address them through a comprehensive assessment of its oversight.", "document_type": "gao"}
{"report": "Since 1867, the internal revenue laws have allowed the government to pay awards to individuals who provided information that aided in detecting and punishing those guilty of violating tax laws. In 1996, Congress increased the scope of the program to also provide awards for detecting underpayments of tax. It also changed the source of awards to money IRS collects as a result of information whistleblowers provide rather than appropriated funds. The Tax Relief and Health Care Act of 2006 created a mandatory whistleblower award program which made fundamental changes to IRS’s existing informant awards program. The 2006 act also established the IRS Whistleblower Office. The Whistleblower Office processes claims that allege a tax noncompliance of more than $2 million as potential 7623(b) claims. If these claims meet the requirements for an award, the whistleblower receives a mandatory award of between 15 and 30 percent of collected proceeds, with the exact percentage determined by IRS’s Whistleblower Office based on the extent of the whistleblower’s contributions. Claims not meeting the criteria for a 7623(b) claim are referred to as 7623(a) claims and are subject to procedural steps similar to those of 7623(b) claims. However, 7623(a) claims are neither eligible for appeals to the U.S. Tax Court nor subject to mandatory award payments. For claims processed as 7623(b) claims, the whistleblower claims process involves multiple steps, starting with a whistleblower’s initial application and ending with a rejection, a denial, or an award payment. The process begins when a whistleblower submits a signed Form 211, Application for Award for Original Information, to the Whistleblower Office. The Initial Claim Evaluation unit, which is part of the Small Business/Self- Employed operating division, performs an administrative review of the incoming applications. The Initial Claim Evaluation unit examines the submission for completeness and logs it into E-TRAK. They may reject claims because the tax noncompliance allegation is unclear, no taxpayer is identified, or the whistleblower is ineligible for an award. Claims that are not rejected are sent to classification to determine which operating division should review the claim. Claims are then generally sent to subject matter experts in the various operating divisions—usually the Small Business/Self-Employed or Large Business & International division—where they are reviewed to determine whether the claims merit further consideration by the operating division, should be referred to Criminal Investigation for investigation, or should be sent back to the Whistleblower Office as denied. Claims can be denied if there is limited audit potential or if there is limited time left on the statute of limitations, among other reasons. Claims that are not denied are generally added to the operating division’s inventory for potential examination. If a claim is selected for examination, the examiner completes and returns to the Whistleblower Office a Form 11369, Confidential Evaluation Report on Claim for Award, at the conclusion of the examination. The Whistleblower Office uses the information on this form when making an award determination. Figure 1 summarizes the full claim review process for 7623(b) claims. According to the fiscal year 2017 Whistleblower Office annual report, IRS collected $191 million in fiscal year 2017 as a result of both 7623(a) and 7623(b) whistleblower claims. IRS also paid out $34 million on 367 claims to 242 whistleblowers. The average whistleblower award for fiscal year 2017 was over $140,000. Figure 2 below shows the collection and payout amounts for fiscal years 2012 through 2017. Prior to February 9, 2018, section 7623(b) of Title 26 required the Whistleblower Office to calculate whistleblower award amounts as a percent of “collected proceeds (including penalties, interest, additions to tax, and additional amounts).” On August 12, 2014, IRS issued a final rule to implement section 7623 (the whistleblower law) that clarified that certain penalties—those collected under Title 31 for FBAR violations, and those collected under Title 18 for criminal and civil penalties for tax law violations—do not constitute collected proceeds for calculating whistleblower awards. IRS received comments on the proposed rule contending that excluding money collected under Title 18 and Title 31 eliminates a whistleblower’s incentive to provide information on violations under these titles and would reduce the number of whistleblowers willing to provide information to IRS. IRS stated in its final rule that section 7623 only authorizes awards for amounts collected under Title 26. IRS also noted that under the Victims of Crime Act, criminal fines paid for tax law violations must go into the Crime Victims Fund and are unavailable for payment to whistleblowers. Whistleblowers challenged IRS’s definition of collected proceeds in court. In August 2016, the U.S. Tax Court issued a ruling in response to a petition filed by a married couple who, as whistleblowers, had provided information leading to a conviction related to a tax fraud scheme and then disputed the award determination made by the Whistleblower Office. The U.S. Tax Court ruled that criminal fines and civil forfeitures were collected proceeds for purposes of an award under Section 7623(b). In its ruling, the court held that “the term ‘collected proceeds’ means all proceeds collected by the Government from the taxpayer” and that “…the term is broad and sweeping; it is not limited to amounts assessed and collected under title 26.” On April 24, 2017, IRS filed an appeal of the Tax Court’s decision with the U.S. Court of Appeals for the District of Columbia Circuit. Before the U.S. Court of Appeals made a final ruling, Congress replaced the term “collected proceeds” with the term “proceeds” and provided a definition of “proceeds” on February 9, 2018, in the Bipartisan Budget Act of 2018. The act’s definition of proceeds includes: (1) penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws; and (2) any proceeds arising from laws for which the IRS is authorized to administer, enforce, or investigate including criminal fines and civil forfeitures, and violations of reporting requirements. This includes FBAR penalties in the definition of proceeds, as well as criminal fines and civil forfeitures. This definition of proceeds applies to cases for which a final determination for an award was not made prior to enactment. On March 26, 2018, IRS withdrew its appeal before the U.S. Court of Appeals. Under the Bank Secrecy Act of 1970, and in particular those sections incorporated into Title 31 of the U.S. Code, U.S. persons with a financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign country are required to keep records and file reports on transactions with foreign financial institutions. Persons with a financial interest or signature authority over one or more foreign financial accounts with a total value of more than $10,000 must file an FBAR with the Department of the Treasury (Treasury). If an FBAR is required, it must be filed each year for the previous calendar year on or before April 15 (or other date as prescribed by the IRS) to coincide with the tax filing deadline. Administration of this statute has been delegated by Treasury to the Financial Crimes Enforcement Network (FinCEN). In April 2003, FinCEN delegated its authority to IRS to enforce the FBAR requirements. These requirements include conducting examinations of FBAR compliance and taking such enforcement actions as assessing penalties, as appropriate. A person’s civil penalty for each FBAR violation can be up to $500 for a negligent FBAR violation and up to $10,000 for non-willful violation. In addition, a person with a willful FBAR violation may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the amount in the account at the time of the violation, and also be subject to possible criminal sanctions. These penalties are per person, per account, and per year. According to the Internal Revenue Manual (IRM), FBAR penalties assessed by IRS are collected and tracked separately from tax assessments. IRS assessed approximately $10.7 million in FBAR penalties to taxpayers who were identified in our sample of whistleblower claims. We reviewed 92 whistleblower claims closed between January 1, 2012, and July 24, 2017, where the identified taxpayer was also subject to an IRS FBAR examination. IRS assessed FBAR penalties in 28 of these 92 cases. In none of these instances was the FBAR penalty included in the collected proceeds used to calculate whistleblower awards. Our analysis of these 28 claims suggests that if IRS had included FBAR penalties in the awards, the whistleblowers involved could have received an additional $1.6 million to $3.2 million, assuming an award of between 15 and 30 percent. Examples of Whistleblower Claims A whistleblower claim may provide IRS information on the undisclosed offshore account of a single individual (such as a business partner, former spouse, or family member), while other whistleblowers, such as bank insiders, may provide IRS a list of individuals with undisclosed offshore accounts. The exclusion of FBAR penalties from whistleblower awards is consistent with IRS’s August 2014 regulation outlining the whistleblower award process. The final regulation describes the process for determining whistleblower awards and includes a definition of collected proceeds. Specifically, the regulation defines collected proceeds as “limited to amounts collected under the provisions of Title 26, United States Code.” This definition excluded FBAR penalties assessed under Title 31 and criminal fines assessed under Title 18. This regulation’s definition of collected proceeds, however, has been superseded by the replacement of “collected proceeds” with “proceeds” and a definition of “proceeds” in the Bipartisan Budget Act of 2018, effective February 9, 2018. The new law defines proceeds as including “penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws and any proceeds arising from laws for which the Internal Revenue Service is authorized to administer, enforce, or investigate, including criminal fines and civil forfeitures, and violations of reporting requirements.” While no whistleblowers were paid for any FBAR penalties collected as a result of the information they provided to the Whistleblower Office, our analysis found that IRS took FBAR enforcement actions against at least 10 taxpayers based on whistleblowers’ information. Table 1 shows the FBAR enforcement outcomes for the 92 claims we reviewed. Of these 92 whistleblower claims we reviewed where the identified taxpayer was subject to an FBAR enforcement effort, 39 involved taxpayers accepted into IRS’s Offshore Voluntary Disclosure Programs (OVDP). OVDP enables taxpayers with tax noncompliance from undisclosed offshore accounts to avoid prosecution and resolve their past noncompliance by paying limited civil penalties. As one of a number of required actions for OVDP, IRS assesses taxpayers accepted into the program a miscellaneous Title 26 offshore penalty in lieu of all other penalties for undisclosed foreign accounts, including FBAR penalties. According to IRS officials, because the OVDP penalty is a Title 26 penalty, these collections were included in collected proceeds for the purposes of whistleblower award calculations even before the new definition of proceeds took effect on February 9, 2018. The case files we reviewed included some examples of whistleblowers receiving an award based in part on the miscellaneous Title 26 OVDP penalty in addition to tax, interest, and other penalties. If the taxpayer had not participated in OVDP, the whistleblower would not have received an award on the part of the collected proceeds that came from the FBAR penalty. FBAR Warning Letters At the conclusion of a Report of Foreign Bank and Financial Accounts (FBAR) examination, an examiner can either assess a penalty or can use a warning letter (Letter 3800, Warning Letter Respecting Foreign Bank and Financial Accounts Report Apparent Violations) to notify taxpayers that they are not in compliance with FBAR reporting requirements. The examiner can use their discretion to issue a warning letter if they determine that the taxpayer would improve their FBAR reporting compliance in the future. A taxpayer’s failure to file an FBAR after receiving a warning letter supports a determination of a willful FBAR violation. The new definition of proceeds establishes a policy of including FBAR penalties in whistleblower awards regardless of whether the identified taxpayer enters OVDP or is assessed an FBAR penalty as a result of an FBAR exam. It also creates consistency with the treatment of penalties assessed under the Foreign Account Tax Compliance Act (FATCA). FATCA, enacted in 2010 under Title 26, assesses penalties for failure to report foreign financial accounts and assets. Because FATCA is under Title 26, any penalties assessed stemming from a whistleblower’s information were already eligible for inclusion in whistleblower awards. Of the total revenue collected from the 28 whistleblower claims we reviewed with an FBAR penalty assessed, more than 97 percent came from 10 cases with willful FBAR penalties. Willful FBAR penalties, which are up to 50 percent of the value of the account, represent a small portion (less than 0.1 percent) of all whistleblower claims closed in our time frame, and less than half of the 28 FBAR penalty cases we reviewed. However, we calculated that had these willful penalties been included in awards, the whistleblower awards would have increased by up to $3,145,754. In contrast, the 18 cases that had a non-willful or negligent FBAR penalty would have led to an increase in whistleblower awards of up to $78,912 based on our calculations. Table 2 shows the number of cases and total amount of FBAR penalties collected by the type of FBAR penalty. Whistleblowers may play an important role in bringing willfully noncompliant taxpayers to the attention of IRS. These taxpayers may be purposefully hiding their assets from IRS detection. To highlight the difference in the magnitude of FBAR penalties between willful and non- willful or negligent taxpayers, figure 3 shows the range of potential whistleblower awards had FBAR penalties been included in award determinations. There is no way to estimate how many whistleblowers would have come forward had IRS included FBAR penalties in whistleblower awards. However, we found a small number of whistleblower claims that included FBAR information anyway. To look for how often whistleblowers submitted claims with allegations of FBAR noncompliance, we identified 401 of the 10,306 IRS whistleblower claims closed between January 1, 2012, and July 24, 2017, as likely to contain allegations of FBAR noncompliance by an identified taxpayer. We identified three groups of claims as being most likely to contain allegations of FBAR noncompliance: 92 claims where the identified taxpayer was subject to an FBAR enforcement action (population discussed above); 299 claims that included key terms in E-TRAK indicating offshore assets; and 10 claims that were closed with “no Title 26 collected proceeds,” which could indicate FBAR noncompliance since FBAR penalties are Title 31 penalties. Since FBAR penalties were excluded from whistleblower proceeds, IRS did not track FBAR allegation data in E-TRAK. Therefore, our numbers might underrepresent the total population of claims likely to include allegations of FBAR noncompliance. We reviewed all 92 of the claims that included taxpayers that were also present in IRS’s FBAR Database (matched claims) and found that 85 of them included allegations of FBAR noncompliance on IRS Form 211, the form used to submit a claim to the Whistleblower Office. We reviewed a random sample of 30 claims from the 299 claims we identified as being likely to include FBAR information based on key terms in the E-TRAK database (key terms claims)—11 of them included allegations of FBAR noncompliance. We also reviewed all 10 of the claims that were closed with “no Title 26 collected proceeds” and found one allegation of FBAR noncompliance. This was not unusual because IRS uses the “no Title 26 collected proceeds” code for closures other than those with FBAR penalties, such as claims with Title 18 criminal fines. Table 3 shows our three populations and how often we found claims with allegations of FBAR noncompliance in each. Based on our stratified sample of selected whistleblower claims, we estimate that at least 1.4 percent (or at least 146 claims) of all large-dollar (7623(b)) whistleblower claims closed between January 1, 2012, and July 24, 2017, involved allegations of FBAR noncompliance. Because the Whistleblower Office did not require data in E-TRAK to indicate the nature of the violation the whistleblower is reporting, the actual number of claims that include allegations of FBAR noncompliance may be higher. While our estimate represents a small proportion of all whistleblower claims, this may be because of the prior policy of excluding FBAR penalties from awards. However, the analysis suggests that despite being ineligible for award payment, some whistleblowers provided information on FBAR noncompliance to IRS that may have helped improve FBAR’s effectiveness as a tool for anti-money laundering and tax enforcement. With the statutory change in award basis, IRS may see more whistleblowers come forward with better information about FBAR noncompliance, according to whistleblower attorneys we interviewed. Even though FBAR penalties were not considered for whistleblower awards until the February 9, 2018 legislative change, the Whistleblower Office forwarded allegations it received of FBAR noncompliance to IRS’s operating divisions for further examination. Whistleblower Office officials told us that if a whistleblower provides information concerning offshore accounts held by a taxpayer, including specific allegations of FBAR noncompliance, IRS evaluates it as it does any other information. The presence of information on possible FBAR noncompliance does not change the process for evaluating the claim. Whistleblower Office instructions for the initial review of a claim specify that, if the claim merits further consideration, it will be referred to the appropriate operating division for review. According to officials from the Small Business/Self-Employed and Large Business & International operating divisions, during their review process information dealing with offshore accounts and possible FBAR violations is treated just as all other information provided by a whistleblower. Once a claim is referred to an operating division, it is generally reviewed by a subject matter expert who then determines whether the claim has sufficient audit potential to warrant adding it to the division’s inventory of possible returns for audit. If the subject matter expert concludes that the claim does not have sufficient audit potential, or the division later decides not to proceed with an examination, the claim is returned to the Whistleblower Office. If the subject matter expert forwards a whistleblower claim for possible audit and an examination takes place, the examiners will establish an audit file for the tax examination. If evidence of FBAR noncompliance is found, a separate audit file is to be created. Most often, both files are maintained and updated by the same examiners. According to IRS officials and procedures laid out in the IRM, the outcome of the examination is based on the quality of the evidence and is not influenced by the presence of a whistleblower or the source of the information. Information on FBAR noncompliance developed by examiners may or may not be provided to the Whistleblower Office. At the conclusion of the examination process, the examiner provides the Whistleblower Office with a Form 11369, Confidential Evaluation Report on Claim for Award. On this form, examiners are required to answer a series of detailed questions about the whistleblower’s contribution to the investigation, such as whether the whistleblower identified specific issues or provided analysis that saved IRS time and resources. According to the IRM, the purpose of the Form 11369 is to inform the Whistleblower Office of the whistleblower’s contribution, if any, to an examination, investigation, or other action. According to the instructions on the Form 11369 as well as the IRM, the Whistleblower Office bases its award determinations in large part on the form and information provided to supplement it. There is no specific space set aside on the Form 11369 for information dealing specifically with FBAR noncompliance. In addition, there are no instructions on or accompanying the form to require examiners to provide documentation relating to FBAR noncompliance. Prior to the legislative change in February 2018 to include FBAR penalties in awards, the Whistleblower Office retained in its files any FBAR-related information provided by the operating division but did not use it for the award determination process. According to Whistleblower Office officials, any information about FBAR noncompliance in its claim files was there incidentally and not collected or retained for any specific tracking purposes. These officials told us, and we found in our review, that some claim files had information about FBAR violations or penalties because the operating division examiner chose to include it in the Form 11369 narrative or in supplemental information, even though the examiner was not required to do so. Because providing FBAR information with the Form 11369 was discretionary prior to the legislative change in February 2018, Whistleblower Office officials told us that if FBAR information existed in the files at the time of the interview, it may not be complete. While having complete information about FBAR exams on the Form 11369 was not needed when IRS did not consider FBAR noncompliance as part of award determinations, now that it is defined as such by statute, the Whistleblower Office will need such information on FBAR noncompliance on Form 11369 to properly determine whistleblower awards in accordance with the new legal requirements. As of June 28, 2018, the Whistleblower Office had not updated Form 11369 or its accompanying instructions. Whistleblower Office officials told us they were reviewing and commenting on draft guidance from the Office of Chief Counsel on how to implement the new provision but had not yet updated the Form 11369 or its instructions. IRS officials did not provide a timeline for when IRS expects to update the form. Because this form asks questions specific to Title 26 tax noncompliance examiners may not have clear guidance indicating that non-Title 26 issues should be included in these answers. According to the IRM, the Form 11369 should assist the Whistleblower Office in making an award determination by explaining how the whistleblower and their information assisted IRS in taking action. By not using an updated form that reflects the technical language distinguishing between tax issues and non-Title 26 issues that IRS also enforces, the Whistleblower Office may not be able to ensure the information it collects for determining whistleblower awards that includes non-Title 26 violations is complete and accurate. When enacted on February 9, 2018, the new law immediately required information concerning FBAR violations to be included in the awards determination process. Subsequently, the Whistleblower Office and IRS started to make changes to policies and procedures to ensure award determination decisions are made fairly and with full information. The day the new statutory definition became law, IRS placed a hold on whistleblower award determinations while the Whistleblower Office developed new procedures. On February 15, 2018, IRS lifted the hold, instructing Whistleblower Office analysts to check with their managers prior to making award determinations on any claims that may include non- Title 26 proceeds. However, the Whistleblower Office did not issue any additional specific guidance to Whistleblower Office staff on how to review claims for any non-Title 26 issues until April 19, 2018. According to IRS officials, the Whistleblower Office closed 2,096 whistleblower claims between the date the law changed and April 19, 2018 when IRS issued the internal guidance. In the April 19, 2018 policy alert, later reissued as a memo on May 8, 2018, Whistleblower Office staff were instructed to look over the Form 211 for indications of FBAR or criminal activity when reviewing a Form 11369 or making award determinations. The policy alert also instructs staff to contact the FBAR Penalty Coordinator and review Special Agent’s Reports and Judgement Documents for non-Title 26 proceeds and to document the results of these reviews in E-TRAK. Issuing complete and final guidance will take time; however the Whistleblower Office did not issue any interim guidance to IRS units outside the Whistleblower Office for more than 2 months after the enactment of the statute redefining proceeds. On April 12, 2018, the Director of the Whistleblower Office issued a memo to the commissioners of the operating divisions and chief of the Criminal Investigation division. This memo stated that those working on whistleblower claims need to provide the Whistleblower Office with details of how whistleblower information was used in any actions taken regardless of whether they were Title 26 issues or not. The Whistleblower Office emailed a communication similar to the memo to other IRS employees working on whistleblower claims on April 18, 2018. The initial memo did not provide specific instructions as to how to provide such information, such as specifying to use Form 11369, but the email said additional guidance and training would be forthcoming. According to Whistleblower Office officials, the timing of the internal communication about the change in whistleblower award basis was because the Whistleblower Office was waiting on draft guidance from the IRS Office of Chief Counsel. The Whistleblower Office received this draft guidance on April 19, 2018. In late April and early May, the Whistleblower Office posted information about these changes in internal IRS media, including IRS-wide web pages and pages for individual IRS operating divisions. The Whistleblower Office specified information should be included with the Form 11369 in these later communications. However, as noted above, the Form 11369 itself and its accompanying instructions had not been updated to reflect these new requirements. The current regulations on whistleblower claims, issued in August 2014, exclude non-Title 26 proceeds from the basis for determining whistleblower awards. According to IRS officials, as of June 20, 2018, IRS had not yet started to take action on making the regulatory change. IRS, however, is in the process of updating the IRM, which serves as the primary guidance for IRS employees. Section 25.2.2 of the IRM, which provides procedures and instructions for the whistleblower award programs, defines collected proceeds for the purpose of awards as tax, penalties, interest, and additions to tax limited to amounts collected only under the provisions of Title 26. According to IRS officials, while IRM updates take time to complete, generally the IRM can be updated quicker than a regulation. The officials could not provide a timeline for when these changes would be complete. IRS can communicate to the public about statutory changes to the whistleblower program through its various external communication channels, such as its website and social media accounts. Such communications are important because whistleblowers have a limited 30- day period to appeal certain award determinations. On May 9, 2018, IRS posted an announcement about the statutory change on the Whistleblower Office page of its web site. The announcement noted the enactment of the provision redefining proceeds for the purpose of whistleblower awards and provided a link to the May 8, 2018 Whistleblower Office memorandum. This information was posted 3 months after the statutory change went into effect and a month after we notified IRS that IRS had not yet announced the change through a press release, its web site, or its Twitter account. IRS collects and maintains FBAR penalty data in a stand-alone database. According to IRS officials, they use these data to carry out IRS’s delegated duties to assess and collect such penalties. For example, the data are used for sending demand notice letters to taxpayers and tracking cases referred to the Department of Justice. According to these officials, IRS also uses information on FBAR penalty assessments and payments for a variety of related purposes including reporting FBAR data to the Financial Crimes Enforcement Network (FinCEN) and for use in annual reports to Congress. IRS also uses the database for internal management. Specifically, IRS officials stated that they use reports on inventory, penalties, and appeals for decision making. Given the February 2018 legislative change to include FBAR penalties in the definition of proceeds, the Whistleblower Office will also use FBAR penalty data for calculating some whistleblower award determinations. While FinCEN retains the rule-making authority for FBAR and is the repository of FBAR filings, IRS assesses and collects FBAR penalties from taxpayers who violate the FBAR reporting requirements. IRS also maintains the FBAR Database. While individuals file their FBAR forms through FinCEN’s online Bank Secrecy Act E-filing portal, IRS enforces these filing requirements. Following procedures laid out in the IRM, IRS examiners can access FBAR filing data from FinCEN’s database during the course of a tax examination. Information on the taxpayers’ FBAR filings is available to examiners through IRS’s Integrated Data Retrieval System, including data from filed tax and information returns. Data on FBAR enforcement actions, including penalties, are only housed in the FBAR Database. The FBAR Database is a stand-alone database maintained by the FBAR team within the Small Business/Self-Employed operating division. The FBAR Database does not interface or connect with any other IRS data sources or systems. Therefore, there is currently no mechanism for any data to automatically feed into or from the FBAR Database to cross-check with taxpayer information in other databases. When examiners open an FBAR exam, the IRM directs them to report exam and exam-outcome information to the FBAR team. Examiners fax, mail, or e-mail FBAR examination and penalty assessment information to the FBAR team which then transcribes the data into the FBAR Database manually. Within IRS, only the FBAR team has access to the database. Because the stand-alone FBAR Database is the only data source within IRS that tracks FBAR penalty assessments and payments, the FBAR team is responsible for completing all data entry as well as generating and circulating reports on FBAR enforcement actions to others within IRS. We assessed the reliability of the FBAR Database for the purposes of using limited data from this database for our own analysis. We determined that the data fields we used were sufficiently reliable for our purposes. Specifically, we matched taxpayer identification numbers in the FBAR Database to those in E-TRAK and reported on enforcement outcomes, including a limited number of penalty payments, as discussed previously. These data were the only available data within IRS on FBAR penalties and enforcement actions. Even though we found the data that we used to be sufficiently reliable for our purpose of identifying penalty information and selecting a sample of claims to review further, we identified some data control deficiencies related to data input and validation. We found certain elements of the database to have limited reliability. Because FBAR penalty information will be used for whistleblower award determinations, it is important for these data to be reliable. A key principle of federal internal control is the use of quality information. Agencies should have controls in their information systems to ensure the validity, completeness, and accuracy of data. Further, these controls should be documented. In addition, the Federal Information Security Modernization Act of 2014 (FISMA) provides for the development and maintenance of the minimum controls required to protect federal information and information systems. Among other things, FISMA requires the National Institute of Standards and Technology (NIST) to develop standards and guidelines that include minimum information security requirements on how agencies should design, protect, and manage their respective data systems. NIST’s guidance outlines appropriate data safeguards for agency data systems based on a risk- based approach. NIST guidance also states an agency’s information system should have controls to check the validity of inputs. This includes checking the valid syntax of inputs to ensure they match the specified definitions for format and content. NIST guidance also recommends controls to help ensure the information system behaves predictably, even if invalid data are entered. While FBAR team employees transcribe data manually into the database from emails or faxed or mailed paper forms, there are no procedures for data testing or validation. For example, there is no secondary check by another individual to ensure data were entered correctly and completely. The FBAR Database procedures also lack sufficient validity checks to ensure that the data entered are accurate. There are some basic data entry checks in the database, such as limiting input to alphanumeric entries and a warning if a date is more than a year from the current date. However, these checks serve only as a reminder for the employees entering the data to verify its accuracy; these checks do not prevent erroneous data from being entered and retained. Without additional controls for accuracy and validity, IRS risks relying upon inaccurate information for some of its reporting and decision making. According to IRS officials, not all fields in the FBAR Database are mandatory. In addition, some fields are new as of January 2017 and, therefore, only contain data after this time. IRS officials also told us that they are aware there are some data missing in the database, such as incomplete records for some taxpayers, but they could not quantify how often this occurs. They also told us that such missing data can contribute to inaccurate reports of FBAR total assessments. For example, if a date field is left blank, certain reports that pull data based on these date fields will not pull the records with this missing field, thereby underreporting FBAR outcomes. We found 44 records with input errors in this date field. The officials stated that they make every effort to input complete data into the database, but sometimes complete information is unavailable from the exam team. Because the FBAR data lack some reliability controls, IRS may rely on insufficient or incomplete data for reporting and decision making, including amounts of whistleblower awards. IRS officials did not have any documentation showing why or how the database was developed in November 2003. Further, IRS officials told us the only documentation on how the database is used is the FBAR Database desk guide. The desk guide provides instructions for data input; however, this guide does not include any information to describe or define the elements in the database. Standard data element definitions are intended to ensure that all users of the system define the same data in the same way and have a common understanding of their meaning. Such documentation is important for providing clear instructions to users to know what information should be input in each variable field to ensure that the type of data in each variable field is consistent. Without it, IRS and other users of the data may not have reasonable assurance that data in the database are input as intended. IRS recognized the need to address the FBAR Database and established an FBAR Improvement Project Team to review the FBAR Database and records system and make recommendations for improvements. The team was established in 2016 after reviews of database-generated reports indicated missing data. The FBAR Improvement Project Team has made recommendations to improve the overall function and reliability of the dataset, including updating FBAR policies and procedures and validating data for the report to Congress. They are also exploring automating case building by pulling taxpayer data from other IRS data sources and creating a report automation tool. As of April 2018, these recommendations had not been implemented. IRS officials were reviewing the recommendations and specific plans had not been vetted by the leadership in the relevant operating divisions. IRS officials noted that because of the small size and limited use of the database, it may be a low priority for scarce information technology resources. Until IRS develops and documents improved controls for the validity, completeness, and accuracy of data in the FBAR Database, it risks using incomplete and insufficient data for decision making. Whistleblower attorneys we spoke with referred to the former exclusion for FBAR and other non-Title 26 collections from whistleblower awards as a significant concern for them and their clients. Their concerns are important to the success of the whistleblower program because if whistleblowers are discouraged from coming forward, IRS risks losing opportunities to identify tax fraud and abuse and ultimately reduce the tax gap. This loss of help in identifying noncompliance could be significant for IRS. According to IRS, between 2007 and 2017, whistleblower information helped IRS collect $3.6 billion in tax revenue that may have otherwise gone uncollected. According to the whistleblower attorneys we spoke with, as well as information we gathered in a search of relevant literature, the estimated value of undisclosed offshore accounts may be in the tens of billions of dollars, but could be as great as hundreds of billions of dollars. Prior to the legislative change in the definition of collected proceeds, we interviewed 11 whistleblower attorneys from nine law firms about their experiences representing tax whistleblowers who submitted allegations of FBAR noncompliance to IRS. Several of these firms also had experience helping whistleblowers appeal IRS award determinations. Of these nine firms, eight firms’ attorneys told us they had refused or limited the number of whistleblowers alleging FBAR noncompliance they were willing to take on as clients when such collections were excluded from award determinations. For example, one attorney told us that his firm would take on whistleblower clients alleging FBAR violations only if there was strong evidence of tax noncompliance. An attorney with another firm reported that the firm was willing to take on such clients but advised these clients that the inclusion of FBAR penalties in any award may have to be litigated in court at the award determination phase. Further, attorneys with three of the nine firms reported fewer whistleblowers either approaching them for representation or following through on filing a claim once informed of the exclusion of non-Title 26 collections from awards. Attorneys with eight of the nine firms also reported that the exclusion of criminal fines from collected proceeds was a potential reason for whistleblowers not coming forward. We spoke with attorneys at eight of the nine firms again after the passage of the statutory change in the definition of proceeds. Most said that this was a positive step for the IRS whistleblower program and expected that more whistleblowers will come forward with information on criminal and FBAR violations. Attorneys with seven of the eight firms stated they would be willing or already had started taking on clients reporting FBAR and criminal violations. However, they cited other concerns with the program that could continue to limit their willingness to represent tax whistleblowers and discourage whistleblowers. These concerns included limits on anonymity for whistleblowers appealing Whistleblower Office decisions to the Tax Court; restrictions on filing claims anonymously; delays in award payments during the lengthy appeals process; and limited communication with the Whistleblower Office during the claim review process. According to these attorneys, for those whistleblowers who are offered an award that excludes FBAR penalty and criminal fine collections, many choose to forgo appealing the decision because it would delay their collection of any part of the award until the appeals process was complete, which can take years. Further, the whistleblower may risk losing their anonymity in an appeal. They added that some whistleblowers risk their lives and livelihoods to come forward and that anonymity is critical to their willingness to provide information to IRS. The attorneys generally stated that these issues can discourage whistleblowers, which then can limit the whistleblower program’s effectiveness. Some of the attorneys we interviewed indicated that whistleblowers may have been further discouraged from bringing information on offshore noncompliance to IRS if they believed that IRS was purposefully trying to limit whistleblower awards by assessing higher FBAR penalties and lower taxes when a whistleblower was involved. The IRM provides IRS examiners with some level of discretion about when to assess tax and FBAR penalties, subject to the facts and circumstances of each individual case. Attorneys at seven of the nine firms we interviewed expressed concern that IRS examiners may have used this discretion to assess higher FBAR penalties and lower taxes as a way to reduce a whistleblower’s potential award. However, these attorneys did not provide specific evidence of this occurring. Because of taxpayer information privacy laws, IRS limits the amount and type of information it can share with whistleblowers and their attorneys about their claims once submitted to the Whistleblower Office. To investigate this claim, we analyzed IRS data on taxpayers that were assessed FBAR penalties from tax years 2010 to 2015. We compared the proportion of FBAR penalties assessed to the overall tax and FBAR penalties assessed to a taxpayer for exams where a whistleblower was and was not involved. Our analysis did not find any evidence of a statistically significant difference between the taxpayers identified by a whistleblower and taxpayers with no whistleblower involved. The IRM lays out the steps examiners should take when determining whether FBAR penalties are warranted and how they should be assessed. These steps are independent of IRM guidance on tax examinations and assessments. IRS officials that we interviewed, including those with oversight of examiners in Small Business/Self- Employed and Large Business & International, indicated that the Title 26 tax exams and Title 31 FBAR exams are conducted independently of each other and neither influences the outcome of the other. Further, they stated that the presence of a whistleblower has no bearing on the decision of whether to assess a tax or penalty or the amount of such assessments, as previously discussed. For the IRS whistleblower program to be successful, whistleblowers need to have confidence in the program’s processes and outcomes, including paying awards when a whistleblower’s information is used. Despite IRS’s prior policy of not including non-Title 26 collections, we found some whistleblowers brought such information to IRS, and IRS assessed penalties on noncompliant taxpayers. However, according to whistleblower attorneys we spoke with, this policy of award exclusions may have discouraged other whistleblowers with significant information on FBAR reporting and tax noncompliance from coming forward. With the new statutory definition of proceeds enacted on February 9, 2018, that includes FBAR and other non-Title 26 collections, whistleblowers may now be more willing to submit claims. However, IRS has not yet fully changed some of the whistleblower program’s policies and procedures to reflect that FBAR penalties, as well as criminal fines and civil forfeitures, are now included in whistleblower awards. Because the change was effective for claims that had not had a final determination made as of February 9, 2018, the Whistleblower Office taking immediate steps to ensure it had full information from other offices and divisions within IRS about claims reaching the award determination phase would have helped IRS act on these determinations. While IRS has now taken steps to communicate the need for information about non- Title 26 actions to be included with the Form 11369, updating the form itself and its instructions will help to better ensure that complete and accurate information about such actions is reflected on the form to be provided to the Whistleblower Office for inclusion in award determinations. The FBAR Database is the only comprehensive source of information within IRS about the FBAR penalties assessed and paid. If this database does not have the controls necessary to provide reasonable assurance that the data are reliable, accurate, and complete, there is a risk that the Whistleblower Office may make award determinations based on incorrect data. We are making the following two recommendations to IRS: The Commissioner of Internal Revenue should ensure that the Director of the Whistleblower Office modifies the Form 11369 and its accompanying instructions to clarify how to document how whistleblower information was used in any IRS actions taken, regardless of whether the laws administered, examined, or enforced are outside of Title 26, such as FBAR penalties. (Recommendation 1) The Commissioner of Internal Revenue should ensure that the Deputy Commissioner for Services and Enforcement develops and documents improved controls for the validity, completeness, and accuracy of data on FBAR exams and enforcement actions. (Recommendation 2) We provided a draft of the sensitive version of this report to IRS for review and comment. IRS agreed with our recommendations and provided technical comments which we incorporated as appropriate. However, IRS deemed some of the information in their original agency comment letter pertaining to the FBAR Database to be sensitive, which must be protected from public disclosure. Therefore, we have omitted the sensitive information in the comment letter, which is reproduced in part in appendix II. These omissions did not have a material effect on the substance of IRS’s comments. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Commissioner of Internal Revenue. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or at mctiguej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Our objectives were to: (1) describe the extent to which the Internal Revenue Service’s (IRS) Whistleblower Office included Report of Foreign Bank and Financial Accounts (FBAR) penalties in whistleblower awards prior to the statutory change; (2) examine how IRS used whistleblower information on FBAR noncompliance and how IRS responded to the statutory change in definition of proceeds; (3) describe the purposes for which IRS collects and uses data from the FBAR Database and assess the controls for ensuring data reliability; and (4) summarize what is known about the potential effect exclusions from collected proceeds, including FBAR penalties, may have had on whistleblowers bringing claims to IRS. This report is a public version of a sensitive report that we issued in August 2018. IRS deemed some of the information in our August report to be sensitive, which must be protected from public disclosure. Therefore, this report omits sensitive information about the information security safeguards of IRS’s FBAR Database as well as an associated recommendation. Although the information provided in this report is more limited, the report addresses the same objectives as the sensitive report and uses the same methodology. To address the first objective, we conducted a case file review of a generalizable stratified sample of closed 7623(b) whistleblower claims to identify how often and to what extent whistleblower claims included information about offshore accounts and FBAR violations. For this case file review, we started with the population of 10,306 7623(b) claims that had been closed by IRS between January 1, 2012 and July 24, 2017 (the time of our analysis). We identified three subpopulations of whistleblower claims from which we selected the claims we reviewed: 1. All 92 claims involving taxpayers who were identified in a whistleblower claim and who also appeared in IRS’s FBAR Database as having been subject to an FBAR examination. We designated this subpopulation as “Matched Claims.” 2. A random sample of 30 claims from a population of 299 claims that a text search within E-TRAK had identified as likely involving noncompliance with offshore account requirements, including FBAR, and that were not included in other samples. We designated this subpopulation as “Key Terms.” 3. All 10 denied claims closed in E-TRAK, the IRS Whistleblower Office’s claim tracking system, with the closing code “Denied - No Title 26 Collected Proceeds.” We designated this subpopulation as “No Title 26 Collected Proceeds.” Table 4 shows descriptive information about each of these subpopulations. The purpose of our file review was to determine how often whistleblower claims in each of our different subpopulations involved offshore accounts and allegations of FBAR violations. We reviewed all claims in our first and third subpopulations; because of the larger number of claims in the second subpopulation, we selected a random sample for review. For the 132 whistleblower claims in our review, two reviewers coded the content of each file into different categories, including: whether the Form 211, Application for Award for Original Information, included allegations of FBAR noncompliance; whether the whistleblower received a whistleblower award; and what collections were included in collected proceeds for those paid whistleblowers. To the extent there were disagreements among the reviewers’ coding for a file, a third reviewer resolved the differences. We agreed on a final coding for all of the data elements collected, recorded them in a summary document, and used these for our analysis. Because whistleblower files were not required to contain information on FBAR penalty assessments or other enforcement actions, although some of the files we reviewed did have this information, we supplemented our file review with data on FBAR enforcement actions, such as penalties and warning letters, from the FBAR Database. We assessed the reliability of the FBAR Database and E-TRAK database for the purposes of using limited data from these databases for our own analysis. We reviewed agency documents, electronically tested data for missing data and outliers, and interviewed IRS officials about these databases. These two databases are the only sources of data within IRS for whistleblower claims information and FBAR enforcement actions and outcomes. We compared data in both databases to identify individuals that were both named by a whistleblower and subject to an FBAR enforcement action. We used data from the FBAR Database for the purpose of identifying and summarizing FBAR enforcement actions taken by IRS, and we used data from the E-TRAK database to identify whistleblower claims that were likely to include allegations of FBAR noncompliance. IRS officials told us that the FBAR Database is the most reliable data source at IRS for individuals who were subject to such FBAR enforcement actions as penalty assessments. We discuss the limitations of these databases in this report, but we concluded that the elements we used in our analyses were sufficiently reliable for the purposes of identifying a sample of whistleblower claims likely to include allegations of FBAR noncompliance and FBAR enforcement outcomes. We also interviewed IRS officials concerning the processing of claims and the operation and maintenance of the E-TRAK and FBAR databases. For the second objective, we reviewed relevant portions of the Internal Revenue Manual and other IRS internal guidance and documentation and interviewed officials from IRS’s Whistleblower Office and operating divisions that handle whistleblower claims about what IRS does when it receives information from whistleblowers that include allegations of FBAR noncompliance. We also reviewed the recently enacted statutory provisions concerning the definition of collected proceeds on which whistleblower awards are based. In addition we spoke to IRS Whistleblower Office officials concerning any changes IRS plans to make in its policies and procedures as a result of the statutory change. For our third objective, we evaluated IRS’s FBAR Database to identify any control deficiencies, using as criteria Standards for Internal Control in the Federal Government, the Federal Information Security Modernization Act of 2014, and National Institute of Standards and Technology Special Publication 800-53. We electronically tested the FBAR Database for missing data, outliers, and obvious errors. We also reviewed IRS documentation on the database. In addition, we interviewed IRS officials responsible for maintaining and using the database to determine how IRS uses the data, what controls are in place, and any known limitations of the database. We also met with IRS officials and discussed the ongoing development of plans for improvement of the database. For our fourth objective, we interviewed a nonprobability sample of attorneys who have represented multiple whistleblowers who have submitted claims to the IRS Whistleblower Office under section 7623(b). The views expressed in these interviews represented only those of the attorneys who participated and are not generalizable to all whistleblower attorneys or law firms. These attorneys have a financial interest in IRS’s treatment of whistleblower claims; however, interviewing these attorneys allowed us to gather broad viewpoints on how whistleblower award exclusions may affect their professional decisions and the decision of their clients and prospective clients. We began with whistleblower attorneys whom we previously spoke with for our 2011 and 2015 reports on the IRS Whistleblower Office and requested from those attorneys names of other attorneys currently active in the IRS whistleblower community who have represented clients who submitted allegations that included FBAR noncompliance. We individually interviewed 11 attorneys from nine firms, asking the same questions of each to obtain their perspectives on the effect the exclusion of FBAR penalties and criminal fines has on the nature and volume of whistleblower complaints and on the cases they bring forward. We also attended a regularly scheduled meeting of attorneys representing whistleblowers, including some we had spoken with and several others. Following the enactment of statutory provisions defining collected proceeds for the purpose of whistleblower awards to include FBAR penalties and other non-Title 26 collections, we contacted the 11 attorneys we had previously interviewed for their views on the effect of the new legislation, and we received written responses from 8 of them. For balance, we also analyzed data on FBAR penalty and tax assessments for a sample of taxpayers who were assessed an FBAR penalty in calendar years 2010 through 2015. For all taxpayers in our sample, we identified those where a whistleblower was involved in providing IRS information about the taxpayer and those where there was no whistleblower presence. We analyzed whether there was a statistically significant difference in proportion of FBAR penalty assessments compared to tax and FBAR penalty assessments based on whether a whistleblower was involved or not using a nonparametric Wilcoxon-Mann- Whitney test. This analysis did not control for other factors that could affect the results, such as the taxpayer being willfully noncompliant with FBAR reporting requirements, the total tax assessment of the taxpayer, or the total income of the taxpayer. In addition, we interviewed IRS Whistleblower Office officials and operating division officials to discuss the relative complexity of claims involving and not involving FBAR and how the exam teams use whistleblower information related to FBAR noncompliance. The performance audit upon which this report is based was conducted from March 2017 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with IRS from August 2018 to September 2018 to prepare this public version of the original sensitive report for public release. This public version was also prepared in accordance with these standards. In addition to the contact named above, Tara Carter (Assistant Director), Danielle N. Novak (Analyst-in-Charge), James Ashley, Steven J. Berke, David Blanding, Amy Bowser, Andrew Emmons, Steven Flint, and Kayla Robinson made key contributions to this report.", "summary": "Tax whistleblowers who report on the underpayment of taxes by others have helped IRS collect $3.6 billion since 2007, according to IRS. IRS pays qualifying whistleblowers between 15 and 30 percent of the proceeds it collects as a result of their information. However, until February 9, 2018, IRS did not pay whistleblowers for information that led to the collection of FBAR penalties. GAO was asked to review how often and to what extent whistleblower claims involve cases where FBAR penalties were also assessed. Among other objectives, this report (1) describes the extent to which FBAR penalties were included in whistleblower awards prior to the statutory change in definition of proceeds; (2) examines how IRS used whistleblower information on FBAR noncompliance, and how IRS responded to the statutory change in definition of proceeds; and (3) describes the purposes for which IRS collects and uses FBAR penalty data, and assesses controls for ensuring data reliability. GAO reviewed the files of 132 claims closed between January 1, 2012, and July 24, 2017, that likely included FBAR allegations; analyzed IRS data; reviewed relevant laws and regulations, and IRS policies, procedures and publications; and interviewed IRS officials. Prior to February 9, 2018, when Congress enacted a statutory change requiring the Internal Revenue Service (IRS) to include penalties for Report of Foreign Bank and Financial Accounts (FBAR) violations in calculating whistleblower awards, IRS interpreted the whistleblower law to exclude these penalties from awards. However, GAO found that some whistleblowers provided information about FBAR noncompliance to IRS. In a sample of 132 whistleblower claims closed between January 2012 and July 2017, GAO found that IRS assessed FBAR penalties in 28 cases. It is unknown whether the whistleblower's information led IRS to take action in all of these cases. These penalties totaled approximately $10.7 million. Had they been included in whistleblower awards, total awards could have increased up to $3.2 million. Over 97 percent of the FBAR penalties collected from these 28 claims came from 10 cases with willful FBAR noncompliance, for which higher penalties apply. IRS forwards whistleblower allegations of FBAR noncompliance to its operating divisions for further examination. However, IRS Form 11369, a key form used for making award determinations, does not require examiners to include information about the usefulness of a whistleblower's information FBAR and other non-tax issues. After Congress enacted the statutory change, IRS suspended award determinations for 1 week, but resumed the program before updating the form or its instructions, or issuing internal guidance on new information required on the Form. As of June 28, 2018, IRS had not begun updating the Form 11369 or its instructions. The lack of clear instructions on the form for examiners to include information on FBAR and other non-tax enforcement collections may result in relevant information being excluded from whistleblower award decisions. IRS maintains FBAR penalty data in a standalone database. It uses these data for internal and external reporting and to make management decisions. Because of the change in statute, IRS will need these data for determining whistleblower awards. GAO found that IRS does not have sufficient quality controls to ensure the reliability of FBAR penalty data. For example, IRS staff enter data into the database manually but there are no secondary checks to make sure the data entered are accurate. Without additional controls for data reliability, IRS risks making decisions, including award determinations, with incomplete or inaccurate data. This is a public version of a sensitive report issued in August 2018. Information on the FBAR Database that IRS deemed to be sensitive has been omitted. GAO recommends IRS update IRS Form 11369 and improve controls for the reliability of FBAR penalty data. IRS agreed with all of GAO's recommendations.", "document_type": "gao"}
{"report": "USPS has a wide range of domestic competitive products that are a growing sector of its business. The volume of USPS’s competitive products increased from approximately 750 million pieces in fiscal year 2008 to 4.9 billion pieces in fiscal year 2017. Revenue from these products increased from about 10 percent of all USPS mail revenues in fiscal year 2008 to about 28 percent in fiscal year 2017 (see fig. 1). USPS forecasts that continued growth in e-commerce will increase the volume of its competitive products, especially for the “last-mile” delivery service to consumers—which involves delivery from retail locations and fulfillment centers (i.e., where online orders are processed, packaged, and shipped out to USPS for delivery) to customers. USPS reported that in fiscal year 2017, revenue from competitive products exceeded USPS’s expectations by $500 million due to the growth in e-commerce and successful marketing and sales campaigns. USPS expects increased competition, though, in the first- and last-mile delivery services—collection and delivery of packages—from other delivery providers. To remain competitive in the competitive product delivery market, USPS officials have stated that information gained from scanning is leveraged to provide customers with real-time visibility for the location of a competitive product in USPS’s delivery process as well as accurate estimates of the delivery time of USPS’s competitive products. Further, USPS’s latest strategic plan states that this information is one factor used to reduce its own costs through optimizing its network, including processing facilities, post offices, and numerous other facilities across the United States, and streamlining its operations. USPS delivers competitive products across the nation, which it divides into seven postal areas comprised of 67 postal districts (see fig. 2). Managers at each level—postal area, postal district, and post office—are responsible for overseeing and reporting on the performance of the level below them. For example, each district manager is accountable to the area vice president. Postmasters, who manage individual post offices, are accountable to district managers and also monitor the performance of employees at their post office. To track the movement of competitive products, USPS leverages automation (i.e., scanning by postal-processing equipment) and passive and active scan technology (i.e., scanning devices used by postal employees) to capture barcode information. In addition, when competitive products are not able to go through all the automated scans, USPS employees are to manually scan barcodes that have been placed on each item. These barcodes link the item with information in USPS’s databases such as: the delivery address, the type of USPS product, and when the item was accepted by USPS. According to USPS procedures, competitive products could be scanned up to 13 times to generate visibility necessary for USPS, mailers, and customers to track their packages as they move through USPS’s network (see fig. 3). For example, the first scan of the product—the “Acceptance” scan—is made when the item is dropped off at the post office or by a carrier if the product is picked up at a mailbox or customer address. The last scan—the “Acceptable Delivery Event” scan—generally means the item was successfully delivered to the addressee or that a delivery attempt was made (e.g., the product requires a signature but the recipient was not at home so another attempt will need to be made or the recipient will need to pick up the product). The interim scans reflect the product’s progress through the postal network, including through mail-processing plants and equipment. The scan data are transmitted to USPS’s data systems throughout the day. Scan information from these systems is available to USPS managers as well as mailers and customers who wish to track the progress of their items. USPS’s employees use devices to scan competitive products in postal facilities and on delivery routes (see scans 1, 2, and 11–13 in fig. 3). Carriers usually use a handheld Mobile Delivery Device (MDD) to scan a package’s barcode. MDDs contain Global Positioning System (GPS) technology and transmit package scanning data and carrier location data using a cellular network. USPS employees working inside post offices or other facilities use similar scanning devices without GPS technology, such as the handheld Intelligent Mail Device (IMD) to perform the manual scans (see fig. 4). USPS reports we reviewed indicate that competitive products are almost always scanned and scanned correctly. USPS has an overall organizational goal of accurately scanning 100 percent of all mail pieces—both competitive and other products—that have a barcode. This includes scanning each competitive product at several points from acceptance, as described earlier. However, individual management employee-performance goals for scanning are set slightly lower than 100 percent, as USPS officials stated that they recognize that some scanning issues, such as for missing or damaged barcodes, may occur across post offices. According to USPS data we reviewed for the first three quarters of fiscal year 2018, all but one of USPS’s 67 districts met USPS’s scanning goals for all five required scans for competitive products. Additionally, in one district we visited, a USPS internal report showed that every group of post offices in the district met its scanning goal for the arrival-at-unit scan for the week, the preceding 4 weeks, and the year-to- date periods, and all but one group of post offices met their scanning goals for the acceptable delivery scan for the same measurement period. In addition, representatives for mailers we interviewed that use USPS’s competitive products stated that they were generally satisfied with USPS’s scanning performance. Representatives of all the major mailers we spoke with that rely on USPS’s delivery network said they believed that USPS is generally scanning competitive products accurately, although issues still occur. Representatives of mailers told us that they receive scanning data from USPS for their items throughout the day, with some mailers receiving the data every 15 minutes, a rate that allows them to track their items through USPS. Some mailers use this information to calculate the expected time of delivery and monitor USPS’s progress against their own estimates of delivery time to measure USPS’s performance. Representatives for major mailers we spoke with said they also get complaints from customers if items are late, lost, or inaccurately scanned, so the customers provide another source of information on any scanning issues. Four of the five representatives for major mailers we interviewed that sent items via USPS competitive products told us that they have seen improvement in USPS’s scanning performance in recent years. Additionally, all of the representatives for mailers we spoke with stated that USPS has increased the amount of scanning and the information provided from the scans in recent years. Although USPS has a high scanning rate, some missed and inaccurate scans for competitive products do occur, errors that could potentially affect millions of competitive products. For example, several USPS OIG reports between 2016 and 2018 found that instances of missed or inaccurate scans still occurred both nationwide and that in nine USPS districts they analyzed, were due in part, to post office personnel not always following proper scanning procedures and post office supervisors not adequately monitoring how scanning procedures were implemented. For example, the USPS OIG analyzed approximately 2 billion delivery scans over a 6-month period in 2017 and found that 1.9 million delivery scans (about 0.1 percent) occurred at the post office instead of at the delivery address and were considered improper scans. Furthermore, examples of USPS’s internal reports we reviewed containing scanning performance results showed that a small percentage of competitive mail items had not been scanned. For example, one USPS internal report for a district we visited showed that for one week, USPS employees in the district missed about 0.73 percent of the expected delivery scans for competitive products. Due to USPS’s large volume of competitive products, a small percentage of products not scanned can represent large numbers of items. For example, about 155,000 competitive products were missing a delivery scan in one district’s 2018 year-to-date report we reviewed. Additionally, the representatives of mailers we interviewed also reported occasional scanning issues with USPS’s competitive products. Most of the mailers’ representatives stated that when they see competitive items missing scanning data, it is generally an isolated situation and USPS usually fixes the issue. According to these representatives, USPS provides them with points of contact to work with to resolve scanning issues immediately and on a regular basis. However, one major mailer’s representative we spoke with stated that even though USPS’s employees are generally good at scanning packages, inaccurate delivery scanning is an issue. The representative stated that about 8 to 10 percent of the company’s products sent through USPS were scanned by carriers as delivered, but not at the customer’s delivery address—contrary to USPS’s standard operating procedures for scanning. The representative stated that, although this percentage has decreased in recent years, the mailer would like to see that number decrease further because delivery to the destination address assures them that the item was left as close as possible to the customer. USPS is taking some steps to address missed or inaccurate scans. For example, USPS officials stated that the current electronic scanning device carried by almost all carriers on their routes does not prevent scanning a mail item as delivered to an address that is not the delivery address associated with the item’s barcode information. They also stated that USPS is updating scanning devices to alert carriers when they scan items as delivered when not physically at the correct delivery address. According to USPS officials, as of May 2018, 80 percent of hand-held electronic scanning devices used by USPS carriers had this functionality and that this functionality is being fine-tuned. This capability, though, still does not preclude all scanning errors, as it only affects the final delivery scan. USPS officials also stated that employees may still encounter scanning issues, such as damaged barcodes, which could lead to missed scans. USPS has not based its operational policies and procedures, such as those that support the accurate scanning of competitive products, on any standards for internal controls. USPS officials told us that they have not used any specific criteria for designing, implementing, and operating an internal control system for meeting its operational policies and internal controls, such as those that help ensure competitive products are accurately scanned. According to USPS officials, USPS does not follow the COSO Framework to design, implement or evaluate its operational internal controls as they believe that the COSO Framework standards are traditionally related to internal controls over financial reporting. In addition, USPS officials stated that USPS is not required to follow Standards for Internal Control in the Federal Government, and therefore USPS does not follow these standards as well. Instead, USPS officials stated that USPS has designed its operational policies and internal controls over the years based on its unique responsibilities, management experience, and sound business practices. However, officials could not identify any specific standards or framework they had followed. We have reported that standards for the design, implementation, and operation of their internal-control system provide an overall framework for establishing and maintaining an effective internal-control system—which is a key factor in achieving an entity’s mission. Further, internal controls help managers achieve desired results through effective stewardship of public resources. USPS has options to choose from in selecting standards for internal controls. Two widely used standards are the COSO Framework and Standards for Internal Control in the Federal Government, which was adapted for federal entities from the COSO Framework. Both standards are designed to help an entity design, implement, and maintain an effective internal-control system. Such a system should encompass all aspects of an entity’s objectives, including operations, reporting, and compliance objectives, and can help an entity adapt to shifting environments, evolving demands, changing risks, and new priorities. Non-federal entities can adopt either of these standards in their efforts to design, implement, and operate an effective internal control system. As stated above, we found that the COSO Framework to be a reasonable and relevant set of internal control standards to evaluate USPS’s operational internal-control activities. However, we and the USPS OIG have applied both the COSO Framework and Standards for Internal Control in the Federal Government in evaluating USPS’s operational internal controls in recent reports. Without standards for an effective internal-control system for its operational policies and procedures for scanning competitive products, USPS may miss opportunities to improve how it achieves its mission to deliver those important products. USPS management has designed standard operating procedures to provide assurance that competitive products are scanned accurately. We found some of these procedures to be consistent with the COSO Framework, which states that an organization should deploy control activities through policies that establish what is expected and procedures that put policies into action. USPS has developed a scanning policy for its products, stating that “properly scanning all barcodes will result in World Class Visibility and be instrumental in retaining and growing our shipping business and providing valuable data to drive improved operational performance and reduce costs.” USPS also has procedures that establish the responsibilities of employees for accurately scanning barcodes for competitive products at various points in the mail flow. Although USPS officials stated that employees should rely on prompts from their scanning devices to ensure scans are done correctly, USPS communicates these procedures in three main ways: documents, such as City Carrier Handbook and Rural Carrier Handbook, that outline scanning procedures and that explain carriers’ duties, including scanning; job aids, such as posters showing proper scanning procedures (see fig. 5); and, standard work steps or guidance that lists procedural steps either for competitive products or for scanning mail in general (see fig. 6). Following these procedures is important to fulfill USPS’s scanning goals. As stated above, the USPS OIG found instances of missed or inaccurate scans for competitive items in recent reports. Further, the USPS OIG also recently found that USPS employees at all 15 postal facilities it visited in the Los Angeles District did not follow correct scanning procedures for USPS’s competitive Parcel Return Service product, leading to inconsistent counts for these products. Such errors can put USPS at risk of not collecting revenue for these products. The USPS OIG has made several recommendations in its recent reports to USPS management to reinforce the importance of these procedures to employees. USPS officials agreed with some of these recommendations and stated that they are taking action to address them. While reinforcing these procedures can be helpful, we found that USPS’s scanning procedures may not provide the necessary assurance for accurate scanning because they are not consistent. For example: The USPS’s City Carrier Handbook states that mail with a barcode should be scanned at the delivery point (or address). However, a standard operating procedures document for city carriers at a post office we visited stated that carriers must scan each delivery confirmation mail piece but did not specify that this scan had to be at the delivery point or address. Locally developed procedures may not be uncommon, as one district manager told us that USPS headquarters allows managers to make a certain amount of flexibility to adapt the standard operating procedures for each post office. The USPS document, SCANNING at a Glance: Delivering 100% Visibility, states that all mail items that require delivery scanning should be scanned at the delivery address, but this document also provides additional scanning procedures not contained in the City Carrier Handbook and other standard operating procedures documents we examined. In particular, the document contained procedures for scanning to account for mail being held for customers on vacation; scanning items correctly to account for mail not delivered to business that were closed; and for mail that was refused by the addressee. This inconsistency in USPS’s scanning procedures has likely occurred because many of the documents have been updated at different times and have not always reflected new operations. For city carriers, the online version of the USPS’s City Carrier Handbook was last updated in April 2001. USPS officials stated that the most recent update regarding scanning was issued in November 2015 via a separate Postal Bulletin. Further, a separate standard operating procedure document for city carriers at a post office we visited was dated June 2006. For rural carriers, the most recently updated scanning procedures we found was dated 2013. As a result, some of these documents are not updated with the latest information on new scanning procedures. In a related example, the USPS OIG recently found that employees at three of the six USPS facilities the USPS OIG visited did not have an adequate understanding of the procedures for processing election and political mail due, in part, to guidance that was not updated, even though the procedures were centrally documented on an internal USPS website. USPS officials recognized this issue and stated that these handbooks are not updated regularly as the content of the handbooks are subject to labor negotiations. Therefore, new procedures are presented to USPS employees outside of the handbooks. However, given that these efforts rely on employees to orally communicate information, having consistent documented procedures is even more important. In addition to stating that the organization should deploy control activities through policies and procedures, the COSO Framework states that senior management should communicate objectives clearly through the organization so that other management and personnel understand their individual roles in the organization. By not having consistent procedures, USPS risks not clearly communicating to its employees how they should carry out scanning procedures and therefore contributing to scanning errors. As discussed below, USPS officials told us that management updates its procedures typically through regular meetings with employees, which are documented in handouts or slides. USPS officials stated that management stresses the importance of scanning and that employees should follow the prompts on their electronic devices when scanning competitive products. However, employees can still scan competitive products as delivered even if they are not, as device prompts can be misread, misinterpreted, or ignored. Furthermore, even with current prompts, scanning errors can and do occur. Consistent procedures, clearly communicated to employees, have become increasingly important as USPS hires new employees to handle, in part, anticipated growth in the volume of competitive packages. For example, GAO analysis of USPS data showed that USPS’s carrier workforce increased by 6.4 percent between fiscal years 2015 and 2017. The USPS OIG has found that these new employees require training and guidance to properly perform their roles and to reduce turnover. In addition to deploying policies and procedures to achieve an organization’s objectives, the COSO Framework states that an organization should internally communicate objectives and responsibilities that are necessary to support the functioning of internal controls. This process can be accomplished through training and meetings. Specifically, the COSO Framework states that training should enable individuals to develop competencies appropriate for assigned roles and responsibilities, among other things, and that active forms of communication such as face-to-face meetings are often more effective than passive forms such as broadcast e-mails and intranet postings. To communicate how its procedures should be correctly implemented, USPS has developed both initial and on-going training for employees. USPS officials stated that new employees are formally trained in scanning procedures when they start their employment. For example, carriers are trained how to use USPS’s electronic scanning devices, when to scan competitive items, the correct codes to use for different delivery situations (i.e., signature required, vacation holds, how to code where a package was left at a delivery address). Any new procedures can be introduced through presentations given by managers during meetings, as described below. Required regular meetings may be tracked by USPS management to ensure they are completed. Some district officials we spoke with stated that they certify that their employees have received required training and send that certification to area and USPS headquarters officials. Additional training also helps USPS reinforce correct scanning procedures. When scanning procedures are not being followed or scanning goals are not met at a post office, USPS officials stated that reminders of the correct procedures designed to reinforce USPS’s scanning procedures are presented to employees through presentations, posters, job aids, and additional documents such as carriers’ handbooks. For example, the representative of the major mailer we spoke with that had 8 to 10 percent of competitive products not scanned to the final delivery address stated that training was needed for both new and experienced carriers to reinforce that they should scan items at the delivery address. To further ensure the accurate scanning of competitive products, USPS reported that it holds internal and external meetings. Specifically, these meetings are designed to: Reinforce procedures: Post office managers can use stand-up talks— weekly meetings between management and employees at the post office—to discuss scanning issues with employees and opportunities to address those issues. For example, the postmaster at one post office we visited stated that this post office reinforces the standard work procedures designed to improve the scanning performance of employees during these meetings. Carriers and clerks can ask questions and learn why they are asked to do something or how to do a specific task, allowing for additional training and reinforcement of procedures. For example, we reviewed a handout developed by USPS headquarters to provide managers with talking points for service talks. This handout provided information on carriers delivering and scanning accurately and instructions on scanning at point of delivery on rural routes. Introduce new procedures: USPS officials told us that post office managers use stand-up talks to introduce new procedures and processes with carriers and clerks. For example, postmasters stated that they used these meetings to introduce and train carriers on new scanning features at the post offices. USPS district and area management develop and disseminate memos and handouts to assist managers conducting these meetings. We reviewed handouts USPS provided to managers for service talks. These handouts provided information on the rollout of some of the most recent scanning procedure changes. Continuously improve operations: District managers we interviewed stated that post offices with low scanning performance scores are placed on a district’s list of underperforming post offices. USPS district managers we interviewed told us that they meet with these post offices to determine how each post office plans to improve its scanning performance. District management also conducts audits of underperforming post offices and post offices that are in need of improvement. Our review of one district office’s service review checklist identified the key areas of audit for underperforming post offices. Reassess procedures: Representatives of mailers we interviewed told us that they meet with USPS representatives to discuss ways USPS can share scanning information for competitive products. Given that inaccurate scans can and do occur, it is important that postal managers explore and investigate any instances of missed or inaccurate scans. To do so, USPS managers—including area vice presidents, district managers, and postmasters—use a variety of reports as tools to ensure that the required scans are made at the appropriate place and time, and take action to monitor the status of competitive products, track lost items, and identify scanning issues. USPS headquarters designs reports used by managers to review performance at the local level across the country. Managers at each level are responsible for overseeing and reporting on the performances of the level below them. For example, the postmaster monitors performance of employees at the post office and is accountable to the district manager. In turn, each district manager is held accountable by the area vice president. To monitor performance of scanning of competitive products, these managers have access to several USPS data systems to generate reports. They can use the reports to monitor scanning performance of carriers and clerks at each post office and to identify the causes of scanning issues, such as missing or incorrect scans. Managers can also use these reports to track the status of competitive products or to investigate customer complaints of lost items. Some examples of reports available to managers include the following: Report 1: USPS officials told us that each post office receives this report from their District Office. The report identifies competitive products that do not have all the required scans, such as scans when the item arrives at the post office or when a delivery attempt was made. For example, one district official sends postmasters weekly reports on competitive products that do not have all the required scans. The officials told us that these reports help managers investigate the cause of incorrect scans identified in the report and how to prevent future occurrences. Report 2: USPS officials told us that this report is generated by district managers to proactively identify scanning irregularities, such as scans that may be out of sequence or multiple competitive products that are scanned at the same time but are for different addresses. District management can query postmasters about these scans and ask them to investigate the reason for the irregularities and determine if the scan was appropriate. Report 3: USPS officials told us that this report is generated by postmasters to monitor scanning status and performances for each competitive product that has received an arrival scan but lacks a delivery scan. While this may indicate a problem, it could also just reflect that the final scan had not been made by the end of the day or the scan that had not been uploaded into the USPS data systems when the report was generated. While having these reports are helpful, their full potential to help USPS managers may be limited because USPS lacks detailed and up-to-date standard operating procedures for how managers should use these reports or conduct other activities to efficiently investigate and resolve scanning issues. USPS’s Scanning Performance: Delivery Standard Operating Procedures for managers are a list of bullet points outlining managers’ responsibilities to meet scanning performance target goals and not a list of detailed procedures for managers to follow, such as how to use Report 1 to identify items that do not have all the required scans. In addition, USPS officials told us that this list has not been updated since approximately October 2005. The COSO Framework states that organizations should internally communicate information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control. Further, it states that a process should be in place to communicate required information to enable all personnel to understand and carry out their internal-control responsibilities. Absent such communication, managers may take different actions to address problems or may have difficulty knowing where to find the appropriate information to locate a missing item to resolve a customer’s complaint quickly. For example, one post office manager told us that he will look at the scanning history in the USPS data systems to determine if the item received an acceptable delivery event scan or what the status of the item is on the route, while another post office manager told us he will use GPS data to see where the scans were made to determine if the item was delivered to the right address. If managers do not know where to find the appropriate information, they may spend more time investigating and be less efficient in resolving issues. Further, not having detailed standard operating procedures means managers may not be aware of all the reports available to them. For example, some post office managers told us that they use Report 3 while other post office managers told us that this report was not available to them. Without using Report 3, some managers told us that they look in several sources to find the same information needed to resolve the issue, such as locating a lost package. Some managers told us that USPS management discontinued the report because it was being misused by some managers. Specifically, managers told us that some managers were manually entering scanning or service-performance information retroactively to improve their performance scores. However, they told us that USPS management recently made Report 3 available to managers again but changed features to reduce any misuse. Additionally, USPS may miss opportunities to prevent scanning issues from happening again by not clearly communicating how managers should use the various reports to address specific scanning issues. For example, the USPS OIG recently determined that instances of missed and inaccurate scans for competitive products were a result of USPS management not adequately monitoring the implementation of those procedures. Without detailed procedures to guide managers in finding and using specific information in available reports and other tools, managers will not have consistent information to use to investigate and resolve customer complaints quickly or accurately. In addition, new managers may not know where to go for the most appropriate information and how to use this information to address some issues. As competitive products have become essential to USPS’s economic viability, it is increasingly important for USPS to accurately track them to remain competitive in this market. While USPS may be scanning most mail accurately, there continue to be instances where mail is not scanned accurately or is missing scans. Given the volume and growth in these competitive products, even a small percentage of inaccurately scanned products could be a large number of such products. Since USPS’s procedures were developed absent standards for internal control, the adoption of a set of internal control standards could enhance USPS’s efforts to continuously improve the design, implementation, and evaluation of its operational internal controls for scanning of competitive products. Further, since USPS’s standard operating procedures for scanning are located in numerous documents and are not always consistent—and given USPS’s reliance on stand-up talks and meetings to keep employees current—USPS employees may not always have accurate scanning procedures easily accessible to them. Having consistent standard operating procedures is increasingly important to ensure that employees are making accurate scans. Additionally, standard procedures that guide managers to investigate and resolve scanning issues would help managers more efficiently address these issues and ideally prevent these issues from happening again. To improve USPS’s competitive products scanning, we recommend that the Postmaster General take the following three actions. The Postmaster General should identify and adopt a set of internal control standards that can be used as the basis for operational internal-control activities, such as those for scanning competitive products. (Recommendation 1) The Postmaster General should improve the communication of standard operating procedures for scanning competitive products by, for example, updating or consolidating USPS documents, job aids, and standard work steps. (Recommendation 2) The Postmaster General should create standard operating procedures for managers on how to address inaccurate scans and use available reports to investigate and resolve scanning issues. (Recommendation 3) We provided a draft of this product to USPS for its review and comment. USPS’s comments are reproduced in appendix I. USPS stated that it cannot agree with our recommendation to identify and adopt a set of internal control standards for USPS’s operational internal control activities at this time. Although USPS has adopted an internal control framework for its financial internal control activities, USPS does not know what the benefits and costs are of adopting internal control standards for its operational internal control activities. As a result, USPS agreed to conduct a cost study to determine whether to commit resources to identifying and adopting a set of internal control standards for its operational internal control activities. We are encouraged that USPS is planning to conduct such a study and anticipate that performing this study will result in the implementation of an appropriate set of internal control standards. USPS agreed with the two recommendations regarding scanning procedures and committed to completing corrective actions by November of 2018. In its general comments, USPS noted that our reference to the USPS OIG’s report, Processing Readiness for Election and Political Mail for the 2018 Midterm Elections did not appear germane to the scanning of competitive mail. We recognize that this report was focused on a different type of mail, but as USPS noted in its letter, we use the OIG report as a related example of how USPS has taken efforts to improve the communication of its scanning procedures to employees. Therefore, we determined that our use of the report is appropriate. We have added information from the OIG report to characterize the OIG’s recommendations and USPS’s actions to address those recommendations. USPS also provided technical comments, which we incorporated as appropriate. We will send copies of this report to the appropriate congressional committees, the Postmaster General, the Chairman of the Postal Regulatory Commission, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix II. In addition to the individual named above, Kyle Browning (Assistant Director); Greg Hanna (Analyst-in-Charge); Michael Hansen; Thanh Lu; John Mingus; Faye Morrison; Malika Rice; Amy Rosewarne; Crystal Wesco; Elizabeth Wood; and Matthew Zaun made key contributions to this report.", "summary": "USPS's competitive products have become increasingly important, comprising about 28 percent of USPS's total revenue. USPS scans these packages at various points throughout the postal network. When scans are inaccurate or missing, questions are raised about the veracity of USPS's data on scanning performance and can lead to customer complaints. GAO was asked to review USPS's scanning policies and procedures. In this report, GAO (1) describes USPS's scanning performance and (2) examines how USPS ensures accurate scanning. GAO reviewed USPS's policies and procedures and assessed them against internal control standards; interviewed officials from USPS and five high-volume mailers; and conducted site visits to six post offices in two USPS districts that represented a range of volume, number of routes, and performance. Mail products over which the United States Postal Service (USPS) does not exercise market dominance, such as many of its packages, are called competitive products. These items are scanned throughout the mail delivery system to track their progress (see figure). USPS data show that these products are almost always scanned. For example, USPS data showed that for the first three quarters of fiscal year 2018; all but one of USPS's 67 districts met their scanning goals. Additionally, mailers that account for a high volume of USPS's competitive products told GAO that they believed USPS was generally scanning products correctly. However, a small percentage of missed or inaccurate scans occur. For example, a report from one USPS district showed that for one week, 0.73 percent of the products delivered were missing a scan and that for the fiscal year to date almost 155,000 competitive products were missing a delivery scan. USPS has designed and implemented procedures and activities to help ensure accurate scanning, but some limitations could contribute to scanning errors. For example, USPS has not based its operational procedures for scanning on any internal control standards. USPS officials said the procedures were based on USPS's unique responsibilities, management experience, and sound business practices, but the officials could not identify specific standards or a framework that they followed as the basis for the procedures. USPS officials said they did not believe any internal controls standards applied to these procedures. By not basing procedures on standards, USPS may miss opportunities to improve how it achieves its mission to scan and measure the performance of competitive products. Additionally, USPS's scanning procedure documents, such as for outlining specific delivery scanning steps, are not always consistent, and USPS relies on more informal methods, such as meetings with employees to communicate changes. Thus, employees may not have accurate procedures available to them. Finally, USPS lacks procedures to help managers identify and address incorrect scans, address customer complaints or otherwise address scanning irregularities. For example, USPS's guidance for managers is limited to a list of bullet-points that do not detail the steps managers should follow to resolve scanning irregularities. In addition, this list has not been updated since 2005. Without consistent or detailed procedures, USPS's employees and managers may not scan items accurately or find information needed to resolve scanning issues—a situation that could hinder USPS's ability to reduce inaccurate or missing scans for these important mail products. GAO recommends that USPS: (1) identify and adopt internal control standards for its operational activities such as for scanning of competitive products; (2) improve the communication of procedures for scanning competitive products; and, (3) create procedures for supervisors on how to address inaccurate scans and resolve scanning issues. USPS agreed to explore addressing the first recommendation and agreed with the other two recommendations.", "document_type": "gao"}
{"report": "This section provides information on BLM’s mission and organizational structure, the process for overseeing the development of federal and Indian oil and gas resources, and key aspects of the Inspection and Enforcement program. BLM’s mission is to maintain the health, diversity, and productivity of public lands for present and future generations. As part of this mission, BLM manages federal lands for multiple uses, including recreation; grazing; timber; minerals; watershed; wildlife and fish; natural scenic, scientific, and historical preservation; and the sustained yield of renewable resources. BLM manages these responsibilities through its headquarters office in Washington, D.C.; state offices; district offices; and field offices. Each level’s general responsibilities include the following: BLM’s headquarters office develops guidance and regulations. State and field offices manage and implement the bureau’s programs. In addition to implementing programs, BLM state offices oversee field office operations. Field offices lead BLM’s oversight of oil and gas development. They are located primarily in the Mountain West, where much of oil and gas development on federal and Indian lands takes place. Within field offices, BLM supervisory and staff PET inspectors and tribal PET inspectors (who are contracted by BLM to inspect some wells on Indian lands in accordance with BLM policies and procedures) have primary responsibility for implementing the Inspection and Enforcement Program with assistance from state office program coordinators, according to the Inspection and Enforcement Program Manager. Among other things, state office program coordinators help field offices plan and prioritize their inspection workloads in accordance with BLM policy and comply with BLM guidance and federal regulations when conducting and documenting inspections, according to BLM officials. Development of oil and gas resources on federal and Indian lands is a multi-stage process. First, Interior holds auctions through which entities may secure the right to federal and Indian leases that allow them to drill for oil and gas after meeting certain conditions. Once an operator plans to drill a well on leased land, it must first secure a permit from Interior. After drilling a well, an operator installs production equipment, such as pump jacks, storage tanks, and metering equipment. This production phase continues until the well becomes inactive, and the operator may decide to plug the well, usually because the well is either depleted or no longer economically viable. After plugging the well, the operator is required to remove all production equipment and reshape and revegetate the land around the well. To ensure compliance with applicable laws, regulations, and other requirements, BLM’s Inspection and Enforcement program verifies that the operator complies with all requirements at a well or lease site during the drilling, production, and plugging phases. Three BLM onshore orders, issued pursuant to regulation, specify requirements that operators are to follow on federal and Indian leases. Inspectors use these orders to verify compliance during inspections. Onshore Oil and Gas Order Number 3 specified requirements for the minimum standards for site security by ensuring that oil and gas produced from federal and Indian leases are properly handled to prevent theft and loss and enable accurate measurement. Onshore Oil and Gas Order Number 4 specified requirements for measurement of oil produced under the terms of federal and Indian leases or received by federal and Indian lessees as shares of oil produced on state or private lands. Onshore Oil and Gas Order Number 5 specified requirements for measurement of gas produced under the terms of federal and Indian leases or received by federal and Indian lessees as shares of gas produced on state or private lands. Figure 1 shows key inspection activities that occur during the drilling, production, and plugging stages of a well’s life cycle. In fiscal years 2012 through 2016, the distribution of the oil and gas Inspection and Enforcement program’s workload and the workforce among the 33 BLM field offices with ongoing oil and gas development activities showed an imbalance, based on our analysis of BLM data. BLM took both short- and long-term actions in fiscal years 2012 through 2016 to address this imbalance, such as temporarily re-assigning inspectors from some medium activity offices to some of the highest activity offices. Based on our review of BLM documentation and interviews with agency officials, two key factors affected the distribution of the program’s workload: (1) energy market changes (e.g., price fluctuations) and (2) BLM actions to plan and prioritize inspection workload (e.g., changing risk classification for production inspections and decreasing the number of work months for plugging inspections). From fiscal years 2012 through 2016, the distribution of the workload and workforce of BLM’s oil and gas Inspection and Enforcement Program was out of balance across the 33 BLM field offices with ongoing oil and gas development activities, based on our analysis of BLM data. The majority of the workload, about 58 percent, was located at the 6 highest-activity field offices, which had 44 percent of the workforce. In contrast, the majority of the workforce, 56 percent, was located in the remaining 27 medium and lowest activity offices, which had about 42 percent of the workload. Figure 2 shows the distribution of workload and workforce across the 33 field offices. In addition, figure 3 shows a map of our categorization of BLM’s 33 field offices by their workload and workforce activity level. From fiscal years 2012 through 2016, based on our review of BLM documentation and interviews with agency officials, BLM took both short and long-term actions to address this imbalance, such as temporarily re- assigning inspectors from some medium activity field offices to some highest activity offices. A specific example of how BLM addressed this workload and workforce imbalance on a short term basis for this period concerns two of the highest activity offices (Hobbs and Dickinson). These offices had fewer PET inspectors on board and fewer PET inspection work months than three medium-activity offices (Pinedale, Rawlins, and Vernal). To address this imbalance, BLM sent short-term “strike teams” of PET inspectors to Hobbs and Dickinson on multiple occasions to help complete inspections. For example, officials from the Hobbs field office told us that in fiscal years 2012 and 2013, PET inspectors from the Farmington field office helped complete drilling and plugging inspections at Hobbs. In addition, officials from the Dickinson field office said that during fiscal years 2012, 2013, and 2014, more than 20 PET inspectors from five different states helped them inspect drilling, production, and plugging operations. BLM officials said there were pros and cons to the strike team approach. They said strike teams generally allow a field office to complete high- priority inspections and can provide additional training to inspectors at that office. However, agency officials said that, at times, the inspection documentation from strike team PET inspectors may not fully align with the policies and practices of the office they are assisting, which can create uncertainty about what inspection activities were completed and what the inspection found. We previously reported that strike teams increase costs and are not a sustainable solution. To address the workload and workforce imbalance on a long term basis, BLM allocated additional funding in fiscal years 2015 and 2016 to hire PET inspectors. The Inspection and Enforcement program manager said that these hires were targeted to address workforce needs at certain field offices. According to agency documentation, BLM allocated additional funding to hire about 20 inspectors in fiscal year 2015 and 40 inspectors in fiscal year 2016. Approximately 75 percent of these inspector positions were in three state offices: Montana (which includes the Dickinson, North Dakota field office), New Mexico (which includes the Tulsa, Oklahoma field office), and Wyoming. All six of BLM’s highest activity field offices are located in these three states. With this additional funding in fiscal years 2015 and 2016, multiple officials from BLM field offices reported that they were generally able to hire inspectors and, as a result, the number of onboard inspectors increased. For example, the number of onboard PET inspectors in the Dickinson field office increased from 8 in fiscal year 2015 to 17 in fiscal year 2017. In the Buffalo field office, the number of onboard PET inspectors increased from 16 in fiscal year 2015 to 23 in fiscal year 2017. These officials generally cited two key reasons for being able to hire inspectors. First, BLM increased the compensation for PET inspectors through the use of special salary rates, incentive payments, and student loan repayments. We have previously reported that BLM faces challenges hiring PET inspectors because BLM competes with industry for employees, and industry offers higher salaries. Second, and as described below, industry reduced development activity (i.e., wells drilled) in fiscal years 2015 and 2016 as commodity prices decreased. Multiple BLM field office officials also told us that it is easier to hire PET inspectors when oil and gas prices are low because industry is not hiring and applicants look to BLM for job security. Two key factors—based on our review of BLM documentation and interviews with agency officials—affected the distribution of the program’s workload: (1) energy market changes (e.g., price fluctuations and increased development of shale plays) and (2) BLM actions to plan and prioritize inspection workload (e.g., changing risk classification for production inspections and decreasing the number of work months for plugging inspections). As we describe below, these factors affected several aspects of the program’s workload (i.e., wells drilled, production inspection cases, planned plugging work months, and enforcement actions). The number of wells drilled on federal and Indian lands from fiscal years 2012 through 2016 declined, according to BLM data. The decline was primarily the result of consistently lower gas prices and oil prices that dropped significantly in fiscal years 2015 and 2016 combined with technological advancements that increased the development of resources located in shale and other tight rock formations—which are generally not found on federal and Indian lands. Multiple BLM officials told us that commodity prices are a key factor that impacts the number of wells drilled on federal and Indian lands. These officials told us that, in general, when commodity prices are higher, industry will drill more wells, whereas when prices are lower, fewer wells are drilled. In addition, we previously reported that the highs and lows in prices and the number of oil and gas wells drilled largely overlapped, strongly suggesting that development activities reacted quickly and proportionally to changes in the prices of oil and gas. Table 1 shows the number of wells drilled on federal and Indian lands and average monthly prices for natural gas and crude oil for the period. While there may have been some year-to-year variability between the number of wells drilled and commodity prices (see the fiscal year 2013 to 2015 prices for natural gas in table 1), operators drilled fewer wells in fiscal years 2015 and 2016, which were years of both consistently low gas prices and significant decreases in oil prices. With regard to natural gas prices, a Purdue University study from March 2017 found that (1) the period of consistently lower natural gas prices (i.e., the Henry Hub average monthly price per million British thermal unit was generally from $2 to $4) began around 2009, which corresponds with increased development of natural gas from shale resources, and (2) the price increase in fiscal year 2014 was related to an extreme winter cold spell. With regard to oil prices, a World Bank report from January 2018 identified multiple factors contributing to the significant price decease that occurred in fiscal years 2015 and 2016. These factors included increased oil production from U.S. shale plays—sedimentary rock formations containing significant amounts of oil and natural gas— contributing to oversupply as well as lower production costs that allowed shale oil wells to be profitable at lower prices. From 2009 to 2016, there was also an increase in the development of oil and gas plays located in shale and other tight rock formations, brought about by advances in production technologies such as horizontal drilling and hydraulic fracturing. According to Energy Information Administration data, shale plays represented more than 90 percent of the growth in oil and gas development from 2011 to 2016. As stated above, most shale plays are not located on federal and Indian lands. However, the few BLM field offices located in shale plays where operators focus on oil development saw a smaller decrease in the number of wells drilled compared to field offices located outside of shale plays. For example, the Dickinson field office—located in the Bakken shale play—experienced a 15 percent decrease in the number of wells drilled from about 400 in fiscal year 2012 to about 330 in fiscal year 2016. Similarly, the Hobbs field office—located in the Permian shale play—experienced a 27 percent decrease from about 160 in fiscal year 2012 to about 120 in fiscal year 2016. According to BLM data, almost all producing wells in the Dickinson and Hobbs field offices are oil wells. In contrast, two field offices located outside of shale plays experienced a more significant decrease. The number of wells drilled in the Bakersfield field office (located in California) declined 90 percent from 285 wells drilled in fiscal year 2012 to 30 wells drilled in fiscal year 2016. According to BLM data, almost all of the Bakersfield field office’s producing wells are oil wells. The number of wells drilled in the Vernal, field office (located in Utah) declined 95 percent from 725 wells drilled in fiscal year 2012 to 35 wells drilled in fiscal year 2016. According to BLM data, about 40 percent of the Vernal field office’s producing wells are oil wells, and the remaining 60 percent are natural gas wells. On multiple occasions from fiscal year 2012 through fiscal year 2016, based on our review of agency documentation, BLM changed its methodology to identify and classify risk, which led to fluctuations in the number of high-priority production inspection cases in a given fiscal year. In our review, we focused on high priority production cases because, according to agency documents, inspecting such cases is one of the program’s top three work priorities. Based on our review of agency documentation, BLM’s risk-based strategy went through several iterations from fiscal years 2011 through 2016, and agency officials said that it was difficult to identify the specific reasons for year-to-year changes in the number of their high-priority production cases. This strategy used multiple weighted factors to develop a composite risk score to identify high- and low-priority cases. In fiscal year 2011, BLM based the composite risk score on seven weighted factors: four factors based on BLM data, and three factors based on data from Interior’s Office of Natural Resources Revenue (ONRR). However, BLM officials stated that they had challenges importing ONRR data in a format compatible with the bureau’s information technology system and have since stopped using the data. From fiscal year 2013 through fiscal year 2016, BLM based the composite risk score on the following four BLM-identified risk factors: (1) average monthly production, (2) number of missing oil and gas operations reports, (3) number of incidents of noncompliance, and (4) number of years since last inspection. With regard to composite risk scores, in fiscal year 2011, BLM determined that a composite risk score of 4 would be considered high risk, meaning that cases with a score of 4 or more required an inspection. For fiscal year 2013, BLM increased the composite risk score needed to be considered high risk and required an inspection with a score of 5, a change intended to reduce the number of required inspections because agency documentation stated that the workload in the preceding years was too high for some field offices. For fiscal years 2014, 2015 and 2016, BLM lowered the composite risk score to 4 again. BLM averaged about 2,150 high priority production cases in fiscal years 2012 through 2016, and in each of those fiscal years, the number ranged from about 1,700 to about 2,500. In addition, over 60 percent of such cases were located in the 6 highest-activity field offices we identified. Since such cases are concentrated in six field offices, seemingly minor fluctuations in the overall number of high priority production cases can have greater impacts to an individual field office’s workload. For example, in fiscal year 2013, BLM identified about 2,500 high priority production cases. The Farmington field office in that year had about 170 such cases (or about 7 percent of the total) and estimated that PET inspectors needed about 12 work months to complete these inspections. In fiscal year 2015, BLM identified about 1,700 high priority production cases. The Farmington field office had about 90 such cases (or about 5 percent of the total) and estimated that PET inspectors needed about 6 work months to complete these inspections. In general, BLM officials told us that a single PET inspector is assigned about 6 inspection work months in a fiscal year once other demands on an inspector’s time (i.e., sick leave, vacation, training, and the completion of other assigned non-inspection duties such as administering various safety programs) are considered. Therefore, in fiscal year 2013 the Farmington field office would have had to dedicate 2 PET inspectors (or about 10 percent of its total PET workforce) to complete only high priority production inspections, and in fiscal year 2015 the field office would have needed 1 PET inspector (or about 5 percent of its total PET workforce) to complete such inspections. Since BLM’s risk-based strategy has gone through multiple iterations since fiscal year 2012, several BLM officials said that it was difficult to identify the specific reasons for year-to-year changes in the number of their high-priority production cases. Officials, however, said that their ability to complete more high-priority production inspections increases during times of reduced industry drilling activity. Specifically, if industry is drilling fewer new wells, BLM can apply additional resources toward inspecting currently producing wells because PET inspectors who would normally conduct drilling inspections can now be deployed to high-priority production inspections. For example, as described above, the number of wells drilled decreased during the time frame covered in our review, with the Vernal and Bakersfield field offices experiencing substantial decreases in the number of wells drilled from fiscal year 2012 to fiscal year 2016. Officials in both offices told us that when drilling activity was low, BLM redirected resources originally planned for drilling inspections to complete high-priority production inspections. According to agency data, BLM reduced the estimated number of plugging inspection work months from about 200 in fiscal year 2012 to about 155 in fiscal year 2016, or about 23 percent. Multiple agency officials told us that due to low or falling commodity prices operators plugged fewer wells from fiscal year 2012 through fiscal year 2016. As discussed above, natural gas prices were consistently low during fiscal years 2012 through 2016, while oil prices decreased significantly in fiscal years 2015 and 2016. According to multiple BLM officials, operators generally plug fewer wells during times of low or falling commodity prices because operators prefer to (1) maintain the income generated from even marginally producing wells or (2) limit the expenditures required to plug wells. In May 2018, we reported that low oil and gas prices placed financial stress on operators, increasing bankruptcies and the risk that operators would not permanently plug wells, and that BLM’s actual costs and potential liabilities for reclaiming oil and gas wells likely increased for fiscal years 2010 through 2017. In addition, we reported that BLM faced challenges identifying and managing shut-in wells. For example, BLM does not have time limits for how long operators can have a well in shut- in status, which may limit the agency’s ability to ensure that operators permanently plug such wells before they become orphaned. However, since BLM estimates the number of plugging inspection work months at the start of each fiscal year, there can be instances where actual industry activity is different than estimated. For example, BLM officials at four field offices told us that during the time frame of our review, operators in their region plugged more wells than estimated. According to agency officials, these operators plugged more wells than BLM estimated because the operators were either looking to reduce their financial liability—sometimes in anticipation of selling assets—or looking for work to keep crews busy. In these instances, agency officials told us that, in general, BLM re-allocated inspection work months from low- priority production inspections to these plugging inspections. According to agency officials and documentation, plugging inspections are a higher priority than production inspections for multiple reasons. First, a plugging inspection is time sensitive because it is the final stage in a well’s lifecycle. In contrast, a production inspection is an ongoing operation that can be conducted at almost any time. Second, properly plugging a well is essential for long-term environmental protection. For example, wells that are not properly plugged can leak methane and contaminate surface and groundwater. As such, multiple BLM officials told us that plugging inspections are their field office’s highest priority work task and they will re-allocate resources, if necessary, to complete such inspections. Based on our analysis of BLM data, two key market changes created an imbalance of the program’s enforcement workload: (1) increased drilling activity at two field offices located in shale formations during times of higher oil prices, and (2) bankruptcies of coalbed methane operators in one field office as gas prices decreased. Combined, the Buffalo, Carlsbad, and Dickinson field offices issued about 45 percent of all enforcement actions, 75 percent of all monetary assessments, and about 85 percent of all civil penalties (see table 2). For purposes of this review, we focused on the number and amount of monetary assessments and civil penalties because, according to agency officials and BLM documentation, these two enforcement actions are the key tools used by BLM to address instances of serious or continued operator noncompliance. Almost all of the monetary assessments that the Carlsbad and Dickinson field offices issued were for drilling violations—either drilling without approval or failure to install a blowout preventer or other well control equipment—and occurred in fiscal years 2012 through 2014, based on our review of BLM enforcement data. Federal regulations generally provide for higher monetary assessment amounts for drilling violations compared to other types of violations. Specifically, drilling violations are subject to assessments of $500 per day (up to $5,000), whereas a violation for failure to comply with a previously issued written notice for a minor violation is $250. As such, even though the Carlsbad and Dickinson field offices issued 24 percent of the number of monetary assessments, they issued about 60 percent (about $710,000) of the total amount assessed by all BLM field offices from fiscal years 2012 through 2016. In contrast, even though the Buffalo field office issued more than half of the monetary assessments, these actions accounted for 18 percent (about $220,000) of the total amount assessed because almost all of these assessments were minor violations for failure to comply (see table 3). From fiscal years 2012 through 2016, the Carlsbad and Dickinson field offices were responsible for about 30 percent of all wells drilled on federal and Indian lands, according to BLM data. These offices are located, respectively, in the Permian and Bakken shale plays, where almost all wells are oil wells. During fiscal years 2012 through 2014, for each of these field offices, operators drilled about 435 wells each year, and the price of oil ranged from $87 to $107 per barrel. In contrast, during fiscal years 2015 and 2016, operators drilled about 275 wells each year while the price of oil ranged from $45 to $86 per barrel. According to agency officials, during fiscal years 2012 through 2014 operators attempted to drill wells as quickly as possible in the Carlsbad and Dickinson field offices to increase production during a time of higher oil prices. BLM field office officials told us that when oil prices are higher, some operators have less financial incentive to follow federal requirements. In the Dickinson field office, for example, almost all monetary assessments were related to drilling without approval. Officials from that field office told us that, in general, these violations were related to operators who applied to BLM for a drilling permit, but the bureau did not approve the permit before the operator started drilling. In these instances, operators decided that the benefit of increased production at higher prices outweighed the cost of a monetary assessment, according to agency officials. BLM officials told us that for both types of drilling violations—drilling without approval and failure to install well control equipment—BLM issues monetary assessments immediately upon discovery due to the potential serious harmful impacts to resource development and environmental health and suspends drilling operations until the operator corrects the violation and pays the assessment. The officials said operators almost always pay these assessments in a timely manner because they wanted to complete drilling operations and start production. In contrast to the monetary assessments issued during times of high oil prices, the Buffalo field office issued hundreds of civil penalties totaling millions of dollars during times of lower natural gas prices as some coalbed methane operators declared bankruptcy and did not complete required reclamation activities. Specifically, the Buffalo field office issued over 75 percent of the number of civil penalties and almost the entire amount penalized during fiscal years 2012 through 2016 (see table 4). As we reported in May 2018, low natural gas prices placed financial stress on operators of thousands of coalbed methane wells (natural gas extracted from coal beds). In that May 2018 report, we also found that coalbed methane was economical to produce when natural gas prices were higher, and thousands of coalbed methane wells were drilled on federal lands. However, coalbed methane production has declined because the production of shale gas has kept natural gas prices low. Officials from the Buffalo field office told us that (1) low natural gas prices contributed to an increasing number of bankruptcies among coalbed methane operators, and (2) in general, these bankrupt operators stopped production activities, shut-in the wells instead of permanently plugging them, and stopped communicating with BLM. For these cases, Buffalo field office documentation outlines a 20-step process to identify a responsible party—that is, the operator or the person(s) to whom BLM issued the lease (the lessee)—to either permanently plug these wells or bring them back into production. Officials said that they repeated this 20-step process for each operator or lessee, as needed. Since one lease can have multiple lessees, the repetition of this process resulted in a very large number of enforcement actions, according to Buffalo field office officials. Under this process, BLM initially issued thousands of written notices requiring the responsible party to either “plug or produce.” When the responsible party did not take the specified corrective action outlined in the written notices, the field office then issued hundreds of monetary assessments for failure to comply with the written notice and again instructed the operators to “plug or produce.” When the responsible party failed to comply with the monetary assessments, Buffalo issued hundreds of civil penalties. Buffalo field office officials told us that they do not know whether the government has collected any of the issued penalties because the responsible parties did not pay the penalties to BLM in a timely manner. As such, BLM turned these outstanding penalties over to the Treasury Department for collection, a process that can take up to 2 years, according to agency documentation. Since market conditions have remained unfavorable for coalbed methane production, BLM has taken actions to permanently plug some wells. For example, according to agency officials and documents, the agency has (1) worked with some non-bankrupt lessees, including at least one major oil and gas corporation, to plug wells, (2) re-directed funding from other BLM programs to pay to plug wells and (3) contributed funding to the state of Wyoming’s well plugging program. We recently reported on BLM’s actual costs and potential liabilities for reclaiming oil and gas wells and have ongoing work reviewing BLM’s bonding requirements, which is the primary mechanism to ensure that operators complete required reclamation activities. BLM state offices did not complete internal control reviews at 27 of 33 field offices—including 5 of the 6 highest activity offices we identified. According to the July 2012 oversight policy, state offices are to periodically conduct internal control reviews of their field offices to, among other things, (1) review whether inspections and enforcement actions are accurate, complete, and conducted in accordance with policy, (2) review staffing and training needs, and (3) identify areas where program guidance can be improved. The July 2012 oversight policy also says that BLM state offices are responsible for overall programmatic oversight of field office operations. For those field offices with Inspection and Enforcement program functions, this means that state offices are responsible for ensuring that the field offices are able to meet the goals stated in the program’s handbook, which include production accountability (i.e., the accurate measuring and reporting of production volumes), environmental safety, and public safety. BLM state offices completed internal control reviews at 6 of the 33 field offices from 2013 through 2017 and scheduled reviews for 5 others from 2018 through 2020, as shown in table 5. Officials from BLM state offices who completed internal control reviews said the benefits of these reviews included obtaining data to justify additional training or resources and providing a formal opportunity to examine key program management practices and correct identified deficiencies. For example, in September 2017, the Colorado state office completed an internal control review of a field office. Prior to this review, officials from that state office told us that they thought the field office might be understaffed based on a variety of factors, including longer than expected inspection times. BLM data showed that in fiscal year 2016 this field office estimated about 60 hours to complete a production inspection, while the other 5 Colorado field offices’ average estimate was about 14 hours. The September 2017 Colorado state review identified unofficial management policies at this field office that resulted in the underutilization of PET inspectors and inflated inspection times, creating a perception of understaffing. For example, one of the field office’s unofficial policies required that PET inspectors drive at least 1,000 miles a month in order to keep their government vehicle, which resulted in some inspectors taking longer routes and driving to locations beyond those required for the job. This policy contributed to artificially inflating inspection times. According to the Colorado state review, the accurate tracking of inspection times is vital for workload planning and staffing purposes. In response to these findings, the field office manager terminated the unofficial policy, and officials from the Colorado state office said they will check on the implementation of their recommendations by reviewing the inspection data. Officials from that state office are also no longer considering hiring additional PET inspectors. To ensure that the field office sustains these corrective actions, Colorado state officials told us that they perform periodic reviews of production inspection records and continue to hold progress report meetings with the field office’s management team. Although BLM state offices completed internal control reviews at 6 of 33 field offices, the state offices did not complete reviews at 27 field offices, including 5 of the 6 highest-activity field offices we identified. Officials from BLM state offices identified some key human capital and workload reasons that hindered their ability to complete reviews, including: long-term vacancies in multiple state offices’ inspection and enforcement coordinator positions, which BLM filled on a temporary basis with other agency employees; competing priorities from upper management (e.g., preparing for lease sales); and hiring and training new PET inspectors. For example, according to one state office inspection and enforcement coordinator, the coordinator position was filled on a temporary basis by four different BLM employees from about November 2013 to November 2015 as the agency tried to find a permanent hire. This official said that as a result of the personnel changes, the state office did not conduct field office internal control reviews as initially scheduled. In addition, another state office inspection and enforcement coordinator said that she spends a lot of her time providing instruction and on-the-job training to newly hired PET inspectors in multiple field offices that do not have a supervisory PET inspector, which limits her ability to perform field office internal control reviews. We also identified two shortcomings with BLM’s control activities that may have limited the agency’s ability to compete internal control reviews as required by the July 2012 oversight policy. First, BLM headquarters did not design appropriate types of control activities to help management fulfill its responsibilities. Specifically, the Inspection and Enforcement program manager said that BLM headquarters did not consistently track and monitor the extent to which state offices completed field office internal control reviews. This official said that headquarters tends to rely on state offices to track and monitor such reviews and that headquarters focused on higher priority work tasks, such as developing and implementing new regulations that were issued in January 2017. Within the first 3 years following the issuance of the July 2012 policy, the agency completed one internal control review each during fiscal years 2013 and 2015, although at least 12 reviews were to be completed. BLM headquarters officials we spoke with were not aware that so few reviews had been completed in fiscal years 2013 and 2015. Federal standards for internal control state that management should design control activities to achieve objectives and respond to risks, such as by comparing actual performance to planned or expected results and analyzing significant differences. Because it did not consistently monitor and track state office performance, BLM headquarters (1) did not know that state offices were not conducting field office internal control reviews in accordance with the July 2012 oversight policy and (2) could not analyze the reasons why actual performance did not meet expected results. Identifying the reasons it did not complete internal control reviews (e.g., human capital and workforce challenges), developing and implementing a plan to address those challenges, and monitoring state offices’ progress toward completing required reviews will better position BLM to ensure that its state offices complete all required internal control reviews as called for by its July 2012 oversight policy. Second, the July 2012 oversight policy identifies specific areas (e.g., the accuracy and completeness of inspections and staffing and training needs) that the reviews should assess, but according to a BLM headquarters official, the agency did not provide state offices with implementation guidance or procedures. This official said that BLM did not provide guidance or procedures so that state offices would have flexibility in how they conducted such reviews. However, multiple BLM state officials told us that such guidance or procedures would provide a helpful framework for conducting these reviews. One state office inspection and enforcement coordinator told us that since she had no prior training or experience designing and implementing internal control reviews, guidance or procedures would be especially beneficial. Because they did not have documented implementation guidance or procedures to follow, the two state offices that completed internal control reviews developed their own procedures, which varied in design, methodology, and resources based our review of the six completed internal control reviews as well as interviews with BLM state officials. Specifically: One state office (1) developed its own review procedures based, in part, on existing program documentation, (2) assigned a single individual to conduct reviews because the state did not have the resources available to provide additional staff support, and (3) reviewed inspection and enforcement data contained in BLM’s corporate oil and gas database as well as hard copy files, and interviewed field office PET inspectors. Another state office (1) developed its review procedures based on those employed during a 2011 review of the entire Inspection and Enforcement program at the suggestion of the Deputy State Director; (2) assigned review teams consisting of multiple BLM officials with different areas of expertise; and (3) reviewed database and hard copy records, interviewed both field office PET inspectors and field office management, and observed field office PET inspectors as they conducted inspection activities. Federal standards for internal control state that management should design control activities to achieve objectives and respond to risks, such as by clearly documenting internal control responsibilities in management directives, administrative policies, or operating manuals. BLM has a documented policy, but this policy does not clearly specify what procedures state office officials are to follow to conduct internal control reviews. Without developing and documenting procedures for implementing internal control reviews under the July 2012 oversight policy, BLM does not have assurance that state offices will review all specific areas identified in the July 2012 oversight policy in a consistent manner. In addition, although BLM did not have documented procedures for conducting periodic internal control reviews, the July 2012 oversight policy specified a schedule for conducting such reviews (see fig. 4). The schedule states the following: For state offices with four or fewer oil and gas field offices, the state office is to complete an internal control review of each field office at least once every 3 years. The state offices in this category are Alaska, California, Eastern States, Montana, Nevada, and Utah. For state offices with five or more oil and gas field offices, the state office is to complete an internal control review of each field office at least once every 6 years. The state offices in this category are Colorado, New Mexico, and Wyoming. According to the Inspection and Enforcement program manager, this schedule was based on discussions with state office inspection and enforcement coordinators to balance officials’ availability to conduct internal control reviews and other responsibilities. The program manager said that BLM did not identify or consider risk when developing the schedule because the agency’s primary focus was to balance the new requirement to conduct field office internal control reviews with the state office coordinators’ existing workload. However, the review schedule in the July 2012 oversight policy generally requires more frequent internal control reviews of low-activity offices and less frequent reviews of high activity offices. In particular, five of the six highest activity field offices we identified in our review are in states in which there are more than five field offices. According to the policy, these highest activity offices would therefore receive an internal control review at least once every 6 years. In contrast, five of the six lowest activity field offices are in states in which the policy requires that reviews be conducted at least once every 3 years. Such a review schedule may not ensure that BLM has properly established and implemented internal control reviews at the highest activity field offices—whose workforce must complete a majority of the program’s workload—which may inherently pose a greater risk to the program’s goals of production accountability, environmental protection, and personnel safety. For example, if the six highest activity field offices have an inadequate number of PET inspectors, then there is an increased risk to BLM’s production accountability goal. Specifically, if these offices do not have the human resources needed to fully inspect high-priority production cases, BLM has less assurance that operators are properly measuring and reporting production volumes, which increases the risks to the accurate collection of royalty payments. Furthermore, those field offices that experienced greater levels of drilling workload may present a higher risk to BLM’s environmental protection goal. Specifically, if the six highest activity offices do not conduct accurate and complete drilling inspections, BLM has less assurance that operators are properly conducting drilling operations, which increases the risks of environmental problems, such as contamination of fresh water aquifers. Federal internal control standards call for entities to identify, analyze, and respond to risks related to achieving the defined objectives, such as by estimating the significance of identified risks to assess their effect on achieving defined objectives. Management estimates the significance of a risk by considering the magnitude of impact, which refers to the likely magnitude of deficiency that could result from the risk and is affected by factors such as the size of a risk’s impact. Without employing a risk- informed approach to scheduling and conducting internal control reviews that takes into account the risks to the Inspection and Enforcement program, such as those inherent in field offices’ workload and workforce, BLM will not have reasonable assurance that it has adequate controls in place to address the effect of the field offices that pose the greatest risk to the program. BLM officials said that assessing risk, including field offices’ workload activity levels, could provide a useful metric to inform how BLM conducts and prioritizes field office internal control reviews. On federal and Indian lands, BLM’s Inspection and Enforcement program is intended to ensure that operators developing oil and gas resources do so in a manner that protects public safety, environmental health, and royalty income. This is a complex undertaking that occurs within the oil and gas market and requires BLM’s PET inspectors to conduct technically challenging drilling, production, and plugging inspections. In this context, BLM’s July 2012 oversight policy calls for its state offices to conduct periodic internal control reviews of field offices. While BLM state offices completed internal control reviews at 6 field offices, they did not complete reviews at 27 field offices, including 5 of the 6 highest activity field offices we identified. In addition, because it did not consistently monitor and track state office performance, BLM headquarters (1) did not know that state offices were not conducting field office internal control reviews in accordance with the July 2012 oversight policy and (2) could not analyze the reasons why actual performance did not meet expected results. Identifying the reasons it did not complete internal control reviews (e.g., human capital and workload), developing and implementing a plan to address those challenges, and monitoring state offices’ progress toward completing required reviews will better position BLM to ensure that its state offices are completing all required internal control reviews as called for by its July 2012 oversight policy. Additionally, although BLM’s July 2012 oversight policy does identify the specific areas that internal control reviews should assess, BLM did not provide state offices with implementation guidance or procedures. Because they did not have documented implementation guidance or procedures to follow, the two state offices that completed internal control reviews developed their own procedures, which varied in design, methodology, and resources. Without developing and documenting procedures for implementing internal control reviews under the July 2012 oversight policy, BLM does not have assurance that state offices will review all specific areas identified in the July 2012 oversight policy in a consistent manner. Furthermore, and inconsistent with federal internal control standards, BLM’s July 2012 oversight policy established a review schedule without identifying or considering risk. Without employing a risk-informed approach to scheduling and conducting internal control reviews that takes into account the risks to the Inspection and Enforcement program, such as those inherent in field offices’ workload and workforce, BLM will not have reasonable assurance that it has adequate controls in place to address the effect of the field offices that pose the greatest risk to the program. We are making the following three recommendations to BLM: The Director of BLM should identify the reasons internal control reviews were not completed (e.g., human capital and workforce), develop and implement a plan to address those reasons, and monitor state offices’ progress toward completing required reviews. (Recommendation 1) The Director of BLM should develop and document procedures for implementing internal control reviews under the July 2012 oversight policy. (Recommendation 2) The Director of BLM should implement a risk-informed approach to scheduling and conducting internal control reviews that takes into account the risks to BLM’s mission, such as those inherent in field offices’ workload and workforce. (Recommendation 3) We provided a draft of this product to the Department of Interior for comment. In its comments, reproduced in appendix I, Interior concurred with our three recommendations and outlined planned actions to implement them. For example, BLM plans to issue updated guidance and procedures for conducting internal control reviews to help ensure that such reviews are completed in a timely manner using a consistent risk- based approach. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or ruscof@gaog.ov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Christine Kehr (Assistant Director), Patrick Bernard (Analyst-in-Charge), Tara Congdon, William Gerard, Cindy Gilbert, Jessica Lewis, Dan Royer, Kiki Theodoropoulos, Karen Villafana, and Jack Wang made key contributions to this report.", "summary": "BLM has primary responsibility for managing oil and gas development on federal and Indian lands. To help ensure operator compliance with laws and regulations, BLM administers the Inspection and Enforcement program. Under the program, BLM inspects operators' drilling, production, and plugging activities and can issue various enforcement actions, such as monetary assessments, for violations. GAO was asked to examine key aspects of the Inspection and Enforcement program. This report (1) describes the distribution of BLM's oil and gas Inspection and Enforcement program's workload and workforce among agency field offices for the most recent 5 years for which such data were available (fiscal years 2012 through 2016) and (2) examines the extent to which BLM conducted internal control reviews in accordance with its July 2012 oversight policy for fiscal years 2013 through 2018, the most recent period for which such data were available. GAO examined BLM policies, data, and documents; interviewed BLM headquarters, state and field office officials; visited six BLM field offices selected based on their level of resource development activity; and toured oil and gas drilling, production, and plugging sites at three of these six field offices. Based on GAO's analysis of Bureau of Land Management (BLM) data, the distribution of BLM's oil and gas Inspection and Enforcement program's workload and workforce showed an imbalance among BLM's 33 field offices in fiscal years 2012 through 2016. GAO analyzed BLM data on the overall percentage of the workload and workforce distributed at each field office (i.e., activity level) and grouped similar activity level field offices together into highest, medium and lowest activity categories. GAO found that the program distributed the majority of its workload to 6 highest activity offices and distributed the majority of the workforce to 21 medium activity offices (see fig.). Based on GAO's review of BLM documentation and interviews with agency officials, BLM took both short- and long-term actions in fiscal years 2012 through 2016 to address this imbalance, such as temporarily re-assigning inspectors from some medium activity offices to some of the highest activity offices. BLM has not completed all required internal control reviews of its field offices. BLM's July 2012 oversight policy instructs its state offices to periodically conduct internal control reviews of field offices, which are to, among other things, identify staffing needs. BLM state offices completed internal control reviews at 6 of 33 field offices from 2013 through 2017, and 5 more are scheduled from 2018 through 2020. Officials from BLM state offices told GAO that some human capital and workload challenges hindered their ability to complete reviews, including long-term vacancies in some state offices positions. However, a senior BLM official said that headquarters did not consistently track and monitor the extent to which state offices completed field office internal control reviews, and headquarters officials said they were not aware that so few reviews had been completed. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks, such as by comparing actual performance to expected results and analyzing significant differences. Identifying the reasons it did not complete internal control reviews, developing and implementing a plan to address those challenges, and monitoring state offices' progress toward completing required reviews will better position BLM to ensure that its state offices are completing all required internal control reviews as called for by its July 2012 oversight policy. GAO is making three recommendations to BLM, including taking actions to increase monitoring of state offices' progress toward completing internal control reviews. BLM concurred with all three recommendations.", "document_type": "gao"}
{"report": "The Buy American Act of 1933 was enacted during the Great Depression when there was a need to create and preserve jobs for American workers, and it established a preference for the federal government to buy domestic end products. Many of the products the federal government buys—including aircraft engines and medical supplies—are end products that may be subject to the requirements of the Buy American Act. Further, the Buy American Act does not apply to products that are purchased for use outside the United States or obtained through contracts under the micro-purchase threshold, which was generally $3,500 in fiscal year 2017. end products manufactured in the United States provided that (a) the product is a commercially available off-the-shelf item; or (b) the cost of the components mined, produced, or manufactured in the United States exceeds 50 percent of the total cost of all components. End products that are not considered domestic under the Buy American Act are treated as foreign. This characterization is based on the origin of the end product—that is, where the product is manufactured or produced—and not the vendor’s location. For example, a vendor located in Finland may supply end products manufactured in the United States, in which case these products would be treated as domestic products. Conversely, a vendor located in the United States may supply end products manufactured in Finland. In this case, the end products would be considered foreign. Although the Buy American Act establishes a preference for domestic end products, there are situations in which agencies can procure foreign end products through established exceptions to the Buy American requirements. In addition, under the Trade Agreements Act of 1979, the United States has waived domestic purchasing requirements—including the Buy American Act—for certain acquisitions of foreign end products from countries that are party to international trade agreements or are considered designated countries by the U.S. Trade Representative. In implementing the Buy American Act, the FAR sets forth several exceptions that permit federal agencies to buy foreign end products. These include situations when a domestic end product is not produced in sufficient quantities or cases where the cost would be unreasonable to buy a domestic end product. The steps that contracting officers must take to determine or document an exception will vary depending on the circumstances of the acquisition. For example, a written determination from the Head of Contracting Activity (HCA) or a delegate may be necessary to determine non-availability in some cases. However, a written determination may not be required when an acquisition is conducted through full and open competition, is synopsized, and no domestic offer is received. Other exceptions to the Buy American Act restrictions on the purchase of foreign products, such as the exception for commercial information technology, are blanket exceptions that do not require a written determination. In addition, some agencies have specified additional considerations that must precede a determination and what level of authority is appropriate for certain determinations. The five Buy American Act exceptions that apply government-wide and the corresponding determination standards in the FAR are listed in Table 1. Individual federal agencies may make blanket determinations of situations in which the Act’s restrictions should not apply to that agency’s procurements, when it is not in the public interest to restrict the purchase of foreign end products. For example, over the years, DOD has entered into reciprocal procurement agreements with 27 foreign counterparts. DOD determined that it would be inconsistent with the public interest to apply the Buy American Act restrictions on products from these 27 qualifying countries. Thus, if an offer includes end products from a qualifying country, those products are not restricted by the Buy American Act and the acquisition of qualifying country end products does not require higher approval. This public interest exception for qualifying countries applies only to contracts awarded by DOD. Federal agencies can purchase eligible foreign end products from designated countries when the Buy American Act’s requirements are waived because of the terms of an international trade agreement or other criteria, such as a designation by the U.S. Trade Representative as a least developed country. In accordance with the Trade Agreements Act of 1979, the president has the authority to waive the Buy American Act. For eligible products that come from countries covered by the World Trade Organization’s Government Procurement Agreement, Free Trade Agreements, and the Israeli Trade Act, the Buy American Act has been waived so that these items receive nondiscriminatory consideration and are on equal footing with domestic end products. In total, these agreements cover approximately 60 countries—overlapping with all but two of the DOD qualifying countries. Appendix II highlights the overlap. Unlike DOD’s blanket public interest exception for qualifying countries, the Buy American Act requirements are only waived under a trade agreement if the acquisition is of a certain value set by the U.S. Trade Representative. Current trade agreement thresholds, at or above which the requirements are waived, range from $25,000 for contracts for eligible products from Canada to $180,000 for the 45 other parties to the World Trade Organization’s Government Procurement Agreement. Table 2 lists the parties eligible for trade agreements and the associated threshold for supply contracts. The FAR specifies certain conditions in which trade agreements do not apply, even if the acquisition is above the requisite threshold value set by the U.S. Trade Representative. In these cases, the Buy American Act would apply. These conditions include, but are not limited to: acquisitions that do not use full and open competition, when the limitation of competition would preclude the procedures applicable to acquisitions covered by trade agreements; certain sole-source acquisitions for commercial items using simplified acquisition procedures; acquisitions set aside for small businesses; acquisition of ammunition, arms, or war materials, or for purchases indispensable for national security or national defense purposes; and acquisitions from federal prison industries or nonprofit agencies employing people who are blind or severely disabled. If the contracting officer determines that a trade agreement applies to a particular acquisition, which waives the Buy American restrictions, that determination does not require additional review at a higher level. This is similar to other circumstances where Buy American Act restrictions do not apply, such as for the acquisition of products for use outside the United States or contracts valued below the micro-purchase threshold. The Buy American Act’s applicability is based on the country of origin of the product being supplied, rather than the country of the vendor offering the product to the government. Vendors who propose to do business with the U.S. government are required to certify as to where their products are manufactured or produced—whether in the United States or in a designated country covered by the Trade Agreements Act. Vendors can provide an annual certification applicable to all of their contracts through the federal government’s contractor registry, known as the System for Award Management (SAM). Through SAM, a vendor identifies the country of origin for foreign products associated with a broad category of products. For example, a vendor could state that it provides aircraft components that originate in France and Mexico. Vendors also have the option not to certify the origin of their products in SAM, but instead provide information about foreign end products in their individual offers for contracts. Contracting officials include the relevant clauses in solicitations and contracts in accordance with regulation to require vendor certification. For example, the clause at FAR 52.225-2, Buy American Certificate, requires the offeror to certify that each end product is a domestic end product, or list any foreign end products and their country of origin. Once a contract is awarded, the awarding agency must enter certain information into FPDS-NG, a government-wide database for contract awards and obligations. The Office of Federal Procurement Policy (OFPP) within the Office of Management and Budget provides the overall direction for FPDS-NG, which is managed by the General Services Administration. FPDS-NG data can be populated through the individual systems agencies use to develop contracts. Agencies are responsible for the quality of the information transmitted to FPDS-NG, including data captured on the contract value and whether the foreign product acquisition is authorized by one of the Buy American Act exceptions or a trade agreement. This information is recorded at the contract level, or at the delivery order level for orders from indefinite delivery contracts. For certain product categories—essentially those that represent end products—FPDS-NG requires that contracting staff enter information in the “Place of Manufacture” drop-down data field, as shown in Figure 1. This field must be populated for all reported manufactured end products, including those valued under the micro-purchase threshold, which at the time of our review was generally $3,500. Options in this field include indicating that the product is made in the United States, or that it is made outside the United States and qualifies under one of the Buy American Act exceptions, or that it is subject to the requirements of a trade agreement instead of the Buy American Act requirements. In 2018, FPDS-NG data on agencies’ historical reporting of the use of Buy American exceptions were added to the website on which agencies post contracting opportunities (www.fbo.gov). According to OFPP, this allows vendors selling domestic products to more easily see how agencies acquire foreign goods pursuant to Buy American Act exceptions. In fiscal year 2017, the federal government obligated approximately $7.8 billion for the acquisition of foreign end products, which accounts for less than 5 percent of total federal contract obligations for end products in that year. We observed differences in how civilian agencies and DOD apply Buy American Act exceptions and waivers. In our review of 38 contracts and orders from four agencies—DOD, HHS, DHS, and VA—we found 6 instances where the place of manufacture information was misreported in FPDS-NG. We further identified system limitations in how FPDS-NG captures information. Based on our analysis of FPDS-NG data, almost 40 percent of federal contract obligations in fiscal year 2017—totaling approximately $196 billion—were for domestic and foreign end products, such as aircraft parts, that may be subject to the Buy American Act. Less than 5 percent of these obligations—approximately $7.8 billion—were reported as foreign end products. This is consistent with the information agencies reported in FPDS-NG in the previous 4 years, with foreign end products accounting for approximately 3 to 8 percent of goods subject to Buy American Act restrictions between fiscal years 2013 through 2016. The foreign end products in fiscal year 2017 primarily came from South Korea, the United Kingdom, Afghanistan, Canada, Mexico, and the United Arab Emirates, which together accounted for almost half of the total foreign end products reported. Appendix III shows the federal government’s obligations for foreign end products from various countries for fiscal year 2017. The procurement of foreign end products is permitted by the flexibilities available under the Buy American Act’s exceptions and waivers. Agencies also procured foreign end products through means separate from the exceptions allowed under the Buy American Act, primarily in cases where the Act would not apply. Agencies reported obligating more than $700 million to procure foreign end products by applying one of the five government-wide Buy American Act exceptions—such as domestic non-availability or unreasonable cost—in FPDS-NG for fiscal year 2017. Agencies reported obligating approximately $550 million to procure foreign end products as permitted by the Trade Agreements Act, which waives the Buy American Act’s domestic preference requirements for US trading partners when eligible products are covered by trade agreements and are above certain dollar thresholds. DOD also obligated nearly $2.9 billion to procure foreign products from countries with which it has reciprocal procurement agreements, using what is referred to as the DOD qualifying country exception. This is an exercise of the authority available to agencies under the Buy American Act’s public interest exception. DOD determined that it is not in the public interest to restrict the purchase of foreign end products from 27 countries. All but two of these qualifying countries are also US trading partners, so some of these awards for eligible products may be authorized by a trade agreement. However, the qualifying country exception allows DOD to procure foreign end products without regard to dollar thresholds or other trade agreement eligibility limitations. Agencies also procured foreign end products, such as fuel, to be used outside the United States, in which circumstance the Buy American Act’s requirements do not apply. For fiscal year 2017, these obligations accounted for almost $3.7 billion—about 47 percent of all dollars obligated for foreign end products, as reported in FPDS-NG. Figure 2 highlights fiscal year 2017 obligations, including agencies’ reported spending on foreign end products under the Buy American Act exceptions and other means. DOD accounted for more than 80 percent—roughly $6.4 billion—of the total obligations for foreign end products in fiscal year 2017. Almost all of DOD purchases were either for use outside of the United States, so were not subject to Buy American Act restrictions, or were reported under the public interest exception for DOD qualifying countries. In contrast, civilian agencies report a more varied mix of the exceptions and waivers of the Buy American Act. The civilian agencies—which are unable to apply DOD’s qualifying country exception—were more likely to report buying foreign end products based on trade agreements or another exception to the Buy American Act requirements. Figure 3 shows how DOD and the civilian agencies acquired foreign end products authorized by the various exceptions and waivers of the Buy American Act. From our review of FPDS-NG data, the civilian agencies are more likely to cite one of the five Buy American Act exceptions or a trade agreement waiver when buying foreign end products, and thus take corresponding actions to document or approve the authority cited. For example, in our review of contracts from four agencies, VA obligated $71,000 for medical imaging equipment from Canada, and had to consider whether a trade agreement waiver applied. The manufacturer was determined to be the only source available and the contracting officer determined the acquisition was authorized by a Buy American exception based on domestic non-availability, which can require additional review. In contrast, DOD may make a similar contract award for equipment from Canada based on the qualifying countries exception. DOD acquisitions, then, may be authorized by exceptions such as domestic non-availability when a required item does not come from a qualifying country. For example, we reviewed a $744,000 DOD award for vehicle equipment that was only available from South Africa—which is not one of the DOD qualifying countries and not covered by any of the trade agreements—so the acquisition was authorized by the domestic non-availability exception. In addition, the civilian agencies also reported buying foreign end products for use outside the United States but to a lesser extent than DOD. For example, this included one of the contracts we reviewed, an HHS award for Ebola vaccines manufactured in the Netherlands, with $44.7 million obligated in fiscal year 2017. This contract was reported as used outside the United States because it is primarily stored overseas. FPDS-NG is the primary means for capturing procurement data regarding the Buy American Act, but we found that agencies may not always input reliable information on the extent to which exceptions or waivers authorized the acquisition of foreign end products. In addition, some aspects of how FPDS-NG is structured could lead to additional data reporting errors. In the non-generalizable sample of 38 contracts and orders we examined from DOD, HHS, DHS, and VA, we found 6 awards where information related to the Buy American Act was incorrectly reported in FPDS-NG. In three of the six contracts, agencies recorded the wrong exception or waiver, most often because of an error when reporting the place of manufacture in FPDS-NG. For example, DOD reported a $22,000 contract for vehicle equipment from South Africa as a Buy American Act exception due to unreasonable cost. But the contract file indicated that the exception that applied was domestic non-availability. DOD officials acknowledged the error and corrected it in FPDS-NG during the course of our review. In the three remaining contracts, agencies misreported whether an end product came from the United States or another country. For example, DHS incorrectly recorded that an $18 million contract was for aircraft accessories and other parts manufactured in the United States, even though file documentation showed the contract was for Italian-produced spare parts from the original equipment manufacturer. The Italian- produced spare parts were available from existing inventory maintained by the manufacturer and were needed immediately to meet a mandatory operational requirement. Officials from DHS acknowledged the recording oversight, attributed it to a mistake when entering information in FPDS- NG, and have since corrected the error in response to our observation. Additionally, FPDS-NG has system limitations that could hinder complete and accurate reporting of Buy American Act information: DOD Qualifying Country Exceptions and Trade Agreement Waivers. FPDS-NG requires that information on the type of Buy American Act exception or waiver applied be provided when end products are reported as foreign. But FPDS-NG does not identify errors associated with this process. For example, we reviewed an $8.3 million DHS contract for engines manufactured in Germany that was recorded as a DOD qualifying country exception in FPDS-NG, although this exception is not available to civilian agencies. Contracting officials corrected the data in FPDS-NG during the course of our review. Further, FPDS-NG does not prevent agencies from reporting trade agreement waivers when the contracts are valued below applicable thresholds or waivers do not apply, such as for small business set asides. For example, in the fiscal year 2017 data we reviewed, more than 5 percent of contract obligations reported for trade agreement waivers were for awards set-aside for small businesses, which would not be eligible under the Trade Agreements Act. OFPP officials noted that because of the various dollar thresholds applicable to different trade agreements, adding automatic thresholds in FPDS-NG to guide contracting staff in reporting an applicable trade agreement could lead to additional data errors in the procurement database. Awards under the Micro-purchase Threshold. Although the Buy American Act requirements do not apply to contract awards valued below the micro-purchase threshold—generally $3,500 in fiscal year 2017—the FPDS-NG ‘Place of Manufacture’ field does not have an option to indicate whether a contract is under the threshold. Instead, contracting officers entering information for awards under the micro- purchase amount must still state whether the product is domestic or foreign. If the product is foreign, the officials must select a Buy American Act exception authorizing the purchase, even though no exception is needed at these dollar levels. As a result, when agencies report in FPDS-NG that a Buy American Act exception or waiver applied for a procurement valued at less than $3,500, that information would not be accurate. Based on our review, this may have involved about $16 million in fiscal year 2017 obligations. Awards for both Foreign and Domestic Products. When reporting data for contracts that include multiple end products from both the United States and a foreign country, FPDS-NG only allows for one country of origin to be identified. Contracting officers told us that they typically will report a foreign end product in FPDS-NG when the foreign products account for the preponderance of the contract value. Thus, in cases where a contract includes foreign end products that do not account for the preponderance of the contract’s value, the value of these foreign end products would not be reported in FPDS-NG. We have previously reported that FPDS-NG has similar limitations in other fields, such the type of product or service provided, which prevent contracting officers from identifying more than one condition. According to OFPP, a recent change in the FAR requiring contract reporting at the line item level should provide greater transparency of all products included in a contract. Buy American Act Exceptions and Waivers under Indefinite Delivery Contracts. The way FPDS-NG captures data for Buy American Act exceptions and waivers for some indefinite-delivery contracts results in inaccurate data reporting. When an indefinite- delivery contract is initially awarded, FPDS-NG functionality does not give contracting staff the option to enter information for the ‘Place of Manufacture’ field. Instead, this information is typically captured once an order is placed on the contract. In our review of FPDS-NG data across the four agencies, however, we found that in some cases obligations are reported on the initial indefinite delivery contract so the Buy American Act exceptions or waivers are not recorded. This occurred with multiple agencies, but particularly at HHS, where information for almost 28 percent of HHS obligations for end products in fiscal year 2017 was not captured in FPDS-NG because the obligations were reported in the system through the initial contracts rather than orders. As a result, the applicability of the Buy American Act for HHS contracts totaling almost $1.9 billion in fiscal year 2017 was unreported in FPDS-NG. DOD, DHS, and VA officials told us they identified FPDS-NG reporting as an area of concern. GAO Standards for Internal Controls in the Federal Government state that management should use quality information to support objectives, and that such data should be complete and accurate. In response to the 2017 Executive Order calling for federal agencies to assess their implementation of the Buy American Act requirement, OFPP officials told us they are identifying potential strategies for improving the information agencies submit to FPDS-NG. As OFPP weighs potential options for FPDS-NG reporting, implementing enhancements to reduce data entry errors and ensure that the data collected are complete and accurate would help enable the system to provide the most useful information possible. Ensuring information is correctly reported in FPDS- NG is critical because the data are used to inform procurement policy decisions and facilitate congressional oversight. The four agencies we reviewed—DOD, HHS, DHS, and VA—took different approaches to provide training and guidance for the Buy American Act requirements. Contracting officers faced challenges when procuring products subject to the Buy American Act. For example, we found instances in which contracting officers applied a waiver or exception to contracts where the waiver did not apply and did not have complete guidance for required determinations or reviews. There also were challenges in confirming product origin information when vendors did not provide consistent information. The four agencies we reviewed varied in the mix of training and guidance provided to aid contracting officers in implementing the requirements of the Buy American Act. Three of the four agencies—DOD, DHS and VA— supplemented the federal acquisition regulation, which implements the requirements of the Buy American Act and Trade Agreements Act, with their own acquisition regulations. In addition, DHS and DOD have recently updated existing training or added new training and guidance. VA issued policy memoranda in 2017, emphasizing the importance of meeting Buy American Act requirements, but has not added training or provided specific guidance. HHS does not provide department-level training or guidance related to the Buy American Act. Most of the DHS and DOD contracting officers we spoke to reported that they had attended training and several found the guidance provided by the training to be helpful. HHS and VA contracting officials described confusion due to the lack of resources available at their respective agencies. In 2017, in response to a series of recommendations from the DOD Inspector General to re-emphasize Buy American Act training and guidance, the Defense Acquisition University introduced an updated training course that specifically focuses on the requirements and implementation of the Buy American Act. While not mandatory, a June 2017 memo notified all DOD services and the defense agencies that members of their contracting workforce should complete this training as part of their professional development. At the current pace of enrollment, DOD officials anticipate approximately 18,000 people will have taken this course by the end of September 2018, which is a seven-fold increase over previous graduation rates. Incorporated into these trainings were supplemental on-the-job tools to assist contracting officers when awarding contracts for end products subject to the Buy American Act requirements. One such tool is a flowchart outlining applicable solicitation provisions or contract clauses based upon the awarded contract’s total dollar value. DOD contracting officials we interviewed from Defense Logistics Agency’s (DLA) Land and Maritime division had completed the agency-level Buy American Act training and said it served as a good refresher, with some noting that most of the training they had received on the subject came when they were first hired. DOD provides regulations and guidance on Buy American Act requirements through both the Defense Federal Acquisition Regulation Supplement (DFARS) and the accompanying Procedures, Guidance and Information. DOD contracting officers use the provisions and clauses in DFARS to address the public interest exception for DOD qualifying countries. In addition, as a part of the updated training, the Defense Pricing and Contracting Office developed two documents to provide additional Buy American Act guidance. One outlines a step-by-step approach contracting officers can follow to determine whether the Buy American Act applies to their particular procurement and, if so, whether the use of an exception or waiver is appropriate. The second assists contracting officers with evaluating all offers—foreign and domestic— when price is the determining factor. In addition, we found that DLA supplements the available Defense Acquisition University training and guidance with a robust level of support, including annual training and subject matter expertise. DLA contracting officers told us that while they found the updated training helpful, they also appreciated the training course internal to their agency, as it addresses the types of procurements they typically handle in their day-to- day work, such as buying spare parts. Further, DLA contracting officers noted that they use the job aid provided through the local training. DHS introduced training courses in 2017 that specifically focus on the requirements and implementation of the Buy American Act, including a mandatory training course for DHS contracting officers. DHS reported that 94 percent of contracting staff had taken the required course as of April 2018. DHS developed these courses in response to the 2017 Executive Order to ensure its staff was familiar with the Buy American Act requirements. Incorporated into these training courses are supplemental on-the-job tools to assist contracting officers when awarding contracts for end products subject to the Buy American Act requirements, such as a flowchart outlining applicable solicitation provisions or contract clauses based upon contract dollar value. Contracting officials generally view the training and tools they received as beneficial. For example, several DHS contracting officials we interviewed said that the agency’s new course provided a helpful review on the topic, while one contracting officer specifically noted that the course materials are useful to new staff, to help them understand the Act’s waivers and exceptions. DHS also revised its acquisition manual in December 2017 to add further detail regarding the Buy American Act requirements. Specifically, DHS updated its acquisition manual to provide contracting officers more explicit FPDS-NG reporting instructions for procurements subject to the Buy American Act, as well as discretion to purchase domestic end products at or below the micro-purchase threshold. Additional changes include increasing the documentation and level of managerial review required to use several of the exceptions to the Buy American Act. For example, prior to 2018—which includes the time period in which the DHS contracts and orders we reviewed were awarded—the head of individual contracting offices had the authority to approve domestic non-availability and unreasonable cost exceptions, with a notification made to the DHS Chief Procurement Officer. But under the new policy, the use of these exceptions must have the concurrence of the HCA—who is responsible for contracting activities within individual DHS components—and be approved by the department’s Chief Procurement Officer. Table 3 outlines these changes. In September 2017, VA issued guidance to reinforce existing Buy American Act requirements. The policy memorandum encourages the HCAs within VA to institute reviews of awarded contracts subject to the Buy American Act to ensure compliance. As of September 2018, policy officials did not know how many HCAs had taken this step. Further, the guidance emphasizes the importance of Buy American Act training for its acquisition workforce. VA policy officials explained that the Buy American Act is introduced in several VA training courses, but the agency does not have a specific course on implementing the Buy American Act requirements or provide additional instruction or tools. During the course of our review, VA officials said that some of the HCAs had added internal training on the Buy American Act. In addition, VA contracting staff has the option of taking training offered outside the agency, such as the updated Defense Acquisition University course on the Buy American Act. This training is not required. Contracting officials we spoke to at VA said they struggled with the details of awarding contracts subject to Buy American Act requirements because they are not provided sufficient agency-specific training and guidance on the topic. Moreover, several contracting staff noted an increased need for training due to recent changes in VA contracting practices. Specifically, in response to a 2016 Supreme Court decision, VA has increased contracting efforts with veteran-owned small businesses through the Veterans First Contracting Program. As a result, contracting officials explained they have reduced their use of schedule contracts, in which the determinations related to the Buy American Act requirements were made with the initial awards. As one contracting officer explained, prior to this change, more than 90 percent of her division’s procurements were through VA schedule contracts in which Buy American Act applicability had already been established. However, this shift in contracting practices means contracting officers will more frequently need to consider the applicability of the Buy American Act, but contracting officers have not received specific guidance or training to do so. Noting the significance of this change, one contracting officer stated she approached VA management to obtain Buy American Act training for her division, but such training was not available. Federal internal controls state that agencies should ensure that training is aimed at developing and retaining employee knowledge, skills, and abilities to meet changing organizational needs. In September 2018, we reported that VA was experiencing difficulties implementing multiple aspects of the Veterans First policy, and we recommended that VA provide more targeted implementation training. As VA moves forward to implement this training, incorporating the Buy American Act requirements will be important to provide greater assurance that staff has the knowledge and skills needed to navigate the changing procurement environment. HHS does not have agency-level Buy American training or guidance. The HHS Acquisition Regulation Supplement does not address foreign acquisitions. HHS officials told us that efforts to develop guidance that would address Buy American Act requirements are underway, but they do not know when they will be finalized and made available to contracting officers, and could not describe the extent to which they will address Buy American Act implementation. The HHS contracting officers we interviewed discussed informal Buy American Act training their divisions had developed because department-level training was not available. For example, at HHS’ National Institutes of Health, a contracting official told us about a training course she recently developed because her office was taking on the administration of additional contracts for which the Buy American Act requirements would apply. Contracting officers at HHS’ Office of Biomedical Advanced Research and Development Authority described informal training on the agency’s contract writing system— included as part of their weekly internal staff meetings—that provides additional guidance on how to appropriately complete certain data fields relevant to the Buy American Act. In our analysis of 38 contracts from across the four agencies, we found that agencies faced various levels of challenge in applying the Trade Agreements Act waivers and Buy American Act exceptions to acquire foreign end products. This was particularly apparent in cases where contracting officers had to determine if a trade agreement applied or cases which required a determination that a domestic end product was not sufficiently available, in accordance with the domestic non-availability exception to the Buy American Act requirements. Contracting staff also had difficulty determining the origin of products in light of incomplete or conflicting information. Of the six contracts we reviewed reporting that a trade agreement applied to the foreign end products purchased, we found two cases in which this waiver did not apply to the contracts in question. The value of the contract is one determining factor for whether a trade agreement waives the Buy American Act requirements, although the FAR also states additional factors that would affect applicability under a trade agreement. The two contracts we found, both from VA, had total dollar values at award— $8,435 and $11,950, respectively—that were less than any of the thresholds at which trade agreement waivers of the Buy American Act are applicable. Both contracts were for products from countries that are party to the World Trade Organization Government Procurement Agreement, so the value of the acquisition would have to be equal to or exceed $191,000—the threshold that was in effect at the time of award—for waivers from Buy American requirements to apply. Contracting officials in both cases were generally unaware that the applicable threshold was not met, making the trade agreement waiver inapplicable. Although VA has added Buy American Act guidance since these contracts were awarded early in fiscal year 2017, the information currently available does not provide sufficient detail to assist contracting officers when awarding contracts in these situations. For example, the guidance VA provided contracting officers in September 2017 does not emphasize consideration of the applicable trade agreement thresholds or include information on how contracting officers should determine the applicable waiver or exception. When contracting officers procure foreign end products, the type of waiver or exception used to support the purchase matters—particularly when required additional steps and review are not completed because the wrong waiver or exception was applied. We found that the two VA contracts with foreign end products were incorrectly reported as the Trade Agreements Act waiver having applied. If one of the other Buy American Act exceptions permitting purchases of foreign end products had applied, contracting officers may have been required to obtain higher-level review or complete a written determination. In addition, we reviewed contracts that show some of the complexities contracting officers face beyond applying the dollar thresholds when determining if an award for foreign end products is eligible under the Trade Agreements Act waiver of the Buy American Act. Specifically, we found instances where DHS contracting officials took different approaches for non-competed awards for similar foreign-manufactured products. For example, we reviewed a non-competed $58 million DHS award for acquiring spare aircraft parts from an original equipment manufacturer located in a foreign country that is party to the World Trade Organization Government Procurement Agreement. DHS reported in FPDS-NG that the procurement was waived by the Trade Agreements Act. However, we also reviewed two other sole-source awards from DHS for similar products—spare aircraft parts from two separate manufacturers in foreign countries that are also party to the World Trade Organization Government Procurement Agreement—that were instead reported as subject to the Buy American Act, but excepted due to the non-availability of domestic products. Contracting officers may come to different conclusions for similar products, in part, because of the multiple factors that have to be considered when determining whether an acquisition is subject to the Buy American Act and whether any waivers or exceptions apply. However, available guidance does not always address these complexities. For example, agencies need to decide if other conditions, such as the procurement of products deemed indispensable for national security or national defense purposes apply to an acquisition that would make a trade agreement inapplicable. Further, if the product’s country of origin is considered a designated country under the World Trade Organization Government Procurement Agreement, officials need to determine that the product is eligible under that agreement. DHS updated its training and guidance for the Buy American Act, which includes a job aid outlining at what dollar values solicitation provisions and contract clauses under a trade agreement waiver are applicable. However, it does not address other situations in which contracts may not be eligible under the Trade Agreements Act, such as non-eligible products or products for national defense purposes. For the other agencies in our review, we found that DOD’s updated Buy American Act training and its acquisition supplement both address trade agreement eligibility, but HHS does not yet have Buy American guidance to address this topic. Federal internal control standards state that agencies should communicate quality information internally to achieve their objectives and that they should select the appropriate methods of communication. When written guidance is not available, agencies may miss opportunities to ensure appropriate steps are taken to meet Buy American Act requirements. Our review of 38 contracts also included 8 contracts for foreign end products pursuant to the domestic non-availability exception. In certain situations, such as when contracts are awarded without full and open competition, this exception requires an approved written determination. The FAR establishes requirements for domestic non-availability determinations, but agencies can delegate the level of review required or specify information to be included in the determination. Three of the agencies we reviewed—DOD, DHS, and VA—provide supplemental guidance on the process for making determinations, including who must make the determination when applying a domestic non-availability exception. However, DHS policy officials told us that when the agency uses the domestic non-availability exception for a sole-source acquisition, the written justification that the FAR requires for non- competed awards should suffice as the documentation to support the non-availability determination as well. The practice of using sole-source justifications to support Buy American determinations is not addressed in DHS guidance. According to DHS policy updated in 2018, determinations of domestic non-availability must be concurred with by the HCA and approved by the Chief Procurement Officer. Federal and DHS acquisition regulations, however, state that some justifications can be approved at a lower level. In the absence of further guidance, this difference in approval levels could result in inconsistent application within the department. In addition, as previously noted HHS does not yet have Buy American Act guidance so the department does not provide information on how to make determinations. According to federal internal control standards, agencies should communicate quality information internally to achieve their objectives and that they should select appropriate communication methods. When written guidance is not available, agencies may miss opportunities to ensure that contracting officers take the steps needed to meet requirements when applying a domestic non-availability exception. Knowing the country of origin of the products the federal government buys is necessary to implement the Buy American Act, but contracting officers do not always have access to accurate information on originating countries. The FAR and the DFARS provide various clauses which, when incorporated into contracts, require vendors to certify that the end products they provide to the government are domestic and, if necessary, declare the foreign countries from which they provide products. Vendors frequently certify this information through the System for Award Management (SAM), the government-wide system used to collect vendors’ annual representations and certifications. Contracting officers may rely on the information vendors provide about their product origins, but they are generally expected to take actions to verify incomplete or conflicting information when they have reason to believe that a vendor will be providing a non-compliant product. We found that SAM certifications and offers did not always include accurate information on end products from foreign countries. In 6 of the 38 contracts that we reviewed—from DHS, HHS, and VA—the vendors certified that they only provided domestic end products although the end products provided were foreign. In all of these cases, the contracting officers knew that the acquisitions included foreign end products. For example, we reviewed two DHS awards for spare aircraft parts from an Italian-based company, one of which was reported in FPDS-NG under the domestic non-availability exception to the Buy American Act, and the other which was incorrectly reported as being manufactured in the United States but has since been corrected. Contracting officials said they knew the parts were made in Italy based on extensive experience contracting with the company and, in part, because they had visited the production location. Contracting officials—including some at HHS and VA—said they use SAM as their primary source to determine whether the vendor is offering domestic end products. Others reported some awareness of the limitations of SAM certifications. At all four agencies, contracting officials emphasized that it is important to ask questions when end product origin information is not readily available—or if there is conflicting information—but agency guidance that we reviewed does not address this need or provide information on how to do so. Only the local training offered by DOD’s DLA addresses other sources of information, which officials said was helpful because it is specific to the industries with which they work. Instead, some officials described how they rely on their experience to know how to verify products’ origins but this can be problematic, particularly with newer staff. For example, in one contract we reviewed VA contracting officials acknowledged that a new contracting specialist at VA did not follow-up when the product origin certification was not provided and assumed all of the items procured were domestic. During the course of our review, the contracting specialist’s supervisor said that she contacted the vendor and learned that some of the items provided were in fact foreign end products. The foreign products were not considered to account for the preponderance of the contract so were not reported in FPDS-NG, but the contracting officer was acting with incomplete information at the time of award. Further, in 4 of the 38 contracts that we reviewed, it is not clear how contracting staff took steps to obtain product origin information in situations where it was not provided in SAM. In these cases—which include contracts for both domestic and foreign end products—the vendors had opted not to certify their product origins in SAM, but instead said that they would provide the information with their individual proposals. However, based on the information in the contract files, the proposals did not include this information. For example: Three of the contracts we reviewed from HHS—all reported as purchasing end items manufactured in the United States—did not certify product origin in SAM. The supervising contracting officer for two of the awards explained that his contracting staff regularly check the vendor’s written representations and certifications provided in the offer, because the SAM certifications are general and do not always apply to the specific equipment they buy. However, the three contract files we reviewed did not include manufacturing or origin information. The vendor for a DHS contract that was reported as manufactured in the United States did not certify this information in SAM. The contracting officer said that he checks SAM for product origin information, but in the documents we reviewed there is no evidence of the information in the contract file. Federal internal control standards state that agencies should communicate the necessary quality information needed to achieve the agency’s objectives, thereby enabling personnel to address risks. Providing guidance regarding the situations in which contracting officers should verify product origin information with vendors may help agencies better meet the requirements of the Buy American Act. Although purchases for foreign end products account for less than 5 percent of federal procurement spending in fiscal year 2017, it is important that these purchases be consistent with the domestic- purchasing restrictions in the Buy American Act. This requires that Buy American Act exceptions and trade agreement waivers be used only when applicable, and that agencies report accurate data on the extent to which they are used. However, data reporting errors by contracting staff and FPDS-NG limitations mean that data on the use of exceptions and waivers are not fully captured. The federal agencies all have responsibilities to ensure Buy American Act data are accurate and complete. The lack of good data can hinder congressional oversight of the extent to which foreign end products are procured as authorized by one of the exceptions or waivers of the Buy American Act. Agencies have taken varied approaches for providing information to contracting officers that navigate the complexities and nuances associated with applying the different Buy American Act exceptions or trade agreement waivers. DOD has added such detailed information through its revised training course and policy guidance. Adding these types of targeted information to address challenging areas would help contracting officers at other agencies implement the Buy American Act’s domestic preferences, as well as related exceptions and waivers. Further, to accurately determine how exceptions and waivers apply requires complete product origin information. Although the responsibility to certify the origins of products supplied to the federal government rests with the contractors, contracting officers would benefit from resources that help them identify information that may be inconsistent, to ensure that accurate information is available. We are making four recommendations, one each to the Office of Management and Budget, DHS, VA, and HHS. The Director of the Office of Management and Budget should instruct the Office of Federal Procurement Policy: To facilitate additional training to improve the understanding of the contracting workforce regarding the Buy American Act requirements; and To facilitate clarifying revisions to FPDS-NG, where needed, and provide training and guidance for recording Buy American Act information in FPDS-NG to improve the accuracy of the Buy American data. (Recommendation 1) The Secretary of Homeland Security should clarify existing guidance in the Homeland Security Acquisition Manual or update training to help contracting officials: Identify the factors that should be considered in order to determine the applicability of the Trade Agreements Act and waiver of the Buy American Act; Document determinations of the use of Buy American exception for domestic non-availability and ensure the required approvals are obtained, particularly when such determinations are evidenced through justifications for other than full and open competition; and Identify sources of information available for determining product origin and the steps they should take to verify information that is inconsistent. (Recommendation 2) The Secretary of Veterans Affairs should clarify existing guidance, or provide training or other instruction, to help contracting officials: Address the applicability of the Buy American Act requirements and provide instruction on how to implement the requirements, including in any training developed to implement the Veterans First policy; Identify the factors that should be considered in order to determine the applicability of the Trade Agreements Act and waiver of the Buy American Act; and Identify sources of information available for determining products’ origins and the steps they should take to verify information that is inconsistent. (Recommendation 3) The Secretary of Health and Human Services should provide guidance, training, or other instruction to help contracting officials: Identify the factors that should be considered in order to determine the applicability of the Trade Agreements Act and waiver of the Buy American Act; Document determinations of the use of Buy American exceptions for domestic non-availability and ensure the required approvals are obtained; and Identify sources of information available for determining products’ origins and the steps they should take to verify information that is inconsistent. (Recommendation 4) We provided a draft of this report to DOD, HHS, DHS, VA, and the Office of Management and Budget for review and comment. DOD reviewed the report, but did not offer comments. HHS, DHS, and VA provided written responses, which are reproduced in Appendices IV, V, and VI of this report, respectively. A senior official within the Office of Federal Procurement Policy (OFPP) at the Office of Management and Budget provided a response via email. In addition, HHS, DHS, and OFPP provided technical comments, which we incorporated into the report where appropriate. In their responses, HHS, DHS, VA agreed, and OFPP generally agreed, with our findings and recommendations. The written response from HHS and DHS included information on the steps each agency plans to take to address the recommendations. Specifically, HHS stated that the agency will evaluate ways to provide additional training and guidance to contracting officials. DHS stated that it will provide guidance on the applicability of the Buy American Act and the Trade Agreements Act in certain situations and the documentation and approvals required when awarding non-competed contracts that require an exception. Additionally, DHS plans to update training regarding actions contracting officers should take when there are discrepancies in product origin information. VA concurred with our three-part recommendation and described some of the actions the agency plans to take in response. However, VA’s comments do not fully address our recommendation. Specifically, we recommended that VA clarify guidance or provide training to identify factors that could help contracting officers determine the applicability of Trade Agreements Act waivers of the Buy American Act. The comments from VA, however, only restate the existing Buy American Act exceptions and make no mention of Trade Agreements Act waivers. Further, we recommended that VA identify sources of information regarding product origin and the steps to be taken to verify inconsistent product origin information. VA’s response only noted that contracting officers are responsible for conducting market research and ensuring that all product origin requirements are met. VA did not outline any additional steps the agency would take to help contracting officers navigate the complexities inherent in this area. Going forward, VA will need to develop a more robust and responsive approach in order to fully implement our recommendation. We are sending copies of this report to the appropriate congressional committees; the Secretaries of the Departments of Defense, Health and Human Services, Homeland Security, and Veterans Affairs; the Director of the Office of Management and Budget; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or woodsw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. The objectives of this report are to assess the extent to which (1) the federal government procures foreign products through Buy American Act exceptions and waivers; and (2) selected agencies provide training and guidance to implement the Buy American Act requirements. To address both of these objectives, we reviewed relevant laws and policies, such as sections of the Federal Acquisition Regulation (FAR); the Buy American Act as amended; the Trade Agreements Act of 1979 as amended; federal acquisition regulation supplements from audited agencies such as the Department of Defense Federal Acquisition Regulation Supplement (DFARS); the Executive Order “Buy American, Hire American” of 2017; the World Trade Organization’s Agreement on Government Procurement; and memorandums, policy, guidance, and instructions related to the Buy American Act. To assess the federal government procurement of foreign products, including those procured through citing exceptions and waivers of the Buy American Act, we analyzed data from the Federal Procurement Data System-Next Generation (FPDS-NG) for fiscal year 2017, which was the most recent and complete data available at the time of our review. We analyzed procurement data in FPDS-NG across the federal government in fields relevant to the Buy American Act’s domestic preference requirements, including the product service code, country of product origin, and place of manufacture, in addition to fields such as the contract value and dollars obligated. We reviewed the place of manufacture field in particular as it contains information on how the Buy American Act applies to the contract, including whether the preponderance of the obligations is for manufactured end products and, if so, whether they are manufactured in or outside of the United States. When manufactured outside of the United States, this field also captures the reason the purchase was permissible, which we analyzed to assess the dollar obligations associated with the various Buy American exceptions or trade agreement waiver reported, as well as when products were used outside of the United States. We also analyzed data from FPDS-NG to identify the countries where foreign end products were reported to be manufactured and the associated dollars obligated in fiscal year 2017. In addition, we met with officials from the Office of Management and Budget, Office of Federal Procurement Policy to better understand ongoing reviews of the data in FPDS-NG that pertains to the Buy American Act. In our analysis of FPDS-NG data, we took steps to minimize issues that might affect data reliability. Specifically, we analyzed FPDS-NG data to identify potential errors and inconsistencies, such as non-eligible agencies reporting the use of exceptions for DOD qualifying countries, or reporting trade agreement waivers for contracts valued less than minimum thresholds for trade agreements. We made minor adjustments to minimize potential data reporting issues, including aggregating the exceptions reported, and where appropriate, limiting our analysis to one year of data, fiscal year 2017. Based on these steps, we determined that FPDS-NG data were sufficiently reliable to allow us to calculate the approximate extent of obligations for foreign end products and the use of the Buy American Act exceptions and the Trade Agreements Act waiver. However, we are unable to precisely determine the amount spent on foreign end products through the use of exceptions and waivers because of the reporting errors and data system limitations we identified in this report. Using FPDS-ND data, we identified four agencies—the Departments of Defense (DOD), Health and Human Services (HHS), Homeland Security (DHS), and Veterans Affairs (VA)—that had the highest fiscal year 2017 obligations in the product codes for manufactured products, which are potentially subject to the Buy American Act restrictions. In addition, to identify trends and determine if there were variations in reported obligations for foreign end products in the past, we reviewed FPDS-NG data on the Buy American exceptions and trade agreement waivers in fiscal years 2013 through 2017. To assess the extent to which selected agencies are providing training and guidance to implement the requirements of the Buy American Act, we reviewed training course materials and regulations, policies, and other guidance available at the four agencies in our review—DOD, HHS, DHS, and VA—to determine the extent to which they address the Buy American Act requirements. In addition, we reviewed training materials available to government employees through sources such as the Federal Acquisition Institute. We interviewed policy officials from the four agencies to understand how training and guidance had been implemented. We further reviewed relevant inspector general reports from the DOD Inspector General issued between 2015 and 2018, which made several recommendations to improve compliance with the Buy American Act, among other requirements. Within the four agencies, we selected contracting offices that reported obligating fiscal year 2017 dollars for awards with foreign end products and awards with US-manufactured end products. We specifically focused on offices that reported a sufficient amount of foreign end product obligations and a sufficient number of contract awards to allow us to select multiple contracts. We also considered offices with a variety of Buy American exceptions and waiver types reported, in order to select a mix of contracts. The contracting offices selected were as follows: DOD: Defense Logistics Agency, Land and Maritime HHS: National Institutes of Health and the HHS Office of the Assistant Secretary for Preparedness and Response DHS: United States Coast Guard VA: Veterans Health Administration From these offices, we selected a non-generalizable sample of 38 contracts and delivery orders awarded in fiscal year 2017. At each agency, we selected awards to include a mix of end items produced by domestic and foreign manufacturers and, when products were reported as foreign manufactured, a mix of the various exceptions and waivers cited. We also include awards across a range of value for dollars obligated above the micro purchase threshold—ranging from approximately $5,000 to more than $100 million—to ensure we reviewed awards both above and below the various thresholds at which the Trade Agreements Act waiver might apply. Additionally, our sample included awards for similar types of end products across agencies, including aircraft parts at DOD and DHS and medical supplies at HHS and VA, to compare practices in different agencies. We originally selected 40 awards for review—10 from each agency—but removed two awards from our sample. One was an HHS award that we determined was awarded using Other Transaction Authority and was not subject to the Buy American Act. The second excluded contract was from DHS, which was modified after award to reflect that it was an information technology service rather than a product. As a service, it would not be subject to the Buy American Act. We reviewed the contract files for each of the 38 awards in our sample, including documentation such as the contract and task order award, solicitations, vendors’ offers or response to proposals, determination and finding memos, and FPDS-NG output documents. In addition, we reviewed the certifications each vendor provided in the System for Award Management (SAM) at the time of contract award. We interviewed contracting officials responsible for each of the 38 contracts and task orders to understand how they addressed the Buy American Act requirements, including how they determined exception or waiver applicability and product origin. We also reviewed any agency-specific or local training and guidance, tools, or job aids available to assist contracting officers in implementing the Act’s requirements We conducted this performance audit from October 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on audit objectives. The United States maintains trade relationships with other countries whose specific negotiated terms results in different levels and types of applicability for waivers and exceptions to the Buy American Act. Figure 4 depicts the range of relationships that the United States maintains with other nations that allow for less restrictive purchasing of foreign end products by the federal government. The federal government purchases foreign end products from various countries. Figure 5 highlights the different amounts of contract obligations for foreign end products from these countries for fiscal year 2017. The highest category, over $500 million, includes 4 countries that account for almost 40 percent of all federal procurement of foreign end products. Countries where the federal government obligated less than $5 million for the procurement of foreign end products are not included. In addition to the contact named above, Candice Wright, Assistant Director; and Jennifer Dougherty, Analyst-in-Charge, managed this review. Skip McClinton; Erin Stockdale; Adam Cowles; Stephanie Gustafson; Julia Kennon; Anne Louise Taylor; and Robin Wilson made key contributions to this report.", "summary": "The Buy American Act of 1933, as amended, is the main U.S. law promoting domestic purchasing. The Act permits agencies to buy foreign end products only under certain exceptions, such as when domestic items are not available at a reasonable cost. Further, U.S. trade agreements waive the Buy American restrictions for certain products. GAO was asked to review implementation of the Buy American Act. This report assesses the extent to which (1) the federal government procures foreign products through Buy American Act exceptions and waivers; and (2) selected agencies provide training and guidance to implement the Act. GAO reviewed laws, regulations, and policies related to the Buy American Act and analyzed data for fiscal year 2017 from FPDS-NG. GAO also analyzed a non-generalizable sample of 38 contracts from DOD, HHS, DHS, and VA—the agencies with the most obligations for products in fiscal year 2017. The 38 awards selected include a mix of foreign and domestic products, as well as dollars obligated. Finally, GAO interviewed cognizant contracting and policy officials from the selected agencies. According to data reported in the Federal Procurement Data System-Next Generation (FPDS-NG) in fiscal year 2017, foreign end products accounted for less than 5 percent—about $7.8 billion—of federal obligations for products potentially subject to the Buy American Act. Federal agencies procured foreign products using exceptions to Buy American Act requirements, as well as through waivers or when the Buy American Act did not apply, as shown in the figure. The amount of foreign end products purchased could be greater than reported in FPDS-NG, however, due to reporting errors and system limitations. GAO found that 6 of the 38 contracts reviewed from the Departments of Defense (DOD), Health and Human Services (HHS), Homeland Security (DHS), and Veterans Affairs (VA) inaccurately recorded waiver or exception information. FPDS-NG system limitations compound these errors because it does not fully capture Buy American Act data. Among other things, the database does not always enable agencies to report the use of exceptions or waivers on contracts for both foreign and domestic products, reducing data accuracy. The Office of Management and Budget (OMB) is considering strategies to improve Buy American Act data. The four agencies GAO reviewed varied in their approaches to Buy American Act training and guidance. DOD reports that it will have trained more than 18,000 personnel by the end of 2018. DHS reports training almost 1,400 people—approximately 94 percent of its contracting staff—as of April 2018. Some VA courses mention the Act, but none is focused specifically on implementing its requirements. HHS does not have agency-level training or guidance on the Act. GAO found that contracting officers for the contracts it reviewed face challenges implementing Buy American Act requirements. Having specific and targeted Buy American Act guidance and training can better ensure that agencies meet the Act's requirements. GAO is recommending that OMB take steps to improve Buy American Act data and that HHS, DHS, and VA improve agency guidance and training on implementing the Act. All of the agencies either concurred or generally concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Since 2001, DOD’s total workforce has changed in size and composition. DOD’s military, civilian, and contractor workforces peaked around 2011 and have since decreased in size, as shown in figure 1. Several factors have contributed to changes in the size of the workforces including varying levels of U.S. involvement in the conflicts in Iraq and Afghanistan, military to civilian and contractor conversions, contractor insourcing, and the growth in certain workforces such as acquisition and cyber. DOD’s management of its workforce is governed by several workforce management statutes, including sections 129, 129a, and 2463 of Title 10 of the United States Code. Section 129 directs that DOD civilian personnel be managed each fiscal year on the basis of, and consistent with, total-force management policies and procedures established under section 129a, the workload required to carry out the functions and activities of the department, and the funds made available to the department each fiscal year. Section 129a directs the Secretary of Defense to establish policies and procedures for determining the most appropriate and cost-efficient mix of military, civilian, and contracted services to perform the mission of the department. Finally, Section 2463 directs the Under Secretary of Defense for Personnel and Readiness to devise and implement guidelines and procedures to ensure that consideration is given to using, on a regular basis, DOD civilian employees to perform new functions and functions performed by contractors that could be performed by DOD civilian employees. DOD Instruction 1100.22, Policy and Procedures for Determining Workforce Mix (April 12, 2010) (Change 1, Dec. 1, 2017) establishes policy, assigns responsibilities, and prescribes procedures for determining the appropriate workforce mix of the military, civilian, and contracted services. The instruction provides criteria for workforce-mix decisions and directs DOD components to conduct a cost comparison to determine the low-cost provider for all new or expanding mission requirements and for functions that have been contracted but could be performed by DOD civilian employees. In addition, over the past 10 years DOD has taken steps to better understand the costs associated with its workforces. For example, we found in September 2013 that DOD had improved its methodology for estimating and comparing the full cost of work performed by military and civilian personnel and contractor support, but the methodology continued to have certain limitations, such as the lack of guidance for certain cost elements related to overhead. We made five recommendations, including for DOD to assess the advantages and disadvantages of allowing the continued use of different cost-estimation tools across the department or directing department-wide application of one tool, and revise its guidance in accordance with the findings of its assessment. DOD implemented this recommendation but has not yet implemented the other four recommendations although it concurred or generally concurred with them. DOD’s Cost-Comparison Report addressed three elements and partially addressed one element concerning the accounting for the fully-burdened, or full, cost of federal civilian and service contractor personnel performing functions at the selected installations, as shown in table 1. DOD concluded that for the 21,000 federal civilians and service contractors compared, neither federal civilians nor service contractors were predominately more or less expensive, with the costs being dependent upon the function being performed, location, and level of expertise. DOD noted that the results were not generalizable across the department. Each of the elements and our assessment are discussed below. We believe that DOD addressed the reporting element to assess performance of functions performed by civilian and contractor personnel by developing a methodology to assess performance of functions performed by federal civilians and service contractors at organizations within nine geographic regions including two locations outside the continental United States. Organizations included in DOD’s methodology include the following: Fort Belvoir Community Hospital Defense Threat Reduction Agency US Army Intelligence and Security Command Aviation and Missile Research, Development, and Engineering Center Naval Medical Center San Diego Space and Naval Warfare Systems Command Ogden Air Logistics Complex 75th Air Base Wing Naval Facilities Engineering Command Tripler Army Medical Center DOD’s methodology included the following: Selecting installations and organizations: DOD used data from the Defense Civilian Personnel Data System to identify military installations with large reported numbers of federal civilians. According to DOD officials, they eliminated from consideration those installations that had no reported contractors. From this subset of installations, DOD selected organizations to represent all three military departments and diverse geographical locations, to include two locations outside the continental United States. Assessing the functions performed by civilians and contractors to identify federal civilians and service contractors performing similar functions: DOD assessed the performance of functions at these selected locations to identify federal civilians and service contractors performing similar functions as there is no direct mapping or perfect match between existing taxonomies used to quantify federal civilian positions and contracted services. Further, DOD reported that the day-to-day functions performed by federal civilian employees do not always directly correlate to the designated occupational series or the job title for their position. For example, an individual with an occupational series assigned as an accountant may actually perform work more consistent with that of a financial analyst. According to DOD’s Cost-Comparison Report, DOD did not rely on occupational series names or job titles alone to determine the actual work being performed by federal civilians. Specifically, DOD conducted site visits with each organization and relied on local managers’ direct knowledge of the actual tasks that their federal civilians and service contractor personnel performed. According to DOD’s Cost-Comparison Report, DOD determined that personnel need to perform at least 80 percent common tasks to be able to make a comparison. For the organizations selected, DOD compared the costs of all federal civilians and service contractors identified as performing similar functions. The challenges DOD identified in DOD’s Cost-Comparison Report on determining the functions performed by contractor personnel are similar to those we encountered in our prior work on DOD’s efforts to compile and review of an inventory of contracted services. Section 2330a of Title 10 of the U.S. Code directs the Secretary of Defense to annually prepare an inventory of activities performed during the preceding fiscal year pursuant to staff augmentation contracts. Section 2330a also directs the secretary of each military department and head of each defense agency responsible for activities in the inventory to, within 90 days after the Secretary of Defense submits the inventory, review the contracts and activities in the inventory for which that secretary or agency head is responsible, in part to identify activities that should be considered for conversion. Our prior work has identified, among other issues, that the absence of a complete and accurate inventory of contracted services hinders DOD’s management of these services. According to DOD officials, the Office of the Under Secretary of Defense (Personnel and Readiness) has also recognized the challenges associated with the various taxonomies and lexicons associated with articulating the size and composition of federal civilian, military, and contracted services workforces, and has efforts underway with the goal of better aligning those to enable more holistic total force management of all sources of labor. According to DOD officials, by improving available workforce data, DOD can support better-informed leadership decisions, improve accuracy of analyses, and provide consistent explanations of the department’s workforce resources. DOD officials told us that this effort has an estimated completion of December 2018. We believe that DOD partially addressed the reporting element to account for the full cost of civilian and contractor personnel by providing an accounting of the labor costs of selected federal civilian and service contractor full-time equivalents for personnel performing similar functions at government-owned facilities during calendar year 2015, but excluding certain non-labor costs from its cost calculations. According to DOD officials, 2015 was the last year for which complete data were available. DOD developed a methodology for identifying labor costs associated with federal civilian and service contractor full-time equivalents during calendar year 2015 at government-owned facilities for its cost comparisons. Based on reviews of applicable guidance and consultations with the Office of the Under Secretary of Defense – Comptroller, DOD included numerous federal civilian costs collected from several sources in DOD’s Cost Comparison Report, as shown in table 2. In addition, to assure data quality, DOD officials told us that they took steps to identify data errors in the data collected including identifying missing data fields and data entries that might indicate data errors. For example, DOD officials told us that they verified that they had pay records for every pay period in calendar year 2015 by identifying potential errors and outliers and sharing these with the Defense Finance and Accounting Service and the selected DOD organizations for review. Officials also stated that DOD sent its complete calculated data sets to each organization for review against their own pay records and that all errors were corrected or outliers were explained. Additionally, according to our analysis, DOD excluded overtime from its costs related to federal civilians in accordance with Office of Management and Budget Circular A-11. However, DOD included overtime pay in its report separately for context and noted that overtime pay is a significant part of civilian compensation for some organizations. Officials noted that those funded via a working capital fund arrangements, such as depots, use overtime to handle surges in demand throughout the year. DOD noted in its report that selected service contracts at government facilities and developed three methodologies to identify labor costs associated with service contractor full-time equivalents during calendar year 2015, as shown in table 3. DOD stated in its report that identifying service contractor full-time equivalents is a significant challenge because the level of detail available in each contract varied such that DOD could not employ a single methodology, and unlike federal civilian pay data, there is no centralized database on service-contractor pay. DOD reported that contracts are rarely written to address the cost-per-contractor as a full-time equivalent, and some contracts do not differentiate between labor and non-labor costs. DOD noted in its report that the negotiated price of the contract includes direct costs, including labor and non-labor costs, and indirect costs such as overhead. Further, the contract costs include service contractor profit. Based on our review of DOD’s Cost-Comparison Report, DOD used non- excludable contract costs as a basis in two of its methodologies. These costs to DOD are associated with labor, and include pay and benefits provided to service contractor personnel, contractor profit, and overhead the contractor included in the cost of the contract. When the number of service contractor full-time equivalents and full costs for a contract was known, DOD used the first method, dividing contract costs by the number of service contractor full-time equivalents to arrive at the cost per service contractor full-time equivalent. When the number of billable hours was known, DOD used the second method, multiplying the ratio of contract costs divided by billable hours by a standard number of annual billable hours. For contracts in which the labor rate was known but costs could not be disaggregated, DOD multiplied the labor rate by a standard 1,880 annual billable hours unless a contract specified the labor rate as a number of annual billable hours. For example, Defense Logistics Agency contractor-labor rates for wage grade equivalent contractor full-time equivalents are based on 2,080 annual labor hours. We assessed DOD’s report as partially addressing the reporting element to account for the full cost of federal civilian and contractor personnel because DOD excluded certain non-labor costs from its costs calculations—(1) direct non-labor costs for government owned facilities and government provided supplies, (2) indirect costs for general and administrative and overhead for civilians, and (3) costs to manage contracts—from its costs calculations. Senate Report 114-49 stated that DOD is to include an accounting of the full cost of DOD federal civilian and service contractors performing similar functions, including facility overhead. DOD stated in its report that the methodology utilized to compare the costs of federal civilian and service contractor full-time equivalents was consistent with DOD Instruction (DODI) 7041.04, Estimating and Comparing the Full Costs of Civilian and Active Duty Military Manpower and Contract Support (July 3, 2013), hereafter referred to DODI 7041.04. However, DODI 7041.04 states that the full cost of personnel should include direct and indirect non-labor costs, such as those referenced previously. DOD officials stated that they considered including non-labor costs in their calculations but did not because they believe these costs would add approximately the same to both federal civilian and service contractor costs. DODI 7041.04 instructs that if a function is performed on government property, the costs of goods, services, and benefits that are common costs may be excluded provided the number of government and contactor personnel is equivalent. DODI 7041.04 further instructs that when the number of government and contractor personnel differs, adjustments must be made to the cost estimates to account for the difference in number of government and contractor personnel. While there were some instances where it was the case that DOD’s cost estimates involved an equal number of civilian and contractor personnel performing functions on government property, there were many instances in where the personnel numbers differed and common costs should not have been excluded. For example, in DOD’s comparisons of federal civilians and service contractors at Fort Belvoir Community Hospital, DOD conducted comparisons of 19 functions where 2 functions had equal numbers of federal civilian and service contractors and 17 functions had differing numbers of federal civilian and service contractors. In one comparison, the number of contractors was over three times the number of civilians. DOD officials also stated that they believe their methodology is in accordance with DODI 7041.04 because DODI 7041.04 states that the cost elements in the instruction can be modified or augmented in each specific case as necessary, but DOD components should be prepared to support such decisions with sufficient justification. We acknowledge that DODI 7041.04 states that the cost elements can be modified, but by excluding non-labor costs in its cost comparisons, DOD did not account for the full cost of federal civilians and service contractors as requested in the mandate. We believe that DOD addressed the reporting element to compare costs by comparing its calculated costs of selected federal civilians and service contractors performing similar functions at selected installations. DOD reported that its results represent selected personnel performing functions within selected organizations and are not generalizable across the department. DOD concluded that for the federal civilian and contractor full-time equivalents included in the study, the costs varied by organization, location, and function being performed. DOD presented comparisons of federal civilian and service contractor full-time equivalents costs and expressed these results as a cost ratio. However, it is not clear how the results would be different if all costs that encompass full costs of personnel would have been included in DOD’s comparisons. See tables 4 and 5 below for examples of greater costs for the performance of functions by federal civilians or service contractors at Fort Belvoir Community Hospital in Fort Belvoir, Virginia. We believe that DOD addressed the reporting element by assessing the flexible employment authorities for the employment and retention of federal civilian employees at the same 17 organizations used for the cost comparison. Specifically, DOD sent questionnaires to DOD hiring officials and human resource professionals to collect information on flexible employment authorities. DOD included a broad spectrum of organizational missions in its query of management and human resource officials regarding the use and availability of flexible hiring authorities. Noting that this assessment is more subjective than the others in DOD’s Cost-Comparison Report, DOD queried senior leaders, middle managers, front-line supervisors and human resource professionals regarding which authorities are being used and the effectiveness of each. According to DOD’s report, in this way, DOD was able to gauge the extent to which each type of authority was used as well as the satisfaction with and effectiveness of each. DOD’s Cost-Comparison Report made several conclusions regarding flexible hiring authorities and made one recommendation. The findings included that there was a variance in the authorities used between organizations, management unfamiliarity with all available authorities, and a belief among managers that expanded use of some authorities is needed to produce more quality hires. DOD’s Cost- Comparison Report recommended DOD and OPM should explore opportunities to refine, consolidate, or reduce unused, inefficient, or cumbersome hiring authorities. We provided a draft of this report to DOD for review and comment. In written comments, DOD non-concurred with our assessment that DOD partially addressed the mandated reporting element to provide an accounting of the fully-burdened cost of federal civilian and service contractor personnel performing functions at the selected installations to include training, benefits, reimbursable costs, and facility overhead. DOD’s comments are reproduced in their entirely in appendix I. DOD also provided technical comments, which we incorporated as appropriate. DOD stated that we presented the three reporting elements identified in the congressional mandate absent the full context and congressional intent. Specifically, DOD stated that in the congressional mandate, the list of elements to be included in the report is not a stand-alone list and DOD stated that we present the elements as a stand-alone list. DOD further stated that the list of elements in the mandate is preceded by a paragraph that we did not reproduce in our report, but which provides context and congressional intent for the reporting elements. We do not believe that the language omitted from our report changes the meaning of the reporting elements to be included in DOD’s cost comparison report because the paragraph omitted clearly states that the purpose of the report is to provide the results of a study that includes a comparison of the fully-burdened cost of the performance of functions by DOD civilian personnel with the fully-burdened cost of the performance by DOD contractors. The paragraph preceding the reporting elements and the elements reads as follows: The committee directs the Secretary of Defense to submit to the Committees on Armed Services of the Senate and the House of Representatives, and to the Comptroller General of the United States, a report setting forth the results of a study, conducted by the Secretary for the purposes of the report, of a comparison of the fully-burdened cost of performance of functions by Department of Defense (DOD) civilian personnel with the fully-burdened cost of the performance of functions by DOD contractors by no later the February 1, 2016. The study shall include: (1) An assessment of performance of such functions at six DOD installations selected by the Secretary for purposes of the study from among DOD installations at which functions are performed by an appropriate mix of civilian personnel and contractors, with four such installations to be located in the continental United States and two such installations to be located outside the continental United States; (2) An accounting of the fully-burdened cost of DOD civilian personnel and contractors performing functions for DOD (including costs associated with training, benefits, reimbursable costs under chapter 43 of title 41, United States Code, and facility overhead) in order to permit a direct comparison between the cost of performance of functions by DOD civilian personnel and the cost of the performance of functions by contractors; (3) A comparison of the cost of performance of the full range of functions, required expertise, and managerial qualities required to adequately perform the function to be compared, including: a. Secretarial, clerical, or administrative duties, including data entry; b. Mid-level managers and other personnel possessing special expertise or professional qualifications; c. Managers and other leadership; and d. Personnel responsible for producing congressionally-directed reports. The committee recommends that, in conducting the study, the Secretary should take into account the policy that inherently governmental functions vital to the national security of the United States may not be performed by contractor personnel. The report required shall include an assessment of the flexible employment authorities available to the Secretary for the employment and retention of civilian employees of the DOD, including an identification of such additional flexible employment authorities as the Secretary considers appropriate to shape the civilian personnel workforce of the DOD. Not later than 120 days after receipt of such report, the Comptroller General shall submit to Congress a report that includes an assessment of the adequacy and sufficiency of the report submitted by the Secretary, including any recommendations for policy or statutory change as the Comptroller deems appropriate. As we reported, DOD noted in its cost comparison report that it identified labor costs used in its comparisons. However, DOD did not include direct and indirect non-labor costs and DODI 7041.04 states that the full cost of personnel should include these non-labor costs as we discussed earlier in the report. Therefore, DOD only partially addressed the reporting provision. In addition, DOD stated that we omit relevant language related to congressional intent for the second reporting element (i.e., an accounting of the fully-burdened cost of DOD civilian personnel and contractors). DOD stated that the text, “. . . in order to permit a direct comparison between the cost of performance of functions by DOD civilian personnel and the cost of the performance of the function by contractors,” conveys the congressional intent that the study is for comparison and our exclusion of the text in our restatement of the element omitted language indicating relevant Congressional intent. We do not believe that the language omitted in our report changed the meaning of the reporting element, which is that DOD was to include an accounting of the fully- burdened costs of federal civilians and service contractors in its cost comparisons. DOD further stated that we did not assess the second reporting element (i.e., an accounting of the fully-burdened cost of DOD civilian personnel and contractors) as it is directly stated but rather that we assessed the element by redefining it and then asserting that DOD partially addressed it. DOD noted that the direct language of the second reporting element is for DOD to include an “accounting” of the fully burdened cost of DOD civilian personnel and contractors. DOD asserted that we misinterpreted the meaning of “accounting” when we determined that DOD partially addressed the mandate because it did not “calculate” certain non-labor costs. We disagree. As we discuss in our report, DOD did account for the labor costs associated with federal civilian and service contractors by gathering labor cost data from several sources, but it did not include non- labor costs in its cost calculations. In order to account for the fully burdened costs of federal civilians and service contractors, as directed to do so by the preamble to the reporting elements, as well as the second reporting element, DOD should have included all labor and non-labor costs in the cost calculations. DOD also stated that our assessment incorrectly implies that to “account” for costs is equivalent to “calculating” costs as evidenced by the following quote from our draft report, \"We acknowledge that DODI 7041.04 states that the cost elements can be modified, but by excluding non-labor costs in its cost comparisons, DOD did not account for the full cost of federal civilians and service contractors as requested in the mandate.\" DOD stated that although DOD did not “calculate” some non-labor costs, they did “account” for them in accordance with DODI 7041.04 and as directed in the congressional mandate. DOD asserted that in multiple places, DODI 7041.04 states that common costs \"are excluded\" and \"may be excluded\" from cost comparisons. DOD provided facility costs as an example of non-labor costs accounted for but not calculated in its cost comparisons. DOD stated that in its report, all of the civilian positions and contractor functions are performed at government-owned facilities. Thus, facility costs are common costs and may be excluded. DOD stated that their report accounted for facility costs by recognizing that such costs exist and are common costs, thus, DOD properly excluded such costs in accordance with DODI 7041.04, and their report satisfied the Congressional mandate. We disagree. As mentioned above, the preamble to the mandated reporting elements and the second reporting element specifically directed that DOD account for the fully-burdened cost of DOD civilian and contractor personnel. Because there are multiple costs associated with civilian and contractor personnel, calculations are necessary in order to account for the full cost of these workforces. DODI 7041.04 instructs that if a function is performed on government property, the costs of goods, services, and benefits that are common costs may be excluded provided the number of government and contactor personnel is equivalent. While there were some instances where it was the case that DOD’s cost estimates involved an equal number of civilian and contractor personnel performing functions on government property, there were many instances where the personnel numbers differed and common costs should not have been excluded. For example, in DOD’s comparisons of federal civilians and service contractors at Fort Belvoir Community Hospital, DOD conducted comparisons of 19 functions where 2 functions had equal numbers of federal civilian and service contractors and 17 functions had differing numbers of federal civilian and service contractors. In one comparison, the number of contractors was over three times the number of civilians. DODI 7041.04 further instructs that when the number of government and contractor personnel differs, adjustments must be made to the cost estimates to account for the difference in number of government and contractor personnel. DOD did not make these adjustments in is calculations and as result non-labor costs should not have been excluded; therefore, DOD did not account for the fully- burdened costs, as directed by Congress. We are sending copies of this report to the appropriate congressional committees. We are also sending copies to the Secretary of Defense, the Director of the Office of Cost assessment and Program Evaluation and other interested parties. This report will also be available at no charge on our Web site at http://www.gao.gov. Should you or your staff have any questions concerning this report, please contact Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Vincent Balloon, Assistant Director; Timothy Carr, Felicia Lopez, Clarice Ransom, Michael Silver, and Norris “Traye” Smith made key contributions to this report. Department of Defense: Actions Needed to Address Five Key Mission Challenges, GAO-17-369 (Washington, D.C.: June 13, 2017) DOD Civilian and Contractor Workforces: Additional Cost Savings Data and Efficiencies Plan Are Needed, GAO-17-128 (Washington, D.C.: October 12, 2016) Federal Hiring: OPM Needs to Improve Management and Oversight of Hiring Authorities, GAO-16-521 (Washington, D.C.: August 2, 2016) DOD Service Acquisition: Improved Use of Available Data Needed to Better Manage and Forecast Service Contract Requirements, GAO-16-119 (Washington, D.C.: February 18, 2016) Civilian and Contractor Workforces: Complete Information Needed to Assess DOD’s Progress for Reductions and Associated Savings, GAO-16-172 (Washington, D.C.: December 23, 2015) DOD Inventory of Contracted Services: Actions Needed to Help Ensure Inventory Data Are Complete and Accurate, GAO-16-46 (Washington, D.C.: November 18, 2015) Sequestration: Comprehensive and Updated Cost Savings Would Better Inform DOD Decision Makers if Future Civilian Furloughs Occur, GAO-14-529 (Washington, D.C.: June 17, 2014) Human Capital: Opportunities Exist to Further Improve DOD’s Methodology for Estimating the Costs of Its Workforces, GAO-13-792 (Washington, D.C.: September 25, 2013) Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce, GAO-13-470 (Washington, D.C.: May 29, 2013) Defense Outsourcing: Better Data Needed to Support Overhead Rates for A-76 Studies, GAO/NSIAD-98-62 (Washington, D.C.: Feb. 27, 1998)", "summary": "In addition to more than 2.2 million active duty and reserve personnel, DOD employs about 760,000 federal civilians and more than 560,000 contractors. In the Senate Report 114-49 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2016 included a provision for DOD to issue a report (1) assessing functions performed by federal civilian and service contractor personnel, (2) accounting for the full costs of federal civilian and service contractor personnel performing these functions, (3) comparing these costs, and (4) assessing available hiring and retention authorities for federal civilians. The Senate report also included a provision for GAO to assess DOD's report, which DOD submitted to Congress in April 2017. This report examines the extent to which DOD's report addressed the prescribed congressional elements. GAO reviewed DOD's report and compared it to the prescribed elements, examined documents relevant to DOD's cost estimating and comparison methodology, and interviewed DOD officials, including those in its Office of Cost Assessment and Program Evaluation responsible for the calculations in DOD's report. In response to Congressional direction, the Department of Defense (DOD) issued a report in April 2017 comparing the costs of federal civilian and service contractor personnel at select installations. The report addressed three out of four provision elements and partially addressed one, as discussed below. DOD concluded that neither federal civilians nor service contractors were predominately more or less expensive, with costs being dependent on position, location, and level of seniority. DOD noted that it used a non-probability based sample of personnel for its report, and the results are not generalizable. An assessment of performance of functions being performed by federal civilian and service contractor personnel at six military installations, with four being in the continental United States and two being outside the continental United States. GAO believes that DOD addressed this requirement because it developed a methodology to assess performance of functions performed by federal civilians and service contractors at 17 organizations within nine geographic regions including two locations outside the continental United States. DOD used data from the Defense Civilian Personnel Data System to identify military installations with large reported numbers of federal civilians. DOD determined that personnel need to perform at least 80 percent common tasks to be able to make a comparison. An accounting of the fully-burdened, or full, cost of federal civilian and service contractor personnel performing functions at the selected installations including training, benefits, reimbursable costs, and facility overhead. GAO believes that DOD partially addressed this requirement because while it calculated the labor costs of selected federal civilian and service contractor full-time equivalents performing similar functions for organizations at government-owned facilities, it excluded certain non-labor costs from its calculations. A comparison of the costs of performance of these functions by federal civilians and service contractor personnel at the selected installations. GAO believes that DOD addressed this requirement because it compared calculated costs for selected federal civilians and service contractors performing similar functions at selected installations and included those comparisons in its report. An assessment of the flexible employment authorities for the employment and retention of federal civilian employees. GAO believes that DOD addressed this requirement because it sent questionnaires to DOD hiring officials and human resource professionals to collect information on flexible employment authorities and conducted interviews with these and human resource professionals at the same 17 organizations used for the cost comparison. Based on an analysis of the information collected, DOD's report included several conclusions regarding flexible hiring authorities and made one recommendation. GAO is not making any recommendations; however, DOD non-concurred with GAO's assessment that DOD partially addressed the element to account for the full cost of personnel. GAO believes the assessment is correct as discussed in the report.", "document_type": "gao"}
{"report": "Viewed broadly, IDT refund fraud is composed of two crimes: (1) the theft or compromise of PII, and (2) the use of stolen (or otherwise compromised) PII to file a fraudulent tax return and collect a fraudulent refund. Figure 1 presents an example of how fraudsters may use stolen PII and other information, real or fictitious (e.g., sources and amounts of income), to complete and file a fraudulent tax return and successfully receive a refund. In this example, a taxpayer may alert IRS of IDT refund fraud. Alternatively, IRS can detect IDT refund fraud through its automated filters that search for specific characteristics as well as through other reviews of taxpayer returns. IRS reported that, through September 2017, the number of taxpayers reporting that they were a victim of IDT refund fraud had decreased by about 40 percent compared to the same period in 2016 (from 348,650 to 208,503). IRS officials attribute this decline to improved fraud filters. We have long highlighted the importance of pre-refund compliance checks as a means to improve compliance while minimizing taxpayer burden. As we testified in 2011, pre-refund compliance checks help IRS to confirm taxpayers’ identity, quickly and efficiently correct some errors with virtual certainty, and identify and audit some returns before refunds are issued. They also have the potential to deter billions of dollars in erroneous refunds, especially for refundable tax credits. These credits have complex eligibility requirements and are often overclaimed. IRS’s ability to match tax returns to information provided by third parties, including from financial institutions, can help enforce compliance with the tax laws. Pre-refund checks benefit taxpayers directly when IRS identifies underclaimed benefits. Pre-refund compliance checks can reduce the tax gap created when taxpayers file returns that, for example, underreport their tax liability. In 2016, IRS estimated that the average annual gross tax gap was $458 billion for tax years 2008 to 2010. IRS estimated that through late payments and enforcement actions, it would collect an additional $52 billion annually for those tax years, resulting in an average net tax gap of $406 billion. Because of the importance of improving voluntary compliance and addressing the tax gap, we continued to include Enforcement of Tax Laws as a high-risk area in our 2017 High-Risk Report. As noted previously, beginning in 2017 the Protecting Americans from Tax Hikes Act of 2015 requires employers to submit W-2s to SSA by January 31 (about 1 to 2 months earlier than in prior years, depending on the method of filing). It also requires IRS to hold refunds for all taxpayers claiming EITC or ACTC until February 15. In October 2017, IRS reported that, among the 13.4 million refunds subjected to this hold, it had completed processing 10.3 million refunds totaling $51.2 billion. Although IRS has authority to hold additional refunds until it receives more W-2 data, IRS, in consultation with Treasury, decided not to exercise this authority in 2017. IRS officials explained that they did not do more than required by the law because it would be a major shift in refund issuance causing a strain on the economy, industry partners, taxpayers, and IRS telephone and other operations. Officials said that they expect to learn from their experience during the 2017 filing season and will continue to consider changes for future filing seasons as they have for 2018. However, all returns—with EITC or ACTC and without EITC or ACTC— were subject to systemic verification as well as other fraud filters. Systemic verification is one element of IRS’s Return Review Program (RRP), its primary system to detect fraud and noncompliance. RRP is a platform that runs individual tax returns through a comprehensive set of rules and models to detect potential taxpayer fraud and other noncompliance, then selects returns for various treatment options. Systemic verification categorized taxpayer returns in one of three outcomes to detect potentially fraudulent or noncompliant returns (see figure 2): 1. Wage information verified: Income and withholding on the return matches W-2 data within the allowed threshold. 2. False or incorrect income: Information on the return is not valid when compared to W-2 data. This mismatch can include income, withholding, employer identification number, or other characteristics. 3. Unable to verify: Unable to verify income or withholding on the return because W-2 data are unavailable or the taxpayer did not report wage income but had other types of income such as Social Security or self- employment. IRS reprocessed (looped) all returns that reported wage income through RRP when new third-party data became available. For EITC or ACTC returns that IRS was required to hold until February 15, IRS had additional time to reprocess these returns before releasing the refund. After systemic verification is completed, IRS either continues processing the refunds for release or holds the refunds for additional review. For returns where IRS either verified or was unable to verify the wage information, the refunds were processed (beginning February 15 for returns with EITC or ACTC) unless selected by the fraud filters for review. However, IRS does not have the authority to correct a taxpayer’s return based on W-2 data, so it must initiate a correspondence audit which, as we have reported, is more costly to IRS, more burdensome on the taxpayer, and more time consuming for both. Therefore, for returns with false or incorrect income, IRS froze the refund and directed it to various units for review depending on the results of systemic verification and fraud filters. For example, if IRS suspected that the return was IDT refund fraud, it directed it to the Taxpayer Protection Program to verify the taxpayer. For returns where IRS suspected potential noncompliance, it directed the return to the Integrity and Verification Operations group. By mid-February 2017, 2 weeks following the new W-2 filing deadline and about when the refund hold expired, IRS had received more than twice as many (over 214 million) W-2s than SSA provided at a similar time in 2016 (see figure 3). Nevertheless, IRS did not have all W-2 data in time to conduct pre-refund checks of wages, withholding, and other information before issuing refunds, especially early in the filing season. Despite not having all W-2 data, IRS was able to identify and prevent some fraud and noncompliance before issuing refunds. IRS received and initially processed through systemic verification a total of about 35.1 million individual tax returns through February 14, representing nearly $200 billion in refunds. As shown in table 1, nearly 13.4 million (38 percent) of those returns claiming about $115 billion in refunds were filed by taxpayers who claimed EITC, ACTC, or both, and were subject to the refund hold. Using systemic verification, as of February 14, 2017, IRS determined that nearly 150,000 of these 13.4 million returns (1 percent) were potentially fraudulent because they included false or incorrect income. The returns represented approximately $800 million in refunds. IRS also verified wage and other information for approximately 4.72 million (35 percent) of those returns filed and processed through February 14, representing $73.5 billion in refunds. However, IRS was unable to verify 7.79 million (58 percent) of these returns before it released refunds because W-2 data were unavailable, as described later in this report. Finally, table 1 also notes that, as of October 2017, IRS reported that, among those returns filed and processed through February 14, 10.3 million had completed processing and $51.2 billion in refunds had been issued. As the February 15 refund hold expiration approached, IRS continued to reprocess (loop) returns through systemic verification as more W-2 data became available. In doing so, IRS staff identified 12,000 more returns, in addition to the 150,000 initially identified, that they suspected to be fraudulent. This brought the total number of potentially fraudulent or noncompliant returns to about 162,000 with nearly $863 million in refunds. IRS manually held these refunds and referred the suspicious returns for further screening to the Integrity and Verification Operations group. IRS later cleared approximately 150,000 (93 percent) of these returns and released about $797 million in refunds. IRS confirmed that approximately 12,000 (7 percent) of the returns that it had not cleared were fraudulent, eventually protecting $65 million, which included $51 million in EITC or ACTC claims. To reduce false positives (when legitimate tax returns are erroneously selected for review), an IRS working group made several changes to how IRS’s fraud filters make selections based on W-2 data and other information. For 2018, IRS plans to automatically select returns that it had held manually in 2017. However, officials noted that while verifying wage information is important, the complexity of determining EITC and ACTC eligibility remains a challenge. We reviewed IRS’s systemic verification results and found that IRS improved its selections of potentially fraudulent returns with W-2 data contributing to its fraud filters. As of February 15, returns selected for review by systemic verification comprised 14,618 (6 percent) of all paper and electronic returns selected as potential identity theft by the fraud filters. By September 15, selections from systemic verification increased to nearly 78,369 (about 10 percent) of all returns selected as potential identity theft. Moreover, we found that if more W-2 data were available earlier, IRS could have excluded more returns from review, thereby reducing or eliminating work and reducing taxpayer burden by not delaying legitimate taxpayers’ returns. For example, systemic verification allowed IRS to exclude about 321,000 electronically-filed tax returns out of more than 700,000 that had been selected for review by the fraud filters. We found that IRS’s ability to verify information on tax returns early in the filing season was limited because of its Information Technology (IT) systems and issues with employers filing W-2s on paper or after the filing deadline. IT systems. IRS receives and maintains validated taxpayer data, including W-2 and 1099-MISC forms, through the Information Return Master File (IRMF) system. IRS received W-2 data from SSA daily but only loads the data onto IRMF weekly due to the legacy design of this system. This contributed to IRS’s inability to verify more than half (7.79 million or 58 percent) of tax returns with EITC or ACTC claiming $38.4 billion in refunds when the February 15 refund hold expired. IRS officials stated that due to the system’s legacy design, adding new or updating existing information return documents requires the agency to reload its entire file, which contains billions of information returns. Officials reported that this process can take up to 3 days or more to complete, depending on the file size of the incoming and existing data, and has prevented IRMF from processing and making the W-2 data available for use, as it is received from SSA. Consequently, while IRS had received a total of about 210.9 million W-2s by February 13, it received an additional 3.9 million W-2s between February 13 and 20 that IRS was unable to use in systemic verification before the February 15 refund hold expired. In October 2017, IRS officials told us several reasons why they were not addressing IT limitations. At that time, they said they had discussed various options to make W-2 data available faster, but they had not assessed whether IRMF processing could occur more than once weekly. Further, these officials said IRS developed a plan to modernize IRMF, which would allow for faster processing, but officials told us that this effort is on hold because of competing priorities and funding shortages. These officials also said they had not considered the potential financial benefits of either modifying existing procedures or continuing to pursue modernizing IRMF to process W-2 data more frequently for use in systemic verification. However, in response to our discussions, in November 2017, IRS officials reported they had started to assess the possibility of processing W-2 data on IRMF daily. Specifically, IRS is planning to assess daily processing for the months of January and February during the 2019 filing season when the number of information returns is lower and the file is less time consuming to load. They noted they would not have time to assess their options and make necessary changes to process W-2s daily for the 2018 filing season. As we reported in October 2017, IRS faces challenges with managing its aging legacy systems, and with establishing a process for prioritizing its modernization efforts. IRS’s planned action is consistent with its strategic plan, which includes objectives to strengthen refund fraud prevention by using third-party data and analytics for timely, informed decision making, and to innovate technology systems to support IRS’s business needs. It is also consistent with Standards for Internal Control in the Federal Government, which calls for management to design and implement internal controls within programs based on the related benefits and costs. By taking its planned action to assess processing W-2 data more frequently, IRS would be in a better position to make informed decisions about the future of IRMF and its modernization efforts. Paper W-2 processing. Of the 253 million W-2s that SSA received by December 1, 2017, about 23 million (9 percent) were paper. SSA receives and processes paper W-2s at the Wilkes-Barre Direct Operations Center (WBDOC) in Wilkes-Barre, Pennsylvania. Beginning in October or November of each year, WBDOC programs and tests its systems for transmitting transcribed paper W-2 data. The majority of W- 2s that WBDOC receives are in optical character recognition (OCR) format, which SSA can scan into its systems instead of manually entering the data. Officials stated that W-2s that are not in OCR format require more time and effort to process. This process of developing, testing, scanning, or entering data manually occurs between October and March before WBDOC begins transmitting the paper W-2 data to SSA’s Baltimore facility. Beginning in March, SSA continually transmits all paper and electronic W-2 data to IRS. By law, employers who file 250 or more W-2s are required to file W-2s electronically, while those who file fewer than 250 W-2s may opt to file on paper or electronically. This requirement has not changed since 1989 when employers filed electronically using magnetic media or other machine-readable forms. Since then, technological advancements allow employers to file for free using SSA’s website or other software packages. Consequently, even though not required, by July 28, 2017, SSA had received approximately 69 million electronically filed W-2s from about 4.4 million employers who filed fewer than 250 W-2s. In August 2014, we reported that lowering the electronic W-2 filing requirement would not only contribute to IRS’s ability to verify employment information on tax returns, but it could reduce administrative costs for SSA. According to SSA estimates, the cost to transcribe and process a total of 24.2 million paper W-2s in 2016 was about $13.3 million, or $0.55 per paper W-2. In addition to the cost savings from lowering the electronic filing requirement, as we reported in August 2014, there would be fewer transcription errors and fewer W-2s subject to the longer paper W-2 processing time. In that report, we suggested that Congress should consider providing the Secretary of Treasury with the regulatory authority to lower the requirement for electronic filing of W-2s from 250 returns annually to between 5 to 10 returns, as appropriate. In August 2017, SSA officials estimated that SSA can save between $9.7 and $11.3 million per year if the W-2 paper filing requirement is lowered to 10 or fewer W-2s. These officials reported that this estimate is based on a projected increase of 17.6 million to 20.6 million in electronically filed W-2s and a decrease of paper W-2s by more than two-thirds. Late W-2 filing. IRS began publicizing the change in the W-2 deadline in June 2016. Nevertheless, about 260,000 employers missed the January 31 filing deadline, accounting for late filing of about 7.9 million W-2s in 2017. IRS officials stated that, of the 27,764 employers who had requested an extension for time to file W-2s, as discussed below, IRS approved approximately 6,500 (23.4 percent), which account for approximately 1.1 million W-2s (13.9 percent) of the 7.9 million late filed W-2s. Because IRS has not yet started to assess penalties, it does not yet know how many of these will be subjected to a penalty. Generally, an employer must pay a penalty for failing to file an information return timely or correctly unless an exception applies, such as being granted an extension. However, IRS has changed how it enforces late filing penalties by not mailing some proposed penalty notices to employers who fail to file W-2s timely. For example, IRS mailed all penalty notices to employers who failed to timely file in 2014. However, it did not mail all penalty notices for 2015 and 2016 to employers who failed to file W-2s timely. IRS officials told us that, due to a lack of resources to manage all the penalty cases, they began applying a risk-based selection process to prioritize compliance efforts. Moreover, officials told us they did not collect data to track how many penalty notices IRS did or did not mail for late-filed W-2s, nor the associated penalties IRS proposed to assess for 2015 and 2016. By law, there are some exceptions to the enforcement of penalties on those who fail to file correct information on or before the required filing date, and who fail to include all of the information required to be shown on the return, or include incorrect information, without correction. However, by not mailing all penalty notices, as it did in the past, IRS is not using a tool to collect, at the least cost, the proper amount of tax revenue, is not enhancing or promoting voluntary compliance, and it is missing an opportunity to educate and help the employer understand his or her legal obligations and rights. Additionally, without timely W-2 data to complete pre-refund checks against filed returns, IRS risks releasing fraudulent and noncompliant refunds or burdening legitimate taxpayers whose returns could be cleared with the W-2 data. IRS officials told us that they are monitoring the effect of not mailing all notices on the number of late filings. However, as of November 2017, IRS did not have plans to track and evaluate the extent to which the late W-2s are associated with fraudulent or noncompliant refunds. In addition, IRS does not mail penalty notices until up to a year and a half after the missed deadline. For example, IRS will not assess and mail penalty notices for the approximately 260,000 employers who filed W-2s or other information returns late in 2017 until summer 2018. In part, this is because IRS waits to compile all late-filed information returns, not just W- 2s, some of which are not due until April. Further, late-filing penalty amounts increase incrementally until August 1 for employers who file or correct information returns after the filing deadline. Finally, for 2017, IRS did not finish transcribing and processing the more than 40 million paper- filed information returns until about late September. However, IRS officials have not assessed the options for mailing penalty notices for late W-2s earlier or communicating with the employers earlier in the process. These officials told us that the penalty notice process is consistent with IRS’s enforcement procedures. They further added that mailing multiple penalty notices could increase burden and cost for both the taxpayer and IRS. However, quickly responding to employers that filed late increases the potential for compliance, thereby increasing the availability of W-2 data for systemic verification to detect and prevent fraud and noncompliance. Finally, because it takes up to a year and a half for IRS to identify the late filing and mail the penalty notice, it is possible that the employer could have filed W-2s late two years in a row without IRS notifying him/her of the first late filing. W-2 extensions. In 2017, IRS received 27,764 employer requests for an extension of time to file W-2s, which is substantially higher compared to prior years. IRS officials attribute the increase in extension requests to the new early filing deadline. IRS also began requiring employers to provide reasonable cause and only file their requests on paper. Prior to 2017, employers could file for an automatic 30-day request for extension, electronically or on paper. Because IRS manually processed all requests to determine if the cause was reasonable, IRS did not complete its processing until November 2017. Consequently, employers would not know until after the extended deadline whether IRS granted them the extension. IRS officials told us that, for 2017, they notified about 10,000 employers who requested but were not granted an extension that they would not be penalized this year. Officials also notified these employers that they would be penalized next year under the same conditions. In November 2017, IRS officials said that they are reviewing the extent to which extension requests made in 2017 affected systemic verification. For 2018, IRS plans to continue requiring employers to file extension requests on paper. IRS officials examined the effectiveness of the February 15 refund hold by analyzing how systemic verification results differ under several hypothetical scenarios. For example, IRS could extend the refund hold date beyond February 15 when more W-2 data are available for systemic verification before issuing refunds. While the law states that IRS cannot release refunds with EITC or ACTC before February 15, IRS has discretion to continue to hold all refunds until it can verify W-2 data, and has the authority to expand the refund hold to all taxpayers, not just those who claimed EITC or ACTC. Further, the law does not preclude IRS from releasing refunds with EITC or ACTC on a rolling basis after February 15, or in conjunction with an extension of the refund hold. In October 2017, the National Taxpayer Advocate (NTA) told us that she supports potential modifications to the refund hold. In addition, in a June 2017 annual report to Congress, the NTA stated that holding the refunds for all taxpayers longer so that IRS can verify W-2 data could help IRS prevent tax refund fraud before refunds are issued. The NTA also recommended that IRS research the benefits and costs of delaying refund payments. During the 2017 filing season, IRS reviewed limited preliminary systemic verification data to assess potential changes to the February 15 refund hold. In October 2017, IRS completed its final analysis, which included more data on taxpayers who filed after the February 15 refund hold and estimated potential amounts of protected refunds. However, both analyses have limitations. We assessed IRS’s preliminary analysis of the 35.7 million returns filed by all taxpayers (those who claimed EITC or ACTC and those who did not) before February 15 and which were subjected to systemic verification. IRS’s analysis included actual results from systemic verification for these tax returns for each week between February 15 and March 15 after reprocessing the returns when new W-2 data became available. Our assessment of IRS’s preliminary analysis showed that by both extending the refund hold date beyond February 15 and expanding the refund hold to all returns: IRS could have verified more than twice as many returns. By March 15, IRS could have verified wage information for more than twice as many returns before issuing refunds—30.5 million compared to 14.3 million verified by February 15. By only holding returns until February 15, IRS would be unable to verify W-2 data for 20.2 million (56 percent) tax returns, representing $66.6 billion in refunds, before releasing the refunds. IRS could have detected about $3 billion—twice as much–in potential fraud and noncompliance. If IRS had held all taxpayers’ refunds until late February or early March, it could have detected about twice as much potential fraud or noncompliance before issuing refunds, as shown in figure 4, because it had more W-2 data available at that time compared to February 15. For example, if IRS held all taxpayers’ refunds until March 1, it could have identified $2.87 billion compared to $1.47 billion as of February 15, about a 95 percent increase. If IRS held all taxpayers’ refunds until March 8, it could have identified even more in potentially fraudulent or noncompliant refunds before issuing them ($3.18 billion compared to $1.47 billion as of February 15, an increase of about 116 percent). However, these potential fraudulent or noncompliant refunds do not represent potential refunds that IRS could protect. This is because IRS limits the number of cases it selects for review due to the large volume of work this represents and limited staff available. Further, some returns that IRS selects for review are false positives—legitimate tax returns erroneously selected for review. Our Fraud Risk Framework provides a comprehensive set of overarching concepts of fraud risk management and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. For example, a leading practice in the Fraud Risk Framework emphasizes risk-based preventive activities for strategically managing fraud risk to help avoid a costly and inefficient “pay and chase” model. Additional leading practices call for federal agencies to continuously monitor and evaluate the effectiveness of preventive activities and to consider the benefits and costs of its control activities. Further, key concepts in the Fraud Risk Framework highlight the importance of measuring outcomes to adapt fraud detection and prevention activities. Additionally, we have reported that program evaluation provides agencies with objective information on program effectiveness and efficiency. Program evaluation is necessary to inform and improve IRS’s fraud risk management activities. However, when we compared IRS’s preliminary analysis to the Fraud Risk Framework and program evaluation standards, we found that it was limited in several areas: IRS has not documented an evaluation plan, goals, or strategy related to the refund hold. To ensure an evaluation’s credibility, agencies should develop evaluation plans with clearly defined program goals and researchable evaluation questions. However, IRS did not have documentation detailing an evaluation plan or program goals that includes the purpose of the analysis and the research questions it is assessing. Moreover, IRS plans to continue assessing the effectiveness of the refund hold on systemic verification. In May 2016, we recommended that IRS develop an overall compliance strategy that includes refundable credits, such as EITC and ACTC. In February 2017, IRS reported that it is taking steps to implement this recommendation. However, it is unclear how IRS plans to incorporate the results of its analysis of systemic verification into its overall compliance and fraud risk management strategy. IRS did not determine how many potentially fraudulent or noncompliant refunds it issued before verifying against W-2 data. A key benefit of obtaining W-2 data early in the filing season is to verify that the information matches before issuing the refund. In its preliminary results, IRS reported the number and amount of refunds it identified as potentially fraudulent or noncompliant before issuance only for taxpayers that claimed EITC or ACTC and whose refunds IRS held until February 15. Of the 22.1 million taxpayers who filed before February 15 and did not claim these credits, IRS identified approximately 196,000 returns filed by taxpayers claiming nearly $580 million in refunds as potentially fraudulent or noncompliant. IRS did not report the number of refunds that were issued before IRS had identified them as potentially fraudulent. IRS has not fully assessed the burden on the taxpayers who were subjected to the refund hold date. We have reported that a key concept in tax administration is reducing unnecessary taxpayer burden, which is the direct time and money that taxpayers spend to comply with tax laws, including costs for paid tax preparation. Three economic experts we interviewed cited key factors that IRS could consider in assessing the burden to taxpayers as a result of the refund hold. For example, experts told us that IRS could examine changes in taxpayer behavior, such as waiting to file a return later, or shifting from using Free File to paid preparation that can offer refund- related financial products such as an advance on their refund. These experts also indicated that IRS could compare the amount of fraud or noncompliance that IRS prevented among taxpayers claiming EITC or ACTC against taxpayers who do not claim these credits. All experts we interviewed agreed that more than 1 year of data might be needed to assess short-term and long-term effects of the refund hold on taxpayer behavior and patterns of fraud and noncompliance. IRS officials told us that they have added a question to IRS’s customer satisfaction survey to determine how taxpayers got their information about the refund hold. They have also indicated they are analyzing taxpayer behaviors related to the timing of filing and taxpayers’ use of refund-related financial products. However, IRS has not provided us with the revised survey or its results, nor provided documentation of what is included in the analyses. IRS officials told us that they have limited resources to conduct research and have not completed the work because they are prioritizing other research efforts. The limitations of IRS’s preliminary analysis prevent IRS from fully understanding the effectiveness of systemic verification and refund hold, and hampers IRS’s broader fraud risk management and compliance efforts. IRS officials stated that they did not document an evaluation plan, include key data, determine how many refunds were issued before detecting potential fraud and noncompliance, nor assess taxpayer burden. Without a documented evaluation plan that includes key data to assess the success of preventing fraud and noncompliance before issuing refunds, IRS risks relying on insufficient information to make decisions on potential changes to the refund hold date and those subjected to it. For example, by not assessing taxpayer burden, IRS does not understand how taxpayers are affected by the current hold date or whether extending the hold or expanding it to all taxpayers would increase taxpayer burden. IRS completed its final analysis of the refund hold in October 2017 and provided us with a draft. Based on our initial review, IRS’s findings correspond with those in the preliminary analysis discussed above in that IRS could detect much more potential fraud and noncompliance if it held refunds longer. However, there were key differences between the preliminary analysis and IRS’s final analysis. First, IRS assessed two potential refund hold dates after February 15—February 28 and March 1, when IRS receives the majority of W-2s. Second, IRS included all returns that would be affected by the two extended refund hold dates rather than only those that filed before February 15. Third, IRS estimated the total amount of fraud and noncompliance that it could protect under these two extended refund hold dates. Finally, IRS based its estimates on returns that had completed final processing rather than returns that had not completed processing. In its final analysis, IRS estimated that it could detect about $7.1 billion in potential fraud and noncompliance if it held refunds with EITC or ACTC until March 1, of which it could protect about $533 million. This is about $468 million more than what IRS protected by holding refunds with EITC or ACTC until February 15. Further, IRS estimated that it could have protected $100 million in fraud and noncompliance had it held all taxpayer refunds until February 15—$35 million more than it protected with the current hold and verification process. IRS further estimated that by holding all refunds until March 1, it could protect about $895 million. Various factors account for the differences between what IRS could detect as potential fraud and noncompliance and what it estimated that it could protect. First, IRS limits the number of cases it selects for review due to the large volume of work required to review all returns flagged by systemic verification and other fraud filters and limited staff available. Second, some returns that IRS selects for review are false positives— legitimate tax returns erroneously selected for review—so not all the returns will be confirmed as fraud or noncompliant. In its final analysis, IRS had not addressed the limitations noted above for the preliminary analysis. However, IRS expects to further explore the possibility of holding refunds beyond February 15. IRS also plans to complete additional analyses, including the effect of W-2 extension requests on systemic verification and taxpayers’ use of refund-related financial products. As IRS continues analyzing the effectiveness of the refund hold date on systemic verification, the limitations we outlined above will continue to prevent IRS from fully understanding the effectiveness of systemic verification and refund hold, and hamper IRS’s broader fraud risk management and compliance efforts. As noted, the Fraud Risk Framework emphasizes the use of fraud prevention activities to help federal agencies avoid the costly and inefficient “pay-and-chase” model. However, IRS has not assessed the benefits and costs of additional uses of early W-2 data to prevent fraud and noncompliance before issuing refunds. For example, IRS has not determined the value of using W-2 data to address employment fraud or underreporting prior to issuing refunds. Employment fraud is a type of identity theft refund fraud that occurs when an identity thief uses a taxpayer’s name and Social Security number to obtain a job and claims a refund. Underreporting occurs when a taxpayer underreports income or claims unwarranted deductions or tax credits. With its Automated Underreporter program, which is utilized after the filing season and after refunds have been issued, IRS electronically matches income information reported to IRS by third parties, such as banks and employers, against the information that taxpayers report on their tax returns. With earlier W-2 information, IRS can detect more possible employment fraud or underreporting before issuing refunds. For example, if IRS has two W-2s reporting wage income for a taxpayer, but that taxpayer did not report both on his or her tax return, the taxpayer may have underreported his or her income or could be a victim of employment fraud. IRS officials stated that they are not using systemic verification to review such instances before issuing a refund because it would require them to follow the deficiency process. IRS typically begins this process when it has completed all of its compliance checks later in the filing season when it has most third-party data available for verification. IRS then sends the taxpayer a notice that informs him or her that IRS has proposed an adjustment to taxes owed because the third-party data IRS received does not match what the taxpayer reported on his or her tax return. The notice also informs the taxpayer of his or her right to challenge any resultant tax increase with the U.S. Tax Court. IRS officials told us they do not want to issue the notice earlier because that could encourage taxpayers to file in Tax Court before IRS has completed its review. IRS officials stated that they did not see the potential benefits of taking intermediate steps before sending a notice of deficiency, such as holding the refunds and corresponding with the taxpayer to resolve the discrepancy. However, while IRS had not explored this or other potential uses of W-2 data, IRS officials acknowledged that it would be worthwhile to consider additional opportunities of earlier W-2 data. Earlier availability of W-2s and other information returns can help IRS identify and prevent fraud and noncompliance before issuing refunds. However, without assessing the benefits and costs, IRS does not know the extent to which it can use earlier W-2 data for other pre-refund compliance checks. During the 2017 filing season, IRS’s ability to detect and prevent fraud and noncompliance improved because it received significantly more W-2 data earlier and utilized it to verify wage, withholding, and other information on millions of tax refunds. Based on these results, systemic verification shows promise for preventing fraudulent refunds and reducing noncompliance. Nevertheless, the agency faced challenges that limited its success in implementing systemic verification. Similar to taking action to assess the potential for processing more W-2s early in the filing season, IRS can take additional steps to increase the availability of more W-2 data. By not collecting data to track late W-2 filings, IRS could not measure the extent to which late W-2 filings are associated with fraud and noncompliance. Further, by not taking earlier action to improve enforcement of penalties for late W-2 filings, IRS is missing an opportunity to encourage compliance with the W-2 filing deadline and verify more wage information before releasing refunds. As a result, IRS risks releasing fraudulent and noncompliant refunds. We have also previously identified action Congress could take to increase the availability of W-2 data to IRS early in the filing season. In August 2014, we suggested that Congress provide the Secretary of the Treasury with the authority to lower the electronic filing requirement from 250 W-2s to 5 to 10 W-2s. This action would also have the benefit of reducing SSA’s W- 2 paper processing costs by millions of dollars each year. In addition, the February 15 refund hold for EITC and ACTC claims afforded IRS an opportunity to verify return information with early W-2 data before issuing refunds. IRS took steps to collect and assess preliminary data on systemic verification and the refund hold during the filing season. In addition, IRS completed its final analysis that considers different scenarios for holding refunds longer and the potential revenue it could protect. However, IRS’s efforts are not guided by an evaluation plan to assess the results of systemic verification in preventing fraud and noncompliance before issuing refunds. Developing and implementing an evaluation plan that fully assesses the benefits and costs of that hold date would help IRS determine the effectiveness of systemic verification, its fraud risks, and the effect of the refund hold on taxpayer burden. IRS would then be in a better position to modify the refund hold under its existing authority and balance detecting and preventing fraud and noncompliance with taxpayer burden. Further, it is not clear how the analysis informs IRS’s broader fraud risk management efforts and other compliance strategies. Finally, with these data, IRS has the potential to improve tax enforcement in other areas such as for underreporting or employment fraud. While IRS has measures in place to address these issues after paying refunds, taking action before issuing refunds can prevent fraud and noncompliance and save IRS time and resources. We are making the following six recommendations to IRS. The Acting Commissioner of Internal Revenue should collect data to track late W-2 filing penalty notices and the extent to which they are associated with fraud and noncompliant returns. (Recommendation 1) The Acting Commissioner of Internal Revenue should assess options for improving enforcement of late W-2 filing penalties, for example, by mailing notices before the next filing deadline. (Recommendation 2) The Acting Commissioner of Internal Revenue should develop an evaluation plan to fully assess the benefits and costs, including taxpayer burden, of modifying the February 15 refund hold, and determine how this effort informs IRS’s overall compliance strategy for refundable tax credits and fraud risk management. (Recommendation 3) Based on the benefits and costs assessment in Recommendation 3, the Acting Commissioner of Internal Revenue should use IRS’s existing authority to modify the refund hold such that it minimizes the risk of releasing fraudulent or noncompliant refunds. (Recommendation 4) The Acting Commissioner of Internal Revenue should assess the benefits and costs of additional uses and applications of W-2 data for pre-refund compliance checks, such as addressing underreporting, employment fraud, and other fraud or noncompliance before issuing refunds. (Recommendation 5) Based on the assessment in Recommendation 5, the Acting Commissioner of Internal Revenue should implement any identified changes to improve pre-refund compliance checks. (Recommendation 6) We provided a draft of this product to Treasury and SSA for review and comment. IRS provided written comments, which are summarized below and reproduced in appendix II. SSA responded in writing with no comments (see appendix III). SSA and Treasury provided technical comments, which we incorporated as appropriate. In its written comments, IRS did not state whether it agreed or disagreed with our recommendations, but outlined planned steps to address five of the six recommendations. If implemented as planned, IRS’s proposed actions for recommendations 1, 4, 5 and 6, could meet the intent of the recommendations. However, for the third recommendation to develop an evaluation plan to fully assess the costs and benefits of modifying the February 15 refund hold, it is not clear whether IRS’s planned actions will fully satisfy the recommendation. IRS stated that it would assess and evaluate options for improvements to its refundable tax credits and fraud risk management strategies. However, IRS did not specify whether this evaluation would fully assess the benefits and costs, including taxpayer burden, of modifying the February 15 refund hold. As we reported, a documented evaluation plan that includes key data to assess the success of preventing fraud and noncompliance before issuing refunds will help IRS make better-informed decisions on potential changes to the refund hold date and those subjected to it. This includes, for example, assessing taxpayer burden to understand how taxpayers are affected by the current hold date and whether extending the hold or expanding it to all taxpayers would increase taxpayer burden. Regarding the second recommendation in our draft report to assess options for improving enforcement of late W-2 filing penalties by mailing notices before the next filing deadline, IRS stated that the timing of the receipt of a W-2 account file from SSA and the overall complexity of the process precludes notices from being issued prior to the start of the next filing season. Specifically, IRS noted that it assesses penalties on approximately 40 different types of information returns—in addition to W- 2s—and that the penalty calculation is complex. For W-2s, IRS explained that it receives a reconciled file from SSA in December that identifies those employers that should not be penalized. Finally, IRS noted that issuing penalty notices on a piecemeal basis would burden the taxpayer and potentially lead to erroneous notices. We recognize that there are challenges to issuing penalty notices, or other communications, before the next filing season. However, there are also benefits. As we reported, earlier communication with the employer, whether it includes a penalty assessment or not, increases the potential for compliance, helps taxpayers avoid filing late in the subsequent year, and increases the availability of W-2 data for systemic verification to detect and prevent fraud and noncompliance. However, we continue to believe that assessing the options for improving enforcement of late W-2 filing penalties, such as through earlier communication, would help IRS identify potential opportunities to encourage compliance with the W-2 filing deadline and verify more wage information before releasing refunds. We intended the recommendation to be inclusive of other options beyond mailing notices earlier. As a result, we clarified the recommendation to make mailing notices before the next filing deadline an example. We are sending copies of this report to the appropriate congressional committees, the Acting Commissioner of Internal Revenue, the Acting Commissioner of Social Security, the Secretary of the Treasury, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or lucasjudyj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. Our objectives in this report were to assess the Internal Revenue Service’s (IRS) performance in detecting fraud and noncompliance using systemic verification, and the Social Security Administration’s (SSA) performance providing timely Form W-2, Wage and Tax Statement (W-2) data to IRS; and the extent to which IRS analyzed the effectiveness of the refund hold on systemic verification as well as opportunities for IRS to apply systemic verification to other efforts to detect fraud and noncompliance. To answer the first objective, we obtained and analyzed IRS documents and data, including documents describing the implementation of IRS’s systemic verification of W-2 data and preliminary systemic verification data on the 2017 filing season, and used this information to determine how IRS used early W-2 data; reviewed the Protecting Americans from Tax Hikes Act of 2015 (the Act) and related tax laws and regulations to understand IRS’s systemic verification matching W-2 data against individual income tax returns affected by the Act (taxpayers claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC)), as well as other returns not affected by the Act (those not claiming EITC or ACTC), and statutory requirements for penalties, electronic filing, and authority to hold refunds; reviewed IRS laws, regulations, and policies on penalty assessments for filing W-2s late, IRS data on late W-2s for 2017, and interviewed IRS officials to understand the process for assessing penalties; interviewed officials from IRS’s Wage and Investment division (which is responsible for managing filing season operations) on the challenges in implementing systemic verification, as well as planned improvements; interviewed officials from IRS’s Information Technology Applications Development unit to understand the technological capabilities of IRS’s Information Return Master File and related systems and identify system limitations and improvements. We compared IRS’s actions to IRS’s Strategic Plan, which includes objectives to strengthen refund fraud prevention by using third-party data and analytics for timely, informed decision making, and to innovate technology systems to support IRS’s business needs. We also compared IRS’s actions to the Standards for Internal Control in the Federal Government, which call for management to design and implement internal controls within programs based on the related benefits and costs; observed and interviewed SSA employees processing and transcribing paper W-2s at the SSA’s Wilkes-Barre Direct Operations Center in Wilkes-Barre, Pennsylvania to understand how this work is performed and the time required for completing it; reviewed our prior reports, including reports on the filing season, tax credits, and identity theft, and evaluated IRS’s actions to implement selected prior recommendations; and interviewed SSA managers and staff who oversee and process paper Form W-2 data and transmit the data to IRS, and obtained and analyzed SSA goals, documents, and data, including data on costs for processing paper W-2s. To answer the second objective, we reviewed IRS documents that included internal working group meeting minutes, planning documents, and management reports; assessed IRS’s data for 2017 and its preliminary and final analyses on the systemic verification results and outcomes under different scenarios for the 2017 filing season; compared IRS’s efforts to detect and prevent fraudulent and noncompliant refund payments with leading practices in our A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework) and program evaluation; interviewed officials from IRS’s Wage and Investment division on the benefits and costs of systemic verification and to determine whether IRS conducted an economic analysis of the effects on taxpayers burden as a result of holding all taxpayer’s refunds until February 15; interviewed three economic experts to identify factors that IRS should consider or study following implementation of the Act. We selected economists based on their expertise in the field of tax policy and refundable tax credits, and to ensure variation in perspectives on tax issues. We asked similar questions of each economist and analyzed their comments to identify commonalities. We used these interviews to identify factors that IRS should consider in evaluating the refund hold date and any potential changes to it. The views of the economic experts are not generalizable; and interviewed officials from the Department of the Treasury’s (Treasury) Bureau of the Fiscal Service and Office of Tax Policy about their actions to prepare for releasing a large volume of refunds on February 15 and to determine what analyses, if any, Treasury had conducted on taxpayer burden related to the holding all taxpayer’s refunds until February 15. To assess the reliability of the data we used for this report, we reviewed IRS and SSA reports on W-2 data and IRS reports on systemic verification and its results. We also reviewed IRS reports on the performance of its fraud filters. We examined systemic verification data to identify obvious errors or outliers and assessed potential data limitations that would affect use of the data for assessing performance. We also interviewed IRS officials about their data quality procedures and the reliability and limitations of these data. We determined that the data presented in this report are sufficiently reliable for the purposes of our reporting objectives. We conducted this performance audit from March 2017 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Joanna Stamatiades, Assistant Director; Erin Saunders Rath, Analyst-in-Charge; Jessica Ard; Mark Canter; Jacqueline Chapin; Jehan Chase; Felisa Garmon; Robert Gebhart; Tom Gilbert; Andrew Howard; Kirsten B. Lauber; Japheth McGee; Paul Middleton; Ed Nannenhorn; Sabine Paul; Bradley Roach; and Robert Robinson made key contributions to this report.", "summary": "IRS continues to confront the ongoing problems of identity theft (IDT) refund fraud. The agency estimates that at least $1.68 billion was paid in IDT refund fraud in 2016. To help address this issue, consistent with GAO's prior reporting, the Protecting Americans from Tax Hikes Act of 2015 advanced the deadline for employers to file W-2s to SSA to January 31 (about 1 to 2 months earlier than in prior years). This change allows IRS more time to match wage information to tax returns through systemic verification, and identify any discrepancies before issuing refunds. GAO was asked to assess how well IRS implemented systemic verification. GAO assessed IRS's performance using systemic verification and the extent to which IRS analyzed the effectiveness of the refund hold on this process. GAO analyzed IRS and SSA data and documents, observed SSA's paper W-2 process, and interviewed IRS and SSA officials. GAO compared IRS actions to laws; IRS policies; and standards for internal control, fraud risk management, and program evaluation. Beginning in 2017, as required by law, the Internal Revenue Service (IRS) held all refunds for taxpayers claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until February 15. IRS also took actions to verify wage and other information reported on tax returns before issuing refunds, referred to as systemic verification, but several factors limited its success. IRS received over twice as many (over 214 million) Forms W-2, Wage and Tax Statement (W-2) by February 15 compared to the same time in 2016, and reported that W-2 data were responsible for improving fraud detection and reducing taxpayer burden. However, IRS was unable to verify over half of the returns it held until February 15 before issuing the refunds. For example, IRS received W-2s daily but its information technology systems processed them weekly. In response to GAO's review, IRS reported it is planning to assess options for processing W-2s daily. Also, some employers submit W-2s late, but IRS did not track the extent to which late W-2s are associated with fraud or noncompliance. Further, IRS has not assessed options for enforcing late W-2 penalties earlier. Additionally, about 9 percent (about 23 million) of W-2s were filed on paper, which IRS does not begin to receive from the Social Security Administration (SSA) until March. By law, employers who file 250 or more W-2s are required to file W-2s electronically, while those who file fewer than 250 W-2s may opt to file on paper or electronically. In August 2014, GAO suggested that Congress provide the Secretary of the Treasury with the authority to lower the electronic filing requirement from 250 W-2s to 5 to 10. This action could also have the benefit of reducing SSA's W-2 paper processing costs by $9.7 to $11.3 million per year. These issues reduce IRS's access to timely W-2 data, limiting its ability to prevent fraud and reduce noncompliance before issuing refunds. IRS's preliminary and final analyses of the February 15 refund hold both showed that IRS could have detected significantly more in potential fraud and noncompliance if it held all refunds until late February, when it had more W-2 data available. There are differences between these analyses. For example, the final analysis included more returns and estimated total revenue IRS could protect by extending the refund hold and expanding it to all taxpayers. In that analysis, IRS estimated that it could have protected $100 million in fraud and noncompliance had it held all taxpayer refunds until February 15—$35 million more than it protected by holding refunds with EITC or ACTC. IRS further estimated that moving the refund hold to March 1 for all taxpayers could protect $895 million compared to $533 million if it only held refunds with EITC or ACTC until that date. However, GAO found limitations to IRS's analyses. For example, while IRS has plans to further explore holding refunds longer, it does not have an evaluation plan to assess the effectiveness of the refund hold on systemic verification. Also, IRS did not fully assess the benefits and costs, including taxpayer burden, of the refund hold, nor how its analysis informs its broader fraud risk management or compliance efforts. As a result, IRS does not have sufficient information to inform a decision on potential changes to the refund hold date and those subjected to it. Finally, IRS has not assessed the benefits and costs of expanding systemic verification to use for pre-refund compliance checks in other areas such as income underreporting and employment fraud. Therefore, IRS may be missing opportunities to maximize use of early W-2 data. GAO recommends IRS collect data to track late W-2 filing penalties and assess options for earlier enforcement; assess the benefits and costs of using existing authority to hold refunds longer, hold all refunds, or both, and expanding systemic verification to other areas; and take actions based on the assessments. IRS listed steps to respond to 5 of 6 recommendations, but said it could not enforce penalties earlier. GAO recognizes the challenges but clarified that assessing other options would provide benefits, as discussed in the report.", "document_type": "gao"}
{"report": "The federal government has recognized 573 Indian tribes as distinct, independent political communities with certain powers of sovereignty and self-government, including some power to manage the use of their territory and resources and control economic activity within their jurisdiction. Some tribal lands include reservations—land set aside by treaty or other agreement with the United States, executive order, or federal statute or administrative action for the residence or use of an Indian tribe. Some tribal lands include parcels with different ownership; for example, parcels may be held in trust by the federal government for the benefit of a tribe or an individual tribal citizen. Trust and restricted lands can affect a tribe’s ability to use their land as collateral to obtain a loan. Tribal lands vary in size, demographics, and location. For example, the smallest in size are less than one square mile, and the largest, the Navajo Nation, is more than 24,000 square miles (the size of West Virginia). Tribal land locations can range from extremely remote, rural locations to urban areas. Indian tribes may form governments and subsidiaries to help manage tribal affairs including schools, housing, health, and economic enterprises. Internet access in the United States is generally privately financed. Broadband providers build infrastructure and sell broadband services to individual consumers. We previously reported that tribal lands can have conditions that increase the cost of broadband deployment, such as remote areas with challenging terrain, which increases construction costs, as well as relatively low population densities and incomes that make it difficult to recoup deployment costs. These conditions may make it less likely that a service provider will build or maintain a network. Some tribal governments provide Internet access to their members, through an information-technology or utility department, and others have created their own telecommunications companies to provide services. FCC has reported that in many instances, tribal governments must build and pay for their own communications infrastructure to ensure Internet access will be “delivered across Indian Country.” The term “broadband” commonly refers to Internet access that is high speed and provides an “always-on” connection, so users do not have to reestablish a connection each time they access the Internet. Telecommunications providers use a range of technologies to provide broadband service, including cable, fiber, satellite, and wireless. Wireless broadband connects users to the Internet using spectrum to transmit data between the customer’s location and the service provider’s facility, and can be transmitted using fixed wireless and mobile technologies, as shown in figure 1. Fixed wireless broadband technologies establish an Internet connection between fixed points, such as from a radio or antenna that may be mounted on a tower, to a stationary wireless device located at a home. This technology generally requires a direct line of sight, and can be delivered two ways: (1) as a point-to-point transmission—between two fixed points—or (2) as a point-to-multipoint transmission—from one point to multiple users. Mobile wireless broadband technologies also establish a connection to the Internet that requires the installation of antennas, but this technology provides connectivity to customers wherever they are covered by service, including while on the move, such as with a cell phone. Spectrum is the resource that makes wireless broadband connections possible. Spectrum frequency bands each have different characteristics that result in different levels of ability to cover distances, penetrate physical objects, and carry large amounts of information. For example, lower frequency bands are able to transmit signals that travel greater distances, thus requiring the use of fewer antennas, and are able to penetrate solid objects. Higher frequency bands are able to transmit more data, but are more easily obstructed. FCC administers spectrum for nonfederal users—such as state, local government, and commercial entities—through a system of frequency allocation and assignment. Allocation involves segmenting the radio spectrum into bands of frequencies designated for use by particular types of radio services or classes of users, such as commercial and nonfederal broadband services. Examples of some of the frequency bands that can be used by commercial and nonfederal entities for broadband services are shown in figure 2. Appendix II presents a full list of the auctioned licensed frequency bands that FCC told us could be used to provide broadband services. The frequency bands that can be used for broadband services are either licensed or unlicensed. For licensed spectrum, FCC can assign licenses through auctions, in which prospective users bid for the exclusive rights to transmit on a specific frequency band within geographic areas, ensuring that interference does not occur. License holders may sell or lease their license, in whole or in part, to another provider, a process that is known as a secondary market transaction, with FCC’s approval. FCC requires license holders to meet specified buildout requirements within a specified amount of time or face penalties, typically termination of all or part of the license. These buildout requirements are designed to ensure that licensees put spectrum to use within a specific period rather than let it sit idle and vary based on the type of license. FCC has also assigned licenses administratively in two frequency bands that can be used for broadband services. Specifically, prior to 1996 FCC assigned geographic licenses for exclusive use in the Educational Broadband Service (2496-2690 megahertz (MHz)), and from 2005 to 2015, FCC assigned non-exclusive nationwide licenses in the 3650-3700 MHz band, where use of the band may be shared by other license holders. FCC also authorizes the use of some spectrum for broadband services without a license on a non-exclusive basis. With unlicensed spectrum, an unlimited number of users can share frequencies using wireless equipment certified by FCC, such as wireless microphones, baby monitors, and garage door openers. In contrast to users of licensed spectrum, unlicensed users have no regulatory protection from interference by other licensed or unlicensed users in the bands. If multiple users are operating simultaneously on the same frequency band, the transmissions may be susceptible to interference, which reduces the quality of service. FCC’s rulemaking process includes multiple steps as outlined by law with opportunities for the public to participate during each step. In general, FCC initiates a rulemaking in response to statutes, petitions for rulemaking, or its own initiative, and releases a Notice of Proposed Rulemaking (NPRM) to propose new rules or to change existing rules. Any interested person may submit comments as part of the public record through electronic filings and meetings with FCC officials. Following internal analysis of the public record, FCC staff may propose actions for consideration for a vote, such as adopting final rules, amending existing rules, or stating that there will be no changes. All of FCC’s sitting commissioners vote on these items. The American Recovery and Reinvestment Act of 2009 directed FCC to develop a plan to ensure every American had access to high-speed Internet. In March 2010, an FCC task force issued the National Broadband Plan that included a centralized vision for achieving affordability and maximizing use of high-speed Internet. The plan made many recommendations to FCC, including that FCC should take into account the unique spectrum needs of tribal communities when implementing spectrum policies and evaluate its policies and rules to address obstacles to spectrum access by tribal communities. With regard to tribal lands, the plan recommended that FCC increase its commitment to government-to-government consultation with tribal leaders and consider increasing tribal representation in telecommunications planning. FCC established the Office of Native Affairs and Policy (ONAP) in July 2010 to promote the deployment and adoption of communication services and technologies to all native communities, by, among other things, ensuring consultation with tribal governments pursuant to FCC policy. Through our analysis of FCC license data as of September 2018, we identified 18 tribal entities that held active spectrum licenses in bands that can be used to provide broadband services. Because tribal entities may hold licenses using entity names that do not include the search terms we identified in our review of the list of tribes in the Federal Register, there may be additional tribal entities that we have not identified. We found that most of the tribal entities obtained the licenses through FCC administrative assignment rather than through an FCC spectrum auction or secondary market transaction. Thirteen of the tribal entities we identified in FCC’s license data held administratively assigned licenses, and these licenses are subject to certain limitations and were only available to applicants for limited time periods. Eleven of these administratively assigned licenses are non- exclusive nationwide licenses in the 3.65 GHz frequency band (3550- 3700 MHz) and were available between 2005 and 2015, when FCC issued a new rule for this band and stopped accepting new applications for these licenses. Two of the tribal entities we identified held administratively assigned Educational Broadband Service licenses in the 2.5 GHz frequency band (2496-2690 MHz). These licenses allow for the transmission of educational materials by accredited educational institutions and government organizations, including tribes, engaged in formal education and require that licensees use the spectrum for educational purposes for a certain amount of time each week. Both of these tribal entities obtained these licenses after the last filing window closed in 1996 through a waiver and special temporary authority permit. Four tribal entities we identified in FCC’s license data held a total of 13 active licenses obtained through secondary market transactions, such as leases and sales of portions of partitioned licenses. Of these 13 secondary market transactions, 2 involved nationwide providers. Two of the tribal entities we identified held active licenses in bands available for broadband deployment that they obtained through an FCC spectrum auction. One of these tribal entities won with a winning bid of over $800,000 in a 2015 auction, and the other won two licenses with winning bids of under $50,000 in a 2002 auction. This second tribal entity also qualified for but did not win a 2003 auction. In addition to these two tribal entities, we identified the following four tribal entities that had applied to participate in auctions with varying results but did not hold active licenses in frequency bands available for broadband deployment as of September 2018: Two tribal entities each won a single spectrum license. The first won its license, which has since expired, in 2000, and the second won its license, which it has since been transferred to a nationwide provider through a secondary market transaction, in 2003. The first tribal entity also applied but did not qualify to participate in a 2001 auction. One tribal entity qualified to participate but did not win in a 2003 auction, and another tribal entity applied but did not qualify to participate in a 2008 auction. In addition, representatives from 2 of the 16 tribal entities we interviewed that were using wireless technologies told us that they use licensed spectrum that is owned by a private provider through a partnership relationship. We have previously reported that some tribes have formed partnership arrangements with other entities to increase broadband access on tribal lands. Most (14 of 16) of the tribal entities we contacted that were using wireless technologies told us that they are accessing various unlicensed bands, such as the 2.4 GHz and 5 GHz bands, to provide service. Representatives from eight of these tribal entities reported using only unlicensed spectrum for their fixed wireless networks. Representatives from 13 tribal entities told us that unlicensed spectrum had the advantage of being free, and representatives from one tribal entity told us that the equipment needed to access these spectrum bands is less expensive than equipment for accessing other spectrum bands. Representatives from some tribal entities reported success in using unlicensed spectrum in certain circumstances. For example, one tribal entity reported using unlicensed spectrum for homes in remote areas where the only potential signal degradation is from trees as well as to set up local hot spots that can serve 5 to 10 users at a time. Another tribal entity reported using primarily unlicensed spectrum to carry signals to end users together with non-exclusive licensed spectrum (3.65 GHz band) for locations where there is congestion in the unlicensed bands. However, representatives from the tribal entities we contacted that were using wireless technologies emphasized the advantages of licensed spectrum and discussed their experiences with the limitations of unlicensed spectrum. As described earlier, exclusive-use spectrum licenses protect license holders from interference from other users, whereas unlicensed spectrum provides no protection against interference. Representatives from 13 of 16 tribal entities identified the fact that unlicensed spectrum is available at no cost as an advantage of this type of spectrum. However, representatives from 15 of the 16 tribal entities identified limitations associated with unlicensed spectrum, such as interference, as described in table 1. Tribal associations, an academic group, a tribal consortium, and FCC have all highlighted the importance of exclusive-use licensed spectrum for tribal entities. Specifically, both a tribal association and an academic group we contacted discussed interference and other challenges of unlicensed spectrum. Representatives from one tribal association pointed out that unlicensed spectrum might not be available in the future if it is allocated for other purposes. Representatives from a tribal consortium we contacted told us that they are already using all of the available unlicensed spectrum for providing Internet access and that they cannot expand service without encountering interference and capacity limitations. Lastly, ONAP reported in 2012 that unlicensed spectrum is not an option across all tribal lands and that tribal access to robust licensed spectrum is a critical need. Representatives from the stakeholders we interviewed told us that there are also non-technological benefits for tribal entities to obtain greater access to licensed spectrum. For example: Enhanced ability to deliver additional Internet service. Representatives from one of the tribal associations, an academic group, and six of the tribal entities said that increased access to licensed spectrum would enable them to deliver their own Internet services and bridge service gaps, thus improving Internet access to their members. For example, representatives from three of these tribal entities said that such access would enable them to deploy in areas where providers that currently hold licenses were not willing to deliver services. In addition, representatives from another tribal entity said that having access to licensed spectrum is one factor that would enable the tribe to establish its own telecommunications company. Ability to sell or lease spectrum for profit. Representatives from one tribal association, an academic group, and two tribal entities told us that holding spectrum licenses would enable tribal governments to sell or lease their licenses. For example, we heard from one of these tribal entities that it was able to sell portions of its license that did not cover tribal lands and to use the profits from the sale to invest in its own network infrastructure. Opportunities for federal funding. Access to licensed spectrum may also provide tribal entities with more opportunity to obtain federal funding, specifically through two Universal Service Fund programs— the Mobility Fund and the Tribal Mobility Fund. These programs provide funding to broadband service providers to expand service in areas where it is not available, including tribal lands. However, service providers must hold, lease, or show they have access to licensed spectrum to participate in these programs, among other requirements. For example, the National Congress of American Indians stated that two tribal entities submitted applications to participate in the Mobility Fund program but were not eligible to participate in part because they did not hold a spectrum license. Moreover, representatives from two of the tribal entities we interviewed told us that they considered applying for one of these programs but realized they were ineligible because they did not have access to licensed spectrum. Furthermore, representatives from one of the tribal associations, an academic group, and seven of the tribal entities told us that having access to licensed spectrum would enable tribes to exercise their rights to sovereignty and self-determination. Representatives from three of the tribal entities we contacted said that they view spectrum as a natural resource that should be managed by the tribe. FCC officials, however, told us that spectrum is not considered a reserved right under treaties with Indian tribes, as it is not explicitly stated. In addition, representatives from four of the tribal entities told us that having access to licensed spectrum would ensure that spectrum is being used in a way that aligns with tribal goals and community needs, further supporting their rights to self-determination. Representatives from the tribal entities we contacted identified several barriers to accessing licensed spectrum through spectrum auctions and secondary market transactions. Regarding spectrum auctions, representatives from tribal entities that provide wireless Internet service most frequently (13 of 16) indicated that spectrum licenses are too expensive for tribal entities. For example, over 60 percent (983 of 1,611) of the winning bids from a 2015 spectrum auction, including bids for spectrum over non-tribal lands, were over $1 million. Representatives from one tribal entity explained that auction licenses are often too expensive for tribal entities because these licenses cover large geographic areas that may include non-tribal urban areas as well as rural tribal areas. Moreover, representatives from eight tribal entities stated that they are unable to obtain financing to participate in auctions because tribal governments cannot use tribal lands as collateral to obtain loans. In addition, representatives from eight tribal entities mentioned that participating in spectrum auctions requires auction-specific expertise that tribal entities may not have. Tribal entities also face barriers obtaining spectrum through secondary market transactions. Most of the spectrum allocated for commercial use has already been assigned through spectrum auctions and other mechanisms to private providers, including licensees that may not be providing service on tribal lands. In a single geographic area, several frequency bands could be used to deploy broadband services, as shown in figure 2, and licenses for these various frequency bands may be held by different providers. There may be tribal areas where providers hold licenses for bands but are not using the spectrum to provide Internet access. In other tribal areas, services may be offered using one or two of the spectrum licenses with the other licenses in the area remaining fallow and inaccessible to tribal entities. All three of the tribal associations we contacted confirmed that there are unused spectrum licenses over tribal lands, and representatives from a nationwide provider indicated that they only deploy services if there is a business case to support doing so. Accordingly, the secondary market is one of few avenues available to tribal entities that would like to access licensed spectrum. However, representatives from tribal entities we contacted identified the following challenges related to participating in the secondary market: Lack of willing sellers. Representatives from eight of the tribal entities, one of the tribal representative groups, and an industry association we contacted indicated that spectrum license holders are often unwilling to participate in secondary market transactions, citing a variety of reasons. For example, representatives from one tribal entity stated that large carriers have no business incentive to negotiate secondary market agreements with tribal entities and that tribal entities do not have the resources to make such transactions sufficiently lucrative for license holders. Representatives from another tribal entity stated that license holders may lack knowledge about the areas covered by their licenses, including tribal areas, and therefore may be unwilling to consider secondary market transactions. Representatives from a tribal representative group told us that license holders may be unwilling to consider secondary market transactions with tribal entities because spectrum is a valuable resource that may become even more valuable over time, and a representative from an industry association indicated that transaction costs such as legal fees outweigh any potential income from such transactions. None of the private providers we contacted reported entering into a secondary market transaction with tribal entities, but one of these providers stated that it had never been approached by a tribal entity interested in a secondary market transaction and was unaware of challenges that are unique to tribal entities. License holders unknown. Representatives from eight of the tribal entities we contacted stated that it is difficult to determine who holds spectrum licenses. For example, two tribal entities had to hire consultants to identify who held licenses for spectrum over the tribes’ lands, and another tribal entity relied on the expertise of its non-tribal partner to identify the license holders. Unaware of secondary market transactions. Representatives from six of the tribal entities we contacted were unaware of the possibility of accessing licensed spectrum through a secondary market transaction prior to our contacting them. Accordingly, secondary market transactions involving tribal entities are rare. As discussed above, our analysis of FCC license data identified four tribal entities that have successfully accessed licensed spectrum in this manner. Regarding one of these tribal entities’ experiences with the secondary market, the tribal representative we contacted stated that an Indian-owned telecommunications consulting company was pivotal in identifying the license holder and facilitating the transaction and that the transaction would not have happened without the consulting company. Representatives from this company told us that they conducted an analysis to identify unused spectrum licenses over the tribe’s land. The company identified three providers holding such licenses, but only one of those providers was willing to participate in a secondary market transaction. Representatives from another of the tribal entities that accessed licensed spectrum through the secondary market told us that they relied on the expertise of their non-tribal partner to facilitate these transactions. We found that FCC has taken the following actions to increase tribal access to and use of spectrum: (1) initiated proposed rulemakings on promoting tribal access to spectrum, (2) adopted rules to increase spectrum available for broadband use, and (3) conducted outreach and training for tribal entities on spectrum-related issues. FCC issued two NPRMs—one in March 2011 and one in May 2018—that included policy options intended to enhance tribal access to spectrum. At the time of our report, FCC had not adopted new rules or taken further action on the 2011 rulemaking, and FCC had not taken further actions since the comments period ended on September 7, 2018, on the May 2018 rulemaking. According to FCC officials, the 2011 NPRM addressed several recommendations made in the National Broadband Plan to promote the greater use of spectrum over tribal lands. Among other things, the 2011 NPRM sought comments on three proposals to create new spectrum access opportunities for tribal entities (see fig. 3). FCC officials told us that they have reviewed public comments to the proposed rulemaking, but have no current plans to take further actions. We reviewed the public comments FCC received that pertained to the three proposals, which included comments from tribal associations, tribal governments, rural and nationwide industry associations, and tribal and private providers. Based on our analysis of the comments that included positions on the proposal for a tribal licensing priority, eight stakeholders—including industry associations, private providers, and a tribal government—were supportive of this proposal. However, we found that stakeholder views differed on implementing good faith negotiations and on the build-or-divest processes. In general, the tribal stakeholders indicated that they were supportive of these proposals, while the industry associations and private providers were not. In addition to reviewing the public comments, we asked representatives from the tribal and industry associations and private providers that we interviewed about their views of these proposals. Representatives from the three tribal associations and two rural industry associations were generally supportive of all three of the proposals, while representatives from one of the private providers that we interviewed told us they did not support any of the three proposals, because, for example, they said that there are more effective ways to increase broadband service over tribal lands. Representatives from another private provider said that they supported the tribal priority process but did not indicate their views on the other two proposals. Representatives from six tribal entities and a representative from a tribal consortium told us that these types of proposals would help them obtain spectrum. In May 2018, FCC issued an NPRM that sought comments on establishing a tribal priority window for tribal nations located in rural areas as part of a process to re-license the Educational Broadband Service spectrum band. As described above, FCC originally allocated this band to qualifying educational institutions and government organizations for the transmission of educational materials. While FCC permitted licensees to lease their excess capacity to commercial providers, FCC reported that significant portions of this band were not being used, primarily in rural areas. In an effort to make additional spectrum available for broadband use, FCC issued this NPRM seeking comments on options to promote the use of this spectrum over tribal lands. One of the options included implementing a local priority filing window so that tribal entities could get access to unassigned spectrum prior to an FCC auction. In a June 2018 order, FCC extended the comment deadline for the NPRM to August 8, 2018, partly in response to a request for a deadline extension. As a result, FCC also extended the deadline to respond to those comments to September 7, 2018. Because FCC was in the process of responding to these comments at the time of our review, we did not analyze these comments. FCC has made additional unlicensed and licensed spectrum available for broadband use and has implemented rules that according to FCC, may make it easier for rural providers to obtain licenses. However, these efforts were not targeted to tribal entities, and according to ONAP’s 2012 report, allocating additional unlicensed spectrum may not be a technically feasible solution for all tribal entities, and such spectrum may not have the necessary capacity to handle an increase in users. In addition, representatives from the tribal associations and entities we contacted told us that there are limitations to the extent that these efforts can address the spectrum needs of tribal entities. In particular, they discussed the effect of FCC’s changes to the rules on the use of TV white space spectrum and the Citizens Broadband Radio Service spectrum: TV white space spectrum: In 2010, FCC made additional unlicensed spectrum available for broadband use by allowing providers to operate in the TV bands at locations where those frequencies were not in use, known as TV white space, but none of the tribal entities we interviewed was using this spectrum. A representative from a tribal consortium said that it used TV white space spectrum, and representatives from three of the tribal entities said that they were considering using it in the future because TV white space spectrum can better pass through some environmental barriers, such as trees, reaching more remote customers. However, representatives from five tribal entities, one tribal consortium, one academic group, and three companies that we interviewed told us about several limitations to the use of TV white space spectrum. For example: limited bandwidth capacity, which causes lower speeds, high latency, and limits the number of households that can be served; equipment needed to access TV whitespace spectrum is expensive and less available; the spectrum may not always be available; and similar to other unlicensed frequency bands, as described above, there is potential for interference and difficulty to pass through extreme terrain. Citizens Broadband Radio Service (CBRS) Spectrum: In 2015, FCC made additional licensed spectrum available for broadband use when it issued a new rule for the 3.65 GHz frequency band (3550-3700 MHz). However the tribal entities who held licenses in this band indicated there are limitations to their ability to use this band and their future use of this spectrum remains unknown. As described earlier, FCC had allocated non-exclusive nationwide licenses in this band. In the 2015 rule, FCC created the CBRS, increased the amount of spectrum allocated for commercial broadband use, and implemented a new licensing scheme. This three-tier priority licensing scheme for spectrum sharing included auctioning exclusive-use geographic licenses and allowing non-exclusive use of the band where a license holder is not operating, an approach that is intended to provide a low- cost entry point for users, but will have no protections from interference. Representatives from four of the five tribal entities that we contacted that held licenses in this band said that there were technical advantages to using it, such as the ability for a signal to pass through dense forests. However, representatives from two tribal entities said that the high cost of the equipment needed to access this spectrum prevented them from either using the frequency band extensively or at all. In addition, representatives from two tribal entities said that they were not sure about their ability to access this band in the future given the changes made in FCC’s 2015 rulemaking. FCC’s 2015 rule also created small-sized and shorter-termed licenses, which FCC stated would decrease the costs of obtaining a license and help rural providers access it. However, FCC issued an NPRM in 2017 that sought comments on suggested changes to CBRS, including increasing the geographic area covered by licenses and lengthening the license term. In October 2018, FCC adopted rules that, among other changes, increased the license area from census tracks to counties and extended the license term from 3 to 10 years, which FCC officials told us were modest changes made to accomplish FCC’s goals of creating incentives for investment, including in urban and rural areas, encouraging efficient spectrum use, and promoting robust network deployments. FCC’s ONAP conducts training, consultation, and outreach to tribal entities on spectrum-related issues. For example, ONAP officials told us that they have conducted 21 training and consultation workshops for tribal entities on broadband and telecom since 2012, where spectrum has been discussed in general in the introduction and has been addressed specifically in separate sessions in some of the workshops. These officials also told us that they communicate with tribal entities prior to when FCC holds auctions or when implementing regulatory actions or policies that will affect tribal governments and spectrum over their lands. While representatives from 9 of the 16 tribal entities using wireless technologies told us that they had received some outreach on spectrum- related issues from FCC, representatives from 2 of these entities said that they had not. In addition, ONAP issued a report in 2012 to provide FCC with a review of its work with tribal governments and organizations, including information on its tribal broadband efforts, priorities, and tribal consultations. Among other things, the report included case-study information on tribal entities’ efforts to access spectrum. Although the report stated that this would be the first of such annual reporting, this is the only report that ONAP has issued on tribal issues. According to ONAP officials, ONAP has not published subsequent reports because it provides FCC with information on its work with tribal governments and organizations, including spectrum-related matters, through more frequent informal briefings and regular updates. FCC has not consistently collected information related to tribal access to spectrum. For example, FCC does not collect data on whether holders of spectrum licenses or auction applicants are tribal entities even though it collects self-reported data on licensee type, such as corporation and government entity. To obtain this information, FCC could include an option for the licensee type, along with the other options, in applications for future licenses and auctions that allows an applicant to identify as a tribal government or tribally owned entity. FCC officials told us that they use information on licensee type to determine eligibility for a license. Because eligibility is not based on whether the applicant is a tribal entity, FCC officials said this information is not needed. However, without this information, FCC does not have a comprehensive understanding of the extent that tribal entities are attempting to obtain or access licensed spectrum or have been successful at obtaining and accessing it. Additionally, FCC does not analyze information on unused licensed spectrum that exists over tribal lands, even though FCC has information—broadband availability data from providers and information on geographic areas covered by spectrum licenses—that could be used for such analysis. As we described earlier, representatives from all three of the tribal associations we contacted reported that there are unused spectrum licenses over tribal lands that could present opportunities through the secondary market for tribal entities to obtain spectrum. When we asked FCC officials why they do not analyze the extent that unused spectrum licenses exists over tribal lands, they told us that the spectrum data noted above is not specific enough to allow for a license by license analysis of unused spectrum. For example, they said that broadband availability data from providers is aggregated across wide spectrum bands to minimize reporting burdens on the wireless industry, and the data are not sufficiently detailed to identify which spectrum blocks and licenses are being used in particular areas. However, FCC could use this data to conduct, at a minimum, high-level analysis that would result in useful information on the extent to which unused spectrum exists over tribal lands. In addition, FCC officials told us that they evaluate the effectiveness of FCC’s secondary markets policies, which FCC views as a mechanism to promote the increased use of unused spectrum licenses, but this approach does not include an analysis of unused spectrum licenses as part of these efforts. As a result, FCC’s evaluations of the secondary market may not accurately reflect how these policies affect tribal access to spectrum. Because the secondary market is one of few ways for tribal entities to access licensed spectrum, an analysis of unused licensed spectrum that exists over tribal lands would enable FCC to better promote a robust secondary market that provides additional opportunities for tribes to access spectrum. FCC’s 2010 National Broadband Plan stated that ongoing measurement of spectrum utilization should be developed to better understand how spectrum resources are being used because some studies indicated that spectrum goes unused in many places much of the time. The plan also stated that any spectrum utilization studies that FCC conducts should identify tribal lands as distinct entities. In FCC’s February 2018 strategic plan, FCC stated that it will implement ongoing initiatives that will assist in spectrum policy planning and decision making, promote a robust secondary market in spectrum, and improve communications services in all areas of the United States, including tribal areas. Additionally, Standards for Internal Control in the Federal Government state that agencies should use quality information, including information that is complete, to inform the decision-making processes. FCC also does not make information on spectrum-license holders available in an easy or accessible manner; such information could be beneficial to the tribes in their efforts to obtain spectrum in the secondary market. As described earlier, the secondary market is a significant mechanism for tribal entities to obtain spectrum licenses, but representatives from the tribal entities we interviewed reported challenges related to participating in the secondary market, such as not knowing whom to contact should they wish to engage in a secondary market transaction to obtain a spectrum license. In July 2014, FCC stopped updating its spectrum dashboard, which provided the public with a way to identify who holds licenses in what areas, including features that allowed users to identify spectrum allocated and assigned in tribal lands. ONAP stated in its 2012 report that this feature represented the first step for individual tribal entities to reach out to licensees and seek leasing, partnership, or other arrangements that could ultimately result in the provision of service over tribal lands. FCC officials told us that the public may view electronic records of all wireless spectrum licenses in FCC’s Universal Licensing System, using a wide range of license and geographic parameters, such as licensee names, radio services, spectrum bands, and geographic locations. However, we attempted to navigate the Universal Licensing System to determine spectrum-license holders for specific tribal lands using geographic parameters, but we were unable to successfully do so because the system is so difficult to use. Furthermore, as described above, representatives from eight of the tribal entities that we contacted stated that it is difficult to determine who holds spectrum licenses. When we asked FCC officials why they do not communicate information to tribes about spectrum-related transactions over tribal lands, FCC officials also told us that they issue public notices on applications for all proposed spectrum transactions and on the winning bidders of all auctions, but they have not made it a practice to reach out directly to tribes to make them aware of when providers have obtained spectrum licenses that cover tribal lands. The National Broadband Plan stated that FCC should make data available that would promote a robust secondary market for spectrum licenses, such as information on how and to whom spectrum is allocated on tribal lands. Additionally, Standards for Internal Control in the Federal Government state the need for federal agencies to communicate with external entities and to enable these entities to provide quality information to the agency that will help it achieve its objectives. Tribal governments are an example of such external entities. The ability of tribal governments to make informed spectrum planning decisions and to participate in secondary market transactions is diminished without information from FCC on the spectrum transactions that occur over tribal lands. Providing this information in a manner that is accessible and easy for tribal entities to obtain could enable them to enter into leasing, partnership, or other arrangements to obtain spectrum. Broadband service on tribal lands continues to lag behind the rest of the country, especially on rural tribal lands, which could hinder tribal efforts to promote self-governance, economic opportunity, education, public safety, and cultural preservation. FCC has reported that wireless technologies that access spectrum to deliver broadband services are cost-effective for remote and sparsely populated areas, such as tribal lands. However, FCC’s efforts to promote and support tribal entities’ access to spectrum have done little to increase tribal use of spectrum, as only very few tribes are accessing spectrum to be able to provide Internet service. Additionally, FCC lacks information that could help inform its decision- making processes related to spectrum policy planning, which is intended to improve communications services in all areas of the United States, including tribal lands. By collecting data on the extent that tribal entities are obtaining and accessing spectrum, FCC could better understand tribal spectrum issues and use this information as it implements ongoing spectrum initiatives. Furthermore, the secondary market is one of few ways for tribal entities to access licensed spectrum to be able to provide Internet service, and FCC has recognized the importance of promoting a robust secondary market. FCC could promote a more robust secondary market by analyzing data to better understand how much unused licensed spectrum exists over tribal lands and using that information to promulgate regulations and to evaluate how FCC policies affect tribal participation in the secondary market. Additionally, by making information on who holds spectrum licenses over tribal lands more accessible and easy to understand, FCC could remove a barrier tribes may face in attempting to obtain spectrum through the secondary market. We are making the following three recommendations to the Chairman of FCC. The Chairman of FCC should collect data on the extent that tribal entities are obtaining and accessing spectrum and use this information as FCC implements ongoing spectrum initiatives. (Recommendation 1) The Chairman of FCC should analyze data to better understand the extent that unused spectrum licenses exist over tribal lands, such as by analyzing the data for a sample of tribal lands, and as appropriate use this information to inform its oversight of the secondary market. (Recommendation 2) The Chairman of FCC should make information on spectrum-license holders more accessible and easy to understand for interested parties, including tribal entities, to promote their ability to purchase or lease spectrum licenses from other providers. (Recommendation 3) We provided a draft of this report to FCC for comment. In its comments, reproduced in appendix III, FCC agreed with the recommendations. FCC also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Chairman of FCC, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) what is known about the ability of tribal entities to obtain and access spectrum to provide broadband services on tribal lands and the reported barriers that may exist; and (2) the extent to which the Federal Communications Commission (FCC) promotes and supports tribal entities’ ability to obtain and access spectrum for broadband services. To address both objectives, we reviewed relevant statutes and regulations and FCC documents, including FCC’s Statement of Policy on Establishing a Government-to-Government Relationship with Indian Tribes, the National Broadband Plan, and FCC’s current strategic plan. We interviewed FCC officials and representatives from 3 tribal associations, 7 private providers that deliver Internet services over tribal lands, 3 industry associations that represent rural and urban telecommunications providers, 3 regional consortia, 3 companies that work with tribal entities, and 1 academic group. In addition, we selected 24 tribal entities—13 Indian tribes and nations and 11 tribally owned providers—to interview. To identify tribal entities that were using wireless technologies, we obtained recommendations from stakeholders, reviewed data on relevant federal grants, such as the Broadband Technology Opportunities Program, and conducted Internet research. We then selected 16 tribal entities considering (1) stakeholder suggestions, (2) population, (3) population density, and (4) urban or rural designation. We visited 7 of these tribes in Idaho, New Mexico, and Washington State. The views represented in our report are not generalizable to those of all stakeholders. See table 2 for a complete listing of the entities we interviewed. We also conducted a literature review to identify relevant academic, government, and media publications that were published between January 1, 2013, and January 11, 2018, that discuss the importance of and options to enhance tribal access to spectrum. To identify tribal entities that applied to participate in spectrum auctions or that held active spectrum licenses in bands that can be used to provide broadband service, we analyzed (1) FCC data on entities that applied to participate in auctions for spectrum in these bands and (2) FCC data on spectrum licenses in these bands that were active as of September 6, 2018. We also analyzed FCC license data, together with license information publicly available through FCC’s Universal Licensing System, to determine whether the tribal entities that held active licenses obtained those licenses through an FCC spectrum auction, administrative assignment, or the secondary market. We then reviewed the list of federally recognized tribes in the Federal Register and identified search terms related to these tribes. For example, we identified the following search terms based on the federally recognized tribe, Yurok Tribe of the Yurok Reservation, California, “Reservation, Tribe, and Yurok.” We then used the identified search terms to search for tribal entities in FCC’s data on auction participants and spectrum license holders. We manually reviewed these matches to identify tribal entities based on information from interviews, Internet research, and professional judgment. Because tribal entities may have applied to participate in spectrum auctions or may hold spectrum licenses under names not associated with their tribes, there may be additional tribal entities that we were unable to identify. Through interviews with FCC officials and review of related documentation, we determined that the license and auction participant data are sufficiently reliable for our purpose of identifying some tribal entities that have applied to participate in a spectrum auction or held active spectrum licenses as of September 2018. However, our analysis does not capture the extent that tribal entities may have obtained a license that is no longer active. To identify tribal entities that used unlicensed spectrum to deliver unlicensed service, we interviewed the tribal entities identified above. In addition, we obtained stakeholder views on the advantages and disadvantages of using unlicensed and licensed frequency bands and any barriers that tribal entities face in obtaining spectrum licenses by interviewing the selected stakeholders noted above. To determine the extent to which FCC promotes and supports tribal entities’ efforts to obtain and access spectrum, first, we reviewed FCC’s proposals in its ongoing 2011 Notice of Proposed Rulemaking In the Matter of Improving Communications Services for Native Nations by Promoting Greater Utilization of Spectrum over Tribal Lands and its ongoing 2018 Notice of Proposed Rulemaking In the Matter of Transforming the 2.5 GHz Band. We summarized public comments submitted, as of August 2018, by private and tribal providers, rural and nationwide industry associations, tribal associations, and tribal governments on FCC’s 2011 proposed rulemaking. We did not analyze comments on FCC’s 2018 Notice of Proposed Rulemaking because FCC was in the process of responding to these comments at the time of our review. Second, we reviewed rules that FCC officials identified that increased the availability of unlicensed and licensed frequency bands for broadband use and that may be particularly useful for tribal entities. These rules included FCC’s 2010 and 2012 rules related to TV white space spectrum and its 2015 rule and 2017 Notice of Proposed Rulemaking related to the Citizens Broadband Radio Services (CBRS) spectrum. We identified tribal entities that had been using CBRS frequency bands by reviewing FCC licensed data and TV white space frequency bands through interviews with tribal entities and regional consortia. Third, we identified FCC’s outreach activities to provide tribal entities with assistance on spectrum-related issues by interviewing FCC officials and reviewing documentation on the content of FCC-led trainings and workshops, e-mail correspondences, and related publications, such as public notices. Lastly, we interviewed FCC officials on the information that they collect, analyze, and report related to tribal use of spectrum and reviewed related documentation, including FCC’s Office of Native Affairs and Policy 2012 Annual Report and FCC’s license and auction data. We interviewed stakeholders, as noted above, and summarized their views of FCC efforts. We also compared FCC’s efforts against FCC’s 2018-2022 strategic plan, recommendations made in FCC’s National Broadband Plan, and Standards for Internal Control in the Federal Government related to using quality information. We conducted this performance audit from November 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We identified the spectrum frequency bands that the Federal Communications Commission (FCC) has made available for commercial broadband services and that FCC assigns licenses through auctions. Table 3 describes these licenses, including the number and date of related auctions. Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov. In addition to the contact named above, Sally Moino (Assistant Director), Anne Doré (Analyst in Charge), Enyinnaya David Aja, Katherine Blair, Stephen Brown, Camilo Flores, Georgeann Higgins, John Mingus, Josh Ormond, Frank Rusco, Rebecca Rygg, Jay Spaan, Andrew Stavisky, James Sweetman, Jr., Hai Tran, and Michelle Weathers made key contributions to this report.", "summary": "In 2018, FCC estimated that 35 percent of Americans living on tribal lands lack broadband service compared to 8 percent of Americans overall. Broadband service can be delivered through wireless technologies using radio frequency spectrum. According to FCC, increasing tribal access to spectrum would help expand broadband service on tribal lands. GAO was asked to review spectrum use by tribal entities—tribal governments and tribally owned telecommunications providers. This report examines (1) tribal entities' ability to obtain and access spectrum to provide broadband services and the reported barriers that may exist, and (2) the extent to which FCC promotes and supports tribal efforts to obtain and access spectrum. GAO interviewed 16 tribal entities that were using wireless technologies. Selected entities varied geographically, among other characteristics. GAO analyzed FCC's license and auction data as of September 2018, reviewed FCC's rulemakings on spectrum for broadband services, and interviewed other tribal and industry stakeholders and FCC officials. The information presented is not generalizable to all tribes or industry participants. The tribal entities GAO contacted cited various barriers to obtaining spectrum licenses in bands that can be used to provide broadband services. According to its analysis of data from the Federal Communications Commission (FCC), GAO identified 18 tribal entities that held active spectrum licenses in such bands. For example, of these 18 tribal entities, 4 obtained licenses through secondary market transactions—that is, they bought or leased the license from another provider, and 2 obtained a license through an FCC spectrum auction. Licensed spectrum is generally preferred because it offers better quality of service compared to unlicensed spectrum; however, almost all of the tribal entities GAO contacted said that they are accessing unlicensed spectrum to provide Internet service. They identified barriers to obtaining licensed spectrum through auctions and secondary market transactions, barriers such as high costs and, in the case of secondary market transactions, a lack of information on who holds licenses over tribal lands. Because most spectrum allocated for commercial use has already been assigned, the secondary market is one of very few avenues available to tribal entities that would like to access licensed spectrum. FCC has taken steps to promote and support tribal access to spectrum. For example, FCC issued proposed rulemakings in 2011 and 2018 that sought comment on tribal-specific proposals, such as establishing tribal-licensing priorities and initiating processes to transfer unused spectrum licenses to tribal entities. However, FCC has not finalized these rules and is in the process of responding to comments to the 2018 rulemaking. Also, while FCC has made additional spectrum available for broadband use in recent years, tribal stakeholders cited limitations with the spectrum FCC has made available. For example, FCC allows broadband providers to operate in unused television broadcast bands on an unlicensed basis. While stakeholders GAO interviewed cited some advantages of these bands, such as being useful to reach remote customers, they also noted technical and cost limitations that reduced the potential to improve tribal access to spectrum. FCC stated that it is implementing spectrum initiatives and recognizes the importance of promoting a robust secondary market to improve communications throughout the United States, including tribal lands. However, GAO found that FCC has not collected data related to tribal access to spectrum, analyzed unused licensed spectrum that exists over tribal lands, or made data available to tribal entities in an accessible and easy manner that could be beneficial in their efforts to obtain spectrum licenses from other providers. By collecting data on the extent that tribal entities are obtaining and accessing spectrum, FCC could better understand tribal spectrum issues and use this information as it implements ongoing spectrum initiatives. Further, given that the secondary market is one of few ways for tribal entities to access licensed spectrum to be able to provide Internet service, FCC could promote a more robust secondary market by analyzing unused licensed spectrum over tribal lands and using that information to inform FCC's oversight of the secondary market. Additionally, by making information available on who holds spectrum licenses over tribal lands, FCC could remove a barrier tribes may face in attempting to obtain spectrum through the secondary market. FCC should (1) collect data on tribal access to spectrum; (2) analyze unused licensed spectrum over tribal lands; and (3) make information available in a more accessible manner that would promote tribes' ability to purchase or lease spectrum licenses over their lands from other providers. FCC agreed with the recommendations.", "document_type": "gao"}
{"report": "Our work has shown that when grants management requirements are duplicative, unnecessarily burdensome, and conflicting, agencies must direct resources toward meeting them—which can make the agency’s programs and services less cost effective and increase burden for grant recipients. For example, in 2016, we reviewed administrative requirements for federal research grants. Officials from universities and stakeholder organizations we interviewed identified common factors that added to their administrative workload and costs for complying with selected requirements. These factors included: variation in agencies’ implementation of requirements, pre-award requirements for applicants to develop and submit detailed documentation for grant proposals, and increased prescriptiveness of certain requirements. We have also reported on a number of initiatives intended to address the challenges grantees encounter throughout the grants lifecycle. These initiatives include consolidating and revising grants management circulars, simplifying the pre-award phase, promoting shared information technology solutions for grants management, and improving the timeliness of grant closeout and reducing undisbursed balances. Our work includes reviews of efforts to submit the Consolidated Federal Financial Report through a single system and to standardize notices of award to reduce reporting burden. In addition, the Digital Accountability and Transparency Act of 2014 (DATA Act) required the Office of Management and Budget (OMB) to establish a pilot program to develop recommendations for reducing reporting burden for recipients of federal awards. In 2016 and 2017, we reported on the design and implementation of the OMB pilot program, known as the Section 5 Pilot, aimed at developing recommendations for reducing reporting burden for grant recipients and contractors. We made a number of recommendations to improve the design of the Section 5 Pilot to ensure its consistency with leading practices for pilot design, which OMB has implemented. We continue to monitor implementation of the Section 5 Pilot through ongoing work and look forward to keeping the subcommittee informed about our findings. To provide increased transparency to agencies, Congress, and the public, the DATA Act required OMB, the Department of the Treasury (Treasury), and other federal agencies to increase the types of information available on the more than $3.7 trillion in annual federal spending, including federal spending on grants. The law requires OMB and Treasury to establish data standards to enable the reporting and tracking of agency spending at multiple points in the spending lifecycle. Since enactment, OMB, Treasury, and federal agencies have addressed many of the policy and technical challenges presented by the act’s requirements, including standardizing data elements across the federal government, linking data contained in agencies’ financial and award systems, and expanding the types of data reported. However, in a 2017 report, we found inconsistencies in key award data elements and issues with the completeness and quality of the information reported. We made a number of recommendations to OMB and Treasury to clarify guidance to help agencies fully comply with DATA Act requirements and report accurate data and to disclose known data quality issues. OMB and Treasury generally agreed with our recommendations. Once the accuracy of these data are improved, federal managers should be better able to make data driven decisions to address ongoing government management challenges and improve the effectiveness and efficiency of government programs. The process of distributing federal assistance through grants is complicated and involves many different parties—both public and private—with different organizational structures, sizes, and missions. A lack of collaboration among and between federal agencies, state and local governments, and nongovernmental grant participants presents a challenge to effective grants implementation. Given the complexity of managing intergovernmental grants, collaboration among the grant participants, particularly with regard to information sharing, is an important factor in effective grants management. For example, one of the lessons learned in our work on the American Recovery and Reinvestment Act of 2009 (Recovery Act) is that increased accountability requirements and aggressive timelines require coordination—both vertically among levels of government and horizontally within the same level of government—to share information and work toward common goals during implementation. Intra- and intergovernmental networks facilitated efforts to achieve the purposes of the act in an effort to efficiently and effectively spend the grant funds. Our work on interagency grants management reform initiatives also found that inadequate ongoing communication with grantees sometimes resulted in poor implementation and prioritization of initiatives. Our 2014 work on the Recovery Act illustrated how agencies can effectively approach ongoing communication. For example, the developers of Recovery.gov used input from user forums, focus groups, and usability testing with interested citizens to collect feedback and recommendations. This information then informed the development of the website from its initial stages. More recently, in our 2014 work on the DATA Act, we have noted OMB and Treasury efforts to allow the public to share their views and comment on the development of federal data standards. Our prior work has shown that numerous federal grant programs created over time without coordinated purposes and scope can result in grants management challenges. Addressing these challenges may achieve cost savings and result in greater efficiencies in grant programs. Our work has underscored the importance of identifying fragmentation, overlap, or duplication in a number of federal programs, including grants management practices. For example, in January 2017, we found that the National Park Service, Fish and Wildlife Service, Food and Nutrition Service, and Centers for Disease Control and Prevention had not established guidance and formal processes to avoid duplication and overlap among grants in their agencies before awarding grants. We recommended that these agencies do so, and they agreed. In response, these agencies have taken a number of actions to address the recommendation. For example, the Department of the Interior provided us documentation showing that the Fish and Wildlife Service now requires that discretionary grant applicants provide a statement that addresses whether there is any overlap or duplication of proposed projects or activities to be funded by the grant. The Fish and Wildlife Service also updated its guidance to grant awarding offices instructing them to perform a potential overlap and duplication review of all selected applicants prior to making grant awards. Our prior work has shown that when awarding and managing federal grants, effective oversight and internal control is important to provide reasonable assurance to federal managers and taxpayers that grants are awarded properly, recipients are eligible, and federal grant funds are used as intended and in accordance with applicable laws and regulations. Internal control comprises the plans, methods, and procedures agencies use to be reasonably assured that their missions, goals, and objectives can be met. In numerous reviews, we and agency inspectors general identified weaknesses in agencies’ internal controls for managing and overseeing grants. Specifically, we found that when such controls are weak, federal grant-making agencies face challenges in achieving grant program goals and assuring the proper and effective use of federal funds to help avoid improper payments. Our work has identified weaknesses in grants oversight and accountability issues that span the government including undisbursed grant award balances, single audit submissions that are late, and significant levels of improper payments in grant programs. Key grants management challenges related to internal controls and oversight that we have identified include: Timeliness of grant closeouts. Federal grant-making agencies must close out grants when the grantee’s period of performance has ended in order to ensure that grantees have met all financial requirements and provide final reports as required. Closing out grants also allows agencies to identify and redirect unused funds to other projects and priorities as authorized or to return unspent balances to the Treasury. These accounts, and, in some cases, the undisbursed balances associated with them, persisted as an issue for agencies, as we reported in 2008, 2012, and 2016. In January 2016, the Grants Oversight and New Efficiency Act (GONE Act) was signed into law. The act, passed in part in response to our work, required government- wide reporting of undisbursed balances in expired grant accounts. The GONE Act requires that agencies report on the grants for which the grantee’s period of performance had expired for more than 2 years, including those with undisbursed balances and with zero dollar balances remaining in the accounts. In the fall of 2017, many agencies included in their annual Agency Financial Reports an appendix providing information required by the GONE Act. For example, the Department of Health and Human Services (HHS) reported almost $2 billion in undisbursed funds remaining in 16,603 grant accounts that were two years or more past their periods of performance and 6,512 grant accounts that had no funds remaining in them. HHS grant officials told us that they intend to close as many of these grant accounts as possible during this fiscal year. Timely submission of single audits. As we have previously reported, one key way that federal agencies oversee nonfederal grantees is through an audit of their expenditures of federal awards, referred to as a single audit. The single audit is an audit of the award recipient’s expenditure of federal awards and of its financial statements. A single audit can identify deficiencies in the award recipient’s compliance with the provisions of laws, regulations, contracts, or grant agreements and in its financial management and internal control systems. Correcting such deficiencies can help reasonably assure the effective use of federal funds and reduce federal improper payments. In 2017, we reported that of the five departments we reviewed—the Departments of Agriculture, Education, HHS, Housing and Urban Development, and Transportation—some of the departments’ subagencies did not effectively design policies and procedures to reasonably assure the timely submission of single audit reports by award recipients. In this report, we made 21 recommendations to these departments. Some action has been taken to date in response to these recommendations. Avoiding improper payments of federal grants. As we have previously reported, improper payments—payments that should not have been made or that were made in an incorrect amount—have consistently been a government-wide issue. Since fiscal year 2003— when certain agencies were required by statute to begin reporting estimated improper payments for certain programs and activities— cumulative improper payment estimates have totaled about $1.4 trillion. Our reviews of Medicaid, a joint federal-state health care program and significant source of federal grant funding to state governments, have shown that the program is particularly vulnerable to improper payments, given its size, diversity, and complexity. For example, Medicaid accounted for more than 26 percent ($36.7 billion) of the nearly $141 billion government-wide improper payment estimate in fiscal year 2017. We have also reported that federal spending for Medicaid is expected to significantly increase, so it is especially critical that appropriate measures be taken to reduce improper payments in this program. Recent and proposed legislative- and executive-sponsored initiatives aimed at grants management reform, present opportunities to improve the efficiency, effectiveness, and transparency of federal grants. Our work on the design and implementation of merit-based grant award selection and initiatives to manage for results across the federal government has highlighted a number of key features necessary to effectively implement such crosscutting initiatives. Those features include: Establishing implementation goals and tracking progress. Our work highlighted the importance of establishing an implementation schedule and tracking progress toward priorities to help pinpoint performance shortfalls and suggest midcourse corrections, including any needed adjustments to future priorities and milestones. Identifying and agreeing on leadership roles and responsibilities. Our work has shown that when interagency councils clarify who will do what, identify how to organize their joint and individual efforts, and articulate steps for decision making, they enhance their ability to work together and achieve results. Developing an effective communication strategy. We reported on the importance of two-way communication that allows for feedback from relevant stakeholders. For example, our work showed that grantees felt that a lack of opportunities to provide timely feedback resulted in poor implementation and prioritization of streamlining initiatives and limited grantees’ use and understanding of new functionality of electronic systems. In addition, given the number and diversity of grantor agencies and grantmaking programs, we believe it is important that any grant reform initiative integrate with other government-wide reform efforts on related issues. One such reform initiative is the PMA, which lays out a long-term vision for modernizing the federal government and improving the ability of agencies to achieve results. The PMA identified a set of CAP goals to target areas where multiple agencies must collaborate to effect change and report progress in a manner the public can easily track. According to the PMA, one of the goals included in the agenda—the Results- Oriented Accountability for Grants CAP goal—is intended to maximize the value of grant funding by applying a risk-based data-driven framework that balances compliance requirements with demonstrating successful results for taxpayers. The PMA further states that this CAP goal seeks to standardize grant reporting data and improve data collection in ways that will increase efficiency, promote evaluation, and reduce reporting burden. Effectively advancing results-oriented accountability for grants will require that implementation of this CAP goal moves forward in tandem with related efforts to implement the DATA Act and advance the use of evidence to inform grant policy, highlighted below: DATA Act implementation. As our work has shown, the DATA Act will continue to be a critical driver of grants management change and reform. When fully implemented, the act will improve the accountability and transparency of federal spending data by (1) establishing government-wide financial data standards so that data are comparable across agencies and (2) holding federal agencies more accountable for the quality of the information disclosed. Such increased transparency provides opportunities for improving the efficiency and effectiveness of federal spending; increasing the accessibility of data to benefit the public and the business community; and improving oversight to prevent and detect fraud, waste, and abuse of federal funds. As efforts to implement the DATA Act move forward, we will continue to monitor implementation efforts and coordinate our efforts with agency inspectors general. Evidence-based policy. To better integrate evidence and rigorous evaluation in budget, management, operational, and policy decisions, OMB has encouraged federal agencies to expand or improve the use of grant program designs that focus federal dollars on effective practices while encouraging innovation in service delivery. For example, OMB’s efforts to foster a culture of evidence-based policy resulted in several federal agencies’ implementation of tiered evidence grant programs. Under this approach, agencies establish tiers of grant funding based on the level of evidence of effectiveness provided for a grantee’s service model. Agencies award smaller amounts to promising service models with a smaller evidence base, while providing larger amounts to those with more supporting evidence. In our 2016 report, we recommended that OMB establish a formal means for federal agencies to collaborate on tiered evidence grants. In response, in 2017, OMB launched the Tiered Evidence Grants Working Group to collaborate and share lessons learned, for example, on the use and dissemination of evaluation results. These efforts should complement each other. A lack of integration could result in duplication of effort or run the risk of working at cross-purposes. For example, the integration of the Results-Oriented Accountability for Grants CAP goal with ongoing DATA Act implementation and efforts to advance evidence-based approaches to federal grant funding and administration presents a complex governance challenge. In conclusion, designing and implementing grants management policies that strike an appropriate balance between ensuring accountability for the proper use of federal funds without increasing the complexity and cost of grants administration for agencies and grantees is a longstanding governance challenge. As the initiatives above demonstrate, meeting this challenge and successfully implementing grants management reforms will require intragovernmental coordination at the federal level, intergovernmental collaboration with state and local governments and other partners, and ongoing integration to ensure that grants management reforms and related DATA Act and evidence-based policy implementation efforts are complementary and do not exist in separate silos. We look forward to continuing our ongoing work to review implementation of the CAP goals, the DATA Act, and the infusion of evidence-based policy in federal grant programs. We also look forward to working with this and other committees as we assist Congress in identifying additional opportunities to advance grants management reform through reviews of individual grant programs and crosscutting analysis of grant implementation and grants management reform efforts. Chairman Palmer, Ranking Member Raskin, and members of the Subcommittee, this concludes my prepared remarks. I look forward to answering any questions you may have. For questions about this statement, please contact me at (202) 512-6806 or sagerm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony were Brenda Rabinowitz and Tom James, Assistant Directors, Alexandra Edwards, Julie Miller, Andrew J. Stephens, and Walter Vance. The Nation’s Fiscal Health: Action Is Needed to Address the Federal Government’s Fiscal Future. GAO-18-299SP. Washington, D.C.: June 21, 2018. Improper Payments: Actions and Guidance Could Help Address Issues and Inconsistencies in Estimation Processes. GAO-18-377. Washington, D.C.: May 31, 2018. 2018 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-18-371SP. Washington, D.C.: Apr. 26, 2018. DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness and Accuracy of Spending Data and Disclose Limitations. GAO-18-138. Washington, D.C.: Nov. 8, 2017. Managing for Results: Further Progress Made in Implementing the GPRA Modernization Act, but Additional Actions Needed to Address Pressing Governance Challenges. GAO-17-775 Washington, D.C.: Sept. 29, 2017. Single Audits: Improvements Needed in Selected Agencies’ Oversight of Federal Awards. GAO-17-159. Washington, D.C.: Feb. 16, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: Feb. 15, 2017. Grants Management: Selected Agencies Should Clarify Merit-Based Award Criteria and Provide Guidance for Reviewing Potentially Duplicative Awards. GAO-17-113. Washington, D.C.: Jan. 12, 2017. Tiered Evidence Grants: Opportunities Exist to Share Lessons from Early Implementation and Inform Future Federal Efforts. GAO-16-818. Washington, D.C.: Sept. 21, 2016. Federal Research Grants: Opportunities Remain for Agencies to Streamline Administrative Requirements. GAO-16-573. Washington, D.C.: June 22, 2016. Managing for Results: OMB Improved Implementation of Cross-Agency Priority Goals, But Could Be More Transparent about Measuring Progress. GAO-16-509. Washington, D.C.: May 20, 2016. DATA Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet Goal of Reducing Recipient Reporting Burden. GAO-16-438. Washington, D.C.: Apr. 19, 2016. Grants Management: Actions Needed to Address Persistent Grant Closeout Timeliness and Undisbursed Balance Issues. GAO-16-362. Washington, D.C.: Apr. 14, 2016. Federal Data Transparency: Effective Implementation of the DATA Act Would Help Address Government-wide Management Challenges and Improve Oversight. GAO-15-241T. Washington, D.C.: Dec. 3, 2014. Managing for Results: Implementation Approaches Used to Enhance Collaboration in Interagency Groups. GAO-14-220. Washington, D.C.: Feb, 14, 2014. Recovery Act: Grant Implementation Experiences Offer Lessons for Accountability and Transparency. GAO-14-219. Washington, D.C.: Jan. 24, 2014. Grant Workforce: Agency Training Practices Should Inform Future Government-wide Efforts. GAO-13-591. Washington, D.C.: June 28, 2013). Grants Management: Oversight of Selected States’ Disbursement of Federal Funds Addresses Timeliness and Administrative Allowances. GAO-13-392. Washington, D.C.: Apr. 16, 2013. Grants Management: Improved Planning, Coordination, and Communication Needed to Strengthen Reform Efforts. GAO-13-383. Washington, D.C.: May 23, 2013. Grants to State and Local Governments: An Overview of Federal Funding Levels and Selected Challenges. GAO-12-1016. Washington, D.C.: Sept. 25, 2012. Grants Management: Action Needed to Improve the Timeliness of Grant Closeouts by Federal Agencies. GAO-12-360. Washington, D.C.: Apr. 16, 2012. Grants Management: Attention Needed to Address Undisbursed Balances in Expired Grant Accounts. GAO-08-432. Washington, D.C: Aug. 29, 2008. Grants Management: Grantees’ Concerns with Efforts to Streamline and Simplify Processes. GAO-06-566. Washington, D.C.: July 28, 2006. Grants Management: Additional Actions Needed to Streamline and Simplify Processes. GAO-05-335. Washington, D.C.: Apr. 18, 2005. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Federal outlays for grants to state and local governments totaled more than $674 billion in fiscal year 2017, equivalent to 3.5 percent of the gross domestic product in that year. GAO's previous work has found that growth in both the number of grant programs and level of funding has increased the diversity of federal grants to state and local governments. GAO's work has also found that designing and implementing grants management policies that strike an appropriate balance between ensuring accountability for the proper use of federal funds without increasing the complexity and cost of grants administration for agencies and grantees presents a governance challenge. At the same time, several government-wide initiatives hold promise for advancing the transparency, efficiency, and effectiveness of federal grants. This statement is based on GAO's prior reports on federal grants management and crosscutting issues related to managing for results across the federal government issued between 2005 and 2018. It addresses: (1) GAO's observations on long-standing challenges for federal grants management, and (2) opportunities to effectively advance current grant modernization initiatives. GAO has identified challenges to federal grants management in its work spanning several decades. These challenges include: Streamlining: Grants management requirements that are duplicative, unnecessarily burdensome, and conflicting require agencies to direct resources toward meeting them and can burden recipients of federal grants. GAO has reported on initiatives to streamline these requirements and address challenges grantees encounter throughout the grants lifecycle. Transparency: The Digital Accountability and Transparency Act of 2014 (DATA Act) required the Office of Management and Budget, the Department of the Treasury, and other federal agencies to increase the types of information available on federal spending, including grants. GAO has reported on progress in standardizing and expanding reported data, but has found inconsistencies with the completeness and quality of the reported information. Collaboration and consultation: Collaboration, particularly information sharing, is an important factor in effective grants management. GAO's work on interagency grants management reform initiatives found that inadequate ongoing communication with grantees sometimes resulted in poor implementation and prioritization of initiatives. Duplication, overlap, and fragmentation : Agencies' grants management practices, such as requirements to avoid duplication and overlap among grants before awarding them, can help agencies achieve cost savings and result in greater efficiencies in grant programs. Internal controls and oversight : GAO's work has identified weaknesses in grants oversight and accountability. For example, GAO has identified opportunities for agencies to more consistently close out grants when the grantee's period of performance has ended to ensure that grantees have met all requirements and identified opportunities to redirect or return unused funds. Recent and proposed initiatives aimed at grants management reform present opportunities to improve the efficiency, effectiveness, and transparency of federal grants. GAO's work on federal grants management and managing for results has highlighted a number of key features for effectively implementing such crosscutting initiatives, which include: (1) establishing implementation goals and tracking progress, (2) identifying and agreeing on leadership roles and responsibilities, and (3) developing an effective communication strategy. Further, given the number and diversity of grantor agencies and grant programs, it is important that any grant reform initiative integrate with other government-wide reform efforts on related issues across government, such as the grants-related Cross-Agency Priority goal, implementation of the DATA Act, and initiatives related to evidence-based policy. These efforts can be effective if they complement each other rather than run the risk of operating independently and potentially duplicating effort or working at cross-purposes.", "document_type": "gao"}
{"report": "In part to improve the information available and management of DOD’s acquisition of services, Congress enacted section 2330a of title 10 of the U.S. Code in 2001, which required the Secretary of Defense to establish a data collection system to provide management information on each purchase of services by a military department or defense agency. Congress amended section 2330a in 2008 to add a requirement for the Secretary of Defense to submit an annual inventory of the activities performed pursuant to contracts for services on behalf of DOD during the preceding fiscal year. The inventory is to include a number of specific data elements for each identified activity, including: the function and missions performed by the contractor; the contracting organization, the military department or defense agency administering the contract, and the organization whose requirements are being met through contractor performance of the function; the funding source for the contract by appropriation and operating agency; the fiscal year the activity first appeared on an inventory; the number of contractor employees (expressed as FTEs) for direct labor hours and associated cost data collected from contractors; a determination of whether the contract pursuant to which the activity is performed is a personal services contract; and a summary of the contracted services data required to be collected in subsection 2330a(a) of title 10 of the U.S. Code. The secretaries of the military departments and heads of the defense agencies are required to review the contracts and activities in the inventory for which they are responsible to ensure that personal services contracts were performed appropriately and that the activities listed do not include inherently governmental functions, among other factors. In addition, in 2011 Congress amended section 2330a to add a requirement that the secretaries of the military departments and heads of the defense agencies develop a plan, including an enforcement mechanism and approval process, to provide for the use of the inventory by the military department or defense agency to implement requirements of section 129a of title 10, U.S. Code (section 129a requires policies and procedures for determining the appropriate mix of military, civilian, and contractor personnel to perform DOD’s mission); facilitate the use of the inventory for compliance with section 235 of title 10, U.S. Code (section 235 requires budget justification materials to include the amount requested for procurement of contract services and the number of full-time contractor employees projected); provide for appropriate consideration of the conversion of activities identified under section 2463 of title 10, U.S. Code (section 2463 requires procedures to ensure civilian employees are considered for performing critical functions); and ensure that the inventory is used to inform strategic workforce planning. In section 812 of the National Defense Authorization Act for Fiscal Year 2017, enacted in December 2016, Congress further amended section 2330a by reducing the scope of the required data collection, specifying the type of contracted services to be included in an inventory summary submitted to Congress, and calling for particular attention to the military departments’ review of certain high-risk contracts (see table 1). To address the requirements of section 2330a of title 10, U.S. Code, DOD is to conduct several key steps for each fiscal year (see table 2). DOD has submitted to Congress annual, department-wide inventories for fiscal years 2008 through 2015. As shown in table 2, each inventory is required to be submitted to Congress by June 30, and is to reflect activities performed during the preceding fiscal year. DOD has not always submitted the inventory to Congress on time. For example, DOD was required to submit the fiscal year 2015 inventory to Congress on June 30, 2016, but did not do so until September 20, 2016. For the inventory of fiscal year 2016 contracted services, the department submitted its summary of the inventory to Congress in February 2018. Over the past 8 years, we have issued several reports on DOD’s efforts to compile and review its inventory of contracted services. We have made 18 recommendations, 7 of which are still open, on a variety of issues related to the inventory. Key findings and recommendations in our prior work that pertain to this review are included below. In November 2014, we found the military departments generally had not developed plans to use the inventory to facilitate DOD’s workforce planning, workforce mix, and budget decision-making processes, and that numerous offices were responsible for the various decision- making processes at the military departments. This, in turn, left the department at risk of not complying with legislative requirements. We recommended that secretaries of the military departments identify an accountable official within their departments with responsibility for leading and coordinating efforts across their manpower, budgeting, and acquisition functional communities, and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes. DOD concurred with the recommendation, but as of January 2018, the Army and Navy still had not identified accountable officials. The Air Force has identified an interim accountable official in its Program Executive Office for Combat and Mission Support, according to an Air Force official. In November 2015, we found that DOD’s effort to establish an office to implement and support a common, enterprise-wide contractor manpower data system had encountered a number of challenges and lacked clearly defined roles and responsibilities for the office. DOD had not outlined the relationships between the support office, military departments, and other stakeholders in exploring the longer-term solution to collect contractor manpower data and integrate inventory data within the military departments’ decision-making processes. We recommended DOD clearly identify the longer-term relationships between the support office, military departments, and other stakeholders. DOD concurred and has since stood up the support office (now called the Total Force Management Support Division) and implemented the Enterprise-wide Contractor Manpower Reporting Application (ECMRA) department-wide. However, DOD has not yet fully identified longer-term relationships. By doing so, DOD would help ensure that efforts to integrate contracted services data into decision- making processes will meet user needs and expectations. Most recently, in October 2016, we found that DOD components (which include the military departments) continued to improve their reviews of the inventory compared to prior years, but that they may continue to underreport contractors providing services that are closely associated with inherently governmental functions. Specifically, our analysis found that in fiscal year 2014 DOD obligated about $28 billion for contracts in the product service codes that the Office of Federal Procurement Policy and GAO identified as more likely to include closely associated with inherently governmental functions. In comparison, the components identified a total of $10.8 billion in obligations or dollars invoiced for contracts that included such work. We also found that the military departments had not yet developed plans to use the inventory to inform workforce mix, strategic workforce planning, and budget decision-making. We did not make new recommendations in that report. To facilitate DOD’s submission of an inventory summary to Congress, OSD’s inventory guidance required each military department to submit to the offices of the USD(AT&L) and USD(P&R) a list of all services provided under contract consistent with the guidance and within the scope of section 2330a of title 10, U.S. Code, as amended by section 812 of the fiscal year 2017 NDAA. The military departments collected data for the fiscal year 2016 inventory using the same data sources—FPDS-NG and ECMRA—as they had in prior years, though each department used slightly different processes from one another. OSD’s inventory guidance provided for flexibility in how the military departments compiled and submitted data. For example, the guidance required that the inventory submissions include, at a minimum, all purchases of services with a total contract value of $3 million or more and in the following service acquisition portfolio groups: logistics management services; equipment-related services; knowledge-based services; and electronics and communications services. It did not, however, preclude the military departments from submitting additional information beyond the minimum threshold. In addition, under the guidance, military departments were encouraged to augment FPDS-NG data with data from ECMRA, as has been the process in the past. We analyzed the effect of the recent statutory changes, as implemented in OSD’s inventory guidance, on fiscal year 2016 contracted services data reported in FPDS- NG and compiled by USD(AT&L). We found that the number of service purchases reported under the inventories across the department would be reduced to about 2 percent of the total service purchases if the components reported only the minimum information required under OSD’s guidance. This approach would capture about 30 percent of the total service contract dollars. Officials responsible for overseeing the data collection effort within each of the three military departments stated that for fiscal year 2016 they collected data captured in FPDS-NG and ECMRA, as they have done for previous inventories. The military departments varied somewhat in how they collected and reported their data, which is permitted under OSD’s guidance. The following is a description of the military departments’ processes for collecting data and key aspects of their inventories: Army officials stated that they extracted their inventory data for fiscal year 2016 primarily from ECMRA and used FPDS-NG data to fill gaps in data not collected in ECMRA, such as data on aspects of contract competition (e.g., number of offers and small business considerations). Army officials estimated that the total invoices in ECMRA represented approximately 80 percent of contracted services obligations for fiscal year 2016. In its inventory, submitted to OSD in January 2018, the Army reported services purchased under contract actions with fiscal year 2016 invoiced amounts both above and below $3 million. The Army reported that its fiscal year 2016 inventory accounts for $31 billion in invoiced amounts and 157,000 contractor FTEs. Navy officials stated that they captured nearly all of their inventory data for fiscal year 2016 from FPDS-NG and combined it with ECMRA data. Navy officials estimated that approximately 75 percent of the Navy services contracts that it believed should have been reported in ECMRA were reported during fiscal year 2016. The Navy submitted summary data, including fiscal year 2016 obligations and contractor FTEs by command and in total, to OSD in December 2017. The Navy did not provide a list of its fiscal year 2016 service purchases in time to be included in the inventory summary for Congress, but a USD(AT&L) official said the information provided was sufficient to allow OSD to prepare the summary. The Navy subsequently submitted its full inventory of fiscal year 2016 contracted services to OSD in March 2018 and reported over $6.5 billion in obligations and over 45,000 contractor FTEs. Air Force officials stated that they drew approximately 75 percent of the data elements required for the inventory for fiscal year 2016 from FPDS-NG. Air Force officials stated that they also extracted data from the Air Force financial management system, such as total contracted dollar amounts, and manpower data from ECMRA. Air Force officials did not have an estimate of the percentage of service contracts that were reported in ECMRA in fiscal year 2016. The Air Force submitted its inventory to OSD in December 2017 and included services purchased under contract actions with fiscal year 2016 invoiced amounts or obligations both above and below $3 million. In addition, the Air Force specifically identified purchases within each of the four service acquisition portfolio groups specified in OSD’s inventory guidance. The Air Force reported approximately $14.6 billion in obligations with an estimated 73,400 contractor FTEs in its fiscal year 2016 inventory. A USD(AT&L) official stated that he used the information provided by the military departments and defense components to help create the inventory summary required by section 812 of the fiscal year 2017 NDAA. OSD submitted this inventory summary to Congress in February 2018. This official added that OSD will discuss whether changes in its guidance for the next inventory are needed to clarify what information the military departments and defense components should submit. The military departments generally have not developed plans to use the inventory to inform management decisions as required by subsection 2330a(e) of title 10 of the U.S. Code and OSD’s inventory guidance. Further, manpower and budget officials said they make limited use of the inventory to inform strategic workforce planning, workforce mix, and budget decisions. This situation is similar to what we have found in our past work. Manpower and budget officials we spoke with stated the inventory is often too outdated to inform their decision-making, though the inventory provides a single source of certain types of information that are not readily available elsewhere. This limited use may also reflect, in part, the lack of accountable officials responsible for developing plans and enforcement mechanisms to use the inventory, as we recommended in November 2014. Subsection 2330a(e) of title 10 of the U.S. Code, DOD Instruction 5000.74, and OSD’s inventory guidance direct the military departments and defense agencies to use the inventory to inform workforce and budget decisions. When we last reported on this issue in October 2016, we identified 12 guidance documents from the military departments related to strategic workforce planning, workforce mix, and budget decisions. Our current work found that 14 documents, some of which are the same as what we reported in October 2016, make up the current set of military departments’ guidance in these areas. Further, we found the degree to which these guidance documents require the use of the inventory in these areas is still minimal—3 of the 14 documents include requirements related to the inventory (see table 3). Two documents, the Army’s July 2009 memorandum on civilian workforce management and the Army’s March 2010 concept plan guidance, require the use of the inventory for insourcing plans to convert contracted activities to performance by government personnel. Air Force Instruction 38-201 on management of manpower requirements directs the Air Force manpower division to support the review of the inventory, but does not require its use for workforce mix decisions. As noted previously, in November 2014 we found that no single office or individual at the military departments was responsible for leading or coordinating efforts between the various functional areas to develop a plan to use the inventory to inform management decisions. As a result we recommended that the secretaries of the military departments identify accountable officials to do so. As of January 2018, the Army and Navy still had not named accountable officials responsible for developing plans and enforcement mechanisms to use the inventory for workforce and budget decisions, according to officials at those departments. Navy officials said they have not reached agreement on the appropriate managerial level of an accountable official. According to an Air Force official, the Air Force has named an official from the Program Executive Office for Combat and Mission Support to serve on an interim basis. We continue to believe this recommendation is valid and should be fully implemented. Army manpower officials we interviewed stated that the inventory provided information that was not readily available elsewhere and the information collected in the inventory process may be useful for making workforce mix decisions. For example, Army manpower officials said the inventory provides a single source for information like the number of contractor FTEs, contractor labor hours and costs, the location of work performance, and the functions performed. Army officials said they can use this information to analyze cost factors and contract expenditures and compare them to in-house costs. In addition, Army officials noted the inventory provides information to address questions from Congress, DOD, and Army leadership about the number and cost of contractors, and that it is the only source of detailed data that supports analysis of the contractor workforce mix that is statutorily required. Comptroller, Navy, and Air Force officials added that they use information from the inventory to estimate the average number of contractor FTEs that are reported in DOD’s annual budget request. However, representatives from the workforce and budgeting offices within the military departments we interviewed also noted that the inventory has limitations that hinder its use. These officials noted that the data reflected in the inventory are often too outdated to help inform strategic decisions that are usually made at the local level—such as a specific military installation—based on real-time data. For example, Air Force officials said that under the program objective memorandum (POM) process, the Air Force identifies future budget requests and workforce needs 2 years before the beginning of a fiscal year, whereas the most recent inventory data available may already be 2 years old when that process starts. To illustrate the issue, the officials noted that they were already planning for the 2020 POM in early fiscal year 2018, although the fiscal year 2016 inventory was not yet available. As a result, if the Air Force were to use inventory data to plan for the 2020 POM, they would have to rely on fiscal year 2015 inventory data. Air Force officials also said certain types of information that are useful for strategic planning, such as planned contracts for services and the scope and duration of the existing contracts, are not captured in the inventory process. Army officials had a similar perspective and said they do not use the inventory to plan for the POM because collecting data on past contracted services is not as relevant to estimating future requirements and funding needs. As part of Congress’s efforts to inform DOD’s management of its acquisition of contracted services, it enacted the inventory legislation. We concluded in January 2011 that the real benefit of the inventory process would ultimately be measured by its ability to inform management’s decision-making. As noted above, we have made recommendations to help improve this decision-making, which we continue to believe should be fully implemented. DOD officials have also identified ways in which the inventory can be useful. Recent legislation and our prior work in other related areas have identified additional means through which DOD can manage its acquisitions of contracted services. In December 2017, the National Defense Authorization Act for Fiscal Year 2018 was enacted. Section 851 requires DOD to regularly analyze past spending patterns and anticipated future requirements for its procurement of services and use these analyses to inform decisions on the award of and funding for such service contracts. In August 2017, we found DOD had not fully implemented three key leadership positions that were intended to enable DOD to more strategically manage service acquisitions. We recommended the USD(AT&L) reassess the roles, responsibilities, authorities, and organizational placement of key leadership positions to help foster strategic decision-making and improvements in the acquisition of services. DOD concurred with our recommendation. In December 2017, the Deputy Secretary of Defense appointed a reform leader for service contracts and category management—an approach intended to manage entire categories of spending across government for commonly purchased goods and services—and established related reform teams to help ensure department-wide efficiency in contract spending. In February 2016, we found that DOD’s and Congress’s insight into future spending on contracted services was limited because DOD did not identify service contract spending needs beyond the current budget year. Although program offices generally kept track of their future service contract needs and estimated costs for 5 years out, they were not required to identify planned service contract spending beyond the budget year. We recommended that the military departments revise their programming guidance to collect information on how contracted services will be used to meet requirements beyond the budget year. DOD partially concurred with our recommendation, but noted that the volatility of requirements and each budget cycle constrain the department’s ability to accurately quantify service contract requirements beyond the budget year. We agreed that requirements and budgets change over time, but our work showed that the needed data already exists and is not captured in such a way to inform senior leadership on future service contract spending. We continue to believe that implementing this recommendation will assist the department in gaining better insight into contracted service requirements and enable more strategic decisions about the volume and type of services it plans to acquire. We are not making new recommendations in this report. We provided a draft of this report to DOD for comment. In its written comments, which are reprinted in appendix I, DOD stated that it remains committed to improving its processes for collecting, analyzing, and reporting contracted services data. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; the Under Secretary of Defense for Personnel and Readiness; the Under Secretary of Defense for Acquisition and Sustainment; and the Under Secretary of Defense (Comptroller). In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Katherine Trimble (Assistant Director); Brenna Derritt (Analyst-in-Charge); Pete Anderson; Dennis Antonio; Vincent Balloon; Lorraine Ettaro; Gina Flacco; Kristine Hassinger; and Julia Kennon made significant contributions to this review.", "summary": "DOD obligated about $150 billion on contracted services—such as information technology support and maintenance of defense facilities—in fiscal year 2016. DOD has faced long-standing challenges in effectively managing its service acquisitions. The National Defense Authorization Act for Fiscal Year 2017 amended existing requirements for DOD to annually collect data on contracted services and to compile and review an inventory of the functions performed by contractor personnel. The Act also contained a provision for GAO to report on the status of this data collection and to assess DOD's use of the inventory. This report addresses how DOD (1) collected data to create an inventory of fiscal year 2016 contracted services and (2) used the inventory to inform workforce planning, workforce mix, and budget decisions. GAO has reported on DOD's inventory of contracted services since 2010. GAO reviewed OSD and the military departments' guidance, as well as the military departments' inventory submissions to OSD. GAO also analyzed contracted services data and interviewed OSD and military department officials. GAO found that the Department of Defense (DOD) used the same sources as it did in prior years to collect data and create an inventory of fiscal year 2016 contracted services, which is intended, in part, to help DOD make more strategic workforce decisions and better align resources. Office of the Secretary of Defense (OSD) guidance, issued in September 2017 to implement congressional direction, required the military departments to include in their submissions, at a minimum, purchases of services with a total contract value of $3 million or more, and in four services acquisition portfolio groups—logistics management, equipment-related, knowledge-based, and electronics and communications. As permitted under OSD's inventory guidance, the military departments varied somewhat in how they reported their contracted services data to OSD. For example, the Army and Air Force included purchases both over and under $3 million and the Air Force also identified purchases by the four portfolio groups. The Navy submitted summary data of contracted services but did not provide a list of purchases in time to be included in an inventory summary for Congress. An OSD official said, however, that the information provided was sufficient to prepare the inventory summary, which OSD submitted to Congress in February 2018. The Navy subsequently provided a list of its fiscal year 2016 service purchases to OSD in March 2018. Military departments generally have not developed plans to use the inventory for workforce and budget decisions, as statutorily required. This is consistent with what GAO found in November 2014 and October 2016. GAO's analysis found that the military departments' guidance generally does not require using the inventory in workforce and budget decisions (see table). Army manpower officials told GAO that inventory information such as the number of contractor full-time equivalents and the functions performed can be used to inform workforce mix decisions. However, workforce and budget officials at the Army, Navy, and Air Force stated they make limited use of the inventory to inform decision-making, in part because by the time the inventory is available, the data reflected are often too outdated to inform strategic decisions. GAO has previously recommended ways to improve use of the inventory. In November 2014, for example, GAO found that a lack of officials at the military departments who are accountable for integrating the use of the inventory leaves the department at continued risk of not complying with the legislative requirement to use the inventory to support management decisions. This issue persists, as the military departments have not made final designations for accountable officials responsible for developing plans and enforcement mechanisms to use the inventory. GAO is not making new recommendations in this report. Seven of 18 prior GAO recommendations related to the inventory remain open, including a recommendation for DOD to identify officials at the military departments responsible for developing plans and enforcement mechanisms to use the inventory. In its comments, DOD stated it is committed to improving its inventory processes.", "document_type": "gao"}
{"report": "Safety defect vehicle recalls (auto recalls) are initiated when a defect in a vehicle or vehicle equipment creates an unreasonable safety risk, as determined by NHTSA or a manufacturer. After a recall is initiated, manufacturers are required to provide written notification to vehicle owners via First-Class Mail within 60 days and remedy the defect. Franchised dealers—which sell or lease an auto manufacturer’s new vehicles—perform the recall remedy. Before manufacturers send recall notification letters to affected vehicle owners, NHTSA reviews draft letters and envelopes to ensure they include required information about the safety defect. Required information includes, among other things, a clear description of the safety defect, an evaluation of the risk to vehicle safety, and a statement that the manufacturer will remedy the defect without charge. See appendix II for an example of a notification letter. The number of vehicles affected by safety defect vehicle recalls has increased dramatically since 2011 (see fig. 1). The increase reflects, in part, several large-scale recalls. For example, in 2014, General Motors initiated a recall of over 8 million vehicles with faulty ignition switches. Similarly, according to NHTSA in 2014 and 2015, some passenger vehicle manufacturers began recalling Takata air bag inflators, recalls that have grown to include approximately 34 million vehicles and 19 auto manufacturers. For the Takata recall, NHTSA issued various orders and established a Coordinated Remedy Program under which the agency oversees the supply of remedy parts and risk-based prioritization of vehicles for repair, and manages related recalls with the assistance of an Independent Monitor. The Independent Monitor assesses compliance with the applicable orders issued by NHTSA and makes recommendations aimed at enhancing the remedy program. According to NHTSA’s Strategic Plan 2016–2020, this unprecedented recall activity encouraged the agency to improve its system for identifying and addressing defective vehicles. For example, the plan states that NHTSA’s “vision is to achieve a 100-percent completion rate for every recall by improving communication at every level, at every step of the way.” Thus, according to the plan, NHTSA and the auto industry have committed to identifying and implementing effective strategies to inform consumers of safety defects and envision that their coordination will bolster recall efforts to improve completion rates. NHTSA reported that annual completion rates for passenger vehicle recalls have remained relatively flat, ranging from 63 to 67 percent between calendar year 2011 and calendar year 2014. See appendix III for completion rates by vehicle component and vehicle type. In part, to improve communication and encourage consumers to complete repairs, NHTSA and manufacturers provide auto recall information to the public on their websites. For example, certain motor vehicle manufacturers are required to allow consumers to search a vehicle’s recall remedy status on the Internet using the vehicle identification number (VIN). NHTSA also provides publicly available auto recall information on its website, including examples of recall notification letters. In December 2016, NHTSA began consolidating its websites into NHTSA.gov to provide a single access point for its auto recall content. One of these websites, safercar.gov, was once NHTSA’s primary method of communicating auto recall information to consumers; however, the agency is in the process of moving this information to NHTSA.gov. NHTSA’s Strategic Plan 2016–2020 states that the agency wants NHTSA.gov to be a comprehensive user-friendly platform that serves as the premier source of vehicle safety information by, for example, improving the website’s search capabilities. NHTSA also aims to encourage consumers to use its website’s auto recall information through its communications program. NHTSA’s Office of Communications and Consumer Information (OCCI) is the primary office responsible for implementing the agency’s public communication efforts. OCCI intends to increase public engagement with the agency’s information through its social media channels, such as Instagram, Twitter, and Facebook. The amount OCCI obligated to support the agency’s auto recall efforts has increased from nearly $.5 million in fiscal year 2011 to about $2.5 million in fiscal year 2016. According to NHTSA officials, these obligations supported various efforts, including public awareness campaigns, an auto recall hotline, advertising agencies, exhibits at auto shows, and NHTSA’s mobile application. As part of our focus group discussion sessions, consumers selected safety risk and convenience as the two most influential factors they considered when using auto recall information to decide whether to complete repairs. All factors considered: During each session, we first asked consumers to describe all the factors they considered. Across the sessions, consumers shared a wide variety of factors including availability of a loaner vehicle, time to schedule and complete the repair, safety risk, and other factors. For example, some consumers had not yet repaired their vehicles because they were “just waiting” for parts to become available. Other consumers considered their previous customer service experiences at the franchised dealership or the distance they would need to travel to complete the repair. For example, one consumer at our rural focus group location told us it would take roughly 2 hours to reach the dealership’s repair shop. Most influential factors considered: After the discussion of all factors, we then asked each consumer to select the single most influential factor they considered. Consumers in the sessions overwhelmingly selected safety risk and convenience as the two most influential factors (see table 1). More than half of consumers in our focus group discussion sessions selected safety risk as the most influential factor they considered when making repair decisions. They told us that their perception of the risk influenced whether or not they repaired their vehicle. For instance, some consumers stated that they completed repairs immediately, because the risks “sounded serious” or that they considered the defect a “safety concern.” Conversely, some consumers said they did not complete the repairs because the defect “didn’t sound very urgent.” While each recall notification letter is required to include an evaluation of the risk to vehicle safety reasonably related to the defect, consumers in our focus group sessions shared mixed opinions about the quality and clarity of safety risk information included in the notification letter they received. For example, some consumers told us the letter’s safety risk information seemed vague. For instance, one consumer told us the letter’s description of the safety defect did not clearly state the chances of an increased risk of injury and so he “had to figure out on his own.” In addition, some consumers commented that the safety risk information could be more prominent in the notification letter, that the letter could emphasize the severity of the risk, or that the letter could describe the risk in simpler language. However, other consumers stated the notification letter they received adequately described the recall’s safety risk. In June 2011, we recommended that NHTSA modify the requirements for defect notification letters to include additional information to obtain readers’ attention. In 2013, NHTSA responded to our recommendation by requiring manufacturers to include the statement “IMPORTANT SAFETY RECALL” at the top of auto recall notification letters. Focus Group Participant’s Comment “I don't want to be without a car for half the day or stay with my kids all day.” Consumers in our focus group discussion sessions selected convenience as the second most influential factor they considered in making repair decisions. While some consumers described the “hassle” of the repair and being “too busy” to schedule and fix the defect, other consumers told us they repaired their vehicles more easily because, for example, they could take advantage of previously scheduled service appointments to also repair the defect. Also, some consumers in our sessions stated that the letter or notification they received could better address the inconvenience of the recall, for example by including better estimates of how long repairs might take. In addition, some consumers recommended the letter include options for scheduling needed repairs. As we discuss later in the report, NHTSA officials told us they continue to work with auto manufacturers to identify ways to encourage consumers to complete needed repairs, while representatives from some manufacturers we met with described specific steps they have taken to address some of the inconveniences consumers may experience in completing repairs. For example, one manufacturer facilitated a pilot program for a third-party service provider in conjunction with dealers to repair vehicles at the owner’s home or place of work, while another manufacturer told us they work with individual dealers to hold events specifically for recall repairs when consumers can come in to have repairs performed after normal business hours. Industry stakeholders’ use of auto recall information varies because these stakeholders play different roles in the auto recall process. Auto manufacturers are primarily responsible for providing auto recall information to the public and others, including NHTSA and auto dealers. Franchised dealers are responsible for performing the recall remedy for manufacturers and therefore use manufacturer-provided information for that purpose. Specifically, all of the franchised dealers we interviewed told us they identify recalls on new vehicles in their inventory primarily by accessing auto recall information through internal manufacturer databases. These franchised dealers may also use information from third-party providers or publicly available auto recall information on NHTSA’s website to identify recalls affecting used vehicles. Independent dealers—which are not generally authorized by manufacturers to perform recall remedies—may use publicly available auto recall information to identify open recalls. Specifically, 2 of the 3 independent dealers we met with told us they use NHTSA’s VIN look-up tool to search for open recalls affecting vehicles in their inventory before selling them to consumers. However, these dealers told us that the current design of the tool takes too much time to use, because it requires users to search each VIN individually. For example, one dealer told us each search took about 15 seconds to perform, resulting in significant time and cost because the dealership has tens of thousands of vehicles in its inventory. These dealers told us being able to search multiple VINs in a single search (i.e., VIN-batch search) could save them time or money. Representatives from the Alliance of Automobile Manufacturers stated they—in coordination with other industry stakeholders—are working with a third-party provider to develop a search tool that would address this concern by enabling VIN-batch searches for use by government agencies, such as state departments of motor vehicles, and commercial entities. The group anticipates the tool will be available in the first half of 2018. Although the vast majority of consumers who participated in our focus group discussion sessions reported a preference to receive auto recall notification by mail, most preferred to receive notifications by at least one additional electronic means such as e-mail, phone calls, and text messages. Eighty of the 94 consumers in our sessions reported a preference for receiving notification by mail, and all but 4 reported actually receiving mailed notification (see fig. 2). However, 69 of the 94 consumers in our sessions also reported a preference for receiving recall notification by electronic means, but only 7 reported actually receiving at least one type of electronic notification. This result suggests a gap between industry recall notification practices and notification preferences for most consumers in our focus groups, especially for younger consumers who were more likely to report a preference for notification by electronic means. For complete results of the questionnaire we administered to consumers for the discussion session, see appendix IV. As we discuss later in this report, in September 2016, NHTSA issued a Notice of Proposed Rulemaking (NPRM) that proposes to require auto manufacturers to notify consumers about auto recalls by electronic means in addition to First-Class Mail. NHTSA officials told us the agency is working with the administration on NHTSA’s regulatory portfolio and priorities, including this rulemaking. Some manufacturers told us they use additional methods to reach consumers, including notifying consumers by electronic means and translating recall information into Spanish. For example, representatives from one manufacturer told us they always notify consumers by e-mail before sending out the required First-Class Mail letter notification. These representatives told us using multiple recall notification means resulted in higher recall completion rates. In addition, eight of the remaining nine manufacturers told us they use supplemental electronic means notification on a case-by-case basis—generally using additional means to improve recall completion rates—while four manufacturers stated they consider safety risk severity when deciding when or how to use additional notification means for individual recalls. Also, representatives from 3 of the 10 manufacturers we spoke with told us they translate the entire mailed notification letter into Spanish. In late 2016, NHTSA launched its redesigned NHTSA.gov website, including the auto recall areas consumers assessed during our testing sessions. According to responses to a questionnaire we administered during our testing sessions, 78 of the 94 consumers found the auto recall areas of NHTSA.gov either “somewhat” or “very easy” to use (see fig. 3). See appendix V for complete participant responses to the questionnaire we administered to each consumer. To inform the development of the redesigned website, NHTSA worked with a contractor to conduct a usability study in 2015 to evaluate users’ reactions to the agency’s websites, including NHTSA.gov. According to agency officials, NHTSA implemented several changes based on the findings from the usability study, including: the creation of a dedicated “recalls” area of NHTSA.gov, and the ability for users to access the VIN look-up tool in three different ways—on the homepage, in the “recalls” area, and through direct links either in a NHTSA e-mail for subscribers or from an external website. In addition, NHTSA officials told us that Department of Transportation (DOT) and NHTSA staff meet as needed to discuss the website and consider improvements. For example, the officials said they monitor user searches for the relevance and accuracy of results and adjust the search software to better assist users in finding auto recall information. Officials also told us the agency collects a variety of other information about how visitors use NHTSA.gov, including how visitors access the website, and makes adjustments accordingly. For instance, NHTSA incorporated responsive web design as part of the agency’s ongoing consolidation effort—meaning the site is optimized for viewing on desktop, tablet, and mobile devices. In addition to monitoring searches and how visitors access NHTSA.gov, NHTSA officials told us they collect and consider online survey data to make website improvements and use web-analytic software to monitor, for example, where visitors choose to exit the website. Officials stated that such monitoring activities have allowed NHTSA to identify and correct problems with NHTSA.gov. We did not directly evaluate the accessibility of the auto recall areas of NHTSA.gov to ensure the ability of people with physical or mental disabilities to use the website. However, NHTSA officials provided us with an overview of several steps the agency takes to ensure NHTSA.gov complies with website accessibility requirements. For example, according to officials, NHTSA subscribes to a service that provides monthly accessibility scans of the agency’s websites. While most consumers in our usability testing sessions generally found the auto recall areas of NHTSA’s website easy to use, some consumers experienced difficulties completing tasks we asked them to perform (see table 2). Specifically, during each testing session we asked participants to perform tasks using the primary means NHTSA.gov provides for consumers to access information about auto recalls affecting their vehicles: searching for auto recalls using their vehicle’s VIN; searching for auto recalls using their vehicle’s year, make, and model; and locating NHTSA’s auto recall notification e-mail subscription service. In addition, an evaluation we requested to corroborate the results of our consumer usability testing, identified similar issues. As discussed below, consumers experienced these difficulties because the auto recall areas of NHTSA.gov do not always reflect federal and industry key website usability practices, which describe standards and guidelines for making websites easy to use. Following such practices can assist agencies in creating quality websites while providing the flexibility necessary to meet organizational needs. Website usability is particularly important for agencies, such as NHTSA, that are responsible for conveying safety information to the public. Federal standards for internal control state that agencies should communicate quality information externally and select appropriate methods for communicating with the public. While most consumers in our usability testing sessions found searching for recalls by VIN somewhat or very easy, some consumers found the search results did not provide the information they were seeking. When we asked consumers to perform VIN searches, they generally found the VIN look-up tool easy to use—88 of 94 consumers found searching with a VIN either somewhat or very easy. But some consumers experienced difficulties performing this task. Specifically, some consumers who had had their vehicles repaired expected to find the completed recall on the search results page. However, they were confused because the page is designed to display only open (i.e., unrepaired) recalls, not completed (i.e., repaired) recalls—leading these consumers to question the accuracy of the results. In addition, the evaluation conducted by website usability professionals found that, when an error occurred during a VIN search, the error message was too difficult to locate on the search results page. The evaluation recommended the error message have greater weight and more prominence on the page. Federal key website usability practices state that agencies should ensure that results of user searches provide the precise information being sought, and in a format matching users’ expectations. When users are confused by search results, or do not immediately find what they are searching for, they become frustrated and may abandon the search or the website entirely. Since NHTSA launched the VIN look-up tool in August 2014, the number of VIN searches performed has increased (see fig. 4). According to NHTSA officials, major increases occurred in mid-2015— when the Takata air bag inflator recalls were announced—and in early 2017, when NHTSA made the VIN look-up tool search function available on NHTSA.gov and displayed it prominently on the website. Ensuring the usability of NHTSA’s VIN look-up tool is particularly important because it is the only way on NHTSA.gov for a consumer to determine whether their specific vehicle has an open safety recall. Recall Search Using Vehicle Year, Make, and Model Some consumers’ vehicle year, make, and model searches were hampered by the information required to conduct an accurate search, as the content on the website is not always in plain language. We asked consumers to perform a recall search using their vehicles’ year, make, and model, and 78 of 94 consumers found the task to be either somewhat or very easy. However, some consumers found that they did not know enough information about their specific vehicles to feel confident that they were searching for the correct vehicle. For example, a year, make, and model search for a 2009 Toyota Tacoma may ask the consumer to choose among vehicle options, including “2009 TOYOTA TACOMA REGULAR CAB W/SAB RWD/AWD.” Acronyms such as “W/SAB”— which stands for “with side air bags”—may be confusing to consumers. Federal key website usability practices state that federal agencies should write website content using plain language, so website visitors can easily find and use what they need. Focus Group Participant’s Comment “I think [the Recall Notification E-mail System Sign-Up is] poorly placed. I had to scroll to find it. I had to search for it. You want at the top .” Recall Notification E-mail System Sign-Up Some consumers suggested improvements to make the Recall Notification E-mail System Sign-Up easier to locate on the homepage. NHTSA first made its Recall Notification E-mail System Sign-Up available in March 2008. Of the 94 consumers in our testing sessions, 66 found it either “somewhat” or “very easy” to find the Recall Notification E-mail System Sign-Up—making this the least easy of the three tasks we asked consumers to perform. Specifically, several consumers said the Recall Notification E-mail System Sign-Up should include a clearer description, be easier to find, and be located at the top of the homepage (see fig. 5). These improvements are particularly important because some consumers in our focus group sessions told us that the ability to sign up for auto recall e-mail notifications was the most useful part of the auto recall areas of NHTSA.gov. The website evaluation conducted by website usability professionals recommended that NHTSA streamline its homepage with more of a focus on primary website tasks. The evaluation also found that users must move through too many pages to sign up for recall e-mails. Federal key website design and usability practices state that agencies should put important items closer to the top of the page, where users can better locate the information. Key practices also state that agencies should design their websites so users can successfully complete the most common tasks in the fewest number of steps. The website usability difficulties that consumers in our focus groups experienced may be due to the fact that NHTSA has not studied the website’s usability since the agency redesigned NHTSA.gov in late 2016 and, therefore, may have been unaware of these difficulties prior to our review. NHTSA plans to conduct a website usability study with consumers after the consolidation effort, discussed above, is complete. However, NHTSA could not provide a general time frame for conducting the study because it has not yet determined when the consolidation effort will be complete. We have previously reported that it is essential for organizations to effectively guide their information technology efforts by establishing timelines to complete them, among other strategic planning best practices. Without establishing a completion date for its website consolidation effort, the website usability difficulties we identified may persist and limit the effectiveness of NHTSA’s primary means of providing consumers with safety recall information about their vehicles on NHTSA.gov. In January 2016, NHTSA launched a national advertising campaign encouraging consumers to check for open recalls using the agency’s VIN and year, make, and model look-up tools. Through March 2017, NHTSA spent about $1 million on its Safe Cars Save Lives campaign, which sponsors advertisements on Google, Facebook, and other media platforms. For example, Google might place NHTSA’s advertisement above other search results, when a consumer typed certain keywords— such as “recall,” “airbag recalls,” or “safercar.gov”—into the search. NHTSA evaluated the campaign’s effectiveness by monitoring website traffic performance reports to determine how frequently consumers clicked on NHTSA-sponsored advertisements and ultimately searched for open recalls using the agency’s look-up tools. NHTSA also compared results across media platforms and adjusted the campaign’s strategy to improve performance. For example, NHTSA optimized advertisements on mobile devices, since mobile-device users performed more recall searches than other users. According to NHTSA data, the awareness campaign resulted in consumers performing 1.1 million recall searches through March 2017—a cost of about $0.90 per search. Agency data indicate that this cost generally decreased as NHTSA improved the campaign’s strategy. Agency officials told us NHTSA plans to spend another approximately $1.8 million on Safe Cars Save Lives from September 2017 through September 2018 due to the campaign’s effectiveness in raising the public’s awareness about auto recalls. NHTSA began implementing a mandated 2-year pilot grant program intended to evaluate the feasibility and effectiveness of informing consumers about open auto recalls during state vehicle registration. In September 2016, NHTSA solicited applications to participate in the program, wherein selected states would inform consumers—at no charge—about open recalls using all means that permit consumers to register vehicles within the state (e.g., in person, Internet, and mail). According to NHTSA, only one state applied for the grant. In September 2017, NHTSA awarded the sole applicant $223,000. Under the program, the grantee needs to collect and report program performance data, including the extent to which open recalls have been identified and repaired. In addition, the grantee must report whether certain notification means were more effective than others and what could be done to improve the program. Upon completion of the pilot program, NHTSA is required to evaluate the extent to which open recalls identified have been remedied. Auto manufacturers we met with were generally supportive of the program. Specifically, representatives from 9 of the 10 manufacturers told us that notifying consumers about open recalls during vehicle registration can raise consumer awareness or improve recall completion rates. In September 2016, NHTSA issued a Notice of Proposed Rulemaking (NPRM), which proposes to require auto manufacturers to notify consumers about open recalls by electronic means—such as e-mails, phone calls, and text messages, in addition to First-Class Mail. As we described earlier, auto manufacturers are currently required to notify consumers about safety recalls affecting their vehicles via First-Class Mail. According to NHTSA, the NPRM aims to aid in efficiently and effectively improving recall completion rates, by proposing that manufacturers provide notification using electronic means in addition to First-Class Mail. Consumers in our focus groups as well as auto manufacturers and consumer associations we interviewed generally supported additional notification using electronic means. Consumers in our focus groups: As we discussed earlier, 69 of the consumers in our focus group discussion sessions reported they would prefer to receive additional notification by at least one type of electronic means. However, only 7 consumers actually received such notifications—suggesting a gap between industry notification practices and notification preferences for these consumers. Auto manufacturers: Representatives from 9 of 10 manufacturers we interviewed told us they generally support providing notification using electronic means. Although the NPRM proposes a broad definition of electronic means to give manufacturers flexibility to determine the most effective means, these representatives also shared implementation concerns. For example, representatives from 1 of the 9 manufacturers told us that—although the company collects e- mail addresses from some customers for other purposes—not all customers provide e-mail addresses, and those collected are not always accurate. As we discussed previously, most manufacturers we met with currently use supplemental electronic means notification on a case-by-case basis. Consumer associations: Similarly, both consumer associations we interviewed told us additional electronic notification can help reach consumers who do not complete repairs after receiving initial mailed notification. NHTSA’s proposal would maintain manufacturer reporting requirements, though it may result in additional reporting. This additional information could help the agency evaluate the effectiveness of various means of consumer notification. We previously found that NHTSA may be able to use manufacturers’ data to identify what factors make some recalls more or less successful than others. We recommended that NHTSA use the recall data it collects to analyze particular patterns or trends that may characterize successful recalls and determine whether these factors represent best practices. If the NPRM is finalized, manufacturers would provide NHTSA with representative copies of the newly required electronic notifications, in addition to mailed notifications, and would specify the electronic means used, such as e-mail or text message. According to NHTSA officials, this information could allow the agency to track and evaluate the effectiveness of various notification means used by manufacturers by, for example, comparing completion rates across means—a key step in identifying best practices that could encourage consumers to complete repairs. However, it is too early for NHTSA to conduct such an evaluation, because the agency has not issued a final rule. NHTSA officials told us the agency is working with the administration on NHTSA’s regulatory portfolio and priorities, including this rulemaking. NHTSA has also taken steps to collaborate with industry stakeholders and explore consumer education best practices. For example, in April 2015 NHTSA hosted a day-long workshop that brought together auto industry stakeholders to examine public education of the recall process. During the workshop, participants identified current barriers to the public’s awareness of auto recalls and discussed potential solutions to address them, such as using text messages and social media to communicate with younger consumers and using different delivery methods for recall notices. Similarly, in January 2016 NHTSA and 18 auto manufacturers adopted a set of Proactive Safety Principles to explore and employ new ways to increase safety recall participation rates. For example, NHTSA and auto manufacturers agreed to share industry best practices and policies based on lessons learned from ongoing safety recalls. The Independent Monitor of Takata in conjunction with NHTSA has also issued a set of coordinated communications recommendations based on consumer research, best practices observed during the Takata recall, and discussions with manufacturers. For example, the recommendations encourage manufacturers to: pursue a “multi-touch” communications strategy that employs non- traditional means, such as e-mail and text messages; convey risk in clear, accurate and urgent terms; and include a clear “call to action” designed to facilitate prompt and efficient scheduling of repairs. According to NHTSA officials, the agency relies on auto manufacturers to evaluate the effectiveness of these efforts. However, agency officials told us NHTSA reviews manufacturers communication plans as part of the Takata recall’s Coordinated Remedy Program and provides ongoing recommendations on manufacturers’ communication language, approach, and strategies. With the recent steep increase in safety defect vehicle recalls and continued low recall completion rates, it is vital for consumers to be able to easily access and use publicly available auto recall information. NHTSA has taken important steps to improve its website—which provides safety recall information to consumers—resulting in most consumers in our focus groups finding the website easy to use. However, the difficulties some experienced in attempting to complete essential auto recall tasks demonstrated that NHTSA.gov does not always reflect key website usability practices for website design. Although NHTSA plans to conduct a website usability study with consumers after consolidating its websites, it has not determined a completion date for this effort—an essential step for organizations to effectively guide their information technology efforts. Without such a date, the website usability difficulties may persist and limit the effectiveness of NHTSA.gov in providing consumers with recall information about their vehicles. By addressing these difficulties in the interim, NHTSA can better assure that consumers obtain this information, which can be vital to their safety. We are making the following two recommendations to NHTSA: The Administrator of NHTSA should determine a completion date for the agency’s website consolidation effort. (Recommendation 1) The Administrator of NHTSA should, while the agency continues its website consolidation effort, take interim steps to improve the usability of the auto recall areas of NHTSA.gov by addressing the website usability difficulties we identified. (Recommendation 2) We provided a draft of this report to DOT for review and comment. In its written comments, reproduced in appendix VI, DOT stated that it concurred with our recommendations. The department also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to relevant congressional committees, the Secretary of Transportation, and the Administrator of NHTSA. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. This report examines the use of publicly available auto recall information for safety defects affecting passenger vehicles. The report addresses the following objectives: (1) How do consumers and industry stakeholders use publicly available auto recall information? (2) How easy or difficult to use do consumers find the auto recall areas of NHTSA.gov? (3) What steps, if any, has the National Highway Traffic Safety Administration (NHTSA) taken to raise consumer awareness about auto recalls and how has NHTSA evaluated the effectiveness of these steps? We define publicly available auto recall information to include information on the auto recall areas of NHTSA.gov, such as examples of notification letters that manufacturers mail to consumers. This report focuses on safety defect vehicle recalls affecting passenger vehicles that are initiated when a defect in a vehicle or vehicle equipment creates an unreasonable safety risk, as determined by NHTSA or a manufacturer. To determine how consumers use publicly available auto recall information, we conducted and analyzed transcripts and questionnaires from 12 consumer focus groups we conducted with used and new vehicle owners who had experienced an auto recall in the last 24 months. Each focus group was split into two sessions: (1) a discussion session to explore participants’ thoughts, experiences, and preferences about auto recall information and (2) a website usability testing session. Also, we administered a questionnaire as part of each of these sessions. For the discussion session, we asked consumers about the recall notification process and how they used the recall information, and for the website usability testing session, we asked consumers to fill in a questionnaire during the session itself as they assessed the usability of the auto recall areas of NHTSA’s website. We conducted the 12 focus groups at six locations across the country, with each group including 7 or 8 consumers for a total of 94 participants. Half of the focus groups were comprised of consumers who had completed the repair and the remaining half included consumers who had not completed the repair. We selected the six focus group locations to provide population and geographic dispersion. To ensure geographic dispersion, we selected at least one location in each U.S. Census region (see table 3). To ensure population dispersion, we selected Metropolitan Statistical Areas representing a range of population sizes based on 2015 U.S. Census estimates. To ensure our selection included the perspectives of vehicle owners in geographically distant or isolated communities, we also selected a rural location, which we defined as a city or town that has a population of less than 50,000 inhabitants and is not an urbanized area contiguous and adjacent to a city or town that has a population of greater than 50,000 inhabitants. Using information provided by the participants, we selected focus group participants based on age, income, gender, education level, race, and ethnicity to ensure we collected a range of perspectives on auto recall information use. However, since we did not select a representative sample of participants, focus group results are not generalizable to all vehicle owners. During focus group discussion sessions, we asked participants to discuss factors they considered when deciding whether to repair their recalled vehicle and then to select the single most influential factor. Each of the 12 focus group sessions was audio recorded and transcriptions were created; transcripts served as the record for each group. We then evaluated those transcripts using systematic content analysis to identify the factors consumers considered when deciding whether to complete repairs and any suggested improvements to the auto recall communication process. The analysis was conducted in three steps. First, two analysts independently developed a code framework and then worked together to resolve any discrepancies. Second, each transcript was coded independently by analysts using the framework and any discrepancies were resolved by both analysts agreeing on the coding of the associated statement by a participant. Third, if needed, another analyst adjudicated any continued disagreement between coders. Because the transcripts did not include a unique identifier for each focus group participant, we conducted our analysis of focus group session discussions at the group level (i.e., of the 12 focus groups we conducted). We also administered and analyzed a questionnaire as part of each discussion session to quantify responses regarding consumers’ use of auto recall information, including how they received and preferred to receive auto recall notifications. Our analysis of the questionnaire responses was conducted at the individual consumer level (i.e., of the 94 consumers who participated). These focus group sessions were structured, guided by a moderator who used a standardized list of questions to encourage participants to share their thoughts, experiences, and preferences. We also conducted two pretest focus groups at our headquarters and made some revisions to the focus group guide prior to beginning the sessions with consumers. Methodologically, focus groups are not designed to demonstrate the extent of a problem or to generalize results to a larger population or provide statistically representative samples or reliable quantitative estimates. Instead, they are intended to generate in-depth information about the reasons for the focus group participants’ thoughts, experiences, and preferences on specific topics. The projectability of the information produced by our focus group sessions is limited. For example, the information includes only the responses from the vehicle owners from the 12 selected groups and their individual responses to questions we asked. The experiences and preferences expressed may not reflect other vehicle owners’ thoughts and preferences. In addition, while the composition of the groups was designed to ensure a range of age and education levels, among the other criteria mentioned previously, the groups were not constructed using a random sampling method. To determine how industry stakeholders use auto recall information, we interviewed selected auto manufacturers, selected franchised and independent auto dealerships, NHTSA program officials, and other industry stakeholders. Specifically, we interviewed representatives from the following 10 auto manufacturers, selected based on each manufacturer’s sales market share (small, medium, and large), place of ownership (foreign and domestic), and experience with auto recalls (lower to higher based on the average annual number of auto recall campaigns and average market share of each manufacturer from 2010 to 2014) to collect a range of perspectives on how manufacturers use auto recall information: Tesla Motors, Inc. To understand the perspective of auto dealers, we interviewed four franchised dealerships, one in each of the four U.S. Census regions where we conducted focus groups with consumers. We also interviewed three independent auto dealerships in two U.S. Census regions. The results of these interviews are not generalizable to all auto manufacturers and dealerships, but provide insights about how some industry stakeholders use auto recall information. We conducted interviews with NHTSA program officials to understand NHTSA’s role in the auto recall process. In addition, we interviewed other stakeholders, including the Independent Monitor of Takata, which assists NHTSA in overseeing the Takata recall, as well as officials from consumer associations and other industry groups (see table 4). To evaluate how easy or difficult consumers find the auto recall areas of NHTSA.gov to use, we reviewed various website usability resources to understand federal and industry key website usability practices for making websites easy to use, such as focusing on design and how easily users can find information. In addition, we reviewed federal standards for internal control related to communicating quality information externally. During our usability testing sessions, we asked consumers to attempt to complete auto recall tasks—the primary means NHTSA.gov provides for consumers to access information about auto recalls affecting their vehicles—and discuss their experiences. We then compared consumers’ experiences with the usability of the website against these practices. To identify key website usability practices, we analyzed guidance documents from NHTSA and other federal agencies. For example, we analyzed the General Services Administration’s (GSA) and the Department of Health and Human Services’ Research-Based Web Design & Usability Guidelines, which includes quantified, peer-reviewed guidelines intended to help federal agencies improve the design and usability of their information-based websites. We also analyzed GSA’s Requirements for Federal Websites and Digital Services, and the U.S. Digital Services Playbook to identify key practices for making websites easy to use. Identified key practices are: (1) design and content— focusing on the layout, headers, and design; (2) navigation—how easily users can find information; (3) clarity—the ability to read and digest content; (4) identity and purpose—whether the site clearly presents its purpose; and (5) accessibility—the ability of people with physical or mental disabilities to use the site. To analyze the results of focus group website testing sessions, we performed a systematic content analysis of the session transcripts using the same content analysis methods described above and an analysis of the questionnaire we administered to each participant during the website usability sessions. Specifically, we analyzed the transcripts from the website usability testing sessions to account for consumers’ experiences, including their initial impressions of the website and any suggested usability improvements. We also analyzed the results of the questionnaire that each participant completed where participants were asked to mark responses regarding their experience including an assessment of the usability of the auto recall areas of NHTSA.gov. Our analysis of the results from the questionnaire responses was conducted at the individual consumer level (i.e., of the 94 consumers who participated) while our analysis of focus group session discussions was conducted at the group level (i.e., of the 12 focus groups we conducted). To corroborate the results of usability testing sessions we conducted with the consumers in our focus groups, we requested that five website usability professionals from GSA’s Federal User Experience Community conduct an independent evaluation of the auto recall areas of NHTSA.gov against federal and industry key website usability practices (described above). The website usability professionals developed a website usability evaluation form, which they used to individually evaluate the auto recall areas of NHTSA’s website. The website usability professionals then met to form a consensus and provided us with one final group evaluation of the website usability of the auto recall areas of NHTSA.gov. Also, although neither our usability testing nor the website usability evaluation conducted by website usability professionals directly addressed accessibility, we interviewed responsible agency officials about how the agency assesses the accessibility of NHTSA.gov. We also requested and analyzed website data provided by NHTSA to understand how consumers access and use NHTSA.gov. Requested data included the number of subscribers to NHTSA’s Recall Notification E-mail System Sign-up; the number of weekly vehicle identification number (VIN) searches performed on NHTSA.gov from August 2014 through May 2017; and NHTSA.gov usage data by device (i.e., usage by mobile devices, tablets, and desktop computers). We assessed the reliability of these data by reviewing any supporting documents provided by the agency and interviewing responsible NHTSA officials, and concluded the data were sufficiently reliable for our reporting purposes. While we did not independently review the usability of auto manufacturers’ auto recall websites, we requested and reviewed the results of any audits that NHTSA performed of these websites, including whether the websites met statutory and regulatory requirements for providing auto recall information to the public. We then corroborated any audit findings by reviewing the auto recall websites of the selected auto manufacturers that we interviewed. To determine any steps NHTSA has taken to raise consumer awareness about auto recalls and how NHTSA evaluates the effectiveness of any steps, we reviewed relevant statutes, regulations, and proposed rules, including the Fixing America’s Surface Transportation Act and a Notice of Proposed Rulemaking related to recall notification methods. We also reviewed agency and other documents that describe or evaluate NHTSA’s public awareness activities. For example, we analyzed NHTSA’s strategic planning documents—such as NHTSA’s Strategic Plan 2016–2020—to identify ongoing public awareness activities along with their related goals, objectives, or performance metrics. Similarly, we requested and analyzed any documents NHTSA uses to evaluate the effectiveness of its public awareness activities, including performance reports for NHTSA’s ongoing Safe Cars Save Lives campaign. To assess the reliability of data included in these performance reports— such as VIN searches performed—we reviewed agency documentation and interviewed agency officials about the reliability, accuracy, and completeness of the data and determined the data were sufficiently reliable for our reporting purposes. We reviewed performance management practices as provided in the Government Performance and Results Act of 1993 (GPRA), the GPRA Modernization Act of 2010, and standards for internal control in the federal government to identify any opportunities for improvement. We also performed a literature review to identify any related published articles and research studies. To understand how NHTSA implements and evaluates any public awareness activities, we also interviewed responsible agency officials from NHTSA’s Office of Communications and Consumer Information and other offices. In addition, we discussed NHTSA’s public awareness efforts during interviews with industry stakeholders, including selected auto manufacturers, selected franchised and independent auto dealerships, and other industry stakeholders. We analyzed the results of these interviews along with the focus group discussions we conducted with consumers (discussed above) to identify perspectives on the effectiveness of NHTSA’s public awareness steps. We conducted this performance audit from October 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The National Highway Traffic Safety Administration (NHTSA) is required to conduct a biennial analysis of vehicle safety recall completion rates and submit the results of its analysis in a report to certain congressional committees. The report must include, among other things, the annual recall completion rate by vehicle type and vehicle component (such as brakes, fuel systems, and air bags) for each of the 5 years preceding the year the report is submitted. According to NHTSA’s May 2017 report, completion rates for all vehicles combined ranged between 63 percent and 67 percent between calendar year 2011 and calendar year 2014 (see table 5). However, NHTSA reported wider variation when the recall completion rates are broken down by vehicle type. Similarly, the report found that completion rates for most component categories fall within a range of 60 percent to 75 percent (see table 6). The annual completion rate is a volume-based, weighted metric, such that the more vehicles affected by the recall, the more weight or influence it has on the computed rate. Focus group participants responded to a questionnaire we administered to collect information on consumers’ auto recall notification preferences during our discussion sessions. Table 7 shows participants’ responses to the administered questionnaire, by age group. We present these responses by age group, because consumers’ notification preferences may vary according to their ages. Focus group participants responded to a questionnaire we administered to collect information on the usability of NHTSA.gov during our usability testing sessions. Table 8 shows focus group participants’ responses to the administered questionnaire, by age group. We present these responses by age group, because consumers’ website usability needs or preferences may vary according to their ages. In addition to the individual named above, H. Brandon Haller (Assistant Director); Katherine Blair; Jason Blake; Melissa Bodeau; Alicia Cackley; William Colwell (Analyst in Charge); Lacey Coppage; Elizabeth Dretsch; Jaci Evans; Marcia Fernandez; Sarah Kaczmarek; Malika Rice; Todd Schartung; and Andrew Stavisky made key contributions to this report.", "summary": "The number of vehicles affected by safety defect recalls increased sharply in recent years—from nearly 13 million in 2011 to over 51 million in 2016. Once a defect is identified, auto manufacturers are required to send written notification to vehicle owners by mail. NHTSA also aims to enhance awareness of auto recalls by providing information on its website, NHTSA.gov . The Fixing America's Surface Transportation Act includes a provision requiring GAO to study the use of publicly available safety recall information. This report addresses: (1) how consumers and industry stakeholders use such information and (2) how easy to use do consumers find the auto recall areas of NHTSA.gov, among other objectives. To understand consumers' use of auto recall information and to test website usability, GAO conducted 12 focus groups with 94 consumers who had a recall. Focus groups were held in six locations selected for population and geographic variation. GAO identified key website usability practices and requested an evaluation by website usability professionals. GAO reviewed statutes, regulations, and NHTSA documents, and interviewed industry stakeholders—including 10 manufacturers selected based on sales market share and other factors. Consumers, manufacturers, and auto dealers use publicly available auto recall information differently. For example, the 94 consumers in 12 focus groups that GAO conducted used this information to decide whether to repair their vehicles. These consumers overwhelmingly cited safety risk and convenience as the two most influential factors they considered. Most consumers reported a preference for receiving recall notification by at least one electronic means, such as by e-mail or text message, in addition to mail. However, only 7 of 94 consumers reported receiving electronic notifications, suggesting a gap between the industry's auto recall notification practices and consumers' preferences. (See fig.). In response to a mandate in law, in September 2016, the National Highway Traffic Safety Administration (NHTSA) issued a proposed rule that, if finalized, would require manufacturers to notify consumers about auto recalls by electronic means in addition to mail. Most consumers in GAO's focus group website usability tests found the auto recall areas of NHTSA's website—NHTSA.gov—easy to use; however, some consumers experienced difficulties when asked to complete auto recall related tasks. For example, when consumers attempted to search for recalls affecting their specific vehicles, some found the search results confusing, leading them to question the accuracy of the results. Similarly, some consumers were hampered in searching for recalls by their vehicles' year, make, and model because the website did not always display model options using plain language. GAO found that the auto recall areas of NHTSA.gov do not always reflect federal and industry key website usability practices, and that an independent evaluation conducted by website usability professionals at GAO's request identified similar issues. NHTSA is in the process of consolidating its websites and plans to conduct a website usability study of NHTSA.gov with consumers after the consolidation is complete. However, the agency has not determined a completion date for the consolidation effort—an essential step for organizations to effectively guide their information technology efforts. Without establishing a completion date and taking interim steps to improve the usability of NHTSA.gov, consumers will likely continue to experience difficulties, which may limit the effectiveness of the website's primary means of providing consumers with information about recalls affecting their vehicles. GAO recommends that NHTSA determine a completion date for its website consolidation effort and take interim steps to improve the usability of NHTSA.gov by addressing the website usability difficulties GAO identified. The Department of Transportation concurred with the recommendations.", "document_type": "gao"}
{"report": "The Military Health System is responsible for, among other things, assuring the overall oral health of all uniformed DOD personnel. As part of this health system, each service’s dental corps provides dental care for its servicemembers. The Army, the Navy, and the Air Force Dental Corps include approximately 3,000 active duty dentists and approximately 247 (200 in the United States) dental clinics to serve over 1.3 million servicemembers. Unlike their medical counterparts, the services’ dental corps rarely provide beneficiary care, according to service officials. The primary role of military dentists is to ensure the oral health and readiness of servicemembers. Servicemembers’ oral health is evaluated using standardized measures to determine the extent to which they are deployable. Generally, servicemembers with identified urgent, emergent, or unknown dental treatment needs are not considered to be worldwide deployable until their oral health is adequately addressed. Most military dentists enter service through the Armed Forces’ Health Professions Scholarship Program (AFHPSP), a scholarship program available to students enrolled in or accepted to dental school. Under the services’ AFHPSP program, DOD pays for tuition, books, and fees, and provides a monthly stipend. In return, the students incur an obligation to serve 6 months of active duty service for each 6 months of benefits received, with a 2-year minimum obligation. AFHPSP dental students can pursue either a Doctor of Dental Surgery or Doctor of Dental Medicine degree to become a general dentist. In addition to the AFHPSP program, the services recruit fully qualified licensed dentists. For example, individuals may become military dentists through direct accessions, either by entering the service as a fully trained, licensed dentist or through the Financial Assistance Program, which provides stipends for dentists accepted or enrolled in a residency program. For additional information on these and other recruitment programs, see appendix I. Regardless of the recruitment program, dentists may begin to practice after obtaining a degree and completing licensure requirements. Military dentists may pursue postgraduate training through a general dentistry program, such as the Advanced Education in General Dentistry Program, a general practice residency, or a specialty dental program offered through the Uniformed Services University of the Health Sciences Postgraduate Dental College. Postgraduate dental college includes training and/or residency within a specific specialty and typically requires between 1 to 6 years of additional training. While in a postgraduate dental college program, participants incur an additional 6 months of active duty service obligation for each 6 months in training, with a minimum of 2 years active duty service obligation. However, this obligation can be served concurrently with obligations already incurred through AFHPSP if incurred through sponsored postgraduate education in a military or affiliated program. Figure 1 portrays the path to becoming a military dentist and the active duty obligation incurred for AFHPSP dental students. Each service takes steps to validate whether the military dentist has the appropriate professional qualifications and clinical abilities. Validation includes ensuring the dentist is credentialed and privileged to practice. See appendix II for more details on service processes for monitoring qualification and performance of dentists. The Assistant Secretary of Defense for Health Affairs (ASD(HA)) serves as the principal advisor for all DOD health policies and programs. The ASD(HA) issues DOD instructions, publications, and memorandums that implement policy approved by the Secretary of Defense or the Under Secretary of Defense for Personnel and Readiness and governs the management of DOD medical programs. The ASD(HA) also exercises authority, direction, and control over the President of the Uniformed Services University of the Health Sciences (USUHS). Further, ASD(HA) sets the special and incentive pay amounts for all military dentists. The ASD(HA) reports to the Under Secretary of Defense for Personnel and Readiness, who in turn reports to the Secretary of Defense. The Army, the Navy, and the Air Force medical commands and agencies report through their service chiefs to their respective military department secretaries and then to the Secretary of Defense. The Army, the Navy, and the Air Force have the authority to recruit, train, and retain dentists. Each military service has its own organizational structure and responsibilities. See figure 2. In September 2013, the Defense Health Agency was established to support greater integration of clinical and business processes across the Military Health System. The Defense Health Agency, among other things, manages the execution of policies issued by the ASD(HA) and manages and executes the Defense Health Program appropriation, which funds the services medical departments. By no later than September 30, 2021, the Director of the Defense Health Agency will assume responsibility for the administration of each military treatment facility, to include budgetary matters, information technology, and health care administration and management, among other things. Although military treatment facilities include dental clinics, DOD initially intended to exclude dental care (except oral and maxillofacial surgery), from the transfer to the Defense Health Agency. However, as of September 2018, DOD stated it is assessing the extent to which dental care will fall under the Defense Health Agency’s administration. In July 2010, we found that the services’ collaborative planning efforts to determine staffing of medical personnel working in fixed military treatment facilities, including dentists, were limited, and that their staffing models and tools had not been validated and verified in all cases as DOD policy requires. Specifically, we found that some Army specialty modules contained outdated assumptions, and that only a portion of the models had been completely validated. We also found that the Navy did not have a model, but instead employed a staffing tool that used current manning as a baseline and adjusted its requirements based on emerging needs or major changes to its mission. However, the Navy’s tool was not validated or verified in accordance with DOD policy. Further, we found that the Air Force may not know its true medical requirements because the model it relied on also was not validated or verified. We made several recommendations in our 2010 report, two of which were aimed at improving staffing of MTFs. Specifically, we recommended that the services identify common medical capabilities shared across military treatment facilities and develop and implement cross-service medical staffing standards for these capabilities as appropriate. We also recommended that each service update or develop medical personnel requirements determination tools as needed to ensure that they use validated and verifiable processes. The Army, the Navy, and the Air Force have implemented our recommendation related to the development and implementation of validated and verifiable tools for developing medical personnel requirements. Additionally, they identified and developed standardized cross-service staffing standards for over 40 medical specialties and incorporated them into their individual MTF staffing tools. The Army and the Air Force have validated the dental clinic staffing models that they use, and the Navy’s draft model is under review. In the absence of a validated model, the Navy uses a general ratio to staff its dental clinics. See table 1 for a description of each of the services’ methodology for staffing dental clinics. The Army and the Air Force models, which were developed in accordance with DOD guidance and service-specific requirements, are subject to the following validation processes: Army. Since 2011, the Army has used the Army Dental Clinic Model, which, according to officials, is intended to determine the minimum number of dentists necessary, by location, to ensure the medical readiness of soldiers. Army staffing models are subject to validation by the U.S. Army Manpower Analysis Agency, which validated the Army’s Dental Clinic Model when it was developed in 2011. According to an Army official, the model’s validation expired in 2014, and was not re-validated until May 2018 due to limited resources. Additionally, Army officials stated that the data used in the model are updated on an annual basis and that the model is subject to revalidation every 5 years. Air Force. Since 2014, according to Air Force officials, the Air Force has used its Dental Manpower Model to determine the minimum number of dentists required, by clinic, to ensure the medical readiness of servicemembers served by Air Force dental clinics. According to Air Force officials, the Air Force Dental Manpower Model is subject to review and validation that includes input from the Air Force Medical Service; Surgeon General’s Manpower, Personnel, and Resources office; Air Force Personnel Center; and consultants. Officials told us the model is reviewed and validated annually and presented to the Dental Operations Panel and Air Force’s medical service corporate structure. The model was most recently validated in April 2018. According to Navy Bureau of Medicine and Surgery (BUMED) officials, the Navy does not yet have a model and therefore instead uses a general ratio of one dentist for every 1,000 sailors as a baseline to initially determine the staffing requirements of its dental clinics. This ratio is adjusted based upon emerging needs or major changes to mission. In 2013, according to Navy officials, BUMED began developing a Dental Services Model that could be used to determine dental clinic staffing needs. In November 2016, BUMED internally released a draft report recommending that the dental corps approve and implement the Dental Services Model as the staffing standard for dental clinics. According to a Navy official, this report was provided to dental corps leadership for review in July 2018 and they are expected to complete their review in October 2018. According to BUMED officials, if the dental corps leadership approves the model for use as an official staffing standard, the model would be subject to official Navy validation processes which, in accordance with DOD policy, would entail verification and validation throughout the model’s lifecycle. Conversely, if the dental corps decides to use the model as an informal staffing tool to supplement its current processes, a BUMED official stated that it will be subject to an ad-hoc internal review every 3 years that mirrors the Navy’s review of its validation process. Currently, the Army, the Navy and the Air Force each use different service-specific standards and other factors to determine the number of dentists needed at their respective dental clinics. As previously discussed, the services have developed and are in the process of implementing cross-service staffing standards—that is, a standardized approach to staffing the common day-to-day health needs of the patient population—for certain medical specialties. In response to DOD policy and our 2010 recommendation, the services established a working group to identify and develop common cross-service staffing standards, and in 2017, the tri-service working group established such standards for 42 different medical specialties. These standards are based on actual workload data for common capabilities within selected medical specialties and were incorporated into each service’s staffing tools to provide consistent values for the minimum number of staff required to meet patient needs. However, according to an official involved in the development of the standards, the services have not collaborated to develop a plan to establish a similar set of standards for dental care. DOD guidance directs modeling and simulation management to develop plans and procedures and to pursue common and cross-cutting modeling tools and data across the services. Also, the ASD(HA) has supported the effort to establish consistent workload drivers across services for determining personnel requirements for MTFs. According to a tri-service working group co-chair, they did not develop cross-service staffing standards for dental care because at the time, the quality of available data on dental procedure frequency and duration varied across the services. The same official stated that these data have been improved, but they still do not have plans to develop cross-service staffing standards for dental care. Additionally, service officials maintained that they must operate their respective dental clinics autonomously and in a manner that best supports their service-specific needs and unique command structures. Specifically, officials from each service’s dental corps stated that their primary mission is focused on the medical readiness of servicemembers and generally does not involve beneficiary care. As such, they have not collaborated on staffing efforts with the other services. While we recognize that each service operates under a different command structure, readiness requirements for oral health are standardized across DOD, and all servicemembers are required to meet the same level of oral health in order to be deployable. Additionally, since DOD is currently assessing whether it will consolidate the services’ dental corps staff under the Defense Health Agency’s administration, it remains unclear to us why dental care has been excluded from cross- service efforts to develop a common set of standards for staffing military dental clinics—especially because the services have developed common staffing standards for42 other medical specialties. The Army, the Navy, and the Air Force have generally met their recruitment goals for dental students, but generally have not met their recruitment goals for fully qualified dentists to address oral health needs of the services. Overall, we found that the services maintained their staffing levels for military dentists during fiscal years 2012 through 2016, but experienced gaps within certain specialties. Further, the services rely on various programs and special pays and incentives, to recruit and retain military dentists, but they do not know the extent to which some of these programs are effective at helping them to do so. Our analysis of Army, Navy, and Air Force data found that in fiscal years 2012 through 2016, the services generally met their goals for dental students recruited through the Armed Forces Health Professions Scholarship Program (AFHPSP). From fiscal year 2012 through fiscal year 2016, the Army met 94 percent of its goals, the Navy met 100 percent of its goals, and the Air Force met 97 percent of its goals. Figure 3 shows the AFHPSP recruitment goals and achievements, by service for fiscal years 2012 through 2016. To address their immediate need for dental providers, the services also recruit fully qualified general dentists or specialists. However, the services have experienced challenges meeting their recruitment goals for fully qualified dentists. Figure 4 below shows the recruitment goals and achievements for fully qualified dentists from fiscal years 2012 through 2016. As shown in the figure, the Army did not meet its recruitment goals for 5 consecutive years, the Navy did not meet its goals for 2 of these 5 years, and the Air Force did not meets its goals for 3 of these 5 years. While the services have experienced challenges in recruiting fully qualified dentists, the challenges are most pronounced in certain specialties. For example, based on our analysis of service data from fiscal years 2012 through 2016, the Army and the Navy were unable to recruit any oral surgeons and the Air Force recruited 50 percent of the oral surgeons it needed. Service officials cited various reasons for not being able to meet their recruitment goals for certain specialties, including the availability of more lucrative careers in the private sector and quality of life concerns associated with military service, such as frequent moves. Additionally, Air Force officials stated that they are not always able to offer accession bonuses consistently, which has caused challenges in recruiting. Table 2 shows the recruitment goals and percentage achieved for fully qualified dentists, by specialty, from fiscal years 2012 through 2016. While the services maintained overall staffing levels for military dentists, they have experienced some challenges retaining certain specialties. Overall, military dentist end strengths—the actual number of dentists on board at the end of the fiscal year—have generally met or exceeded dental authorizations. Specifically, between fiscal years 2012 and 2016, the Army’s dental authorizations were filled, on average, at about 109 percent, the Navy’s at about 101 percent, and the Air Force’s at about 97 percent. Further, DOD data show that average overall gain rates are equal to average overall loss rates for the services’ dental corps in fiscal years 2012 through 2015 at approximately 10 percent for the Army, 9 percent for the Navy, and 11 percent for the Air Force. Additionally, according to our analysis of Army and Navy data, on average, approximately 73 percent of Army dentists continue on active duty after 5 years of service, and approximately 63 percent of Navy dentists continue on active duty after 5 years of service. According to Air Force officials, the Air Force does not routinely track data on the number of dentists that continue on active duty after 5 years of service. Although the services have been able to maintain their overall numbers for the total number of dentists in their respective dental corps, we found, based on the data the services provided us, that each service experienced gaps in certain dental specialties, including critically short wartime specialties. For example, all of the services experienced gaps in comprehensive dentistry from fiscal years 2012 through fiscal year 2016. In addition, for the same time period, all of the services experienced gaps in prosthodontists and oral surgeons. Officials from all three services cited family concerns, frequent moves, and competition from the private sector as reasons why these and other dentists choose to leave the military. Additionally, Army and Navy officials cited limited training and education opportunities and limited scope of practice as reasons why specialists such as oral surgeons leave the military. The services rely on programs, such as AFHPSP, the Critical Wartime Skills Accession Bonus (CWSAB), and special pay and incentives, to attract and retain military dentists, but they do not know the extent to which some of these programs are effective at helping them meet their recruiting and retention goals. Our prior work on effective strategic workforce planning principles concluded that agencies should periodically measure their progress toward meeting human capital goals. These principles state that measuring the extent that human capital activities contribute to achieving programmatic goals provides information for effective oversight by identifying performance shortfalls and appropriate corrective actions. Further, according to these principles, agencies should develop use of flexibilities and other human capital strategies that can be implemented with the resources that can be reasonably expected to be available, and should consider how these strategies can be aligned to eliminate gaps. Additionally, Standards for Internal Control in the Federal Government states that management should monitor internal control systems, through ongoing monitoring and evaluations. According to these standards, evaluations should be used to provide feedback on the effectiveness of ongoing monitoring and should be used to help design systems and determine effectiveness. The standards also provide that management should determine the appropriate corrective actions to address any identified deficiencies upon completing its evaluation. According to Army, Navy, and Air Force officials, the services have taken various actions to monitor their recruitment and retention programs. For example, officials told us that they review recruitment goals, achievements, and retention rates; conduct workforce planning and modeling; and participate in recruitment and retention working groups. Specifically, Army officials stated that they use forecasts from a 5-year management plan to determine the Army’s recruiting mission and review its continuation rates to assess retention of dentists. Navy officials told us that they review annual recruitment goals and track whether they are meeting those goals on a weekly basis. Air Force officials stated that they participate in the Medical Accessions Working Group three times per year to assess ongoing recruitment activities. While the services monitor their progress toward recruitment and retention goals, they do not know the extent to which the programs designed to help them meet their goals affect their ability to recruit and retain dentists because they have not evaluated their effectiveness. For example, DOD Directive 1304.21 allows the services to use accession bonuses to meet their personnel requirements and specifies that bonuses are intended to influence personnel inventories in specific situations in which less costly methods have proven inadequate or impractical. The services have the discretion to issue up to $20,000 as an accession bonus under the AFHPSP—in addition to paying full tuition, education expenses, and a monthly stipend. In fiscal years 2012 through 2016, the Army and the Navy offered the accession bonus and generally met their recruitment goals—an achievement that Army officials credit, in part, to their use of the incentive. Specifically, Army officials told us that prior to using the bonus in 2009, they were not meeting their recruitments goals. They also expressed concern that, if they were to discontinue use of the bonus, they would not be able to meet their current goals. Conversely, Air Force officials told us that they stopped offering the bonus in 2012 because the number of AFHPSP applicants had exceeded the number of AFHPSP positions; the Air Force has continued to meet its recruiting goals without the use of the bonus. An Air Force official acknowledged that not offering the bonus could result in their losing potential applicants to the services that do offer the bonus, but Air Force officials also recognized that money is not always a deciding factor for those who choose to serve as a dentist in the military. The uncertainty described by the Army and Air Force officials demonstrates their lack of information about what factors motivate individuals to join the military. Moreover, the differing use of the accession bonus by the two services with similar outcomes indicates that the services do not know when it is necessary to use the recruiting tool because they have not evaluated the effectiveness of this program. Another bonus the services can offer is the CWSAB, which ranges from $150,000 for general dentists to $300,000 for comprehensive dentists, endodontists, prosthodontists, and oral maxillofacial surgeons, to individuals entering the military as a dentist in a critically short wartime specialty. While a bonus can be offered to any dental specialty designated as a critically short wartime specialty, data that we analyzed indicate that the bonus may be disproportionately effective in recruiting for these specialties. For example, from fiscal years 2012 through 2016, the Navy used this type of bonus and was able to meet or exceeded its recruitment goals for critically short wartime specialty general dentists and staffed this specialty at between 108 and 122 percent. However, our analysis of the Navy’s data also found that, even after offering this bonus, the Navy was unable to recruit any oral surgeons during the same time period. However, like with the accession bonus, service officials do not know the extent to which the CWSAB bonus is an effective recruitment incentive for some or all of the critically short wartime specialties because they have not evaluated the effectiveness of this program. In addition, the services offer special pay and incentives, which vary by specialty, to qualified dentists. Special pay and incentives include incentive pay, retention bonuses, and board certification pay. Each bonus and incentive, except board certification pay, requires an additional service obligation, thus creating a retention tool for the services. The services and officials from the Office of the ASD(HA) participate in the Health Professions Incentives Working Group to review recruitment and retention special pay and incentives and recommends adjustment to amounts offered as necessary. Service and officials from the Office of the ASD(HA) told us that there are no ways to evaluate the effectiveness of these incentives because they cannot account for the emotional or non- monetary decisions that contribute to whether servicemembers stay in the military, and money is not always an effective incentive for getting people to train in certain specialties or to continue their service. However, in our recent review of DOD’s special pay and incentive programs in 2017, we recommended that DOD take steps to improve the effectiveness of its special pay and incentive programs. Additionally, in February 2018, through our review of gaps in DOD’s physician specialties, we recommended that the services develop targeted and coordinated strategies to alleviate military physician gaps. An official from the Office of the ASD(HA) stated that they have started discussing measures with the services to evaluate the effectiveness of DOD’s medical and dental recruitment and retention programs, including special pay and incentives. Additionally, Office of ASD(HA) and service officials stated that they will begin reviewing the dental special pays and incentives in fiscal year 2019. Because these reviews are in the early stages, it is too soon to know how effective they will be in evaluating pay and incentive programs. Although service officials also told us that they believe their recruitment and retention programs are effective because they have generally met their overall recruiting and retention goals, until the services evaluate the effectiveness of their recruitment and retention efforts, they will not have the information to know which programs are the most efficient and cost- effective. DOD continues to implement several major initiatives to support the mission of its health system maintaining the medical readiness of servicemembers while operating as efficiently as possible. The dental corps plays a critical role in these efforts by ensuring the oral health and dental readiness of all servicemembers. Ensuring dental readiness requires, in part, that the services are able to staff dentists adequately and consistently across DOD’s dental clinics. However, the Army, the Navy, and the Air Force have not collaborated in their approaches to staffing dental clinics, and have not developed cross-service staffing standards for dental clinic staffing. As DOD progresses in its efforts to implement efficiencies across its Medical Health System and assesses the scope of medical care to be transferred to the Defense Health Agency, it could be of benefit to the dental corps to develop cross-service standards that could result in improvements to the consistency and efficiency of dental clinic staffing. In addition to ensuring the appropriate number of dentists at each clinic to support the dental corps’ mission, recruiting and retaining fully qualified dentists has been an ongoing challenge for the services. However, the services have not evaluated whether their existing programs have been effective at helping them recruit and retain dentists, and therefore do not know whether they are effectively targeting their resources to address the most significant recruitment and retention challenges. We are making a total of six recommendations, including two to the Army, two to the Navy, and two to the Air Force. Specifically: The Secretary of the Army should ensure that the Surgeon General of the Army Medical Command (1) collaborate with the Navy Bureau of Medicine and Surgery and the Air Force Medical Service to develop a common set of planning standards to be used to help determine dental clinic staffing needs, and (2) incorporate these standards into the Army’s dental corps staffing model. (Recommendation 1) The Secretary of the Navy should ensure that the Surgeon General of the Navy Bureau of Medicine and Surgery (1) collaborate with the Army Medical Command and the Air Force Medical Service to develop and implement a common set of planning standards to be used to help determine dental clinic staffing needs, and (2) incorporate these standards into the Navy’s dental corps staffing model. (Recommendation 2) The Secretary of the Air Force should ensure that the Surgeon General of the Air Force Medical Service (1) collaborate with the Army Medical Command and the Navy Bureau of Medicine and Surgery to develop and implement a common set of planning standards to be used to help determine dental clinic staffing needs, and (2) incorporate these standards into the Air Force’s dental corps staffing model. (Recommendation 3) The Secretary of the Army should ensure that the Surgeon General of the Army Medical Command evaluates the effectiveness of its recruitment and retention programs for military dentists, including the need for and effectiveness of the recruitment and retention incentives currently offered. (Recommendation 4) The Secretary of the Navy should ensure that the Surgeon General of the Navy Bureau of Medicine and Surgery evaluates the effectiveness of its recruitment and retention programs for military dentists, including the need for and effectiveness of the recruitment and retention incentives currently offered. (Recommendation 5) The Secretary of the Air Force should ensure that the Surgeon General of the Air Force Medical Service evaluates the effectiveness of its recruitment and retention programs for military dentists, including the need for and effectiveness of the recruitment and retention incentives currently offered. (Recommendation 6) We provided a draft of this report to DOD for review and comment. DOD did not provide comments. DOD did provide us with technical comments, which we have incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense for Personnel and Readiness, the Office of the Assistant Secretary of Health Affairs, the Secretaries of the Army, the Navy, the Air Force, and the President of the Uniformed Services University of the Health Sciences. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or FarrellB@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In addition to the Department of Defense’s (DOD) Armed Forces Health Professions Scholarship Program, DOD uses several other programs and incentives to recruit military dentists. Table 3 includes a selection of DOD’s military dentist accession programs and incentives. DOD policy requires that all military dentists must be credentialed and privileged to practice dentistry. Credentialing is the process of inspecting and authenticating the documentation to ensure appropriate education, training, licensure, and experience. Privileging is the corresponding process that defines the scope and limits of practice for health care professionals based on their relevant training and experience, current competence, peer recommendations, and the capabilities of the facility where they are practicing. According to officials, the services have developed and implemented processes to continuously monitor dentist performance in accordance with DOD policy. According to officials, the services monitor military dentist performance through On-Going Professional Practice Evaluations (OPPE) and Focused Professional Practice Evaluations (FPPE). The OPPE is a continuous evaluation of dentist performance that reviews six dimensions of performance: (1) patient care, (2) medical knowledge, (3) professionalism, (4) practice-based learning and improvement, (5) interpersonal and communication skills, and (6) systems-based practice. The FPPE is a process of periodic evaluation by the dental clinic of the specific competence of a dentist performing procedures and administering care. FPPEs are conducted during a dentist’s initial appointment, when granting new privileges, or if a question arises about a dentist’s ability to provide, safe, high quality patient care. In addition to the performance monitoring required by DOD, according to officials, the Army and the Air Force have instituted their own mechanisms for monitoring the quality and performance of their dentists. Army: According to officials, the Army monitors dental quality through its quarterly Continuous Quality Management Program. This program includes the review of data related to records audits, infection control, radiation protection, utilization management, implant reports, drug utilization reports, patient safety events, and risk management. According to officials, these reviews are intended to identify and address any errors or trends in dental care. Air Force: According to officials, annually, Air Force dentists must document that they have reviewed and will follow the Air Force Medical Service Dental Clinical Practice Guidelines. According to officials, this ensures that all dentists are following the same standard of care for dental treatment. Additionally, according to officials, Air Force dentists participate in a peer review process known as Clinical Performance Assessment and Improvement. According to officials, in this process, a licensed peer dentist preferably of the same specialty reviews the dentist’s practice and procedures. Further, according to officials, depending on the nature of issues found during the review, corrective actions—ranging from refresher courses to a loss of license and credentials—may be taken. In addition to the contact named above, Kimberly Mayo, Assistant Director; Nicole Collier; Alexandra Gonzalez; Amie Lesser; Tida Barakat Reveley; Rachel Stoiko; John Van Schaik; Lillian Yob; and Elisa Yoshiara made key contributions to this report. Defense Health Care: Additional Assessments Needed to Better Ensure an Efficient Total Workforce. GAO-18-102, Washington, D.C.: Nov. 27, 2018. Defense Health Care: DOD Should Demonstrate How Its Plan to Transfer the Administration of Military Treatment Facilities Will Improve Efficiency. GAO-19-53, Washington, D.C.: Oct. 30, 2018. Defense Health Care: Expanded Use of Quality Measures Could Enhance Oversight of Provider Performance. GAO-18-574, Washington, D.C.: Sept. 17, 2018. Military Personnel: Additional Actions Needed to Address Gaps in Military Physician Specialties. GAO-18-77. Washington, D.C.: Feb. 28, 2018. Defense Health Reform: Steps Taken to Plan the Transfer of the Administration of the Military Treatment Facilities to the Defense Health Agency, but Work Remains to Finalize the Plan, GAO-17-791R. Washington, D.C.: Sept. 29, 2017. Military Compensation: Additional Actions Are Needed to Better Manage Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.: Feb. 3, 2017. Defense Health Care Reform: DOD Needs Further Analysis of the Size, Readiness, and Efficiency of the Medical Force. GAO-16-820. Washington, D.C.: Sept. 21, 2016. Defense Health Care: Additional Information Needed about Mental Health Provider Staffing Needs. GAO-15-184. Washington, D.C.: Jan. 30, 2015. Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce. GAO-13-470. Washington, D.C.: May 29, 2013 Defense Health Care: Actions Needed to Help Ensure Full Compliance and Complete Documentation for Physician Credentialing and Privileging. GAO-12-31. Washington, D.C.: Dec. 15, 2011. Military Cash Incentives: DOD Should Coordinate and Monitor Its Efforts to Achieve Cost-Effective Bonuses and Special Pays. GAO-11-631. Washington, D.C.: June 21, 2011. Military Personnel: Enhanced Collaboration and Process Improvements Needed for Determining Military Treatment Facility Medical Personnel Requirements. GAO-10-696. Washington, D.C.: Jul. 29, 2010. Military Personnel: Status of Accession, Retention, and End Strength for Military Medical Officers and Preliminary Observations Regarding Accession and Retention Challenges. GAO-09-469R. Washington, D.C.: Apr. 16, 2009. Military Personnel: Better Debt Management Procedures and Resolution of Stipend Recoupment Issues Are Needed for Improved Collection of Medical Education Debts, GAO-08-612R. Washington, D.C.: Apr. 1, 2008. Primary Care Professionals: Recent Supply Trends, Projections, and Valuation of Services. GAO-08-472T. Washington, D.C.: Feb. 12, 2008. Military Physicians: DOD’s Medical School and Scholarship Program. GAO/HEHS-95-244. Washington, D.C.: Sept. 29, 1995. Defense Health Care: Military Physicians’ Views on Military Medicine. GAO/HRD-90-1. Washington, D.C.: Mar. 22, 1990.", "summary": "DOD has taken steps to modernize its Military Health System to ensure that it operates efficiently. For example, in September 2013, the Defense Health Agency was created, in part, to implement common clinical and business processes across the services. Essential to this effort are the services' ability to effectively staff their medical facilities, including the processes used for staffing dental clinics and the services' ability to recruit and retain military dentists. Senate Report 115-125 included a provision for GAO to review the services' processes for determining requirements for dentists and its programs for recruiting and retaining military dentists, among other things. GAO assessed the extent to which the services (1) use validated dental clinic staffing models that also incorporate cross-service staffing standards, and (2) have recruited and retained military dentists and measured the effectiveness of their recruitment and retention programs. GAO assessed service dental clinic models, analyzed recruitment and retention data from fiscal year 2012 through 2016, and interviewed DOD and service officials. The Army and the Air Force use validated staffing models for their respective dental clinics, and the Navy has developed a model that is under review. The Army and the Air Force's models are based on service-specific staffing standards. For example, the Army's model generally projects dental clinic staffing based on historical facility data and, according to officials, the Air Force model is largely a population-based model that requires one dentist for every 650 servicemembers. In contrast, in the absence of a validated model, officials stated that, the Navy uses a general ratio of one dentist for every 1,000 servicemembers to staff its dental clinics. The Navy has developed a model that is under review, and if approved, according to officials, will be subject to the Navy's validation processes. While the services have developed and implemented cross-service staffing standards for 42 medical specialties, according to a key official involved in developing these standards, they currently do not plan to develop a similar set of standards for dental care. Cross-service staffing standards help the services standardize clinic staffing to address the common day-to-day health needs of patients. Service officials maintain that they must operate their respective dental clinics autonomously and in a manner that best supports their service-specific needs and unique command structures. However, as oral health requirements for servicemembers are standardized across the Department of Defense (DOD), it is unclear why dental care has been excluded from the staffing standardization effort—especially because the services have implemented cross-service staffing standards for 42 other medical specialties. The Army, the Navy, and the Air Force meet their needs for military dentists by recruiting both dental students and fully qualified dentists. The services generally met their recruitment goals for dental students between fiscal years 2012 and 2016, but faced challenges recruiting and retaining fully qualified dentists during that period. For example, the Army missed its recruitment goals for fully qualified dentists in all 5 years, the Navy missed its goals in 2 out of 5 years, and the Air Force missed its goals in 3 out of 5 years. These challenges are most pronounced for certain specialties. For example, service data indicate that the Army and the Navy were unable to recruit any oral surgeons, while the Air Force recruited 50 percent of the oral surgeons it needed. Service officials cited various reasons for not meeting recruitment goals, including the availability of more lucrative careers in the private sector and quality of life concerns associated with military service. The services rely on various programs, including scholarships and special pay and incentives, to attract and retain military dentists, and service officials stated that they monitor their programs by reviewing their goals, among other actions. However, GAO found that some services continue to provide incentive bonuses for positions that are overstaffed and have met or exceeded recruitment goals, but they do not know whether this is necessary because they have not evaluated the effectiveness of their programs. Without evaluating their programs, the services lack the information necessary to ensure that they are using recruitment and retention incentives effectively and efficiently for attracting and retaining dentists. GAO recommends that each of the services develop cross-service staffing standards to be incorporated into their staffing models, and evaluate the effectiveness of their recruitment and retention programs. DOD did not provide comments on a draft of this report.", "document_type": "gao"}
{"report": "Just after World War II, VA developed affiliations with medical schools to improve acute care and physical and mental rehabilitation for veterans. As part of the relationship, VA medical centers have contributed to the education of medical students and residents. Besides medical students and residents, other dual appointees—clinicians and researchers—spend either a full 40-hour week or a fraction of the work week at VA and other time at the affiliated university. On January 23, 1950, Executive Order 10,096 established that the government shall obtain the entire right, title, and interest in and to all inventions made by government employees during working hours; with a contribution by the government of facilities, equipment, materials, funds, or information, or time and services of other government employees on official duty; or which bear a direct relation to or are made as a consequence of the employee’s duties. Since the early 1980s, the federal government has taken several actions related to technology transfer from federal laboratories. Technology transfer is the process of transferring scientific findings from one organization to another for the purpose of further development and commercialization. In this regard, federal agencies are authorized to issue licenses to outside entities granting rights to make, use, or sell government owned inventions. One of the first technology transfer laws, the Stevenson-Wydler Technology Innovation Act of 1980, articulated the need for a strong national policy supporting domestic technology transfer. The law requires federal laboratories to establish an office of research and technology applications and devote budget and personnel resources to promoting technology cooperation and the transfer of technologies to private industry and state and local governments. In addition, the act requires federal agencies that operate or direct federal laboratories to report information on technology transfer performance annually to the Office of Management and Budget, as part of their annual budget submission. Copies of those reports should be transmitted to the Secretary of Commerce who must submit a summary report to Congress and the President. For many years after the Stevenson-Wydler Technology Innovation Act of 1980, VA waived ownership rights to inventions generated by its researchers, leaving the responsibilities for patenting, marketing, and licensing with the inventor and the VA medical center’s university partner. As a result of this practice, according to former VA officials, some VA research was not commercialized because VA did not have a technology transfer program or other means to promote commercialization. In 2000, VA created the VA Technology Transfer Program to facilitate the commercialization of VA inventions to benefit veterans and the American public. VA developed technology transfer agreements with universities to help facilitate technology transfer. Under the terms of the agreements, the universities can take the lead on patenting and commercialization, and VA can retain joint ownership of inventions. Among other things, the original agreements gave the universities the right of first refusal to apply for and manage patents, market the technologies, negotiate licenses, and collect royalties to be shared with VA. As of November 2017, the VA Technology Transfer Office, located in Washington, D.C., employed five technology transfer specialists responsible for all technology transfer activities for VA’s solely owned inventions. These inventions may come from more than 3,000 VA researchers at over 100 VA medical centers, as well as from VA employees at other VA locations. In addition, the technology transfer specialists are responsible for coordinating with universities on inventions made by dually appointed researchers. According to VA officials, VA relies on affiliated universities for most of the technology transfer efforts connected with such inventions, since the universities have their own offices with expertise in technology transfer and are usually willing to take the lead. Under a Veterans Health Administration 2002 policy on invention disclosures, which was revised in January 2017, VA employees who invent something are directed to disclose those inventions to VA using a disclosure form and complete a certification form to certify whether VA resources were used. VA employees are to disclose inventions to VA even if they were not created with VA resources. Affiliated universities may also require dually appointed researchers to disclose inventions to the university. Under agreements between the universities and VA, universities are required to disclose a dually appointed researcher’s invention to VA, as an additional assurance to aid VA in capturing relevant inventions. Similarly, VA is to notify the university when a dually appointed researcher’s invention comes to its attention. According to VA policy, researchers’ supervisors or research administrators at VA medical centers are to review the disclosure forms and send them to the VA Technology Transfer Office. The office evaluates the information and provides a recommendation to VA’s General Counsel on whether VA should assert ownership. If General Counsel’s review finds that VA should assert ownership, the General Counsel notifies the VA researcher’s and the VA medical center’s research and development office of the determination. The Technology Transfer Office then notifies the researcher’s university about VA’s ownership of the invention. At this point the department expects the university to include VA as an owner during the patenting process, according to VA officials. Figure 1 shows VA’s process for determining ownership of inventions created by dually appointed researchers, according to VA policies. If the university takes the lead on an invention of a dually appointed researcher, original VA agreements require universities to provide annual reports to update VA on commercialization activities, such as progress in licensing inventions or collecting royalties from licensees. While less commonly used, alternative processes for commercialization are shown in appendix I. We and others have identified a number of challenges associated with technology transfer from federal research facilities. For example, we found that technology transfer is often not a priority for laboratory managers; researchers may not understand the potential commercial applicability of their innovations; or the technologies are often not developed enough for use in market-ready products and may require investment of additional time and money to develop. We also have reported that pharmaceutical inventions in particular may take a relatively long time to develop. For example, the entire discovery, development, and review process of a new drug can take up to 15 years. Although VA has taken steps to educate researchers about disclosure of inventions, VA officials reported that the researchers have not consistently disclosed inventions to the department because they did not always fully understand VA’s disclosure policy. Officials from VA’s technology transfer office told us on multiple occasions that they believed researchers did not consistently disclose inventions. For example, in December 2016, VA officials said that once the technology transfer office began sending researchers e-mail notices about the need to disclose inventions, the number of disclosures increased, which they said suggested underreporting had been occurring. In March 2017, the officials told us that many of the inventions from more than 50 researchers during a 5-year period at one university had not been disclosed until VA checked with the university and discovered the error. By November 2017, VA technology transfer officials thought disclosure had improved throughout VA, but they were still not able to describe the extent of the problem. The researchers we interviewed at the six medical centers in our sample generally believed that they had properly disclosed inventions. However, according to VA officials, a university official, and two VA researchers, there could be several reasons that contributed to researchers not consistently disclosing their inventions to VA, including the following: Researchers may have disclosed inventions to their university, assuming the university would disclose them to VA on their behalf. Researchers may have disclosed their inventions to the university because it was more convenient than disclosing to VA, as the university’s technology transfer officials were more accessible to answer questions. Researchers were not familiar with VA’s invention disclosure process because the process was not routine to them. Researchers may have believed they did not use VA resources and did not realize they were still required to disclose to VA. VA research administrators may not always have reminded researchers of the need to disclose inventions, as they did not consider this requirement a priority. VA made efforts since fiscal year 2016 to inform researchers about its disclosure policy. For example, according to VA officials, the department has increased its in-person communication with VA researchers. In the first 8 months of fiscal year 2017, VA staff made 26 visits to universities and VA medical centers to meet with researchers to encourage the disclosure of inventions. However, VA officials said participation rates among researchers at these voluntary meetings were low in some cases. At one medical center, only the research administrator and one other researcher attended the meeting, according to the administrator. In addition, VA established an online training program in 2017 covering the invention disclosure process, but the training is not mandatory. VA provided us with a report from October 2017 indicating that out of over 3,000 eligible researchers, 130 had taken the training (about 4 percent). One VA research administrator said that mandatory training would be helpful. Under federal internal control standards, management is to internally communicate the necessary quality information to achieve the entity’s objectives, such as by communicating that information down and across reporting lines to enable personnel to perform key roles in achieving those objectives. Given that VA has not made the meetings or online training on disclosure policy mandatory, its importance may not be clear to all researchers. Also, because researchers do not make discoveries every year, and the process is not routine, taking such training once may not be sufficient to educate users. Without requiring researchers to take online training on the invention disclosure process annually, researchers may not be fully informed about the requirement to disclose inventions, which can result in lost technology transfer opportunities and lost royalties for VA if the inventions are not disclosed. Based on our interviews with VA and university officials in our sample, since fiscal year 2016, the department took steps to make universities aware of VA researchers and their disclosure requirements in an effort to improve university disclosures to VA. We reviewed 16 agreements between VA and affiliated universities, including the five universities with agreements in our sample, and all of the universities agreed to disclose joint inventions to the department. However, VA officials we interviewed said that universities may not always disclose all inventions to VA. Although they said they could not identify the extent of the problem, the officials highlighted one university in our sample that had not disclosed inventions to VA for at least 5 years. This university did not disclose inventions to VA, as agreed, until prompted by VA’s technology transfer office late in fiscal year 2016. Responsible university officials said they had assumed the dually appointed researchers were disclosing the inventions to VA. According to VA officials, when the VA technology transfer office received a report from the university in fiscal year 2017 that covered 5 years of disclosures, VA learned it had not received 80 percent of the disclosures from that university for that period. VA officials said they had not contacted the university sooner because their technology transfer office had been understaffed until early in calendar year 2016. VA officials from the technology transfer office had not identified a similar problem of this magnitude with the other universities, including those in our sample. According to our interviews with VA and university officials, some of VA’s university partners may not have been aware of which researchers were also VA employees because the universities’ lists of VA researchers were not current and universities generally relied on the researchers to disclose whether they were VA employees. Furthermore, in some cases, the university disclosure forms did not specifically ask whether the researcher also worked at VA. For example, two of the six forms used by universities in our sample did not specifically ask the researcher to indicate whether they were VA employees. Upon recognizing some shortcomings in universities’ disclosures to VA, the department provided current lists of VA researchers at affiliated VA medical centers to their respective universities in fiscal year 2017, and VA technology transfer officials said they intend to provide such updated lists to the universities semi-annually. VA officials said that universities may not be using these lists, but they will not know until time has elapsed. VA technology transfer officials said their site visits to VA medical centers—they conducted 26 visits in fiscal year 2017—along with other communications with their counterparts at the universities should help the disclosure process. VA has increased communication with universities since 2016 to help ensure that universities report information about commercialization activities for joint inventions, but universities’ reporting remained inconsistent as of January 2018, according to VA. Under the original agreements, such as the ones in our sample of eight agreements, universities have the exclusive right to license and commercialize joint inventions. VA’s awareness of the commercialization of such inventions depends on universities providing this information through annual reports, as required by the agreements. However, according to VA officials, prior to 2011, only about 20 percent of the 79 universities with which VA has agreements submitted annual reports. According to VA officials, VA made an effort to increase annual reporting, and by 2013 it was up to 80 percent. The officials said, however, that the percentage of universities submitting annual reports dropped again after losing staff in the technology transfer office—the office retained only three staff in subsequent years until fiscal year 2017 when there were 11 staff, including 5 technology transfer specialists. In addition, VA officials we interviewed said that there was some confusion among universities regarding when they needed to submit annual reports. For example, they said that some universities may not have understood whether they needed to provide annual reports during years when there was no new patenting or licensing activity. The officials said that this was at least part of the reason some universities did not submit annual reports. VA officials told us that they expect universities to provide annual reports even when there is no new patenting or licensing activity, and in fiscal year 2016 technology transfer officials e-mailed universities to clarify this expectation. The officials also said that in October 2016 they sent a letter to each of the 79 universities with which the department has agreements to remind universities to submit the required annual reports. Further, as stated earlier, VA staff made 26 visits to VA medical centers and universities in the first 8 months of fiscal year 2017 to discuss reporting and disclosure requirements. However, VA reported that 24 percent of the 79 affiliated universities provided annual reports in fiscal year 2017 even after VA’s outreach. Because they did not always receive annual reports, VA officials said they were often not aware of a joint license until the university sent VA the first royalty check for a joint invention. VA officials said they plan to conduct audits to check the accuracy of university information. Beginning in fiscal year 2015, VA began creating new agreements with universities to give VA enhanced responsibility in licensing and commercialization of joint inventions. By the end of fiscal year 2017, VA had new agreements in place with 11 of the 79 universities. Based on our review of 8 of the new agreements, VA will now, for the first time, have the option to take the lead in licensing joint inventions. For inventions for which VA does not take the lead role, under the new agreements, it will have the right to review and provide input on all joint licenses. This new provision improves VA’s awareness of any joint licenses created in the future. However, because original agreements did not include this provision, VA will still need to rely on accurate and updated annual reports from universities for information on licenses negotiated under those agreements. In addition, the new agreements do not improve or clarify language from the original agreements about what details need to be included in the annual reports. According to our analysis, these eight new agreements, similar to the original eight agreements we reviewed, do not contain details on the specific information and format in which to present the annual report. For example, both the original and four of the new agreements we reviewed require universities to provide an annual report, but four other new agreements state that the universities will provide annual reports upon request. The original agreements as well as all eight of the new agreements indicate that reports should include the status of all patent prosecution, commercial development, and licensing activity on joint inventions but do not explain whether an annual report is needed if there has been no commercialization activity. As noted above, VA officials said universities were confused about whether they were required to report to VA if they had no new activity in a given period; however, VA officials told us they still need reports in these situations. Furthermore, based on our analysis of 12 annual reports from eight universities, the format and content of the reports has been inconsistent. Four universities submitted reports in a spreadsheet format; two universities submitted reports in portable document format (PDF); one university submitted a report in a Word format; and one submitted five different documents, including both PDF and spreadsheet. In addition to differences in format, the annual reports differed considerably in the content they provided—the more detailed annual reports included patent application numbers, patent expenses, the status of patent applications, and information about whether the patent had been licensed. In contrast, the less detailed annual reports did not provide any of this information on patents for the joint inventions. Moreover, one university only included active license agreements in its annual report, while other universities also included license agreements that were terminated. VA officials we interviewed agreed that the reports are not very detailed or standardized but said they would like to eventually standardize the annual report format and content so they can use the reports to track and audit joint inventions The differences in annual reports exist because VA has not provided the universities with a standardized method for reporting, including the format that should be used for the annual reports and the content to include in them. Under federal standards for internal control, management should design control activities to achieve objectives and respond to risks. Such control activities include providing a standardized method that guides universities in fulfilling VA’s reporting requirements to ensure the objectives of the program are being achieved. Without providing a standardized method that clearly guides universities in fulfilling VA’s reporting requirements for these annual reports, including their format and content, the department will not be able to ensure detailed and standardized annual reports that include details about licenses and royalties. VA officials said that they were working on a template for universities to use in reporting on commercialization activities for joint inventions. However it is not clear whether the template would inform universities of VA’s requirements to submit an annual report even if they had no new commercialization activity in a given period. VA manages a research program unique within the federal government in that most of its researchers are dually appointed to universities, and their inventions are jointly owned by VA and the universities, which typically take the lead on commercialization activities. While VA has taken steps to educate researchers about requirements for researchers and universities to disclose inventions to VA, VA officials reported that researchers have not consistently done so, because they did not always fully understand the policy. Given that VA has not made its online training on disclosure policy mandatory, the policy’s importance may not be clear to researchers. Also, because researchers do not make discoveries every year, and the process of disclosure is not routine, taking such training once may not be sufficient. Without requiring researchers to take online training on the invention disclosure process annually, researchers may not be fully informed about the requirement to disclose inventions, which can result in lost technology transfer opportunities as well as lost royalties for VA if the inventions are not disclosed. VA has also taken steps to improve communication with universities to increase reporting of commercialization activities, but said that such reporting by universities is inconsistent, and VA may not have adequate information to account for all of its licenses and royalties. Without providing a standardized method that clearly guides universities in fulfilling VA’s reporting requirements for these annual reports, including their format and content, the department will not be able to ensure detailed and standardized annual reports. We are making the following two recommendations to VA: The Under Secretary of Health should make VA’s online training on invention disclosure mandatory for researchers and require that it be completed annually. (Recommendation 1) The Under Secretary of Health should provide a standardized method that guides universities in fulfilling VA’s reporting requirements for these annual reports, including their format and content. (Recommendation 2) We provided a draft of this report to the Department of Veterans Affairs for review and comment. In written comments reproduced in appendix II, VA agreed with our recommendations. Specifically, for our first recommendation, VA said it will develop a plan to ensure its researchers complete online technology transfer training on invention disclosure annually. Furthermore, the plan will contain contingencies for those who do not meet the requirements. The department expects to issue a training requirement, train staff, and also demonstrate training is done by September 2019. In addition, for our second recommendation, VA said it will develop a standardized method that guides universities in fulfilling VA’s reporting requirements for the university technology transfer annual reports. VA has a target completion date of December 2018. VA also provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At this time, we will send copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix III. The process for commercializing a Department of Veterans Affairs (VA) invention can take several avenues. Generally a university takes the lead on inventions of dual appointees who work for VA and a university, and VA researchers who are not dually appointed rely on VA to patent and license their inventions. Also, VA can take the lead on joint inventions, for example, if the university is not interested in ownership. (see fig. 2). VA received about $316,000 in royalties from 45 licenses for its inventions in fiscal year 2016 (see table 1). VA has U.S. and foreign patents. From calendar years 2000 through November 2017, the U.S. Patent and Trademark Office has granted VA 82 patents for which VA is the sole assignee, according to VA officials. Also, table 2 shows by university the breakdown of the 206 patents for which VA shares ownership with an affiliate. John Neumann, (202) 512-3841 or neumannj@gao.gov. In addition to the contact named above, Rob Marek (Assistant Director), Daniel Semick (Analyst in Charge), Ivelisse Aviles, Navaiyoti Barkakati, Kevin Bray, Ellen Fried, Matthew Hunter, Cynthia Saunders, Dan C. Royer, Ardith Spence, and Kiki Theodoropoulos made key contributions to this report.", "summary": "VA manages a $1.9 billion research program that has produced numerous healthcare inventions, such as the pacemaker. In 2000, VA created a program to help transfer VA inventions to the private sector so that they can be commercialized and used by veterans and the public, while VA retains ownership and collects royalties. Many of VA's 3,000 researchers also hold positions at universities, which take the lead in commercializing inventions developed by these researchers. Researchers and universities are required to disclose such inventions to VA, and universities are to report on commercialization activities according to their agreements with VA. GAO was asked to examine VA's ability to ensure its ownership of inventions made with VA resources. This report examines, among other things, the extent to which VA has taken steps to ensure that (1) researchers disclose inventions and (2) universities report on commercialization activities for joint inventions. GAO reviewed laws; policies; a nongeneralizable sample of university agreements based on backlogs of disclosures, among other factors; and interviews with officials and researchers from VA medical centers and their affiliated universities. The Department of Veterans Affairs (VA) has taken steps to educate agency researchers about its requirements to disclose inventions to VA, but officials reported that researchers have not consistently done so. VA policy requires researchers to disclose inventions to both VA and the university they work for even when they do not use VA resources. GAO found, through discussions with VA officials and researchers, that several factors contribute to researchers not consistently disclosing their inventions, including that VA researchers may have: disclosed inventions to their university, assuming the university would then disclose them to VA; not been familiar with VA's invention disclosure process, because they may not have frequently developed inventions; or thought that invention disclosure was unnecessary when they did not use VA resources to develop their invention. In 2017, VA staff visited universities and VA medical centers 26 times to meet with researchers about invention disclosure. Also, VA created an online training course to educate researchers on the need to disclose inventions, but the training is not mandatory, and about 4 percent of researchers took it. Without mandatory training to communicate invention disclosure requirements—consistent with federal internal control standards for internally communicating quality information—VA researchers may not be fully informed about those requirements, which can result in lost technology transfer opportunities and royalties for VA. VA has improved communication with universities but has not ensured that they are consistently reporting information on commercialization activities for joint inventions. VA reported that about three-quarters of VA's 79 university partners did not submit the annual reports required by VA in 2017. GAO reviewed a nongeneralizable sample of agreements VA has with universities and found that reporting requirements about timing and content of reports were unclear. Without providing a standardized method that clearly guides universities in fulfilling VA's reporting requirements, consistent with federal standards for internal control, VA cannot ensure that it has adequate information to account for its licenses and royalties. GAO recommends that VA (1) make training about invention disclosure mandatory and (2) provide universities with a standardized method for annual reporting. VA concurred with GAO’s recommendations.", "document_type": "gao"}
{"report": "On multiple occasions since 2011, we have reported on the progress the Border Patrol has made deploying technologies along the southwest border. Figure 1 shows the land-based surveillance technology systems used by the Border Patrol. In November 2017, we reported on the progress the Border Patrol made deploying technology along the southwest border in accordance with its 2011 Arizona Technology Plan and 2014 Southwest Border Technology Plan. For example, we reported that, according to officials, the Border Patrol had completed deployments of all planned Remote Video Surveillance Systems (RVSS), Mobile Surveillance Capability systems, and Unattended Ground Sensors, as well as 15 of 53 Integrated Fixed Tower systems to Arizona. The Border Patrol had also completed deployments of select technologies to Texas and California, including deploying 32 Mobile Surveillance Capability systems. In addition, the Border Patrol had efforts underway to deploy other technology programs, but at the time of our report, some of those programs had not yet begun deployment or were not yet under contract. For example, we reported that, according to the Border Patrol officials responsible for the RVSS program, the Border Patrol had begun planning the designs of the command and control centers and towers for the Rio Grande Valley sector in Texas. Further, we reported that the Border Patrol had not yet initiated deployments of RVSS to Texas because, according to Border Patrol officials, the program had only recently completed contract negotiations for procuring those systems. Additionally, the Border Patrol initially awarded the contract to procure and deploy Mobile Video Surveillance System units to Texas in 2014, but did not award the contract until 2015 because of bid and size protests, and the vendor that was awarded the contract did not begin work until March 2016. Our November 2017 report includes more detailed information about the deployment status of surveillance technology along the southwest border as of October 2017. We also reported in November 2017 that the Border Patrol had made progress identifying performance metrics for the technologies deployed along the Southwest Border, but additional actions are needed to fully implement our prior recommendations in this area. For example, in November 2011, we found that CBP did not have the information needed to fully support and implement the Arizona Technology Plan and recommended that CBP (1) determine the mission benefits to be derived from implementation of the Arizona Technology Plan and (2) develop and apply key attributes for metrics to assess program implementation. CBP concurred with our recommendations and has implemented one of them. Specifically, in March 2014, we reported that CBP had identified mission benefits of its surveillance technologies to be deployed along the southwest border, such as improved situational awareness and agent safety. However, the agency had not developed key attributes for performance metrics for all surveillance technologies to be deployed. Further, we reported in March 2014 that CBP did not capture complete data on the contributions of these technologies. When used in combination with other relevant performance metrics or indicators, these data could be used to better determine the impact of CBP’s surveillance technologies on CBP’s border security efforts and inform resource allocation decisions. Therefore, we recommended that CBP (1) require data on technology contributions to apprehensions or seizures to be tracked and recorded within its database and (2) subsequently analyze available data on apprehensions and technological assists—in combination with other relevant performance metrics or indicators, as appropriate—to determine the contribution of surveillance technologies. CBP concurred with our recommendations and has implemented one of them. Specifically, in June 2014, the Border Patrol issued guidance informing agents that the asset assist data field—which records assisting technology or other assets (canine teams)—in its database had become a mandatory data field. While the Border Patrol has taken action to collect data on technology, it has not taken additional steps to determine the contribution of surveillance technologies to CBP’s border security efforts. In April 2017, we reported that the Border Patrol had provided us a case study that assessed technology assist data, along with other measures, to determine the contributions of surveillance technologies to its mission. We reported that this was a helpful step in developing and applying performance metrics; however, the case study was limited to one border location and the analysis was limited to select technologies. In November 2017, we reported that Border Patrol officials demonstrated the agency’s new Tracking, Sign Cutting, and Modeling (TSM) system, which they said is intended to connect between agents’ actions (such as identification of a subject through the use of a camera) and results (such as an apprehension) and allow for more comprehensive analysis of the contributions of surveillance technologies to the Border Patrol’s mission. One official said that data from the TSM will have the potential to provide decision makers with performance indicators, such as changes in apprehensions or traffic before and after technology deployments. However, at the time of our review, TSM was still early in its use and officials confirmed that it was not yet used to support such analytic efforts. We continue to believe that it is important for the Border Patrol to assess technologies’ contributions to border security and will continue to monitor the progress of the TSM and other Border Patrol efforts to meet our 2011 and 2014 recommendations. We have reported on the significant investments CBP has made in tactical infrastructure along the southwest border. The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA), as amended, provides that the Secretary of Homeland Security shall take actions, as necessary, to install physical barriers and roads in the vicinity of the border to deter illegal crossings in areas of high illegal entry. The Secure Fence Act of 2006, in amending IIRIRA, required DHS to construct at least two layers of reinforced fencing as well as physical barriers, roads, lighting, cameras, and sensors on certain segments of the southwest border. From fiscal years 2005 through 2015, CBP increased the total miles of primary border fencing on the southwest border from 119 miles to 654 miles—including 354 miles of primary pedestrian fencing and 300 miles of primary vehicle fencing. In addition, CBP has deployed additional layers of pedestrian fencing behind the primary border fencing, including 37 miles of secondary fencing. From fiscal years 2007 through 2015, CBP spent approximately $2.4 billion on tactical infrastructure on the southwestern border—and about 95 percent, or around $2.3 billion, was spent on constructing pedestrian and vehicle fencing. CBP officials reported it will need to spend additional amounts to sustain these investments over their lifetimes. In 2009, CBP estimated that maintaining fencing would cost more than $1 billion over 20 years. CBP used various fencing designs to construct the 654 miles of primary pedestrian and vehicle border fencing. Figure 2 shows examples of existing pedestrian fencing deployed along the border. In February 2017, we reported that border fencing had benefited border security operations in various ways, according to the Border Patrol. For example, according to officials, border fencing improved agent safety, helped reduce vehicle incursions, and supported Border Patrol agents’ ability to respond to illicit cross-border activities by slowing the progress of illegal entrants. However, we also found that, despite its investments over the years, CBP could not measure the contribution of fencing to border security operations along the southwest border because it had not developed metrics for this assessment. We reported that CBP collected data that could help provide insight into how border fencing contributes to border security operations. For example, we found that CBP collected data on the location of illegal entries that could provide insight into where these illegal activities occurred in relation to the location of various designs of pedestrian and vehicle fencing. We reported that CBP could potentially use these data to compare the occurrence and location of illegal entries before and after fence construction, as well as to help determine the extent to which border fencing contributes to diverting illegal entrants into more rural and remote environments, and border fencing’s impact, if any, on apprehension rates over time. Therefore, we recommended in February 2017 that the Border Patrol develop metrics to assess the contributions of pedestrian and vehicle fencing to border security along the southwest border using the data the Border Patrol already collects and apply this information, as appropriate, when making investment and resource allocation decisions. The agency concurred with our recommendation. As of December 2017, officials reported that CBP plans to establish initial metrics by March 2018 and finalize them in January 2019. In February 2017, we also reported that CBP was taking a number of steps to sustain tactical infrastructure along the southwest border; however, it continued to face certain challenges in maintaining this infrastructure. For example, CBP had funding allocated for tactical infrastructure sustainment requirements, but had not prioritized its requirements to make the best use of available funding, since CBP also required contractors to address urgent repair requirements. According to Border Patrol officials, CBP classifies breaches to fencing, grates, or gates as urgent and requiring immediate repair because breaches increase illegal entrants’ ability to enter the country unimpeded. At the time of our February 2017 review, the majority of urgent tactical infrastructure repairs on the southwest border were fence breaches, according to Border Patrol officials. From fiscal years 2010 through 2015, CBP recorded a total of 9,287 breaches in pedestrian fencing, and repair costs averaged $784 per breach. While contractors provide routine maintenance and address urgent repairs on tactical infrastructure, certain tactical infrastructure assets used by the Border Patrol—such as border fencing—become degraded beyond repair and must be replaced. For example, in February 2017 we reported that CBP had provided routine maintenance and repair services to the primary legacy pedestrian fencing in Sunland Park, New Mexico. However, significant weather events had eroded the foundation of the fencing, according to the Border Patrol officials in the El Paso sector, and in 2015 CBP began to replace 1.4 miles of primary pedestrian fence in this area. We also reported on several additional CBP projects to replace degraded, legacy pedestrian fencing with more modern, bollard style fencing. For example, in fiscal year 2016, CBP began removing and replacing an estimated 7.5 miles of legacy primary pedestrian fencing with modern bollard style fencing within the Tucson sector. In addition, from fiscal years 2011 through 2016, CBP completed four fence replacement projects that replaced 14.1 miles of primary pedestrian legacy fencing in the Tucson and Yuma sectors at a total cost of approximately $68.26 million and an average cost of $4.84 million per mile of replacement fencing. We plan to provide information on additional fence replacement projects in a forthcoming report. In 2014, the Border Patrol began implementing the Requirements Management Process that is designed to facilitate planning for funding and deploying tactical infrastructure and other requirements, according to Border Patrol officials. At the time of our February 2017 review, Border Patrol headquarters and sector officials told us that the Border Patrol lacked adequate guidance for identifying, funding, and deploying tactical infrastructure needs as part of this process. In addition, officials reported experiencing some confusion about their roles and responsibilities in this process. We reported that developing guidance on this process would provide more reasonable assurance that the process is consistently followed across the Border Patrol. We therefore recommended that the Border Patrol develop and implement written guidance to include roles and responsibilities for the steps within its requirements process for identifying, funding, and deploying tactical infrastructure assets for border security operations. The agency concurred with this recommendation and stated that it planned to update the Requirements Management Process and, as part of that update, planned to add communication and training methods and tools to better implement the process. As of December 2017, DHS plans to complete these efforts by September 2019. In response to the January 2017 Executive Order, CBP established the Border Wall System Program to replace and add to existing barriers along the southwest border. In April 2017, DHS leadership authorized CBP to procure barrier prototypes, which are intended to help refine requirements and inform new or updated design standards for the border wall system. CBP subsequently awarded eight contracts with a total value of $5 million for the construction, development, and testing of the prototypes. From October to December 2017, CBP tested eight prototypes—four constructed from concrete and four from other materials—and evaluated them in five areas: breachability, scalability, constructability, design, and aesthetics. CBP officials said the prototype evaluation results are expected by March 2018. CBP has selected the San Diego and Rio Grande Valley sectors for the first two segments of the border wall system. In the San Diego sector, CBP plans to replace 14 miles of existing primary and secondary barriers. The primary barriers will be rebuilt to existing design standards, but the secondary barriers will be rebuilt to new design standards once established. In the Rio Grande Valley sector, CBP plans to extend an existing barrier by 60 miles using existing design standards. CBP intends to prioritize construction of new or replacement physical barriers based on threat levels, land ownership, and geography, among other things. We have ongoing work reviewing the Border Wall System Program, and we plan to report on the results of that work later this year. In November 2017 we reported that, in fiscal years 2011 through 2016, the Border Patrol had statutorily-established minimum staffing levels of 21,370 full-time equivalent agent positions, but the Border Patrol has faced challenges in staffing to that level. Border Patrol headquarters, with input from the sectors, determines how many authorized agent positions are allocated to each of the sectors. According to Border Patrol officials, these decisions take into account the relative needs of the sectors, based on threats, intelligence, and the flow of illegal activity. Each sector’s leadership determines how many of the authorized agent positions will be allocated to each station within their sector. At the end of fiscal year 2017, the Border Patrol reported it had over 19,400 agents on board nationwide, and that over 16,600 of the agents were staffed to sectors along the southwest border. As mentioned earlier, the January 2017 executive order called for the hiring of 5,000 additional Border Patrol agents, subject to available appropriations, and as of November 2017 we reported that the Border Patrol planned to have 26,370 agents by the end of fiscal year 2021. The Acting Commissioner of CBP reported in a February 2017 memo to the Deputy Secretary for Homeland Security that from fiscal year 2013 to fiscal year 2016, the Border Patrol hired an average of 523 agents per year while experiencing a loss of an average of 904 agents per year. The memo cited challenges such as competing with other federal, state, and local law enforcement organizations for applicants. In particular, the memo noted that CBP faces hiring and retention challenges compared to DHS’s U.S. Immigration and Customs Enforcement (which is also planning to hire additional law enforcement personnel) because CBP’s hiring process requires applicants to take a polygraph examination, Border Patrol agents are deployed to less desirable duty locations, and Border Patrol agents generally receive lower compensation. In November 2017, we reported that the availability of agents is one key factor that affects the Border Patrol’s deployment strategy. In particular, officials from all nine southwest border sectors cited current staffing levels and the availability of agents as a challenge for optimal deployment. We reported that, as of May 2017, the Border Patrol had 17,971 authorized agent positions in southwest border sectors, but only 16,522 of those positions were filled—a deficit of 1,449 agents—and eight of the nine southwest border sectors had fewer agents than the number of authorized positions. As a result of these staffing shortages, resources were constrained and station officials had to make decisions about how to prioritize activities for deployment given the number of agents available. We also reported in November 2017 that within sectors, some stations may be comparatively more understaffed than others because of recruitment and retention challenges, according to officials. Generally, sector officials said that the recruitment and retention challenges associated with particular stations were related to quality of life factors in the area near the station—for example, agents may not want to live with their families in an area without a hospital, with low-performing schools, or with relatively long commutes from their homes to their duty station. This can affect retention of existing agents, but it may also affect whether a new agent accepts a position in that location. For example, officials in one sector said that new agent assignments are not based solely on agency need, but rather also take into consideration agent preferences. These officials added that there is the potential that new agents may decline offers for stations that are perceived as undesirable, or they may resign their position earlier than they otherwise would to pursue employment in a more desirable location. We have ongoing work reviewing CBP’s efforts to recruit, hire, and retain its law enforcement officers, including Border Patrol agents. Chairwoman McSally, Ranking Member Vela, and Members of the Subcommittee, this concludes my prepared statement. I will be happy to answer any questions you may have. For questions about this statement, please contact Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony are Jeanette Henriquez (Assistant Director), Leslie Sarapu (Analyst-in- Charge), Ashley Davis, Alana Finley, Tom Lombardi, Marycella Mierez, and Claire Peachey. Southwest Border Security: Border Patrol Is Deploying Surveillance Technologies but Needs to Improve Data Quality and Assess Effectiveness. GAO-18-119. Washington, D.C.: November 30, 2017. Border Patrol: Issues Related to Agent Deployment Strategy and Immigration Checkpoints. GAO-18-50. Washington, D.C.: November 8, 2017. 2017 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-17- 491SP. Washington, D.C.: April 26, 2017. Homeland Security Acquisitions: Earlier Requirements Definition and Clear Documentation of Key Decisions Could Facilitate Ongoing Progress. GAO-17-346SP. Washington, D.C.: April 6, 2017. Southwest Border Security: Additional Actions Needed to Better Assess Fencing’s Contributions to Operations and Provide Guidance for Identifying Capability Gaps. GAO-17-331. Washington, D.C.: February 16, 2017. Southwest Border Security: Additional Actions Needed to Better Assess Fencing’s Contributions to Operations and Provide Guidance for Identifying Capability Gaps. GAO-17-167SU. Washington, D.C.: December 22, 2016. Border Security: DHS Surveillance Technology, Unmanned Aerial Systems and Other Assets. GAO-16-671T. Washington, D.C.: May 24, 2016. 2016 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-16- 375SP. Washington, D.C.: April 13, 2016. Homeland Security Acquisitions: DHS Has Strengthened Management, but Execution and Affordability Concerns Endure. GAO-16-338SP. Washington, D.C.: March 31, 2016. Southwest Border Security: Additional Actions Needed to Assess Resource Deployment and Progress. GAO-16-465T. Washington, D.C.: March 1, 2016. Border Security: Progress and Challenges in DHS’s Efforts to Implement and Assess Infrastructure and Technology. GAO-15-595T. Washington, D.C.: May 13, 2015. Homeland Security Acquisitions: Addressing Gaps in Oversight and Information is Key to Improving Program Outcomes. GAO-15-541T. Washington, D.C.: April 22, 2015. Homeland Security Acquisitions: Major Program Assessments Reveal Actions Needed to Improve Accountability. GAO-15-171SP. Washington, D.C.: April 22, 2015. 2015 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-15- 404SP. Washington, D.C.: April 14, 2015. Arizona Border Surveillance Technology Plan: Additional Actions Needed to Strengthen Management and Assess Effectiveness. GAO-14-411T. Washington, D.C.: March 12, 2014. Arizona Border Surveillance Technology Plan: Additional Actions Needed to Strengthen Management and Assess Effectiveness. GAO-14-368. Washington, D.C.: March 3, 2014. Border Security: Progress and Challenges in DHS Implementation and Assessment Efforts. GAO-13-653T. Washington, D.C.: June 27, 2013. Border Security: DHS’s Progress and Challenges in Securing U.S. Borders. GAO-13-414T. Washington, D.C.: March 14, 2013. Border Patrol: Key Elements of New Strategic Plan Not Yet in Place to Inform Border Security Status and Resource Needs. GAO-13-25. Washington, D.C.: December 10, 2012. U.S. Customs and Border Protection’s Border Security Fencing, Infrastructure and Technology Fiscal Year 2011 Expenditure Plan. GAO- 12-106R. Washington, D.C.: November 17, 2011. Arizona Border Surveillance Technology: More Information on Plans and Costs Is Needed before Proceeding. GAO-12-22. Washington, D.C.: November 4, 2011. Homeland Security: DHS Could Strengthen Acquisitions and Development of New Technologies. GAO-11-829T. Washington, D.C.: July 15, 2011. Border Security: DHS Progress and Challenges in Securing the U.S. Southwest and Northern Borders. GAO-11-508T. Washington, D.C.: March 30, 2011. Border Security Preliminary Observations on the Status of Key Southwest Border Technology Programs. GAO-11-448T. Washington, D.C.: March 15, 2011. Secure Border Initiative: DHS Needs to Strengthen Management and Oversight of Its Prime Contractor. GAO-11-6. Washington, D.C.: October 18, 2010. U.S. Customs and Border Protection’s Border Security Fencing, Infrastructure and Technology Fiscal Year 2010 Expenditure Plan. GAO- 10-877R. Washington, D.C.: July 30, 2010. Department of Homeland Security: Assessments of Selected Complex Acquisitions, GAO-10-588SP. Washington, D.C.: June 30, 2010. Secure Border Initiative: DHS Needs to Reconsider Its Proposed Investment in Key Technology Program. GAO-10-340. Washington, D.C.: May, 5, 2010. Secure Border Initiative: DHS Has Faced Challenges Deploying Technology and Fencing Along the Southwest Border, GAO-10-651T. Washington, D.C.: May 4, 2010. Secure Border Initiative: Testing and Problem Resolution Challenges Put Delivery of Technology Program at Risk. GAO-10-511T. Washington, D.C.: March 18, 2010. Secure Border Initiative: DHS Needs to Address Testing and Performance Limitations That Place Key Technology Program at Risk. GAO-10-158. Washington, D.C.: January 29, 2010. Secure Border Initiative: Technology Deployment Delays Persist and the Impact of Border Fencing Has Not Been Assessed. GAO-09-1013T. Washington, D.C.: September 17, 2009. Secure Border Initiative: Technology Deployment Delays Persist and the Impact of Border Fencing Has Not Been Assessed. GAO-09-896. Washington, D.C.: September 9, 2009. Border Patrol: Checkpoints Contribute to Border Patrol’s Mission, but More Consistent Data Collection and Performance Measurement Could Improve Effectiveness. GAO-09-824. Washington, D.C.: August 31, 2009. Customs and Border Protection’s Secure Border Initiative Fiscal Year 2009 Expenditure Plan. GAO-09-274R. Washington, D.C.: April 30, 2009. Secure Border Initiative Fence Construction Costs. GAO-09-244R. Washington, D.C.: January 29, 2009. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "DHS has employed a variety of technology, tactical infrastructure, and personnel assets to help secure the nearly 2,000 mile long southwest border. Since 2009, GAO has issued over 35 products on the progress and challenges DHS has faced in using technology, infrastructure, and other resources to secure the border. GAO has made over 50 recommendations to help improve DHS's efforts, and DHS has implemented more than half of them. This statement addresses (1) DHS efforts to deploy and measure the effectiveness of surveillance technologies, (2) DHS efforts to maintain and assess the effectiveness of existing tactical infrastructure and to deploy new physical barriers, and (3) staffing challenges the Border Patrol has faced. This statement is based on three GAO reports issued in 2017, selected updates conducted in 2017, and ongoing work related to DHS acquisitions and the construction of physical barriers. For ongoing work GAO analyzed DHS and CBP documents, interviewed officials within DHS, and visited border areas in California. The U.S. Border Patrol, within the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP), has made progress deploying surveillance technology—a mix of radars, sensors, and cameras—along the southwest U.S. border. As of October 2017, the Border Patrol had completed the planned deployment of select technologies to several states along the southwest border. The Border Patrol has also made progress toward assessing performance of surveillance technologies, but additional actions are needed to fully implement GAO's 2011 and 2014 recommendations in this area. For example, the Border Patrol has not yet used available data to determine the contribution of surveillance technologies to border security efforts. CBP spent about $2.3 billion to deploy fencing from fiscal years 2007 through 2015 and constructed 654 miles of fencing by 2015. The Border Patrol has reported that border fencing supports agents' ability to respond to illicit cross-border activities by slowing the progress of illegal entrants. GAO reported in February 2017 that CBP was taking a number of steps in sustaining tactical infrastructure—such as fencing, roads, and lighting—along the southwest border. However, CBP has not developed metrics that systematically use data it collects to assess the contributions of border fencing to its mission, as GAO has recommended. CBP concurred with the recommendation and plans to develop metrics by January 2019. Further, CBP established the Border Wall System Program in response to a January 2017 executive order that called for the immediate construction of a southwest border wall. This program is intended to replace and add to existing barriers along the southwest border. In April 2017, DHS leadership gave CBP approval to procure barrier prototypes, which are intended to help inform new design standards for the border wall system. Physical Barriers in San Diego, California, April 2016 The Border Patrol has faced challenges in achieving a staffing level of 21,370 agents, the statutorily-established minimum from fiscal years 2011 through 2016. As of September 2017, the Border Patrol reported it had about 19,400 agents. GAO reported in November 2017 that Border Patrol officials cited staffing shortages as a challenge for optimal deployment. As a result, officials had to make decisions about how to prioritize activities for deployment given the number of agents available. In recent reports, GAO made or reiterated recommendations for DHS to, among other things, assess the contributions of technology and fencing to border security. DHS generally agreed, and has actions planned or underway to address these recommendations.", "document_type": "gao"}
{"report": "In 1990, GAO began a program to report on government operations that we identified as “high risk.” Since then, generally coinciding with the start of each new Congress, we have reported on the status of progress addressing previously identified high-risk areas and have updated the High-Risk List to add new high-risk areas. Our most recent high-risk update in February 2017 identified 34 high-risk areas. Overall, our high-risk program has served to identify and help resolve serious weaknesses in areas that involve substantial resources and provide critical services to the public. Since the program began, the federal government has taken high-risk problems seriously and has made long-needed progress toward correcting them. In a number of cases, progress has been sufficient for us to remove the high-risk designation. To determine which federal government programs and functions should be designated high risk, we use our guidance document, Determining Performance and Accountability Challenges and High Risks. In making this determination, we consider whether the program or function is of national significance or is key to the performance and accountability of the federal government, among other things. Our experience has shown that the key elements needed to make progress in high-risk areas are top-level attention by the administration and agency leaders grounded in the five criteria for removal from the High-Risk List, as well as any needed congressional action. The five criteria for removal that we identified in November 2000 are listed in table 1 below. In each of our high-risk updates, we have assessed agencies’ progress to address the five criteria for removing a high-risk area from the list using the following definitions: Met. Actions have been taken that meet the criterion. There are no significant actions that need to be taken to further address this criterion. Partially Met. Some, but not all, actions necessary to meet the criterion have been taken. Not Met. Few, if any, actions towards meeting the criterion have been taken. Figure 1, which is based on a general example, shows a visual representation of varying degrees of progress in each of the five criteria for a high-risk area. We use this system to assess and track the progress of all agencies with areas on our High Risk list. When we rate Interior and HHS’s progress on Improving Federal Management of Programs that Serve Tribes and Their Members for the first time in our 2019 High Risk report, we will provide similar information. As we have previously reported, the Office of the Assistant Secretary- Indian Affairs (Indian Affairs), through BIE, is responsible for providing quality education opportunities to Indian students and oversees 185 elementary and secondary schools that serve approximately 41,000 students on or near Indian reservations in 23 states, often in rural areas and small towns. About two-thirds of BIE schools are operated by tribes, primarily through federal grants, and about one-third are operated directly by BIE. BIE’s Indian education programs originate from the federal government’s trust responsibility to Indian tribes. It is the policy of the United States to fulfill this trust responsibility for educating Indian children by working with tribes to ensure that education programs are of the highest quality and, in accordance with this policy, Interior is responsible for providing children a safe and healthy environment in which to learn. All BIE schools—both tribally- and BIE-operated—receive almost all of their operational funding from federal sources—namely, Interior and the Department of Education (Education)—totaling about $1.2 billion in 2016. Indian Affairs considers many BIE schools to be in poor condition. BIE is primarily responsible for its schools’ educational functions, while their administrative functions—such as safety, facilities, and property management—are divided mainly between two other Indian Affairs’ offices: BIA and the Office of the Deputy Assistant Secretary of Management. As discussed below, we have made 23 recommendations to Interior on Indian education—including recommendations cited in GAO’s 2017 High Risk report and included in two late May reports. Interior generally agreed with our recommendations. However, none have been fully implemented. In our 2017 High Risk report, we cited 3 recommendations from a 2013 report on management challenges facing Indian Affairs, with which Interior agreed, and these recommendations remain unimplemented as of late August 2017. These recommendations were based on our findings of Indian Affairs’ poor management and lack of accountability for BIE schools. In particular, we found that BIE did not have procedures in place specifying who should be involved in making key decisions, resulting in inaccurate guidance provided to some BIE schools about the appropriate academic assessments required by federal law. We also found that Indian Affairs had not developed a strategic plan with specific goals and measures for itself or BIE or conducted workforce analysis to ensure it has the right people in place with the right skills to effectively meet the needs of BIE schools. Further, we found that fragmented administrative services for BIE schools and a lack of clear roles for BIE and Indian Affairs’ Office of the Deputy Assistant Secretary for Management contributed to delays in BIE schools acquiring needed materials, such as textbooks. As a result, we recommended that Indian Affairs develop decision-making procedures and a strategic plan for BIE and revise its workforce plan, among other areas. Of the 3 unimplemented recommendations we made to Interior on Indian Affairs’ management and accountability for BIE schools, agency officials reported that they have taken several actions to address them, including drafting written procedures for BIE decision-making; starting to develop a strategic plan for BIE; and conducting workforce planning. Indian Affairs’ actions to implement our recommendations to develop decision-making procedures and a strategic plan for BIE had not been completed as of late August. Indian Affairs officials told us they believed they had fully implemented our recommendation on strategic workforce planning. However, in reviewing their supporting documentation, we determined that their actions did not address our recommendation to ensure that the staff who are responsible for providing administrative support to BIE schools have the requisite skills and knowledge and are placed in the appropriate offices. For a full description of the agency’s actions and our evaluation of these actions, see recommendations in table 2 in appendix I. We made 4 recommendations in a 2014 report on BIE’s oversight of school spending, none of which have been implemented. These recommendations were based on our findings of key weaknesses in Indian Affairs’ oversight of BIE school spending. In particular, we found that BIE lacked sufficient staff with expertise to oversee school expenditures, and as a result, these staff told us they lacked the knowledge and skills to understand the audits they needed to review. We also found that some staff did not have access to some of these audits. In addition, we found that BIE lacked written procedures and a risk-based approach to overseeing school spending—both integral to federal internal control standards—which resulted in schools’ misuse of federal funds. For example, external auditors identified $13.8 million in unallowable spending at 24 schools. Auditors also found that one school lost about $1.7 million in federal funds that were improperly transferred to off-shore accounts. As a result, we recommended that Indian Affairs take several actions to address these oversight weaknesses, including developing written procedures and a risk-based approach to monitor school spending and a process to share relevant information, such as audit reports, with all BIE staff responsible for overseeing BIE school spending, among other areas. Of the 4 unimplemented recommendations we made to Interior on the oversight of BIE school spending, agency officials reported taking several actions, including providing their auditors with needed access to schools’ audit reports. Officials also said they would put in place written procedures and a risk-based approach to improve the financial monitoring of BIE schools. As of late August 2017, officials had not provided us with documentation of any steps they have taken to improve oversight of school spending. For a full description of the agency’s actions and our evaluation of these actions, see recommendations in table 2 in appendix I. We made 4 recommendations in a 2016 report on the safety and health of BIE school facilities, none of which have been implemented. These recommendations were based on our findings that Indian Affairs was not annually inspecting all BIE schools, as required by Indian Affairs’ policy. We also found that the agency did not have a plan to monitor safety inspections across its regions to ensure that inspection practices were consistent and supported the collection of complete and accurate inspection information. Further, we found the agency had not taken steps to assist BIE schools to build their capacity to address identified safety deficiencies. Some school officials we spoke to reported lacking staff with the knowledge and skills necessary to understand and address safety issues. Further, at one school we visited, we found seven boilers that failed inspection because of multiple high-risk safety deficiencies, including elevated levels of carbon monoxide and a natural gas leak. Four of the boilers were located in a student dormitory, and three were located in classroom buildings. All but one of the boilers were about 50 years old. Although the poor condition of the boilers posed an imminent danger to the safety of students and staff, most of them were not repaired until about 8 months after failing their inspection, prolonging safety risks to students and staff. As a result of these findings, we recommended that Indian Affairs take several actions, including developing a plan to build BIE schools’ capacity to address safety hazards identified by BIA inspectors, among other areas. Of the 4 unimplemented recommendations we made to Interior on ensuring safety and health at BIE schools, Indian Affairs completed safety inspections at all BIE schools in 2016, among other actions. However, based on our review of the agency’s actions, we determined that several steps remain for these recommendations to be fully implemented. For example, as of late August 2017 the agency had not provided us with documentation that it has developed a plan for monitoring safety inspections across its regions to ensure that inspection practices are consistent. Further, Indian Affairs did not provide documentation that it had taken any actions to develop a plan to build BIE schools’ capacity to address safety and health problems identified with their facilities. For a full description of the agency’s actions and our evaluation of these actions, see recommendations in table 2 in appendix I. We also made 6 recommendations in a May 2017 report on oversight and accountability for BIE school safety inspections, none of which have been implemented. These recommendations were based on our findings of key weaknesses in Indian Affairs’ oversight of school safety inspections. In particular, we found that Interior and Indian Affairs had not taken actions to address identified weaknesses in BIA’s safety program, despite internal evaluations since 2011 that consistently found it to be failing. For example, no Indian Affairs office routinely monitored the quality or timeliness of inspection reports, and BIA employees were not held accountable for late reports despite a new employee performance standard on timely report submission. We found that 28 of 50 inspection reports we reviewed were incomplete, inaccurate, or unclear, including reports in which inspectors did not include all school facilities or incorrectly gave schools a year to fix broken fire alarms instead of the required 24 hours. We concluded that unless steps are taken to address safety program weaknesses, the safety and health of BIE students and staff may be at risk. As a result, we recommended that Indian Affairs take steps to address weaknesses in BIA’s safety program, including establishing processes to monitor the quality and timeliness of BIE school inspection reports, among other areas. Of these 6 unimplemented recommendations we made to Interior to improve its oversight of school safety inspections, Indian Affairs reported taking several actions. In particular, Indian Affairs reported that its safety office had established a procedure to monitor the timeliness of inspection report submissions to schools, and that BIA is currently developing a corrective action plan to address findings and recommendations from a 2016 Interior review of BIA’s safety program. However, as of late August 2017, Indian Affairs had not provided us with any documentation on these two actions. For a full description of the agency’s actions and our evaluation of these actions, see recommendations in table 2 in appendix I. We made 6 recommendations in a May 2017 report on school construction projects, none of which have been implemented. These recommendations were based on our findings of key weaknesses in Indian Affairs’ oversight of school construction projects. In particular, we found that Indian Affairs did not have a comprehensive capital asset plan to guide the allocation of funding for school construction projects. We concluded that until Indian Affairs develops such a plan, it risks using federal funds inefficiently and not prioritizing funds to schools with the most pressing needs. Additionally, we found that Indian Affairs has not consistently used accountability measures or conducted sufficient oversight to ensure that BIE school construction projects are completed on time, within budget, and meet schools’ needs. For instance, Indian Affairs has not always used accountability measures, such as warranties, to have builders replace defective parts or repair poor workmanship, and project managers do not always understand how to use accountability measures because Indian Affairs had not provided them guidance. We concluded that until Indian Affairs develops and implements guidance to ensure accountability throughout the school construction process and improves its oversight of construction projects, it will have little assurance they are completed satisfactorily and meet the needs of students and staff. As a result, we recommended that Indian Affairs take several actions, including developing a comprehensive capital asset plan and guidance on the effective use of accountability measures for managing BIE school construction projects, among other areas. Of these 6 unimplemented recommendations that we made to Interior to improve its oversight of BIE school construction projects, Indian Affairs reported taking several actions. For example, Indian Affairs reported that to support the effective use of accountability measures, it established new oversight mechanisms, hired staff with expertise in construction contracting, and administered training for contracting staff. As of late August 2017, however, Indian Affairs had not provided us any documentation of these steps, so we cannot verify that the actions were responsive to our recommendations. Further, Indian Affairs did not report taking any actions to develop guidance on the effective use of accountability measures, which our recommendation specifies. Indian Affairs also reported that it is currently in the process of establishing a new work group to focus on asset management and will continue working to develop a capital asset management plan. Finally, the agency reported it was planning to take several other actions to address our recommendations. For a full description of the agency’s actions and our evaluation of these actions, see recommendations in table 2 in appendix I. As we have previously reported, some tribes and their members hold abundant energy resources and have decided to develop these resources to meet the needs of their community, in part because energy development provides opportunities to improve poor living conditions, decrease high levels of poverty, and fund public services for tribal members. While tribes and their members determine how to use their energy resources, if the resources are held in trust or restricted status, BIA—through its 12 regional offices, 85 agency offices, and other supporting offices—generally must review and approve leases, permits, and other documents required for the development of these resources. In the past 2 years, we have reported that BIA has mismanaged Indian energy resources held in trust, thereby limiting opportunities for tribes and their members to use those resources to create economic benefits and improve the well-being of their communities. Specifically, we issued 3 reports that identified concerns associated with BIA management of energy resources and categorized those concerns into the following four areas: (1) BIA’s data and technology; (2) oversight of BIA activities; (3) collaboration and communication; and (4) BIA’s workforce planning. As discussed below, we made 14 recommendations to BIA to help address BIA management weaknesses that were cited in our 2017 High Risk report. BIA generally agreed with these recommendations. However, none have been fully implemented. We made 2 recommendations related to data and technology for which BIA has taken some actions and made some progress to implement. However, neither of these recommendations has been fully implemented. We made these recommendations based on our June 2015 findings that BIA did not have the necessary geographic information systems (GIS) mapping data and that BIA’s federal cadastral surveys cannot be found or are outdated. According to Interior guidance, GIS mapping technology allows managers to easily identify resources available for lease and where leases are in effect. However, we found that BIA did not have the necessary GIS mapping data for identifying who owns and uses resources, such as existing leases. We also found that BIA could not verify who owned some Indian resources or identify where leases were in effect in a timely manner because, in part, federal cadastral surveys could not be found or were outdated. In addition, we found the extent of this deficiency was unknown because BIA did not maintain an inventory of Indian cadastral survey needs, as called for in Interior guidance. Of the 2 unimplemented recommendations to help ensure that BIA can verify ownership in a timely manner and identify resources available for development, BIA has taken several actions. Regarding GIS data, BIA officials told us that the agency has integrated and deployed data viewing and map creation capabilities into its database for recording and maintaining historical and current data on ownership and leasing of Indian land and mineral resources—the Trust Asset and Accounting Management System (TAAMS)—on August 31, 2017. We will work with BIA to obtain the documentation needed to determine if the deployed GIS capability has the functionality for us to consider this recommendation as fully implemented. Regarding cadastral surveys, according to a BIA official, the agency requested that each of its 12 regions review and identify historic survey requests from a data system that has not been fully maintained or consistently used since 2011 to determine if the requests are still valid. BIA officials told us the next step is to create a new database that will track cadastral survey needs and a reporting mechanism for each BIA region to use when making new survey requests. According to BIA officials, the agency anticipates the new database and reporting mechanism will be deployed by September 30, 2017. For a full description of the agency’s actions and our evaluation of these actions, see table 3 in appendix II. We made 5 recommendations to BIA related to its review process for energy development, none of which have been fully implemented. In June 2015 and June 2016, we found that BIA did not have a documented process or the data needed to track its review and response times throughout the development process, including the approval of leases, rights-of-way (ROW) agreements, and communitization agreements (CA). The ability to track and monitor the review of permits and applications is a best practice to improve the federal review process. Of the 5 unimplemented recommendations we made to help ensure that BIA fulfills its responsibilities concerning the review and approval of documents related to energy development in an efficient and transparent manner, BIA has taken some actions and identified other actions it plans to take. For example, on May 17, 2017, the Acting Assistant Secretary- Indian Affairs testified before this committee that a group of BIA subject matter experts have been working to modify TAAMS, incorporating the key identifiers and data fields needed to track and monitor review and response times for oil and gas leases and agreements. The Acting Assistant Secretary also stated that BIA is in the process of evaluating and reviewing the current realty tracking system and TAAMS to improve efficiencies and timeliness in processing workloads. BIA identified actions to track and monitor review and response times for oil and gas leases and agreements; however, BIA did not indicate whether it intends to track and monitor its review of other energy-related documents, such as ROW agreements, that must be approved before tribes can develop resources. In another example, on May 17, 2017, the Acting Assistant Secretary- Indian Affairs testified before this committee that a National Policy Memorandum has been developed that establishes time frames for review and approval of Indian CAs. The Acting Assistant Secretary also stated that such time frames will also be incorporated into the BIA Fluid Mineral Estate Procedural Handbook and the Onshore Energy and Mineral Lease Management Interagency Standard Operating Procedures. However, in our review of the National Policy Memorandum we did not find that it establishes time frames for review and approval of Indian CAs. In response to our request for clarification, a BIA official told us the agency is in the process of drafting suggested time frames. For a full description of the agency’s actions and our evaluation of these actions, see table 3 in appendix II. We made 5 recommendations related to collaboration and communication in our June 2015 and November 2016 reports. BIA has taken some actions, but the actions are generally limited in scope and none of these recommendations have been fully implemented. We found in our November 2016 report that BIA has taken steps to form an Indian Energy Service Center that is intended to, among other things, help expedite the permitting process associated with Indian energy development. However, we found several weaknesses in BIA’s collaboration processes and structure. For example, in November 2016, we reported that BIA did not coordinate with other key regulatory agencies that can have a role in the development of Indian energy resources, including Interior’s Fish and Wildlife Service (FWS), the Army Corps of Engineers (Corps), and the Environmental Protection Agency (EPA). As a result, the Service Center was neither established as the central point for collaborating with all federal regulatory partners generally involved in energy development, nor did it serve as a single point of contact for permitting requirements. In addition, BIA did not include the Department of Energy (DOE) in a participatory, advisory, or oversight role in the development of the Service Center. Further, although Interior’s Office of Indian Energy and Economic Development (IEED) developed the initial concept and proposal for the Service Center and has special expertise regarding the development of Indian energy resources, BIA did not include IEED in the memorandum of understanding (MOU) establishing the Service Center. BIA also did not document the rationale for key management decisions or the alternatives considered in forming the Service Center—a leading practice for effective organizational change. In addition, several tribal leaders and tribal organizations made suggestions that were not currently reflected in BIA’s Service Center. Without documentation on alternatives considered, it was unclear whether these requests were appropriately considered. Of the 5 unimplemented recommendations to help improve efficiencies in the federal regulatory process, BIA reported that it has taken some actions. For example: According to a BIA official, the agency has initiated discussions with FWS, EPA, and the Corps in an effort to establish formal agreements. BIA has a target of December 31, 2017, to establish these agreements. However, in its current structure, the Service Center is not serving as a lead agency or single point of contact to coordinate and navigate the regulatory process. Without additional information, it is unclear if the formal agreements alone will allow the Service Center to serve this role. We will continue to work with BIA officials to understand how the formal agreements with other regulatory agencies will help to transform the Service Center into a central point of contact for Indian energy development. According to a BIA official, the agency developed and is currently reviewing an addendum to expand an existing MOU between DOE and IEED to include the Service Center. However, the existing MOU between DOE and IEED does not identify the role for these agencies as related to the Service Center. As such, the addendum, as currently described to us by a BIA official, will not fully implement our recommendation. On May 17, 2017, the Acting Assistant Secretary- Indian Affairs testified before this committee that Interior considers this recommendation implemented because (1) the development of the Service Center was the result of a concept paper produced by a multi- agency team and (2) a multi-agency team held a tribal listening session, received written comments, and conducted conference calls in an effort to gather input from relevant stakeholders. We do not agree that these actions meet the intent of the recommendation. BIA’s actions have not resulted in documentation on the alternatives considered, whether tribal input and requests were considered, and the rationale for not incorporating key suggestions. In addition, in 2005, Congress provided an option for tribes to enter into a tribal energy resource agreement (TERA) with the Secretary of the Interior that allows the tribe, at its discretion, to enter into leases, business agreements, and rights-of-way agreements for energy resource development on tribal lands without review and approval by the Secretary. However, in a June 2015 report, we found that uncertainties about Interior’s regulations for implementing this option have contributed to deter tribes from pursuing agreements. We recommended that Interior provide clarifying guidance. On May 17, 2017, the Acting Assistant Secretary- Indian Affairs testified before this committee that Interior is working to provide additional energy development-specific guidance on provisions of TERA regulations that tribes have identified to the department as unclear. As part of this effort, the Acting Assistant Secretary reported that IEED continues to perform training and technical assistance on the TERA regulations, and plans to issue guidance on those provisions of TERA that have been identified as unclear. As of September 6, 2017, Interior has not issued additional guidance and several Interior officials told us it is unlikely any new guidance will clarify “inherently federal functions”—one provision of Interior’s regulations tribes have identified as unclear. For a full description of the agency’s actions and our evaluation of these actions, see table 3 in appendix II. We made 2 recommendations on workforce planning to BIA in November 2016, neither of which has been fully implemented. In our November 2016 report we found BIA had high vacancy rates at some agency offices and that the agency had not conducted key workforce planning activities consistent with Office of Personnel Management standards and leading practices identified in our prior work. Of the 2 unimplemented recommendations to help ensure that it has a workforce with the right skills, appropriately aligned to meet the agency’s goals and tribal priorities, BIA has reported several actions it plans to take. On May 17, 2017, the Acting Assistant Secretary- Indian Affairs testified before this committee that BIA is in the process of identifying and implementing a workforce plan regarding positions associated with the development of Indian energy and minerals. Specifically, the Acting Assistant Secretary stated that the Service Center will collect data directly from BIA, Bureau of Land Management (BLM), the Office of Natural Resources Revenue (ONRR), and the Office of Special Trustee (OST) employees in an effort to identify workload and necessary technical competencies. Then, the Service Center will work with partner bureaus to assess skills and competencies needed for energy and mineral workforce standards. BIA’s target for completion of the activities is the end of 2017. BIA stated it is taking steps to identify workload and technical competencies, but without additional information, it is unclear if these actions will identify potential gaps in its workforce or result in the establishment of a documented process for assessing BIA’s workforce composition at agency offices. For a full description of the agency’s actions and our evaluation of these actions, see table 3 in appendix II. As we have previously reported, the Indian Health Service (IHS), an agency within the Department of Health and Human Services (HHS), is charged with providing health care to approximately 2.2 million Indians. IHS oversees its health care facilities through a decentralized system of area offices, which are led by area directors and located in 12 geographic areas. In fiscal year 2016, IHS allocated about $1.9 billion for health services provided by federally and tribally operated hospitals, health centers, and health stations. Federally operated facilities—including 26 hospitals, 56 health centers, and 32 health stations—provide mostly primary and emergency care, in addition to some ancillary or specialty services. When services are not available at federally operated or tribally operated facilities, IHS may, in some cases, pay for services provided through external providers through its Purchased/Referred Care (PRC) program— previously referred to as the Contract Health Services program. The PRC program is funded through annual appropriations and must operate within the limits of available appropriated funds. To be eligible for PRC services, recipients must generally meet several criteria, including being a member or descendant of a federally recognized tribe or having close social and economic ties with the tribe, and living within a designated PRC area. Although funding available for the PRC program has recently increased, we have reported that the program is unable to pay for all eligible services, and that these gaps in services sometimes delay diagnoses and treatments, which can exacerbate the severity of a patient’s condition and necessitate more intensive treatment. As discussed below, we made 13 recommendations to IHS that were unimplemented when we issued our 2017 High Risk report, with which HHS generally agreed. One has been fully implemented. In our February 2017 High Risk report, we cited 2 recommendations from a 2011 report on the accuracy of data used for estimating PRC needs, with which HHS agreed. These recommendations remain unimplemented as of late August 2017. We based these recommendations on our finding that IHS’s estimates of the extent to which unmet needs exist in the PRC program were not reliable because of deficiencies in the agency’s oversight of the collection of data on deferred and denied PRC program services. As a result, we made several recommendations for IHS to develop more accurate data for making these estimates and improving agency oversight. Of the 2 recommendations not yet fully implemented that we made to IHS on estimating PRC program needs, HHS officials reported that updated policy and procedural guidance will be issued to all IHS sites by September 30, 2017. We will evaluate the policy and procedural guidance when it is issued. For a full description of the agency’s actions and our evaluation for these unimplemented recommendations, see table 4 in appendix III. We made 3 recommendations to IHS to help make its allocation of PRC program funds more equitable, none of which have been implemented. We also raised a matter for Congress to consider requiring IHS to develop and use a new PRC funding allocation methodology. These recommendations and matter for Congress to consider were based on our findings of wide variations in PRC funding across the 12 IHS areas, that these variations were largely maintained by IHS’s long-standing use of its base funding methodology, that variation in PRC funding was sometimes not related to the availability of IHS-funded hospitals, that IHS’s estimate of PRC service users was imprecise, and that IHS allowed area offices to distribute program increase funds to local PRC programs using different criteria than the PRC allocation formula without informing IHS. As a result, we suggested that Congress consider requiring IHS to develop and use a new method to allocate all PRC program funds to account for variations across areas, and recommended that IHS use actual counts of PRC users and variations in levels of available hospital services in allocation formulas, and develop written policies and procedures to require area offices to notify IHS when changes are made to the allocations of funds to PRC programs. In response to our matter for Congress to consider, a bill that would have addressed this matter was introduced in the House and reported out of committee in 2016, but the bill did not become law. In response to our recommendations, HHS officials told us that a tribal/federal workgroup is currently discussing the PRC fund allocation issues. In July 2017, we requested additional information about the workgroup and any discussion that has occurred or decisions that have been made about PRC funding allocation since we made the recommendation 5 years ago, but as of late August 2017, we have not received any information. As the workgroup continues to discuss the PRC fund allocation issues, we will evaluate any decisions that are made to determine if they address this recommendation. For a full description of the agency’s actions and our evaluation for these recommendations, see table 4 in appendix III. We made 1 recommendation to IHS in a 2013 report on IHS payment rates for nonhospital services through the PRC program, which has not been fully implemented, as well as a matter for Congress to consider. The recommendation and matter for Congress to consider were based on our finding that IHS primarily paid nonhospital providers, including physicians, at their billed charges, despite an IHS policy—in place since 1986—that stated that area offices should attempt to negotiate with providers at rates that are no higher than Medicare rates. As a result, we suggested that Congress consider imposing a cap on payments for physician and other nonhospital services made through IHS’s PRC program that is consistent with the rates paid by other federal agencies. We also recommended that IHS monitor PRC program patient access to physician and other nonhospital care in order to assess how any new payment rates may benefit or impede the availability of care. In response to our recommendation, HHS officials told us that the agency has developed an online PRC rates provider tracking tool that enables PRC programs to document providers that refuse to contract for their most favored customer rate or accept the Medicare-like rate. We have requested documentation of this provider tracking tool, but as of late August 2017, we have not yet received information sufficient to consider the recommendation implemented. For a full description of the agency’s actions and our evaluation for these recommendations, see table 4 in appendix III. In our February 2017 High Risk report, we cited 1 recommendation from a 2013 report on the eligibility and enrollment of American Indians in expanded health care programs, with which HHS neither agreed nor disagreed. This recommendation remains unimplemented as of late August 2017. We reported that the expansion of Medicaid and new coverage options under the Patient Protection and Affordable Care Act (PPACA) may allow many American Indians to obtain additional health care benefits for which they were not previously eligible, resulting in IHS facilities receiving increased reimbursements from third-party payers and an increased workload for IHS facility staff responsible for processing these payments. We also found that IHS did not have an effective plan in place to ensure that a sufficient number of facility staff were prepared to assist with enrollment and to process increased third-party payments. As a result, we recommended that IHS realign its resources and personnel to increase its capacity to assist with increased enrollment and third-party billing. IHS has not reported taking any new action to implement the remaining recommendation. In response to our request for an update, IHS again provided a copy of a planning template it developed for facility Chief Executive Officers (CEO) that encourages them to assess the need for staffing changes in light of new and expanded coverage options available under PPACA. IHS previously explained, during the course of our review, that its planning template is a document that facility CEOs have been directed to use. We agree that developing a template to aid facilities in their planning for PPACA implementation is a good step. However, considering the large, system-wide growth in eligibility for new and expanded coverage options described in our report, we expect to see a system-wide response. Under its current approach, preparing for increased eligibility is dependent on the discretion of facility CEOs. IHS has not provided any evidence that this approach has resulted in the realignment of personnel needed to address an increased need for application assistance and third party billing. For a full description of the agency’s actions and our evaluation for these recommendations, see table 4 in appendix III. We made 2 recommendations in a 2013 report on opportunities for IHS to improve the PRC program, neither of which has been fully implemented. Our recommendations were based on our finding that determining eligibility for PRC funding—including the need to ascertain each time a referral is received whether the patient met residency requirements and the service met medical priorities—is inherently complex. As a result, we recommended that IHS take steps to improve the PRC program, including separately tracking IHS referrals and self-referrals, and revising its practices to allow available funds to be used to pay for PRC program staff. HHS agreed with our recommendation to separately track IHS referrals and self-referrals, but not to revise its practices to allow available funds to be used to pay for PRC program staff. HHS agreed to our recommendation to proactively develop potential options to streamline program eligibility requirements. IHS has not yet fully implemented these recommendations. HHS officials told us that IHS is developing 2 new measures that will track and measure PRC authorized referrals and self- referrals to time of payment for each type of referral. We will review the proposed changes when they are available. For a full description of the agency’s actions and our evaluation for these recommendations, see table 4 in appendix III. We made 2 recommendations in a 2016 report on IHS oversight of patient wait times, one of which was implemented in August 2017. These recommendations were based on our finding that IHS had not set any agency-wide standards for patient wait times at IHS federally operated facilities. We found that, while individual facilities had taken steps to help improve patient wait times, IHS had not monitored the timeliness of patient care on an agency-wide scale. As a result, we recommended that IHS 1) develop specific agency-wide standards for patient wait times, and 2) monitor patient wait times in its federally operated facilities and ensure corrective actions are taken when standards are not met. In response to our first recommendation, IHS developed specific standards for patient wait times and published them to the IHS Indian Health Manual website in August 2017. As a result of this action, we consider this recommendation to be fully implemented. In response to our second recommendation, in early September 2017 HHS officials told us that data collection tools for monitoring are under development. We will review IHS’s monitoring of facility performance, as well as any corrective actions, when these steps have been completed. For a full description of the agency’s actions on the unimplemented recommendation and our evaluation, see table 4 in appendix III. We made 2 recommendations in a 2017 report on IHS’s oversight of quality of care in its federally operated facilities, neither of which has been fully implemented. These recommendations were based on our finding that IHS’s oversight of the quality of care provided in its federally operated facilities has been limited and inconsistent, due in part to a lack of agency-wide quality of care standards. We found that these inconsistencies were exacerbated by significant turnover in area leadership and that the agency had not defined contingency or succession plans for the replacement of key personnel, including area directors. As a result, we recommended that IHS develop agency-wide standards for quality of care, systematically monitor facility performance in meeting these standards, enhance its adverse event reporting system, and develop contingency and succession plans for the replacement of key personnel. HHS agreed with our recommendations, and officials reported that the development of agency-wide measures, goals, and benchmarks are nearing completion. According to HHS, it is also developing a system- wide dashboard of performance accountability metrics for use at the enterprise, area, and facility levels. HHS officials told us that the enhancements to their adverse event reporting system are delayed because key personnel on the project became unavailable due to deployment. Finally, HHS officials told us that all IHS headquarters offices and area offices established a succession plan that identified staff and development needs to prepare for future leadership opportunities. We requested documentation of these succession plans, but as of late August 2017, we have not received any. For a full description of the agency’s actions and our evaluation for these recommendations, see table 4 in appendix III. In conclusion, although Interior and HHS have taken some actions to address our recommendations related to federal programs serving Indian tribes, 49 recommendations discussed in this testimony have not yet been fully implemented. We plan to continue monitoring the agencies’ efforts to address these unimplemented recommendations. In order for the Federal Management of Programs that Serve Tribes and Their Members to be removed from our High-Risk List, Interior and HHS need to show improvement on the five key elements described earlier: leadership commitment, capacity, action plan, monitoring, and demonstrated progress. These five criteria form a road map for agencies’ efforts to improve and ultimately address high-risk issues. We look forward to continuing our work with this committee in overseeing Interior and IHS to ensure that they are operating programs for tribes in the most effective and efficient manner, consistent with the federal government’s trust responsibilities, and working toward improving services for tribes and their members. Chairman Hoeven, Vice Chairman Udall, and Members of the Committee, this completes my prepared statement. My colleagues and I would be pleased to respond to any questions that you may have. If you or your staff have any questions about education issues in this testimony or the related reports, please contact Melissa Emrey-Arras at (617) 788-0534 or emreyarrasm@gao.gov. For questions about energy resource development, please contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov. For questions about health care, please contact Kathleen King at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this statement include Elizabeth Sirois (Assistant Director), Edward Bodine (Analyst-in- Charge), James Bennett, Richard Burkard, Kelly DeMots, Christine Kehr, Liam O’Laughlin, William Reinsberg, James Rebbe, Jay Spaan, Ann Tynan, and Emily Wilson. Appendix III: Status of Unimplemented Recommendations to the DHHS on the Indian Health Service This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "GAO's High-Risk Series identifies federal program areas needing attention from Congress and the executive branch. GAO added federal management of programs that serve Indian tribes and their members to its February 2017 biennial update of high-risk areas in response to serious problems with management and oversight by Interior and HHS. This testimony identifies GAO's recommendations to Interior and HHS from prior GAO reports on the federal management and oversight of Indian education, energy resources, and health care that remain unimplemented. It also examines agencies' recent actions to address the recommendations and the extent to which these actions address GAO's recommendations. To conduct this work, GAO reviewed and analyzed agency documentation on actions taken to implement the recommendations and conducted interviews with agency officials. As discussed in the 2017 High Risk report, GAO has identified numerous weaknesses in how the Department of the Interior (Interior) and the Department of Health and Human Services (HHS) manage programs serving Indian tribes. Specifically, these weaknesses were related to Interior's Bureau of Indian Education (BIE) and Bureau of Indian Affairs (BIA)—under the Office of the Assistant Secretary-Indian Affairs (Indian Affairs)—in overseeing education services and managing Indian energy resources, and HHS's Indian Health Service (IHS) in administering health care services. GAO cited nearly 40 recommendations in its 2017 High Risk report that were not implemented, and has since made an additional 12 recommendations in two new reports on BIE school safety and construction published in late May of this year. Interior and HHS have taken some steps to address these recommendations but only one has been fully implemented. Education. GAO has found serious weaknesses in Indian Affairs' oversight of Indian education. For example, in 2016, GAO found that the agency's lack of oversight of BIE school safety contributed to deteriorating facilities and equipment in school facilities. At one school, GAO found seven boilers that failed inspection because of safety hazards, such as elevated levels of carbon monoxide and a natural gas leak. In 2017, GAO found key weaknesses in the way Indian Affairs oversees personnel responsible for inspecting BIE school facilities for safety and manages BIE school construction projects. Of GAO's 23 recommendations on Indian education—including recommendations cited in GAO's 2017 High Risk report and in two late May reports—none have been fully implemented. Energy resource management. In three prior reports on Indian energy, GAO found that BIA inefficiently managed Indian energy resources and the development process, thereby limiting opportunities for tribes and their members to use those resources to create economic benefits and improve the well-being of their communities. GAO categorized concerns associated with BIA management of energy resources and the development process into four broad areas, including oversight of BIA activities, collaboration, and BIA workforce planning. GAO made 14 recommendations to BIA to address its management weaknesses, which were cited in the 2017 High Risk report. However, none have been fully implemented. Health care. GAO has found that IHS provides inadequate oversight of its federally operated health care facilities and of its Purchased/Referred Care program. For example, in 2016 and 2017, GAO found that IHS provided limited and inconsistent oversight of the timeliness and quality of care provided in its facilities and that inconsistencies in quality oversight were exacerbated by significant turnover in area leadership. GAO also found that IHS did not equitably allocate funds to meet the health care needs of Indians. Of GAO's 13 recommendations on Indian health care cited in GAO's 2017 High Risk report, one has been fully implemented. GAO cited nearly 40 unimplemented recommendations in its February 2017 High Risk report on federal programs for Indian tribes in education, energy development, and health care, and added 12 recommendations in two new reports on BIE school safety and construction in late May of this year. Sustained focus by Interior and HHS in fully implementing these recommendations and continued oversight by Congress are essential to achieving progress in these areas.", "document_type": "gao"}
{"report": "As reported by the United Nations, the International Criminal Police Organization, and other organizations, wildlife trafficking networks span the globe. These organizations have attempted to measure the value of illegally traded wildlife, but available estimates are subject to uncertainty. In 2016, for example, the United Nations Environment Programme (UNEP) reported that various sources estimated the global scale of illegal wildlife trade to be from $7 billion to $23 billion annually. UNEP also estimated that the scale of wildlife crime has increased in recent years in part based on a rise in environmental crime. U.S. trade in wildlife and related products includes a variety of species, such as live reptiles, birds, and mammals, as well as elephant ivory, according to law enforcement reports and government and nongovernmental officials. FWS and NOAA data on wildlife products seized at U.S. ports provide examples of the diversity of illegally traded plants, fish, and wildlife imported into or exported from the United States. For example, from 2007 to 2016, the top 10 plant, fish, and wildlife shipments seized nationally by FWS were coral, crocodiles, conchs, deer, pythons, sea turtles, mollusks, ginseng, clams, and seahorses. During that time, FWS reported that more than one-third of the wildlife shipments it seized were confiscated while being imported from or exported to Mexico (14 percent), China (13 percent), or Canada (9 percent). FWS and NOAA law enforcement offices are responsible for enforcing certain laws and treaties prohibiting wildlife trafficking. FWS Office of Law Enforcement. This office enforces certain U.S. laws and regulations as well as treaties prohibiting the trafficking of terrestrial wildlife, freshwater species, and birds. Among other things, the office aims to prevent the unlawful import, export, and interstate commerce of foreign fish and wildlife, as well as to protect U.S. plants, fish, and wildlife from unlawful exploitation. As of fiscal year 2016, the office had a budget of $74.7 million and employed 205 special agents to investigate wildlife crime, including international and domestic wildlife trafficking rings. Most of these special agents report to one of eight regional offices, which receive national oversight, support, training, and policy guidance from the FWS Office of Law Enforcement headquarters. The office’s headquarters houses a special investigative unit focused on conducting complex, large- scale criminal investigations of wildlife traffickers. In addition, the FWS Office of Law Enforcement has deployed special agents to serve as international attachés at seven U.S. embassies. These attachés provide countertrafficking expertise to embassy staff, work with host government officials to build law enforcement capacity, and contribute directly to casework or criminal investigations of wildlife traffickers. According to FWS data, the FWS Office of Law Enforcement opened more than 7,000 investigations on wildlife trafficking and other illegal activities in fiscal year 2016, including nearly 5,000 cases involving Endangered Species Act violations and nearly 1,500 cases involving Lacey Act violations. FWS Office of Law Enforcement investigations have disrupted wildlife trafficking operations. For example, Operation Crash—an ongoing rhino horn and elephant ivory-trafficking investigation launched in 2011—has led to over 30 convictions and more than $2 million in fines. NOAA Office of Law Enforcement. This office enforces certain U.S. laws and regulations as well as treaties prohibiting the trafficking of marine wildlife, including fish, as well as anadromous fish. Among other things, the office aims to prevent the illegal, unregulated, and unreported harvesting and trade of fish as well as the trafficking of protected marine wildlife. As of fiscal year 2016, the office had a budget of $68.6 million and employed 77 special agents to investigate wildlife crimes within its jurisdiction. These agents report to one of five regional offices, and those offices receive national oversight, support, and policy guidance from the NOAA Office of Law Enforcement headquarters. According to NOAA data, the NOAA Office of Law Enforcement initiated more than 5,000 investigations in fiscal year 2016. About half of those investigations involved violations of the Magnuson-Stevens Fishery Conservation and Management Act, as amended, and some of the 5,000 investigations involved violations of the Endangered Species Act or the Lacey Act. NOAA Office of Law Enforcement investigations have disrupted wildlife trafficking operations. For example, in fiscal year 2016, a NOAA Office of Law Enforcement investigation led to the conviction of a company and five individuals for illegally trafficking whale bone carvings, walrus ivory carvings, black coral carvings, and other products derived from protected species into the United States. The FWS and NOAA law enforcement offices collaborate with other government agencies and organizations to combat wildlife trafficking. Both agencies work with other federal, state, and tribal law enforcement officers as well as their international counterparts as needed during wildlife trafficking investigations. For example, FWS and NOAA work with U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, and the U.S. Department of Agriculture to maintain import and export controls and interdict smuggled wildlife and related products at U.S. ports of entry. In addition, FWS and NOAA collaborate with Department of Justice prosecutors on criminal cases that result from agency investigations. Both agencies also collaborate with nongovernmental organizations to combat wildlife trafficking. For example, FWS and NOAA officials said that nongovernmental organizations have, in some cases, offered financial rewards (in addition to rewards offered by FWS and NOAA) for information on a wildlife crime. In addition, some nongovernmental organizations proactively provide information to FWS and NOAA on wildlife trafficking activities in the United States or foreign countries that violate U.S. laws. For example, in 2017, a nongovernmental organization created a website to collect tips on wildlife crime and to connect the sources of those tips with relevant U.S. authorities for potential financial rewards. FWS may pay financial rewards from moneys in two accounts. Law Enforcement Reward Account. FWS may pay rewards under the Endangered Species Act, the Lacey Act, and the Rhinoceros and Tiger Conservation Act from moneys in the agency’s Law Enforcement Reward Account. The moneys in this account come from fines, penalties, and proceeds from forfeited property for violations of these three laws. According to FWS officials, these moneys are available until expended. These moneys can be used to (1) pay financial rewards to those who provide information that leads to an arrest, criminal conviction, civil penalty assessment, or forfeiture of property for any violation of the Endangered Species Act, the Lacey Act, or the Rhinoceros and Tiger Conservation Act or (2) provide temporary care for plants, fish, or wildlife that are the subject of a civil or criminal proceeding under the Endangered Species Act, Lacey Act, or the Rhinoceros and Tiger Conservation Act. As of the beginning of fiscal year 2017, the balance of the Law Enforcement Reward Account was about $7 million. Law Enforcement Special Funds Account. FWS may also pay rewards from moneys in its law enforcement office’s Special Funds Account. The moneys in this account come from an annual line item appropriation and are available until expended. Since fiscal year 1988, this appropriation has provided FWS up to $400,000 each year to pay for information, rewards, or evidence concerning violations of laws FWS administers, as well as miscellaneous and emergency expenses of enforcement activity that the Secretary of the Interior authorized or approved. NOAA generally pays rewards from moneys available in the Fisheries Enforcement Asset Forfeiture Fund. The moneys in this account come from fines, penalties, and proceeds from forfeited property for violations of marine resource laws that NOAA enforces, including the Magnuson- Stevens Fishery Conservation and Management Act, the Endangered Species Act, and the Lacey Act. According to NOAA officials, moneys are available until expended and can be used to pay certain enforcement- related expenses, including travel expenses, equipment purchases, and the payment of financial rewards. As of the beginning of fiscal year 2017, the Fisheries Enforcement Asset Forfeiture Fund had a balance of about $18 million. Academic literature on the use of financial rewards to combat illegal activities and stakeholders we interviewed identified several advantages and disadvantages of using financial rewards to obtain information on wildlife trafficking. Potential advantages of using financial rewards include the following: Providing incentives. The potential for a financial reward can motivate people with information to come forward when they otherwise might not do so. Increasing public awareness. Financial rewards may bring greater public attention to the problem of wildlife trafficking, including federal efforts to combat wildlife trafficking. Saving resources. Using financial rewards may save agency resources by enabling agents to get information sooner and at a lower cost than they could have through their own efforts. Potential disadvantages of using financial rewards include the following: Eliciting false or unproductive leads. Financial rewards may generate false or unproductive leads. Affecting witness credibility. Financial rewards may lead to a source’s credibility being challenged at trial by defense attorneys since sources receive compensation for the information they provide. Consuming resources. The potential for a financial reward may create a flood of tips that take agency time and resources to follow up on or corroborate. Outside of wildlife trafficking, multiple federal agencies and federal courts are authorized to pay financial rewards for information on illegal activities under certain circumstances. For example, U.S. Customs and Border Protection—which controls, regulates, and facilitates the import and export of goods through U.S. ports of entry—is authorized, under certain circumstances, to pay rewards for original information about violations of any laws that it enforces. The Department of State may also pay rewards under certain circumstances, including for information leading to the disruption of financial mechanisms of a transnational criminal group. Similarly, the U.S. Securities and Exchange Commission (SEC) and Internal Revenue Service (IRS) may pay rewards for information about violations of federal securities laws and the underpayment of taxes, respectively, if certain conditions are met. Federal judges may award money to persons who give information leading to convictions for violating treaties, laws, and regulations that prohibit certain pollution from ships, including oil and garbage discharges. FWS and NOAA officials identified multiple laws, such as the Endangered Species Act and the Lacey Act, that authorize the payment of financial rewards to people who provide information on wildlife trafficking. FWS and NOAA reported paying few financial rewards under these laws from fiscal years 2007 through 2017. However, agency officials could not provide sufficient assurance that the reward information they provided to us represented all of their reward payments for this period. FWS and NOAA officials identified over 10 laws prohibiting wildlife trafficking—including the Endangered Species Act, Lacey Act, and Bald and Golden Eagle Protection Act—that specifically authorize the payment of financial rewards in certain circumstances to people who provide information on violations of the law (see app. II for a complete list of the laws). These laws provide discretion to the agencies to choose whether to pay rewards but have varying requirements for who is eligible to receive a reward and the payment amounts. For example, the Bald and Golden Eagle Protection Act caps rewards at $2,500 for information that leads to a conviction. In contrast, the Endangered Species Act does not cap reward amounts and authorizes rewards for information that leads to a conviction as well as to an arrest, civil penalty, or forfeiture of property. Table 1 identifies the laws that FWS and NOAA officials indicated they have used to pay financial rewards for information on wildlife trafficking from fiscal years 2007 through 2017, along with information on these laws’ requirements for payment of rewards. FWS and NOAA reported paying few financial rewards for information on wildlife trafficking from fiscal years 2007 through 2017, but agency officials could not provide sufficient assurance that this information was complete. Officials from both agencies said that their agencies have not prioritized the use of rewards, and they believed that the reward information they identified—such as the number, dollar amount, and year that rewards were paid—appropriately captured the few reward payments they made during this time frame. Based on the agencies’ reviews of their records, FWS reported paying 25 rewards for a total of $184,500 from fiscal years 2007 through 2017, and NOAA reported paying 2 rewards for a total of $21,000 during that same period (see table 2). See appendix III for additional details on the cases where financial rewards were paid. FWS reported paying rewards in trafficking cases involving a variety of wildlife species, such as eagles, bears, reptiles, and mollusks, across the 11-year period. FWS officials said they generally paid rewards to thank sources who proactively provided information. For example, based on our review of a reward case, FWS paid a reward in 2010 because the source provided information that was crucial in uncovering an attempt to illegally traffic leopards into the United States from South Africa. FWS would not have known about this illegal activity if the source had not come forward with the information. In several cases we reviewed, FWS officials said that the sources did not know about the possibility of receiving a reward when they contacted the agency with information. The two rewards NOAA reported paying from fiscal years 2007 through 2017 involved the illegal trafficking of sea scallops and a green sea turtle. NOAA officials said that in both cases they paid a reward to thank the source who proactively provided information to law enforcement agents. For example, the agent who investigated the sea scallop case reported requesting the reward because the information the source proactively provided was timely, credible, and led to the criminal conviction of several individuals. FWS and NOAA officials could not provide sufficient assurance that the reward information they reported to us represented all of the rewards their agencies had paid from fiscal years 2007 through 2017, but they said the information was complete to the best of their knowledge. Specifically, FWS and NOAA officials said they track all their expenditures, including reward payments, in their financial databases. However, they are not able to readily identify reward payments because their financial systems do not include a unique identifier for such payments and their reward information is located in multiple databases and formats. As a result, FWS and NOAA officials said they identified the rewards they reported to us by manually reviewing their financial and law enforcement records. In particular, FWS officials said they reviewed their paper records to identify instances when the agency paid rewards and then retrieved additional information from their financial and law enforcement databases, such as final payment amounts. NOAA officials said they identified instances when the agency paid rewards by using a combination of paper and electronic records located at NOAA’s headquarters office. NOAA officials also contacted their regions to obtain additional information located at the regional offices to confirm information about the rewards NOAA had paid. Seventeen stakeholders we interviewed who had experience investigating wildlife trafficking or expertise in using financial rewards as a law enforcement tool said that it would be useful for FWS and NOAA to maintain comprehensive information on the rewards they paid. For example, two stakeholders said that maintaining comprehensive information and making that information available to law enforcement agents could motivate agents to make greater use of rewards as a law enforcement tool. Two other stakeholders said that maintaining information on and monitoring reward use would allow the agencies to make ongoing adjustments, such as adjusting payment amounts, to make the most effective use of rewards in combating wildlife trafficking. Federal internal control standards say that management should clearly document internal control and all transactions and other significant events in a manner that allows the documentation to be readily available for examination. Control activities can be implemented in either an automated or a manual manner, but automated control activities tend to be more reliable because they are less susceptible to human error and are typically more efficient. FWS and NOAA officials agreed that maintaining reward information so that complete information is easily retrievable may be beneficial. FWS officials said having clearly documented and readily available reward information could improve how they manage rewards and enable them to monitor and examine their use of rewards more holistically. The officials said they may analyze options for creating a single repository for reward information but did not commit to doing so. They said that creating a single repository for reward information may involve some drawbacks, such as duplicating some data entry in separate databases. Similarly, NOAA officials said having clearly documented and readily available reward information would provide agency management with easier and more consistent access to that information. As a result, they said that they are exploring modifications to their financial and law enforcement databases to better identify and track rewards. For example, NOAA officials said they may be able to create a unique identifier to flag payments that are for rewards in their financial system to enable them to identify payment amounts more easily. NOAA officials did not provide a time frame for completing modifications to their financial system. By tracking reward information so that it is clearly documented and readily available for examination, FWS and NOAA can better ensure that they have complete information on the rewards they have paid to help manage their use of rewards as a law enforcement tool. FWS and NOAA have policies to guide their law enforcement agents on the process for preparing and submitting a request to pay a financial reward. Specifically, both agencies’ policies call for agents to include a description of the case, the nature of the information that the source provided, a justification for providing a reward, and an explanation of how a proposed reward amount was developed. These policies also outline the general review and approval process, how payments are to be made upon approval of a request, and eligibility criteria to receive a reward. For example, FWS and NOAA policies prohibit paying rewards to foreign government officials as well as paying rewards to any person whose receipt of a reward would create a conflict of interest or the appearance of impropriety. NOAA’s policy explicitly states that the NOAA Office of Law Enforcement is to use statutorily authorized rewards as a tool to obtain information from the public on resource violations and that rewards can help promote compliance with marine resource laws. NOAA’s policy suggests that agents consider advertising reward offers to assist investigations, encourages press releases, and describes the process agents should follow to do so. Moreover, NOAA’s policy specifies factors that agents might include in their reward requests to support the proposed reward, such as (1) the benefit to the marine resources that was furthered by the information provided; (2) the risk, if any, the individual took in collecting and providing the information; (3) the probability that the investigation would have been successfully concluded without the information provided; and (4) the relationship between any fines or other collections and the information provided. FWS’s policy specifies that rewards may be provided in situations in which an individual furnishes essential information leading to an arrest, conviction, civil penalty, or forfeiture of property. However, it does not discuss the usefulness of financial rewards as a law enforcement tool or the types of circumstances when rewards should be used or advertised to the public. Further, FWS’s policy does not communicate necessary quality information internally that agents may need when deciding to request the payment of rewards. In particular, it does not specify factors for agents to consider when developing proposed reward amounts. Instead, the policy leaves it to the discretion of field and regional agents to develop proposed reward amounts within any limitations specified in law. Some FWS agents we interviewed said that they developed proposed reward amounts on a case-by-case basis and did not know whether their proposed amounts were enough, too little, or too much. In addition, some agents said that because FWS’s policy does not specify factors for agents to consider, the reward approval process is subjective and unclear and this has made it challenging for the agents to develop proposed reward amounts. For example, one agent we interviewed said he submitted a request to his supervisor to pay a $10,000 reward to a source who provided information on a major wildlife trafficker. But, for reasons unknown to the agent, his supervisor reduced the amount to $1,000. FWS headquarters officials said field agents submit reward requests to headquarters for approval, and these officials were not aware of instances of proposed reward amounts being changed or denied during the review process. Seven of the 20 stakeholders we interviewed suggested that FWS augment its reward policy to specify factors for agents to consider when developing proposed reward amounts. For example, helpful factors to consider when developing a proposed reward amount may include (1) the number of hours the source dedicated to the case, (2) the risk the source took in providing the information, (3) the significance of the information provided by the source, and (4) the amount of fines or other penalties collected as a result of the information. Two stakeholders expressed concern that some of FWS’s reward payments were insufficient, especially when comparing the amount of time and effort or the risk a source faced in providing the information. A couple of stakeholders also said that without a policy that specifies factors for agents to consider, reward amounts may be subjective and could vary depending on which agent develops the reward proposal. Another stakeholder said that it was important to specify factors for agents to consider when developing proposed reward amounts so that the agency has a reasonable and defensible basis for the reward amounts it pays across cases. According to federal standards for internal control, management should internally communicate the necessary quality information to achieve an agency’s objectives. For example, management communicates quality information down and across reporting lines to enable personnel to make key decisions. FWS officials said they believe that their reward policy is sound, indicating they believe that law enforcement agents have the information they need to develop proposals for reward amounts in cases where rewards are warranted. However, they also agreed that it may be helpful to review their policy but did not commit to doing so. By augmenting its policy to specify factors for agents to consider when developing proposed reward amounts, FWS can better ensure that its agents have the necessary quality information to prepare defensible reward proposals. Based on our review of the agencies’ websites and other communications, we found that FWS and NOAA communicate little information to the public on financial rewards for reporting information on wildlife trafficking, such as the potential availability of rewards and eligibility criteria. Specifically, some FWS and NOAA law enforcement websites provided information to the public on ways to report violations of the laws that the agencies are responsible for enforcing, such as via tip lines. Some of the websites also provided examples of the types of information the public can report, such as photos or other documentation of illegal activities. However, most of the agencies’ websites did not indicate that providing information on illegal activities could result in a reward. In contrast, the FWS Alaska regional office’s website provided information on the potential availability of rewards and ways the public may submit information for a potential reward. For example, this website provided phone numbers and an e-mail address for the public to use when submitting information. Figure 1 shows the information available on FWS’s and NOAA’s national and regional websites relevant to reporting violations of the laws the agencies enforce in general and on receiving rewards in particular. In addition, FWS and NOAA headquarters officials said their field agents have used other means to communicate the potential availability of rewards in specific cases when the agents had no other information that could help solve those cases. For example, a FWS field official said that the agency advertised a reward offer for information on a case of bald eagle killings by distributing reward posters and posting news releases in the vicinity where the killings occurred. Similarly, NOAA officials said they have advertised reward offers through various means, including circulating reward posters in specific geographic areas after an illegal activity has occurred. Figure 2 shows a reward poster that NOAA distributed in Guam in 2017 advertising a $1,000 reward for information leading to the arrest and conviction of sea turtle poachers. Instead of having a plan for communicating general information to the public on rewards, FWS and NOAA grant discretion to their regional offices and law enforcement agents to determine the type and level of communication to provide, according to FWS and NOAA policies. FWS officials explained that because they typically use financial rewards to thank individuals who come forward on their own accord—rather than using rewards to incentivize individuals with information to come forward—they have not seen the need to communicate more information to the public on the potential availability of rewards. NOAA officials said they have targeted their communications on rewards by publicizing reward offers for specific cases where they do not have leads. They added that they want to receive quality information and already receive a substantial amount of information from sources who reach out to them proactively, so NOAA has not seen the need to communicate more information to the public on the potential availability of rewards. Sixteen of the 20 stakeholders we interviewed said that it would be useful for FWS and NOAA to advertise the potential availability of financial rewards. Several stakeholders said that if the public does not know about the possibility for rewards, then some people with information may not be incentivized to come forward. Two stakeholders added that agencies should carefully consider how and which reward information to communicate to the public so that people who are most likely to have information on illegal wildlife trafficking learn about the potential for rewards. For example, one stakeholder suggested advertising rewards at ports where international shipments are offloaded or placing advertisements at wildlife trafficking nodes, such as entrances to African wildlife refuges. This stakeholder suggested advertising rewards along with wildlife trafficking awareness-raising posters that nongovernment organizations place in some airports. In addition, 14 stakeholders suggested that it would be useful for FWS and NOAA to provide information to the public on the process for submitting information to potentially receive rewards. Several other stakeholders said that it is important for the public to understand whether they may be eligible for a reward, how to submit information, and whether or to what extent their confidentiality will be protected. Another stakeholder provided examples of how other agencies provide information about their reward programs on their websites. SEC and IRS, for instance, use their websites to communicate information to the public on the process for reporting illegal activity for financial rewards. This information includes the types of information to report, confidentiality rules, eligibility criteria, and the process for submitting information to obtain a reward. In addition, the Department of State posts instructions on its websites on how to submit information on an illegal activity and potentially receive a reward. Federal internal control standards say that management should externally communicate the necessary quality information to achieve an agency’s objectives. For example, using appropriate methods to communicate, management communicates quality information so that external parties, such as the public, can help the agency achieve its objectives. This could include communicating information to the public on the types of information and eligibility requirements for potentially receiving rewards for reporting information on wildlife trafficking. FWS officials said that making more reward information available could lead to a significant increase in the amount of information the agency receives, which, in turn, could strain FWS’s resources in following up on that information. However, FWS officials also agreed that it was reasonable to consider making more reward information available to relevant members of the public, particularly in targeted circumstances, but did not commit to doing so. Similarly, NOAA officials said they had some concerns about the additional resources it might take to investigate potentially unreliable or false tips that may result if they make reward information broadly available to the public, but they agreed that it would be reasonable for the agency to consider doing so. NOAA officials also said they may consider making more reward information publicly available at the conclusion of our audit but provided no plans for doing so. By determining the types of additional information to communicate to the public on rewards—such as providing information on the agency’s website on the potential availability of rewards—and then developing and implementing plans to do so, FWS and NOAA can improve their chances of obtaining information on wildlife trafficking activities that they otherwise might not receive. FWS and NOAA have not reviewed the effectiveness of their use of financial rewards or considered whether any changes might improve the usefulness of rewards as a tool for combating wildlife trafficking. FWS officials said their agency has not reviewed or considered changes to its use of rewards because the agency has not prioritized the use of rewards. NOAA officials said their agency has not focused on using rewards or identified the need to review its use of this tool, particularly in light of other, higher mission priorities. Nine of the 20 stakeholders we interviewed said that FWS and NOAA should review the effectiveness of their use of rewards and consider potential improvements. Several stakeholders said that it would be useful for FWS and NOAA to compare their respective approaches to those of federal agencies that use rewards in contexts outside of wildlife trafficking to identify best practices or lessons learned that might be applicable in the context of combating wildlife trafficking. For example, one stakeholder said that SEC has an effective whistleblower program and may have lessons learned that are relevant for FWS and NOAA to consider. Another stakeholder we interviewed separately indicated that in 2010, before SEC had a whistleblower program that publicized rewards and provided detailed instructions on how members of the public could report information on illegal activities, SEC received few tips. Once SEC implemented a whistleblower program that publicized rewards and provided detailed instructions on its public website, the agency’s use of the program grew substantially, according to the stakeholder. Other stakeholders said it would be useful for the agencies to consider potential improvements to their use of rewards, such as making a standing reward offer for information on wildlife trafficking targeted at high-priority endangered species or particular criminal networks. Two of these stakeholders said such an offer might improve FWS’s and NOAA’s use of rewards by generating more tips than reward offers focused on individual cases. At the same time, they said such an offer would likely filter out some of the false or unproductive tips that the agencies might receive if they made an untargeted standing reward offer. Federal internal control standards state that management should design control activities to achieve objectives and respond to risks by, for example, conducting reviews at the functional or activity level by comparing actual performance to planned or expected results and analyzing significant differences. Further, under the standards, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving an agency’s objectives or addressing related risks. FWS and NOAA officials agreed that reviewing the effectiveness of their use of rewards would be worthwhile. Specifically, FWS officials said that it would be useful to compare their approach to those of other federal agencies that use rewards in investigating crimes that involve interstate and foreign smuggling of goods. Similarly, NOAA officials said that reviewing the agency’s use of financial rewards would be worthwhile but cautioned that such a review would need to be balanced against the agency’s constrained resources and many mission requirements. FWS and NOAA officials said they may consider conducting such a review at the conclusion of our audit but provided no plans for doing so. By reviewing the effectiveness of their use of rewards, FWS and NOAA can identify opportunities to improve the usefulness of rewards as a tool for combating wildlife trafficking. Wildlife trafficking is a large and growing transnational criminal activity, with global environmental, security, and economic consequences. The federal government has emphasized strengthening law enforcement efforts to combat wildlife trafficking, and using financial rewards to obtain information on illegal activities is one tool that some federal agencies have used. However, to date, FWS and NOAA have not prioritized the use of rewards and were unable to provide sufficient assurance that the 27 rewards they paid during fiscal years 2007 through 2017 represented all of the rewards they provided during that period. By tracking reward information so that it is clearly documented and readily available for examination, FWS and NOAA can better ensure that they have complete information on the rewards they have paid to help manage their use of rewards as a law enforcement tool. Additionally, FWS and NOAA have policies outlining the processes their law enforcement agents are to use in making reward payments, and NOAA’s policy specifies factors for its agents to consider in developing proposed reward amounts, such as the risk the individual took in collecting the information. FWS’s policy does not specify such factors that could inform agents in achieving the agency’s objectives, which is not consistent with federal internal control standards. By augmenting its policy to specify factors for its agents to consider when developing proposed reward amounts, FWS can better ensure that its agents have the necessary quality information to prepare defensible reward proposals. Both agencies have also advertised the potential for rewards in specific cases when agents had no other information, but FWS and NOAA have otherwise communicated little information to the public on the potential availability of rewards. If the public does not know about the possibility of rewards, then some people with information may not be incentivized to come forward. By determining the types of additional information to communicate to the public on rewards—such as providing information on the agency’s website about the potential availability of rewards—and then developing and implementing plans to do so, FWS and NOAA can improve their chances of obtaining information on wildlife trafficking activities that they otherwise might not receive. Finally, FWS and NOAA have not reviewed the effectiveness of their use of financial rewards or considered whether any changes might improve the usefulness of rewards as a law enforcement tool. By undertaking such reviews, the agencies can identify opportunities to improve the usefulness of rewards as a tool for combating wildlife trafficking. We are making a total of seven recommendations, including four to FWS and three to NOAA. Specifically: The Assistant Director of the FWS Office of Law Enforcement should track financial reward information so that it is clearly documented and readily available for examination. (Recommendation 1) The Director of the NOAA Office of Law Enforcement should track financial reward information so that it is clearly documented and readily available for examination. (Recommendation 2) The Assistant Director of the FWS Office of Law Enforcement should augment FWS’s financial reward policy to specify factors law enforcement agents are to consider when developing proposed reward amounts. (Recommendation 3) The Assistant Director of the FWS Office of Law Enforcement should determine the types of additional information to communicate to the public on financial rewards and then develop and implement a plan for communicating that information. (Recommendation 4) The Director of the NOAA Office of Law Enforcement should determine the types of additional information to communicate to the public on financial rewards and then develop and implement a plan for communicating that information. (Recommendation 5) The Assistant Director of the FWS Office of Law Enforcement should review the effectiveness of the agency’s use of financial rewards and implement any changes that the agency determines would improve the usefulness of financial rewards as a law enforcement tool. (Recommendation 6) The Director of the NOAA Office of Law Enforcement should review the effectiveness of the agency’s use of financial rewards and implement any changes that the agency determines would improve the usefulness of financial rewards as a law enforcement tool. (Recommendation 7) We provided a draft of this report for review and comment to the Departments of Commerce and the Interior. The departments transmitted written comments, which are reproduced in appendixes IV and V of this report. The Department of Commerce concurred with the three recommendations directed to NOAA and stated that NOAA is developing procedures to ensure that its rewards are closely tracked, clearly documented, and better communicated. In written comments from NOAA, NOAA stated the report fairly and thoroughly reviews NOAA’s use of financial rewards. NOAA outlined the steps it plans to take in response to our recommendations, including developing a procedure to track financial reward information, reviewing information currently disseminated to the public and evaluating whether additional information may be useful, and reviewing the agency’s reward policy to determine whether changes are needed to enhance reward effectiveness. In its written comments, the Department of the Interior concurred with the four recommendations directed to FWS. Interior stated that it appreciated our review of the challenges faced by FWS’s Office of Law Enforcement in combating wildlife trafficking and identifying areas where FWS and NOAA can improve the use of financial rewards as a tool for combating wildlife trafficking. Interior also provided technical comments, which we incorporated as appropriate. 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The objectives of our review were to (1) identify laws that authorize the U.S. Fish and Wildlife Service (FWS) and the National Oceanic and Atmospheric Administration (NOAA) to pay financial rewards for information on wildlife trafficking and the extent to which these agencies paid such rewards from fiscal years 2007 through 2017, (2) evaluate FWS’s and NOAA’s policies on financial rewards, (3) evaluate the information available to the public on financial rewards, and (4) determine the extent to which FWS and NOAA reviewed the effectiveness of their use of financial rewards in combating wildlife trafficking. To address these objectives, we reviewed academic literature on the use of financial rewards to combat illegal activities and United Nations Environment Programme reports on the scope and scale of wildlife trafficking. We also interviewed officials from federal agencies that play a role in combating wildlife trafficking or manage programs that pay financial rewards for information on illegal activities. Specifically, we interviewed officials from the Departments of Agriculture, Commerce, Homeland Security, the Interior, Justice, and State, as well as officials from the Internal Revenue Service, the U.S. Securities and Exchange Commission, and the U.S. Agency for International Development. In addition, we reviewed documentation that the Department of the Treasury provided on its role in paying financial rewards. We did not compare FWS’s and NOAA’s use of financial rewards in combating wildlife trafficking to federal agencies’ use of financial rewards in other contexts because the different contexts are not directly comparable. However, we reviewed information on other federal agencies’ use of financial rewards as examples of how financial rewards are used in contexts outside of wildlife trafficking. In addition, we interviewed representatives of six nongovernmental organizations that we selected based on those organizations’ knowledge or experience in combating wildlife trafficking. Specifically, we interviewed representatives from the Elephant Action League, the Environmental Investigation Agency, the National Association of Conservation Law Enforcement Chiefs, the National Whistleblower Center, TRAFFIC, and the World Wildlife Fund. To identify laws that authorize FWS and NOAA to pay financial rewards for information on wildlife trafficking, we asked FWS and NOAA attorneys to compile a list of laws that each of their agencies implements or enforces that prohibit wildlife trafficking and authorize the agency to pay rewards for providing information about trafficking. We then compared that list to the results of our search of the United States Code for such laws. We also reviewed FWS and NOAA documentation for accounts where the fines, penalties, and proceeds from forfeited property that are used to pay rewards are deposited as well as the accounts where appropriations available to pay rewards were deposited. To identify the extent to which FWS and NOAA have paid financial rewards for information on wildlife trafficking, we analyzed FWS and NOAA data on financial rewards the agencies reported paying from fiscal years 2007 through 2017. The data included information on, among other things, the fiscal years in which rewards were paid, laws under which rewards were paid, types of wildlife involved in those cases, the amounts of civil penalties or criminal fines imposed in those cases, the numbers of arrests and convictions as a result of those cases, and whether reward recipients were individuals or groups and U.S. or foreign citizens. To assess the reliability of the data FWS and NOAA provided on financial rewards, we interviewed agency officials knowledgeable about the data and compared the data to case records the agencies provided. Specifically, FWS and NOAA officials said they track all expenditures, including reward payments, in their financial databases, but they are not able to readily identify reward payments because their financial systems do not include a unique identifier for such payments and their reward information is located in multiple databases and formats. As a result, FWS and NOAA officials said they identified the rewards that they reported to us by manually reviewing their financial and law enforcement records, and officials said the information was complete to the best of their knowledge. Based on these steps, we found the data that the agencies provided to us to be sufficiently reliable for reporting information on the rewards the agencies reported paying. However, as we discuss in the report, FWS and NOAA officials could not provide sufficient assurance that the data included all the financial rewards that they had paid from fiscal years 2007 through 2017. To obtain additional detail about cases where financial rewards were paid, we reviewed a nongeneralizable sample of 10 wildlife trafficking cases. We selected these cases based on the agency that investigated the case (to include both FWS and NOAA cases), the amount of the reward paid in the case (to reflect both low and high amounts), the year in which the reward was paid (to include rewards paid more recently), and the type of wildlife trafficked in the case (to include both fish and wildlife cases—there were no plant trafficking cases to select). While the findings from our review cannot be generalized to cases we did not select and review, they illustrate how FWS and NOAA have used financial rewards in wildlife trafficking cases. To evaluate FWS and NOAA policies on financial rewards, we reviewed relevant FWS and NOAA policies and compared them to each other; interviewed FWS and NOAA officials about those policies; and compared the information in the policies with federal internal control standards on information and communication. To evaluate information available to the public on rewards, we reviewed relevant FWS and NOAA publications and examples of communications to the public on the availability of rewards in specific cases and interviewed FWS and NOAA officials. We also reviewed information available on FWS’s and NOAA’s national and regional websites as of December 2017 and January 2018, respectively, relevant to reporting violations of the laws that the agencies enforce in general and on receiving rewards in particular. We compared the agencies’ public communications on rewards with federal internal control standards on information and communication. To evaluate the extent to which FWS and NOAA reviewed the effectiveness of their use of financial rewards in combating wildlife trafficking, we interviewed FWS and NOAA officials and requested any reviews the agencies had conducted regarding their use of financial rewards to compare with federal internal control standards on control activities. FWS and NOAA did not have any such reviews to provide. In addition, for all four objectives, we interviewed a nongeneralizable sample of 20 stakeholders who had experience investigating wildlife trafficking or expertise in the use of financial rewards as a law enforcement tool. To select stakeholders to interview, we first identified a list of stakeholders by reviewing (1) FWS and NOAA data on law enforcement agents with at least 5 years of experience who had investigated wildlife trafficking cases and used financial rewards, (2) Department of Justice data on federal prosecutors who had prosecuted wildlife trafficking cases since fiscal year 2014, (3) literature search results identifying academics with expertise in the use of financial rewards as a law enforcement tool and federal programs that use financial rewards to combat illegal activities in contexts outside of wildlife trafficking, (4) the biographies of members of the federal Advisory Council on Wildlife Trafficking, and (5) recommendations from stakeholders we interviewed. From this list, we then used a multistep process to select the 20 stakeholders to interview. To ensure coverage and a range of perspectives, we selected stakeholders from the following groups: FWS and NOAA law enforcement agents, including field and federal prosecutors responsible for prosecuting wildlife trafficking cases; federal officials responsible for programs that use financial rewards to combat illegal activities in contexts outside of wildlife trafficking; academics with expertise in the use of financial rewards as a law members of the federal Advisory Council on Wildlife Trafficking; and representatives of nongovernmental organizations that investigate wildlife trafficking. We conducted semistructured interviews with the 20 selected stakeholders using a standard set of questions. We asked questions about stakeholder views on the usefulness of financial rewards in combating wildlife trafficking; the strength and weaknesses of the statutory provisions that authorize federal agencies to pay financial rewards for information on wildlife trafficking; FWS’s and NOAA’s use of financial rewards to combat wildlife trafficking; and how, if at all, the two agencies could improve their use of financial rewards to combat wildlife trafficking. We analyzed the stakeholders’ responses to our questions, grouping the responses into overall themes. We summarized the results of our analysis and then shared the summary with relevant FWS and NOAA officials to obtain their views. Views from these stakeholders cannot be generalized to those whom we did not select and interview. We conducted this performance audit from February 2017 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Department of the Interior’s U.S. Fish and Wildlife Service (FWS) and the Department of Commerce’s National Oceanic and Atmospheric Administration (NOAA) implement or enforce multiple laws that specifically authorize the payment, under specified circumstances, of financial rewards to persons for information about violations of laws that prohibit wildlife trafficking. The laws that FWS officials identified are listed and summarized in table 3, and the laws that NOAA officials identified are listed and summarized in table 4. In addition, as noted above, the reward provisions in the Magnuson- Stevens Fishery Conservation and Management Act as amended and the Fish and Wildlife Improvement Act as amended authorize the payment of rewards for information about violations of multiple laws. Specifically, the Magnuson-Stevens Fishery Conservation and Management Act as amended authorizes the payment of rewards for information about violations of the act as well as any other marine resource law that the Secretary of Commerce enforces. Further, the Fish and Wildlife Improvement Act as amended authorizes the payment of rewards for information about violations of any law administered by NOAA’s National Marine Fisheries Service relating to plants, fish, or wildlife. NOAA officials identified 14 such laws that prohibit wildlife trafficking (see table 5). If a violation of the laws listed in table 5 occurs, NOAA officials said they could use the Magnuson-Stevens Fishery Conservation and Management Act or Fish and Wildlife Improvement Act reward provision to pay a reward for information on the violation. None of the laws listed in table 5 specifically authorize the payment of financial rewards. Table 6 provides information on U.S. Fish and Wildlife Service and National Oceanic and Atmospheric Administration cases where these agencies reported paying rewards for information on wildlife trafficking from fiscal years 2007 through 2017. In addition to the contact named above, Alyssa M. Hundrup (Assistant Director), David Marroni (Analyst-in-Charge), Cindy Gilbert, Keesha Luebke, Jeanette Soares, Sheryl Stein, Sara Sullivan, and Judith Williams made key contributions to this report.", "summary": "Wildlife trafficking—the poaching and illegal trade of plants, fish, and wildlife—is a multibillion-dollar, global criminal activity that imperils thousands of species. FWS and NOAA enforce laws prohibiting wildlife trafficking that authorize the agencies to pay financial rewards for information about such illegal activities. GAO was asked to review FWS's and NOAA's use of financial rewards to combat wildlife trafficking. This report examines (1) laws that authorize FWS and NOAA to pay rewards for information on wildlife trafficking and the extent to which the agencies paid such rewards from fiscal years 2007 through 2017, (2) the agencies' reward policies, (3) information available to the public on rewards, and (4) the extent to which the agencies reviewed the effectiveness of their use of rewards. GAO reviewed laws, examined FWS and NOAA policies and public communications on rewards, analyzed agency reward data for fiscal years 2007 through 2017 and assessed their reliability, interviewed FWS and NOAA officials, and compared agency policies and public communications on rewards to federal internal control standards. Multiple laws—such as the Endangered Species Act and Lacey Act—authorize the Departments of the Interior's U.S. Fish and Wildlife Service (FWS) and Commerce's National Oceanic and Atmospheric Administration (NOAA) to pay rewards for information on wildlife trafficking. FWS and NOAA reported paying few rewards from fiscal years 2007 through 2017. Specifically, the agencies collectively reported paying 27 rewards, totaling $205,500. Agency officials said that the information was complete to the best of their knowledge but could not sufficiently assure that this information represented all of their reward payments. FWS and NOAA have reward policies that outline the general process for preparing reward proposals, but FWS's policy does not specify factors for its agents to consider when developing proposed reward amounts. Some FWS agents GAO interviewed said that in developing proposals, they did not know whether their proposed reward amounts were enough, too little, or too much. By augmenting its policy to specify factors for agents to consider, FWS can better ensure that its agents have the necessary quality information to prepare proposed reward amounts, consistent with federal internal control standards. FWS and NOAA communicate little information to the public on rewards. For example, most agency websites did not indicate that providing information on wildlife trafficking could qualify for a reward. This is inconsistent with federal standards that call for management to communicate quality information so that external parties can help achieve agency objectives. FWS and NOAA officials said they have not communicated general reward information because of workload concerns, but they said it may be reasonable to provide more information in some instances. By developing plans to communicate more reward information to the public, the agencies can improve their chances of obtaining information on wildlife trafficking that they otherwise might not receive. FWS and NOAA have not reviewed the effectiveness of their use of rewards. The agencies have not done so because using rewards has generally not been a priority. FWS and NOAA officials agreed that such a review would be worthwhile but provided no plans for doing so. By reviewing the effectiveness of their use of rewards, FWS and NOAA can identify opportunities to improve the usefulness of rewards as a tool for combating wildlife trafficking. GAO is making seven recommendations, including that FWS and NOAA track reward information, FWS augment its reward policy to specify factors for agents to consider when developing proposed reward amounts, FWS and NOAA develop plans to communicate more reward information to the public, and FWS and NOAA review the effectiveness of their reward use. Both agencies concurred with these recommendations.", "document_type": "gao"}
{"report": "This section describes agency responsibilities, the history of the federal timber export and substitution ban, and changes to the timber economy since restrictions on timber export and substitution were first implemented. Under the National Forest Management Act and the Federal Land Policy and Management Act of 1976, respectively, the Forest Service and BLM manage federal lands under their jurisdiction for various uses such as protection of fish and wildlife habitat, recreation, mineral production, and timber harvesting. As part of the agencies’ management of timber harvesting on public lands, both the Forest Service and BLM conduct timber sales. Timber sale activities include identifying the sale area, conducting the required environmental analyses, soliciting bids, preparing the timber sale contract, marking the sale boundary and the trees to be cut or left, and monitoring the harvest operations and reforestation activities. The agencies monitor harvest operations to help ensure that, for example, the trees are harvested from the agreed-upon area and the logs are hauled on the route agreed upon in the timber sale contract. The agencies have developed policies for general timber sale activities, as well as policies specific to preventing, detecting, and responding to illegal federal timber export and substitution. Since the late 1960s, four primary laws have been enacted prohibiting federal timber export and substitution: the Foreign Assistance Act of 1968, the Interior and Related Agencies Appropriations Act of 1974, the Forest Resources Conservation and Shortage Relief Act of 1990, and the Forest Resources Conservation and Shortage Relief Act of 1997. In 1968, an amendment to the Foreign Assistance Act of 1968— commonly referred to as the “Morse Amendment”—restricted the volume of timber that could be harvested and exported from federal lands in unprocessed form. This legislation was enacted after the Secretaries of Agriculture and the Interior issued joint orders calling for this restriction, deeming it necessary to maintain a viable domestic wood-processing industry. As we previously found, in the early 1960s, export of federal timber was generally not viewed as a concern, but as exports of federal, private, and other timber increased, public and private concerns grew about the effect of unrestricted log exports on the domestic wood- processing industry. For example, the percentage of timber harvested in Oregon and Washington that was exported grew from approximately 6 percent in 1965 to about 18 percent in 1972. In 1973, a provision was included in the Interior and Related Agencies Appropriations Act of 1974 that, in effect, prohibited the export of unprocessed timber harvested from federal lands west of the 100th meridian in the contiguous 48 states. (Figure 1 shows the location of the 100th meridian and Forest Service- and BLM-managed lands.) The 1973 provision also prohibited purchasers from using timber harvested from federal lands in their processing facilities while exporting nonfederal unprocessed timber that could have been used in those facilities, an activity referred to as substitution. The provision also stated that the limitation on export and substitution did not apply to species of timber the agencies have determined to be surplus to domestic lumber and plywood manufacturing needs. In 1990, the Forest Resources Conservation and Shortage Relief Act of 1990 made permanent the ban on exporting unprocessed logs from western federal lands and provided for greater restrictions on substitution. Under the 1990 act, however, it is not considered substitution if a company purchases federal timber from within a particular “sourcing area” and exports nonfederal timber harvested from areas outside the sourcing area. For example, firms with timber operations in both Oregon and Washington could purchase federal timber from a sourcing area in eastern Oregon for manufacture while also purchasing private timber in Washington for export. The 1990 act required the Forest Service and Interior to issue, in consultation with each other, coordinated and consistent regulations implementing the act on the lands under their respective jurisdictions. The Forest Service issued a series of regulations to implement the 1990 act, the most comprehensive of which was issued September 8, 1995. In a provision contained in the act providing appropriations to the Forest Service for fiscal year 1996, Congress effectively suspended implementation of the 1995 regulation to allow the administration, Congress, and affected parties more time to address policy issues with respect to the 1990 act. The Forest Service’s fiscal year 1997 appropriation act contained a similar provision. BLM did not issue regulations implementing the 1990 act. In 1997, Congress amended the 1990 act. Among other things, the Forest Resources Conservation and Shortage Relief Act of 1997 relaxed substitution restrictions in Washington State and allowed the Forest Service and BLM to reduce the penalties imposed for violating the act by taking into account “all relevant mitigating factors, including mistake, inadvertence, and error.” The 1997 act also suspended the Forest Service’s 1995 regulations implementing the 1990 act and directed the agencies to issue new coordinated and consistent regulations implementing the act by June 1998. The law requires the agencies to implement their regulations in effect prior to September 8, 1995, until new regulations are issued. Since restrictions on timber export and substitution were first implemented in the late 1960s, the timber economy has continued to change. Domestically, the volume of timber harvested from Forest Service lands each year has declined from about 12.4 billion board feet in 1973 to 2.6 billion board feet in 2017. The number of domestic mills along the Pacific Coast has also decreased, mostly through mill closures. For example, from 1996 to 2016, the number of mills in Washington State declined from 186 to 88. In addition, since the 1990s, the structure of the corporate timber industry has changed. For example, many of the corporate timber companies that once owned both mills and the private lands to supply those mills have divested some or all of their private timberlands. Additionally, the value of U.S. softwood log exports has grown since 2007, with China, Japan, and Canada the three largest importers of these logs. According to information from the Foreign Agricultural Service, the value of U.S. softwood log exports grew from approximately $949 million in 2007 to approximately $1.4 billion in 2017 (in constant 2017 dollars). According to Forest Service and BLM officials, the agencies found no violations of the ban on federal timber export and substitution from 2007 through 2017. Forest Service officials described instances in which the agency responded to reports of potential violations, but the reports were not substantiated. All agency officials and stakeholders we interviewed said that the likelihood of illegal timber export and substitution is low. However, several officials acknowledged that some risk of violations exists under certain circumstances. From 2007 through 2017, the Forest Service and BLM found no violations of the federal timber export and substitution ban. Forest Service officials identified four instances in which the agency investigated potential violations. For example, in one instance, the Forest Service’s Pacific Southwest region investigated an incident in 2017 at the Port of Richmond near Oakland, California. According to the associated investigation report, an employee at the port’s export facility noticed four logs were marked as coming from a federal timber sale and reported it to the Forest Service. Forest Service law enforcement officials conducted an investigation and determined that the logs came from the Sierra National Forest and were placed at the facility in error. The purchaser subsequently delivered the logs to the intended recipient and the agency took no further action. Forest Service officials said that because the logs had not been exported, but had been placed at the facility in error with no intent to export them, the agency determined that there was no violation of the export ban. In another instance, officials from the agency’s Southwestern Region said that, in 2010, they identified a case in which a purchaser cut federal logs, removed the bark, and then exported the logs to Mexico for use as telephone poles. The officials investigated to determine whether that type of exporting was legal. The Forest Service concluded that the purchaser’s activities constituted processing the logs into end products and therefore the logs were being legally exported. BLM officials we interviewed did not describe any instances in which they identified, or were made aware of, potential violations. All Forest Service and BLM officials and stakeholders we interviewed said the likelihood of timber export and substitution violations is low due to a combination of several factors, including economic factors associated with log markets and changes in the organizational structure of timber companies. However, several officials acknowledged that some risk of violations exists under certain circumstances. Economic factors within log markets. Several agency officials and stakeholders said smaller trees of a lower quality are being harvested from federal lands compared to the trees harvested in the 1990s. Several of these officials and stakeholders said there is less demand and lower value in overseas markets for logs with such characteristics. A senior official from the Klamath National Forest in California, for example, said that trees harvested from the forest in the 1980s had log diameters of 35 to 42 inches, but by 2017 the diameter had decreased to 14 to 18 inches. Additionally, according to statistics from the State of California, old-growth trees—generally, trees more than 150 years old—represented nearly 70 percent of timber harvested in California in 1979, but by 1999 the proportion had fallen to less than 10 percent. As we have found, old-growth trees can have more attractive grain characteristics and can be used for higher- value products compared to young-growth trees, which may make the former more attractive for export. Several officials and stakeholders also said that the decrease over time in the amount of federal timber available for sale has made violations less likely. For example, Oregon Department of Forestry information shows that the volume of timber harvested on BLM-managed lands in Oregon declined from about 1.5 billion board feet in 1973 to 182 million board feet in 2016. Some of these officials and stakeholders said that federal timber is an important part of domestic sawmill operators’ timber supply, and, given the reduced amount of federal timber available, sawmill operators would have little incentive to export logs because doing so would further reduce their own timber supply. Changes in timber company organizational structure. Several officials and stakeholders said that changes in timber company organizational structure have also made substitution less likely. Several officials and stakeholders noted that many Pacific Northwest timber companies once owned both sawmills and timberland from which they harvested timber to supply their mills. According to some officials, under those conditions, the likelihood of substitution was greater because these companies could have benefitted by exporting logs from their own lands for a high price while supplying their sawmill operation with federal timber purchased at a lower price. However, many timber companies have sold or reorganized over the past 2 decades, resulting in few companies now owning both sawmills and timberlands, according to some agency officials. In 2009, Oregon State University reported on this change, noting that “almost all large, publicly traded forest product companies have shed their timber lands in the past 20 years, a reflection of global economic pressures, new tax laws, and other forces.” A 2014 report from the Department of Agriculture likewise noted this change. Some agency officials said that, as a result, sawmills generally must buy all of their timber— whether privately sourced or federal—on the open market, which provides less incentive for substitution than if these sawmills were using timber they already owned. Several officials also said, however, that some risk of violations remains, particularly under certain circumstances. For example, some Forest Service regional officials said that some national forests could be vulnerable to illegal timber export if log prices or demand for certain tree species increase in the future. Additionally, several Forest Service officials expressed concern about having sufficient staff to monitor timber sales for compliance with relevant requirements, including the ban on export and substitution, especially in light of potential increases in timber sales. In particular, officials from four of the six national forests included in our review said the Forest Service increased the volume of timber their national forest is expected to offer for sale beginning in fiscal year 2018. For example, a Boise National Forest official said the forest’s timber sale target increased from 50 million board feet per year, which has been consistent over the last decade, to 74 million board feet in fiscal year 2018, with a goal of 96 million board feet per year by fiscal year 2021. According to some Forest Service officials, higher timber sale targets could reduce the ability of agency staff to carry out timber sale responsibilities, including monitoring, that help guard against illegal timber export and substitution. Several Forest Service “Timber and Log Accountability Audits”—internal evaluations of regional and forest-level timber sale activities—also noted that reduced staffing levels and experience were areas of concern in carrying out forests’ timber sale programs. The Forest Service and BLM neither issued new regulations as required by the Forest Resources Conservation and Shortage Relief Act of 1997 nor obtained legislative relief from the requirement. The agencies have policies and practices to help prevent, detect, and respond to illegal timber export and substitution. However, some policies are outdated or unclear, and the agencies have not reviewed their policies for continued relevance and effectiveness. As noted previously, in 1997, Congress amended the Forest Resources Conservation and Shortage Relief Act of 1990 to, among other things, relax substitution restrictions in Washington State. The 1997 act included other provisions such as allowing the agencies to reduce the penalties imposed for violating the ban. The act also states that the agencies “shall, in consultation, each prescribe new coordinated and consistent regulations to implement the act” and required the agencies to issue these regulations by June 1, 1998. The act also states that, until new regulations are issued, regulations that were in effect prior to September 8, 1995, are to remain in effect. However, because neither agency issued regulations as required by the act, their regulations currently in use do not reflect changes made by the 1997 act. Forest Service. The Forest Service drafted regulations to implement the 1997 act, but as of June 2018, the agency had not finalized them. According to Forest Service headquarters officials, the agency did not finalize the draft regulations because of competing priorities. The officials did not provide an estimate as to when the draft regulations would be made final. Because the draft regulations have not been made final, Forest Service regulations from the early 1990s remain in effect but do not reflect the changes made by the 1997 act. BLM. According to BLM headquarters officials, BLM began drafting regulations in 2010 to implement the 1997 act, but did not complete that effort because of insufficient resources and competing priorities. Because BLM did not issue new regulations, BLM is required by law to rely on its regulations issued prior to September 8, 1995. BLM regulations reflect timber export and substitution laws from the 1970s because BLM did not issue regulations implementing the 1990 act because of competing priorities at that time, according to officials. Consequently, BLM regulations currently in use do not reflect the changes made by the 1997 act. Forest Service officials said their agency did not seek legislative relief from the requirement to issue new regulations, and BLM officials said they have no record that their agency sought legislative relief but could not be certain that the agency had not done so. Without issuing new coordinated and consistent regulations as required by the 1997 act, or obtaining legislative relief, the agencies will continue to be out of compliance with this provision of the act. We identified several areas in which either the Forest Service or BLM or both have policies to help prevent, detect, and respond to illegal federal timber export and substitution. For example: Timber sale contract provisions. Both agencies have policies that require timber sale contracts to include a statement about the prohibition on federal timber export and substitution, which can help ensure timber purchasers are aware of the prohibition. We reviewed the standard timber sale contract forms used by both agencies at the time of our review and found that the forms include provisions with this statement. Marking of unprocessed logs. Both agencies generally require purchasers to mark unprocessed logs originating from federal lands subject to the ban with a spot of yellow paint and an identifying mark known as a hammer brand before the logs are removed from the timber sale area. According to the agencies’ policies, marking the logs is intended to help identify them as being prohibited from export. Figure 2 shows an example of marked federal logs. Forest Service regulations generally require that both ends of each unprocessed log be marked, but agency policy allows agency officials to waive the requirement under certain circumstances if officials determine that the risk of export or substitution is low. For example, for certain timber sales the Pacific Southwest Region does not require that logs smaller than 10 inches in diameter be painted and branded. BLM policy directs that one end of most unprocessed logs be painted and branded. Specifically, it calls for painting and branding one end of each log with a diameter of more than 10 inches. Likewise, when a log truck carries 10 or fewer logs (regardless of the logs’ diameter), all logs on the truck are to be painted and branded. For truckloads of 11 logs or more, a minimum of 10 logs must be painted and branded on one end, regardless of the logs’ diameter. BLM policy allows contracting officers to implement more stringent requirements, such as requiring purchasers to paint and brand all logs harvested on an individual timber sale regardless of size or number, but it does not allow contracting officers to waive the marking requirement. Penalizing violators. Both agencies have penalties for violating the export and substitution ban. Forest Service penalties are described in agency policy and in agency contract provisions, and include imposing penalties, cancelling contracts, and debarring purchasers from bidding on future Forest Service timber sales. BLM penalties are described in agency contract provisions only, and include contract cancellation and recovery of damages. In addition, many Forest Service and BLM officials said that general timber sale administration policies—those aimed at managing timber sales generally, regardless of export issues—help address the risk of illegal federal timber export and substitution. Both agencies’ policies for timber sale administration include mechanisms for monitoring various activities associated with federal timber sales, including periodically inspecting timber harvest operations at active logging sites and observing log trucks carrying cut timber from logging sites to ensure they follow designated haul routes. Many officials we spoke with from both agencies said that such periodic inspections and consistent contact with logging operators help prevent and detect illegal export or substitution of federal timber. However, Forest Service and BLM policies related to three areas— surveillance, certification requirements, and investigating potential violations—are outdated or unclear, or in some cases have not been fully implemented. The agencies also have not reviewed their policies for continued relevance and effectiveness as called for by federal internal control standards. Surveillance. Forest Service policy directs each Forest Service region with forests subject to the export ban to conduct surveillance and establish procedures, training, and other controls for the surveillance program in the region—stating that, at a minimum, regional standards must include monthly surveillance. However, three of the six regions subject to the ban have not established surveillance procedures because, according to regional officials, they have no access to ports and therefore the policy is not relevant to them. However, Forest Service headquarters officials said the requirement is relevant to all regions having forests subject to the ban, because federal logs originating from regions without ports could be transported across regions and exported from another region. These headquarters officials said that more clarity in the agency’s policy about establishing regional surveillance procedures may be helpful to the regions. The remaining Forest Service regions subject to the ban—the Pacific Southwest, Pacific Northwest, and Northern regions, each of which contains log export facilities—established procedures as called for by national policy but do not conduct surveillance on a monthly basis. The Pacific Southwest Region’s procedures call for monthly surveillance of export facilities in accordance with national policy. However, the Pacific Northwest Region’s procedures call for quarterly surveillance rather than monthly surveillance. The Northern Region delegates responsibility for surveillance to a national forest in the Pacific Northwest Region. We reviewed surveillance inspection reports from calendar year 2017 and found that, during that year, the Pacific Southwest Region conducted from one to nine inspections of each of the six facilities regional officials identified as exporting logs— less than the monthly surveillance called for by regional and national policy. Officials from the Pacific Northwest Region provided us calendar year 2017 surveillance information for one of the region’s six facilities that exported logs that year. For that facility, Forest Service officials conducted surveillance seven times in 2017, including at least one inspection per quarter, which is in accordance with regional policy but not national policy. Officials from both regions said they view the frequency with which they conduct surveillance to be appropriate. For example, officials from the Pacific Southwest Region said that when a port is actively exporting timber, they conduct surveillance at least once per month, as required by policy. Officials from the Pacific Northwest Region said they view their frequency of surveillance to be appropriate, since they view the likelihood of export violations to be low and they have competing agency priorities. BLM policy does not call for surveillance of log export facilities. However, officials from BLM’s Coos Bay District, which has two log export facilities, have conducted surveillance since the 1970s as a way to help detect illegal timber export, according to BLM documents and officials. Based on our review of 2017 surveillance inspection reports, BLM officials inspected one export facility twice and the other facility seven times during that year. Figure 3 shows an example of unprocessed logs at one of the export facilities in Coos Bay, Oregon. Some officials from both agencies said they may in some cases be unable to conduct surveillance within export facilities because they do not have clear authority to enter these facilities. BLM headquarters officials said BLM did not develop a policy calling for surveillance because the agency did not know whether it had the authority to enter log export facilities and therefore was not confident that such a policy could be carried out. Some officials from both agencies said they generally have been granted access but noted that this is subject to the willingness of the facility owners. Forest Service and BLM headquarters officials similarly said the agencies generally do not have legal authority to board ships or to inspect closed shipping containers to look for federal logs. Certification Requirements. Both agencies’ policies direct the agencies to collect certification forms to help them determine whether timber purchasers are engaged in export or substitution. However, the agencies’ forms are outdated—the Forest Service’s certification form expired, and some BLM forms reflect legal requirements that are no longer in effect. Nevertheless, the agencies have not updated their forms or changed their policies requiring collection of these forms. Forest Service policy states that “Prior to award, during the life of the contract, and for a period of 3 years from the termination date, the purchaser must furnish, upon request, the volume and geographic origin of unprocessed timber from private lands that was exported or sold for export.” The purchaser may submit the information on a specified Forest Service certification form or “other appropriate forms.” Forest Service regional officials from three of the six regions subject to the ban said they do not collect this information because the certification form, approved by the Office of Management and Budget, expired in 1999. Some Forest Service officials said updating and collecting the form could help prevent and detect illegal timber export and substitution by providing agency officials with information about purchasers’ activities. One senior headquarters official, however, noted that the information provided on the form relies on the purchaser’s self-certification, making it difficult for agency officials to verify. BLM policy requires agency staff to collect a minimum of two certification forms for each timber sale. One is to be collected before the sale is approved, to determine whether the timber sale purchaser has substituted federal timber for exported unprocessed private timber within a specified time frame. The other is to be collected after the harvest is completed and before the contract is terminated, to determine whether purchasers are exporting BLM timber. Two additional certification forms may be collected when applicable—one prior to the sale and the other after the harvest is completed—but are not required for all sales. We reviewed documentation from a sample of 22 BLM timber sale contracts that closed in 2017 in the five western Oregon BLM districts and found that BLM collected the required certification forms for 21 of the 22 contracts. The remaining contract file was missing a required form. BLM officials said the missing form could not be located. However, the two certification forms BLM can collect before approving a timber sale reflect legal requirements that are no longer in effect. According to the 1997 act, a purchaser may not purchase unprocessed federal timber if “such person has, during the preceding 24-month period, exported unprocessed timber originating from private lands.” However, the two BLM certification forms instruct the purchaser to provide this information for the preceding 12-month period. Senior BLM officials acknowledged the inconsistency between these forms and the current legal requirement. They said that the 12- month time frame specified in the certification forms reflects the BLM regulations issued to implement the appropriations act export restrictions in the 1970s. Investigating Potential Violations. Both agencies have policies for investigating potential export violations. The Forest Service’s policy for investigating export violations states that, upon finding a violation, the contracting officer should contact law enforcement and prepare a report about the violation, including any planned follow-up actions. Forest Service headquarters officials said that it is unclear whether this policy applies only in cases where export violations have been substantiated or is to be used in instances where violations are suspected but not confirmed. BLM headquarters officials said that their personnel are to use policies detailed in the agency’s standard contract administration procedures, which cover all timber sale administration violations, to investigate potential and substantiated export violations. These procedures provide officials discretion in the actions they take. For example, the procedures state that “many such violations may simply be corrected with good verbal communications between the BLM and purchaser representatives. Other violations require more forceful action and complete documentation of such actions.” The agencies differ in the extent to which they define what conduct constitutes an export violation. Forest Service policies do not define export; however, its regulations do, stating that export can occur at any of several points—when a person enters into an agreement to convey logs to another country, when logs are placed in an export facility in preparation for shipment outside the United States, or when logs are placed on a ship, train, or other transport destined for a foreign country. BLM policies and regulations do not define the term export or state what constitutes an export violation. Officials from both agencies said that determining whether a violation has occurred requires judgment on the part of agency staff. For example, according to these officials, finding logs in an export facility may constitute a violation, but would require the agency to determine whether the logs were being prepared for shipment outside the United States. Officials from both agencies said they would benefit from a clear definition of export violation. In addition, the agencies do not have up-to-date information about sourcing areas, which is used to determine substitution violations. Under the 1997 act, manufacturers may not engage in substitution— that is, exporting timber from private lands while purchasing federal timber to supply their mills. However, it is not considered substitution if a company purchases federal timber from within a particular “sourcing area” and exports nonfederal timber harvested from areas outside the sourcing area. Sourcing areas outside Washington State are subject to Forest Service or BLM approval, and the agencies are required by law to review them at least every 5 years. Forest Service headquarters officials said they had not reviewed sourcing areas for at least 20 years, and said that over this time, many timber companies with approved sourcing areas have gone out of business or no longer purchase national forest timber. Forest Service headquarters officials said that they did not maintain lists of sourcing areas, and none of the six Forest Service regions subject to the ban had information about sourcing areas. BLM provided us a list of sourcing areas identified by the Forest Service, but the list dates to 1992. Moreover, many Forest Service and BLM officials we interviewed said they were unfamiliar with the concept of substitution and sourcing areas. A few officials said identifying sourcing areas may no longer be relevant given the changes in the organizational structure of timber companies and the resulting lower likelihood of substitution. According to the Standards for Internal Control in the Federal Government, management should implement control activities through policies, including by periodically reviewing policies, procedures, and related control activities for continued relevance and effectiveness in achieving an entity’s objectives or addressing related risks. Forest Service officials said the agency has not reviewed its policies specific to export and substitution since the enactment of the 1997 act, largely because of competing priorities and the officials’ view that the likelihood of illegal export or substitution is low. Nevertheless, these officials agreed that it would be beneficial for the Forest Service to review and update its policies, especially in light of the significant changes to the timber economy in the past 2 decades. BLM officials said they reviewed the agency’s export regulations in 2010, but this effort did not include a review of log export policies. They said they did not believe such a review would be useful until new regulations are issued, since it is important that policies conform with regulations. These officials noted that BLM’s Oregon/Washington State Office updated some of its policies in 2016, but the officials did not indicate the extent to which the policies were reviewed for relevance and effectiveness—and, as noted, some BLM policies appear unclear or are inconsistent with the 1997 act. By reviewing agency policies and making changes to them as necessary, in accordance with applicable regulations, the Forest Service and BLM will have better assurance that their policies are relevant and effective for addressing the risk of illegal timber export and substitution. For 50 years, Congress has restricted the export and substitution of federal timber from the western United States. Since the restrictions were put in place, substantial changes to the timber economy have occurred, and agency officials and stakeholders view the likelihood of illegal timber export and substitution as low. The Forest Service and BLM have various regulations, policies, and procedures to carry out the ban. However, the agencies did not issue new regulations as required by the Forest Resources Conservation and Shortage Relief Act of 1997 and have not obtained legislative relief from this requirement. As a result, the agencies are relying on regulations issued before 1995. Without issuing new coordinated and consistent regulations or obtaining legislative relief, the Forest Service and BLM will continue to be out of compliance with the regulation provisions of the 1997 act. Further, some agency policies are outdated or unclear. For example, Forest Service policy calls for collecting a certification form that expired in 1999, and BLM policy does not clearly define what constitutes a violation of the export ban. The Forest Service and BLM have not reviewed their policies for continued relevance and effectiveness, consistent with federal internal control standards. By reviewing agency policies and making changes to them as necessary, the Forest Service and BLM will have better assurance that their policies are relevant and effective for addressing the risk of illegal timber export and substitution. We are making four recommendations, including two to the Forest Service and two to the BLM: The Chief of the Forest Service should determine whether new regulations governing timber export and substitution are appropriate. If the agency determines new regulations are appropriate, it should issue them in accordance with the 1997 act, in consultation with BLM. Otherwise, the agency should seek legislative relief from the act’s requirement. (Recommendation 1) The Director of the BLM should determine whether new regulations governing timber export and substitution are appropriate. If the agency determines new regulations are appropriate, it should issue them in accordance with the 1997 act, in consultation with the Forest Service. Otherwise, the agency should seek legislative relief from the act’s requirement. (Recommendation 2) The Chief of the Forest Service should review agency policies for continued relevance and effectiveness in addressing the risk of illegal timber export and substitution, and based on that review—and in accordance with applicable regulations—should issue new policies as necessary. (Recommendation 3) The Director of the BLM should review agency policies for continued relevance and effectiveness in addressing the risk of illegal timber export and substitution, and based on that review—and in accordance with applicable regulations—should issue new policies as necessary. (Recommendation 4) We provided a draft of this report for review and comment to the Departments of Agriculture and the Interior. The departments provided written comments, which are reproduced in appendixes I and II of this report. The Forest Service, responding on behalf of the Department of Agriculture, stated in its written comments, and in a subsequent e-mail from the Forest Service audit liaison, that it generally concurred with our findings and recommendations. The Forest Service stated that it will coordinate with BLM to determine the next best steps in moving ahead in administering the export law. In its written comments, the Department of the Interior concurred with the recommendations we directed to BLM. Regarding our recommendation related to regulations, Interior stated that BLM will review its regulations to identify inconsistencies with the 1997 act, and if it determines new regulations are appropriate, will begin consultation with the Forest Service to maximize consistency between the agencies to minimize the impact to federal timber purchasers. Regarding our recommendation related to policies, Interior stated that BLM will review its export and substitution policies as well as its relevant contracts and forms for any immediate updates needed to conform with the 1997 act, and will ensure the policies are updated in conjunction with any new regulations. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretaries of Agriculture and the Interior, the Chief of the Forest Service, the Director of the BLM, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix III. In addition to the individual named above, Steve Gaty (Assistant Director), Ulana M. Bihun (Analyst-In-Charge), Mark Braza, Justin Fisher, Richard P. Johnson, and Kyle Stetler made key contributions to this report. Important contributions were also made by Tara Congdon, Barb El Osta, Kimberly Gianopoulos, and Dan Royer.", "summary": "Each year, the federal government sells millions of dollars of timber from federal forests. Federal law generally prohibits the export of unprocessed logs harvested from federal lands in the western United States. It also prohibits substitution of federal logs for privately sourced timber in domestic mills when the privately sourced timber is exported without processing. GAO was asked to examine the issue of illegal federal timber export and substitution. This report (1) describes the extent to which the Forest Service and BLM identified violations of the timber export and substitution ban that occurred from 2007 through 2017 and the likelihood of violations and (2) examines the agencies' regulations, policies, and practices to help prevent, detect, and respond to illegal timber export and substitution. GAO reviewed laws, regulations, and policies regarding illegal timber export and substitution; compared agency regulations with laws, and agency policies with federal internal control standards; and interviewed agency officials and stakeholders—such as trade groups and state officials— selected to provide a range of perspectives. The Forest Service, within the Department of Agriculture, and the Bureau of Land Management (BLM), within the Department of the Interior, found no violations of the ban on federal timber export and substitution from 2007 through 2017, according to agency documents and officials. All agency officials and stakeholders GAO interviewed said the likelihood of illegal timber export and substitution is low, citing several reasons, including economic factors associated with log markets, which have changed over the years. For example, many officials and stakeholders said the timber harvested from federal lands is smaller and of lower quality compared to what was harvested in the 1990s, making it less likely to be exported. The Forest Service and BLM did not issue new regulations related to illegal federal timber export and substitution, and some agency policies related to export and substitution are outdated or unclear. The agencies did not issue regulations to implement the Forest Resources Conservation and Shortage Relief Act of 1997, as required by the act. Without issuing new regulations or obtaining legislative relief from this requirement, the agencies will continue to be out of compliance with the act. The agencies have policies to help prevent, detect, and respond to illegal timber export and substitution, such as policies that require the marking of logs to identify them as coming from federal lands. However, the agencies have not reviewed their policies for continued relevance and effectiveness as called for by federal standards for internal control, and some policies are outdated or unclear. For example, Forest Service policy calls for the collection of a certification form to help determine whether timber purchasers are engaged in export or substitution, but the form expired in 1999. Also, it is unclear what BLM considers a violation of the export ban because agency policy does not define what constitutes a violation. Forest Service officials said the agency has not reviewed its policies since 1997, largely due to competing priorities, but agreed it would be beneficial to do so. BLM officials said they reviewed the agency's export regulations in 2010, but this effort did not include a review of timber export policies. By reviewing agency policies and making changes as necessary, the agencies will have better assurance that their policies are relevant and effective for addressing the risk of illegal timber export and substitution. GAO recommends that the Forest Service and BLM issue new regulations or seek legislative relief from the requirement to do so, and review their policies for relevance and effectiveness and issue new policies as necessary. The agencies generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Oil and petroleum products markets have changed substantially in the years since the establishment of the SPR. Specifically, U.S. domestic crude oil production has generally been increasing, consumption has been relatively stable, and crude oil and petroleum products markets have become increasingly global. Additionally, U.S. crude oil production is projected to rise further in the future, according to EIA and IEA projections, further reversing a decades-long decline. Recent technological improvements have made onshore production from shale formations economically viable, and domestic crude oil production began to rise in about 2008. The combination of increasing production and relatively stable consumption has resulted in declining net crude oil and petroleum products imports, from a high of about 12 million barrels per day in 2005 to fewer than 4 million barrels per day in 2017. Since these trends are expected to continue, the IEA and EIA both project net U.S. crude oil and petroleum products imports will decline to zero sometime in the late 2020s and the United States will become a net exporter shortly thereafter. Since the IEA 90-day reserve obligation is based on a country’s net imports, there is no such obligation for net exporters; therefore, the United States would have no 90-day reserve obligation as long as it is a net exporter, though it would still be obligated to release reserves in response to supply disruptions. Over the longer term, EIA’s projections show U.S. net exports peaking in 2037 and the United States again becoming a net importer between 2040 and 2050. At the time of the Arab oil embargo, price controls in the United States prevented the prices of oil and petroleum products from increasing as much as they otherwise might have, contributing to a physical oil shortage that caused long lines at gasoline stations throughout the United States. In addition, in the 1970s, oil prices were often set in long-term contracts, which meant that prices would not automatically rise in the face of greater scarcity. This generally reduced incentives for producers to expand production and sales as well as for consumers to reduce consumption in the face of greater scarcity caused by a supply disruption. Now that crude oil and petroleum product markets are global, the prices of these commodities are determined in the world market, primarily on the basis of supply and demand. In the absence of long-term contracted prices or price controls, scarcity from a supply disruption is generally expressed in the form of higher prices, as purchasers are free to bid as high as they are willing to pay to secure oil supply. In a global market, a large enough supply disruption anywhere in the world raises prices everywhere. This creates incentives for producers unaffected by the disruption to increase their production and release existing inventories and for consumers everywhere to reduce consumption in the ways they find most efficient and least disruptive. While it can take time for some of these actions to affect crude oil and petroleum product markets—according to DOE officials, it can take approximately 6 months from when a producer drills an oil well until oil production comes on line—all these actions tend to mitigate the effects of supply disruptions. The Energy Policy and Conservation Act of 1975 authorized the creation of the SPR, partly in response to the Arab oil embargo of 1973-1974 that caused a shortfall in the international oil market. The purposes of the SPR are, among other things, to reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program. Specifically, the 1974 International Energy Program Agreement, a joint strategy and treaty, established the IEA to address oil security issues on an international scale. The SPR is owned by the federal government, managed by DOE’s Office of Petroleum Reserves, and maintained by Fluor Federal Petroleum Operations LLC. The SPR stores crude oil in underground salt caverns along the Gulf Coast in Louisiana and Texas. The SPR currently maintains four storage sites—Bayou Choctaw, Big Hill, Bryan Mound, and West Hackberry—with a design capacity of 713.5 million barrels. Under conditions prescribed by the Energy Policy and Conservation Act, as amended, the President has discretion to authorize the release of petroleum products from the SPR to minimize significant supply disruptions. When oil is released from the SPR, it is distributed through commercial pipelines or on waterborne vessels to refineries, where it is converted into gasoline and other petroleum products, and then transported to distribution centers for sale to the public. According to DOE documents, well-functioning infrastructure is fundamental to the SPR’s ability to maintain operational readiness and meet mission requirements. However, most of the critical infrastructure for moving SPR oil has exceeded its serviceable life, which has led to increasing maintenance costs and decreasing system reliability. Specifically, the reserve relies on a complex system of salt caverns, pipelines, wells, and pumps, with other infrastructure and equipment. Any failures, such as ruptured pipelines, could affect the readiness of a site for an oil release. According to DOE officials, a growing backlog of major maintenance needs raises concerns about the ability of the system to operate as designed. In addition, there have been equipment failures that have rendered parts of the system temporarily inoperable. For example, the SPR has experienced at least five major equipment failures since fiscal year 2013, including the Big Hill site pipe failure shown in figure 1. The United States has two regional petroleum product reserves—the Northeast Home Heating Oil Reserve and the Northeast Gasoline Supply Reserve. The Northeast Home Heating Oil Reserve, which is not part of the SPR, holds 1 million barrels of ultra low sulfur distillate, a petroleum product essentially equivalent to diesel fuel but that is also used for heating oil. The Northeast United States is heavily dependent on the use of heating oil in winter months. The distillate is stored in leased commercial tank storage in terminals in Connecticut, Massachusetts, and New Jersey. In 2000, the President directed the creation of the reserve to hold approximately 10 days of inventory, the time required for ships to carry additional heating oil from the Gulf of Mexico to New York Harbor. The Northeast Gasoline Supply Reserve, a part of the SPR, holds 1 million barrels of gasoline for consumers in the northeastern United States. According to DOE’s website, this region is particularly vulnerable to gasoline disruptions as a result of hurricanes and other natural events. For example, Hurricane Sandy caused widespread gasoline shortages in the region in 2012. DOE conducted a test sale of the SPR in 2014 and used a portion of the proceeds from the sale to create the reserve. The gasoline is stored in leased commercial tank storage in terminals in Maine, Massachusetts, and New Jersey. The SPR helps the United States meet its IEA obligation to hold the equivalent of 90 days of net imports of crude oil and petroleum products. In order to meet the IEA 90-day reserve obligation, countries, including the United States, can count existing private reserves of crude oil and petroleum products in addition to public reserves (in the United States, the SPR). In most years, the United States has met its 90-day reserve obligation with a combination of SPR and private reserves. The days of import protection may vary based on actual net U.S. crude oil and petroleum products imports as well as the inventory levels of the SPR and private reserves. As discussed previously, because the IEA 90-day reserve obligation is based on a country’s net imports, there is no such reserve obligation for countries that are net exporters of crude oil and petroleum products. The United States also relies on the SPR to meet its IEA obligation to release reserves in the event of a collective action to respond to a supply disruption. Countries contribute to an IEA collective action based on their share of IEA oil consumption, and they can meet their obligation by whatever measure they choose, including release of public or private reserves, or demand restraint. IEA collective actions are designed to mitigate the negative effects of sudden supply shortages by making additional crude oil and petroleum products available to the global market through a combination of emergency response measures, which include increasing supply and reducing demand. In the event of a global market disruption, IEA member countries can call for a collective action after reaching consensus on whether a response is needed. DOE stated that the collective action IEA obligation is more relevant to the SPR’s mission of protecting the U.S. economy from severe petroleum supply interruptions than the 90-day reserve obligation. The United States has participated in each of the three IEA collective actions. In 1991, with the commencement of Operation Desert Storm, DOE released 17.3 million barrels of SPR crude oil. After Hurricane Katrina in 2005, DOE released 11 million barrels of SPR crude oil. Most recently, in June 2011, in response to crude oil supply disruptions driven by hostilities in Libya, DOE released 30.6 million barrels of crude oil from the SPR. The Libya collective action is an example of how, in practice, member countries participate according to national circumstances. After consultations with IEA member countries, all IEA member countries agreed to the Libya collective action, under which 12 of the 28 members at that time contributed to the action. In addition to the three IEA collective actions, the SPR has been used 10 times in response to U.S. domestic supply disturbances that were not IEA collective actions, most notably in response to severe weather events. In terms of how they meet their IEA obligations, most other IEA members differ from the United States in two basic ways. Specifically, as of December 2017, most IEA members rely at least in part on private rather than public reserves to meet their obligations, and most hold significant proportions of these reserves as petroleum products rather than as crude oil. In December 2017, before Mexico joined the IEA in early 2018, there were 29 member countries. Of these 29 countries, 25 IEA members had two common attributes: (1) as net importers, they had a 90-day reserve obligation and met that obligation, and (2) they had formal processes for holding and releasing these reserves. As of December 2017, 18 of these 25 members relied entirely or in part on private reserves to meet their reserve obligations. Specifically, based on IEA data as of December 2017, these 18 countries met their 90-day reserve obligation through private reserves and either had no public reserves or had public reserves of less than 90 days. According to a 2014 IEA report, some of these countries require industry to hold reserves and, when needed, release them. For example, according to a 2014 IEA report and documentation provided by government officials, the United Kingdom meets its entire obligation by requiring private industry to hold reserves. In contrast, New Zealand had publicly held reserves amounting to 26 days of net imports, according to IEA data as of December 2017. According to a 2014 IEA report, New Zealand relied on industry reserves held for commercial purposes to meet the rest of its 90-day reserve obligation, although New Zealand does not formally require industry to hold reserves specifically for this purpose. Unlike the 18 countries that rely at least in part on private reserves, as of December 2017, the United States and 6 other IEA members met the 90- day reserve obligation exclusively through public reserves. Specifically, according to IEA data on member reserves, Estonia, Finland, Germany, Hungary, Ireland, Japan, and the United States held public reserves equal to 90 days or more of net imports. Although the United States currently meets its IEA 90-day reserve obligation solely with public reserves, for most of the SPR’s existence, public reserves were insufficient to meet this obligation, so the United States also had to rely on private reserves. Specifically, according to EIA data, the United States has relied, at least in part, on private reserves together with the SPR to meet the 90-day reserve obligation with the exception of two time periods (1984-1987 and 2012-present), when the United States has relied solely on the SPR. The United States does not require industry to hold reserves for the purposes of meeting IEA obligations. Figure 2 compares the United States’ reserves in days of net imports to the IEA’s 90-day reserve obligation. According to a 2014 IEA report, most IEA members hold at least a third of their reserves as petroleum products, such as gasoline and diesel fuel, rather than as crude oil. Holding petroleum products can be advantageous during certain disruptions because such reserves can be directly distributed to consumers, whereas crude oil must first be refined and turned into products, adding response time. According to the IEA’s 2014 report, Germany’s stockholding agency holds 55 percent of its reserve as petroleum products. Similarly, France holds only petroleum products that are distributed geographically across the country so that the reserves can be used quickly in the event of a supply disruption. In contrast, more than 99 percent of the SPR (665.5 million barrels as of March 2018) is held as crude oil, all of which is stored at the four storage sites in Louisiana and Texas. The exception is the Northeast Gasoline Supply Reserve, which, as mentioned previously, is a 1 million barrel gasoline reserve in terminals in Maine, Massachusetts, and New Jersey that was established in 2014 after Hurricane Sandy and that is considered part of the SPR. According to DOE officials, there are several reasons the SPR holds predominantly crude oil, including that it is more costly to store petroleum products than crude oil and that the United States has the largest refining capacity of any IEA member country. Because of the large U.S. refining sector, crude oil from the SPR can be domestically refined into petroleum products to meet demand. Some IEA member countries store some of their reserves abroad, though the United States does not. According to a 2014 IEA report, some IEA member countries allow part of their reserves to be stored abroad to leverage spare storage capacity or more cost-effective storage by utilizing available storage space or excess private reserves in other countries. For example, approximately 30 percent of Ireland’s reserves are held in other European Union countries. In some of these cases, countries use short-term contracts, also known as tickets, instead of directly acquiring and storing oil and petroleum products. For example, according to documents provided by government officials, since 1995 the United Kingdom has increased its reserves held under ticket agreements outside of the country from around 10 percent of its total reserves to more than 25 percent. In addition, unlike the United States, some IEA countries specify the size of their public or private reserves in terms of net imports or consumption, rather than a specific volume. In the United States, the total volume of crude oil and petroleum products held in the SPR is the result of amounts historically purchased to fill the reserve and subsequent sales as mandated by Congress or released in response to a supply disruption. According to DOE, it cannot otherwise reduce or increase volumes held in reserve without congressional action—either through requirements to purchase additional oil or laws authorizing or mandating sales. On the other hand, some IEA countries have tied their reserves’ volumes of crude oil and petroleum products to a metric such as days of net imports or a percent of consumption. For example, according to documentation provided by government officials, in 2015 Japan changed how it specifies its target reserves from a specified amount to days of net imports. In specifying the size of reserves in this way, the amount held is adjusted as market conditions change—for example, if net imports change and require more or fewer reserves to meet the IEA 90-day reserve obligation, or when other underlying factors affecting a nation’s energy security needs change. While DOE has examined a range of sizes for the SPR, it has not identified the optimal size for the SPR to meet U.S. energy security needs and IEA obligations, and DOE’s analysis of SPR sizes was limited in three ways. DOE also has not identified whether additional regional petroleum product reserves should be part of the SPR in U.S. regions identified as vulnerable to fuel supply disruptions. DOE has not identified the optimal size for the SPR and though the agency examined a range of SPR sizes, its analysis was limited in at least three ways. In response to direction from Congress and recommendations from GAO and the DOE Inspector General, DOE developed and published a long-term strategic review of the SPR in August 2016. In DOE’s 2016 review, the agency examined the expected economic benefits of SPR sizes ranging from 430 million to 695 million barrels of oil over a 25-year time horizon (2016 through 2040), but it did not recommend an optimal size for the reserve. DOE’s review did not identify the optimal size for the SPR because of three limitations: DOE did not fully evaluate implications of market fluctuations and estimate needs. DOE did not fully evaluate the implications of falling net imports of crude oil and petroleum products with respect to meeting IEA obligations to hold the equivalent of 90 days of net imports and to respond to collective actions. As mentioned previously, the United States is expected to become a net exporter of crude oil and petroleum products by the late 2020s. Since the IEA 90-day reserve obligation is based on a country’s net imports, this means that at that point the United States would not have a 90-day reserve obligation. However, even as a net exporter, the United States would still have to meet the IEA obligation to respond to a collective action. Yet, DOE’s analysis did not evaluate the SPR’s configuration as it relates to projected fluctuations in net imports or estimate the minimal amount of reserves needed to meet potential future collective actions. Without considering projected fluctuations in net imports or providing an analysis of how much oil is estimated to be needed to meet IEA collective actions, DOE cannot fully advise Congress on the optimal size of the SPR. DOE did not consider private-sector response. DOE’s analyses in its 2016 review focused on the publicly held reserves in the SPR as the only means to respond to oil supply disruptions and did not consider a response from the private sector or through consumers reducing demand. According to DOE’s 2016 review, the underlying analysis for the benefits of the SPR did not consider a response from the private sector for three reasons: (1) while U.S. commercial stocks could conceivably address part of a supply disruption, private industry could also hold oil inventories in a crisis instead of releasing them; (2) unlike most other IEA member countries, the United States does not require private-sector response; and (3) research on the exact nature of private-sector response during a disruption is needed. DOE officials told us the agency has not studied the extent to which SPR releases of crude oil displace what would otherwise have been private releases of inventories. As we reported in September 2014, changing market conditions— most importantly the significant increase in domestic production of oil—have implications for the SPR’s size because increased production has led to increasing private reserves. According to IEA data as of December 2017, U.S. private reserves held the equivalent of 194 days of net import protection coverage, up from about 59 days in 2006. Further, private reserves in the United States consist of both crude oil and petroleum products with more than half in the latter category. For example, as of January 2018, total private reserves of crude oil and petroleum products were about 1.215 billion barrels, of which about 420 million barrels were in the form of crude oil and 795 million barrels were petroleum products, according to the EIA. As of 2013, these private reserves were distributed across the entire country in more than 1,400 terminals, according to the EIA. As we reported in December 2007, international trade in oil and petroleum products has expanded significantly over the past 2 decades, making markets for gasoline and other petroleum products increasingly global in nature. In such a global oil market, higher levels of private reserves can benefit the United States and the rest of the world by helping mitigate a supply disruption. Most experts and stakeholders we interviewed generally agreed that the private sector is in a better position to respond to supply disruptions than they were when the SPR was created. With regard to demand response, DOE officials told us they do not consider this because there is no mechanism to require industry to respond to supply disruptions or consumers to reduce demand in response to a supply disruption. However, DOE has not studied how voluntary response to changes in petroleum product prices affects the need for or efficacy of strategic releases. Without conducting an analysis of how private parties respond to supply disruptions, DOE cannot advise Congress on the optimal size of the SPR because it cannot know how effective such private responses could be in mitigating supply disruptions. DOE did not fully examine costs of differently sized reserves. DOE’s review of the expected economic benefits of differently sized reserves did not fully examine the corresponding costs of those sizes. According to DOE officials, there was no requirement or need to conduct a formal cost benefit analysis of the SPR because the SPR’s oil acquisition and initial capital costs to create the reserve are sunk costs and the ongoing operational costs to maintain the reserve are minimal in comparison. However, this does not take into account the opportunity cost to the government that holding reserves represents; as Congress has mandated several times recently, crude oil from the reserve can be sold to fund other federal priorities. Without additional analysis, such as of the costs and benefits of SPR’s size, DOE cannot fully advise Congress on the optimal size of the SPR. When we reviewed the SPR in 2006 and 2014, we found that DOE had not periodically re-examined the strategic reserves. In 2006, we recommended that the Secretary of Energy reexamine the appropriate size of the SPR. In its response to our recommendation, DOE stated that its reexamination had taken the form of more “actionable items,” including not requesting expansion funding in its 2011 budget and canceling and redirecting the prior year’s expansion funding to general operations of the SPR, based on the Administration’s decision that the SPR’s current size at the time was adequate. Similarly, as previously mentioned, in 2014 we found that changing market conditions have implications for the size, location, and composition of the SPR, but DOE had not reexamined the SPR’s size since 2005. Accordingly, we recommended that the Secretary of Energy undertake a comprehensive reexamination of the appropriate size of the SPR. In response to our recommendation, the 2014 DOE Inspector General recommendation mentioned previously, and the Bipartisan Budget Act of 2015, DOE published its 2016 review. As previously mentioned and reported, crude oil and petroleum markets are constantly changing, but DOE conducted its full evaluations of the SPR more than a decade apart. According to DOE officials, there is no formal policy to periodically reevaluate the SPR. We previously found that federal programs should be reexamined if there have been significant changes in the country or the world that relate to the reason for initiating the program. In that report, we found that many federal programs and policies were designed decades ago to respond to trends and challenges that existed at the time of their creation. Moreover, the Office of Management and Budget Circular A-94 for benefit-cost analysis of federal programs includes guidelines that apply to any analysis used to support government decisions to initiate, renew, or expand programs or projects that would result in a series of measurable benefits or costs extending for 3 or more years into the future. Given changing market conditions and future projections, without conducting additional analysis to supplement its 2016 review and thereafter periodically reexamining the SPR to take into account changes in market conditions and include a thorough consideration of the costs and benefits of a wide range of SPR sizes, DOE cannot provide information to Congress to inform decisions about the appropriate size of the SPR and risks holding too much or too little in the SPR to meet the United States’ evolving energy security needs and IEA obligations. DOE has also not fully identified whether additional regional petroleum product reserves should be part of the SPR. Because the SPR stores oil nearly exclusively along the Gulf Coast, the SPR is configured primarily to respond to global oil supply disruptions. However, as we reported in November 2017, the SPR has primarily been used in response to domestic disruptions. The SPR is limited in its ability to respond to domestic disruptions because reserves are almost entirely composed of crude oil and not refined petroleum products, which may not be effective in responding to disruptions that affect the refining sector. For example, as we reported in November 2017, Hurricanes Harvey, Irma, and Maria damaged infrastructure and property, caused the loss of life, and disrupted the operations of refineries representing at least 15 percent of the nation’s refining capacity. DOE has identified regions subject to product supply vulnerabilities as shown in Figure 3. The Quadrennial Energy Review of 2015 recommended that the agency analyze the need for additional or expanded regional product reserves by undertaking updated cost-benefit analyses for all of the regions of the United States that have been identified as vulnerable to fuel supply disruptions. In response to this recommendation, DOE studied the costs and benefits of regional petroleum product reserves in the West Coast and Southeast Coast. According to DOE officials, weather events in the Southeast Coast are of higher probability but lower consequence, and events in the West Coast are of lower probability but higher consequence. DOE did not finalize its 2015 studies on regional petroleum product reserves and make them publicly available. However, the draft 2015 studies concluded that a product reserve in the Southeast would provide significant net economic benefits to the region and the United States, particularly in the event of a major hurricane, while further analyses are needed to determine the potential benefits of a reserve on the West Coast. A prior DOE study also suggests that petroleum product reserves merit consideration—in 2011, DOE carried out a cost-benefit study of the establishment of a refined product reserve in the Southeast and estimated that such a reserve would reduce the average gasoline price rise by 50 percent to 70 percent in the weeks immediately after a hurricane landfall, resulting in consumer cost savings, according to the Quadrennial Energy Review of 2015. According to DOE officials, the agency has no plans to conduct additional studies. DOE’s 2016 review of the SPR did not fully assess whether there is a need for additional regional product reserves in other U.S. regions identified as vulnerable to fuel supply disruptions, as recommended by DOE’s studies and the 2015 Quadrennial Energy Review. Without completing studies on the costs and benefits of regional petroleum product reserves for all the vulnerable U.S. regions and publicly releasing the results, DOE cannot ensure that it and Congress have the information they need to make decisions about whether additional regional product reserves are needed. DOE has taken steps to take into account the effects of congressionally mandated oil sales in its plans for modernizing the SPR, though DOE’s current plans are based on information largely developed prior to the most recent congressionally mandated oil sales. According to DOE, the SPR modernization program is focused on a life extension project to modernize aging infrastructure to ensure the SPR will be able to meet its mission requirements for the next several decades. The project’s scope of work has undergone several revisions since its inception in response to changing conditions and requirements, according to the agency. DOE has estimated the total cost for the SPR’s modernization at up to $1.4 billion. DOE raised about $323 million for modernization through the sale of SPR oil in fiscal year 2017, and the Consolidated Appropriations Act of 2018 provided that DOE is to draw down and sell an amount of crude oil not to exceed $350 million for modernization in fiscal year 2018. As of the end of February 2018, DOE has spent $22 million on modernization efforts and the additional funds will allow DOE to continue moving forward with the project, according to agency officials. According to DOE’s modernization plans, the first major construction is scheduled for fiscal year 2019. However, these plans are largely based on information DOE analyzed before recent congressionally mandated sales of an additional 117 million barrels of oil. Since the most recent mandated sales, DOE has taken steps to update its modernization plans and has changed its assumptions for SPR’s modernization. For example, DOE now assumes that the reserve will hold about 405 million barrels of oil and that one of the four SPR sites may close after congressionally mandated sales are completed at the end of fiscal year 2027, according to agency officials. However, DOE has not fully updated the SPR’s modernization plans based on these assumptions. According to DOE officials, in March 2018, DOE commenced a study—the SPR post-sale configuration study—to examine potential future reserve configurations. This study is to take into account the effects of congressionally mandated sales on the reserve and its modernization, and is targeted for completion in October 2018, according to agency officials. Information from the study will inform DOE’s updates to the SPR’s modernization plans, according to DOE officials. As part of its post-sale configuration study, DOE plans to examine how the agency may handle the potentially excess SPR facilities created by the mandated sales. In January 2017, the SPR had a design capacity to hold 713.5 million barrels of oil and actually held 695 million barrels. As shown in figure 4, without action by DOE to reduce the SPR’s design capacity or otherwise use SPR facilities, congressionally mandated sales will cause excess storage capacity to grow to 308 million barrels or more by the end of fiscal year 2027—meaning that about 43 percent of the SPR’s total design capacity to store oil would be unused. DOE plans to explore some options to use these potentially excess SPR assets in its ongoing post-sale configuration study. In withdrawing oil to meet congressionally mandated oil sales currently in place (290 million barrels through fiscal year 2027), DOE could close at least one SPR site based on our analysis of projected excess storage capacity. For example, if DOE were to close the smallest SPR site, Bayou Choctaw, the agency could also explore selling the connected pipeline and marine terminal, which are currently being leased to a private company. DOE could also consider leasing excess storage capacity to other countries so that they could store oil at the SPR. DOE has not entered into any such leases with other countries and has not considered such leases because, according to DOE, the SPR has historically lacked capacity to store additional oil. DOE has not proposed any of these options or explored the revenue the agency could generate by selling or leasing these assets. According to DOE officials, the agency will examine the feasibility of such options in the ongoing SPR post-sale configuration study. As DOE takes steps to plan for the SPR’s modernization, ongoing uncertainty regarding the SPR’s long-term size and configuration have complicated DOE’s efforts. According to DOE officials, this uncertainty makes it extremely difficult to effectively perform any mid-to long-range planning efforts for the SPR’s modernization project, including the execution of major maintenance projects. Congress has generally set the SPR’s size by mandating purchases or sales of oil, and has established and amended the minimum size of the SPR as it pertains to the release of oil for emergency protection. Since 2015, Congress has, across six pieces of legislation, mandated 290 million barrels in additional oil sales. However, DOE developed its modernization plans in 2016. DOE officials told us they do not know whether additional sales will be mandated over the next 10 years or whether other changes may be required to the configuration of the reserve. Any additional congressionally mandated sales or direction to pursue additional petroleum product reserves would require DOE to again revisit its modernization plans and assessments of the potential uses of any excess SPR assets. Oil market projections also have implications for the future of the SPR. Under current projections, the United States may fluctuate between being a net importer and net exporter over the next several decades. Specifically, the United States is projected to become a net exporter by the late 2020s and would then no longer have a 90-day reserve obligation, but it is projected to return to being a net importer between 2040 and 2050. These projected fluctuations could affect the desired size of the SPR in the future. This uncertainty creates risks for DOE’s modernization plans, as DOE may end up spending funds on facilities that later turn out to be unnecessary should Congress ultimately decide on a larger- or smaller-sized SPR than DOE anticipates. Having a long-term target for the size and configuration of reserves helps other IEA member countries manage their reserves. For example, as previously discussed, unlike the United States, some other IEA members have specified in dynamic terms the amount of reserves to be held, such as days of net import protection or days of consumption, rather than specifying a specific static volume amount. Under such approaches, the amount held varies over time as entities managing the reserve acquire or sell reserves in order to meet the target. Setting a long-term target for the size and configuration of the SPR—taking into account projections for oil production, consumption, and IEA obligations—could better position DOE to ensure that funds spent on the SPR’s modernization do not modernize a system that is no longer needed and that DOE is able to adequately plan for potentially excess SPR assets. In the course of our work, we also identified other options for handling potentially excess SPR assets that DOE is not planning on examining, largely because DOE does not currently have the authority to pursue them, according to agency officials. First, DOE could explore leasing storage capacity to private industry. U.S. oil production has generally increased over the last decade. As a result, the private sector may want to lease excess SPR capacity, which may be cheaper than above-ground storage, according to a representative of a private company we spoke with. Fees for doing so could help defray public reserve storage costs. However, officials told us that the Energy Policy and Conservation Act gives DOE authority to lease underutilized storage to other countries, but not to the private sector. Second, if Congress determines that the SPR holds oil in excess of that needed domestically, DOE could explore selling contracts or tickets for the excess oil rather than selling the oil outright. Australian and New Zealand officials told us that if DOE were to sell tickets for SPR oil, tickets would help these countries meet their IEA 90- day reserve obligations. Australian officials told us they have discussed this option with DOE. Currently the United States and Australia have agreed, through an arrangement, to allow Australia to contract for petroleum stocks located in the United States and controlled by commercial entities. According to DOE officials, the arrangement would permit Australia to receive credit from the IEA for tickets it purchases from the U.S. private sector. While the arrangement does not cover government-owned oil in the SPR, if it did, based on our analysis, DOE could generate up to approximately $15 million annually if Australia purchased the maximum allowable amount of oil specified in an arrangement through tickets for excess SPR oil. However, although the Energy Policy and Conservation Act allows DOE to lease underutilized storage to other countries, DOE lacks the authority to sell tickets and does not plan to seek this authority, according to DOE officials. DOE officials told us that they do not plan to examine these options. According to DOE’s real property asset management order, the agency is to identify real property assets that are no longer needed to meet the program’s mission needs and that may be candidates for reuse or disposal. Once identified, the agency is to undertake certain actions, including determining whether to dispose of these assets by sale or lease. As part of its SPR post-sale configuration study, DOE plans to determine whether it is appropriate to close SPR facilities, and the relative benefit of any closures would be informed by potential lease revenues from maintaining sites so they could be leased, according to officials. However, without examining a full range of options in the post-sale configuration study, DOE risks missing beneficial ways to modernize the SPR while saving taxpayer resources. Given changing crude oil and petroleum product market conditions and the constrained budget environment, it is important that DOE ensures the SPR is effective at meeting U.S. energy security needs and IEA obligations while being managed and maintained in an efficient manner. In response to congressional direction and recommendations from GAO and DOE Inspector General, DOE conducted a long-term strategic review of the SPR in 2016 after its last comprehensive examination in 2005. In its review, DOE did not determine an optimal size for the SPR, and its analysis was limited in several ways. In particular, DOE did not fully consider recent and expected future changes in crude oil and petroleum market conditions such as the implications of projected fluctuations in U.S. net imports or the role that increased levels of private reserves could play in responding to supply disruptions. DOE also did not perform a full cost-benefit analysis of holding different volumes of reserves. Without supplementing its 2016 strategic review by conducting additional analysis, and periodically conducting such analyses going forward, DOE cannot provide information to Congress to inform decisions about the appropriate amounts of crude oil and petroleum products to hold in the SPR and risks holding too much or too little in the SPR to meet the United States’ energy security needs and international obligations. Such information is needed on a timely basis, to reflect the pace of change in oil and petroleum markets and other relevant factors that affect the optimal size of the SPR. Though the SPR has primarily been used in response to domestic supply disruptions, such as hurricanes, the reserve is limited in this role because it is almost entirely composed of crude oil, and not petroleum products. In this regard, the Quadrennial Energy Review of 2015 recommended that DOE analyze the need for additional regional product reserves for U.S. regions that have been identified as vulnerable to fuel supply disruptions. DOE has not identified whether additional regional product reserves should be part of the SPR or completed studies of all vulnerable U.S. regions, and it has no plans to do so, according to DOE officials. Without conducting or completing studies for all the vulnerable U.S. regions and releasing the results, DOE cannot ensure it and Congress have the information they need to make decisions about potential additional regional product reserves. In the face of declining net U.S. imports, Congress has taken repeated steps to reduce the size of the reserve. Given that net imports are projected to continue to decline through the late 2020s and fluctuate in the future, there may be additional congressionally mandated SPR oil sales. This has created long-term uncertainty regarding the future size and configuration of the SPR. Congress could address this uncertainty by identifying a long-term target for the size of the SPR—either by volume or in terms tied to factors, such as consumption or net import protection, that affect the country’s energy security needs and IEA obligations. Setting such a long-term target could better position DOE to ensure the efficiency and efficacy of federal funds spent on the reserve. DOE has recently begun to study the potential effects of congressionally mandated sales on its modernization plans. As part of its SPR post-sale configuration study, DOE plans to determine whether it is appropriate to close SPR facilities, and the relative benefit of any closures would be informed by potential lease revenues from maintaining sites so they could be leased, according to officials. However, we identified other options for handling potentially excess SPR assets that DOE is not planning to examine in its study, inconsistent with the agency’s order on real property asset management. Although DOE does not currently have the authority to implement these options, according to officials, examining their potential use, including possible revenue enhancement, could inform Congress as it examines whether it should grant such authority. Without examining a full range of options in the post-sale configuration study for handling potentially excess SPR assets, DOE risks missing beneficial ways to modernize the SPR while saving taxpayer resources. We are making the following matter for congressional consideration: Congress may wish to consider setting a long-range target for the size and configuration of the SPR that takes into account projections for future oil production, oil consumption, the efficacy of the existing SPR to respond to domestic supply disruptions, and U.S. IEA obligations. (Matter 1) We are making four recommendations to DOE: The Secretary of Energy should supplement the agency’s 2016 long-term strategic review by conducting an additional analysis that takes into account private-sector response, oil market projections, and costs and benefits of a wide range of different SPR sizes. (Recommendation 1) The Secretary of Energy should take actions to ensure that the agency periodically conducts and provides to Congress a strategic review of the SPR that, among other things, takes into account changes in crude oil and petroleum product market conditions and contains additional analysis, such as the costs and benefits of a wide range of different SPR sizes. (Recommendation 2) The Secretary of Energy should conduct or complete studies on the costs and benefits of regional petroleum product reserves for all U.S. regions that have been identified as vulnerable to fuel supply disruptions, and the Secretary should report the results to Congress. (Recommendation 3) The Secretary of Energy, in completing DOE’s ongoing study on the effects of congressionally mandated sales, should consider a full range of options for handling potentially excess assets and, if needed, request congressional authority for the disposition of these assets. (Recommendation 4) We provided a draft of this report to DOE for review and comment. DOE provided written comments, which are reproduced in appendix I. Of the four recommendations, DOE agreed with two, partially agreed with one, and disagreed with one. Regarding our recommendation that DOE supplement its 2016 long- term strategic review with an additional analysis that takes into account private sector response, oil market projections, and costs and benefits of a wide range of different SPR sizes, the agency partially agreed with the recommendation. DOE agreed to conduct an additional analysis to assess the purpose, goals, and objectives of the SPR, taking into account private sector response, oil market projections, and any other relevant factors, that will lead to an evaluation of possible optimal sizes of the SPR in the future. In response to taking into account the costs and benefits of a wide range of different SPR sizes, DOE stated that the agency determined the projected benefits of a wide range of different SPR sizes ranging from 430 million barrels of oil to 695 million barrels of oil in its 2016 review. However, the minimum SPR size considered by DOE is greater than the projected SPR size after congressionally mandated sales have occurred. Further, the SPR size after congressionally mandated sales is projected to be far in excess of the IEA obligation to hold a minimum of 90 days of net imports. DOE must also consider the minimum size needed to meet its IEA obligations in the event of a collective action. In conducting additional analysis, DOE should consider a smaller lower bound, in line with congressionally mandated sales, for the size of the SPR, and more fully consider the size needed to meet the IEA 90-day net import and collective action obligations. Regarding our recommendation that DOE conduct periodic reviews of the SPR, the agency agreed with the recommendation. DOE stated that a 5-year time interval between reviews would strike an appropriate balance between the need to periodically conduct a strategic assessment and evaluation of the SPR and the limitations on resources to plan and conduct such a review. Regarding our recommendation that DOE conduct or complete studies on the costs and benefits of regional petroleum product reserves, the agency disagreed. DOE stated that it is the agency's position that government owned and operated regional petroleum product reserves are an inefficient and expensive solution to respond to regional fuel supply disruptions. DOE further stated, based on studies done in 2015 that DOE officials told us were pre-decisional and therefore could not be reported, that there are additional concerns associated with government-owned and operated regional refined petroleum product reserves, including little to no storage capacity for lease in commercial terminals and high costs for government owned and operated regional product reserves. However, these same studies took these concerns into account, and concluded that a product reserve in the Southeast would provide significant net economic benefits (benefits minus costs) to the region and the United States in the event of a major hurricane. These studies also concluded that additional analyses are required to inform decisions regarding the potential benefits of a similar reserve on the West Coast. Further, the Quadrennial Energy Review of 2015 recommended that similar analyses be completed for other areas deemed by DOE to be vulnerable to fuel supply disruptions. Therefore, we continue to believe that conducting these analyses, as recommended in the Quadrennial Energy Review of 2015, will provide Congress with information needed to make decisions about regional product reserves. Regarding our recommendation that DOE consider a full range of options for handling potentially excess assets, DOE agreed with the recommendation. DOE stated that in its ongoing study, the agency will include an assessment of disposition options for any potential excess or underutilized SPR assets, to include the need for new legislative authority, as necessary, for the disposition of assets. DOE expects this study to be completed in October 2018. DOE also provided technical comments, which we incorporated, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the individual named above, Quindi Franco (Assistant Director), Nkenge Gibson (Analyst-in-Charge), Philip Farah, Ellen Fried, Cindy Gilbert, Greg Marchand, Celia Mendive, Patricia Moye, Camille Pease, Oliver Richard, Dan Royer, Rachel Stoiko, and Marie Suding made key contributions to this report.", "summary": "More than 4 decades ago, Congress authorized the creation of the SPR to reduce the impact of disruptions in supplies of petroleum products. DOE manages the SPR. As a member of the International Energy Agency, the United States is obligated to maintain reserves equivalent to at least 90 days of the previous year's net imports (imports minus exports). The SPR's storage and related infrastructure is aging, and DOE has plans to modernize these facilities. Since 2015, Congress has mandated crude oil sales. As of March 2018, the SPR held about 665 million barrels of crude oil. GAO was asked to examine the SPR's ability to meet U.S. energy security needs. This report examines, among other things, the extent to which (1) DOE has identified the optimal size of the SPR, and (2) DOE's plans for modernizing the SPR take into account the effects of congressionally mandated crude oil sales. GAO reviewed DOE's plans and studies, and interviewed agency officials and nine experts selected based on prior work, referrals, and a literature review. The Department of Energy (DOE) has not identified the optimal size of the Strategic Petroleum Reserve (SPR). In 2016, DOE completed a long-term strategic review of the SPR after its last comprehensive examination conducted in 2005. The 2016 review examined the benefits of several SPR sizes, but it did not identify an optimal size and its review was limited in several ways. In particular, DOE did not fully consider recent and expected future changes in market conditions, such as the implications of falling net imports, or the role that increased levels of private reserves (reserves held by private companies for their own purposes) may play in responding to supply disruptions. These changes have contributed to SPR and private reserves reaching historically high levels on a net imports basis (see figure). These changes are expected to continue to evolve—according to government projections, the United States will become a net exporter in the late 2020s before again becoming a net importer between 2040 and 2050. GAO has found that agencies should reexamine their programs if conditions change. Without addressing the limitations of its 2016 review and periodically performing reexaminations in the future, DOE cannot be assured that the SPR will be sized appropriately into the future. DOE has taken steps to take into account congressionally mandated sales of SPR crude oil in its $1.4 billion modernization plans for SPR's infrastructure and facilities. The SPR is projected to hold 405 million barrels of oil by the end of fiscal year 2027. However, DOE's current plans are based on information analyzed prior to recently mandated sales. According to DOE officials, the agency began a study in March 2018 to assess the effects of these sales on the SPR's modernization. However, this study is not examining all options for handling any excess SPR assets that may be created by currently mandated sales or any additional sales that may be mandated in the future, inconsistent with an agency order on real property asset management that calls for identifying excess assets. For example, DOE does not plan to examine the potential to lease unused SPR storage capacity to the private sector because DOE is not currently authorized to enter into such leases, according to agency officials. If authorized, leasing capacity could generate revenues that could help offset the costs of modernization. By not examining a full range of options, DOE risks missing beneficial ways to modernize the SPR while saving taxpayer resources. GAO is making four recommendations, including that DOE (1) supplement the 2016 review by conducting an additional analysis, (2) ensure that the agency periodically reexamines the size of the SPR, and (3) consider a full range of options for handling potentially excess assets as it conducts its study, among other things. DOE agreed with two, partially agreed with one, and disagreed with another recommendation on refined product reserve studies. GAO maintains that the recommendations are valid.", "document_type": "gao"}
{"report": "BEP produces notes at the request of the Federal Reserve. Each year, the Federal Reserve determines how many currency notes are needed to meet the demand for currency. Federal Reserve and BEP officials then agree on a payment amount for note production, including costs associated with maintaining BEP’s facilities. The Federal Reserve’s payments are deposited into BEP’s revolving fund; the revolving fund is used for BEP’s operational expenses, including note production. According to Treasury officials, the revolving fund can pay for renovations and retrofitting of a production facility, but not for land purchase or new building construction. In 2016, the Federal Reserve paid around $660 million for note production. In order to cover all expenses associated with the Federal Reserve’s needs, including currency production, the Federal Reserve generates income primarily from the interest on their holdings of U.S. government securities, agency mortgage-backed securities, and agency debt acquired through open market operations. The Federal Reserve is required to transfer any surplus funds over $7.5 billion to the General Fund of the U.S. Treasury. Increases or decreases in operating costs or BEP’s currency production could affect these surpluses and subsequent transfers to the General Fund. Historically, the Federal Reserve has had significant surpluses. In 2016, the Federal Reserve transferred $92 billion to the General Fund. BEP’s Washington, D.C., facility consists of a 104-year old, multi-story, multi-wing Main Building and an 80-year old multi-story, multi-wing Annex Building (see fig. 1). The Main Building is the primary production building, and the Annex Building is used primarily for administrative functions. Both buildings qualify for historic designation and thus any alterations would be subject to certain requirements under the National Historic Preservation Act of 1966, as amended. In addition to these buildings, BEP leases a warehouse in Landover, Maryland, to store production supplies in part because the two Washington, D.C., buildings do not have the necessary infrastructure to accommodate shipments carried by large commercial trucks. BEP’s Fort Worth facility was built in order to ensure reliable currency production in the event of any disruption of operations at the D.C. facility. BEP was able to obtain donated land and a building in Fort Worth and therefore did not need to purchase land or construct a new facility. Specifically, in 1986, BEP accepted a proposal from the City of Fort Worth that included 100 acres of donated land and a donated building shell to be built to BEP’s specifications. BEP then used its revolving fund to pay for the building’s interior retrofitting, including a central energy plant and installation of currency presses. The Fort Worth facility began producing notes in December 1990 and was intended to produce around 25 percent of U.S. notes. According to BEP officials, as a result of increased demand for U.S. notes and production limitations associated with the D.C. facility, the Fort Worth facility has produced an increasingly large share of notes. In fiscal year 2016 the Fort Worth facility produced nearly 60 percent of notes, while the D.C. facility produced the remaining 40 percent. From 2010 through 2017, BEP contracted for various studies to investigate alternatives, costs, potential sites, and program requirements to ensure future currency production in the D.C. area (see table 1 for details of the studies). In BEP’s 2013 study and since then, the agency has focused on three alternatives: “Renovation”—a major renovation of the current facility “New build”—a new building in a different location that would house currency production and all administrative functions “Hybrid”—a new building in a different location that would house currency production, but having administrative functions in one of its current buildings According to BEP officials, the cost estimates in the 2013 study were an important factor in their preference for a new facility instead of a renovation. The 2013 study concluded that BEP should pursue the new build alternative because it was estimated to be the least costly option, could be completed in the shortest time frame, and promised the greatest efficiencies. The study found that the renovation alternative would be the most costly option and take the longest time to complete because it would require BEP to produce currency at its current location while it was being renovated. BEP officials told us this would require moving production equipment from the Main Building to the Annex during the renovation and back to the Main Building once it was renovated. According to GSA officials, renovations are often more costly than new construction. According to Federal Reserve officials, moving large, complex printing presses and machines from one building to another and then back again significantly expands the renovation’s timeframe, as time would be needed to test the machines to get them back into specification. The Federal Reserve further noted that some modern presses will not fit into the Main Building without significant structural alterations, which would add cost and time to a renovation. Following the release of the 2013 study, BEP proposed to the Secretary of Treasury, with the support of Treasury officials, that Treasury and BEP pursue the hybrid alternative as their first choice (see table 2 for details on BEP’s proposal). BEP officials told us that they, along with Treasury, selected the hybrid alternative even though the hybrid was more expensive than the new build alternative. According to BEP officials, the cost difference between the hybrid and new build was outweighed by the value of maintaining administrative functions in Washington, D.C., to facilitate the day-to-day decision-making process among BEP, Treasury, and Federal Reserve officials. According to Treasury officials, the ability for other Treasury employees to co-locate in the Main Building after the repurposing is completed would also provide long-term cost benefits to Treasury because Treasury could save on expensive lease agreements in downtown Washington, D.C. Further, Treasury officials noted that it is important that the Treasury Department maintain the Main Building as an asset because of its location and history, and Treasury officials prefer that BEP maintain some functions in the building. The 2017 study provided cost estimates of BEP’s and Treasury’s preferred hybrid option, as well as the renovation option that BEP officials said they would pursue if BEP does not receive the necessary legal authority to construct a new facility. The study estimated that the hybrid option would cost approximately $1.389 billion and that the renovation option would cost approximately $1.957 billion. Federal Reserve officials told us they concur with the 2013 study that a new facility is warranted, that a renovation of the existing facility would be more costly than a new facility, and a renovation would not provide the same degree of efficiency. Federal Reserve officials said that they prefer the new build alternative because the 2013 study identified this alternative as the least expensive option, and would provide a modern, efficient manufacturing process. These officials also told us that, whatever alternative BEP pursues, the Federal Reserve will be financially responsible —whether it is for a new building, a renovated building, or the continuation of the currency production process in the D.C. facility. BEP officials stated that they support a new building over a renovation because the new build would both be less expensive and have greater benefits than a renovation. Furthermore, BEP officials told us that while they prefer to remain in the D.C. area, they would approve of the construction of a new facility in a different location if necessary. However, BEP officials also told us that if BEP does not get the legal authority necessary to use its revolving fund to purchase land and build a new facility in 2018, BEP will pursue a renovation of the existing D.C. facility beginning at the end of 2018. As a federal facility, BEP must meet physical security standards established by the Interagency Security Committee (ISC). According to an assessment conducted by BEP’s Office of Security, the D.C. facility does not meet many of the necessary requirements for a facility of its security level. While certain security improvements, such as blast resistant windows or vehicle barriers, could be installed if the facility is renovated, other standards could only be addressed with a new facility. Specifically, the current buildings are located in an urban center surrounded by buildings (see fig. 1 above). As a result, according to the assessment, the facility does not have a secure perimeter because it lacks the required setback between the building and any point where an unscreened vehicle can travel or park. BEP officials said that even after a renovation, the facility would continue to have inadequate setback distance. According to the assessment, the facility’s designation as a historic building also limits BEP’s ability to make changes to the current facility to meet the necessary level of protection. For example, the facility’s placement on the historic registry limits BEP’s ability to make certain structural changes that could mitigate the building’s chances of progressively collapsing in the event of certain types of destructive attacks or actions. BEP’s Office of Security attributed certain security deficiencies to the facility’s limited setback distance and the buildings’ structure, and determined that the D.C. facility is at relatively high risk to threats such as an externally-placed portable explosive device. BEP aims to provide quality banknotes in an efficient, cost effective manner. However, BEP officials concluded that the layout of the D.C. facility makes production less efficient than the Fort Worth facility. According to BEP production data, from 2013 to 2016, manufacturing costs were higher at the D.C. facility for all comparable denominations. For example, in 2016, production costs of $1 and $20 notes were 23 percent and 7 percent higher, respectively, at the D.C. facility compared to the Fort Worth facility. Additionally, the D.C. facility employs more manufacturing personnel than Fort Worth, even though it produces fewer notes (see table 3). BEP officials attributed the difference in the costs to the D.C. facility’s multi-floor, multi-wing production layout. Specifically, in D.C., after notes are printed on one side, they are moved to another floor to dry for at least 72 hours, brought back to the original floor to be printed on the opposite side, and again moved to the other floor to dry. In Fort Worth, because the production occurs in one large room on one floor, these processes occur in adjacent spaces on the same floor. As a result, according to BEP, notes travel more than twice as far during production in the D.C. facility. According to BEP, Treasury, and Federal Reserve officials, a new production facility would offer greater efficiency gains than a renovated facility. According to BEP officials, maintaining production on one floor in an open space improves production efficiency. They added that a renovation of the D.C. facility could include tearing down some walls and raising ceilings, steps that could improve some production processes. However, they also noted that because the D.C. facility qualifies for a historic designation, according to BEP officials, a renovation could not alter the building’s shape. As a result, production would still occur on multiple levels and in separate wings if the facility were renovated. We have reported in the past that agencies faced challenges in rehabilitating and modernizing historic buildings for contemporary use because of their age, specific design characteristics, and their particular historical features. According to its Strategic Plan, BEP is committed to providing a safe and positive work environment for its employees. However, BEP officials said that manufacturing employees at the D.C. facility face greater injury risk than at the Fort Worth facility. According to BEP workers’ compensation claim data, approved workers’ compensation claims at the D.C. facility accounted for approximately 67 percent of BEP’s approved claims from fiscal year 2013 through fiscal year 2016, or 200 of 297 approved claims. BEP officials attributed the higher number of workers’ compensation claims in the D.C. facility to the relatively high number of employees needed to produce fewer notes (see table 3) and the increased opportunity for employee injury because production material must be transported farther and between floors. BEP officials estimated that approximately 65 to 70 percent of all worker injuries are related to materials handling. BEP officials noted that there is an estimated $196-million deferred- maintenance backlog at the D.C. facility. This backlog includes maintenance to the facility’s electrical and architectural systems. Even if BEP had taken care of these maintenance issues in the past, it would not negate the need for a renovation or a new facility. BEP officials noted that a renovation would reduce some safety concerns, such as upgrading the facility’s electrical systems and adding more fire-rated exits as required by Occupational Safety and Health Administration regulations; however, a renovation would not be able to address the multi-floor production process that BEP officials attributed to employee injuries. According to BEP officials, it is important for BEP to maintain flexible currency production to respond to production needs that may change over time. Specifically, BEP officials said that a production facility should have the ability to adapt to changes in production equipment. Both BEP and Federal Reserve officials told us that the new equipment likely will be larger than current machinery. According to a representative from a leading currency printing equipment manufacturer from which BEP buys its printing equipment, future equipment is unlikely to decrease in size. BEP officials said that, while the D.C. facility could be renovated to accommodate larger equipment, it would not be possible to replicate the large, open production floor of the Fort Worth facility, which allows for simple installation of equipment. BEP officials told us that, unlike the current D.C. facility, a new production facility would be able to easily accommodate the printing equipment necessary for security features that BEP is currently developing for the next currency redesign. Flexibility is also an important factor when considering the future demand for currency. The demand for currency fluctuates, and recent changes in how the public makes purchases could affect the demand for currency. Some observers have noted that the increased use of new payment technologies—such as online banking and phone applications—as well as the rise in online purchases may lead to a substantially reduced demand for currency. In a few countries, such as Sweden, noncash transactions have become common and the demand for currency has fallen substantially. In the United States, there are several indications that currency demand will not substantially decline within the next decade. For example, the yearly number of U.S. currency notes in circulation increased by 43 percent from 2008 to 2016. In addition, the number of ATMs in the United States continues to grow, and a 2016 Federal Reserve study of consumer payment choice found that cash still accounted for 32 percent of all transactions, and more than 50 percent of transactions under $25. This continued strength in the demand of cash has several sources. Cash can be seen as a hedge against uncertainties, such as natural disasters or political or economic turmoil, and also has advantages related to privacy, anonymity, and personal data security. Moreover, according to the Federal Deposit Insurance Corporation, approximately 25 percent of U.S. households have limited access to the products and services of the banking industry, and therefore, these “unbanked” and “underbanked” populations, who may not have many alternative means of payment, rely largely on cash. Federal Reserve and Treasury officials we spoke with do not believe that the use of cash in the U.S. will decline in any significant way over the next decade. In particular, the Federal Reserve predicts a continued rise in demand for cash over the next 10 years, despite the increased availability of noncash payment options, indicating that a new or renovated facility will still be required for currency production. According to BEP officials, a new production facility would better manage the ebbs and flows in the future demand for currency than a renovation of the current facility. Specifically, should production demand increase, a new production facility could be designed to easily scale to meet new production requirements. Conversely, should the demand for currency decline in the coming years or substantially decline in the future, unused space in a new facility could be partitioned off and be used for other purposes or by another Treasury agency. Capital investments in infrastructure can require significant resources to construct, operate, and maintain over the course of their life-cycle. Leading capital-planning practices can help agencies determine the resources needed to meet their mission, goals, and objectives and how to efficiently and effectively satisfy those needs throughout the capital decision-making process. As shown in table 4, we found that BEP’s capital investment decision-making process that resulted in its decision to pursue a new currency-production facility (as part of the previously described hybrid option) followed three applicable capital-planning leading practices and substantially followed the fourth. Needs assessment: BEP followed this leading practice, which calls for comprehensively assessing the resources needed as a basis for investment decisions. BEP conducted a facility condition assessment in 2004 that contributed to BEP’s effort to seek a new production facility, resulting in the studies from 2010-2017 discussed above. The assessment identified the current condition of the facility and the facility’s capabilities, including production inefficiencies that led BEP to begin a multi-year effort to determine its immediate and future infrastructure needs. BEP also determined in 2004 that the agency had almost $200 million in deferred maintenance needs. BEP officials told us that they consulted with Federal Reserve officials and concluded that it would not be prudent to spend substantial funds to address this deferred maintenance. For example, officials determined that it would not be prudent to replace the heating and plumbing systems while pursuing a new production facility. As a result, BEP deferred some maintenance items, such as replacing heating systems, which would not compromise safety and production. However, BEP officials said that they prioritized and maintained critical items, such as its cleaning and recycling systems, and implemented energy conservation initiatives to help reduce costs. As of October 2017, BEP’s deferred maintenance backlog was about $196 million. Alternatives evaluation: BEP substantially followed this leading practice, which calls for a determination of how best to bridge performance gaps by identifying and evaluating alternative approaches. As noted above, BEP first considered multiple alternatives on how to achieve its mission to efficiently produce banknotes. Further, BEP considered different methods to fund and obtain land and a shell for a new production facility (see table 5). To evaluate alternatives for the location of a new facility, a contractor identified, in 2015, potential construction sites in the D.C. area and compared each site to a set of criteria. However, BEP officials told us that they discounted locations outside the metropolitan D.C. area because they believed it would be costly to relocate employees or hire and train new manufacturing personnel to replace employees who do not relocate. BEP officials said that the few employees who relocated from the D.C. facility to the Fort Worth facility when it first opened were paid $50,000 each for their move. Based on these factors, BEP focused on a D.C-area location and did not conduct an analysis of the financial implications of building a new facility outside the D.C. area, where construction or other costs could be less expensive. Strategic linkage: BEP followed this leading practice, which stresses the importance of linking plans for capital asset investments both to an organization’s overall mission and to its strategic goals. In the 2014-2018 Strategic Plan, BEP noted that it would seek approval to proceed with the 2013 study’s recommendation to construct a new production facility. According to the strategic plan, a new production facility would help achieve BEP’s long-articulated strategic goal of being a printer of world- class currency notes, providing its customers and the public with superior products through excellence in manufacturing and technological innovation. Furthermore, Treasury concurred with BEP’s assessment and added its request for legal authority to purchase land and build a new facility in the fiscal year 2018 President’s Budget proposal. Long-term capital plan: BEP followed this leading practice, which calls for a capital plan that documents an agency’s decisions and describes its mission, planning process, and risk management, among other things. BEP completed all of the key activities associated with this practice. For example, in its fiscal year 2018 capital investment plan, BEP lays out the purpose, goals, and benefits of a new currency production facility. It also notes the implications of exposing currency production to vulnerabilities relating to potential facility systems failures and inefficiencies. A reliable cost estimate—a summation of individual cost elements—is critical to support the capital planning process by providing the basis for informed investment decision-making, realistic budget formulation and program resourcing, and accountability for results. BEP’s 2017 cost estimate includes a contractor-developed estimate of the cost for the construction of a new production plant and the repurposing of the Main Building for BEP’s administrative offices (the hybrid alternative) and a BEP-developed estimate of additional project costs, such as additional production equipment and real estate acquisition. We found this estimate partially met the four characteristics of a high-quality, reliable cost estimate (see table 6). In developing this estimate, BEP relied on GSA guidance that was available at the time. That guidance did not refer to leading practices for cost estimates that are identified in GAO’s Cost Guide. GSA has recently updated its guidance to refer to the leading practices in GAO’s Cost Guide, and BEP officials told us that they will follow this updated GSA guidance when developing any future cost estimates. Comprehensive: BEP’s 2017 cost estimate substantially met the comprehensive characteristic. For example, the estimate included most life-cycle cost components, defined the program and its current schedule and included a consistent work breakdown structure. However, the estimate did not include operating and sustainment costs or information regarding the ground rules and assumptions used to develop the costs. Well documented: BEP’s 2017 cost estimate partially met the well- documented characteristic. For example, the estimate documented the source data and the technical assumptions used for the construction costs, which were reviewed by GSA and BEP personnel. However, documentation for the contractor’s estimate and its sources for the factors used in the estimate did not include details to enable an outside cost analyst to replicate the work. According to BEP officials, the cost data are the contractor’s proprietary data. BEP officials also told us that sources for the factors used were based on subject matter expert opinion. Accurate: BEP’s cost estimate partially met the accurate characteristic. While we found minor rounding errors and no errors in the model build-up calculations and did not find any calculation or adjustment errors in the estimate, the estimate nonetheless did not provide information regarding the bias of the costs and the appropriateness of the estimating technique used. However, BEP did follow industry standards to develop contingency costs for a pre-design estimate for a program that has not yet been authorized. We also found that $515 million of the internal estimate (37 percent of the program’s total cost estimate) was based on undocumented subject matter opinion or escalated incorrectly from the 2013 study estimate. Further, BEP’s estimate did not use the same construction year mid-point as its contractor for the inflation assumptions. According to BEP officials, that lack is because BEP’s costs were projected based upon the contractor’s estimate of fiscal year 2022, while the production equipment was escalated to fiscal year 2021 because this is the projected year for purchasing equipment. The officials also acknowledged that this rationale, however, was not documented in the cost estimate. BEP clarified that the estimates did not explicitly state a confidence level because the estimate is in the pre-planning stage. They added that it is common in the design and construction industry that contingencies are applied to the estimate based on the completeness of design, and as the design progresses, these contingencies are reduced as more becomes known about the project. As there have not been actual costs yet, variances between planned and actual costs have not been documented, explained, and reviewed. Credible: BEP’s 2017 cost estimate partially met the credible characteristic. For example, BEP provided documentation showing that both BEP and GSA reviewed the contractor’s construction estimate and its technical assumptions. However, the estimate did not include a sensitivity analysis for the construction costs, a risk and uncertainty analysis, or cross-checks to see whether similar results could be obtained. A cross-check could include an independent cost estimate conducted by an outside group to determine whether other estimating methods would produce similar results, but BEP officials told us that no independent cost estimate was developed because this was too early in the project to do such a comparison and that the construction estimate was developed in response to a government contract statement of work to prepare a preliminary budget forecast for BEP. Rather, BEP relied on what it characterized as an extensive review by BEP management and GSA officials. The alternative that BEP pursues could have a financial effect on the federal government and ultimately taxpayers. Below, we discuss potential costs and potential savings associated with the disposition of the three buildings under the different scenarios based on our review of BEP documents and interviews with Treasury and GSA officials (see fig. 2). For example, Treasury, which has custody and control over the Main Building and the Annex, could experience costs if it needs to spend money to upgrade these buildings, but could also experience savings if it can repurpose the buildings or consolidate its employees into fewer buildings. GSA, which serves as the federal government’s primary real property and disposal agent, could incur costs for the marketing and disposal process, but could create savings for the government if it could repurpose or sell any vacated buildings. Proceeds from sales of Treasury- controlled facilities would benefit the federal government. While it is possible to identify some potential costs and benefits, it is too early to determine which costs or benefits may be realized or to attempt to quantify them. GSA and Treasury officials told us that the actions of other agencies or interested third parties (e.g., those potentially interested in purchasing the Annex) would affect the costs and cost-savings of any alternative. In addition, there are factors outside of the government’s control, such as timing and market conditions, that could affect costs and cost-savings. For example, changes in the Washington, D.C., real estate market could affect the opportunity to sell the Annex. Based on interviews with officials at GSA, Treasury, the Federal Reserve, and BEP, we have identified the following potential costs and savings for each building. Potential costs and savings associated with the Main Building: Both BEP and Treasury officials told us that the Main Building will remain under Treasury’s custody and control, regardless of which alternative BEP undertakes. Renovation: BEP would use its revolving fund to replace existing heating/cooling systems and windows in the Main Building with higher efficiency ones. Ideally, there would be some long-term cost savings because the new systems would be less costly to operate. However, BEP officials told us that a renovation may be more expensive than currently estimated because the Main Building is over 100 years old and there could be unforeseen expenses depending on what is found once walls and ceilings are removed. New build: Treasury would likely pay to renovate the Main Building once BEP vacates it because the Main building would remain under Treasury’s custody and control. The cost of this renovation could be partially offset by savings associated with co-locating other Treasury offices in the Main Building after the renovation is complete. For example, Treasury bureaus currently have 15 leased facilities with about 1.9-million square feet in the downtown D.C. area. The annual cost of these facilities is $91.7 million. While, not all of the employees currently in leased space could move into a renovated Main Building, the Main Building’s 530,000 square feet could provide opportunities to reduce leasing costs. However, because these potential renovations and staff moves are not likely to occur for several years, Treasury officials told us that they are not able to determine either the costs or benefits of moving Treasury staff to the Main Building. Hybrid: BEP’s revolving fund would pay for the renovation of one- third of the Main Building that would serve as BEP’s administrative office and a future visitors’ center. This step would leave the remaining two-thirds to be renovated to a “warm lit shell” to allow others to occupy the building. At this time, Treasury does not know what entity or account would pay for the renovation of the remaining two-thirds because, according to Treasury officials, they have not determined what the use of the balance of the Main Building would be, including what entity would fund any modifications needed for new occupants. If Treasury decided to use the Main Building for its own staff, then Treasury could fund the cost to convert to offices for other Treasury agencies. Under this scenario, there is both a cost to Treasury to renovate the space it plans to use as well as a savings in having Treasury staff vacate other leased space and move to a Treasury-controlled building. Potential costs and savings associated with Treasury’s Annex: The Annex could either remain for BEP’s administrative offices or could be declared excess and transferred to GSA for disposal. Renovation: BEP’s revolving fund would cover the cost of renovating the entire Annex as a “warm lit shell” and a more extensive renovation of the portion of the Annex that BEP would use first as temporary space for its currency printing equipment and then permanently for its administrative office. According to BEP officials, the Annex would be renovated to accommodate currency-printing lines that would be relocated from the Main Building in order for the Main Building to be renovated. Once the Main Building is renovated, the Annex would then be renovated to become administrative space for BEP. This process could be quite costly and take more time as the Annex would be renovated twice for different purposes. However, if the unused part of the Annex could be used by Treasury for other Treasury offices, there could be some cost savings to Treasury. According to BEP officials, while BEP would use its revolving fund to renovate the Annex to a “warm lit shell,” the agency that ultimately occupies the unused space would be responsible for the costs associated with repurposing that space for its own purposes. New build and Hybrid: BEP’s revolving fund would pay for any necessary environmental clean-up needed in order for the Annex to be declared as excess and transferred to GSA for disposal. GSA, as part of its mission, would incur costs such as marketing, conducting the disposition process, and concluding the property transfer. GSA’s disposal process can result in the building being transferred for use by another Federal agency, being sold to a local or state government via a negotiated sale, being conveyed to a public entity or eligible non- profit for public uses (e.g. homeless use), or being sold to a private party via a public sale. As the Annex is centrally located in Washington, D.C., the building could be attractive to potential developers. GSA recently sold another federal building near the Annex for over $30 million. GSA officials believe that there would be significant market interest in the Annex due to the Annex’s location and recent private development in the area. Treasury and GSA officials stated that proceeds from the sale of the Annex would be deposited into the Land and Water Conservation Fund to benefit the federal government. On the other hand, there is no guarantee that GSA would be able to sell the Annex: our previous work found that the most frequent method of disposal for federal buildings from fiscal years 2011 through 2015 was demolition (57 percent) rather than sale (14 percent). Federal buildings identified for disposal may not be suitable for sale for reasons such as their age, location, and condition, factors that often make demolition the preferred disposal method. The unique configuration of the Annex with its five wings, its age and condition, and historic-designation eligibility could deter some potential buyers. The future demand for the building, interest from private-sector buyers, and the general economic and real estate market are uncertain and can change quickly. If the Annex is not sold and remains on the government’s real property inventory, generally BEP or Treasury would be responsible for any annual maintenance costs for the building. Alternatively, the unsold Annex could be donated to a state or local government that would then be responsible for maintenance costs. Potential costs and savings associated with the leased warehouse: The warehouse is a GSA-leased property. Renovation: BEP would continue its annual leasing of the warehouse, which would still be needed to accommodate large trucks that cannot access the D.C. facility. The current lease costs approximately $3.4 million each year, and BEP recovers about $500,000 per year of these costs by permitting other Treasury components to use the building through interagency agreements. New build and Hybrid: If BEP discontinued its lease after a new facility is completed, it would save approximately $2.9 million per year. If BEP ended its lease prior to the end of the lease term, GSA would need to find another entity to occupy the warehouse for the remainder of the lease term. We provided copies of the draft report to the BEP, GSA, the Federal Reserve, and Treasury for review and comment. BEP coordinated with Treasury in providing comments. In these comments, reproduced in Appendix I, BEP emphasized the factors that led BEP to determine that a new facility is the preferred alternative for its currency production process and acknowledged our findings on those factors. BEP and the Federal Reserve also provided technical comments, which we incorporated as appropriate. GSA did not provide comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Director of the Bureau of Engraving and Printing, the Secretary of the Treasury, the Chair of the Federal Reserve Board, and the Administrator of the General Services Administration. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or RectanusL@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the individual named above, John W. Shumann (Assistant Director); Martha Chow (Analyst in Charge); Amy Abramowitz; Lacey Coppage; Delwen Jones; Jennifer Leotta; Josh Ormond; and Tomas Wind made key contributions to this report.", "summary": "BEP, within Treasury, designs and produces U.S. currency notes at BEP's facilities in Washington, D.C., and Fort Worth, Texas. The Federal Reserve pays for BEP's operational expenses, including currency production. BEP is requesting legal authority to purchase land and construct a new production facility in the D.C. area. BEP officials told GAO that, if it does not receive the necessary legal authority for a new production facility, it will renovate the D.C. facility. GAO was asked to review BEP's facility planning process. This report: (1) describes the results of facility studies that BEP has funded and factors that led BEP to propose a new production facility, (2) examines the extent to which BEP's actions align with leading capital planning and cost estimating practices, and (3) describes other factors that could affect total federal costs of BEP's actions. GAO analyzed BEP documents and data from 2010-2017 on currency note production, visited both BEP production facilities, assessed BEP's actions against leading capital planning and cost estimating practices, and interviewed officials from BEP, GSA, the Federal Reserve, and Treasury. GAO provided the draft report to BEP, GSA, the Federal Reserve, and Treasury for review. BEP coordinated with Treasury in its comments. In the comments, reproduced in Appendix I, BEP emphasized the factors that led BEP to determine that a new facility is the preferred alternative. BEP and the Federal Reserve also provided technical comments, which we incorporated as appropriate. GSA did not provide comments. The Bureau of Engraving and Printing's (BEP) studies and research determined that a new production facility would be less expensive and better address BEP's need for secure, efficient, and flexible currency production than a renovation of its Washington, D.C. facility. According to 2017 cost estimates, BEP's preferred option—a new production facility in the Washington, D.C., area and some renovated administrative space in its current D.C. facility—would cost approximately $1.4 billion, while a renovation of its current facility for both production and administrative functions would cost approximately $2.0 billion. A new facility similar to BEP's Texas facility could have a secure perimeter that meets federal building security standards. Such a perimeter is not possible with the current facility. A new facility could also house production on a single production floor to allow for a more efficient production process. BEP generally followed leading capital-planning practices, and its 2017 cost estimate of a new production facility partially met the characteristics of a reliable cost estimate. BEP's capital planning followed leading practices, for example, by including a needs assessment, a link to BEP's strategic plan, and a long-term capital plan. BEP's cost estimate partially followed leading practices, for example, by including most life-cycle cost components and documentation of the data used for the estimate. However, it did not include sufficient sensitivity analyses, which identify a range of costs-based on varying assumptions. BEP officials stated that they plan to follow the updated GSA guidance that includes GAO's cost-estimating leading practices when updating this early stage estimate. The ability to sell or repurpose any part of the current D.C. facility could affect the total federal costs of BEP's actions. According to officials from the Department of the Treasury (Treasury) and the General Services Administration (GSA), there could be savings if Treasury could consolidate staff or operations into the vacated facility. There could also be savings if the unneeded facility could be sold to a private buyer. However there would be costs to prepare the facility for use by other entities or if the unneeded facility does not sell. Agency officials said that it is too early to determine specific costs and savings.", "document_type": "gao"}
{"report": "Information security is a critical consideration for any organization that depends on information systems and computer networks to carry out its mission or business, and is especially important for government agencies, where maintaining the public’s trust is essential. Concerns about cyber threats to government systems and networks are well-founded, due to the dramatic increase in reports of security incidents, the ease of obtaining and using hacking tools, and advances in the sophistication and effectiveness of cyberattack technology, among other reasons. Without proper safeguards, systems are vulnerable to individuals and groups with malicious intent who can intrude and use their access to obtain or manipulate sensitive information, commit fraud, disrupt operations, or launch attacks against other computer systems and networks. We and federal inspectors general have reported extensively on information security deficiencies that place federal agencies at risk of disruption, fraud, or inappropriate disclosure of sensitive information. Accordingly, since 1997, we have designated federal information security as a government-wide high-risk area. This area was expanded to include the protection of critical cyber infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015. The Federal Information Security Modernization Act of 2014 (FISMA) is intended to provide a comprehensive framework for ensuring the effectiveness of security controls over information resources that support federal operations and assets as well as the effective oversight of information security risks. FISMA assigns responsibility to the head of each agency to provide information security protections commensurate with the risk and magnitude of the harm resulting from unauthorized access, use, disclosure, disruption, modification, or destruction of information systems used or operated by an agency or on behalf of an agency. The law also delegates to the agency’s Chief Information Officer (or comparable official) the authority to ensure compliance with FISMA requirements. FISMA requires each agency to develop, document, and implement an agency-wide information security program to provide risk-based protections for the information and information systems that support the operations and assets of the agency, including those provided or managed by another entity. Such a program includes assessing risk; developing and implementing cost-effective security plans, policies, and procedures; developing plans for providing adequate information security for networks, facilities, and systems; providing security awareness and specialized training; testing and evaluating the effectiveness of controls; planning, implementing, evaluating, and documenting remedial actions to address information security deficiencies; developing and implementing procedures for detecting, reporting, and responding to security incidents; and ensuring continuity of operations. In addition, FISMA requires agencies to comply with NIST standards. In accordance with FISMA, the Office of Management and Budget (OMB) is responsible for the oversight of agencies’ information security policies and practices. OMB establishes requirements for federal information security programs and assigns agency responsibilities to fulfill the requirements of statutes such as FISMA. OMB requires agencies to oversee the implementation of security and privacy controls by contractors that collect, use, process, store, maintain, and disseminate federal information on behalf of a federal agency. For specific technical direction, OMB requires agencies to implement standards and guidelines established by NIST. NIST has issued a suite of information security standards and guidelines, including Recommended Security Controls for Federal Information Systems and Organizations and the Framework for Improving Critical Infrastructure Cybersecurity. These documents collectively provide comprehensive guidance on developing and implementing information security programs to agencies and entities that perform work on their behalf. The framework serves as a baseline for protecting critical information assets. In response to Executive Order 13636, NIST issued the framework in February 2014. It is intended to help organizations apply the principles and best practices of risk management to improve the security and resilience of critical infrastructure. The framework outlines a risk- based approach to managing cybersecurity that is composed of three major parts: a framework core, profile, and implementation tiers. The framework core includes a list of functions, categories, subcategories, and informative references that describe specific cybersecurity activities identified as being in common across all critical infrastructure sectors. Additionally, the framework contains implementation tiers that provide context on how an organization views cybersecurity risk and the processes in place to manage that risk. Further, the framework provides guidance on documenting individual organizational profiles that describe how the functions, categories, and subcategories align with the business requirements, risk tolerance, and resources of the organization. According to NIST, the framework core represents a common set of activities for managing cybersecurity risk. The framework also states that, while it is not exhaustive, it is extensible, allowing organizations, sectors, and other entities to use subcategories and informative references that are cost-effective and efficient and that enable them to manage their cybersecurity risk. Table 1 lists the five functions and 22 categories of the framework core. Subsequent to the issuance of the Cybersecurity Framework, a May 2017 executive order required agencies to use the framework to manage cybersecurity risks. It outlined actions to enhance cybersecurity across federal agencies and critical infrastructure to improve the nation’s cyber posture and capabilities against cybersecurity threats to digital and physical security. In addition, the order directed agencies to develop plans to implement the framework within 90 days. The order required agencies to include in their plans: the status of planning, organizing, and submitting IT budget materials, as directed in the Fiscal Year 2018 IT Budget Capital Planning Guidance, that are aligned with the framework, the proposed internal management of cybersecurity risk using the updated metrics aligned to the framework, a timeline to map existing and planned capabilities with the framework the proposed use of the terminology and concepts in the framework to organize and communicate cybersecurity activities and outcomes. CMS shares Medicare beneficiary data with three major types of external entities: (1) Medicare Administrative Contractors (MACs), the contractors that provide the core processing and distribution functions that support the payment of Medicare Part A, Part B, and Durable Medical Equipment (DME) beneficiary claims on behalf of CMS, (2) research organizations (researchers), academic and non-profit entities that use Medicare beneficiary data to assist CMS in monitoring, managing, and improving Medicare programs or the services provided to beneficiaries, and (3) qualified public or private entities that use claims data on behalf of CMS to evaluate the performance of Medicare service providers and equipment suppliers. MACs process more than 1.2 billion claims for Medicare Fee-for-Service beneficiaries annually. To do so, they interact with more than 1.5 million health care providers enrolled in the Medicare Fee-for-Service program. In addition to claims processing, some of the specific functions that the MACs perform include customer service for beneficiaries and providers, financial and debt management, audit and appeals functions, and medical reviews. Each MAC contract covers a specific geographic area and a specific type of processing—either (1) Medicare Parts A and B claims or (2) DME claims for beneficiaries. Some MACs may hold multiple contracts and, thus, process multiple types of claims. In total, a network of eight MACs covers 16 multi-state jurisdictions, serving as the primary operational connection between the Medicare Fee-for-Service program and health care providers enrolled in the program. The geographic jurisdictions of the MACs that support Parts A and B and DME beneficiary claims are shown in figures 1 and 2, respectively. In order to collect, store, and process information needed to process claims and make benefits payments on behalf of CMS, MACs connect directly to CMS systems. Specifically, MACs connect to CMS’s Virtual Data Centers (VDCs) through its CMSNet telecommunications network. MACs process Medicare Fee-for-Service claims, which include beneficiaries’ PII and protected health information, through the VDCs. The VDCs consists of two large datacenters that are operated and managed by CMS that collectively serve as a platform for Medicare claims processing software systems. MACs use a combination of four CMS systems that operate within the VDCs to process claims. These systems and their functions are described in table 2. Health care providers submit Medicare fee-for-service claims to the MACs. The claims are reviewed to check if the claim is in a valid format, if the requestor is valid, and whether it is a duplicate. In addition, MACs process claims in the Fiscal Intermediary Shared Systems, Multi-Carrier System, VIPS Medicare System, and Common Working File. Processing includes adjudicating claims, checking whether the services are covered by Medicare, and determining the price that should be paid to the provider for the service. The links between external entities and CMS systems can take several different paths. Figure 3 shows how these entities are connected to CMS systems in order to obtain and use Medicare beneficiary data. Researchers use Medicare beneficiary data to study how healthcare services are provided to beneficiaries. Examples of research entities include universities and colleges, non-profit research institutes, and policy research organizations. CMS offers researchers a broad range of data on the Medicare program to support research on current and future spending, past and present enrollment, and claims, which can benefit the public through improved delivery of healthcare services. Research performed using this data may also assist CMS in monitoring, managing, and improving Medicare programs and services to beneficiaries. To obtain Medicare data from CMS, researchers must apply for access to a specific dataset, such as the Carrier file which includes claims for services provided by physicians and other non-institutional providers. In the application, the researcher provides information explaining how the data are to be used and stored, and CMS reviews and approves (or denies) the application. The researcher then enters a data use agreement with CMS for access to specific sets of Medicare beneficiary data, which are to be used only for stated research objectives. The data use agreement specifies which beneficiary data can be accessed, for what purpose, the duration of access, and data protection and confidentiality requirements. Unless the agreement authorizes the release of the data in accordance with CMS policy, it is not to be released by the researcher. As of October 2017, 195 research entities had received Medicare data. Researchers access Medicare beneficiary data in one of two ways. To gain access from their computers, they connect to CMS’s Chronic Conditions Warehouse/Virtual Research Data Center (CCW/VRDC) through a CMS-provided secure network connection. Within the CCW/VRDC, researchers are given access to an individually tailored computing environment containing only copies of the specific sets of beneficiary data they have been authorized to use. Researchers can then conduct their analysis on the data using software tools provided by CMS within this secure environment. Researchers can also access data by having it shipped to them in encrypted form through the U.S. mail. Once it has been received, researchers decrypt the data and load it into their own information systems for analysis. The data use agreements specify requirements for protecting beneficiary data obtained in this fashion. Qualified entities use CMS claims data to assess the effectiveness of Medicare service providers and equipment suppliers. The Medicare Data Sharing for Performance Measurement Program, originally established to comply with the Patient Protection and Affordable Care Act, requires qualified entities to combine the Medicare data with claims data from sources other than Medicare to produce and publicly disseminate CMS- approved reports on provider and supplier performance with regard to measures of quality, efficiency, effectiveness, and resource use. Like researchers, after they have been approved to access data by CMS, qualified entities must enter into a data use agreement with CMS. The agreement specifies which beneficiary data can be accessed, for what purpose, the duration of access, and data protection and confidentiality requirements. A separate agreement is required for each qualified entity’s activity. The Medicare beneficiary data to be accessed are encrypted and can either be shipped to the qualified entity on an external hard drive or saved within the CCW/VRDC to be accessed through a Secure File Transfer System connection. Once it has received the electronic files, the qualified entity decrypts the files and analyzes the data on its own system(s). As of October 2017, ten organizations had received Medicare data as a qualified entity. Each entity is responsible for analyzing and reporting on provider performance for one or more specific geographic area. CMS has developed requirements for implementing security controls that align with federal guidance for two of the three types of external entities that access Medicare Fee-for-Service data. Specifically, adherence to the requirements, which CMS defined using a risk-based process, is mandatory for MACs and qualified entities. However, CMS does not consider the requirements to be applicable to researchers because they are not CMS contractors. Without providing comprehensive, risk-based requirements for implementing security controls to all external entities that have access to Medicare beneficiary data, CMS increases the risk that external entities possessing CMS data may not have applied security controls that meet CMS standards. To assist agencies in the selection of appropriate security controls, NIST developed the Cybersecurity Framework, which specifies controls that support the core security functions of identifying, detecting, preventing, responding to, and recovering from security incidents. Further, to ensure that controls are selected that achieve the security goals of the organization, NIST recommends that organizations use risk-based methods to tailor the selection of controls within this framework for implementation. According to NIST risk management guidance, the tailoring process includes identifying a baseline of security controls, assigning specific values to organization-defined security control parameters, such as password complexity, and supplementing baselines with additional controls and control enhancements. Once an agency has assessed security risks and identified appropriate controls to mitigate them, NIST recommends that the agency establish specific requirements for implementing those controls to ensure consistency both internally and externally to the agency. This is important in meeting the requirements of FISMA, which requires that a federal agency’s security efforts include information and systems provided or managed by another agency, contractor, or other source. Additionally, the Cybersecurity Framework recommends that contracts or other formal agreements abide by NIST guidance to provide a means to ensure privacy and security controls; it also states that contractors are to protect PII in the same manner as their customers. CMS developed minimum security requirements based on applicable federal guidance, for its own internal systems and for the systems operated by its contractors, such as MACs and qualified entities. These requirements are documented primarily in CMS’s Acceptable Risk Safeguards (ARS). CMS designed the ARS as a tailored selection of NIST controls reflecting FISMA requirements as well as the agency’s own policies, procedures, and guidance; other federal and non-federal guidance; and industry leading practices. According to the agency, the requirements in the ARS are intended to ensure that systems meet a minimum level of information security and privacy assurance and reflect the agency’s information systems security policy. CMS requires all employees, contractors, sub- contractors, and their respective facilities supporting agency business missions and performing work on behalf of the agency to observe this policy. Because MACs are CMS contractors, the agency requires them to align their security practices with the ARS as well as with broader federal guidance, including NIST’s catalog of recommended security controls, its minimum security standard for federal information systems, and OMB’s guidance on information management. Additionally, as part of the Qualified Entity Certification Program and consistent with NIST guidance, CMS requirements state that systems used by qualified entities to process Medicare beneficiary data have been assessed at a moderate impact level and accordingly are held to the ARS implementation guidance using the minimum controls specified for moderate risk systems. According to agency officials responsible for developing and maintaining the ARS, CMS used a risk-based process to select security controls to include in the requirements, thus ensuring that the ARS appropriately reflected agency needs and priorities. The process began with a review of baseline control requirements outlined in NIST guidance to ensure that all of those controls were reflected in the requirements. Then, the agency reviewed the rest of the NIST information security controls that were not included in the baseline and determined whether to include them in the ARS as “optional” controls. For example, the officials stated that certain controls appeared to apply primarily to national security systems and would not be needed for CMS applications. In all, the agency decided not to include 13 of the 165 controls specified in the NIST Cybersecurity Framework, none of which were designated by NIST as mandatory baseline controls. By undertaking this process of assessing the risk associated with each of the information security controls, the agency helped to ensure that its ARS reflects security requirements that are necessary and appropriate for its own systems and for systems operated by contractors on its behalf. A complete description of the NIST Cybersecurity Framework controls and how the ARS aligns with them can be found in appendix II. While CMS requires MACs and qualified entities to implement security controls consistent with NIST guidance and provides additional guidance to ensure that those controls are consistent with CMS standards, it does not provide supplemental guidance tailored for researchers. Specifically, as part of its data use agreements with researchers, CMS includes a broad requirement to implement security and privacy protections that are consistent with NIST and OMB guidance. However, the agency has not provided risk-based guidance defining the minimum acceptable security controls that researchers should implement to protect Medicare beneficiary data. Nor has CMS provided guidance to researchers on how to select and implement specific security controls. According to CMS officials who oversee researcher access to CMS data, all researchers are required to prepare data management plans that outline their planned safeguards for protecting Medicare beneficiary data in their custody. In determining what controls to implement, however, they have only broad federal guidance, such as NIST’s catalog of controls, to use as a reference. The officials stated that CMS has not developed specific requirements based on an assessment of the risks associated with researcher functions that would define a minimum set of required safeguards. This is in contrast with the MACs and qualified entities, which have specific requirements based on the ARS that they are to implement to adequately protect data received from CMS. The lack of specific requirements does not affect all data that researchers access on behalf of CMS. In many cases, researchers access and process Medicare beneficiary data on systems operated by CMS and are not responsible for implementing the security controls for those systems. In such cases, the researchers access beneficiary data within a virtualized environment, called the CCW/VRDC, which allows CMS to monitor data retrieval and use. However, in other cases, CMS provides beneficiary data to researchers on external hard drives or other physical media that are outside of the Chronic Conditions Warehouse. In those cases, researchers receive Medicare beneficiary data that they transfer to and process on their own systems. These systems are secured according to individual researchers’ own policies and procedures, which may or may not be consistent with CMS requirements applied to other entities. CMS requirements tailored specifically for researchers could address topics such as password complexity, patch management, and encryption of sensitive data, all of which otherwise may be implemented inconsistently by different researchers. According to CMS officials responsible for overseeing researcher access to data, CMS does not require researchers to adhere to its Information Systems Security and Privacy Policy or to implement the controls specified in the ARS because researchers are not agency contractors. The CMS officials said it was not necessary for the agency to set specific security requirements for entities that do not have a contractual relationship with the agency. Additionally, these officials stated that they believe the lack of specific guidance gives the researchers more flexibility to independently assess their security risks and determine which controls to implement based on that assessment. However, by not providing guidance to researchers that includes security implementation requirements tailored to CMS-authorized uses of Medicare data, CMS cannot ensure that researchers implement security measures that are commensurate with the sensitivity of the data that is provided to them. As a result, there is an increased risk that sensitive PII and protected health information may be at risk of compromise. CMS has established a program to oversee the MACs’ implementation of security and privacy protections over Medicare beneficiary data, but it does not consistently track low-risk weaknesses in the CMS FISMA Controls Tracking System. MACs are subject to two types of independent annual assessments that regularly identify weaknesses in their implementation of security controls. The assessments have identified several recurring categories of weaknesses; however, the agency does not track low-risk weaknesses that could be related to these recurring categories. Additionally, CMS has not established a corresponding program for overseeing the implementation of security controls by researchers and qualified entities. Without more consistently tracking identified issues at MACs and establishing effective oversight measures for researchers and qualified entities, CMS cannot fully ensure that the security of Medicare beneficiary data is being adequately protected. Requirements for agencies to oversee the implementation of security protections are established in law and federal guidance. For example, the NIST Cybersecurity Framework specifies that organizations should assess security controls to determine the extent to which the controls are implemented correctly, operating as intended, and producing the desired outcome. The framework states that, as part of the process for conducting security control assessments, organizations should track and monitor weaknesses and develop remedial actions. Further, according to the framework, the security assessment process is intended to provide feedback to organizations that can use the information to make risk- based adjustments to protections for their systems and networks. In addition, both FISMA and the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 set specific requirements for CMS oversight of the implementation of information security controls by the MACs. FISMA requires an annual independent evaluation of an agency’s information systems, including those provided or managed by contractors, to ensure compliance with NIST requirements. Further, OMB’s FISMA guidance specifies regular testing of all security controls with an agency-determined, risk-based subset to be tested annually. The MMA likewise requires the MACs to undergo an independent evaluation of their information security program on an annual basis. Specifically, an independent assessor is to annually test an appropriate subset of a contractor’s systems and assess compliance with federal requirements for information security policies, procedures, standards, and guidelines, as defined by OMB. In order to meet the requirements of the MMA and FISMA, CMS established two separate annual information security assessment processes for the MACs. Specifically, to comply with MMA, CMS has overseen independent annual evaluations of these contractors since the law was enacted in 2003. CMS selected an independent assessor to perform all of the MMA assessments. The assessor first reviews documentation of the implementation of security controls by the contractor and then reviews technical security controls onsite at each MAC. In 2010, CMS expanded the MMA assessments into more technical areas and has included penetration testing as part of the assessments. In addition, agency officials that oversee the MMA assessments stated that CMS reviews contractor policies and procedures for configuration management twice a year and conducts an on-site review of the implementation of selected technical controls every June. In 2016, the independent assessor performed tests in nine categories of security controls at eight MAC datacenters. In total, these assessments reported 168 weaknesses, of which 53 were categorized as high or moderate risk and 115 were low-risk. Further, to comply with FISMA requirements that all controls are tested regularly, CMS requires MACs to test one-third of their system security controls annually. CMS determines the control families to be tested in any given year and rotates the selection each year so that all controls are tested by the end of the 3-year testing cycle. For the 2016 FISMA assessment, CMS selected 121 security requirements within 8 control families. The independent assessor is responsible for assessing the security controls and making recommendations on how to correct weaknesses and address identified vulnerabilities. To determine compliance with CMS requirements, controls are assessed against the minimum security requirements defined in the CMS ARS. According to CMS officials from the Medicare Contractor Management Group, the two annual assessment processes together ensure that sufficient testing is being conducted each year. For example, in any given year, the MMA assessments may cover different security controls than the FISMA assessments. In addition, the FISMA assessors may identify outstanding recommendations that were made from the prior year’s MMA assessment and provide a status update on progress made to address open recommendations. Tracking and remediation are key parts of an organization’s security program that help to ensure that identified issues are addressed promptly and effectively. CMS requires the MACs to develop corrective action plans to remediate most of the weaknesses identified by the MMA and FISMA assessments. CMS requires that these weaknesses, along with plans of action and milestones for correcting them, be captured and tracked in its CMS FISMA Controls Tracking System, which is an agency- wide system for tracking the remediation of identified weaknesses. The tracking system maintains the certification and accreditation documents for all MAC systems and manages plans of action and milestones, their remediation activities, and completion. CMS monitors the disposition of all issues captured in the CMS FISMA Controls Tracking System, which helps to ensure that the MACs take steps to address weaknesses within required time frames. However, because CMS does not routinely track low-risk weaknesses, it may not be ensuring that all weaknesses consistently receive appropriate management attention and timely remediation. Specifically, with regard to the MMA assessments, CMS requires MACs to develop a corrective action plan to remediate only high and medium-risk weaknesses, which are tracked using plans of action and milestones. CMS does not require the tracking of low-risk weaknesses, which are shown in the assessment reports as recommended improvements rather than weaknesses in need of correction. In certain cases, MMA assessments have classified weaknesses as low-risk, and they have not been tracked in the CMS FISMA Controls Tracking System, even though similar weaknesses were classified by other assessments as medium- or high-risk, and were tracked. In contrast to the MMA assessments, CMS requires that MACs track all weaknesses identified in FISMA assessments in the CMS FISMA Controls Tracking System. Examples of inconsistently classified weaknesses reported in the 2016 MMA assessments include (1) maintaining complete and up-to-date inventories of information system components and (2) ensuring that protections against malicious software are installed and kept up-to-date. Of the six assessments that reported that MACs did not have a complete and accurate listing of systems and devices supporting Medicare claims processing, three classified this weakness as medium-risk and created a plan of action and milestones, while the other three assessed a low-risk level and did not create a plan of action and milestones. Similarly, eight assessments reported that MACs either did not have malicious software protections installed or they were not up-to-date. Of these eight, CMS officials stated that three were classified as medium-risk and were tracked by CMS, while the other five were assigned a low-risk level and not tracked. The inventory and malicious software protection weaknesses that were tracked inconsistently are related to categories of weaknesses that have posed recurring challenges for the MACs in recent years. Since 2009, both the MMA and FISMA assessments have reported incomplete implementation of several types of high-risk security requirements across all the MACs. The weaknesses identified during these assessments— which generally involved configuration management, system security plans, and system inventories—have yet to be fully resolved. Table 3 describes these key categories of weaknesses. According to CMS officials, weaknesses identified in the annual MMA assessments may be ranked at different risk levels because the specific circumstances of each finding can vary. However, documentation of the specific weaknesses identified in the 2016 MMA assessment reports does not make clear why findings that are characterized in similar terms or have the same name may have been assigned different risk levels. CMS officials who oversee the information security testing at MACs stated that they are aware of the recurring areas of weaknesses identified in the annual assessments and have been taking actions to address them. For example, in 2009, CMS began requiring MACs to submit evidence that their configuration management programs complied with CMS requirements. According to the officials, since this program has been put into place, configuration management processes at the MACs have become more consistent and more thoroughly documented. Nevertheless, the 2016 FISMA assessments concluded that a MAC’s system security plan did not include procedures for testing changes made to their production environments, and the MAC was not tracking changes made to the production environments. According to the CMS officials, the fact that recurring issues such as these have not yet been fully resolved may be due to the root causes of the deficiencies not yet being addressed. Without more consistent tracking of identified issues through plans of action and milestones, it may be difficult for CMS to fully determine the extent to which security weaknesses identified during assessments of the MACs are remediated. Weaknesses that appear to be low-risk may be indicators of more significant underlying issues and, thus, may not be receiving appropriate management attention or prompt remediation, unnecessarily exposing Medicare beneficiary data to security risks. While CMS has established assessment programs for MACs, the agency has much more limited security oversight mechanisms in place to ensure that qualified entities and researchers with access to Medicare beneficiary data implement appropriate security controls. CMS oversight processes and procedures for qualified entities and researchers consists primarily of reviewing the data protections that researchers and qualified entities describe in the data management plans they submit when requesting access to Medicare beneficiary data. According to CMS officials who review these plans, they may ask follow- up questions to obtain more information or make recommendations on how to better implement security safeguards in accordance with CMS requirements. However, no further reviews are conducted for any qualified entities or researchers. For example, CMS does not conduct on- site reviews of the implementation of security controls and does not collect or review evidence of whether the controls have been appropriately implemented. Further, it does not conduct or require any independent testing of security controls. As an additional check for qualified entities, instead of assessing their security controls, CMS assesses their responses to questions relating to 213 moderate-level data security controls from 26 control families set forth in the ARS. However, once the initial document review has been completed, CMS does not perform any in-person or document reviews of security controls that are in place unless the qualified entity reports a major change in its data security environment after initial approval. According to officials of the Office of Enterprise Data Analytics, which is responsible for overseeing access to Medicare data by researchers and qualified entities, CMS has, in the past, conducted remote and on-site reviews as a pilot project. These reviews examined selected researchers’ security controls, based on factors such as the use of data described in the researchers’ data management plans. According to these officials, the pilot project is no longer being conducted because funding for the program has stopped. The need to ensure that these entities have effectively implemented information security controls is demonstrated by data breaches that these organizations have reported. Of the 195 research entities that CMS has data use agreements with, six have suffered data breaches involving the loss of over 500 records containing PII covered under the Health Insurance Portability and Accountability Act of 1996, which they reported to the HHS Office of Civil Rights. These breaches included Internet-based intrusions into researcher systems as well as other IT- related incidents. According to CMS officials who oversee access to Medicare data for researchers and qualified entities, the data use agreement requires organizations to report any breach of PII or personal health information from the CMS data files to the agency. These officials also stated that the six organizations did not report any breaches to CMS and that they were unaware that the organizations had reported compromises. The officials noted that if the breaches did not involve PII or personal health information from CMS data files provided under a data use agreement, the organizations were not required to report this information to CMS. Further, these officials stated that the agency is currently revising its data management plan to include a requirement for organizations to fully disclose all breaches to the agency, which may impact whether or not to grant access to Medicare data for organizations that were breached. Given that, in the past, researchers’ systems have been successfully attacked, effective implementation of security controls is critical to reducing threats of compromise. However, without more robust oversight processes and procedures, CMS cannot determine whether qualified entities or researchers have implemented security controls appropriately and, thus, cannot ensure that the risks associated with their use of Medicare beneficiary data have been adequately mitigated. CMS shares Medicare beneficiary data with external entities primarily for processing Medicare claims, supporting medical research, and evaluating the performance of Medicare service and equipment providers. CMS has set basic requirements for protecting the security of Medicare beneficiary data that it shares with MACs, qualified entities, and researchers. However, CMS has not required the documentation of low-risk weaknesses in the CMS FISMA Controls Tracking system so that CMS can track the MACs’ remediation of weaknesses that have been identified in recurring annual assessments. In addition, MACs and qualified entities are given guidance that generally aligns with federal guidance and is based on an assessment of risks specific to CMS to ensure that appropriate controls have been included. However, CMS has not provided guidance to researchers on how to select and implement specific security controls. Until CMS provides more comprehensive, risk- based guidance on implementing security controls to all of its external partners, there is an increased risk that researchers will not fully implement appropriate protections for Medicare beneficiary data. CMS has developed and implemented an oversight program for the MACs’ implementation of security controls based on two types of annual independent assessments, which together help ensure that sufficient testing is being conducted each year. However, CMS has not ensured that the MACs track and remediate identified weaknesses consistently, including weaknesses that have been identified in recurring annual assessments. Further, CMS has not established an oversight program for qualified entities and researchers to assess whether they are implementing security controls as they are required. Without more effective oversight programs in place, CMS lacks full assurance that external entities are appropriately implementing security protections for Medicare beneficiary data. We are making three recommendations to the Administrator of the Centers for Medicare and Medicaid Services: Develop and distribute guidance for researchers defining minimum security controls and implementation guidance for those controls that is consistent with NIST guidance. (Recommendation 1) Develop processes and procedures to ensure that findings from all MAC assessments are classified consistently and tracked appropriately. (Recommendation 2) Develop processes and procedures to ensure that qualified entities and researchers have implemented information security controls effectively throughout their agreements with CMS. (Recommendation 3) We received written comments on a draft of this report from HHS. In the comments (reprinted in appendix III), the department concurred with our three recommendations and discussed actions that the department has planned or taken. If fully and effectively implemented, the intended actions should help HHS to address weaknesses in processes and procedures for ensuring the protection of Medicare beneficiary data used by the department’s contractors. The department also provided technical comments, which we have incorporated in the report, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9342 or marinosn@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. Our objectives were to (1) identify the major entities that collect, store, and process Medicare beneficiary data and that connect with Centers for Medicare and Medicaid Services (CMS) systems and networks; (2) determine whether requirements for the protection of Medicare beneficiary data align with federal guidance; and (3) assess the programs CMS has in place to oversee the implementation of security protections for Medicare beneficiary data. To address our first objective, we analyzed prior GAO reports and CMS documentation, such as CMS data maps and system documentation. Additionally, we conducted interviews with agency officials to identify major external entities that access Medicare beneficiary data, including with Medicare Administrative Contractors (MAC) and researchers. We analyzed the information obtained from CMS to describe the type of Medicare data each entity has access to and purposes for which such access is provided. Further, we analyzed agency agreements with external entities to describe external uses for the data CMS collects and distributes. Regarding our second objective, we analyzed CMS guidance, specifically its Acceptable Risk Safeguards (ARS), to determine baseline requirements for the protection of Medicare beneficiary data that have been established by CMS. To assess the completeness of this guidance, we compared the ARS to the National Institute of Standards and Technology’s (NIST) Cybersecurity Framework’s controls included in the “identify,” “protect,” “detect,” and “respond” categories. We did not include the “recover” category because it is more focused on data recovery than on the identification, protection, and detection capabilities necessary to prevent incidents. We compared the controls referenced by NIST to the controls that were documented in the ARS to identify controls that had not been included. We also interviewed CMS officials responsible for developing the ARS to determine the process that the agency uses to select controls. Additionally, to determine how CMS required external entities to implement security measures, we reviewed formal agreements that were entered into with those organizations. For the MACs, we analyzed contracts to determine CMS security requirements. For researchers and qualified entities, we reviewed the data use agreement templates to determine what requirements CMS specified for selecting and implementing security measures. To address our third objective, we analyzed system assessments performed by CMS and conducted interviews with CMS officials responsible for overseeing the security of Medicare beneficiary data provided to external entities. Specifically, we analyzed information security assessments to determine the nature and extent of reported findings, the disposition of assessment recommendations, and whether assessment results were being addressed in a timely fashion over the span of time that they have been conducted. For the MACs, we reviewed assessments performed in accordance with the Federal Information Security Management Act and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. For researchers and qualified entities, we obtained information from CMS about ongoing and previously performed assessment programs. Through interviews with relevant CMS officials, we obtained and analyzed information about the findings that were not resolved in a timely fashion and about the constraints that prevented the ongoing assessment of researchers and qualified entities. We conducted this performance audit from October 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We compared the Centers for Medicaid and Medicare Services (CMS) Acceptable Risk Safeguards (ARS) with the National Institute of Standards and Technology (NIST) Cybersecurity Framework to determine the extent to which the ARS aligns with the framework. To do this, we compared the controls noted as informative references by the framework to the controls documented in the ARS. We did not assess the “Recover” category because it is more focused on data recovery than on the identification, protection, and detection capabilities necessary to prevent incidents. In addition to the contact named above, John De Ferrari (assistant director); Thomas Johnson (analyst-in-charge); Chris Businsky, Kavita Daitnarayan, Nancy Glover, Charles Hubbard III, Monica Perez-Nelson, and Richard Sayoc made key contributions to this report.", "summary": "Recent data breaches have highlighted the importance of ensuring the security of health information, including Medicare beneficiary data. Such data are created, stored, and used by a wide variety of entities, such as health care providers, insurance companies, financial institutions, researchers, and others. GAO was asked to conduct a study of CMS efforts to protect Medicare beneficiary data accessed by external entities. GAO's objectives were to (1) identify the major external entities that collect, store, and process Medicare fee-for-service beneficiary data; (2) determine whether requirements for the protection of Medicare beneficiary data align with federal guidance; and (3) assess CMS oversight of the implementation of those requirements. GAO analyzed information about how external entities access data, reviewed CMS documentation on who they share data with, compared federal standards with CMS security requirements for external entities, and analyzed results of independent security reviews. GAO also interviewed CMS officials about their oversight activities. The Centers for Medicare and Medicaid Services (CMS) shares Medicare beneficiary data with three major types of external entities: (1) Medicare Administrative Contractors (MAC) that perform processing and distribution functions that support the payment of Medicare benefits; (2) research organizations (researchers) that use Medicare beneficiary data to study how health care services are provided to beneficiaries; and (3) qualified public or private entities that use claims data to evaluate the performance of Medicare service providers and equipment suppliers. CMS has developed requirements for implementing security controls that align with federal guidance for two of the three types of external entities that access Medicare beneficiary data. While CMS has developed guidance for MACs and qualified entities, it has not developed equivalent guidance for researchers. Researchers must adhere to broad governmentwide standards, but are not given guidance on which specific controls to implement. According to CMS, the lack of specific guidance gives the researchers more flexibility to independently assess their security risks and determine which controls are appropriate to implement; however, without providing comprehensive, risk-based security guidance to researchers, CMS increases the risk that external entities possessing agency data may not have applied security controls that meet CMS standards. Additionally, CMS has established an oversight program for the security of MAC data, but has not established a corresponding program to oversee security implementation by researchers and qualified entities. Without effective oversight measures in place for researchers and qualified entities, CMS cannot fully ensure that the security of Medicare beneficiary data is being adequately protected. Regarding MACs, although they are subject to two types of independent annual assessments, which have regularly identified weaknesses in their implementation of security controls, the weaknesses that have been assessed as low-risk have not been consistently tracked in the CMS finding tracking system. Without more consistent tracking of these low-risk weaknesses, it may be difficult for CMS to determine if all weaknesses are being addressed in a timely manner. Examples of categories of recurring weaknesses that have been identified during annual assessments are listed in the table. GAO recommends that CMS develop additional guidance for researchers on implementing security controls required by CMS, consistently track results of independent assessments, and provide oversight of researchers and qualified entities. CMS concurred with GAO's three recommendations and described actions it has planned or taken to address them.", "document_type": "gao"}
{"report": "In November 2014, the Secretary of Defense directed DOD to address the recommendations from the 2014 nuclear enterprise reviews and directed CAPE to track and assess these implementation efforts. The Joint Staff, the Navy, the Air Force, offices within the Office of the Secretary of Defense, and U.S. Strategic Command have supported CAPE’s efforts. CAPE compiled the recommendations from the 2014 nuclear enterprise reviews. In total, CAPE identified 175 distinct recommendations from the three documents. CAPE then identified 247 sub-recommendations within those recommendations, which were directed to multiple military services or other DOD components. For example, if a recommendation was directed to the Air Force and the Navy, then one sub-recommendation was made to the Air Force and one to the Navy. CAPE then worked with the military services to identify offices of primary responsibility for implementing actions to address the recommendations, any offices with coordinating responsibility, and any resources necessary to implement each recommendation. CAPE has developed a centralized tracking tool to collect information on progress in meeting milestones and metrics. As shown in figure 1, the tracking tool includes fields for the underlying problem statement, or root cause, for the recommendation; time frames with milestones for implementing the recommendation; and performance measures (referred to as metrics in the tracking tool) to assess the effectiveness of the actions taken. The tracking tool currently contains hundreds of unique milestones and metrics and, according to CAPE officials, additional milestones and metrics are added as they are identified. The Air Force and the Navy also have developed their own methods of tracking their service-specific recommendations. In December 2016, the Deputy Secretary of Defense issued a memorandum that directed the transition of the tracking and analysis responsibilities related to implementing the recommendations of the 2014 nuclear enterprise reviews from CAPE to the military departments and other DOD components. However, CAPE remains responsible for providing guidance to inform the analyses conducted by other DOD entities, overseeing these analyses, and assessing recommendations for closure. The aim of these changes was to enhance ownership and embed the principles of robust analysis, continuous monitoring, and responsibility throughout the department. NC3 is a large and complex system comprised of numerous land-, air-, and space-based components used to ensure connectivity between the President and nuclear forces. NC3 is managed by the military departments, nuclear force commanders, and the defense agencies; it provides the President with the means to authorize the use of nuclear weapons in a crisis. NC3 systems support five important functions: Force management: assignment, training, deployment, maintenance, and logistics support of nuclear forces before, during, and after any crisis. Planning: development and modification of plans for the employment of nuclear weapons and other options. Situation monitoring: collection, maintenance, assessment, and dissemination of information on friendly forces, adversary forces and possible targets, emerging nuclear powers, and worldwide events of interest. Decision making: assessment, review, and consultation that occur when the employment or movement of nuclear weapons is considered. Force direction: implementation of decisions regarding the execution, termination, destruction, and disablement of nuclear weapons. As recommended in the 2015 NC3 report, the NLC3S Council has taken a lead role in providing oversight and making the final determination on the implementation status of that report’s 13 recommendations. The NLC3S Council is co-chaired by the Under Secretary of Defense for Acquisition and Sustainment and the Vice Chairman of the Joint Chiefs of Staff. Members of the council include the Under Secretary of Defense for Policy; the Commander, U.S. Strategic Command; the Commander, North American Aerospace Defense Command/U.S. Northern Command; the Director, National Security Agency; and the DOD CIO. The DOD CIO also serves as the Secretariat for the NLC3S Council and tracks the implementation of recommendations from the 2015 NC3 report, among other activities. Additional organizations, such as the Office of the Under Secretary of Defense for Intelligence, may participate in the NLC3S Council’s meetings to provide subject matter expertise. Regular participants in the NLC3S Council include the Office of the Under Secretary of Defense (Comptroller); senior leaders from the Army, the Navy, and the Air Force; the Defense Information Systems Agency; the White House Military Office; and CAPE. DOD has established or participated in a number of oversight organizations that aid in the management of the defense nuclear enterprise. These organizations include the following: NDERG: Established in 2014 by the Secretary of Defense to ensure the long-term health of the nuclear enterprise by addressing resourcing, personnel, organizational, and enterprise policy issues identified in the 2014 nuclear enterprise reviews. The NDERG consists of a group of senior officials chaired by the Deputy Secretary of Defense, including the Vice Chairman of the Joint Chiefs of Staff. The NDERG is supported by a Nuclear Deterrent Working Group, which meets biweekly and reviews the status of the recommendations of the nuclear enterprise reviews, and a Nuclear Deterrent Senior Oversight Group, which meets quarterly and reviews any recommendations that the Working Group believes are ready for the NDERG to close. The Nuclear Deterrent Senior Oversight Group also receives annual briefings on component assessments, reviews organizational changes, and discusses other cross-service issues. The Deputy Secretary of Defense updates the Secretary of Defense on the NDERG’s progress as requested. NLC3S Council: A DOD council established by statute that is responsible for the oversight of the command, control, and communications system for the national leadership of the United States. Additionally, as recommended in the 2015 NC3 report, the NLC3S Council reviews the recommendations from the report and assesses them for closure. The NLC3S Council is supported by the National Leadership Command Capabilities Executive Management Board, which comprises a Senior Steering Group and four working groups—Stakeholders, Resources, Assessments, and Nuclear Command and Control Issues. The Executive Management Board ensures that the Council is informed of and presents issues that need principal-level decisions. Nuclear Weapons Council: A joint DOD and Department of Energy council established by statute that is responsible for managing aspects of the U.S. nuclear weapons stockpile and programs. The Under Secretary of Defense for Acquisition and Sustainment is designated as the chair of the Nuclear Weapons Council, and the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs serves as the staff director of the Council. The Nuclear Weapons Council is supported by a senior executive-level Standing and Safety Committee and a subordinate, working-level Action Officers Group. The Action Officers Group performs detailed analyses of issues and provides those analyses to the Standing and Safety Committee, which reviews them and formulates decision packages for final Council review and decision. Nuclear Matters: An office under the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs; it is headed by the Deputy Assistant Secretary of Defense for Nuclear Matters and serves as a focal point for DOD activities and initiatives to sustain a safe, secure, and effective nuclear deterrent and counter the threat from nuclear terrorism and nuclear proliferation. Nuclear and Missile Defense Policy: An office supporting the Under Secretary of Defense for Policy and the Assistant Secretary of Defense for Strategy, Plans, and Capabilities. Nuclear and Missile Defense Policy participates in the development of strategies, creation of policies, and conduct of oversight of national nuclear policy, treaty negotiations, and missile defense policy. U.S. Strategic Command: DOD functional combatant command responsible for planning for and employment of U.S. nuclear weapons and for certain matters related to NC3. DOD continues to make progress in implementing the recommendations from the 2014 nuclear enterprise reviews and has made improvements in tracking and evaluating this progress. Specifically, the military services and other DOD components have begun identifying and documenting risks associated with implementing recommendations from the 2014 reviews, based on guidance that was issued by CAPE in January 2018. DOD has also made progress in implementing the recommendations from the 2015 NC3 report. For example, the DOD CIO issued guidance in July 2018 to improve the tracking and evaluation of DOD’s progress in implementing the recommendations of the NC3 report. DOD continues to make progress in implementing the recommendations of the 2014 nuclear enterprise reviews. As of our last report, in October 2017, DOD had closed 77 sub-recommendations. Based on our review of CAPE’s centralized tracking tool, the NDERG has closed 74 additional sub-recommendations since then. As a result, according to the CAPE tracking tool, the NDERG has closed 151 of the 247 sub- recommendations as of September 2018 (see fig. 2). Since October 2017, DOD has closed sub-recommendations related to a number of issues identified in the 2014 nuclear enterprise reviews. For example, in January 2018, the NDERG closed a sub-recommendation originating from the Internal Assessment of the Department of Defense Nuclear Enterprise that the Air Force should ensure its nuclear inspection teams are properly sized and that inspection efforts are coordinated. In response to the recommendation, the Air Force worked to reduce the footprint of inspectors, to the extent possible, and improve consolidation of inspections to avoid redundancy. Meanwhile, in January 2018, the NDERG also closed a sub-recommendation that originated from the Independent Review of the Department of Defense Nuclear Enterprise that the Navy improve its readiness reporting system to provide better information about manning and personnel costs. In response to the recommendation, the Navy has made improvements in its readiness reporting by having ballistic missile submarine fleet commanders report additional readiness information about manning and personnel costs through the Navy’s readiness reporting. The Air Force, the Navy, and CAPE have described some of the remaining open recommendations as enduring issues for the enterprise, and tracking progress toward these recommendations will aid in monitoring the overall health of the defense nuclear enterprise. These recommendations include ongoing sustainment and maintenance efforts and improving the morale of the nuclear forces. As we have previously reported, CAPE officials stated that it would take years to implement the great majority of these recommendations and measure whether they have had their intended effect. For example, CAPE and military service officials have noted that it would take years for some of the recommended cultural changes to manifest. The military departments and other DOD components are responsible for tracking and evaluating the implementation status of the 2014 nuclear enterprise reviews’ recommendations; CAPE is providing guidance to aid these efforts. As we previously reported, CAPE had been responsible for tracking this progress until, in December 2016, the Deputy Secretary of Defense issued a memorandum that transitioned this responsibility from CAPE to the military departments and other DOD components. However, CAPE remains responsible for providing guidance to inform the analyses conducted by other DOD entities, overseeing the analyses, and assessing recommendations for closure. In January 2018, in response to our 2017 recommendation, CAPE issued additional guidance to improve the identification, assessment, and documentation of risks related to implementing the 2014 nuclear enterprise reviews’ recommendations. CAPE’s January 2018 guidance includes specific instructions that military departments and other DOD components should follow when identifying, assessing, and documenting risks. Specifically, the guidance instructs the responsible components to identify any key risks associated with the open recommendations and to document those key risks. The January 2018 guidance defines key risks as those that require mitigation by the leadership of the DOD component (e.g., a risk that requires mitigation by senior Air Force or Navy leadership) or those that cannot be mitigated within a component’s existing authorities and resources (e.g., a risk that cannot be mitigated within the Air Force or Navy that must be raised to a higher authority). Additionally, the guidance indicates that risks that do not rise to the level of being key risks should also be tracked according to the component’s own assessment methodology and, if a component’s approach to a recommendation does not carry any key risks, this should be documented. The guidance identifies some risk assessment tools for components to use, as appropriate, but specifically states that components should consider the following questions: What are the risks if the recommendation is not implemented? What are the risks in the approach to implementing the recommendation? What flexibility does the approach have to respond to unintended consequences? What are the controls and actions needed to mitigate risk to an acceptable level? The guidance also notes that components should update risk assessments periodically as progress is made and new data become available. According to the CAPE tracking tool, as of September 2018, key risks—or the absence of key risks—are documented for 85 of the 96 open sub- recommendations in the centralized tracking tool. Of the 85 sub- recommendations for which risk information is identified in the centralized tracking tool’s “Key Risks and Issues” field, key risks are identified for 50. For the remaining 35, no risks are identified as rising to the level of being a key risk. Based on information in the tracking tool, the Air Force and the Navy have lead responsibility for the 85 sub-recommendations for which risk information is identified in the tracking tool. U.S. Strategic Command, Joint Staff, and the Office of the Secretary of Defense have not yet included any risk information for the remaining 11 open sub- recommendations for which they have lead responsibility. In addition to updated risk information in CAPE’s central tracking tool, the Air Force has updated its internal tracking tool. According to Air Force officials, the Air Force tracking tool includes both key risks—risks that require Air Force leadership to mitigate them—and low-level risks—risks that do not rise to the level where Air Force leadership should mitigate them—for each of the 60 remaining sub-recommendations for which it has the lead. For example, for the recommendation concerning Air Force nuclear personnel shortages, the Air Force’s internal tracker notes the risk that over-prioritizing the nuclear enterprise could affect the Air Force’s ability to conduct conventional operations. Additionally, the Air Force has identified areas where there is no key risk. For example, for the recommendation concerning intercontinental ballistic missile sustainment, the Air Force’s internal tracker noted that there was no key risk but that there was a low-level risk that using limited resources to support legacy systems could lead to underfunding modernization efforts. The Navy, in addition to documenting risk information in CAPE’s centralized tracking tool, has documented risks for many of its open sub- recommendations in an internal document called the Navy Nuclear Deterrent Review Plan of Actions and Milestones, which tracks the Navy recommendations by categories that the Navy created. For example, when discussing risks for maintaining Navy NC3 systems, the Navy Nuclear Deterrent Review Plan of Actions and Milestones states that the Navy monitors availability across several levels, including sustainment and modernization efforts. Additionally, controls are in place at various levels to manage risks to the availability of NC3 assets. The Navy Nuclear Deterrent Review Plan of Actions and Milestones acknowledges that if the Navy does not continue to use these controls, the risk to the NC3 mission may be unacceptable. According to Navy officials, risk is also examined during the Navy’s internal process for closing recommendations through a review by the Navy Nuclear Deterrent Mission Oversight Council. For example, the Council was briefed on actions to mitigate the risk that insufficient personnel strength at some maintenance facilities poses to the operational availability of Ohio-class submarines. DOD continues to make progress in implementing the recommendations of the 2015 NC3 report. Since we last reported, in October 2017, DOD has closed 3 additional recommendations. In total, as of August 2018, the NLC3S Council has closed 5 of the 13 recommendations from the NC3 report (see fig. 3). According to tracking information from the DOD CIO, the Navy has completed its portion of two of the open recommendations, but the Air Force still has tasks it needs to complete before each recommendation can be reviewed and closed by the NLC3S Council. As a result, these two recommendations will remain “in progress” until the Air Force also completes its portion of the implementation. In addition, a DOD component has recommended that an additional 2 of the 13 recommendations be closed; however, these have not yet been reviewed by the NLC3S Council. In July 2018, in response to our October 2017 recommendation, the DOD CIO issued guidance to improve the tracking and evaluation of DOD’s progress in implementing the recommendations of the 2015 NC3 report. This guidance provides instructions to the military departments and DOD components with responsibility for implementation of the 2015 NC3 report recommendations to identify and provide key milestones, metrics utilized to track progress, and information about recent progress—including an assessment of progress, required decisions and guidance, and key risks and other issues. Information on the status of the 2015 NC3 report’s recommendations is collected in a layout similar to that developed by CAPE for the 2014 recommendations. The responsible organizations are in the process of updating the information they have provided to the DOD CIO to respond to the new guidance. The guidance directs the responsible organizations to provide quarterly updates on the remaining, open recommendations beginning in August 2018. According to a DOD CIO official, these regular updates will continue until the recommendations are closed. DOD and the military services have taken steps to improve oversight of the defense nuclear enterprise, in part in response to recommendations from the 2014 nuclear enterprise reviews. DOD plans to use the NDERG to oversee long-term and enduring issues affecting the nuclear enterprise. However, the NDERG does not have formally defined roles and responsibilities, and DOD has not established methods for how the NDERG will communicate and collaborate with the other nuclear enterprise oversight organizations. Further, DOD NC3 oversight guidance has not been updated to reflect evolving NC3 oversight roles and responsibilities and to include methods for communicating and collaborating with other nuclear enterprise oversight groups. The military services have taken steps to improve oversight of the nuclear enterprise in response to the concerns raised by the 2014 nuclear enterprise reviews. The reviews noted a lack of comprehensive oversight of the defense nuclear enterprise and a need for increased visibility for senior leaders. Specifically, Since 2014, the Air Force has realigned responsibilities, authorities, and accountability for its nuclear forces to improve oversight of the nuclear enterprise. For example, the Air Force implemented two recommendations from the Internal Assessment of the Department of Defense Nuclear Enterprise to elevate senior Air Force leadership positions in the nuclear enterprise. Air Force Global Strike Command was upgraded from a three-star to a four-star major command. According to officials from Air Force Global Strike Command, the elevation of the command to a four-star major command has helped ensure support from the Air Force for funding and management of the nuclear enterprise. In 2016, Air Force Global Strike Command created the Air Force NC3 Center to manage portions of the Air Force NC3 weapon system that are owned by the command and—according to Air Force NC3 Center officials—to provide oversight of the organize, train, and equip function for all of the Air Force’s NC3 missions. The Air Force also upgraded the position of Deputy Chief of Staff for Strategic Deterrence and Nuclear Integration, Headquarters Air Force, from a two-star to a three-star position. The elevation of both the Air Force Global Strike Command and A10 leadership was authorized by the Secretary of Defense to ensure that their rank is commensurate with the importance of the nuclear mission. The Navy oversees its leg of the nuclear triad using the Navy Nuclear Deterrent Mission Oversight Council. The Council is a senior Department of the Navy forum that is responsible for coordinating the Navy’s nuclear weapon activities (safety, security, reliability, and nuclear weapons incident response), operations, personnel, policy, material support, and oversight functions. According to Navy officials, the Navy Nuclear Deterrent Mission Oversight Council addresses long-term issues affecting the Navy’s nuclear enterprise and identifies and monitors risks associated with those issues, including the actions taken in response to the 2014 nuclear enterprise reviews. While the Deputy Secretary of Defense was designated as chairman of the NDERG, DOD guidance does not define the membership, roles, and responsibilities of the NDERG or identify methods for how the NDERG and its working and oversight groups should communicate and collaborate with other nuclear enterprise oversight groups. In July 2018, the Deputy Secretary of Defense issued a memorandum directing a series of changes intended to make the NDERG an enduring, principal- level forum to track risks, issues, and opportunities associated with the health of the defense nuclear enterprise. The memorandum directed the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs to serve as the NDERG secretariat and, with the Director of CAPE, co-chair the Nuclear Deterrent Senior Oversight Group. In addition, within 60 days of the issuance of the memorandum, the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs is to provide a draft NDERG charter for coordination. The charter will serve as an interim step while the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs prepares a DOD directive; it will also specify the NDERG’s functions, organization, and responsibilities. The new role as secretariat of the NDERG and co-chair of the Nuclear Deterrent Senior Oversight Group will expand the current responsibilities of the Office of the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs with regard to nuclear enterprise oversight. However, it is not clear whether the charter under consideration will adequately incorporate the roles and responsibilities of the entities on the NDERG, particularly given the new long-term role of the NDERG. According to DOD officials, they have not determined to what extent NDERG roles and responsibilities will be articulated in the charter. Further, prior to issuance of the July 2018 memorandum, officials stated that they had not created a charter for the NDERG because senior leaders within the department were still deciding what ongoing role the NDERG should take in monitoring the health of the nuclear enterprise. The July memorandum helps to clarify this role, but it does not make clear all of the associated roles and responsibilities of the NDERG and its participants. For example, DOD has not determined whether the charter will identify the NDERG’s responsibilities for issues that are not directly related to the 2014 nuclear enterprise reviews or what the NDERG’s long- term role will be once most or all of the recommendations from the 2014 nuclear enterprise reviews are implemented. The July memorandum does indicate that the charter will include a plan to confirm that NDERG- approved actions have the expected effects and do not result in unintended consequences or recurrence of the initial issue. However, the memorandum does not specify how or when the NDERG should address new issues and does not indicate that the charter or DOD directive will do so either. Standards for Internal Control in the Federal Government states that management should establish an organizational structure, assign responsibility, and delegate authority to achieve an entity’s objectives. Specifically, the standards call for management to develop an organizational structure with an understanding of the organization’s overall responsibilities and assign these responsibilities to enable the organization to operate in an efficient and effective manner, comply with applicable laws and regulations, and reliably report quality information. In the 2014 nuclear enterprise reviews, DOD identified a lack of comprehensive oversight of the defense nuclear enterprise. To ensure greater awareness among senior DOD leaders, the internal review recommended that DOD create a single, senior-level position to oversee the nuclear enterprise, provide the Secretary of Defense with additional routine visibility into the nuclear enterprise, and marshal the authority of the Secretary to resolve identified issues. DOD did not implement the internal review team’s recommendation to establish a senior oversight position for the nuclear enterprise because, according to CAPE officials, the Secretary of Defense considered the NDERG to be sufficient to address the recommendation. However, four years after it was established, the roles and responsibilities of the NDERG have not been clearly articulated. DOD now plans to develop a charter and subsequent DOD directive for the NDERG, but it remains unclear whether these documents will provide clear roles and responsibilities for the NDERG to effectively function as the comprehensive oversight body for the enterprise—in part because, according to officials, they are in the early stages of development. In addition, DOD has not clearly defined how the NDERG will communicate and collaborate with the other oversight groups. DOD uses other groups, such as the Nuclear Weapons Council and the NLC3S Council, to oversee portions of the nuclear enterprise and coordinate among various DOD entities and with the Department of Energy. Many of the same individuals and organizations are represented in two or all three of the oversight organizations. For example, four DOD senior leaders— the Vice Chairman of the Joint Chiefs of Staff; the Under Secretary of Defense for Acquisition and Sustainment; the Under Secretary of Defense for Policy; and the Commander, U.S. Strategic Command—participate in both the Nuclear Weapons Council and the NLC3S Council, which are statutorily responsible for oversight of aspects of the defense nuclear enterprise. Figure 4 shows the roles and responsibilities of some of the nuclear enterprise oversight groups and DOD components. The NDERG, the Nuclear Weapons Council, and the NLC3S Council have lower-level management and working groups that include participants from many of the same organizations. For example, the Air Force’s Office of Strategic Deterrence and Nuclear Integration is represented in the NDERG’s Nuclear Deterrent Senior Oversight Group and on the Nuclear Weapons Council’s Standing and Safety Committee. The Army, Navy, and Air Force also participate in all three oversight groups’ working groups. Unlike the NDERG—which will have no formally defined roles and responsibilities until its charter and the eventual directive are finalized—the Nuclear Weapons Council and the NLC3S Council are statutorily responsible for overseeing specific aspects of the nuclear enterprise. According to officials from the Office of the Deputy Assistant Secretary of Defense for Nuclear Matters, in response to updated presidential guidance, a charter is being drafted for a new nuclear enterprise oversight group—the Security Incident Response Council. According to these officials, the council will be an interagency group that will have oversight of plans for responding to potential security incidents involving nuclear weapons and will bring together officials from across all relevant departments and agencies. The Deputy Secretary of Defense’s July 2018 memorandum, previously discussed, does not address how the NDERG should collaborate with other nuclear enterprise oversight groups with overlapping responsibilities. According to the memorandum, issues falling under the purview of other existing nuclear enterprise oversight groups will be addressed by those groups, but the memorandum acknowledges that the groups may interact. Specifically, the memorandum states that the Nuclear Weapons Council, the NLC3S Council, the Nuclear Posture Review Implementation group, and the Security Incident Response Council may recommend issues for the NDERG. However, the memorandum does not describe how the NDERG should communicate the necessary quality information with other oversight groups, including criteria for determining which issues should be recommended or otherwise communicated to the NDERG or when those groups should go about recommending issues for consideration to the NDERG. Further, the other oversight groups will not fall under the authority of the NDERG charter, so stating that the groups may recommend issues for the NDERG does not ensure that they will do so. As previously stated, it is not clear whether these issues will be addressed in either the NDERG’s charter or the subsequent DOD directive. As we have previously reported, leading practices for enhancing interagency collaboration include agreeing on roles and responsibilities and having written guidance and agreements. Specifically, collaborating agencies should work together to define and agree on their respective roles and responsibilities. In doing so, agencies can clarify who will do what, organize their joint and individual efforts, and facilitate decision making. Additionally, Standards for Internal Control in the Federal Government states that management should use quality information to achieve an entity’s objectives and internally and externally communicate the necessary quality information to achieve the objectives. These standards call for management to communicate quality information with appropriate methods of communication and consider a variety of factors in selecting an appropriate method of communication, such as the audience and the nature of the information. The 2014 independent nuclear enterprise review found that the difficulty of defining the defense nuclear enterprise complicates senior DOD leaders’ ability to take ownership of the enterprise. Specifically, the independent review noted that senior leaders within the Office of the Secretary of Defense and the military services referred to the “nuclear enterprise” as if there were a coherent, integrated structure and set of activities supporting the nuclear forces. However, the review team did not find a coherent, integrated structure and synchronized set of activities that could be characterized as a DOD “nuclear enterprise.” Further, the independent review team found that there was a loose federation of separate nuclear activities scattered across multiple organizations with no clearly defined responsibility or accountability. In response to the challenges the independent review identified in 2014, the review recommended that the loosely federated nuclear activities within OSD and the Air Force be brought together into a coherent and synchronized structure that focuses on direction and support for the nuclear forces. In addition, the internal review noted as one of its most important findings that the problems of the nuclear enterprise did not exist in isolation and would require a coordinated, holistic approach to resolve. In particular, the internal review team concluded that, because the issues they identified in each of the military services were interdependent, the ultimate solutions in many instances would have to be cultural, structural, and sustained over the long term. Identifying oversight groups’ roles and responsibilities and identifying and establishing methods for communicating and collaborating among groups could help mitigate the problems identified in the 2014 reviews. In the absence of defined roles and responsibilities or methods for how the NDERG is to communicate and collaborate with other existing oversight organizations, the NDERG may be unable to effectively oversee the defense nuclear enterprise in a coordinated, holistic manner that would address problems identified by the 2014 nuclear enterprise reviews or other issues it may need to address in the future. Additionally, clear roles and responsibilities and methods for communication and collaboration could better position senior leaders to effectively manage resourcing and risk across the department. Officials from CAPE; the Office of the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs; and the military services agreed that clarifying roles and responsibilities and identifying methods for communication would be helpful in addressing long-standing issues and guiding the NDERG in the future. Additionally, with increased funding and prioritization of the nuclear enterprise, as called for in the 2018 Nuclear Posture Review, there is an increased need for the kind of coordinated, holistic oversight of the nuclear enterprise that was recommended in the 2014 Internal Assessment of the Department of Defense Nuclear Enterprise. For example, the Nuclear Posture Review’s goal of replacing legacy nuclear systems beginning in the mid-2020s will require senior leaders from across the defense nuclear enterprise to make decisions regarding resource allocation and prioritization—for both the new systems and the existing systems that are not being replaced. Collaboration among the various nuclear enterprise oversight groups can help to make this resource allocation and prioritization effective. As a result of the 2018 Nuclear Posture Review, NC3 roles, responsibilities, and authorities are evolving as DOD is in the process of making changes to the NC3 governance construct. The Nuclear Posture Review directed the Chairman of the Joint Chiefs of Staff to develop a plan to reform NC3 governance to ensure its effective functioning and modernization. The following key documents outline the proposed changes to NC3 roles, responsibilities, and authorities: 2018 Nuclear Posture Review, February 2018: To improve NC3 governance, the Nuclear Posture Review directed the Chairman of the Joint Chiefs of Staff, in consultation with key DOD stakeholders, to deliver to the Secretary of Defense, no later than May 1, 2018, a plan to reform NC3 governance to ensure its effective functioning and modernization. NC3 Governance Reform Initiative, February – May 2018: In response to the Nuclear Posture Review, the Joint Staff conducted a review of NC3 governance identifying problems with the current NC3 enterprise governance construct and suggested changes to address these problems. Chairman of the Joint Chiefs of Staff memorandum, May 2018: Following the NC3 Governance Reform Initiative review, the Chairman of the Joint Chiefs of Staff provided the Secretary of Defense a memorandum recommending a new NC3 governance construct that would make the Commander of U.S. Strategic Command the operational commander of the NC3 enterprise. Under this new construct, specifically, the Commander of Strategic Command would be designated as the NC3 enterprise lead and would have increased responsibilities for operations, requirements, and systems engineering and integration. In addition, to support the new role of the Commander of U.S. Strategic Command, the Office of the Under Secretary of Defense for Acquisition and Sustainment would be designated as the NC3 enterprise capability portfolio manager and given increased responsibilities for resources and acquisition. The memorandum also proposes that the Chairman and the Deputy Secretary of Defense would provide leadership and oversight, which would include providing enterprise-level guidance to the department. U.S. Strategic Command Commander’s Estimate, May 2018: At the direction of the Chairman of the Joint Chiefs of Staff, U.S. Strategic Command developed the NC3 Governance Reform – Commander’s Estimate (Commander’s Estimate) with a recommended course of action to implement the new NC3 governance roles, responsibilities, and authorities. This Commander’s Estimate was provided to the Secretary of Defense along with the Chairman’s May memorandum. Concurrently, U.S. Strategic Command is developing an implementation plan. U.S. Strategic Command NC3 implementation plan, expected fall 2018: According to a Strategic Command official, an NC3 implementation plan is currently being drafted to implement the proposed changes to NC3 governance. Initial operating capability for the new roles, responsibilities, and authorities is expected to occur within six months of the approval of U.S. Strategic Command’s implementation plan. If the changes to NC3 governance are approved, as proposed in the Commander’s Estimate, the Commander of U.S. Strategic Command would have the operational lead for NC3 and would be delegated the authorities and assigned the resources necessary to perform the following functions: operating the NC3 enterprise assessing and managing NC3 enterprise operational performance defining NC3 enterprise requirements and prioritization conducting systems engineering and analysis to integrate current and future NC3 enterprise architectures approving NC3 enterprise developmental tests and operations overseeing NC3 enterprise acquisition and service/national programs leading NC3 enterprise advocacy across DOD’s processes and governance forums, such as the NLC3S Changes to NC3 roles, responsibilities, and authorities would necessitate changing existing NC3-related guidance documents. The current NC3 oversight structure is documented in statutes and presidential and departmental guidance. For example, the NLC3S Council’s roles and responsibilities are defined in statute and in charters for the Council and its National Leadership Command Capability Executive Management Board. DOD issuances also establish policy and assign responsibilities for matters related to the NC3 system to organizations throughout DOD, including U.S. Strategic Command. The changes proposed in the Commander’s Estimate, if implemented, would result in DOD having to update its own guidance and determine whether there is a need to request a change in the statutory language or presidential guidance. According to a U.S. Strategic Command official, work still needs to be done to help align authorities within the NC3 enterprise. The Commander’s Estimate states that any changes to NC3 oversight authorities that may result from implementing the suggested changes in the Commander’s Estimate will be annotated in existing applicable policy and guidance documents. As we have previously reported and as we have noted in this report, leading practices for enhancing interagency collaboration include agreeing on roles and responsibilities and having written guidance and agreements. Additionally, Standards for Internal Control in the Federal Government calls for management to develop an organizational structure with an understanding of the organization’s overall responsibilities, and assign these responsibilities to enable the organization to operate in an efficient and effective manner, comply with applicable laws and regulations, and reliably report quality information. To achieve this, management should assign responsibility and delegate authority to key roles throughout the organization. Further, federal internal control standards call for identifying appropriate methods for communicating both internally and externally. However, DOD has not clearly defined roles and responsibilities. Additionally, DOD has not developed written guidance and agreements that establish how the NLC3S Council, U.S. Strategic Command, and other organizations responsible for NC3 governance will collaborate with each other, or identified methods of communication. Further, DOD has not determined how these entities will collaborate with other oversight groups that need to have visibility over any problems or resourcing decisions related to the NC3 enterprise, such as the NDERG and other entities with responsibility for the nuclear enterprise as a whole. The 2015 NC3 report made recommendations to address diffused responsibility in the NC3 enterprise; however, based our interviews with officials, these issues still persist. According to DOD officials, 3 years later there continues to be a problem with the management of the NC3 enterprise that resulted in the Secretary of Defense including the need to reform NC3 governance in the 2018 Nuclear Posture Review. Specifically, the 2018 Nuclear Posture Review recognized the broad diffusion of NC3 system governance authority and responsibility within DOD as an area of particular concern. To address these concerns, the department is increasing the oversight roles of a number of organizations. However, these changes may further complicate long-standing issues associated with the governance of the NC3 enterprise unless the department clearly articulates how all of the NC3 oversight bodies are to collaborate. As DOD identifies changes that must be made to guidance for implementing the new NC3 governance construct, it has an opportunity to make improvements to enhance collaboration and communication among NC3 oversight groups and other nuclear enterprise groups. Updating its guidance to clarify changes to the roles and responsibilities of the many entities involved in the oversight and governance of NC3—and establishing methods for how those entities should communicate and collaborate—would better position senior leaders to effectively manage resourcing and risk across the NC3 enterprise. The NC3 enterprise is a large and complex system, and without clearly identified roles and responsibilities for an effective oversight structure, problems similar to those identified in 2014 as negatively affecting the management of the entirety of the defense nuclear enterprise may continue to limit effective management of the NC3 enterprise. DOD has continued to take steps to improve the defense nuclear enterprise in response to the 2014 nuclear enterprise reviews and the 2015 NC3 report. By including risk identification, assessment, and documentation, CAPE has strengthened its framework for monitoring the department’s efforts to address the many issues identified in 2014— including those enduring issues that must be watched for years to come. The DOD CIO’s adoption of a similar framework to monitor the implementation of recommendations from the 2015 NC3 report has also set up a structure to track and evaluate progress. The responsible military services and DOD components’ use of these structures should aid them in assessing their efforts, including providing means to reassess and re- evaluate individual efforts and their relationship to the health of the defense nuclear enterprise as a whole. The efforts the department has taken and has under way should improve senior leaders’ visibility into these issues and better position them to ensure that progress continues to be made, underlying problems are addressed, and risks mitigated or accepted after considering the predictable and desirable results. However, for these changes to be effective, the department must clearly articulate the roles and responsibilities for a comprehensive oversight structure. Unless DOD is able to align the roles and responsibilities of the many entities now charged with oversight functions, the department’s leadership may not be in a position to be informed of issues affecting the nuclear enterprise or the NC3 enterprise and may be unable to make effective resourcing decisions. The creation of both a charter and DOD directive for the NDERG as well as DOD’s efforts to reform NC3 governance provide DOD with opportunities to create comprehensive oversight structures—with defined roles and responsibilities and methods for communication among oversight groups—for the defense enterprise to address enduring leadership problems and help the department to move forward in its governance of the nuclear enterprise. Further, by establishing methods for communication and collaboration among these organizations, the department could better avoid unnecessary overlap and duplication of effort, important issues falling through the seams between organizations, or enterprise-wide risks not being identified or addressed through a holistic approach. We are making four recommendations to the Secretary of Defense: The Secretary of Defense should ensure that the Deputy Secretary of Defense—in coordination with the military departments; U.S. Strategic Command; the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs; CAPE; and other relevant components of DOD—identify in the planned charter and DOD directive clear roles and responsibilities for the members of the NDERG. (Recommendation 1) The Secretary of Defense should ensure that the Deputy Secretary of Defense—in coordination with the military departments; U.S. Strategic Command; the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs; CAPE; and other relevant components of DOD—establish in the planned charter and DOD directive methods for the NDERG to communicate and collaborate with other organizations that have oversight responsibilities for portions of the nuclear enterprise. (Recommendation 2) The Secretary of Defense should ensure that the Deputy Secretary of Defense and Chairman of the Joint Chiefs of Staff—in coordination with the Vice Chairman of the Joint Chiefs of Staff, the Under Secretary of Defense for Acquisition and Sustainment (as NLC3S Council co-chairs), and U.S. Strategic Command—update the applicable DOD guidance (such as the NLC3S Council’s and Executive Management Board’s charters) and identify whether there is a need to request changes to statutory or presidential guidance in order to clarify changes to roles and responsibilities for NC3 oversight. (Recommendation 3) The Secretary of Defense should ensure that the Deputy Secretary of Defense and Chairman of the Joint Chiefs of Staff—in coordination with the Vice Chairman of the Joint Chiefs of Staff, the Under Secretary of Defense for Acquisition and Sustainment (as NLC3S Council co- chairs),and U.S. Strategic Command—update the applicable guidance to establish methods for communication and collaboration among organizations that have oversight responsibilities for portions of the nuclear enterprise as changes are considered for charters, guidance, and laws to reflect the changes to NC3 oversight. (Recommendation 4) We provided a draft of this report to DOD for comment. In its comments, reproduced in appendix I, DOD concurred with all four of our recommendations. DOD also provided technical comments, which we incorporated as appropriate. In concurring with our first and second recommendations, DOD stated that it will clearly identify roles and responsibilities in the NDERG charter and stated that the charter will also direct NDERG stakeholders to coordinate on the prioritization of issues that involve other organizations that have oversight responsibilities for portions of the nuclear enterprise. In concurring with our third and fourth recommendations, DOD stated that U.S. Strategic Command, in coordination with other DOD components, has developed an NC3 Governance Improvement Implementation Plan that outlines the required updates and revisions that need to be requested for statutory guidance as well as implemented for NC3 governance body charters, DOD issuances, and Chairman of the Joint Chiefs of Staff issuances to clarify the new roles and responsibilities for NC3 oversight. Further, DOD noted that these updates and revisions will establish methods and provide direction for communication and collaboration among organizations that have nuclear enterprise oversight roles and responsibilities. We are encouraged that DOD is planning to take these actions to address all four of our recommendations. We believe that, once DOD implements our recommendations, the department’s leadership will be better positioned to be informed of issues affecting the nuclear enterprise or the NC3 enterprise and better organized to make effective resourcing decisions. We are providing copies of this report to the appropriate congressional committees, and to the Secretary of Defense; the Under Secretary of Defense for Acquisition and Sustainment; the Chairman of the Joint Chiefs of Staff; the Secretaries of the Army, of the Navy, and of the Air Force; the Commandant of the Marine Corps; the Commander, U.S. Strategic Command; the Department of Defense Chief Information Officer; and the Director of the Office of Cost Assessment and Program Evaluation. If you or your staff have any questions about this report, please contact me at (202) 512-9971 or KirschbaumJ@gao.gov.Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, key contributors to this report were Penney Harwell Caramia, Assistant Director; R. Scott Fletcher; Jonathan Gill; Susannah Hawthorne; Brent Helt; Joanne Landesman; Amie Lesser; K. Ryan Lester; Ned Malone; and Michael Shaughnessy. Defense Nuclear Enterprise: Processes to Monitor Progress on Implementing Recommendations and Managing Risks Could Be Improved. GAO-18-144. Washington, D.C.: Oct. 5, 2017. Nuclear Weapons Sustainment: Budget Estimates Report Contains More Information than in Prior Fiscal Years, but Transparency Can Be Improved. GAO-17-557. Washington, D.C.: July 20, 2017. Nuclear Weapons: DOD Assessed the Need for Each Leg of the Strategic Triad and Considered Other Reductions to Nuclear Force. GAO-16-740. Washington, D.C.: Sept. 22, 2016. Defense Nuclear Enterprise: DOD Has Established Processes for Implementing and Tracking Recommendations to Improve Leadership, Morale, and Operations. GAO-16-597R. Washington, D.C.: July 14, 2016. Nuclear Weapons Council: Enhancing Interagency Collaboration Could Help with Implementation of Expanded Responsibilities. GAO-15-446. Washington, D.C.: May 21, 2015.", "summary": "In 2014, the Secretary of Defense directed two reviews of DOD's nuclear enterprise. These reviews identified problems with leadership, organization, investment, morale, policy, and procedures, as well as other shortcomings that adversely affected the nuclear deterrence mission. The reviews also made recommendations to address these problems. In 2015, DOD conducted a review focused on NC3 systems, which resulted in additional recommendations. The National Defense Authorization Act for Fiscal Year 2017 includes a provision for GAO to review DOD's processes for addressing these recommendations. This report addresses the extent to which DOD and the military services have (1) made progress in the implementation, tracking, and evaluation—including identifying and documenting risk—of the recommendations of the 2014 nuclear enterprise reviews and the 2015 NC3 report and (2) improved oversight of the defense nuclear enterprise and managed roles, responsibilities, and collaboration among various organizations. GAO reviewed relevant documents and interviewed agency officials from DOD and the military services. The Department of Defense (DOD) has made progress in implementing the recommendations from the 2014 nuclear enterprise reviews and a 2015 nuclear command, control, and communications (NC3) review and has improved its tracking and evaluation of this progress. For example, since GAO last reported—in October 2017—an additional 74 of the 247 sub-recommendations from the 2014 reviews have been closed; 96 remain open. In January 2018, in response to a GAO recommendation, the Office of Cost Assessment and Program Evaluation (CAPE) issued guidance to aid the military services in identifying, assessing, and documenting risks associated with the 2014 recommendations, such as unintended consequences from their implementation. The guidance calls on them to update their risk assessments periodically as new data become available. The Air Force and Navy have begun to provide risk information in CAPE's and their own tracking tools. In July 2018, in response to a GAO recommendation, DOD's Chief Information Officer issued guidance to improve tracking and evaluation of progress in implementing the 2015 recommendations. DOD and the military services have taken steps to improve oversight of the nuclear enterprise in response to the 2014 reviews but lack clear roles and responsibilities and methods for collaboration. The Secretary of Defense created the Nuclear Deterrent Enterprise Review Group (NDERG) in 2014 to ensure the long-term health of the nuclear enterprise by addressing resourcing, personnel, organizational, and enterprise policy issues. However, DOD guidance has not clearly defined roles and responsibilities for the NDERG or provided methods for the NDERG to communicate and collaborate with other nuclear oversight organizations, including those shown in the figure. Nor has NC3 oversight guidance been updated to reflect changes in roles and responsibilities and to include methods for communication and collaboration among NC3 oversight groups. In the absence of defined roles and responsibilities for the NDERG and NC3 oversight bodies and methods for how the NDERG and NC3 oversight groups are to communicate and collaborate, senior leaders may not be in a position to effectively manage resourcing and risk across the department. GAO makes four recommendations for DOD to clarify roles, responsibilities, and methods of communication and collaboration for both the NDERG and NC3 oversight bodies. DOD concurred with all four recommendations and provided information about planned actions to implement them.", "document_type": "gao"}
{"report": "Mobile devices use wireless networks to enable voice and data communications. Mobile wireless networks comprise several components and provide coverage based on dividing a large geographic area into smaller areas of coverage known as “cells.” Each cell contains a cell site—a base station equipped with an antenna—to receive and transmit radio signals to mobile devices within its coverage area. (See fig. 1.) The cell sites are often located on a tower, rooftop, or other structure to provide coverage to a wide area. For a mobile device to transmit and receive signals, it must be within range of a cell site antenna. In many areas, a mobile device is able to transmit and receive signals from multiple cell sites. Each cell site is linked to a base station controller that manages communications between the cell site and the mobile switching center (e.g., routes and hands over calls). The mobile switching center then directs voice and data traffic to landline phones, other cell phones via a carrier’s network, or the Internet. Backhaul facilities provide transport for this voice and data traffic, and backhaul can be provided over fiber optic or copper cables or wirelessly via microwave facilities. According to FCC, there are four “nationwide” mobile wireless carriers— AT&T, Verizon, T-Mobile, and Sprint—with networks that cover most of the United States. The industry also includes dozens of other carriers, many of which provide service in a specific, sometimes rural, geographic area. According to an FCC report on the wireless industry, most consumers in the United States have the ability to choose among multiple carriers with wireless network coverage in their area, and wireless carriers typically compete on price, network quality, and the availability of mobile devices with innovative features. Federal law states that FCC must take into account whether its actions will encourage competition in mobile wireless networks. Some wireless carriers own a portion or all of the structures that host cell sites, but wireless carriers mostly lease space from independent companies that own or operate a majority of the towers and other structures that host cell sites. Mobile wireless networks face several kinds of risks that could affect the network’s physical components, resulting in disrupted service or an outage. Government reports generally identify three types of physical risks facing wireless networks: Natural disasters, such as hurricanes, tornados, wildfires, and earthquakes. Manmade events, such as terrorist attacks and damage associated with theft or another malicious act. Accidents, such as cable damage due to digging or locating errors and damage associated with a vehicle accident. The potential effects related to these physical risks include damage to wireless network components that requires wireless carriers and other providers to make repairs or replace equipment to restore service. For example, flooding, which can occur with a hurricane or heavy rain, could damage the cable or other equipment submerged in water. Wildfires can damage network components like antennas and backhaul facilities (including fiber optic and copper lines and microwave towers) as well as equipment in buildings if the buildings are damaged or destroyed. In addition to physical risks, wireless networks face risks stemming from their dependence on other sectors and providers. One key dependency identified by several government and industry reports is the reliance on commercially provided electricity, referred to in this report as commercial power. Several components—including the mobile switching center, antennas at cell sites, and consumer devices—may rely on commercial power. Therefore, loss of electric power may result in a loss of wireless communications. Another key dependency for wireless networks is backhaul used to get data from an end user to a major network. Wireless carriers can provide backhaul but typically obtain it from another communications provider, such as a local telephone company or cable company. An outage in the backhaul network can cause an outage that affects one or more cell sites or a portion of the wireless network. FCC has reported that the loss of backhaul service is a major cause of a cell site’s unavailability, which can lead to wireless outages. Also important is having clear roads and highways, as wireless carriers’ personnel or contractors need to be able to access cell sites to repair or replace equipment, or deliver fuel for generators that are sometimes located at cell sites. Resilience is the ability to prepare for and adapt to changing conditions and withstand and recover rapidly from disruptions, according to Presidential Policy Directive 21. Owners and operators of wireless networks can take a variety of actions to manage different risks, including various physical risks, according to the Communications Sector-Specific Plan. These actions can be designed to achieve different aims, including to prepare for incidents, like creating and exercising disaster recovery reduce a specific vulnerability, like elevating or moving a mobile switching center in a flood-prone area to a higher location; mitigate the consequences of an incident, like installing backup power—using batteries with a limited supply of power or generators that run on diesel or other fuel sources—to support continued wireless service during a commercial power outage; or enable efficient response and restoration following an incident, such as deploying portable cell sites on trucks and other equipment after an incident to provide wireless communications when the network experiences an outage or a significant disruption. FCC, pursuant to the Communications Act of 1934, as amended, is charged with regulating interstate and international communications throughout the United States, which means that FCC regulates wireless networks and carriers, among other responsibilities. It develops and administers policies and rules to advance the security and reliability of the nation’s communications infrastructure; this responsibility includes, among other topics, network resiliency, public safety communications, and communications infrastructure protection. FCC administers two web-based outage-reporting systems to help it oversee network reliability and resiliency: NORS: Carriers are required to report details about service disruptions or outages (e.g., cause, location, and duration) to their communications systems that meet specified thresholds set forth in regulation. FCC uses NORS data to monitor trends in communications outages and to try to identify and address any shortcomings or issues going forward. Disaster Information Reporting System (DIRS): Carriers can voluntarily report on the status of communications infrastructure during an emergency event in DIRS. For example, wireless carriers report daily on the number of cell sites, by county, that are out of service by reason (e.g., power outage, physical damage). FCC activates DIRS in response to an event and then uses these data to track network restoration during and after an emergency event. DHS also plays a role in wireless network resiliency as the lead agency for coordinating and prioritizing security and resilience activities for the communications sector. Presidential Policy Directive 21 establishes national policy to strengthen the security and resilience of critical infrastructure and states that the federal government shall work with critical infrastructure owners and operators to do so. DHS’s Office of Cybersecurity and Communications, within the National Protection and Programs Directorate, leads this coordination for the communications sector as the sector-specific agency, and this office works with the Communications Sector Coordinating Council and the Communications Government Coordinating Council to set goals, objectives, and activities for the sector. During a national emergency or disaster, DHS also coordinates response efforts for communications systems in its role as the coordinator for Emergency Support Function #2 – Communications (ESF-2). Specifically, two DHS components—the Federal Emergency Management Agency (FEMA) and Office of Cybersecurity and Communications—lead the federal government’s work to support the restoration of communications infrastructure, coordinate response efforts, and facilitate the delivery of information to emergency-management decision makers. DHS has direct access to FCC’s NORS and DIRS data to support its work. Other DHS components also have responsibilities related to wireless network resiliency. For example, the Science & Technology Directorate conducts research in the area of wireless and other communications network resiliency, although its focus is on communications for the public-safety community. Within the Department of Commerce, NIST also plays a role in promoting network resiliency by sponsoring the Community Resilience Panel. According to NIST, the Community Resilience Panel is sponsored by NIST and co-sponsored by other federal agencies to promote collaboration among stakeholders to strengthen the resiliency of infrastructure that communities rely on, including communications infrastructure. As part of this mission, the panel seeks to identify policy and standards-related impediments to community resiliency, raise awareness of sector dependencies and of the cascading effects of disasters, and identify potential resiliency metrics. The number of wireless outages attributed to a physical incident increased from 2009 to 2016 (see fig. 2). Specifically, the number of outages with a physical incident reported as a root cause increased from 189 outages in 2009 to 1,079 in 2016. The number of outages increased substantially during the first few years of this period and then was relatively stable, which mirrored the trend for all wireless outages. According to FCC officials, the increase in reported outages was due to increases in both the number of wireless customers and wireless infrastructure over this period, as well as due to FCC’s outreach to wireless companies to clarify the thresholds for which carriers are required to report wireless outages to help ensure that carriers were consistently and fully reporting outages. From 2009 to 2016, about one- third of all wireless outages reported to FCC (6,002 of 18,325) were attributed to physical incidents. Of wireless outages reported to FCC that were attributed to physical incidents, most were due to accidents, described below: Accidents—which include cable damage due to a backhoe cut, among other causes—were the root cause for 74 percent of wireless outages attributed to a physical event. Natural disasters—including tornados and wildfires—were the root cause for 25 percent of wireless outages attributed to a physical incident. Manmade events—which include damage associated with theft or other intentional damage to facilities—were the root cause for the remaining 1 percent of these outages. FCC typically suspends NORS reporting requirements in areas where FCC activates DIRS reporting for an emergency event, generally a natural disaster. For example, when FCC activated DIRS reporting for all counties in Puerto Rico and the U.S. Virgin Islands in response to Hurricane Maria in September 2017, FCC suspended NORS reporting requirements for those counties. As a result, FCC officials said that NORS data can undercount the number of wireless outages due to natural disasters. For a large natural disaster, however, FCC still can receive NORS reports for wireless outages outside the DIRS reporting area that are due to the natural disaster. Hurricane Irma In September 2017, Hurricane Irma made landfall as a Category 3 hurricane in Florida, having previously tracked near Puerto Rico and the U.S. Virgin Islands. The hurricane produced sustained winds of nearly 115 miles per hour as it made landfall in Florida. In the days that followed, the hurricane’s impact was felt over the southeastern United States, with nearly 16 inches of rain falling over portions of Florida and high winds observed in five states. The President issued disaster declarations covering portions of Puerto Rico, the U.S. Virgin Islands, Florida, and Georgia. The damage from Hurricane Irma—both damage to wireless network infrastructure and damage resulting in power outages—created wireless service disruptions and outages in certain impacted areas. In particular, over half of cell sites were out of service for 3 or more consecutive days in five counties in Puerto Rico and in two counties in the U.S. Virgin Islands, according to data from wireless carriers reported to FCC. Within a week, only 6 percent of cell sites were out of service in reporting counties in Puerto Rico, but a majority of cell sites remained non-operational in the U.S. Virgin Islands; in one county, St. John, 90 percent of cell sites remained out of service a week and a half after landfall. In southern Florida, three counties had more than half of cell sites out of service for 4 straight days. The number of out-of-service cell sites decreased over time, so that less than 20 percent of cell sites were out of service in these counties within a week. Looking more broadly across all counties for which FCC collected data in Florida, Georgia, and Alabama, about 13 percent, 2 percent, and 1 percent of cell sites in the reporting area were out of service 4 days after Hurricane Irma’s landfall, respectively. cause and contributing factor fields. Looking across cause fields, wireless outages citing an accident were most common, particularly from 2010 to 2016, as shown in figure 3. Wireless outages citing a natural disaster were less common, although there were several spikes in the number of outages citing a natural disaster. Some of these spikes correspond with major natural disasters like the derecho affecting Midwest and Mid-Atlantic states in 2012 or Hurricane Matthew in 2016. Manmade events were rarely reported as the cause or contributing factor. While less common than accidents, wireless outages attributed to natural disasters lasted much longer than outages attributed to other physical incidents. Specifically, figure 4 shows that outages where a natural disaster was cited as the root cause were often twice as long as outages attributed to an accident or manmade event. From 2009 to 2016, the annual median duration of wireless outages attributed to accidents ranged from 8 hours to 16 hours, compared to natural disasters, which ranged from 19 to 36 hours. Due to this longer duration, wireless outages attributed to natural disasters have a greater impact on the public as it is left without key means of communication for longer periods of time. In addition, an industry association told us that even though public safety officials primarily use dedicated communication networks, like land mobile radio networks, to carry out their work, they also rely on their mobile devices that use commercial wireless networks for maps and other applications. Ten of 24 stakeholders we interviewed said that natural disasters pose the greatest risk to wireless networks as they have the most intense consequences. Natural disasters can result in physical damage to or flooding of critical network components, and fallen trees and debris can temporarily block transportation routes, keeping repair crews from inoperable cell sites and other network components, as described in the Community Resilience Planning Guide for Buildings and Infrastructure Systems. Further, the failure of other systems like commercial power upon which wireless networks depend can lead to cascading failures in communications networks. One industry association we spoke with said that natural disasters are the primary risk to wireless network resiliency as these events usually create the largest outages with the longest durations. By location, the number of wireless outages attributed to physical incidents increased from 2009 to 2016 in some states, including several of the most populous states such as California and Texas (see fig. 5). Most of the recent expansion of wireless networks has tended to be in the most populous states, as those states contain the most customers and the highest densities of customers, according to FCC officials. In addition, the thresholds for which carriers are required to report wireless outages in NORS are such that many outages that affect primarily rural areas will not accumulate enough user minutes to be reportable. However, the number of wireless outages with a physical incident as the root cause was relatively steady in many states or had spikes that generally corresponded with major natural disasters like the 2012 derecho. For more detailed information on the location of all reported wireless outages that occurred from 2009 through 2016, including the cause and number of users associated with these outages, see an interactive graphic which can be viewed at http://www.gao.gov/products/gao-18-198. Power failures and failures in other providers’ networks (e.g., backhaul) played a role in the majority of wireless outages attributed to physical incidents. When an accident, natural disaster, or manmade event was the root cause for an outage, we found that wireless carriers often also reported a failure in one of these two key dependencies for wireless networks: Regarding power, 8 percent of wireless outages with a physical incident as the root cause (465 of 6,002 outages) cited power failure as the direct cause of the outage. Nearly all these outages were attributed to a natural disaster. Regarding failures in other providers’ networks, 87 percent of outages attributed to a physical incident (5,206 of 6,002 outages) were due to a failure in another provider’s network, which includes backhaul connecting cell sites to mobile switching centers and onto the broader network. Most of these outages—4,111—cited an accident (i.e., a digging error resulting in cable damage) as the root cause. In 2014, a working group from an FCC-chartered federal advisory committee concluded that there is little to no shared, last-mile transport infrastructure for backhaul that wireless carriers (or other providers) could share dynamically to mitigate the effect of a backhaul failure. Thus, a backhaul outage will often result in a wireless outage. However, the working group identified existing best practices that providers can employ to help reduce or lessen the impact of failure in last-mile backhaul. Since 2013, FCC and DHS have both continued to take action using a range of existing mechanisms to improve wireless network resiliency. These mechanisms include leading communications-specific planning activities and topic-specific research to develop and to share best practices. While these mechanisms are not new, FCC and DHS report updating and adapting these activities based on emerging needs and lessons learned from exercises and emergency events. FCC and DHS actions include the following: Chartering advisory committees that examine resilience: DHS and FCC charter federal advisory committees that have studied how agencies and industry could improve resiliency. For example, one such committee is FCC’s Communications Security, Reliability, and Interoperability Council (CSRIC), whose members include representatives from wireless carriers and other communications companies, industry associations, and federal, state, and local agencies. CSRIC working groups often develop best practices for industry and make recommendations to wireless carriers, FCC, and others to improve network resiliency. One example is a working group that studied how industry could share backup power resources in 2014. FCC maintains a database of best practices and publicizes these through presentations at conferences and in public reports, as it did in a report on communications outages caused by the 2012 derecho. Six stakeholders we interviewed said best practices represent a valuable means to improve resiliency, as for example, best practices are flexible and enable providers to adapt practices as communications networks evolve. One stakeholder attributed CSRIC’s effectiveness in issuing and promoting best practices and information in part to its affiliation with the industry’s regulator, FCC. Other advisory committees that examined resiliency include DHS’s National Security Telecommunications Advisory Committee and FCC’s Technological Advisory Council. Developing and implementing procedures to respond to physical incidents: DHS leads emergency communications response and recovery efforts, as coordinator for ESF-2. For example, within DHS, the National Coordinating Center for Communications (NCC) holds weekly calls with government and industry partners to exchange information as part of NCC’s work to continuously monitor events that may affect communications. These weekly calls sustain relationships and promote readiness that can be leveraged to coordinate a response to an emergency incident, according to DHS and FCC officials and members of the Communications Sector Coordinating Council. During an incident, NCC reports that it holds these calls on a daily basis to understand the status of wireless and other networks—along with FCC outage data and other information collected from carriers—and to support industry response efforts. For instance, NCC officials said that during an incident they can help carriers find available generators or work with local governments to enable carriers to enter disaster areas to make repairs if carriers are denied access. Two carriers we interviewed said the NCC works well to support industry response to and recovery from incidents, as NCC has established response processes to help the communications sector to coordinate with the power industry. According to DHS, NCC participates in the Energy Priority Restoration Group that is dedicated to determining power restoration priority following an incident. While this group includes many sectors, it enables communications providers to help prioritize power restoration for critical communications components, like mobile switching centers. Analyzing wireless outage data to identify trends and areas for further study: As noted above, FCC collects and regularly analyzes data on wireless outages during the regular course of business and during emergency events. FCC meets with each nationwide wireless carrier annually to discuss trends in the carrier’s outages and any issues related to how the carrier completes NORS reports, according to FCC officials and an industry association we interviewed. FCC also analyzes and shares its analysis of NORS data with industry at quarterly meetings of the Alliance for Telecommunications Industry Solutions’ Network Reliability Steering Committee. Specifically, FCC presents trends in NORS outage data for the last 3 years for different types of outages. Such data include trends in the total number and duration of wireless outages. The Network Reliability Steering Committee, at FCC’s request or its own initiative, establishes teams to examine NORS trends and to make recommendations that may increase network reliability and reduce network outages. Based on this work, the team may identify relevant best practices that carriers could use to reduce or eliminate outages or suggest refining or creating a new best practice. Representatives from two industry associations said that FCC meets with industry to discuss outage data and is receptive to feedback on how to improve data-reporting processes and data quality. In addition to these existing mechanisms, federal agencies have initiated some new activities to enhance wireless network resiliency since 2013. Community Resilience Panel: NIST issued the Community Resilience Planning Guide for Buildings and Infrastructure Systems in October 2015 and sponsors the Community Resilience Panel, which aims to reduce barriers to achieving community resilience by promoting collaboration among stakeholders to strengthen the resilience of buildings, infrastructure, and social systems upon which communities rely. The panel held its first meeting in November 2015. The planning guide provides a process that communities can use to improve their resilience by setting priorities and allocating resources to manage risks based on their prevailing hazards. The guide also devotes sections to key infrastructures; the communications section describes components of communications networks, the regulatory environment, and industry standards that can help inform community planning. The Community Resilience Panel also has a Communication Standing Committee comprised of industry and government members. This committee is currently creating additional resources to support communities, including a methodology that communities could use to involve wireless carriers and other communications providers in resilience planning activities. While communities have started to use the guide, NIST officials said it is too soon to measure or point to specific outcomes attributable to the Community Resilience Panel’s work. Post Hurricane Sandy hearings and proposed rule: In 2013, FCC held field hearings on network reliability and continuity. The goals of the hearings were to improve network resiliency, improve restoration, empower the public, and unleash technological solutions. The two hearings included a wide range of panelists including representatives from FCC and FEMA, state and local agencies, consumer groups, wireless carriers, and other communications providers. Following the hearings, FCC issued a notice of proposed rulemaking to promote transparency to the public on how wireless carriers compare in keeping their networks operational during emergency events. Specifically, FCC’s proposed rule would publicly report the number and percentage of each carrier’s cell sites that remained operational during an emergency event to enable consumers to compare wireless carriers when purchasing service. Based on our review of comments, public safety and consumer groups tended to support the proposed rule while industry expressed concerns, in particular, that the public reporting in the proposed rule would not accurately portray the service available during an emergency or be a useful measure to help consumers choose among wireless carriers. FCC decided not to issue a final rule, stating in December 2016 that a voluntary industry approach, described below, provided a more appropriate path to improve network resiliency. We asked stakeholders about the results of the actions taken by FCC and DHS, and across the 24 stakeholders we interviewed, there was no consensus regarding needed improvements in DHS and FCC guidance, coordination, or research on wireless resiliency. Seven stakeholders said they did not think there were any gaps or needed improvements from FCC, and six stakeholders said they did not think there were any gaps or needed improvements from DHS. Although most stakeholders identified a need for further federal agency action, they tended to identify dissimilar actions. However, the three state and two local agencies we interviewed noted that more real-time data on wireless outages would help aid their efforts to respond to an incident, which we discuss further below. In April 2016, an industry coalition consisting of CTIA, a wireless industry association, and five wireless carriers announced the Wireless Network Resiliency Cooperative Framework (framework) in response to FCC’s 2013 notice of proposed rulemaking on wireless network resiliency. The framework is a voluntary initiative designed to advance wireless service continuity and information sharing during and after emergencies by enhancing coordination and communication, both among carriers and between carriers and government. The framework has five elements; some elements are specific to disaster response while other elements focus on preparedness and education. Industry has taken steps related to all five elements of the framework, as described in table 1. Furthermore, CTIA representatives told us they have ongoing meetings with representatives from the public-safety community, the outcome of which they expected to be a series of best practices concerning planning before disasters, addressing coordination during and after emergencies, and developing education and awareness strategies in fall 2017. The threshold to trigger the response elements is when DHS activates ESF-2 and FCC activates DIRS. At the time of our review, four events—Hurricane Matthew in October 2016 and hurricanes Harvey, Irma, and Maria in late 2017—had met the threshold to trigger the response elements. Prior to the three events in 2017, FCC officials and three stakeholders we interviewed told us it was too soon to know the effectiveness or results of the framework. FCC is responsible for administering policies to improve resiliency, which include monitoring actions taken by industry, and federal standards for internal control state that management should establish and operate monitoring activities, evaluate and document the results of ongoing monitoring, and then identify changes that either have occurred or are needed. Federal standards for internal control also state that agencies should define objectives clearly and that objectives should be in specific and measurable terms that allow for the assessment of performance. In December 2016, FCC said it would continue to engage with industry on the implementation and use of the framework, and FCC has taken some steps to monitor the framework’s implementation. Specifically, FCC developed a plan to track certain tasks related to the framework in August 2017. This plan tracks the completion of initial tasks related to the framework, such as tracking industry’s publication of best practices to enhance municipal preparedness and resiliency, and confirming the five signatory wireless carriers’ commitment to the framework, and notes that FCC will update its emergency response documents to ensure that the documents reflect the framework and include checklists to validate that carriers take these actions during emergency events (e.g. instituting roaming, providing mutual assistance). In August 2017, FCC also issued a public notice inviting carriers beyond the five signatory wireless carriers to sign on to the framework. However, we found FCC’s plan does not include any steps to document and assess the effect of the framework on the resiliency of wireless networks. In particular, FCC’s plan does not track any outputs or outcomes over time that speak to the results of the framework, such as the number of roaming requests made and fulfilled during an emergency event. FCC’s plan to monitor the framework is still new. According to FCC officials, FCC did not decide what division would lead its monitoring of the framework until August 2017 because it needed to determine which division should have responsibility for the framework. Since the plan was created, FCC has met with industry groups and individual carriers to gather additional information and has updated its plan with this information to track implementation tasks. Overall, by monitoring the outputs and outcomes of the framework, FCC could determine where further changes are needed to help ensure that wireless networks are resilient. In 2016, FCC reported that the framework could produce benefits such as bolstering FCC’s situational awareness and providing consumers with a means to hold carriers accountable for service continuity during emergency events. Yet, seven stakeholders we interviewed, including wireless carriers, said the framework largely codified actions that carriers already generally take to prepare for and respond to an emergency event. In addition, comments submitted to FCC in 2016 were split on whether the framework represented a sufficient path forward, and some stakeholders noted specific issues that they believed could limit the effectiveness of the framework, for example: Four stakeholders we interviewed—an industry association, local agency, state agency, and consumer group—cited the lack of federal agency enforcement or monitoring. Two industry associations stated in joint comments that there was no assurance that all carriers would conduct adequate testing to enable roaming under disasters. A local agency said in comments that the threshold to trigger the response elements was too high; as such, carriers would not be- obligated to implement the elements for more local events. Therefore, monitoring the outputs and outcomes of the framework would help FCC understand the effect of industry formalizing these actions in the framework. Furthermore, although FCC and industry documents that describe and endorse the voluntary framework include broad goal statements, there are no specific measures for what the framework hopes to achieve. As a result, FCC lacks specific and measurable terms to monitor the effect of the framework. The CTIA- and carrier-released public summary of the framework said it aims to advance wireless service continuity and information sharing during and after emergencies and disasters, as well as help consumers be better prepared for future disasters. FCC, when endorsing the framework, said it was a reasonable approach to achieve FCC’s stated goals for the 2013 proposed rule, including promoting availability of wireless mobile services in the event of natural disasters and increasing provider transparency around wireless resiliency. FCC officials told us they have not discussed possible measures to monitor the effect of the framework with industry participants. As the creators of the framework, industry participants could provide insight into such measures. However, FCC officials acknowledged that it will be important to determine what the results of the framework have been in light of the 2017 hurricanes, and that developing measures to assess industry’s efforts under the framework would be beneficial. In addition, FCC has not communicated the framework to all state and local public-safety officials and wireless carriers, potentially limiting its effectiveness. At the time of our review, CTIA and the signatory wireless carriers had released a high-level summary of the framework but no additional documentation on the scope of wireless carriers’ obligations under the framework. Based on our interviews, we found that knowledge of the framework was not widespread. Six stakeholders we interviewed, including representatives of state agencies we interviewed and a non-signatory wireless carrier, were either unaware of the framework or unaware of whether industry had taken actions on any elements of the framework since its announcement. For example, a state emergency manager in one state affected by Hurricane Matthew was unaware of the framework and that FCC, based on one element of the framework, had posted daily status updates on wireless service following the hurricane. This manager noted that those updates would be useful for response efforts. Federal standards for internal control state that federal agencies should externally communicate necessary, quality information to achieve the agency’s objectives and that open communication can also help enable a federal agency to obtain information from external parties. Among the stated objectives of FCC is to advise and assist public safety entities on wireless communications issues and to develop and administer policy goals and plans to promote reliable communications for public safety and disaster management. Moreover, one of FCC’s current strategic objectives is to promote access to effective public-safety communications services used by government as well as all consumers in need. To address this and other objectives, FCC stated that it will facilitate discussions and share information among key constituencies. FCC uses several mechanisms and standing forums to share information and educate constituencies. For example, FCC gives presentations about FCC activities at conferences on public safety communications that include state and local officials. In addition, FCC participates in the regular conference calls hosted by DHS’s NCC through which government and industry exchange information and the Network Reliability Steering Committee’s public quarterly meetings, as noted above. Without greater awareness of the framework, state and local public safety officials may continue to be unaware of tools or other improvements available through the framework that could help them prepare for or respond to an emergency, such as the posting of daily updates on the number of out-of-service cell sites or best practices that could aid resilience. Also, smaller and rural (non-signatory) wireless carriers might be unaware of commitments made by the signatory carriers, such as committing to roaming under disasters that could benefit them and the citizens they serve during an emergency event but may require entering into and testing a roaming arrangement. By actively communicating information about the framework, FCC could also increase the likelihood of receiving information from industry or state and local public-safety officials about any implementation issues or positive results from the framework. In August 2017, FCC created a website that summarized the framework and, as noted above, issued a public notice inviting additional carriers to sign on to the framework. Only two carriers, as of October 2017, beyond the carriers involved in creating the framework publicly informed FCC of their intent to participate in the framework. As of October 2017, FCC officials told us they did not have additional plans to promote awareness of the framework, but noted that it would be important to inform relevant stakeholder groups about the framework, especially those who might remain unaware of it. We identified options that federal agencies could take to further improve wireless network resiliency based on agency reports, federal advisory committee recommendations, peer-reviewed literature, and other reports. The options we identified could be implemented either alone or in combination and are not meant to be exhaustive. We categorized them by their aim—preparedness, response, and awareness. FCC, as the regulator for wireless communications, would be the likely agency to implement many of the options, although DHS or other federal agencies could play a role in implementing some of the options. We asked stakeholders to comment on the advantages and disadvantages, including the feasibility—technical, legal, or other—of each option. The tables below describe identified options by category, along with the most frequently cited advantages and disadvantages. FCC has previously suggested and discussed some of these options, most recently during its notice of proposed rulemaking in 2013. FCC noted that its proposed rule sought to comply with guidance from the Office of Management and Budget to use disclosure requirements or transparency measures where possible in place of prescriptive regulations. However, as noted above, FCC declined to issue a final rule, stating that the proposed rule was problematic in light of substantial concerns raised about proposed metrics and disclosure requirements. Two options identified in agency reports and literature intend to improve resiliency by focusing on actions to be taken ahead of an emergency or disaster, as described in table 2. Twelve stakeholders we interviewed raised concerns about the feasibility of the option to require a minimum level of backup power at cell sites due to technical or legal issues. In 2007, FCC adopted a requirement for wireless carriers to provide 8 hours of backup power at cell sites. That requirement was vacated after the Office of Management and Budget disapproved the rule’s information collection requirements. In contrast, nine stakeholders we interviewed were more positive about the feasibility of guidance. Further, FCC created the Broadband Deployment Advisory Committee in January 2017 to provide recommendations on how to accelerate broadband deployment. Two of the committee’s five working groups focus on state and local regulatory barriers and model language for state and municipal code, both of which could provide a model for wireless network infrastructure. As shown in table 3, agency reports and literature also included options related to response activities during and after an emergency event. For the first option, FCC officials and six stakeholders we interviewed noted that wireless carriers have on occasion opened up their networks in prior emergency situations, which indicates that the option is technically feasible. For the second option, every state and local agency we spoke with noted the value of having real-time information on wireless outages during an emergency event. FCC collects DIRS data, and these data are confidential when provided to FCC. According to FCC, if outage data were shared with a state or local agency, it may be subject to open records laws that provide a means for the public to gain access to government documents. Other options are intended to improve wireless network resiliency by fostering transparency, as described in table 4. For some options below, transparency would involve making information publicly available so consumers could use this information when choosing a wireless carrier. Such transparency could give industry an incentive to improve the resiliency of their networks. For example, by setting performance standards or requiring wireless carriers to disclose their efforts to improve resiliency, consumers could compare the performance or practices of wireless carriers. However, some of these options would require defining specific parameters, whether a metric or the specific information to disclose, and seven stakeholders we interviewed noted this could be difficult given factors such as the variation in carriers’ wireless networks and the pace of technological change. For other options below, transparency would involve more selectively sharing information with other public safety agencies to improve coordination and aid planning for possible disruptions to wireless networks during emergencies. During natural disasters and other emergencies, wireless network outages can make emergency communications, such as making 911 calls, nearly impossible for the vast number of people who rely solely on wireless communications. The wireless industry sought to enhance resiliency by improving the continuity of wireless service and information sharing during and after emergency events by introducing a voluntary framework. Although FCC stated that this voluntary framework would have many benefits, neither industry nor FCC has identified any specific, measurable objectives that could be used to determine whether the framework meets its broad goals, and FCC has limited plans to monitor the framework’s implementation and use. Absent sufficient monitoring, including identifying specific, objective measures for the framework, FCC lacks information on the framework’s outcomes and overall effectiveness; such information could help FCC identify whether it needs to take steps to address challenges or take other action to further promote wireless network resiliency. Furthermore, FCC does not have any plans to actively communicate information about the framework to public safety officials and industry representatives. A concerted effort by FCC to promote awareness of the framework could help more public safety officials and other industry participants use the framework to prepare for or help mitigate the risks to wireless networks posed by natural disasters and other emergencies. We are making the following three recommendations to FCC: The Chairman of FCC should work with industry, to the extent practical, to develop specific and measurable objectives for the Wireless Network Resiliency Cooperative Framework, such as outputs to measure the extent of the framework’s use. (Recommendation 1) The Chairman of FCC should develop a plan to monitor the outputs and outcomes of the Wireless Network Resiliency Cooperative Framework and document the results of its monitoring to evaluate its effectiveness and identify whether changes are needed. (Recommendation 2) The Chairman of FCC should promote awareness about the elements of and any outcomes from the Wireless Network Resiliency Cooperative Framework among state and local public safety officials and other industry stakeholders, such as through existing outreach mechanisms and government-industry forums. (Recommendation 3) We provided a draft of this report to FCC, DHS, and the Department of Commerce for comment. In its comments, reproduced in appendix III, FCC agreed with the recommendations. FCC also provided technical comments, which we incorporated as appropriate. DHS and the Department of Commerce had no comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Chairman of FCC, the Secretary of Homeland Security, and the Secretary of Commerce. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines federal agency and industry efforts to improve the resiliency of mobile wireless networks in response to natural disasters and other physical incidents since Hurricane Sandy, a natural disaster that caused significant communications outages across several states in late 2012. Specifically, this report examines: (1) trends in mobile wireless outages attributed to physical incidents since 2009 as reported to the Federal Communications Commission (FCC), (2) the actions federal agencies and industry have taken since 2013 to improve wireless network resiliency, and (3) options that federal agencies could take to improve network resiliency and their advantages and disadvantages. This report focuses on the physical risks facing wireless networks; that is, the potential for an unwanted effect from an incident on a network’s infrastructure like towers, antennas, and switches. Therefore, we did not examine cyber risks facing wireless networks. To determine the trends in wireless outages, we analyzed data from FCC’s Network Outage Reporting System (NORS) on wireless outages that occurred from 2009 through 2016. We chose this timeframe to cover 4 years of data before and after Hurricane Sandy. Communications providers, including wireless carriers, are required in regulation to submit outage reports in NORS for network service disruptions that reach certain thresholds. Given our focus on wireless outages, we examined reports in NORS for outages (1) that were reported by wireless companies that identified themselves as either a wireless carrier or Voice over Internet Protocol (VoIP) provider and (2) that were cited, as the reason the outage was reportable, a reporting requirement applicable to a wireless carrier or VoIP provider in 47 C.F.R. Part 4. We analyzed NORS data for wireless outages to determine the total number and the causes of wireless outages that occurred from 2009 through 2016. FCC provides carriers a list of 19 main categories from which a carrier selects a root cause, direct cause, and contributing factor(s) for an outage. We examined the root cause and direct cause for each wireless outage reported to FCC. We collapsed several of the FCC categories to create 9 categories for ease of presentation. Table 5 shows the crosswalk between the 19 FCC categories and our 9 collapsed categories. We also analyzed the data to identify the share of all wireless outages attributed to a physical incident—that is, a natural disaster (e.g., flooding, earthquake, wildfire); accident (e.g., backhoe cut); or manmade event (e.g., theft, malicious act). FCC provides carriers a list of categories from which they select a root cause, direct cause, and contributing factor(s) for an outage. Using these FCC categories, we created three new categories for natural disasters, accidents, and manmade events (see table 6). We based these three new categories on the description and categorization of physical risks in FCC and DHS reports, including the Communications Sector-Specific Plan. To understand the distribution of causes across all wireless outages in our time frame, we focused primarily on the root cause for each wireless outage. However, we also examined the root and direct cause reported for each outage to better understand the multiple factors that may have led to an outage and to understand wireless network dependencies (e.g., power, backhaul). Finally, we examined the number of outages, by month and by year, for which a wireless carrier reported a physical event as the root cause, direct cause, or contributing factor to better understand the total number of outages related to a physical incident during our time period. We also analyzed other characteristics of wireless outages such as location, duration, and whether the failure occurred in another company’s network. To examine location, we focused on three NORS fields—city, state, and description of location—to identify a city(ies) and state for each outage, and then we determined the latitude and longitude for each outage. We also examined NORS data in conjunction with two other data sets. First, data on events for which FCC activated its Disaster Information Reporting System (DIRS) or “DIRS-lite” to understand any correlation between wireless outages and major physical incidents. Second, data from CTIA’s annual wireless survey on the number of wireless subscribers and other measures of wireless networks’ size to understand any correlation between wireless outages and the size of the wireless industry. To assess the reliability of NORS data, we reviewed FCC’s data glossary and other FCC documentation on the NORS data system and data elements. We interviewed agency officials responsible for collecting and analyzing NORS data to understand the manual and automated controls used to review carrier-reported outage information and any potential limitations in the data. We also reviewed relevant data elements for missing data, outliers, and errors. We found the data were sufficiently reliable for the purpose of describing the number and type of wireless outages reported to FCC that were attributed to a physical incident. To determine the actions federal agencies have taken since 2013 to improve the resiliency of mobile wireless networks, we reviewed reports and documents from FCC, the Department of Homeland Security (DHS), and the National Institute of Standards and Technology (NIST) within the Department of Commerce. Specifically, we reviewed transcripts and papers from hearings and a workshop FCC held in 2013 on communications reliability and continuity. We also analyzed agency orders and comments submitted in FCC’s 2013 proceeding on wireless resiliency. In addition, we reviewed communications sector planning reports, such as the 2015 Communications Sector-Specific Plan and 2013 National Infrastructure Protection Plan, and other DHS communications sector-specific documents, as well as the NIST Community Resilience Planning Guide for Buildings and Infrastructure Systems and related documents. We also examined reports from federal advisory committees and partnership councils that cover wireless network resiliency, including reports from the Technological Advisory Council; Communications, Security, Reliability, and Interoperability Council; National Security Telecommunications Advisory Committee; and the Communications Sector Coordinating Council. To ensure we covered relevant agency actions and to seek any information on the results of these actions, we interviewed officials from DHS’s Office of Cybersecurity and Communications within the National Protection and Programs Directorate, including officials from the Stakeholder Engagement and Cyber Infrastructure Resilience division— the sector-specific agency that leads federal efforts to protect and secure the communications critical infrastructure—and National Cybersecurity and Communications Integration Center—the center that continuously monitors incidents that may impact communications. We also interviewed officials from DHS’s Federal Emergency Management Agency and Science and Technology Directorate, FCC, and NIST. Beyond federal agency officials, we interviewed 24 stakeholders to further understand federal agency and related industry actions to improve wireless network resiliency since 2013 and any results from these actions. Stakeholders included wireless carriers and other owners of wireless network infrastructure, industry associations, consumer groups, and state and local government officials. We selected stakeholders to ensure we covered different perspectives (e.g., industry and consumer groups, associations that represent state and local public safety officials). In particular, we selected industry associations and individual companies to cover both wireless carriers—which operate networks and own some network infrastructure—and communications tower companies—which own and operate towers and sites and then lease space to wireless carriers. We selected wireless carriers to include both nationwide and regional carriers. We selected state agencies to include states directly affected by two events—flooding in Louisiana and Hurricane Matthew— for which industry had implemented elements of the framework at the time we began our review. The views presented in our report are not generalizable to those of all stakeholders. See table 7 for a list of interviewed stakeholders. We reviewed documents describing the Wireless Network Resiliency Cooperative Framework (framework)—a voluntary, industry initiative announced in April 2016. We interviewed CTIA and three of the five wireless carriers that collectively proposed the framework to learn about the impetus for, status of, and any outcomes or lessons learned from use of the framework to date. We also interviewed FCC and DHS about each agency’s awareness of and role monitoring industry use of the framework, and we reviewed FCC plans to monitor and share information about the framework. Finally, we asked stakeholders we interviewed, as described above, about their knowledge of and experience with the framework, including any observed outcomes from its use to date. We assessed FCC’s efforts to monitor implementation of the framework against Standards for Internal Control and FCC’s current strategic plan. To determine what options exist for federal agencies to improve wireless network resiliency, we examined federal agency reports, literature, and other sources. First, we reviewed filings in FCC’s 2013 proceeding examining wireless resiliency, including FCC’s orders and comments filed by various parties, for proposed options that federal agencies could take. Second, we conducted a literature review of peer-reviewed articles, government reports, industry publications, and think tank publications from the last 5 years to identify additional options. Third, we examined reports from the aforementioned federal advisory committees on wireless network resiliency, the NIST Community Resilience Planning Guide for Buildings and Infrastructure Systems, and the Hurricane Sandy Rebuilding Task Force for recommendations made to federal agencies to enhance wireless network resiliency. From these sources, we identified 11 proposed options that federal agencies could take to improve wireless network resiliency. We eliminated one option—requiring wireless carriers to disclose outage information to the public—as this was the only option that FCC specifically proposed as a new rule in its 2013 proceeding, but ultimately FCC decided not to move forward on this proposal when it decided to not issue a final rule. The identified options were primarily those that FCC could implement, as FCC is the regulatory agency for wireless communications, although DHS or NIST could implement several of the options. We interviewed a variety of stakeholders, described above, to obtain their views on the advantages, disadvantages, and feasibility of each of the identified options. We used open-ended questions to solicit input on each option rather than provide a list of advantages and disadvantages to stakeholders. We also asked stakeholders if there were additional options for federal agencies to ensure we had a thorough list of options for federal agencies. Based on interviews with stakeholders and federal agencies, we decided not to present two options in our report—establish more formal, ongoing collaboration between wireless carriers and power companies and create a program to facilitate collaborative restoration between wireless carriers and power companies—as federal agencies told us they were already taking actions on these fronts. Therefore, we included federal agencies’ actions related to these two options while describing actions taken by federal agencies since 2013. We analyzed information collected through the interviews with stakeholders to identify the most commonly cited advantages and disadvantages, and to determine the number of stakeholders that supported or did not support each option. The information collected from stakeholder interviews is not generalizable to all industry stakeholders. The figures below provide results from our analysis of Federal Communications Commission (FCC) data on wireless outages from 2009 through 2016. The data is from the Network Outage Reporting System (NORS), the system that wireless carriers and other communications providers use to report information on outages meeting certain threshold as required by regulation. The figures below present information on the number, cause, and duration of all wireless outages reported to FCC for this period. To describe wireless outages by cause, we use nine categories that collapse several of the FCC categories from which wireless carriers select the root cause, direct cause, and contributing factor(s) when reporting an outage. The following provides a brief description of these nine categories. Appendix I contains information on the scope and methodology for this analysis, including these nine collapsed categories. Cable damage/failure includes outages caused by an error locating or digging that resulted in cable damage, by an aerial cable that was damaged or ceased to function, and by loss of transmission in a cable due to aging, among other causes. FCC categories: cable damage, cable damage/malfunction. Equipment failure contains outages caused by the failure of a hardware component (e.g., circuit pack or card in a processor) or by a problem with the design of firmware, hardware, or software (e.g., failure for firmware to reset or restore after initialization, logical errors in software). FCC categories: design-firmware, design-hardware, design-software, hardware failure. Network robustness includes outages caused by, for example, a failure to provide or maintain diversity, thus preventing single points of failure. FCC categories: diversity failure, simplex condition. Maintenance includes outages caused by a needed spare part not being on hand or available, a vendor or contractor lacking updated procedures for its work, a service provider not providing adequate or up-to-date training, and scheduled maintenance to upgrade a network component or fix a known problem, among other causes. FCC categories: spare, procedural-other vendor/contractor, procedural- service provider, procedural-system vendor, planned maintenance. External environmental contains outages caused by earthquakes, wildfires, flooding, and other natural disasters as well as vandalism, theft, vehicle accidents that impair or destroy a component, and animal damage. FCC category: environment (external). Internal environmental contains outages caused by contamination due to dirt or dust that leads to overheating, by water entering manholes or vaults that destroys or impairs a component, and by other damage related to the condition of buildings and structures housing network equipment. FCC category: environment (internal). Other/Insufficient data includes outages for which there is not enough information for a failure report or investigation to determine the cause of the failure, service was restored before the cause could be determined, and the cause cannot be determined or proven. FCC categories: insufficient data, other/unknown. Power failure includes outages due to a commercial power failure (including power failures that extend beyond any backup power capabilities), a generator running out of fuel, a power system that was insufficiently sized for its purpose, and batteries not functioning as designed. FCC category: power failure (commercial and/or backup). Traffic/System overload contains outages where a network is overloaded or congested because of an unplanned, external event, or because of under-engineering the network due to changing demand or technologies. FCC category: traffic/system overload. . In addition to the contacts named above, Sally Moino (Assistant Director); Joanie Lofgren (Analyst in Charge); Enyinnaya David Aja; Stephen Brown; David Hooper; Richard Hung; Joshua Ormond; Amy Rosewarne; Andrew Stavisky; and Timothy Young made key contributions to this report. Jon Ludwigson, John Mortin, Mark Pross, Pam Snedden, James R Sweetman, Jr., and Joe Thompson also made contributions to this report.", "summary": "Americans increasingly rely on mobile wireless communications for safety-related communications like calling 911 and receiving weather alerts. Mobile wireless networks face risks from physical incidents including extreme weather events and intentional and accidental damage. For example, in 2017 several major hurricanes damaged wireless network infrastructure, leaving many U.S. citizens without reliable access to wireless communications. GAO was asked to review federal efforts to improve the resiliency of wireless networks following natural disasters and other physical incidents. This report examines: (1) trends in mobile wireless outages reported to FCC since 2009 and (2) actions federal agencies and industry have taken since 2013 (after Hurricane Sandy) to improve wireless network resiliency, among other objectives. GAO analyzed wireless outage data from 2009 to 2016 (4 years before and after Hurricane Sandy); reviewed FCC, DHS, and industry documents; and interviewed stakeholders who represented a variety of perspectives, such as industry, public safety, and consumer groups. GAO assessed FCC's efforts to monitor an industry initiative to improve wireless network resiliency against federal internal control standards. The number of wireless outages attributed to a physical incident—a natural disaster, accident, or other manmade event, such as vandalism—increased from 2009 to 2016, as reported to the Federal Communications Commission (FCC). During this time, the number of outages substantially increased from 189 to 1,079 outages, with most of the increase occurring from 2009 to 2011. FCC officials said this increase was due in part to growth in wireless customers and wireless infrastructure. Almost all outages attributed to a physical incident were due to an accident, such as damage to a cable due to a digging error (74 percent) or a natural disaster (25 percent). However, outages due to a natural disaster had a longer median duration (ranging from 19 to 36 hours), which was more than twice as long as outages caused by an accident. Power failures and failures in other providers' networks also play a role in wireless outages attributed to physical incidents. For instance, carriers reported that 87 percent of wireless outages attributed to a physical incident were due to a failure in another provider's network on which they rely. Since 2013, federal agencies and industry have taken actions to improve the resiliency of wireless networks. For example, the Department of Homeland Security (DHS) and FCC charter federal advisory committees that have examined resiliency issues and potential solutions, such as sharing infrastructure during emergencies. FCC also proposed a rule that would disclose how individual wireless carriers' networks performed during emergency events. In response, an industry coalition announced an initiative—the Wireless Network Resiliency Cooperative Framework—whereby carriers agreed to allow roaming on each other's networks and aggregated statistics to be published on how networks performed during emergency events. This initiative prompted FCC to not adopt its proposed rule. FCC said it would engage with industry about the framework's implementation and use, but FCC has limited formal plans to oversee or spread knowledge of the framework: FCC developed a plan to track the completion of initial implementation tasks outlined in the framework, but this plan does not include steps to track or evaluate any outputs or outcomes from the framework. FCC and industry documents describe broad goals for the framework, such as advancing information sharing during and after emergency events, but neither FCC nor industry has set any specific measures to help determine whether the framework achieves these broad goals. Although some public safety officials and other stakeholders GAO contacted were not aware of the framework, FCC did not have plans to actively communicate information about the framework to these audiences. More robust measures and a better plan to monitor the framework would help FCC collect information on the framework and evaluate its effectiveness. Such steps could help FCC address any challenges or decide whether further action is needed. Also, by promoting awareness about the framework, FCC would help public safety officials and other industry participants to be well positioned to use the framework to help them prepare for or respond to emergency events. FCC should work with industry to develop specific performance measures for the Wireless Network Resiliency Cooperative Framework, monitor the framework's outcomes, and promote awareness of it. FCC agreed with the recommendations.", "document_type": "gao"}
{"report": "Countering the proliferation of nuclear weapons and other weapons of mass destruction (WMD) remains a U.S. national security priority. According to the 2017 National Security Strategy, terrorist groups continue to pursue WMD-related materials, which pose a grave danger to the United States. As also stated in the 2017 National Security Strategy, Russia’s nuclear arsenal remains the most existential threat to the United States, China’s nuclear arsenal is growing and diversifying, Iran has the potential of renewing its nuclear program and North Korea has pursued nuclear weapons despite international commitments. As the DSB report noted, U.S. monitoring abilities are increasingly challenged by evolving risks in 1) the capability of existing nuclear states and 2) the number of state and nonstate actors possessing or attempting to possess nuclear weapons. U.S. nonproliferation activities are conducted and coordinated across multiple government agencies and organizations, as well as the intelligence community. In addition, these efforts are coordinated with international entities, national laboratories, industry, and academia. U.S. nuclear nonproliferation verification and monitoring efforts are guided by, among other things, U.S. obligations under the Treaty on the Non- Proliferation of Nuclear Weapons (NPT) and U.S. support for the Preparatory Commission for the Comprehensive Nuclear Test-Ban Treaty Organization (CTBTO). The NPT lays out the respective responsibilities of nuclear-weapon and nonnuclear-weapon states with regard to the transfer, acquisition, possession, control, and manufacture of nuclear weapons. All nonnuclear-weapon states are required to have a comprehensive safeguards agreement with the International Atomic Energy Agency (IAEA) to facilitate IAEA’s safeguards activities. IAEA safeguards are a set of technical measures and activities by which IAEA seeks to verify that nuclear material subject to safeguards is not diverted to nuclear weapons or other proscribed purposes. Under the Comprehensive Nuclear Test-Ban Treaty (CTBT), which has yet to enter into force, parties agree not to carry out any nuclear explosions. The United States supports the work of the CTBTO to build up a verification regime in preparation for the treaty’s entry into force. The Administration’s fiscal year 2018 plan for verification and monitoring described ongoing interagency efforts to support nuclear proliferation verification and monitoring and includes information about relevant national priorities, capability gaps, R&D initiatives, and roles and responsibilities. The 2018 plan (40 pages) is longer and more detailed than the 2015 plan (2 pages) or the 2017 update (4 pages). The bulk of the 2018 plan is contained in two chapters—one chapter broadly describes U.S. and international efforts and roles and responsibilities, and the other chapter describes ongoing U.S. R&D efforts. We found the Administration’s 2018 plan provided details on each of the four major reporting requirements called for in the fiscal year 2018 NDAA with the exception of future costs and funding needs (see table 1). The first reporting requirement called for a plan and roadmap for verification, detection, and monitoring with respect to policy, operations, and research, development, testing, and evaluation, including— Identifying requirements for verification, detection, and monitoring; Identifying and integrating roles, responsibilities, and planning for verification, detection, and monitoring activities; and The costs and funding requirements over 10 years for these activities. We found that the 2018 plan provided detail on verification, detection, and monitoring requirements and roles and responsibilities, but did not provide details on future costs and funding needed to support the activities in the plan. We found that the plan identified requirements for verification, detection, and monitoring as required. To identify these requirements, the plan notes that interagency partners first identified a set of verification and monitoring priorities. From these priorities they identified a number of technical gaps. The plan then described dozens of examples of R&D efforts and non-technical activities to address those technical gaps. For example, for one gap the plan identifies eight current efforts to address this gap, including continued Department of Energy and NNSA investment in sensor capabilities that are small, light, and can operate in low power. We found that the plan provided details on the requirement to identify and integrate roles and responsibilities and planning. The plan includes details of the roles and responsibilities of interagency partners and international bodies that cooperate in the nonproliferation realm. For example, the plan describes how the Department of Defense is to support U.S. verification activities under the CTBT, including the installation, operation, and maintenance of U.S. International Monitoring Systems. We found that the plan did not identify costs and funding needs over a 10- year period. NNSA officials stated that they believed providing funding information over a 10-year period is unrealistic for several reasons. First, according to NNSA officials, it is not feasible to achieve agreement on actual or implied budgets outside of the existing President’s budget process. Second, according to NNSA officials, agencies have little influence over the funding priorities of other departments outside of existing budget efforts. Third, according to NNSA officials, long-term funding estimates are infeasible because the President’s budget only identifies funding levels five years into the future. However, the 2018 NDAA did not ask for budget information. Instead, the NDAA reporting requirement called for long-term costs and funding information necessary to support the verification and monitoring activities in the plan. Finally, NNSA officials told us that they and officials from other agencies briefed the appropriate congressional committees prior to the release of the 2018 plan, and discussed the challenges with providing cost and funding data. According to NNSA officials, they verified with the congressional committees that providing such information in the plan would be impractical. We have previously reported that providing estimates of future costs and funding needs can help congressional decisionmakers prioritize projects and identify long-term funding needs. NNSA as well as other agencies within the federal government already develop plans with long-term funding priorities and cost estimates. For example, in June 2014, we reported on 10-year estimates for sustaining and modernizing U.S. nuclear weapons capabilities. As we found in this and other reports, even when budgets are preliminary or not yet known, plans that include a range of potential estimates help Congress prioritize projects and funding. Because the plan does not include any information on interagency costs and funding needs, it limits 1) congressional understanding of the long-term affordability of the nation’s verification and monitoring efforts and 2) Congress’s ability to make necessary funding and policy decisions. By including in its plan estimates of future costs and funding needed to support the activities in the plan, NNSA could help provide assurance that agencies are allocating appropriate resources to the verification and monitoring effort. In addition, including estimates of future costs and funding needs in the plan can help ensure that interagency partners understand the amount of resources necessary to support verification and monitoring efforts, and determine if these resources align with agency activities. We have previously reported on the importance of identifying resources among collaborating agencies; we noted that without information on resource contributions from partners in a collaborative effort, there is less assurance that agency contributions are appropriate to successfully sustain the effort. Similarly, providing information on future costs and funding needs is important to help interagency partners coordinate and develop long-term strategic plans that align with future interagency efforts. We have found that for strategic planning to be done well, plans should demonstrate alignment between activities, core processes, and resources that support mission outcome. By including in its plan estimates of future costs and funding needed to support the activities in the plan, NNSA could help provide assurance that agencies are allocating appropriate resources for interagency efforts and that these resources are aligned with future activities and processes. The second reporting requirement called for an international engagement plan for building cooperation and transparency—including bilateral and multilateral efforts—to improve inspections, detection, and monitoring activities. We found that the 2018 plan provided detail on this requirement. The 2018 plan reiterates the nation’s commitment to the NPT and includes information on IAEA’s safeguards programs and U.S support for those programs. For example, under the plan, interagency partners are to continue to encourage countries through diplomatic outreach to conclude Additional Protocol agreements with IAEA. The third reporting requirement called for the plan to describe current and planned R&D efforts toward improving monitoring, detection, and in-field inspection and analysis capabilities, including persistent surveillance, remote monitoring, and rapid analysis of large data sets; and measures to coordinate technical and operational requirements early in the process. We found that the 2018 plan provided detail on this requirement. The plan includes detail on a wide range of R&D efforts and non-technical efforts that agencies are pursuing. For example, the plan reports that the Defense Advanced Research Projects Agency is starting a program that models millions of nodes and billions of connections to support the detection of WMD proliferation activities. In addition, the plan describes interagency groups involved in coordinating R&D requirements, such as the National Science and Technology Council Subcommittee on Nuclear Defense Research and Development. The fourth reporting requirement called for the plan to describe the engagement of relevant federal departments and agencies; the military departments; national laboratories; industry; and academia. We found that the 2018 plan provided detail on this requirement. The plan includes detail on the roles and responsibilities for interagency partners, as well as information on interagency organizations and working groups to coordinate efforts and reduce duplication. For example, the plan discusses the Department of State’s efforts to lead the interagency policy process on nonproliferation and manage global U.S. security policy, and the Department of Defense’s support of U.S. diplomatic efforts, including agreements with other defense departments, R&D cooperation, and multinational exercises. This 2018 plan represents the third effort by Administrations to address the nation’s nuclear proliferation verification and monitoring efforts. The 2018 plan provides more detail on these efforts than the 2015 plan and 2017 update. However, the plan does not include estimates of future costs and funding needs as required by the fiscal year 2018 NDAA. Costs and funding information can help congressional decisionmakers prioritize projects and identify potential long-term funding needs. Similarly, costs and funding information helps interagency partners understand what resources they are expected to contribute in the future and helps to ensure long-term strategic plans reflect an alignment between resources and interagency activities. By including in its plan estimates of future costs and funding needed to support the activities in the plan, NNSA could help provide assurance that agencies are allocating appropriate resources to the verification and monitoring effort and interagency activities, and that these resources are aligned with future activities and processes. We are making the following recommendation to NNSA: The Administrator of NNSA should include in its plan for verification and monitoring estimates of future costs and funding needed to support the activities in the plan. (Recommendation 1) We provided NNSA with a draft of this report for review and comment. NNSA provided written comments, which are summarized below and reproduced in appendix I; the agency neither agreed nor disagreed with our recommendation to include estimates of future costs and funding needed to support the activities in its plan for nuclear proliferation verification and monitoring. However, NNSA stated that it planned no further action with regard to costs and funding data. NNSA also provided technical comments, which we incorporated as appropriate. NNSA stated that it appreciated our recognition of improvements in the 2018 plan for verification and monitoring over the 2015 plan and the 2017 update. In its written comments, NNSA acknowledged that it did not include interagency cost and funding requirements in the 2018 plan over 10 years as required in the NDAA. The agency stated that it briefed the appropriate congressional committees before the release of the plan about the challenges and feasibility of providing the cost and funding data and received no objections on the omission of the data from the plan. NNSA also stated that it informed us of the briefings. We have added clarification in our report that NNSA officials believed they received agreement from congressional staff to exclude funding and cost estimates from its plan. NNSA stated that the NDAA did not prioritize the relative importance of the reporting requirements, and that we disproportionately weighted the one omission in our assessment, effectively overstating the importance of providing cost and funding information. In addition, NNSA identified challenges to the feasibility of providing interagency out-year cost and funding estimates, including the difficulty to quantify the level of R&D and associated funding required to achieve specific outcomes and that departments and agencies are unable to commit to aligning 10 year funding estimates with individual agencies’ timelines and internal processes for planning, programming, budgeting, and execution. NNSA’s statement suggests that it views nuclear proliferation verification and monitoring programs as being unique and different from other federal programs and that they should therefore be exempt from estimating their potential long-term resource burden on the federal budget. We disagree. Developing future cost and funding estimates for programs is central to effective interagency planning efforts. The efforts described in NNSA’s 2018 nuclear verification and monitoring plan span a diverse range of activities that are implemented across multiple agencies. The absence of cost and funding estimates for these efforts in NNSA’s plan raises questions as to whether there is an effective interagency process to coordinate these efforts and if the process is taking adequate account of resource constraints and making realistic assessments of program resource needs. In addition, information on future cost and funding estimates of federal programs provides Congress with a better understanding of the potential long-term funding needs and costs of the diverse efforts supporting the proliferation verification and monitoring mission. We believe this big picture view is important given the multiple congressional committees of jurisdiction—including appropriations, authorization, and oversight committees—for the efforts identified in NNSA’s plan. Regarding the feasibility of providing 10-year cost and funding estimates, we recognize the difficulty and uncertainty agencies face in estimating future funding needs. However, we do not believe developing such estimates is impossible. As we reported, the Department of Defense (DOD) and the Department of Energy (DOE) prepare an annual plan with 10 year cost and funding estimates for their ongoing nuclear sustainment and modernization efforts, including R&D efforts. NNSA also provided general technical comments addressing our findings on the cost and funding estimates that were not included in the plan, including comments on NNSA’s authority to obtain 10-year estimates from other agencies, and on the examples we cited of other interagency plans that include similar estimates. NNSA stated that it did not have authority to require other agencies to submit 10-year budget estimates for their efforts that are included in the plan. We noted in our report that Congress directed the President to include this element in the nuclear proliferation verification and monitoring plan. However, responsibility to prepare and submit the plan was delegated by the President to DOE. NNSA commented that the joint DOD-DOE annual nuclear sustainment and modernization plan is not comparable to the NNSA plan because the former primarily addresses capital projects and other material products, while the latter primarily addresses R&D activities. The reporting requirements for NNSA’s nuclear proliferation verification and monitoring plan were not limited to R&D efforts, but included cost and funding estimates for related activities and capabilities, including policy, operations, testing, and evaluation. NNSA’s comment focuses only on the difficulty of addressing cost and funding estimates for only one aspect (R&D) of nuclear proliferation verification and monitoring and ignores the possibility that estimates for non-R&D efforts may be more feasible and less difficult to report. Moreover, we have reported that the joint DOD- DOE plan on nuclear modernization includes 10-year DOD and DOE estimates for R&D, as well as estimates for related modernization efforts, including infrastructure, nuclear weapon life extension programs, delivery systems, nuclear command, control, and communications systems, and other related activities. We are sending copies of this report to the appropriate congressional committees, the Administrator of NNSA, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix II. In addition to the contact named above, William Hoehn (Assistant Director), Dave Messman (Analyst-in-Charge), Alisa Carrigan, Antoinette Capaccio, Ben Licht, Steven Putansu, and Gwen Kirby.", "summary": "Countering the proliferation of nuclear weapons is a national security priority that is challenged by weapons advances from existing nuclear states and other actors possessing or attempting to possess nuclear weapons. To help address these issues, Congress directed the Administration in 2015 and 2017 to develop a plan for verification and monitoring relating to the potential proliferation of nuclear weapons, components of such weapons, and fissile material. GAO reviewed the first plan submitted to Congress in 2015, and an update submitted in 2017. GAO reported in March 2018 that this plan and update generally did not address the congressionally mandated reporting requirements. In the fiscal year 2018 NDAA, Congress directed the Administration to develop another plan and included a provision for GAO to review the plan. This report assesses whether the Administration's new plan provided details on the reporting requirements included in the NDAA. To determine whether the plan provided details on the reporting requirements, GAO reviewed the fiscal year 2018 plan and assessed whether the plan included details for each of the elements as required by the NDAA. GAO found that the 2018 plan provided details on most of the reporting requirements in the National Defense Authorization Act (NDAA) for Fiscal Year 2018, but did not include information on future costs and funding needs (see table below). In the NDAA, Congress directed the President to produce a plan that would address four reporting requirements: (1) a plan and roadmap on verification, detection and monitoring efforts, including details on costs and funding needs over 10 years, (2) an international engagement plan, (3) a research and development plan, and (4) a description of interagency engagement. The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy, developed the plan and submitted it to Congress in April 2018. According to NNSA officials, NNSA did not include long-term costs and funding needs in the plan because identifying these needs is unrealistic for several reasons, including because agencies have little influence over the spending priorities of other departments outside of the President's budget process. However, NNSA and other agencies already develop plans with long-term funding priorities and cost estimates for other programs. Because the plan does not include any estimates on future costs and funding needs, it limits congressional understanding of the long-term affordability of the nation's verification and monitoring efforts and its ability to make necessary funding and policy decisions. GAO has previously reported that providing estimates of future costs and funding needs can help congressional decisionmakers prioritize projects and identify long-term funding needs. By including in its plan estimates of future costs and funding needed to support the activities in the plan, NNSA could help provide assurance that agencies are allocating appropriate resources to the verification and monitoring effort and that these resources are aligned with future activities and processes. GAO recommends that the Administrator of NNSA should include in its plan estimates of future costs and funding needed to support the activities in the plan. NNSA neither agreed nor disagreed with the recommendation, but said it planned no further action. GAO maintains that the recommendation is valid.", "document_type": "gao"}
{"report": "The Commercial Space Launch Act Amendments of 1988 established the foundation for the current U.S. policy to potentially provide federal payment for a portion of claims by third parties for injury, damage, or loss that results from a commercial launch or reentry accident. A stated goal of the act was to provide a competitive environment for the U.S. commercial space launch industry. The act also provided for, among other things, government protection against some losses—referred to as indemnification—while still minimizing the cost to taxpayers. All FAA- licensed commercial launches and reentries by U.S. companies, whether unmanned or manned and from the United States or overseas, are covered by federal indemnification for third-party damages that result from the launch or reentry. According to agency officials, in 2016 FAA issued five active licenses, which had an average third-party MPL of about $51 million and ranged from $10 million to $99 million. The amount of insurance coverage that FAA requires launch companies to purchase—the MPL value—is intended to reflect the greatest dollar amount of loss to third parties and the federal government for bodily injury and property damage that can be reasonably expected to result from a launch or reentry accident. FAA calculates separate MPL values for potential damages to third parties and the federal government. For each launch license that it issues, FAA determines MPL values for third parties with the intent of estimating the greatest dollar amount of losses that reasonably could be expected from a launch or reentry accident, which have no less than a 1 in 10 million chance of occurring. For damages to the federal government, FAA determines MPL values with the intent of estimating the greatest dollar amount of losses that reasonably could be expected from a launch or reentry accident, which have no less than a 1 in 100,000 chance of occurring. According to FAA, the agency defines these probability thresholds to estimate the federal government’s exposure to losses above the MPL. Agency officials said that the current probability thresholds are set such that losses are very unlikely to exceed launch companies’ private insurance and become potential costs for the government under CSLCA. FAA’s process for determining the MPL value for a launch or reentry license generally includes three elements: 1. Number of casualties. Estimating the number of third-party casualties involves adding the number of direct and secondary casualties that could result from a launch accident. Direct casualty estimates include serious injuries and deaths. Secondary casualties include those resulting from fires and collapsing buildings. 2. Cost of casualties. FAA uses $3 million as an estimate of the average loss per casualty, which is multiplied by the number of estimated casualties. 3. Property damage. FAA applies a predetermined factor—which it recently changed from 50 percent to 25 percent—to the estimated cost of casualties to derive estimated losses from property damage. The total MPL is equal to the estimated cost of casualties plus property damage. FAA has revised two components of its MPL methodology since our 2012 report. For example, in April 2016, the agency adopted a new method for estimating the number of casualties, known as the risk profile method. This method uses different tools to simulate a range of possible scenarios to create a distribution of potential casualty numbers and the simulated probability of different levels of casualty numbers. The risk profile method replaced FAA’s “overlay method,” which was a method it had used since the early 1990s which the agency said did not work well for launches of small launch vehicles in remote areas, or for reentries. In addition, FAA reduced the factor it uses to estimate losses due to property damage, based on tests of a new process for estimating such losses that showed the previous factor was too high. We have previously reviewed FAA’s MPL methodology in 2012 and 2017. In 2012 we examined the U.S. government’s indemnification policy, the federal government’s potential costs for indemnification, and the effects of ending indemnification on the competitiveness of U.S. launch companies, among other aspects of FAA’s MPL methodology. In 2017 we examined the extent to which FAA had revised its MPL methodology since our 2012 report to address previously cited weaknesses and the potential effect of any changes to that methodology on financial liabilities for the federal government. The findings and recommendations of those reports, including any unaddressed weaknesses, are discussed later in this report. CSLCA required FAA to evaluate its MPL methodology incorporating three requirements, but the agency’s report did not fully address these requirements. First, the act required FAA to ensure a balance of risk between launch companies and the federal government. However, agency officials told us that they did not re-evaluate the probability thresholds—which are used to divide the risk of loss between launch companies and the federal government—as part of evaluating its MPL methodology when implementing the risk profile method due to resource constraints. Second, the act required FAA to consider the cost impact of implementing an updated MPL methodology, but the agency did not evaluate the impact of implementing its revised methodology on the direct costs to launch companies (insurance premiums) and to the federal government (indemnification liability). Third, the act required FAA to consult with the commercial space sector and insurance providers in evaluating its MPL, but they did not consult such parties in response to the act. Without fully addressing CSLCA’s mandated requirements, FAA cannot ensure that the federal government is not exposed to greater liability costs than intended or that launch companies are not required to purchase more insurance coverage than necessary. In its report, FAA states that implementing an updated MPL methodology in April 2016—the risk profile method—helps ensure that the federal government is not exposed to greater liability costs than intended and that launch companies are not required to purchase more insurance coverage than necessary, as required under CSLCA. Further, agency officials told us that their updated methodology is technically more valid and improves their ability to avoid overestimating MPL values (which can cause launch companies to purchase more insurance coverage than necessary) or significantly underestimating MPL values (which can expose the federal government to greater costs than intended). While an improved model may provide a more realistic calculation of the MPL, by changing the resulting estimates it can also change the balance between the federal government’s exposure to liability costs and the amount of insurance launch companies are required to purchase. For example, if the more realistic results produced by the revised methodology increased the MPL estimates, this would increase insurance costs for the launch companies and reduce the federal government’s exposure, thereby shifting the balance of costs between the two and suggesting a reevaluation of the thresholds. In addition, FAA officials told us that they had not reevaluated the probability thresholds upon implementing the revised MPL methodology, although defining these thresholds is their primary mechanism for adjusting the balance of risk between launch companies and the federal government. Agency officials acknowledged that an examination of the thresholds’ continued appropriateness would be warranted in the future. However, they told us that changing the probability thresholds would require significant effort because it would require them to change federal regulations and that resources are currently allocated to other rulemaking priorities. Nevertheless, without evaluating the appropriateness of the probability threshold as part of the mandated evaluation of the MPL methodology, FAA cannot ensure that the federal government is not exposed to greater liability costs than intended or that launch companies are not required to purchase more insurance coverage than necessary. CSLCA also required FAA to consider the cost impact on both the commercial space launch industry and the federal government of implementing an updated MPL methodology. In its report to Congress, the agency discussed indirect costs to launch applicants and the federal government. For example, FAA discussed indirect data burden costs on launch company applicants and FAA analysts associated with the agency’s risk profile method implementation. The report states that the risk profile method requires more data from a launch applicant than the previous method, but that the added burden is minimal because the information is similar to the type of information required by FAA for a risk analysis. Agency officials also said that the risk profile method requires more of an FAA analyst’s time than the overlay method, but that the added burden is minimal because the work done by FAA on risk analysis provides much of the foundation for an MPL analysis. However, FAA’s report did not include an evaluation of the direct costs to launch companies and the federal government of implementing an updated MPL methodology. The report identifies the direct cost to the launch industry as insurance premiums, and the direct cost to the federal government include potential indemnification payments. Agency officials also told us that the agency does not track commercial space launch insurance costs, and that they do not have meaningful insights on insurance premiums paid by commercial launch companies. FAA officials told us that they only have a general notion of insurance premiums because the industry is reluctant to share such information. FAA officials also told us that, outside of the work done for the report, they have not evaluated the economic implications for launch companies of implementing an updated MPL methodology. Without evaluating direct costs to both the launch companies and the federal government, FAA will be limited in its ability to consider the impact of the cost to both the industry and the federal government of implementing an updated methodology. Although CSLCA required FAA to consult with the commercial space sector and insurance providers in evaluating its MPL methodology for the mandated report, it obtained limited input. For example, FAA officials told us that they obtained input from their Commercial Space Transportation Advisory Committee (COMSTAC) in April 2016 about what to include in their report to Congress, but did not consult with the commercial space sector and insurance providers to evaluate their MPL methodology in response to CSLCA. FAA officials also said that, to respond to CSLCA’s consultation requirement, they did not think they needed to repeat the consultations they took in 2013. In January 2013, the agency solicited input from COMSTAC’s Business/Legal Working Group about how to best conduct a review of FAA’s methodology for calculating MPL, in response to our July 2012 report. FAA also briefed the Business/Legal Working Group in May 2013 to solicit input on MPL methodologies, including the risk profile method. In the January 2013 meeting, a COMSTAC member suggested several contractors for a study by outside experts of the complete MPL methodology, and FAA subsequently hired one of these contractors to develop the risk profile method that it implemented in April 2016. However, the agency did not solicit input from COMSTAC about its risk profile methodology prior to its April 2016 implementation or following CSLCA’s November 2015 mandated evaluation. As a result, FAA lacks input on the effect of its revised MPL methodology on launch companies and the federal government, making it difficult to evaluate the balance of risk between the two. Our 2012 report identified concerns with all three components of FAA’s MPL methodology: estimating the number of casualties, estimating the cost of casualties, and deriving estimated property damage costs from estimated casualty costs. In that report we recommended that the agency reassess its methodology, including the reasonableness of several key elements. As noted in our 2017 report, FAA has since made improvements to its methodology. However, it still has not yet updated the cost of a casualty. In addition, in our 2017 report we also noted that there are instances where deriving estimated property damage from estimated casualty costs is inappropriate. As of November 2017, FAA does not have guidance to identify such instances or to guide decisions on which tools to use in developing the MPL estimate. FAA has taken steps designed to improve two of three elements of its MPL methodology, including revising its methodology for estimating the number of potential casualties for a given launch and changing the factor it uses to derive estimated property damage from estimated casualties. However, the agency has not updated the third element, the amount it uses for the cost of an individual casualty, leaving a previously identified weakness unaddressed. Our 2012 report raised concerns with each of the three components of FAA’s MPL calculation methodology. First, we found that FAA’s method for estimating the number of casualties involved use of a single loss scenario instead of applying the insurance industry’s standard practice of catastrophe modeling, and that the agency’s method might significantly understate the number of potential casualties. Catastrophe modeling, unlike the single-loss approach, generally estimates losses by using various tools to simulate tens of thousands of scenarios to create a distribution of potential losses and the simulated probability of different levels of loss. Second, we reported that FAA had been using an outdated and likely understated figure of $3 million to estimate the cost of a single casualty—including injury or death—which Office of Commercial Space Transportation officials said has not been updated since they began using it in 1988. Third, we reported that the agency’s approach of estimating potential property damage by adding a flat 50 percent to the estimated casualty damage could lead to estimates that were too high in some cases. Given these weaknesses, we recommended that FAA reassess its MPL methodology, including assessing the reasonableness of the cost-of- casualty amount and other assumptions used. Because the agency took actions to assess its MPL methodology, we closed the recommendation as implemented. In March 2017 we reported that FAA had taken steps to address weaknesses in two of these three areas. Specifically, we reported that FAA’s adoption of the risk profile method in April 2016 had improved its estimates of the number of potential casualties associated with a particular license launch. In addition, we reported that the agency had revised the factor it uses to estimate losses from property damage in the MPL calculation from 50 percent to 25 percent. This change has resulted in property damage estimates that FAA officials believe are still conservative but more realistic than previous estimates. However, in our March 2017 report we also determined that FAA had not yet addressed weaknesses in the cost-of-casualty amount we had previously identified; despite the conclusion by a contractor it had hired to study the cost-of-casualty that it was too low. Agency officials told us that they had not addressed this weakness because of other priorities. Given the significance of the cost-of-casualty amount to the MPL calculations, we recommended that FAA prioritize the development of a plan to address the identified weakness in the cost-of-casualty amount, including setting time frames for action, and update the amount based on current information. In October 2017, FAA officials told us that they had not yet updated the cost-of-casualty because they have continued to prioritize completing other work with their limited resources, such as reviewing launch applications and fulfilling other safety responsibilities. As a result, our recommendation remains open. FAA officials told us that they have identified potential steps to update the cost-of-casualty amount, including seeking public input on whether and how to revise the amount, but that they do not expect to make a decision on whether to make any changes to the cost-of-casualty amount until June 30, 2018, at the earliest. FAA officials told us that in order to prioritize the development of a plan to address the identified weakness in the cost-of-casualty amount they will need to consult with both the commercial space and insurance industries about the necessity and implications of any potential increase in the cost-of-casualty amount. Agency officials said that they plan to do such consultations through COMSTAC. However, because COMSTAC was just reestablished in June 2017 after not having been active since November 2016 and new members had not been approved as of October 2017, the anticipated decision date of June 2018 could be further delayed. As we reported in March 2017, an understated cost-of-casualty amount can lead to an inaccurate loss calculation, which in turn understates the amount of insurance a launch company must obtain. This could increase the potential exposure to the federal government, as the insurance amount would be less than the potential losses associated with the launch activity and the property would be inadequately protected. Because of this potential exposure, we maintain that addressing this weakness is a priority. As noted above, in our 2012 report we raised concerns about the first element of FAA’s MPL methodology, which is estimating the number of potential casualties. FAA officials said that they have implemented two tools for estimating the number of potential casualties, and that each tool requires a different level of resources and is more appropriate for different launch scenarios. The Range Risk Analysis Tool creates physics-based simulations of possible accidents using launch vehicle data, such as launch trajectory and types of failures, and assigns each simulated accident a probability of occurrence based on the failure rates of the different elements of the launch vehicle. According to agency officials, the Range Risk Analysis Tool is a comprehensive, high-fidelity tool and is the most appropriate tool for coastal launch sites, which are often located in heavily populated areas, and is labor intensive. The Risk Estimator Sub- orbital and Orbital Launch Vehicle and Entry tool, which in contrast to the Range Risk Analysis Tool, is a medium-fidelity tool that can be used for low-risk launches, such as launch sites located in very sparsely populated areas and reentry operations that do not need the use of a high-fidelity tool. According to FAA, this tool significantly reduces the time required to estimate the risk from launch and reentry vehicle operations. In our 2017 report, we also reiterated that there are cases where the third element of FAA’s methodology, deriving estimated property damage from estimated casualties, could lead to misleading MPL calculations. Specifically, in March 2017 we reported that estimating losses from property damage as a percentage of losses from casualties could lead to overestimates. For example, FAA’s contractor found that, if a launch accident affected a residential area, the agency’s practice of estimating property damage based on casualties would likely overstate property damages because residential structures have relatively low values compared to losses from casualties. We also reported in March 2017 that in some accidents the number of casualties may be low but property losses could still be very large, in which case FAA’s estimating property losses based on casualties would likely understate potential property damage. For example, a launch vehicle could strike an unoccupied structure that is very expensive, such as a neighboring launch complex. Agency officials said that while deriving property losses from casualty losses is a simpler method that may be an effective use of limited FAA resources, it could be inappropriate in scenarios where the number of casualties might be low but property losses could still be very large. In October 2017, agency officials said that FAA had not developed guidance for determining, for a given launch license, which of the available tools would be most appropriate to estimate the number of potential casualties, and whether it would be more appropriate to estimate property losses separately rather than derive them from estimated casualties. While FAA officials said they believe their current decision process is adequate and that they do not need more formal guidance at this time, they also told us that they were in the process of developing internal guidance on the most appropriate tool to use for future launches. The officials said that they did not have a projected completion date for the guidance, primarily because the agency has other priorities and resource limitations. As noted earlier, these priorities include reviewing commercial space launch license applications and managing program safety. Federal internal control standards state that, as part of an entity’s risk assessment component, management should identify, analyze, and respond to risks to achieving objectives. For example, the standards state that management should design control activities in response to the entity’s objectives and risks to achieve an effective internal control system. Without such guidance, FAA could face challenges in ensuring that it is using the most appropriate method to calculate an MPL for a given launch and is making the most efficient use of its resources. Such guidance could become more important as the number of commercial space launches increases, potentially creating greater demands on its resources. We have previously reported that the commercial space launch industry has experienced significant growth in the number and complexity of launches in the past half-decade. FAA has also reported that its licensed launches have increased 60 percent and industry revenue has increased 471 percent since 2012. FAA’s MPL methodology is critical in balancing the encouragement of the U.S. commercial space industry with the need to manage the federal government’s risk exposure because it determines how much risk each party will bear for third-party damages resulting from potential space launch accidents. However, despite changes to the methodology, the probability threshold that the agency uses to achieve this balance of risk has been the same since the 1990s, and has not been reviewed for appropriateness. In addition, while FAA evaluated the effect of its MPL methodology on the indirect costs of launch companies and the federal government, it did not similarly evaluate direct costs. Further, although FAA has obtained input from some stakeholders on certain aspects of its MPL methodology, it has not consulted with launch providers and insurance companies to evaluate effects on key potential costs to launch companies and the federal government, as required under CSLCA. FAA officials told us that resource issues and pursuing other priorities have prevented them from taking these actions. However, the longstanding nature of these issues, as well as their importance in determining the federal government’s financial exposure, makes their completion a priority. FAA has also begun improving other aspects of its MPL process, but important actions remain incomplete. For example, the cost of a casualty, a key component of the methodology, has not been updated since 1988. While FAA has identified potential steps to update this amount, it has not implemented these steps and our March 2017 recommendation to prioritize the updating of this amount remains open. Further, agency officials said they have begun to develop internal guidance on how to determine which methodological tools should be used for a given launch, but are not sure when this process will be completed. These are important steps to help ensure the validity of the MPL methodology and the results obtained for each launch, which in turn determine the balance between the amount of insurance launch companies are required to purchase and the potential financial exposure for the federal government. We are making the following four recommendations to FAA: The FAA Administrator should fulfill the CSLCA mandate to include ensuring a balance of risk between the federal government and launch companies as part of FAA’s MPL methodology evaluation by reexamining the current probability thresholds. (Recommendation 1) The FAA Administrator should fulfill the CSLCA mandate to analyze the cost impact of implementing its revised MPL methodology by evaluating the impact on the direct costs of launch companies and the federal government. (Recommendation 2) The FAA Administrator should fulfill the CSLCA mandate to evaluate its MPL methodology in consultation with the commercial space sector and insurance providers by consulting with those entities on the cost impact of its revised MPL methodology, including an updated cost-of-casualty amount, on the launch industry and the federal government. (Recommendation 3) The FAA Administrator should establish an estimated completion date for developing and implementing a plan to establish guidance on the most appropriate MPL methodologies and tools to use for each launch. (Recommendation 4) We provided a draft of this report to the Department of Transportation for their review and comment. In its comments, reproduced in appendix I, the Department of Transportation concurred with our recommendations. The Department of Transportation also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to interested congressional committees and the Secretary of the Department of Transportation. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions or would like to discuss this work, please contact Alicia Puente Cackley at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Individuals making key contributions to this report are listed in appendix II. In addition to the contact named above, Patrick Ward (Assistant Director), Jessica Artis, Isidro Gomez (Analyst in Charge), Courtney La Fountain, Maureen Luna-Long, Jessica Sandler, Jennifer Schwartz, Joseph Silvestri, and Shana Wallace made key contributions to this report.", "summary": "The federal government shares liability risks with the commercial space launch industry for accidents that result in damages to third parties or federal property. This arrangement requires space launch companies to have a specific amount of insurance to cover these damages. The government is potentially liable for damages above that amount, up to a cap GAO estimated to be $3.1 billion in 2017, subject to appropriations in advance. CSLCA, enacted in 2015, directed the Department of Transportation, of which FAA is a part, to evaluate its MPL methodology and, if necessary, develop a plan to update that methodology. The act also included a provision requiring GAO to assess FAA's evaluation and any actions needed to update the methodology. This report discusses the extent to which (1) FAA's evaluation report addresses the requirements in CSLCA and (2) FAA has addressed previously identified weaknesses in the MPL methodology. GAO reviewed documents and interviewed FAA on its loss methodology evaluation and actions to address weaknesses. The Federal Aviation Administration's (FAA) report evaluating its maximum probable loss (MPL) methodology did not fully address the evaluation and consultation requirements specified by the U.S. Commercial Space Launch Competitiveness Act (CSLCA). Balance of Risk. CSLCA required FAA to include ensuring that the federal government is not exposed to greater indemnification costs and that launch companies are not required to purchase more insurance coverage than necessary as a result of FAA's MPL methodology. FAA said that it ensured this balance by improving its methodology, but it did not reevaluate its probability thresholds after revising its methodology. These thresholds are used to divide the risk of loss between launch companies and the government. Impact on Costs. The act required FAA to consider the costs to both the industry and the federal government of implementing an updated methodology. FAA's report discussed the impact on indirect costs, such as data collection, but did not discuss direct costs: insurance premiums for launch companies and indemnification liability for the federal government. Consultation. The act also required FAA to consult with the commercial space sector and insurance providers in evaluating its MPL methodology in accordance with the preceding requirements. While the agency consulted with some stakeholders, these consultations were limited in scope. FAA officials said they have not been able to take the actions needed to fully satisfy the mandated elements because of issues such as resource limitations and the lack of available data. However, by not resolving these issues, FAA lacks assurance that launch companies are not purchasing more insurance than needed or that the federal government is not being exposed to greater indemnification costs than expected. FAA has addressed two of three previously identified weaknesses in its MPL methodology but has not yet dealt with the remaining weakness. Specifically, the agency has revised its methodology for estimating the number of potential casualties for a launch and changed the factor it uses to derive estimated property damage from estimated casualties. However, FAA has not updated the amount used for the cost of an individual casualty. GAO recommended in a March 2017 report (GAO-17-366) that FAA update this amount. Not doing so could understate the amount of insurance launch companies are required to purchase, exposing the federal government to excess risk. GAO also determined that while FAA has two tools and methods it can use in making its MPL estimates, it does not have guidance on determining which are most appropriate for a given launch scenario. For example, one tool is more comprehensive but also labor intensive to use, while the other is inappropriate for certain launch scenarios and could result in misleading MPL amounts. Officials said they have begun to create such guidance but do not have an estimated completion date. Without such guidance, FAA cannot ensure that the most appropriate MPL methodology is used for each launch. FAA should fully address mandated requirements in evaluating its MPL—probability thresholds, direct costs, and stakeholder consultations— and establish an estimated completion date for developing guidance on tools and methods to use for specific launch scenarios. The Department of Transportation concurred with the recommendations, and provided technical comments.", "document_type": "gao"}
{"report": "FSA seeks to ensure that all eligible individuals enrolled in postsecondary education can benefit from federal financial aid for education. It is responsible for implementing and managing programs authorized under the Higher Education Act of 1965, as amended. Specifically, Title IV of the act authorizes the federal student assistance programs for which FSA is responsible. These programs (Title IV programs) provide loans, grants, and work-study funds to students attending college or career school. In fulfilling its program obligations, FSA is responsible for managing and overseeing almost $1.4 trillion in outstanding loans. In administering Title IV programs, FSA performs a variety of functions across the student aid life cycle. These include educating students and families about the process of obtaining processing millions of student aid applications; disbursing billions of dollars in aid; enforcing financial aid rules and regulations; servicing millions of student loans and helping borrowers avoid default; securing repayment from borrowers who have defaulted on loans; partnering with schools, lenders, and guaranty agencies to prevent fraud, waste, and abuse; and insuring billions of dollars in guaranteed student loans previously issued by financial institutions. In carrying out these functions, FSA collects, maintains, and shares a large amount of information, including sensitive personal information from students and their families. The office also relies on various automated systems to assist with student aid functions. Further, FSA works with various entities, such as loan servicers, guaranty agencies, private collection agencies, and lenders, to carry out loan servicing and collection activities. The three main categories of federal student financial aid are loans, grants, and federal work-study. Loans are student aid funds that are borrowed to help pay for eligible education programs and must be repaid with interest. FSA administers loans under the William D. Ford Direct Loan Program (Direct Loan) and the Federal Family Education Loan (FFEL) Program, along with other programs, such as Perkins Loans, for students demonstrating financial need. Direct Loans are loans for which the Department of Education is the lender. They include subsidized loans made to undergraduate students based on financial need, for which the government does not generally charge interest while the student is in grace or deferment status; unsubsidized loans made to undergraduate and graduate students for which the borrower is fully responsible for paying interest regardless of loan status; PLUS loans made to graduate or professional students and parents of dependent undergraduate students for which the borrower is fully responsible for paying the interest regardless of the loan status; and consolidation loans, which allow the borrower to combine existing federal student loans into a single new loan. FFEL loans are loans that were obtained through private lenders, with federal subsidies ensuring that private lenders earned a certain yield on the loans they made. Under this program, the Department of Education entered into agreements with guaranty agencies to insure the private lenders against losses due to a borrower’s default. Federal law ended the origination of these loans as of July 1, 2010; however, FSA, lenders, and guaranty agencies continue to service (i.e., handle billing and other activities related to loan repayment) and collect outstanding FFEL loans. According to FSA, borrowers’ eligibility is the same under both the Direct Loan and FFEL programs. The department also administers student aid through grants, such as Pell grants, which are student aid funds that generally do not have to be repaid. It also administers the federal work-study program, which provides part-time jobs for students with financial need, allowing them to earn money to help pay educational expenses. In fiscal year 2017, FSA reported disbursing about $122.5 billion in aid to students through its various programs. In addition, the portfolio of outstanding FFEL loans totaled approximately $305.8 billion, as of September 30, 2017. Table 1 provides details on the amounts of financial aid disbursed to students in fiscal year 2017 across all financial aid programs. The federal financial aid process is complex and consists of four phases: school eligibility determination, student application and eligibility determination, disbursement of funds, and repayment and collection of loans. Each phase of the process is supported by automated FSA information systems that collect and process student aid information. The information is then used by FSA, schools, and other stakeholders to determine the type and amount of aid a student is eligible to receive, and to support the distribution and repayment of loans. See figure 1 for an overview of the four phases. Federal laws and guidance specify requirements for protecting federal systems and data. This includes systems used or operated by a contractor or other organization on behalf of a federal agency. FISMA is intended to provide a comprehensive framework for ensuring the effectiveness of security controls over information resources that support federal operations and assets, as well as the effective oversight of information security risks. The act requires each agency to develop, document, and implement an agency-wide information security program to provide risk-based protections for the information and information systems that support the operations and assets of the agency, including those provided or managed by another entity. The primary laws that provide privacy protections for personal information accessed or held by the federal government are the Privacy Act of 1974 and the E-Government Act of 2002. These laws describe, among other things, agency responsibilities with regard to protecting PII. The Privacy Act places limitations on agencies’ collection, disclosure, and use of personal information maintained in systems of records. It requires, among other things, that agencies issue system of records notices to notify the public when the agencies establish or make changes to a system of records. System of records notices are to identify, among other things, the types of data collected, the types of individuals about whom information is collected, the intended “routine” uses of the data, and procedures that individuals can use to review and correct personal information. In addition, the E-Government Act of 2002 requires agencies to conduct assessments of the impact on privacy from using information systems to collect, process, and maintain PII. A privacy impact assessment is an analysis of how personal information is collected, stored, shared, and managed in a federal system. In accordance with FISMA, OMB is responsible for the oversight of agencies’ information security policies and practices. OMB establishes requirements for federal information security programs and assigns agency responsibilities to fulfill the requirements of statutes such as FISMA. OMB requires agencies to oversee the implementation of security and privacy controls by contractors and other non-federal entities that collect, use, process, store, maintain, and disseminate federal information on behalf of a federal agency. OMB notes that agencies are ultimately responsible for ensuring that federal information is adequately protected, commensurate with the risk resulting from the unauthorized access, use, disclosure, modification, or destruction of such information. Accordingly, OMB guidance states that, when sharing PII with contractors or other non-federal entities, agencies should establish requirements for the protection of their data in written agreements with these entities. For specific technical direction, OMB requires agencies to implement standards and guidelines established by NIST. FISMA also assigns certain responsibilities to NIST, including to develop standards and guidelines for systems other than national security systems. These standards and guidelines include (1) standards for categorizing agency information and systems to provide appropriate levels of information security, according to a range of risk levels; (2) guidelines for the types of information and systems to be included in each category; and (3) minimum information security requirements for information and systems in each category. Accordingly, NIST has developed a series of information security standards and guidelines for agencies to follow in managing information security risk. NIST guidance provides steps that agencies can take to identify appropriate security and privacy controls and establish specific requirements for implementing those controls to ensure consistency both internally and externally to the agency. NIST guidance also outlines requirements for protecting the confidentiality of controlled unclassified information (which includes PII) when it resides in a non-federal system or organization. Relevant publications include the following: Federal Information Processing Standard 199, Standards for Security Categorization of Federal Information and Information Systems, requires agencies to categorize their information systems as low- impact, moderate-impact, or high-impact for the security objectives of confidentiality, integrity, and availability. The potential impact values assigned to the respective security objectives are the highest values from among the security categories that the agency identifies for each type of information residing on those information systems. NIST Special Publication 800-53, Security and Privacy Controls for Federal Information Systems and Organizations, provides a catalog of security and privacy controls for federal information systems and organizations. It also provides a process for selecting controls to protect organizational operations, assets, individuals, other organizations, and the nation from a diverse set of threats. These threats include hostile cyber attacks, natural disasters, structural failures, and human errors. The guidance includes privacy controls to be used in conjunction with the specified security controls to achieve comprehensive security and privacy protection. According to NIST, the privacy controls are based on the Fair Information Practice Principles embodied in the Privacy Act of 1974, the E-Government Act of 2002, and OMB policies. NIST Special Publication 800-37, Guide for Applying the Risk Management Framework to Federal Information Systems: A Security Life Cycle Approach, explains how to apply a risk management framework to federal information systems, including security categorization, security control selection and implementation, security control assessment, information system authorization, and security control monitoring. NIST Special Publication 800-171, Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations, provides federal agencies with recommended security guidance for protecting the confidentiality of controlled unclassified information when it resides in a non-federal system and organization. The Framework for Improving Critical Infrastructure Cybersecurity, serves as a baseline for protecting critical information assets. It is intended to help organizations apply the principles and best practices of risk management to improve the security and resilience of critical infrastructure. The framework outlines a risk-based approach to managing cybersecurity that is composed of three major parts: a framework core, profile, and implementation tiers. Subsequent to the issuance of the NIST cybersecurity framework, a May 2017 executive order required agencies to use the framework to manage cybersecurity risks. It also outlined actions to enhance cybersecurity across federal agencies and critical infrastructure to improve the nation’s cyber posture and capabilities against cybersecurity threats to digital and physical security. In addition, the Gramm-Leach-Bliley Act requires financial institutions— companies that offer consumers financial products or services like loans, financial or investment advice, or insurance—to explain their information- sharing practices to their customers and to safeguard sensitive data. As part of its implementation of the act, the Federal Trade Commission (FTC) issued the Safeguards Rule, which requires financial institutions under FTC’s jurisdiction to have measures in place to keep customer information secure. Specifically, the rule requires financial institutions to develop a documented information security program that describes the administrative, technical, or physical safeguards used to protect customer information. The program must be appropriate to the company’s size and complexity, the nature and scope of its activities, and the sensitivity of the customer information it handles. As part of its program, each company must designate one or more employees to coordinate its information identify and assess the risks to customer information in each relevant area of the company’s operation, and evaluate the effectiveness of the current safeguards for controlling these risks; design and implement information safeguards to control risks and regularly monitor and test their effectiveness; select service providers that can maintain appropriate safeguards, require them to maintain safeguards, and oversee their handling of customer information; and evaluate and adjust the program in light of relevant circumstances, including changes in the firm’s business or operations, or the results of security testing and monitoring. We recently reported on aspects of FSA’s protection of student aid data, noting that weaknesses existed in key processes. Specifically, in November 2017, we reported, among other things, that FSA needed to improve its policies and procedures for the management and protection of student aid data. For example, while the agency had established policies and procedures for key privacy requirements, such as publishing notices to describe how personal information is to be maintained, used, and accessed, it did not always ensure that privacy impact assessments for its information systems included an analysis of privacy risks and mitigation steps. In addition, we reported that FSA’s information security policies and procedures were not always up to date. Further, we noted that the agency needed to strengthen its oversight of schools’ implementation of federal information security requirements to help ensure student aid information was adequately protected. We recommended that the Secretary of Education take seven actions to strengthen FSA’s management and protection of federal student aid records and enhance its oversight of schools. For example, we recommended that the agency incorporate information security program requirements in its reviews of postsecondary schools, and that the Department of Education update its regulation to include protections of personal information as an element of a school’s ability to demonstrate its administrative capability. FSA concurred or generally concurred with five of our seven recommendations, partially concurred with one recommendation, and did not concur with another. FSA’s non-school partners play key roles in the federal student financial aid program, particularly with regard to the servicing, repayment, and collection of student loans. These partners include FFEL lenders, Title IV loan servicers, guaranty agencies, and private collection agencies. FSA shares a variety of PII with the non-school partners to assist them in carrying out their functions. Non-school partners are involved primarily in the loan servicing, repayment, and collection phases of the federal student aid process. FFEL lenders: During the administration of the FFEL program, these lenders were involved primarily in the disbursement of funds. As part of the program, students and parents obtained federal loans through non-federal lenders, such as the borrower’s school, a bank, credit union, or other lending institution. Generally, lenders provided the loan proceeds to a student’s school, which then credited the student’s account and disbursed the residual amount, if any, to the student. After a loan was disbursed, lenders chose to either service the loan, contract with an outside organization for servicing, or sell the loan. According to FSA, the majority of lenders have third-party servicers that perform servicing, billing, and reporting on their behalf. The lenders also work closely with guaranty agencies, which insure FFEL loans in case of default, and oversee certain aspects of the lenders’ activities. As of June 2018, there were 1,079 lenders participating in the FFEL program. Although FSA purchased a portion of the FFEL loans as a result of disruptions in financial markets during the financial crisis of 2007 and 2008, the majority of the FFEL portfolio continues to be owned and serviced by private lenders. These lenders are required to report quarterly on their portfolios and are to sign participation agreements with FSA requiring that electronic data submitted by the lenders be accurate and conform to applicable laws, regulations, and policies. FSA also noted that lenders are regulated by a variety of entities, such as the FTC, Federal Deposit Insurance Corporation, Federal Reserve, Department of the Treasury, and, in some cases, state agencies. Title IV loan servicers: These organizations are primarily involved in the repayment and collection phase of the aid process. Under the Direct Loan program, after the loan is disbursed, the Department of Education contracts with loan servicers to perform a variety of administrative functions. Loan servicers are responsible for collecting payments on a loan, advising borrowers on resources and benefits to better manage their federal student loan obligations, responding to customer service inquiries, and performing other administrative tasks associated with maintaining a loan on behalf of the Department of Education. In addition, once a Direct Loan becomes delinquent (i.e., the first day after a borrower fails to make a scheduled monthly payment), loan servicers may take several actions pending the loan entering default, such as reaching out to past-due borrowers and entering into repayment arrangements for loans. As of July 2018, FSA contracted with 11 loan servicers. The contracts between FSA and the servicers establish the servicers’ responsibilities in the aid process. The contracts lay out requirements for servicers with regard to financial reporting, internal controls, accounting, and other areas. Guaranty agencies: These agencies are state or private non-profit entities that are primarily involved in the repayment and collection phase of the aid process. As part of the FFEL program, they receive federal funds to play the lead role in administering aspects of the program. These agencies’ functions include insuring private lenders against losses due to a borrower’s default or other losses (the guaranty agencies are, in turn, reinsured by the federal government); providing assistance in preventing delinquent borrowers from going into default; working with defaulted student and parent borrowers to rehabilitate their defaulted loans, restore their credit, and provide them with a fresh start; and reporting actions to credit bureaus. Prior to July 2010, when the origination of FFEL loans stopped, guaranty agencies also were involved in verifying student eligibility for loans and notifying lenders, who would send a promissory note to lenders for their signature and disburse the funds. According to FSA, guaranty agencies continue to work closely with holders of FFEL loans, including supporting them in default aversion activities and overseeing aspects of their operations through monitoring, auditing, and ensuring compliance with regulations. As of July 2018, 24 guaranty agencies were administering FFEL loans. FSA uses participation agreements to govern the agencies’ responsibilities in the aid process. The agreements lay out reporting requirements, records retention periods, and other requirements. For example, guaranty agencies are required to report to the Department of Education on the loans they insure. They are also required to keep records and have them available for inspection by the federal government. Private collection agencies: Private collection agencies are also primarily involved in the repayment and collection phase of the aid process. If borrowers default on their loans after entering the repayment phase, private collection agencies will attempt to enter into voluntary repayment agreements, while ensuring that defaulted borrowers are aware of both the consequences of their failure to repay and the options available to help them get out of default. Other debt resolution functions performed by private collection agencies include determining whether a borrower’s account is eligible for administrative resolutions, such as discharge due to death or total and permanent disability; determining whether a borrower’s account is eligible for involuntary payment methods such as administrative wage garnishment; preparing accounts for litigation; and returning accounts to FSA for failure to convert the account to active repayment status. As of July 2018, FSA had contracts with 18 private collection agencies. These contracts describe the private collection agencies’ responsibilities in the aid process. In administering the federal student aid program, FSA shares a large amount of PII that it collects from students and parents with its non-school partners. This is particularly significant in that FSA directly manages or oversees more than 203 million student loans made to approximately 43 million borrowers. PII collected when students or their parents apply for financial aid includes, but is not limited to the following: Student demographics: Name, address, Social Security number, telephone numbers, email address, marital status, driver’s license number, etc. Student eligibility: Citizenship status, dependency status, high school completion status, selective service registration (if applicable), and whether the student has a drug conviction, among other information. Student finances: Tax return filing status; adjusted gross income; cash, savings, and checking account balances; untaxed income; and current net worth of student’s assets. Parent demographics (if applicable): Name, Social Security number, email address, and marital status. Parent finances: Tax return filing status, adjusted gross income, tax exemptions, and asset information. After the borrower’s eligibility is determined or the funds are disbursed, the PII that the agency collected as part of the process is stored on several of FSA’s internal IT systems. FSA shares the PII stored on its systems with its non-school partners to assist them in carrying out their respective functions. This sharing occurs when the agency grants non-school partners access to specific systems. According to FSA, the data that non-school partners have access to depends on the non-school partner’s relationship with the individual holding the loan. Table 2 provides a description of the FSA systems from which non-school partners receive student aid data, as well as the types of PII they contain. To gain access to FSA systems and data, non-school partners must submit an application to use FSA’s Student Aid Internet Gateway (SAIG). The SAIG application enables the enrolling organization (i.e., the non- school partner) to select services to receive, submit, view, and/or update student financial aid data online, or receive or send information by batch exchange. To gain access to services allowing them to receive, submit, view, and update student aid data, each non-school partner must designate a Primary Data Point Administrator, who is responsible for determining which staff within the non-school partner’s organization are to be given access to FSA’s systems and data. The primary Data Point Administrator is also responsible for ensuring the privacy of the information obtained or provided via the SAIG. According to FSA officials, enrollment for access to borrower data via the SAIG varies based on the type of non-school partner and the functions it performs. Further, the officials stated that non-school partners can only access information about the borrowers with whom they are directly involved. The services that non-school partners can access via the SAIG include the following: Central Processing System data: Processed data from the Free Application for Federal Student Aid are reported to institutions on the Institutional Student Information Record, and corrections to data can be made. Common Origination and Disbursement System data: Origination, disbursement, and other required reporting information for the Direct Loan program can be exchanged electronically between FSA and non-school partners. National Student Loan Data System: Title IV, enrollment history information, and federal grant information can be viewed and updated by non-school partners. Financial Management System: Financial reporting information can be sent by non-school partners to FSA. As noted previously, OMB and NIST guidance calls for agencies to oversee third-party entities with which they share PII to ensure that appropriate security and privacy controls are in place. This guidance identifies key practices for overseeing the protection of data by such entities. These practices include the following, among others: Require the implementation of risk-based security and privacy controls: NIST guidance states that agencies should categorize their information and systems based on their risk impact level and require the implementation of security controls that include one of three baseline sets of controls that correspond to the impact level, tailored to the system and organization as appropriate. Independently assess the implementation of security controls: Security control assessments determine the extent to which controls are implemented correctly, operating as intended, and producing the desired outcome. For external entities that store or process federal information, NIST guidance states that agencies can verify that controls have been implemented through independent, third-party assessments or attestations. Develop and implement corrective actions: As part of the process for conducting security control assessments, organizations should develop remedial actions to address identified weaknesses and track them to closure. Monitor the implementation of controls on an ongoing basis: Ongoing monitoring includes ensuring that technical, management, and operational security controls are tested at an organization-defined frequency and results are provided to officials on an ongoing basis. NIST guidance notes that agencies should monitor security control compliance by external entities on an ongoing basis. This can be achieved through reporting the security status of the system and security controls on an ongoing basis. FSA has established policies and procedures for overseeing its non- school partners’ protection of the PII that it shares with the partners. These policies and procedures vary in the extent to which they address the key practices for overseeing the protection of PII. For example, FSA’s policies and procedures for Title IV loan servicers and private collection agencies fully address three of the four key practices. For guaranty agencies, FSA’s procedures require onsite assessments but do not require monitoring controls on an ongoing basis. Finally, for FFEL lenders, FSA has minimal oversight procedures. FSA established policies and procedures for overseeing Title IV loan servicers and private collection agencies that generally address the key selected practices for overseeing the protection of data. Specifically, by applying its standard contractor oversight processes, the agency has addressed three of the four key practices that pertain to loan servicers and private collection agencies. FSA partially addressed one practice related to ensuring that the implementation and effectiveness of all controls is monitored on an ongoing basis. Table 3 summarizes the extent to which FSA’s processes address the key practices for loan servicers and private collection agencies. FSA required loan servicers and private collection agencies to implement risk-based security and privacy controls: FSA established security requirements and guidance for loan servicers and private collection agencies. These requirements are communicated through provisions in the contracts that FSA has with the loan servicers and private collection agencies. Specifically, FSA requires loan servicers and private collection agencies to implement security controls in accordance with NIST’s Security and Privacy Controls for Federal Information Systems and Organizations. The contracts also require loan servicers and private collection agencies to adhere to applicable Department of Education and FSA security policies and procedures. For example, the Department of Education’s policy for security system categorization, which applies to contractor- owned systems (such as those owned by loan servicers and private collection agencies), requires that systems containing PII be categorized as, at a minimum, “moderate impact.” This categorization reflects an assessment of the risks associated with a compromise of the information and determines the selection of appropriate security controls for the information system. In addition, FSA developed a standard operating procedure for implementing security requirements based on this determination, which applies to loan servicers and private collection agencies. This process for categorizing systems and selecting and implementing controls is based on NIST’s risk management framework, including steps for selecting, implementing, and assessing controls, and authorizing the information system to operate. FSA required independent assessments of the implementation of security controls: To help ensure that loan servicers and private collection agencies meet minimum security standards, FSA developed procedures for assessing the implementation of security controls based on applicable federal guidance. Specifically, FSA’s security authorizations process includes procedures for an independent assessor to review security controls implemented on the loan servicers’ and private collection agencies’ systems. This includes, among other things, developing a test plan; executing the plan, to include observing security controls; running automated scans; and collecting artifacts and evidence. The independent assessor then is to document the issues, findings, and recommendations for remediation. According to FSA’s procedures, once the assessment of the loan servicer’s or private collection agency’s system is completed, issues have been identified, and a plan of action and milestones (POA&M) has been developed, an FSA authorizing official is to review key documentation and make a decision on whether to authorize the system to operate. This decision is to be based on a determination as to whether the residual risk to agency operations, agency assets, resources, or individuals resulting from the operation of the system is acceptable. Once approved, the authorization to operate the system is valid for 3 years, provided that the conditions, if any, specified in the POA&M are met. FSA established a process for developing and implementing corrective actions: FSA requires loan servicers and private collection agencies to follow a standard operating procedure for documenting and implementing corrective actions to address weaknesses identified during security assessments. This procedure requires the owners of the systems to work with their agencies’ information system security officers and FSA’s internal independent validation and verification teams to document deficiencies and remediation plans in the FSA’s POA&M management tool, review and document evidence to close deficiencies, and provide monthly updates on the status of POA&Ms, along with reasons for any overdue items. FSA officials added that they are reviewing ways to further automate the process for flagging overdue items. In addition, the procedure specifies time frames for system owners to remediate weaknesses based on their criticality. To confirm that a weakness has been addressed, the procedure requires FSA’s independent validation and verification team to review submitted plans and evidence and determine if they are sufficient to close the deficiency. FSA did not fully establish a process for monitoring all controls on an ongoing basis: To monitor security controls between the independent assessments supporting the authorization to operate process, FSA’s contracts with loan servicers require the servicers to have a continuous monitoring program, as defined by NIST SP 800-37. Similarly, FSA’s contracts with private collection agencies require these agencies to enroll their systems in FSA’s Continuous Security Authorization program, which is intended to oversee and monitor the security controls in FSA’s information systems on an ongoing basis. In addition, the contracts require the private collection agencies to ensure that independent testing and monitoring of system security controls is performed on an ongoing basis. The contracts require these tests to cover a subset of the system security controls quarterly so that all controls are tested at least once during a 3-year period. However, according to FSA Technology Office officials, neither loan servicers nor private collection agencies have been enrolled in FSA’s Continuous Security Authorization program, as required. The officials added that they had not established a time frame to incorporate loan servicers and private collection agencies into the agency’s continuous monitoring program. According to the officials, both loan servicers and private collection agencies rely on their own continuous monitoring programs to oversee their systems; however, only the private collection agencies report the results of their monitoring activities to FSA (on a quarterly basis). In addition, FSA does not specify which controls the loan servicers and private collection agencies are to test; rather, it leaves this determination to the non-school partners. FSA policy also requires that loan servicers and private collection agencies respond to an annual self-assessment questionnaire concerning their implementation of NIST security and privacy controls. According to the FSA officials, if deficiencies are noted in the agencies’ responses, FSA works with the non-school partners to create POA&Ms and track remediation efforts through closure. Officials in FSA’s Technology Office added that loan servicers participate in FSA’s Web Application Surveillance Program, in which FSA conducts vulnerability scans of the servicers’ systems and shares findings with the servicers for remediation on a monthly or quarterly basis, depending on the environment being tested. Nevertheless, while these processes can provide helpful information about the loan servicers’ and private collection agencies’ security posture on an ongoing basis, they do not ensure that all security controls implemented on these partners’ systems are tested on a regular basis. For example, according to FSA policy, the Web Application Surveillance Program is intended to simulate the scanning and probing of a web application that might be useful to intruders. However, the program is not intended to ensure that management, operational, and technical controls have been implemented. Without fully establishing policies and procedures for ongoing monitoring of security controls implemented by loan servicers and private collection agencies, FSA has less assurance that these controls are effectively implemented and operating as intended. Further, FSA has a limited ability to ensure that risks associated with these non-school partners’ use of PII have been adequately mitigated. FSA policies and procedures requires guaranty agencies to implement security and privacy controls to protect student aid data, and the agency has recently enhanced its processes to include independent, on-site assessments of those controls and the development of corrective actions for identified weaknesses. However, it lacks processes for monitoring guaranty agencies’ implementation of controls on an ongoing basis. Table 4 summarizes the extent to which FSA’s processes address the four key practices for overseeing the protection of data by guaranty agencies. FSA did not fully specify a required baseline of risk-based security and privacy controls for guaranty agencies: FSA requires, through written agreements, that guaranty agencies participating in the federal student aid program comply with federal security requirements. Specifically, these agreements include an amendment that requires the guaranty agencies to ensure that any information systems that include PII about borrowers implement security and privacy controls specified in NIST guidance. In addition, when applying for access to FSA systems and information through the SAIG, guaranty agencies agree to protect the privacy of all information that has been provided by the Department of Education. In particular, guaranty agencies are required to affirm that administrative, operational, and technical security controls are in place and operating as intended. FSA provides guidance to guaranty agencies on implementing security controls, in the form of a template to be used in completing an annual self-assessment (discussed in more detail below). This template identifies security and privacy controls to be used in the self-assessment, based on the NIST control baseline for moderate-impact systems. The guaranty agencies are expected to inform FSA as to whether they have implemented these controls. However, the agreements FSA has established with guaranty agencies do not specify that information must be maintained at a specific impact level or that guaranty agencies are to implement a particular baseline set of security controls that correspond to an agency established risk-based impact level. As noted previously, once agencies determine the impact level of their information or systems, they should select one of three baselines of security controls (low, moderate, or high) that correspond to the impact level. This baseline can then be tailored based on risk and the specific organizational and system environment. According to FSA officials, the agreements allow the guaranty agencies to determine whether their systems are low, moderate, or high impact. The officials also added that guidance provided to guaranty agencies, such as self-assessment questionnaires—are based on the NIST 800-53 moderate baseline. However, allowing guaranty agencies to determine the specific designation could result in inconsistent implementation of security controls if guaranty agencies choose varying impact levels for their systems. OMB guidance states that agencies should require third parties with whom PII is shared to maintain security at a specified impact level. By not specifying in written agreements the impact level of the information it shares with guaranty agencies, and a corresponding set of minimum security requirements, FSA jeopardizes its ability to ensure that the PII it shares with guaranty agencies will be adequately and consistently protected. FSA established a process for on-site assessment of guaranty agencies’ security and privacy controls: Prior to fiscal year 2018, FSA relied on a self-assessment process, wherein guaranty agencies completed annual questionnaires about their implementation of security and privacy controls. The completed questionnaires were reviewed by FSA staff, who then met with guaranty agency staff over the telephone to discuss any identified weaknesses. As part of this process FSA staff did not collect or review documentation to independently verify whether controls had been appropriately implemented, or conduct on-site reviews to obtain first-hand evidence of the implementation of the controls. However, according to FSA officials, they also conducted targeted, on- site visits to selected guaranty agencies in 2016 and 2017 to verify security control implementation. FSA has recently enhanced its process for assessing guaranty agencies’ implementation of security and privacy controls. FSA officials stated that, in March 2018, they began a series of on-site assessments of guaranty agencies which are to be completed by the end of September 2018. FSA provided the guaranty agencies with a security plan template that outlines roles and responsibilities, methodology, controls to be tested, and the test plan approach for these assessments. In addition, the list of evidence includes required artifacts to demonstrate compliance with NIST requirements. FSA officials stated that they plan to alternate between on-site assessments and self-assessments each year. By enhancing its approach to assessing guaranty agencies’ implementation of security requirements, FSA should be better positioned to ensure that the data shared with these entities are being adequately protected. FSA processes include monitoring of guaranty agency corrective actions: As part of the guaranty agency self-assessment process, FSA established procedures for documenting weaknesses identified during the self-assessments and corrective action plans for addressing the weaknesses. FSA Deputy Chief Information Officer officials stated that they track the corrective action plans in a system that provides weekly status reports that include notifications of overdue corrective actions. The officials added that all actions to correct weaknesses identified during the self-assessments were to be taken within 12 months of identifying the corrective actions. In April 2018, FSA officials stated that they intended to follow a procedure similar to the one used for the self-assessments to document and monitor corrective actions for weaknesses identified during the on-site assessments of guaranty agencies’ security and privacy controls. Specifically, the officials noted that all findings of weaknesses during the on-site assessments are to be turned into POA&Ms, assigned an expected completion date, and tracked to completion by FSA. This procedure, if effectively implemented, should help FSA ensure that gaps in security controls are remediated in a timely manner. FSA did not establish a process for monitoring all guaranty agency controls on an ongoing basis: To monitor guaranty agencies’ compliance between assessments, FSA officials stated that they hold weekly teleconferences with officials from guaranty agencies during which they discuss new security requirements or other issues. FSA Information Technology officials stated that they follow up with guaranty agencies after these calls to ensure that they implement new requirements. In addition, FSA issued guidance to guaranty agencies in January 2018 on conducting vulnerability scans of these agencies’ systems. This guidance addresses vulnerability testing guidelines and scanning requirements, as well as guidance on security control testing. However, FSA does not monitor all security controls by requiring guaranty agencies to report regularly on the status of security controls between on- site assessments. Neither the weekly teleconferences nor the vulnerability scans include testing the implementation of all security and privacy controls on a defined, periodic basis or reporting results to FSA. FSA officials stated that they rely on the on-site and self-assessments to oversee guaranty agencies’ security control implementation because FSA does not have a contractual relationship with guaranty agencies and does not own the guaranty agencies’ systems. However, OMB and NIST note that agencies have a responsibility for ensuring that their information is protected at a consistent level even when such information is shared with non-federal partners. Without fully establishing procedures for ongoing monitoring of guaranty agencies, FSA cannot fully ensure that risks to the student aid data containing PII that it shares with guaranty agencies have been adequately mitigated. FSA established high-level requirements for FFEL lenders to protect student aid data, but it exercises minimal oversight to ensure implementation of security and privacy protections for these data. Table 5 summarizes the extent to which FSA’s processes for overseeing lenders address key practices for overseeing the protection of data. FSA did not fully specify risk-based security and privacy controls for FFEL lenders: Like other non-school partners, lenders must complete FSA’s SAIG application when applying for access to FSA data and systems. The SAIG application outlines general requirements for ensuring the security and privacy of the data that FSA shares with the lenders. In addition, FFEL lenders enter into participation agreements with FSA which include requirements related to data exchange, such as ensuring that data lenders share with FSA are correct. Also, FSA officials told us that security requirements are communicated to the lenders’ staff via “dear colleague” letters and the security notices that appear when users log on to the agency’s Access and Identity Management System to access PII and other data. However, neither the SAIG application nor the participation agreement requires the FFEL lenders to implement a baseline set of risk-based security and privacy controls based on the impact level of the affected information and systems. FSA Information Technology and Business Operations officials said that they plan to add security and privacy requirements to the FFEL lender participation agreements as part of their next update during the 2018 revision cycle, but they did not specify what requirements would be included in these revised agreements. Until FSA establishes specific requirements for lenders’ protection of data, it will lack assurance that information it shares is being protected in a manner consistent with FSA’s determination of its sensitivity. FSA did not require independent assessments of FFEL lenders’ implementation of controls: FSA does not have policies or procedures for independently assessing lenders’ implementation of protections for student aid data. The SAIG application does not require an independent assessment of the non-school partners’ information security and privacy controls to determine the extent to which the controls are implemented correctly, operating as intended, or producing the desired outcome with respect to security. According to FSA officials, by accepting the terms of use displayed when logging on to FSA systems, users agree to comply with security and privacy requirements. The officials added that FSA monitors activity on the National Student Loan Data System and can remove a user’s access if a case of improper usage is identified. However, FSA’s procedures for monitoring system usage do not include an independent assessment of lenders’ implementation of security controls. Further, while FFEL lenders may be required to undergo various compliance audits and program reviews, FSA has not determined the extent to which these audits or reviews address security and privacy protections; it also does not review the results of such reviews to gain assurance that security and privacy protections are in place. Without requiring evidence of such assessments, FSA does not have a basis for ensuring that lenders are implementing adequate security and privacy protections. FSA has not established a process for overseeing corrective actions taken by FFEL lenders: Since FSA does not require independent assessments of lenders’ information security controls, it does not have a process for identifying weaknesses in the FFEL lenders’ security and privacy controls and monitoring corrective actions. Lenders do not notify FSA of security or privacy weaknesses that may be identified in their systems, nor do they report on corrective actions taken to remedy such weaknesses. In the absence of such reporting, FSA cannot ensure that weaknesses in the security and privacy controls of the lenders’ systems are being addressed. FSA did not establish procedures for monitoring FFEL lenders’ implementation of controls on an ongoing basis: FSA does not have a process for ongoing monitoring of lenders’ implementation of security or privacy safeguards. FSA does not require lenders to provide periodic reports to FSA on their security and privacy posture or to conduct any reviews of their implementation of security and privacy controls. Without requiring evidence that lenders are effectively implementing security and privacy protections, FSA cannot ensure that the data accessed by lenders are being safeguarded commensurate with risk. Regarding the lack of FFEL lender oversight, FSA officials noted that lenders, as financial institutions, are subject to a number of other legal and regulatory requirements that were not defined by FSA as part of the FFEL program. For example, lenders are subject to requirements for protecting customer information imposed by the Gramm-Leach-Bliley Act and FTC’s Safeguards Rule, which calls for financial institutions to document an information security program that includes specific elements. However, FSA does not have a process for ensuring that lenders are complying with these, or other, requirements related to the protection of student aid data. Consequently, FSA lacks assurance that risk-based safeguards commensurate with the sensitivity of these data are being effectively implemented, tested, and monitored. In our previous work, we similarly found that FSA did not have assurance that schools, which are also required to comply with the FTC Safeguards Rule, were implementing these requirements. OMB noted that agencies are ultimately responsible for ensuring that their information is adequately protected, and NIST stated that this responsibility does not change when information is shared with non- federal partners. Accordingly, agencies should have assurance that information they share with non-federal entities is being protected at an appropriate level. In the case of FSA, this could include leveraging processes already in place, such as the FTC Safeguards Rule, to gain assurance that appropriate security and privacy controls are in place and are being regularly monitored and tested. Without establishing a process for gaining such assurance, FSA is not meeting its responsibility to ensure that borrowers’ data are being adequately protected. FSA shares PII on millions of people with non-school partners (i.e., loan servicers, private collection agencies, guaranty agencies, and FFEL lenders) so that they can carry out key aspects of the federal student aid program. FSA is responsible for ensuring that its non-school partners protect this information by implementing adequate information security and privacy safeguards. While FSA has taken steps to oversee the security and privacy protections of some of its non-school partners, its policies and procedures did not always include all key oversight practices. In particular, while FSA established requirements for loan servicers and private collection agencies, along with processes for ensuring their implementation that generally adhered to the key practices, the agency had not ensured that controls are tested and results are reported on an ongoing basis. FSA, therefore, may lack visibility into the effectiveness of the protections applied to student aid data. With respect to guaranty agencies, FSA established security and privacy requirements and has taken steps to enhance security assessments. Nevertheless, without ensuring that controls are monitored on an ongoing basis, it lacks adequate assurance that security controls required by FSA are in place and effective. Further, because it exercised minimal oversight over FFEL lenders, FSA has limited assurance that they are protecting student aid data consistent with the agency’s requirements. FSA’s limited oversight could result in inconsistent or ineffective implementation of security controls, which in turn could have serious consequences for the privacy of millions of borrowers whose information is shared with non-school partners. We are making the following six recommendations to the Department of Education: The Secretary of Education should enroll loan servicers in FSA’s continuous monitoring program and, in the interim, require these entities to report the results of security controls testing at an FSA- defined frequency. (Recommendation 1) The Secretary of Education should enroll private collection agencies in FSA’s continuous monitoring program, and, in the interim, require these entities to test all controls at an FSA-defined frequency and regularly report the results. (Recommendation 2) The Secretary of Education should modify FSA’s agreements with guaranty agencies to specify a required baseline of security controls based on the impact level of the information shared with these agencies, as determined by FSA. (Recommendation 3) The Secretary of Education should establish a process for continuous monitoring of guaranty agencies’ implementation of security and privacy requirements between on-site assessments, to include testing all controls at an FSA-defined frequency and regularly reporting results. (Recommendation 4) The Secretary of Education should include specific security and privacy requirements in agreements with FFEL lenders based on FSA’s categorization of the information shared with the lenders. (Recommendation 5) The Secretary of Education should develop policies and procedures to gain assurance that FFEL lenders have appropriate security and privacy controls in place and that these controls are being regularly tested and monitored. (Recommendation 6) We received written comments on a draft of this report from FSA. In its comments (reprinted in appendix II), FSA concurred with three of our recommendations, partially concurred with two recommendations, and did not concur with one. In addition, FSA provided technical comments, which we have incorporated as appropriate. FSA generally concurred with our first three recommendations and described various actions it planned or had under way to implement them. Specifically, regarding our recommendation to enroll loan servicers in FSA’s continuous monitoring program (recommendation 1), the agency stated that loan servicers are scheduled to be enrolled in its ongoing security authorization program beginning in fiscal year 2019. Regarding our recommendation to enroll private collection agencies in FSA’s continuous monitoring program and, in the interim, require these entities to test all controls at an FSA-defined frequency and regularly report the results (recommendation 2), FSA stated that it concurred, although the actions it said it planned to take would not fully address the recommendation. Specifically, the agency stated that it intends to work with private collection agencies to identify specific relevant criteria to strengthen continuous monitoring testing schedules and include these criteria in private collection agencies’ quarterly reports to FSA. This measure, if implemented effectively, would address the interim measure called for in our recommendation. However, FSA did not describe actions to address the first part of our recommendation. Specifically, it did not state whether it intended to enroll private collection agencies in its ongoing security authorization program, as called for by its contracts with these agencies. Doing so would provide enhanced oversight of their implementation of security and privacy controls. The agency concurred with our recommendation to modify FSA’s agreements with guaranty agencies to specify a required baseline of security controls (recommendation 3). In this regard, FSA stated that the agreements it has established with guaranty agencies require them to comply with standards in NIST Special Publication 800-53, revision 4, and that assessments of the guaranty agencies require compliance with the moderate-impact level control baseline under the applicable NIST standards. Even though FSA did not describe plans to modify its agreements with guaranty agencies to explicitly require a specific baseline of controls, the procedures that it noted should help FSA ensure that guaranty agencies are protecting student aid data based on the office’s determination of risk. We intend to follow up with FSA to obtain and assess the evidence supporting its implementation of these recommendations. FSA stated that it partially concurred with two other recommendations. With respect to establishing a process for continuous monitoring of guaranty agencies’ implementation of security and privacy requirements between on-site assessments, to include testing all controls at an FSA- defined frequency and regularly reporting results (recommendation 4), FSA cited its process for on-site assessments or self-assessments as the means by which it monitors guaranty agencies. Specifically, it stated that it requires guaranty agencies to annually either complete a self- assessment or participate in an on-site assessment. However, FSA did not describe any additional steps it intends to take to monitor guaranty agencies’ implementation of security and privacy controls between assessments. As noted in the report, the self- assessment process that FSA established for guaranty agencies does not include such elements as collecting or reviewing documentation to verify that controls have been appropriately implemented. Further, FSA does not monitor all security controls between on-site assessments by requiring guaranty agencies to report regularly on the status of security controls. Regular reporting on the status of security controls, such as test results, would provide FSA with additional assurance that guaranty agencies have implemented adequate protections. Thus, we believe our recommendation remains appropriate. FSA also stated that it partially concurred with our recommendation to include specific security and privacy requirements in agreements with FFEL lenders based on FSA’s categorization of the information shared with the lenders (recommendation 5). Specifically, FSA stated that it has revised its 2019-2020 Lender Organization Participation Agreement with FFEL lenders to include specific security and privacy responsibilities and requirements, which is to be effective at the beginning of fiscal year 2019. The planned actions that the agency described in its response should fully address our recommendation, if effectively implemented. We intend to follow up with FSA to obtain and assess the evidence supporting its implementation of this recommendation. FSA did not concur with our recommendation to develop policies and procedures to ensure that FFEL lenders have appropriate security and privacy controls in place and that these controls are being regularly tested and monitored (recommendation 6). According to the agency, it lacks statutory authority under the Higher Education Act to monitor FFEL lenders in this area. FSA noted that the lenders are already subject to security and privacy controls that are monitored and enforced through other legal authorities that are not administered by the Department of Education or FSA. However, we continue to believe that our recommendation should be implemented. We recognize that FSA may not have the authority to impose additional requirements related to monitoring the adequacy of security and privacy controls implemented by FFEL lenders. Furthermore, the recommendation does not require FSA or the Department of Education to exercise additional regulatory authority over FFEL lenders or to conduct testing or other assessments of the lenders’ security and privacy programs. Rather, it seeks for FSA to review the results of other compliance audits or program assessments, including, as appropriate, those conducted by other federal entities, to acquire visibility into the lenders’ implementation of information security and privacy safeguards. Leveraging such a process should help provide FSA with assurance that the student aid data it shares with them are being adequately protected. Accordingly, we have clarified our recommendation to better reflect its intent. We are sending copies of this report to the appropriate congressional committees, the Secretary of Education, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9342 or marinosn@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The objectives of our review were to (1) describe the roles of the Office of Federal Student Aid’s (FSA) non-school partners in the federal student financial aid program, including the types of personally identifiable information (PII) shared with them; and (2) assess the extent to which FSA’s policies and procedures for overseeing non-school partners’ protection of federal student aid data align with federal requirements, federal guidance, and best practices. To address the first objective, we obtained and reviewed various documentation that described the federal student aid process and the types of information collected, used, and shared in the process. To determine the roles played by non-school partners in the federal student aid process, we reviewed reports from the Department of Education and FSA, including FSA’s annual reports for fiscal years 2016 and 2017, and reports from the department’s Office of Inspector General; reports from the Congressional Research Service on federal student aid programs; and prior GAO reports on aspects of federal student aid programs. These non-school partners included entities that FSA directly engages with to carry out key aspects of the student aid process. These partners were non-federal lenders participating in the Federal Family Education Title IV loan servicers, guaranty agencies, and private collection agencies. Specifically, we identified key functions carried out by these partners, the types of agreements they had with FSA, and the numbers of each type of partner that FSA engages with. To determine the types of PII shared with non-school partners, we reviewed FSA documentation on key systems used to collect, store, and process information as part of the student aid process. This included high-level documentation and descriptions of FSA’s systems architecture, privacy impact assessments for FSA and non-school partner systems, and information on the process by which FSA enrolls non-school partners to share student aid data with the agency. We also reviewed previous GAO reports on FSA’s management of student aid data, including PII collected during the aid process. In addition, we interviewed FSA officials, including officials from the agency’s technology and business operations offices. To address the second objective, we reviewed and analyzed the policies, procedures, and processes FSA has in place for overseeing non-school partners’ protection of student aid data and compared them to federal requirements and guidance for ensuring the protection of PII. We identified key activities for overseeing the protection of PII by reviewing laws, including the Federal Information Security Modernization Act of 2014; Office of Management and Budget requirements and guidance on managing federal information; and National Institute of Standards and Technology information security standards and guidance. Based on our review of these requirements and guidance, we identified four key practices for establishing security and privacy requirements for non- federal entities and overseeing the implementation of these requirements. These practices are require the implementation of risk-based security and privacy controls, independently assess the implementation of security controls, develop and implement corrective actions, and monitor the implementation of controls on an ongoing basis. We collected and reviewed evidence provided by FSA (policy and process documents, artifacts, written responses to questions, and verbal responses to questions) to understand its processes for overseeing the non-school partners’ protection of student aid data. We then compared the processes to the four key practices we identified. We determined whether the process met, partially met, or did not meet the key practices: Met – the agency provided evidence of processes and procedures that address all aspects of the key practice. Partially met – the agency provided evidence of processes and procedures that address some, but not all aspects of the key practice. Not met – the agency did not provide evidence of processes and procedures that addressed the key practice. We supplemented our review with interviews of FSA Business Operations and Information Technology officials with knowledge of and responsibility for the oversight of non-school partners. We also reviewed relevant Department of Education inspector general reports. We conducted this performance audit from June 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, John De Ferrari (assistant director), Chris Businsky, Marisol Cruz, Rebecca Eyler, Lee McCracken, David Plocher, and Bruce Rackliff made key contributions to this report.", "summary": "FSA administers billions of dollars in student financial aid, including loans and grants, to eligible college students. The processing of student aid is complex, and FSA relies on non-school partners to carry out various activities supporting the student aid process, such as loan repayment and collection. GAO was asked to review how FSA ensures the protection of PII by its non-school partners. The objectives of this review were to (1) describe the roles of non-school partners and the types of PII shared with them and (2) assess the extent to which FSA policies and procedures for overseeing the non-school partners' protection of student aid data adhere to federal requirements, guidance, and best practices. To address these objectives, GAO collected and reviewed FSA documentation, reports, policies, and procedures and compared FSA policies and procedures to four key practices included in federal guidance for overseeing the protection of PII by non-federal entities. GAO also interviewed FSA officials with responsibility for the oversight of non-school partners. The Department of Education's Office of Federal Student Aid (FSA) partners with various entities (“non-school partners”) that are involved primarily in supporting the repayment and collection of student loans. Federal loan servicers are responsible for collecting payments on loans and providing customer service to borrowers on behalf of the Department of Education through its Direct Loan program. Private collection agencies collect on loans that are in default and work with borrowers to help them get out of default. Guaranty agencies insure lenders against loss due to borrower default and carry out a variety of loan administration activities. Federal Family Education Loan lenders are non-federal lenders, such as banks, credit unions, or other lending institutions, that made loans to students in the past and continue to service these loans. FSA shares a variety of personally identifiable information (PII) on borrowers with its non-school partners. This includes names, addresses, phone numbers, email addresses, Social Security numbers, and financial information. Key practices for overseeing the protection of PII shared with non-federal entities include requiring (1) risk-based security and privacy controls, (2) independent assessments to ensure controls are effectively implemented, (3) corrective actions to address identified weaknesses in controls, and (4) ongoing monitoring of control status. FSA established oversight policies and procedures for loan servicers and private collection agencies that generally address these key practices. However, FSA exercises minimal oversight of lenders' protection of student data (see table). FSA officials maintain that the lenders are subject to other legal and regulatory requirements for protecting customer data. However, FSA does not have a process for ensuring lenders are complying with these requirements, and thus lacks assurance that appropriate risk-based safeguards are being effectively implemented, tested, and monitored. GAO is making six recommendations to FSA to ensure that its oversight of non-school partners addresses the four key practices for ensuring the protection of PII. FSA concurred with three of the recommendations, partially concurred with two, and did not concur with one. It also described actions planned or under way to implement four of the recommendations. GAO maintains that all of its recommendations are warranted.", "document_type": "gao"}
{"report": "IRS’s process for collecting unpaid tax debts includes: Notice Phase: IRS sends the taxpayer an automatically-generated series of letters about unpaid debts or delinquent returns to prompt payment or response if the taxpayer disagrees with the balance due or is unable to pay the amount owed. Automated Collection System: IRS attempts to have telephone contact with the taxpayer to discuss the debt and prompt full payment or set up a payment installment agreement. According to IRS officials, telephone contact generally happens when taxpayers call IRS in response to IRS enforcement notices or actions, such as filing a lien against the taxpayer’s property or levying financial assets. Field Collection: IRS revenue officers attempt in-person contact with taxpayers to prompt a payment or take enforcement action such as those described above with the Automated Collection System. According to IRS, its collection efforts focus on the potentially collectible inventory. IRS attempts to prioritize the debts it believes it will most likely be able to collect, based on an analysis of factors such as the debt amount and the taxpayer’s ability to pay it. In 1995, Congress authorized IRS to contract with private debt collectors to collect unpaid tax debts. In 1997 we reported IRS data showing that the program cost about $21.1 million and collected about $3.1 million. The program was canceled, in part, because of the net loss. In October 2004, Congress granted discretionary authority to IRS for creating a PDC program to collect some portion of unpaid taxes. The program enabled IRS to contract with private collection agencies to collect tax debts and pay them from a revolving fund of the revenue collected. IRS said it would study the comparative performance of private collection agencies versus the agency in collecting unpaid taxes because of concerns that the program might cost more than using IRS resources to collect the debts. IRS began assigning cases to private collection agencies in September 2006. It began the study at that time too. In March 2009, IRS released its study, which concluded that IRS was more cost effective than collection agencies in collecting tax debts when working similar cases. As a result, IRS announced that it would not renew expiring contracts with the private collection agencies. The Fixing America’s Surface Transportation (FAST) Act in 2015 mandated that IRS assign inactive tax debt cases to private collection agencies. Inactive cases are those that IRS includes in its potentially collectible inventory but is not actively pursuing. Congress defined three types of inactive tax debt cases that must be assigned to the collection agencies, which are those: removed from active inventory due to a lack of IRS resources or inability to contact a taxpayer; not assigned for collection to an IRS employee and more than one- third of the period of applicable statute of limitation has lapsed; and assigned for collection and more than 365 days have passed without any interaction with the taxpayer or a third party for purposes of furthering collection. The act also excluded certain taxpayer accounts from being assigned to a collection agency. Specifically, accounts are to be excluded if the taxpayer is deceased; under the age of 18; in designated combat zones; a victim of tax-related identity theft; under examination, litigation, criminal investigation or levy; subject to pending or active offers in compromise, an installment agreement, or a right of appeal; or involved in an innocent spouse case. The American Jobs Creation Act and the FAST Act together created two funds which allow IRS to retain up to 50 percent of the amounts collected by private collection agencies. Specifically, IRS can retain up to 25 percent of the amounts that collection agencies collect in each of these funds: Cost of Services fund to pay collection agencies’ commissions. Special Compliance Personnel Program fund to pay costs of administering the collection agency contracts and costs of adding collection staff. According to IRS officials, IRS’s approach for implementing the PDC program is to roll out cases over time in three major phases, moving from simpler to more complex cases. The first phase (April 2017) included the simplest types of cases in which individual taxpayers had agreed to the debt owed. The second phase (March 2018) added individual tax debts from IRS compliance activities—such as auditing the accuracy of filed tax returns—where taxpayers have not agreed with the debt owed and unfiled tax returns (i.e., from individuals who did not file tax returns as required). The third phase (planned for March 2019) is to add business tax debt cases and unfiled business tax returns. As shown in figure 1, since first assigning cases to collection agencies in April 2017, IRS has increased the number and types of tax debt cases. By the end of fiscal year 2019, IRS plans to have assigned about 2.4 million cases that it expects to be eligible for the PDC program. IRS has not clearly defined program objectives, measures, and targets for the PDC program. According to federal internal control standards, management should define objectives clearly to enable the identification of risks and define risk tolerances. Objectives should be defined in specific and measurable terms to enable design of internal control for related risks. Establishing measures and related targets also allows assessment of program performance and helps ensure that objectives are achieved. Although IRS started sending cases to collection agencies under the PDC program in April 2017, IRS did not document the program’s objectives and their links to related proposed measures until October 2018. IRS officials explained that they wanted to get some experience with the program before establishing its objectives and measures, so in June 2018 and August 2018, officials held working sessions to draft the program’s mission, vision, and values statements, and link performance metrics to them. The resulting proposed mission statement was to “provide taxpayers an opportunity to understand and resolve their tax obligations and apply tax laws in a manner that is consistent with IRS collection practices.” The sessions also yielded the following statements under related categories that according to IRS officials are the PDC program’s three program objectives. Taxpayer Protection—Apply tax laws in a manner that is consistent Taxpayer Experience/Satisfaction—Provide taxpayers an opportunity to understand and resolve their tax obligations Private Collection Agency Operational Success—Resolve tax obligations by utilizing private collection agencies According to the working sessions’ documents, officials also proposed PDC measures. However, our review found that these measures did not clearly link to two of the three PDC objectives—applying tax laws consistently with IRS collection practices and providing taxpayers an opportunity to understand and resolve their tax obligations. Table 1 shows our analysis of the clarity of the links between the objectives and proposed measures, and the lack of targets for each of the objectives and measures. In addition, based on our discussions with IRS officials and review of PDC program documents, IRS’s three program objectives do not acknowledge all key program-related risks. For example, because high costs put previous PDC programs at risk, IRS officials said they designed program procedures to control costs and compare these costs to revenue collections. However, none of the objectives or measures addresses costs compared to revenue collections. Similarly, IRS has acknowledged the risks of scams and created risk responses but none of the three objectives focuses on protecting taxpayers from the risks of scams. Our review of IRS documentation also shows that IRS has used inconsistent terms to communicate the program’s objectives. Specifically, IRS’s fiscal year 2019 communication plan for the PDC program states different program objectives than those in the working session documents. This document states the program’s objectives as: help America’s taxpayers settle their debt and come into compliance; ensure the safety and security of taxpayers and their data; and ensure that all taxpayers contacted by private collectors are treated with fairness and respect by monitoring the program. These objectives do not include terms used in the objectives stated in table 1, such as applying tax laws consistently with collection practices while they introduce new terms such as compliance, safety and security, and fairness and respect. Although the two sets of objectives do not necessarily conflict, their differing, inconsistent terms contribute to the stated program objectives being unclear. According to IRS officials, the objectives defined by the working sessions are the objectives for the PDC program. They said that IRS needs more time to finalize the program objectives and measures and develop related targets. The officials said their efforts and resources until recently had been directed toward implementing the PDC program. However, they do not expect to finish refining the objectives, measures, and targets until fiscal year 2020 or later, when they will use program data that may be available then. Until program objectives are clearly defined and consistently stated, IRS cannot ensure that appropriate controls will be in place to address risks and achieve the desired results of the PDC program. Also, without measures and targets that are clearly linked to the objectives, IRS will be limited in its ability to assess and assure that the program is making progress in achieving its objectives. According to federal internal control standards, management should externally communicate complete, quality information necessary to achieve objectives. Ways to carry this out include using and reporting complete financial information. However, we found that IRS’s reporting on the PDC program to Congress did not provide complete, quality financial information on some of the program’s results for revenue collected and costs. Specifically, IRS’s reporting did not clarify how much of the collected revenue went to the general fund of the Treasury (the Treasury) rather than to IRS for two special funds. For example, from fiscal year 2016 when IRS started to develop the program through September 2018, IRS’s report to Congress in October 2018 showed program revenue collections of $88.8 million and costs of $66.5 million—a program balance of $22.3 million. While suggesting this positive program balance to the Treasury, the report did not clarify that about $50.9 million of the $88.8 million went to the Treasury and about $37.8 million went to the two IRS special funds—about $18.9 million for each—to pay current and future related IRS costs (see table 2 in appendix II). The report included the required information on the collected revenue retained in the two special funds. We analyzed the status of the two funds as of September 2018 (see table 3 in appendix II). The $18.9 million that IRS retained to pay the costs for commissions to the contracted collection agencies had a balance of $2.9 million; the $18.9 million that IRS retained to pay costs to administer the PDC contracts and hire and train additional staff for IRS collection activities had a balance of $14.6 million. IRS officials said IRS used this fund to hire 100 additional collection staff in October 2018. The officials said that information system improvements will allow IRS to track the revenue collections and costs related to those additional staff pursuing tax debts. IRS officials said in September 2018 that they plan for future reports to include a program balance table and retained fund balance tables. However, they said IRS does not plan to include a table on the amount of collected revenue that went to the Treasury because IRS is not required to include this in the report. Full reporting of revenue and costs can help stakeholders better understand and assess program results. Without clearly reported data, stakeholders are challenged to know how much of the collected revenue went to the Treasury rather than to IRS’s two funds. Nor did IRS’s reporting to Congress include all PDC program costs. As discussed above, ways for management to meet internal control standards include using and communicating quality information on achieving program objectives. IRS has not included the costs incurred by the Treasury Inspector General for Tax Administration’s (TIGTA) Office of Investigation to operate the system for taxpayer complaints about collection agencies, which is part of the PDC program (see table 4 in appendix II for IRS’s reported costs). IRS officials said that IRS did not include TIGTA’s program costs because IRS does not typically include costs incurred by TIGTA or other agencies in its program costs. However, by not including TIGTA’s operational costs, as opposed to its audit costs, Congress is not informed of full PDC program costs. Our work has shown that using performance data helps agencies achieve better results. Federal internal control standards also require that management use quality information to achieve objectives. The standards also point out that management is responsible for an effective internal control system that minimizes the waste of resources. In addition, an IRS strategic goal includes analyzing data to improve decision-making and program results. However, IRS does not have plans to analyze data to identify ways to improve the results of the PDC program by using this information to guide the types of cases sent to collection agencies. We found that IRS has not conducted any analysis of PDC results to determine which types of cases are not potentially collectible and should not be assigned to collection agencies because they result in little or no collected revenue. Our analysis of IRS data showed that certain cases assigned to collection agencies generally have had limited results. Specifically, from April 2017 to September 2018, collection agencies had only collected $88.8 million of the $5.7 billion assigned—1.6 percent—in about 730,000 cases. closed about 111,000 cases, of which about 38,000 were closed as either fully paid or with an installment agreement, while about 56,000 were recalled by IRS and 17,000 were returned by collection agencies with little or no revenue collected. IRS officials said that these recalled and returned cases may have generated some revenue but did not know how much. Although revenue amounts were not known, IRS fiscal year 2018 data showed that collection agencies returned 288 cases (1.7 percent of about 17,000 cases returned in 2018) with a partial debt payment. In addition, our review of IRS’s data indicated that most returned cases would not have had collected revenue. According to these fiscal year 2018 data, more than 95 percent of the 17,000 cases—involving $183 million in tax debt— were returned because the collection agencies indicated that: they were unable to collect on the debt or contact the taxpayer, or the taxpayer received Social Security supplemental or disability income payments (which are to be returned because these taxpayers have limited resources or ability to pay, according to IRS officials), asked the collection agency to cease contact, or had died. When we shared our analysis with IRS officials, they said they were not surprised by these limited PDC collection results because IRS considers them to have low collection potential. Furthermore, many taxpayers may not be able to pay because they have low income. In September 2018, TIGTA reported that 54 percent of taxpayer accounts assigned to collection agencies had a low income indicator. By pursuing such cases that produce little or no revenue, IRS increases PDC program costs to manage the cases being sent and returned as well as the burdens for taxpayers who have to respond to collection agencies’ contacts. However, IRS officials said that they have not analyzed these results and do not have data on either the costs or the burdens associated with these cases. We also found that IRS does not have plans to analyze PDC program results and inactive debt cases to identify cases that IRS will not pursue that could be added to the PDC inventory. These cases could have higher collection potential than many of the current PDC cases that are collecting little or no revenue even though this potential has not been high enough to be actively pursued by IRS. For example, IRS could use its discretion to assign cases before they meet the FAST Act’s case age requirements criteria for collection agency assignment. Assigning such cases earlier could improve PDC program results because of the debt collection principle that collection success generally worsens as cases age. Similarly, IRS does not have plans to analyze PDC results to identify characteristics of cases with the highest collection results and use that analysis to find other types of inactive cases with similar characteristics that could be included in the PDC inventory. IRS officials said they are not conducting or planning such analyses because their priority is to fully implement the program and assign the types of cases to collection agencies that the FAST Act mandates. They said that they may consider expanding the types of cases sent to collection agencies after March 2019 and that they do not know whether they will do related analyses or when any decision will occur. However, for both the debt cases that could be excluded or added, IRS has existing discretionary authority to revise the PDC inventory. For example, IRS has authority to exclude cases from the PDC program if IRS determines they are not potentially collectible. Furthermore, prior law grants IRS the discretion to assign collection agencies cases beyond the three types of cases specified by the FAST Act. Even so, IRS officials said that they have no plans to analyze data on whether to revise the PDC inventory to reduce costs or maximize revenue collection. By not analyzing the results of the PDC cases, IRS risks continuing to send cases to collection agencies that collect little or no revenue and incur costs that waste federal resources as well as burden taxpayers. If most of the more than 2 million cases slated for collection agency assignment into 2019 collect little or no revenue, the accumulated IRS costs as well as burdens imposed on taxpayers could be significant. Similarly, by not analyzing new types of cases that could be assigned to private collection agencies, IRS could miss opportunities to assign cases that collect more revenue than cases that these agencies currently return with little or no revenue. As shown in figure 2 and as described in greater detail below, IRS has made progress in implementing elements of a risk management process for its PDC program but has not completed full implementation of the process. IRS has involved leadership in supporting the risk management process but has not aligned the process with objectives for protecting taxpayers in the PDC program. We previously reported that agency officials should engage leadership and regularly consider risks and how they could affect achievement of objectives. IRS’s initial discussions of risk—including taxpayer risks—involved PDC leadership and internal stakeholders, and followed guidance from the Office of Chief Risk Officer, according to IRS officials. IRS created a risk register to track the status of PDC risks. PDC leadership and IRS stakeholders continue to update these risks biweekly, according to IRS officials. In addition, IRS has developed a program mission statement and draft objectives. However, IRS has not aligned its risk management process for the PDC program with an objective for protecting taxpayers because, as discussed earlier in this report, IRS has not yet finalized its objectives for the PDC program. IRS has taken some steps to identify risks; however, we found various weaknesses in its implementation of this risk management element. According to our 2016 report on risk management, agencies should assemble a comprehensive list of risks that could affect achievement of goals and objectives. IRS’s risk register includes taxpayer risks that IRS internal stakeholders initially identified and continue to update biweekly, according to IRS officials. IRS assigned each of these a risk category— such as taxpayer rights and protection—and most risks have an IRS official assigned to manage them. Our prior work found that clearly documenting actions taken in a risk management process—such as in a risk register—facilitates systematic risk review to help accomplish an agency’s mission. However, we found that IRS has not documented a comprehensive list of specific risks to taxpayers in the risk register. IRS’s risk register identified 6 taxpayer risks but we identified another 10 risks by reviewing other PDC documentation, such as the Policy and Procedures Guide, and by interviewing external stakeholders, as shown in figure 3. For example, IRS did not identify in the risk register the risk that taxpayers may agree to debt payments they cannot afford. Also, IRS has not aligned the taxpayer risks with one or more PDC objectives because IRS has not yet finalized the objectives, as previously discussed. IRS officials said they did not list all taxpayer risks in the risk register because they covered many of these risks in other PDC program documents. Even so, not documenting risks and aligning them with the objectives in the risk register will make it more difficult to properly manage all taxpayer risks. Furthermore, based on our review, the register identified many risks that are broad and unclear. For example, IRS’s description of a taxpayer rights risk is broad and unclear on which rights are at risk given the 10 taxpayer rights in the Taxpayer Bill of Rights. For other risks, we found that IRS did not clearly state the risk to taxpayers. For example, IRS identified certain taxpayer risks with a focus on: giving taxpayers an opportunity to agree to pay their tax debts through a series of payments rather than the effects on taxpayers if they are unable to make all payments; and harming IRS’s reputation if collection agencies do not follow IRS standards rather than clarifying any specific risks to taxpayer rights. While IRS identified some taxpayer risks, the lack of completeness and clarity in IRS’s risk register limits its effectiveness as a tool for tracking taxpayer risks. As a result, IRS does not have reasonable assurance that it has fully identified and addressed all taxpayer risks from the PDC program. IRS has not consistently documented its assessment of taxpayer risks from the PDC program, making it unclear how risks will be prioritized. Our 2016 report on risk management describes the importance of assessing the impact and likelihood of risks so risks can be prioritized. This step is necessary to guide decisions on how to respond to risks. Before implementing the PDC program in April 2017, IRS assessed potential risks and developed sections in the risk register on risk impacts, likelihood, and responses that IRS would use to address each risk. However, IRS has not clearly documented the impacts for each risk in the risk register. We found that the column in the risk register designated for capturing risk impact was generally blank or contained just a date. We also found that IRS did not fully capture information on the severity of a risk’s impact. For example, in a column for recording severity in the risk register, we found information on the implementation status of a risk response instead. Further, although IRS officials said they continue to monitor “closed” risks, we found that the register recorded no information about the severity of the risk impact after IRS implemented a response. Instead, the register recorded the risk as “closed.” We also found that IRS had not clearly documented the likelihood of each risk in the risk register, making it difficult to understand how likely each risk is to occur after IRS responds to and closes a risk. For example, the PDC program and taxpayers could be harmed if scammers find a way to impersonate collection agencies. IRS set up a Taxpayer Authentication Number to allow taxpayers to verify that a phone call is from a collection agency and not a scammer, and closed the risk involving scams. However, the risk register is unclear on how IRS estimates the likelihood this risk could occur or on how this response would reduce the likelihood of scams. IRS officials said quantifying the impacts and likelihood of some risks is difficult. Even so, without clear documentation on the risk impacts and likelihood, it will be difficult for IRS to prioritize the risks. Without a reasonable measure of the impact’s severity, IRS may be unable to properly select responses to mitigate the potential impacts from the risks. IRS has developed many responses to broadly address taxpayer risks in the PDC program, but has not clearly documented and aligned the responses to address specific risks. Our 2016 report on risk management suggests as a good practice selecting risk responses based on a prioritized list of risks. IRS established risk categories and risk responses that broadly respond to taxpayer risks in the PDC program, such as the quality review process to measure how well collection agency employees properly follow IRS procedures. However, IRS has not addressed all of the elements we described in our 2016 report for selecting responses to risks—in part because identified risks and responses are broad—as IRS has not completed all the steps for risk identification and assessment, as previously discussed. In addition, we found that the risk register did not clearly document the responses chosen to mitigate some stated risks. First, IRS did not always clearly document in the register column for responding to risks how its many responses aligned with a specific risk. For example, the register aligned a response on tracking taxpayer complaints with the risk on protecting taxpayer rights but not with the risk of scams, even though IRS officials said that they rely on TIGTA to monitor taxpayer complaints for PDC-related scams. Second, the register did not include some taxpayer protection responses. Specifically, we identified taxpayer protection responses in the collection agency contracts that were not included in the risk register, such as 1) ensuring that collection agency employees are not paid based on how much they collect, or 2) relying on taxpayers to inform collection agencies if debt payments would cause a hardship. IRS officials acknowledged that their risk register does not align all of its responses with specific risks, but said they created many responses to generally protect taxpayers, although we did not find many of these responses documented in the risk register. Without thorough risk identification and assessment or clear documentation in the risk register of how all risk responses align with specific risks, IRS does not have reasonable assurance that it has properly selected risk responses for each taxpayer risk. IRS has developed monitoring efforts for major taxpayer risk responses for the PDC program, but lacks assurance that specific responses are working effectively to mitigate specific risks. Our prior work encourages agencies to monitor how risks change and how well risk responses work. IRS monitoring includes: reviewing the quality of a statistically reliable sample of calls between collection agencies and taxpayers, reviewing monthly reports from collection agencies on their compliance and behaviors involving taxpayers, periodically visiting collection agencies to review program compliance, acting on referrals from Treasury Inspector General for Tax Administration’s (TIGTA) investigation of complaints, and tracking taxpayer satisfaction through a customer satisfaction survey. However, we found that IRS’s broad monitoring efforts provide limited information on whether or how effectively the responses are addressing taxpayer risks in the PDC program. For example: IRS monitors calls and scores collection agencies’ accuracy in following various collection procedures, but this measure provides little information on how well specific risks in the PDC program are addressed to protect taxpayers. For fiscal year 2017, the quality scores indicated that collection agencies scored at least 98 percent accuracy. However, IRS focuses on this overall score rather than monitoring individual components that make up the overall score, which could serve as possible indicators of taxpayer risks, such as unauthorized disclosures of taxpayer information. IRS documentation showed that IRS is still identifying which components of the quality score apply to collection agency performance on taxpayer rights protection, but IRS officials said they do not plan to finalize the program’s performance measures until fiscal year 2020. IRS has not documented how it uses its customer satisfaction survey measure to monitor specific risks to taxpayer rights. IRS reports that taxpayers’ satisfaction scores for interacting with collection agencies exceed 93 percent overall. However, this overall score does not provide specific information about risks to taxpayers or related risk responses. Some survey questions—such as on collection agency professionalism—could provide information about specific taxpayer risks. IRS has plans to consider using other survey questions as measures and, in October 2018, officials said they are planning analysis in fiscal year 2019 to inform and implement survey changes by fiscal year 2020. IRS expects taxpayers to tell the collection agency if they cannot afford a debt payment, but does not track whether this risk response is effective. If a taxpayer reports to a collection agency that debt payments would cause economic hardship, that they have a medical hardship, or that they receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), the collection agency is required to return the case to IRS. To start such tracking, IRS officials said they were open to possibly analyzing which types of taxpayers pay or do not pay, as well as the voluntary payment rate on installment agreements for PDC taxpayers. As of October 2018, IRS documentation showed ongoing development of measures for monitoring taxpayer complaints that TIGTA receives and investigates. It showed that IRS proposes to establish thresholds for the number of actionable complaints and unauthorized disclosures a collection agency needs to report before IRS takes corrective action. In addition to TIGTA complaints, we found that IRS has other sources of taxpayer complaints available that it was not using to monitor changes in taxpayer risk. The Federal Trade Commission’s (FTC) Consumer Sentinel Database received a number of taxpayer complaints about collection agencies and possible scams, but we found that IRS did not ask FTC for these data. FTC gathers data on complaints from the public, the Better Business Bureau, and IRS and other federal and state agencies. We analyzed FTC data from about the first 15 months of the PDC program and identified 20 PDC-related taxpayer complaints. More than half of the complaints indicated taxpayer confusion after being contacted by a collection agency; of these, seven taxpayers mistook the collection agencies for scammers. In addition, six cases were possible scams, and in three cases taxpayers reported harassment by the collection agency. When we shared our analysis with IRS officials, they agreed that the FTC data would be valuable to them and said they plan to work with TIGTA’s Office of Investigations to incorporate these data into their monitoring of taxpayer complaints by the end of March 2019. Although IRS has developed methods to monitor its risk responses involving taxpayer risks and taxpayer rights violations, IRS’s monitoring provides broad indicators rather than specific measures on how well responses address each risk in the PDC program. Although officials are considering changes to IRS’s monitoring and have plans to conduct data analysis in fiscal year 2019 to inform decisions about possible customer satisfaction survey changes, until these changes are implemented, IRS will have limited assurance that it has effective responses to address each risk in the PDC program. IRS informs internal stakeholders and Congress about taxpayer risks in the PDC program, but has not fully engaged external stakeholder groups that represent taxpayers’ interests to learn about risks. Our 2016 report on risk management discussed the need to inform internal and external stakeholders about program risks and risk response performance, and to seek feedback on risks from stakeholders. We found that IRS followed some of these practices and conducted outreach to some internal and external stakeholders. For example, PDC management engages regularly with IRS stakeholders, and produces annual reports to Congress on PDC performance including taxpayer protection. IRS officials said that IRS staff regularly meet with the Taxpayer Advocate Service (TAS) staff on PDC. However, TAS has recommended that it be involved in overseeing taxpayer protection procedures by reviewing collection agency calls with taxpayers. IRS officials said they also reached out to external stakeholders such as practitioner groups and Low-Income Taxpayer Clinics through conferences and the Office of National Public Liaison, and participated in Nationwide Tax Forums to provide “limited talking points” about the PDC program. IRS provided documents showing prior outreach to these groups as well as AARP about the PDC program. In addition, IRS provided documents showing planned outreach to external stakeholders for fiscal year 2019, including TAS, Congress, tax preparers, and tax professional groups. IRS officials said they welcome feedback about taxpayer risks, but documents they provided showed limited efforts to solicit feedback from external stakeholders about the PDC program. For example, between May 2016 and October 2018, IRS anonymously recorded 26 questions from external stakeholders through its Stakeholder Liaison office, which is designated to communicate with stakeholders. Ten of these questions were recorded after April 21, 2017, when collection agencies started contacting taxpayers directly about their tax debts. Because the identities of stakeholders submitting questions are kept anonymous, we could not follow up with stakeholders about IRS’s responses. IRS officials said they had not received any direct feedback from Low Income Taxpayer Clinics, but that any such feedback would be shared through TAS. Our interviews with external stakeholders from practitioner groups and groups that represent taxpayer interests indicated that IRS had not offered them clear opportunities to provide feedback. For example, several Low Income Taxpayer Clinic officials informed us that they did not perceive that IRS was soliciting their feedback when the PDC topic was discussed at conferences and meetings they attended. We received similar comments that feedback opportunities were lacking or unclear from representatives at AARP, the American Bar Association, and other groups, raising questions about how fully IRS solicited feedback while conducting its outreach on the PDC program. As previously mentioned, we learned about taxpayer risks IRS did not include in its risk register and the experiences of vulnerable groups by reaching out to stakeholders and listening to their stories (see figure 3). For example, some stakeholders expressed concerns that using collection agencies could increase scam risk and make it more difficult to advise taxpayers on how to avoid scams. They also identified a range of risks to various types of vulnerable taxpayers. For example, stakeholders told us that low-income taxpayers can be risk averse and will try to pay, and may be unaware they do not have to pay the debt if it will cause a hardship. According to some of the groups we interviewed, some elderly taxpayers are particularly vulnerable to scams and could be easier for collection agencies to pressure into payment arrangements; other types of taxpayers might be confused and believe that a legitimate collection agency call is actually a scam. While we did not encounter clear examples of taxpayer mistreatment by collection agencies or scammers impersonating collection agencies, the concerns stakeholders raised suggest they can provide IRS with feedback and insights about taxpayer risks—particularly to vulnerable groups—that IRS may not identify on its own. Without ensuring that it has fully solicited feedback and conducted outreach to stakeholders, IRS does not have assurance that it has identified specific risks to taxpayers and appropriately responded to them. IRS identified scams as a risk to the PDC program and taxpayers. In response to the scam risk, IRS established a Taxpayer Authentication Number to help taxpayers and collection agencies verify each other’s identities, provided authentication guidance to taxpayers with cases assigned to collection agencies, and posted scam alerts and press releases on its website. In addition, TIGTA monitors taxpayer complaints to identify instances of scams, according to IRS officials. Beyond this step, IRS has not identified other fraud risks, such as those internal to the operation of PDC. To help agencies better address fraud, we issued A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework), which includes a comprehensive set of leading practices to combat fraud in a strategic, risk-based manner. These practices include: identifying and assessing inherent fraud risks—including fraud risks within the program, examining the suitability of existing fraud controls, and documenting the program’s fraud risk profile. IRS did not have information to demonstrate a formal fraud risk assessment for the PDC program. IRS officials said they did not conduct and document a formal fraud risk assessment because they considered fraud risk as part of their risk management process for the PDC program. However, IRS’s risk register did not identify fraud types beyond scams, and our review of other IRS risk management documents found that they had no clear information about consideration of other external or internal fraud risks, such as from collection agency employees. In addition, IRS did not document responses to address fraud risks beyond the Taxpayer Authentication Number and scam-related complaints monitoring. Without information on IRS’s assessment and responses to fraud risks it is not clear that IRS fully considered internal and external fraud risks, or developed appropriate responses to those risks, meaning IRS cannot provide assurance it is effectively managing fraud risks to taxpayers and the program. IRS assures taxpayers that they can expect the same level of service and protections from collection agencies as they do from IRS collections. However, we identified two inconsistencies in IRS guidance on taxpayer protections for the PDC program, which could increase confusion among taxpayers or risks to taxpayers. In response to our findings, IRS is revising its guidance to address one of these issues but the other has not been addressed. Responding to suicidal taxpayers: IRS guidance for its collection employees requires them to take all taxpayer suicide threats seriously, keep the taxpayer on the phone, and act quickly to report the incident to authorities to locate and help the taxpayer. However, IRS guidance for collection agency staff allowed debt collectors to first use judgment to try and determine if the suicide threat was sincere before taking steps to help the taxpayer. When we pointed out this discrepancy to IRS officials, they acknowledged it and, in October 2018, issued revised guidance to collection agencies that removed collector discretion to judge whether suicide threats are valid before taking actions to help the taxpayer. Reporting scams to TIGTA: IRS instructs taxpayers to call TIGTA if they suspect a scam. IRS information mailed to taxpayers and on the main PDC program website includes contact information for TIGTA, but does not say to call TIGTA to report a scam. This information is found separately on IRS’s website for scams—which can be accessed through the main PDC program website—but this may not be clear to all taxpayers in the PDC program. IRS officials acknowledged that their mailed publications do not instruct taxpayers to contact TIGTA to report scams, but said they encourage taxpayers to visit IRS.gov to keep informed about scams. External stakeholders including AARP and the National Center on Elder Abuse said that older Americans generally trust and rely more upon the mail than the internet. In addition, because older Americans are more likely to watch televised news, they may not necessarily see IRS website scam alerts and therefore may be less aware of these scams. They also said that not all taxpayers—in particular elderly taxpayers—use the internet, and thus rely on printed guidance or the telephone for information about reporting scams. Without clear guidance, taxpayers will not know how to report scams. Thus, TIGTA and IRS may be unaware of and unable to appropriately respond to them. IRS officials said it would be possible to update the printed guidance provided to taxpayers with information about contacting TIGTA to report scams, but that such revisions could take up to a year to implement. The PDC program can contribute to IRS’s enforcement efforts to assure taxpayer compliance and help address the tax gap. However, without program objectives that are clearly defined and consistently stated, IRS cannot assure that appropriate controls will be in place to address risks. Also, without measures and targets that are clearly linked to program objectives, IRS will be limited in assessing progress and assuring that the program achieves its objectives. Without complete reporting on the PDC program revenue collection results, Congress is not fully informed on the amounts of collected revenue sent to the general fund of the Treasury and amounts retained by IRS to pay costs. In addition, IRS’s not reporting TIGTA’s costs to administer the PDC taxpayer complaint system means Congress is not informed of full PDC program costs. Furthermore, because IRS does not have plans to analyze data to identify ways to improve the results of the PDC program by using its discretion to revise the types of tax debt cases it sends to collection agencies, IRS risks continuing to send cases to collection agencies that incur costs but collect little or no revenue. IRS may also miss opportunities to assign cases that collect more revenue to more efficiently and effectively address the gap between what taxpayers owe and pay. IRS’s incomplete documentation of how taxpayer risks align with program objectives, identification of risks, and risk assessment make it difficult for IRS to prioritize risks, and does not provide reasonable assurance that IRS properly selected risk responses to address each risk. Similarly, not fully documenting how IRS is monitoring taxpayer risks and related responses means that IRS has limited assurance that each response is effective in addressing the risk. Taxpayers may face increased risk if IRS guidance to taxpayers is unclear, such as how to report scams. Lastly, more fully soliciting feedback from external stakeholders to learn about taxpayer risks—particularly to vulnerable groups—would provide assurance that IRS has identified and appropriately responded to taxpayer risks. We are making the following 12 recommendations to the Commissioner of Internal Revenue: The Commissioner of Internal Revenue should finalize the PDC program objectives so that they are clearly defined in consistent terms, and assure that the key program risks, measures, and targets are linked with the objectives. (Recommendation 1) The Commissioner of Internal Revenue should include TIGTA costs in IRS’s reporting of PDC program costs. (Recommendation 2) The Commissioner of Internal Revenue should report the amount of collected revenue sent to the general fund of the Treasury and amounts retained by IRS to pay its costs. (Recommendation 3) The Commissioner of Internal Revenue should analyze PDC program results to identify the types of cases that are not potentially collectible and should not be assigned to collection agencies. (Recommendation 4) The Commissioner of Internal Revenue should analyze PDC program results and the cases not assigned to the PDC program to identify the types of inactive cases IRS will not pursue that could be assigned to collection agencies to improve PDC program results. (Recommendation 5) The Commissioner of Internal Revenue should clearly document and distinguish the complete list of identified risks to taxpayers in the PDC program risk register, and align the risks with PDC program objectives. (Recommendation 6) The Commissioner of Internal Revenue should clearly document the severity of impacts of the taxpayer risks, as well as the likelihood of each taxpayer risk after responding to it, in the PDC program risk register, and use this information to prioritize risks to address and guide selection of risk responses. (Recommendation 7) The Commissioner of Internal Revenue should clearly document how each risk response aligns with specific taxpayer risks in the PDC program risk register. (Recommendation 8) The Commissioner of Internal Revenue should document how IRS’s monitoring of the PDC program provides information on specific taxpayer risks and how well specific responses are working to address each risk, and should supplement IRS’s monitoring of taxpayer complaints with FTC complaint data. (Recommendation 9) The Commissioner of Internal Revenue should more fully seek and document feedback from external stakeholders representing vulnerable taxpayers to identify and appropriately respond to possible PDC taxpayer risks. (Recommendation 10) The Commissioner of Internal Revenue should clearly document an assessment of fraud risks related to the PDC program. (Recommendation 11) The Commissioner of Internal Revenue should ensure that its printed guidance to PDC taxpayers includes information about reporting scams to TIGTA. (Recommendation 12) We provided a draft of this report to the Commissioner of Internal Revenue for comment. IRS provided written comments, which are reproduced in appendix III. Of our twelve recommendations, IRS partially agreed with one and disagreed with two. IRS agreed with the remaining nine recommendations and outlined actions to implement them. Of these nine recommendations, IRS said it already implemented one and planned to implement another, even though IRS disagreed with part of the related finding. IRS partially agreed with our recommendation on defining PDC program objectives related to key risks and developing related measures and targets (Recommendation 1). IRS said it would use consistent terms in developing measures that link to its PDC program objectives, but did not agree that program objectives are necessarily framed in terms of program risks. IRS said its approach to risk management is consistent with GAO’s Standards for Internal Control in the Federal Government, which is to identify objectives before identifying risks to achieving those objectives. However, IRS did not document the program’s objectives until October 2018, about two years after it validated identified PDC program risks, and did not expect to finalize the objectives and related measures and targets until fiscal year 2020 or later. Further, as discussed in the report, IRS’s stated objectives did not acknowledge all key PDC program risks, such as scams and high costs compared to revenue collected. We revised the recommendation to more clearly address our intent that whenever IRS finishes defining the PDC program objectives, IRS should ensure that they include objectives that are linked with key program risks. IRS disagreed with our recommendation that IRS include TIGTA costs in reporting program costs (Recommendation 2). IRS said that doing so would be inconsistent with legislative requirements that define program costs as IRS’s costs and with IRS cost-accounting practices. However, the FAST Act set minimum reporting requirements to which IRS can add more information. Also, the existing cost accounting standards and practices to which IRS refers govern IRS’s accounting for and reporting of costs incurred by IRS. However, our intent is to ensure fuller reporting of the PDC program’s cost to the federal government. Therefore we stand by our recommendation because without such reporting Congress is not informed of full PDC program costs. IRS also disagreed that it should analyze PDC program results to identify the types of cases that are not potentially collectible and therefore should not be assigned to collection agencies (Recommendation 4). IRS said the PDC statute requires the assignment of all inactive tax receivables to collection agencies and therefore no collectability analysis is required or necessary. However, as we discuss in our report, the statute defines “inactive tax receivables” as being in “potentially collectible inventory” but does not define “potentially collectible inventory.” We also noted that IRS has the discretion to define “potentially collectible inventory” under its general rulemaking authority in 26 U.S.C. § 7805 and can use this authority to determine which cases are potentially collectible and which are not. IRS also said it questioned whether the analysis we recommend would improve efficiency and said there is very little cost associated with assigning additional cases to collection agencies. During our review, we asked IRS for such cost information and IRS officials said they did not know the costs to send or to handle returned PDC cases. As we noted in our report, IRS has incurred tens of millions of dollars in costs with little or no revenue collected for most of the PDC cases that IRS has closed. IRS analysis to improve PDC case assignment could improve efficiency. Under its general rulemaking authority, IRS is authorized to make rules it deems necessary for the efficient administration of the tax code. We added language in the report to emphasize IRS’ management responsibility to assure efficient program operations. Without the analysis we recommend, IRS could continue assigning uncollectible debts to PCAs that generate IRS costs and waste federal resources. IRS agreed that it should analyze PDC program results and the cases not assigned to the PDC program to identify the types of inactive cases that could be assigned to collection agencies to improve PDC program results (Recommendation 5). IRS said it had already built this analysis into its current shelving process, as the statue addresses inactive cases that are shelved due to lack of resources. However, it is not clear that the analysis embedded into IRS’s shelving process identifies cases that IRS will not pursue and assigns them to collection agencies before the 52-week shelving threshold, or before the FAST Act’s case age requirements, as we discuss in the report. Similarly, it is not clear that IRS’s shelving process includes analysis of PDC results to identify characteristics of cases with the highest collection results and uses that analysis to find inactive cases with similar characteristics that could be assigned to collection agencies, as we discuss in the report. We look forward to IRS taking actions that will address our findings. Without such analyses, IRS could miss opportunities to assign cases that collect more revenue than cases that collection agencies return with little or no revenue collected. Finally, although IRS agreed with our recommendation that it report the amount of collected revenue sent to the general fund of the Treasury and amounts retained by IRS to pay its costs (Recommendation 3), IRS said it disagreed that its reports to Congress on the PDC program have not provided complete financial information and said such reporting followed statutory requirements. As we state in our report, IRS has documented PDC revenue collections and costs in its annual report to Congress as required by the FAST Act. However, although not required by the Act, IRS has reported the program balance measure—program revenue less cost—without clarifying how much revenue goes to the general fund of the Treasury (the Treasury) rather than to IRS’s two funds. We appreciate IRS’s agreement with this recommendation as well as its plans to report PDC revenue amounts going to the Treasury and to IRS’s retained funds. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or at lucasjudyj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The objectives of this report were to assess the extent to which the Internal Revenue Service (IRS) has (1) documented Private Debt Collection (PDC) program objectives and measures; (2) documented data on PDC revenue collection and cost results, and used these data to improve the program and meet its objectives; and (3) addressed PDC program risks to prevent or address scams or other harmful effects on taxpayers. We limited the scope of our analysis to PDC program planning and implementation, PDC program data on costs and revenues, and risks to taxpayers in the PDC program. To assess the extent to which IRS documented PDC program objectives and measures, we reviewed PDC program management documents and interviewed IRS officials—including the Director of Headquarters Collection and the PDC Program Manager—to identify the stated objectives and proposed measures to support identification of program risks and assess program performance. We compared the program objectives and measures to criteria in federal internal control standards for defining objectives, including standards that objectives be clearly defined to enable risk identification in specific and measurable terms with measures and related targets to allow assessment of program performance. We assessed the clarity of links between the IRS’s stated PDC program objectives and proposed program performance measures. We also interviewed IRS officials and reviewed program documents to assess the extent to which PDC program objectives were linked to acknowledged key program risks. Finally, we compared IRS’s documented objectives statements to assess consistency in their terms. To assess the extent to which IRS has documented data on PDC revenue collections and costs, we compared IRS’s reporting of PDC costs and revenue collections data to criteria in federal internal control standards, including standards that management should externally communicate complete, quality information necessary to achieve objectives, including objectives for reporting financial information. We assessed the extent to which IRS’s reporting of its program balance measure was complete in reporting program’s results for revenue collected and costs to include how much of the collected revenue goes to the general fund of the Treasury, and how much IRS is retains to pay for related costs. We also assessed the completeness of IRS cost reporting to include the Treasury Inspector General for Tax Administration costs for administering the system for taxpayer complaints about collection agencies. To assess the extent to which IRS is using costs and revenue collect data to improve the PDC program and meet objectives, we compared IRS’s program administration plans to criteria in federal internal control standards that management use quality data to achieve objectives, our work showing that using performance data helps agencies achieve better results, and IRS strategic goals. We also assessed the extent to which IRS had legal authority to revise the types of cases it assigns to collection agencies, and to what extent it had plans to analyze data to revise case assignments to minimize costs and maximize collection revenue results. To assess the extent to which the PDC program addressed risks to taxpayers, we reviewed risk management criteria from one of our previous publications on enterprise risk management (ERM), guidance from the Office of Management and Budget Circular A-123, the Fraud Reduction and Data Analytics Act, and our Fraud Risk Framework. We then applied these criteria to the PDC program risk register for the taxpayer risks. We believe this was appropriate because IRS follows an ERM process to manage taxpayer risks as well as other program risks that were not part of our work. We did not assess IRS’s overall approach to applying its ERM process. To identify taxpayer risks and understand the program’s risk responses, we reviewed the risk register, the collection agency Policy and Procedures Guide, collection agency contracts, and other program documentation and analyzed data on cases collection agencies returned to IRS. We also interviewed IRS officials involved in PDC, including the Director of Headquarters Collection and PDC Program Manager in IRS’s Small Business/Self-Employed operating division, and solicited feedback from external stakeholders—such as Low-Income Taxpayer Clinics and groups dealing with elder fraud and abuse issues—that represent vulnerable taxpayers to learn about risks, and analyzed FTC data on taxpayer complaints. We also reviewed PDC program performance data on quality reviews, taxpayer satisfaction, and taxpayer complaints to understand how IRS monitors taxpayer risks and responses. Lastly, while reviewing program documents, we noted inconsistencies between PDC program guidance for collection agencies and IRS collection procedures that arose during our review, and verified these inconsistencies with IRS officials. We conducted this performance audit from January 2018 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 2 shows the overall private debt collection (PDC) program’s revenue collections and cost data the Internal Revenue Service (IRS) used to calculate and report the PDC program balance measure through September 30, 2018, along with additional detailed information (in bold) that IRS did not include in the program balance table it reported to Congress. The added information shows the amounts that went to the general fund of the Treasury and the amounts of commissionable collections that went to IRS to pay costs to contract for PDC and hire additional collection staff in the future. Table 3 shows the status of the two IRS retained funds for fiscal years 2017 and 2018; these funds had no activity during fiscal year 2016 because IRS had not yet sent any cases to the private collection agencies to be worked. Table 4 shows IRS’s reporting of its PDC program costs for fiscal years 2016 through 2018, including the costs that IRS incurred before IRS started sending tax debt cases to private collection agencies in April 2017. Jessica Lucas-Judy, (202) 512-9110 or lucasjudyj@gao.gov. In addition to the contact named above, Tom Short (Assistant Director), Ronald W. Jones (Analyst-in-Charge), Carole J. Cimitile, Charles Fox, Robert Gebhart, James Andrew Howard, Edward Nannenhorn, William M. Reinsberg, Robert Robinson, Cynthia Saunders, Rebecca Shea, Margie K. Shields, and Adam Windram made key contributions to this report.", "summary": "IRS attempts to collect tax debts to promote tax compliance but does not have resources to pursue all debts. A 2015 law required IRS to contract with private collection agencies for certain tax debts. However, stakeholders such as the National Taxpayer Advocate have noted that safeguards are needed to protect taxpayers from risks, such as scammers impersonating collection agencies. GAO was asked to review IRS's PDC program. This report assesses the extent to which IRS (1) documented program objectives and measures, (2) documented revenue collection and cost results data, (3) used data to improve the program and meet its objectives, and (4) addressed risks to prevent or address scams and other harmful effects on taxpayers. GAO analyzed IRS's documents on PDC program administration and planning; collections and costs reporting; and managing risks. GAO interviewed officials from IRS and external groups that represent taxpayer interests. The Internal Revenue Service (IRS) documented objectives and proposed measures for its private debt collection (PDC) program for sending tax debt cases to private collection agencies, but the objectives are not clearly defined and their linkages with program measures are unclear. For example, one objective is to provide taxpayers an opportunity to understand and resolve their tax debts, but the proposed measure focuses on taxpayer satisfaction with collection agencies rather than taxpayers' understanding. The objectives also do not include some key program risks, such as scams. Without clearly defined objectives and measures, IRS will have limited ability to assess program results. IRS's reports to Congress on the PDC program have not provided complete financial information. For example, as of September 2018, IRS reported program revenue collections of about $89 million and costs of $67 million, suggesting a positive balance of $22 million for the general fund of the Treasury (the Treasury). However, the report did not clarify that about $51 million collected went to the Treasury and the remaining $38 million were retained by IRS in two special funds to pay current and future program costs. Without this information, Congress has an incomplete picture of the program's true costs and revenues. IRS has not analyzed PDC program results to identify the types of cases that should not be assigned to collection agencies because they do not result in collections. GAO's analysis of IRS data shows that between April 2017 and September 2018 about 73,000 of 111,000 cases closed by collection agencies had little or no revenue collected because the collection agencies were unable to contact the taxpayer or collect the debt, among other reasons. Given the costs associated with managing these cases, without such analyses, IRS may continue to use resources inefficiently and assign cases with little or no potential for revenue collection, or miss opportunities to assign other cases that could produce more revenue. IRS has identified and taken steps to mitigate some PDC program risks that could harm taxpayers. However, IRS has not completed the process of identifying and documenting all risks nor has it fully assessed risks to taxpayers from the program or its response to these risks. Specifically, GAO found that IRS identified and documented 6 taxpayer risks related to the PDC program, such as scammers impersonating collection agencies, but had not identified an additional 10 risks that GAO did, such as taxpayers agreeing to debt payments they cannot afford. IRS had not consistently assessed the impact or likelihood of the identified risks. As a result, IRS's responses to mitigate risks were broad in nature, and were not prioritized or aligned to address specific risks. IRS monitors a sample of collection agencies' telephone calls with taxpayers and reviews taxpayer complaints, but these methods do not provide information on whether IRS's responses to risks are effective. Without addressing these risk management issues, IRS cannot ensure it has fully identified PDC program risks and effectively responded to protect taxpayers from them. GAO makes 12 recommendations, including that IRS improve PDC program objectives and measures, revenue and cost reporting, analysis to assign cases, and management of taxpayer risks. IRS agreed with nine recommendations, partially agreed with GAO's recommendation on improving objectives—which GAO clarified in response—and disagreed with two recommendations to include certain costs in reporting and analyze data to identify cases not collectible. GAO maintains the recommendations would more fully report PDC program federal costs and prevent waste.", "document_type": "gao"}
{"report": "The ACV is being developed as a partial or full replacement for the AAV, which is a tracked (non-wheeled) vehicle with capability to launch from ships to reach the shore carrying up to 21 Marines at a speed of up to approximately 6 knots. This speed effectively limits its range for traveling from ship to shore to no farther than 7.4 nautical miles. In order to upgrade the AAV to meet current threats and establish a path toward an enhanced platform, DOD and the Marine Corps implemented an incremental approach. The first step was to improve the AAVs’ protection from threats such as improvised explosive devices by installing enhanced armor and other equipment—referred to as survivability upgrades—efforts which are currently underway. The second step was to establish a plan to replace the AAV with a new vehicle, the ACV, which would develop and enhance capabilities in three incremental steps: ACV 1.1 would be a wheeled vehicle that provides improved protected land mobility but limited amphibious capability. In operations, it is expected to be part of an amphibious assault through the use of a surface connector craft to travel from ship to shore. This increment would leverage prototypes, demonstration testing, and other study results from the previously suspended Marine Personnel Carrier program. ACV 1.2 would have improved amphibious capability, including the ability to self-deploy and swim to shore. The development phase of the second ACV increment (ACV 1.2) is scheduled to begin in February 2019. ACV 2.0 would focus on exploring technologies to attain higher water speed capability. The ACV 1.1 program was initiated in 2014 and development of ACV 1.1 vehicles started in November 2015. The remainder of this report is focused on development and acquisition of the ACV 1.1, which we will refer to as ACV. The Marine Corps acquisition of the ACV employs a two- phase strategy for selecting a contractor to produce the ACV fleet. In the first phase, the program issued a solicitation for offerors to submit proposals and provided for award of multiple contracts for each contractor to design and develop 16 prototypes for performance assessment. In the second phase, referred to as the down-select process, after testing the prototypes, the Marine Corps intends to select a single contractor to continue into the start of production. The Marine Corps received five initial proposals and ultimately awarded contracts to BAE and SAIC to develop the ACV prototypes. The Marine Corps considered the ACV to be a substantially non-developmental item because both contractors’ designs were based on vehicles that were already in production and deployed by other militaries. Figure 1 depicts the BAE and SAIC prototype vehicles. After testing the prototypes, the Marine Corps plans to select a single contractor to continue into the production phase. The first prototypes were delivered in January 2017 and have since been undergoing developmental, operational, and live fire testing. Developmental testing assesses whether the system meets all technical requirements and is used to: verify the status of technical progress, determine that design risks are minimized, substantiate achievement of contract technical performance, and certify readiness for initial operational testing. ACV developmental testing includes testing for sustainability, system survivability, and water and land mobility. Operational testing (assessment) is the field test, under realistic conditions, for the purpose of determining effectiveness and suitability of the weapons for use in combat by typical military users. Live fire testing is used to demonstrate vehicle capability against a range of ballistic and non-ballistic threats expected to be encountered in the modern battlefield, such as improvised explosive devices among others. In January 2018 the Marine Corps started an operational assessment, which was scheduled to be completed in March 2018. The assessments consist of field tests, under realistic conditions, to inform the decision to enter production. Ongoing test results, including the operational assessment, will be used to inform the ACV June 2018 production decision. Figure 2 is a timeline of the ACV program’s progress and plans to full capability. The ACV program plans to produce at least 208 vehicles after exercising contract options for 2 years of low-rate production of 30 vehicles each year starting in 2018 and then exercise options for 2 years of full-rate production for the remaining 148 or more vehicles starting in 2020. In addition to testing the prototype vehicles, the program is holding a production readiness review that started in November 2017 and according to program officials, they will keep the review open until April 2018. During this review, the program will determine whether the designs are ready for production and whether the contractors have accomplished adequate production planning to enter production. Officials from DCMA, which conducts contract performance oversight, have provided support in assessing production readiness. After receiving the proposals for the production down-select, the program will hold a system verification review in April 2018 to verify that the performance of the ACV prototypes meets capability requirements and performance specifications. This report represents the last in the series of reports we are to issue in response to the fiscal year 2014 National Defense Authorization Act, which contains a provision that we review and report annually on the ACV program until 2018. Previously, In October 2015 we found that the Marine Corps made efforts to adopt best practices and minimize acquisition risk, including: adopting an incremental approach to update capabilities, using proven technologies, increasing competition, and awarding fixed-price incentive contracts for much of the development work. In April 2017, we found that DOD’s life cycle cost estimate for ACV 1.1 of about $6.2 billion, fully or substantially met the criteria for the four characteristics of a high-quality reliable cost estimate. However, we also found that changes the Marine Corps made to the acquisition schedule — partly in response to a stop work order following a bid protest that was denied by GAO in March 2016 — raised acquisition risk by increasing the overlap between development activities, such as testing of the vehicles, with production. This is a risk we had identified in a previous report. As a result, we recommended that the Marine Corps delay the production decision until 2019. DOD did not concur with that recommendation. Costs for the development phase of ACV are on track to meet cost goals established at the start of development, based on a recent Navy estimate, the ACV program office, and reporting from the contractors. In September 2017, the ACV program’s Defense Acquisition Executive Summary Report for ACV provided a Navy cost estimate for development of $750.7 million, less than the $810.5 million baseline established at the start of development in November 2015. Program officials also indicated that the ACV program was on track to meet cost goals. They noted that the contractors have not contacted the government to negotiate an increase in billing prices, as of December 2017. Since both of the contractors have delivered all 16 of their required prototypes and the manufacturing of the prototypes is the largest anticipated portion of ACV development contract costs, most of the costs associated with the manufacturing of the prototypes have likely been realized. The Marine Corps made efforts to reduce cost risk to the government by adopting a fixed-price incentive (firm target) contract type for the construction of the prototype vehicles. As we previously reported in October 2015, the Marine Corps planned to award hybrid contracts to each of the ACV development contractors, which would apply different pricing structures for different activities. The Marine Corps awarded the contracts in November 2015 as planned. Most critically, a fixed-price incentive contract type is being used for items in the contract associated with the manufacturing of the development prototypes, which was anticipated to be the largest portion of ACV development contract costs. Under this contract type, the government’s risk is generally limited to the contract’s price ceiling. Incentive contracts are appropriate when a firm- fixed-price contract is not appropriate and the required supplies can be acquired at lower costs by relating the amount of profit or fee to the contractor’s performance. According to Federal Acquisition Regulation, since it is usually to the government’s advantage for the contractor to assume substantial cost responsibility and appropriate share of the cost risk, fixed-price incentive contracts are preferred over cost-reimbursement incentive contracts when contract costs and performance requirements are reasonably certain. The fixed-price incentive (firm target) contract type provides for adjusting profit and establishing the final contract price by application of a formula based on the relationship of total final negotiated cost to total target cost. The final price is subject to a price ceiling, negotiated at the outset. If the final negotiated cost exceeds the price ceiling, the contractor absorbs the difference. As we also previously reported, however, the Marine Corps received a waiver to forgo the establishment of a certified Earned Value Management System for the ACV program, which reduces the regularly-available cost, schedule, and performance data available for the program to review. The ACV program office and DOD also indicated that they anticipate production costs will be within goals established at the start of development, though key production costs have not yet been determined. The program’s development contracts with the two competing contractors contain fixed-price incentive options for 4 years of production. The pricing of the production vehicles will not occur, however, until DOD makes a production decision in June 2018 and negotiates the final terms and exercises the production option with one of the contractors. The Marine Corps has made no major changes to the ACV acquisition schedule since we previously reported on the program in April 2017. In that report we found that the production decision was moved from February to June 2018 after a stop work order was issued to the contractors in response to a bid protest from a vendor that was not selected for one of the ACV development contracts. A senior program official emphasized the importance of keeping the ACV acquisition on schedule because the capability it provides is complementary to a broader set of capability updates across multiple platforms that the Marine Corps is in the process of procuring. The ACV program office is in the process of conducting tests and assessments to determine if the program is on track to meet the criteria to enter production, but program officials told us the Navy—which has the authority to approve major acquisition milestone decisions for the program—may choose to start low-rate production without meeting established best practices for manufacturing maturity. At the start of development, DOD established criteria for entering production in areas such as capability performance and the status of the contractors’ manufacturing readiness to manufacture the ACV vehicles. Leading up to the production decision, the program is engaged in a number of activities such as the operational assessment and production readiness review to inform the decision to start production. The production readiness review has a critical role in informing the decision to enter production because it represents an opportunity for the program to determine the maturity of the contractor’s manufacturing process and assess potential risks related to cost, schedule, or performance. Our previous reviews about manufacturing best practices found that identifying manufacturing risks early in the acquisition cycle and assessing those risks prior to key decision points, such as the decision to enter production, reduces the likelihood of cost growth and potential delays. The ACV program has used the DOD Manufacturing Readiness Level (MRL) Deskbook to identify levels of manufacturing capability and establish targets for minimal levels of manufacturing readiness at specific acquisition milestones. The ratings are applied to various risk areas such as design, materials, process capability and control, and quality management. Table 1 shows the basic MRL definitions provided by the Joint Defense Technology Panel. The MRL Deskbook recommends that a program is expected to demonstrate a MRL of 8 by the time of the low-rate production decision. However, GAO’s previously identified best practices for managing manufacturing risks recommend programs reach a higher level—MRL- 9— for the risk area of process capability and control before entering low- rate production. At MRL-9, a program is expected to have its applicable manufacturing processes in statistical control. The MRL Deskbook recommends that a program achieve an MRL-9 at the start of full-rate production. The Marine Corps has eliminated manufacturing capability as a criterion for consideration in the down-select production decision. In the solicitation issued to the two competing contractors for the production decision in December 2017, the Marine Corps identified two criteria that would be considered to determine the winner of the down-select competition for the production decision. They are, in descending order of importance: (1) technical performance of the prototype vehicles and (2) the contractors’ submitted cost proposals. Previously, the ACV acquisition strategy and development contracts identified five criteria for the selection process, with manufacturing capability as the second most important factor (behind technical performance). The development contracts stipulated that the government reserved the right to adjust the factors and their order of importance prior to the release of the solicitation for the production down- select decision. Program officials said that narrowing the down-select factors to performance test results and cost was in line with the original intent of the program to use the best value tradeoff process described in the Federal Acquisition Regulation and that the revised criteria were appropriate for a non-developmental item such as the ACV. While the program removed manufacturing capabilities from its criteria for selecting the contractor for production, ACV program officials are still assessing manufacturing readiness to support their production decision. Program officials stated that they could enter production at a lower level of manufacturing readiness than DOD guidance or GAO identified best practices suggest. The program started a production readiness review in November 2017 to determine the contractors’ respective manufacturing maturity. According to program officials, they will keep the review open until April 2018, at which point the program will make a determination about the contractors’ manufacturing readiness levels. The program office confirmed that the ACV criterion for entering production is to achieve an MRL-8 but noted that it is possible that the program could choose to enter into production without an overall MRL-8. Program officials stated that if there are any specific risk areas that are assessed below that threshold, the program office will define the risk and make a recommendation to the Navy for entry into production based on whether or not they consider the risk acceptable. To help inform its determination, program officials said that they will review the manufacturing readiness assessments produced by the contractors, as well as reviews by the DCMA, which is responsible for assisting with contract oversight. Because the two contractors were still in competition at the time of the release of this report, we are unable to publicly report additional, more detailed, information about production readiness or performance tests. However, we have previously found that programs with insufficient manufacturing knowledge at the production decision face increased risk of production quality issues, cost growth, and schedule delays. Entering the production phase of the ACV acquisition with manufacturing readiness levels lower than those recommended by DOD guidance and GAO-identified best practices would increase the likelihood of outcomes associated with insufficiently mature manufacturing capabilities, such as production quality issues and schedule delays. The Marine Corps has already been authorized funding to start production and plans to exercise options in 2018 to produce 30 vehicles for the first year of low-rate production. However, the Marine Corps has two upcoming decisions that would provide opportunities to refocus on manufacturing readiness for the ACV—specifically the decision to enter into the second year of low-rate production in 2019 for 30 vehicles, and the decision to enter the first year of full-rate production in 2020 and acquire 56 of the remaining 148 vehicles. Acquiring additional vehicles before ensuring sufficient manufacturing maturity could raise the risk that the contractor may not be sufficiently prepared for continued production, which could result in delays in delivery of acceptable vehicles or additional costs to the government. The Marine Corps has long identified the need for the enhanced capabilities envisioned through the ACV program and is nearing the potential production of such a vehicle. Following the cancellation of the EFV program after the expenditure of $3.7 billion, the ACV program represents an opportunity to follow a better acquisition approach. It is too early to determine whether the contractors will meet targets for production readiness by the time of the production decision, but the program office is considering entering production without meeting the recommended manufacturing maturity levels established by DOD or GAO-identified best practices. We have already identified the ACV program as adopting an aggressive acquisition schedule in which the amount of concurrent developmental testing and production is more than typical acquisition programs. In fiscal year 2018, Congress authorized funding for the program to start production, but the decision to enter a second year of low-rate production and the decision to start full-rate production represent opportunities for the ACV program to verify the manufacturer has achieved a sufficient level of readiness before commencing production of the bulk of vehicles. If the Marine Corps does not take steps to ensure that the contractor’s manufacturing readiness is sufficiently mature, as demonstrated through MRLs, prior to committing to additional production beyond the first year of low-rate production, there is an increased risk for production quality issues, cost growth, and schedule delays. We are making two recommendations to DOD. The Secretary of the Navy should take steps to ensure that the Marine Corps not enter the second year of low-rate production until after the Marine Corps has determined that the contractor has achieved an MRL of at least an 8 for all risk areas. (Recommendation 1) The Secretary of the Navy should take steps to ensure that the Marine Corps not enter full-rate production until the Marine Corps has determined that the contractor has achieved an MRL of at least 9 for all risk areas. (Recommendation 2) We provided a draft of this product to DOD for comment. In its comments, reproduced in appendix I, DOD partially concurred with GAO’s recommendations. DOD agreed that manufacturing readiness should be assessed prior entering both the second year of low-rate production and the start of full- rate production, and plans to do so. DOD acknowledged that the MRL Deskbook provides best practices for identifying risks, but noted that the ACV program is not required to follow it. DOD noted that it may be reasonable to proceed into manufacturing at lower MRLs, if steps to mitigate identified risks are taken. However, DOD disagreed that not demonstrating a specified MRL for any individual risk area, in itself, should delay the start of either production milestone. DOD expressed concern that delaying subsequent years of production, if MRLs are not at the levels recommended, could lead to counterproductive breaks in production. We agree that adopting the MRL Deskbook is not required by DOD and represents best practices to minimize production risk. However, we also believe that demonstrating the MRL levels recommended in the MRL Deskbook for all risk areas mitigates increased risk associated with the aggressive schedule pursued by the ACV program—about which we have previously expressed concerns. We believe our recommendation to achieve an overall MRL-8 by the second year of low-rate production is a reasonable goal, considering it gives the ACV program an additional year after the point at which the MRL Deskbook recommends reaching MRL- 8—the start of low-rate production. In addition, ensuring that all manufacturing readiness risk areas are at MRL-9 for the start of full-rate production, as recommended by best practices in the MRL Deskbook, would help further alleviate risks associated with the program’s aggressive schedule. We appreciate the DOD concerns about delaying subsequent years of production if MRLs have not reached those identified in the best practices in the MRL Deskbook, but note that not doing so increases the likelihood of production quality issues that could lead to cost growth and schedule delays in future years. Therefore, we made no changes to the recommendations in response to the comments. We are sending copies of this report to interested congressional committees; the Secretary of Defense; the Under Secretary of Defense for Acquisition and Sustainment; the Secretary of the Navy; and the Commandant of the Marine Corps. This report also is available at no charge on GAO’s website at http://www.gao.gov. Should you or your staff have any questions on this report, please contact me at (202) 512-4841 or ludwigsonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Bruce H. Thomas (Assistant Director), Matt Shaffer (Analyst in Charge), Pete Anderson, Alexandra Jeszeck, Jennifer Leotta, Roxanna Sun, and Marie Ahearn made key contributions to this report.", "summary": "In June 2018, the United States Marine Corps plans to select a contractor and begin low-rate production for the ACV, a vehicle used to transport Marines from ship to shore under hostile conditions. The ACV will replace all or part of the current Assault Amphibious Vehicle fleet. The National Defense Authorization Act for Fiscal Year 2014 included a provision for GAO to annually review and report on the ACV program until 2018. This report, GAO's last under that provision, assesses the extent to which the Marine Corps is making progress toward (1) meeting cost and schedule goals for the ACV program and (2) demonstrating manufacturing readiness. GAO reviewed program cost estimates, updated schedules, and program assessments of test results and production readiness, as well as compared ACV acquisition efforts to DOD guidance and GAO-identified best practices. GAO also interviewed program and testing officials, and visited both ACV primary assembly locations. The first version of the Amphibious Combat Vehicle (ACV 1.1) is on track to meet development cost goals with no additional anticipated delays for major acquisition milestones. With regard to costs, the development phase of ACV 1.1 is on pace to not exceed cost goals that were established at the start of development, based on a recent Navy estimate, the ACV program office, and reporting from the contractors. For example, a September 2017 program progress review reported a Navy estimate of the cost of development at $750.7 million, less than the $810.5 million baseline established at the beginning of development. With regard to schedule, the ACV program has made no major changes to the acquisition schedule since GAO previously reported on the program in April 2017. ACV 1.1 program officials are in the process of preparing to down-select to a single contactor and enter low-rate production in June 2018, start a second round of low rate production the following year, and begin full-rate production in 2020. ACV 1.1 may be followed by the acquisition of other versions (ACV 1.2 and ACV 2.0) with advanced capabilities such as higher water speeds. The ACV program is preparing to start production of ACV 1.1, which includes determining that the contractors' manufacturing capabilities are sufficiently mature. However, program officials are considering entering production with a lower level of manufacturing maturity than called for in Department of Defense (DOD) guidance or GAO identified best practices. The ACV program measures manufacturing maturity with manufacturing readiness levels (MRL) for risk areas such as design, materials, process capability and control, and quality management. DOD guidance for weapons acquisition production recommends that programs achieve an MRL of 8 across all risk areas before entering low-rate production and that a program achieve an MRL of 9 at the start of full-rate production. GAO's previous reviews about manufacturing best practices found that achieving manufacturing maturity and identifying production risks early in the acquisition cycle and assessing those risks prior to key decision points, such as the decision to enter production, reduces the likelihood of quality issues, cost growth, and delays. The Marine Corps contract option for producing the first round of low-rate production for ACV 1.1 will be exercised after June 2018; the contract also contains additional options for production vehicles. Making the decisions to proceed with the second round of low-rate production and for the start of full-rate production before meeting called-for levels of manufacturing readiness criteria increases the risk that ACV 1.1 will witness delays and increased costs. GAO recommends the Marine Corps (1) not enter the second year of low-rate production for ACV 1.1 until after the contractor has achieved an overall MRL of 8 and (2) not enter full-rate production until achieving an overall MRL of 9. DOD partially concurred with both recommendations, but noted that it is reasonable to proceed at lower MRL levels if steps are taken to mitigate risk. GAO made no changes to its recommendations in response to these comments.", "document_type": "gao"}
{"report": "The Aviation and Transportation Security Act established TSA as the federal agency with primary responsibility for securing the nation’s civil aviation system, which includes acquiring technology to screen and secure travelers at the nation’s TSA-regulated airports. TSARA defines SRT as any technology that assists TSA in the prevention of, or defense against, threats to United States transportation systems, including threats to people, property, and information. As illustrated in figure 1, TSA acquired various SRT for passenger and baggage screening, including: Advanced Imaging Technology (AIT)—screens passengers for metallic and nonmetallic threats; Explosives Trace Detection—detects various types of commercial and military explosives through chemical analysis on passengers and their property; and Explosives Detection System (EDS)—provides imaging, screening, and detection capabilities to identify possible threats in checked baggage contents. TSA follows DHS’s policies and procedures for managing its acquisition programs, including for acquisition management, test and evaluation, and resource allocation of its SRT. TSA’s acquisition programs and policies are primarily set forth in DHS Acquisition Management Directive 102-01 (DHS’s acquisition directive) and DHS Instruction Manual 102-01-001, Acquisition Management Instruction/Guidebook. DHS acquisition policy establishes that an acquisition program’s decision authority should review the program at a series of predetermined acquisition decision events to assess whether the program is ready to proceed through the acquisition life cycle phases. An acquisition program is established once it has passed through the phases that establish the acquisition need and selects an option that meets this need. Figure 2 depicts the DHS acquisition life cycle. Under DHS’s acquisition directive, TSA is to ensure, among other things, that required acquisition documents are completed. Two of these key acquisition documents are: (1) the life cycle cost estimate, which provides an exhaustive and structured accounting of all resources and associated cost elements required to develop, produce, deploy, and sustain a program; and (2) the acquisition program baseline, which establishes a program’s cost, schedule, and performance metrics. These documents are used throughout the process to identify instances when an acquisition program exceeds cost, schedule, or performance thresholds. TSA’s acquisition policies, which supplement DHS policies, generally designate roles and responsibilities and identify the procedures that TSA is to use to implement the requirements in DHS policies. In December 2017, TSA reorganized its acquisition offices, which are responsible for implementing TSARA’s requirements, from two offices (Office of Acquisition and Office of Security Capabilities) into three offices: Requirements and Capabilities, Acquisition Program Management, and Contracting and Procurement. TSARA includes a number of requirements for TSA, including developing and submitting a biennial technology investment plan and annual small business contracting goals reports to Congress, adhering to various acquisition and inventory policies and procedures, and ensuring consistency with Federal Acquisition Regulation and departmental policies and directives. TSARA also includes requirements for justifying acquisitions and establishing acquisition baselines, which largely codify aspects of DHS’s existing acquisition policy described in DHS’s acquisition directive. TSA fulfills these requirements through the processes outlined in DHS’s acquisition directive when establishing a new acquisition program or modifying an existing acquisition program. See Appendix I for the list of TSARA’s requirements. Since 2016, TSA generally addressed TSARA requirements through its acquisitions policies and procedures. Since our February 2016 report, TSA has also developed and issued an updated technology investment plan. Further, TSA has continued to submit an annual report to Congress on TSA’s performance record in meeting its published small business contracting goals. TSA continues to address TSARA’s requirements, including those related to acquisition justifications, baseline requirements, managing inventory and consistency with regulations. In addition, TSA developed an updated technology investment plan and submitted small business contracting goals reports to Congress in accordance with TSARA. TSARA provides that before TSA implements any SRT acquisition, the agency must, in accordance with DHS policies and directives, conduct an analysis to determine whether the acquisition is justified. The analysis must include elements such as cost effectiveness and confirmation that there are no significant risks to human health or safety posed by the proposed acquisition, among others. In February 2016, we reported that DHS and TSA had policies and procedures that were in place prior to TSARA addressed each of the elements required in the analysis. For example, DHS’s acquisition directive includes several of these elements in its process for establishing a new acquisition program. TSARA also includes a provision requiring TSA to submit information (i.e. report) to Congress 30 days prior to the award of a contract for an SRT acquisition over $30 million. TSA established procedures that address this provision, as discussed later in this report, by developing a template for providing justifications under this provision. We found that, since 2016, TSA continues to have policies in place, such as DHS’s acquisition directive, to address the analysis-related requirements. TSA officials stated they would use these policies and procedures to address TSARA’s requirements. TSARA requires that before TSA implements any SRT acquisition, the appropriate acquisition official from the department shall establish and document a set of formal baseline requirements and subsequently review whether acquisitions are meeting these requirements. Additionally, TSARA provides that TSA must report a breach if results of any assessment find that (1) actual or planned costs exceed the baseline costs by more than 10 percent, (2) actual or planned schedule for delivery has been delayed more than 180 days, or (3) there is a failure to meet any performance milestone that directly impacts security effectiveness. Pursuant to TSARA, in March 2016, TSA reported two breaches to Congress for the Passenger Screening Program and Security Technology Integrated Program (STIP), a data management system that connects transportation security equipment to a single network. Further, in February 2016, we reported that TSA had policies in place that require it to prepare an acquisition program baseline, risk management plan, and staffing requirements before acquiring SRT, in accordance with TSARA requirements. We found that since our February 2016 report, TSA continues to leverage the existing DHS acquisition directive to meet all of TSARA’s baseline requirements. TSARA requires that TSA, among other things: to the extent practicable, use existing units in inventory before procuring more equipment to fulfill a mission need; track the location, use, and quantity of security-related equipment in inventory; and implement internal controls to ensure accurate and up-to-date data on SRT owned, deployed, and in use. In 2016, we reported that TSA’s policies and procedures address TSARA requirements for managing inventory. We found that since our February 2016 report, TSA continues to use established policies and procedures to address TSARA’s inventory management requirements. For example, TSA continues to use the Security Equipment Management Manual, which describes the policies and procedures that require TSA to use equipment in its inventory if, for example, an airport opens a new terminal. Additionally, TSA has procedures to track the location, use, and quantity of security-related equipment in inventory, regardless of whether such equipment is in use. Specifically, TSA has procedures to track the entire life cycle of equipment, including initial possession, any moves, and disposal. Further, TSA continues to use standard operating procedures developed by its Internal Control Branch, which describe TSA’s system of internal controls to conduct reviews, report, and follow-up on corrective actions. TSARA provides that TSA must execute its acquisition-related responsibilities in a manner consistent with and not duplicative of the Federal Acquisition Regulation and DHS policies and directives. In 2016, we reported that TSA’s policy documents state that TSA is required to ensure that its policies and directives are in accordance with the Federal Acquisition Regulation and DHS acquisition and inventory policies and procedures. We also reported that according to TSA’s TSARA Implementation Strategy Memo (implementation strategy memo), TSA was able to address this requirement by, among other things, forming a working group as part of an effort to ensure that TSA implemented TSARA in a manner consistent with the Federal Acquisition Regulation and DHS policies and directives. We found that no changes have been made to the implementation strategy memo since our 2016 report and TSA still has policies in place to execute the responsibilities set forth in TSARA in a manner consistent with and not duplicative of the Federal Acquisition Regulation and DHS policies and directives. TSARA requires TSA to develop and submit to Congress a Strategic Five-Year Technology Investment Plan (technology investment plan) and update it on a biennial basis. The technology investment plan is to include, among other things, a set of SRT acquisition needs that includes planned technology programs and projects with defined objectives, goals, timelines and measures, and an identification of currently deployed SRTs that are at or near the end of their life cycles. In August 2015, TSA developed and submitted to Congress the first technology investment plan and in 2016 we reported that the 2015 plan generally addressed TSARA requirements. In December 2017, TSA developed and submitted to Congress an updated technology investment plan in accordance with TSARA. The updated plan details the aviation security efforts TSA initiated, developed, or completed since the initial plan was released. The updated plan also includes the extent to which TSA’s acquisitions were consistent with technology programs and projects identified in the initial plan, as required by TSARA. TSA officials stated that a positive effect of TSARA’s requirement to develop the technology investment plan has been the establishment of the Innovation Task Force. The task force, created in the Spring of 2016, is tasked to identify and demonstrate emerging capabilities and facilitate other innovative projects at select airports. TSA established the task force based on feedback from industry representatives provided during development of the initial plan. A TSA official who manages the task force said that it led to efficiencies in TSA’s acquisition process. The official noted, for example, that the task force began demonstrating Automated Screening Lanes in March 2016 and by October 2016 DHS approved additional deployments of the technology. For a video of TSA’s Innovation Task Force demonstration of Automated Screening Lanes, see the hyperlink in the note for figure 3. TSARA requires TSA to submit an annual report to Congress on TSA’s performance record in meeting its published small business contracting goals during the preceding fiscal year. If the preceding year’s goals were not met or TSA’s performance was below the published small business contracting goals set for the department, TSARA requires that TSA’s small business report includes a list of challenges that contributed to TSA’s performance and an action plan, with benchmarks, for addressing each of the challenges identified that is prepared after consultation with other federal departments and agencies. Since our last review, TSA has submitted small business reports for fiscal years 2014 through 2017 and has reported achieving its small business contracting goals. Through July 2018, TSA’s narrow application of TSARA’s report and certification provision resulted in no SRT acquisitions being reported to Congress pursuant to TSARA. In August 2018, TSA provided its first three notifications on SRT acquisitions to Congress under this provision. TSA did not provide any information on contract awards or task or delivery orders for the acquisition of SRT and associated services to Congress under TSARA’s report and certification provision from enactment through July 2018. Under the provision, TSA is to provide Congress with a comprehensive justification and a certification that the benefits to transportation security justify the contract cost not later than 30 days preceding the award of a contract for any SRT acquisition over $30 million. Our analysis of FPDS-NG data on contract obligations from December 18, 2014 through July 2018 found approximately $1.4 billion in obligations for acquisitions of SRT and for services associated with the operation of SRT, as shown in table 1. Specifically, TSA obligated $591 million for SRT. For services associated with an SRT that are necessary to ensure its continuous and effective operation, such as maintenance and engineering support services, TSA obligated $772 million during this timeframe. TSA officials said that none of the agency’s acquisition activities from enactment through July 2018 invoked TSARA’s report and certification provision because the activities did not align with TSA’s policy that identifies SRT acquisitions subject to this provision. TSA’s policy on what constitutes an SRT and the award of a contract for an SRT acquisition ultimately determine what acquisitions are subject to TSARA’s report and certification provision. See table 2 for TSA’s policy. TSA’s TSARA Implementation Strategy Memo states, “o support and ensure Congress is receiving the necessary information regarding critical TSA acquisitions, TSA will focus on security screening related technologies” which will ensure “the necessary actions are implemented for those technologies the public directly interacts with (i.e. is impacted by).” According to TSA officials, security screening related technologies, i.e. SRT, subject to TSARA must (1) be equipment or technology and (2) interact with (or impact) the public. Specific examples of SRT subject to TSARA, as identified by TSA officials, are the equipment typically deployed to airports to assist in the physical screening of passengers and their property, such as AIT, EDS, and boarding pass scanners. TSA officials explained that in accordance with its policy, TSA provided its first three notifications to Congress under TSARA’s report and certification provision in August 2018, more than 30 days prior to the award of three new SRT contracts, each with ceiling values in excess of $30 million. Since the enactment of TSARA through July 2018, TSA awarded multiple indefinite-delivery/indefinite-quantity (IDIQ) contracts and entered into a blanket purchase agreement for services associated with the operation of SRT, each with values in excess of $30 million, and issued orders under the contracts and agreement that exceeded $30 million. In accordance with TSA’s implementation policy, which applies to acquisitions of physical screening equipment, TSA did not report these acquisition actions under TSARA’s report and certification provision. TSA officials said, consistent with its implementation policy, that services associated with the operation of the SRT, such as engineering support, maintenance services, and other services described in table 1, are not SRT, as TSARA defines the term, because they are not equipment that directly interacts with the public. Associated services, however, are necessary to ensure the effective performance of SRT. For example, engineering support can assist in addressing changing security needs, such as through the development of threat detection algorithms and other software or hardware improvements. Associated services have also been used to extend the intended lifecycle of SRT already deployed to airport checkpoints. TSA officials said that research and development advancements have allowed TSA to upgrade existing equipment that had reached the end of its initial lifecycle rather than acquire new equipment. Further, TSA will likely need to increase spending on maintenance services because the equipment parts may break down when used past their intended life cycles. Consequently, through maintenance and hardware improvements, for example, TSA has been able to offset the need to procure new SRT by upgrading and maintaining existing SRT. Examples of contract actions for the associated services described in table 1 include: Maintenance Services: TSA awarded three IDIQ contracts in 2015 and 2016, with ceiling values ranging from $76 million to $222 million, and issued 10 orders under these IDIQ contracts with obligations that each exceeded $30 million; System Integration: TSA awarded three IDIQ contracts in 2015, each with a ceiling value of $450 million; STIP: In November 2017, TSA awarded a blanket purchase agreement with a ceiling value of $250 million; and Security Technology Support Services: TSA awarded three IDIQ contracts in 2017 with ceiling values ranging from $65 million to $169 million. The report of the Committee on Homeland Security of the House of Representatives on TSARA explains that the law introduces greater transparency and accountability for TSA spending decisions and codifies acquisition best-practices that the committee believes will result in more effective and efficient SRT acquisitions at TSA. As explained in the report, TSARA is, in part, a response to historical examples where TSA spent significant funds on SRT acquisitions that failed to meet security performance objectives or wasted federal funds. Consistent with the purpose of the statute expressed in the committee report, TSARA’s report and certification provision promotes greater transparency over TSA acquisition practices. TSA obligates a significant amount of funds—approximately $772 million from TSARA’s enactment through July 2018—for services that help ensure the effective and continuous operation of SRT. Applying TSARA’s report and certification provision to a broader range of services associated with the operation of SRT would provide Congress with increased transparency and improved oversight of TSA’s SRT acquisition practices. According to TSA’s TSARA implementation policy, indefinite-quantity contracts or blanket purchase agreements for “security screening related technology equipment”, i.e. SRT, are subject to TSARA’s report and certification provision when the ceiling value exceeds $30 million. The implementation policy also explains that the provision does not apply to individual task and delivery orders placed under these contracts or agreements. However, IDIQ contracts typically have a lengthy period of performance—for example one base year followed by four option years. Specifically, from December 18, 2014 through July 2018, all of TSA’s 14 active contracts for SRT were IDIQ contracts awarded prior to the enactment of TSARA on December 18, 2014. Further, 8 of the 14 contracts had been in place for 5 or more years, and according to TSA officials, the agency had extended the original period of performance for 9 of the 14 contracts. Per its implementation policy, TSA did not report to Congress under TSARA’s report and certification provision on the seven task orders, ranging from $31 million to $70 million, to purchase and install EDS, EDS upgrade kits, and explosives trace detection systems issued under IDIQ contracts in place at the time of TSARA’s enactment. See figure 4 for an example of an EDS IDIQ contract where TSA issued orders in excess of $30 million and extended the contract’s original period of performance. One of TSA’s most recent SRT contract awards further illustrates how TSA’s policy to only report on initial contract awards, and not orders issued pursuant to the contract, has resulted in limited reporting under TSARA’s report and certification provision. In September 2018, TSA awarded a new $500 million IDIQ contract for the acquisition of medium speed explosives detection systems. TSA reported this contract award to the requisite committees pursuant to the report and certification provision and consistent with its implementation policy. However, under TSA’s policy, this is the only notification that Congress will receive pursuant to TSARA over the course of the contract’s period of performance. For example, TSA also issued a $55 million order to purchase and install medium speed EDS units under this IDIQ contract, but per its implementation policy, TSA did not report on this order under the provision to Congress and per its policy would not do so for any subsequent orders during the contract’s period of performance. TSA has developed a policy with parameters for determining which contract actions are subject to TSARA. However, TSA’s policy limits the application of the report and certification provision only to initial contract awards for physical security screening equipment. According to TSA officials, TSA established this policy in order to ensure Congress is informed as early as possible that there is potential for an award in excess of $30 million as opposed to the point at which amounts awarded reach $30 million. However, the implementation policy expressly excludes orders in excess of $30 million issued under IDIQ contracts or blanket purchase agreements for SRT. Due to this narrow application of TSARA to its SRT acquisitions, TSA did not report any information to Congress pursuant to TSARA’s report and certification provision through July 2018. In addition, as currently implemented this policy will continue to result in TSA providing Congress with limited information in the future. As described earlier, TSARA was enacted to introduce greater transparency and accountability for TSA spending decisions. Because TSA’s policy for the report and certification provision excludes reporting on task and delivery orders, TSA misses the opportunity to inform Congress of the more routine SRT obligations that exceed TSARA’s $30 million threshold. In addition, applying TSARA’s report and certification provision to services that result in new capabilities, enhancements, or otherwise upgrade SRTs would provide Congress with increased transparency and improved oversight of TSA’s SRT acquisition practices. TSA has not effectively communicated its implementation decisions internally for what constitutes an SRT under TSARA. After the enactment of TSARA, TSA formed a working group to evaluate the act and develop an implementation strategy. The resulting policy is documented in TSA’s TSARA Implementation Strategy Memo, published in June 2015. According to TSA officials, the memo is the only formal document that describes TSA’s TSARA policy. Among other things, the memo designates roles and responsibilities for TSARA’s requirements and outlines TSA’s approach to implementing each requirement. To explain what constitutes an SRT for the purposes of TSARA, TSA officials described various parameters to us that guide their decision- making. However, not all of these parameters are documented in the implementation strategy memo. Specifically, the memo states that, “To support and ensure Congress is receiving the necessary information regarding critical TSA acquisitions, TSA will focus on security screening related technologies. This ensures the necessary actions are implemented for those technologies the public directly interacts with (i.e. is impacted by).” TSA officials clarified for us that technologies the public does not directly interact with or that do not otherwise impact the public in some physical manner, such as STIP and Secure Flight, are not considered SRT and thus not subject to TSARA, but this distinction is not clearly documented. Further, the memo does not explicitly explain which technologies are considered SRT and which are not. For example, TSA officials told us that SRT under TSARA excludes software such as updates to threat detection algorithms, and other associated services such as STIP, but this is not documented in the memo. TSA acquisition program staff are responsible for determining if a new acquisition qualifies as SRT under TSARA and initiating TSA’s congressional notification process. TSA officials stated that program staff rely upon the TSARA Implementation Strategy Memo to make these decisions. During our review, TSA’s acquisition program staff were initially unable to confirm in all instances whether the security-related equipment they had acquired were subject to TSARA. Over the course of our review, TSA officials clarified the application of TSARA’s SRT definition to us and based on our inquiries, confirmed a list of existing technologies that are considered SRT. However, this information has not been documented in the TSARA Implementation Strategy Memo. TSA officials explained that there was a lot of activity after TSARA was initially enacted to determine how to comply with TSARA, but after the implementation working group disbanded, activity subsequently faded. Consequently, the implementation strategy memo has not been updated since its initial distribution in June 2015. TSA officials stated that they plan to update the implementation strategy memo by the end of calendar year 2018 to reflect the new offices responsible for implementing TSARA’s requirements due to an internal reorganization. Effective information and communication are vital for an entity to achieve its objectives. Standards for Internal Control in the Federal Government states that management should document policies in the appropriate level of detail and internally communicate the necessary quality information to achieve the entity’s objectives. In the absence of a policy that clearly states what constitutes an SRT and with several large acquisitions pending, TSA may be missing an opportunity to ensure effective and consistent implementation of TSARA. TSA spends hundreds of millions of dollars each year developing, acquiring, deploying, and maintaining technologies in furtherance of its mission to ensure civil aviation security. Through TSARA, Congress sought to address challenges faced by TSA in effectively managing its acquisitions and procurements by specifying measures for TSA to implement that align with identified acquisition best practices and increase the transparency and accountability of TSA’s SRT acquisitions. Overall, TSA has policies and procedures in place to accomplish many of the reforms sought by TSARA, but more could be done to improve the transparency of its spending on SRTs. Specifically, reporting on individual task and delivery orders as well as associated services under TSARA’s report and certification provision would help TSA ensure that Congress has timely information it could use to effectively oversee TSA acquisitions. TSA took a positive step towards greater transparency on SRT spending with its first notifications to Congress in August 2018—in accordance with its policy—, but TSA’s existing policy does not require similar notification for associated services or for individual task and delivery orders issued that exceed $30 million. Further, while TSA developed the TSARA Implementation Strategy Memo, which serves as TSA’s policy for implementing TSARA, designated roles and responsibilities for TSARA’s requirements, and outlined TSA’s approach to implement each requirement, TSA has not clearly documented and internally communicated its parameters on what constitutes an SRT under TSARA. With several large acquisitions pending, clear guidance would better assure that staff understand how TSARA’s reporting requirements apply. In the absence of updated internal policy to clearly communicate what is or is not an SRT, TSA will continue to be at risk of inconsistent and incomplete implementation of TSARA. We are making the following three recommendations to TSA: The TSA Administrator should revise TSA’s policy to require that TSA also submit information under TSARA’s report and certification provision prior to the award of contracts and blanket purchase agreements for services associated with the operation of security-related technology, such as maintenance and engineering services, that exceed $30 million. (Recommendation 1) The TSA Administrator should revise TSA’s policy to require that TSA also submit information under TSARA’s report and certification provision prior to the issuance of individual task and delivery orders for security- related technology acquisitions that exceed $30 million. (Recommendation 2) The TSA Administrator should clarify and document what constitutes an SRT under TSARA as part of the planned update of TSA’s TSARA implementation policy. (Recommendation 3) We provided a draft of this product to DHS for comment. In its comments, reproduced in appendix II, DHS generally concurred with each of the three recommendations and described steps it plans to take to implement them. TSA also provided technical comments, which we incorporated as appropriate. While DHS concurred with our recommendation to revise TSA's policy to include reporting on contracts over $30 million for services associated with the operation of security-related technology, in its letter, DHS stated that not all services associated with an SRT should be subject to TSARA's reporting requirements. Specifically, it noted that TSA will revise policy language and instructions to ensure that the justification analysis and certification analysis required under TSARA is submitted prior to the award contracts and blanket purchase agreements for services that would result in new capabilities, enhancements, or otherwise upgrade SRT. It distinguishes these services from services that are indirectly related to the SRT or used to keep the SRT operational, such as deployment and system integration. We agree with this distinction and do not consider all of the associated services mentioned in this report as necessary for inclusion in TSA’s revised policy. Further, we recognize that TSA, in conjunction with feedback from Congress, is best positioned to determine the services included in its revised policy for reporting under TSARA, consistent with its interest in avoiding duplicative or administratively burdensome reporting and delays in the acquisition process. We are encouraged by DHS’s plans to implement this recommendation and its recognition that the additional information will provide Congress with increased transparency and an opportunity for more effective oversight of TSA’s acquisitions. DHS also described planned actions to address our recommendation to revise TSA’s policy to include reporting on individual task and delivery orders that exceed $30 million. DHS expects to complete the revisions by September 30, 2019. If implemented, this action should provide Congress with greater transparency over TSA’s SRT acquisitions. DHS also noted that, in accordance with our recommendation to update its implementation guidance, it plans to (1) clarify and document what constitutes an SRT under TSARA and (2) document all offices responsible for implementing TSARA’s requirements in its TSARA implementation strategy memo by September 30, 2019. If implemented, guidance that is clear and documented will better assure that staff across all DHS offices will understand how to consistently implement TSARA. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8777 or russellw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in Appendix III. In tables three through eight, we identify the requirements of the Transportation Security Acquisition Reform Act (TSARA), as enacted on December 18, 2014. In addition to the contact named above, Kevin Heinz (Assistant Director), Amber Edwards (Analyst-in-Charge), Winchee Lin, Cristina Norland, Richard Hung, Thomas Lombardi, Amanda Miller, and Richard Cederholm made key contributions to this report.", "summary": "Enacted in December 2014, TSARA introduced legislative reforms to promote greater transparency and accountability in TSA's SRT acquisitions. TSARA contains a provision that GAO submit two reports to Congress on TSA's progress in implementing TSARA. In February 2016, GAO issued the first report that found TSA had taken actions to address TSARA. This second report examines TSA's (1) progress in addressing TSARA requirements since 2016, (2) reporting to Congress on SRT acquisitions, and (3) internal communication of its implementation decisions. GAO examined TSARA and TSA documents and guidance; analyzed TSA contract data and reports from TSARA's enactment in December 2014 through July 2018 and September 2018, respectively; and interviewed DHS and TSA officials on actions taken to implement TSARA. GAO also conducted interviews with TSA officials on parameters for reporting on SRT acquisitions. Since 2016, the Transportation Security Administration (TSA) generally addressed Transportation Security Acquisition Reform Act (TSARA) requirements through its policies and procedures for acquisition justifications, baseline requirements, and management of inventory. TSA also, among other actions, submitted a technology investment plan and annual small-business contracting goals reports to Congress as required. Since December 2014, TSA reported limited security-related technology (SRT) acquisitions to Congress under TSARA, submitting its first report in August 2018. TSARA contains a report and certification provision pursuant to which TSA is to submit information to Congress 30 days prior to the award of a contract for an SRT acquisition exceeding $30 million. Through July 2018, TSA obligated about $1.4 billion on SRT and associated services. TSA officials explained that none of these obligations—including 7 SRT orders, each in excess of $30 million—invoked the report and certification provision because the obligations did not align with TSA's implementation policy, which provides that the $30 million threshold relates to the contract ceiling of the initial SRT contract and not to individual task and delivery orders. Revising TSA's policy to include contracts for services that enhance the capabilities of SRT, including any orders for SRT and associated services in excess of $30 million, would better ensure that Congress has the information it needs to effectively oversee TSA's SRT acquisitions. TSA has not effectively communicated internally its implementation decisions for what constitutes an SRT under TSARA. TSA officials described to GAO that SRT must be equipment that is public facing, but TSA's policy does not clearly state the parameters of what is considered an SRT. Without clear guidance, TSA staff may be unaware of these parameters and how they apply to future acquisitions under TSARA. For example, TSA acquisition program staff were initially unable to confirm for GAO whether the technologies TSA had acquired were SRTs and thus subject to TSARA. Updating TSA policy to include detailed parameters for what constitutes an SRT would better ensure consistency in applying the act. GAO recommends that TSA revise its policies for the report and certification provision of TSARA to include reporting on task and delivery orders and services associated with SRT, and clarify in policy what constitutes an SRT under TSARA. DHS generally concurred with the recommendations and described steps it plans to take to implement them.", "document_type": "gao"}
{"report": "Education administers federal student aid programs, including the Direct Loan program, through the Office of Federal Student Aid. Under the Direct Loan program, Education issues and oversees the loans while contractors service them. Education currently contracts with nine loan servicers that each handle the billing and other services for a portion of the over $1 trillion in outstanding student loans provided through the Direct Loan program. These servicers track and manage day-to-day servicing activities, and they report key information on the status of each loan to Education’s central student loan database. In 2011, Education contracted with one of its existing loan servicers to become the single servicer for borrowers pursuing PSLF. The PSLF servicer is responsible for processing certification requests and forgiveness applications, as well as servicing the loans of borrowers who have met basic PSLF eligibility requirements. The PSLF program provides eligible borrowers with forgiveness on the remaining balance of their Direct Loans after they have met program requirements. To receive forgiveness for a loan, borrowers are required to be employed by a qualifying employer when making 120 qualifying payments, at the time they apply for forgiveness, and at the time they receive forgiveness for their loans. Specifically, borrowers are required to: Work full-time for a public service organization, such as a government organization, agency, or entity at any level (federal, state, local, or tribal); a nonprofit, tax exempt organization (under section 501(c)(3) of the Internal Revenue Code); or another private nonprofit organization that provides certain public services. Not be in default and be repaying their loans through an income- driven repayment plan (in which borrowers’ monthly payments are based on their income and family size); the 10-year Standard repayment plan; or another plan if the monthly payment amounts equal or exceed the amount the borrower would have paid under the 10-year Standard repayment plan. Although the 10-year Standard repayment plan qualifies for PSLF, borrowers in this plan will pay off their loans before they are eligible for forgiveness unless they change to an income-driven repayment plan that leaves them with a balance remaining to be forgiven after 120 payments. Make 120 on-time monthly loan payments for the full amount due on their bill after October 1, 2007. These monthly payments do not need to be consecutive. In January 2012, Education began offering a voluntary process to certify borrowers’ public service employment and loans as eligible for PSLF. Borrowers can request to have their employment and loans certified at any time to make sure they are meeting basic program requirements and are on track towards qualifying for loan forgiveness (see fig. 1). Once a borrower submits a request, the PSLF servicer reviews the borrower’s employment and loans to determine if they qualify, and if so, counts how many qualifying payments the borrower has made. In September 2017, 10 years after the PSLF program was established, Education began accepting loan forgiveness applications from borrowers. The application is similar to the form borrowers use to request certification of their employment and loans for PSLF, but is intended for borrowers that have already made 120 qualifying payments (see fig. 2). The PSLF servicer reviews a borrower’s application and incorporates information from any previously approved certification forms to determine if the borrower’s employment and loans qualify and if they have made 120 qualifying payments. If the borrower meets all of these requirements, the PSLF servicer forwards the application to Education for final review. If Education determines the borrower has met all eligibility requirements, it directs the PSLF servicer to forgive the remaining balance on the borrower’s loans. Over 890,000 borrowers have taken an initial step towards qualifying for the PSLF program by voluntarily having their employment and loans certified as eligible for PSLF, according to data from the PSLF servicer as of April 2018. Of these, over 520,000 borrowers had recorded at least one qualifying payment that counted towards the 120 required to be eligible for loan forgiveness (see fig. 3). In total, almost 1.2 million borrowers requested to have their employment and loans certified but over 280,000 were denied, primarily due to missing information on the form, or because they did not have qualifying federal loans or work for a qualifying employer, according to data from the PSLF servicer. The number of new borrowers whose employment and loans have been certified as eligible for PSLF has increased in each of the past 6 years, according to PSLF servicer data (see fig. 4). Officials with the PSLF servicer said they anticipated that the volume would continue to increase as the program gains visibility. In the first 8 months that borrowers were able to apply for loan forgiveness (September 2017 through April 2018), Education had approved 55 borrowers and forgiven a total of almost $3.2 million in outstanding student loan balances, an average of almost $58,000 per borrower. The amount of loan forgiveness for individual borrowers ranged from almost $800 to almost $290,000. Over 19,300 borrowers had submitted loan forgiveness applications as of April 2018 (see fig. 5). Of the almost 17,000 borrowers with applications that had been processed, over 40 percent had qualifying loans and employment but were denied because they had not yet made 120 qualifying payments. The other most common reasons borrowers were denied included missing information on the application or because the borrower did not have qualifying federal loans. Education officials estimated that about 700 borrowers will be approved for loan forgiveness by September 30, 2018. Although Education has conducted some outreach to communicate PSLF program requirements to borrowers, the large number of borrowers whose certification requests and forgiveness applications were denied suggests that many borrowers do not understand or are not aware of these requirements. For example, over half of borrowers that requested to have their employment and loans certified as of April 2018 either did not meet basic eligibility requirements or had yet to make any qualifying loan payments. This includes over 150,000 borrowers who requested to have their employment and loans certified despite not having qualifying federal loans, which suggests these borrowers either did not know which types of loans they had or which types qualified for the program. Borrowers who had qualifying loans also may have been confused about requirements related to making qualifying payments. Over 370,000 borrowers that had their employment and loans certified as of April 2018 had not made any qualifying payments at the time of certification because they were not on qualifying repayment plans, had loans in a deferment or forbearance, were still in the grace period before starting repayment, or had recently consolidated their loans, among other reasons, according to PSLF servicer data (see fig. 6). Although some of these borrowers may have understood how prior choices they made regarding repayment of their loans would affect their ability to make qualifying payments, other borrowers may not have. Officials with the PSLF servicer said borrowers were frequently confused by program requirements related to qualifying loans, employment, repayment plans, and payments. For example, PSLF servicer officials said that borrowers were sometimes unaware that they were not on a qualifying repayment plan or that forbearance, deferment, and loan consolidation would affect their qualifying payments. PSLF servicer frontline customer service staff also said they frequently received calls from borrowers who were confused about whether their loans qualified for PSLF and other program requirements. Two other loan servicers we spoke to identified the same general areas of confusion among borrowers who call with questions about PSLF. In addition, borrower complaints reported by the Consumer Financial Protection Bureau indicate confusion with PSLF requirements related to qualifying loans and payments. Education uses several methods to conduct outreach to inform borrowers about PSLF requirements, but denial data suggest and PSLF servicer officials confirmed that borrower confusion persists. Education currently provides information on its website about PSLF requirements and links to an online portal where borrowers can check what types of loans they have and identify their loan servicer. When the PSLF servicer notifies borrowers that their certification requests or forgiveness applications were denied, the notification letter includes information on program requirements and explains why the borrower did not qualify for the program. Education has also adopted other methods to raise awareness of the program among borrowers, such as webinars and outreach to schools, in response to a recommendation in our previous report. Education also instructs borrowers who have additional questions about PSLF to contact the PSLF servicer. However, officials with the PSLF servicer said they can provide more details about the program but cannot answer certain eligibility questions, such as whether a particular borrower has qualifying employment or is on a qualifying repayment plan, until the borrower submits a form to request certification. Officials with three other loan servicers we spoke with also said it is their general policy not to answer specific questions about an individual borrower’s eligibility for PSLF due to the complexity of program requirements, and they instead direct the borrower to contact the PSLF servicer. Although this approach may help avoid the risk of other servicers providing borrowers with incorrect advice, it highlights the need for Education to provide borrowers with clear and sufficient information about how to qualify for the program. It is essential for borrowers to understand eligibility requirements because the retrospective nature of the program requires borrowers to make decisions about their loans and employment months or years before they submit a PSLF certification request or apply for loan forgiveness. For example, the Consumer Financial Protection Bureau reported that borrowers have complained of spending years making payments, believing they were making progress towards PSLF loan forgiveness, and then learning that they were not eligible. Recent legislation requires Education to conduct additional outreach. The consolidated appropriations act enacted in March 2018 appropriated $350 million to forgive the loans of borrowers who otherwise would qualify for PSLF had they not selected a non-qualifying repayment plan. In addition to these funds, the act directed that $2.3 million of Education’s appropriation for administering student aid be used to conduct outreach to borrowers about PSLF, to help ensure borrowers are meeting program requirements. The act specifically requires Education to communicate PSLF program requirements to all Direct Loan borrowers and improve PSLF outreach and information through calls, electronic communications, and other methods. Once implemented, these provisions could reduce confusion about PSLF requirements and help Education provide better service to borrowers. Education does not have a comprehensive document or manual to provide the PSLF servicer guidance and instructions, which PSLF servicer officials said makes it difficult to effectively administer the program and provide consistent service to borrowers. Instead, Education’s guidance and instructions to the PSLF servicer are dispersed in a piecemeal manner across multiple documents, including Education’s original contract with the servicer, multiple updates to the contract, and hundreds of emails. According to PSLF servicer officials, administering the program based on this fragmented collection of guidance and instructions creates a risk that relevant information may be overlooked. Education’s use of email to communicate key guidance and instructions to the PSLF servicer is particularly problematic because this important information is not disseminated to relevant individuals at Education and the PSLF servicer in the same standard fashion as official changes to the servicing contract. Various individuals at Education have sent emails with guidance and instructions to different staff at the PSLF servicer. As a result, all the relevant parties may not be aware of important policy changes or clarifications provided in these emails, according to PSLF servicer officials and Education’s monitoring reports. In one instance, for example, Education staff incorrectly identified what they thought was an error in how the servicer was certifying borrowers that were employed part-time because they were not aware of the most recent guidance that other staff at Education had emailed the servicer on the topic. Similarly, PSLF servicer officials said their staff are sometimes unaware of relevant guidance and instructions in emails provided by Education, which creates a risk that some policy updates will be overlooked and not consistently implemented. Education has also used email to communicate certain policy clarifications involving employer eligibility and payment counting that, according to the PSLF servicer, have affected hundreds of borrowers and set precedents for future eligibility decisions. Gaps in Education’s guidance and instructions have also left the PSLF servicer uncertain about how to administer key aspects of the program. For example, PSLF servicer officials said that from 2016 to 2018 they were awaiting additional clarifications from Education about how to account for loan payments when borrowers pay more than the amount due or submit a payment several weeks before the due date. How overpayments and prepayments are accounted for can affect whether the borrower’s subsequent payments qualify for PSLF because borrowers can only receive credit for one payment per month and only when a payment is due. While Education provided a clarification about how to address this issue in May 2018, current guidance from Education on other topics is still unclear or incomplete, according to PSLF servicer officials. The absence of a central, authoritative source of PSLF guidance and instructions creates a risk of differing interpretations and inconsistent implementation. The PSLF servicer has developed its own internal processing handbook based on Education’s guidance and instructions, which PSLF servicer officials said is useful for helping staff process certifications and forgiveness applications. However, Education has reviewed sections of this processing handbook and identified places where the handbook does not accurately reflect PSLF requirements and could result in borrowers’ certification requests being improperly approved or denied. The PSLF servicer has made updates to its processing handbook to address certain issues that Education identified, but Education has not conducted a comprehensive review of this handbook. As a result, there is a risk that the PSLF servicer may still be applying Education’s guidance and instructions differently from how the agency intended. PSLF servicer officials said it would be helpful if Education created a centralized manual of PSLF guidance and instructions. The lack of a central guidance document also makes it difficult to maintain program continuity in the event of staff turnover or if Education decides to contract with a new servicer to administer the PSLF program. Federal internal control standards state that agencies should communicate information to those who need it, in a form that enables them to carry out their responsibilities. Education has recently taken some steps to provide clearer guidance and instructions, such as holding meetings with PSLF servicer officials every 2 weeks to discuss any administrative issues. Education officials also told us they plan to develop a comprehensive PSLF servicing manual, but they do not have a timeline for completing it. They are currently drafting an initial section of the manual focusing on payment counting. The current lack of a definitive and comprehensive source of guidance and instructions for the PSLF servicer creates the risk of inconsistent interpretations that could potentially result in borrowers being improperly denied loan forgiveness since Education does not currently review loan forgiveness applications that are denied by the PSLF servicer. Education has provided the PSLF servicer and borrowers with limited information that could help them determine which employers qualify for PSLF, creating uncertainty for borrowers and increasing the risk that the PSLF servicer may improperly certify or deny certification to some borrowers. Education has not provided the PSLF servicer with a definitive source of information for determining which employers qualify a borrower for loan forgiveness. Instead, Education has identified some data sources the PSLF servicer can use to determine whether borrowers are working for qualifying employers. However, these sources are not comprehensive, and PSLF servicer officials said they sometimes have to consult other sources that have significant limitations. For example, Education directs the PSLF servicer to review the Internal Revenue Service’s public list of 501(c)(3) organizations to identify qualifying nonprofit employers. Since this list does not capture all potentially qualifying nonprofits, the PSLF servicer supplements this with other sources that have not been fully reviewed or assessed for accuracy by Education. For example, PSLF servicer officials told us they use an online directory of nursing home facilities to help determine if certain nursing homes are nonprofit employers. However, this website explicitly states that it does not guarantee that the information it provides is accurate or current. PSLF servicer officials also said they sometimes use state government websites to research organizations’ nonprofit status, but they only have access to the relevant information from states that provide it for free. For assessing government employers, Education directs the servicer to www.usa.gov, an official federal government website that describes government agencies and services, but this source provides limited information on state and local government employers. In addition, PSLF servicer officials said it is particularly difficult to assess certain types of employers, such as quasi-governmental entities and charter schools. PSLF servicer officials said that when they are uncertain whether an employer qualifies, they elevate the assessment to Education, but they generally try to resolve as many employer determinations as possible by using supplemental sources to research employers. However, the reliability of some of these supplemental sources is unclear. PSLF servicer officials said that having additional information would help them assess employers more quickly and minimize the risk of inaccurate decisions. One way to provide this information would be for Education to develop an official, comprehensive list of qualifying employers, which would help the PSLF servicer assess employers and help borrowers determine whether they are eligible for PSLF, according to PSLF servicer officials. Education officials said they are considering creating their own list of qualifying employers and are investigating how to leverage information from other federal government agencies that could be useful for categorizing employers. In particular, Education officials said they have reached out to the Internal Revenue Service to explore the feasibility of obtaining relevant data on employers. Education could also expand and improve on a database that the PSLF servicer created based on its prior assessments of employers. Education staff that conducted a spot check on the PSLF servicer’s database expressed concerns about using it as a sole source for assessing employers, according to an Education monitoring report, but Education officials said it could provide a foundation for Education to build on. Borrowers would also benefit from additional information about qualifying employers, according to PSLF servicer officials. Education currently provides borrowers with basic information on the types of employers that qualify for PSLF, but not sufficient details to reliably determine whether specific employers qualify. When borrowers contact their loan servicer with questions about their employer’s eligibility, officials with the PSLF servicer and other loan servicers we spoke with said they generally do not provide borrowers with information about whether a specific employer qualifies, due to the complexities involved in assessing qualifying employers. Instead, borrowers are encouraged to submit an employment certification form once they are working for an employer in order to find out if the employer qualifies. PSLF servicer officials said that providing borrowers with access to additional information about qualifying employers, such as an official list, would reduce uncertainty for borrowers and reduce the number of borrowers who submit certification requests and forgiveness applications despite working for non-qualifying employers. In addition, making this information readily available to borrowers could help them to make better informed employment decisions rather than having to wait to submit a certification request after they have started a job to find out if their employer qualifies. Federal internal control standards state that agencies should communicate the necessary quality information to those who need it in order to achieve the agencies’ objectives. Unless Education provides additional information to help the PSLF servicer make employer assessments, it will remain difficult to determine whether employers qualify for the program, raising the risk that borrowers’ certification requests will be improperly approved or denied. Moreover, without access to sufficient information about qualifying employers, borrowers will not be able to reliably determine whether certain employers qualify for PSLF. This creates uncertainty for borrowers as to which jobs and careers to pursue and leaves them to make important employment decisions without knowing until after the fact how these decisions affect their future eligibility for PSLF. Education does not ensure the PSLF servicer receives consistent information on borrowers’ prior loan payments from other loan servicers, which could raise the risk of qualifying payments being miscounted. In order to process certification requests and loan forgiveness applications, the PSLF servicer has to examine the borrower’s prior loan payment information to determine which prior payments count towards the 120 needed to qualify for loan forgiveness. This is relatively easy in cases where the PSLF servicer was servicing the borrower’s loans during the entire period he or she was pursuing PSLF because the servicer already has the necessary information on their prior payments, according to PSLF servicer officials. However, the PSLF servicer does not have the same information readily available for loans that are serviced by one of Education’s eight other loan servicers. For these loans, Education established a process for servicers to use in transferring loan and prior payment information to the PSLF servicer. The servicers transfer most information through standardized templates that Education developed. However, despite the use of standardized templates, the PSLF servicer does not receive consistent and reliable information from other servicers, according to PSLF servicer officials. For example, PSLF servicer officials said the lack of standard definitions and terminology among loan servicers leads servicers to interpret some data fields differently, resulting in inconsistencies in the data other loan servicers report to the PSLF servicer. Comparable data and standardized terminology is particularly important given the need for loan servicers with different systems and practices to communicate key payment information with one another. PSLF servicer officials said inconsistencies in the information provided by other loan servicers make it challenging to determine whether borrowers are on qualifying repayment plans or making qualifying payments. For example, when a borrower has multiple loans, PSLF servicer officials said they assess PSLF eligibility and payments separately for each individual loan. Officials added that some servicers only report total monthly payments for the borrower’s combined loans, and not how these payments were allocated among each loan. This makes it difficult for the PSLF servicer to determine whether the borrower paid the full monthly payment amount due on each loan, which it needs to know in order to determine whether the payment qualifies for PSLF. Officials with Education and the PSLF servicer said that inconsistencies in the information obtained from other loan servicers increase the risk of miscounting qualifying payments. Education officials said they have started to track these data consistency problems and coordinate discussions among the PSLF servicer and the three other loan servicers that together provide the data systems used by all nine servicers. However, these efforts are in the early stages. Federal internal control standards state that agencies should use quality information to achieve their objectives. Standardizing the prior payment information transferred among servicers could improve the PSLF servicer’s ability to determine qualifying payment counts for borrowers transferring from other servicers. Although Education and PSLF servicer officials acknowledge the risk of miscounting qualifying payments, the PSLF servicer does not provide borrowers with sufficient information to easily catch errors. In addition to the risks caused by inconsistent prior payment information from other loan servicers, the payment counting process is also vulnerable to errors in instances when the PSLF servicer has to manually review payment information from other servicers, according to PSLF servicer officials and an Education monitoring report. Borrowers whose loans were transferred to the PSLF servicer from other loan servicers have complained about inaccurate qualifying payment counts, according to a Consumer Financial Protection Bureau report. Officials with the PSLF servicer said they rely on borrowers to catch any payment counting errors resulting from issues with information provided by other loan servicers. However, the PSLF servicer provides borrowers with aggregate counts of qualifying payments, which are useful for helping borrowers track their progress, but do not provide borrowers with enough detail to check the servicer’s counts and identify prior payments that the servicer may have missed (see fig. 7). Borrowers have several options for disputing payment counts or other aspects of the eligibility determination process, including contacting the PSLF servicer or filing an official complaint with Education’s Federal Student Aid Ombudsman Group or through the Federal Student Aid Feedback System. However, the lack of detailed information on qualifying payment counts makes it difficult for borrowers to determine whether the count is correct or not. Education officials said they have not considered requiring the PSLF servicer to provide more detailed information to borrowers on which prior payments were approved or denied. Officials noted that there would be a cost associated with providing this information to borrowers, although they have not produced a cost estimate. Also, officials said that providing too much information may confuse borrowers, and they must consider how to meet borrowers’ need for detailed information without overwhelming borrowers with payment counting complexities. Officials with the PSLF servicer said providing this information to borrowers could be helpful but would require time to confirm the information was correct and would only be done at the direction of Education. Federal internal control standards state that agencies should communicate necessary quality information to external parties. While providing too much information could prove counterproductive, borrowers could benefit from receiving greater detail about their qualifying payments beyond the aggregate counts of qualifying payments that they currently receive. Without clearer and more detailed information on qualifying payments, borrowers may not detect any errors in payment counts, which could ultimately affect borrowers’ eligibility for loan forgiveness. Education is responsible for establishing the administrative structure necessary to fulfill the PSLF program’s goal of encouraging individuals to enter and continue in public service employment by providing loan forgiveness to eligible borrowers who meet program requirements. However, Education has not provided the PSLF servicer with a comprehensive source of guidance and instructions on how to operate the program, raising the risk that the PSLF servicer may improperly approve or deny borrowers’ certification requests and forgiveness applications. Education officials told us they have plans for creating a comprehensive PSLF servicing manual, but no timeline for doing so. Working for a qualifying employer is one of the key requirements of the PSLF program; however, Education has not provided the PSLF servicer and borrowers with sufficient information for determining whether employers qualify. This makes the PSLF servicer’s employer assessments vulnerable to inconsistencies and fosters uncertainty for borrowers as to whether or not their employment will eventually qualify them for loan forgiveness. Similarly, inconsistencies in the information used for counting borrowers’ qualifying loan payments raise the risk of errors. Borrowers should be confident that their loan payments will be accurately counted regardless of who their servicer is. However, Education has not ensured the PSLF servicer is receiving consistent loan payment history information from other loan servicers, increasing the risk of inaccurate qualifying payment counts. The chance that these and any other payment counting errors will go undetected is compounded by the fact that Education does not require the PSLF servicer to provide borrowers with details on which payments qualified and which did not. This makes it difficult for borrowers to detect erroneous counts that could ultimately affect their eligibility for loan forgiveness. Consequently, some borrowers may be required to make more payments than necessary before receiving loan forgiveness, while others may be improperly approved for forgiveness. We are making the following four recommendations to Education’s Office of Federal Student Aid: The Chief Operating Officer of the Office of Federal Student Aid should develop a timeline for issuing a comprehensive guidance and instructions document for PSLF servicing. This could involve developing a new servicing manual or expanding upon the PSLF servicer’s existing processing handbook. (Recommendation 1) The Chief Operating Officer of the Office of Federal Student Aid should provide additional information to the PSLF servicer and borrowers to enhance their ability to determine which employers qualify for PSLF. This could involve Education developing an authoritative list of qualifying employers or improving the PSLF servicer’s existing database, and making this information available to borrowers. (Recommendation 2) The Chief Operating Officer of the Office of Federal Student Aid should standardize the information the PSLF servicer receives from other loan servicers to ensure the PSLF servicer obtains more consistent and accurate payment information for borrowers pursuing PSLF. (Recommendation 3) The Chief Operating Officer of the Office of Federal Student Aid should ensure that borrowers receive sufficiently detailed information from the PSLF servicer to be able to identify any errors in the servicer’s counts of qualifying payments, including information on whether or not each payment qualified toward forgiveness. (Recommendation 4) We provided a draft of this report to Education for its review and comment. In its comments, reproduced in appendix I, Education concurred with each of our recommendations and identified steps it plans to take to implement them. To improve guidance and instructions for PSLF servicing, Education stated it is documenting PSLF requirements and guidelines and plans to incorporate them into a comprehensive guide. Regarding our recommendation to provide additional information on qualifying employers to the PSLF servicer and borrowers, Education stated that it is reviewing options for developing an online help tool that would be expanded to incorporate qualifying employer information. To standardize the information other loan servicers provide to the PSLF servicer, Education stated it will continue its efforts to address data definition issues related to the data exchanged between servicers. To ensure borrowers receive sufficiently detailed information on counts of qualifying payments, Education stated it will review the letters the PSLF servicer sends to borrowers to determine how to better communicate regarding qualifying payment counts, program requirements, and employer eligibility. We also provided relevant report sections to the PSLF servicer and the three other loan servicers included in our review for technical comments. The PSLF servicer provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Education, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Debra Prescott (Assistant Director), William Colvin (Analyst-in-Charge), and Linda Collins made key contributions to this report. Additional assistance was provided by James Bennett, Deborah Bland, Alicia Cackley, Sarah Cornetto, Hedieh Fusfield, Kirsten Lauber, Sheila R. McCoy, Jeffrey G. Miller, Jessica Orr, Ellen Phelps Ranen, and Paul Wright.", "summary": "Starting in September 2017, the first borrowers became eligible and began applying to have their loans forgiven through the PSLF program. GAO was asked to review the PSLF program. This report examines the (1) number of borrowers pursuing PSLF and the extent to which Education has conducted outreach to increase borrower awareness of program eligibility requirements, and (2) extent to which Education has provided key information to the PSLF servicer and borrowers. GAO analyzed data from the PSLF servicer on employment and loan certifications and loan forgiveness applications as of April 2018; reviewed Education's guidance and instructions for the PSLF servicer; assessed the information used by Education and the PSLF servicer and communicated to borrowers against federal internal control standards; and interviewed officials from Education and the four largest loan servicers, including the PSLF servicer. As of April 2018, over a million borrowers had taken steps to pursue Public Loan Service Forgiveness (PSLF) from the Department of Education (Education), but few borrowers have been granted loan forgiveness to date. The PSLF program, established by statute in 2007, forgives borrowers' federal student loans after they make at least 10 years of qualifying payments while working for certain public service employers and meeting other requirements. Over 890,000 borrowers have passed a first step towards potentially qualifying for PSLF by voluntarily having their employment and loans certified as eligible for PSLF as of April 2018, according to data from Education's PSLF loan servicer. While borrowers first became eligible to apply for loan forgiveness in September 2017, few applicants had met all requirements as of April 2018, with 55 borrowers having received loan forgiveness (see figure). Education has used various outreach methods to inform borrowers about PSLF, but the large number of denied borrowers suggests that many are still confused by the program requirements. A recently enacted law requires Education to conduct additional outreach to help borrowers understand how to meet program requirements. Education does not provide key information to the PSLF servicer and borrowers. Guidance and instructions: Education provides piecemeal guidance and instructions to the PSLF servicer it contracts with to process certification requests and loan forgiveness applications. This information is fragmented across the servicing contract, contract updates, and hundreds of emails. As a result, PSLF servicer officials said their staff are sometimes unaware of important policy clarifications. Education officials said they plan to create a comprehensive PSLF servicing manual but have no timeline for doing so. Qualifying employers: Education has not provided the PSLF servicer and borrowers with a definitive source of information for determining which employers qualify a borrower for loan forgiveness, making it difficult for the servicer to determine whether certain employers qualify and for borrowers to make informed employment decisions. Qualifying loan payments: Education does not ensure the PSLF servicer receives consistent information on borrowers' prior loan payments from the eight other federal loan servicers, which could increase the risk of miscounting qualifying payments. Borrowers also lack sufficiently detailed information to easily identify potential payment counting errors that could affect their eligibility for loan forgiveness. These weaknesses are contrary to federal internal control standards for using and communicating quality information, creating uncertainty for borrowers and raising the risk some may be improperly granted or denied loan forgiveness. GAO recommends that Education (1) develop a timeline for issuing a comprehensive guidance and instructions document for the PSLF servicer, (2) provide the PSLF servicer and borrowers with additional information about qualifying employers, (3) standardize payment information other loan servicers provide to the PSLF servicer, and (4) ensure borrowers receive sufficiently detailed information to help identify potential payment counting errors. Education agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "In November 2011, we reported that over the previous decade, the FBI and GSA conducted a number of studies to assess the Hoover Building and its other headquarters facilities’ strategic and mission needs. Through these studies, they determined the condition of the FBI’s current assets and identified gaps between current and needed capabilities, as well as studied a range of alternatives to meet the FBI’s requirements. According to these assessments, the FBI’s headquarters facilities did not fully support the FBI’s long-term security, space, and building condition requirements. Since our report, the assessment of the Hoover Building has not materially changed. For example: Security: Since September 11, 2001, the FBI mission and workforce have expanded, and the FBI has outgrown the Hoover Building. As a result, the FBI also operates in annexes, including some located in the National Capital Region. During our 2011 review, FBI security officials told us that they have some security concerns—to varying degrees— about the Hoover Building and some of the headquarters annexes. In our report, we noted that the dispersion of staff in annexes created security challenges, particularly for at least nine annexes that were located in multitenant buildings, where some space was leased by the FBI and other space was leased by nonfederal tenants. While this arrangement did not automatically put FBI operations at risk, it heightened security concerns. In addition, in January 2017, we found that the FBI occupies space leased from foreign owners in at least six different locations, including one in Washington, D.C. Further, federal officials who assess foreign investments told us at that time that leasing space in foreign-owned buildings could present security risks, such as espionage and unauthorized cyber and physical access. Space: In 2011, we reported that FBI and GSA studies showed that much of the Hoover building’s approximately 2.4 million gross square feet of space is unusable, and the remaining usable space is not designed to meet the needs of today’s FBI. Moreover, the Hoover Building’s original design is inefficient, according to GSA assessments, making it difficult to reconfigure space to promote staff collaboration. For example, in its fiscal year 2017 prospectus for the proposed FBI headquarters consolidation project, GSA noted that the Hoover Building was designed at a time when FBI operated differently, and it cannot be redeveloped to provide the necessary space to consolidate the FBI Headquarters components or to meet the agency’s current and projected operational requirements. As a result, the FBI reported facing several operational and logistical challenges. We similarly noted in our prior work in 2011 that space constraints at the Hoover Building and the resulting dispersion of staff sometimes prevented the FBI from physically locating certain types of analysts and specialists together, which in turn hampered collaboration and the performance of some classified work. Building condition: In our 2011 report, we noted that the condition of the Hoover Building was deteriorating, and GSA assessments had identified significant recapitalization needs. At that time, we found that GSA had decided to limit investments in the Hoover Building to those necessary to protect health and safety and keep building systems functioning while GSA assessed the FBI’s facility needs. We found that this decision increased the potential for building system failures and disruption to the FBI’s operations. Given that the FBI would likely remain in the building for at least several more years, we recommended that GSA evaluate its strategy to minimize major repair and recapitalization investments and take action to address any facility condition issues that could put FBI operations at risk and lead to further deterioration of the building. In 2014, in response to our recommendation, GSA evaluated its strategy for the Hoover Building and determined it needed to complete some repairs to ensure safety and maintain tenancy in the building. For example, in 2014, GSA funded contracts to waterproof portions of the building’s mezzanine level to prevent water intrusion into the building and repair the concrete facade, small sections of which had cracked and fallen from the building. In July 2017, GSA and FBI officials stated that they cancelled the procurement for the new FBI headquarters consolidation project, noting that the there was a lack of funding necessary to complete the procurement. GSA added that the cancellation of the procurement did not lessen the need for a new FBI headquarters, and that GSA and the FBI would continue to work together to address the space requirements of the FBI. In July 2014, we reported that the swap exchange approach can help GSA address the challenges of disposing of unneeded property and modernizing or replacing federal buildings. GSA officials told us that swap exchanges can help GSA facilitate construction projects given a growing need to modernize and replace federal properties, shrinking federal budgets, and challenges obtaining funding. Specifically, GSA officials noted that swap exchanges allow GSA to immediately apply the value of a federal property to be used in the exchange to construction needs, rather than attempting to obtain funds through the appropriations process. In our 2014 report, GSA officials stated that the exchanges can be attractive because the agency can get construction projects accomplished without having to request full upfront funding for them from Congress. In addition, because swap exchanges require developers or other property recipients to complete the agreed-upon GSA construction projects prior to the transfer of the title to the current property GSA is exchanging, federal agencies can continue to occupy the property during the construction process for the new project, eliminating the need for agencies to lease or acquire other space to occupy during the construction process. GSA has limited experience in successfully completing swap exchange transactions and has cancelled several recently proposed swap exchanges. More specifically, in 2016 we reported that GSA had only completed transactions using the swap exchange authority for two small (under $10-million each) swap exchanges completed in Atlanta, Georgia, in 2001 and in San Antonio, Texas, in 2012. Furthermore, GSA has faced a number of obstacles in its use of this authority. For example, for our 2014 report, we reviewed five projects identified since August 2012 in which GSA solicited market interest in exchanging almost 8-million square feet in federal property for construction services or newly constructed assets. However, GSA chose not to pursue swap-exchanges in all five of these projects, including the proposed FBI headquarters consolidation project. For example, GSA officials told us that there was little or no market interest in potential swap exchanges in Baltimore, Maryland, and Miami, Florida, and that GSA chose to pursue different approaches. Respondents to the solicitations for these two GSA swap exchanges noted that GSA did not provide important details, including the amount of investment needed in the federal properties and GSA’s specific construction needs. In addition, from 2012 to 2015, GSA pursued a larger swap exchange potentially involving up to 5 federal properties located in the Federal Triangle South area of Washington, D.C., to finance construction at GSA headquarters and other federal properties. In 2013, GSA decided to focus on exchanging two buildings, the GSA Regional Office Building and the Cotton Annex, based on input from potential investors. On February 18, 2016, GSA decided to end its pursuit of the exchange, saying in a memorandum supporting this decision that private investor valuations for the two buildings fell short of the government’s estimated values. After the discontinuation of the Federal Triangle swap exchange project, we reported in 2016 that GSA officials noted they planned to improve the swap exchange process, including the property appraisal process, outreach to stakeholders to identify potential project risks for future projects, and to the extent possible, mitigate such risks. However, we also reported that several factors may continue to limit the applicability of the agency’s approach. Specifically, the viability of swap exchanges may be affected by specific market factors, such as the availability of alternative properties. In addition, the specific valuation approach used by appraisers or potential investors may reduce the viability of the swap exchange. For example, in reviewing the proposed Federal Triangle project, we found in 2016 that the proposals from two of the investment firms valued the two federal buildings involved in the proposed swap substantially less than GSA’s appraised property value. In addition, swap exchanges can require developers to spend large sums on GSA’s construction needs before receiving title to the federal property used in the exchanges. We found in 2014 that GSA’s solicitations have not always specified these construction needs in sufficient detail. Consequently, developers may be unable to provide meaningful input, and GSA could miss swap exchange opportunities. In 2014, we recommended that GSA develop criteria for determining when to solicit market interest in a swap exchange. GSA agreed with the recommendation and has since updated its guidance to include these criteria. In January 2017, GSA agreed to a swap exchange for the U.S. Department of Transportation Volpe Center in Cambridge, Massachusetts. After a competitive process, GSA selected the Massachusetts Institute of Technology (MIT) as its exchange partner for the existing Department of Transportation (DOT) facility. Per the agreement, MIT will construct a new DOT facility on a portion of a 14 acre site to which DOT has title and, in exchange, will receive title to the remaining portion of the site that will not be used by DOT, which is located near its main campus. GSA indicated that, once completed, the project will provide $750 million in value to the federal government in the form of the design and construction services and value-equalization funds from MIT. Our prior work has identified a number of alternative approaches to funding real property projects. In March 2014, we reported that upfront funding is the best way to ensure recognition of commitments made in budgeting decisions and to maintain fiscal controls. However, obtaining upfront funding for large acquisitions such as the Hoover Building replacement can be challenging. Congress has provided some agencies with specific authorities to use alternative funding mechanisms for the acquisition, renovation, or disposal of federal real property without full, upfront funding. Table 1 outlines selected funding mechanisms, and considerations for each mechanism we identified in our 2014 report. Some of these alternative mechanisms allow selected agencies to meet their real property needs by leveraging other authorized resources, such as retained fees or land swaps with a private sector partner. Funding mechanisms leverage both monetary resources, such as retained fees, and non-monetary resources, such as property exchanged in a land swap or space offered in an enhanced use lease. In some cases, the funding mechanism may function as a public-private partnership intended to further an agency’s mission by working with a partner to leverage resources. Some of these mechanisms allow the private sector to provide the project’s capital—at their cost of borrowing. The U.S. federal government’s cost of borrowing is lower than the private sector’s. When the private sector provides the project capital, the federal government later repays these higher private sector borrowing costs (e.g., in the form of lease payments). In some cases, factors such as lower labor costs or fewer requirements could potentially help balance the higher cost of borrowing, making partner financing less expensive. Our 2014 report also identifies budgetary options—within the bounds of the current unified budget—to meet real property needs while helping Congress and agencies make more prudent long-term decisions. In 2014, we reported that projects with alternative funding mechanisms present multiple forms of risk that are shared between the agency and any partner or stakeholder. Further, we noted project decisions should reflect both the likely risk and the organization’s tolerance for risk. Incorporating risk assessment and management practices into decisions can help organizations recognize and prepare to manage explicit risks (e.g. financial and physical) and implicit risks (e.g. reputational). For example, clearly defined lease terms may help agencies manage risks of costs for unexpected building repairs. Further considerations we noted in our 2014 report include the availability of an appropriate partner—and that partners should bring complementary resources, skills, and financial capacities to the relationship—and management of the relationship with that partner. While different funding mechanisms have been used as an alternative to obtaining upfront funding for federal real property projects, changes to the budgetary structure itself—within the bounds of the unified budget that encompasses the full scope of federal programs and transactions—may also help agencies meet their real property needs. Such alternatives may include changing existing or introducing new account structures to fund real property projects. Our previous work identified options for changes within the current discretionary budget structure and options on the mandatory side of the budget. Alternative budgetary structures may change budgetary incentives for agencies and therefore help Congress and agencies make more prudent long-term fiscal decisions. Chairman Barrasso, Ranking Member Carper, and Members of the Committee, this concludes my prepared statement. I am happy to answer any questions you may have at this time. If you or your staff members have any questions concerning this testimony, please contact me at (202) 512-2834 or wised@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony are Mike Armes (Assistant Director), Colin Ashwood, Matt Cook, Joseph Cruz, Keith Cunningham, Alexandra Edwards, Carol Henn, Susan Irving, Hannah Laufe, Diana Maurer, John Mortin, Monique Nasrallah, Matt Voit, Michelle Weathers, and Elizabeth Wood. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "GSA, which manages federal real property on behalf of other federal agencies, faces challenges in funding new construction projects due to budget constraints—including obtaining upfront funding—among other reasons. One type of transaction, called a swap exchange, enables GSA to apply the value of federal property to finance construction without relying on appropriated funds. Under such an exchange, GSA transfers the title of the unneeded property to a private investor after receiving the agreed upon construction services at another location. GSA proposed a swap exchange procurement for construction of a new FBI headquarters building in exchange for the Hoover Building and appropriations to compensate for the difference in value between the Hoover Building and the new building. GSA cancelled this procurement in July 2017 due to lack of funding. This statement addresses (1) GSA's and FBI's assessments of the Hoover Building, (2) GSA efforts to implement swap exchanges, and (3) alternative approaches to funding real property projects. It is based on GAO's body of reports on real property from 2011 to 2017, and selected updates from GSA. In November 2011, GAO reported that, according to General Services Administration (GSA) and Federal Bureau of Investigation (FBI) assessments, the FBI's headquarters building (Hoover Building) and its accompanying facilities in Washington, D.C., did not fully support the FBI's long-term security, space, and building condition requirements. Since GAO's report, the assessments have not materially changed, for example: Security: GAO's prior work noted that the dispersion of staff in annexes creates security challenges, including where some space was leased by the FBI and other space was leased by nonfederal tenants. Earlier this year, GAO reported the FBI is leasing space in D.C. from foreign owners. Space : In 2011, GAO reported that FBI and GSA studies showed that much of the Hoover Building is unusable. GSA noted in its fiscal year 2017 project prospectus for the FBI headquarters consolidation that the Hoover Building cannot be redeveloped to meet the FBI's current needs. Building Condition: In GAO's 2011 report, GAO noted that the condition of the Hoover Building was deteriorating, and GSA assessments identified significant recapitalization needs. Since GAO's report and in response to GAO's recommendation, GSA has evaluated its approach to maintaining the building and completed some repairs to ensure safety. GSA has limited experience in successfully completing swap exchange transactions and chose not to pursue several proposed swap exchanges, most recently the planned swap exchange for the Hoover Building. GSA has developed criteria for determining when to solicit market interest in a swap exchange, in response to recommendations in GAO's 2014 report. In addition, GSA officials told GAO that they planned to improve the swap exchange process, including the property appraisal process, outreach to stakeholders to identify potential risks associated with future projects, and to the extent possible, mitigate such risks. Nevertheless, several factors may continue to limit use of swap exchanges, including market factors, such as the availability of alternative properties and an investor's approach for valuing properties. For example, in reviewing a proposed swap exchange in Washington, D.C., GAO found in a 2016 report that the proposals from two firms valued the two federal buildings involved in the proposed swap substantially less than GSA's appraised property value. In a 2014 report, GAO identified a number of alternative approaches to funding real property projects. Congress has provided some agencies with specific authorities to use alternative funding mechanisms—including the use of private sector funds or land swaps—for the acquisition, renovation, or disposal of federal real property without full, upfront funding, though GAO has previously reported that upfront funding is the best way to ensure recognition of commitments made in budgeting decisions and maintain fiscal controls. GAO has reported that projects with alternative funding mechanisms present multiple forms of risk that are shared between the agency and any partner or stakeholder. In addition, alternative budgetary structures could be established, such as changing existing or introducing new account structures to fund real property projects. GAO has made recommendations in the past to GSA on various real property issues, including to develop additional guidance for swap exchanges and to evaluate its approach to maintaining the Hoover Building. GSA agreed with these two recommendations and addressed them.", "document_type": "gao"}
{"report": "As Interior’s primary water management agency, Reclamation’s mission has been to manage, develop, and protect water and water-related resources in 17 western states since 1902. Reclamation has led or provided assistance in the construction of most of the large dams and water diversion structures in the West for the purpose of developing water supplies for irrigation, municipal water use, flood control, and habitat enhancement, among others. Reclamation is organized into five regions—Great Plains, Lower Colorado, Mid-Pacific, Pacific Northwest, and Upper Colorado—and the agency’s central office in Denver provides technical and policy support. Each regional office oversees the water projects, including Title XVI projects and studies, located within its regional boundaries. The types of projects eligible under the Title XVI program include, among others, construction of water treatment facilities, pipelines to distribute reused water, and tanks and reservoirs to store reused water. The Title XVI program is one of several programs under Interior’s WaterSMART (Sustain and Manage America’s Resources for Tomorrow) Program. The WaterSMART program is implemented by Reclamation and the U.S. Geological Survey within Interior. According to an Interior document, the WaterSMART program focuses on identifying strategies to help ensure sufficient supplies of clean water for drinking, economic activities, recreation, and ecosystem health. Reclamation carries out its portion of the WaterSMART program by administering grants, including Title XVI grants for water reuse, conducting research, and providing technical assistance and scientific expertise. Reclamation offers three types of grants to project sponsors under the Title XVI program: construction projects, which are projects to plan, design, or construct infrastructure for the treatment and distribution of reused water; feasibility studies, which are documents that generally identify specific water reuse opportunities, describe alternatives, and incorporate other considerations, such as the financial capability of the project sponsor; and research studies, which are studies to help states, tribes, and local communities establish or expand water reuse markets, improve existing water reuse facilities, or streamline the implementation of new water reuse facilities. Key Terms Related to Water Reuse Acre-foot of water: about 326,000 gallons generally identify specific water reuse opportunities; describe alternatives; and incorporate other considerations, such as the financial capability of the project sponsor. Federal awards for construction projects under the Title XVI program are generally limited to 25 percent of total project costs—up to $20 million in federal funding—and require a 75 percent nonfederal cost share from the project sponsor. Federal funding for feasibility studies under the Title XVI program is generally limited to 50 percent of the total study costs, up to $450,000, and federal funding for research studies is generally limited to 25 percent of the total study costs, up to $300,000. Reclamation generally awards Title XVI grants for construction projects to project sponsors in installments over multiple years before the federal funding maximum for each project is reached, whereas it generally awards the full amount for feasibility and research study grants in a single year. Potable: water that is suitable for drinking. Project sponsors: water districts, wastewater or sanitation districts, municipalities, tribes, and other entities that develop projects or studies eligible for Title XVI grants. tribes, and local communities establish or expand water reuse markets, improve existing water reuse facilities, or streamline the implementation of new water reuse facilities. From fiscal year 1992, when the Title XVI program was established, through fiscal year 2009, Congress authorized 53 Title XVI projects. Each of these projects was subject to a cap on the federal cost share. In fiscal years 1992 through 2010, Congress generally directed funding for these specific authorized projects each year. Starting in fiscal year 2011, Congress began appropriating funding for the Title XVI program without directing specific funding to individual projects. As a result, Reclamation started using a competitive process to award Title XVI grants to projects and studies, through which project sponsors with authorized projects applied for Title XVI grants. Only the 53 projects that were already authorized by Congress were eligible to apply for grants for construction projects. Section 4009(c) of the WIIN Act, enacted in December 2016, authorized an additional $50 million to be appropriated for water reuse projects. To be eligible to receive Title XVI grants under the WIIN Act, projects must submit a completed feasibility study to Reclamation, and Reclamation must review the study to determine whether, among other things, the project is technically and financially feasible and provides a federal benefit in accordance with the reclamation laws. Reclamation is then to submit a report with the results of its review to Congress, and projects determined to be feasible are then eligible to apply for grants under the competitive grant program established by the WIIN Act. Each feasibility study identifies an estimated project cost. Like most projects individually authorized prior to the WIIN Act, the federal share of this cost is generally capped at 25 percent, up to $20 million. In addition to construction projects, Reclamation began awarding Title XVI grants to project sponsors for feasibility studies in fiscal year 2011 and for research studies in fiscal year 2016. Figure 1 shows a timeline of the Title XVI program. With water reuse, water that is typically unusable, such as municipal or industrial wastewater, undergoes additional treatment to make it suitable for certain purposes. For example, municipal wastewater typically undergoes primary and secondary treatment before it can be discharged into a river, stream, or other body of water. With water reuse, wastewater generally undergoes further (tertiary) treatment to remove additional nutrients and suspended solids and to disinfect the water. The treated water can then be reused for nonpotable uses, such as landscape or agricultural irrigation or industrial uses. In some cases, wastewater undergoes additional, advanced treatment—such as microfiltration and reverse osmosis—and may then be suitable for potable uses, such as injection into a groundwater basin or reservoir where it may later be extracted for drinking water. Figure 2 shows some of the typical treatment processes that may be applied to reused water, and figure 3 shows some of the typical uses of reused water. Several reports have shown that water reuse could offer significant untapped water supplies, particularly in coastal areas facing water shortages. For example, in a 2012 report on municipal wastewater reuse, the National Research Council of the National Academies estimated that U.S. municipalities discharged about 12 billion gallons of treated municipal wastewater each day into coastal waters. They estimated that reuse of these coastal discharges could directly augment available water sources by providing the equivalent of 27 percent of the municipal supply. Municipalities discharge another 20 billion gallons each day to inland locations. While reuse of inland discharges has the potential to affect the water supply of downstream users by decreasing the amount of water available to them, we previously found that at least some of this volume could also be beneficial. Even with such potential uses, the Environmental Protection Agency reported in 2012 that only 7 to 8 percent of municipal wastewater was being intentionally reused in the United States. In our past work, we have highlighted the importance of awarding competitive grants in a fair and transparent way and monitoring grants. In recent years, OMB has taken actions to help improve the effectiveness and efficiency of grantmaking across the federal government. In particular, in December 2014, OMB’s Uniform Guidance became effective for new grant awards after adoption by federal grantmaking agencies, including Interior. The Uniform Guidance requires, among other things, that federal agencies provide public notices of funding opportunities, and these notices are to contain information, such as key dates and the merit and other criteria that the agency will use to evaluate applications. The Uniform Guidance also requires certain monitoring activities for federal grants, such as generally requiring grant recipients to submit financial reports. From fiscal years 1992 through 2017, Reclamation awarded about $715 million for 46 construction projects and 71 studies under the Title XVI program, based on our review of agency documents. Most of this funding—about $703 million—went toward construction projects, while the remaining awards were for feasibility and research studies. Some construction projects remain eligible for Title XVI grants. Specifically, about $464 million in grant funding not yet awarded up to the federal ceiling remains for individually congressionally authorized Title XVI construction projects, and about $513 million remains in total estimated projects eligible for Title XVI grants under the WIIN Act, as of August 2018. Across the three different types of grants offered under the Title XVI program—construction projects, feasibility studies, and research studies—Reclamation awarded about $715 million from fiscal years 1992 through 2017, according to agency documents. This $715 million awarded under Title XVI leveraged more than $2.8 billion in nonfederal cost share. Reclamation awarded most of this Title XVI funding for construction projects, as shown in table 1. Overall, Reclamation awarded about $703 million under Title XVI to 46 construction projects from fiscal years 1992 through 2017. Of these 46 construction projects that received awards, 43 were individually congressionally authorized construction projects and 3 were construction projects that were eligible for Title XVI grants under the WIIN Act, according to agency documents we reviewed. Additionally, Reclamation made awards for 71 studies—58 feasibility study grants since fiscal year 2011 and 13 research study grants since fiscal year 2016. Based on our review of Reclamation financial data, some construction projects remain eligible for Title XVI grants. Eligible project costs fell into two categories: (1) grant funding not yet awarded up to the federal ceiling for individually congressionally authorized Title XVI construction projects, and (2) the federal share of estimated costs identified in feasibility studies for projects eligible for Title XVI grants under the WIIN Act. About $464 million in not-yet-awarded funding remained for 28 individually congressionally authorized Title XVI construction projects as of August 2018. Also, about $513 million remained in estimated project costs for the 40 construction projects that were eligible under the WIIN Act, as of August 2018, as shown in table 2 below. As of August 2018, of the 53 individually congressionally authorized construction projects, more than half—28 projects—had remaining project costs eligible for Title XVI grants. The 13 ongoing congressionally authorized projects had about $233 million in project costs that had not yet been awarded. Some project sponsors told us that they were in the process of designing or constructing projects. Others told us that while they were not currently designing or constructing projects, they had plans to pursue additional Title XVI grant awards in the future. More than one-third of the $233 million in remaining eligible project costs was for two projects— located in San Diego and San Jose, California—that were two of the projects authorized when the Title XVI program was created in 1992. The 15 congressionally authorized projects with no planned construction had remaining project costs of about $231 million eligible for Title XVI grants. Project sponsors identified several reasons why they were not planning to apply for further grant awards. Specifically, several project sponsors said they had faced challenges in applying for further grants because language in the statutes authorizing the projects limited the scope of their projects. For example, one project sponsor told us that it was interested in expanding its water reuse demonstration facility but that it was not eligible to apply for additional Title XVI grants because the statute that authorized the project specifically authorized a demonstration facility. In addition, one project sponsor stated that its project authorization had already reached its sunset date, which means the project can no longer apply for Title XVI grants. Some of the project sponsors with no construction planned said that they may consider applying for additional Title XVI grants under their existing authorizations in the future, should they decide to move forward with construction. However, others said that they had decided not to move forward with authorized projects and had no plans to apply for Title XVI grants in the future. For example, one project sponsor said that it had determined that its project was no longer financially feasible. In addition, as of August 2018, 40 projects had Reclamation-approved feasibility studies that had been transmitted to Congress, based on our review of agency documents, and were therefore eligible to apply for Title XVI construction grants under the WIIN Act. A total of about $513 million in project costs across these 40 projects remained eligible for Title XVI grants. Of the 40 projects, 20 applied for Title XVI grants in fiscal year 2017, and Reclamation selected 3 for awards. These 20 projects had about $269 million in project costs that remained eligible for Title XVI grants. Twenty projects did not apply for Title XVI grants in fiscal year 2017 and had about $244 million in project costs that remained eligible for these grants, as of August 2018. Title XVI projects and studies for fiscal years 1992 through 2017 cover various uses for reused water and include both urban and rural areas throughout the West, based on our review of agency data as well as documents from and interviews with project sponsors. For example, Title XVI construction projects produce both nonpotable and potable reused water for a variety of purposes, such as landscape and agricultural irrigation, habitat restoration, and extraction as drinking water. The projects and studies funded by the Title XVI program include both urban and rural areas throughout the West, with California accounting for 36 construction projects and about 90 percent of total Title XVI funding. Title XVI construction projects are generally large-scale infrastructure projects, such as water reuse treatment plants and pipelines, that produce, store, and distribute reused water for a variety of purposes, both nonpotable and potable. Since the inception of the Title XVI program, Reclamation has awarded Title XVI grants to construction projects that cumulatively provided nearly 390,000 acre-feet of reused water in 2017. According to Reclamation data, the projects funded by Title XVI individually delivered between 38 acre-feet of reused water and more than 100,000 acre-feet of water in fiscal year 2017. Most of these construction projects provided reused water for nonpotable uses across four main categories: (1) landscape irrigation, (2) agricultural irrigation, (3) commercial and industrial use, and (4) habitat restoration. Landscape irrigation. Landscape irrigation—including irrigation of golf courses, road medians, school grounds, parks, sport fields, and other green spaces—is the most common use of reused water produced by Title XVI projects, with 29 Title XVI projects producing reused water for this purpose, based on our analysis of documents from Reclamation and project sponsors. The reused, nonpotable water produced by such projects is generally distributed through purple-colored pipes, to denote that the water is not for drinking purposes. For example, the Title XVI program provided grants to Eastern Municipal Water District—a water district located in Southern California—to help build water reuse infrastructure, including pipelines, pumping stations, and storage tanks. With this added storage capacity, the district has the ability to store more than 2 billion gallons of reused water, which is used to irrigate sports fields, golf courses, parks, school grounds, and medians, according to the project sponsor. By maximizing use of its reused water, the project sponsor noted that the district is reducing its dependence on water piped in from other parts of the state or region. Similarly, the Title XVI program provided grants to help build pipelines and reservoirs to distribute and store reused water for landscape irrigation and other purposes in other parts of California (see fig. 4). Agricultural irrigation. Reused water produced by Title XVI projects is also used to irrigate a variety of agricultural products, including fruits and vegetables, flowers, and vineyards. For example, the North Valley Regional Recycled Water Program is helping to provide a reliable water source for the Del Puerto Water District, which provides water to approximately 45,000 acres of farmland in California’s San Joaquin Valley, according to the project sponsor. The Del Puerto Water District has encountered water shortages in recent years, which have created economic hardships on growers in the area, according to the project sponsor. Title XVI grants provided under WIIN Act authority helped the district expand its reused water supply and distribution infrastructure and ensure a reliable, drought-resistant water supply, according to the project sponsor. In addition, reused water produced by the Watsonville Area Water Recycling Project near Watsonville, California, is used to irrigate strawberries and other fruits and vegetables as well as flowers. The groundwater basin that serves the coastal region where Watsonville is located has been overdrafted for a long time, causing groundwater elevations to drop below sea level and leading to seawater intrusion that makes the groundwater unusable in certain areas, according to the project sponsor. This sponsor noted that Watsonville’s Title XVI project helps reduce demand on the overdrafted groundwater basin, which in turn helps to protect against further seawater intrusion and also provides a reliable, drought-tolerant water supply to help protect the region’s agricultural economy. Figure 5 shows flowers in a greenhouse that are irrigated with reused water from Watsonville’s Title XVI project. Commercial and industrial use. Reused water produced by Title XVI projects is used for cooling towers at power plants and data centers, oil production, toilet flushing in university and commercial buildings, and for other commercial and industrial purposes, according to project sponsors. For example, some of the reused water produced by the Southern Nevada Title XVI project is used for power plant cooling, and reused water from San Jose’s Title XVI project is used for cooling at data centers in California’s Silicon Valley. In addition, reused water from the Long Beach Area Reclamation Project is injected into the ground after oil is extracted, which helps prevent the ground from sinking, according to the project sponsor. Having access to a secure source of reused water can attract data centers and other businesses that require large amounts of water to areas that can guarantee access to reused water, according to a project sponsor and representatives from a nongovernmental water reuse organization we interviewed. Habitat restoration. Some Title XVI projects use reused water to restore wetlands or supply water to recreational lakes. For example, in California’s Napa Valley, reused water from the North Bay Title XVI project is being used to restore the Napa Sonoma Salt Marsh. Some threatened and endangered species, such as the Chinook Salmon, have started returning to the area since the restoration began, according to the project sponsor. Reused water from this Title XVI project also provides other habitat benefits. For example, wineries in the area that irrigate with reused water do not need to divert as much water from streams, which leaves more water for fish, according to the project sponsor. In addition, the North Valley Regional Recycled Water Program in California’s San Joaquin Valley supplies reused water to wildlife refuges and wetlands, in addition to agricultural lands. This area has the largest remaining freshwater marsh in the western United States, which provides critical habitat for migratory birds as well as other species, according to the project sponsor (see fig. 6). There are also several potable projects that have been funded by Title XVI. These projects generally fall into two categories: (1) indirect-potable reuse and (2) desalination. Indirect-potable reuse. Title XVI has provided grants for indirect-potable projects, in which wastewater undergoes advanced treatment to obtain potable-quality water. The water is then injected into an environmental buffer, such as a groundwater aquifer, where it is left for a certain amount of time before it is extracted. The water is treated again before it is distributed as drinking water. One use for highly-treated reused water is for seawater barriers, where water is injected into the ground to prevent the intrusion of high-salinity water into groundwater aquifers. Indirect- potable reuse has been gaining prominence, according to some project sponsors and representatives from nongovernmental water reuse organizations, with Title XVI grants going to several project sponsors for both the construction of facilities as well as research into optimal treatment methods. For example, the Groundwater Replenishment System in Orange County, California, which was partially funded by Title XVI, takes highly-treated wastewater that would have previously been discharged into the Pacific Ocean and purifies it using an advanced treatment process. The water is then injected into a groundwater aquifer and is later extracted as drinking water that serves more than 800,000 people, according to the project sponsor. Figure 7 shows reused water at several different points in the treatment process and reverse osmosis treatment equipment at Orange County’s Groundwater Replenishment System. Desalination. Title XVI has provided grants for projects that treat brackish groundwater—water that has a salinity above freshwater but below seawater—and then feed it directly into potable water distribution systems or into a groundwater aquifer or surface water reservoir. For example, the Mission Basin Groundwater Purification Facility in Oceanside, California, desalinates brackish groundwater using reverse osmosis and other treatment methods. The reused water supplies about 15 percent of the city’s water needs, according to the project sponsor. In addition to Title XVI construction projects, Reclamation’s feasibility and research studies also vary in their planned uses of reused water. For example, one feasibility study project sponsor we interviewed was awarded a Title XVI grant to investigate the feasibility and potential impacts of reusing produced water from oil and gas operations in Oklahoma. The study plans to investigate possible dual benefits of reusing produced water, including (1) providing a new source of water for irrigation and other purposes and (2) reducing the disposal of produced water as a possible means for addressing increased seismic activity associated with oil and gas operations, according to the project sponsor. Another feasibility study project sponsor we interviewed from a rural, landlocked community in Washington State is investigating the feasibility of creating a virtual zero discharge system that would eliminate all wastewater disposal by reusing the wastewater. Similar to feasibility studies, Title XVI research studies address different topics. For example, one project sponsor we interviewed was researching how to optimize filtration of reused water using membrane filtration, which is a critical treatment process to reduce contaminants in water. Another project sponsor was researching impediments and incentives to using reused water for agricultural irrigation. Based on our review of agency documents, project sponsors in 12 of the 18 states eligible to participate in the Title XVI program were awarded at least one type of funding under Title XVI since the inception of the program in 1992, as shown in table 3. From fiscal year 1992 through fiscal year 2017, Reclamation awarded about $640 million—or about 90 percent of total awarded Title XVI funding—to projects in California, the majority of which was for construction projects. The concentration of projects in California reflects the early emphasis of the Title XVI program on Southern California and reducing its reliance on water provided by the Colorado River, as well as the high level of interest in the program in the state, according to a 2010 Congressional Research Service report. Overall, project sponsors in 9 states were awarded feasibility study grants, sponsors in 4 states were awarded research study grants, and sponsors in 8 states were awarded construction grants (see fig. 8). Title XVI projects and studies include western urban and rural areas. In particular, many Title XVI projects are sponsored by entities in urban areas that serve a large population base. For example, the main part of the Los Angeles Area Water Supply Title XVI project is sponsored by the West Basin Municipal Water District, which has a service area of nearly 1 million people in 17 cities and unincorporated areas in Los Angeles County. This Title XVI project produces five different types of reused water to meet the unique needs of West Basin’s municipal, commercial, and industrial reuse customers, according to the project sponsor. Similarly, the City of San Diego, which has a population of about 1.4 million, was awarded Title XVI grants for a number of projects, including an indirect-potable reuse project anticipated to provide one-third of San Diego’s water supply by 2035, according to the project sponsor. Other Title XVI projects are sponsored by entities in rural areas and small cities. For example, the Hi-Desert Water District project serves a rural and economically disadvantaged community in the town of Yucca Valley, California, that has a population of about 20,000. This Title XVI project will fund facilities to collect, treat, and reuse treated wastewater, thereby eliminating degradation of the local groundwater supply and helping ensure a safer, reliable water supply for this community, according to the project sponsor. Similarly, the city of Round Rock, Texas, which has a population of about 120,000, sponsored the Williamson County Title XVI project. This project produces reused water for landscape irrigation, most of which is used to irrigate a 650-acre park, according to the project sponsor. Some Title XVI projects are sponsored by regional partnerships composed of different local entities. For example, in the late 1990s, 4 entities in Northern San Diego County—Carlsbad Municipal Water District, Leucadia Wastewater District, Olivenhain Municipal Water District, and San Elijo Joint Powers Authority—formed a coalition to leverage their water reuse programs; the coalition has since grown to 10 entities. This coalition sponsored an individually congressionally authorized Title XVI project, the North San Diego County project, and applied for a Title XVI grant for a new project eligible under the WIIN Act in fiscal year 2017. Similarly, in the northern part of the San Francisco Bay Area, 10 local agencies formed a regional partnership covering 315 square miles across Sonoma, Marin, and Napa Counties to sponsor the North Bay Water Reuse Program. According to the project sponsors involved in this regional partnership, using a regional partnership approach to water reuse projects provides an economy of scale; maximizes the ability to obtain local, state, and federal funding for the projects; and allows smaller, local entities to access funding and expertise for projects that would be out of reach without regional collaboration. See appendix I for more detailed information on specific Title XVI construction projects. Reclamation’s process for selecting projects and studies to award grants under the Title XVI program involves announcing the funding opportunity, establishing criteria to evaluate potential projects, and reviewing applications to make award decisions. We found that this process is consistent with relevant federal grant regulations outlined in OMB’s Uniform Guidance, based on our review of agency documents and federal grant regulations. The criteria Reclamation uses to evaluate Title XVI projects have changed in recent years, with the elimination or addition of some criteria and changes in the weighting of others. To start its selection process, Reclamation announces funding opportunities by developing annual funding opportunity announcements (FOA), which are publicly available on its website and on www.grants.gov. These FOAs contain information for applicants to consider prior to applying, including the types of eligible projects and studies, estimated funding available, information on the application review process, the application due date, and the criteria that Reclamation will use to score applications. Project sponsors submit applications for Title XVI grants to Reclamation in response to the FOAs, according to Reclamation officials. Reclamation officials then review the applications to ensure the projects are eligible and that applications are complete, according to agency officials we interviewed and documents we reviewed related to the selection process. Next, an application review committee scores eligible applications. The application review committee is composed of Reclamation staff representing the five regions and other staff with technical expertise. Committee members individually review and score each Title XVI application based on the evaluation criteria in the FOA. After the individual scoring, the application review committee meets collectively to discuss the scores; this meeting is generally facilitated by Title XVI program staff from Reclamation’s central office in Denver. If there are any outliers in the scores—e.g., if a committee member scores an application significantly higher or lower than the other members—then they are to discuss and may adjust the score to help ensure fairness and consistency in how the applications are scored relative to the evaluation criteria, according to agency officials. Following this discussion, Reclamation averages the members’ scores for each application and then ranks the applications based on the average scores. Reclamation creates a list of recommended projects and funding amounts for these projects, based on the rankings and congressional direction on the amount of funding for the Title XVI program in any given year. Reclamation’s process for selecting projects and studies to fund under the Title XVI program is consistent with relevant federal grant regulations outlined in the Uniform Guidance. Based on our review of Title XVI FOAs from fiscal years 2011 through 2018, all FOAs met the requirements prescribed by the Uniform Guidance. Specifically, the Uniform Guidance requires that grant funding opportunities be publicly announced and contain certain information, such as the evaluation criteria, key dates, and the process used to evaluate applications. Based on our review of FOAs, Reclamation’s FOAs were publicly announced and contained this information. Many project sponsors we interviewed said that Reclamation’s Title XVI application selection process is generally clear and well-managed and that Reclamation officials, at both the regional level and central office in Denver, were responsive and transparent throughout the selection process. Several project sponsors noted that Reclamation offered to debrief with Title XVI applicants after it made its grant selections; further, Reclamation officials provided constructive feedback to applicants to improve their applications in future years. Some project sponsors raised concerns about how long it takes WIIN Act- eligible Title XVI projects to be awarded grants. In particular, the WIIN Act provides that WIIN Act-eligible projects can only receive funding if an enacted appropriations act designates funding by project name, after Reclamation has recommended specific projects for funding and transmitted its recommendations to Congress. Given the timing of Reclamation’s FOA process, WIIN Act-eligible projects selected in a given fiscal year generally need to be included in the subsequent fiscal year’s appropriations act. For example, congressional direction in May 2017 provided that $10 million of the total Title XVI funding was to go to Title XVI WIIN Act-eligible projects, and Reclamation sent Congress its fiscal year 2017 selections for WIIN Act-eligible projects to fund in November 2017. However, according to Reclamation officials, Reclamation could not begin awarding fiscal year 2017 funding to selected projects until March 2018, after enactment of the fiscal year 2018 appropriations act, which listed the selected projects by name. One project sponsor noted that this two-part process created challenges related to the project timeline and budget. Reclamation officials said that project sponsors have also expressed concerns to Reclamation about how any resulting delays may affect the ability of projects to move forward. Reclamation officials noted that this is a statutory requirement and that they had discussed this process with project sponsors to make them aware of the timing for the grants. Reclamation has changed the evaluation criteria it uses to select projects to fund under the Title XVI program since it began using a competitive process in fiscal year 2011. Reclamation first developed criteria for the annual Title XVI project selection process in 2010, which it applied starting in fiscal year 2011. Prior to that, Congress generally provided project-specific funding direction for individually authorized Title XVI projects. According to agency officials, Reclamation developed the initial evaluation criteria for the annual Title XVI selection process based on (1) the language in the Reclamation Wastewater and Groundwater Studies and Facilities Act, as amended; (2) Reclamation goals and priorities for the program; and (3) the criteria Reclamation used to select projects to fund under the American Recovery and Reinvestment Act of 2009. Reclamation sought and incorporated public comments on the criteria in 2010. After that, Reclamation’s evaluation criteria for Title XVI construction projects generally remained unchanged from fiscal years 2011 through 2016. In fiscal years 2017 and 2018, Reclamation eliminated some criteria in the Title XVI FOAs for construction projects, added some new criteria, and changed the weighting of some criteria, based on our review of FOAs for those years. For example, in 2017, Reclamation more than doubled the weight of the economic criterion for the fiscal year 2017 FOA for WIIN Act-eligible projects, making it worth 35 percent of the points as compared to the previous 13 percent. Reclamation officials told us that these changes were made in response to the language of the WIIN Act— which listed a number of criteria for projects, including projects that provide multiple benefits—and comments they received from OMB during the review process for the revised criteria. In March 2018, Reclamation proposed further revisions to the evaluation criteria for the fiscal year 2018 Title XVI program and held a public comment period to solicit input on the proposed changes. The proposed FOA contained one set of criteria applicable to both types of eligible Title XVI construction projects—individually congressionally authorized and WIIN Act-eligible projects. Reclamation received 21 comment letters on the criteria and, after analyzing the comments, officials said that they made additional changes to some of the criteria before issuing the final fiscal year 2018 FOA on May 30, 2018. For example, Reclamation added clarification to the economic criteria. See appendix II for a more detailed description of the final fiscal year 2018 Title XVI criteria, as well as changes to the criteria in fiscal years 2017 and 2018. Several project sponsors noted that changes to the evaluation criteria may affect which projects are more competitive in Reclamation’s application scoring and project selection process. In particular, several project sponsors and representatives from nongovernmental organizations we interviewed told us they believed that recent changes— particularly the increased weight on economic criteria, including cost effectiveness—may disadvantage small projects. Others said increasing the weight on cost effectiveness may disadvantage new projects that are just beginning construction of costly new treatment facilities versus projects that are expanding existing facilities. Reclamation officials we interviewed stated that the economic criteria take into account the extent to which projects would provide multiple benefits—not just cost effectiveness. They also pointed out that they clarified in the fiscal year 2018 FOA that there are a number of ways to provide information on project benefits in Title XVI applications, including by describing benefits in a qualitative manner. They added that feedback from project sponsors had been positive on the additional changes Reclamation made in response to earlier stakeholder comments on the economic criteria for the final fiscal year 2018 FOA. Furthermore, Reclamation’s increased emphasis on economic criteria is consistent with federal principles on federal spending for water infrastructure projects, which states that federal infrastructure investments are to be based on systematic analysis of expected benefits and costs. To monitor Title XVI grants, Reclamation reviews financial and performance reports submitted by project sponsors, regularly communicates and visits with project sponsors to obtain information on the status of the projects, and collects information on the amount of water Title XVI projects deliver each year, which is included in Interior’s annual performance report. Financial and Performance Reports. In its financial assistance agreements for Title XVI grants, Reclamation generally requires project sponsors to submit financial and performance reports. Specifically, Reclamation generally requires that project sponsors submit financial and performance reports at least once per year and sometimes more frequently, as determined by the risk that each project poses, according to agency officials. Based on our review of reports, the financial reports list transactions related to Title XVI grants, such as expenditures, and the performance reports provide updates on the status of the Title XVI projects. Reclamation delineates its monitoring requirements, which generally include requirements for financial and performance reports, in the financial assistance agreements for Title XVI grants that each project sponsor agrees to prior to receiving funding. In our review of documents related to Reclamation’s monitoring process for Title XVI construction grants active in fiscal year 2017, we found that project sponsors submitted all but one financial and performance reports that Reclamation had required, and submitted all but two by their due date or within 2 weeks of this date. We found that Reclamation’s requirements are consistent with relevant federal grant regulations in OMB’s Uniform Guidance, which provide that federal awarding agencies, including Reclamation, generally are to collect financial reports from project sponsors at least annually. Ongoing Communication and Site Visits. To further monitor the performance of Title XVI grants, Reclamation officials communicate regularly with project sponsors via telephone and email and conduct site visits to obtain information on the status of the projects, according to Reclamation officials and project sponsors. Based on our review of agency guidance, Reclamation generally is to conduct at least one site visit per year for projects with significant on-the-ground activities, such as construction projects. During the visits, agency officials generally are to receive updates on progress made on the project and determine if it is on schedule and meets the scope of work identified in the financial assistance agreement. Reclamation generally requires officials to document these visits and other monitoring activities in project files, according to agency documents. Through the site visits and other communication with project sponsors, agency officials may also provide information on program requirements and respond to project sponsors’ questions about the Title XVI program. For example, during site visits, Reclamation officials have responded to project sponsors’ questions about the status of payments and allowable project costs and clarified requirements for financial and performance reports, according to our review of agency documents and interviews with project sponsors. In our review of Reclamation’s Title XVI construction grants active in fiscal year 2017, we found that Reclamation generally conducted annual site visits for Title XVI construction projects that year. We found that this is consistent with federal grant regulations in OMB’s Uniform Guidance, which state that federal awarding agencies may make site visits as warranted by program needs. Data Collection. Reclamation also annually collects data on the amount of water delivered from each Title XVI construction project, as well as projected water deliveries for the coming year. Reclamation analyzes the water delivery data, compares projected data to actual deliveries, and follows up with project sponsors to understand any discrepancies, according to agency officials. For example, actual water deliveries could be lower than projected deliveries if communities implement water conservation measures that result in projects having less wastewater to treat and deliver for reuse. According to Reclamation officials, information on the amount of reused water delivered from Title XVI projects helps them to monitor progress on Title XVI projects and helps demonstrate the benefits and accomplishments of the Title XVI program. These data are consolidated and included in Interior’s annual performance report to demonstrate how the agency is meeting Interior’s objective of achieving a more sustainable and secure water supply. Collecting data on Title XVI water deliveries is consistent with the Title XVI program’s purpose of supporting water supply sustainability by providing financial and technical assistance to local water agencies for the planning, design, and construction of water reuse projects. We provided a draft of this report to the Department of the Interior for review and comment. The Department of the Interior provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. This appendix provides information on construction projects that are individually congressionally authorized under the Bureau of Reclamation’s Title XVI Water Reclamation and Reuse Program (Title XVI), as well as projects to which Reclamation awarded grants under the Water Infrastructure Improvements for the Nation Act (WIIN Act) funding opportunity in fiscal year 2017. Figure 9 below provides information on the 53 construction projects that have been individually authorized by Congress under the Title XVI program. The projects are ordered by the total amount of Title XVI funding each was awarded from fiscal years 1992 through 2017, from highest to lowest. Figure 10 below provides information on the three construction projects to which Reclamation awarded grants under the Title XVI WIIN Act funding opportunity in fiscal year 2017. The projects are ordered by the total Title XVI funding each was awarded in fiscal year 2017—the first year that grants were awarded under the WIIN Act—from highest to lowest. This appendix provides detailed information on the evaluation criteria the Bureau of Reclamation used to select projects to award grants under the Title XVI Water Reclamation and Reuse Program (Title XVI). The six evaluation criteria Reclamation used to select construction projects to fund in fiscal year 2018 are as follows (points are out of a total of 110 points). 1. Water Supply (35 points) a. Stretching Water Supplies (18 points): Points will be awarded based on the extent to which the project is expected to secure and stretch reliable water supplies. Consideration will be given to the amount of water expected to be made available by the project and the extent to which the project will reduce demands on existing facilities and otherwise reduce water diversions. b. Contributions to Water Supply Reliability (17 points): Points will be awarded for projects that contribute to a more reliable water supply. 2. Environment and Water Quality (12 points): Points will be awarded based on the extent to which the project will improve surface, groundwater, or effluent discharge quality; will restore or enhance habitat for nonlisted species; will address problems caused by invasive species; or will provide water or habitat for federally listed threatened or endangered species. Indirect benefits of the project will also be considered under this criterion. 3. Economic Benefits (35 points) a. Cost Effectiveness (10 points): Points will be awarded based on the cost per acre-foot of water expected to be delivered upon completion of the project and how the cost of the project compares to a nonreclaimed water alternative. b. Economic Analysis and Project Benefits (25 points): Points will be awarded based on the analysis of the project’s benefits relative to the project’s costs. 4. Department of Interior Priorities (10 Points): Points will be awarded based on the extent that the proposal demonstrates that the project supports the Department of the Interior priorities, such as utilizing natural resources and modernizing infrastructure. 5. Reclamation’s Obligations and Benefits to Rural or Economically Disadvantaged Communities (8 points) a. Legal and Contractual Water Supply Obligations (4 Points): Points will be awarded for projects that help to meet Reclamation’s legal and contractual obligations. b. Benefits to Rural or Economically Disadvantaged Communities (4 Points): Points will be awarded based on the extent to which the project serves rural communities or economically disadvantaged communities in rural or urban areas. 6. Watershed Perspective (10 Points): Points will be awarded based on the extent to which the project promotes or applies a watershed perspective by implementing an integrated resources management approach, implementing a regional planning effort, forming collaborative partnerships with other entities, or conducting public outreach. Reclamation changed some of its evaluation criteria in fiscal years 2017 and 2018. The fiscal year 2017 changes were made in response to requirements in the Water Infrastructure Improvements for the Nation Act (WIIN Act)—which listed several criteria for projects, including projects that provide multiple benefits—and comments from the Office of Management and Budget, according to Reclamation officials. The fiscal year 2018 changes were generally made in response to comments Reclamation received during the formal comment period it held in March and April 2018 to solicit input on the criteria, according to Reclamation officials. The changes to the criteria are shown in table 4. In addition to the individual named above, Elizabeth Erdmann (Assistant Director), Lesley Rinner (Analyst-in-Charge), Margaret Childs, and Sierra Hicks made key contributions to this report. Ellen Fried, Timothy Guinane, Thomas M. James, John Mingus, Patricia Moye, Anne Rhodes-Kline, Sheryl Stein, and Sara Sullivan made additional contributions.", "summary": "Population growth and drought are among the factors that have placed increasing demands on the U.S. water supply, particularly in the arid West. The reuse of wastewater can help address water management challenges by treating water that is typically unusable and then reusing it for beneficial purposes, such as irrigation, according to the Environmental Protection Agency. Reclamation's Title XVI program awards grants for the study and construction of water reuse projects in 17 western states and Hawaii. From fiscal years 1992 through 2009, Congress individually authorized some Title XVI projects. In 2016, Congress amended the Title XVI program to allow grants to be awarded to additional water reuse projects. GAO was asked to review the Title XVI program. This report describes, among other things, for the Title XVI program (1) grants Reclamation has awarded for projects and studies and remaining projects that are eligible for grants, (2) the types and locations of projects and studies that have received grants, and (3) Reclamation's process for selecting projects and studies and its consistency with federal grant regulations as well as how the program's evaluation criteria have changed since 2011. GAO reviewed relevant laws, regulations, and agency guidance; analyzed financial data for fiscal years 1992 through 2017; compared documents related to the project selection process against federal grant regulations; and interviewed agency officials and nonfederal project sponsors with different types of projects. The Bureau of Reclamation, within the Department of the Interior, awarded about $715 million in water reuse grants for 46 construction projects and 71 studies under the Title XVI Water Reclamation and Reuse Program (Title XVI) from fiscal year 1992 through fiscal year 2017, according to agency documents. Most of the Title XVI funding—about $703 million—has been awarded for construction projects. Some construction projects remain eligible for Title XVI grant funding. About $464 million in eligible Title XVI grant funding not yet awarded remains for projects that Congress individually authorized; for projects eligible under the 2016 amendments to the Title XVI program, about $513 million remains. Title XVI projects and studies cover various uses for reused water. For example, many projects GAO reviewed produce reused water for landscape and agricultural irrigation, as well as water that may later be extracted for drinking water, as shown in the figure. Title XVI projects are located in western urban and rural areas, with California accounting for 36 construction projects. Reclamation's process to select Title XVI projects and studies to receive grants involves announcing the funding opportunity, establishing criteria to evaluate potential projects, and reviewing applications to make award decisions, according to agency documents GAO reviewed. GAO found that Reclamation's grant award process is consistent with relevant federal regulations for awarding grants. For example, the Title XVI funding opportunity announcements GAO reviewed contained information required by the regulations, such as the criteria used to evaluate applications. In recent years, Reclamation has changed the criteria it uses to evaluate projects, eliminating or adding some criteria and changing the weighting of others. Reclamation officials said that these changes were made in part in response to statutory changes.", "document_type": "gao"}
{"report": "Victims of federal crimes may be compensated for their losses through criminal proceedings when a federal court orders restitution pursuant to statute. Restitution is part of the sentencing process for federal offenders and there are four key groups of stakeholders involved: Judges and court officials. The federal judiciary consists of a system of courts that has the critical responsibility of ensuring the fair and swift administration of justice in the United States and handles all federal civil, criminal, and bankruptcy cases and reviews of federal administrative agency cases throughout the country. The federal courts have various responsibilities in the restitution process. Federal judges are responsible for ordering the proper amount and type of restitution, including payment schedules and modifications. Federal probation officers are responsible for the presentence report, which must include information for the court to use in fashioning a restitution order, including, among other things, a complete accounting of the losses to each victim and information about the economic circumstances of each defendant. Following a defendant’s sentencing and the imposition of restitution, probation officers supervise offenders to ensure compliance with orders for restitution, including conducting ongoing financial investigations, supporting U.S. Attorneys’ Offices in the collection and enforcement of restitution orders, notifying the federal court of an offender’s failure to pay outstanding restitution, and making recommendations to amend orders based on changes in an offender’s ability to pay. Clerks of federal courts are responsible for receipting and disbursing restitution payments and notifying DOJ of such. In addition, the Director of the Administrative Office of the U.S. Courts has statutory responsibilities related to the restitution process, including establishing procedures and mechanisms within the judicial branch for processing fines, restitution, forfeitures of bail bonds or collateral, and assessments. The Judicial Conference of the United States, a body of 27 judges over which the Chief Justice of the United States presides, is the judiciary’s principal policymaking body and operates through a network of committees created to address and advise on a wide variety of subjects such as budget, criminal law, and court administration. Given the role of the judiciary in the restitution process, the Judicial Conference has taken policy positions on various restitution-related issues and has supported various legislative proposals to improve the process. Prosecutors and DOJ officials. DOJ officials are responsible for prosecuting federal offenses, identifying victims of crime and informing them of restitution to which they may be entitled, identifying victim losses and harms that are subject to restitution after consulting with victims and providing that information to probation officers, demonstrating the amount of loss sustained by the victim, enforcing orders of restitution, and collecting criminal debt, including unpaid restitution. Various entities and officials within DOJ are responsible for these activities, including federal prosecutors in the Criminal Division and the U.S. Attorneys’ Offices, and their respective Financial Litigation Units. Victims. A federal crime victim is a person directly and proximately harmed as the result of a federal offense. Federal crime victims are entitled to full and timely restitution as provided in law. Victims may provide information to prosecutors, probation officers, and to the court about their losses and have a right to be heard at sentencing, but are not required to participate in any phase of the restitution proceedings. Defendants and their counsel. Defendants who commit federal crimes where an identifiable victim suffered a physical injury or monetary loss are generally required to pay restitution. Defendants are required to submit information about their financial resources and the financial needs and earning ability of their dependents to the court and have the burden of demonstrating these resources and needs in any restitution proceedings. Defendants are generally represented by counsel in criminal proceedings and according to the judiciary approximately 90 percent qualify for court-appointed counsel under the Criminal Justice Act because they are financially unable to retain counsel in federal criminal proceedings. Court-appointed counsel is provided by Federal Defender Organizations and panel attorneys. A defendant may be convicted pursuant to plea agreement with the government or after a trial; more than 90 percent of defendants plead guilty rather than go to trial. A defendant is referred to as an offender following conviction of an offense. Restitution is only available to victims and for harms as statutorily authorized. Congress passed the MVRA in 1996, which substantially revised the restitution process. The legislative history reflects the balancing of competing interests—including ensuring that the loss to crime victims is recognized, that they receive the restitution that they are due, and also that the offender realizes the damages caused by the offense and pays the debt owed to the victim as well to society. As provided in the legislative history, one of the ways that the law sought to balance the application of mandatory restitution was by limiting it to the instances where a named identifiable victim suffered a physical injury or monetary loss as a direct and proximate result of the defendant’s offense of conviction. This means that the victim would not have been harmed “but for” the conduct underlying the offense of conviction and also that the harm was proximately caused by the conduct. Proximately caused means that the causal nexus between the conduct and the loss is not too attenuated either factually or temporally. As such, a defendant is not held liable for downstream effects of an act where there were additional, intervening causes not sufficiently related to the offense. For example, a rapist would not be held responsible for the death of a hospitalized rape victim who died in a hospital fire. In addition, the loss caused by the defendant’s conduct underlying the offense of conviction establishes the outer limits of the restitution order. This means that harms caused by the defendant’s conduct that were related to, but outside the scope of, the crime of conviction cannot be compensated through restitution. For example, a defendant who was convicted of illegally possessing a firearm but acquitted of using the firearm to shoot someone would not be liable for restitution for medical costs for the shooting victim. The restitution statutes specify the types of harm that may be compensated, and federal case law interpreting these statutes provides guidance to courts when ordering restitution. For example, when a crime results in bodily injury to a victim, compensable expenses include the costs of medical and other services related to physical, psychiatric, and psychological care; costs for necessary physical and occupational therapy and rehabilitation; and reimbursement for lost income as a result of the offense, among other enumerated losses. Courts have also ordered restitution for a victim’s actual losses that were proximately caused by the defendant’s conduct even when not explicitly listed in statute. When restitution is ordered by the court, it is to be in the full amount of each victim’s losses without consideration of the economic circumstances of the defendant. During a defendant’s sentencing, additional hearings may be held to examine losses to victims for restitution and prosecutors are responsible for proving and litigating issues related to victims’ losses. Restitution may be imposed by the federal courts up to 90 days after sentencing if additional time is needed by the court to locate victims and calculate losses. In some cases, courts can decline to order restitution, such as when the court determines that fashioning an order of restitution would complicate or prolong the sentencing process so much that the need to provide restitution is outweighed by the burden on the sentencing process. Separate from criminal restitution, victims may seek compensation from the offender by pursuing litigation at their own expense through a civil proceeding in a federal, state, or local court. In the United States, criminal and civil proceedings are separate legal systems subject to different laws, standards, and rules of procedure. The types of harms for which a victim may receive compensation differ in a civil proceeding. For example, federal criminal courts may order restitution to reimburse a victim for medical expenses, but cannot order compensation for pain and suffering caused by a crime. However, a victim may seek compensation for pain and suffering by filing a civil action against the defendant, as well as for other types of damages that are not available through restitution. Other types of civil remedies not compensable as criminal restitution include intended harm, punitive damages, breach of contract, and disgorgement of ill-gotten gains, among others. Figure 1 below outlines the steps taken for compensation of victims of federal crimes through federal criminal restitution and civil proceedings. According to USSC data for fiscal years 1996 through 2016, the percentage of offenders ordered to pay restitution by federal courts has remained fairly steady. From fiscal years 1996 through 2016, an average of 15 percent of individual offenders and 32 percent of organizational offenders annually were ordered to pay restitution by the federal courts (see fig. 2). For more information on the restitution imposed by the federal courts from fiscal years 1996 through 2016, see appendix II. We have previously reported on issues related to the collection of federal restitution and currently have ongoing work on DOJ’s collection of restitution pursuant to the Justice for All Reauthorization Act of 2016. According to data DOJ provided to us, the total outstanding restitution debt owed in federal cases as of the end of fiscal year 2016 was $110.2 billion. DOJ, through its U.S. Attorneys’ Offices’ Financial Litigation Units, is responsible for collecting restitution debt from offenders. This collection typically begins after offenders are sentenced and ordered to pay restitution and includes enforcement actions such as filing garnishments and liens. We noted in our 2001 and 2004 reports that collection of outstanding restitution debt is inherently difficult due to a number of factors, such as offenders who may be incarcerated or have minimal earning capacity and the MVRA requirement that the assessment of restitution be based on actual loss and not on an offender’s ability to pay. In 2005, we reported that court-ordered restitution amounts far exceed likely collections for crime victims in selected financial fraud cases. Specifically, we found that these offenders, who had either been high-ranking officials of companies or operated their own businesses, pleaded guilty to crimes for which the courts ordered restitution totaling about $568 million to victims. As of the completion of our fieldwork, which was up to 8 years after the offenders’ sentencing, court records showed that amounts collected for the victims in these cases totaled only about $40 million, or about 7 percent of the ordered restitution. Stakeholders we interviewed identified various factors related to the potential expansion of federal courts’ authority to order restitution in the four areas listed in the Justice for All Reauthorization Act of 2016: (1) to apply to victims who have suffered harm, injury, or loss that would not have occurred but for the defendant’s related conduct; (2) in the case of an offense resulting in the victim’s death, to allow the court to use its discretion to award the income lost by the victim’s surviving family members or estate as a result of the victim’s death; (3) to require that the defendant pay to the victim an amount determined by the court to restore the victim to the position he or she would have been in had the defendant not committed the offense; and (4) to require the defendant compensate the victim for any injury, harm, or loss, including emotional distress, that occurred as a result of the offense. Stakeholders also identified additional factors to consider, beyond the ones identified for the four provisions above, for potential broadening of courts’ authority to order restitution generally. For a summary of the provisions and factors cited by stakeholders, see appendix I. Federal courts have the authority to order defendants to pay restitution for a victim’s losses that resulted from the defendant’s conduct underlying the offense of conviction. However, at times, a defendant’s related conduct can be broader than the offense of conviction and can include criminal conduct for which the defendant’s guilt was not established either by trial or plea agreement with the government. For example, in a case before the Fourth Circuit where restitution was not allowed for conduct that was broader than the offense of conviction, the government asserted that the defendant was the ringleader of a nationwide pickpocketing ring and submitted a list of victims for restitution that included five financial institutions and four individuals who had suffered losses. However, because the defendant had pleaded guilty to, and was convicted for, fraudulent use of a credit card related to one individual on one date—and the defendant’s offense did not involve as an element a scheme, conspiracy, or pattern—the court determined that restitution was not proper for the additional victims because they were not harmed by the conduct underlying the offense of conviction. On the other hand, when a defendant has been convicted of an offense that involves as an element a scheme, conspiracy, or pattern, the court may order restitution for direct harm caused by that scheme, conspiracy, or pattern. For example, in another case involving credit card fraud, because the defendant pleaded guilty to and was convicted of conspiracy to traffic in counterfeit credit cards—in contrast to the previous case where the defendant was convicted of only one fraudulent use—the Eleventh Circuit held that the sentencing court could order a defendant to pay restitution for losses from additional credit card fraud that were to advance the conspiracy. Stakeholders we interviewed identified the following factors to consider if federal courts’ authority were to be broadened to allow a defendant’s related conduct to be included in an order for restitution: Constitutional issues. Eight of 10 stakeholders we spoke with identified potential constitutional issues if the federal courts could order restitution for a defendant’s related conduct. For example, two stakeholders representing defendants and an association representing federal prosecutors told us that including a defendant’s related conduct in orders for restitution could result in potential violations of a defendant’s rights under the Fifth Amendment’s Due Process Clause, which provides that no person shall be deprived of life, liberty, or property without due process of law. This was also a concern noted in the legislative history of the MVRA, and an individual knowledgeable about restitution we interviewed noted that the Supreme Court has also suggested that due process could be a concern if the court were to order federal criminal restitution beyond the conduct underlying the conviction. Increased complexity to determine losses. Four of 10 stakeholders we spoke with stated that if the authority of federal courts to order restitution were broadened to allow inclusion of harms for a defendant’s related conduct, there would be increased complexity to determine losses for restitution. For example, DOJ officials told us that inclusion of a defendant’s related conduct would allow restitution to be open to a larger pool of potential victims, and identifying and calculating losses for all victims with a nexus to the offense of conviction could become an impossible task. An association representing federal prosecutors stated that this increased complexity could have the effect of federal courts ordering less restitution through the exception for complex cases, which would negatively impact victims. DOJ’s practices for plea bargaining. In contrast, two individuals we spoke with who represent victims stated that prosecutors could more consistently follow DOJ’s guidelines to include a defendant’s related conduct in plea agreements without expanding federal courts’ authority to order restitution. DOJ guidelines, which are based on statutory direction, provide that prosecutors must consider requesting full restitution to all victims for all charges contained in the indictment, without regard to the counts to which the defendant actually pleaded guilty. In other words, when DOJ and the defendant agree to certain terms as part of a plea agreement in which the defendant pleads guilty to one or more charged offenses, or lesser or related offenses, prosecutors must consider requesting the defendant pay restitution for all of the charges, not just the ones to which the defendant is pleading guilty. As a result, federal courts may order restitution pursuant to the plea agreement for losses sustained by crime victims for related conduct or criminal conduct that is not part of the offense of conviction. Federal courts currently have the authority to order an offender to pay restitution to victims who have suffered harms as a direct and proximate consequence of the crime of conviction. This means that the harm must have been not only caused by the offense, as a matter of fact, but also that it was reasonably foreseeable as a result of the offense. For example, courts have allowed damage caused by the escape from a robbery—such as damage to police cars hit during a car chase—to be compensable as restitution because the flight was casually related to the bank robbery. Although 5 of 10 stakeholders stated that the proximate harm requirement does not generally present challenges related to federal courts’ authority to order restitution, stakeholders identified additional factors to consider if the federal courts’ authority were to be expanded to eliminate the proximate cause requirement: Additional sentencing-related hearings and litigation. Three of 10 stakeholders we interviewed stated that eliminating the proximate harm requirement could result in prolonged sentencing for defendants due to additional sentencing-related hearings and litigation. For example, judiciary officials and an association representing federal prosecutors stated that if federal courts’ authority to order restitution were expanded to eliminate the proximate harm requirement, more litigation would be required during sentencing to examine harms to victims and to determine how losses related to the offense of conviction. Plea bargaining could be affected. Two of 10 stakeholders we interviewed stated that eliminating the proximate harm requirement would impact plea bargaining between defendants and DOJ. For example, an individual knowledgeable about federal restitution stated that eliminating proximate harm would hinder plea bargaining as during plea agreement negotiations a defendant would no longer have a sense of how much federal criminal restitution could be ordered. At the time the MVRA was passed, Congress also recognized the central role of plea bargaining in the federal criminal justice system with the legislative history of the MVRA noting the intent that the legislation not impair the role of plea bargaining. In cases involving the death of a crime victim, federal courts may order restitution for losses to be paid to a deceased crime victim’s surviving family members or estate, including for funeral expenses, as applicable. Further, according to 6 of 10 stakeholders we interviewed, federal courts currently have the authority to order compensation for future lost income of a deceased crime victim’s family member or estate due to precedent established in case law. For example, the Tenth Circuit held that restitution for the future lost income of a three-month-old victim of voluntary manslaughter was not precluded by the MVRA; thus a court may exercise its discretion in declining to grant an award, or, as it did in this case, undertake such proceedings. In a Ninth Circuit case, the court held that “restitution for future lost income may be ordered under the MVRA so long as it is not based upon speculation, but is reasonably calculable,” and returned the case to the district court to redetermine the amount of restitution to be awarded. Stakeholders we interviewed also identified the following factors to consider if federal courts’ authority were to be expanded to include compensation for the future lost income of a deceased crime victim and to compensate the deceased victim’s surviving family members for their lost income as a result of the victim’s death: Increased victim compensation awards. Four of 10 stakeholders we interviewed stated that expanding federal courts’ authority to include compensation for future lost income of a deceased crime victim could result in more compensation awarded through restitution. For example, three stakeholders representing victims stated if this provision were specified or made explicit in statute, it would be more likely that federal courts would order compensation for the future lost income of a deceased crime victim. One of the stakeholders added that having such loss specified and enumerated in restitution statutes would ensure it is considered during the restitution process and is less likely to be challenged during appeal. Further, another stakeholder representing victims stated that including the surviving family members’ lost income in a restitution order could allow for compensation of those family members who lost income prior to a victim’s death, such as in cases where those family members provided care to a victim prior to the victim’s death. Complexity of calculation and need for experts. Three of 10 stakeholders we interviewed stated that determining a deceased crime victim’s future and family members’ lost income would add complexity to the restitution process. For example, an association representing federal prosecutors stated that it would be difficult for federal probation officers and prosecutors to determine the amount of future lost income for deceased victims as that area of specialization is currently in civil law. In addition, DOJ officials stated that the complexity and need for experts to make these specialized calculations could increase the cost of prosecution given the government’s burden to prove victim losses. Suitability of criminal versus civil proceedings. Three of 10 stakeholders we interviewed stated that compensation for a deceased crime victim’s future and family members’ lost income is more appropriate for litigation through civil proceedings rather than combining or merging such litigation in a federal criminal proceeding. For example, an association representing defendants stated that federal criminal proceedings are not suitable venues to fairly vet and litigate this type of victim issue. This stakeholder further stated that issues of this type are routinely litigated vigorously in civil proceedings and involve extensive discovery practices, such as taking of depositions, exchanges of documents, and assessments by competing experts. An association representing federal prosecutors additionally noted that federal prosecutors are not well positioned to handle typical civil losses in criminal trials. Sentencing of defendants could be prolonged. Two of 10 stakeholders we interviewed stated that including a deceased crime victim’s future and family members’ lost income in an order for restitution could result in a defendant’s sentencing being prolonged. For example, judiciary officials stated that the sentencing of defendants could take more time due to the need for multiple hearings to examine losses and calculate a deceased crime victim’s future lost income. Collectability of debt due to these offenders’ ability to pay. Two of 10 stakeholders stated that the potential collectability of restitution from offenders for a deceased crime victim’s future and family members’ lost income should be considered. For example, an association representing federal prosecutors stated that these offenders are most likely to be incarcerated with the least ability to pay. As a result, the amount of resources needed to order restitution compared to collectability of the debt for a deceased crime victim’s future lost income should be considered. Further, according to that stakeholder, resources—such as prosecutorial expertise, money to hire experts, judicial resources like probation officers—need to be weighed against the collectability of the debt. This issue was also described in the legislative history of the MVRA: significant number of defendants required to pay restitution…will be indigent … many…may also be sentenced to prison terms as well, making it unlikely that they will be able to make significant payments… At the same time, these factors do not obviate the victim’s right to restitution or the need that defendants be ordered to pay restitution. According to 6 of 10 stakeholders we interviewed, the provision “to require that the defendant pay to the victim an amount determined by the court to restore the victim to the position he or she would have been in had the defendant not committed the offense” is already the goal of federal restitution. These stakeholders stated that this is established in case law and is not an expansion of federal courts’ current authority. Other stakeholders we interviewed identified the following factor to consider if federal courts’ authority were to be expanded to include the provision “to require that the defendant pay to the victim an amount determined by the court to restore the victim to the position he or she would have been in had the defendant not committed the offense”: Expansion of authority to include general restitution. Three of 10 stakeholders we interviewed stated that the provision would expand federal courts’ authority to order restitution by allowing general restitution, meaning courts would have more discretion to determine awards for all harms that victims suffered in order to restore the victim to his or her pre-offense condition. Further, an association representing victims stated that federal courts’ authority to order restitution is listed as elements or categories of losses. For example, losses such as the cost of necessary physical and occupational therapy and rehabilitation, and necessary funeral and related services, among others. This association explained that by including a provision for general restitution, the courts would be able to order restitution to victims for any losses outside of those categories, which would function as a catchall for all victim harm. Federal courts may order restitution for actual losses—in other words, these must be tangible or “out-of-pocket” losses, and they must be supported by the record. This includes, for example, reimbursement of medical expenses for bodily injuries resulting from the victimizing offense. However, federal courts are not authorized to order restitution for losses such as pain and suffering and emotional distress to crime victims. For example, in a case where the defendant was convicted of committing a brutal hate crime against the victim, leaving him with severe physical injuries and depression, among other harms, the sentencing court acknowledged that it did not have authority to award restitution for pain and suffering and noted that the victim would be allowed to pursue civil remedies. Stakeholders we interviewed identified the following factors to consider if federal courts’ authority were expanded to allow any injury, harm, or loss, including emotional distress, to be included in an order for restitution: Suitability of criminal versus civil proceedings. Five of 10 stakeholders we interviewed stated that including compensation to victims for any injury, harm, or loss, including emotional distress, in restitution orders raises issues related to the types of harms that should be compensated in civil versus criminal proceedings. For example, a stakeholder representing defendants stated that federal criminal law is not suited to determine injuries such as emotional distress and pain and suffering, whereas the civil system is set up to handle these kinds of issues and losses. Further, an association representing federal prosecutors stated that federal prosecutors and federal probation officers in criminal cases lack the specialized skills to determine losses for cases involving compensation for pain, suffering, and emotional distress. This was an issue that was considered during passage of the MVRA as well, as the report accompanying the MVRA provides, “It is the committee’s intent that courts order full restitution to all identifiable victims of covered offenses, while guaranteeing that the sentencing phase of criminal trials do not become fora for the determination of facts and issues better suited to civil proceedings.” Increased complexity to determine losses. Four of 10 stakeholders we interviewed stated that determining losses such as emotional distress and pain and suffering would add complexity to the restitution process. For example, DOJ officials stated that pain and suffering and emotional distress are not easily quantified and restitution hearings to examine such losses would involve experts trying to prove these kinds of losses. Stakeholders we interviewed identified the following factors to consider related to the potential broadening of courts’ authority to order restitution generally, in addition to the factors discussed above associated with particular expansions of federal courts’ authority to order restitution: Increased restitution debt and collection challenges. Seven of 10 stakeholders we interviewed told us that increased restitution debt and collectability challenges should be considered in the potential broadening of federal courts’ authority to order restitution. For example, two stakeholders representing defendants stated that offenders often lack the financial resources to pay restitution. Under the MVRA, federal courts must order mandatory restitution without consideration of a defendant’s financial resources which has resulted in large amounts of uncollected federal restitution debt. These two stakeholders stated that by broadening federal courts’ authority to order restitution, the amount of uncollected restitution debt owed to victims would continue to increase. One of these stakeholders further suggested that the addition of secondary restitution (i.e., additional victims entitled to compensation) could have the effect of reducing the amount paid to the primary victims because all classes of victims will be forced to compete for payment on restitution awards that will often far exceed an offender’s ability to pay. According to judiciary officials, adding to the uncollected restitution debt would lead to further collection challenges, including the additional DOJ efforts needed to collect more restitution debt and additional supervision of offender restitution payments by probation officers. These issues were also observed during the passage of the MVRA. The report accompanying the law states that the Chair of the Criminal Law Committee of the Judicial Conference of the United States had testified before the Senate Judiciary Committee that 85 percent of all federal defendants are indigent at the time of sentencing and mandatory restitution would not lead to an appreciable increase in victim compensation; however, the report noted the Committee’s view of the benefits of even nominal payments to victims as well as the potential penalogical benefits of requiring the offender to be accountable for the harm caused to the victim. Suitability of criminal versus civil proceedings. Seven of 10 stakeholders we interviewed told us that the suitability of criminal versus civil proceedings should be considered in the potential broadening of federal courts’ authority to order restitution. According to judiciary officials, a system has been developed with rules to litigate damages in civil proceedings which are not included within criminal trials. Further, an association representing defendants told us that attorneys who directly represent alleged victims in civil proceedings are more appropriate parties to pursue this type of litigation. The association said this is because the prosecutor represents the public at large instead of an individual client, whereas a private attorney has an obligation to obtain a maximum recovery for the client. Comparing the process for the compensation of victims through restitution and civil proceedings, a stakeholder knowledgeable about federal restitution told us that the restitution process to compensate victims is more efficient for victims compared to civil proceedings which can last longer and result in victims incurring costs for ligation. Further, this individual stated that through the federal criminal restitution process in contrast to civil proceedings, victims receive help collecting funds through the federal courts, prisons, and probation officers during offender supervision. Other stakeholders did not consider the civil forum to be a suitable alternative for victims. One stakeholder representing victims stated that civil proceedings are inadequate for compensating victims and should not be considered. Additionally, another stakeholder representing victims also stated that victims may lack access to evidence to pursue civil litigation against an offender in cases where the conduct was not part of an offense of conviction or listed in a plea agreement. The legislative history of the MVRA also acknowledged the need for a balance, providing, as noted above, the intent that courts order full restitution but also that sentencing not become a forum for issues better suited to civil proceedings; to that end, the MVRA restricted mandatory restitution requirements to the specified set of crimes. Impacts to federal resources. Five of 10 stakeholders we interviewed told us that impacts to judiciary and DOJ resources— including increased workloads, additional legal services, and the need for more experts—should be considered in the potential broadening of federal courts’ authority to order restitution. According to judiciary officials, broadening federal courts’ authority to order restitution could result in increased workloads by probation officers who could have to conduct more investigations to support additional restitution orders. As discussed above, federal probation officers could also be required to track and supervise more restitution payments. Officials from Federal and Community Defenders told us that if federal courts’ authority to order restitution were broadened, additional legal services would need to be provided to offenders. For example, these officials stated that larger restitution orders could require increased workloads for federal defenders to work on behalf of offenders to modify payment schedules and their level of supervision by probation officers. Likewise, an association representing defendants stated that increased collection efforts could be required by U.S. Attorneys’ Offices’ Financial Litigation Units if the number of victims eligible for restitution increased. According to DOJ officials, prosecutors could experience increased workloads as they would be identifying more victims, thereby having to spend more time investigating and determining losses. Moreover, an association representing defendants told us that additional federal experts could be needed as sentencing courts and probation officers lack the resources and expertise to examine the harms that would result from broadening restitution authority. Attention to the costs to the justice system for mandatory restitution was considered in 1995, with the legislative history of the MVRA noting the attempt to reduce costs by limiting mandatory restitution to offenses in which an identifiable victim suffered a physical injury or monetary loss. Concerns about offenders’ reentry into society. Two of 10 stakeholders we interviewed told us that offenders’ reentry into society should be considered in the potential broadening of federal courts’ authority to order restitution. These two stakeholders, an association that represents defendants and officials from Federal and Community Defenders, told us that if the authority of the federal courts to order restitution were broadened to include non-monetary harms, offenders would be further burdened in their ability to reenter society due to excessive monetary sanctions from restitution orders. Further, these two stakeholders stated that offenders with large restitution orders face challenges obtaining employment, securing housing, and satisfying other financial obligations, which could increase their risk for recidivism and reduce their ability to pay any restitution. We provided a draft of this report for review and comment to DOJ, USSC, the Administrative Office of the U.S. Courts, and the Federal Judicial Center. The Administrative Office of the U.S. Courts provided technical comments that we incorporated as appropriate. We are sending copies of this report to the Attorney General, the Judicial Conference of the United States, the Directors of the Administrative Office of the U.S. Courts and the Federal Judicial Center, the Staff Director of USSC, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you and your staff have any questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions are listed in appendix III. Table 2 summarizes and describes the provisions included in the Justice for All Reauthorization Act of 2016 for potential expansion of federal courts’ authority to order restitution and the factors cited by stakeholders that Congress should consider in broadening existing restitution statutes. . Table 3 and 4 summarize restitution imposed by the federal courts from fiscal years 1996 through 2016 for individual and organizational offenders. In addition to the contact named above, Dawn Locke (Assistant Director); Carl Potenzieri; Janet Temko-Blinder; David Alexander; Sasan J. “Jon” Najmi; Amber Edwards; Kathleen Donovan; and Emily Hutz, made key contributions to this report.", "summary": "Victims of federal crimes may be compensated for their losses through criminal proceedings when federal courts order restitution during a defendant's sentencing. Federal law dictates the crimes for which restitution is mandatory versus discretionary and what types of losses may be compensated. Federal prosecutors and Department of Justice officials are responsible for proving and litigating issues related to victims' losses for restitution orders, enforcing orders of restitution, and collecting criminal debt, including unpaid restitution. The Justice for All Reauthorization Act of 2016, Pub. L. No. 114-324, contains a provision for GAO to conduct a review on the factors that should be considered when broadening restitution provisions. This report describes factors stakeholders believe should be considered for a potential expansion of federal courts' authority to award restitution. To gather information on factors, GAO interviewed a non-generalizable group of stakeholders knowledgeable about the restitution process, including individuals and entities representing federal judges and court officials, federal prosecutors and Department of Justice officials, victims, and defendants and their counsel. GAO also reviewed relevant federal laws, legal cases, agency documentation, summary data on orders for restitution from fiscal years 1996 through 2016, and the amount of outstanding restitution debt owed in federal cases as of the end of fiscal year 2016. Federal courts have authority to award restitution for authorized losses to eligible victims. Generally, victims are those directly and proximately harmed as a result of a defendant's offense of conviction and they may be awarded compensation for their actual or “out-of-pocket” losses. Provisions for the potential expansion of restitution contained in the Justice for All Reauthorization Act of 2016 that GAO reviewed could allow for courts to award restitution to additional victims and for a greater scope of losses. Stakeholders GAO interviewed identified various factors to consider related to these potential expansion provisions, for example: Restitution for related conduct and no proximate cause requirement . A factor stakeholders stated should be considered in potentially allowing restitution for conduct that is broader than the offense of conviction was that it could be a violation of a defendant's constitutional right to due process because restitution could be awarded for conduct for which the defendant's guilt was not established. In addition, they said it could lead to increased complexity to determine victim losses, which could create challenges for federal prosecutors and could result in less restitution being awarded. For a potential expansion of restitution to compensate harm that was not proximately caused by the defendant (i.e., harm that was not reasonably foreseeable as a result of the offense) stakeholders said factors that should be considered include that the current proximate harm requirement does not present challenges and that such an expansion could lead to additional sentencing-related hearings and litigation. Restitution to restore victims to their position had the offense not been committed . Stakeholders said this provision is already a goal of federal restitution, but that a potential expansion could allow judges more discretion to order restitution for victim losses not specified by statute, which could help restore the victim to his or her pre-offense condition. Restitution for any injury, harm, or loss, including emotional distress . A factor stakeholders identified in potentially expanding restitution to cover intangible losses, including emotional distress, included that it could increase the complexity of the restitution process because these are not easily quantified losses. Relatedly, stakeholders said that the suitability of criminal versus civil proceedings should be considered because the civil system, through which crime victims may seek compensation at their own expense, is set up to handle these issues and losses, whereas officials involved in criminal cases lack the specialized skills to determine these kinds of losses. Stakeholders GAO interviewed identified additional factors related to the potential broadening of courts' authority to order restitution generally; for example, they told GAO that increased restitution debt and collectability challenges should be considered. According to the Department of Justice, the amount of outstanding restitution debt owed in federal cases as of the end of fiscal year 2016 was $110.2 billion. Stakeholders stated that defendants often lack the financial resources to pay restitution and adding to the uncollected restitution debt through a potential expansion of authority could lead to further collection challenges.", "document_type": "gao"}
{"report": "Medicare is one of four principal health-insurance programs administered by CMS; it provides health insurance for persons aged 65 and over, certain individuals with disabilities, and individuals with end-stage renal disease. See table 1 for information about Medicare’s component programs. Medicare is the largest CMS program, at $702 billion in fiscal year 2017. As discussed earlier, according to CBO, Medicare outlays are projected to rise to $1.5 trillion in 2028 (see fig. 1). Fraud involves obtaining something of value through willful misrepresentation. There are no reliable estimates of the extent of fraud in the Medicare program, or in the health-care industry as a whole. By its very nature, fraud is difficult to detect, as those involved are engaged in intentional deception. Further, potential fraud cases must be identified, investigated, prosecuted, and adjudicated—resulting in a conviction— before fraud can be established. As I mentioned earlier, we designated Medicare as a high-risk program in 1990 because its size, scope, and complexity make it vulnerable to fraud, waste, and abuse. Similarly, the Office of Management and Budget (OMB) designated all parts of Medicare a “high priority” program because they each report $750 million or more in improper payments in a given year. We also highlighted challenges associated with duplicative payments in Medicare in our annual report on duplication and opportunities for cost savings in federal programs. Improper payments are a significant risk to the Medicare program and may include payments made as a result of fraud. However, I would note that improper payments are not a proxy for the amount of fraud or extent of fraud risk in a particular program as improper payment measurement does not specifically identify or estimate such payments due to fraud. Improper payments are those that are either made in an incorrect amount (overpayments and underpayments) or those that should not have been made at all. Our December 2017 report found that CMS manages its fraud risks as part of a broader program-integrity approach working with a broad array of stakeholders. CMS’s program-integrity approach includes efforts to address waste, abuse, and improper payments as well as fraud across its four principal programs. In Medicare, CMS collaborates with contractors, health-insurance plans, and law-enforcement and other agencies to carry out its program-integrity responsibilities. According to CMS officials, this broader program-integrity approach can help the agency develop control activities to address multiple sources of improper payments, including fraud. According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks. Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks. Risk management is a formal and disciplined practice for addressing risk and reducing it to an acceptable level. In July 2015, GAO issued the Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. The Fraud Risk Framework describes leading practices in four components: commit, assess, design and implement, and evaluate and adapt, as depicted in figure 2. The Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires OMB to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities. The act further requires OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines. In July 2016, OMB published guidance about enterprise risk management and internal controls in federal executive departments and agencies. Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework. Further, the act requires federal agencies to submit to Congress a progress report each year for 3 consecutive years on the implementation of the controls established under OMB guidelines, among other things. CMS’s antifraud efforts partially aligned with the Fraud Risk Framework. Consistent with the framework, CMS has demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts. It has also taken steps to establish a culture conducive to fraud risk management, although it could expand its antifraud training to include all employees. CMS has taken some steps to identify fraud risks in Medicare; however, it has not conducted a fraud risk assessment or developed a risk-based antifraud strategy for Medicare as defined in the Fraud Risk Framework. CMS has established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with a risk-based antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare. The commit component of the Fraud Risk Framework calls for an agency to commit to combating fraud by creating an organizational culture and structure conducive to fraud risk management. This component includes establishing a dedicated entity to lead fraud risk management activities. Within CMS, the Center for Program Integrity (CPI) serves as the dedicated entity for fraud, waste, and abuse issues in Medicare, which is consistent with the Fraud Risk Framework. CPI was established in 2010, in response to a November 2009 Executive Order on reducing improper payments and eliminating waste in federal programs. This formalized role, according to CMS officials, elevated the status of program-integrity efforts, which previously were carried out by other parts of CMS. As an executive-level Center—on the same level with five other executive-level Centers at CMS, such as the Center for Medicare—CPI has a direct reporting line to executive-level management at CMS. The Fraud Risk Framework identifies a direct reporting line to senior-level managers within the agency as a leading practice. According to CMS officials, this elevated organizational status offers CPI heightened visibility across CMS, attention by CMS executive leadership, and involvement in executive-level conversations. The commit component of the Fraud Risk Framework also includes creating an organizational culture to combat fraud at all levels of the agency. Consistent with the Fraud Risk Framework, CMS has promoted an antifraud culture by, for example, coordinating with internal and external stakeholders. Consistent with leading practices in the Fraud Risk Framework to involve all levels of the agency in setting an antifraud tone, CPI has worked collaboratively with other CMS Centers. In addition to engaging executive-level officials of other CMS Centers through the Program Integrity Board, CPI has worked collaboratively with other Centers within CMS to incorporate antifraud features into new program design or policy development and established regular communication at the staff level. For example: Center for Medicare and Medicaid Innovation (CMMI). When developing the Medicare Diabetes Prevention Program, CMMI officials told us they worked with CPI’s Provider Enrollment and Oversight Group and Governance Management Group to develop risk-based screening procedures for entities that would enroll in Medicare to provide diabetes-prevention services, among other activities. The program was expanded nationally in 2016, and CMS determined that an entity may enroll in Medicare as a program supplier if it satisfies enrollment requirements, including that the supplier must pass existing high categorical risk-level screening requirements. Center for Medicare (CM). In addition to building safeguards into programs and developing policies, CM officials told us that there are several standing meetings, on monthly, biweekly, and weekly bases, between groups within CM and CPI that discuss issues related to provider enrollment, FFS operations, and contractor management. A senior CM official also told us that there are ad hoc meetings taking place between CM and CPI: “We interact multiple times daily at different levels of the organization. Working closely is just a regular part of our business.” CMS has also demonstrated its commitment to addressing fraud, waste, and abuse to its stakeholders. Representatives of CMS’s extensive stakeholder network whom we interviewed—contractors and officials from public and private entities—generally recognized the agency’s commitment to combating fraud. In our interviews with stakeholders, officials observed CMS’s increased commitment over time to address fraud, waste, and abuse and cited examples of specific CMS actions. CMS contractors told us that CMS’s commitment to combating fraud is incorporated into contractual requirements, such as requiring (1) data analysis for potential fraud leads and (2) fraud-awareness training for providers. Officials from entities that are members of the Healthcare Fraud Prevention Partnership (HFPP), specifically, a health-insurance plan and the National Health Care Anti-Fraud Association, added that CMS’s effort to establish the HFPP and its ongoing collaboration and information sharing reflect CMS’s commitment to combat fraud in Medicare. The Fraud Risk Framework identifies training as one way of demonstrating an agency’s commitment to combating fraud. Training and education intended to increase fraud awareness among stakeholders, managers, and employees serve as a preventive measure to help create a culture of integrity and compliance within the agency. The Fraud Risk Framework discusses requiring all employees to attend training upon hiring and on an ongoing basis thereafter. To increase awareness of fraud risks in Medicare, CMS offers and requires training for stakeholder groups such as providers, beneficiaries, and health-insurance plans. Specifically, through its National Training Program and Medicare Learning Network, CMS makes available training materials on combating Medicare fraud, waste, and abuse. These materials help to identify and report fraud, waste, and abuse in CMS programs and are geared toward providers, beneficiaries, as well as trainers and other stakeholders. Separately, CMS requires health- insurance plans working with CMS to provide annual fraud, waste, and abuse training to their employees. However, CMS does not offer or require similar fraud-awareness training for the majority of its workforce. For a relatively small portion of its overall workforce—specifically, contracting officer representatives who are responsible for certain aspects of the acquisition function—CMS requires completion of fraud and abuse prevention training every 2 years. According to CMS, 638 of its contracting officer representatives (or about 10 percent of its overall workforce) completed such training in 2016 and 2017. Although CMS offers fraud-awareness training to others, the agency does not require fraud-awareness training for new hires or on a regular basis for all employees because the agency has focused on providing process-based internal controls training for its employees. While fraud-awareness training for contracting officer representatives is an important step in helping to promote fraud risk management, fraud- awareness training specific to CMS programs would be beneficial for all employees. Such training would not only be consistent with what CMS offers to or requires of its stakeholders and some of its employees, but would also help to keep the agency’s entire workforce continuously aware of fraud risks and examples of known fraud schemes, such as those identified in successful HHS OIG investigations. Such training would also keep employees informed as they administer CMS programs or develop agency policies and procedures. Considering the vulnerability of Medicare and Medicaid programs to fraud, waste, and abuse, without regular required training CMS cannot be assured that its workforce of over 6,000 employees is continuously aware of risks facing its programs. In our December 2017 report, we recommended that the Administrator of CMS provide fraud-awareness training relevant to risks facing CMS programs and require new hires to undergo such training and all employees to undergo training on a recurring basis. In its March 2018 letter to GAO, HHS stated that CMS is in the process of developing Fraud, Waste, and Abuse Training for all new employees, to be presented at CMS New Employee Orientations. Additionally, CMS is also developing training to be completed by current CMS employees on an annual basis. As of July 2018, this recommendation remains open. The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile. Identifying fraud risks is one of the steps included in the Fraud Risk Framework for assessing risks to determine a fraud risk profile. In our December 2017 report, we discussed several examples of steps CMS has taken to identify fraud risks as well as control activities that target areas the agency has designated as higher risk within Medicare, including specific provider types and specific geographic locations. These examples include data analytics to assist investigations in Medicare FFS, including Medicare’s Fraud Prevention System (FPS ), prior authorization for Medicare FFS services or supplies, revised provider screening and enrollment processes for Medicare FFS, and temporary provider enrollment moratoriums for certain providers and geographic areas for Medicare FFS. CMS officials told us that CPI initially focused on developing control activities for Medicare FFS and consider these activities to be the most mature of all CPI efforts to address fraud risks. CMS Has Not Conducted a Fraud Risk Assessment for Medicare The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and assess risks to determine a fraud risk profile. Furthermore, federal internal control standards call for agency management to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that, as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks. The Fraud Risk Framework states that, in planning the fraud risk assessment, effective managers tailor the fraud risk assessment to the program by, among other things, identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process. Fraud risk assessments that align with the Fraud Risk Framework involve (1) identifying inherent fraud risks affecting the program, (2) assessing the likelihood and impact of those fraud risks, (3) determining fraud risk tolerance, (4) examining the suitability of existing fraud controls and prioritizing residual fraud risks, and (5) documenting the results (see fig. 3). Although CMS had identified some fraud risks posed by providers in Medicare FFS, the agency had not conducted a fraud risk assessment for the Medicare program as a whole. Such a risk assessment would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy. According to CMS officials, CMS had not conducted a fraud risk assessment for Medicare because, within CPI’s broader approach of preventing and eliminating improper payments, its focus has been on addressing specific vulnerabilities among provider groups that have shown themselves particularly prone to fraud, waste, and abuse. With this approach, however, it is unlikely that CMS will be able to design and implement the most-appropriate control activities to respond to the full portfolio of fraud risks. A fraud risk assessment consists of discrete activities that build upon each other. Specifically: Identifying inherent fraud risks affecting the program. As discussed earlier, CMS took steps to identify fraud risks. However, CMS has not used a process to identify inherent fraud risks from the universe of potential vulnerabilities facing Medicare, including threats from various sources. According to CPI officials, most of the agency’s fraud control activities are focused on fraud risks posed by providers. The Fraud Risk Framework discusses fully considering inherent fraud risks from internal and external sources in light of fraud risk factors such as incentives, opportunities, and rationalization to commit fraud. For example, according to CMS officials, the inherent design of the Medicare Part C program may pose fraud risks that are challenging to detect. A fraud risk assessment would help CMS identify all sources of fraudulent behaviors, beyond threats posed by providers, such as those posed by health-insurance plans, contractors, or employees. Assessing the likelihood and impact of fraud risks and determining fraud risk tolerance. CMS has taken steps to prioritize fraud risks in some areas, but it had not assessed the likelihood or impact of fraud risks or determined fraud risk tolerance across all parts of Medicare. Assessing the likelihood and impact of inherent fraud risks would involve consideration of the impact of fraud risks on program finances, reputation, and compliance. Without assessing the likelihood and impact of risks in Medicare or internally determining which fraud risks may fall under the tolerance threshold, CMS cannot be certain that it is aware of the most-significant fraud risks facing this program and what risks it is willing to tolerate based on the program’s size and complexity. Examining the suitability of existing fraud controls and prioritizing residual fraud risks. CMS had not assessed existing control activities or prioritized residual fraud risks. According to the Fraud Risk Framework, managers may consider the extent to which existing control activities—whether focused on prevention, detection, or response—mitigate the likelihood and impact of inherent risks and whether the remaining risks exceed managers’ tolerance. This analysis would help CMS to prioritize residual risks and to determine mitigation approaches. For example, CMS had not established preventive fraud control activities in Medicare Part C. Using a fraud risk assessment for Medicare Part C and closely examining existing fraud control activities and residual risks, CMS could be better positioned to address fraud risks facing this growing program and develop preventive control activities. Furthermore, without assessing existing fraud control activities and prioritizing residual fraud risks, CMS cannot be assured that its current control activities are addressing the most-significant risks. Such analysis would also help CMS determine whether additional, preferably preventive, fraud controls are needed to mitigate residual risks, make adjustments to existing control activities, and potentially scale back or remove control activities that are addressing tolerable fraud risks. Documenting the risk-assessment results in a fraud risk profile. CMS had not developed a fraud risk profile that documents key findings and conclusions of the fraud risk assessment. According to the Fraud Risk Framework, the risk profile can also help agencies decide how to allocate resources to respond to residual fraud risks. Given the large size and complexity of Medicare, a documented fraud risk profile could support CMS’s resource-allocation decisions as well as facilitate the transfer of knowledge and continuity across CMS staff and changing administrations. Senior CPI officials told us that the agency plans to start a fraud risk assessment for Medicare after it completes a separate fraud risk assessment of the federally facilitated marketplace. This fraud risk assessment for the federally facilitated marketplace eligibility and enrollment process is being conducted in response to a recommendation we made in February 2016. In April 2017, CPI officials told us that this fraud risk assessment was largely completed, although in September 2017 CPI officials told us that the assessment was undergoing agency review. CPI officials told us that they have informed CM officials that there will be future fraud risk assessments for Medicare; however, they could not provide estimated timelines or plans for conducting such assessments, such as the order or programmatic scope of the assessments. Once completed, CMS could use the federally facilitated marketplace fraud risk assessment and apply any lessons learned when planning for and designing fraud risk assessments for Medicare. According to the Fraud Risk Framework, factors such as size, resources, maturity of the agency or program, and experience in managing risks can influence how the entity plans the fraud risk assessment. Additionally, effective managers tailor the fraud risk assessment to the program when planning for it. The large scale and complexity of Medicare as well as time and resources involved in conducting a fraud risk assessment underscore the importance of a well-planned and tailored approach to identifying the assessment’s programmatic scope. Planning and tailoring may involve decisions to conduct a fraud risk assessment for Medicare as a whole or divided into several subassessments to reflect their various component parts (e.g., Medicare Part C). CMS’s existing fraud risk identification efforts as well as communication channels with stakeholders could serve as a foundation for developing a fraud risk assessment for Medicare. The leading practices identified in the Fraud Risk Framework discuss the importance of identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process. CMS’s fraud risk identification efforts discussed earlier could provide key information about fraud risks and their likelihood and impact. Furthermore, existing relationships and communication channels across CMS and its extensive network of stakeholders could support building a comprehensive understanding of known and potential fraud risks for the purposes of a fraud risk assessment. For example, the fraud vulnerabilities identified through data analysis and information sharing with health-insurance plans, law-enforcement organizations, and contractors could inform a fraud risk assessment. CPI’s Command Center missions—facilitated collaboration sessions that bring together experts from various disciplines to improve the processes for fraud prevention in Medicare—could bring together experts to identify potential or emerging fraud vulnerabilities or to brainstorm approaches to mitigate residual fraud risks. As CMS makes plans to move forward with a fraud risk assessment for Medicare, it will be important to consider the frequency with which the fraud risk assessment would need to be updated. While, according to the Fraud Risk Framework, the time intervals between updates can vary based on the programmatic and operating environment, assessing fraud risks on an ongoing basis is important to ensure that control activities are continuously addressing fraud risks. The constantly evolving fraud schemes, the size of the programs in terms of beneficiaries and expenditures, as well as continual changes in Medicare—such as development of innovative payment models and increasing managed- care enrollment—call for constant vigilance and regular updates to the fraud risk assessment. In our December 2017 report we recommended that the Administrator of CMS conduct fraud risk assessments for Medicare and Medicaid to include respective fraud risk profiles and plans for regularly updating the assessments and profiles. In its March 2018 letter to GAO, HHS stated that it is currently evaluating its options with regards to implementing this recommendation. As of July 2018, the recommendation remains open. The design and implement component of the Fraud Risk Framework calls for federal managers to design and implement a strategy with specific control activities to mitigate assessed fraud risks and collaborate to help ensure effective implementation. According to the Fraud Risk Framework, effective managers develop and document an antifraud strategy that describes the program’s approach for addressing the prioritized fraud risks identified during the fraud risk assessment, also referred to as a risk-based antifraud strategy. A risk- based antifraud strategy describes existing fraud control activities as well as any new fraud control activities a program may adopt to address residual fraud risks. In developing a strategy and antifraud control activities, effective managers focus on fraud prevention over detection, develop a plan for responding to identified instances of fraud, establish collaborative relationships with stakeholders, and create incentives to help effectively implement the strategy. Additionally, as part of a documented strategy, management identifies roles and responsibilities of those involved in fraud risk management activities; describes control activities as well as plans for monitoring and evaluation; creates timelines; and communicates the antifraud strategy to employees and stakeholders, among other things. As discussed earlier, CMS had some control activities in place to identify fraud risk in Medicare, particularly in the FFS program. However, CMS had not developed and documented a risk-based antifraud strategy to guide its design and implementation of new antifraud activities and to better align and coordinate its existing activities to ensure it is targeting and mitigating the most-significant fraud risks. Antifraud strategy. CMS officials told us that CPI does not have a documented risk-based antifraud strategy. Although CMS has developed several documents that describe efforts to address fraud, the agency had not developed a risk-based antifraud strategy for Medicare because, as discussed earlier, it had not conducted a fraud risk assessment that would serve as a foundation for such strategy. In 2016, CPI identified five strategic objectives for program integrity, which include antifraud elements and an emphasis on prevention. However, according to CMS officials, these objectives were identified from discussions with CMS leadership and various stakeholders and not through a fraud risk assessment process to identify inherent fraud risks from the universe of potential vulnerabilities, as described earlier and called for in the leading practices. These strategic objectives were presented at an antifraud conference in 2016, but were not announced publicly until the release of the Annual Report to Congress on the Medicare and Medicaid Integrity Programs for Fiscal Year 2015 in June 2017. Stakeholder relationships and communication. CMS has established relationships and communicated with stakeholders, but, without an antifraud strategy, stakeholders we spoke with lacked a common understanding of CMS’s strategic approach. Prior work on practices that can help federal agencies collaborate effectively calls for a strategy that is shared with stakeholders to promote trust and understanding. Once an antifraud strategy is developed, the Fraud Risk Framework calls for managers to collaborate to ensure effective implementation. Although some CMS stakeholders were able to describe various CMS program- integrity priorities and activities, such as home health being a fraud risk priority, the stakeholders could not communicate, articulate, or cite a common CMS strategic approach to address fraud risks in its programs. Incentives. The Fraud Risk Framework discusses creating incentives to help ensure effective implementation of the antifraud strategy once it is developed. Currently, some incentives within stakeholder relationships may complicate CMS’s antifraud efforts. Among contractors, CMS encourages information sharing through conferences and workshops; however, competition for CMS business among contractors can be a disincentive to information sharing. CMS officials acknowledged this concern and said that they expect contractors to share information related to fraud schemes, outcomes of investigations, and tips for addressing fraud, but not proprietary information such as algorithms to risk-score providers. Without developing and documenting an antifraud strategy based on a fraud risk assessment, as called for in the design and implement component of the Fraud Risk Framework, CMS cannot ensure that it has a coordinated approach to address the range of fraud risks and to appropriately target and allocate resources for the most-significant risks. Considering fraud risks to which Medicare is most vulnerable, in light of the malicious intent of those who aim to exploit the programs, would help CMS to examine its current control activities and potentially design new ones with recognition of fraudulent behavior it aims to prevent. This focus on fraud is distinct from a broader view of program integrity and improper payments by considering the intentions and incentives of those who aim to deceive rather than well-intentioned providers who make mistakes. Also, continued growth of the program, such as growth of Medicare Part C, calls for consideration of preventive fraud control activities across the entire network of entities involved. Furthermore, considering the large size and complexity of Medicare and the extensive stakeholder network involved in managing fraud in the program, a strategic approach to managing fraud risks within the programs is essential to ensure that a number of existing control activities and numerous stakeholder relationships and incentives are being aligned to produce desired results. Once developed, an antifraud strategy that is clearly articulated to various CMS stakeholders would help CMS to address fraud risks in a more coordinated and deliberate fashion. Thinking strategically about existing control activities, resources, tools, and information systems could help CMS to leverage resources while continuing to integrate Medicare program-integrity efforts along functional lines. A strategic approach grounded in a comprehensive assessment of fraud risks could also help CMS to identify future enhancements for existing control activities, such as new preventive capabilities for its Fraud Prevention System (FPS) or additional fraud factors in provider enrollment and revalidation, such as provider risk-scoring, to stay in step with evolving fraud risks. CMS Has Established Monitoring and Evaluation Mechanisms That Could Inform a Risk-Based Antifraud Strategy for Medicare The evaluate and adapt component of the Fraud Risk Framework calls for federal managers to evaluate outcomes using a risk-based approach and adapt activities to improve fraud risk management. Furthermore, according to federal internal control standards, managers should establish and operate monitoring activities to monitor the internal control system and evaluate the results, which may be compared against an established baseline. Ongoing monitoring and periodic evaluations provide assurances to managers that they are effectively preventing, detecting, and responding to potential fraud. CMS has established monitoring and evaluation mechanisms for its program-integrity activities that it could incorporate into an antifraud strategy. As described in the Fraud Risk Framework, agencies can gather information on the short-term or intermediate outcomes of some antifraud initiatives, which may be more readily measured. For example, CMS has developed some performance measures to provide a basis for monitoring its progress towards meeting the program-integrity goals set in the HHS Strategic Plan and Annual Performance Plan. Specifically, CMS measures whether it is meeting its goal of “increasing the percentage of Medicare FFS providers and suppliers identified as high risk that receive an administrative action.” CMS does not set specific antifraud goals for other parts of Medicare; other CMS performance measures relate to measuring or reducing improper payments in the various parts of Medicare. CMS uses return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities and FPS. For example, CMS uses return-on-investment to measure the effectiveness of FPS and, in response to a recommendation we made in 2012, CMS developed outcome-based performance targets and milestones for FPS. CMS has also conducted individual evaluations of its program-integrity activities, such as an interim evaluation of the prior-authorization demonstration for power mobility devices that began in 2012 and is currently implemented in 19 states. Commensurate with greater maturity of control activities in Medicare FFS compared to other parts of Medicare and Medicaid, monitoring and evaluation activities for Medicare Parts C and D and Medicaid are more limited. For example, CMS calculates savings for its program-integrity activities in Medicare Parts C and D, but not a full return-on-investment. CMS officials told us that calculating costs for specific activities is challenging because of overlapping activities among contractors. CMS officials said they continue to refine methods and develop new savings estimates for additional program-integrity activities. According to the Fraud Risk Framework, effective managers develop a strategy and evaluate outcomes using a risk-based approach. In developing an effective strategy and antifraud activities, managers consider the benefits and costs of control activities. Ongoing monitoring and periodic evaluations provide reasonable assurance to managers that they are effectively preventing, detecting, and responding to potential fraud. Monitoring and evaluation activities can also support managers’ decisions about allocating resources, and help them to demonstrate their continued commitment to effectively managing fraud risks. As CMS takes steps to develop an antifraud strategy, it could include plans for refining and building on existing methods such as return-on- investment or savings measures, and setting appropriate targets to evaluate the effectiveness of all of CMS’s antifraud efforts. Such a strategy would help CMS to efficiently allocate program-integrity resources and to ensure that the agency is effectively preventing, detecting, and responding to potential fraud. For example, while doing so would involve challenges, CMS’s strategy could detail plans to advance efforts to measure a potential fraud rate through baseline and periodic measures. Fraud-rate measurement efforts could also inform risk assessment activities, identify currently unknown fraud risks, align resources to priority risks, and develop effective outcome metrics for antifraud controls. Such a strategy would also help CMS ensure that it has effective performance measures in place to assess its antifraud efforts beyond those related to providers in Medicare FFS, and establish appropriate targets to measure the agency’s progress in addressing fraud risks. In our December 2017 report we recommended that the Administrator of CMS should, using the results of the fraud risk assessments for Medicare, create, document, implement, and communicate an antifraud strategy that is aligned with and responsive to regularly assessed fraud risks. This strategy should include an approach for monitoring and evaluation. In its March 2018 letter to GAO, HHS stated that it is currently evaluating its options with regards to implementing this recommendation. As of July 2018, the recommendation remains open. Chairman Jenkins and Ranking Member Lewis, this concludes my prepared statement. I look forward to the subcommittee’s questions. If you or your staff have any questions concerning this testimony, please contact Seto J. Bagdoyan, who may be reached at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Tonita Gillich (Assistant Director), Irina Carnevale (Analyst-in- Charge), Colin Fallon, Scott Hiromoto, and Maria McMullen. Improper Payments: Actions and Guidance Could Help Address Issues and Inconsistencies in Estimation Processes. GAO-18-377. Washington, D.C.: May 31, 2018. Medicare: CMS Should Take Actions to Continue Prior Authorization Efforts to Reduce Spending. GAO-18-341. Washington, D.C.: April 20, 2018. Medicare and Medicaid: CMS Needs to Fully Align Its Antifraud Efforts with the Fraud Risk Framework. GAO-18-88. Washington, D.C.: December 5, 2017. Medicare: CMS Fraud Prevention System Uses Claims Analysis to Address Fraud. GAO-17-710. Washington, D.C.: August 30, 2017. Medicare Advantage Program Integrity: CMS’s Efforts to Ensure Proper Payments and Identify and Recover Improper Payments. GAO-17-761T. Washington, D.C.: July 19, 2017. Medicare Provider Education: Oversight of Efforts to Reduce Improper Billing Needs Improvement. GAO-17-290. Washington, D.C.: March 10, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Medicare Advantage: Limited Progress Made to Validate Encounter Data Used to Ensure Proper Payments. GAO-17-223. Washington, D.C.: January 17, 2017. Medicare: Initial Results of Revised Process to Screen Providers and Suppliers, and Need for Objectives and Performance Measures. GAO-17-42. Washington, D.C.: November 15, 2016. Medicare: Claim Review Programs Could Be Improved with Additional Prepayment Reviews and Better Data. GAO-16-394. Washington, D.C.: April 13, 2016. Medicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments. GAO-16- 76. Washington, D.C.: April 8, 2016. Health Care Fraud: Information on Most Common Schemes and the Likely Effect of Smart Cards. GAO-16-216. Washington, D.C.: January 22, 2016. A Framework for Managing Fraud Risks in Federal Programs. GAO-15-593SP. Washington, D.C.: July 28, 2015. Medicare Program Integrity: Increased Oversight and Guidance Could Improve Effectiveness and Efficiency of Postpayment Claims Reviews. GAO-14-474. Washington, D.C.: July 18, 2014. Medicare Fraud Prevention: CMS Has Implemented a Predictive Analytics System, but Needs to Define Measures to Determine Its Effectiveness. GAO-13-104. Washington, D.C.: October 15, 2012. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Medicare covered over 58 million people in 2017 and has wide-ranging impact on the health-care sector and the overall U.S. economy. However, the billions of dollars in Medicare outlays as well as program complexity make it susceptible to improper payments, including fraud. Although there are no reliable estimates of fraud in Medicare, in fiscal year 2017 improper payments for Medicare were estimated at about $52 billion. Further, about $1.4 billion was returned to Medicare Trust Funds in fiscal year 2017 as a result of recoveries, fines, and asset forfeitures. In December 2017, GAO issued a report examining how CMS managed its fraud risks overall and particularly the extent to which its efforts in the Medicare and Medicaid programs aligned with GAO's Framework. This testimony, based on that report, discusses the extent to which CMS's management of fraud risks in Medicare aligns with the Framework. For the report, GAO reviewed CMS policies and interviewed officials and external stakeholders. In its December 2017 report, GAO found that the Centers for Medicare & Medicaid Services' (CMS) antifraud efforts for Medicare partially align with GAO's 2015 A Framework for Managing Fraud Risks in Federal Programs (Framework). The Fraud Reduction and Data Analytics Act of 2015 required OMB to incorporate leading practices identified in this Framework in its guidance to agencies on addressing fraud risks. Consistent with the Framework, GAO determined that CMS had demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts; the Center for Program Integrity (CPI) serves as this entity for fraud, waste, and abuse issues in Medicare. CMS also promoted an antifraud culture by, for example, coordinating with internal stakeholders to incorporate antifraud features into new program design. To increase awareness of fraud risks in Medicare, CMS offered and required training for stakeholder groups such as providers of medical services, but it did not offer or require similar fraud-awareness training for most of its workforce. CMS took some steps to identify fraud risks in Medicare; however, it had not conducted a fraud risk assessment or designed and implemented a risk-based antifraud strategy for Medicare as defined in the Framework. CMS identified fraud risks through control activities that target areas the agency designated as higher risk within Medicare, including specific provider types, such as home health agencies. Building on earlier steps and conducting a fraud risk assessment, consistent with the Framework, would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy. CMS established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with an antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare. For example, CMS used return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities. In developing an antifraud strategy, consistent with the Framework, CMS could include plans for refining and building on existing methods such as return-on-investment, to evaluate the effectiveness of all of its antifraud efforts. In its December 2017 report, GAO made three recommendations, namely that CMS (1) require and provide fraud-awareness training to its employees; (2) conduct fraud risk assessments; and (3) create an antifraud strategy for Medicare, including an approach for evaluation. The Department of Health and Human Services agreed with these recommendations and reportedly is evaluating options to implement them. Accordingly, the recommendations remain open.", "document_type": "gao"}
{"report": "Black lung benefits include both cash assistance and medical benefits. Maximum cash assistance payments generally ranged from about $650 to $1,300 per month in fiscal year 2017, depending on the number of dependents the miner has. Miners receiving cash assistance are also eligible for medical benefits that cover the treatment of their black-lung- related conditions, which may include hospital and nursing care, rehabilitation services, and drug and equipment charges, according to DOL documentation. DOL estimates that the average annual cost for medical treatment in fiscal year 2017 was approximately $6,980 per miner. There were about 25,700 total beneficiaries (primary and dependents) receiving black lung benefits during fiscal year 2017 (see fig. 1). The decrease in the number of beneficiaries over time has resulted from a combination of declining coal mining employment and an aging beneficiary population, according to DOL officials. Further, black lung beneficiaries could increase in the near term due to the increased occurrence of black lung disease and its most severe form, progressive massive fibrosis, particularly among Appalachian coal miners, according to HHS officials. Black lung claims are processed by DOL’s Office of Workers’ Compensation Programs. Contested claims are adjudicated by DOL’s Office of Administrative Law Judges, which issues decisions that can be appealed to the Benefits Review Board. Claimants and mine operators may further appeal these agency decisions to the federal courts. If an award is contested, claimants can receive interim benefits, which are generally paid from the Trust Fund according to DOL officials, while their claims are in the appeals process. Final awards are either funded by mine operators—who are identified as the responsible employers of claimants—or the Trust Fund, when responsible employers cannot be identified or do not pay. In fiscal year 2017, black lung claims had an approval rate of about 29 percent, according to DOL data. Of the 19,430 primary black lung beneficiaries receiving benefits during fiscal year 2017, 64 percent (12,464) were paid from the Trust Fund, 25 percent (4,798) were paid by liable mine operators, and 11 percent (2,168) were receiving interim benefits, according to DOL officials. Black Lung Disability Trust Fund revenue is primarily obtained from mine operators through the coal tax. The coal tax is imposed at two rates, depending on whether the coal is extracted from underground or surface mines. The current tax rates are $1.10 per ton of underground-mined coal and $0.55 per ton of surface-mined coal, up to 4.4 percent of the sales price. Therefore, if a ton of underground-mined coal is sold for less than $25, than the tax paid would be less than $1.10. For instance, if a ton of underground-mined coal sold for $20, than it would be taxed at 4.4 percent of the sales price, or $0.88. To a lesser extent, the Trust Fund also receives other miscellaneous revenue from interest payments, and various fines and penalties paid by mine operators, among other sources, according to DOL documentation. Coal tax revenue is collected from mine operators by Treasury’s Internal Revenue Service and then transferred to the Trust Fund where it is then used by DOL officials to pay black lung benefits and the costs of administering the program. Trust Fund expenditures include, among other things, black lung benefit payments, certain administrative costs incurred by DOL and Treasury to administer the black lung benefits program, and debt repayments. When necessary for the Trust Fund to make relevant expenditures under federal law, the Trust Fund borrows from the Treasury’s general fund. When this occurs, the federal government is essentially borrowing from itself—and hence from the general taxpayer—to fund its benefit payments and other expenditures. Multiple factors have challenged Trust Fund finances since it was established about 40 years ago. Its expenditures have consistently exceeded its revenue, interest payments have grown, and legislative actions taken that were expected to improve Trust Fund finances did not completely address its debt. Combined black lung benefit payments and program administrative costs exceeded Trust Fund revenue every year for the program’s first decade (fiscal years 1979 through 1989), resulting in the accrual of debt. During the Trust Fund’s first three fiscal years in particular, revenue covered less than 40 percent of the Trust Fund’s combined benefit payments and administrative costs. For instance, in fiscal year 1980, the Trust Fund received about $251 million in revenue and paid about $726 million in black lung benefits and administrative costs. Beginning in 1982, revenue increased as a result of the Black Lung Benefits Revenue Act of 1981 that doubled the coal tax rates from $0.50 to $1 per ton of underground-mined coal and from $0.25 to $0.50 per ton of surface-mined coal, up to 4 percent of the sales price. Even with the tax rate increase, combined benefit payments and administrative costs continued to exceed revenue throughout the 1980s (see fig. 2). As a result, the Trust Fund borrowed from Treasury’s general fund to cover the annual differences between its expenditures and revenues, and by fiscal year 1989 the Trust Fund’s outstanding debt to Treasury’s general fund exceeded $3 billion. Beginning in fiscal year 1990, Trust Fund revenue generally began to exceed combined benefit payments and administrative costs, and, in fact, total Trust Fund cumulative revenue collected from fiscal years 1979 through 2017 exceeded total cumulative benefit payments and administrative costs incurred during these years. However, interest owed from earlier years of borrowing led to more borrowing and debt. From fiscal years 1979 through 1989, the Trust Fund borrowed—primarily through 30-year term loans according to Treasury officials—from Treasury’s general fund at interest rates that varied from about 6.5 percent to about 13.9 percent. In fiscal year 1985, for instance, the Trust Fund paid about $275 million in interest, which was equal to about half of the total revenue collected that year. Since fiscal year 1990, revenue has generally exceeded combined benefit payments and administrative costs, although interest payments on the Trust Fund’s outstanding debt kept the fund in a position whereby its total expenditures continued to exceed its total revenues. As a result, the principal amount of the Trust Fund’s total outstanding debt to Treasury’s general fund increased and exceeded $10 billion by fiscal year 2008. Legislation has been enacted over the years that was expected to improve Trust Fund finances: In 1981, the Black Lung Benefits Revenue Act of 1981 doubled the coal tax rates from $0.50 cents to $1 per ton of underground-mined coal, and from $0.25 cents to $0.50 cents per ton of surface-mined coal, up to 4 percent of the sales price (as mentioned previously). In 1986, the Consolidated Omnibus Budget Reconciliation Act of 1985 established a 5 year moratorium on interest accrual with respect to repayable advances to the Trust Fund (which we refer to as annual borrowing from Treasury’s general fund), and increased the coal tax rates to $1.10 per ton of underground-mined coal, and $0.55 per ton of surface-mined coal (up to 4.4 percent of the sales price), where they have remained since. In 2008, the EIEA included provisions that were expected to eliminate the Trust Fund’s debt. Specifically, EIEA (1) generally extended the coal tax rates at their current rates until December 31, 2018 (after which they are scheduled to decrease to their original levels of $0.50 per ton of underground-mined coal, and $0.25 per ton of surface- mined coal, up to 2 percent of the sales price); (2) provided for a one- time federal appropriation toward Trust Fund debt forgiveness (about $6.5 billion, according to DOL data); and (3) provided for the refinancing of the Trust Fund’s debt that was not forgiven as a result of EIEA (which we refer to as the Trust Fund’s legacy debt). Specifically, the Trust Fund’s legacy debt was refinanced with more favorable interest rates, according to DOL data. Interest rates on the refinanced legacy debt range from about 1.4 percent to about 4.5 percent. The forgiveness and refinancing of Trust Fund debt along with extending the current coal tax rates through 2018 were expected to result in annual tax revenue that could be used to pay down interest and principal on the Trust Fund’s legacy debt, according to DOL and Treasury officials. These officials said that models showed that debt would be eliminated by fiscal year 2040; however, they noted that coal tax revenue has been less than originally projected due, in part, to the 2008 recession and increased market competition from other energy sources. As a result, the Trust Fund’s total expenditures continued to exceed revenue and the Trust Fund borrowed from Treasury’s general fund each year from fiscal years 2010 through 2017 to cover debt repayments expenditures. In fiscal year 2017, the Trust Fund’s total principal amount of outstanding debt, which includes its legacy debt and the amount borrowed from Treasury’s general fund that year, was about $4.3 billion (see fig. 3). Trust Fund borrowing will likely continue to increase from fiscal years 2019 through 2050 due, in part, to the scheduled coal tax rate decrease of about 55 percent that will take effect in 2019 and declining coal production, according to our moderate simulation. We simulated the effects of the scheduled 2019 tax rate decrease on Trust Fund finances through 2050, and in this report, we generally present the results of a moderate case set of assumptions (see table 1). These simulations are not predictions of what will happen, but rather models of what could happen given certain assumptions. For more information on our simulation methodology see appendix I. In addition to the moderate case assumptions, we also simulated how Trust Fund debt could change through 2050 given various other assumptions, and the full range of results for all of our simulations are presented in appendix II. Our moderate case simulation suggests that Trust Fund revenue may decrease, from about $485 million in fiscal year 2018 to about $298 million in fiscal year 2019, due, in part, to the scheduled approximate 55 percent decrease in the coal tax. Our simulation, which incorporates EIA data on future expected coal production, also shows that annual Trust Fund revenue will likely continue to decrease beyond fiscal year 2019 due, in part, to declining coal production. Domestic coal production has declined from about 1.2 billion tons in 2008 to about 728 million tons in 2016, according to EIA. Based on these projections, our moderate simulation shows that Trust Fund annual revenue may continue to decrease from about $298 million in fiscal year 2019 to about $197 million in fiscal year 2050 (see fig. 4). With the scheduled 2019 tax rate decrease, our moderate case simulation suggests that expected revenue will likely be insufficient to cover combined black lung benefit payments and administrative costs, as well as debt repayment expenditures. Specifically, our moderate case simulation suggests that revenue may not be sufficient to cover beneficiary payments and administrative costs from fiscal years 2020 through 2050 (see fig. 5). For instance, in fiscal year 2029, simulated benefit payments and administrative costs will likely exceed simulated revenue by about $99 million. These annual deficits will likely decrease over time to about $4 million by fiscal year 2050 due, in part, to the assumed continued net decline in total black lung beneficiaries. Our simulation also therefore suggests that Trust Fund revenue may not be enough to also cover the debt repayment expenditures it must continue to make through fiscal year 2040, per the payment schedule established following the 2008 EIEA. Our moderate simulation suggests that the amount borrowed by the Trust Fund will likely increase from about $1.6 billion in fiscal year 2019 to about $15.4 billion in fiscal year 2050 (see fig. 6). Although the Trust Fund’s legacy debt decreases through fiscal year 2040, total Trust Fund expenditures—including combined benefit payments and administrative costs as well as debt repayments—will likely continue to exceed revenue which will require continued annual borrowing from Treasury’s general fund. However, the amount borrowed by the Trust Fund could vary depending, in part, on future coal production and the number of new beneficiaries and could range between about $6 billion and about $27 billion in 2050, according to our simulations (see appendix II). We simulated three options that can affect Trust Fund finances through fiscal year 2050. Specifically, we simulated the effects of (1) adjusting the coal tax, (2) forgiving interest, and (3) forgiving debt. In each of the simulations, we compared the results of the option to a baseline in which the coal tax rates will decrease by about 55 percent, which we refer to as the scheduled 2019 tax rate decrease. We compare interest and debt forgiveness options to a baseline which assumes the scheduled 2019 tax rate decrease has taken effect, and that there is no interest or debt forgiveness. The simulated options are not intended to be exhaustive and we are not endorsing any particular option or combination of options. Using the moderate case, we simulated four options: (1) implementing the 2019 coal tax rate reduction to $0.50 per ton of underground-mined coal and $0.25 per ton of surface-mined coal; (2) maintaining the current coal tax rates of $1.10 per ton for underground-mined coal and $0.55 per ton of surface-mined coal; (3) reducing the tax rates by 25 percent (from $1.10 and $0.55); and (4) increasing these tax rates by 25 percent (see fig. 7). Increasing the tax rates by 25 percent was the only option that eliminated simulated Trust Fund debt by fiscal year 2050, according to our moderate case simulation. We simulated three interest forgiveness options including forgiving interest on (1) legacy debt, (2) annual borrowing, and (3) all debt. Our moderate case simulation suggests that forgiving interest will not eliminate simulated debt by fiscal year 2050 (see fig. 8). We simulated two debt forgiveness options by forgiving principal and interest on (1) legacy debt and (2) all debt. Our moderate case simulation suggests that both debt forgiveness options would reduce simulated Trust Fund borrowing by fiscal year 2050, but these options would not eliminate debt altogether as simulated revenue will likely not be enough to cover simulated expenditures (see fig. 9). In these cases, the Trust Fund will need to continue borrowing from Treasury’s general fund to cover annual deficits, and thus accumulate debt. While adjusting coal tax rates and forgiving interest or debt could reduce the Trust Fund’s simulated borrowing by 2050, implementing them could affect the coal industry or general taxpayers, according to stakeholders we interviewed. For instance, a coal industry representative noted that maintaining the coal tax at its current rate would continue to burden the coal industry and increasing the tax would exacerbate the burden at a time when coal production has been declining. Treasury officials noted that the costs associated with forgiving Trust Fund interest or debt would be borne by the general taxpayer since Treasury borrows from taxpayers to lend to the Trust Fund as needed. These officials also said that making a one-time federal appropriation to forgive interest or debt would be the most transparent way to satisfy the Trust Fund’s outstanding debt to Treasury’s general fund. In addition to the simulations, other options could affect the financial position of the Trust Fund including reducing black lung benefits, eliminating or adjusting the coal tax cap, or creating a variable coal tax. Our moderate case simulation suggests that completely eliminating black lung benefits as of fiscal year 2019 could reduce the Trust Fund’s borrowing from Treasury’s general fund in fiscal year 2050 from about $15.4 billion to about $6.4 billion. However, doing so would generally mean that coal tax revenue would be collected solely to fund the repayment of Trust Fund debt. Another option could be to eliminate or adjust the coal tax cap, which currently prevents mine operators from paying a coal tax of more than 4.4 percent of the price per ton of coal sold. If the coal tax cap were eliminated, for instance, mine operators would pay $1.10 per ton of underground-mined coal and $0. 55 per ton of surface-mined coal regardless of price sold, which could increase revenue. As an additional option, changing the structure of the coal tax to flexible rates that change based on an annual actuarial assessment of the Trust Fund could help to ensure that coal mine operators pay the necessary amount of tax to cover Trust Fund expenditures, without resulting in a Trust Fund balance or deficit. Multiple options could reduce the Trust Fund’s future debt and distribute the financial burden among the coal industry and general taxpayers. We simulated whether various coal tax and debt forgiveness options could balance the Trust Fund by fiscal year 2050, whereby its simulated revenue would be sufficient to cover its simulated expenditures. These options were selected, in part, based on interviews with Trust Fund stakeholders and the availability of DOL and other data. We approached these simulations from two perspectives. First, we simulated how much Trust Fund debt would need to be forgiven based on various coal tax rates. Second, we simulated the average tax collected per ton needed to balance the Trust Fund by 2050, based on certain debt forgiveness options. The simulated options are not intended to be exhaustive and we are not endorsing any particular combination of options. Our first set of options using the moderate case simulations are based on the current coal tax rates of $1.10 per ton of underground-mined coal and $0.55 per ton of surface-mined coal, and show the amount of debt forgiveness in fiscal year 2019 needed to balance the Trust Fund by fiscal year 2050 based on certain tax rates (see fig. 10). Specifically, our moderate case simulations show the following: Increasing current coal tax rates by 25 percent could balance the Trust Fund by 2050 and would likely require no debt forgiveness. For this option, the simulated coal tax revenue would likely be sufficient to cover simulated Trust Fund expenditures, including combined benefit payments and administrative costs, as well as debt repayments. However, this option would place the burden solely on the coal industry that would be paying higher taxes at a time when coal production has been declining. Maintaining current coal tax rates could balance the Trust Fund by 2050 if coupled with about $2.4 billion of debt forgiveness. This option would distribute the burden among the coal industry and general taxpayers. Decreasing current coal tax rates by 25 percent could balance the Trust Fund by 2050 if coupled with about $4.8 billion in debt forgiveness. This option would burden the coal industry less than maintaining the current tax rates, but would increase the burden on general taxpayers. Decreasing current tax rates by 55 percent, which we refer to as the scheduled 2019 tax rate decrease, would balance the Trust Fund by 2050 if coupled with about $7.8 billion in debt forgiveness. This figure comprises the Trust Fund’s total simulated outstanding debt in fiscal year 2019 ($6.6 billion), and an additional about $1.2 billion that would be required because the Trust Fund will accrue additional debt from fiscal years 2020 through 2050, according to our moderate case simulations. The coal industry would bear some of the financial burden of this option, while also placing a financial burden on general taxpayers. Our second set of options using moderate case simulations show the change in average coal tax revenue collected per ton to balance the Trust Fund by fiscal year 2050 based on certain debt forgiveness options (see fig. 11). Specifically, our moderate simulations show the following: Forgiving the Trust Fund’s legacy debt would allow for an average tax collected of about $0.59 per ton to balance the Trust Fund by 2050. Based on certain assumptions, this could be accomplished with a tax of $0.88 per ton on underground-mined coal and $0.44 per ton on surface-mined coal. Forgiving all Trust Fund debt would allow for an average tax collected per ton of coal sold of $0.47 per ton to balance the Trust Fund by 2050. Based on certain assumptions, this could be accomplished with a tax of $0.70 per ton on underground-mined coal and a tax of $0.35 per ton of surface-mined coal. We provided a draft of this report to the Departments of Labor (DOL), Treasury, and Health and Human Services (HHS) for review and comment. DOL, Treasury, and HHS provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time we will send copies of this report to the appropriate congressional committees, the Secretaries of Labor, Treasury, and Health and Human Services, and other interested parties. In addition, the report will be available at no charge on GAO’s web site at http://www.gao.gov. If you or your staff should have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. We examined the extent to which (1) Black Lung Disability Trust Fund (Trust Fund) debt may change through 2050 and (2) selected options to improve its future financial position. We interviewed officials from the Departments of Labor (DOL), Treasury, and Health and Human Services (HHS), as well as representatives from the National Mining Association and the United Mine Workers of America. We then selected options to simulate based, in part, on these interviews and the availability of DOL and other data. These options included adjusting the coal tax, forgiving interest on some or all Trust Fund debt, forgiving some or all Trust Fund debt, or various combinations of these options. The options we simulated are not intended to be exhaustive and we are not endorsing any particular option or combination of options. Our simulations are based on various assumptions and simulate Trust Fund revenues and expenditures from fiscal years 2016 through 2050. To develop these simulations, we used actual and projection data from (1) DOL for fiscal years 2015 through 2040; (2) Treasury’s Office of Tax Analysis for fiscal years 2011 through 2015; (3) the Department of Energy’s Energy Information Administration (EIA) for calendar years 2015 through 2050; and (4) the Office of Management and Budget for fiscal year 2017. To simulate future Trust Fund benefit expenditures, we simulated the number of beneficiaries each fiscal year, and the annual average amount of benefits received (cash assistance and medical benefits). To simulate the numbers of beneficiaries, we used DOL data on the (1) age distributions of miner and widow beneficiaries for fiscal year 2015; (2) mortality rates by age for miner and widow beneficiaries as of fiscal year 2015; and (3) numbers of beneficiaries—including married miners, single miners, widows, and miners receiving medical benefits only—in fiscal year 2015. We assumed—as DOL does in its Black Lung Budget and Liability Model—that all miners are men, all widows are women, and all spouses are 3 years younger than the miner. We also assumed that the age distribution of single miners is the same as for married miners, and that the age distribution of new miner and widow beneficiaries is the same as for miner and widow beneficiaries during fiscal year 2015. We used DOL’s mortality rates to simulate the number of beneficiaries of each age and type in each year, and used those numbers to then simulate the total number of beneficiaries of each type each year (see table 2). We also assumed that there will be no new medical-benefit-only recipients. Formula The number of married miner beneficiaries age a in fiscal year y is equal to the number of new married miner beneficiaries age a in fiscal year y plus the number of married miner beneficiaries age a-1 in fiscal year y-1 who survived and whose spouse survived. The total number of married miner beneficiaries in fiscal year y is then the sum of the number of married miner beneficiaries of all ages in fiscal year y. Finally, we averaged the number of married miner beneficiaries by averaging the prior fiscal year’s total and the current fiscal year’s total. The number of single miner beneficiaries age a in fiscal year y is equal to the number of new single miner beneficiaries age a in fiscal year y plus the number of single miner beneficiaries age a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a-1 in fiscal year y-1 who survived but whose spouse did not survive. The total number of single miner beneficiaries in fiscal year y is then the sum of the number of single miner beneficiaries of all ages in fiscal year y. Finally, we averaged the number of single miner beneficiaries by averaging the prior fiscal year’s total and the current fiscal year’s total. The number of widow beneficiaries age a in fiscal year y is equal to the number of new beneficiaries who are widows age a in fiscal year y plus the number of widow beneficiaries age a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a+2 in fiscal year y-1 who did not survive but whose spouse did survive. The total number of widow beneficiaries in fiscal year y is then the sum of the number of widow beneficiaries of all ages in fiscal year y. Finally, we averaged the number of widow beneficiaries by averaging the prior fiscal year’s total and the current fiscal year’s total. The number of MBO beneficiaries of age a in fiscal year y is equal to the number of MBO beneficiaries of age a-1 in fiscal year y-1 who survived. The total number of MBO beneficiaries only in fiscal year y is then the sum of the number of MBO beneficiaries of all ages in fiscal year y. Finally, we averaged the number of MBO beneficiaries by averaging the prior fiscal year’s total and the current fiscal year’s total. To simulate future coal tax revenue, we used Treasury and EIA data to calculate (1) the amounts of underground and surface-mined coal taxed at fixed dollar amounts of $1.10 and $0.55 per ton, respectively, in 2015; (2) the amounts of underground and surface-mined coal taxed at variable dollar amounts per ton equal to 4.4 percent of the price in 2015; and (3) average prices of underground and surface-mined coal taxed at 4.4 percent of the price in 2015. We then used EIA data on projected amounts of total coal production, underground-mined coal production, lignite coal production, and coal exports, as well as projected average coal prices, for the period from 2015 through 2050 to simulate future coal tax revenues (see table 3). We simulated other Trust Fund expenditures and revenues, including administrative costs and debt repayments (see table 4). For our simulations, total Trust Fund expenditures are the sum of black lung benefits (cash assistance and medical benefits), total administrative costs, repayment of interest and principal on outstanding debt to Treasury’s general fund, and other expenditures. Total Trust Fund revenues are the sum of coal tax revenue and other miscellaneous revenue, and exclude annual borrowing from Treasury’s general fund. Annual borrowing from Treasury’s general fund is the difference between total Trust Fund expenditures and revenues and is assumed to be repaid with interest the following year. If total revenues are greater than total expenditures, then the Trust Fund has a balance and would not have to borrow that year. In this case, we assumed that the Trust Fund will earn interest on that balance at the same rate on which interest would accrue on annual borrowing. We simulated how the scheduled 2019 tax rate decrease and various options including adjusting the coal tax, forgiving debt interest, and forgiving debt principal and interest may affect Trust Fund finances through fiscal year 2050 (see table 5). The options listed are not intended to be exhaustive and we are not endorsing any particular option or combination of options. We simulated option combinations for coal tax rates, interest forgiveness, and debt forgiveness to demonstrate how potential financial adjustments could affect future Trust Fund borrowing from Treasury’s general fund through fiscal year 2050. For options that involve adjusting coal tax rates, we estimated the amount of debt that would need to be forgiven in fiscal year 2019 for the Trust Fund’s revenues to be sufficient to cover its expenditures through fiscal year 2050, assuming the Trust Fund does not borrow from Treasury’s general fund after fiscal year 2018. To do so, we first calculated the real discounted present value of Trust Fund expenditures for fiscal years 2019 through 2050, including benefit payments, administrative costs, legacy debt repayments, and repayment of annual borrowing from Treasury’s general fund. Second, we calculated the real discounted present value of Trust Fund revenue for the same period, including coal tax revenue and other miscellaneous revenue. Third, we calculated debt forgiveness as the difference between the real discounted present value of Trust Fund expenditures from the first calculation and the real discounted present value of Trust Fund revenues from the second calculation. When the amount of debt forgiveness is greater than the amount of debt outstanding, the Trust Fund would need an additional cash inflow in addition to forgiveness of all outstanding debt. Amounts of debt forgiveness less than zero suggest that no debt forgiveness is required. For options involving forgiving debt (interest or principal), we estimated the average tax per ton of coal that, if implemented in fiscal year 2019, would provide the Trust Fund sufficient revenue to cover its expenditures through fiscal year 2050, assuming the Trust Fund does not receive any advances from Treasury’s general fund after fiscal year 2018. To do so, we first calculated the real discounted present value of Trust Fund expenditures for the period from fiscal year 2019 through fiscal year 2050, again including benefit payments, administrative costs, legacy debt repayments, and repayment of annual borrowing from Treasury’s general fund, minus the real discounted present value of miscellaneous revenues for the same period. Second, we calculated the real discounted present value of coal production for the same period. Third, we calculated the average tax per ton of coal as the first amount divided by the second amount. To assess the sensitivity of each option, we ran each simulation 36 times using four different sets of assumptions about the numbers of future beneficiaries and nine different sets of assumptions about future coal production and prices (see table 6). Doing so provided a range of estimates about the Trust Fund’s future borrowing needs and provided insight on the sensitivity of its overall financial position relative to its various expenditures and revenues. The analysis also provided a range of estimates of the amount of debt forgiveness needed to bring the Trust Fund into balance by fiscal year 2050, assuming various coal tax rates, and the average tax collection per ton needed to do the same, and assuming various amounts of debt forgiveness. From the range of estimates that resulted from our sensitivity analysis, we selected cases with moderate expectations related to future Trust Fund expenditures and revenue. Specifically, for future expenditures, we assumed an average growth rate of new black lung beneficiaries for fiscal years 2003 through 2015 as a moderate case that reflects historical experience. For future revenue, we used a moderate coal production outlook based on EIA’s reference case, which reflects moderate expectations about future coal production based on various assumptions about economic growth, oil prices, technological innovation, and energy policy. We summarized the results of our simulations by showing the extent to which the Black Lung Disability Trust Fund’s (Trust Fund) balance—the sum of tax revenue and miscellaneous revenue less expenditures—may change in fiscal year 2050 for each option simulated. For example, with the scheduled 2019 tax rate decrease, our moderate case simulations suggest that the Trust Fund would likely have a deficit in fiscal year 2050 of about $15.4 billion. Multiple options could reduce the Trust Fund’s future debt and distribute the financial burden among the coal industry and general taxpayers. We simulated how various coal tax and debt forgiveness options could balance the Trust Fund by fiscal year 2050, whereby its simulated revenue would be sufficient to cover its simulated expenditures. We approached these simulations from two perspectives. First, we simulated how much Trust Fund debt would need to be forgiven based on various coal tax rates. Second, we simulated the average tax collected per ton needed to balance the Trust Fund by 2050, based on certain debt forgiveness options. For our first set of simulations, we calculated the amount of debt outstanding in fiscal year 2019 and the amount that would likely need to be forgiven in fiscal year 2019 for the Trust Fund to have sufficient revenues to cover its expenditures by fiscal year 2050, assuming that it does not borrow from Treasury’s general fund after fiscal year 2018. For example, before any options are implemented, our moderate case simulations suggest that the Trust Fund’s outstanding debt in fiscal year 2019—including both legacy debt and annual borrowing from Treasury’s general fund—would likely be about $6.6 billion (after discounting and adjusting for inflation). Therefore, with implementation of the coal tax rate decrease of about 55 percent as scheduled in calendar year 2019, about 117.7 percent of that debt would need to be forgiven to balance the Trust Fund. In other words, balancing the Trust Fund would require forgiveness of $6.6 billion and an additional cash inflow of about $1.2 billion because the Trust Fund will accrue additional debt from fiscal years 2020 through 2050, according to our moderate case simulations (see table 8). For our second set of simulations, we estimated the average tax per ton of coal that, if implemented in fiscal year 2019, would likely provide the Trust Fund sufficient revenues to cover its expenditures in fiscal year 2050, assuming that it does not borrow from Treasury’s general fund after fiscal year 2018. For example, if all principal and interest on Trust Fund legacy debt is forgiven, as of 2019, the estimated average tax that balances the Trust Fund is about $0.59 per ton (see table 9). Based on certain assumptions, this could be accomplished with a tax of $0.88 per ton on underground-mined coal and $0.44 per ton on surface-mined coal. In addition to the contact named above, Blake Ainsworth (Assistant Director), Justin Dunleavy (analyst-in-charge), Angeline Bickner, Courtney LaFountain, and Rosemary Torres Lerma made key contributions to this report. Also contributing to this report were James Bennett, Melinda Bowman, Lilia Chaidez, Caitlin Cusati, Holly Dye, Alex Galuten, Carol Henn, John Lack, Emei Li, Almeta Spencer, Kate van Gelder, and Shana Wallace.", "summary": "With revenue of about $450 million in fiscal year 2017, the Trust Fund paid about $184 million in benefits to more than 25,000 coal miners and eligible dependents. However, the Trust Fund also borrowed about $1.3 billion from the Treasury's general fund in fiscal year 2017 to cover its debt repayment expenditures. Adding to this financial challenge, the coal tax that supports the Trust Fund is scheduled to decrease by about 55 percent beginning in 2019. GAO was asked to review the financial positon of the Trust Fund and identify options to improve it. This report examines (1) factors that have challenged the financial position of the Trust Fund since its inception and (2) the extent to which Trust Fund debt may change through 2050, and selected options that could improve its future financial position. GAO reviewed Trust Fund financial data from fiscal years 1979 through 2017. GAO also interviewed officials from the Departments of Labor, Treasury, Health and Human Services (HHS) and representatives of coal industry and union groups. Using assumptions, such as the about 55 percent coal tax decrease and moderately declining coal production, GAO simulated the extent to which Trust Fund debt may change through 2050. GAO also simulated how selected options, such as forgiveness of debt, could improve finances. The options simulated are not intended to be exhaustive. Further, GAO is not endorsing any particular option or combination of options. GAO provided a draft of this report to DOL, Treasury, and HHS. The agencies provided technical comments, which were incorporated as appropriate. Multiple factors have challenged Black Lung Disability Trust Fund (Trust Fund) finances since it was established about 40 years ago. Its expenditures have consistently exceeded its revenues, interest payments have grown, and actions taken that were expected to improve Trust Fund finances did not completely address its debt. When necessary to make expenditures, the Trust Fund borrows with interest from the Department of the Treasury's (Treasury) general fund. Because Trust Fund expenditures have consistently exceeded revenue, it has borrowed almost every year since 1979, its first complete fiscal year, and as a result debt and interest payments increased. Legislative actions were taken over the years including (1) raising the rate of the coal tax that provides Trust Fund revenues and (2) forgiving debt. For example, the Energy Improvement and Extension Act of 2008 provided an appropriation toward Trust Fund debt forgiveness; about $6.5 billion was forgiven, according to Department of Labor (DOL) data (see figure). However, coal tax revenues were less than expected due, in part, to the 2008 recession and increased competition from other energy sources, according to DOL and Treasury officials. As a result, the Trust Fund continued to borrow from Treasury's general fund from fiscal years 2010 through 2017 to cover debt repayment expenditures. GAO's simulation suggests that Trust Fund borrowing will likely increase from fiscal years 2019 through 2050 due, in part, to the coal tax rate decrease of about 55 percent that will take effect in 2019 and declining coal production. The simulation estimates that Trust Fund borrowing may exceed $15 billion by 2050 (see figure). However, various options, such as adjusting the coal tax and forgiving interest or debt, could reduce future borrowing and improve the Trust Fund's financial position. For example, maintaining the current coal tax rates and forgiving debt of $2.4 billion could, under certain circumstances, balance the Trust Fund by 2050, whereby revenue would be sufficient to cover expenditures. However, a coal industry representative said that maintaining or increasing the coal tax would burden the coal industry, particularly at a time when coal production has been declining. Further, Treasury officials noted that the costs associated with forgiving Trust Fund interest or debt would be paid by taxpayers.", "document_type": "gao"}
{"report": "VA’s mission is to promote the health, welfare, and dignity of all veterans in recognition of their service to the nation by ensuring that they receive medical care, benefits, social support, and lasting memorials. In carrying out this mission, the department manages one of the largest health care delivery systems in the United States that provides enrolled veterans with a full range of services. These services may include primary care; mental health care; and outpatient, inpatient, and residential treatment. VHA, one of the department’s three major components, is responsible for overseeing the provision of health care at all VA medical facilities. IT is widely used and critically important to supporting the department in delivering health care to veterans. As such, VA operates and maintains an IT infrastructure that is intended to provide the backbone necessary to meet the day-to-day operational needs of its medical centers and other critical systems supporting the department’s mission. The infrastructure is to provide for data storage, transmission, and communications requirements necessary to ensure the delivery of reliable, available, and responsive support to all VA staff offices and administration customers, as well as veterans. Over nearly 2 decades, VA pursued multiple efforts to modernize VistA. However, these efforts were abandoned due to expectations of high costs and challenges to ensuring interoperability of health data. Beginning in December 2013, the department initiated VistA Evolution, a joint program between OIT and VHA that focused on implementing a collection of projects to improve the efficiency and quality of veterans’ health care. Specifically, it focused on modernizing the VistA system, increasing the department’s data exchange and interoperability with DOD and private sector health care partners, and reducing the time it takes to deploy new health information management capabilities. The VistA 4 Roadmap was the key plan that the department used to guide VistA Evolution. According to this plan, VistA Evolution was intended to result in lower costs for system upgrades, maintenance, and sustainment. As part of VistA Evolution, the department initiated work to, among other things, standardize VistA instances; expand the use and functionality of the Joint Legacy Viewer; and release enhancements to legacy scheduling, pharmacy, and immunization systems. For example, one focus of the VistA Evolution program over the last several years was to standardize a core set of the system’s modules which, according to the department, account for about 60 percent of VistA. As part of these efforts, the department implemented a process to assess variances in the system at individual sites. According to OIT officials, this process led to more standardization of the code, where possible, and also allowed sites to apply for a waiver if there was a need to continue to operate a nonstandardized VistA instance. Although VistA Evolution was intended to modernize aspects of the system through December 2018, the planned scope of work was reduced as VA redirected the department’s efforts. Specifically, in June 2017, the former VA Secretary announced a significant shift in the department’s approach to modernizing VistA. Rather than continue to use the system, the Secretary stated that the department planned to acquire the same EHR system that DOD is acquiring—Cerner Millennium. According to the department, it has chosen to acquire this product because Cerner Millennium should allow the entire department’s and DOD’s patient data to reside in one system, thus, potentially reducing or eliminating the manual and electronic exchange and reconciliation of data between two separate systems. Accordingly, the department awarded an indefinite delivery, indefinite quantity contract to Cerner in May 2018 for a maximum amount of $10 billion over 10 years. Cerner is to replace the 130 instances of VistA with a standard COTS system to be implemented across VA. This new system is to support a broad range of health care functions including acute care, clinical decision support, dental care, and emergency medicine. When implemented, the new system will be expected to become the authoritative source of clinical data to support improved health, patient safety, and quality of care provided by VA. The EHRM program is responsible for managing the Cerner contract implementation. As of June 2019, the department had issued eight task orders to Cerner to: provide project management and planning support services, conduct site assessments at the initial operating capability sites, host the Cerner system and supporting data, perform data migration and enterprise interface development, develop a functional baseline, deploy the Cerner system at the initial operating capability sites, analyze, design, and develop a technical baseline, and provide additional interface development. For fiscal year 2019, the program was appropriated about $1.1 billion for planning and managing the transition from VistA to Cerner. VA’s Office of the Deputy Secretary approves spending on EHRM activities according to the appropriation. Further, according to the department, funds are tracked as a major IT investment on the Office of Management and Budget’s Federal IT Dashboard. According to VA documentation, the EHRM program is to provide management support and the infrastructure modernization required to install and operate the new system. Further, the department has estimated that an additional $6.1 billion in funding, above the Cerner contract amount, will be needed to fund additional project management support supplied by outside contractors, government labor costs, and infrastructure improvements over the 10-year contract period. Each VA medical facility is expected to continue using VistA until the new system has been deployed. VA plans to deploy the new EHR system at three initial operating capability sites within 18 months of October 1, 2018, with a phased implementation of the remaining sites over the next decade. The three initial deployment sites, located in the Pacific Northwest, are the Mann- Grandstaff, American Lake, and Seattle VA Medical Centers and related clinical facilities that operate the same instances of VistA. These are the first locations where the system is expected to “go live.” The task order to deploy the Cerner system at the three initial sites provides a detailed description of the steps Cerner needs to take in order to reach initial operating capability at the Mann-Grandstaff site in March 2020, and at the Seattle and American Lake sites in April 2020. According to the schedule, the initial operating capability sites are expected to be operational by July 2020. In 2015, we designated VA health care as a high-risk area for the federal government, and we continue to be concerned about the department’s ability to ensure that its resources are being used cost-effectively and efficiently to improve veterans’ timely access to health care. In part, we identified limitations in the capacity of VA’s existing IT systems, including the outdated, inefficient nature of key systems and a lack of system interoperability, as contributors to the department’s challenges related to health care. In our 2019 update to the high-risk series, we stressed that VA should demonstrate commitment to addressing its IT challenges by stabilizing senior leadership, building capacity, and finalizing its action plan for addressing our recommendations and establishing metrics and mechanisms for assessing and reporting progress. We have also issued numerous reports over the last decade that highlighted the challenges facing VA in modernizing VistA and improving EHR interoperability with DOD. For example, Between July 2008 and January 2010, we issued a series of reports related to provisions included in the National Defense Authorization Act for Fiscal Year 2008 that required VA and DOD to, among other things, jointly develop and implement fully interoperable EHR systems or capabilities and establish an Interagency Program Office to be a single point of accountability for their efforts. These reports summarized progress made over time to set up the program office, but also noted that the office was not positioned to function as a single point of accountability for the delivery of the future interoperable capabilities that the departments were planning. In March 2011, the Secretaries of VA and DOD committed the two departments to the development of a new common integrated electronic health record (iEHR) system and, in May 2012, announced their goal of implementing it across the departments by 2017. However, in February 2014, we reported on the departments’ decision to abandon their plans for the iEHR. Specifically, we reported that the Secretaries of VA and DOD, citing challenges in the cost and schedule for developing the iEHR, had announced that they would not continue with the new system and would, instead, pursue separate efforts to modernize or replace their existing systems and work to ensure interoperability between them. Further, we reported that the departments had not addressed management barriers to effectively collaborate on their joint health IT efforts. We made recommendations regarding, among other things, developing a plan to describe the schedule, cost, and roles and responsibilities for the organizations within VA and DOD involved in acquiring, developing, and implementing the EHR systems. The departments agreed with these recommendations and took steps to address them. We reported in August 2015 that VA and DOD, with guidance from the Interagency Program Office, had taken actions to increase interoperability between their EHR systems. However, the office had not yet specified outcome-oriented metrics and established related goals that are important to gauging the impact that interoperability capabilities have on improving health care services for shared patients. As a result, we made several recommendations to VA and DOD to address these deficiencies and the departments agreed with them. VA, DOD, and the Interagency Program Office subsequently took actions that addressed the recommendations. In a June 2018 testimony, we noted that VA had undertaken important analyses to better understand the scope of VistA and identify capabilities that can be provided by the Cerner system. The department also had other key activities underway, such as establishing program governance and EHRM program planning. We noted that critical success factors could serve as a model of best practices that VA could apply to enhance the likelihood that the acquisition of the new system would be successfully achieved. Further, in a September 2018 testimony, we summarized our previously reported findings on the establishment and evolution of the DOD/VA Interagency Program Office, which has been involved in various approaches to increase health information interoperability between the departments. We noted that the office had not been effectively positioned to function as the single point of accountability for the departments’ EHR system interoperability efforts as called for in the National Defense Authorization Act for Fiscal Year 2008. As a result of these findings, we recommended that VA clearly define the role and responsibilities of the Interagency Program Office within the governance plans for acquisition of the department’s new EHR system. The department agreed with the recommendation and stated that the Joint Executive Council, a joint governance body comprised of leadership for both VA and DOD, had approved a role for the office. However, as of June 2019, additional work was ongoing to clarify the role of the Interagency Program Office in VA’s EHR acquisition. In order to maintain internal control activities over an IT system and its related infrastructure, organizations should be able to define physical and performance characteristics of the system, including descriptions of the components and the interfaces. Further, consistent with GAO’s Cost Estimating and Assessment Guide, a comprehensive system definition should identify customization and the environment in which the system operates. While defining a complex IT system can be challenging, having an adequate understanding of its characteristics will better position the organization to comprehensively project and account for costs over the life of a system or program as well as identify specific technical and program risks. Definition of VistA remains important because VA plans to continue using the system during the department’s decade-long transition to the Cerner system. VA maintains multiple documents and a database that describe parts of VistA, including various components and interfaces. However, despite these existing sources, OIT officials acknowledged that there is no comprehensive definition of the VistA system. Consequently, VA has completed a number of efforts to better define VistA and understand the environment in which it operates and additional work is planned in the future. Specifically, VA has documented descriptions of the system, including the components that comprise it. These descriptions are documented in multiple sources: the VA Monograph, VA Systems Inventory, and VA Document Library. The VA Monograph is a document maintained by OIT that provides an overview of VistA and non-VistA applications used by VHA. According to VHA officials, the VA Monograph is the primary document that describes the components of the system. The Monograph describes VistA in terms of modules. For modules identified, including VistA modules, information such as the associated business functions, VA Systems Inventory identification number, and a link to the VA Document Library for additional technical information are provided. The VA Systems Inventory is a database maintained by OIT that identifies current IT systems at the department, including systems and interfaces related to VistA. For systems identified, the database includes information such as the system name, the system status (i.e., active, in development, or inactive), and related system interfaces. The VA Document Library is an online resource for accessing documentation (i.e., user guides and installation manuals) on the department’s nationally released software applications, including VistA. VA has also taken steps to further define the system in its efforts to understand VistA and the environment in which it operates. For example, EHRM program officials recognized the need to further understand the customization of VistA components at the various medical facilities and have conducted analyses to do so. These analyses include: Variance analysis: As part of its VistA Evolution program, which has focused on standardizing a core set of VistA functionality, the department implemented a process to compare the instances of VistA installed at sites to the Enterprise Standard version. The results of this analysis allowed the department to assess the criticality of each variance, which is expected to help with VA’s transition to the Cerner system. Module analysis: EHRM program subject matter experts undertook an analysis that involved reviewing and assessing capabilities provided by VistA modules. This analysis enabled department officials to determine whether the capability provided by a VistA module could be provided by the Cerner system, or whether another COTS solution would be required to support this function going forward. Visual mapping: EHRM program officials also directed an analysis that involved developing a notional visual mapping of VA’s health care applications, components, and supporting systems within the health delivery environment. The results of this analysis provided a description of the current state of one instance of VistA and the VA health environment, which is intended to inform the department of possible opportunities for business process and IT improvements as it proceeds with the Cerner acquisition. Nevertheless, even with these analyses, VA has not yet fully defined VistA, including, for example, identifying performance characteristics of the system and describing the environment in which it operates. The department’s three sources that describe VistA and the additional analyses undertaken do not provide insight into site specific customizations of the system. For example, the VA Monograph does not include information on module customization at local facilities. In addition, according to OIT officials, the systems inventory does not reflect differences among the 130 different instances of VistA and does not take into consideration regional and local customizations of related components. Further, the visual mapping analysis noted that there was not full insight of the intertwined structure of data and applications or the various local customizations of VistA. EHRM program officials stated that they have not been able to fully define VistA and understand all local customizations due to the decentralization of the development of the system and its evolution over more than 30 years. They explained that VistA’s complexity is partly due to the various instances of the system, compounded by local customizations, which have resulted in differences in VistA instances operating at various facilities. According to EHRM program documentation, Cerner’s contract calls for the company to conduct comprehensive assessments to capture the current state of technical and clinical operations at specific facilities, as well as identify site-specific requirements where the Cerner system is planned to be deployed. As of June 2019, Cerner had completed site assessments for the three initial operating capability sites in the Pacific Northwest and had planned additional assessments at future deployment sites. The initial site assessments included, among other things, an assessment of the unique VistA instances and the environment in which the system operates. The continuation of planned site assessments should provide a thorough understanding of the 130 VistA versions, help the department better define VistA, and position it for transitioning from VistA to Cerner’s COTS solution. When using public funds, an agency must employ effective management practices in order to let legislators, management, and the public know the costs of programs and whether they are achieving their goals. To make those evaluations for a program or for a system as large and complex as VistA, a complete understanding of the system and reliable cost information is required. By following a methodology and utilizing reliable data, an agency can ensure that all costs are fully accounted for, which in turn, better informs management decisions, establishes a cost baseline, and enhances understanding of a system’s performance and return on investment. Fundamental characteristics of reliable costs are that they should be accurate (unbiased, not overly conservative or optimistic), well- documented (supportable with source data, clearly detailed calculations, and explanations for choosing a particular calculation method), credible (identifying any uncertainty or biases surrounding data or related assumptions), and comprehensive (costs are neither omitted nor double counted). Identification of VistA’s costs remains important because VA plans to continue using the system during the department’s transition to the Cerner system over the next decade. VA identified costs for VistA and its related activities adding up to approximately $913.7 million, $664.3 million, and $711.1 million in fiscal years 2015, 2016, and 2017, respectively—for a total of about $2.3 billion over the 3 years. However, of the $2.3 billion, the department was only able to demonstrate that approximately $1 billion of these costs were reliable. The department could not sufficiently demonstrate the reliability of the remaining approximately $1.3 billion of VistA costs that it identified. In addition, VA identified other categories of VistA-related costs, but omitted these costs from the total. Of the $2.3 billion total costs for VistA, VA demonstrated that only approximately $1 billion of these costs were reliable. Specifically, OIT officials identified VistA-related costs within seven categories. The officials were able to sufficiently explain why these categories were included in the development and sustainment costs for VistA and how they were documented by the department; the officials also presented detailed source data for our examination. As a result of our review, we determined that the cost data for these seven categories were accurate, well-documented, credible, and comprehensive and, thus, sufficiently reliable. Table 1 provides a summary of the program costs identified for VistA by OIT and VHA for fiscal years 2015 through 2017 that we determined to be reliable. As shown in the table, VA identified costs for the following seven categories for fiscal years 2015 through 2017: VistA Evolution – The VistA Evolution program costs were associated with VistA strategy, system design, product development, and program management. These costs totaled approximately $549.6 million. Interoperability – The Interoperability program focused on sharing electronic health data between VA and non-VA facilities, including private sector providers and DOD. For example, interoperability costs were associated with architecture, strategy, the Interagency Program Office, product development, and program management. These VistA-related costs totaled approximately $140.2 million. Virtual Lifetime Electronic Record (VLER) Health – This program focused on streamlining the transition of electronic medical information between VA and DOD. These VistA-related costs were associated with product development and program management and totaled approximately $81.2 million. Contracts – Contract costs for VistA Evolution included VHA’s obligations associated with workload management, change management, clinical requirements, and clinical interoperability. These VistA-related costs totaled approximately $202.8 million. Intergovernmental personnel acts – Intergovernmental personnel acts are agreements for the temporary assignment of personnel between the federal, state, and local governments; colleges and universities; Indian tribal governments; federally funded research and development centers; and other eligible organizations. These costs accounted for VHA’s need to use outside experts from approved entities for limited periods of time to work on VistA Evolution assignments. The total VistA-related costs were approximately $2.4 million. Memorandums of understanding – According to VHA, memorandums of understanding are agreements used by the administration to obtain the services of personnel between VA entities for VistA-related activities. These agreements accounted for approximately $2.3 million. Pay – Costs in this category included salaries for VHA staff who worked on VistA-related projects as well as travel, training, and supply costs associated with employment. These costs totaled approximately $34.1 million. However, VA was not able to sufficiently demonstrate the reliability of approximately $1.3 billion in costs related to VistA. Specifically, OIT officials identified the additional legacy VistA costs of $1.3 billion that generally fell into three categories: Legacy VistA: Infrastructure, hosting, and system sustainment – Legacy VistA costs are generally related to the maintenance of fully operational items, such as VistA Imaging and Fileman—two key components related to VistA’s operation. The costs also included obligations for costs related to hosting health data in both VA and non-VA facilities. The OIT officials and subject matter experts estimated these total costs to be approximately $343 million during fiscal years 2015 through 2017. However, we were not able to determine the reliability of these costs because, for example, source data were not well documented; changes in the cost information provided to us during our review indicated that the cost data may not be credible; and subject matter experts were unclear about how to separate VistA costs from non- VistA costs. Related software – Related software costs are associated with the software supporting or closely integrated with VistA that were identified by EHRM officials, yet not tracked directly for one of the VistA-related programs. Both OIT and VHA identified software licensing costs as VistA-related obligations. The EHRM program reported these costs to be approximately $389 million in total during fiscal years 2015 through 2017. However, we were not able to determine the reliability of the costs in this category for a variety of reasons, including that source data were not well documented. In addition, VA officials were not clear regarding how the total amounts in each category should be divided between OIT and VHA. Given this confusion, we were not able to determine if the costs were fully accurate or credible. OIT personnel (pay and administrative) – According to EHRM officials, OIT does not track labor costs by program. Instead, the department provided estimations of the amount of salaries paid to OIT government staff working on activities such as VistA Evolution, program management, and overall support of VistA and related applications. OIT personnel costs were estimated by the EHRM program office to be approximately $544 million total during fiscal years 2015 through 2017. However, we were not able to determine the reliability of costs in this category because assumptions made for estimating the personnel and salary costs were not well documented and could not be verified. In addition, VA omitted certain VistA costs from the total costs identified for fiscal years 2015, 2016, and 2017. Specifically, VA omitted the following costs: Additional hosting – OIT officials stated that additional costs related to hosting health data by an outside vendor, as well as hosting backup VistA instances at each of the medical center sites, should also be included in the total costs for VistA; however, VA omitted these costs from the total for fiscal years 2015 through 2017. Specifically, according to the officials, calculating costs for these hosting activities requires subject matter experts to identify equipment, space, utilities, and maintenance costs for resources allocated specifically for VistA. However, the department has not yet developed a methodology to calculate the costs. The officials said they were working on identifying a reliable approach for calculating these costs in the future. Data standardization and testing – OIT officials stated that additional costs related to work on clinical terminology mapping and functional testing were not included in the total costs for VistA for fiscal years 2015 through 2017. This work related to mapping existing clinical data to national standards and making updates to VistA or the Joint Legacy Viewer and included mapping data and building test scripts and reports. OIT officials noted that this work had been critical to the VistA Evolution program, but they did not provide actual cost data in this category. The lack of sufficiently reliable and comprehensive costs indicates that the department is not positioned to accurately report the annual costs to develop and sustain VistA. This is due, in part, to the fact that VA has not followed a well-documented methodology that describes how the department determined the total costs for the system. In lieu of a methodology, OIT officials said that leadership and staff from the program took efforts to identify and track the cost components and contracts associated with the system. However, they noted that costs associated with VistA were not all clearly labeled as VistA in an IT system and it was necessary to estimate other costs. The officials were also unable to verify how VistA-related costs were separated from other department costs in all areas and subject matter experts were not consistently familiar with the estimation methods employed and how VistA was defined for the purposes of calculating costs. Further, VA officials noted that they were still working on the best approach to identifying and calculating omitted costs. Without documenting the methodology for what costs are to be included and how they were identified and calculated, VA’s total does not accurately reflect the development and sustainment costs for VistA. As a result, the department, legislators, and the public do not have the comprehensive, reliable information needed to understand how much it actually cost to develop and maintain the system. Further, VA does not have the reliable information needed to make critical management decisions for sustaining the many versions of VistA over the next 10 years until the Cerner system is fully deployed. VA has initiated a number of actions to prepare for the transition from VistA to the Cerner system. These actions include (1) taking steps to establish a program office reporting to senior agency management, (2) forming a governance structure, (3) conducting assessments at initial system deployment sites, (4) preparing program plans, and (5) setting an initial program baseline. These activities represent important initial steps to prepare for the transition to the new system. The program office is working to hire staff and establish a joint governance structure to coordinate with DOD on the departments’ efforts to implement the Cerner system. Strong agency leadership support is a key factor that can increase the likelihood of a program’s success. For example, senior leadership can define a vision for the program and intervene when there are difficulties. Such leadership can come from the establishment of a program office with staff reporting to senior agency management. VA took steps to establish a program office, under the leadership of the VA Deputy Secretary, to support the contract negotiations between the department and Cerner. Toward this end, in January 2018, the department moved the EHRM program office from OIT to directly report to the VA Deputy Secretary. Then, after the contract with Cerner was awarded in May 2018, a new program office—the Office of Electronic Health Record Modernization—was established in June 2018 to plan and implement the EHRM program. The office is intended to coordinate with OIT and VHA leadership—specifically, VA’s CIO and VHA’s Under Secretary for Health—under the direction of an Executive Director. The Executive Director reports directly to the VA Deputy Secretary. Reporting to the Executive Director is the Deputy Executive Director, whose responsibilities include supporting the program’s execution and management, ensuring the program’s direction is in alignment with VA’s desired outcomes, and identifying strategic challenges related to the program. The Office of Electronic Health Record Modernization also includes three management structures: The Chief Medical Office is responsible for overseeing strategy and planning efforts for change management, user testing and training, and business process re-engineering. It also leads communication efforts for the end users and deployment. The Technology and Integration Office is responsible for providing technical leadership, management, and oversight of IT. As such, the office approves technical requirements and supports interoperability with DOD, as well as performs information security, architecture, data migration and management, configuration management, infrastructure engineering, transition and data engineering, and development. The Program Management Office is responsible for, among other things, providing program control support for the scope, schedule, quality, and risk management for the EHRM program; human resources support for the Office of Electronic Health Record Modernization government staff; financial management for operating plans, budgets, cost estimates and reporting; test and evaluation support; and oversight of contracts providing staffing to the EHRM program. As of May 2019, VA was still working to fully staff the Office of Electronic Health Record Modernization. Figure 1 shows the organization of the Office of Electronic Health Record Modernization. According to program officials and the Office of Electronic Health Record Modernization organization chart, the office is expected to be staffed by 289 government employees. These positions are expected to be filled by April 2020 and represent the staff required for the program to achieve its initial operational capability. According to the program’s January 2019 hiring plan, the office had begun its process to reassign staff and hire additional government employees. VA also awarded a contract for program management support. According to EHRM program officials, the support contractor is to supplement the Office of Electronic Health Record Modernization staff with program and project management support, technical support, community care support, and executive support and internal communications, among other areas. The support contractor provides about 370 personnel to deliver project management support. The contractor reported as of January 2019 that it had achieved the following accomplishments, among others: Developed a Project Readiness Assessment Report including roles, schedules, risk, and measures of success within the Chief Medical Office. Developed a survey to identify key clinical priorities for data migration related to patient safety and clinical quality. Coordinated the site visit schedule and logistics with initial operating capability sites and conducted site surveys at eight outpatient clinics. By establishing a program office reporting to the Deputy Secretary, VA has begun to build a framework to demonstrate senior agency management support of the program. Establishing the program office also focuses oversight and program management of the EHRM program. Implementing collaborative governance brings together key agency executives to discuss investment performance and increases accountability. In addition, it is critical for program officials to be actively engaged with stakeholders to ensure the success of a major acquisition. The department has established a governance structure that includes multiple levels of governance bodies and stakeholders. In addition, VA has prepared charters for the governance boards and identified board membership. According to the charters for the governance bodies, the structure is intended to address technical and functional issues, as well as any joint management issues that arise between VA and DOD as both departments implement the Cerner EHR. As of January 2019, the EHRM program governance structure was comprised of a Steering Committee, Governance Integration Board, Functional Governance Board, Technical Governance Board, and EHR Councils. EHRM program officials have stated that the charters for these boards, which describe their membership and responsibilities, will continue to evolve as the program matures. The Steering Committee, the highest board in the program governance structure, advises the VA Secretary on the progress and performance of the EHRM program toward meeting program goals and outcomes and providing strategic direction on program implementation. This committee is chaired by the Deputy Secretary of VA. Voting members of the committee include, among others, the VA CIO and the Under Secretary for Health. According to the draft charter, the Steering Committee is expected to resolve any items that cannot be resolved at the level of the next lower-level board and is to meet at least quarterly. However, as of January 2019, the Steering Committee had not met. According to program officials, other reviews, such as a monthly program review with the Deputy Secretary, beginning in November 2018, have provided executive-level oversight of the EHRM program and have met the purpose of the Steering Committee. The Governance Integration Board is responsible for integrating and communicating efforts across all lower program governance boards (including the Functional Governance Board and the Technical Governance Board) to meet program goals and milestones. The board has three voting members: the Office of Electronic Health Record Modernization Executive Director, the Assistant Deputy Under Secretary for Health, and the Principal Deputy Assistant Secretary for OIT. According to the charter, this board is expected to act as arbitrator between clinical, technical, and budget priorities and adjudicate items that cannot be resolved at the lower-level boards. In addition, the Governance Integration Board serves as the EHRM program Configuration Control Board. According to the charter, the board is to meet on a monthly basis. According to program officials and meeting minutes, as of January 2019, the Governance Integration Board had met six times. The Functional Governance Board is responsible for providing guidance on the functional and business community needs for the EHR modernization efforts. This board interacts with the Technical Governance Board as a functional and business advisor. The Functional Governance Board is chaired by the program office’s Chief Medical Officer and includes members from a variety of VHA functional areas (e.g., nursing, community care, and patient safety). According to the charter, the board is to meet on a biweekly basis and is to provide guidance to address functional decisions escalated from the EHR Councils. According to program officials and meeting minutes, as of January 2019, the Functional Governance Board had met 10 times. The Technical Governance Board is responsible and accountable for all decisions related to EHRM program technical transformation efforts. The board is expected to provide technical decision recommendations and collaborate with DOD and other external partners. The chair of this board is the Office of Electronic Health Record Modernization’s Chief Technology and Integration Officer. Other voting members include an OIT CIO representative and selected technical directors from within the Office of Electronic Health Record Modernization. The board’s draft charter specifies that it is to meet on a biweekly basis. According to EHRM program officials, as of January 2019, the Technical Governance Board had met 16 times. The EHR Councils are working groups comprised of subject matter experts from both clinical and functional (i.e., business) domains that are to work with Cerner to provide input and recommendations for developing and validating standard workflows. As of October 2018, a total of 12 councils had been established to address clinical processes and six councils had been established to address business processes. A total of 121 VHA field office staff and 100 VHA central office staff were appointed to these councils. In addition, the councils have eight planned national workshops and seven planned local workshops. These workshops are ongoing and are expected to be completed by October 2019. According to program officials, the national workshops are intended to establish a national baseline for workflow configuration decisions. The local workshops are to review the national baseline and make integration decisions to suit local needs. Figure 2 depicts the relationships among VA’s EHRM program governance bodies. In addition to the program’s governance, the Secretaries of VA and DOD issued a joint memorandum in September 2018 asserting the need to establish a joint management structure, which could have responsibilities beyond those currently within the purview of the Interagency Program Office. According to the agency officials, the joint management structure will be expected to leverage lessons learned by DOD from its experience in deploying the Cerner system, such as the timing of infrastructure upgrades. Further, in December 2018, the departments chartered a Joint Electronic Health Record Modernization Work Group to assess the departments’ existing EHR modernization strategies and efforts. According to its charter, the work group is also intended to develop and design recommended approaches, processes, and organizational structures to optimize the use of the departments’ resources in pursuit of EHR interoperability objectives. The joint working group is to develop short- and long-term recommendations to support four objectives to provide: a single accountable authority to facilitate decision-making and an organizational structure to support the delivery of a single, coordinated clinical and business workflows; and a coordinated implementation plan and detailed timelines. According to EHRM program officials, the joint working group is to define the joint management structure to be used to coordinate between the departments. According to the charter, the goal is for the recommended joint organization to be operational by the end of September 2019. As previously discussed, according to EHRM program officials, the department determined that site-specific assessments are required to allow Cerner to appropriately identify the requirements for system implementation at each site. To refine the scope of work required for initial operating capability, Cerner and the department conducted assessments, beginning in July 2018, at the three sites identified to be part of the initial operating capability of the program. These site assessments included, among other things, an assessment of the IT infrastructure at each site and identification of site-specific requirements. Additional site assessments are planned at every facility before the Cerner system will be deployed at each location. According to the task order, the assessments are expected to provide perspective on the current state of technical and clinical operations of each facility beyond VA’s current documentation. For example, Cerner is expected to document all interfaces with medical devices, third-party systems and other data sets at each site, as well as update monthly a site readiness checklist to inform comprehensive deployment planning. According to the assessments of the three initial operating capability sites, a number of issues have been identified such as updating or replacing infrastructure and workstations to be compatible with the Cerner COTS system. In addition, according to the site assessments, the services offered by the department, such as telehealth and behavioral health, are generally more expansive than commercial deployments and will require increased collaboration between VA and Cerner to meet business and system requirements. Thus, the assessments are intended to position Cerner and the department to have more information readily available in order to better plan for site-specific issues prior to actual implementation. Program planning is critical for ensuring effective management of key aspects of an IT program and serves as the basis for controlling and managing project performance. These key aspects include, for example, identification of the program’s scope, responsible organizations, costs, and schedules. The Office of Electronic Health Record Modernization Executive Director approved an initial Program Management Plan for the EHRM program in November 2018. According to the plan, it is to be used to guide the management of the EHRM program and defines the program’s policies and processes necessary to achieve the program’s goals. It briefly defines the program’s scope and strategy, including the assumptions made. For example, according to the plan, the EHRM program assumes that VA and DOD will use a single instance of the Cerner system. Further, it states that both the legacy VistA data and EHRM data will be available to both VistA and new system users during the transition. The Program Management Plan also identifies a series of subordinate plans that have been developed to further elaborate on specific program planning and execution activities. For example, the plan summarizes the Deployment Management Plan, which details the strategy and tasks required from initial site assessment through configuration, testing, training, change management, deployment, and transition to sustainment. The plan also describes the Schedule Management Plan, which defines the development and maintenance of the integrated master schedule for the life of the program. Thus, the Program Management Plan provides the guidance for where to look for key planning information for the department. The EHRM program also developed a draft Risk Management Plan, dated September 2018, that defines how risk and issue planning, analysis, and management are to be implemented. The draft risk management process consists of risk identification and mitigation, including conducting risk management planning, identification, analysis, response planning, response identification, and monitoring. According to the plan, management of overall program risk is intended to keep risk exposure within an acceptable range and maximize the likelihood of achieving overall objectives. In addition, the EHRM program developed plans for change management, communications, and training activities to ensure that VA clinicians, staff members, volunteers, and veterans understand and are ready for the changing systems and processes that will impact them. The initial versions of the plans were delivered by Cerner in November 2018. The program’s approach is to continue to evolve these plans as the program matures. By developing these program plans, VA is taking steps to ensure effective management of key aspects of the EHRM program. Baselined program plans act as a guide throughout the life of an investment to provide a basis for measuring performance, identify who is accountable for the deliverables, describe the implementation approach and interdependencies, identify key decisions, and embed quality assurance and reviews. Ultimately, baseline management demonstrates that a project is under financial and managerial control. According to EHRM program officials, on October 30, 2018, the program conducted a review of the time period from contract award through initial operating capability. The review validated the scope of the program for the transition of VistA to the initial operating capability sites, identified an initial work breakdown structure, and included an integrated master schedule and a cost baseline. The results of this review established a baseline for the initial operating capability and changes to the baseline are subject to change control. Also, as a result of the review, the Office of Electronic Health Record Modernization is to conduct monthly program reviews to inform the Deputy Secretary of the status of the EHRM program. According to EHRM program officials, upgrades to the IT infrastructure are to be accomplished by OIT, and the local area network infrastructure is to be upgraded at all initial operating capability sites prior to implementation of the new system. As baselined, upgrades of end user devices are scheduled to be completed at the Mann-Grandstaff site by September 2019, the American Lake site by October 2019, and the Seattle site by November 2019. Program officials have stated that the goal is to have infrastructure upgrades at a site completed 6 months before the site begins to implement the Cerner system. However, in May 2019, EHRM program officials indicated that infrastructure updates may be delayed for the initial sites by up to 3 months. After an evaluation of the initial operating capability, the EHRM program is to determine whether the minimum operational capabilities have been achieved. Figure 3 shows a timeline of the baselined implementation milestones for the initial sites, established at the review held in October 2018. The baseline review also included identifying and addressing program risks related to the Cerner system implementation. The review identified 10 program risks, prioritized the risks by probability and impact, and assigned mitigation plans for the risks. For example, the review identified the risk that if required infrastructure upgrades were not implemented, then VA would not be able to deploy a fully operational EHR system. The program identified development of acquisition strategies to address infrastructure requirements from the site assessments as an action to mitigate this risk. By establishing a program baseline for the initial operating capability, VA has instituted a basis for measuring actual versus planned program performance. In addition, the risk mitigation plans provide an approach to address the identified risks. VA lacks a comprehensive definition of the VistA system that captures the complexity of the system, the environment in which it operates, and the local customizations that have evolved in the VistA instances over many years. Consequently, VA has engaged in efforts to provide additional insight into the system. The department plans to continue to conduct comprehensive site-specific assessments with Cerner to refine its understanding of the unique VistA instances and the environment in which the system operates. The continuation of planned site assessments should help VA better define VistA. With regard to calculating costs for VistA, the department has identified reliable costs for approximately $1 billion in development and sustainment for the system over 3 fiscal years. However, VA was not able to sufficiently demonstrate the reliability of an additional $1.3 billion of costs identified and omitted other relevant costs from the total. The cost deficiencies existed largely because VA officials were uncertain about what to identify as part of VistA; documentation related to certain categories of costs was incomplete; and a documented methodology for identifying and reporting those costs does not exist. As a result, VA lacks the comprehensive and reliable cost information needed to make critical management decisions for sustaining the system and ensuring an accurate basis for reporting on the return on its investment for replacing VistA. VA has taken a number of actions to prepare for the transition from VistA to the Cerner system, such as establishing and beginning to staff a program office, forming a governance structure, conducting site assessments at initial sites, preparing program plans to guide the initial implementation, and setting an initial program baseline to help guide implementation of the system at three key sites. The Secretary of VA should direct the Under Secretary for Health and the Assistant Secretary for Information and Technology/Chief Information Officer to develop and implement a methodology for reliably identifying and reporting the total costs of VistA. The methodology should include steps to identify the definition of VistA and what is to be included in its sustainment activities, as well as ensure that comprehensive costs are corroborated by reliable data. (Recommendation 1) VA provided written comments on a draft of this report. In its comments (reprinted in appendix II), the department generally agreed with our conclusions and concurred with our recommendation. The department stated that it will provide the actions it plans to take to address the recommendation within 180 days. VA also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of VA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Our objectives were to: (1) determine the extent to which the Department of Veterans Affairs (VA) has defined the Veterans Health Information Systems and Technology Architecture (VistA), (2) evaluate VA’s annual costs to develop and sustain VistA, and (3) describe the actions VA has taken to transition from VistA to the Cerner system. To address the first objective, we examined VA documentation including the VA Monograph, reports from the VA Systems Inventory, and documents listed in the VA Software Document Library. These documents were cited by VA officials as sources that define the VistA system and provide information on modules and interfaces. Our review and compilation of information from these three sources enabled us to describe the various sources used at the department to document information about the VistA system and identify the limitations of each source. We also examined the VistA Product Roadmap, which described modernization plans and achievements related to VistA. Further, we interviewed officials from the Veterans Health Administration (VHA) to obtain information on additional efforts undertaken by the department to further understand and define VistA. In addition, we reviewed program documentation related to three analyses undertaken by VA to further define VistA. These analyses included the department’s efforts to ascertain variances between versions of VistA, identify components of VistA to be replaced by the Cerner System, and document the current state of a sample instance of VistA. For example, we examined VA documentation that described software modules available in the department’s VistA product and program documentation identifying components of VistA to be replaced by the Cerner system. In addition, our review of a visual mapping developed for Electronic Health Record Modernization (EHRM) program officials depicting the environment in which VistA operates allowed us to describe the size and complexity of the system and how it is used by the department. Further, we compared the extent to which VA has defined VistA with criteria for defining information technology (IT) systems described in GAO’s Standards for Internal Control in the Federal Government and our Cost Estimating and Assessment Guide. In addition, we reviewed EHRM program documentation related to site assessments that have taken place at initial operating capability sites and are planned for future sites. Specifically, we reviewed the relevant contract task order to understand how site assessments were planned and to identify site-specific gaps between the current VistA system in use and the target future Cerner system. We supplemented our documentation reviews with information obtained through interviews with officials from VA’s Office of Information and Technology (OIT), VHA, and the EHRM program office. To address the second objective, we examined department documentation of costs associated with the development and sustainment (operation and maintenance) of VistA for fiscal years 2015, 2016, and 2017. These 3 fiscal years were selected because development and sustainment cost information for full fiscal years should have been available during the time period in which we conducted our evaluation. To compile the total costs, we examined all categories of costs identified by VA to determine reliability of the source data. We also discussed the methodology VA used related to identifying costs and estimating costs when source data was not available with officials from the EHRM program. We compared the identified cost data to best practices described in GAO’s Cost Estimating and Assessment Guide that are the basis for effectively capturing reliable program costs. The guide also describes the importance of documenting the methodology by which costs are included and how they are calculated in detail, step by step, to provide enough information so that someone unfamiliar with the program could easily recreate or update cost calculations. Specifically, we analyzed all cost documentation provided by the department over the course of our work. For example, OIT officials identified VistA costs tracked under three programs—VistA Evolution, Interoperability, and Virtual Lifetime Electronic Record (VLER) Health– and VHA officials reported that costs for the system were tracked separately from OIT through various types of contracts and agreements associated with VistA Evolution. In regard to the OIT and VHA program data, VA provided detailed source data that we analyzed for reliability and verified the calculations of costs identified over the course of our work. We also examined the documentation and controls related to the IT systems VA identified as the source of these cost data. The systems included OIT’s Budget Tracking Tool and VA’s Financial Management System. Further, we discussed the nature of the cost data, the rationale behind why each cost line item was included, and any anomalies found during our analysis with cognizant OIT and VHA officials. For example, anomalies included omitted contract numbers or transposed entries in summary tables. As a result of these efforts, OIT and VHA were able to sufficiently demonstrate the reliability of the program data for the purpose of calculating costs for VistA. Officials from the EHRM program also identified costs that were not directly tracked under the program areas previously mentioned. OIT and VHA relied upon subject matter experts or vendors to identify costs or to calculate estimates for cost categories such as sustainment, maintenance, co-location, hosting, pay, administrative, and infrastructure costs related to VistA operations. We analyzed the data provided for reliability consistent with GAO Cost Estimating and Assessment Guide over the course of our work. Further, we discussed the nature of the cost data, the rationale behind why each cost line item was included, and any anomalies found during our analysis with cognizant OIT and VHA officials. We also interviewed OIT and VHA subject matter experts and vendors identified by VA to examine the rationale or methodology for how the costs were identified and estimated. During the course of our work, VA continued to revise these estimates as part of the department’s efforts to identify the costs for VistA and could not provide a consistent, documented methodology for how the costs were calculated or provided only summary costs that could not be analyzed. As such, VA was not able to sufficiently demonstrate the reliability of legacy VistA, related software, and OIT personnel costs for our purpose of calculating the total costs for VistA. This report does not conclude that the data are unreliable, only that a reliability determination could not be made during the course of our work. However, given the importance of these related costs to VistA, we have summarized and reported these costs in the total cost amount for VistA to more accurately approximate the magnitude of total costs, but have not reported itemized costs in these areas. Finally, the department identified that there were additional costs that should be included in the compilation of the total costs for VistA related to additional hosting costs and data standardization and testing. However, the department did not provide such data to include in the total costs for VistA. To address the third objective, we examined the department’s decision memorandums and charters establishing the Office of Electronic Health Record Modernization and the EHRM program to manage VA’s transition from VistA to Cerner. We also examined the statement of work for the program support contract as well as VA’s draft charters, program briefings, and organization charts that describe plans to govern the program to acquire the Cerner system. Specifically, we examined VA’s plans to establish a structure for governing technical and functional issues and joint decisions that arise with the Department of Defense. To understand how site assessments were used to refine the scope of work, we examined the site assessment task order and the site assessment reports. To understand how the program office plans to manage the program, we examined the EHRM Program Management Plan and subordinate plans that guide the management of the program and describe ongoing efforts to define the policies and processes necessary to achieve the program’s goals. To address the program’s establishment of an initial program baseline, we examined the decision memorandum approving the award of the Cerner contract, the briefings presented to program stakeholders at the initial program baseline review, and the documents supporting the program baseline review. We supplemented our analysis with information obtained through interviews with relevant department officials including the Executive Director and Chief Technology and Integration Officer for the EHRM program. We conducted this performance audit from August 2017 to July 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Mark Bird (Assistant Director), Jennifer Stavros-Turner (Analyst in Charge), John Bailey, David Blanding, Chris Businsky, Juaná Collymore, Rebecca Eyler, Jacqueline Mai, Scott Pettis, and Charles Youman made key contributions to this report.", "summary": "VA provides health care services to approximately 9 million veterans and their families and relies on its health information system—VistA—to do so. However, the system is more than 30 years old, is costly to maintain, and does not fully support exchanging health data with DOD and private health care providers. Over nearly 2 decades, VA has pursued multiple efforts to modernize the system. In June 2017, the department announced plans to acquire the same system—the Cerner system—that DOD is implementing. VA plans to continue using VistA during the decade-long transition to the Cerner system. GAO was asked to review key aspects of VistA and VA's plans for the new acquisition of the Cerner system. The objectives of the review were to (1) determine the extent to which VA has defined VistA, (2) evaluate VA's annual costs to develop and sustain VistA, and (3) describe the actions VA has taken to transition from VistA to the Cerner system. GAO analyzed documentation that defines aspects of VistA and identifies components to be replaced; evaluated the reliability of cost data, including obligations associated with the development and sustainment of VistA for fiscal years 2015, 2016, and 2017; and reviewed program documentation related to VA's program, governance, and plans to transition to Cerner. The Department of Veterans Affairs (VA) has various documents and a database that describe parts of the Veterans Health Information Systems and Technology Architecture (VistA); however, the department does not have a comprehensive definition for the system. For example, VA has identified components that comprise VistA, identified interfaces related to the system, and collected system user guides and installation manuals. VA has also conducted analyses to better understand customization of VistA components at various medical facilities. Nevertheless, the existing information and analyses do not provide a thorough understanding of the local customizations reflected in about 130 versions of VistA that support health care delivery at more than 1,500 sites. Program officials stated that they have not been able to fully define VistA due to the decentralization of the development of the system for more than 30 years. Cerner's contract to provide a new electronic health record system to VA calls for the company to conduct comprehensive assessments to identify site-specific requirements where its system is planned to be deployed. Three site assessments have been completed and additional assessments are planned. If these assessments provide a thorough understanding of the 130 VistA versions, the department should be able to define VistA and be better positioned to transition to the new system. VA identified costs for VistA and its related activities adding up to approximately $913.7 million, $664.3 million, and $711.1 million in fiscal years 2015, 2016, and 2017, respectively—for a total of about $2.3 billion over the 3 years. However, of the $2.3 billion, the department was only able to demonstrate that approximately $1 billion of these costs were sufficiently reliable. In addition, the department omitted VistA-related costs from the total. The lack of a sufficiently reliable and comprehensive total cost for VistA is due in part to not following a well-documented methodology that describes how the department determined the costs for the system. As a result of incomplete cost data and data that could not be determined to be sufficiently reliable, the department, legislators, and the public do not have a complete understanding of how much it has cost to develop and maintain VistA. Further, VA lacks the information needed to make decisions on sustaining the many versions of the system. VA has initiated a number of actions to prepare for the transition from VistA to the Cerner system. These actions include taking steps to establish and begin to staff a program office, forming a governance structure, conducting assessments at the initial sites, preparing program plans to guide the initial system implementation, and setting a program baseline to help guide implementation at the initial sites. The department's actions in these important areas are ongoing. Additional actions are in progress to address GAO's September 2018 recommendation that VA clearly define the role and responsibilities of the joint Department of Defense (DOD) and VA Interagency Program Office in the department's governance plans for the new electronic health record system. VA intends to continue maturing and fully establishing a program management organization and a program governance structure to track program progress. GAO is recommending that VA develop and implement a methodology for reliably identifying and reporting the total costs of VistA. VA agreed with the recommendation.", "document_type": "gao"}
{"report": "The livelihood of cattle producers, such as cow-calf operators and feeders, depends fundamentally on the price they receive for their cattle and the cost to produce these cattle. Numerous supply and demand factors can affect this. For example, the long production cycle for cattle means that producers must make decisions about herd size long before they can price and sell their cattle. Producers’ profits also hinge on how weather affects the supply and cost of forage and feed grains. Additionally, the outcome for producers depends on the effect of consumer preferences on demand for and price of beef. International trade in cattle and beef and competition from other protein sources—such as poultry and pork—are also among the many supply and demand factors that influence cattle prices and producers’ incomes. The cattle production cycle, which runs from birth to slaughter, for most cattle generally ranges from 15 months to 24 months. Calves are usually weaned from cows when they weigh about 500 pounds. They may then move to stocker or growing operations until they weigh 600 to 800 pounds. At this point, they move to feedlots, which produce fed cattle. Specifically, feedlots specialize in feeding cattle a concentrated diet of corn and other grains to enable them to reach between 950 and 1,300 pounds. They are then transported to and slaughtered at a packing plant. Feedlots and packing plants are located throughout the United States but are concentrated in states such as Texas, Oklahoma, Kansas, Nebraska, Colorado, South Dakota, and Iowa. Figure 1 traces the movement of cattle from breeding to processing and consumption. Figure 2 shows the locations of cattle in feedlots. According to price data from AMS’s price reporting group, inflation- adjusted fed cattle prices have generally been increasing since about 2010. Fed cattle prices rose from about $125 per hundred pounds (live weight) in July 2013 and began to increase rapidly in fall 2013. Prices reached a historical high of about $173 per hundred pounds in November 2014, began to drop at the beginning of 2015, and then decreased dramatically in August and September of 2015, decreasing to about $123 per hundred pounds by the end of that year—an overall drop of about 30 percent from November 2014. In 2016, after briefly increasing, prices dropped further throughout much of the year to about $100 per hundred pounds—an overall drop of about 40 percent from November 2014. Prices then rose in the first half of 2017 before dropping again midyear. See figure 3 for more detailed information on fed cattle price changes over the past 10 years, including a trend line. Market participants use the futures market for fed cattle to manage the risk associated with price changes, determine prices, or speculate on price changes. Futures contract terms that reflect the underlying fed cattle market help ensure that prices in both the fed cattle and futures markets are closely linked because they are influenced over the long run by the same market forces. The two markets also show similar patterns because participants in both markets tend to rely on the same types of information when entering into transactions. The Chicago Mercantile Exchange establishes the terms of futures contracts, including the quantity, quality, and locations to which fed cattle bought and sold on the futures market may be delivered. The only aspect left unspecified is the price at which each individual contract will be bought or sold. The futures market provides cattle market participants with a means to hedge—shift unwanted price risk to others more willing to assume the risk. Some buyers and sellers in the fed cattle market, such as packers and feeders, trade in futures contracts to hedge the risks of price changes in the fed cattle or wholesale and retail beef markets. For example, a feeder concerned that fed cattle prices may decline in the future may decide to lock in his or her sell price by selling futures contracts: if fed cattle prices decline, profits from the futures contracts will generally offset losses from the lower fed cattle prices. The same is true for a meat packer concerned about prices going up. The packer might buy a futures contract to lock in a purchase price, with futures profits offsetting higher fed cattle prices. Other futures market participants—generally, speculators—may take a view about whether the price of fed cattle may go up or down and, based on that view, enter into the market as a buyer or seller. For example, speculators could purchase futures contracts from cattle market participants if they think that futures prices may increase in the future or, conversely, sell a futures contract if they believe prices may decline. These speculators provide the market with additional liquidity so that cattle market participants have willing buyers and sellers with whom to conduct transactions. Within USDA, AMS’s P&SP and price reporting group play specific roles in the cattle market. For example, P&SP performs various functions to help USDA execute its oversight responsibilities for cattle markets, which include halting unfair and anticompetitive marketing practices. To help USDA execute these oversight responsibilities, P&SP collects the following types of information to conduct both routine monitoring and targeted investigations: Packers’ annual reports. Under the Packers & Stockyards Act, each packer must submit an annual summary of operations to P&SP that includes information on the dollar volume of cattle purchased, number of head purchased, and some proprietary financial information. P&SP officials use this information to, among other things, review the financial status of packers and their ability to stay solvent to pay for their purchases. Transaction data from the four largest packers. P&SP officials told us that they send letters annually to the industry’s four largest packers requesting data on their transactions with feeders. According to P&SP officials, the packers provide P&SP with information on every transaction made during that year. P&SP officials told us that they also ask for new marketing agreements the packers have entered into throughout the year, to allow officials to track marketing agreements over time. Investigation information. During investigations, P&SP officials collect evidence such as business records and witness testimony from packers and others. P&SP can conduct investigations based on its own initiative or based on complaints from market participants. If, in the course of its oversight work, P&SP determines that a competition violation may have occurred, P&SP officials refer the case to USDA’s Office of the General Counsel, which may pursue the case or further refer the case to the U.S. Department of Justice. The price reporting group’s role in the cattle market is to implement the Livestock Mandatory Reporting program as required by the Livestock Mandatory Reporting Act of 1999. According to AMS, the purpose of the group is, among other things, to provide information regarding the marketing of livestock and encourage competition in the marketplace for livestock and livestock products. To fulfill this role, the price reporting group collects information on packers’ daily livestock purchases on both mandatory and voluntary bases. Mandatory. Under the Livestock Mandatory Reporting Act of 1999, all qualifying packers must report information on all their purchases and sales on a daily basis. The price reporting group receives daily price data on all fed cattle that a packing plant purchases, and all the beef it sells. According to price reporting group officials, they aggregate and summarize the information by sector and publish it within an hour of receipt. For example, the price reporting group publishes information on the number of cattle transacted, proportion of each of the four transaction types used, and the average weight and price of cattle transacted. The price reporting group does not report information on individual transactions or summarized information if there is a risk that the packer may lose confidentiality due to low reporting numbers. Voluntary. The price reporting group collects additional voluntary information from packers, such as data on feeder cattle transactions and on new or unique markets (e.g., the market for grass-fed cattle). CFTC, an independent agency of the federal government, has exclusive jurisdiction over futures and other derivatives markets, except otherwise provided in law. Consistent with the Commodity Exchange Act, CFTC’s mission is to protect market users and the public from fraud, manipulation, abusive practices, and systemic risk related to derivatives, and to foster open, competitive, and financially sound futures markets. This mission is achieved through a regulatory scheme that is based on federal oversight of industry self-regulation through organizations such as the Chicago Mercantile Exchange. As a self-regulatory organization, the Chicago Mercantile Exchange is responsible for, among other things, establishing and enforcing rules governing the conduct and trading of its members and preventing market manipulation. Our review identified several supply and demand factors—such as a prolonged drought that affected the price of cattle feed and the availability of relatively less expensive protein substitutes such as pork—that affected changes in fed cattle prices from 2013 through 2016. Furthermore, we found that varying competition levels among packers did not appear to explain the large national price changes but may have contributed to variations in fed cattle prices in different areas of the country. Based on interviews with some experts, stakeholders, officials from USDA and CFTC, and our analysis of cattle market data, several interrelated supply and demand factors affected the large national changes in fed cattle prices from 2013 through 2016. These factors included drought, costs for feed, and the price of substitute proteins, such as pork. As it relates to supply factors, from 2010 through early 2013 a prolonged drought—beginning in the southern United States in late 2010 and expanding to the High Plains in 2012—affected major cattle areas. This drought caused the supply of young cattle to decrease and then increase and, correspondingly, the national price of fed cattle to increase and then decrease when those cattle came to market as fed cattle. Some experts and stakeholders we interviewed told us that cow-calf operators may have liquidated their herds in 2012 and 2013 because the droughts reduced the supply of forage available to raise younger cattle, and cow- calf operators could not feed as many cattle on available pasture and rangeland. The domestic cattle inventory decreased from about 96.5 million in 2007 to about 88.5 million in 2014. This decrease in inventory reduced the supply of fed cattle available for sale in 2013 and 2014, which could have driven up prices for fed cattle. As the drought eased in late 2013, it became more feasible to feed herds on forage, creating incentives for cow-calf operators to expand their herds throughout 2014 and 2015. This increased the number of fed cattle sold for slaughter by late 2015, and prices began to drop at that time. See figure 4 for information on the relationship between fed cattle price changes and the U.S. cattle inventory over the past 10 years. See appendix II for more information on the number of U.S. cattle at various points in the supply chain. Costs for feed also affected the fed cattle supply, contributing to the large changes in fed cattle prices from 2013 through 2016. An easing of the widespread drought in late 2013 reduced the price of corn and other grains used to feed cattle, which, according to some experts and P&SP officials, may have created an incentive for feeders to grow their cattle to heavier weights before marketing them to packers. For example, the price of corn decreased from about $6.87 per bushel in late 2012 to about $3.50 per bushel in late 2014. According to data from USDA’s price reporting group, fed cattle weight increases from 2003 through 2013 averaged about 14 pounds per year; however, our analysis of cattle market data from USDA showed average fed cattle weights increased by about 40 pounds in 2015. For additional longer-term information on increases in cattle weights, see appendix II. However, particularly heavy cattle can receive lower prices per pound, in part because packers told us that unusually large cuts of beef can be more difficult to sell. In 2014 when the fed cattle supply was low, P&SP officials reported that packers were not necessarily paying lower prices for over-heavy cattle, so feeders would not have received this price indicator to keep the cattle they sold below certain weights. According to some experts, these heavier weights, combined with the larger overall number of cattle offered for sale in 2015, resulted in increased supply, exacerbating the price decline. Reduced demand for wholesale beef and for fed cattle also affected the large national changes in fed cattle prices. Our analysis of cattle market and other economic data showed that several factors reduced demand for beef; this in turn reduced demand for fed cattle. These factors included (1) higher wholesale beef prices and concurrently lower relative prices of pork and chicken, which are substitutes for beef for consumers and which would reduce demand for retail beef; (2) increases in the amount of beef in cold storage, also limiting packer demand for fed cattle; and (3) fluctuations in the strength of the U.S. dollar, which would shift consumer purchases toward or away from relatively less expensive imported beef, as well as contribute to shifts in net exports—that is, total exports minus total imports. In addition, according to some experts and stakeholders, an overall reduction in packing capacity when packers closed several plants, including one large plant in Texas, may have also limited packer demand for fed cattle. P&SP officials conducted an investigation into the price drop beginning in August 2015. P&SP officials told us that as they saw fed cattle prices rapidly decreasing in August and September 2015, they included this investigation in the agency’s annual work plan for 2016. They also told us that P&SP conducted the work based on its own initiative and not as the result of a request from a market participant or because it received specific information on possible wrongdoing. The P&SP investigation reviewed changes in price spreads between fed cattle and wholesale—or boxed—beef because such price spreads can serve as a rough indicator of packer profit. P&SP found that packers may have benefitted for a short period as the prices they paid for fed cattle decreased more quickly than the prices they received for boxed beef, but it also found that those price differences quickly diminished to smaller levels than before the price drop. The report concluded that the sharp price decrease in 2015 was likely due to a number of market factors that affected both supply and demand, such as an increased number of fed cattle sold for slaughter and lower relative prices for pork and chicken. Competition levels among packers varied in different areas of the country. These variations did not appear to explain the large national changes in fed cattle prices from 2013 through 2015 but may have contributed to variations in fed cattle prices in different areas of the country. Specifically, at the national level, packer competition levels were stable from 2013 through 2015. Using P&SP’s annual data on transactions between packers and feeders during this time frame, we estimated the degree of competition in any given area by calculating market concentration levels among packers using a measure called the Herfindahl-Hirschman Index (HHI). From a practical perspective, a lower HHI indicates generally that there is more competition in a market. In particular, an HHI is lowest when a market is occupied by a large number of firms of relatively equal size and is highest when a market is controlled by a single firm (i.e., there is no competition in that market). Some large packing plants closed from 2013 through 2015, but the average HHI level varied by only one percentage point (from about 51 to about 52 percent), whereas the total price decrease from November 2014 through December 2015 was about 30 percent. Because of this, it was unlikely that variations in competition affected the large price decrease. However, variations in competition levels in different areas of the country may have contributed to price differences we observed in those areas. The data show that the average competition level was about 51 percent, suggesting that, on average, a given feedlot had two packing plants to which it could sell its fed cattle. Competition levels tended to be higher in states such as Texas, Oklahoma, Kansas, Nebraska, Colorado, South Dakota, and Iowa, where there are more cattle on feed as we showed in figure 2, suggesting that feeders in those areas had more packing plants to choose from. Competition levels tended to be lower in areas that had fewer cattle on feed, such as in the northeast and the Pacific Northwest, suggesting that feeders in those areas had fewer packing plants to which they could sell their cattle. Using an econometric model, after controlling for other factors that could affect price—such as the supply and demand factors we discuss above, or attributes of the beef produced by fed cattle such as yield and quality grade—we found that less packer competition in any given area was associated with lower fed cattle prices in that area. Specifically, our model estimated that fed cattle prices in less concentrated areas (those with an HHI in the 25th percentile of our analysis) may have been about 9 percent higher than in more concentrated areas (those with an HHI in the 75th percentile of our analysis). Such competition effects can exist in legitimately functioning markets. The results of our analysis suggest that some packers may have been able to exercise market power in areas with less competition. Evidence of this effect alone does not imply that packers engaged in anticompetitive or improper behavior. For more detailed information on our analysis, see appendix III. CFTC’s regular monitoring efforts and its analysis of trading patterns, including of particularly volatile trading days, did not find evidence of irregularities in the futures market for fed cattle in 2015. However, CFTC and others have expressed concern that certain terms in futures contracts for fed cattle—such as the quality of beef represented in the contract—did not sufficiently mirror the specifics of the fed cattle market, which could make them less useful to cattle market participants for hedging risk. In response, the Chicago Mercantile Exchange submitted changes to contract terms to CFTC. CFTC reviewed those changes, and where the agency found the changes consistent with the Commodity Exchange Act and regulations, allowed or expressly approved those changes. CFTC’s daily monitoring of the futures market for fed cattle did not find evidence of trading irregularities. In addition, CFTC conducted a more in- depth review of volatile trading days in 2015 and did not identify evidence of trading anomalies or that certain groups of traders, such as speculators, unduly influenced the market. Our analysis of trading data confirmed that the futures market for fed cattle experienced episodes of higher volatility beginning in late 2015 and going through 2017 than it had experienced in years immediately prior, and some market participants expressed concern that this volatility could be due to possible trading irregularities. Specifically, variations in futures market prices were generally higher in late 2015 than in 2013 or 2014 and more frequently reached the maximum allowed change in price for any given day, based on rules set by the Chicago Mercantile Exchange. See figure 5 for information on average futures prices for fed cattle and historical volatility from 2008 through 2017. Some experts told us that high volatility in the futures market generally can be the result of uncertainty or shocks in the futures or fed cattle markets. For example, the futures market experienced high levels of volatility in late 2003 through 2005 after bovine spongiform encephalopathy (BSE) was first detected in a cow in the United States in December 2003 (see appendix II for more information on BSE events since 2003 and their impact on U.S. beef exports). More recently, the market also experienced high levels of volatility during the financial crisis that began in 2008 as well as in the latter part of 2015 as the price of fed cattle rapidly decreased. However, some cow-calf operators and feeders, including members of the National Cattleman’s Beef Association and the Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America raised questions about whether the futures market volatility in 2015 might be due to manipulation or to high-frequency trading, a specific type of activity in which a speculator makes numerous trades at very high speeds in an effort to profit from small changes in the market. Both CFTC and the Chicago Mercantile Exchange conduct daily monitoring of the futures market for fed cattle, and CFTC officials told us that they did not identify evidence of trading irregularities in 2015. In addition, in response to concerns and a request from some cattle market participants, CFTC analyzed trading patterns in the market, including reviewing particularly volatile days in 2015. CFTC did not find evidence of trading anomalies or that certain groups of traders, such as speculators, unduly influenced the market. The Chicago Mercantile Exchange conducted a similar review and came to similar conclusions. Both CFTC and the Chicago Mercantile Exchange also concluded that high-frequency trading did not contribute substantially to volatility on the days they reviewed. Specifically, the Chicago Mercantile Exchange concluded that the futures market volatility was predominantly the result of non-high frequency traders placing and executing large, aggressive futures orders. Furthermore, as a way of comparing the use of automated and high- frequency trading in the futures market for fed cattle to related markets, CFTC officials told us that their review found that futures contract markets for other agricultural commodities from 2014 through 2016—including for corn, wheat, soybeans, and pork—were characterized by a greater percentage of automated trading, including high-frequency trading, than the futures market for fed cattle. Finally, according to documentation from the Chicago Mercantile Exchange, the high levels of volatility in the futures market could be related to both the swift declines in fed cattle prices and the fact that an increasing number of fed cattle are sold during the last few business days of the week, rather than throughout the week. Concentrating purchases to one or two days of the business week decreases the number of price signals that the fed cattle market can provide futures market participants. According to Chicago Mercantile Exchange documentation, a decrease in the frequency of price signals creates information gaps for market participants and likely contributes to price volatility. CFTC and some stakeholders expressed concern that the terms of cattle futures contracts did not adequately reflect structural changes in the fed cattle market and that differences between the terms of futures contracts and the fed cattle market could cause futures contracts to become less useful to cattle market participants to hedge risks. According to Chicago Mercantile Exchange documents, futures contract terms are designed to match relevant commodities markets and industry standards to help ensure that there is a two-way relationship between the futures market and the relevant commodity market. When contract terms reflect the market and futures markets operate properly, prices in the fed cattle and futures markets may initially diverge, but over time should generally converge by the time a contract expires. If the prices do not converge, contracts become less useful to market participants as a way to hedge risks. For example, prior to October 2017, cattle futures contracts specified that at least 55 percent of the fed cattle in those contracts were to produce a beef quality grade of Choice or better. From fiscal years 2013 through 2017, the percentage of beef graded nationally as Choice or better has been higher than this—at times as high as about 80 percent, although proportions have varied by region. Stakeholders have expressed concern that because the beef quality specifications in futures contracts for fed cattle are lower than the beef quality produced by animals traded in the fed cattle market, this difference may decrease the value of those futures contracts. Additionally, stakeholders expressed concern that this difference can negatively impact whether prices in the futures and fed cattle markets effectively converge as expected. In response to these concerns, the Chicago Mercantile Exchange made changes to the terms of futures contracts for fed cattle in 2016 and 2017, which were reviewed and approved by CFTC. To better align futures contracts with the fed cattle market, the Chicago Mercantile Exchange has increased the quality percentage of Choice or better quality beef to 60 percent, starting with October 2017 futures contracts, and to 65 percent Choice or better quality beef, starting with October 2018 futures contracts. In 2016, also in response to concerns raised by stakeholders, CFTC asked the Chicago Mercantile Exchange to provide information on additional measures under consideration by the exchange, such as changing the terms in futures contracts for fed cattle and making them more consistent with the fed cattle market. As a result of dialogue between the two entities, the Chicago Mercantile Exchange revised its delivery process and expanded the timeframe for making deliveries, which has allowed it to add locations where cattle can be delivered to satisfy a futures contract. According to CFTC, this change made delivery more accessible and improved the connection between the fed cattle and futures markets. The Chicago Mercantile Exchange submitted these and similar changes to CFTC. CFTC reviewed those changes, and where the agency found the changes consistent with the Commodity Exchange Act and regulations, allowed or expressly approved those changes. Chicago Mercantile Exchange representatives told us that these changes will help futures contracts better reflect the fed cattle market. CFTC officials said that they believe the changes have the potential to strengthen the performance of the futures market for fed cattle as a risk management and price discovery tool, but will continue to monitor the effectiveness of the changes. Two factors affect P&SP’s routine monitoring to ensure against discriminatory or anticompetitive practices in the fed cattle market. First, USDA’s view of its legal authority does not allow P&SP routine access to the data from AMS’s price reporting group on daily transactions between packers and cattle feeders. Second, P&SP does not periodically analyze the transaction data that it collects from packers to learn more about the operation of the fed cattle market. P&SP carries out its oversight responsibilities through monitoring and investigations. The price reporting group, housed within AMS with P&SP (which moved to AMS in November 2017), collects extensive data on transactions between packers and feeders via livestock mandatory price reporting as required by law. The price reporting group does not regularly share these data with P&SP, so the data are not available for P&SP to use for regular monitoring activities to flag potential issues for investigation. Currently, according to USDA officials, P&SP officials may request and receive only specific portions of price reporting data based on individual investigations it has already decided to conduct. For example, P&SP was able to analyze price reporting data in the course of its investigation into the price drop in 2015. Based on USDA’s reading of the Livestock Mandatory Reporting Act of 1999 provisions that prohibit the disclosure of facts or information acquired through the mandatory reporting program, the price reporting group has not routinely shared the data with P&SP. The act provides some exceptions to the disclosure prohibition. For example, the act allows the price reporting group to share data, as directed by the Secretary of Agriculture, for enforcement purposes. USDA officials told us that they do not believe this exception allows the price reporting group to provide routine access to the data for monitoring activities. The officials told us that while the statute does allow for sharing of price reporting data for enforcement purposes, they interpret the term “enforcement purposes” to be a specific ongoing investigation, not market oversight. USDA officials note that the act does not discuss market oversight; rather, it was established to help market participants make business decisions through USDA’s collection and dissemination of price data. P&SP officials told us that regular access to price reporting data would allow them to more routinely conduct analyses as part of their routine market monitoring activities similar to those carried out in their investigations as part of their routine market monitoring activities. Specifically, the officials said that going forward, price reporting data could be used to detect price outliers more quickly and help P&SP identify potential anticompetitive behavior; for example, where buyers might agree to take turns buying cattle at different times so as to avoid competing with one another. Under federal internal control standards, an agency’s management should internally communicate the necessary quality information to achieve the entity’s objectives. Such information is, for example, communicated down, across, up, and around reporting lines to all levels of the entity. Because USDA eliminated the Grain Inspection, Packers & Stockyards Administration and reorganized P&SP under AMS in November 2017, the reorganization provides an opportunity for USDA to review the extent to which price reporting data could be shared with P&SP under the act— now that both P&SP and the price reporting group are within the same agency. However, USDA officials told us in November 2017 that it was too early in the reorganization process to determine whether AMS leadership would view routine sharing of these data any differently. By reviewing the extent to which AMS’s price reporting group can share daily transaction data with P&SP to strengthen the effectiveness of its oversight, USDA has an opportunity to allow P&SP to more effectively carry out its responsibilities to ensure against discriminatory or anticompetitive practices in the fed cattle market. In reviewing its authority to share these data, determining whether it is necessary or advisable to request additional exceptions from the current information disclosure restrictions from Congress would position USDA to strengthen its oversight of that market. P&SP does not periodically analyze the transaction data that it collects from packers to learn more about the operation of the fed cattle market. As part of its monitoring program, P&SP reviews publicly available, summarized price data on a weekly basis but it does not routinely review the data it collects on transactions between packers and feeders, a potentially useful source of data from packers that would enable P&SP to conduct more detailed monitoring. We conducted several in-depth analyses of P&SP’s transaction data, and found that some of these analyses could provide useful information to agency management when it makes oversight decisions. For example, as discussed earlier in this report, one of our analyses found that different areas of the country experienced differing levels of competition and that, controlling for other possible sources of price variation, areas with less packer competition were associated with lower fed cattle prices. Such analyses may allow P&SP to better monitor changes in competition and prices over time, which may help inform its decisions on where to direct its investigative resources and better fulfill its mission to ensure against discriminatory or anticompetitive practices in the fed cattle market. Other federal agencies conduct routine, in-depth analyses to efficiently direct their investigative resources. For example, as we reported in March 2012, as required by statute, USDA routinely conducts in-depth analyses of crop insurance data to detect potential program fraud, waste, and abuse by farmers, insurance agents, and loss adjusters. The agency then uses these analyses to direct its investigative resources. Federal internal control standards specify that management should use quality information to achieve the entity’s objectives including processing the obtained data into quality information and then evaluating the processed information. P&SP officials told us that they typically do not receive all of the previous year’s transaction data from packers until the following May. As a result, P&SP has previously considered the use of packer transaction data for routine monitoring to be somewhat limited by the lack of timeliness. However, these officials also told us that the analyses we suggested could still provide useful information. By routinely conducting in-depth analysis of the transaction data it collects, USDA could enhance its monitoring of the fed cattle market. Such analysis could include but not be limited to examining competition levels in different areas of the country. The cattle industry is an important part of the nation’s agricultural sector and contributes tens of billions of dollars to the U.S. economy. Amid concerns about the drop in fed cattle prices beginning in late 2015 and ongoing questions about anticompetitive behavior in the fed cattle market, P&SP’s role in overseeing this market is paramount. While P&SP routinely conducts monitoring and investigations, the program does not have routine access to daily price reporting data or periodically analyze the transaction data that it currently collects from packers. The Livestock Mandatory Reporting Act of 1999 allows AMS’s price reporting group to share data with P&SP for enforcement purposes, as directed by the Secretary of Agriculture, but USDA does not believe it has the authority to do so, based on its interpretation of “enforcement purposes” in the statute. Although both P&SP and the price reporting group are within AMS because of a November 2017 departmental reorganization, USDA officials told us that it was too early in the reorganization process to determine whether AMS leadership would view routine sharing of these data any differently. By reviewing the extent to which AMS’s price reporting group can share daily transaction data with P&SP to strengthen the effectiveness of its oversight, USDA has an opportunity to allow P&SP to more effectively carry out its responsibilities to ensure against discriminatory or anticompetitive practices in the fed cattle market. In reviewing its authority to share these data, determining whether it is necessary or advisable to request additional exceptions from the current information disclosure restrictions from Congress would position USDA to strengthen its oversight of that market. Furthermore, as part of its monitoring, P&SP does not periodically analyze the transaction data that it collects from packers to learn more about the operation of the fed cattle market. In analyzing P&SP’s transaction data, we found that while less competition among packers did not appear to result in lower national cattle prices from 2013 through 2015 on a national level, it did account for variations in prices in different parts of the country. By routinely conducting in-depth analysis of the transaction data it collects, USDA could enhance its monitoring of the fed cattle market. Such analysis could include but not be limited to examining competition levels in different areas of the country. We are making the following two recommendations to USDA: The Secretary of Agriculture should review the extent to which, under the Livestock Mandatory Reporting Act of 1999, the price reporting group can share daily transaction data with P&SP to allow P&SP to strengthen the effectiveness of its oversight. After reviewing that authority, if the Secretary determines that the statute does not permit the price reporting group to share data with P&SP for routine monitoring purposes, and that routine sharing is advisable in light of the purposes behind the statutory disclosure restrictions, the Secretary should submit to Congress a proposal to allow such sharing. (Recommendation 1) The Secretary of Agriculture should direct the AMS administrator to ensure that P&SP routinely conducts in-depth analysis of the transaction data that it collects. Such analysis could include but not be limited to examining competition levels in different areas of the country. (Recommendation 2) We provided a draft of this product to USDA and CFTC for comment. In written comments, reproduced in appendix V, USDA agreed with our two recommendations and described actions it has taken and will take to implement them. CFTC only provided technical comments, which we incorporated as appropriate. With respect to our first recommendation, USDA stated that it took action and reviewed the authority provided by the Livestock Mandatory Reporting Act of 1999 and determined that the act does not allow for data sharing for routine monitoring purposes. Further, USDA stated that the agency believes considering a statutory amendment to allow for routine data sharing is not advisable, due to the agency’s concerns about maintaining the public’s trust in USDA’s administration of the Livestock Mandatory Reporting program. We believe the steps USDA has taken address our recommendation. Concerning our second recommendation, USDA agreed that routine in- depth analysis of packer transaction data would enhance USDA’s monitoring of the fed cattle market to ensure against discriminatory or anticompetitive practices. USDA stated that it plans to create a new competition branch in P&SP—now known as the Packers and Stockyards Division—that will be staffed by employees with economic expertise. USDA stated that this new branch will be responsible for reviewing the transactions data P&SP receives from packers and conducting in-depth analyses that would help the agency to monitor changes in competition and prices over time to inform USDA decisions on where to direct its resources. Routinely conducting such analyses would address our recommendation. USDA also provided technical comments. We incorporated these comments as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Chairman of the Commodity Futures Trading Commission, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact Steve Morris at (202) 512-3841 or moriss@gao.gov or Oliver Richard at (202) 512-2700 or richardo@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI. This report (1) describes key factors that affected fed cattle price changes from 2013 through 2016; (2) describes what CFTC found about possible trading irregularities in the futures market for fed cattle in 2015 and any changes to the futures contract for fed cattle since 2015; and (3) examines factors that may affect the U.S. Department of Agriculture’s (USDA) routine monitoring to ensure against discriminatory or anticompetitive practices in the fed cattle market. To describe the key factors that affected fed cattle price changes from 2013 through 2016 and to understand changes and trends in the U.S. cattle market since 2000, we analyzed economic and other market data collected by federal agencies. These data included information about cattle and beef prices, quality, and inventories; cattle and beef transactions; feed prices and feedlot sizes; transaction methods; national drought patterns; and consumption trends for beef, pork, and chicken. We gathered these data from USDA’s Agricultural Marketing Service (AMS), Economic Research Service, National Agricultural Statistics Service, and World Agricultural Outlook Board, among others. For example, we reviewed AMS data on fed cattle prices from November 2002 through August 2017, and we used it to, among other things, develop a long term price trend line. We did not quantify or rank the impact of various factors. We assessed the reliability of the data we analyzed by interviewing officials who maintain the data, reviewing related documentation, and testing the data for missing or erroneous values, and determined that the data were sufficiently reliable for our purposes. When we found discrepancies such as data entry errors, we brought them to the agencies’ attention and worked with the agencies to correct the discrepancies before conducting our analyses. We also collected USDA transaction data on beef packer (packer) purchases of fed cattle from 2013 through 2015 and we analyzed these data using a variety of methods, including econometric analysis. For more on the methods and results of this analysis, see appendix III. We assessed the reliability of the transactions data we analyzed by interviewing officials who maintain the data, reviewing related documentation, and testing the data for missing or erroneous values. We determined that the data were sufficiently reliable for our purposes. In addition to analyzing these data, we reviewed an investigation by AMS’s Packers & Stockyards Program (P&SP) on the 2015 drop in fed cattle prices. We did not obtain and review internal packer documents, so the scope of our analysis did not include a review of whether packers engaged in anticompetitive behavior. Such specific investigations would typically be carried out by entities with subpoena authority such as the Federal Trade Commission of the Antitrust Division in the Department of Justice. To describe what CFTC found about possible trading irregularities in the futures market for fed cattle in 2015 and any changes to the futures contract for fed cattle since 2015, we reviewed and summarized relevant statutes and regulations, such as the Commodity Exchange Act and Commodity Futures Trading Commission (CFTC) regulations for futures exchanges. We compared that information with CFTC documentation on its oversight activities related to the futures market for fed cattle, such as its 2013 review of the Chicago Mercantile Exchange and the Chicago Board of Trade to verify the exchange’s ongoing compliance with standards intended to, among other things, prevent market manipulation. Such rule enforcement reviews include oversight into whether designated contract markets comply with core principles as outlined by CFTC. We also reviewed CFTC analyses of trading patterns on specific dates in 2015 after conducting a review of the analyses data and methods and determining the work to be sufficiently reliable for our purposes. In addition, we reviewed and summarized documentary evidence from the Chicago Mercantile Exchange on its analysis of the market and on its changes to terms in futures contracts for fed cattle. To better understand the volatility in the market in 2015, we gathered and analyzed price data from Bloomberg on the futures market for fed cattle. To examine factors that may affect USDA’s routine monitoring to ensure against discriminatory or anticompetitive practices in the fed cattle market, we gathered and reviewed relevant oversight documentation, including P&SP annual reports and investigative policies and procedures. In addition, we met with officials from AMS’s P&SP and Livestock Mandatory Reporting program (price reporting group) to discuss their roles and responsibilities. We also used the results of our analysis of USDA transaction data on packer purchases of fed cattle. We compared USDA actions with standards for internal control in the federal government, specifically those related to the communication and use of quality information. To address all our objectives, we conducted interviews with (1) cattle market experts; (2) stakeholders selected to represent a variety of views including small and large feedlot operators (feeders), packers, futures market speculators, the Chicago Mercantile Exchange, and an organization specializing in competition and antitrust issues; and (3) agency officials from AMS’s P&SP and price reporting group, and USDA’s Office of the General Counsel, as well as CFTC. We used the following criteria to identify cattle market experts: the expert’s recognition in the professional or academic community, and the relevance to cattle markets of his or her published work or research to cattle markets. We identified these experts through our prior work, the recommendations of USDA or CFTC officials, stakeholders, or other recognized experts. We conducted semi-structured interviews with 34 individuals or groups of experts, stakeholders, and officials, and performed a content analysis of relevant responses to our questions. To characterize responses and quantify interviewees’ views throughout this report, we defined modifiers (e.g., “some”) as follows: “some” users represents 2 to 5 users, “several” users represents 6 to 9 users, “many” users represents 10 to 15 users, “most” users represents 16 to 24 users, and “nearly all” users represents 25 to 29 users. The views of the experts and stakeholders we interviewed cannot be generalized to all others with expertise in the cattle markets or all cattle market stakeholders, but they provided valuable insights to our work. Appendix IV presents a list of recognized experts that we interviewed. We conducted this performance audit from August 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides supplemental information on trends in the fed cattle market. The sections below provide information from analyses and interviews we conducted as part of our review of the fed cattle market, including on fed cattle transaction methods, drought, number of U.S. cattle, feedlot consolidation and size, cattle weights, consumption trends, product differentiation and branded beef, beef price spread, and factors affecting beef exports. Beef packers (packers) and cattle feedlot operators (feeders) generally use one of four transaction methods to buy and sell fed cattle, and their use of these methods has changed over time for various reasons. The four transaction methods are: Cash (also referred to as spot or negotiated). A purchase price is determined through buyer-seller interaction. The price is known at the time of agreement, and delivery to the packing plant may take place up to 30 days later. Negotiated grid. A base price is negotiated between buyer and seller and is known at the time of agreement. Delivery to the packing plant is usually expected within 14 days. Unlike a cash transaction, the final net price is determined by applying a series of premiums and discounts after slaughter based on carcass performance (usually related to weight, beef yield grade, and beef quality). Forward contract. An agreement for the purchase of cattle, executed in advance of slaughter, under which the base price is established by reference to prices quoted on the Chicago Mercantile Exchange and can be set any time prior to the transaction. Formula contract. An advance commitment of cattle—by any method other than cash, negotiated grid, or forward contract—in advance of slaughter. Formula contracts use a method of calculating price in which the price often is not known until a later date. For example, a feeder and a packer may enter into a formula contract several months in advance of slaughter. According to U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service (AMS) officials and others we interviewed, formula contracts often use the cash price from AMS’ Livestock Mandatory Reporting price summaries around the time of slaughter as a base upon which the contract then applies additional premiums and discounts. Since 2002, the share of fed cattle sold via cash transactions has decreased and the share of cattle sold through formula and forward contracts has increased proportionally. According to our analysis of AMS data, approximately 50 percent of cattle were traded using cash transactions in 2002, but the share fell as low as 22 percent of cattle transactions in 2015. Conversely, the use of other types of transactions— formula and forward contracts and negotiated grid arrangements— increased from about 50 percent of cattle in 2002 to approximately 78 percent in 2015. However, the use of the cash transactions slightly increased again from 2016 through 2017. Figure 6 shows the share of fed cattle transactions by method from November 2002 through September 2017. Several experts and stakeholders we interviewed told us that feeders and packers have generally increased their use of formula contracts for a variety of reasons, including improving the quality and consistency of beef products while decreasing transaction costs. For example, one industry stakeholder told us that formula contracts ensure a steady supply of specific cattle breeds and eliminate the costs of sending personnel to bid for these cattle using cash transactions. In addition, a report from AMS’s Packers and Stockyards Program (P&SP) noted that formula contracts help feeders to, among other things, reduce the price risks of raising and selling fed cattle; these contracts also help packers ensure a steady supply of cattle to help them satisfy delivery requirements they may have in contracts with their wholesale or retail customers. However, some experts and stakeholders told us that the movement away from cash transactions has reduced the depth and liquidity of several regional markets, which may make it more difficult for market participants to accurately determine the market price of cattle (e.g., for a cash sale) because there are fewer observed price points. Moreover, the effect of this difficulty in determining market prices is not limited to cash transactions because cash prices are often used to establish a base price in formula contracts. This reduction of depth and liquidity may also make the fed cattle market more susceptible to wider price fluctuations, according to some experts we interviewed. Several experts and stakeholders told us that options such as an online fed cattle exchange, established in May 2016, may help address this issue by providing a transparent forum for feeders and packers to sell and purchase fed cattle. However, the exchange is still in its early stages and, as of September 2017, comprised a small fraction of total fed cattle transactions. Prolonged drought may cause cow-calf operators to liquidate their herds. This is because drought can reduce the supply of forage used to raise younger cattle, so that cow-calf operators cannot feed as many cattle on available pasture and rangeland. From 2000 to 2010 the United States saw periods of both extensive drought and extensive wetness on a broad scale, according to the National Oceanic and Atmospheric Administration. Following that, in early 2010, little of the country was experiencing drought, according to the U.S. Drought Monitor; however, drought conditions worsened throughout the second half of that year and improved through the first half of 2011 before worsening in the second half of 2011. This drought impacted some areas of the United States particularly hard with nearly 12 percent of the country in an exceptional drought by the third quarter of 2011. Although the winter months of January 2012 through March 2012 were dry, extreme drought levels improved through early 2012 before a widespread drought began in the summer of 2012. By July 2012, more than 80 percent of the country was at least abnormally dry and more than 60 percent of the country was experiencing drought. From 2013 through early 2015, drought conditions generally improved. Overall drought conditions continued to improve in 2015, except in the spring and fall, which were somewhat drier. The second half of 2016 was drier but after this, drought conditions improved, with a smaller percentage of the country experiencing dryness in 2017 than had been seen since 2000. Figure 7 shows the percent of the United States land mass experiencing drought conditions from January 2000 through May 2017. The number of cattle at different points in the supply chain can provide various levels of insight into fed cattle market supply. Specifically, the beef cow inventory provides insight into what may happen in the fed cattle market in a few years, and the number of cattle on feed can give an indication of what may happen in the fed cattle market in the next few months. The number of cattle sold for slaughter (also called marketings) is an indication of current supply levels in the fed cattle market. The beef cow inventory drives the size of the overall cattle inventory and therefore the number of fed cattle coming to market. As such, the size of the beef cow inventory provides a sense of how the fed cattle industry may change over the following 2 years. Our analysis of inventory data from USDA’s National Agricultural Statistics Service indicated that the beef cow inventory declined from 2006 through 2014, at which point it started to increase. In the most recent period of contraction the year-over- year period with the highest rate of contraction in the beef cow inventory was from July 2011 to July 2012, during which the beef cow inventory decreased by 3.0 percent—a rate of contraction not seen in a single year- over-year period since July 1988 to July 1989. The inventory then began to expand in 2014, increasing rapidly by mid-2014, and continued to expand through 2016. From January 2016 to January 2017, the beef cow inventory expanded 3.5 percent, the highest rate of expansion in a single year-over-year period since January 1993 to January 1994. Prior to the late 1980s, higher rates of expansion and contraction were common, but during the next 20 years, annual changes in the beef cow inventory were more gradual, with rates of expansion staying below 0.5 percent. Figure 8 shows the beef cow inventory from 1920—the first year for which we have data—through 2016, with an overall downward trend since the mid-1970s. Cattle are sent to feedlots and are fed for 3 to 10 months before being sold for slaughter. Thus, the number of cattle on feed at a given point in time provides insight into the number of cattle that will be available for slaughter in the coming months. Unlike the beef cow inventory, which saw larger rates of increase in the mid-2010s than seen in the prior 2 decades, the number of cattle on feed increased at a more modest rate during the same time frame. The total number of cattle on feed decreased throughout 2012 and 2013, then began increasing in 2014, and continued to increase through 2015, before decreasing in 2016. Although it might be expected that cattle on feed would increase steeply about 18 months after the steep increases in the beef cow inventory, these sharper increases may be delayed as cow-calf operators continue to increase their beef cow herds, thus preventing these heifers from going into the pool of fed cattle. Total sales for slaughter declined overall from the early 2000s through 2015. On an annual basis, sales for slaughter declined sharply from 2014 through 2015 before increasing sharply in 2016. Sales for slaughter fell 5.68 percent in 2014, the largest decline in the data available (starting in 1996), followed by a further decline of 3.87 percent in 2015 and a rise of 6.29 percent in 2016, the largest increase in the data we analyzed. The monthly sales for slaughter data show that after the long decline starting in 2014, year-over-year increases in sales for slaughter began in November 2015 and continued through August 2017, the most recent month for which data were available at the time of our review. Some experts told us that significant consolidation has occurred among feedlots. Our analysis of USDA National Agricultural Statistics Service data from the mid-1990s through 2016 suggests that the number of individual larger feedlots (those with a capacity of 50,000 or more head of cattle) increased by a small amount—in terms of both number and percentage of total feedlots. During this time frame, the number of cattle fed at large lots increased, and the number of cattle fed at feedlots of other sizes decreased. For example, while there were 45 feedlots with a capacity of more than 50,000 head of cattle in 1996, there were 73 feedlots of this size in 2016. Similarly, in 1996, large feedlots made up 2 percent of all feedlots with a capacity of more than 1,000 head of cattle; this number rose to 3 percent in 2016. Furthermore, since the late 2000s, larger feedlots generally have been contributing an increasing portion of fed cattle to overall slaughter numbers, with medium-sized feedlots (those with a capacity of 16,000 to 49,000 head of cattle) generally contributing fewer. Average cattle weights have increased gradually and steadily from 2002 through September 2017, according to our analysis of average weights reported to AMS and several industry stakeholders we interviewed. Figure 9 shows average monthly and annual cattle weights in live weight contracts from November 2002 through September 2017. In the figure, seasonal fluctuations are visible, with weights generally declining in late fall. According to our analysis of consumption data from USDA’s Economic Research Service, there has been a broad societal shift in consumption from beef to chicken in the United States since the mid-1970s. Increasing consumption of proteins such as chicken may shift consumption away from beef, which would put downward pressure on beef and cattle prices. Per capita chicken consumption has increased steadily for the past 40 years, though the growth in consumption has slowed since 2006. Per capita pork consumption has remained steady over the same period, while per capita beef consumption has largely decreased. Figure 10 provides information on the long-term trends in per capita consumption of beef, pork, and chicken in the U.S. from 1970 through 2016. As consumer tastes and demands have changed since 2000, producers have increased differentiation of their products. For example, producers have increased grass-fed options since 2000, and organic beef became available in 2002. In addition, producers have increased their offerings of branded beef varieties (e.g., Certified Angus and Wagyu beef). As beef products become increasingly differentiated and more branded varieties become available, average prices of beef and fed cattle may be expected to rise. Packers are unlikely to differentiate or brand a product if it is less valuable than an unbranded commodity product, so they would likely only create differentiation or branding for higher-value beef products, which are sold at higher prices than commodity beef. Because of this, packers will likely pay more for the fed cattle that produce these higher value products. We analyzed information on branded beef from AMS and found that branded beef sales increased from about 7 percent of total beef sales in 2002 to about 17 percent of total beef sales in 2017. Some experts we spoke with pointed out that the increase in formula and forward contracts has gone hand-in-hand with the increase in product differentiation and branding. They told us that, as retailers demand specific types or brands of beef, the industry has relied more heavily on formula and forward contracts to ensure a steady supply of those types and brands. In the fed cattle market, the fed cattle-retail price spread is the difference between the price feeders receive for their cattle and the price consumers pay for beef at the retail level. The vast majority of the price spread comes from price spread between the wholesale and retail levels. In short, the retail price is much higher than the wholesale price that retailers pay packers for beef, which, in contrast, is not much higher than the price packers pay feeders for fed cattle. The fed cattle-wholesale price spread remained fairly steady from 2000 through May 2016, typically remaining below $0.50 per pound of retail weight equivalent. The price spread, at both the fed cattle-wholesale and wholesale-retail levels, spiked in June 2016. The spike was small but persistent, continuing through the end of 2016. To be more specific, the fed cattle-wholesale spread was between $0.51 and $0.67 from June through December, compared with a range of $0.36 to $0.52 from January through May of 2016. The price spread dropped to lower levels in early 2017, then spiked again from May through August 2017, the latest date for which data were available at the time of our review. Similar to the fed cattle-retail and fed cattle-wholesale spreads, the fed cattle share of the beef dollar is a measure of the percentage of the retail price of beef made up by the price of fed cattle. The fed cattle share of the beef dollar dropped from about 65 percent in the early 1970s to about 50 percent by the mid-1990s. From 2000 to the present, the farmers’ share of the beef dollar has remained relatively flat, rising to close to 60 percent in 2014 but regularly being as low as 40 percent. Several factors can drive changes in the fed cattle share of the beef dollar. For example, a report from USDA’s Economic Research Service found that much of the decline in the proportion of the beef dollar paid to producers can be driven by technology changes that help increase productivity; and, as producers have become more productive, they have been willing and able to supply more animals to packers at lower prices. Figure 11 shows the historical price spread for beef from January 1970 through December 2016. Some industry stakeholders told us that the bovine spongiform encephalopathy (BSE) event—in which the disease was detected in a cow in the United States in 2003—has had a lasting effect on beef exports from the United States. Specifically, these industry stakeholders told us that the 2003 event—and additional BSE events in 2005 and 2006—has continued to depress demand for beef by closing certain foreign markets to U.S. beef. Based on our review of ERS export data, the total tonnage of beef exports plummeted in January 2004 due to the BSE outbreak in the United States and did not consistently return to levels seen before the BSE outbreak until May 2010. This appendix provides information on the econometric model we used to estimate the impact of market power on transaction prices for fed cattle. It describes our econometric model in detail, provides the results of our analysis, and discusses some limitations. We developed an econometric model to analyze the effect of market concentration on the cash price of fed cattle. Specifically, we analyzed how the level of market concentration of beef packers (packers) affected the cash price of fed cattle. The U.S. fed cattle market is characterized by a large number of feedlot operators (feeders) that sell to a small number of packers for slaughter at packing plants; approximately 83 to 85 percent of the total amount of packing market is conducted by four major packing companies. To analyze the packing market, we obtained transaction data from the Agricultural Marketing Service’s Packers and Stockyards Program (P&SP) within the U.S. Department of Agriculture (USDA). The data we used for our analysis comprised transactions collected from these four largest packers for about 127,000 cash transactions from 2013 through 2015. The data identified the packing plant involved in each transaction; however, we generally could not identify the specific feedlot involved, especially when comparing transactions across different packers. The data were administrative data from each packer, and in some instances, a packing plant may have used a unique set of identifying codes for the feedlots with which it did business. Therefore, we could only consistently identify different feedlots associated with a given packing plant. The same feedlot may have done business with a different plant but we were unable to identify this information consistently across plants. The data contained 963 different dates on which transactions occurred, 970 counties where feedlots were located, and 23 packing plants that purchased fed cattle. To reduce distortion from dissimilar transactions and outliers, we eliminated transactions that were not cash transactions as well as cash transactions that met certain parameters. Specifically, we excluded transactions with (1) fewer than 10 animals; (2) a per-pound carcass price of less than 1 dollar or of 10 dollars or more; (3) an average weight per animal that was less than 500 pounds or more than 2,000 pounds; (4) a slaughter date that preceded the number of days from the purchase date by more than 14 days; (5) more than 10 percent cows in the lot; and (6) more than 10 percent ungraded cattle in the lot. Our dependent variable in the model was the logarithm of the transaction price per carcass-based pound (not including freight) between a packing plant and a feedlot on a given purchase date. Our model included a variety of explanatory variables, including the Herfindahl-Hirschman Index (HHI), beef quality and yield grades, feedlots, live weights, and fixed effects for time and geographic location of the feeder and packing plants. HHI. The key variable in the model was the HHI, a measure of packer market concentration faced by feedlots in a given geographic area— analyzed in the model by county—on a given purchase date. The HHI takes the same value for any transaction in a given county on a given purchase date (it varies only at the county level and over time). Our calculation used a 90-day moving average window (current day and the 89 days prior) to calculate the HHI for each county on each date. Although our model included only cash transactions, we calculated the HHI using all transactions; that is, we included formula contracts, forward contracts, negotiated grid transactions, and cash transactions. However, we excluded transactions involving packer- owned feedlots and feedlots not in the United States from our HHI calculation. Econometric analysis that uses HHIs to explain prices generally considers the possibility that the HHI variable is endogenous and is possibly correlated with the error term and to address this issue, we instrumented our HHI variable. Beef quality and yield grades. For each lot of cattle transacted, we used as controls the percent of fed cattle in each transaction whose beef graded as Choice or better. We also used as a control the percent of fed cattle in each transaction whose beef yield was rated grades 1 or 2. In addition, we included a measure of the percentages of Holstein cattle, ungraded cattle, and cows in the lot. Large feedlots. We used an indicator (dummy) variable for large feedlots—specifically feedlots that were in the 95th percentile of feedlots for the packing plant with which the transaction occurred. We used this variable to control for possible extra bargaining leverage that large feedlots may have with packers. Live weight. We controlled for the average live weight of the cattle lot by including categorical variables (dummies) for: less than 1,050 pounds and more than 1,500 pounds (the 1,050 pounds to 1,500 pounds category is the omitted comparison category). We selected these category cut-off values because generally prices are reduced for cattle lots with an average weight of less than 1,050 pounds or more than 1,500 pounds. Fixed effects. We used a set of indicator variables to account for fixed effects associated with packing plants, time, and individual counties. Specifically, we used a set of packing plant indicator variables to account for effects pertaining to individual packing plants, such as a plant’s location. We also used a set of time indicator variables—one for each purchase date in the data—to account for prevailing market conditions on that particular day, such as whether prices were generally low or high on that day. Last, we used a set of county indicator variables to account for local or regional effects that are time invariant, such as a county’s transportation availability or proximity to inexpensive sources of feed. Our model was written as: 𝑦𝑦𝑖𝑖,𝑡𝑡=𝑋𝑋𝑖𝑖,𝑡𝑡𝛽𝛽+𝜀𝜀𝑖𝑖,𝑡𝑡 ,𝑖𝑖=1,…,𝑁𝑁𝑡𝑡; 𝑡𝑡=1,…,𝑇𝑇. 𝑦𝑦𝑖𝑖,𝑡𝑡 was the dependent variable in our model; namely, the logarithm of 𝑋𝑋𝑖𝑖,𝑡𝑡 was the list of control variables used in the model including the the transaction price per pound. sets of fixed effects for plants, counties and purchase dates. β was the list of parameters associated with the control variables Each observation in the model was a single transaction between a packing plant and a feedlot. The subscript i represented a transaction between a feedlot and a packing plant, and the subscript t represented (𝑋𝑋𝑖𝑖,𝑡𝑡). 𝜀𝜀𝑖𝑖,𝑡𝑡. was an error term. the purchase date of that transaction. The term 𝑁𝑁𝑡𝑡 expressed the fact that the number of transactions may have varied across purchase dates. Our results suggest that when there is a more concentrated market of buyers (packers), those packers will have more negotiating and market power, and therefore, with other factors held constant, these packers will be able to purchase fed cattle at lower prices from feeders. We found a significant negative parameter estimate for our HHI explanatory variable. This estimate suggests that for each 0.01 increase in the HHI—meaning, a greater degree of packer concentration—there is about a 0.86 percent reduction in the price of cattle. The interquartile range for the HHI is from approximately 0.45 to 0.55, which implies an approximate price effect of 9 percent across that range. For a carcass price of about $2.22 per pound—the average for 2013 through 2015, based on the data from P&SP—that translates to a difference of about 20 cents per pound variation across this HHI range. The variables used in the model to control for effects other than HHI had the expected directional effect on price or else were not significant. Parameter estimates for the indicator variables for beef quality and yield were both significant and positive, suggesting that fed cattle with higher beef quality grade and yield levels have a higher price. The indicator variables for the lots with weights of less than 1,050 pounds average weight suggest that lots with very low weight received lower prices. However, the variable for lots with more than 1,500 pounds was not significant. The feedlot size variable was not statistically significant. Our controls for the percent of Holsteins and ungraded cattle in the lot were both negative and statistically significant, as expected. The percent of cows in the lot was not statistically significant. Finally, our measure of feedlot size was positive and statistically significant, suggesting that larger feedlots may be able to obtain higher prices from packers. Our results suggest that instrumenting the HHI variable was appropriate. We used a measure of the proportion of total fed cattle traded by the packer using non-cash transaction methods as an instrument. Our results satisfied the essential specification tests for appropriate use of instruments: The endogeneity tests rejected the null hypothesis that the endogenous variable (HHI) can be treated as exogenous. Thus it is appropriate to instrument the HHI variable. Our results rejected the null hypothesis of weak instruments— Sanderson-Windmeijer, Stock-Wright and Anderson-Rubin. The F- Statistic from the first stage of the regression (20.36) is highly significant and exceeded the critical Stock-Yogo value for the 10 percent maximal instrumental variable size (16.38). Thus the instruments had sufficient explanatory power in the first-stage regression equation. See Table 1 for a more detailed description of our results. Our analysis had a number of limitations as listed below. Only transactions for the market’s four major packers were included in the data from P&SP. As a result, our HHI variable is a “large firm HHI.” Whereas these four firms account for approximately 83 to 85 percent of total cattle sold, the remaining 15 to 17 percent of fed cattle sold in the United States was not included in the data from P&SP. In addition, we did not use some of the four large packers’ plant-level data because the data was missing key variables, such as the purchase date. Therefore, our estimates of HHI in any location are likely to be overestimates, and in general, our HHI estimates for any location should be viewed only as relative to other locations in this analysis and should not be compared with measures in other studies or industries. The feedlot location may not be in the city listed for it. In some cases, the feedlot city that is named in the data from P&SP as the location of the feedlot is not the exact feedlot location. The feedlot may be somewhat outside the city or at a headquarters location. Feedlot concentration differs across counties. The analysis reflects the fact that, on average, in any given area, feedlots are far more numerous and packing plants are relatively few in number. However, this is not generalizable to all areas. Although there are a relatively large number of feedlots in the United States in general, in some cases, it is possible that a relatively small number of feedlots account for a relatively large proportion of cattle sold to some packing plants. Our data could only identify a feedlot that sold cattle to a particular packing plant, so we could not identify which feedlots might have sold fed cattle to multiple plants. We control for this in the regression model in part by including an indicator variable for packing plants’ transactions that were with a large feedlot (in the 95th percentile for that particular packing plant). HHI calculations must use a geographic definition. In our analysis, we include fixed effects for each packing plant as well as fixed effects for each county, which controls for variations in market conditions in different areas that are constant over time. The calculation of the HHI takes into account transactions flowing from different counties to the same packing plants and from a single county to different packing plants, so the HHI calculations by necessity must use some geographic definition. However, our HHI calculation does not depend upon a county to define a market, but simply measures market concentration conditions that the feedlots in that county face. The level of detail and scope in the data varied across the different packing plants in our data set. For example, a detailed breakdown of the type of cattle was not available on a consistent basis across all packers and packing plants. Therefore, we were unable to control for some variation in quality and type of cattle in our model. However, this may be mitigated by our use of fixed effects if certain transaction characteristics—for instance, the type or breed of cattle sold—are fairly constant over time in a given county or plant. As in any model, there is the possibility of misspecification or bias. We used various econometric tests for our instrumental variables estimation (two-stage least-squares): endogeneity of the HHI measure, J-statistic for identification, and weak instrument tests. However, in any instrumental model there is a possibility that the instruments are inappropriate or the estimators are biased, and that bias may be exacerbated in the presence of outliers. Sargan recommends a simple procedure for assessing the efficacy of two- stage least-squares versus ordinary least squares. Our results using this criterion suggests our use of two-stage least squares is justified. Packing plants from the same company likely did not compete with one another. Our HHI measure was calculated treating each packing plant as a separate entity rather than at the packing company level, despite the fact that multiple plants are owned by each of the four major packing companies. Therefore, we assumed that packing plants “compete” to some extent regardless of whether they are owned by the same company. However, in the data we used for our model, there were no plants owned by the same packing company in the same city. There may be noise in the data. The data were administrative data and may have random noise associated with issues such as different administrative procedures of a plant, affecting when and how the data are entered. We cleaned the data to remove observations that appeared unreasonable or not easily explained, but some variation in prices remains. Specifically, in the data that was used in our model, the median intra-day price variation was about 18 percent for the 1st to 99th percentile and about 11 percent for the 5th to the 95th percentile. In addition to the contacts named above, Thomas Cook (Assistant Director), Michael Kendix (Assistant Director), Kevin Bray, Candace Carpenter, Tara Congdon, Jaci Evans, Dan Royer, Monica Savoy, Kiki Theodoropoulos, Richard Tsuhara, and Jarrod West made key contributions to this report. U.S. Agriculture: Retail Food Prices Grew Faster Than the Prices Farmers Received for Agricultural Commodities, but Economic Research Has Not Established That Concentration Has Affected These Trends. GAO-09-746R. Washington, D.C.: June 30, 2009. Livestock Market Reporting: USDA Has Taken Some Steps to Ensure Quality, but Additional Efforts Are Needed. GAO-06-202. Washington, D.C.: December 9, 2005. Economic Models of Cattle Prices: How USDA Can Act to Improve Models to Explain Cattle Prices, GAO-02-246. Washington, D.C.: March 15, 2002. Packers and Stockyards Programs: Actions Needed to Improve Investigations of Competitive Practices, GAO/RCED-00-242. Washington, D.C.: September 21, 2000. Beef Industry: Packer Market Concentration and Cattle Prices, GAO/RCED-91-28. Washington, D.C.: December 6, 1990.", "summary": "The U.S. cattle industry accounted for about $64 billion in receipts in 2016, according to USDA. The price of fed cattle has fluctuated widely from 2013 through 2016 and experienced a sharp downturn beginning in late 2015, raising concerns about the market and questions about USDA's oversight. GAO was asked to review issues related to the U.S. cattle market. This report (1) describes key factors that affected changes in fed cattle prices from 2013 through 2016; (2) describes what CFTC found about possible trading irregularities in the futures market for fed cattle in 2015 and any changes to the futures contract for fed cattle since 2015; and (3) examines factors that may affect USDA's routine monitoring to ensure against discriminatory or anticompetitive practices in the fed cattle market. GAO reviewed economic data and USDA and CFTC documentation; analyzed transaction data on beef packer purchases from 2013 through 2015; and interviewed recognized experts, cattle industry stakeholders such as feedlot operators and packers, and agency officials. Supply and demand factors , such as a drought that affected the price of cattle feed, affected changes in prices of fed cattle—those ready for slaughter from 2013 through 2016. According to industry experts and GAO's analysis, a drought from late 2010 to early 2013 led the cattle inventory to fall and rise and, in turn, fed cattle prices to fluctuate (see figure). GAO's analysis of cattle market data from the U.S. Department of Agriculture (USDA) also indicated that competition levels among packers that slaughter and process fed cattle did not appear to affect the national price changes in the fed cattle market in 2015 but that areas of the country with less competition among packers had lower cattle prices. The Commodity Futures Trading Commission (CFTC)—an agency that regulates cattle futures markets where participants buy and sell standardized agreements for cattle at an agreed-upon price at a specified date in the future—did not find evidence of trading irregularities in the cattle futures market in 2015. However, to better align futures contracts with the actual fed cattle market, CFTC reviewed changes to contract terms and will continue to monitor those changes. The Packers & Stockyards Program (P&SP), which oversees the cattle industry within USDA's Agricultural Marketing Service (AMS), does not have routine access to daily data for transactions between feedlot operators, which produce fed cattle, and packers. Those data are collected by AMS's price reporting group, which does not routinely share them with P&SP because officials said it is prohibited by statute from doing so. The Livestock Mandatory Reporting Act of 1999 specifies that the Secretary of Agriculture may authorize the sharing of these data for enforcement purposes, which USDA interprets as an ongoing investigation, not market monitoring. In November 2017, USDA reorganized P&SP under AMS and officials said it was too early in the reorganization to determine whether AMS would view routine sharing of these data any differently. Reviewing the extent to which these data can be shared with P&SP provides an opportunity to enhance P&SP's oversight of the fed cattle market. Determining whether it is advisable to request additional exceptions from information disclosure restrictions from Congress would help USDA strengthen its oversight. GAO is making two recommendations, including that USDA review the extent to which, under statute, the price reporting group can share daily transaction data with P&SP, and if USDA determines the statute does not permit such sharing and it is advisable, submit to Congress a proposal to allow such sharing. USDA agreed and subsequently determined that the act does not allow for such sharing and it would not be advisable citing concerns about the public's trust in the program.", "document_type": "gao"}
{"report": "SNAP is intended to help low-income households obtain a more nutritious diet by providing them with benefits to purchase food from authorized retailers nationwide. SNAP is jointly administered by FNS and the states. FNS pays the full cost of SNAP benefits and shares the costs of administering the program with the states. FNS is responsible for promulgating SNAP program regulations, ensuring that state officials administer the program in compliance with program rules, and authorizing and monitoring stores from which recipients may purchase food. States are responsible for determining applicant eligibility, calculating the amount of their benefits, issuing the benefits on EBT cards—which can be used like debit cards to purchase food from authorized retailers—and investigating possible program violations by recipients. Participation in SNAP has generally increased among recipients and retailers in recent years. Specifically, participation in SNAP increased from about 26 million recipients in fiscal year 2007 to 42 million in fiscal year 2017, leading to a corresponding increase in the amount of SNAP benefits redeemed. The number of stores FNS authorized to participate in SNAP also increased, from about 162,000 nationwide in fiscal year 2007 to more than 250,000 in fiscal year 2017. Although there was particular growth in the number of small grocery and convenience stores, as well as “other” stores (which include independent drug stores, general merchandise stores like dollar stores, and farmers’ markets), the majority of SNAP benefits were redeemed at large grocery stores and supermarkets in each year (see fig. 1). According to FNS, most SNAP benefits are used for the intended purpose; however, as we have reported in prior work, FNS has faced challenges addressing trafficking—one type of program fraud. In general, trafficking occurs when retailers exchange recipients’ SNAP benefits for cash, often taking a fraudulent profit. For example, a retailer might charge $100 to a recipient’s SNAP EBT card and give the recipient $50 in cash instead of $100 in food. The federal government reimburses the retailer $100, which results in a fraudulent $50 profit to the retailer. While this type of trafficking is a direct exchange of SNAP benefits for money, trafficking also can be done indirectly. For example, a retailer might give a recipient $50 in cash for the use of $100 in benefits on that recipient’s EBT card. The retailer could then use the EBT card to purchase $100 in products at another SNAP retailer (see fig. 2). In this instance, the retailer would profit because they paid $50 for $100 worth of products, and the retailer might also increase their profit by reselling the products at a higher price in their own store. Among other things, FNS is responsible for authorizing and monitoring retailers who participate in SNAP to ensure program integrity. In order to participate in SNAP, a retailer applies to FNS and demonstrates that they meet program requirements, such as those on the amount and types of food that authorized stores must carry. FNS verifies a retailer’s compliance with these requirements, for example, through an on-site inspection of the store. If the retailer meets requirements, FNS generally authorizes it to participate for a period of 5 years. FNS then monitors retailers’ participation by analyzing data on SNAP transactions and conducting undercover investigations, among other activities. If FNS suspects a retailer is trafficking, it generally must notify the USDA OIG—which is responsible for investigating allegations of fraud and abuse in all of USDA’s programs, including SNAP—before opening a case. The OIG may choose to open its own investigation of the retailer for possible criminal prosecution, or allow FNS to pursue the case. If FNS determines that a retailer has engaged in trafficking, FNS sanctions the store. Generally, stores found to have engaged in trafficking are permanently disqualified from SNAP, but in limited circumstances, the owner may instead receive a civil monetary penalty. Retailers who do not agree with the sanction assessed by FNS can file a written request to have FNS’s Administrative Review Branch review the decision, and, if not satisfied, file a complaint in the appropriate U.S. District Court. In 2013, FNS consolidated its retailer management functions, including those for authorizing stores and analyzing SNAP transaction data, into a single national structure known as the Retailer Operations Division (see fig. 3). Since 1995, FNS has published periodic reports estimating the extent of trafficking in SNAP as part of its efforts to monitor program integrity. These trafficking estimates are the most commonly cited measure of SNAP fraud, including in the news media and congressional testimony. FNS estimates retailer trafficking by adjusting a sample of stores known or suspected of trafficking to reflect the total population of SNAP- authorized stores. For each report, FNS uses 3 years of data on stores and SNAP transactions to estimate the amount and percentage of benefits that were trafficked and the percentage of stores engaged in trafficking (see fig. 4). For example, the most recent report—published in September 2017—analyzes data from 2012 through 2014. FNS’s data indicate an increase in the estimated rate of retailer trafficking in recent years. FNS reported in March 2011 that approximately $330 million in SNAP benefits (or 1 percent of all benefits redeemed) were trafficked annually from 2006 through 2008, and that approximately 8.2 percent of all authorized stores engaged in trafficking. In its most recent report from September 2017, FNS reported that approximately $1 billion in SNAP benefits (or 1.5 percent) were trafficked annually from 2012 through 2014, and that approximately 11.8 percent of all authorized stores engaged in trafficking. Although FNS produces the trafficking estimates with accepted statistical methods, its reports do not clearly convey the level of uncertainty introduced by the approach used to calculate the estimates. Throughout each report, FNS presents its estimates as precise numbers. However, uncertainty is introduced when extrapolating from a smaller sample—in this case, an investigative sample that solely includes stores known to have trafficked or suspected of trafficking—to the full population of SNAP- authorized stores because the extent to which the sample reflects the broader population of stores is unknown (see sidebar). According to the Office of Management and Budget’s (OMB) statistical standards for federal agencies, possible variation in estimates should be noted, such as by reporting the range of each estimate. While FNS discusses some limitations of its trafficking estimates in the body of each report, only the report’s appendices include information that can be used to assess the level of uncertainty around the estimates. Using information contained in these appendices, we found widely varying trafficking estimates. For example, although FNS reported that approximately $1 billion in SNAP benefits were trafficked annually from 2012 through 2014, information in the report’s appendices indicates that the amount trafficked could have ranged from about $960 million to $4.7 billion. In other words, the total value of SNAP benefits that were trafficked each year from 2012 through 2014 could have been approximately $40 million less or $3 billion more than FNS reported (see fig. 5). FNS officials stated the agency has not considered and does not intend to consider changes to how it reports its trafficking estimates in the next report. According to an FNS official, FNS would like the reports to continue to provide non-technical information that is comparable to prior years. However, as shown in the figure above, it is possible to compare estimates over time when estimates are presented with ranges. Further, reporting the level of uncertainty with each estimate increases transparency. According to a recent Congressional Research Service report, these estimates are the most-often cited measure of fraud in SNAP. The estimates have been cited in the news media and congressional testimony, and FNS officials stated the estimates can help quantify the outcomes of FNS’s efforts to prevent, detect, and respond to retailer trafficking. By not clearly reporting the level of uncertainty around these commonly cited estimates of SNAP retailer trafficking, FNS’s reports are potentially providing misleading information to Congress and the public regarding the extent of fraud in SNAP. FNS has acknowledged limitations with its current approach to estimating retailer trafficking and evaluated ways to address some of those limitations. As previously noted, FNS selects a non-random sample of stores known to have trafficked or suspected of trafficking when calculating its estimates, which may introduce bias into those trafficking estimates (see sidebar). For example, the sample could overestimate the extent of retailer trafficking if the stores in the sample that are targeted for investigation are more likely to traffic. Conversely, if FNS’s detection methods do not capture all instances of trafficking—such as retailers who only traffic with people they know—the sample could lead to an underestimate of trafficking among all SNAP-authorized stores. Recognizing that the trafficking estimates provide important information on program fraud, FNS evaluated ways to address limitations in the estimates. In 2013, FNS convened a technical working group of experts to discuss alternate ways to estimate retailer trafficking. That group made various recommendations to improve the estimates, some of which FNS pursued through additional analyses. For example, to address limitations introduced by the sample FNS uses to estimate trafficking, the agency conducted a study to assess the feasibility of calculating its estimates using a national random sample of stores. However, FNS determined it would be infeasible to use a random sample because of the costs and resources that would be involved. According to FNS officials, it cost the agency approximately $67,000 to produce the September 2017 trafficking estimates report. By comparison, FNS estimated that using a national random sample could cost between $11.5 million and $38 million, depending on the specific sample selection method. This is because, among other factors, taking this approach would require investigative staff to visit stores suspected of trafficking as well as those that are not suspected of trafficking. Doing so would require a significant number of additional investigators, according to the feasibility study. Also in response to a recommendation by the technical working group, FNS contracted for a study in November 2017 that reviewed the five factors the agency uses to make adjustments to reduce the bias in its sample of stores (see sidebar). FNS began using these five factors—such as the type of store—more than 20 years ago when it initially developed its approach to estimating trafficking. The study evaluated the continued relevance of the five factors, as well as the relevance of additional factors related to store characteristics and neighborhood demographics. The study did not make recommendations, and the expert who conducted the study told us that based on the analysis, the original five factors remain relevant. As a result, FNS officials stated the agency would continue to use these factors to reduce bias in the sample. However, FNS has not evaluated whether factors the agency currently uses to identify stores for possible investigation could help reduce bias in the sample and improve the trafficking estimates. Specifically, FNS analyzes data on SNAP transactions and looks for suspicious patterns or other indications of potential trafficking. Based on the results of these analyses, FNS assigns a numeric score to each store, and stores with scores above a certain threshold are added to FNS’s Watch List for further review. Several experts have suggested to FNS that including this score or other related factors when adjusting the investigative sample could help reduce the bias in the sample and improve the trafficking estimates, yet FNS has not evaluated the use of these factors for this purpose. FNS officials said that stores’ numeric scores and the factors related to the Watch List are not public information, and the agency’s preference is to be transparent about the methodology used to produce the trafficking estimates. However, FNS already describes its Watch List and the use of a numeric score threshold in an appendix to its trafficking reports. According to OMB’s statistical standards, federal agencies should take steps to maximize the objectivity of the statistical information they produce. Objectivity refers to whether the information is accurate, reliable, and unbiased. Without evaluating the usefulness of the Watch List factors for adjusting the sample, FNS may miss an opportunity to reduce the bias in the sample and improve the accuracy of its trafficking estimates. In addition, FNS has not evaluated the accuracy of its assumption of the percentage of SNAP benefits trafficked by different types of stores, which FNS developed over 20 years ago from anecdotal information. Among stores that engaged in trafficking, FNS assumes that 90 percent of benefits redeemed in small stores and 40 percent of benefits redeemed in large stores were trafficked (see sidebar). A former FNS official who helped develop the agency’s approach for estimating trafficking stated that the assumption was based on conversations with investigators in the 1990s—deemed to be the best source of information at the time. He noted that the investigators who were consulted generally disagreed on the percentage of benefits that were trafficked, as the actual percentage could vary widely based on whether, for example, one employee had trafficked or the entire store was a front for trafficking. However, the investigators generally agreed that 90 percent and 40 percent would overestimate trafficking by retailers in small and large stores, respectively. According to FNS officials, in the absence of other data, they preferred to use an overestimate, rather than an underestimate, of the percentage of benefits trafficked in stores found to have trafficked. Despite an increase in the availability of data on retailer trafficking over the last 20 years, FNS officials have not evaluated the accuracy of this key assumption and said that they have no plans to do so. FNS officials noted that they do not believe there are available data that indicate whether the assumption is accurate and, as such, any evaluation would require new data collection. However, according to contractors and a former official we spoke with who had studied the methodology as well as USDA OIG officials, data are currently available that may help FNS evaluate the accuracy of this assumption. For example, they suggested FNS could analyze the transaction data of stores that trafficked to identify the percentage of all redeemed SNAP benefits that were consistent with known indicators of trafficking. Currently, OIG officials told us that they use a similar approach to calculate the amount of benefits trafficked for a store whose owner is being prosecuted. According to OMB’s statistical standards, assumptions should be reviewed for accuracy and validated using available, independent information sources. Without FNS evaluating its key assumption of the percentage of SNAP benefits trafficked, the estimates it reports on the extent of program fraud are potentially inaccurate. FNS has taken some steps to prevent retailer trafficking that align with leading fraud risk management practices and our prior recommendations, but has not pursued some opportunities for early oversight. As we note in our Fraud Risk Framework, while fraud control activities can be interdependent and mutually reinforcing, preventative activities generally offer the most cost-effective investment of resources. FNS officials told us that the agency tries to prevent trafficking through its policies and procedures for authorizing stores to participate in SNAP. Since our 2006 report, FNS has taken some steps to amend retailer authorization policies to address vulnerabilities that we identified. For example: Increasing requirements for food that retailers must stock to participate in SNAP: In 2006, we found that FNS had minimal requirements for the amount of food that retailers must stock, which could allow retailers more likely to traffic into the program. At that time, FNS officials said that they authorized stores with limited food stock to provide access to food in low-income areas where large grocery stores were scarce. In 2006, retailers were generally required to stock a minimum of 12 food items (at least 3 varieties in each of 4 staple food categories), but FNS rules did not specify how many items of each variety would constitute sufficient stock. We recommended that FNS develop criteria to help identify the stores most likely to traffic, using information such as the presence of low food stock. In 2016, FNS promulgated a final rule increasing food stock requirements and, in January 2018, issued a policy memorandum to clarify these requirements. FNS officials told us that the new requirements are designed to encourage stores to provide more healthy food options for recipients and discourage trafficking. According to the memorandum, retailers are now generally required to stock at least 36 food items (including stocking at least 3 varieties in each of 4 staple food categories, and 3 items of each variety). See figure 6 for a comparison of the previous (as of 2006) and current (reflecting the January 2018 memorandum) requirements. Assessing retailer risk levels: Also in 2006, we found that FNS had not conducted analyses to identify characteristics of stores at high risk of trafficking and to target its resources accordingly. For example, we reported that some stores may be at risk of trafficking because one or more previous owners had been found to be trafficking at the same location. At that time, FNS did not have a system in place to ensure that these stores were quickly targeted for heightened attention. We recommended that FNS identify the stores most likely to traffic and provide earlier, more targeted oversight to those stores. In 2009, FNS established risk levels for stores: high, medium, and low. For example, high-risk stores are those with a prior permanent disqualification at that location or nearby. In January 2012, FNS revised its policy for authorizing high-risk stores. The policy requires high-risk retailers to provide specific documentation to ensure that the owners listed on the application have not been previously disqualified or do not have ties to a previously disqualified owner, such as a letter from the bank listing the authorized signers on the store’s accounts. Although FNS took these steps to identify risk levels for stores and target its initial authorization activities accordingly, the agency is not currently using this information to target its reauthorization activities to stores of greatest risk. During reauthorization, FNS reviews previously approved stores for continued compliance with program requirements. Although the agency’s policy and website both state that certain high-risk stores will be reauthorized annually, FNS is currently reauthorizing all stores on the same 5-year cycle, regardless of risk. FNS reauthorized most high-risk stores under this policy one time in fiscal year 2013, but officials told us that they then discontinued annual reauthorizations after an in-depth assessment of the benefits and costs of this practice. For example, FNS staff reported collecting more than 150,000 documents as part of the fiscal year 2013 reauthorization cycle and found that collecting these documents annually is ineffective and burdensome to FNS and the retailer. FNS instead decided to annually reauthorize a sample of high-risk retailers as a result of its assessment of the fiscal year 2013 cycle, but did not follow through with those plans. Specifically, the agency decided to pursue annual reauthorizations of a sample of stores at the greatest risk of program violations—those at the same address as a store that had been previously permanently disqualified. However, FNS officials did not have documentation that the approach was ever implemented or that they assessed the benefits and costs of reauthorizing this sample of high-risk retailers. More frequent reauthorization of certain high-risk stores is consistent with federal internal control standards, which suggest that agencies should consider the potential for fraud when determining how to respond to fraud risks. Considering the benefits and costs of control activities to address identified risks is a leading practice in GAO’s Fraud Risk Framework. By not assessing the benefits and costs of reauthorizing certain high-risk stores more frequently than other stores, FNS may be missing an opportunity to provide early oversight of risky stores and prevent trafficking. The steps FNS has taken to improve how it detects retailer trafficking generally align with fraud risk management leading practices for designing and implementing control activities to detect fraud. For example, FNS’s website shows how to report SNAP fraud, including retailer trafficking, through the USDA OIG’s fraud hotline. According to our Fraud Risk Framework, reporting mechanisms help managers detect instances of potential fraud and can also deter individuals from engaging in fraudulent behavior if they believe the fraud will be discovered and reported. Increasing managers’ and employees’ awareness of potential fraud schemes can also help managers and employees better detect potential fraud. To that end, FNS has developed fraud awareness training for staff in each of the branches in its Retailer Operations Division—the office primarily responsible for oversight of SNAP-authorized retailers. This includes training related to retailer trafficking for new staff and refresher training for experienced staff. Some of the training materials employ identified instances of trafficking to improve future detection and response activities. See figure 7 for photographs from a store investigation that were featured in an April 2017 training session. FNS also uses data analytics, another leading practice in our Fraud Risk Framework, to identify potential trafficking and prioritizes its investigative resources to the stores most likely to be trafficking. Specifically, FNS scans about 250 million SNAP transactions per month through its Anti- Fraud Locator using EBT Retailer Transactions (ALERT) system to identify certain patterns indicative of trafficking. ALERT assigns a numeric score to each store based on the likelihood of trafficking. Stores with scores above a certain threshold are added to FNS’s Watch List, and FNS analysts and investigators prioritize the stores on this list for review based on factors such as average transaction amounts that are excessive for that type of store. In addition, FNS’s analysts conduct their own data mining and review complaints and fraud tips from the OIG’s hotline to add stores to the Watch List. FNS also has explored ways and taken steps to improve its data analytics through internal workgroups and external studies. Using the results of monitoring and evaluations to improve fraud risk management activities is a leading fraud risk management practice. For example, staff in the Retailer Operations Division participate in a workgroup that uses findings from FNS’s trafficking investigations to improve the Division’s detection efforts. This collaborative effort has led to improvements such as using store ZIP codes to compare transactions at stores suspected of trafficking with similar stores nearby. According to FNS, its staff can use this information to substantiate charges against retailers by establishing what typical transaction patterns look like, compared to trafficking patterns, for similar stores. In addition, FNS commissioned studies in fiscal years 2014 and 2015 to evaluate the effectiveness of its data analytics to monitor stores and identify areas for improvement. For example, one of the studies identified and recommended new ways that FNS could analyze SNAP transaction data to detect emerging trafficking schemes—such as indirect trafficking at super stores and supermarkets, where more than 80 percent of SNAP benefits are redeemed. FNS officials reported in August 2018 that they examined the recommendations and implemented those they determined were feasible with current resources and would add value to their efforts. For example, they decided to analyze data over shorter periods of time (monthly instead of a 6-month period) to more quickly identify stores that may be trafficking. Officials also reported that they are continuing to assess the effectiveness of their data analytics. FNS’s efforts to respond to retailer trafficking generally align with leading practices for fraud risk management. Consistent with our Fraud Risk Framework, FNS has established collaborative relationships with external stakeholders to respond to identified instances of potential fraud. For example, to amplify its own efforts, FNS has agreements (known as state law enforcement bureau, or SLEB, agreements) with 28 states. Through these agreements, FNS allows state and local law enforcement agencies to use SNAP EBT cards in their own undercover investigations of retailers. According to the most recent available FNS data, participating states opened 1,955 cases from fiscal year 2012 to fiscal year 2018 under SLEB agreements. These cases resulted in a total of 139 retailers being permanently disqualified from the program. Within USDA, FNS and the OIG also said they recently updated a memorandum of understanding (MOU) that outlines, among other things, how the two entities will coordinate on retailer trafficking investigations. Under the MOU, FNS investigates retailers with average monthly SNAP redemptions below a certain dollar threshold without first obtaining clearance from the OIG to pursue the case. FNS and OIG officials said that this provision of the MOU allows FNS to more quickly investigate suspicious behavior and pursue administrative action, such as permanent disqualification, against retailers found to be trafficking. Previously, according to OIG officials, FNS needed to clear most cases against retailers suspected of trafficking through the OIG. As we noted in our 2006 report, due to the time it takes to develop an investigation for prosecution and the costs associated with doing so, a natural tension exists between the goal of disqualifying a retailer as quickly as possible to prevent further trafficking and seeking prosecution of the retailer to recover losses and deter other traffickers. The MOU is also designed to strengthen collaboration between FNS and the OIG in identifying the situations that warrant criminal investigations. Since our 2006 report, OIG and FNS both generally increased the number of actions taken against SNAP retailers found to be trafficking. Specifically, the OIG reported an increase in the number of trafficking cases that it successfully referred for federal, state, or local prosecution (see fig. 8). The OIG also reported increases in the number of convictions resulting from its investigations, from 79 in fiscal year 2007 to 311 in fiscal year 2017. FNS also generally increased the number of retailers sanctioned for trafficking, though few received a monetary penalty. From fiscal year 2007 to fiscal year 2017, the number of permanent disqualifications resulting from FNS’s trafficking investigations nearly doubled (see fig. 9). In lieu of a permanent disqualification, FNS sometimes imposes a monetary penalty on a retailer found to be trafficking. However, FNS imposed few monetary penalties for trafficking in lieu of permanent disqualification during this period. From fiscal year 2007 to fiscal year 2017, FNS assessed a total of 40 such penalties, totaling $1.5 million (for an average of about $38,000 each). In our 2006 report, we found that FNS’s penalties for retailer trafficking may be insufficient to deter traffickers. We noted that trafficking will continue to be lucrative for retailers as long as the potential rewards outweigh the penalties and recipients are willing to exchange their benefits for cash. We recommended that FNS develop a strategy to increase penalties for trafficking. Using the results of evaluations, such as audits, to improve fraud risk management activities is a leading practice in GAO’s Fraud Risk Framework. The Food, Conservation, and Energy Act of 2008 (known as the 2008 Farm Bill) gave USDA authority to impose higher monetary penalties, as well as authority to impose both a monetary penalty and program disqualification on retailers found to have violated relevant law or regulations (such as those found to be trafficking). Although USDA was granted this authority a decade ago, the department has not finalized regulatory changes to strengthen penalties against retailers found to be trafficking. In August 2012, FNS proposed regulatory changes to implement this authority from the 2008 Farm Bill, including assessing a new trafficking penalty in addition to permanent disqualification. The penalty would have been based on the store’s average monthly SNAP redemptions and was intended to recoup government funds diverted from their intended use. In proposing these changes, FNS stated that they were necessary to improve program integrity and deter retailers from committing program violations. FNS also estimated that it would assess an additional $174 million per year in these new trafficking penalties—a significant increase from the amounts FNS currently assesses in penalties for trafficking (less than $100,000 in fiscal year 2017). However, FNS did not finalize this rule, and, as of spring 2018, the rule was considered “inactive.” At that time, FNS officials told us that they had not finalized the rule because other rulemaking had taken priority in the intervening 6 years. More recently, in August 2018, FNS officials told us that they plan to revise the previously proposed rule to increase penalties and submit it for the spring 2019 regulatory agenda. In November 2018, FNS officials indicated that they were beginning to draft the proposed rule but could not provide us with documentation of this effort because the regulatory action was still pending. Increasing penalties for retailer trafficking would serve as an important tool to deter trafficking and safeguard federal funds. FNS measures the effectiveness of many of its trafficking detection and response activities, but lacks measures to evaluate its prevention activities. Measuring outputs, outcomes, and progress toward the achievement of fraud risk objectives is a leading practice in our Fraud Risk Framework. At the agency level, FNS has a priority plan for fiscal year 2018 that includes a goal of reducing the SNAP trafficking rate through retailer- and client-focused activities. At the program level, FNS’s Retailer Operations Division has an internal scorecard that tracks performance measures related to retailer oversight activities, but none of these focuses on prevention of trafficking. For example, the scorecard measures the outputs and outcomes of activities designed to detect and respond to trafficking, such as the total number of sanctions implemented against retailers and the percentage of undercover investigations that result in a permanent disqualification. However, the scorecard does not have any measures related to preventing trafficking through the retailer authorization process—a key area for prevention activities. The scorecard includes one output measure related to this process, but the measure (the percentage of retailer authorization requests processed within 45 days) focuses on how quickly retailers gain access to the program, rather than preventing trafficking. Although FNS officials have acknowledged that their program compliance efforts begin with the retailer authorization process, they said that they had not considered establishing measures related to preventing trafficking. They added that their supervisory review process may help ensure that staff who process retailer applications in the Retailer Operations Branch do not overlook evidence of potential fraud, but this review includes a small sample of approved store applications (typically 5 cases per staff member monthly). Although FNS has not established measures to assess its trafficking prevention activities, the agency has data that it could leverage for this purpose. For example, FNS collects data on the number of applications that were denied because FNS found that the retailer lacked business integrity, such as applicants previously found to be trafficking or with ties to a prior owner who had trafficked. Such data could be used to develop measures related to the number and percentage of retailer applications denied for business integrity. FNS officials acknowledged that these data could be used to develop performance measures for its trafficking prevention activities. Establishing such measures would enable FNS to more fully assess the effectiveness of its retailer oversight activities and better balance retailer access to the program with preventing retailer fraud. FNS must continue to balance its goal of program integrity with its mission to provide nutrition assistance to millions of low-income households. During a period in which SNAP retailer participation has markedly increased, FNS has made progress in addressing SNAP retailer trafficking by identifying high-risk stores and increasing the number of stores disqualified for trafficking. It is critical that FNS maintain progress and momentum in these areas, particularly since FNS’s own data suggest that trafficking is on the rise. To its credit, FNS has already evaluated some ways to improve how the agency measures and addresses retailer trafficking, yet, at the same time, the agency has missed opportunities to strengthen these areas. For example, since FNS has not taken steps to clarify and improve its retailer trafficking estimates—one of the only available SNAP fraud measures— questions remain regarding the accuracy of the estimates and the extent of fraud in SNAP. In addition, prevention and early detection of retailer trafficking are particularly important and deserve continued attention, especially since retailers can quickly ramp up the amount they redeem in federal SNAP benefits, potentially by trafficking. However, because FNS is reauthorizing all stores once every 5 years, the agency may be missing an opportunity to prevent trafficking through more frequent oversight of risky stores. Further, until FNS strengthens its response to trafficking by increasing penalties, the agency will continue to miss an opportunity to improve program integrity and deter retailers from committing program violations. Finally, FNS directs a significant amount of staff resources to authorizing and monitoring retailers who participate in SNAP. Ensuring that those staff understand the importance of addressing fraud is key for program integrity. FNS has taken steps to make that clear through the inclusion of relevant performance measures for the branches responsible for fraud detection and response, yet the agency has not developed such measures for its trafficking prevention activities. Until FNS establishes performance measures for these activities, it will be unable to fully assess the effectiveness of its overall efforts to address retailer trafficking. In addition, such measures would assist FNS in balancing its efforts to ensure retailer access with those to prevent retailer fraud. We are making the following five recommendations to FNS: The Administrator of FNS should present the uncertainty around its retailer trafficking estimates in future reports by, for example, including the full range of the estimates in the report body and executive summary. (Recommendation 1) The Administrator of FNS should continue efforts to improve the agency’s retailer trafficking estimates by evaluating (1) whether the factors used to identify stores for possible investigation could help address the bias in its sample, and (2) the accuracy of its assumption of the percentage of SNAP benefits that are trafficked by different types of stores. (Recommendation 2) The Administrator of FNS should assess the benefits and costs of reauthorizing a sample of high-risk stores more frequently than other stores, use the assessment to determine the appropriate scope and time frames for reauthorizing high-risk stores moving forward, and document this decision in policy and on its website. (Recommendation 3) The Administrator of FNS should move forward with plans to increase penalties for retailer trafficking. (Recommendation 4) The Administrator of FNS should establish performance measures for its trafficking prevention activities. (Recommendation 5) We provided a draft of this report to USDA for review and comment. On December 3, 2018, the Directors of the Retailer Policy & Management Division and the Retailer Operations Division of FNS provided us with the agency’s oral comments. FNS officials told us that they generally agreed with the recommendations in the report. Officials also provided technical comments, which we incorporated as appropriate. Regarding the recommendation to present the uncertainty around the retailer trafficking estimates, FNS officials told us that they plan to include the estimate intervals and results of sensitivity analyses in the body of their next report, rather than in appendices. This is the information we used to determine the range around the trafficking estimates. Making this change would address our recommendation, as we continue to believe that reporting the level of uncertainty around each estimate would increase transparency and provide Congress and the public with better information on the extent of fraud in SNAP. In addition, regarding the recommendation to assess the benefits and costs of reauthorizing a sample of high-risk retailers more frequently, FNS officials noted that while reauthorizations currently occur at least once every 5 years, monitoring for potential violations occurs on an ongoing basis regardless of risk level. Low-, medium-, and high-risk stores are continually scanned by FNS’s ALERT system. FNS officials added that, in fiscal year 2017, FNS imposed sanctions (e.g., fines or temporary disqualifications) on 862 stores found to be violating program rules, and disqualified permanently 1,661 stores for trafficking SNAP benefits or falsifying an application. FNS officials noted that this is a 26 percent increase in the number of stores sanctioned, compared to fiscal year 2013. We agree that ongoing monitoring is important, and we discussed these and other FNS efforts to detect and respond to retailer trafficking in our report. We nevertheless believe, and FNS officials agreed, that assessing the value of earlier oversight of risky stores through the reauthorization process is warranted, and could enhance efforts to prevent trafficking. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the USDA, congressional committees, and other interested parties. In addition, this report will be available at no charge on the GAO website at www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. Kathy Larin, (202) 512-7215 or larink@gao.gov. In addition to the contact named above, Rachel Frisk (Assistant Director), Rachael Chamberlin (Analyst-in-Charge), and Swati Deo made significant contributions to this report. Also contributing to this report were James Bennett, Thomas Cook, Alex Galuten, Lara Laufer, Olivia Lopez, Jean McSween, Jessica Orr, Philip Reiff, Almeta Spencer, Jeff Tessin, Matthew Valenta, and Erin Villas.", "summary": "SNAP is the largest federally funded nutrition assistance program, providing about $64 billion in benefits to over 20 million households in fiscal year 2017. FNS oversees SNAP at the federal level and is responsible for authorizing and overseeing retailers. While most benefits are used as intended, some retailers have engaged in trafficking, which represents fraud and diverts federal funds from their intended use. GAO was asked to review FNS's efforts to address SNAP retailer trafficking since GAO's last report in 2006. This report examines (1) what is known about the extent of SNAP retailer trafficking, and (2) the extent to which FNS has taken steps intended to improve how it prevents, detects, and responds to retailer trafficking. GAO reviewed relevant federal laws and regulations, FNS policies, and studies related to retailer trafficking; assessed FNS's use of statistical standards for federal agencies and selected leading practices in GAO's Fraud Risk Framework ; and interviewed FNS and USDA Office of Inspector General officials and key stakeholders. The U.S. Department of Agriculture (USDA) Food and Nutrition Service's (FNS) estimates of retailer trafficking—when a retailer exchanges Supplemental Nutrition Assistance Program (SNAP) benefits for cash instead of food—have limitations, though they suggest trafficking has increased in recent years, to $1 billion each year from 2012 to 2014. One key limitation of the estimates is that FNS has not evaluated the accuracy of its assumption about the percentage of SNAP benefits trafficked. FNS assumes that, among stores that trafficked, 90 percent of the benefits redeemed in small stores, and 40 percent in large stores, were trafficked. A former FNS official stated that this assumption is based on discussions with investigators in the 1990s when FNS first developed its approach to estimate trafficking, and that they have not since evaluated it for accuracy. However, there are options available for evaluating this assumption, such as reviewing SNAP transaction data from stores that are known to have trafficked. Statistical standards for federal agencies indicate that assumptions should be reviewed for accuracy and validated using available, independent information sources. By not evaluating this key assumption, FNS's commonly cited estimates of SNAP fraud are potentially inaccurate. FNS has generally taken steps to address retailer trafficking that align with leading fraud risk management practices, but the agency has not pursued additional actions to prevent and respond to trafficking. For example: Although FNS assigns a risk level to each store when it applies to participate in SNAP, it is not currently using this information to target its reauthorization activities to stores of greatest risk. During reauthorization, FNS reviews previously approved stores for continued compliance with program requirements. FNS currently reauthorizes all stores on the same 5-year cycle, regardless of risk, although its policy states that it will reauthorize certain high-risk stores annually. FNS officials planned to reauthorize a sample of high-risk stores each year, but said they did not follow through with those plans. Officials also stated that they did not document an analysis of the benefits and costs of this practice, which would be consistent with leading fraud risk management practices. As a result, FNS may be missing an opportunity to provide early oversight of risky stores and prevent trafficking. The Food, Conservation, and Energy Act of 2008 gave USDA the authority to strengthen penalties for retailers found to have trafficked, but as of November 2018, FNS had not implemented this authority. FNS proposed a related rule change in 2012 and indicated the change was necessary to deter retailers from committing program violations, but the rule was not finalized. By failing to take timely action to strengthen penalties, FNS has not taken full advantage of an important tool for deterring trafficking. GAO is making five recommendations, including that FNS improve its trafficking estimates by, for example, evaluating the accuracy of its assumption of the percentage of benefits that are trafficked; assess the benefits and costs of reauthorizing a sample of high risk stores more frequently than others; and move forward with plans to increase penalties for trafficking. FNS generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "The MTW demonstration was authorized by the Omnibus Consolidated Rescissions and Appropriations Act of 1996 (1996 Act). The demonstration’s ultimate goal is to identify successful approaches that can be applied to public housing agencies nationwide. As of November 2017, a total of 39 agencies were authorized to participate in the demonstration (see fig. 1); however, two agencies consolidated their MTW demonstration programs and are counted as one agency for purposes of MTW participation. The MTW Office within the Office of Public and Indian Housing (PIH) is responsible for implementing the demonstration. The MTW Office currently includes a program director and eight coordinators, who are each assigned to a specific group of MTW agencies. MTW coordinators facilitate the reviews of planned and implemented activities and are responsible for coordinating with other HUD offices, including local HUD field offices, to obtain additional input on MTW agencies’ planned activities and accomplishments. The 1996 Act that created the MTW demonstration provides three objectives for the demonstration: (1) reduce costs and achieve greater cost-effectiveness in federal housing expenditures; (2) give incentives to families with children where the head of household is working, seeking work, or is preparing for work by participating in job training, educational programs, or programs that assist people to obtain employment and become economically self-sufficient; and (3) increase housing choices for low-income families. In making these changes, MTW agencies must comply with the following five contractual requirements derived from the 1996 Act: 1. assist substantially the same total number of eligible low-income families under MTW as would have been served absent the demonstration; 2. maintain a mix of families (by family size) comparable to those they would have served without the demonstration; 3. ensure that at least 75 percent of the families assisted are very low- 4. establish a reasonable rent policy to encourage employment and self- 5. assure that the housing the agencies provide meets HUD’s housing quality standards. MTW agencies do not receive special funding allocations; rather, they receive funds from the three traditional primary funding sources (public housing capital funds, public housing operating funds, and voucher funds). Public housing agencies generally are required to use the funds from each source only for specific purposes, but MTW agencies may combine the money from the three sources and use the funds for a variety of HUD-approved activities. This fungibility is intended to give MTW agencies greater flexibility. For example, public housing operating funds are traditionally used to make up the difference between rents charged for units and the cost of operating them. Capital funds are traditionally used for modernization and management improvements, while voucher funds traditionally provide rental assistance in the private market. However, an MTW agency may use public housing capital funds to issue additional vouchers or use voucher funds to develop more public housing. MTW agencies also have the authority to use their funds to implement innovative activities that differ from traditional housing assistance. For instance, an MTW agency can use funds to replace public housing with mixed-income communities or reach special-needs populations using vouchers paired with supportive services. HUD entered into a standard agreement with each existing MTW agency. HUD created the agreement in 2008 to standardize the contract terms. The agreement references an attachment that sets out reporting requirements (Attachment B or Form 50900) and another attachment (Attachment C) that lists the specific sections of the United States Housing Act of 1937, as amended, and its implementing regulations that an MTW agency may waive as part of its MTW flexibility. While the standard agreement is generally the same for all MTW agencies, two attachments are tailored to individual agencies: a description of the formulas for determining the amounts of funding each agency will receive (Attachment A) and a section that may include some agency-specific authorizations (Attachment D). In addition to statutory requirements, the agreement requires all existing MTW agencies to submit to HUD an annual plan for approval as well as an annual report. Attachment B outlines the information that agencies are required to include in their annual plans and annual reports. For example, MTW agencies must include certain elements in their annual plans for each activity they propose to adopt, such as (1) a description of the activity and its anticipated effect in relation to the statutory objective under which the activity is proposed; (2) the HUD metrics that will be used to quantify the changes the agency anticipates as a result of the activity, including baseline performance level and yearly benchmarks; and (3) the MTW authorizations that give the agency the flexibility to conduct the activity. Similarly, MTW agencies are required to include in their annual reports information about housing stocks and leasing as well as information required for HUD to assess compliance with key demonstration requirements (such as number and mix of families served and percentage of very low-income households served). For rent-reform activities, agencies are also required to describe the number and results of any hardship requests. MTW agencies also are required to report standard information through HUD data systems. MTW agencies must submit tenant-related data into the Moving to Work section of the Public and Indian Housing Information Center (MTW-PIC). According to HUD officials, the MTW-PIC module was created in 2007 because the standard PIC system that non-MTW agencies use could not accommodate some of the activities allowed under MTW, such as rent calculations that vary from HUD’s standard calculations. MTW agencies also must submit year-end financial information into FDS, and HUD issued special instructions to enable MTW agencies to complete the reporting. Finally, MTW agencies must report voucher unit utilization in VMS. The Consolidated Appropriations Act, 2016 authorized HUD to expand the MTW demonstration from the current 39 public housing agencies to an additional 100 agencies (expansion agencies) over 7 years. The 2016 act requires that the expansion agencies must be high performers at the time of application and that the selected agencies represent geographic diversity. The expansion agencies will be brought into the demonstration by cohort, as required by the 2016 act. HUD plans to designate the initial cohort by summer 2018. As directed by the 2016 act, within each cohort each agency will implement one policy change that HUD selects for that cohort to test. The 2016 act requires that expansion agencies be rigorously evaluated and that HUD establish a research advisory committee to advise the Secretary on policies to study and methods of research and evaluation. HUD established the committee and received its recommendations on which policy changes to test and how to evaluate them. As of November 2017, HUD had not announced the policy changes each cohort will be testing. On January 23, 2017, HUD published in the Federal Register a request for comment on a draft operations notice for the MTW expansion. The draft operations notice establishes requirements for the implementation and continued operations of the demonstration and describes waivers available, terms of participation, funding and financial reporting, and administration and oversight for agencies joining under the expansion. The comment period closed on June 5, 2017. According to HUD officials, there will be another opportunity for comment before the notice is finalized in early 2018. Since our last review of the MTW demonstration in April 2012, HUD has taken steps to improve MTW agencies’ annual reporting and its process for monitoring agencies’ compliance with requirements of the demonstration. However, we found that HUD’s oversight—review of annual reports and compliance assessments—has not been timely and HUD has not fully documented its process for assessing compliance, due to limited staffing and competing priorities. While the MTW Office added staff to assist with the oversight of the current 39 MTW agencies, HUD has not conducted workforce planning to address the resources needed for overseeing the 100 agencies to be added through the MTW demonstration expansion. HUD has taken steps to improve MTW agencies’ annual reporting. While agencies were already required to submit annual plans and reports, HUD revised its reporting requirements for MTW agencies in May 2013 in response to our recommendations. Specifically, HUD revised Attachment B to provide detailed clarifications on the meaning of the three statutory objectives of the demonstration and relevant standard metrics. For example, for each of the statutory objectives, the revised guidance requires that the MTW agency use and report on all of the applicable standard metrics listed in Attachment B. The revised attachment also includes standard tables for MTW agencies to provide operating information and financial information. Additionally, HUD conducted training on the revised Attachment B and issued a document containing answers to frequently asked questions about the revisions. HUD also took some steps to improve its monitoring of MTW agencies’ compliance with the five requirements of the demonstration. Specifically, in response to our 2012 recommendation that HUD implement a process for assessing compliance with the requirements, HUD developed a process and began to track MTW agencies’ compliance with each of the five requirements. The 2013 revisions to Attachment B added requirements for agencies to submit information in annual reports with which HUD assesses compliance. The attachment includes standard tables for MTW agencies to provide specific information on households served, family sizes, and income levels. According to our review of HUD documents and discussions with HUD officials, the MTW Office uses this information, along with information MTW agencies submitted in other HUD data systems, to assess compliance with the five requirements. Table 1 summarizes HUD’s description of its compliance processes for each of the five requirements. We found that HUD’s reviews of MTW agencies’ annual reports were not completed in a timely manner; reviews were completed multiple years after the annual reports were submitted. Specifically, HUD did not complete its review of the agencies’ 2013–2015 reports until March 2017 and its review of 2016 reports was still underway as of November 2017 (see fig. 2). As previously mentioned, MTW agencies submit information about their MTW activities, financial information, data related to compliance assessments, and other information through annual reports. Attachment B states that HUD officials will use this information to monitor MTW agencies, particularly their compliance with some of the five requirements. Although the standard agreement gives MTW agencies 90 days after the end of their fiscal year to submit the annual report to HUD, it does not specify a time frame for HUD’s review of the report. However, it states that HUD must notify an agency in writing if it requires additional information or clarifications to the information provided in the report. HUD officials said that limited staffing resources in the MTW Office in 2014–2016 led to delays in the reviews. Officials further noted that in 2014 and 2015 existing staff in the MTW Office had to focus on other priorities, including renegotiating the standard agreement, and then in 2016 on implementing the expansion of the demonstration. Untimely reviews of MTW annual reports diminishes oversight and can result in delays on HUD’s part in responding to issues arising from the review, agencies not having an opportunity to respond to concerns promptly, and HUD’s inability to assess the information reported to determine effects on tenants. As previously described, HUD developed a process to assess compliance with the five requirements of the demonstration, but its implementation of the process was not always timely. HUD did not complete its 2013–2015 reviews of MTW agencies’ compliance with the five requirements until 2017. In March 2016, HUD officials provided us with a tracker of agencies’ compliance with the requirements that indicated HUD started its review for 2013 but had not yet completed that assessment or started reviewing compliance for subsequent years. In July 2017, HUD provided us with evidence it had completed the 2013–2016 assessments for all five requirements. In addition, HUD has not clearly documented its process for assessing compliance with the five requirements. HUD officials told us they did not have documentation of the process they used to assess compliance with most of the requirements, such as the methodologies and data used. As previously discussed, HUD has different processes for assessing compliance with each requirement and the information it uses to determine compliance comes from various data sources. Based on our review of HUD documents (including Attachment B and the recently completed compliance assessments) and discussions with HUD officials, it was not always clear what methods HUD used to support its compliance determinations. For example, documentation we reviewed on the requirement that MTW agencies ensure that 75 percent of the households served are very low-income did not state the methodology used to determine if MTW agencies were in compliance. While our review of the documentation indicated that tenant income in all relevant programs was used, it was not clear if the percentages of tenants in each income category were averaged or weighted to obtain the final percentage of tenants with very low incomes. Additionally, while Attachment B briefly describes the data sources used for some of the compliance assessments, HUD has no documentation specifying what data variables to extract and how to use them. The lack of written instructions led to HUD having to redo its assessment of compliance with the requirement that MTW agencies ensure that 75 percent of the households served are very low-income. Specifically, HUD officials noted that HUD staff initially determined compliance with this requirement based on tenants’ current income, but later determined that they needed to reassess compliance with the requirement using tenants’ income at the time of entry to the program. In September 2017, HUD officials said they were developing internal standard operating procedures to document their approach to assessing compliance with each requirement, and expected to complete the procedures by early calendar year 2018. However, because HUD has not finalized these standard operating procedures, it is unclear whether they fully document the steps and data needed to complete the compliance assessments. Federal internal control standards state that management should develop and maintain documentation of its internal control system, including for controls related to any compliance objectives of the agency. They note that effective documentation assists in management’s design of internal control by establishing and communicating purposes, roles and responsibilities, and specifics of implementation to agency staff. HUD officials stated that limited staffing in the MTW Office in 2014–2016 and competing priorities led to delays in compliance assessments and development of full documentation on procedures. Limited documentation for assessing compliance can lead to inconsistent monitoring of MTW agencies’ compliance with the five requirements. For example, as previously discussed, the lack of documentation on the process and data needed led to the need to reassess compliance with the requirement that MTW agencies ensure that 75 percent of the households served are very low-income. While HUD has taken some steps to address oversight and staff responsibilities for an expanded demonstration, it has not conducted workforce planning for the expanded demonstration. Federal internal control standards state that management should design control activities, including management of human capital, to achieve objectives and respond to risks. Management is to continually assess the knowledge, skills, and ability needs of the entity so that the entity is able to obtain a workforce that has the required knowledge, skills, and abilities to achieve organizational goals. In previous work on human capital, we identified key principles for effective strategic workforce planning, including determining the critical skills and competencies needed to achieve current and future programmatic results and developing strategies that are tailored to address gaps in number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies. In 2014, the MTW Office engaged in a workforce analysis exercise to determine staffing levels needed to oversee the MTW demonstration as configured at that time. Based on the 2014 analysis, the MTW Office determined that seven staff were needed to oversee the 39 participating agencies. In 2014, the MTW Office had four staff and in 2015, five (see table 2). Officials told us that in 2016, an additional five staff were hired in the MTW Office and that one staff member would focus on financial analysis and compliance assessment. In 2017, the MTW staff count was nine. In July 2017, officials told us that based on the 2014 workforce analysis, they determined they had sufficient resources to oversee the current 39 MTW agencies. In response to a congressional request to determine resource needs for MTW expansion, in December 2015 the MTW Office updated its 2014 workforce analysis. As with the 2014 analysis, the 2015 workforce analysis discussed the level of staffing resources needed and not the skill sets and competencies needed to oversee the expanded MTW demonstration and actions to fill any gaps. According to this analysis, HUD determined that a significant number of staff would be needed to oversee the new agencies. Specifically, 41 full-time equivalent personnel across various HUD offices would be needed to meet the resource needs of the expansion in 2016–2020. In September 2017, HUD officials said that because of the current budget environment, the agency planned to address the staffing gap identified in the 2015 analysis by developing a joint oversight structure between the MTW Office and PIH’s Office of Field Operations. According to HUD officials, currently the MTW Office is primarily responsible for monitoring MTW agencies (reviewing annual plans and reports and assessing compliance with demonstration requirements). Field office staff in PIH assist with the review of MTW agencies’ overall financial health and public housing occupancy and voucher leasing information, among other things. HUD plans to continue to follow this oversight structure for the existing 39 agencies, but have field office staff assume more responsibilities for agencies that will join the MTW demonstration as a result of the expansion. MTW Office officials said they have been having internal discussions through a working group with field office staff in PIH to discuss the new oversight structure and determine how best to meet resource needs associated with the expansion. However, as of November 2017, the MTW Office and PIH had not completed plans for joint oversight of the expanded MTW demonstration with the field offices or assessed the knowledge, skills, or abilities needed to implement this new oversight structure. As previously stated, the first cohort of public housing agencies will join the expanded MTW demonstration by summer 2018. MTW Office officials also told us that PIH is planning to finalize a workforce plan by early calendar year 2018 that will address the broad resource needs of PIH. However, according to MTW Office officials, PIH has not yet determined the extent to which the human capital resource needs for the MTW expansion will be incorporated into the PIH workforce plan. Without strategic workforce planning that reflects the oversight strategy for the expanded MTW demonstration, identifies the critical skills and competencies needed, and includes strategies to address any gaps, HUD will not be able to reasonably ensure that it has the staffing resources necessary to oversee an expanded demonstration. We found significant differences between MTW agencies and comparable non-MTW agencies in key outcomes: MTW agencies had lower public housing occupancy rates, lower voucher unit utilization rates, and higher program expenses in 2009–2015 than similar non-MTW agencies. MTW funding flexibilities may partly explain the differences, but limitations in HUD data (such as the inability to determine which funding source was used to fund which activity) make it difficult to more fully understand the differences. MTW agencies accumulated relatively large reserves of voucher funding, but HUD has performed limited oversight of reserves for these agencies. We found significant differences between MTW agencies and comparable non-MTW agencies in key outcomes of the public housing and voucher programs, possibly affecting the number of tenants MTW agencies served. MTW agencies had lower yearly median public housing occupancy rates in fiscal years 2009–2015 than comparable non-MTW agencies, and the difference was statistically significant (see fig. 3). The median share of public housing units occupied (public housing occupancy rate) for MTW agencies was 3 percentage points lower than for similar non-MTW agencies (93 versus 96 percentage points). The middle 50 percent of MTW agencies in our analysis had occupancy rates that ranged from 88 to 96 percentage points, while the non-MTW agencies in our analysis had occupancy rates that ranged from 92 to 98 percentage points. MTW agencies also had lower rates of voucher unit utilization than comparable non-MTW agencies in each year during 2009–2015 (see fig. 4). The voucher unit utilization rate for MTW agencies was about 3 percentage points lower than for similar non-MTW agencies (about 93 percent versus about 96 percent). The middle 50 percent of the MTW agencies had utilization rates that ranged from about 82 to 97 percentage points, while the non-MTW agencies had occupancy rates that ranged from about 92 to 98 percentage points. We also analyzed expenses for the public housing and voucher programs of MTW agencies and comparable non-MTW agencies in 2009–2015. For the public housing program, we included all operating expenses the MTW and non-MTW agencies incurred that were associated with their public housing properties. As figure 5 shows, median public housing operating expenses for MTW agencies in each year during 2009–2015 were $7,853 per household and $6,622 for non-MTW agencies, a difference of about 19 percent. The middle 50 percent of the MTW agencies had total public housing expenses that ranged from $6,048 to $11,436, while the non-MTW agencies had expenses that ranged from $5,827 to $8,355. We also compared the operating expenses associated with the central office cost center of MTW and comparable non-MTW agencies. If larger public housing agencies implement HUD’s property management rules, they generally are required to create a central office cost center, which manages all the centralized activities of the agency and earns fees for providing day-to-day oversight of individual public housing properties such as property management. As figure 6 shows, median public housing operating expenses related to the central office cost center for MTW agencies were about 9 percent higher than comparable non-MTW agencies in each year during 2009–2015 ($2,745 per household and $2,520, respectively). The middle 50 percent of the MTW agencies had central office cost center expenses associated with their public housing program that ranged from $1,509 to $5,798, while the non-MTW agencies had expenses that ranged from $1,635 to $4,939 per household. For the voucher program, we separately examined expenses in 2009– 2015 related to administration, subsidy (housing assistance payments), and tenant services. MTW agencies had higher median administrative, subsidy, and tenant services expenses than comparable non-MTW agencies. As figure 7 shows, median yearly administrative expenses for MTW agencies were $922 per household and $642 for comparable non- MTW agencies, a difference of about 43 percent. The middle 50 percent of the MTW agencies had voucher administrative expenses that ranged from $713 to $1,179, while the non-MTW agencies had expenses that ranged from $555 to $762. As shown in figure 8, the yearly median voucher subsidy expenses for MTW agencies were about 25 percent higher than for comparable non- MTW agencies ($8,295 per household for MTW agencies and $6,629 per household for non-MTW agencies). The middle 50 percent of the MTW agencies had voucher subsidy expenses that ranged from $6,128 to $12,201, while the non-MTW agencies had expenses that ranged from $5,524 to $8,178. As shown in figure 9, the tenant services expenses for the voucher program were higher for MTW agencies than for comparable non-MTW agencies, and many non-MTW agencies did not record any expenses for tenant services in HUD’s database for the years we reviewed. These results are consistent with MTW agencies having more flexibility to use funds to provide tenant services. The median yearly expenses for tenant services for MTW agencies were about $37 per household. Although tenant services are an allowable administrative expense under the traditional voucher program, more than half of the non-MTW agencies in our sample did not report any expenses for tenant services for most of the years we examined. Non-MTW agencies generally use their voucher funds to make subsidy payments to landlords and for administrative expenses. The statistical matching and modeling analysis we conducted improved upon unadjusted comparisons of MTW and non-MTW agencies, but it was not designed to estimate the causal effects of MTW flexibilities. To reduce the influence of known differences between the two groups, we accounted for broad characteristics that differed between MTW agencies and non-MTW agencies. However, our analysis did not attempt to measure the unique circumstances of each MTW agency, but rather broad outcomes relevant to public housing and voucher programs in general. For additional details on our methods and results, see appendix II. As noted by others who studied the MTW demonstration and our previous report, no central source of systematic data exists for MTW activities and outcomes. However, a July 2017 report by Abt Associates, a research and consulting firm, identified and tested indicators they developed to track the performance of MTW demonstrations and compare them to similar non-MTW agencies. As with our analysis, the Abt study found MTW agencies tended to have worse outcomes than similar non-MTW agencies on the indicators of voucher administrative expenses and voucher unit utilization. The study also analyzed other indicators such as increases in earnings of nonelderly, nondisabled households; households served by a service coordinator; and share of voucher households in neighborhoods with lower poverty rates. On many of the other indicators analyzed, the study found that MTW agencies did better than similar non- MTW agencies. For example, for the self-sufficiency measures examined in the study, estimates showed that household earnings were more likely to increase at MTW agencies than at comparison non-MTW agencies. The study also concluded that MTW agencies were able to serve a significant number of individuals not reached by traditional housing assistance and that in many cases, they were also able to offer additional supportive services. However, because our analysis did not look at these other indicators, we could not confirm these results. The observed differences in public housing occupancy and voucher unit utilization rates and program expenses between MTW and non-MTW agencies, which could affect the number of tenants served, may be a result of MTW agencies’ ability to (1) combine their public housing and voucher funds and use them interchangeably and (2) use funds to implement policies that go beyond traditional forms of housing assistance. Combined funding and fungibility. The single fund authorization permits MTW agencies to combine their public housing operating, public housing capital, and voucher funds into a single agency-wide funding source and use the funds interchangeably. For instance, voucher funds may be used for public housing expenses and vice versa, which could affect utilization and occupancy rates. Our analysis of 2015 data from FDS, which HUD uses to account for the agencies’ MTW financial data, showed that 19 MTW agencies transferred voucher funding to their public housing program as the result of the single-fund authorization (that is, they transferred more funding to their public housing accounts than they received through their public housing funding allocation). This analysis was possible because HUD requires agencies to report financial information in FDS at the public housing project level. However, the data could not be used to determine whether all the funds transferred to the public housing accounts were spent on public housing expenses because, according to HUD officials, FDS is not a system that tracks the actual drawdown or disbursement of funds. Instead, public housing agencies use the system to report year-end financial activity. (As discussed later in this report, FDS data could not be used to determine the extent to which public housing funds were used for voucher expenses.) Nontraditional activities. Public housing occupancy and voucher unit utilization rates might be lower for MTW agencies in part because MTW agencies can use funds to implement policies that go beyond traditional forms of housing assistance. Since October 2009, the demonstration’s “broader uses of funds” authorization under the standard agreement has permitted all MTW agencies to adopt local, nontraditional activities, which HUD guidance organizes into four categories (see table 3). In July 2017, HUD provided us with data it had recently compiled on the number of households served through local, nontraditional activities, by MTW agency, during 2009–2016 (see fig. 10). According to these data, in 2009 four agencies implemented at least one type of local, nontraditional housing assistance activity and served 1,177 households (that is, less than 1 household served through local, nontraditional housing assistance for every 100 MTW public housing and voucher units available). In 2016, the number of agencies that implemented at least one local, nontraditional housing assistance activity grew to 25 agencies, which served 9,787 households (about 2 households served through local, nontraditional housing assistance for every 100 MTW public housing and voucher unit available). Some of these households could be served through a rental assistance program that offers a lower level of subsidy than is available to households served through traditional voucher and public housing programs. For example, a local, nontraditional activity could result in an MTW agency lowering its share of housing assistance, thereby increasing the tenant’s share of rent. Conversely, HUD officials pointed out that because MTW agencies assist hard-to-serve households, the subsidies provided to these households could be higher than the subsidy provided under HUD’s traditional housing assistance programs. As such, a household served through local, nontraditional housing activity may not be equivalent to a household served under the traditional voucher or public housing program. Other factors related to expenses. According to HUD officials, factors that could explain the observed differences in the expenses for the public housing and voucher programs of MTW agencies and non-MTW agencies include that MTW agencies typically (1) need more time and resources to develop and implement “innovative” activities, (2) serve hard-to-serve households such as those experiencing homelessness, and (3) provide additional services to the households they serve as a result of the funding flexibilities. According to a University of North Carolina at Chapel Hill study, nearly all MTW agencies have used program flexibility to provide supportive housing for various hard-to-serve populations, including the previously homeless, mentally disabled, developmentally disabled, formerly incarcerated, domestic abuse victims, youth aging out of foster care, and those with substance abuse issues. Some of these programs were provided through sponsor-based voucher programs administered by partner agencies, which required coordination between the MTW agency and the partnering agencies. Limitations in HUD data make it difficult to more fully explain the differences that may affect the number of households served. For instance, HUD cannot measure how participation in the demonstration affected the occupancy and voucher unit utilization rates of MTW agencies. As previously discussed, HUD uses FDS to account for the agencies’ MTW funds, but once combined in the system, the funds are decoupled from the original funding source and it is difficult to determine how these funds were used. As described earlier, although FDS data could be used to illustrate how many agencies transferred voucher funding to their public housing program, these data could not be used to illustrate how many agencies transferred public housing funding to their voucher program because, according to HUD officials, FDS does not identify the source of funding that is available for the voucher program and local, nontraditional activities. Similarly, FDS cannot measure expenses that were for local, nontraditional activities because FDS expenditure categories are not tailored to the MTW demonstration. HUD officials said the reporting of expenses associated with local, nontraditional activities varies by MTW agency, which affects where FDS captures such expenses. HUD has not made changes to FDS because, according to HUD officials, FDS is an accounting system that tracks agencies’ year-end financial activity and, therefore, is not designed to keep track of these data. Furthermore, historical data do not exist on the households served through local, nontraditional activities. Although HUD provided us a spreadsheet it compiled in July 2017 with data on the number of households served through local, nontraditional housing assistance activities from 2009 through 2016, HUD had to manually compile the spreadsheet because its PIC system does not capture data on these households. HUD officials said the agency was considering capturing some data on local, nontraditional households in PIC, but making this change would require HUD and MTW agencies to devote resources to update their systems. HUD previously considered making changes to the system. In 2012, HUD issued a Federal Register notice requesting public comment on changes to the system to track households provided assistance through local, nontraditional activities. According to the notice, agencies had not been reporting these families into the system, which made it difficult to accurately account for the number of MTW families being served. The notice further stated that the MTW Office was manually collecting data on the number of families served each year but the PIC system needed to be revised to make information collection easier for MTW agencies and HUD. HUD officials said HUD did not have the information technology resources needed to make this change in PIC. Federal internal control standards state that management should use quality information to achieve the entity’s objectives. Additionally, one of the statutory objectives of the MTW demonstration is to reduce costs and achieve greater cost-effectiveness in federal housing expenditures, and a key demonstration requirement is to assist substantially the same total number of eligible low-income families under MTW as would have been served absent the demonstration. As discussed previously, intermingled funding streams, the purpose and structure of FDS, and limitations in PIC have combined to limit the data collected and readily available on the MTW demonstration. According to HUD officials, it would be difficult for HUD to require existing agencies to report additional financial data because doing so would require changes to the standard agreement, which generally cannot occur without mutual agreement between the agencies and HUD. Yet agencies’ specific reporting obligations are not set forth in the general standard agreement but rather in Attachment B, which HUD already expanded without requiring an amendment to the standard agreement in 2011 and 2013 and proposed to do in 2016. The standard agreement states that agencies must provide in their annual plan the information required in Attachment B, and under the standard agreement, HUD retains flexibility to determine what constitutes satisfactory completion of the annual plan. Further, the standard agreement, which sets forth general covenants for the demonstration and not specific data points or reporting definitions, specifically acknowledges that HUD must have the “flexibility to design and test various approaches” for housing assistance and that the agencies agree “to cooperate fully with HUD” in the monitoring and evaluation of the MTW demonstration. Under the standard agreement, MTW agencies must provide in their annual report “the information necessary for HUD to assess the Agency’s activities,” without specific detail. As with the annual plan, HUD retains flexibility to determine what data agencies must report. Without more comprehensive data on the uses of MTW demonstration funds and households served through local, nontraditional activities, HUD cannot assess the performance of MTW agencies in relation to public housing occupancy and voucher unit utilization rates and program expenses, which could affect the number of tenants served. MTW agencies have accumulated relatively large reserves of voucher funding. The agencies are able to accumulate more reserves because their voucher funding formula differs from the formula used for the traditional voucher program. HUD allocates voucher funds to non-MTW agencies based on leasing rates and subsidy costs from the prior year. As a result, these agencies have an incentive to expend their voucher funding to keep their budget utilization rate high. However, the voucher formula for MTW agencies, which is outlined in an attachment to each agency’s standard agreement, is generally based on the actual, per-unit costs in the year prior to the agency joining the MTW demonstration. Because the voucher allocation is not tied to prior-year subsidy expenses, MTW agencies do not have the same incentive that non-MTW agencies have to use all their voucher funds in a given year. According to 2016 HUD voucher reserve data, the 39 MTW agencies had almost as much voucher reserves as the 2,166 non-MTW agencies combined. Specifically, as of December 31, 2016, MTW agencies had a total of about $1.11 billion in voucher reserves, whereas the 2,166 non- MTW agencies had slightly higher reserves of $1.13 billion. Similar to our analysis above, we compared the voucher reserves MTW agencies held to the reserves comparable non-MTW agencies held. As figure 11 shows, as of December 31, 2016, the median amount of reserves per household held by MTW agencies was $2,462 compared to $480 for comparable non-MTW agencies (a difference of $1,982 or about 5 times higher). After we completed our analysis, HUD provided updated reserve levels as of June 30, 2017, that showed that MTW agencies’ reserves exceeded non- MTW agencies’ reserves. MTW agencies had a total of about $808 million in reserves while non-MTW agencies had reserves of about $737 million. HUD has performed limited oversight of MTW reserves. For example, before 2016 HUD did not capture data that would help it determine the amount of voucher reserves held by MTW agencies. In January 2012, as part of a new cash management requirement for the voucher program, HUD implemented a process to help transition the accrual of excess funds held at the agency level to HUD-held reserves. According to HUD officials, this process was only partially implemented for MTW agencies at that time because voucher subsidy expenses were comingled with expenses associated with other allowable MTW activities in VMS. In 2016, HUD added new fields in VMS to distinguish various MTW nonvoucher subsidy expenses (such as those for capital improvements of existing public housing units and operation of local, nontraditional activities) from unspent funding. According to HUD officials, these enhancements to VMS now allow HUD to keep track of MTW agencies’ reserves. Consequently, in 2016, HUD started cash reconciliations for MTW agencies, consistent with the cash management procedures for non-MTW agencies. HUD also does not have a process to systematically determine if MTW agencies have public housing reserves. Unlike for the voucher program, HUD was unable to determine the extent to which MTW agencies had unspent public housing funding in reserves. According to HUD officials, FDS tracks overall MTW reserves but HUD cannot distinguish between public housing and voucher reserves because the MTW funds are combined into a single account and because HUD does not have a system similar to VMS that separately tracks public housing reserves for MTW agencies. According to federal internal control standards, management should internally communicate the necessary quality information, such as through written communication, to help achieve the agency’s objectives. Management should design control activities—policies, procedures, techniques, and mechanisms—to achieve objectives and respond to risks. Maintaining comprehensive written policies and procedures will help ensure that control activities are in place to address risks and carry out management directives. We also developed criteria—a set of questions— that agency managers and Congress could use to identify and manage fee revenue instability, including identifying common principles and leading practices for managing reserve funds. For example, managers should ask what level of reserves is to be maintained. In addition, they should consider establishing minimum and maximum reserve levels to ensure accountability and adherence to the reserve’s goals, justifying the numbers with program data and risk management considerations. When established reserve goals have been achieved, such as to fund planned capital investments, the level of reserve should be assessed for reasonableness. However, HUD has not developed and implemented a process to monitor MTW reserves. Specifically, it does not monitor existing MTW agencies’ reserves to determine what agencies plan to do with these reserves and assess whether the plans are reasonable given the amount of reserves. HUD officials said it would require a significant amount of time to individually compare the MTW agencies’ reserves to their planned activities. However, HUD officials said that the draft operations notice for the MTW expansion proposes requiring that expansion agencies hold no more than 1 year of voucher subsidy funds in reserves. But the notice did not outline a plan to evaluate whether this cap was appropriate, and HUD has not yet finalized the notice. Without a process to monitor existing MTW agencies’ plans for their reserves and the appropriateness of the cap for expansion agencies, HUD cannot provide reasonable assurance that MTW agencies have sound plans for expending their reserves. HUD does not have a framework—standard definitions for rent reform and self-sufficiency, clear guidance on reporting requirements, or analysis plans—for monitoring the effect of rent-reform, work-requirement, and time-limit policies. HUD’s definition of rent reform is unclear, leading to agencies inconsistently categorizing some policies and not reporting required information for rent-reform policies. Federal internal control standards state that management should use quality information—relevant and reliable data—to achieve the entity’s objectives. HUD defines rent reform as “any change in the regulations on how rent is calculated for a household.” Under traditional public housing and voucher program rules, an assisted household generally must contribute the greater of 30 percent of its monthly adjusted income or the housing-agency established minimum rent—up to $50—toward its monthly rent. Statute and HUD regulations direct how public housing agencies are to certify tenant income and determine a participating household’s tenant rental payments. Non-MTW agencies must implement this determination process when a household first joins the program and then on a regular basis. In addition, the total housing costs, which are used to calculate a household’s tenant rental payment, include both the rent for the unit and utility costs. As such, an agency is responsible for establishing and maintaining a utility allowance schedule that provides reasonable allowances for tenant-paid utilities. MTW agencies can propose rent- reform policies that make changes to these program rules, such as changing how often tenants are recertified, eliminating certain exclusions or deductions, or changing the approach agencies use to determine a household’s tenant contribution. HUD has 15 categories of activities it considers to be rent reform under the MTW demonstration, but does not further define the activities under each category (see table 4). Based on our review of MTW agencies’ 2015 annual reports, we identified 194 activities that involved one or more rent-reform changes based generally on HUD’s categories of rent-reform activities. When we requested that agencies provide information on their rent- reform activities, several MTW agencies asked for clarification on how rent reform was defined and what activities fell into this category. Based on our analysis of the agencies’ 2015 annual reports, we found five agencies did not consider 15 of the 194 activities we identified to be rent reform using HUD’s definition. Based on our review of the agencies’ 2011–2016 annual plans, we found that some agencies did not report information they are required to report when proposing a rent-reform activity in their annual plans. Based on our review of the 2015 annual reports, we found that 83 of the 194 policies we identified as rent reform did not include any of the hardship data HUD requires agencies to report for rent-reform activities. Officials from some MTW agencies said they did not agree with some of the categories HUD considers to be rent reform. For example, officials from three agencies told us that they did not consider changes to the recertification schedule to be rent reform because such changes do not change how rent is calculated, only the frequency of the calculation. Officials from one agency said that HUD’s definition did not match their agency’s definition because the agency restricts its view of rent reform to any change that affects the actual rent calculation. HUD’s definition includes any change that affects the process related to rent. Officials from another agency told us that they believe HUD does not uniformly apply its definition of rent reform when reviewing agencies’ policies. HUD officials also told us that they plan to clarify the rent-reform definition for expansion agencies. But, as noted previously, HUD told us that making changes for existing MTW agencies could be difficult because doing so could require changes to the standard agreement, which generally cannot occur without mutual agreement between the agencies and HUD. However, HUD’s definition for rent reform is set forth in Attachment B, which HUD already has revised without changes to the standard agreement and is currently revising to clarify existing reporting requirements. Without a more clear definition of rent reform and specific criteria or standards with which to classify activities as rent reform, HUD lacks the quality information needed to monitor all rent-reform activities. Although one of the requirements of the MTW demonstration is to establish a reasonable rent policy to encourage employment and self- sufficiency, HUD has not defined self-sufficiency, but rather allowed each agency to develop its own definition. To measure the extent to which certain MTW activities, including rent-reform activities, encourage households to achieve self-sufficiency, HUD requires MTW agencies to report on the number of households that transitioned to self-sufficiency, among other things. According to Attachment B of the standard agreement, MTW agencies are allowed to define self-sufficiency for each activity that is tied to this HUD metric. MTW agencies’ definitions of self-sufficiency can diverge widely and sometimes are inconsistent within an MTW agency. Some examples include defining self-sufficiency as attaining a total gross household income at 80 percent of the area’s paying a minimum rent of $225; voluntarily terminating housing assistance and other forms of government assistance; and attaining a household income of 50 percent of the area median income, even if the family may be receiving other state benefits. In addition, some agencies use multiple definitions of self-sufficiency. For example, one agency uses three definitions for self-sufficiency (one for its public housing minimum rent activity, one for its voucher rent-reform activity that combined various changes, and another for its public housing earned income disregard alternative activity). Previously, we found that clarity, reliability, and balance are three of several key attributes of successful performance measures, which are means of objectively assessing the outcomes of programs, products, projects, or services. A measure has clarity when it is clearly stated and the name and definition are consistent with the methodology used for calculating the measure. A measure that is not clearly stated can confuse users and cause managers or other stakeholders to think performance was better or worse than it actually was. A measure is reliable when it produces the same result under similar conditions. Lack of reliability causes reported performance data to be inconsistent and adds uncertainty. Another key attribute of successful performance measures is balance, which exists when measures ensure that an agency’s various priorities are covered. Performance measurement efforts that overemphasize one or two priorities at the expense of others may skew the agency’s performance and keep managers from understanding the effectiveness of their program. According to HUD officials, they have not defined self-sufficiency for MTW agencies because they want to give agencies the ability to address local needs. However, the individualized definitions have led to measurements of self-sufficiency that cannot be consistently evaluated across activities or agencies. In addition, officials said that it would be inappropriate for them to develop a definition of self-sufficiency for the MTW demonstration because HUD has not defined it for the department. However, despite the lack of an agency-wide definition of self-sufficiency, HUD regulations define self-sufficiency for certain other HUD programs. As such, HUD also could develop a self-sufficiency definition for the MTW demonstration. Without a more standardized definition of self-sufficiency for the MTW demonstration, HUD cannot collect consistent information that would allow for the evaluation of the effect of MTW rent-reform and occupancy policies on tenants. HUD’s guidance on how agencies are to perform impact analyses, reevaluate activities, and establish hardship policies has not described the elements of the analysis, required submission of reevaluations, or described elements of hardship policies. Attachment B of agencies’ standard agreement contains general instructions for reporting information in MTW annual plans and annual reports, including on rent- reform activities. For example, when an agency proposes a rent-reform activity, the agency must conduct an impact analysis, describe how it will annually reevaluate the activity, and develop a hardship policy for the activity. According to HUD officials, HUD implemented these reporting requirements for rent-reform activities because they could have significant effects on tenants. Attachment B suggests agencies take four steps when developing an impact analysis and include the results, including describing the rent- reform activity and identifying the intended and possible unintended effects of the activity; however, it does not provide any explanation or suggestions for how agencies should approach each step. According to HUD officials, these steps are not required and the only other guidance provided to agencies to monitor the effect of rent-reform activities is draft guidance from 2009. The 2009 draft guidance reiterates the four suggested steps of an impact analysis and provides a narrative explanation of the purpose of each step along with examples; however, agencies are not required to follow the guidance and HUD never finalized it. We reviewed the impact analyses agencies reported in their annual plans from 2011 through 2016 and found that agencies’ impact analyses for their rent-reform policies varied widely in the type of information included and level of detail. For example, a majority of impact analyses included whether the activity would increase or decrease tenants’ rent burden and a majority included other benefits or costs to tenants, but analyses less often discussed possible unintended consequences of their rent-reform policies. In addition, some agencies did not include the same type of information across the analyses of their activities. One agency provided an example of how a hypothetical tenant’s rent could change when the agency moved to biennial recertifications, but did not analyze how tenants’ rent could change for its minimum rent or tiered rent policies. Another agency included the potential impact on the agency for each of its proposed activities, but only analyzed the potential rent burden on tenants for one activity. In addition, the level of detail included in the impact analyses varied. For example, in discussing a policy that would change what sources of income were included in a tenant’s rent calculation, one agency’s impact analysis stated that the change would save money for tenants. An impact analysis for a similar policy from another agency included the number of tenants who would be affected by the policy and a dollar estimate of how much money tenants could save. Activities that might be considered administrative, such as changes to the frequency of tenant recertifications, were less likely to include details such as analysis of the rent burden on tenants than were other activities. In several agencies’ impact analyses, as well as in interviews with agency officials, agencies generally indicated that they think of these MTW policies or activities as being good for tenants, which may explain why agencies were less likely to discuss burden on tenants. HUD officials acknowledged the need for more detailed guidance and said they planned to provide such guidance for the expansion agencies. HUD officials said that they have not created such guidance for the existing agencies because they have been focused on the recent expansion of the demonstration and because doing so could require changes to the standard agreement. However, the steps for an impact analysis are contained in Attachment B, to which, under the standard agreement, agencies must adhere to satisfy their annual reporting obligations. Further, HUD has already revised Attachment B and agencies’ reporting requirements contained therein on multiple occasions without requiring changes to the standard agreement. Officials stated they could encourage existing agencies to follow the guidance for the expansion agencies. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the agency’s objectives. By framing the steps in Attachment B as suggestions and not prescribing the elements of impact analyses, HUD cannot consistently collect the type of information it needs to assess the effect of MTW activities on tenants across agencies. For example, according to HUD officials, one of the purposes of the impact analysis is to encourage agencies to consider potential unintended consequences of their activities. However, unintended consequences cannot be assessed without more detailed impact analyses. Attachment B does not describe the elements MTW agencies must include in their annual reevaluation, and HUD does not require MTW agencies to submit the results of those reevaluations. According to Attachment B, when agencies propose a rent-reform activity in their annual plan, they should provide an overview of how they will annually reevaluate the proposed activity and revise the activity as necessary to mitigate the negative effects of any unintended consequences. However, it does not provide any further detail or examples of what agencies should annually reevaluate. In addition, while HUD requires agencies to perform annual reevaluations of rent-reform activities, HUD guidance does not require MTW agencies to report the results of their annual reevaluations. According to federal internal control standards, management should externally communicate the necessary quality information to achieve the agency’s objectives. Based on our review of agencies’ annual plans submitted from 2011 through 2016, about one-third of the rent-reform policies proposed by agencies included a description of how agencies planned to annually reevaluate the policies. The remaining proposals either did not include a description or agencies stated that they would evaluate the activity annually without providing further description of how they would perform the evaluation. When we requested that agencies provide their 2015 annual reevaluations of their rent-reform policies, several of the MTW agencies were confused about what we meant by annual reevaluation. Some of those agencies asked if we were referring to their annual report and one agency asked how an annual reevaluation was different from an impact analysis. When we received documentation of what the agencies considered to be the annual reevaluations of their rent-reform activities, 30 of the agencies provided us information they are required to include for all of their activities in their annual reports. For example, agencies must include a description of their activities and their impact, compare policy outcomes to HUD metrics, and explain challenges they faced if benchmarks were not achieved. Most agencies referred us to all or part of this information. However, some agencies provided analyses that went beyond those required for annual reports, including evaluations from third-party researchers. For example, one agency partners with a local university to conduct an annual survey that allows the agency to assess the effect of its rent-reform activities on households. During the course of our work, a HUD official said the agency had not required MTW agencies to report annual reevaluations because, as long as agencies had a plan to annually reevaluate their activities and HUD had the ability to request the reevaluations if concerns arose, HUD did not want to require agencies to report information HUD did not intend to analyze. HUD officials later stated that the agency plans to provide more detailed guidance for the expansion agencies and has been updating Attachment B to clarify that agencies’ annual reports must include the results of their annual reevaluations of their rent-reform activities. In addition, HUD officials said they could issue guidance that encouraged existing agencies to follow the guidance for the expansion agencies but it would be difficult to require existing agencies to include specific elements in these annual reevaluations without changes to the standard agreement. However, the standard agreement merely requires that MTW agencies fulfill the annual reporting requirements set forth in Attachment B, which provides the detailed description of the required elements of the annual plan and report and which HUD has already revised on multiple occasions without requiring changes to the standard agreement. Because HUD allows agencies to determine the process for reevaluating their activities, most MTW agencies have not collected or reported additional information on rent-reform activities (including effects or unintended consequences) outside of the requirements of their annual reports. This leaves HUD and the agencies themselves less able to assess the effects of MTW activities on tenants. While MTW agencies must establish a hardship policy to define the circumstances under which households may be exempted or receive temporary waivers from a new rent-reform activity, Attachment B does not define what elements must be included in the hardship policy. The nonbinding draft guidance from 2009 we previously discussed suggested four questions hardship policies should address (including the process households would use to request an exemption or waiver and how hardship cases would be resolved). Officials from the seven agencies we interviewed said they looked to a range of tools to create their hardship policies. For example, officials from one agency said they relied on the 2009 draft guidance and officials from another agency said they relied on Attachment B when developing their policies. Officials from three other agencies said they reviewed the hardship policies of other MTW agencies, had conversations with HUD while planning the activity or waiting for HUD’s review of their annual plan, or looked to relevant federal regulations. In contrast, officials from another agency said that there was no guidance available on how to create their hardship policies because their agency joined the demonstration the year it began. Our review of MTW agencies’ hardship policies for rent-reform activities showed that while these hardship policies had some commonalities, they also were inconsistent in terms of the type of information included. For example, of the 84 hardship policies we reviewed, MTW agencies included a discussion of how the agency processes a hardship complaint in 56 policies and what remedies are available for residents approved for a hardship exemption or waiver in 75 policies. In contrast, 26 policies included information about whether tenants have the ability to reapply for a hardship exemption or waiver, and 26 policies mentioned if the agencies have different rules for the elderly or persons with disabilities. In addition, although most hardship policies generally discussed how a tenant may claim a hardship and apply for an exemption, some agencies were much more specific about the process. For example, one agency stated only that tenants may request a hardship exemption in writing, while another agency explained which application a tenant needed to fill out, what supporting documentation to include, and how to submit the application. Some agencies have created more parameters around a tenant’s ability to request a hardship exemption or waiver than others. For example, some hardship policies are time-limited (that is, tenants have a certain window of time in which to apply). One agency instituted a hardship policy for its minimum rent that stated that tenants had 15 days from receipt of notice of their new household tenant rental payment to apply for a hardship exemption or waiver. Another agency instituting a hardship policy for a similar activity did not seem to impose a time limit for a tenant to request an exemption. In addition, some hardship policies provided relief for current tenants. For example, one-third of agencies created a hardship policy for at least one of their activities that either exempted current residents from the rent-reform activity or provided some form of temporary relief as the rent-reform policy was implemented. We also found variation in the information MTW agencies were able to provide on the households that requested a hardship exemption. We asked all the MTW agencies to provide us a list of all tenants who requested a hardship exemption in 2011–2015, including the result of each request (denied or approved), the current status of each tenant, and the reason the tenant was no longer receiving housing assistance, if applicable. Of all the MTW agencies, five said they had not received any requests for hardship exemptions. Three agencies were only able to provide us information on those hardship requests that were approved, two agencies did not indicate if the requests they received were approved or denied, and one agency did not provide any data because it could not distinguish hardship requests for its traditional programs from its MTW activities. Additionally, five agencies did not provide the reasons why tenants who requested a hardship exemption were no longer receiving assistance. The remaining 22 agencies were able to provide the information as requested. Tenants and advocates expressed mixed opinions about the rent-reform hardship policies created by the MTW agencies we interviewed. Some tenants with whom we spoke said they were aware of rent-reform hardship policies the agencies developed. For example, tenants who participated in one of our group meetings told us that during their income recertification the case worker assigned to their case provided them a checklist that outlined each of the agency’s hardship policies. When we spoke with advocates who work with tenants subject to MTW activities, some said most tenants do not know about the hardship policies available to them. Some tenants and advocates with whom we spoke said the process for requesting a hardship could be difficult. For example, one tenant said that although the MTW agency mailed tenants “frequently asked questions” that described the hardship policy, the document was confusing and included a citation to the Federal Register for more information, which was difficult for tenants to access. Advocates at one organization also said tenants asked for help because the tenants applied for a hardship waiver through their case manager, but never received a response. In contrast, during these meetings some other tenants told us that they had no issues with the hardship policies or the way in which the MTW agencies implemented them. As discussed previously, federal internal control standards require agencies to communicate effectively with external stakeholders to help achieve agency goals. While HUD’s proposed update to Attachment B provides more detail than the current version, HUD officials said it could be difficult to develop more descriptive guidance for existing MTW agencies because doing so could require changes to the standard agreement. In addition, officials said they had not been able to develop more guidance for existing agencies because of their focus on the expansion demonstration. However, the standard agreement merely requires that MTW agencies fulfill the requirements contained in Attachment B, which HUD has already revised on multiple occasions without requiring changes to the standard agreement. Officials said that they plan to provide more descriptive guidance for expansion agencies and encourage existing agencies to follow such guidance. By not providing more specific direction to the MTW agencies about what to include in their hardship policies and therefore what is communicated to tenants, existing agencies may not be adequately communicating all of the information tenants need to understand the circumstances in which they may be exempted from rent-reform activities. HUD requirements for MTW agencies that establish policies for work requirements and time limits are largely inconsistent with requirements pertaining to rent-reform activities (see table 5). Although HUD has said it considers work-requirement and time-limit activities to have a great and direct impact on tenants, the current MTW agencies in the demonstration are not subject to the same reporting requirements when proposing those policies as when proposing rent-reform activities. For example, as previously discussed, HUD guidance in Attachment B requires agencies to include an impact analysis, annual reevaluation, and hardship policy for rent-reform activities in their annual plans when the activity is proposed. However, Attachment B does not include similar requirements for proposed work-requirement or time-limit policies. Further inconsistencies include that Attachment C of the standard agreement, which lists the various MTW flexibilities available to agencies, requires MTW agencies to create a hardship policy if they establish a time-limit policy for public housing assistance. However, HUD did not develop guidance requiring agencies to report on their hardship policies for time-limit policies for public housing assistance. Furthermore, HUD does not have a similar requirement for time-limit policies established for voucher assistance. In addition, in the Federal Register operations notice for the expansion of the MTW demonstration published in January 2017, HUD proposed requiring the new MTW agencies to conduct an impact analysis and develop a hardship policy for rent-reform and time-limit policies, but develop only a hardship policy for work requirements. As previously discussed, federal internal control standards require management to design control activities—policies, procedures, techniques, and mechanisms—in response to the entity’s risks. In determining the necessary level of precision for a control activity, management is to evaluate, among other things, consistency of performance. A control activity that is performed routinely and consistently generally is more precise than one performed sporadically. HUD officials have said that they consider rent-reform, work-requirement, and time-limit policies to have a great and direct impact on tenants. HUD was not able to provide an explanation as to why they do not require similar reporting for all of these activities. HUD officials said they did not know why MTW agencies were not initially required to report on impact analyses, annual reevaluations, and hardship policies associated with work-requirement and time-limit policies in general. However, they said, currently, these policies are typically implemented in conjunction with a rent-reform activity so there is still reporting on the combined policies. HUD officials also stated that if an agency proposed an activity with a time limit for public housing, the MTW coordinator reviewing the agency’s annual plan would ensure that a hardship policy was in place. In addition, when MTW staff review a proposed work requirement for both the public housing and voucher programs and a proposed time limit for the voucher program, staff suggest that MTW agencies adopt hardship policies and conduct impact analyses for these policies. HUD officials also stated that the agency plans to require expansion agencies to develop an impact analysis, annual reevaluation, and hardship policy for rent-reform, work-requirement, and time-limit policies. Although HUD officials said it would be difficult to set a similar requirement for existing MTW agencies because doing so would require changes to the standard agreement, they stated they could update Attachment B to incorporate the requirement for a hardship policy for public housing time limits and develop guidance encouraging existing agencies to comply with the additional requirements put in place for the expansion agencies. Without taking these steps, HUD will miss an opportunity to collect information needed to evaluate the effect of work- requirement and time-limit policies on tenants. Although HUD requires MTW agencies to report annually on their rent- reform, work-requirement, and time-limit policies, HUD could not provide us with documentation of how it analyzed, used, or planned to use the information it received from agencies on a continuous basis. According to HUD officials, because of the recently resolved backlog of annual reports, the MTW Office now can begin to use the years of reported data it previously had not used. Officials added they provide the annual plans and reports to other departments in HUD to conduct ad hoc analysis and that other HUD offices have used MTW plans and reports when proposing new rules or legislation related to housing. For example, officials said HUD used MTW plans and reports when working on HUD’s 2016 rule intended to provide greater flexibility for agencies administering HUD’s rental assistance programs. HUD provided us documentation showing that it used lessons learned from the MTW demonstration to inform legislative proposals in the agency’s fiscal year 2018 and 2019 budgets. Also, MTW officials said they intend to use the data in annual reports to inform some oversight rules. When asked about the agency’s plan to analyze the information provided in the annual plans and reports, HUD officials said it had awarded a contract to the Urban Institute to perform a retrospective evaluation of the demonstration, and the results will be available in 2018. Officials said although they have not finalized their reporting requirements for agencies in the expansion, these agencies likely will not be required to create annual plans or reports but instead to annually create a supplemental document to their annual public housing plan. With those agencies, HUD will be able to learn from each of the cohorts about the effect of a specific policy being evaluated. However, the plan to analyze the supplemental documentation and cohorts of the expansion agencies does not address how HUD plans to use the information it receives from the current MTW agencies. Federal internal control standards state that management should establish monitoring activities and evaluate results. Analysis (evaluation of results) contributes to the operating effectiveness of monitoring. The internal control standards also state that management should use quality information to achieve the entity’s objectives. In doing this, management is expected to use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. Because the MTW Office has not systematically analyzed or evaluated the information it requires MTW agencies to report—or determined how best to evaluate it—the agency cannot assess the effect of MTW rent- reform, work-requirement, and time-limit policies on tenants. More specifically, without a plan for analyzing information in agencies’ impact analyses, annual reevaluations, and hardship policies, HUD cannot monitor the effect of rent-reform, work requirement, and time limit policies on tenants. These limitations also extend to the definitional and guidance issues we previously discussed. As a result, without a comprehensive framework—standard definitions, clear guidance on reporting requirements, and analysis plans—HUD cannot provide assurance that it is adequately monitoring how MTW activities affect tenants. The MTW demonstration is on the brink of significant expansion, but HUD does not yet have the people, data, and processes in place to effectively oversee agency participants and assess the demonstration’s performance and effects on tenants. Workforce planning. Insufficient staffing for the MTW demonstration already has had negative effects. For instance, HUD has not always reviewed annual reports that include information needed to determine the demonstration’s effect on tenants in a timely manner, annually assessed whether current MTW agencies comply with demonstration requirements, and fully documented its review processes. When complete, expansion of the demonstration would more than triple the number of MTW agencies. By finalizing its workforce planning (including an assessment of competencies and skills needed) and documenting its compliance review process, HUD can provide assurance that it would be positioned to oversee an expanded demonstration before new agencies start being added in 2018. Data collection. Our comparison of public housing occupancy and voucher unit utilization rates and program expenses among MTW and non-MTW agencies raises questions about agency performance and use of funding that cannot be fully answered with current data. The differences among agencies may result in part from the MTW demonstration’s funding flexibilities. However, HUD is limited in its ability to readily determine the extent to which MTW funds were used for other allowable purposes. More comprehensively capturing and tracking data on uses of funding and the characteristics of households served by local nontraditional activities would allow HUD to better assess agency performance. HUD also would be better able to account for differences in outcomes—especially in relation to occupancy and voucher utilization rates and program expenses—that affect the number of tenants served. MTW reserves. The accumulation of relatively large reserves by MTW agencies also raises questions about funding uses. HUD has performed limited oversight of MTW voucher reserves and its data and financial reporting systems are not structured to effectively track public housing reserves. Developing and implementing a process to monitor MTW reserves could help HUD provide reasonable assurance that MTW agencies have sound plans for expending reserves. Framework for assessing effect of rent-reform, work-requirement, and time-limit policies on tenants. The effectiveness of certain MTW activities and their effects on tenants remain largely unknown because HUD does not have a framework—standard definitions for key terms, clear guidance on reporting requirements, and analysis plans—for monitoring rent-reform, work-requirement, and time-limit policies. For example, the variations in reporting on rent reform and self-sufficiency as a result of inconsistent definitions of these terms; limited guidance (often couched as suggestions) HUD provided to agencies for developing impact analyses, annual reevaluations, and tenant hardship policies; and inconsistent treatment of rent-reform and work-requirement and time-limit policies suggest that HUD may have emphasized flexibility to the detriment of oversight. In addition, HUD does not have a plan for assessing the information agencies report on the effect of these policies. Developing such a framework will help both HUD and MTW agencies to assess performance and determine if activities have advanced demonstration goals. We recognize the challenges involved with monitoring the MTW demonstration, but maintain it is important for HUD to take steps to achieve and sustain a better balance between flexibility and prudent oversight. Improving oversight of the demonstration would help HUD assess what MTW agencies have done, including their use of funding. Such information also would help inform Congress and the public about how demonstration innovations have affected tenants. We are making the following 11 recommendations to HUD: The Assistant Secretary for PIH should complete workforce planning for the MTW demonstration to help ensure that PIH has sufficient staff with appropriate skills and competencies to manage an expanded demonstration, including reviewing reports and carrying out compliance reviews in a timely manner. (Recommendation 1) The Assistant Secretary for PIH should more fully document the process for annually assessing compliance with the five demonstration requirements. (Recommendation 2) The Assistant Secretary for PIH should develop and implement a process to track how MTW demonstration funds are being used for other allowable activities, including local, nontraditional activities. (Recommendation 3) The Assistant Secretary for PIH should identify and implement changes to PIC to capture household data for households served through local, nontraditional activities. (Recommendation 4) The Assistant Secretary for PIH should develop and implement a process to monitor MTW agencies’ reserves. (Recommendation 5) The Assistant Secretary for PIH should clarify HUD’s rent-reform definition for the MTW demonstration as part of a framework for monitoring the effect of rent-reform, work-requirement, and time-limit policies on tenants. (Recommendation 6) The Assistant Secretary for PIH should set parameters for HUD’s definition of self-sufficiency for the demonstration, either by providing one definition or a range of options from which agencies could choose, as part of a framework for monitoring the effect of rent-reform, work- requirement, and time-limit policies on tenants. (Recommendation 7) The Assistant Secretary for PIH should revise HUD’s guidance to MTW agencies to make it clear which elements are required in impact analyses, annual reevaluations, and hardship policies and the information required for each element as part of a framework for monitoring the effect of rent-reform, work-requirement, and time-limit policies on tenants. (Recommendation 8) The Assistant Secretary for PIH should develop written guidance for existing MTW agencies that requires a hardship policy for public housing time limits and encourages an impact analysis, annual reevaluation, and hardship policy for work-requirement and time-limit policies for public housing and voucher programs as part of a framework for monitoring the effect of these policies on tenants. (Recommendation 9) The Assistant Secretary for PIH should require an impact analysis, annual reevaluation, and hardship policy for work-requirement and time- limit policies new MTW agencies adopt for their public housing and voucher programs as part of a framework for monitoring the effect of these policies on tenants. (Recommendation 10) The Assistant Secretary for PIH should develop and implement a plan for analyzing the information that agencies report on the effect of rent- reform, work-requirement, and time-limit policies on tenants as part of a framework for monitoring the effect of these policies on tenants. (Recommendation 11) We provided a draft of this report to HUD for comment. In written comments, which are summarized below and reproduced in appendix III, HUD disagreed with three of our recommendations and generally agreed with the remaining eight. In its general comments, HUD made the following points: HUD noted that our report did not identify any harmful effects on tenants as a result of MTW flexibilities. As discussed in the draft report, due to data limitations, we could not evaluate the effect of MTW flexibilities on tenants. Instead, we focused on the extent to which HUD monitored the effects of rent-reform, work-requirement, and time-limit policies on tenants. Furthermore, our analysis of available data showed that MTW agencies had lower public housing occupancy rates and voucher unit utilization rates and higher program expenses than comparable non- MTW agencies, which could affect the number of tenants served. HUD also stated that it seemed we reviewed MTW agencies through the lens of the traditional housing and voucher programs. HUD noted fundamental differences in MTW and non-MTW agency operations and stated it must consider the extensive MTW flexibilities and the locally- designed nature of each MTW agency’s program in administering the demonstration. HUD stated it did not agree with three of our recommendations (discussed below) that it noted would restrict an MTW agency’s ability to exercise MTW flexibility and respond to variations in local markets. As stated in the draft report, we recognize the challenges involved with monitoring the MTW demonstration, but maintain it is important for HUD to take steps to achieve and sustain a better balance between flexibility and prudent oversight. Furthermore, given that the demonstration’s ultimate goal is to identify successful approaches that can be applied to public housing agencies nationwide, we believe we looked objectively and with the appropriate rigor and contextual sophistication at MTW agencies. HUD disagreed with the draft report’s third recommendation to develop and implement a process to track how public housing and voucher funding is being used for other allowable activities, including local, nontraditional activities. HUD stated that funding fungibility and policy flexibility are the core tenets of the MTW demonstration. As a result, identifying and tracking expenses paid from a specific funding source are not necessary and should not be a requirement. We acknowledge the demonstration’s funding and policy flexibility and did not intend for our recommendation to be interpreted solely as a suggestion to track funding sources. We therefore clarified our recommendation to focus on tracking how MTW demonstration funds are being used for allowable activities, such as local, nontraditional activities. HUD stated that the revised HUD Form 50900 or Attachment B (expected to be published in early 2018) would require existing MTW agencies to estimate the cost of each planned activity. Although this would provide some cost information, it would be limited to planned activities only and would not capture actual costs. Therefore, we continue to believe that more comprehensively tracking data on uses of funding would allow HUD to better account for differences in outcomes—especially in relation to occupancy and voucher utilization rates and program expenses—that affect the number of tenants served. HUD disagreed with the fifth recommendation to develop and implement a process to monitor MTW agencies' reserves. HUD stated that there is no language in the 1996 Act that limits the reserves of MTW agencies to a certain level. Although our draft report noted that leading practices for managing reserve funds include considering establishing a maximum reserve level, we did not recommend that HUD set such a reserve level for MTW agencies because we recognized the demonstration’s funding flexibilities. Rather, we recommended that HUD develop a process to monitor MTW agencies’ plans for reserves. HUD also commented that by reviewing and granting approval for all MTW activities that the existing 39 agencies implemented, it already had a process to determine if spending of reserve funds was reasonable. However, as HUD noted in its comments on the draft report’s third recommendation, the agency does not currently require MTW agencies to include the cost of a planned activity when proposing the activity. An approval process that does not include a review of information on planned costs, including the extent to which reserves would be used to fund the activity, is not sufficient because HUD lacks data needed to determine that reserve expenditures are reasonable. Finally, HUD noted that PIH’s Financial Management Division currently tracks the public housing and voucher reserves of MTW agencies. However, this does not address our concern that HUD does not monitor existing MTW agencies’ plans for their reserves and whether the plans are reasonable given the amount of reserves. In order to provide reasonable assurance that MTW agencies have sound plans for expanding their reserves, HUD still would have to develop a process to monitor MTW agencies’ reserves. Therefore, we maintain our recommendation. Similarly, HUD disagreed with our seventh recommendation to set parameters for its definition of self-sufficiency for the demonstration, either by providing one definition or a range of options from which agencies could choose. It noted that the MTW demonstration provides agencies with the ability to develop creative solutions to address local conditions, and a one-size-fits-all approach is not appropriate. HUD stated it intentionally has not developed a standard definition for self- sufficiency, because the definition could depend on local conditions such as employment opportunities and availability of supportive services. We recognized the need for flexibility in our recommendation by suggesting that HUD could develop a range of definitions from which MTW agencies could choose. This approach would provide the necessary flexibility while still allowing HUD to collect the consistent information needed to evaluate the effect of MTW rent-reform and occupancy policies on tenants. Therefore, we maintain our recommendation. HUD generally agreed with our remaining eight recommendations. For example, HUD agreed with the draft report’s first recommendation on workforce planning, but requested that due to the cross-cutting nature of MTW, we expand the recommendation to include other PIH offices. We acknowledge that the staff needed to manage the expanded demonstration may be found outside the MTW Office, and therefore we modified our recommendation. HUD also agreed with the second recommendation to more fully document the process for annually assessing compliance with the five demonstration requirements and said it will finalize internal written procedures in early 2018. In addition, in commenting on the fourth recommendation, HUD described plans to update its data system to capture information on households served through local, nontraditional MTW activities. Furthermore, in regard to the eighth recommendation, HUD noted that it plans to develop guidance for MTW agencies for the monitoring of high-impact activities such as rent reform, work requirements, and time limits. Finally, in commenting on the eleventh recommendation, HUD stated it will improve its process of analyzing the data MTW agencies provide on high-impact activities. In commenting on our workforce planning finding, HUD made the following points: HUD stated that our finding that planning for the MTW expansion workforce structure has not been completed is not an accurate characterization. It noted that HUD completed a workforce analysis and hired five additional staff in 2016 in anticipation of the MTW expansion. In our draft report, we acknowledged steps that HUD took to increase the staffing levels of the MTW Office. However, we found that in its workforce analysis, HUD had not assessed the knowledge, skills, and abilities needed to implement an oversight structure for the MTW expansion demonstration. HUD acknowledged in its response to the recommendation that its workforce planning efforts will continue in 2018. HUD said our draft report did not discuss two other factors (beyond insufficient staff) that affected oversight of the MTW demonstration: (1) 2013 was the first year HUD assessed each agency’s compliance with the five demonstration requirements, and (2) from 2013 to 2015, HUD was in protracted and complex negotiations with the existing MTW agencies to determine the terms of the extension of their MTW participation. Our draft report acknowledged both factors. Specifically, we noted that HUD developed a process for assessing compliance with the five demonstration requirements in response to a recommendation in our 2012 report and that the process was implemented in 2013. Our draft report also stated that HUD officials noted that in 2014 and 2015 existing staff in the MTW Office had to focus on other priorities, including renegotiating the standard agreement, and then in 2016 on implementing the expansion of the demonstration. HUD said that even with limited staff, MTW agency plans had been reviewed and approved within the required time frames. In commenting on our data collection finding, HUD made the following points: Related to our multivariate statistical analysis to examine any association between MTW flexibilities and program outcomes, HUD stated that HUD and MTW agencies historically found it difficult to establish comparison groups because MTW and non-MTW agencies implement significantly different interventions. We agree that comparisons of MTW and non- MTW agencies are difficult to make. We acknowledge that MTW agencies differ substantially from non-MTW agencies on factors such as size and market housing costs. Accordingly, we used statistical techniques to improve on simple comparisons between MTW and non- MTW agencies. These techniques enabled us to identify a group of comparison non-MTW agencies that were similar to MTW agencies on important factors such as geographic location, households served, and county median rents. We then compared outcomes between the two groups of agencies over a number of years (2009 through 2015). We did not compare a single MTW agency to a non-MTW comparison group, as HUD stated. For more detailed information on our analysis, see appendix II. HUD also stated that our finding that MTW agencies had higher tenant services expenses for the voucher program than non-MTW agencies was an expected outcome (because the demonstration encourages MTW agencies to engage in employment, self-sufficiency programming, and tenant services). In our draft report, we stated that the results of the analysis were consistent with MTW agencies having more flexibility to use funds to provide tenant services. Furthermore, HUD said that a comparison of voucher administrative expenses for MTW and non-MTW agencies was skewed and not a valid comparison because administrative expenses for MTW agencies included voucher administrative expenses and other administrative expenses not permitted under the traditional voucher program. Differences in financial and performance outcomes that only MTW flexibilities allow, such as a broader range of administrative expenses, represent the potential effects of the demonstration, not a source of bias. The purpose of our analysis was to determine any association between MTW flexibilities and program outcomes. Because MTW rules allow for additional administrative expenses, it was appropriate to include these expenses in our analysis. In addition, HUD stated that that it had requested the list of the comparison group of non-MTW agencies to MTW agencies and suggested the list be included in our report. The agency noted that without this information, HUD was not able to validate our analysis. As noted previously, our analysis was not a simple comparison of MTW and non-MTW agencies. We developed a comparison group, applied algorithms based on certain assumptions, and conducted sensitivity analyses that tested these assumptions. Therefore, simply providing the list would not enable HUD to reproduce our analysis. Furthermore, we selected the variables for matching because they were similar across all agencies in each group (that is, the full distributions), not for any particular pair of matched agencies. Consequently, we evaluated the quality of our comparison group using the distributions of these variables across all agencies in each group. We included those statistics in our report, rather than the identity of particular agencies, to encourage systematic evaluations of the matched comparison agencies using aggregate statistics, rather than anecdotal evaluations of particular matched pairs. Finally, we communicated with HUD throughout the review about our data analysis. For example, we met with HUD to discuss our methodology, provided initial results, and worked with HUD officials to ensure we were using appropriate data fields. HUD also provided technical comments, which we incorporated as appropriate. We considered one comment to be more than technical in nature. Specifically, in response to our finding that HUD does not require MTW agencies to submit the results of their annual reevaluations of the impact of rent-reform activities, HUD officials stated that they consider the annual report (and information therein) to be the annual reevaluation of rent-reform activities. However, Attachment B does not include a requirement that agencies report the results of their annual reevaluations. Furthermore, if the information currently required to be included in the annual report satisfied the annual reevaluation requirement, then there would be no need for HUD to update Attachment B to clarify that agencies’ annual reports must include the results of their annual reevaluations, as the agency plans to do. Therefore, we maintain our finding and made revisions to the report to clarify what is currently required in Attachment B. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of the Department of Housing and Urban Development, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Our objectives were to examine (1) the Department of Housing and Urban Development’s (HUD) oversight of agencies participating in the Moving to Work (MTW) demonstration, including agency reporting and compliance with demonstration requirements; (2) any association between MTW flexibilities and program outcomes, including public housing occupancy rates and voucher unit utilization rates; and (3) the extent to which HUD monitored effects of rent-reform, work-requirement, and time-limit policies on tenants. For all our objectives, we interviewed officials from the following seven MTW agencies: Boulder Housing Partners (Boulder, Colorado); Chicago Housing Authority (Chicago, Illinois); Delaware State Housing Authority (Dover, Delaware); Lincoln Housing Authority (Lincoln, Nebraska); Louisville Metropolitan Housing Authority (Louisville, Kentucky); Housing Authority of the County of San Bernardino (San Bernardino, San Diego Housing Commission (San Diego, California). In selecting these agencies, we focused on agencies that had implemented major rent-reform changes and work-requirement and time- limit policies based on information in a study conducted in January 2015 by the Center for Urban and Regional Studies at the University of North Carolina at Chapel Hill. We focused on these policies because, according to HUD, they have a great and direct impact on tenants. We also considered agency size, length of time in the demonstration, and geographic diversity. Although the results of the interviews cannot be generalized to all MTW agencies, they provide insight into the ways in which agencies implemented MTW flexibilities and report to HUD, among other things. In addition, we interviewed representatives of the following research groups to discuss their recent or ongoing work on the MTW demonstration: Abt Associates, the Center for Urban and Regional Studies at the University of North Carolina at Chapel Hill, HAI Group, Public and Affordable Housing Research Corporation, and the Urban Institute. We also interviewed representatives of affordable housing advocacy groups such as the Council of Large Public Housing Agencies; National Association of Housing and Redevelopment Officials; National Leased Housing Association; and Public Housing Authorities Directors Association. Finally, we interviewed resident advocacy organizations such as the Center on Budget Policy and Priorities, National Housing Law Project, and National Low-Income Housing Coalition. To select the groups to interview, we reviewed our 2012 report on MTW, identified organizations through our background literature review, and obtained recommendations from those we interviewed. To examine HUD’s oversight of MTW agencies, we reviewed our 2012 report, relevant HUD policies and procedures, and HUD documentation relating to compliance with the demonstration. Specifically, we reviewed the standard agreement that governs the participation of the existing 39 MTW agencies in the demonstration and HUD’s guidance on agency reporting and the five demonstration requirements. We also interviewed HUD officials about the processes HUD uses to review the agencies’ annual reports and assess compliance with the demonstration requirements. We also reviewed workforce analyses and interviewed HUD officials about their resource needs and plans to monitor the current MTW agencies and any agencies that may join the MTW demonstration through its expansion. We compared relevant internal control standards that apply to federal agencies and best practices we identified for workforce planning with HUD’s monitoring policies and procedures. To assess the extent to which HUD follows its processes, we reviewed HUD’s documentation of compliance assessments from 2013 through 2016, the only years for which HUD had completed such analysis. To identify and examine any association between MTW flexibilities and program outcomes, we obtained the following 2009–2015 data on MTW and non-MTW agencies: agency and tenant characteristics from the Public and Indian Housing Information Center (PIC) system, public housing occupancy rates from the Picture of Subsidized Households database, voucher unit utilization rates from the Voucher Management System (VMS), and expense data from the Financial Data Schedule (FDS). These were the most reliable and recent data available at the time of our analysis. We combined the HUD data with data from the American Community Survey (1-year estimates) conducted by the Census Bureau. To assess the reliability of these data, we reviewed relevant documentation on the information systems, conducted electronic testing, and interviewed officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purpose of identifying a comparison group and comparing the outcomes of certain measures for MTW and comparable non-MTW agencies. We used these data and multivariate statistical methods to compare MTW and non-MTW agencies to estimate any association between MTW flexibilities and public housing occupancy rates, voucher unit utilization rates, and various public housing and voucher expenses. We used statistical matching and modeling methods to identify a comparison group of non-MTW agencies that closely resembled MTW agencies on characteristics including number of households served, geographic location, and housing market characteristics. For more detailed information on our analysis, see appendix II. To determine the factors that could partially explain the results of our analysis, we reviewed Attachment C of the standard agreement to identify the funding flexibilities the MTW demonstration affords participating agencies. We also reviewed MTW agencies’ 2011–2016 annual plans to identify the MTW activities that were proposed under those funding flexibilities and interviewed officials from the seven selected agencies to learn how they used the funding flexibilities. We started with the 2011 annual plans because that was the first year in which all MTW agencies were required to include specific information when proposing rent-reform policies. We ended with 2016 annual plans because it was the most recent year for which annual plans were available for all MTW agencies at the time of our analysis. To illustrate how MTW agencies used their funding flexibility for public housing, we used FDS data to determine the amount of MTW funds that were transferred from the Housing Choice Voucher (voucher) program to the public housing program. To perform this analysis, we compared the MTW agencies’ 2015 public housing funding—the sum of FDS line items 70600 (HUD public housing agency operating grants) and 70610 (capital grants)—to the aggregate amount MTW agencies transferred into individual public housing project accounts. We selected 2015 because it was the most recent FDS data available at the time of our analysis. We also reviewed 2009–2016 data from HUD on the number of households MTW agencies served through their local, nontraditional activities. We determined that HUD’s process for compiling this information was sufficiently reliable for our purposes of reporting on local nontraditional activities by tracing 2015 data in the spreadsheet to data in the agencies’ 2015 annual reports (the most recent reports available) and interviewing HUD staff. Finally, we analyzed program data that HUD prepared using information derived from the Central Accounting and Program System and VMS on unspent voucher funds as of December 31, 2016, for MTW agencies and the comparison group of non-MTW agencies. To determine the extent to which HUD monitors the effect on tenants of rent-reform, work-requirement, and time-limit policies, we reviewed HUD documents such as Attachment B of the standard agreement and HUD’s Table of Applicable Standard Metrics by Activity to determine how HUD defines these types of activities and the guidance HUD provides on monitoring and reporting their effects on tenants. As previously discussed, we compared HUD’s monitoring policies and procedures with relevant internal control standards. We reviewed MTW agencies’ 2015 annual reports to determine the extent to which agencies adopted rent- reform, work-requirement, and time-limit policies. We selected 2015 because it was the most recent year for which annual reports were available for all MTW agencies at the time of our analysis. We also reviewed agencies’ 2011–2016 annual plans and collected information from all MTW agencies on tools they use to monitor the effects of rent- reform policies on tenants. We reviewed information from all 39 MTW agencies on their hardship policies and data and their annual reevaluations of the impact of rent-reform activities. We also collected information from all MTW agencies on how they monitor the effect of work-requirement and time-limit policies on tenants. We interviewed officials from the seven selected agencies about their monitoring of rent- reform, work-requirement, and time-limit policies’ effects on tenants and associated hardship policies and to obtain their views about HUD guidance. We also conducted group interviews with tenants from five agencies to get their perspective on the effects of rent-reform, work-requirement, and time-limit policies the agencies had implemented and associated hardship policies. To select the tenants to invite to these group interviews, we focused on the populations (for example, those able to work) subject to these policies. To the extent the MTW agency had a resident advisory board or comparable resident association, we worked with the boards or associations to contact tenants. When appropriate, we asked the MTW agencies to post notices on their websites and throughout their properties and send mailings to tenants of interest to notify them about the meetings. Finally, we interviewed representatives from tenant advocacy organizations. The organizations represented tenants served by four of the agencies we visited as well as tenants served by two additional MTW agencies that were not part of the group of seven selected agencies but that also had implemented major rent-reform changes, work-requirement, or time-limit policies. We obtained information on the effect of these policies on tenants and the extent to which tenants were aware of the hardship policies associated with these policies. To select these groups, we generally relied on recommendations from a representative of the National Housing Law Project. For those areas for which a recommendation was not provided, we identified the local legal aid association through an Internet search. We conducted this performance audit from February 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We analyzed associations between the Moving to Work (MTW) demonstration’s flexibilities and two types of outcomes: housing availability, measured by public housing occupancy and voucher unit utilization rates, and program expenses, measured by public housing operating expenses and voucher administrative, subsidy, tenant services expenses, and voucher reserves per household. These outcomes are broadly consistent with the goals of the demonstration’s authorizing statute. MTW was designed to provide flexibility to participating public housing agencies to design and test innovative strategies, while meeting certain statutory objectives and demonstration requirements, including reducing costs and achieving greater cost-effectiveness and assisting substantially the same number of eligible low-income households as would have been served absent the demonstration. In this appendix, we summarize the statistical methods we used to analyze a dataset we assembled from administrative databases maintained by the Department of Housing and Urban Development (HUD) and the American Community Survey (ACS), conducted by the Census Bureau, to compare MTW and non-MTW agencies on these outcomes. Our analysis did not seek to conduct a definitive evaluation of the MTW demonstration’s causal impacts. MTW agencies carry out varied and unique activities. The agencies also vary widely in size, location, housing market, and area and tenant demographics—both compared to non-MTW agencies and among themselves. A persuasive impact evaluation would need to assess the unique circumstances of each activity and outcome at each agency. In contrast, our analysis sought to improve on simple comparisons of outcomes between MTW and non-MTW agencies, by constructing a comparison group of non-MTW agencies that were similar to MTW agencies on variables broadly relevant to housing programs. Although this multivariate analysis reduced the risk that factors other than MTW participation may have biased the comparison, we did not seek to hold constant all factors uniquely relevant to each MTW agency and activity. As a result, our analysis cannot provide definitive estimates of causal impacts. Developing and applying statistical “treatments” to MTW agencies is complex, due to demonstration rules that allow agencies to conduct various activities tailored to their unique needs. We considered the option of forming several groups of MTW agencies, defined by similar activities. For example, we might have identified all agencies reforming HUD’s rent calculation formula, and included those agencies in one level of a multilevel treatment variable. We ultimately rejected this approach due to limited sample sizes and the difficulty of developing homogeneous groups of activities. A multilevel approach would have limited the number of agencies in each level of the treatment. Small sample sizes would have limited our statistical power to identify differences between treatment groups, if they existed. In addition, the wide variety of MTW activities would have made it difficult to produce a sufficient number of homogenous groups, and would have required subjective judgment about what activities were sufficiently similar. Instead, we used a binary treatment measure identifying agencies that participated in MTW or operated under traditional public housing rules in a given year. The timing of MTW implementation limited our ability to account for changes in participation and outcomes over time. Agencies joined the MTW demonstration at various times between 1996 and 2012, and many joined before sufficient data became available. Only nine agencies entered the demonstration after 2009, when HUD’s Public and Indian Housing Information Center (PIC) system began to provide sufficiently complete and reliable data on the characteristics of housing agencies we needed to measure. All agencies that exited the demonstration did so before 2009. Comparisons within agencies over time can implicitly control for other factors that may not substantially change before and after implementation by using data collected before and after agencies joined the MTW demonstration. We might have been able to implicitly control for many factors that did not substantially change over short periods, such as land prices, or that changed in identical ways for MTW and non-MTW agencies, such as national economic cycles. However, the implementation of the MTW demonstration and available data limited our analysis to repeated cross-sectional comparisons of MTW and non-MTW agencies from 2009 through 2015. Measuring participation in the MTW demonstration at any one time was somewhat imprecise. The MTW demonstration was not implemented at uniform times across agencies, due to variation in the ratification dates of MTW agreements between HUD and the agency and variation in when each MTW agency began to implement activities under the demonstration. For our primary analysis, we classified an agency as participating in the MTW demonstration if it had ratified an MTW agreement with HUD at least 1 year before the year measured. In sensitivity analyses, described below, we assessed how classifying MTW participants according to different time lags affected our results. Table 6 lists the number of MTW and non-MTW agencies in our dataset, based on how MTW participation was defined in the analysis for housing agencies in the PIC database from 2009 through 2015. We compared MTW and non-MTW agencies on several outcomes that are broad measures of housing availability and expenses. The outcomes were available in HUD data systems and were reliable for our purposes. However, they do not exhaust the potential outcomes that may be relevant under the MTW authorizing statute or the design of specific agency activities. For example, potential outcomes could measure the number of households that achieve self-sufficiency (as defined by a MTW agency) or move to a low-poverty neighborhood. Our specific outcome measures were the following: Public housing occupancy rate. Occupied units as a percentage of units available. Voucher unit utilization rate. Monthly rate of unit months leased divided by unit months available for the public housing agency. Public housing operating expenses per household. Total yearly operating expenses, divided by number of public housing households. Public housing central office cost center expenses per household. Total yearly central office cost center operating expenses, divided by number of public housing households. Voucher administrative expenses per household. Total yearly administrative expenses, divided by the number of voucher households. Voucher subsidy expenses per household. Total yearly expenses for housing assistance payments, divided by the number of voucher households. Voucher tenant services expenses per household. Total yearly expenses for tenant services, divided by the number of voucher households. Reserves per household (2016 only). Unspent voucher housing assistance funds as of December 31, 2016, divided by the number of voucher households. Following the Rubin Causal Model, our primary parameter of interest was the average (or median) treatment effect on the treated: where Yij(T) denotes the outcome for agency i at time j in (potentially counterfactual) treatment condition T. That is, we estimated the expected difference in outcomes that would exist due to MTW participation, among those agencies that actually participated in the demonstration. Estimating the average treatment on the treated is conservative and appropriate, given the varied and unique nature of MTW activities. Generalizing the effect of MTW participation from the treated agencies to the rest of the public housing agency population makes the implausible assumption that the untreated agencies would have implemented the same activities, in the same ways, as the treated agencies. Due to the discretion inherent to the MTW demonstration, the experiences of the treated agencies may not generalize to the whole population, as would be required for estimating the average treatment effect. We specify a parameter of interest (that is, a value to be estimated) for methodological completeness and to specify the population of inference (the target population of agencies). However, we do not interpret our results as robust causal impact estimates, due to the inability to measure the unique circumstances relevant for each MTW agency, demonstration activity, and outcome. Our analysis measured and held constant conditions that could have otherwise explained differences in outcomes between MTW and non- MTW agencies. For each MTW and non-MTW agency, we measured the following agency-level covariates (with sources in parentheses): Number of households (PIC) Percent of households with a member over the age of 65 (PIC) Percent of households with a member under the age of 18 (PIC) Percent of households with a disabled member (PIC) Whether an agency issues vouchers (VMS) County median household income (ACS) County median rent (ACS) County rental vacancy rate (ACS) County population density, measured as county population/land area (2010 Census) HUD region (HUD website) Latitude (Picture of Subsidized Households) Longitude (Picture of Subsidized Households) We assessed the reliability of the ACS estimates by calculating the ratio of each estimate’s 95 percent margin of error to the estimate. For example, this ratio would equal 5 for an estimated rental vacancy rate of 10 percentage points, with a margin of error equal to plus or minus 2 percentage points. Across all variables we used from ACS, we found that this ratio did not exceed 2.0 for 99 percent of agency-county observations. This level of reliability was acceptable for our purposes. When PIC showed that agencies spanned multiple counties, we aggregated the data to the agency level by either summing count variables across counties or calculating averages of ACS descriptive statistics, such as county mean incomes. We calculated unweighted averages because the Census Bureau does not release ACS microdata with the exact geographic locations needed to re-estimate the statistics of interest within public housing agency boundaries. Weighting by the total area population or number of households served by each public housing agency would have had unknown effects on the bias of the published ACS estimates, due to their complex weighting methods. Our aggregation methods should minimally influence our measurements, due to limited variation across counties within agencies. To quantify this variation, we calculated the coefficient of variation (CV) across counties served by each agency in our analysis, and these CVs of the ACS statistics did not exceed 0.99 for 50 percent of the agencies and 1.73 for 95 percent of the agencies. We used statistical matching methods to construct the comparison group of non-MTW agencies. The general iterative matching process involves 1. identifying some distance measure that quantifies how “close” units are to each other on the covariates of interest; 2. implementing a matching method that uses this distance measure to identify comparison units; and 3. assessing the quality of the matched samples and iterating between the first two steps, until the treatment and comparison groups become sufficiently close on the distance measure. We developed our specific matching approach using recent reviews of the statistical literature. Two established matching methods rely on propensity scores and Mahalanobis distance (MD). In the context of this analysis, propensity scores estimate the probability that an agency is an MTW or non-MTW agency, such as when Pr(MTW | X) = logit-1(Xβ), where X is a matrix of covariates and β is a vector of coefficients. Propensity scores are calculated using the estimated coefficients and X to obtain a predicted probability that an agency participates in the MTW demonstration. MD is a multivariate sample statistic measuring the distance between agency i and j, similar to the number of standard deviations away from the sample mean vector of the covariates: where X is the ith row vector of X and S is the sample covariance matrix. Propensity scores and MD measures can have several limitations in practice. Matching on known propensity scores is used to balance the covariate distributions between the treatment and comparison groups and matching using MD tends to improve balance across all measured covariates. However, both approaches are optimal under assumptions of normally distributed data, and may worsen covariate balance if this assumption does not hold. Genetic matching methods seek to solve the problem of achieving sample balance in practice, using computer algorithms to search over the space of possible distance measures. Genetic matching generalizes MD by weighting covariates according to how they achieve balance in any particular sample, rather than by constants equal to the inverse of their sample covariance matrix, as in MD: where W is the covariate weighting matrix. If desired, genetic matching can incorporate propensity scores by including them as a covariate, with the algorithm assigning as much weight to them as necessary to optimize balance. The genetic matching algorithm, as implemented by the R software package “Matching,” has the following steps: 1. Initialize covariate weights, W, at starting values. 2. Calculate the distance matrix between MTW and non-MTW agencies. 3. Specify the number of non-MTW agencies to be matched comparison agencies for each MTW agency. 4. Assess the balance between the sample distributions of the treatment and control groups, using p-values from matched t-tests of equal means for each covariate or Kolmogorov–Smirnov tests of equal distributions. 5. Apply a loss function to the vector of p-values to quantify overall sample balance. 6. If the loss function is not minimized, regenerate W using a genetic algorithm. 7. Repeat steps 2–6 until the loss function is optimized and covariate balance is maximized. In sum, the genetic matching algorithm searches for the best k matches, incorporating covariates and distance metrics as desired and minimizing the distance in a candidate matched set by weighting and reweighting the covariates and metrics, according to how they influence balance. In our primary analysis, we ultimately used one-to-one matching (k = 1), with one comparison agency selected for each MTW agency. Large imbalances in the number of households served by the MTW and non- MTW agencies substantially reduced the pool of similar comparison agencies, such that setting k > 1 substantially worsened the balance for some variables. In addition to the automated matching criteria above, we compared the sample distributions of the covariates before and after matching using descriptive statistics and nonparametric density estimates. We required exact matches on the year of measurement to ensure that observations were compared at roughly the same times. We also required exact matches on whether an agency issued vouchers and HUD region. Due to data limitations, we compared 2016 reserve spending between MTW and non-MTW agencies for the 2015 matched set. Figure 12 compares MTW agencies and non-MTW agencies on the covariates we identified, before constructing a matched sample of comparable non-MTW agencies. As the figure shows, there are some covariates for which there are significant differences between the group of MTW agencies and non-MTW agencies. After implementing the matching method described above, we identified a primary group of comparison agencies that were similar to the MTW agencies on most of the covariates, but differed on a few, as shown in table 7. Examples of matched agencies in our primary analysis include: Oakland Housing Authority (MTW) and Housing Authority of the County of Sacramento (non-MTW); San Antonio Housing Authority (MTW) and Housing Authority of New Orleans (non-MTW); and Housing Authority of the City of Pittsburgh (MTW) and Allegheny County Housing Authority (non-MTW). Imbalances between MTW and comparison agencies for the main analyses remained after our primary matching analysis for county median income, county median rental cost, number of households, percent of households with a disabled member, and county rental vacancy rate, as shown in table 7. Figure 13 shows the covariate density estimates for MTW and non-MTW agencies, after matching. As the figure shows, there are fewer differences in the group of MTW agencies and the matched non-MTW agencies after matching. MTW agencies had higher county median incomes and rent, lower percentages of disabled household members, and lower rental vacancy rates, as compared to the primary matched non-MTW agencies. These imbalances decreased when we allowed for matches across HUD region and required matches within calipers (1 standard deviation), as shown in table 8. However, allowing HUD region to vary potentially allowed other unmeasured factors within a HUD region to vary between the MTW and non-MTW groups. Applying caliper constraints failed to match a comparison agency for 91 of the 232 yearly observations for MTW agencies during 2009–2015, which changes the population for inference. We used these matched samples with improved balance for sensitivity checks, in our discussion of the results below. After constructing the primary matched analysis sample, we estimated outcome descriptive statistics for MTW and non-MTW agencies. We estimated differences in mean and median outcomes using paired t-tests and nonparametric Wilcoxon signed-rank tests, respectively, that account for correlations over time within and between matched groups of MTW and non-MTW agencies. We estimated differences in medians between groups using nonparametric Wilcoxon signed-rank tests to address potential outliers. For example, the tenant services cost distributions for MTW agencies (median = $37; 25th quantile = $2.80; 75th quantile = $110) and non-MTW agencies (median = $0; 25th quantile = $0; 75th quantile = $20) were highly skewed. The nonparametric test was not influenced by these skewed distributions and outliers. To complement this matched comparison, we used Generalized Linear Models to model outcomes in 2009–2015 using the matched sample of MTW and non-MTW agencies. The models had the form: i = 1, …, n indexes agencies j = 2009, …, 2015 indexes years MTWij indicates whether agency i participated in the MTW demonstration µij is the mean outcome, conditional on the covariates g is the Gaussian link function Year is a vector of indicators for each year from 2010 through 2015 (excluding 2009), which accounts for common period effects across agencies, γ Xij is a vector of linear continuous (e.g., number of households) and categorical (e.g., HUD region) control variables that may confound the association between agency type and the outcome of interest (discussed above for the matched sample) β is the parameter of interest, estimating the association between MTW Repeated observations from 2009 through 2015 for MTW agencies and their corresponding matched non-MTW agencies can introduce autocorrelation within these clusters of observations, and the differences across matched clusters can introduce heteroscedasticity (that is, the variance in one cluster of agencies may be not be consistent with the variance in another cluster). A conventional linear model does not account for these interdependencies and inconsistent variances in the data, leading to potential bias in the variance estimation for the parameters of interest (such as variances for β and γ) and any subsequent statistical inference on the association (and p-values) between the outcome and covariates. To account for the potential bias arising from heteroscedasticity and autocorrelation, the variance-covariance matrix used to generate the variances for the parameters incorporated weights that (1) decreased the influence of extreme observations, clusters, or both; (2) used an autoregressive approximation in which the correlation was strongest for observations closest in time and decays as time lengthens; and (3) preprocesses (“prewhitens”) the variance-covariance matrix using an autoregressive function to reduce the temporal dependence in the data. These processes lead to statistical inference on associations of interest that account for the interdependencies within agency clusters and the differences across clusters. In the sensitivity analyses described below, we will fit this model on the unmatched population of agencies. In the matched sample, MTW agencies had lower median public housing occupancy rates and voucher unit utilization rates compared to non-MTW agencies, as shown in table 9. Compared to non-MTW agencies, MTW agencies had higher median public housing expenses per household (operating and central office cost center operating expenses) and higher median voucher administrative expenses per household, subsidy expenses per household, tenant services expenses per household, and reserves per household. These differences were significant at the 0.05 level for all variables using the nonparametric Wilcoxon signed-rank test. However, using the parametric t-tests and related t-tests from the regression models, there was not a significant difference in central office cost center operating expenses. This could arise from the presence of outliers skewing the distribution, leading to different results compared to the Wilcoxon test that does not make any distributional assumptions. Regardless of the particular method used, small sample sizes in each group, as well as repeated observations over time, may limit our statistical power to identify differences, if they existed. Sample sizes resulting from missing data also affect the degree to which comparable non-MTW agencies can be found, given the limited overlap in the covariate distributions between groups. We assessed the results above for sensitivity to various methodological assumptions. For the matching analysis, we assessed the impact of 1. measuring MTW status as of the agreement year, rather than as of 1 year following the agreement (i.e., 1 year lag); 2. matching within 1 standard deviation calipers for each covariate; 3. allowing matches between HUD regions; 4. including county unemployment and poverty rates as covariates; 5. including estimated propensity scores, as a logistic function of the control variables described for the primary analysis, as a matching covariate; 6. increasing the number of comparison agencies for each MTW agency to k = {2, 3, 4} using the control variables described for the primary analysis; and 7. excluding clusters where the MTW and/or non-MTW agencies had an outlying value for an outcome of interest. For the regression model, we compared the results obtained from fitting the model to the matched and unmatched data. The sensitivity tests above showed no substantively meaningful differences in the results as compared to the primary analysis, with several exceptions. Adding the caliper constraint and dropping the HUD region constraint improved covariate balance. Dropping the HUD region constraint led to MTW agencies having a smaller difference in voucher subsidy expenses, compared to non-MTW agencies. In our primary analysis, MTW agencies had higher subsidy expenses. However, allowing matches between HUD regions may introduce unmeasured geographic characteristics into the comparison group of non-MTW agencies, which may limit the comparability of subsidy expenses and bias the estimated difference in outcomes. In addition to the contact named above, Paige Smith (Assistant Director), Josephine Perez (Analyst in Charge), Enyinnaya David Aja, Bethany Benitez, Farrah Graham, Anar N. Jessani, Morgan Jones, Courtney LaFountain, Won Lee, Marc Molino, Anna Maria Ortiz, Barbara Roesmann, Shannon Smith, and Jeff Tessin made key contributions to this report.", "summary": "The MTW demonstration gives 39 participating public housing agencies the flexibility to use funding for HUD-approved purposes other than housing assistance, such as developing affordable housing; change HUD's tenant rent calculation; and impose work requirements and time limits on tenants. In 2015, Congress authorized the expansion of MTW by adding 100 new agencies. GAO was asked to evaluate the MTW demonstration. GAO examined HUD oversight of MTW agencies, including its monitoring of demonstration effects on tenants. For this report, GAO reviewed HUD and MTW agency policies and documentation; interviewed officials at HUD and seven MTW agencies (selected based on type of policy changes, size, and geographic diversity); and interviewed tenants served by selected agencies. GAO also conducted a statistical analysis comparing data for MTW and non-MTW agencies on public housing occupancy rates, voucher utilization rates, and program expenses. The Department of Housing and Urban Development‘s (HUD) oversight of the Moving to Work (MTW) demonstration has been limited. Improving oversight—particularly for information collection and analysis—would help HUD assess what MTW agencies have done, including funding use. HUD took steps to improve oversight and reporting, but GAO found limitations in the following areas: Workforce planning. While HUD has taken steps to address staffing to oversee the current 39 MTW agencies, HUD has not finalized its workforce planning for 100 agencies to be added to the demonstration. According to a 2015 HUD analysis, a large number of additional staff would be needed for the expansion. HUD officials said field office staff might assume greater oversight responsibilities to fill this gap, but a joint (headquarters-field) oversight structure is not final and HUD's workforce analysis has not been updated to reflect this proposed oversight structure. Data collection. Due to limited data, HUD cannot fully determine the extent to which demonstration flexibilities affected the performance of MTW agencies, especially in relation to outcomes that affect the number of tenants served—occupancy and voucher utilization rates and program expenses. GAO found that MTW agencies had lower yearly median rates for public housing occupancy and Housing Choice Voucher (voucher) unit utilization and higher yearly median program expenses than comparable non-MTW agencies. The differences may be partly the result of demonstration funding flexibilities, such as the ability to use public housing and voucher funding for purposes such as gap financing for affordable housing (a nontraditional activity). But limitations in HUD data (such as not differentiating expenses for nontraditional activities) make it difficult to fully explain differences in outcomes GAO analyzed. Oversight of reserves. HUD has not implemented a process to monitor MTW reserves or agencies' plans for such reserves, which led to agencies accruing relatively large amounts of unused funds that could be used for vouchers. According to HUD data as of June 30, 2017, the 39 MTW agencies had more voucher reserves than the 2,166 non-MTW agencies that administer the voucher program combined ($808 million compared to $737 million). Without a monitoring process, HUD cannot provide reasonable assurance that MTW agencies have sound plans for expending reserves. Monitoring the effect of rent reform, work requirements, and time limits on tenants. HUD is limited in its ability to evaluate the effect of MTW policies on tenants. HUD does not have a framework—including clear guidance on reporting requirements and analysis plans—for monitoring the effect of rent-reform, work-requirement, and time-limit policies. HUD guidance instructs agencies to analyze the impact of their rent reform activities, describe how they will reevaluate them, and develop a tenant hardship policy for such policies (but not for time limits or work requirements). But the guidance does not describe what must be included in the analyses or policies, leading to wide variation in how agencies develop them. Also, HUD does not assess the results of agencies' analyses. GAO makes 11 recommendations to HUD, which include completing workforce planning, developing processes to track use of funds and monitor agencies' reserves, and developing a framework—including clear guidance on reporting requirements and analysis plans—to monitor effects on tenants. HUD generally agreed with eight of the recommendations and disagreed with three, citing the need for flexibility. GAO maintains the recommendations, as discussed further in the report.", "document_type": "gao"}
{"report": "After the 2002 consolidation of 22 agencies into a single department, DHS had, until recently, different appropriation structures and budget management practices based on agencies’ enacted appropriations prior to DHS consolidation. DHS reported that, with over 70 different appropriations and over 100 formal program/project activity (PPA) accounts, it operated for over a decade with significant budget disparities and inconsistencies across its components. The lack of uniformity hindered visibility, inhibited comparisons between programs, and complicated spending decisions. To address some of these inconsistencies, DHS proposed a new, common appropriations structure to Congress in 2014, according to officials. The House Appropriations Committee then included language regarding a common appropriations structure for the President’s budget request in its report that accompanied a proposed House fiscal year 2015 DHS Appropriations Bill. The language in the report directed the DHS Office of the Chief Financial Officer to work with the DHS components, the Office of Management and Budget, and the Committee to establish a common appropriations structure for the President’s budget request. While the specific appropriations bill that the report accompanied did not become law, Congress subsequently enacted a common appropriations structure for the department. DHS’s fiscal year 2016 President’s budget request was the first to use this common appropriations structure. Under the common appropriations structure, DHS uses these four enacted accounts to capture the following costs: Research and development – includes funds to support the search for new or refined knowledge and ideas as well as improved products or processes to yield future benefits; Procurement, construction, and improvements – provides funds for planning, operational development, engineering and purchase of one or more assets prior to deployment. Operations and support – provides funds necessary for operations, mission support, and associated management and administration activities, including salaries. Operational costs can include funding for fuel and other consumables as well as personnel. Maintenance costs can include routine or critical maintenance, spare parts, and additional personnel; and Federal assistance – provides monetary or non-monetary support to any entity through various types of loans, grants, and other means. Within each component’s budget request, the four appropriations accounts are subdivided into mission-oriented PPAs that correspond to the components’ varied operations. One PPA can include costs for multiple programs and funding for programs may cross multiple PPAs. For example, in the fiscal year 2017 congressional budget justification— the formal budget submission from DHS that comprises its portion of the President’s annual budget submission—Customs and Border Protection’s Integrated Fixed Towers and UH-60 helicopter programs both requested O&S funds through the Securing America’s Borders PPA. Other examples of PPAs include Transportation Screening Operations and Securing and Expediting Trade and Travel. Figure 1 shows the relationship between DHS appropriations PPAs. DHS components use the mission-oriented PPAs to develop component budget requests within the President’s budget request. The DHS budget request includes components’ requested funds within the four appropriations accounts, including O&S, and their PPAs. DHS also uses the PPAs in its monthly execution reports to Congress to communicate its obligations and expenditures, along with other information. The monthly execution report mirrors the format of the congressional budget justification by providing execution data organized by appropriation account and mission-oriented PPA. This monthly snapshot includes personnel costs as part of the O&S costs they report. The Future Years Homeland Security Program is a database that contains 5-year funding plans for DHS’s major acquisition programs and is used to prepare a report to Congress that supplements information in the annual budget request. In addition to the information presented in the budget submission and monthly execution report, this document organizes funding projections by major acquisition program. The 5-year plans in the Future Years Homeland Security Program are intended to allow the department to achieve its goals more efficiently than an incremental approach based on 1-year plans and articulate how the department will achieve its strategic goals within fiscal constraints. The establishment of DHS in 2002 consolidated 22 agencies from multiple cabinet-level departments and independent agencies into a single organization. To help manage its portfolio of acquisition programs, DHS established policies and processes for acquisition management, test and evaluation, and resource allocation. The department uses these policies and processes to acquire and deliver systems that are intended to close critical capability gaps and enable DHS to execute its mission. Figure 2 outlines the acquisition life-cycle for major acquisition programs at DHS. Programs initially identify costs—including those for O&S—in their department-approved LCCE during the analysis phase. When a program becomes operational while still going through its acquisition milestones, programs may use O&S funds during the obtain or deploy phases. For example, the Coast Guard has several operational National Security Cutters, but is also obtaining additional cutters; therefore, it would use O&S funds for support of deployed cutters and procurement funds for acquisition of additional cutters. GAO’s Cost Estimating and Assessment Guide notes four characteristics of a high quality cost estimate: comprehensive, well documented, accurate, and credible. Specifically, a comprehensive cost estimate should include all costs of the program for the O&S phase, while reflecting the current schedule, and should document all ground rules and assumptions. Furthermore, an accurate cost estimate should provide for results that are based on historical data, if available, while containing few, if any, minor errors. DHS acquisition policy has generally required components to update LCCEs at Acquisition Decision Events, up until the deployment phase, since 2008. However, since issuance of the department’s October 2011 acquisition policy revision, LCCE revisions must also be DHS-approved. Prior to the 2008 policy, GAO found that nearly two-thirds of programs did not have life-cycle cost estimates. Each of our 11 selected programs has an approved cost estimate. Table 1 lists the programs selected for our study. In accordance with DHS policy and GAO’s Cost Estimating and Assessment Guide, the O&S costs in the LCCE should inform the O&S portion of the program’s budget request and the funds provided to the program. Accordingly, as programs use these funds in the obtain or deploy phases, they should update the LCCE with spending data to reflect actual costs. Figure 3 illustrates this feedback cycle. To help facilitate this feedback process, DHS issued a memorandum in January 2016 reminding components that an annual updated LCCE is required for each major acquisition program that has not reached full operational capacity. According to this memorandum, components must submit this cost estimate by April 1st of each year and should include the incurred costs to date through the prior fiscal year as well as how these costs track to prior LCCEs. According to agency officials, DHS’s mission-oriented budget management provides operational flexibility in using O&S funding. However, DHS’s budget justifications and reports aggregate programs’ O&S data, limiting oversight of major acquisition programs’ O&S costs. While some program-oriented O&S data are available at the component level, this information does not appear in DHS’s budget reports to Congress. This disparity is due, in part, to the format of the budget reports. Officials across DHS identified operational flexibility as the primary benefit of the department’s mission-oriented budget management. The mission- oriented PPA accounts allow, to a limit, components to move funds between major acquisition programs. For example, officials from Customs and Border Protection’s Air and Marine Operations Division stated they consolidate O&S funds within a single account, which makes them more responsive to mission changes. If a new mission requires a specific aircraft capability, flexible O&S funds will support using that asset, as opposed to another. This flexibility is also apparent in other kinds of change or trade-offs components can make in deploying their systems. We could not identify the frequency with which programs or operators made these operational trade-offs because of limitations in the data we obtained. A few examples include the following: Asset Trade-Off: Customs and Border Protection officials told us they manage aircraft usage to meet mission needs while remaining within the overall O&S budget for the Integrated Operations PPA. At times, they use a less expensive and less capable asset that can still complete the mission as a cost-saving technique. For example, officials told us the UH- 60 Helicopter cost per flight hour is nearly three times the cost of a smaller helicopter. The smaller aircraft does not have the same capabilities as the UH-60, but operators can save money and sufficiently complete the mission with this aircraft, according to officials. Inventory Trade-Off: Coast Guard officials responsible for maintaining aircraft, such as the Medium Range Surveillance Aircraft, noted that recent budget constraints affected their ability to buy sufficient spare parts. To address this shortfall, they sometimes pulled working parts from aircraft that were grounded and awaiting maintenance to install on aircraft already undergoing maintenance. Contract or Upgrade Trade-Off: Immigration and Customs Enforcement’s TECS Modernization program requested $3 million in O&S funding for fiscal year 2017, but the program did not receive this funding. To mitigate this unexpected shortfall, officials described how they adapted their contracting strategy to stretch funding through the fiscal year until they could receive full funding in fiscal year 2018. Officials stated that additional proposed funding cuts in fiscal year 2018 would leave the program unable to meet its minimum operating costs. According to officials, the program has several mitigation plans that will reduce cost through a new contract and reductions in data housing center costs. Because O&S funding represents the money available to end users to carry out their missions, we attempted to use program-level data to identify O&S funding shortfalls for our selected programs. Potentially, this information could also identify how frequently system users are making these trade-offs. However, the components’ use of consolidated funds for certain programs makes O&S costs difficult to see, particularly at Customs and Border Protection’s Air and Marine Operations Division. This component relies on aggregated O&S accounting and could not provide program-level O&S cost information for the Multi-Role Enforcement Aircraft and UH-60 Helicopter programs. As a result, we could not obtain usable information. However, Customs and Border Protection Officials also informed us that they are replacing their internal maintenance cost tracking system, which could help improve expenditure tracking in the future. DHS first used its common appropriations structure—which DHS proposed and Congress enacted—to address appropriations and budget management inconsistencies in its fiscal year 2016 budget submission. The common appropriation structure streamlined its appropriations, but the resulting reports that the department provides to Congress obscure O&S costs for individual programs. Additionally, while DHS has program- level expenditure data for most of the programs we reviewed, it also relies on fragmented financial management systems that further limit reporting. The PPAs DHS uses to communicate its annual budget requests and projections, as well as monthly obligations and expenditures, are mission- oriented. As a result, the budget reports DHS provides to Congress do not always present a clear accounting of individual programs’ O&S costs. Congressional Budget Justification – Requests for total program O&S funds are not always visible in the DHS congressional budget justification. This document’s mission-oriented reporting within the O&S section continues to combine program-level data within PPAs, as they were for previous budgets. Beginning in fiscal year 2018, DHS added O&S information to the individual program funding request summaries that appear in the procurement, construction, and improvements section of the budget justification, which describes acquisition funding requests. According to officials, this line shows requested funding for O&S for the coming fiscal year and two prior years. Our review of the fiscal year 2018 congressional budget justification found this information for 5 of our 11 selected programs. However, these program-level details did not appear in the O&S section of the same document, except for one program: Customs and Border Protection’s TECS Modernization program, which recently transitioned to its deployment phase. Of the remaining programs we reviewed that did not have clear O&S information in this document, two were Customs and Border Protection programs: the Multi-Role Enforcement Aircraft and UH- 60 Helicopter. Three were Coast Guard programs: the Long Range Surveillance Aircraft program, the Medium Range Surveillance Aircraft Program, and the National Security Cutter. Both of these components consolidate their O&S funds, meaning they can direct available funds based on program needs. As stated above, this practice also makes it difficult to provide program-level O&S cost information and as a result, the O&S information DHS added to its procurement section is blank for these programs. This new information also does not include programs that completed their procurement phase as DHS requests O&S funds for programs in the deployment phase. Therefore programs in deployment still lack clear program-level O&S data in the congressional budget justification. For example, the Secure Flight program completed procurement and does not have an entry in the procurement section and therefore lacking O&S information. Monthly Execution Reports – DHS provides monthly execution reports to Congress that include O&S expenditure, obligation, and other budget data, organized by PPA. These reports consist of summary information at the PPA level, again obscuring individual programs’ O&S costs. For example, the Customs and Border Protection PPA cited above would include multiple programs in the same way. Visibility of DHS’s O&S costs by program is further limited in congressional budget submissions, as personnel costs are not fully captured. For nearly all of our selected programs, we could not identify funding for personnel who operate and maintain program assets within the congressional budget justification or monthly execution report. Program officials stated that, in certain cases, personnel costs are funded in mission–oriented PPAs not clearly associated with the program. According to officials, Customs and Border Protection’s Integrated Fixed Towers program is an example of this scenario. In other cases, the personnel funding associated with a program appears within the same PPA but may fund operations for more than one program. As a result, the full O&S cost of a program—inclusive of operating and supporting personnel—is not clear in the budget request and execution report. Federal standards for internal control state that managers should communicate quality information to external bodies. DHS is not clearly communicating to Congress the full O&S costs of its programs—inclusive of operating and supporting personnel—in congressional budget justifications and execution reporting. By comparison, agencies such as the National Aeronautics and Space Administration (NASA) and the Department of Defense directly request individual programs’ O&S costs, at least until projects launch or begin operations in NASA’s case. Further, our best practices on capital decision making state that good budgeting requires that the full costs of a project be considered when making decisions to provide resources. Providing data on full program costs permits Congress to better understand the long term costs of a program and the budgetary and programmatic effect of its decisions. While the recent change DHS made to its congressional budget justification to include program-level O&S cost information in the procurement section is an improvement, Congress still lacks complete information regarding DHS O&S costs as such data are absent from monthly execution reporting. In the course of our review, DHS initiated a pilot program to use unique identifier codes to track O&S expenditures for individual major acquisition programs. As of January 2018, headquarters officials told us the department was testing the identifier with three components that have relatively simple acquisition portfolios: the Domestic Nuclear Detection Office, Immigration and Customs Enforcement, and the National Protection and Programs Directorate. Following the pilot, officials plan to assess whether and how to implement this identifier within other components’ financial management systems. DHS officials stated that they intend to use this information to inform O&S cost estimating for future acquisitions. As of January 2018, DHS did not plan to include the information in any of the budget information provided to Congress. According to DHS officials, they would need to work with Congress in order for Congress to identify how its existing reporting requirements should change, as they did during the development of a common appropriations structure in 2015. Prior to fiscal year 2018, the Future Years Homeland Security Program report, which accompanies DHS’s annual budget request, provided supplemental data on planned funding for major acquisition programs. For most components, the report included prior year funds and 5 years of estimated procurement funding for O&S as well as government personnel costs for each program. DHS removed this reporting in its fiscal years 2018-2022 Future Years Homeland Security Program report. Officials explained they removed program O&S funding to focus on planned procurement funding. However, in January 2018, DHS officials stated that they plan to re-introduce O&S funding for major acquisition programs in the Future Years Homeland Security Program report for fiscal years 2019-2023. DHS officials based this decision on multiple internal discussions about the best way to present a more comprehensive view of programs’ total costs and feedback from key stakeholders, such as the Office of Management and Budget. With its intention of reflecting program-level O&S costs in the upcoming Future Years Homeland Security Program report, to be submitted with the fiscal year 2019 President’s budget request, DHS officials recognize the value in such reporting. This change also aligns to federal standards for internal control and communicating quality information. Re-introducing O&S program cost information would improve the quality of information DHS provides to Congress in its Future Years Homeland Security Program Report. Until DHS takes concrete action to reverse the exclusion of O&S funding at a major acquisition program level in its Future Years Homeland Security Program reports, Congress will lack important information necessary for oversight. Programs can generally track detailed O&S obligations and expenditures within their financial systems; however, department officials told us they do not request this information. Each component uses a different financial system to track its O&S costs and report expenses and, in some cases, must manually transfer data between systems. As a result, headquarters officials told us they do not have direct access to components’ systems and request summary information organized by PPA to develop budget requests and monthly execution reports, in accordance with DHS’s mission-oriented budget management. DHS financial management systems are an area we have designated as high risk since 2003. In September 2013, we found that without sound internal controls over its financial reporting, DHS is hindered in its ability to efficiently manage its operations and resources on a daily basis and provide useful, reliable, and timely financial information for decision making. At that time, we recommended DHS take steps to integrate financial management systems and unify the components’ financial management. In September 2017, we found that despite efforts to address long-standing financial management system deficiencies, several factors delayed the Transportation Security Administration and Coast Guard’s efforts to replace their financial management systems. Specifically, insufficient resources, an aggressive schedule, complex requirements, increased costs, and project management and communication concerns resulted in cost and schedule growth. DHS is taking steps to mitigate these risks and is revising its acquisition strategy to replace these systems, based in part on the issues we identified. The O&S portion of our selected programs’ most recently approved life- cycle cost estimates (LCCEs) were nearly all comprehensive, but lacked elements of accuracy despite annual and other updates. Program-level LCCEs are one of the sources DHS components should rely on for budget development. Specifically, 10 of the 11 selected programs reviewed either substantially or fully met our best practices criteria for comprehensiveness, while only 5 substantially or fully met criteria for accuracy. These programs have met DHS’s acquisition policy that major acquisition programs generally revise their LCCEs at major acquisition decision events and generally met DHS’s 2016 requirement for annual updates. As of December 2017, 10 out of 11 selected programs’ most recent DHS- approved LCCE either substantially or fully met GAO’s four criteria for a comprehensive cost estimate. Figure 4 depicts the results of our analysis and the criteria for this characteristic. GAO best practices in cost estimating note it is important that the O&S portion of a program’s LCCE be comprehensive. That is, it should provide an exhaustive and structured accounting of all resources and associated cost elements—hardware, software, personnel, and so on—required to deploy and sustain a program. Five programs fully met and 5 programs substantially met the comprehensive characteristic. Within those programs that substantially met the characteristic, we found two reasons programs did not fully address criteria. First, 2 of those programs partially met the criterion that requires the estimate to completely define the program, reflect current schedule, and be technically reasonable. Second, despite substantially meeting the characteristic, the Customs and Border Protection’s TECS Modernization program did not have a single, authoritative technical baseline document that contained all the details to satisfy this specific criterion. Instead, multiple technical baselines or baseline documents were present. The one program in our review that minimally met criteria for comprehensiveness is the Next Generation Security Networks Priority Services program. It is “acquisition-only,” meaning that its LCCE includes the costs to acquire new capabilities for its parent program—Priority Telecommunication Services. When it has acquired these capabilities, the parent program becomes responsible for O&S costs. This unique acquisition relationship is a reason we selected this program, namely to see how the component would factor O&S costs into its estimate. We also previously reported on variance in the program’s cost estimate, due to changes in how the component included O&S costs. Our analysis found that the Next Generation Networks Priority Services program’s LCCE contained minimal information on O&S costs. In the program’s recently updated LCCE, which we did not assess, the National Protection and Programs Directorate refined the Priority Telecommunication Services’ O&S costs to identify only those attributable to the Next Generation Networks Priority Services acquisition. In contrast to the comprehensiveness of programs’ O&S estimates, only 5 of the 11 selected programs we reviewed either fully or substantially met GAO’s five criteria for accuracy. Accuracy is critical to ensuring a reliable and well-founded LCCE to support operations. This is important because these estimates serve as the basis to request program funding and provide insight into the overall affordability of the acquisition program. Figure 5 depicts the results of our analysis and the selected criteria for this characteristic. Two programs fully met and 3 programs substantially met the criteria we assessed. Of the programs that substantially met these criteria, we found a common criterion programs struggled to address: they did not document, explain, and review variances experienced between planned and actual costs. DHS acknowledges the importance of including this information and, in its 2016 memorandum, required its components to annually provide a detailed description of any differences between updated and past cost estimates. Of the 5 programs that partially met criteria for accuracy, we found several reasons for these results, including our lack of access to the cost models used to develop the programs’ LCCE and an explanation of any variances. For example, the Coast Guard was unable to share cost models for the programs we assessed, due to information sensitivities. Without access to the cost models, we could not determine whether the estimates had been properly adjusted for inflation and could not determine whether the estimates contained few, if any, errors—one of GAO’s criteria for accuracy. Similar to the results of our comprehensiveness analysis, the Next Generation Network Priority Services program did not meet our selected accuracy criteria because it did not include O&S costs in its LCCE. While we could not determine that selected programs’ LCCEs were accurate based on the information reviewed, we found that the department is regularly updating LCCEs, a GAO best practice that promotes accuracy. All of the programs met DHS requirements to update their LCCE at each acquisition decision event, as applicable, a policy that also aligns with our cost estimating best practices. Updating LCCEs is an important step to maintain the utility of an estimate throughout a program’s life-cycle and is critical to budget development. Outdated O&S estimates hamper a program’s ability to analyze changes in costs over time. For example, they may not reflect fluctuation in the price of fuel, which could lead to a program requesting insufficient funds for annual operations. DHS relies on the programs’ LCCEs to develop initial budget requests, which it subsequently updates with actual expenditures as the program matures. As of November 2017, 10 of our 11 selected programs also met DHS’s requirement for programs not yet in the deployment phase to update their LCCEs annually. These new requirements to update LCCEs are making this acquisition document more relevant throughout the life of a program to inform budget requests. The Coast Guard’s Long Range Surveillance Aircraft program is the only program we selected that did not meet this requirement for fiscal year 2017. Coast Guard officials explained that the program is in the process of revising its LCCE, which is why it did not have a submission within fiscal year 2017. While components are following DHS policy, programs may vary in their approach to updating O&S reporting elements as newer versions of the LCCE document are developed and approved. For about half of our programs, we observed changes to O&S cost elements in the LCCE, which can reflect program changes. This situation is consistent with our cost estimating best practices, which note that cost elements should be updated as changes occur and the program becomes better defined. For example, the Coast Guard’s Medium Range Surveillance Aircraft program’s original LCCE was completed in 2009, when the Coast Guard planned to procure a single aircraft type. Since then, the Coast Guard revised its LCCE in 2012 and 2016 to account for changes to the program, namely the addition of a second aircraft type. The Medium Range Surveillance Aircraft program’s 2016 LCCE now includes an entirely new set of O&S cost elements for both aircraft. Conversely, a program that has very stable cost elements may not need to make such changes. Officials from Customs and Border Protection TECS Modernization program explained they did not alter its cost elements between its original 2014 LCCE and its 2016 revision because O&S costs are stable and well-known as the program enters its deployment phase. Operations and Support (O&S) is the bulk of the taxpayer’s investment in major acquisition programs and is necessary to meet end user’s needs for spares, maintenance, and operations. To support this mission, DHS manages its budget to maximize components’ flexibility to use O&S funds across major acquisition programs. This aspect of the department’s budget management did not change with enactment of the common appropriation structure. We do not take issue with DHS’s mission-oriented budget management approach; however, with this reliance on broader O&S mission-oriented program/project activity (PPAs) in reporting, program-specific O&S information is difficult to discern. DHS’s addition of program-level O&S information to the procurement, construction, and improvements section of the congressional budget justification is a positive step, but still does not address this shortfall for all programs. The identifier pilot program DHS has underway could add details on O&S costs for major acquisition programs in addition to those already contained in programs’ life-cycle cost estimates. Such an action will require additional reporting from the components, which may be challenging due to the department’s fragmented financial management systems, as we have observed and made recommendations on in prior reports. DHS could work with Congress to identify ways to strengthen its congressional budget justifications and monthly execution reports by including information on O&S costs. DHS’s recent proposal to shift back to reporting program-level O&S funding in the Future Years Homeland Security Program report demonstrates that the department sees value in providing such information to Congress and that such information is available to some extent. Until DHS takes concrete action to reverse the exclusion of O&S funding at a major acquisition program level in its Future Years Homeland Security Program reports, Congress will lack important information necessary for oversight. We are making the following three recommendations to DHS: The Secretary of Homeland Security should work with Congress to add information to its annual congressional budget justification to show O&S funding requests for major acquisition programs within current program/project activity accounts. (Recommendation 1) The Secretary of Homeland Security should work with Congress to include O&S data in monthly execution reports at a major acquisition program level within current program/project activity accounts. (Recommendation 2) The DHS Chief Financial Officer should reverse the exclusion of O&S funding at a major acquisition program level in its Future Years Homeland Security Program report for all components. (Recommendation 3) We provided a draft of this report for review and comment to DHS. DHS provided written comments, which are reproduced in appendix III. In its comments, DHS concurred with all three of our recommendations and identified actions it plans to take to address them. DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. The House Homeland Security Subcommittee on Oversight and Management Efficiency asked us to evaluate operations and maintenance (O&S) activities for the Department of Homeland Security’s (DHS) major acquisition programs. This report assesses, for selected major acquisition programs, the extent that (1) DHS budget management and reporting affects operations and oversight; and (2) life-cycle cost estimates (LCCEs) are comprehensive and accurate, as well as regularly updated. To conduct our work, we reviewed the DHS Major Acquisition Oversight List as of April 2017 and selected 11 major acquisition programs from five components to serve as case studies for our review. We selected a non- generalizable sample of programs, and their corresponding components, based on their stage in the acquisition cycle, including programs in the deployment phase. We also ensured we had a mix of different DHS components reflecting the broad spectrum of DHS operations. Our case studies included four information technology programs and seven other programs. To determine how O&S funds are organized within the budget request, we reviewed the O&S and procurement, construction, and improvements appropriations accounts within the fiscal year 2017 and 2018 congressional budget justification by program/project activity account (PPAs) for the 11 programs in our review. We identified the selected programs within these accounts, as possible. To determine whether the PPAs we identified in the O&S budget request were all-inclusive of O&S costs, we developed and disseminated a data collection instrument to program offices, which collected information on selected programs’ O&S budget requests, budget authority, obligations, and expenditures, including personnel expenditures, from fiscal years 2015 to 2017. We compared this information to our analysis of the congressional budget justification and conducted follow-up meetings with each of the component budget offices to understand differences in the data sources and learn if program obligations and expenditures were included in other common component PPAs. To determine the inclusion of personnel costs in the program O&S expenditures, we reviewed the congressional budget justification and our data collection instrument for personnel expenditures. We held follow-up meetings with program offices to discuss to what extent DHS used O&S PPA funds for personnel costs, identify those PPAs, and whether personnel costs were shared with other programs. To determine if monthly execution reports contained program-level O&S cost information, we reviewed the December 2016 monthly execution report, as well as DHS guidance to programs on preparing that report, to determine whether individual program obligations and expenditures could be identified within the report. We determined that O&S cost information is reported by mission-oriented PPA in this report and were unable to identify O&S obligations or expenditures by program. We held follow-up discussions with DHS officials to discuss how this information is collected and reported to Congress. To determine whether O&S costs were included in the Future Years Homeland Security Program database, we reviewed the fiscal years 2017-2021and 2018-2022 reports from the Future Years Homeland Security Program database for identification of program costs. We found that program costs were identified. However, while we are able to determine the inclusion of O&S costs in the fiscal year 2017-2021 report, DHS excluded these costs in the fiscal year 2018-2022 report. We discussed with DHS and components the financial management systems used by the five components to track obligations and expenditures, and the financial management system used by the Department to develop the monthly execution reports and Future Years Homeland Security Program database. To assess the extent to which the DHS budget management and reporting has affected operations, we reviewed program budget information including the Congressional budget justification, a data collection instrument, a monthly execution report to Congress, and the fiscal years 2017-2021 and fiscal years 2018-2022 reports from the Future Years Homeland Security Program database. In addition, we conducted interviews with program personnel to discuss the effect of any budget shortfall or surplus on their programs. To assess how DHS incorporated or revised life-cycle cost estimates to include comprehensive and accurate O&S costs, we analyzed the O&S portion of DHS-approved LCCEs for the case study programs, as well as prior versions where applicable, to identify changes in reporting elements over time. We conducted an abridged analysis of programs’ approved LCCE against criteria from GAO’s Cost Estimating and Assessment Guide, with focus on comprehensiveness and portions of accuracy. Typically in analyzing a cost estimate against GAO best practices, we examine four characteristics, each defined by multiple criteria: credible. For this review, we assessed our case study programs’ LCCEs against the comprehensive and accurate characteristics, in part, because we limited our analysis to the O&S portion of programs’ LCCEs and did not review entire LCCEs. Further, if the cost estimate is not comprehensive (that is, “complete”), then it cannot fully meet the well documented, accurate, or credible best practice characteristics. For instance, if the cost estimate is missing some cost elements, then the documentation will be incomplete, the estimate will be inaccurate, and the result will not be credible due to the potential underestimating of costs and the lack of a full risk and uncertainty analysis. In addition, we excluded one of the supporting criteria for the accuracy characteristic, which assesses that the cost estimate results are unbiased, not overly conservative or optimistic, and based on an assessment of most likely costs. Because we did not assess program risk as part of the characteristics we excluded, which also considers potential bias, we did not analyze programs against this criterion. We interviewed officials at DHS headquarters; component program and budget offices; Coast Guard Surface Forces Logistics Center in Baltimore, Maryland; Coast Guard Aviation Logistics Center in Elizabeth City, North Carolina; Transportation Security Administration at Reagan National Airport in Washington, D.C.; Customs and Border Protection Southwest Border Regional Headquarters in Albuquerque, New Mexico; Customs and Border Protection Tucson Air Branch in Tucson, Arizona; and the Border Patrol’s Nogales Station in Nogales, Arizona. We chose these locations, in part, as we could often discuss multiple programs during a single site visit. For example, we discussed both of our Coast Guard aircraft programs at the Aviation Logistics Center. We conducted this performance audit from November 2016 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Using the GAO Cost Estimating and Assessment Guide, GAO cost experts assessed selected DHS major acquisition programs against 2 of the 4 characteristics of a quality cost estimate. Please see Appendix I for a more detailed description of our methodology and why we did not assess O&S cost estimates against all 4 characteristics. We determined the overall assessment rating by assigning each individual rating a value: Not Met = 1, Minimally Met = 2, Partially Met = 3, Substantially Met = 4, and Met = 5. Next we averaged the individual assessment ratings to determine the overall rating for each of the two characteristics. The resulting average becomes the Overall Assessment as follows: Not Met = 1.0 to 1.4, Minimally Met = 1.5 to 2.4, Partially Met = 2.5 to 3.4, Substantially Met = 3.5 to 4.4, and Met = 4.5 to 5.0. Table 3 provides our results of selected Custom and Border Patrol acquisition programs’ individual and overall assessment for the comprehensive and accuracy characteristics. Table 4 provides our results of the selected Immigration and Customs Enforcement acquisition program’s individual and overall assessment for the comprehensive and accuracy characteristics. Table 5 provides our results of the selected National Protection and Programs Directorate program’s individual and overall assessment for the comprehensive and accuracy characteristics. Table 6 provides our results of the selected Transportation Security Administration acquisition programs’ individual and overall assessment for the comprehensive and accuracy characteristics. Table 7 provides our results of the selected U.S. Coast Guard acquisition programs’ individual and overall assessment for the comprehensive and accuracy characteristics. Marie A. Mak, (202) 512-4841, or makm@gao.gov. In addition to the contact named above, J. Kristopher Keener, Assistant Director; Burns Chamberlain Eckert; Peter Anderson; Jessica Berkholtz; George Bustamante; Erin Butkowski; Jeff Cherwonik; Juana Collymore; Matthew T. Crosby; Jennifer Echard; Jason Lee; and Robin Wilson made key contributions to this report.", "summary": "O&S costs—the costs used to operate and sustain a program—can account for up to 70 percent of a program's total cost. End users rely on O&S funds for maintenance, spares, and personnel. DHS programs initially identify O&S costs in their life-cycle cost estimate at the outset of the acquisition. This estimate informs the program's budget and affects the amount the department designates for the program's use. In 2015, GAO found that DHS's budget requests did not reflect all estimated costs—including O&S—for certain programs, which limits visibility for decision makers. GAO was asked to review O&S activities for major acquisition programs at DHS. This report examines the extent that (1) DHS's budget management and reporting affects operations and oversight, and (2) cost estimates are comprehensive and accurate, as well as regularly updated. GAO selected a non-generalizable sample of 11 major acquisition programs, based on asset type and acquisition status, as case studies from selected DHS components. GAO analyzed selected programs' O&S cost estimates, funding, and spending. In addition, GAO interviewed DHS officials at the headquarters, component, and program office level. While the Department of Homeland Security's (DHS) budget management provides flexibility to conduct operations, such as shifting funds to programs within the same mission area to cover unforeseen needs, budget reporting does not provide Congress with insight into specific programs' operations and support O&S costs. The O&S budget information that DHS reports to Congress is oriented by mission—for example, Integrated Operations—instead of by program—for example, the Multi-Role Enforcement Aircraft Program. The figure depicts the mission-oriented nature of the budget. While some program-oriented O&S data are available at the component level, this information does not appear in DHS's budget reports to Congress. This disparity is due in part to the manner in which the department reports budget information. However, these limitations are not insurmountable. Standards for internal controls state that managers should communicate quality information, in this case full program costs. Providing additional data on O&S costs in budget reports would preserve DHS's flexibility in its use of funds while providing Congress a better understanding of the budgetary and programmatic effect of its funding decisions. GAO reviewed the O&S portion of the most recently approved cost estimates for selected programs and found that 10 of the 11 estimates provided a complete accounting of all resources and associated cost elements. Further, all the programs had appropriately updated their cost estimates as required, a GAO best practice in cost estimating. Due to the sensitive nature of some programs' cost models, GAO could not verify all aspects of accuracy for all estimates reviewed. GAO is making three recommendations, including that DHS work with Congress to add program-level O&S funding details to the budget information it provides Congress. DHS concurred.", "document_type": "gao"}
{"report": "The U.S. strategic nuclear deterrent is spread among three legs, as depicted in figure 1. DOD has continued to reinforce the high priority of the Columbia class program to the nation’s long-term defense. SSBNs are designed to maximize stealth to remain undetected while on patrol at sea. This survivability gives the United States a credible ability to retaliate if faced with an attack targeting other legs of the triad, and explains DOD’s decision to ultimately deploy up to 70 percent of the nation’s nuclear warheads on SSBNs. As stated in its April 2010 Nuclear Posture Review Report, DOD determined that ensuring a survivable U.S. deterrent requires continuous at-sea deployments of SSBNs in both the Atlantic and Pacific oceans, as well as the ability to surge additional submarines in crisis. Currently, 14 Ohio class SSBNs provide the sea-based strategic deterrent. The Navy commissioned the lead ship of this fleet in 1981. The first Ohio class SSBN to retire—SSN 730—will leave service in 2027 and plans are to retire one per year following this. When these submarines retire, they will have been in service over 40 years, longer than any previous submarines. Navy officials have stated that the legacy Ohio fleet cannot be life-extended any longer than what is planned due to aging issues. The U.S. Strategic Command (STRATCOM) retains operational control of the strategic triad and determines how many SSBNs are needed to patrol on a day-to-day basis. STRATCOM and the Navy have determined that 10 operationally available SSBNs are needed to meet mission requirements. As a result, the lead Columbia class submarine must be available for its first deterrent patrol in the first quarter of fiscal year 2031 to coincide with the planned 2031 retirement of SSN 734, or the Navy will not have 10 operationally available SSBNs, thereby requiring DOD to identify other steps to ensure it can meet current deterrent requirements. The Navy expects that it can meet mission requirements with 12 Columbia class submarines carrying 16 missile tubes (equating to a total of 192 available tubes) in lieu of 14 Ohio class submarines carrying 24 tubes (336 total available tubes). Currently, it takes 14 Ohio class submarines to provide 10 operationally available SSBNs due to maintenance needs that can take up to 4 submarines out of the patrol rotation at any given time. The Navy plans to reduce the number and duration of required maintenance periods for the Columbia class, allowing just 12 Columbia class submarines to provide the required 10 operational submarines at all times. Between fiscal year 2031-2040, the Navy plans to have a mix of 10 operationally available Columbia and Ohio class submarines. In fiscal year 2041, with the retirement of the final Ohio class submarine, this is to increase to 11 Columbia class, and finally to 12 operationally available Columbia class submarines by fiscal year 2042. The Columbia class program is comprised of several major lines of effort—hull and supporting systems, the strategic weapons system; and the nuclear reactor-based propulsion plant—which are managed by different program offices, as depicted in figure 2. The Navy is introducing new technologies to improve capabilities where required while leveraging systems from existing submarine programs— the Virginia and Seawolf attack submarines and the Ohio class SSBNs— in order to ensure commonality with the submarine fleet and reduce development needs for the Columbia class to limit technical risk. For example, the program is re-using over 19,000 Virginia class standard parts including fittings, valves, and switches and leveraging the Navy’s Submarine Warfare Federated Tactical System program, which integrates more than 40 independent electronics systems into a common combat system for use by multiple program offices. The Navy has identified several key technical efforts for the Columbia class program: (1) the Common Missile Compartment, (2) Integrated Power System, (3) Stern Area System, and (4) propulsor. Other systems that we consider key technical efforts include the nuclear reactor and the coordinated stern, a system-of-systems that includes the propulsor and submarine maneuvering components. These areas are depicted in Figure 3 and defined below. Since 2008, the United States and the United Kingdom (U.K.) have been jointly developing a common system to house the tubes that will carry submarine launched ballistic missiles. Columbia class SSBNs and U.K. SSBNs will carry the Trident II D-5 missile for the first portion of their respective operational lives; the U.S. missiles armed with nuclear warheads which are maintained by the Department of Energy (DOE). Figure 4 shows a notional example of the CMC. In addition to the missile tubes, the CMC also provides systems to support the missiles and the launch equipment, including power, cooling, gas venting, and launch hardware and software. The Navy’s Strategic Systems Program is responsible for CMC development efforts. The IPS includes an electric drive system to propel the submarine through the water, unlike other current U.S. submarines which use a mechanical drive system. IPS is powered by the nuclear reactor, which is a separate system. As shown in figure 5, with a nuclear electric drive system, steam from the nuclear reactor turns a turbine creating electricity, which is then directly used to power electric motors. This is in contrast with a nuclear mechanical propulsion system, where steam from the nuclear reactor turns a turbine creating high-speed rotation; a reduction gear then slows the speed of this rotation to a speed that is suitable for use by the propulsor. To provide power to the electric drive, the Columbia class nuclear propulsion plant relies on a life-of-the-ship reactor core—called S1B—that is planned to remain in service without refueling, almost 10 years longer than current U.S. Navy nuclear reactors. The Virginia class also uses a life-of the-ship reactor core, but the Columbia class reactor needs to be more powerful to drive the larger submarine, and needs to last longer to allow for the 42.5-year Columbia class service life of versus 33 years for the Virginia class. By using a life-of-the-ship reactor, the Columbia class will not require a mid-life refueling. This will reduce the mid-life maintenance period from 27 months for Ohio class to 16 months for Columbia class. This reactor is being developed by the Naval Nuclear Propulsion Program (also known as Naval Reactors) and the Naval Nuclear Laboratory (operated by Bechtel Marine Propulsion Corporation). SAS is a technical feature of the stern that is comprised of three subcomponents; details of which are classified. The Columbia class will use a propulsor instead of a propeller to drive the submarine through the water. The design of the propulsor relies on several other technical features that form a system-of-systems, sometimes referred to as the coordinated stern. The coordinated stern is where the rudder and other control surfaces are mounted; these control surfaces are used for submarine maneuvering and are critical to submarine performance. The coordinated stern consists of interrelated technology elements, including the propulsor and advanced propulsor bearing, the stern control surface configuration, and the propulsor shaft and bearing. The propulsion shaft and bearing connects the propulsion system to the propulsor, transferring energy from the propulsion system to the propulsor to drive the submarine through the water. The Navy plans to use a new design “X-stern” configuration instead of the cruciform stern used in other submarines. Figure 6 depicts the major components of the coordinated stern, omitting a depiction of the classified Stern Area System. The Navy expects to require over $267 billion (then-year dollars) in total life-cycle costs for the Columbia class program. Figure 7 shows the break-down of this amount between operations and support costs and acquisition costs, as well as the elements comprising the $128 billion in acquisition costs. The approximately $128 billion total acquisition cost includes funding the Navy expects it will need to research, develop, and build its Columbia class SSBN. Due to their size and complexity, submarines require funding for design, long-lead materials (such as nuclear propulsion plant components), and construction over many years. To accomplish these activities, the Navy awards contracts over several phases of design and construction. Figure 8 outlines major acquisition plans for the Columbia class. In 2014, Congress created a National Sea-based Deterrence Fund to provide DOD with greater discretion to fund the design, construction, and purchase of the Columbia class. Since then, Congress has provided the Navy with enhanced acquisition authorities to buy and construct submarines and certain key components early, in bulk, and continuously. The Columbia class program entered the Technology Development phase of the defense acquisition process in January 2011. The schedule to acquire the Columbia class was shifted in 2011 when the Navy decided to delay the start of construction of the lead submarine by 2 years—from 2019 to 2021—due to budget constraints. The first patrol date for the lead ship was also shifted from fiscal year 2029 to fiscal year 2031. In January 2017, the Columbia class program achieved Milestone B—considered the official start of a DOD acquisition program—and moved into the Engineering and Manufacturing Development phase of the acquisition process. The program does not envision holding a Milestone C, which typically denotes a program’s approval to enter the production and deployment phase as shown in figure 9, but does plan to have an OSD- level review prior to authorizing the construction of the lead ship. Shipbuilding programs have slightly different decision points than other DOD weapon systems, partly because of the timing of the Milestone B decision for ships. Milestone B for ship programs usually occurs after development of ship specifications and system diagrams is well under way. As part of the Columbia class Milestone B decision, OSD approved a Low Rate Initial Production quantity of 12 submarines, the total quantity expected for the class. According to the Navy, the program awarded a $5.1 billion detail design contract to Electric Boat in September 2017 for work including design completion, component and technology development, and prototyping efforts. Detail design is typically funded with Shipbuilding and Conversion, Navy funds (the Navy’s procurement fund for buying ships) and represents a further refinement of the design of the ship and ultimately generation of work instructions needed by the shipyard in advance of lead ship construction. The program was granted approval to begin early detail design work in January 2017. In shipbuilding, the design phase generally encompasses three activities: basic design, functional design, and detail design. These steps occur after the Navy sets the technical requirements for the ship. At a high level: basic design serves to outline the steel structure of the ship; functional design routes distributive systems—such as electrical or piping systems—throughout the ship; a three-dimensional (3D) computer-aided design model is often generated; and detail design completes the design work for even the lowest-level items, and ultimately furnishes the work instructions for the shipyard workers to use in constructing the ship. During this phase, all aspects of the ship are defined, and two-dimensional paper or 3D electronic drawings (also called work instructions) are generated. For the Columbia class program, the Navy defines design in two phases: arrangements, which program officials describe as a combination of basic and functional design; and disclosures, which they describe as a combination of detail design and generation of work instructions. Figure 10 shows the phases of design for the program as compared with typical surface ship terminology. Two shipbuilders—General Dynamics Electric Boat and Huntington Ingalls Industries Newport News—are responsible for designing and building nuclear submarines. For the Columbia class program, Electric Boat is the prime contractor for design and construction, with Newport News as a subcontractor. Similar to the Virginia class program, each shipyard will build modules of the submarine, but Electric Boat will be responsible for final delivery of the submarine to the Navy. For more than a decade, our work on major acquisitions has shown that part of an effective management process is assessing how far a technology has matured and how it has been demonstrated, which indicates the technology’s readiness to be integrated into a system and the degree of program risk. DOD acquisition instruction requires that programs complete a technology readiness assessment (TRA) at Milestone B. A TRA is a systematic, evidence-based process that evaluates the maturity of hardware and software technologies critical to the performance of a larger system or the fulfillment of the key objectives of an acquisition program. A reliable TRA illuminates concerns and serves as the basis for realistic discussions on how to mitigate potential risks as programs move from the early stages of technology development. TRAs do not eliminate technology risk but, when done well, can illuminate concerns and serve as the basis for realistic discussions on how to mitigate potential risks as programs move from the early stages of technology development, where resource requirements are relatively modest, to system development and beyond, where resource requirements are often substantial. In addition, TRAs help legislators, government officials, and the public hold government program managers accountable for achieving their technology performance goals. A main element of a TRA is the identification of critical technology elements (CTE) and assessment of the appropriate Technology Readiness Level (TRL), used to measure the readiness of technologies to be incorporated into a weapon or other type of system. TRLs range from 1 (least mature) to 9 (most mature), as shown in table 1. Current DOD guidance assigns the program manager responsibility for identifying CTEs. The program manager identifies possible technologies, then, in consultation with officials from the Assistant Secretary of Defense for Research and Engineering—ASD(R&E)—and with the program executive office and component acquisition executive approval, identifies the subject matter experts needed to perform the TRA. For the Columbia class TRA, the expert team was comprised of Navy program management and technical personnel. ASD(R&E) reviews the list of critical technologies provided by the program manager and recommends technologies to add or delete. Ultimately, the program submits the TRA report to ASD(R&E), who independently assesses the maturity of the technologies. The ASD(R&E) prepares a memorandum based on the assessment that is transmitted to the milestone decision authority, along with the TRA Report. The TRA is also an element of the Milestone B approval process. Section 2366b, title 10, U.S. code states that a major defense acquisition program may not receive Milestone B approval until the milestone decision authority has, among other things, certified that the CTE has been demonstrated at a TRL 6. A program may request a waiver from OSD if the maturity provision cannot be met. The statute requires that: Every waiver determination must be submitted in writing to the congressional defense committees within 30 days after the waiver request by the program is authorized. The milestone decision authority reviews the program not less often than annually until the milestone decision authority determines that the program satisfies all certification and determination components. In addition, in 2015 Congress required program acquisition strategies to include a comprehensive approach to risk management, including the consideration of techniques such as technology demonstrations and decision points for disciplined transition of planned technologies into programs or the selection of alternative technologies. Recognizing the importance of the TRA to risk management, in 2016, GAO developed a Technology Readiness Assessment Guide. This guide has two purposes: (1) to describe generally accepted best practices for conducting effective evaluations of technology developed for systems or acquisition programs; and (2) to provide program managers, technology developers, and governance bodies with the tools they need to more effectively mature technology, determine its readiness, and manage and mitigate risk. As noted above, we developed the guide by drawing heavily from DOD, DOE, and NASA best practices, terminology, examples, and credible resources, materials, and tools developed and applied by experts and organizations in order to capture the current thinking on technology readiness and maturity. In our guide, we identify criteria for a CTE, namely that it is a technology that is “new or novel, and needed for a system to meet its anticipated operational performance requirements; or that poses major cost, schedule, or performance risk during design or demonstration”. According to our guide, re-used existing technologies can also become critical if they are being used in a different form, fit, or function—as is the case with the propulsor and coordinated stern. Several key technical efforts remain immature as the Columbia class program moves into its design phase—a practice counter to best practices we have previously identified. These efforts include the integrated power system, nuclear reactor, propulsor/coordinated stern, stern area system, and common missile compartment. While the Navy made progress in some areas—such as prototyping efforts for the missile compartment and nuclear reactor—all of these systems continue to require development and testing to mature them to TRL 7, the point at which GAO’s technology readiness guide considers a technology mature. Any challenges in development could put the program at risk of costing more, taking longer to develop, or jeopardizing the program’s ability to meet its expected performance requirements. However, the Navy identified only two of the submarine’s technologies as “critical” in the program’s 2015 TRA, thereby underrepresenting the technology risk in the program. Underreporting technical risks can hinder Congress’ and other decision makers’ full understanding of the program’s progress. This is especially important because the Navy has already requested $1.6 billion for advanced procurement and recently awarded the detail design contract. Moreover, there is no requirement that the Navy report to Congress on its progress in developing and testing the technologies until after the program completes its production readiness review in May 2020 after the Navy requests another $8.7 billion in funding for the construction of the lead submarine. Demonstrating Technology Maturity Based on our work on best practices in weapon system acquisitions, we have previously recommended that programs fully mature technologies to TRL 7—versus TRL 6 as required by DOD—prior to passing Milestone B and entering the engineering and manufacturing development phase. TRL 7 represents a major step up from TRL 6, requiring demonstration of an actual system prototype in an operational environment such as in an aircraft, vehicle, or space. We have previously identified that demonstrating technologies in an operational environment provides a higher level of technology understanding and reduces risk prior to starting product development. DOD has historically disagreed with this recommended practice. added that modeling and simulation should be considered appropriate in some cases in lieu of actual prototype testing. While the Navy has made progress in reducing technical risks in many areas, such as starting construction of the first CMC, the program (according to the Navy) awarded a detail design contract in September 2017, with several key technologies not yet at a TRL 7. The nuclear reactor, IPS, propulsor and coordinated stern, and SAS all have potentially significant effects on design and construction of the Columbia class because they encompass much of the design and physical structure of the submarine. Based on our analysis, we found that IPS, SAS, the propulsor and coordinated stern are not yet at a TRL 7, as depicted in figure 11. The nuclear reactor and CMC are further along in prototyping work but still require testing in an operational environment to achieve a TRL 7. If any of these systems do not develop as planned, the Navy and the shipyards could be required to complete some redesign, or, if risks manifest later, they may force costly workarounds or construction rework. In addition, these systems also enable many performance attributes ranging from weapon launch to speed and maneuverability, so performance could be negatively affected. The status of these technologies is discussed in detail below. According to officials from Naval Reactors, the permanent magnet motor- based electric drive system—a key component of IPS for the Columbia class—is at a TRL 6, below the TRL 7 recommended by our work on best practices. Naval Reactors has yet to develop an IPS prototype that is near or at the planned operational system configuration (integrated and full-size) and has been tested in an operational environment. The Navy has experimented with electric drive technology on submarines in the past with two now-decommissioned nuclear-powered attack submarines, but these submarines used different motor technology than what is planned for the Columbia class, and thus are not representative. The T- AKE 1 Lewis and Clark class of dry-cargo ammunition ships and DDG 1000 Zumwalt class destroyer are current U.S. Navy electric drive ships in operation, but these two systems are somewhat different than what is planned for the Columbia class and neither is powered by a nuclear reactor. The Navy is currently developing the IPS and producing a number of pre-production prototypes. Naval Reactors officials told us that they are confident that the IPS will meet requirements based on 20 years of development and testing of the underlying permanent magnet motor technology. They also noted that this technology is proven based on testing of the smaller-scale prototype motor to validate the main propulsion motor design. However, Naval Reactors is still developing and producing the system’s major components. Testing of a full-scale prototype under full power, which we would consider evidence that the technology is mature, is not scheduled to occur until fiscal years 2018-2020. In a land-based test facility, the Navy plans to integrate all the IPS systems in a ship-representative layout. Successful completion of this testing is an important step in mitigating risk. In contrast, the DDG 1000 program only tested its electric drive system at the land based test facility at one-half of the ship’s power generation and electric propulsion system configuration, and as a result performance problems were not discovered until well after installation and when system testing on the ship was run at full power. Thus, the Navy’s planned full-scale prototype testing for Columbia class should prevent a similar experience, since it will test a full-sized and full-power system rather than a partial system. According to officials from Naval Reactors, as a result of its statutory mandate, its programs follow a different development process than typical DOD programs and do not use documents typical of other Navy programs, such as an Integrated Master Schedule or a Test and Evaluation Master Plan. Instead, officials from Naval Reactors told us that they use a rigorous process to assess, manage and control technical risk during development and testing to manage its day-to-day technical efforts. Based on descriptions provided by Naval Reactors officials, the Navy has been operating a Columbia-like experimental reactor in a land- based environment for many years to demonstrate some Columbia class submarine systems. Naval Reactors officials said that this experience gives them confidence that the Columbia class reactor will be delivered to the shipyard on time and will meet all requirements. Naval Reactors has design and development work remaining before it awards the contract for reactor core production in fiscal year 2019. Naval Reactors budget documentation shows that reactor design work is planned to be 65 percent complete in fiscal year 2018. While we recognize that it would not be realistic to expect Naval Reactors to test the reactor in a submarine to achieve a TRL 7, a completed design would still be required to produce a final configuration to demonstrate technology maturity. Neither the propulsor nor other related components of the coordinated stern have been demonstrated through testing in a near or planned operational system configuration, a key element for achieving TRL 7. Navy officials told us that the propulsor effort is based on prior experience with propulsors and that it will resemble the Virginia-class propulsor design. However, according to Navy documentation, the propulsor will be different in form, fit, and function than prior propulsors, and the final configuration has yet to be selected or tested. Specifically, the following components require additional design work and testing prior to demonstrating a representative prototype: Propulsor: The Navy is working with various partners to refine two different high-level propulsor designs. The program also faced a year delay in completing the first phase of design work, which subsequently delayed large-scale vehicle testing. Further, the Navy still has to complete large-scale prototype testing of different propulsor designs that are being evaluated for an eventual down-select to one vendor for production. Propulsor shaft: The system that connects the propulsion to the motors—which the Navy states is similar to shafting systems used on previous submarine classes but with different materials and size and weight—is still in concept and preliminary design phases. Main shaft design development and testing is being performed to select materials and inform design efforts. Advanced propulsor bearing: The Navy has yet to complete the preliminary design of the advanced propulsor bearing, with prototype test in a full scale configuration planned to begin in fiscal year 2019. Navy officials told us that they believe that the final design and material selections will exceed the reserved weight and size margins of the shafting or bearing system. X-stern: the final X-stern configuration has yet to be tested with a final design propulsor. Our assessment of the propulsor and coordinated stern system design indicates that it is not yet mature enough to provide the basis for a prototype in final form, fit, and function—key elements of achieving TRL 7. The Navy identified the SAS as a TRL 4 at Milestone B. The preliminary design review for the SAS is planned for March 2018. This review establishes the baseline (hardware, software, human/support systems) and underlying architectures to ensure that the system has a reasonable expectation of satisfying requirements within the current budget and schedule. The critical design review—a technical review that ensures that a system can proceed into fabrication and demonstration and can meet stated performance requirements within cost, schedule, and risk—is not planned until March 2020. A TRL 4 represents a relatively low level of maturity compared to the eventual system. At this low level of maturity, there are no assurances that the SAS will work as planned, which would likely result in the Columbia class not meeting certain requirements or in cost and schedule increases. The Navy plans to hold a critical design review for SAS in fiscal year 2019. The Navy has identified existing fleet technologies as backups for two SAS components, but officials noted that if these are used the submarine will not meet current requirements. According to the program office, there is no backup technology for one other SAS component, and, if that element—currently a TRL 4—does not develop as planned, it will be omitted, meaning that the program will lack that capability. Specific details of SAS are classified and cannot be included in this report. The shipbuilders and the Navy have described CMC as complex to build. The Navy and the two shipyards—with consultation from the United Kingdom, which will also leverage the CMC design on its new SSBN— have conducted risk-reducing prototyping work and are building a representative CMC to demonstrate production processes. In fact, Columbia class representative missile tubes will be first installed on a United Kingdom submarine, scheduled for mid-2020. The Navy has plans for a robust land-based test procedure for both the missile tubes and the CMC as a system that will provide an operationally similar environment to a submarine; however, this testing has yet to start and will not conclude for several years. While the Navy conducted the 2015 Columbia class TRA in accordance with a DOD-approved plan, it did not follow our identified best practices for identifying all critical technology elements (CTE), resulting in an underrepresentation of the technical risk facing the program. Specifically, the TRA only identified 2 CTEs: the SAS and a carbon dioxide removal system. CTEs are required to be at TRL 6 at Milestone B (the official start of a program). For the Columbia class program, OSD approved Milestone B in January 2017. The Navy received a waiver at Milestone B for the SAS because the system was still immature, as discussed above. The carbon dioxide removal system has matured since the TRA following demonstration on an operational submarine, and no longer requires active risk mitigation efforts. We compared the Navy’s 2015 Columbia class TRA to criteria documented in GAO’s TRA Guide and DOD’s own guidance. In doing so, we found that 4 additional key technical efforts—IPS, nuclear reactor, and propulsor/coordinated stern, and the CMC—meet the criteria for a CTE. Since the Navy did not identify these technologies in the TRA, it also did not assign them a TRL. Their exclusion is significant because the 2015 TRA represents a key independent review and technical risk assessment used by DOD to certify to Congress that the Columbia class program’s technologies had been demonstrated in a relevant environment (TRL 6) at Milestone B. Because not all of the CTEs were identified, DOD and Congress lack an important oversight tool for assessing technology maturity and evaluating program risk. Further, this certification is the only required reporting on technology development prior to the Navy requesting authorization for construction of the lead ship. Some of the concerns that we identified are discussed in detail below. The team responsible for preparing the 2015 Columbia class TRA did not identify all appropriate CTEs because it used a more restrictive definition of a CTE than that recommended in our best practices guide and DOD’s 2011 TRA guide. Table 2 compares the criteria in the three sources. As reflected in table 2, not only does the Navy’s TRA definition require a technology to meet a number of criteria to be considered a CTE, it also has to be considered a technology development effort. According to the Columbia class program office, the TRA team based this definition on a 2011 OSD AT&L memorandum issued contemporaneously with the 2011 TRA guidance that states: “TRAs should focus only on technology maturity, as opposed to engineering and integration risk.” However, our analysis of this memo found that it also directs programs to use DOD’s TRA guidance and CTE definition, which are broader and more consistent with our definition of a CTE. The 2015 Columbia class TRA does not further define what constitutes a technology development effort, with the Navy applying this as a criterion without defining what the criteria actually meant. Moreover, the TRA does not provide any definition or criteria for what it considers engineering and integration risk. We determined that the Navy under-identified program technical risks because the Navy’s criteria were more restrictive than GAO’s CTE definition. We further assessed the specific technologies in the Columbia class program against our technology readiness criteria for a CTE, as shown in table 3. As shown in table 3, by applying the additional “technology development effort” criteria in the 2015 Columbia class TRA, the TRA team eliminated several systems from CTE consideration without criteria or a definition of what constitutes a technology development effort. Some of these systems were previously identified as CTEs in other recent Navy documentation. The TRA team did not identify the nuclear reactor as a CTE because this system is under the cognizance of Naval Reactors and not the Columbia class program office. Officials from Naval Reactors told us that they do not conduct TRAs, but rather follow a different and more iterative process to manage their technology development efforts. While the Navy did not identify all of the program’s CTEs as compared with the TRA criteria in our guide, it is tracking these efforts to manage technology risks. For example, 3 of the 4 CTEs we identified are also identified in Navy documents as “key technical efforts” with active risk mitigation plans. We will continue to track the progress of these efforts in our future work. As the Columbia class program moves into its detail design and construction phase, it will be more than 2 years before the next requirement for a formal DOD report to Congress on the progress of the technology efforts. This will occur at some point after the program’s Production Readiness Review is completed in May 2020. In the meantime, the Navy plans to request another $8.7 billion (in addition to the $1.6 billion already requested) for lead ship construction. If a typical budget schedule is followed, this request will come before Congress in February 2020. The Navy plans to begin construction of the lead submarine starting in fiscal year 2020. Congress will be asked to approve lead ship construction absent key information on the maturity of the critical technologies that, at present, are not up to the maturity levels that would provide assurance they will work as intended. Without additional updates on the progress of technology maturity between now and 2020, we believe Congress will not have information it needs to evaluate technical risk in advance of the Navy’s requests for considerable increases in program funding. As previously discussed, there is currently no DOD requirement to submit such reports to congressional oversight committees. The Navy is prioritizing design completion before starting construction, which is a good practice that is in accordance with our work on best practices because it helps reduce cost and schedule challenges in construction. However, since some of the key technologies are not fully matured, detail design work is proceeding with notional or placeholder data representing these key systems. As a result, the design will likely remain immature once construction starts in fiscal year 2021. We have previously reported that concurrency of technology development and design increases the risk of design rework—or having to make modifications to design drawings to accommodate any changes needed as a result of technologies changing size, shape, or weight as they mature—and potentially can result in negative cost and schedule impacts. Further, the Navy faces an aggressive production schedule in order to deliver the lead submarine by fiscal year 2031, which will be required to prevent a gap in U.S. nuclear deterrent capabilities. According to our analysis of previous submarine program schedules, the Columbia class program’s schedule is aggressive in its expected short duration to build the lead submarine. The program office intends to mitigate this schedule challenge, in part, by starting construction of portions of the submarine earlier than initially planned. If this early construction occurs and the Navy does not alter design plans, construction of some parts of the lead submarine could outpace a finalized design for developing other components, which increases the risk of rework during construction and could further delay completion. The Columbia class program is prioritizing a high level of design completion prior to the start of construction of the lead submarine of the class. The program plans to complete 100 percent of design arrangements and 83 percent of design disclosures prior to the start of construction of the lead submarine. In our 2009 report on best practices in shipbuilding, we identified design maturity as important step in reducing cost and schedule risk. As such, we recommended that the design be stabilized through completion of basic and functional design and 3D product modeling prior to the start of construction for a new ship. Because, as mentioned previously, the Navy defined design arrangements on the Columbia class program as being equivalent to basic and functional design, having 100 percent of the arrangements completed prior to the start of Columbia class construction would meet the intent of our prior recommendation. Further, our analysis found that the Columbia class program’s planned level of design completion prior to starting construction is much higher than most recent Navy shipbuilding programs. For example, the Virginia class attack submarine program started construction with only 43 percent of the design complete compared with a planned 83 percent completion for the Columbia class. The Columbia class program also plans to have a 52 week buffer between the completion of design for an area of the submarine and the start of construction on that area, which is intended to allow time to address any challenges that may arise and thus minimize schedule delays. Additionally, the Navy plans to have all components fully developed 8 months before they are required in the shipyard, which will provide some additional schedule buffer to address challenges before the components are actually needed for construction. To facilitate design completion, the Navy made a commitment at the start of the program to set realistic and reasonable requirements and to keep those requirements stable throughout the program. This approach is also in keeping with our previously identified best practices, which highlight the importance of demonstrating balance among program requirements, technology demands, and cost considerations. The Columbia class program has not had any significant requirements changes since DOD’s Joint Requirements Oversight Council validated the Capability Development Document in 2015. Setting realistic and reasonable requirements also permitted the Navy and shipyards to reuse some design elements for components of the submarine that are similar in design and function to the Virginia class instead of requiring new design work. Similarly, the program has worked to keep stable ship specifications to minimize design disruptions. The technical specifications for the ship have been set since 2014, and the program manager maintains personal visibility and accountability over any proposed deviations or changes to the specifications. According to the program manager, to date there have been minimal changes made to the technical baseline. These steps help to minimize design rework that can be caused by changing requirements, as was seen on the Littoral Combat Ship program, and that can lead to cost increases or scheduled delays. The program has also conducted some prototyping efforts— including building representative portions of the submarine to demonstrate that its design tool can send the correct information to the shop floor to build the ship—and has plans for more. However, based on our analysis of the program’s current technology development plan and status, it is unlikely that the Navy’s planned 83 percent of design disclosures will be finalized at the time construction begins for the lead ship in 2021. Similar to many shipbuilding programs, the Columbia class program plans to continue to mature technologies into their final form while detail design is underway. As we have previously reported, to offset this risk, shipbuilding programs, including the Columbia class, often include design “reservations” for space, weight, power, cooling, and other key attributes to reserve a footprint for components. As contractors or government employees develop and refine technologies or systems, they provide vendor furnished information (VFI) or government furnished information (GFI) to the shipyards to update the design. Completion of the detail design of the submarine—and subsequent achievement of design stability to support a properly sequenced construction phase—requires shipbuilders to have final information on the form and fit of each system that will be installed on the ship, including the system’s weight and its demand for power, cooling, and other supporting elements. As development proceeds on a new technology, initial assumptions about size, shape, weight, and power and cooling requirements can change, potentially significantly. These changes in VFI or GFI—if not resolved early in the design phase—can introduce considerable volatility to the design process for a lead ship. As such, in our May 2009 report, we recommended that, to attain the level of knowledge needed to retire design risk and reduce construction disruptions, complete—versus notional—VFI or GFI must be incorporated for the design to be truly stable. DOD concurred with this recommendation. We have previously reported that other Navy programs have run into difficulties, including out- of-sequence or more costly construction work, when space, weight, power, and cooling reservations are based on immature or ill-defined technologies or components that have changed in size, weight, or other attributes when they are finalized. Ramifications from such changes can ripple through much of the ship design. For example, we reported in 2009 that during construction of the Seawolf-class attack submarine, the AN/BSY-2 combat system did not fit into the space and weight reservations that the Navy had allocated within the submarine’s design. As a result, a portion of the submarine had to be redesigned at additional cost. However, the Navy has entered the detail design phase for the Columbia class with incomplete technical data on several key components that are either significant in size relative to the submarine or spread throughout a number of spaces of the submarine. These components include IPS, the nuclear reactor, the propulsor and coordinated stern, and SAS. This situation is problematic because even if the Columbia class design is 83 percent complete, if it contains many reservations for systems that are not fully developed the design will continue to be immature and subject to change. Thus, the 83 percent completion metric may be somewhat meaningless since elements of the design are uncertain and could change because of the incomplete technology development efforts. As shown in figure 12, the Columbia class program has entered the detail design phase with a number of technologies still in development or design finalization, which means that the VFI/GFI for these systems are not yet final. This figure also depicts our recommended knowledge points for shipbuilding programs, which align with contract award for detail design and the start of lead ship construction. The concurrency depicted between phases could be further exacerbated if the Navy pursues plans to start construction of some components early. As is shown in figure 12, the Navy plans to continue technology development while executing detail design; this concurrency may potentially extend through construction if the Navy pursues its plans for early construction. For example, the Navy and the shipyards are currently designing the stern of the submarine—with 95 percent of stern arrangements planned to be complete by December 2017—but the final configuration of the propulsor has yet to be determined. As currently planned, the Navy will not complete prototype testing until the third quarter of fiscal year 2020, and development and design of the SAS is planned to continue until the end of fiscal year 2021—almost a year after the start of lead ship construction. The Navy believes it is managing this stern risk by controlling the interfaces through an Interface Control Document that identifies set design constraints. According to Navy officials, all aspects of the propulsor design that could impact the overall ship design such as size, weight, and arrangements of major sub- assemblies of the propulsor are already finalized, and that the systems are currently tracking to the reservation allowances. However, until a final representative prototype is tested as a system, the possibility of design changes and broader design impacts remains. Although the Navy plans to have arrangements for the stern 100 percent complete at construction start, the VFI or GFI for these important systems will not be finalized until later after these systems finish development. Additionally, the electric drive of IPS has already experienced manufacturing problems that could compromise its ability to meet its schedule if further challenges arise. According to Naval Reactors officials, a manufacturing defect was identified in February 2017 that affected the assembly of the first production-representative propulsion motor intended for installation in the land-based test facility to prove out the integration of all the electric drive components. The officials explained that the vendor responsible for the motor is in the process of repairing the defect—a process that will take up to 9 months to complete. As a result, Naval Reactors is now executing a schedule recovery plan to regain some schedule margin. Part of this plan involves using a smaller scale prototype motor in initial land-based test facility testing to prove out system integration. This plan means that initial full-scale system testing will be conducted with a different motor, albeit one with the same electromagnetic properties. Further, this delay will leave less margin to account for any unexpected challenges encountered in developmental testing. The Columbia class program has an aggressive schedule to deliver the lead submarine in time to begin patrols in fiscal year 2031. The Navy plans for 84 months, or 7 years, to build the lead submarine. While imperatives associated with our nation’s nuclear deterrent are driving this planned schedule, our analysis shows that it is significantly shorter than what the Navy has achieved on any recent lead submarine construction effort—including during high levels of Cold War submarine production. The Navy expects that the Columbia class will be built in the same timeframe as was planned for the lead Virginia class submarine—a submarine that is one and a half times smaller and has less estimated construction man hours than the Columbia class. Figure 13 shows the estimated and actual timeframes for constructing prior lead submarines as compared with the 84 month estimate for the Columbia class lead submarine. Further, there are industrial base implications to this aggressive schedule. The Navy and the two shipyards will be trying to attain this level of unprecedented schedule performance with the lead submarine while the shipbuilders are also starting work on the first few Virginia class submarines built in a new Block V configuration. Virginia class program officials told us that the ramp-up to building two attack submarines per year has resulted in recent cost and schedule growth at the shipyards. The addition of Block V and Columbia-class will likely create additional schedule pressures with the increase in workload required to build those submarines compared with non-Block V version submarines. In an effort to mitigate the risks associated with its aggressive delivery schedule, the Navy is planning to start construction of a number of parts of the structure of the lead submarine years earlier than the date of lead ship authorization in fiscal year 2021. This plan, called advanced construction, would use expanded acquisition authorities provided by Congress in the National Sea-Based Deterrence Fund. The Navy and its shipbuilders intend to start construction as early as 2019 on numerous areas of the submarine’s structure. Specifically, the Navy and shipyards plan to start building the stern, bow and missile command and control module as early as 6 months before fiscal year 2021, citing the disruptive effects of delays to these three “super-modules” that are also critical to ensuring an on-time delivery. These super-modules also comprise vital areas of the submarine, including the CMC, IPS and the coordinated stern. The shipyards have proposed moving 500,000-600,000 labor hours of construction work to before ship authorization. Figure 14 shows the super-modules of the submarine that the Navy plans to start early. However, the Navy has yet to finalize or fund the approach for this type of early work. Starting construction early for the lead and follow submarines provides schedule relief to the Navy and shipbuilders, but these plans may further exacerbate the existing overlap of technology development and design and construction, which was discussed above. Moving construction earlier could challenge the Navy’s goal to have all components developed 7 months before they are required in the shipyard. Further, the shipbuilders acknowledge that early construction plans will result in increased overlap between various stages of design activities in certain areas, including the bow and stern. If Congress funds the Navy’s plans to fund advanced construction work, this incomplete VFI/GFI situation will likely be worsened and could disrupt the optimal build strategy. We have previously reported that programs starting construction of the lead ship of a class without a mature, stable design has been a major source of cost growth and schedule delays in Navy programs. We have also reported that when a schedule is set that cannot accommodate program scope, delivering an initial capability is often delayed and higher costs are incurred because problems typically occur that cannot be resolved within compressed, optimistic schedules. The Navy’s Columbia class plans put the program at risk of cost and schedule growth. However, its options for reducing concurrency are, at this point, limited due to the schedule imperatives driven by the lead ship patrol deadline. Our analysis determined that it is more likely than not that the Columbia class program will exceed the Navy’s $128 billion (then-year dollars) estimate of total acquisition cost to which the program will be funded. Specifically, the program’s 2017 Milestone B cost estimates are optimistic because they do not account for a sufficient amount of program risk due to ongoing technology development, as well as the likely costs to design and construct the submarines. In addition, the Navy has budgeted the program to a confidence level for the program that is lower than what experts recommend, with a particularly optimistic estimate for the lead ship. While there may be situations when this would be appropriate, this is not the case for the Columbia class program due to the technical and design risks that we identified above. As a result, program costs will more likely than not exceed requested funding, particularly for lead ship construction. Due to the significant level of funding required for this program, even a small percentage of cost growth could have far-reaching consequences on the Navy’s long-range plans to fund construction of its future fleet. For this review we conducted an initial analysis of the Navy’s cost estimate but did not assess if it was conducted in accordance with all of the best practices identified in our cost estimating guide. We plan to more fully assess the Navy’s life-cycle cost estimate for the entire Columbia class, including the program’s risk analyses, in future work. Confidence Levels A confidence level is stated as a percentage depicting the probability that the program’s cost will actually be at some value or lower, calculated after conducting a risk analysis to identify and quantity program risks and determine the effects of these risks on its point estimates. From early on, the Navy recognized the need to control costs for the Columbia class. In fact, the program’s cost estimates have decreased significantly since the program’s inception due to Navy decisions early in the program to trade off some capabilities and the incorporation of updated actual cost data from the continued procurement of Virginia class submarines. At Milestone B, OSD determined that Columbia class procurement costs had fallen almost 40 percent since the program’s original estimate. However, while the Navy did conduct a risk analysis for its recent Columbia class cost estimates, the confidence level of the Navy’s estimate at Milestone B for acquisition of the entire class is 45 percent. This means that it is more likely than not that actual costs to research, develop, and buy the submarines will exceed the Navy’s $128 billion estimate. This situation is particularly apparent at this point with regard to costs to design the class and build the lead submarine. Any difficulties in ongoing technology development efforts would likely worsen the picture. At Milestone B, the Navy’s point estimate to develop the technologies, design the class, and build the lead Columbia was at a 43 percent confidence level. Experts agree that programs should be budgeted to at least the 50 percent confidence level, but budgeting to a higher level (e.g., 70 to 80 percent, or the mean) is a common practice to cover increased costs resulting from unexpected design complexity and technology uncertainty, among other things. Navy cost guidance recommends using the “risk adjusted mean” for the cost for the program, which usually lies between 50 and 60 percent. If the Navy budgeted to an estimate at a higher confidence level like the risk adjusted mean, its Milestone B point estimates—meaning the selected estimate of cost—would be higher, reducing the probability of overruns occurring. According to Navy cost analysts, the program’s total acquisition cost, which the Navy estimated at Milestone B at $128 billion (then-year dollars), would exceed $131 billion (then-year dollars) at 50 percent confidence, which is the bottom range of the risk adjusted mean confidence level. Even if the Navy budgeted to the 90 percent—a “worst-case” scenario where significant programmatic challenges are realized and the probability of cost overruns is low—confidence level, Columbia class lead ship costs would not be dissimilar to cost outcomes on other lead ship programs. We have observed in prior work that cost growth for recent lead ships across the Navy’s shipbuilding portfolio is 28 percent on average. For example, the Navy’s lead Virginia class submarines (SSN 774 and SSN 775)—the most similar class to Columbia in terms of technology and component development as well as aspects of its design and build plans—experienced 15 and 24 percent budget growth respectively, with average cost growth of 28 percent for the three most recent lead submarines (see figure 15). The 28 percent cost growth we have observed is slightly more than the 22 percent cost increase between the Navy’s point estimate and the 90 percent confidence level, meaning that even if the Navy budgeted the program to the 90 percent confidence level there would still be historical shipbuilding precedence for further cost growth. In particular, if costs to build the lead Columbia class submarine grow similar to the lead Seawolf and Virginia class submarines, the cost to construct the submarine would exceed the Navy’s Milestone B estimate by more than $2.5 billion. This would represent a total approaching $12 billion (then-year dollars) versus the current estimate of $9.2 billion for the lead submarine. Due to the magnitude of the Columbia class program’s expected cost, any cost growth, including for design and construction of the lead ship could impact the availability of funds for other Navy priorities. The Congressional Budget Office (CBO) and CAPE also analyzed Columbia class program costs. CBO predicted higher costs than the Navy estimate. In its 2017 assessment of the Navy’s long-term shipbuilding plans, CBO concluded that the Navy underestimated the cost of the total Columbia class procurement by $8 billion (2017 dollars). CAPE estimated a lower cost, but also identified areas where reliable cost data were unavailable. The independent cost estimate prepared by CAPE in support of the program’s Milestone B reflects a 3 percent lower total program life-cycle cost (2017 dollars) than the Navy estimate. In setting the program baseline in January 2017, DOD pragmatically opted to use the Navy’s higher estimate ($7.3 billion) instead of CAPE’s $7 billion estimate for the average unit cost to procure a Columbia class submarine (calendar year 2017 dollars). According to CAPE officials, this difference in estimates is largely due to CAPE incorporating more recent Virginia class actual cost data into its estimate than the Navy. However, CAPE also identified that there is a lack of reliable cost data on some contractor- furnished materials and government furnished equipment (GFE) for the Columbia class program, which limited the quality of the estimate. GFE comprises critical areas of the Columbia class submarine, including the strategic weapon system managed by Strategic Systems Program and the IPS developed by Naval Reactors. The Columbia class submarine will be a significant DOD acquisition for the next several decades due to cost and mission importance in guaranteeing the nation’s strategic deterrence. Failure to meet the aggressive patrol dates required of the program could challenge the Navy in effectively meeting strategic patrol requirements, and not delivering the required level of performance could compromise the Navy’s plan to operate this class through 2080. Given the risks facing the program and the significance of potential delays or cost growth, we believe this program warrants increased attention to and scrutiny over what we consider to be its critical technologies (inclusive of the program’s stated technology development efforts), several of which remain immature. Specifically, technologies such as IPS and the propulsor and coordinated stern demand more specific congressional visibility to ensure they stay on track. These areas also warrant specific assurances from the Navy that they will be delivered on time and will perform as required. This assurance could augment the Milestone B certifications which were predicated on a TRA that was not representative of the technical risk facing the program. Further, such information would help bolster confidence for Congress that the program technologies will be matured in time to support construction, which is especially important as the Navy pursues plans to start construction of the lead ship early. Without putting in place a requirement for the Navy to provide these assurances on a periodic basis, Congress will not have the information until after the Navy has asked for another $8.7 billion in funding for lead ship construction. It is also important for Congress to be informed of the impact on performance requirements if technologies are delayed or fail to mature as planned. The Columbia class program is also facing risks from its aggressive and concurrent schedule as a result of the continued and pressing need for it to meet the Navy’s nuclear deterrent requirements as the legacy submarine fleet that cannot be life extended any longer. Typically addressing risks of such concurrency is accomplished by, among other things, delaying milestones until more knowledge is obtained. Doing so helps reduce concurrency and bring more stability to the design before construction activities begin. Recognizing the mission imperatives that are driving Columbia class’s aggressive and concurrent schedule it is unlikely that the Navy will have the ability to slow the pace of the program in order to reduce cost and schedule risk. Therefore, additional reporting to decisionmakers on the status of key technologies could help ensure they fully understand the risks of such an approach and account for such risks when making programmatic decisions. In our draft report we had suggested a matter for congressional consideration related to additional Navy reporting on the Columbia class technologies, but we have since removed it because the recently passed National Defense Authorization Act (NDAA) for 2018 includes Navy reporting requirements for the Columbia class program that would achieve the intent of our matter. We provided a draft of this product to DOD for comment. The Navy provided technical comments earlier in the review process which we incorporated where appropriate. In its written comments, reproduced in appendix III, DOD’s position was that there is not a need for additional congressional reporting on the Columbia class program because there are new reporting requirements in the conference report accompanying the NDAA for fiscal year 2018. We agree that the reporting requirements in the section 231 of the NDAA for Fiscal Year 2018 meet the intent of our matter for congressional consideration. These new reporting requirements for the Navy became law on December 12, 2017, after we sent the report to DOD and appropriate congressional committees. We agree that the reporting requirements meet the intent of our matter for congressional consideration. Accordingly, we have removed our matter from this report. In addition, DOD also disagreed with our characterization of technical risks facing the Columbia class program and its TRA. Specifically, DOD stated that the program is meeting statutory and DOD maturity standards and met or exceeded DOD technology maturity requirements. DOD also stated that the program’s TRA was conducted in accordance with a 2011 DOD policy memo that directed TRA’s should focus only on “technology maturity, as opposed to engineering and integration risk.” However, neither this policy memo nor the Columbia class TRA define what constitutes engineering and integration risk and it is unclear what criteria the Navy used in making these determinations. Our report acknowledges that DOD followed statutory and DOD requirements for the two technologies that the Navy identified as critical technologies in the program’s TRA. However, our report also identifies several other technologies that we believe should have also been subject to these requirements had the Navy conducted a TRA in accordance with our identified best practices. By applying our identified best practices, we believe these efforts would have been considered critical technologies and would have been subject to an evaluation of technology maturity levels, additional reporting requirements and, potentially, identification of additional risk mitigation efforts. DOD also disagreed with our criteria for identifying a critical technology and assessing maturity. DOD asserted that applying our criteria would result in nearly every system on a submarine becoming a critical technology. We disagree. Our criteria are consistent with DOD’s own criteria for identifying critical technologies, and only focus on those that are most significant to a program. Given the program’s cost and schedule risks and operational imperatives, we believe that appropriately identifying the critical technologies is an important step in acknowledging and mitigating program risk. DOD also stated that achieving a TRL 7 by milestone B would be unrealistic because of the difficulties in testing some systems in an operational environment prior to launching the submarine. We agree that in some cases testing at sea is not practical and testing in a relevant environment may be sufficient to demonstrate maturity. However, achieving a TRL 7 is not only based on the test environment; it is also based on demonstrating a prototype near or at the planned operational system configuration, which requires a design resembling the final configuration. The Columbia class program has yet to complete this type of prototype for the key systems we identified. As we stated in the report some systems, like the propulsor, do not yet have a final design. While we do not expect the Navy to test every critical technology on a submarine at sea to demonstrate maturity, we would expect testing of a prototype near or at the planned operational system configuration prototype in a relevant environment. For example, prototype testing of the electric drive at a land-based test facility would demonstrate maturity—but is not planned for several years—well after the submarine’s design and potentially construction is underway. While such concurrency introduces cost, schedule and technical risk, we have previously reported that programs may choose to move forward with these risks, but should acknowledged and appropriately resource the program to address the risks should they materialize. As we stated in the report, this is not the case for the Columbia class program: some risks have not been properly identified and the cost estimate does not fully account for the margin of technical and schedule risks facing the program. DOD also provided a table of Columbia class practices, reprinted with our comments in appendix III. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense, the Secretary of the Navy, and other interested parties. This report will also be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact me at (202) 512-4841 or oakleys@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix IV. This report examines (1) the status of key Columbia class technologies and congressional reporting requirements on this status, (2) risks, if any, with the Navy’s planned approach for design and construction, and (3) whether expected funding levels for the Columbia class will be adequate moving forward. To assess the status of key Columbia class technologies, we reviewed the Navy’s technology development plan and the planned technical approach and the status of key prototyping efforts to all of the systems that comprise the program, focusing on the technology readiness level of the major components that are key to enabling program success and that are key cost and schedule drivers. We also compared technology development efforts with program requirements and with GAO’s identified best practices for shipbuilding programs. We also evaluated the program’s Technology Readiness Assessment, which included applying the GAO-developed criteria documented in GAO’s Technology Assessment Guide. GAO’s guide draws heavily from the Department of Defense (DOD), Energy (DOE), and National Aeronautics and Space Administration (NASA) best practices, and establishes a methodology based on those best practices that can be used across the federal government for evaluating technology maturity, particularly as it relates to determining a program or project’s readiness to move past key decision points that typically coincide with major commitments of resources. We also interviewed relevant officials from the Navy’s Columbia class submarine program office; the Office of the Chief of Naval Operations- Undersea Warfare; Naval Sea Systems Command Naval Nuclear Propulsion Program; Navy Strategic Systems Program; Naval Undersea Warfare Center Newport; Naval Surface Warfare Center Carderock Division; Office of the Secretary of Defense (OSD) Director Operational Test and Evaluation; OSD Acquisition, Technology, and Logistics (AT&L); OSD Cost Analysis and Program Evaluation (CAPE); and the prime contractor shipyard General Dynamics Electric Boat and their sub- contractor Huntington Ingalls Industries Newport News Shipbuilding. To determine the congressional reporting requirements on this status we reviewed relevant DOD acquisition instructions and statute. To assess the risks, if any, with the Navy’s planned approach for design and construction, we compared the status of design maturity with Navy and shipyard plans to identify any delays, and compared planned design maturity and schedule projections with those of prior U.S. submarine efforts (the Virginia, Seawolf, and Ohio classes) to assess realism of Columbia class estimates. We also interviewed and analyzed available documentation from Naval Reactors (NAVSEA 08) related to nuclear reactor and Integrated Power System status. We also interviewed relevant officials from the Navy’s Columbia class submarine program office; Naval Sea Systems Command Naval Nuclear Propulsion Program; Naval Surface Warfare Center Carderock Division, and the prime contractor shipyard General Dynamics Electric Boat and their sub- contractor Huntington Ingalls Industries Newport News Shipbuilding. We also assessed the Navy’s acquisition strategy and the Integrated Enterprise Plan that tracks shipyard workload across the Columbia and Virginia class submarines and the Ford class aircraft carrier to identify any factors related to potential schedule challenges. To assess whether expected funding levels for the Columbia class will be adequate moving forward, we compared program cost estimates prepared at Milestone B to historical data on lead ships and submarine estimates and actuals to assess the realism of these requirements. We also analyzed program documentation to identify risk factors, if any, related to cost projections, including the program’s Independent Cost Estimate created by the OSD Cost Analysis and Program Evaluation, and the Navy’s Service Cost Position and Program Life Cycle Cost Estimate. This evaluation leverages, among other things, prior GAO work on cost estimating and the Navy’s acquisition of lead ships. We also interviewed relevant officials from the Navy’s Columbia class submarine program office; the Office of the Chief of Naval Operations- Undersea Warfare; Naval Sea Systems Command Naval Nuclear Propulsion Program; Naval Undersea Warfare Center; Naval Surface Warfare Center Carderock Division; OSD Director Operational Test and Evaluation; OSD AT&L; CAPE; and the prime contractor shipyard General Dynamics Electric Boat and their sub-contractor Huntington Ingalls Industries Newport News Shipbuilding. We conducted this performance audit from May 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Department of Defense Technology Readiness Levels Description Lowest level of technology readiness. Scientific research begins to be translated into applied research and development (R&D). Examples might include paper studies of a technology’s basic properties. Invention begins. Once basic principles are observed, practical applications can be invented. Applications are speculative and there may be no proof or detailed analysis to support the assumptions. Examples are limited to analytic studies. Active R&D is initiated. This includes analytical studies and laboratory studies to physically validate the analytical predictions of separate elements of the technology. Examples include components that are not yet integrated or representative. Basic technological components are integrated to establish that they will work together. This is relatively “low fidelity” compared with the eventual system. Examples include integration of “ad hoc” hardware in the laboratory. Fidelity of breadboard technology increases significantly. The basic technological components are integrated with reasonably realistic supporting elements so they can be tested in a simulated environment. Examples include “high-fidelity” laboratory integration of components. Representative model or prototype system, which is well beyond that of TRL 5, is tested in a relevant environment. Represents a major step up in a technology’s demonstrated readiness. Examples include testing a prototype in a high-fidelity laboratory environment or in a simulated operational environment. Prototype near or at planned operational system. Represents a major step up from TRL 6 by requiring the demonstration of an actual system prototype in an operational environment (e.g., in an aircraft, in a vehicle, or in space. Technology has been proven to work in its final form and under expected conditions. In almost all cases, this TRL represents the end of the true system development. Examples include developmental test and evaluation of the system in its intended weapon system to determine if it meets design specifications. Actual system proven through successful mission operations. Actual application of the technology in its final form and under mission conditions, such as those encountered in operational test and evaluations. Examples include using the system under operational conditions. DOD also provided the above table of Columbia class practices. These practices align with GAO’s identified best practices in shipbuilding—stable requirements, design maturity at construction start, and manufacturing readiness. However, we have several observations on the DOD’s statements: Stable Operational and Technical Requirements: We have previously identified maintaining stable requirements as a best practice; in this report we note that the Navy has provided a stable basis for the Columbia class program by adhering to this practice. High Design Maturity at Construction Start: While we give credit to the program for striving for a high level of design maturity at construction start for the Columbia class program, we identify in this report that we have concerns about the Navy’s ability to stabilize design drawings while technology development continues. As we point out in this report, we are concerned with the maturity of the Columbia class design due to the unknowns with key technologies. In this table the Department identifies that the program is leveraging proven Virginia class technology for the propulsor, which it identifies as a TRL 9. Although this technology is indeed mature in the context of Virginia class submarines (i.e., not new or novel), it is nevertheless novel in the context of Columbia class submarines and should thus be considered a CTE to be evaluated and risk managed. As such, we dispute the Navy’s assertion that the Virginia class propulsor is TRL 9 in the context of the Columbia class program, since the Navy has yet to complete a design for the propulsor nor has it tested a production representative prototype, which would achieve a TRL 6 or 7 (depending on the test environment). Manufacturing and Construction Readiness: We have not conducted adequate work in this area to comment on DOD’s statements of manufacturing and construction readiness; we plan to address this in future work. Aggressive Action to Reduce Costs: While the Navy has made significant progress in reducing potential costs for the Columbia class program, we believe that the risks identified in this report, coupled with the optimistic cost estimate and aggressive schedule, could result in cost growth that reduces the actual savings identified by the program. In addition the contact name above, the following staff members made key contributions to this report: Diana Moldafsky, Assistant Director; C. James Madar; Jacob Leon Beier; Brian Bothwell; Herb Bowsher; Kurt Gurka; Stephanie Gustafson; Tim Persons; and Robin Wilson.", "summary": "The Navy's Columbia class ballistic missile submarines will replace the 14 Ohio class that currently provide the sea-based leg of the U.S. nuclear triad, slated to begin retiring in 2027. The first Columbia must begin patrols in 2031 to prevent a gap in deterrent capabilities; the class will ultimately carry up to 70 percent of the nation's strategic nuclear capability. The program is a top Navy priority with an expected cost of $267 billion over its life cycle, including $128 billion to research, develop, and buy 12 submarines. House Report 114-102 included a provision for GAO to examine the Columbia class program. Among other things, this review examines (1) the status of key Columbia class technologies; and (2) potential risks with the Navy's planned approach for design and construction. GAO reviewed the Navy's technology readiness assessment, technology development plan, and the status of key prototyping efforts, and compared efforts with GAO's identified best practices for shipbuilding programs and technology readiness assessments. GAO also assessed the status of design maturity and the Navy's acquisition strategy and interviewed relevant officials. Additional development and testing are required to demonstrate the maturity of several Columbia class submarine technologies that are critical to performance, including the Integrated Power System, nuclear reactor, common missile compartment, and propulsor and related coordinated stern technologies (see figure). As a result, it is unknown at this point whether they will work as expected, be delayed, or cost more than planned. Any unexpected delays could postpone the deployment of the lead submarine past the 2031 deadline. Further, the Navy underrepresented the program's technology risks in its 2015 Technology Readiness Assessment (TRA) when it did not identify these technologies as critical. Development of these technologies is key to meeting cost, schedule, and performance requirements. A reliable TRA serves as the basis for realistic discussions on how to mitigate risks as programs move forward from the early stages of technology development. Not identifying these technologies as critical means Congress may not have had the full picture of the technology risks and their potential effect on cost, schedule, and performance goals as increasing financial commitments were made. The Navy is not required to provide Congress with an update on the program's progress, including its technology development efforts, until fiscal year 2020—when $8.7 billion for lead ship construction will have already been authorized. Periodic reporting on technology development efforts in the interim could provide decision makers assurances about the remaining technical risks as the Navy asks for increasing levels of funding. Consistent with GAO's identified best practices, the Navy intends to complete much of the submarine's overall design prior to starting construction to reduce the risk of cost and schedule growth. However, the Navy recently awarded a contract for detail design while critical technologies remain unproven—a practice not in line with best practices that has led to cost growth and schedule delays on other programs. Proceeding into detail design and construction with immature technologies can lead to design instability and cause construction delays. The Navy plans to accelerate construction of the lead submarine to compensate for an aggressive schedule, which may lead to future delays if the technologies are not fully mature before construction starts, planned for 2021. GAO had suggested a matter for congressional consideration related to additional reporting on the Columbia class technologies, but removed it because of recent legislation that implements this requirement. Department of Defense comments on the draft were incorporated as appropriate in this report.", "document_type": "gao"}
{"report": "Federal law generally requires the Secretary of State to convene an ARB not later than 60 days after the occurrence of an incident that resulted in serious injury, loss of life, or significant destruction of property at, or related to, a U.S. mission abroad unless the Secretary determines the incident clearly involves only causes unrelated to security. This time period can be extended for an additional 60-day period if the Secretary determines that the additional period is necessary for the convening of the board. Whenever the Secretary convenes an ARB, the Secretary shall promptly inform the Chairman of the Committee on Foreign Relations in the Senate and the Speaker of the House of Representatives. Federal law specifies that an ARB will consist of five members appointed by the Secretary of State and one appointed by the Director of National Intelligence. It also states that the ARB shall submit its findings to the Secretary of State. According to State’s FAM, the ARB is a mechanism to foster more effective security of U.S. missions and personnel abroad by ensuring a thorough and independent review of security-related incidents. Through its investigations and recommendations, the ARB seeks to determine accountability and promote and encourage improved security programs and practices. M/PRI—the central management analysis organization of State’s Under Secretary of State for Management—is responsible for initiating and shepherding the incident vetting process to identify incidents that may warrant an ARB, according to the FAM. The FAM states that M/PRI will begin the ARB incident vetting process once M/PRI becomes aware of an incident abroad that could involve loss of life, injury, or destruction of property. This process includes consultation with the Office of the Legal Adviser (Legal), DS, and other offices as appropriate to evaluate whether the ARB statute criteria apply. If the ARB statute criteria are deemed applicable or if the applicability is questionable, M/PRI is responsible for calling a meeting of State’s ARB Permanent Coordinating Committee. See figure 1 for members of the Permanent Coordinating Committee and other State offices and bureaus involved in responding to the incidents in Cuba. If M/PRI decides the ARB statute criteria are not applicable, M/PRI will notify committee members in writing, providing a summary of the incident and an explanation as to why the criteria do not apply. If any member disagrees, M/PRI will call a Permanent Coordinating Committee meeting. According to the FAM, the committee will review the available facts and recommend to the Secretary of State whether or not to convene an ARB as quickly as possible after an incident occurs. The Secretary of State makes the final decision on whether to convene an ARB. WHA, DS, and MED, among other State entities, support the U.S. Embassy in Havana by providing advice and guidance on policy, security, and other issues. WHA. Reporting to the Under Secretary of State for Political Affairs, WHA oversees the U.S. Embassy in Havana and is responsible for managing and promoting U.S. interests in the region. Embassy officials, including senior leadership, report to WHA and its Office of the Coordinator for Cuban Affairs through diplomatic cables, email, and phone calls. DS. Reporting to the Under Secretary of State for Management, DS oversees security at diplomatic posts and is responsible for providing a safe and secure environment for the conduct of U.S. foreign policy. Embassy Regional Security Officers are required to report security incidents through different systems, including diplomatic cables, SPOT Reports, or the Security Incident Management Analysis System, depending on the type of incident. Regional Security Officers are also in regular contact with DS via phone and email, according to State officials. MED. Reporting to the Under Secretary of State for Management, MED ensures that U.S. government employees and their families who are assigned to diplomatic posts have access to healthcare and advises State management about health issues around the world. The U.S. Embassy in Havana has a medical unit, including U.S. direct-hire and locally hired staff. MED approves requests to medically evacuate U.S. personnel and family members from diplomatic posts. Other State entities. Other State entities provide support to the U.S. embassy in Havana on specific issues. For example, CMS, within State’s Executive Secretariat, gathers, assesses, and disseminates information to State senior management about events that threaten the security of U.S. missions and their personnel. The Office of Foreign Missions, which reports to the Under Secretary of State for Management, seeks fair treatment for U.S. personnel abroad while ensuring that foreign diplomats based in the United States receive the same treatment that their respective governments provide to U.S. personnel abroad in return. Although M/PRI is responsible for initiating and leading State’s ARB incident vetting process, State’s ARB policy does not define how M/PRI should become aware of incidents that may involve injury, loss of life, or destruction of property. Regarding Cuba, the U.S. embassy and several State entities responded to incidents that were later associated with various injuries in early 2017. As of June 2018, State officials remained uncertain of the cause or perpetrator of the incidents and injuries. M/PRI officials said they did not know about the incidents in Cuba until August 2017, when the media began to report on the incidents. Although M/PRI is responsible for initiating and leading the ARB incident vetting process, State’s polices do not define responsibilities for internal communication to M/PRI of incidents that may involve injury, loss of life, or destruction of property. According to the FAM, M/PRI and the Permanent Coordinating Committee are responsible for evaluating whether incidents meet the ARB statute criteria. However, M/PRI can only initiate the process after it is made aware of potentially qualifying incidents, and the FAM does not outline how M/PRI should be notified of these types of incidents or which, if any, State entities are responsible for notifying M/PRI. In contrast, the FAM outlines other specific reporting responsibilities for Regional Security Officers. According to State officials and our analysis, State’s FAM and Foreign Affairs Handbooks do not establish a policy, procedure, or process for internal communication of such incidents to M/PRI. In 2006, the Under Secretary of State for Management issued a cable requiring U.S. diplomatic posts to report potential ARB incidents directly to M/PRI. However, the cable did not identify who at post was responsible for reporting, and instructed posts to report to an individual who is no longer in M/PRI. Moreover, State officials we met with were unaware of the cable. M/PRI officials said that information about potentially qualifying incidents is not directed to them through State’s established reporting mechanisms, such as diplomatic cables. State’s cable system does not have a caption, channel, or tag that would direct information to M/PRI about incidents that may involve injury, loss of life, or damage to property. State’s Office of the Inspector General previously found deficiencies in State’s internal communication of incidents that may meet ARB criteria. Despite the 2006 cable on potential ARB incident reporting, in 2013, State’s Inspector General found that State had no systematic process ensuring immediate notification of security-related incidents to M/PRI, and that DS did not routinely provide security reports to M/PRI. The Inspector General made an informal recommendation that DS should include M/PRI as an addressee on all security-related incident reports. In 2015, the Inspector General noted that DS, in response to the recommendation, said that such a blanket inclusion of M/PRI on all security-related incident reports would result in M/PRI being inundated with a large number of irrelevant reports. Because State has no policy that ensures M/PRI becomes aware of incidents that may involve injury, loss of life, or destruction of property, M/PRI officials said they typically become aware of potentially qualifying incidents—such as explosions at diplomatic facilities—when such incidents are discussed internally and widely publicized. M/PRI officials also told us they occasionally became aware of potentially qualifying incidents through informal communication, such as during senior staff meetings with the Under Secretary of State for Management. If M/PRI officials are not aware of incidents, they cannot initiate State’s ARB incident vetting process. This situation puts State at risk of not meeting statutory time frames for convening an ARB and could result in State being unable to improve security programs and practices at other U.S. diplomatic posts, which could affect the response to similar incidents elsewhere. Standards for Internal Control in the Federal Government call for internal communication to achieve the entity’s objectives and note that management should document responsibilities through policy. The FAM requires internal controls, which includes as an objective that programs are efficiently and effectively carried out in accordance with applicable law and management policy. The FAM also states that the Under Secretary of State for Management is responsible for, among other things, developing and executing management policies; the organization, operations, and assignment of functions within State; and directing and administering worldwide information resources. In January 2017, U.S. embassy and State officials began responding to incidents in Cuba that were later associated with various injuries. In June 2018, the Secretary of State noted that the precise nature of the injuries and the cause had not yet been established. According to congressional testimony by State officials, in late 2016, U.S. personnel in Havana first reported incidents, typically involving sounds and resulting in various medical symptoms, to the embassy’s Regional Security Officer and Chief of Mission. Embassy officials reported the incidents to DS and the National Security Council as a new type of harassment in early January 2017, according to State documents. The embassy’s Medical Officer first evaluated a U.S. official related to the incidents on December 30, 2016, and others in January 2017. Starting in late March 2017, the embassy held several meetings with U.S. personnel to share the limited information it had about the incidents, according to State officials. In April 2017, the embassy held Emergency Action Committee meetings regarding the incidents. CMS communicated with State senior management about the incidents beginning in April 2017. To ensure that State senior management were aware of how the embassy was responding, CMS distributed among various State entities, including M/PRI, one of the embassy’s April 2017 diplomatic cables reporting on an Emergency Action Committee meeting. According to CMS officials, the cable that CMS distributed was unclear about what incidents had occurred and did not include detailed information about the incidents or associated injuries. According to M/PRI officials, M/PRI was on CMS’s distribution list because M/PRI was responsible for monitoring the implementation of a previous ARB recommendation that called for State to review embassy risk management decisions. According to a former M/PRI official, M/PRI did not review these CMS communications for other purposes, including to identify incidents that may meet ARB statute criteria. In addition, in April and May 2017, CMS included multiple cables on the situation in Cuba in its daily Safety Overseas Summary for State senior management. In response to the incidents, U.S. embassy and WHA officials met with Cuban officials to emphasize to the Cuban government its responsibilities to ensure the safety of foreign diplomats in Cuba, according to testimony by State officials. In mid-February 2017, U.S. officials met with Cuban officials in Havana and Washington, D.C., about the incidents, citing the Vienna Convention requirements to provide for the safety and security of diplomats, according to State officials. Following additional incidents reported in March and April 2017, U.S. officials met again with Cuban officials in Havana and Washington, D.C. In May 2017, State expelled two Cuban diplomats from the United States to underscore the Cuban government’s responsibility to protect U.S. personnel in Cuba, according to testimony by State officials. In September 2017, State ordered the departure from Cuba of non-emergency U.S. embassy personnel and, in October, expelled 15 Cuban diplomats from Washington, D.C. to underscore to Cuba its obligations to protect U.S. personnel, according to testimony by State officials. According to State officials, by May 2017, the embassy, WHA, DS, and MED were aware of 16 U.S. personnel and family members in Havana who had been injured, although unable to determine the cause. In January 2018, State’s Medical Director testified to Congress that by May 1, 2017, State had determined that several of those individuals had serious injuries. Between February and May 2017, a specialist at the University of Miami evaluated 80 members of the embassy community. MED arranged for the medical evacuations of about 40 U.S. personnel from Cuba to Miami, Florida, for evaluations with the specialist, and the specialist subsequently conducted additional evaluations at the embassy in Havana. According to State testimony to Congress, the specialist identified 16 individuals who had symptoms and medically verifiable clinical findings similar to mild traumatic brain injury. In June 2018, the Secretary of State noted that the precise nature of the injuries and the cause had not yet been established. M/PRI officials said they became aware of the incidents in Cuba after media reports in August 2017. According to M/PRI officials, a State official—who previously worked in M/PRI—contacted M/PRI in early August after seeing media reports to inquire whether they were aware of the incidents in Cuba. Although several State entities were aware of the incidents, WHA, DS, and MED did not report the incidents to M/PRI and it was unclear whether the incidents met the criteria for convening an ARB, according to officials. However, our analysis shows that State’s policies do not instruct State entities to evaluate whether incidents meet the ARB criteria before reporting such incidents to M/PRI. Instead, State’s FAM requires M/PRI to lead the process for evaluating incidents that may involve injury, loss of life, or destruction of property. According to the FAM, M/PRI will call a Permanent Coordinating Committee meeting if the ARB statute criteria apply or if the applicability is questionable. The committee will, as quickly as possible after an incident occurs, review the available facts and recommend to the Secretary whether to convene an ARB. M/PRI initiated State’s incident vetting process in August 2017, as shown in figure 2 below. As a result of the incidents in Cuba, M/PRI officials told us they realized that they may not be aware of all incidents that may involve injury to U.S. diplomats. In an initial attempt to address this concern, M/PRI officials said they requested that CMS add M/PRI officials to the distribution list for the Safety Overseas Summary to try to increase M/PRI’s awareness of potential incidents. CMS told us that it added M/PRI officials to the distribution list in October 2017. According to M/PRI officials and a timeline provided by M/PRI, once these officials became aware of the incidents in August 2017, the office began the ARB incident vetting process, as described in the FAM. In August 2017, these officials initially consulted with DS and MED about the incidents. In further discussion with Legal, the officials determined that they did not have sufficient information to determine whether the incidents met the ARB statute criteria. Given the uncertainties surrounding the incidents, in mid-September 2017, they decided to call a meeting of the Permanent Coordinating Committee, which included representatives from M/PRI, WHA, DS, MED, Legal, the Bureau of Intelligence and Research, the Bureau of Counterterrorism, and the Intelligence Community. The committee initially met on September 28, 2017, to review the available facts against the ARB statute criteria, and concluded that it needed additional time to determine whether the ARB statute criteria had been met. On November 28, 2017, the committee met again and recommended to the Secretary of State that an ARB be convened. The Secretary of State concurred with the recommendation on December 11, 2017, and convened the ARB on January 12, 2018. The ARB officially began its work in early February 2018. An ARB is intended to result in improved security programs and practices at U.S. missions abroad. While State has directed M/PRI to initiate the incident vetting process—including convening the Permanent Coordinating Committee to evaluate the facts—State’s policies do not define responsibilities for internal communication to M/PRI of incidents that may involve injury, loss of life, or destruction of property at U.S. missions abroad. Although M/PRI officials may receive information through informal channels, this approach does not ensure that M/PRI will be made aware of relevant incidents. With regard to the incidents in Cuba, M/PRI could not begin the incident vetting process for determining whether the ARB statute criteria had been met until it became aware of them in August 2017. When M/PRI is not aware of incidents that may meet the ARB statute criteria, it cannot initiate the incident vetting process for convening ARBs. Until State establishes policies that ensure the appropriate office is promptly aware of potentially relevant incidents—for example, policies that identify formal internal communication procedures and document responsibilities for such communication—State is at risk of failing to comply with the ARB statute. Improving its security programs at U.S. diplomatic posts is all the more imperative given recent reports of similar incidents, such as in Guangzhou, China. To ensure that State’s process allows it to initiate its ARB incident vetting process in a timely manner, the Secretary of State should revise State’s policies to define responsibilities for internal communication to M/PRI of incidents that may involve injury, loss of life, or destruction of property at, or related to, U.S. missions abroad. (Recommendation 1) We provided a draft of this report to State. In its written comments, State concurred with our recommendation. State said it will improve its processes for ensuring effective internal communication. We have reprinted State’s comments in their entirety in appendix I. State also provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of State. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you and your staff have any questions about this report, please contact me at (202) 512-5130 or mazanecb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, Judith McCloskey (Assistant Director), Ashley Alley, Debbie Chung, Thomas Costa, Marcia Crosse, Neil Doherty, Justin Fisher, Christopher Hayes, Brandon Hunt, Joseph Kirschbaum, and George Ogilvie made key contributions to this report.", "summary": "U.S. diplomats and their families in Havana, Cuba, were affected by incidents that were associated with injuries, including hearing loss and brain damage. Over State has reported that over 20 U.S. diplomats and family members in Havana have suffered from medical conditions believed to be connected to the incidents, which began in late 2016 and have continued into 2017. By law, State is generally required to convene an ARB within 1260 days of incidents that result in serious injury at, or related to, a U.S. mission abroad, but the Secretary of State can determine that a 60 day extension is necessary. According to State's policy, M/PRI is responsible for initiating and leading State's ARB incident vetting process. This report is part of a broader request to review State's response to the incidents in Cuba. In this report, GAO examines the extent to which State's ARB policy ensures that M/PRI is made aware of incidents that may meet the ARB statute criteria. GAO analyzed relevant federal laws, State policies, and other State documents. GAO also interviewed cognizant State officials. The Department of State's (State) Accountability Review Board (ARB) policy does not ensure that the responsible office—State's Office of Management Policy, Rightsizing, and Innovation (M/PRI)—is made aware of incidents that may meet the ARB statute criteria, such as those that occurred in Cuba and were associated with injuries to U.S. personnel. According to State policy, as soon as M/PRI becomes aware of potentially qualifying incidents, M/PRI will start the process for considering whether the incident warrants an ARB. M/PRI relies on informal communication to identify potentially qualifying incidents to begin the vetting process because State does not have a policy, procedure, or process for internal communication of such incidents to M/PRI, according to State officials and GAO analysis. As illustrated in the figure below, other State entities began responding to the incidents in early 2017, but M/PRI was not made aware of the incidents until mid-August 2017, when a former M/PRI official contacted the office after seeing media reports. If M/PRI is not aware of incidents, it cannot initiate State's ARB incident vetting process. This situation puts State at risk of not meeting statutory time frames for convening an ARB and could result in State being less able to improve security programs and practices at other U.S. diplomatic posts. Standards for Internal Control in the Federal Government call for internal communication to achieve the entity's objectives and note that management should document responsibilities through policy. GAO recommends that State revise its policies to define responsibilities for internal communication to M/PRI of relevant incidents. State concurred with GAO’s recommendation.", "document_type": "gao"}
{"report": "In November 2014, the Secretary of Defense directed DOD to address the 2014 nuclear enterprise reviews’ recommendations and directed CAPE to track and assess these implementation efforts. The Joint Staff, Navy, Air Force, offices within the Office of the Secretary of Defense, and U.S. Strategic Command are supporting CAPE’s efforts. The Secretary also established the Nuclear Deterrent Enterprise Review Group (NDERG), a group of senior officials chaired by the Deputy Secretary of Defense and including the Vice Chairman of the Joint Chiefs of Staff, to oversee and make decisions regarding implementation of the nuclear enterprise reviews’ recommendations. The NDERG is supported by a Nuclear Deterrent Working Group, which meets biweekly and reviews the status of recommendations, and a Nuclear Deterrent Senior Oversight Group, which meets quarterly and reviews any recommendations that the Working Group believes are ready for the NDERG to close. The Deputy Secretary of Defense updates the Secretary of Defense on NDERG progress as requested. CAPE compiled the recommendations from the two 2014 nuclear enterprise reviews and a memorandum from the Commander of U.S. Strategic Command that identified several additional recommendations. In total, CAPE identified 175 distinct recommendations from the three documents. CAPE then identified 247 sub-recommendations from recommendations directed to multiple services (or other DOD components)—for example, if a recommendation was directed to the Air Force and the Navy, then one sub-recommendation was made to the Air Force and one sub-recommendation was made to the Navy. CAPE then worked with the services to identify offices of primary responsibility for implementing actions to address the recommendations, any offices of coordinating responsibility, and any resources necessary to implement each recommendation. CAPE has developed a tracking tool to collect information on progress in meeting milestones and metrics. This tracking tool identifies offices of responsibility, implementation actions, milestones, and metrics to measure the effectiveness of the actions taken toward implementing each of the recommendations. The tracking tool currently contains hundreds of unique milestones and metrics, and according to CAPE officials, additional milestones and metrics are included as they are identified. The Air Force and the Navy also developed their own methods of tracking their service-specific recommendations. We reviewed DOD’s processes for implementing the 2014 nuclear enterprise reviews’ recommendations and issued a report on July 14, 2016. We found that the process DOD had developed for implementing and tracking the 2014 nuclear enterprise reviews’ recommendations generally appeared consistent with relevant criteria from the Standards for Internal Control in the Federal Government—including using and effectively communicating quality information and performing monitoring activities. As we reported in July 2016, CAPE officials stated that it would take about 3 years to see measurable improvements in the health of the nuclear enterprise and 15 years to implement the great majority of the recommendations and measure whether they have had their intended effects. CAPE and service officials have noted that it would take years for some of the recommended cultural changes to manifest. NC3 is a large and complex system comprised of numerous land-, air-, and space-based components used to assure connectivity between the President and nuclear forces. NC3 is managed by the military departments, nuclear force commanders, and the defense agencies and provides the President with the means to authorize the use of nuclear weapons in a crisis. NC3 systems support five important functions: Force management: assignment, training, deployment, maintenance, and logistics support of nuclear forces before, during, and after any crisis. Planning: development and modification of plans for the employment of nuclear weapons and other options. Situation monitoring: collection, maintenance, assessment, and dissemination of information on friendly forces, adversary forces and possible targets, emerging nuclear powers, and worldwide events of interest. Decision making: assessment, review, and consultation that occur when the employment or movement of nuclear weapons is considered. Force direction: implementation of decisions regarding the execution, termination, destruction, and disablement of nuclear weapons. As recommended in the 2015 NC3 report, the Council on Oversight of the National Leadership Command, Control, and Communications System (the Oversight Council) has taken a lead role in providing oversight and making the final determination on the implementation status of that report’s 13 recommendations. The Oversight Council is co-chaired by the Under Secretary of Defense for Acquisition, Technology, and Logistics and the Vice Chairman of the Joint Chiefs of Staff and its members are the Under Secretary of Defense for Policy; the Commander, U.S. Strategic Command; the Commander, North American Aerospace Defense Command/U.S. Northern Command; the Director, National Security Agency; and the DOD Chief Information Officer. Additional organizations, such as CAPE, may participate in the Oversight Council’s meetings to provide subject matter expertise. The Oversight Council is supported by the Executive Management Board—a functional governance committee chaired by the DOD Chief Information Officer. DOD CIO tracks the implementation of the 2015 NC3 report’s recommendations, among other activities. DOD and the military services set standards to ensure that personnel who work with nuclear weapons and nuclear weapons systems, NC3 systems and equipment, and special nuclear material are reliable, trustworthy, and capable of performing their assigned nuclear weapons-related mission. Nuclear surety generally refers to DOD’s efforts to ensure that nuclear weapons and materials are safe, secure, reliable, and controlled. DOD and the military services use personnel reliability assurance programs— the Personnel Reliability Program and the Air Force’s Arming and Use of Force program for Air Force security forces—to implement these nuclear surety requirements for personnel. When personnel are assigned to a nuclear unit, relevant unit commanders certify that those personnel meet the personnel reliability assurance program standards. Commanders can also suspend or decertify personnel from working with nuclear weapons if they fail to meet these standards during their service. Factors that may lead to suspension or decertification include medical issues; personal conduct; emotional, mental and personality disorders; financial problems such as an inability or unwillingness to satisfy debts or the presence of unexplained wealth; criminal conduct; sexual harassment or assault; misuse of drugs or alcohol; and security violations. According to DOD data, as of December 31, 2016, there were 10,603 DOD personnel certified under the Personnel Reliability Program and 36,464 security forces personnel certified under the Air Force’s Arming and Use of Force program. Together, there were a total of 47,067 personnel that met the personnel nuclear surety requirements of a personnel reliability assurance program (see table 1). DOD and the military services have made progress in implementing recommendations to improve the defense nuclear enterprise but could improve their efforts by identifying additional performance measures, milestones, and associated risks. CAPE and DOD CIO have separate processes for tracking and evaluating DOD’s progress in implementing the recommendations from the 2014 nuclear enterprise reviews and the 2015 NC3 report, respectively. The NDERG has closed 77 of the 247 sub-recommendations from the 2014 nuclear enterprise reviews following CAPE’s assessment of implementation actions that had been taken by the military services and other DOD components (see fig. 1). For example, with regard to Nuclear Weapons Technical Inspections, the independent 2014 nuclear enterprise review recommended that inspection teams not focus on auditing records but instead examine the processes in place to inform commanders of Personnel Reliability Program issues. In response, DOD, the Air Force, and the Navy have made changes to their inspection processes and the Joint Chiefs of Staff have updated the Nuclear Weapons Technical Inspections guidance to de-emphasize records reviews in favor of knowledge checks and scenario-based discussion during the Personnel Reliability Program portion of these inspections. After reviewing these actions, the NDERG closed this recommendation in December 2016. The 77 closed sub-recommendations make up 62 of the initial 175 recommendations from the 2014 nuclear enterprise reviews. According to DOD CIO officials, as of March 2017, the Oversight Council has closed two of the 13 recommendations from the 2015 NC3 report, and DOD is making progress in implementing the remaining 11 recommendations (see fig. 2). The two closed recommendations are to (1) make the Oversight Council the synchronizing body to evaluate, track, and resolve the findings and recommendations made in that report and (2) broaden Air Force Global Strike Command’s responsibilities to include serving as the lead command for all of the Air Force-owned portions of the NC3 systems. DOD has made progress in implementing the remaining 11 recommendations. For example, the 2015 NC3 report recommended that U.S. Strategic Command review and validate the availability requirements of one of the NC3 systems, which the command has now completed. Additional detail about DOD’s progress is omitted because the information is classified. DOD’s processes for tracking and evaluating its progress in implementing the 2014 nuclear enterprise reviews’ recommendations do not consistently identify and document risks, and its processes for tracking and evaluating its progress in implementing the 2015 NC3 report’s recommendations do not identify performance measures, milestones, or risks. Identifying performance measures, milestones, and associated risks can help an agency to track and evaluate its progress toward completing tasks over time and can help to inform decision makers of potential issues that need to be addressed. We have previously reported that by tracking and developing a performance baseline for all performance measures, agencies can better evaluate whether they are making progress and their goals are being achieved. Similarly, Standards for Internal Control in the Federal Government emphasizes using performance measures and milestones to assess performance over time. We have also derived leading practices from the Government Performance and Results Act of 1993 (GPRA) and the GPRA Modernization Act of 2010, such as clearly defining performance measures and milestones and assessing program results against them. Additionally, Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to risks related to achieving the defined objectives and should use and internally communicate the necessary quality information in meeting those objectives. CAPE is working with the military services and other DOD components to track and evaluate the implementation actions taken in response to the recommendations from the 2014 nuclear enterprise reviews; however, risks associated with these actions are not consistently identified and documented. In July 2016, we reported on CAPE’s use of a centralized tracking tool that contains relevant information about the status of the actions taken in response to those recommendations. CAPE continues to use this tool, and it remains accessible to the services and other DOD entities on DOD’s classified network. As shown in figure 3, it includes fields for the underlying problem statement, or root cause, for the recommendation; time frames with milestones for implementing the recommendations; and performance measures (referred to as metrics in the tracking tool) to assess the effectiveness of the actions taken. The tracking tool also contains a field for Key Risks and Issues, but we found that this field has not been used consistently. According to CAPE officials, CAPE is using the tracking tool to track progress in meeting milestones and record the metrics it has identified to assess both the progress (through “process metrics”) and the effectiveness of the implementation actions (through “outcome metrics”). The outcome metrics are selected to aid CAPE in determining whether implemented recommendations have addressed the underlying problem that was the impetus for the original recommendation. CAPE used the outcome metrics to inform its assessment of each of the 77 sub- recommendations that the NDERG then closed. According to CAPE officials, CAPE’s approach to measuring effectiveness is to gather supporting data from the services and measure the effectiveness of each recommendation separately. However, these officials noted that until a recommendation has been implemented, CAPE cannot fully assess the effectiveness of the implementation actions. Some recommendations— including changing a service’s culture or morale—will take time to evaluate. According to CAPE officials, the tracking tool currently contains 389 unique metrics and 370 unique milestones to aid in the assessment of the implementation actions. For each of these metrics and milestones, the tracking tool includes expected completion dates and indicates which have been met and which are behind schedule. Additional milestones, particularly for actions more than 18 months out, and additional metrics to aid in measuring the effectiveness of actions taken, are still being identified, according to CAPE officials. In December 2016, the Deputy Secretary of Defense issued a memorandum that directed the transition of the tracking and analysis responsibilities related to implementing the 2014 nuclear enterprise reviews’ recommendations from CAPE to the military departments and other DOD entities. However, CAPE remains responsible for providing guidance to inform the analyses conducted by other DOD entities, overseeing the analyses, and assessing recommendations for closure. The aim of these changes was to enhance ownership and embed the principles of robust analysis, continuous monitoring, and responsibility throughout the department. As part of this transition, CAPE provided the military departments and other DOD entities with guidance to aid in their tracking and analysis of the recommendations from the 2014 nuclear enterprise reviews, but this guidance does not require the military services and other DOD components to identify and document risks prior to bringing a recommendation for closure. This guidance emphasizes using performance measures and milestones to track and measure the progress of implementation actions. It includes sections tailored to specific groups of recommendations from the 2014 nuclear enterprise reviews. It also calls for the consideration of potential risks that unintended consequences could occur when a recommendation is brought for closure, but it does not call for risks to be identified, assessed, or documented prior to that time. According to officials from CAPE and the military services, the department considers risks in a number of ways and does capture information about some risks. For example, CAPE has supplemented its review of the military services’ proposed budgets by conducting a review of funding risks related to the nuclear enterprise in areas such as modernization, investment, and personnel. CAPE briefs the results of this review to senior leadership within the NDERG to provide them information about whether the services are including funds to address these items in their yearly budget requests. Additionally, CAPE personnel have identified key risks regarding some of the recommendations and have entered this information into the centralized tracking tool. According to CAPE officials, 63 of the 247 sub-recommendations include information in the Key Risks and Issues field in the tracking tool. However, these officials told us that none of the remaining 184 sub-recommendations include information in this field, because either no key risks or issues were identified or the risks that were identified were not formally documented within the tool. Additionally, risks that are introduced as a result of actions taken to implement a recommendation are not consistently included in the centralized tracking tool or otherwise documented by CAPE. For example, according to Navy and CAPE officials regarding a recommendation to increase the number of skilled shipyard workers to keep up with the maintenance demands of ballistic missile nuclear submarines, the centralized tracking tool documents the risks as the need to complete hiring and training of new shipyard personnel. However, according to Navy officials, the risks resulting from the prioritization of maintenance of ballistic missile nuclear submarines over other vessels not associated with the nuclear deterrent mission, such as fast attack submarines and nuclear aircraft carriers, were discussed and accepted by the Navy, but not documented in the centralized tracking tool. Similarly, the risks associated with recommendations that the Air Force provide additional incentive pay for personnel serving in nuclear positions were identified but not documented in the centralized tracking tool prior to implementation and closure. According to a CAPE official, the Nuclear Deterrent Working Group determined that implementing incentive pay could negatively affect morale, because some Air Force personnel in nuclear positions are not eligible to receive this additional pay. The official stated that the Nuclear Deterrent Senior Oversight Group was briefed on this risk and responded by requesting updates from the Air Force’s annual review on the effectiveness of this incentive pay. The department is not consistently identifying and documenting risks associated with the recommendations, because CAPE’s guidance does not direct the military services and DOD components to document and update information on risk in the centralized tracking tool. According to CAPE officials, since the release of the December 2016 memorandum directing the transition of the tracking and analysis responsibilities for the 2014 nuclear enterprise reviews’ recommendations from CAPE to the military departments and other DOD components, the military services have not, to date, formally identified any key risks for inclusion in the centralized tracking tool. According to one Air Force official, the Air Force identifies and responds to risks through its day-to-day operations; however, this information is not captured by the tracking tool or otherwise documented. According to a CAPE official, additional guidance on documenting risk could encourage the military services and DOD components to capture risks that they have identified in the tracking tool. In a November 2014 memo announcing the department’s response to the nuclear enterprise reviews, the Secretary of Defense stated that the nuclear deterrent plays a critical role in assuring U.S. national security and that it is DOD’s highest priority mission. The Independent Review of the Department of Defense Nuclear Enterprise found that the avoidance of managing risks by many leaders within the enterprise resulted in adverse impacts to the mission. The review noted that avoiding risk by avoiding the problem until it becomes a major issue is a near inevitable outcome of risk-averse cultures and that, too often, it takes a significant event for the leadership to recognize major problems within the force. Similarly, the Internal Assessment of the Department of Defense Nuclear Enterprise stated that many of the senior leaders within DOD and the military services were not cognizant of the problems faced by the enterprise. According to that review, many issues were already being reported through internal self-assessments, but many senior leaders within DOD and the military services were not aware of the conclusions of these self-assessments and so were unable to take action to address them. Given the critical role the nuclear enterprise plays in national security, and given the challenges the Independent Review of the Department of Defense Nuclear Enterprise identified with respect to managing risks and communicating them across the defense nuclear enterprise, it is essential that risks be consistently identified and documented. By documenting information on risks in its centralized tracking tool, DOD could enhance its ability to provide oversight of the recommendations throughout its review processes in the military services, the Nuclear Deterrent Working Group, the Nuclear Deterrent Senior Oversight Group, and the NDERG. By developing additional guidance for identifying and documenting information about these risks, CAPE can also aid the components of the defense nuclear enterprise in their efforts to communicate and formulate responses to the risks—either by deliberately determining to accept the risk or by taking steps to avoid, reduce, or share the risk across the enterprise. DOD CIO uses an internal spreadsheet to track the implementation of the 13 recommendations from the 2015 NC3 report, but it has not identified performance measures, milestones, or associated risks to evaluate these actions. This spreadsheet includes fields for indicating whether an execution plan exists, the operational impact from implementing the recommendation, forecast closeout (which lists the responsible DOD component or designates the status of the recommendation), and follow- up actions to be taken after a recommendation is closed. Figure 4 shows the layout of this spreadsheet. According to DOD CIO officials that we met with, DOD CIO shares information about the status of the 2015 NC3 report recommendations through meetings with the DOD entities with primary responsibility for implementing the recommendations. However, there is currently no centralized collection of metrics, milestones, and other information with the same level of detail that CAPE had developed and is using for the 2014 nuclear enterprise reviews’ recommendations. According to DOD CIO officials, they are working with the offices of primary responsibility to expand on the current content of the internal tracking spreadsheet. These officials stated that while they had drafted a template to contain the expanded content, it has not yet been approved by the Oversight Council. This draft template contains fields similar to those CAPE developed and the department uses for tracking the department’s progress in implementing the recommendations from the 2014 nuclear enterprise reviews. When approved and implemented, this template will provide a form that could be used for documenting performance measures, milestones, and risks for these 2015 recommendations, once this information is identified. Identifying and sharing performance measures, milestones, and risks could aid DOD CIO in tracking and evaluating DOD’s efforts to implement the 2015 NC3 report recommendations. DOD CIO could improve its efforts to track DOD’s progress in addressing the recommendations by identifying performance measures and milestones as part of the effort it has initiated to expand on the content of its tracking spreadsheet. DOD CIO could also use performance measures to evaluate the actions DOD has taken and determine whether the actions have fully addressed the root cause of the recommendation. DOD officials leading some of the recommendation implementation efforts told us that a number of the issues identified in the 2015 NC3 report stem from enduring problems. These officials noted that an overemphasis on identifying easily attainable performance measures and closing recommendations quickly may improve the overall percentage of recommendations implemented but also could result in underlying root causes continuing to go unaddressed. Our prior work on performance measurement has identified several important attributes—such as the inclusion of baseline and trend data— that performance measures must have if they are to be effective in monitoring progress and determining how well programs are achieving their goals. Additionally, by identifying and communicating risks to NC3 stakeholders, DOD leadership may be in a better position to formulate responses to these risks—including deliberately determining to accept the risk or take steps to avoid, reduce, or share the risk across the defense nuclear enterprise. Promoting the sharing of quality information on the status of the recommendations and potential risks from the 2015 NC3 report among the services and other DOD components with a role in NC3 could help DOD to integrate its nuclear deterrent efforts and help decision makers to formulate responses to any potential risks. The DOD CIO officials that we met with said that it will be important to incorporate performance measures and milestones into their tracking and evaluation process and to consider operational risk and its management when discussing effects on the nuclear enterprise and its NC3 systems. The draft template that DOD CIO is developing, once it is finalized and implemented, could aid the department in identifying performance measures and milestones for these 2015 recommendations in the same way that the centralized tracking tool CAPE developed has been used to collect performance measures and milestones for the 2014 recommendations. In addition, including an assessment of risks associated with the implementation of the recommendations from the 2015 NC3 report similar to the follow-up to the recommendations of the 2014 nuclear enterprise reviews could enhance DOD’s ability to provide oversight of the recommendations and make informed responses to address any identified risks throughout its review processes, all the way to their closure by the Oversight Council. DOD and the military services have implemented changes to their personnel reliability assurance programs in response to 17 recommendations from the 2014 nuclear enterprise reviews. DOD has identified nine essential elements of reliability and released updated guidance to refocus personnel reliability on these elements. Additionally, the Air Force has incorporated these nine essential elements into its Arming and Use of Force program, allowing the Air Force to use this program to ensure that its security forces meet nuclear surety requirements. The Air Force has also created a new office within the Air Force Personnel Center, the Personnel Reliability Program Administrative Qualification Cell, to assist with the administrative review process for personnel newly assigned to Personnel Reliability Program positions or returning to Personnel Reliability Program positions after working elsewhere. In response to both the personnel recommendations and the inspections-related recommendations of the 2014 nuclear enterprise reviews, the Joint Staff, the Navy, and the Air Force have made changes to the procedures they use to conduct nuclear personnel reliability inspections at nuclear facilities. In response to recommendations from the 2014 nuclear enterprise reviews, the Joint Staff led a review of the department’s guidance on the personnel reliability assurance program. The Joint Staff, with the assistance of the military services, identified nine elements from DOD’s personnel reliability assurance requirements that it considered essential to ensure that personnel working with nuclear weapons fully met nuclear surety standards of reliability and trustworthiness. These nine essential elements are that an individual must 1. be a U.S. citizen 2. have a security clearance and be reinvestigated every five years 3. be fully qualified for the position in which he or she will serve 4. have reliability verified by the commander before being assigned to a Personnel Reliability Assurance Program position 5. be continuously monitored by peers, supervisors, and commander for issues that could affect reliability 6. have his or her personnel file checked for issues that could affect 7. undergo a medical evaluation to identify any conditions that could 8. have a personal interview with the commander who will be assessing 9. exhibit the character and competence to do the job, including allegiance to the United States and a positive attitude toward nuclear weapons In response to the Joint Staff review, the Office of the Assistant Secretary of Defense for Nuclear Matters, through the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, issued a new version of the Personnel Reliability Program manual in January 2015, followed by a reissue and renaming of the overarching DOD instruction— changing the name to DOD Nuclear Weapons Personnel Reliability Assurance—in April 2016. This guidance requires that all DOD personnel occupying positions subject to nuclear personnel reliability assurance program standards must meet the nine essential elements of reliability. Additionally, the revised guidance removed a procedure for temporary decertification, which under the previous guidance was to occur immediately on receipt of information that was, or appeared to be, a reason for decertification. The manual also makes it clear that personnel reliability assurance programs are the commanders’ programs, and the commander is exclusively accountable for determining the fitness for duty of individuals subject to the program. The updated manual also provides some clarity regarding requests for reinstatement by personnel who had previously been decertified from the Personnel Reliability Program. The military services have responded to DOD’s changes by updating their own guidance. The Navy has released a new version of its department- specific Personnel Reliability Program manual, applicable to the Navy and Marine Corps, and Army officials told us that the Army plans to release a new version of its manual in early 2018. The Air Force has released a new version of its Personnel Reliability Program manual, in addition to other guidance changes. Specifically, in response to a provision in DOD’s updated personnel reliability guidance that authorizes the military departments to develop reliability guidance specific to their security force personnel guarding nuclear weapons, the Air Force has made changes to its Arming and Use of Force program. Air Force Arming and Use of Force standards include qualification requirements under which all Air Force security forces, whether assigned to a nuclear facility or a non-nuclear facility, are authorized to carry a weapon as part of their official duties. In addition, Air Force nuclear security forces no longer require separate Personnel Reliability Program certification, as they previously did. The 2014 nuclear enterprise reviews determined that requiring nuclear security forces to meet the standards of two reliability programs at the same time was redundant. Air Force officials told us that utilizing the two reliability programs caused manning problems for the Air Force, because the availability of security force personnel qualified under both programs was limited. As a result of the changes to DOD’s guidance, the Air Force rewrote its Arming and Use of Force guidance to incorporate a new chapter that outlines procedures for assessing security forces against each of the nine essential elements of reliability. This change has allowed the Air Force to use its Arming and Use of Force program as its sole method of establishing personnel reliability assurance for Air Force security force personnel. The Air Force continues to use its Personnel Reliability Program to certify nuclear operators and maintainers. Prior to the implementation of its new version of Arming and Use of Force standards, the Air Force conducted an assessment of the new Arming and Use of Force reliability standards as the sole standard for security forces at six Air Force installations (four nuclear installations and two non- nuclear installations), to identify any gaps or areas for improvement of the new guidance prior to its Air Force-wide implementation. The assessment found that the new Arming and Use of Force standard adequately addressed the nine essential elements required of a personnel reliability assurance program, streamlined monitoring of security forces for commanders by merging the Arming and Use of Force standards with the Air Force Personnel Reliability Program standards, and held the security force personnel to a higher standard to perform armed duty. The Air Force fully implemented its new version of Arming and Use of Force standards across the service in February 2016. As a result of the Air Force’s changes to its Arming and Use of Force guidance, Air Force security forces are now qualified to serve at nuclear facilities and do not need to certify under the Personnel Reliability Program (see fig. 5). Air Force officials told us that requiring security forces to qualify under Arming and Use of Force standards had helped to address manning challenges among nuclear security forces, as well as allowing the Air Force to move experienced security forces personnel from non-nuclear facilities to nuclear assignments. According to several Air Force officials in command of security forces at non-nuclear installations, the changes to the Arming and Use of Force guidance have led to a slight increase in administrative work but have been an overall positive development, in part due to improvements in communication with medical personnel about factors that may affect a determination that an airman should not be armed. All Air Force security force personnel are required to meet the standards of Arming and Use of Force to carry a firearm and perform many of their duties. The Air Force implemented the new version of the Arming and Use of Force standards in 2016. According to Air Force officials, during the implementation, the Air Force decided that security force personnel who were, at that time, disqualified or permanently decertified under the Personnel Reliability Program would not be allowed to certify under the new version of Arming and Use of Force until they had been restored to eligibility for the Personnel Reliability Program. In early 2016, the Air Force conducted a review of 3,167 security force personnel who had previously been decertified or disqualified from the Personnel Reliability Program. The Air Force determined that 2,628 of these personnel were able to attain Personnel Reliability Program eligibility during this review, while 539 were not. Because qualifying under the new version of Arming and Use of Force is now a positional requirement, Air Force officials noted that those who do not qualify must retrain for a different job or separate from the Air Force. Air Force officials told us that the security forces career field received a greater number of new security forces personnel than they had been allocated in previous years to account for the loss of personnel who were unable to qualify under the new Arming and Use of Force standards. The Air Force tracks metrics from the Personnel Reliability Program and from the Arming and Use of Force program on an annual basis. Air Force officials told us that they have not yet reviewed the extent to which the changes to Arming and Use of Force made in February 2016 have been effective. Air Force and DOD officials told us that they are waiting until sufficient data are available before making additional changes to the guidance for their personnel reliability assurance program. The Air Force is currently developing a nuclear enterprise health assessment, which will include further assessment of the effects of the changes the Air Force has made to its Personnel Reliability Program and Arming and Use of Force guidance. Air Force officials told us that data collection for this assessment began in the spring of 2017 and that the first summary report will be released in September-October 2017. Once implemented, this Air Force nuclear health assessment will provide an overarching assessment on a periodic basis, similar to a biennial assessment that the Navy conducts of the Navy nuclear enterprise. Unlike the Air Force, the Navy and the Army have opted not to develop separate guidance on nuclear personnel reliability assurance for their security forces personnel. Navy and Army officials told us that there was no reason to create separate guidance for their security forces personnel because, unlike the Air Force, they have not faced manning challenges or administrative burdens related to these positions. The Air Force has a much larger nuclear security force, and personnel transfer between nuclear and non-nuclear facilities more frequently within the Air Force than the other services. The Navy fills security forces positions at the two Navy nuclear facilities with Navy and Marine Corps personnel who report directly from training. According to a Marine Corps official, once these personnel move on to non-nuclear assignments, they generally do not return to nuclear security positions. Army officials told us that their nuclear security forces are highly specialized, very few in number, and serve at only one facility. The Air Force has taken additional steps to improve the Personnel Reliability Program by creating the Air Force Personnel Reliability Program Administrative Qualification Cell to aid with the review of non- security force personnel (e.g., operations personnel, maintenance personnel) as they transition into Personnel Reliability Program positions. Personnel transferring into these positions are subject to an administrative qualification process, which includes a review of their personnel file, medical information, and security clearance information as well as an interview by the new, gaining, commander to assess them for factors that affect their reliability. Prior to October 2015, the commander for the unit that the individual was leaving reviewed the individual’s administrative paperwork and then provided an assessment of the individual’s reliability under the Personnel Reliability Program standards to the commander of the gaining unit. Because this initial review was often conducted by commanders outside of the nuclear field, they had less experience than nuclear commanders in conducting such an assessment. According to Air Force officials, this lack of experience often resulted in the standards being applied either too stringently or too loosely and the initial reviews often being completed late. Additionally, although Air Force guidance indicated that personnel transferring directly from one Personnel Reliability Program position to another were not required to undergo administrative qualification, one of the 2014 nuclear enterprise reviews found that some administrative file reviews were occurring. As of November 2016, the Air Force Personnel Reliability Program Administrative Qualification Cell has been staffed by personnel experienced with the standards, and they assist in conducting reviews of many of the Air Force personnel moving to nuclear assignments. The cell performs the administrative review formerly conducted by the commander of the individual’s losing unit and provides a recommendation to the commander of the gaining unit before that commander makes an assessment (see fig. 6). As a result, according to Air Force officials, the qualification process is now completed more quickly, and the administrative burden on commanders has been lessened. Officials from the Air Force Personnel Center told us that the Personnel Reliability Program Administrative Qualification Cell was currently assisting all Air Force Major Commands but had not yet begun working with all Personnel Reliability Program units. In addition, in response to a recommendation from the 2014 nuclear enterprise reviews, the Air Force has eliminated administrative reviews that some commands were conducting of personnel transferring directly from one Personnel Reliability Program position to another, but which were not required in the Air Force’s guidance. These personnel have remained subject to continuous monitoring, so they do not require new administrative qualification reviews. DOD, the Air Force, and the Navy also made changes to their nuclear inspections processes in response to the 2014 nuclear enterprise reviews. Nuclear units are subject to a number of different inspections. For example, Joint Staff guidance requires that each of the services conduct Nuclear Weapon Technical Inspections biennially at each of their nuclear units. These inspections are intended to examine every aspect of the nuclear mission at that unit, including the processes of the personnel reliability assurance program. Because of the importance of maintaining nuclear surety by keeping nuclear weapons safe and secure, units that receive an unsatisfactory rating on an inspection may be decertified from conducting operations or have a portion of their nuclear capabilities withdrawn and retain only a limited nuclear capability in mission areas that would not jeopardize the safety, security, or reliability of the nuclear weapons. The 2014 nuclear enterprise reviews found that inspections of nuclear forces occurred too frequently, and that the procedures for inspections of personnel reliability assurance programs had become overly burdensome because of their focus on records review. The reviews found that, as a result, these personnel reliability assurance programs had become dominated by processes that were intended to prepare for inspections, rather than to ensure personnel reliability. Before the 2014 nuclear enterprise reviews, DOD personnel working with nuclear weapons were subject to frequent inspections by multiple organizations. According to DOD officials, Air Force major commands and Navy commands were performing inspections at nuclear units under their control every 18 months. One such inspection was conducted as a combined military service and Defense Threat Reduction Agency inspection. Each service inspected additional specific areas. For Navy units, the Navy inspectors would accept the Defense Threat Reduction Agency inspection report and the Navy inspectors would review additional, service-specific items; this resulted in a larger number of inspectors present. For Air Force units, the combined inspection was performed concurrently, with the Air Force inspecting the same items as the Defense Threat Reduction Agency inspectors as well as reviewing additional, service-specific items; this resulted in two separate inspection teams. The 2014 nuclear enterprise reviews found that a mistake by a single individual could result in an entire submarine or wing receiving an unsatisfactory rating—even in cases not involving a clear, critical error—potentially leading to the withdrawal of their nuclear weapons capabilities. The Independent Review of the Department of Defense Nuclear Enterprise found that the high frequency of inspections resulted in nuclear units spending significant time preparing for inspections rather than focusing on performing their mission. The Independent Review of the Department of Defense Nuclear Enterprise also stated that the portions of these inspections concerned with the personnel reliability assurance program were heavily focused on records review, especially at Air Force nuclear units. During each inspection, inspectors would review hundreds of personnel files and medical records to assess whether the commander and medical staff had made the correct decision in determining an individual to be reliable. Air Force officials told us that commanders and their medical staffs could be found deficient for improperly certifying individuals as reliable even if these individuals had been able to perform their duties without any issues—for example, after routine medical procedures like a regular check-up with an eye doctor. As a result, commanders and medical staff at these units implemented additional procedures beyond those outlined in DOD guidance, such as temporarily suspending personnel from Personnel Reliability Program duties for every off-base medical appointment regardless of whether it could affect their reliability. Additionally, according to the Internal Assessment of the Department of Defense Nuclear Enterprise, inspectors also cited minor administrative deficiencies that were unrelated to personnel reliability, such as using the improper color of ink to fill out a form. To address the recommended improvements identified by the 2014 nuclear enterprise reviews, DOD has updated its inspection procedures. The Joint Staff has updated the Nuclear Weapons Technical Inspections guidance to reduce the frequency of inspections at nuclear units from every 18 months to every 24 months. DOD’s Defense Threat Reduction Agency no longer conducts joint inspections with the services but is responsible for providing oversight of the services’ inspectors on behalf of the Chairman of the Joint Chiefs of Staff. For the portion of the inspection concerned with personnel reliability assurance, the updated guidance de-emphasizes records reviews in favor of focusing on processes and procedures through observation, interviews, and scenario- based discussions. The Navy and the Air Force have also updated their inspection procedures to implement these changes in DOD’s guidance. For example, Air Force inspectors do not conduct records checks unless the interviews and scenario-based discussions reveal a lack of procedural knowledge. Similarly, Navy officials stated that Navy inspectors review additional records as needed if a lack of procedural knowledge is revealed. To aid the Navy in assessing the overall effectiveness of the updated inspection procedures, the Navy has opted to also review a sample of the health records of personnel recently certified or reinstated into the Personnel Reliability Program. According to Air Force officials at one nuclear wing that had recently undergone a Nuclear Weapons Technical Inspection, the changes to inspection procedures for their personnel reliability assurance programs that DOD and the Air Force have implemented have had a positive effect. These officials stated that the increased use of scenario-based discussions and knowledge checks, combined with inspectors taking a less adversarial and more conversational discussion approach to their inspection inquiries, has resulted in an environment where personnel feel more comfortable self-disclosing problems or mistakes, and where the focus of the inspection is on process improvement rather than on identifying administrative errors, independent of whether the errors were substantive deficiencies. DOD has taken steps to improve the defense nuclear enterprise in response to the 2014 nuclear enterprise reviews and the 2015 NC3 report. The processes CAPE has developed to track and evaluate continuing progress to improve the defense nuclear enterprise—including changes in DOD’s and the military services’ approaches to administering their personnel reliability assurance programs—provide a good framework for continually monitoring the department’s efforts. This framework is also a good example of how similar efforts to implement and oversee actions on department-wide improvements on a wide range of subjects could be made effectively. By developing additional guidance to identify and document risks associated with implementing the recommendations from the 2014 nuclear enterprise reviews and identifying and communicating performance measures, milestones, and risks for the 2015 NC3 report recommendations, the department— particularly through the NDERG and the Oversight Council for NC3— would be better positioned to ensure that progress continues to be made, underlying problems are addressed, and risks are mitigated or accepted after considering the predictable and desirable results. We are making the following two recommendations to DOD: CAPE, in coordination with the military departments and other DOD entities serving as offices of primary responsibility for implementing the recommendations, develop additional guidance for these offices to identify associated risks and document information about these risks in the centralized tracking tool. (Recommendation 1) DOD CIO—in coordination with CAPE, the military departments, Joint Staff, and U.S. Strategic Command—as the draft template and any other additional tools to aid in their approach are finalized, identify and communicate to NC3 stakeholders performance measures and milestones to assist in tracking the progress of implementation of the recommendations from the 2015 NC3 report and evaluating the outcomes of implementation actions, and risks associated with the implementation of the recommendations from the 2015 NC3 report. (Recommendation 2) We provided a draft of the classified report to DOD for comment. In its comments, reproduced in appendix I, DOD concurred with both of our recommendations. In response to our first recommendation, DOD indicated that the Director, CAPE, will issue supplementary guidance for the relevant DOD components to identify and document key risks related to implementation of recommendations from the 2014 reviews, risks related to implementation of alternate approaches, and potential unintended consequences. In response to our second recommendation, DOD stated that DOD CIO will work with the stakeholders of the Council on Oversight of the National Leadership Command, Control, and Communications System to identify and document performance measures and milestones associated with progress toward the recommendations from the 2015 NC3 report, as well as the risks related to implementation of these recommendations. We are encouraged that DOD is planning to take these actions and believe that, once they have been completed, the department will be better positioned to ensure that progress in implementing the recommendations from both the 2014 nuclear enterprise reviews and the 2015 NC3 report continues to be made, underlying problems within the defense nuclear enterprise are addressed, and risks are mitigated or accepted after deliberate consideration. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, and to the Secretary of Defense; the Under Secretary of Defense for Acquisition, Technology, and Logistics; the Chairman of the Joint Chiefs of Staff; the Secretaries of the Army, of the Navy, and of the Air Force; the Commandant of the Marine Corps; the Commander, U.S. Strategic Command; the Department of Defense Chief Information Officer; and the Director of the Office of Cost Assessment and Program Evaluation. In addition, the report is available at no charge on the GAO website at http://www.gao.gov If you or your staff have any questions about this report, please contact me at (202) 512-9971 or KirschbaumJ@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, key contributors to this report were Penney Harwell Caramia, Assistant Director; Chris Cronin; R. Scott Fletcher; Jonathan Gill; Brent Helt; Douglas Hunker; Joanne Landesman; Marc Molino; Amie Lesser; Pamela Davidson; and Michael Shaughnessy. Nuclear Weapons Sustainment: Budget Estimates Report Contains More Information than in Prior Fiscal Years, but Transparency Can Be Improved. GAO-17-557. Washington, D.C.: July 20, 2017. Nuclear Weapons: DOD Assessed the Need for Each Leg of the Strategic Triad and Considered Other Reductions to Nuclear Force. GAO-16-740. Washington, D.C.: September 22, 2016. Defense Nuclear Enterprise: DOD Has Established Processes for Implementing and Tracking Recommendations to Improve Leadership, Morale, and Operations. GAO-16-597R. Washington, D.C.: July 14, 2016. Nuclear Weapons Sustainment: Improvements Made to Budget Estimates Report, but Opportunities Remain to Further Enhance Transparency. GAO-16-23. Washington, D.C.: December 10, 2015.", "summary": "In 2014, the Secretary of Defense directed two reviews of DOD's nuclear enterprise. These reviews identified problems with leadership, organization, investment, morale, policy, and procedures, as well as other shortcomings that adversely affected the nuclear deterrence mission. The reviews also made recommendations to address these problems. In 2015, DOD conducted a review focused on NC3 systems, which resulted in additional recommendations. The National Defense Authorization Act for Fiscal Year 2017 includes a provision for GAO to review DOD's processes for addressing these recommendations, and House Report 114-537 includes a provision for GAO to review changes to DOD's nuclear personnel reliability assurance programs. This report addresses the extent to which DOD and the military services have (1) made progress in implementing recommendations to improve the nuclear enterprise and (2) made changes to their personnel reliability assurance programs. GAO reviewed relevant documents and interviewed agency officials from DOD and the military services. This is a public version of a classified report GAO issued in August 2017. It omits information DOD deemed classified. The Department of Defense (DOD) has made progress in implementing the recommendations from the 2014 nuclear enterprise reviews and the 2015 nuclear command, control, and communications (NC3) systems report. In December 2016, the Office of Cost Assessment and Program Evaluation (CAPE) provided the military services with guidance that emphasizes using performance measures and milestones to evaluate progress to aid them in tracking and analyzing their implementation of the recommendations from the 2014 nuclear enterprise reviews. However, CAPE's guidance does not require the military services and other DOD components to identify and document risks as part of its recommendation tracking processes. As a result, DOD does not consistently identify and document risks, and it may not be identifying and communicating potential risks related to the nuclear enterprise. One of the 2014 nuclear enterprise reviews found that the avoidance of managing risks by many leaders within the enterprise adversely affected the mission. Developing additional guidance on identifying and documenting risks could enhance DOD's ability to provide oversight of its efforts to monitor progress and make informed responses to address any identified risks. For recommendations made in the 2015 NC3 report, DOD's Office of the Chief Information Officer (DOD CIO) uses an internal spreadsheet to track implementation but has not yet identified performance measures, milestones, or risks. DOD CIO has drafted a template that, once it has been approved and implemented, will provide a form that could be used for documenting performance measures, milestones, and risks. By identifying and communicating this information, DOD CIO could improve its efforts to track the progress of DOD's actions, evaluate their effects, and formulate responses to risks. DOD and the military services have implemented changes to their personnel reliability assurance programs in response to recommendations from the 2014 nuclear enterprise reviews. These programs are intended to ensure that DOD personnel who work with nuclear weapons and nuclear weapons systems, NC3 systems and equipment, and special nuclear material are trustworthy, reliable, and capable of performing their assigned nuclear weapons-related mission. The 2014 nuclear enterprise reviews found that these personnel reliability assurance programs were overly complex and administratively burdensome and that frequent and intrusive inspections left nuclear units more focused on preparing for and responding to inspections than on ensuring personnel reliability. DOD and the services have updated their guidance for personnel reliability assurance programs, including focusing on nine essential elements of reliability. For example, the Air Force has incorporated these elements into the standards it uses for its security forces. Additionally, the Air Force has centralized some of its administrative processes, and the Joint Staff has updated inspection procedures in a way that may ease the burden on personnel being inspected. DOD should develop additional guidance on identifying and documenting risks, and should identify and communicate performance measures and risks. DOD concurred and provided information about planned actions to implement them.", "document_type": "gao"}
{"report": "The National Guard consists of the NGB—which includes the Office of the Chief, National Guard Bureau; the National Guard Joint Staff; the Office of the Director, Army National Guard; the Office of the Director, Air National Guard—and the National Guard units, which are located in the 50 states, 3 U.S. territories, and the District of Columbia. Figure 1 illustrates the organizational structure of the National Guard. The National Guard has both a federal- and state-level mission. The National Guard’s federal mission is to (1) maintain well-trained and well- equipped units that are ready to be mobilized by the President of the United States during war or international peacekeeping efforts, and (2) provide assistance during national emergencies, such as natural disasters or civil disturbances. The National Guard’s state-level mission is to (1) protect life and property and preserve peace, order, and public safety, and (2) provide emergency relief support during local or statewide emergencies, such as riots, earthquakes, floods, or terrorist attacks. The National Guard’s state-level mission is executed under the control of state and territory governors, and for the District of Columbia, the President. Reflecting the National Guard’s federal and state roles, National Guard members may function under one of three command statuses: Title 10. When performing duty under the authority of Title 10 of the United States Code (Title 10 status), National Guard members are under the command and control of the President and are federally funded. When operating in Title 10 status, National Guard members are subject to the Uniform Code of Military Justice. Title 32. When performing duty under the authority of Title 32 of the United States Code (Title 32 status), National Guard members are under the command and control of the governors, but are federally funded. For example, past missions have included providing security at the nation’s airports in the immediate aftermath of the September 11, 2001 terrorist attacks and assisting the Gulf Coast in the aftermath of Hurricane Katrina. While operating in Title 32 status, National Guard members are not subject to the Uniform Code of Military Justice, but, according to OCI officials, may be subject to a state code of military justice enacted by the state legislature. State Active Duty. When performing duty in State Active Duty status, National Guard members are under command and control of the governors and are state funded. When operating in State Active Duty status, National Guard members are not subject to the Uniform Code of Military Justice. When performing their state-level mission, National Guard units within a state, territory, or the District of Columbia report to a state-level senior officer known as the Adjutant General, who in turn reports to either a state or territorial governor, or for the District of Columbia, the President (as Commander-in-Chief). The Adjutant General coordinates with the NGB’s Army or Air National Guard, as appropriate, on such matters as staffing and unit readiness. The Army and Air National Guard in turn coordinate with Army and Air Force staff, respectively. OCI was established in 2012 by the Chief of the NGB to perform complex administrative investigations at the request of the Adjutants General of the 50 states, the three territories, and the District of Columbia, or at the direction of the Chief of the NGB. OCI’s primary purpose is to provide the state National Guards with the capability to administratively investigate reports of sexual assault having a National Guard nexus when the reports fall outside the jurisdiction of military criminal investigative organizations and are not sufficiently investigated by civilian law enforcement. OCI’s secondary purpose is to administratively investigate other complex matters as assigned, one of which is a state assessment. The types of investigations conducted by OCI are further described later in this report. Congress designated the Chief of the NGB as (1) the senior military officer responsible for the organization and operations of the NGB and (2) the principal advisor on National Guard matters to the Secretary of Defense through the Chairman of the Joint Chiefs of Staff, as well as to the Secretary and Chief of Staff of the Army, and Secretary and Chief of Staff of the Air Force. Further, a DOD directive states that one function of the NGB is to monitor and assist states in the organization, maintenance, and operation of National Guard units so as to provide well- trained and well-equipped units capable of augmenting the active forces. OCI officials stated that the Chief of the NGB has the authority to investigate matters in order to support the above statutory and regulatory obligations and authorities. Moreover, a DOD instruction makes clear that DOD components without law enforcement authority, like the NGB, have the authority to conduct only administrative investigations. The NGB Instruction states that the Chief of OCI specifies the requisite education, training, and experience for appointing an investigator to OCI and for assigning investigators to conduct a specific investigation. According to OCI officials, investigators are initially selected based on their analytical and investigatory skills, as well as their experience and understanding of the civilian and military criminal justice systems. OCI officials stated that investigators are required to complete an initial two- week training course conducted by the U.S. Army Military Police School, followed by three days of orientation conducted by OCI. OCI officials stated that investigators are also offered additional training opportunities throughout the year, including annual refresher training and professional development training. In response to statutory requirements, in 2005, DOD established its Sexual Assault Prevention and Response Program to promote the prevention of sexual assault, encourage increased reporting of such incidents, and improve victim response capabilities. DOD’s program allows servicemembers to make a restricted or unrestricted report of sexual assault. DOD’s restricted reporting option is designed to allow sexual assault victims to confidentially disclose an alleged sexual assault to selected individuals without initiating an official investigation and to receive medical and mental health care. DOD’s unrestricted reporting option triggers an investigation by a military criminal investigative organization, such as the Army Criminal Investigation Command or the Air Force Office of Special Investigations. DOD’s directive for its Sexual Assault Prevention and Response Program delegates authority to the Chief of the NGB for implementing policy and procedures for the program as it applies to National Guard members in Title 32 status. OCI conducts administrative investigations of reports of sexual assault, in addition to state assessments of state National Guard units. OCI is funded through appropriations made available for DOD’s Sexual Assault Special Victims’ Counsel Program. Moreover, OCI is staffed with temporarily assigned National Guard members as investigators. Since its inception, OCI has primarily conducted administrative investigations of unrestricted reports of sexual assault, in addition to a smaller number of state assessments. Since 2013, OCI has completed approximately 380 administrative investigations of sexual assault and 5 state assessments, as shown in figure 2. The National Guard reported to Congress in 2018 that OCI has experienced a 350 percent increase in requests for assistance from fiscal year 2014 to fiscal year 2017; and 53 of the 54 states and territories have requested OCI support during this period. OCI’s sexual assault investigations are conducted at the request of the Adjutants General and are intended to provide the Adjutants General with information to make administrative decisions. Figure 3 describes the OCI process for accepting sexual assault cases. Based on its investigation, OCI provides a report to the state National Guard that includes the findings resulting from the investigation and identifies whether OCI has found the allegation to be substantiated. OCI’s reports resulting from its sexual assault investigations do not include recommendations for action. Rather, the Adjutant General can use the report as the basis to determine whether and what type of administrative action should be taken. Such administrative actions may include a letter of reprimand, administrative separation, or other appropriate administrative remedy. OCI may also conduct a state assessment at the request of a state official, such as the Adjutant General or Governor. Each state assessment reflects the informational needs of the requesting official. According to NGB policy, the office will generally not conduct an assessment into criminal matters, and the assessment will also not include investigations of unrestricted reports of sexual assault. According to OCI officials, state assessments generally involve matters that are widespread issues and may adversely affect the good order and discipline of the National Guard, such as hostile work environment or concerns regarding a state Guard’s approach to sexual assault prevention and response. At the conclusion of an assessment, OCI provides a report to the requesting official that may include recommended actions to address problems identified as a result of the assessment. In addition, according to OCI officials, the Chief of the NGB has the authority to direct inquiries into matters affecting the good order of the National Guard. OCI officials stated that OCI has the capacity to conduct inquiries at the direction of the Chief of the NGB and which are not performed at the request of a state official. For example, according to OCI officials, in 2014, the Chief of the NGB directed OCI to conduct an inquiry to evaluate the fiscal stewardship of the National Guard. National Guard officials stated that this was the only inquiry of this kind that the office has performed. Adjutants General and their staffs stated that OCI provides the states with an unbiased or impartial third-party review of reported incidents of sexual assault. Officials from one state stated that they could not identify an alternative entity that could provide this service if OCI did not exist. OCI is primarily funded through amounts made available by Congress for transfer to the services for the Sexual Assault Special Victims’ Counsel Program in annual Operation and Maintenance, Defense-wide (O&M, Defense-wide) appropriations. According to OCI officials, the office estimates its annual budgetary needs based on an analysis of prior fiscal year’s case load and expected personnel, travel, and training costs in the upcoming fiscal year. OCI, along with the National Guard’s Special Victims’ Counsel Program, submits its budget requirements to DOD SAPRO. SAPRO then submits a consolidated request for inclusion in DOD’s overall budget request. According to OCI and DOD officials, OCI does not receive its allotment of transferred amounts until late in the fiscal year. When the transferred amounts are received into Army and Air National Guard O&M and Military Personnel accounts, amounts initially allotted for OCI are reprogrammed to other activities that supported OCI earlier in the fiscal year. OCI’s overall funding has increased since 2014. According to an OCI official, the funding increase has been in response to increasing requests for OCI’s services by the states and territories. Specifically, in fiscal year 2014, OCI funding was approximately $1.4 million, and by fiscal year 2018 total funding was almost $5 million. Figure 4 shows OCI’s funding levels from fiscal year 2014 through fiscal year 2018. According to the NGB’s 2018 manual, the NGB Joint Staff is responsible for coordinating funding for OCI’s state assessments. OCI officials said that costs related to state assessments may be funded through available NGB O&M amounts. However, the officials also said that OCI does not track its expenditures related to state assessments separately from those related to its sexual assault investigations. According to OCI officials, OCI does not receive reimbursement from the states and territories for the cost of its investigations. OCI officials further stated that OCI investigators are part of the federal oversight of the federally recognized and funded units and members of the State National Guards. As such, states do not reimburse DOD for the cost of investigations performed by OCI. According to an OCI briefing document, a benefit of the office is its ability to conduct sexual assault investigations for the states which alleviates the need for Adjutants General to choose between funding such investigations versus other mission needs. According to the National Guard’s 2018 Report to Congress, OCI primarily relies on National Guard members staffed temporarily to the office as investigators to conduct its sexual assault investigations and state assessments. The report stated that, since fiscal year 2015, OCI has used active duty operational support (ADOS) orders to maintain a staff of National Guard members, including between 22 and 28 investigator positions and 4 administrative and support positions. That report further stated that in fiscal year 2018, OCI hired one additional full- time Active Guard Reserve enlisted position and one Department of the Army civilian position. According to OCI officials, the office’s investigative staff consists primarily of individuals with legal or law enforcement experience. See appendix I for more information on the organizational structure of OCI. In its 2018 Report to Congress, the National Guard stated that, of those OCI staff serving on ADOS orders, more than half serve in their position for one year or less, which was a contributing factor to longer investigative timelines and a backlog of requests for investigation. In February 2017, we found that the timeliness of investigations was a challenge for OCI and that 57 percent of investigations conducted in fiscal year 2015 took 6 to 9 months from the time a case was referred until the investigation was completed. We made a recommendation that the Chief of the NGB reassess OCI’s timeliness and resources and identify the resources needed to improve the timeliness of these investigations. As of October 2018, the Office of the Chief Counsel has taken some steps to address this recommendation, which according to OCI officials include, for example, starting to develop a strategic plan to address the office’s long term staffing and funding needs. In its 2018 Report to Congress, the National Guard stated that OCI’s current manning and resourcing strategy of one-year ADOS tours, coupled with unprogrammed funding, impairs the office’s ability to recruit and sustain a stable, experienced workforce, resulting in longer investigation timelines and a growing backlog of requests for assistance which OCI struggles to meet. According to the National Guard’s 2018 Report to Congress, OCI’s backlog of investigation requests grew from 7 cases in fiscal year 2014 to 55 in fiscal year 2017. According to OCI officials, the office continued to experience a backlog in fiscal year 2018. NGB guidance establishes policies for OCI’s investigations, and OCI has implemented internal controls to help ensure it follows key policies. NGB guidance also establishes two criteria that allegations of sexual assault must meet for OCI to begin an investigation; however, this guidance does not require OCI to consistently include documentation in its case files related to how its case acceptance criteria are met. The NGB Instruction delineates the authority and responsibilities of NGB and state officials and the NGB Manual serves as the implementing guidance. According to OCI officials, the office’s investigative process was designed based on the Army’s Procedures for Administrative Investigations and Boards of Officers. To determine the allegations OCI will investigate, NGB policy includes specific requirements for OCI’s coordination with state officials such as the Adjutant General and legal staff. According to NGB guidance, OCI officials will work with state officials to determine the appropriateness of sending a case to OCI, but state National Guard officials are responsible for formally requesting an OCI investigation. NGB policy also includes requirements for OCI investigators and outlines policies for the investigation process. The NGB Manual has additional requirements for the office’s dissemination of investigation results back to the state National Guard. Based on the content of the NGB policy, OCI also created Standard Operating Procedures to guide the activities that are designated as the office’s responsibilities. Based on our review, we found that OCI has internal controls to help ensure stakeholders follow key policies, including a review of final investigation reports and checklists to monitor activity. OCI’s review of its investigations and case files includes both administrative and legal reviews conducted by officials within OCI and the NGB’s Office of the Chief Counsel, including both administrative staff and leadership. Similar to the Army’s administrative investigations procedures, OCI’s reports of investigation undergo a review process which confirms that case files include all required documentation and provide sufficient evidence for the report’s conclusions. Investigators have primary responsibility for storing administrative and evidentiary case documents, and a team of quality control administrators works with investigators to store and publish case files in accordance with OCI’s policies. According to OCI officials, once investigators produce a report of investigation and determine whether to substantiate the allegation, the Investigations Manager reviews the investigators’ determinations before sending the report to the office’s Deputy Chief to review. According to OCI’s Standard Operating Procedures, after the Deputy Chief’s review, OCI submits the report for review by an independent legal counsel in the Administrative Law Division of the NGB’s Office of the Chief Counsel. Furthermore, OCI’s procedures state that all OCI reports of investigation must be reviewed by both the Chief of OCI and the Deputy Chief Counsel before being submitted to the state that requested the investigation. In addition to the internal controls implemented through OCI’s report review process, OCI officials stated that the office also developed checklists designed to support internal policy adherence. For example, the review process includes an Investigator Checklist which outlines investigation policies and a Quality Control Checklist for administrators to ensure that the final report of investigation includes specific documentation and is coordinated appropriately, consistent with policy. Alongside these checklists, OCI’s Standard Operating Procedures provide guidance to ensure that OCI investigators securely store private and sensitive information, particularly video recordings of personnel related to the case. Our analysis of a non-generalizable sample of 27 case files from 5 states from fiscal years 2016 and 2017—out of a total of approximately 225 cases for those same years—found that OCI generally adhered to key policies. For example, OCI included the Adjutants General requests to initiate the OCI investigation and executive summaries explaining OCI’s determination of whether or not the allegation was substantiated in all 27 case files. However, 4 of 27 case files in our sample contained investigation request letters with personally identifiable information. OCI policy states that these letters should not include such information. OCI officials stated that they are unable to control the information the state National Guards include in their request letters; however, OCI officials also stated that investigators are expected to work with the states to get this information removed. NGB policies describe two criteria that allegations of sexual assault must meet for OCI to initiate and conduct an investigation. First, OCI may only conduct administrative investigations of sexual assault with an identified National Guard nexus. The NGB Instruction defines a National Guard nexus as generally existing when the reported perpetrator or the alleged victim is or was—at the time of the reported incident—a member or civilian employee of the National Guard. Officials stated that this includes National Guard members in Title 32 or state active duty status. Second, OCI may investigate a case only after a military criminal investigative organization or civilian law enforcement has declined to investigate a case, when a victim declines investigation by civilian law enforcement, or when a civilian law enforcement organization did not sufficiently investigate. Table 1 describes the OCI criteria to administratively investigate sexual assault cases with a National Guard nexus. The NGB Manual includes a template that the states should use when submitting requests for OCI to initiate an investigation of an unrestricted report of sexual assault. The template includes standardized language that the state National Guard staff determined the existence of a National Guard nexus and confirmed coordination with at least one criminal investigative organization prior to requesting OCI’s assistance. All 27 written requests from the Adjutants General included in the sample of case files we analyzed included a statement that used this standardized language and indicated that the state National Guard staff had determined the existence of a National Guard nexus and confirmed coordination with at least one criminal investigative organization prior to requesting OCI’s assistance, consistent with NGB policy. However, we found that OCI’s case files do not consistently include supporting documentation to show how the case acceptance criteria— specifically the determination of a National Guard nexus and verification of coordination with the appropriate criminal investigative organizations— were met. This is because NGB policy does not require that OCI collect and include any additional documentation for verification purposes in its case files. In our review of OCI’s case files, we found that 12 of the 27 case files did not include additional supporting documentation, such as police reports or e-mail correspondence with the appropriate criminal investigative organizations. We also found that 7 of the 27 case files did not include supporting documentation of both the nexus determination and coordination with the appropriate criminal investigative organizations. According to OCI officials, the office relies on state National Guard officials’ evaluation and determination about the nexus criteria and does not always receive supporting documentation to verify the criteria have been met before initiating an investigation. OCI officials further stated that this is due, in part, to the fact that the NGB and Adjutants General cannot require local law enforcement to produce documentation related to their investigations because neither entity has subpoena power over state law enforcement organizations. However, in response to our concerns about the lack of supporting documentation to verify the state National Guard officials’ evaluations of the criteria, in October 2018, OCI officials shared a draft memorandum template that they developed for verifying how the two case acceptance criteria were met. Standards for Internal Control in the Federal Government state that management should design control activities to achieve objectives and respond to risks. More specifically, documentation of such activities should be readily available for examination, properly managed, and maintained. Those standards state that documentation is a necessary part of an effective internal control system and is required to demonstrate design, implementation, and operating effectiveness. Without a requirement that supporting documentation related to the National Guard nexus and criminal investigative organization coordination efforts is included in each case file, OCI does not have reasonable assurance that the cases it is investigating adequately meet the two criteria for case acceptance. Through the creation of the Office of Complex Investigations in 2012, the NGB has taken steps to address a gap by exercising its investigative authority to address those instances of sexual assault involving National Guard members that the military justice system or local law enforcement could not or would not investigate. OCI has implemented processes and procedures to help ensure that its policies are followed. However, the NGB does not require OCI to include supporting documentation in its case files for verifying how state National Guard officials determined that case acceptance criteria have been met. Without a requirement to collect and maintain such supporting documentation as part of its case files, OCI does not have reasonable assurance that it is only undertaking investigations that meet case acceptance criteria. The Secretary of Defense should ensure that the Chief of the National Guard Bureau, in coordination with the Office of Complex Investigations, includes a requirement in its guidance to collect and maintain supporting documentation as part of its case files that verifies whether and how (1) the National Guard nexus exists, and (2) the allegation has been referred to the appropriate military criminal investigative organization or civilian law enforcement organization prior to opening an OCI investigation. (Recommendation 1) We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix II, DOD concurred with our recommendation and noted actions it was taking. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and other interested parties, including the Chief of the National Guard Bureau, the National Guard Bureau’s Office of Chief Counsel, and the Office of Complex Investigations. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions regarding this report, please contact Brenda Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. The Office of Complex Investigations (OCI) was established within the National Guard Bureau’s Office of the Chief Counsel. To conduct its sexual assault investigations and state assessments, OCI primarily relies on Guard members staffed temporarily to the office as investigators. From August 2012 through September 2014, the office operated with three full- time personnel, who administered the program and conducted investigations with investigative personnel who received assignments as an extra duty. Since fiscal year 2015, however, OCI has used one-year active duty operational support (ADOS) orders to maintain a staff of National Guard members, including between 22 and 28 investigator positions and 4 administrative and support positions. In fiscal year 2018, the office was primarily staffed with traditional Guard members on ADOS tours—4 administrative support personnel and 24 investigators—in addition to one full time Active Guard and Reserve enlisted position and one Department of the Army civilian position. According to OCI officials, the office’s investigative staff consists primarily of individuals with legal or law enforcement experience. Figure 5 illustrates the organizational structure of OCI. In addition to the contact named above, Kimberly Seay, Assistant Director; Johana Ayers; Maurice Belding; Vincent Buquicchio; Serena Epstein; Laura Ann Holland; Amie Lesser; Wayne McElrath; Stephanie Moriarty; Clarice Ransom; Ramon Rodriguez; Michael Silver; Jennifer Weber; and Nell Williams made key contributions to this report.", "summary": "Sexual assault incidents involving military service members can devastate victims and have far reaching impacts for DOD due to the potential for these crimes to undermine the department's core values, degrade mission readiness, and raise financial costs. The National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review, among other things, the purpose and structure of OCI and its adherence to policies. This report (1) describes OCI's services and budgetary and staffing resources; and (2) evaluates OCI's policies for investigations and internal controls to ensure its policies are consistently followed. GAO analyzed OCI policy, budget, and staffing documents and interviewed OCI, DOD, Army, and Air Force officials. GAO also interviewed National Guard officials and analyzed case files for select years from a nongeneralizable sample of five states. The National Guard Bureau's (NGB) Office of Complex Investigations (OCI) was established in 2012 to conduct administrative investigations into allegations of sexual assault that are not criminal in nature and are conducted only when criminal law enforcement entities, such as military criminal investigative organizations or local civilian law enforcement, have declined or do not have jurisdiction to investigate and a National Guard nexus has been identified. Since 2013, OCI has completed approximately 380 investigations of allegations of sexual assault at the request of state National Guard officials and 5 assessments of state National Guard units to review the current culture, policies, and practices for the handling of sexual assault, among other things. State National Guard officials told GAO that OCI provides the states with an unbiased or impartial third-party review of reported incidents of sexual assault. OCI is primarily funded through amounts made available for the Sexual Assault Special Victims' Counsel Program in the Department of Defense's (DOD) annual defense-wide Operation and Maintenance appropriation. This funding has increased from approximately $1.4 million in fiscal year (FY) 2014 to almost $5 million in FY 2018; which OCI officials attributed to increasing demands for OCI's services. OCI uses trained National Guard members temporarily assigned to the office as investigators. NGB guidance establishes OCI investigation policies and OCI has implemented controls to help ensure key policies are followed. However, OCI has inconsistently documented how case acceptance criteria have been met. GAO's analysis of a sample of 27 case files from 5 states from FY 2016 and FY 2017 found that OCI generally adhered to key investigation policies. For example, in accordance with its policies, in all 27 case files GAO reviewed, OCI had included the state National Guard's requests to initiate an OCI investigation and executive summaries explaining OCI's determination of whether or not the allegation was substantiated. Furthermore, NGB has established two case acceptance criteria—specifically that a National Guard nexus exists and that coordination with at least one criminal investigative organization occurred. According to OCI officials, state National Guard officials are to verify these criteria are met before submitting requests for OCI to initiate an investigation of sexual assault. NGB has developed a template with standardized language that includes these criteria that the states should use. While OCI's case files included the request letters with standardized language from state National Guards indicating the state National Guard staff had determined the case acceptance criteria were met, they did not consistently include supporting documentation to verify how the case acceptance criteria were met. This is because NGB policy does not require such documentation to be included in OCI's case files. Without such documentation, OCI does not have reasonable assurance that the cases it accepts for investigation adequately meet the two criteria for case acceptance. GAO recommends that DOD require OCI to include supporting documentation in case files to verify a National Guard nexus exists and referral to the appropriate law enforcement organization occurs. DOD concurred with the recommendation.", "document_type": "gao"}
{"report": "In February 2013, the White House released Presidential Policy Directive (PPD)-21, Critical Infrastructure Security and Resilience, directing DHS to coordinate the overall federal effort to promote the security and resilience of the nation’s CI from all hazards. Within DHS, NPPD has been delegated the responsibility for the security and resilience of the nation’s CI, and within NPPD, the Office of Infrastructure Protection (IP) leads and coordinates national programs and policies on CI issues. Also in February 2013, the President issued Executive Order 13636, “Improving Critical Infrastructure Cybersecurity,” citing repeated cyber intrusions into critical infrastructure as demonstrating the need for improved cybersecurity. Among other things, the order addressed the need to improve cybersecurity information sharing and collaboratively develop risk-based standards; stated U.S. policy to increase the volume, timeliness, and quality of cyber threat information shared with private sector entities; directed the federal government to develop a technology- neutral cybersecurity framework to help CI owners and operators identify, assess, and manage cyber risk; and required DHS to use a consultative process to identify infrastructure in which a cybersecurity incident could result in catastrophic consequences. The NIPP sets forth a risk management framework and outlines DHS’s roles and responsibilities regarding CI security and resilience. As shown in Figure 1, the NIPP risk management framework is a planning methodology that outlines the process for setting goals and objectives; identifying assets, systems, and networks; assessing risk; implementing protective programs and resiliency strategies; and measuring performance and taking corrective action. The risk management framework calls for public and private CI partners to conduct risk assessments to understand the most likely and severe incidents that could affect their operations and communities, and use this information to support planning and resource allocation in a coordinated manner. According to the NIPP, the risk management framework is also intended to inform how decision makers take actions to manage risk, which according to DHS, is influenced by the nature and magnitude of a threat, the vulnerabilities to that threat, and the consequences that could result, as shown in figure 2. Multiple DHS offices conduct or assist with risk assessments for CI, including the Office of Cybersecurity and Communications (CS&C), Office of Infrastructure Protection, and Office of Cyber and Infrastructure Analysis (OCIA). The Office of Infrastructure Protection and CS&C both use voluntary programs to introduce risk-related tools intended to identify gaps in infrastructure security. These include voluntary security surveys and vulnerability assessments carried out by DHS’s Protective Security Advisors (PSA) and Cyber Security Advisors (CSA). PSAs are CI protection and security specialists responsible for assisting asset owners and operators with protection strategies of physical assets, and CSAs are cybersecurity specialists responsible for helping to bolster owners’ and operators’ cyber assessment capabilities. Both types of advisors use their respective assessment tools to work with CI stakeholders to develop measures intended to make assets more resilient. Other DHS offices with CI risk assessment responsibilities include DHS’s Office of Intelligence and Analysis, U.S. Coast Guard, and TSA. PPD-21 and the NIPP also call for other federal departments and agencies to play a key role in CI security and resilience activities in their capacity as SSAs. In general, an SSA is a federal department or agency responsible for, among other things, supporting the security and resilience programs and related activities of designated CI sectors. DHS is designated as the SSA or co-SSA for 10 of the 16 CI sectors, and has assigned its SSA duties to multiple entities including the Office of Infrastructure Protection, TSA, Coast Guard, and Federal Protective Service. For our three selected sectors, DHS’s Sector Outreach and Programs Division (SOPD), within the Office of Infrastructure Protection, serves as the SSA for the Critical Manufacturing and nuclear sectors. DHS’s TSA and the U.S. Department of Transportation serve as co-SSAs for the Transportation Systems sector. Other federal agencies or departments external to DHS serve as the SSAs for the remaining 6 sectors for which DHS is not designated as the SSA or co-SSA. Figure 3 provides descriptions of the 16 sectors, identifies the SSA of each sector, and highlights the three selected sectors. For some sectors, assets or operations are regulated by federal or state regulatory agencies that possess unique insight into the risk mitigation strategies of the CI they oversee. These regulators, who may not serve as the designated SSA for the sector, help establish safety and security protocols for the industries they regulate and ensure sector resilience through the policymaking and oversight processes. For example, the Nuclear Regulatory Commission, in its role as the regulatory agency for the nuclear sector, conducts threat assessments to help protect against acts of radiological sabotage and to prevent the theft of special nuclear material. Additionally, pursuant to the Maritime Transportation Security Act of 2002, DHS must use risk management in specific aspects of its homeland security efforts. For example, the Coast Guard and other port security stakeholders are required to carry out certain risk-based tasks, including assessing risks and developing security plans for ports, facilities, and vessels. DHS is also involved in promoting and supporting the adoption of the NIST Framework for Improving Critical Infrastructure Cybersecurity. In accordance with requirements in Executive Order 13636, as discussed above, this framework provides voluntary standards and procedures for CI organizations to follow to better manage and reduce cybersecurity risk, and is designed to foster communication among CI stakeholders about cybersecurity management. In December 2015, we reported that SSAs and NIST had promoted and supported adoption of the cybersecurity framework in the CI sectors. For example, in February 2014, DHS established the Critical Infrastructure Cyber Community Voluntary Program to encourage adoption of the framework and has undertaken multiple efforts as part of this program. These include developing guidance and tools that are intended to help sector entities use the framework. We also reported that DHS did not have metrics to measure the success of these program efforts, and recommended that DHS develop metrics to understand the effectiveness of their promotion activities. DHS concurred, and in December 2016 DHS officials stated that they plan to continue to work with SSA partners and NIST to determine how to develop measurement activities and collect information on the voluntary program’s outreach and its effectiveness in promoting and supporting the cybersecurity framework. We are currently conducting a review that will identify actions taken by relevant federal entities including NIST, DHS, and other SSAs to promote the adoption of the cybersecurity framework. We will continue to monitor the voluntary program’s outreach as well as DHS’s efforts to measure its effectiveness in promoting and supporting the cybersecurity framework. The convergence of physical and cyber security is a major challenge for owners and operators of CI as more physical processes and systems are connected to Internet-enabled networks to improve operational efficiency, according to DHS officials. For example, facilities may make use of automated building control systems to control certain processes or functions, such as security, lighting, or heating, ventilation, and air conditioning (HVAC). These control systems increase efficiency and optimize operational performance by reducing the need for manual controls and adjustments. Building control systems and the devices within them are often configured with connections to the Internet. These Internet connections allow the systems to be accessed remotely for control and monitoring and, for example, to receive software patches and updates. Figure 4 illustrates how a facility’s HVAC and security systems are managed through a building automation system and operated over a control network. In this example, the information systems and networks are protected by a firewall—a cybersecurity countermeasure—while the control network and its devices have direct Internet connectivity without going through a firewall, potentially allowing a cyber-attacker to control the building’s electronic door locks. Broader examples of these types of networked systems include electrical grids and water distribution systems, as well as control systems that operate chemical manufacturing processes, monitor natural gas pipelines, and control petroleum refineries. Depending on the cyberattack, there is potential to cause a disruption to specific infrastructure operations and a possibility that such an event could lead to cascading effects within the sector or to other sectors in the economy. According to a 2015 DHS report on cyber-physical infrastructure risks, greater connectivity among technologies that connect cyber systems to physical systems expands the potential for cyberattack by malicious actors. The growing convergence of these systems mean that exploited cyber vulnerabilities can result in physical consequences, as well. DHS primarily assesses the three elements of risk–threat, vulnerability, and consequence–separately for individual CI assets and sectors. According to DHS officials, these assessments help critical infrastructure owners and operators take actions to improve security and mitigate risks. However, according to SCC representatives from three selected sectors, timely and actionable threat assessment data is the most useful type of risk information. In limited circumstances, DHS generates risk assessments that collectively incorporate all three elements of risk which selected SCC representatives found of limited use for their sectors’ infrastructure protection efforts due to the amount of time it takes to finalize the assessment data, the inclusion of risk scenarios that are not likely to occur, and the results not being applicable to individual assets. Threat Information Products Help Make Critical Infrastructure in Selected Sectors More Secure and Resilient DHS’s Office of Intelligence and Analysis (I&A) compiles information from a variety of classified and unclassified sources to develop threat-related analytic products for each of the 16 CI sectors. I&A’s threat assessment efforts include classified briefings intended to help CI owners and operators manage risks to their individual operations and assets, and to determine effective strategies to make them more secure and resilient. DHS typically shares these products via its Homeland Security Information Network for Critical Infrastructure (HSIN-CI) platform. I&A also partners with sector-specific agencies to engage asset owners and operators directly during biweekly classified threat briefings to share threat data. During these meetings, both I&A officials and CI owners and operators take this opportunity to identify potential threat-related risks that may inform future I&A threat products. The Homeland Security Information Network–Critical Infrastructure (HSIN-CI) HSIN-CI is the Department of Homeland Security’s (DHS) information sharing platform and collaboration tool for critical infrastructure stakeholders. It is the primary system through which private sector owners and operators, DHS, and other federal, state, and local government agencies collaborate to protect CI. According to DHS, it is an unclassified, web-based communications system for sharing sensitive but unclassified information. Users can access protection alerts, information bulletins, incident reports, situational updates, and analyses. Users can also engage in secure discussions with sector peer groups. Other features include CI protection training, planning and preparedness information, and a document library. Similarly, TSA’s Office of Intelligence (TSA-OI) receives intelligence information regarding threats to transportation-related assets and disseminates it to industry officials with transportation responsibilities, as well as to other federal, state, and local officials. TSA-OI disseminates security information through products including reports, assessments, and briefings. For example, TSA-OI, in conjunction with I&A and the Federal Bureau of Investigation, provides intelligence and security information to mass transit and passenger rail security directors, law enforcement chiefs in major metropolitan areas, and Amtrak officials through joint classified intelligence and analysis briefings. Although it is not an intelligence generator, TSA-OI receives and assesses intelligence from within and outside of the intelligence community to determine its relevance to transportation security. Sources of information outside the intelligence community include other DHS components, law enforcement agencies, and owners and operators of transportation systems. TSA-OI also reviews suspicious activity reporting by Transportation Security Officers, Behavior Detection Officers, and Federal Air Marshals. DHS officials from IP and TSA told us that they also share threat information within their respective sectors. For example, as the Critical Manufacturing SSA, IP disseminates threat information to sector stakeholders daily. Officials from IP also hold quarterly threat briefings to alert stakeholders of relevant threats. TSA likewise shares transportation security related information, including details on threats, vulnerabilities, and suspicious activities, with Transportation Systems sector stakeholders through unclassified or classified products and briefings. For example, TSA provides Transportation Intelligence Notes to transportation security partners to offer additional information or analysis on a specific topic and also provides situational awareness of ongoing or recent incidents. Table 1 in appendix I summarizes DHS threat assessment activities and products provided to the three selected sectors. Examples of Threat Information the Department of Homeland Security Provides to Critical Infrastructure Owners and Operators Classified Threat Briefings: Officials from the Office of Intelligence and Analysis and the sector-specific agencies participate in briefings at regular intervals with critical infrastructure owners and operators to share threat information gathered from intelligence sources. Incident-Specific Outreach: The Nuclear Reactors, Materials and Waste sector-specific agency hosts incident-specific meetings and calls for sector stakeholders. Daily Threat Briefings: DHS publishes a daily e-mail that contains threat information intended to provide situational awareness from a variety of sources including the Federal Emergency Management Agency, Department of Justice, and other stakeholders as appropriate. According to DHS, these emails are distributed to more than 140 recipients in the Critical Manufacturing sector. NCCIC Established to Share Cyber Threat Information According to DHS, the NCCIC is a 24x7 cyber situational awareness, incident response, and management center. The center shares information among public and private sector partners to build awareness of cyber vulnerabilities, incidents, and mitigation strategies and its partners include other government agencies, the private sector, and international entities. The NCCIC works with the private sector by integrating (both physically and virtually) CI owners and operators into the center’s operations so that, during an incident, threat information can be aggregated and communicated between government and appropriate private sector partners in an efficient manner. The NCCIC manages several programs that provide data used in developing 43 products and services in support of its 11 statutorily required cybersecurity functions. The programs include monitoring network traffic entering and exiting federal agency networks and analyzing computer network vulnerabilities and threats. The products and services are provided to its customers in the private sector; federal, state, local, tribal, and territorial government entities; and other partner organizations. For example, the NCCIC issues indicator bulletins, which can contain information related to cyber threat indicators, defensive measures, and cybersecurity risks and incidents. A list of these products and services is summarized in table 5 in appendix II. As of September 2017, 199 private sector CI owners and operators had as-needed access to NCCIC through their participation in the Cyber Information Sharing and Collaboration Program (CISCP). The National Cybersecurity and Communications Integration Center (NCCIC) The Department of Homeland Security’s (DHS) NCCIC serves as a central location where partners involved in cybersecurity and communications protection coordinate and synchronize their efforts. NCCIC's partners include other government agencies, the private sector, and international entities. According the DHS, working closely with its partners, NCCIC analyzes cybersecurity and communications information, shares timely and actionable information, and coordinates response, mitigation, and recovery efforts. The NCCIC is made up of four branches: NCCIC Operations and Integration; United States Computer Emergency Readiness Team; Industrial Control Systems Cyber Emergency Response Team; and National Coordinating Center for Communications. In February 2017, we reported that the NCCIC had taken steps to perform each of its 11 statutorily required cybersecurity functions, such as being a federal civilian interface for sharing cybersecurity-related information with federal and nonfederal entities. However, we recommended nine actions to DHS for enhancing the effectiveness and efficiency of the NCCIC, including determining the applicability of the implementing principles and establishing metrics and methods for evaluating performance. DHS concurred with our recommendations and we will monitor DHS’s progress toward addressing them. Selected Private Sector Representatives Reported Threat Data as Most Useful Risk Information SCC representatives we spoke to from the three selected sectors cited threat assessment data as generally the most useful risk information for CI owners and operators. Each of these six representatives indicated that threat information must be distributed rapidly to owners and operators in order to maintain its value and utility. Three of the six representatives reported that DHS generally provides threat information in a timely manner. For example, SCC representatives from the nuclear sector told us that timely threat information from DHS was helpful in clarifying erroneous reports circulating about the terror attacks in Belgium being aimed at nuclear sites in that region. According to these SCC representatives, working with DHS to gather credible information in a timely fashion was very valuable to their sector because it allowed owners and operators within their sector to determine whether they needed to implement certain protocols to ensure that they were not vulnerable to similar attacks. The remaining three representatives told us that delays in receiving threat information from DHS decreased the value of this information. For example, one representative noted that he believes DHS’s process for vetting threat information before it is shared with his sector prevents the agency from disseminating valuable threat information in a timely manner. Another representative shared an example where the threats referenced in one of the products distributed by DHS had already been identified and addressed. However, the sixth representative emphasized that despite delays in receiving information from DHS, government threat information is very credible and a major resource often used by security managers proposing security upgrades to their respective chief executive officers. This representative also highlighted the significance of TSA’s adoption of industry-defined intelligence priorities as directly supporting training and awareness initiatives to create opportunities for prevention. The NIPP establishes that the government is to provide the private sector with access to timely and actionable information in response to developing threats and crises. Similarly, the sector-specific plans from each of three selected sectors emphasize reliance upon timely and actionable threat information. For example, the 2015 Transportation System’s sector-specific plan discusses the importance of an effective and efficient process for receiving, analyzing, and disseminating pertinent and timely threat information and states that effective protection or response to a potential hazard relies on providing the stakeholders at greatest risk with real-time or near real-time alerts of emerging or breaking events. According to one SCC representative, threat information is the one element of risk that adds the most value because it allows owners and operators to react immediately to improve their security posture to mitigate the effects of any potential hazards. The representative added that specific products like TSA-OI’s annual country-specific threat assessments are particularly useful because a number of companies within his sector have business interests outside the U.S. and these reports help them stay abreast of potential threats abroad. Three of the six SCC representatives we interviewed reported that information regarding cybersecurity threats has become increasingly important. One SCC representative from the Critical Manufacturing sector stated that many of the security managers within his sector are physical security experts who are now facing more and more questions related to cybersecurity threats as a result of the cyber and physical security convergence their companies are experiencing. Therefore, the Critical Manufacturing sector worked with federal partners to increase access to the NCCIC, FBI, and U.S. Secret Service for additional cybersecurity support and also began promoting the sector’s awareness and use of the NIST framework. Infrastructure Survey Tool The Infrastructure Survey Tool (IST) is one of the Department of Homeland Security’s (DHS) voluntary vulnerability assessment tools available to Critical Infrastructure owners and operators. It is a web-based security survey conducted by a Protective Security Advisor in coordination with facility owners and operators to identify the overall security and resilience of a facility. The survey contains more than 100 questions used to gather information on such things as physical security, security forces, security management, information sharing, and protective measures. The IST results inform owners and operators of potential vulnerabilities facing their asset or system and recommend measures to mitigate those vulnerabilities. Facility owners access results and preview the effects of proposed mitigation measures through the interactive IST Dashboard. NPPD helps CI owners and operators develop capabilities to mitigate vulnerabilities by conducting voluntary physical vulnerability assessments primarily by using PSAs to conduct voluntary vulnerability assessments in coordination with owners and operators. These assessments focus on physical infrastructure and are generally asset-specific and conducted during site visits at individual assets. They are used to identify security vulnerabilities and identify potential risk mitigation strategies for owners and operators to address over time. One tool PSAs use in conducting CI assessments is the Infrastructure Survey Tool to assess facilities that agree to voluntarily participate. According to NPPD officials, vulnerability assessments take longer to develop than threat assessments, and the vulnerabilities identified are typically more static than threats, which are constantly evolving. PSAs store the collected assessment data on DHS’s Infrastructure Protection Gateway, an information sharing platform intended for use by DHS and its homeland security partners, including CI owners and operators, for access to infrastructure protection tools and information in support of incident preparedness and response efforts. Table 2 in appendix I summarizes the physical vulnerability assessments DHS conducts for the three selected sectors. In September 2014, we reported that the vulnerability assessment tools and methods that different DHS offices and components used varied with respect to the areas of vulnerability assessed. For example, we found that while all of the assessment tools we reviewed considered perimeter security, approximately half of these tools (6 of 10) included an assessment of cybersecurity. We also found that DHS had not established guidance on what areas should be included in a vulnerability assessment. We recommended, among other things, that DHS review its vulnerability assessments to identify the most important areas of vulnerability to be assessed, and establish guidance. DHS agreed with our recommendation and in July 2016 reported that IP had taken steps to collect and evaluate information on the various vulnerability assessment tools and methods used by DHS offices and components. More specifically, IP identified six security areas to incorporate into DHS assessment tools and methods. DHS reported in August 2016 that DHS offices and components received guidance for the areas and the specified levels of detail to be incorporated into existing assessment tools. As a result of addressing this recommendation, we believe that DHS is better positioned to collect and analyze assessment data to enable comparisons and determine priorities between and across CI sectors. DHS is also taking additional steps to address related recommendations from our September 2014 report that remain open. For example, we recommended that DHS develop and implement ways it can facilitate data sharing and coordination of vulnerability assessments to minimize the risk of potential duplication or gaps in coverage. As of September 2017, in response to this recommendation, DHS officials reported they were coordinating with stakeholders and developing features in an online portal to better facilitate information vulnerability assessment data sharing. We will continue to monitor the status of DHS’s efforts to address these recommendations. In addition, in July 2017, DHS officials reported that they were finalizing a strategy intended to identify ways that vulnerability assessment data can be used by not only CI owners and operators but DHS and other government stakeholders to improve their own decision-making. According to these officials, DHS held workshops with over 120 stakeholders from NPPD as well as senior officials from other designated sector-specific agencies and federal departments who identified the need for DHS to provide more vulnerability assessment data related to lifeline facilities—such as water and wastewater treatment plants and train stations. They also noted that stakeholders recommended that DHS use the vulnerability assessment data it collects to conduct trend analysis in specific CI sectors and geographic regions. The Cyber Resilience Review The Cyber Resilience Review is one of the Department of Homeland Security’s (DHS) cyber vulnerability assessments available to critical infrastructure owners and operators. It is a voluntary, nontechnical assessment to evaluate an organization’s operational resilience and cybersecurity practices. It may be conducted as a self-assessment or as an on-site assessment facilitated by DHS cybersecurity Cyber Security Advisors. It assesses enterprise programs and practices across 10 domains: asset management, controls management, configuration and change management, vulnerability management, incident management, service continuity management, risk management, external dependency management, training and awareness, and situational awareness. DHS Offers Voluntary Cyber Vulnerability Assessments for CI Owners and Operators The Office of Cybersecurity and Communications (CS&C) offers CI owners and operators a suite of voluntary vulnerability assessments aimed at securing their cyber systems. For example, CS&C’s Industrial Control Systems Cyber Emergency Response Team (ICS-CERT) is responsible for taking steps to help mitigate vulnerabilities to computer- based systems that are used to monitor and control industrial processes. CS&C also maintains the National Cybersecurity Assessment and Technical Services team which offers cybersecurity scanning and testing services that identify vulnerabilities within stakeholder networks and provides risk analysis and remediation recommendations. The CSA program also provides cyber assessment services for CI owners and operators through on-site vulnerability assessments for cyber systems. CSAs offer the Cyber Infrastructure Survey Tool, an assessment of essential cybersecurity practices instituted by critical infrastructure organizations to protect their critical IT services as well as the Cyber Resilience Review which evaluates an organization’s operational resilience and cybersecurity practices. A summary of DHS’s critical infrastructure cyber vulnerability assessment efforts can be found in table 3 in appendix I. Selected Private Sector Representatives View Asset-Specific Vulnerability Assessments As Useful Sector Coordinating Council representatives from two of the three selected sectors stated that DHS’s vulnerability assessment efforts were useful for determining vulnerabilities for individual CI owners and operators, but their opinions varied concerning the usefulness of aggregating sector-wide data and sharing broadly among private sector stakeholders. For example, one SCC representative told us that the risk scores associated with individual vulnerability assessments are of value to the CI owners and operators of the infrastructure for which that assessment was administered. However, this representative also mentioned that these scores have limited value beyond the individual asset because risks differ greatly between companies, rendering sector- wide or regional vulnerability assessments less useful. Another SCC representative told us that because the membership of their respective sectors is so broad and diverse, it is difficult for members to discern the value of high-level aggregated vulnerability data––especially from organizations with very different business models. However, another SCC representative indicated that DHS could offer aggregated vulnerability assessment data to all CI stakeholders for the purpose of developing broader situational awareness. While DHS’s IST is used to assess vulnerabilities for CI, the tool also includes a consequence module intended to allow DHS to assess facility criticality in terms of potential loss of life and economic impact. Also, OCIA analyzes consequence from incidents, and models past events to better understand the effect of these disruptions on assets and predict consequences of future events. Table 4 in appendix I describes the DHS components and corresponding products and activities associated with consequence assessments. DHS officials we spoke with stated that consequence information is important to owners and operators. These officials added that DHS needs to demonstrate that potential losses can be avoided by owners’ and operators’ investment in risk mitigation, thereby reducing the overall consequence of a potential incident on the CI owner’s operations and the nation. Three of the six SCC representatives we interviewed shared that consequence information was not useful. For example, one SCC representative noted that consequence information is not very useful for owners and operators because timely threat information combined with knowledge of an asset’s vulnerabilities put owners and operators in a better position to mitigate potential incidents and, subsequently, any associated consequences. DHS officials acknowledged that a range of perspectives concerning the usefulness of consequence information exists and stated that these differences reflect the array of owner and operator views about how to use risk information for different risk management decisions. Within DHS, NPPD, TSA, and the Coast Guard are responsible for developing complete risk assessments, which can be conducted for an entire CI sector or multiple sub-sectors within a CI sector. Both TSA and the Coast Guard regularly conduct complete risk assessments within the Transportation Systems sector. However, according to a senior OCIA official, NPPD receives very few requests for complete risk assessments. Our review of available assessment documentation found that among our three selected sectors, DHS has conducted complete risk assessments for the Transportation Systems sector but not the other two sectors. For example, the Transportation Systems Sector Security Risk Assessment is TSA’s annual report to Congress on transportation security. It assesses risk by establishing risk scores for various attack scenarios within the sector, including for domestic aviation; examines risks to individual transportation modes; and compares them to risks within and across modes. Table 6 in appendix III describes the assessment in more detail. Also within the Transportation Systems sector, the Coast Guard’s Maritime Security Risk Analysis Model (MSRAM) serves as the primary tool for assessing and managing security risks for all of the vessels, barges, and facilities regulated by the Coast Guard under the Maritime Transportation Security Act of 2002. Since its development and implementation in 2005, MSRAM has provided the Coast Guard with a standardized way of assessing risk to maritime infrastructure, referred to in the analysis model as targets that can include chemical facilities, oil refineries, hazardous cargo vessels, passenger ferries, and cruise ship terminals. For example, a scenario related to cruise ships identified using this analysis model could include a boat bomb or an attack by a hijacked vessel. MSRAM is designed to allow comparison between different targets at the local, regional, and national levels with the goal of reducing risk by prioritizing security activities and resources. To prioritize and assess security risks at U.S. ports and facilities, the Coast Guard uses MSRAM to calculate risk using threat judgments provided by the Coast Guard Intelligence Coordination Center. The Center provides threat probabilities for MSRAM based upon judgments regarding specific intent, capability, and geographic preference of terrorist organizations to deliver an attack on a specific type of maritime target class—for example, a boat bomb attack on a ferry terminal. To make these judgments, Center officials use intelligence reports generated throughout the broader intelligence community to make qualitative determinations about certain terrorist organizations and the threat they pose to the maritime domain. At the sector level, Coast Guard MSRAM users are required to use the threat probabilities provided by the Center to ensure that threat information is consistently applied across ports. MSRAM users at the sector level also assess the vulnerability of targets within their respective areas of responsibility and assess the consequences of a successful attack on these targets. Vulnerability and consequence factors included in the MSRAM assessment can be found in table 7 in appendix III. According to one NPPD official, various sector councils have requested analysis of certain risk elements, such as vulnerabilities or consequences, as opposed to complete risk assessments. For example, councils have asked for analysis of vulnerabilities and consequences due to potential failures within their sector’s respective systems and the potentially cascading effects of these failures on systems beyond their own span of control. This official noted that these requests provide the opportunity for OCIA to develop analytic products that companies within these sectors can then use as part of the risk assessments they conduct for themselves, as well as analytic products more broadly related to homeland security risks. SCC representatives from our three selected sectors told us that complete risk assessments are of limited utility for CI owners and operators because complete assessments take a long time to produce, often involve risk scenarios that are not likely to occur, or generates results that are so broad that they may not be applicable to individual assets. For example, according to one SCC representative, the diversity among the members of his sector, including size and sophistication of operations, is the primary reason that conducting a complete risk assessment for their sector would not be helpful for individual companies. Similarly, another SCC representative told us that the private sector does not operationalize information from complete risk assessments because the assessments do not add practical value and some of the scenarios evaluated in the assessments are not applicable to many of the companies within their sector. TSA and NPPD officials provided explanations of the utility of complete risk assessments, particularly for government decision-making purposes. For example, TSA officials told us that they believe the Transportation Systems Sector Security Risk Assessment data gathering methodology for identifying risk inputs adds the most value in the assessment process for CI owners and operators in the Transportation Systems sector. According to these officials, the data gathering process is extensive and involves a substantial number of industry experts who are brought together to analyze potential threats, vulnerabilities, and consequences across the five transportation modes for which TSA is responsible. The officials added that this elicited risk information allows TSA to better allocate resources across the multiple transportation modes. According to one senior OCIA official, NPPD is best suited to execute complete risk assessments that are intended to focus on broad risks to CI and are not specific to individual CI assets. For example, NPPD is providing risk information for the execution of the 2018 Homeland Security National Risk Characterization (HSNRC), which evaluates the full range of risks addressed by DHS. This official stated that their office is working with DHS’s Office of Policy to maximize the value of the insights gained from the HSNRC effort and using it to inform NPPD decisions about strategy and policy. DHS uses CI risk information in multiple ways, including informing strategic planning and developing analytic products, and at the component level to guide its day-to-day owner and operator outreach and incident response. DHS is also facilitating risk-based cross-sector planning and information sharing through sector coordinating councils. According to DHS Office of Policy officials, DHS is using risk information to inform departmental strategic planning as part of its third QHSR. The QHSR is DHS’s process for updating the national homeland security strategy, identifying critical homeland security missions, and assessing the organizational alignment of DHS with the homeland security strategy and missions. The results of the QHSR are used in DHS’s Strategic Plan, which outlines how DHS plans to implement the QHSR homeland security goals, lists strategies to achieve these goals, and identifies performance measures to track progress towards these goals. The QHSR incorporates multiple sources of risk information, including the HSNRC. The HSNRC assesses natural hazards such as floods, and manmade hazards such as terrorism. According to Office of Policy and NPPD officials, NPPD provides a broad range of risk-related inputs to support the implementation of the HSNRC risk assessment methodology. These inputs provide DHS officials a better understanding of risks to CI during strategic planning, according to Office of Policy officials. Our prior work on DHS’s QHSR found that DHS assessed homeland security risks for its second QHSR for fiscal years 2014 to 2018 by considering threats, vulnerabilities, and consequences. We also found that while the QHSR risk assessment described a wide range of homeland security challenges and was a valuable step toward using risk information to prioritize and select risk management activities, DHS did not document how its various analyses were synthesized to generate results, thus limiting the reproducibility and defensibility of the results. We found that without sufficient documentation, the QHSR risk assessment results could not easily be validated or the assumptions tested, hindering DHS’s ability to improve future assessments. In addition, the QHSR described homeland security hazards, but did not rank those hazards or provide prioritized strategies to address them. We reported that comparing and prioritizing risks helps identify where risk mitigation is most needed and helps justify cost-effective risk management options. Thus, we recommended that future QHSR risk assessment reflect key elements of successful risk assessment methodologies, including being documented, reproducible, and defensible. We also recommended that DHS refine its risk assessment methodology so that in future QHSRs it can compare and prioritize homeland security risks and risk mitigation strategies. DHS concurred with these recommendations and outlined steps it planned to address them. In response to our recommendations, DHS officials described several steps they have taken to address our recommendations. According to these officials, the Office of Policy held initial meetings with government and nongovernment subject matter experts after the release of our report to refine the HSNRC. Also, according to these officials, a Departmental Risk Modeling and Analysis Steering Committee (Risk committee) was convened in June 2016 to review and approve proposed new methodologies to help identify and prioritize threats and hazards for the HSNRC. According to NPPD officials, NPPD proposed updates to the HSNRC process as part of the Risk committee proceedings, such as changing the scope and detail of the assessment. The Risk committee evaluated these requests and finalized proposals for use in the third QHSR, which is scheduled to be released in 2018. We will continue to monitor the status of DHS’s actions to address our recommendations and how they are implemented. According to IP officials, PSAs use risk information to guide their outreach to CI owners and operators. PSAs use the National Critical Infrastructure Prioritization Program (NCIPP) list––which prioritizes CI assets into different levels according to their criticality––to inform their outreach to owners and operators. PSAs and their leadership use the NCIPP list to prioritize outreach to owners and operators across each level of assets within their area of jurisdiction for participation in DHS’s voluntary security survey and vulnerability assessment programs, as shown in figure 5. Generally, PSAs engage CI owners and operators in the order in the pyramid shown in figure 5, starting with Level 1. According to IP officials, PSAs also use risk information to guide incident response. The officials explained that when an incident occurs, they pull information from a variety of sources, including the database of assets on the NCIPP list, to identify CI in the affected area. OCIA officials then prioritize this information into a list to guide incident response efforts. For example, when Hurricane Hermine approached Georgia in September 2016, PSAs received a list from OCIA that categorized potentially affected CI assets in the region into priority levels. The PSAs used the list to prioritize their outreach to the highest priority assets. Officials from the CSA program, also plan to use risk information to guide cybersecurity outreach to CI owners and operators. According to CS&C officials, CSAs are currently able to meet resource demands for outreach with little or no delay. However, as the CSA program continues to expand, CSAs plan to use a risk-based methodology to prioritize outreach. This methodology considers cyber threats, vulnerabilities, and consequences to determine how and where CSAs are used, according to CS&C officials. DHS SSA representatives for our three selected sectors also use risk information to guide their outreach to CI owners and operators. For example, in response to a physical threat to a nuclear facility in Brussels, Belgium, nuclear sector SSA officials engaged with private sector representatives on the SCC and discussed ways to improve their information-sharing process. In another example, Critical Manufacturing SSA officials determined that smaller businesses in their sector did not have business continuity plans. According to these SSA officials, this was a risk that could disrupt the operations of these small businesses and other businesses in their supply chain. SSA officials developed a tool to help Critical Manufacturing sector owners and operators develop their own continuity plans––including templates, tabletop exercises, and a self- directed risk assessment for private sector owners and operators to use. According to the Critical Manufacturing sector-specific plan, the expanded use of business continuity planning will enhance the resilience of the Critical Manufacturing Sector. As part of DHS’s responsibility described in the NIPP, DHS created the Critical Infrastructure Partnership Advisory Council (CIPAC), a forum for stakeholders including government officials and asset owners and operators, to facilitate planning and information sharing. CIPAC membership consists of representatives from the government and sector coordinating councils—federal, state, and local agency officials, and private owners and operators, respectively—who work together to coordinate strategies, activities, and policies across governmental entities within each of the 16 CI sectors. There is also a Critical Infrastructure Cross-Sector Council comprised of SCC chairs and vice chairs from each of the 16 sectors that meets quarterly to discuss, among other things, details about risks and opportunities to share information across sectors. Additionally, this Critical Infrastructure Cross-Sector Council provides a forum for the leaders of the SCCs to provide senior-level, cross-sector strategic coordination with DHS. The chairperson of the cross-sector council also communicates with owners and operators across the sectors as situations arise. For example, the chairperson convened a teleconference within 24 hours of a recent terror attack in the United Kingdom to share information and answer questions about potential risks or lessons learned for CI owners and operators. In addition, DHS engages private sector owners and operators in cross- sector discussions through sector planning documents. For example, the 2015 sector-specific plans for each of the three sectors we studied include descriptions of cross-sector interdependencies. These include summaries of lifeline functions––such as energy, water, communications, and transportation systems––which are essential to the operations of most CI partners and communities. During development of the 2015 sector-specific plans the sectors and SSAs also collaborated and identified emerging risks that spanned across multiple sectors, as shown in figure 6. We provided a draft of this product to DHS for review and comment. DHS provided technical comments, which we incorporated as appropriate. We also provided draft excerpts of this product to the selected sector coordinating council representatives we interviewed, who provided technical comments that we also incorporated as appropriate. We are sending copies of this report to interested congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (404) 679-1875 or CurrieC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix V. The following tables highlight threat, vulnerability and consequence products and activities developed by the Department of Homeland Security for the purpose of providing risk information to critical infrastructure owners and operators. Table 5 below highlights the cybersecurity products and services that the National Cybersecurity and Communications Integration Center (NCCIC) reported providing to its customers in fiscal years 2015 and 2016. The following tables highlight complete risk assessments regularly conducted by the Transportation Security Administration and the U.S. Coast Guard within the Transportation Systems sector. Figure 7 below illustrates the Department of Homeland Security’s (DHS) approach for prioritizing the list of systems and assets that the Secretary of Homeland Security determines would, if destroyed or disrupted, cause national or regional catastrophic effects. DHS has prioritized these CI assets into different levels according to their criticality, to inform their outreach to owners and operators. Consistent with the National Infrastructure Protection Plan risk management framework, the criteria for determining which level each asset is assigned to on the National Critical Infrastructure Prioritization Program (NCIPP) list are entirely consequence based thresholds and include fatalities, economic loss, mass evacuation length, or national security impacts. In addition to the contact named above, Ben Atwater (Assistant Director) and Landis Lindsey (Analyst-in-Charge) managed this audit engagement. Chuck Bausell, Michele Fejfar, Daniel Glickstein, Tracey King, Steve Komadina, Tom Lombardi, Kush Malhotra, Gabrielle Matuzsan, and Claire Peachey made significant contributions to this report.", "summary": "The nation's critical infrastructure includes cyber and physical assets and systems across 16 different sectors whose security and resilience are vital to the nation. The majority of critical infrastructure is owned and operated by the private sector. Multiple federal entities, including DHS, work with infrastructure owners and operators to assess their risks. GAO was asked to review DHS's risk assessment practices for critical infrastructure. This report describes:(1) DHS's risk assessment practices in 3 of 16 critical infrastructure sectors and private sector representatives' views on the utility of this risk information, and (2) how this risk information influences DHS's strategic planning and private sector outreach. GAO selected 3 of 16 sectors–Critical Manufacturing; Nuclear Reactors, Materials, and Waste; and Transportation Systems–to examine based on their varied regulatory structures and industries. GAO reviewed DHS guidance related to infrastructure protection, the QHSR and DHS Strategic Plan, and plans for the selected critical infrastructure sectors. GAO interviewed DHS officials responsible for critical infrastructure risk assessments, and the owner and operator representatives who serve as chairs and vice-chairs of coordinating councils for the 3 selected sectors. Information from the 3 sectors is not generalizable to all 16 sectors but provides insight into DHS's risk management practices. GAO provided a draft of this report to DHS and relevant excerpts to the council representatives interviewed during this review. Technical comments provided were incorporated as appropriate. The Department of Homeland Security (DHS) primarily conducts assessments for each of the three elements of risk—threat, vulnerability, and consequence—for critical infrastructures from the three sectors GAO reviewed—Critical Manufacturing; Nuclear Reactors, Materials, and Waste; and Transportation Systems. In limited circumstances, DHS generates risk assessments that both incorporate all three elements of risk and cover individual or multiple subsectors. Threat : DHS's Office of Intelligence and Analysis assesses threats—natural or manmade occurrences, entities, or actions with the potential to cause harm, including terrorist attacks and cyberattacks—and disseminates this information to critical infrastructure owners and operators. For example, the Transportation Security Administration provides threat intelligence to mass transit security directors and others through joint classified briefings. Vulnerability : DHS officials provide various tools and work directly with owners and operators to assess asset and facility vulnerabilities—physical features or operational attributes that render an asset open to exploitation, including gates, perimeter fences, and computer networks. For example, DHS officials conduct voluntary, asset-specific vulnerability assessments that focus on physical infrastructure during individual site visits. Consequence : DHS officials also assess consequence— the effect of occurrences like terrorist attacks or hurricanes resulting in losses that impact areas such as public health and safety, and the economy—to better understand the effect of these disruptions on assets. These assessments help critical infrastructure owners and operators take actions to improve security and mitigate risks. Six private sector representatives told GAO that threat information is the most useful type of risk information because it allows owners and operators to react immediately to improve their security posture. For example, one official from the Transportation Systems sector said that government threat information is credible and is critical in supporting security recommendations to company decision-makers. DHS uses the results of its risk assessments to inform the department's strategic planning and to guide outreach to infrastructure owners and operators. Critical infrastructure risk information is considered within DHS's strategic planning. Specifically, according to DHS officials, risk information informs the Department's Quadrennial Homeland Security Review (QHSR)—a process that identifies DHS's critical homeland security missions and its strategy for meeting them. DHS also uses risk information to guide outreach to critical infrastructure owners and operators. For example, DHS officials annually prioritize the most critical assets and facilities nationwide and categorize them based on the severity of the estimated consequences of a significant disruption to the asset or facility. DHS officials then use the results to target their assessment outreach to the infrastructure owners and operators categorized as higher risk. DHS officials also told GAO that they use risk information after an incident, such as a natural disaster, to quickly identify and prioritize affected infrastructure owners and operators to help focus their response and recovery assistance outreach.", "document_type": "gao"}
{"report": "The Settlement Act, enacted on December 22, 1974, was intended to provide for the final settlement of a land dispute between the Navajo and Hopi tribes that originated nearly a century ago. The 1882 Executive Order, signed by President Chester Arthur, set aside approximately 2.5 million acres of land for the Hopi and “such other Indians as the Secretary of the Interior may see fit to settle thereon.” Since that time, the Navajo and Hopi tribes have disputed the rights and occupancy of the lands. In a 1962 court case, Healing v Jones, the Hopi tribe claimed exclusive rights to the entire reservation, and the Navajo claimed exclusive rights to about 80 percent of the reservation. In 1963, the U.S. Supreme Court affirmed an Arizona District Court decision that set aside about 631,000 acres of the land—known as District Six—as exclusively Hopi and designated the remaining about 1.9 million acres as a joint use area, to be managed and used jointly by the two tribes. The two tribes legally co-owned the joint use area, but the use of the land remained a source of disputes between the two tribes. The Settlement Act authorized the partitioning of the surface of the joint use area and directed that it generally be split evenly between the tribes. It required Navajo households residing on lands partitioned to the Hopi Tribe (Hopi Partitioned Lands) to relocate and, similarly, Hopi households residing on lands partitioned to the Navajo Nation (Navajo Partitioned Lands) to relocate. Figure 1 illustrates the current Navajo and Hopi reservations. Figure 2 illustrates the portion of the reservation near Tuba City, Arizona, that was subject to the land dispute, the area that was designated as exclusively Hopi (District Six), and the partitioned lands. The Settlement Act and its subsequent amendments contain several key provisions for relocation and other activities. Relocation. The Settlement Act mandated that ONHIR submit a report, including a detailed plan, to Congress concerning the relocation of households and members of each tribe from lands partitioned to the other tribe. ONHIR stated that it has no authority to require any person to leave the land that was awarded to the other tribe. The act instructed that the relocation process be completed 5 years after the relocation plan took effect. The report and plan, which ONHIR transmitted to Congress in April 1981, provided details on relocation of households and their members, including generating names of those residing on the partitioned lands and identifying sites for relocation, among other things. The relocation was scheduled to be completed by July 1986. Specifically, the relocation benefits include $130,000, adjusted to current construction and housing development costs, for a household of three or fewer and $136,000 for a household of four or more to obtain a decent, safe, and sanitary replacement home, in addition to moving expenses and, within the first few years, bonus payments provided within the first years following the relocation plan. Because there were far fewer Hopi households residing on lands partitioned to the Navajo Nation, almost all of the households relocated (about 99 percent) have been for Navajo families. Resettlement land taken into trust for the Navajo Nation. The Settlement Act as amended authorizes and directs the Secretary of the Interior to take certain lands into trust for the Navajo Nation, which would become part of the Navajo Reservation. The 1980 amendments to the Settlement Act required the border of any parcel taken into trust to be within 18 miles of the Navajo reservation’s then boundary. Most of the lands taken into trust in Arizona pursuant to the Settlement Act as amended are known as the New Lands. Navajos living on Hopi Partitioned Lands could choose to relocate to the New Lands, as well as other areas on the Navajo reservation or off-reservation. Administration and use of acquired trust land. Pursuant to the Settlement Act as amended, ONHIR administers these lands taken into trust for the Navajo Nation until relocation is complete. In contrast, Interior administers other land the federal government holds in trust for Indian tribes, including the Navajo Nation. In addition, the Settlement Act as amended requires the lands taken into trust for the Navajo Nation to be used solely for the benefit of Navajo families— known as relocatees—that at the time of the Settlement Act’s enactment had been residing on lands partitioned to the Hopi. Leasing of acquired trust land. The Navajo and Hopi Indian Relocation Amendments of 1988 transferred responsibility for issuing leases and rights-of-way for housing and related facilities on the New Lands from Interior to ONHIR. In July 1990, ONHIR issued procedures for the leasing of New Lands, including homesite and business leases, in section 1810 of its management manual. ONHIR’s regulations specify that the agency’s operation is to be governed by a management manual. Navajo Rehabilitation Trust Fund. The 1988 amendments to the Settlement Act established the Navajo Rehabilitation Trust Fund in the U.S. Treasury. The Trust Fund consists of appropriations made for the fund, deposits of income from certain trust assets, and any interest or investment income accrued. The Trust Fund is essentially a loan from the federal government to the Navajo Nation to be repaid from revenues derived from leases of the lands and minerals taken into trust in New Mexico pursuant to the Settlement Act as amended. The tribe assumed responsibility for managing the Trust Fund pursuant to the American Indian Trust Fund Management Reform Act of 1994, according to Interior officials. Under this act, neither Interior, ONHIR, nor Treasury has a role in managing or overseeing the Trust Fund once a tribe has assumed responsibility for managing it. Aside from administering the relocation activities and the lands taken into trust pursuant to the Settlement Act as amended, ONHIR also operates the Padres Mesa Demonstration Ranch. The ranch was established in fiscal year 2009 on the New Lands and teaches sustainable cattle ranching and modern livestock marketing to the Navajo. According to ONHIR officials, the ranch is on approximately 60,000 acres of trust land acquired pursuant to the Settlement Act as amended. The purpose of the ranch is to teach relocatees methods to maximize income from cattle- raising operations and be good stewards of the land. In addition to purchasing cattle, ONHIR hired an employee to manage the ranch’s operations and contract cowboys to work on the ranch. ONHIR sells the cattle raised on the ranch and uses the proceeds to help pay for ranch operations. According to ONHIR documents, from fiscal years 2009 through 2016, ONHIR obligated approximately $1.8 million for the ranch’s operation from a mixture of appropriations and cattle sale revenue. Over the same period, cattle sales generated over $1.4 million, according to ONHIR documents. The Settlement Act established a three-member commission, the Navajo and Hopi Indian Relocation Commission, to administer the relocation program. The 1988 amendment abolished the three-member Relocation Commission and established in its place ONHIR as an independent entity of the executive branch under the authority of a single Commissioner. ONHIR has not had a Commissioner since 1994 and has been under the leadership of its Executive Director. As of December 2017, ONHIR said that they had 31 employees among its three offices in Flagstaff, Sanders, and Chambers, Arizona. ONHIR was not designed to be a permanent agency, but a specific closing date has not been determined. ONHIR previously developed plans to close out its activities in 2008, according to ONHIR officials, but has continued to operate. The Settlement Act states that ONHIR will cease to exist when the President of the United States determines that its functions have been fully discharged. During a testimony at a congressional hearing in February 2016, ONHIR’s Executive Director said that ONHIR was working toward completing its work so the office can close by the end of fiscal year 2018. ONHIR has developed a draft transition plan, dated March 2017, that identifies, among other things, four areas of activity that would need to be transferred to another entity in the event of its closure in September 2018: (1) appeals and eligibility; (2) housing; (3) administration of the New Lands; and (4) the Padres Mesa Demonstration Ranch. In the draft transition plan, ONHIR primarily identified offices within Interior—including BIA, the Office of Hearings and Appeals, and the Office of the Solicitor—to take over several key activities, as well as other entities including the Department of Justice and the Navajo Nation government. In October 2017, ONHIR supplemented the draft transition plan with an implementation plan to outline the transfer of these four areas, among other things. BIA is generally responsible for the administration and management of land held in trust by the United States for Indians and Indian tribes. BIA provides services to 573 federally recognized tribes and about 1.9 million individual American Indians and Alaska Natives. BIA’s responsibilities include regulating grazing on trust land, leasing trust land, and maintaining roads in Indian country, among other things. BIA administers the vast majority of land held in trust for Indian tribes and has issued regulations governing leasing of and grazing on trust land that it administers, including the Hopi Partitioned Lands and the portions of the Navajo reservation that are not administered by ONHIR. BIA’s regulations do not apply to the lands acquired pursuant to the Settlement Act as amended because under the act, ONHIR is responsible for administering those lands. BIA also administers a Housing Improvement Program that funds rehabilitation of housing units. Other federal agencies, such as HUD and the Indian Health Service, provide housing assistance and infrastructure in Indian country and tribal entities, such as the Navajo Tribal Utility Authority, provide services on the Navajo reservation. HUD, through its Office of Native American Programs, awards block grants (known as the Indian Housing Block Grant program) to tribally designated housing entities, such as the Navajo Housing Authority. These grants can be used to provide housing assistance for tribal members, such as constructing homes. The Indian Health Service is authorized to provide drinking water and sanitation services to Indian homes and communities, among other things. ONHIR and the Indian Health Service have an interagency agreement to share the cost of connecting relocation homes on the reservation to water and sewer lines. Most of the electricity, water, and wastewater on the Navajo reservation are operated by the Navajo Tribal Utility Authority, an enterprise of the Navajo Nation government. Similarly, ONHIR and the Navajo Tribal Utility Authority have an interagency agreement for the construction of electrical power lines and related services for relocation homes. The Navajo Nation government makes decisions about allocation of resources, including federal grants it receives. The Navajo Nation Council hosts 24 council delegates representing 110 Navajo Nation chapters. The chapters are political subdivisions of the Navajo Nation with delegated authority to address local issues pertaining to the land and health status of their respective chapter populations. In a March 2014 report, we found each chapter could have different development priorities and approval processes for housing programs and services. In its comments on a draft of this report, ONHIR stated that more than 400 families have moved to the New Lands, and over 1,200 families have moved to locations outside the Navajo Nation. The New Lands are part of the Nahata Dziil Chapter. We have previously found that American Indians have historically faced worse housing conditions than other socioeconomic groups. They disproportionately experience socioeconomic challenges, including high unemployment and extreme poverty, which affect housing conditions on Indian reservations and in Indian communities. Overcrowding, substandard housing, and homelessness are far more common in American Indian communities. For example, a 2017 Urban Institute report prepared for HUD found that 5.6 percent of American Indian households had problems with plumbing, 6.6 percent had problems with the kitchen, and 12 percent had problems with heating. In comparison, 1.3 percent of households in the United States had problems with plumbing, 1.7 percent had problems with the kitchen, and 0.1 percent had problems with heating. As we have previously found, common housing challenges in Indian communities are largely related to remoteness and other geographical factors, lack of adequate infrastructure, land use regulation, and other factors. Some remote areas where Indian tribes are located can present unique logistical challenges, including a lack of buildable land and limited supply of building materials. In some regions, tribes face challenges related to a lack of adequate infrastructure, such as roads, water, and sewer systems. According to Navajo Nation officials, traditionally, tribes lived a lifestyle that was connected to their traditional and ancestral lands, with homes and other structures built from natural materials and constructed in communities with extended families. For example, many of the Navajo who were on the Hopi Partitioned Lands were self-sufficient and lived in traditional homes called hogans, which are made of wooden poles, tree bark, and mud. See figure 3 for an example of a traditional home. ONHIR’s process for certifying applicants’ eligibility to receive relocation benefits has generally been consistent over time since ONHIR began accepting applications. All applicants must apply through ONHIR for relocation benefits and demonstrate that they meet eligibility criteria, discussed later in this report. Based on eligibility criteria, in general, a certifying officer determines whether an applicant is certified or denied. If an applicant is certified, the applicant becomes an ONHIR client for relocation. If an applicant is denied, the applicant is eligible to file for appeals—first, an administrative appeal, then an appeal with the U.S. District Court for the District of Arizona, if the administrative appeal upholds the denial decision. Figure 4 illustrates this process. If an applicant is denied, he or she can obtain assistance from the Navajo-Hopi Legal Services Program, an entity established in 1983 within the Navajo Nation’s Department of Justice to assist individual members of the Navajo and Hopi tribes who were affected by the Settlement Act. Applicants’ denial letters indicate that the applicant can seek counsel through this program; however, not all applicants are represented by counsel for the administrative hearing. As of July 2017, ONHIR had spent about $1.5 million on legal services and over $1.2 million on the hearing officer who adjudicates the administrative appeals. In addition, about $285,000 was spent for an attorney salary at the Navajo-Hopi Legal Services Program from 2009 through 2011 and, according to ONHIR officials, about $418,000 was spent on attorney fees for applicants whose eligibility for relocation benefits was reversed in the U.S. District Court. As of December 2017, ONHIR had certified more than 3,800 households since the agency began reviewing its first applicants in 1977. The certification process on average has taken about 979 days for those who were certified without a need to file for an appeal and 3,301 days for those who were certified through the appeals process (that is, those who had their denied application reversed through the appeals process). Figure 5 illustrates these time frames. For various reasons, ONHIR provided three additional application periods after the first application period deadline in 1986, which were not included in the plan ONHIR submitted to Congress. After the original deadline, ONHIR provided a second application period from April 1997 through March 2000 after the enactment of a new law, which ratified a formal agreement under which the Hopi tribe agreed to allow traditional Navajo residents to remain living on Hopi Partitioned Lands for 75 years. In conjunction, the formal agreement provided that ONHIR relocate all eligible Navajo residents on Hopi Partitioned Lands who (1) did not sign an individual agreement to remain on the land, or (2) signed but then surrendered their signed individual agreement before the February 2000 deadline. ONHIR accepted applications again from May 2005 through June 2006 (third application period) based on language in a 2005 Senate bill to provide a last chance for Navajos living on Hopi Partitioned Lands to relocate, which passed the Senate but was not enacted, according to ONHIR officials. ONHIR was not required to reopen its application process, but it chose to do so. Even though ONHIR issued relocation notices in newspapers and at chapter facilities at the time of the original application period, ONHIR officials said that the additional application periods were in recognition that not all Navajo residing on the Hopi Partitioned Lands had moved, an outcome that was not considered in the original plans. ONHIR also accepted applications from February 2008 through September 2010 (fourth application period) in response to a federal court decision that concluded that ONHIR had not provided personal notice to a potentially eligible applicant before July 7, 1986 (the deadline for the initial application process) to enable him to apply for relocation benefits. According to ONHIR officials, in consultation with the Department of Justice in Washington, D.C. and the U.S. Attorney’s Office in Arizona, ONHIR reopened the process for applications to help ensure that everyone who might be eligible for benefits was given the opportunity to apply, rather than litigating a series of similar cases. ONHIR officials said they worked closely with the Navajo Nation to send out letters of notification to potential eligible applicants, even though they were not required to reopen the application process. These three additional application periods have resulted in more applicants and time required for ONHIR to review applications. The numbers of applicants and outcomes across the different application periods are summarized in table 1. The attempts to prompt more Navajos to relocate in the second and third application periods resulted in a limited number of applications, 129 and 167 applicants, respectively. However, ONHIR received nearly 2,300 applicants during the fourth application period. Throughout the multiple application periods, applicants demonstrated two key eligibility criteria: (1) head of household status and (2) residency on the lands partitioned to the other tribe. However, ONHIR chose and applied varying eligibility rules related to residency status over the different application periods. Original application period. Under the original residency status criterion, applicants had to demonstrate that they were residents of the partitioned lands on December 22, 1974 (the date the Settlement Act was passed) and had not moved there within the previous year. Second and third application periods. During the second and third application periods, ONHIR used provisions for late applicants— persons who had not applied for relocation benefits before the original deadline—that were established in 1986 amendments to ONHIR’s regulations and that revised the residency status eligibility criterion. Unlike the original residency criterion, the agency guidance applicable to applicants during the second and third application period stated that applicants must demonstrate continuous residence on the partitioned lands from December 22, 1974, to July 7, 1986 (the original deadline) and until eligibility determination is rendered. There were exceptions for demonstrating continuous residency as set out in the agency guidelines interpreting the regulations, including for those who were temporarily away for school, prison, medical treatment, and military service. Fourth application period. During the fourth application period, ONHIR decided to apply the original criterion, without the continuous residency requirement implemented in the guidelines for the second and third application periods, for all applicants. ONHIR officials said they made this decision in response to a federal court decision, discussed previously, that concluded that ONHIR had not provided personal notice to a potentially eligible applicant before the original July 1986 deadline; the U.S. District Court District of Arizona applied the original criterion in this decision. The applicant has the burden of proof for providing evidence to meet the eligibility criteria. Demonstrating head of household or residency status has been difficult for residents for several reasons, according to a Navajo-Hopi Legal Services Program representative and Navajo Nation chapter officials we interviewed. For example, Navajo is an oral culture that historically existed mostly on a livestock or cash economy in which transactions were not documented, making it difficult to document the source of income or head of household status. In its comments on a draft of this report, ONHIR stated that the legal residence determination was complicated because many Navajos performed seasonal work and lived outside the Hopi Partitioned Lands for extended periods. According to Navajo Nation officials, oral evidence has not been allowed by the ONHIR Hearings Officer, and language and cultural barriers have also been obstacles. Some Navajos have limited English proficiency, although ONHIR offers translators for Navajo speakers. In its comments on a draft of this report, ONHIR stated that oral evidence has always been allowed but has sometimes been found not to be credible. Another unique characteristic of the Navajo is the use of shared mailboxes at trading posts—a place in the community for people to meet and receive their mail—making it difficult to ensure that ONHIR denial letters or other notifications reach individual applicants. For example, in one appeals case a court found that applicants who did not personally sign for the receipt of a denial letter must be notified of the court’s decision to allow those applicants to file a waiver of the appeal deadline. ONHIR also stated that it offered administrative appeals to Navajos for whom ONHIR could not show actual receipt of denial letters. While ONHIR officials said that eligibility determination has been completed, the potential exists for further federal court appeals, potentially resulting in the need for additional eligibility determinations. As of January 2018, ONHIR officials said that 24 of the remaining 25 households that were denied eligibility benefits have gone through the hearing process and are awaiting their decisions, which officials said should be completed in early 2018. Households whose denials are upheld will be eligible to file for an appeal with the U.S. District Court for the District of Arizona. Additionally, any households that have been denied and are within the 6-year statute of limitations are still eligible to file for appeals in federal court. Eleven cases were pending in the federal district courts and four in federal appeals court as of March 2018, and according to ONHIR officials, at least 240 households that were denied eligibility benefits and whose decisions were upheld by the hearing officer (and are within the 6-year statute of limitation) could potentially file for appeals in federal court before the end of fiscal year 2018. Any additional court appeals could result in the need for additional eligibility determinations in the future. For example, a federal court recently remanded a case to ONHIR to review the applicant’s income information and reevaluate the eligibility determination. According to ONHIR officials, they are taking steps to review the applicant’s case file, investigate the evidence of the applicant’s income to demonstrate the head of household status, and share the findings with the applicant’s attorney. ONHIR officials stated that due to the unique situation of each applicant, they review the information in the applicant’s case file to comply with the court’s order on eligibility determination. ONHIR’s policies and procedures are intended to provide certified applicants who are eligible for relocation benefits with decent, safe, and sanitary homes, as mandated in the Settlement Act. For example, ONHIR’s management manual includes policies that require ONHIR to provide counseling on the home-building process and home maintenance training for relocatees. Figure 6 shows an example of a relocation home. Prior to moving to relocation homes, many families lived in one-room houses that they constructed themselves with no basic infrastructure, such as electricity, water, or plumbing facilities, and some families were unfamiliar with the features of a modern home. Families lived a spiritual and religious lifestyle that was connected to their traditional culture and ancestral lands, with homes constructed in communities with extended families. ONHIR’s management manual also includes policies that require employees to work with clients on the home acquisition process starting from the time clients are certified and continue until 2 years after the client has been relocated, including assisting clients with finding contractors, signing home-building contracts, understanding home maintenance, and requesting warranty repairs. ONHIR works with families after they have moved into their relocation home by providing assistance with warranty issues; assistance in adjusting to their new community; and referrals to agencies in the new community that provide health care, supplemental nutrition, financial assistance, behavioral health, employment, and other social services. Relocation homes are the property of the client, and ONHIR has no responsibility for relocation homes after a 2-year warranty period on each home expires. ONHIR wrote a standard template of a contract that clients and contractors must sign, but ONHIR is not a signatory of the home-building contract. However, ONHIR is a signatory to the 2-year home warranty contract, along with the client and the contractor. Additional policies and procedures required by ONHIR’s management manual are summarized in table 2. ONHIR’s management manual also includes policies for overseeing contractor performance. ONHIR officials provide clients with a list of home-building contractors, but clients may choose any licensed contractor in the jurisdiction where the home is built. ONHIR officials estimate that more than 95 percent of relocation homes have been built by contractors from its list. ONHIR officials said that contractors on the list ONHIR provides to clients must demonstrate good standing and must be licensed by the state of Arizona, as stated in its policy. In addition, ONHIR’s policy states that ONHIR may take action against contractors whose work results in an excessive number of warranty complaints. The majority of ONHIR’s home-building work is now complete. As of December 2017, according to officials, ONHIR had relocated 3,687 families into new homes, and ONHIR officials said they expect construction on the remaining 20 homes to be completed by September 2018. Although most home-building activities are complete, we found that ONHIR has historically allowed contractors with a history of performance issues to build relocation homes. For example, ONHIR provided us with a report generated from its contractor performance database that shows a contractor who had failed 42 percent of final inspections during a 11-year period—from January 2006 through September 2017—continued to receive home-building contracts. Similarly, we identified homes with multiple warranty complaints in ONHIR’s warranty database. Specifically, one home in the warranty file database had 17 warranty defect complaints attributed to the contractor. ONHIR officials said that they do not track complaints by contractor in a database nor do they have a defined number of complaints for removing contractors. ONHIR officials said that they have not removed a contractor involuntarily from their list since the 1990s. ONHIR officials explained that these contractors continued building homes because it is difficult to find contractors who want to work on the reservation due to the isolated nature of homesites. Moreover, in recent years they said they did not track complaints by contractor because they would be aware of complaints about a contractor due to the smaller number of relocation homes that have been built. As a result, according to ONHIR officials, they have not needed to take actions to remove contractors from their list since the 1990s or to generate reports on contractor performance. In addition, ONHIR officials said some warranty complaints were trivial, such as peeling paint or visible carpet seams, and thus terminating contractors for such issues was unnecessary. ONHIR officials also noted that all homes eventually passed their final inspections and any failed inspection items were corrected and reinspected before contractors received payments. Although ONHIR said it has nearly completed its relocation obligations, some relocatees, the Hopi tribe, and Navajo Nation government officials said that it has not completed its work. Specifically, Navajo Nation officials and some relocatees said the office should remain open to address various concerns with relocation homes and the societal effects of relocation. Moreover, according to some relocatees and Navajo Nation government officials, these concerns include homes that were built with faulty materials and with unfinished infrastructure, such as electricity. As previously mentioned, ONHIR has no responsibility over relocation homes after the 2-year warranty period on each home expires. However, an official from the Navajo-Hopi Legal Services Program said that homeowners had concerns with their homes beyond the 2-year warranty period. While ONHIR has attributed such issues to a lack of homeowner maintenance, relocatees have attributed these issues to ONHIR’s lack of oversight of the home-building process. Concerns some relocatees and tribal government officials described include the following: Construction. Navajo Nation officials from three separate chapters told us that relocation homes were not built properly. The President of the Navajo Nation said that homes frequently have construction issues related to cheap materials or poor workmanship, while another official said that ONHIR does not properly oversee contractors. Another official told us that the windows fall out of homes when it gets too windy. One official said that some families have left their relocation homes behind because of structural issues. Hopi tribe officials said relocatees from their tribe were provided the cheapest homes available and that the conditions of mobile homes are substandard. See figure 7 for examples of homes with cracked foundations and broken windows. ONHIR officials said they inspect all complaints on relocation homes, even after the warranty period has expired. If the investigation reveals an issue that is a result of a construction defect, ONHIR officials said they will fix the issue, whereas they will not fix issues they deem are the result of poor homeowner maintenance. Soil settling. Navajo Nation officials from two chapters told us that ONHIR did not conduct soil tests on homesites and others said that some homes have experienced foundation issues. For example, one relocatee said her relocation home has cracks in the walls and the floors. ONHIR helps clients to apply for homesite leases, and according to ONHIR officials, they assigned engineering technicians to conduct feasibility studies to assess the condition of the soil for all on-reservation homesites, as required by ONHIR policy. However, ONHIR officials also acknowledged that expansion and contraction of soil over time in Arizona is common and that shifting soil can lead to cracks in the foundation or walls of homes. As reported by the Interior Inspector General in 2016, 5 relocatee homes on the Navajo reservation experienced cracks and other visible signs of damage due to soil settling and have consequently been replaced by ONHIR. ONHIR officials acknowledged that they have demolished and replaced an additional 9 homes due to foundation issues related to soil expansion and other issues, such as leaks in utility lines and septic tanks. For the homes experiencing foundation issues outside of the 14 homes ONHIR has replaced, ONHIR attributed continued soil collapse to homeowners not maintaining the proper degree of slope around their home to allow for drainage. In addition, they said that homes may now be occupied by three generations of families. According to a 2016 Interior Inspector General report, ONHIR officials said this leads to increased water use inside the homes which, in their opinion, exacerbates the soil-settling issue. Societal effects. Relocated families expressed that relocation has contributed to societal ills such as depression; alcoholism; drug abuse; and suicide due to substandard living conditions and homesites away from their family and previous sources of livelihood. The Navajo Nation stated that relocatees experienced hardships adjusting to a new way of life and felt a loss of connection with their culture moving away from their ancestral lands and traditional way of life. According to a report issued by the Navajo Nation Human Rights Commission, relocatees were promised by the federal government, the Hopi Tribe, and the Navajo Nation that relocation would offer a better life that did not materialize. ONHIR officials noted that both the Navajo Nation and the Hopi Tribe have requested extended counseling beyond the warranty period; however, according to the March 2017 transition plan, ONHIR does not believe providing it is within their statutory authority. Connections to utility infrastructure. According to Navajo Nation officials, some homes are not properly connected to utility infrastructure, such as electricity and water. For example, they stated that a number of relocation homes in the Navajo area do not have electricity. In its comments on a draft of this report, ONHIR stated that some relocatees chose to relocate to remote areas and signed a form to affirm that they wanted solar or cistern rather than grid utilities. A representative from the Hopi Tribe told us that in one home, contractors installed plumbing systems that were subsequently covered in concrete, which made repairs difficult. Another chapter official said that a septic tank in one relocation home continually overflowed because the tank was smaller than the specifications. ONHIR officials said all homes are built to code at the time of construction and have proper connections to infrastructure in terms of water and electricity. They said they verify that homes pass necessary inspections, including framing; mechanical; plumbing; and insulation, prior to disbursing payments to the contractors. Community infrastructure. Some Navajo Nation chapter members and ONHIR officials disagree as to whether ONHIR had an obligation to provide additional community infrastructure under the Settlement Act. Some chapter members said that ONHIR should not close because it has not met its responsibilities to provide infrastructure projects, such as paved roads and running water. The Navajo Nation Human Rights Commission report states that relocatees were told they would be provided with running water and the ability to raise livestock, among other things. Provisions in the Settlement Act directed ONHIR to create a report with a plan to ensure that infrastructure such as water, sewers, and roads would be available at their relocation sites. ONHIR published a report to meet the provision in 1981. This provision was repealed in November 1988. ONHIR officials acknowledged that relocatees have expressed the need for additional infrastructure, but said it is not within ONHIR’s statutory responsibility to provide it. The Settlement Act as amended does not require ONHIR to provide infrastructure for the New Lands. Although ONHIR’s home building for certified applicants is nearly complete, responsibilities remain for existing homes under warranty and any additional homes built for newly certified applicants. As previously discussed, relocation homes are under warranty for 2 years, starting at the time when the house passes final inspection. During this 2-year period, ONHIR is responsible for helping homeowners, who are located on-reservation, request warranty repairs. After September 2018, 52 relocation homes will remain under the 2-year warranty period, according to ONHIR officials. In addition, as previously discussed, ONHIR officials told us that at least 240 denied applicants could still file for appeals in the federal court and become eligible for relocation benefits, which would necessitate the construction of additional homes. A 2-year warranty period would then begin after these houses pass final inspection. As previously mentioned, ONHIR was not designed to be a permanent agency. The Settlement Act states that ONHIR will cease to exist when the President of the United States determines that its functions have been fully discharged. Although ONHIR officials have said they are working toward completing their tasks so the office can close by the end of fiscal year 2018, they acknowledge that not all activities will be complete by that time. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives. For example, information necessary to communicate to an agency’s oversight body includes significant matters related to risks or changes. However, according to ONHIR officials, they have not specifically communicated with the President about the determination on whether the agency has fully discharged its functions and whether the office should close. Instead of directly requesting that the President make a determination for ONHIR to cease operations, ONHIR has been making plans to close through other means and transition remaining activities. Specifically, ONHIR officials told us that they anticipate that closure of the office will need to occur through a legislative change or through the termination of program funds through the budget and appropriations process. As stated in the March 2017 transition plan, the plan was developed in response to direction from the Office of Management and Budget and the Senate and House Appropriations Committees that ONHIR should wind down its activities. Further, in its comments on a draft of this report, ONHIR stated that it has had regular communications with executive and legislative branch offices on completing its work and closing. However, neither the draft transition plan nor the October 2017 implementation plan indicates how ONHIR would request a determination from the President that ONHIR has fully discharged its responsibilities and can be terminated. Without such a presidential determination, ONHIR has not met the explicit requirements for being permitted to cease operation under the Settlement Act. Although ONHIR officials anticipate that the agency will close by September 2018, they have not ensured that complete information related to its relocation activities can be made available to other successor agencies. This lack of planning and information could hamper the efforts of a successor agency or agencies to effectively take over these activities. Eligibility and appeals. As previously mentioned, there is the possibility for 240 or more denied households to appeal their eligibility decision in the future, and the paper case files and client database contain important information regarding eligibility for the continuation of ONHIR’s relocation activities. Specifically, paper case files contain comprehensive information on each applicant from the time he or she applied for relocation benefits, including documents submitted to prove head of household or residency status for eligibility determination. In addition, the client database tracks decisions and dates related to the eligibility determination process and is necessary to identify applicants’ status. In its March 2017 transition plan and October 2017 implementation plan, ONHIR has not developed detailed information on how it plans to identify and prepare information in the paper case files and client database for the 240 or more denied households that could file for federal appeals. ONHIR officials said that they have not prepared eligibility determination and appeals information for transfer because they expect eligibility determinations to be completed by the time the office plans to close. In the event that such transfers are needed, they said the transfer of these records will be through an agreement between ONHIR, the National Archives and Records Administration, and BIA. However, such an agreement has not yet been developed, and discussions on the transfer of records—such as during monthly transition meetings—are high-level and mostly unrelated to information needed for potential eligibility determination responsibilities. In addition, officials said that information about appeals filed in the future in the federal court could be obtained from an online federal database. Federal internal control standards state that management should use quality information to achieve the entity’s objectives. Additionally, the standards state that management should identify, analyze, and respond to risks related to achieving the defined objectives. If ONHIR does not take the steps to ensure that complete information for the 240 or more denied households eligible to appeal their eligibility decision is available to a successor agency, a successor agency could face difficulty in administering eligibility determinations and remaining appeals in the future. Warranties and contractor performance. As previously discussed, ONHIR’s remaining home-building responsibilities include managing the 52 remaining 2-year warranty agreements and assisting in the construction of homes for any newly certified applicants. To fulfill these responsibilities, complete information on home warranties and contractor performance is critical. ONHIR’s warranty database has data fields to track relevant information on concerns reported to ONHIR—including warranty expiration date, date warranty complaint received, type of complaint (possible warranty defect or homeowner maintenance issue). However, the database is incomplete. For example, our review found that about 98 percent of warranty complaints in the warranty database have no record of the date of warranty repairs. Moreover, ONHIR does not list the names of contractors in its database. ONHIR officials said the information is not recorded because they rely on memory and paper files to supplement the information in the warranty database about contractors. ONHIR officials also said they do not regularly use the database to monitor contractors’ performance because it became too cumbersome to track electronically. However, in its comments on a draft of this report, ONHIR stated that it has the capability in its electronic data system to search for warranty complaints. In its October 2017 implementation plan, ONHIR suggested BIA’s contract office as a potential successor agency for administering the remaining warranty provisions in the event that it closes before these home-building responsibilities are fully discharged. With regard to any newly certified applicants deemed eligible for benefits through the appeals process, the October 2017 implementation plan suggests that these applicants be given the cash equivalent of a relocation home instead of building new homes. However, the Settlement Act provides for no authority to issue cash payments and Congress has not otherwise authorized cash payments, and any future home-building activities may need to be assumed by a successor agency. Because OHNIR does not have complete information on existing warranties and contractor performance, another successor agency could be hampered in its ability to assume ONHIR’s remaining home-building responsibilities. Federal internal control standards state that management should identify, analyze, and respond to risks related to achieving the defined objectives. Additionally, the standards state that management should use quality information to achieve the entity’s objectives. Without complete warranty and contractor information, a successor agency may have difficulty understanding what warranty issues have already been addressed or have difficulty overseeing contractors to help ensure that newly certified applicants secure decent, safe, and sanitary relocation homes. In its transition and implementation plans, ONHIR has identified a number of potential successor agencies that could be selected to take over ONHIR’s remaining activities in different areas. However, officials at these agencies said they currently do not have the authority to undertake these activities under the Settlement Act. Appeals and eligibility. Should ONHIR close before the 6-year statute of limitations has expired for all denied applicants, another agency or agencies would need statutory authority for coordinating eligibility determinations and home-building for any newly certified applicants. As previously discussed, at least 240 households that had been denied relocation benefits as of September 2017 may choose to contest their denial in federal court, according to ONHIR officials. ONHIR’s March 2017 transition plan states that the Department of Justice will continue to represent the government on behalf of ONHIR in any federal court hearings, and ONHIR has also identified Interior’s Office of Hearing and Appeals to hear any matter remanded to the agency by the federal court for a further hearing. Home-building. Another entity would need authority to assume remaining home-building activities. Alternatively, ONHIR’s October 2017 implementation plan suggests that newly certified applicants be given the cash equivalent of a relocation home. However, as previously mentioned, cash payments are not currently authorized under the Settlement Act and legislation would be needed to provide such payments. Moreover, Navajo Nation officials said they do not approve of using cash payments in place of providing relocatees with a home. In November 2017, ONHIR officials said that, as an alternative to cash payments, they discussed with the Navajo Nation the potential for the Navajo Housing Authority—a recipient of the HUD Indian Housing Block Grant Program—to administer remaining home-building activities. They did not make a decision, however, because the Navajo Nation wanted to inquire about the capacity of the Navajo Housing Authority to assume these activities. Although ONHIR has not identified HUD as an agency with a potential role, such as assuming or providing oversight of Navajo Housing Authority administration of remaining home-building activities, HUD officials told us that HUD would not be able to assume ONHIR housing functions. This is due to the nature of its block grant program, restricted oversight mechanisms, and limited capacity in terms of staff resources and technical skills to supervise construction. In addition, HUD officials said that their current oversight is limited to reviewing a sample of Indian Housing Block Grant program grantees’ policies, procedures, and implementation of procurement and environmental regulations, which may not be consistent with the oversight or authority needed should the Navajo Housing Authority administer the remaining ONHIR home-building activities. Warranties. Should ONHIR close before 2-year home warranties expire on the remaining homes constructed under ONHIR’s oversight, another agency would need statutory authority to oversee these home warranties. As previously mentioned, ONHIR is currently a signatory to the warranty along with the contractor and the client, and more than 52 homes will have warranties in effect after ONHIR’s proposed closure date of September 2018, according to ONHIR officials. In its draft transition plan, ONHIR suggests transferring warranty-related activities to the BIA Contract Office. However, according to BIA officials, BIA does not currently have the authority to conduct these activities, and BIA is not equipped to implement warranties. Post-move counseling. Another agency would need statutory authority to provide post-move counseling to the 52 clients who will remain under warranty after ONHIR’s proposed closure date of September 2018. Currently, ONHIR provides relocatees with post-move counseling during the 2-year warranty period. According to ONHIR’s management manual, the purpose of post-move counseling is to assist families in adjusting to their new house, connect families to local service agencies, and gain understanding about the client’s familial and employment situation. ONHIR’s March 2017 transition plan suggested that the post-move counseling program could be transitioned to BIA. However, BIA officials said BIA currently does not have the authority to conduct these activities. In November 2017, ONHIR officials said the program would discontinue for any newly certified applicants if cash settlements for relocation benefits were authorized, but they did not address what would happen to the 52 clients that will remain within the 2-year warranty period after September 2018. The Settlement Act does not include provisions on the transfer of activities after ONHIR’s closure, and as described above several activities will remain past ONHIR’s planned closure date. Without legal direction to authorize the transfer of ONHIR’s remaining activities to other federal entities, the future of these activities remains uncertain and may adversely affect those in the process of relocating. ONHIR is statutorily required to administer the land taken into trust for the Navajo Nation pursuant to the Settlement Act as amended until relocation is complete. The act also authorizes ONHIR to issue leases for housing and other related facilities on the New Lands. ONHIR’s management manual, which governs its operations, states that it will grant appropriate requests for leases of the New Lands—both developed and undeveloped land—for homesites, businesses, and community services facilities, among other things. According to the manual, entities that want to lease property in the New Lands are to submit an application form and supporting documents to ONHIR. Since the 1980s, ONHIR has received applications from and granted leases to various businesses, the New Lands chapter, and other tribal entities. The leases give the lessee permission to occupy and use the land, including, in the case of developed land, any structures on it, for terms varying from 2 to 99 years. In addition, ONHIR has entered into or administered surface use agreements for the New Lands. Unlike ONHIR’s eligibility determinations and home-building activities, which were intended to have a finite end, the Navajo trust land will need to be managed in perpetuity so long as it is held in trust by the federal government. ONHIR’s draft transition and implementation plans identify BIA and the Navajo Nation as entities that could assume responsibility for managing the trust land once ONHIR terminates. However, ONHIR does not have the authority to transition management of the trust land it administers to another entity. Moreover, we identified a number of concerns with how ONHIR has maintained information or established controls for proper administration of leases and agreements for the New Lands, which could further hinder an eventual transition of these responsibilities to another entity. ONHIR does not have a comprehensive inventory of leased and vacant properties on or surface use and other agreements for Navajo trust land it administers. ONHIR officials identified 23 properties on trust land they administer through documentation and in interviews. Of these 23 properties, ONHIR possessed the current lease for 15 properties. ONHIR officials also identified 5 surface use agreements for Navajo trust land they administer, 3 of which are listed as active on their transition website. ONHIR officials said they have not maintained a comprehensive inventory because they had a long tenure with the agency and are cognizant of what properties and agreements exist. Federal internal control standards state that management should design control activities to achieve objectives and respond to risk. For example, as part of control activities, management clearly documents all transactions and other significant events in a manner that allows the documentation to be readily available for examination. Without developing a comprehensive inventory of leased and vacant properties on Navajo trust land that ONHIR administers, the entity which assumes responsibility for leasing the land will not have the information it needs to carry out that responsibility. ONHIR has occupied or has allowed others to occupy Navajo trust land it administers without a written lease or agreement, which is inconsistent with ONHIR’s management manual. Specifically, of the 23 existing properties on trust land ONHIR officials identified, 7 were in use as of December 2017 but did not have a written lease, as required, for various reasons: ONHIR issued a permit for the use of one property in 2000 that was valid through 2005 and then, according to ONHIR officials, had an oral agreement to indefinitely extend the permit. The officials also said they had an oral agreement to lease another property. ONHIR itself occupies and uses 4 properties without leases, including a headquarters and New Lands office and two structures on the Padres Mesa Demonstration Ranch, discussed below. A lease for 1 property expired in 2011 but it has not been renewed and does not include an option to extend the lease beyond its initial termination date. The Navajo Nation is currently working to renew the lease because it has assumed responsibility from BIA for leasing its trust land. In its comments on a draft of this report, ONHIR stated that in the meantime the federal agency using the property has continued to pay rent to ONHIR while a new lease is negotiated. ONHIR officials said some of these properties do not have written leases because the agency deferred to the tribe’s wishes. However, not having written leases for these properties on trust land is inconsistent with ONHIR’s management manual, which calls for written leases and land use approvals for the New Lands. Without written leases for these properties, the entity which assumes responsibility for leasing the Navajo land that ONHIR has been administering will not know the status of these properties because they are being used without written leases. There are at least two parties to every lease of land, the lessor and the lessee. The lessor is generally the landowner, and the lessee is the party to whom the lease grants permission to use or occupy the land. However, the New Lands are held in trust by the federal government for the Navajo Nation, and federal law provides that trust lands may be leased by the Indian owners with the approval of the Secretary of the Interior. ONHIR is the lessor for 20 of the 22 leases that we reviewed. ONHIR officials said the leases were done this way because its management manual called for ONHIR to serve as the lessor. However, ONHIR changed its management manual in 2011 to say the Navajo Nation should serve as the lessor for business; commercial; industrial; and mineral leases unless the tribe requests ONHIR to be the lessor. ONHIR did not revise the leases in effect in 2011 to reflect this change. After the 2011 changes to the management manual, ONHIR became the lessor for the one business lease entered into for the New Lands. ONHIR did not provide documentation that the tribe requested ONHIR to serve as lessor for this lease. Navajo Nation officials said ONHIR informs the tribe about leases out of courtesy and does not seek the tribe’s permission to lease Navajo trust land. Moreover, the Navajo Nation Department of Justice has taken the position that ONHIR does not have the authority to lease Navajo trust land. In addition to these leases, ONHIR identified 5 surface use agreements for Navajo trust land it administers. In 3 of 5 of these agreements, ONHIR, not the tribe, is the party granting the right to access and use the Navajo trust land. However, ONHIR is not the landowner and this is also inconsistent with BIA’s leasing practices. In addition, of the current leases of New Lands with ONHIR as the lessor, 2 leases specify what is to happen should ONHIR close. None of the surface use agreements specify what is to happen should ONHIR close. ONHIR officials said that they have not updated or amended the other leases and agreements because there is no need to do so yet. ONHIR’s transition and implementation plans also do not identify which leases and agreements need to be amended or assigned upon ONHIR’s closure. In its March 2017 transition plan, ONHIR identified BIA as the successor agency for managing leases on the Navajo trust land ONHIR is currently administering. However, this is inconsistent with the Navajo Nation’s assumption of responsibility for leasing its trust land from BIA. Federal internal control standards state that management should design control activities to achieve objectives and respond to risk, for example, to ensure that transactions such as leases are properly executed. In addition, federal internal control standards state that management should design control activities to identify, analyze, and respond to change, including changes to the entity’s activities. Without ONHIR identifying which leases and other agreements need to be amended or assigned because they identify ONHIR as the lessor, any entity that assumes responsibility for leasing these trust lands in the event that OHNIR closes will not be able to effectively manage these properties. Half of the 22 leases we reviewed required the lessee to pay a non- nominal amount (i.e., more than $1 a year) of annual rent to ONHIR. In addition, annual payments for 3 of 5 surface use agreements are made to ONHIR, according to ONHIR officials. According to agency documents, since the 1990s, ONHIR has collected and retained over $1 million in revenue from these leases of and surface use agreements for Navajo trust land it administers. ONHIR deposits the lease revenue into ONHIR’s Treasury account. ONHIR officials said they have used the revenue to aid relocation efforts by renovating facilities located on Navajo trust land ONHIR administers, providing grants to Navajo chapters, and funding other activities to benefit the relocatees. However, the Settlement Act as amended does not state that ONHIR may collect, retain, and use revenue from leases of Navajo trust land, and ONHIR officials have not identified another statute authorizing the agency to do so. ONHIR officials said the agency retained this revenue to ensure that all net revenues from these trust lands are used exclusively for the benefit of relocatees because the Settlement Act as amended requires the trust lands be administered for the benefit of relocatees. However, this statutory provision does not authorize ONHIR to receive lease revenues. ONHIR is operating the Padres Mesa Demonstration ranch on Navajo trust land, but has not leased the land, which is inconsistent with ONHIR’s management manual. As mentioned previously, ONHIR’s management manual calls for written leases for and land use approvals of the New Lands. According to ONHIR officials, there is no requirement for them to have a lease or obtain permission from the tribe to occupy the structures on the ranch, including a range office, or operate a ranch on Navajo trust land. In addition, ONHIR’s grazing of the ranch’s cattle on the New Lands without a grazing permit is inconsistent with ONHIR’s regulations. ONHIR’s grazing regulations require a grazing permit for all livestock grazed on the New Lands, but ONHIR does not have a grazing permit for the cattle on the ranch because ONHIR officials decided it was not necessary to issue a permit to itself. Moreover, ONHIR is not eligible for a grazing permit under its regulations because it is a federal entity and only enrolled Navajo tribal members are eligible for permits. We are examining ONHIR’s use of appropriations to establish and operate a cattle ranch in a separate legal opinion. ONHIR has identified two different entities to assume operation of the ranch in the event of its closure. ONHIR’s March 2017 transition plan identified BIA as the entity to oversee the continued operation of the Padres Mesa Demonstration Ranch. However, BIA officials said the agency does not have the statutory authority to operate a for-profit ranch. Moreover, these officials said they are not interested in doing so because it is a role for the tribe and would be a conflict of interest for the agency since BIA regulates grazing on trust land. In addition, ONHIR’s October 2017 implementation plan indicates that the Navajo Nation would assume responsibility for the ranch after ONHIR’s closure and after negotiating an agreement with the chapter. Because the ranch is located on Navajo Nation trust land, the tribe could choose to continue its operation after ONHIR closes. Navajo officials said they are interested in operating the ranch but they have not determined how the for-profit ranch would be managed if the tribe also regulated grazing on the New Lands, which it is also interested in doing. Congressional action may also be needed to address other provisions in the Settlement Act as amended regarding (1) the use of the acquired trust lands, (2) trust acquisition, and (3) the Navajo Rehabilitation Trust Fund. Trust land is generally held in trust for the benefit of an Indian tribe or individual Indian. However, the Settlement Act as amended requires the land taken into trust pursuant to the Settlement Act, including the New Lands, to be used solely for the benefit of relocatees. The New Lands chapter government wants this restriction to continue if and when ONHIR terminates. However, without congressional action to continue this restriction, it is likely the trust lands acquired in Arizona pursuant to the Settlement Act as amended would be administered for the benefit of the tribe as a whole rather than to solely benefit the relocatees. In addition, as part of its administration of the New Lands, ONHIR’s regulations governing grazing of livestock on the New Lands are different from how grazing is regulated by BIA for other Indian trust land. The purpose of ONHIR’s regulations was to aid in the resettlement of Navajo Indians residing on Hopi Partitioned Lands to the New Lands and to preserve the New Lands’ forage, land, and water resources. Under these regulations, grazing permit holders must be permanent residents of the New Lands. In contrast, under BIA’s regulations that apply to the portions of the Navajo reservation not under ONHIR’s administration, any Navajo tribal member is eligible for a grazing permit. Navajo Nation and chapter officials told us they would like ONHIR’s grazing regulations to continue if ONHIR were to close. ONHIR’s implementation plan identifies BIA as the entity to regulate grazing on the New Lands after ONHIR closes. ONHIR’s implementation plan also says BIA officials have agreed to regulate grazing on the New Lands in accordance with ONHIR’s regulations. However, BIA officials said Interior currently does not have the authority to regulate grazing on the New Lands, so they cannot make any decisions on how to do so. In addition, Navajo Nation officials said they want to assume responsibility for regulating grazing on the New Lands and prefer to have ONHIR’s grazing regulations, which are stricter than BIA’s, remain in place at least at the Padres Mesa Demonstration Ranch. Should ONHIR close, Congress will need to consider addressing how grazing on the New Lands will be regulated after ONHIR’s closure. The Settlement Act as amended provides for two categories of land to be taken into trust for the Navajo Nation: (1) up to 250,000 acres of BLM land in Arizona and New Mexico that is transferred to the tribe (category 1) and (2) up to 150,000 acres of land held in fee by the Navajo Nation (category 2). No more than 35,000 of the 400,000 acres selected could be in New Mexico. The tribe was authorized to select the lands in both categories for 3 years after the 1980 amendments’ enactment, and then ONHIR was authorized to select the lands after consultation with the Navajo Nation. Once the lands are selected, the Settlement Act as amended provides for the mandatory acquisition of these selected lands as land held in trust by the federal government for the Navajo Nation. Mandatory trust acquisitions are not subject to BIA’s regulatory requirements for discretionary trust acquisitions under the Indian Reorganization Act. As of December 2017, about 12,000 of the 400,000 acres had yet to be selected, and about 24,000 acres that had been selected had yet to be taken into trust (see table 3). The over 11,000 acres of category 1 land selected but not yet taken into trust are located in New Mexico. These lands have not been taken into trust because of unprocessed coal preference right lease applications. Congress will need to determine whether the Navajo Nation should be able to select the entire 400,000 acres and have that land taken into trust as a mandatory trust acquisition, as provided for in the Settlement Act as amended. Without congressional action, any additional land the tribe acquired and wanted taken into trust would be a discretionary trust acquisition subject to BIA’s regulations. Furthermore, the Navajo Nation has raised two additional issues regarding the trust acquisition provision that Congress may also need to address. Deselection and reselection. The Navajo Nation would like to make changes to some of the land it has selected and make new selections, but the Settlement Act as amended does not authorize deselection of land the tribe previously selected to be taken into trust pursuant to the act’s mandatory trust acquisition provision. Deselection had not occurred as of January 2018, but bills have been introduced in Congress that would cancel some of the tribe’s land selections and authorize the tribe to replace those with new selections. Without statutory authorization, the Navajo Nation cannot deselect these lands and make new selections to reach the 400,000 acres provided for in the Settlement Act as amended. Trust status versus restricted fee status. The Navajo Nation has indicated that it is interested in having a statutory option for the selected land to be held in restricted fee status rather than held in trust. In 2016, a law was enacted that mandated a trust acquisition for certain parcels of land unassociated with the Settlement Act unless the Navajo Nation elected to have the land conveyed to it in restricted fee status. The President of the Navajo Nation has testified before Congress that the tribe is interested in having this option in future legislation involving the Settlement Act. Without statutory authorization, the land not yet selected pursuant to the Settlement Act as amended could not be held in restricted fee status if the tribe so chooses. However, without congressional action this cannot be changed. Established in the U.S. Treasury by the 1988 amendments to the Settlement Act, the Navajo Rehabilitation Trust Fund is essentially a loan from the federal government to the Navajo Nation to be paid back from revenues derived from leases of the lands and minerals taken into trust in New Mexico pursuant to the Settlement Act as amended. From fiscal years 1990 through 1995, Congress appropriated approximately $16 million to the Trust Fund. The Settlement Act as amended requires all net income derived by the Navajo Nation from the surface and mineral estates of lands in New Mexico taken into trust pursuant to the act to be deposited into the Trust Fund. Moreover, the net income is required to be used to reimburse the general fund of the Treasury for the amounts originally appropriated to the Trust Fund. According to leasing and other documents from the Navajo Nation and BLM, several of these parcels have been generating modest income since at least the 1990s. Specifically, BLM identified several parcels of the New Mexico trust land with grazing allotments or oil and gas leases. In addition to these sources of revenue, the tribe entered into an agreement for use of a parcel of the New Mexico trust land that requires, beginning in 2015, annual rent payments of $25,000 to be paid to the Trust Fund. The Navajo Nation has not reimbursed the general fund of the Treasury for the approximately $16 million appropriated to the fund, contrary to the statutory requirement to do so. While the Navajo Nation acknowledges its legal obligation to repay the Treasury, the tribe is seeking loan forgiveness because the Trust Fund’s purpose was to aid the relocatees and the tribe views such aid as an unfulfilled federal obligation, according to tribal officials. Further, these officials said repaying the Treasury would eliminate any benefit the relocatees received from the land because the revenue generated from the New Mexico trust lands and minerals has not been sufficient to justify partial payment. Because much of the land the Navajo Nation selected in New Mexico has not been taken into trust and the land that has been taken into trust is generating modest income, Congress will need to consider whether to continue the statutory repayment requirement or repeal it. If Congress decides to repeal the repayment requirement, it will need to consider specifying whether revenues from the trust lands acquired in New Mexico pursuant to the Settlement Act as amended are to be used by the tribe exclusively for the benefit of relocatees. The relocation of Navajo and Hopi families has taken more time than originally anticipated when the Settlement Act was enacted in 1974, extending ONHIR operations more than 30 years beyond the original estimates. ONHIR has proposed to close by the end of fiscal year 2018 and initiated steps to identify agencies to handle the remaining activities. However, the Settlement Act does not give other agencies the authority to undertake various ONHIR responsibilities. Therefore, if ONHIR closes without congressional actions, any potential successor agency will not have the appropriate authority to administer any remaining activities. As a result, newly certified applicants and clients who remain under the 2-year warranty period will not have an entity to assist with securing decent, safe, and sanitary relocation homes, as intended in the Settlement Act. Further, several other provisions in the Settlement Act as amended may need congressional action. These include (1) the requirement for the trust lands acquired in Arizona pursuant to the Settlement Act as amended to be used solely for the benefit of relocatees and whether grazing on the New Lands should be regulated consistent with ONHIR’s current regulations; (2) the mandatory trust acquisition provision for the Navajo Nation; and (3) the requirement for the Navajo Nation to repay the U.S. Treasury for appropriations made to the Navajo Rehabilitation Trust Fund. In addition, although ONHIR believes it has completed most of its responsibilities under the act and believes it can close by September 2018, it does not have the authority to make this decision. Rather, the Settlement Act states that ONHIR will cease to exist when the President of the United States determines that its functions have been fully discharged. However, ONHIR has yet to request that the President make this determination. Moreover, OHNIR has not prepared complete information about its various activities, such as eligibility determinations, appeals, and home building, which increases the risk that successor agencies will not be able to effectively assume ONHIR’s activities. Finally, ONHIR has not appropriately managed leases and other agreements for Navajo trust land it administers or identified changes that would need to be made in leases in the event that it closes. Because the land ONHIR administers is held in trust by the federal government, another entity will need to assume these responsibilities if ONHIR closes. However, OHNIR does not maintain a complete inventory of leased or occupied land and does not have written agreements for some occupied land. Further, ONHIR has not identified which leases will need to be amended to identify the appropriate lessor and the entity to receive the lease revenue. Without these actions, the entity that assumes responsibility for leasing the New Lands will not have the information it needs to effectively manage the properties. We are making the following four matters for congressional consideration for when ONHIR closes: Congress should consider providing necessary authority for other agencies to continue remaining activities when ONHIR closes. (Matter for Consideration 1) Congress should consider determining (1) whether the requirement for the land acquired pursuant to the Settlement Act as amended to be used solely for the benefit of relocatees should continue and (2) how grazing on the New Lands should be regulated. (Matter for Consideration 2) Congress should consider addressing the mandatory trust acquisition provision for the Navajo Nation in the Settlement Act as amended. (Matter for Consideration 3) Congress should consider whether the requirement for the Navajo Nation to repay the U.S. Treasury for appropriations made to the Navajo Rehabilitation Trust Fund should continue. (Matter for Consideration 4) We are making the following five recommendations to ONHIR. The Executive Director of ONHIR should request a presidential determination as to whether ONHIR has fully discharged its responsibilities and whether it should close. (Recommendation 1) The Executive Director of ONHIR should prepare complete information on the remaining denied households who could still file for federal appeals. Such information could include paper case files and information in ONHIR’s client database for those households. (Recommendation 2) The Executive Director of ONHIR should prepare complete information on warranties and contractors. Such preparation should include linking warranty complaints to the relevant contractor, completing missing warranty information, and completing information on contractors’ past performance. (Recommendation 3) The Executive Director of ONHIR should establish a comprehensive inventory of (1) properties located on trust land it administers, (2) leases of those properties, and (3) surface use and other use agreements for trust land it administers. (Recommendation 4) The Executive Director of ONHIR should identify which leases and other agreements need to be amended or assigned because (1) ONHIR is the lessor, (2) the lease or agreement provides for annual payments to be made to ONHIR, and/or (3) the lease or agreement terminates upon ONHIR’s closure. (Recommendation 5) We provided a draft of this report to the Office of Navajo and Hopi Indian Relocation (ONHIR); Department of the Interior; Department of Justice; Department of Housing and Urban Development (HUD); Department of Health and Human Services; Department of the Treasury; the Navajo Nation; and the Hopi Tribe for review and comment. The Department of Justice, Department of the Treasury, and the Hopi Tribe did not provide comments. The Department of the Interior and the Department of Health and Human Services provided technical comments that we incorporated as appropriate. We received comments via e-mail from HUD’s Acting Director of Grants Evaluation in the Office of Native American Programs. In this e-mail, the Acting Director stated that HUD believes the report should clearly state that HUD would not be an appropriate agency to continue ONHIR’s housing functions, because it does not provide direct services to tribes, review or approve actions or transactions, or have the technical capacity to assume ONHIR housing functions. We have acknowledged this in the report and our objective was to identify legislative actions that may be necessary to transition remaining relocation activities. Therefore, our focus was on whether or not additional authorities might be needed if ONHIR were to close. Although we present background information about other federal agencies and tribal entities with responsibilities in Indian Country as well as perspectives from various agencies on the transition and remaining activities, we did not independently evaluate these agencies’ authorities or capacity and do not draw conclusions about which agencies and tribal entities including HUD should be provided the necessary authority by Congress to continue ONHIR’s remaining activities. In ONHIR’s comments, which are summarized below and reproduced in appendix II, ONHIR did not explicitly agree or disagree with our five recommendations but stated that it had either already taken steps or had plans to once a successor is identified. With regard to the draft report’s first recommendation to request a presidential determination as to whether ONHIR has fully discharged its responsibilities and whether it should close, ONHIR stated that it has worked for decades with the Office of Management and Budget within the Executive Office of the President on completing its work. While this may be the case, our review found that no presidential determination for ONHIR to cease operation has been requested, and no such decision has been communicated, therefore we believe our recommendation is valid. With regard to the second recommendation to prepare complete information on the remaining denied households that could still file for federal appeals, ONHIR stated that it has a solid grasp of potential appeals. Specifically, ONHIR said that case files have been identified and all needed information already exists in the case files and in its database. ONHIR stated that it will provide potential successor agencies with any information they request. However, because it is unclear when ONHIR will close and which agency will assume ONHIR’s remaining eligibility and appeals activities at that time, a successor agency will not have the institutional knowledge to follow and connect the information needed for determining eligibility and providing support for cases for which appeals were filed in federal court. Therefore, we maintain that ONHIR should proactively prepare the necessary information associated with these appeals for any successor agency. Preparing complete and readily available information could minimize the challenges the successor agency may encounter in administering future appeals and eligibility determinations. With regard to the third recommendation to prepare complete information on warranties and contractors, ONHIR stated that up- to-date and complete information on warranty status appears in the existing case files. We maintain our concern about the accuracy of ONHIR’s warranty database because in its comment letter ONHIR acknowledged that some complaints were entered multiple times due to data entry issues. Moreover, ONHIR states that its staff know which relocatee homes will still be under warranty as of September 30, 2018, and have compiled a list of such homes. However, preparing the case file and list of such homes does not address the deficiencies that we found in the warranty database. While we revised the report by including ONHIR’s statement that its system has the capability to search warranty complaints, we continue to believe that the information available through searches will be incomplete for a successor agency because the information is disconnected. Without linking warranty complaints to the relevant contractor, completing missing warranty information, and completing information on contractors’ past performance, any successor agency may have difficulty understanding what warranty issues have already been addressed or have difficulty overseeing contractors to help ensure that newly certified applicants secure decent, safe, and sanitary relocation homes. With regard to the fourth recommendation to establish a comprehensive inventory of (1) properties located on trust land it administers, (2) leases of those properties, and (3) surface use and other use agreements for trust land it administers, ONHIR stated that such documentation exists and is maintained and updated. However, this statement is inconsistent with what we found during our review. We reviewed information provided by ONHIR from various sources as part of our review, and the information available did not include a comprehensive inventory of leased and vacant properties on or surface use and other agreements for Navajo trust land ONHIR administers. We continue to believe that without developing a comprehensive inventory of leased and vacant properties on Navajo trust land that ONHIR administers and leases and agreements for those properties, the entity that assumes responsibility for leasing the land will not have the information it needs to carry out that responsibility. With regard to the fifth recommendation to identify which leases and other agreements need to be amended or assigned because (1) ONHIR is the lessor; (2) the lease or agreement provides for annual payments to be made to ONHIR, and/or (3) the lease or agreement terminates upon ONHIR’s closure, ONHIR stated that it will move forward with specific transition activities after a successor entity is identified. We believe that such an approach is risky because it assumes that ONHIR staff will be available to work closely with staff from a new successor entity to personally transfer their knowledge to the new staff. However, there is no guarantee that ONHIR will continue operating or that its many retirement-eligible employees will be available to assist any successor entities during a transition period. We, therefore, maintain that the Executive Director of ONHIR should identify which leases and other agreements need to be amended or assigned. ONHIR also made other comments in its letter, which we have responded to in appendix II. The Navajo Nation and the Navajo Nation Human Rights Commission also submitted comments on a draft of this report, which are reproduced in appendix III and IV. We are sending copies of this report to the appropriate committees and the Office of Navajo and Hopi Indian Relocation, Department of the Interior, Department of Justice, Department of Housing and Urban Development, Department of Health and Human Services, Department of the Treasury, the Navajo Nation, and the Hopi Tribe. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact us at (202) 512-8678 or shearw@gao.gov or (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report examines (1) ONHIR’s management of the eligibility and appeals processes and the status of these activities; (2) ONHIR’s management of the home-building process and the status of these activities; (3) executive branch or legislative actions that may be necessary to terminate ONHIR in an orderly manner and transition remaining relocation activities; (4) ONHIR’s management of Navajo trust lands and related transition activities; and (5) legislative actions that may be necessary to address other Settlement Act provisions. To address these objectives, we reviewed our prior related reports and other studies and analyzed relevant laws and regulations. We interviewed ONHIR officials on relocation and other key activities, and we interviewed ONHIR’s hearing officer to better understand his role in the appeals process. We also interviewed federal officials from the Department of the Interior’s (Interior) Bureau of Indian Affairs (BIA), Office of Inspector General, and Bureau of Land Management (BLM); Department of Housing and Urban Development (HUD); Department of the Treasury (Treasury); and Indian Health Services within the Department of Health and Human Services. We also conducted interviews with tribal government officials from the Navajo Nation and the Hopi Tribe including officials from the Navajo-Hopi Legal Services Program, the Navajo-Hopi Land Commission Office, and the Navajo Nation Human Rights Commission. Additionally, we conducted two visits in August 2017 to ONHIR’s offices in Flagstaff and Sanders, Arizona, and the Navajo region where we interviewed ONHIR staff, observed a transition meeting, took two separate tours of homes (one with ONHIR officials and the other with Navajo Nation officials) and observed rangeland management activities, and attended presentations in three Navajo Nation chapters. Additionally, to address the first, second, and third objectives, we reviewed ONHIR’s management manual, policy memorandums, the 1981 Report and Plan, and the 1990 Plan Update on relocation activities, including the eligibility and appeals processes, and home-building activities. We obtained two data files as of June 2017 from ONHIR’s Client Database—Client Master and Hearing File—to analyze the time frame for becoming certified for relocation benefits and relocating to the house provided by ONHIR. Using the case numbers in the Hearing File, we identified those applicants that were certified for relocation benefits through the administrative appeals process. We assessed the reliability of ONHIR’s data files by conducting a file review of a random sample of 30 case numbers, which we selected based on the distribution of two factors: (1) application date, and (2) type of determination. We recorded the relevant information in the paper files— such as date applied, date of determination, determination code, and date relocated—and compared it to the data fields in the electronic files. We determined that ONHIR’s data files were sufficiently reliable for the purpose of our report. We also reviewed home-building-related documentation, including contractor lists, contracts, warranty information, and contractor performance reports, to understand ONHIR’s oversight of home-building activities. In addition, we reviewed ONHIR’s transition-related documentation including transition guiding principles, the draft transition plan, and the draft “From Transition Plan to Transition Implementation” document to understand ONHIR’s planned closure. We also reviewed and assessed the original statute to determine the extent to which ONHIR has the authority to transfer those activities. We interviewed ONHIR and Interior officials to identify any opportunities for modifying or continuing other Settlement Act provisions. To address the fourth and last objectives, we obtained from ONHIR copies of all leases and use agreements for Navajo trust land it administers pursuant to the Settlement Act as amended from the 1980s to the present. We reviewed the terms of the leases and agreements provided to identify specific elements, such as the identity of the lessor, lessee, and any concurring parties; start and end dates; required rental payments, if any; and any provisions on the leases’ continuation or termination in the event that ONHIR closes. We compared the leases to ONHIR’s list of properties on Navajo trust land it administers to determine if all of the properties were covered by leases. We also reviewed information, such as summary spreadsheets, on sources of revenue ONHIR collects, retains, and uses, including documentation of Treasury accounts where such revenue is deposited. We cross-checked the revenue information ONHIR provided with information from Treasury about deposits into ONHIR’s Treasury account and we interviewed ONHIR officials regarding discrepancies. Revenues from the Padres Mesa Demonstration Ranch were included as part of the revenue information and ONHIR provided a separate accounting of the obligations, expenditures, and revenues for the ranch. We reviewed ONHIR’s regulations and management manual for policies and procedures on leasing and grazing on the New Lands and compared them to the agency’s practices. We also reviewed BIA’s regulations on leasing and grazing on Indian trust lands under the agency’s administration to identify comparable grazing and leasing policies and procedures. Furthermore, we interviewed ONHIR, Interior, BLM, Treasury, and Navajo Nation officials and reviewed documents from the agencies and tribe to identify any opportunities for modifying or continuing other Settlement Act provisions. We conducted this performance audit from March 2017 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. 1. We revised the report to state that ONHIR has no authority to require any person to leave the land that was awarded to the other tribe. 2. We disagree with the Office of Navajo and Hopi Indian Relocation’s (ONHIR) characterization of our report and did not make a change based on this comment. Our report focuses on ONHIR’s management of the home building process and the status of these activities. To appropriately address our audit objective on the home building process, we included the experiences of the population that was being served by ONHIR. While ONHIR states that the information included in our report is unsubstantiated, we do not assert that the views on home building from those we attributed—tribal government officials and relocatees—are accurate or draw conclusions about the reasons for the condition of the homes. Further, we presented ONHIR’s counterargument to the concerns raised by the relocatees to provide context and balance, with additional details explained in footnotes. Throughout our report, we ensured a balanced presentation with an objective tone, consistent with generally accepted government auditing standards and our quality assurance framework. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Moreover, our description of Navajo Nation chapters was reviewed and verified by the Navajo Nation, therefore we believe it accurately states the views of Navajo Nation officials. 3. We revised the report to indicate the attorney fees reported were over a 35-year period. 4. We revised the report to state that, for the third application period, the requirement was for applicants to maintain legal residency until their contact with ONHIR. 5. We made revisions to the report to include ONHIR’s efforts related to eligibility determination, such offering administrative appeals to Navajos for whom ONHIR could not show actual receipt of denial letters and using restricted delivery certified mail for almost 30 years. 6. We made revisions to the report to include ONHIR’s perspective on the difficulties in determining residency because of the nature of Navajos’ employment opportunities. 7. Our report does not evaluate the reasons that have affected the length of the appeal process because it is not pertinent to our objectives. Therefore, we did not make a change to the report in response to this comment. 8. Although this is new information that was not presented to us during our review, it does not materially affect our findings, therefore we did not make a change in the report. 9. We clarified the report to state that ONHIR consulted with the Department of Justice in Washington, D.C, and the U.S. Attorney’s Office in Arizona. 10. We clarified the report to indicate that, in response to the Herbert decision, ONHIR was required to provide notices to “potentially” eligible applicants. 11. Our report focuses on actions that may be necessary to terminate ONHIR in an orderly manner and transition remaining relocation activities. We did not make a change in the report in response to ONHIR’s comment because ONHIR had not identified and compiled the case files during our review that would be necessary or easily accessible for a successor agency. While ONHIR states in its letter that case files have been identified and all needed information already exists in the case files and in its database, because these activities may have occurred subsequent to our review, we cannot confirm the accuracy of this comment. We maintain our concerns about ONHIR’s database given its admission of data entry issues as stated in the comment letter. 12. We revised the headings of two report sections to emphasize the distinction between administrative appeals and appeals to the federal court. 13. We revised the report to include ONHIR’s perspective on allowing oral evidence. 14. We revised the report to incorporate information ONHIR provided related to the communities to which relocatees have moved. 15. We clarified the report to state that relocatees with existing Navajo homesite leases can have their relocation home built on the homesite lease site if it meets feasibility requirements. 16. We revised the report to incorporate information ONHIR provided on relocatees who chose to relocate to remote areas. 17. Our report focuses on ONHIR’s management of the home building process. We did not make a change to the report in response to ONHIR’s comment because we already describe several procedures related to home building, including contractor licensing requirements and feasibility studies. The report also acknowledges that houses have passed final inspection. 18. As described in comment 2, we disagree with ONHIR’s characterization of our methodology. We did not make a change in the report because we maintain that including the experiences of the population served by ONHIR is appropriate for balance. 19. We disagree with ONHIR’s characterization of our report and did not make a change to the report based on this comment. Throughout the body of the report, we have included ONHIR’s policies, its implementation of activities, as well as the statements of officials related to relocatees’ home-building concerns. 20. We have made revisions to clarify the figure title. The two photographed houses are on the Navajo reservation, shown to us during our site visit. Because one of the houses was shown to us by ONHIR officials, we believe the home was built by ONHIR. The other home was from a separate tour with Navajo Nation officials. The Navajo Nation officials indicated that the home was built by ONHIR. 21. As described in comment 2, we disagree with ONHIR’s characterization of our methodology. We did not make a change in the report because we maintain that including the experiences of the population served by ONHIR is appropriate for balance. 22. As described in comment 2, we disagree with ONHIR’s characterization of our methodology. Throughout the report, we specifically attribute all the views on home building to those we interviewed—tribal government officials and relocatees. We also do not draw conclusions about the reasons for the condition of the homes. We did not make a change in the report because we maintain that including the experiences of the population served by ONHIR is appropriate for balance. 23. We revised the report to include ONHIR’s statement about the search capability of its electronic data system. 24. During our review, ONHIR officials did not identify contracting for post- move counseling services as an option that they have considered nor did we find any such reference in transition documents we reviewed. Therefore we have not made any changes to the report based on this comment. 25. We disagree with ONHIR’s characterization of our report. We reviewed information provided by ONHIR from various sources, and accurately reported that ONHIR does not have a comprehensive inventory of leased and vacant properties or surface use and other agreements for Navajo trust land it administers. Therefore, we made no changes in response to this comment. 26. We disagree with ONHIR’s characterization of our report and did not make a change in the report based on this comment. ONHIR’s management manual calls for written leases and land use approvals for the New Lands, whether or not the Navajo Nation requests these. It is not the responsibility of the trust beneficiary to request a written lease. The trustee has a duty to maintain clear, complete, and accurate books and records regarding trust property. 27. We disagree with ONHIR’s statement that it will wait until a successor is identified to inform it of the leases. Moving forward with specific transition activities only after a successor entity is identified is a risky approach because it assumes that ONHIR staff will be available to work with staff from a successor entity to transfer their knowledge to the new staff. However, there is no guarantee that ONHIR will continue to be operating at that time or that its many retirement- eligible employees will be available to assist any successor entities during a transition period. ONHIR has proposed closing on September 30, 2018. As of March 2018, no successor entities have been designated or authorized to assume any ONHIR activities. As we recommended, clearly documenting what needs to happen as part of the transition will help ensure a smoother transition in the event that there is not a transition period between ONHIR and a new successor entity. 28. We revised the report to indicate that, according to ONHIR, Federal Aviation Administration has continued to pay rent to ONHIR while a new lease is negotiated. 29. We disagree with ONHIR’s characterization of the report and did not make a change based on this comment. As we reported, the Settlement Act as amended does not specifically authorize ONHIR to collect, retain, and use revenues from leases of Navajo trust land it administers. The Settlement Act as amended also does not specify whether ONHIR, the Navajo Nation, or the relocatees should receive lease revenues. However, as we reported, under BIA’s regulations for trust land it administers, revenue from leases is to be either paid directly to the tribe whose trust land is being leased or to BIA, which deposits the revenue in the tribe’s trust account that generally earns interest. BIA officials told us leases of trust land that provide for BIA to retain lease revenue would not be consistent with the agency’s trust responsibility. 30. We recognize that ONHIR is not, and has never been, part of BIA. As we note in the report, the comparison to BIA is instructive because BIA administers the vast majority of Indian trust land. In addition, ONHIR in its comments and draft transition plan identify BIA as a possible successor entity for some activities. 31. As described in comment 29, we disagree with ONHIR’s characterization of its duties and powers as a trustee and did not make a change to the report. The Settlement Act as amended does not specifically authorize ONHIR to collect, retain, and use revenues from leases of Navajo trust land it administers. Moreover, BIA officials told us leases of trust land that provide for BIA to retain lease revenue would not be consistent with the agency’s trust responsibility. 32. We disagree with ONHIR’s characterization of the realities of leasing Navajo trust land and did not make a change to the report. ONHIR did not provide documentation of requests from the Navajo Nation for ONHIR to serve as the lessor on some commercial leases. When ONHIR served as the lessor, ONHIR provided the Navajo Nation with some leases for “technical review” or for “review and comment”. However, only one of the leases we reviewed includes the Navajo Nation President’s signature when the tribe, or a tribal entity, is not the lessee. Moreover, as we reported, the Navajo Nation Department of Justice repeatedly informed ONHIR that it lacked the authority to lease Navajo trust land. 33. As described in comment 27, we disagree with ONHIR’s planned approach to wait until a successor is identified and did not make a change in the report. Moving forward with specific transition activities only after a successor entity is identified is a risky approach because it assumes that ONHIR staff will be available to work with staff from a successor entity to transfer their knowledge to the new staff. However, there is no guarantee that ONHIR will continue operating or that its many retirement-eligible employees will be available to assist any successor entities during a transition period. 34. We clarified the report to note that another entity is needed to assume remaining home building activities. 35. We clarified the report to include ONHIR’s statement that it has had regular communications with executive and legislative branch offices on completing its work and closing. 36. We disagree with ONHIR’s comments that the report is misleading related to a presidential determination. Although we included ONHIR’s statement on its communications about closure in the report, we maintain that without a presidential determination, ONHIR has not met the explicit requirements for being permitted to cease operations under the Settlement Act. 37. As described in comment 11, during the course of our review, ONHIR did not have complete information readily available for use by a successor agency. We cannot assure that any efforts ONHIR has taken subsequently to compile this information as stated in its comment letter are accurate. We continue to believe that ONHIR should proactively compile necessary information rather than waiting for a successor to request it. Moreover, we maintain our concerns about ONHIR’s database given its admission of data entry issues in its comment letter. Therefore, we did not make a change in the report based on this comment. In addition to the contact named above, Jill Naamane and Jeffrey Malcolm (Assistant Directors), Chir-Jen Huang (Analyst in Charge), Susan Baker, William Chatlos, Brad Dobbins, Justin Fisher, Randi Hall, Erik Kjeldgaard, Ellie Klein, Jessica Sandler, Jennifer Schwartz, Jena Sinkfield, and Jeanette Soares made key contributions to this report.", "summary": "In 1974, the Settlement Act was intended to provide for the final settlement of a land dispute between the Navajo and Hopi tribes that originated nearly a century ago. The act created ONHIR to carry out the relocation of Navajo and Hopi Indians off land partitioned to the other tribe. ONHIR's relocation efforts were scheduled to end by 1986. However, those efforts continue today. GAO was asked to review ONHIR's operations. Among other things, this report discusses (1) ONHIR's management and the status of relocation activities and (2) executive branch and legislative actions that may be needed for ONHIR to close and transfer remaining activities. GAO reviewed documentation; interviewed officials at ONHIR and other federal agencies, as well as from the Navajo Nation and Hopi Tribe; and conducted two site visits to ONHIR's offices and the Navajo reservation in Arizona. As of December 2017, the Office of Navajo and Hopi Indian Relocation, and its predecessor agency (collectively, ONHIR), has relocated 3,660 Navajo and 27 Hopi families off disputed lands that were partitioned to the two tribes and provided new houses for them. Although the Navajo-Hopi Settlement Act of 1974 (Settlement Act) intended for ONHIR to complete its activities 5 years after its relocation plan went into effect, the agency has continued to carry out its responsibilities for over three decades beyond the original deadline and the potential remains for relocation activities to continue into the future. For example, GAO found that by the end of fiscal year 2018 at least 240 households whose relocation applications were previously denied could still file for appeals in federal court and if the court rules in their favor these households could become eligible for relocation benefits under the Settlement Act, and ONHIR is still responsible for helping homeowners who might request repairs for 52 relocation homes that remain under warranty. ONHIR believes that it has substantially completed its responsibilities under the Settlement Act and has stated its intent to close by September 2018. However, ONHIR does not have the authority to close its operations and has not yet taken the steps necessary to facilitate such a closure. GAO identified a number of areas where either executive branch or congressional actions would be needed to affect a closure of ONHIR, as shown in these examples: The Settlement Act states that ONHIR will cease to exist when the President determines that its functions have been fully discharged. ONHIR, however, has not requested a determination nor provided specific information to the President that could facilitate such a decision. ONHIR has prepared a transition plan and identified potential successor agencies that could assume its remaining activities. However, officials at these agencies said they currently do not have authority under the Settlement Act to undertake ONHIR's activities. Without congressional authorization these agencies would not be able to succeed ONHIR. ONHIR has prepared an implementation plan to guide its closure but has not yet taken necessary steps to ensure that all the key information about its activities has been compiled. For example, ONHIR's database for tracking warranty requests is missing information, such as the date of warranty repairs and other contractor information. Similarly, ONHIR has not prepared complete information from its files on the remaining denied households who could file for federal appeals. Federal internal control standards state that agencies should identify and respond to risks and use quality information. By not preparing complete information on the relocation activities it has been engaged in, ONHIR places an effective transition of its functions to another agency at risk. This is because any successor agency authorized to continue these activities will not have the complete information needed to effectively fulfill these functions. GAO is making four matters for congressional consideration; including that Congress provide successor agencies necessary authority to continue ONHIR's remaining activities if it closes. GAO is also making five recommendations to ONHIR, including that it request a closure determination from the President and prepare necessary information to facilitate the transfer of its activities to a successor. ONHIR neither agreed nor disagreed with the five recommendations and stated it had either already taken steps or planned to once a successor is identified. GAO continues to believe the recommendations are valid, as discussed in the report.", "document_type": "gao"}
{"report": "Coal accounted for 17 percent of energy production (30 percent of electricity production) in the United States in 2016. To generate this energy, approximately 730 million tons of coal were mined domestically in 2016, according to the U.S. Energy Information Administration, approximately 40 percent of which was produced on federal lands. As of 2016, state regulatory authorities and OSMRE had received financial assurances associated with coal mines that had been permitted to disturb approximately 2.3 million acres, according to OSMRE data. Coal is mined in two different ways: surface mining and underground mining. In surface coal mining, before the underlying coal can be extracted, the land is cleared of forests and other vegetation and topsoil is removed and stored for later use. Explosives or other techniques are then used to break up the overlying solid rock, creating dislodged earth, rock, and other materials known as spoil. Surface coal mines can cover an area of many square miles. In underground coal mining, tunnels are dug to access coal that is too deep for surface mining methods. In some cases, underground coal mines are designed to leave sufficient coal in the mine to support the overlying surface, and in other cases, they are designed to extract higher quantities of coal that results in subsidence of the overlying surface as mining progresses. In addition to disturbing the land surface, coal mining can affect water quality, according to the Environmental Protection Agency, the National Academies, and others. For example, mining can increase sediments in rivers or streams, which may negatively affect aquatic species. Moreover, mining can expose minerals and heavy metals to air and water, leading to a condition known as acid mine drainage, which can lead to long-term water pollution and harm some fish and wildlife species. Mining can also lower the water table or change surface drainage patterns. The surface effects of coal mining in the United States are regulated under SMCRA, which also created OSMRE to administer the act. SMCRA allows an individual state or Indian tribe to develop its own program to implement the act if the Secretary of the Interior finds that the program is in accordance with federal law. A state with an approved program is said to have “primacy” for that program. To obtain primacy, a state or Indian tribe submits to the Secretary of the Interior for approval a program that demonstrates that the state or tribe has the capability of carrying out the requirements of SMCRA. The program must demonstrate that the state or Indian tribe has, among other things, a law that provides for the regulation of the surface effects of coal mining and reclamation in accordance with the requirements of SMCRA, and a regulatory authority with sufficient personnel and funding to do so. Of the 25 states and four Indian tribes that OSMRE identified as having active coal mining in 2017, 23 states had primacy, and OSMRE manages the coal program in 2 states and for the four Indian tribes. SMCRA requires a mine operator to obtain a permit before starting to mine. The permit process requires operators to submit plans describing the extent of proposed mining operations and how and on what timeline the mine sites will be reclaimed. In general, an operator must reclaim the land to a use it was capable of supporting before mining or to an alternative postmining land use that OSMRE or the state regulatory authority deems higher or better than the premining land use. In reclaiming the mine site, operators must comply with regulatory standards that govern, among other things, how the reclaimed area is regraded, replanting of the site, and the quality of water flowing from the site. Specifically: Operators are generally required to return mine sites to their approximate original contour unless the operator receives a variance from the regulatory authority. To return to this contour, the surface configuration achieved by backfilling and grading of the mined area must closely resemble the general surface configuration of the land before mining and blend into and complement the drainage pattern of the surrounding terrain, with all highwalls and spoil piles eliminated. Operators are required to demonstrate successful revegetation of the mine site for 5 years (in locations that receive more than 26 inches of rain annually) or 10 years (in drier areas). States have requirements for what vegetation may be planted depending on the approved postmining land use. For example, West Virginia’s regulations call for sites with a postmining land use of forest land to be planted with at least 500 woody plants per acre. The state specifies that at least five species of trees be used, including at least three of the species being higher value hardwoods, such as oak, ash, or maple. SMCRA requires that financial assurances be sufficient to ensure reclamation compliant with water quality standards, including those established by the Environmental Protection Agency or the states under the Clean Water Act. SMCRA’s implementing regulations also contain additional water protection requirements. For example, the regulations require that all surface mining and reclamation activities be conducted to minimize disturbance of the hydrologic balance within the permit and adjacent areas and to prevent material damage to the hydrologic balance outside the permit area. The federal government also enacted SMCRA, in part, to implement an abandoned mine land program to promote the reclamation of mined areas left without adequate reclamation prior to 1977, when SMCRA was enacted, and that continue to substantially degrade the quality of the environment, prevent or damage the beneficial use of land or water resources, or endanger the health or safety of the public. Specifically, Congress found that a substantial number of acres of land throughout the United States had been disturbed by surface and underground coal mining on which little or no reclamation was conducted. Further, it found that the impacts from these unreclaimed lands imposed social and economic costs on residents in nearby areas as well as impaired environmental quality. Since the abandoned mine land program was created, approximately $3.9 billion has been spent to reclaim abandoned mine lands, and there is at least $10.2 billion in remaining reclamation costs for coal mines abandoned prior to 1977, as of September 30, 2017, according to OSMRE. SMCRA generally requires operators to submit a financial assurance in an amount sufficient to ensure that adequate funds will be available for OSMRE or the state regulatory authority to complete the reclamation if the operator does not do so. The amount of financial assurance required is determined by the regulatory authority—OSMRE or the state—and is based on its calculation of the estimated cost to complete the reclamation plan it approved as part of the mining permit. Financial assurance amounts can be adjusted as the size of the permit area or the projected cost of reclamation changes. SMCRA also authorizes states to enact an OSMRE-approved alternative bonding system as long as the alternative achieves the same objectives. One kind of alternative bonding system is known as a bond pool. Under this type of system, the operator may post a financial assurance for an amount determined by multiplying the number of acres in the permit area by a per-acre assessment. The per-acre assessment may vary depending on the site-specific characteristics of the planned mining operation and the operator’s history of compliance with state regulations. However, the per-acre bond amount may be less than the estimated cost of reclamation. To supplement the per-acre bond, the operator generally must pay a fee for each ton of mined coal and may also be required to pay other types of fees. These funds are pooled and can be used to reclaim sites that participants in the alternative bonding system do not reclaim. Under OSMRE regulations, all alternative bonding systems must provide a substantial economic incentive for the operator to comply with reclamation requirements and must ensure that the regulatory authority has adequate resources to complete the reclamation plan for any sites that may be in default at any time. OSMRE regulations implementing SMCRA recognize three major types of financial assurances: surety bonds, collateral bonds, and self-bonds. A surety bond is a bond in which the operator pays a surety company to guarantee the operator’s obligation to reclaim the mine site. If the operator does not reclaim the site, the surety company must pay the bond amount to the regulatory authority, or the regulatory authority may allow the surety company to perform the reclamation instead of paying the bond amount. Collateral bonds include cash; certificates of deposit; liens on real estate; letters of credit; federal, state, or municipal bonds; and investment-grade rated securities deposited directly with the regulatory authority. A self-bond is a bond in which the operator promises to pay reclamation costs itself. Self-bonds are available only to operators with a history of financial solvency and continuous operation. To remain qualified for self-bonding, operators must, among other requirements, do one of the following: have an “A” or higher bond rating, maintain a net worth of at least $10 million, or possess fixed assets in the United States of at least $20 million. In addition, the total amount of self-bonds any single operator can provide shall not exceed 25 percent of its tangible net worth in the United States. Primacy states have the discretion on whether to accept self-bonds. State regulatory authorities and OSMRE reported holding a total of approximately $10.2 billion in surety bonds, collateral bonds, and self- bonds as financial assurances for coal mine reclamation in 2017. Of the total amount of financial assurances, approximately 76 percent ($7.8 billion) were in the form of surety bonds, 12 percent ($1.2 billion) in collateral bonds, and 12 percent ($1.2 billion) in self-bonds (see fig. 1). Twenty-four states reported holding surety bonds, 20 states reported holding collateral bonds, and 8 states reported holding self-bonds (see table 1). In addition, OSMRE officials identified 6 states—Indiana, Kentucky, Maryland, Ohio, Virginia, and West Virginia—that have also established alternative bonding systems, such as bond pools. In a state with a bond pool, the operator may generally post a financial assurance for less than the full estimated cost of reclamation; in addition, the operator must pay into a bond pool. The pooled funds can be used to supplement forfeited financial assurances to reclaim sites that operators participating in the bond pool do not reclaim. States and OSMRE reported that operators forfeited more than 450 financial assurances for reclaiming coal mines between July 2007 and June 2016, with 13 of the 25 states reporting at least one forfeiture. States and OSMRE reported that the amount of financial assurance forfeited was sufficient to cover the cost of required reclamation in about 52 percent of the cases and did not cover the cost of required reclamation in about 22 percent of the cases. In the remainder of the cases (26 percent), the state or OSMRE reported that it had not yet determined if the financial assurance amount covered the reclamation costs that it was intended to cover. State and OSMRE officials said that it can take many years to fully reclaim a site and that it may take time for them to identify the extent of reclamation needed and to determine if the amount of financial assurance forfeited was sufficient to cover reclamation costs. State and OSMRE officials said there were several reasons why the amount of financial assurance obtained might not be sufficient to cover reclamation costs. For example, officials said the amount of financial assurance might not be sufficient if an operator mined in a manner inconsistent with the approved mining plan upon which the amount of financial assurance was calculated or if mining activity resulted in water pollution that was not considered when the amount of financial assurance was calculated. In cases where the amount of financial assurance does not cover the cost of reclamation, the operator remains responsible for reclaiming the mine site. However, OSMRE officials said that in those cases where the operator may be experiencing financial difficulties, it might be difficult for the states or OSMRE to compel the operator to complete the reclamation or provide additional funds to do so without having the operator go out of business or into bankruptcy. If the operator does not reclaim the site, the regulatory authority must use the forfeited financial assurance to do so. If the forfeited funds are not adequate, the site may not be fully reclaimed unless the regulatory authority either successfully sues the operator for more funds or provides any additional funds needed for reclamation. One other source of funds states can use to reclaim forfeited mines is civil penalties that the United States government collects from operators that violate conditions of their mining permits. OSMRE obligated approximately $2.8 million in civil penalties from fiscal years 2012 through 2017 for states to use to perform reclamation in cases where the financial assurance was not sufficient, according to agency officials. OSMRE has taken steps—including periodically reviewing financial assurance amounts, inspecting mine sites, and reviewing state programs that implement SMCRA—to oversee financial assurances and aspects of the mining and reclamation process that can affect whether the amount of financial assurances obtained will cover the cost of required reclamation. SMCRA requires OSMRE or the primacy state regulatory authority to calculate the amount of financial assurance required for each mine and to adjust the amount when the area requiring bond coverage increases or decreases or when the cost of future reclamation changes. OSMRE officials and state regulatory authority officials from four of the six states we interviewed said they generally review the amount of financial assurance at least every 2 1/2 years or when the mining plan has been modified in a way that may affect the amount of financial assurance required. Such periodic reviews are in part to help ensure that OSMRE and state regulatory authorities continue to hold an amount sufficient to complete required reclamation as conditions change. These reviews can lead to OSMRE or the state regulatory authority changing the amount of financial assurance required for a mine. For example: A state regulatory authority official in Utah said that the regulatory authority reviewed an existing mine permit in 2014, which led to it recalculating the estimated cost of reclamation on the basis of current costs. The state regulatory authority requested that the operator provide a financial assurance to cover the difference (approximately $195,000), in addition to the $445,000 financial assurance already in place. However, the official said that the operator—which had stopped mining the site in 2012 and filed for bankruptcy in 2013—did not provide the additional financial assurance amount. As a result, in 2017 the state regulatory authority collected the financial assurance that was in place (i.e., the operator forfeited its assurance). The official said in December 2017 that the state regulatory authority is determining the steps it will take to reclaim the site and expects that the forfeited amount will be sufficient to cover reclamation costs. OSMRE officials said that the agency reviewed a permit for a mine on Navajo tribal lands and determined that it needed to ask the operator to provide an additional financial assurance in the amount of $5.7 million. The increase was due to inflation and to include certain costs, such as the cost of mobilizing equipment needed for reclamation, that had inadvertently been excluded from the earlier calculation of the financial assurance required. The officials said that the operator provided the additional financial assurance amount. State regulatory authority officials in Wyoming said they review financial assurance amounts annually, and in 2017 they reduced the financial assurance for one mine by almost $35 million because of a substantial decline in fuel costs and the mine’s ability to share the cost of needed reclamation equipment with a neighboring mine. SMCRA requires OSMRE to make an average of at least one complete inspection per calendar quarter and one partial inspection per month for each active permit for which it is the regulatory authority to ensure that mines are in compliance with SMCRA and federal regulations. Complete inspections cover all inspection elements in OSMRE’s directive, while partial inspections may instead focus on issues that most frequently result in violations or a specific topic identified for oversight, according to OSMRE officials. In addition, OSMRE’s directive instructs the agency to inspect a sample of mines annually in states that have primacy to monitor and evaluate approved state programs’ compliance with SMCRA. The total number of inspections OSMRE is directed to conduct in primacy states is based on the number of inspectable units in each state. Complete inspections are to be done on 33 percent of those sites selected for inspection. Overall, OSMRE completed more inspections in primacy states than directed each year for evaluation years 2013 through 2016, according to agency data. For example, in evaluation year 2016, OSMRE’s directive called for it to conduct 1,225 inspections and OSMRE completed 1,388. As part of a complete inspection, OSMRE confirms that the operator is following the mining and reclamation plans to assure that the amount of financial assurance in place is adequate, according to OSMRE officials. If a violation is identified during an inspection, SMCRA requires OSMRE to issue a ten-day notice to the state regulatory authority or an immediate cessation order to the operator. If the violation increases the estimated cost of reclamation (e.g., if the operator disturbed more land than it was approved for) or an adequate financial assurance had not been collected, OSMRE or the state regulatory authority can request that the operator provide an additional financial assurance. For example: OSMRE issued a ten-day notice to the Pennsylvania regulatory authority in 2015 because a water treatment system for a mine in that state did not have a financial assurance. According to OSMRE officials, the state regulatory authority took appropriate action to resolve the situation by issuing an order for the operator to post a financial assurance within 7 days. During an inspection of a mine in Tennessee, a nonprimacy state, OSMRE determined that the operator had not correctly reclaimed a portion of the mine because the slope of the regraded area was too steep, according to an OSMRE official. For the reclamation work that would be needed to regrade that area, OSMRE determined that the operator needed to provide an additional financial assurance of $272,000. Under SMCRA, OSMRE is required to evaluate each primacy state’s coal program annually to ensure that it complies with SMCRA. SMCRA includes a requirement that the regulatory authority secure necessary financial assurances to assure the reclamation of each permitted mine site. While OSMRE’s directive on oversight of state and tribal regulatory programs does not instruct the agency to review state regulatory authority calculations of financial assurance amounts, it instructs OSMRE to focus on the state programs’ success in achieving the overall purposes of SMCRA. For example, OSMRE, in conducting its oversight, is to evaluate the states’ effectiveness in successfully reclaiming lands affected by mining and in avoiding negative effects outside of areas authorized for mining activities. If OSMRE’s review of a state program identifies an issue that could result in the state not effectively implementing, administering, enforcing, or maintaining all or any portion of its approved coal program, OSMRE can work with the state regulatory authority to develop an action plan to correct the issue. If a state regulatory authority does not take the necessary corrective action, OSMRE may begin the process of withdrawing approval for a part or all of the state’s primacy. In addition to annually evaluating state programs, OSMRE can conduct national or regional reviews on specific topics. For example, OSMRE conducted a national review in 2010 that examined how state regulatory authorities calculated the required amount of financial assurances for coal mine reclamation. The review examined financial assurance practices in 23 states and reported that on the basis of the sample of mining permits reviewed, OSMRE was unable to determine if the amount of financial assurances was adequate for at least one of the permits it reviewed in 10 of the 23 states. Among the potential issues OSMRE identified were errors in the methods state regulatory authorities used to calculate financial assurance amounts and insufficient information in the reclamation plan upon which to calculate reclamation costs. OSMRE has worked with the 10 state regulatory authorities to address the financial assurance issues identified in the 2010 review. For example, OSMRE’s review found that the regulatory authority in Pennsylvania did not secure sufficient financial assurances to complete reclamation plans, in part because amounts were not calculated based on the actual sizes of the areas excavated for mining. In August 2014, OSMRE and Pennsylvania’s regulatory authority agreed to an action plan to ensure that the financial assurances for all active and new permits would be calculated using the actual sizes of the excavated areas. According to an OSMRE official, as of February 2017, the state regulatory authority had recalculated the financial assurance amount for all mines and had secured the additional financial assurances needed from operators of all but two of the mines. State officials said in October 2017 that they were continuing to work to obtain the assurances required for the two mines. OSMRE’s 2010 review also found that financial assurances in Kentucky were not always sufficient to cover required reclamation costs, in part because the method Kentucky’s regulatory authority used to calculate financial assurance amounts did not factor in all costs, such as the cost of moving equipment to and from the reclamation site. In February 2011, OSMRE and Kentucky’s regulatory authority signed an action plan identifying steps needed to address the issues OSMRE had identified. However, in May 2012, OSMRE determined that the state regulatory authority’s proposed changes to its method for calculating financial assurance amounts was an improvement but would not result in the authority obtaining sufficient funds to cover required reclamation. As a result, OSMRE initiated the process of revoking Kentucky’s primacy for this aspect of its program. In response, Kentucky implemented regulations to increase the minimum financial assurance required. The regulations also required the state regulatory authority to evaluate financial assurance amounts every 2 years to determine whether they need to be increased, among other things. The state regulatory authority sent a set of program amendments to OSMRE designed to address the identified deficiencies, some of which OSMRE is currently reviewing. OSMRE and state regulatory authorities face a number of challenges in managing financial assurances for coal mine reclamation—including those related to self-bonding, unanticipated reclamation costs, and the financial stability of surety companies—according to federal and selected state regulatory authority officials, representatives from organizations associated with the mining and financial assurance industries, and representatives from environmental nongovernmental organizations whom we interviewed. Challenges facing OSMRE and state regulatory authorities related to self- bonding include the following: Not knowing the complete financial health of an operator. The information federal regulations require operators to provide to regulatory authorities may provide an incomplete picture of the financial health of an operator, according to some parties we interviewed. For example, the financial information that operators provide reflects their past financial health, which may not reflect the operators’ current financial position, according to OSMRE’s response to the 2016 petition seeking revisions to its self-bonding regulations. In addition, if an operator applying for a self-bond is a subsidiary of another company, the operator is not required by regulation to submit information on the financial health of its parent company. While the operator applying may have sufficient financial assets to qualify for self-bonding, if its parent company experiences financial difficulties, the operator’s assets may be drawn on to meet the parent’s obligations, which could worsen the financial health of the self-bonded operator. In addition, according to OSMRE officials, even if OSMRE or a state regulatory authority were to become aware that an operator’s parent company was at financial risk, it would be difficult for the agency to deny the operator’s request for a self-bond because eligibility is specific to the entity applying for the self-bond, according to regulations. OSMRE could change its self-bonding regulations to require more information, according to OSMRE officials. However, the financial relationships between parent and subsidiary companies have become increasingly complex, making it difficult to ascertain an operator’s financial health on the basis of information reported in company financial and accounting documents, according to officials. When OSMRE first approved its self-bonding regulations in 1983, it noted that it was attempting to provide rules that would allow self-bonding without necessitating regulatory authorities to employ financial experts to determine which companies should be allowed to self-bond. However, according to OSMRE officials, financial expertise is now often needed to evaluate the current complex financial structures of large coal companies, which was not envisioned when the regulations were developed. Difficulty in determining whether an operator qualifies for self- bonding. The regulatory authority in a given state may not be aware that an operator had self-bonded in other states, making it difficult for the agency to determine whether the operator qualifies for self- bonding, according to some parties we interviewed. Operators are only allowed to self-bond for up to 25 percent of their net worth in the United States, according to regulations. Regulatory authority decisions on accepting self-bonds generally focus on assessing activities occurring in a specific state, not nationwide, according to the Interstate Mining Compact Commission. As a result, the state regulatory authority or OSMRE may know whether an operator has applied for self-bonds in other states that if approved would exceed 25 percent of its net worth in total. Difficulty in replacing existing self-bonds with other assurances if needed. OSMRE and state regulatory authorities may find it difficult to get operators to replace existing self-bonds with another type of financial assurance when needed, according to some parties we interviewed. If an operator no longer qualifies for self-bonding (e.g., if it has declared bankruptcy), federal regulations require it to either replace self-bonds with other types of financial assurances or stop mining and reclaim the site. In either case, however, some parties noted that such actions could lead to a worsening of the operator’s financial condition, which could make it less likely that the operator will successfully reclaim the site. Some parties we interviewed have noted that regulatory authorities may be reluctant to direct the operator to replace a self-bond with another type of financial assurance and may instead allow the operator to keep mining so that any generated revenue could help the operator reclaim the site. For example, in 2015 the Wyoming regulatory authority determined that an operator no longer qualified for self-bonding and ordered it to replace a $411 million self-bond. However, the operator entered into bankruptcy without having replaced the self-bond. In this case, the state regulatory authority determined that reclamation was more likely to occur if the operator continued mining and allowed the operator to do so without a valid financial assurance. The operator replaced its self-bond as a part of its bankruptcy settlement approximately 17 months after the state regulatory authority’s order to replace the self-bond, according to OSMRE officials. However, if a self-bonded operator were to enter bankruptcy and did not secure a financial assurance to replace the self-bond or complete the required reclamation, the state regulatory authority would have to work through the bankruptcy proceedings to obtain funds for reclamation, according to OSMRE’s preamble to its 1983 self-bonding regulations. As a result, the state may recover only some, or possibly none, of the funds promised through the self- bond, and the cost of reclamation could fall on taxpayers. Difficulty in managing the risk associated with self-bonding. The risk associated with self-bonding is greater now than when the practice was first authorized under SMCRA, according to some parties we interviewed. According to SMCRA, the purpose of financial assurances is to ensure that regulatory authorities have sufficient funds to complete required reclamation if the operator does not do so. While SMCRA allows self-bonding in certain circumstances, when OSMRE first approved its self-bonding regulations, the agency did so noting that at the time there were companies financially sound enough that the probability of bankruptcy was small. Furthermore, the regulations stated that the intent was to avoid, to the extent reasonably possible, the acceptance of a self-bond from a company that would enter bankruptcy. However, as previously mentioned, three of the largest coal companies in the United States declared bankruptcy in 2015 and 2016, and these companies held approximately $2 billion in self-bonds at the time, according to an OSMRE August 2016 policy advisory, making it a very different risk landscape than originally envisioned. Following these bankruptcies—and recognizing that the coal industry was likely to continue to face economic challenges for several more years— OSMRE initiated steps in 2016 to reexamine the role of self-bonding for coal mine reclamation. Specifically, as previously mentioned, OSMRE issued a policy advisory in August 2016 noting that given these circumstances, state regulatory authorities should exercise their discretion under SMCRA and not accept new or additional self-bonds for any permit until coal production and consumption market conditions reach equilibrium. OSMRE has reported that it is not likely for that to occur until at least 2021. OSMRE also announced in September 2016 that the agency planned to examine changes to its bonding regulations that would, among other things, help ensure that reclamation is completed if a self-bonded operator does not do so. However, following a review of department actions that could affect domestic energy production, Interior announced in October 2017 that it was reconsidering the need for and scope of potential changes to its bonding regulations. OSMRE officials said that they did not have a timeline for finalizing a decision on potential changes in its bonding regulations. In addition, OSMRE rescinded its August 2016 policy advisory that states take steps to assess whether operators currently using self-bonds can still quality to do so and that states not accept any new self-bonds. Similar issues involving bankruptcies of hardrock mining operators led the Bureau of Land Management to implement regulations in 2001 eliminating the use of self-bonding for hardrock mining. In doing so, the Bureau of Land Management determined that a self-bond is less secure than other types of financial assurances, especially in cases where commodity prices fluctuate. The agency also noted that operators that would otherwise be eligible to self-bond should not have a significant problem obtaining another type of financial assurance. In our previous work examining other types of environmental cleanup, we found that the financial risk to the government and the amount of oversight needed for self-bonds are relatively high compared to other forms of financial assurances. Furthermore, we also previously reviewed federal financial assurance requirements for coal mining, hardrock mining, onshore oil and gas extraction, and wind and solar energy production and found that of these activities coal mining is the only one where self-bonding was allowed. Because SMCRA explicitly allows states to decide whether to accept self-bonds, eliminating the risk that self-bonding poses to the federal government and states would require that SMCRA be amended. Unanticipated reclamation costs, such as those related to long-term treatment for water pollution, may arise late in a mine’s projected lifespan, and the operator may not have the financial means to cover the additional costs, according to OSMRE officials. Under SMCRA, OSMRE and state regulatory authorities are not to approve a permit for a coal mine if the regulatory authority expects the mine to result in long-term water pollution. As a result, since long-term water pollution is not anticipated to occur, the cost of addressing it would not be included in the initial financial assurance that the operator provides. If the regulatory authority later determines that long-term water treatment is needed, the regulatory authority must adjust the amount of financial assurance that the operator is required to provide. Some parties we interviewed have also noted that the costs and duration of long-term water treatment are not well defined and that surety bonds are not well-suited to provide assurance for such indefinite long-term costs. For example, according to the Interstate Mining Compact Commission, surety bonds are designed for shorter-term, defined obligations that have a high certainty for bond release following the completion of reclamation. To help address this challenge, some states have established, or allowed operators to establish, trust funds to help cover such unanticipated reclamation costs. For example, West Virginia established a fund, primarily supported through a tax on the amount of coal mined, to operate water treatment systems on forfeited sites. West Virginia’s regulatory authority is also working to evaluate permits for sites with water pollution to estimate water treatment costs within the state more precisely. Similarly, Pennsylvania allows operators to establish trust funds that are maintained by foundations and monitored by the state regulatory authority and are intended to ensure that there are sufficient funds to cover the costs of long-term water treatment, according to state regulatory authority officials. In addition, the OSMRE-run coal program in Tennessee allows trust funds for water treatment, in part because an assurance system that provides an income stream may be better suited to ensuring the treatment of long-term water pollution than conventional financial assurances, according to an OSMRE notice in the Federal Register. The utility of surety bonds in providing a financial assurance depends on the surety company’s ability to pay the amount pledged if the operator forfeits. OSMRE regulations require that a surety company be licensed to do business in the state where a mine is located. Some parties we interviewed noted that surety companies have declared bankruptcy or experienced financial difficulties in the past and could experience similar difficulties in the future. In addition, two states reported recent issues related to surety companies. For example, state regulatory authority officials in Alabama said that a surety company that had provided surety bonds totaling $760,000 for four mines in that state had gone bankrupt or was insolvent. As of May 2017, the state had collected only $127,000. Similarly, state regulatory authority officials in Alaska said that as of August 2017, the state had not collected any part of a forfeited $150,000 surety bond because the surety company had gone bankrupt. In our previous work examining other types of environmental cleanup, we have found that the financial risk to the government and the amount of oversight needed for surety bonds are relatively low to moderate compared to other forms of financial assurances. Billions have been spent to reclaim mines abandoned prior to the financial assurance requirements SMCRA put in place, and billions more remain. Under SMCRA, self-bonding is allowed for coal mine operators with a history of financial solvency and continuous operation—the only type of energy production or mineral extraction activity we have reviewed for which this is allowed. Bankruptcies of coal mine operators in 2015 and 2016 have highlighted risks that OSMRE and state regulatory authorities face in managing self-bonding—a risk that may be greater today than when self-bonding was first authorized under SMCRA. If a self-bonded operator were to enter bankruptcy and does not provide a different type of financial assurance or complete the required reclamation, the regulatory authority and the taxpayer potentially assume the risk of paying for the reclamation. Although OSMRE said it would examine changes to its self- bonding regulations following recent bankruptcies, Interior recently said that it is reconsidering the need to do so. Because SMCRA explicitly allows states to decide whether to accept self-bonds, eliminating the risk that self-bonding poses would require amending SMCRA. Until such a change is made, the government will remain potentially at financial risk for future reclamation costs resulting from coal mines with unsecured financial assurances. Congress should consider amending SMCRA to eliminate the use of self- bonding as a type of financial assurance for coal mine reclamation. (Matter for Consideration 1) We provided a draft of this report to the Department of the Interior for review and comment. Interior did not provide written comments on our findings and matter for congressional consideration. OSMRE provided technical comments in an e-mail, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, the Acting Director of OSMRE, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions, please contact Anne-Marie Fennell at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix II. We selected a nonprobability sample of states to examine the Office of Surface Mining Reclamation and Enforcement’s (OSMRE) oversight activities in more detail. We generally selected states that produced the most coal in 2015 but also selected states in order to achieve some variation in factors such as geographic location, the dominant type of coal mining conducted (e.g., surface or underground mining), whether the state had primacy, and whether the state allowed self-bonding (see table 2). In addition to the contact named above, Elizabeth Erdmann (Assistant Director), Antoinette Capaccio, Jonathan Dent, Cynthia Grant, Marya Link, Anne Rhodes-Kline, Sheryl Stein, Guiovany Venegas, and Jack Wang made key contributions to this report.", "summary": "Coal accounts for 17 percent of domestic energy production. SMCRA requires coal mine operators to reclaim lands that were disturbed during mining and to submit a financial assurance in an amount sufficient to ensure that adequate funds will be available to complete reclamation if the operator does not do so. Recent coal company bankruptcies have drawn attention to whether financial assurances obtained by OSMRE and state agencies will be adequate to reclaim land once coal mining operations have ceased. GAO was asked to review management of financial assurances for coal mine reclamation. This report describes, among other things, the amounts and types of financial assurances held for coal mine reclamation in 2017 and the challenges that OSMRE and state agencies face in managing these financial assurances. GAO collected and analyzed data from OSMRE and 23 state agencies; reviewed federal laws, regulations, and directives; and interviewed OSMRE and state agency officials and representatives from organizations associated with the mining and financial assurance industries and environmental organizations. State agencies and the Department of the Interior's Office of Surface Mining Reclamation and Enforcement (OSMRE) reported holding approximately $10.2 billion in surety bonds (guaranteed by a third party), collateral bonds (guaranteed by a tangible asset, such as a certificate of deposit), and self-bonds (guaranteed on the basis of a coal operator's own finances) as financial assurances for coal mine reclamation. OSMRE and state agencies face several challenges in managing financial assurances, according to the stakeholders GAO interviewed. Specifically, Obtaining additional financial assurances from operators for unanticipated reclamation costs, such as long-term treatment for water pollution, can be difficult. Determining the financial stability of surety companies has been challenging in certain instances. Self-bonding presents a risk to the government because it is difficult to (1) ascertain the financial health of an operator, (2) determine whether the operator qualifies for self-bonding, and (3) obtain a replacement for existing self-bonds when an operator no longer qualifies. In addition, some stakeholders said that the risk from self-bonding is greater now than when the practice was first authorized under the Surface Mining Control and Reclamation Act (SMCRA). GAO's previous work examining environmental cleanup found that the financial risk to government and the amount of oversight needed for self-bonds are relatively high compared to other forms of financial assurances. GAO also previously reviewed federal financial assurance requirements for various energy and mineral extraction sectors and found that coal mining is the only one where self-bonding was allowed. However, because SMCRA explicitly allows states to decide whether to accept self-bonds, eliminating the risk that self-bonds pose to the federal government and states would require SMCRA be amended. GAO recommends that Congress consider amending SMCRA to eliminate self-bonding. Interior neither agreed nor disagreed with GAO's recommendation.", "document_type": "gao"}
{"report": "Guidance governing executive agencies’ use of government aircraft generally does not apply to aircraft in use by or in support of the President. Memorandum opinions to the White House from the Department of Justice’s Office of Legal Counsel have provided guidance for categorizing expenses associated with official, political, and personal travel by the President or Vice President. These memoranda provide that certain individuals—such as Secret Service and military aides and support personnel—are required in the performance of their official duties to accompany the President whenever he travels. Further, the official nature of the responsibilities performed by these persons does not change depending upon whether the trip is official, political, or personal and their expenses should generally be paid from public funds. DOD organizations such as the Air Force 89th Air Wing, Presidential Airlift Group, and Marine Helicopter Squadron One provide passenger airlift for presidential travel (fig. 1). The Air Force Air Mobility Command also provides aircraft to move equipment, such as limousines, to support the President’s travel. The Military Working Dog Program and Explosive Ordnance Disposal Program support protection of the President while he is on travel by providing explosive detection capabilities. The Secret Service protects the President through a layered security plan that includes securing locations the President will be visiting, as well as physically screening individuals entering secure areas and conducting background checks on individuals scheduled to be within close proximity to the President, as deemed necessary. Secret Service personnel who support presidential travel include personnel from the Presidential Protection Division and from various headquarters divisions that support protective operations, field offices across the country that provide additional manpower, and the field office with jurisdiction over the location. Additionally, the field office with jurisdiction over the location provides logistical support, additional manpower, regional expertise, and coordinates with state and local law enforcement entities. Consistent with the Presidential Protection Assistance Act, the Secret Service requests support from other agencies—including the Coast Guard and DOD—as necessary when the President travels. The Coast Guard primarily secures the waterways in support of protecting the President, family members, and other designated protectees, as necessary. Specifically, when requested by the Secret Service, the Coast Guard will enforce security zones and provide air intercept capabilities for protectees. Local assets are used to the extent that they are available. However, the Coast Guard can request additional support from Coast Guard assets across the nation to meet the security demand. Costs related to presidential travel fall into two primary categories: Operational costs include costs for assets used to transport or provide protection for the President or spaces used for operational purposes. These include costs for government aircraft and vehicles, such as Air Force One, Marine One, airlift, patrol boats, and hotel rooms used as command centers. Temporary duty costs are costs incurred for personnel who are traveling on official business. These costs include those for transportation, lodging, meals and incidental expenses and other travel-related expenses for personnel supporting the President’s trips. They also include travel-related expenses for personnel who operate the government aircraft and vehicles used to support the President’s trips and Secret Service agents who provide protection. They include the costs for additional personnel who provide bomb detection and disposal capability—military working dog teams and explosive ordinance disposal teams—and support personnel from the White House Military Office, the White House Communications Agency, and the White House Transportation Agency. Two regulations implement statutory requirements and executive branch policies for travel, allowing agencies to pay for or reimburse their employees’ per diem expenses (lodging, meals, and incidentals expenses) and other travel-related expenses: The Federal Travel Regulation (FTR), issued by the General Services Administration (GSA), applies to Secret Service personnel. The Joint Travel Regulations (JTR), issued by the Department of Defense, apply to DOD personnel. Both regulations allow agencies to pay for employees’ daily expenses when they travel, based on allowances set by GSA for the applicable location and date (per diem rates) or the actual expense of travel. Under the FTR, the maximum amount that a civilian employee may be reimbursed is 300 percent of the applicable per diem rate. The JTR allows uniformed service members to be reimbursed up to 300 percent when they travel in the continental United States, but they can be reimbursed more than 300 percent of the per diem rate for lodging when they travel outside the continental United States. Costs for each presidential trip may vary, because each trip is unique. Costs associated with each trip can be influenced by a number of factors, mainly the location, number of protectees, foreign visitors, time of year, the protectee’s schedule of events, and the airlift requirements—including the originating location of airlift flights. The combination of these factors can increase or decrease the cost to transport and protect the President. Specifically, an increase in the number of protectees, including foreign dignitaries, would require the Secret Service to deploy additional personnel to support its protective operations. The Presidential Protection Assistance Act establishes procedures and reporting requirements for protective services provided by the Secret Service. The primary aim of the legislation was to strengthen control over costs for protective services, particularly at non-governmental properties, by centralizing in the Secret Service authority and accountability for such costs. The Act continues the authority of executive departments and agencies to assist the Secret Service in meeting its protective responsibilities but specifies that protective services may only be provided at the request of the Secret Service and must be on a reimbursable basis except when temporary support is provided by DOD and the Coast Guard and is directly related to protecting the President, Vice President, or an officer immediately next in the order of succession to the office of the President. The Act further requires that the Secret Service, DOD, and the Coast Guard submit semiannual reports in March and September to six congressional committees on expenditures pursuant to the Act. For the President’s four trips to Mar-a-Lago from February 3, 2017 to March 5, 2017, we estimate that federal agencies incurred costs of about $13.6 million. As shown in table 1, these costs consisted of approximately $10.6 million for operating costs and $3.0 million for temporary duty costs. DOD and DHS incurred the majority of these costs—about $8.5 million and $5.1 million, respectively. As previously mentioned, these figures do not include certain classified cost information. Moreover, they do not include the salaries and benefits of U.S. government civilian and military personnel traveling with the President or involved with agency travel preparations, because these personnel would have received their salaries and benefits for the conduct of their regular duties and responsibilities regardless of whether the President traveled. We identified about $60,000 in expenses paid to Mar-a-Lago for these four trips. DOD lodging expenses of about $24,000 were within GSA limits of 300 percent of the per diem rate. DHS expenses of about $36,000 were for space required by the Secret Service for operational purposes. The legal authorities that the Secret Service relied on to pay for these kinds of rooms do not limit how much the agency can pay; however, none of the rooms used to meet operational security standards exceeded the maximum allowed under the FTR’s actual expense reimbursement method. DOD incurred an estimated $8.5 million in costs to provide support for the President’s four trips to Mar-a-Lago from February 3, 2017 to March 5, 2017, as shown in table 2 below. The majority of these costs were operational costs for DOD assets, specifically, for operating Air Force One and Marine Corps One to transport the President, as well as airlift support from the Air Mobility Command. Table 2 shows the estimated costs incurred by DOD for these trips. The cost per flying hour for military aircraft is a significant cost driver that affects the overall costs of any presidential travel. These costs are predominately borne by the Air Force and the Marine Corps, because they operate the aircraft used by the President. Generally, Air Force One costs represent the operating costs to fly the President from Joint Base Andrews, Maryland, to Palm Beach, Florida. Similarly, the Marine Corps One costs represent the operating costs to fly the President between the White House and Joint Base Andrews. For the airlift support requirements, the Air Mobility Command used aircraft departing from various U.S. Air Force bases. These aircraft arrived at Joint Base Andrews or Marine Corps Base Quantico to transport Secret Service personnel and vehicles and Marine Corps personnel and helicopters to support the trip before returning to their air base of origin (see fig. 2). DOD also incurred temporary duty costs for DOD personnel who supported these trips, including the travel associated with the aircrews and support personnel for Air Force One and Marine Corps One. Each of the military services also provided military working dog teams (see fig. 3) and explosive ordnance disposal teams to provide explosive detection and disposal capabilities and to perform patrol functions. Finally, personnel from the White House Military Office incurred travel expenses associated with the President’s trips. For these four trips, the majority of DOD personnel stayed at nearby hotels with rooms at the GSA rate or within 300 percent of the GSA per diem rate, as required by the FTR and JTR. DOD paid $24,414.70 to Mar-a-Lago for lodging expenses for DOD personnel. We reviewed lodging receipts and confirmed that these payments were within 300 percent of the GSA per diem rate. DHS incurred an estimated $5.1 million in costs to provide support for the President’s four trips to Mar-a-Lago from February 3, 2017 to March 5, 2017. Of this figure, the Secret Service incurred about $1.6 million to provide support. This included per diem and other related travel expenses, such as commercial airfare or use of rental cars for officials traveling in advance of the President. We identified about $35,750 in expenses for operational space at Mar-a-Lago for these four trips. Table 3 shows the estimated costs incurred by the Secret Service and the Coast Guard for these trips. The majority of costs incurred by the Secret Service were temporary duty costs associated with travel to protect the President. The number of agents assigned to the protective detail for each trip varied based on the number of protectees present (including foreign dignitaries) and unrelated events at the same location. To execute the four trips, the Secret Service leveraged support from across the agency and field offices across the country to implement protective operations for the President’s travel. Agents were assigned as part of the protective detail—providing twenty-four hour protection for the President or other protectee; members of the advance team—determining and implementing the security plan for the site; or on-site support throughout the duration of the visit. For example, agents from the Secret Service’s Presidential Protective Division, Uniformed Division, and Technical Security Division, among others, traveled in advance of the President to assess the location and develop and implement a security plan. Further, agents from Secret Service field offices across the country provided additional manpower at Mar-a-Lago and supported the Presidential Protection Division within the Office of Protective Operations —which holds primary responsibility for the daily protection of the President—in ensuring that the location remained safe for the President and other protectees. The majority of agents who supported the four trips during our time frame did not stay at Mar-a-Lago. The Secret Service booked a limited number of rooms around the President to meet operational security requirements. According to officials, these rooms allowed the Secret Service to provide 360-degree protection around the President. For these four trips, most Secret Service agents stayed at nearby hotels at which rooms were at the GSA lodging rate or within 300 percent of the GSA per diem rate, consistent with the FTR. The Coast Guard incurred about $3.4 million in costs to provide support for the four trips to Mar-a-Lago. The majority of these costs were operational costs for Coast Guard assets, specifically, the use of small response boats, special purpose law enforcement boats, deployable rotary wing aircraft, and marine protection-class cutters to provide support in waterways near Mar-a-Lago (see fig. 4). For the Coast Guard, operating costs are determined by the type of boat or aircraft used and the hourly operating costs. According to Coast Guard officials, to the extent possible, they request support from assets that they determine are within close proximity to the travel location. For the four Mar-a-Lago trips, support was requested from the local Miami sector, Kings Bay (Georgia), New Orleans (Louisiana), Houston (Texas), Boston (Massachusetts), and New York (New York). The Coast Guard incurred other travel-related costs, such as for meals and incidental expenses and lodging for officials on temporary duty assignment to support the President’s travel. Coast Guard officials noted that, if possible, personnel are to stay on the asset (for example a boat); however, if this is not possible, they are to stay in nearby lodging at or within 300 percent of the GSA per diem rate. Coast Guard officials confirmed that personnel supporting presidential travel for these four trips did not stay at Mar-a-Lago. The Department of Homeland Security incurred costs of about $6,000 in connection with the Secretary of Homeland Security and staff’s travel to Mar-a-Lago on March 4, 2017. Costs included transportation to and from Mar-a-Lago and per diem expenses (meals and incidental expenses). According to DHS officials, agents supporting the protection of the Secretary of the Department of Homeland Security were multi-staffed and protected other protectees at the same time. Therefore, travel costs for personnel associated with the Secretary’s protective detail are captured in the overall travel costs for this trip. No lodging costs were incurred at Mar- a-Lago in connection with the Secretary of Homeland Security’s travel. The Department of Justice and the Department of State incurred costs of about $29,000 for official travel to Mar-a-Lago during these four trips. The Department of Justice incurred costs of about $18,000 to transport the Attorney General, his Federal Bureau of Investigation (FBI) detail, and three Department of Justice personnel to Mar-a-Lago for one trip. The operational costs were for the FBI Gulfstream 550 used to transport the officials from the Washington, D.C. area to West Palm Beach, Florida and back. The Department of Justice provided documentation that no Department of Justice or FBI personnel had per diem expenses, since the trip was less than 12 hours. In addition, the Department of State incurred costs of about $10,000 to provide interpreter support and protocol officials associated with the President’s trip to Mar-a-Lago in February 2017 when the Prime Minister of Japan was a guest. The Secret Service incurred costs of approximately $396,000, primarily for Secret Service agents’ temporary duty costs, while protecting Donald Trump, Jr., Eric Trump, and their spouses during three international trips taken during January and February 2017, as shown in table 4 below. Eric Trump traveled to Uruguay from January 3, 2017 to January 5, 2017 and the Dominican Republic from February 2, 2017 to February 3 2017. Donald Trump, Jr., Eric Trump, and their spouses traveled to the United Arab Emirates from February 14, 2017 to February 19, 2017. The Secret Service protects presidential family members domestically and internationally. Children of the President with a protective detail are required to receive protection twenty-four hours a day, and agents who are part of their detail travel with them wherever they go. For international travel, because there are no local Secret Service field offices in most countries, the Department of State supports the Secret Service by booking and paying for all hotel reservations required by Secret Service and State Department personnel and coordinating onsite needs. This includes, but is not limited to, acquiring rental cars, phones, and interpreters at the trip’s destination. Transportation for individuals in foreign offices is booked in a variety of ways. For example, agents may book their own flights, flights may be booked by a contracted agency, or sometimes the local embassy may assist in booking transportation. Meals and incidental expenses are reimbursed to the traveler. The Secret Service and the Department of State have implemented a memorandum of understanding detailing their respective roles and responsibilities and, as required by law, the Secret Service is to reimburse the Department of State for all costs incurred in support of the Secret Service’s protective operations. Documentation provided by the Secret Service confirmed that Donald Trump Jr., Eric Trump and their spouses flew on commercial aircraft. Officials from the 89th Airlift Wing confirmed that no military aircraft supported these trips. Secret Service agents protecting the Trump family flew by commercial aircraft. Additionally, reimbursement documentation provided by both the State Department and the Secret Service confirmed that no costs were incurred for chartered air travel. As with all protective missions, Secret Service officials noted that the number of agents assigned to the detail depended on the number of protectees and the threat environment, among other things. The trips to the Dominican Republic and Uruguay each included only one protectee, and the trip to the United Arab Emirates included four protectees. For fiscal years 2015 through 2017 we found that, of the three agencies required to report costs incurred for protecting the President and others under the Presidential Protection Assistance Act, only the Coast Guard reported semiannually on costs under the Act. The Secret Service did not do so consistently, and DOD did not report any protection costs during this time frame. Coast Guard: The Coast Guard submitted the semiannual reports required under the Act for fiscal years 2015 through 2017. To facilitate complying with the Presidential Protection Assistance Act, the Coast Guard developed and implemented a policy for preparing the semiannual reports to Congress. The policy contains business rules identifying what information is to be collected and by whom, who is responsible for compiling the information, and time frames for when the information is to be submitted internally. For example, the Coast Guard operationalized collection of this information by requiring a form to be used when collecting information related to protective details for the Vice President and the President. Its internal policy and additional guidance also require that information be submitted internally no more than 14 days after each event and validated no more than 30 days after each event. According to agency officials, these business rules and forms are published and provided to all Coast Guard field units, and quarterly reminders about completing the forms are disseminated via email. Secret Service: The Secret Service has not consistently submitted the semiannual reports to Congress and does not have a policy for ensuring that the semiannual reports are prepared. Specifically, we found that the Secret Service submitted semiannual reports to Congress in 2015 but had not submitted semiannual reports for fiscal years 2016 and 2017. The Secret Service notified us that it was compiling and submitting reports for fiscal year 2017 after we had brought the reporting requirement to officials’ attention during the course of our review. Secret Service officials told us that they were unaware that the reports for 2016 and 2017 had not been submitted until we requested this information. According to Secret Service officials, the division that is responsible for preparing and submitting the reports to Congress experienced a transition in leadership during the period when there was the lapse in reporting. Specifically, management and the personnel responsible for preparing and submitting the reports to Congress were no longer with the agency in 2016 and therefore could not brief incoming management hired in 2017. According to officials, this contributed to a reporting lapse. Standards for Internal Control in the Federal Government states that management should implement control activities through policies, for example, by documenting responsibilities for each unit. Control activities are the policies, procedures, techniques, and mechanisms that enforce management’s directives to achieve the entity’s objectives. Further, management should also define objectives clearly to enable the identification of risks and define risk tolerances. This would include defining objectives in specific terms so they are understood at all levels and can be carried out without regard to personnel changes. This further involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for realizing the achievement. Establishing a policy defining requirements for producing the semiannual reports to Congress—including what is to be reported, the entity responsible for preparing and submitting the reports, and reporting time frames—and an oversight mechanism to ensure that the reports are prepared and submitted to Congress, may better position the Secret Service to consistently report required expenditure data to specified congressional committees as required. DOD: DOD has issued a policy related to collecting information on its support for the Secret Service’s protective duties but has not produced and submitted the required reports to Congress in accordance with its policy. DOD officials were unaware that the reports had not been submitted until we requested them. According to DOD officials, the reports were not submitted as a result of an administrative oversight, and they could not determine when the reports had last been submitted. This situation is in part the result of weaknesses in DOD’s existing policy and implementing instruction with regard to specific information that could help ensure the reports are consistently produced and provided to Congress. For example, the policy requires that any DOD organization incurring costs associated with support provided to the Secret Service collect and report the costs to the Assistant Secretary of Defense for Homeland Defense and Global Security, the Chairman of the Joint Chiefs of Staff, and the Chief Financial Officer. However, neither the policy nor underlying instruction sets forth time frames for internal or external reporting to ensure that the semiannual dates are met. Further, DOD has no mechanism for ensuring that the required information is submitted to Congress. As previously noted, internal control standards require that management should implement control activities through policies and define objectives clearly to enable the identification of risks and define risk tolerances. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for realizing the achievement. Moreover, the policies, procedures, techniques, and mechanisms that enforce management’s directives to achieve the entity’s objectives are to be defined. According to a DOD official, in March 2018 the department began efforts to gather the information necessary to prepare the required report. However, collecting the information has been challenging, largely due to the multiple data sources and inconsistent methods for capturing the data to date. Therefore, according to DOD officials, once the department completes its initial data collection effort, officials plan to assess the adequacy of the data and review DOD’s existing guidance to identify revisions needed to ensure that future reports are submitted in accordance with Presidential Protection Assistance Act. However, the agency has not yet defined the steps necessary to fulfill near-term reporting requirements under the Act, or time frames for doing so. By addressing these issues, DOD could be better positioned to comply with the law. Further, while DOD officials anticipate updating the policy and instruction at a future date, steps and time frames for completing the update have not yet been defined, and it is unclear when or whether the updates will occur. Updating DOD’s policy and instruction to specify the requirements and establish an oversight mechanism may better position DOD to report expenditure data to Congress, as required, on a semiannual basis and enhance visibility over the costs associated with providing protective services, in particular in relation to protection at nongovernmental properties. The Secret Service, with help from the Coast Guard and DOD, plays a vital role in protecting the President during his travels. The Presidential Protection Assistance Act was intended to establish procedures to control the expenditure of federal funds for protection at nongovernmental properties; it requires that each of these entities report expenditures under the Act. The Secret Service, the Coast Guard, and DOD have all incurred costs related to protection for the President and others. However, information on such costs is limited, because only the Coast Guard has been reporting them. As a result, Congress lacks information about the amounts that DOD and the Secret Service have expended for providing protection—including providing protection at nongovernmental properties. This limits congressional efforts to ensure accountability for these costs. The Secret Service does not have a policy in place that defines and enforces reporting requirements, and DOD’s policy and underlying instruction lack important details such as time frames for reporting expenditures and a mechanism for ensuring that the required information is submitted to Congress. DOD has initiated steps to develop required reports but has not identified the specific steps it will take and the time frames within which these efforts will be completed. We are making one recommendation to the Director of the Secret Service and two to the Secretary of Defense. The Director of the Secret Service should establish a policy defining requirements for producing the semiannual reports of expenditures required by the Presidential Protection Assistance Act of 1976, as amended, and an oversight mechanism to ensure that the Secret Service consistently submits these reports to specified congressional committees. (Recommendation 1) The Secretary of Defense should ensure that the Under Secretary of Defense for Policy updates its policy and instruction on providing support to the Secret Service to define the requirements for producing semiannual reports of expenditures required by the Presidential Protection Assistance Act of 1976, as amended. These requirements should, at a minimum, include (1) the steps and time frames for completing updates to the policy and instruction, (2) time frames for reporting the expenditures, and (3) an oversight mechanism to ensure that the Department of Defense consistently submits these reports to specified congressional committees. (Recommendation 2) The Secretary of Defense should ensure that the Under Secretary of Defense for Policy defines the steps, including time frames, necessary to achieve near term reporting requirements under the Presidential Protection Assistance Act of 1976, as amended, and submit the reports as required. (Recommendation 3) We provided a draft of this report for review and comment to the Executive Office of the President, and the Departments of Homeland Security, Defense, Justice, and State. DHS and DOD provided written comments, which are reproduced in appendixes I and II respectively. In their comments, DHS and DOD concurred with their respective recommendation(s). DHS concurred with our first recommendation, which called for the Secret Service to establish a policy defining requirements for producing the semiannual reports of expenditures required by the Presidential Protection Assistance Act of 1976, as amended, and an oversight mechanism to ensure the Secret Service consistently submits these reports to specified congressional committees. Specifically, the Secret Service has recently updated several guidance documents related to the Act. It further plans to publish a directive during fiscal year 2019 documenting the requirements for producing the semiannual reports and defining the oversight mechanism to ensure that the reports are consistently submitted. DOD concurred with our second recommendation, which called for DOD to update its policy and instruction on providing support to the Secret Service to define the requirements for producing semiannual reports of the expenditures required by the Presidential Protection Assistance Act of 1976, as amended. DOD concurred with our recommendation that DOD define the steps, including time frames, necessary to achieve near term reporting requirements under the Presidential Protection Assistance Act of 1976, as amended, and submit the reports as required. DHS and DOJ also provided technical comments, which we incorporated into the report as appropriate. The Department of State and the Executive Office of the President had no comments. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Executive Office of the President; the Secretary of Homeland Security; the Director of the Secret Service; the Commandant of the Coast Guard; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; the Commandant of the Marine Corps; the Under Secretary of Defense for Policy; the Secretary of State; and the Attorney General. Consistent with section 10 of the Presidential Protection Assistance Act of 1976, this report is also being sent the Committees on Appropriations and on the Judiciary, the House Committee on Oversight and Government Reform, and the Senate Committee on Homeland Security and Governmental Affairs. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact Brian Lepore at (202) 512-4523 or leporeb@gao.gov or Diana Maurer at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. In addition to the contact named above, Gina R. Hoffman, Assistant Director; Joseph P. Cruz, Assistant Director; Tracy Barnes, Kerstin Hudon, Jennifer Kamara, Joanne Landesman, Carol Petersen, Michael Silver, Janet Temko-Blinder, and John Wren made key contributions to this report.", "summary": "The Secret Service is responsible for protecting the President and his family, including adult children when they travel. The Secret Service can request assistance in its mission from other agencies, such as DOD and the Coast Guard. When the President travels, he must fly on DOD aircraft. GAO was asked to review the travel- related costs for four trips that the President took to Mar-a-Lago and three trips that the President's adult children made to certain overseas destinations. This report examines (1) the costs incurred by federal agencies associated with the President's travel on selected trips to Mar-a-Lago, (2) the costs incurred by federal agencies associated with certain overseas trips taken by Donald Trump, Jr. and Eric Trump, and (3) the extent to which the Coast Guard, the Secret Service, and DOD have reported their costs pursuant to the Presidential Protection Assistance Act of 1976. GAO analyzed agency cost data in connection with the President's travel to Mar-a-Lago and the President's adult children's trips to certain overseas locations. GAO also reviewed the law, agency guidance, and semiannual reports related to the Presidential Protection Assistance Act of 1976. GAO estimated that federal agencies incurred costs of about $13.6 million for the President's four trips to Mar-a-Lago from February 3 through March 5, 2017. This estimate consisted of approximately $10.6 million for operating costs of government aircraft and boats and $3 million for temporary duty costs of government personnel supporting the President's travel, including transportation, lodging, and meals and incidental expenses. These figures do not include certain classified cost information or the salaries and benefits of government personnel traveling with the President because, salaries and benefits would be paid regardless of whether the President was traveling. The United States Secret Service (Secret Service) incurred about $396,000, primarily for temporary duty costs, while protecting Donald Trump, Jr. and Eric Trump during three international trips taken in January and February 2017. Eric Trump traveled to Uruguay and the Dominican Republic and Donald Trump, Jr., Eric Trump, and their spouses traveled to the United Arab Emirates. Documentation provided by Secret Service officials confirmed that the Trumps and their spouses flew on commercial aircraft. Officials from the 89th Airlift Wing confirmed that no military aircraft supported these trips. Secret Service agents protecting the Trump family flew by commercial aircraft. GAO found that, of the three agencies required to report by the Presidential Protection Assistance Act of 1976, as amended, only the United States Coast Guard (Coast Guard) reported protection costs semiannually to Congress for fiscal years 2015 through 2017. GAO found that the Secret Service does not have a policy for ensuring that the semiannual reports are prepared and has not consistently submitted the reports. Secret Service officials last submitted reports in fiscal year 2015 and were unaware that reports had not been submitted in fiscal years 2016 and 2017 until GAO requested this information. GAO also found that the Department of Defense (DOD) has a policy but did not produce and submit the reports as required. Moreover, weaknesses in DOD's existing policy and instruction do not clearly establish the responsibility for preparing and reporting the costs incurred to support protection activities. Absent clear policies with an oversight mechanism to ensure that the reports are produced, Congress has not been provided required information concerning the costs for providing protective services for the President and others. GAO is making recommendations to the Secret Service and DOD to ensure that the reports required under the Presidential Protection Assistance Act of 1976, as amended, are prepared and submitted. The Department of Homeland Security and DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Implementing Telework: The Telework Enhancement Act of 2010 (the Act) establishes telework implementation requirements for agencies, including, for example, that each agency designate a Telework Managing Officer and that each agency incorporate telework into its continuity of operations plans. The Act does not mention telework specifically in the context of space planning. The Act also requires the Office of Personnel Management (OPM) to assess whether agencies have met agency- established telework outcome goals such as real estate savings. It also requires OPM to submit reports that include executive agencies’ goals for increasing telework participation to the extent practicable, assist each agency with developing qualitative- and quantitative- teleworking measures and goals, and track telework eligibility and participation rates across the government. According to OPM telework information from fiscal year 2012 through fiscal year 2015, the percentage of federal workers eligible to telework remained stable at about 45 percent, on average. However, during the same period, the percentage of eligible employees who participated in telework increased from 29 percent to 46 percent. Figure 1 shows the frequency of telework across the federal government from fiscal years 2012 through 2015 by type of telework. Reducing Space: OMB issued the National Strategy for the Efficient Use of Real Property and the Reduce the Footprint policy in 2015, which require all CFO Act agencies to improve the efficiency of real property use, control costs, and reduce holdings. These OMB initiatives also required agencies to develop Five-Year Real Property Efficiency Plans annually; develop office space standards that specify maximum square footage identify reduction targets for office space in square feet; and freeze the footprint (i.e., not increase square footage of office space). OMB’s National Strategy noted that employee telework has changed the dynamic of the federal real property portfolio and resulted in a need for less space. OMB’s Reduce the Footprint guidance memo states that agencies’ 5-year plans should include an explanation of actions the agency is taking to increase space efficiency, including cost-effective alternatives to acquisition of additional office space, such as consolidation, colocation, teleworking, and “hoteling.” Federal statute also requires that agencies consider whether space needs can be met using alternative workplace arrangements when deciding whether to acquire new space. GSA defines mobility as an overarching term describing the ability of employees, enabled by information technology (IT) and workplace policies to perform work both within and outside the agency worksite. Under this definition, mobility includes telework, desk-sharing, site work, and travel. Agencies can strategically use telework—one form of mobility—combined with desk-sharing and hoteling to reduce space needs and increase efficiency. This allows agencies to plan for fewer workstations than the number of employees. Other space efficiency strategies such as smaller workstations (e.g., reduced space standards), reconfigured office space (e.g., open-office plans instead of private offices), and mobile technology (e.g., laptops, Wi-Fi throughout the office, and smart phones) can be combined with telework and used as planning tools to reduce office space, use space more efficiently, and potentially cut costs. GSA, in a 2010 publication, described a continuum of three different scenarios for the ways agencies may use mobility, including telework. These scenarios range from limited mobility not leveraged for space planning to extensive mobility leveraged for space planning to reduce and use office space more efficiently: (1) No space changes: Some employees telework at least 2 scheduled days per week but retain assigned workstations with no changes to the existing space configuration. (2) No space reduction but different space allocation: Most employees telework at least 2 scheduled days per week and keep assigned workstations. Workstations are smaller and more densely organized; and space freed up by smaller workstations can be used for collaborative work spaces. (3) Space reduction and different space allocation: Nearly all employees telework at least 3 scheduled days per week and participate in hoteling (i.e., unassigned workstations), and workstations are also smaller and more densely organized. In this scenario, according to GSA, an agency can redesign its office and potentially reduce space by up to 30 percent. The key factors in distinguishing these scenarios illustrated in figure 2 below include the: level of employee participation in telework; changes to physical office spaces (e.g., smaller and more densely organized workstations and more emphasis on collaborative workspaces); and extent to which employees have assigned workstations or participate in desk-sharing. Under federal statute, GSA has a role in promulgating rules and developing guidance promoting the efficient use of real property. For example, the GSA Administrator may provide guidance, assistance, and oversight to client agencies regarding the establishment and operation of alternative workplace arrangements, which include leveraging telework to reduce space needs. GSA also directly assists client agencies with identifying and prioritizing opportunities to improve and implement real- property efficiency measures. In reviewing planning documents, policies, and survey data, we found that the 23 civilian CFO Act agencies reported using telework to reduce or use space more efficiently. Specifically, our analysis of (1) agency-wide space-planning policies and procedures and (2) Real Property Efficiency Plans found that all of the agencies discussed telework in the context of space planning and achieving greater space efficiencies. Agencies also provided examples in survey responses of how they have used telework to increase operational effectiveness while optimizing their use of space. Fifteen agencies’ space-planning policies and procedures included provisions for using telework and other mobility strategies, such as hoteling and desk-sharing, as a strategic space-planning tool. Three of the agencies mentioned these strategies only in the context of space planning, and five agencies did not mention them at all (see table 1). For the fifteen agencies with space planning policies that incorporated telework, the documents either expressly directed agency planners to include telework, hoteling, or desk-sharing in space planning; provided instructions and guidance for using these in space planning; or issued space allocation standards for their implementation. Several agency-wide space plans identify space reduction goals based on using telework strategically. For example, the Department of Transportation (DOT) documents identify a goal of at least a 10 percent workspace reduction in new acquisitions as a result of compressed work schedules and telework, and specifically state that employees who telework six or more days per pay period should not have a permanent workspace. Agency-wide space planning documents from three civilian CFO Act agencies mentioned telework, hoteling or desk-sharing as strategies in the context of space planning. For example, DOJ’s agency-wide policy notes that telework and hoteling could increase the efficient use of space and directs each sub-agency to maintain its own space design guidelines within agency-wide policy office space standards. The other two agencies, the Department of State and the Nuclear Regulatory Commission, either had a short provisional agency-wide space planning document that laid out space standards or mentioned telework, hoteling and desk-sharing as a tool for creating sustainable space. Five agencies’ space planning documents made no reference to telework; however, one agency, OPM, developed a maximum office space utilization rate and criteria for determining which positions require a private office. As noted above, OMB’s Reduce the Footprint policy (2015) requires agencies to establish Real Property Efficiency Plans. In our analysis of the agencies’ fiscal year 2016 or 2017 plans, we found that 19 of the 23 civilian CFO Act agencies discussed telework in the context of space planning. A few agencies’ Real Property Efficiency Plans explicitly stated that the agency reduced space as a result of telework. For example, GSA used telework to reduce space in its Heartland, Rocky Mountain, and National Capital Region offices. Some (5 of 23) Real Property Efficiency Plans discussed the telework pilot programs agencies have initiated. For example, the Department of Education’s plans reported using a pilot program to acclimate employees to teleworking and desk-sharing; as a result, the agency intends to incorporate hoteling or space-sharing opportunities into proposed space designs in future projects. The Social Security Administration (SSA) plans also reported initiating a pilot program to experiment with smaller “hoteling” workspaces. Similarly, the Nuclear Regulatory Commission’s plan reported conducting a pilot program at its headquarters offices to identify challenges, better understand telework, and evaluate the potential of shared workspaces. In response to our survey, about three-quarters of agencies reported space-planning policies that use telework to reduce office space, lower real estate costs, or reduce the size of individual workstations. Agencies reported accomplishing this by using desk-sharing and hoteling for employees who have relinquished permanent workspaces. For example, several agencies discussed strategies to reduce space in their responses to our survey. The Department of Labor reported using telework to close some small offices resulting in overall space reductions of about 16,000 square feet. OPM reported that it both reduced space and created space efficiencies by transitioning staff in its Eastern Management Development Center to full-time telework and terminating the lease, resulting in a space reduction of about 32,000 square feet. OPM’s Human Resource Solutions Program also achieved a 47 percent space reduction when it instituted desk-sharing and freed the vacated space for use by another program office. The Department of the Treasury reported that its sub-agency, the Internal Revenue Service, has aggressively used telework to help reduce its real property portfolio, while other Treasury units have leveraged telework to achieve significant space reductions. At the end of fiscal year 2016, Treasury reported agency-wide reductions of about 484,000 square feet at a cost savings of about $10 million. Two agencies––Department of Homeland Security, and the National Science Foundation––reported using telework to increase the efficiency of existing office space in sub-agencies by increasing staff without increasing the size of offices, for example: The Department of Homeland Security reported that one of its sub- agencies used telework in the planning and design of a new office, resulting in both a space reduction and more efficient use of the space. The new office is 57,573 square feet smaller than the prior office while personnel assigned to the office increased from 315 to 394. The National Science Foundation reported that it used teleworking, among other workspace strategies such as new space standards and virtual technologies, to increase staff numbers without increasing its real estate footprint. Among the agencies we reviewed in detail—GSA, OJP, CDC, and the Fiscal Service—the use of telework in office space planning varied from emerging consideration to extensive implementation. GSA and OJP have used telework extensively to both reduce space and increase space efficiency in their office spaces. CDC has leveraged telework to reduce space or use space more efficiently in more limited cases while the Fiscal Service has begun to consider telework in future space planning. Appendix II provides additional details on office spaces where these agencies reduced space or used space more efficiently, including the role of telework, if any. GSA has leveraged telework to reduce space by implementing unassigned workstations in nearly all of its regional and headquarters offices, along with other forms of “employee mobility,” complementary IT, and smaller space standards. GSA adopted telework as early as 1999 and by fiscal year 2015, more than 90 percent of all eligible GSA employees teleworked, and nearly half of all employees teleworked 3 or more days per pay period, according to OPM data. GSA’s space policy cites desk-sharing (e.g., hoteling, “hot-desking,” or other arrangements) as one strategy to help meet its space standard of 136 useable square feet (USF) per person. GSA employees may telework full-time, but may be required to give up dedicated workstations if they are on site 2 or fewer days per week. GSA has gradually transitioned to unassigned workstations at headquarters and in its regional offices, allowing the agency to implement desk-sharing and calculate space needs at less than one desk per employee. The agency also assigned laptops and mobile or soft phones to employees to further maximize mobility. The three GSA sites we visited used space-planning strategies to achieve, or nearly achieve, GSA’s space standard of 136 USF per person. For example, at its Philadelphia Regional Office, GSA leveraged existing telework levels to meet reduced space standards and move to a smaller leased space by accommodating about 600 employees in fewer than 500 workstations. According to GSA, this allowed the office to achieve a utilization rate of 139 USF per person and realize a reported annual rent cost savings of about $2 million. Similarly, at its New York Regional Office, GSA also leveraged existing telework levels to meet reduced space standards and move to a smaller leased space. This step allowed the office to achieve a utilization rate of 119 USF per person and realize a reported total rent cost savings of nearly $11 million. GSA also leveraged telework as part of its headquarters consolidation. GSA reports that it was able to move approximately 1,000 additional employees to the headquarters building by implementing a hoteling system and planning for less than one workstation per employee. This allowed GSA to achieve a utilization rate of 138 USF per person at its headquarters and realize a reported annual rent-cost savings of approximately $24 million. Similar to GSA, OJP used telework, along with complementary tools, to reduce space and use space more efficiently at its consolidated office. More than 90 percent of eligible employees teleworked in fiscal year 2015, and nearly half of all employees teleworked 3 or more days per pay period, according to OPM data. More recently, OJP reported that around 70 percent of its employees teleworked in August 2017, with just less than 40 percent doing so three or more days per pay period. At the departmental level, DOJ’s plans to improve space utilization include reduced space requirements, and, in some cases, alternative workplace strategies. DOJ’s space utilization policy mentions telework with hoteling as one way to increase efficient use of space, and DOJ’s telework policy mentions the potential of telework to create cost savings by decreasing space needs. While most OJP employees are eligible to telework, a few federal staff occupying administrative positions are not eligible. OJP took the opportunity to examine and improve its space use as three of its leases approached expiration in 2013. It leased space in two adjacent buildings under three separate leases. OJP worked with GSA to analyze space-planning options, contracting a study of the office that recommended ways to improve space utilization. This study included a survey of all employees, a complete physical space survey, and interviews with leadership. The results of this study not only indicated OJP employees’ openness to more mobility but also that they had concerns such as loss of privacy and social connectedness. For example, more than 80 percent of survey respondents said they could work off-site more often with proper tools and support, and almost half said they would give up dedicated space to work remotely more often. Furthermore, interviews with the leadership of several OJP units indicated a willingness to support increased mobility but also a need to maintain privacy and improve mobile IT. According to OJP, it alleviated these concerns by encouraging participation in the planning process, highlighting opportunities for positive changes, and maintaining open communication (e.g., communicating changes and expected benefits). Based on the analysis of space-planning options, OJP retained one of the three previous leases and leveraged telework to accommodate all employees into less space overall in one building. OJP achieved this objective by targeting 25 percent employee mobility and implementing hoteling. Concurrently, OJP officials explained that they introduced smaller workstations and used tenant-improvement allowance funds to reconfigure space for more flexible use. Physical reconfigurations included changing hard-walled office spaces with dedicated workstations to a primarily open office with few walls or dedicated workstations. According to OJP, it complemented these changes with investments in mobile IT for individual employees, improved IT capabilities in conference rooms and other collaborative spaces, and an emphasis on training employees to work well in a mobile office environment. For example, OJP officials said they installed Wi-Fi throughout the space, issued laptops and smart phones to employees, upgraded video-conferencing capabilities in conference rooms and collaborative spaces, and expanded tools for informal employee communication. According to OJP officials, through the consolidation, they said they achieved a utilization rate of 190 USF per person—a decrease of 30 USF per person from the prior 220 utilization rate. This rate remained higher than DOJ’s overall target and housed the same total number of employees—about 1,000—in about 50,000 fewer USF. OJP reports that the consolidation resulted in an estimated $3 million annual lease- cost savings. OJP also estimates additional savings from reduced transit subsidies, carbon emissions, and continuity of operations. Relative to GSA and OJP, CDC has made more limited use of telework in office space-planning. CDC officials told us that they have leveraged telework as a space-planning tool in many locations, but they have only documented doing so in one case. HHS expects each sub-agency to comply with its 170 USF per-person utilization-rate policy, and this policy suggests that planned space reductions should take telework into account. As a component of HHS, CDC has its own space policy, which states that telework, desk-sharing, and hoteling can help CDC’s units meet HHS’s utilization rate policy of 170 USF per person. CDC’s telework policy requires employees who telework frequently to agree to participate in desk-sharing, but according to CDC officials, how and to what extent this portion of the broader policy is implemented is up to the discretion of management. CDC officials cited two limitations to further implementing space sharing techniques: (1) the large number of employees’ who may be unable to telework on certain days based upon their job responsibilities and (2) the voluntary nature of telework. Some CDC employees cannot work off-site at least some of the time due to confidential data or lab-based work. Approximately 60 percent of eligible CDC employees teleworked in fiscal year 2015 and about one-quarter of all employees teleworked 3 or more days per pay period, according to OPM data. CDC officials told us that telework participation ranges from 49 to 86 percent across CDC units. CDC’s National Center for Chronic Disease Prevention and Health Promotion’s office in Chamblee, GA, provides the most clearly documented case of CDC’s leveraging telework for space efficiency. According to CDC officials, this unit accommodated more than 300 additional employees within its existing space by implementing hoteling for employees who telework 4 or more days per pay period, and it continues to use hoteling as part of its space management strategy. In contrast, CDC’s National Center for Health Statistics’ (NCHS) office in Hyattsville, MD, reduced space without leveraging telework by reconfiguring the space with smaller, soft-walled workstations. CDC officials told us that NCHS reduced its office space from seven floors to three and three-quarters floors, resulting in a reported space reduction of more than 40 percent and allowing it to achieve a 170 USF per person utilization rate. CDC officials reported that this space reduction resulted in annual rent cost savings of approximately $1 million. Hoteling was not feasible at this location because work on confidential data limits the ability of employees to work off-site, and NCHS employees also prefer dedicated workstations. CDC officials said that there is limited documentation of any additional cases of CDC’s leveraging telework as a space- planning tool because, prior to our review, there had been no formal request to connect telework and space utilization data. In contrast to GSA, OJP, and CDC, telework as a space-planning tool is an emerging consideration at the Fiscal Service. At the departmental level, Treasury has space standards that aim for efficient and effective offices that use increased telework and shared workstations to minimize the number of dedicated workstations. Similarly, objectives of the Fiscal Service telework policy include cost savings from reduced office space needs. Treasury’s space standards specify a planned maximum utilization rate of 200 USF per person for facilities with general office space, and the Fiscal Service reported that its average office space-utilization rate was 183 USF per person at the time of our review. Treasury policy also recommends hoteling for employees who are out of the office 80 or more hours per month, but the Fiscal Service told us that it would like to conduct additional desk-sharing pilots to assess their impact before negotiating broader desk-sharing with the union. At the Fiscal Service, approximately 80 percent of eligible employees teleworked in fiscal year 2015, and about one-quarter of all employees teleworked 3 or more days per pay period, according to OPM data. The Fiscal Service reported that approximately 80 percent of Fiscal Service employees telework at its Washington, D.C., Maryland, and West Virginia locations. At the time of our review, the Fiscal Service officials said the agency had reduced space without leveraging telework or implementing hoteling, instead relying on smaller space standards (i.e., fewer square feet per workstation) to lease smaller offices. For example, the Fiscal Service reduced space by giving up several floors at its Hyattsville, MD, office starting in 2012. According to Fiscal Service officials, they accomplished these reductions by consolidating data centers to other locations, conducting targeted buyouts of employees, and, most recently, by implementing a new space standard of 183 USF per person through smaller workstations. The officials said that the most recent space reduction at this location resulted in savings in annual rent costs not attributable to telework. Looking forward, the Fiscal Service reported that it has started taking preliminary steps to promote efficient space utilization through telework. These steps have included: creating an Executive Space Management Council that discussed incorporating telework and desk-sharing into space management guidelines; implementing a voluntary, informal desk-sharing pilot in one program area for employees who already telework 50 percent or more of the time; and seeking information from GSA, including discussing and visiting GSA offices that have implemented hoteling as part of their space planning model. In addition, the Fiscal Service officials told us that the agency plans to negotiate the impact and implementation of desk-sharing and hoteling for telework employees with its union, but the Fiscal Service has not yet begun this effort. Our analysis of the survey responses from the 23 civilian CFO Act agencies identified three major planning challenges agencies face with using telework to reduce space: human capital issues such as negotiating workspace changes with collective bargaining units and managing organizational change; the suitability of telework to mission work requirements; and difficulty measuring cost savings that might result from space reductions attributable to telework. This measuring difficulty may include both gross savings as well as savings net of costs, such as for renovations or IT investments. See table 3 for examples of space-planning challenges related to telework reported by the 23 agencies. To address these challenges, nearly two thirds of the agencies we surveyed reported they would like guidance on using telework programs or other alternatives to meet the federal goals of reducing space or using space more efficiently. Our review of agency survey responses, Real Property Efficiency Plans, and other agency space-planning documents, found that human capital challenges to using telework in space planning generally fell into two categories: (1) requirements to negotiate space allocation changes with collective-bargaining units; and (2) managing department workforces in adapting to new workspace designs and altered workspace allocations. Collective-bargaining challenges: Of the 23 civilian CFO Act agencies, 7 of 23 noted that changes to telework policy or workspace arrangements required negotiation with collective bargaining units, for example, The Small Business Administration (SBA) reported its greatest challenge to incorporating telework in office space planning has been with negotiating and securing agreement from all parties, including management and its union, on establishing space standards. HUD reported that it could not implement hoteling or desk-sharing as its collective-bargaining agreements require that each employee retain an assigned workstation regardless of an employee’s type of telework agreement. SSA reported that changing floor plans required negotiation with its three collective-bargaining units, which could extend the time needed for construction and relocation. DOT reported that collective-bargaining agreements posed a challenge to incorporating workforce mobility options, including telework. In addition, the collective-bargaining agreements we reviewed from the four agencies we reviewed in detail––GSA, OJP, CDC and Fiscal Service––required negotiations or the opportunity to negotiate changes to matters relating to workspace arrangements and in some cases, to telework policy. Managing change: Using telework as a strategic space-planning tool, particularly in conjunction with complementary space-saving efforts such as desk-sharing, hoteling, or open-space designs, generally involves a cultural change. Nine of the 23 agencies we surveyed reported challenges associated with managing change. For example, three agencies reported employees’ discomfort or apprehension about desk-sharing and hoteling. In 2013, we reported that organizations may also encounter concerns from agency leaders, managers, employees, or employee organizations when introducing physical space changes associated with increased workforce mobility (telework). More recently, we reported that management concerns remain the most frequently reported barrier to expanding telework. Two private sector experts we met with underscored the importance of management “buy-in” saying it was imperative that senior executives fully support the initiative to facilitate the necessary cultural change for agencies to use telework in space planning. One noted that management needed to make the business case to employees so that each layer of the organization could understand the importance of the initiative and its potential benefits. Another suggested a change management plan tailored to the work performed within a unit. This individual said that key components of such a plan might include studying existing work practices and program requirements, surveying employee preferences, and including employees in the planning process. Further, a GSA document circulated in response to the Telework Enhancement Act of 2010 mentions obtaining supervisory “buy-in” or support as key to facilitating change. According to survey responses, within agencies there are sub-agencies that have individual mission requirements that may or may not be suitable for telework. This makes it difficult for agencies to implement overarching telework and space planning policies that apply department-wide. Sub- agencies and units within sub-agencies must individually determine if telework is appropriate given their particular mission requirements. For example, the Veterans Administration reported that although it developed an agency-wide telework policy, each sub-agency and supervisor has the flexibility to implement telework based on operational needs. Moreover, because the agency’s core mission involves direct services to veterans, about 83 percent of agency staff positions are not suitable for telework. The Telework Enhancement Act of 2010 outlines two broad exceptions to telework participation for employees: (1) directly handling secure materials determined to be inappropriate for telework by the agency head and (2) on-site activity that cannot be handled remotely or at an alternative worksite. In cases where telework does not support an agency’s mission or where a particular mission may require increases or decreases in personnel, telework as a strategic space-planning tool may not work. About half (12 of 23) of the agencies we surveyed reported that office space reductions resulting from using telework in space planning led to real estate cost savings while the other half reported either that cost savings did not result or they did not know. GSA officials told us that calculating cost savings attributable to a particular aspect of space planning is complicated as several factors contribute to savings. In particular, in survey responses, the Departments of Education, Energy, and Agriculture reiterated this point. OMB’s National Strategy for the Efficient Use of Real Property and its Reduce the Footprint policy encourage agencies to increase and maximize efficiencies in office space by implementing cost-effective strategies such as telework. For example, the National Strategy outlines a framework that aims to measure real property costs and utilization to improve the efficient use of federal real property. The Reduce the Footprint policy requires agencies to measure cost savings that result from reducing space through disposals. However, neither document offers guidance or methodologies on how to measure the costs or savings that may result from using telework. We previously reported that GSA works with client agencies to develop tools to measure office space utilization and, in 2013, was developing an Excel-based tool to help agencies quantify the benefits and costs of using telework to achieve greater office space efficiencies. This tool—the Workplace Investment and Feasibility Tool—is aimed at helping agencies quantify the benefits and costs of increased telework participation and implementing other alternative-work arrangements. When completed, the tool will enable users to quickly develop rough estimates of cost and space impacts resulting from workplace changes, particularly relating to desk-sharing, workspace reconfiguration, and consolidation. Key features include the ability to compare up to three scenarios, which in turn may be used to inform a more detailed design program. As of January 2018, GSA had not yet completed the tool. GSA officials said mission needs, resource constraints, and developmental adjustments have contributed to delays in the time frame for completing the tool. They added that during this time, GSA has diverted resources to space calculation tools for individual agencies. For example, GSA worked with DHS on its Space Calculation Tool as a way to help determine workplace space requirements in a manner consistent with DHS space policies. In January 2018, GSA officials told us that they plan to make the Workplace Investment and Feasibility Tool available to GSA staff in March 2018 along with training on how to use it. However, GSA officials have not decided whether to make the tool available to other federal agencies to use as a space-planning tool. Instead, the officials plan to assess GSA’s use of the tool and then determine in late 2018 if and how it should be released to other agencies for independent use. Given the absence of a government-wide tool, in our review, we found that some agencies had used their own resources to purchase similar tools for their space-planning needs from the private sector. Without such a government-wide resource, agencies may not be able to determine how best to reduce space or use it more efficiently. In responses to our survey, nearly two-thirds of agencies reported that they would find it helpful to have additional information, assistance, or resources to assist them in using telework as a space-planning tool. As noted above, a key element of GSA’s mission is to provide guidance and services that enable agencies to improve space utilization, reduce costs, and better achieve their missions. Moreover, under federal statute, GSA may provide guidance to executive agencies on the implementation of alternative workplace arrangements, which includes telework. Federal standards for internal control also call for agencies to communicate necessary quality information such as guidance with external parties. In reviewing GSA’s websites, we found that GSA last developed formal guidance on alternative workplace arrangements in 2006 and maintains several separate informational websites on implementing telework and optimizing space utilization. Our review of this guidance and these websites found that they do not provide specific guidance for using telework as a strategic space-planning tool. For example, the 2006 guidance is generally limited to defining the factors agency heads must contemplate when considering alternative workplace arrangements along with the equipment and technical services agencies may provide for alternative worksites. However, this guidance does not address in detail the impact of such arrangements on agency office space and resulting planning issues. Similarly, our review of GSA’s teleworking and space- planning websites found that although they separately offered documented case studies along with information such as tips for implementing telework and managing a mobile workforce, GSA did not provide documents consolidating the concept of using telework as a strategic space-planning tool. For example, information on GSA’s Total Workplace Program website––intended to assist agencies in using workforce mobility (including telework) to increase space efficiencies––is generally limited. Although this website includes high-level information that describes the potential benefits of using telework with office space planning and design, it lacks a practical outline of the process agencies might use to achieve them. Because the information in the 2006 guidance and the telework and space-planning websites is neither specific nor detailed, it is of limited assistance for agencies that would like to use telework as a strategic space-planning tool to meet the goals of a more efficient use of space. While using telework to reduce space is not a new challenge, it has become more pressing with OMB’s requirement for federal agencies to explore alternatives to acquiring more office space. Most civilian CFO Act agencies reported having a telework program in place and some reported success with using it in space planning to reduce space or accommodate more employees without increasing space. However, many of the agencies continue to face challenges and do not believe that they have adequate information, assistance, or resources to assist them in using telework as a space-planning tool or assess its costs and benefits. Until agencies have access to detailed guidance and tools to help utilize various space-planning options, they may not be able to effectively identify opportunities to use telework toward the goal of reducing their real property footprint. We are making the following two recommendations to GSA: The Administrator of General Services should ensure that the appropriate GSA offices develop guidance including, but not limited to, how agencies can use telework as a strategic space-planning tool for reducing and optimizing office space efficiency and that the offices make the guidance readily available. (Recommendation 1) The Administrator of General Services should ensure the appropriate GSA offices complete the Workplace Investment and Feasibility Tool and make it available to federal agencies for use in assessing the benefits and costs of telework to achieve office space efficiencies. (Recommendation 2) We provided a draft of this report to GSA, the Department of Justice, the Department of Health and Human Services, and the Department of the Treasury. In its written comments, reproduced in Appendix III, GSA concurred with our recommendations and stated that it is developing a plan to address them. We received technical comments from the Department of Justice and the Department of Health and Human Services, which we incorporated where appropriate. The Department of the Treasury did not have comments on our draft report. We are sending copies of this report to the appropriate congressional committees; the Administrator of GSA; and the Secretaries of the Department of Health and Human Services and Department of the Treasury, and the Attorney General of the Department of Justice. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions concerning this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report is listed in appendix III. This report addresses: (1) how the 23 civilian Chief Financial Officer (CFO) Act agencies reported using telework in office space planning; (2) the specific ways selected agencies and GSA used telework in their office space planning; and (3) any challenges the 23 civilian CFO Act agencies faced in using telework in office space planning. To determine how the 23 civilian CFO Act agencies reported using telework in office space planning, we surveyed the agencies. The survey asked questions about agency-wide efforts to use telework in the human- capital and space-planning areas; whether agencies had achieved any cost savings as a result; the challenges agencies faced in using telework in space planning; and asked agencies to identify additional information, resources, or guidance that might be helpful. In addition to the survey questions, we asked each agency real property officer to provide copies of agency-wide space-planning documents and the Real Property Efficiency Plans agencies prepared for fiscal years 2016 and 2017 pursuant to the requirements of the Office of Management and Budget’s (OMB) Reduce the Footprint policy. We developed survey questions based on our review of the relevant literature, white papers from federal agencies and private sector entities, and past GAO reports. We pre- tested the survey instrument with three federal agencies to ascertain: (1) the clarity of survey questions; (2) the precision of language; and 3) the availability of information queried. As a result of the pre-tests we made changes to the content and format of the survey where appropriate. We received survey responses from each of the 23 civilian CFO Act agencies in addition to requested space-planning documents and Real Property Efficiency Plans, and thus achieved a 100 percent response rate. We analyzed survey results by calculating the frequency of responses to dichotomous questions (i.e., questions requiring a “yes” or “no” answer). We also conducted a content analysis on the open-ended, narrative-based questions by identifying common themes and tabulating results. We also conducted a content analysis to determine the extent to which agencies referenced telework in their agency-wide space-planning documents and in their Real Property Efficiency Plans. To accomplish these analyses, we developed separate coding schemes for each of the two types of documents. These were based on information obtained in our literature review, interviews with subject matter experts, and our professional judgment. We then identified relevant sections and common themes, and coded and tabulated the results. To validate the coding results, we used a second, independent coder. To determine the specific ways agencies include telework in their office space planning, we selected a non-generalizable sample of three CFO Act agency sub-agencies as illustrative case studies. To select sub- agencies, we analyzed data from the Office of Personnel Management’s (OPM) Public Use 2014-2015 Telework Data call. First, we applied two selection criteria: (1) agency-wide progress toward a stated goal of using telework to reduce real estate costs, and (2) agency-reported data indicating that more than 25 percent of sub-agency employees teleworked 3 or more days per pay period. Next, we considered variations in sub-agency size and percentage of employees eligible to telework. Finally, we excluded candidates that had recently been selected for related GAO work and we excluded sub-agencies related to agency administration such as Offices of Inspector General or Secretary-level offices. We assessed the reliability of the OPM’s data by interviews with knowledgeable officials and by reviewing prior assessments of the same data, and we found the data reliable for our purposes. As a result of this process, we selected (1) the Department of the Treasury’s Bureau of the Fiscal Service (Fiscal Service); (2) the Department of Health and Human Services’ (HHS) Centers for Disease Control and Prevention (CDC); and (3) the Department of Justice’s Office of Justice Programs (OJP). For each of the selected agencies, we interviewed agency officials and reviewed their telework and space- planning documents. We also visited four sub-agency office locations to determine if and how telework played a role in any space reductions or efficiencies along with any associated cost savings. In addition to these three sub-agencies, we used the General Services Administration (GSA) as a comparative example since it is responsible for providing space- planning guidance to client agencies and has experience using telework in space planning. We interviewed GSA officials, reviewed relevant documents, and visited three GSA office locations with recent space reductions or efficiencies. In total, we conducted seven site visits including two Fiscal Service locations, one location each for CDC and OJP, and three GSA locations (National Headquarters, Region 2 Office, and Region 3 Office) in Washington, D.C.; New York City; and Philadelphia, respectively. To identify any challenges the 23 civilian CFO Act agencies faced in using telework in office space planning, we analyzed results from survey questions addressed to challenges, interviewed sub-agency and GSA officials as detailed above, interviewed two private sector subject matter experts, and representatives from four private-sector entities that had reported using telework to reduce and use office space more efficiently. Statements made by knowledgeable federal officials, outside experts and private sector entities are not generalizable to the universe of civilian CFO Act agencies. We also analyzed the section of each of the 23 civilian CFO Act agencies’ Real Property Efficiency Plans devoted to challenges agency face in reducing space. We selected the two subject matter experts––representatives from Global Workplace Analytics and Fentress Facility Planning and Analytics––based on: (1) their experience working with federal agencies to incorporate telework programs into the space planning process; (2) information compiled in our literature review; (3) prior GAO reports; (4) internal GAO recommendations; and (5) industry recommendations. We selected the four private sector entities (AT&T, Deloitte, Adobe, and CapitalOne) based on our literature review, recommendations from industry experts, and reports of having achieved space efficiencies including space reduction, cost savings, or cost avoidance(s). To identify what guidance or information on using telework as a space- planning tool GSA makes available through its website, we reviewed the contents of multiple GSA websites including Telework, Total Workplace, Alternative Work, and GSA Telework Resources. We followed links and reviewed webpage contents for information on how agencies might use telework as a strategic tool to reduce space or use space more efficiently. We compared GSA’s guidance and website information to relevant statutory requirements and federal internal controls standards related to external communication. We conducted this performance audit from January 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, David J. Wise (Director); Amelia Bates Shachoy (Assistant Director); Lindsay Bach (Analyst-in-Charge); Geoff Hamilton; Malika Rice; Kelly Rubin; Shelia Thorpe; Elise Vaughan Winfrey; and Amelia Michelle Weathers made key contributions to this report.", "summary": "Federal agencies are exploring ways to use telework as a tool to reduce the federal footprint and use space more efficiently. GAO was asked to examine the effects of telework on agencies' space-planning efforts. In this report, GAO reviewed: (1) how the 23 civilian CFO Act agencies reported using telework in office space planning; (2) the specific ways selected agencies and GSA used telework in their office space planning; and (3) any challenges the civilian CFO Act agencies faced in using telework in office space planning. GAO surveyed all 23 civilian CFO Act agencies, analyzed each agency's space-planning documents, and Real Property Efficiency Plans . GAO reviewed four agencies in greater detail based on analysis of telework data and other factors. For those four agencies GAO conducted site visits, interviewed officials, and analyzed agency documents. GAO also identified challenges agencies faced in using telework in space planning, based on survey results, agency documents, and interviews. The 23 civilian Chief Financial Officer (CFO) Act agencies reported various ways of considering and using telework as a space-planning tool, by, for example, implementing desk-sharing for employees who telework in order to relinquish leased space, or increasing the number of staff working in an existing space without increasing its size. All of the 23 agencies discussed telework in the context of space planning and achieving greater space efficiencies in either their space-planning documents or Real Property Efficiency Plans . The agencies that used telework as a space-planning tool generally reported implementing smaller or unassigned workstations. Three of the four agencies GAO reviewed in greater detail––the General Services Administration (GSA); the Office of Justice Programs at the Department of Justice; the Centers for Disease Control at the Department of Health and Human Services; and the Bureau of the Fiscal Service at the Department of the Treasury––leveraged telework to reduce or use office space more efficiently. For example, GSA and the Office of Justice Programs used telework to accommodate more employees in a smaller office space as illustrated in figure 1 below. The Centers for Disease Control used telework to accommodate more employees in the same amount of space. The Bureau of the Fiscal Service reduced space without telework by reducing the size of individual workstations. The 23 civilian CFO Act agencies reported several challenges in using telework to reduce space including human capital issues, mission suitability, and measuring cost savings attributable to telework. About two-thirds of the agencies said they would find it helpful to have additional information, assistance, or resources in using telework as a space-planning tool. GSA provides guidance to improve space utilization. However, GAO found that GSA last developed relevant formal guidance in 2006. This information, and that on GSA's telework and space-planning websites, was neither specific nor detailed and therefore of limited assistance to agencies that would like to use telework as a space-planning tool. Additionally, GSA's space-planning tool—the Workplace Investment and Feasibility Tool, intended to help agencies quantify the benefits and costs of telework––remains under development after more than 4 years, and GSA officials have not decided whether to make the tool available to other federal agencies. As such, agencies reported that they lack adequate guidance to determine how best to reduce space or use it more efficiently, and how to assess the benefits and costs of using telework in space planning. GSA concurred with recommendations that GSA should: (1) develop guidance on how agencies can use telework as a strategic space-planning tool and make this guidance readily available and (2) complete and make the Workplace Investment and Feasibility Tool available to federal agencies for use in assessing the benefits and costs of telework.", "document_type": "gao"}
{"report": "Following medical school, GME training provides the clinical training required for a physician to be eligible for licensure and board certification to practice medicine independently in the United States. Physicians pursue GME training within a variety of specialties or subspecialties. Initially, these physicians, known as residents, go through GME training for a specialty—such as internal medicine, family medicine, pediatrics, anesthesiology, radiology, or general surgery. Of the specialties, family medicine, internal medicine, and pediatrics are generally considered primary care specialties. However, a resident who trained in a primary care specialty may not ultimately practice as a primary care physician. Some residents may choose to subspecialize and seek additional GME training. For example, a resident who completed an internal medicine GME training program may decide to subspecialize in cardiology. The percentage of residents who later subspecialize varies based on specialty type. To operate and maintain GME training programs, teaching sites, including hospitals, health centers, medical schools, and other settings, incur medical education costs that can generally be categorized into two groups—direct costs and indirect costs. Direct costs include, for example, residents’ salaries and benefits; compensation for faculty who supervise the residents; and overhead costs. Indirect costs are the portion of higher patient care costs that teaching sites are thought to incur as a result of training residents, such as increased diagnostic testing and procedures performed. (See table 1.) While they may generate costs, residents may also produce financial benefits for a teaching site. Teaching sites may incur lower personnel costs because residents perform services at lower pay than more experienced clinicians or other health care professionals. And, residents may have more flexibility to work long or irregular hours. For example, residents can provide on-call services in lieu of fully trained physicians at a much lower cost to the teaching site. Residents may also increase the efficiency and productivity of faculty with whom they work by, for example, enabling the faculty to increase the number of patient services for which they can bill. Within the federal government, funding of GME training is fragmented. Most federal GME funding is provided through five programs—Medicare GME payments, Medicaid GME payments, HRSA’s CHGME and THCGME payment programs, and the VA’s physician GME training programs. For most of the programs, the funding is formula-driven and essentially guaranteed if eligibility requirements are met. Each program uses a different methodology to determine the amount of payments to funding recipients, though there are some similarities between programs. GME training programs generally must be accredited by an independent organization in order to receive federal funding. Medicare—a federally financed program that provides health insurance coverage to people age 65 and older, certain individuals with disabilities, and those with end-stage renal disease—pays for GME training. It does so through two mechanisms—Direct Graduate Medical Education (DGME) payments and Indirect Medical Education (IME) payments—both of which are formula-based payments set by statute. These payments are made to reflect Medicare’s “share” of the costs associated with providing GME training. Medicare DGME payments are made to cover a hospital’s direct costs associated with GME training, such as stipends, supervisory physician salaries, and administrative costs. The payments are the product of a hospital’s weighted 3-year average number of FTE residents, subject to a cap; a per resident amount (PRA); and the hospital’s Medicare patient load—the portion of a hospital’s total inpatient bed days that were paid for by Medicare. In part to constrain spending, the Balanced Budget Act of 1997 capped, for most hospitals, the number of FTE residents that hospitals may count for DGME and IME payment at the number of FTE residents in place in 1996. Rather than reimburse teaching hospitals for actual direct costs incurred each year from training residents, DGME payments are calculated using a PRA. A hospital’s PRA is based on its direct costs and its number of FTE residents when the PRA was set in a base year, which is fiscal year 1984 for most hospitals, and is adjusted annually for inflation. Congress set a base year for calculating DGME costs that would incentivize local providers to keep down their costs and for local communities to assume a greater role in the costs of medical education. After fiscal year 1984, for hospitals that did not previously have any approved residency programs or did not participate in Medicare but began doing so, a PRA for the hospital is established using direct costs the hospital reported that it incurred on its cost report during its base year, which is generally the first cost reporting year it began training residents. In general, each hospital has two separate PRAs—a primary care PRA and a nonprimary care PRA—whereby teaching hospitals receive slightly higher payments for residents training in primary care specialties. Medicare IME payments, which are made to cover a hospital’s indirect costs associated with GME training, are an add-on to the hospital’s Medicare reimbursement for each discharge. IME payments are not based on teaching hospitals’ actual indirect costs. Rather, the adjustment is based on the number of FTE residents per hospital bed, referred to as the resident-to-bed ratio, and a statistically estimated factor that represents the incremental patient care cost due to providing GME training. Medicaid is a joint federal-state program that finances health care coverage for low-income and medically needy individuals. While there is no federal requirement for state Medicaid programs to fund GME training, states may elect to recognize GME training costs as a component of the overall costs incurred by hospitals. And, payment for these expenses is shared by the federal government through federal matching funds. GME training costs may be reimbursed as an add-on adjustment to the state’s payment rates to eligible providers or as an enhanced payment made as a lump sum supplemental to the initial payment rate. Because children’s hospitals treat very few Medicare patients and consequently receive few GME payments from Medicare, the CHGME Payment Program was created in 1999 and reauthorized through fiscal year 2018 to support pediatric and pediatric subspecialty GME training in freestanding children’s hospitals. Unlike Medicare GME, which is a mandatory spending program, the CHGME program relies on discretionary spending. And, the total amount of payments available to each hospital varies from year to year depending on the total amount of funding made available from annual appropriations and the total number of hospitals that participate. The CHGME program makes both DGME and IME payments where one-third of program funds are allocated for DGME payments and two-thirds for IME payments. Both payments are calculated using formulas similar to Medicare. For example, the program’s DGME payments are based, in part, on the number of FTE residents, subject to a cap, and an updated national standardized PRA. And, the IME payment is based, in part, on an estimated factor that represents the incremental patient care cost due to providing GME training, rather than the hospital’s actual indirect costs. The THCGME program was created under the Patient Protection and Affordable Care Act and reauthorized through fiscal year 2017 to increase the number of primary care residents who trained in community-based, ambulatory patient settings. HRSA awards funds to eligible teaching health centers for the purpose of covering both direct and indirect GME costs of new or expanded community-based primary care residency programs. HHS established an interim annual payment rate of $150,000 per resident until it establishes formulas for determining the payments. However, the payment rate for THCGME recipients may fluctuate over time, depending on available appropriations, the number of eligible applicants, and the number of FTE residents supported. THCGME awards can supplement GME payments from other federal sources, including Medicare, Medicaid, and CHGME, but recipients generally cannot use funds to pay for the same portion of resident time that they used to count toward funding in these other GME programs. GME training is a statutory requirement of VA to enhance the nationwide supply of health care professionals and assists VA in the recruitment and retention of staff at its medical facilities. Nearly all of VA’s GME training is conducted through academic affiliations with medical schools and teaching hospitals where residents from those institutions do clinical rotations at VA medical facilities. VA provides financial support for GME training at its facilities in two ways—disbursement payments to its academic affiliates and educational support payments for its VA medical facilities. VA reimburses academic affiliates through disbursement agreements to cover the costs of stipends and benefits for the period of time that a resident serves in a VA medical facility. Reimbursement is based on the number of FTE residents completing a VA rotation and the approved per diem rate of the academic affiliates’ stipend and benefit costs by residents’ postgraduate year level of training. In addition, VA allocates a portion of VA-wide funding for educational support using a formula that accounts for the number of FTE resident positions and a per resident cost factor. According to VA officials, the funding is used to pay for compensation of faculty and other staff, overhead costs, and other costs necessary to host and manage the GME training at VA medical facilities. Like its funding, federal oversight of programs that fund GME training is fragmented. Federal agencies are responsible for the management and oversight of their respective GME training program or programs. For Medicare, CMS uses regional contractors—MACs—to process and audit payments for health care items and services submitted by enrolled Medicare providers on their annual cost report, including Medicare DGME and IME payments. For example, MACs audit the number of FTE residents that hospitals report on their annual cost report by reviewing relevant rotation schedules. Hospitals claiming reimbursement for GME training are also required to submit Intern and Resident Information System (IRIS) files that provide data on each resident that the hospital trained, including the resident’s specialty type, postgraduate year, and proportion of time spent on rotation at each training site. CMS is responsible for broad oversight of the Medicaid program, while states are responsible for the daily administration of their individual Medicaid programs, including program integrity activities. In its broad oversight role, CMS develops guidance and provides assistance to the states. However, state Medicaid programs are not required to make GME payments, and CMS has not established requirements or guidance specifically related to Medicaid GME payments. Instead, CMS reviews states’ Medicaid payments to providers, including GME payments, as part of its review of Medicaid state plans. HRSA is responsible for the management and oversight of the CHGME and THCGME programs. Specifically, it is responsible for determining applicants’ program eligibility, making payments, and auditing those payments. HRSA is also responsible for collecting information about, and reporting on, the performance of the CHGME and THCGME programs. Oversight of GME training at VA medical facilities is shared between the VA medical facilities and their academic affiliates. Through affiliation agreements, academic affiliates provide for the central administration of residents’ stipends and benefits. Academic affiliates are also responsible for the overall quality of the GME training program, monitoring all resident educational activities, obtaining and maintaining accreditation, developing educational objectives and curriculum, selecting residents, creating resident rotation schedules, and submitting residents’ schedules of educational activities to VA for reimbursement. VA has the responsibility of overseeing and managing clinical training in VA medical facilities, and must ensure that there are sufficient patient care opportunities, educational infrastructure, and qualified teaching physicians to accommodate trainees from the affiliates. Each VA medical facility must also track the educational activities of all residents, including the amount of time the resident spent training at its facility. Federal agencies and state Medicaid agencies spent over $16.3 billion on GME training in 2015 to support direct and indirect costs of training. The amount spent per FTE resident varied across programs, and the largest variation across payment recipients and regions was within Medicare due to variation in the values of factors used to calculate Medicare payment amounts. Almost half of participants received payments from more than one program, and the designs of federal programs may reduce the potential for duplicate payments. Federal agencies and state Medicaid agencies spent over $16.3 billion on GME training in 2015 through five federal programs and 45 state Medicaid agencies. Of this, the federal government spent $14.5 billion through Medicare, Medicaid, VA, the CHGME program, and the THCGME program. (See table 2). Most spending on GME training came from Medicare, accounting for 71 percent of federal spending, with over $10.3 billion in payments to teaching hospitals. Medicaid spending accounted for 16 percent of federal spending on GME training, or $2.4 billion. These federal Medicaid funds matched an additional $1.8 billion that Medicaid agencies in 45 states spent on GME training in 2015. (For information about state Medicaid agency and other non-federal sources of funding on GME training, see appendix I.) These payments supported both direct and indirect costs associated with GME training, though data were limited for some programs. We calculated that about one-third of Medicare payments were made to cover the direct costs of GME training. Similarly, HRSA reported that one-third of CHGME payments were made to cover direct costs. For the VA GME program, we calculated that 44 percent of payments were made to academic affiliates to reimburse them for resident salaries and benefits, a category of direct costs. HRSA does not separate payments for direct costs from those for indirect costs under the THCGME program. And, the data we received from state Medicaid directors did not separate them, though 8 of 45 states specifically reported paying providers for indirect costs in addition to direct costs. Providers in all 50 states and the District of Columbia received payments for training GME residents, but some regions received a notably higher amount compared to others. In particular, federal agencies spent $5.47 billion ($97 per-capita) in the Northeast region, which represents 38 percent of total federal spending, compared with the West where federal agencies spent $1.83 billion ($24 per-capita or 13 percent of total federal spending). (See table 3). State Medicaid agencies in the Northeast also spent significantly more on GME training than did agencies in other regions. Agencies in the Northeast spent $1 billion ($18 per-capita), whereas agencies in the West spent $120 million ($2 per-capita). Notably, New York accounted for about half (48 percent) of nationwide state Medicaid agency spending on GME and 86 percent of spending in the Northeast. Overall, GME spending was somewhat more concentrated in the Northeast than was the number of GME residents; in a May 2017 study, we found that 31 percent of GME residents were located in the Northeast. The Northeast was the only region for which the percentage of the GME spending in the region was higher than the percentage of GME residents. Available data show that almost all spending on GME training (99 percent) went to recipients located in urban areas. However, it is likely that more than 1 percent of spending was used to support training in rural areas; data limitations in HHS and state Medicaid agency data preclude calculation of the amount of spending on GME training in rural areas. The data we received from HHS listed only the direct recipient of the payments, such as a hospital or a medical school, which can arrange rotations at other teaching sites that may be located in rural areas. Data limitations also preclude calculation of the overall amount of spending on GME resident training in specific specialties, such as primary care. With data that were available, we found: Of the 10,367 FTE residents that VA funded, 53 percent were training in a primary care specialty. We also estimated that 52 percent of VA’s spending supported primary care training. The THCGME program is intended to train residents in primary care, with 100 percent of the $76.3 million used to support 630 primary care residency positions. HRSA reported that 43 percent of the 11,667 trainees supported by CHGME funds trained in general pediatrics or combined pediatrics programs. HRSA did not report how much it spent on primary care training, or the number of FTE residents training in primary care specialties. Of the 87,980 FTE residents that Medicare funded, 44 percent were denoted as primary care residents. However, Medicare is likely supporting more residency positions than these data indicate, and these residents are unlikely to be training in primary care. The program counts each resident pursuing additional training, such as a resident training in a subspecialty, as half of an FTE when calculating DGME payments. We found that in 2015, the average amount that a program paid per FTE resident ranged from $34,814 for Medicaid GME payments to $137,491 for the VA GME program. (See table 4.) Programs use different methods to calculate how much to pay providers on a per resident basis, thus payment amounts are not comparable across programs. For example, Congress appropriated funding for the THCGME program for each of the fiscal years 2011 through 2017 and eligible entities received the same amount per FTE resident. In contrast, Medicare GME payments to eligible entities are determined according to formulas that take many factors into account, including the share of a hospital’s patients that are covered under Medicare. Consequently, the amount that Medicare pays recipients varies widely based on variation in the values of factors used to calculate payments. Nationwide, hospitals received $116,997 on average from Medicare for each FTE resident, and the middle 50 percent of hospitals received between $85,478 and $150,610. Given the wide variation in overall Medicare per FTE resident payment amounts by hospital, we examined variation among regions and states. Regionally, the average total Medicare per FTE resident payment ranged from $127,503 in the Midwest to $87,172 in the West. (See table 5.) Across individual states, the average total Medicare per FTE resident payment amount ranged from $65,672 in California to $170,591 in New Hampshire. (See fig. 1.) Some of this variation is due to significant variation in the values of certain factors used to calculate Medicare DGME payments—specifically, the PRA and Medicare patient load. (See table 6.) The Medicare PRA varies among recipients and across regions, though to a lesser degree than the overall per FTE resident payment. For example, the average PRA for the middle 50 percent of primary care residents ranged from $87,962 to $117,144 per FTE resident, compared to $85,478 to $150,610 for the overall per FTE resident payment. The PRA also varied by region and, as with the overall payment amounts, the average PRA was lowest in the West. However, in contrast to the nationwide average per FTE resident payment, which was highest in the Midwest, the recipients in the Northeast had the highest average PRA. The Medicare patient load also varies across regions, which affects DGME payments. Medicare DGME payment recipients in the West reported an average Medicare patient load of 24 percent, which is significantly lower than the 34 to 36 percent reported in other regions. A hospital’s Medicare patient load also affects Medicare IME payments per FTE resident. A hospital’s IME payment is calculated by increasing Medicare’s payments for inpatient services to a hospital by an IME adjustment factor. Therefore, a hospital that received more Medicare payments for inpatient services will receive a larger IME payment. Over half (51 percent) of providers that participated in any of the five GME programs received payments from more than one federal program. For example, 69 percent of providers that participated in Medicare also participated in another program, and 84 percent of CHGME awardees participated in another program. However, in each case, these programs provided most of these recipients’ total funding (74 percent and 66 percent respectively). In contrast, recipients of Medicaid or VA payments also generally participated in another program, but received only 22 percent and 10 percent of their total funding for GME training through Medicaid and VA, respectively. (See table 7.) Though the high portion of providers that receive payments from multiple sources creates the potential for providers to receive duplicate payments, this risk of duplication is reduced by the programs’ designs. The CHGME program was established for children’s hospitals because they did not traditionally receive significant Medicare GME payments. The THCGME program provides payments to outpatient facilities, whereas residency training has been, in general, hospital based. VA only pays for residents’ time spent training at a VA medical facility, and not for time residents spent training in non-VA settings that may receive other federal payments for GME training. Medicare adjusts all DGME payments by the ratio of a hospital’s patients covered under Medicare. CMS has not established requirements or guidance specifically related to Medicaid GME payments, including how the payments are to be calculated. However, 10 states adjust payments by the ratio of a teaching site’s patients covered under Medicaid. GME training costs vary by program characteristics, such as size, type, training setting, and age, and some training costs are more prone to variation than others. Challenges exist in measuring and comparing GME training costs due to a lack of standard cost methodologies across teaching sites and some training costs being difficult to measure. Further, little is known about how GME training costs relate to federal GME funding. According to literature we reviewed and experts we interviewed, GME training costs vary by residency program characteristic, and some costs, such as faculty teaching time, are more prone to variation than others. Specifically, variation in training costs can be explained by one or more of the following program characteristics: Program size: Larger residency programs may be more cost efficient than smaller ones in that fixed costs, such as infrastructure and program administration, can be spread out over a larger number of residents. Therefore, adding another resident increases variable costs, but lowers per resident fixed costs. Type of Specialty: Residency training in some specialties costs more than others, and accreditation requirements are one of several factors driving this variation. For example, compared to internal medicine programs, accreditation standards for family medicine programs require more hours of faculty involvement and higher faculty-to- resident ratios. Therefore, these residency programs may incur higher per resident costs. The complexity of a specialty program also affects its training costs—for example, subspecialty programs, such as vascular surgery or gastroenterology, require additional GME training or specialized equipment and will thus incur more training costs. In addition, costs can be affected by variation in faculty compensation. According to a 2013 analysis of available data on residency training costs, the median compensation for attending physicians in academic health centers ranged from $163,319 for family medicine to $336,136 for radiation oncology. Further, malpractice insurance premium costs can vary based on the degree of surgical involvement, with primary care specialties having the lowest premium costs and general surgery physicians the highest. Type of Training Setting: GME training in outpatient settings, such as community-based clinics, is considered less efficient and more expensive than in inpatient hospital settings, according to reviewed literature and experts we interviewed. One reason for this may be differences in the models of teaching used in each of these settings. According to one group of experts we interviewed, residents in inpatient settings are part of teams that do rounds together, where much of the teaching time involves one clinical teacher and a team of residents, nurses, and other affiliated professionals. This method of teaching may not be feasible in outpatient settings where teaching is more often provided on a more expensive one-to-one basis. Outpatient settings, particularly smaller ones, may also have to incur more fixed costs relative to inpatient settings that may have more facility space and other resources in place to meet accreditation requirements. Location: Geographic location also drives the variation in training costs. For example, resident salaries vary based on general salary patterns across the United States. According to one group of experts we interviewed, there is a range of compensation packages for residents, and base salaries can vary from $35,000 to $55,000 per year. Malpractice insurance may also vary by geographic location. Further, rural training sites may incur higher costs because their training may have to utilize multiple training sites—such as community hospitals or rural health clinics—in order to meet accreditation requirements for resident rotations and patient case-mix. The added administrative work of coordinating with other sites to provide these resources can be a challenge. Age of the program: Newer residency programs may have higher costs than older, more established programs. According to some GME experts we interviewed, the first year a teaching site operates a residency program is more expensive because new programs may be smaller and cannot spread out fixed costs. In addition, it can be expensive for a new GME program to meet accreditation requirements, such as required infrastructure and minimum faculty. Studies estimating GME training costs show these costs vary by program characteristics. For example, we identified 10 studies that estimated GME training costs; however, these studies were not comparable because they focused on discrete programs with different characteristics, utilized different methodologies, were conducted at different points in time, and did not examine the same cost elements. Further, these studies are not generalizable due to limitations in study methodology, such as small sample sizes. And, given the age of some of these studies, they may not be reflective of current GME training costs. Across the 10 studies we reviewed, estimates of costs ranged from $35,164 to $226,331 per resident. (See table 8.) The Medicare cost reports that hospitals submit annually to CMS, though they have certain limitations, also suggest variability in residency training costs. For example, according to the cost reports, in 2015, direct costs varied from $56,998 to $333,565 per resident (excluding outliers). (See table 9.) However, these costs are limited to direct GME costs specified in Medicare guidance, and they have other limitations due to their collection and reporting. We found that there is no standard method or tool across teaching sites for identifying and capturing GME training costs. One expert told us that, therefore, the reporting of costs depends on how each teaching site, and the individuals at each site, are tracking and defining those costs. Another group of experts who conducted a study to estimate GME training costs in teaching health centers told us they were unable to identify a common instrument and had to develop their own instrument to standardize costs. According to literature we reviewed and experts we interviewed, Medicare GME guidance for reporting training costs is not always clear, and differences in how teaching sites define costs can lead to inconsistent measurement. One expert told us that Medicare GME payment rules are subject to interpretation, and thus there is variation between teaching sites in how costs are reported on Medicare cost reports. Other GME experts told us that many teaching health center residency programs rely on in-kind benefits, such as building space donated by organizations, but health centers vary in how they account for the costs of these benefits. Some teaching health centers will score them as in-kind contributions, others will provide a square footage cost amount, and others may not track and report these costs at all. While one group of experts suggested there be national guidelines to ensure all teaching sites are using the same rules to define and report costs, one expert cautioned that a common tool would make it impossible to reflect the unique characteristics of each program. Factors specific to teaching sites may affect how they identify their training costs. The varying relationships and financial arrangements between the teaching site, its partners, and its faculty affect how it allocates and reports training costs. For example, a teaching site may have various educational partners, such as medical schools and community-based training sites, and be affiliated with multiple hospitals, each of which tracks costs differently. Teaching sites differ in how they share training costs with these partners. In addition, faculty arrangements vary. For example, in some cases faculty are employees of the teaching site and in other cases, faculty bill for their services independently. Moreover, facilities vary in the experience of their personnel responsible for identifying GME training costs. For example, program directors may not have the financial experience needed to identify costs, and some teaching sites may use outside consultants to identify costs. Turnover in the staff responsible for tracking costs, lack of communication between program staff and the accounting departments, or a change in ownership of the teaching site may add to the challenge of accurately identifying costs. According to studies we reviewed and experts we interviewed, some GME training costs are difficult to accurately identify and measure. For example: Faculty Costs: Faculty responsibilities are spread out across education, research, administrative, and patient care activities, and the time spent in each activity is not always clear. The only allowable faculty costs on Medicare cost reports are those for education-related activities, such as the clinical supervision of residents. For example, if a faculty member performs a procedure while doing rounds with residents, the teaching site must determine how much of that time was for patient care and how much was for education. However, making this determination can be challenging for teaching sites. One group of experts told us that while most teaching sites have a formula to calculate these education costs, they are most likely an undercount. However, another expert said that officials preparing the cost reports are not systematically splitting faculty time between education and patient-care activities and are most likely guessing. Facility Costs: MAC officials told us that facility costs that hospitals report on their cost reports should be allocated based on square footage, building depreciation, and utility costs, but there is some variation in how teaching sites calculate their square footage. Further, as previously described, donated building space may not be accurately identified by teaching sites. Experts who conducted a study to estimate teaching health center program costs told us that several centers in their study were not accustomed to thinking of donated space as a residency program expense. Indirect Medical Education Costs: There is not a clear and consistent definition of the indirect medical education costs, and there may be variability in these costs. Furthermore, there is little incentive for teaching sites to accurately identify these costs because Medicare does not require them for purposes of determining IME payments, according to one reviewed study. As a result, it is unclear what indirect costs the Medicare IME payment adjustment is meant to cover. Additionally, experts told us that it is difficult to measure the extent to which costs associated with the unique services that teaching sites provide, such as stand-by services or their role as a safety net provider, are attributable to GME training. Resident benefits for teaching site costs and productivity: The benefits that residents provide can generate cost savings and revenue for the teaching site, yet the extent of these benefits can be difficult to calculate. According to one study we reviewed, the value that residents provide cannot be measured directly; rather, the value is reflected in the teaching site’s patient care costs and on the clinical productivity of attending physicians. One expert we interviewed said that identifying when residents move from a cost to a financial benefit is complicated and depends, for example, on a resident’s year of training and residency program requirements. Also, the value of resident services can vary by specialty. For example, residents in general surgery or internal medicine provide more on-call services than residents in dermatology or radiation oncology. Although the cost savings and revenue generated by residents has an effect on the net costs of GME training, it is typically not accounted for when estimating costs. In addition to these challenges, federal agencies do not systematically collect and standardize cost information at the national level, according to literature we reviewed and experts we interviewed. For example, a HRSA study identified training costs in teaching health centers, but the study only captured costs over one year and did not include all THCGME programs. Further, in addition to inconsistencies in how teaching sites collect data for Medicare cost reports, the data do not include the revenue impact and actual indirect costs associated with training residents and cannot be broken down by specialty programs. In addition, they are not a comprehensive source of training costs because they are limited to teaching sites that received Medicare GME payments. It does not include other teaching sites, such as medical schools, teaching health centers, and teaching hospitals that may have only received other federal funding for GME training, such as VA GME payments. Finally, because Medicare cost report data are not generally used to calculate GME payments, they are not reviewed or audited by contractors except when new teaching sites establish their base year PRA. Further, teaching sites may not have accurately reported costs used to calculate Medicare DGME payments. According to experts we interviewed, at the time that most teaching sites established the base year PRAs used to calculate DGME payments, teaching site accounting practices and their varying financial relationships with affiliated education partners may have led them to over-report or under-report their costs. As a result, there is variation in sites’ PRAs, which may not reflect actual variation in direct costs. To identify how the PRA compares to reported direct training costs, we compared teaching site PRAs with the direct training costs that they reported for 2015 (though reported costs may not accurately reflect all GME training costs, as previously noted). For teaching sites in the median range, their Medicare DGME payment covered 67 percent of their reported direct training costs in 2015. However, we found wide variation across teaching sites—the PRA ranged from 31 to 157 percent (excluding outliers) of teaching sites’ reported direct costs. (See table 10.) In addition to the challenges of identifying and comparing costs, little is known about their relationship to federal GME funding. Some studies have analyzed federal GME funding relative to GME training costs but do not consistently indicate whether federal payments accurately reflect training costs. For example, both the Medicare Payment Advisory Commission and HHS found that the Medicare IME payment adjustment exceeds the actual indirect costs that teaching sites incur from operating GME programs. The studies recommended modifying the IME payment adjustment. However, another study found that indirect medical education costs and other costs, such as stand-by services, add to patient care costs in teaching hospitals, and concluded that a reduction in the Medicare IME payment adjustment could result in insufficient Medicare payments to cover these costs. Other studies found that federal funding is lower than actual program costs. For example, one study estimated the per resident training cost in teaching health centers in fiscal year 2017 to be $157,602, compared to the $95,000 per resident that was being provided in federal funding. Another study found that their average $183,138 per resident cost estimate for internal medicine programs of 120 residents exceeded Medicare DGME payments in 2012 by approximately $160,000 per resident, and noted that other sources of funding, including Medicare IME payments, subsidized training costs. The relationship between training costs and federal GME funding is complicated by the nature of how most GME payments are made. For example, with respect to Medicare GME payments, the largest source of federal GME funding, payments are not based on actual costs, and there are no reporting requirements for how teaching sites use the payments. Specifically, teaching sites distribute these payments depending on their needs and the needs of their affiliates, making it difficult to understand the relationship between GME funding and training costs. Agencies generally collect information to manage their respective programs, ensure the accuracy of payments, and reduce the potential for duplicative payments within or across federal programs that fund GME training. However, HHS does not have sufficient information available to comprehensively evaluate the federal programs that fund GME training, identify gaps between federal GME programs’ results and physician workforce needs, and make or recommend to Congress changes in order to improve the efficient and effective use of federal funds. Federal agencies generally collect information to manage their respective programs and ensure the accuracy of payments. To manage their programs, agencies use information, such as the total number of FTE residents and training costs, to calculate payments. For example, VA medical facilities use information that academic affiliates report about the costs of their resident salaries and benefits to set payment rates used to reimburse the affiliates. And, information about individual residents is used to verify that recipients accurately reported, according to resident counting rules, the number of FTE residents used to calculate payments. For example, MACs use IRIS data about residents’ number of years completed in all types of GME training programs to verify that residents who have completed their initial residency period were only counted as half (50 percent) when determining the DGME payment amount. (For a summary of the information that agencies collect for each of the five programs we reviewed, see appendix II. See table 11 for a summary of how agencies use the collected information.) In contrast to the other programs, states establish and administer Medicaid GME payment policies and CMS generally collects limited information about states’ Medicaid GME payments. CMS does not use this information except to determine the amount of federal matching funds for each state. While state Medicaid agencies report the aggregate amount of GME supplemental payments they make to CMS, there are no federal requirements that states or teaching institutions report information about supplemental payments at the provider level, the aggregate or provider-level amount of add-on adjustments to the state’s payment rates for GME training, or how these payments support GME training. Rather, CMS officials said that states have the option to collect information about Medicaid GME payments. However, of the 45 state Medicaid agencies that reported on our survey that they paid for GME training, less than half (20 states) indicated that they require funding recipients to report any information related to Medicaid GME payments, such as the number or type of residents supported. While the risk of duplication is reduced by each program’s design, federal agencies also use the information collected to identify duplicative payments within and between most of the federal programs, with the exception of Medicaid. For example, IRIS data is used to identify whether more than one hospital claimed the same resident’s time for purposes of Medicare GME payments. Also, according to HRSA officials, contractors conduct assessments of the FTE resident counts reported by recipients of CHGME or THCGME program funding to identify duplication with FTE residents reported for Medicare GME payments. For example, HRSA officials told us that its combined academic years 2012-2013, 2013-2014, and 2014-2015 FTE assessment of the 59 teaching health centers in the THCGME program identified 6 centers, from 3 unique organizations, that had a combined total of 6.63 FTE residents that were duplicative with Medicare FTE resident claims, out of over 1,000 FTE residents reviewed over that 3-year time period. In addition, HRSA has worked with CMS to maintain data for this assessment. For example, at HRSA’s request, CMS added a field to the cost reports to check whether any residents from a teaching health center rotated to the hospital and, if so, the number that rotated from a teaching health center. However, these agencies do not have procedures in place to identify potentially duplicative payments between their programs and Medicaid GME payments, which totaled $2.3 billion in federal Medicaid spending in 2015. There is no federal requirement that CMS identify potentially duplicative payments between Medicaid GME payments and other federal GME programs. And, without better data collected about Medicaid GME payments, there is limited information available to identify potentially duplicative payments between, for example, HRSA’s GME programs and Medicaid GME payments. HRSA and VA, which combined provided 13 percent of total federal GME funding in 2015, use the information collected for ongoing program performance measurement and program evaluation. HRSA evaluates the performance of its payment programs. To do so, HRSA collects information on program outcomes, such as whether supported residents received training in, or went on to practice in, a medically underserved area, a primary care setting, or rural area. HRSA uses these performance measures for ongoing evaluations, for internal and congressional reporting, and in its budget justification. In addition, HRSA is authorized to implement a quality bonus system for the CHGME program, which it plans to do by fiscal year 2019. VA issues a survey to VA residents to assess, among other things, a resident’s likelihood of considering a future employment opportunity at a VA medical facility. VA medical facilities are required to collect detailed records of residents’ participation in assigned educational activities and they must evaluate each resident according to accrediting body requirements, such as patient care and medical knowledge. VA medical facilities are also required to produce an annual report on each GME training program that includes, among other things, the accreditation status of its GME training programs, its response to results of the resident satisfaction survey, and opportunities for improvement in residents’ education. CMS, however, does not use the information it collects for Medicare or Medicaid to evaluate the performance of these programs toward meeting physician workforce goals, even though they accounted for 87 percent of federal GME spending in 2015. As noted, Medicaid programs are administered at the state level. For Medicare, CMS officials said that their goal is to ensure hospitals are paid according to the GME statutes and regulations. It does not use information collected to evaluate the performance of Medicare GME payments, such as evaluating the number of residents supported by specialty or whether residents went on to practice in rural areas, primary care, or in medically underserved areas. The officials further noted that Medicare is an insurance program, and not among the health care workforce programs that are under the purview of HRSA. Although CMS officials told us that they coordinate with HRSA regarding Medicare GME payments, HRSA does not conduct research to inform GME policy related to CMS’s GME payments. Also, in a 2015 report, we found that HHS lacks performance measures of Medicare GME payments that are directly aligned with areas of health care workforce needs identified in HRSA workforce projections. Information that agencies collect is not always complete, especially information about Medicaid GME spending. As previously noted, CMS collects limited information about the amount of Medicaid GME payments and how these payments support GME training, such as the number or type of residents supported. In addition, agencies did not collect or use the following information, with some exceptions, to understand the federal investment in GME training: Payment Amounts by Recipient Characteristics: With the exception of HRSA’s CHGME and THCGME programs, agencies do not collect information on payment amounts to training programs with specific characteristics, such as payment amounts by the type of training programs supported. This information would be needed, for example, to compare the payment rates of each program to the costs of training residents in the teaching sites supported. GME Costs and Revenues: Agencies did not collect information about funding recipients’ indirect costs or revenue generated from resident activities, with the exception of HRSA’s THCGME program. Also as previously noted, the costs that hospitals are required to report annually on their Medicare cost report may not be complete or consistent, nor, according to CMS officials we interviewed, is this information audited and used except in limited cases. No information is collected by CMS about direct or indirect training costs incurred by recipients of Medicaid GME payments, and only eight state Medicaid agencies reported on our survey that they require recipients to report information about their direct costs. Output or Outcome Measures: Unlike HRSA and VA, CMS does not collect information for the GME training programs that it supports through Medicaid to assess outputs or outcomes related to health care workforce planning. In addition, while CMS uses IRIS to collect information on the number and type of residents and their number of years completed in all types of GME training programs of residents supported by Medicare GME payments, it does not use it to understand the output of such spending or for health care workforce planning. CMS also does not collect information on the outcomes associated with Medicare GME payments, such as whether residents who were supported by Medicare went on to practice primary care specialties or in rural or medically underserved areas. Further, although HRSA collects data about the outcomes of its CHGME and THCGME programs, this information is self-reported by funding recipients. However, HRSA officials told us that it has taken steps to validate the information reported. For example, it has started to collect residents’ national provider identifiers for residents supported by the CHGME and THCGME programs, which is used to validate resident FTE counts and reported outcomes, such as whether residents went on to practice in primary care. Quality Measures: Agencies generally require that GME training programs be accredited in order to receive funding, and accrediting bodies are responsible for evaluating the educational quality of GME training programs. In addition, HRSA and VA collect some information about the learning experiences of residents in GME training programs supported, such as whether residents received training in certain topic areas. HHS and its advisory bodies have proposed tying federal funding to the performance of the programs. For example, the President’s budget proposals for fiscal years 2015, 2016, and 2017 for HHS proposed to Congress that it be allowed to set standards for teaching hospitals that receive Medicare GME payments to emphasize skills that promote high quality and high value in health care. In addition, the National Academy of Medicine has called for improved measures of the performance of GME training programs, and as of October 2017, it had an initiative to identify quality and other measures, such as residents’ competency or patient outcomes of care provided by residents. Information is also not always consistently collected within programs or standardized across programs. For example, VA medical facilities report information centrally to VA about their total payments to academic affiliates, but they inconsistently used accounting codes to report the total amount that they spent and did not report the amount they paid each academic affiliate, limiting the reliability of data VA collects on the total amount spent on GME. Additionally, VA medical facilities are required to report annually to VA their approved payment rates that each affiliate charges, but VA was unable to provide payment rate schedules for all affiliates in fiscal year 2015. Across all agencies, information about the number of FTE residents supported was collected at, and for, generally different points in time and through different reporting systems. (See table 12.) For example, HRSA generally collects FTE resident information through applications or supporting documentation prior to and at the end of a fiscal year, while VA collects such information in monthly or quarterly invoices throughout an academic year. And, CMS collects similar FTE resident information through cost reports and IRIS files based on each hospital’s own cost reporting period, which can vary by hospital. In addition, the five federal programs do not consistently use the same unique identifiers for their funding recipients, such as a hospital’s Medicare provider identification number, or individual residents supported, such as their national provider identifier, which limits the ability to link data across programs. In some cases, data collection may vary across the various GME programs based on program requirements. Additionally, GME funding recipients may be required by law to report certain types of information for some programs, but not for others. For example, THCGME recipients are required to report on the number of residents trained at the health centers who completed their residency and care for vulnerable populations living in underserved areas. Relatedly, CHGME funding recipients are required to report the number of residents trained at the hospital who completed their residency training and care for children within the service area of the hospital or state in which the hospital is located. No similar requirements apply to Medicare GME recipients. Because the information that agencies collect is not always complete or consistent, HHS does not have sufficient information available to comprehensively evaluate the federal programs that fund GME training. As a result, HHS cannot identify problems and make or recommend changes to Congress in order to improve the efficient and effective use of federal funds. Under leading practices we derived from GPRA and GPRAMA and federal standards for internal controls, agencies should identify and collect complete and reliable information needed to evaluate the performance of federal programs, while balancing the administrative costs of such efforts. In addition, agencies should use that information to monitor performance of programs in order to identify problems and make changes or recommendations to Congress for improvements. Improvements in the performance monitoring can enhance and sustain collaboration and reduce fragmentation within and across federal agencies that administer programs that fund GME training. However, because of limitations with the information agencies collect, HHS does not have information available to comprehensively understand across all programs that fund GME training, for example, the: 1. Total amount that the federal government spends on GME training that includes total Medicaid GME spending and the total amount VA medical facilities paid to academic affiliates; 2. The amount the federal government paid each recipient for GME training, such as the amount paid to each VA academic affiliate; 3. Distribution of funding—that is, the amount of funding by GME training program characteristics, including program type; 4. Extent to which the net cost of training residents, including the variation in costs along different factors that were previously discussed, are accurately represented by formulas used to calculate payments; 5. Output and outcomes of GME training funded by federal programs— that is, how many and what type of residents the federal government supports, where those residents trained and went on to practice, and whether those residents will help address future health care workforce needs; and 6. Quality of GME training programs that are supported by the federal government, such as whether residents participated in certain educational activities or the practice readiness or competence of residents who completed GME training programs supported. HHS’s advisory bodies and stakeholders have made calls for improvements in the accountability and transparency of federal programs that fund GME training. For example, the Medicare Payment Advisory Commission recommended greater accountability and transparency for Medicare GME payments by making information about Medicare GME payments and teaching costs available to the public. And, the National Academy of Medicine recommended that a GME Center within the Centers for Medicare & Medicaid Services be created to be responsible for, among other things, data collection and detailed reporting to ensure transparency in the distribution and use of Medicare GME payments. The federal government is an important source of funds for GME training, and through its funding and workforce planning efforts, HHS, as the largest funder of GME training, has an important role in ensuring federal programs are meeting the nation’s workforce needs. For HHS to carry out the comprehensive planning approach that we recommended in 2015, complete and consistent information on GME training is important. However, the information currently collected is insufficient for this purpose. For example, HHS lacks comprehensive information on the total number and specialty type of residents supported by all of the federal programs that fund GME training. But, HHS may have the opportunity to improve the information that its component agencies collect about how federal funding is used to support GME training to determine whether these programs are meeting these needs. New data collection efforts could potentially increase certain administrative costs for the federal government and providers. However, unless HHS collects more complete and consistent information, it will be limited in its ability to conduct comprehensive, ongoing evaluations of the federal government’s $14.5 billion annual investment in GME training. Such evaluations could allow HHS and other federal agencies to make programmatic changes, or make recommendations to Congress if legislative authority is needed, to improve the cost effectiveness of current federal funding. In addition, collecting more complete information could help HHS and other federal agencies better manage fragmentation in spending, management, and oversight of federal programs that fund GME training. We are making the following two recommendations to HHS: The Secretary of HHS should coordinate with federal agencies, including VA, that fund GME training to identify information needed to evaluate the performance of federal programs that fund GME training, including the extent to which these programs are efficient and cost-effective and are meeting the nation’s health care workforce needs. (Recommendation 1) The Secretary of HHS should coordinate with federal agencies to identify opportunities to improve the quality and consistency of the information collected within and across federal programs, and implement these improvements. (Recommendation 2) We provided a draft of this product to HHS and VA for comment. In its comments, reproduced in appendix III, HHS concurred with our two recommendations to identify and improve information collected to evaluate the performance of federal GME programs. HHS noted that the President’s fiscal year 2019 budget for HHS, released on February 12, 2018, proposed consolidating federal spending from Medicare, Medicaid, and the CHGME Payment Program into a single grant program for teaching hospitals. The proposed program would be jointly operated by CMS and HRSA and grant HHS authority to modify GME payment amounts based on criteria, including addressing health care workforce shortages. HHS stated that the program would allow the department to set priorities, reward performance, and align reporting metrics across its GME efforts. HHS indicated that, if the Congress adopts this proposal, it could work toward addressing both recommendations. It is important to note, however, that the recommendations in this report stand on their own and are separate from any efforts to modify how federal GME funds are distributed. Whether or not legislation is enacted to implement a consolidated federal GME grant program, HHS still needs to take actions to improve the information that agencies collect about how federal funding is used to support GME training. Such actions are important for HHS to assess the cost effectiveness of federal efforts to help meet the nation’s physician workforce needs. HHS also provided technical comments, which we incorporated as appropriate. In its comments, reproduced in Appendix IV, VA said that it has significant relationships with other federal funders of GME, including HRSA. In addition, VA said it looks forward to further dialogue with other agencies to better share GME information. VA did not provide technical comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 20 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services and the Secretary of Veterans Affairs. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix V. In addition to federal funding, state governments—including state Medicaid agencies—and private sources also support graduate medical education (GME) training. However, little is known about these other sources. Therefore, we analyzed Medicare cost report data to determine the extent to which teaching hospitals were operating above their FTE resident caps in 2015—an indication of the extent to which hospitals may receive other sources of GME funding, such as state or private sources. We also surveyed state Medicaid Directors from 50 states and the District of Columbia to collect information on how and the extent to which states paid for GME training through Medicaid payments, and the states’ related reporting requirements and oversight activities. As part of our interviews with experts from research and industry organizations, we asked about state and private sources of funding for GME training and what is known about the amount of such funding. Teaching hospitals likely utilize state and private sources of funding, as well as other federal funding, to pay for residents beyond those paid for by Medicare—the largest federal funder of GME training. Hospitals have continued to add residents over time even though for most hospitals Medicare capped funding based on their number of full-time-equivalent (FTE) residents in 1996. In 2015, about half of teaching hospitals that receive Medicare GME payments had expanded their GME training programs above their Medicare FTE cap, and the extent to which they operate above their cap varied by hospital. We found that 47 percent of teaching hospitals were operating their GME training programs above their Medicare FTE cap on direct GME (DGME) payments. These hospitals had an average of 30.8 additional FTE residents above their DGME cap, ranging from 1.0 to 284.3 additional FTE residents. Most states (45) paid for GME training through their Medicaid programs in 2015; however, states varied in the payment model that they used to make Medicaid payments for GME training, though most used fee-for- service payments, including supplemental payments. Of the 45 state Medicaid agencies that paid for GME training, 25 states did so through fee-for-service payments only; 19 states did so through both fee-for- service and managed care payments; and 1 state (New Jersey) made managed care payments only. Of the 44 states that paid for GME through Medicaid fee-for-service payments, 21 states paid as an add-on to its fee-for-service rate, and 31 states paid through lump sum supplemental or other payments. Of the 20 states that made Medicaid managed care payments for GME, 12 paid teaching sites directly and 10 states made GME payments through managed care plans. Of the 19 states that paid for GME through both Medicaid fee-for- service and managed care, fee-for-service GME payments made up 48 percent of all Medicaid GME payments, on average, while managed care payments made up 52 percent. (See table 13.) While some states followed the Medicare formula for calculating GME payments, most have deviated from this method. Of the 43 states that responded about how they calculated the amount of GME payments, 10 states reported that they followed the Medicare GME payment formula to calculate Medicaid fee-for-service payments for GME training. In addition, two states followed Medicare’s formula for making managed care payments for GME training. Most states (32) followed another method. Medicaid GME payments per FTE resident varied by state and within states, even after adjusting for geographic differences in labor costs. Specifically, the average combined federal and state payment per FTE resident ranged from $2,108 in Rhode Island to $100,587 in Arizona. (See table 14.) The payment per FTE resident also varied within states. The Medicaid payment per FTE varied the most within Ohio, where the state reported payments ranging from $1,415 per FTE to $453,098 per FTE. About half of the states (22 of 45) reported that they specified the type of expenses that its Medicaid GME payments were intended to cover. Of these 22 states, payments were intended to cover the costs of residents’ salaries and benefits (14 states), faculty salaries and benefits (11 states), program administration costs (10 states), or indirect medical education costs (8 states). Some state Medicaid agencies have tied their payments to incentives to expand the physician workforce. Of the 45 states that reported Medicaid GME payments in 2015, 4 states—Alabama, Montana, New Mexico, and South Dakota—reported that they restrict payments to the training of primary care physicians only. (See table 15.) An additional 9 states required that the funding recipient have a primary care residency program. In addition, according to experts we interviewed, states have been considering how to target Medicaid GME payments to meet state workforce needs. For example, one expert said some states have used Medicaid payments to expand GME training of physicians in outpatient, ambulatory care settings. However, Medicaid GME payments generally go to hospitals. Specifically, 44 of the states reported making payments to hospitals and 7 states paid other teaching sites, such as teaching health centers. The one state that did not make payments to teaching hospitals directed all Medicaid payments for GME training to medical schools. Further, one expert we interviewed told us that it is difficult for states to change their GME financing models to direct funding to specific workforce goals because hospitals are reliant on state GME payments to support certain residency positions. Instead, states have used a moderate approach, such as providing additional funding targeted to specific training, rather than a complete funding overhaul that would redistribute existing funds. Despite the significant investment in GME training by state Medicaid agencies, which is matched by the federal government, the extent of state oversight of Medicaid GME spending varied by state. As previously mentioned, less than half of the states (20 of 45) required teaching sites that received Medicaid GME payments to report information to the state. (See table 16.) Among these 20 states, 16 required recipients to report information on the number of residents or FTE residents, 8 states required information about direct medical education costs, 6 states required information about the GME training program specialties supported, and 4 states required recipients to report information about the residents’ characteristics, such as their post-graduate year. Of the 10 states that made Medicaid GME payments to managed care plans, 4 states—Kansas, Kentucky, Michigan, and Minnesota—set the methodology or base rate that managed care plans were required to use to calculate GME payments. None of the states reviewed and approved payments. Further, 44 of the 45 states were able to provide at least some information on the total amount the state spent on Medicaid GME payments, but the amount of information they were able to provide varied. While most states (38) were able to provide data on all GME payments by recipient, 4 states could provide data on some but not all payments, and 2 states could not provide data on the amount of GME payments by recipient. And, less than half of the states (18 of 45) were unable to provide data on either the number of FTE residents or resident counts at teaching entities that received Medicaid GME payments. (See table 17.) Experts we interviewed identified other sources of state and private funding for GME training. Hospitals and health systems: Hospitals may rely on their own funding to support their residency programs. One expert we interviewed said that hospitals that sponsor GME residency programs provide funding for certain specialty residency programs that make money for the hospital. State government grant or other funding: Aside from GME funding through Medicaid, one expert told us that some states make direct grants to residency programs, mostly primary care residency programs, or through state appropriations specifically for GME training. For example, Florida created an $80 million fund to support state training in outpatient or community-based programs. And, one expert told us that some states have developed innovative funding mechanisms. This was the case in Georgia, which established a hospital coalition that funded 400 new residency slots to meet the needs of medically underserved populations. Private health insurers: Experts said GME funding from private health insurers is generally thought to be provided through higher reimbursement rates to teaching hospitals than nonteaching hospitals, including through Medicare reimbursement. While private insurers fund GME training through their contracts with individual hospitals, one expert told us that those contracts do not likely differentiate the amount of funding that is used toward GME training versus other activities. However, one expert raised concerns that private insurers are not paying their share of GME costs. Another expert noted that there have been some state-level efforts to require all payers, including private insurers, to have some responsibilities in paying for the education of the health care workforce, even beyond physician GME training. Other: Experts also identified other possible sources of private funding. For example, one expert told us that, while the amount of funding from pharmaceutical or medical device companies has not been identified in existing studies, anecdotally there is a growing use of these funding sources. Experts also said that some funding is provided by philanthropic organizations or medical schools that are affiliated with residency programs. Appendix II: Information that Federal Programs Collect about Funding for Graduate Medical Education Training Medicaid Services (CMS) Administration (HRSA) Affairs (VA) Medicaid Services (CMS) Administration (HRSA) Affairs (VA) In addition to the contact named above, William Hadley, Assistant Director; Christine Brudevold, Assistant Director; Katherine Mack, Analyst-in-Charge; A. Elizabeth Dobrenz; Maggie G. Holihan; Daniel Lee; and Todd Anderson made key contributions to this report. Also contributing were Sam Amrhein, Muriel Brown, Lisa Opdycke, and Jennifer Whitworth.", "summary": "An adequate, well-trained physician workforce is essential for providing access to quality health care. While a number of factors affect the supply and distribution of physicians, GME is a significant determinant. A significant portion of GME training funds come from federal programs and states. This report (1) describes the amount and distribution of federal government and state Medicaid agency spending on GME; (2) describes what is known about GME costs; and (3) examines the extent to which the federal government collects information to understand its investment in GME. GAO reviewed reports, agency websites, and interviewed agency officials to identify federal programs that fund the clinical training of residents and were authorized through 2017. GAO analyzed 2015 data—the most recent data available at the time of GAO's analysis—including from a state survey. All 50 states and the District of Columbia responded to the survey. GAO reviewed literature, interviewed experts from seven organizations knowledgeable about GME costs, and analyzed Medicare data. GAO also reviewed documentation from HHS and the Department of Veterans Affairs (VA) and interviewed agency officials. Federal agencies and state Medicaid agencies spent over $16.3 billion in 2015 to fund graduate medical education (GME) training for physicians—commonly known as residency training. The federal government spent $14.5 billion through five programs, and 45 state Medicaid agencies spent $1.8 billion. About half of teaching sites that received funding—such as teaching hospitals—received funds from more than one of the five programs. GME training costs vary due to the characteristics of teaching sites, such as the number of residents trained and their specialty, which can make it difficult to compare training costs across sites. Further, challenges exist in measuring training costs because some costs, such as faculty teaching time, are difficult to identify. Also, there is no standard method for identifying and capturing training costs, and each teaching site may vary in how it does so. While federal agencies generally collect information needed to manage their individual programs, this information is not sufficient to comprehensively understand whether the federal investment in GME training meets national physician workforce needs. The information agencies collect is not always complete or consistent within or across programs. For example, national data on GME training costs are not systematically collected, and some agencies lacked data to understand the total amount spent, or the outcomes of their programs, such as where supported residents went on to practice. GAO recommended in 2015 that the Department of Health and Human Services (HHS) develop a comprehensive planning approach to identify and address areas of health care workforce need. HHS concurred and identified steps it could take. While HHS has yet to take these steps, the information currently available is also insufficient for such planning. Comprehensive information is needed to identify gaps between federal GME programs and national physician workforce needs—particularly the distribution of physicians geographically or across specialties—and to make or recommend to Congress changes to improve the efficient and effective use of federal funds to meet those needs. GAO recommends that HHS coordinate with federal agencies, including VA, to (1) identify information needed to evaluate federal GME programs, and (2) identify opportunities to improve the quality and consistency of information, and implement these improvements. HHS concurred with both recommendations.", "document_type": "gao"}
{"report": "Agent Orange is composed of two different chemical components—the n- butyl ester forms of 2,4-dichlorophenoxyacetic acid (hereinafter referred to as n-butyl 2,4-D) and 2,4,5-trichlorophenoxyacetic acid (hereinafter referred to as n-butyl 2,4,5-T)—that are manufactured separately and then combined to form the tactical herbicide. The U.S. EPA has determined that there was not adequate data either to support or to refute that the acid or ester forms of 2,4-D can cause cancer in humans. In 2015 the International Agency for Research on Cancer classified 2,4-D as possibly causing cancer to humans, since there was inadequate evidence in humans and limited evidence in experimental animals. According to an Institute of Medicine report, information on the toxic effects of 2,4,5-T alone is sparse. However, in the 2,4,5-T manufacturing process, the dioxin 2,3,7,8-tetrachlorodibenzo-p-dioxin (hereinafter referred to as 2,3,7,8-TCDD) is formed, particularly when the reaction temperature is excessive. The World Health Organization has determined that dioxins are highly toxic and can cause a variety of illnesses, including reproductive and developmental problems and damage to the immune system. The World Health Organization reports that 2,3,7,8-TCDD, a human carcinogen, is the most toxic dioxin-related compound. Moreover, according to the National Academies of Sciences, Engineering, and Medicine report, 2,3,7,8-TCDD has been shown by researchers to be very toxic in animals. Figure 1 depicts the proportion of the components of Agent Orange and the amount of 2,3,7,8-TCDD contamination that would be present in an average 55-gallon drum. The Crops Division of the U.S. Army Chemical Corps was established at Camp Detrick (now Fort Detrick), Maryland, in 1943 to conduct anti-crop research, development, and engineering. In 1944 the Crops Division was given the mission of developing chemical compounds to destroy or reduce the value of crops. These chemical compounds were intended to rapidly clear vegetation in military operations in order to eliminate concealed enemy positions, improve air and ground observations, and destroy or reduce the value of crops. Initial field trials at Camp Detrick were small-scale efforts involving test plots typically 6 by 18 feet in size, and the herbicides being tested were usually applied using a hand sprayer. Over the following three decades, DOD collaborated with the U.S. Department of Agriculture, universities, and private companies to conduct testing activities ranging from laboratory experiments to spray tests of larger-scale aerial dissemination of a variety of chemical compounds throughout the United States, U.S. territories, and abroad. The tactical herbicides used by the U.S. military in Vietnam were formulations based on tests of thousands of different chemical compositions at Camp Detrick in an effort to determine chemical agents and chemical compounds that would meet specific requirements. The U.S. military developed and tested six tactical “rainbow” herbicides that it used during the Vietnam War era—Pink, Purple, Green, Blue, White, and Orange. The chemical component n-butyl 2,4,5-T, which is known to have been contaminated with 2,3,7,8-TCDD, was present in four of these six tactical herbicides—specifically, Agents Pink, Purple, Green, and Orange. In late 1961, DOD began color-coding the herbicide formulations that it was testing in aerial spray trials in Vietnam and elsewhere in Southeast Asia. The tactical herbicides, which were used for a variety of different purposes, to include defoliation and crop destruction, were identified by colored bands placed around the drums, as shown in figure 2. Beginning in 1962, the U.S. Air Force received shipments of Agents Pink, Purple, and Green to supply the first spray missions for Operation Ranch Hand, the program for defoliation and crop destruction missions during the Vietnam War. Agent Purple was similar to the herbicide formulation that was later designated “Orange,” but it was more costly to purchase. Agents Blue and White were used in Vietnam extensively along with Agent Orange after 1964, but they were of a different chemical composition and did not contain any form of 2,4,5-T, the component that produced 2,3,7,8-TCDD as a by-product of the manufacturing process. Of the tactical herbicides, Agent Orange was used the most extensively in Vietnam. In 1964 DOD began to procure large quantities from U.S. manufacturers for military use in Vietnam. The first shipment of Agent Orange arrived in Saigon in February 1965 by merchant vessel. Together, nine manufacturers produced a total of approximately 13.9 million gallons of Agent Orange, and DOD is estimated to have used approximately 12.1 million gallons between 1965 and 1970 in operations in Vietnam, and much smaller quantities in Korea and Thailand. Evidence from animal and epidemiologic studies of adverse effects from Agent Orange exposure led the U.S. government to restrict the use of 2,4,5-T in April of 1970 and led DOD to temporarily suspend the use of Agent Orange. In 1972 the U.S. Air Force consolidated the approximately 1.36 million gallons of the herbicide that had remained unused in Vietnam and shipped them for storage on Johnston Island in the Pacific. DOD held its remaining stocks of Agent Orange—approximately 860,000 gallons—within the continental United States, at the Naval Construction Battalion Center Gulfport, Mississippi, until those stocks were also shipped toward Johnston Island in June 1977. All of these remaining stocks of Agent Orange were incinerated at sea aboard the M/T Vulcanus by September 1977. In addition to the tactical herbicides used during the Vietnam War era, the U.S. military also used commercial herbicides to manage vegetation on its installations. The U.S. military managed tactical herbicides differently from commercial herbicides. According to DOD officials and archived military specifications, tactical herbicides were not authorized for use on lands owned by, or otherwise managed as military installations and were not to be diverted for domestic use. DOD developed military specifications for the tactical herbicides that provided detailed information on product requirements, quality assurance, packaging, and precautionary statements that prohibited domestic use. The tactical herbicides were centrally managed, first by the Army Chemical Corps and later by the U.S. Air Force Logistics Command. Agent Orange used in Vietnam was formulated for aerial spraying by aircraft and helicopter and applied at full strength without additional solvents at a rate of 3 gallons per acre. Agent Orange is soluble in diesel fuel and organic solvents, but it is insoluble in water, so equipment was cleaned using diesel fuel rather than water. Commercial herbicides, conversely, were widely available worldwide for use in vegetation management at military installations, to include controlling vegetation adjacent to flightlines or along perimeter fencing. Federal agencies developed federal specifications for these products to ensure that they met specific requirements, and these specifications were approved by the Commissioner, Federal Supply Service, in the General Services Administration for use by all federal agencies. According to DOD officials, during the Vietnam era there was no requirement for DOD to retain records concerning the use of commercial herbicides on military bases beyond 5 years. DOD officials also stated that DOD catalogued these herbicides available for use on military installations in the federal supply schedule under federal supply classification group 68, which contains chemicals and chemical products. In reviewing supply catalogues from that time period, DOD officials identified more than 35 different commercial herbicides that were listed in the federal supply system for use on DOD installations between 1960 and 1973. Some of these commercial herbicides contained 2,4-D; 2,4,5-T; or both, although they were not in the n-butyl form used in Agent Orange. These included at least 4 commercial herbicides that contained some form of 2,4,5-T, the component that contained the contaminant 2,3,7,8- TCDD. In addition, numerous commercial herbicides that were not in the federal supply system but were being widely used elsewhere for agriculture purposes contained the form of n-butyl 2,4,5-T found in Agent Orange and thus its associated contaminant, 2,3,7,8-TCDD. According to DOD officials, the commercial herbicides used on installations were mixed with diesel or water and sprayed by hand or truck. Tactical herbicides, however, were formulated for aerial spraying by fixed-wing aircraft or helicopter without being diluted. When the U.S. military was employing these tactical and commercial herbicides during the Vietnam War era, U.S. EPA had not yet been established, and the U.S. Department of Agriculture had oversight of commercial herbicides. The Federal Insecticide, Fungicide, and Rodenticide Act of 1947, then administered by the U.S. Department of Agriculture, governed the marketing and use of these commercial herbicides. Until amended in 1972, the Federal Insecticide, Fungicide, and Rodenticide Act review process was designed as a consumer protection measure that focused primarily on a product’s effectiveness, rather than on concerns about health or the environment. The Agent Orange Act of 1991, as amended, requires a review of the available scientific evidence regarding the associations between certain diseases and exposure to tactical herbicides. The act specifically requires the VA to enter into an agreement with the National Academy of Sciences (the Academy), or with an alternative scientific organization, to review and evaluate the scientific evidence concerning the association between exposure to an herbicide agent and each disease suspected to be associated with such exposure. The Academy is required to submit periodic reports at least once every 2 years. The most recent report—the 2014 report—was issued in March 2016. The next report, which Academy officials told us would focus on inter-generational and trans-generational effects of exposure to herbicides, was at the time of our report scheduled to be issued in late 2018. In its biannual reports, the Academy identifies different levels of association between exposure to 2,3,7,8-TCDD or other chemical compounds in herbicides used in Vietnam and a wide range of health effects. These levels include the following: sufficient evidence of an association; limited or suggestive evidence of an association; inadequate or insufficient evidence to determine an association; and limited or suggestive evidence of no association. The Academy has identified that there is either sufficient evidence of an association with exposure to a tactical herbicide or limited or suggestive evidence of an association leading to certain diseases. For example, the Academy has identified both chloracne and non-Hodgkin’s lymphoma as having sufficient evidence of an association with exposure to a tactical herbicide, and both Parkinson’s disease and diabetes mellitus (type 2) as having limited or suggestive evidence of an association. Examples of diseases for which the Academy has found inadequate or insufficient evidence to determine an association include kidney disease and pancreatic cancer. In making determinations regarding the association between certain diseases and exposure to herbicide agents, the Secretary of Veterans Affairs is required to take into account the Academy’s reports. Once the Secretary finds that such an association existed, the Secretary is then required to prescribe regulations, providing that a presumption of service connection is warranted for that disease. The Agent Orange Act of 1991, as amended, also establishes a presumption of service connection, by reason of exposure to an herbicide agent, for diseases listed in the statute, to include Hodgkin’s disease and diabetes mellitus (type 2). This presumption applies to veterans who, during active military, naval, or air service, served in the Republic of Vietnam during the period beginning on January 9, 1962, and ending on May 7, 1975. Veterans who served in Vietnam and other specific locations and time frames and who have been diagnosed with those diseases are presumed to have incurred those diseases as a result of their service and are thus eligible for presumptive service connection for disability compensation. Figure 3 illustrates the diseases for which the Academy has found either sufficient, or limited or suggestive, evidence of an association. In addition, appendix II provides information on the 14 presumptive diseases that the VA currently identifies as being associated with exposure to Agent Orange or other tactical herbicides during military service for which veterans and their survivors may be able to receive disability compensation benefits. Under 38 U.S.C. § 1110, the United States will pay benefits to any veteran disabled for a disability resulting from personal injury suffered or disease contracted in line of duty, or for aggravation of a preexisting injury suffered or disease contracted in line of duty, in the active military, naval, or air service, during a period of war. The VA offers health registry exams, health care, disability compensation, and other benefits to eligible veterans who were exposed to herbicides during military service. According to the VA’s Claims Adjudication Procedures Manual, the claims evaluation process begins with the VA requesting any information missing from the veteran’s claim, such as the approximate dates and location(s) of service, claimed disability, and, for certain locations, the nature of the alleged exposure to herbicides. Generally, the veteran then has 30 days to submit the requested information. During the claims process, VA will check military records to confirm exposure to Agent Orange or other herbicides and qualifying military service. Certain diseases have already been presumed to be associated with herbicide exposure, and no further evidence of an association is needed. However, if the claimed disability is not a presumed condition, then VA will request that the veteran present scientific or medical evidence showing that the claimed condition is medically associated with herbicide exposure. If the veteran is not able to provide this information, the case is referred to DOD for verification of exposure to herbicides. Veterans’ claims can either be approved or denied based on the evidence submitted by the veteran, and, if needed, by DOD. The VA tracks its claims data for Agent Orange exposure according to whether the exposure occurred inside or outside of Vietnam, which includes the Korean demilitarized zone and certain locations in Thailand. According to VA officials, as of June 30, 2018, 557,653 living veterans and 199,451 deceased veterans have been granted benefits for diseases associated with Agent Orange exposure inside Vietnam, with 44,925 claims pending for veterans who served in Vietnam and believe they were exposed to Agent Orange. For diseases associated with Agent Orange exposure outside of Vietnam, VA had granted service connection decisions to more than 10,758 veterans and denied service connection decisions to more than 58,250 veterans, as of June 30, 2018. According to VA, there are an additional 23,400 claims pending for veterans who did not serve in Vietnam but believe they were exposed to Agent Orange. In 1980 Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act, which established the Superfund program—the federal government’s principal program to clean up hazardous waste sites. The U.S. EPA is responsible for administering the Superfund program, which places some of the most seriously contaminated sites on the National Priorities List, and has oversight for federal and non-federal sites on that list. Additionally, amendments to the act in 1986 require the Secretary of Defense to carry out the Defense Environmental Restoration Program, which was specific to DOD environmental cleanup activities at active installations, formerly used defense sites, and base realignment and closure locations in the United States. The cleanup process under the Environmental Response, Compensation, and Liability Act process generally includes the following phases and activities: preliminary assessment, site inspection, remedial investigation and feasibility study, remedial design and remedial action, and long-term monitoring. Through this process, DOD and U.S. EPA cleaned up some U.S. sites where Agent Orange was known to have been present after the sites were tested and confirmed to have been contaminated with 2,3,7,8- TCDD. For example, U.S. EPA identified a site in Jacksonville, Arkansas, where 2,4,5-T had been manufactured, that was contaminated with 2,3,7,8-TCDD. In addition, under the Defense Environmental Restoration Program, DOD cleaned up the Naval Construction Battalion Center Gulfport, Mississippi, where Agent Orange had been stored while awaiting shipment for use in Southeast Asia. The site had also been used to store Agent Orange drums that were awaiting shipment to Johnston Island for disposal. According to a DOD report, approximately 860,000 gallons of the herbicide were stored at the site. An Agency for Toxic Substances and Disease Registry report further states that spills that occurred during storage caused 2,3,7,8-TCDD contamination around several water areas. According to a 5-year review completed by DOD in 2017, capping of the contaminated soil at the site where herbicides were stored has been completed, and long-term monitoring of the soil and groundwater began in 2012 and continues today. DOD also cleaned up the Johnston Island site where Agent Orange was ultimately disposed of. Once drums of Agent Orange were stored at Johnston Island, environmental sea conditions caused them to corrode and leak. Initial cleanup activities assessed and monitored the area to track the chemical components remaining as a result of Agent Orange contamination. Site remediation and environmental monitoring continued throughout the 1970s until February 1989, when the Air Force, in accordance with the Defense Environmental Restoration Program, completed a final site cleanup at Johnston Island by destroying all remaining 2,3,7,8-TCDD-contaminated soil. Figure 4 shows drums of Agent Orange stored at Johnston Island. In addition, U.S. EPA listed on its National Priorities List two former Agent Orange manufacturing sites—the Kanawha River site in West Virginia previously owned by the Monsanto Company and a site in Newark, New Jersey, owned by the Diamond Alkali Company—due to high levels of contamination from various sources and threats to human health. In 2017, U.S. EPA entered into an agreement with the Monsanto Company on a cleanup plan to address 2,3,7,8-TCDD contamination at the Kanawha River Superfund Site in Putnam and Kanawha counties, West Virginia. The cleanup effort will focus on a 14-mile stretch within the Kanawha River. Cleanup work will include constructing a cap over more than 9 acres of contaminated river sediments. Similarly, the Diamond Alkali site in New Jersey contained 2,3,7,8-TCDD contamination at both the manufacturing site and the nearby Lower Passaic River. The site was found to contain high levels of 2,3,7,8-TCDD and was placed on the National Priorities List in 1984. As late as 2014, the site was still undergoing cleanup actions to prevent exposure to the contaminated soil and prevent further releases to the river. It is difficult to isolate the specific costs of cleaning up Agent Orange contamination under the Comprehensive Environmental Response, Compensation, and Liability Act, according to DOD and U.S. EPA officials. Moreover, cleanup plans address multiple contaminants, making it difficult to isolate the costs for cleaning up a specific contaminant, according to DOD and U.S. EPA officials. For example, the Diamond Alkali site had multiple contaminants from a number of companies that owned or operated facilities from which hazardous substances, including 2,3,7,8-TCDD and pesticides, were potentially discharged into the river and found in the soil and groundwater. Various cleanup actions were taken to address not only 2,3,7,8-TCDD contamination but the other contaminants as well. These actions included a groundwater collection and treatment system and capping to prevent exposure to contaminated soil (including contaminated soil that originated at the facility and soil that was brought to the facility from neighboring lots) and prevent further releases to the river. The federal government maintains information on Agent Orange, and available records indicate that DOD procured approximately 13.9 million gallons of the tactical herbicide, which was either used in U.S. military operations in Southeast Asia, used for testing, or destroyed. Our analysis of the available logbooks for 152 of the 158 shipments (approximately 96 percent) of Agent Orange to Southeast Asia that we identified indicates that the vessels carrying tactical herbicides generally stopped at foreign ports and sometimes at U.S. ports en route to Southeast Asia. Available primary source materials, such as shipment documentation, are incomplete because they were likely not maintained during and after the Vietnam era. However, based on the available information, we identified at least one ship carrying Agent Orange that stopped at Port Apra (now Apra Harbor) on Guam on its way to Vietnam, although we could not locate any evidence showing that any cargo was offloaded. Further, while DOD documents identify the use of commercial herbicides on Guam, they do not identify the use of tactical herbicides there. Available records that the federal government maintains indicate that DOD procured approximately 13.9 million gallons of Agent Orange between 1963 and 1968, of which it used an estimated 12.1 million gallons in Southeast Asia from 1965 to 1970; used a small amount for testing; and incinerated another 2.3 million gallons in 1977. Thus, the total quantity of Agent Orange that DOD procured was approximately equal to the total quantity that records indicate was tested in the United States and its territories, damaged during storage and shipment, and used during the Vietnam War, combined with the total quantity that records indicate was disposed of afterwards. Procurement and Use. Based on available records we reviewed, DOD procured approximately 13.9 million gallons of Agent Orange from nine chemical manufacturers between 1963 and 1968. In 1963 DOD used small amounts of Agent Orange for testing. DOD procurement officers then advised the Military Assistance Command, Vietnam, in late 1964 that they could fulfill the supply requirements for tactical herbicides with Agent Orange. Available records further indicate that of the approximately 13.9 million gallons of Agent Orange procured, DOD used an estimated 12.1 million gallons in operations in Vietnam from 1965 to 1970. In addition to the quantity used in Vietnam, Agent Orange usage also included quantities that were tested in the United States and its territories; used or tested in countries outside of Vietnam; lost during shipment and storage; or removed from the inventory and used to test different disposal options after its use was suspended. With the exception of the disposal testing amounts, no archival resources we could locate and obtain provided definitive usage figures. The last known shipment of Agent Orange to Vietnam was aboard the SS Frederick Lykes and arrived in May 1970. Restrictions on Use. In 1969 the National Environmental Health Service of the Department of Health, Education, and Welfare conducted testing of n-butyl 2,4,5-T—the component of Agent Orange whose manufacturing process produced 2,3,7,8-TCDD as a by-product—on mice, which raised concerns about health effects of the herbicide for women of child-bearing age. These concerns led to several U.S. government decisions that ended the use of tactical herbicides. Specifically, in 1969 DOD restricted the use of Agent Orange in Vietnam to keep it away from population centers. In April 1970 the federal government began restricting the use of 2,4,5-T in the United States. Exceptions were made for the control of weeds and brush on range, pasture, and forests, or on rights of way and other nonagricultural land. On April 15, 1970, DOD temporarily suspended the use of Agent Orange, including new procurement, acceptance of product on terminated contracts, transfer of stocks at Gulfport, and ocean shipping operations. Consolidation and Incineration of Remaining Stocks. After the U.S. government restricted the use of n-butyl 2,4,5-T—a component of Agent Orange—in 1970, DOD decided to consolidate the remaining 2.3 million gallons of Agent Orange stored in Vietnam and Gulfport, Mississippi, as well as any remaining amounts of n-butyl 2,4,5-T. According to an Office of Air Force History monograph, on January 16, 1971, DOD ordered the termination of all crop destruction missions by U.S. forces in Vietnam, and on September 27 of that year, the Chairman of the Joint Chiefs of Staff directed the Air Force to return all remaining stocks of Agent Orange to the United States and to dispose of them. Specifically, Agent Orange stocks in Vietnam were temporarily stored at U.S. Air Force bases at Da Nang, Phu Cat, and Bien Hoa until they were moved to Johnston Island in 1972. In 1972 the U.S. military moved approximately 1.36 million gallons of Agent Orange onto Johnston Island for storage. The cargo vessel SS Transpacific picked up this quantity at three Vietnamese ports from March 15 to April 1, traveled to Johnston Island, arrived on April 18, and completed offloading on April 28 before returning to the United States. This consolidated quantity of Agent Orange from Vietnam remained at Johnston Island until 1977. The Naval Construction Battalion Center Gulfport, Mississippi, was the final storage location in the continental United States for Agent Orange until the U.S. Air Force began the incineration of Agent Orange in 1977. There were approximately 860,000 gallons of Agent Orange at this location in 1977, which takes into account amounts lost in Hurricane Camille in 1969 or shipped away for testing, as described previously. The 1977 figure also takes into account 14,025 gallons transferred to the Naval Construction Battalion Center Gulfport, from Eglin Air Force Base, Florida, where the Air Force had tested formulations of Agent Orange for aerial spraying. In addition, available records show that quantities of the two components of Agent Orange were stored at the former Kelly Air Force Base, Texas, until 1972 before they were transferred to the U.S. Department of Agriculture for brush control projects. These reported amounts included 106,260 gallons of n-butyl 2,4-D and 38,940 gallons of n-butyl 2,4,5-T. These records also show that 173,910 gallons of Agent Blue were stored at the installation; see figure 5. DOD chartered the incinerator ship M/T Vulcanus and loaded the 860,000 gallons stored at Naval Construction Battalion Center Gulfport, Mississippi, beginning in May 1977. The vessel left Gulfport, Mississippi, in June 1977, and began incinerating the Agent Orange on board in July 1977 in a research burn to test the incineration process at sea near Johnston Island. In August 1977, the M/T Vulcanus loaded the remaining 1.36 million gallons stored at Johnston Island and conducted two more incineration operations just southwest of Johnston Island, as shown in figure 6. By September 3, 1977, all stocks of Agent Orange had been incinerated. Our review of documentation for the shipment of almost 12.1 million gallons of the approximately 13.9 million gallons (approximately 87 percent) of Agent Orange procured by DOD found, based on available shipment documentation, that vessels transporting Agent Orange made stops at various ports on the way to Southeast Asia. However, shipment documentation is incomplete. Manufacturers of Agent Orange blended the two components of the herbicide—the n-butyl forms of 2,4-D and 2,4,5-T—and marked 55-gallon drums for shipment to Southeast Asia. Available records indicate that manufacturers produced Agent Orange according to military specifications and marked all drums for shipment directly to the receiving U.S. military unit in Vietnam. These specifications indicated the precise herbicide formulation of Agent Orange (n-butyl esters, 50 percent 2,4-D and 50 percent 2,4,5-T) and general instructions for marking the 55-gallon drums for shipment. For example, according to a historical monograph by the San Antonio Air Materiel Area, DOD specified that each drum was to be marked with a colored band or bands around the center as well as with transportation and contract data. Figure 7 shows an example of these drum markings. DOD then arranged for the transport of these drums, as well as drums of other tactical herbicides, by train from the manufacturers to several U.S. ports. DOD transportation officials accepted the product by signing a Material Inspection and Receiving Report that indicated the destination of the rail shipment and the final destination in Vietnam. DOD primarily chartered merchant marine vessels to ship the drums to Southeast Asia, but we identified one official Navy vessel, the USNS Lt. George W.G. Boyce, that carried Agent Orange to Southeast Asia. The first known shipment of Agent Orange left the port of New Orleans, Louisiana, on the SS Adabelle Lykes and arrived in Vietnam in February 1965. The last known shipment left the port of Gulfport, Mississippi, on the SS Frederick Lykes and arrived in Vietnam in May 1970. By that time, DOD had suspended all further shipments of Agent Orange. The photos in figure 8 provide examples of drums of Agent Orange being shipped by rail and tactical herbicides being loaded onto a cargo ship. The bulk of materiel used to support U.S. military forces in Vietnam, including tactical herbicides, was transported from the continental United States to Vietnam via ship. The vessels carrying the tactical herbicides generally stopped at foreign ports and sometimes at U.S. ports on the way to Southeast Asia. Our analyses of available shipment documentation indicate that at least 114 unique cargo vessels carried Agent Orange to Southeast Asia on at least 158 different voyages from 1965 through 1970. For each of these voyages, merchant vessel captains submitted logbooks to the U.S. port authorities at the end of each voyage. We were able to locate and obtain logbooks for 152 of the 158 shipments (approximately 96 percent) we identified. For 3 of the 6 voyages for which we were not able to locate logbooks, we obtained copies of the vessels’ shipping articles. We were not able to obtain shipping articles for the 3 foreign-flagged vessels because documents for such vessels were not turned in at U.S. ports. The Military Sea Transportation Service directly chartered merchant vessels to carry tactical herbicides during the Vietnam War. At least 28 vessels owned by the New Orleans, Louisiana-based Lykes Brothers Steamship Company transported Agent Orange between 1965 and 1970 from Gulf Coast ports to Southeast Asia. Lykes Brothers vessels were designed to handle cargo with cables that could place the cargo in a series of holds— numerous compartmented internal storage spaces. Tactical herbicides were stored vertically on pallets in these holds. The first large shipments of Agent Orange took place on the SS Adabelle Lykes, SS Elizabeth Lykes, and SS Mayo Lykes, traveling from the port of New Orleans, Louisiana, through the Panama Canal, and refueling in the Philippines before offloading a total of 1,782 55-gallon drums (approximately 97,000 gallons) in Saigon, Vietnam, in February and March of 1965. Our review of the logbooks and shipping articles for vessels carrying Agent Orange and other tactical herbicides showed that these vessels made stops at several U.S. and foreign ports, both in going to and in returning from Vietnam. For example, we identified vessels that stopped at several West Coast ports to load cargo before traveling to Vietnam, and others that made port calls to refuel in Hawaii. We also identified vessels that stopped at foreign ports such as Okinawa, Thailand, and Taiwan, as well as locations near the major U.S. Naval Supply Depots in Yokosuka, Japan, or Subic Bay, Philippines. These supply depots were major logistics hubs for U.S. military operations in East Asia, and they provided supplies to commercial ships that were chartered by DOD’s Military Sea Transportation Service through contracts with shipping companies. These companies would reserve cargo space for military cargo and include Saigon, Vietnam, as a destination, but the voyages were otherwise made for normal commercial activities. From those locations, the cargo vessels traveled to one or more ports in Vietnam. However, while the logbooks we reviewed identify when vessels left the various ports as they traveled to and from Vietnam, logbooks do not provide information on whether and how much cargo was loaded and unloaded at those ports of call, nor do they indicate whether tactical herbicides were offloaded at any ports before the vessels reached Vietnam. Based on our review of available logbooks, we identified at least one vessel carrying Agent Orange that stopped at Guam en route to Vietnam and at least three vessels that stopped at Guam on the return from Vietnam. However, in our review of available shipment documentation, we found no evidence indicating that Agent Orange or any other tactical herbicides were offloaded from those vessels or used in the U.S. territories of Guam or the Northern Mariana Islands. Figure 9 indicates the timelines of the four vessels known to have carried Agent Orange that stopped at Guam either on their way to or returning from Vietnam, each of which is discussed in detail below. Available shipment documentation indicates that hundreds of vessels delivered supplies to the Naval Supply Depot, including supplies bound for Andersen Air Force Base, on Guam during the Vietnam War due to both installations’ strategic location in supporting the war effort. While the logbooks we were able to locate and review for vessels that transported Agent Orange to Southeast Asia between 1965 and 1970 do not show that these vessels typically stopped at Guam or the Northern Mariana Islands at any time during their voyages, we identified one ship carrying Agents Orange, Blue, and White that did stop at Guam on its way to Vietnam. Specifically, available records indicate that sometime around February 1, 1968, the SS Gulf Shipper stopped at Port Apra (now Apra Harbor) on Guam en route to Vietnam. Figure 10 shows a photo of the logbook from the SS Gulf Shipper indicating the ship’s ports of call en route to Vietnam. The logbooks do not provide details about whether cargo was moved on or off the vessels during these port calls, or whether tactical herbicides were offloaded at these ports before the vessels reached Vietnam. However, the SS Gulf Shipper’s logbook indicates that the stop at Guam could have been related at least in part to the repatriation of an injured crew member to the United States, and not to matters related to the loading or unloading of cargo. Further efforts to locate information on cargo movements for the SS Gulf Shipper, such as customs records, manifests, or bills of lading, were unsuccessful, because those records were not routinely retained. As such, we were not able to verify why the SS Gulf Shipper stopped at Guam, what its crew did while there, or whether any cargo was loaded or unloaded. We also identified at least three vessels that stopped on Guam on their return from Vietnam, based on our review of available logbooks. Specifically, around November 30, 1969, the SS Aimee Lykes stopped at Port Apra on Guam and offloaded an injured crew member into a small motorboat so that he could be hospitalized on Guam. In addition, around December 23, 1969, the SS Buckeye Atlantic stopped at Guam and offloaded two injured crew members. Lastly, around May 5, 1970, the SS Overseas Suzanne stopped at Guam and offloaded an injured crew member. Based on a review of the vessels’ logbooks, it is not clear whether the stops at Guam were for reasons other than offloading injured crew members—for example, reasons related to the loading or unloading of any cargo. Appendix III describes information that we were able to obtain regarding the quantities of herbicides known to have been shipped to Southeast Asia on the four vessels that we identified as having stopped at Guam (either on the way to or from Vietnam) between February 1968 and May 1970. As noted earlier, based on our review of available shipment documentation, we were able to identify approximately 87 percent of the shipments of Agent Orange to Southeast Asia, and to obtain logbooks for about 96 percent of the vessels known to have transported Agent Orange from U.S. ports to Vietnam. Because we were unable to obtain logbooks for every shipment of Agent Orange, we cannot conclude with certainty whether any ships other than the SS Gulf Shipper that were transporting the tactical herbicide to Vietnam, or the three ships returning to the United States from Vietnam—the SS Aimee Lykes, the SS Buckeye Atlantic, and the SS Overseas Suzanne—made port calls either at Guam or the Northern Mariana Islands. Additionally, we found and U.S Air Force officials agreed that it is unlikely that Agent Orange was shipped by air to or from Guam. The U.S. Air Force transported small quantities of tactical herbicides by air to Vietnam in 1961. However, we did not identify any documentation showing the transport of tactical herbicides by air to Vietnam after 1961. During our visit, officials at Andersen Air Force Base stated that it would have been possible to fly 55-gallon drums from Guam to supply operations in Vietnam, but that such an action would have been an inefficient method of transporting large quantities of herbicides. Agent Orange weighed approximately 600 pounds per drum, or about 11 pounds per gallon, a weight that, according to a 1966 memorandum from the Military Assistance Command, Vietnam, would have precluded large- scale transport of the herbicide by aircraft. Available records show that DOD stored and used commercial herbicides on Guam, possibly including those containing n-butyl 2,4,5-T, during the 1960s and 1970s, but documents do not indicate the use of tactical herbicides on Guam. Commercial herbicides were available through the federal supply system for use on U.S. military installations worldwide. For example, the fuel supply for Andersen Air Force Base was delivered by ship to the port at Naval Base Guam and was then delivered to the Air Force base by a cross-island fuel pipeline—see figure 11. A detailed 1968 report by the Naval Supply Depot states that the Public Works Center sprayed herbicides semi-annually to control the vegetation along fuel pipelines between the depot and Andersen Air Force Base. Additionally, draft environmental assessments written in 1999 and 2009 by Naval Facilities Engineering Command, Pacific, indicate that commercial herbicides containing 2,4-D were present on Guam, and that commercial herbicides containing 2,4,5-T, which included the contaminant 2,3,7,8-TCDD, had been used for weed control along power lines and substations through 1980. Further, a 1969 master storage plan for the Naval Supply Depot includes sketches of storage facilities that specify the location of weed killers. Commercial herbicides approved for DOD procurement for use on installations were issued in 55-gallon drums and 5-gallon containers during the Vietnam War era, as were a range of other products, such as fuel oil and diesel. According to DOD officials, records for such purchases were not typically retained due to short record retention policies related to such routine supply transactions. During the course of our review, we received photographs and written statements from veterans alleging the presence of Agent Orange on Guam. However, based on our discussion sessions with veterans and civilians and our review of this documentation, we could not substantiate the presence or use of Agent Orange or other tactical herbicides on Guam. We asked veterans in our six discussion sessions about their potential for exposure to Agent Orange and where, if, and how they believe they were exposed. In their responses, some veterans in each of the six discussion sessions stated that they believe they were exposed to Agent Orange while deployed in Vietnam or other areas where a presumption of service for benefits has already been granted, while some veterans in three of the six discussion sessions stated that they believe they were exposed to Agent Orange while stationed on Guam. Specifically, some veterans in our discussion sessions described using herbicides or witnessing the spraying of herbicides at locations on Andersen Air Force Base and along the pipeline, as well as the burning of contaminated fuel as part of firefighting training on the installation. As we previously stated, according to DOD officials and archived military specifications, tactical herbicides were not authorized or available for use on lands owned by, or otherwise managed as military installations. However, commercial herbicides were widely available worldwide for use in vegetation management at military installations, to include controlling vegetation adjacent to flightlines or along perimeter fencing. Selected Comments by Veterans at Discussion Sessions Moderated by GAO Regarding Where They Believe They Were Exposed to Agent Orange or Its Components I feel like I was exposed on Guam. I was temporary duty there during the conflict and my duties were as a squadron controller that worked the schedules for the B-52 Bombers on Guam. I did venture into the loading area because I was with the aircrew on the Navy field at Andersen Air Force Base. I thought I was in contact with Agent Orange in Guam loading bombs in sites. We would move from one site to another and they would spray those areas before we got there. I never saw spraying but could smell it. One time I was near that and I broke out in boils and blisters on my face and arms. I was a fuel specialist I witnessed spraying going on at the barracks at Marbo Annex, 2 to 3 miles off the main Air Force base. It was sprayed all around the barracks. As my job, I worked at POL —where they stored all of the 55-gallon drums—fuels, pesticides, herbicides—in bulk storage. Those were constantly sprayed around—for maintenance and fire safety. Also, I would work on the flightline and at the pump houses—these were about 20 yards from the security fence. As I was working there, I witnessed spraying. DOD’s official compilation of herbicide testing and storage locations outside of Vietnam, which is posted on the VA’s website, is inaccurate and incomplete, and DOD does not have a process for managing the list. Further, while DOD and VA each have methods for communicating information to veterans and the public about Agent Orange, they do not have a formal process for communicating the most accurate available information to veterans about potential locations where they could have been exposed to Agent Orange or other tactical herbicides. DOD developed a list that identifies locations and dates where herbicides, including Agent Orange, are thought to have been tested and stored outside of Vietnam, which VA has made publicly available on its website, but this list is neither accurate nor complete. DOD’s list includes information on testing and storage locations, applicable dates, the herbicide or herbicide components tested, a description of the project, and DOD’s involvement. See appendix IV for the list that was posted on the VA website as of September 2018. When we began this review, DOD and VA officials were unable to identify the origin of the DOD list that is posted on the VA website, which does not have a date. A DOD official subsequently informed us that the list was initially created in 2003 by an individual in the Office of the Secretary of Defense in response to a congressional inquiry about the use of Vietnam-era herbicides at specific locations in the United States and overseas. DOD subsequently provided this list to VA, which in turn posted the information on its website. VA’s Claims Adjudication Procedures Manual related to Agent Orange directs VA officials to review the DOD list to determine whether herbicides were used as claimed as part of verifying potential herbicide exposure when a veteran alleges exposure at locations other than the Republic of Vietnam, the Korean demilitarized zone, or Thailand. However, in our review of several sources provided by DOD and VA officials, we identified multiple examples of inaccurate and incomplete information in DOD’s list, to include the following: Omission of specific testing and storage locations: We identified additional testing and storage locations in the United States and its territories that were not included on DOD’s list. For instance, we identified additional testing locations at Belle Glade, Florida, and Stuttgart, Arkansas, where researchers reported small-plot field tests of the components of Agent Orange on rice. In addition, we found examples of shipments of herbicides to Kelly Air Force Base, Texas, where Agent Orange components were stored following the cancellation of tactical herbicide contracts. None of these locations are included on DOD’s list. Lack of clarity in descriptive information: DOD’s list lacks clarity in descriptive information, making it difficult to identify which specific herbicides or components were tested and stored, as well as when and where. For example, the size and scope of some testing activities are unclear from the descriptions provided in DOD’s list, making it difficult to differentiate between small-scale and large-scale testing. Some testing events on DOD’s list are described in detail, including the amount of herbicide or components tested, while descriptions of other testing activities contain little information about what took place. Furthermore, we could not identify the chemical components of some of the agents on DOD’s list. We asked DOD and VA officials to identify those specific agents for us, and they were unable to do so. Specifically, neither DOD nor VA officials could identify the chemical composition of 26 different agents on the DOD list, making it difficult to determine whether these agents should be included on the list. Omission of additional time periods for identified locations: We identified additional testing events of Agent Orange or its components at locations that are on the DOD list but that cover additional time periods not reflected on the list. For instance, the DOD list identified testing that took place at Aberdeen Proving Grounds, Maryland, in July 1969. However, our review uncovered additional testing events that took place at Aberdeen Proving Grounds in 1963, 1965, and 1966. In addition to the lack of clarity and omissions that we identified, reports commissioned by DOD and VA since 2003 have also identified omissions in the list. For example, a report prepared for DOD in 2006 identified 40 different locations where Agent Orange was tested or stored outside of Vietnam. However, during our review, we found several examples of locations in the United States and its territories that were included in that 2006 report but are not included on the DOD list that is currently posted on the VA website. These include locations in Arkansas, California, New Jersey, New York, Maryland, Ohio, Oregon, Puerto Rico, Texas, and Utah. Similarly, a report prepared for VA in May 2013 described locations where Agent Orange exposure to Vietnam-era veterans has been alleged. This report summarized additional sites where veterans alleged Agent Orange was used, stored, or destroyed. It also included an assessment of the DOD information posted on the VA’s website—and indicated, notably, that information had not changed since the 2006 report to DOD. In the assessment, the report identified that the list contained many errors of dates, chemicals, locations, and the governmental agencies or institutions responsible for conducting the tests or military operations. The report suggested specific criteria for validating the presence of a tactical herbicide at a site, including evidence that a veteran actually came into contact with a tactical herbicide at that site. Even though they have received reports dating back more than a decade that identified issues with the accuracy and completeness of the list, neither DOD nor VA has taken steps to validate or correct the list, or to develop the criteria they would use to determine which locations and dates to include on the list. As previously stated, this list is posted on the VA’s Agent Orange website as a primary source for veterans seeking information on Agent Orange. Despite its inconsistencies, the list can be accessed from multiple places on the VA website, and we found that some veterans service organizations and other groups also post this incomplete and inaccurate list of testing and storage sites on their websites, as well as communicate this information to their members. Standards for Internal Control in the Federal Government state that agencies should use quality information to achieve their objectives. We found and DOD officials agreed that DOD’s list was not as accurate or complete as available records would allow because (1) there are not clearly identified responsibilities for validating the information on this list, (2) there is no process for updating the list as needed, and (3) criteria have not been developed and used to determine which locations and dates to include on the list. Until recently, neither DOD nor VA has taken responsibility for ensuring the accuracy and completeness of the list, which is being provided to veterans and the public on the VA website. Federal internal control standards state that management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives. As noted earlier, DOD and VA officials were initially unable to identify the source or date of this list, and neither agency took action to respond to reports about the problems with it. During the course of our review, DOD took some initial steps to begin validating the accuracy and completeness of information on its list by reviewing primary source records for additional locations and events of herbicide testing and storage. However, thus far in its efforts, DOD has not identified responsibilities for completing the validation of the information included on the list, nor has it established a process for updating the list as any new information becomes available. Moreover, it remains unclear whether DOD’s review will cover all locations, including non-DOD sites, where testing and storage of Agent Orange or its components were thought to have occurred, or if it will focus only on U.S. military installations. Private companies, academic institutions, and other federal agencies were involved in the testing of herbicides at some of the non-DOD sites on the list, and, in some of those cases, Army personnel were involved in the testing at the non-DOD locations. For instance, testing was performed by DOD personnel at non- DOD locations in Georgia and Tennessee in the 1960s. Some non-DOD storage locations included various U.S. commercial ports, such as Mobile, Alabama, where Agent Orange was transferred by rail from the manufacturers to be stored until it was loaded onto vessels for shipment to Vietnam. According to a DOD official, DOD’s priority in its review of testing and storage locations is to focus on DOD installations. Although this official told us that the department expects to eventually identify non- DOD locations where the department was involved in herbicide testing and/ or storage through collaboration or funding, the official was not able to provide information on the time frames for conducting this review. Finally, DOD has not established a process for how this list will be updated once it has been validated and revised, when and if new information about Agent Orange testing and storage locations is identified. In our analysis of the DOD list, we were also unable to determine the criteria that DOD initially used to select which locations and time periods to include—particularly given that the testing varied in intensity and duration, and that the likelihood that personnel at a particular location could have been exposed to the herbicides or components was unclear. For example, some tests on the list included small laboratory experiments on a couple of plants using a very small amount of chemical agents, as in bench tests of various compounds at Forts Detrick and Ritchie, Maryland, in the 1950s, while other tests included gallons of Agent Orange or other chemical agent components that were used in field testing trials or to test aerial spraying, as in a defoliation effort in which 13 drums were sprayed by helicopter over an area covering 4 square miles. Similarly, the duration of testing events could have been over a total of 3 days, as with spray testing in Marathon, Florida, or over several months or even years, as with spray testing of several tactical herbicides at Eglin Air Force Base, Florida. Because of the variance in the size and duration of testing events; the specific areas where the testing events took place at the locations; and the number of personnel who actually came into contact with the chemical agents during the testing, the presence of a location on this list does not clearly indicate the likelihood or extent of potential exposure that individuals not involved would have had if they were simply present at the locations on the list at the times indicated. In May 2018, during the course of our review, a DOD official noted that DOD and VA formed a joint Herbicide Orange Working Group to address the issues with the DOD list and identify criteria for including information on this list. This group held its first meeting on May 31, 2018. As of July 2018, a DOD official noted that the group was working to identify appropriate steps to take, but that it was too soon to report specific actions that were being implemented, and that no documentation on the group’s efforts was available. Without assigned responsibility for ensuring an accurate and complete list of locations where Agent Orange or its components were tested and stored; a process for updating the list as needed; and clearly defined and transparent criteria for what to include on this list, DOD will not have reasonable assurance that it has identified the most complete information possible for VA to use when informing veterans and the public of the full extent of locations where Agent Orange exposure could potentially have occurred. As a result, veterans may not have complete information about the risk that they could have been exposed to Agent Orange during their military service, and VA may not have quality information when making important decisions on claims for veterans who may not be eligible for benefits. Both DOD and VA have communicated with veterans in response to inquiries about Agent Orange, but veterans have expressed confusion regarding how to obtain information to determine their potential exposure to Agent Orange. Further adding to this confusion are inconsistencies in the list of testing and storage locations, as discussed above. As the agency responsible for reviewing and validating veterans’ disability compensation claims for possible Agent Orange exposure, VA communicates with veterans largely through the agency’s website, which contains information on Agent Orange regarding related diseases, benefits, exposure locations, and resources. The VA also communicates through other means, including an annual newsletter and forums with veterans service organizations. DOD also receives inquiries from veterans about the potential that they could have been exposed to Agent Orange at DOD installations outside of Vietnam. In addition, DOD receives Freedom of Information Act inquiries and congressional requests for information on where Agent Orange was present. A DOD official stated that while they will respond to veterans’ inquiries, they typically direct veterans with Agent Orange inquiries to VA. In responding to these inquiries, both DOD and VA officials stated that they rely on the expertise of staff at the Armed Forces Pest Management Board to provide details to answer questions related to locations where exposure might have occurred. According to a DOD official, the board received 109 inquiries in 2017 alone. In addition, DOD’s Joint Services Records Research Center provides information to VA regional liaisons electronically in response to their questions about where and when specific units were stationed or on temporary duty. The center extracts operational records from various record repositories and, if the information is available, corroborates the descriptions of incidents described by veterans in their claims. According to DOD officials, unless an herbicide-related incident was documented in some sort of unit record, the center would not have information on where Agent Orange was present. Despite these various approaches for communicating information to veterans and the public, veterans we spoke with expressed confusion as to where to obtain information on their potential exposure to Agent Orange. Specifically, we asked veterans in our six discussion sessions about what they had heard from DOD, VA, or other federal agencies about the potential that they could have been exposed to Agent Orange or its components at locations where Agent Orange was manufactured, transported, stored, used, or destroyed. Veterans in each of the six sessions stated that, generally, the federal government has not reached out to them regarding Agent Orange, but that they instead have relied on their own research to learn more about their potential for having been exposed, adding to the confusion about where to obtain information on Agent Orange exposure. Other veterans, however, stated that they have received information from VA regarding potential exposure. DOD officials acknowledged that there is confusion among veterans about a variety of issues related to their potential for exposure to Agent Orange, including where to go for information. U.S. EPA and DOD officials stated that veterans are contacting multiple agencies to get information on herbicide exposure. Selected Comments by Veterans at Discussion Sessions Moderated by GAO Regarding What They Had Heard from the Federal Government about Negative Health Effects Associated with Exposure to Herbicides, Including Agent Orange or Its Components I’ve heard things from multiple sources—media, newspaper, television, people themselves. It has mainly been from my own research, not from a federal agency. Just based on the fact that I have heart disease and going through the VA process means I receive updates from VA on just about everything going on, including Agent Orange and all of the research they have done. I do know the Secretary is authorized by law from Congress late last year to add additional presumptive diseases associated with Agent Orange and how one would contract that. I had to do the research myself. It seems to be a secret with information coming out in spurts. When you have things happen to your body, they [the Department of Veterans Affairs] say it is not service connected. Sometimes when the government tries to explain something, they don’t give the whole thing and they give it piecemeal. It does not carry any essence of importance. I am not hearing anything from the federal government. Most of the information I get is from a USveterans.com website and I subscribe to a daily newsletter from the Vietnam Veterans of America and the Veterans of Foreign Wars. There is information on the VA website about conditions attributed to Agent Orange In that context, I went to the VA website and found that there are 21 states where Agent Orange was used, including on Hawaii in Kauai. It is because of this list that I became aware that people in Hawaii may have been exposed to Agent Orange. I learned that such exposure might increase the likelihood of having diabetes or cancer. I believe the list is still on the VA website and that there is also a list of units that were possibly exposed to Agent Orange. I have not been contacted by any government agency with regard to Agent Orange exposure or ill health. I first heard about Agent Orange and dioxin and cancer related issues/illnesses in late 1980s or early 1990s and later on after doing own research. Standards for Internal Control in the Federal Government state that management should internally and externally communicate the necessary quality information to achieve an entity’s objectives. The standard further states that management should evaluate the entity’s methods of communication so that the organization has the appropriate tools to communicate quality information throughout the entity on a timely basis. Additionally, DOD issued guidance in June 2017 establishing procedures for DOD components to implement when there is a scientifically plausible likelihood of a significant long-term health risk from a past environmental exposure to military personnel or civilians resulting from living or working on military installations. Even though the testing and storage of Agent Orange and its components occurred several decades ago, this instruction states that DOD components should provide targeted and effective health risk communication early and continuously, as new and credible information becomes available. However, DOD and VA officials stated that they have not developed a formal process for coordinating on how best to communicate information to veterans and the public regarding the presence of Agent Orange at locations outside of Vietnam. Officials stated that the DOD-VA Deployment Health Working Group—an existing forum for exchanging information—meets monthly to discuss health issues, including those related to Agent Orange. However, the working group is not focused on ensuring the availability and distribution of information on Agent Orange testing and storage locations. DOD’s and VA’s joint Herbicide Orange Working Group has the potential for being an effective forum for communicating this information; however, a DOD official noted that this is an ad hoc group, and as we discussed earlier, it has not yet determined the direction it will be taking for communicating with veterans regarding exposure to Agent Orange. By coordinating on how best to communicate this information, VA would be better positioned to provide veterans with information regarding their potential exposure to Agent Orange at locations where Agent Orange was known to have been present outside of Vietnam. Testing to determine whether Agent Orange was present in a particular location is challenging because, for example, derivatives of Agent Orange—including the two components of Agent Orange (n-butyl 2,4-D and n-butyl 2,4,5-T) and the contaminant from the 2,4,5-T manufacturing process (2,3,7,8-TCDD)—degrade over time, and because derivatives of 2,4-D and 2,4,5-T can come from multiple sources. Regardless of these challenges, in response to a request by the Government of Guam, DOD developed a testing plan that was reviewed and accepted by U.S. EPA and Guam EPA to conduct a limited investigation into alleged Agent Orange use at three sites on Guam. Testing to identify locations where Agent Orange may have been present is challenging because the components of Agent Orange degrade over time. It has been nearly 50 years since Agent Orange was last transported and used in support of military operations in Vietnam. According to scientific research, it is difficult to find traces of the two components of Agent Orange—n-butyl 2,4-D and n-butyl 2,4,5-T— because, under normal environmental conditions, the n-butyl forms break down rapidly into the acid forms. Scientific research indicates that the half-lives of the acid forms of the chemical components 2,4-D and 2,4,5-T in soil can range from several days to many months, depending on conditions. The World Health Organization has stated that the half-life of 2,4-D in soil is reported to range from 4 to 7 days in most soil types. According to the Centers for Disease Control and Prevention, the half-life of 2,4,5-T in soil varies with conditions, ranging from several weeks to many months. In addition, when Agent Orange is sprayed for defoliation, there are several things that can happen to it. For example, it can be washed out by rain, degrade in the presence of sunlight (photodegradation), or slowly turn into a vapor (volatize) from surfaces such as foliage. These factors reduce the chances of finding traces of Agent Orange components after 50 years. The amount of time it takes for the contaminant 2,3,7,8-TCDD to degrade is longer than that for the components of Agent Orange, although estimates vary. For example, according to the research cited by the Agency for Toxic Substances and Disease Registry, the half-life of 2,3,7,8-TCDD is approximately 9 to 15 years in surface soil and 25 to 100 years in subsurface soil. Further, 2,3,7,8-TCDD breaks down quickly when exposed to sunlight, providing one explanation for the shorter half- life in surface soil. Any 2,3,7,8-TCDD contamination from herbicide spraying—as opposed to being spilled onto the soil—would generally be expected to be found in surface soil, where it would be exposed to degradation due to sunlight. This reduces the likelihood of detecting this compound 50 years later. However, as discussed below, there are multiple sources of dioxins, including 2,3,7,8-TCDD, and the specific source of dioxin contamination is difficult to identify. Testing to identify locations where Agent Orange may have been present is challenging because there are multiple sources of 2,4-D and 2,4,5-T derivatives as well as multiple sources of the contaminant, 2,3,7,8-TCDD. Specifically, many commercial herbicides that were available at the time Agent Orange was used contained derivatives of 2,4-D; 2,4,5-T; or both. Additionally, 2,4-D derivatives are still used in commercial herbicides today. Therefore, even if testing were to show the presence of one of the two components of Agent Orange, it would be difficult to distinguish whether the chemicals were present from the use of commercial herbicides or the use of tactical herbicides. Further, because 2,4-D is still used in many commonly used herbicides sold today, the presence of this component could be due to a recent use of a commercial herbicide rather than a tactical herbicide used decades ago. Moreover, multiple sources of the contaminant 2,3,7,8-TCDD can be found in the environment today. DOD and U.S. EPA officials told us that if 2,3,7,8-TCDD is found in soil today, the source of the dioxin contamination could be a result of other sources besides Agent Orange. For example, according to the World Health Organization, dioxins— including 2,3,7,8-TCDD—are primarily released to the environment with the burning of materials such as wood and waste (see figure 12). In 2017 the Government of Guam coordinated with DOD to test for Agent Orange and other tactical herbicides at Andersen Air Force Base due to claims from veterans that they were exposed to Agent Orange while stationed on Guam during the 1960s and 1970s. In December 2017 DOD developed a draft testing plan in collaboration with U.S. EPA and Guam EPA to test for the acid form of the components 2,4-D and 2,4,5-T at three different sites on Andersen Air Force Base. The draft testing plan did not include testing for the presence of 2,3,7,8-TCDD. According to DOD and U.S. EPA officials, they are not testing for 2,3,7,8-TCDD because the test would not be able to conclusively link any positive results to the use of tactical herbicides, given that dioxins are also produced by, among other things, burning fossil fuels. These officials noted that, over time, large quantities of fuel have been burned at Andersen Air Force Base, and they stated their belief that if 2,3,7,8-TCDD were found, the likely source would be from combustion. The areas identified for testing included the fuel pipeline, a perimeter fenceline, and an area near some fuel storage tanks. See figure 13 for a photograph of the fenceline testing site near the fuel storage tanks on Andersen Air Force Base. Based on our initial review of the draft testing plan and a review of the scientific literature, we identified and discussed with DOD and U.S. EPA officials some challenges the two agencies would face in detecting the presence of Agent Orange on Guam due to two factors: (1) the short amount of time that it takes for 2,4-D and 2,4,5-T to degrade; and (2) the inability of testing to determine whether the presence of 2,4-D and 2,4,5-T is attributable to the use of Agent Orange or to some other source. Degradation of 2,4-D and 2,4,5-T: DOD officials and the jointly developed draft testing plan acknowledged that the planned testing would not be able to confirm the presence of Agent Orange, given that the components degrade over time. The draft testing plan indicates that the maximum half-lives of 2,4-D and 2,4,5-T are 14 days and 24 days, respectively, in soil and groundwater. Even given the possible variation in half-lives discussed above, it is likely that no detectable concentrations remain in soil today, given that the alleged period of use on Guam was in the 1960s and 1970s. Inability to distinguish whether the presence of 2,4-D and 2,4,5-T is attributable to the use of Agent Orange or some other source: Even if the results were to confirm the presence of either 2,4-D or 2,4,5-T in any form, it would be difficult to distinguish the source of the chemical, and whether its presence was attributable to the use of Agent Orange or some other source. For example, 2,4-D is still in use today, and 2,4,5-T was used in both tactical and commercial herbicides during the 1960s. In addition, if the components were found, the interpretation of those results could be complicated by, for example, natural variability in the potential half-lives and the possibility of more recent use of banned products. Further, the testing protocol will convert all forms of 2,4-D and 2,4,5-T, including the ester forms, to the acid forms, further complicating any attempt to identify the source of the compounds. We discussed with cognizant officials the challenges that we identified in the draft testing plan to determine how the information from the testing would be used to inform U.S. EPA, DOD, veterans, and the public about whether Agent Orange was present on Andersen Air Force Base. DOD officials subsequently stated that the questions raised by us and internally within DOD led them to reconsider the approach for testing for Agent Orange on Guam. For example, in December 2017, DOD officials told us that they would begin testing for Agent Orange and other tactical herbicides in March 2018. In late March 2018, a DOD official noted that the department had placed the testing on hold until they were certain that the methodology to be employed would meet scientific rigor and could be replicated in future testing efforts at other locations. In April 2018, DOD officials told us that the contract execution took longer than anticipated, and that soil sample testing would commence that month. In April 2018, DOD provided us with a copy of the final plan that was reviewed and approved by U.S. EPA and Guam EPA and was used to test for Agent Orange and other tactical herbicides at Andersen Air Force Base. When we reviewed the final testing plan and compared it with the draft previously provided, we found that some of the challenges we had initially identified in the draft testing plan, as described above, were still present. For example, based on our review of the final testing plan, with the proposed testing methodology, it would be difficult to determine if 2,4- D and 2,4,5-T came from Agent Orange or another source, and there were inconsistencies in the reported half-lives of the components of Agent Orange. At the same time, both DOD and U.S. EPA officials questioned the ability of any testing for 2,4-D or 2,4,5-T on Andersen Air Force Base to either confirm or deny the presence of Agent Orange on Guam. Specifically, the final testing plan states that more than 50 years have passed since the period of alleged use, and that a lack of detection provides no evidence that herbicides were not used historically. Moreover, U.S. EPA officials noted that the testing on Guam would not provide definitive proof of Agent Orange use on the island. Although DOD officials recognized these challenges and acknowledged the low probability of conclusively identifying the components of Agent Orange, they decided to move forward with testing to address veterans’ and the public’s concerns. In April 2018, samples were collected from the three areas at Andersen Air Force Base, according to DOD officials. Each sample was divided following procedures outlined in the final testing plan, resulting in two identical sample sets. A sample set was sent to two independent laboratories for analysis. According to officials from DOD and U.S. EPA, test results and associated quality control reports from both laboratories agreed on the results from two of the area samples, but did not agree on the third area sample. The jointly developed decision rules for the sampling and analysis plan required the results from both laboratories to agree in order to draw a conclusion on the presence or absence of Agent Orange. As a result, according to the officials, the DOD, U.S. EPA, and Guam EPA project team agreed in July 2018 to resample the one area where the two labs reported differing results. The project team is updating the sampling and analysis plan to address the various possible reasons for the differing laboratory results in order to provide a conclusive final testing result. DOD officials told us they do not anticipate completing the updates for the sampling and analysis plan, field sampling, analysis, and reporting until early 2019. As such, we were not able to comment on the results of the final testing in this report. Moreover, DOD officials said that, provided the final resampling results are negative, DOD does not have plans to conduct additional testing, because the testing was conducted in areas alleged to be the likeliest locations for the application of Agent Orange. However, an official from U.S. EPA said that the challenges associated with testing on Guam are not insurmountable and that the agency would like to continue this investigation. Given that (1) DOD, working with U.S. EPA and Guam EPA, made a decision to test for Agent Orange and other tactical herbicides; (2) DOD, U.S. EPA, and Guam EPA recognize the limitations associated with the testing; (3) the testing and analysis of results are still on-going; and (4) there is currently uncertainty regarding whether any additional testing will take place on Guam, we are not making any recommendations with respect to the testing plan or its execution. DOD suspended the use of Agent Orange in Vietnam in 1970 and incinerated remaining stockpiles at sea in 1977, but concerns about the effects of exposure in U.S. locations have persisted. DOD developed a list that identifies locations and dates where herbicides, including Agent Orange, are thought to have been tested and stored outside of Vietnam, which VA has made publicly available on its website, but this list is neither accurate nor complete. Without assigning responsibilities for verifying the accuracy of the information included on the list; a process for ensuring that the list is updated, as new information is found; and clear and transparent criteria, indicating which locations should be included on the list, DOD and VA will not have assurance that they have the most complete information possible when informing veterans and the public of the full extent of locations where Agent Orange exposure could potentially have occurred. By relying on an inaccurate list, VA may not have quality information when making important decisions on claims for veterans who might or might not be eligible for benefits. Further, while DOD and VA both communicate with veterans in response to their Agent Orange inquiries, the two agencies do not have a formal process for coordinating on how best to communicate this information. Until DOD and VA develop a process for how best to coordinate to ensure that they are communicating information, veterans and the public may not have the information needed regarding their potential exposure to Agent Orange. We are making six recommendations: four to the Secretary of Defense and two to the Secretary of Veterans Affairs. The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment assigns responsibility for ensuring that DOD’s list of locations where Agent Orange or its components were tested and stored is as complete and accurate as available records allow. (Recommendation 1) The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment develops a process for updating the revised list as new information becomes available. (Recommendation 2) The Secretary of Defense, in collaboration with the Secretary of Veterans Affairs, should develop clear and transparent criteria for what constitutes a location that should be included on the list of testing and storage locations. (Recommendation 3) The Secretary of Veterans Affairs, in collaboration with the Secretary of Defense, should develop clear and transparent criteria for what constitutes a location that should be included on the list of testing and storage locations. (Recommendation 4) The Secretary of Defense, in collaboration with the Secretary of Veterans Affairs, should develop a formal process for coordinating on how best to communicate information to veterans and the public regarding where Agent Orange was known to have been present outside of Vietnam. (Recommendation 5) The Secretary of Veterans Affairs, in collaboration with the Secretary of Defense, should develop a formal process for coordinating on how best to communicate information to veterans and the public regarding where Agent Orange was known to have been present outside of Vietnam. (Recommendation 6) We provided a draft of this report for review and comment to DOD, VA, U.S. EPA, the U.S. Department of Agriculture, and the U.S. Department of Health and Human Services. In its written comments, DOD concurred with each of our four recommendations directed to the Secretary of Defense and identified actions it plans to take to implement them. In its written comments, VA concurred with one recommendation directed to the Secretary of VA and described actions it would take to implement the recommendation. VA also non-concurred with one recommendation. In its written comments, the U.S. Department of Agriculture agreed with the report’s findings related to matters under the purview of agricultural research and programs, though we did not make any recommendations to the department. Comments from DOD, VA, and the U.S. Department of Agriculture are reprinted in their entirety in appendixes V through VII. We also received technical comments from DOD, VA, U.S. EPA, and the U.S. Department of Health and Human Services, which we incorporated as appropriate. Based on oral comments we received from DOD, we revised our recommendation regarding the development of clear and transparent criteria for what constitutes a location that should be included on the list of testing and storage locations to clarify that DOD and VA should collaborate on this effort. VA non-concurred with this recommendation, noting that DOD chairs the Herbicide Orange Working Group that will be responsible for developing the criteria (Recommendation 4). However, VA stated that as a member of the working group, it would work collaboratively with DOD as the lead. Doing so would meet the intent of our recommendation. In its overall written comments, VA stated that it was concerned that the report conflates the terms “commercial herbicides” with “tactical herbicides,” which the department noted were distinctive from one another. While VA stated that it does not dispute that some chemicals found in the VA regulation may be included in certain commercial herbicides, VA noted that exposure to tactical herbicides intended for military operations in Vietnam is required for VA to grant disability benefits on a presumptive basis. We recognize that the presumption for service- connection applies to exposure to tactical herbicides and nothing in our report states otherwise. VA also stated in its letter that the focus on commercial herbicides is not relevant for determining the list of locations where tactical herbicides were tested or stored. We agree and as we noted in this report, the U.S. military managed tactical herbicides used during the Vietnam War era differently from commercial herbicides in the federal supply system, which were widely available worldwide for use in vegetation management at military installations. To avoid conflating tactical and commercial herbicides, the report further notes that while some of these commercial herbicides contained 2,4-D; 2,4,5-T; or both, these commercial herbicides were not in the n-butyl form used in Agent Orange. However, commercial herbicides with 2,4,5-T likely contained some level of 2,3,7,8-TCDD. Moreover, we believe it is important to reiterate that numerous commercial herbicides that were being widely used elsewhere for agriculture purposes contained the form of 2,4,5-T found in Agent Orange and thus its associated dioxin contaminant, 2,3,7,8-TCDD. In its overall written comments, VA also recommended that GAO analyze its list to ensure that only locations where the presence of tactical herbicides has been confirmed are included on the list of locations. It is important to note that we do not maintain a list of herbicide testing and storage locations. As we noted in this report, DOD developed a list that identifies locations and dates where herbicides, including Agent Orange and its components, are thought to have been tested and stored outside of Vietnam, which VA has made publicly available on its website. We are sending copies of this report to the appropriate congressional addressees; the Secretaries of Defense, VA, Agriculture, and Health and Human Services; and the Administrator of U.S. EPA. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Brian Lepore at (202) 512-4523 or leporeb@gao.gov or J. Alfredo Gómez at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VIII. House Report 115–200 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision that we review the government’s handling of Agent Orange on Guam. In response to both this provision and a separate request letter, this report examines (1) the extent to which the federal government has information about the procurement, distribution, use, and disposition of Agent Orange or its components at locations in the United States and its territories, including Guam; (2) the extent to which the Department of Defense (DOD) and the Department of Veterans Affairs (VA) have complete and accurate information about where Agent Orange and its components were tested and stored and communicated this information to veterans and the public; and (3) challenges associated with testing for Agent Orange. For objective one, we collected and reviewed available agency records and shipping documents on Agent Orange from the following sources: the U.S. National Archives and Records Administration; the U.S. National Agricultural Library; the U.S. Air Force Historical Research Agency at Maxwell Air Force Base, Alabama; staff historians at the Air Force Materiel Command at Wright- Patterson Air Force Base, Ohio, and Pacific Air Forces at Joint Base Pearl Harbor–Hickam, Hawaii; the Armed Forces Pest Management Board in Silver Spring, Maryland; the Defense Logistics Agency; the U.S. Army Corps of Engineers; and the Naval History and Heritage Command. The records we researched and collected include published and unpublished materials on the procurement, shipment, and disposition of Agent Orange, including U.S. military correspondence, logistics reports, and Navy and merchant vessel logbooks. We reviewed DOD documents related to Agent Orange contracts to determine the total quantity of Agent Orange that was produced by the nine manufacturers. To show how much Agent Orange was used in Vietnam, we used estimates from the National Academy of Sciences analysis of Operation Ranch Hand data. Details about the estimated quantity of Agent Orange that was destroyed in 1977 are available in public reports from DOD and the U.S. Environmental Protection Agency (U.S. EPA). We used a variety of archival sources to identify the shipping routes for Agent Orange, to include a database prepared for VA that lists records held in National Archives and Records Administration Record Group 341, which contains more than 200 boxes of unclassified records relating to tactical herbicides used in Vietnam. During our review of this record group, we identified and summarized the correspondence between and reports submitted by the U.S. military commands that managed the tactical herbicides, to identify details of tactical herbicide shipments and, to the extent that the data were available, to develop a consolidated list of shipments of Agent Orange, including vessel names, ports of embarkation and debarkation, time frames, and quantities. In some cases, individual source documents did not identify which specific tactical herbicides were being shipped. To the extent we were able, we used multiple sources to identify which shipments carried Agent Orange. For the purposes of this report, we refer to these records collectively as shipment documentation. Using this shipment documentation, we located and obtained from several regional facilities of the National Archives and Records Administration logbooks for the vessels that we had identified as having shipped Agent Orange—hereinafter referred to as logbooks—which accounted for approximately 83 percent of the shipments we found. Logbooks that were submitted to port authorities upon the vessels’ returns to the United States were consolidated at National Archives and Records Administration facilities including Fort Worth, Texas; Seattle, Washington; San Francisco and Riverside, California; New York, New York; Philadelphia, Pennsylvania; Boston, Massachusetts; Chicago, Illinois; and Atlanta, Georgia, as well as at Archives I in Washington, D.C., and Archives II in College Park, Maryland. These logbooks recorded basic details about each ship’s operation and route, which we analyzed to identify any shipments that stopped at locations in the United States or its territories before arriving in Vietnam. Because none of the logbooks we reviewed provided detail about the specific types of cargo that were loaded onto or unloaded from the vessels, we relied on available military correspondence and reports about those vessels to identify whether the ships carried Agent Orange. We attempted to locate the remaining 17 percent of the logbooks, or 27 shipments. Of those shipments, 3 were by foreign-flagged merchant vessels, which did not submit logbooks to U.S. ports. Working with officials from the U.S. Coast Guard, the agency that oversees the retention and archiving of logbooks, we coordinated with archivists at the Federal Records Centers to determine whether there were any unprocessed boxes of logbooks that had not yet been archived. When that effort did not turn up additional logbooks, we worked with archivists at Archives I to obtain copies of shipping articles—the articles of agreement between the captain of a ship and the seamen with respect to wages, length of time for which they are shipped, and related matters—for the remaining 24 shipments. While these documents focus on employment issues, the annotations include the locations where different personnel actions took place. We reviewed these documents to identify the locations and approximate dates of the ports of call during those voyages. We were able to obtain the shipping articles for the 24 remaining voyages, as well as for the one vessel that stopped in Guam on the way to Vietnam (SS Gulf Shipper) and the three that stopped in Guam on the way back (SS Aimee Lykes, SS Buckeye Atlantic, and SS Overseas Suzanne). Using the information on voyage ending dates and ports that we obtained from the shipping articles, we were able to work with the regional archives to obtain another 21 logbooks, bringing the total number of logbooks obtained to 152, or 96 percent of the shipments we identified. We relied on the shipping article information for the remaining three voyages (excluding the shipments on the three foreign-flagged vessels) to provide some information on the routes taken by those vessels. However, one limitation of relying on shipping articles for port information and dates is that locations are mentioned only if a personnel action—such as an injury, hospitalization, or desertion—took place. If no personnel action took place at a location on a vessel’s route, that port would not be listed in the shipping articles. To obtain specific information about the SS Gulf Shipper voyage that stopped in Guam en route to Vietnam, to include documentation on its cargo and whether or not cargo was loaded or unloaded at the ports on the way to Vietnam, we contacted officials at several agencies. In Guam, we contacted the Customs and Quarantine Service, the University of Guam’s Micronesian Research Center, and officials at Naval Base Guam for information on vessels that stopped in Guam during the Vietnam War era, and any cargo they carried. We also contacted archivists at the Federal Records Center in Seattle, Washington, where the SS Gulf Shipper logbook is archived, and the regional archives in Fort Worth, Texas, for additional information on the vessel itself and guidance on retaining and archiving cargo information. The National Archives had some information on the SS Gulf Shipper, such as sales documents and company correspondence records. However, the National Archives did not have records for the manifest or bills of lading, which may have documented any cargo offloaded from the ship. We contacted U.S. Customs and Border Protection for information on movements of vessels engaged in foreign trade in and out of ports, which is found in customs forms that are required to be archived after 30 years. We were unsuccessful in locating the customs forms for the SS Gulf Shipper’s voyage to Vietnam through Guam; however, an official noted that although these records provide manifest numbers and ports of sailing, the manifests themselves are not archived. An online search on the SS Gulf Shipper through the U.S. Maritime Administration’s website identified the transfer of vessel ownership over the years. We contacted the latest company that owned the vessel to see whether the company had retained any cargo manifests or other historical records as the ownership changed hands. However, we could not obtain this information because, according to a company official we contacted, the vessel’s records, along with other historical documents, were stored in an off-site storage facility in New Jersey, and were subsequently destroyed in a fire in 1996. We also looked at articles from Guam newspapers and news sources such as the Military Sea Transportation Service Vietnam Chronicles for any information about vessel comings and goings in Guam in early 1968 to see if they mentioned the SS Gulf Shipper or specific cargo being offloaded in Guam. None of these contacts or written sources provided information specific to any cargo that was being moved through Guam, or about this particular vessel. We also obtained original DOD reports and command histories that provided additional operational details about the procurement, distribution, use, and disposition of Agent Orange and its components. According to an Office of History, Air Force Logistics Command, monograph, the command directly responsible for managing Agent Orange was the Directorate of Aerospace Fuels at the San Antonio Air Materiel Area at the former Kelly Air Force Base, Texas, which was a sub-component of the U.S. Air Force Logistics Command during the Vietnam War. The unclassified San Antonio Air Materiel Area command histories for the years 1966 through 1973 include chapters with extensive documentation on “herbicide management.” We obtained copies of command histories from the Air Force Historical Research Agency at Maxwell Air Force Base, Alabama, and the Air Force Materiel Command at Wright-Patterson Air Force Base, Ohio. To obtain information regarding herbicide use on Guam, we obtained command histories for Naval Base Guam and an analysis and summary of the available documentation by the historian at Andersen Air Force Base. We also spoke with Navy and Air Force officials on Hawaii and Guam to identify any relevant records pertaining to such use. In addition, we met with and obtained information from officials representing the Office of the Governor of Guam and senior members and staff from the Guam Legislature. We also met with officials representing a veterans service organization. Finally, as discussed below, we spoke directly with veterans about their recollections of herbicide use on Guam, and any documentation they might have pertaining to such use. For objective two, we analyzed the archival search records provided by DOD to identify additional locations where Agent Orange or its components were tested and stored in the United States and its territories. We reviewed Army archives search reports of herbicide testing at Aberdeen Proving Grounds (including Edgewood Arsenal), Maryland; Dugway Proving Ground, Utah; Fort Chaffee, Arkansas; Fort Gordon, Georgia; Fort Meade, Fort Ritchie, and Fort Detrick, Maryland; and two Air Force studies related to herbicide equipment testing at Eglin Air Force Base, Florida, to determine whether there were additional sites and testing events that were not included on the DOD list found on the VA website. We also reviewed the proceedings of the First, Second, and Third Defoliation Conferences, technical and special reports, and published papers provided by the Armed Forces Pest Management Board to determine whether there were additional sites and testing events that were not included on the list. We compared the information about testing locations and dates on the DOD list found on the VA website with information found in a 2006 report on locations where Agent Orange was tested and stored. To determine the locations where Agent Orange or its components were tested and stored, we attempted to identify the chemical composition of all the agents on DOD’s list found on the VA website. We located information on the chemical composition of agents on the list in archives search reports for Forts Detrick, Meade, and Gordon; a glossary of pesticide chemicals from the Food and Drug Administration; journal articles; and the defoliation conference proceedings. We also interviewed DOD and VA officials about the chemical composition of agents on the list, the origins of the list, how the list is used, and the role of each agency in managing the list. We compared the results with information that DOD and VA provided publicly on testing and storage locations of tactical herbicides in the United States and its territories, and with DOD policies for conducting record research and responding to inquiries related to past environmental exposures. We also compared the accuracy and completeness of the list with Standards for Internal Control in the Federal Government, which state that management should internally and externally communicate the necessary quality information to achieve the entity’s objectives. We also reviewed the extent to which DOD and VA have communicated health information to DOD personnel and veterans. We compared the communication process that both DOD and VA use with DOD’s guidance on assessing long-term health risks, and with VA’s process for determining benefits based on veterans’ claims. We also compared DOD and VA actions with Standards for Internal Control in the Federal Government, which state that management should internally and externally communicate the necessary quality information to achieve the entity’s objectives. The standard further states that management should evaluate the entity’s methods of communication so that the organization has the appropriate tools to communicate quality information throughout the entity on a timely basis. We also reviewed documents from DOD and VA on communication with veterans, including the VA’s website on Agent Orange. Further, we interviewed cognizant agency officials from DOD and VA, including officials from the Armed Forces Pest Management Board and DOD’s Joint Services Records Research Center. For objectives one and two, to better understand veterans’ experiences with Agent Orange and other herbicides and the health effects of exposure to them, we conducted six small discussion sessions with a non-generalizable sample of veterans. Four of the discussion sessions were conducted in person in the following locations: two discussion sessions in Guam, and two discussion sessions in Hawaii. We conducted two additional discussion sessions that were moderated via telephone from Washington, D.C.: one of those had individuals participate both in person and by telephone, while the other was held solely by telephone. We selected Guam because of the provision in House Report 115–200 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 for GAO to review the government’s handling of Agent Orange on Guam. We selected Hawaii because of its strategic location during the Vietnam War and because of the VA presence in the region. A total of 38 individuals attended the sessions, which ranged from 1 to 10 participants per session and lasted approximately 1 to 2 hours. These discussion sessions were consistently moderated by the same team member using a prepared script and documented by several other team members. To select candidates for participating in our discussion sessions, we worked with the Veterans Health Administration as well as veteran clinics and veteran centers at the selected locations to identify non-combat veterans who had served during the Vietnam era. In Guam, we also worked with the Guam Environmental Protection Agency to coordinate a discussion session. Attendees included Vietnam-era veterans who self- reported that they were in active service between 1961 and 1977 in Vietnam, the United States, and its territories, including Guam. As we became aware of other veterans who might be interested in these discussion sessions, including Vietnam combat veterans, we reached out to offer them the opportunity to participate in one of our discussion sessions. Our six discussion sessions included questions to individuals regarding what, if anything, they had heard from DOD, VA, or other federal agencies about links between exposure to herbicides and negative health effects, and whether attendees believed that they had been exposed to Agent Orange or its components at locations where Agent Orange was manufactured, transported, stored, used, or destroyed. We also asked individuals if they believed they had been exposed to Agent Orange in Guam, Vietnam, or another location, and if so, to describe the situation. At the start of the discussion sessions, the moderator told participants that their responses would be kept confidential and that we were not recording their statements. The moderator noted that we would be taking notes to make sure we accurately captured the conversations, but that we would not attribute statements directly to individuals. For those discussion sessions held in person in Guam and Hawaii, we also administered a brief, written questionnaire about individuals’ experiences during the Vietnam era (for example, duty locations, military occupation, rank), and what they had heard and experienced related to Agent Orange and other herbicides. Due to logistical obstacles, we were not able to administer the questionnaire to participants in sessions held via telephone. However, the information requested in the questionnaire was also covered in the discussion sessions themselves. Therefore, we did not analyze the information from the completed questionnaires. We also solicited from the veterans any documentation they might have that could support their allegations of the use of Agent Orange on Guam, but we did not receive documentation that corroborated the use of Agent Orange on Guam. In addition, we met with officers from the Vietnam Veterans of America to discuss how, if at all, veterans could have been exposed to Agent Orange beyond serving directly in Vietnam as part of Operation Ranch Hand, and how the organization disseminates information, especially on Agent Orange, to veterans. For objective three, we reviewed scientific literature and agency documents regarding the degradation and sources of the components of Agent Orange and an associated dioxin contaminant, 2,3,7,8-TCDD, as well as other sources of dioxins. This review included documents from the Agency for Toxic Substances and Disease Registry and reports and protocols from U.S. EPA, the World Health Organization, the Centers for Disease Control and Prevention, and the American Industrial Hygiene Association. We also reviewed the draft and final plans for testing for the presence of the acid forms of the components of Agent Orange—2,4-D and 2,4,5-T—on Guam. We compared the information outlined in the testing plan with scientific literature on the environmental fate of the components of Agent Orange and other Agent Orange testing methodologies. We interviewed officials from DOD, U.S. EPA, and Guam EPA about the testing plan for Guam and the science surrounding Agent Orange testing. We also conducted a site visit to Naval Base Guam and Andersen Air Force Base on Guam and interviewed DOD and Government of Guam officials involved in the planning for the testing for Agent Orange on Andersen Air Force Base. We visited the three selected sites where the initial testing took place and took photographs of those sites. We conducted this performance audit from May 2017 through November 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The VA recognizes 14 presumptive diseases associated with exposure to Agent Orange or other herbicides during military service for which veterans and their survivors may be eligible to receive disability compensation benefits. The list of diseases provided by the VA has generally incorporated the findings of reviews performed by the National Academy of Sciences (the Academy). The list includes 5 diseases that have been identified as having sufficient evidence of association and 9 that have been identified as having limited or suggestive evidence of association. In the Academy’s biannual reports, for a disease identified as having sufficient evidence of association, the evidence is sufficient to conclude that there is a positive association—that is, a positive association has been observed between herbicides and the outcome in studies for which chance, bias, and confounding could be ruled out with reasonable confidence. For a disease identified as having limited or suggestive evidence of association, the evidence is suggestive of an association between herbicides and the outcome but is limited, because chance, bias, and confounding could not be ruled out with confidence. Table 1 describes those 14 diseases and the extent of association identified by the Academy. The 2014 Academy biannual report, issued in 2016, listed four more diseases it categorized as having limited or suggestive evidence of association, as described in table 2. VA officials told us that these diseases are not included on the VA’s current list of presumptive diseases associated with exposure to Agent Orange or other herbicides because, as of October 25, 2018, the Secretary of Veterans Affairs had yet to make the determination based on the most recent biannual review (the 2014 report). According to the officials, the Secretary is also considering the inclusion of parkinsonism and Parkinson-like syndromes. Finally, according to the VA website, VA has recognized that certain birth defects among veterans’ children are associated with veterans’ qualifying service in Vietnam or Korea. For example, spina bifida (except spina bifida occulta) is associated with veterans’ exposure to Agent Orange or other herbicides during qualifying service in Vietnam or Korea. The affected child must have been conceived after the veteran entered Vietnam or the Korean demilitarized zone during the qualifying service period, and a child with spina bifida or covered birth defects who is a biological child of a veteran with qualifying service may be eligible for a monetary allowance, health care, and vocational training. The 2014 report moved spina bifida to the lower category of \"inadequate or insufficient evidence to determine an association,\" as studies that have been released since the 1996 update do not support a link between the condition and exposure to herbicides. According to VA officials, VA does not currently plan to change its regulations based on this conclusion. Based on available shipment documentation and logbooks, we identified one vessel—the SS Gulf Shipper—carrying Agents Orange, Blue, and White that stopped at Port Apra (now Apra Harbor) on Guam on its way to Southeast Asia. Additionally, we identified three vessels—the SS Aimee Lykes, the SS Buckeye Atlantic, and the SS Overseas Suzanne—that stopped in Guam on the return routes after having made various port calls in Southeast Asia. For each of these voyages, we obtained shipment documentation that outlined the quantities of herbicides that records indicate had been loaded onto the vessels while at port in the United States, and to the extent available, quantities of herbicides that were discharged in Southeast Asia. We also obtained logbooks that identified the routes the vessels took from U.S. ports to Vietnam and back, and identified any port calls en route. While we are unable to confirm the reliability of the information available in shipment documentation and logbooks, details on the quantities of herbicides that were documented to have been transported on these vessels during their routes are outlined below. SS Gulf Shipper: According to shipment documentation and the vessel’s logbook, the SS Gulf Shipper left the port of Mobile, Alabama, on January 9, 1968, and stopped at Port Apra (now Apra Harbor) on Guam and offloaded a mariner for repatriation to the United States on February 2, 1968. We are unable to state with certainty whether there were reasons why this vessel stopped in Guam beyond what was reported in available shipment documentation and the vessel’s logbook. The logbook further indicates that the SS Gulf Shipper then arrived in Saigon, Vietnam, approximately February 27, 1968, with subsequent stops in Cam Rahn Bay, Vietnam, approximately February 29, 1968, and Nha Trang, Vietnam, approximately March 2, 1968. According to available documentation, there is some discrepancy with regard to the amount of herbicides that records indicate were loaded onto the SS Gulf Shipper when it left the port of Mobile, Alabama. Specifically, shipment documentation indicates that 62,570 gallons of Agent Orange, 31,735 gallons of Agent White, and 4,620 gallons of Agent Blue—a total of 98,925 gallons of herbicides—were loaded onto the SS Gulf Shipper before it departed for Saigon, Vietnam. On the contrary, according to the available shipping documentation, the vessel’s manifest indicates that the vessel was carrying 86,270 gallons of herbicides, but does not break the total down by individual herbicide. The vessel’s manifest further indicates that the SS Gulf Shipper discharged 93,150 gallons of herbicide in Saigon, Vietnam, on March 1, 1968, which does not align with reported dates in the vessel’s logbook. However, we are unable to determine discharge quantities by specific herbicide—for example, the quantities of Agents Orange, Blue, or White discharged—because available documentation states that the breakdown of the herbicides would not be determined until arrival at the depot. Moreover, we are unable to account for the difference between the number of gallons of herbicides reported to have been loaded onto the vessel and the number of gallons reported to have been discharged in Saigon, Vietnam, or potentially any other location. SS Aimee Lykes: According to shipment documentation and the vessel’s logbook, the SS Aimee Lykes left the port of Beaumont, Texas, on October 4, 1969. The vessel arrived in Saigon, Vietnam, approximately November 9, 1969. The vessel made a subsequent stop at Da Nang, Vietnam, approximately November 23, 1969. Following its departure from Vietnam, the SS Aimee Lykes stopped in Apra Harbor on Guam approximately November 30, 1969, and offloaded an injured crew member. However, the logbook does not include Guam on its list of ports of call. Rather, there is a separate entry within the logbook that describes the vessel pulling into Apra Harbor and offloading the injured mariner into a small motorboat so that he could be hospitalized in Guam. Therefore, we cannot confirm whether the vessel docked at Port Apra during this voyage. According to available documentation, the SS Aimee Lykes left the port of Beaumont, Texas, with 880 gallons of Agent Orange on board—documentation does not indicate that there were any amounts of Agents White or Blue on this voyage. Based on the available documentation, we are unable to determine the quantity of Agent Orange that was discharged in Saigon, Vietnam, or potentially any other location. SS Buckeye Atlantic: According to shipment documentation and the vessel’s logbook, the SS Buckeye Atlantic left the port of New Orleans, Louisiana, on October 1, 1969. The vessel arrived in Saigon, Vietnam, approximately November 20, 1969. The vessel made a subsequent stop at Qui Nhon, Vietnam, approximately November 29, 1969. Following its departure from Vietnam, the SS Buckeye Atlantic stopped at various ports in Japan before stopping in Guam approximately December 23, 1969, and offloading two injured crew members, one who returned to duty and another who was repatriated to the United States. While on Guam, the SS Buckeye Atlantic also performed a fire and boat drill on December 26, 1969, before departing. According to available documentation, the SS Buckeye Atlantic left the port of New Orleans, Louisiana, with 17,105 gallons of Agent Orange on board. Based on the available documentation, we are unable to determine the quantity of Agent Orange that was discharged in Saigon, Vietnam, or potentially any other location. SS Overseas Suzanne: According to shipment documentation and the vessel’s logbook, the SS Overseas Suzanne left the port of New Orleans, Louisiana, on February 28, 1970. The vessel arrived in Saigon, Vietnam, approximately April 9, 1970. The vessel made a subsequent stop at Da Nang, Vietnam, approximately April 17, 1970, and at Cam Rahn Bay, Vietnam, approximately April 22, 1970. Following its departure from Vietnam, the SS Overseas Suzanne stopped in Taiwan and Japan before stopping in Guam approximately May 5, 1970, and offloading an injured crew member. The vessel then departed Guam on May 9, 1970. According to available documentation, the SS Overseas Suzanne left the port of New Orleans, Louisiana, with 80,795 gallons of Agent Orange and 48,537 gallons of Agent Blue on board. Based on the available documentation, we are unable to determine the quantity of Agent Orange that was discharged in Saigon, Vietnam, or potentially any other location. In addition to the contacts named above, Kristy Williams and Barbara Patterson (Assistant Directors), Karyn Angulo, Emil Friberg, Ashley Grant, Karen Howard, Kelly Husted, Richard Johnson, Amie Lesser, Keegan Maguigan, Jeff Mayhew, Dennis Mayo, Parke Nicholson, Shahrzad Nikoo, Josie Ostrander, Rebecca Parkhurst, Michael Silver, Anne Stevens, Rachel Stoiko, Roger Stoltz, and Cheryl Weissman made key contributions to this report. Agent Orange: Limited Information Is Available on the Number of Civilians Exposed in Vietnam and Their Workers’ Compensation Claims. GAO-05-371. Washington, D.C.: Apr. 22, 2005. Agent Orange: Persisting Problems with Communication of Ranch Hand Study Data and Results. GAO/T-NSIAD-00-117. Washington, D.C.: Mar. 15, 2000. Agent Orange: Actions Needed to Improve Communications of Air Force Ranch Hand Study Data and Results. GAO/NSIAD-00-31. Washington, D.C.: Dec. 17, 1999. Agent Orange Studies: Poor Contracting Practices at Centers for Disease Control Increased Costs. GAO/GGD-90-122BR. Washington, D.C.: Sept. 28, 1990. Agent Orange: VA Needs To Further Improve Its Examination and Registry Program. GAO/HRD-86-7. Washington, D.C.: Jan. 14, 1986. VA’s Agent Orange Examination Program: Actions Needed To More Effectively Address Veterans’ Health Concerns. GAO/HRD-83-6. Washington, D.C.: Oct. 25, 1982.", "summary": "The tactical herbicide Agent Orange was first produced in 1964, and some 12 million gallons were shipped from U.S. ports to Southeast Asia from 1965 to 1970. DOD suspended its use in 1970 and incinerated remaining stockpiles at sea in 1977. Congress has expressed long-standing interest in the effects of Agent Orange exposure. The House report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review the government's handling of Agent Orange on Guam. This report examines (1) information the federal government has about the procurement, distribution, use, and disposition of Agent Orange; (2) DOD and VA efforts to make information about where Agent Orange and its components were tested and stored available; and (3) challenges associated with Agent Orange testing. GAO reviewed agency policies, documents, and available archival records that GAO identified; interviewed DOD, VA, and other agency officials; and met with a non-generalizable sample of 38 veterans and a veterans service organization. Available shipment documentation indicates that nearly all of the Agent Orange procured was either used in U.S. military operations in Southeast Asia, used for testing, damaged, or destroyed. However, some records are incomplete, such as shipment documentation and logbooks that identify ports where vessels stopped on the way to Southeast Asia. GAO obtained and reviewed shipment documentation for over 12.1 million of the 13.9 million gallons of Agent Orange procured by the Department of Defense (DOD). GAO reviewed logbooks for 96 percent (152 of 158) of those shipments and identified that vessels stopped at various ports on the way to Southeast Asia, including at least one vessel carrying Agent Orange that stopped at Guam. While the logbooks GAO reviewed identify when vessels left various ports as they traveled to and from Vietnam, they do not show whether and how much cargo was loaded or unloaded at those ports. DOD's official list of herbicide testing and storage locations outside of Vietnam that is posted on the Department of Veterans Affairs' (VA) website is inaccurate and incomplete. For example, the list lacks clarity in descriptive information and omits both testing and storage locations and additional time periods covered by testing events. Also, the list has not been updated in over a decade, though DOD and VA have obtained reports on its shortcomings since 2006. Both DOD and VA communicate with veterans in response to inquiries about Agent Orange, but some veterans GAO met with expressed confusion regarding how to obtain information on potential exposure. DOD officials acknowledged this confusion and stated that veterans are contacting multiple agencies to obtain such information. However, DOD and VA have not established a formal process for coordinating on how best to communicate information to veterans and the public regarding the presence of Agent Orange outside of Vietnam. Without a reliable list with complete and accurate information and a formal process for DOD and VA to coordinate on communicating this information, veterans and the public do not have quality information about the full extent of locations where Agent Orange was present and where exposure could potentially have occurred. Challenges exist with testing for Agent Orange today due to degradation of the herbicide's two chemical components and a potential for sources of contamination other than the herbicide. According to scientific research, the half-life (average time for components to decrease by half of the original amount) of Agent Orange's two chemical components—n-butyl 2,4-D and n-butyl 2,4,5-T— in soil can range from several days to many months, depending on conditions. The suggested half-life of the dioxin 2,3,7,8-TCDD—a by-product of the 2,4,5-T manufacturing process—is much longer, but there are multiple sources of dioxins, including the burning of wood and waste. DOD and the U.S. and Guam Environmental Protection Agencies are testing for the acid form of the components of Agent Orange at Andersen Air Force Base on Guam. While acknowledging the low probability of conclusively identifying the components of Agent Orange on Guam, DOD has made a decision to move forward with testing to address veterans' and the public's concerns, and it expects to complete the updates for the sampling and analysis plan, field sampling, analysis, and reporting in early 2019. GAO is making six recommendations, including that DOD develop a process for updating its list of Agent Orange testing and storage locations, and that DOD and VA develop a process for coordinating the communication of information on where Agent Orange was known to have been present. DOD concurred with four recommendations. VA concurred with one recommendation and non-concurred with one recommendation.", "document_type": "gao"}
{"report": "Phased retirement arrangements are programs that allow older workers to reduce their working hours to transition into retirement, rather than stopping working abruptly at a given age. The option to transition into retirement through phased retirement encourages older workers who might otherwise retire immediately to continue working. Delayed retirement may help alleviate pressures on national pension systems and address labor shortages and shortages of skilled workers. Phased retirement programs exist in both the public and private sectors and are used by employers that cover workers through both defined benefit (DB) and defined contribution (DC) retirement plans. The programs sometimes include a partial draw-down of pension benefits for workers while they continue to work and may include a knowledge-transfer component. Phased retirement programs are often called “flexible,” “partial,” or “gradual” retirement programs. Similar to the United States, the retirement systems in other developed countries consist of three main pillars: a national pension, similar to the U.S. Social Security program; workplace employer-sponsored pensions or retirement savings plans; and individual savings. Retirement plans can be broadly classified as DB or DC. A DB plan promises a stream of payments at retirement for the life of the participant, based on a formula that typically takes into account the employee’s salary, years of service, and age at retirement. A DC plan, such as a 401(k) plan in the U.S., allows individuals to accumulate tax-advantaged retirement savings in an individual account based on employee and/or employer contributions, and the investment returns (gains and losses) earned on the account. With DC plans certain risks and responsibilities shift from the plan sponsor (employer) to the plan participant (employee). For example, workers with a DC plan often must decide how much to contribute, how to invest those contributions, and how to spend down the savings in retirement. For DB plans, many of those decisions reside with the employer. Some retirement plans combine features of both DB and DC plans, often referred to as hybrid plans. National pensions: According to literature we reviewed, many countries have created retirement plans for their citizens and residents to provide income when they retire. These plans are typically earnings-based and require employer and employee contributions over a number of years, with pension benefits not accessible before a certain age. National pensions are generally DB plans, similar to the U.S. Social Security program. Employer-sponsored pensions or retirement savings plans: Employer-based pensions or retirement savings plans are set up by employers to help ensure their workers have income during retirement. Employer-sponsored plans often require both the employer and employee to contribute money to a fund during employment so that the employee may receive benefits upon retirement. Employer-sponsored pensions typically refer to DB plans that promise a source of lifetime income at retirement, whereas retirement savings plans are typically DC plans, with retirement benefits that accrue based on contributions and the performance of the investments in the employees’ individual accounts. Over the past several decades, there has been a significant shift in private sector employer-based retirement plans from traditional DB plans to DC plans. In the U.S. this shift has been to 401(k)s as the primary employer-sponsored retirement plans. Individual savings: Individuals can augment their retirement income from the national pension and employer-sponsored plans with their own savings, which would include any home equity, investments, personal retirement savings accounts like Individual Retirement Accounts (IRA) used in the United States, and other non-retirement savings. Population aging, primarily due to declining fertility rates and increasing life expectancy, has raised concerns about the sustainability and adequacy of pensions, especially as many workers continue to exit the labor force before the statutory or full retirement age. Research indicates that while certain countries are aging more rapidly than others, population aging will affect most OECD countries, including the United States, over the coming decades. For example, the share of the population aged 65 and older is projected to increase significantly by 2030 (see fig. 1). According to a 2017 OECD report, since 1970, the average life expectancy at age 60 in OECD countries has risen from 18 years to 23.4 years and, by 2050, it is forecast to increase to 27.9 years. At that time, the average person is expected to live to nearly 90 years old. The increased life expectancy means that workers are spending more years in retirement. In many instances, the aging population is placing additional pressure on public pension systems and has raised concerns about the solvency of national pension systems and the long-term adequacy of benefits. In response, countries have used strategies, including increasing the statutory retirement age of their national pension systems, to reduce that pressure. However, many workers continue to leave the workforce prior to reaching the statutory retirement age, according to OECD data. To address this development, retaining older workers in the labor market has been an objective in many countries. Some researchers have suggested that, in the U.S., economic productivity could decline as baby boomers age and leave the labor force, thus reducing the rate of economic growth. For example, a 2016 study found that a 10 percent increase in the percentage of the population age 60 and older decreases the growth rate of per capita gross domestic product (per capita GDP) by 5.5 percent. According to this study, two-thirds of the reduction is due to slower growth in the labor productivity of workers of all ages while one- third is due to slower labor force growth, suggesting that annual GDP growth in the U.S. could slow by 1.2 percentage points per year this decade, entirely for demographic reasons. Phased retirement has the potential to provide options that would be beneficial both to older workers and the overall economy by extending labor force participation. Among the 44 countries that met our initial criteria as having a national pension system similar to Social Security and an aging population, we identified 17 with some kind of phased retirement program. Based on a review of relevant research, studies, and interviews, we determined that phased retirement programs in these countries were established in several ways: (1) through national policies including legislative actions and specific programs that encourage phased retirement; (2) at the industry or sector-level through collective bargaining agreements that cover specific occupations or sectors; and (3) by individual employers. Table 1 shows the three types of phased retirement arrangements found in the 17 countries we identified. Based on our research, we determined that a national policy on phased retirement may provide a voluntary framework within which employers may participate rather than a requirement that they offer such programs. For example, Canadian officials reported Canada changed regulations that require employers who provide defined benefit pension plans and also offer phased retirement to allow participating workers to receive some partial pension benefits while continuing to accrue pension credits. However, according to the Canadian government, it is ultimately up to individual employers to make phased retirement available for their employees. In many countries, collective bargaining played a key role in the formation of phased retirement programs, particularly at the industry or sector level. Half of the 17 countries have “sectoral” phased or partial retirement arrangements established through collective bargaining agreements that cover a large number of workers from specific industrial sectors or occupations, such as local government workers in Sweden or metal and chemical sector workers in Germany. Such sectoral programs can include public and private employers that provide a program or policy that applies to their workers only. Sometimes, companies with sectoral programs have the flexibility to set their own program requirements, within the broad guidelines of arrangements established through collective bargaining agreements. Phased retirement programs can also be established by individual employers. Employers offering phased retirement are generally larger companies in the private sector with their own pension plans. Our research found examples of phased retirement programs offered by individual employers both within and outside of collective bargaining agreements. The national policies implemented in our four case study countries— Canada, Germany, Sweden, and the U.K.—currently, are mainly designed to encourage older workers to remain in the labor force and continue to earn and contribute to their pensions, and often, share their institutional knowledge with younger workers, according to the officials, experts, and employers we interviewed. For example, according to Canadian government officials, Canada, to retain older workers and meet the financial needs of those workers, amended its income tax regulations in 2007 to allow phased retirement under certain DB pension plans. Additionally, government officials in the U.K. reported that in 2014, the U.K.’s national flexible work policy was expanded to cover older workers who wanted to phase into retirement. They said that this was done, in part, to keep older workers—aged 50 and over—in the labor force. However, the reasons for instituting phased retirement have shifted over time. Based on our research and interviews with foreign officials and other experts, we found that, in some cases, phased retirement was initially used as an incentive for older workers to retire early so employers could hire unemployed younger workers. For example, officials reported that in 1996 at a time of double-digit unemployment (around 10 percent), Germany instituted a national part-time work program, the Altersteilzeitgesetz (ATZ), to encourage older workers to retire. Officials said this phased retirement program originally sought to get older workers out of the labor force and encourage employers to hire unemployed workers and trainees. Today, in response to an aging population, Germany is using phased retirement to encourage older workers to remain in the workforce and ensure knowledge and skills transfer, according to officials we interviewed. In addition, our research found that Sweden offered a national phased retirement program or a “partial pension” scheme from 1976 to 2001, mainly as an option to allow workers to gradually withdraw from work 5 years before the statutory retirement age. According to our research, this program was implemented, in part, to make it the transition from work to retirement more flexible. Swedish officials stated that the country abolished the program in 2001, mainly due to excessive costs, and implemented a new policy in 2010 that permits partial retirement and access to partial pension to encourage workers to stay in the labor force longer. The four case study countries employed various efforts at the national level to encourage phased retirement options that seek to keep older workers in the labor force. From our interviews with government officials, unions, and other experts, we found that all four countries have national policies to help facilitate phased retirement. Examples include national programs that companies and sectors can offer to workers—such as the national program in Germany or the program in Sweden that ended in 2001—as well as implementing policies that seek to incentivize both employers and employees to offer and participate in phased retirement programs. As shown in table 2, the four countries reported having made efforts at the national level to encourage phased retirement, including implementing national policies and programs that involve public subsidies, tax incentives, or changing pension rules to allow individuals to receive partial pension benefits while continuing to accrue benefits in the same pension plan. For additional information on the national efforts made by case study countries, see appendix II. Employers in our case study countries have implemented various phased retirement programs that reflect the employers’ goals for offering phased retirement and the preferences of participating employees. Based on our interviews with officials, employers, and representatives from employer associations and unions in the four selected countries, we found that the programs offered by employers in those countries had similarities and differences in how the programs were established, designed, implemented, and funded. Role of collective bargaining. Based on our research and interviews with experts, we found that most of the phased retirement programs we reviewed in the four case study countries were established as part of collective bargaining agreements between employers and union- represented workers. This was often the case for sectoral programs in either the public or private sectors and for those covering specific occupations. The programs often covered a large number of workers. For example, in Sweden, representatives of an organization for public employers with approximately 1.2 million employees (23 percent of the Swedish workforce) told us that 90 percent of the workers in Sweden were covered by collective agreements, and that they have negotiated collective agreements that included phased retirement for many of their members. In Canada, one expert reported that phased retirement was most common in fields that are highly unionized, because Canadian unions wanted to increase flexibility for members to gradually decrease work, but also receive a pension payment. For example, the expert said that universities were at the forefront of phased retirement implementation and they are highly unionized. While most of the programs we reviewed were based on collective bargaining agreements, we identified a few companies that initiated phased retirement for their workers outside of the collective bargaining process, when the employer determined a need for such a program. For example, one private sector employer in the financial industry we interviewed in the U.K. told us that offering phased retirement options addressed employees’ need for flexibility. This employer commented that if employees are happy, they will stay with the company longer and continue to provide customers with superior service. As another example, a large German employer in the transportation industry offers a phased retirement program for managers who are not covered by a collective bargaining agreement. Defined benefit and defined contribution plans available. Many phased retirement programs we reviewed involve DB pension plans that provide a fixed stream of payments at retirement for the life of the participant. However, we also found some employers that were moving from such plans to DC or hybrid pension plans, and phased retirement is permitted under those plans as well. For example, a private sector employer in the U.K. that sponsors both DB and DC retirement plans, told us that workers in both types can participate in phased retirement and can draw from their employer-sponsored retirement accounts at age 55, although the drawdown rules are different for each type of retirement plan. As another example, the UK’s National Health Service workers are currently covered by two retirement plans, according to pension plan administrators we interviewed. Specifically, a pure DB plan initiated in 2008 is being phased out and replaced by a DB hybrid plan introduced in 2015. Both plans offer flexible retirement options, plan administrators said. Health care coverage. Each of the four countries we reviewed provided universal health care coverage. The broad availability of health care in these countries, allows workers to reduce their work hours or responsibilities without concern for losing health coverage, while not increasing employer costs. This also made it easier for employers in our case study countries to retain phasing part time workers and potentially hire another worker without the additional cost of providing health care to two workers. Program limits. Other similarities found in the phased retirement programs that we reviewed in the four case study countries, include 1) having a maximum age up to which a worker can partially retire— sometimes phased retirement can only be taken previous to the statutory retirement age as set by the country’s national pension system—and 2) limiting phased retirement to specific groups of employees. As examples, one employer in Germany told us that it offers phased retirement only to employees working in “hardship” positions, such as those who work night or rotating shifts, while some employers in Sweden offer phased retirement to workers in particularly skilled occupations where workers cannot be easily replaced, such as certain health professionals, according to representatives from an employer association. Program terms and conditions. Based on our review of program documents and interviews with program administrators, we found that the phased retirement programs we reviewed in the four countries, regardless of type, had basic requirements, such as age of participation, years of service, eligible positions, period of phasing work, and time requirements; however, the specific terms differed from program to program. For example, a sectoral phased retirement program in Sweden allowed workers to apply for phased retirement at age 60, and draw down 50, 80, or 90 percent of their earned employer-sponsored retirement account while phasing. A public sector employee program in the U.K. provided a phased retirement option at age 55, and workers could draw down from 20 to 80 percent of their employer-sponsored pension while reducing their work hours. In contrast, a program in Germany only allowed workers aged 56 and older, with 20 years of service, and who had rigorous work schedules (i.e., night shifts or rotating shifts) to apply for phased retirement. Other aspects, such as the categories of workers eligible to participate, also differ. For example, one higher education employer in Canada only allows faculty and librarians to participate in phased retirement, while another employer in the U.K. allows all employees to apply for phased retirement. Sources of income. Workers participating in phased retirement typically forego some amount of wages as a result of reduced working hours or reduced responsibilities, similar to the wage reduction in full retirement. In the programs we reviewed in our four countries, workers are able to offset foregone wages, at least partially, from multiple sources. According to program administrators and employers we interviewed, these sources include the national pension; employer-sponsored retirement accounts; an employer-provided benefit designated for this purpose; personal savings; or some combination of these sources. For example, German experts told us that, in Germany, workers participating in the national ATZ program can reduce their work hours by 50 percent. Experts told us that employers are required to pay a minimum of 70 percent of full-time wages for phasing employees and pay contributions toward the employee’s pension as though the employee were working 90 percent. Among the employers we interviewed that continue to offer the national ATZ program, the 20 percent topped-off amount was reported as generally financed by the employer. In the U.K., employees participating in a private-sector employer’s phased retirement programs make up for the foregone wages by withdrawing funds from their own employer- sponsored retirement plan. In Canada, one employer offers a lump-sum allowance to employees between 60 and 64 years of age who wished to reduce their hours as part of phased retirement. Participating employees are paid a salary proportional to their reduced hours and can use the lump-sum benefit to supplement their income, but may not exceed their full-time salary. This lump-sum is funded solely by the employer. During the phased retirement period, employees can continue to contribute to their employer-sponsored retirement account as if working full time, and need not withdraw from their pension. In Sweden, one public sector phased retirement arrangement is financed by employers as part of collective bargaining agreements. This program allows workers to work 80 percent of a full- time job and receive 90 percent of a full-time salary. The employers continue to contribute to the employer-sponsored pension as if employees were working full-time. Workers in Sweden can also supplement any reduced income with national pension benefits. Institutional and employer-specific factors in other countries, which shape the design of phased retirement programs, typically differ from the institutional environment experienced by many U.S. private sector employers, although they may be similar to those common in U.S. public sector employment. Some of these institutional factors include the extent to which employers and workers are supported by universal health insurance, whether the programs are structured around employer- sponsored traditional DB plans—particularly for workers who have worked at their firm long enough to qualify for phased retirement—and whether programs are the result of collective bargaining agreements. In many of the selected countries we reviewed, phased retirement programs designed to extend labor force participation are fairly recent. While the rate of employment among older workers in the case study countries and the U.S. increased in recent years, data has not been collected in the case study countries to gauge the effects of phased retirement and participation is low. Experiences of the case study countries suggest that, in implementing such programs at the employer or national level, phased retirement programs may be more effective if carefully designed based on the employer’s specific industry or production characteristics, and with data collected and analyzed to pinpoint the most successful strategies. A Unique Consideration for U.S. Companies Wishing to Offer Phased Retirement: Importance of Employer- Sponsored Benefits Unlike our case study countries, most U.S. workers get their health insurance through their employer, which can be a costly benefit to provide. Employers with 50 or more employees must provide coverage or pay a fee; however, the requirement does not apply to those working less than 30 hours per week, on average. In June 2017, we found that employers offering phased retirement programs must decide if they will include participants in their health care coverage and that all eight of the employers with phased retirement programs with whom we spoke had extended their employer-sponsored insurance to program participants. In addition, the benefit payments provided under U.S. Social Security may not be as high as the national retirement benefits in some of our case study countries and many U.S. workers rely on employer-based retirement benefits and personal savings for a secure retirement. Strategies such as allowing continued contributions during phased retirement and supplementing phased retirement income through partial retirement payouts or other sources may be helpful for worker satisfaction in phased retirement programs. more common in the U.S. than in most of our case study countries. (see sidebar) However, we found examples of phased retirement programs offered to workers covered under DC pension plans that are not collectively bargained in our case study countries. Some of the employers with DC pensions that we learned about were transitioning from traditional DB plans to DC plans. In these instances, newer workers are usually enrolled in the DC plan and, because the shift is recent, many of the workers covered under DC plans may not be old enough or have sufficient years of service to qualify for phased retirement, where such characteristics are criteria for participation. For example, a privately-run transportation company in Germany reported offering phased retirement programs that reduce working hours by about 20 percent, to workers who meet certain criteria. Workers hired after 1995 and workers from the former East Germany are covered under a DC plan and may qualify for the phased retirement program. These examples indicate that private sector employers in the U.S., where workers are increasingly covered by DC plans rather than DB plans and generally not covered by collective bargaining agreements, may also be able to implement and benefit from phased retirement programs. Most of the programs we reviewed are relatively recent and have reported small numbers of participants. Although OECD’s data show that employment of 55- to 64-year-olds increased between 2006 and 2016 in Germany, Sweden, and the U.K., it is not clear what role phased retirement has played in that growth. (see fig. 2) Governments, employers, and unions have not systematically collected data to understand the effect of the program on choices older workers make regarding when to retire or the effects of phased retirement on employers, workers, or national workforce participation. Some employers we spoke with provided information on the number of workers who had used or were currently using the programs, but there is not enough data to draw conclusions, possibly because the programs are relatively new. As previously mentioned, the goal for some phased retirement programs has shifted and although employers and national governments now have greater incentives to retain older workers, the design of some phased retirement programs may encourage workers to use the program to leave the workforce earlier than they might in its absence. For example, experts at a high-skill employer in Canada said that they believed that the program may have incentivized older workers to reduce their hours when in the absence of the program they may have worked full time. Employers, workers, and countries may have competing needs and goals in phased retirement programs, which must be considered in designing programs. Specifically, these groups may differ in their preferences in the areas of who may participate, the primary goals for the program, and how the program will be financed. In previous work, we found that some U.S. employers are reluctant to offer phased retirement programs because they believe there is not sufficient interest among employees and that employers in industries with technical and professional workforces were more likely to provide formal and informal phased retirement programs. Challenges identified by the programs in our case study countries can provide helpful insights into areas of concern in designing phased retirement programs in the U.S. A Unique Consideration for U.S. Companies Wishing to Offer Phased Retirement: Nondiscrimination Laws In June 2017, we found that U.S. industries with skilled workers or with labor shortages also have motivation to offer phased retirement programs, in part because their workers are hard to replace. However, U.S. companies must comply with laws intended to protect workers from discrimination. Experts and employers said programs that target highly skilled workers, who are often highly paid, could violate nondiscrimination rules, which generally prohibit qualified pension plans from favoring highly compensated employees. One study we reviewed for that work noted that regulatory complexities and ambiguities involving federal tax and age discrimination laws impact an organization’s ability to offer a phased retirement program. Program scope: Certain experts noted that, particularly in the context of collective bargaining, workers typically want phased retirement programs to be broadly available; in contrast, certain employers may want narrowly scoped programs that are targeted to certain high-skilled or scarce workers. Phased retirement is also used by certain employers to target key employees with rare or sought after knowledge, skills, and experience and provide opportunities for knowledge transfer prior to retirement. Representatives from two German companies with high-tech or high- skilled workforces noted that phased retirement was important to retain workers with experience and knowledge. Employers also reported setting criteria that limit the program to individuals with a specific length of service with the employer, with physically difficult jobs, or with challenging schedules, which may help employers to target the program to certain workers. We reported in June 2017, that U.S. employers noted that targeting specific workers might pose a challenge because of laws that prohibit special treatment of selected workers for certain U.S. pension plans. (see sidebar) The differences in the desired scope of phased retirement programs could potentially be resolved. For example, some experts we interviewed reported that employers may have caps which limit participation, such as limiting participation to a specific percentage of employees who are age eligible. A union representative in Germany noted that employers there may set restrictions or caps on participation, such as 3 percent of the workforce, or an employer may effectively cap the extent of participation by restricting the program to a budgeted amount of funds. Employers in the U.S. could explore whether using a similar approach regarding the scope of a phased retirement program, taking into consideration any legal concerns or other practical challenges, could help them to control the number of workers participating in phased retirement programs. Knowledge sharing/succession planning: A representative at a German employer noted that the employer has integrated a knowledge sharing component to its program so that workers are able to train younger workers and share their expertise. Retaining older workers may have an added benefit—according to a U.K. public plan administrator, their phased retirement program also brought more age diversity to the workforce. One expert said that phased retirement has the additional benefit of helping with succession planning since management has more information about the retirement decisions of those participating in the program. An official from a Canadian university stated that the university’s phased retirement program, which includes a specified timeframe of 3 years, helps with planning because they know exactly when the worker will leave their job and can begin the sometimes lengthy process of recruiting replacement faculty. In our previous report, we noted that five of the nine employers we interviewed said that knowing when workers will retire allows employers to plan for the future. Work life balance/program complexity. Union representatives in our case study countries described several benefits that phased retirement provides to workers. For example, one said that phased retirement provides more choice for workers, another noted that phased retirement allows workers to continue to work at reduced hours until they reach the statutory age to receive a national pension, and a third mentioned that such programs reduce the burden for workers who cannot or do not want to work full time. Similarly, other experts we interviewed said that phased retirement’s part time work schedule provides workers the opportunity to continue working when they might otherwise retire. The experts each cited specific reasons workers might retire, including health concerns, the physical demands of their work, or the responsibility of caring for a loved one. U.K government officials stated that phased retirement for older workers in their country originated from a 2002 policy to facilitate flexible work for caregivers of dependent adults and young and disabled children. According to the U.K.’s government website, flexible work can be part time, job sharing, annualized hours, or telework, among others. It also states, that employers can decline a request for flexible employment if they can demonstrate that granting such a request can have a detrimental effect on the firm, but, according to a 2013 U.K. government survey, 97 percent of employers offer some kind of flexible work. Experts in several of our case study countries noted that the rate of participation in phased retirement programs is low, which each attributed to different factors, including that workers may have insufficient knowledge or understanding of the programs; employers may have restrictions on program participation, such as eligibility requirements or caps on participation; or there may be insufficient interest or incentives for workers. For example, a German academic noted that his country’s Teilrente program, which combines partial national pension benefits and reduced work hours for workers age 63 and older, is confusing and has not been well-marketed, leading to low uptake. In our previous report, we noted that according to 2014 Health and Retirement Study data, an estimated 29 percent of 61- to 66-year-olds in the U.S. plan to reduce their work hours: however only an estimated 11 percent actually did gradually reduce their hours. Extending labor force participation: Countries may want to encourage older workers to delay retirement to increase labor force participation, broadly or in certain sectors, especially in times of low unemployment. In the past, phased retirement in some nations had been used as a tool to downsize workforces and encourage workers to retire early. However, the rising costs of national pensions and an aging workforce have now encouraged nations to view phased retirement as a tool or mechanism to extend labor force participation. Indeed, according to the European Commission, increased labor force participation of older workers is a goal of the Eurozone. According to an academic expert we interviewed, increasing the use of phased retirement is not a specific strategy to achieve that goal, some countries are now using such programs to help achieve it. For example, a Swedish official commented that the availability of phased retirement can help older workers stay in the workforce longer. In addition, an association of employers in Germany stated that raising the age of eligibility for national pension benefits and eliminating incentives for early retirement was likely to induce older workers to work longer. Delayed retirement also gives workers longer working lives and earning potential, which may help make pension systems sustainable. A German academic noted that continued work keeps older individuals out of poverty and increasing retiree income could reduce their reliance on national “safety net” benefits. He said that retired people are interested in Germany’s program allowing work after retirement age because they may have insufficient savings and “mini jobs” provide opportunities for earning more. Certain sectors of national economies may particularly benefit from extending workers’ time in the workforce. For example, an expert at a U.K. consulting firm noted that, due to Britain’s expected departure from European Union membership the country may face labor shortages in certain sectors, such as health care and hospitality, because of the loss of foreign workers. He also suggested that flexible work arrangements may help to avoid potential shortages by retaining older workers who are citizens in those sectors. We also found, in our previous report, that phased retirement could also benefit the U.S. economy in helping to extend participation in the workforce. A Unique Consideration for U.S. Companies Wishing to Offer Phased Retirement: In-service Distributions and ERISA Requirements Related to Plan Design We previously reported that defined benefit (DB) plans may provide in-service distributions, which would allow phased retirement participants to draw a portion of their retirement benefit during their participation in phased retirement, to workers aged 62 and older. Defined contribution (DC) plan participants generally may not receive distributions from a DC plan until they reach age 59 ½ and distributions before that age may be subject to an additional tax. Our previous work also found that in-service distributions may be important to supplement salaries for participants in phased retirement. An expert we spoke to stated that the Employee Retirement Income Security Act of 1974 (ERISA) requirements pertaining to plan design reduce plan flexibility since changes to plan structure to allow for phased retirement have to be honored even if the economy changes and employers want to shed rather than retain older workers. He stated that this requirement reduces the appeal of phased retirement for employers sponsoring DB plans. Program design. Experts in certain case study countries reported that employers must design their programs carefully to ensure that they meet sometimes complex statutory requirements and to ensure that workers are eligible for and benefit from phased retirement. However, some also mentioned that designing a program that incentivizes continued work and avoids penalties for workers can be a challenge. For example, an expert we interviewed stated that, in Germany, early retirees can receive their full pension benefit after 45 years of work, but they are subject to salary caps until they reach the full retirement age, which may be a disincentive to combining continued work with a pension draw down. Conversely, there is an incentive for continued work in Germany without claiming a pension since, should the worker continue to work, contribute to the public pension, and delay claiming, their benefit increases by 0.5 percent for each additional month worked. In our previous report, U.S. employers also cited concerns in designing programs to meet statutory requirements. (See sidebar). According to a Eurofound report, the flexibility of phased retirement can come with administrative costs, particularly if frequent changes are allowed. For example, a Canadian employer noted that managing a workforce of part-time employees was a challenge because it was unfamiliar. They also said that, in some circumstances, their program allowed participants to renege on their retirement date and that it was administratively cumbersome. We also reported in our previous work that employers using phased retirement in the U.S. had experienced administrative concerns that included challenges with part-time workforces. Potential costs of phased retirement programs. Several of the experts we spoke with said that making programs sufficiently financially beneficial to encourage worker participation can be costly. In addition, some employers reported that, where available, tax incentives, government subsidies, or financing salary supplements directly from the workers’ retirement benefits were used, which may have helped to minimize their costs in providing the programs. In contrast, some government experts from the case study countries noted in interviews that certain government supports had been cut, suggesting that those governments prefer employers to finance more of the benefit. Other experts we spoke to explained that some employers in our case study countries paid for most of the cost of the programs themselves, although, some employers also benefit from tax incentives. For example, according to experts, the current provisions of the German ATZ program’s required that employers provide salary supplements of at least 20 percent of full-time wages above the pay for partial (50 percent) employment. According to an OECD report, initially, the supplement was paid through government subsidies to employers but now, if employers wish to retain the program, they must pay the salary supplement themselves, adding additional costs to employers. German government officials noted that the salary supplement paid during phased retirement is tax-advantaged. Such incentives might also encourage employers in the U.S. to offer phased retirement programs. Potential reductions in future benefits: Some experts noted that certain phased retirement programs allow workers to reduce their hours without a proportional reduction in wages or benefits when they enter full retirement. It may also provide more options in how to draw down benefits. However, some programs we reviewed also include pay that is less than what is received during full employment and may involve reduced benefits after retirement, which is a factor for workers considering participation. For example, German experts explained that ATZ requires a salary supplement of at least 20 percent of salary, effectively resulting in workers receiving 70 percent of their wage for 50 percent of hours worked. In our previous report, we noted that according to 2014 HRS data, an estimated 22 percent of U.S. workers aged 61- to 66-years surveyed would be interested in reducing their hours even if it meant their pay would be reduced proportionally. We also found in our previous report that low savings and concerns about eligibility for health benefits may create barriers that affect workers’ ability or interest in participating in phased retirement programs. Even when they receive employer-provided subsidies, as in Germany, workers’ salaries in phased retirement programs are less than under what is earned for full-time work. A recent OECD report noted that removing obstacles, such as limits on earnings while working and receiving pension payouts and limits on the accumulation of benefits, is important to make combining work and pensions more attractive. A Canadian employer had similar concerns and noted that workers may be reluctant to reduce their hours without having some way to supplement their income, for example through a partial draw down on their retirement savings or private or public pension. In some cases, workers may work and draw a benefit from their national or employer-sponsored pension plan. Some experts reported that certain programs allow workers to continue to contribute to their pension plans or earn pension credits. Union representatives in the U.K. and Germany noted the importance of workers remaining in the labor force longer for the purpose of increasing their income after full retirement. For example, according to a U.K. government website, the U.K. has no mandatory retirement age for the national pension system and allows individuals who have reached the retirement age to work and draw a benefit. According to a U.K. government website, if a worker continues to work after the full retirement age and delays their claim for the national pension benefit, their weekly payments could be larger when they do choose to retire and take their benefit. Experts at a privately run German transportation company noted that workers earn 100 percent of their pension credits during the period that they are participating in the company’s phased retirement program. In addition, the U.K. allows workers to draw a portion of their plan benefits—with 25 percent being tax-free—and one U.K. employer we spoke to allows continued contributions to those plans. Participants may also see reductions in their retirement benefits after full retirement. Workers with DC plans may reduce their retirement savings through early withdrawals during phased retirement. Similarly, depending on program design, workers may have limitations on their contributions to their employer-sponsored DB plan or public pension during phased retirement; yielding lower pension benefits at retirement. An OECD report notes that national pension payments made during participation in phased retirement programs and any change in the age at which a worker retires, such as retiring prior to or after the full retirement age, should result in pension adjustments that are actuarially neutral—in other words, workers taking early pension payments will have reduced benefits for the duration of their retirement while those who delay payment receive increased benefits. One expert at a German university noted that participants do not always realize the effect the program will have on their pensions. We provided a draft of this report to the Commissioner of the Social Security Administration, the Secretary of State, the Secretary of Labor, the Secretary of the Treasury, the Commissioner of the Internal Revenue Service, and the Acting Director of the Office of Personnel Management. The Social Security Administration provided a technical comment, which was incorporated as appropriate. The remaining agencies had no comments. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Commissioner of the Social Security Administration, the Secretary of State, the Secretary of Labor, the Secretary of the Treasury, the Commissioner of the Internal Revenue Service, the Acting Director of the Office of Personnel Management, and other interested parties. This report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) the extent to which phased retirement exists in other countries with aging populations, (2) the key aspects of phased retirement programs in selected countries, and (3) the experiences that other countries have had in providing phased retirement and how that can inform the U.S. experience. To determine the extent to which phased retirement exists in other countries with aging populations, we used data from the Social Security Administration’s publication Social Security Programs throughout the World and United Nations population data to first identify countries with aging populations. Social Security Programs throughout the World contains comprehensive data on the social security programs in different countries around the world, including the statutory retirement age, early retirement age, and GDP per capita. We used the Social Security Administration’s publication to gather a list of 179 countries that have some kind of social security program. For these countries, we used United Nations population data to find the proportion of the population aged 50 and over, where available. We then limited our research to those countries whose proportion of population aged 50 and over is more than one standard deviation above the average. This group represents countries where the proportion of the population aged 50 and over is above 33 percent, and includes a total of 44 countries. To determine whether the 44 countries that met our initial criteria of having 1) an national pension program similar to social security and 2) an aging population have adopted phased retirement programs, we reviewed the Organisation for Economic Co-operation and Development (OECD) and the European Union reports and data that focus on older workers and extending work life in other countries. We focused on OECD and European Union countries because they are advanced economies that are most similar to that of the United States. In addition, we conducted literature searches and reviews to identify countries with phased retirement programs aimed at extending working lives of older workers as well as to assist with knowledge transfer from older workers to younger workers. The literature searches comprised of terms related to phased retirement, such as gradual retirement; partial retirement; labor force participation of older workers; and transitional retirement. We limited our searches to literature released during the 10-year period from 2007 to 2017. Additionally, we spoke with subject matter experts to gain their perspective on which countries offer phased retirement programs or have a policy aimed at extending working lives of older workers. We identified these experts through our review of relevant literature and expert referrals. In total, we identified 17 countries with some form of phased or gradual retirement options for older workers. We examined these 17 countries to identify the types of phased retirement programs within each country. For example, we researched whether the country had (1) national phased retirement policies or programs (2) sectoral programs established through collective bargaining agreements that cover specific industries, occupations, or sectors; and (3) individual employer programs. To obtain a more complete understanding of key aspects, and the benefits and challenges of phased retirement programs in selected countries, as well as potential lessons learned for the U.S., we reviewed the group of aging countries with relevant programs identified in the first objective, to select a sample of four countries for case studies. These countries are Canada, Germany, Sweden, and the United Kingdom (U.K.). The criteria for selecting case study countries included being described in literature or by experts as having a national policy related to phased retirement or as having taken legislative action, in part, to facilitate or encourage phased retirement, a variety of sectoral and individual employer programs (public and private sector), when the programs were implemented, and expert or industry recommendations. We also considered the various countries’ economic and social frameworks and whether they are similar to that of the U.S. Specifically, we selected Canada, Germany, Sweden, and the U.K. because they had national phased retirement policies, which may include a national program such as in Germany and Sweden, and a wide variety of phased retirement programs in both the private and public sectors. For the case studies, we conducted interviews with government officials, program administrators, employer associations, unions, and employers to obtain in-depth program information and to learn about their experiences with phased retirement. We identified appropriate officials and organizations to contact primarily through review of relevant literature, subject matter expert recommendations, and referrals from the U.S. Embassy in each country. We reached out to a variety of labor unions and employers in selected countries in an effort to obtain multiple perspectives on issues related to phased retirement and met with those available to speak with us. We did not conduct an independent legal analysis to verify the information provided about the laws, regulations, or policies of the foreign countries selected for this study. Rather, as described above, we relied on appropriate secondary sources, interviews, and other sources to support our work. We submitted key report excerpts to government officials in each country, as appropriate, for their review and verification, and we incorporated their technical corrections as necessary. To determine whether experiences with phased retirement in other countries could inform efforts in the U.S., we relied on testimonial evidence from interviews and a review of relevant research. The applicability of lessons learned was shaped by the differences in the national pension and social systems in the selected countries, such as the availability of healthcare and other retirement benefits. To compile the information in this appendix, we interviewed officials and program administrators from selected phased retirement programs in Canada, Germany, Sweden, and the United Kingdom (U.K.), as well as employer associations, unions, and retirement experts. We also reviewed documentation and obtained statistics from country agencies. We identified employers offering phased retirement programs primarily through reviews of relevant literature, referrals from subject matter experts, and referrals from the U.S. Embassy in each country. We reached out to a variety of labor unions and employers in selected countries and met with those available to speak with us. We did not conduct an independent legal analysis to verify the information provided about the laws, regulations, or policies of the countries selected for this study. Rather, we relied on appropriate secondary sources, such as plan documents; interviews; and other sources. We submitted key report excerpts to government officials in each country, as appropriate, for their review and verification, and we incorporated their technical corrections as necessary. starting at age 65 with full benefits Early retirement age: 60, with Sources of retirement income National pension: The earnings- related Canada Pension Plan targets a replacement rate of 25 percent of average lifetime earnings, up to a maximum earnings limit each year. Starting in 2019, this plan will replace one- third of average earnings, and the earnings range used to determine average earnings will also gradually increase. Employees in the province of Quebec have their own Quebec Pension Plan, broadly similar to the Canada Pension Plan. National efforts to encourage phased retirement In 2007, Canada introduced changes to the Income Tax Regulations to allow more flexible phased retirement arrangements under defined benefit (DB) registered pension plans. Under the pension tax rules, phased retirement allows an individual to receive a portion of his or her pension benefit from a DB pension plan while continuing to accrue pension benefits in the same plan. The income tax regulation changes permitted qualifying employees to receive up to 60 percent of their accrued benefits in their employer-sponsored DB pension while continuing to accrue further pension benefits based on either full-time or part-time work, subject to employer agreement. Qualifying employees must be at least 60 years of age or aged 55 or older and eligible for an unreduced pension under the terms of the DB plan. Highlights of individual phased retirement programs Sectoral Collectively Bargained Programs Employer group 1: Certain provincial government hospital employees of this public sector employer, those aged 55 or older with at least 5 years of service, can reduce their work schedule to between 50 and 60 percent of full-time work, and receive pay proportional to hours worked plus an annual pension pre-payment from their employer-sponsored retirement plan, which changed from a DB to a target benefit or shared-risk plan. Combined, the payments equal 85 percent of full- time earnings. Workers can choose to phase for a period of 1 to 5 years. Participants continue to accrue pension service benefits based on full-time work. Employer-sponsored pensions: Registered Pension Plans established by employers or unions to provide pensions for employees. In general, the plans can be defined benefit (DB), defined contribution (DC), or a combination of DB and DC plans. Individual savings: Individuals can use tax-assisted arrangements that foster personal savings including Registered Retirement Savings Plans that are similar to traditional IRAs in the United States and the Tax Free Savings Account—a general purpose savings plan that provides tax treatment similar to Roth IRAs in the United States. the ages of 60 and 64, can reduce their workload by working fewer hours. They are paid a salary proportional to their reduced hours and a lump-sum retirement allowance, paid by the employer that can be used to supplement their income, not to exceed their full time salary. Participants can continue to contribute to the employer-sponsored DB plan as if working full time. Canada (cont.) participate in phased retirement up to 3 years prior to age 71. Participants can work 50 percent of full time work each year over a 3- year period and get paid a salary proportional to their reduced hours. Participants cannot draw from their employer-sponsored DB plan, but can contribute to it and the national pension as if working full time. Employer 5: An employer with two phased retirement programs. One program was established through a collective bargaining agreement, and allows unionized faculty aged 60 or older with at least 10 continuous years of service to slowly reduce their work time and receive proportionate pay. Participants can contribute to their employer-sponsored DC pension as if working full time. Participants in this program cannot draw from their pension until fully retired. The second phased retirement program was established in-house by the employer (outside of collective bargaining agreements) for non-faculty staff (see details below). Employer 5 (same employer 5 above): All non-faculty staff over age 55, with at least 15 years of full-time work can reduce hours for up to 3 years. Source of supplemental income In Canada, employees participating in phased retirement programs we reviewed were compensated for foregone wages due to reduced hours primarily by withdrawing funds from their own employer-sponsored pension plan, a lump sum benefit funded by the employer, or their savings, as necessary. GDP: $3.68 trillion (2017) and a few months, gradually increasing to 67 by 2029 (Those with 45 years of contribution can get a full pension at 63, gradually increasing to 65) Early retirement age: 63 with 35 years of contributions, with reduced benefits, gradually increasing to 67 Sources of retirement income National pension: An earnings- related pension, requiring at least 5 years of contributions. In 2018, the employer and employee contribution rates were 18.6 percent of covered earnings. common national phased retirement program, the ATZ was established in 1996. Broad program guidelines specify that the program is available to those 55 and older and allows part-time work up to 6 years prior to the statutory retirement age. Workers can participate in the ATZ under two basic models: one in which an employee works part-time the entire period (reducing hours up to 50 percent of full-time work) and a second “block” model with 100 percent work the first half of the period and 0 percent the second half. The second model was the most popular among workers as a way to retire early. Employers pay a minimum of 70 percent of full-time wage for works in the phasing period. In general, 20 percent of the income foregone due to a reduction in hours worked is paid by the employer, who would also pay contributions toward the national pension as though the employee was working 90 percent of the time. ATZ provides tax benefits to both employers and employees on the 20 percent supplemented wages and the national pension contributions. The ATZ program provides the general framework, but employers and employees can set specific parameters through collective bargaining agreements. In 2009, the program reached its peak with 680,000 participants, when public subsidies were discontinued. Public sector employees have access to a phased retirement program similar to ATZ with minor differences such as a starting age of 60 instead of 55 and a maximum duration of 5 years. Employer-sponsored pensions: While most occupational pension plans are DB plans, they vary by how they are funded, such as book reserves, autonomous pension funds or direct insurance. Employer-sponsored pensions are generally voluntary and cover about 60 percent of the workforce. Pension reforms implemented in January 2018 aim at increasing coverage by making it less onerous for employers to sponsor DC pensions. The reforms removed the guaranteed minimum benefit that was previously required for DC plans that made it difficult for smaller employers especially to offer pensions to their workers. Teilrente: This national phased retirement program, established in 1992, allows eligible workers to work reduced hours and draw partial benefits from the national pension at the same time, with a ceiling on allowable earnings for those below the statutory retirement age. The program is used very little because it is perceived as complicated, though program reforms in 2017 simplified some of the features and added flexibility, such as raising the earnings limit and replacing the 3- tier partial benefits with smoother withdrawal options between 10 percent and 99 percent of pensions. In general, eligibility for Teilrente starts at age 63, and there are no rules on additional earnings past the full retirement age. With the reforms, policymakers hope more people will consider the program and not stop working completely at 63 when they reach early retirement age. Sources of retirement income (cont.) Individual savings: Private retirement savings include products such as Riester pensions, first introduced in 2002. Riester pensions benefit from tax incentives on contributions but also from additional direct public subsidies for low-income households and households with children. The self-employed are generally not eligible for Riester pensions but can benefit from the Ruerurp pensions, another instrument for private retirement savings. Germany (cont.) Employer 1: This employer offers the ATZ program to its workers. Currently, almost 14 percent of this employer’s eligible workers aged over 55 and covered by collective bargaining agreements participate in the ATZ phased retirement program. Of those in the program, about half are in the active phase of ATZ, working 100 percent (first years of the block model), while the other half are in the second phase with 0 percent work (last years or second half of the block model). Participants in the ATZ receive 85 percent of full-time wages for an average of 50 percent of full-time hours during the phasing period, which lasts up to 6-years. The employer also contributes 100 percent of full-time wages to the employer-sponsored hybrid contribution plan and the national pension plan during the entire phasing period. Employer 2: This employer has workers covered by collective bargaining agreements participating in the ATZ phased retirement program. Accordingly, employees 55 and older can reduce their hours to 50 percent for up to 6 years prior to the statutory retirement age, subject to approval. However, the employer reports it is phasing out ATZ as it has negotiated its own company phased retirement program. The new program targets workers in hardship positions, such as those who work night or rotating shifts. Specifically, workers aged 56 and older with at least 20 years of service with this employer, including at least 10 years of service in a hardship position, can phase into retirement for a maximum of 6 years and then must retire. Eligible workers can work 80 percent of full-time hours, receive 90 percent of their full-time wage, and receive 100 percent of their employer- sponsored pension credits as well as 90 percent of national pension credits. There is no cap on the number of workers who may participate, though eligibility requirements effectively limit the number of workers who can enroll. Currently 2,400 workers are participating in the program. Employer 1 (same employer 1 above): This employer offers a phased retirement program to certain retired executives for the purpose of retaining experience and knowledge, with a temporary contract (18 months maximum). The program is relatively new and currently includes about 80 senior experts, about 85 percent of which are aged 65 or older. Employer 2 (same employer 2 above): This employer offers a phased retirement program for managers, that allows managers to work an 80 percent schedule and receive 80 percent of their pay and 100 percent of their pension credits. Source of supplemental income In Germany, employees participating in phased retirement programs we reviewed were compensated for the foregone wages due to reduced hours primarily by their employer, together with their own savings schemes. National efforts to encourage phased retirement The current part-pension national policy, in effect since 2010, allows workers, after age 61, to withdraw 25, 50, 75, or 100 percent of their national pension benefits, independent of hours worked. Individuals can draw from the earnings related to part of their national pension and continue to earn new pension entitlements. There is no penalty for working and earning and drawing from the national pension. The decision to draw a pension has a lifelong effect, but is not irrevocable. The pensioner can instruct pension payments to cease and subsequently for the pension to resume at any time. The two components of the national pension, the income pension and the premium pension, are drawn independently of each other. Early retirement age: None Sources of retirement income National pension: The earnings- related national pension has two components, one notional income pension and a smaller DC premium pension. Employers and employees contribute 16 percent of salary toward the income pension and 2.5 percent towards the premium pension, for a total of an 18.5 percent contribution rate. Sweden had a national partial pension program that was in effect from 1976 to 2001, when it was abolished. The program allowed workers to gradually withdraw from work 5 years before the statutory retirement age, which was lowered from 67 to 65 at the time. Partial retirement was publicly funded, replacing 65 percent of the loss of income resulting from the reduction in hours worked (made less generous with a replacement rate of 50 percent in 1981). Upon reaching the statutory pension age of 65, program participants still received a full old-age pension. Highlights of individual phased retirement programs Sectoral Collectively Bargained Programs Local authorities and regions employers: Public sector workers covered by a multiemployer collective bargaining agreement can work 80 percent of full-time work, receive 90 percent of full time salary, and receive an employer-sponsored pension as if working full-time. Employers of graduate engineers: Engineers covered by a multiemployer collective bargaining agreement, age 60 and older may apply for the right to part-time retirement. Once approved the employees can ask to reduce their hours and receive 50, 80, or 90 percent of the earned employer-sponsored pension. Employers of professional employees: White collar union members working in all parts of the labor market, including schools, healthcare, trades, media, police, sports, and telecom, among others, are covered by a multiemployer collective bargaining agreement that allows phased retirement. This program allows workers aged 62 and older to shorten their working hours and begin to take withdrawals from their employer-sponsored pension. Sweden (cont.) Sources of retirement income (cont.) Employer-sponsored pensions: Workplace pension plans are generally established through collective bargaining agreements and cover about 90 percent of workers, in the public and private sectors. Employers and unions negotiate the details of workplace pensions in four sectoral collective bargaining agreements: blue-collar private sector, white-collar private sector, state employees, and municipal employees. Most workplace pensions are DC plans. In general, workers can withdraw from pensions at age 55. Source of supplemental income In Sweden, employees participating in a phased retirement programs we reviewed were generally compensated for foregone wages due to reduced hours primarily by withdrawing funds from their own employer-sponsored pension plan or their own savings, as necessary. Workers also have the option to withdraw benefits from the national pension after age 61. Individual savings: Until 2016, it was possible to make tax deductions for private pension saving, up to a maximum. The tax- deductibility of private voluntary pension savings was abolished in 2016 for all but the self-employed, who do not qualify for occupational pension plan reductions. Population: 66 million (2017) GDP: $2.62 trillion (2017) Statutory retirement age: (state pension age) 65, gradually rising to age 66 from 2018 to 2020, to age 67 from 2026 to 2028 and to age 68 between 2037 and 2039. National efforts to encourage phased retirement Since 2014, the UK has had a flexible work policy where any employee who has worked for their employer continuously for at least 26 weeks has the statutory right to request flexible work. There are several types of flexible working, including job sharing, working from home, working compressed hours, or working annualized hours, among other things. The policy covers workers who want to phase into retirement. Early retirement age: None (for the state pension) Employer-sponsored pension: Since the 2008 Pensions Act, employers have been required to automatically enroll eligible workers into a qualified workplace pension plan and make minimum contributions, with the option for workers to opt-out. The qualified plans can be either DB, DC, or hybrid plans. The National Employment Savings Trust (NEST), managed as an independent entity, was established by the government to help employers meet their obligation to automatically enroll eligible workers in a retirement plan and thus functions as the default qualified workplace plan. covered by this DB pension plan, aged 55 and older, can reduce their hours or move to a less senior position. Reduced income can be supplemented by the workers workplace pension. Participants can draw some or all of their pension benefits, while continuing to contribute into their pension and build up future pension benefits. According to plan documents, actuarial reductions on benefits paid before a worker reaches their statutory retirement age can be waived, in whole or in part, upon agreement with the employer. Teacher’s Pension: Since 2007, teachers, between the age of 55 and 75 in England and Wales covered by this DB pension plan, can reduce earnings by at least 20 percent due to part time work or a reduction in responsibilities for a minimum of 1 year. This reduction in income can be supplemented by the workers workplace pension. The maximum amount that participants can withdraw from their pension is 75 percent of the total pension benefits. Remaining pension benefits continue to grow as participants continue to work and contribute on a reduced salary. According to plan documents, benefits taken before statutory retirement age would be subject to actuarial reductions. United Kingdom (cont.) Sources of retirement income (cont.) Individual savings: Savings arranged by the individual—similar to traditional or Roth IRAs in the U.S. The U.K. has Individual Savings Accounts that allow an individual to save up to a designated amount per year tax-free. Workers can take money out of their Individual Savings Account at any time. Highlights of individual phased retirement programs (cont.) Civil service pension: Since 2008, civil service workers covered by the civil service pension, aged 55 and older, can reduce their earnings by at least 20 percent due to reduced hours or reduced job responsibilities. Participants can take some or all of their pension and pension lump sum they have accrued, while continuing to work, and contribute to their pension until their normal pension age. Drawn down benefits paid before a worker reaches their normal pension age are actuarially reduced as they are being paid early. A private sector employer in the financial industry offered phased retirement to employers under both a DB and a DC plan. Both plans allow workers age 55 and older to reduce their hours and receive benefits from their DB and DC pension plans. Workers continue to contribute to their workplace pension and the national pension plan. In the U.K., employees participating in phased retirement programs we reviewed were generally compensated for the foregone wages by withdrawing funds from their own workplace employer sponsored pension plan. In addition to the individual named above Michael Collins (Assistant Director), Susan Chin (Analyst-in-Charge), Laurel Beedon, Britney Tsao, Margaret J. Weber, and Seyda Wentworth made key contributions to this report. Also contributing to this report were Sharon Hermes, Amy MacDonald, Sheila R. McCoy, Kelly Snow and Adam Wendel.", "summary": "In response to an aging workforce, countries around the world have developed policies to encourage older workers to work longer to improve the financial sustainability of national pension systems and address shortages of skilled workers. Phased retirement is one option that can be used to encourage older workers to stay in the workforce. GAO was asked to look at phased retirement programs in the United States and other countries. In June 2017, GAO issued a report (GAO-17-536) that looked at phased retirement in the United States, where formal phased retirement programs are as yet uncommon. This report looks at phased retirement in other countries. Specifically, GAO examined (1) the extent to which phased retirement exists in other countries with aging populations, (2) the key aspects of phased retirement programs in selected countries, and (3) the experiences of other countries in providing phased retirement and how their experiences can inform policies in the United States. GAO analyzed relevant data, reviewed academic research, and conducted interviews to identify countries with phased retirement, and selected four countries with national policies permitting phased retirement programs with broad coverage for case studies. GAO also conducted interviews with government officials, unions, employer associations, and other experts. GAO's review of studies and interviews with employment and retirement experts identified 17 countries with aging populations and national pension systems similar to the Social Security program in the United States. These countries also have arrangements that allow workers to reduce their working hours as they transition into retirement, referred to as “phased retirement.” Phased retirement arrangements encourage older workers who might otherwise retire immediately to continue working, which could help alleviate pressures on national pension systems as well as address labor shortages of skilled workers. The17 countries had established phased retirement programs in different ways: at the national level via broad policy that sets a framework for employers; at the industry or sector level; or by single employers, often through the collective bargaining process. GAO's four case study countries—Canada, Germany, Sweden, and the United Kingdom (UK)—were described as employing various strategies at the national level to encourage phased retirement, and specific programs differed with respect to design specifics and sources of supplemental income for participants. Canada and the U.K. were described as having national policies that make it easier for workers to reduce their hours and receive a portion of their pension benefits from employer-sponsored pension plans while continuing to accrue pension benefits in the same plan. Experts described two national programs available to employers and workers in Germany, with one program using tax preferences. Experts also said Sweden implemented a policy in 2010 that allows partial retirement and access to partial pension benefits to encourage workers to stay in the labor force longer. Even with unique considerations in the United States, other countries' experiences with phased retirement could inform U.S. efforts. Some employer-specific conditions, such as employers offering employee-directed retirement plans and not being covered by collective bargaining are more common in the United States, but the case study countries included examples of designs for phased retirement programs in such settings. Certain programs allow access to employer-sponsored or national pension benefits while working part-time. For example, experts said the U.K. allows workers to draw a portion of their account based pension tax-free, and one U.K. employer GAO spoke to also allows concurrent contributions to those plans. In addition, experts said that certain program design elements help determine the success of some programs. Such elements could inform the United States experience. For instance, U.S. employers told us that while offering phased retirement to specific groups of workers may be challenging because of employment discrimination laws, a union representative in Germany noted that they reached an agreement where employers may set restrictions or caps on participation, such as 3 percent of the workforce, to manage the number of workers in the program. Employers in the U.S. could explore whether using a similar approach, taking into consideration any legal concerns or other practical challenges, could help them to control the number of workers participating in phased retirement programs. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "Many of our reports and testimonies include recommendations that, if acted upon, may result in tangible benefits for the U.S. taxpayer by improving the federal government’s efficiency, effectiveness, and accountability. Implemented recommendations can result in financial or nonfinancial benefits for the federal government. An estimated financial benefit is based on agency actions taken in response to our recommendations; such benefits can result in reduced government expenditures, increased revenues, or a reallocation of funds to other areas. For example, in fiscal year 2016, our work across the federal government resulted in $63.4 billion in financial benefits. Other benefits that result from our work cannot be measured in dollar terms, and we refer to them as nonfinancial or other benefits. During fiscal year 2016, we recorded a total of 1,234 other benefits from our work that cannot be measured in dollars, but that led to program and operational improvements to the federal government. These benefits are linked to specific recommendations or other work that we completed over several years and could include improvements to agency programs, processes, and policies. In some cases, benefits are realized based on the actions of Congress. For example, since 1994, we have found that EPA faces challenges in its ability to assess and control toxic chemicals under the Toxic Substances Control Act of 1976—largely due to issues of statutory choice, regulatory control, data, confidentiality, workload, and resources. In response to our work and the work of others, Congress passed the Lautenberg Act in 2016, giving EPA greater authority to implement several of our outstanding recommendations related to these six areas and positioning the agency to better protect public health and the environment from the risks posed by toxic chemicals. As part of our responsibilities under generally accepted government auditing standards, we periodically follow up on recommendations we have made to agencies and report their status to Congress. Agencies also have a responsibility to monitor and maintain accurate records on their progress made toward addressing our recommendations. After issuing a report, we follow up with audited agencies at least once a year to determine the extent to which they have implemented our recommendations and the benefits that they have realized. During these follow-up contacts, we identify for agencies what additional actions, if any, they would need to take to address our recommendations. A recommendation is considered implemented when agencies have taken actions that, consistent with our recommendation, address the issue or deficiency we identified and upon which the recommendation is based. Experience has shown that it takes time for agencies to implement some recommendations. For this reason, we actively track unaddressed (i.e., open) recommendations for 4 years and review them to determine whether implementation can be reasonably expected. The review includes consideration of alternative strategies an agency may have for implementing recommendations. Our experience has shown that recommendations remaining open after 4 years are generally not implemented in subsequent years. We will close a recommendation as not implemented if an agency has indicated that it was not planning to take action or if we have determined that it is unlikely that the agency will take action to address the recommendation. Figure 1 shows our process for monitoring and reporting on recommendations. We maintain a publicly available database with information on the current status of most open recommendations. The database allows searches by agency, congressional committee, or key words and is available at http://www.gao.gov/openrecs.html. In addition to our process for monitoring and reporting on recommendations, we use other mechanisms to encourage agencies to implement our recommendations in a timely manner. For example, we initiated an effort in fiscal year 2015 to call attention to unimplemented recommendations that we believe warrant priority attention by the Secretary or agency heads at key departments and agencies. We sent letters to the heads of key executive branch agencies, including EPA, in fiscal years 2015, 2016, and 2017 identifying these high-priority recommendations and urging the agency head to continue to provide attention to these issues. As of August 23, 2017, EPA had implemented 191 of the 318 recommendations we made since fiscal year 2007, and the recommendations fall into six broad categories that relate to EPA operations and programs. EPA had not yet fully implemented the remaining 127 recommendations. Figure 2 shows the status of the 318 recommendations. For recommendations that we made over 4 years ago (i.e., fiscal years 2007 to 2012), EPA had implemented 77 percent. For recommendations made since fiscal year 2013, EPA had implemented 34 percent. The 318 recommendations we made to EPA since fiscal year 2007 fall into six broad categories that relate to EPA operations and programs and generally align with many of the goals and strategies identified in EPA’s Fiscal Year 2014-2018 Strategic Plan. These six broad categories are: (1) management and operations; (2) water issues, which includes water infrastructure, drinking water, water quality, and ecosystem restoration; (3) environmental contamination and cleanup, which includes environmental cleanup, pollution prevention, hazardous and other waste programs, and emergency management; (4) toxics, chemical safety, and pesticides; (5) public health and environmental justice; and (6) air quality, climate change, and energy efficiency. The percentage of recommendations implemented within each category ranged from 80 percent for the environmental contamination and cleanup category to 48 percent in the management and operations category. Figure 3 shows the number of recommendations we identified in each of these categories and the percentage of recommendations within each category that had been implemented and not implemented. Almost three-fourths of the recommendations we made since fiscal year 2007 fall into three categories: management and operations, water issues, and environmental contamination and cleanup. The recommendations to EPA relating to management and operations included actions for better managing its grants, better coordinating management of its laboratories, and improving the agency’s information security. Recommendations on water issues included actions targeted at improving the regulation of contaminants in drinking water, improving water quality and ecosystem health in regions such as the Great Lakes and Chesapeake Bay, and better managing water pollution from both point and nonpoint sources. Recommendations related to environmental contamination and cleanup included: taking actions for better managing cleanup at hazardous waste sites; enhancing responses to disasters, such as the collapse of the World Trade Center on September 11, 2001, and Hurricane Katrina in August 2005; and promoting proper disposal and recycling of electronic waste. The remaining quarter of the recommendations fell into the other three categories of toxics, chemical safety, and pesticides; air quality, climate change, and energy efficiency; and public health and environmental justice. Appendix I lists, by category, our reports with recommendations to EPA since fiscal year 2007, and for each report lists the numbers of implemented, not implemented, and total recommendations, as of August 23, 2017. Of the 127 recommendations that EPA has not implemented, we made 82, or 65 percent, since fiscal year 2013 and 45, or 35 percent, earlier (i.e., fiscal years 2007 to 2012). Most of these recommendations concern EPA management and operations and water issues. Some examples of recommendations that have not yet been implemented in these categories are described below. In January 2017, we made recommendations to EPA related to their management of grants. In 2015, EPA awarded roughly $3.9 billion, about 49 percent of its budget, in grants to states, local governments, tribes, and other recipients. These grants supported activities such as repairing aging water infrastructure, cleaning up hazardous waste sites, improving air quality, and preventing pollution. In our January 2017 report, we concluded that EPA’s ability to manage this portfolio depended primarily on grant specialists and project officers, but the agency did not have the information it needed to allocate grants management resources in an effective and efficient manner. In addition, EPA had not identified project officer critical skills and competencies or monitored its recruitment and retention efforts for grant specialists. We recommended that EPA, among other things, develop documented processes that could be consistently applied by EPA offices to collect and analyze data about grants management workloads and use these data to inform staff allocation. We also recommended that EPA review project officer critical skills and competencies and determine training needs to address gaps and develop recruitment and retention performance measures and collect performance data for these measures. According to a May 2017 letter, EPA agreed with the five recommendations we made in the report and identified steps it was initiating to address them. We will continue to monitor EPA’s actions to implement these recommendations. In August 2014, we made recommendations to EPA related to information security. Federal agencies rely on contractors to operate computer systems and process information on their behalf. Federal law and policy require that agencies ensure that contractors adequately protect these systems and information. In our August 2014 report, we evaluated how six agencies, including EPA, oversaw contractor-operated systems. With regard to EPA, we found that the agency generally established security and privacy requirements for contractors to follow and prepared for assessments to determine the effectiveness of contractors’ implementation of controls but was inconsistent in overseeing the execution and review of those assessments. We recommended that EPA develop, document, and implement oversight procedures for ensuring that, for each contractor-operated system: (1) a system test is fully executed and (2) plans of action and milestones with estimated completion dates and resources assigned for resolution are maintained. In comments on the report, EPA generally agreed with our recommendations and has recently told us that it has taken steps to implement these recommendations. We will evaluate whether these steps meet the intent of the recommendations. In March 2010, we made recommendations to EPA related to workforce planning. The ability of federal agencies to achieve their mission and carry out their responsibilities depends in large part on whether they can sustain a workforce that possesses the necessary education, knowledge, skills, and other competencies. We and others have shown that successful organizations use strategic workforce planning to help meet present and future mission requirements. In our March 2010 report on workforce planning at EPA and other agencies, we found that EPA’s workforce plan was not clearly aligned with its strategic plan or budget formulation, consistent with leading workforce planning principles. For example, EPA’s workforce plan did not show how full-time equivalent employees, skills, and locations would be aligned with the strategic plan or budget. Without alignment to the strategic plan, we concluded that EPA was at risk of not having the appropriately skilled workforce it needs to effectively achieve its mission. We recommended, among other things, that EPA incorporate into its workforce plan clear and explicit links between the workforce plan and the strategic plan, and describe how the workforce plan will help the agency achieve its strategic goals. In comments on our report, EPA generally agreed with our recommendation. According to EPA, the agency has taken some positive steps toward better workforce planning, such as developing workforce planning gap analyses. However, EPA has not fully implemented this recommendation. In May 2012, we made recommendations to EPA related to a key program under section 319 of the Clean Water Act to address water pollution from nonpoint sources. Under this program, EPA provides grants to states to implement programs and fund projects that address nonpoint source pollution. We found that EPA’s regional offices had varied widely in the extent of their oversight and the amount of influence they had exerted over states’ nonpoint source pollution management programs. In addition, EPA’s primary measures of effectiveness of states’ management programs did not always demonstrate the achievement of program goals, which are to eliminate remaining water quality problems and prevent new threats from creating future water quality problems in water bodies currently of high quality. To help protect water quality, we recommended that EPA (1) provide guidance to its regional offices on overseeing state programs and, (2) in its revised reporting guidelines to states, emphasize measures that more accurately reflect the overall health of targeted water bodies and demonstrate states’ focus on protecting high-quality water bodies, where appropriate. EPA agreed with these recommendations in its comments on the report. In 2013, EPA issued final guidelines laying out expectations for EPA’s regional oversight and issued a memorandum to its regional managers highlighting their oversight responsibilities. However, in a subsequent report issued in July 2016, we found that EPA’s 2013 guidance did not completely address our recommendation to provide sufficient guidance to states to fulfill their oversight responsibilities. We also found that according to EPA officials, the agency planned to make changes to some of the program’s measures of effectiveness. Although EPA has taken some action, these recommendations remain open pending EPA’s (1) ensuring that the guidelines to states incorporate specific instructions on how to review states’ plans and criteria for ensuring funded projects reflect characteristics of effective implementation and tangible results, and (2) improving its measures of program effectiveness. We have identified many benefits—process and programmatic improvements and financial benefits—based on EPA taking actions on our recommendations and related work. Since fiscal year 2007, we have identified improvements to EPA’s operations and programs in categories such as management and operations, water issues, and public health and environmental justice. In addition, we have identified financial benefits resulting from the implementation of our recommendations and our related work. The following are examples of process improvements we have identified based on actions EPA has taken in response to our recommendations. In August 2015, we reviewed EPA’s grant management program, including the extent to which its grants management plan followed leading practices for federal strategic planning. We found that EPA could better ensure the effectiveness of its planning framework for meeting grants management goals. We recommended that EPA incorporate all leading practices in federal strategic planning relevant to grants management as it finalized its draft 2016-2020 grants management plan, such as defining strategies that address management challenges and identifying the resources, actions, and time frames needed to meet EPA’s goals. In response to our recommendation, EPA fully incorporated each of the relevant leading practices for federal strategic planning in its final 2016- 2020 grants management plan, issued in February 2016. Specifically, EPA included an annual priority-setting process to identify strategies to address management challenges and the resources needed to achieve its goals. EPA also incorporated mechanisms to ensure leadership accountability for achieving results, including numeric targets and time frames for each action identified in performance measures. Consequently, EPA has better assurance that its 2016-2020 grants management plan is an effective framework to guide and assess its efforts to meet its grants management goals. In August 2011, we found that EPA operated 37 laboratories across the nation to provide the scientific research, technical support, and analytical service to support its mission. In that report, we also found that EPA did not use a comprehensive process for managing its laboratories’ workforce and lacked basic information on its laboratory workload and workforce. Without such information, we found that EPA could not undertake succession planning and management to help the organization adapt to meet emerging and future needs. We recommended that EPA for all of its laboratories develop a comprehensive workforce planning process that is based on reliable workforce data and reflects the agency’s current and future needs in the overall number of federal and contract employees, skills, and deployment across all laboratory facilities. EPA generally agreed with our recommendation and, in 2015, developed a comprehensive workforce planning process for all of its laboratories and, according to the agency, collected, verified, and analyzed, from all of its laboratories, workforce data that included personnel’s organization, location, grade levels, and area of expertise. In October 2012, we found that funding for rural water and wastewater infrastructure was fragmented across the three largest federal programs—EPA’s Drinking Water and Clean Water State Revolving Fund programs and the U.S. Department of Agriculture’s (USDA) Rural Utilities Service Waste and Waste Disposal program—leading to program overlap and possible duplication of effort when communities applied for these programs. For example, we found that some communities had to prepare separate environmental analyses for each program, resulting in delays and increased costs to communities applying to the programs. We recommended that EPA and USDA work together and with state and community officials to develop guidelines to assist states in developing uniform environmental analyses that could be used, to the extent appropriate, to meet state and federal requirements for water and wastewater infrastructure projects. In February 2017, EPA and USDA issued a joint memorandum to address concerns identified in our report and highlighted best practices currently employed in some states to eliminate duplicative environmental reviews. In particular, the memorandum highlighted a uniform environmental review document developed by the state of Pennsylvania. To eliminate potential duplication of effort during the environmental review process, the memorandum encouraged state programs to evaluate the best practices and incorporate the practices into their own operations where applicable. The following are examples of programmatic improvements we have identified based on actions EPA has taken in response to our recommendations. Under the Clean Water Act, EPA currently regulates 58 industrial categories of wastewater pollution—such as petroleum refining, fertilizer manufacturing, and coal mining—with technology-based regulations called “effluent guidelines.” Such guidelines are applied in permits to limit the pollutants that facilities may discharge. The Clean Water Act also calls for EPA to revise the guidelines when appropriate. EPA has done so, for example, to reflect advances in treatment technology or changes in industries. EPA uses a two-phase process to identify industrial categories needing new or revised effluent guidelines, including an initial “screening” phase in which EPA ranks industrial categories according to the total toxicity of their wastewater. In September 2012, we concluded that limitations in EPA’s screening phase may have led the agency to overlook some industrial categories that warrant further review for new or revised effluent guidelines. For example, during the screening phase, EPA had not considered the availability of advanced treatment technologies for most industrial categories. We recommended that EPA modify the screening phase of its review process to include a thorough consideration of information on the treatment technologies available to industrial categories as it considered revisions to its screening and review process. In comments on the report, EPA agreed that factoring treatment technology information into its reviews would be valuable. In September 2014, EPA published a combined Final 2012 and Preliminary 2014 Effluent Guidelines Program report that discussed revisions to its screening process in response to our report. Specifically, EPA stated that it recognized the need to consider the availability of treatment technologies, process, changes, or pollution-prevention practices in the screening phase of its process and said that it was targeting new data sources to provide such information. In July 2015, EPA published its “Final 2014 Effluent Guidelines Program” with a diagram showing the change to EPA’s screening process to include screening of treatment technologies. EPA established a 1995 Policy on Evaluating Health Risks to Children to ensure that the agency consistently considers children in its actions, since children can be more vulnerable than adults to certain environmental hazards. In August 2013, we found that EPA did not have a specific process for program offices that led regulatory workgroups to document how the agency considers children’s health risks in rulemakings and other actions or how the agency’s analyses comply with the 1995 policy. We recommended that EPA require lead program offices to document their decisions in rulemakings and other actions regarding how health risks to children were considered and that their decisions be consistent with EPA’s children’s health policy. In comments on our report, EPA generally agreed with the recommendation and stated that the Office of Children’s Health Protection worked with the Office of Policy and the program offices to assure a consistent approach for documenting these decisions as part of EPA’s process to develop rules, regulations, and other agency actions. Subsequently, in October of 2014, EPA finalized a template for all EPA employees to use that outlined how to address EPA’s 1995 policy and other requirements under various situations. The template instructs lead program offices to document their decisions in rulemaking and other actions regarding how they considered health risks to children (e.g., conducting a children’s health risk assessment), or provide a rationale for why such an evaluation was not necessary. The following are examples of financial benefits we have identified based on actions EPA has taken in response to our prior reviews. During the course of work related to a July 2008 report on the funding and reported costs of Superfund enforcement and administrative activities, we reviewed EPA’s methodology for calculating the indirect costs—or administrative costs for managing the Superfund program—that EPA charged responsible parties in fiscal year 2006. In conducting this work, we identified two spending codes for which associated administrative costs had not been carried over into EPA’s calculations of the indirect cost rate applicable to each region for fiscal year 2006. As a result of this error, we determined that the percentage that EPA was charging responsible parties for indirect costs associated with fiscal year 2006 spending was lower than it should have been. In response to our finding, EPA published revised indirect cost rates for fiscal years 2005 and 2006 in May 2008 to correct the error. EPA acknowledged that correcting this error would result in more money being potentially recoverable from responsible parties. In 2010, we estimated that the additional amount EPA has recovered (or would recover) had a present value worth about $42.2 million. Since fiscal year 2000, we have issued a body of work aimed at raising the level of attention given to improper payments across government. Our work demonstrated that improper payments have been a long- standing, widespread, and significant problem in the federal government and as a result, contributed to Congress passing the Improper Payments Information Act of 2002 (IPIA). This act, as amended, requires, among other things, that all agencies annually identify and review programs and activities that may be susceptible to significant improper payments, provisions that coincide with recommendations we have made that agencies estimate, reduce, and publicly report improper payments. Subsequently, in 2005, EPA began reporting on the improper payment rate for the Clean Water and Drinking Water State Revolving Funds. By 2009, the most recent year for which we identified financial benefits from the agency addressing improper payments, EPA reported that its total improper payment error rates for the State Revolving Funds declined by 0.16 percent since it first reported on this issue. This resulted in about a $4.5 million decrease in improper payments from the Clean Water and Drinking Water State Revolving Funds for fiscal years 2008 and 2009. In conclusion, as the fiscal pressures facing the government continue, so too does the need for executive branch agencies to improve the efficiency and effectiveness of government programs and activities. Our recommendations provide a significant opportunity to improve the government’s fiscal position, better serve the public, and make government programs more efficient and effective. We believe that EPA’s implementation of our outstanding recommendations will enable the agency to continue to improve its performance and the efficiency and effectiveness of its operations. We will continue to work with Congress to monitor and draw attention to these important issues. Chairman Murphy, Ranking Member DeGette, and Members of the Committee, this completes my prepared statement. I would be pleased to answer questions that you may have at this time. If you or your staff members have any future questions about this testimony, please contact Alfredo Gómez at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this testimony include Barb Patterson, Assistant Director; Cindy Gilbert; Anne Hobson; Richard Johnson; Dan C. Royer; and Kiki Theodoropoulos. Appendix I: GAO Reports since Fiscal Year 2007 with Recommendations to EPA, by Category This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "EPA's mission is to protect human health and the environment. To accomplish this mission, EPA develops and enforces environmental regulations; awards grants; and studies environmental issues, among other things. GAO has conducted reviews focused on various aspects of EPA's operations and programs. Through this work, GAO has made numerous recommendations to improve EPA's performance and the efficiency and effectiveness of its operations. GAO follows up with executive branch agencies to determine the extent to which they have implemented its recommendations. In fiscal year 2015, GAO began sending letters annually to the heads of key executive branch agencies, including EPA, identifying unimplemented recommendations that warrant priority attention. This statement discusses (1) the status of EPA's implementation of GAO recommendations made since fiscal year 2007 and how these recommendations relate to EPA's operations and programs and (2) examples of benefits realized by EPA and others based on GAO's work, including through the agency's implementation of these recommendations. This statement is based on GAO's work since fiscal year 2007 and on an analysis of recommendations GAO has made to EPA during this period. As of August 23, 2017, the U.S. Environmental Protection Agency (EPA) had implemented 191 of the 318 recommendations GAO made since fiscal year 2007. EPA had not yet implemented the remaining 127 recommendations. The figure below shows the status of the 318 recommendations. The recommendations fall into six broad categories that relate to EPA programs and operations: (1) management and operations; (2) water issues; (3) environmental contamination and cleanup; (4) toxics, chemical safety, and pesticides; (5) public health and environmental justice; and (6) air quality, climate change, and energy efficiency. Almost three-fourths of the recommendations fall into the first three categories and include actions for EPA to better manage grants, improve the regulation of drinking water contaminants, and better manage hazardous waste cleanup. Most of the recommendations that have not yet been implemented concern EPA management and operations and water issues. For example, regarding management and operations, EPA has not yet implemented GAO's recommendation to link its workforce plan with its strategic plan to help ensure EPA has an appropriately skilled workforce to achieve its mission. Similarly, for water issues, EPA has not fully implemented GAO's recommendation to provide guidance to regional offices on overseeing state water quality programs. GAO has identified many benefits—that is, process and programmatic improvements and financial benefits—based on EPA taking actions on GAO's recommendations and related work. For example, in October 2012, GAO recommended that EPA and the U.S. Department of Agriculture (USDA) develop guidelines to assist states in developing uniform environmental analyses to meet state and federal requirements for water and wastewater infrastructure projects. EPA and USDA issued a joint memorandum in February 2017 that, among other things, highlighted best practices to eliminate duplicative environmental reviews. In addition, GAO has identified financial benefits from the implementation of its recommendations and related work. For example, during the course of work related to a July 2008 report, GAO identified an error in EPA's calculation of recoverable indirect costs for hazardous waste cleanup. EPA acknowledged the error and published revised indirect costs rates. As a result, GAO estimated in 2010 that EPA had recovered or would recover $42.2 million.", "document_type": "gao"}
{"report": "The National Security Strategy released in December 2017 states that the U.S. government has a national security interest in addressing conflict and instability in fragile and failing nations. The strategy commits to strengthening nations where state weakness may foster threats such as violent extremism. The strategy also prioritizes efforts that empower reform-minded governments, people, and civil society in order to address the drivers of state fragility. In the SAR, a joint review of U.S. stabilization efforts—diplomacy, assistance, and defense— the Secretaries of State and Defense and the USAID Administrator stated that increasing stability and reducing violence in conflict-affected areas are essential to meeting U.S. national security goals. State and USAID’s joint strategic plans have identified strategic objectives to counter instability, transnational crime, and violence that threaten U.S. interests. Notably, the plan for fiscal years 2018–2022 states that the agencies will make early investments in preventing conflict, atrocities, and violent extremism before they spread. The 2018 National Defense Strategy identifies objectives to deter adversaries from aggression against U.S. interests and prevent terrorists from directing or supporting external operations against the United States and its citizens and allies overseas. Additionally, the Quadrennial Diplomacy and Development Review released in 2015 and covering 2015 to 2019 outlines the lines of effort that fall under State and USAID’s commitment to prevent and mitigate conflict. These lines of effort include countering violent extremism, strengthening U.S. and international capacity to prevent conflict, preventing atrocities, establishing frameworks for action in fragile states, strengthening partner capacity to protect civilians and restore peace, and eliminating the threat of destabilizing weapons. In the Quadrennial Defense Review released in 2014 and covering 2014–2018, DOD also asserts that “the surest way to stop potential attacks is to prevent threats from developing.” The 2014 Quadrennial Defense Review further states that tackling root drivers of conflict, including building capacity with allied and partner militaries, and sustaining a global effort to detect, disrupt, and defeat terrorist plots are part of DOD’s efforts to protect the United States. U.S. foreign policy strategies and plans identify the Middle East and Africa as strategically important regions affected by conflict and instability. In countries such as Iraq, Nigeria, and Syria, the United States is working to address drivers of conflict and stabilize areas liberated from violent extremist groups. Iraq. As we have previously reported, U.S. government efforts for the global war on terrorism in Iraq began in 2003. Since the removal of the Ba’ath regime and the construction of a new government, Iraq has experienced varying levels of political instability, sectarianism, and conflict. In December 2011, the last units of U.S. Forces–Iraq were withdrawn from that country. After their departure, the United States continued to provide assistance such as training and equipment to Iraq’s military and security forces and funding for programs to strengthen political institutions and civil society organizations and to promote economic growth in Iraq. In 2014, the Islamic State of Iraq and Syria (ISIS) emerged as a major force in Iraq, destabilizing various areas of the country according to reporting from State and USAID. As of December 2017, Iraqi forces, with support from the United States and the Global Coalition to Defeat ISIS (Coalition), had liberated the country’s territory from the control of ISIS, according to State (see fig. 1). According to a State official, although ISIS no longer holds Iraqi territory, it remains a terrorist threat. Syria. Syria’s instability is largely caused by an ongoing civil war that began with a government crackdown on antigovernment protests in March 2011. USAID has reported that the conflict has led to economic collapse, a breakdown in services and governance, and instability, which violent extremist groups, including ISIS, have sought to exploit. Millions of Syrians have become refugees or internally displaced due to this crisis, according to reporting from the United Nations High Commissioner for Refugees. In May 2012, the United States began providing nonlethal aid to Syrian opposition forces, and in September 2014, the United States began air strikes against ISIS components in Syria. In January 2015, DOD created the Syria Train and Equip program to provide assistance, including training and equipment, to vetted members of the Syrian opposition and to support efforts to counter ISIS and liberate territory from ISIS. For populations that remain in Syria, governance entities and institutions face challenges in delivering services to their communities, according to USAID. As of July 2018, DOD has reported that the Syrian Democratic Forces, with Coalition support, continued efforts to defeat ISIS in the middle Euphrates River Valley (see fig. 1 above). Additionally, the civil war between Syrian opposition forces and the Assad regime was ongoing as of July 2018, according to reporting from the United Nations. Nigeria. There are multiple sources of instability across Nigeria. The terrorist groups Boko Haram and its offshoot ISIS-West Africa have destabilized areas in northeast Nigeria and the greater Lake Chad Region leaving over 2 million people displaced and millions more dependent upon humanitarian assistance as of June 2018, according to USAID reporting. Also, in the Middle Belt and Northwest of the country, according to a State official and reporting from Search for Common Ground, there is rural violence among civilians which includes criminal attacks, banditry, cattle rustling, and long-standing intercommunal conflicts between farming and herding communities. This violence has exacerbated tensions between the populations in the north and south and among ethnic and religious groups across the country. Figure 2 shows incidents involving fatalities due to conflict and violent extremism in Nigeria from January 1, 2012 to September 8, 2018. The U.S. government, through federal agencies and federally funded organizations, supports numerous efforts to address instability and prevent conflicts abroad. State and USAID. These are the principal agencies conducting U.S. foreign policy and international development and humanitarian assistance. State is the Executive Branch’s lead foreign affairs agency. State leads U.S. foreign policy through diplomacy, advocacy, and assistance. USAID is the U.S. government’s lead international development and humanitarian assistance agency with a key role in U.S. efforts to ensure stability, prevent conflict, and build citizen- responsive local governance. DOD. While DOD’s primary mission is to provide combat-ready military forces to deter war and protect the United States, DOD also provides support to foreign disaster relief through humanitarian assistance and stabilization efforts across all phases of conflict and military operations, and in combat and non-combat environments. U.S. Institute of Peace (USIP). USIP is an independent national institute, founded by Congress, to promote international peace and the resolution of conflicts among the nations and peoples of the world without recourse to violence. USIP is governed by a bipartisan Board of Directors, which includes the Secretaries of State and Defense or their designees, the President or Vice President of the National Defense University, and 12 others. USIP’s primary funding comes from congressional appropriation and can be supplemented by funds from U.S. government partners. USIP staff work abroad and at its headquarters in Washington, D.C. USIP initiates its own work and enters into interagency agreements with U.S. agencies such as State, USAID, and DOD, according to USIP officials. Because USIP is not an agency within the executive branch, it is not a formal participant in interagency national security policy processes involving State, USAID, and DOD, according to State. U.S. agencies and USIP are engaged in efforts to counter violent extremism and address conflict in countries affected by instability and violent conflicts, including Iraq, Syria, and Nigeria. For example, as areas are liberated from ISIS in Iraq and Syria, the United States is working with its partners to try to consolidate gains, reduce levels of local instability, peaceably manage change, and build the capacity of local governance entities. To improve the effectiveness of these efforts, U.S. agencies have evaluated lessons from similar efforts in countries such as Afghanistan and Iraq. The SAR and assessments from the Special Inspector General for Afghanistan Reconstruction and the Special Inspector General for Iraq Reconstruction are examples of U.S. government initiatives to identify lessons learned from past U.S. efforts. In prior work, we have identified key collaboration practices that can be used to assess collaboration at federal agencies (see fig. 3). These practices can help agencies implement actions to operate across boundaries, including fostering open lines of communication, and establish goals based on what the agencies share in common. Additionally, clarifying roles and responsibilities allows agencies to determine who will do what, organize their joint and individual efforts, and facilitate decision making. We have previously found that improving coordination and collaboration across agencies can potentially help agencies reduce or better manage fragmentation, overlap, and duplication. State, USAID, DOD, and USIP reported that they have conducted a variety of efforts in Iraq, Nigeria, and Syria aimed at preventing and mitigating violent conflicts and stabilizing areas affected by such conflicts. In response to our request, each agency and USIP provided descriptions and goals for their specific program-level or project-level efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria). To identify these efforts, each agency and USIP used its own terminology and definitions that were in place in fiscal year 2017. Efforts reported by State as active in fiscal year 2017. State reported that it conducted a range of ongoing conflict mitigation and stabilization efforts to address violent conflict in Iraq, Nigeria, and Syria, in fiscal year 2017. State, in addition to conducting its own efforts, reported that it sometimes conducted these efforts through grants to implementing partners or through interagency agreements with USIP. For Iraq, State reported a list of three individual efforts and four categories of other efforts as active in fiscal year 2017. These efforts included, for example, antiterrorism training and equipment for law enforcement; promotion of democratic governance and protection of basic human rights; support for religious and ethnic minority groups, internally displaced persons (IDP), and returnees; and clearance of explosive hazards. These programs were intended to help defeat ISIS and transnational terror groups, improve governance and rule of law, and promote reconciliation and the safe return of displaced Iraqis. Figure 4 depicts clearance operations for explosive remnants of war at a water treatment facility in Iraq supported by State. For Nigeria, State reported 21 efforts as active in fiscal year 2017. State supported programs to prevent and counter violent extremism though media programing, human rights training, police and law enforcement training and equipment, conflict early warning and response systems, and women’s and youth empowerment. According to State, these programs were intended to aid in the fight against Boko Haram and ISIS-West Africa by countering the radicalization process that leads individuals to violent extremism, protecting civilians from terrorist groups, and assisting the victims of Boko Haram and ISIS-West Africa and their host communities. To address crime and communal conflict in other regions of Nigeria, State reported that it conducts human rights and investigative training for Nigerian police, supports efforts to teach conflict resolution skills to youth, convenes dialogues between farmer and herder stakeholders to develop conflict resolution mechanisms, and other efforts. For Syria, State reported nine efforts as active in fiscal year 2017. State reported efforts that included providing training, equipment, and stipends to Free Syrian Police and education directorates in opposition-controlled parts of the country, and building the capacity of civil society and advocacy organizations, local councils, and civilian networks. According to State, these programs were intended to support the opposition and help counter violent extremists, such as ISIS and al Qaeda in Syria. Appendix II presents a full list of State’s reported conflict mitigation and stabilization efforts and their respective goals for Iraq, Nigeria, and Syria, active in fiscal year 2017. Efforts reported by USAID as active in fiscal year 2017. USAID reported that it conducted a range of ongoing conflict mitigation and stabilization efforts to address violent conflict in Iraq, Nigeria, and Syria, in fiscal year 2017. USAID reported that it primarily conducted these efforts through grants and contracts awarded to implementing partners. For Iraq, USAID reported one effort as active in fiscal year 2017. USAID, along with other international donors, supplies funding to the United Nations Development Program’s (UNDP) Funding Facility for Stabilization. The UNDP, at the request of the Prime Minister of Iraq, and with support from leading members of the Coalition to Degrade and Defeat the Islamic State of Iraq and the Levant (ISIL), established the Funding Facility for Stabilization in June 2015 to help rapidly stabilize newly retaken areas. The aim is to help restore confidence in the leading role of the Iraqi government in these areas and give populations a sense of progress and forward momentum. According to USAID, the Funding Facility for Stabilization supports restoration of essential services and efforts to kick-start the local economy, enabling internally displaced persons to return to their homes. For Nigeria, USAID reported five efforts as active in fiscal year 2017. USAID reported that it works through its implementing partners to conduct a variety of ongoing country-specific efforts including working with youth to develop countering violent extremism (CVE) action plans, building the capacity of civil society organizations and religious leaders, and providing education for displaced persons and host communities. According to USAID, these efforts are intended to counter violent extremism from Boko Haram and ISIS-West Africa, reduce conflict between herders and farmers, and support state and local government ownership for the continued education of internally displaced children. For Syria, USAID reported five efforts as active in fiscal year 2017. USAID reported that it supports a multidonor trust fund to restore essential services and works through an implementing partner to enable local councils’ ability to restore essential services. USAID reported that it also works through implementing partners to support democratic institutions, livelihoods, and local nongovernmental organizations. According to USAID, the intent of these programs is to enable the early recovery of areas liberated from ISIS by strengthening resistance to extremists, democratic processes, and the influence of strategic moderate actors. Figure 5 depicts a solar array installation that provides renewable energy for a drinking water pumping station in Dar’a Province, Syria, supported by a USAID essential services program. Efforts reported by DOD as active in fiscal year 2017. DOD reported that it conducted stabilization efforts to address violent conflict in Iraq and Syria, in fiscal year 2017. In Iraq, DOD reported one effort as active in fiscal year 2017. Medical Staff of the Combined Joint Forces Land Component Command— Operation Inherent Resolve provided immediate medical trauma supplies to the World Health Organization to fill a gap in medical supplies available to treat injured civilians. According to DOD, the project was coordinated with State and USAID and was funded through the Overseas Humanitarian, Disaster, and Civil Aid (OHDACA) appropriation. According to DOD, this project was intended to increase the chance of survival for civilians affected by military operations, increase civilian confidence in the government and the humanitarian assistance community, and provide access, influence, and visibility to DOD. In Syria, DOD reported eight efforts as active in fiscal year 2017. Civil Affairs personnel of Special Operations Joint Task Force—Operation Inherent Resolve provided classroom furniture and school supplies; cold weather items such as jackets, hats, gloves, socks and blankets; and in one area food, cooking fuel, construction material, and garbage removal. The projects were often managed through the local councils. According to DOD, the projects were coordinated with State and USAID and were funded through the OHDACA appropriation. Generally, according to DOD, the projects were intended to assist vulnerable populations, protect them from ISIL, and support local councils, while also providing access, visibility, and influence for DOD forces. Appendix IV presents a full list of DOD’s reported conflict stabilization efforts and their respective goals for Iraq and Syria, active in fiscal year 2017. Efforts reported by USIP as active in fiscal year 2017. Although USIP generally refers to all of its work as “conflict prevention and resolution,” USIP officials stated that all of USIP’s efforts fit under the general umbrella of conflict prevention, mitigation, and stabilization and thus reported all of USIP’s efforts abroad for Iraq, Nigeria, and Syria (and in neighboring countries for Syria) that were active in fiscal year 2017. USIP reported that it conducts its efforts in conjunction with local staff and implementing partners. According to USIP, some USIP efforts are supported through interagency agreements with U.S. agencies. For Iraq, USIP reported eight efforts as active in fiscal year 2017. USIP reported that it facilitated targeted dialogues among Iraq’s religious minorities to address security and governance challenges to reduce the likelihood of recurring violence and enable the return of IDPs. These dialogues created a monitoring framework to provide early warnings of potential violence. USIP also reported that it facilitated dialogues among Iraqis intended to prevent revenge acts of violence, facilitate the return of the internally displaced, and increase the resilience of communities to violent extremism from ISIS or others. Additionally, USIP reported that it provided both governmental and nongovernmental organizations with training in conflict management and identified influential religious leaders in specific conflict zones for future Iraqi-led mediations, dialogues, and peace and reconciliation efforts. Further, USIP reported that it conducted multiple justice and security dialogues that included police and government officials and citizens in areas affected by the aftermath of ISIS to collect and disseminate lessons learned and best practices. For Nigeria, USIP reported 14 efforts as active in fiscal year 2017. USIP reported that it conducted training programs, facilitated dialogues, established working groups, collected and shared lessons learned and best practices, and conducted in-country research and assessments involving civilian populations, nongovernmental organizations, police, and youth. The intent of these programs, according to USIP, was to reduce violent conflict and its root causes, strengthen the country’s recovery from Boko Haram, and prevent the emergence of other extremist groups in support of long-term stability. In addition, according to USIP, the institute connected U.S. policymakers with key Nigerian officials at the subnational levels who wield significant influence in Nigeria’s federal government system but with whom the United States has had limited contact. Figure 6 depicts a USIP symposium in Washington, D.C., funded by State, which included governors from states across northern Nigeria to foster key exchanges and critical discussions with leading American and international experts on the drivers of violent conflict in the region and how to resolve them. For Syria, USIP reported three efforts as active in fiscal year 2017. USIP reported that it held dialogues with interfaith and other key leaders to strengthen civil society’s engagement and coordinating role with civic, religious, and tribal leaders on conflict management and prevention. For one effort, according to USIP, it has three ongoing grants related to the Syria conflict in neighboring countries that focus on reducing tensions associated with the absorption of Syrian refugees. Appendix V presents a full list of USIP’s reported efforts and their respective goals for Iraq, Nigeria, and Syria, active in fiscal year 2017. State, USAID, DOD, and, where appropriate, USIP have incorporated aspects of key collaboration practices to coordinate their conflict prevention, mitigation, and stabilization efforts for Iraq, Nigeria, and Syria. However, the agencies have not documented their agreement on coordination for stabilization efforts in conflict-affected areas through formal written guidance and agreements that address key collaboration practices. The agencies have individually and jointly established some common outcomes for stabilization efforts in Iraq, Nigeria, and Syria. Additionally, State, USAID, DOD, and USIP have generally taken steps to bridge their organizational cultures; identify sources of leadership that facilitate coordination; establish roles and responsibilities; and include relevant participants for their conflict prevention, mitigation, and stabilization efforts in these countries. During the course of our review, State, USAID, and DOD released the SAR, which identified areas where U.S. government coordination for stabilization efforts in conflict-affected areas could be improved; however, the agencies have not documented their agreement as to how they will coordinate these efforts in formal written guidance and agreements that address key collaboration practices. Because multiple federal entities are engaged in U.S. conflict prevention, mitigation, and stabilization efforts in Iraq, Nigeria, and Syria, there is some inherent fragmentation in their efforts as well as the potential for overlap and duplication. According to key practices for enhancing interagency collaboration, articulating interagency agreement on collaborative efforts in formal documents, can strengthen those collaborative efforts and could reduce the potential for unnecessary fragmentation, overlap, and duplication. We previously found that establishing common outcomes can help agencies shape and define the purpose of their collaborative efforts. According to a senior State official, the classified country strategies maintained by the National Security Council (NSC) may contain common outcomes for some U.S. conflict prevention, mitigation, and stabilization efforts. However, the NSC did not respond to our requests for information regarding NSC-level country strategies for Iraq, Nigeria, and Syria. In the absence of information from the NSC, we reviewed information provided by the agencies as well as other government documents and found that outcomes for U.S. stabilization efforts in Iraq, Nigeria, and Syria have generally been established by one or more of the agencies. For example, for its stabilization efforts for Iraq, USAID reported that its outcome metric is the return of internally displaced populations to their communities. USAID also reported that it monitors progress toward this outcome using, in part, quarterly reporting from the United Nations Development Program (UNDP), the implementer for the primary mechanism through which the United States and other donor partners fund stabilization efforts in Iraq. Similarly, in the case of Nigeria, the U.S. government has established common outcomes and accountability mechanisms related to U.S. efforts to counter Boko Haram and ISIS-West Africa, which includes stabilization assistance. For example, the interagency, NSC-approved U.S. Strategy for Countering Boko Haram/ISIS-West Africa (March 2017), states that the United States seeks long-term end states under which Lake Chad Basin countries, in tandem with local authorities and international partners, are able to address specific regional and community-level conditions that are drivers of conflict and that make communities vulnerable to violent extremist groups. The National Counterterrorism Center facilitates an annual assessment of this strategy, and State, USAID, and DOD review their progress toward achieving objectives in this strategy during weekly meetings, according to State officials. For Syria, in January 2018, then-Secretary of State Tillerson identified the creation of conditions for the safe and voluntary return of Syrian refugees and internally displaced persons as one of several end states for Syria. However, agency officials reported different views regarding clarity about end states and goals for U.S. efforts in Syria. While some U.S. officials we interviewed could point to sources for U.S. strategy in Syria, other U.S. officials told us that the United States’ policy and goals for Syria were unclear. State and DOD officials indicated that the U.S. goals for Syria change in response to conditions where U.S. agencies and their partners operate. A USAID official told us that events on the ground often overtake U.S. efforts, and the complicated regional dynamics also affect U.S. policy goals. Moreover, the U.S. government has also developed Integrated Country Strategies for Iraq and Nigeria. The Integrated Country Strategies developed by U.S. embassies and missions may contain outcomes related to, but not necessarily specific to, U.S. conflict prevention, mitigation, and stabilization efforts abroad, according to a senior State official. According to State guidance, Integrated Country Strategies should articulate a common set of U.S. government goals and objectives in a country and may also outline performance indicators to measure progress toward each mission objective. The guidance further states that the development of these strategies should include coordination and collaboration among State, USAID, and other U.S. government agencies at the mission. Finally, at a global-level, State, USAID, and DOD have identified a need to improve the outcomes and accountability of U.S. stabilization efforts. Specifically, the 2018 SAR recommended that State, USAID, and DOD work with relevant U.S. embassy, State regional bureaus, DOD combatant commands, and other stakeholders to develop an outcome- based political strategy for stabilization in countries where stabilization is a high priority. The SAR notes the importance of developing an outcome-based political strategy that outlines core assumptions and achievable end states and that guides all lines of effort to ensure unity of purpose within the U.S. government. The SAR also identified a need to establish indicators to measure changes in the conflict environment and track them consistently over time and stated that doing so could facilitate more rigorous reviews by policy makers to determine whether adjustments are needed in U.S. government political strategy and objectives. State and USIP officials reported that due to USIP’s status as an independent, federally funded institute that operates outside of executive branch mechanisms, USIP is not a direct participant in processes to establish common outcomes and accountability mechanisms for U.S. government conflict prevention, mitigation, and stabilization efforts. We previously found that it is important for agencies to establish ways to operate across agency boundaries. According to State, USAID, and DOD officials, they have taken steps to bridge their different organizational cultures with regard to their conflict prevention, mitigation, and stabilization efforts for Iraq, Nigeria, and Syria. Specifically, officials said that they have developed a variety of ways to jointly operate across agency boundaries, such as through interagency groups and special coordination positions. USIP does not participate in such interagency mechanisms; however, it reported that it communicates and coordinates with State, USAID, and DOD through other means, such as through bilateral communications and interagency tabletop exercises. State, USAID, and DOD have established various interagency groups to coordinate their efforts for Iraq, Nigeria, and Syria. According to State, USAID, and DOD officials, interagency working groups help agencies to reduce the potential for overlap and duplication of effort. Examples of interagency groups, by country, are described below. Iraq: A “Liberated Areas Working Group” serves as a clearinghouse and information exchange for both mission-level and headquarters- based counterparts to coordinate agencies’ post-ISIS stabilization efforts for Iraq. As another example, the Ambassador or Deputy Chief of Mission at Embassy Baghdad leads a stabilization and humanitarian assistance working group that meets biweekly and includes participation from State, USAID, and DOD. Nigeria: In 2015, State established an interagency group, headed by a retired U.S. Ambassador, that aims to ensure the coordination of U.S. government efforts to counter Boko Haram. Additionally, the U.S. mission in Nigeria has working groups that examine various issues, such as U.S. efforts to mitigate conflict in the country and address conflict issues in northeast Nigeria. Syria: Given that the U.S. agencies do not have an embassy-based presence in Syria, State, USAID, and DOD coordinate their stabilization efforts for Syria through three interagency platforms: the Southern Syria Assistance Platform (SSAP), located in Jordan; the Syria Transition Assistance Response Team (START), located in Turkey; and, according to a State official, START-Forward in northeastern Syria, which reports to START. START and SSAP personnel noted that the colocation of State and USAID personnel through these platforms has facilitated coordination between the two agencies, including information sharing. Further, a State Office of Inspector General inspection of the U.S. Embassy Ankara, Turkey, described START as a “cohesive unit” that blends State and USAID officials, and as a unique and “innovative model for diplomacy in dangerous environments.” In addition, for northeast Syria, START established four stabilization-related working groups that meet on a regular basis and include civilian and military representation. USIP does not participate in these interagency working groups. Rather, USIP reported that it coordinates on a bilateral, multilateral, and as- needed basis with State, USAID, and DOD headquarters personnel as well as with embassy personnel in the countries where USIP conducts work. USIP also reported that it convenes interagency officials through various programs and events, such as tabletop exercises and conferences. For example, in 2016, USIP convened State, USAID, and DOD, along with various nongovernmental and international organizations, to design and implement a tabletop exercise on countering violent extremism in the Lake Chad Basin. State, USAID, and DOD officials reported that they also bridge their organizational cultures through staff positions that are aimed at enhancing interagency collaboration, such as liaison positions and officials who are embedded in other organizations. For example, SSAP and START each have civil-military liaisons, and agency officials said that these positions have helped to facilitate information sharing among State, USAID, and DOD. As another example, DOD officials reported that embedded State and USAID officials at U.S. Africa Command have helped to inform DOD’s perspective on stabilization in Nigeria. USIP reported that to help bridge organizational cultures and enhance cooperation with its agency partners, the institute operates an annual interagency fellows program. Through the program, USIP hosts one fellow each from State and USAID, and two military officers—one Marine lieutenant colonel and one Army lieutenant colonel—to conduct research and work alongside USIP program staff, according to USIP. In 2018, State, USAID, and DOD established a common definition of “stabilization.” The three agencies have not established common definitions of the terms “conflict prevention” and “conflict mitigation.” In the SAR, State, USAID, and DOD defined “stabilization” as “a political endeavor involving an integrated civilian-military process to create conditions where locally legitimate authorities and systems can peaceably manage conflict and prevent a resurgence of violence. Transitional in nature, stabilization may include efforts to establish civil security, provide access to dispute resolution, and deliver targeted basic services, and establish a foundation for the return of displaced people and longer term development.” According to USAID’s Administrator, the SAR built on lessons learned from Iraq and Syria, among other locations. The SAR states that, despite the U.S. government’s significant international experience in conducting stabilization efforts over recent decades, the U.S. government’s concept of stabilization was previously ill-defined and poorly institutionalized across government structures. The SAR also notes that the lack of standardization in defining and conducting stabilization led to repeated mistakes, inefficient spending, and poor accountability for results. During the course of our review, agency and USIP officials expressed varying views related to the feasibility of articulating a common definition for “conflict prevention” and “conflict mitigation.” For example, State and USAID officials noted that all of their agencies’ foreign assistance and diplomatic efforts could be considered conflict prevention. USAID also noted that defining the issues or problem sets associated with “conflict prevention” or “conflict mitigation” will depend, in part, on the context in which the relevant government agency engages on those issues. In addition, State’s Bureau of Conflict and Stabilization Operations opined that conflict management and mitigation is an evolving field of practice as well as an area that can encompass a very broad and multifaceted range of efforts, including diplomacy, foreign assistance, sanctions, and mobilization of international actions. Agency and USIP officials did not identify a negative effect associated with the lack of common definitions of the terms “conflict prevention” and “conflict mitigation.” Nonetheless, according to State and DOD officials, the agencies have started discussing the merits and feasibility of defining “conflict prevention.” For example, in response to our inquiry during a joint meeting of the three agencies with us in March 2018 to discuss the SAR, a senior State official noted that the three agencies were collectively exploring the feasibility of developing a standardized definition and harmonized approach for conflict prevention. In its technical comments to our draft report, State indicated that the agencies have begun to collaborate on the development of a definition for “conflict prevention.” In addition, as part of its planned structural reorganization of its headquarters bureaus, USAID is proposing the establishment of a new Bureau for Conflict Prevention and Stabilization. We previously found that it is important for agencies to identify sources of leadership for the collaborative effort. Agency and USIP officials identified sources of leadership, such as various NSC committees and special leadership positions, that facilitate coordination of the U.S. government’s conflict prevention, mitigation, and stabilization efforts for Iraq, Nigeria, and Syria. State and DOD officials reported that the NSC plays a leadership role in providing strategic direction and policy guidance on issues related to conflict prevention, mitigation, and stabilization. State and DOD officials also said that the NSC convenes interagency actors, including State, USAID, and DOD, to discuss high-level issues in these areas. State reported that the NSC Fragile States and Stabilization Policy Coordination Committee is the broadest conflict-related coordination group. State also reported that a significant degree of NSC-level coordination on conflict-related issues occurs through country- specific working groups, including the groups for Iraq, Syria, and Nigeria. The NSC-level Atrocities Prevention Board is another interagency mechanism that covers conflict-related issues. It has the primary purpose of coordinating a whole-of-government approach to prevent mass atrocities and genocide. While USIP is not a member of NSC-level groups, USIP reported that it engages with the NSC regarding national security issues on a bilateral basis. Agency officials also told us that various special diplomatic positions, such as special envoys and designated coordinators, are a source of leadership for the coordination of U.S. efforts to address conflict abroad. State and USAID officials cited the role of the Special Presidential Envoy for the Global Coalition to Counter ISIS, who reports to the Secretary of State, as a source of leadership for U.S. stabilization efforts for Iraq and Syria. State officials also cited the former U.S. Special Envoy for Syria position as a source of leadership for U.S. efforts for Syria. In 2015, the Assistant Secretary of State for African Affairs at the time appointed a retired Ambassador as Senior Coordinator on Boko Haram for the Lake Chad Basin region (which includes Nigeria), according to a State official. The Senior Coordinator on Boko Haram chairs a weekly interagency working group that includes a wide array of U.S. agency offices, including State, USAID, and DOD elements at both the headquarters and field-levels. According to DOD and State officials, the weekly meetings led by the Senior Coordinator on Boko Haram have helped U.S. agencies deconflict their efforts. According to a USIP report, the Senior Coordinator position has improved the U.S. government’s ability to align its efforts at both senior and working levels and has supported broad, interagency information sharing and coordination in the development of a common U.S. strategy to defeat Boko Haram. Agency officials also cited field-level leadership as helpful in coordinating U.S. government efforts for Iraq, Nigeria, and Syria. For example, for Nigeria, a USAID official told us that the Ambassador and the Deputy Chief of Mission at the U.S. embassy have enhanced and led interagency coordination. The Ambassador has provided input to help deconflict U.S. programming related to conflict mitigation and stabilization, according to this USAID official. For Syria, agency officials identified the leadership of START as helpful in coordinating U.S. stabilization efforts for Syria. Agency officials provided various views regarding the sufficiency of leadership mechanisms currently in place for coordinating U.S. stabilization efforts for Syria. While U.S. field-level efforts for Iraq and Nigeria are led by Ambassadors, the U.S. government’s ambassadorial position for Syria has been vacant since 2014. Some officials told us there was a lack of centralized leadership and decision-making authority for Syria, while others said that the current leadership structures were generally sufficient for the coordination of U.S. government efforts for Syria. We previously found that it is important for agencies to define and agree on their respective roles and responsibilities for a collaborative effort. We found that agencies’ roles and responsibilities for conducting stabilization efforts for Iraq, Nigeria, and Syria were generally clear, and through the SAR, agencies have taken steps to clarify their stabilization roles and responsibilities at a global level. USAID officials reported that the agency has largely funded and overseen stabilization efforts for Iraq through the UNDP and local implementers. In Syria, State and USAID reported that they formed a combined team for implementing stabilization assistance, with support and equipment supplied by the U.S. military. For Nigeria, according to DOD and USAID officials, roles and responsibilities for agencies, including lead and supporting roles, have been defined for the U.S. counter Boko Haram and ISIS-West Africa effort. Through the 2018 SAR, State, USAID, and DOD recommended the clarification of their respective roles and responsibilities for conducting U.S. stabilization efforts abroad. The SAR recommended State as the overall lead federal agency for U.S. stabilization efforts, USAID as the lead implementing agency for nonsecurity U.S. stabilization assistance, and DOD as a supporting federal agency that provides security and reinforces civilian efforts where appropriate. The SAR noted that clear lines of authority between U.S. agencies would improve effectiveness, reduce duplication and confusion, enable greater accountability, and fully operationalize a whole-of-government approach. In June 2018, the Secretaries of State and Defense and the USAID Administrator approved the SAR, including its recommendations regarding proposed U.S. agency roles and responsibilities for U.S. stabilization efforts. In addition to the SAR, a 2018 DOD-sponsored study also recommended that DOD play a primarily supporting role in non-military, U.S. stabilization efforts. According to a DOD official, DOD is in the process of updating its stabilization policy to reflect DOD’s supporting role in U.S. government stabilization efforts, in accordance with the SAR. As indicated above, U.S. agencies do not distinguish their coordination of prevention and mitigation efforts as discrete areas of work; as a result, we were unable to assess specific roles and responsibilities among U.S. agencies for these areas. According to USIP, it aims to complement U.S. executive branch efforts and partner with U.S. agencies to prevent and resolve conflict in areas of interest to U.S. security. USIP reported that it convenes U.S. government and non-U.S. government entities on a variety of high-level policy issues; conducts its own research and programs; and partners with U.S. agencies to conduct research and programs abroad. State, DOD, and USAID officials said that USIP plays a valuable, unique, and helpful role given its status as an independent organization, its specialized expertise, its ability to convene interagency actors in a non-official setting, and its ability to build local relationships through a continuous, field-based presence in certain countries. For example, State officials and nongovernmental partners of USIP in Nigeria told us that USIP played a beneficial role in convening national and local Nigerian leaders for peace and reconciliation dialogues. We previously found that it is important to ensure that the relevant participants have been included in the collaborative effort. U.S. government entities conducting conflict prevention, mitigation, and stabilization efforts abroad have demonstrated the key collaboration practice of ensuring the inclusion of all relevant participants. State, USAID, DOD, and other agency officials identified State, USAID, and DOD as the primary U.S. government agencies that participate in mechanisms to coordinate U.S. conflict prevention, mitigation, and stabilization efforts abroad. Agency officials conducting such efforts for Iraq, Syria, and Nigeria reported that the relevant participants—State, USAID, and DOD—are involved in the coordination of such efforts. USIP also reported that it participates in U.S. conflict prevention, mitigation, and stabilization efforts through a variety of means. At the headquarters-level, USIP officials told us that they conduct both regular and as-needed consultations and discussions with senior agency officials at the NSC, State, USAID, DOD, and other agencies. USIP and State officials also indicated that they coordinate their Iraq, Nigeria, and Syria programs that are funded by State through interagency agreements. USIP officials said that it is in communication with the embassies where USIP has a USIP office or ground presence. For Iraq, State and USIP officials located in-country said that they contact one another as needed. According to USIP, in March 2018, it reestablished an American country manager position in Baghdad, Iraq, whose responsibilities include regular communication and coordination with relevant U.S. government officials. For Nigeria, USAID and USIP officials said that USIP participates in a peace and security network that brings together international nongovernmental organizations and governmental actors—including USAID—to share information on peace and security efforts being conducted in Nigeria. We previously found that agencies that articulate their agreements in formal documents can strengthen their commitment to working collaboratively. We found that U.S. agencies and USIP have documented some aspects of how they coordinate their conflict prevention, mitigation, and stabilization efforts in Iraq, Nigeria, and Syria. However, State, USAID, and DOD have not documented their agreement from the SAR on how they will coordinate their global stabilization efforts in conflict-affected areas, such as their agreements on common outcomes and accountability and their roles and responsibilities for conducting U.S. stabilization efforts. Specifically, we found that U.S. agencies and USIP have documented some aspects of how they coordinate their conflict prevention, mitigation, and stabilization efforts in Iraq, Nigeria, and Syria. Notably, USIP provided us with examples of its written agreements with U.S. agencies for which USIP implements conflict prevention and mitigation programming with agency funding. USIP has written agreements with USAID and various State bureaus for programs implemented in Iraq, Nigeria, and Syria. According to USIP officials in Nigeria, USIP and State coordinated the planning and implementation of their efforts during the course of these interagency agreements. In June 2018, State publically announced that the Secretaries of State and Defense and the USAID Administrator approved the SAR’s recommendations regarding U.S. stabilization efforts, such as the SAR’s recommendations to establish outcomes and accountability mechanisms and to formally define agencies’ stabilization roles and responsibilities. According to the SAR, while the principles for effective stabilization, such as clarified and formally defined roles and responsibilities, have been widely studied, they have not been systematically applied and institutionalized. According to key practices for enhancing interagency collaboration, articulating agreements in formal documents can strengthen collaborative efforts, and reduce the potential for fragmentation, overlap, and duplication. However, the SAR remains a “framework” that, according to State, has yet to be translated into agency policy and practice, and State, USAID, and DOD have not yet developed a plan to implement the SAR recommendations. State, USAID, and DOD officials acknowledged the importance of codifying their agreement on the collaboration elements raised in the SAR but said that they had not yet decided on a specific document or documents for doing so. For example, officials discussed the idea of establishing an interagency memorandum among the three agencies to codify their specific roles and responsibilities for conducting stabilization efforts, but they indicated that next steps will depend on various factors, such as decisions with regard to State’s and USAID’s ongoing organizational redesign processes. Agency officials also indicated that they are considering implementing the SAR’s recommendations through issuing written, internal guidance within each agency. We have previously found that written guidance, such as an implementation plan or memorandum of agreements, can help agencies during times of transition when leadership changes and there is a need for continuity. By formally documenting agreements according to key leading practices, the agencies will be better positioned to strengthen their collaborative efforts, and reduce any potential for fragmentation, overlap, and duplication. In the National Security Strategy issued in December 2017, the United States emphasized the need to integrate all instruments of the United States’ national power in order to deter conflict and secure peace. State, USAID, DOD, and USIP work individually and jointly to prevent and mitigate conflict and stabilize conflict-affected areas. Although the three agencies have incorporated aspects of key practices in the coordination of their conflict prevention, mitigation, and stabilization efforts in Iraq, Nigeria, and Syria, they have not fully demonstrated the key practice of documenting agreements in written guidance. By articulating their agreement in formal documents, such as a memorandum of agreement or an implementation plan, these agencies can strengthen their coordination of U.S. stabilization efforts. We are making a total of three recommendations, one each to State, USAID, and DOD. Specifically: The Secretary of State, in collaboration with the Administrator of the U.S. Agency for International Development and the Secretary of Defense, should document their agreement on coordination for U.S. stabilization efforts through formal written guidance and agreements that address key collaboration practices such as defining outcomes and accountability and clarifying roles and responsibilities for U.S. stabilization efforts. (Recommendation 1) The Administrator of the U.S. Agency for International Development, in collaboration with the Secretaries of Defense and State, should document their agreement on coordination for U.S. stabilization efforts through formal written guidance and agreements that address key collaboration practices such as defining outcomes and clarifying roles and responsibilities for U.S. stabilization efforts. (Recommendation 2) The Secretary of Defense, in collaboration with the Administrator of the U.S. Agency for International Development and the Secretary of State, should document their agreement on coordination for U.S. stabilization efforts through formal written guidance and agreements that address key collaboration practices such as defining outcomes and accountability and clarifying roles and responsibilities for U.S. stabilization efforts. (Recommendation 3) We provided a draft of this report to State, USAID, and DOD for comment. State, USAID, and DOD concurred with the recommendations and provided comments, which are reproduced in appendixes VI through VIII, respectively. State, USAID, and DOD also provided technical comments, which we incorporated as appropriate. We also provided a draft of this report to USIP for comment. USIP’s comments are reproduced in appendix IX. USIP also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of USAID, the Secretary of Defense, the President of USIP, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or FarbJ@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix X. This report (1) describes examples of conflict prevention, mitigation, and stabilization efforts that U.S. agencies and the U.S. Institute of Peace (USIP) conducted in Iraq, Nigeria, and Syria and their goals in fiscal year 2017 and (2) examines the extent to which U.S. agencies and USIP incorporated key collaboration practices to coordinate their efforts. To address both objectives, we reviewed the conflict prevention, mitigation, and stabilization efforts of the Departments of State (State) and Defense (DOD), the U.S. Agency for International Development (USAID), and USIP. We reviewed program, coordination, strategy, and planning documentation and interviewed State, USAID, DOD, and USIP officials at headquarters and in the field with regard to specific efforts in Iraq, Nigeria, and Syria. We conducted work in Washington, D.C.; Iraq; Nigeria; and Jordan and held teleconferences with officials in Syria, Turkey, and Kuwait. At the posts, we interviewed U.S. embassy leadership, agency program officers, and implementing partners, where available. We focused on Iraq, Nigeria, and Syria based on several criteria, including U.S. national security interests, countries with ongoing conflict, countries where all three agencies and USIP initially reported that they conducted relevant efforts in fiscal year 2017, prior GAO reporting, and input from agencies and USIP. We cannot generalize our findings from these three countries to the other countries where these agencies have conflict prevention, mitigation, and stabilization efforts. Specifically, we interviewed officials at the following entities. State officials in the Bureau of African Affairs; Bureau of Conflict and Stabilization Operations; Bureau of Democracy, Human Rights, and Labor; Bureau of International Narcotics and Law Enforcement; Bureau of Near Eastern Affairs; Bureau of Political-Military Affairs; Bureau of Public Affairs; Office of the Inspector General; Office of the Special Presidential Envoy for the Global Coalition to Defeat ISIS (the Islamic State of Iraq and Syria); and the Office of U.S. Foreign Assistance Resources; USAID officials in the Bureau for Africa; Bureau for Democracy, Conflict, and Humanitarian Assistance; and Bureau for the Middle East; DOD officials in the Office of the Secretary of Defense, Office of the Joint Chiefs of Staff, U.S. Africa Command, and U.S. Central Command; and USIP officials in the Middle East and Africa Center and the Policy, Learning, and Strategy Center. To describe examples of conflict prevention, mitigation, and stabilization efforts that U.S. agencies and USIP conducted in Iraq, Nigeria, and Syria and their goals in fiscal year 2017, we collected, synthesized, and summarized information from State, USAID, DOD, and USIP. First, we obtained the definitions of conflict prevention, mitigation, and stabilization from each entity to the extent each entity used and defined these terms. Based on our discussions with each agency and USIP, we determined that we could not use one common definition, as each agency and USIP defined these terms based on its programs and the context of its operations; thus, we would have had to use overlapping terms and definitions to capture their efforts for fiscal year 2017. State and USAID used the term “conflict mitigation and stabilization” and defined their efforts as foreign assistance programs that reduce the threat or impact of violent conflict and promote the peaceful resolution of differences, mitigate violence if it has already broken out, establish a framework for peace and reconciliation, and provide for the transition from conflict to post-conflict environments. DOD used the term “stabilization” and defined it as “an integrated civilian and military process applied in designated fragile and conflict affected areas outside the United States to establish civil security, address drivers of instability, and create conditions for sustainable stability—a condition characterized by local political systems that can peaceably manage conflict and change; effective and accountable institutions that can provide essential services; and societies that respect fundamental human rights and the rule of law.” USIP generally referred to its work as conflict prevention and resolution, which may include conflict prevention, mitigation, and stabilization efforts. USIP did not have current definitions for these terms in fiscal year 2017. USIP officials stated that all of USIP’s efforts would fit under the general umbrella of conflict prevention, mitigation, and stabilization and reported all of USIP’s efforts abroad for Iraq, Nigeria, and Syria (and in neighboring countries for Syria) that were active in fiscal year 2017. Second, to collect the data describing the efforts and their goals from each agency and USIP, we developed a standardized data collection instrument. We defined “efforts” as any program, initiative, or other similar level of engagement and also accepted projects and activities when reported. We had each agency and USIP use its own terms, definitions, and categorizations of efforts in this instrument. Based on our discussions with the agencies and USIP, we determined that this would still allow us to collect a comprehensive set of programs from each entity and to learn about their key efforts in this domain. However, we recognize that some entities might have included programs that other entities would not have included, even though both entities’ programs may have had many similarities, because of the entities’ differing definitions and terms. To ensure that our report could be made publically available, we also accepted reported categories of programs if listing each program separately would have meant including controlled unclassified information (sensitive but unclassified) . Within the data collection instrument, we asked agencies to report efforts by country, specifically, for Iraq, Nigeria, and Syria. To corroborate entries in the instrument, we requested that the agencies and USIP also provide one document or website link supporting each entry. Not all agencies fully complied with this request. In some cases, we conducted web searches for any publicly available supporting information. Third, we reviewed the reported data and supporting documents and obtained clarification from agency officials where needed. We synthesized and summarized information for each effort in this report’s appendixes and, at a higher level, in the body of the report. We requested technical comments on our summarized information from the agencies and USIP, and incorporated their suggestions as appropriate. We did not independently verify whether the reported lists of conflict prevention, mitigation, and stabilization efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria). To examine the extent to which U.S. agencies and USIP incorporated key collaboration practices to coordinate their conflict prevention, mitigation, and stabilization efforts, we analyzed information about State, USAID, DOD, and USIP’s coordination using six of the seven key practices for implementing interagency collaborative mechanisms that we have previously identified and that were applicable to our review. We assessed coordination of agency and USIP efforts for conflict prevention, mitigation, and stabilization as a whole because, as indicated above, the agencies did not always distinguish their coordination efforts to address conflict using the same terms or categorization of efforts. Where information was available, we assessed whether the agencies and USIP had generally incorporated or not incorporated the six selected key practices to coordinate their efforts between State, USAID, DOD, and USIP at the headquarters level and for our selected countries of Iraq, Nigeria, and Syria. To make this determination, we examined agency and USIP documents and conducted interviews about interagency collaboration activities with officials from State, USAID, DOD, and USIP. We reviewed agency reports; jointly developed and independently developed strategies; interagency agreements; monitoring reports; and public statements by senior U.S. government officials, among other documents. We also reviewed agency and third-party reports that assessed interagency collaboration, among other issues, though it was beyond the scope of this review to assess the methodology or underlying data in these reports. During the course of our work, State, USAID, and DOD released the 2018 Stabilization Assistance Review: A Framework for Maximizing the Effectiveness of U.S. Government Efforts to Stabilize Conflict-Affected Areas. This report assessed U.S. stabilization assistance globally in conflict-affected areas. We reviewed the contents of the report and interviewed agency officials associated with this review to better understand their findings as may be related to the key collaboration practices applicable to our review. Although the National Security Council (NSC) is responsible for coordination of security-related activities and functions of the executive departments and agencies, the NSC did not respond to our request for documents and interviews. We mitigated this limitation by interviewing officials at the three agencies and reviewing other available documentation including the U.S. Strategy for Countering Boko Haram/ISIS-West Africa and the U.S. Strategy to Counter the Islamic State of Iraq and the Levant. During our visit to the U.S. embassy in Nigeria, we observed meetings for two interagency working groups. We also interviewed implementing partners for U.S. government and USIP efforts in Iraq, Jordan, and Nigeria. We used our analysis of agency and USIP documents and the results of our interviews with officials to assess collaboration practices among State, USAID, DOD, and USIP. To aid in our analysis of coordination from our review of documents and interviews, we used the information obtained under the first objective and compared State, DOD, USAID, and USIP descriptions of each of their efforts in Iraq, Nigeria, and Syria to assess for any unnecessary duplication. As discussed above, some entities may have included efforts that other entities would not have included based on their definitions for the terms in our scope. As a result, our analysis only includes the list of programs provided by the agencies to assess for duplication. We conducted this performance audit from April 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Anti-Terrorism Assistance Program (ATA) The Department of State’s (State) ATA Program is managed by the Bureau of Counterterrorism and implemented by the Bureau of Diplomatic Security. The ATA program trains and equips selected Iraqi law enforcement agencies to counter improvised explosive devices, respond to critical incidents, and conduct terrorism related investigations. ATA funds support training courses, consultations, associated equipment deliveries, and training support costs in Iraq and other selected third-country training locations. ATA provides the antiterrorism training and equipment to help Iraqi law enforcement agencies deal effectively with security challenges within their borders, to defend against threats to national and regional stability, and to deter terrorist operations across borders and regions. ATA assists efforts to defeat the Islamic State of Iraq and Syria (ISIS) and counter transnational terror groups and organizations by curtailing the transit of foreign terrorist fighters throughout the country and mitigating the effects of terrorist incidents. State’s Bureau of Democracy, Human Rights, and Labor (DRL) conducts Good Governance Programs in Iraq through grants to implementing partners. These programs aim to advance the equitable representation of religious and ethnic minority groups and internally displaced persons (IDP), women, and other populations marginalized in governance structures. The programs are also intended to promote equitable access to resources and services and support reform efforts on key issues of human rights and democratic governance. Programming engages civil society to develop and implement key democratic reform processes and institutions in both the central government and the Kurdistan Regional Government. The goals of Good Governance Programs in Iraq are to strengthen citizen-responsive governance, security, and rule of law to prevent instability, violence, or other crises through collaboration with Iraqi partner institutions on activities that combat corruption and strengthen governance. State’s DRL conducts Political Competition and Consensus Building Programs in Iraq through grants to implementing partners. Capitalizing on political openings created through national and provincial elections, these programs intend to work with newly elected officials and parties to strengthen their ability to equitably represent the needs of their constituents, with a particular focus on outreach to minorities and marginalized populations. One publicly competed grant will support avenues for citizens to negotiate disputes and debate policy priorities through peaceful, democratic methods, and will work to ease tensions between the central government and the Kurdistan Regional Government. The overall goal of these programs is to build the capacity of the government of Iraq to take the lead in strengthening citizen-responsive governance, security, and rule of law to prevent further instability and violence. DRL programing intends to help the government of Iraq become more inclusive, transparent, and responsive with increased participation by women, youth, and religious and ethnic minorities. State’s description of effort and its goals State’s DRL conducts Rule of Law Programs in Iraq through grants to implementing partners. These programs are intended to promote reconciliation initiatives, including efforts to counter violent extremism; reintegrate returning IDPs, survivors, and their families; rehabilitate men and boys affected by the conflict; reconstitute and protect minority communities—in support of the global religious minorities earmark; and support civil society to promote accountability and transparency. More specifically, these efforts aim to (1) strengthen civil society’s ability to monitor the status of detainees and advocate for fair treatment, anti-torture, and due process; promote protection of basic human rights and democratic principles; and provide psychosocial support for trauma survivors; (2) increase accountability for human rights violations, including those associated with the current crisis, with a particular focus on the most vulnerable Iraqis, including religious and ethnic minorities, and women and children; and (3) support efforts to advocate for the rights and protections of women, girls, IDPs, victims of war— including Marla Ruzicka Iraqi War Victims Fund beneficiaries—and other marginalized groups. State’s DRL conducts Social and Economic Services and Protections for Vulnerable Populations Programs in Iraq through grants to implementing partners. Programs may include livelihood and vocational training; small and medium enterprise creation and support; psychosocial and legal aid services; compensation for war victims/reparations; and other efforts to support the rehabilitation of victims of conflict that are not reached through current assistance. These programs aim to address the post-conflict vulnerabilities of disproportionately affected marginalized populations that are often targeted by transnational terror groups and organizations to spread radicalization. The particular emphasis is on widows, single female-headed households, vulnerable youth, religious minorities in support of the global earmark, and victims of torture and war— including Marla Ruzicka Iraqi War Victims beneficiaries. State’s Bureau of Political and Military Affairs supports Explosive Remnants of War (ERW) Clearance efforts in response to recent activities of ISIS in Iraq that have dramatically altered the Conventional Weapons Destruction landscape. ISIS used mass-produced, technologically advanced improvised explosive devices (IED) to defend captured territory and target Iraqi Security Forces, as well as to booby trap homes, public spaces, farm land, and infrastructure to discourage the return of IDPs. As IDPs return to their communities, these devices continue to perpetuate ISIS’s reign of terror by indiscriminately killing civilians and impeding stabilization operations. This program, which State conducts through implementing partners, supports the urgent survey and clearance of explosive hazards from critical infrastructure associated with the delivery of clean water, electricity, healthcare, education, and transportation, as well as other sites in areas of Iraq liberated from ISIS to facilitate follow-on stabilization projects, the restoration of basic community services, and the return of IDPs. This program also supports the survey and clearance of ERW in areas impacted by legacy contamination in Iraq’s North and South. The overall goal is to assist efforts to defeat ISIS and help the government of Iraq support the safe return of Iraqis that were displaced from their homes by ISIS or liberation campaigns. State’s description of effort and its goals State’s Bureau of Political and Military Affairs conducts the Mine Risk Education and Victims’ Assistance programs in Iraq through grants to implementing partners. The risk education program teaches men, women, and children across Iraq about the dangers posed by explosive hazards. This program focuses on IDPs who will be returning to areas liberated from ISIS as well as communities who have already returned to liberated areas. The program also provides risk education to people in North and South Iraq who live and work near legacy ERW contamination. The goal of this program is to strengthen citizen-responsive governance and security to prevent further instability and violence as well as to bolster human security. State’s Bureau of International Narcotics and Law Enforcement, Office of Africa and Middle East Programs, is responsible for the Advance Human rights Training for Law Enforcement Officers effort. It provides advanced human rights training to Nigerian Police Force officers deploying to the northeast and to trainers from the force’s academies and colleges (a train-the-trainer focus). The goal of the effort is to increase the Nigerian Police Force’s capacity to better prevent, detect, respond to, and investigate crime while protecting the rights of all citizens. Arewa 24—Hausa Language Media Platform State’s Bureau of African Affairs, Office of Security Affairs, was responsible for supporting Arewa 24—Hausa Language Media Platform. Arewa 24 is a free-to-air satellite TV channel and trans-media platform based in Kano, Nigeria. Positive narratives intended to help counter violent extremism were inserted into general entertainment programming aimed at young Hausa speakers in Northern Nigeria. Arewa 24 contributed to a sustainable ecosystem of indigenous capacity to create, develop, produce, and disseminate countering violent extremism (CVE) programming. State supported this effort through grants to an implementing partner. State’s Bureau of Counterterrorism also managed separate awards in support of this program. This effort was a Trans-Sahara Counterterrorism Partnership (TSCTP) project, and the U.S. Embassy Abuja Public Affairs Section also supported it. The goals of the effort were to (1) sustain broadcast quality of credible, effective, and entertaining CVE television programming; (2) increase the capacity of media professionals in Northern Nigeria to produce CVE programming; (3) expand the reach of Arewa 24’s messaging in Nigeria through agreements and arrangements with other distribution channels; and (4) continue to build commercially derived revenue, paving the way to sustainability. Although all U.S. funding for this program ended on September 30, 2017, Arewa 24 remains on the air through support from private Nigerian investors. State’s Public Affairs Section at the U.S. Embassy Abuja conducts the Community Engagement of Federal Security Agents in Peace and Trustbuilding effort through a grant to an implementing partner. This project is intended to promote confidence- building measures between youth and government of Nigeria law enforcement and security personnel in Kaduna state. The goal is to improve cooperation between local residents and the government’s law and security forces essential to deterring and capturing members of violent extremist organizations. Conflict mitigation and stabilization effort CVE Messaging Center—White Dove (Farar Tattabara) State’s description of effort and its goals State’s Bureau of African Affairs, Office of Public Diplomacy and Public Affairs, conducts this effort through a cooperative agreement and grant to an implementing partner. This effort supports the establishment of a messaging center to produce three original radio programs in the Hausa language broadcast weekly over 22 stations across 19 states of northern Nigeria. The program also includes a social media component. The three radio programs deal with themes of de-radicalization, rehabilitation, and reintegration. The primary goal is to produce and disseminate counter-violent extremism organization messaging to mitigate efficacy of such organizations’ propaganda and recruitment efforts. State’s Bureau of African Affairs, Office of Security Affairs, conducted the Ending Labor Exploitation of Almajiri Children and De-Escalating Insecurity project through a grant to an implementing partner. The project aimed to reduce vulnerabilities associated with the Almajiri education system by (1) enhancing public awareness of the threat presented to community security by the present state of degeneration of the system of Almajiri education; (2) mobilizing the voices of key community stakeholders, including teachers, parents, religious scholars and institutions; and (3) supporting the government to put in place adequate laws and policies to reform the system and combat exploitation of the Almajiri in the state of Kano. This effort was a TSCTP project, and the U.S. Embassy Abuja Public Affairs Section also supported it. The project’s goal was to contribute to ending the systemic labor exploitation and abuse of Almajiri children prevalent in the Almajiranci system of education, and to reduce the risk of violence and insecurity in Kano state in Northern Nigeria. This project ended on January 30, 2018 State’s Bureau of International Narcotics and Law Enforcement, Office of Africa and Middle East Programs, is responsible for the Equipment Procurements for Police in Northeast Nigeria effort. This program equips police commands, stations, and officers in northeast Nigeria. The equipment includes military-grade tents, ponchos, poncho stuff sacks, cots, flashlights, flashlight holsters, individual first aid kits, and portable emergency lighting for 1,500 officers. The goal of this effort is to increase the Nigerian Police Force’s capacity to provide security in the Northeast and to lay the foundation for the safe and voluntary return of displaced persons when conditions are conducive. State’s DRL, Office of Global Programming, is responsible for the Global Center on Cooperative Security, Promoting Resilient Communities in Nigeria and Kenya effort. The U.S. Embassy Abuja Political Section also supports this effort. This 2-year program is designed to support existing networks of young civil society leaders; forge new partnerships among local civil society organizations, young people, and government stakeholders; facilitate collaborative learning activities; and organize small grant assistance and in-kind support to local civil society organizations working to prevent violent extremism. The goal of the effort is to mitigate threats of violent extremism in Nigeria and Kenya by promoting community resilience and empowering youth leaders to recognize and prevent violence committed by groups such as Boko Haram and Al Shabaab. State’s description of effort and its goals State’s Bureau of African Affairs, Office of Security Affairs, conducted the Healing, Reconciliation, and Counter-Radicalization in Adamawa, Borno, and Yobe State project through a grant to an implementing partner. Project activities were designed to help resolve tensions between individuals returning to local communities and those who remained throughout periods of instability and to reduce prejudice and stigmatization of those captured by Boko Haram (especially women who were raped and impregnated, forced into marriage, and/or kept as sex slaves). Community resilience groups were also created to promote community cohesion through the use of strategic communications and counter narratives. This effort was a TSCTP project, and the U.S. Embassy Abuja Public Affairs Section also supported it. This project ended on May 31, 2018. State’s Bureau of International Narcotics and Law Enforcement Affairs, Office of Anti- Crime Programs, is responsible for the International Law Enforcement Academy Program (ILEA)—Countering Violent Extremism Series. Nigeria is one of the member countries of ILEA Gaborone, ILEA Roswell, and the West Africa Regional Training Center in Accra. In fiscal year 2017, Nigerian law enforcement and criminal justice system personnel participated in a specialized Countering Violent Extremism (CVE) course series, which included anticorruption, community policing, combatting CVE in prisons, threat finance, post-blast investigations, and law enforcement techniques to combat terrorism. The ILEA program generates course schedules annually based on feedback from participant countries, like Nigeria, as well as U.S. federal law enforcement, and State functional and geographic bureaus. The program is also a cooperative effort that involves the expertise of trainers and agents from federal, state, municipal, and foreign law enforcement agencies. The ILEA program pursues three core objectives: building the capacity of foreign criminal justice partners of the United States to stop crime before it comes to the United States, fostering partnerships across national borders within important regions of the world, and advancing partner nations’ engagement with U.S. law enforcement agencies. The ILEA program is an important part of the interagency U.S. effort to combat transnational criminal organizations and combat violent extremism, which facilitates stability in individual countries and regions, including Nigeria. State’s Bureau of International Narcotics and Law Enforcement, Office of Africa and Middle East Programs, awarded funds to the U.S. Institute of Peace to conduct the Justice and Security Dialogues project. Under this effort, citizens and authorities work to jointly address important security challenges within select communities of the Sahel and Maghreb, including in Nigeria. Participants share knowledge and skills and support each other across the broader region. The project is targeting a community population of 430,000 in the north local government of Jos in Plateau state. The goal of the effort is to improve the relationship between security providers and citizens and to support civilian security forces to be more effective, accountable, and responsive to community needs. State’s description of effort and its goals State’s Bureau of Conflict and Stabilization Operations, Office of Africa Operations, awarded funds to the U.S. Institute of Peace to conduct the Northern Governors Dialogue. This effort supports governors of northern states, relevant federal government officials, and representative civil society leaders in addressing conflict drivers and stabilization-related challenges. The program is intended to strengthen their collective understanding of relevant issues and their capacity to develop sustainable and inclusive policies. The goal is to have an invested group of northern governors and a Senior Working Group of civil society leaders that have (1) identified a set of citizen-informed priority policy areas for northern Nigeria to prevent and resolve violent conflict, as well as to enhance stabilization efforts where appropriate, and (2) demonstrated a continued willingness to engage together on specific conflict-related issues. State’s Public Affairs Section at the U.S. Embassy Abuja, conducts the Open Minds Project through a grant to an implementing partner. This project intends to train and mentor 80 primary and secondary school students from Plateau state and Federal Capital Territory in critical thinking skills in support of CVE efforts. The goal is to better enable participants to resist messaging and recruitment efforts of violent extremist organizations State’s Bureau of Democracy, Human Rights, and Labor, Office of Global Programming, is responsible for the Search for Common Ground, Early Warning/Early Response effort. This program establishes community-based early warning and early response systems and strengthens the capacity of state and local actors to secure communities. The intent is to enhance community and state actors’ ability to protect citizens from imminent threats from Boko Haram. Overall goals of the program are to increase capacity of target communities to identify and analyze early warning signs of violence; to increase collaboration between communities and local government officials and security actors in responding to these signs; and to enhance mutual understanding of their roles in protecting their communities. State’s Public Affairs Section at the U.S. Embassy Abuja conducts the Strengthening Community Resilience through Peace Building project through a grant to an implementing partner. The project intends to train 50 youth in conflict resolution. The participants, supported by traditional elders, engage in local community-driven initiatives. The goal is to strengthen conflict resolution capacity at the community level by promoting peaceful dialogue and tolerance in S. Kaduna state. State’s Bureau of African Affairs, Office of Security Affairs, conducts this effort through a grant to an implementing partner who is to produce and air 52 episodes of a weekly radio drama based on stories of victims of the Boko Haram insurgency, especially women and children. The series focuses on reducing the risks of radicalization and recruitment, while encouraging adult listeners to reflect on the effects of the insurgency on their communities and vulnerable groups. The B Chronicles, created in English but performed in Hausa and Kanuri, are interpreted by the actors and aired on radio stations in Bauchi, Gombe, Adamawa, Yobe, and Borno states. The series targets a regional audience of approximately 6–8 million people. The goal of this project is to chronicle and help mitigate the current security challenges in Northern and Northeastern Nigeria through real life stories that encourage dialogue while fostering peace, respect, and the spirit of community. This effort is a TSCTP project, and the U.S. Embassy Abuja Public Affairs Section also supports it. State’s description of effort and its goals State’s Public Affairs Section at the U.S. Embassy Abuja conducts the Training Almajiri as Peace Promoters in Kano project through a grant to an implementing partner. This project intends to train 240 students from the formal education system and the traditional Islamic school system (Almajiri) as peace ambassadors. Student participants advocate for peaceful conflict resolution, improvements in youth education, and incorporation of Almajiri schools into the formal educational system. State’s Public Affairs Section at the U.S. Embassy Abuja conducts the Training of Youth Leaders and Community Influencers effort through a grant to an implementing partner. The project intends to train 25 youth and community influencers from Adamawa, Borno, and Yobe states as CVE messengers with enhanced leadership skills. The goal is to develop peer-to-peer CVE messengers with proven community influence to mitigate propaganda and recruitment efforts of violent extremist organizations. State’s Public Affairs Section at the U.S. Embassy Abuja conducts the Transformation of Farmer/Herder Conflict in Plateau State effort through a grant to an implementing partner. This project convenes dialogues between farmer and herder stakeholders in Plateau state to develop mechanisms to resolve disputes between these groups. The goal is to establish a multistakeholder peace architecture committee to periodically review conflict risks and to develop a framework for adjudicating conflict. State’s Public Affairs Section at the U.S. Embassy Abuja, conducts the United in Diversity effort through a grant to an implementing partner. This project aims to increase a core team of 25 youths’ conflict resolution skills and, through a Training of Trainers model, to train additional youths. The goal is to facilitate interreligious dialogue between religious groups. State’s Bureau of African Affairs, Office of Security Affairs, conducts the Vocational Training for Women in Adamawa State through a grant to an implementing partner. This effort is a TSCTP project, and the U.S. Embassy Abuja Public Affairs section also supports it. This project intends to provide rural women living in IDP camps and the surrounding communities with training and employment opportunities in poultry and cash-crop farming to help raise their social status, enhance their self-esteem, and encourage self-reliance to contribute income to their households. The goal is to help these women learn to recognize and resist techniques and methods of recruitment and radicalization to violence; and provide options for resisting recruitment into violent extremist organizations. State’s Bureau of African Affairs, Office of Security Affairs, conducts the Youth for Healthy Communities Initiative through a grant to an implementing partner. This program is a community initiative anchored in athletic competition that offers concurrent workshops and creates social and mentoring networks to engage youth on issues of civic responsibility, conflict mitigation, and the dangers of drug abuse and violent extremism. This effort is a TSCTP project, and the U.S. Embassy Abuja Public Affairs Section also supports it. The goals of this program are to build teamwork and leadership skills, foster citizen responsibility, and counter drug abuse and the risk of recruitment and radicalization to violence among vulnerable youth in the Kano city metropolitan area. State’s Bureau of Near Eastern Affairs (NEA), Office of Near Eastern Affairs Assistance Coordination, is responsible for the Access to Justice and Community Security Program, which provides training, equipment, and stipends to Free Syrian Police stations in liberated areas of Syria. The United States supports 56 Free Syrian Police stations comprising approximately 3,500 officers. Support includes vehicles, equipment, stipends, and training to help moderate community security actors to establish public security and stand up local unarmed civilian police forces. State conducts this effort through an implementing partner, and NEA manages this effort as part of the Syria Transition Assistance Response Team based in U.S. Embassy Ankara. The program’s goal is to improve local stability, mitigate sectarian violence, and counter the influence of violent extremists. State’s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts the Building the Legitimacy of Local Councils effort through an implementing partner. NEA manages this effort as part of the Syria Transition Assistance Response Team, which is based in U.S. Embassy Ankara. The effort aims to build the capacity of local and provincial councils and civilian networks through (1) organizational development, standardized processes, and institutional capacity for effective civil administration; (2) strengthened cooperation between local and provincial councils, civil society organizations, Free Syrian Police, technical directorates, and moderate armed actors; (3) increased engagement between citizens and opposition governance structures; (4) increased inclusiveness in governance structures, especially with regard to representation of women, religious and ethnic minorities, and other marginalized populations; and (5) more effective provision of basic local governance services to meet citizen priorities and needs through cash subgrants for essential services. The goal of the effort is to strengthen the moderate Syrian institutions by building their capacity to provide services, promote stability, counter extremism, and advocate for political dialogue. State’s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts the Civil Society in Syria effort through an implementing partner. NEA manages this effort as part of the Syria Transition Assistance Response Team, which is based in U.S. Embassy Ankara. Through cash subgrants, this effort works to enhance civil society and advocacy organizations in eastern and western Syria to implement activities that (1) improve communication mechanisms with constituents and key stakeholders in reconciliation, conflict mediation, and advocacy efforts; (2) increase citizen understanding of rights and civic responsibilities; (3) enhance civil society advocacy efforts to promote strengthened competitive, inclusive, and transparent political processes; (4) improve organizational structures and internal processes that allow civil society organizations to become more effective public advocates; and (5) provide community services, such as vocational training for women and youth and essential services in areas newly liberated from ISIS where governance bodies are still emerging. The goal of the effort is to increase the ability of civil society organizations to serve, represent, and advocate for all Syrians and hold local governance structures accountable. State’s description of effort and its goals State’s DRL conducts the Civil Society Support for Peacebuilding, Reconciliation, and Conflict Mitigation effort through implementing partners. These efforts provide funding to build local leadership and reconciliation processes and to support activities related to inclusive peace-building and conflict mitigation that are specifically designed to be more responsive to the evolving nature of the conflict. Current programming focuses on local community members, including women, religious minorities, and other marginalized populations, to use advocacy and other skills needed to effectively engage with armed factions. This work also supports the political transition process by fortifying the conditions for stabilization and empowering local leadership. State’s Bureau of Political-Military Affairs supports ERW clearance efforts in areas of northeast Syria recently liberated from ISIS, in particular the urban centers of Raqqa and Tabqa cities. Following their defeat, ISIS placed mass-produced, technologically advanced IEDs and booby-traps in homes, public spaces, farm land, and infrastructure to discourage the return of IDPs and cut off essential services. As IDPs return to their communities, these devices continue to perpetuate ISIS’s reign of terror by indiscriminately killing civilians and impeding stabilization operations. ERW clearance programs, which State conducts through implementing partners, supports the urgent marking, survey and clearance of explosive hazards from critical infrastructure associated with the delivery of clean water, electricity, healthcare, education, and governance to facilitate follow-on stabilization projects, the restoration of basic community services, and the return of IDPs in coordination with USAID and other State offices. State’s DRL conducts the Meaningful Justice and Accountability for Syria efforts through implementing partners. These efforts involve the documentation of human rights violations committed by all parties; increased coordination among international and local civil society groups on transitional justice processes, including memorialization; and support to survivors of torture, sexual and gender-based violence, and other gross human rights violations. The goal is to support the capacity of local civil society groups to secure and preserve documentation of human rights abuses and increase advocacy around accountability and transitional justice mechanisms, including domestic and regional led efforts. State’s Bureau of Political-Military Affairs delivers Mine Risk Education, through nongovernmental organizations, to affected communities by teaching children and young adults about the dangers posed by explosive hazards. Also, due to the lack of national capacity, a mine action nongovernmental organization collects, stores, and disseminates data on areas contaminated and cleared to the coalition, nongovernmental organizations, humanitarian community, and military. State’s DRL awarded funds to the U.S. Institute of Peace to conduct the Strengthening Social Cohesion in Northern Syria effort, which aims to provide positive engagement and lines of communication across religious and sectarian groups, particularly in key districts prone to sectarian violence. The goals are to (1) support Syrian civilian networks to maintain stabilization and mitigate violence and (2) manage localized ceasefires, including reconciliation and stabilization of areas as they are being liberated. State’s description of effort and its goals State’s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts Syria’s Education Program through an implementing partner that works closely with opposition education directorates in Western Syria and moderate education actors in newly liberated areas in the east to (1) support the development of the Syrian Interim Government’s aligned Provincial Education Directorates and other education actors to better manage education in non–regime-controlled communities; (2) provide stipends and salaries for education staff to ensure schools have people to deliver education; (3) engage in teacher training; (4) provide light refurbishments and supplies for damaged schools, and; (5) provide psychosocial support and training to children, teachers, and community members. NEA manages this effort as part of the Syria Transition Assistance Response Team, which is based in U.S. Embassy Ankara. The goal of this effort is to improve equitable access to Syrians to moderate, vital education services for youth and children. We did not independently verify whether State’s reported list of conflict mitigation and stabilization efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria). For the purposes of this list of efforts and goals, “efforts” includes what our sources referred to as “programs,” “program-level initiatives,” and “projects.” Countries for which State conducts efforts are shaded in gray. USAID’s description of effort and its goals The U.S. Agency for International Development (USAID), along with other international donors, supplies funding to the UNDP FFS. The UNDP, at the request of the Prime Minister of Iraq, and with support from leading members of the Coalition to Degrade and Defeat the Islamic State of Iraq and the Levant (ISIL), established the FFS in June 2015 to help rapidly stabilize newly retaken areas. The FFS works in areas liberated from the Islamic State of Iraq and Syria (ISIS)—another name for ISIL—to restore essential services and kick-start the local economy. The FFS rehabilitates water, health, electricity, education, and municipal light infrastructure. The FFS also provides temporary employment to local laborers to remove rubble and grants to small businesses to restock and reopen. The aim of the FFS is to help restore confidence in the leading role of the Iraqi government in newly retaken areas, give populations a sense of progress and forward momentum, and enable the voluntary return of internally displaced persons. USAID’s Office of Peace and Democratic Governance (PDG) is responsible for the Building Bridges Between Herders and Farmers in Nasarawa, Plateau, and Kaduna States effort. The overall goal is to strengthen engagement and understanding to reduce conflict between the nomadic pastoralist and sedentary farming communities in the three states. Given the herders’ and farmers’ ethnic, religious, economic, and lifestyle differences, these two groups rarely come into contact with each other outside of confrontational scenarios or passing encounters, creating a deadly social disconnect that risks dehumanizing each community in the other’s eyes. The program aims to achieve its goal by (1) improving intercultural understanding between nomadic pastoralist and sedentary farming communities and (2) building capable coalitions between community leaders, civil society, and government to prevent conflict between nomadic pastoralist and sedentary farming communities. USAID’s Education Office is responsible for the ECR, which, addresses the main learning needs of internally displaced and host community pupils affected by the crisis in Northeast Nigeria through nonformal learning centers, Youth Learning Centers, and Adolescent Girls Learning Centers. The ECR provides learning in protective centers, supports integration of pupils from nonformal to formal schools, and works within communities hosting internally displaced persons. For example, the ECR established more than 935 nonformal learning centers that provided services to internally displaced children and youth and their host communities affected by violence in Adamawa, Bauchi, Borno, Gombe, and Yobe. Nonformal centers may be located in churches, mosques, Qur’anic schools, and other locations. The services provided included access to quality education, psycho-social counseling, child-friendly spaces, and opportunities for peer reading, mentoring, counseling, and vocational skills training. The ECR also trains and mobilizes instructors to provide conflict-sensitive lessons, while engaging communities and local leaders to increase education options, such as nonformal learning centers. The ECR has provided assistance to over 80,341 individuals since 2014. The overall goal is to support the efforts of northeastern states and local governments to take full ownership for the continued education of internally displaced children. USAID’s description of effort and its goals USAID’s PDG is responsible for the Engaging Communities for Peace in Nigeria effort. The initial goal was to reduce violence between farmers and pastoralists in Nigeria’s Middle Belt states in target sites by (1) strengthening the capacity of farmer and pastoralist leaders to resolve disputes in an inclusive, sustainable manner; (2) leveraging social and economic opportunities to build trust across lines of division; and (3) fostering engagement among farmer-pastoralist communities, local authorities, and neighboring communities to prevent conflict. Under a scope and cost extension, PDG expanded the effort to help with conflict sensitivity integration throughout the USAID mission’s portfolio, and build the technical and operations capacity of nongovernmental organizations working on peace building in the northeast. PDG intends to do this by providing (1) conflict mitigation, monitoring and evaluation, and administrative/financial management training to civil society organizations in the northeast, and (2) conflict analysis and conflict mitigation training for USAID mission personnel and implementing partners anywhere in the country. USAID’s Office of Transitional Initiatives (OTI) launched the Nigeria Regional Transition Initiative in September 2014 to minimize conditions that allow terrorism to flourish, in turn reducing Boko Haram and ISIS-West Africa recruitment and support for their ideology and the insecurity they cause. Following a Strategic Review Session in September 2017, OTI established a new program goal: to deny terrorists space to operate. The goal has a two pronged focus: (1) to “compete” with ISIS-West Africa, thereby reducing its appeal before it is able to seize and hold significant territory and (2) to continue to work on issues that weaken Boko Haram’s ability to operate. OTI’s two main objectives to achieve this goal are to offer alternatives to extremist action for vulnerable individuals and increase community resilience to extremist action. Training of Religious Leaders for National Coexistence (TOLERANCE) USAID’s PDG is responsible for the TOLERANCE effort, which aims to support stability in Nigeria by enhancing the legitimacy and capacity of governance structures to defend religious freedom. TOLERANCE supports community-based peacebuilding approaches by strengthening the capacity of religious and traditional leaders, women and youth groups, government officials, and civil society to mitigate and manage conflicts, and improve responses to threats and outbreaks of violence. TOLERANCE is implemented in seven states—Borno, Bauchi, Imo, Kaduna, Kano, Plateau, and Sokoto. A human rights funding component promotes the culture of interfaith peaceful coexistence between target states in the North and South, respect for human rights, religious freedom and nonviolent elections. The goal of TOLERANCE is to develop an active network of religious, government, and civil society leaders that can effectively address ethno-religious violence in Northern Nigeria and beyond through shared strategies and common messages that have strong resonance and popular support from a wide range of stakeholders. Contributions to the Syria Recovery Trust Fund (SRTF) USAID contributes funding to the SRTF, a multidonor trust fund initiated by the Group of Friends of the Syrian People and its Working Group on Economic Recovery and Development. The SRTF’s core objective is to relieve the suffering of the Syrian people affected by the ongoing conflict through recovery and rehabilitation efforts undertaken in partnership with the Interim Government of the Syrian Opposition Coalition, local councils, local community organizations, and service providers. While the conflict continues, the SRTF assists Syrian communities in opposition-controlled territories by funding essential services and early recovery programming in critical sectors, including health, electricity, water, agriculture and food security, education, and waste management. For example, the SRTF completed the renovation of two gynecological operating rooms, two obstetrics rooms, adult and pediatric intensive care units, and provided incubators, an oxygen generation system, and 6 months’ worth of essential medications to a hospital in Aleppo Governorate so that it could treat an average of 1,000 patients each month. More than 2 million Syrians have received assistance through more than 30 SRTF projects. USAID funds totaling almost $60 million to date have leveraged other donor funds totaling $190 million. USAID’s goal is to support the restoration of essential services and early recovery. USAID’s Bureau for the Middle East (ME) provides support for the SRTF. USAID’s ME is responsible for the PRIDE program, which supports the establishment of robust, inclusive, effective, and accountable democratic processes and institutions in opposition-held areas and areas liberated from ISIS and advances freedom, dignity, and development. The goal of the program is to increase political and civic participation and representation of women, youth, and minorities, to foster public and stakeholder confidence in peaceful and representative transitional political processes and bolster opposition credibility. PRIDE is also intended to increase knowledge and understanding of democratic processes among the Syrian population, including consensus building, coalition formation, citizen and stakeholder engagement, and elections, which will enhance an inclusive Syrian-led transition. USAID’s ME and the Offices of U.S. Foreign Disaster Assistance and Food for Peace are responsible for the SLS program, which is intended to help increase production and productivity of key products that have both food security and market potential, in moderate, opposition-held areas and areas liberated from ISIS. The effort is based on the theory that if communities have humanitarian support in the short-term and have access to agricultural inputs and extension, they will adopt behaviors that increase productivity along with household-level income, ultimately improving food security and resilience to shocks. ME and the Office of Foreign Disaster Assistance have funded an implementing partner to initiate this effort in fiscal year 2017. If this effort is successful, USAID intends to replicate this effort in other barley-belt areas of Syria, including in the Idleb, Raqqa, and Hasakah governorates. USAID’s ME is responsible for the SES II effort, which supports the restoration of essential services through local councils in communities. The essential services include support for water services, electricity, sewage systems, public use buildings, agricultural infrastructure, and market access. The program provides technical and material assistance, including capacity building for local councils and civil society, engineering expertise and other training, and cash grants to communities. The goal of the program is to restore essential services and strengthen institutions in non-regime areas. USAID’s description of effort and its goals USAID’s OTI is responsible for the SRP. The SRP works closely with trusted and vetted local organizations to implement quick-impact activities that promote an inclusive and stable Syria. OTI has conducted this effort since 2012 through an implementing partner that has implemented about 538 activities through about 155 local and provincial partners and 570 subpartners with a budget of about $172.5 million. OTI works along three lines of effort: (1) enable the early recovery of areas liberated from ISIS; (2) strengthen communities’ ability to resist extremist groups; and (3) maintain and increase the influence of strategic moderate actors. For example, OTI partners restore services in communities liberated from ISIS to reduce ISIS’s appeal; support local councils and civil society organizations, increasing the influence of moderate actors in strategic areas where extremist groups are vying for control; and support Syrian Civil Defense and impartial emergency responders who amplify the voice of Syrians struggling against extremism and authoritarianism. OTI aims to support resistance to extremists, particularly ISIS, by strengthening individuals and groups who are saving lives, meeting basic needs, promoting moderate values, and engaging with vulnerable populations. We did not independently verify whether USAID’s reported list of conflict mitigation and stabilization efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria). For the purposes of this list of efforts and goals, “efforts” includes what our sources referred to as “programs,” “program-level initiatives,” and “projects.” USAID conducted its efforts through grants and contracts to implementing partners. Countries for which USAID conducts efforts are shaded in gray. DOD’s description of effort and its goals Medical Staff of the Combined Joint Forces Land Component Command–Operation Inherent Resolve provided immediate medical trauma supplies to the World Health Organization to fill a gap in medical supplies available to treat injured civilians. The project was coordinated with the Department of State (State) and the U.S. Agency for International Development (USAID) and was funded through the Overseas Humanitarian, Disaster, and Civic Aid (OHDACA) appropriation. The project was intended to increase the chance of survival for civilians affected by military operations; increase civilian confidence in the government and the humanitarian assistance community; and provide access, influence, and visibility to the Department of Defense (DOD). U.S. Army Civil Affairs (CA) personnel of Special Operations Joint Task Force–Operation Inherent Resolve (SOJTF–OIR) provided winterization kits including jackets, hats, gloves, socks, and blankets to Syrian civilians displaced from their homes in the Raqqa region. The project provided much needed cold weather items. This project was coordinated with State and USAID and funded through the OHDACA appropriation. The project was intended to alleviate human suffering; pull the population away from Islamic State of Iraq and the Levant (ISIL) population centers; and provide access, visibility, and influence for DOD forces. U.S. Army CA personnel of SOJTF–OIR provided 1,200 winterization kits consisting of jackets, hats, gloves, and socks to Syrian families in the Hamad desert. This project addressed a critical need among the poorest and most vulnerable of the Syrian population. The project was coordinated with State and USAID and was funded through the OHDACA appropriation. The project was intended to alleviate human suffering; support DOD efforts to diminish ISIL influence; and provide access, visibility, and influence for DOD forces. U.S. Army CA personnel of SOJTF–OIR provided assistance, including food, cooking fuel, construction material, and garbage removal, for up to 31,000 civilians in Manbij, Syria. DOD undertook this project because USAID and State were unable to provide any support to the civilians in need. This project was coordinated with State and USAID and was funded through the OHDACA appropriation. The project was intended to alleviate human suffering and improve the civilian populace’s perception of the local council. U.S. Army CA personnel of SOJTF–OIR provided basic education supplies and equipment, including desks, chairs, and whiteboards, to schools in Karamah. This project was coordinated with State and USAID and funded through the OHDACA appropriation. The project was intended to assist in reestablishment of education services in the area, enhance the local council’s ability to provide essential services and increase their standing with the community, and provide access to DOD forces operating in the area. U.S. Army CA personnel of SOJTF–OIR provided basic education supplies and equipment, including desks, chairs, whiteboards, and backpacks, to schools in Kobani. This project was coordinated with State and USAID and funded through the OHDACA appropriation. The project was intended to assist in reestablishment of education services, improve the capacity of the local government to provide essential services; improve the perception of the local council; and provide access, visibility, and influence for DOD forces. DOD’s description of effort and its goals U.S. Army CA personnel of SOJTF–OIR provided classroom furniture and school supplies to 4,000 students in Manbij. The project, managed through the local council, provided a viable opportunity to resume attending classes for students who had not attended school in over 4 years. The project was coordinated with State and USAID and funded through the OHDACA appropriation. The project was intended to assist in reestablishment of education services; improve the perception of the local council; and provide access, visibility, and influence for DOD forces. U.S. Army CA personnel of SOJTF–OIR provided winterization kits, including jackets, hats, gloves, socks, and blankets, to civilians in the Raqqa region. The project provided much needed winter clothing to civilians who had fled their homes due to ISIL operations. The project was coordinated with State and USAID and funded through the OHDACA appropriation. The project was conducted through the local council and intended to alleviate human suffering, build the council’s legitimacy, and provide access to DOD forces. U.S. Army CA personnel of SOJTF–OIR provided winterization kits, including jackets, hats, gloves, socks, and blankets to civilians in the Manbij region. The project provided cold weather items, through the local council, to civilians fleeing ISIL forces because State and USAID were unable to provide support. The project was coordinated with State and USAID and funded through the OHDACA appropriation. The project was intended to alleviate human suffering, elevate the standing of the local council with the populace, and improve access to DOD forces operating in the area. We did not independently verify whether DOD’s reported list of conflict mitigation and stabilization efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria). For the purposes of this list of efforts and goals, “efforts” includes what our sources referred to as “programs,” “program-level initiatives,” and “projects.” Countries for which DOD conducts efforts are shaded in gray. USIP’s description of effort and its goals The U.S. Institute of Peace’s (USIP) Middle East and Africa Center (MEA) is responsible for the Advancing the Role of Iraqi Minorities in Stabilization and Governance effort with funding from and in partnership with the Department of State’s (State) Bureau of Democracy, Human Rights, and Labor. This effort creates mechanisms for gathering and sharing high-quality information with key Iraqi decision makers and stakeholders on the minorities’ situations, regardless of whether these groups return home or remain displaced. The project utilizes and acts upon information gathered through facilitated local dialogues that prevent violence (especially violence stemming from revenge killing) and/or reduce tensions between displaced minorities and host communities. Improving access to this information is intended to strengthen the role of civil society in stabilization and enable Iraqi decision makers to enact more inclusive and information-based governance policies. The specific objectives are to (1) improve key decision makers’ understanding of conflict drivers in liberated and minority-rich areas and (2) reduce tensions among and between communities in Nineveh and other minority areas during the stabilization process and in the build-up to provincial-level, Kurdish Regional Government, and national elections. The goal of the effort is to improve stabilization and promote inclusive governance in areas liberated from the Islamic State of Iraq and Syria (ISIS) in Nineveh province and other minority-rich territories. USIP’s MEA and its strategic partner, Sanad for Peacebuilding, conduct the Facilitated Dialogues effort in Iraq. The effort supports facilitated, outcome-oriented dialogue processes that enable local reconciliation in areas liberated from ISIS. This type of engagement has two main objectives in the current context: (1) preventing revenge acts of violence by communities in conflict and (2) identifying and addressing the main barriers impeding the return of internally displaced persons (IDP). Such engagement is intended to increase the resilience of communities to the persistent threat of violent extremism from ISIS remnants, the Popular Mobilization Forces, or others. USIP’s Center for Applied Conflict Transformation (ACT) is responsible for the JSD – Lessons Learned effort. Approximately 200 security and community representatives from three major cities affected by the aftermath of ISIS participated in nine JSD sessions as part of an assessment on preventing violent extremism in Iraq. The project culminated in a conference attended by members of the JSD-Community of Practice (COP), a network of local leaders committed to dialogue processes established by USIP through its ongoing engagement in Iraq to support dialogue. The project’s three objectives are to (1) better understand local drivers of violent extremism through the multiple perspectives included in the JSD-COP, (2) strengthen capacity of the JSD- COP to continue efforts to sustain local stability and promote the rule of law, and (3) identify key lessons learned to further strengthen future JSD initiatives in the region. USIP’s ACT is responsible for the Mapping Post-ISIS Iraqi Religious Groups for Peace and Reconciliation effort. ACT is partnering with country teams to undertake mappings of influential religious actors, institutions, and ideas in conflict zones. This project identifies and maps influential religious leaders in specific conflict zones with the long- term goal of including them in future Iraqi-led mediations, dialogues, and peace and reconciliation efforts. USIP’s description of effort and its goals USIP’s MEA is responsible for the Problem-Solving Dialogues for Iraq’s Religious Minorities and Governance Issues with funding from and in partnership with State’s Bureau of Democracy, Human Rights, and Labor. The effort addresses tensions and disputes between the Christian and Shabak communities in Nineveh in the wake of ISIS, pushing toward outcome-oriented solutions through facilitated dialogues led by experienced Iraqi facilitators. This effort also provides the USIP-created Alliance of Iraqi Minorities (AIM) with experience in project development and execution as AIM seeks to improve its impact on the provincial budget process, curriculum reform, outreach, and influencing specific legislation pertaining to minorities. The effort supports AIM’s organizational capacity toward becoming more independent, self- reliant, and self-sustaining through developing the capacity and assuming total responsibility for its organizational, administrative, programmatic, financial, and logistical affairs. Establishing facilitated dialogues among Iraq’s religious minorities and, most importantly, between those groups and the majority Muslim communities, is especially important as Nineveh is home to one of Iraq’s largest concentration of minorities. The goal of the effort is for Iraqis—minorities in particular—to prevent the recurrence of violence through peaceful dialogue with each other and various stakeholders, including national, provincial, and local governments. USIP’s MEA is responsible for the Support to Sanad for Peacebuilding effort. This effort provides ongoing technical and financial support to USIP’s strategic national partner, Sanad, and the networks it manages, including the Network of Iraqi Facilitators and the Alliance of Iraqi Minorities. Sanad and its affiliated networks serve as a resource for conflict analysis, bringing disputing parties together through facilitated dialogue and providing technical expertise for training and peacebuilding. The goal, through helping Sanad become Iraq’s leading and self-sustaining peacebuilding organization, is to increase Iraqi capacity and leadership in conflict prevention and mitigation. USIP’s MEA is responsible for the Training Iraqis in Conflict Management effort. This project provides training to both governmental and nongovernmental organizations, including officials and civil society activists in Kurdistan working to prevent the escalation of tensions among the nearly 1.8 million IDPs located there and in local communities. It also provides technical support to the Kurdish Regional Government on the implementation of Iraq’s national action plan under United Nations Security Council Resolution 1325, and ongoing assistance to Iraq’s National Reconciliation Committee and other governmental bodies that play a key role in local and national reconciliation. The goal of the project is to enable a variety of Iraqi organizations to use the tools and skills taught to them by professional trainers and USIP staff to resolve local tensions that have the potential to reignite sectarian tensions on a large scale. Building the skills of Iraqis in this field is intended to enable them to solve issues stemming from extremist violence and local sectarian conflict without external aid, thus stopping violence at its sources before it spreads to other communities and causes further destabilization. USIP’s description of effort and its goals USIP’s ACT was responsible for the Youth Leaders’ Exchange with His Holiness the Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual dialogue with youth peacebuilders drawn from countries across Africa, Asia, and the Middle East, including Iraq. Many of these countries grapple with the world’s deadliest conflicts, as well as campaigns by extremist groups to incite youth to violence. The youth leaders are among their countries’ most effective peacebuilders. The dialogue with the Dalai Lama was intended to help them to build the practical skills and personal resilience they need to work against the tensions or violence in their homelands. The overarching goal was to strengthen the capacity of youth to create positive change as leaders and peacebuilders in their communities by partnering with more traditional leaders. USIP’s MEA is responsible for the development of a USIP strategy for countering violent extremism (CVE) for Nigeria that is integrated with its Nigeria country strategy and consistent with USIP’s overall CVE strategy. Working in collaboration with ACT, MEA partners with a local organization for project implementation and uses local staff for support. This effort is intended to further USIP’s current process of strengthening its Nigeria country strategy to guide program initiatives for its Africa team and USIP more broadly. The goal is to deepen and expand USIP’s programming and thought leadership in the field of CVE through initiatives based on an evidence-based assessment. USIP’s MEA and ACT are responsible for the Election Security Assessment. Together with selected partners, USIP began three assessment rounds in Washington, D.C., and Nigeria focused on assessing election violence risks and gaps in electoral security and peacebuilding planning. USIP works closely with State’s Nigeria desk, USAID’s political section, the USAID’s mission at U.S. Embassy Abuja, and relevant international and local partners engaged in election programming. The assessment will produce programmatic recommendations to address identified vulnerabilities and seize opportunities for the promotion of peaceful elections. The goal of the effort is to help ensure that the prevention activities by USIP, U.S. government partners and civil society are better integrated and evidence-based. Generation Change Fellows Program (GCFP) USIP’s ACT is responsible for the GCFP, which strengthens youth leaders’ peacebuilding skills and creates a community of practice through which they can learn from and mentor each other, share best practices, and work to create positive change in their communities. GCFP carefully selects small cohorts of dedicated peacebuilders aged 18–35 through a highly competitive application process. These Fellows hold leadership roles within their local communities and tackle challenges, from countering violent extremism to enhancing gender equality. The goal of the GCFP is to increase youth leaders’ participation in and contribution to conflict transformation and positive social change in conflict-affected communities. USIP’s ACT, with funding from and in partnership with State’s Bureau of International Narcotics and Law Enforcement Affairs, is responsible for the Justice and Security Dialogue Project in the Sahel and Maghreb. The project offers opportunities to develop, refine, and test models and tools through field pilot experimentation in six countries, including Nigeria. The project aims to strengthen the relationship between civilian security services and communities at the local level and to pilot a model for bridging the gap between police and citizens for use across the region. Through a series of dialogues and activities supported by USIP and local partners, participants will collaboratively identify and address concrete security challenges at the local level. Conflict prevention and resolution effort Lake Chad Basin and Sahel Working Group USIP’s MEA is responsible for the Lake Chad Basin and Sahel Working Group. USIP USIP’s description of effort and its goals will convene a working group focused on addressing the drivers of violent extremism in the Lake Chad Basin and the Sahel. This will include developing a research framework, drawing on ACT’s CVE assessment tool, and commissioning a series of papers by academics, policy experts, and practitioners from countries across the region. The goal is to advance USIP’s thought leadership in the field of preventing violent extremism by studying the impact of the Boko Haram crisis in the context of broader regional dynamics and the potential for more regional approaches to foster resilience to violent extremism. USIP’s MEA is responsible for the Lake Chad Basin Project, with funding from and in partnership with State’s Bureau of Conflict and Stabilization Operations. This project builds upon over a decade of programming in Nigeria to implement a multiyear program that seeks to strengthen the capacity of Nigerian opinion leaders and policy makers, to foster sustainable and inclusive strategies toward addressing the root causes of violent conflict, particularly in Northern Nigeria. Some activities included (1) convening a 3-day symposium in Washington, D.C., of governors from states across northern Nigeria to foster key exchanges and critical discussions with leading American and international experts on the drivers of violent conflict in the region and how to resolve them; (2) creating a senior working group of 11 Nigerian civic leaders that can engage strategically with the governors and work collaboratively to articulate a set of policy priority areas toward addressing the drivers of conflict; (3) conducting quantitative and qualitative studies in Borno and Plateau states to understand citizen perceptions to the drivers of violent conflict, and how policymakers should address them; and (4) supporting sustained, facilitated engagement between the governors and members of the senior working group to help to shape a more inclusive policy platform toward preventing violent conflict and addressing stabilization needs in target states across the north. The goal of this project is to have an invested group of governors from across the northern states in Nigeria and a senior working group of civic leaders identify a set of citizen-informed priority policy areas for northern Nigeria to prevent and resolve violent conflict, increase stabilization efforts where appropriate, and demonstrate a continued willingness to engage together on specific conflict- related issues. USIP’s MEA is responsible for the Network of Nigerian Facilitators. USIP is identifying and supporting a group of community leaders, including youth, women, and religious leaders with dialogue facilitation skills to prepare, convene, and facilitate intergroup dialogues in their communities. In addition to building the abilities of the facilitators to locally manage conflict, USIP will provide financial support to the facilitators to implement localized conflict management activities. The goal is to build capacity and provide ongoing support to a network of community facilitators that can prevent and resolve conflict nonviolently. USIP’s MEA is responsible for the Nigeria Conversation Series. MEA partners with a local organization to implement the series and uses local staff for support. The series brings together a broad array of policy professionals for in-depth discussions on current issues in Nigeria and to explore options for preventing and resolving violent conflict in the country. The purpose of the series is to inform and influence Nigerian, U.S., and international policies and programs that seek to address conflict in Nigeria. The discussions seek to promote improved understanding and shared analysis of the conflict dynamics in the country through engagement with informed researchers and practitioners. Conflict prevention and resolution effort Nigeria’s Imam and Pastor: Faith at the Front USIP’s MEA is responsible for Nigeria’s Imam and Pastor project. In fiscal year 2017, USIP’s description of effort and its goals the findings from USIP research were used to inform the production of a short USIP video to contribute to understanding (1) the role of religious leaders in peacebuilding and (2) that grassroots dialogues are necessary for reducing violence but are complemented by changes in governance. Also, USIP produced a video series of pieces to highlight the work and voices of USIP’s country and partner organizations and provide practical tools to inform policymakers and partners in their work in reducing violent conflict. USIP’s ACT, with funding from and in partnership with USAID, is responsible for the Research on Violent Extremism, Politics, Religion, and the Higher Education Sector in the Lake Chad Basin effort. Under the rubric of the RESOLVE Network—a global consortium of research organizations established by USIP—this project is intended to enhance USAID’s assistance to the educational sector in the Lake Chad Basin region by providing research support for locally driven analysis in Nigeria, Chad, and Cameroon. The primary purpose of the RESOLVE Network initiative in the Lake Chad Basin is to assess the role of the state, civil society, and other nonstate actors in shaping the political divides over the role of religion in education and community and state responses to extremism in Chad, Nigeria, and Cameroon. USIP’s MEA is responsible for the Support to State Peacebuilding Institutions effort, which is being implemented by a local partner with the support of local USIP staff in Abuja. The Africa Team, in partnership with USIP’s ACT, provides training for the Plateau Peacebuilding Agency, the Kaduna Peace Commission and the relevant peacebuilding entities in the Borno state administration on conflict analysis, conflict management and facilitation. USIP delivers the training through a combination of online and in-person training. The Africa team identifies ways to engage the Interfaith Mediation Center (the Imam and the Pastor) to share their expertise and experiences. The goal is to advance the skills of the practitioner peacebuilding community in Nigeria to inform policy to prevent and resolve conflict at the state-level through online and in- person training. USIP’s MEA is responsible for the Supporting Transition to Civilian-Led Governance and Security effort, which is being implemented by a local partner with the support of local USIP staff in Abuja. The Africa team developed a framework for the transition from military and vigilante security to community-oriented policing through (1) research on comparative experiences in the transition from nonstate actors to civilian governance and (2) a series of roundtables and engagements with The Multinational Joint Task Force. The research seeks to incorporate USIP’s experiences in Afghanistan, Iraq, Colombia, Nepal, and Myanmar to offer concrete lessons, tools, and approaches. The goal is to contribute evidence-based and comparative research that will inform discussions on civil-military relationships, justice, security, and rule of law reform in the Northeast and Lake Chad Basin. USIP’s MEA is responsible for the Women Preventing Violent Extremism effort, with funding from and in partnership with State’s Bureau of Counterterrorism. The project is implemented by a local organization. This project began as a pilot project in 2012 and is designed to increase women’s agency and influence in strengthening community- level resilience to violent extremism through engagement and collaboration with security actors. The project was piloted in Plateau and Kaduna states in Nigeria and in Nairobi, Mombasa, and Garissa, Kenya. The project aims to understand ways in which trust and cooperation between women in civil society and the security sector can best be fostered and supported. USIP’s description of effort and its goals USIP’s ACT is responsible for the Youth Leaders’ Exchange with His Holiness the Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual dialogue with youth peacebuilders drawn from countries across Africa, including Nigeria; Asia; and the Middle East. Many of these countries face the world’s deadliest conflicts, as well as campaigns by extremist groups to incite youth to violence. The youth leaders are among their countries’ most effective peacebuilders. The dialogue with the Dalai Lama was intended to help them to build the practical skills and personal resilience they need to work against the tensions or violence in their homelands. The overarching goal was to strengthen the capacity of youth to create positive change as leaders and peacebuilders in their communities by partnering with more traditional leaders. USIP’s MEA is responsible for the Dialogues with the Interfaith and Other Key Leaders effort in partnership with and with funding from State’s Bureau of Democracy, Human Rights, and Labor. In Northeastern Syria, USIP works with Syrian partners to strengthen civil society’s engagement and coordinating role with civic, religious, and tribal leaders in al-Qamishli/al-Qahtaniya. The effort aims to address drivers of tensions and conflicts through an evidenced-based, outcome-oriented dialogue process. The overall goal is to strengthen social cohesion among and between the communities in Northern Syria, enable the return of displaced communities, and stem potential conflict. USIP’s MEA is responsible for three ongoing grants related to the Syria conflict in neighboring countries: The first is a grant to War Child to work with a local network of Jordanian organizations training young Syrian refugees in Amman and vicinity on youth leadership, peacebuilding, and conflict resolution skills. The two other grants fund (1) a Lebanese civic group that supported mediation and training aimed at reducing refugee-related tensions in Lebanon’s Bekaa Valley and to enable Syrian refugees to find jobs and register their children in schools, and (2) a nongovernmental organization that trained Syrian and Lebanese journalists on conflict-sensitive reporting about the Syrian refugee crisis and on raising awareness of the benefits the refugees bring to the host community. These grants are aimed at reducing tensions that threaten peace and stability in Lebanon and Jordan because of the burdens of their absorption of Syrian refugees. USIP’s ACT was responsible for the Youth Leaders’ Exchange with His Holiness the Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual dialogue with youth peacebuilders drawn from countries across Africa, Asia, and the Middle East, including Syria. Many of these countries face the world’s deadliest conflicts, as well as campaigns by extremist groups to incite youth to violence. The youth leaders are among their countries’ most effective peacebuilders. The dialogue with the Dalai Lama was intended to help them to build the practical skills and personal resilience they need to work against the tensions or violence in their homelands. The overarching goal was to strengthen the capacity of youth to create positive change as leaders and peacebuilders in their communities by partnering with more traditional leaders. We did not independently verify whether USIP’s reported list of conflict mitigation and stabilization efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria). For the purposes of this list of efforts and goals, “efforts” includes what our sources also referred to as “projects.” Countries for which USIP conducts efforts are shaded in gray. In addition to the individual named above, Godwin Agbara (Assistant Director), Kathleen Monahan (Analyst-in-Charge), David Dayton, Martin de Alteriis, Mark Dowling, Emily Gupta, and Jasmine Senior made key contributions to this report. Additional assistance was provided by Michael Fahy, Christopher Keblitis, Judith McCloskey, James Reynolds, Kira Self, and Sarah Veale.", "summary": "The United States has a national security interest in promoting stability in conflict-affected countries to prevent or mitigate the consequences of armed conflict, according to the 2017 National Security Strategy. State, USAID, and DOD have reported that a collaborative government approach is an essential part of maximizing the effectiveness of U.S. efforts in conflict-affected areas. GAO was asked to review U.S. conflict prevention, mitigation, and stabilization efforts abroad. This report (1) describes examples of conflict prevention, mitigation, and stabilization efforts that U.S. agencies and USIP conducted in Iraq, Nigeria, and Syria and their goals in fiscal year 2017 and (2) examines the extent to which U.S. agencies and USIP incorporated key collaboration practices to coordinate their efforts. GAO collected data from the agencies and USIP on their efforts and goals in Iraq, Nigeria, and Syria. GAO selected these countries based on U.S. national security interests, among other criteria. GAO reviewed agency and USIP documents, interviewed officials, and conducted fieldwork in Iraq, Nigeria, and Jordan. GAO assessed coordination against key practices identified by GAO to enhance interagency collaboration. The Departments of State (State) and Defense (DOD), the U.S. Agency for International Development (USAID), and the U.S. Institute of Peace (USIP)—an independent, federally funded institute—reported conducting various efforts to address conflict prevention, mitigation, and stabilization for Iraq, Nigeria, and Syria in fiscal year 2017. For example, in Iraq, State supported efforts to remove improvised explosive devices from homes and infrastructure (see figure); USAID contributed to the United Nations to restore essential services; DOD provided immediate medical trauma supplies to the World Health Organization to treat injured civilians; and USIP conducted facilitated dialogs to enable local reconciliation in areas liberated from the Islamic State of Iraq and the Levant. In conducting U.S. conflict prevention, mitigation, and stabilization efforts, State, USAID, DOD, and USIP have addressed aspects of key collaboration practices such as elements of bridging organizational cultures and leadership. However, the agencies have not formally documented their agreement on coordination for U.S. stabilization efforts through formal written guidance and agreements that address key collaboration practices. GAO found the following, for example, with regard to the extent key collaboration practices have been used by these entities. Bridging organizational cultures: U.S. agencies have established various mechanisms to coordinate their efforts, such as interagency working groups and staff positions focused on coordination. USIP convenes interagency actors, including State, USAID, and DOD through various programs and events. Defining outcomes and accountability: One or more agencies have established some common outcomes and accountability mechanisms for their stabilization efforts in Iraq, Nigeria, and Syria. Moreover, through an interagency review of U.S. stabilization assistance, State, USAID, and DOD identified a need to develop an outcome-based political strategy outlining end states for U.S. stabilization efforts and strategic analytics to track and measure progress, among other needs. Written guidance and agreements: Although State, USAID, and DOD have developed a framework for stabilization, they have not documented their agreement on the key collaboration practices identified, such as defining outcomes and accountability and clarifying roles and responsibilities. According to key practices for enhancing interagency collaboration, articulating agreements in formal documents can strengthen collaborative efforts, and reduce the potential for duplication, overlap, and fragmentation. State, USAID, and DOD should document agreement on their coordination for U.S. stabilization efforts though formal written guidance and agreements addressing key collaboration practices. The agencies concurred with the recommendations.", "document_type": "gao"}
{"report": "The 340B Program was created following the enactment of the Medicaid Drug Rebate Program and gives 340B covered entities discounts on outpatient drugs comparable to those made available to state Medicaid agencies. HRSA is responsible for administering and overseeing the 340B Program. Eligibility for the 340B Program, which is defined in the PHSA, has expanded over time, most recently through the Patient Protection and Affordable Care Act (PPACA), which extended eligibility to additional types of hospitals. Entities generally become eligible by receiving certain federal grants or by being one of six hospital types. Eligible grantees include clinics that offer primary and preventive care services, such as Federally Qualified Health Centers, clinics that target specific conditions or diseases that raise public health concerns or are expensive to treat, and AIDS Drug Assistance Programs, which serve as a “payer of last resort” to cover the cost of providing HIV-related medications to certain low-income individuals. Eligible hospitals include certain children’s hospitals, free-standing cancer hospitals, rural referral centers, sole community hospitals, critical access hospitals, and general acute care hospitals that serve a disproportionate number of low-income patients, referred to as disproportionate share hospitals (DSH). To become a covered entity and participate in the program, eligible entities must register with HRSA and be approved. Entity participation in the 340B Program has grown over time to include more than 38,000 entity sites, including more than 21,000 hospital sites and nearly 17,000 federal grantee sites (see fig. 1). To be eligible for the 340B Program hospitals must meet certain requirements intended to ensure that they perform a government function to provide care to the medically underserved. First, hospitals generally must meet specified DSH adjustment percentages to qualify. Additionally, they must be (1) owned or operated by a state or local government, (2) a public or private nonprofit corporation that is formally delegated governmental powers by a unit of state or local government, or (3) a private, nonprofit hospital under contract with a state or local government to provide health care services to low-income individuals who are not eligible for Medicaid or Medicare. All drug manufacturers that supply outpatient drugs are eligible to participate in the 340B Program and must participate in order to have their drugs covered by Medicaid. To participate, manufacturers are required to sign a pharmaceutical pricing agreement with HHS in which both parties agree to certain terms and conditions. The 340B price for a drug—often referred to as the 340B ceiling price—is based on a statutory formula and represents the highest price a participating drug manufacturer may charge covered entities. Covered entities must follow certain requirements as a condition of participating in the 340B Program. For example covered entities are prohibited from subjecting manufacturers to “duplicate discounts” in which drugs prescribed to Medicaid beneficiaries are subject to both the 340B price and a rebate through the Medicaid Drug Rebate Program. covered entities are also prohibited from diverting any drug purchased at the 340B price to an individual who does not meet HRSA’s definition of a patient. This definition, issued in 1996, outlines three criteria that generally state that diversion occurs when 340B discounted drugs are given to individuals who are not receiving health care services from covered entities or are only receiving non-covered services, such as inpatient hospital services. (See table 1 for more information on HRSA’s definition of an eligible patient.) Covered entities are permitted to use drugs purchased at the 340B price for all individuals who meet the 340B Program definition of a patient regardless of whether they are low-income, uninsured, or underinsured. A covered entity typically purchases and dispenses 340B drugs through pharmacies—either through an in-house pharmacy, or through the use of a contract pharmacy arrangement, in which the covered entity contracts with an outside pharmacy to dispense drugs on its behalf. The adoption and use of contract pharmacies in the 340B Program is governed by HRSA guidance. HRSA’s original guidance permitting the use of contract pharmacies limited their use to covered entities that did not have in-house pharmacies and allowed each covered entity to contract with only one outside pharmacy. However, March 2010 guidance lifted the restriction on the number of pharmacies with which a covered entity could contract. Since that time, the number of unique contract pharmacies has increased significantly, from about 1,300 at the beginning of 2010 to around 18,700 in 2017 (see fig. 2); and, according to HRSA data, in 2017, there were more than 46,000 contract pharmacy arrangements. HRSA guidance requires a written contract between the covered entity and each contract pharmacy. Covered entities are responsible for overseeing contract pharmacies to ensure compliance with prohibitions on drug diversion and duplicate discounts. HRSA guidance indicates that covered entities are “expected” to conduct annual independent audits of contract pharmacies, leaving the exact method of ensuring compliance up to the covered entity. Drug manufacturers also must follow certain 340B Program requirements. For example, HRSA’s nondiscrimination guidance prohibits manufacturers from distributing drugs in ways that discriminate against covered entities compared to other providers. This includes ensuring that drugs are made available to covered entities through the same channels that they are made available to non-340B providers, and not conditioning the sale of drugs to covered entities on restrictive conditions, which would have the effect of discouraging participation in the program. In our September 2011 report, we found that HRSA’s oversight of the 340B Program was weak because it primarily relied on covered entities and manufacturers to police themselves and ensure their own compliance with program requirements. Upon enrollment into the program, HRSA requires participants to self-certify that they will comply with applicable 340B Program requirements and any accompanying agency guidance, and expects participants to develop the procedures necessary to ensure and document compliance, informing HRSA if violations occur. HRSA officials told us that covered entities and manufacturers could also monitor each other’s compliance with program requirements, but we found that, in practice, participants could face limitations to such an approach. Beyond relying on participants’ self-policing, we also found that HRSA engaged in few activities to oversee the 340B Program and ensure its integrity, which agency officials said was primarily due to funding constraints. Further, although HRSA had the authority to conduct audits of program participants to determine whether program violations had occurred, at the time of our 2011 report, the agency had never conducted such an audit. In our 2011 report, we concluded that changes in the settings where the 340B Program was used may have heightened the concerns about the inadequate oversight we identified. In the years leading up to our report, the settings where the 340B Program was used had shifted to more contract pharmacies and hospitals than in the past, and that trend has continued in recent years. We concluded that increased use of the 340B Program by contract pharmacies and hospitals may have resulted in a greater risk of drug diversion to ineligible patients, in part because these facilities were more likely to serve patients that did not meet the definition of a patient of the program. To address these oversight weaknesses, we recommended that the Secretary of HHS instruct the Administrator of HRSA to conduct selective audits of covered entities to deter potential diversion. In response to that recommendation, in fiscal year 2012, HRSA implemented a systematic approach to conducting annual audits of covered entities that is outlined on its website. HRSA audits include entities that are randomly selected based on risk-based criteria (approximately 90 percent of the audits conducted each year), and entities that are targeted based on information from stakeholders (10 percent of the audits conducted). HRSA currently audits a total of 200 entities per year, which accounts for less than 2 percent of covered entities. (See table 2.) As a result of the audits already conducted, HRSA has identified instances of non-compliance with program requirements, including violations related to drug diversion and the potential for duplicate discounts. The agency has developed a process to address non- compliance through corrective action plans. The results of each year’s audits are available on HRSA’s website, and we currently have work underway reviewing HRSA’s efforts to ensure compliance with 340B Program requirements at contract pharmacies that includes an examination of HRSA’s audits of covered entities. In our 2011 report, we found that HRSA’s guidance on three key program requirements lacked the necessary level of specificity to provide clear direction, making it difficult for participants to self-police or monitor others’ compliance, and raising concerns that the guidance could be interpreted in ways that were inconsistent with its intent. First, we found that HRSA’s nondiscrimination guidance was not sufficiently specific in detailing practices manufacturers should follow to ensure that drugs were equitably distributed to covered entities and non- 340B providers when distribution was restricted. Some stakeholders we interviewed for the 2011 report, such as covered entities, raised concerns about the way certain manufacturers interpreted and complied with the guidance in these cases. We recommended that HRSA further clarify its nondiscrimination guidance for cases in which distribution of drugs is restricted and require reviews of manufacturers’ plans to restrict distribution of drugs at 340B prices in such cases. In response, HRSA issued a program notice in May 2012 that clarified HRSA’s policy for manufacturers that intend to restrict distribution of a drug and provided additional detail on the type of information manufacturers should include in such restricted distribution plans. In addition, we found a lack of specificity in HRSA’s guidance on two other issues—the definition of an eligible patient and hospital eligibility for program participation. Specifically, we found that HRSA’s guidance on the definition of an eligible patient lacked the necessary specificity to clearly define the various situations under which an individual was considered eligible for discounted drugs through the 340B Program. As a result, covered entities could interpret the definition either too broadly or too narrowly. At the time of our report, agency officials told us they recognized the need to provide additional clarity around the definition of an eligible patient, in part because of concerns that some covered entities may have interpreted the definition too broadly to include non-eligible individuals, such as those seen by providers who were only loosely affiliated with a covered entity. HRSA had not issued guidance specifying the criteria under which hospitals that were not publicly owned or operated could qualify for the 340B Program. For example, we found HRSA guidance lacking on one of the ways hospitals could qualify for the program, namely by executing a contract with a state or local government to provide services to low-income individuals who are not eligible for Medicaid or Medicare. Specifically, we found that HRSA did not outline any criteria that must be included in such contracts, such as the amount of care a hospital must provide to these low-income individuals, and did not require the hospitals to submit their contracts for review by HRSA. As a result, hospitals with contracts that provided a small amount of care to low-income individuals not eligible for Medicaid or Medicare could claim 340B discounts, which may not have been what the agency intended. Given the lack of specificity in these areas, we recommended that HRSA (1) finalize new, more specific guidance on the definition of an eligible patient, and (2) issue guidance to further specify the criteria that hospitals not publicly owned or operated must meet to be eligible for the 340B Program. HRSA agreed with these recommendations and had planned to address them in a comprehensive 340B Program regulation that it submitted to the Office of Management and Budget for review in April 2014. However, HRSA withdrew this proposed regulation in November 2014 following a May 2014 federal district court ruling that the agency had not been granted broad rulemaking authority to carry out all the provisions of the 340B Program. After this ruling, the agency issued a proposed Omnibus Guidance in August 2015 to interpret statutory requirements for the 340B Program in areas where it did not have explicit rulemaking authority, including further specificity on the definition of a patient of a covered entity and hospital eligibility for 340B Program participation. However, in January 2017, the agency withdrew the guidance following the administration’s January 20 memorandum directing agencies to withdraw or postpone regulations and guidance that had not yet taken effect. In March 2018, HRSA indicated that it was working with HHS to determine next steps regarding the proposed Omnibus Guidance, which included the patient definition, but that it was unable to further clarify guidance on hospital eligibility without additional authority. HRSA also noted that the administration’s fiscal year 2019 budget proposal requests rulemaking authority, which, if enacted, would provide the agency with the authority to regulate hospital eligibility for the 340B Program. GAO has ongoing work related to 340B contract pharmacies and the characteristics of hospitals participating in the program. Specifically, given the increase in the number of contract pharmacies in the 340B Program and concerns that contract pharmacy arrangements present an increased risk to the integrity of the program, we were asked to review contract pharmacy use under the 340B Program. In our forthcoming report, we plan to describe the extent to which covered entities contract with pharmacies to distribute 340B drugs, and the characteristics of these pharmacies; describe financial arrangements selected covered entities have with contract pharmacies and third-party administrators related to the administration and dispensing of 340B drugs; describe the extent to which selected covered entities provide discounts on 340B drugs dispensed by contract pharmacies to low- income, uninsured patients; and examine HRSA’s efforts to ensure compliance with 340B Program requirements at contract pharmacies. In addition, with the growth in the number of hospitals participating in the 340B Program and Medicaid coverage expansions as a result of PPACA, we were asked to review how hospitals that participate in the 340B Program compare to other hospitals. In our forthcoming report, we plan to address how hospitals that participate in the 340B Program compare to non- 340B hospitals in terms of certain characteristics; and how, if at all, the characteristics of 340B and non-340B hospitals changed after state Medicaid coverage was expanded under PPACA. We expect to issue these reports this summer. Chairman Alexander, Ranking Member Murray, and Members of the Committee, this concludes my statement. I would be pleased to respond to any questions you may have. For further information about this statement, please contact Debra A. Draper at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Key contributors to this statement were Michelle Rosenberg, Assistant Director; Amanda Cherrin, Sandra George, and David Lichtenfeld. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "According to HRSA, the purpose of the 340B Program, which was created in 1992, is to enable covered entities to stretch scarce federal resources to reach more eligible patients, and provide more comprehensive services. Covered entities can provide 340B drugs to eligible patients regardless of income or insurance status and generate revenue by receiving reimbursement from patients' insurance. The program does not specify how this revenue is to be used or whether discounts are to be passed on to patients. The number of participating covered entity sites—currently about 38,000—has almost doubled in the past 5 years and the number of contract pharmacies increased from about 1,300 in 2010 to around 18,700 in 2017. In recent years, questions have been raised regarding oversight of the 340B Program, particularly given the program's growth over time. In September 2011, GAO identified inadequacies in HRSA's oversight of the 340B Program and made recommendations for improvement. Among other things, this statement describes HRSA actions in response to GAO recommendations to improve its program oversight. For this statement, GAO obtained information and documentation from HRSA officials about any significant program updates and steps they have taken to implement the 2011 GAO recommendations. More detailed information on the objectives, scope, and methodology can be found in GAO's September 2011 report. The 340B Drug Pricing Program requires drug manufacturers to sell outpatient drugs at discounted prices to covered entities—eligible clinics, hospitals, and others—in order to have their drugs covered by Medicaid. Covered entities are only allowed to provide 340B drugs to certain eligible patients. Entities dispense 340B drugs through in-house pharmacies or contract pharmacies, which are outside pharmacies entities contract with to dispense drugs on their behalf. The number of contract pharmacies has increased significantly in recent years. In its September 2011 report, GAO found that the Health Resources and Services Administration's (HRSA) oversight of the 340B Program was inadequate to ensure compliance with program rules, and GAO recommended actions that HRSA should take to improve program integrity, particularly given significant growth in the program in recent years. HRSA has taken steps to address two of GAO's four recommendations: HRSA initiated audits of covered entities . GAO found that HRSA's oversight of the 340B Program was weak because it primarily relied on covered entities and manufacturers to ensure their own compliance with program requirements and HRSA engaged in few oversight activities. GAO recommended that HRSA conduct audits of covered entities and in fiscal year 2012, HRSA implemented a systematic approach to conducting annual audits of covered entities. HRSA now audits 200 covered entities a year, which is less than 2 percent of entities participating in the 340B Program. Audits conducted to date have identified instances of non-compliance with program requirements, including the dispensing of drugs to ineligible patients. GAO currently has work underway reviewing HRSA's efforts to ensure compliance at contract pharmacies, which includes an examination of HRSA's audits of covered entities. HRSA clarified guidance for manufacturers. GAO found a lack of specificity in guidance for manufacturers for handling cases in which distribution of drugs is restricted, such as when there is a shortage in drug supply. GAO recommended that HRSA refine its guidance. In May 2012, HRSA clarified its policy for manufacturers that intend to restrict distribution of a drug and provided additional detail on the type of information manufacturers should include in their restricted distribution plans. HRSA has not clarified guidance on two issues. GAO also found that HRSA guidance on (1) the definition of an eligible patient and (2) hospital eligibility criteria for program participation lacked specificity and recommended that HRSA clarify its guidance. HRSA agreed that clearer guidance was necessary and, in 2015, released proposed guidance that addressed both issues. However, in January 2017, the agency withdrew that guidance in accordance with recent directives to freeze, withdraw, or postpone pending federal guidance. In March 2018, HRSA indicated it was in the process of determining next steps related to guidance on the patient definition, but would need additional authority to further clarify guidance on hospital eligibility; rulemaking authority for the 340B Program was requested in the administration's fiscal year 2019 budget proposal.", "document_type": "gao"}
{"report": "According to OMB, the federal government spends more than $25 billion annually for core mission support services, such as HR and financial management that are common across agencies. These services are generally supported by a wide range of activities. For example, the HR employee life cycle functions represent hiring to retirement and include activities such as payroll and other compensation and benefits management. The financial management function includes core financial activities such as making and receiving payments for goods or services. As shown in figure 1, for more than two decades, the federal government has taken actions aimed at increasing agencies’ use of shared services. Key congressional actions included new laws to create uniform standards for financial reporting, promote agency use of information technology (IT) to deliver core mission support services, and establish funding mechanisms for agencies to modernize IT systems. Presidential administrations have made it a priority to promote the use of shared services for HR and financial management activities for many years. For example, in 2014 and again in 2018, OMB established a cross-agency priority (CAP) goal of improving the use, quality, and availability of administrative shared services. Complementing the goal, the Digital Accountability and Transparency Act of 2014 is intended to standardize and increase the transparency of agencies’ spending data. At present, OMB has responsibility and authority to develop and implement government-wide shared services policy. OMB is working with GSA to develop shared services strategy, policies, and guidance, with OPM and Treasury also having important roles (see table 1). Table 1 also describes the agencies we selected and their roles in the shared services initiatives. OMB’s efforts to promote HR shared services resulted in cost savings, cost avoidance, and more consistent service delivery. OMB announced the HR Line of Business in 2004 simultaneously with the Financial Management Line of Business. These shared services initiatives shared similar goals: (1) standardize systems, business processes, and data elements to promote consistency across the federal government; and (2) reduce costs by establishing a marketplace or a system of buying and selling products and services. In this context, the marketplace would allow agencies to acquire IT systems for core mission support services through shared services solutions. OPM and FIT coordinated with their respective Chief Human Capital Officer and CFO stakeholder communities to develop data elements and business process standards for common HR and financial management activities. Setting consistent standards for data and systems can lead to benefits for shared services customers as well as providers. For example, the ability to meaningfully aggregate or compare data across the federal government increases as more agencies adopt common or standardized data elements or processes. As we have previously reported, the lack of comparable data across agencies can hinder efforts to analyze government-wide trends. Specifically, OPM reported in 2015 that the lack of standardized time and attendance data or required data components limits access to workforce data and hinders efforts to analyze government-wide trends. In addition, once providers know the standards, they can develop a solution applicable to multiple customer agencies and achieve economies of scale. OPM oversaw one of the first efforts to create a shared services marketplace in 2001, which focused on payroll. That effort resulted in cost savings, cost avoidance, and greater consistency in the interpretation and application of payroll rules. In the early 2000s, many agencies’ payroll systems were nearing the end of their estimated life cycles. As managing partner of the HR Line of Business, OPM worked with OMB to identify payroll providers. They selected 4 of the then 22 federal payroll providers to serve as FSSPs for the 116 executive branch agencies. We previously reported that, according to OPM officials who had overseen the payroll consolidation effort, OMB authorized only the chosen federal payroll providers—not other agencies—to spend money on modernizing payroll systems, thereby encouraging the shift to the selected FSSPs. OPM designated six more public- and private-sector shared services centers to provide additional HR functions to agencies in between 2005- 2008. These functions include core HR services such as personnel action processing and benefits and compensation management, as well as noncore services such as HR strategy and performance management. According to OPM, more than 99 percent of agencies migrated to a payroll provider and more than 88 percent of agencies migrated to an HR shared services center. This resulted in an estimated savings and cost avoidance of more than $1 billion between fiscal years 2002 and 2015. The consolidation of payroll providers from 22 to 4 providers also contributed to greater consistency in the way the federal government interprets and applies payroll rules. The federal government made progress toward establishing standards for selected financial management activities and designating providers to engage in a marketplace. However, information on outcomes is limited because data were not tracked amidst changes in the Financial Management Line of Business leadership and strategy. In 2004, OMB designated GSA’s Financial Systems Integration Office (FSIO) as managing partner of the Financial Management Line of Business. OMB also designated four FSSPs to provide financial management services to other agencies. They were: the Department of the Treasury’s Administrative Resource Center (ARC), the Department of the Interior’s Interior Business Center (IBC), the Department of Transportation’s Enterprise Service Center (ESC), and GSA’s Federal Integrated Solutions Center. Under the original Financial Management Line of Business, which was launched in 2004, federal agencies were required to either serve as a shared services provider or leverage a shared services provider when modernizing a financial system. In 2010, OMB changed this strategy. Agencies would no longer be required to adopt shared services for financial systems. In announcing this change in strategy, OMB noted concerns related to the costs and risks—such as projects that did not meet agency needs upon completion—that medium and large agencies had encountered as they pursued shared services for financial management activities. OMB also noted that agency managers were more likely to pursue shared services for less complex operations such as common website hosting, rather than more complex operations, such as financial transactions. Further, OMB announced a change in leadership. FSIO ceased operations and OMB later designated the Department of the Treasury’s Office of Financial Innovation and Transformation (FIT) as the new managing partner of the Financial Management Line of Business. FIT took steps to establish a marketplace for customers seeking shared financial management services and to develop standards for financial management activities. As part of this effort, FIT created a process to analyze the existing financial management FSSPs to identify capability gaps. FIT invited the existing FSSPs and other agencies that wanted to receive FSSP designation to apply. In 2014, FIT selected ARC, IBC, ESC, and USDA Financial Management Services (which is separate from NFC) to provide financial management services to other federal agencies. FIT also worked with the CFO community to develop more than 40 business use cases for financial management activities. Business use cases document how a common activity, such as disbursing payments, is executed, including a sequential description of each step in the process. According to a FIT official, these business use cases foster a common understanding of how to execute specific financial management functions among customers and providers, which can make it easier for customers to transition to shared services. Further, FIT identified four initiatives to expand shared services for financial transactions. FIT’s four shared services initiatives included expanding shared services for accounts payable and accounts receivable, debt collection, and payment processing. FIT officials estimated these projects could contribute to cost savings of around $620 million over 5 years, but they did not track cost savings. FIT officials also did not track the percentage of non-CFO Act agencies that migrated financial systems to a shared services provider. FSSP customer lists show that non-CFO Act agencies and commissions more frequently rely on external providers for core financial shared services than do medium and large agencies. FIT officials stated that OMB transferred many of FIT’s responsibilities, including collecting performance information, to GSA in 2016. In 2018, GSA officials published customer satisfaction data from 2017 and 2018 for administrative functions, including financial management services through the Customer Satisfaction Survey. GSA also plans to track the percentage of selected financial transactions—such as certain types of payments—completed by a shared services provider starting in 2020. However, tracking of cost data continues to be an issue, which we address later in this report. Wider adoption of HR and financial management shared services has been impeded by challenges in two areas. First, shared services efforts have faced persistent governance challenges, such as limited interagency collaboration, difficulty reconciling benefits and trade-offs, and limited oversight and technical support for shared services migrations. Second, the efforts have also experienced marketplace challenges, which involve difficulty obtaining funding to invest in shared services, demand uncertainty among providers, and limited choices for customers. These issues hampered efforts to establish effective and efficient shared services marketplaces. As a result, these marketplaces have not been able to consistently support sufficient competition limiting the potential cost sharing efficiencies and improved performance that could be realized with greater usage. OMB and GSA have taken steps to address these challenges, which we assess later in this report. Limited interagency collaboration. The Lines of Business governance structure limited collaboration across different mission support areas. This made it more difficult for those with expertise in acquisitions, IT, HR, and financial management policy to work together on shared services solutions. For example, although a shared payroll solution should ideally consider how to appropriately implement payroll rules, an area in which the Chief Human Capital Officers community has subject-matter expertise, it also needs the expertise of others. Specifically, the solution should also be able to integrate with an agency’s financial reporting systems, an area in which the CFOs and Chief Information Officers have expertise. Additionally, the solution should ideally leverage the government’s purchasing power, an area in which the Chief Acquisition Officers have expertise. The Lines of Business Managing Partners took steps intended to address this issue. For example, the HR Line of Business chartered the Multi-Agency Executive Strategy Committee to facilitate interagency collaboration by bringing together representatives from human capital offices across CFO Act agencies. Later in this report, we describe additional steps OMB and GSA took to promote greater collaboration across the individual Lines of Business. Difficulty reconciling benefits and trade-offs. We found that agencies have had difficulty reconciling the trade-offs associated with adopting a standardized service. OMB has issued multiple memorandums over the years directing agency officials to consider shared services solutions when researching options for replacing legacy HR or financial management systems. Despite OMB’s direction, the benefits for customers to migrate to a standardized solution were not always clear. According to ARC officials, prospective customers were invested in their legacy processes, or did not factor long-term cost savings or cost avoidance into their decision-making process, therefore limiting the full realization of standardized shared services. These difficulties are illustrated in a recent experience at Education. Education officials debated whether to migrate the department’s financial management system to a shared services provider, and spent substantial time and money determining whether it was feasible. Education has several systems which are closely integrated and dependent on one another, including financial and grants management. In considering trade- offs, officials were concerned about the costs they would incur and the impact to their grantees if they de-coupled these systems to migrate to a standardized financial system. According to Education officials, they spent about a year meeting with officials from OMB, FIT, and ARC to determine the feasibility of migrating their core accounting system to ARC. They also reported spending more than $750,000 on a feasibility study. The study noted that the cost of an internal migration would be less expensive than migrating to ARC. Ultimately, in 2016, Education officials decided that instead of migrating they would modernize their legacy system internally. GSA and OMB supported Education’s decision to modernize in house and agreed that Education did not need to move to a shared services provider at that time. However, GSA officials working with Education on their financial management modernization efforts noted that Education’s decision to pursue a customized solution that paired financial systems and grants contributed to the higher quoted cost of migrating to ARC. GSA officials also recommended that Education consider the costs and benefits of making changes to its financial management systems that would eventually facilitate the transition to a shared services solution. Education officials said they remain committed to reviewing this effort again in the future. Limited oversight and technical support. Customer and provider agencies experienced issues with project management, which contributed to delayed and costly migrations. For example, we previously reported that two recent financial management migrations—involving the Department of Housing and Urban Development (HUD) migrating to ARC and the Department of Homeland Security (DHS) migrating to IBC, the federal shared services provider within the Department of the Interior— were late, over budget, and only addressed a portion of the original project scope. In 2016, we reported that HUD migrated 4 of 14 planned financial management capabilities to shared service solutions, but ended efforts to migrate the remaining 10 planned capabilities to ARC, in part because of weaknesses in implementing key management practices. For example, HUD’s senior leaders did not recognize and fully address challenges as they arose, including those identified with scope, schedule, and program costs. As a result, HUD was unable to follow through with its plans to replace a number of its legacy financial management systems and continues to maintain those systems while seeking other new initiatives to address aspects of the remaining capabilities. HUD spent about $58 million over three years before deciding to end the migration and modernization effort in April 2016. ARC officials reported that as of November 2018, it continues to provide financial management services for the capabilities that HUD migrated. Similarly, in 2017, we reported that to address long-standing deficiencies in DHS’s financial management systems, DHS started to migrate three components to a modernized financial management system solution provided by the IBC. However, we found that significant challenges such as project management and communication problems, among others, disrupted the project, raising concerns about the extent to which objectives would be achieved as planned. In May 2016, DHS and IBC determined that the planned implementation dates were not viable. We reported that plans for DHS’s path forward on this project were delayed for 2 years. In both cases, we found that the customer agencies did not consistently follow leading project management practices, such as properly identifying potential risks and developing mitigation plans. We made four recommendations to HUD and two recommendations to DHS intended to address weaknesses in their department’s financial management systems modernization efforts. However, as of November 2018, they had not yet implemented them. OPM took steps to address this issue for the HR Line of Business. OPM officials told us that in 2007 they developed an online guide to assist customer agencies to prepare for and manage a migration of their human resources operations to a shared services center. According to OPM, the guidance contains information regarding different delivery models, the migration process, and roles and responsibilities. Further, OMB and GSA recognized that customers and providers would benefit from additional technical support and oversight. In May 2016 guidance, OMB tasked GSA with assisting agencies during implementation by publishing guidance incorporating best practices and lessons learned in project management. OMB also tasked GSA with monitoring implementations to ensure that agencies are following a disciplined process and properly assessing project risk in partnership with OMB. Later in this report, we describe steps GSA has taken to provide guidance and technical assistance to agencies. Funding challenges, demand uncertainty, and limited choices. Funding challenges, demand uncertainty among providers, and limited choices for customers are challenges that have limited the effectiveness of shared services marketplaces for HR and financial management services. We have previously reported that agencies consider obtaining the funding required for consolidation and migration efforts to be a challenge. This can affect their ability to realize cost savings and cost avoidance. GSA officials said funding challenges can be a barrier to entry into the marketplace for potential customers. In part because of funding challenges, agencies continue to rely on legacy IT systems for core mission support services. Many of these systems are increasingly at risk of failure because of aging technology and reliance on applications that are no longer supported by vendors. As a result, agencies are limited in their ability to deploy updates or make adjustments to ensure the systems support mission needs. In our 2017 High-Risk report, we found that agencies needed to establish action plans to modernize or replace obsolete IT investments across the federal government. Some FSSPs have also struggled to keep up with the capital investments necessary to modernize. We previously reported that OPM officials involved with the payroll consolidation effort said that funding had not materialized for systems modernization for the four payroll service providers, though it was expected at the outset of the initiative. The officials said this lack of funding was a major problem that put the long- term viability of the effort at risk. According to NFC officials, the HR FSSPs continue to find it difficult to keep up with the capital investments necessary to modernize. GSA officials said that federal investment in HR and financial management systems modernization lags behind the private sector. According to agency officials and subject-matter experts, federal and commercial shared services providers faced uncertainty related to customer demand, which made it difficult for them to plan and more fully participate in the shared services marketplace. For example, ARC officials said that in determining whether to invest in system improvement, they need to evaluate the impact on current customers as well as the benefits to potential customers. They also pointed out that the costs associated with systems improvements would be borne by the current customer base if potential new customers failed to materialize. On the customer side, both agency officials and subject-matter experts told us that potential customers often found it difficult to identify providers capable of meeting their needs. Some customers wanted a la carte services and others had needs which surpassed the capacity of available providers. For example, Education’s HR officials said it was difficult to find a provider to meet their needs for specific HR services. A lack of up-to- date information about providers’ services and costs complicated their search process. Education officials said they reached out to several FSSPs, but either they did not provide the specific services Education wanted, they were not taking on new customers, or the cost was not feasible for Education. We previously found that as more agencies consider transitioning to shared services providers, making pricing and performance information publically available can help agencies determine the most efficient method for obtaining services. Subject-matter experts said that large agencies also had challenges finding an FSSP capable of meeting their needs. For example, one subject-matter expert who works at a large agency with more than 350,000 employees described the challenges his agency faced identifying a provider capable of providing financial management services. He said one potential FSSP was concerned that adding a large customer would negatively impact its ability to serve other customers. In light of the difficulty in finding a provider with sufficient capacity, the agency decided to modernize its financial system internally. In light of these challenges, agency adoption of shared services has been slow and uneven. In 2015, the Association of Government Accountants (AGA) surveyed government managers and staff, and found that difficult migration experiences raised doubts among officials at other agencies contemplating shared services. AGA found that respondents considering migrating to a shared services provider were hearing enough concerns that they were not eager to undergo a substantial migration. Consequently, agencies continue to conduct common business activities in an inconsistent manner and maintain unique systems. Therefore, they may be missing opportunities to achieve cost savings offered by greater use of shared services. For example, according to OPM, there are at least 108 different systems that send time and attendance data to FSSPs. There are also an estimated 86 learning management systems across the government. We have consistently reported that duplicative and incompatible agency business systems and data prevent agencies from sharing data, or force them to depend on expensive, custom-developed systems or programs to do so. Over the past several years, OMB and GSA have taken actions— including creating a new governance structure and redesigning the marketplace—to address the challenges that impeded more widespread adoption of shared services. To bolster interagency collaboration, OMB issued guidance in 2016, which designated a Shared Services Policy Officer within OMB with responsibility and authority to develop and implement government-wide shared services policy. OMB also tasked the new Unified Shared Services Management (USSM) office within GSA to bring together key stakeholders, including the managing partners of the different lines of business, and representatives from customer and provider agencies. GSA also introduced the Federal Integrated Business Framework to build on ongoing efforts by OPM and FIT to develop standards for HR and financial management data elements and business processes, among other things. As part of this effort, cross-agency working groups identified 11 end-to-end processes for mission support services. Similar to the business use cases FIT developed, these business processes document how a common administrative activity is executed, including a sequential description of each step in the process. According to GSA officials, these business processes serve as the basis for a common understanding of what services agencies need, and what shared services providers should offer. These working groups also bring together those with expertise in acquisitions, IT, HR, and financial management policies. GSA also developed guidance for selecting and migrating to a shared services provider. The new guidance identified opportunities for GSA to review agency migration materials. GSA developed the Modernization and Migration Management Playbook (M3 Playbook), a compilation of leading project management practices and lessons learned from past systems migrations, and met with agencies contemplating or undertaking migrations. The M3 Playbook divides a typical shared services migration into six phases. For each phase, the M3 Playbook identifies key steps agencies should take before they move on, such as completing a risk mitigation strategy and defining performance and success metrics. At the end of each phase, the M3 Playbook recommends a “tollgate” review to ensure both customer and provider completed the necessary steps and are ready to move to the next phase. GSA is to provide recommendations to OMB on the migrations based on observations of project status and risk from tollgate reviews. Agency officials involved with HR and financial management migrations we spoke with said they found both the Playbook and GSA’s reviews helpful. For example, Justice officials said they started to use the Playbook once it was available midway through their HR system migration to NFC. Prior to each tollgate review, Justice officials said they submitted the required deliverables so that GSA had time to review the documents prior to the meetings. Justice officials said that GSA staff reviewing their materials offered concrete suggestions such as developing and documenting success metrics, strengthening their business case, and developing a risk assessment document. According to Justice officials, these suggestions improved the migration process. Education officials also reported they appreciated the project management expertise provided by GSA staff. In fiscal year 2018, OMB and GSA introduced a new marketplace model for shared services that seeks to better meet the needs of customers and providers by offering more choices for purchasing shared services. We examined their approach for the new model and found they were following some key change management practices, but there are weaknesses with the implementation. Specifically, we found OMB and GSA do not have a plan to monitor the implementation of an initiative designed to determine how well the new marketplace model works as intended. Nor have they identified and documented some key roles and responsibilities. The action plan also does not explain how OMB and GSA will provide information to customers about provider services, pricing, and performance. Lastly, OMB and GSA have not implemented a process for collecting and tracking cost-savings data. OMB and GSA described their plan for the new marketplace in an action plan, released in March 2018, along with the President’s Management Agenda. The management agenda issued a new cross-agency priority (CAP) goal to improve the effectiveness of shared services. According to the management agenda, the shared services goal will support CAP goals related to IT modernization, data accountability and transparency, and the workforce of the future. OMB and GSA are the shared services goal leaders and staff said they are coordinating with other CAP goal leaders to achieve their objectives. To oversee the marketplace and provide greater accountability for migrations, OMB and GSA are implementing a new two–tier governance structure (see figure 2). To ensure that agencies are adhering to the standards developed by the Business Standards Council and to provide greater oversight and accountability for shared services migrations, OMB and GSA are working on plans to create Task Order Review Boards (Review Boards) for different types of services, such as payroll or accounting. According to OMB and GSA’s action plan, the Review Boards will administer standards and will review all task orders for shared services purchases for compliance with the standards. The Review Boards will need to approve any requested customizations. According to GSA officials, the contracts for the various vendors providing shared technology and transaction processing services will be purchased through and managed by Service Management Offices (SMO). The SMO will be responsible for managing the integration of new commercial suppliers into the marketplace and responding to user concerns. The SMO will also be held accountable for provider performance. OMB staff noted that the details of the Review Boards depend on the shared services solutions that are identified. Figure 3 describes the different options customers will have for purchasing shared services in the new marketplace. The figure also shows how a Review Board and SMO are intended to interact with customers and providers. To determine whether the marketplace model functions as intended, OMB and GSA introduced an initiative, NewPay. In September 2018, GSA awarded a 10-year, $2.5 billion NewPay agreement to two commercial teams to provide payroll, and work schedule and leave management services using Software-as-a-Service. Software-as-a-Service—a cloud- based computing model—delivers one or more applications and all the resources—operating system, programming tools, and underlying infrastructure to run them—for use on demand. According to OMB and GSA staff, Software-as-a Service should help address some of the challenges with demand uncertainty because providers can more easily increase and decrease capacity depending on changes in demand than FSSPs have been able to do with their current technology. Our prior work on organizational transformations shows that incorporating change management practices—such as setting implementation goals and a timeline to show progress—improves the likelihood of successful reforms. Adopting key change management practices can also help managers recognize and address agency cultural factors that can inhibit reform efforts. As OMB and GSA prepared to implement the new marketplace model, they incorporated some key change management practices. For example, they defined their vision for a shared services marketplace and some of the key activities needed to achieve that future state. GSA also issued a draft statement of objectives for NewPay in December 2017. The statement includes a comprehensive list of tasks related to project management and assigns responsibility for those tasks to the prospective customers, providers, or the government agency that will fulfill the SMO role. Although OMB and GSA have incorporated some key change management practices, we found some weaknesses in OMB and GSA’s implementation of the marketplace. Monitoring. OMB and GSA do not have a finalized plan to monitor the implementation of NewPay. We have previously identified key questions for agencies that are planning and implementing transformations. In that work, we found that agencies need to monitor and evaluate their efforts to identify areas for improvement. We have also reported that effective monitoring plans should include performance goals and milestones, transparent reporting tools to help manage stakeholder expectations, and a process for capturing lessons learned to improve the management of subsequent phases. OMB and GSA staff said they are working on a plan to help them implement NewPay. However, it is not yet complete and they did not provide us with a draft to review. They said their plans continue to evolve and they anticipate having an implementation plan by spring 2019. The lack of a finalized plan with the elements listed above hinders OMB and GSA’s ability to provide sufficient oversight for this transition. Having such a plan would provide various benefits to the NewPay implementation effort. First, a monitoring plan that includes performance goals and milestones would help OMB and GSA track how many and how well customer agencies are transitioning from one provider to another. Similarly, setting performance goals related to continued delivery of services during the transition could help OMB and GSA more quickly identify gaps and make adjustments as needed. Specifically, OMB and GSA could more effectively monitor how the new approach for purchasing payroll, and work schedule and leave management systems integrates with current HR systems. Additionally, transparent reporting tools, such as web-based reporting on key milestones, could help OMB and GSA demonstrate that they are aware of challenges and are addressing them as they arise. Greater reporting transparency could also help build momentum, show progress, and help justify continuing investments in reforming shared services efforts. Finally, a process for capturing lessons learned based on NewPay could help OMB and GSA improve the process for subsequent initiatives and further minimize disruptions to agency delivery of services during these future transitions. Without a monitoring plan with performance goals and milestones, transparent reporting tools, and a process for capturing lessons learned, it will be more difficult for OMB and GSA to provide oversight of the transition and its effects on providers and customers, including whether there are interruptions to delivery of services. A monitoring plan could help OMB and GSA avoid gaps in service or costly delays as agencies transition to the new model for obtaining payroll and work management services. Roles and responsibilities. OMB and GSA have also not identified or documented some key roles and responsibilities related to the implementation of NewPay. Identifying a NewPay SMO is a crucial first step, since the SMO is supposed to play a key role driving standards and holding customers and providers accountable for performance. However, OMB and GSA have not announced which agency will serve as the SMO. Further, they have not identified which agencies or officials will serve on the NewPay Review Board. They also have not documented the authority or the resources the SMO and Review Board will have to enforce agency adoption of standards. OMB and GSA have also not yet documented which agency will be responsible for interpreting payroll rules and regulations. This has been an ongoing issue for the payroll FSSPs. According to GSA and NFC officials, the payroll FSSPs have been interpreting business rules differently, and thus have implemented new regulations inconsistently. According to NFC officials, the payroll FSSPs requested the establishment of a governing body to help standardize the process for implementing new regulations. OPM officials told us in September 2018 that they intend to start providing guidance to support payroll standardization to the extent allowed by law and regulation in the future. However, as of October 2018, OMB and GSA had not documented this decision. According to federal standards on internal control, management should establish an organizational structure, assign responsibility, and delegate authority to achieve an entity’s objectives. When the organizational structure describes overall responsibilities, and when those responsibilities are assigned to discrete units, then organizations can operate more efficiently and effectively. Moreover, in our previous body of work on enhancing interagency collaboration, we identified key practices that can help agencies mitigate challenges when they attempt to work collaboratively. For example, clarifying roles and responsibilities can enhance interagency collaboration. OMB staff and GSA officials said they are still identifying which agencies or entities will fill key roles and assume key responsibilities. They anticipate that some of this information will be finalized by spring 2019. Identifying and documenting roles and responsibilities would help ensure that key stakeholders are involved in planning and implementation activities. Until OMB and GSA clearly identify, communicate, and document key roles and responsibilities, they run the risk of not achieving their objectives. They also risk repeating past problems, such as the inconsistent implementation and interpretation of standards and migrations that encounter costly delays because agencies do not follow available guidance. Information on services, pricing, and performance. Although the action plan aims to help additional providers enter the marketplace, it does not explain how OMB and GSA will provide information to customers about provider services, pricing, and performance. According to the Association of Government Accountants, effective marketplaces require market transparency with information on services, pricing, and performance. Also, according to federal standards on internal control, managers should externally communicate the necessary quality information to achieve an entity’s objectives. As we have previously reported, reliable information on the costs of federal programs and activities is crucial for effective management of government operations. OMB staff and GSA officials said that data collection efforts are on hold as they continue to try to determine what performance metrics they will use and share with potential customers. Without up-to-date information on providers—such as the services they offer, their level of performance, and their costs—it will be time consuming and difficult for potential customers to compare providers. This lack of information could slow the rate of shared services adoption. Cost-savings data. In the CAP goal action plan for shared services, OMB and GSA established a cost savings goal of an estimated $2 billion over 10 years based on reforms to the shared services governance structure and marketplace. However, their action plan does not include steps they intend to take to collect and track cost-savings data. Such data would allow them to assess their progress toward their goal. In their action plan, OMB and GSA included performance measures for goals such as customer satisfaction. They also have output measures related to HR and financial management activities. However, they did not include a measure to gauge their progress in achieving cost savings. In our previous work on key questions for agencies that are planning and implementing transformations, we found that agencies need to have processes in place to collect the needed data and evidence to effectively measure goals of reform efforts. OMB and GSA said they are still finalizing their implementation plan. Including a process to collect and track cost savings data in the final plan would position them to assess how well their reform efforts are contributing to their cost savings goal. Cost savings data would also support oversight efforts, as OMB and GSA could better communicate to Congress and other relevant stakeholders the extent to which their reforms are contributing to cost savings goals. Earlier in this report, we described how difficult it was to determine the progress of the financial management line of business because the managing partners of that effort did not track data on cost savings. Until OMB and GSA finalize a plan for collecting the needed data and evidence to effectively measure cost-savings goals, they risk experiencing a similar challenge. OMB and GSA’s action plan to support the shared services CAP goal does not directly address funding challenges. However, new legislation intended to promote IT modernization efforts may address these challenges. In 2017, Congress enacted the Modernizing Government Technology (MGT) Act as part of the 2018 National Defense Authorization Act. The MGT Act allows agencies to create working capital funds for modernizing IT systems. Working capital funds are primarily used for business-like activities, such as purchasing consolidated or shared services within and between federal agencies. The MGT Act allows CFO Act agencies to transition legacy systems to cloud computing platforms or other innovative platforms and technologies, among other things. We have previously reported that working capital funds provide agencies with an opportunity to operate more efficiently by consolidating services and creating incentives for customers and managers to exercise cost control and economic restraint. The MGT Act also established the Technology Modernization Fund and Technology Modernization Board. Agencies can apply to the board for loans for IT modernization projects, including replacing legacy systems with shared services. In February 2018, OMB issued guidance on the initial process agencies should follow to submit proposals to the board. As of February 2019, OMB announced plans to award close to $90 million to various agencies for modernization projects. Two of these awards were for shared services: one award was to GSA for more than $20 million to help fund NewPay and one award was to USDA for $5 million to migrate 10 IT applications to a shared services cloud platform model. When properly implemented, a shared services model for HR and financial management activities has the potential to help the federal government cut costs and modernize aging IT systems. Over the past 15 years there have been some notable shared services successes: for example, consolidating payroll services resulted in more than $1 billion in cost savings and cost avoidance over 10 years, according to OPM estimates. However, there have also been persistent governance and marketplace challenges that have impeded more widespread adoption of shared services. OMB and GSA have been involved in shared services reform efforts for decades. Their plan for a new shared services governance structure and marketplace has the potential to address some of the challenges that have previously hindered more widespread adoption of shared services. For example, their proposed marketplace model has the potential to make the marketplace more effective by reducing demand uncertainty among shared services providers and providing more choices for customers. However, several weaknesses in their implementation of NewPay could limit the initiative’s success. OMB and GSA do not have a plan to monitor NewPay’s implementation. They also have not documented key decision- making roles and responsibilities related to the implementation of NewPay. Until they develop a monitoring plan which includes performance goals and milestones, transparent reporting tools, and a process for capturing lessons learned, and documenting key roles, they risk implementation challenges that could cause gaps in service or costly delays. OMB and GSA also do not have a process to provide information to customers about provider services, pricing, and performance. Developing such a process would help minimize the challenges of transitioning to shared services on key stakeholders. Finally, OMB and GSA do not have a process for collecting and tracking cost-savings data. Until OMB and GSA finalize their plan for collecting the related data and evidence to measure their cost savings goal of an estimated $2 billion over 10 years, they will not be able to determine and report progress made. We are making four recommendations to OMB to work with GSA, which is the co-goal leader for the shared services CAP goal. OMB’s Shared Services Policy Officer should work with GSA to finalize a plan for monitoring the implementation of NewPay. The plan should include: implementation goals, a timeline, and milestones for agencies to transition from one provider to another; transparent reporting mechanisms on key milestones; and a process for capturing and communicating lessons learned. (Recommendation 1) OMB’s Shared Services Policy Officer should work with GSA to document key roles and responsibilities, including which agency will be the NewPay SMO, who will be assigned to the NewPay Task Order Review Board, how the SMO, the Review Board, and other key stakeholders will work together, and which agency will be responsible for interpreting payroll rules and regulations. (Recommendation 2) OMB’s Shared Services Policy Officer should work with GSA to update provider information on services offered, pricing, and performance and share that information with prospective customers. (Recommendation 3) OMB’s Shared Services Policy Officer should work with GSA to implement a process for collecting and tracking cost-savings data that would allow them to assess progress toward the shared services cost- savings goal of an estimated $2 billion over 10 years. (Recommendation 4) We provided a draft of this report to the Director of OMB, the Administrator of GSA, the Acting Director of OPM, the Secretary of the Treasury, the Deputy Assistant Inspector General for Audit of the USDA, the Secretary of Education, and the Assistant Attorney General for Administration of Justice for review and comment. OMB staff did not agree or disagree with our recommendations. In comments provided by email, OMB staff stated OMB has been re-evaluating its shared services policies and may provide an updated policy in the future. OMB, GSA, Treasury, OPM, USDA, and the Department of Education provided technical comments on this report which were incorporated as appropriate. The Department of Justice did not have comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Director of the Office of Management and Budget, the Administrator of General Services Administration, the Acting Director of the U.S. Office of Personnel Management, the Secretary of the Treasury, the Deputy Assistant Inspector General for Audit of the U.S. Department of Agriculture, the Secretary of the Department of Education, and the Assistant Attorney General for Administration of the Department of Justice, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact Tranchau (Kris) T. Nguyen at (202) 512-2660 or Nguyentt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix II. This report: (1) identifies the progress and challenges associated with federal shared services initiatives for selected human resources (HR) and financial management activities, and (2) assesses the Office of Management and Budget’s (OMB) and the General Service Administration’s (GSA) actions to address those challenges. To address both of our objectives, we conducted a literature review of GAO work and other relevant publications on HR and financial management shared services. In addition to GAO reports, we selected reports by think tanks and professional associations from the past 15 years, such as reports by the Partnership for Public Service and the Association of Government Accountants (AGA). We reviewed reports that described past HR and financial management federal shared services initiatives or specific shared services migrations involving HR or financial management services. These reports assessed the outcomes, challenges, or summarized lessons learned associated with those initiatives or migrations. We reviewed planning and performance documents and we interviewed officials from (1) OMB and GSA, the agencies that oversee shared services policy and guidance, and (2) the Office of Personnel Management (OPM) and the Office of Financial Innovation and Transformation (FIT) within the Department of the Treasury (Treasury), agencies that oversaw past shared services initiatives and continue to play a key role developing government-wide policy for HR and financial management shared services. Key documents we reviewed included: OMB memorandums announcing federal shared services initiatives; the Modernization and Migration Management (M3) Playbook, guidance that GSA developed and provides to agencies considering or implementing shared services migrations; strategic or operational plans for earlier shared services initiatives, such as the Human Resources and Financial Management Lines of Business; and strategic or operational plans for ongoing shared services initiatives such as the Federal Integrated Business Framework, a model GSA developed with the lines of business managing partners for moving agencies toward common, cloud-based solutions for management functions. To illustrate examples of outcomes and challenges, we selected two federal shared services providers (FSSPs), federal agencies that provide shared services to other agencies: the National Finance Center (NFC) within the U.S. Department of Agriculture (USDA) and the Administrative Resource Center (ARC) within Treasury. We also selected two customer agencies: the Departments of Justice (Justice) and Education (Education), which are experiencing different phases of shared services migrations. We made our selection based on a number of factors. To capture a range of experience and perspectives, we selected a mix of customer and provider agencies. We selected one HR and one financial management systems migration to review, as well as one migration in an earlier phase and one in a later phase. To capture an in-depth perspective of a migration, we selected one customer and provider working together on a migration. To capture perspectives on OMB and GSA’s efforts to address shared services challenges and improve outcomes, we selected provider and customer agencies that were meeting regularly with GSA in 2016 or 2017 on their shared services migration. Our selection of agencies is non- generalizable and their experiences and outcomes may not be reflective of all migrations. We reviewed guidance, planning, and performance documents at the four selected agencies. Specifically, we reviewed planning documents that describe shared services migration purpose and goals, the composition and responsibilities of the project management team, and estimated costs and savings; documented results of market research and analyses of alternatives; risk management strategies; service level agreements and performance metrics; communication plans for stakeholders; and reports that capture lessons learned. For each of the illustrative example agencies, we interviewed agency officials involved with shared services migrations. At Justice, we interviewed the project management team overseeing the HR migration to the NFC. At Education, we interviewed the officials who reviewed the Department’s HR and financial management shared services options. At the two FSSPs, we interviewed officials knowledgeable about the outcomes and challenges associated with past and ongoing federal shared services initiatives. We also interviewed subject-matter experts who were involved in public and private shared services migrations as customers, providers, or consultants. We met with members of the Shared Services Leadership Coalition, an interest group promoting shared services solutions involving commercial vendors. The members who participated in the group interview discussed shared services benefits, challenges, and lessons learned. We also met with members of the nonprofit Partnership for Public Service Shared Services Roundtable. The roundtable members who participated in the group interview are federal employees involved with shared services operations. They represented a mix of small and large agencies. To further address the second objective, we reviewed OMB and GSA’s efforts to identify and address challenges and lessons learned from past migrations, including the new shared services action plan OMB released in March 2018. We assessed the extent to which OMB and GSA’s plan and guidance are designed to facilitate better shared services outcomes using criteria such as standards for internal control in the federal government, principles identified in our previous work related to addressing major management challenges, and the Association of Government Accountants criteria for effective marketplaces. During our interviews with customer and provider agency officials and subject-matter experts, we asked for their perspectives on these efforts and the likely effect they will have on ongoing and future shared services migrations. We conducted this performance audit from June 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Key contributors to this report include Sonya Phillips (Assistant Director), Jessica Nierenberg (Analyst-in-Charge), Rose Almoguera, and Monique Nasrallah. Faisal Amin, Ann Czapiewski, Timothy J. DiNapoli, Jared Dmello, Robert Gebhart, Amanda Gill, Dave Hinchman, Gina Hoover, Valerie Hopkins, John Hussey, Heather Krause, Michael LaForge, Laura Pacheco, Paula M. Rascona, and Kevin Walsh also contributed to this report.", "summary": "The federal government can reduce duplicative efforts and free up resources for mission-critical activities by consolidating mission-support services that multiple agencies need—such as payroll or travel—within a smaller number of providers so they can be shared among agencies. However, migrating to a shared services provider has not consistently increased cost savings, efficiencies, or customer satisfaction, according to OMB and others who have observed these migrations. GAO was asked to review previous shared services initiatives. This report: (1) identifies the progress and challenges associated with federal shared services initiatives for selected HR and financial management activities and (2) assesses OMB and GSA's actions to address those challenges. GAO analyzed planning and performance documents and interviewed officials from selected customer and provider agencies and from agencies involved with shared services policy and guidance. GAO also interviewed subject-matter experts familiar with shared services. GAO reviewed steps OMB and GSA are taking to identify and address challenges from past migrations to improve shared services performance. Efforts to promote greater use of shared services for human resources (HR) and financial management activities resulted in some cost savings and efficiency gains, but challenges impeded more widespread adoption. For example, the Office of Personnel Management estimates that shared services for HR, including payroll resulted in more than $1 billion in government-wide cost-savings and cost avoidance between fiscal years 2002 and 2015. However, challenges include limited oversight, demand uncertainty among providers, and limited choices for customers. To address these challenges, the Office of Management and Budget (OMB) and the General Services Administration (GSA), as the shared services initiative leaders, introduced a new marketplace model in 2018 meant to better meet the needs of customers and service providers by offering more choices for purchasing shared services (see figure). They are also working on plans to create Service Management Offices and Task Order Review Boards to work with agencies to adopt standards for common management activities. GAO found that OMB and GSA were following some key change management practices such as improving interagency collaboration in their design of the marketplace model. However, implementation weaknesses may limit their success. For example, OMB and GSA do not have a plan to monitor the implementation of NewPay, a 2018 payroll shared services initiative designed to determine how well the new model works. A monitoring plan which includes performance goals and milestones could help OMB and GSA avoid gaps in service or costly delays as agencies transition to the new model for obtaining shared services. GAO is making four recommendations to OMB including to work with GSA to finalize a plan for monitoring the implementation of NewPay, among other actions. OMB staff did not comment on GAO's recommendations, but noted that OMB may update its shared services policy in the future.", "document_type": "gao"}
{"report": "CMS intends for the T-MSIS initiative to provide a national data repository that would support federal and state program management, financial management, and program integrity activities, among other functions. T- MSIS is also intended to benefit states by reducing the number of reports CMS requires them to submit, and by improving program efficiency by allowing states to compare their data with other states’ data in the national repository or with information in other CMS repositories, including Medicare data. For example, CMS intends to use T-MSIS data for reports that states are currently required to submit, such as Early and Periodic Screening, Diagnostic, and Treatment Program reports. T-MSIS is designed to capture significantly more data from states than is the case with MSIS, thereby collecting data not previously reported that should provide CMS and states with information to enhance their oversight efforts. T-MSIS includes the five data files that were collected through MSIS: an eligibility file and four claims files (inpatient, long-term care, pharmacy, and other). The scope of data to be collected from these five previously defined MSIS files has expanded to include more detailed information on enrollees, such as their citizenship, immigration, and disability status; and expanded diagnosis and procedure codes associated with their treatments. Additionally, T-MSIS requires states to report three new data files on (1) providers, (2) third-party liability, and (3) managed care organizations (MCO). The provider file includes a unique identifier for each provider, as well as data fields to show provider specialty and practice locations. Each of these identifiers can assist CMS and state oversight by providing information on provider referrals, Medicaid payments to specific providers, and identifying ineligible providers. The third-party liability file includes data on whether a beneficiary has any health insurance in addition to Medicaid, or other potential sources of funds that could reduce Medicaid’s expenditures. Medicaid is generally the payer of last resort, meaning if Medicaid enrollees have another source of health care coverage, that source should pay, to the extent of its liability, before Medicaid does. Information on beneficiaries’ other sources of coverage could help ensure that Medicaid pays only those expenditures for which it is liable. The managed care file includes more detailed information on MCOs, such as type and name of managed care plans, covered eligibility groups, service areas, and reimbursement arrangements. In addition to identifying which MCOs are reporting encounter data as required, this file could help CMS’s oversight by allowing the agency to identify excess plan profits and volatility of expenditures for some beneficiary groups across states. In total, T-MSIS includes approximately 1,400 data elements, according to CMS. Many of these elements, however, have content that is used in more than one of the eight T-MSIS files. For example, the element “DATE OF BIRTH” is required in five T-MSIS files—Eligibility, Claim Inpatient, Claim Long-term Care, Claim Prescription, and Claim Other. CMS requires states to report all T-MSIS elements that are applicable to their programs, and has worked closely with states to facilitate their efforts to report these data. For example, before CMS approves a state for reporting T-MSIS data, states must complete a number of activities, including developing detailed work plans and completing a series of data testing phases. For a state to meet CMS’s requirements for submitting T-MSIS data, it must report data for all eight files, but not necessarily all elements within each file. In addition, T-MSIS includes aspects aimed at improving the timeliness and accuracy of data submitted by states. For example, CMS requires states to report T-MSIS data monthly, rather than quarterly, as was the case with MSIS. Regarding data accuracy, T-MSIS includes approximately 2,800 automated quality checks that provide states with feedback on data format and consistency, according to CMS; this is in contrast to MSIS, which had relatively few automated checks. Other quality checks are to ensure logical relationships across T-MSIS files. Both we and the HHS-OIG have previously recommended that CMS take steps to address the quality of T-MSIS data. In our January 2017 report, we recommended that CMS take immediate steps to assess and improve T-MSIS data. As part of that effort, we noted that CMS could refine their T-MSIS data priority areas to identify those that are critical for reducing improper payments and expedite efforts to assess and ensure their quality. CMS agreed with our recommendation, but as of September 2017, the agency had not implemented it. More recently, the HHS-OIG reported that CMS and states continue to have concerns regarding the completeness and reliability of T-MSIS data, echoing concerns raised in its 2013 review of CMS’s T-MSIS pilot program. The HHS-OIG noted it was concerned that CMS and states would delay further efforts rather than assign the resources needed to address the outstanding challenges, and reaffirmed its 2013 recommendation that CMS establish a deadline for when T-MSIS data will be available for program analysis and other management functions. Despite challenges converting their data to the T-MSIS format, most states were reporting T-MSIS data as of November 2017, representing significant progress over the past year. With most states reporting, CMS has shifted its efforts to working with states to improve the quality of T- MSIS data. As of November 2017, 49 states have begun reporting T-MSIS data, a significant increase from the 18 states that had started reporting these data in October 2016. These reporting states represent over 97 percent of the 2017 Medicaid population nationwide. CMS officials told us that they expect all states to report T-MSIS data by 2018. (See fig. 1.) As of November 2017, all eight of our selected states were reporting T- MSIS data, with seven of them having begun in September 2016 or later. Selected states’ estimated spending a collective $14.16 million on their efforts to report T-MSIS data from October 2011 through June 2017, ranging from approximately $850,000 in Virginia to $4.42 million in Minnesota. (See table 1.) The age and scope of states’ existing Medicaid Management Information Systems (MMIS) were among the factors that affected certain states’ spending and timing on this effort. Mapping the data—the process by which states convert their data to the T-MSIS format on an element-by-element basis—was the primary challenge our eight selected states identified in reporting T-MSIS data. In some cases, before converting their data to the T-MSIS format, states had to obtain data they had not previously collected from other state entities, MCOs, or providers. For example, Minnesota had to begin collecting information on denied claims from MCOs, and Utah had to collect third-party liability information from other state agencies. In addition, while some state data elements could be converted to the T- MSIS format fairly easily, because the relationships between the two were clear, the conversion of other data elements was more complicated. For example, the T-MSIS data element for male and female is “M” and “F,” respectively. Accordingly, in states that identified gender by a numeric value, “1” for male and “2” for female, the conversion to T-MSIS for this element was a fairly straightforward one-to-one relationship. However, for other data elements, the conversion process was more complex, requiring states to expand or collapse their data to match the T-MSIS format. (See fig. 2.) Selected states shared examples of steps they took to convert state data to the T-MSIS format. Louisiana officials noted that they had to map the state’s single durable medical equipment (DME) element to multiple specific T- MSIS DME elements, such as DME pharmacy or DME orthotics. Virginia officials said they had to combine three state ambulance service provider elements into a single T-MSIS element. In addition, individuals who had experience with other states’ T-MSIS reporting efforts also noted that states may not have always collapsed categories in the same way. For example, one state collapsed its 109 provider categories to match T-MSIS’s 57 provider categories, according to an individual who worked with the state on this effort. This individual noted that there were 32 state provider elements that did not directly match a specific T-MSIS element, so the state grouped them all into the “other” T-MSIS element. Changes in CMS’s data reporting requirements further complicated some states’ efforts to convert their data to the T-MSIS format, according to officials from our selected states. CMS updated the T-MSIS data dictionary—the document that defines the required T-MSIS elements and their reporting formats—twice in 2013 and again in November 2015. According to CMS officials, they updated the data dictionary to clarify and remove inconsistencies from guidance in response to feedback from states. Some of the selected states reported that the changes included in this update required considerable rework, and in some cases, delayed their T-MSIS reporting. For example, Washington officials noted that the 2015 update became available at the point it was completing a T-MSIS testing phase. Due to the rework required to comply with the new data specifications, the state’s efforts to report T-MSIS data were delayed by nearly one year. Similarly, Minnesota officials also cited rework associated with changes to the 2015 data dictionary, which contributed to delays in their efforts to report T-MSIS data. Over the past six years, CMS has relied on a variety of mechanisms to support states’ efforts to report T-MSIS data. CMS assigned technical assistants to help states understand the T- MSIS requirements, prioritize steps to report T-MSIS data, and serve as a resource on technical issues. The majority of selected states had positive comments about the technical assistance they received. For example, Pennsylvania officials said its technical assistant regularly met with them, answered any questions they had, and facilitated their efforts to complete T-MSIS testing. CMS began hosting national webinars covering a range of topics, including clarification on specific T-MSIS elements that CMS identified as challenging or subject to error, and updates on the nationwide implementation. The webinars also provided an opportunity for states to ask CMS questions about T-MSIS requirements. CMS established web-based avenues through which the agency could compile and disseminate information, as well as elicit questions from states and contractors. For example, CMS provided an electronic option for states to submit questions regarding policy and technical issues. CMS took additional steps to help states, including creating a SharePoint web site through which states are notified about changes in guidance. With nearly all states having begun reporting T-MSIS data, CMS has shifted its efforts to improving the quality of the T-MSIS data reported, and these efforts are still evolving. For example, to provide states with immediate feedback on their reported T-MSIS data, CMS created an online “operational dashboard” for each state, which provides specific information on errors in its reported data. Using information on the operational dashboard, states can identify the frequency and cause of certain errors, which facilitates their efforts to resolve them more expeditiously and to improve future submissions. All six of the selected states reporting T-MSIS data had positive comments about the value of the operational dashboard, with some of them noting that the feedback on errors was a significant improvement from their experience with MSIS, where feedback had a considerable time-lag. More recently, according to agency officials, CMS has initiated a pilot study with four states to identify anomalies in their reported data that merit further attention, obtain feedback on automated quality measures, and determine the best approach for ongoing quality review. While work on the pilot is ongoing, CMS officials anticipate using what they learned to expand the agency’s quality review to include all states. In addition, CMS has turned to external stakeholders to evaluate the quality of T-MSIS data. Specifically, CMS has shared T-MSIS data with a Technical Expert Panel it formed to obtain feedback on inconsistencies and other quality concerns. According to CMS officials, the Technical Expert Panel focused on a preliminary set of T-MSIS data from a limited number of states. The agency officials noted that Technical Expert Panel members include individuals from HHS’s Office of the Actuary, the Congressional Budget Office, and the Medicaid and CHIP Payment and Access Commission, among others. Panel participants analyzed the T- MSIS data from 11 states on the specific topics in which they have expertise. According to CMS officials, the panel is to provide its results to the agency in a summary report. Ongoing data concerns raise questions about how soon—and to what extent—T-MSIS data will be sufficient to achieve the goals of improving CMS’s and states’ ability to use Medicaid data for oversight. For example, none of the six selected states that were reporting T-MSIS data as of August 2017 were reporting complete data at that time. In reviewing selected states’ documentation of unreported data elements, we determined that the number of unreported data elements ranged from about 80 elements to 260 elements. Although T-MSIS includes about 1,400 data elements, the number of data elements relevant to each state varies, in part, because certain elements may not be applicable to all states and others may be populated at the state’s discretion. In addition, the content of some data elements are present in more than one of the eight T-MSIS files. As a result, the number of unreported elements may overstate the extent of state efforts needed to report complete T-MSIS data. Our selected states provided a range of reasons for not reporting T-MSIS data elements, including that certain elements were contingent on federal or state actions. In other cases, state officials indicated that data elements were too costly to report, so they would not be reporting them. We identified further examples of where certain data elements were not applicable to states’ Medicaid programs, and therefore were not required. (See table 2.) Although CMS requires states to report all T-MSIS data elements applicable to their program, CMS officials said they did not specify a reporting deadline for states, and selected states’ documentation to CMS did not always include the reasons they did not report certain elements, or whether or when they planned to report them. Due to the lack of clarity and completeness in selected states’ documentation, we were not able to identify the reasons for all unreported data elements. However, among our selected states, Virginia’s documentation more clearly specified most—but not all—of the reasons it was not reporting 260 T-MSIS elements. Virginia identified 167 elements that its MMIS did not capture, and noted that once the state’s new Medicaid information system is fully implemented in 2019, the state will be able to report them. Virginia identified 16 elements as pending other state or related actions. Virginia identified 18 elements as pending the implementation of HHS efforts. Virginia identified 53 elements as not applicable to aspects of its Medicaid program. Without complete information from all states on unreported data elements and their plans to report them, it is unclear when—and to what extent—T- MSIS data will be available to use for oversight, which is inconsistent with federal internal control standards for using quality information to achieve objectives. In some cases, data elements important for program oversight were not reported by two or more of the six selected states reporting T-MSIS data, limiting T-MSIS’s usefulness for oversight in these areas. (See table 3.) Another factor affecting the ability of CMS and states to use T-MSIS data for oversight is that not all of the 49 states submitting T-MSIS data are submitting current data. According to CMS officials, before beginning to report T-MSIS data, each state stops reporting MSIS data. At that point, there is a temporary gap in the state’s reporting until it receives CMS’s approval to begin reporting T-MSIS data. After a state gets CMS’s approval, it must first submit the T-MSIS data that correspond to the date that it stopped submitting MSIS data; the data for previous months is known as “catch up” data. Once a state reports that data, it then shifts to reporting current T-MSIS data. According to CMS, as of November 2017, 42 of the 49 states reporting T-MSIS data were reporting current data; the remaining 7 states were still reporting catch up data for previous months. Regarding the comparability of T-MSIS data across states, state officials we interviewed cited concerns that could affect their use of T-MSIS for oversight. Officials from most selected states cited the benefit that a national repository of T-MSIS data could provide by allowing them to compare their Medicaid program data—such as spending or utilization rates—to other states, which could potentially improve their oversight. However, concerns about comparability of the data make officials from most selected states hesitant to use the data for this purpose. In particular, officials from six of eight selected states, and other individuals we interviewed, are not confident that the decisions states made when converting their data to the T-MSIS format were consistent across states. An individual who worked with other states on T-MSIS reporting efforts noted that states may have made different decisions about what types of providers to include as part of the “all other” category of providers within T-MSIS. While one state he worked with included a range of provider types, such as licensed drug and alcohol counselors and non-emergency medical transportation providers, in the “all other” T-MSIS provider category, other states may have made different decisions. Some state officials and individuals working with states noted that states’ different decisions may complicate their ability to use the data for cross-state comparisons. Further, officials from some of the selected states noted that they were not familiar with the quality of other states’ T-MSIS data. CMS has begun to take steps to address the quality of the T-MSIS data; however, its efforts are still evolving. For example, in May 2017, CMS identified 12 data quality priority areas for states to focus on for improving the accuracy and consistency of T-MSIS data, including accurately categorizing beneficiaries into T-MSIS eligibility groups and ensuring consistency related to MCO reporting. CMS has worked to identify existing or develop new guidance for each of these priority areas, and to compile the guidance in a central location for states’ reference. As of August 2017, CMS officials said they compiled guidance for 11 of the 12 areas, and intended to continue work with states on these priorities. In addition, CMS has not created a mechanism to disseminate information about states’ data limitations or states’ efforts to improve and use the data, which also affects their utility for oversight. Officials from four of the eight selected states said that learning more about other states’ T-MSIS data could help allay their concerns about comparability, and two of the four states said it could also help them address their own data quality issues. Additionally, officials from all eight selected states were interested in opportunities to learn more about other states’ use of the data. CMS officials acknowledged the benefits of a mechanism to disseminate information about states’ data limitations more broadly, and to facilitate information sharing among states. CMS officials told us that they plan to launch a Learning Collaborative with states to facilitate feedback and collaboration. This effort could address a range of data-related topics, including data quality. CMS officials told us they were taking actions to put the Learning Collaborative in place, and may launch the collaborative in early 2018. The lack of an effort to facilitate information sharing is inconsistent with CMS’s goals for T-MSIS and with federal internal control standards for using and communicating quality information to achieve objectives. Absent such an effort, CMS is missing an opportunity to help states understand ways they could improve the quality of their T-MSIS data and facilitate states’ use of the data for oversight. CMS is also missing an opportunity to expedite quality improvements that could result from states conducting their own independent analyses. Although CMS has taken steps to begin using T-MSIS data, it has not yet fully articulated a plan for how and when it will use T-MSIS data for its own broader oversight efforts of state Medicaid programs. For example, according to CMS officials, the agency has begun to use T-MSIS data to generate Money Follow the Person reports, and has begun exploring additional uses of T-MSIS data to reduce states’ reporting burden. These preliminary efforts are consistent with one of CMS’s stated goals for T-MSIS, which is to reduce states’ reporting burden by relying on T- MSIS data in place of separate reports that states currently submit, and officials from six of eight selected states indicated that such an effort would reduce their reporting burden. However, as of August 2017, CMS officials acknowledged that they had yet to outline how best to use T-MSIS data for program monitoring, oversight, and management, because they were still largely focused on working with the remaining states to begin reporting T-MSIS data, analyzing the quality and usability of the T-MSIS data, and preparing the data for research purposes. CMS’s lack of a specific plan and time frames for using T-MSIS data is inconsistent with federal internal control standards related to using and communicating quality information to achieve objectives. Absent a specific plan and time frames, CMS’s ability to use these data to oversee the program, including ensuring proper payments and beneficiaries’ access to services, is limited. As part of its efforts to address longstanding concerns about the data available to oversee the Medicaid program, CMS has taken important steps toward developing a reliable national repository for Medicaid data. T-MSIS has the potential to improve CMS’s ability to identify improper payments, help ensure beneficiaries’ access to services, and improve program transparency, among other benefits. By providing more standardized data on various aspects of Medicaid—such as spending or utilization rates—states could be better positioned to compare their programs to other states, thereby improving their ability to identify program inefficiencies or opportunities for improvement. Implementing the T-MSIS initiative has been a significant undertaking. Over the past 6 years, CMS has worked closely with states and has reached a point where nearly all states are reporting T-MSIS data. While recognizing the progress that has been made, more work needs to be done before CMS or states can use these data for program oversight. It remains unclear when all states will report complete and comparable T- MSIS data, and how CMS and states will use them to improve oversight. In the interim, improper Medicaid payments continue to increase, reaching $36.7 billion in fiscal year 2017. Further delays in T-MSIS’s use limit CMS’s ability to reverse that trend in the near term, underscoring the need for CMS to take additional steps to expedite the use of the data. We are making the following two recommendations to CMS. The Administrator of CMS, in partnership with the states, should take additional steps to expedite the use of T-MSIS data for program oversight. Such steps should include, but are not limited to, efforts to obtain complete information from all states on unreported T-MSIS data elements and their plans to report applicable data elements; identify and share information across states on known T-MSIS data limitations to improve data comparability; and implement mechanisms, such as the Learning Collaborative, by which states can collaborate on an ongoing basis to improve the completeness, comparability, and utility of T-MSIS data. (Recommendation 1) The Administrator of CMS should articulate a specific plan and associated time frames for using T-MSIS data for oversight. (Recommendation 2) We provided a draft of this report to HHS for comment. In its written comments, HHS concurred with our recommendations, and noted that strong Medicaid data can help the federal government and the states move toward better health outcomes and improve program integrity, performance, and financial management. With most states now reporting T-MSIS data, HHS highlighted efforts it has taken to improve the quality of T-MSIS data. For example, HHS developed a database on data quality findings, which could be used to identify solutions for common problems across states, and has begun to develop a data quality scorecard for T- MSIS users, which aggregates data quality findings in a user-friendly tool. Regarding taking steps to expedite the use of T-MSIS data for program oversight, HHS stated that it will (1) continue to work to obtain complete T-MSIS information from all states; (2) take additional steps to share information across states on T-MSIS data limitations; and (3) implement ways for states to collaborate regarding T-MSIS. HHS also noted that it is in the process of developing a plan for using T-MSIS data for oversight. HHS emphasized that it is dependent on states—and their available staffing and resources—to address data quality and reporting issues. HHS also provided technical comments, which we incorporated as appropriate. HHS’s comments are reprinted in appendix I. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of HHS, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. Major contributors to this report are listed in appendix II. Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov. In addition to the contact named above, individuals making key contributions to this report include Susan Anthony (Assistant Director), Manuel Buentello (Analyst-in-Charge), Anna Bonelli, and Robin Burke. Also contributing were Muriel Brown, Drew Long, and Jennifer Rudisill.", "summary": "GAO and others have identified insufficiencies in state-reported Medicaid data that affect CMS's ability to oversee the program effectively. Recent increases in improper payments—estimated at $36.7 billion in fiscal year 2017—exacerbate concerns about program oversight. CMS officials identified the T-MSIS initiative, which began in 2011, as its main effort to improve Medicaid data, and cited aspects of T-MSIS aimed at improving the scope and quality of state-reported data. GAO reported in January 2017 that it is unclear when T-MSIS data will be available from all states; how CMS will ensure data quality; or how the data will be used to enhance oversight of Medicaid. GAO was asked to review states' experiences with T-MSIS implementation and planned uses of T-MSIS data. This report examines (1) states' experiences regarding T-MSIS implementation, and (2) challenges to CMS's and states' use of T-MSIS data for oversight. GAO reviewed federal laws, guidance, and internal control standards; reviewed documents and interviewed officials from eight states, selected based on their T-MSIS reporting status, location, program expenditures, and other factors; and interviewed CMS officials, CMS contractors, and individuals involved with other states' T-MSIS efforts. As of November 2017, 49 states had begun reporting Transformed Medicaid Statistical Information System (T-MSIS) data—a significant increase from 18 states reporting these data one year earlier. All eight states GAO reviewed identified converting their data to the T-MSIS format on an element-by-element basis as the main challenge in their reporting efforts. For some data elements, states had to expand or collapse their data to match the T-MSIS format. With the continued implementation of T-MSIS, the Centers for Medicare & Medicaid Services (CMS) has taken an important step toward developing a reliable national repository for Medicaid data. However, data challenges have hindered states' and CMS's use of the T-MSIS data for oversight. None of the six selected states reporting T-MSIS data in August 2017 was reporting complete data. These states said that certain unreported elements were contingent on federal or state actions, and others were not applicable to the state's Medicaid program. States did not always specify in their documentation whether they planned to report elements in the future or when they would report complete data. Six of eight selected states expressed concerns about the comparability of T-MSIS data across states. Further, all states were interested in CMS facilitating information sharing among states. CMS has not compiled and shared information about states' data limitations, which would help states accurately compare their T-MSIS data to other states' T-MSIS data. CMS has taken steps for the initial use of T-MSIS data, but does not have a plan or associated timeframes for using these data for oversight. As a result, important CMS goals for T-MSIS, such as reducing states' reporting burden and enhancing program integrity activities, are not being fully realized. GAO recommends that CMS (1) improve T-MSIS's completeness and comparability to expedite its use, and (2) articulate a specific oversight plan. The Department of Health and Human Services concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Federal agencies’ personal property may include commonly used items, such as computers, office equipment, and furniture, and more specialized property reflective of their mission, such as scientific devices, fire control equipment, heavy machinery, precious metals, generators, and chemicals. Some items require special handling, such as hazardous materials, animals, and firearms. See figure 1 for examples of federal personal property. Federal agencies manage personal property while they are using it. Specifically, executive agencies are required by law to: maintain adequate inventory controls and accountability systems for property under their control; continually survey property under their control to identify excess; promptly report excess property to GSA and dispose of it in accordance with GSA regulations; and use existing agency property or obtain excess property from other federal agencies before purchasing new property. GSA assists agencies when they no longer need personal property and has established a government-wide personal-property disposal process in federal regulation. The process generally begins when an agency declares a personal property item as “excess”—that is, the agency determines it no longer needs the item to carry out its mission. Agencies are to make this determination only after ensuring the property is not needed elsewhere within the agency. Once property is declared excess, there are four potential property disposal methods: transfer to another federal agency or certain non-federal entities, donation, sale, and abandonment or destruction. Federal agencies and some non-federal entities have the priority to acquire excess property, through transfer. If none of these eligible entities have requested the property for transfer after 21 days, the property becomes “surplus”—that is, GSA determines that federal agencies no longer need the item to carry out their missions. Surplus property may be donated to eligible entities through a State Agency for Surplus Property, representing the state of the prospective donee. Property not donated within 5 days after the close of the 21-day screening period may be sold to the general public and, finally, unsold property may be abandoned or destroyed. See appendix II for an expanded description of the personal property disposal process. OMB is responsible for establishing government-wide management policies and requirements and provides guidance to agencies to implement them. OMB has issued guidance for specific types of personal property, such as for government aircraft and information technology systems. OMB also implemented the Freeze the Footprint and Reduce the Footprint initiatives, starting in 2012, to reduce the amount of domestic office and warehouse space needed by the federal government, in part, through consolidations and improved space utilization. As a result, federal agencies have reported achieving space reductions, and they have goals for additional reductions in the future. Although these reductions are a relatively small part of the federal government’s overall footprint, according to OMB, through this and other efforts agencies collectively reduced their office and warehouse space by about 25 million square feet from fiscal years 2012 through 20156. As federal agencies continue to reduce office and warehouse space, they will also likely have to manage or dispose of personal property, such as office furniture or stored property, from these spaces. Each of the five selected agencies we reviewed have policies and processes for carrying out their responsibilities to maintain adequate accountability systems and inventory controls for property under their control: All five agencies have policies for regularly inventorying their personal property to physically locate and verify property tracked in their asset management systems. EPA, GSA OAS, and IRS policies require physical inventories of personal property once a year, while Forest Service’s policy requires inventories every other fiscal year and a 10 percent sample inventory in the alternate years. HUD policies require inventories every 2 years at its headquarters, but according to HUD officials, field locations conduct inventories annually. All of the agencies also have an electronic asset-management system for maintaining information on personal property. Although each agency has its own system, and the type of information maintained varied by agency or type of property, generally each system generates a record for each property item that provides descriptive information about the item, such as manufacturer name, model number, serial number or other identifier, acquisition cost, condition, and current location. We found that the five agencies use these policies and processes to track and inventory certain property determined by each agency to be “accountable.” Accountable property is nonexpendable personal property with an expected useful life of 2 years or longer that an agency determines should be tracked in its property records, based on an item’s acquisition cost and sensitivity. Each agency determines its own appropriate acquisition cost threshold: four of the agencies—EPA, Forest Service, HUD, and IRS—consider property with an original acquisition cost of $5,000 or greater to be accountable; GSA OAS’s accountable threshold is $10,000 or greater. In addition, certain sensitive property— such as digital cameras, laptop computers with hard drives, and firearms—is considered accountable regardless of acquisition cost because it could be easily stolen or can store data or personal information. Table 1 provides a snapshot of accountable personal property items— including the reported original acquisition cost, amount, and examples— reported from 4 of the selected agencies’ asset management systems in 2017. The agencies in our review generally did not track in their asset management systems or formally inventory their remaining—or “non- accountable”—personal property that did not meet their definition of accountable property. According to agency officials we interviewed, they do not track or inventory low value items because: (1) the cost and manpower required to do so are too high; (2) certain property, such as office furniture, is less susceptible to theft; or (3) agencies believe they are not required by law to inventory low value items. While agencies are required to have systems of accounting and internal controls that provide effective control over, and accountability for, their assets, they generally have latitude in how they implement these procedures, including which property to track and inventory. While the five selected agencies had policies and processes for their property accountability and inventory control responsibilities, they largely did not have policies and processes for carrying out their responsibilities, as established in law, to continually survey property under their control to identify excess. According to officials at each of the selected agencies, the responsibility for identifying unneeded property generally lies with that agency’s property custodians—designated officials who are assigned responsibility for the property—or the agency program or individual using the property. Four of the five selected agencies’ policies do not require property custodians or other property users to assess property for continued need. Furthermore, these four agencies’ policies did not have specific criteria for the property custodian or user to assess property for continued need. Only IRS’s personal-property management policy specifies that the property custodian is responsible for identifying excess property and provides criteria to be applied in doing so, such as whether property is still needed in its location and the feasibility of transferring it to other locations, taking into account the property’s condition and transportation charges. An official at one of the selected agencies identified several specific criteria that should be used to assess property for continued need, including the item’s serviceability, whether it poses a safety hazard, and the feasibility of relocating it. However, the official acknowledged that these or any other criteria are not part of the agency’s formal policy. The personal property policy of an agency not included in our review— NASA—includes requirements and criteria to review NASA property for continued need in multiple ways. For example, it requires a high-level NASA official to conduct a walk-through inspection annually to identify idle or underused equipment that is no longer needed and report it as excess. It also requires, as part of an annual property inventory, that property that appears to be excess, worn out, or in obvious need of repair be noted as such and that guidance on identifying unneeded property be provided to personnel involved in conducting the inventories as well as employees assigned to use the property. In addition to not having policies on identifying and assessing property for continued need, agencies we reviewed also did not have a systematic process for doing so. Instead, when describing situations in which they declared property as excess, officials said they typically did so as a result of a “triggering event.” The types of triggering events the officials cited include an office move or consolidation or a lifecycle replacement of laptops. For example, officials from field locations of three of these agencies reported declaring most of their existing furniture as excess as the result of an office relocation or renovation. Agency officials said they were unable to use their existing furniture and had to declare it excess because it did not conform to new space utilization standards. At another agency, officials were disposing of a large number of laptop computers that had been declared excess because they had been replaced by new computers. Officials at two agencies said an assessment of property for continued need is an assumed practice that is part of the inventory for accountable property. However, an official from one of these agencies acknowledged that assessing need is not addressed in the written instructions provided to those conducting the inventory. Officials from two other agencies acknowledged that they continue to retain unneeded property that should be declared excess in storage on-site but had not pursued disposal due to other competing responsibilities with higher priorities. Proactively assessing personal property for continued need instead of responding to a triggering event can help agencies achieve both effective and efficient operations by ensuring that only needed property is retained and unneeded property is identified and declared excess. Federal internal control standards require that agencies design and maintain internal control activities—such as policies and procedures—to identify risks arising from mission and mission-support operations, and to provide reasonable assurance that agencies are operating in an efficient manner that minimizes the waste of resources. Such a system also provides reasonable assurance that agency property is safeguarded against waste, loss, or unauthorized use. OMB staff and GSA officials agreed that assessing all types of property—accountable and non-accountable—for continued need is important and called-for by internal control standards. Because the agencies we reviewed did not have systematic processes for assessing the continued need for personal property, they may not be aware of potential risks of maintaining property that may no longer be needed for operational purposes. Furthermore, previous work others have performed has shown that inaction on unneeded or idle property can limit efficient use of the government’s personal property, unnecessarily use an agency’s resources, or miss opportunities for potential cost savings, for example: The Department of Homeland Security’s Inspector General found that the U.S. Coast Guard could not ensure that personal property was efficiently reutilized or properly disposed of to prevent unauthorized use or theft because the Coast Guard did not have adequate policies, procedures, and processes to identify and screen, reutilize, and dispose of excess personal property properly, including criteria for identifying such property. The EPA’s Inspector General estimated EPA could save $8.9 million in reduced warehouse costs through improved management of stored personal property. GSA personal property asset management studies conducted in 2003 and 2005 found, among other things, that personal property is not being used to its fullest extent in some agencies and that no government-wide usage assessment or standard exists to detect whether property is no longer needed and can be reported as excess. Without a triggering event, agencies may not be seeking out or identifying property that is no longer needed and declaring it excess as often as they should. Such unneeded property may be put to better use elsewhere within the agency or the federal government, or agencies may purchase or lease new property instead of using another agency’s property that is unneeded but not reported as excess. In addition, agencies may be missing opportunities to realize cost savings by identifying and disposing of unneeded property, such as property stored in warehouses, to reduce or make better use of that space. While the requirements for agencies to continually survey property under their control to identify excess is established in law, according to GSA officials, there are no government-wide regulations on managing personal property or fulfilling this specific requirement. According to GSA OGP officials, GSA does not have the authority to promulgate regulations or issue formal guidance on personal property that is in use by executive agencies. Furthermore, according to the officials, GSA is only authorized by law to prescribe regulations on excess and surplus personal property. OMB staff stated that they could issue a notification, such as a controller alert to agencies’ chief financial officers, to reinforce the statutory requirement that agencies conduct assessments of personal property for continued need. OMB periodically issues such alerts to highlight emerging financial management issues for agencies and also issues guidance to agencies through bulletins, circulars, and memorandums. By issuing a controller alert or other guidance, OMB can help ensure that agencies are proactively taking steps to evaluate their property for continued need, including developing appropriate policies for doing so, and can thereby improve efforts to promote maximum use of excess personal property. Officials from the five agencies we reviewed reported that they followed GSA’s automated process to dispose of property once they had made the determination it was no longer needed to support their agency’s mission. As previously described, GSA regulations on disposing of property establish a specific process for all executive agencies to follow, and GSA has also issued guidance to help agencies dispose of property under this process. In particular, once an agency has determined that the property it has is no longer needed within the agency, the agency is required to promptly report the property to GSA as excess, typically by entering information about it into GSAXcess, GSA’s web-based system for facilitating personal property disposal. This method requires agency employees to manually enter information using data entry screens that include help screens and error messages. GSA encourages agencies to provide a complete description of the property and to include multiple photographs of it. Officials from the five agencies we reviewed reported no significant difficulties with entering information into GSAXcess; collectively, these agencies reported over 37,000 items as excess property from fiscal year 2012 through 2016. Figure 2 indicates the number of items each selected agency reported to GSA as excess during that period. Once information entry is completed, the disposal process begins. If the property is not disposed of during one stage, it advances to the next stage. The disposal process is shown in figure 3. Agency officials we interviewed told us that responsibility for disposing of property is decentralized and typically occurs at the property’s location, whether at an agency headquarters, regional office, or lower level. Because of the large federal government presence in the Washington, D.C., area, agency offices in that area may have access to resources to facilitate the disposal process that are unavailable elsewhere, such as transferring excess property to certain entities that complete some or all aspects of the disposal process for a fee. Two such entities are GSA’s Personal Property Center in Springfield, Virginia, which takes full accountability and control of an agency’s excess property for a fee and handles all the details of the disposal process, and USDA’s Centralized Excess Property Operation in Beltsville, Maryland. According to USDA’s Agriculture Property Management Regulations, property not needed by USDA or its bureau offices in the Washington, D.C., area must be transferred to this office for final disposal actions. It also provides these same services to some non-USDA agencies. Agencies also use GSAXcess to search for and select available excess property. Agency officials told us that the system also sends disposition instructions to the property-holding agency, when the property is to be transferred to other federal agencies, donated, or sold and that the agencies follow these instructions. For example, when an agency requests an excess item in GSAXcess and GSA approves the request, the system notifies the requesting agency and the property-holding agency and provides contact information to arrange to complete the transaction. None of the selected agency officials reported difficulties completing a transfer or donation transaction. For property not transferred, donated, or sold, GSA notifies the agency that the property has no commercial value and can be abandoned or destroyed. All of our selected agencies reported trying to recycle such property. Selected agency officials told us they disposed of property from space reduction efforts, such as Freeze the Footprint and Reduce the Footprint, the same way as other personal property—using GSA’s disposal process. To meet space reduction goals, selected agencies are undertaking projects at dozens of locations. Projects have primarily involved leased space for offices and warehouses and have included office moves, consolidations, and closures. As federal agencies carry out these space reduction projects, they must also address any personal property in the project spaces. Selected agencies reported several factors that affected their decisions about this property, which for three of the agencies was primarily office furniture. Four agencies reported needing less space than they previously occupied because of changes in agency missions or staffing levels. Furthermore, officials from GSA OAS and IRS noted that workplace trends, including teleworking and decreased staffing, reduced the space needed. Finally, agencies also reported that the office furniture itself was mostly unsuitable because it was old and because it could not be configured for use in more efficient office space designs. As a result, some selected agency locations that completed an office move or renovation project reported that most of their existing furniture was not needed in their new space. For example, in its Reduce the Footprint plan for fiscal years 2017 through 2021, HUD noted that many of its locations were designed and furnished when it had a much larger staffing level and reported that in 2016, its usable square feet per employee was 356. Subsequently, HUD revised its space design standards, requiring future office spaces to adhere to a utilization rate of 175 square feet or less. At the HUD project we visited, an official told us the furniture in use before the project was old and was generally too large to be used to achieve space design standards. In 2017, Housing and Urban Development (HUD) reduced its Denver regional office space by 30 percent. HUD’s lease was expiring and it needed less space because it had fewer employees in the office, in part due to increased telework. Adhering to new space utilization standards in its office and furniture design further reduced HUD’s overall required space. An example of a new workstation is shown above. Before the project, the agency occupied about five floors of a commercial building. HUD renovated in place, one floor at a time, and replaced its existing office furniture with new. Personal property at this office included primarily office furniture, such as desks and 25-year old modular systems, and equipment, such as telephones. As each floor was completed and employees moved to new workstations, the property official on-site disposed of their old furniture and workstations by entering its information in GSAXcess. The official reported selling some of the excess furniture after completing the first floor but recycled or discarded excess furniture in subsequent rounds. In some cases, agencies did not dispose of all the personal property after a space reduction project but instead were able to retain it for other uses within the agency. For example, IRS officials reported closing an office in Englewood, Colorado, and transferred its furniture to Ogden, Utah, for storage for an upcoming project. GSA OAS officials in Denver said that after a space reduction project in which GSA decreased the size of its regional office, it retained the unneeded furniture and office space for temporary use by other agencies. For property that was declared excess following a space reduction project, agencies reported transferring, donating, and selling property to dispose of it, using GSA’s process. For example, officials in GSA OAS, Forest Service, and IRS locations told us they transferred some excess property to other federal agencies. The Forest Service in Denver transferred some modular office furniture to the Bureau of Land Management and the U.S. Postal Service. The Forest Service and IRS also reported donating property, such as office furniture and equipment, through the State Agencies for Surplus Property program. Four agencies reported selling some of their property from a space reduction project. For example, HUD’s regional office in Denver sold some of its excess office furniture, which dated to 1992, and recycled or discarded the remainder. When disposing of property from a space reduction project, some agencies sought assistance from GSA. GSA’s Office of Personal Property Management (GSA OPPM) assists agencies, when requested, in disposing of personal property, and officials at selected agency locations reported receiving assistance and training. In one example, GSA officials told us that a regional office of a selected agency needed to dispose of an office full of furniture and, in addition to using the disposal process, contacted GSA OPPM for additional assistance. Because of the large amount of property, GSA OPPM took steps to make other agencies in the area aware of the available property and facilitated access to allow agencies to view the property. In another example, GSA OPPM officials met with officials from another agency in the planning stages of a relocation to answer questions and provided advice and guidance for disposing of personal property. When the Forest Service’s lease on its Denver-area office expired, the agency leased space in another location, requiring a move but reducing its office by over 21,000 square feet. The agency sought to conform to new space utilization standards, which required more efficiently-designed furniture than its existing office furniture. Because the Forest Service did not reuse most of its old furniture in its new space, it no longer had a need for it. The Forest Service retained some of the furniture for use in other Forest Service offices within the region and declared the remainder as excess. Through GSAXcess, the Forest Service transferred some of its excess furniture to other federal agencies, such as the Bureau of Land Management and the U.S. Postal Service. The Forest Service sold some furniture at auction; broken items were recycled. Agencies may dispose of large amounts of property during a space reduction project, but overall, agency officials reported few challenges in doing so. This may be in part because any effects from space reductions are distributed across an entire agency. Although selected agencies’ average Reduce the Footprint space reduction goals ranged from 97,000 square feet to 662,000 square feet each fiscal year from 2016 to 2020, each agency’s efforts consisted of dozens of geographically dispersed projects of various sizes to be completed over several years. For example, as of fiscal year 2016, EPA had 21 space reduction projects planned from fiscal years 2016 through 2021, with individual anticipated reductions ranging from less than 1,000 square feet to more than 140,000 square feet. At least one project is present in 8 of EPA’s 10 regions. Agencies’ ability to pay for space reduction projects may also have affected these projects’ effects. Two selected agencies said they delayed projects because of a lack of funding. Agencies may reduce costs over the long term because of lower rent for smaller spaces but they may have to pay some expenses upfront, such as for moving, renovations, and new furniture. Although officials from all five agencies told us they have been able to manage personal property disposals from space reductions, they identified factors that can impact the efficient use of the disposal process during a space reduction project and some strategies taken to address them: Inventorying non-accountable property: As a space reduction project commenced at a location, most selected agencies reported that they did not have a complete list of the personal property affected by the project. As previously described, selected agencies do not maintain an itemized list of non-accountable personal property and for four agencies, office furniture is generally non-accountable. During a space reduction project, property personnel had to develop some type of inventory to identify property that would be needed and property that should be disposed of. Selected agencies had various methods for conducting such an inventory. For example, officials from two agencies said they walked through the affected space and created a list of all the items. Officials from one agency said a contractor was hired for this purpose. Most agencies reported using the inventory they created to enter information on excess property into GSAXcess. Officials at GSA’s OPPM offices in Philadelphia and Fort Worth said that they offer training and guidance to agencies in conducting inventories. Managing disposals within time frames: Agencies generally are not able to begin the disposal process until the property is no longer in use. For example, agency staff continue to use their old workspaces until they can move to new workspaces. Agencies also face deadlines, such as vacating space due to a lease expiration or commencement of renovation work. Officials from three agencies described challenges completing the disposal process—reporting excess personal property as well as completing transactions to transfer, donate, sell or abandon or destroy it—within required time frames. Some agency officials reported using different strategies to address this timing challenge. For example, one agency official was able to enter information about the excess property items into GSAXcess while employees were still using them. According to the official, this was possible because a note could be included in the property item’s description in GSAXcess, with the date when the property would be available. When the property was no longer in-use within the agency, the transfers or other transactions were completed. Additionally, an agency may conduct an on-site screening of its unneeded property to allow other federal agencies or authorized parties to physically view and identify any furniture they want. For example, GSA OPPM officials in Philadelphia conducted an on-site screening of unneeded office furniture resulting from the agency’s regional office relocation. Federal agencies collectively have billions of dollars’ worth of personal property, ranging from office furniture to highly specialized equipment that, when in use, supports agency missions. However, the agencies in our review did not have policies and systematic processes for identifying unneeded property. Furthermore, other’s previous work has shown that agencies across the government may not be effectively assessing their property for continued need, leading to idle property that could be put to better use elsewhere within the agency or the federal government and potential unnecessary storage costs. Consequently, agencies may be retaining property that is no longer needed. GSA has recognized that opportunities may exist for agencies to more effectively manage property under their control, but according to GSA OGP officials, GSA’s authority is limited to agency property that has been declared excess or surplus. According to OMB staff, OMB has the authority to issue guidance, such as controller alerts, emphasizing agencies’ property management obligations, and thus, it is well-positioned to assist agencies to more effectively manage their property and to ensure unneeded property is made available to others, as appropriate. The Director of OMB should provide guidance to executive agencies on managing their personal property, emphasizing that agencies’ policies or processes should reflect the requirement to continuously review and identify unneeded personal property. (Recommendation 1) We provided a draft of this report to OMB, EPA, the Forest Service, GSA, HUD, and IRS for comment. OMB stated that it did not have any comments on our draft report in an email and provided a technical clarification to the report, which we incorporated. GSA and IRS provided technical comments in an email, which we incorporated as appropriate. EPA, the Forest Service, and HUD each stated in an email that they did not have any comments on the draft report. We are sending copies of this report to the appropriate congressional committees, the Director of the Office of Management and Budget, the Administrator of the Environmental Protection Agency, the Secretary of the U.S. Department of Agriculture, the Administrator of the General Services Administration, the Secretary of the Department of Housing and Urban Development, and the Secretary of the Department of the Treasury. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix III. The objectives of this report were to examine (1) how selected federal agencies assess whether personal property is needed and (2) how selected federal agencies dispose of unneeded personal property, and how, if at all, space reduction efforts have affected disposals. We excluded certain types of personal property, such as aircraft and vehicles, from our review because of our prior or ongoing work. To address our objectives, we reviewed applicable federal statutes and regulations pertaining to personal property management and disposal, our prior work, and reports by federal agencies’ Offices of Inspector General on personal property issues. In addition, to determine how selected federal agencies assess whether personal property is needed, we conducted background searches to inform our understanding of key practices for personal property and asset management through a search of databases containing peer-reviewed articles, government reports, general news, hearings and transcripts, and association and think tank papers. We also reviewed relevant asset management practices, such as ASTM standards and the General Services Administration’s (GSA) Federal Asset Management Evaluation and Personal Property Asset Management Study. In order to select agencies that may have had recent experiences with excess personal property, we selected 5 of the 24 agencies that were included in the Freeze the Footprint and Reduce the Footprint initiatives. We selected agencies based on their overall Freeze the Footprint results, in terms of the amount of square feet reduced, and Reduce the Footprint goals for reducing domestic office and warehouse space, and the amount of personal property declared excess over the last 5 years, as reported to GSA’s GSAXcess system from fiscal years 2012 to 2016, to coincide with the Freeze the Footprint time frame. Specifically, we obtained information on the Freeze the Footprint results and Reduce the Footprint goals from the Office of Management and Budget’s public website and from Performance.gov. We limited our scope to civilian federal agencies with personal property within the United States. Although we have previously reported that the overall accuracy of data that agencies reported on office and warehouse space reductions could be improved, we found that the data were generally reliable for our purposes. After reviewing the data for any inconsistencies and discussing the information with selected agency officials to ensure that the reported numbers for the Reduce the Footprint initiative were current, we determined that the quality of the data were sufficient for our use in selecting agencies. In order to select agencies that were more likely to have relevant, recent experience with excess personal property from space reduction efforts, we ranked these agencies based on their Freeze the Footprint results, Reduce the Footprint goals, and the amount of declared excess personal property, and eliminated the bottom third of the agencies. We selected GSA as our first agency due to its central role in excess personal property disposal, and randomly selected four additional agencies from the remaining agencies. These agencies were the Environmental Protection Agency, the U.S. Department of Agriculture, the Department of Housing and Urban Development, and the Department of the Treasury. The organizational structure of two selected agencies, the Department of Agriculture and the Department of the Treasury, is different than the other three agencies in that they are comprised primarily of sub-agencies. Therefore, we selected the largest sub-agency for both departments—the Forest Service within the Department of Agriculture and the Internal Revenue Service within the Department of the Treasury. We obtained information from the five selected federal agencies on the total value and number of items in their asset management systems in 2017 to understand the size and scope of personal property assets they manage. As we used the information to describe the scope of the agencies’ property holdings, we did not verify the data. We also analyzed documents, such as the selected agencies’ personal property management policies, along with policies from the National Aeronautics and Space Administration and Department of Energy, to understand how they addressed requirements for managing personal property. We included these agencies’ policies based on our review of prior work related to personal property. We interviewed officials from the selected agencies about their processes for managing personal property assets, such as their inventory procedures. However, we did not independently assess agencies’ inventory practices. We also interviewed staff from the Office of Management and Budget (OMB) to discuss regulations and policies pertaining to personal property and OMB’s role in personal property management. To determine how selected federal agencies dispose of excess and surplus personal property and how space reduction efforts may have affected disposals, in addition to the above, we obtained information from each selected agency on its space reduction projects and interviewed officials about their roles and responsibilities in the agency’s space reduction planning efforts and personal property disposal process. We also conducted site visits to Philadelphia, Pennsylvania, and Denver, Colorado to meet with regional and local officials from each selected agency responsible for managing and disposing of personal property. These locations were chosen based on the number of our selected federal agencies present, the amount of excess personal property declared, and the existence of space reduction projects. We discussed property accountability policies, overall personal property disposal processes, and how the disposal processes were affected by government-wide space savings initiatives, such as Freeze the Footprint and Reduce the Footprint, and any efforts to prepare for them, and requested supporting documentation on the amount of property declared as excess and the disposition outcomes of that property. We did not independently verify the information that was provided, as data reported as excess from space reduction projects are not always tracked separately from other property disposed of for other reasons. We reviewed documents and interviewed officials from GSA’s Office of Personal Property Management (GSA OPPM) in GSA’s headquarters, in Philadelphia and in Fort Worth, Texas, to discuss their role in assisting agencies in disposing of personal property and to obtain their views on how personal property disposals have been affected by space reductions. Finally, we interviewed GSA’s Office of Government-wide Policy (GSA OGP) officials about the Interagency Committee on Property Management and the Property Management Executive Council regarding their personal property and asset management efforts and met with officials and representatives from the following: the U.S. Department of Agriculture’s Centralized Excess Property Operation, the Users and Screeners Association–Federal Excess Personal Property, and the National Association of State Agencies for Surplus Property to discuss their roles in the reuse and disposal of Federal personal property. We conducted this performance audit from July 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Federal Property and Administrative Services Act of 1949, as amended, requires executive agencies, in part, to promptly report excess property to the General Services Administration (GSA) and dispose of it in accordance with GSA regulations. Each executive agency is also required to fulfill requirements for personal property by using existing agency property or by obtaining excess property from other federal agencies before purchasing new property. GSA’s disposal process, as laid out in federal regulation, incorporates and facilitates these requirements, providing a means for both disposing of and acquiring unneeded property: agencies with excess personal property can dispose of it and other agencies, authorized non-federal entities, and, eventually, the general public can acquire this property. After determining that a property item is no longer needed to complete its mission, an agency may have several options for proceeding before formally declaring the property as excess to GSA: Immediately authorize abandonment or destruction of the property: Determine, in writing, that the property has no commercial value or the estimated cost of its continued care and handling would exceed the estimated proceeds from its sale. If an agency makes such a determination, it may abandon or destroy the property without reporting it to GSA as excess. In lieu of abandonment or destruction, an agency may donate excess personal property to a public body without going through GSA. Directly transfer the property to another federal agency: Agencies usually become aware of available property through informal means, such as a contact at the disposing agency, according to GSA. GSA approval for such a transfer is not needed if the total original acquisition cost for each item does not exceed $10,000. If this cost is greater than $10,000, the acquiring agency must obtain prior approval from GSA. In either case, the acquiring agency must notify GSA of the transfer. Directly transfer the property to an eligible recipient under a special authority: Special authorities are legal provisions that are designed to give excess assets to groups that may use them for a particular purpose, such as universities that can use the National Aeronautics and Space Administration’s scientific equipment in their research. Some authorities exist to collectively support all federal agencies and some support an agency-specific program. According to GSA, the primary government-wide programs are the Stevenson-Wydler Technology Innovation Act of 1980 and Executive Order 12999, also known as the Computers for Learning program. Recipients meeting eligibility requirements of the special authority contact agencies to determine the availability of property, and the agency and recipient must complete the appropriate documentation to make a record of the transfer. An agency initiates GSA’s disposal process by formally declaring property as excess, either by completing and submitting a form to GSA or, more typically, by electronic entry of an item into GSAXcess, GSA’s real-time, Web-based site for facilitating the disposal process. The latter method requires agency employees to enter information about the excess property using data entry screens that include help screens and error messages. GSA encourages reporting agencies to provide a complete description of the property and to include multiple photographs of the property. The disposal process generally consists of four sequential stages in which personal property may be transferred to another agency or eligible recipient, donated, sold, or abandoned or destroyed, as described below. If the property is not disposed of during one stage, it advances to the next stage, though the holding agency generally retains physical custody of the property until it is disposed of. Table 2 illustrates actions a disposing agency and eligible property recipients take during each of the four stages of the disposal process after an agency declares property excess. In addition to the individual named above, the following individuals made important contributions to this report: David J. Wise (Director), Nancy Lueke (Assistant Director), Travis Thomson (Analyst-in-Charge), Lacey Coppage, Rosa Leung, Josh Ormond, Amy Rosewarne, Pamela Vines, and Elizabeth Wood.", "summary": "The federal government owns billions of dollars of personal property—such as office furniture, scientific equipment, and industrial machinery. By law, each agency is required to follow GSA's disposal process so that an agency's unneeded property can be used by other agencies or certain non-federal entities. Since 2012, agencies have reduced their office and warehouse space due to government-wide initiatives, a reduction that in turn has required agencies to dispose of some affected personal property. GAO was asked to review how federal agencies identify and dispose of unneeded personal property. This report examines (1) how selected agencies assess whether personal property is needed and (2) how these agencies dispose of unneeded property and how, if at all, space reduction efforts have affected disposals. GAO reviewed federal statutes and regulations, and selected five agencies—EPA, Forest Service, GSA, HUD, and IRS—mainly based on space reduction results and goals. GAO reviewed these agencies' property disposal data for 2012 through 2016 and interviewed headquarters and field staff about their property management and disposal processes. The five agencies GAO reviewed—the Environmental Protection Agency (EPA), Forest Service, General Services Administration (GSA), Department of Housing and Urban Development (HUD), and Internal Revenue Service (IRS)—generally do not have policies or processes for identifying unneeded personal property, such as office furniture, on a proactive basis. Instead, officials from these agencies said they typically identified unneeded property as a result of a “triggering event,” such as an office space reduction. Executive agencies are required by law to continuously review property under their control to identify unneeded personal property and then dispose of it promptly. Without such policies or processes, agencies may not be routinely identifying unneeded property that could be used elsewhere, and efforts to maximize federal personal property use and minimize unnecessary storage costs may not be effective. GSA has issued regulations establishing a government-wide disposal process for unneeded personal property. However, according to GSA officials, the agency lacks the authority to promulgate regulations or formal guidance on management of in-use agency property, and there is no government-wide guidance to agencies on identifying unneeded personal property. Agencies are required to have internal control activities—such as policies and procedures—for reasonable assurance of efficient operations and minimal resource waste, and the Office of Management and Budget (OMB) provides guidance to agencies on implementing such activities. Guidance from OMB that emphasizes agencies' internal control responsibilities could help ensure that agencies are proactively and regularly identifying property that is no longer needed. The selected agencies reported little difficulty in following GSA's personal property disposal process, reporting over 37,000 items as unneeded property in fiscal years 2012 through 2016. This property was disposed of through transfers to other agencies, donations to authorized recipients, sales, or discarding. When disposing of personal property from space reduction projects at locations GAO visited, agencies also reported using GSA's process (see figure). Overall, agencies said they have not experienced major challenges with disposing of personal property from space reduction efforts. This lack of challenges could be because projects are geographically dispersed and spread over several years. OMB should provide guidance to executive agencies on managing their personal property, emphasizing that agencies' policies or processes should reflect the requirement to continuously review and identify unneeded personal property. OMB did not comment on GAO's recommendation.", "document_type": "gao"}
{"report": "According to its strategic plan for 2017 through 2022, the MEP program aims to strengthen and empower U.S. manufacturers by providing them with the information and tools to improve productivity, assure consistent quality, and accelerate the transfer of manufacturing technology into production processes and new products. MEP centers do not all offer the same services; however, across the network, their services span areas such as the following: Lean services. These services help manufacturers implement tools and practices to incorporate “lean” manufacturing principles, which involve producing more with existing resources through eliminating and reducing incidental work or non-value-added activities. Quality services. These services help manufacturers implement management systems to achieve a defined industry-specific or general quality certification or standard. Growth services. These services provide manufacturers with the tools and methods to identify and target opportunities to develop new products, markets, services, or customers. Technology/product development services. These services help manufacturers identify, develop, and diffuse technology and new products. Workforce services. These services help manufacturers recruit, retain, or develop human resources. Some centers provide services directly to manufacturers, and others, to varying extents, use external consultants to provide services. In fiscal year 2018, the 51 MEP centers served 8,425 manufacturers encompassing a variety of manufacturing subsectors (see fig. 1). To receive federal financial assistance from NIST, MEP centers must match the federal contribution with a nonfederal contribution. MEP centers provide their nonfederal contributions through various means, such as fees collected from manufacturers for services provided or in the form of cash or in-kind contributions from other sources, such as state or local governments, trade associations, or community colleges. MEP centers may receive nonfederal resources in any of those forms in excess of the amount needed to match the federal contribution. Prior to the 2017 AICA cost share adjustment, we, NIST, and others reported on issues associated with the cost share structure for the MEP program. For example: In April 2011, we reported that MEP centers identified positive and negative effects of the cost share structure in place at the time. Positive effects of the cost share structure included encouraging MEP centers to leverage resources and emphasize services relevant to manufacturers, and negative effects included MEP centers spending more time and effort seeking cost share matching funds and focusing more on larger clients that could pay higher fees and less on rural clients. In July 2013, NIST analyzed the cost share structure and found that it provided MEP centers with incentives to make strategic and operational decisions based largely on which services generated revenue rather than on which services manufacturers needed to be competitive. NIST recommended several criteria upon which to base the MEP program’s cost share, such as encouraging delivery of innovative services, providing financial stability, and enabling the program to adapt quickly to changing economic conditions and the needs of small and medium-sized manufacturers. NIST requested that the MEP Advisory Board review this analysis and provide recommendations on how best to structure the cost share requirement to provide for the long-term sustainability of the program. In October 2013, the MEP Advisory Board responded to a request in NIST’s July 2013 report with a letter to the NIST Director largely echoing the findings of the earlier reports—for example, that the cost share structure in place at the time made it more difficult to serve smaller and rural clients and drove centers to focus on larger manufacturers that could pay fees. The MEP Advisory Board recommended, among other things, adjusting the cost share ratio to 1:1. In 2014, we reported on NIST’s spending on the MEP program and found that NIST’s financial assistance to MEP centers did not take into account variations across service areas in the demand for program services and the cost of providing services. We recommended that the Secretary of Commerce revise the program’s cooperative agreements to account for such variations. Subsequently, from 2014 through 2017, NIST undertook a system-wide recompetition of MEP centers’ cooperative agreements to better align center funding levels with the national distribution of manufacturing activity and cost of providing services. As a result, NIST recompeted most MEP centers’ cooperative agreements and reduced the number of centers to 51, with a single center in each state and Puerto Rico. Additionally, the recompetition provided for a new minimum annual funding level of $500,000 per center (previously eight centers were below this mark) and nearly $20 million more in federal financial assistance for 34 of the centers. According to NIST’s 2017 congressional budget request, recompetition would increase the capacity and capability of the MEP centers to help small and medium-sized manufacturers, including very small manufacturers—those with fewer than 20 employees—and rural manufacturers. In response to our survey, most MEP centers reported that the AICA cost share adjustment has helped them serve manufacturers, but some center officials indicated that the impact is hard to measure. Specifically, most MEP centers we surveyed reported that the AICA’s adjustment of the cost share to 1:1 for the life of a center’s cooperative agreement has increased their financial stability and helped them serve very small and rural manufacturers. According to the survey results, centers run by nonprofit organizations reported greater impacts of the cost share adjustment than those run by states or universities. In follow-up interviews, some MEP center officials indicated that the impact is difficult to measure because of other recent changes that have also impacted their ability to serve manufacturers. In response to our survey, most of the 51 MEP centers reported that the cost share adjustment has had a positive impact on their finances, particularly by increasing their financial stability. Specifically, in their responses to an open-ended question on the effect of the cost share adjustment on the overall financial resources to support center operations, 44 centers provided examples of how the adjustment has generally helped them in areas such as improving center services (23 centers), better serving underserved manufacturers (17 centers), improving collaboration with partners (10 centers), improving planning and financial stability (10 centers), and improving ability to secure funding (10 centers). In responses to a separate question about the impact of the cost share adjustment, 41 centers indicated that the adjustment has provided a more stable financial outlook. Centers noted that in the past, meeting the 2:1 cost share often meant diverting their focus from serving manufacturers to generating and documenting revenue. Some centers provided the following examples of how the financial stability provided by the 1:1 cost share has helped them: One center stated that its staff now spend less time accounting for the hundreds of small transactions used to count toward the 2:1 cost share and can now focus their time on managing the program. One center stated that its budget is now less complicated and center staff are now less distracted by having to generate matching funds. One center stated that before the cost share adjustment, it could not plan on growing its capabilities after the third year of the cooperative agreement because of the anticipated impact of increased cost share requirements. The center noted that since the cost share adjustment, it can continue to plan for growth and has modified its strategic plan to reflect this shift. With a decreased focus on generating revenue, some MEP centers reported that they are now better able to serve manufacturers, particularly very small and rural manufacturers. Overall, 47 of the 51 MEP centers (92 percent) reported that the cost share adjustment has helped them serve manufacturers to a moderate or greater extent. In particular, in response to a question asking if MEP centers experienced certain changes as a result of the cost share adjustment, 43 (84 percent) reported conducting more work with very small manufacturers, and 39 (76 percent) reported conducting more work in rural areas. MEP centers reported that the cost share adjustment has allowed them to take a number of specific actions to serve manufacturers, such as conducting additional outreach (46 of 51), providing new services (45 of 51), offering a greater quantity of existing services (40 of 51), offering training events (39 of 51), and providing services at reduced cost (28 of 51). In follow-up interviews, officials from eight of the nine MEP centers we contacted stated that the cost share change has either already helped or should help them serve underserved manufacturers. These MEP center officials provided the following examples: One center official said that the cost share adjustment has allowed the center to donate time to help manufacturers that could not afford to pay the fees for the services provided. One center official said that the cost share adjustment could provide the financial stability to hire an additional staff person to serve rural parts of the state that were underserved before the adjustment. One center official said that the cost share adjustment has allowed the center to provide new services that it was not able to provide prior to the adjustment because the center struggled to meet its cost share requirement. For example, the center expanded its work to help manufacturers with Food and Drug Administration requirements pursuant to the FDA Food Safety Modernization Act. One center official stated that the cost share adjustment provided the center a strong financial basis upon which to begin offering Manufacturing 4.0 services throughout the state. Our analysis of survey results indicates that MEP centers run by nonprofit organizations reported impacts from the AICA cost share adjustment to a greater extent than centers run by states or universities. For instance, 22 of 26 centers (85 percent) run by nonprofits reported that the cost share adjustment has to a great or very great extent helped them serve manufacturers, compared to 14 of 25 centers (56 percent) run by states and universities. As table 1 shows, a greater percentage of nonprofit centers reported experiencing certain changes, such as an increase in center staff and the development of stronger partnerships, as a result of the cost share adjustment compared to centers run by states and universities. Officials from MEP centers run by states and universities stated that their centers are often directly funded by a state agency or educational institution and already enjoyed some degree of financial stability, which is why they generally reported fewer changes from the cost share adjustment compared to centers run by nonprofits. In a follow-up interview with the operations director of a MEP center run by a state agency, the operations director told us that one advantage of being funded by the state is that, even prior to the adjustment, the center had a steady source of income to help meet its cost share. In response to an open-ended survey question, one university-run MEP center noted that being part of a university provided access to professional services, support systems, and a network of resources that would not otherwise be available at an affordable rate. In responding to another open-ended question on the effect of the cost share adjustment on financial resources to support center operations, another university-run MEP center noted that the AICA adjustment has not resulted in significant changes to the center’s financial resources but could put some of its university funding at risk in the future. In a follow-up interview with the director of this MEP center, she told us that in a university setting her center competes against other university priorities for grant funding and being on a 1:1 cost share puts the center on a less competitive footing against other candidates because the center will no longer need additional university grant funding to meet a higher cost share ratio in the later years of its cooperative agreement. In survey responses and follow-up interviews, MEP center officials noted that a number of factors have impacted their ability to serve manufacturers in recent years. For example, in response to an open- ended survey question, centers provided the following as possible factors other than the cost share adjustment that could have impacted their operations: the strength of the overall economy of the nation or of the state in which they are located (19 centers), budgetary or political stability in their state (e.g., stability of state funding) (19 centers), and NIST’s recompetition of nearly all MEP centers’ cooperative agreements between 2014 and 2017 (10 centers). According to several MEP centers we surveyed or officials we interviewed, it is difficult to identify the impacts of the cost share adjustment because of the other factors that have also impacted MEP center operations. For example, in its survey response, one MEP center noted that it would not be easy to isolate the impact of the cost share adjustment from the impact of factors such as the recent recompetition that doubled the center’s federal financial assistance, new leadership at the center, and an improving economy and a tighter labor market that may have resulted in more companies needing the center’s services. In our follow-up interviews, some MEP center officials said that the recompetition, in particular, makes it difficult to isolate the effect of the cost share adjustment. Officials from several MEP centers we contacted cited effects of the recompetition, such as increased baseline funding, resetting of the cost share to 1:1, center leadership changes, and consolidation of centers within states, as reasons why it would be hard to separate the effects of the recompetition from those of the cost share adjustment. For certain centers, the impact of the cost share adjustment was clearer because they did not undergo recompetition, which meant that their cost share had not been reset to 1:1 through that process. Seven MEP centers were not included in the recompetition process that NIST began in 2014 because their cooperative agreements had recently been recompeted (i.e., within 2 years before 2014). Four of these seven “legacy” MEP centers were at or past the third year of their cooperative agreements and, as a result, were at a greater than 1:1 cost share ratio when the AICA was enacted in 2017. These four centers reported that the AICA’s cost share adjustment was helpful in the following ways: One center wrote that having to generate more matching contributions during its fourth year in operation coincided with a drop in its performance that continued until the 2017 cost share adjustment. This center said the cost share adjustment allowed it to devote additional resources to maintaining its services to manufacturers. One center wrote that it was already scaling back its plans to expand manufacturer engagement by the second and third years of its cooperative agreement in anticipation of the higher cost share ratios that would start in the fourth year of operation. This center noted that following the 2017 cost share adjustment, it revised its strategic plan to focus on growing its capabilities instead of scaling them back. One center wrote that moving to the 1:1 cost share helped it increase its focus on service delivery to clients with less concern for cost matching. One center wrote that the 2:1 cost share incentivized a focus on larger manufacturers to meet the cost share requirement. Following the cost share adjustment, the center is now able to develop new services for small and very small manufacturers. Should the cost share structure revert to what it was before the 2017 adjustment, most of the 51 MEP centers that we surveyed stated that they likely would be less able to serve manufacturers, particularly very small and rural manufacturers. In response to an open-ended survey question on the effect of changing the cost share requirement back to what it was before enactment of the AICA, 45 of the 47 MEP centers that responded to this question wrote that such a change would generally reduce their ability to serve manufacturers by causing them to do one or more of the following: shift to higher-revenue clients and services (23 centers), reduce center services and staff (21 centers), seek new revenue sources (11 centers), reduce staff (10 centers), reduce ability to collaborate with partners (7 centers), and increase fees (7 centers). Our analysis of NIST data indicates that there have been some changes in MEP centers’ finances and activities since the 2017 AICA cost share adjustment. However, these changes generally began around the time NIST recompeted the centers’ cooperative agreements, before the enactment of the AICA, and cannot necessarily be linked to the cost share adjustment. NIST data on funding for the MEP centers show that, from fiscal year 2017 to fiscal year 2018, the amount of federal assistance to the MEP centers increased and funds reported by MEP centers to meet cost share requirements decreased. However, these changes generally began around fiscal year 2013. As figure 2 shows, during the period from fiscal year 2013 through fiscal year 2018, federal assistance to MEP centers increased from about $81 million to $116 million while MEP centers’ reported nonfederal contributions decreased from approximately $195 million to $135 million. The centers’ reported nonfederal contributions generally decreased across all three of their primary sources of revenue—program income, cash contributions, and in-kind contributions. Specifically, the amount of program income centers reported to meet their cost share requirement decreased from approximately $95 million in fiscal year 2013 to $71 million in fiscal year 2018. Reported cash and in-kind contributions decreased from approximately $100 million in fiscal year 2013 to $65 million in fiscal year 2018. In particular, the MEP centers reported a substantial decrease in in-kind contributions over this time period, from approximately $25 million in fiscal year 2013 to $5 million in fiscal year 2018. Based on our analysis of NIST data, the overall changes in center financing—that is, the changes in both federal assistance and reported nonfederal contributions—were influenced by NIST’s recompetition of nearly all MEP centers’ cooperative agreements. When NIST recompeted the MEP centers’ agreements, it increased the level of federal assistance for 34 of the 51 MEP centers, constituting an overall increase in base funding amounts for federal assistance from about $90 million before recompetition began in fiscal year 2014 to about $110 million after the recompetition process was complete. Additionally, as MEP centers’ cooperative agreements were recompeted, the centers’ cost share was reset to 1:1, and the centers’ reported nonfederal contributions began to decrease. As figure 3 shows, in fiscal years 2013 and 2014, before the new cooperative agreements began taking effect, most MEP centers operated under a 2:1 cost share. After fiscal year 2014, the number of MEP centers operating under a 1:1 cost share began to increase. With enactment of the AICA, all MEP centers operated under a 1:1 cost share in fiscal year 2017. NIST data show that there also may have been some changes in MEP centers’ activities since the 2017 cost share adjustment. Our analysis of NIST data indicated that from fiscal year 2017 to fiscal year 2018, the total number of manufacturers MEP centers reported serving increased from approximately 8,000 to 8,400, very small manufacturers MEP centers reported serving increased from approximately 2,600 to 2,700, and rural manufacturers MEP centers reported serving increased from approximately 1,500 to 1,600. As with the changes in MEP centers’ finances, the changes in the numbers of total manufacturers and very small manufacturers these centers reported serving generally began before the cost share adjustment. When we analyzed NIST’s data, we found that the total number of manufacturers and the number of very small manufacturers served began increasing around fiscal year 2014, when NIST started recompeting centers’ cooperative agreements, and this increase continued through fiscal year 2018. The overall direction of the change in the number of rural manufacturers served during this period was mixed. Specifically, the number of rural manufacturers centers reported serving increased from fiscal year 2014 to fiscal year 2015, then decreased through fiscal year 2017, and then increased in fiscal year 2018. NIST officials, like MEP center officials, said that it may not be possible to separate the effects of the AICA cost share adjustment from the effects of the recompetition. NIST officials stated that a longer time span would be needed to identify trends in the manufacturers served by MEP centers; however, even then, confounding factors, such as overall economic conditions, could continue to make it difficult to analyze and isolate the effect of the AICA’s cost share adjustment. Looking forward, NIST officials said one impact of the 2017 cost share adjustment is that it will help sustain recent increases in the number of very small and rural manufacturers served by MEP centers. In addition, establishing a link between changes in MEP centers’ finances and activities and the cost share adjustment is difficult not only because the changes generally predated the cost share adjustment, but also because MEP centers likely underreport certain data to NIST. Specifically: Financial data underreporting. NIST officials stated that because MEP centers are not required to report all of their nonfederal resources in excess of the nonfederal contributions required to meet their cost share, the amount of resources available to centers is likely underreported. According to NIST officials, NIST’s Grants Management Division policy provides that centers will generally be held accountable for any amounts that they opt to pledge in excess of the 1:1 cost share. According to NIST officials, centers are thus operating rationally and legally in pledging and reporting only the amount needed to meet their nonfederal contribution for their cost share match. Activity data underreporting. NIST officials said that because MEP centers are not required to report activity data on manufacturers served if the services provided used nonfederal resources that were not directly related to meeting the MEP centers’ cost share, certain activity data, such as the number of rural manufacturers served, is likely underreported. During their discussions with some MEP centers leading up to the 2017 AICA cost share adjustment, the NIST officials learned that some centers were not reporting activity data on manufacturers served if the services provided used nonfederal resources that were not directly related to meeting the MEP centers’ cost share. An official with one such center provided us with information indicating that the number of rural manufacturers served in fiscal year 2016 was about 36 percent more than the number the center reported to NIST. According to NIST officials, centers are not obligated to report activity data on manufacturers served if those activities are not directly related to funds used to meet the MEP centers’ cost share requirements. Because of this underreporting, NIST officials stated that the amount of nonfederal resources in excess of the nonfederal contributions required to meet the cost share, as well as the total number of manufacturers served and the number of very small and rural manufacturers served, are likely higher that what centers reported to NIST. Moreover, the officials noted that, because of the recompetition and the 2017 AICA cost share adjustment, they believe that the extent of MEP centers’ underreporting may have increased in recent years as more centers began operating under a 1:1 cost share ratio. We provided a draft of this report for review and comment to the Secretary of Commerce. NIST provided technical comments, which we incorporated as appropriate. NIST’s comments also included some comments of a more general nature. For example, NIST highlighted the impact that the recompetition had on MEP centers. NIST also noted that while it cannot directly attribute recent increases in the number of manufacturers served to the AICA cost share adjustment, it believes the AICA cost share adjustment has fundamentally allowed MEP centers to deliver more value to clients rather than tie up resources in fundraising. We are sending copies of this report to the appropriate congressional committees, the Secretary of Commerce, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. The objectives of our review were to describe (1) Manufacturing Extension Partnership (MEP) centers’ views regarding the extent to which the recent cost share adjustment has helped them serve manufacturers and (2) the extent to which National Institute of Standards and Technology (NIST) data show impacts of the cost share adjustment on centers’ finances and activities. To describe MEP centers’ views regarding the extent to which the 2017 American Innovation and Competitiveness Act (AICA) cost share adjustment has helped them serve manufacturers, we sent a survey to all 51 MEP centers and received a response from every center. We administered this survey in July and August 2018. Because this survey was not a sample survey, there are no sampling errors. As part of developing this survey, we conducted pretests over the telephone with four MEP centers to ensure that the questions were understandable, that the data collected are uniform and usable, and that the survey would place minimal burden on center officials. We pretested our survey with the MEP centers for California, Kentucky, Virginia, and Washington. Using data on MEP center characteristics provided by NIST, we selected these centers to reflect a range of characteristics in the following categories, among others: the number of manufacturers in the state, the type of MEP organization (i.e., whether the center is run by a nonprofit, state agency, or university), and NIST’s classification of the state as urban or rural. We made changes to the content and format of the survey based on the feedback we received. In the survey, we asked the MEP centers about the effects of the cost share adjustment, both experienced and anticipated, using several different types of questions. For example: We asked the MEP centers whether the cost share adjustment has resulted in or will likely result in changes such as an increase in center staff; an increased use of contractors; an increase in overall financial resources to support the centers’ operations; a more stable financial outlook; or the ability to develop stronger partnerships, conduct more work in rural areas, or conduct more work with very small manufacturers (fewer than 20 employees). If centers responded in the affirmative, we asked whether those changes have already allowed the center to take specific actions such as conducting additional outreach to manufacturers, providing new services to manufacturers, offering manufacturers a greater quantity of existing services, providing services to manufacturers at reduced cost, or offering training events to manufacturers. We asked questions that allowed the MEP centers to identify the extent to which they had experienced a change. For example, we asked, “Whether or not there were any specific types of manufacturers that may have previously underutilized the center’s services, to what extent has changing the federal/nonfederal cost share to 1:1 for future years for all centers regardless of when they began operating helped the center serve manufacturers overall?” The centers could select one of the following responses: very great extent, great extent, moderate extent, some extent, little or no extent, don’t know. We asked open-ended questions to gain additional understanding about the effect of the cost share adjustment, including the following: What, if any, other factors might contribute to the changes or lack of changes identified in ? Please consider factors such as general economic conditions in the center’s state, the recompetition of the center’s cooperative agreement with NIST, or other factors. What has been the effect of changing the federal/nonfederal cost share to 1:1 for future years for all centers regardless of when they began operating on the overall financial resources to support the center’s operations? What, if anything, would the center change about how it provides services to manufacturers in that state if the federal/nonfederal cost share were to change back to the way it was prior to enactment of the AICA in January 2017? We analyzed the survey responses using content analysis and descriptive statistics. Using content analysis, we analyzed the responses to the three open-ended questions listed above by identifying common themes in centers’ open-ended survey responses to establish categories. Two analysts independently reviewed and coded the survey responses to the categories. Then the analysts compared their coding and if there was disagreement, they discussed their assessment and reached a final determination on the categorization. We also used descriptive statistics to analyze centers’ survey responses to evaluate the impact of the cost share adjustment on different types of MEP centers. For example, we compared the number of centers responding to certain survey questions by center type (i.e., nonprofit institutions, state agencies, or universities) as well as centers whose cooperative agreements were or were not recompeted. To further understand the impacts of the AICA cost share adjustment on different types of MEP centers, we conducted follow-up interviews with officials from nine MEP centers using a standard set of questions. We selected these MEP centers based on our analysis of centers’ survey responses. Furthermore, we selected these centers to include the perspectives of a variety of MEP centers, accounting for factors such as when the center’s agreement was recompeted, number of manufacturers in the state, and whether the center is operated by a nonprofit institution, state agency, or university. During these follow-up interviews, we asked the centers questions such as the following: To what extent did the cost share change affect the center and why? Please explain. Please explain how the center meets the cost share requirement. What has changed since the AICA set the cost share at 1:1? To what extent will the cost share change help or hinder the center’s ability to reach underserved manufacturers? Is there any way that the center can isolate the changes in the cost share from the recompetition? To describe the extent to which NIST data show impacts from the AICA cost share adjustment, we obtained NIST data on MEP centers’ finances and activities for fiscal years 2013 through 2018. We selected this period to encompass the year prior to when NIST began recompeting MEP centers’ cooperative agreements. NIST collects financial information from each MEP center, including the amount of financial assistance received from NIST, program income received from manufacturers for services provided, cash received from other sources (such as grants), and in-kind contributions. We analyzed these data to identify any changes in centers’ finances for fiscal years 2013 through 2018. We also obtained NIST data detailing the cost share under which each center was operating for fiscal years 2013 through 2017. We assessed the reliability of centers’ financial data by reviewing agency documentation, verifying some data against another data source, and interviewing NIST officials and officials from selected centers. We determined that NIST’s data on MEP centers’ federal assistance and nonfederal contributions are the best available data and are sufficiently reliable to describe general changes in these aspects of centers’ finances during this time period. However, as noted in the report, we found that some centers underreport their nonfederal resources in excess of the nonfederal contributions required to meet their cost share. As a result, we expect that centers’ total available resources—including their federal assistance, nonfederal contributions, and nonfederal resources in excess of their nonfederal contributions—are higher than what we present in the report. We determined this because the underreporting we identified with centers’ nonfederal resources in excess of their nonfederal contributions would tend to understate the amount of these resources over time and because we did not find evidence of overreporting that would contradict this pattern. In addition, we did not independently verify the nonfederal contributions reported by the MEP centers because it was outside the scope of our work. We also obtained and analyzed NIST data on MEP centers’ activities, such as data on the size, location, and number of manufacturers the centers reported serving in fiscal years 2013 through 2018. NIST guidance for MEP centers calls for centers to report various information about the manufacturers that they serve, including company name, Dun and Bradstreet number, and the North American Industry Classification System code. NIST uses the Dun and Bradstreet number to compile other information about each manufacturer, including location and number of staff. We analyzed the data to identify any changes in centers’ activities and to determine the extent to which any changes might be associated with the AICA cost share adjustment. We also reviewed NIST guidance for the MEP program and interviewed NIST and MEP center officials to gain an understanding of the MEP center activity data NIST collects. We assessed the reliability of the activity data by reviewing agency documentation and interviewing NIST officials and selected centers. As noted in the report, these efforts indicated that cost share changes caused some centers’ activity data to be underreported. While we were not able to precisely determine the extent of underreporting or precise changes in centers’ activities over time, as noted in the report, we believe the data are the best available data and are sufficiently reliable to describe general changes in centers’ activities during this time period. We determined this because the underreporting we identified would tend to understate the increases in the total number of manufacturers and the number of very small manufacturers served over time and because we did not find evidence of overreporting that would contradict this pattern. Since the number of rural manufacturers served fluctuated during this time period, however, we were unable to determine whether complete data would indicate a general increase in the number of rural manufacturers served similar to the increases in the total number of manufacturers and the number of very small manufacturers served. To help us understand the legal framework for the cost share adjustment, we reviewed the AICA. We reviewed other documents to provide additional context regarding MEP centers’ cost share requirements, including past GAO reports and reports from the Congressional Research Service and National Academies of Sciences, Engineering, and Medicine. We also reviewed reports on the MEP program’s cost share structure from NIST and the MEP Advisory Board. To gain additional insight on the impact of the cost share adjustment, we also interviewed NIST officials, members of the MEP Advisory Board, and the head of an association representing the MEP centers. Further, we visited a MEP Center in Bothell, Washington, and a manufacturer in Woodinville, Washington, to obtain a more in-depth perspective on the services MEP centers provide to manufacturers. We conducted this performance audit from March 2018 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Chris Murray (Assistant Director), Arvin Wu (Analyst in Charge), Stephen Betsock, Kevin Bray, Mark Braza, TC Corless, Ellen Fried, Jill Lacey, John Mingus, Calaera Powroznik, Sara Sullivan, David Wishard, and John Yee made key contributions to this report.", "summary": "Small and medium-sized manufacturers are an important part of the U.S. economy. In 1988, to enhance the competitiveness, productivity, and technological performance of U.S. manufacturing, NIST established what is now called the MEP program. The program supports manufacturers through services provided by MEP centers. The centers, located in all 50 states and Puerto Rico, are operated by nonfederal organizations. The MEP centers provide assistance, either directly or through third parties, to help improve manufacturing firms' processes and productivity; expand their capacity; and help them adopt new technologies, utilize best management practices, and accelerate company growth. NIST enters into a cooperative agreement with the nonfederal organization that runs each center to provide federal financial assistance conditional upon the center contributing nonfederal matching funds—known as a cost share. The AICA included a provision for GAO to review the effect of the 2017 cost share adjustment. This report describes (1) the MEP centers' views regarding the extent to which the recent cost share adjustment has helped them serve manufacturers and (2) the extent to which NIST data show impacts of the cost share adjustment on centers' finances and activities. GAO surveyed all 51 MEP centers, analyzed NIST data on the MEP program, and interviewed NIST and MEP center officials. Most Manufacturing Extension Partnership (MEP) centers reported that the January 2017 American Innovation and Competitiveness Act (AICA) cost share adjustment has helped them serve manufacturers, especially very small (i.e., less than 20 employees) and rural ones. The AICA adjusted the cost share ratio to remain at 1:1, that is, $1 of nonfederal contributions for each $1 of federal assistance. Before the adjustment, MEP centers' cost share requirement increased over the course of their cooperative agreements from 1:1 to 2:1, requiring centers to obtain a greater proportion of revenue from nonfederal sources. In GAO's survey of all 51 MEP centers, 44 centers cited positive effects of the adjustment on center operations, such as helping to improve center services or better reach underserved manufacturers. Also, 41 centers indicated the adjustment increased their financial stability, which some centers stated has allowed them to focus less on revenue generation and to serve very small and rural manufacturers. However, some MEP center officials observed that the AICA cost share adjustment impact is hard to distinguish from other factors, such as the National Institute of Standards and Technology's (NIST) recompetition of nearly all centers' cooperative agreements between fiscal years 2014 and 2017. The recompetition increased the level of federal financial assistance for most centers and reset many centers' cost share ratio from 2:1 to 1:1 prior to the 2017 adjustment. Still, center officials said that if the cost share requirement reverted to what it was prior to the 2017 adjustment, centers would be less able to serve manufacturers, particularly very small and rural ones. NIST data show that there have been some changes in MEP centers' finances and activities since the AICA cost share adjustment; however, these changes generally began prior to the adjustment. For example, NIST data on centers' finances show an increase in federal assistance and a decrease in reported nonfederal contributions from fiscal year 2017 to 2018, but these changes generally began around fiscal year 2014, when NIST began the recompetition process. Similarly, NIST data on centers' activities show an overall increase in the numbers of very small and rural manufacturers served from fiscal year 2017 to 2018. While the change in the number of very small manufacturers served began around fiscal year 2014, the number of rural manufacturers served fluctuated from fiscal years 2014 through 2018. Like MEP center officials, NIST officials said the impact of the AICA cost share adjustment is intertwined with the recompetition impacts and, going forward, the AICA adjustment may help sustain recent increases in the number of very small and rural manufacturers served.", "document_type": "gao"}
{"report": "Several presidential directives and national strategies establish biodefense policy for the federal government. These directives establish overall goals and policies as well as assign specific responsibilities to federal agencies. See table 1 for relevant directives and strategies. Among these directives, the White House released HSPD-10 in 2004, which outlines the structure of the biodefense enterprise and discusses various federal efforts and responsibilities that help to support it. The directive organizes biodefense efforts into four key pillars, consisting of threat awareness, prevention and protection, surveillance and detection, and response and recovery. Each of these pillars comprise numerous activities—such as conducting research on emerging pathogens that could pose a threat—that are carried out by multiple federal agencies and generally require coordination across the entire biodefense enterprise. The biological threat landscape is vast and requires a multidisciplinary approach to developing threat awareness. Synthetic biology, if used to create and combine agents, also poses a significant threat and potentially complicates the ability to assess the biological threat landscape. Despite ratification of the Biological Weapons Convention in 1975 and the end of the Cold War decades later, the threat of biological warfare persists today. For example, as the Blue Ribbon Study Panel on Biodefense reported, the State Department assessed in 2015 that China, Iran, North Korea, Russia, and Syria continue to engage in dual-use or biological weapons-specific activities and are failing to comply with the convention, to which each of these countries has agreed. Additionally, the revolution in biotechnology presents opportunities to advance the life sciences, yet that same technology in the wrong hands could be used to create biological weapons. For example, nonstate actors such as terrorist organizations, domestic militia groups, and “lone wolves” have both the interest and capacity to develop biological weapons. The intelligence community plays a key role in assessing these types of threats. Threat awareness is also challenged by the unpredictable nature of naturally occurring disease, which could affect human and animal health and agricultural security, potentially causing global catastrophic biological risks which could lead to loss of life, and sustained damage to the economy, societal stability, or global security. To assess and develop means to combat these threats, many federal agencies conduct biological threat awareness activities, which may include a combination of risk assessment and key activities to better understand certain characteristics of biological threats. For example, the genetic compositions of some viruses naturally change, as exemplified in 2009, when an H1N1 influenza virus emerged with a new combination of genes, causing a global pandemic. According to the Centers for Disease Control and Prevention (CDC)—an entity within HHS—when these significant genetic changes occur in a virus, most people have little or no immunity to the new virus. Climate change also has the potential to negatively impact human health and the agriculture industry. As we reported in October 2015, climate change may contribute to the spread of vector-borne diseases that are transmitted to humans by animals, including invertebrate animals such as mosquitoes and ticks. Examples of vector- borne diseases that currently pose health risks in some regions of North America include chikungunya disease, dengue fever, Lyme disease, and West Nile virus fever. Additionally, habitat loss and human encroachment on rural and wildlife environments are bringing populations of humans and animals into closer and more frequent contact, increasing the risk of disease transmission among people, pets, livestock, and wildlife. Finally, the scientific community must safeguard the biological agents it uses to assess threats. Protecting laboratory workers and the population at large from intentional or accidental release of dangerous pathogens during the pursuit of more knowledge about them is also challenging. Recent high-profile events, such as a DOD laboratory inadvertently shipping incompletely inactivated samples of Bacillus anthracis, the bacterium that causes anthrax, to almost 200 laboratories worldwide over the course of 12 years and the unexpected discovery of misplaced vials of smallpox (variola) virus at the National Institutes of Health (NIH) campus, also highlight the threat due to improper handling and unknown storage of dangerous biological agents. Several federal departments and agencies have responsibilities as part of their mission to assess the threat of biological agents and carry out key biodefense roles as delineated in HSPD-10 and the National Strategy for Countering Biological Threats, among other documents. National Biodefense Analysis and Countermeasures Center (NBACC) NBACC consists of two centers: National Biological Threat Characterization Center Its mission supports national goals to deter and reduce the impact of current and newly identified biological threats by providing timely scientific data, knowledge products, and expertise required for accurate and informed threat analyses and biodefense planning, preparedness, response, and recovery. National Bioforensics Analysis Center It serves as the lead federal facility to conduct and facilitate the technical forensic analysis and interpretation of materials from biocrime and bioterror investigations or those recovered following a biological attack in support of the lead federal agency. Department of Homeland Security. DHS is the principal federal department with responsibility for domestic incident management and supports federal efforts to prepare for, respond to, and recover from domestic biological attacks. Within DHS, the Science & Technology Directorate’s (S&T) Chemical and Biological Defense (CBD) Division leads key efforts related to enhancing threat awareness with a focus on bioterrorism. S&T develops Material Threat Assessments in collaboration with HHS, as well as the BTRA, which includes assessments of the relative risks posed by biological agents based on variable threats, vulnerabilities, and consequences. S&T also operates NBACC, which conducts scientific research and develops reports and products specifically intended to address identified knowledge gaps associated with current and future biological threats, including the characterization of key attributes of biological attacks by an adversary such as agent acquisition; agent production; dissemination methods; virulence; and the effectiveness of potential countermeasures. Department of Defense. DOD is responsible for protecting U.S. armed forces from biological threats worldwide and conducts a range of efforts to support research, development, and acquisition of medical countermeasures and other technologies to prevent or mitigate the health effects of biological agents and naturally occurring diseases. Multiple organizations across DOD are responsible for a number of activities, including (1) determining requirements; (2) providing science and technology expertise; (3) conducting research, development, test, and evaluation; and (4) providing oversight. This enterprise is structured to conduct research and develop defenses against chemical and biological threats. Department of Health and Human Services. HHS is the federal agency primarily responsible for identifying needed medical countermeasures to prevent or mitigate potential health effects from exposure to biological agents for the nation and engaging with industry to develop them. In 2006, HHS established the Public Health Emergency Medical Countermeasures Enterprise (PHEMCE), a federal interagency body that is responsible for providing recommendations on medical countermeasure priorities and development and acquisition activities. Within HHS, the Office of the Assistant Secretary for Preparedness and Response (ASPR) leads PHEMCE and the federal medical and public health response to public health emergencies, including strategic planning, medical countermeasure prioritization, medical countermeasure requirements development, and support for developing and procuring medical countermeasures for the Strategic National Stockpile. CDC maintains the Strategic National Stockpile and supports state and local public health departments’ efforts to detect and respond to public health emergencies, including providing guidance and recommendations for the mass distribution and use of medical countermeasures, among other activities. The agency also engages in laboratory detection of diseases and epidemiological investigation of outbreaks to protect the nation from health, safety, and security threats, both foreign and in the United States. The Food and Drug Administration (FDA) conducts research and performs vulnerability assessments to help prevent adulteration of the food supply. NIH conducts and funds basic and applied research to develop new or enhanced medical countermeasures and related medical tools and provides oversight and guidance on biosafety and biosecurity to research laboratories. U.S. Department of Agriculture. USDA is the lead agency with responsibility to protect and improve the health, quality, and marketability of our nation’s agricultural products. Within USDA, the Animal and Plant Health Inspection Service (APHIS) is responsible for working to prevent, control, or eliminate harmful pests, pathogens, and diseases of animals and plants. APHIS consists of multiple component units with key roles in biodefense including Veterinary Services, and the Plant Protection and Quarantine (PPQ) program. These offices are supported by multiple research centers and laboratory networks, as well as the Agricultural Research Service (ARS), which conducts a wide range of research addressing agricultural issues of high national priority. Environmental Protection Agency. EPA is the lead agency for environmental cleanup and remediation, including indoor cleanups. EPA is also the lead federal agency for protecting drinking water and wastewater infrastructure. In addition, EPA provides technical assistance and operational support for sampling, characterization, decontamination, clearance, and waste-management efforts. According to EPA officials, if there is potential for environmental contamination due to a biological incident, HHS collaborates with EPA in developing and implementing sampling strategies and sharing results. EPA’s Office of Research and Development’s Homeland Security Research Program aims to help increase the capabilities of EPA and communities to prepare for and respond to chemical, biological, and radiological disasters. EPA’s Water Security Division also provides resources to monitor incidents and threats. Key biodefense agencies, including DHS, DOD, HHS, USDA, and EPA rely on intelligence and global surveillance information, scientific study of disease agent characteristics, and analysis to better understand threats and help make decisions about biodefense investments. Figure 1 depicts the three components of threat awareness described in this report. Key federal biodefense agencies use intelligence to understand adversaries’ capabilities to cause harm with a biological weapon and conduct global disease surveillance to monitor threats from naturally occurring agents. DHS and DOD rely on information from the intelligence community about adversaries’ capabilities to acquire, produce, reengineer, and disseminate a biological agent. For example, DHS solicits information from the intelligence community to create models on nonstate actors’ possible target (e.g., a transportation hub), the possible agent and amount used, and the method of attack. DHS also gathers information on terrorist organizations’ financial and technical resources to help determine their capabilities in staging an attack. This information is used to develop the BTRA to support DHS’s responsibilities to protect against non-state actor intentional acts of bioterrorism. For more information on the BTRA and its development and evolution, see appendix I. Predicting the Threat of Zika Virus Spread to the United States Based on Chikungunya and Dengue Zika virus is a flavivirus that is primarily spread in humans by the same mosquitos that also spread dengue, chikungunya, and other viruses. The first confirmed local transmission of this emerging threat in Brazil occurred in May 2015. Since that time, the Centers for Disease Control and Prevention’s (CDC) Global Disease Detection Operations Center has been monitoring the spread of the epidemic from Brazil to other countries in the Americas. By early 2016, the Zika virus had spread to dozens of countries, including local transmission in U.S. territories. At this time, CDC activated its Emergency Operations Center to respond to outbreaks of Zika occurring in the Americas, and enhance disease surveillance and response coordination. In February 2016, the director of CDC said that recent chikungunya and dengue outbreaks in the United States suggest that Zika outbreaks in the U.S. mainland may be relatively small and localized, which can be attributed to better infrastructure and mosquito control than that found in Latin America. In contrast, he said outbreaks of dengue and chikungunya suggest that Zika virus may spread widely in the U.S. territories. CDC estimates of Zika virus cases for 2016 support the CDC director’s prediction, with 224 locally acquired mosquito-borne cases in the United States (in Florida and Texas) compared to nearly 36,000 locally acquired cases in U.S. territories (largely in Puerto Rico). Efforts to improve international capacity for virus surveillance support CDC’s ability to characterize emerging threats and enhance threat awareness. subjects. It projects foreign capabilities in particular warfare areas out 20 years in the future. Other agencies, such as HHS and USDA, rely on global disease surveillance to identify and characterize naturally occurring disease events that may impact human, animal, or plant health. Although surveillance and detection activities constitute an entire separate pillar of the biodefense enterprise, these activities can also help federal agencies enhance threat awareness by providing information about emerging global disease events that might affect the United States. For example, within HHS, CDC’s Global Disease Detection program conducts global surveillance on emerging infectious disease events to rapidly detect and monitor the characteristics of the disease event to determine whether and what kind of threat it poses to the U.S. population. Similarly, within USDA, APHIS conducts surveillance of foreign animal diseases and plant pests and pathogens to determine what threat they may pose to the U.S. agriculture industry. APHIS officials said they have a number of relationships and sources they use to gather information on traditional and emerging animal diseases. These include the National Center for Medical Intelligence within DIA, DHS’s National Biosurveillance Integration Center, CDC, and the World Organisation for Animal Health. USDA’s Risk Identification and Risk Assessment unit conducts open source monitoring globally to identify situations of greatest risk to the animal agriculture community. For plant surveillance, USDA’s PestLens is an offshore open-source monitoring and analysis function designed to identify emerging pests and diseases. The PestLens team stationed overseas evaluates these potential threats for their impact on trade and identifies threats to look for at ports. It conducts research to determine whether there are outbreaks of disease or pests in other countries. Epidemiology Terms Virulence is the relative capacity of a pathogen to overcome body defenses. Pathogenesis is the process by which an infection leads to disease. Infectious dose is an estimate of the amount of a pathogen required to cause illness. Zoonotic disease is an infectious disease that is transmissible from animals to humans. Agencies use scientific research to help understand the characteristics of various threat agents, including their virulence, stability, and ability to be dispersed through various methods. Agencies also perform or contract for scientific research on emerging pathogens to understand their means of transmission, host susceptibility, and effects of infection. Research is conducted on agents that may be used intentionally as biological weapons or on disease-causing agents that may exist in nature and contribute to outbreaks or pandemics, such as influenza viruses. One example of DHS-conducted scientific research is NBACC’s work to understand properties associated with agent acquisition, production, dissemination, stability, virulence and pathogenesis, and existing medical countermeasure efficacy. A DOD example of scientific research is DTRA’s efforts to characterize biological agents (virulence, dissemination, infectious dose, etc.). For instance, DTRA might fund research to determine whether current diagnostic tools would be adequate if the Ebola virus’s genetic sequence were to change. For conducting scientific research to characterize naturally occurring threats, HHS and USDA agencies engage in a spectrum of activities. Within HHS, CDC, NIH, and FDA all conduct various scientific research to characterize biological agents. For example, CDC conducts characterization of infectious diseases, including analyses of pathogenesis, and works to identify uncommon signals of disease and conduct research to assess zoonotic potential. One effort CDC has to characterize an infectious disease is the Influenza Risk Assessment Tool that assesses potential pandemic risk. NIH also conducts characterization research—such as pathogenesis, infectious dosage rates, and potential effects if agents are aerosolized—primarily for known public health threats, which may also be used as inputs into modeling. Additionally, FDA conducts scientific food defense research to understand, among other things, thermal stability and inactivation of biological agents. Within USDA, ARS also conducts basic biological research on animal and plant pathogens. Because of the sheer volume of animal diseases, ARS takes a strategic approach to research and study families of viruses, rather than a single virus. For example, ARS officials said they were able to leverage ongoing research on flaviviruses when Zika virus, a flavivirus, emerged in the Americas. ARS is also trying to use more predictive biology to anticipate and properly prepare for new and emerging pathogens—such as understanding vector-borne virus adaptability to potentially prevent transmission to humans—to ensure the public and animal health, as 70 percent of new and emerging diseases are zoonotic. ARS researchers also look at pests and pathogens not currently in the United States to help identify countermeasures, should they appear. Additionally, EPA conducts research to fill science gaps associated with environmental contamination resulting from accidental or intentional releases of biological agents. For example, EPA studies the behavior of biological agents in the environment to inform strategies for characterization and remediation. Research includes developing methods for characterization of persistent biological contamination, mitigating its impacts, cleaning it up in the environment, and managing the subsequent waste. All agencies we interviewed described modeling studies and other analytical work they conduct to help determine the scope and impact of possible biological threats. For example, because biological threat agents cannot be released into the air in operational environments due to health risks, programs such as DHS’s BioWatch Program rely on computer modeling and attack simulations to assess the performance of biological detection systems. DHS also uses the BTRA modeling to assess potential public health impacts and mitigation efforts for potential biological attacks (see app. I). Similarly, according to DOD officials, DTRA develops and employs modeling and simulation tools for consequence assessment of biological attacks within and outside of the United States. HHS conducts public health consequence modeling for various types of attacks with specific agents, which uses inputs from DHS Material Threat Assessments to help determine the unmitigated medical consequences. Unmitigated consequence estimates are modeled based on factors such as projected spread patterns, infectious dose rates, and estimated time frames, which can help inform response efforts that could mitigate these consequences such as needed prophylaxis and medical countermeasures as part of the PHEMCE process. The public health and medical consequence assessment is the first step in developing the documents necessary for the PHEMCE to establish medical countermeasure requirements. This analysis allows PHEMCE to determine how many lives could be saved if a medical countermeasure were developed, procured, and deployed, and informs HHS decisions regarding the development of medical countermeasures that might be needed during an event. HHS and USDA also conduct disease patterns and pathways analysis to determine the routes by which certain pathogens found overseas might arrive in the United States. For example, CDC conducts modeling to identify modes of transmission, sources and nodes; and to project epidemiological patterns. One such example is a 2015 CDC study to estimate future numbers of Ebola patients needing treatment at any one time in the United States. The model was developed to help public health officials assess the potential risk for Ebola virus infection in individual travelers and the subsequent need for postarrival monitoring. USDA units also use pathways analysis to assess the likelihood and means by which animal diseases and plant pests might arrive in the United States. For example, USDA Plant Protection and Quarantine (PPQ) evaluates the environmental and economic impacts of pest introduction, and the pathways by which certain pests might arrive (e.g., imported commodities via ship or rail). Additionally, EPA supports water utilities by providing models, tools, and guidance that help harden their infrastructure to respond to and recover from contamination incidents and other disasters, as contamination of drinking water can result from acts of terrorism. Agency officials in our review described how their threat awareness activities help identify biological threat agents of concern and broad- based capability needs, which help guide their biodefense investment decisions. For example, agencies use threat information to determine which agents represent their highest priorities based on the potential of those agents to cause catastrophic harm. Officials from HHS and USDA also described properties or criteria against which they evaluate emerging or reemerging biological agents while conducting surveillance activities to determine whether they pose a serious threat, such as: health effects after exposure to an agent or toxin, degree of contagiousness, economic and trade impact, and likely transmission routes. This threat assessment activity allows agencies to characterize and respond to urgent or real-time disease events, such as a Zika virus or an avian influenza outbreak. In addition to agent-specific approaches, some agencies also reported using threat awareness information as part of efforts to identify and develop broader capabilities that would prepare them to respond to more than one agent. For example, DOD looks at what types of protective equipment are needed to complete the mission in the face of various threats, rather than starting with an individual threat agent. DOD’s Joint Requirements Office (JRO) uses a broad capability-based approach by performing operational risk assessments to evaluate current and future capability needs that will translate into military service requirements. Additionally, HHS, through PHEMCE, reported working on broad capabilities-based investments for medical countermeasures that provide more flexible and sustainable capabilities over the long term. In this regard, PHEMCE seeks to promote technologies that have more than one application or are able to be quickly modified to respond to new threats. For example, according to the PHEMCE Strategy and Implementation Plan, HHS agencies continue to expand their broad-spectrum antimicrobial programs to address both biodefense disease threats, such as plague and tularemia, and the more general public health concern of antimicrobial resistance. Investments in multiplex diagnostic tools also represent a move beyond single-agent detection capabilities. Once threats have been established and capability gaps have been identified, agencies reported using threat awareness information to help prioritize their investments across various biodefense enterprise activities—threat awareness, prevention and protection, surveillance and detection, and response and recovery—to support their missions (see fig. 2). The following figures present examples, based on our analysis of agency documents and interviews, of how agencies use threat awareness information to help direct resources and investments across the biodefense pillars. This presentation is not a comprehensive catalogue of all biodefense investments in these areas, but rather examples of the diversity of activities agencies conduct to fulfill their biodefense missions for threat awareness, prevention and protection, surveillance and detection, and response and recovery. Appendix II includes information organized by agency. Federal agencies with key roles in biodefense share biological threat information through many different mechanisms designed to facilitate collaboration among government partners, including working groups and interagency agreements. However, as we and others have observed in recent reports, opportunities remain to enhance threat awareness across the entire biodefense enterprise, leverage shared resources, and inform budgetary tradeoffs among various threats and agency programs. Officials from key federal agencies, including DHS, DOD, EPA, HHS, and USDA, identified multiple mechanisms that facilitated biodefense collaboration and shared awareness of biological threats. These mechanisms often serve multiple purposes; for example, a working group can develop policy and also aid in information sharing, among other benefits. Officials from these key biodefense agencies reported using collaborative mechanisms to share biological threat information, as well as to coordinate activities, avoid duplication and overlap, implement specific programs for addressing biological threats, and assist in policy development at the agency and White House level. The existence of working groups and similar bodies to help promote information sharing, align policies and procedures, and coordinate to leverage resources is consistent with key practices and mechanisms that we have previously reported as useful for enhancing and sustaining interagency collaboration. Figure 7 provides examples of collaborative mechanisms identified for biodefense. Officials at key federal agencies reported participating in several types of collaborative mechanisms, including interagency bodies, working groups at the agency and executive level, formalized agreements, colocation, joint projects and funding efforts, and shared expertise. Examples within each mechanism include the following: Interagency bodies. Key federal agencies reported participating in formal interagency bodies that have their own authority and resources and are established to coordinate activities related to biodefense. One such group is PHEMCE, the federal interagency decision-making body for medical countermeasure development and acquisition. PHEMCE is led by HHS, and includes both internal HHS partners, such as CDC, FDA, and NIH, and external interagency partners, such as DOD, DHS, USDA, and the Department of Veterans Affairs. In addition, other key agency officials reported participating in interagency bodies coordinated by HHS and USDA to determine additions and removals to the select agent list. Working groups. Officials in each of the key agencies said they participate in established and ad hoc working groups to provide subject- matter knowledge and expertise, share information, prioritize research, and avoid duplicating efforts. For example, officials from over a dozen agencies and components participate in an Interagency Bioterrorism Working Group through DHS that provides a conduit for interagency review of technical inputs and assumptions for biological agents and other parameters in the BTRA. DHS officials stated that this working group also works to obtain wider interagency understanding and ownership of the DHS BTRA. Officials from DOD’s JPEO-CBD also stated that they sit on multiple interagency working groups with DHS officials that focus on combating terrorism, biosurveillance, and research and development, among other topics. Similarly, CDC officials stated they participated on approximately 10 to 20 separate working groups with specialized purposes, such as integrated process teams for specific research programs. Collaborative mechanisms within the Executive Office of the President. Some working groups and other collaboration mechanisms have been led by the National Security Council and other offices within the Executive Office of the President in order to ensure a comprehensive and coordinated approach to biodefense across agencies. For example, the Subcommittee on Biological Defense Research and Development was led by the White House Office of Science and Technology Policy and included representatives from 16 agencies and three White House offices. This subcommittee evaluated U.S. biological defense capabilities to identify future priorities and actions. The National Security Council has also led integrated policy committees focused on a particular threat or range of threats, such as genome editing and synthesis and select agents and toxins. Written interagency agreements. Agencies have executed written agreements in order to define their relationships for a particular aspect of biodefense. For example, in March 2015, DOD, DHS, and EPA renewed a formalized relationship through a memorandum of understanding for chemical and biological defense research, development, and acquisition—all of which require shared threat awareness. The agreement identifies roles and responsibilities for chemical and biological defense, establishes senior and technical working groups, and establishes cross-agency responsibilities. In particular, DOD, DHS, and EPA agreed to exchange and identify program needs and overlapping interests; establish interagency agreements between parties for joint projects and funding; conduct research and provide data to the partner agencies; and facilitate the establishment of interagency projects and working groups. DOD officials stated that the activities carried out under the memorandum have varied over time, but ongoing collaborative activities included efforts in biosurveillance, wearable sensors, decontamination, and a repository for threat agent data. Joint facility locations. As we reported in 2014, to maximize resource sharing and facilitate scientific exchange on the study of biological threat agents and other pathogens, DOD, HHS, and DHS share a joint biological campus, known as the National Interagency Biodefense Campus, located at Fort Detrick, Maryland. DHS officials said that, in addition to gaining efficiencies by sharing biosecurity and infrastructure requirements among all three facilities (U.S. Army Medical Research Institute of Infectious Diseases, DHS’s NBACC, and NIH’s Integrated Research Facility), personnel at the three laboratories can communicate more regularly than would otherwise be possible with different locations. The agencies represented on the National Interagency Biodefense Campus also conduct a research consortium to coordinate projects. Joint funding and program efforts. Key federal biodefense agencies have provided funding to partner organizations and agencies in order to obtain technical assistance or expertise for individual projects. DOD and EPA officials stated that DHS’s S&T Directorate often funds subject- matter experts to perform research and testing to assist in the development of answers to technical questions. For example, DHS funded staff at the U.S. Army Medical Research Institute of Infectious Diseases to research the characteristics of a particular agent in an aerosolized environment. Leveraging expertise. Agency officials also stated how more informal mechanisms, such as relationships between key personnel and soliciting input for research projects, provide the opportunity to leverage expertise to share threat awareness information and can increase collaboration and positive results between agencies. For example, DHS holds interagency stakeholder panels and outreach events (separate from existing working groups) to gather expertise during development of several biodefense products, including the BTRA. DHS officials said that DOD personnel from DTRA and DHS’s Biological Threat Characterization Program also conduct joint program reviews, and DHS personnel contribute expertise to DTRA’s contract evaluation teams. The collaborative mechanisms in which the key agencies in our review participate may facilitate information sharing in support of specific federal activities and in individual programs, or in response to specific biological events after they begin to unfold, but there is no mechanism in place to develop enterprise-wide threat awareness and assess the relative risks. For example, the BTRA is a dedicated effort to identify and assess the risk of biological events that stem from nonstate actors intentionally seeking to harm U.S. interests using biological agents. By design, it is focused on the consequences and likelihood of terrorist events threatening human health, and does not assess the risk from other types of biological threats. However, there is no similar comprehensive mechanism in place that integrates threat awareness information for all sources of intentional biological threats, as well as naturally occurring events that could harm or destabilize U.S. interests by catastrophically affecting humans, animals, and plants. Similarly, HHS officials stated that PHEMCE is a primary mechanism used to communicate threat awareness and other information on biodefense. However, the primary purpose of PHEMCE is to make decisions about human health countermeasures to be acquired for the Strategic National Stockpile. As a result, biological threat information pertaining to other domains, such as plant or animal health, may not be discussed and shared within this venue without a connection to human health. In addition, there is no existing mechanism that can leverage threat awareness information to direct resources and set budgetary priorities across all agencies for biodefense. Agencies use threat awareness mechanisms for resource planning according to the individual agency’s mission. For example, DOD guidance states that budgeting and planning for biodefense relies, in part, on DIA’s CBRN Warfare Capstone Threat Assessment. Similarly, DHS officials stated they use the BTRA to help plan DHS investments in future research or to help inform domestic biodefense preparations. According to DOD officials, because the DOD mission is different, they only use the BTRA indirectly and do not specifically rely on it for prioritizing activities or planning efforts. HSPD-10 requires the development of periodic assessments of the evolving biological weapons threats. DHS officials stated that the BTRA was created, in part, to fulfill the need for an assessment of the risk of intentional use of biological weapons by nonstate terrorists. However, the nation faces other biological threats, including naturally occurring diseases that affect human, animal, and plant health, and biological weapons used by state actors. Without a mechanism that is able to assess the relative risk from biological threats across all sources and domains, the nation may be unable to prioritize resources, defenses, and countermeasures against the most pressing threats. We previously reported in 2011 that the overarching biodefense enterprise would benefit from strategic oversight mechanisms, including a national strategy, to ensure efficient, effective, and accountable results. We noted that the complexity and fragmentation of roles and responsibilities across numerous federal and nonfederal entities presents challenges to ensuring efficiency and effectiveness across the entire biodefense enterprise. In light of that complexity and fragmentation, we observed that a national biodefense strategy could help address the key fragmentation issues across the biodefense enterprise, such as ensuring strong linkage and identifying gaps in investments across the four pillars. In response to our observations, National Security Council staff in December 2014 identified three presidential policy documents—the National Strategy for Countering Biological Threats, the National Biosurveillance Strategy, and Presidential Policy Directive 8—they reported work in concert to provide comprehensive strategic guidance. However, none of these documents comprehensively addresses all four pillars of biodefense, and, even when taken together, they do not fully address the fragmentation issues we have previously identified. Other independent observers have also commented on challenges presented by fragmentation and complexity across the biodefense enterprise. For example, in October 2015, the Blue Ribbon Study Panel on Biodefense reported that the United States lacked strategic leadership to promote collaboration within the federal government and other biodefense partners and achieve innovation throughout the enterprise. The study panel also recommended that the federal government develop, implement, and update a comprehensive national biodefense strategy that would define all organizational structures, future plans, and resource requirements along with unified budgetary authority. We testified in 2016 that several high-level biodefense strategies had been created in the past. However, there is no broad, integrated strategy that can be used to identify risk, assess resources, and prioritize investments. For example, the National Security Council’s National Strategy for Countering Biological Threats is focused solely on outlining the federal government’s approach to reducing the risks of biological weapons proliferation and terrorism, while the National Health Security Strategy authored by the Assistant Secretary for Preparedness and Response (ASPR) seeks to strengthen communities’ abilities to protect against and respond to any incidents with negative health consequences. While these and other strategies, such as the National Strategy for Biosurveillance, address aspects of biodefense, no single strategy provides a comprehensive approach for the nation to prepare and plan for biological threats. In addition, as we reported in 2016, the individual strategies related to pieces of the biodefense enterprise do not currently address the need for prioritization and tradeoffs among approaches when faced with limited resources and expansive threat. In addition, there is no individual or entity with responsibility, authority, and accountability for overseeing the entire biodefense enterprise. White House officials have previously told us that the National Security Council and the Homeland Security Council act together as focal points for federal biodefense efforts. As noted above, many federal departments and agencies participate in National Security Council groups and mechanisms, and biodefense efforts at the White House level are recognized collaboration mechanisms. However, as described in the Blue Ribbon Study Panel report and reported to us by HHS and DHS officials, these mechanisms may not persist from one presidential administration to the next. As a result, any mechanism located within bodies such as the National Security Council and Homeland Security Council may not provide the continuity and leadership needed to address persistent biological threats. The absence of mechanisms to develop shared threat awareness across the full set of biological threats and use that information to identify opportunities for leveraging resources to mitigate risk across the enterprise is another example of the fragmentation we have previously identified. However, opportunities exist to enhance shared threat awareness across the biodefense enterprise. Enacted on December 23, 2016, the National Defense Authorization Act (NDAA) for Fiscal Year 2017 required DOD, HHS, DHS, and USDA to jointly develop a national biodefense strategy and associated implementation plan. The law requires the strategy and implementation plan to: inventory and assess all existing strategies, plans, policies, laws, and interagency agreements related to biodefense; describe biological threats from warfare, terrorism, naturally occurring infectious disease, and accidental exposure; describe current federal efforts preventing the proliferation and use of biological weapons, preventing accidental or naturally occurring outbreaks, and mitigating the effects of an epidemic; describe roles and responsibilities of the agencies for biodefense; describe interagency capabilities required to support the national recommend actions for strengthening current biodefense capabilities and structures, and for improving interagency coordination. According to DHS officials, as of September 2017, the White House National Security Council is currently overseeing an interagency workgroup to develop that strategy. DOD officials confirmed that the process to create such a strategy is under way, and the effort may include revising or consolidating existing guidance in addition to developing a new national biodefense strategy. As the departments fulfill their obligations under the NDAA for 2017, key federal organizations have the opportunity to institutionalize mechanisms to help the nation make the best use of limited biodefense resources, to include broader shared threat awareness to inform opportunities to leverage resources. However, until the strategy is developed, we will not know the extent it will address shared threat awareness, if at all. The NDAA for 2017 requires the strategy to be submitted to Congress not later than 275 days after enactment (September 2017) and requires us to review it 180 days after the date of submittal. We will continue to monitor progress toward developing strategic mechanisms to help confront fragmentation and complexity across the biodefense enterprise. According to DHS officials, the threat characterization research agenda at NBACC is based primarily on the results and knowledge gaps identified through evaluation of the BTRA. Each year NBACC produces an annual plan that, among other elements, outlines new research projects intended to address priority knowledge gaps for identified biological threat agents. These projects are identified through a multistep process that incorporates a combination of DHS-designated priorities, interagency stakeholder input, and additional planning criteria, such as resource availability and ongoing maintenance of required technical capabilities. (See fig. 8.) The first step in the project selection process is the identification of knowledge gaps by officials within DHS’s Biological Threat Characterization Program (BTCP) based on their evaluation of the BTRA. According to these officials, identification of the most critical knowledge gaps involves determining which inputs have a relatively high impact on BTRA consequence estimates and have a relatively high degree of uncertainty, for example, because data about agent attributes are limited. The officials said they aim to enhance the value of BTRA conclusions by increasing the accuracy and completeness of the data used as modeling inputs through the work of NBACC. DHS has historically relied on the opinions of subject-matter experts to review the BTRA and support determinations regarding data quality but has also recently developed more quantitative methods to integrate BTRA results into the research planning and prioritization process for NBACC. Using data from the 2010 BTRA, DHS identified a total of 22 priority knowledge gaps that it is currently working to address through NBACC research and plans to complete within 6 to 10 years. BTCP program officials reported that although research priorities generally target Tier 1 Select Agents, they also seek to advance research projects that broadly encompass (1) a variety of biological threat agents (e.g., bacteria, viruses, and toxins); (2) agents representing different characteristics that affect threat (e.g., means of acquisition or production, dissemination and exposure attributes, and expected medical consequences), and (3) a selection of traditional, emerging, enhanced, and advanced biological threat agents. In addition to the identification of BTRA-related knowledge gaps, BTCP officials stated that emerging events and specific stakeholder needs could also influence research priorities. For example, during the 2014 Ebola outbreak, BTCP officials directed NBACC to perform research to better understand the risk factors associated with disease transmission, such as the persistence of the virus on various surfaces, and the efficacy of common disinfectants to inform decontamination and public health response efforts. DHS officials also noted that the needs of the Federal Bureau of Investigation, particularly through its casework at the National Bioforensics Analysis Center, may drive some of NBACC’s research priorities. The second step in the process for identifying NBACC threat characterization research projects includes the development of a proposed annual research plan. The annual plan is developed using a combination of inputs including DHS’s research priorities, annual NBACC budgetary resources, and technical capability and staff development needs. Although the plan documents the DHS knowledge gaps that serve as a key driver for developing specific project proposals, in some cases these gaps are identified only as general areas of research, such as the virulence of specified threat agents, which could require a broad scope of research to address. As the plan notes, these priority knowledge gaps exceed the resources available for threat characterization each year. For this reason, NBACC uses a combination of additional criteria to further refine research priorities and select projects for inclusion in the new scope of work, such as consideration of the time and resources required and which knowledge gaps are most likely to provide clear and compelling answers through experimentation. Other factors that may influence final project selection include addressing the knowledge gaps that could be completed reasonably comprehensively in 3 to 4 years or may have potential to provide a framework to better understand other priority agents or emerging threats, such as the Ebola virus or other infectious diseases (see fig. 9). In developing the annual research plan, NBACC also sets aside a small portion of its threat characterization budget to respond to emerging requests, and the plan notes that project plans may be readjusted due to any emerging requirements. The annual plan also identifies priorities needed to maintain four core technical capabilities (aerobiology, bacteriology, virology, and comparative medicine) and accreditation standards required to perform ongoing threat characterization research on potential threat agents in a maximum security national biocontainment laboratory. For example, one of the priorities identified within the 2016 annual plan includes the installation and verification of new equipment intended to enhance aerobiology capabilities. Each annual plan includes a crosswalk between the proposed projects and the associated capabilities that will be utilized. For example, the 2016 NBACC annual plan outlines a scope of work that includes seven research studies that collectively cover all four of the core technical capabilities. Examples of some of the research conducted in recent years include assessment of the decay rates of aerosolized Tier 1 agents and the virulence of select agents based on particle size and production methods. Once NBACC develops a proposed annual research plan, stakeholders review it before the plan goes for S&T approval. According to S&T officials we interviewed, the BTCP program solicits input and feedback on the draft annual plan from interagency stakeholders within DOD, HHS, and the Intelligence Community, among others. According to these officials, the community of practice for conducting this type of research is small and is generally well coordinated to avoid potential duplication of work. Once S&T officials approve the plan, it then undergoes a final approval process through DHS’s Compliance Review Group to ensure adherence with the Biological Weapons Convention. According to S&T officials, they also participate in periodic project reviews to maintain oversight regarding the extent to which each research study is achieving its objectives, and an overall assessment is performed as part of the annual evaluation process of the NBACC contract performer. The purpose of these periodic reviews is to help identify any changes to the project plan that may be required and help ensure that the research is making progress toward addressing identified knowledge gaps. S&T officials stated that although some projects have been modified based on preliminary results, they rely much more heavily on advance review of the experimental methodology by technical subject-matter experts before a project is initiated to help ensure the research will address identified gaps and help inform future iterations of the BTRA. Consistent with its strategic goals, S&T officials reported that NBACC research has directly contributed to the closing of identified knowledge gaps and the development of capabilities that are used to respond to emerging threat characterization needs. According to these officials, NBACC products have improved BTRA consequence and hazard modeling by reducing the uncertainty associated with key data inputs. Specifically, officials cited that significant changes were made to the underlying risk models as a result of NBACC research conducted since the completion of the 2010 BTRA, including updates to 62 individual data points associated with eight biological hazards. As noted in the 2016 NBACC annual plan, the limited research available on authentic threat agents has historically entailed the use of data from surrogate or unrelated biological agents to evaluate the threat and consequences of a biological attack on the homeland. According to S&T officials, the use of authentic threat agents at NBACC addresses this shortcoming and has enhanced confidence in estimates of risk and operational response planning. Although NBACC research currently remains focused on closing specific knowledge gaps, officials noted that this research is also intended to lay a foundation for more predictive modeling, such as using the data to identify shared characteristics among a class of agents. Although the focus of NBACC threat characterization research is generally on the intentional use of Tier 1 biological agents, S&T officials stated that NBACC capabilities could also be employed to address challenges associated with emerging infectious diseases. They further noted that, because many of the high-priority biological threat agents that affect humans also may affect livestock, NBACC’s studies could also be useful for informing risk associated with animal health. NBACC expertise has also been leveraged by other DHS components. For example, S&T officials reported that the U.S. Coast Guard requested information from NBACC to help inform its global vaccine program for its workforce, and DHS’s National Protection and Programs Directorate and the Secret Service have requested NBACC to review their own biological risk assessments. Within S&T, CBD officials stated that NBACC- produced products were used to inform the development of new biological sensor technologies. In addition to sharing NBACC research findings through briefings and reports, NBACC officials also reported that they are currently pursuing efforts to establish an electronic repository for NBACC scientific products at the Unclassified/ For Official Use Only, Secret, and Top Secret levels. The goal of this repository site is to facilitate the ability of end users to search, view, and download documents according to their approved access. We provided a draft of this report to DHS, DOD, EPA, HHS, and USDA for review and comment. Each of these departments provided technical comments that we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Agriculture, Defense, Health and Human Services, and Homeland Security; and the EPA Administrator. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. The Department of Homeland Security (DHS) is responsible for assessing the risks posed by biological agents as directed by the Project BioShield Act of 2004 and Homeland Security Presidential Directives 10— Biodefense for the 21st Century, and 18—Medical Countermeasures against Weapons of Mass Destruction. To this end, DHS’s Science & Technology Directorate (S&T) has developed four Bioterrorism Risk Assessments (BTRA) since 2006 to assess the relative risks posed by various biological agents based on estimates of likelihood and consequence parameters for a number of potential attack scenarios. The BTRA is a probabilistic risk assessment intended to quantify risk for rare yet potentially catastrophic intentional attacks using biological agents by nonstate actors. Results are based on risk modeling for a vast number of potential scenarios derived from multiple event trees representing specific decisions or actions an adversary may pursue. The most recent iteration issued in 2017, called the BTRA 5.0, includes over 600,000 scenarios with predicted impacts on human health, fatalities, and economic costs. These consequence estimates are based in part on inputs provided or validated by the Intelligence Community, various estimates of likelihood, and applicable consequence parameters, such as specific agent attributes and threat characterization research results from the National Biodefense Analysis and Countermeasures Center (NBACC). The BTRA incorporates a number of different models related to the various attack scenarios being assessed. For example, DHS utilizes unique models to assess risk for indoor attacks (in 12 different target categories, such as transportation hubs and sporting events), outdoor attacks (including the top 100 most populated U.S. cities and their associated weather patterns), and potential dissemination via food or water systems, as well as a model that estimates the ability for the public health system to mitigate potential illnesses or fatalities based on disease progression, response timelines, and available medical countermeasures. According to S&T officials, one of the key updates in the BTRA 5.0 is the introduction of adversary-decision models, which allow BTRA program officials to incorporate inputs from subject-matter experts and other data sources regarding the likelihood of various attack scenarios. Selected factors that are considered to help identify potential agents or dissemination methods chosen by an adversary include data on agent acquisition or the means of production in various countries, as well as the likelihood of interdiction during transport. According to S&T officials, the BTRA 5.0 is intended to address previous recommendations of the National Research Council of the National Academies (National Academies) and provide additional information regarding data and intelligence inputs provided by subject-matter experts. The BTRA 5.0 was released in May 2017 and represents the first full BTRA product since 2010. According to BTRA program officials, a series of limited reports were issued in 2012, but S&T management instructed the division to address previous criticisms of the BTRA, including the National Academies’ recommendations, before developing another full report. S&T program officials reported taking action on 12 of the 13 National Academies’ recommendations, and determined, after subsequent review by DHS, that no action was required to address the final recommendation. Some notable changes that DHS reported making in response to the National Academies’ recommendations include: Officials reported implementing adversary-decision models to assess the probabilities of terrorist decisions for transporting materials and selecting targets to respond to National Academies’ criticism that the BTRA methodology may not fully consider adversaries’ efforts to maximize their chance of success. Officials reported publishing models and methodology reports and sending biological data for interagency review to respond to the National Academies’ recommendation to improve transparency. In addition, officials said that DHS had made this information available to stakeholders on a secured electronic site for those with access. Officials reported developing additional tools and methods to assess consequences and probabilities of changing threats to address the National Academies’ concern that the BTRA did not allow for incorporation of newly recognized threats or those that may not yet be well understood. Officials reported developing an economic consequence model and beginning to incorporate assessments of agricultural risk in addition to human mortality and morbidity to respond to the National Academies’ recommendation that DHS add economic and agricultural effects, among other losses, to its consequence modeling. According to S&T officials, another change implemented in the BTRA 5.0 is an effort to collect more detailed information about the sources and confidence level of the data inputs provided by subject-matter experts. These officials reported that they obtained expertise by survey primarily from terrorism subject matter experts, including members of the Intelligence Community. Data results now indicate whether inputs are based upon official reporting or the contributor’s opinion based upon subject knowledge. DHS also reported working on additional tools and models that officials expected would enhance the BTRA and make the results more useful to stakeholders. The following are examples of new developments identified to us by S&T officials: Research Prioritization Matrix (RPM) Tool. The RPM tool is intended to help identify areas of research that will be of greatest benefit to further inform future iterations of the BTRA. The RPM Tool uses a mathematical formula to develop a score based on numerous factors including (1) estimates of likelihood and consequences calculated by the BTRA, (2) the results of a sensitivity analysis of individual data parameters, and (3) an estimate of the confidence in the underlying and supporting data. According to officials, the result is a parameter and agent-specific score that can be used to support decisions regarding research prioritization in a structured, transparent manner that can be tracked over time to demonstrate progress. For example, a specific parameter in the RPM tool may include the decay rate of an agent in a particular substance (for example, in food items), and another parameter might be how much of a certain agent can likely be produced by certain adversaries. According to S&T officials, the RPM tool was recently updated with the latest data and results from the BTRA 5.0 and is expected to be more influential on the development of the research plan for fiscal year 2018. S&T program officials also said that the RPM tool will be made available to other federal entities so that they may use it for their own research prioritization needs, as well as customize the results, such as restricting the model to include only indoor attacks. Agricultural Terrorism Modeling. S&T officials have initiated efforts to develop additional modeling of potential agricultural impacts of a biological attack. Although a risk assessment of agricultural terrorism was completed in 2012 that assessed potential impacts from five animal diseases and two plant pathogens, officials reported that it was criticized for having substandard modeling and employing limited scenarios. The current effort includes representatives from the U.S. Department of Agriculture, the Food and Drug Administration, and the Federal Bureau of Investigation, and is focused on development of modeling for biological attacks on agriculture that may occur pre- harvest (before food processing begins) to differentiate it from attacks on the food system itself. DHS and stakeholders are currently evaluating available modeling tools and they plan to include the new modeling within the BTRA 6.0. Key threat awareness activities identified by the agency The U.S. Department of Agriculture (USDA) operates numerous programs designed to help prevent the entry and spread of agricultural pests and diseases, and protect the health of U.S. agricultural resources by addressing zoonotic diseases (transmissible from animals to humans) and implementing surveillance, preparedness and response, and control efforts. Examples of program activities include the following: High Consequence List. A three-tier classification system of foreign animal diseases determined to pose a significant threat to animal health if introduced into the United States. The list was developed in 2013 to help prioritize investments in the National Veterinary Stockpile. produced annually to provide an assessment of pests deemed most important in terms of likelihood or potential consequence. These guidelines define the procedures that stakeholders are to use to identify, characterize, survey, and respond to a particular pest if detected in the United States. Vulnerability Assessments. The Food Safety and Inspection Service conducts vulnerability assessments that, among other things, can inform the development of countermeasures to help prevent or mitigate the impacts of an intentional attack on the food supply. Scientific Research. The Agricultural Research Service conducts research to help characterize the status of diseases worldwide and assess their spread patterns. This work can also include basic research on various biological agents, as well as identification of specific scientific and technology gaps related to effective preparedness and response efforts. Chemical and Biological Defense (JPEO-CBD) manages the development and acquisition of different technologies and prototypes in order to provide biological defense products to the military services. The technologies can include biological detection systems and laboratory equipment, medical countermeasures, protective equipment for individual warfighters to provide deployed units detection and protection capabilities against different types of biological weapons. Threat assessment. The Defense Intelligence Agency produces the Chemical, Biological, Radiological, and Nuclear Warfare Capstone Threat Assessment, a report on chemical and biological programs of countries and technology that could be used by adversaries in a threat environment. DOD officials said that JPEO-CBD uses the report to identify biological warfare threats against military and civilian populations and help prioritize resources and investments into research and development. assessments of potential impacts to water systems and the environment in the event of a biological incident. EPA officials said EPA relies on the Department of Homeland Security’s Bioterrorism Risk Assessment and information on adversary capabilities and tactics to better assess potential environmental countermeasures for attacks on water systems and indoor/outdoor areas, to steer research resources, and to support responders who may need to address the consequences of an attack. EPA Water Security Division officials said they develop tools, training, and programs to address intentional contamination, detection in distribution networks, vulnerability assessments, emergency response capabilities, and how to monitor incidents and threats. Research and Development. The Office of Research and Development’s Homeland Security Research Program aims to help increase the capabilities of EPA and communities to prepare for and respond to chemical, biological, and radiological disasters. EPA relies on information from the BTRA in addition to its own research to inform preparedness activities and its research agenda. EPA’s homeland security research is organized into three topic areas that support these objectives: (1) characterizing contamination and assessing exposure; (2) water system security and resilience; and (3) remediating wide areas. (PHEMCE). Includes various HHS agencies and other federal departments, such as the Department of Defense (DOD), DHS, and the U.S. Department of Agriculture, to advise the Secretary of HHS on medical countermeasure priorities and approaches to the development, acquisition, stockpiling, and distribution of medical countermeasures for biological weapons attack agents, pandemic influenza, and other emerging infectious diseases. Global disease surveillance. Helps identify and respond to emerging infections, including pathogenic avian influenza, which remains an urgent global infectious disease threat. Medical and Public Health Consequence Modeling. HHS’s medical and public health consequence modeling reports use the exposure information from DHS’s material threat assessments (MTA) to calculate the number of individuals who may become ill, be hospitalized, or die based on the MTA scenario with and without medical countermeasures. HHS reported using the modeling reports as part of an assessment process to establish requirements for medical countermeasures that need to be developed and acquired to respond to a biological incident. aimed at reducing large public health consequences of attacks on the food supply. FDA assesses public health and economic impact of an attack, the accessibility of a target and ease of an attack, the ability to recover, the loss of production due to an attack, and target selection. FDA also said it considers the health, economic, and psychological impacts of an attack on the food industry. Scientific Research. Studies include thermal stability of microbial agents and ability to inactivate biological agents in the food supply, and studies of pathogenic properties of viruses to help understand the epidemiology, transmission, evolution and origin of an outbreak. which is a system of environmental monitoring intended to provide early warning and detection of a biological attack. DHS also houses and supports the National Biosurveillance Integration Center—a collaboration of 14 federal partners intended to integrate information about threats to human, animal, plant, and environmental health from thousands of sources to develop a more comprehensive picture of the threat landscape. Research and Analysis. DHS operates the National Biodefense Analysis and Countermeasures Center, which conducts scientific research and develops reports and products intended to address identified knowledge gaps associated with current and future biological threats, including the effectiveness of potential countermeasures and the characterization of key attributes of biological attacks by an adversary such as agent acquisition; agent production; dissemination methods; and virulence. Additional research and analysis efforts are supported by the Biodefense Knowledge Center and multiple National Laboratories. In addition to the contact named above, Kathryn Godfrey (Assistant Director), Ryan Lambert (Analyst-in-Charge), Amy Bowser, Ben Emmel, Ashley Grant, Eric Hauswirth, Susanna Kuebler, Cody Raysinger, and Amber Sinclair made key contributions to this report. Biological Defense: Additional Information That Congress May Find Useful as It Considers DOD’s Advanced Development and Manufacturing Capability. GAO-17-701. Washington, D.C.: July 17, 2017. Chemical and Biological Defense: DOD Has Identified an Infrastructure Manager and Is Developing the Position’s Roles and Responsibilities. GAO-17-522R. Washington, D.C.: July 7, 2017. Emerging Infectious Diseases: Actions Needed to Address the Challenges of Responding to Zika Virus Disease Outbreaks. GAO-17-445. Washington, D.C.: May 23, 2017. Avian Influenza: USDA Has Taken Actions to Reduce Risks but Needs a Plan to Evaluate Its Efforts. GAO-17-360. Washington, D.C.: April 13, 2017. Defense Civil Support: DOD, HHS, and DHS Should Use Existing Coordination Mechanisms to Improve Their Pandemic Preparedness. GAO-17-150. Washington, D.C.: February 10, 2017. Bioforensics: DHS Needs to Conduct a Formal Capability Gap Analysis to Better Identify and Address Gaps. GAO-17-177. Washington, D.C.: January 11, 2017. Defense Intelligence: Additional Steps Could Better Integrate Intelligence Input into DOD’s Acquisition of Major Weapon Systems. GAO-17-10. Washington, D.C.: November 1, 2016. High-Containment Laboratories: Actions Needed to Mitigate Risk of Potential Exposure and Release of Dangerous Pathogens. GAO-16-871T. Washington, D.C.: September 23, 2016. High-Containment Laboratories: Improved Oversight of Dangerous Pathogens Needed to Mitigate Risk. GAO-16-642. Washington, D.C.: August 30, 2016. Biodefense: The Nation Faces Multiple Challenges in Building and Maintaining Biodefense and Biosurveillance. GAO-16-547T. Washington, D.C.: April 14, 2016. Emerging Infectious Diseases: Preliminary Observations on the Zika Virus Outbreak. GAO-16-470T. Washington, D.C.: March 2, 2016. Air Travel and Communicable Diseases: Comprehensive Federal Plan Needed for U.S. Aviation System’s Preparedness. GAO-16-127. Washington, D.C.: December 16, 2015. Emerging Animal Diseases: Actions Needed to Better Position USDA to Address Future Risks. GAO-16-132. Washington, D.C.: December 15, 2015. Biosurveillance: DHS Should Not Pursue BioWatch Upgrades or Enhancements Until System Capabilities Are Established. GAO-16-99. Washington, D.C.: October 23, 2015. Climate Change: HHS Could Take Further Steps to Enhance Understanding of Public Health Risks. GAO-16-122. Washington, D.C.: October 5, 2015. Biosurveillance: Challenges and Options for the National Biosurveillance Integration Center. GAO-15-793. Washington, D.C.: September 24, 2015. Chemical and Biological Defense: Designated Entity Needed to Identify, Align, and Manage DOD’s Infrastructure. GAO-15-257. Washington, D.C.: June 25, 2015. Biological Defense: DOD Has Strengthened Coordination on Medical Countermeasures but Can Improve Its Process for Threat Prioritization. GAO-14-442. Washington, D.C.: May 15, 2014. National Preparedness: HHS Is Monitoring the Progress of Its Medical Countermeasure Efforts but Has Not Provided Previously Recommended Spending Estimates. GAO-14-90. Washington, D.C.: December 27, 2013. Homeland Security: An Overall Strategy Is Needed to Strengthen Disease Surveillance in Livestock and Poultry. GAO-13-424. Washington, D.C.: May 21, 2013. Influenza: Progress Made in Responding to Seasonal and Pandemic Outbreaks. GAO-13-374T. Washington, D.C.: February 13, 2013. Managing for Results: Key Considerations for Implementing Interagency Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September 27, 2012. Biosurveillance: DHS Should Reevaluate Mission Need and Alternatives before Proceeding with BioWatch Generation-3 Acquisition. GAO-12-810. Washington, D.C.: September 10, 2012. Chemical, Biological, Radiological, and Nuclear Risk Assessments: DHS Should Establish More Specific Guidance for Their Use. GAO-12-272. Washington, D.C.: January 25, 2012. Biosurveillance: Nonfederal Capabilities Should Be Considered in Creating a National Biosurveillance Strategy. GAO-12-55. Washington, D.C.: October 31, 2011. National Preparedness: Improvements Needed for Acquiring Medical Countermeasures to Threats from Terrorism and Other Sources. GAO-12-121. Washington, D.C.: October 26, 2011. Homeland Security: Challenges for the Food and Agriculture Sector in Responding to Potential Terrorist Attacks and Natural Disasters. GAO-11-946T. Washington, D.C.: September 13, 2011. Homeland Security: Actions Needed to Improve Response to Potential Terrorist Attacks and Natural Disasters Affecting Food and Agriculture. GAO-11-652. Washington, D.C.: August 19, 2011. National Preparedness: DHS and HHS Can Further Strengthen Coordination for Chemical, Biological, Radiological, and Nuclear Risk Assessments. GAO-11-606. Washington, D.C.: June 21, 2011. Live Animal Imports: Agencies Need Better Collaboration to Reduce the Risk of Animal-Related Diseases. GAO-11-9. Washington, D.C.: November 8, 2010. Biosurveillance: Efforts to Develop a National Biosurveillance Capability Need a National Strategy and a Designated Leader. GAO-10-645. Washington, D.C.: June 30, 2010. Agricultural Quarantine Inspection Program: Management Problems May Increase Vulnerability of U.S. Agriculture to Foreign Pests and Diseases. GAO-08-96T. Washington, D.C.: October 3, 2007. Global Health: U.S. Agencies Support Programs to Build Overseas Capacity for Infectious Disease Surveillance. GAO-07-1186. Washington, D.C.: September 28, 2007.", "summary": "Biological threats come from a variety of sources and can pose a catastrophic danger to public health, animal and plant health, and national security. Threat awareness, which consists of activities such as collecting and analyzing intelligence, developing risk assessments, and anticipating future threats, is vital to help federal agencies identify necessary biodefense capabilities and ensure investments are prioritized to make effective use of federal funds. GAO was asked to review how key federal agencies develop and share threat awareness information, and how that information informs further investments in biodefense. This report describes: (1) the types of actions that key federal agencies have taken to develop biological threat awareness, and how that information is used to support investment decisions; (2) the extent to which these agencies have developed shared threat awareness; and (3) how DHS's NBACC determines what additional threat characterization knowledge to pursue. GAO analyzed federal policies, directives, and strategies related to biodefense, as well as agency documents such as threat assessments and modeling studies. We identified five key biodefense agencies based on review of the roles designated in these documents. GAO interviewed officials from these agencies about threat awareness activities, and reviewed prior GAO work and related biodefense studies. Each of the key agencies reviewed a draft of this report and provided technical comments that GAO incorporated as appropriate. Key biodefense agencies—the Departments of Homeland Security (DHS), Defense (DOD), Agriculture (USDA), and Health and Human Services (HHS), and the Environmental Protection Agency—conduct a wide range of activities to develop biological threat awareness for intentional and naturally occurring threats, and reported using that information to support investment decisions. Intelligence gathering: Agencies use a combination of intelligence gathering on adversaries' capabilities to cause harm with a biological weapon and global disease surveillance to monitor threats from naturally occurring health threats that might impact humans, animals, or plants. Scientific research: Agencies use traditional laboratory research to help understand the characteristics of various threat agents, including their virulence, stability, and ability to be dispersed through various methods. Scientific research is also performed on emerging pathogens to understand their means of transmission, host susceptibility, and effects of infection. Analysis activities: Agencies use modeling studies and other analytical work to help determine the scope and impact of possible biological threats. These three activities help agencies identify and prioritize the most dangerous biological threats, which can then be used to guide biodefense investments. For example, USDA told GAO it uses threat information to determine which foreign animal diseases represent its highest priorities based on the potential of those agents to cause catastrophic harm, and those priorities are used to inform investments. Similarly, HHS said it conducts threat awareness activities to help inform the development and acquisition of human medical countermeasures. Federal agencies with key roles in biodefense share biological threat information through many different mechanisms designed to facilitate collaboration among government partners, including working groups and interagency agreements. For example, agency officials reported using collaborative mechanisms to coordinate activities and avoid duplication and overlap. However, as GAO and others have noted, opportunities exist to better leverage shared resources and inform budgetary tradeoffs. Recent legislation requires key biodefense agencies to create a national biodefense strategy that has the potential to help address these issues, by, among other things, supporting shared threat awareness. Until the strategy is developed, the extent to which it will meet this need is unknown. The threat characterization research agenda at DHS's National Biodefense Analysis and Countermeasures Center (NBACC) is based primarily on the results and knowledge gaps identified through the Bioterrorism Risk Assessment (BTRA). According to DHS officials, the knowledge gaps deemed most critical include data about biological agents that have a high impact on BTRA consequence estimates and also a high degree of uncertainty. Each year NBACC produces an annual plan that outlines new research projects intended to address these knowledge gaps, and incorporates additional planning criteria, such as interagency stakeholder input, resource availability, and maintenance of required technical capabilities. According to DHS officials, the results of NBACC research were used to directly enhance the BTRA, including updating data associated with eight biological agents since 2010.", "document_type": "gao"}
{"report": "NSF relies on two programs for bringing rotators into the agency: (1) the IPA program and (2) the VSEE program. The Office of Personnel Management develops policies on agencies’ use of the IPA program and promulgates program regulations. Rotators in NSF’s IPA and VSEE programs differ in key respects, including their employment status and compensation. IPA rotators. NSF enters into written agreements with rotators’ home institutions for all IPA assignments. The agreements detail rotators’ salaries and health, retirement, and other fringe benefits at their home institutions, as well as the cost-sharing amounts NSF and home institutions are to pay during rotators’ assignments. NSF reimburses its cost-sharing amounts to home institutions, which continue to pay rotators’ full salaries and benefits. NSF does not cap the salaries of IPA rotators; as a result, IPA rotators may receive salaries that exceed the maximum federal salary for the position they hold at NSF. In contrast, if an IPA rotator’s salary is less than the minimum federal salary for the position, NSF will supplement the salary to the minimum rate. VSEE rotators. NSF appoints VSEE rotators as federal employees on a nonpaid leave of absence from their home institutions. VSEE rotators receive their salaries directly from NSF but are not eligible for certain federal benefits, such as retirement; instead, NSF reimburses home institutions for the employer’s share of retirement, life insurance, and health benefits that would otherwise be discontinued. NSF’s policy is to set salaries for VSEE rotators that are generally comparable to the salaries the rotators would receive at their home institutions. In setting salaries, NSF also takes into account other sources of income, such as consulting, and allows for locality pay adjustments applicable to employees in the Washington, D.C., metropolitan area. However, because VSEE rotators are federal employees, NSF caps their salaries at the federal maximum for the position they hold at NSF. Both IPA and VSEE rotators are eligible for certain other types of reimbursement. In particular, rotators have the option of having NSF pay their moving expenses to and from Washington, D.C., or receiving per diem allowances in accordance with federal travel regulations for up to 2 years. In addition, NSF may reimburse rotators for travel-related expenses related to their participation in NSF’s Independent Research and Development program, which enables NSF staff to maintain their involvement with their professional research and research-related activities at their home institutions. Table 1 shows additional information on IPA and VSEE rotator expenses. Rotators are generally assigned to one of NSF’s seven directorates that support science and engineering research and education (see table 2). Each directorate is headed by an assistant director and deputy assistant director. Directorates are further subdivided into divisions, offices, or sections. Each division is headed by a division director and typically a deputy division director, and each office is headed by an office director and typically a deputy office director. All these positions are executive positions at NSF. At the staff level, NSF uses program directors—subject matter experts in the scientific areas they manage—to conduct reviews of proposals and recommend which projects the agency should fund. With an annual budget of about $7.5 billion, NSF funds approximately 24 percent of all federally supported basic research conducted by colleges and universities in the United States. In 2016, NSF established the Steering Committee for Policy and Oversight of the IPA Program. The steering committee serves as the primary body for considering policy on NSF’s use of IPA rotators and overseeing common approaches to budgeting and implementation of the IPA program. The committee’s membership includes NSF’s chief human capital officer, who serves as the chair, and several other NSF officials. The steering committee has established strategic principles for management of the IPA program. These principles include maintaining a balance between IPA rotators and federal staff and a commitment to ongoing improvement of the program. NSF officials told us that there is no similar steering committee for overseeing VSEE rotators. Instead, each VSEE rotator is individually overseen by his or her respective supervisor. For the agency as a whole, NSF’s Office of Information and Resource Management and its Division of Human Resource Management conduct human capital management. NSF officials stated that the head of the Office of Information and Resource Management serves as the Chief Human Capital Officer and develops and oversees NSF’s human capital approaches and strategies. These officials also told us that the Deputy Chief Human Capital Officer serves as the division director of Human Resource Management and is responsible for administering the division’s day-to-day operations. The Division of Human Resource Management administers the agency’s human capital policies as set forth in NSF’s personnel manual. The numbers of rotators and their costs to NSF in proportion to other staff have remained relatively stable. Most rotators were IPA rotators, and were used in both executive and program director (staff-level) positions. NSF generally used VSEE rotators in program director positions. Most rotators at NSF were IPA rotators, and the proportion of rotators relative to other staff has remained relatively stable over time (see fig. 1). During the 10-year period we reviewed, from fiscal year 2008 through fiscal year 2017, IPA and VSEE rotators comprised about 12 percent and about 3 percent, respectively, of NSF’s total workforce; and the number of IPA rotators ranged from 162 to 190 (about 11 to 12 percent of total staff), and the number of VSEE rotators ranged from 22 to 52 (about 1 to 3 percent of total staff). NSF primarily used rotators across its seven scientific directorates, using IPA rotators in executive and program director positions and VSEE rotators in program director positions. The agency used rotators in these positions alongside NSF’s permanent staff to perform day-to-day agency operations, including managing the agency’s merit review process for determining which projects to fund. NSF used IPA rotators in executive positions such as assistant director. According to agency officials, individuals in executive positions at NSF are responsible for setting the direction for the scientific area they are assigned, leading scientific and technical matters, establishing an organizational culture, overseeing outreach and collaboration with NSF stakeholders, and contributing to NSF and national policy development and implementation. For example, an executive IPA rotator that we interviewed told us that he emphasized forming partnerships with industry when setting the direction for his directorate, including issuing joint solicitations for research proposals with industry partners. In addition, according to NSF officials, individuals in executive positions provide guidance and team management for staff. The proportion of IPA rotators to federal employees in executive positions within NSF’s seven scientific directorates and other staff offices has generally increased since fiscal year 2012. As shown in figure 4, from fiscal year 2008 through fiscal year 2017, the number and proportion of executive positions filled by IPA rotators ranged from 18 of 98 (about 18 percent) in 2008 to 30 of 108 (about 28 percent) in fiscal year 2016. In November 2017, IPA rotators filled 29 of 88 (about 33 percent) executive positions within NSF’s seven scientific directorates. At that time, the proportion of executive positions filled by IPA rotators varied among directorates, as shown in table 3. For example, IPA rotators filled 4 of 8 (50 percent) of the executive positions in the Directorate for Social, Behavioral, and Economic Sciences and 2 of 14 (about 14 percent) of the executive positions in the Directorate for Mathematical and Physical Sciences. According to NSF officials, NSF often pairs IPA rotators and federal employees at the executive level so that each can benefit from the other’s experience and perspective. For example, in all but one directorate, an IPA rotator filled the assistant director position and a federal employee filled the corresponding deputy assistant director position. Two NSF executives we interviewed, including an IPA rotator and a federal employee, commented positively on the pairing of IPA rotators and federal employees at the executive level. For example, they said that rotators maintain close ties to the research community and federal employees may have more experience with NSF’s institutional history. One NSF executive told us that IPA rotators help keep the agency at the forefront of science because they have deep ties with the research community and regularly publish their own research. Additionally, a federal program director we interviewed told us that in one previous instance in which an IPA rotator filled an executive position without being paired with a federal employee, the rotator’s lack of institutional knowledge of NSF and the steep learning curve for the position caused inefficiencies during the rotator’s first year at NSF. The agency, however, does not require pairing IPA rotators and federal employees at the executive level, according to NSF officials. For example, in November 2017, IPA rotators filled both the division director and deputy division director positions in the Division of Behavioral and Cognitive Science and Division of Undergraduate Education. In our interviews with a nongeneralizable sample of NSF employees and rotators, we found mixed perceptions about the effect of NSF’s use of IPA rotators on opportunities for advancement for permanent employees. For example, in response to a question about this effect, one permanent NSF employee told us that she advanced to an executive position and that opportunities exist for advancement within the agency. In contrast, another NSF employee we interviewed told us that she did not feel there were opportunities for advancement because, in her view, executive vacancies created by the departure of rotators were exclusively filled with other rotators. NSF officials said that the agency has no policy that restricts repeatedly filling certain executive positions with rotators and that such a situation is a common practice. Nevertheless, NSF officials told us 32 of the 88 executives (about 36 percent) in NSF’s seven scientific directorates in November 2017 had held staff-level positions within the agency before becoming executives. NSF uses both IPA and VSEE rotators in program director positions, which are staff-level positions. In fiscal year 2016, NSF had a total of 506 program directors, including 139 IPA rotators (about 27 percent) and 39 VSEE rotators (about 8 percent). According to NSF officials, program directors are responsible for conducting long-range planning and developing budgets for the areas of science represented by their program and for administrating the merit review process. In particular, IPA and VSEE rotators who serve as program directors help determine the projects that NSF funds. To do so, they review proposals, identify experts in their field to serve as external reviewers, and make funding recommendations to their respective division directors. NSF officials told us that, similar to the pairing of IPA rotators and federal employees at the executive level, permanent and rotating program directors frequently work together on a shared program so that each can benefit from the other’s experience and perspective. For example, a rotating program director we interviewed told us that she worked under the guidance of a program lead, who is typically a permanent employee. Another rotating program director told us that NSF’s permanent federal employees are good at training incoming rotators. Beginning in fiscal year 2017, NSF adopted rotator program cost- management strategies expected to achieve the greatest savings with the least harm to recruitment, but NSF officials said it is too soon to determine the full results because these new strategies are being phased in for new IPA agreements only. NSF considered other strategies to manage rotator costs, but it did not adopt them, generally because NSF anticipated negative effects on rotator recruitment or because it estimated the resulting cost savings would be small. NSF has adopted three strategies to manage rotators’ costs in fiscal year 2017, but, NSF officials said it is too soon to determine the full results because these new strategies are being phased in for new IPA agreements only. All three of these strategies relate to IPA rotators; NSF officials told us that they have not considered or adopted any cost- management strategies related to VSEE rotators. The officials explained that any such strategies could affect NSF’s entire federal workforce because VSEE rotators are federal employees. The three strategies are: (1) obtaining a minimum 10 percent cost-share from each IPA rotator’s home institution, (2) limiting IPA rotators’ paid trips to their home institutions to 12 per year, and (3) no longer reimbursing IPA rotators for consulting income that they forgo while at NSF. NSF officials told us they expect to issue a report with the results of evaluations of all three strategies in December 2018. In October 2016, NSF implemented a cost-sharing pilot program that requires institutions covered by the program—those who entered into negotiations for new IPA agreements in fiscal year 2017—to pay for at least 10 percent of the IPA rotators’ salaries and fringe benefits. Implementing this cost-management strategy, and the other strategies that NSF adopted, was consistent with recommendations from NSF’s steering committee for oversight of IPA rotators. This cost-management strategy targeted NSF’s costs for IPA rotators’ salary and fringe benefits, which constitute the largest component of IPA rotators’ costs. For example, these costs were about $34.7 million, or about 89 percent of IPA rotator costs in fiscal year 2017. Previously, according to NSF officials, the agency requested an optional cost-share amount of 15 percent from rotators’ home institutions, but it typically received less because of variations in the amounts that home institutions provided. According to an October 2016 report from the task force on fiscal oversight, NSF decided on 10 percent for the cost-sharing pilot program because, historically, few home institutions provided the full 15 percent and NSF believed a requirement of 10 percent would not significantly affect its ability to recruit and hire IPA rotators. If a home institution is unable to provide the full 10 percent, the institution may request that NSF waive the cost-sharing requirement. According to NSF officials, such requests must be signed by a senior administrator at the rotator’s home institution and include the rationale for not being able to provide the required amount, the financial impact on the institution if it were to provide the full 10 percent, and associated documentation, among other things. Changes made in implementing this strategy, and the other strategies that NSF adopted, applied to new IPA agreements made in fiscal year 2017. These changes did not apply to IPA rotators with agreements made prior to 2017—even if those agreements are subsequently extended or renewed—or that were being negotiated at the time of the policy change, provided that the rotators’ appointment memoranda were already being reviewed by NSF’s Division of Human Resource Management. NSF officials told us that as of March 2018, the agency had not conducted full evaluations of this strategy or the other strategies because it was too soon to determine their full effects and NSF had not yet collected enough data to do so. Instead, NSF issued reports in January and March 2018 containing its preliminary analyses. In general, these preliminary reports found that the cost-management strategies resulted in savings to NSF. Similarly, our analysis of data from NSF found that cost sharing as a percentage of IPA rotators’ salary and fringe benefits increased from about 7 percent in fiscal year 2016 to about 8 percent in fiscal year 2017. NSF officials told us that of the 55 IPA rotators who were subject to the cost-sharing requirement in fiscal year 2017: the home institutions for 54 rotators met or exceeded the 10 percent cost-share requirement, and of those, 16 exceeded the cost-share requirement; and the home institution for 1 rotator did not cost-share because the rotator was from a Federally Funded Research and Development Center and NSF waived the cost-share requirement because cost- sharing would not decrease the overall federal cost. In November 2017, NSF decided to extend the cost-sharing pilot through at least the end of fiscal year 2018, to ensure a full evaluation could be conducted. In particular, NSF officials told us that they need more data and experience with this pilot program to better understand its effects, such as the ability to recruit potential IPA rotators. For example, one IPA rotator that we interviewed expressed concern with the cost-sharing requirement’s potential effect on small or publicly funded universities, which may lack funds to contribute to the cost of an IPA assignment. According to NSF officials, their evaluation will include an analysis of the cost of IPA rotators under the cost-sharing requirement and its effect on the IPA program, including recruitment. Beginning in fiscal year 2017, for IPA rotators who entered into negotiations for new agreements in that fiscal year, NSF placed a limit of 12 agency-funded trips per year that rotators may take to their home institutions under the Independent Research and Development program. In our analysis of data from NSF, we found that NSF’s costs for IPA rotators under this program decreased from about $1.5 million (about 3 percent of IPA rotator costs) in fiscal year 2016 to $1.1 million (about 3 percent of IPA rotator costs) in fiscal year 2017. NSF officials told us that the new limit applies only to an IPA rotator’s trips to their home institution and does not limit travel to other locations for fieldwork or scientific conferences, among other things. These officials explained that NSF chose not to limit trips to these other locations because they are considered fundamental to IPA rotators’ research and are infrequent—occurring one to three times per year, on average, per IPA rotator. Additionally, rotators are permitted to use annual leave, leave without pay, or flexitime to take trips using non-NSF funds for activities performed on a rotator’s own time. In adopting this cost-management strategy, NSF sought to balance the benefits of IPA rotators’ travel with the travel costs. According to the Task Force on Fiscal Oversight’s October 2016 report, NSF’s support for travel benefits the agency by providing a way for program directors and executives to stay current in their scientific fields, conduct outreach with scientific communities, and provide oversight and stewardship of NSF’s programs and awards. NSF officials told us that the agency sought to control travel costs under the Independent Research and Development program by setting a reasonable limit to NSF-funded trips that would cause the least harm to rotators’ research so as not to discourage them from coming to NSF. As a result, NSF decided on a maximum of 12 trips per year under this program because, historically, more than 80 percent of the IPA rotator participants traveled to their home institution less than once per month. In fiscal year 2017, for IPA rotators who entered into new agreements in that fiscal year, NSF ended reimbursements for consulting income that the rotators forgo as a result of their assignment to NSF. Previously, when an IPA rotator discontinued consulting activities during an IPA assignment, NSF would reimburse the rotator up to $10,000 a year. IPA rotators who entered into negotiations or agreements with NSF prior to this change may still receive this reimbursement. In fiscal year 2017, NSF’s cost for lost consulting reimbursements to IPA rotators was $150,000. This amount represented a decrease of about $160,000, or about 52 percent, from fiscal year 2016. NSF made this change because it determined that doing so would not negatively affect the IPA program. In particular, NSF found that other federal science agencies typically did not reimburse IPA rotators for lost consulting income and it concluded that IPA rotators typically do not expect NSF to offer reimbursement. In addition to the three adopted strategies, NSF’s Task Force on Fiscal Oversight identified other potential cost management strategies for the IPA program. The task force reviewed various data on the costs that make up the IPA program, such as the number of IPA rotators who received a particular form of compensation or who would be affected by the potential strategies. In addition, the task force took into account anecdotal and other evidence on how IPA rotators might react to the strategies. Using input from the task force, NSF opted against the other potential strategies because it either (1) expected the resulting cost savings to be small or (2) anticipated potential negative effects from implementing them, such as increased difficulty in hiring IPA rotators. These potential cost-management strategies primarily related to IPA rotator compensation, as described below. Capping IPA rotators’ salaries. NSF decided against establishing a salary cap for IPA rotators at various levels between about $185,000 and $240,000 annually. The task force found that salary caps at lower levels would have greater cost savings because of the higher number of individuals covered by the cap, but that the caps would also pose a significant risk to NSF’s ability to recruit IPA rotators. In particular, the task force found that salary caps at lower levels would disproportionately affect IPA rotators in two of its directorates—the Directorate for Computer and Information Science and Engineering and the Directorate for Engineering—because of the higher salaries of individuals in positions associated with those fields. As a result, the task force recommended that NSF first assess the effects of its cost-sharing pilot program before proceeding with any cap on IPA rotators’ salaries. Reducing or eliminating IPA rotators’ supplemental pay. NSF decided against reducing or eliminating the supplemental pay that IPA rotators receive when their salary at their home institution is below the minimum for their NSF position. In fiscal year 2017, NSF’s cost for IPA rotators’ supplemental pay was $1.0 million (about 3 percent of IPA rotator costs). The task force recommended against this potential cost-management strategy because it would disproportionately affect IPA rotators in two of its directorates—the Directorate for Biological Sciences and the Directorate for Geosciences. In addition, the task force expected that any cost savings associated with this strategy would be small. Reducing IPA rotators’ per diem payments. NSF decided against reducing or eliminating per diem payments for lodging (excluding taxes), meals, and incidental expenses incurred during the length of rotators’ assignments. In fiscal year 2017, NSF’s cost for per diem payments was $3.1 million (about 8 percent of IPA costs). The task force concluded, based on its analysis of per diem costs and anecdotal evidence, that many IPA rotators would opt to depart NSF if NSF did not provide per diem payments. As a result, the task force recommended against this strategy. As of June 2018, NSF had not developed an agency-wide workforce strategy for using rotators, as its IPA program steering committee recommended. In addition, NSF has not fully evaluated or developed plans to evaluate both IPA and VSEE rotator program results in terms of progress toward NSF’s human capital goals or programmatic results. As of June 2018, NSF had not developed an agency-wide workforce strategy that includes use of rotators, as NSF’s IPA program steering committee had recommended. In an August 2016 report on the IPA program, the steering committee stated that NSF did not have an agency- wide workforce strategy; instead, each directorate made decisions on its own about when and how to use IPA rotators in executive and program director positions. According to the report, an agency-wide framework would enable NSF to ensure an optimal balance of federal and rotator executives and program directors, which is a strategic principle that the steering committee developed for the IPA program. In February 2017, the committee issued an internal report to agency leadership that recommended expanding what was originally envisioned as a workforce strategy for the IPA program into a comprehensive agency-wide workforce strategy. The report stated that expanding the scope of the workforce strategy would have the greatest impact across the agency and would help NSF leadership in making strategic human capital decisions. The report outlined a process for developing a workforce strategy with various steps, including the following: Job analyses. The report recommended job analyses to review the roles and responsibilities of executive and staff-level positions and to identify the skills and capabilities required for successful performance of the work. According to the report, the steering committee’s working group for developing a workforce strategy found, based on its initial efforts to review position descriptions and roles and responsibilities, that some functions may be better served if performed by permanent federal employees and other functions by rotators. However, the working group concluded that NSF should obtain additional input and evidence before initiating large-scale changes in its workforce. Analysis of workforce gaps and surpluses. The report stated that identifying gaps and surpluses in the demand and supply for federal and rotator scientific staff would inform opportunities to optimize recruitment and retention efforts. The report recommended separate analyses for executive and scientific staff- level positions. Development of strategies to close workforce gaps and address surpluses. According to the steering committee’s report, examples of strategies include succession planning and rebalancing the mix of permanent federal staff and rotators to ensure an optimal workforce with the skills, experience, and capabilities to accomplish NSF’s science-related work. According to NSF officials, the agency’s Division of Human Resource Management was responsible for implementing the steering committee’s recommendation. In particular, it undertook an effort to work with senior leadership to develop a broad strategic workforce plan for the agency. However, in June 2018, NSF officials told us that they shifted their focus from developing a separate workforce strategy in order to focus instead on (1) development of a human capital operating plan, which agencies are required to develop and approve annually, and update as needed, under OPM regulations that went into effect on April 11, 2017; and (2) an Office of Management and Budget (OMB) memorandum issued in April 2017 directing agency heads to develop reform plans that identify ways to improve the efficiency, effectiveness, and accountability of their respective agencies. The NSF officials explained that they recognized the value in having a workforce strategy, but they did not consider it appropriate for the Division of Human Resource Management to develop a workforce strategy at the same time that the agency was completing the OPM and OMB plans. NSF did not specify how its efforts to complete the OPM and OMB plans would address the need the steering committee identified for an agency- wide framework that would enable NSF to ensure an optimal balance of federal and rotator executives and program directors. In particular, NSF’s human capital operating plan, which it approved in April 2018, does not discuss NSF’s use of rotators or include information on balancing the agency’s use of rotators with permanent staff. Furthermore, NSF has not yet determined how it will address its use of rotators as part of its agency reform plan. In particular, NSF officials told us in June 2018 that they may address the agency’s use of rotators under the workforce focus area of its reform plan, but that they were only just beginning to identify and select initiatives under this focus area and that these initiatives have not yet been finalized. The process the NSF steering committee laid out in its internal report, when implemented, would align with two key principles GAO has identified for effective strategic workforce planning. Specifically, it would align with the principles of (1) determining the skills and competencies that are critical to successfully achieving missions and goals, and (2) developing human capital strategies to address gaps and enable the contribution of critical skills and competencies needed for mission success. By incorporating the NSF’s steering committee’s recommendation for a workforce strategy—and the process outlined by the steering committee for developing this strategy—into its human capital operating plan or agency reform plan, NSF could better manage its use of rotators and balance them with its permanent staff. We have previously found that high-performing organizations recognize the fundamental importance of measuring both the outcomes of human capital strategies and how these outcomes have helped the organizations accomplish their missions and programmatic goals. However, as of May 2018, NSF had not fully evaluated and did not have plans to evaluate the results of its IPA and VSEE rotator programs in terms of progress toward human capital goals and the contributions the programs made toward achieving programmatic results. One of GAO’s key principles for effective strategic workforce planning states that agencies should monitor and evaluate progress toward the agencies’ human capital goals and the contribution that human capital results have made toward achieving programmatic results. In particular, we previously found that evaluation activities can improve the effectiveness of workforce strategies by identifying shortfalls in performance and other improvement opportunities. OPM also requires agencies to develop a human capital operating plan that will support the evaluation of the agency’s human capital strategies. In March 2014, NSF published a summary of the results of focus groups with IPA rotators and their supervisors. This summary outlined benefits and challenges of the program from the perspectives of both groups, such as the benefit of bringing fresh perspective and new ideas to NSF and the challenge of recruiting and retaining qualified IPA rotators. However, the summary did not provide the agency’s assessment of progress towards programmatic results and human capital goals. For example, it summarized the benefits of the program from the standpoint of rotators and did not provide NSF’s assessment of how individual IPA rotators or the program as a whole contributed to NSF’s scientific mission. In addition, the summary did not provide an assessment of the extent to which the current workforce balance of federal and rotator executives and program directors is aligned with NSF’s work. In our semistructured interviews with federal staff and rotators in executive and staff-level positions at NSF, most were comfortable with the current balance, but three individuals raised concerns about the use of rotators in executive positions, suggesting that NSF could benefit from further analysis of its balance of rotators and federal staff. In April 2018, NSF adopted its human capital operating plan which identifies specific, short-term actions that the agency will take to achieve its human capital goals. In its plan, NSF identified strategies derived from NSF’s commitment to ongoing improvement, such as reviewing and realigning its workforce to meet future needs. Also, NSF’s process for developing a workforce strategy, outlined in the steering committee’s February 2017 internal report, included recommendations to conduct an assessment of the outcomes of workforce strategies and the impact of these outcomes on helping NSF accomplish its scientific mission and related programmatic goals. However, plans for this assessment did not include an evaluation of the agency’s rotator programs. Moreover, neither the steering committee’s February 2017 internal report nor NSF’s April 2018 report committed to conducting such an evaluation or specified how assessments described in its reports would address NSF’s rotator programs. For example, neither report specified how NSF would evaluate the extent to which the rotator programs have achieved NSF’s objectives, which we identified through our review of NSF documentation and interviews with NSF officials. These objectives include: bringing fresh perspectives from across the country and across all fields of science and engineering supported by NSF; helping influence new directions for research in science, engineering, and education, including emerging interdisciplinary fields; providing scientific leadership and management of NSF’s research and education programs; and providing opportunities for researchers to gain first-hand knowledge of the philosophy and mechanisms of federal support for research and bring this knowledge back to their home institutions. According to NSF officials, the agency has not separately evaluated the results of its rotator programs in part because rotators are blended into its permanent federal workforce, making it difficult to evaluate the results of its rotator programs separately from those of its overall workforce. In our December 2003 report on key principles for effective strategic workforce planning, we found that federal agencies in general have experienced difficulties in defining practical and meaningful measures that assess the effects human capital strategies have on programmatic results. However, without an evaluation of the extent of the rotator programs’ contributions toward NSF’s human capital goals or programmatic results, NSF is limited in its ability to demonstrate the programs’ benefits to external stakeholders, such as the Congress, and to adjust the programs, if warranted. Such adjustments could include increasing or decreasing the use of rotators overall or in certain types of positions, such as executive or staff-level positions. In recent years, NSF has recognized the need to think more strategically about its use of rotators and has taken positive steps to manage its rotator programs. For example, beginning in fiscal year 2017, NSF adopted several strategies to manage the cost of rotators. However, as of June 2018, NSF had decided against developing a separate agency-wide strategy for balancing its use of IPA rotators and federal staff, as NSF’s steering committee for the IPA program recommended in February 2017. NSF officials said that they recognized the value in having a workforce strategy but wanted to focus instead on addressing OPM and OMB requirements related to workforce planning. By following through on the steering committee’s recommendation for a workforce strategy, NSF could better manage its use of rotators and balance them with its permanent staff. Moreover, as of June 2018, NSF had not fully evaluated the results of the rotator programs, as called for by key principles for effective strategic workforce planning. NSF officials told us they have not done so, in part, because rotators are blended into NSF’s permanent federal workforce, making it difficult to evaluate the results of its rotator program separately from those of its overall workforce. However, without an evaluation of the extent of the rotator programs’ contributions toward NSF’s human capital goals or programmatic results, NSF is limited in its ability to demonstrate the programs’ benefits to external stakeholders, such as the Congress, and to adjust the programs, if warranted. We are making the following two recommendations to NSF: The NSF Director of Human Resource Management should complete the development of an agency-wide workforce strategy for balancing the agency’s use of IPA and VSEE rotators with permanent staff as part of NSF’s current agency reform planning efforts or updates to its human capital operating plan. (Recommendation 1) The NSF Director of Human Resource Management should evaluate the contributions of the IPA and VSEE rotator programs toward NSF’s human capital goals and the contributions the programs have made toward achieving programmatic results. (Recommendation 2) We provided a draft of this report to NSF for comment. In its written comments, which are reproduced in appendix I, NSF concurred with our recommendations and stated that implementation of the recommendations will enhance efforts to fulfill the agency’s mission and strengthen its workforce. NSF also provided technical comments, which we incorporated as appropriate. We are sending copies to the appropriate Congressional Committees, the Director of the National Science Foundation, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the individual named above, Joseph Cook (Assistant Director), Nkenge Gibson, Kathryn Smith, and Douglas Hunker made key contributions to this report. Also contributing to this report were Antoinette Capaccio, Serena Lo, Timothy Guinane, Cynthia Norris, and Sara Sullivan.", "summary": "NSF has identified potential benefits and challenges associated with its use of rotators. Benefits include fresh perspectives and close connections to the scientific community, while challenges include staffing turnover and higher costs for some rotators compared with permanent employees. GAO was asked to review NSF's use and management of the IPA and VSEE rotator programs, among other things. This report examines (1) the number, costs, and uses of NSF rotators for fiscal year 2008 through fiscal year 2017; (2) the strategies NSF has used to manage rotator costs and the results of these efforts; and (3) the extent to which NSF has a workforce strategy for using rotators and has evaluated the results of its rotator programs. GAO analyzed summary-level data on NSF's rotators; reviewed key documents; interviewed NSF officials; conducted semistructured interviews with a nongeneralizable sample of rotators and permanent federal employees selected from different scientific directorates within NSF; and compared NSF's management of the program to key principles for effective strategic workforce planning. The numbers of rotators—outside scientists, engineers, and educators on temporary assignment—at the National Science Foundation (NSF) and their costs in proportion to other staff remained relatively stable in fiscal years 2008 through 2017. Most rotators joined NSF under its Intergovernmental Personnel Act (IPA) mobility program. IPA rotators comprised about 12 percent of NSF's workforce and 17 percent of staff costs on average and were not subject to a federal salary cap. They remain employees of their home institutions, with NSF reimbursing the institutions for most of their salaries and benefits. The remaining rotators are considered temporary federal employees under the Visiting Scientist, Engineer, and Educator (VSEE) program; their salaries could not exceed the federal maximum for their positions. Beginning in fiscal year 2017, NSF adopted IPA rotator program cost management strategies expected to achieve the greatest savings with the least harm to recruitment, but NSF officials said it is too soon to determine the full results. For example, for new IPA rotators who had not yet begun negotiating their assignments, NSF began requiring their home institutions to pay for 10 percent of the rotators' salary and benefits. NSF officials told GAO they expect to issue a report evaluating the strategies in December 2018. NSF's IPA program steering committee recommended developing a workforce strategy for balancing the agency's use of rotators with federal staff, but as of June 2018, NSF had not developed a strategy or fully evaluated the IPA and VSEE rotator programs' results, as called for by GAO's key principles for effective strategic workforce planning. NSF officials said they recognized the value of a workforce strategy but were focusing instead on other workforce planning efforts, and they had not fully evaluated program results in part because rotators are blended into the agency's permanent workforce, making a separate evaluation difficult. Without a workforce strategy and evaluation of results, NSF is limited in its ability to manage and, if warranted, adjust its use of rotators. GAO recommends that NSF develop an agency-wide strategy for balancing the agency's use of rotators with permanent staff and evaluate the contributions of its rotator programs toward NSF's human capital goals and programmatic results. NSF agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Individuals’ sensitive personal information can be lost, stolen, or given away. Once exposed, individuals’ information can be misused to commit identity theft, fraud, or inflict other types of harm. Identity theft occurs when individuals’ information is used without authorization in an attempt to commit fraud or other crimes. In 2016, according to the Bureau of Justice Statistics, an estimated 26 million people—10 percent of U.S. residents aged 16 or older—reported that they had been victims of identity theft in the previous year. One potential source of identity theft is a data breach at an organization that maintains large amounts of sensitive personal information. Recent data breaches include the 2018 breach of Marriott International’s Starwood guest registration database, which may have exposed information of millions of individuals, and the 2017 data breach at Equifax, Inc., a nationwide consumer reporting agency, which exposed identifying information of at least 145.5 million people. The types of harm that can result from exposure of sensitive personal information include the following: Financial fraud from identity theft, which can include new-account fraud, in which thieves use identifying data, such as Social Security and driver’s license numbers, to open new financial accounts without that person’s knowledge; and, existing-account fraud, which is more common and entails the use or takeover of existing accounts, such as credit or debit card accounts, to make unauthorized charges or withdraw money. Tax refund fraud, which occurs when a Social Security number or other personally identifiable information is used to file a fraudulent tax return seeking a refund. Government benefits fraud, which occurs when thieves use stolen personal information to fraudulently obtain government benefits. For example, the Social Security Administration has reported that personal information of beneficiaries has been used to fraudulently redirect the beneficiary’s direct deposit benefits. Medical identity theft, which occurs when someone uses an individual’s name or personal identifying information to obtain medical services or prescription drugs fraudulently, including submitting fraudulent insurance claims. Synthetic identity theft, which involves the creation of a fictitious identity, typically by using a combination of real data and fabricated information. The federal government has identified synthetic identity theft as an emerging trend. Child identity theft, which occurs when a child’s Social Security number or other identifying information is stolen and used to commit fraudulent activity. Other types of fraud that occur when personal information is used; for example, to set up mobile phone or utility accounts, or to engage in activities such as applying for employment or renting a home. The harms caused by exposure of personal information or identity theft can extend beyond tangible financial loss, including the following: Lost time. Victims of identity theft or fraud may spend significant amounts of time working to restore their identities. In 2016, according to the Bureau of Justice Statistics survey of identity victims, most victims resolved issues in 1 day or less but about 1 percent of victims spent 6 months or more resolving their identity theft issues. Emotional distress and reputational harm. Exposed information also can cause emotional distress, a loss of privacy, or reputational injury. In 2016, according to the Bureau of Justice Statistics, about 10 percent of those who experienced identity theft reported suffering severe emotional distress. Harm from state-based actors. State-sponsored espionage can cause harm to individuals when nations use cyber tools as part of information-gathering, espionage, or other nefarious activities. Options available to consumers to help prevent or mitigate identity theft include actions they can take on their own (generally for free) or services they can purchase. Actions individual consumers can take themselves include the following: Placing a credit freeze. A credit or security freeze restricts potential creditors from accessing a credit report until the consumer asks the agency to remove or temporarily lift the freeze. Placing a fraud alert. A fraud alert on a credit report requires businesses to verify a consumer’s identity before they issue credit. Monitoring accounts and other information. Reviewing free annual credit reports. Individuals can request one copy of their credit report every 12 months (available for free at AnnualCreditReport.com).from each of the three nationwide consumer reporting agencies. Reviewing financial statements and other accounts. Individuals can review bank and other financial statements regularly for suspicious activity and make use of automatic transaction alerts and other free features that financial institutions offer to detect potential fraud. Individuals also can regularly review mobile phone or utility accounts for unusual activity. Reviewing health insurance benefits explanations and medical information. Individuals can review explanation-of- benefits statements from their health insurer to detect fraudulent insurance claims or monitor their files at their healthcare providers to detect unauthorized use of medical services. Consumers also can obtain various free or fee-based identity theft services, which are commercial products that generally offer tools intended to help consumers detect identity theft and restore their identity if it has been compromised. The private research firm IBISWorld estimated that the U.S. market for identity theft services was about $3 billion annually in 2015–2017. The services may be marketed directly to individuals for a monthly or annual fee. In addition, private- and public- sector entities that have experienced data breaches sometimes purchase these services and offer them to affected individuals at no cost. Identity theft services most often include credit monitoring, which tracks an individual’s credit reports and sends alerts about potentially suspicious activity; identity monitoring, which aims to monitor other sources such as public records and illicit websites (sometimes referred to as the “dark web”); identity restoration, which provides a range of services to recover from identity theft; and identity theft insurance, which reimburses individuals for certain costs related to the process of restoring identities. Other actions consumers can take to protect their identity include adoption of certain data security practices and early filing of tax returns. Data security practices can help protect sensitive information. For example, individuals can change or avoid sharing or re-using passwords, and make use of strong passwords and authentication options on online accounts; properly safeguard or shred sensitive paper documents; and limit access to their sensitive information on social media. Filing a tax return early reduces the risk of tax refund fraud, and some victims of tax refund fraud may be eligible for an Identity Protection Personal Identification Number (PIN)—issued by the Internal Revenue Service IRS)—to prevent future fraud. To protect their Social Security benefits, individuals can set up an online account at the Social Security Administration to monitor their benefits accounts. We did not identify any studies that analyzed whether consumers who sign up for or purchase identity theft services encounter fewer instances of identity theft or detect instances of financial or other fraud more—or less—rapidly than consumers who take steps on their own. Views of experts varied, but most said identity theft services have limitations and would not address all data breach risks. Most experts also said that a credit freeze, which consumers place on their own for free, is a useful way to prevent one type of financial fraud—the illegal opening of new credit accounts in consumers’ names. Based on our review and discussions with experts, consumers can consider four factors when deciding on options to address risks after a data breach: the extent to which an option might prevent fraud; the cost of an option; its convenience; and the type of information that was exposed and may be at risk. Information that can help consumers assess their options for mitigating and addressing the risks of identity theft and other harm from data breaches is limited. Specifically, we did not identify any studies that analyzed whether consumers who sign up for free or purchase identity theft services encounter fewer instances of identity theft or detect instances of financial or other fraud more—or less—rapidly than consumers who take steps on their own for free—such as monitoring their credit reports or placing a credit freeze. For consumers who experienced identity theft, we did not find any studies that compared the effectiveness of free options to help consumers recover from identity theft with commercial identity restoration services. In addition to searching databases of scholarly publications and other sources, a range of academic, consumer, government, and industry experts we interviewed told us that they were unaware of any specific independent studies on the effectiveness of consumer options. We interviewed representatives of seven companies that provide identity theft services about how they assess the effectiveness of their services and found that what they measure does not directly address how effective these services would be in mitigating the risks of identity theft compared with options consumers can take on their own. For example, two company representatives said that their services focus on detection of fraudulent activity or assistance after identity theft has occurred, rather than on prevention of identity theft or other harms. The representatives of each of the providers said that their companies generally measure how customers use their products and services; customer satisfaction (for example, through surveys or other feedback); and whether the products work as intended (for example, whether alerts of fraudulent activity are successfully delivered to customers or customers can successfully access the company’s website when they need to). Companies that offer identity restoration services also measure the rate at which they complete the process of recovering stolen identities. While it is not possible to prevent identity fraud, four representatives said that early detection of fraud is important as it allows consumers to address potential fraud more quickly. FTC, a primary source for assistance to consumers on issues related to data breaches and identity theft, has advised consumers that the effectiveness of services that offer identity monitoring depends on factors such as the kinds of databases the service provider monitors, how well the databases collect information, and how often the service provider checks each database. For example, FTC suggests that consumers ask if service providers check databases that show payday loan applications or changes in addresses for misuse of their information as part of identity monitoring. In reviewing consumer education and promotional materials on the websites of five identity theft service companies we contacted that offer identity monitoring, we found that three providers included information about which types of databases they monitor; the other two did not. Government and commercial entities—such as federal agencies and retail stores—that decide to purchase identity theft services to offer to affected individuals after a breach of their data do not necessarily base their decision on how effective these services are. Rather, according to industry and some government representatives we interviewed, some base their decisions on federal or state legal requirements to offer such services and the expectations of affected customers or employees for some action on the breached entities’ part. Representatives of retail and banking associations we interviewed indicated that it has become the industry standard to offer 1 year of credit or identity monitoring services in the wake of a data breach. One industry representative said that in some cases the decision is not based on the effectiveness of the services. States such as California require companies to offer some type of identity theft service after a data breach. Moreover, Connecticut requires health insurers and certain health care-related companies to offer identity theft services following an actual or suspected data breach. In 2017, we reported that companies do not assess the effectiveness of an identity theft provider’s services when selecting a vendor to provide such services. Rather, they consider other selection factors, including price, reputation, capacity to respond quickly to large-scale breaches, and ability to provide comprehensive post-breach services, such as complying with statutory notification requirements. But companies that purchase identity theft services may be in a position to obtain more detailed information from potential providers than is publicly available to consumers. In the absence of independent evidence of the effectiveness of identity theft mitigation options, we interviewed representatives and reviewed consumer education materials, working papers, and articles from academic, consumer, industry, and government entities. No one solution can protect against the full range of risks to individuals whose personal information was exposed in a data breach, based on our review of documentation and the views of academic, consumer, government, and industry experts. We obtained perspectives on the value of options available to consumers. The following summarizes key observations: Identity theft services. Representatives of 9 of the 10 consumer groups we interviewed generally viewed credit or identity monitoring (or both) to be of limited value. However, one consumer group representative noted that identity monitoring might be useful in circumstances in which Social Security numbers were compromised. In addition, a few consumer group representatives indicated that consumers could consider signing up for such services if they are offered for free. If identity theft services are not free, FTC and CFPB consumer education materials recommend that consumers consider the benefits and limitations of such services and compare them to free or low-cost options before signing up. A few consumer groups and one academic highlighted that consumers may not fully understand the limitations of signing up for identity theft services. A few consumer group representatives and one industry and state government representative cautioned that free services may be offered for only 1 or 2 years; exposed information can be used for identity theft or other harms over a much longer period. For example, in 2017, we reported that nation-state actors that steal consumer data as part of their espionage activities can wait much longer than a private identity thief to use compromised information (if at all), according to one identity theft service provider. In addition, CFPB consumer information and a few consumer group representatives noted that consumers should be aware that some services may try to charge consumers after the free period ends. Some consumer group and one industry representatives also said that the value of one feature of identity monitoring—dark web monitoring—is unclear. One representative said that there is nothing new that consumers can do once they learn their information was found on an illicit website. Rather, they must continue to monitor their accounts as they already should have been doing. In addition, one consumer group representative indicated that these services may provide consumers with a false sense of security. Experts we interviewed for our 2017 report said that identity restoration in particular could be helpful to consumers. FTC staff and one consumer group representative we interviewed said that one-on-one assistance can be helpful. Identity restoration typically is included with other identity theft services rather than offered as a stand-alone service. However, the level of service provided in identity restoration can vary substantially—some providers offer individualized hands-on assistance, while others largely provide self-help information that is of more limited value. In our 2017 report, we also found that another feature of identity theft services, identity theft insurance, may provide minimal benefits for consumers. More details about identity theft insurance appear later in this report. Options to prevent fraud or harm unrelated to credit accounts. Consumers have limited options to mitigate risks of other harms from data breaches, such as medical identity theft and identity theft tax refund fraud. Commercial identity theft services, credit freezes, and fraud alerts do not directly address these risks. Some consumer, government, and industry representatives cited self-monitoring as a way for consumers to be on the alert for these other types of fraud. Consistent with our 2017 report, identity theft service providers we interviewed generally indicated that their products and services do not directly monitor for these types of fraud. However, two noted that they would assist with any identity restoration involving medical identity theft, tax refund fraud, or government benefits fraud (such as fraudulently redirecting Social Security benefits). Identity theft services also may address these types of fraud indirectly—for example, detecting a fraudulent change of address can prevent sensitive health insurance information from being redirected to the fraudster. A few consumer groups said that consumers may not understand which risks commercial identity theft services address. Additionally, we reported in 2017 that identity theft services do not address non-financial harms, such as emotional distress, embarrassment, and harm to one’s reputation. For example, a House Committee report on the OPM data breaches noted that the information stolen from background investigations included some of the most intimate and potentially embarrassing aspects of a person’s life, such as mental health history, misuse of alcohol or drugs, or problems with gambling. Identity theft services also may be of limited value in cases of nation-state espionage. For example, in 2017, we reported that when the source of the data breach appears to be a nation state (as opposed to a private party), the risk of the information being sold for monetary purposes is likely to be lower, according to an FTC representative. Importance of data security. In the view of some experts, entities such as the federal government and private companies that hold consumer data have a responsibility to protect those data. A few experts said that the burden should not be on consumers to protect data they do not control. Except in certain circumstances, companies are generally not required to be transparent about the consumer data they hold or how they collect, maintain, use, and secure these data. Identity theft service providers may contract with third parties such as consumer reporting agencies or with third-party identity monitoring providers, such as dark web monitoring services. Moreover, one consumer group representative noted that identity monitoring services require consumers to provide additional personal information to enroll—which also could be compromised if the service provider’s information were breached. Finally, consumer group and government researchers we interviewed suggested other options that entities can (or already) use to address risks of harm. For example, one government researcher noted that financial institutions have started to use multifactor authentication and other technologies that can help institutions verify a consumer’s identity and thus help prevent fraud. Multifactor authentication involves first logging into an online account using the traditional username and password, and then the institution sending a verification code to a mobile phone or e-mail address that the consumer must enter as part of the log-in process. In addition, one researcher noted that some institutions have started to use facial recognition technology, or to ask an account holder to provide answers to questions such as the size of the account holder’s last deposit. Other biometric technologies such as fingerprint recognition on mobile phones, or one-time passcodes that are synced with financial institutions’ websites, also can help, according to one researcher and one consumer group representative. Other strategies can focus on reducing the riskiness of breaches by making information less useful for purposes of committing identity theft. For example, one researcher noted that organizations could encrypt data or use tokens so static account numbers could not be used on their own. There is no single solution to address all risks of harm, based on our review of documentation and the views of academic, consumer, government, and industry experts. A credit freeze is the only consumer option that can prevent one type of identity theft-related fraud, and recent federal legislation made credit freezes free and easier to place or lift. This option is effective because it restricts potential creditors from accessing a consumer’s credit report to open a new account until the consumer asks the nationwide consumer reporting agency to remove or temporarily lift the freeze. In contrast, identity theft services and self-monitoring detect or remediate identity theft after it has occurred, but do not prevent the fraud from occurring in the first place. We interviewed representatives, or reviewed the consumer education or informational materials, of consumer, industry, and government entities and found that almost all of them included credit freezes on credit reports as a useful consumer option to protect against identity theft. More specifically, the Economic Growth, Regulatory Relief, and Consumer Protection Act, which took effect on September 21, 2018, required the three nationwide consumer reporting agencies (Equifax, Experian, and TransUnion) to make placing and lifting freezes free and specifies that the agencies must place a freeze within 1 business day, and lift it within 1 hour, of receiving a telephone or electronic request (see fig. 1). Consumers must contact each of the three agencies individually and request the freeze. Consumers obtain a PIN from each company, which enables them to lift or remove a freeze at a later date. Before the 2018 act, consumers typically had to pay $5-$10 per agency to place a credit freeze. Some experts had noted cost and inconvenience as some of the limitations to a credit freeze. The new law addresses these concerns to some degree by making credit freezes free and requiring these consumer reporting agencies to lift freezes expeditiously on request. While the new law removed some barriers to placing credit freezes, others still exist and the freezes have some limitations. For example, consumers still have to lift a freeze before applying for a loan or new credit account and need to place or remove a freeze at each consumer reporting agency separately, which could cause delays for consumers actively shopping for a home, car, or other purchase requiring the extension of credit. Two consumer groups said that there is confusion about how the law would affect minor children. (Under the new law, credit freezes only can be placed on behalf of children under age 16, but not minors ages 16 and 17—who must place freezes themselves). Moreover, as the new law only applies to the three nationwide consumer reporting agencies, credit freezes do not protect against new-account fraud resulting from the use of credit reports from other consumer reporting agencies. For example, one consumer group recommended that consumers place a fourth freeze with the National Consumer Telecom and Utilities Exchange—a consumer reporting agency that maintains credit reports that telecommunications or utilities companies may use to check the creditworthiness of consumers interested in opening phone or utility accounts. The law also permits insurance companies and employers to continue to access credit reports even after they are frozen, among other exceptions. One general limitation of credit freezes is that they do not protect against new-account fraud in cases in which credit reports are not used to verify a consumer’s creditworthiness. Furthermore, credit freezes do not protect against existing-account fraud, such as fraudulent credit card charges, or certain other types of fraud, such as identity theft tax refund fraud or synthetic identity fraud using elements of individuals’ identity information. While experts with whom we spoke across industry, government, and consumer groups generally believed credit freezes to be an effective tool in preventing new-account fraud, some consumer and industry experts indicated that fraud alerts also can be a good alternative for consumers. Unlike a credit freeze, a fraud alert still allows companies to access an individual’s credit report for the purpose of opening a loan or credit account. Fraud alerts notify companies requesting the reports that the individual may have been a victim of identity theft. The alerts require companies to verify consumers’ identities before they issue credit to a consumer. Fraud alerts therefore can make it harder for an identity thief to open accounts in a consumer’s name. Moreover, fraud alerts are easier to place than credit freezes, as consumers only need to contact one of the three nationwide consumer reporting agencies to place a fraud alert (that agency is then obligated to contact the other two on the individual’s behalf). The Economic Growth, Regulatory Relief, and Consumer Protection Act extended the period of an initial fraud alert from 90 days to 1 year. However, fraud alerts do not restrict access to consumers’ credit reports the way freezes do. Therefore, some consumer group and industry representatives noted that consumers should be aware that a fraud alert may not offer as strong a protection as a credit freeze does. We did not find any data or analysis on the effectiveness of fraud alerts compared to credit freezes or monitoring options. One consumer group told us that it recommends that after a data breach consumers first place a fraud alert, because it requires contacting only one of the three nationwide consumer reporting agencies, and then follow up by placing a credit freeze at the three agencies. The three nationwide consumer reporting agencies also offer a product called a credit lock that is functionally similar to a credit freeze in that it restricts access to an individual’s credit report. Credit locks do not require consumers to use a PIN and consumers can turn access to credit reports on or off through an application on their mobile phone. However, credit locks are not subject to the same federal requirements regarding the placement and removal of freezes and therefore do not offer the same degree of protection to consumers. Instead, credit locks are private products subject to the consumer reporting agencies’ terms and conditions, which could change. A credit lock is in place only as long as the individual subscribes to an agency’s service, but a credit freeze remains in place until the consumer chooses to remove it. Finally, consumers may be charged a fee to place a credit lock, whereas credit freezes can now be placed for free. Based on our interviews and review of consumer education materials and our 2017 report, we identified four factors that consumers can consider in deciding which options are best for them in responding to a breach of their personal information: Prevention. Consumers can consider the extent to which an option might prevent fraud. For example, because credit freezes block all access to an individual’s credit report, by definition they are effective in preventing new-account fraud where credit reports are used as part of the account-opening process. Identity theft services do not prevent fraud, but detect suspicious activity or help restore identities after identity theft. Cost. Consumers can consider the cost of a service. For instance, consumers can consider whether to pay for commercial identity theft services if they believe the value of the service outweighs the effort of monitoring their accounts on their own. In addition, they may consider that credit freezes now are available for free. Convenience. Consumers may consider the convenience of a service. For example, while consumers can monitor their own credit reports and accounts, some might prefer not to or may be limited in their ability to do so. In addition, technologies offered through financial institutions that automatically alert customers to any transactions involving their accounts can be a convenient, no-cost way for consumers to monitor their accounts. Type of information at risk. Finally, several experts from consumer and industry organizations indicated that the type of option that might be beneficial would depend on the type of information at risk. For example, one consumer group representative noted that if a credit card number were stolen, an identity monitoring service that monitored the dark web for Social Security numbers might not be needed. Furthermore, consumers should consider that credit monitoring will be of limited effectiveness in alerting them to misuse of an existing credit account—which is more common than fraud related to setting up new accounts. For more information on consumers’ options, see appendix II. Among federal agencies, FTC serves as a primary source for free assistance (including online resources, educational outreach, and customized assistance through IdentityTheft.gov) to consumers on ways to respond to data breaches, identity theft, and related harm. Approximately 13 percent of those affected by the 2015 OPM breaches used credit and identity monitoring and identity restoration services that OPM offered them and a fraction of a percent made identity theft insurance claims (the payouts for which averaged $1,800). Data we assessed for this report support a 2017 recommendation we made to the Office of Management and Budget (OMB) to revise guidance to federal agencies about responding to data breaches and one to Congress to consider permitting agencies to determine appropriate levels of identity theft insurance offered after data breaches. FTC, as a primary source for assistance to consumers on issues related to data breaches and identity theft, provides guidance and assistance through its website and through conferences and workshops. Online and printed resources. FTC’s home page includes links to identity theft-related resources, including information about key options consumers can consider to help them mitigate identity theft risks and other harms, and a link to IdentityTheft.gov (discussed later in this section). FTC updates the information regularly, such as after large-scale data breaches. Outreach. FTC maintains relationships with state government, law enforcement, and community and consumer organizations, through which it conducts outreach about how to respond to exposure or loss of personal information and identity theft mitigation. For example, FTC collaborated with the International Association of the Chiefs of Police to update the association’s model policy for identity theft to include referral information for IdentityTheft.gov. FTC also has held webinars, conferences, and workshops on topics related to data breaches and identity theft for groups including government officials, nonprofits, and the general public. Customized assistance (IdentityTheft.gov). FTC provides information and customized assistance through IdentityTheft.gov to individuals whose information was lost or stolen or who experienced identity theft or other harm, such as tax refund fraud. During fiscal year 2018, IdentityTheft.gov received almost 2 million unique visitors. The website in its current form has been in place since January 2016 and offers the following types of assistance: Steps to take after identity theft. IdentityTheft.gov provides individual victims with step-by-step instructions to resolve specific problems. From January 2016 (when FTC launched the current version of IdentityTheft.gov) through October 1, 2018, approximately 700,000 individuals set up and activated accounts on the website to help them recover from identity theft. Individuals who set up accounts can indicate what kind of information was stolen and what kind of adverse event they experienced. The site helps users generate pre- filled letters, affidavits, and forms to send to consumer reporting agencies, businesses, debt collectors, and IRS, as appropriate. For example, individuals who fill out an Identity Theft Report affidavit can use this report instead of filing a police report to request extended 7- year fraud alerts (available to identity theft victims) on their credit reports. In addition, individuals who experienced tax refund fraud can fill out a form on IdentityTheft.gov that is then submitted directly to IRS. An individual who experienced credit card fraud would be advised to take different steps than one who experienced fraud related to utility bills or medical insurance. Steps to take after data breaches or loss of personal information. IdentityTheft.gov/databreach provides checklists and suggestions for people whose personal information was lost or exposed but has not yet been misused. FTC also maintains an online chat function and telephone number for those who need additional assistance. For complex cases, FTC staff may refer individuals to the Identity Theft Resource Center, a nonprofit organization. We found that in developing and updating the website, FTC followed some key practices for consumer education planning. One key practice we identified was consulting with stakeholders. According to FTC staff we interviewed and documentation we reviewed, FTC obtained feedback from stakeholders such as law enforcement agencies and community organizations in developing IdentityTheft.gov. Another key practice we identified was assessing users’ needs. FTC conducted usability testing to ensure the site’s features were easy to use. FTC staff also told us that after receiving user feedback, they made it easier for users to set up an account. FTC also made changes to IdentityTheft.gov—such as incorporating the ability to auto-generate forms—to implement a 2014 Executive Order calling for federal agencies to centralize identity theft information at the website. Furthermore, in January 2018, FTC implemented a new function that allows users who report identity theft tax refund fraud to file reports directly with IRS. Since its launch in early 2018 through October 1, 2018, almost 22,000 IRS Identity Theft Affidavits (IRS Form 14039) were submitted to IRS through IdentityTheft.gov. In general, experts across consumer, government, and industry organizations and identity theft service providers we interviewed expressed the view that IdentityTheft.gov is a valuable or user-friendly resource. Other federal agencies provide assistance to consumers on topics related to identity theft, including CFPB, the Department of Justice, IRS, and the Social Security Administration. CFPB. CFPB enforces, supervises for compliance with, and issues regulations to implement the federal consumer financial laws that address certain firms’ and financial institutions’ practices, which may include data security. A few of these laws and regulations contain provisions that can help protect the personal information of consumers. CFPB also offers consumer education resources. Similarly to FTC, CFPB included information about how consumers can address risks related to exposure of personal information and recover from identity theft in the bureau’s overall consumer education activities. CFPB provides consumer education materials related to data breaches and identity theft through its blog and its financial education resource, “Ask CFPB.” CFPB also maintains relationships with external groups, such as librarian networks. CFPB provides links to FTC resources about data breaches and identity theft topics on its website, so as not to duplicate efforts, according to CFPB staff. The two agencies also have coordinated some efforts. FTC and CFPB published a jointly produced blog post on September 21, 2018, the date the new free credit freeze and 1-year fraud alert provisions took effect. Such coordination is consistent with the 2014 Executive Order, which designated FTC as a centralized source of information about identity theft across the federal government. Staff of both agencies said that in developing new resources, they monitor information from a variety of sources, including consumer complaints, news and social media, and reports from other government entities, law enforcement, or nongovernmental stakeholders. Other federal and state agencies. IRS and the Social Security Administration provide some assistance to consumers for specific types of identity theft. For example, as noted previously, IRS provides some taxpayers with PINs if they are victims of identity theft tax refund fraud. In addition, states enforce laws and regulations and provide consumer education resources and assistance to consumers at risk of identity theft and other harms as a result of data breaches. For example, the Illinois Attorney General’s office maintains a call-in number for victims of identity theft, and the Colorado Bureau of Investigation can assist residents with identity theft issues. OPM offered identity theft services to approximately 22.1 million individuals whose personal information was compromised during the 2015 data breaches at OPM. Personnel records or OPM systems containing information from the background investigations of current, former, and prospective federal employees and other individuals were breached. The services, offered at no cost to affected individuals, included credit monitoring, identity monitoring, identity restoration services, and identity theft insurance. To receive credit and identity monitoring services, affected people have to enroll with the identity theft service provider with which OPM contracted, but identity theft insurance and identity theft restoration services are available to the entire affected population whether or not they enroll. Few affected individuals have used the services. According to data from OPM, as of September 30, 2018, close to 3 million, or 13 percent, of individuals affected by the 2015 incidents had made use of the services. As seen in figure 2, the great majority of enrollments occurred in the months immediately following notification of the breach. OPM staff said that the spike in enrollments in July and August 2016 likely was due to the follow-up mailing that OPM sent to approximately 10 percent of affected individuals whose mailing addresses were incorrect in the original mailing of notifications. In addition, according to OPM-reported data we reviewed, of the 3 million individuals who used the services, about 1 percent made identity restoration requests and a fraction of 1 percent submitted insurance claims. According to data we reviewed, approximately 27,000 identity restoration cases had been resolved as of September 30, 2018. In addition, 61 insurance claims (of 81 submitted) had been paid, totaling $112,000, with an average payout of $1,800. Since 2015, OPM has obligated approximately $421 million for identity theft services and as of November 30, 2018, OPM paid out approximately $361 million of the obligated funds. OPM is required to provide identity theft services through September 2026. The contract to provide these services on behalf of OPM expired in December 2018; OPM re-competed and awarded a single contract that month to ID Experts, the company that had been providing these services. After the OPM breaches in 2015, OPM provided federal employees and other affected individuals with information and guidance about their options in mailed letters and on its website. On its website, OPM developed a Cybersecurity Resource Center and included background about the breaches and who was affected; instructions for how to enroll in identity theft services; and a Frequently Asked Questions webpage that included links to FTC resources, including IdentityTheft.gov. OMB’s 2017 policy guidance to federal agencies, including OPM, states that agencies should determine appropriate information to provide to affected individuals and review breach responses annually. Consistent with that guidance, OPM’s September 2017 Breach Response Plan calls for the agency to review its breach response plan annually, including to reinforce or improve training and awareness. In December 2018, OPM updated its website to incorporate changes in the cost of credit freezes and duration of fraud alerts resulting from new legislation we discussed earlier. Data we assessed for this report support a 2017 recommendation we made to OMB and a matter for congressional consideration, both of which have not yet been implemented. In our March 2017 report, we found that OMB policy guidance for federal agencies on how to prepare for and respond to data breaches did not address how agencies might assess the effectiveness of identity theft services relative to lower-cost alternatives. For example, the guidance did not discuss whether identity theft services would be preferable to alternatives (such as fraud alerts, credit freezes, or the agency conducting its own database monitoring). We concluded that the guidance might not fully reflect the most useful and cost-effective options agencies should consider in response to a breach—contrary to OMB’s risk-management and internal control guidance calling on federal leaders to improve effectiveness and efficiency. Therefore, we recommended that OMB conduct an analysis of the effectiveness of identity theft services relative to alternatives, and revise its guidance to federal agencies in light of the analysis. In oral comments on a draft of the 2017 report, staff from OMB’s Office of Information and Regulatory Affairs said that our draft recommendation to OMB on expanding OMB’s guidance to federal agencies would benefit from greater specificity, and we revised this recommendation to provide greater clarity. We contacted OMB several times between May 2018 and early March 2019 to update the status of this recommendation but as of March 2019, OMB had not responded with an update. In our current review, we found that information on the effectiveness of various consumer options continues to be limited. We also found that some free and low-cost alternatives to free or fee-based identity theft services can prevent or more directly address new account fraud and some options consumers can take on their own have become less burdensome. Therefore, we stand by this recommendation. In addition, as noted previously in this report, the identity theft insurance that OPM offered to affected individuals resulted in few insurance claims, and the amounts claimed have been small. These data are consistent with the findings of our 2017 report—which reported that the number and dollar amount of claims for identity theft generally were low. They also reinforce our conclusion that the $5 million per-person coverage limit mandated by Congress likely was unnecessary and might impose costs without providing a meaningful corresponding benefit. Specifically, we noted that $5 million in coverage would increase federal costs unnecessarily, likely mislead consumers about the benefit of the product, and create unwarranted escalation of coverage amounts in the marketplace. Therefore, we reiterate the matter for congressional consideration we made in our March 2017 report: in the event that Congress again requires an agency to provide individuals with identity theft insurance in response to a breach, it should consider permitting the agency to determine the appropriate level of that insurance. We provided a draft of this report to CFPB, FTC, and OPM. The agencies provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Director of CFPB, the Chair of FTC, and the Acting Director of OPM. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8678 or ortiza@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. This report examines (1) information and expert views about the effectiveness of options consumers can use to prevent or address the risks resulting from data breaches; and (2) federal assistance available to help consumers understand these options, including the status of one matter for congressional consideration and one recommendation relating to these issues in our 2017 report. To address the first objective, we conducted a literature review to identify any studies or independent research on the effectiveness of various options consumers have for mitigating data breach harms, consumer attitudes and behavior following data breaches, and identity theft and other harm to individuals from exposure of personal information. We searched databases of scholarly publications and other sources for work generally published within the last 5 years. Examples of databases searched include ProQuest, EconLit, Policy File Index, and SciTech Premium Collection. We searched for terms including “effective,” “data breach,” “identity theft,” “consumer attitudes,” and “consumer behavior” and options such as “credit freeze,” “fraud alert,” and “credit lock.” We also reviewed relevant academic literature to identify additional studies. From these searches, we did not identify any studies that assessed the extent to which commercial identity theft services were effective in preventing or mitigating harm from exposure of personal information. We identified and reviewed 54 studies that appeared in peer-reviewed journals or research institutions’ publications and were relevant to consumer attitudes and behavior related to privacy, data breaches, and identity theft. To ensure the selection of a range of perspectives on the effectiveness of options to mitigate harms, we reviewed the selection of experts and sources in our prior report and our literature review, and updated that selection through additional searches and recommendations from discussions with experts and identity theft service providers and review of relevant literature. We defined experts as those representing consumer and industry policy organizations that have conducted research or taken policy positions on consumers’ or entities’ options after data breaches; academics who conducted research on relevant topics; and federal and state government staff with specific positions of responsibility in consumer protection or education. We also contacted seven companies that provide identity theft services to consumers. We interviewed representatives of a nongeneralizable sample of 35 entities in the following categories: academic or independent research institution (4); consumer or privacy research and advocacy (10); industry association, identity theft service provider, or industry consultant (12); and federal or state government (9). We also reviewed relevant consumer education and other materials produced by consumer, government, industry, and other entities. We interviewed academics from Carnegie- Mellon University, RAND Corporation, the University of Maryland, and the University of Rochester. In addition, we interviewed representatives from the following organizations: Consumer or privacy groups: AARP, Consumer Action, Consumer Federation of America, Consumer Reports, Electronic Privacy Information Center, Identity Theft Resource Center, National Consumer Law Center, Privacy Rights Clearinghouse, U.S. PIRG, and World Privacy Forum. Industry associations or consultants: American Bankers Association, Consumer Data Industry Association, Property and Casualty Insurers Association of America, National Retail Federation, and Rational 360. Identity theft service providers: Credit Karma, Equifax, Experian, ID Experts, ID Shield, LifeLock, and TransUnion. Government agencies: Consumer Financial Protection Bureau (CFPB), Federal Reserve Bank of Philadelphia, Federal Trade Commission (FTC), Office of Personnel Management (OPM), and Offices of the Attorney General of California, Connecticut, Illinois, Massachusetts, and New York. Throughout this report, we use certain qualifiers when describing responses from interview participants and views of entities whose articles and written material we reviewed, such as “few,” “some,” and “most.” We define few as a small number such as two or three. The specific quantification of categories depends on the overall numbers of entities that addressed a specific topic. For example, we may refer to views shared by a proportion of the 10 consumer groups we interviewed, or those shared by identity theft service providers. We also reviewed provisions in the Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted in May 2018, that address credit freezes and fraud alerts (two tools for preventing new-account fraud). To address the second objective, we reviewed and analyzed documentation and interviewed staff from FTC, CFPB, and OPM. We reviewed and analyzed FTC, CFPB, and OPM consumer education materials including blog posts, online fact sheets, and printed brochures and data on usage of the materials. For example, we analyzed FTC, CFPB, and OPM data and website analytics for their data breach- and identity theft-related web pages. We interviewed FTC and CFPB agency staff about their assistance to individuals and how they measure effectiveness of their efforts. We reviewed documentation and interviewed agency staff about the development, implementation, and assessment of consumer education materials and other resources and assistance. For example, we reviewed materials documenting FTC’s outreach to stakeholders and usability testing of IdentityTheft.gov. We compared the activities against a 2014 Executive Order on the security of consumer financial transactions, key practices for consumer education planning we identified in prior work, and federal standards for internal control. We analyzed data from the company with which OPM contracted to provide identity theft services to the approximately 22.1 million individuals whose information was exposed in the 2015 data breaches. We obtained data on the number of enrollments, the number and size of identity theft insurance claims submitted and paid, and number of identity restoration cases the companies handled. We assessed the reliability of the data by interviewing agency officials and reviewing documentation about the systems used to store the data. We found the data to be reliable for purposes of this reporting objective. We also reviewed the online guidance OPM provided to affected individuals and assessed the guidance against Office of Management and Budget guidance for agencies following data breaches and OPM’s 2017 Breach Response plan. In addition, for both objectives, we reviewed the evidence gathered and analyzed for the 2017 GAO report (GAO-17-254) and updated the status of the matter for congressional consideration and recommendations made in that report. We conducted this performance audit from November 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: What Can Consumers Do After a Data Breach? Figure 3 below provides information on actions consumers can take to monitor for identity theft or other forms of fraud, protect their personal information, and respond if they have been a victim of identity theft. This information summarizes prior GAO work and comments of academic, consumer organization, industry, and government experts. In addition to the contact named above, Kay Kuhlman (Assistant Director), Meghana Acharya, Carl Barden, Bethany Benitez, Catherine Gelb (Analyst in Charge), Danielle Koonce, Jill Lacey, Kathleen McQueeney, Barbara Roesmann, Jena Sinkfield, and Meg Tulloch made significant contributions to this report.", "summary": "Recent large-scale data breaches of public and private entities have put hundreds of millions of people at risk of identity theft or other harm. GAO was asked to review issues related to consumers' options to address risks of harm from data breaches. This report, among other things, examines information and expert views on the effectiveness of consumer options to address data breach risks. GAO analyzed available data on options, collected and analyzed related documentation, conducted a literature review of studies, and interviewed a nongeneralizable sample of 35 experts (from academia, government entities, consumer and industry organizations) and identity theft service providers to reflect a range of views. No one solution can address the range of potential risks from a data breach, according to interviews with academic, consumer, government, and industry experts and documentation GAO reviewed. Perpetrators of fraud can use stolen personal information—such as account numbers, passwords, or Social Security numbers—to take out loans or seek medical care under someone else's name, or make unauthorized purchases on credit cards, among other crimes. Foreign state-based actors can use personal information to support espionage or other nefarious uses. Public and private entities that experience a breach sometimes provide complimentary commercial identity theft services to affected individuals to help monitor their credit accounts or restore their identities in cases of identity theft, among other features. Consumers also may purchase the services. As of November 30, 2018, the Office of Personnel Management (OPM) had obligated about $421 million for a suite of credit and identity monitoring, insurance, and identity restoration services to offer to the approximately 22 million individuals affected by its 2015 data breaches. As of September 30, 2018, about 3 million had used the services and approximately 61 individuals had received payouts from insurance claims, for an average of $1,800 per claim. OPM re-competed and awarded a contract to the previously contracted company in December 2018. GAO's review did not identify any studies that analyzed whether consumers who sign up for or purchase identity theft services were less subject to identity theft or detected financial or other fraud more or less quickly than those who monitored their own accounts for free. A few experts said consumers could sign up for such services if offered for free. Credit monitoring may be convenient for consumers and personalized restoration services may help identity theft victims recover their identities, but such services do not prevent fraud from happening in the first place. The services also do not prevent or directly address risks of nonfinancial harm such as medical identity theft. Consumer, government, and industry experts highlighted other free options, including a credit freeze, which prevents one type of fraud. A freeze restricts businesses from accessing a person's credit report—and can prevent the illicit opening of a new account or loan in the person's name. A provision of federal law that took effect in September 2018 made it free for consumers to place or lift credit freezes quickly at the three nationwide consumer reporting agencies (Equifax, Experian, and TransUnion). Consumers also can regularly monitor their accounts and review their credit reports for free every 12 months. In addition, they can take advantage of free federal assistance such as the guidance on the Federal Trade Commission's IdentityTheft.gov website. Finally, large amounts of personal information are outside of consumers' control and bad actors can use stolen information for years after a breach. Therefore, experts noted that data security at entities that hold such information—and efforts to make stolen information less useful for identity thieves, through use of new identity verification technologies, for example—are important ways to mitigate risks of harm for consumers. GAO reiterates a matter for congressional consideration and a recommendation from its 2017 report on identity theft services ( GAO-17-254 ). In that report, GAO found that legislation requiring federal agencies that experience data breaches, including OPM, to offer certain levels of identity theft insurance coverage to affected individuals requires coverage levels that are likely unnecessary. Therefore, Congress should consider permitting agencies to determine the appropriate coverage level for such insurance. GAO also recommended the Office of Management and Budget (OMB) update its guidance for agency responses to data breaches, after analyzing the effectiveness of identity theft services relative to lower-cost alternatives. OMB did not agree or disagree and had not taken action as of early March 2019.", "document_type": "gao"}
{"report": "A series of laws and policy directives dating back to 1904 require DOD to rely in large part on U.S.-flag commercial vessels over government- owned or foreign-flag vessels for its sealift needs. Most recently, a 1989 National Security Directive reaffirmed the policy of relying on U.S.-flag commercial vessels to provide sealift in times of peace, crisis, and war. These requirements and policies align with the following principles from the Merchant Marine Act of 1936, as amended: A fleet of commercial vessels with military utility that are owned and operated by U.S. citizens and are able to provide reliable support during difficult wartime missions is necessary for national defense. According to testimony by the Commander of Transportation Command, during Operation Desert Shield, 7 percent of foreign-flag vessels refused to go into war zones, whereas U.S.-flag vessels continued to deliver cargo as promised. A pool of trained U.S. mariners is needed to crew the U.S.-flag fleet. According to DOD and MARAD, mariners are necessary to crew not only the U.S.-flag commercial vessels but also the U.S. government- owned reserve cargo vessels. These vessels are held in reduced operating status with minimal crew in peacetime. When put into full operating status—such as for a surge related to a wartime effort—the government needs to add additional trained and qualified mariners to operate them. U.S.-flag commercial vessels, which are required to be staffed by U.S.-citizen mariners, provide a pool of mariners who can be used for this task. Because mariners work on vessels for months at a time, commercial vessels typically have at least two full sets of mariners to crew a single vessel—one set of which is on the vessel while the other is on leave. In times of crisis, one set of mariners could continue to work on the commercial vessel, while some of those on leave could be called upon to voluntarily crew vessels in the government-owned reserve fleet. A U.S. presence in international trade is needed to carry goods overseas. According to MARAD, a U.S. presence in international trade helps ensure that both commercial shippers and the military can access vessels to carry their goods overseas at all times, both in times of peace and in times of war. In line with this policy, as of March 2018, DOD’s sealift capacity consisted of 61 government-owned reserve vessels held in reduced operating status and 113 commercial vessels operating under the U.S. flag in regular trade (see fig. 1). MARAD, in consultation with DOD, administers a program designed to ensure that needed U.S.-flag commercial vessel capacity will be available during a wartime activation. The program consists of an agreement between the U.S. government and operators of U.S.-flag commercial vessels, called the Voluntary Intermodal Sealift Agreement (VISA). MSP vessel operators are required to enroll in VISA or a similar agreement for tankers as part of their participation in the MSP, while other operators with U.S.-flag vessels may but are not required to enroll in VISA. Operators enrolled in VISA: commit to providing their intermodal resources and a certain percentage of their U.S.-flag vessel capacity to meet national defense needs during times of war or national emergency, if activated by DOD; will receive compensation during a VISA activation at rates that are set according to certain parameters established in contingency contracts between DOD and the operator; and receive priority for peacetime DOD cargo contracts, under which they carry DOD cargo at established or negotiated rates. According to Transportation Command and MARAD officials, DOD has never formally activated VISA, as vessel operators with these agreements have voluntarily met DOD’s ocean cargo carrying needs under regular operations and compensation rates established under contract with DOD. For example, these officials said that U.S.-flag vessels carried significant amounts of cargo during recent military conflicts such as those in Iraq and Afghanistan, and DOD did not have to activate VISA to obtain additional capacity. International shipping is dominated by foreign-flag vessels. According to MARAD, only about 1.5 percent of U.S. international oceangoing trade by weight is carried on U.S.-flag vessels. U.S.-flag vessels face difficulties competing in international markets due to the higher costs of operating under the U.S. flag. For example, to operate under the U.S. flag, vessel operators must comply with various U.S. laws, including requirements of the United States Coast Guard (Coast Guard), and must use U.S.-citizen and permanent resident crews, which according to a MARAD 2011 report, results in higher labor costs than are typically incurred by foreign-flag vessels for foreign crews. Since U.S.-based vessel operators engaged in international trade can choose to operate vessels under a foreign flag, according to the 2011 MARAD report, the majority of large, oceangoing, self-propelled merchant-type U.S.-owned vessels are not registered under the U.S. flag. In 2011, MARAD reported that the Marshall Islands, Singapore, and Liberia registries accounted for 52 percent of U.S.-owned vessels. According to MARAD, these registries have different requirements than the U.S. registry that result in lower associated operating costs. Further, according to MARAD data, the fleet of large U.S.-flag vessels engaged in international trade has declined from approximately 199 vessels at the end of 1990 to 82 vessels at the end of 2017 (see fig. 2). In February 2018, the number of U.S.-flag vessels dropped again, to 81 vessels. To ensure the existence of an international maritime presence of U.S.- registered and U.S.-citizen-crewed vessels, the U.S. government has, at least since 1936, had laws designed to provide financial support to offset the higher costs of operating an internationally trading vessel under the U.S.-flag. This support has provided an incentive for U.S. commercial vessel operators to register vessels under the U.S. flag in spite of the higher operating costs. Currently, this support is provided through the (1) MSP stipend for certain vessels and (2) cargo preference requirements: MSP stipend—Since fiscal year 1996, the MSP has provided an annual stipend set by statute to support a specific number of vessels. In return for receiving the stipend, the MSP vessel operator agrees to keep the vessel or an equivalent vessel under the U.S. flag for the life of a 10-year operating agreement (subject to annual appropriation), and enrolled in VISA. For fiscal year 2018, the MSP provided an annual stipend of $5 million per vessel, for a total cost of $300 million for the 60 vessels in the MSP. According to MARAD officials, the MSP was designed as a less costly replacement for the Operating Differential Subsidy that, since 1936, had subsidized the higher operating costs of the U.S.-flag fleet. According to DOT officials, the MSP currently covers approximately 80 percent of the average annual operating cost differential between U.S. and foreign-flag vessels, although this varies across vessels in the MSP. Cargo preference requirements—In general, cargo preference requirements specify that certain percentages of all U.S. government cargo, military and otherwise, must be carried on U.S.-flag vessels, to the extent the vessels are available at reasonable rates. Current law requires that 100 percent of military cargo be transported on U.S.-flag vessels. DOD charters a small number of internationally trading U.S.-flag vessels, while contracting with other internationally trading U.S.-flag vessels to carry cargo as part of the vessel’s regular operations. A minimum of 50 percent of the gross tonnage of all other government civilian cargo, such as food aid or freight sent to overseas embassies and consulates, is to be transported on privately owned commercial U.S.-flag vessels. In addition, cargoes financed by U.S. agencies, such as through loans from EXIM Bank, have been congressionally directed to be transported on U.S.-flag vessels. DOD and MARAD each play a role in managing the nation’s sealift capacity. DOD’s Transportation Command determines the vessel capacity necessary to meet national security requirements, whereas MARAD is responsible for determining whether there are enough commercial vessels and mariners available to support the activation of the government-owned reserve fleet while maintaining trade. In addition, MARAD supports the U.S.-flag fleet by administering VISA and the MSP and monitoring federal agencies’ compliance with cargo preference requirements, among other responsibilities. DOD and MARAD each maintain their own set of government-owned vessels that are part of the surge sealift fleet. U.S. government support for the internationally trading U.S.-flag fleet has helped meet national defense needs. Specifically, financial support to U.S.-flag vessels through both the MSP stipend and the cargo preference requirements has helped ensure a sufficient number of internationally trading U.S.-flag vessels are available to meet DOD’s most recently stated cargo capacity needs from such vessels. In contrast, while cargo preference requirements are a means of providing government support to U.S.-flag vessels, these requirements have had a negative impact on some non-defense programs. For example, the requirement that food aid agencies send a certain percentage of food aid on U.S.-flag vessels has resulted in higher shipping costs for these agencies, and USAID and USDA officials stated that this has reduced the amount of funds the agencies can spend on their mission to reduce hunger. DOD’s Transportation Command conducts periodic mobility studies that, among other things, determine the overall vessel capacity needed under differing wartime scenarios, including resource-heavy scenarios involving a range of concurrent military operations for a sustained period of time. A mobility requirements study completed in 2000 found that in addition to the cargo capacity that could be provided by government-owned or long- term chartered vessels and by vessels belonging to allies, the United States would need the capacity of approximately 55 commercial vessels designed to carry dry cargo to meet mobility requirements. The study also found a potential need for additional tankers, which are designed to carry liquid cargo. At the time, the MSP stipend was provided to 47 vessels; subsequently, through the Maritime Security Act of 2003, a new MSP was established that raised funding levels to support an increase in the program fleet to 60 vessels beginning in fiscal year 2006, to include both vessels designed to carry dry cargo and tankers. According to Transportation Command officials, mobility study updates in 2010 and 2013 confirmed that this capacity remained sufficient to meet defense needs. As a result, the 60 vessels currently participating in the MSP have the ability to meet DOD’s stated cargo capacity needs. They include a mix of vessel types designed to carry dry cargo as well as two tankers for liquid cargo (see table 1). DOD is required by statute to complete a new study by September 30, 2018. According to Transportation Command officials, this study will evaluate the sufficiency of the sealift fleet in light of the current defense strategy, plans, threats, and DOD's mobility capabilities. MSP regulations establish that DOD and MARAD select vessels for the MSP based in part on their military utility. Due to different configurations and cargo capacity, some vessel types are more useful to the military than others. For example, Transportation Command officials stated that currently the most useful type of cargo vessel for DOD’s military needs is the roll on/roll off (Ro-Ro) vessel, in part because it is configured so that vehicles, including tanks, can be easily driven on and off the vessel. DOD’s priority for the selection of MSP vessels is Ro-Ro vessels, multi- purpose/heavy-lift vessels (also referred to as general cargo vessels), geared containerships, and all others (including tankers), in that order. According to Transportation Command officials, due to the need to balance military utility with commercial viability, a mix of vessel types with military utility is currently in the MSP, with over half of the vessels in the MSP being containerships. In addition to selecting vessels based on military utility, MARAD, in consultation with Transportation Command, also bases their MSP vessel selections on the commercial viability of operations. The assessment of commercial viability includes, among other things, four key areas: 1) the intermodal networks accessible to the applicant; 2) the trading routes operated by the applicant, and the ability to maintain service during military operations; 3) the applicant’s record of owning and operating vessels; and 4) the applicant’s financial condition. MARAD and Transportation Command officials cited numerous benefits to the current configuration of the MSP. First, MARAD and Transportation Command officials stated that the annual cost of the stipend is small compared to the outlay required to acquire, crew, and maintain a government-owned fleet of vessels that are not needed on a day-to-day basis. (See app. I for more information on the potential effects of discontinuing the MSP stipend and instead relying on a government- owned fleet.) Second, MSP vessels must be less than 25 years of age. According to MARAD officials, this requirement helps ensure the recapitalization of the U.S.-flag fleet participating in the program. According to our analysis of MARAD data, since the beginning of fiscal year 2006, MSP vessel operators have replaced more than 70 MSP vessels. In most cases, we found that the replacement vessels have been newer and provide greater capacity to meet DOD requirements. Finally, under the MSP’s operating agreements, participating vessel operators are required to make their commercial transportation resources, including infrastructure, available upon request by the Secretary of Defense during times of war or national emergency. In this way, according to MARAD and Transportation Command officials as well as MSP vessel operators, the MSP provides DOD with assured access to a global intermodal transportation network, including logistical management services, infrastructure, and terminal facilities. According to MARAD and Transportation Command officials, without assured access to this network and infrastructure, the government would have to undertake a multi-billion dollar effort to create such a network on its own or would have to contract for such a network separately, a process that could come with additional risks and costs in a war-time scenario. A 2006 study for the National Defense Transportation Association estimated that it would cost approximately $13 billion to replicate the Ro-Ro and containership capacity of MSP vessels and $52 billion to replicate the intermodal networks provided by MSP vessel operators. A 2012 report by the National Defense Transportation Association provided some examples of how intermodal networks made available by MSP vessel operators have helped meet DOD needs. This report states that during military action in Afghanistan, U.S. forces depended on supplies transported overland through Pakistan. However, the limited road capacity in Pakistan resulted in delayed cargo and left drivers vulnerable to attacks. In addition, U.S.-Pakistan relations became strained, and the need for an alternative delivery method arose. The report says that MSP vessel operators devised alternative distribution systems, including an overland distribution network from Baltic seaports to Afghanistan as well as a multimodal (both sea and air transport) route from other seaports in the region. Some MSP vessel operators also told us that they were willing to participate in the MSP because, as U.S.- based companies, they felt a responsibility to contribute to national security. The MSP stipend provides a fixed financial incentive for vessel operators to maintain vessels under the U.S. flag, but on its own is not sufficient to support the higher costs of operating U.S.-flag vessels, according to MARAD officials and 12 of the 14 MSP vessel operators we spoke to. According to MARAD officials, the MSP currently covers about 80 percent of the operating cost differential between U.S. and foreign-flag vessels. However, a majority of MSP vessel operators we spoke with said that in order for a U.S.-flag vessel to be financially viable, the entire operating cost differential must be somehow made up. The other key way that MSP vessel operators can make up the difference in operating costs between U.S.-flag and foreign-flag vessels is through the transport of government cargo under cargo preference requirements. According to a 2015 MARAD report, the higher freight rates that DOD and other federal agencies pay to transport government cargo on U.S.-flag vessels are critical to these vessels’ financial viability. According to this report, carriers of U.S.-flag vessels stated that in the absence of government cargo at freight rates that cover the higher commercial cost of operating under a U.S. flag, the financial support provided by MSP would be insufficient to continue operating under the U.S. flag. A 2011 MARAD report similarly stated that the portion of U.S.-flag vessels’ higher operating costs not covered by the MSP stipend is defrayed by the ability of those vessels to carry government cargo at rates that are significantly higher than commercial rates. Under cargo preference requirements, the use of U.S.-flag commercial vessels is required to the extent that such vessels are available at rates that are fair and reasonable, as determined by MARAD and the Transportation Command. According to Transportation Command guidance, even though lower prices may be available from foreign-flag carriers, a lower price for use of a foreign-flag vessel is not a sufficient basis, on its own, to determine the ocean freight rate proposed by a U.S.- flag vessel operator is excessive or otherwise unreasonable. Similarly, by regulation, MARAD’s determination of U.S.-flag vessels’ fair and reasonable rates takes into account the vessels’ operating costs, among other things, which as described previously are higher than foreign-flag vessels’ operating costs. Our analysis of DOD and MARAD data show that in total, more than 1.4- million metric tons of government cargo were shipped on MSP vessels in fiscal year 2016. Fifty-nine of the 60 MSP vessels carried government cargo in fiscal year 2016. One MSP vessel (a general cargo vessel) entered the MSP at the end of the fiscal year but did not carry any government cargo until the next fiscal year. As shown in figure 3, the MSP Ro-Ro and containership vessels carried more cargo for DOD than for civilian agencies. MSP general cargo vessels predominantly carried food aid, and during this time, tankers were used only by civilian agencies for foreign military assistance. Our analysis also found that the extent to which government cargo shipped on U.S.-flag vessels was transported on MSP vessels varied. For example, 69 percent of the cargo DOD shipped on U.S.-flag vessels was transported on an MSP vessel; 99 percent of non-food aid cargo that civilian agencies shipped via U.S.-flag vessels was transported on an MSP vessel; and 24 percent of food aid shipped on U.S.-flag vessels was transported on MSP vessels. The rest of the government cargo shipped on U.S.-flag vessels was shipped on vessels that are not in the MSP. Most of the MSP vessel operators we spoke to said that in addition to government cargo, their MSP vessels also carry commercial cargo. These vessel operators told us that because they have to compete for commercial cargo with foreign-flag vessels that have lower operating costs, commercial cargo alone typically does not have high-enough rates to maintain the financial viability of U.S.-flag vessels. However, when added to the MSP stipend and government cargo rates, the rates they receive for commercial cargo are part of the overall financial picture that allows them to operate MSP vessels under the U.S. flag (see fig. 4). Officials at USAID and the EXIM Bank have raised concerns that the higher shipping costs that result from cargo preference requirements have had a negative effect on their missions. For example: According to officials at USAID’s Office of Food for Peace, the additional costs the agency incurs by using U.S.-flag vessels instead of foreign-flag vessels for its cargo directly reduces its budget to fulfill its mission of reducing hunger and malnutrition. For example, USAID officials stated that for each $40-million increase in shipping costs, its food aid reaches one-million fewer recipients each year. Concerns about the role of cargo preference requirements for food aid in supporting the U.S.-flag fleet are longstanding, and we reported on them in 1994, 2011, and 2015. Others have also reported on these concerns over the last few decades. According to USAID officials, due to cargo preference requirements and the limited availability of U.S.-flag bulk carriers, the agency has at times had to send bulk food, such as grain, on other types of U.S.-flag vessels that are not meant to carry this type of cargo. According to these officials, this process has resulted in additional costs and delays because the equipment used to load and unload bulk grains onto and off of a bulk cargo vessel cannot be used with other types of vessels, as wells as concerns about the appearance and health of bulk food being transported, for example, on vessels that typically carry oil or other fuels. Officials from the EXIM Bank said that U.S. shipping provisions may have put EXIM bank at a competitive disadvantage compared with other countries’ export credit agencies, thus having a negative impact on the Bank’s mission—which is to support American jobs by facilitating the export of U.S. goods and services. Cargoes financed through loans from EXIM Bank have been congressionally directed to be transported on U.S.-flag vessels. According to a 2014 survey of exporters and lenders conducted by EXIM Bank, arranging U.S. transport typically results in higher costs and can result in shipment delays. These exporters and lenders reported that the requirement to ship on U.S.-flag vessels placed them at a competitive disadvantage relative to other countries’ exporters—and may have resulted in potential clients choosing to import goods from other countries without the same requirements. According to our prior work and EXIM’s 2016 Competitiveness Report, export credit agencies in many other countries do not have such a requirement. Furthermore, food aid advocates have questioned the economic efficiency of using food aid shipments to financially support the U.S.-flag fleet for defense purposes, particularly in light of the increased costs to food aid agencies. These advocates have argued that it is inefficient to spend U.S. government funds to support U.S.-flag vessels generally considered to have little military utility—such as bulk carriers—primarily for the U.S.-citizen mariners they provide. According to our analysis of MARAD data, during fiscal year 2016, food aid agencies shipped 592,000 metric tons of cargo on U.S.-flag dry bulk carriers, providing substantial government support to a vessel type that Transportation Command officials have stated is not a priority for the military’s cargo needs and that Transportation Command and MARAD officials acknowledge has only limited military utility. Based on our analysis of data provided by DOD, during fiscal year 2016, DOD did not ship any cargo on dry bulk vessels. In contrast, based on our review of data provided by MARAD, in fiscal year 2016, 57 percent of food aid transported on U.S.-flag vessels was transported on vessels flagged by MARAD as having limited military utility. In contrast to the food aid advocates’ perspective, Transportation Command and MARAD officials stated that ensuring sufficient mariners for defense purposes is one key purpose of supporting the U.S.-flag fleet, regardless of the military utility of the vessel. The total additional cost the government incurred due to cargo preference requirements is not known, as neither Transportation Command nor MARAD track the additional costs to ship on U.S.-flag vessels. Transportation Command and MARAD officials both stated that their current processes are not designed to track the difference between what federal agencies are paying to ship government cargo on U.S.-flag vessels and what they would pay to ship the same cargo on foreign-flag vessels, and that it would require considerable time and expense for them to create processes to do this. Moreover, Transportation Command officials stated that there would be little value in tracking this information, since their focus is on complying with the requirement to transport DOD cargo on U.S.-flag vessels whenever possible. Our past work on this issue has shown that cargo preference laws have increased transportation costs to federal agencies. For example, in 1994 we reported that these costs increased by $578 million per year between fiscal years 1989 and 1993, with DOD estimating that it spent about $350 million of that amount in increased costs. More recently, in 2015, we found that cargo preference requirements for food aid increased the cost of shipping food aid by 23 percent, or $107 million, for the period from April 2011 through fiscal year 2014. MARAD and Transportation Command officials acknowledged that some agencies have raised concerns that cargo preference requirements may have adverse impacts on their programs. According to MARAD officials, while there is not overall agreement on the net benefit to the nation of cargo preference requirements, such requirements provide offsetting benefits to the U.S. maritime sector that are difficult to quantify in dollar terms. A Transportation Command official stated that cargo preference for food aid has been less beneficial in supporting U.S.-flag vessels than it once was because of recent decreases in food aid volumes. However, this official emphasized that cargo preference for food aid continues to provide value as a tool to help support the U.S.-flag vessels that provide mariners to meet DOD’s needs. Stakeholders we spoke with identified two primary challenges to ensuring that the U.S.-flag fleet would continue to meet DOD’s national defense needs. First, stakeholders described maintaining the financial viability of U.S.-flag vessels participating in MSP as a challenge. Second, stakeholders identified a potential shortage of U.S. citizen mariners available to crew the government-owned reserve fleet during a military activation as a challenge, in part due to the declining numbers of U.S.-flag vessels. According to MARAD officials, the relative cost of operating a U.S.-flag vessel compared to a foreign-flag vessel has increased in recent years, making it increasingly challenging for vessel operators to remain economically viable under the U.S. flag. While an increasing cost differential between U.S.-flag and foreign-flag vessels affects all U.S. flag vessels, MARAD officials raised particular concerns related to defense needs about maintaining the financial viability of vessels in the MSP. MARAD estimates this operating cost differential is currently between $6.2 million and $6.5 million per vessel per year, up from an estimated $4.9 million in 2009 and 2010—an increase of more than 25 percent. MARAD and MSP vessel operators we spoke with stated that the increase is due to a range of factors, primarily the rising relative costs of employing U.S. mariners as crew versus foreign crew members. For example, one MSP vessel operator indicated that labor costs for its U.S.- flag vessels are projected to increase approximately 4 percent per year compared to smaller increases in its foreign-flag crew costs. Representatives from maritime unions that we interviewed acknowledged that labor costs have risen and also noted that one factor contributing to higher labor costs in the United States is that operators are required to cover retirement benefits for employees. These representatives stated that such benefits are paid by the government in some other countries. In addition to labor costs, MSP vessel operators also mentioned that increasing insurance and maintenance and repair costs are also factors. At the same time, total government cargo volumes have fallen, compounding the challenge for vessel operators to remain viable under the U.S. flag. Figure 5 below shows the decline in total government cargo volumes between 2004 and 2014 for DOD, food aid, and other civilian agencies. According to a 2015 MARAD report on the effect of declining cargo preference volumes, vessel operators that reflagged vessels from the U.S. flag to a foreign flag, or retired vessels in recent years said that the primary reason for doing so was the loss of government cargo. However, it is not known exactly how many vessels have been reflagged, and the 2015 MARAD report stated it could not quantify the number of vessels that left the U.S. flag specifically for this reason. One vessel operator we spoke with stated that it removed five vessels from the U.S.- flag registry due to a decline in food aid shipments and an increase in the cost of operating under the U.S flag. According to MARAD officials, if government cargo volumes continue to decline in future years, the resulting decline in revenue to U.S.-flag vessels for shipping these goods may lead to further reductions in the number of U.S.-flag vessels and may also affect the financial viability of those vessels in the MSP. According to the 2015 MARAD report, the decrease in total government cargo volumes has been driven by two trends. First, the international military presence of the United States has decreased overseas. DOD, which generates 75 percent of preference cargo, has gone through a worldwide drawdown following the end of the cold war in the 1990s, notwithstanding brief upticks in volume during military escalations since that time. Second, due to reduced funding, fluctuating commodity prices, and other factors, food aid agencies, such as USDA and USAID, have shipped reduced volumes of food aid overseas. Further affecting the amount of food aid cargo on U.S.-flag vessels were changes to the cargo preference requirement and the elimination of reimbursements designed to help cover the extra cost of meeting the preference requirement. The Cargo Preference Act of 1954, as amended, requires that at least 50 percent of all U.S. government cargo be shipped on U.S.-flag commercial vessels. For food aid programs, an additional 25 percent of the tonnage of certain agricultural commodities was required beginning in 1988. This increase was repealed in 2012, and the cargo preference requirement for food aid effectively returned to 50 percent. In prior work, we found that although the reduction in the food aid cargo preference requirement reduced overall shipping costs for food aid, food aid agencies still paid a higher price to ship on U.S.-flag vessels than on foreign-flag vessels to meet cargo preference requirements. Further, in 2012 and 2013, government reimbursements to USAID and USDA to help cover the extra costs to meet cargo preference requirements were discontinued. As we reported in 2015, this change in reimbursement policy reduced the amount of food aid these agencies were able to provide. In 2015, to ensure the continued financial viability of vessels in the MSP, maritime unions advocated for and eventually received an MSP stipend increase. According to MARAD data, at the time, several companies with vessels in the MSP were in financial trouble, and all but three of the companies participating in the MSP would have been operating at a loss without the MSP stipend. Congress authorized the appropriation of a 42 percent increase in the MSP appropriation from fiscal year 2016 to fiscal year 2017—from $210 million to $299 million. The corresponding authorized stipend rose from $3.5 million to $4.99 million per vessel annually. The appropriation for fiscal year 2018 further increased this amount to $5 million, and an additional increase to about $5.23 million is authorized for fiscal year 2021. Figure 6 shows the authorized annual stipend for MSP vessels from fiscal year 1996 through fiscal year 2021. According to MARAD officials, the recent increase in the MSP stipend to the current level of $5 million in fiscal year 2018 has temporarily stabilized the financial situation of MSP vessel operators. However, concerns remain about the future of the U.S.-flag fleet. According to MARAD officials and commercial vessel operators we spoke with, if the cost differential between operating U.S.-flag and foreign-flag vessels continues to increase, the levels of government support would accordingly need to rise to ensure that vessel operators would be willing and able to keep the existing U.S.-flag vessels under the U.S. flag, including those in the MSP. In 2015, MARAD issued a statutorily-mandated report that concluded that without a comprehensive change to maritime policy, the size of the U.S.- flag fleet would continue to decline. However, in this report, MARAD did not propose specific changes or options to address this concern. According to MARAD and DOD officials, another challenge related to the ability of the U.S.-flag fleet to meet national defense needs is a potential shortage of U.S.-citizen mariners qualified to crew government-owned reserve vessels. While in terms of cargo capacity, the current number of U.S.-flag commercial vessels in international trade is sufficient to meet DOD’s stated needs, MARAD and DOD have raised concerns that the declining number of such U.S.-flag vessels has led to a corresponding decline in the number of U.S.-citizen mariners qualified to crew these types of vessels and who are also able to crew government-owned reserve vessels that are usually held in reduced operating status. On January 23, 2018, MARAD’s Maritime Workforce Working Group issued a statutorily-mandated report that found that the current number of U.S.-citizen mariners is insufficient to support sustained activation of the government-owned reserve fleet for military operations. Specifically, the report estimated approximately 11,768 qualified and available U.S.-citizen mariners as of June 2017—1,839 less than the 13,607 mariners the working group estimates would be needed for sustained operation of the reserve and commercial fleet. The working group based its identification of 11,768 existing qualified U.S.-citizen mariners on the number of U.S.-citizen mariners actively sailing on U.S.-flag commercial and government-owned ocean-going vessels. For the vessels in full operating status, the working group accounted for 2 mariners employed for each crew position. The double crew, which according to MARAD officials is typical for a commercial U.S.-flag vessel operating in international trade, allows each mariner, over the course of a year, to work for 6 months on the vessel and take 6 months of earned leave. According to MARAD officials, this typical double crew configuration is based on the fact that while on duty, mariners work long hours with little to no opportunity to leave the vessel. The working group assumed that during a military activation, commercial operations would continue at the same level as during peacetime—but that some U.S-citizen mariners currently working on commercial vessels would be willing to reduce the amount of earned leave they took in order to work on government-owned reserve vessels. The working group analyzed this scenario by changing the ratio of crew positions to crew from 2 (in which case half of the employed mariners are working on the vessel and half are on earned leave at any one time) to 1.75. As illustrated in figure 7, under this scenario, with an average of 26 crew positions per vessel, between 6 and 7 mariners per existing commercial oceangoing U.S.-flag vessel are made available to crew the reserve fleet. According to the working group’s methodology, given the size of the current U.S. flag oceangoing fleet and the number of currently employed mariners on this fleet, there are enough U.S.-citizen mariners to crew the reserve fleet during an initial surge, but not for a sustained activation, during which the working group estimated that the reserve vessels themselves would need a double crew to allow for crew rotations. This need for crew rotations on the reserve vessels led the working group to the estimate a shortage of 1,839 U.S.-citizen mariners. Moreover, the working group’s report found that the shortage of mariners may be understated if some of the estimated available mariners are unable or unwilling to continue sailing during times of national emergency, as available mariners are not required to crew the reserve fleet. Although the working group concluded that there is a shortage of mariners for sustained operations, its report also details data limitations that cause some uncertainty regarding the actual number of existing qualified mariners and, thus, the extent of this shortage. The working group’s approach—driven, in part, by limitations of the U.S. Coast Guard’s database that tracks mariner credentials—did not count any qualified mariners who are no longer employed on U.S.-flag oceangoing vessels or who are employed on other types of vessels but may have the required credentials. In fact, according to the working group’s analysis, over 15,000 mariners listed in the U.S. Coast Guard’s database have unlimited credentials but are unaccounted for, as they are neither currently employed on large, oceangoing vessels nor serving as civil- service mariners committed to government-owned vessels. The working group stated that the availability and continuing proficiency of these mariners remains unknown. These data limitations, which the working group was unable to resolve, are long standing. For example, in August 2015, we reported that the number of U.S. civilian mariners who would be qualified and available to serve during a prolonged defense activation was uncertain. We found that MARAD’s analysis of the sufficiency of the mariner pool could have included more qualified mariners using different assumptions, and we recommended that MARAD study this issue. MARAD was later mandated by statute to convene a working group to study the sufficiency of the U.S.-citizen mariner pool. MARAD officials emphasized to us, however, that mariners who have not worked on the right types of vessels for more than 18 months are likely to need additional training before they would be qualified to crew the reserve fleet during a military activation. The working group’s report contains several recommendations related to improving information on the number of available and willing mariners. These recommendations include that the Coast Guard database should be replaced with one that would enable a more accurate account of available mariners, and that a periodic survey of the U.S.-citizen mariner pool should be established to allow MARAD to determine, with reasonable certainty, how many qualified mariners would be available and willing to sail in U.S. government reserve vessels if called upon to do so. The report concluded that until these agencies improve the tracking of licensed mariners who may be available to crew the government-owned reserve vessels when activated into full operating status, the extent to which there is a shortage of mariners for defense needs will remain unclear. The lack of information on the extent to which there is a shortage of mariners limits the U.S. government’s ability to effectively plan for such needs. In January 2018, MARAD’s administrator testified that MARAD is working with the Coast Guard and the maritime industry to better track licensed mariners who may no longer be sailing but could serve in a time of crisis, and in March 2018, MARAD officials told us they are taking steps to initiate a new survey of mariners, as recommended in the Mariner Workforce Working Group’s report. Congress issued two separate mandates to DOT to develop strategies related to challenges facing the U.S.-flag fleet, specifically: The Secretary of Transportation was directed in 2014 to develop a national maritime strategy with recommendations, among other things, to increase U.S.-flag vessel competitiveness. The Secretary of Transportation and MARAD were directed in 2014 to develop, in collaboration with DOD, a national sealift strategy to ensure the long-term viability of the U.S. Merchant Marine (which encompasses U.S.-flag vessels and U.S.-citizen mariners). According to MARAD and DOD officials, MARAD has been working on a single draft maritime strategy to meet both mandates, since from their perspective, the national maritime strategy would need to encompass the national sealift strategy, as well. While there was no statutory deadline for the completion of the national sealift strategy, there was a statutory deadline of February 2015 for the national maritime strategy to be submitted to Congress. However, DOT had not finalized the national maritime strategy as of May 2018. According to MARAD officials, MARAD completed a draft strategy in 2016, which was approved by DOT and reviewed by the Office of Management and Budget (OMB) and 28 additional agencies identified as being stakeholders, including DOD. MARAD officials told us that while MARAD had reached initial concurrence with these other agencies, the strategy is now subject to the new administration’s review. MARAD and DOT officials told us that they now view the existing draft strategy as pre- decisional and emphasized that no decisions have yet been made about the extent to which it must be revised before being sent out for a new round of review by the stakeholder agencies. DOT officials provided no timeline to us as to when they expect the strategy to move forward, stating that it was not yet clear how long DOT would be reconsidering and potentially revising the strategy before moving it forward again. Similarly, no time frames have been provided to Congress. The delay in submitting this strategy to Congress means that decision-makers do not have information and recommendations from the agency to inform policy- making in this area. Moreover, it further delays a response to a specific statutory requirement that DOT make recommendations related to U.S.- flag vessel competitiveness and develop a strategy to ensure the long- term viability of U.S.-flag vessels and U.S.-citizen mariners. While DOT has been delayed in issuing the national strategy, MARAD has in other agency reports or through discussions with stakeholders identified some options to address the competitiveness of U.S.-flag vessels and the long-term viability of the U.S. Merchant Marine—issues that are very similar to the key challenges identified by stakeholders with whom we spoke. However, DOT and MARAD officials stated that they are not yet ready to address the feasibility of these options. For example, MARAD has identified the following options as having potential to reduce the costs of operating a U.S.-flag vessel—which would in turn increase U.S.-flag vessels’ competitiveness: MARAD is part of a U.S. Registry Working Group that was established in response to a 2016 report and is looking at actions to decrease the time and cost of bringing vessels under the U.S. flag, including the cost of meeting Coast Guard requirements. This working group is considering actions, such as applying internationally recognized vessel standards to U.S.-flag vessels to meet Coast Guard requirements, among others. In the current strategic plan for 2017 through 2021, MARAD identified two areas of reform—mariner income-tax relief and liability insurance reform—that could reduce the crew costs of operating under a U.S. flag. MARAD officials stated that stakeholders have recommended that MARAD consider whether a tax on U.S.-flag vessels receiving maintenance overseas should be eliminated in order to reduce maintenance costs for U.S.-flag vessels. In general, maintenance and repairs on U.S.-flag vessels not conducted at U.S. shipyards are subject to a statutory 50 percent ad valorem tax on the cost of maintenance performed overseas. According to 12 of the 14 MSP vessel operators we spoke with, U.S. shipyards are typically more expensive than foreign shipyards or may not be close to the vessel’s location or route, so they typically choose to pay the tax and have the maintenance performed overseas. Four MSP vessel operators stated that they send U.S.-flag vessels to U.S. shipyards for maintenance when it makes sense from a logistical and financial perspective. MARAD officials stated they are considering the effect of eliminating the tax, a step that would reduce costs for vessel operators but would potentially negatively affect the financial viability of U.S. shipyards, which the law was designed to assist. However, MARAD officials stated that they have not yet evaluated these trade-offs. MARAD and Transportation Command officials have also identified—but not officially proposed—several options to increase the volume of government cargo carried on U.S.-flag vessels, which was identified by stakeholders we spoke with as a cause of the challenge of sustaining the financial viability of MSP vessels. For example, Transportation Command officials told us that they consider access to cargo to be a critical means of sustaining U.S.-flag vessels. Transportation Command and MARAD officials stated that one way to increase the amount of commercial cargo on U.S.-flag vessels would be to require that certain energy export commodities, such as oil or liquefied natural gas, be carried on U.S.-flag vessels. While this option has been considered in the past, it would require new legislation and would have potential trade-offs. For example, in 2015, we analyzed the potential effects of a requirement that U.S. liquefied natural gas exports be carried on U.S.-built and flagged vessels. We found that such a requirement could potentially increase the number of U.S.-flag vessels by 100, but, due to their higher operating costs, could also increase the cost of transporting liquefied natural gas from the United States, decrease the competitiveness of U.S. liquefied natural gas in the world market, and in turn, reduce demand for U.S. liquefied natural gas. MARAD officials stated that another option would be increasing the percentage of cargo, such as food aid, that civilian agencies are required to transport on U.S.-flag vessels. This would also require an amendment to existing legislation and would also have trade-offs since as described previously, cargo preference requirements can negatively affect the missions of civilian agencies. Another option stated by MARAD officials to address declining government cargo volumes would be to increase the MSP stipend to replace some of the government support previously provided through cargo preference programs. This option was previously used to address the recent reduction in government cargo, as described previously in this report. MARAD, through its 2017 Mariner Workforce Working Group report, also identified options to address the challenge of ensuring a sufficient number of U.S.-citizen mariners for defense needs. This challenge was identified by stakeholders we spoke with and by the sealift strategy mandate’s call for DOT to ensure the long-term viability of the U.S. Merchant Marine, which includes U.S.-citizen mariners. The Mariner Workforce Working Group report identified two actions that could help increase the number of U.S.-citizen mariners. However, the working group’s report did not discuss specific costs or trade-offs related to either action or elaborate any further on them. The identified actions were as follows: MARAD should develop a broad-based reserve program that would identify and support qualified mariners willing to sail in commercial and government-owned vessels during an emergency. MARAD would provide limited financial assistance in training mariners and maintaining credentials, in turn for which mariners who participate would be obligated to sail in the event of a defense need. MARAD and other U.S. government agencies should support a healthy merchant marine (which encompasses U.S.-flag vessels and U.S.-citizen mariners). The government should fully support programs including MSP, cargo preference requirements, the Jones Act, and government chartering of privately owned vessels. When DOD determines that national needs require more mariners and vessels than can be provided through current programs, those programs should be expanded to meet such needs. MARAD and DOT officials stated that they are not yet ready to propose actions to address any of these issues. According to these officials, they have not yet developed cost estimates or analyzed the trade-offs of various alternatives to increasing U.S.-flag vessels’ competitiveness or otherwise supporting the financial viability of the U.S.-flag fleet or ensuring sufficient U.S. citizen mariners for defense purposes. The officials stated that they are therefore not ready to recommend which of the identified options, if any, should be pursued, either as recommendations in the national maritime strategy or elsewhere. To date, U.S. government support for commercial sealift has helped meet national defense needs, but recent increases in the cost differential of U.S.-flag vessels versus foreign-flag vessels and decreases in the volumes of government cargo have made it more challenging to ensure the financial viability of U.S.-flag vessels. Moreover, with a smaller number of U.S. flag vessels in international trade than in previous years, DOD and MARAD have raised concerns about the sufficiency of the pool of U.S. citizen mariners the United States can count on to crew government-owned reserve vessels activated for national defense needs. Congress mandated in 2014 that DOT issue strategies to address these challenges. MARAD has been working on a national maritime strategy to address both mandates. However, over 3 years after a congressionally mandated issuance date of February 2015, DOT has not published this strategy or made any recommendations to increase U.S.-flag vessels’ competitiveness or to ensure the long-term viability of the U.S.-flag fleet and U.S. citizen mariners. DOT has also not developed a timeline for when it will complete and provide this strategy to Congress. The continued lack of such a strategy limits decision-makers’ ability to make policy choices related to these challenges in a comprehensive way that considers the complex issues related to the long-time government support for the U.S.-flag fleet. The Secretary of the Department of Transportation should complete the national maritime strategy and establish and provide to Congress a timeline by which the strategy document will be issued. (Recommendation 1) We provided a draft of this report to DOT, DOD, USDA, USAID, EXIM Bank, the Department of Energy, and the State Department for review and comment. DOT provided written comments, which are reprinted in appendix II, and technical comments, which we incorporated as appropriate. DOT agreed with our recommendation that DOT should complete the national maritime strategy and provide a timeline to Congress by which the document will be issued. USAID provided written comments, which are reprinted in appendix III. DOD and EXIM Bank provided technical comments, which we incorporated as appropriate. USDA, the Department of Energy, and the State Department informed us that they had no comments. We are sending copies of this report to the Secretary of Transportation, the Secretary of Defense, the Secretary of State, the Secretary of Energy, the Secretary of Agriculture, the Administrator of USAID, and the Chairman of EXIM Bank, as well as appropriate congressional committees and other interested parties. In addition this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-2834 or vonaha@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. In addition to the potential modifications to the Maritime Security Program (MSP) that we described in the report, we examined two alternatives to the MSP that we identified by conducting a literature search on the program and reviewing a 2009 study of the MSP. We also interviewed stakeholders about these two alternatives. These two alternatives were for the government to purchase its own vessel fleet to meet defense requirements or for DOD to charter or contract for vessels in times of need. However, these options do not present clear cost savings or would reduce the government’s ability to meet national defense goals, according to stakeholders we interviewed and the 2009 study. We also identified additional options beyond those described in the report to modify the MSP while maintaining the annual stipend by reviewing prior GAO work and interviewing the same stakeholders on ways to improve the MSP. These modifications included implementing a competitive-bidding process to select participants and varying payments to MSP vessel operators based on the vessel’s type and military usefulness, among others. Cost savings to the government associated with these modifications are likely to be small to nonexistent, according to MARAD officials, and maritime stakeholders had differing views on whether these modifications would improve the program. Tables 2 and 3 below show the potential effects, as identified by stakeholders, that each of the alternatives and modifications to the MSP would have on costs, mission, and other areas. In addition to the individual named above, Alwynne Wilbur (Assistant Director), Stephanie Purcell (Analyst in Charge), Amy Abramowitz, David Ballard, Geoff Hamilton, Bonnie Ho, Christopher Jones, Josh Ormond, Amy Rosewarne, and Kelly Rubin made key contributions to this report.", "summary": "The U.S. government relies on U.S.-flag vessels that trade internationally to transport cargo and to provide a pool of U.S. mariners who could be called upon in times of crisis for DOD's reserve fleet. Through financial support and cargo preferences, the United States has supported the viability of the U.S.-flag fleet. However, in recent years concern has grown about the sustainability of the U.S.-flag fleet, and in 2014, Congress statutorily mandated that DOT develop national strategies related to the sustainability of the U.S.-flag fleet including recommendations for the future. GAO was asked to review U.S. government support for these U.S.-flag vessels that trade internationally. This report discusses: (1) the effect the U.S. government's support for the U.S.-flag fleet has had on national defense needs and other government programs; (2) the challenges identified by stakeholders in sustaining the U.S.-flag fleet for defense needs; and (3) the status of the mandated national strategies related to the U.S.-flag fleet. GAO reviewed relevant laws and analyzed DOT and DOD documents and government cargo data for fiscal years 2012–2017. GAO also interviewed officials from DOT, DOD, and other federal agencies subject to cargo preference; MSP vessel operators; and other stakeholders. U.S. government support for the U.S.-registered (U.S.-flag) fleet has helped meet national defense needs, but it has had a negative effect on some non-defense government programs. Specifically, the U.S. government supports U.S.-flag vessels through: (1) an annual stipend provided through the Maritime Security Program (MSP) and (2) cargo preferences that require federal agencies to transport certain percentages of government cargo on U.S.-flag vessels. These supports have helped ensure that a sufficient number of U.S.-flag vessels are available to meet the Department of Defense's (DOD) cargo capacity needs. Although cargo preference requirements have helped support the financial viability of U.S.-flag vessels that participate in the MSP, they have had a negative impact on some non-defense programs. For example, the requirement pursuant to which food-aid agencies send a certain percentage of food aid on U.S.-flag vessels has resulted in higher shipping costs for these agencies and has negatively affected their missions, according to officials at these agencies. Stakeholders GAO spoke to identified two primary challenges in sustaining the internationally trading U.S.-flag fleet for national defense needs. First, even with the annual MSP stipend, maintaining the financial viability of U.S.-flag vessels is a challenge. This challenge largely results from the higher costs of operating a U.S.-flag vessel. According to U.S. Maritime Administration (MARAD) officials, the additional cost of operating a U.S. flag vessel compared to a foreign-flag vessel has increased—from about $4.8 million annually in 2009 and 2010 to about $6.2 to $6.5 million currently—making it harder for such vessels to remain financially viable. In addition, government cargo volumes have fallen in recent years. In response to this challenge, Congress increased the MSP stipend from $3.5 million per vessel for fiscal year 2016 to $4.99 million per vessel for fiscal year 2017. MARAD officials said this increase has temporarily stabilized the financial situation of MSP vessel operators. However, MARAD officials stated trends in operating costs and government cargo suggest this will remain an ongoing challenge. Second, a potential shortage of U.S.-citizen mariners available to crew the government-owned reserve fleet during a crisis is a challenge. DOD counts on mariners working on U.S.-flag vessels to crew this fleet when activated. A MARAD working group recently estimated a shortage of over 1,800 mariners in the case of a drawn-out military effort, although it also recommended data improvements to increase the accuracy of the count of available mariners. The Department of Transportation (DOT) has drafted but not issued the national maritime strategies mandated by Congress. The strategies are intended to address U.S.-flag vessels' competitiveness and ensure the long-term viability of U.S.-flag vessels and U.S.-citizen mariners. According to DOT officials, a combined draft strategy was developed under the previous administration but is now being reviewed by the current administration. DOT has not established a timeline for finalizing the strategy even though it was to be completed by 2015. Without establishing a timeline to complete this required strategy, DOT continues to delay providing decision-makers the information they need to determine how best to address the challenges facing the U.S.-flag fleet. GAO recommends that DOT complete the national maritime strategy and establish time frames for its issuance. DOT concurred with our recommendation and provided technical comments, which we incorporated as appropriate.", "document_type": "gao"}
{"report": "USMS mission areas include fugitive apprehension, witness protection, and federal prisoner transportation, among others. There are 94 U.S. Marshals—one for each federal judicial district—who are presidentially appointed and direct agency operations in each district. U.S. Marshals are considered to generally operate autonomously from headquarter offices and divisions. USMS’s current workforce consists of roughly 3,709 Deputy U.S. Marshals and Criminal Investigators, and approximately 1,435 Detention Enforcement Officers and administrative employees. In general, a cadre of Deputy U.S. Marshals in each district collectively conducts various activities associated with the USMS mission areas. In addition, Deputy U.S. Marshals and Criminal Investigators who are assigned to headquarter operational divisions are located in district offices and work collectively with district employees across the 94 districts to carry out division functions. Deputy U.S. Marshals are categorized into two federal government occupational series – 0082 and 1811. USMS typically hires entry-level Deputy U.S. Marshals in the 0082 series at the GS-5 or GS-7 level. At the GS-11 level, deputies automatically convert to the 1811 series and receive non-competitive career ladder promotions through GS-12 if they complete the required waiting period for advancement to the next grade level and maintain an acceptable level of performance. For GS-13 and above, deputies must compete for promotions through the operational merit promotion process. USMS’s Human Resources Division (HRD) is responsible for issuing and implementing policy guidelines, revisions, and supplements in accordance with appropriate regulations and merit system principles. HRD also periodically assesses the effectiveness of merit promotion policy, assists in filling division and district vacancies, and reports officials who inappropriately discriminate against candidates, and candidates who engage in improper behavior, such as willful exaggeration, misstatements, or other abuses of the application process. USMS’s Office of Professional Responsibility (OPR) oversees the internal compliance review of USMS staff, division, and district offices, which assess compliance with DOJ and USMS policies and procedures, and ensures the integrity of the agency’s internal controls. Congress passed the Pendleton Act in 1883, establishing that federal employment should be based on merit. The nine merit system principles established by the Pendleton Act were later codified as part of the Civil Service Reform Act of 1978. The first merit principle indicates that federal personnel management should be implemented consistent with certain merit system principles, including that selection and advancement should be determined solely on the basis of relative ability, knowledge, and skills, after fair and open competition which assures that all receive equal opportunity. Title 5 of the United States Code refers to the government-wide personnel management laws and related provisions generally applicable to federal employment. While title 5 of the United States Code generally outlines the rules agencies must follow to make appointments in the competitive service, excepted service, and the senior executive service, agencies have significant discretion to design and implement internal merit promotion policies and processes. Title 5 also states that federal personnel management should be implemented consistent with merit system principles that protect federal employees against “personal favoritism.” According to MSPB, personal favoritism occurs when a supervisor or selecting official grants an advantage to one employee or candidate but not another similarly situated employee or candidate based on friendship or other affinity rather than a legitimate merit-based reason. Favoritism is distinct from discrimination on legally protected bases and is frequently more difficult to clearly identify when it occurs. OPM is responsible for overseeing all policy created to support Federal human resources departments as well as for ensuring that these policies are properly implemented and continue to be correctly carried out. OPM delegates many personnel decisions to federal agencies, but is responsible for establishing and maintaining an oversight program ensuring that the personnel management functions it delegates to agencies are in accordance with merit system principles and the standards established by OPM for conducting those functions. OPM has also established minimum qualification requirements for hiring or promoting individual employees under the competitive process. In addition, OPM allows agencies to make minimum qualification requirements more specific by adding selective placement factors. According to OPM, selective placement factors identify any qualifications that are important for the job and are required when an individual starts the job. Candidates who do not meet selective placement factors are ineligible for further consideration. OPM generally allows agencies to establish selective placement factors for any position without prior OPM approval, but requires agencies to establish and document selective placement factors through the job analysis process. OPM guidance also states that selective placement factors have four characteristics: extensive training or experience to develop; essential for successful performance on the job (i.e., if individuals do not have the selective factor, they cannot perform the job); almost always are geared toward a specific technical competency; cannot be learned on the job in a reasonable amount of time. We determined that the USMS merit promotion policy aligns with relevant provisions of title 5 of the United States Code, and title 5 of the Code of Federal Regulations. Specifically, the most recent version of the USMS Merit Promotion Plan, which was revised in November 2016, outlines the mechanisms for affording merit staffing and promotional opportunities to competitive status candidates for GS-13, GS-14, and GS-15 1811 operational law enforcement positions. The plan states that it is the policy of the USMS to maintain a sound staffing program that will ensure that USMS fills positions from among the best qualified candidates and that the selection, assignment, and promotion of employees are on the basis of job-related criteria. The Merit Promotion Plan cites parts of title 5 of the Code of Federal Regulations as the governing authority under which the plan was developed and aligns with key provisions of title 5 of the United States Code and title 5 of the Code of Federal Regulations. Agencies must design and administer merit promotion programs to ensure a systematic means of selection for promotion based on merit. These programs must conform to five requirements outlined in title 5 of the Code of Federal Regulations. Table 1 describes the five requirements and how key provisions in the USMS Merit Promotion Plan align with these requirements. USMS has developed a multi-step process based on the USMS Merit Promotion Plan to assess and select eligible candidates for promotion. To be considered eligible for promotion to GS-13, GS-14, or GS-15 law enforcement positions, candidates must (1) serve one year in an operational position at the next lower grade than the position desired; (2) take the most recent USMS merit promotion examination, which is administered every two years; and (3) submit required documents, including the promotion application package, during an annual open season submission process. Once candidates have met these prerequisites, they may apply to individual position vacancy announcements, which are advertised electronically to all USMS employees. Figure 1 depicts the multiple steps in the USMS merit promotion process. Table 2 provides a detailed description of the multiple steps in the USMS merit promotion process. USMS does not monitor the implementation of the scoring component of its rating process or compliance with its temporary promotion policy, but is taking steps to improve these aspects. We found that raters may directly compete with candidates whose merit promotion packages they score. For example, for an open GS-13 position, a GS-12 employee may promote into the position or a GS-13 employee may be laterally reassigned to the position. Employees seeking a lateral reassignment to another district or division are not required to submit a merit promotion application package during the open season, but instead submit documentation to the merit promotion staff to confirm their eligibility for a lateral reassignment. Thus, a GS-13 employee who serves as a rater may directly compete as a lateral candidate with a GS-12 employee seeking a promotion to the same position. Some USMS employees in our discussion groups expressed the view that the rating process is biased due to this potential conflict of interest. Specifically, seven employees across multiple districts, including four who had served as raters, expressed the view that raters may have personal incentives to score strong candidates lower because they may compete with these candidates for the same positions. The Office of Management and Budget’s (OMB) Circular No. A-123, Management’s Responsibility for Internal Control (A-123) explains that an agency should have processes in place to detect and mitigate potential employee conflicts of interest to demonstrate a commitment to integrity and ethical values. We found that USMS does not have a process in place to eliminate potential rater conflicts of interest. USMS stated that it would be difficult to detect situations where raters who might be seeking a lateral reassignment would be scoring a potential competitor, but acknowledged that to the extent this is occurring, it would be a conflict of interest. USMS also does not monitor the implementation of the rating component of its process to ensure that raters complied with a key merit promotion process requirement. Specifically, USMS guidance states that raters are expected to decline to score a candidate’s application if there is a conflict of interest with the candidate, for example, a former employee or supervisor relationship or a close personal relationship. USMS officials explained that using two raters to score each merit promotion application is intended to mitigate personal bias. However, during our discussion groups, 4 employees who had served as raters said they had directly observed raters scoring applications for employees with whom there existed possible conflicts of interest. Additionally, 18 employees in our discussion groups told us they had heard from colleagues who served on rating panels that raters have used personal knowledge of candidates to influence their scoring. Another 16 employees expressed a related concern that raters can see the names of the applicants they are scoring. According to HRD officials, they relied on raters to decline to score applications of candidates for which they may have personal knowledge and only use the information in the package to determine candidate scores. Although USMS does not monitor the implementation of key aspects of its rating process to mitigate potential rater conflicts of interest or bias, USMS has begun to implement changes that could address these deficiencies. In February 2017, during the course of our review, USMS announced a planned change to the process the agency uses to assess the experience component of candidate applications. Under the existing process, USMS raters collectively score the experience narrative component, which helps determine the overall merit promotion score. The planned change entails having a third-party contractor, rather than USMS employees, determine candidates’ competency scores using a scenario- based competency assessment. As part of the new process, USMS also updated the scoring rubric based on the new competency assessment, which includes the elimination of the experience category (see table 3). USMS started to implement this change to the process during the summer 2017 promotion cycle for GS-13 promotions. USMS plans to evaluate the effectiveness of the new process during the fall of 2017 and determine whether the new process is ready to be implemented for GS- 14 and GS-15 promotions during the next promotion cycle. If USMS effectively implements these planned changes, these actions could address the deficiencies we identified by reducing the potential for rater conflict of interest and bias because independent, third-party raters will assess candidate qualifications, rather than USMS employees evaluating their colleagues. We reviewed USMS compliance with federal guidelines for noncompetitive temporary promotions and found, in a few instances, that USMS violated federal guidelines and its merit promotion policy by extending some noncompetitive temporary promotions beyond the regulatory limit of 120 days. According to USMS officials, they typically use temporary promotions to fill open positions between merit promotion cycles. A temporary promotion may also be used to temporarily promote a GS-14 employee to the Chief Deputy position in the event a U.S. Marshal resigns and the Chief Deputy becomes the acting U.S. Marshal. According to title 5 of the Code of Federal Regulations and the USMS Merit Promotion Plan, individual employees may receive noncompetitive temporary promotions or details to a higher-graded position, or a position with known promotion potential, if the total time spent in any noncompetitive position is 120 days or less within a 12-month timeframe. USMS may also fill open positions between cycles using another type of temporary promotion for up to one year; however, employees are required to compete for temporary promotions beyond 120 days through the merit promotion process. These requirements help USMS use a systematic process of selection according to merit. We analyzed all 844 noncompetitive temporary promotion selections (of 120 days or less) from October 2015 through February 2017 and found 9 instances in which the USMS exceeded the regulatory limit of 120 days for individual employees. These 9 instances exceeded the statutory limit by approximately 30 days on average, while ranging from 5 days to 103 days. USMS officials acknowledged that because they manually enter the noncompetitive temporary promotion end dates into the system that contains the temporary promotions data, they have made errors in reviewing these dates, such as incorrectly adding dates for candidates who have received multiple noncompetitive temporary promotions that exceeded a 12-month timeframe. According to HRD, this system has internal checks and controls to ensure an employee’s temporary promotion does not go beyond the not-to-exceed date. For example, the system does not allow an employee who received a noncompetitive temporary promotion to a higher grade level to continue to be paid at the higher level beyond the date the temporary promotion is set to expire unless HRD processes an action to extend the promotion. Otherwise, to ensure the employee continues to be paid, HRD must process an action to revert the employee back to their original grade level. USMS officials explained that they must manually review instances in which employees receive multiple noncompetitive temporary promotions within a year, to ensure the total time spent serving in these positions does not exceed 120 days during any 12-month period. Despite having identified relatively infrequent instances of non- compliance, we note that agencies are required to comply with federal regulations. As a result of our review, USMS took immediate steps to strengthen its internal controls to ensure its compliance with these temporary promotion regulations. Specifically, USMS reported to us that they developed a spreadsheet to help staffing specialists correctly calculate the number of days the employee is eligible for a temporary promotion. Moreover, USMS has developed training on how to use the new tool and on the federal regulations that guide temporary promotions, which it plans to provide to staffing specialists in October 2017. Finally, USMS plans to incorporate a regular review of temporary promotion actions into the HRD standard operating procedure. USMS provides verbal guidance to instruct raters on how to score the experience category of merit promotion packages, which may result in inconsistent application of the guidance. USMS Merit Promotion Procedures generally state that raters assign a numerical grade to each experience category—such as problem-solving or leadership—by comparing how the experience described in the application relates to the established benchmarks. The benchmarks, which are provided to raters, contain descriptions of relevant experience that are designed to guide the raters as they assign scores to specific knowledge, skills and abilities, such as supervising staff and working with databases. At the beginning of the scoring process, each rating panel receives verbal guidance from merit promotion staff, which entails using actual candidate applications as examples and verbally discussing how to use professional judgment to apply the benchmarks. Some employees in our discussion groups expressed the opinion that the guidance provided to raters to score candidate experience narratives is unclear, which results in inconsistent scoring. Specifically, during our discussion groups, 39 employees across multiple districts, including 7 employees who had served as a rater, stated that raters often had different interpretations of HRD’s expectations for how to apply the benchmarks. For example, they stated that some raters determined scores based on whether a candidate’s narrative contained the specific language in the benchmark. Other raters, by contrast, determined scores based on whether the candidate met the intent of the benchmark, regardless of whether the candidate included the specific language in the benchmark. As a result, employees in our discussion groups explained that highly qualified candidates with relevant management and supervisory experience may receive a low experience score if a rater determines that the candidate did not use the exact language appearing in the benchmarks. Furthermore, 70 of 85 employees (82 percent) expressed the view that inconsistent scoring of similarly qualified candidates creates the perception that the rating process is unfairly subjective. Specifically, they asserted that comparable candidates with similar types of experience have received vastly different scores depending on which raters scored their applications. Two employees in different districts also said that they re-submitted the same experience narrative as the prior year, and received a significantly different score each year. Additionally, approximately 20 employees contended that raters may be influenced by their own professional experiences. For example, raters who have operational experiences that are different from candidates’ experiences may not sufficiently understand the duties or professional experiences described by candidates. Consequently, they argued, these raters may be limited in their ability to fairly rate some candidates’ experiences. Although USMS is implementing a new competency assessment process for GS-13 merit promotions, it is not clear at this time whether the new process will address concerns about inconsistent rater scoring because the agency plans to use new benchmarks that were developed by a third- party contractor in collaboration with USMS subject matter experts to determine candidate scores. According to USMS officials, the new process will entail professionally trained assessors using evaluation guidelines to assess how well USMS promotion candidates respond to scenario-based questions. In collaboration with the contractor, USMS also developed evaluation guidelines that include plans for monitoring quality assurance over the rating process. For example, according to USMS officials, the third-party contractor will conduct random spot checks to assess the consistency with which raters apply the new benchmarks and will provide USMS a report on the results of the quality assurance monitoring. However, given that USMS implemented these changes near the end of our review, we did not assess the implementation of the new process or the related quality assurance monitoring. Furthermore, until USMS determines a timeframe for implementing the new competency assessment at the GS-14 and GS-15 levels, the current rating process will remain in effect. Standards for Internal Control in the Federal Government call for agency management to determine the consistency with which controls are applied. Furthermore, it states management should document policies in the appropriate level of detail to allow management to effectively monitor the control activity. While USMS provides raters with benchmarks and verbal guidance on how to apply the benchmarks when scoring applications, USMS has not documented guidance for raters. Six employees who had served as raters said the rating guidance provided was insufficient or the guidance could be improved. By developing clear and specific documented guidance on how raters should interpret and apply the benchmark guidelines, USMS could minimize rater subjectivity and scoring inconsistency for both the current rating process and the forthcoming competency-based assessment. According to an OPM report summarizing 2016 Federal Employee Viewpoint Survey (FEVS) data, about one-third of USMS employees who answered the survey indicated they agree that promotions are based on merit. Specifically, in response to the survey statement, promotions in my work unit are based on merit, an estimated 41 percent of USMS respondents strongly disagreed or disagreed with the statement, while 34 percent strongly agreed or agreed, and 25 percent neither agreed nor disagreed. Based on our review of an agency report examining district and division-level USMS 2016 FEVS scores, district and division scores varied greatly among those employees who responded to the FEVS. For example, across the 10 districts with the lowest reported ratings in 2016, we found that 63 percent to 78 percent of respondents disagreed that promotions are based on merit. By comparison, across the 10 districts with the highest reported satisfaction ratings in 2016, 7 percent to 16 percent of respondents disagreed that promotions are based on merit. Most of the USMS employees at four district locations who met with us and answered our questions viewed the merit promotion process unfavorably, citing concerns primarily related to favoritism in the process. For example, 57 of 82 employees (70 percent) indicated that they had low or no trust that the merit promotion process is fair and based on merit. Employees in lower grade levels expressed a greater degree of mistrust than did those in higher grades (see table 4). Specifically, 45 of 53 GS-12 employees (85 percent) indicated that they had low or no trust in the merit promotion process, while just less than half of GS-13 employees (10 of 22) and relatively few GS-14 employees (2 of 7) said they had low or no trust in the merit promotion process. While most employees (51 of 70, or 73 percent) answered that sometimes qualified candidates get promoted; several explained during our discussion groups that they believe the promotion of less qualified—or unqualified—employees occurs frequently enough to affect morale. Further, 47 of 84 employees (56 percent) noted that morale has deteriorated as a result of merit promotion processes or selections. Finally, most of the employees (66 of 85, or 78 percent) answered that USMS has not taken any steps to understand or improve employee morale or they were unsure of whether any steps had been taken. In addition, USMS employees we talked with during our discussion groups expressed concerns about the USMS merit promotion process. The prevalent themes that emerged during these groups were concerns that (1) promotions are based on favoritism, (2) the promotion process lacks transparency, and (3) promotion guidance is unclear and promotion candidates do not receive feedback. Employees in our discussion groups expressed the view that many promotion decisions are based on personal relationships over individual merit. Notably, 51 of 85 employees in our discussion groups cited examples of qualified candidates who were passed over for promotion by those whom they believed were less-qualified due to favoritism. From their perspective, there have been instances where candidates with high promotion package scores and good reputations as supervisors have not been promoted, while lower scoring candidates with poor reputations as supervisors who have personal relationships with decision-makers have been promoted. Further, 36 employees in our discussion groups said they believed that career-enhancing opportunities, such as temporary promotions, which improve employees’ promotion potential by providing them with directly related experience in positions for which they may be competing, are often provided unfairly to employees based on personal relationships. Employees in our discussion groups also expressed the view that some employees receive more guidance on their application from supervisors than do others, which they attributed to favoritism. As part of the merit promotion process, supervisors are required to verify the experience statements submitted by candidates. We found that among the limited number of supervisors with whom we met, there were varying interpretations of their responsibility in meeting this requirement. Specifically, 1 supervisor viewed his role as strictly verifying the experience and providing no further input. However, 7 other supervisors viewed their role as providing guidance and mentorship to employees by offering advice for improving candidate applications. Finally, 5 additional supervisors said they provided additional guidance to employees only when specifically requested. Of the 85 employees in our discussion groups, 28 indicated that they believed supervisors helped certain candidates develop their merit promotion packages, which provides an unfair advantage over candidates who do not receive such guidance. Additionally, nine employees raised concerns that USMS has sometimes expanded certificate of eligibles lists inconsistent with USMS policy to include preselected, favored candidates. According to the USMS Merit Promotion Plan, if there are more than five candidates applying for a position, at least the top five scoring candidates will generally be included on the list and subsequently referred for candidate selection. In some circumstances, more than five eligible candidates are allowed to be placed on the list. For example, if there is a tie for the last position on the list, all candidates with that score will be included. Additionally, candidates with a score within one point from the fifth highest scoring candidate would also be included on the list. Finally, if there are multiple vacancies for the same position (same series, grade, title, and location), one additional name for each vacancy may be added to the list. To examine USMS compliance with this policy, we analyzed certificate of eligibles lists and the corresponding candidate scores for fiscal years 2015 and 2016. For fiscal year 2015, we examined all 213 position vacancies and found 2 instances where additional candidates were included on the list inconsistent with USMS’ established policy. Specifically, these 2 lists contained the names of candidates with scores that were more than one point below the fifth highest-scoring candidate, and of these 2 instances, 1 candidate was promoted. For fiscal year 2016, we examined all 224 position vacancies and did not find any inconsistencies with USMS’ established policy. Whistleblowers who raised concerns about improper promotion practices to Congress had alleged that USMS managers used selective placement factors to limit competition for certain positions or to tailor vacancy announcements for preselected, favored candidates. Similarly, five employees in our discussion groups expressed the view that USMS used selective placement factors to limit competition or pre-select certain candidates. In this regard, we reviewed USMS compliance with OPM requirements for the use of selective placement factors. Specifically, OPM requires that agencies document the justification for using selective placement factors through a job analysis process. We reviewed all job vacancy announcements for fiscal year 2015, fiscal year 2016, and part of fiscal year 2017 (October 2016 through April 2017) to determine if a job analysis had been performed when selective placement factors were included in the announcement. In fiscal year 2015, there were 213 vacancy announcement positions, and 12 contained selective placement factors. We found USMS had not completed a job analysis justification for any one of these 12 announcements. In fiscal year 2016, there were 224 vacancy announcements, and 15 contained selective placement factors. USMS completed a job analysis justification for all 15. For part of fiscal year 2017, there were 171 vacancy announcements, and 23 contained selective placement factors, each of which had a justification. HRD officials acknowledged that in the past they did not consistently document the agency’s use of selective placement factors by conducting job analysis justifications, as required by OPM, but have consistently complied with this requirement since April 2016. Employees in our discussion groups also expressed the view that poor communication and limited transparency about the merit promotion process and certain management decisions further contribute to employees’ negative perceptions of the merit promotion process. For example, among the 85 employees in our discussion groups: Sixty-three employees expressed the view that the merit promotion process lacks transparency because HRD does not effectively communicate with employees about procedural steps or process changes, contributing to a lack of understanding about the process. Forty-eight employees expressed the view that they have a limited understanding of the rating and ranking process or that there is no mechanism to dispute or appeal their score if they do not believe they were fairly rated. Nineteen employees stated that HRD does not provide information about policy or process changes until the changes have been implemented and that they initially learn about forthcoming process changes through other employees and hearsay, causing confusion and frustration. Twenty-five employees expressed the perspective that USMS management cancels vacancy announcements when preselected or favored candidates do not appear on the certificate of eligibles list. According to USMS officials, the agency cancels an announcement when the announcement posting was made in error (i.e., the position was not actually available) or when they need to reassign an employee to a different location. We found vacancy cancellations were infrequent—9 of 437 announcements—during fiscal years 2015 and 2016; however, we noted that USMS canceled 5 of the 9 announcements after final certificate of eligibles were issued, which may have contributed to employees’ concerns. Another prevalent theme that emerged during our discussion groups was that the merit promotion process is unclear, and that employees do not receive feedback when they do not get promoted. Notably, among the 85 employees in our discussion groups: Forty-six employees described the merit promotion process as unclear. Fifty-nine employees stated that the merit promotion application package does not reflect their qualifications to perform specific jobs or their readiness to be promoted. Thirty-seven employees told us they are not notified of key steps in the merit promotion process, such as whether they make the certificate of eligibles list. Thirty-eight employees stated that because they are not provided feedback when they are not selected for a promotion, they do not have a clear understanding of how the USMS promotion process assesses the extent to which candidates are ready for promotion. While there is no formal mechanism for providing specific feedback, HRD officials explained, they may provide general feedback about the process to candidates who proactively request feedback. However, as part of the promotion process, HRD officials do not provide employees with specific feedback at that time about their performance or readiness for promotion. HRD officials also noted that as part of the new competency-based assessment process, candidates will receive detailed instructions and guidance on how candidates will be assessed for each competency. HRD officials acknowledged that informing candidates about key merit promotion steps, such as making the certificate of eligibles, would help improve transparency and employee morale. They further explained that while they do not directly inform candidates about making the certificate of eligibles, in 2016 during the course of our review, they began posting the cutoff scores for each job so candidates are now able to determine whether they made the certificate of eligibles by comparing their final score to the cutoff score for each position. Federal guidance notes that perceptions of favoritism, particularly when combined with unclear guidance, a lack of transparency, and limited feedback, negatively impact employee morale. According to MSPB, perceptions of favoritism are damaging to employee morale regardless of their basis in fact, because employees’ perceptions are their reality. Moreover, MSPB noted that providing honest feedback from selecting officials can help employees improve their readiness for future opportunities, and provide transparency to decrease perceptions of favoritism. The report further noted that to achieve the goals of fair and effective management of the federal workforce, organizations must establish clear expectations for supervisors, and supervisors must be aware of employees’ perceptions and exercise sound judgment when making a variety of decisions such as promotion selections, work assignments, training, performance management, and providing workplace flexibilities. In addition, Standards for Internal Control in the Federal Government state that management should communicate quality information down and across reporting lines to enable personnel to perform key roles in achieving objectives, addressing risks, and supporting the internal control system. Providing specific and consistent information to employees about key steps in the merit promotion process and internal management decisions, and constructive feedback to employees on the results of the promotion process, including employee readiness for promotion, would improve transparency and help mitigate employee perceptions of favoritism that have negatively impacted employee morale. USMS has taken limited steps to understand and address employee concerns about its merit promotion process. Specifically, after analyzing the results of the 2016 FEVS responses, USMS headquarters staff acknowledged employees’ negative perceptions of the merit promotion process as an internal agency challenge. In an update provided to DOJ on plans for addressing employee engagement challenges identified in the FEVS, USMS reported that the primary employee engagement challenges are the geographical dispersal and management structure of district offices (since USMS districts are led by political appointees, who have different management styles). To address this challenge, USMS disseminated an agency-wide memorandum emphasizing to all employees that each employee and manager has an individual responsibility to take action to improve engagement at the local level. Also, USMS encouraged local managers to evaluate their FEVS results and formulate an action plan that fits their individual district or division. USMS does not track the extent to which district and divisions complete action plans and does not require district or division offices to submit their action plans to HRD. We found that none of the four districts we visited had developed a written action plan in response to the 2016 FEVS results. At three of these districts, the Chief Deputy U.S. Marshals indicated to us that no steps were being taken to develop an action plan because they did not consider it a required or necessary step. However, the Chief Deputy U.S. Marshal in one district explained that while he did not document an action plan, he took steps to better understand employee engagement challenges identified in the FEVS for his district. Specifically, he facilitated small discussion groups to better understand low employee agreement with two FEVS survey statements, including promotions in my work unit are based on merit. During these discussions, he said that he aimed to clarify areas where employees’ negative perspectives were based on a lack of understanding about the merit promotion process. While USMS has taken some positive steps, having a better understanding of the basis for these concerns, and how to address them, will likely require that USMS take additional steps. Most of the employees we interviewed said they were unaware of whether USMS has taken any steps to understand or improve employee morale related to merit promotions, and some feared raising concerns to management. Specifically, 25 of 85 (29 percent) employees in our discussion groups said no steps were taken to understand or improve employee morale, while an additional 41 employees (48 percent) were unsure that any steps were taken. Further, 24 of 85 employees in our discussion groups expressed fears of raising concerns to USMS district or headquarters management, citing allegations of district management intimidating or retaliating against employees who raise issues, such as not selecting those employees for career-enhancing opportunities or promotions. To the extent that employees fear they will not get promoted if they raise concerns to management and management does not have sufficient information to understand the nature and causes of employee concerns about the merit promotion process, taking meaningful and effective steps to address the concerns will be difficult. OMB and OPM intend for agency managers to use the findings in the FEVS to develop policies and action plans for improving agency performance, including the enhancement of employee engagement and satisfaction. According to OPM, action plans should be developed at multiple levels; agency-wide, by subcomponent, and several levels down in the agency. Also, many agencies have found it beneficial to conduct focus groups after reviewing survey results to better understand the underlying causes of employee engagement scores and get employee suggestions for how to improve. OPM’s action planning guidance also suggests that agencies specify time frames for accomplishing the actions, who will be responsible for implementing the actions, who will be affected by the actions, the resources required, and a plan to communicate these actions to managers and employees. Although HRD disseminated a memorandum requesting district and division managers to develop action plans, it has not developed an agency-wide action plan, nor has it taken steps to ensure that all districts and divisions develop action plans. By delegating responsibility for developing action plans to individual districts and divisions, HRD does not have consistent or adequate information to understand the nature and causes of employee concerns across districts and divisions. Without this information, USMS is unable to address employee concerns about its merit promotion process and remains vulnerable to adverse effects, such as decreased employee satisfaction and engagement, and decreased agency performance. USMS management stated that they take employee concerns and feedback into consideration as appropriate, but are primarily concerned with ensuring the process is implemented in accordance with legal requirements. They further stated that they generally believe the USMS merit promotion process to be fair, and attributed some employee concerns with the merit promotion process to a lack of available positions relative to the number of employees who are ready for promotion. Nevertheless, we believe an agency-wide action plan would help USMS more fully understand and address areas where employees express negative perceptions of the merit promotion process. Selecting candidates based on their qualifications instead of patronage has been the foundation of the federal hiring system for more than 130 years. Federal guidelines give agencies significant discretion to design and implement their merit promotion processes to best meet their needs. Since 2016, USMS has been implementing changes to its merit promotion process in response to multiple internal and external investigations, which substantiated allegations made by whistleblowers. While the new competency assessment process has the potential to reduce the risk of rater conflicts of interest and bias, USMS could still do more to further improve its process. Developing specific guidance to help raters more consistently score candidate applications would minimize scoring subjectivity. Continuing to take steps to improve this process would better position USMS to improve employee engagement. In light of the significant distrust in the merit promotion practices we heard from employees, USMS management can also take further action to better understand and appropriately address employee concerns, such as providing employees specific feedback on the results of the promotion process, including their readiness for promotion and developing an agency-wide action plan to more fully understand and address areas where employees express negative perceptions of the merit promotion process. More actively engaging employees could also bolster ongoing USMS efforts to improve the promotion process and enhance agency performance. We recommend that the Director of the USMS take the following actions: Develop specific documented guidance—both for the current and new processes—to enhance raters’ ability to consistently interpret and apply experience-based benchmarks for GS-14 and GS-15 positions and competency-based benchmarks for GS-13 positions when evaluating candidate qualifications. (Recommendation 1) Develop and implement a mechanism to provide specific feedback to employees on the results of the promotion process, including their readiness for promotion. (Recommendation 2) Develop and implement an agency-wide action plan to more fully understand and address areas where employees express negative perceptions of the merit promotion process. Consistent with OPM guidance in this area, the plan should specify time frames for accomplishing the actions, who will be responsible for implementing the actions, who will be affected by the actions, the resources required, and a plan to communicate these actions to managers and employees. (Recommendation 3) We provided a draft of this report to DOJ and USMS for review and comment. Liaisons from DOJ and USMS responded in an email that DOJ had no formal comments on the report. In addition, the USMS liaison concurred with the recommendations and provided technical comments, which we incorporated as appropriate. We are sending copies of this report to DOJ, the Director of the USMS, appropriate congressional committees and members, and other interested parties. In addition, this report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions, please contact Diana Maurer at (202) 512-8777 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made significant contributions to this report are listed in appendix I. In addition to the contact named above, Brett Fallavollita (Assistant Director), Carissa Bryant (Analyst-in-Charge), Jessica Du, and Kelsey Hawley made key contributions to this report, along with David Alexander, Willie Commons III, Dominick Dale, and Eric Hauswirth.", "summary": "USMS mission areas include fugitive apprehension, witness protection, and federal prisoner transportation, among others. USMS whistleblowers recently alleged that USMS officials engaged in improper promotion practices—such as routinely preselecting favored candidates. Investigations have substantiated multiple whistleblower allegations which has raised questions about the integrity of USMS's merit promotion process. USMS announces about 260 law enforcement promotion opportunities annually. GAO was asked to review USMS's promotion processes and policies and effects that USMS promotion practices have on employee morale. This report examines (1) the extent to which the USMS's merit promotion policies are aligned with federal guidelines; (2) the extent to which USMS monitors its merit promotion processes; and (3) the steps, if any, USMS has taken to understand and address employee concerns about its merit promotion policies and processes. GAO analyzed data and documents on USMS promotions from October 2015 through April 2017, and found these data to be sufficiently reliable for the purposes of GAO's study. GAO also analyzed USMS documentation, and interviewed USMS officials and non-generalizable groups of employees (85 in total) in four district locations. The U.S. Marshals Service's (USMS) merit promotion policy aligns with relevant provisions in title 5 of the United States Code and Code of Federal Regulations, which are the government-wide laws and related provisions agencies must follow to make federal appointments. Agencies must design and administer merit promotion programs to ensure a systematic means of selection for promotion based on merit and these programs must conform to five key requirements outlined in title 5. GAO found that the USMS merit promotion plan, as revised in November 2016, aligned with each of these five requirements. For example, the first requirement states that agencies must establish merit-based procedures for promoting employees that are available in writing to candidates. The USMS merit promotion plan, which is available to employees, outlines such procedures. USMS is taking steps to improve how it monitors the implementation of the scoring component of its process to rate promotion applications, but lacks documented guidance to ensure consistent compliance with its merit promotion policy. GAO found that USMS does not adequately monitor the rating process, which allowed for conflicts of interest with raters who may compete with candidates whose applications they score. USMS also does not monitor the rating process to ensure that raters complied with a key requirement—that raters decline to score applications of candidates with whom there is a conflict of interest, such as a supervisor-employee relationship. USMS is implementing a process change that, if implemented effectively, can address these two deficiencies. The new process entails having a third-party contractor, rather than USMS employees, determine candidates' scores. Finally, GAO found that USMS lacks documented guidance on rater scoring. USMS only provides verbal guidance to instruct raters on how to score the experience category of merit promotion packages, creating inconsistent application of the guidelines. Employees GAO met with expressed the view that such discrepancies create the perception that the rating process is unfairly subjective. Developing clear and specific documented guidance on how raters should apply the benchmark guidelines could minimize scoring inconsistency and potential rater subjectivity for both the current rating process and the new competency-based assessment. USMS has taken limited steps to understand and address employee concerns about the promotion process. An estimated 41 percent of USMS respondents to the 2016 Office of Personnel Management Federal Employee Viewpoint Survey strongly disagreed or disagreed that USMS promotions are merit-based, while 34 percent strongly agreed or agreed, and 25 percent neither agreed nor disagreed. During discussion groups GAO held at four USMS district locations across the U.S., employees frequently expressed negative views and many indicated low or no trust that the process is fair and merit-based. Although USMS has acknowledged employees' negative perceptions of the promotion process, it has not developed an agency-wide action plan in accordance with federal guidance to better understand the nature and causes of employee concerns across districts and divisions. Providing specific and consistent information to employees about key steps in the merit promotion process and internal management decisions could improve transparency and help mitigate employee perceptions of favoritism that have negatively impacted employee morale. GAO recommends that USMS develop specific rater guidance and develop and implement an agency-wide action plan to better understand and address employee concerns, among other steps. USMS concurred with the recommendations.", "document_type": "gao"}
{"report": "Definitions of and terms for recovery housing can vary, and recovery housing may differ in the types of services offered and resident requirements. Alcohol- and drug-free housing for individuals recovering from SUD may be referred to as “recovery residences,” “sober homes,” or other terms. NARR has defined four levels of recovery housing (I through IV) based on the type and intensity of recovery support and staffing they offer, up to and including residential, or clinical, treatment centers. For the purposes of this report, we use the term “recovery housing” to refer to peer-run, nonclinical living environments for individuals recovering from SUD in general, and “recovery homes” to refer to specific homes. These homes generally are not considered to be residential treatment centers, not eligible to be licensed providers for the purposes of billing private insurance or public programs—such as Medicaid and Medicare—and residents typically have to pay rent and other housing expenses themselves. Recovery home residents may separately undergo outpatient clinical SUD treatment, which is typically covered by health insurance. In addition, recovery homes may encourage residents to participate in mutual aid or self-help groups (e.g., 12-step programs such as Alcoholics Anonymous) and may require residents to submit to drug screenings to verify their sobriety. Residents may be referred to recovery homes by treatment providers, the criminal justice system, or may voluntarily seek out such living environments. In addition to SAMHSA, two national nonprofit organizations that have missions dedicated to recovery housing include NARR and Oxford House, Inc. NARR promotes standards for recovery housing, provides training and education to recovery housing operators and others, and conducts research and advocacy related to recovery housing to support individuals in recovery from SUD. As of January 2018, NARR’s membership comprised 27 state affiliates that work to promote and support NARR’s quality standards for recovery housing and other activities in their states. Of the 27 NARR affiliates, 15 were actively certifying recovery homes. Oxford House, Inc. connects individual Oxford Houses across the United States and in other countries. Individual Oxford Houses, which operate under charters granted by Oxford House, Inc., are democratically run, self-supporting homes. According to the Oxford House manual and related documents, all Oxford Houses are rentals, and residents are responsible for sharing expenses, paying house bills on time, and immediately evicting residents who drink or use illicit drugs while living in the house. Oxford House, Inc. maintains a directory of houses on its website, and individuals can search this directory for vacancies by state. Oxford Houses align with NARR’s definition of level I residences; that is, peer-run, self-funded, typically single family homes where residents have an open-ended length of stay. SAMHSA and other organizations recognize recovery housing as an important step in SUD treatment and recovery. Research has shown positive outcomes of recovery housing on long-term sobriety, such as at 6-, 12-, and 18-month follow up. However, according to SAMHSA and NARR officials, much of the available research on effectiveness of recovery housing focuses on the Oxford House population, and research on other types of recovery homes is limited. The nationwide prevalence of recovery housing is unknown because there are no comprehensive data regarding the number of recovery homes in the United States, although NARR and Oxford House, Inc. collect data on a subset of recovery homes across the United States. Specifically, NARR collects data only on recovery homes that seek certification from one of its 15 state affiliates that certify homes. However, NARR-certified homes may represent only a portion of existing recovery homes, as NARR does not know how many such homes are uncertified. As of January 2018, NARR reported that its affiliates had certified almost 2,000 recovery homes, which had the capacity to provide housing to over 25,000 individuals; NARR-certified recovery homes include recovery housing across all four NARR levels, including residential treatment centers that provide clinical services, which are outside the scope of our study. Oxford House, Inc. collects data annually on the prevalence and characteristics of Oxford Houses across the United States. In its 2017 annual report, Oxford House, Inc. reported that there were 2,287 Oxford Houses in 44 states that provided housing to a total of 18,025 individuals. Of the total number of Oxford Houses in 2017, 71 percent served men and 29 percent served women, with the average resident aged 37 years. The Oxford House, Inc. report also provides information on other characteristics of Oxford House residents. For example, of the 18,025 Oxford House residents in 2017, Oxford House, Inc. reported the following: 79 percent were addicted to drugs and alcohol; 21 percent were addicted to alcohol only. 77 percent had been incarcerated. 68 percent had previously experienced homelessness. 12 percent were veterans. 87 percent were employed. 98 percent regularly attended 12-step meetings, such as Alcoholics Anonymous or Narcotics Anonymous. 45 percent attended weekly outpatient counseling in addition to Average length of sobriety was 13.4 months. The five states we selected for review have taken actions to investigate and oversee recovery housing. Four of the five states have conducted law enforcement investigations of recovery homes in their states and some of these investigations have resulted in arrests and changes to public and private insurance policies. In addition to actions taken in response to state investigations, three of the five states in our review have also taken steps to formally enhance their oversight of recovery homes, and the other two states have taken other steps intended to increase consistency, accountability, and quality across recovery homes. Officials from four of the five states we reviewed (Florida, Massachusetts, Ohio, and Utah) told us that since 2007, state agencies have conducted, or are in the process of conducting, law enforcement investigations of unscrupulous behavior and potential insurance fraud related to recovery housing, and outcomes of some of these investigations included criminal charges and changes to health insurance policies. An official from the fifth state, Texas, told us that the state had not conducted any recent law enforcement investigations related to recovery housing. This official, from the Texas Department of Insurance, told us that the department received two fraud reports in 2014 and 2016 related to recovery homes and that the state was unable to sufficiently corroborate the reports to begin investigations. Across the four states, officials told us that potential insurance fraud may have relied on unscrupulous relationships between SUD treatment providers, including laboratories, and recovery housing operators, because recovery homes are not considered eligible providers for the purposes of billing health insurance. For example, treatment providers may form unscrupulous relationships with recovery housing operators who then recruit individuals with SUD in order to refer or require residents to see the specific SUD treatment providers. This practice is known as patient brokering, for which recovery housing operators receive kickbacks such as cash or other remuneration from the treatment provider in exchange for patient referrals. The extent of potential fraud differed across the four states, as discussed below. Officials from several state agencies and related entities described investigations into fraud related to recovery housing in southeastern Florida as extensive, although the scope of the fraud within the industry is unknown. In 2016, the state attorney for the 15th judicial circuit (Palm Beach County) convened a task force composed of law enforcement officials tasked with investigating and prosecuting individuals engaged in fraud and abuse in the SUD treatment and recovery housing industries. The task force found that unscrupulous recovery housing operators or associated SUD treatment providers were luring individuals into recovery homes using deceptive marketing tactics. Deceptive marketing practices included online or other materials that willfully misdirected individuals or their family members to recruiters with the goal of sending these individuals to specific treatment providers, in order to receive payments from those treatment providers for patient referrals. According to officials from the Florida state attorney’s office, these individuals, often from out of state, were lured with promises of free airfare, rent, and other amenities to recover in southern Florida’s beach climate. Recruiters brokered these individuals to SUD treatment providers, who then billed their private insurance plans for extensive and medically unnecessary urine drug testing and other services. Officials from the Florida state attorney’s office told us that SUD treatment providers were paying $300 to $500 or more per week to recovery housing operators or their staff members for every patient they referred for treatment. In addition, these officials cited one case in which a SUD treatment provider billed a patient’s insurance for close to $700,000 for urine drug testing in a 7-month period. Officials from the state attorney’s office noted that the recovery homes that the task force was investigating were not shared housing in the traditional, supportive sense, such as Oxford Houses, where residents equally share in the rent and division of chores, but rather existed as “warehouses” intended to exploit vulnerable individuals. As a result of these investigations, as of December 2017, law enforcement agencies had charged more than 40 individuals primarily with patient brokering, with at least 13 of those charged being convicted and fined or sentenced to jail time, according to the state attorney’s office. In addition, the state enacted a law that strengthened penalties under Florida’s patient brokering statute and gave the Florida Office of Statewide Prosecution, within the Florida Attorney General’s Office, authority to investigate and prosecute patient brokering. An official from the Massachusetts Medicaid Fraud Control Unit told us that the unit began investigating cases of Medicaid fraud in the state on the part of independent clinical laboratories associated with recovery homes in 2007. The unit found that, in some cases, the laboratories owned recovery homes and were self-referring residents for urine drug testing. In other cases, the laboratories were paying kickbacks to recovery homes for patient referrals for urine drug testing that was not medically necessary. According to the Medicaid Fraud Control Unit official, as a result of these investigations the state settled with nine laboratories between 2007 and 2015 for more than $40 million in restitution. In addition, the state enacted a law in 2014 prohibiting clinical laboratory self-referrals and revised its Medicaid regulations in 2013 to prohibit coverage of urine drug testing for the purposes of residential monitoring. Ohio has also begun to investigate an instance of potential insurance fraud related to recovery housing, including patient brokering and excessive billing for urine drug testing. Officials from the Ohio Medicaid Fraud Control Unit told us that the unit began investigating a Medicaid SUD treatment provider for paying kickbacks to recovery homes in exchange for patient referrals, excessive billing for urine drug testing, and billing for services not rendered, based on an allegation the unit received in September 2016. As of January 2018, the investigation was ongoing, and the Ohio Medicaid Fraud Control Unit had not yet taken legal or other action against any providers. Officials from other state agencies and related state entities, such as the state substance abuse agency and the state NARR affiliate, were not aware of any investigations of potential fraud on the part of recovery housing operators or associated treatment providers when we spoke with them and stated that this type of fraud was not widespread across the state. In August 2017, officials from the Utah Insurance Department told us that the department is conducting ongoing investigations of private insurance fraud similar to the activities occurring in Florida, as a result of a large influx of complaints and referrals it received in 2015. These officials told us that the department has received complaints and allegations that SUD treatment providers are paying recruiters to bring individuals with SUD who are being released from jail to treatment facilities or recovery homes; billing private insurance for therapeutic services, such as group or equine therapy, that are not being provided, in addition to billing frequently for urine drug testing; and encouraging patients to use drugs prior to admission to qualify patients and bill their insurance for more intensive treatment. In addition, insurance department officials told us that they believed providers are enrolling individuals in private insurance plans without telling them and paying their premiums and copays. According to these officials, when doing so, providers may lie about patients’ income status in order to qualify them for more generous plans. Officials found that providers were billing individual patients’ insurance $15,000 to $20,000 a month for urine drug testing and other services. Officials noted that they suspect that the alleged fraud was primarily being carried out by SUD treatment providers and treatment facilities that also own recovery homes. Officials told us that the department has not been able to file charges against any treatment providers because it has been unable to collect the necessary evidence to do so. However, according to insurance department officials, the state legislature enacted legislation in 2016 that gives insurers and state regulatory agencies, such as the state insurance department and state licensing office, the authority to review patient records and investigate providers that bill insurers. This authority may help the insurance department and other state regulatory agencies better conduct investigations in the future. In addition to actions taken in response to state investigations, three of the five states in our review—Florida, Massachusetts, and Utah—have taken steps to formally increase oversight of recovery housing by establishing state certification or licensure programs. Florida enacted legislation in 2015 and Massachusetts enacted legislation in 2014 that established voluntary certification programs for recovery housing. Florida established a two-part program for both recovery homes and recovery housing administrators (i.e., individuals acting as recovery housing managers or operators). According to officials from the Florida state attorney’s office and Massachusetts Medicaid Fraud Control Unit, their states established these programs in part as a result of state law enforcement investigations. In 2014, Utah enacted legislation to establish a mandatory licensure program for recovery housing. According to officials from the Utah substance abuse agency and the state licensing office, the state established its licensure program to, in part, protect residents’ safety and prevent their exploitation and abuse. Although state recovery housing programs in Florida and Massachusetts are voluntary and recovery homes and their administrators can operate without being certified, there are incentives for homes to become certified under these states’ programs, as well as incentives to become licensed under Utah’s program. Specifically, all three states require that certain providers refer patients only to recovery homes certified or licensed by their state program. Thus, uncertified and unlicensed homes in Florida, Massachusetts, and Utah would be ineligible to receive patient referrals from certain treatment providers. Further, state officials told us that state agencies are taking steps to ensure providers are making appropriate referrals. For example, according to officials from the Florida substance abuse agency, treatment providers may refer patients to certified recovery homes managed by certified recovery home administrators only and must keep referral records. These officials also told us that the state substance abuse agency can investigate providers to ensure they are referring patients to certified homes and issue fines or revoke providers’ licenses if the program finds providers are referring patients to uncertified homes. Recovery homes may also view certification as a way to demonstrate that they meet quality standards. For example, the official from the Massachusetts NARR affiliate told us that some residential treatment centers that are required to be licensed by the state are also seeking certification to demonstrate that they meet the NARR affiliate’s quality standards. To become state-certified or licensed, recovery homes in Florida, Massachusetts, and Utah must meet certain program requirements— including staff training, documentation submissions (such as housing policies and code of ethics), and onsite inspections to demonstrate compliance with program standards—though specific requirements differ across the three states. For example, while all three state programs require recovery housing operators or staff to complete training, the number of hours and training topics differ. In addition, for recovery homes to be considered certified in Florida, they must have a certified recovery housing administrator. Similar to Florida’s certification program for the homes, individuals seeking administrator certification must also meet certain program requirements, such as training in recovery residence operations and administration and legal, professional, and ethical responsibilities. Features of the state-established oversight programs may also differ across the three states, including program type, type of home eligible for certification or licensure, how states administer their programs, and initial fees. See table 1 for additional information on features of state- established oversight programs for recovery housing. State-established oversight programs in Florida, Massachusetts, and Utah also include processes to monitor certified or licensed recovery homes and take action when homes do not comply with program standards. For example, an official from the Florida Association of Recovery Residences—the state NARR affiliate and organization that certifies recovery homes in Florida—told us that the entity conducts random inspections to ensure that recovery homes maintain compliance with program standards. State-established oversight programs in the three states also have processes for investigating grievances filed against certified or licensed recovery homes. Further, officials from certifying or licensing bodies in all three states—the Florida Association of Recovery Residences, Massachusetts Alliance for Sober Housing, and the Utah Office of Licensing—told us their organizations may take a range of actions when they receive complaints or identify homes that do not comply with program standards, from issuing recommendations for bringing homes into compliance to revoking certificates or licenses. According to officials from the certifying body in Florida, the entity has revoked certificates of recovery homes that have acted egregiously or have been nonresponsive to corrective action plans. Officials from the certifying and licensing bodies in Massachusetts and Utah told us that these entities had not revoked certificates or licenses when we spoke to them for this review, but may have assisted homes with coming into compliance with certification standards or licensure requirements. Officials from Ohio and Texas told us that their states had not established state oversight programs like those that exist in Florida, Massachusetts, and Utah, but their states had provided technical assistance and other resources to recovery homes that were intended to increase consistency, accountability, and quality: Officials from the Ohio substance abuse agency told us that since 2013 the state has revised its regulatory code to define recovery housing and minimum requirements for such housing. Officials also told us that the agency does not have authority to establish a state certification or licensure program for recovery housing. According to these officials, the state legislature wanted to ensure that Ohio’s recovery housing community maintained its grassroots efforts and did not want a certification or licensure program to serve as a roadblock to establishing additional homes. However, officials from the Ohio substance abuse agency told us that the agency encourages recovery homes to seek certification by the state NARR affiliate—Ohio Recovery Housing—to demonstrate quality. In addition, these officials told us that the state substance abuse agency also provided start-up funds for Ohio Recovery Housing and has continued to fund the affiliate for it to provide training and technical assistance, as well as to continue certifying recovery homes. According to officials from Ohio Recovery Housing, the NARR affiliate regularly provides the state substance abuse agency with a list of newly-certified recovery homes, as well as updates on previously-certified homes, as part of ongoing efforts to develop a recovery housing locator under its contract with the agency. Officials from the Texas substance abuse agency noted that establishing a voluntary certification program, such as one that certifies homes according to NARR’s quality standards, would be beneficial. However, the state legislature has not enacted any legislation establishing such a program to date. The agency is in the process of developing guidance for providers on where and how to refer their patients to recovery housing, which includes a recommendation to send patients to homes certified by the Texas NARR affiliate, but officials could not tell us when they expected the guidance to be finalized. SAMHSA provides some funding for states to establish recovery homes. Of the five states we reviewed, two used SAMHSA funding and four used state funding to help support recovery housing from fiscal year 2013 through fiscal year 2017. SAMHSA makes funding available to states for recovery housing through certain grant programs for SUD prevention and treatment. Specifically, under its Substance Abuse Prevention and Treatment block grant, which totaled approximately $1.9 billion in fiscal year 2017, SAMHSA makes at least $100,000 available annually to each state to provide loans for recovery housing. States that choose to use this funding may provide up to $4,000 in loans to each group that requests to establish alcohol- and drug-free housing for individuals recovering from SUD. The loan can be used for start-up costs such as security deposits and must be repaid within 2 years. Loans are to be made only to nonprofit entities that agree to requirements for the operation of the recovery homes outlined in the authorizing statute, namely that (1) the homes must prohibit the use of alcohol and illegal drugs; (2) the homes must expel residents who do not comply with this prohibition; (3) housing costs, such as rent and utilities, are to be paid by the residents; and (4) residents are to democratically establish policies to operate the homes. According to SAMHSA officials, states are prohibited from using block grant funding other than the loan funding for recovery housing. However, the block grant application does not require states to provide a description of whether and how they will use the loan. SAMHSA has also made funding for recovery housing available under the agency’s State Targeted Response to the Opioid Crisis grant (opioid grant), a 2-year grant program under which SAMHSA anticipated awarding up to $485 million for each of fiscal years 2017 and 2018. The opioid grant is intended to supplement states’ existing opioid prevention, treatment, and recovery support activities, and SAMHSA requires most of states’ funding to be used for opioid use disorder treatment services, such as expanding access to clinically appropriate, evidence-based treatment. States may also use their opioid grant funding for recovery housing and recovery support services—which SAMHSA recognizes as part of the continuum of care—such as establishing recovery homes and providing peer mentoring. (See the next section of this report for information on how states have used SAMHSA funding.) In addition to providing funding, SAMHSA has undertaken other initiatives related to recovery housing, including an assessment of needs for certifying recovery housing in the future. In 2017, SAMHSA held two recovery housing meetings that covered topics including research on emerging best practices in recovery housing, state recovery housing programs, available funding for recovery housing, and challenges that state entities have experienced regulating recovery homes in their states. SAMHSA contracted with NARR at the end of fiscal year 2017 to provide technical assistance and training to recovery housing organizations, managers, and state officials on NARR’s quality standards and certification process, including presentations at three to four national and regional SUD conferences, such as those held by the National Association of State Alcohol and Drug Abuse Directors and other associations. NARR is also required to submit a final report to SAMHSA before the 1-year contract ends with recommendations for future needs for certifying recovery housing and establishing additional NARR state affiliates. SAMHSA officials told us that this is the agency’s first contract with NARR, and SAMHSA plans to conduct an internal assessment at the end of fiscal year 2018 to determine next steps. Two of the five states we reviewed used SAMHSA funding to help support recovery housing in their states from fiscal years 2013 through 2017, according to state officials. Texas was the only state in our review that used the loan funding available under SAMHSA’s block grant. Officials from the Texas substance abuse agency told us that from fiscal years 2013 through 2017, the state used at least $150,000 of this funding annually to increase the number of Oxford Houses in the state and hire Oxford House outreach workers. Texas and Ohio also used a portion of their SAMHSA opioid grant funding for recovery housing. For example, in fiscal year 2017, officials from Ohio’s substance abuse agency told us that the state used $25,000 of its approximately $26 million in opioid grant funding to support and train recovery housing operators, with the goal of increasing the number of recovery homes that accept individuals who receive medication-assisted treatment. The other states we reviewed— Florida, Massachusetts, and Utah—did not opt to use the loan funding available under the SAMHSA block grant and did not use their SAMHSA opioid grant funding for recovery housing services, according to state officials. Four of the five states in our review—Florida, Massachusetts, Ohio, and Texas—have used state funding to establish and support recovery housing and recovery housing-related activities. For example, officials from the Texas substance abuse agency told us that, since 2013, the state legislature has authorized at least $520,000 annually for recovery housing. In fiscal years 2015 through 2017, the state used this funding for personnel costs and related expenditures, such as hiring seven Oxford House outreach workers and establishing a state loan fund of $200,000 to supplement the SAMHSA loan funding to support the establishment of an additional 25 new Oxford Houses. Officials from the Massachusetts substance abuse agency told us that the agency has received annual state appropriations in the amount of $500,000 since fiscal year 2015 to contract with the entities that inspect and certify recovery homes for the state certification program and to contract with the state NARR affiliate for technical assistance with developing recovery housing certification standards and supporting the certification process. State substance abuse agency officials from the fifth state, Utah, told us that the state did not use state funding to establish recovery homes during fiscal years 2013 through 2017. See table 2 for states’ use of SAMHSA and state funding for recovery housing activities. We provided a draft of this report to HHS. HHS did not have any comments. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact Katherine M. Iritani, Director, Health Care at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Tom Conahan, Assistant Director; Shana R. Deitch, Analyst-in-Charge; Kristin Ekelund; and Carmen Rivera-Lowitt made key contributions to this report. Also contributing were Lori Achman, Jennie Apter, Colleen Candrl, and Emily Wilson.", "summary": "Substance abuse and illicit drug use, including the use of heroin and the misuse of or dependence on alcohol and prescription opioids, is a growing problem in the United States. Individuals with SUD may face challenges in remaining drug- and alcohol-free. Recovery housing can offer safe, supportive, drug- and alcohol-free housing to help these individuals maintain their sobriety and can be an important resource for individuals recovering from SUD. However, the media has reported allegations about potentially fraudulent practices on the part of some recovery homes in some states. GAO was asked to examine recovery housing in the United States. This report examines (1) what is known about the prevalence and characteristics of recovery housing across the United States; (2) investigations and actions selected states have undertaken to oversee such housing; and (3) SAMHSA funding for recovery housing, and how states have used this or any available state funding. GAO reviewed national and state data, federal funding guidance, and interviewed officials from SAMHSA, national associations, and five states—Florida, Massachusetts, Ohio, Texas, and Utah—selected based on rates of opioid overdose deaths, dependence on or abuse of alcohol and other drugs, and other criteria. State information is intended to be illustrative and is not generalizable to all states. Nationwide prevalence of recovery housing—peer-run or peer-managed drug- and alcohol-free supportive housing for individuals in recovery from substance use disorder (SUD)—is unknown, as complete data are not available. National organizations collect data on the prevalence and characteristics of recovery housing but only for a subset of recovery homes. For example, the National Alliance for Recovery Residences, a national nonprofit and recovery community organization that promotes quality standards for recovery housing, collects data only on recovery homes that seek certification by one of its 15 state affiliates that actively certify homes. The number of homes that are not certified by this organization is unknown. Four of the five states that GAO reviewed—Florida, Massachusetts, Ohio, and Utah—have conducted, or are in the process of conducting, investigations of recovery housing activities in their states, and three of these four states have taken formal steps to enhance oversight. The fifth state, Texas, had not conducted any such investigations at the time of GAO's review. Fraudulent activities identified by state investigators included schemes in which recovery housing operators recruited individuals with SUD to specific recovery homes and treatment providers, who then billed patients' insurance for extensive and unnecessary drug testing for the purposes of profit. For example, officials from the Florida state attorney's office told GAO that SUD treatment providers were paying $300 to $500 or more per week to recovery housing operators for every patient they referred for treatment and were billing patients' insurance for hundreds of thousands of dollars in unnecessary drug testing over the course of several months. Some of these investigations have resulted in arrests and other actions, such as changes to insurance payment policies. Florida, Massachusetts, and Utah established state certification or licensure programs for recovery housing in 2014 and 2015 to formally increase oversight. The other two states in GAO's review—Ohio and Texas—had not passed such legislation but were providing training and technical assistance to recovery housing managers. The Substance Abuse and Mental Health Services Administration (SAMHSA), within the Department of Health and Human Services (HHS), administers two federal health care grants for SUD prevention and treatment that states may use to establish recovery homes and for related activities. First, under its Substance Abuse Prevention and Treatment block grant, SAMHSA makes at least $100,000 available annually to each state to provide loans to organizations seeking to establish recovery homes. Second, states have discretion to use SAMHSA funding available under a 2-year grant for 2017 and 2018 primarily for opioid use disorder treatment services, to establish recovery homes or for recovery housing-related activities. Of the five states GAO reviewed, only two, Texas and Ohio, have used any of their SAMHSA grant funds for these purposes. Four of the five states—Florida, Massachusetts, Ohio, and Texas—have also used state general revenue funds to establish additional recovery homes. HHS had no comments on this report.", "document_type": "gao"}
{"report": "All depository institutions that have federal deposit insurance have a federal prudential regulator, which generally may issue regulations and take enforcement actions against institutions within its jurisdiction (see table 1). The securities and futures markets are regulated under a combination of self-regulation (subject to oversight by the appropriate federal regulator) and direct oversight by the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), respectively. SEC regulates the securities markets, including participants such as corporate issuers, securities exchanges, broker-dealers, investment companies, and certain investment advisers and municipal advisors. SEC’s mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. SEC also oversees self-regulatory organizations—including securities exchanges, clearing agencies, and the Financial Industry Regulatory Authority—that have responsibility for overseeing securities markets and their members; establishing standards under which their members conduct business; monitoring business conduct; and bringing disciplinary actions against members for violating applicable federal statutes, SEC’s rules, and their own rules. CFTC is the primary regulator for futures markets, including futures exchanges and intermediaries, such as futures commission merchants. CFTC’s mission is to protect market users and the public from fraud, manipulation, abusive practices, and systemic risk related to derivatives subject to the Commodity Exchange Act, and to foster open, transparent, competitive, and financially sound futures markets. CFTC oversees the registration of intermediaries and relies on self-regulatory organizations, including the futures exchanges and the National Futures Association, to establish and enforce rules governing member behavior. CFTC and SEC jointly regulate security futures (generally, futures on single securities and narrow-based security indexes). CFTC and SEC serve as primary regulators for certain designated financial market utilities. In addition, Title VII of the Dodd-Frank Act expands regulatory responsibilities for CFTC and SEC by establishing a new regulatory framework for swaps. The act authorizes CFTC to regulate swaps and SEC to regulate security-based swaps with the goals of reducing risk, increasing transparency, and promoting market integrity in the financial system. CFTC and SEC share authority over mixed swaps—that is, security-based swaps that have a commodity component. The Dodd-Frank Act transferred consumer financial protection oversight and other authorities over certain consumer financial protection laws from multiple federal regulators to the Consumer Financial Protection Bureau (CFPB). The Dodd-Frank Act charged CFPB with responsibilities that include the following: ensuring that consumers are provided with timely and understandable information to make responsible decisions about financial transactions; ensuring that consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination; monitoring compliance with federal consumer financial law and taking appropriate enforcement action to address violations; identifying and addressing outdated, unnecessary, or unduly burdensome regulations; ensuring that federal consumer financial law is enforced consistently, in order to promote fair competition; ensuring that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation; and conducting financial education programs. Furthermore, the Dodd-Frank Act gave CFPB supervisory authority over certain nondepository institutions, including certain kinds of mortgage market participants, private student loan lenders, and payday lenders. The uniform application of new or revised regulations can have a comparatively greater impact on smaller entities than on larger entities because the smaller entities have small staffs with which to face expanded demands and a smaller asset and income base with which to absorb increases in compliance costs. RFA was enacted in 1980 in part to address this disparity. The act requires that federal agencies, including the financial regulators, engaged in substantive rulemaking analyze the impact of proposed and final regulations on small entities and, when there may be a significant economic impact on a substantial number of small entities, to consider any significant regulatory alternatives that will achieve statutory objectives while minimizing any significant economic impact on small entities. RFA defines “small entity” to include small businesses, small governmental jurisdictions, and certain small not-for-profit organizations. RFA does not seek preferential treatment for small entities, require agencies to adopt regulations that impose the least burden on small entities, or mandate exemptions for small entities. Rather, it requires agencies to examine public policy issues using an analytical process that identifies, among other things, barriers to small business competitiveness and seeks a level playing field for small entities, not an unfair advantage. Unless the head of the agency certifies that the proposed regulation would not have a significant economic impact upon a substantial number of small entities, RFA requires regulators to prepare an initial regulatory flexibility analysis for each draft rule that requires a notice of proposed rulemaking. These analyses must contain an assessment of the rule’s potential impact on small entities and describe any significant alternatives to the rule that would reduce its burden on small entities while achieving statutory objectives (see table 2 for more information). RFA requires that regulators publish in the Federal Register their initial regulatory flexibility analysis, or a summary, with the proposed rule. Following a public comment period, RFA requires regulators to conduct a similar analysis when they promulgate the final rule—the final regulatory flexibility analysis. This analysis must address any comments received on the initial regulatory flexibility analysis and include a description of the steps the agency took to minimize the rule’s significant economic impact on small entities, consistent with statutory objectives. Agencies then must publish the final analysis, or a summary, with the final rule. If the head of the agency certifies in the Federal Register that the rule would not have a significant economic impact on a substantial number of small entities, agencies do not have to conduct the initial or final analysis. Certifications must include a statement providing a factual basis for the certification. Agencies may make a certification in lieu of the initial or final analysis, and can choose to certify at both points. Figure 1 illustrates the decision process that agencies must follow to comply with RFA. Section 610 of RFA requires agencies to review, within 10 years of a final rule’s publication, those rules assessed as having a significant economic impact on a substantial number of small entities to determine if they should be continued without change, amended, or rescinded (consistent with statutory objectives) to minimize any significant economic impact on small entities. Section 610 requires that agencies publish in the Federal Register a list of the rules that have a significant economic impact on a substantial number of small entities and are to be reviewed pursuant to section 610 during the upcoming year. These notices alert the public to the upcoming review and permit interested parties to submit their comments on the rule’s impact on small entities. The Dodd-Frank Act, which established CFPB, amended RFA to impose additional rulemaking requirements for CFPB for certain proposed rules. Specifically, when CFPB conducts rulemakings it expects will have a significant economic impact on a substantial number of small entities it must convene Small Business Review Panels, comprising employees from CFPB, the Small Business Administration’s Chief Counsel for Advocacy, and Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs. The panels must seek direct input from a representative group of small entities that would be affected by CFPB’s rulemakings. The panels must be conducted before publication of an initial regulatory flexibility analysis (in effect, before the proposed rule is issued for public comment). RFA designates certain responsibilities to the Small Business Administration’s Chief Counsel for Advocacy, including monitoring agency compliance with RFA and reviewing federal rules for their impact on small businesses. Executive Order 13272 requires the Office of Advocacy to provide notifications about RFA requirements and training to all agencies on complying with RFA. The Office of Advocacy published guidance on complying with RFA in 2003 (updated in 2012 and August 2017), which was designed to be a step-by-step guide for agency officials. The Small Business Administration publishes size standards to determine eligibility for classification as a small entity. Generally, to qualify as a small entity the annual asset threshold for banks is $550 million in assets; for financial investment and related activities, the annual revenues threshold is $38.5 million. Most agencies rely on these size standards; however, RFA also sets forth a procedure that permits agencies to formulate their own definitions of small entities. Rules that do not have a proposed rule are not subject to RFA requirements, such as analyzing the rule’s effects on small entities and considering alternatives. Financial regulators promulgated 520 rules (483 final and 37 interim final) during calendar years 2010–2016. Of those, RFA requirements were not applicable in 39 percent (204 rules) because the regulators did not publish a proposed rule. The regulators published a proposed rule for the other 316 final rules. This result is consistent with our prior analysis of rulemaking government wide. In December 2012, we found that about 35 percent of major rules and about 44 percent of nonmajor rules published during calendar years 2003–2010 did not have a proposed rule. The percentage of rules finalized without a proposed rule and therefore not subject to RFA requirements varied by regulator. As shown in figure 2, CFPB had the largest percentage (53 percent) of rules not subject to RFA requirements and CFTC the smallest percentage (16 percent). In their rulemakings, the regulators gave several reasons for not publishing a proposed rule. The Administrative Procedure Act (APA), which outlines the process for informal rulemaking, includes six broad categorical exceptions to publishing a proposed rule (for example, rules dealing with agency organization and procedure). Additionally, APA provides that an agency may forgo a notice of proposed rulemaking when it finds for “good cause” that such notice is “impractical, unnecessary, or contrary to the public interest.” We found that the regulators used such exceptions for a number of the rules we reviewed. For example, in December 2015, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), and the Federal Deposit Insurance Corporation (FDIC) used the good- cause exception to publish a joint rule to adjust the asset-size thresholds for small and intermediate banks and savings associations related to performance standards under the Community Reinvestment Act without a proposed rule. According to the Federal Register notice, the agencies had no discretion on the computation or timing of the changes, which were based on a regulation that previously had been published for public comment before being finalized. In another rule published in October 2013, SEC made changes to the filer manual for its Electronic Data Gathering, Analysis, and Retrieval System based on updates to the system and did not publish a proposed rule because the rule changes related solely to agency procedures or practice. According to CFPB officials, the majority of final CFPB rules issued during this time period without a proposed rule involved technical—and in many cases non- discretionary—adjustments of statutory or regulatory thresholds to account for inflation. While RFA requirements do not apply when an agency does not publish a proposed rule, all the financial regulators (except OCC) occasionally performed some RFA evaluation in rules without a proposed rule. For example, each agency, except for OCC, certified that at least one of the final rules they promulgated without publishing a proposed rule (within our time frame) would not have a significant economic impact on a substantial number of small entities. The Federal Reserve most frequently performed some RFA analyses in these rules, although such analyses were not required. Of 51 rules without a proposed rule, the Federal Reserve certified in 7 rules and performed an initial or final regulatory flexibility analysis in 10 rules. For the 316 rules subject to RFA requirements from 2010 through 2016, regulators certified that most would not have a significant economic impact on a substantial number of small entities, although the frequency with which individual regulators certified varied. Such certifications may be made at either the proposed rule or final rule stage, and a certification in a final rule may be preceded by an initial regulatory flexibility analysis in the proposed rule. When certifying, the regulators most often made such certifications in both the proposed and final rules (63 percent of analyses in rules subject to RFA requirements) and did not perform regulatory flexibility analyses. Certifications of final rules made after performing an initial regulatory flexibility analysis accounted for another 4 percent. As shown in figure 3, CFPB, CFTC, FDIC, and OCC certified most-to-nearly- all of their final rules that were subject to RFA requirements, while the Federal Reserve rarely certified final rules, and SEC certified almost half. According to Federal Reserve officials, the agency generally performed a full regulatory flexibility analysis for almost all rulemakings regardless of the rule’s impact on small entities. This pattern was generally consistent across our time period (see fig. 4). The Federal Reserve usually performed an initial and final regulatory flexibility analysis, while the other agencies, except SEC, rarely did. SEC’s RFA analyses were the most variable over our time period. The spikes in analyses were generally due to the small number of rules promulgated each year. For example, in 2013, OCC promulgated three rules subject to RFA requirements, performing an initial and final regulatory flexibility analysis in one (33 percent) and certifying in two (67 percent). SEC published seven rules in 2013, completing an initial and final regulatory flexibility analysis in all of them. While the Federal Reserve usually performed initial and final regulatory flexibility analyses, it concluded that almost all of its rules would not significantly affect small entities. In 86 percent of its analyses (54 of 63), the Federal Reserve concluded that the rule would not have a significant economic impact on a substantial number of small entities (see fig. 5). In addition, FDIC concluded that almost all of its rules (5 of 6) in which it performed a final regulatory flexibility analysis would not significantly affect small entities, although as previously mentioned, FDIC certified almost all its final rules subject to RFA requirements. (We discuss the Federal Reserve’s and FDIC’s RFA analyses in more detail later in this report.) SEC, CFPB, and CFTC also concluded that at least one of their rules would not significantly affect small entities after performing a final regulatory flexibility analysis. For the CFPB rule, the Federal Reserve first proposed the rule and performed the initial regulatory flexibility analysis before certain rulemaking authorities were transferred to CFPB for the final rule. We reviewed Federal Register notices and the regulators’ internal workpapers for all certifications made in the final rule (66 certifications) in calendar year 2015 and 2016 to determine the basis for the certifications and the extent to which the analyses were consistent with RFA requirements and Office of Advocacy’s guidance and other best practices. As previously discussed, RFA requires that agencies provide the factual basis for their certifications in the Federal Register. In most certifications, the agencies provided a factual basis and concluded the rule would not apply to small entities or have any economic impact. In others, the agencies found the rule would have some economic impact on small entities, but concluded that the impact would not be significant for a substantial number of small entities. In those instances, we found that the factual basis provided for most certifications across all regulators lacked key components recommended by the Office of Advocacy for understanding the analyses regulators used to support their conclusion. We also found that while most agencies relied on the Small Business Administration’s definitions of small entities for use in their RFA analyses, two agencies relied on alternative definitions of small entities, some of which have not been updated in more than 35 years. In almost half of the certifications (31 of 66) we reviewed, regulators concluded the rule would apply to no or few small entities (see table 3). According to the regulators, these rules generally regulated activities in which small entities do not engage, pertained to the internal processes of the agency, or applied only to entities that were not small as defined by the Small Business Administration or the agency. For example, in a rule on recovery planning, OCC determined that the rule did not have an impact on small entities because it applied only to banks with $50 billion or more in assets, which are not small entities based on the Small Business Administration’s definition. In 12 certifications, the agencies concluded the rules would have no economic impact regardless of whether small entities were affected and therefore did not require regulatory flexibility analyses. According to the regulators, most of these certifications applied to rules that did not create new regulatory requirements, eliminated duplicative rules, or established optional specifications. For example, FDIC published a rule in October 2015 that consolidated into a single part Fair Credit Reporting regulations for all institutions FDIC regulates. According to the Federal Register notice, the rule eliminated redundant requirements and aligned FDIC’s definitions with CFPB rules that were substantively similar. Regulators generally used the current state of regulations as the baseline for these determinations. For example, when analyzing the economic effects of a new rule that consolidated duplicative regulations, the regulator compared the compliance costs of the new rule with the costs small entities already incurred to comply with the duplicative regulations. Additionally, regulators concluded in 5 of 66 certifications that the rule would have a beneficial impact on small entities. For these rules, agencies concluded they reduced regulatory burden, eliminated regulations, or exempted certain entities. In almost a third (18 of 66) of the certifications, the agencies found that the rule would have some economic impact on small entities, but determined that the impact would not be significant for a substantial number of small entities. For example, in a rule that required specified entities to become members of an association, CFTC identified as an economic impact the costs of membership dues and attorney fees related to completing registration filings and preparing for required audits. But it determined that the costs were not significant for a substantial number of the specified small entities. In the seven joint rules we reviewed, we determined regulators conducted their own certification analysis independent of other agencies, although they generally reached the same conclusion to certify (except for the Federal Reserve, which generally treated RFA analysis differently, as discussed later). As previously noted, the Federal Reserve, FDIC, and OCC rely on the Small Business Administration’s definition of small banks for RFA purposes. CFPB also relies on the Small Business Administration’s definitions of small entities; for example, a business engaged in automobile financing is considered small if its revenues are $38.5 million or less. In contrast, CFTC and SEC previously established alternative definitions of small entities for the purposes of RFA that the agencies used to conclude that most of their rules (10 of 15 for CFTC and 9 of 12 for SEC) would not apply to small entities. But some of these small entity definitions have not been updated in more than 35 years. In a 1982 policy statement, CFTC published its first set of RFA definitions, which covered designated contract markets, futures commission merchants, and commodity pool operators, among others. In subsequent years, CFTC modified its definitions of small entities to exclude several other groups of entities that it regulates, such as eligible contract participants and major swap participants. SEC originally established definitions for small entities through a rule published in the Federal Register in 1982 after consulting with the Office of Advocacy. The agency subsequently updated some of its definitions in 1986 and 1998, although others have not been updated at all. In an October 2017 report to the President, the Department of the Treasury recommended CFTC and SEC review and update their small entity definitions for RFA purposes to ensure their RFA analyses appropriately consider small entities. According to CFTC officials, the agency has been reviewing its small entity definitions since April 2017 as part of its working group to update the agency’s RFA practices. SEC staff told us they had no comment on Treasury’s recommendation. For the 18 certifications in which regulators determined rules would have some economic impact on small entities, they conducted additional analyses to determine that the impact was not significant for a substantial number of small entities. We found that the factual basis provided for many of these certifications lacked key information (discussions of data sources or methodologies and of broader economic impacts, or definitions for key criteria) for understanding the analyses regulators used to support their conclusion. The Office of Advocacy interprets RFA’s factual basis requirement to mean that a certification should include, at a minimum, why the number of entities or the size of the economic impact justifies the certification. In its RFA guide, the Office of Advocacy details the components regulators should include in their certification discussion to obtain meaningful public comment and information on the rule’s impact on small entities. These components include a description and estimate of the economic impact, criteria for “significant economic impact” and “substantial number,” and a description of any uncertainties in the analysis, including sensitivity analysis when appropriate. The Office of Advocacy guidance states that agencies’ reasoning and assumptions underlying the analyses used to support their certifications, including data sources, should be explicit in the Federal Register notices. Additionally, when estimating significant economic impact, the guidance states agencies should not view impact in absolute terms, but relative to the size of the business, the size of the competitor’s business, and the impact on larger competitors. According to the Office of Advocacy, broader economic impacts (such as a disparity in impact on small entities that affects their ability to compete) could be significant. Data sources or methodologies. In most of these certifications (15 of 18), regulators did not describe or did not fully describe their methodology or data sources for their conclusions. In addition to the Office of Advocacy’s RFA guide, OMB guidance on regulatory analysis—regulatory agencies’ evaluation of the likely consequences of rules—states that agencies should clearly set out the basic assumptions, methods, and data underlying the analysis and discuss the uncertainties associated with the estimates. While independent regulatory agencies, including those in our review, are not required to follow the OMB guidance, it provides a strong set of analytical practices relevant to agency rulemakings. For these certifications, regulators generally provided partial sources and methodology for their conclusions. Examples of incomplete discussions include the following: In its rule requiring specified entities to become members of an association, CFTC detailed its source and methodology for estimating the hourly labor costs of retaining a lawyer, as mentioned above, but did not provide the reasoning for its estimate of the number of hours that a lawyer would spend counseling entities with respect to the rule’s requirements. In a joint rule related to homeowner flood insurance, OCC provided the source for the estimated number of affected small entities, but provided no source or methodology for its estimated economic impact of $6,000. In a rule amending reporting requirements for the dissemination of security-based swap information, SEC said that it partially relied on its “own information” without explanation for declaring that small entities do not participate in security-based swap markets. In a joint rule implementing the minimum requirements in the registration and supervision of appraisal management companies, the Federal Reserve estimated a range of small entities that might be affected but did not provide the source or methodology for how it approximated the number. CFPB fully discussed sources and methodology in some of its certifications but not others. In three of five certifications that required additional analysis, CFPB provided thorough descriptions of its methodology and data sources for its conclusions. The agency detailed its assumptions and uncertainties in these rules and performed a sensitivity analysis to ensure the rules would not significantly affect small entities. However, in the other two certifications, CFPB did not discuss all of the data sources on which it relied. Broader economic impacts. The regulators’ certifications generally did not address broader economic impacts such as cumulative effects, competitive disadvantage, or disproportionality of effects and focused most of the analysis on specific compliance costs. In addition to the Office of Advocacy’s guidance on analyzing broader economic impacts, Executive Order 13563 requires agencies to consider the cumulative economic impacts of regulations during the rulemaking process, which reinforces the agencies’ obligations under RFA. While this executive order is not binding on independent regulatory agencies, such as those in our review, it represents a best practice for rulemaking. Of the 18 certifications that contain additional analysis, agencies discussed some aspect of broader economic impacts in 3. CFPB considered future changes in market share for small entities because of new requirements in one rule and whether the regulation placed small entities at a competitive disadvantage in another rule. OCC also examined a rule’s impact on small entities’ competitiveness and profitability in one certification. None of the regulators discussed cumulative effects in their certifications. Defining key criteria. Regulators generally did not define the criteria they used for “substantial number” and “significant economic impact” in their certifications. RFA does not define these terms. The Office of Advocacy has left it up to agencies to determine their own criteria, which it recommends that agencies discuss in their certifications. None of the regulators defined what would constitute a substantial number of small entities for the rule in the Federal Register notices. OCC was the one agency to define its criteria for a significant economic impact in its rulemaking, although it did not include this definition in all of its certifications. The other agencies did not define significant economic impact for the rule in the Federal Register notices. While CFPB did not disclose its criteria in the Federal Register notices, it defined these criteria in its internal workpapers for two certifications. Additionally, many of the analyses (13 of 18) did not discuss the significance of the rule’s costs relative to the size of the business, such as profits, revenues, or labor costs. Limited information. In addition, three of the certifications we reviewed included none of the Office of Advocacy’s suggested components. The factual basis provided for these certifications did not include a description of the number of affected entities, the size of the economic impacts, or the justification for the certification. Two FDIC rules related to revisions of the treatment of financial assets transferred in connection with a securitization provided no additional information beyond the declarative statement that the agency certified that the rule would not have a significant economic impact on a substantial number of small entities. Additionally, an OCC certification in a joint rule that formalized the calculation method for mortgage loans exempted from certain requirements provided little information, although an internal agency workpaper detailed the number of small entities affected and the estimated economic impact that supported the certification. OCC officials said that the agency will comply with instructions from its rulemaking procedure guide, which was updated in August 2016. According to the guide, certifications should include additional information beyond the certification statement, such as number of affected small entities, size of the economic impact, and reason for the certification. The regulators’ guidance for complying with RFA generally does not include policies and procedures for helping to ensure consistent and complete RFA analyses. (We discuss the regulators’ guidance later in this report.) Without policies and procedures that would help ensure that key components were incorporated in certification assessments—including disclosing the methodology and data sources of economic analyses and considering potential broad economic impacts—regulators may be limiting the effectiveness of their reviews. In turn, such reviews hinder the achievement of RFA’s goal. For example, incomplete disclosure of methodology and data sources could limit the public and affected entities’ ability to offer informed comments in response to regulators’ certification assessments in proposed rules. In many recent regulatory flexibility analyses, the evaluation of key components—potential economic effects and alternative regulatory approaches—was limited. Many final rules described changes to limit burden, and few regulatory flexibility analyses concluded rules would have a significant impact on small entities. For most rules we reviewed, regulators were unable to provide documentation supporting their regulatory flexibility analyses. Our review of recent regulatory flexibility analyses found that in many cases, the evaluation of key components—potential economic effects and alternative regulatory approaches—was limited, although the extent varied by regulator. RFA requires the initial and final analyses to include information to assist the agency, regulated entities, and the public in evaluating the potential impact of rules on small entities (see sidebars). The most important components include the assessment of a rule’s potential economic effects on small entities—such as compliance costs— and the identification and evaluation of alternative regulatory approaches that may minimize significant economic effects while achieving statutory objectives. The Office of Advocacy’s guide on RFA compliance explains that an agency principally should address these components in an initial regulatory flexibility analysis. feasible—of the number of small entities to which the rule will apply. Description of the projected reporting, recordkeeping, and other compliance requirements of the rule, including the type of necessary professional skills. Identification—to the extent practicable— of all relevant federal rules that may duplicate, overlap, or conflict with the proposed rule. goal of RFA. See appendixes V–XII for a summary of findings for each of the six regulators. We reviewed regulatory flexibility analyses for recent rulemakings to assess the extent to which they included these and other elements and to examine the outcome of the analyses. For each regulator, we selected all final rules published in 2015 and 2016 for which the agency performed an initial and final regulatory flexibility analysis. For regulators with fewer than three such rules, we included rules published in prior years (on a full- year basis) until we reached three rules or 2013. See table 4 for the number of rules selected for each regulator. For each rule, we reviewed Federal Register notices for the proposed and final rules and supporting documentation on the initial and final regulatory flexibility analyses. small entities to which the rule will apply or explanation of why no such estimate is available. the significant economic impact on small entities consistent with statutory objectives, including the reasons for selecting the alternative adopted in the final rule and why each of the other alternatives was rejected. In meeting the requirements, agencies may provide either a quantifiable or numerical description of the rule’s effects or alternatives or more general descriptive statements if quantification is not practicable or reliable. Many of the Federal Reserve’s regulatory flexibility analyses lacked some required components and contained limited information and analysis. As previously discussed, the Federal Reserve generally performed regulatory flexibility analyses for its rulemakings regardless of the rule’s potential impact on small entities. The majority (11 of 17) of the Federal Reserve’s analyses stated that the rules either did not apply to small entities or lacked compliance requirements. Nevertheless, the Federal Reserve conducted regulatory flexibility analyses in which nearly all of the initial (14 of 17) and final analyses (15 of 17) concluded that the rule would not have a significant economic impact on small entities, which generally is a basis for certification. Examples included rules on capital and liquidity requirements applicable only to large banking organizations and rules that amended official regulatory interpretations or repealed regulations. None of the regulatory flexibility analyses performed by other regulators indicated that a rule did not apply to small entities or lacked compliance requirements. For additional information, see appendix V. More specifically, the regulatory flexibility analyses for the 11 rules that did not apply to small entities or impose compliance requirements were minimal. The analyses did not describe or estimate compliance costs, identify alternatives, or include other items. In the case of alternatives, the analyses either stated that there were no alternatives that would further minimize economic impact on small entities or requested comments on any alternatives. The analyses did not include some other information that could be available and relevant such as the reasons or need for the rule. Because the purpose of a regulatory flexibility analysis is to evaluate a rule’s potential effects on small entities, key components of the analysis may not be relevant or meaningful in such cases. For example, there may be no compliance costs to estimate, alternatives to consider, necessary professional skills to describe, or actions that could minimize impact on small entities. With their focus largely on explaining why the rule would not affect small entities rather than examining effects of compliance requirements and potential alternatives to limit such effects, such cases resemble certifications more than regulatory flexibility analyses. See appendix V for further information on the Federal Reserve’s regulatory flexibility analyses. The Federal Reserve’s regulatory flexibility analyses for six rules that might impose compliance requirements on small entities also had limitations. Specifically, most of the analyses (both initial and final) contained limited evaluation of the potential economic impact on small entities and lacked other components. RFA directs agencies to provide a quantifiable or numerical description of the effects of a proposed rule and allows a qualitative description in lieu of a numerical evaluation in instances when quantification is not practicable or reliable. Most of the analyses for rules that might impose compliance requirements on small entities did not include a description of potential compliance costs. Nearly all (five of six) did not quantify compliance costs in either the initial or final analyses or explain why such assessments were not possible. For two rules, the Federal Reserve’s assessments of economic effects and compliance costs generally consisted of descriptive statements on the rule’s provisions and coverage. For example, the final analysis for a rule on margin and capital requirements for participants in financial swap transactions stated that, among other things, all financial end users would be subject to the variation margin requirements and documentation requirements of the rule but that the Federal Reserve believes such treatment is consistent with current market practice and should not represent a significant burden on small financial end users. Although containing minimal information, analyses in three of the six rules indicated that the rules would have a largely beneficial impact for small entities by reducing burden or offering positive economic effects. These analyses generally lacked clear descriptions of any compliance requirements that would apply to small entities. For example, the initial and final analyses for a rule involving the Federal Reserve’s emergency lending authority stated that participants at a minimum likely would be required to pay interest on loans extended to them and to keep records, but that the positive economic impact of receiving a loan likely would outweigh any economic burden. The initial analysis for another rule stated that the projected reporting, recordkeeping, and other compliance requirements were expected to be minimal but did not describe the requirements or any associated costs. Alternatives. Few of the Federal Reserve’s initial regulatory flexibility analyses identified alternatives to the proposed rule and some did not explain why there were no alternatives. Although most of the rules’ analyses (10 of 17) described alternatives, all but 2 stated that there were no alternatives that would have less economic impact on small entities. Of the 6 rules that might impose compliance requirements on small entities, 2 included such a statement, 1 had no mention of alternatives, and another solicited comments on any significant alternatives that would reduce burden associated with the proposed rule. Analyses for the other two rules described alternative approaches included in the proposed rule to limit economic impact on small entities. For example, one of the rules incorporated an applicability threshold for certain compliance requirements and the other exempted small entities from some of the rule’s provisions and applied a longer transition period. Other Components. Several of the final regulatory flexibility analyses also lacked other RFA-required components. In particular, only three of the six rules described steps taken to minimize economic impact on small entities and reasons for selecting the alternative adopted in the final rule. The other three rules did not include either component. The reasons cited for selecting the approach in the final rule generally reflected the actions taken by the agency to mitigate the rule’s economic impact on small entities. For the other financial regulators (FDIC, CFPB, CFTC, OCC, and SEC), most of the regulatory flexibility analyses we reviewed included the components required by RFA, but the extent of the analyses varied among regulators, with some lacking required information or having other limitations. For the majority (three of four) of FDIC’s analyses, the agency indicated that the rules were not subject to RFA but that it voluntarily undertook the analyses to help solicit public comments on the rules’ effects on small entities. For these three rules, FDIC’s analyses described and quantified each of the rule’s compliance costs and concluded that each rule would not have a significant economic impact on small entities, but other components were missing. For example, these rules’ analyses focused on illustrating how the rule would not have an economic impact on small entities and did not include other required components including a description and assessment of regulatory alternatives. The initial and final analyses for each of the rules were nearly identical and did not include statements about alternatives, any issues raised in public comments, or steps to minimize impact on small entities, among other missing components. In that regard, FDIC’s analyses for these rules—similar to many of the Federal Reserve’s analyses—resembled a certification. The regulatory flexibility analyses for the fourth FDIC rule that we reviewed included all required components. CFPB’s regulatory flexibility analyses generally included all required components. However, for three of the seven rules neither the initial nor final analyses estimated compliance costs for small entities. In some cases, the analyses stated that costs likely would be minimal or described difficulties in estimating costs such as a lack of information about the current practices of subject entities. Of the analyses that included cost estimates, several did not quantify all identified costs or explain why such estimates were not available. Unlike other regulators we reviewed, CFPB is required to seek input from small entities during the rulemaking process (through Small Business Review Panels) when proposed rules are expected to have a significant economic impact on a substantial number of small entities. CFPB’s regulatory flexibility analyses often incorporated information received from these panels in its assessment of potential economic effects and regulatory alternatives. For example, several analyses that estimated compliance costs relied on information from small entities that participated in the panel process as well as data from other sources. The description of regulatory alternatives often reflected comments received from small-entity representatives. Although each of CFPB’s initial analyses described alternatives, in some cases, it was not clear whether CFPB had identified alternatives of its own. CFTC performed initial and final analyses for one rule during the period we reviewed and the analyses had limited evaluation of potential effects on small entities. The analyses did not estimate the number of affected entities or compliance costs, but indicated that the rule’s compliance requirements would be minimal while concluding the rule likely would have a beneficial impact on small entities. The discussion of compliance requirements in the final analysis stated only that the rule would relieve affected entities from certain compliance requirements, although the initial analysis stated that the proposed rule would impose a new requirement on certain entities—which could include small entities—to annually provide CFTC with a notice about certain trading activity. In other sections of the final rule, CFTC discussed its decision to address concerns raised in public comments by not adopting the notice requirement. OCC also had one rule with initial and final regulatory flexibility analyses, and it included nearly all required components. The rule revised capital requirements for banking organizations and was issued jointly with the Federal Reserve. The initial analysis described multiple alternative approaches that it stated were included in the proposed rule to incorporate flexibility and reduce burden for small entities. However, other than listing the alternatives and requesting comment, the analysis does not discuss or evaluate how the options minimize economic impact on small entities. The regulatory flexibility analysis in the final rule notes that the Small Business Administration’s Chief Counsel for Advocacy submitted a comment letter in which it encouraged the agencies to provide more detailed discussion of the alternatives and the potential burden reductions associated with them. SEC’s regulatory flexibility analyses also included most components, but some rules’ assessment of compliance costs and alternatives had limitations. Specifically, although all of the rules described compliance requirements, some did not describe (four of nine) or estimate (five of nine) the costs they might impose on subject entities. For example, in December 2015, SEC published a proposed rule requiring resource extraction issuers to disclose certain payments. The proposed rule’s initial regulatory flexibility analysis described requirements for the disclosures. However, the regulatory flexibility analysis did not discuss or evaluate potential compliance costs and concluded with statements on alternatives and a request for comments. Many of the SEC rules we reviewed focused on reasons why alternatives were not appropriate and did not discuss specific options for minimizing economic impact on small entities. As part of describing any significant alternatives to the proposed rule which accomplish statutory objectives while minimizing any significant economic impact on small entities, RFA requires that initial regulatory flexibility analyses discuss alternatives such as the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities; the use of performance rather than design standards; and an exemption from coverage of the rule, or any part thereof, for such small entities. For five of the nine rules, the initial analysis discussed the general types of alternatives listed in RFA but did not describe specific options for implementing them in the proposed rule. For example, the initial regulatory flexibility analyses did not identify how compliance or reporting requirements might be altered for small entities or in what ways requirements could be simplified. One of the rules involved changes to SEC’s requirements for the reporting and disclosure of information by registered investment companies. The initial analysis stated that the agency had considered (1) establishing different reporting requirements or frequency to account for resources available to small entities, (2) using performance rather than design standards, and (3) exempting small entities from all or part of the proposal. However, the analysis lacked details about what different reporting requirements, frequencies, performance standards, or partial exemptions it considered for small entities. In addition, for seven of the rules—including the five rules considering only the general alternative types—the discussion was limited to describing the reasons why regulatory alternatives were not appropriate. The reasons cited typically included that the different regulatory approaches would not be consistent with the agency’s goals or statutory objectives. For example, the analysis for SEC’s rule on reporting and disclosure by registered investment companies concluded that the agency believed that establishing different reporting requirements or frequency for small entities would not be consistent with SEC’s goal of industry oversight and investor protection. However, for this and the other proposed rules, the analyses generally did not examine the extent to which the considered alternatives could limit the rule’s economic impact on small entities. In another case, a rule’s final analysis stated that one public commenter raised concerns that the initial analysis did not identify significant alternatives, including that it only considered alternatives related to exempting small business from the proposed rules. Several of the commenters suggested additional alternatives for reducing burden. The lack of specific details about potential alternatives may limit the usefulness of public comments on SEC’s regulatory flexibility analyses and its ability to identify alternatives that could reduce economic impacts on small entities while achieving a rule’s objectives. Most regulators (five of six) did not disclose the data sources or methodologies used for estimating the number of subject small entities or compliance costs for the regulatory flexibility analyses we reviewed. OMB guidance on regulatory analysis—regulatory agencies’ anticipation and evaluation of the likely consequences of rules—states that agencies should clearly set out the basic assumptions, methods, and data underlying the analysis and discuss the uncertainties associated with the estimates. While independent regulatory agencies, such as those in our review, are not required to follow the OMB guidance, it provides a strong set of analytical practices relevant to agency rulemakings that serves as best practices for all agencies. Many initial analyses (11 of 23) and final analyses (11 of 24) that estimated the number of subject small entities did not describe the data source used for the estimate. Each of the regulators except for CFPB (which included data sources) and CFTC (whose only rule did not include an estimate) had at least one rule that did not disclose the data source for the estimate of subject small entities. Furthermore, many analyses that estimated a rule’s compliance costs (5 of 12 initial and 5 of 14 final) did not describe the information sources used to calculate the projections. The analyses for several additional rules included data sources for some but not all cost estimates. Except for CFPB, each of the regulators that estimated compliance costs had at least one rule that lacked information on data sources for some estimates. For example, the regulatory flexibility analyses for a joint OCC and Federal Reserve rule discussed how the agencies estimated costs of implementing new capital requirements but did not disclose the data sources or methodology used to calculate the costs of creditworthiness measurement activities. A lack of information necessary to understand how an agency evaluated a rule’s economic impact on small entities may limit the extent to which the public and other interested parties can meaningfully comment on the analyses. Although a regulatory flexibility analysis is required only for rules that may have a significant economic impact on a substantial number of small entities, few final analyses concluded that the rules would have such an impact. Specifically, the final analysis for only 4 of 39 rules that we reviewed stated that the rule likely would have a significant economic impact. Final analyses for the majority of rules (20 of 39) concluded there would be no significant impact and the remainder did not have a clear conclusion. The Federal Reserve accounted for 15 of those 20 analyses. As discussed previously, nearly all of the Federal Reserve’s regulatory flexibility analyses concluded a rule would not have a significant impact on small entities. About half of the regulatory flexibility analyses we reviewed (18 of 39) described changes to the proposed rule to limit economic impact on small entities and most were by regulators other than the Federal Reserve. Several rules (12 of 39) described changes attributable to comments on the regulatory flexibility analyses. Specifically, for regulators other than the Federal Reserve, the final analyses for about half of the rules (11 of 22) noted receiving public comments on the initial analysis and nearly all of those described changes resulting from the comments. A smaller number of rules described changes related to comments on the initial analysis received from the Office of Advocacy. Some rules also described other changes to the proposed rule, including changes in response to general public comments and the adoption of alternatives. For rules that identified alternatives to a proposed rule in the initial analysis, about half of the final analyses (10 of 21) described reasons for rejecting all the alternatives. An additional 2 rules noted reasons for rejecting some of the alternatives. For further information on the results of regulators’ regulatory flexibility analyses, see appendix XII. Regulators described taking various steps to minimize impact on small entities, although they did not all result from changes to the proposed rule and were not all clearly attributable to the agency’s consideration of alternatives. For example, some analyses described provisions that had been included as part of the proposed rule. For rules that disclosed actions to minimize effects on small entities, most regulators noted multiple actions that included reducing compliance requirements such as for reporting and disclosure, exempting small entities from certain requirements, increasing applicability or exemption thresholds, providing for flexibility in meeting compliance requirements, clarifying and simplifying compliance requirements, not adopting certain provisions of the proposed rule, and providing for delayed or gradual implementation of compliance requirements. Although some actions were specific to small entities, many applied more broadly, such as to all subject firms. For most rules we reviewed, regulators (five of six) were unable to provide documentation supporting their regulatory flexibility analyses or certification decisions, although the extent of documentation varied by regulator (see table 5). We requested supporting documentation for the 39 rules we reviewed for which the agency performed initial and final regulatory flexibility analyses and the 66 rules for which the agency made a certification determination. Staff from two regulators—CFPB and OCC—provided documentation for all or nearly all of the rules we reviewed. Many of these documents were formal analysis or decision memorandums on assessing a rule’s potential economic impact on small entities. For CFPB rules that had regulatory flexibility analyses, documentation included RFA-required reports summarizing the results of Small Business Review Panels. Staff from the other regulators produced documentation for fewer or no rules and the documents they provided were largely limited and informal. For example, other than for CFPB and OCC, RFA-related documentation generally consisted of emails between agency staff and data queries and output files on the number of affected entities and potential economic effects. OMB guidance on regulatory analysis states that agencies should prepare documentation of their economic analysis so that a qualified third party reading the analysis can understand the basic elements and the way in which the agency developed its estimates. The guidance also states that agencies are expected to document all the alternatives considered as part of their regulatory analysis and which alternatives were selected for emphasis in the main analysis. As previously discussed, independent regulatory agencies are not required to follow the OMB guidance, but it provides a strong set of analytical practices relevant to agency rulemakings. A lack of documentation of the analysis supporting regulators’ RFA implementation limits transparency and accountability. Most regulators (five of six) have established written guidelines that restate the statutory requirements for certification and for preparing the regulatory flexibility analyses and provide some additional guidance for staff conducting the analyses, as shown in table 6. However, they generally have not developed comprehensive policies and procedures to assist staff in complying with RFA, which may contribute to the weaknesses we identified in some certifications and regulatory flexibility analyses. The guidelines for FDIC, OCC, CFPB, and SEC discuss regulatory flexibility analyses as part of their general rulemaking guidance for staff. At a minimum, each of these regulators’ guidance describes the statutory requirements under RFA for certifications and for preparing the initial and final analyses, and, for CFPB, agency-specific RFA requirements. These four agencies also provide some additional information intended to be useful in complying with RFA requirements, such as excerpts from the Office of Advocacy’s RFA compliance guide. For example, some of the incorporated Office of Advocacy guidance covers considerations for determining whether a rule would have a significant economic impact on a substantial number of small entities. In addition, some regulators’ RFA guidelines include organizational information for coordinating with certain agency departments (such as offices responsible for economic analysis or legal review) and identifying staff responsible for completing RFA analyses. Until recently, CFTC and the Federal Reserve had not established any policies, procedures, or guidance for conducting regulatory flexibility analyses, except for a policy statement CFTC issued in 1982 that defines small entities and an informal Federal Reserve document listing RFA requirements. Since we started our review, CFTC announced a working group intended to enhance compliance with RFA. According to CFTC staff, the group began its work in April 2017 with a focus on updating CFTC’s small-entity definitions. Staff said that the group’s next task would be to formulate RFA policies and procedures with a goal of adopting them in spring 2018. Also during the course of our review, the Federal Reserve finalized a handbook covering guidelines and policies for RFA and small- entity compliance guides that it provided to us in November 2017. Previously, the Federal Reserve’s RFA guidance consisted of an informal resource document identifying RFA requirements that it made available to rulemaking staff. While the financial regulators’ guidance discusses RFA requirements for regulatory flexibility analyses and includes some information on how to approach these analyses, it generally does not address how each agency helps ensure that its rulemakings consistently and completely comply with RFA requirements. Federal internal control standards state the importance for agency management to establish through policies and procedures the actions needed to achieve objectives. In addition, Executive Order 13272 required agencies to establish policies and procedures to promote compliance with RFA. While this executive order is not binding on independent regulatory agencies, it represents a best practice for rulemaking. We found that the regulators’ guidance lacks specific details on the procedures by which the agency expects rulemaking staff to implement RFA requirements. Other than restating RFA requirements and identifying organizational responsibilities, regulators’ guidance documents largely are limited to offering suggestions for rulemaking staff to consider while preparing RFA sections of the rule. For example, in many cases, the guidance documents include recommendations and excerpts from the Office of Advocacy’s RFA compliance manual such as factors to consider about what constitutes a significant economic impact and a substantial number of small entities. In another case, guidance suggests staff refer to RFA statements included in previously issued rules to use as examples. In addition, some guidance documents described agency policies on certain RFA elements. For example, one regulator’s guidance states a preference for completing an initial regulatory flexibility analysis, rather than making a certification determination. Yet, while these types of guidance may be instructive and allow for necessary flexibility, they do not represent specific and comprehensive procedures for implementing RFA requirements. As illustrated in table 7, the extent to which regulators’ guidance includes policies and procedures varies but generally does not include policies or procedures for identifying definitions or criteria for assessing whether a rule will have a significant economic impact on a substantial number of small entities; evaluating a rule’s potential economic impact on small entities, including compliance costs and broad effects such as cumulative effects, competitive advantage, and disproportionality; identifying and assessing regulatory alternatives that could minimize impact on small entities while accomplishing statutory objectives; disclosing analytical methodology and data sources; and creating and maintaining documentation that supports analytical findings. Some regulators’ guidance, including CFPB and OCC, includes policies and procedures for certain elements—such as disclosing methodology and sources—but not for others, such as defining what constitutes significant economic impact or a substantial number of small entities. FDIC’s rule development guide includes guidance for certification determinations (largely from Office of Advocacy’s compliance guide) but not for initial and final regulatory flexibility analyses for which the guide restates RFA requirements. SEC’s handbook describes some policies and procedures on alternatives but it focuses on having RFA statements acknowledge consideration of each RFA alternative type even if unsuitable. It also includes some policies and procedures for assessing economic impact. However, the handbook was last revised in 1999, so it does not incorporate recommendations from the Office of Advocacy’s compliance guide, and two SEC divisions have developed their own manuals, which generally restate RFA requirements. As previously described, we found inconsistencies and weaknesses in financial regulators’ certifications and regulatory flexibility analyses that we reviewed, including for the key elements discussed in this section. The shortcomings are attributable in part to the regulators’ lack of comprehensive policies and procedures for RFA requirements. Our prior work on RFA implementation by federal agencies found that uncertainties about RFA’s requirements and varying interpretations of those requirements by federal agencies limited the act’s application and effectiveness. However, the Office of Advocacy subsequently published guidance on complying with RFA requirements that includes information to help agencies interpret and implement RFA requirements. Such guidance could help regulators develop comprehensive and specific policies and procedures. Without such policies and procedures, regulators’ ability to consistently and effectively meet RFA objectives may be limited. As previously discussed, section 610 of RFA requires agencies to review, within 10 years of adoption, those rules assessed as having a significant economic impact on a substantial number of small entities to determine if they should be continued without change, amended, or rescinded to minimize any significant economic impact on small entities. During the last 10 years, the three federal banking regulators (Federal Reserve, FDIC, and OCC) used other retrospective reviews that they said fulfilled RFA requirements. Specifically, the banking regulators said that the retrospective reviews required under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) also satisfied RFA section 610 requirements. EGRPRA requires the federal banking regulators to identify outdated or otherwise unnecessary regulatory requirements imposed on insured depository institutions every 10 years. We compared EGRPRA requirements for retrospective reviews to those of section 610 and found they do not fully align (see table 8). For example, the EGRPRA review process relies on public comments to identify rules that may be outdated, unnecessary, or unduly burdensome. The comments are solicited through public notices in the Federal Register and through public outreach meetings held across the country. In contrast, public comments are only one component of section 610 reviews. Following a public notice and comment period, section 610 requires agencies to evaluate rules found to have a significant economic impact on a substantial number of small entities to identify opportunities to reduce unnecessary burden. The section 610 reviews are to consider five specific factors, such as the degree to which technology and economic conditions have changed in the area affected by the rule. Section 610 reviews focus specifically on reducing unnecessary regulatory burden on small entities; EGRPRA reviews focus more broadly on reducing regulatory burden on all insured depository institutions. We reviewed the 2007 and 2017 EGRPRA reports, along with their preceding Federal Register notices, and found that the regulators solicited comment from the public on the burden of regulations on community banks and other smaller, insured depository institutions. However, we found that the final reports primarily focus on the issues identified through public comments and generally did not include independent agency consideration of the impact of regulations on small entities, as required by section 610. The public notice requirements for RFA section 610 and EGRPRA also differed. RFA requires agencies to publish in the Federal Register a list of the rules that have a significant economic impact on a substantial number of small entities and that are to be reviewed pursuant to section 610 during the upcoming year. This list must include a brief description of each rule and the need for and legal basis of each rule. The notices alert the public to specific rules that may affect small entities and request public comment on these rules. EGRPRA public notice requirements do not require agencies to specifically identify rules that have an impact on small entities. Rather, agencies must at regular intervals provide notice and solicit public comment on a particular category or categories of rules (such as consumer protection, safety and soundness) governing all insured depository institutions. The notices request commenters to identify areas of the regulations that are outdated, unnecessary, or unduly burdensome. Our searches of the Federal Register turned up no notices of section 610 reviews posted by the regulators in the last 10 years. In its RFA guide, the Small Business Administration’s Office of Advocacy stated that agencies may satisfy section 610 requirements through other retrospective reviews if these other reviews meet the criteria of section 610. To obtain credit for a section 610 review through another review process, the Office of Advocacy recommends that agencies adequately communicate with stakeholders and the Office of Advocacy. According to an official from the Office of Advocacy, the office has not yet made a determination on whether the EGRPRA review process satisfies the requirements of section 610. Although the agencies stated that they fulfill RFA requirements through EGRPRA, without confirming this with the Office of Advocacy, it is possible that they are not meeting the RFA section 610 requirements and therefore may not be achieving the small- entity burden reduction that the statute seeks to ensure. We found that the regulators lack policies and procedures for how to conduct section 610 reviews or provide rationale for meeting the section 610 review requirements through other retrospective review processes. Our review of SEC’s section 610 reviews found that they were conducted late and were not fully consistent with RFA requirements or the Office of Advocacy’s guidance for such reviews. Although SEC staff have a process for tracking which rules are due for section 610 reviews, SEC conducted all but one of its reviews 12 years after the rules were published. According to RFA requirements, rules must be reviewed within 10 years of their publication as final rules. SEC staff told us that SEC conducted a broader review than required by RFA and recommended by the Office of Advocacy. Moreover, staff said that SEC conducted section 610 reviews for all rules previously published for notice and comment to assess the continued utility of the rules. Agency officials stated that when they prepare the agency’s annual Federal Register notice of rules to be reviewed during the succeeding 12 months, they consult a chronological list of final rules adopted by the agency to determine which rules are due for a section 610 review. However, when we reviewed documentation of 46 section 610 reviews SEC staff conducted in 2015 and 2016, we found that each of the reviews was conducted for a rule adopted in 2003 or 2004, with 45 rule reviews being conducted 12 years after their publication as final rules. By not conducting section 610 reviews within the time frame established by RFA, SEC may delay taking timely action to minimize significant economic impact of rules on small entities. In general, SEC did not follow Office of Advocacy’s guidance for conducting section 610 reviews. The Office of Advocacy recommends that to evaluate and minimize any significant economic impact of a rule on a substantial number of small entities, agencies may want to use an economic analysis similar to the initial regulatory flexibility analysis. Additionally, OMB guidance on regulatory analysis states that agencies should provide documentation that analysis is based on the best reasonably obtainable scientific, technical, and economic information available. As previously discussed, independent regulatory agencies are not required to follow the OMB guidance, but it provides a strong set of analytical practices relevant to agency rulemakings. To facilitate its section 610 reviews, SEC staff used a template that prompts staff to consider each of the five RFA-required section 610 considerations and to document the conclusion of the review (if the rule should be continued without change, amended, or rescinded). We reviewed the templates for all 46 reviews conducted between 2015 and 2016 and found that SEC staff consistently followed this template to document their conclusions. However, the reviews generally lacked substantive analysis and no rules were amended as a direct result of their section 610 review. Overall, of the 46 reviews, 7 identified comments or complaints from the public, 4 identified changes in technology, economic conditions, or other factors in the area affected by the rule, and 4 identified instances of overlap, conflict or duplication. The reviews generally provided no evidence of empirical analysis and no data to support the conclusions of the reviews, as recommended by the Office of Advocacy and OMB. Furthermore, in most cases, the reviews lacked a description of whether, or to what extent, the rule was affecting small entities. For example, when addressing the first RFA-required consideration, describing and evaluating the continuing need for a rule, most SEC section 610 reviews included language from the final rule as a description and included SEC’s conclusion that the rule continues to be necessary. The Office of Advocacy also suggests that useful section 610 reviews should evaluate potential improvements to the rule by going beyond obvious measures and evaluating factors such as the unintended market effects and distortions and widespread noncompliance with reporting and other paperwork requirements. We found no evidence that these factors were considered. The Office of Advocacy further recommends that agencies pay particular attention to changes in the cumulative burden faced by regulated entities. We did not find evidence that SEC considered the cumulative burden faced by regulated agencies in the reviews we examined. By not including these best practice elements as part of its section 610 reviews, SEC may not fully achieve RFA’s purpose of minimizing significant economic impact of rules on small entities. SEC does not have written policies or procedures for completing rule reviews pursuant to RFA section 610, potentially contributing to the weaknesses we identified on the timing of the reviews, and the lack of data and analysis to support the review findings. As previously mentioned, federal internal control standards state the importance for agency management to establish policies and procedures needed to achieve objectives. In addition, Executive Order 13272 requires agencies to establish policies and procedures to promote compliance with RFA. While this executive order is not binding on independent regulatory agencies, including SEC, it represents a best practice for rulemaking. SEC also does not publicly disclose the findings or conclusions of its section 610 reviews. Although RFA does not require that agencies publish the results of their 610 reviews, the Office of Advocacy recommends that to enhance transparency, agencies should communicate with interested entities about the status of ongoing as well as completed section 610 reviews. Several executive orders also highlight the importance of public disclosure of retrospective reviews. For example, Executive Order 13563 recommends that retrospective analyses, including supporting data, should be released online whenever possible. Executive Order 13610 reiterated this recommendation, stating that public disclosure promotes an open exchange of information. While these executive orders are not binding on independent regulatory agencies, we consider them a best practice for rulemaking. OMB guidance on regulatory analysis states that to provide greater access to regulatory analysis, agencies should post their analysis, along with supporting documents, on the Internet so the public can review the findings. Staff from SEC confirmed that they do not publish the results or summaries of their section 610 reviews, stating that they are not required to do so by law. Lack of public disclosure limits the transparency of section 610 reviews, hindering the public’s ability to hold agencies accountable for the quality and conclusions of their reviews. The other two regulators we reviewed, CFTC and CFPB, plan to put procedures in place for section 610 reviews. According to CFTC officials, the agency has not conducted any section 610 reviews in at least the last 10 years. CFTC officials confirmed that the agency currently has no policies or procedures in place to track which rules require reviews or to conduct the reviews. Furthermore, agency officials were unable to identify any final rules published by the agency from 1997 through 2007 that were found to have a significant economic impact on a substantial number of small entities and therefore would have required a section 610 review. According to CFTC officials, an agency working group has a goal to develop a process and criteria for conducting section 610 reviews. Additionally, agency officials stated an interest in establishing an automated system to develop a schedule for tracking which rules require section 610 reviews. CFPB has not yet been required to conduct any section 610 reviews. Section 610 reviews are required within 10 years of a rule’s adoption as a final rule; to date, none of the rules issued by CFPB, which was created in 2010, have met this deadline. CFPB officials confirmed that CFPB has conducted no section 610 reviews and stated that the agency currently has no formal plan or procedure in place to begin conducting these reviews. However, officials further stated that CFPB has had initial planning discussions about the section 610 review requirements and their role in a comprehensive regulatory review program. RFA aims to have agencies tailor regulatory requirements to the scale of regulated entities in a manner consistent with the objectives of the rule and applicable statutes. To achieve this goal, RFA requires agencies to assess the impact of proposed rules on small entities, solicit and consider flexible regulatory proposals, and explain the rationale for their actions. While many of the regulators’ certification determinations and regulatory flexibility analyses incorporated RFA-required components, the weaknesses and inconsistencies we found—in the analyses and in documentation—could undermine the act’s goal. Some certification determinations lacked important information recommended by the Office of Advocacy and OMB, including data sources and methodologies, definitions, and consideration of broad economic impacts. Many evaluations of key components—potential economic effects and alternative regulatory approaches—in the regulatory flexibility analyses were limited. For most rules we reviewed, regulators were unable to provide documentation supporting the economic analysis underlying their regulatory flexibility analyses—including their certification decision. Moreover, regulators generally lacked comprehensive policies and procedures for RFA implementation, a potential contributing factor for many of the weaknesses we identified. By developing policies and procedures that provide specific direction to rulemaking staff, the regulators could better ensure consistent and complete implementation of RFA requirements and more fully realize the RFA goal of appropriately considering and minimizing impacts on small entities during and after agency rulemakings. The issues we identified with section 610 reviews included the use of a substitute review process as well as gaps or weaknesses in analysis and documentation. To fulfill section 610 requirements, the Federal Reserve, FDIC, and OCC used other retrospective reviews required under EGRPRA that do not fully align with requirements under section 610. SEC’s section 610 reviews are not fully consistent with RFA requirements and Office of Advocacy and OMB guidance (for example, not within the 10-year time frame, no evidence of empirical analysis, and no data to support the conclusions of the reviews). CFTC has not recently completed section 610 reviews and CFPB has not yet been required to do so. These regulators have begun or will soon begin developing policies and procedures for conducting the reviews. By meeting section 610 review requirements and using best practices, regulators will be in a better position to minimize any significant economic impact of a rule on small entities that the statute seeks to ensure. Additionally, for regulators that have not publicly issued their finding or for those that have yet to undertake the reviews, it will be important to adopt best practices for transparency and accountability. We are making a total of 10 recommendations among the six financial regulators we reviewed: FDIC should develop and implement specific policies and procedures for how it will consistently comply with RFA requirements and key aspects of Office of Advocacy and OMB guidance that include the following three elements: processes for creating and maintaining documentation sufficient to support analysis of economic impact and alternatives; processes for disclosing the methodology—including criteria for assessing significant economic impact and substantial number of small entities—and data sources of economic analysis supporting certification determinations and regulatory flexibility analyses; and processes for considering to the extent practicable a rule’s potential economic impacts on small entities, including for evaluating broad economic impacts of regulations in certification determinations and assessing alternatives that could minimize impact on small entities. (Recommendation 1) FDIC should coordinate with the Office of Advocacy to determine whether the EGRPRA review process satisfies the requirements of section 610 and, if not, what steps should be taken to align the process with section 610 requirements. If additional actions are needed, FDIC should develop and implement specific policies and procedures for performing section 610 reviews, including processes for determining which rules require review, posting notices of upcoming reviews in the Federal Register, and maintaining documentation supporting the analysis and conclusions of RFA-required considerations; and publicly disclose the reviews, or summaries of the reviews, with the basis for any conclusions. Such disclosure could include publishing results as part of the EGRPRA report, in the Federal Register, or on the agency’s website. (Recommendation 2) OCC should develop and implement specific policies and procedures for how it will consistently comply with RFA requirements and key aspects of Office of Advocacy and OMB guidance that include the following three elements: processes for creating and maintaining documentation sufficient to support analysis of alternatives that could minimize impact on small entities; processes for disclosing the methodology—including criteria for assessing significant economic impact and a substantial number of small entities—and data sources of economic analysis supporting certification determinations and regulatory flexibility analyses; and processes for considering to the extent practicable a rule’s potential economic impacts on small entities, including for evaluating broad economic impacts of regulations in certification determinations and assessing alternatives that could minimize impact on small entities. (Recommendation 3) OCC should coordinate with the Office of Advocacy to determine whether the EGRPRA review process satisfies the requirements of section 610 and, if not, what steps should be taken to align the process with section 610 requirements. If additional actions are needed, OCC should develop and implement specific policies and procedures for performing section 610 reviews, including processes for determining which rules require review, posting notices of upcoming reviews in the Federal Register, and maintaining documentation supporting the analysis and conclusions of RFA-required considerations; and publicly disclose the reviews, or summaries of the reviews, with the basis for any conclusions. Such disclosure could include publishing results as part of the EGRPRA report, in the Federal Register, or on the agency’s website. (Recommendation 4) The Federal Reserve should develop and implement specific policies and procedures for how it will consistently comply with RFA requirements and key aspects of Office of Advocacy and OMB guidance that include the following three elements: processes for creating and maintaining documentation sufficient to support analysis of economic impact and alternatives; processes for disclosing the methodology—including criteria for assessing significant economic impact and a substantial number of small entities—and data sources of economic analysis supporting certification determinations and regulatory flexibility analyses; and processes for considering to the extent practicable a rule’s potential economic impacts on small entities, including for evaluating broad economic impacts of regulations in certification determinations and assessing alternatives that could minimize impact on small entities. (Recommendation 5) The Federal Reserve should coordinate with the Office of Advocacy to determine whether the EGRPRA review process satisfies the requirements of section 610 and, if not, what steps should be taken to align the process with section 610 requirements. If additional actions are needed, the Federal Reserve should develop and implement specific policies and procedures for performing section 610 reviews, including processes for determining which rules require review, posting notices of upcoming reviews in the Federal Register, and maintaining documentation supporting the analysis and conclusions of RFA-required considerations; and publicly disclose the reviews, or summaries of the reviews, with the basis for any conclusions. Such disclosure could include publishing results as part of the EGRPRA report, in the Federal Register, or on the agency’s website. (Recommendation 6) CFPB should develop and implement specific policies and procedures for how it will consistently comply with RFA requirements and key aspects of Office of Advocacy and OMB guidance that include the following three elements: processes for creating and maintaining documentation sufficient to support analysis of alternatives that could minimize the impact on small entities; processes for considering to the extent practicable a rule’s potential economic impacts on small entities, including for evaluating broad economic impacts of regulations in certification determinations and assessing alternatives that could minimize impact on small entities; and in developing policies and procedures for section 610 reviews, include processes for determining which rules require review, posting notices of upcoming reviews in the Federal Register, maintaining documentation supporting the analysis and conclusions of RFA- required considerations, and establishing procedures for publicly disclosing the review or summaries (such as in the Federal Register or on the agency’s website). (Recommendation 7) CFTC should develop and implement specific policies and procedures for how it will consistently comply with RFA requirements and key aspects of Office of Advocacy and OMB guidance that include the following four elements: processes for creating and maintaining documentation sufficient to support analysis of economic impact and alternatives; processes for disclosing the methodology—including criteria for assessing significant economic impact and a substantial number of small entities—and data sources of economic analysis supporting certification determinations and regulatory flexibility analyses; processes for considering to the extent practicable a rule’s potential economic impacts on small entities, including for evaluating broad economic impacts of regulations in certification determinations and assessing alternatives that could minimize impact on small entities; and in developing policies and procedures for section 610 reviews, include processes for determining which rules require review, posting notices of upcoming reviews in the Federal Register, maintaining documentation supporting the analysis and conclusions of RFA- required considerations, and establishing procedures for publicly disclosing the review or summaries (such as in the Federal Register or on the agency’s website). (Recommendation 8) SEC should develop and implement specific policies and procedures for how it will consistently comply with RFA requirements and key aspects of Office of Advocacy and OMB guidance that include the following four elements: processes for creating and maintaining documentation sufficient to support analysis of economic impact and alternatives; processes for disclosing the methodology—including criteria for assessing significant economic impact and a substantial number of small entities—and data sources of economic analysis supporting certification determinations and regulatory flexibility analyses; processes for considering to the extent practicable a rule’s potential economic impacts on small entities, including for evaluating broad economic impacts of regulations in certification determinations and assessing alternatives that could minimize the impact on small entities; and processes for performing section 610 reviews, including determining which rules require review, posting notices of upcoming reviews in the Federal Register, and maintaining documentation supporting the analysis and conclusions of RFA-required considerations. (Recommendation 9) SEC should publicly disclose its section 610 reviews, or summaries of the reviews, with the basis for any conclusions. Such disclosure could include publishing results in the Federal Register or on the agency’s website. (Recommendation 10) We provided a draft of this report to CFPB, CFTC, the Federal Reserve, FDIC, OCC, Office of Advocacy, and SEC for review and comment. CFPB, CFTC, the Federal Reserve, FDIC, and SEC provided written comments that we have reprinted in appendixes XIII–XVII, respectively. CFTC, the Federal Reserve, and FDIC also provided technical comments, which we have incorporated, as appropriate. We received technical comments from OCC too late to be incorporated in the final product. Although the comments were not incorporated, they do not significantly affect the facts or conclusions we presented. In their written comments, CFPB, CFTC, the Federal Reserve, FDIC, and SEC generally agreed with the report’s recommendations. CFPB recognized the importance of having specific policies and procedures to consistently comply with RFA requirements. CFPB noted the existence of formal guidance instructing staff on conducting and documenting analyses for substantive rulemakings, including following RFA, and stated its commitment to updating its policies and procedures—and developing them for section 610 reviews—to ensure it will consistently comply with RFA requirements. In written comments provided by CFTC, the agency stated its commitment to fully complying with RFA and described the formation and progress of its interdivisional working group for enhancing RFA implementation. CFTC noted that our recommendations are largely consistent with the planned efforts of the working group and that the group will use the recommendations as a guide in completing its work. CFTC also explained that while not a clear requirement of RFA, it will carefully consider making the public aware of the results of section 610 reviews in cases in which the review does not lead to proposed changes to a rule. In its written comments, the Federal Reserve noted that it strives for consistent and complete compliance with RFA requirements. Regarding our recommendation to develop and implement specific policies and procedures for complying with RFA requirements and key aspects of Office of Advocacy and OMB guidance, the Federal Reserve stated it plans to review existing policies and procedures to develop and implement, as appropriate, additional processes with respect to documentation, disclosing methodology and data sources, and considering a rule’s potential economic impact on small entities. Regarding our recommendation to coordinate with the Office of Advocacy and take steps to align the EGRPRA review process with section 610 requirements, the Federal Reserve stated that it will coordinate with the Office of Advocacy and noted that it also plans to conduct a broader review of processes for section 610 reviews to ensure they are comprehensive and transparent. In its written comments, FDIC stated it will consider our recommendations as it continues to enhance its policies and procedures for performing regulatory analyses, in particular compliance with RFA. Regarding our recommendation to develop and implement specific policies and procedures for complying with RFA requirements and key aspects of Office of Advocacy and OMB guidance, FDIC noted that although independent agencies are not required to follow certain guidance used as criteria in the report, it will continue to incorporate provisions from Office of Advocacy and OMB guidance where feasible. FDIC noted that GAO limited its review to analysis specifically included in the RFA sections of a rule and did not consider analysis published elsewhere in the preamble, as permitted by RFA. FDIC stated that it continues to look for ways to make its regulatory analysis more transparent. However, while RFA allows agencies to perform regulatory flexibility analyses as part of other required analysis if such other analysis satisfies RFA requirements, RFA also calls for initial and final regulatory flexibility analyses to contain or describe the required components. Including these components elsewhere in a rule’s preamble without referencing or describing them in the RFA section does not help promote transparency for the public or small entities the rule might affect. As the Office of Advocacy’s guidance notes, agencies can coordinate preparation of regulatory flexibility analyses with any other analyses accompanying a rule. But in doing so, agencies should ensure that such analyses describe explicitly how RFA requirements were satisfied. Otherwise, it may be unclear to small entities and others if relevant analysis appears elsewhere in a rule’s preamble, which could limit transparency and the ability of small entities to review and respond to relevant analyses. Regarding documentation supporting regulatory flexibility analyses and certification determinations, FDIC noted that it will ensure staff considers our recommendation. Regarding our recommendation to coordinate with the Office of Advocacy and take steps to align the EGRPRA review process with section 610 requirements, FDIC stated that it will consider the recommendation. FDIC noted that before this year, the last section 610 review for FDIC was part of the 2007 EGRPRA review process, and notices of that review were provided at that time. Since then, FDIC said that it issued one rule in 2014 that requires a section 610 review, which must be completed by 2024. In written comments, SEC’s chairman stated that he asked staff to identify additional ways to improve the quality of SEC’s rulemaking analysis and procedures. SEC noted that as an independent regulatory agency, it is not subject to the specific requirements for regulatory analysis in Executive Orders 12866 and 13563 and OMB Circular A-4, but that it will continue to strive to incorporate the principles and best practices in those documents into internal practices, where appropriate. SEC also noted that as part of its rulemaking, it engages in economic analyses of the likely costs and benefits of proposed and final rules along with other anticipated effects. SEC further explained that as permitted by RFA, relevant RFA analyses in SEC rulemaking releases often are found across several sections of the releases, and that it would therefore consider potential improvements to better communicate to the public about other analyses relevant to the RFA analyses. As we previously stated, although RFA allows agencies to perform regulatory flexibility analyses as part of other required analysis, it also requires the initial and final analyses to include or describe the required components. Including these components in different parts of a rule release without explicitly referencing or describing them in the RFA section may limit transparency and the ability of small entities to review and respond to relevant analyses. We are sending copies of this report to the appropriate congressional committees and members and financial regulators. This report will also be available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or EvansL@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix XVIII. The objectives of this report were to (1) analyze the trends in financial regulators’ application of Regulatory Flexibility Act (RFA) requirements in their recent rulemakings; (2) examine the extent to which financial regulators performed analyses for rules they certified would not have a significant economic impact on a substantial number of small entities; (3) examine the extent to which financial regulators performed regulatory flexibility analyses and the analyses’ effects on their rulemakings; (4) examine the extent to which financial regulators established policies, procedures, and criteria for complying with RFA requirements; and (5) examine the extent to which financial regulators performed retrospective reviews required by RFA. For the purposes of this report, financial regulators are the Consumer Financial Protection Bureau (CFPB), the Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC). To analyze the trends in financial regulators’ application of RFA requirements in their recent rulemakings, we reviewed all final rules published in the Federal Register from January 2010 through December 2016. Using the document search on the official Federal Register website, we downloaded all actions published in the Rules and Regulations section of the Federal Register for the financial regulators during our time period. The downloaded file had 744 actions and included a website link to each notice on the Government Printing Office’s website. We then reviewed each notice to remove actions that were not final rules, such as corrections, orders, and statements of policies. We also removed obvious duplicate rules, using the rule’s Regulation Identifier Number that we recorded from the notice or the title for rules without such an identification number. We considered rules to be duplicates if they were (1) a final rule confirming an interim rule or (2) an extension of the compliance date that did not make changes to the Code of Federal Regulations. We removed 181 actions that were not final rules and 43 duplicates, leaving 520 final rules promulgated by the financial regulators from 2010 through 2016. We then analyzed the Federal Register notices for these final rules, using a spreadsheet-based data collection instrument, to quantify how many rules (1) did not include a proposed rule, (2) included an initial regulatory flexibility analysis, (3) included a final regulatory flexibility analysis, (4) certified that RFA analyses were not required, and (5) had other characteristics, such as those rules that performed a final regulatory flexibility analysis but also certified that it was not required. In cases in which the RFA analysis performed in the proposed rule was not clear or present in the final rule, we used the Regulation Identifier Number or citations listed in the final rule to locate the proposed rule to make the determination. To examine the extent to which financial regulators performed analyses for rules they certified would not have a significant economic impact on a substantial number of small entities, we used the results from the trend review to select all final rules published in the Federal Register from January 2015 through December 2016 for which an agency published a notice of proposed rulemaking and certified in the final rule that the rule would not have such an economic impact. We identified a total of 66 final rules that included certifications. More specifically, CFPB had 11 rules that included certifications, CFTC had 15, FDIC had 18, the Federal Reserve had 1, OCC had 9, and SEC had 12. For these rules, we collected and reviewed internal workpapers from the financial regulators on their decisions to certify that regulatory flexibility analyses were not required because the rule would not have a significant economic impact on a substantial number of small entities (certifications). We then assessed the regulators’ certifications in Federal Register publications to determine the extent to which they reflected RFA requirements, guidance from the Small Business Administration’s Office of Advocacy on complying with RFA, and other best practices for rulemaking, specifically Office of Management and Budget (OMB) guidance on regulatory analysis and Executive Order 13563. Our analysis did not include an evaluation of other aspects of agency rulemaking, including regulatory analyses for purposes other than RFA, such as analyses for the Paperwork Reduction Act and other economic analyses in the preamble. We based our evaluation on the RFA sections of each Federal Register notice for proposed and final rules and did not review other rule sections unless the RFA section explicitly referenced them. We also reviewed the workpapers and notices of joint rules for coordination on the certification analysis or decisions between regulators. To examine the financial regulators’ initial and final regulatory flexibility analyses and the analyses’ effects on their rulemakings, we used the results from the trend review to select all final rules published in the Federal Register from January 2015 through December 2016 for which the agency performed an initial regulatory flexibility analysis in the proposed rule and a final regulatory flexibility analysis in the final rule. For any regulator that had fewer than three rules meeting these criteria, we selected all rules published in the prior year for which the agency performed an initial and final regulatory flexibility analysis until we reached three rules or a publication date of January 2013. For rules issued jointly by multiple financial regulators in our scope, we included the rule for each regulator that prepared an initial and final regulatory flexibility analysis. We included such rules even if they would not otherwise have been selected using the outlined criteria. This resulted in the inclusion of one additional rule for the Federal Reserve (a 2013 rule issued jointly with OCC). We selected a total of 39 final rules for which the agency performed an initial and final regulatory flexibility analysis. More specifically, we selected 7 CFPB rules, 1 CFTC rule, 4 FDIC rules, 17 Federal Reserve rules, 1 OCC rule, and 9 SEC rules. For these rules, we obtained and reviewed internal workpapers from the financial regulators related to the initial and final regulatory analyses. We assessed the regulators’ regulatory flexibility analyses contained in the RFA summary in the notices of proposed and final rules published in the Federal Register to determine the extent to which they reflected RFA requirements, the Office of Advocacy’s guidance on complying with RFA, and OMB guidance on regulatory analysis. Our analysis did not include an evaluation of other aspects of agency rulemaking, including regulatory analyses for purposes other than RFA. We based our evaluation on the RFA sections of each rule and did not review other rule sections unless the RFA section explicitly referenced them. We also analyzed the workpapers, notices, and interviews to identify the extent to which regulators revised draft and proposed rules as a result of regulatory flexibility analyses, the source of the changes, and the types and characteristics of changes that regulators made to draft and proposed rules as a result of regulatory flexibility analyses. We also reviewed the workpapers and notices of joint rules for coordination on the analyses. To examine financial regulators’ policies, procedures, and criteria for complying with RFA requirements, we obtained and reviewed internal agency policies, procedures, and guidance for conducting initial and final regulatory flexibility analyses or certifying that such analyses were not required. We then assessed the documents received to determine the extent to which they reflected RFA requirements and Office of Advocacy’s guidance on complying with RFA. We also assessed the extent to which the documents included comprehensive policies and procedures to assist staff in complying with RFA in accordance with best practices outlined in Executive Order 13272 and federal internal control standards. To examine the extent to which financial regulators performed retrospective reviews required by RFA, we searched the Federal Register for notices of upcoming section 610 reviews as well as results of section 610 reviews. We also obtained and reviewed documentation from the financial regulators of section 610 reviews performed from calendar year 2006 through 2016. We assessed the section 610 reviews we received against RFA requirements and other best practices for rulemaking, specifically OMB guidance on regulatory analysis and Executive Orders 13563 and 13610. For agencies that conducted other retrospective reviews in lieu of section 610 reviews, we compared the other retrospective review processes to RFA requirements for section 610 reviews to determine the extent to which they aligned. We also interviewed staff from each of the financial regulators to understand the process and analysis supporting their certification decisions, regulatory flexibility analyses, and retrospective reviews. We conducted this performance audit from January 2017 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In the seven joint rules we reviewed with a certification, financial regulators conducted their own certification analyses independently of the other agencies responsible for the rule. The Regulatory Flexibility Act (RFA) allows agencies to coordinate on their RFA analyses but does not require it. The Small Business Administration’s Office of Advocacy does not make any recommendation on coordination in its RFA guide. Because agencies regulate different small entities that could be affected differently by a rule, coordination would not necessarily result in efficiencies or other benefits. In joint rules, the regulators (except for the Board of Governors of the Federal Reserve System (Federal Reserve), which generally treated regulatory flexibility analyses differently) reached the same conclusion to certify, although their analyses sometimes differed. For example, in one joint rule, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) concluded that the rule mainly imposes requirements on states and therefore affected no small entities. The Consumer Financial Protection Bureau agreed that the rule pertained mainly to states, but performed an analysis to assess the indirect impact on small entities, concluding that even indirectly the rule would not have a significant economic impact on a substantial number of small entities. The Federal Reserve found that some entities would be federally regulated but that the number was uncertain but not substantial (less than five). In another joint rule, FDIC concluded that the rule would not have a significant economic impact on a substantial number of small entities because banks with less than $1 billion in assets were exempted. The Small Business Administration defines a small bank as one with assets of $550 million or less; therefore, no small entities would be affected. However, OCC assumed that every bank subject to the rule would be required to comply regardless of the exemption and performed its analysis with that assumption. Under this premise, OCC found that a substantial number of small entities would be affected by the rule but that the economic impact would not be significant. Of the seven joint rules that we reviewed with initial and final regulatory flexibility analyses, the analyses for two rules indicated that regulators collaborated in preparing the analysis. For one rule, the Federal Reserve, FDIC, and OCC published a joint initial analysis but FDIC and OCC made a certification determination in the final rule. For the other rule, the Federal Reserve and OCC prepared separate initial analyses but published a joint final analysis that included separate sections evaluating the potential economic impact of the final rule. The remaining five joint rules included separate regulatory flexibility analyses for each regulator and all but the Federal Reserve reached a certification determination. None of the rules we reviewed with initial and final flexibility analyses that were issued by individual regulators indicated that the regulator had coordinated with other agencies. The following table details the entities regulated by the Commodity Futures Trading Commission (CFTC) that the agency determined were not small entities for the purposes of the Regulatory Flexibility Act (RFA). RFA allows agencies to establish alternative definitions of small entities when appropriate by publishing the definition in the Federal Register and, in the case of small businesses, in consultation with the Small Business Administration’s Office of Advocacy. We reviewed CFTC’s small-entity definitions to assess the extent to which they met these requirements. We reviewed the Federal Register notices for the definition of those entities included in final rules in calendar years 2015 and 2016 where the agency certified that the rule would not have a significant economic impact on a substantial number of small entities. The following table compares the Securities and Exchange Commission’s definitions of small entities for the purposes of the Regulatory Flexibility Act (RFA) with the Small Business Administration’s size standards that RFA uses to define small entities. The Board of Governors of the Federal Reserve System (Federal Reserve) generally performed regulatory flexibility analyses for its rulemakings regardless of the rule’s potential impact on small entities. As shown in table 11, nearly all of the Federal Reserve’s initial and final regulatory flexibility analyses concluded that the rule would not have a significant economic impact on a substantial number of small entities, which generally is a basis for certification. Furthermore, the majority of the Federal Reserve’s analyses stated that the rules either did not apply to small entities or lacked compliance requirements. Table 12 summarizes our findings on the Federal Reserve’s initial and final regulatory flexibility analyses for the 17 rules we reviewed. Table 13 summarizes our findings for the six rules we reviewed for which the Federal Reserve’s regulatory flexibility analysis indicated the rule might impose compliance requirements on small entities. Lawrance L. Evans, Jr., (202) 512-8678, EvansL@gao.gov. In addition to the contact named above, Stefanie Jonkman (Assistant Director), Kevin Averyt (Analyst in Charge), Bethany Benitez, Katherine Carter, Andrew Emmons, Marc Molino, Lauren Mosteller, and Barbara Roesmann made key contributions to this report. Other assistance was provided by Farrah Graham, Courtney LaFountain, and Tim Bober.", "summary": "Since the 2007–2009 financial crisis, federal financial regulators have issued hundreds of rules to implement reforms intended to strengthen the financial services industry. Financial regulators must comply with rulemaking requirements such as RFA when drafting and implementing regulations. Congress included a provision in statute for GAO to study these financial services regulations annually. This annual report examines the extent to which and how financial regulators performed required RFA analyses and established policies and procedures for complying with RFA requirements, among other objectives. GAO reviewed the RFA section of financial regulators' Federal Register notices of rulemaking, related internal workpapers, and policies and procedures for conducting RFA analyses. GAO also determined the extent to which regulators' analyses reflected RFA requirements, guidance issued by the Office of Advocacy, and OMB guidance on regulatory analysis. GAO's review covered certifications in 66 final rules and regulatory flexibility analyses in 39 proposed and final rules. To comply with the Regulatory Flexibility Act (RFA), agencies generally must assess the rule's potential impact on small entities and consider alternatives that may minimize any significant economic impact of the rule (regulatory flexibility analyses). Alternatively, agencies may certify that a rule would not have a significant economic impact on a substantial number of small entities. GAO found several weaknesses with the analyses of six financial regulators (Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, Commodity Futures Trading Commission, and Consumer Financial Protection Bureau) that could undermine the goal of RFA and limit transparency and public accountability, as shown in the following examples. Certifications. In certifications for rules that regulators determined may affect small entities, regulators conducted analyses to support their conclusions. GAO found many analyses across all regulators lacked key information the Small Business Administration's Office of Advocacy and the Office of Management and Budget (OMB) recommend. Missing information included discussions of data sources or methodologies, consideration of broader economic impacts of the rulemaking (such as cumulative economic impacts of regulations), and definitions of the criteria regulators used for “substantial number” and “significant economic impact.” Regulatory flexibility analyses. In many of the initial and final regulatory flexibility analyses that GAO reviewed, financial regulators' evaluation of key components required by RFA—potential economic effects and alternative regulatory approaches—was limited. Most regulators (five of six) also did not disclose data sources or methodologies used for their analyses, as OMB recommends. For most rules GAO reviewed, regulators (five of six) were unable to provide documentation supporting their regulatory flexibility analyses, as OMB recommends, including analyses supporting certification decisions. However, the extent of documentation varied by regulator. Federal internal control standards state the importance for agency management to establish policies and procedures to achieve objectives. All but one of the financial regulators have guidelines that restate RFA requirements for certification and for preparing regulatory flexibility analyses and provide some information on how to approach these analyses. However, these regulators generally have not developed specific policies and procedures to assist staff in complying with RFA, which may contribute to the weaknesses GAO identified in the analyses. For example, regulators' guidance generally did not include procedures for evaluating a rule's potential economic impact; identifying and assessing regulatory alternatives that could minimize impact on small entities; disclosing methodology and data sources; and creating and maintaining documentation that supports findings. By not developing and implementing comprehensive policies and procedures for RFA analyses, regulators' ability to consistently and effectively meet RFA objectives may be limited. GAO is making a total of 10 recommendations among the six financial regulators reviewed, including that regulators develop and implement specific policies and procedures for consistently complying with RFA requirements and related guidance for conducting RFA analyses. Five agencies generally agreed with the recommendations and one did not provide written comments.", "document_type": "gao"}
{"report": "U.S. agencies implementing foreign assistance have individually and jointly developed strategies to guide their efforts. While State’s, USAID’s, and MCC’s strategies focus exclusively on foreign affairs or foreign assistance, DOD’s, HHS’s, and USDA’s strategies—as well as those of other agencies—address foreign assistance as part of larger portfolios of programs. State and USAID, which provide the majority of all foreign assistance, develop joint foreign assistance-related strategies. The State-USAID Joint Strategic Plan outlines top-level goals for State and USAID efforts, including the use of foreign assistance, to inform strategies developed by State and USAID bureaus, offices, and country teams. Six joint State-USAID regional strategies (e.g., the State Bureau of African Affairs–USAID Bureau for Africa Joint Regional Strategy) identify regional bureau priorities that are intended to align with the State-USAID Joint Strategic Plan and guide country-level planning for joint integrated country strategies. State, the lead U.S. foreign affairs agency, also develops strategies for its functional bureaus, which implement foreign assistance programs, and has participated in the development of a number of multisectoral and global strategies. State’s Office of U.S. Foreign Assistance Resources is responsible for coordinating foreign assistance programs, including providing strategic direction for both State and USAID. According to State documents, the Office of U.S. Foreign Assistance Resources strengthens the integration of foreign assistance with U.S. foreign policy priorities by guiding the development of coordinated strategic plans for each U.S. overseas mission at the country level (i.e., integrated country strategies), aiming for a holistic, whole-of-government approach. It provides tools and resources to assist bureaus, offices, and country teams in designing foreign assistance programs, projects, and processes that can help align with, and advance, broader strategic goals as well as monitoring and evaluation of progress and results. USAID, the lead U.S. foreign assistance agency, develops global, regional, and country strategies in the areas of health, democracy and human rights, water and sanitation, food security, education, poverty, and the environment, among others. MCC has developed one overall strategy document, related to its mission of reducing poverty through country-led economic growth. MCC also collaborates with stakeholders in and outside government to develop and implement foreign assistance programs. DOD performs security cooperation strategic planning, implementation, and oversight to achieve national defense strategy objectives. DOD also develops country-specific strategies for security cooperation and other assistance, including humanitarian assistance and efforts to build foreign partner security capacity. HHS has developed, or is a party to, a number of strategies related to global health, including strategies for specific diseases, such as HIV/AIDS, malaria, and Ebola, and for immunization and emergency preparedness. The Centers for Disease Control and Prevention (CDC), a component of HHS, develops its own strategies, which discuss CDC’s plans to combat infectious diseases worldwide. USDA has contributed to jointly issued strategies in food security related to two food aid programs that it administers—the Food for Progress program and the McGovern-Dole International Food for Education and Child Nutrition program. In addition, these agencies implement foreign assistance programs under the auspices of government-wide foreign assistance strategies developed by the National Security Council, the Executive Office of the President, and the Office of Management and Budget. These government-wide strategies include, for example, the National Security Strategy and the National Action Plan for Women, Peace, and Security. The geographic focus of these six agencies’ foreign assistance strategies ranges from country level to regional to global. For example, State, USAID, and DOD have developed integrated country strategies, country development cooperation strategies, and country cooperation plans, respectively, applicable to the countries where they implement foreign assistance. Similarly, State and USAID have six joint regional strategies and DOD has strategies focusing on its various geographic areas of command. In addition, various agencies, working both jointly and independently, have developed a wide variety of sectoral, multisectoral, agency-specific, and multi-agency strategies to guide global assistance efforts. Foreign assistance strategies are continuously developed and updated. Some strategies emerge after the launch of a specific initiative, such as the President’s Emergency Plan for AIDS Relief (PEPFAR), while others are updated as part of agencies’ strategic management processes. For example, State’s functional bureau strategies and its joint regional strategies with USAID are periodically updated as bureau-level components of State’s planning, budgeting, and performance management cycle. Planning at the agency level is reflected in the State- USAID Joint Strategic Plan, updated most recently in February 2018, with which bureau- and country-level strategies are expected to align. As we have previously reported, strategies that consider relationships among goals and objectives, interagency collaboration, and performance assessment can improve federal management. In particular, these considerations can help identify, eliminate, or better manage fragmentation, overlap, and duplication in the federal government. While many of the 52 foreign assistance strategies that we reviewed at least partially addressed the key elements we identified related to alignment of foreign assistance strategies, some did not address these elements. Regarding interagency coordination, 40 percent of the strategies generally identified roles and responsibilities for implementing the strategies, while 33 percent generally identified interagency coordination mechanisms; 23 percent and 38 percent, respectively, did not address these elements. Regarding strategic integration, 58 percent of the strategies we reviewed described linkages with U.S. foreign assistance strategies in the same sector and 54 percent generally described linkages with relevant higher- or lower-level U.S. foreign assistance strategies; 21 percent and 25 percent, respectively, did not identify such linkages. Regarding assessment of progress toward strategic goals, almost all of the strategies generally established desired results and a framework of goals and objectives and described activities to achieve results; however, 21 percent did not identify milestones or performance indicators and 21 percent did not outline plans for monitoring and evaluation. We also found that the six agencies implementing most U.S. foreign assistance do not have consistent guidance for strategy development that could help ensure their strategies address the key elements we identified. On the basis of our prior reporting about U.S. government strategic planning and interagency collaboration, we identified nine key elements that are important for helping to ensure that agencies’ foreign assistance strategies are well aligned in terms of implementation approach and desired results and that planning among multiple agencies is not fragmented. The nine elements we identified are associated with (1) interagency coordination, (2) strategic integration, and (3) assessment of progress toward strategic goals (see table 1). As we have previously reported, fragmentation in the U.S. government refers to circumstances in which multiple federal agencies are involved in serving the same broad area of national need and opportunities exist to improve service delivery. Implementing foreign aid involves the collaborative efforts of multiple U.S. agencies, each of which brings specific contributions and statutory authorities and has its own organizational structure, culture, and priorities. Our prior work has shown that foreign assistance strategies that consistently address (1) agencies’ roles and responsibilities and (2) interagency coordination mechanisms can help guide the implementation of various aspects of a strategy and the identification of agreed-on processes for effective collaboration to resolve conflicts and better manage fragmentation. Strategies that do not consistently address elements related to interagency coordination miss opportunities to ensure that agencies’ roles and responsibilities are clear and distinct and that coordination mechanisms are well defined. As figure 1 shows, of the 52 strategies we reviewed, 40 percent generally identified agencies’ roles and responsibilities and 23 percent did not address this element. In addition, while 33 percent generally identified interagency coordination mechanisms, 38 percent did not identify any such mechanisms. Agencies’ roles and responsibilities. Forty percent (21 of 52) of the strategies we reviewed generally defined agencies’ roles and responsibilities. For example, USAID’s Strategy on Democracy, Human Rights and Governance identified all agencies involved in its implementation and laid out the roles and responsibilities of each agency as well as USAID offices. Thirty-seven percent (19 of 52) of the strategies partially defined agencies’ roles and responsibilities, which suggests the potential for improvement in this area. For example, State-USAID joint regional strategies identified the partners and stakeholders and enumerated the activities that State and USAID or the embassy and missions would undertake. However, most of those strategies did not specify the individual agencies’ roles and responsibilities. Twenty-three percent (12 of 52) of the strategies contained no information about agencies’ lead, support, and partner roles. Interagency coordination mechanisms. Thirty-three percent (17 of 52) of the strategies we reviewed generally identified interagency coordination mechanisms. For example, USAID’s Multi-Sector Nutrition Strategy identified joint planning, funding, and programming mechanisms for coordination among development and humanitarian assistance agencies at country and regional levels in USAID and the U.S. government as a whole. Twenty-nine percent (15 of 52) of the strategies partially identified coordination mechanisms. For example, CDC’s Global Health Strategy and USAID’s Global Health Strategic Framework both described the agencies’ respective unique roles in global health but did not specifically discuss how the agencies would work together to achieve their goals. Thirty-eight percent (20 of 52) of the strategies did not discuss interagency coordination mechanisms. As our prior work has shown, agencies that establish strategies that align with partner agencies’ activities, processes, and resources are better positioned to accomplish common goals, objectives, and outcomes. Our prior work has also determined that collaboration among federal agencies working toward similar results can help ensure consistent goals and mutually reinforcing program efforts that effectively manage fragmentation. These agencies can use higher-level strategic plans as a tool to drive interagency collaboration to ensure complementarities in goals and objectives. To improve alignment of related strategies, each strategy should address (1) integration with relevant sectoral strategies and (2) integration with relevant higher- or lower-level strategies. Strategies that do not consistently address elements related to strategic integration do not clearly show whether objectives and activities align with existing strategic priorities at the government-wide, sectoral, regional, and country levels. As figure 2 shows, 58 percent of the strategies we reviewed generally described linkages with at least one relevant sectoral strategy, while 21 percent did not mention such linkages at all. In addition, 54 percent of the strategies generally described linkages with at least one higher- or lower-level foreign assistance strategy, while 25 percent did not describe any such linkages. Integration with relevant sectoral strategies. Fifty-eight percent (30 of 52) of the strategies we reviewed generally identified or described linkages with other, related U.S. government strategies. For example, State’s Strategy for Women’s Economic Empowerment discussed how its activities are designed to complement and reinforce those of the U.S. National Action Plan on Women, Peace and Security, the U.S. Strategy to Prevent and Respond to Gender-Based Violence Globally, and the U.S. Global Strategy to Empower Adolescent Girls. About 21 percent (11 of 52) of the strategies we reviewed partially addressed this element. For example, the strategy PEPFAR 3.0—Controlling the Epidemic: Delivering on the Promise of an AIDS-Free Generation explicitly referred to the PEPFAR Blueprint for Creating an AIDS-Free Generation and stated that targeting interventions for populations at greatest risk for HIV incidence is an important activity. However, the strategy did not discuss how its goals and objectives relate to the strategies of the various agencies implementing PEPFAR and did not refer to the other strategies pertaining to PEPFAR. The remaining 21 percent (11 of 52) of strategies did not mention any other relevant U.S. government strategies. (See app. II for additional analysis of strategies by sector.) Integration with relevant higher- or lower-level strategies. Fifty-four percent (28 of 52) of the strategies we reviewed generally described their relationship to relevant strategies at higher or lower levels of government. For example, the U.S. Global Strategy to Empower Adolescent Girls discussed its relationship to a policy framework that, according to the strategy, is embodied in three higher-level strategies establishing gender equality as an important element of U.S. foreign policy—the National Security Strategy, the U.S. Global Development Policy, and the Quadrennial Diplomacy and Development Review. About 21 percent (11 of 52) of the strategies we reviewed partially addressed this element— that is, they discussed their relationship with higher- or lower-level strategies in a limited way. For example, the U.S. Government Approach on Business and Human Rights discussed priorities outlined in the National Security Strategy, aligning activities of business with those priorities, and noted efforts by State’s Bureau of Democracy, Human Rights, and Labor to discuss human rights with businesses. However, the U.S. Government Approach on Business and Human Rights did not reference common goals or activities outlined in other relevant higher- level strategies, such as the U.S. Global Development Policy or the Quadrennial Diplomacy and Development Review. The remaining 25 percent (13 of 52) of strategies did not address their relationship with strategies at other levels of government. Our prior work has shown that effective strategies clearly identify goals and objectives and a means for assessing progress in achieving them and that alignment of strategies and other plans can improve the management of fragmentation. Therefore, our prior work has called for agencies to develop strategies that identify and describe (1) desired results, (2) activities to achieve results, (3) a hierarchy of goals and subordinate objectives, (4) milestones and indicators, and (5) plans for monitoring and evaluation. Strategies that do not consistently address elements related to assessing progress may limit agencies’ ability to specify and assess common goals and objectives and mutually reinforcing results. As figure 3 shows, most of the strategies we reviewed generally identified desired results, activities to achieve those results, and a hierarchy of goals and subordinate objectives. However, fewer strategies addressed how progress toward those goals and objectives would be assessed. In particular, 63 percent generally identified milestones and performance indicators, while 21 percent did not address this element. In addition, 42 percent of the strategies generally outlined plans for monitoring and evaluation, while 21 percent did not outline such plans. Desired results, activities to achieve results, and hierarchy of goals and objectives. Ninety-two percent (48 of 52) of the strategies we reviewed generally included a statement of desired results, and 90 percent (47 of 52) generally included a description of activities to achieve these results. For example, MCC’s Next: A Strategy for MCC’s Future stated the agency’s overall mission of reducing poverty through economic growth and listed priority actions for each goal, such as exploring new data sources for accurately identifying countries with high poverty rates. In addition, about 83 percent (43 of 52) of the strategies generally included a hierarchy of strategic goals and subordinate objectives. For example, CDC’s Global Health Strategy included a clear hierarchy of goals and subordinate objectives (see table 2). Six percent (3 of 52) of the strategies did not identify desired results, 2 percent (1 of 52) did not describe activities to achieve these results, and 10 percent (5 of 52) did not include a hierarchy of goals and objectives. Milestones and performance indicators. Sixty-three percent (33 of 52) of the strategies we reviewed generally included milestones or performance indicators. These strategies often incorporated milestones or indicators as discrete components of each goal or subordinate objective. For example, DOD’s Kenya Country Cooperation Plan tracked discrete tasks with specific time frames, using color-coding to designate stages of implementation. Fifteen percent (8 of 52) of the strategies partially addressed milestones or indicators. For example, the 2016 updated joint State-USAID Strategy to Prevent and Respond to Gender-Based Violence Globally included an annex listing indicators but did not link them to the strategic objectives and planned actions. Twenty- one percent (11 of 52) of the strategies did not include any milestones or performance indicators. Monitoring and evaluation plans. Forty-two percent (22 of 52) of the strategies we reviewed generally outlined monitoring and evaluation plans. These strategies typically outlined such plans in a specific goal or in a designated section or appendix. For example, USAID’s Kenya Country Development Strategy included a section on monitoring and evaluation planning. In this strategy, USAID committed to host donor coordination and other stakeholder forums to monitor progress and to establish a monitoring and evaluation “core team” to ensure that learning is incorporated in decision making. Thirty-seven percent (19 of 52) of the strategies partially addressed monitoring and evaluation planning. Some of these strategies emphasized the importance of monitoring and evaluation or made broad statements without outlining more specific plans. For example, the State-USAID Joint Strategy on Countering Violent Extremism noted that State and USAID will develop a results framework for measuring progress that will be accompanied by clear, well-developed, and well-resourced monitoring and evaluation plans. The strategy also noted that State and USAID will, to the extent possible, develop a common set of indicators to measure outputs and outcomes. However, the strategy provided no additional details. Twenty-one percent (11 of 52) of the strategies did not outline any monitoring and evaluation plans. The six agencies implementing most of U.S. foreign assistance do not have consistent guidance for strategy development that could help ensure their strategies address the key elements we identified. For example, State and USAID guidance for strategy development includes many of these elements but does not cover all strategies that these agencies are involved in developing. Additionally, guidance for State’s and USAID’s joint regional strategies, State’s functional bureau strategies, and USAID’s country development cooperation strategies does not apply to other State and USAID strategies, such as the joint State-USAID integrated country strategies. DOD has also established guidance for developing security assistance programs that addresses the key elements we identified. However, DOD’s guidance does not explicitly apply to the development of foreign assistance strategies. HHS, MCC, and USDA have not established any guidance on foreign assistance strategy development. Inconsistent guidance for developing foreign assistance strategies has contributed to variations in the strategies’ addressing the key elements we identified related to interagency coordination, strategic integration, and assessing progress toward strategic goals. Existing government-wide guidance requires agencies to address some of the key elements of assessment of progress toward strategic goals that we identified as being important for ensuring alignment of agencies’ foreign assistance strategies. In January 2018, the Office of Management and Budget issued new guidance for agencies that administer foreign assistance that includes some of the elements we used to assess the strategies we reviewed. For example, the guidance recommends that agencies ensure their programs have clear goals and objectives, align their programs with higher-level strategies or objectives, and plan for monitoring and evaluation while developing policies and strategies. In addition, the Government Performance and Results Act, as amended, requires agencies to submit strategic plans for program activities that include general goals and objectives for the major functions and operations of the agency, a description of how the goals are to be achieved, and a description and schedule of program evaluations. The act’s provisions were among the sources we used to develop the desirable characteristics from which we derived the key elements we identified. However, according to officials of State’s Office of U.S. Foreign Assistance Resources, there is no government-wide guidance that incorporates interagency coordination, strategic integration, and assessment of progress toward strategic goals into the interagency strategic planning process. In addition, the officials stated that there is no overarching review mechanism for strategies outside of the core strategic planning process for joint State-USAID strategies. According to State officials, State’s Office of U.S. Foreign Assistance Resources plays a significant role in promoting interagency coordination by convening roundtables and working groups. By collaborating with the five other agencies that implement most of U.S. foreign assistance to establish guidance for developing foreign assistance strategies, the office could help the agencies ensure that future strategies address the key elements we identified. Consistent guidance for strategy development could help the agencies align their strategies and better identify and manage fragmentation in foreign assistance planning. U.S. foreign assistance often involves multiple agencies or a whole-of- government approach. Alignment of related foreign assistance strategies can help agencies better identify and manage fragmentation. Moreover, consistently addressing the key elements we identified related to interagency coordination, strategic integration, and assessment of progress toward strategic goals can help ensure that strategies provide a clear and comprehensive picture of alignment. Several of the six largest providers of U.S. foreign assistance in the three sectors we reviewed have not issued consistent guidance for foreign assistance strategy development that incorporates these key elements. For example, some agencies have issued guidance that addresses many of the key elements we identified related to interagency coordination, strategic integration, and assessment of progress toward strategic goals, but this guidance does not apply to all of these agencies’ strategies. State’s Office of Foreign Assistance Resources leads interagency strategic planning for the implementation of foreign assistance. This office—which has responsibility for, and experience in, promoting coordination among agencies involved in foreign assistance—is uniquely placed to collaborate with other agencies implementing foreign assistance to establish guidance for developing foreign assistance strategies that addresses the key elements we identified. Such guidance would improve the agencies’ ability to align future strategies and to identify and manage fragmentation in foreign assistance planning. We are making the following recommendation to the Department of State: The Secretary of State should ensure that the Director of the Office of U.S. Foreign Assistance Resources leads an effort to establish, in collaboration with the five other agencies that implement most of U.S. foreign assistance, guidance for strategy development that addresses the key elements we identified related to interagency coordination, strategic integration, and assessment of progress toward strategic goals. (Recommendation 1) We provided a draft of this report to State, USAID, MCC, DOD, HHS, and USDA for review and comment. We received substantive comments from State, USAID, and MCC, which are reprinted in appendixes IV through VI, respectively. In addition, we received technical comments from HHS, which we incorporated as appropriate. State, USAID, MCC, USDA, and DOD did not provide technical comments about our draft report. In their substantive comments, State and MCC concurred with our recommendation. USAID’s comments expressed support for our goal of strengthening interagency coordination, strategic integration, and assessment of progress across the federal departments and agencies that implement U.S. foreign assistance. However, USAID suggested that we issue our recommendation to the National Security Council or address it jointly to State and USAID. We believe that our recommendation is appropriately addressed to State, given the responsibility of State’s Office of U.S. Foreign Assistance Resources for coordinating foreign assistance programs, including providing strategic direction for both State and USAID. We are sending copies of this report to the appropriate congressional committees and to the Secretaries of Agriculture, Defense, Health and Human Services, and State; the Chief Executive Officer of MCC; and the Administrator of the USAID. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. This report examines the extent to which foreign assistance strategies address key elements that we identified related to alignment of agencies’ efforts—specifically, elements related to (1) interagency coordination, (2) strategic integration, and (3) assessment of progress toward strategic goals. We focused on the six agencies that administer the largest amounts of foreign assistance, according to fiscal year 2016 obligations data: the Departments of Agriculture (USDA), Defense (DOD), Health and Human Services (HHS), and State (State); the Millennium Challenge Corporation (MCC); and the U.S. Agency for International Development (USAID). We limited our review to foreign assistance strategies that were in effect during 2017. We further focused on strategies relating to health, security, and democracy assistance, which account for the majority of total foreign assistance obligations, according to fiscal year 2016 data. We excluded strategies for other assistance sectors, such as counternarcotics and other law enforcement activities that require interagency coordination with domestically focused agencies outside the scope of our review, such as the Departments of Homeland Security and Justice. To identify the strategies for this review, we asked the six agencies to update a list of 63 government-wide, agency, multi-agency, regional, sector-specific, and multisectoral strategies that they had provided for a related report that we published in June 2017. We also asked the agencies to provide country-level strategies for Afghanistan and Kenya, two of the largest recipients of U.S. security and development assistance, based on fiscal year 2016 obligations data. We obtained and initially reviewed 72 strategies, which included the 63 strategies we identified for the June 2017 report; 6 country-level strategies for Afghanistan and Kenya; and 3 updated strategies covering national security, the President’s Emergency Plan for AIDS Relief, and water and sanitation. We determined that 52 of these 72 strategies incorporated goals or activities related to health, security, or democracy assistance (see fig. 4). These 52 strategies, which had been issued by December 2017 and were current in that year, include 44 of those listed in our June 2017 report and 8 of those subsequently identified by the agencies. We reviewed the 52 strategies to determine the extent to which they addressed nine key elements we identified relating to the alignment of multiple strategies. We identified these nine elements by reviewing prior reports focused on foreign assistance in the security sector that assessed the quality of various U.S. government strategies; articulated practices for enhancing collaboration among federal agencies; or discussed fragmentation, overlap, and duplication among government programs. Those reports identified six desirable characteristics for government-wide strategies and practices for enhancing agency collaboration. For the purposes of this report, we selected three of these characteristics, related to interagency coordination, strategic integration, and assessment of progress toward strategic goals. We excluded three characteristics— purpose, scope, and methodology; detailed discussion of problems, risks, and threats; and description of future costs and resources needed— because we did not consider them to be directly related to alignment of strategies. The three characteristics we included comprised 15 elements, 9 of which we considered to be directly related to the alignment of health, security, and democracy assistance sector strategies across multiple agencies. We excluded 6 elements—for example, potential changes to structure and details on subordinate strategies and plans for implementation (e.g., enterprise architecture)—that we did not consider to be directly related to this topic. We reviewed the selected strategies using NVivo, a qualitative data analysis software package. For each strategy, two reviewers, including at least one with expertise in the area of foreign assistance addressed by each strategy, independently identified text related to each of the key elements we had identified. We used a standardized set of criteria in an assessment instrument to consistently judge whether each strategy sufficiently addressed these elements. This instrument contained evaluative questions intended to gauge the presence of each element— for example, “To what extent does the strategy address the agencies involved and their roles and responsibilities?”. Given the variety of strategies we reviewed and reviewers’ varying expectations for the detail and emphasis accorded the key elements we had identified, we rated the strategies using a three-part scale focused on the presence of these elements. We rated a strategy as generally addressing an element if the strategy provided sufficient detail to understand the element in that strategy; as partially addressing an element if the strategy mentioned it but lacked sufficient detail; and as not addressing an element if the strategy did not mention it. The two reviewers for each strategy independently documented their judgments on the extent to which the strategy addressed the key elements we had identified. Our initial coding shows that the reviewers agreed in about 78 percent (363 of 468) of these initial judgments. The reviewers reconciled their judgments, with resolution of differences split roughly evenly between accepting the higher and lower of the initial ratings. A supervisor reviewed each set of ratings for internal consistency. The supervisor related any identified issues, as appropriate, to the reviewers, who addressed them before the supervisor recorded the review as final. We examined these strategies and any appendixes included in the documents that the agencies submitted, because these strategic documents should broadly describe objectives and efforts—including interagency coordination, strategic integration, and assessment of progress toward strategic goals—needed to achieve them. We did not review agencies’ efforts to implement the strategies and did not assess the overall effectiveness of such efforts. Instead, we focused on the extent to which the strategies we reviewed provided a clear picture of the organization and management of U.S. foreign assistance efforts. To measure the extent of strategies’ integration with other relevant sectoral strategies and with higher- and lower-level strategies, we performed a word search for references to the other selected strategies in the same sector and to other strategies or sets of strategies (e.g., regional or country-level strategies) that we classified as either higher- or lower-level strategies. We searched for such references in each of the 14 strategies that we classified as covering the health sector, the 12 strategies that we classified as covering the security sector, and the 8 strategies that we classified as covering the democracy assistance sector. See appendix III for the results of this analysis. We also reviewed agency guidance related to foreign assistance strategies. We requested current versions of any relevant documentation from each of the six agencies. State provided us with agency guidance for developing its functional bureau strategies and joint State-USAID regional strategies as well as a related template. State also provided guidance documents related to its monitoring and evaluation policy and performance management. USAID provided strategic planning and implementation guidance for its country development and cooperation strategies. HHS, USDA, and MCC did not provide—and, according to agency officials, do not have—specific guidance related to what constitutes a foreign assistance strategy. DOD provided guidance for developing security assistance programs. We conducted this performance audit from May 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following list shows the 52 foreign assistance strategies that we reviewed. 1. Quadrennial Diplomacy and Development Review: Enduring Leadership in a Dynamic World (2015) 2. U.S. Global Development Policy (Sept. 22, 2010) 3. State-USAID Joint Strategic Plan FY2014-2017 (Mar. 17, 2014) 4. State Department, Office of U.S. Foreign Assistance Resources (F), Functional Bureau Strategy (2016) 5. Millennium Challenge Corporation, NEXT: A Strategy for MCC’s Future (Feb. 24, 2016) 6. USAID Multi-Sectoral Nutrition Strategy 2014-2025 (May 2014) Regional strategies (not specific to any single sector) 7. State Bureau of East Asian and Pacific Affairs/USAID Bureau for Asia Joint Regional Strategy (approved May 24, 2016) 8. State Bureau of African Affairs/USAID Bureau for Africa Joint Regional Strategy (approved Apr. 5, 2016) 9. State Bureau of Near Eastern Affairs/USAID Bureau for Middle East Joint Regional Strategy, FY 2016-2018 10. State Bureau of European and Eurasian Affairs/USAID Bureau for Europe and Eurasia Joint Regional Strategy, FY 2015-2018 (approved April 2015) 11. State Bureau of Western Hemisphere Affairs/USAID Bureau for Latin America and the Caribbean Joint Regional Strategy, FY 2015-2018 12. State and USAID Joint Regional Strategy for South and Central Asia, and Afghanistan and Pakistan, FY 2015-2018 (June 2014) 13. PEPFAR: Strategy for Accelerating HIV/AIDS Epidemic Control 2017- 2020 (September 2017) 14. 2016-2020 CDC Strategic Framework for Global Immunization (May 2016) 15. “U.S. Government Strategy for Reducing Transmission of the Ebola Virus Disease in West Africa” (draft strategy, Sept. 30, 2015) 16. President’s Malaria Initiative Strategy 2015-2020 (April 2015) 17. President’s Emergency Plan for AIDS Relief (PEPFAR) Human Resources for Health Strategy PEPFAR 3.0 (February 2015) 18. CDC Division of Parasitic Diseases and Malaria Strategic Priorities 19. The Global Strategy of the U.S. Department of Health and Human Services (2015-2019) 20. State Department, Office of the U.S. Global AIDS Coordinator, 21. PEPFAR 3.0 Controlling the Epidemic: Delivering on the Promise of an AIDS-Free Generation (December 2014) 22. HHS Strategic Plan, 2014-2018 (updated March 10, 2014) 23. HHS Assistant Secretary for Preparedness and Response Strategic Plan (February 2014) 24. PEPFAR Blueprint: Creating an AIDS-Free Generation (November 2012) 25. USAID’s Global Health Strategic Framework: Better Health for 26. CDC Global Health Strategy 2012-2015 (June 29, 2012) 27. National Security Strategy of the United States of America (December 2017) 28. State Bureau of Political-Military Affairs, Office of Weapons Removal and Abatement, Conventional Weapons Destruction Strategic Plan, 2017-2019 29. Department of Defense Guidance for Security Cooperation (Aug. 29, 2016) 30. Department of State & USAID Joint Strategy on Countering Violent Extremism (May 2016) 31. State Department, Arms Control, Verification and Compliance, Functional Bureau Strategy (approved December 2015) 32. State Bureau of Political-Military Affairs, Office of Plans & Initiatives, Peace Operations Capacity Building Division, U.S. Global Peace Operations Initiative Strategy: Strengthening the Effectiveness of United Nations and Regional Peace Operations (October 2015) 33. National Security Strategy (February 2015) 34. State Department, Bureau of International Security and Nonproliferation, Functional Bureau Strategy, FY 2015-2018 (January 2015) 35. State Department, Bureau of Political-Military Affairs, Functional Bureau Strategy, FY 2015-2018 (January 2015) 36. State Department, Bureau of Counterterrorism, Functional Bureau Strategy, FY 2015-2017 (January 2015) 37. National Strategy for Counterterrorism (June 2011) 38. Security Sector Reform (February 2009) 39. State Department, The Secretary’s Office of Global Women’s Issues, Functional Bureau Strategy (approved Mar. 27, 2017) 40. United States Strategy to Prevent and Respond to Gender-based Violence Globally (June 2016) 41. United States National Action Plan on Women, Peace, and Security (June 2016) 42. U.S. Department of State Strategy for Women’s Economic Empowerment (June 2016) 43. United States Global Strategy to Empower Adolescent Girls (March 2016) 44. State Department, Bureau of Democracy, Human Rights, and Labor, Functional Bureau Strategy, FY 2015-2018 (approved 2014) 45. U.S. Government Approach on Business and Human Rights (2013) 46. USAID Strategy on Democracy, Human Rights and Governance (June 2013) Country strategies (for Afghanistan) 47. Department of Defense, Enhancing Security and Stability in Afghanistan. Report to Congress in Accordance With Section 1225 of the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 (P.L. 113-291), as Amended (June 2017) 48. USAID Afghanistan Plan for Transition 2015-2018 (Jan. 6, 2016) 49. State/USAID Integrated Country Strategy: Afghanistan (February 2015) Country strategies (for Kenya) 50. State/USAID Integrated Country Strategy: Kenya (approved Feb. 1, 2017) 51. DOD/USAFRICOM: Kenya Country Cooperation Plan FY 2017-2021 (Nov. 8, 2016) 52. USAID Kenya Country Development Cooperation Strategy 2014-2018 (May 2014) Our analysis of strategies we reviewed in the health, security, and democracy assistance sectors found inconsistency in the extent to which the strategies addressed selected, or key, elements that we identified related to interagency coordination, strategic integration, and assessment of progress toward strategic goals. As figure 5 shows, about 30 percent (4 of 14) of the strategies in the health sector and about 17 percent (2 of 12) in the security sector generally identified interagency coordination mechanisms, while about 33 percent (4 of 12) in the security sector addressed agencies’ roles and responsibilities. In contrast, 75 percent (6 of 8) of the strategies in the democracy assistance sector generally addressed interagency coordination mechanisms and 63 percent (5 of 8) addressed agencies’ roles and responsibilities. As figure 6 shows, in the health sector, 50 percent (7 of 14) of the strategies generally addressed their relationship with at least one other strategy in the same sector and about 43 percent (6 of 14) generally addressed their relationship with at least one higher- or lower-level strategy. In the security sector, about 58 percent (7 of 12) of the strategies generally addressed their relationship with at least one other strategy in the same sector and their relationship with at least one higher- or lower-level strategy. In the democracy assistance sector, about 75 percent (6 of 8) of the strategies we reviewed generally addressed their relationship with at least one other strategy in the same sector, while about 63 percent (5 of 8) generally addressed their relationship with at least one higher- or lower-level strategy. Figures 7, 8, and 9 show the strategies in the health, security, and democracy assistance sectors, respectively, that refer to higher- and lower-level strategies as well as to other strategies in the same sector. As figure 10 shows, most strategies in the health, security, and democracy assistance sectors generally identified desired results, a hierarchy of goals and subordinate objectives, and activities to achieve results. However, strategies in all three sectors were less consistent in identifying milestones and performance indicators. Specifically, 57 percent (8 of 14) of health sector strategies, 50 percent (6 of 12) of security sector strategies, and 50 percent (4 of 8) of democracy assistance strategies generally addressed this element. In addition, while 71 percent (10 of 14) of strategies in the health sector outlined plans for monitoring and evaluation, 17 percent (2 of 12) of security sector strategies and 50 percent (4 of 8) of democracy assistance sector strategies generally addressed this element. In addition to the contact named above, James Michels (Assistant Director), Gergana Danailova-Trainor (Analyst-in-Charge), Timothy Young, Kay Halpern, Steven Putansu, Mona Sehgal, Drew Lindsey, Judith Williams, Leslie Holen, Ming Chen, Aniruddha Dasgupta, Mark Dowling, Giff Howland, Neil Doherty, and Reid Lowe made key contributions to this report.", "summary": "More than 20 federal agencies spend billions of dollars on U.S. foreign assistance each year. Six agencies—the Departments of Agriculture, Defense, Health and Human Services, and State; the Millennium Challenge Corporation; and the U.S. Agency for International Development—implement most of this assistance, using multiple strategies. State is responsible for coordinating their efforts. Questions have been raised about potential inefficiencies in implementing multiple foreign assistance strategies. GAO was asked to review the alignment of U.S. foreign assistance strategies. This report examines the extent to which strategies include key elements GAO identified, related to interagency coordination, strategic integration, and assessment of progress, that help ensure alignment. These elements are based on GAO's prior work on strategic planning and interagency collaboration. GAO reviewed 52 strategies related to health, security, and democracy assistance that were current in 2017. These included government-wide, agency, multi-agency, and regional strategies as well as strategies for two countries. GAO also reviewed agency guidance and interviewed agency officials. Many foreign assistance strategies related to health, security, and democracy assistance that GAO reviewed at least partially addressed key elements GAO identified that help ensure the strategies are aligned. Prior work has found that consistently addressing these elements, related to interagency coordination, strategic integration, and assessment of progress, is important for, among other things, better managing fragmentation in strategic planning. However, some strategies did not address these elements (see figure). For example: Interagency coordination . Twenty-three percent of the strategies (12 of 52) did not address agencies' roles and responsibilities, and 38 percent (20 of 52) did not identify specific interagency coordination mechanisms. Strategic integration . Twenty-one percent of the strategies (11 of 52) did not address linkages with other related strategies, and 25 percent (13 of 52) did not address linkages with higher- or lower-level strategies. Assessment of progress toward strategic goals . Twenty-one percent of the strategies (11 of 52) did not include milestones and performance indicators, and 21 percent (11 of 52) did not outline plans for monitoring and evaluation. The six agencies implementing most U.S. foreign assistance do not have consistent guidance for strategy development that could help ensure their strategies address these key elements. Some agencies' guidance addresses many of the elements but does not apply to all of their foreign assistance strategies, while other agencies have no such guidance. The Department of State (State) plays a significant role in interagency coordination. By collaborating with other agencies to establish guidance that addresses the key elements GAO identified, State could help the agencies improve their ability to align future strategies and identify and manage fragmentation in foreign assistance planning. GAO recommends that State lead an effort to establish, in collaboration with the five other agencies, guidance for developing foreign assistance strategies that addresses the key elements GAO identified related to interagency coordination, strategic integration, and assessment of progress. State concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "WIOA was designed, in part, to deliver a broad array of integrated services to customers of the public workforce system, including individuals seeking jobs and skills training, and employers seeking skilled workers. WIOA authorizes six core programs, including youth formula grants, with four programs administered by DOL and two by Education, as described in table 1. Program participants, including youth, may co- enroll in multiple WIOA core programs, such as the adult education or vocational rehabilitation programs, if they meet eligibility requirements for each. The core programs are generally required to report on common performance indicators, such as how many workers entered and retained employment, their median wages, whether they attained credentials, and their measurable skill gains. The law also includes new requirements for state workforce development plans to unify workforce strategies across the six core programs. Most provisions of WIOA became effective on July 1, 2015, superseding the Workforce Investment Act (WIA) of 1998. The Departments of Labor and Education issued the final regulations in August 2016, just after the close of the first full WIOA program year. Figure 1 shows the timing of key actions in implementing WIOA and timeframes governing state and local spending of initial youth grants. As illustrated, compliance is determined over the period for which funds are available, rather than on a program year basis. States have 3 years after the start of the program year to expend each program year’s youth funds, and local areas have 2 years. WIOA also emphasized improving opportunities for populations with significant barriers to employment, including out-of-school youth. We have previously reported that disconnected youth (those neither in school nor employed) may experience challenges successfully transitioning to adulthood. Disconnected youth are more likely than in-school youth to have characteristics and/or circumstances that can pose obstacles to employment, such as a lack of stable housing or transportation, parenting responsibilities, disabilities, limited basic skills, criminal convictions, or lack of adult support. In addition, WIOA emphasizes work experiences for youth—both in- and out-of-school youth—including paid and unpaid work, pre-apprenticeships, and internships. To ensure states and local areas emphasized services to out-of-school youth and youth work experiences, WIOA introduced new expenditure requirements for each. WIOA also changed the age range of eligible youth (see table 2). However, DOL has broad authority to issue waivers to individual states or local areas, exempting them from meeting certain requirements, including those relating to expenditures. In addition to the new spending requirements and eligible age range, WIOA changed the services local areas are required to make available to youth, as appropriate. Specifically, 2 of WIA’s 10 program services were combined, and 5 new services were added, bringing the total to 14 (see table 3). In general, WIOA’s youth program elements support career readiness as a youth transitions from basic educational attainment to occupational skills training and work opportunities, then to post-secondary education or unsubsidized employment. Since 2011, total youth formula grants to states—under WIA and then WIOA—have fluctuated but declined overall, with $700,044,855 being allotted to the 50 states and the District of Columbia for all WIOA youth activities in PY2017 (see fig. 2). Under WIOA Title I, DOL administers youth grants to states based on a formula reflecting the distribution of unemployment and economically disadvantaged youth. In general, states allocate funds to local areas based on a similar formula. In addition to changes in federal grant funding, fluctuations in unemployment and estimates of disadvantaged youth affect annual state and local grants. Governors establish state Workforce Development Boards that help guide implementation of WIOA by developing state plans, crafting statewide WIOA policies, and assisting local boards in the planning and delivery of WIOA services, among other duties. The state Boards must include a majority share of leaders in the state business community as well as representation from the state legislative and executive leadership, and labor organizations, and may include community-based organizations and service providers. Local Workforce Development Boards operate under state Boards and perform several roles, including developing local WIOA plans, contracting with service providers, providing oversight of youth activities, and selecting American Job Center operators. As was the case with WIA, WIOA provides significant flexibility to states and local areas to design and operate their WIOA programs to best suit local needs. For example, some local Workforce Development Boards provide direct services to youth while others contract with one or more organizations to provide the WIOA youth program services. In addition, services can be provided to youth at the workforce area’s American Job Center, a separate youth center, service providers’ offices, other locations in the community, or a combination of these sites. Local service providers work with each youth participant to develop an individual service strategy, which is a combination of services connected to a career pathways plan and tailored to the youth’s needs. Local workforce areas generally must make available all 14 program services, though youth are not required to participate in all services. Complete data on the spending of youth grants allocated to states for the first 2 program years of WIOA (PY2015 and PY2016) were unavailable during our review, but available data states reported to DOL showed a growing number of states were on target to expend at least 75 percent of their youth formula grant on out-of-school youth (see fig. 3). Nationally, as of September 30, 2017, states reported spending over 99 percent of their WIOA youth grant program funds allotted in PY2015, and 36 states had spent 75 percent or more of their expended funds on out-of-school youth (with an additional 13 states having spent between 70 and 75 percent). Twenty-nine states reported having spent all of their PY2015 funds, and of these states, 21 had spent 75 percent or more on out-of-school youth. The remaining 8 fell short of the level generally required by statute. However, for PY2015 specifically, DOL officials told us that the agency used its transition authority to modify the requirement. For that program year, DOL allowed states that could not meet the 75 percent requirement to spend a minimum of 50 percent of funds on out-of-school youth (rather than 75 percent) if they spent at least 10 percentage points more on these youth than in the previous program year. Applying this standard to DOL data on state spending, all but two states were on track to meet the modified requirement for PY2015 funds. Available DOL data also suggest most states are making progress in meeting the out-of-school youth spending requirement for their PY2016 youth funds. The rate at which states are spending their PY2016 funds varies, but as of September 30, 2017, states had collectively spent approximately 77 percent of their allotments. As of that date, 48 states had spent 75 percent or more of their expended funds on out-of-school youth. Only 4 states reported they had spent all of their PY2016 funds, and of those 4, all had spent more than 75 percent on out-of-school youth. States that have not yet spent all of their youth funds nor met the requirement to spend 75 percent of their PY2015 or PY2016 funds on out-of-school youth may still do so by the end of the 3-year period, ending June 30, 2018 for PY2015 funds, and June 30, 2019 for PY2016 funds. Conversely, states that are currently at or above the 75 percent level, with substantial funds left to spend, may fall below that level by the end of the 3-year spending period. Past federal emphasis on serving out-of-school youth, and many states’ experience in doing so, may partially account for states’ progress in meeting WIOA’s higher spending targets for this population. As far back as 2002, DOL guidance had emphasized serving out-of-school youth. Even before WIOA went into effect, many states were exceeding the existing WIA requirement to spend 30 percent of their WIA youth grant funds on out-of-school youth, with nationwide levels exceeding 50 percent since 2012 (see fig. 4). State workforce board officials in the three states we visited reported that they did not need to make significant changes to their youth programs to meet the new spending requirement. For example, in Texas, officials told us that the state had anticipated the increased focus on out-of-school youth for a number of years. In response, in the years before WIOA, it began steering more of its WIA youth grant funds toward serving out-of-school youth. According to this state official, in PY2006, Texas increased the percentage of youth grant funds that local areas must spend on out-of-school youth from 30 (the requirement under WIA) to 45 percent, and raised the requirement again in PY2007 to 65 percent. Similar to states, most local workforce areas we surveyed reported that they were on track to meet the requirement that they spend 75 percent of their WIOA youth grant funds on out-of-school youth. They also reported they were making progress on the requirement that they spend 20 percent of their funds providing work experience to all youth served by WIOA (in- and out-of-school). With respect to the out-of-school youth spending requirement, approximately 76 percent of survey respondents reported spending at or above the required level, and 3 percent reported spending below it. The majority of local workforce areas reported that meeting the spending requirement on out-of-school youth was not challenging or only slightly challenging. Likewise, staff in several local workforce development areas we visited told us that meeting the out-of-school youth spending requirement was not a significant challenge. An estimated 15 percent of those surveyed reported that meeting the spending target for out-of- school youth in PY2016 was very or extremely challenging. A majority of local workforce areas we surveyed also reported they were on track to meet the requirement to spend 20 percent of local WIOA youth grant funds on work experiences for both in- and out-of-school youth. While work experience was a youth program element under WIA, spending a specific percentage of WIOA funds on the service is a new requirement and applies only to local areas and not to states. Based on our survey, we estimate that approximately two-thirds of local workforce areas reported spending 20 percent or more of their PY2016 youth funds on work experiences (see fig. 5), but around 11 percent reported spending less. In general, many local workforce areas reported that it was not challenging or only slightly challenging to meet WIOA’s spending requirements for serving out-of-school youth and the provision of work experiences. However, an estimated 15 percent reported that meeting the out-of-school youth requirement was very or extremely challenging, and around 21 percent reported the same about the work experience requirement (see fig. 6). Under WIOA, states are responsible for monitoring local areas’ progress in meeting youth spending requirements. DOL officials we interviewed told us that states collect local area expenditure data, but those data are not transmitted to DOL except in the aggregate. The three states we visited confirmed that they collect local expenditure data from local areas using their own individual state reporting systems and then aggregate those data at the state level. DOL takes steps to determine whether states are carrying out their monitoring responsibilities, including conducting on-site visits to state offices. However, DOL officials said regional offices do not have the capacity to conduct on-site monitoring in each state every year. To make up for this, they conduct risk-based monitoring based on quarterly desk reviews that can alert them to expenditure issues at the state level. According to the officials, DOL regional offices typically conduct on-site monitoring of approximately one-third of their states each year. The officials said that during on-site monitoring, regional office staff may elect to review a sample of local area expenditures and the monitoring activities the state has taken to ensure local targets are being met. Also, to supplement their monitoring activities, DOL officials said they rely on regional offices’ ongoing interactions with states to stay abreast of state and local experiences and challenges. They said staff from regional offices maintain a dialogue with state officials, including periodic conference calls. As part of this communication, they said states might inform DOL regional officials about certain local areas experiencing challenges. DOL officials also said they hear from some local area staff directly during national conferences. As of February 2018, DOL’s monitoring had thus far focused on assisting states in overcoming challenges with WIOA requirements through technical assistance and guidance, according to DOL officials. At that time, the officials told us that the agency was moving to more formal compliance monitoring and would be beginning to address state-level non-compliance. DOL officials also told us that the agency has developed a core monitoring guide supplement for the WIOA Youth program and plans to publish the guide by December 2018. The tool will be used by DOL officials in their monitoring of states, but will also be shared with state officials to, among other things, help them organize their state-level monitoring of localities. While most local areas reported that their efforts to meet the out-of-school youth spending requirement involved serving greater numbers of that population, they also reported the need to accommodate that increase by significantly reducing or eliminating services provided to in-school- youth. In addition to the estimated 71 percent of local areas reporting that the number of out-of-school youth receiving services had increased since the enactment of WIOA, an estimated 80 percent reported that the number of in-school youth receiving services had decreased. An estimated 51 percent said they had reduced outreach and services to in- school youth to a great or very great extent, with another 22 percent saying they had moderately reduced outreach or services to these youth. Notably, an estimated 35 percent of local areas reported that they had stopped enrolling in-school youth in their WIOA youth program entirely. Available DOL WIOA program participant data reflects this shift, as the number of in-school youth served since PY2014—the program year prior to when WIOA went into effect—through PY2016 has dropped from just over 97,700 to around 38,900, or approximately 60 percent (see fig. 7). During the same period, the levels of out-of-school youth served rose from nearly 97,200 to around 108,800, or approximately 12 percent. DOL officials and some local workforce area staff reported that it is generally more expensive to serve out-of-school youth, in part because they often require more services than other youth. Although DOL does not have current data on cost per participant, DOL’s Employment and Training Administration’s fiscal year 2017 Congressional Budget Justification notes that WIA data indicate that out-of-school youth may cost approximately $1,000 more per youth served than in-school youth. Survey respondents most frequently reported that the reduction in services to in-school youth was the most adverse consequence they observed as a result of the new WIOA youth requirements. Similarly, WIOA practitioners we interviewed during our local area site visits expressed concerns about reducing services for in-school youth. Several told us that local in-school youth were no longer receiving the level of services they might need and that the shift might lead to more youth becoming disconnected from school and employment. Staff in one of the more rural workforce areas we visited noted that there are often insufficient services available to replace these lost WIOA services. Without a presence in the schools, staff in one workforce area told us they were concerned that they were not reaching youth at the right time and that more youth might become disconnected as a result. Some survey respondents made similar points, reporting that youth are more likely to become disconnected without WIOA services available in schools. In addition, workforce development board staff in one local area we visited told us that the WIOA definition of out-of-school youth has limited their ability to provide services to youth who need them if they have enrolled in community college but are not yet attending classes. DOL has provided technical assistance identifying other federal programs available for assistance to in-school youth, but we did not determine the extent to which these resources were being used in the local areas we visited. One major urban area we visited had managed the program’s transition toward serving a larger proportion of out-of-school youth through a city-wide committee established by the mayor. According to workforce development board staff, this committee works with the workforce development board and other community partners (e.g., civic, business, and philanthropic groups) and has helped develop an overarching strategy to assist youth that did not exist prior to WIOA. As local areas have worked to meet the new out-of-school youth spending requirement, they report applying other strategies to address certain challenges associated with serving that population in greater numbers. While many local areas reported that one of the main benefits of WIOA was its focus on hard-to-serve youth and those in greatest need of services, survey respondents and local workforce area staff and service providers reported that it has forced them to make some adjustments in how they administer their local youth programs, particularly in their approach to recruitment, local partnerships, and service offerings. Challenges Associated with WIOA’s Shift toward Out-of-School Youth In response to our survey, local area staff cited a number of specific challenges related to recruiting, retaining, and serving out-of-school youth under WIOA (see fig. 8). Transportation: A lack of transportation can prevent youth from getting to and from WIOA-funded educational programs, service providers, training, and work, and it was among the most significant barrier to employment cited by survey respondents. An estimated 71 percent of local workforce areas reported that transportation barriers were moderately or very difficult, and an additional 18 percent said they were somewhat difficult. Local service providers also told us that the lack of transportation could be particularly acute in rural areas without public transportation, such as bus systems. Locating and Recruiting: Finding out-of-school youth to enroll in WIOA- funded services was a significant challenge cited by local workforce areas, with an estimated 59 percent reporting that locating out-of-school youth was moderately or very difficult and another 21 percent reporting that it was somewhat difficult. Some local workforce area staff and service providers told us that many out-of-school youth move frequently, making it difficult to find and track them. In some locations, workforce area staff or service providers reported that youth typically do not “walk-in” to American Job Centers seeking services or congregate in the same places as in-school youth. Staff in one rural area told us that service providers had to recruit constantly. But even in urban areas, locating and recruiting out-of-school youth can be difficult. In fact, service providers in one urban workforce development area we visited told us that recruiting out-of- school youth is by far their greatest challenge. “Life barriers crop up once engaged and can take the young adults off course. The system must be flexible to allow these young adults time to leave and come back multiple times.” Retaining and Serving: Convincing out-of-school youth to stay in a WIOA program is also challenging for workforce development areas and service providers. In our survey, retaining youth was cited as moderately or very difficult by an estimated 54 percent of workforce development areas, with another 31 percent reporting it was somewhat difficult. Some survey respondents and workforce development area staff and service providers cited current low unemployment rates, which make it easier for youth to find jobs without completing WIOA work experiences or services, and frequent moves by out-of-school youth, sometimes far from work or training locations, as reasons retaining these youth can be difficult. “Many of the out-of-school youth have significant barriers that they have faced their entire life. We have to address a series of barriers with the individual before we can even begin to think about career, training, education, or work experience.” Addressing Personal Barriers: Addressing the personal barriers often faced by out-of-school youth was also a key challenge cited by local workforce areas. According to an estimated 44 percent of local workforce areas, addressing obstacles faced by this population such as homelessness or having a criminal history is moderately or very difficult, with another 30 percent reporting that it is somewhat difficult. Multiple survey respondents noted that because of their multiple barriers, out-of- school youth require more frequent contact and intensive case management services. During our interviews in local workforce areas, staff and service providers told us that out-of-school youth tend to face more of these types of obstacles than in-school youth. They told us these youth may have disabilities, such as diagnosed or undiagnosed mental health needs. In addition, they may have children and lack childcare, be involved in the child welfare or juvenile justice system, or experience homelessness. Out-of-school youth also often lack basic academic or job readiness (“soft”) skills, and sometimes are not proficient in English or face other barriers to employment. Some survey respondents also noted that the needs of older out-of-school youth are often different from those of younger youth. For example, they may have multiple children or housing needs and thus require more supportive services. Strategies Local Areas Have Applied to Address Challenges To mitigate challenges in shifting spending to out-of-school youth, local workforce area staff and service providers said that they have increased their recruiting efforts, developed new partnerships, strengthened existing partnerships, and in some cases, expanded services. Increased Recruitment Efforts to Locate Out-of-School Youth: An estimated 51 percent of local workforce areas said they are spending a larger percentage of their WIOA youth grant funds on recruiting compared to what they spent under WIA. According to our survey, the top approaches workforce development areas use to recruit out-of-school youth involve seeking referrals from community-based organizations, family and friends, and other agencies. They also include recruiting in person and in places throughout the community where out-of-school youth tend to congregate. Advertising WIOA youth programs using fliers and social media were also cited as being used to a great or very great extent by about 50 percent of local workforce areas (see fig. 9). In addition to survey respondents, those we spoke to in the local workforce development areas we visited described how they have increased their recruitment efforts of out-of-school youth since the enactment of WIOA. For example, one local workforce development board used its funds to hire an additional staff person to assist a service provider with its recruitment efforts. Service provider staff from across the local areas we visited said they spend time out in the community where out-of-school youth congregate much more now than under WIA when they served more in-school youth who were easier to find. They told us they recruit at malls, barbershops, and other places where out-of-school youth are likely to gather. One service provider told us they have regular hours at a popular major-chain coffee shop where they meet with youth and complete enrollment paperwork rather than relying on youth coming to an American Job Center or the service provider’s office. According to our survey, an estimated 70 percent of local workforce areas receive referrals from parents, siblings, friends, and other community members to a great or very great extent. These word-of-mouth and peer- to-peer recruiting strategies were also frequently cited as being very successful by local workforce area staff and service providers we interviewed. For example, staff in one local workforce area told us that one of their most successful recruitment efforts has been using or employing youth who had experienced success in the program to help enroll others in the local community who could benefit from WIOA services. They reported these youth recruiters knew where to find out-of- school youth in need of services and can more easily establish relationships with these youth, both in person and via social media. Other approaches used by the local areas we visited included seeking referrals from other community-based organizations and agencies, placing information fliers in high school graduation packets, attending job fairs and other community events, using social media or radio ads, going door- to-door in public housing, using mobile recruiting units, and placing fliers for WIOA services in grocery bags or attaching them to water bills. Strengthened Partnerships: Local workforce areas report strengthening partnerships with other WIOA programs and organizations to enroll and serve out-of-school youth. Approximately 60 percent of local workforce areas reported developing new partnerships or strengthening relationships with other WIOA core programs. Specifically, approximately two-thirds reported that they are co-enrolling WIOA youth with other WIOA core programs. Similarly, local workforce areas reported developing new partnerships or strengthening relationships with state and local government agencies, as well as community-based organizations. For example, some local workforce development area staff and local service providers we interviewed told us they had strengthened relationships with child welfare, juvenile justice, vocational rehabilitation, community colleges, and adult education programs. Some service providers focus on delivering services to a specific population of youth, such as youth involved in the foster care or justice system. For example, staff at one local workforce board told us that one of its local service providers ran a program in a juvenile justice facility to provide services to incarcerated youth. Some local workforce areas also reported co-enrolling youth in non-WIOA programs such as Temporary Assistance for Needy Families (TANF). In addition, an estimated 80 percent of local workforce areas reported that they had created new partnerships or strengthened relationships with employers. Other ways that local workforce areas reported strengthening partnerships included strengthening coordination across youth serving programs by improving communication (an estimated 78 percent), co-locating programs (47 percent), and integrating information technology systems (21 percent). Several survey respondents said that new or strengthened partnerships were one of the primary benefits of the WIOA program and that referrals from these partners are an important way to recruit out-of-school youth for the WIOA youth program. Expanding or Intensifying Services: To encourage enrollment or retain and serve of out-of-school youth, local workforce areas reported that they had expanded the variety or intensity of the youth services they provide. For example, workforce areas reported that they had expanded occupational training (59 percent), adult education (55 percent), and the development of career pathways (63 percent). In addition, approximately 46 percent of local workforce areas reported they had expanded their supportive services and approximately one-third of workforce areas reported that they spent a higher percent of their youth grant funds on supportive services than they did under WIA. For example, local workforce area staff or service providers we interviewed in three local areas (in two different states) told us that they had used WIOA funds to pay for the care of children of enrolled youth. Staff at another local workforce development area we visited reported intensified focus on staff training in trauma-informed care and emphasized the need to assume trauma among program participants. One WIOA service provider we interviewed explained that keeping more transient out-of-school youth motivated and enrolled required more intensive services and more interaction with staff until they learn to become more self-sufficient. She also emphasized that linking occupational training to an employer is vital for success with out of school youth. Reducing Transportation Barriers: In addition to these overall strategies, some local workforce area staff and service providers we spoke to told us they had taken steps to address transportation obstacles, which were widely cited as especially challenging. For example, local workforce staff in one local area we visited reported supplying bus passes to help youth participants get to their work experience jobs or training in areas where bus systems existed. One service provider staff member in a more rural area told us his organization used two vans to transport youth and another told us that his organization had provided bicycles to out-of- school youth. In one location we visited, a community college that partners with the WIOA program provides shuttle bus services between its various campuses and has expanded this service to include transportation to various partners, to and from job sites, and to and from credentialing exams. The representative from this community college told us that this approach is working well but needs to be further expanded. A service provider in another local area we visited told us they have developed some portable training modules that can travel across the local area, alleviating some of the transportation issues out-of-school youth face. These modules help train students in more remote areas in fields such as heating, ventilation, and air conditioning (HVAC), electrical work, and plumbing. To help states and local areas implement their WIOA programs and overcome challenges, DOL has developed and provided a significant amount of guidance and technical assistance in the form of Training and Employment Guidance Letters, webinars, conferences, and online resources; all of which state and local officials generally reported as being helpful. Officials in the three states we visited stated that DOL’s guidance and technical assistance had been helpful and that DOL’s Employment and Training Administration regional offices had been responsive to their needs. While local workforce development board staff we interviewed in several local areas told us that they relied primarily on guidance from their state, they also reported using DOL guidance and technical assistance and agreed that it was generally helpful. About half of local workforce area survey respondents reported that DOL guidance and technical assistance are either extremely or very helpful. When asked what topics or issues related to WIOA youth needed additional or clearer guidance, 54 out of 106 (approximately 51 percent) survey respondents did not provide any examples. Of those that did respond, the most commonly cited areas for additional guidance included performance measures and work experiences. However, these topic areas were only mentioned by 14 and 9 of the survey respondents, respectively. Many local workforce areas we surveyed have increased their emphasis on work experiences for youth under WIOA, with paid employment being the most common type of opportunity provided to participants. While work experience was a youth program element under WIA, since the enactment of WIOA, an estimated 82 percent of local workforce areas reported they had expanded work experience opportunities, and 59 percent of local workforce areas reported they provided work experiences to a greater percentage of youth participants than in the years prior to WIOA. Year-round paid employment and summer paid employment were the most common work experience opportunities that local workforce areas reported providing to a great or very great extent (an estimated 69 percent and 42 percent, respectively). In contrast, pre-apprenticeship, on- the-job training, job shadowing, and internship opportunities were less commonly provided (see fig. 10). WIOA youth participated in several types of work experiences with employers in numerous occupational fields, local workforce areas reported, though some were more common than others. Since the enactment of WIOA, an estimated 80 percent of local areas developed new or strengthened existing partnerships with employers. Through partnerships with employers youth participated in work experiences in a wide range of fields, the most common being jobs involving retail, customer service, and hospitality. Healthcare and medical-related jobs were also common, as were jobs in manufacturing. These occupations were also associated with the three most common career pathway plans developed for participants, according to the local workforce areas we surveyed. Several local staff members and survey respondents said they try to align youth work experiences with the youth’s interests and career pathway plan. However, many survey respondents noted that finding a good match can be difficult. Several workforce development board staff members and service providers across the three states we visited told us they had a positive opinion of work experiences and thought they were beneficial for youth. They praised work experiences for reasons like helping youth learn valuable soft skills, helping them realize the value of work, and improving employment outcomes. An American Job Center staff member in one local area we visited told us how important work experiences were for letting youth explore their interests and “try out” a new field before investing program funds in a related training program, only for the youth to decide later they did not like that field. Staff at two other centers described similar instances where participants placed in teaching, medical, and veterinarian positions reconsidered their decisions after the work experience exposed them to some of less appealing aspects of the occupations. Payment of participants’ salary is the dominant strategy local workforce areas said they are using to meet the new WIOA work experience spending requirement. Specifically, based on our survey an estimated 81 percent of local areas reported that to a great or very great extent they relied on paying a youth participant’s salary to meet the requirement (see fig. 11). Our survey also indicates that when local areas paid a participant’s work experience salary, 88 percent often or very often paid the entire salary with youth program funds, far outpacing other payment structures (see fig. 12). Although there is no limit on the length of the paid employment experience, DOL officials told us the typical length is around 6 to 8 weeks. In one local area, service provider staff told us that paying a youth’s entire salary encourages businesses to take a chance on a youth when they otherwise might not. DOL officials also told us that out-of-school youth, in particular, are a harder population to serve and many employers are not willing to take a risk in hiring them without the full salary paid through WIOA. However, based on our survey, an estimated 42 percent of local areas have at least sometimes arranged an agreement that part of a participant’s salary be paid by the employer. WIOA requires local areas spend at least 20 percent of local youth funds on work experience for in-school and out-of-school youth. Most local workforce areas we surveyed reported meeting that requirement, with an estimated 42 percent reporting it was slightly or not at all challenging to meet it in PY2016. However, another 34 percent found it moderately challenging, and 21 percent reported that it was very or extremely challenging. As shown in figure 13, local areas reported experiencing a variety of challenges as they attempted to meet the new spending requirement. Participant Challenges: The fact that youth participants may be less prepared for employment than older participants posed a challenge for workforce area staff as they worked to address WIOA’s new emphasis on youth work experiences. Overall, we estimate that 38 percent of local areas found it moderately or very difficult to meet the spending requirement because youth were not ready for a work experience. An estimated 31 percent of local workforce areas reported it was moderately or very difficult to meet the new requirement as a result of youth not completing their work experiences because they failed to live up to employer expectations. Several local WIOA program staff members told us that youth often have no prior work experience, can lack the soft skills needed for work, and may face other barriers to employment that can complicate success in a work experience. Some local staff we interviewed noted that many youth require substantial preparation before, and support during, a work experience in order to succeed. Perhaps as a consequence, about half (48 percent) of local workforce areas provided job readiness training to youth to a great or very great extent in order to prepare them for work experiences. In addition, some local service providers we met with told us they provided orientations to employers in order to manage expectations and prepare them to employ WIOA youth. Further, local service provider staff members told us they lend ongoing support to both youth participants and employers throughout the work experience period. This included check-ins at employment sites, mediating employee/employer conflicts, and addressing employer concerns about a youth’s performance to ensure youth meet employers’ expectations. Employer Reluctance: Employers are crucial to a local workforce area’s ability to provide work experiences to youth, yet many local areas have struggled to develop effective employer relationships that foster such opportunities. Notably, identifying employer partners does not appear to be the primary challenge, as an estimated 55 percent of local workforce areas reported little or no difficulty doing so. Yet, the existence of employers may not readily yield work experiences, as approximately 35 percent of local areas reported it was moderately or very difficult to align youth interests with available work experiences. Nearly the same proportion reported similar difficulty generating work experience opportunities because employers may perceive that providing those experiences would come with additional burdens. For example, service provider staff in two local areas told us some employers expressed concern about whether they would be responsible for workers’ compensation should a youth be injured. Staff in other areas told us that large companies in particular worry about potential administrative burdens, such as getting approval from corporate headquarters for a WIOA-sponsored work experience, or incorporating a participating youth into their payroll system. Some of the additional administrative burden perceived by employers may be associated with their general concern about the job-readiness of youth enrolled in WIOA programs. Around 31 percent of local areas reported it was moderately or very difficult to meet the work experience spending requirement because employers were reluctant to work with WIOA youth participants. One local employer we interviewed said out-of- school youth, in particular, may require additional help with communication, professional presentation, punctuality, and interpersonal skills, which can require additional personal attention. Many local service provider staff and survey respondents described the numerous barriers to employment often faced by out-of-school youth. One service provider said, as a result of these barriers, employers may be less receptive to provide work experiences for them. A survey respondent voiced a similar concern, saying employers may think youth with significant barriers are “too difficult to manage and/or retain in employment.” In light of employers’ possible reluctance to provide work experiences for youth, our survey shows many local workforce areas focused more resources toward developing employer partnerships. Specifically, we estimate that 51 percent of local areas reported that they increased their spending on business/employer relations under WIOA. Service providers in two local areas we visited, as well as many survey respondents, reported they had hired new staff, or were utilizing existing staff, to coordinate with employers. In one local area, workforce board staff told us that even with an established community presence and decades of experience, they still had to convince potential employer partners that their youth program staff would do everything in their ability to make work experiences easier for the employer. Other Challenges: Youth interest in work experiences may also vary according to current life circumstances, especially the need for immediate income. About a quarter (23 percent) of local areas reported youths’ lack of interest in obtaining WIOA-funded work experiences made meeting the spending requirement moderately or very difficult. As one survey respondent reported, “Many youth in this program simply want and need a job.” This sentiment was echoed by service providers in all three states we visited, who said the need for income can inhibit youths’ interest in a temporary work experience opportunity. Also, during our interviews with local area service providers we were told that challenges associated with the WIOA work experience component may be more acute in rural areas. As with other WIOA components, such as education and training, the availability of transportation can determine whether a youth can participate in WIOA-funded work experiences. For example, service providers we interviewed in Texas stressed how a lack of transportation, especially in rural areas where employers may be more distant from a youth’s home, can prevent youth from getting to and from a work site. In addition, a lack of employers in rural areas can hinder the creation of work experience opportunities. One service provider we interviewed said that some rural towns in his local area “have little more than a gas station and a school,” and the lack of local employers significantly limits work experience opportunities for youth. In such cases, arranging an opportunity in an alternate location would also likely require that the youth have a means of transportation to travel to the job site. This report does not include any recommendations. We provided a draft of this report to the Secretaries of Labor and Education for review and comment. Both agencies provided technical comments which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretaries of Labor and Education, and other interested parties. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or gurkinc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. This report examines the implementation of the Workforce Innovation and Opportunity Act (WIOA) youth program in states and local workforce areas with respect to the new requirements that 75 percent of youth funds be expended on out-of-school youth and 20 percent of youth funds be expended on work experiences. In particular, this report examines: (1) what is known about states’ and local areas’ progress in meeting the WIOA spending requirements for serving out-of-school youth and providing youth with work experiences; (2) how local areas are addressing WIOA’s emphasis on serving out-of-school youth, and any challenges they have encountered; and (3) how local areas are addressing WIOA’s emphasis on youth work experiences and any challenges they have encountered. To answer all of our research objectives we reviewed relevant federal laws, regulations, and guidance. We also employed other methods to answer our audit objectives, as described below. To address our first objective, we analyzed Department of Labor (DOL) state-level WIOA youth program expenditure data from program year (PY) 2015 and PY2016, the most recent data available, for the 50 states and the District of Columbia. We also analyzed WIA state level expenditure data from PY2012 through PY2014. These data include the funds allotted to each state, minus the governors’ reserve for statewide activities, which can be up to 15 percent of the total allotment. In addition, the data include funds spent by the states on out-of-school youth, and for PY2015 and PY2016, funds spent on work experiences. To determine whether states appeared to be on track to meet WIOA spending requirements, we considered the percentage of their overall funds they had spent, as well as the percentage of their expended funds that were spent on out-of-school youth and work experiences. Our analysis should not be used to make conclusions about legal compliance with WIOA requirements. To assess the reliability of these data, we interviewed DOL officials with knowledge of the data and reviewed written responses from the agency officials to data reliability questions. We also reviewed other documentation related to the data. We found these data to be reliable for the purposes of addressing our research objective. We also reviewed DOL guidance and technical assistance materials to identify the measures the agency is taking to help states and local areas meet program requirements and deliver WIOA services to youth. To gather information about the extent to which local areas are making progress in meeting WIOA spending requirements, we collected data through our nationally representative survey, described below. In addition, to address this research objective, we conducted semi- structured interviews with DOL headquarters and regional office officials to gain information on DOL’s role in the implementation and administration of the WIOA youth program, the steps the agency is taking to monitor states’ and local areas’ progress in meeting program requirements, and to assess the availability and reliability of program and expenditure data. We spoke to three of the Employment and Training Administration’s six regional offices, selected for their timely availability and to account for a large portion of state and territorial oversight. Among them, these regional offices were responsible for overseeing 24 states and 3 territories. Our review of DOL’s monitoring of state oversight was limited to aspects necessary to describe DOL’s general review structure and collection of information, if any, on local spending; we did not comprehensively assess DOL’s monitoring efforts. To address each of our research objectives, we conducted a nationally representative web-based survey of local workforce development areas (local workforce areas) in the 50 states and the District of Columbia. We surveyed workforce development areas because they are responsible for overseeing local youth workforce investment activities. Our survey results can be generalized to the entire population of workforce development areas. Specifically, we took a stratified random sample of workforce development areas (130 out of a universe of 543) to create estimates about the population of all workforce development areas. To ensure that our survey included workforce development areas located in major population areas, in Strata 1 we included the 23 local areas serving the 20 largest metropolitan areas in the United States with a workforce development board within the city, as identified by U.S. Census Bureau data. In addition, we included all 11 states in which there is only a single workforce development board that oversees WIOA activities for the entire state. There were 33 total workforce development areas in this strata. Strata 2 included 97 other randomly selected workforce development areas across the country. Each workforce development area was weighted in the analysis so our survey would be representative of the entire universe of workforce development areas. We conducted the survey from November 15, 2017 through January 31, 2018. We emailed our survey to the executive director of each workforce development area and asked questions about changes the area has made in response to the enactment of WIOA, challenges the workforce area has faced in meeting WIOA requirements related to serving out-of- school youth, and the adequacy of federal guidance and technical assistance, among other topics. The survey contained a mix of closed- ended and open-ended items. The survey’s weighted response rate was 82.3 percent (81.5 percent unweighted), with 106 of 130 workforce areas surveyed responding. A small number of items had higher non-response rates; we note this in the text when the rate of non-response is material. All closed-ended questions were weighted; however, open-ended questions were analyzed without weighting. Open-ended items generally received fewer responses than closed-ended questions. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 10 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that each of the confidence intervals in this report will include the true values in the study population. All percentage estimates in this report have a margin of error of plus or minus 10 percentage points or fewer, unless otherwise noted. To collect more detailed information about WIOA implementation at the state and local levels than our survey allowed, we conducted semi- structured interviews of state and local officials, as well as WIOA service providers, and partners, in three states. For our state-level interviews we selected three states primarily based on two criteria: 1) Proportions of disconnected youth at or above the median for all states. 2) WIOA state youth grant allotment for PY2016 at or above the median for all states. Sixteen states met both criteria. From those 16 states, we selected 3 that ensured diversity across DOL Employment and Training Administration regions and provided a mix of states with large percentages of disconnected youth and large state allotments. Based on this process we selected Arizona, Michigan, and Texas. In aggregate, these 3 states received approximately 12 percent of total PY2016 WIOA Youth funds. In each of the three states we selected, we visited three separate local workforce development areas, for a total of nine local areas. For our local workforce development area site selection we considered a number of factors, including disconnected youth rate data, input from state officials, and logistical feasibility. We also selected workforce development areas that would provide a mix of urban and rural areas. Specifically, we analyzed data on the percentage of disconnected youth at the county or metro area level and selected local areas with relatively high percentages of disconnect youth. To ensure that we selected workforce areas that would provide both urban and rural perspectives, we relied on county classifications by the U.S. Census Bureau. As we narrowed the list of site visit candidates, we reviewed the local area strategic plans published on the state workforce board’s website to gain additional insight into youth-specific programs in these areas. We also considered state officials’ input regarding workforce development areas in their states. Lastly, in making our final selections, we considered the logistical feasibility of traveling between local areas. We held interviews with state workforce officials in these states by phone and then conducted site visits to the three selected workforce development areas in each of the three selected states. In the each local area we visited, we interviewed local workforce development board staff, including, for example, executive directors, youth program supervisors, workforce youth specialists, community and business liaisons or business service managers, and others. Members of the workforce development board, in addition to board staff, participated in some of these interviews. In addition, in these local areas we interviewed staff from American Job Centers (one-stops), contracted youth service providers, and WIOA youth partner organizations, such as community colleges and other educational services providers, Job Corps, vocational rehabilitation agencies, and the Temporary Assistance for Needy Families (TANF) program. In one of the three states we visited, we also spoke with a small number of employers in each local area that had provided work experiences or hired youth through the WIOA program. These interviews were designed to obtain information on a variety of topics related to our research objectives, such as: how local workforce practitioners were serving out-of-school youth through the WIOA program; changes made as a result of the transition from WIA to WIOA; recruitment and service delivery strategies focused on out-of-school youth; challenges related to implementing WIOA and meeting new WIOA spending requirements; and federal guidance and technical assistance. We conducted this performance audit from December 2016 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Cindy Brown Barnes (Director), Betty Ward Zukerman (Assistant Director), David Perkins (Analyst-in- Charge), David Barish, and Kelly Turner made significant contributions to this report. In addition, key support was provided by James Ashley, Susan Baker, James Bennett, Stephen Betsock, Holly Dye, David Forgosh, Laura Hoffrey, Benjamin Sinoff, Almeta Spencer, and Walter Vance. Workforce Innovation and Opportunity Act: Federal Agencies’ Collaboration Generally Reflected Leading Practices, but Could Be Enhanced. GAO-18-171. Washington, D.C.: February 8, 2018. Workforce Innovation and Opportunity Act: Selected States’ Planning Approaches for Serving Job Seekers and Employers. GAO-17-31. Washington, D.C.: November 15, 2016. Workforce Innovation and Opportunity Act: Information on Planned Changes to State Performance Reporting and Related Challenges, GAO-16-287. Washington, D.C.: March 7, 2016). Workforce Innovation and Opportunity Act: Performance Reporting and Related Challenges. GAO-15-764R. Washington, D.C.: September 23, 2015. Transportation-Disadvantaged Populations: Federal Coordination Efforts Could Be Further Strengthened. GAO-12-647. Washington, D.C.: June 20, 2012. Disconnected Youth: Federal Actions Could Address Some of the Challenges Faced by Local Programs That Reconnect Youth to Education and Employment. GAO-08-313. Washington, D.C.: February, 28, 2008.", "summary": "Approximately 4.6 million youth ages 16 to 24 were neither in school nor employed in 2016. WIOA, enacted in July 2014, provides, in part, grants to states and local areas to assist youth—particularly out-of-school youth—in accessing employment, education, and training services. It also emphasizes the provision of work experiences to in- and out-of-school youth. GAO was asked to review how states and local areas are using WIOA grants to serve youth. This report examines (1) what is known about states' and local areas' progress in meeting WIOA spending requirements for serving out-of-school youth and for providing youth with work experiences; (2) how local areas are addressing WIOA's emphasis on serving out-of-school youth and any challenges, and (3) how local areas are addressing WIOA's emphasis on youth work experiences and any challenges. GAO reviewed relevant federal laws, regulations, and guidance; interviewed DOL officials; analyzed DOL state level WIOA youth program expenditure data from program years 2015 and 2016, the most recent data available; surveyed a nationally representative sample of local workforce development areas; and visited nine local workforce development areas in three states selected for their relatively large WIOA Youth funding allotments and relatively high rates of out-of-school youth. GAO is not making recommendations in this report. DOL and the Department of Education provided technical comments on a draft of this report, which were incorporated as appropriate. Most states reported they were on target to meet the Workforce Innovation and Opportunity Act's (WIOA) requirement to spend 75 percent of their Program Year 2015 and 2016 youth grant funding to serve out-of-school youth, according to Department of Labor (DOL) data. Because deadlines had not arrived for the spending of state youth grant allotments for these program years, compliance could not be determined. Similarly, most local areas reported they were on track to meet the out-of-school youth spending requirement, as well as the requirement that 20 percent of local youth grant funds be spent on providing work experiences to youth. Through GAO's survey, many local areas reported it was not challenging or only slightly challenging to meet the spending requirements, but some reported experiencing greater challenges (see figure). Under WIOA, DOL does not collect local expenditure information, but states must monitor local areas' compliance while DOL monitors state oversight. DOL has taken some steps to determine whether states are carrying out their monitoring responsibilities, including limited on-site monitoring and ongoing dialogue with states. According to DOL officials, the agency's monitoring of the new requirements has thus far focused on providing technical assistance and guidance, but they reported plans for more formal compliance monitoring. Note: All percentage estimates in this figure have a margin of error of plus or minus 10 percentage points or fewer. Percentages do not add to 100 due to rounding and because a small number of survey respondents answered “don't know” or did not respond. Local areas reported in GAO's survey that they used a combination of strategies to meet the WIOA spending requirement for serving out-of-school youth and to address other related challenges. For example, many local areas reported suspending enrollment of in-school-youth to help meet the requirement to spend 75 percent of youth grant funds on out-of-school youth. In addition, local areas reported having taken steps to address challenges locating, retaining, and serving out-of-school youth in their WIOA-funded programs, including increasing their recruiting efforts and strengthening partnerships with other WIOA programs, state and local government agencies, and community-based organizations. To meet WIOA's 20 percent spending requirement for work experiences, local areas reported expanding work experience opportunities for youth, most commonly with temporary paid employment. An estimated 81 percent of local areas reported they paid youth participants' salaries, with most paying the entire salary. Many local areas also reported challenges, including youths' lack of job-readiness and employers' reluctance to hire WIOA participants. To address these challenges, local areas reported providing job-readiness training for youth and strengthening partnerships with employers.", "document_type": "gao"}
{"report": "According to international and U.S. government sources, climate change poses serious risks to many of the physical and ecological systems upon which society depends, although the exact details of these impacts are uncertain. Climate change may intensify slow-onset disasters, such as drought, crop failure, and sea level rise. Climate change is also increasing the frequency and intensity of extreme weather events, including sudden- onset disasters, such as floods, according to key scientific assessments. These effects of climate change may alter existing migration trends across the globe, according to IOM. (See appendix II for further discussion of climate change as a driver of migration in seven geographic regions.) For example, sea level rise, a slow-onset disaster, may result in the salinization of soil and drinking water, thereby undermining a country or community’s ability to sustain livelihoods and maintain critical services, which could cause some people to migrate. Sudden-onset disasters may also contribute to migration as people flee natural disasters, in most cases leading to temporary displacement. For example, people may either voluntarily migrate, or be forced to migrate, to earn money needed to rebuild damaged homes after flooding, especially as extreme weather events increase in intensity and number. If unable or unwilling to migrate, people may find themselves trapped or choosing to stay in deteriorating conditions. Sources agree that the effects of climate change generally impact internal migration, while migration across international borders due to climate change is less common. In deciding whether to migrate, people weigh multiple factors including economic and political factors, social or personal motives, or demographic pressures. The effects of climate change add another layer of complexity to this decision, but there is debate about the role climate change plays in migration. Figure 1 depicts how climate change may influence other factors that drive the decision to migrate or stay. There are limitations to reliably estimating the number of people displaced by climate change because there are no reliable global estimates for those migrating due to slow-onset disasters, and estimates for those migrating due to sudden-onset disasters are based on limited data, according to IOM. The lack of reliable data is due in part to the multi- causal nature of migration. Further, IOM notes that forecasts for the number of environmental migrants by 2050 vary from 25 million to 1 billion. They and others have questioned the methodologies used to arrive at even these broad estimates. Migration, potentially driven by climate change, may contribute to instability and result in national security challenges, according to some international organizations and national governments. For example, an influx of migrants to a city may put pressure on existing resources, resulting in tensions between new migrants and residents, or between the population and its government. The U.S. Global Change Research Program has also stated that migration, such as displacement resulting from extreme weather events, is a potential national security issue. At different times, the United Nations General Assembly and, in 2014, DOD have deemed climate change to be a threat multiplier, as the effects of climate change could increase competition for resources, reduce government capacity, and threaten livelihoods, thereby causing instability and migration. Further, the U.S. intelligence community considers climate change to increase the risks of humanitarian disasters, conflict, and migration. Identifying the cause of a conflict, however, is complicated, and experts debate the connections linking climate, migration, and national security. For example, IOM has reported that existing evidence on climate migration and instability must be considered with caution. Further, some studies stress that other factors can mitigate the effects of climate change on migration and stability, including governance and community resilience, as the World Bank has reported. State, USAID, and DOD are among the U.S. government agencies with a role in responding to issues related to climate change, including as a driver of migration. State interacts with foreign governments and international organizations focused on climate change and migration primarily through the Bureau of Oceans and International Environmental and Scientific Affairs (State/OES) and the Bureau of Population, Refugees, and Migration (State/PRM). USAID supports a range of development programs that help to mitigate the effects of climate change through the Bureaus for Economic Growth, Education and Environment; Democracy, Conflict and Humanitarian Assistance; Food Security; Asia; and Africa; and individual USAID missions. Additionally, USAID’s Offices of U.S. Foreign Disaster Assistance (USAID/OFDA) and Food for Peace (USAID/FFP) lead and coordinate the U.S. government’s emergency responses to sudden- and slow-onset disasters, and complex emergencies overseas. DOD assists in the United States’ humanitarian response to sudden- onset disasters abroad through its six geographic combatant commands, with support from the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict and the Joint Staff’s Office of Humanitarian Engagement. Climate change as a driver of migration was not a focus of the policy documents we reviewed for either the current or previous administrations during fiscal years 2014 through 2018. Our review of executive actions, budget requests, and executive branch strategies that affected State, USAID, and DOD found only brief mentions of climate change as a driver of migration. None of the documents we reviewed reflected a priority for assessing or addressing climate change as a driver of migration, although these documents reflect a shift in administrations’ climate change priorities more generally. The previous administration issued two executive orders and a presidential memorandum related to climate change. These executive actions had a policy of improving climate preparedness and resilience, factoring climate-resilience considerations into agencies’ international development decisions, and creating forums for interagency coordination. In March 2017, the current administration issued a subsequent executive order revoking some of the previous executive actions related to climate change. See figure 2 for a timeline of these executive actions. The previous administration issued three executive actions related to climate change, which included requirements focused on agencies’ considerations of the impacts of climate change and established forums for interagency coordination. The current administration issued an executive action related to energy independence and climate change. Executive Order 13653: Preparing the United States for the Impacts of Climate Change. Executive Order 13653 stated that agencies—including State, USAID, and DOD—shall, among other things, develop, implement, and update comprehensive Agency Adaptation Plans that integrate consideration of climate change into agency operations and overall mission objectives. Executive Order 13653 also established the Council on Climate Preparedness and Resilience. Executive Order 13677: Climate-Resilient International Development. Executive Order 13677 requires State, USAID, and other U.S. government agencies with direct international development programs and investments to incorporate climate-resilience considerations into decision making by assessing climate-related risks to agency strategies, and to adjust relevant strategies as appropriate, among other things. Executive Order 13677 also established the Working Group on Climate-Resilient International Development as part of the Council on Climate Preparedness and Resilience. 2016 Presidential Memorandum on Climate Change and National Security. The 2016 presidential memorandum required, among other things, that agencies, including State, USAID, and DOD, develop an agency-specific approach to address climate-related threats to national security. It also required agencies to develop implementation plans that would describe how they would identify the potential impact of climate change on human mobility, including migration and displacement, and the resulting impacts on national security, among other requirements, and stated that the effects of climate change can lead to population migration within and across international borders, spur crises, and amplify or accelerate conflict in countries or regions already facing instability. The 2016 memorandum also established the Climate and National Security Working Group. Executive Order 13783, Promoting Energy Independence and Economic Growth. Executive Order 13783 revoked Executive Order 13653 and the 2016 presidential memorandum, among other things, as seen in figure 2. Priorities related to climate change shifted between the past two administrations as reflected in a recent budget request that reduced some climate change funding affecting U.S. foreign assistance. 2017 Presidential Budget Request. The previous administration stated in its fiscal year 2017 budget request that “the challenge of climate change will define the contours of this century more dramatically than any other” and that “it is imperative for the United States to couple action on climate change at home with leadership internationally.” The fiscal year 2017 budget request sought $1.3 billion in discretionary funding to advance the goals of the Global Climate Change Initiative, which was established in 2010 and aimed to promote resilient, low-emission development, and integrate climate change considerations into U.S. foreign assistance. The $1.3 billion in requested funding included $750 million in U.S. funding for the Green Climate Fund, a multilateral trust fund designed to foster resilient low-emission development in developing countries. 2018 Presidential Budget Request. The current administration, in its fiscal year 2018 budget request, did not include any funding for the Global Climate Change Initiative. In addition, the current administration’s budget request stated that it “Eliminate the Global Climate Change Initiative and fulfill the President’s pledge to cease payments to United Nations’ (UN) climate change programs by eliminating U.S. funding related to the Green Climate Fund. . .” Some strategies from the current and previous administrations that affect State, USAID, and DOD, among other agencies, reflect a shift in priorities related to climate change. For example, the previous administration cited climate change as a “top strategic risk” in its 2015 National Security Strategy and stated that climate change is an urgent and growing threat to U.S. national security, contributing to increased natural disasters, refugee flows, and conflicts over basic resources like food and water. The current administration does not discuss climate change in its 2017 National Security Strategy. Additionally, State and USAID have a Joint Strategic Plan to help the agencies achieve the objectives of the National Security Strategy. The previous State-USAID Joint Strategic Plan included a strategic goal on “promoting the transition to a low-emission, climate-resilient world” that proposed leading international actions to combat climate change. The current State-USAID Joint Strategic Plan does not have a climate change goal. State, USAID, and DOD were required by executive orders to assess climate change-related risks to their missions and, for State and USAID, to their strategies, among other things. In response to Executive Order 13653, which has since been revoked, the agencies completed adaptation plans that integrated considerations of climate change into agency operations and overall mission objectives. In response to Executive Order 13677, which has not been revoked, State and USAID developed processes for climate change risk assessments for their country and regional planning documents. Although these executive orders did not require a specific assessment of climate change as a driver of migration, all three agencies have discussed the effects of climate change on migration in their adaptation plans and risk assessments. However, State lacks clear guidance on its process for assessing climate change-related risks to its integrated country strategies. State, USAID, and DOD each completed adaptation plans in 2014 that included limited discussions of migration as one potential effect of climate change. Executive Order 13653 directed the agencies to develop or continue to develop, implement, and update comprehensive Agency Adaptation Plans that integrate consideration of climate change into agency operations and overall mission objectives. Each adaptation plan was to include, among other things, a description of how the agency would consider the need to improve climate adaptation and resilience. State. In its 2014 adaptation plan, State included a brief discussion of climate change as one of multiple factors that potentially will drive migration and impact its mission. State reported that the specific impacts of climate change on the ability of the department to promote peace and stability in regions of vital interest to the United States were unknown. For example, according to the plan, an increase in heavy precipitation events around the world could damage the electric grid and transportation and energy water infrastructure, upon which State depends, making it difficult to maintain operations and diplomatic relations. In its plan, State reported that climate change impacts may threaten international peace, civil stability, and economic growth through aggravating existing problems related to poverty and environmental degradation. Further, environmental and poverty- related issues and regional instability could stress relationships with some foreign governments. However, the plan noted that specific impacts of climate change on conflict, migration, terrorism, and complex disasters were still unknown. USAID. In its 2014 adaptation plan, USAID included a brief discussion of migration as one potential effect of climate change that could also impact security. USAID stated that the impact of climate change on its programs and operations, if left unaddressed, could compromise the agency’s ability to achieve its mission. Further, USAID’s plan referred to increased migration as a potential risk of climate change. Flooding and other extreme climate events can result in increased migration, among other impacts, that could affect existing and planned USAID programming. In particular, programs in areas like agriculture and food security, global health, water and sanitation, infrastructure, and disaster readiness and humanitarian response are vulnerable to climate change, according to USAID. In the infrastructure area, climate change may necessitate new protective measures for coastal homes and infrastructure, and in some cases even mass evacuations or permanent migration. USAID stated that climate change could further reduce or alter the distribution of already limited resources like food and water, or force temporary or permanent migration of communities. According to the plan, in areas with high risk factors for conflict, climate change stresses can aggravate tensions and contribute to conflict. DOD. In its 2014 adaptation roadmap, DOD included a brief discussion of migration as one of multiple potential effects of climate change that could impact national security. DOD referred to climate change as a threat multiplier that can aggravate other risks around the world, with migration being one effect that could increase requests for DOD to provide assistance. The roadmap stated that as climate change affects the availability of food and water, human migration, and competition for natural resources, the department’s unique capability to provide logistical, material, and security assistance on a massive scale or in rapid fashion may be called upon with increasing frequency. Furthermore, DOD stated that the impacts of climate change may cause instability in other countries by, among other things, impairing access to food and water, damaging infrastructure, uprooting and displacing large numbers of people, and compelling mass migration. These developments, according to the department, could undermine already fragile governments that are unable to respond effectively, or challenge currently stable governments, as well as increase competition and tension between countries vying for limited resources. In response to Executive Order 13677, State and USAID developed processes for climate change risk assessments for their country and regional planning documents. Though these assessments are not specific to migration, a few of the assessments identified the nexus of climate change and migration. State. State required climate change risk assessments for all new integrated country strategies drafted in 2016 or later. We reviewed 10 integrated country strategies from the two regions that were the first to implement the climate change risk assessment requirement— Africa, and East Asia and the Pacific. All 10 of the strategies included climate change risk assessments, one of which—Cambodia— identified migration as a risk for the country. The Cambodia strategy states that internal migration due to climate change hinders access to health care and the prevention of infectious diseases like malaria. We also reviewed 10 strategies from State’s functional and regional bureaus for assessments of climate-related risks, including 3 functional bureau strategies (State/PRM, State/OES, and State’s Bureau of International Organization Affairs) and 7 regional bureau strategies. All of the functional bureau strategies we reviewed identified climate change as a risk and State/PRM cited the impact of climate change on migration. Of the regional bureau strategies we reviewed, we found that one, the Bureau for East Asian and Pacific Affairs, identified climate change as a driver of migration as a challenge or risk in its region. For example, the strategy states that climate change is becoming increasingly disruptive, potentially increasing migration due to rising sea levels. None of the other six regional bureau strategies we reviewed identified the nexus of climate change and migration as a risk or challenge. However, five regional bureaus identified climate change as a risk or challenge and one identified migration as a risk or challenge. USAID. USAID also requires the integration of climate risk management into all country or regional development cooperation strategies drafted since October 1, 2015. Missions must document in a climate change appendix to the strategy any climate risks they identified and how they considered climate change in their strategy. As of August 2018, USAID had completed five country or regional development cooperation strategy updates initiated since October 1, 2015—Uganda, Tunisia, East Africa, Sri Lanka, and Zimbabwe—and all five included the required appendix. Of the five updated strategies, three—Uganda, Tunisia, and East Africa—discuss the indirect effect of climate change on migration, among other issues. For example, Uganda’s 2016-2021 country strategy states that increased frequency and duration of droughts is likely to be the most significant climate‐related change in Uganda. The strategy also notes that droughts have affected, and will continue to affect, water resources, hydroelectricity production, and agriculture, among other sectors. As agriculture, forestry, and fisheries decline in Uganda, the strategy asserts that people will migrate to urban areas, leading to the formation of slums. We also reviewed USAID’s nine regional development cooperation strategies, one of which—East Africa—had been updated since the requirement to include climate risk management. Of the other eight strategies that have yet to be updated, seven identified climate change as a challenge or risk and three identified climate change as a driver of migration as a challenge or risk. For example, the Southern Africa regional development cooperation strategy states that water scarcity, natural disasters, and other climate change related events will most likely increase migration throughout the region. Additionally, the Asia regional development cooperation strategy discusses the risks of climate change in urban areas. In Asia, the number of migrants seeking economic opportunities in urban centers is likely to increase. According to the strategy, migrants are moving into hazard-prone areas located along coastlines, flood plains, and other low-lying areas in many Asian primary and secondary cities—areas that experts predict will experience more frequent and intense storm surges, floods, and coastal erosion as a result of climate change. The requirement in Executive Order 13677 to assess climate change- related risks to agency strategies remains unchanged; however, State now lacks clear guidance on its process for assessing climate change- related risks to its integrated country strategies. Specifically, State’s 2016 guidance for developing integrated country strategies stated that all missions should assess the risk of climate change on their strategies’ goals and objectives and included reference to the climate risk screening tool—a method that missions could use to assess climate change risks. State issued new guidance to its missions in 2018, but this guidance does not include information on the process for assessing climate change-related risks to agency strategies. According to State officials, the 2018 guidance for integrated country strategies does not reference climate change risk assessments because, in September 2017, State decided that the strategies should not single out climate change risks in a separate appendix. State officials said this decision resulted, in part, from the new administration’s shift in priorities on climate change. Officials also said that this decision reflects a new approach to risk management by State and that the missions could choose to include climate change and other potential risks in the general risk discussion section of their strategies. Officials from State’s Office of U.S. Foreign Assistance Resources said that it is now up to each mission to decide whether a strategic objective may have a climate challenge. However, those missions that choose to include an assessment of climate change risks are not provided guidance on the process for doing so and there is no reference to the climate risk screening tool—or to climate change at all—in the 2018 guidance. Executive Order 13677 directed State to incorporate climate-resilience considerations into decision making by assessing climate-related risks to agency strategies, among other things. Subsequently, a State cable from September 2016 further explained that State would implement the executive order’s requirement by screening for climate risks as part of the process for drafting all new integrated country strategies. Additionally, the Standards for Internal Control in the Federal Government state that documentation is a necessary part of an effective internal control system. If management determines that a principle is not relevant, management must support that determination with documentation that includes the rationale of how, in the absence of that principle, the associated component could be designed, implemented, and operated effectively. Because State lacks clear guidance on its process for assessing climate change-related risks to its integrated country strategies, it is less likely that the current round of strategies will include the assessment of climate- related risks. It is also possible that those missions that choose to conduct climate change risk assessments will not do so in a consistent manner. Such assessments might identify climate change as a driver of migration, as at least one previous assessment did under the 2016 guidance. Thus, without clear guidance, missions may not examine climate change as a risk to their strategic objectives and could miss opportunities to improve the climate resilience of foreign assistance activities. For fiscal years 2014 through 2017, State, USAID, and DOD had some activities that could potentially address climate change as a driver of migration, although none of these activities specifically focused on the issue. For example, USAID has climate change adaptation activities, but to date migration has not been a focus of this programming. With the shift in priorities related to climate change in fiscal year 2017, agencies have reduced some of these activities. State’s offices that are focused on the issues of climate change (State/OES) and migration (State/PRM) have participated in multilateral activities related to climate change as a driver of migration and funded adaptation and other activities related to the issue. State officials said that the agency does not, however, have any activities that specifically address migration due to climate change or environmental factors. State has participated in multilateral activities related to climate change and migration. With the shift in priorities related to climate change in fiscal year 2017, the United States has disengaged from some of these multilateral activities (see table 1). In addition to State’s participation in the multilateral activities described in table 2, State has provided funding for activities related to climate change and capacity building that address natural disasters. These activities may involve efforts potentially related to migration. For example, according to State: State provided about $2 million per year, between fiscal years 2014 and 2016, to the Intergovernmental Panel on Climate Change, which analyzed the impacts of climate change on migration in its most recent assessment report. State/PRM provided about $4 million, between fiscal years 2014 through 2018, for IOM’s Migrants in Countries in Crisis Initiative, which provides guidelines to protect migrants in countries experiencing conflict or natural disasters. IOM provides training to countries on these guidelines. State/PRM officials said that this initiative is not specifically related to climate change and does not focus on specific types of disasters but does mention sudden-onset disasters. Officials also said that IOM tries to promote a climate change perspective in its trainings. State/OES provided about $78 million in adaptation funding from the Global Climate Change Initiative to eight projects during fiscal years 2014 through 2017. (See appendix III for a description of all eight projects.) State/OES officials said that these projects help countries prepare for the impacts of climate change, potentially reducing the pressure to migrate. However, to these officials’ knowledge, none of these projects directly supported activities related to migration. For example, State/OES provided a $4 million grant to the National Adaptation Plans Global Network. This network focuses on increasing the capacity of governments to identify and assess climate risks, integrate these risks in planning, develop a pipeline of projects to address these risks, identify and secure funding for projects, and track progress toward resilience targets. Adaptation activities occurred in over 35 countries. With the shift in priorities related to climate change in fiscal year 2017, State discontinued some of these efforts. For example, funding for the Global Climate Change Initiative was not included in the President’s budget request for fiscal year 2018. State/OES officials said that the agency does not plan to fund additional adaptation activities and has not requested additional funding for the activities. According to a State official, PRM had been in discussion with IOM to develop a project proposal that would have assisted the governments of Small Island Developing States in adapting their migration policies to account for challenges and opportunities associated with environmental degradation, ecosystem loss, climate change impacts, and natural disasters. State/PRM stopped further development of the proposal following the change in administrations. Additionally, according to a State official, the department made some efforts at the end of the previous administration to develop a formal position on the topic of climate change as a driver of migration. For example, State drafted an internal document to help clarify its role in responding to the humanitarian aspects of sudden-onset and slow-onset climate events. This initial work stopped under the current administration. USAID officials said that, with respect to the agency’s climate-related programming, its climate change adaptation programming was the most likely to include activities related to migration or displacement, although a broad swath of USAID development programming has the potential to build host country resilience. Officials stated that, to date, migration has not been a primary motivation for the agency’s climate-related or disaster assistance programming. However, officials said that, in a humanitarian crisis or under some economic conditions, development programming can reduce displacement or the pressure to migrate—such as by fostering greater resilience to drought or other adverse conditions—and that this is also true of climate-related programming. USAID also provides humanitarian assistance in response to natural disasters that displace people. Officials said that USAID recognizes the links between displacement and natural disasters, but that the agency does not have specific programs linking disaster assistance, migration, and climate change. USAID identified about 250 activities that received adaptation funding from the Global Climate Change Initiative during fiscal years 2014 through 2016. Our analysis of the descriptions of these activities determined that none directly mentioned any efforts specifically related to migration. Officials emphasized that the connection between climate change and migration tends to be indirect and shaped by other more immediate factors. USAID’s data on activities that received adaptation funding identified 38 beneficiary countries, as well as activities described generally as implemented at the regional or global level. For activities where USAID’s data identified a specific region, most activities were located in Africa followed by Asia and Latin America and the Caribbean. Examples of the types of activities that received adaptation funding from the Global Climate Change Initiative during fiscal years 2014 through 2016 include: The Mali Climate Change Adaptation Activity, which aims to build resilience to current climate variability and increase resilience to longer-term climate change effects. This activity is also working to strengthen the capacity of Mali’s meteorological agency to provide improved climate information as well as to incorporate climate considerations into local-level planning. The total estimated cost is about $13 million over 5 years. The activity for Climate-Resilient Ecosystems and Livelihoods, which ended in September 2018, aimed to increase Bangladesh’s resilience to natural hazards by working with community-based organizations, government ministries, and technical agencies. This activity provided technical assistance to the Government of Bangladesh and local communities to improve ecosystem conservation and resilience capacity. The total estimated cost was about $33 million in funding over 6 years. The activity for Pastoralist Areas Resilience Improvement through Market Expansion, which aims to support pastoralists in Ethiopia via expansion of markets and long-term behavior change (see fig. 3). USAID officials cited this activity as an example of adaptation efforts that indirectly address the issue of climate change as a driver of migration. The activity has three interrelated objectives: increasing household incomes, enhancing resilience, and bolstering adaptive capacity to climate change among pastoral people in Ethiopia. An evaluation of the activity found that migration is a coping strategy for dealing with climate shocks, although participants said that drought is becoming more frequent, placing a severe strain on traditional coping mechanisms, such as migration and selling cattle, and that permanent migration is not a preferred strategy. The total estimated cost is about $60 million in funding over 6 years. With the shift in priorities related to climate change, funding for USAID’s climate change adaptation activities has decreased. Missions may continue to fund their adaptation activities with discretionary funds or other earmarked, sector funding, provided the activities further the funding source’s objective, according to USAID. For example, in some cases, missions are using Water sector funding to continue some of their adaptation work. USAID also said that among the agency’s goals are to increase the resilience of USAID partner countries to recurrent crises, including climate variability and change. In addition to USAID’s climate change adaptation programming, USAID/OFDA and USAID/FFP provide emergency humanitarian assistance to people affected by sudden-onset disasters—such as hurricanes and floods—and slow-onset and extended disasters, including droughts and conflicts. Some of this assistance helps people who have been displaced by disaster. USAID officials stated that although disasters cause mainly temporary displacement, the relationship among humanitarian assistance, climate change, and migration is very complex and depends on both climatic and non-climatic factors. USAID/OFDA responded to 267 disasters from fiscal year 2014 through June 2018, according to agency data. For example, USAID/OFDA responded to the effects of Hurricane Matthew in Haiti in October 2016, as seen in figure 4, including helping temporarily displaced people. DOD assists in the U.S. government response to overseas disasters, including helping people displaced by such disasters, regardless of the cause of the disaster. These efforts are not specific to climate change as a driver of migration. For example, officials from DOD’s geographic combatant commands said that, to the extent they address climate change, migration is not a focus of those efforts and they view migration as caused by security and economic issues. Between fiscal years 2014 and 2018, Congress has appropriated to DOD between $103 and $130 million per year for Overseas Humanitarian, Disaster, and Civic Aid. Officials said that the geographic combatant commands use most of this funding for steady state humanitarian assistance related to health, education, basic infrastructure, and disaster preparedness with a smaller amount set aside for immediate disaster assistance although that varies based on emergency requirements. DOD officials said that they have not seen any changes to this funding or associated activities with the change of administrations in fiscal year 2017. DOD officials we spoke with also emphasized that USAID/OFDA is the lead agency for the U.S. government’s response to disasters overseas. USAID/OFDA formally requested DOD support on about 10 percent of the foreign disaster assistance provided by USAID/OFDA, according to USAID data for fiscal year 2014 through June 2018 and DOD officials. DOD assistance is typically provided for the largest, most complex disasters, according to agency officials. According to a July 2015 assessment conducted by the geographic combatant commands, while their activities vary, each command works with partner nations to increase their abilities to reduce the risks and effects from environmental impacts and climate-related events, including severe weather and other hazards. For example, in the report, U.S. Southern Command stated that it had requested funding to pre-position assets for when a severe storm threatens Haiti to be able to respond immediately to a potential disaster. U.S. Southern Command officials said that they work with partner nations to encourage residents experiencing extreme weather to remain where they are because it is easier to provide help to people who stay in one place. Officials from U.S. Southern Command and U.S. Africa Command also said that the major factors driving migration in their regions are security and economic issues. State, USAID, and DOD have participated in interagency forums regarding climate change, which may have addressed its effects on migration. With changes to priorities regarding climate change in fiscal year 2017, these forums have been disbanded or are not meeting. The Council on Climate Preparedness and Resilience. The Council on Climate Preparedness and Resilience, of which State, USAID, and DOD were members, was established to facilitate the integration of climate science in policies and planning of government agencies, including by promoting the development of climate change related information, data, and tools, among other things. Additionally, the council was to develop, recommend, and coordinate interagency efforts on priority federal government actions related to climate preparedness and resilience. According to State officials, the council began working with the National Security Council and other agencies to facilitate greater interagency cooperation on adaptation. In addition, a task force on the council was discussing the federal role in addressing displacement related to climate change. The council was disbanded when Executive Order 13783 revoked Executive Order 13653, which had established the council. The Working Group on Climate-Resilient International Development. The Working Group on Climate-Resilient International Development, of which State and USAID were members, was established by Executive Order 13677 and placed under the Council on Climate Preparedness and Resilience. The working group’s mission includes developing guidelines for integrating considerations of climate-change risks and climate resilience into agency strategies, plans, programs, projects, investments, and related funding decisions, among other things. Additionally, the working group was tasked with facilitating the exchange of knowledge and lessons learned in assessing climate risks to agency strategies, among other things. USAID officials said that the working group had not discussed climate change as a driver of migration. While the working group has not been formally disbanded, it has not met since at least November 2017 according to USAID. The Climate and National Security Working Group. The Climate and National Security Working Group, of which State, USAID, and DOD were members, was established by the 2016 presidential memorandum. The chairs of the working group were to coordinate the development of a strategic approach to identify, assess, and share information on current and projected climate-related impacts on national security interests and to inform the development of national security doctrine, policies, and plans, among other things. According to the memorandum, the working group was to provide a venue for enhancing the understanding of the links between climate change- related impacts and national security interests and for discussing opportunities for climate mitigation and adaptation activities to address national security issues. This working group was disbanded when Executive Order 13783 revoked the 2016 presidential memorandum, which had established the working group. State, USAID, and DOD assessments and activities have not focused specifically on the nexus of climate change and migration. State did identify migration as a risk of climate change in at least one of its climate change risk assessments for the department’s country strategies. However, State now lacks clear guidance on its process for assessing climate change-related risks to its integrated country strategies. State’s current guidance for these country strategies no longer mentions a climate change risk assessment and does not provide missions with information about the climate risk screening tool that can be used to conduct such an assessment. As such, missions are less likely to examine climate change as a risk to their strategic objectives, or to do so in a consistent manner, and thus may not have the information they would need to identify migration as a risk of climate change. By clearly documenting and providing guidance on how to assess the risk of climate change, State would ensure that the department examines the potential risks of climate change on its foreign assistance activities. We are making the following recommendation to State: The Secretary of State should ensure that the Director of the Office of U.S. Foreign Assistance Resources provides missions with guidance that clearly documents the department’s process for climate change risk assessments for integrated country strategies. (Recommendation 1) We provided a draft of this product to State, USAID, and DOD for review and comment. State provided written comments, which we have reprinted in appendix IV. In its comments, State did not oppose the recommendation and noted that the agency will update its integrated country strategy guidance by June 30, 2019 to inform missions that they have the option to include an annex on climate resilience, as well as other topics. However, State also indicated that the agency will begin working with stakeholders to consider whether to recommend that the Secretary of State ask the President to rescind Executive Order 13677: Climate- Resilient International Development. USAID also provided written comments, which we have reprinted in appendix V. In its letter, USAID provided some additional information about its programs and its proposed transformation effort. USAID and DOD provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional requesters, Secretary of State, the Administrator of USAID, and the Secretary of Defense. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact David Gootnick at (202) 512-3149 or gootnickd@gao.gov, or Brian J. Lepore at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. This report (1) describes executive branch actions related to climate change and migration from fiscal years 2014 through 2018; (2) examines the extent to which the Department of State (State), the U.S. Agency for International Development (USAID), and the Department of Defense (DOD) have discussed the potential effects of climate change on migration in their plans and risk assessments; and (3) describes State, USAID, and DOD activities, if any, that are related to climate change and global migration. We chose fiscal years 2014 through 2018 as our time frame based on our review of recent executive orders related to climate change. We selected State, USAID, and DOD because the agencies’ missions of diplomacy, development, and defense provide the foundation for promoting and protecting U.S. interests abroad. To describe executive branch actions related to climate change and migration from fiscal years 2014 through 2018, we reviewed documents that reflect priorities of the previous and current administrations. Specifically, we reviewed budget requests and enacted appropriations between fiscal years 2014 through 2018 for funding priorities related to climate change and U.S. foreign assistance. In addition, we reviewed executive actions and executive branch strategies that applied to State, USAID, and DOD between fiscal years 2014 through 2018 for executive and national security priorities related to climate change. For example, we reviewed the current and previous national security strategies. strategies and seven regional bureau strategies. For USAID, we examined the five country and regional strategies that were required to include a climate risk assessment at the time of our review: Uganda, Tunisia, East Africa, Sri Lanka, and Zimbabwe. We also reviewed all nine USAID regional strategies. For both State and USAID, we reviewed the selected strategies by searching for information related to migration and climate change. To determine whether State clearly documents the department’s current climate risk assessment process for integrated country strategies, we compared State’s 2018 guidance for developing integrated country strategies with standards related to documentation in Standards for Internal Control in the Federal Government and previous State guidance issued in 2016, which was created in response to Executive Order 13677’s requirements to assess climate change risks to strategies, among other things. to these issues. The agency then provided us with data for about 250 activities from its annual operational plans for fiscal years 2014 through 2016, the 3 years during the period we reviewed in which it received adaptation funding. USAID identified these activities based on whether the agency had tagged them in its plans as having an “adaptation key issue.” USAID excluded projects that had planned attributions to the adaptation key issue of less than $250,000 in a given fiscal year, as well as certain other activities such as those that focused on project support. We then conducted an automated review of the activity description fields provided by USAID for terms related to migration and other descriptive information such as locations of activities. Because no USAID adaptation activities specifically mentioned migration, for the purposes of this report we chose illustrative examples to provide context for the types of activities the agency has funded. DOD officials we met with did not identify any specific activities related to climate change as a driver of migration. DOD officials from the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict and the geographic combatant commands generally discussed DOD activities related to humanitarian assistance and disaster response as most relevant to our inquiry. Because DOD works in coordination with USAID’s Office of U.S. Foreign Disaster Assistance on disaster assistance we also reviewed USAID data on its disaster response activities during this period. We determined that the USAID and State adaptation project data and USAID disaster assistance data were sufficiently reliable for the purposes of describing these efforts. State, USAID, and DOD to obtain information on whether changes in government priorities related to climate change affected their activities. We conducted this performance audit from October 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides a review by region of observed and projected climate change effects, migration trends, and challenges in stability and security. Multiple sources we used for this overview make a connection between climate change and such events as rising sea levels, higher temperatures, and an increase in the number and severity of extreme weather events. The following regions are discussed: Asia, South America, the Arctic, Sub-Saharan Africa, the Middle East and North Africa, Oceania, and Central America and the Caribbean. We have provided an overview for each region and a focus on one country or territory in the region. international and regional organizations, including a variety of organizations within the United Nations, the World Bank, regional development banks, the European Union, and others. Third, we reviewed relevant public documents from U.S. government agencies, including the Department of Defense, the U.S. Agency for International Development (USAID), and the United States Institute of Peace (USIP). Fourth, we reviewed academic sources, research institutions, and documents from the relevant country’s national government. population. Economic conditions may be a factor for people deciding whether to migrate or stay in their country of origin. Remittances as Percent of GDP: The money international migrants transfer to recipients in their country of origin, expressed as a percentage of the origin country’s GDP. Sources agree that remittances support resilience in origin countries. Agriculture, Fishing, Forestry as Percent of GDP: A measure of the value added to an economy from the agricultural sector, which includes forestry, hunting, fishing, and the cultivation of crops and livestock, expressed as a percentage of the country’s GDP. Countries that depend on the agricultural sector may be vulnerable to the effects of climate change, according to the World Bank. Percent of Population in Cities: The population living in areas classified as urban according to criteria each country uses. Today, more than half of the global population lives in cities. Migration, in some cases due to climate change, is an important driver of urban growth, according to IOM. Cities are also expected to face increasing risks from rising sea levels, flooding, storms, and other climate change effects. Net Migration Rate: A measure of the number of people leaving a country compared to the number of people entering a country, expressed as a number per 1,000 people. The effects of climate change in Asia may impact migration and stability according to the Intergovernmental Panel on Climate Change (IPCC) and the Asian Development Bank (ADB). In coastal areas, effects of climate change include rising sea levels, storm surges, and others. Receding glaciers in mountanous areas may also cause flooding, and monsoons in a warmer climate may be more severe. Heat extremes and more rainfall are a particular concern in Southeast Asia. Changes in precipitation and drought in Asia may exacerbate food security challenges, and contribute to people deciding to migrate. Increases in migration, partly stemming from the effects of climate change in surrounding rural areas, may put pressure on existing urban infrastructure. Rural migrants may settle in informal communities on the outskirts of cities, areas that have little resilience to natural disasters. Although the World Bank and others agree that climate change largely causes internal migration, some evidence shows that the impact of climate change contributes to cross-border migration in Asia. Large numbers of migrants, along with other destabilizing factors, may contribute to instability and conflict, according to the IPCC. The effects of climate change on livelihoods, for example, could increase migration, strain governance, and contribute to conflict as a result. Bangladesh is one example where decreased yields from agriculture and fisheries have contributed to migration to the country’s coastal cities, which face their own climate change challenges. Bangladesh’s high population density and geography make the country susceptible to the effects of climate change, according to the World Bank, and others. Bangladesh’s coasts and river banks are vulnerable to sudden-onset events such as tropical cyclones and flooding. Cyclone Aila in 2009, for example, caused widespread flooding in the southern coastal areas of Bangladesh and impacted millions of people. The storm washed away embankments that protected coastlines and caused severe damage to crops and livelihoods. Tropical Cyclone Mora in 2017 damaged thousands of homes and displaced an estimated 200,000 people. Increases in the number and intensity of tropical cyclones, which some predict will occur in a warmer climate, could have severe impacts on homes, livelihoods, and food security. Bangladesh also experiences many slow-onset climate change events, such as rising sea levels and increasingly severe droughts, which are projected to intensify with climate change. Bangladesh would lose an estimated 17.5 percent of its land if the sea level rose 1 meter, as the International Organization for Migration (IOM) has reported. Projected changes in precipitation levels could cause drought and food insecurity in the northwest and salt-water intrusion could reduce crop yields in the southwest. Migration is a common adaptation strategy to climate change in Bangladesh, according to the ADB. For example, some farmers have adapted to salt water intrusion and destroyed crops by switching to salt- tolerant rice production or shrimp cultivation. Others have migrated, often to Bangladesh’s cities to find work less dependent on agriculture. Many new migrants to Bangladesh’s cities live in informal settlements that lack the resilience to withstand sudden-onset climate events. The capital city, Dhaka, is a common destination for migrants displaced by salt-water intrusion, flooding, and river erosion, according to IOM. Dhaka, like many coastal cities in South Asia, is located on a low-lying riverbank and faces increasing risks of extreme flooding. For example, past floods in Dhaka have destroyed homes and contaminated drinking water, creating significant health hazards. In some cases, individuals migrate to cities temporarily for work and return home after the agricultural off season ends. Bangladeshis also provide a significant number of labor migrants to the Gulf States and Malaysia. Remittances from international migrants represent 5.4 percent of the country’s GDP, and may help to support resilience to climate change, according to IOM, and others. These migration trends may intensify in the future. One study estimates 9.6 million people will migrate from 2011 to 2050 due to the effects of climate change. Challenges in Stability and Security Migration due to climate change is cited as a potential destabilizing factor in Bangladesh by ADB, and others. The low-income population in Bangladesh is dependent on agriculture, making the effects of climate change—including impacts on food security—a particular concern. By 2030, these effects on livelihoods and food security could increase the poverty rate in Bangladesh by 15 percent, as the IPCC has reported. Given the proximity of Bangladesh to India, some individuals may also choose to cross the border. Increased migration to India is a potential concern, according to some sources, as India may not have the resources to absorb large numbers of Bangladeshi migrants. The CNA Corporation, National Security and the Threat of Climate Change (Alexandria, VA: 2007); and Population Council, “Effects of Future Climate Change on Cross-Border Migration in North Africa and India,” Population and Development Review, Vol. 36, No. 2 (2010). The effects of climate change in South America vary by region, according to the the Intergovernmental Panel on Climate Change (IPCC) and International Organization for Migration (IOM), as well as potentially impacting migration and stability. On the coast, risks include sea level rise, depletion of fisheries, and coral reef bleaching, according to IOM. Coastal cities with growing populations are particularly vulnerable. Melting glaciers in the Andean mountain region, and increased rainfall are expected to change the distribution of water resources, and impact food production as global demand for food is growing. Desertification and land degradation, complicated by the effects of climate change, are contributing to migration from rural areas to cities in South America, as IOM has reported. An estimated 77 percent of people living in high risk areas in South America are located in cities, according to IOM. IOM predicts that as these people feel the effects of sea level rise and water scarcity, they will migrate from the large coastal cities to smaller urban areas. While South America has experienced economic growth in the last decade, poverty rates remain high, and the effects of climate change, including possible migration, may exacerbate inequalities, putting further pressure on cities to meet the needs of their populations. Water security in particular is expected to disproportionaly impact low-income communities, according to the IPCC. For example, in Brazil, drought in the northeast may increase migration to southern cities that are facing rising sea levels and landslides, with consequences for food, water, and energy security. Observed and Projected Effects of Climate Change Brazil’s cities and rural regions may encounter a range of climate change effects, according to the IPCC and IOM. Rural areas, particularly in the northeast, could experience significant impacts from climate change partly due to poverty rates, and historical vulnerability to drought. Higher temperatures are expected to affect crop yields and household incomes, especially for low-income communities. In northeastern Brazil, temperatures are expected to increase and rainfall to decrease. The northeast could see a 22 percent reduction in precipitation by 2100, according to IPCC projections. Brazil’s coastal areas, including cities, are also vulnerable to rising sea levels, heavy precipitation, flooding, and landslides. The vast majority of Brazil’s population, about 86 percent, lives in cities, many in coastal areas, according to the United Nations Development Program. As their populations have grown, urban areas have extended out. This urban growth in Brazil’s megacities has caused further increases in temperature, rainfall, and landslides. For example, current levels of urbanization in the metropolitan area of Sao Paulo may already be responsible for the 2°C warming observed in the city over the last 50 years, as well as the rise in extreme rainfall, according to the IPCC. The metropolitan area is expected to extend its area 38 percent by 2030. Multiple studies of the effects of urbanization on Sao Paulo’s climate suggest higher temperatures affect convective rainfall, which occurs when warm air rises, condenses to form clouds, and produces extreme rain. Other concerns are the depletion of coral reefs and mangrove forests on Brazil’s coastlines, and decreases in biodiversity. Migration from drought in northeastern Brazil to cities has increased urban populations, putting more people at risk of displacement from flooding and landslides. Migration from the northeast is a historical trend in Brazil, as economic migrants have sought seasonal jobs in more productive agricultural regions, or moved permanently to southern cities. Projected declines in rainfall have led some to predict further increases in migration in northeastern Brazil, as the IPCC has reported. However, remittances from family members who leave Brazil’s northeast support resilience for those who remain and may help to reduce migration. Already environmental factors contribute to migration to cities, including to favelas, informal settlements often constructed in hilly areas and floodplains outside of Brazilian cities. A significant number of the favela residents in Rio de Janeiro are migrants from northeastern Brazil, according to IOM. These new migrants may be at risk of further displacement if heavy rainfall, flooding, and other climate change effects destroy their vulnerable homes. For example, heavy rainfall in April 2010 resulted in landslides across Rio de Janeiro, displacing an estimated 5,000 people, according to a report from the World Bank. Brazil is also a destination for migrants from other countries in the region. Migrants from Venezuela searching for jobs and improved food security have come in growing numbers in recent years, as have migrants from Haiti fleeing a series of natural disasters, as IOM has reported. Challenges in Stability and Security Although Brazil ranks 106th out of 178 countries on the Fragile States Index, the effects of climate change may contribute to challenges with water, food, and energy access according to the IPCC. Decreased rainfall could decrease agricultural productivity, with potential health impacts for poor populations. These conditions are of particular concern in northeastern Brazil, as extreme weather and low crop yields are associated with more violence, according to the IPCC. Brazil also receives about 70 percent of its electricity from hydroelectric power, according the United Nations Environment Programme, and recent droughts caused power cuts across many major cities. Although not linked to the effects of climate change, absorbing a growing number of migrants fleeing political and economic instability in Venezuela may impact the broader region, according to the U.S. Department of Defense and the National Intelligence Council. Neighboring countries, including Brazil, may struggle to absorb the influx of migrants. On average, 800 Venezuelans are crossing the border to Brazil every day in need of urgent humanitarian assistance, according to the UNHCR, the UN Refugee Agency. The effects of climate change in the Arctic, including higher temperatures and melting ice, have contributed to shifts in migration across the Arctic, and may have security implications. Increasing temperatures may have a variety of impacts in the Arctic, according to the Intergovernmental Panel on Climate Change (IPCC). The effects of rising temperatures are disrupting livelihoods and food security, especially for indigenous communities, and opening up untapped natural resources to extraction. Both trends have impacted migration flows in the Arctic. Rising temperatures and melting ice have opened up previously inaccessible waterways in the Arctic, with implications for national security, according to the Department of Defense and others. Greenland, located in the Arctic and considered part of Kingdom of Denmark, exhibits many of these trends. Greenland is experiencing the effects of climate change, including glacial and ice melt, shifts in wildlife distribution, and newly available oil and mineral deposits, among others. The Greenland Ice Sheet covers approximately 80 percent of Greenland’s land mass. The ice sheet’s melting rate is slow, but uncertain. Increases in temperature greater than 1°C may result in the near loss of the entire ice sheet over a millennium and significant sea level rise, according to the IPCC. In the short term, predicting the ice sheet’s melting rate is a challenge as predictions vary in the scientific community. Accurate predictions would support mitigation and adaptation efforts in vulnerable areas. Rising temperatures and shrinking ice cover have shifted the distribution and migration patterns of marine mammals and fish, and impacted food security according to the IPCC and the Arctic Council, an intergovernmental forum for Arctic states. For example, the economy in Paamiut, Greenland, depended primarily on cod fisheries until changing climate conditions caused cod to disappear, and the town was slow to adapt to newly available shrimp. Similarly, fisheries in Disko Bay, Greenland, have struggled to adapt to new conditions. Rising temperatures and the resulting reduction in ice cover have required a shift to fishing from boats in open water instead of hunting and fishing over ice cover. Lastly, warming and ice melt may make significant oil and mineral deposits accessible for extraction in the future. The potential expansion of extraction industries makes environmental sustainability another possible concern. For example, an estimated 31 billion barrels of oil and gas may exist off the coast of Northeast Greenland, according to the Kingdom of Denmark’s 2011-2020 Arctic Strategy. The strategy stresses the importance of assessing and reducing risks to the environment resulting from the exploration and extraction of oil and gas. The effects of climate change are predicted to contribute to internal and external migration in Greenland. For example, young people are increasingly leaving indigenous communities in rural areas for cities in Greenland in search of work, as traditional livelihoods become unsustainable. Greenland is home to a majority indigenous population, primarily Inuit, whose traditional hunting and fishing practices require travel across ice. In the past, people adapted to seasonal changes to support livelihoods by migrating, and the practice was embedded into indigenous social structures. With reduced ice cover, however, migrating to hunt, fish, and maintain connections to community is more dangerous or restricted. Government policies promoting centralized services, such as health care and education, have also played a role in the shift away from migration as a way of life. As a result, indigenous livelihoods are more difficult to maintain, and young people often migrate to towns and cities in Greenland, or to Denmark, for education. At the same time, warmer temperatures have made mineral extraction feasible. As the extraction industry grows, new jobs may draw migrants from outside the Arctic region. In 2011 companies spent $100 million on the exploration of minerals in the Artic, and the estimated number of new mines is expected to require more workers than now live in the region.17 79Currently, more people leave than migrate to Greenland. The local Inuit population in Uummannaq, Greenland relies heavily on ice coverage for fishing and travel by traditional dog-sled. Brookings-LSE Project on Internal Displacement, A Complex Constellation: Displacement, Climate Change and Arctic Peoples (January 30, 2013). Brookings-LSE Project on Internal Displacement. The effects of climate change on Sub-Saharan Africa vary depending on the region and have impacts on migration and security, according to the International Organization for Migration (IOM). Coastal areas, for example, in West and East Africa are at risk from sea level rise that could affect major cities. Drought and the risk of desertification in the Sahel is cited as a concern, as is increased rainfall in parts of Central Africa accompanied by lower agricultural yields. As desertification threatens the livelihoods of farmers and herders, and drought makes fishing more challenging, rural dwellers may be more likely to migrate to cities, according to the United Nations Environment Programme (UNEP). Urbanization and population growth across Sub-Saharan Africa is already making densely populated cities vulnerable to flooding, storms, and erosion, increasing the number of people at risk of displacement by sudden-onset disasters. Climate change effects and changing migration flows across Sub-Saharan Africa may impact access to natural resources and contribute to existing tensions and conflicts, according to UNEP and the Intergovernmental Panel on Climate Change (IPCC). In Nigeria, the effects of climate change may effect a variety of livelihoods and increase migration south, while also exacerbating existing conflicts. The effects of climate change on Nigeria may impact the country’s agriculture and economy, according to the United States Institute of Peace (USIP). Higher temperatures and decreased rainfall have contributed to drought in northern Nigeria. Desertification is also a concern. Some regions in northern Nigeria have less than 10 inches of rain a year, an amount that has decreased by 25 percent since the 1980’s, according to USIP. In other areas across Nigeria flooding has resulted in major crop losses, according to UNEP. Rising sea level, water inundation, and erosion are concerns in Nigeria’s coastal areas. Rising sea level is predicted to pose medium to very high risks to Africa’s coastal areas by 2100, according to the IPCC. Future sea level rise could result in the inundation of over 70 percent of the Nigerian coast. A rise of 0.2 meters in sea level could risk billions of dollars in assets, including oil wells near the coast. Even without a rapid rise in sea level, Nigeria’s coastal areas could experience erosion and significant land loss by 2100, as the IPCC has reported. The effects of climate change on livelihoods in northern Nigeria may contribute to migration to the south according to UNEP, while conflict in the north drives separate migration trends. As the effects of climate change make farming and fishing more challenging elsewhere in Nigeria, migration to southern coastal cities may increase. Traditionally, farmers, herders, and fishery workers migrated for temporary employment during the off season, including migration to Nigeria’s cities to work in the oil industry. Permanent migration south as well as to cities may become more common if land suitable for farming decreases. As fish habitats like Lake Chad dry up, fishery workers may also migrate. Larger urban populations on the coast will put more people at risk of sea level rise, water inundation, and erosion, according to the IPCC. A rise in sea level of 1 meter could put over 3 million people at risk of displacement as the IPCC has reported. Herders have also moved further south due to increased drought in northern Nigeria, as UNEP and USIP have reported. A 2010 survey of herdsmen in Nigeria, for example, found that nearly one-third of them had migrated southeast as a result of changes in the natural environment, according to the UNEP. The ongoing conflict with Boko Haram, while not caused by climate change, has further resulted in millions of displaced people across the Lake Chad region, including many Nigerians who have fled to Cameroon, Chad, and Niger. Nigerian refugees at the Minawao camp in Cameroon. Challenges in Stability and Security The effects of climate change, migration, and conflict are interconnected in Nigeria, as USIP has reported. The country is ranked 14th of 178 countries on the Fragile States Index. Events in northwest Africa, including Boko Haram’s attacks in Nigeria, have underscored concerns about the region’s vulnerability to the spread of violent extremism. The effects of climate change may exacerbate these concerns, according to USIP. Nigerians fleeing attacks from Boko Haram in the north have gone to communities in neighboring Chad, Cameroon, and Niger that are already experiencing food shortages due in part to climate change. These neighboring countries as a result have fewer resources to support both their own residents and the newer refugees. Non-state actors may also take advantage of government inaction on the effects of climate change. Boko Haram, for example, has justified its acts of violence by pointing to government failures, according to the USIP. Separately, increased drought in the north may aggravate historic tensions over land and water use between farmers in the south and herders migrating from the north, according to UNEP. Nigeria’s oil fields on the coast, which represent a significant part of the economy, are also at risk from sea level rise. Potential losses in oil revenue could impact Nigeria’s ability to respond to humanitarian crises and conflict at home. Increased violence within its borders could also affect Nigeria’s ability to support regional peacekeeping missions, such as the United Nations Mission in Liberia from 2003 to 2018, where Nigerian troops worked to restore security after a civil war. The effects of climate change in the Middle East and North Africa, including on its desert regions, may impact water access and compound migration and stability challenges, according to the United Nations Environmental Programme (UNEP). Over 60 percent of the population already experiences high or very high water stress, according to the World Bank. Coupled with unsustainable water use, climate change may further exacerbate challenges with water security. The region continues to experience rising temperatures and declining annual rainfall, trends that contribute to the severity and length of drought, land degradation, and desertification. Decreased water security affects the livelihood and quality of life of farmers in the region, contributing to an increase in their migration to the cities and more urbanization, according to the World Bank. In contrast, many people are expected to migrate away from coastal cities as a result of sea level rise, according to UNEP. These potential migrations would be taking place in a region that already hosts large numbers of migrants such as those displaced by conflict and violence, including 18 percent of the world’s refugees, according to the International Organization for Migration. Challenges in water security may put greater pressure on unstable governments in the region, by intensifying existing tensions and conflicts between populations and their governments as well as between countries that share sources of water. The conflict in Syria illustrates the complex nature of climate change, migration, and conflict in the region, and the challenges to accurately assessing the links among the three, as noted in a technical paper commissioned by the U.S. Agency for International Development (USAID). Rising temperatures and declining rainfall have contributed to recent droughts in Syria, a trend that may continue. The country underwent an extended drought from about 2006 until 2011. During the drought an estimated 60 percent of Syria experienced severe crop failure, and accompanying impacts on food security. Some studies have linked the length and severity of the drought in Syria to climate change, as USAID has reported. Others, however, have pointed to government land and water use policies, combined with the effects of climate change, as responsible for the severity of the drought. Agricultural policies, for example, encouraged farmers to grow water intensive crops like wheat, and supported inefficient irrigation practices, policies which further depleted ground water and made the region more vulnerable to decreases in rainfall linked to climate change. Across the Middle East, the rising temperatures and declining rainfalls of recent decades may worsen, according to the World Bank. If these trends continue, countries in the Middle East, including Syria, could continue to experience periods of severe drought and reduced crop yields. Migration Trends The ongoing conflict in Syria, in which migration due to climate change may have been a contributing factor, has caused large-scale migration to neighboring countries in the Middle East and to Europe. Leading up to the civil war, prolonged drought, among other factors, had increased migration to Syrian cities. Because of the drought, in 2009, over 800,000 Syrians lost their livelihoods in the agricultural sector, while nearly 1 million experienced food insecurity. In 2010, an estimated 200,000 people migrated from farms in rural areas to cities, according to a UN report. The conflict in Syria, which began in 2011, has further displaced large numbers of people within the country and across the Middle East, as we have previously reported.At the beginning of the conflict, Syrians, as well as Iraqi and Palestinian refugees who had been residing in Syria, fled mainly to Jordan, Lebanon, and Turkey. As the conflict persisted, refugees fled in larger numbers to Turkey, with the UNHCR reporting that nearly 1 million Syrians sought protection in that country in 2015. Starting that year, a growing number of Syrians risked dangerous sea voyages to reach countries in Europe, such as Greece, Germany, and Sweden. As of June 2017, more than 5 million registered Syrian refugees were living in neighboring countries, including more than 3 million in Turkey, and more than 1 million in Lebanon. Challenges in Stability and Security Sources agree that the Syrian conflict is a significant security challenge that has resulted in large scale migration across the Middle East and to Europe. Yet the link between prolonged drought, rural to urban migration, and the current conflict in Syria is uncertain. Some academic sources argue that the increased strain on urban infrastructure and resources due to the rural to urban migration played a role in Syria’s growing instability. Others highlight the complex nature of the Syrian conflict, pointing to broader political factors that exacerbated resource scarcity and inequality. For example, as the drought intensified, the Syrian government downplayed the severity of the humanitarian crisis, as described in research cited in a technical report commissioned by USAID.result, appeals to the international community for emergency aid received minimal support. Combined with existing sectarian divisions, ongoing revolutions across the Middle East, and other factors, the government’s response to the drought may have contributed to the current conflict. Migration and displacement are a concern in the region, according to the Department of Defense and others. The U.S. government has provided significant humanitarian assistance for Syrian refugees in the Middle East, including in Lebanon and Jordan, as we have previously reported.However, a technical report commissioned by USAID has cautioned that the ongoing conflict in Syria makes it difficult to conduct research and draw conclusions related to climate, migration and conflict. As a The effects of climate change on Oceania, particularly rising seas, may significantly impact coastal populations and increase migration in the future, as the Asian Development Bank (ADB) and the Intergovernmental Panel on Climate Change (IPCC) have reported. Rising temperatures and declining rainfall may also contribute to lower yields from fisheries and agriculture, and a significant decrease in coral reef cover. Extreme weather events, including higher temperatures, wind, and rainfall, have already increased in number and intensity across the region. In the majority of Pacific island nations, of those who migrate, more people leave than come, according to the African, Caribbean, and Pacific Observatory on Migration. The majority of migration in the region is economically driven. In the future, climate change may further impact these migration patterns across the region, according to the IPCC. Climate change has already exacerbated challenges that aid-dependent nations in the region face, restricting livelihoods and resources and contributing to pressures to migrate. The costs of climate change, including a decline in crop yields, a rise in energy demands, and a loss of coastal land, are predicted to be significant. The ADB estimates these costs will reach 12.7 percent of the Pacific regions’ GDP by 2100. Increased migration may also impact political stability and play a role in geopolitical rivalries within the region, according to the IPCC. The effects of climate change, especially rising sea levels, may result in forced migration from the Republic of the Marshall Islands (the Marshall Islands) and have additional impacts on the U.S. defense infrastructure on the islands. Observed and Projected Effects of Climate Change Rising sea levels are a grave threat to the Marshall Islands.The country consists of islands, low-lying atolls—coral caps sitting on top of submerged volcanoes—making it particularly vulnerable to rising sea levels. On average, the Marshall Islands are 2 meters above sea level. In Majuro, the country’s most populous atoll, observed rates of sea level rise are already twice as fast as the global average. Population centers experience significant flooding, with damage to roads, houses, and infrastructure, especially during La Niña years, which are significantly wetter and more prone to extreme rainfall. Flooding is expected to worsen with rising sea levels, with consequences for the availabity of drinking water. On Roi-Namur island, for example, a 0.4 meter rise in sea level combined with wave-driven flooding is predicted to make groundwater undrinkable year round as early as 2055. This salt water inundation may contaminate already limited groundwater across the Marshall Islands. Lastly, during the 1940s and 1950s, the Marshall Islands was the site of 67 U.S. nuclear weapons tests on or near Bikini and Enewetak Atolls. Projected increases in frequency of flooding may negatively impact efforts to contain radioactive material stored on Runit Island. A number of factors have increased migration from the Marshall Islands, including to the United States. In 1986, the United States entered into a compact of free association with the country that allowed its citizens to migrate to the United States, as we have previously reported. As a result, more than 20,000 Marshallese now live in the United States.People are more likely to migrate abroad as the effects of climate change on the Marshall Islands—including rising sea levels—increasingly impact livelihoods.The threat of mass displacement and forced migration is also a concern, as the International Organization for Migration has reported. However, Marshallese culture has a strong connection to the land, which means that many view migration as a last resort. For people still living in the Marshall Islands, they face overpopulation in urban centers and displacement by sudden-onset disasters like cyclones and flooding. Factors influencing people deciding to move abroad include displacement, lack of economic opportunity—sometimes exacerbated by climate change—and limited access to health care. Climate change is likely to increase risks to public health in the country.Increased rainfall, for instance, may expand mosquito breeding grounds, raising the risk of diseases like dengue fever. The country’s limited health care system may further contribute to migration from the islands. Challenges in Stability and Security In the future, the Marshall Islands may become uninhabitable. This prospect threatens the existence of the Marshall Islands as a sovereign state, as well as the United States defense facilities located on the islands. The total loss of land could result in the Marshall Islands being uninhabitable, which raises problems of migration, resettlement, cultural survival, and sovereignty. Relocation of the population of the Marshall Islands, and of other Pacific Island nations at risk of rising seas, could cause significant geopolitical challenges.The Marshall Islands are also of strategic importance for the United States. Under the Compact of Free Association, the United States has permission to use several islands— including Kwajalein Atoll, the location of the Ronald Reagan Ballistic Missile Defense Test Range—until 2066. The country’s proximity to the equator makes the Marshall Islands ideal for missile defense and space work. Yet the island’s defense infrastructure and operations are at significant risk due to rising sea levels, flooding, and diminishing supplies of potable water. As the Department of Defense has noted, climate change will have serious implications for the department’s ability to maintain its infrastructure and ensure military readiness in the future. DOD, 2014 Climate Change Adaptation Roadmap (Alexandria, VA: June 2014). The effects of climate change on Central America and the Caribbean may increase migration and exacerbate poverty rates, as the National Intelligence Council has reported. The climate in Central America and the Caribbean is predicted to be warmer and dryer. The Caribbean’s extensive coastlines and low-lying areas are vulnerable to sea level rise and an increase in sudden-onset disasters, including hurricanes and storm surges. Drought is a particular concern in Central America, where declines in rainfall have reduced crop yields and threatened livelihoods in recent years. Some evidence shows that drought in parts of Central America has contributed to migration north, including to the United States. Population growth, especially in coastal cities, has increased the number of people at risk during hurricane season, and the number and intensity of hurricanes have grown in recent years. Some attribute the increase in intensity to higher sea surface temperatures caused by climate change. However, there remains debate about long term hurricane trends. Recent hurricanes have caused displacement, and significant losses and damages—including to infrastructure—across the region. The depletion of coral reefs and mangrove trees, natural barriers to coastal erosion and flooding, has exacerbated vulnerability to storms in coastal areas. Climate change is likely to have negative impacts on tourism in the Caribbean, where the industry is an important part of the economy, according to Inter-American Development Bank. Climate change impacts on the economy may make it increasingly difficult for governments to reduce poverty and move towards environmental sustainability. Haiti’s geography, location, and high poverty rates make the country especially vulnerable. Haiti is highly vulnerable to climate change effects, partly due to its long coastline.Hurricanes routinely make landfall in the country, and increases in rainfall and wind speeds associated with hurricanes are likely. Severe hurricanes, including Hurricane Matthew in September 2016, have hit Haiti in recent years. Hurricane Matthew was the first category 4 storm in Haiti since 1964. Damage from severe flooding and severe winds during the hurricane affected over 2 million people and created significant food security and public health challenges. Significant deforestation has further exacerbated Haiti’s vulnerability to hurricanes, as trees previously provided a natural barrier to the erosion that strong winds and more rainfall can cause. Rising temperature and highly variable rainfall have led to extreme drought and flash flooding, according to the U.S. Agency for International Development (USAID).32 2 These trends decrease crop yields, affecting the livelihoods of farmers, and threaten water access. Projected increase in temperature and decreases in rainfall are likely to intensify drought in Haiti’s interior. USAID, Haiti: Environment and Climate Change Fact Sheet (January 2016). Migration Trends Slow-onset climate events, such as drought, and rising sea levels, and sudden-onset events, including earthquakes, affect Haiti, according to the International Organization for Migration (IOM). Haiti is also particularly exposed to extreme weather events, such as hurricanes, which can lead to displacement. In January 2010, a catastrophic earthquake in Haiti killed an estimated 230,000 people and left close to 1.5 million people homeless. According to IOM, the recurrence of environmental disruptions increases risks and vulnerabilities. When Hurricane Sandy struck Haiti in October 2012, the country had still not recovered from the 2010 earthquake. The worsening of climate change effects around the world, particularly in low-income countries, may increase the number of people wanting to immigrate to the United States, where approximately 700,000 Haitians live today.Remittances from family members living outside Haiti make up a significant portion of the economy, at 24.7 percent of GDP. The majority of these remittances come from the United States, as we have previously reported.34 4Remittances may support resilience to climate change effects as migrants send money home for disaster recovery and adaptation. Challenges in Stability and Security Haiti, the poorest country in the western hemisphere, has experienced political instability for most of its history, and ranks 12th of 178 on the Fragile States Index. The government has a low capacity to respond to additional challenges like those related to climate change, according to USAID. The Ministry of Environment, for example, is a relatively new organization within the Haitian government, and local and regional governments have a limited ability to enforce environmental laws and regulations. The United States has provided substantial aid to Haiti, both in disaster response and broader development projects. Official development assistance for Haiti in 2015, for instance, totaled slightly more than $1 billion. According to a January 2018 UN report, 2.8 million people were still in need of humanitarian assistance. GAO, Remittances To Fragile Countries: Treasury Should Assess Risks from Shifts to Non-Banking Channels, GAO-18-313 (Washington, D.C., March 8, 2018). The Department of State’s Bureau of Oceans and International Environmental and Scientific Affairs (State/OES) provided about $78 million in adaptation funding from the Global Climate Change Initiative for eight projects for fiscal years 2014 through 2017 (see table 2). The Global Climate Change Initiative was established in 2010 to promote resilient, low- emission development, and integrate climate change considerations into U.S. foreign assistance and was divided into three main programmatic initiatives: (1) Adaptation assistance, (2) Clean Energy assistance, and (3) Sustainable Landscapes assistance. The primary purpose of these contributions to the LDCF was to address the adaptation needs of the least developed countries, which are especially vulnerable to the adverse impacts of climate change. The LDCF financed the preparation and implementation of National Adaptation Programs of Action, which identify a country’s priorities for adaptation actions. Initial grant to the National Adaptation Plans Global Network. The network is focused on increasing the capacity of national and subnational governments to identify and assess climate risks, integrate these risk considerations in sector planning, develop a pipeline of projects to address risks, identify and secure funding for projects, and track progress toward resilience targets. Colombia, East Caribbean (Guyana, Saint Lucia, Saint Vincent and the Grenadines), Ethiopia, Peru, South Africa, Uganda, West Africa (Côte d’Ivoire, Ghana, Guinea, Sierra Leone, Togo) and, under current consideration, East Caribbean (Dominica, Suriname), and Pacific (Fiji, Kiribati, Tuvalu) The cost amendment intensified the technical support on National Adaptation Plans to select countries dependent upon specific country adaption needs. In addition, the cost amendment continued the learning and progress from the initial grant. Implemented through the Department of Treasury, this funding supported a Treasury grant to the Pacific Catastrophe Risk Assessment and Financing Initiative Multi Donor Trust Fund at the World Bank. This activity established the Pacific Catastrophe Risk Insurance Foundation and the Pacific Catastrophe Risk Insurance Company, among other things. The goal of PIER is to increase private sector investment in resilience to climate change in eight developing countries. The first phase of the project will assess and identify opportunities for private investment in resilience, as well as build public and private capacity for climate risk assessment in all the countries. In the second phase, public and private sector partners will develop and pilot climate risk-reduction investment models in four of the countries. The third phase will publicize the piloted investment models and lessons learned among the eight countries. Implemented through the National Oceanic and Atmospheric Administration, this activity aims to implement a capacity-building partnership with India to promote effective climate resilient decision making at national, state, and local levels. In addition to the contacts named above, the following individuals made key contributions to this report: Miriam Carroll Fenton (Assistant Director), Kristy Williams (Assistant Director), Rachel Girshick (Analyst-in-Charge), Nancy Santucci, Miranda Cohen, Aldo Salerno, Neil Doherty, and Judith Williams. Alexander Welsh, Justin Fisher, and Joseph Thompson provided technical and other support. Climate Change Adaptation: DOD Needs to Better Incorporate Adaptation into Planning and Collaboration at Overseas Installations. GAO-18-206. Washington, D.C.: November 13, 2017. Compacts Of Free Association: Actions Needed to Prepare for The Transition of Micronesia and the Marshall Islands to Trust Fund Income. GAO-18-415. Washington, D.C.: May 17, 2018. Remittances to Fragile Countries: Treasury Should Assess Risks from Shifts to Non-Banking Channels. GAO-18-313. Washington, D.C.: March 8, 2018. Syrian Refugees: U.S. Agencies Conduct Financial Oversight Activities for Humanitarian Assistance but Should Strengthen Monitoring. GAO-18-58. Washington, D.C.: October 31, 2017. International Food Assistance: Agencies Should Ensure Timely Documentation of Required Market Analyses and Assess Local Markets for Program Effects. GAO-17-640. Washington, D.C.: July 13, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Federal Disaster Assistance: Federal Departments and Agencies Obligated at Least $277.6 Billion during Fiscal Years 2005 through 2014. GAO-16-797. Washington, D.C.: September 22, 2016. Coast Guard: Arctic Strategy Is Underway, but Agency Could Better Assess How Its Actions Mitigate Known Arctic Capability Gaps. GAO-16-453. Washington, D.C.: July 12, 2016. Climate Information: A National System Could Help Federal, State, Local, and Private Sector Decision Makers Use Climate Information. GAO-16-37. Washington, D.C.: November 23, 2015. Hurricane Sandy: An Investment Strategy Could Help the Federal Government Enhance National Resilience for Future Disasters. GAO-15-515. Washington, D.C.: July 30, 2015. High-Risk Series: An Update. GAO-15-290. Washington, D.C.: February 11, 2015. Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 10, 2014. Combating Terrorism: U.S. Efforts in Northwest Africa Would Be Strengthened by Enhanced Program Management. GAO-14-518. Washington, D.C.: June 24, 2014. Climate Change Adaptation: DOD Can Improve Infrastructure Planning and Processes to Better Account for Potential Impacts. GAO-14-446. Washington, D.C.: May 30, 2014. Extreme Weather Events: Limiting Federal Fiscal Exposure and Increasing the Nation’s Resilience. GAO-14-364T. Washington, D.C.: February 12, 2014. Climate Change: State Should Further Improve Its Reporting on Financial Support to Developing Countries to Meet Future Requirements and Guidelines. GAO-13-829. Washington, D.C.: September 19, 2013. High-Risk Series: An Update. GAO-13-283. Washington, D.C.: February 14, 2013. International Climate Change Assessments: Federal Agencies Should Improve Reporting and Oversight of U.S. Funding. GAO-12-43. Washington, D.C.: November 17, 2011. Climate Change Adaptation: Federal Efforts to Provide Information Could Help Government Decision Making. GAO-12-238T. Washington, D.C.: November 16, 2011. Foreign Relation: Kwajalein Atoll Is the Key U.S. Defense Interest in Two Micronesian Nations, GAO-02-119. Washington D.C.: January 22, 2002.", "summary": "The effects of climate change, combined with other factors, may alter human migration trends across the globe, according to the International Organization for Migration. For example, climate change can increase the frequency and intensity of natural disasters, causing populations to move from an area. Climate change can also intensify slow-onset disasters, such as drought, crop failure, or sea level rise, potentially altering longer-term migration trends. GAO was asked to review how U.S. agencies address climate change as a potential driver of global migration. For State, USAID, and DOD, this report (1) describes executive branch actions related to climate change and migration from fiscal years 2014 through 2018; (2) examines the extent to which the agencies discussed the potential effects of climate change on migration in their plans and risk assessments; and (3) describes agency activities on the issue. GAO analyzed documents on administration priorities; reviewed agency plans, risk assessments, and documentation of agency activities; and interviewed agency officials. From fiscal years 2014 through 2018, a variety of executive branch actions related to climate change—such as executive orders and strategies—affected the Department of State (State), the U.S. Agency for International Development (USAID), and the Department of Defense (DOD), including their activities that could potentially address the nexus of climate change and migration. For example, a fiscal year 2016 presidential memorandum—rescinded in 2017—required agencies to develop implementation plans to identify the potential impact of climate change on human mobility, among other things. In general, however, climate change as a driver of migration was not a focus of the executive branch actions. For example, a fiscal year 2014 executive order—also rescinded in 2017—requiring agencies to prepare for the impacts of climate change did not highlight migration as a particular concern. State, USAID, and DOD have discussed the potential effects of climate change on migration in agency plans and risk assessments. For example, State and USAID required climate change risk assessments when developing country and regional strategies, and a few of the strategies reviewed by GAO identified the nexus of climate change and migration as a risk. However, State changed its approach in 2017, no longer providing missions with guidance on whether and how to include climate change risks in their integrated country strategies. In doing so, State did not include in its 2018 guidance to the missions any information on how to include climate change risks, should the missions choose to do so. Without clear guidance, State may miss opportunities to identify and address issues related to climate change as a potential driver of migration. The three agencies have been involved in climate change related activities but none were specifically focused on the nexus with global migration. For example, USAID officials said that the agency's adaptation efforts, such as its Pastoralist Areas Resilience Improvement through Market Expansion project in Ethiopia, were the most likely to include activities, such as enhancing resilience, that can indirectly address the issue of climate change as a driver of migration. GAO recommends that State provide missions with guidance that clearly documents its process for climate change risk assessments for country strategies. In commenting on a draft of this report, State indicated that it would update its integrated country strategy guidance and will specifically note that missions have the option to provide additional information on climate resilience and related topics.", "document_type": "gao"}
{"report": "DOD has addressed one additional statutory requirement of section 911 of the NDAA for Fiscal Year 2017 since our June 2018 report. However, DOD has still not addressed five other requirements, including (1) issuing its organizational strategy, (2) issuing guidance on cross-functional teams, (3) providing training on cross-functional teams for team members and their supervisors, (4) providing training for presidential appointees, and (5) taking actions to streamline the Office of the Secretary of Defense, as shown in table 1. DOD addressed one of the statutory requirements in section 911 by submitting a report to Congress on the establishment of cross-functional teams on June 21, 2018. The report described the number of cross- functional teams established to date and the design and function of those teams, consistent with the requirements in section 911. OCMO officials told us that DOD plans to address three of the five remaining requirements by March 2019. Specifically, the department plans to take the following actions. Issue DOD’s organizational strategy. DOD has drafted, but not issued, its organizational strategy, which section 911 required to be issued by September 1, 2017. In June 2018, we reported that OCMO officials had revised the draft strategy to address the recommendation from our February 2018 report, including identifying potential action steps for the department that align with our leading practices for mergers and organizational transformations. OCMO officials have again revised the draft organizational strategy, incorporating, among other things, the criteria that distinguish cross-functional teams established under section 911 from other cross-functional working groups, committees, integrated product teams, and task forces, as required by section 918 the NDAA for Fiscal Year 2019. The officials said they expect the Secretary of Defense to issue the strategy in March 2019—18 months later than required by section 911. Take actions to streamline the Office of the Secretary of Defense. OCMO officials have revised the draft organizational strategy to identify the actions the department has taken that it views as responsive to this requirement. For example, the draft strategy states that DOD has delegated authority to approve certain global force management actions to the Chairman of the Joint Chiefs of Staff and certain acquisition oversight functions to the military departments. Section 911 required DOD to take these actions by June 23, 2018. As noted above, however, the organizational strategy has not been finalized. We will assess these actions against the requirements of section 911 after the organizational strategy has been issued. Issue guidance on cross-functional teams. DOD has drafted, but not issued, guidance on cross-functional teams, which section 911 required to be issued by September 30, 2017. In June 2018, we reported that OCMO officials had revised the draft guidance to address the recommendation from our February 2018 report. OCMO officials stated that they have no other planned revisions and that they expect the Secretary of Defense to issue the guidance in March 2019—18 months later than required by section 911. Further, OCMO officials told us that DOD plans to finalize the draft curricula and provide training to fulfill two additional section 911 requirements after the organizational strategy is issued. Training for cross-functional team members and their supervisors. OCMO has not provided the required training to cross-functional team members and their supervisors. OCMO officials stated that they plan to send the draft training curriculum for cross-functional team members and their supervisors to the Secretary after they send the strategy. In February 2018, we reported that the draft training curriculum addressed the section 911 requirements; OCMO officials told us they plan no further revisions to the curriculum. After the Secretary approves the curriculum, the officials stated, they plan to offer the training to cross-functional team members. Some cross- functional team members we met with stated that receiving training on cross-functional teams earlier would have been helpful for them to understand how to operate in a cross-functional team environment, such as reporting to both the team leader and to their home organization. Training for presidential appointees. OCMO has not provided the required training to individuals filling presidentially-appointed, Senate- confirmed positions in the Office of the Secretary of Defense. Section 911 requires these individuals to complete the training within 3 months of their appointment, or for DOD to request waivers. However, as of January 2, 2019, 23 of 35 such officials had been in their positions for more than 3 months, and none had received the training or been granted a training waiver. In our February 2018 report, we found that the draft curriculum met only one of the four required elements in section 911. We recommended, and DOD concurred, that the CMO should either (1) provide training that includes all of the required elements in section 911 or (2) develop criteria for obtaining a waiver and have the Secretary of Defense request such a waiver from the President for these required elements. In October 2018, an OCMO official stated that OCMO had revised the draft training curriculum for presidential appointees to include all of the required elements in section 911. The official also stated that OCMO plans to send the draft training curriculum to the Secretary of Defense for review after OCMO sends the organizational strategy. Once the curriculum is approved, the official stated that OCMO plans to recommend to the Secretary of Defense that all presidential appointees in the Office of the Secretary of Defense receive the training and does not plan to request waivers. As described above, we have previously recommended that DOD take actions to improve its implementation of the section 911 requirements related to the organizational strategy, guidance, and training. As we have reported before, addressing our recommendations and fully implementing the remaining requirements would better position DOD to effectively implement its cross-functional teams and advance a collaborative culture, as required by the NDAA. We will continue to monitor DOD’s progress in addressing these statutory requirements and our related recommendations. DOD is establishing a new cross-functional team to address growing challenges in the electronic warfare mission area. Section 918 of the NDAA for Fiscal Year 2019 requires DOD to establish this cross- functional team by November 11, 2018, to identify gaps in electronic warfare and joint electromagnetic spectrum operations, capabilities, and capacities within the department across personnel, procedural, and equipment areas. In January 2019, an OCMO official stated that the Office of the Under Secretary of Defense for Acquisition and Sustainment had drafted the team's charter and that it had been sent to the Secretary of Defense for review and approval. In addition, DOD plans to disestablish the first cross-functional team established in response to section 911 to address challenges with personnel vetting and background investigations. This team was responsible for managing the transfer of background investigations for certain DOD personnel from the Office of Personnel Management to DOD. However, Office of the Under Secretary of Defense for Intelligence officials stated that DOD plans to subsume the roles and responsibilities of the team into a new Personnel Vetting Transformation Office. According to the officials, the new office will be responsible for managing the administration’s proposed transfer of background investigations for all executive branch personnel from the Office of Personnel Management to DOD. As a result, the cross-functional team’s roles and responsibilities would overlap with those of the Personnel Vetting Transformation Office, the officials stated. The officials expect to formally disestablish the cross-functional team in the first quarter of fiscal year 2019 after DOD issues the charter for the Personnel Vetting Transformation Office. Last, DOD continues to implement its nine cross-functional teams dedicated to reforming and improving business operations, but plans to no longer consider these teams as responsive to section 911. The National Defense Business Operations Plan for Fiscal Years 2018-2022, issued in May 2018, stated that these teams were established pursuant to section 911. As of October 2018, however, DOD’s draft organizational strategy states that these teams were not established in response to section 911. Instead, it describes them as a second layer of cross- functional coordination that will aid in ensuring broader implementation of collaborative and team-oriented practices in the department. We describe these teams’ efforts to improve DOD’s enterprise business operations below and in appendix III. The National Defense Business Operations Plan for Fiscal Years 2018- 2022 highlights nine cross-functional teams as key mechanisms for implementing the plan’s strategic objective to improve and strengthen business operations through a move to enterprise or shared services. From October 2017 through January 2018, the Deputy Secretary of Defense, at the direction of the Secretary, established these nine teams to implement initiatives intended to improve the quality and productivity of the department’s business operations, including moving toward more use of enterprise services. According to memoranda appointing the team leaders, the teams support the Secretary of Defense’s focus on creating a more lethal and effective force by allowing the department to reallocate resources from business operations to readiness and to recapitalization of the combat force. These nine teams—hereafter referred to as business reform teams and whose leaders report to the CMO—address community services management, financial management, health care management, human resources, information technology and business systems, real property management, service contracts and category management, supply chain and logistics, and testing and evaluation. They are described in more detail in appendix III. The Fiscal Year 2019 DOD Annual Performance Plan identifies performance goals and measures to achieve the strategic goals and objectives described in the National Defense Business Operations Plan, including the goal of reforming the department’s business practices. It designates several business reform team leaders as responsible for meeting the performance goals and associated performance measures. For example, the leader of the information technology and business systems reform team is responsible for the performance goal to transform how the department delivers secure, stable, and resilient information technology infrastructure in support of warfighter lethality. This goal is consistent with the team’s overarching objective to plan and execute the transformation of all business systems affecting support areas within the department. The Annual Performance Plan’s objectives and timeframes related to the business reform teams, however, do not fully align with some of the initiatives that the teams are pursuing. For example, according to the plan, the leader of the community services management team is responsible for developing a strategic plan for armed forces retirement home reform by the second quarter of 2018. However, according to a list of the team’s current initiatives as of September 2018, the team was not pursuing this initiative. In October 2018, OCMO officials stated that Washington Headquarters Service is currently leading the armed forces retirement home reform effort. When we asked these officials how they view the relationship between performance measures in the plan and those of the business reform teams’ initiatives, they acknowledged that the teams’ initiatives have evolved since the plan’s development and that the teams have identified additional initiatives that may not be reflected in the plan. They also noted that OCMO drafted the content for the Fiscal Year 2019 DOD Annual Performance Plan before most of the teams were fully staffed and operational. As of October 2018, the officials stated that OCMO was coordinating with the team leaders to review the Fiscal Year 2019 DOD Annual Performance Plan and, as appropriate, to modify or develop new performance measures and targets for the Fiscal Year 2020 DOD Annual Performance Plan. Given DOD’s efforts to address this issue, we are not making a recommendation at this time, but will continue to monitor their efforts as part of our ongoing work on the high-risk nature of DOD’s business transformation efforts. DOD has made some progress establishing and organizing the business reform teams, but implementation of the teams’ initiatives has been uneven. We found that implementation of the business reform teams has demonstrated some key characteristics of leading practices for implementing effective cross-functional teams that we have identified in our prior work. For example, across all the teams we spoke with, members were responsible for leading the development of their team’s initiatives and communicating with their home organizations to obtain input, demonstrating a well-defined team structure. In addition, the business reform teams are structured to facilitate open and regular communication, another leading practice. For example, the teams are generally co-located with each other, which enables direct communication among team members and between teams, members stated. Further, members from most of the teams we spoke with were supportive of their team leaders and viewed them as effective in their roles, demonstrating an inclusive team environment. Team leaders across all teams also stated that they regularly interact with senior management, such as through weekly one-on-one meetings with the CMO or Deputy CMO. This engagement reflects a key characteristic that states team leaders should regularly interact with senior management. However, we found that the business reform teams’ efforts have not proceeded according to early plans outlined by the department. DOD’s August 2017 report to Congress on restructuring the CMO organization stated that the teams were intended to help modify processes to move toward enterprise service delivery. According to the report, the department would transition to DOD enterprise services by the end of fiscal year 2018. In July 2018, OCMO officials acknowledged that they were behind schedule, but told us they expected to catch up to this deadline by the end of fiscal year 2018, as originally planned. That deadline was not realized. According to OCMO officials, the teams are identifying new milestones for implementing initiatives, some of which will contribute to a move toward enterprise services. In addition, the business reform teams vary in the number of initiatives they are pursuing. As of September 2018, OCMO reported that the teams were pursuing a total of 135 initiatives and that the number of initiatives per team ranged from 2 to 38. For example, the community services management team was developing 2 initiatives—1 to examine the feasibility of merging DOD’s three military exchange services and the Defense Commissary Agency into a single resale enterprise, and the other to streamline the inventory of DOD lodging. In contrast, the supply chain and logistics team was developing 21 short- and long-term initiatives, such as reducing the footprint of underutilized warehouses and developing better data interoperability throughout the supply chain and logistics enterprise. Further, the teams’ progress in advancing their initiatives to the implementation and monitoring phase has varied. The Reform Management Group oversees the business reform teams. The Deputy Secretary of Defense chairs the Reform Management Group, and the CMO facilitates regular meetings of the group. The Reform Management Group authorizes the business reform teams to proceed with their initiatives through five gates—0 through 4. These gates trace initiatives from conception to implementation and monitoring. Before proceeding from one gate to the next, the teams must submit certain deliverables to the Reform Management Group for review and approval. For example, before an initiative can proceed to gate 1, OCMO requires the teams to submit a charter for the initiative, which can identify, among other things, the problem or opportunity statement, the project scope, expected outcomes and risk analysis, and preliminary performance measures. Figure 1 provides an overview of the five gates and the status of initiatives by gate, as of September 2018. As shown in figure 1, while some teams have successfully advanced several initiatives to gate 4, others have not yet progressed initiatives past gate 2. Specifically, as of September 2018, DOD reported that 104 of the teams’ 135 initiatives had not yet reached gate 3, the implementation phase. According to the teams we interviewed, several factors may affect the progress of an initiative, such as its complexity or a team’s approach to developing initiatives. For example, the community services management team leader stated that the team is primarily focused on the consolidation of the defense commissaries and exchanges, an initiative that is relatively large in scope and complexity. According to the team leader, this initiative involves a number of internal stakeholders, including all of the military services, as well as outreach to external stakeholders, such as veterans’ organizations. In addition, the leader stated that the team would need legislative changes to fully implement the initiative. As a result of the large scope and complexity, the leader expects the initiative to take longer to implement than others. Some teams have pursued a proof-of-concept approach to developing their initiatives, which involves pilots to test initiatives to prove their value prior to department-wide implementation. For example, the health care management team is conducting a regional pilot to test the feasibility of consolidating the purchasing of services across the military health system. DOD has asserted that some of its initiatives have produced benefits through savings or efficiencies. For example, according to a September 2018 DOD report on the department’s investments in support of the National Defense Strategy, the department achieved $1.61 billion in benefits by implementing private-sector best practices in purchasing goods and service contracts in the Air Force and defense agencies. In addition, DOD reported that the department saved $297 million through commercial information technology solutions, department-wide network management, and optimized data centers. Further, according to the report, consolidating four health care enterprises improved patient care and medical readiness, with an estimated savings of more than $2.5 billion annually by 2023. OCMO officials stated that they are still in the process of working with the Office of the Under Secretary of Defense for Comptroller to document savings generated from the business reform teams’ initiatives. Given that OCMO officials stated they are taking steps to document savings generated from the teams’ initiatives, we are not making a recommendation at this time, but will continue to monitor their efforts as part of our ongoing work on the high-risk nature of DOD’s business transformation efforts. One senior DOD official involved in the reform effort acknowledged that the teams’ progress has been uneven. He cited a number of factors that can affect teams’ implementation, including the degree to which the teams have support from the highest levels of department leadership to operate independently and advance changes that may be unpopular with internal or external stakeholders, and the ability of teams to tackle longstanding systemic challenges, such as inaccurate cost data throughout the department. This official and several teams we met with cited the importance of the team leader’s commitment to driving team success. We found that uncertainty with funding for initiatives may be an additional factor inhibiting some teams’ progress. In some cases, the business reform teams need funding to further develop and implement their initiatives, such as the supply chain and logistics team’s requirement for $2.4 million to conduct a pilot project that included conducting three site visits for warehouse and labor assessments in support of one of its initiatives. According to OCMO officials, the business reform teams can request funding from OCMO to further develop their initiatives, or if funding is not available from OCMO, the teams can seek funding from functional organizations. However, even in the early stages of their implementation, some teams told us that they did not have access to sufficient funding to fully develop and implement some of their approved initiatives or that the process for obtaining the funding was uncertain. For example, in June 2018, one team leader told us that the team did not have sufficient funding to implement four initiatives. The leader also stated that the team was not alerted to the lack of funding until immediately prior to its planned implementation of these initiatives. Members from another team stated that the Reform Management Group wanted the team to implement its initiatives more quickly, which increased the amount of funding the team needed for implementation. When the team requested additional funding, however, OCMO did not have it available. Further, OCMO officials told us that the teams submitted nine requests for funding in fiscal year 2018, but OCMO did not have funding to support four of these requests as of the end of fiscal year 2018. As the teams continue to develop and implement their initiatives, the number of requests for funding may increase in the future. Our prior work on efficiency initiatives has found that up-front investments may often be required to realize long-term efficiencies and savings. In this regard, OCMO officials told us that, as of September 2018, the nine teams had planned investments of about $6.7 billion to implement their initiatives from fiscal years 2018 through 2024. OCMO officials stated that this amount is a projection from the teams, and DOD has not yet identified sources for this funding. In addition, officials stated that more investment could be needed as the teams continue to develop initiatives and more enter the implementation phase. However, according to DOD’s budget materials for fiscal year 2019, requested funding for OCMO—a source used to fund the development of some of the teams’ initiatives—will decrease from about $48 million in fiscal year 2018, to about $36 million in fiscal year 2019. Leading practices for implementing effective cross-functional teams highlight the importance of senior management providing teams with access to resources. These leading practices also state that teams should have well-defined team operations with established rules and procedures. Further, the findings from a study contracted by DOD in August 2017 to determine how best to implement effective cross- functional teams identified actions for DOD to consider for supporting the implementation of its cross-functional teams, including identifying funding mechanisms to fully support cross-functional teams. The study suggested that language outlining the preferred mechanisms and authorities for this purpose can be included in cross-functional team guidance. OCMO officials told us that the office maintains a list of funding requests from the teams and prioritizes which initiatives to fund based on several factors including estimated yield, feasibility, and available resources for implementation. However, OCMO did not have a process for identifying and prioritizing available funding for implementing the initiatives planned by the business reform teams for fiscal year 2018, and has not established one for fiscal year 2019. According to OCMO officials, the department initially planned to use available funding from OCMO or the savings generated by the initiatives to fund the development and implementation of other initiatives. However, OCMO officials have since recognized that funding is needed and they are in the early stages of developing an approach to do so. Specifically, OCMO officials said they are working with the Office of the Under Secretary of Defense for Comptroller to identify funding for initiatives in fiscal year 2020. While there will likely be initiatives that cannot be funded given limited resources, OCMO and the reform teams could benefit from a clear process for identifying and prioritizing available funding. Without such a process, OCMO and the reform teams may not be able to adequately plan for and execute their initiatives. Section 911 of the NDAA for Fiscal Year 2017 called for organizational and management reforms to assist DOD in addressing challenges that have hindered collaboration and integration across the department. While the department has taken some steps to implement the section 911 requirements, it has still not met statutory due dates for implementing key requirements intended to support its cross-functional teams and to advance a more collaborative culture within the department. We continue to believe it is important for senior leadership to demonstrate their commitment to fulfilling section 911 by addressing our prior related recommendations and by completing the remaining requirements. Further, section 921 of the NDAA for Fiscal Year 2019 requires DOD to reform its enterprise business operations to increase the effectiveness and efficiency of mission execution. DOD has highlighted its nine cross- functional teams dedicated to improving the department’s business operations as key to achieving enterprise business reform. However, this effort has been marked by a slow start and uneven progress, and teams face a number of challenges. One key challenge is the teams’ lack of resources to drive their initiatives forward. OCMO has not established a process for identifying and prioritizing available funding for the development and implementation of the teams’ initiatives, which has hampered the success of some of the enterprise reform efforts. The Secretary of Defense should ensure that the Chief Management Officer establishes a process for identifying and prioritizing available funding to develop and implement initiatives from the cross-functional reform teams. (Recommendation 1) We provided a draft of this report to DOD for review and comment. In its written comments, which are reproduced in Appendix V, DOD concurred with our recommendation and described ongoing and planned actions to address it. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Defense, and DOD’s Acting Chief Management Officer. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. Section 911 of the NDAA for Fiscal Year 2017 included a provision for us—every 6 months after the date of enactment on December 23, 2016, through December 31, 2019—to submit to the defense committees a report. Each report is to set forth a comprehensive assessment of the actions that DOD has taken pursuant to section 911 during each 6-month period and cumulatively since the NDAA’s enactment. We issued our first report in June 2017, and did not make recommendations. We issued our second report in February 2018, and made four recommendations to improve DOD’s implementation of section 911. We issued our third report in June 2018, and did not make recommendations. Table 2 identifies our three prior reports on DOD’s implementation of section 911 and the status of the four recommendations from our February 2018 report. Section 911 of the National Defense Authorization Act for Fiscal Year 2017 requires the Secretary of Defense to take several actions. Table 3 summarizes these requirements, the due date, and the date completed, if applicable, as of December 2018. The Deputy Secretary of Defense has established nine cross-functional teams since October 2017 to implement reform initiatives intended to improve the quality and productivity of the department’s business operations, including moving toward more use of enterprise services. According to the memoranda appointing the team leaders, these teams support the Secretary of Defense’s focus on creating a more lethal and effective force by allowing the department to reallocate resources from business operations to readiness and to recapitalization of the combat force. As of September 2018, these nine cross-functional teams varied in size, ranging from 5 to 31 members. According to OCMO officials, the size of the teams can vary based on the knowledge and expertise needed to implement the teams’ initiatives. The team leaders are either presidential appointees or members of the Senior Executive Service. In addition, the Deputy Secretary of Defense directed the military departments and functional organizations to appoint reform team members, and the teams include representatives from the military departments, functional organizations relevant to the reform topic, and external experts. At the time we met with the teams, most reported that they were the appropriate size and had the right skills and expertise represented on the team. Figure 2 provides additional details on the composition of these nine cross-functional teams, as of September 2018. In February 2018, we reported on eight leading practices for implementing effective cross-functional teams. Table 4 identifies these leading practices and their related key characteristics. In addition to the contact named above, Margaret Best (Assistant Director), Tracy Barnes, Arkelga Braxton, William Carpluk, Michael Holland, William Lamping, Chad Johnson, Matthew Kienzle, Amie Lesser, Ned Malone, Judy McCloskey, Sheila Miller, Sally Newman, Richard Powelson, Daniel Ramsey, Ron Schwenn, Jared Sippel, Susan Tindall, and Sarah Veale made key contributions to this report.", "summary": "DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for FY 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives that span multiple functional boundaries; establish cross-functional teams to support this strategy and provide related guidance and training; and take actions to streamline the Office of the Secretary of Defense. Further, section 921 of the NDAA for FY 2019 calls for the Secretary of Defense to reform the department's enterprise business operations. The NDAAs for FY 2017 and 2019 also included provisions for GAO to assess DOD's actions in response to sections 911 and 921, respectively. This report assesses the extent to which DOD has made progress in (1) addressing the requirements of section 911, and (2) reforming the department's enterprise business operations under section 921. GAO reviewed documentation on DOD's implementation of sections 911 and 921; interviewed cross-functional team leaders, members, and other DOD officials; and compared DOD's implementation of its cross-functional teams to GAO's key practices. The Department of Defense (DOD) has implemented four statutory requirements in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, but has not addressed five requirements intended to support cross-functional teams and promote department-wide collaboration (see table). For two of these requirements, DOD has missed the statutory deadline by more than a year. GAO previously recommended that DOD take actions to improve its implementation of section 911, and DOD reported it is doing so, such as revising its draft cross-functional team guidance to address statutory requirements. Fully implementing GAO's prior recommendations and the remaining statutory requirements would better position DOD to effectively implement its cross-functional teams and advance a collaborative culture, as required by the NDAA. Nine cross-functional teams are driving DOD's enterprise business reform efforts under section 921 of the FY 2019 NDAA, but the teams' progress has been uneven. As of September 2018, DOD reported that these nine teams were pursuing a total of 135 business reform initiatives. However, 104 of these initiatives have not reached the implementation phase. A key challenge facing the teams is that some lack resources to fully implement their approved initiatives. For example, DOD officials stated that the department did not fulfill four of nine funding requests from the teams in fiscal year 2018 to implement their initiatives. As of September 2018, DOD officials estimated that the teams need about $6.7 billion to implement their initiatives from FYs 2018 through 2024, but DOD has not identified sources for this funding. GAO's prior work on efficiency initiatives found that up-front investments may be required to realize long-term savings. In addition, GAO's prior work on leading practices for implementing effective cross-functional teams highlights the importance of providing teams with access to resources and having well-defined team operations with established rules and procedures. However, DOD has not established a process for identifying and prioritizing available funding for implementing the teams' initiatives. Without such a process, DOD and the teams may not be able to adequately plan for and execute their reform initiatives. GAO recommends that DOD establish a process to identify and prioritize funding for implementing its cross-functional teams' business reform initiatives. DOD concurred with this recommendation.", "document_type": "gao"}
{"report": "This section provides an overview of FMD, as well as information on the potential impact of an outbreak in the United States; USDA activities to respond to outbreaks of diseases, including FMD; federal, state, tribal, and industry roles in FMD control; and FMD vaccines. FMD is a highly contagious viral disease that causes fever and painful lesions on cloven-hoofed animals’ hooves, mouths, and udders (see fig. 1). These debilitating effects, rather than high mortality rates, are responsible for severe productivity losses associated with FMD. The disease generally does not infect humans and is not considered a public health or food safety threat. Young animals may die from the virus, while most adult animals recover. However, livestock infected with FMD have severely diminished meat and milk production. FMD virus can be found in all secretions and excretions from infected animals, including in breath, saliva, milk, urine, feces, and semen, as well as in the fluid from the lesions. Animals can release the virus for up to 4 days before showing visible signs of infection, and FMD can spread from one animal species to another. The virus itself can survive in the environment for many months and can spread when healthy animals come into contact with infected animals or via contaminated vehicles, equipment, clothes, feed, or animal products, as shown in figure 2. The United States has not had an FMD outbreak since 1929, but the disease could be introduced here from countries in Africa, Asia, Eastern Europe, or South America where it is present. The United States is vulnerable to FMD transmission, given the large size and mobility of the U.S. livestock sector. In 2018, the United States had about 94 million head of cattle, 74 million swine, 5 million sheep, and more than 2 million goats. Many of these livestock are concentrated in major livestock- producing states such as Texas and Iowa, but livestock are present in every state. (See figs. 3 and 4 for the populations of cattle and swine by state.) According to USDA documents, a large percentage of livestock in the United States are kept on large farms, ranches, or feedlots (i.e., areas or buildings where livestock are fed and fattened up), some with capacity for 50,000 to 100,000 or more animals. Livestock are transported daily to feeding facilities, markets, slaughter plants, and other farms or ranches. For example, swine are often moved among multiple premises at different stages of their life spans to accommodate their growth in size, among other things. According to the swine industry, approximately 1 million swine are on the road every day in transit to various stages of the production process. An FMD outbreak in the United States could have serious economic consequences. A 2001 outbreak of FMD in the United Kingdom, for example, resulted in the killing of more than 6 million animals, with direct costs of more than $3 billion to the public sector and more than $5 billion to the private sector. The extent of economic damage in the United States would depend primarily on the duration and geographic extent of the outbreak, the extent of trade disruptions, and how consumers reacted to the disease and associated control measures, according to USDA. In a large and long-lasting outbreak, control measures such as killing animals and halting the transportation of animals could cause significant losses for livestock operations. In addition, trade disruptions could have an enormous impact because U.S. exports of livestock, meat, and dairy products—together valued at more than $19 billion in 2017 based on estimates from the U.S. Meat Export Federation and the U.S. Dairy Export Council—would likely stop or be sharply reduced. In addition, domestic consumers might be reluctant to purchase meat and animal products such as milk during an FMD outbreak, even though the products would be safe for people to consume, according to USDA. Partly to protect the economic interests of the U.S. livestock industry, the Animal Health Protection Act authorizes USDA to detect, control, and eradicate diseases in livestock. USDA’s Animal and Plant Health Inspection Service (APHIS) is the lead agency for responding to outbreaks of foreign animal diseases, including FMD. According to APHIS, in responding to an outbreak of FMD or any foreign animal disease, APHIS, in coordination with state and industry partners, would conduct the following activities, among others: Surveillance. Observing animals for visible signs of disease and analyzing data on locations and numbers of disease cases to detect premises with the disease, determine the size and extent of an outbreak, and determine whether outbreak control measures are working. Epidemiologic tracing. Gathering and analyzing data on cases of a disease, premises with such cases, movement of infected animals, and their potential contact with uninfected animals to locate other animals or premises with the disease, understand the outbreak’s rate and direction of spread, and investigate the source of the outbreak. Diagnostic testing. Conducting approved and validated assessments of samples taken from animals to identify infected animals or to demonstrate that healthy animals are free of disease. Applying quarantines and stop-movement orders. Restricting the movement of infected or potentially infected animals, animal products, and contaminated items to prevent the virus from spreading to healthy animals. Biosecurity Biosecurity measures, which help minimize disease spread, include the following: placing signs indicating precautions personnel and visitors must follow; establishing sign-in procedures at entry points; removing dirt from boots and disinfecting them prior to entering a facility; using disposable personal protective equipment, such as Tyvek suits, gloves, masks, and boots, when entering premises; disposing of contaminated items properly; designating “clean” and “dirty” storage areas in vehicles; and controlling movement on and off premises. Employing biosecurity measures. Taking steps, such as cleaning and disinfecting trucks that travel between premises, to contain the virus on infected premises and prevent it from spreading via objects or equipment that can carry infection. Stamping out and vaccination. Killing infected animals and vaccinating uninfected animals—for example in buffer zones around infected premises—to limit the spread of the virus. Compensating owners. Paying owners fair market value for animals and equipment that the government determines must be destroyed to limit disease spread. To help prepare for a potential FMD outbreak, APHIS and its partners conduct preparedness exercises in which officials practice responding to simulated FMD outbreaks. Such exercises range from small-scale, narrowly scoped exercises to full-scale, broadly scoped exercises. For example, some exercises focus on specific response tasks such as electronic messaging between laboratories or shipping response supplies to the field, and involve relatively few people for less than a day. Other exercises simulate a wide range of response activities that APHIS and its partners would use in an FMD outbreak, involve dozens of people from different agencies and industry organizations in locations across the country, and last for multiple days. Multiple units within APHIS carry out these preparedness and response activities at the agency’s headquarters in Maryland; field offices in 27 states and Puerto Rico; and the National Veterinary Services Laboratories in Ames, Iowa, and on Plum Island, New York. APHIS’s Foreign Animal Disease Diagnostic Laboratory on Plum Island, New York, develops and performs diagnostic tests for foreign animal diseases, including FMD. APHIS also works with federal agencies within and outside of USDA, along with states, tribes, and academic and industry partners—all of which have roles related to FMD control, as discussed below. USDA’s Food Safety and Inspection Service is responsible for the safety of meat, poultry, and egg products. Agency officials assigned to slaughter establishments examine animals before processing to look for visible symptoms of FMD, among other things. USDA’s Agricultural Research Service conducts research on agricultural problems of high national priority, including the FMD virus and FMD vaccine. USDA’s National Institute of Food and Agriculture invests in and conducts agricultural research, education, and extension to help solve national challenges in agriculture, food, the environment, and communities. The agency has funded modeling of FMD spread and research on potential economic impacts. DHS has funded research on FMD vaccine and development of response decisions tools, training, and equipment; sponsored preparedness exercises; and developed emergency plans, among other things. In an FMD outbreak, DHS may assume the lead for coordination of federal resources if the Secretary of Agriculture requests assistance from DHS. The Secretary of Homeland Security, in coordination with the Secretaries of Agriculture, Health and Human Services, the Attorney General, and the Administrator of the Environmental Protection Agency, is to ensure that the combined federal, state, and local response capabilities are adequate to respond quickly and effectively to a major disease outbreak, among other things, affecting the national agriculture or food infrastructure. The Department of the Interior carries out disease surveillance of wild animals and coordinates surveillance activities with state fish and wildlife agencies, among other things. The Department of the Interior’s U.S. Geological Service conducts research on wildlife diseases, including FMD, and if needed in an FMD outbreak, would administer diagnostic tests for wildlife. The Federal Bureau of Investigation coordinates the federal investigation of criminal activities through the Joint Terrorism Task Force. If animals, livestock, or poultry are suspected targets of a terrorist attack, or if any evidence suggests a foreign animal disease may have been or could be intentionally introduced, USDA notifies the Federal Bureau of Investigation to investigate. State governments prepare plans for foreign animal diseases, including FMD; conduct preparedness exercises; and would play a key role in a response effort. In an FMD outbreak, a state animal health official and an APHIS field official would co-lead initial response efforts. For example, state governments might take immediate actions, such as applying quarantines and stop-movement orders. Tribal governments, like state governments, would play a key role in initial response efforts and conduct activities similar to those of state governments. The National Animal Health Laboratory Network is a partnership of 59 federal, state, and university-associated animal health laboratories throughout the United States, of which 45 are approved to administer diagnostic tests for FMD. Livestock industry organizations support communication and education efforts with their members and the public, participate in FMD preparedness exercises, and have helped develop some FMD planning documents. As part of its response to an FMD outbreak, APHIS may access vaccine through the North American Foot-and-Mouth Disease Vaccine Bank (vaccine bank), which is jointly administered by the United States, Mexico, and Canada. Because finished vaccines have a short shelf life, the vaccine bank manages a supply of vaccine concentrate, which can be stored at extremely cold temperatures for about 5 years. Some of the concentrate is stored at the Foreign Animal Disease Diagnostic Laboratory on Plum Island, New York, and some at the manufacturer’s facilities in Lyon, France. During an FMD outbreak, the manufacturer would convert the concentrate into finished vaccine and ship it to the United States. For the concentrate stored in the United States, the vaccine bank would need to first ship it to the manufacturer overseas. APHIS’s National Veterinary Stockpile coordinates logistics planning, particularly for catastrophic outbreaks, and would be responsible for delivering the finished vaccine to affected states, according to USDA planning documents. The FMD virus has seven distinct variations, or serotypes, and more than 60 subtypes within the serotypes, according to USDA documents. FMD vaccine should be as closely matched to the outbreak subtype as possible to provide more effective protection, according to USDA officials and a document on FMD vaccination. A vaccine for one FMD subtype may also provide good or partial immunity to other closely related subtypes, but it would not generally protect against other serotypes. The vaccine bank has concentrate for a number of FMD subtypes that pose the greatest risk to North American livestock based on recommendations from the World Reference Laboratory for FMD. We have previously reported on APHIS’s management of foreign animal diseases, including FMD. For example, in May 2015, we recommended that USDA assess and address its veterinarian workforce needs for emergency response to an outbreak of an animal disease such as FMD. USDA agreed, in part, with the recommendation, and in 2017 hired additional veterinarians. The agency is currently building a model to develop workforce estimates for a large-scale FMD outbreak, according to agency officials. USDA’s planned approach for responding to an FMD outbreak relies on several different strategies emphasizing stamping out, vaccination, or both, depending on factors such as the size of the outbreak. To aid agency officials in implementing the strategies, USDA has developed overarching guidance for responding to animal disease outbreaks and detailed procedures for many response activities. USDA’s APHIS has developed several different, but not mutually exclusive, outbreak response strategies that the agency will consider to control and eradicate FMD in an outbreak as part of its planned approach, according to USDA documents and officials. These strategies rely on stamping out—killing and disposing of—infected and susceptible animals, vaccination of uninfected animals, or both. For strategies involving vaccination, options include killing and disposing of vaccinated animals (vaccinate-to-kill), allowing the animals to be slaughtered and their meat processed (vaccinate-to-slaughter), or allowing the animals to live out their useful lifespan (vaccinate-to-live). Response strategies would likely change as an outbreak unfolds, and might also vary by region or type of animal affected, according to APHIS planning documents. Over time, USDA’s FMD planned approach has evolved from relying solely on stamping out to including vaccination strategies as it became apparent that in many potential scenarios, reliance on stamping out alone would not be effective or feasible. Specifically, in 2010, USDA’s Foot-and- Mouth Disease Response Plan: The Red Book (Red Book) first stated that APHIS would consider vaccination strategies such as vaccinate-to- slaughter and vaccinate-to-live. In 2014 APHIS updated the Red Book with the addition of a vaccinate-to-kill strategy to better distinguish what would happen to animals if they were not eligible for slaughter. By 2016, USDA had determined that complete stamping out of anything beyond a small FMD outbreak was not a viable, effective, or sustainable response strategy for the United States, according to USDA’s FMD vaccination policy. Experiences in preparedness exercises and foreign outbreaks of FMD influenced a shift in USDA’s planned approach toward vaccination strategies. In 2010, Japan and South Korea both experienced FMD outbreaks and initially relied on stamping out combined with strict movement restrictions. Japan stamped out about 300,000 cattle and swine, and South Korea stamped out about 150,000 cattle and 3 million swine—a third of the country’s total swine population. Despite these efforts, FMD continued to spread in both countries until they implemented vaccination strategies, according to USDA documents. A 2007 FMD preparedness exercise, sponsored by the Texas Animal Health Commission and USDA, found that killing and disposing of infected animals in a livestock-dense area like the Texas panhandle would not be feasible in a timely manner because of the large number of animals on infected premises (e.g., 50,000 to 75,000 head of cattle on large cattle feedlots). USDA learned that having vaccination strategies in place would be necessary to effectively respond to an FMD outbreak. If an FMD outbreak occurred, APHIS would select a response strategy or multiple strategies, or it would modify strategies to achieve its FMD response goals based on the unique circumstances of the outbreak, according to agency planning documents. APHIS would do so in consultation with affected states and tribes, and if the agency chose to use vaccine, states would request it from USDA. According to agency planning documents we reviewed, APHIS would consider a number of factors when deciding on its approach, including the following: FMD vaccine availability; consequences of the outbreak (e.g., trade restrictions or loss of valuable genetic stock); public acceptance of response strategy or strategies; scale of the outbreak (i.e., number and size of infected premises); rate of outbreak spread; location of initial outbreak (e.g., isolated ranch versus livestock- producing area); movement of animals (number of locations that infected or potentially infected animals have traveled to or through); and federal and state resources available to implement response strategies. Resource needs vary among strategies and generally increase with the scale of an outbreak, according to USDA planning documents. Having the necessary resources available to implement a stamping-out response strategy would include having qualified personnel to kill animals in accordance with accepted protocols and having appropriate disposal facilities. To implement strategies involving vaccination, APHIS would need a sufficient quantity of vaccine, the resources for distributing and administering the vaccine, and the diagnostic tests necessary to distinguish between vaccinated and infected animals, according to USDA’s FMD vaccination policy. If the scale of an outbreak were small, and APHIS had access to sufficient resources, agency officials would likely implement a stamping-out strategy in an attempt to quickly stop the production of virus in infected animals and limit the outbreak’s spread, according to agency planning documents. However, these planning documents indicate that if the outbreak grew to a moderate regional, large regional, national, or catastrophic scale, the resources required for killing all infected and potentially infected animals, disposing of carcasses, and paying compensation to livestock owners would quickly multiply, and APHIS policy calls for strategies focused on vaccination, according to USDA documents. Over time, USDA’s APHIS has developed various documents to guide its response to FMD, including overarching guidance for responding to FMD and other foreign animal diseases, procedures with in-depth operational details, and plans to secure the nation’s food supply. To aid agency officials in implementing FMD response strategies broadly, APHIS has developed FMD response plans and guidance for responding to foreign animal disease outbreaks more generally. For example, the Red Book describes USDA’s FMD response strategies; identifies the capabilities needed to respond to an FMD outbreak; and provides guidance on the critical activities required during the response, including time frames for these activities. The Red Book is intended for responders at all levels of government and industry partners. For example, if a state official or a livestock owner wanted to know the steps to test and confirm a positive case of FMD, the Red Book explains the process and has a flowchart to illustrate the steps. APHIS also has developed response manuals that provide guidance relevant to foreign animal disease outbreaks, including FMD. For example, a manual on roles and coordination provides an overview of USDA’s framework for incident management, funding, communication strategies, relationships, and authorities during a foreign animal disease outbreak, including an FMD outbreak. APHIS also has produced ready reference guides that condense guidance material from these broader documents into short summary documents for training and education purposes. In addition, APHIS has developed standard operating procedures (SOP) for many response activities. Some SOPs are specific to an FMD outbreak, and others provide more general instruction on activities to respond to foreign animal diseases. The FMD biosecurity SOP, for example, describes steps responders at all levels of government and industry partners can take to help prevent the spread of the virus, such as protocols for putting on and taking off personal protective equipment (e.g., coverall suits, boots, and gloves); standards for separating “clean” and “dirty” zones in vehicles and on premises; and instructions for cleaning and disinfecting vehicles before arrival at and after departure from different premises. Many of the more general SOPs have proven useful during outbreaks of other animal diseases and exercises simulating FMD outbreaks, according to APHIS and state government officials, and APHIS has revised them to incorporate lessons learned. For example, one state animal health official said that during the 2014 avian influenza outbreak, the SOP for disposing of poultry carcasses through composting was initially insufficient because the poultry industry had not previously been composting in all states. To improve consistency across states, APHIS updated protocols during the outbreak and created composting protocols for avian influenza-infected flocks and livestock to supplement the agency’s disposal SOP, which addresses carcass disposal for foreign animal diseases generally. These composting protocols expanded on and clarified guidance to be used in subsequent outbreaks. In addition, APHIS held training on composting procedures for birds and on large animal composting, which could be part of an FMD response. USDA, in coordination with industry, state, federal, and academic representatives, has also developed supply plans to secure the nation’s food supply and keep businesses operating during an FMD outbreak while managing the risk of spreading the virus, which would decrease the economic impact of an outbreak. To date, USDA and its industry and university partners have developed Secure Milk Supply and Secure Pork Supply plans and have partially completed a Secure Beef Supply plan. These plans guide industry on managing uninfected premises and uninfected animals during an FMD or other foreign animal disease outbreak. For example, the Secure Milk Supply plan has guidance on what producers can do to continue moving shipments of milk during an outbreak, including how to implement enhanced biosecurity plans to prevent the spread of FMD to their facilities. The sheep industry is currently developing its own secure food and wool supply plan, according to industry representatives. USDA would likely face significant challenges in pursuing its FMD response goals of detecting, controlling, and containing FMD as quickly as possible; eradicating FMD using strategies that seek to stabilize animal agriculture industries and the economy; and facilitating continuity of commerce in uninfected animals. We identified 11 challenge areas, based on our review of USDA documents, interviews with agency officials and others with expertise with FMD, and 29 responses to our questionnaire. A majority of respondents indicated that in 10 of the 11 areas USDA would face challenges that are significant—that is, important enough to be worthy of USDA action. (See app. I, fig. 7, for a summary of the responses.) For the 11th area, which is communication and coordination, opinions were split on whether the area would present significant challenges. The 11 challenge areas, which sometimes overlap or fall outside of USDA’s direct control, are described below. Examples of actions USDA is taking to address these challenges are described later in this report. USDA would likely face surveillance challenges that could delay detection of the first cases in an FMD outbreak. A majority (22 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. FMD can spread without detection for the following reasons: there is no active surveillance for FMD, animals may not have visible signs until up to 4 days after becoming signs can be difficult to notice in some species, and infected wild animals could go undetected and spread the virus. For initial detection of an FMD outbreak, USDA relies on passive surveillance, waiting for producers or veterinarians to notice and report visible signs. In contrast, for initial detection of other diseases, such as bovine spongiform encephalopathy (commonly known as mad cow disease), USDA has active surveillance programs in which animals are routinely tested regardless of visible signs. According to USDA officials, the cost and resources required to conduct active surveillance for initial detection of an FMD outbreak would not be justified because the United States has not had an FMD outbreak for decades and there is a risk that false positives could create unnecessary disruptions. However, the officials said the agency would likely use active surveillance during an outbreak. Passive surveillance, however, may not allow for timely detection of the initial cases of FMD, particularly in sheep. FMD infection in sheep often causes only mild signs or symptoms, such as an elevated temperature or loose stool, and in some cases will not cause any overt signs or symptoms at all, even though the animal may be spreading the virus, according to representatives of the sheep industry. Therefore, an FMD outbreak could become widespread before USDA detects the first cases. Even if responders are able to detect FMD in domesticated animals before an outbreak becomes widespread, wild animals may become infected and spread the virus, posing additional challenges for USDA and its partners. For example, the U.S. population of feral swine, which are susceptible to FMD, is estimated at 6 million and is rapidly expanding, according to APHIS. Detecting and controlling infected wild animals could be extremely difficult, according to agency officials, and if not controlled, these populations could serve as carriers for the disease. In addition, limitations in diagnostic capabilities, discussed below, could hamper the availability of data needed for surveillance, such as accurate information on new cases of FMD. USDA would likely face challenges related to its capability to diagnose FMD. Such challenges include the lack of validated population-level diagnostic tests and potentially insufficient resources to collect samples and perform diagnostic testing in a large outbreak. A majority (24 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. Currently, during an FMD outbreak, USDA would rely on individual animal testing, given that it has not validated any diagnostic tests that can be used for a group or population of animals, according to USDA’s surveillance SOP. If an FMD outbreak expands, the ability to test a large number of animals quickly with minimal resources would be useful for USDA. In a 2017 study of the potential uses of a bulk milk test for FMD in dairy cattle, for example, USDA found that 720 bulk milk tests could replace over 35,000 individual animal tests with the same level of confidence in disease status. However, the study identifies additional work needed to implement bulk milk tests. USDA and state officials investigate suspected cases of FMD on previously uninfected premises, according to USDA documents. To do so, USDA or state officials travel to the suspected premises—sometimes over long distances—collect samples from the animal or animals, and send them to a qualified laboratory for diagnostic testing. During an outbreak, massive quantities of diagnostic testing may need to be conducted, straining the capacity of federal and state laboratories that are qualified to investigate suspected cases of FMD, and potentially causing delays in detecting infected premises, according to both an after-action report for a preparedness exercise and agency officials. In addition, USDA officials we interviewed expressed concern that diagnostic kits used for these individual animal tests would be in short supply during an outbreak and said that they do not currently know how much time it would take for manufacturers to produce more. In the event of a large FMD outbreak, delays in getting diagnostic results could slow USDAs ability to detect, control, and contain an outbreak. USDA would likely face challenges in the area of information management during an outbreak, including incompatible data systems at the state and federal levels or between diagnostic laboratories and USDA and responders who lack familiarity with USDA data systems. A majority (20 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. USDA and state data systems track information on registered livestock premises and animals. In addition, USDA has an emergency response database for collecting and analyzing data on disease outbreaks and managing response resources. However, state data systems cannot always communicate directly with USDA’s data systems because they use different software, according to two state animal health officials. Such impediments to communication could delay information sharing about the location of infected and susceptible animals. One industry representative said that such delays could prolong decisions about permits for uninfected animals to move, disrupting industries’ continuity of business. According to an academic researcher, interruptions in movement of animals could cause processing facilities to either close, operate at a diminished capacity, or be overwhelmed by a backlog of animals once movement is restarted, leading to animal welfare concerns. These disruptions could present challenges for USDA to facilitate continuity of commerce in uninfected animals, one of its response goals. USDA’s ability to control an outbreak could also be impaired if responders lack familiarity with USDA data systems. For example, according to a USDA after-action report, during the 2014 avian influenza outbreak, some responders were unfamiliar with USDA’s system for entering outbreak response information, resulting in incorrect usage or underutilization of the system. As a result, USDA’s overall response was slower than it would have been if timely information had been available. USDA would likely face challenges related to the traceability of animals (i.e., the ability to trace their locations and movements) after an outbreak was detected. We found that these challenges result from insufficient use of identification numbers for livestock premises (such as farms and ranches) and individual animals to enable tracing of infected, exposed, and susceptible animals, and from identification numbers that cannot be easily read (e.g., because they are not electronic). A majority (25 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. In an outbreak, responders would use premises and animal identification numbers, if available, to trace the location and movements of infected animals to identify other animals that may have been exposed. They would also use the identification numbers to locate all susceptible animals in the region, in order to notify owners about the outbreak and any response measures in place, such as stop- movement orders. These activities would be hampered without the identification numbers. For example, Iowa and Texas regulations do not require producers to register all of their animals with the state. Also, record keeping varies at individual farms and ranches, where some producers have electronic records, but others have no written records or rely on hand-written paper documents, according to USDA documents. Searching through records by hand at individual farms could take days rather than the hours that it would take if the records were electronic, according to a USDA planning document. Without timely and accurate tracing through the use of premises and animal identification numbers, USDA may face challenges controlling and containing an FMD outbreak and facilitating continuity of commerce in uninfected animals. In addition, some animals have identification numbers on ear tags that must be read visually, which could slow USDA’s efforts to control and contain an outbreak. In an outbreak, responders would need to inspect animals with such ear tags to manually read and record the identification numbers for individual animals. In contrast, for animals with electronic tags, responders could use electronic readers, which can accurately read identification numbers for a group of animals from a distance of up to 12 feet, according to a 2016 USDA study on electronic identification for livestock. One industry representative said that the beef cattle industry has not widely implemented electronic identification because it is difficult for many operators to justify the added cost of purchasing and attaching an electronic tag for each animal. In an FMD outbreak, USDA would likely face biosecurity challenges including lack of sufficient biosecurity on some premises, difficulty in implementing biosecurity measures for certain species, and lack of documentation (such as a written plan) specifying what measures are currently in place. A majority (20 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. If sufficient biosecurity measures are not consistently in place on farms, ranches, and feedlots, people and vehicles may inadvertently spread the FMD virus when they travel among premises, impeding USDA’s ability to control and contain an outbreak. For example during the 2001 FMD outbreak in the United Kingdom, poor biosecurity and livestock owners’ movements between scattered farms led to the introduction of FMD in previously uninfected areas, according to a 2002 report by the United Kingdom’s National Audit Office. Some livestock owners have not implemented extensive biosecurity measures on their premises, in part because they have not experienced a recent animal disease outbreak and measures may be difficult or expensive to implement, according to an industry representative. In addition, it may be difficult to implement biosecurity measures for certain species. For example, cattle feedlots operate outdoors and may have unrestricted points of entry and exit, so it can be more difficult and costly to control access and implement other biosecurity measures. In addition, even if producers have biosecurity measures in place, these measures may not be sufficiently documented to facilitate continuity of commerce in uninfected animals. According to USDA guidance documents, during an FMD outbreak, premises in areas with movement restrictions will be required to obtain permits to move any animals or animal products. To obtain such a permit, producers must show that they are not contributing to the spread of disease or putting their animals at risk of exposure, and producers without documented biosecurity plans may face delays moving their animals. According to swine industry representatives, even swine farms with biosecurity procedures do not always document such procedures or the steps they have taken. USDA would likely face depopulation challenges during an FMD outbreak, including limited capability for killing large numbers of animals in a timely manner and difficulties owing to the large size of some animals affected by FMD. A majority (22 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. For example, USDA officials said killing animals in large feedlots—which can hold 50,000 or more animals—would quickly overwhelm resources, such as the staff and equipment required to kill animals. USDA policy calls for depopulating infected premises within 24 hours, but this may not be feasible on large livestock operations because the animals have to be killed individually, which would be time-consuming according to an industry representative. If infected premises are not quickly depopulated, animals will continue producing the virus and increase the risk of infecting animals on additional premises, hampering USDA’s ability to control and contain an outbreak. Rapid depopulation of infected swine is particularly critical to containing the spread of an outbreak because swine are known as amplifiers of FMD virus, producing and excreting 3,000 times more virus than cattle or sheep, according to USDA documents. USDA would likely face disposal challenges during an FMD outbreak, including the feasibility and logistics of disposing of a large number of animal carcasses, public concern about disposal options, and the environmental impacts of disposal. A majority (25 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. In a large FMD outbreak, millions of cattle could be affected. It is possible that FMD can survive for several months on a frozen carcass, according to USDA documents, so if such carcasses are not disposed of properly, they could pose a risk for spreading FMD, hampering USDA’s efforts to control and contain an outbreak. Disposing of the carcasses of a 50,000- head herd of cattle from a large feedlot would be a massive effort: the total weight for disposal could be as much as 30,000 tons, or about 1,500 dump truck loads to move all the animals to disposal sites, according to an industry representative. One state animal health official stated that disposal of one or two herds may be possible, but if an outbreak were more widespread, the state would quickly run out of options. In addition, certain disposal strategies, such as incinerating large piles of carcasses, may cause a negative public reaction, according to an industry representative, USDA’s disposal SOP, and state animal health officials. Figure 5 illustrates carcass disposal during a 2001 FMD outbreak in the United Kingdom, where the government implemented a policy of stamping out all susceptible animals within 3 kilometers of known FMD cases. In reaction to the policy, the public staged protests, and businesses in rural areas lost customers who stayed away because of the striking images in the media, according to a 2002 report by the University of Newcastle. Finally, carcass disposal can create environmental impacts, such as when a burial site contaminates the groundwater or incineration contaminates the air. In general, states regulate disposal, including such things as the timing (e.g., within 24 hours of an animal’s death) and the method of disposal (e.g., prohibiting outdoor incineration or specifying that up to 7 cattle may be buried per acre per year). In an FMD outbreak, large numbers of carcasses could make it difficult to comply with such regulations. USDA would likely face resource challenges in pursuing its FMD response goals, including insufficient numbers of incident responders to effectively implement USDA strategies in a medium or large outbreak, as well as insufficient resources devoted to preparedness planning in some states. A majority (23 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. During the 2014 avian influenza outbreak, there were difficulties quickly providing response resources, such as personnel and equipment, to rapidly stamp out affected flocks, according to a USDA after-action report. According to an academic researcher, an FMD outbreak would be significantly more difficult to handle than recent avian influenza outbreaks. One state official noted that in his state there is not enough of a workforce to adequately respond to an outbreak, and there is no assigned workforce at the local level. For example, this official noted that his state employed only two veterinarians and a few animal health technicians to collect samples for testing in the event of an FMD outbreak. Other state animal health officials expressed concern that states and counties will have difficulty fielding adequate workforces to inspect animal transport vehicles and implement stop-movement orders. Insufficient preparedness planning in some states could also hamper response efforts, according to a response to our questionnaire from an academic researcher with expertise in FMD preparedness. Some states have not allocated resources to develop FMD response plans, including, for example, the conditions that would trigger a stop-movement order. States typically control intrastate movement under the state’s authority, and if states delay issuing stop-movement orders, it may be more difficult for USDA to control and contain an outbreak. Communication and coordination may be an area where USDA could face challenges during an FMD outbreak because of ineffective external or internal communications and unclear roles and responsibilities. Responses to our questionnaire in all categories (federal and state government officials, industry representatives, and academic researchers) were mixed about whether communication and coordination was an area with significant challenges. Specifically, 11 respondents said it was an area with significant challenges, 12 said it was not, and 6 were unsure. One industry respondent who said that the area was not a challenge cited a team of industry representatives that is working with USDA and states to prepare for an FMD outbreak. On the other hand, during a 2016 FMD preparedness exercise in Texas, coordination between USDA and other participants was at times inadequate. For example, during the exercise USDA and the Texas Animal Health Commission shared leadership of the response effort, and some respondents cited frustration with this top-down leadership structure because they were accustomed to emergency management practices and protocols designed for incidents such as natural disaster response efforts, which are generally initiated at the local level. Participants commented that they were confused about who did what and said that coordination needs to be improved between USDA and local governments, according to an after-action report. Also, communication across participating agencies broke down. For example, information from USDA on stop-movement orders, the size of the quarantine zone, and the number of sites quarantined did not reach all stakeholders in a timely manner, according to an after-action report. Compensating livestock owners for animals or equipment that the government determines must be destroyed to limit the spread of FMD would likely pose various challenges for the agency. USDA would provide the owners with up to 100 percent of the expenses of purchase, destruction, and disposition of animals or materials required to be destroyed, based on the agency’s appraisal of the fair market value. Doing so would likely pose various challenges for the agency, according to USDA and state government officials. A majority (19 of 29) of respondents to our questionnaire indicated that USDA would face significant challenges in this area. Such challenges include uncertainties about fair appraisal methods (especially when an outbreak has caused livestock prices to decline), owners resisting killing their animals if compensation rates are too low, and the potentially massive scale of compensation payments. According to USDA economists, if trade restrictions were imposed during an FMD outbreak, the fair market value of animals and their products would likely drop as a result of oversupply. USDA’s response to the outbreak could be slowed if producers brought legal challenges to stop the stamping out of their herds because they were not satisfied with compensation levels, a scenario that took place in a 2018 USDA-led exercise simulating the first few days of an FMD outbreak. Moreover, in a widespread FMD outbreak, the scale of federal compensation payments could be substantial. For example, in the 2001 United Kingdom FMD outbreak, compensation costs were estimated at over $1 billion for the killing of about 6 million animals. Given the larger size of the livestock industry in the United States, federal compensation costs could be much higher, depending on the number of animals killed as part of the response. USDA would likely face challenges related to vaccination, an area of particular importance given vaccination’s central role in USDA’s strategies for pursuing its response goals. All 29 respondents to our questionnaire agreed that the challenges USDA faces related to vaccination are significant. In particular, USDA does not have access to sufficient vaccine to achieve its response goals under many potential outbreak scenarios, and there is not consensus about how to allocate the limited supply, according to USDA officials and documents. Other challenges in this area relate to the timing and logistics of obtaining, distributing, and administering vaccine and to scientific, procedural, and infrastructure issues in vaccine production. Supplies of FMD vaccine concentrate in the vaccine bank may be sufficient to help control and eradicate a small, localized outbreak, but it is unlikely that they would be sufficient to stop a larger outbreak, according to USDA planning documents and officials. With a vaccine that is matched to the appropriate FMD subtype, a single dose can protect cattle for 6 months, and two doses are required to provide the same protection to swine. APHIS’s 2016 FMD vaccination policy states that 25 million doses for each of 10 subtypes of the virus is an appropriate minimum target to have available. However, the United States currently has access to only 1.75 million doses of each subtype available in the vaccine bank, according to USDA documents. In the United States, there are 24 states in which the number of livestock exceeds the doses available in the vaccine bank, according to USDA documents. In a 2016 report to Congress, USDA stated that the cost to reach its target of 25 million doses would be about $125 million, which would be about 10 percent of APHIS’s budgetary resources in fiscal year 2016. In addition, because the vaccine concentrate has a 5-year shelf life, USDA would incur costs to routinely replace the supply of concentrate, according to agency officials. The Agriculture Improvement Act of 2018 contains a provision that directs the Secretary of Agriculture to establish a national animal vaccine and veterinary countermeasures bank, and to prioritize the acquisition and maintenance of sufficient quantities of FMD vaccine and accompanying diagnostic products. The need for additional FMD vaccine was reinforced by a 2016 survey of states by USDA and Iowa State University. On the basis of responses from 32 state animal health officials, the authors estimated that in a widespread or national outbreak, states would plan to use on average 4.2 million doses during the first 14 weeks of the outbreak. Based on these estimates, a vaccine request from a single state could greatly exceed the 1.75 million doses available per subtype in the vaccine bank’s supply. Moreover, if an FMD outbreak occurred in Texas or Iowa, the states with the largest cattle and swine populations, respectively, the available vaccine supply would provide a single dose for about 14 percent of Texas’s 12.3 million cattle or the required two doses for about 4 percent of Iowa’s 22.8 million swine. Texas’s and Iowa’s cattle and swine populations together make up about 24 percent of the combined population of cattle and swine nationwide. Figure 6 illustrates the vaccine doses needed to protect cattle and swine in Texas and Iowa compared with the currently available FMD vaccine bank supply of 1.75 million doses per subtype. In addition, because of the large number of FMD subtypes present around the world, and because the FMD virus is constantly mutating, it is possible that an FMD subtype could be introduced in the United States that is not covered by vaccines currently in the vaccine bank. According to a representative from an FMD vaccine manufacturer, producing a vaccine for a new subtype of FMD could take from 6 to 18 months, depending on whether the subtype was known and other factors. Because of the limited supply of vaccine and the potentially high demand for it, USDA would likely face the challenge of deciding how to allocate it in an FMD outbreak. In a 2016 survey of 13 industry veterinarians, there was no consensus within the beef, dairy, and swine industries about priorities for the vaccine. Specifically, USDA and Iowa State University asked the veterinarians to rank the importance of vaccinating various populations (e.g., bull studs, lactating cows, and boar studs) within the beef, dairy, and swine industries, assuming there was only enough vaccine to vaccinate 25 to 50 percent of animals in a specified area. The responses varied widely, with high and low rankings for nearly every population of animals. The timing and logistics of obtaining, distributing, and administering the FMD vaccine could also pose challenges. The timing to reformulate the banked vaccine would pose challenges for USDA in an outbreak, according to respondents to our questionnaire. In addition, in March 2005, we found that USDA would not be able to deploy vaccines rapidly enough to contain a widespread FMD outbreak. After USDA requests FMD vaccine from the vaccine bank, vaccine manufacturers could take from 4 to 13 days to finish and ship all of the requested vaccine to the United States, during which time the virus could spread within the livestock population, according to USDA documents. If the vaccine bank’s supply of concentrate is exhausted during an outbreak and more is needed, manufacturers may take several months to produce it, according to a vaccine manufacturer. After obtaining the vaccine, USDA would distribute it to affected states, and the states would distribute it to veterinarians, producers, or others who would be responsible for administering vaccine, according to USDA and state FMD vaccination documents. Many states do not currently have vaccination plans in place and may not have identified the warehousing locations, staff needs, and tracking required to efficiently distribute FMD vaccine, according to agency and state government officials, which could slow USDA’s efforts to contain and control an outbreak. States with vaccination plans may be able to more quickly and effectively distribute and administer FMD vaccine during an outbreak. For example, California has a vaccination plan that details how it would receive, distribute, and administer FMD vaccine while maintaining the appropriate temperatures and documentation. The plan includes details such as the supplies needed for administering FMD vaccine to cattle. USDA faces challenges in obtaining vaccine and using it in a response effort because of scientific, procedural, and infrastructure challenges related to the vaccine and its production. There are very few vaccine manufacturers in the world with the capacity to produce most of the FMD vaccine subtypes and meet the quality standards required by the United States, according to agency officials. Further, there is currently no production capacity for FMD vaccine in the United States because dedicated infrastructure is not in place to produce vaccines without live virus. There is a statutory prohibition against working with live FMD virus on the U.S. mainland, absent a permit granted by the Secretary of Agriculture, and live virus is needed to produce conventional vaccines. To work within this constraint, USDA’s Agricultural Research Service (ARS) and DHS developed new technologies to produce vaccine using modified versions of the virus that are unable to cause or transmit disease. The agencies transferred these technologies to vaccine companies that are investing in their development, according to USDA officials. In 2018, the Secretary of Agriculture announced that vaccine companies could apply for permits to work with a specific modified, noninfectious version of the FMD virus on the mainland. One company has exclusive rights to use this modified version, which was developed and patented by ARS. The company plans to produce FMD vaccine in the United States, but it could take several years to license the initial product, complete the necessary permitting procedures, and build manufacturing infrastructure, according to USDA documents and a company official. Using FMD vaccine to respond to an outbreak presents additional challenges that are related to limitations of FMD vaccines. Specifically, animals may take up to 28 days after vaccination to develop protective immunity to FMD, depending on the species, potency of vaccine, and other factors. Even after 28 days, some vaccinated animals may not be fully immune to FMD and may continue spreading the virus despite having no visible signs of infection, according to USDA documents. To mitigate challenges in responding to potential FMD outbreaks, USDA’s APHIS has identified corrective actions through preparedness exercises, surveys, and lessons learned in other outbreaks, as called for in its SOPs. However, APHIS generally does not follow its SOPs for prioritizing or monitoring the completion of these actions. A USDA SOP outlines a process for identifying corrective actions to improve the agency’s preparedness for outbreaks of foreign animal diseases. According to the SOP, APHIS is to identify corrective actions after preparedness exercises and animal disease incidents. Consistent with this SOP, APHIS identifies corrective actions for FMD preparedness through exercises simulating FMD outbreaks, surveys of agency officials and others, and lessons learned from outbreaks of other diseases. More specifically, see the following: APHIS sponsors FMD preparedness exercises and participates in some such exercises that other federal or state agencies sponsor. After an exercise, the sponsoring agency generally prepares an after- action report that specifies corrective actions, and may include a responsible party for and a date for completing each action. APHIS has after-action reports for more than 40 FMD preparedness exercises that it sponsored or participated in from 2007 through 2018, which include corrective actions for USDA and APHIS. APHIS conducts annual surveys of its staff and others—including state government officials, industry representatives, and academics— to identify corrective actions related to preparedness and response training needs. APHIS identifies corrective actions for FMD preparedness based on lessons learned after outbreaks of other diseases. For example, some of the actions that APHIS identified after outbreaks of avian influenza, such as improving a database used for emergency response, could also help the agency mitigate challenges it would face in an FMD outbreak, according to agency officials. APHIS has identified dozens of corrective actions in all 11 of the areas where we identified challenges for USDA in pursuing its FMD response goals. APHIS has taken corrective actions in each area. For example, to help mitigate the challenge of insufficient biosecurity on some premises, the agency partnered with Iowa State University to offer producers across the nation training on developing enhanced biosecurity plans for implementation during a foreign animal disease outbreak. However, APHIS has not yet taken some other corrective actions that it has identified. According to agency officials and experts we interviewed, these corrective actions can help mitigate, but may not completely resolve, the challenges identified. Some challenges may be outside USDA’s control to fully resolve. For example, the logistical challenges of carcass disposal could be overwhelming in a large-scale outbreak, which could generate thousands of tons of carcasses. A corrective action calling for training on carcass management may help educate FMD responders about disposal methods or preventing environmental impacts; however, such training may not fully resolve the challenge. Table 1 shows examples of corrective actions identified by USDA in after- action reports, planning documents, other agency documents, or interviews, which the agency has taken or not yet taken for the 11 challenge areas we identified. Some of the corrective actions that USDA has identified and taken relate to the challenge area of vaccination. For example, to help speed access to vaccine, in 2018, the Secretary of Agriculture announced that vaccine companies could apply for permits to enable them to develop and produce certain types of FMD vaccine in the United States in the future, thereby avoiding delays from producing the vaccine overseas and shipping it here. Also, APHIS officials have used an FMD predictive model to evaluate the effectiveness of different vaccination schemes at the state level, and they told us that they plan to conduct a similar analysis at the national level. The results could help inform USDA’s vaccine prioritization decisions in advance of an outbreak, according to the officials. USDA has also begun implementing other corrective actions that have been identified related to FMD vaccination, although more work remains. For example, in February 2009, we recommended—and USDA agreed— that it should detail in a contingency response plan how a response using vaccines would be implemented. Similarly, after-action reports for 2013 and 2016 preparedness exercises highlighted the need for procedures to guide the implementation of FMD vaccination strategies. APHIS has taken or planned several steps to help address this need: In 2009, APHIS began drafting vaccine implementation procedures but realized that the national procedures needed to be developed in collaboration with states because of variation among states in their predominant industries, agriculture infrastructure, and government resources. When more states have developed vaccination implementation procedures, APHIS may revise and finalize the national procedures originally drafted in 2009, according to agency officials. APHIS’s National Veterinary Stockpile developed plans in 2009 and 2011 outlining how some aspects of a vaccination strategy would be implemented. Specifically, in 2009 it developed a template that states and tribes can use to develop their own plans, and in 2011 it prepared a logistical plan for distributing FMD vaccine to the field. The National Veterinary Stockpile also held preparedness exercises from 2008 to 2018 for states and tribes to practice requesting, receiving, and delivering the vaccine and to obtain information that could help APHIS develop national vaccination procedures. From 2011 to 2018, APHIS and the California Department of Food and Agriculture worked together to draft detailed procedures for implementing an FMD vaccination strategy in California. The draft procedures and related planning documents are intended to serve as templates to help other states develop such procedures, according to agency officials. APHIS also piloted a workshop on FMD vaccination planning in October 2018 and plans to hold related preparedness exercises with states from 2019 to 2021. Although APHIS has identified dozens of corrective actions for FMD preparedness, it has not consistently followed its SOP for prioritizing all of the actions and monitoring progress in implementing them. Specifically, once corrective actions have been identified, APHIS’s SOP calls for prioritizing the actions in an improvement plan, and monitoring the actions to track their completion. APHIS has sometimes designated actions related to FMD vaccination as high priority during annual management meetings, but not all corrective actions have been prioritized, according to agency officials. For example, a 2016 corrective action called for USDA to conduct an exercise to explore roles, responsibilities, and activities related to recovery from a large-scale animal disease outbreak. However, as of December 2018, this action has not been prioritized in an improvement plan, according to the after-action report and an agency official. In addition, corrective actions have sometimes been identified multiple times without being tracked to completion. For example, an after-action report for a 2007 exercise found that a process for making vaccine- allocation decisions was needed and suggested that a vaccine advisory group could assist with doing so. A 2014 after-action report stated that processes governing vaccine prioritization and allocation were not clear and identified a corrective action calling for USDA to develop a federal- level doctrine for vaccine prioritization and allocation. USDA’s 2016 FMD vaccination policy states that APHIS, in coordination with state, local, and industry stakeholders, should consider developing processes, procedures, and strategies for prioritizing the use of currently available vaccine in an outbreak. However, APHIS has not developed processes, procedures, or strategies for prioritizing and allocating its supply of FMD vaccine, according to agency officials. The officials said they have not developed such a process because of limited resources and competing priorities. Also, it would require participation from state and industry stakeholders, and given the small quantity of FMD vaccine relative to the large number of susceptible animals in the country, the stakeholders have had little incentive to devote the necessary time to the issue, according to agency officials. More generally, agency officials told us that the agency has not prioritized or monitored completion of some corrective actions because they have been responding to actual outbreaks of animal and plant diseases. They also noted that they have limited resources for FMD preparedness, which may make it difficult for them to complete all of the corrective actions that have been identified. However, for avian influenza preparedness, APHIS compiled and prioritized more than 300 corrective actions in a database and tracked more than 200 of them to completion. Through this process, it completed nearly all of the 111 high-priority actions and over 100 moderate-priority actions, according to its database as of May 2018. For example after the 2014 avian influenza outbreak, APHIS completed corrective actions that improved its response to a subsequent outbreak in 2016, according to agency documents. The corrective actions addressed such issues as how to quickly depopulate and dispose of infected poultry and efficiently compensate affected producers. APHIS continues to monitor its progress in implementing the remaining corrective actions for that disease, according to agency officials. APHIS’s SOP calls for prioritizing corrective actions to identify the most beneficial use of resources. The SOP also calls for monitoring corrective actions to track their completion so that APHIS can improve its response capabilities and correct problems or deficiencies identified in exercises or incidents. Without following its SOP to prioritize corrective actions for FMD preparedness, APHIS cannot ensure that it is allocating its limited resources toward implementing the most beneficial actions. And without following its SOP for monitoring the corrective actions, APHIS cannot ensure that the highest-priority actions are completed. APHIS has taken important steps to prepare for an FMD outbreak and to mitigate challenges it may face in responding to one. For example, the agency has developed an extensive collection of strategy and guidance documents, held FMD preparedness exercises to practice response activities, and identified dozens of corrective actions and completed some of these actions. However, APHIS has not yet completed other corrective actions, including actions that have been identified multiple times, such as developing a process for prioritizing and allocating the limited supply of FMD vaccine. APHIS has an SOP for prioritizing and monitoring corrective actions. By following this SOP for avian influenza preparedness, the agency succeeded in prioritizing more than 300 corrective actions and tracking over 200 corrective actions to completion, including nearly all high-priority actions. In contrast, for FMD preparedness, APHIS has not consistently prioritized or monitored the corrective actions it has identified. Without following its SOP to prioritize and monitor corrective actions for FMD preparedness, APHIS cannot ensure that it is allocating its limited resources to the most beneficial actions to prepare for a possible FMD outbreak. We are making the following two recommendations to USDA: The Administrator of the Animal and Plant Health Inspection Service should follow the agency’s SOP to prioritize corrective actions for FMD preparedness. (Recommendation 1) The Administrator of the Animal and Plant Health Inspection Service should follow the agency’s SOP to monitor progress and track completion of corrective actions for FMD preparedness. (Recommendation 2) We provided a draft of this report to USDA and DHS for review and comment. USDA provided comments, reproduced in appendix II, in which it agreed with our recommendations. In addition, USDA and DHS provided technical comments, which we incorporated as appropriate. In response to our recommendations, USDA said that, starting in the second quarter of fiscal year 2019, APHIS will implement the agency’s SOP and prioritize corrective actions to be tracked in its corrective actions database, as we recommended. USDA also said that, starting in the third quarter of fiscal year 2019, APHIS will assess and update the items related to FMD in its corrective actions database, as we recommended. In addition, USDA said that APHIS will track accomplishments it makes under a related provision of the Agriculture Improvement Act of 2018. We are sending copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Secretary of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If your or your staff have any questions about this report, please contact me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report (1) describes the U.S. Department of Agriculture’s (USDA) planned approach for responding to a foot-and-mouth disease (FMD) outbreak; (2) identifies what challenges, if any, USDA would face in pursuing its FMD response goals; and (3) examines how USDA identifies, prioritizes, and monitors corrective actions to mitigate these challenges. To describe USDA’s planned approach for responding to an FMD outbreak, we reviewed relevant legislation and USDA strategy and guidance documents. We also interviewed officials from USDA’s Animal and Plant Health Inspection Service (APHIS) at the agency’s headquarters in Riverdale, Maryland; laboratories on Plum Island, New York, and in Ames, Iowa; center for epidemiology and animal health in Fort Collins, Colorado; and center for veterinary biologics in Ames, Iowa; and officials from the Department of Homeland Security (DHS) and the Agricultural Research Service (ARS) at DHS’s Plum Island Animal Disease Center on Plum Island, New York. We selected these officials to interview because of their knowledge about USDA’s planned approach, their involvement in preparing for an FMD outbreak, and the roles they would play in responding to such an outbreak. To identify what challenges, if any, USDA would face in pursuing its FMD response goals, we first came up with a list of potential challenge areas. To develop the list of potential challenge areas, we reviewed USDA documents, reports about FMD outbreaks in other countries, and after- action reports from 41 preparedness exercises in the United States from 2007 to 2018 in which officials practiced responding to simulated FMD outbreaks and identified emerging challenges. The preparedness exercises included small-scale as well as large-scale ones with a variety of participants, durations, and response activities. We also interviewed APHIS headquarters staff and field staff in Iowa (the state with the most livestock); APHIS and ARS laboratory officials; state animal health officials in California, Colorado, Iowa, and North Carolina; representatives from the beef cattle, dairy cattle, swine, and sheep industries; and academic researchers with expertise in this area. We selected the individuals to interview based on their knowledge about challenges that USDA could face in pursuing its FMD response goals, their central role in preparing for an FMD outbreak, and recommendations from other interviewees, as well as diversity in geographic location. We also visited a swine farm and cattle feedlot in Iowa and interviewed the owners. We selected a swine farm and cattle feedlot to visit because swine and cattle were the livestock industries with the greatest populations of animals in the United States in 2016. We identified a list of 11 potential challenge areas. To confirm the significance of the challenge areas, we used a questionnaire with the list of potential challenge areas. To select the questionnaire recipients, we identified four categories of people who are knowledgeable about challenges that USDA could face in pursuing its FMD response goals, including those who could be involved in a response effort. The four categories are (1) federal government officials, (2) state government officials, (3) livestock industry representatives, and (4) academic researchers with expertise in FMD preparedness. For categories with multiple individuals, we selected individuals to represent relevant units within APHIS, ARS, and DHS (e.g. headquarters; field offices; laboratories; surveillance, preparedness and response services; and science, technology, and analysis services); different livestock industries (beef cattle, dairy cattle, swine, and sheep); and states with relatively high livestock populations. We asked the recipients whether USDA would face a significant challenge in each of the 11 areas and whether they knew of other challenge areas we had not listed. We defined significant to mean a challenge that is sufficiently great or important enough to be worthy of USDA action to address the challenge. We initially sent the questionnaire with potential challenges to 39 recipients. Two federal officials had retired from their positions, so we sent the list to their replacements. Of the 39 recipients, we received responses from 28. We also included an additional response that APHIS provided from an official who we had not initially contacted and who had relevant expertise, for a total of 29 responses. Despite two follow-up attempts, we did not receive responses from 11 recipients, including both recipients from ARS, 5 of the 18 from APHIS, 3 of the 10 state animal health officials, and 1 of the 2 national animal health laboratory network officials (these are affiliated with universities). Figure 7 shows the categories of respondents and their responses in each of the11 challenge areas. Since we used a nonprobability sample, the results are not generalizable to all government officials, livestock industry officials, or FMD experts, but the responses helped confirm the list of 11 challenge areas and provided illustrative information about each one. We reviewed challenges related to vaccination for FMD in greater depth than other challenges because of the significant role vaccination could play if reliance solely on stamping out is not feasible. Specifically, we visited DHS’s Plum Island Animal Disease Center on Plum Island, New York, where we interviewed officials from USDA’s Foreign Animal Disease Diagnostic Laboratory and the Agricultural Research Service, as well as DHS officials, about challenges related to FMD vaccination. We also reviewed agency documents on the topic and interviewed other officials from USDA, the North American Vaccine Bank, universities, states, and industry groups about issues related to FMD vaccination. Further, we interviewed officials from the vaccine company that currently produces the majority of FMD vaccine available for use in the United States and a company that has rights to use a modified version of the FMD virus to produce FMD vaccine in the future. To determine how USDA identifies, prioritizes, and monitors corrective actions to mitigate the challenges, we reviewed APHIS and DHS guidance on evaluation and improvement planning and other agency documents, observed an FMD preparedness exercise, reviewed after- action reports from 41 FMD preparedness exercises conducted from 2007 through 2018, and interviewed USDA officials. We reviewed APHIS’s and DHS’s procedures for evaluation and improvement planning to understand how APHIS is to identify, prioritize, and monitor corrective actions. To determine whether APHIS was consistently following these procedures, we observed the preparedness exercise at APHIS’s Riverdale, Maryland, office; reviewed a preliminary after-action report for that exercise; and reviewed after-action reports for the 41 other preparedness exercises. We interviewed APHIS officials about corrective actions identified in the after-action reports and what steps the agency has taken to prioritize the actions and monitor their progress. We reviewed agency documents about these procedures and about actions USDA has taken and identified but not yet taken to mitigate challenges. To find examples of corrective actions that USDA has identified and taken or not yet taken, we reviewed after-action reports for the 41 preparedness exercises; APHIS’s 2018-2020 training and exercise plan for its veterinary services emergency preparedness and response unit; and other agency documents, such as contracts and plans, and interviewed agency officials. The examples of corrective actions in table 1 are illustrative only and do not include or represent all of the actions that USDA has identified. We sent a draft table of examples to APHIS officials and incorporated their comments as appropriate. We also reviewed a GAO report on USDA’s management of highly pathogenic avian influenza (avian influenza) outbreaks; interviewed agency officials; reviewed USDA after-action reports for avian influenza outbreaks; and reviewed USDA’s database of related corrective actions to learn how the agency identifies, prioritizes, and monitors actions to mitigate challenges for that disease. To assess the overall reliability of that database to use information from the database in our report, we reviewed management controls over the information systems that maintain the data and interviewed USDA officials who manage the database. We determined that the database was sufficiently reliable to describe the contents of the database and general status of corrective actions. We conducted this performance audit from May 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Nico Sloss (Assistant Director), Kevin Bray, Emily Christoff, Mary Denigan-Macauley, Christine Feehan, Jesse Lamarre-Vincent, Cynthia Norris, Anne Rhodes-Kline, and Amber Sinclair made key contributions to this report. Ross Campbell, Barb El Osta, Kathryn Godfrey, Hayden Huang, and Dan Royer also made important contributions to this report. Foot-and-Mouth Disease: USDA’s Evaluations of Foreign Animal Health Systems Could Benefit from Better Guidance and Greater Transparency. GAO-17-373. Washington, D.C.: April 28, 2017. Avian Influenza: USDA Has Taken Actions to Reduce Risks but Needs a Plan to Evaluate Its Efforts. GAO-17-360. Washington, D.C.: April 13, 2017. Emerging Animal Diseases: Actions Needed to Better Position USDA to Address Future Risks. GAO-16-132. Washington, D.C.: December 15, 2015. Federal Veterinarians: Efforts Needed to Improve Workforce Planning. GAO-15-495. Washington, D.C.: May 26, 2015. Homeland Security: An Overall Strategy Is Needed to Strengthen Disease Surveillance in Livestock and Poultry. GAO-13-424. Washington, D.C.: May 21, 2013. Veterinarian Workforce: Actions Are Needed to Ensure Sufficient Capacity for Protecting Public and Animal Health. GAO-09-178. Washington, D.C.: February 4, 2009. High-Containment Biosafety Laboratories: DHS Lacks Evidence to Conclude That Foot-and-Mouth Disease Research Can Be Done Safely on the U.S. Mainland. GAO-08-821T. Washington, D.C.: May 22, 2008. National Animal Identification System: USDA Needs to Resolve Several Key Implementation Issues to Achieve Rapid and Effective Disease Traceback. GAO-07-592. Washington, D.C.: July 6, 2007. Avian Influenza: USDA Has Taken Important Steps to Prepare for Outbreaks, but Better Planning Could Improve Response. GAO-07-652. Washington, D.C.: June 11, 2007. Homeland Security: Much Is Being Done to Protect Agriculture from a Terrorist Attack, but Important Challenges Remain. GAO-05-214. Washington, D.C.: March 8, 2005.", "summary": "FMD is a highly contagious viral disease that causes painful lesions on the hooves and mouths of some livestock, making it difficult for them to stand or eat, thus greatly reducing meat and milk production. The United States has not had an FMD outbreak since 1929, but FMD is present in much of the world. An FMD outbreak in the United States could have serious economic impacts, in part because trade partners would likely halt all imports of U.S. livestock and livestock products until the disease was eradicated. These imports were valued at more than $19 billion in 2017. GAO was asked to review USDA's efforts to prepare for an FMD outbreak. This report examines (1) USDA's planned approach for responding to an FMD outbreak; (2) challenges USDA would face in pursuing its response goals; and (3) how USDA identifies, prioritizes, and monitors corrective actions to mitigate the challenges. GAO observed a USDA FMD preparedness exercise; reviewed agency documents and nongeneralizable questionnaire responses from 29 respondents from federal and state government, livestock industries, and universities; and interviewed officials from federal and state governments and representatives of livestock industries and universities. The U.S. Department of Agriculture's (USDA) planned approach for responding to an outbreak of foot-and-mouth disease (FMD) includes several strategies. These strategies generally rely on killing infected and susceptible animals, vaccinating uninfected animals, or a combination of both approaches. USDA would implement one or more of the strategies, depending on factors such as the outbreak's size and the resources available, according to agency documents. USDA would likely face significant challenges in pursuing its response goals of detecting, controlling, and containing FMD quickly; eradicating FMD while seeking to stabilize industry and the economy; and facilitating continuity of commerce in uninfected animals. GAO identified challenges in 11 areas—including allocating a limited supply of FMD vaccine—based on its review of USDA documents, responses to GAO's questionnaire, and interviews with agency officials and others with expertise on FMD. According to USDA, the agency may not have a sufficient supply of FMD vaccine to control more than a small outbreak because of limited resources to obtain vaccine. As shown below, the current vaccine supply would be sufficient to protect about 14 percent of Texas's cattle or about 4 percent of Iowa's swine; these states' cattle and swine populations are the nation's largest. The Agriculture Improvement Act of 2018 includes a provision to increase the FMD vaccine supply. USDA has identified dozens of corrective actions to mitigate the challenges of responding to an FMD outbreak, as called for in USDA procedures, but has not prioritized these corrective actions or monitored their completion, as also called for in its procedures. USDA has identified the corrective actions through exercises simulating FMD outbreaks, surveys, and lessons learned from other foreign animal disease outbreaks. However, USDA has not completed all of the corrective actions, including actions related to vaccination. Agency officials stated that they have not completed such corrective actions because they have been responding to outbreaks of other animal diseases and have limited resources. Without following agency procedures to prioritize and monitor corrective actions, USDA cannot ensure that it is allocating its resources to the most beneficial actions to prepare for a possible FMD outbreak. GAO is recommending that USDA follow its procedures to prioritize and monitor the completion of corrective actions that the agency has identified for FMD preparedness. USDA agreed with these recommendations, and described actions it will take to implement them.", "document_type": "gao"}
{"report": "VA administers its services and programs through three distinct administrations—Veterans Health Administration (VHA), Veterans Benefits Administration, and the National Cemetery Administration. VHA is the largest property holder within VA and is responsible for overseeing health care delivery to enrolled veterans and managing all VA medical facilities. VHA’s VISNs are responsible for overseeing medical facilities, and VA works with the VISNs and local medical facilities to manage its real property assets through VA’s capital-planning process. Various VA offices share responsibilities for managing and disposing of real properties. Specifically: VISNs and local facilities are responsible for identifying, planning, and managing underutilized and vacant properties, including executing demolitions of buildings. Office of Capital Asset Management, Engineering, and Support, within VHA, is responsible for supporting the property disposal efforts of VISNs and local facilities, including providing funding for demolitions (if properties are part of a minor construction project or non-recurring maintenance project). Office of Construction and Facilities Management, within VA’s Office of Acquisition, Logistics and Construction, is responsible for: (1) developing and updating policies and procedures on disposal actions (except enhanced-use leases) and executing them; (2) coordinating the Steward B. McKinney Homeless Assistance Act’s (McKinney- Vento Act) screening process for potential homeless use prior to disposal; (3) overseeing implementation of required federal environmental reviews for planning and construction of major projects and real property actions; and (4) promulgating policy related to historic preservation, among other things. Office of Asset Enterprise Management (Asset Enterprise Office), within the VA’s Office of Management, is responsible for: (1) ensuring local facility disposal requests align with VA policy; (2) reviewing real- property inventory data, including annual disposal plans; (3) monitoring completion of disposal projects; (4) executing enhanced- use lease-related disposals; and (5) overseeing the Strategic Capital Investment Planning process, among other responsibilities. According to VA’s guidance on managing underutilized properties and disposals, the process for managing vacant properties usually begins with VISNs and local medical facilities. Together, they are responsible for identifying underutilized real properties and updating this information in the CAI database, which VA uses to manage its real property. VA has also identified and prioritized disposal options VISNs and local facilities have for determining what to do with vacant and underutilized properties they have identified. As shown in figure 2, VA’s first priority is to re-use vacant and underutilized properties within the department. If properties cannot be re-used, then VA looks at disposal options that would remove them from its inventory. If no disposal options are feasible, then VA may choose to close or “mothball” properties. Properties in the CAI database with utilization rates that are less than 50 percent—including vacant properties—are candidates for disposal, and VISNs’ and local facilities’ managers are required to develop a disposal plan for all vacant buildings or update an existing plan for these facilities each year. VA may choose from several options to dispose of vacant and underutilized properties, including: entering into an enhanced-use lease, demolition, like-kind exchange, transfer of real properties to the state for nursing home use, declaring excess property for disposals through GSA, or mothball, among others. (See fig. 3.) The disposal process differs depending on the disposal method selected. As part of the disposal process, VA is required to take certain actions, including conducting environmental reviews and considering the effects of its actions on historic properties. Accordingly, VA conducts “due diligence” reviews on vacant properties, and these reviews include complying with selected federal requirements described in table 1 below. From fiscal years 2012 through 2017, VA disposed of 577 properties (including 471 buildings with about 5-million gross square feet), primarily through demolition of medical facilities and enhanced-use lease agreements (see fig. 4). These two methods accounted for the disposal of 3.6-million gross square feet of building space. VA used other disposal methods, such as transferring property to states for nursing home care or negotiating a sale, for the remaining 50 properties, as shown in figure 4 below. As of July 2018, VA reported initiating the disposal or re-use of 167 of the 430 vacant buildings the Secretary identified for disposal in June 2017. Of the 471 building disposals from fiscal years 2012 through 2017, VA disposed of 203 buildings in fiscal year 2012 alone in contrast to 61 building disposals in fiscal year 2017, as shown in figure 5. A VA official attributed the decline in disposals from fiscal year 2012 to fiscal year 2013 to limitations placed on VA’s enhanced-use lease authority in 2012. The characteristics of the 471 buildings VA disposed of varied from fiscal years 2012 through 2017. The majority (331 out of 471) was offices, housing quarters, service buildings, and warehouses; other buildings included hospitals, laboratories, and outpatient healthcare facilities. VA reported many of these buildings as historic, as shown in figure 6. More than a third of the vacant buildings designated as non-historic were demolished. Almost a third of the buildings—primarily housing quarters— were disposed of using enhanced-use leases. VA officials and stakeholders we spoke with said that administering both environmental and historic reviews are key challenges for disposals. Two other ongoing challenges—the marketability of VA properties and prioritizing funding for disposals—were also mentioned as factors impeding VA’s property disposal efforts. As part of VA’s initiative to begin the re-use or disposal process for 430 vacant properties within 2 years, VA has begun addressing its environmental and historic review challenges. For example, VA established a working group to assist VISNs’ and local facilities’ managers in conducting these reviews. While VA is addressing challenges related to these reviews, limited interest in purchasing or leasing VA properties and competition for funding with other important VA projects directly related to veterans’ care are ongoing challenges that continue to hinder disposal efforts. VA officials and stakeholders we spoke with cited the time it takes to complete the required environmental and historic reviews as a challenge in managing the disposal process. Although VA does not maintain data on how long these reviews can take or how long it takes to dispose of its properties, in our review of 31 selected properties, we found variation in the timespan to conduct environmental and historic reviews. The environmental reviews of these properties took about 2 years on average to complete, depending on the condition of the property. For example, an environmental review of temporary storage facilities in Biloxi took about a year, as no environmental issues were identified. In another case, it took about 2 years to conduct an environmental review of VA’s Cincinnati-Fort Thomas property, as asbestos and lead paint were identified during the course of the review. For those disposals requiring historic reviews, we found that it took about 5 years on average, depending on the complexity of the disposal. For example, it took 5 years to complete a historic review of the St. Louis, Jefferson Barracks property due to the need to collaborate with multiple stakeholders, including the neighboring Army National Guard base, the state’s historic preservation office, local community council, community organizations, and many veteran service organizations; and addressing the adverse effects on historic properties, according to VA officials. VA officials and stakeholders we spoke with stated that due to lack of staff expertise and resources, VISNs’ and local facilities’ managers may choose to contract out these reviews, but procuring contractors may also add time to the disposal process, as facility managers need to define the terms of work and identify contractors. Further, environmental and historic reviews can affect VA’s decision- making process with regard to choosing a disposal method, potentially lengthening the time it takes for disposal. For example, VA officials told us that they began a historic review on the Pittsburgh-Highland Drive property in 2012 but discontinued the review in 2013, partially due to disagreements with historic preservation stakeholders about the proposed demolition of some historic buildings. After 4 years, in 2017, VA decided to declare the property as excess and turn it over to GSA for disposal. According to VA officials, this required a different historic review, as it entailed a different disposal method. GSA is currently administering the additional historic review of this property. VA has begun taking actions to reduce the time it takes to conduct environmental and historic reviews as part of VA’s initiative to begin the process of re-using or disposing of 430 vacant buildings within 2 years. For example, VA worked with the Advisory Council on Historic Preservation to obtain a program comment alternative to reduce time spent with historic preservation stakeholders when consulting on “ancillary utilitarian support buildings and structures,” such as a boiler plant or a sewage plant. VA officials also told us that they established a headquarters-level working group consisting of experts in historic preservation and environmental reviews as well as real property transactions to assist VISNs’ and local facilities’ managers in administering disposals, including conducting these reviews, and in moving them forward. VA officials also told us that they awarded four regional contracts with contractors to complete the environmental and historic reviews and expedite the disposal process. VA officials and historic preservation stakeholders we spoke with also said they can have disagreements on how to meet the historic review requirements, and such disputes can add time to the review process. The historic preservation stakeholders commented that VA does not consult with them early in the disposal’s decision-making process and does not provide adequate information on the adverse effects of demolishing a historic property as well as other potential methods through which VA could dispose of a property. VA officials we spoke with stated that they have been consulting with historic preservation stakeholders on all disposal projects as required. To improve collaboration and communication between VA and external stakeholders, VA developed a toolkit in June 2017 on how to effectively communicate with stakeholders. This communications toolkit responded to our recommendation for VA to develop and distribute guidance for VISNs’ and local facilities’ managers to use when communicating with stakeholders on facility alignment changes, and we subsequently closed this recommendation. VA officials and stakeholders we spoke with also pointed out that competing priorities for VA funds is another remaining challenge. VA officials stated that projects to demolish buildings compete for funding with other capital projects, such as renovating inpatient units. Since VA’s mission is to provide health care services, demolishing buildings is not as high a priority compared to other projects that may lead to providing better health care services. VA officials also told us that competing priorities can affect how long it takes to dispose of vacant properties. If a demolition project is part of a construction project, then VA may give it a relatively high priority for funding. For example, at VA’s Dayton campus it took about a year from when VA requested funding in 2016 to demolish two historic buildings in 2017. A VA official said that due to a $1 million donation to build a Fisher House on VA’s Dayton campus, funds were prioritized to demolish two national historic landmark buildings to make space available for construction of the Fisher House. However, according to other VA officials, demolition projects in and of themselves do not rank well for funding; such rankings can affect the time it takes for disposal. For example, a VA official said that VA had initially planned to demolish a temporary building on the Cleveland Wade Park campus sometime during the 2012-to-2013 time frame; however, VA did not demolish the temporary building until 2017, in part due to the longer than expected time it took for VA to allocate funds to this project. If funds are not available for demolition, a building can remain vacant for many years. For example, VA closed several properties on its Sepulveda Ambulatory Care Center campus in North Hills, CA, after they sustained major damage from the 1994 Northridge earthquake. According to VA officials, competing funding priorities, among other factors, contributed to the long wait to demolish these vacant properties, which had not been disposed of as of October 2018 (see fig. 7). VA officials also noted that waiting for VA to allocate funds to demolish properties can result in additional potential cost later on. For instance, VA officials mentioned that since buildings on the Sepulveda campus have been vacant for many years, they now qualified for historic status, requiring them to undergo a historic review—a requirement that could have been avoided if VA had demolished them more than 20 years ago when they were originally identified for disposal. VA officials and stakeholders we spoke with identified property characteristics that affect the marketability of VA properties—historic status, deficient physical conditions, location, unusable building configuration, and repair costs—as barriers for disposal. This is a long- standing challenge that limits VA’s ability to re-use or dispose of vacant and underutilized properties. In our recent analysis of VA’s CAI data, we found that a majority of VA’s vacant properties (about 78 percent) from fiscal years 2012 through 2017 have an historic status, and the average age of those vacant properties is about 91 years old. As discussed earlier, historic reviews can be lengthy and can make the disposal process challenging, according to VA officials. Also, older buildings are likely to have configurations that are difficult to use or are in need of significant repair. VA officials and stakeholders said that the location of VA properties limits disposal options. For example, a VA official told us that demolition is sometimes the only disposal option available when a deficient building is located on an existing VA campus and cannot be re-used or disposed of and removed from VA’s inventory. VA officials also stated that historic buildings are frequently located in the middle of a campus and sometimes cannot be easily demolished due to the historic designation (see fig. 8). In these cases, VA will close and “mothball” the building to minimize maintenance and operations costs and let the buildings sit vacant as an interim measure. VA officials commented that there are also safety and security challenges associated with disposing of or re-using a building located in the middle of a VA campus. For example, a local facility manager told us that when two of its buildings on campus were leased out to an organization on a short-term lease for use as dormitories, young adults from the dormitories gained access to private inpatient areas, violating patients’ privacy. This is consistent with our previous findings that many disposable VA properties located in the middle of medical campuses draw limited private sector interest making some disposal options challenging. VA officials and stakeholders we spoke with—including commercial real estate experts—also indicated that it can be difficult to attract developers for several reasons. In one instance, a VA official and a stakeholder we spoke with told us that it took multiple years to identify developers that would take on environmental mitigation efforts as part of the negotiated sale and transfer of VA’s properties to the City of Fort Thomas, Kentucky. According to a stakeholder, developers were not willing to take on the cost and risk of environmental mitigation without a title to the property and no guaranteed income from the property. VA, however, could not transfer the property title to a third party without first meeting federal standards for cleaning up the environmental hazards on the properties. While the issue was ultimately addressed, it took several years to complete the deal. Another challenge that VA officials and stakeholders raised was VA’s lack of clear disposal procedures. Several VA officials and stakeholders we spoke with stated that it is unclear what specific steps need to be taken for disposals, what are the targeted time frames for completing those steps, and who is responsible for completing them. VA’s guidance on managing underutilized properties and disposals provides policies and procedures on a portfolio level, such as VA’s priorities for disposing of vacant properties and the different disposal options available. However, VA’s guidance does not specify sequential steps and actions that need to be taken at the project level to plan, implement, and execute property disposals for VISNs’ and local facilities’ managers. Further, a VA official in headquarters told us that VA does not have formal guidance on selecting any particular disposal methods. While we found that documentation on policies and procedures exists for some specific disposal methods, such as enhanced-use lease projects, VA officials told us that policies and procedures for other disposal actions, such as transferring or declaring property as excess and disposing of it through GSA, are not documented. A VA official in headquarters told us that informal guidance may exist in some VISNs, but no standardized procedures on managing a disposal project is available. VA officials said there are no step-by-step procedures to refer to when using a disposal options more complex than demolishing a building. A VISN facilities’ manager we spoke with further pointed out that a decision-tree to help plan, implement, and execute for the different disposal methods does not exists to help local facilities navigate through VA’s decentralized and complex disposal process. VA officials told us that its disposal process is decentralized, an approach that can contribute to unclear procedures for disposal projects. According to VA officials, VISNs’ and local facilities’ managers are responsible for making disposal decisions, developing a disposal plan, and executing the disposal. As previously discussed, different VA program offices are responsible for different disposal actions, depending on the disposal method that VISNs’ and local facilities’ managers are considering. VA officials noted that this decentralized approach to managing disposals can make it difficult for VISNs’ and local facilities’ managers as well as local stakeholders to know when or how best to coordinate with the appropriate VA offices. A real property stakeholder we spoke with also noted that common uncertainties in working with VA, such as its lack of a clear and timely disposal process, can hinder developers’ interests in VA properties. Specifically, the stakeholder stated that VA’s decision-making process is divided among different entities within VA, a situation that may add time to the disposal process, and stated that having a clear and timely disposal process may provide a level of certainty for developers. VA officials and stakeholders also said that in some cases, VISNs’ and local facilities’ managers may lack the knowledge and experience to manage disposals. For example, VA officials told us that while facility managers generally know what actions are needed to demolish properties, they are not familiar with actions that need to be taken for transferring or selling properties to a third party or turning excess property over to GSA for disposal. VA officials also mentioned staff turnover and the infrequency of disposals as contributing factors to staff’s lack of knowledge on procedures for disposing of properties. For example, two facilities’ managers we spoke with said that in their many years of working for VA they have never reported a property as excess and disposed of it through GSA, until recently. VA officials and stakeholders further noted that VISNs’ and local facilities’ managers may lack expertise conducting historic and environmental reviews as they are usually engineers, who are not experts on environmental and historic issues. For example, a VISN facility manager informed us that a local facility manager was not familiar with administering an environmental review, a lack that led to a misstep in the review and duplication of work and added time to the disposal process. While VA has policies and guidance on historic and environmental reviews, our review of these documents showed that they do not provide guidance on how to make decisions, what actions to take, what are the targeted time frames for taking those actions, and who should be completing those actions. Further, while VA officials with experience in disposals may estimate how long these reviews can take, VA does not have documented guidance on estimated time frames (milestones) for taking those actions. Federal internal controls call for documentation to help management oversee execution of procedures by establishing and communicating the “who, what, when, where, and why” to personnel. Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel and a means to communicate that knowledge as needed to external parties, such as external auditors or interested third parties. Federal internal controls also call for management to define objectives in specific terms—in this case, disposal actions—so they are understood at all levels of the entity. This understanding involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the estimated time frames for achievement. Without procedural documentation that describes the disposal options and the actions needed to carry out the disposal, including estimated time frames, it is difficult for VISNs’ and local facilities’ managers to plan, implement, and execute the different disposal options available and efficiently dispose of vacant properties. A procedural document at the project level may include information on who is authorized to make decisions and include estimated time frames around historic and environmental reviews to ensure timely and appropriate disposal of VA properties. For example, VA officials with experience in disposals estimated that it should take about 6-to-8 months for a property disposal, if there are no environmental and historic issues involved and funding is available. For disposals where environmental and historic reviews are needed, those officials told us it should take about 2- to-4 years from when VA decided to dispose of a property to complete the disposal. According to facilities managers we spoke to, additional procedural documentation at the project level could help VISNs’ and local facilities’ managers navigate through the complex disposal process and avoid missteps or delays in the disposal of vacant properties. To enhance the monitoring of its real property and to meet reporting requirements, VA officials told us VA has taken steps in the last 6 years to improve its real property inventory and the data it collects on its vacant properties, including properties VA has identified for disposal. These steps include: Requiring VISNs’ and local facilities’ managers to verify and certify the accuracy of the information in the CAI. VA’s Asset Enterprise Office sends out an annual call for facility managers to verify and certify the validity of vacant property data for each of the facilities. Requiring VISNs’ and local facilities’ managers to make ongoing updates to the CAI database. VA’s annual data-call memo requires these managers to continuously update the data as they take actions. Facility managers we spoke to stated they update this information regularly, including when actively planning disposal projects and individual projects are complete. One facility manager told us that VA’s Asset Enterprise Office is “actively pushing” local managers to update this information, and the data in the CAI have improved as a result. Generating “discrepancy reports” to identify problems with inaccurate or outdated property data in the CAI. VA officials in headquarters told us that facility managers review these reports and explain any identified discrepancies regarding vacant properties, including those identified for disposal. VA officials told us they then correct any errors. Discrepancy reports include checks on whether facility managers have specified a disposal method for each disposal, estimated an associated disposal’s cost, and entered a planned future year for the disposal. Refining the database by, for example, adding new “business rules” to limit user errors. VA officials told us that since 2012 it has implemented program changes and new business rules to the CAI database to address inaccuracies in the data, including data that support disposal information. For example, a VA official in headquarters told us that to decrease the number of errors caused by users entering data more than once, the database now limits the number of times users may enter the same information. This prevents multiple data entries appearing for, for example, the year a building was built, according to VA officials. VA officials in headquarters also told us they developed similar business rules to identify “clearly wrong” data entries and duplicative data. For instance, users cannot enter letters in numeric fields which, they told us, has led to fewer errors. Although VA has enhanced its data collection efforts for vacant properties, we found that VA does not collect all the information necessary for its headquarters officials to track and monitor the disposal of VA’s vacant properties. As part of its annual call for validating data, VA requires facility managers to record certain information about disposals in the CAI, including: which buildings are identified for disposal, whether a disposal plan is in place, when the disposal is to occur, what type of disposal method is to be used, and what are the costs associated with the disposal. However, VA does not have the ability in its CAI to collect detailed data on the status of disposal projects—specifically, data fields for facility managers to input detailed information on the status of: (1) disposal actions, (2) due diligence reviews, and (3) approvals, such as environmental permits that are necessary to complete the disposal. Since CAI does not have this information, VA’s Asset Enterprise Office, as part of the Secretary’s initiative to begin the re-use or disposal process of 430 buildings, developed a standalone spreadsheet to track and monitor the disposal status of these buildings. Then, according to officials in VA’s Asset Enterprise Office, they had to ask local facility managers what was the status of each individual disposal. Federal internal-control standards state that management should use quality information to achieve an entity’s objectives and establish and operate monitoring activities to monitor the internal control system and evaluate the results. This includes management obtaining data on a timely basis and using it for effective monitoring, which includes controls to achieve complete and accurate data. While the Secretary’s initiative has raised the priority of tracking and monitoring VA’s real property disposals, the CAI does not contain key information to improve VA’s routine tracking as called for in internal controls. A key official in VA’s Asset Enterprise Office told us that officials there usually leave it to local facilities to track key information and that the CAI currently does not collect this information. Without incorporating information needed to better track and monitor disposals through VA’s primary real property tracking database—CAI—VA may not be able to efficiently track and monitor its real property disposals going forward after the Secretary’s initiative is completed. VA officials in headquarters told us that without data on the actions and status of disposals, including steps taken to complete environmental and historic reviews, they are unable to track and monitor the progress of disposal projects—including the length of time these reviews take—and to identify any areas where management may assist local facilities in disposing of properties. For instance, as previously mentioned, VA officials in headquarters told us they used the information gathered as part of the 430 re-use or disposal initiative to identify and award contracts to perform environmental and historic reviews and, as a result, more quickly expedited the disposal process. In addition, VA officials in headquarters do not collect documentation, such as environmental and historical review documents, that could allow headquarters staff to verify the status of disposal projects. As mentioned, federal internal controls state that management should use quality information to achieve an entity’s objective, including obtaining data on a timely basis and using these data for effective monitoring, which includes controls to achieve complete and accurate data. Further, VA requires VISNs’ and local facilities’ managers to record a planned or completed disposal in the CAI, including updating information as changes occur. However, a key official in VA’s Asset Enterprise Office told us the CAI database does not currently have enough space for facility managers to upload supporting documentation, including environmental and historic review documents. As part of the Secretary’s initiative to begin the re-use or disposal process for 430 buildings, VA’s Asset Enterprise Office set up a website to collect and exchange documents, such as environmental and historic review documents from local facility managers. This process allowed VA’s Asset Enterprise staff to verify the disposal information of the properties in the spreadsheet using this collected information. While VA created a website to exchange documentation as part of the 430 re- use or disposal initiative, this website is separate from CAI and was created because VA had not previously collected supporting documents in CAI. However, a VA official told us that when they compared information they collected from the website, they found the information in CAI is not always correct and appropriately updated. As we have previously found, documentation provides a means to retain organizational knowledge while mitigating the risk of having that knowledge limited to a few personnel. Documentation can also ensure that knowledge gets communicated to external parties, such as external auditors. As previously mentioned, some VA staff lack expertise and organizational knowledge to properly document a variety of disposal options. VA also experiences frequent staff turnover. These issues, together with the inability of facilities’ managers to upload disposal-related documents directly into CAI, puts VA at risk of losing valuable information about the disposal process. For example, according to a stakeholder we spoke with, VA could not readily provide information about consulting stakeholders on historic properties, as required by historic review requirements. A VA official told us that after contacting facility managers for information about specific disposal projects as part of the 430 initiative, they found disposal procedures were not consistently documented and, in some cases, documents were missing. VA officials in headquarters provided us with a draft proposal to enhance the CAI in several ways, including: to add specific data fields for dates, including completion dates for reviews and to increase the capacity of the CAI to allow facility managers to upload disposal documentation, including environmental and historic review documentation. However, the proposed changes do not include some key information, such as the start dates for compliance reviews, so VA cannot monitor and track when the reviews began and how disposals are progressing. Additionally, a VA official we spoke with could not provide a specific time frame for increasing the capacity of CAI, as VA is currently working on developing space requirements that are needed to increase capacity and help estimate a time frame. Given that the number of VA’s vacant buildings has been generally increasing in the last 6 years and the implementation of the VA Asset and Infrastructure Review Act of 2018 could lead to more unneeded buildings, effectively managing VA’s real property disposal is crucial. Otherwise, VA may maintain a large inventory of vacant buildings that may be costly to secure and maintain. While effectively disposing of excess and underutilized property has been a long-standing challenge for VA, the agency has taken some positive actions, such as examining ways to streamline the historic review process, having some documented procedures, and improving data collection efforts on vacant properties. However, without documented procedures for all the disposal options to assist VISNs’ and local facilities’ managers in planning, implementing, and executing disposals and navigating the complex property-disposal process, VISNs and local facilities—which are responsible for managing their real property—may continue to struggle to facilitate property disposals efficiently. Also, without important information on the status of disposal projects and supporting documents, it is unclear how VA can monitor and track disposals, including identifying any areas where management can assist in the disposal of its vacant properties. We are making the following three recommendations to the VA: 1. The Secretary should develop clear procedures for each of VA’s disposal options to help facilities’ managers plan, implement, and execute projects to dispose of vacant and unneeded properties. (Recommendation 1) 2. As VA implements its plans to enhance the CAI to collect key data on disposal projects, the Secretary should collect data on disposal status information and time frames (e.g., environmental and historical reviews’ starting dates) to ensure VA has the information it needs to track the length of the disposal process and identify any areas where management may assist local facilities in implementing property disposals. (Recommendation 2) 3. As VA pursues its plans to enhance the CAI, the Secretary should increase the capacity of the CAI to allow local facilities to upload disposal-specific documentation, such as environmental- and historical-review documents, to ensure all documentation related to a property’s disposal is available to appropriate parties, including VA officials. (Recommendation 3) We provided a draft of this report to VA for review and comment. In written comments, reproduced in appendix II, VA concurred with our recommendations and stated that it has begun or is planning to take actions to address them. VA also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Veteran’s Administration, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact Andrew Von Ah at (202) 512-2834 or vonaha@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. This report examines the U.S. Department of Veterans Affairs’ (VA) efforts to dispose of properties, including the management of its real property disposals. Specifically, we address: (1) the challenges VA faces disposing of its vacant property and how it is addressing those challenges and (2) the extent to which VA is tracking and monitoring the disposal of its properties. To address these objectives, we reviewed relevant laws, regulations, policies, handbooks, and other documents related to VA’s real property management, including VA’s Handbook and Directive on Managing Underutilized Real Property Assets, including Options for Reuse and Disposal and VA’s Capital Asset Inventory User Guide as well as VA’s annual budget submissions to Congress to fully understand VA’s disposal process. To examine the full scope and extent of VA’s vacant and disposed of properties, we obtained and analyzed data from VA’s Capital Asset Inventory for fiscal years 2012 through 2017 and assessed their reliability. To assess the reliability of VA’s data we: (1) looked for any missing data, outliers, or other obvious data errors; (2) reviewed existing documentation about the data and the system that produced them; (3) reviewed VA’s processes for checking and validating the data; and (4) interviewed officials knowledgeable about the data. We found the data to be reliable for our purposes of identifying the number and type of vacant and disposed of buildings and the characteristics of those buildings. To identify challenges that VA faces when disposing of property and how VA is addressing them, we selected a non-generalizable sample of 31 properties using data from VA’s Capital Asset Inventory as mentioned above. The 31 properties we selected were either completed in fiscal year 2017 or planning was under way for disposal, including through the General Services Administration (GSA). Specifically, we selected properties that: captured a range of disposal methods available to VA using VA’s current process for disposal, included both recently planned and completed disposals to observe disposals in different phases of planning and were likely documented by current VA staff, and represented a variety of building and disposal characteristics, including associated disposal costs, historic status, age, and size. The challenges faced by these selected properties cannot be used to make inferences about all VA properties. However, they illustrate the range of challenges that VA faces in disposing of properties. In addition, to help identify disposal challenges VA faces, including those challenges that were identified as a lengthy time frame for disposal, we obtained and reviewed documents related to the 31 selected properties, including environmental review reports and historic review documents. We used environmental and historic review documents to help estimate the timespan for disposals, including time frames to conduct these reviews. We also conducted semi-structured interviews with VA officials and external stakeholders, who were involved or knowledgeable about the disposal of these selected properties and are familiar with VA’s disposal process. These included interviews with facility managers from VA’s Veterans Integrated Service Networks (VISN) and local facilities who were knowledgeable about the disposal of the 31 selected properties. This group represented 7 of VA’s 18 VISNs and 10 local medical facilities, including two local medical facilities—Perry Point (MD) and Sepulveda (CA)—with planned disposal projects—we visited. We also interviewed external stakeholders who included officials from the GSA; veterans service organizations (e.g., Veterans of Foreign Wars and the American Legion); a local community that purchased VA properties, a major commercial real estate company; and historic preservation groups (e.g. Advisory Council on Historic Preservation and the National Conference of State Historic Preservation Officers) as well as selected State Historic Preservation Officers to obtain their perspectives on VA’s disposal challenges. To identify common challenges, along with illustrative examples and lengthy time frames, we reviewed and analyzed documents from the 31 properties we selected as well as interviews with VA officials and external stakeholders. This analysis included one analyst reading through all of the documents and interviews, creating a list of challenges mentioned, and then a subsequent analyst verifying this list. To identify steps VA has taken to address challenges, we reviewed documents and interviewed officials from VA’s Office of Asset Enterprise Management and its Office of Construction & Facilities Management as well as Veterans Health Administration’s Office of Capital Asset Management and Engineering Support. We then assessed VA’s efforts to address these challenges against applicable federal internal control standards. To determine the extent to which VA is tracking and monitoring the disposal of its vacant properties, we reviewed the current data fields in VA’s Capital Asset Inventory, as well as VA’s planning and guidance documents, including the Fiscal Year 2017 Capital Asset Inventory and Disposal Plans Updates (Annual Call Memo). In addition, we interviewed VA officials in headquarters, including VA’s Office of Asset Enterprise Management and the Office of Construction and Facilities Management to determine the extent to which VA is tracking and monitoring the disposal of its vacant properties. We obtained and reviewed a copy of VA’s data discrepancy report for fiscal year 2016 that VA uses to verify data and track and monitor vacant properties and disposals. We also reviewed VA’s planning documents, including a tracking spreadsheet that VA is using to monitor the disposal of vacant properties. In addition, we interviewed VA officials, including facility managers from VISNs and local facilities, to obtain their perspective on VA’s efforts to track and monitor disposals, specifically. Subsequently, we assessed VA’s plan to track and monitor these properties against applicable federal internal controls. We conducted our work from November 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Kyle Browning; Cathy Colwell (Assistant Director); Gina Hoover; Jennifer Kim (Analyst in Charge); Brian Lepore; Jeff Mayhew; Nitin Rao; Malika Rice; Minette Richardson; Todd Schartung; Michelle Weathers; and Crystal Wesco made key contributions to this report.", "summary": "VA is one of the largest federal property-holding agencies, and its inventory of vacant buildings has generally increased over the last 6 years. Disposing of its excess properties has been a long-standing challenge. GAO was asked to review how VA manages its real property disposals. This report addresses: (1) the challenges VA faces in disposing of its vacant properties and how it is addressing those challenges and (2) the extent to which VA is tracking and monitoring the disposal of its vacant properties. GAO reviewed VA's policies and planning documents regarding property disposals. GAO also selected 31 properties that were either disposed of or planned for disposal in fiscal year 2017, among other selection criteria. GAO interviewed VA officials and stakeholders involved in the disposal of the 31 selected properties and familiar with VA's disposal process, including steps VA is taking to address challenges. Conducting required environmental and historic reviews in a timely manner is among the challenges the Department of Veterans Affairs (VA) faces in its real property disposal process. These reviews include assessing the potential effects of property disposals on the environment and historic preservation. VA is taking steps to address these ongoing challenges. For example, VA has established a working group consisting of experts in historic preservation, environmental reviews, and real property to assist facilities' managers in expediting disposals. However, other ongoing challenges remain, including the marketability of VA properties and VA's lack of clear procedures for property disposals. While VA has guidance on disposals at the broad portfolio level, GAO determined that this guidance does not contain step-by-step procedures at the project level to assist facilities' managers to plan, implement, and execute disposals for the different disposal options. (See figure.) For example, a number of managers told GAO that they were not familiar with actions to take when transferring properties to a third party or turning over excess property to the General Services Administration for disposal. VA officials commented that facilities' managers do not frequently dispose of properties, so a procedural document outlining the steps and who is responsible for taking those steps may help staff navigate more complex disposal processes and avoid missteps and delays. VA has enhanced its data collection on vacant properties, but the agency does not collect information needed to track and monitor disposal projects at the headquarters level. For example, VA requires facilities' managers to verify and certify the validity of vacant property data in the database used to manage real property—the Capital Asset Inventory. On disposal projects, however, VA lacks certain information, such as the status of environmental or historical reviews, to monitor progress. According to VA, the Capital Asset Inventory currently does not have enough capacity to collect key information and supporting documentation. VA officials said they plan to increase the capacity, but VA has not yet included some key information in the Capital Asset Inventory that could enable VA to monitor the progress of disposals. Without information on the status of disposal projects, VA cannot readily track and monitor its progress and identify areas where facilities' managers may need additional assistance. GAO is making three recommendations. These include developing disposal procedures for facilities' managers to help plan, implement, and execute disposal projects and collecting key information on the status of disposal projects, as VA implements its plans to increase the capacity of VA's Capital Asset Inventory. VA concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "To help manage its multi-billion dollar acquisition investments, DHS has established policies and processes for acquisition management, requirements development, test and evaluation, and resource allocation. The department uses these policies and processes to deliver systems that are intended to close critical capability gaps, helping enable DHS to execute its missions and achieve its goals. DHS policies and processes for managing its major acquisition programs are primarily set forth in its Acquisition Management Directive 102-01 and Acquisition Management Instruction 102-01-001. DHS issued the initial version of this directive in November 2008 in an effort to establish an acquisition management system that effectively provides required capability to operators in support of the department’s missions. DHS’s Under Secretary for Management is currently designated as the department’s Chief Acquisition Officer and, as such, is responsible for managing the implementation of the department’s acquisition policies. DHS’s Under Secretary for Management serves as the acquisition decision authority for the department’s largest acquisition programs, those with LCCEs of $1 billion or greater. Component Acquisition Executives—the most senior acquisition management officials within each of DHS’s components—may be delegated acquisition decision authority for programs with cost estimates between $300 million and less than $1 billion. Table 1 identifies how DHS has categorized the 28 major acquisition programs we review in this report, and table 7 in appendix III specifically identifies the programs within each level. DHS acquisition management policy establishes that a major acquisition program’s decision authority shall review the program at a series of predetermined acquisition decision events to assess whether the major program is ready to proceed through the acquisition life-cycle phases. Depending on the program, these events can occur within months of each other, or be spread over several years. Figure 1 depicts the acquisition life cycle established in DHS acquisition management policy. An important aspect of an acquisition decision event is the decision authority’s review and approval of key acquisition documents. See table 2 for a description of the type of key acquisition documents requiring department-level approval before a program moves to the next acquisition phase. DHS acquisition management policy establishes that the APB is the agreement between program, component, and department-level officials establishing how systems will perform, when they will be delivered, and what they will cost. Specifically, the APB establishes a program’s schedule, costs, and key performance parameters. DHS defines key performance parameters as a program’s most important and non- negotiable requirements that a system must meet to fulfill its fundamental purpose. For example, a key performance parameter for an aircraft may be airspeed and a key performance parameter for a surveillance system may be detection range. The APB schedule, costs, and key performance parameters are defined in terms of an objective and minimum threshold value. According to DHS policy, if a program fails to meet any schedule, cost, or performance threshold approved in the APB, it is considered to be in breach. Programs in breach are required to notify their acquisition decision authority and develop a remediation plan that outlines a time frame for the program to return to its APB parameters, re-baseline—that is, establish new schedule, cost, or performance goals—or have a DHS-led program review that results in recommendations for a revised baseline. In addition to the acquisition decision authority, other bodies and senior officials support DHS’s acquisition management function: The Acquisition Review Board reviews major acquisition programs for proper management, oversight, accountability, and alignment with the department’s strategic functions at acquisition decision events and other meetings as needed. The board is chaired by the acquisition decision authority or a designee and consists of individuals who manage DHS’s mission objectives, resources, and contracts. The Office of Program Accountability and Risk Management (PARM) is responsible for DHS’s overall acquisition governance process, supports the Acquisition Review Board, and reports directly to the Under Secretary for Management. PARM develops and updates program management policies and practices, reviews major programs, provides guidance for workforce planning activities, provides support to program managers, and collects program performance data. Components, such as U.S. Customs and Border Protection, the Transportation Security Administration, and the U.S. Coast Guard sponsor specific acquisition programs. The head of each component is responsible for oversight of major acquisition programs once the programs complete delivery of all planned capabilities to end users. Component Acquisition Executives within the components are responsible for overseeing the execution of their respective portfolios. Program management offices, also within the components, are responsible for planning and executing DHS’s individual programs. They are expected to do so within the cost, schedule, and performance parameters established in their APBs. If they cannot do so, programs are considered to be in breach and must take specific steps, as noted above. Figure 2 depicts the relationship between acquisition managers at the department, component, and program level. DHS established a Joint Requirements Council (JRC) to develop and lead a component-driven joint requirements process for the department. The JRC has issued policies outlining a process for analyzing and validating capability gaps, needs, and requirements. The JRC consists of a chair and 14 members who are senior executives or officers that represent key DHS headquarters offices and seven of the department’s operational components. The JRC chair rotates annually among the seven operational components. JRC members represent the views of their components or office leadership, endorse and prioritize validated capability needs and operational requirements (user-defined performance parameters outlining what a system must do), and make recommendations that are supported by analytical rigor. Figure 3 depicts the current headquarters and component members of the JRC. The JRC provides input to two senior-level entities: The Acquisition Review Board—as a member, the JRC chair advises the board on capability gaps, needs, and requirements at key milestones in the acquisition life cycle. The Deputy’s Management Action Group, which the Secretary established in April 2014, is a decision-making body that is chaired by the Deputy Secretary. Its membership consists of the DHS Chief of Staff, DHS Under Secretaries, senior operational component deputies and select support component deputies, and the Chief Financial Officer. The group provides recommendations to the Deputy Secretary for consideration in the annual resource allocation process that reflects DHS’s investment priorities. The group reviews JRC- validated capability needs and recommendations, provides direction and guidance to the JRC, and endorses or directs related follow-on JRC activities. The JRC is responsible for validating proposed capability needs and requirements for all major acquisitions, as well as for programs that are joint or of interest to the Deputy’s Management Action Group, regardless of level. See table 3 for a description of the key requirements documents requiring JRC validation. In general, the DHS requirements development process moves from broad mission needs and capability gaps to operational requirements. See figure 4. In May 2009, DHS established policies that describe processes for testing the capabilities delivered by the department’s major acquisition programs. The primary purpose of test and evaluation is to provide timely, accurate information to managers, decision makers, and other stakeholders to reduce programmatic, financial, schedule, and performance risks. We provide an overview of each of the 28 programs’ test activities in the individual program assessments presented in appendix I. DHS testing policy assigns specific responsibilities to particular individuals and entities throughout the department: Program managers have overall responsibility for planning and executing their programs’ testing strategies, including scheduling and funding test activities and delivering systems for testing. They are also responsible for controlling developmental testing, which is used to assist in the development and maturation of products, manufacturing, or support processes. Developmental testing includes engineering- type tests used to verify that design risks are minimized, substantiate achievement of contract technical performance, and certify readiness for operational testing. Operational test agents are responsible for planning, conducting, and reporting on operational test and evaluation, which is intended to identify whether a system can meet its key performance parameters and provide an evaluation of the operational effectiveness, suitability, and cybersecurity of a system in a realistic environment. Operational effectiveness refers to the overall ability of a system to provide a desired capability when used by representative personnel. Operational suitability refers to the degree to which a system can be placed into field use and sustained satisfactorily. The operational test agents may be organic to the component, another government agency, or a contractor, but must be independent of the developer in order to present credible, objective, and unbiased conclusions. The Director, Office of Test and Evaluation is responsible for approving major acquisition programs’ operational test agent and test and evaluation master plans, among other things. A program’s test and evaluation master plan must describe the developmental and operational testing needed to determine technical performance and operational effectiveness, suitability, and cybersecurity. As appropriate, the Director is also responsible for observing operational tests, reviewing operational test agents’ reports, and assessing the reports. Prior to a program’s acquisition decision event 3, the Director provides the program’s acquisition decision authority a letter of assessment that includes an appraisal of the program’s operational test, a concurrence or non-concurrence with the operational test agent’s evaluation, and any further independent analysis. As an acquisition program proceeds through its life cycle, the testing emphasis moves gradually from developmental testing to operational testing. See figure 5. DHS has established a planning, programming, budgeting, and execution process to allocate resources to acquisition programs and other entities throughout the department. DHS uses this process to produce the department’s annual budget request and multi-year funding plans presented in the FYHSP, a database that contains, among other things, 5-year funding plans for DHS’s major acquisition programs. According to DHS guidance, the 5-year plans should allow the department to achieve its goals more efficiently than an incremental approach based on 1-year plans. DHS guidance also states that the FYHSP articulates how the department will achieve its strategic goals within fiscal constraints. At the outset of the annual resource allocation process, the department’s Offices of Policy and Chief Financial Officer provide planning and fiscal guidance, respectively, to the department’s components. In accordance with this guidance, the components should submit 5-year funding plans to the Chief Financial Officer. These plans are subsequently reviewed by DHS’s senior leaders, including the DHS Secretary and Deputy Secretary. DHS’s senior leaders are expected to modify the plans in accordance with their priorities and assessments, and they document their decisions in formal resource allocation decision memorandums. DHS submits the revised funding plans to the Office of Management and Budget, which uses them to inform the President’s annual budget request—a document sent to Congress requesting new budget authority for federal programs, among other things. In some cases, the funding appropriated to certain accounts in a given fiscal year can be carried over to subsequent fiscal years. Figure 6 depicts DHS’s annual resource allocation process. Federal law requires DHS to submit an annual FYHSP report to Congress at or about the same time as the President’s budget request. This report presents the 5-year funding plans in the FYHSP database at that time. Two offices within DHS’s Office of the Chief Financial Officer support the annual resource allocation process: The Office of Program Analysis and Evaluation (PA&E) is responsible for establishing policies for the annual resource allocation process and overseeing the development of the FYHSP. In this role, PA&E develops the Chief Financial Officer’s planning and fiscal guidance, reviews the components’ 5-year funding plans, advises DHS’s senior leaders on resource allocation issues, maintains the FYHSP database, and submits the annual FYHSP report to Congress. The Cost Analysis Division is responsible for reviewing, analyzing, and evaluating acquisition programs’ LCCEs to ensure the cost of DHS programs are presented accurately and completely, in support of resource requests. This division also supports affordability assessments of the department’s budget, in coordination with PA&E, and develops independent cost estimates for major acquisition programs upon request by DHS’s Under Secretary for Management or Chief Financial Officer. Of the 24 programs we assessed with approved schedule and cost goals, 10 were on track to meet those goals during 2017. The other 14 programs were not on track because they changed or breached their schedule goals, cost goals, or both. We found that most programs updated their cost estimates in response to requirements DHS established in January 2016 that are intended to provide decision makers with more timely information. These actions are in accordance with GAO’s best practice to regularly update cost estimates and we plan to use these updated estimates to measure programs’ cost changes going forward. Based on our April 2014 recommendation, DHS revised the format of its fiscal year 2018–2022 FYHSP report to Congress to include acquisition affordability tables for select major acquisition programs. However, the report shows—and our analysis of programs’ current cost estimates confirms— that some programs face acquisition funding gaps in fiscal year 2018. We also reviewed 4 programs that were early in the acquisition process and planned to establish department-approved schedule and cost goals in calendar year 2017. However, these programs were delayed in getting department approval for their initial APBs for various reasons and, therefore, we excluded them from our assessment of whether programs were on track to meet their schedule and cost goals during 2017. DHS leadership subsequently approved initial APBs for 2 particularly complex and costly programs—a border wall system along the southwest U.S. border and the Coast Guard’s Heavy Polar Icebreaker—in January 2018. We plan to assess these programs in next year’s review, but provide more details on all 4 additional programs we reviewed in the individual assessments in appendix I. Table 4 summarizes our findings and we present more detailed information after the table. From January 2017 to January 2018, 10 of the 24 programs we assessed with department-approved APBs were on track to meet their schedule and cost goals. This is fewer than our last annual review in which we found that 17 of the 26 programs we assessed were on track during 2016. Three of the 10 programs on track during 2017 were on track against initial schedule and cost goals; that is, the schedule and cost estimates in the baseline DHS leadership initially approved after the department’s acquisition management policy went into effect in November 2008. The other 7 programs had re-baselined prior to January 2017 and were on track against revised schedules and cost estimates that reflected past schedule slips, cost growth, or both. However, some of the programs on track in 2017 identified risks that may lead to schedule slips or cost growth in the future. For example, officials from the Technology Infrastructure Modernization program told us that staffing challenges may impede their ability to execute the program in accordance with its current APB. We also identified 2 programs that are in the process of re-baselining or plan to re-baseline in the near future to account for significant program changes or to add capabilities. For example, the Next Generation Networks Priority Services program plans to update its APB to establish schedule, cost, and performance goals for the next increment, which is intended to address landline capabilities for providing government officials emergency telecommunication services. During 2017, 14 of the 24 programs we assessed with department- approved APBs were not on track. Twelve of these programs had at least one major acquisition milestone that slipped, including 6 of these programs that also changed or breached their cost goals. Two additional programs changed or breached only their cost goals. As of January 2018, 6 of the 12 programs that experienced a schedule slip were in breach and had not yet revised their goals. Therefore, the magnitude of the schedule slips is unknown. For the remaining 6 programs, the change in schedule during 2017 ranged from a delay of 6 months to 66 months. Figure 7 identifies the programs that experienced schedule slips and the extent to which their major milestones slipped in 2017, as well as—for additional context—in prior years. While there are various reasons for schedule delays, the result is that end users may not get needed capabilities when they originally anticipated. Examples of the reasons why these key milestones slipped in 2017 include the following: New requirements: For example, the Passenger Screening Program re-baselined in May 2017 for the fifth time since its initial APB was approved in January 2012. This latest re-baseline was to remediate a 17-month breach caused by delays in incorporating new cybersecurity requirements in one of the program’s transportation security equipment technologies, known as the Credential Authentication Technology. The program now plans to achieve full operational capability for this system by December 2023—more than 9 years later than it initially planned. In another example, the Tactical Communications Modernization program re-baselined in November 2017—4 months after the program notified DHS leadership that it would not achieve full operational capability as planned. The reason for this re-baseline was to resolve issues related to federal information security requirements. The program now plans to achieve this milestone by March 2019, which is more than a year later than its initial APB threshold. Technical challenges: For example, the Continuous Diagnostics and Mitigation program re-baselined in June 2017 to account for significant coverage gaps identified during the deployment of phase 1 sensors and to establish cost, schedule, and performance goals for phase 3 tools. The program’s full operational capability date slipped almost 4 years after this milestone was redefined as the point in time at which phase 1–3 tools are available to all participating civilian agencies. Additionally, the Automated Commercial Environment program declared a schedule breach in April 2017—its second in less than a year—after encountering difficulties developing its remaining functionality. These difficulties have caused further delays to the program’s final acquisition milestone decision. External factors: Officials from the Logistics Supply Chain Management System program notified DHS leadership in September 2017 that the program would not complete all required activities to achieve acquisition decision event 3 and subsequent events, including full operational capability. The primary reason for the delay was because program staff were deployed to support response and recovery efforts during the 2017 hurricane season. Additionally, the Medium Lift Helicopter program experienced delays in getting key acquisition documents approved in time to achieve its acquisition decision event 3. These delays were attributed, in part, to DHS leadership directing Customs and Border Protection to develop a comprehensive border plan that included the helicopter’s capabilities. We elaborate on the reasons for all 12 programs’ schedule slips in the individual assessments in appendix I. Of the 14 programs not on track during 2017, 8 revised or breached their established cost goals. Four of these 8 programs revised their cost goals when they re-baselined to address new requirements and technical challenges, among other things. When the Passenger Screening Program re-baselined in May 2017, the program’s APB threshold for its life-cycle costs increased $418 million (8 percent) over its previous APB. However, the revised threshold is $1 billion below the threshold established in the program’s initial APB, which was approved in January 2012. From 2012 to 2015, the program’s scope was reduced in response to funding constraints. However, emerging threats drove the program to increase capability requirements, which has subsequently increased costs. When the Continuous Diagnostics and Mitigation program re- baselined in June 2017, the APB threshold for life-cycle costs decreased by $15 million (1 percent). However, the program shifted some acquisition costs to operations and maintenance (O&M) to be consistent with DHS’s new common appropriations structure. This, in addition to other changes, increased the APB threshold for O&M by $631 million (3,712 percent). When the National Security Cutter program re-baselined in November 2017 to account for a ninth ship—as directed by Congress—the APB cost thresholds for acquisition and O&M increased by $453 million (8 percent) and $123 million (1 percent), respectively. When the Immigration and Customs Enforcement’s TECS Modernization program re-baselined in November 2017 in preparation for acquisition decision event 3, the APB cost thresholds increased overall. Specifically, the acquisition cost threshold decreased by $14 million (6 percent) when the program included actual costs through fiscal year 2016, among other things, and the O&M cost threshold increased by $147 million (92 percent) when the program extended the estimate by 4 years and included support costs for an additional 11 years. The other 4 programs breached their established cost goals during 2017. The Medium Lift Helicopter and Electronic Baggage Screening programs breached certain APB cost thresholds when they shifted costs between categories, such as O&M to acquisitions or vice versa, to be consistent with DHS’s new common appropriations structure. The Tactical Communications Modernization program experienced a cost breach primarily because of increases in costs for contractor labor and support for facilities and infrastructure. The program’s APB cost threshold for O&M increased by $110 million (23 percent) when it re-baselined in November 2017. The Automated Commercial Environment program experienced a cost breach because it had to extend its contracts to address the development difficulties discussed above. The magnitude of the program’s cost goal changes is not yet known because the program does not plan to revise its APB until August 2018. We elaborate on the reasons for all 8 programs’ cost goal changes or breaches in the individual program assessments in appendix I. In January 2016, based on several of our past recommendations, DHS required major acquisition programs to begin submitting to headquarters (1) detailed data on program affordability, such as updates to the program’s LCCE and funding source information, to help inform the department’s annual resource allocation process, and (2) an annual LCCE update. These requirements are intended to provide more timely information that may improve DHS’s efforts to address acquisition program affordability issues, as well as internal and external oversight of programs’ progress against its cost goals. These actions are in accordance with GAO’s cost estimating best practices, which state that cost estimates should be updated with actual costs so that they are always relevant and current. As a result, we have used these sources to provide the programs’ current estimate in the individual assessments in appendix I, as appropriate, and plan to use these data sources to measure programs’ cost changes going forward. According to officials from the Cost Analysis Division, a program’s annual LCCE update should inform the affordability submission to support the annual resource allocation process and can be completed at any point during the fiscal year leading up to this process. We examined documentation to ascertain whether the programs we reviewed complied with the two requirements. For the 24 programs we assessed with department-approved APBs, we found the following: All 24 programs submitted the detailed data on program affordability to headquarters by June 2017 to inform the fiscal year 2019 resource allocation cycle. Most programs’ submissions accounted for changes since the program’s last LCCE was approved by DHS’s Chief Financial Officer, except three. For example, the Long Range Surveillance Aircraft program’s submission reflected no updates from its November 2011 LCCE because the program was in the process of re-baselining to account for significant changes. The program began re-baselining nearly 3 years ago and has been delayed for various reasons, including challenges with the vendor hired to complete a revision of the program’s LCCE. Eighteen of the 24 programs submitted annual LCCE updates. Three programs—Automated Commercial Environment, H-65, and Transformation—did not submit an annual LCCE update because they were in breach. The other 3 programs—all within the Coast Guard—did not submit an annual LCCE because, according to Coast Guard officials, they have limited internal cost estimating capability and rely on outside sources for this service, which led to delays in completing the annual LCCEs for these programs. Coast Guard officials said they are reviewing options to resolve these delays and improve the Coast Guard’s cost estimating capability. Cost Analysis Division officials anticipate the Coast Guard will increase compliance with the annual LCCE requirement in fiscal year 2018. They also plan to update the annual LCCE template to include additional information, such as comparisons of the updated estimates to the program’s APB cost goals and projected funding. In addition, DHS revised the format of its FYHSP report to Congress, improving insight into major programs’ acquisition funding, but decreasing insight into O&M funding. In April 2014, we found that DHS could better communicate its funding needs for acquisition programs to Congress and recommended that DHS enhance the content for future FYHSP reports by presenting programs’ annual cost estimates and any anticipated funding gaps, among other things. DHS concurred with the recommendation and, for the first time, included acquisition affordability tables that presented programs’ annual acquisition cost estimates compared to projected acquisition funding for select major acquisition programs in its FYHSP report for fiscal years 2018–2022. However, DHS no longer reported O&M funding for individual programs. DHS reported in the FYHSP that it focused on acquisition information because O&M funding estimates are generally stable year-to-year and components manage O&M in various ways, such as by individual program or across a portfolio of programs. By removing O&M funding information in the FYHSP for all programs, DHS presents an incomplete picture of programs’ full funding needs and affordability. In April 2018, we assessed the extent to which DHS had accounted for O&M costs and funding in greater detail and recommended that DHS reverse the exclusion of O&M funding at the acquisition program level in its FYHSP report to Congress for all components. DHS officials stated that they plan to re-introduce O&M funding for major acquisition programs in the FYHSP report for fiscal years 2019–2023 based on multiple internal discussions about the best way to present a more comprehensive view of programs’ total costs and feedback from key stakeholders, such as the Office of Management and Budget. Based on the information presented in the FYHSP report for fiscal years 2018–2022, DHS’s acquisition portfolio is not affordable over the next 5 years. For example, the report contained acquisition affordability tables for 18 of the 24 programs we assessed that have approved APBs. Of these 18 programs, 9 were projected to have an acquisition affordability gap in fiscal year 2018. However, some of these projections are outdated since the FYHSP report—which was issued in September 2017—relied on cost information as of April 2016. Therefore, we updated these tables using the programs’ current acquisition cost estimate presented in the individual assessments in appendix I. Based on our assessment of programs’ current cost estimates, we also found that a total of 9 programs are projected to have an acquisition affordability gap in fiscal year 2018. However, 3 of these 9 programs were different programs than those identified based on the FYHSP report. Of the 9 programs we identified with a projected acquisition affordability gap in fiscal year 2018, we found the following: Five programs identified other funding, such as funding from previous fiscal years that remained available for obligation—known as carryover funding—which would address their projected acquisition funding gap. For example, in the FYHSP report, DHS projected allocating approximately $16 million in funding for the Technology Infrastructure Modernization program in fiscal year 2018 to cover an estimated $16 million in acquisition costs. However, in its November 2017 annual LCCE update, this program’s acquisition cost increased to almost $30 million, resulting in a projected acquisition affordability gap of almost 45 percent. The program plans to realign $57 million in O&M carryover funding to cover this and any future acquisition shortfalls. Four programs did not identify other funding that would address their projected acquisition funding gap, which increases the likelihood that they will cost more and take longer to deliver capabilities to end users than expected. For example, in the FYHSP report, DHS projected allocating $109 million in funding for the Non-Intrusive Inspection Systems program in fiscal year 2018 to cover an estimated $103 million in acquisition costs. However, in its April 2017 annual LCCE update, this program’s acquisition costs increased to nearly $186 million, resulting in a projected acquisition affordability gap of 41 percent. The program identified only $2.5 million in fiscal year 2017 acquisition carryover funding. Further, 5 of the 24 programs we assessed were not included in the fiscal years 2018–2022 FYHSP report because they were no longer expected to receive acquisition funding. Officials from 3 of these 5 programs projected funding gaps that could cause future program execution challenges, such as schedule slips or cost growth. For example, the National Bio and Agro-Defense Facility anticipates a projected funding shortfall of approximately $90 million over the next 5 years, which officials said could delay a number of activities to make the facility operational. We elaborate on programs’ affordability over the next 5 years in the individual program assessments in appendix I. We assessed DHS’s policies outlining the department’s processes for acquisition management, resource allocation, and requirements and found that, when considered collectively, they generally reflect key portfolio management practices. In March 2007, we examined the practices that private sector entities use to achieve a balanced mix of new projects and found that successful commercial companies use a disciplined and integrated approach to prioritize needs and allocate resources when making investments. This approach, known as portfolio management, requires companies to view each of their investments as contributing to a collective whole, rather than as independent and unrelated. With this perspective, companies can effectively (1) identify and prioritize opportunities, and (2) allocate available resources to support the highest priority—or most promising—opportunities. Based on this and other work, we identified four key practice areas for portfolio management in September 2012. We previously assessed DHS’s acquisition management and resource allocation policies against our key portfolio management practices in September 2012 and April 2014, respectively. We found that the policies in place at the time of our reviews did not fully reflect all of the key portfolio management practices and recommended that DHS revise its policies to do so. DHS concurred with our recommendations and subsequently took actions to mature and solidify the department’s portfolio management processes and policies. In April 2014, the Secretary of Homeland Security issued a memorandum titled Strengthening Departmental Unity of Effort, which aimed to strengthen DHS’s structures and processes to improve departmental cohesiveness and operational effectiveness, among other things. The memorandum identified several initial focus areas intended to build organizational capacity, one of which centered on improving and integrating the department’s processes for acquisition oversight, resource allocation, and joint requirements analysis. To improve these processes, the memorandum directed senior DHS leaders to update the existing acquisition management and resource allocation processes, as well as lead an expedited review to provide alternatives for developing and facilitating a component-driven joint requirements process, which ultimately led to the re-establishment of the JRC. In response to our recommendations and the Unity of Effort memorandum, DHS issued new policies outlining the acquisition management, resource allocation, and requirements processes in 2016. We assessed these policies and found that, when considered collectively, they generally reflect the key portfolio management practices, as shown in table 5. Because DHS’s new policies were issued in 2016, we did not specifically assess DHS’s implementation of them. However, we did review documentation resulting from the acquisition management, resource allocation, and requirements processes since January 2016 to get a sense of how the department began implementation. Examples of how DHS’s policies reflect the key portfolio management practices and their implementation status are outlined below. Clearly define and empower leadership: the policies identify the roles and responsibilities for decision makers in the acquisition management, resource allocation, and requirements processes, as well as establish cross-functional teams to support those decision makers. For example, to fulfill the role of acquisition decision authority, the Under Secretary for Management is supported by the Acquisition Review Board, which consists of key DHS senior leaders responsible for managing the department’s finances, contracts, and testing, among other things. We reviewed the memorandums issued since January 2016 that document Acquisition Review Board decisions and found that, through this group, DHS has taken steps to manage across programs through its acquisition management process. For example, after reviewing the status of several individual Customs and Border Protection programs in 2016, the Acquisition Review Board identified the need for a comprehensive border plan that depicts the component’s current land, maritime, and air domain awareness capabilities. In October 2016, the Deputy Under Secretary for Management—who was serving as acquisition decision authority at the time—directed Customs and Border Protection to develop such a plan. The plan is to consist of separate analyses for each of the three domains—starting with land— that reflect end users’ capability requirements for systems, such as Integrated Fixed Towers, Multi-Role Enforcement Aircraft, and Medium Lift Helicopter, that address relevant domain threats. As of February 2018, Customs and Border Protection had not yet completed the analysis for land domain awareness capabilities. Establish standard assessment criteria and demonstrate comprehensive knowledge of the portfolio: the policies establish standard criteria for assessing major acquisition programs through the acquisition management, resource allocation, and requirements processes. For example, the updated resource allocation handbook established that PA&E conduct annual assessments of all major investments using standard criteria in five main categories— contribution to DHS’s mission, program health, risk, resources, and governance—to assess the portfolio of investments and present alternatives for leadership decision. PA&E officials told us they used these criteria when assessing components’ resource allocation requests during development of the President’s fiscal year 2018 budget to develop funding options for the Deputy’s Management Action Group, which is responsible for making resource allocation recommendations for the Secretary’s approval. PA&E presented its funding options by DHS mission, which, according to officials associated with the Deputy’s Management Action Group, allowed the group to make cross-component allocation decisions that directly aligned with the department’s strategic goals. We could not verify these officials’ assertions based on the documentation we were provided, but will continue to monitor PA&E’s assessment of major acquisition programs against the standard criteria as the department’s implementation of its resource allocation policies matures. In addition, PARM formally established its Acquisition Program Health Assessments in October 2016 after more than a year of development and pilot efforts. These assessments are intended to monitor major acquisition programs quarterly (both on an individual program level and in aggregate) by rating programs against standard criteria in several categories—such as program management, financial management, and human capital—that DHS deemed important for successful program execution. We reviewed the quarterly reports issued from January 2016 to April 2017 and found that they primarily focused on individual programs. The portfolio-level information contained in these reports was limited to program results grouped in various categories, such as by component, by acquisition life-cycle phase, and by investment type (e.g., information technology). PARM officials said they plan to use the health assessments as a portfolio management tool in the future and are working to determine how to best to analyze and present portfolio-level data. We will continue to track PARM’s implementation of the health assessment process moving forward through GAO’s High Risk work to determine DHS’s progress in demonstrating that major acquisition programs are on track to achieve their established goals. Prioritize investments by integrating the requirements, acquisition, and budget processes: the policies identify areas where DHS’s requirements, acquisition management, and resource allocation processes are integrated and establish processes for prioritizing investments. For example, the updated resource allocation policies require reviews of DHS’s major acquisition portfolio during this annual process. When the portfolio faces a funding gap, programs are to be returned to their respective components for scope or funding adjustments, or prioritized by department leadership to identify an affordable set of programs. For the fiscal year 2018 resource allocation cycle, PA&E officials provided an example where DHS leadership directed components to identify funding from alternative sources to fund specific purposes related to DHS’s mission to prevent terrorism and enhance security. However, as previously discussed, the resulting FYHSP report for fiscal years 2018–2022 showed that DHS’s portfolio of major acquisition programs is not affordable over the next 5 years. In addition, the requirements policies established the Joint Assessment of Requirements, an annual process to prioritize emerging and existing requirements to inform the department’s resource allocation decisions. As we found in October 2016, the JRC plans to implement the Joint Assessment of Requirements through a 3-year phased approach that is expected to be fully implemented in time to inform DHS’s fiscal year 2021 budget request. In fiscal year 2016, the JRC completed the first phase, which included (1) developing initial criteria to evaluate emerging requirements, and (2) evaluating and prioritizing a sample of those requirements against the initial criteria. Based on these results, JRC officials told us in September 2017 that they are working to develop assessment metrics for the criteria as part of the next phase. We will continue to track the JRC’s progress through GAO’s High Risk work to determine DHS’s progress to effectively operate the JRC. Continually make go/no go decisions to rebalance the portfolio: the requirements policies outlining the Joint Assessment of Requirements process also reflected the key practices to conduct reviews (1) annually to make requirement scoping adjustments as priorities change and (2) when new investments are identified. However, as previously discussed, the JRC is still in the process of implementing this process. We consider this overall key practice area to be partially met because DHS’s policies do not reflect the key practice (3) to reassess programs that breach established thresholds within the context of the portfolio to determine if the program remains relevant and affordable. PARM officials told us that—in practice—DHS reassesses programs in the context of their component’s overall acquisition portfolio based on a certification of funds memorandum submitted to DHS’s Chief Financial Officer when programs re-baseline as a result of a cost, schedule, or performance breach. The memorandum is intended to enable the Acquisition Review Board to discuss affordability by certifying a program’s funding levels and identifying trade-offs necessary to address any projected funding gaps. We previously found that the certification of funds memorandum was an effective tool for DHS leadership to assess program affordability. However, DHS’s acquisition management policy requires components to submit this memorandum prior to most acquisition decision events, but not when a program re-baselines as a result of a cost, schedule, or performance breach. During our review of programs’ progress against schedule and cost goals in 2017, we found one instance where a component did not follow the practice to submit this memorandum when one of its programs re-baselined as a result of a breach. Specifically, Customs and Border Protection did not submit a certification of funds memorandum when the Tactical Communications Modernization program re-baselined in November 2017 as a result of a schedule and cost breach. Nevertheless, DHS leadership approved the program’s revised APB and removed it from breach status, even though DHS’s Chief Financial Officer identified that the program’s revised LCCE was not affordable. PARM officials stated that this instance was an oversight because, at the time, the department was still determining when certification of funds memorandums should be submitted. According to the federal standards for internal control, documentation of internal control practices is necessary so that they can be implemented effectively. By amending its acquisition management policy to require a certification when a program re-baselines as a result of a cost, schedule, or performance breach, DHS can ensure that leadership receives the necessary information to reassess that program’s affordability in the context of a larger portfolio. PARM officials stated that, moving forward, components will be required to submit a certification of funds memorandum for each program when a new APB is submitted for DHS leadership approval. In contrast, the acquisition management policy does reflect the key practice (4) to use information gathered from post-implementation reviews to fine tune investment processes and the portfolio to achieve strategic outcomes. For example, DHS’s acquisition management policy requires programs to conduct post-implementation reviews 6 to 18 months after initial operational capability to identify and document any deployment or implementation and coordination issues, how they were resolved, and how they could be prevented in the future. These reviews are intended to help identify capability gaps that may inform future acquisitions, among other things. However, PARM officials said that they do not consider the results of the post-implementation reviews when managing the department’s current acquisition portfolio because these reviews are typically conducted after program oversight shifts from PARM to the component. While post-implementation reviews are conducted later in the acquisition life cycle, the insights they provide could be leveraged by other programs in the acquisition portfolio, not just the program under review. For example, the Integrated Fixed Towers program completed a post-implementation review in June 2016 after its initial deployment of capabilities to the Arizona border. The review found that changes in illegal traffic patterns as a result of the program’s deployment may be predicted, and other technologies may be able to compensate for changes in these patterns. This information could help other programs under development plan for similar outcomes or enable DHS to change deployment plans for existing programs to address changes in threats. PARM has an opportunity to use the results from programs’ post- implementation reviews since it is responsible for overseeing the department’s acquisition portfolio by monitoring each investment’s cost, schedule, and performance against established baselines. Federal standards for internal control state that management should obtain data on a timely basis so that they can be used for effective monitoring and that separate evaluations may provide feedback on the effectiveness of ongoing monitoring. By leveraging the results from post-implementation reviews in its monitoring efforts, PARM may be better able to ensure that programs in the current acquisition portfolio achieve their baselines. PARM officials stated they have generally focused on leveraging information gathered from canceled acquisition programs, such as where and why plans went wrong. However, they agreed that they could better leverage post- implementation review information gathered from programs that complete planned capability deployments. DHS’s mission to safeguard the American people and homeland requires a broad portfolio of acquisitions. However, the performance of DHS’s major acquisition portfolio during 2017 did not improve compared to our last review because we found that more programs will require more time and may require more money to complete than initially planned. DHS is collecting more timely cost estimate information on its acquisition programs to make more informed investment decisions. Yet DHS continues to face challenges in funding its acquisition portfolio, which highlights the need for disciplined policies that reflect best practices to ensure that the department does not pursue more programs than it can afford. DHS leadership has taken positive steps in recent years by strengthening its policies for acquisition management and resource allocation, and establishing policies related to requirements. Collectively, these policies reflect an integrated approach to managing investments. However, opportunities remain to further strengthen the acquisition management policy by documenting DHS’s current practice to reassess programs that breach their established cost, schedule, or performance thresholds to ensure they are still worth pursuing within the context of the portfolio. Additionally, leveraging information learned once programs complete deployment across the acquisition portfolio could help ensure that programs stay on track against their baselines in the first place. This is particularly relevant because DHS is initiating a number of complex and costly acquisition programs, such as development of a wall system along the southwest border and the Coast Guard’s Heavy Polar Icebreaker, which could benefit from this type of information. We are making the following two recommendations to DHS: The Under Secretary for Management should update DHS’s acquisition management policy to require components to submit a certification of funds memorandum when a major acquisition program re-baselines in response to a breach. (Recommendation 1) The Under Secretary for Management should require PARM to assess the results of major acquisition programs’ post-implementation reviews and identify opportunities to improve performance across the acquisition portfolio. (Recommendation 2) We provided a draft of this report to DHS for review and comment. In its comments, reproduced in appendix IV, DHS concurred with both of our recommendations and identified actions it planned to take to address them. DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This appendix presents individual assessments for each of the 28 programs we reviewed. Each assessment presents information current as of January 2018. They include standard elements, such as an image, a program description, and summaries of the program’s progress in meeting cost and schedule goals, performance and testing activities, and program management-related issues, such as staffing. Each assessment also includes the following figures: Fiscal Years 2018–2022 Affordability. This figure compares the funding plan presented in the Future Years Homeland Security Program report to Congress for fiscal years 2018–2022 to the program’s current cost estimate. We use this funding plan because the data are approved by the Department of Homeland Security (DHS) and Office of Management and Budget, and was submitted to Congress to inform the fiscal year 2018 budget process. The figure only presents acquisition funding because DHS did not report operations and maintenance (O&M) funding for individual programs in its funding plan to Congress. In addition, the data do not account for other potential funding sources, such as carryover. Acquisition Program Baseline (APB) vs. Current Estimate. This figure compares the program’s cost thresholds from the initial APB approved after DHS’s acquisition management policy went into effect in November 2008 and the program’s current DHS-approved APB to the program’s expected costs as of January 2018. The source for the current estimate is the most recent cost data we collected (i.e., a department-approved life-cycle cost estimate, updated life-cycle cost estimates submitted during the resource allocation process to inform the fiscal year 2019 budget request, or a fiscal year 2017 annual life- cycle cost estimate update). Schedule Changes. This figure consists of two timelines that identify key milestones for the program. The first timeline is based on the initial APB DHS leadership approved after the department’s current acquisition management policy went into effect. The second timeline identifies when the program expected to reach its major milestones as of January 2018 and includes milestones introduced after the program’s initial APB. Dates shown are based on the program’s APB threshold dates or updates provided by the program office. Test Status. This table identifies key recent and upcoming test events. It also includes DHS’s Director, Office of Test and Evaluation’s assessment of programs’ test results, if an assessment was conducted. Staffing Profile. This figure identifies the total number of staff a program needs (measured in full time equivalents) including how many are considered critical and how many staff the program actually has. Lastly, each program assessment summarizes comments provided by the program office and identifies whether the program provided technical comments. AUTOMATED COMMERCIAL ENVIRONMENT (ACE) CUSTOMS AND BORDER PROTECTION (CBP) The ACE program is developing software that will electronically collect and process information submitted by the international trade community. ACE is intended to provide private and public sector stakeholders access to information, enhance the government’s ability to determine whether cargo should be admitted into the United States, and increase the efficiency of operations at U.S. ports by eliminating manual and duplicative trade processes, and enabling faster decision making. Final deployment and operational testing of ACE functionality delayed. Program plans to identify an approach to address collections functionality in March 2018. We last reported on this program in March 2018 and April 2017 (GAO-18-271, GAO-17-346SP). CBP declared a cost and schedule breach in April 2017—5 months after re-baselining the program in response to a prior breach—because of difficulties developing the collections aspect of ACE’s remaining functionality, which collects and processes duties owed on imported goods. CBP reported that its officials were not versed in the complexities of collections in the legacy system and underestimated the level of effort required to integrate collections capabilities into ACE. As a result, the program delayed final deployment of ACE functionality several times and missed the deadlines for completing the remaining milestones in its current acquisition program baseline (APB), including achieving acquisition decision event (ADE) 3 and full operational capability (FOC) by the revised dates of June 2017 and September 2017, respectively. Additional coding and testing to complete ACE development also required contract extensions that exceeded the current APB cost thresholds. The program subsequently decoupled collections from ACE’s remaining functionality to permit deployment of the other post-release capabilities—such as liquidations and reconciliation—using a phased approach between September 2017 and February 2018. In November 2017, CBP officials estimated that efforts to decouple collections from post-release functionality would be an additional $32 million in acquisition costs. CBP officials plan to cover these costs with $18 million in fiscal year 2017 carryover funding and by reprogramming $14 million from ACE disaster recovery funding. CBP is in the process of determining a path forward for collections, which is due to Department of Homeland Security (DHS) leadership by the end of March 2018. CBP then plans to update the program’s acquisition documentation, including APB and life- cycle cost estimate, by August 2018. Until then, the time frame for completing ACE’s remaining milestones and true cost of the program, including the cost to complete collections development is unknown. The program was not included in DHS’s funding plan to Congress for fiscal years 2018 to 2022 because DHS did not report operations and maintenance (O&M) funding for individual programs. CBP officials anticipate receiving approximately $535 million in O&M funding over this 5-year period. Customs and Border Protection (CBP) AUTOMATED COMMERCIAL ENVIRONMENT (ACE) When DHS leadership re-baselined ACE’s cost, schedule, and performance parameters in 2013, the program adopted an agile software development methodology to accelerate software creation and increase flexibility in the development process. As of October 2017, the ACE program office oversees 11 agile teams that conduct development and O&M activities. CBP officials said they extended the program’s agile development contracts in 2017 to permit further development of the collections function. In identifying a path forward for collections, CBP officials stated there are three main options: 1. leave collections in the legacy system, 2. continue to pursue development and deployment in ACE, or 3. move collections to a different program altogether. The program previously experienced a schedule breach in June 2016 because it delayed events to address external stakeholders’ concerns about transitioning to ACE. According to CBP officials, CBP has signed a memorandum of understanding with each of the 22 partner agencies responsible for clearing or licensing cargo that provides access to ACE. As of February 2018, 21 of the partner agencies had transitioned to ACE and the program was piloting a solution for the remaining partner. In September 2017, CBP reported that ACE continued to lack a director of testing and evaluation. CBP officials said they do not plan to fill this vacancy despite plans to conduct further testing because existing staff have successfully covered the workload and a large portion of testing has already been completed. CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. CUSTOMS AND BORDER PROTECTION (CBP) The Biometric Entry-Exit Program is developing capabilities to enhance traveler identification upon departure from the U.S. at air, land, and sea ports of entries by collecting biometric data, such as fingerprints and facial recognition. The program plans to match this data to biometric data obtained from travelers upon their arrival into the U.S. to identify foreign nationals that stay in the U.S. beyond their authorized periods of admission and verify the identities of travelers leaving the U.S. CBP completed four biometric pilot programs and selected a solution for development. DHS has explored biometric exit capabilities since 2009, but was directed to expedite implementation in March 2017. GAO last reported on this program in February 2017 (GAO- 17-170). In June 2017, the Department of Homeland Security’s (DHS) Under Secretary for Management (USM) granted the Biometric Entry-Exit Program acquisition decision event (ADE) 1 approval after CBP completed several pilot initiatives to study the feasibility of proposed biometric exit solutions at air and land ports of entry. The USM also authorized the program to continue testing a pilot exit solution at Hartsfield-Jackson Atlanta International Airport and conduct technology demonstrations as needed, but directed the program to achieve ADE 2A prior to deploying a solution to the 20 U.S. airports with the most international flights. CBP officials initially planned to achieve ADE 2A approval in September 2017—the point at which the program would establish cost, schedule, and performance goals in a DHS-approved acquisition program baseline (APB)—and pursue separate ADE 2B decisions to initiate development of a biometric solution for each type of port of entry, starting with air. As of December 2017, the program had yet to conduct its ADE 2A because CBP officials have had to resolve several issues identified by the Joint Requirements Council that has delayed approval of the program’s operational requirements document (ORD). In January 2018, CBP officials said the program plans to conduct ADE 2A in February or March 2018 and is aiming for ADE 2B for the biometric air solution in December 2018. In December 2015, Congress established an account to be used for the development and implementation of the biometric entry-exit system starting in 2017. Specifically, Congress provided that half the amount collected from fee increases for certain visa applications from fiscal years 2016 through 2025—up to $1 billion—would be available to DHS until expended. In February 2017, DHS leadership approved the program to use about $73 million of this funding in fiscal year 2017 for information technology investments and programmatic and operational support, among other things. In September 2017, DHS’s Chief Financial Officer approved the program’s life-cycle cost estimate (LCCE), which CBP expects to refine as the program progresses to meet the fee-funding limit. According to CBP officials, the current funding structure poses challenges because the fees will fluctuate based on immigration rates. Customs and Border Protection (CBP) of a traveler to different sources—one technology compared the photo to the traveler’s passport upon entrance to the U.S.; the other technology compared the photo to a gallery of photos based on the outbound flight manifest during an airline’s boarding process. According to CBP officials, the facial recognition technology that matched photos during an airline’s boarding process was the most viable approach and served as the foundation for its development of the ADE 2A acquisition documents. Officials stated a similar approach may be feasible for land border crossings, but will require further planning. In January 2018, CBP officials stated they were developing a test and evaluation master plan—which will outline the developmental and operational test approach—for the biometric exit air solution. DHS’s Director, Office of Test and Evaluation will need to review and approve this plan prior to the program’s ADE 2B. Since 1996, several federal statutes have required development of an entry and exit system for foreign nationals. DHS has been exploring biometric exit capabilities since 2009 and an Executive Order issued in March 2017 directed DHS to expedite the implementation of the biometric entry-exit system. The Biometric Entry-Exit Program plans to develop a capability to match a traveler’s biometric data against data contained in existing DHS biometric data repositories— primarily the National Protection and Program Directorate’s IDENT system. DHS is in the process of replacing and modernizing IDENT through the Homeland Advanced Recognition Technology (HART) program because IDENT is at risk of failure. However, HART has experienced delays, which could affect the Biometric Entry-Exit Program’s development progress. For the air biometric solution, CBP plans to pursue a public/private partnership in which airlines and airports invest in the equipment to collect biometric data. According to CBP officials, this approach could reduce program costs and improve the passenger boarding process. In August 2017, CBP officials told GAO that several airlines have expressed interest in partnering with the program, including one that expanded CBP’s pilot of facial recognition matching for outbound flights to additional gates at the Hartsfield-Jackson Atlanta International Airport. CBP officials reported a staffing gap of 14 full time equivalent staff which the program plans to fill once partnerships with airlines are established. CBP officials stated that authorized funds are collected from visa fee increases that expire in fiscal year 2025. Beyond 2025, officials stated that additional funding will need to be appropriated or the fee increases extended to continue the program. They added that fee collections are currently below forecasted levels and may come under the current $1 billion limit. CBP officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. CUSTOMS AND BORDER PROTECTION (CBP) The border wall system is intended to prevent the illegal entry of people, drugs, and other contraband by enhancing and adding to the 654 miles of existing barriers along the U.S. southwest border. CBP plans to create a border enforcement zone between a primary barrier—such as a fence—and a secondary barrier. To establish the enforcement zone, the wall system may also include detection technology, surveillance cameras, lighting, and roads for maintenance and patrolling. CBP has evaluated prototypes for new barrier designs, but risks with planned detection technologies exist. CBP is leveraging staff and the contracting strategy from prior border fencing programs. GAO last reported on the existing Southwest border barriers in February 2017 (GAO-17-331). In April 2017, Department of Homeland Security (DHS) leadership granted CBP permission to procure barrier prototypes to inform new design standards and approved the construction of the first segment of the wall system. CBP subsequently awarded 8 task orders with a total value of over $3 million for the development of prototypes and selected San Diego as the first segment. CBP plans to replace an existing 14 miles of primary and secondary barriers in San Diego. DHS plans to use fiscal year 2017 funding for the replacement of the primary barrier, which it plans to rebuild to existing design standards. DHS has requested funding for replacement of the secondary barrier beginning in fiscal year 2018 that it plans to rebuild to new design standards once established. DHS leadership plans to approve acquisition documentation—including an acquisition program baseline (APB) and a life-cycle cost estimate (LCCE)—for each segment to determine affordability prior to authorizing construction. However, CBP officials said they do not plan to develop an APB for the San Diego segment because DHS already approved construction. In January 2018, DHS leadership approved an APB establishing cost, schedule, and performance goals for a second segment in the Rio Grande Valley (RGV), which will extend an existing barrier by 60 miles. To inform leadership’s decision, DHS headquarters conducted an independent cost estimate, which CBP adopted as the program’s LCCE. The LCCE includes costs for both the San Diego and RGV segments. However, DHS officials stated that the amounts in the LCCE are not releasable until CBP evaluates the prototypes, determines, and designs a final solution for the San Diego secondary barrier, and updates the LCCE—which is not expected to be complete until June 2018. The costs presented here are only for the RGV segment. CBP reported that construction of the RGV segment would be sufficiently funded if it receives $1.3 billion of acquisition funding in fiscal year 2018. However, CBP identified a shortfall in operations and maintenance (O&M) funding from fiscal years 2019 to 2022 that it plans to cover with existing funding from the Tactical Infrastructure program, which will be responsible for maintenance of the wall system as segments are complete. If funded, the program expects to achieve full operational capability for the RGV segment in March 2023. Customs and Border Protection (CBP) The Border Wall System Program was initiated in response to an Executive Order issued in January 2017 stating that the executive branch is to secure the southern border through the immediate construction of a physical wall on the southern border of the U.S. To expedite the acquisition planning process, CBP officials said they leveraged expertise from staff that worked on previous border fencing programs and were familiar with implementation challenges, such as land access. CBP intends to prioritize segments based on threat levels, land ownership, and geography, among other things. From fiscal years 2007 to 2015, CBP spent approximately $2.3 billion to construct pedestrian and vehicle fencing along the southwest border. CBP’s Tactical Infrastructure program is responsible for sustaining this fencing and other infrastructure—such as gates, roads, and bridges— over its lifetime. CBP plans to continue coordinating with the U.S. Army Corps of Engineers (USACE) for engineering support and for awarding and oversight of construction contracts. CBP anticipates that all contract awards issued by USACE in support of the RGV segment will be firm fixed price. If appropriations are received, the program plans to award construction contracts for the first portion of RGV in May 2018 and for the secondary barrier in San Diego in August 2018. In February 2018, CBP officials stated that staffing the program office is a challenge because funding has not yet been received. CBP officials said that existing work for the program is being handled by current CBP staff. CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. INTEGRATED FIXED TOWERS (IFT) CUSTOMS AND BORDER PROTECTION (CBP) The IFT program helps the Border Patrol detect, track, identify, and classify illegal entries in remote areas. IFT consists of fixed surveillance tower systems equipped with ground surveillance radar, daylight and infrared cameras, and communications systems linking the towers to command and control centers. CBP plans to deliver or upgrade approximately 53 IFT systems across six areas of responsibility (AoR) in Arizona: Nogales, Douglas, Sonoita, Ajo, Tucson, and Casa Grande. System acceptance test completed in Douglas AoR and requirements were met. Program is adequately staffed, but simultaneous deployments in the future may have a negative impact. GAO last reported on this program in November and April 2017 (GAO-18-119, GAO-17-346SP). In December 2017, CBP declared a schedule breach of the IFT program’s current acquisition program baseline (APB) because the program did not receive the funding needed to complete planned deployments on time to achieve its full operational capability (FOC) date of September 2020. The program’s FOC date previously slipped 5 years because of delays in the initial contract award process and funding shortfalls. CBP completed IFT deployments to the Douglas AoR in June 2017 and anticipates completing deployments to the Sonoita AoR in December 2017, as scheduled. However, in September 2017, CBP officials stated that they requested—but did not receive—additional funding from the Department of Homeland Security (DHS) to address new IFT requirements, including camera upgrades and replacement of existing tower systems deployed under a legacy program. In January 2015, Border Patrol requested the program prioritize replacement of the legacy systems in the Tucson and Ajo AoRs because the technology was obsolete and more expensive to maintain than the IFT technology planned for deployment in other AoRs. Without additional funding, CBP officials stated that they would be unable to exercise the contract options for the remaining AoRs on time. In June 2017, the program updated its life-cycle cost estimate (LCCE), which is slightly less than its current APB cost thresholds. This LCCE update includes estimated costs for the new requirements. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. CBP identified $8 million in acquisition carryover funding for fiscal year 2018 and officials anticipate receiving $126 million in O&M funding to cover $100 million in O&M costs over the next 5 years. The program plans to submit a revised APB to DHS leadership by June 2018. However, the FOC date may be further delayed because of land access issues. CBP officials told GAO that they have not yet reached an agreement with the Tohono O’odham Nation—a sovereign Native American Nation—to access tribal lands, which these officials said is necessary for the construction of IFTs in the Ajo and Casa Grande AoRs. 10/15 Initial operational capability (Nogales) Customs and Border Protection (CBP) INTEGRATED FIXED TOWERS (IFT) When CBP initiated the IFT program, it decided to procure a non-developmental system, and it required that prospective contractors demonstrate their systems prior to CBP awarding the contract. The program awarded the contract to EFW, Inc. in February 2014, but the award was protested. GAO sustained the protest and CBP had to reevaluate the offerors’ proposals before it again decided to award the contract to EFW, Inc. As a result, EFW, Inc. could not initiate work at the deployment sites until fiscal year 2015. According to CBP officials, the number of IFT systems deployed to a single AoR is subject to change based on assessments by the Border Patrol. DHS leadership directed CBP to develop a comprehensive border plan in October 2016 that includes IFT capabilities and—when preparing for the last budget cycle—the program estimated costs for expansion to the southwest border beginning in fiscal year 2019. In September 2017, CBP officials told GAO that they did not have any current staffing gaps. However, CBP officials added that if the program receives full funding and reaches an agreement with the Tohono O’odham Nation to initiate IFT deployments to the Ajo and Casa Grande AoRs, while concurrently deploying capability to the Sonoita and Tucson sectors, they will be short on government and contracted staff. CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. MEDIUM LIFT HELICOPTER (UH-60) CUSTOMS AND BORDER PROTECTION (CBP) UH-60 is a medium-lift helicopter that CBP uses for law enforcement and border security operations, air and mobility support and transport, search and rescue, and other missions. CBP’s UH-60 fleet consists of 20 aircraft acquired from the U.S. Army in three different models. CBP previously acquired 4 modern UH-60M aircraft and converted 6 of its older 16 UH-60A aircraft into more capable UH-60L models. CBP is replacing the remaining 10 UH-60A with reconfigured Army HH-60L aircraft. CBP test agent and the Army completed testing of reconfigured HH-60L prototype. CBP has initiated efforts to acquire additional converted HH-60L aircraft from the Army. GAO last reported on this program in April 2017 (GAO-17-346SP). The program breached the cost and schedule goals in its acquisition program baseline (APB) and, as of December 2017, CBP officials stated they were in the process of developing the breach notification required under the Department of Homeland Security’s (DHS) acquisition policy. In its annual life-cycle cost estimate (LCCE) update, the program shifted some operations and maintenance (O&M) costs to acquisitions to be consistent with DHS’s new appropriation structure. For example, the program shifted costs for recurring upgrades from O&M to acquisition because these upgrades require development and production. As a result, the program’s updated acquisition cost estimate exceeded the APB acquisition cost threshold, which constitutes a cost breach under DHS’s acquisition policy. CBP officials stated that they did not initially declare a cost breach because the program’s total LCCE was within the APB threshold. The program also did not hold its acquisition decision event (ADE) 3 by the APB deadline of September 2017. The ADE 3 is intended to approve the transfer of CBP’s remaining UH-60A aircraft for reconfigured Army HH60-L aircraft based on an evaluation of a reconfigured prototype. According to CBP officials, the program did not complete the required acquisition documentation by the ADE 3 deadline, in part, because DHS leadership directed CBP to develop a comprehensive border plan in October 2016 that includes UH-60 capabilities. It is unclear when the ADE 3 will occur because, as of December 2017, several documents were pending validation by the Joint Requirements Council. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained O&M funding for individual programs. In addition, CBP officials previously told GAO that UH-60 O&M is funded through a separate, central funding account for all of CBP’s air and marine assets. CBP officials stated that the projected acquisition funding gap in fiscal years 2019 and 2020 is primarily for replacing obsolete parts that were previously considered O&M. According to these officials, the Army conducts an annual obsolescence study that will help CBP identify and prioritize replacements across the UH-60 fleet based on available funding levels. Customs and Border Protection (CBP) MEDIUM LIFT HELICOPTER (UH-60) CBP previously acquired UH-60 as a part of its Strategic Air and Marine Program (StAMP). In July 2016, DHS leadership designated UH-60 as a separate and distinct major acquisition program. CBP initially planned to convert all 16 of its UH-60A aircraft into UH-60L models, but changed its strategy once it learned the Army planned to divest several HH-60L aircraft that could more easily be converted into UH-60L aircraft for CBP missions. CBP officials anticipated the new strategy could reduce the program’s costs by an estimated $70 million, accelerate its schedule, and result in newer aircraft since the Army’s HH-60L airframes had fewer operating hours than CBP’s existing UH-60A aircraft. In September 2017, CBP officials told GAO they had initiated efforts to acquire additional HH-60L aircraft by conducting a study of current capability gaps and drafting a mission need statement. As of September 2017, program officials confirmed that they maintain a consolidated program office where the same staff from StAMP continue to support all remaining acquisitions, including the UH-60. However, these officials stated that they plan to realign staff to a dedicated asset over time. Program officials also stated that the program has hired a dedicated cost estimator and would like to hire additional staff to focus on procuring spare parts and common component issues, such as radio replacements, for CBP’s air and marine assets. CBP officials reiterated that the changes in acquisition costs were primarily a result of cost realignment and that the program’s total life-cycle cost is still within the initial APB LCCE goals. CBP officials also stated that—to supplement Army test data—the program’s OTA participated in the flight tests and will provide a formal report on the results. MULTI-ROLE ENFORCEMENT AIRCRAFT (MEA) CUSTOMS AND BORDER PROTECTION (CBP) MEA are fixed-wing, multi-engine aircraft that can be configured to perform multiple missions including maritime, air, and land interdiction, as well as signals detection to support law enforcement. The current MEA configuration is equipped with marine search radar and an electro-optical/infrared sensor to support maritime and land surveillance and airborne tracking missions. MEA will replace CBP’s fleet of aging C-12, PA-42, and BE-20 aircraft. Testing of new configuration planned for May 2018, but requirements not yet defined. Began retrofitting accepted MEA with new mission system in fiscal year 2017. GAO last reported on this program in April 2017 (GAO-17- 346SP). According to CBP officials, the program is on track to meet the cost and schedule goals in its current acquisition program baseline (APB) for 16 maritime interdiction MEA and is actively pursuing additional aircraft. In April 2016, CBP developed a report that identified capability needs in three mission areas and proposed increasing the program’s total to 38 aircraft by adding 13 air and 6 land interdiction MEA, and 3 signals detection MEA. The Joint Requirements Council endorsed CBP’s findings, but recommended CBP develop a number of requirements documents—including an operational requirements document—to fully validate the findings. As of September 2017, CBP officials told GAO they were in the process of updating these documents to focus on air interdiction capabilities—the next MEA configuration. These officials stated that completing these documents has been delayed, in part, because Department of Homeland Security (DHS) leadership directed CBP to develop a comprehensive border plan in October 2016 that includes MEA capabilities. Despite not yet completing all the updated documents, DHS leadership approved CBP’s request to procure MEA 17 in September 2017 after the congressional conferees agreed to an additional aircraft beyond DHS’s budget request. CBP anticipates delivery of MEA 17 by September 2018, which is within the program’s full operational capability (FOC) date. However, if the program receives approval to acquire additional aircraft, the FOC date will be extended. The program completed an annual life-cycle cost estimate update, which exceeds the program’s current APB cost thresholds, because it reflects costs for all 38 aircraft, among other reasons. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. In addition, CBP officials previously told GAO that MEA’s O&M is funded through a separate, central funding account for all of CBP’s air and marine assets. In September 2017, CBP officials said that the program was fully funded for 17 aircraft but had some affordability challenges with spare parts, which they are working with CBP and DHS headquarters to address. Customs and Border Protection (CBP) MULTI-ROLE ENFORCEMENT AIRCRAFT (MEA) CBP is replacing the mission system processor on the MEA with a system used by the U.S. Navy and U.S. Coast Guard that is intended to enhance operator interface and sensor management, as well as replace obsolete equipment. CBP’s OTA tested a prototype of the processor during an operational assessment in July 2015. The OTA found that the MEA had resolved issues found during prior testing, but also made 29 additional recommendations and findings to improve the aircraft and new mission system’s effectiveness. DHS’s Director, Office of Test and Evaluation (DOT&E) concurred with the OTA’s findings. CBP previously acquired MEA as a part of its Strategic Air and Marine Program (StAMP). In July 2016, DHS leadership designated MEA as a separate and distinct major acquisition program. CBP initially planned to procure 50 MEA and awarded the first production contract in September 2009. However, the aircraft did not perform well during testing. In October 2014, DHS leadership said CBP could not procure or accept transfer of additional MEA without approval. CBP procured 12 aircraft under the initial contract and—with DHS approval—CBP awarded a new indefinite delivery, indefinite quantity contract in September 2016 for 1 base year and four 1-year options to support procurement of additional aircraft. In December 2017, CBP officials said the program had received 12 aircraft and awarded contracts for 5 more. According to program officials, MEA 13-16 will be delivered with the new mission system and CBP began retrofitting previously delivered aircraft in fiscal year 2017. As of September 2017, program officials confirmed that they maintain a consolidated program office where the same staff from StAMP continue to support all remaining acquisitions, including MEA. However, these officials stated that they plan to re-align staff to a dedicated asset over time. Program officials also stated that the program has hired a dedicated cost estimator and would like to hire additional staff to focus on procuring spare parts and common component issues, such as radio replacements, for CBP’s air and marine assets. CBP officials stated that delays in receiving approval of the program’s requirements documents may pose a risk to exercising options for additional MEA on an existing contract, which could stop production and increase contract costs associated with procuring future aircraft. CBP officials added that air and marine requirements officers continue to produce documentation requested by the Joint Requirements Council to provide sufficient context for the mission need and border security. CBP officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. CUSTOMS AND BORDER PROTECTION (CBP) The NII Systems Program supports CBP’s interdiction of weapons of mass destruction, contraband such as narcotics, and illegal aliens being smuggled into the United States, while facilitating the flow of legitimate commerce. CBP officers use large- and small-scale NII systems at air, sea, and land ports of entry; border checkpoints; and international mail facilities to examine the contents of containers, railcars, vehicles, baggage, and mail. CBP initiated efforts for future NII requirements and procurements. 66 percent staffing gap contributed to delays in NII deployments. GAO last reported on this program in April 2017 (GAO-17-346SP). The NII Systems Program is on track to meet its approved schedule and cost goals. The estimates in the program’s annual life-cycle cost estimate (LCCE) update continued to decrease overall compared to its approved acquisition program baseline (APB) cost thresholds. Specifically, compared to the prior year’s estimate, the program’s acquisition costs decreased by $96 million and operations and maintenance (O&M) costs increased by $22 million. However, the LCCE update only estimated costs through fiscal year 2026—9 years short of the program’s final year. The LCCE primarily decreased because of a reduction of 1,977 planned additional and replacement NII systems. CBP officials said fewer large- and small-scale systems are needed because some systems have longer estimated lives than expected, and systems procured have better capability. CBP officials do not anticipate that the reduction in quantities will have an adverse effect on operations because they stated that the new systems can provide dual purpose capabilities (i.e., one system can replace multiple separate systems). The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained O&M funding for individual programs. CBP officials anticipate receiving approximately $605 million of O&M funding over this 5-year period to cover about $626 million in estimated O&M costs, which includes $100 million to operate and maintain radiation detection equipment acquired by the Domestic Nuclear Detection Office. These officials also identified $37 million in carryover funding to cover the remaining $21 million of O&M estimated costs. However, the program is projected to have a $266 million acquisition funding gap from fiscal years 2018 to 2022.The program has a plan to address funding shortfalls but, according to CBP officials, it has not yet needed to implement the strategies in this plan because of several factors, including cost reductions achieved through combined life-cycle contracts and lower-than-expected actual technology costs in fiscal year 2016. Customs and Border Protection (CBP) trucks as they are driven through the inspection portals—low dose X-ray to inspect the truck cab and high dose X-ray to inspect the cargo trailer. In March 2017, the Joint Requirements Council validated a capability analysis report that assessed current capability gaps in NII operations to assist with identifying potential upgrades to existing systems and developing requirements for future systems. According to program officials, CBP plans to review and update, as necessary, the mission need statement in fiscal year 2018. Additionally, program officials are preparing a consolidated acquisition plan for future procurements. These officials said CBP has not yet determined whether future procurements would be included into the current NII Systems Program of record or constitute a new acquisition program. CBP’s ability to successfully execute the existing NII Systems Program and plan for future efforts may be at risk because of understaffing. As of January 2018, the NII Systems Program continued to face a staffing gap of approximately 66 percent, including critical vacancies such as the acquisition program manager and a logistics program manager. Officials also noted that a lack of adequate personnel to procure, test, and deploy NII systems forces the program to prioritize its acquisitions, which can result in delays of NII deployments and testing efforts. For example, one manufacturer increased its output rate of NII systems, but the program did not have the staff to accept the systems at the increased rate. Officials anticipate the program may remain understaffed until CBP completes a reorganization that started more than a year ago, in which acquisition programs are realigned from a mission-support office to their operational entity. CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. REMOTE VIDEO SURVEILLANCE SYSTEM (RVSS) CUSTOMS AND BORDER PROTECTION (CBP) The RVSS program helps the Border Patrol detect, track, identify and classify illegal entries across U.S borders. RVSS consists of daylight and infrared video cameras mounted on fixed towers and buildings with communications systems that link to command and control centers. From 1995 to 2005, CBP deployed approximately 310 RVSS towers along the U.S. northern and southern borders, and initiated efforts to upgrade legacy RVSS towers in Arizona in 2011. Program does not plan to conduct additional operational testing on future deployments. Once funded, program plans to award a new contract for deployments in sectors along the southwest border. GAO last reported on this program in November 2017 (GAO-18-119). In April 2016, Department of Homeland Security (DHS) leadership elevated RVSS from a level 3 program—which focused on upgrading legacy RVSS in Arizona—to a level 1 program after approving CBP’s plan to expand deployments to the Rio Grande Valley (RGV) sector and adding an additional 6 sectors along the southwest border. At this time, DHS leadership approved the program to move forward with deployments to two RGV stations, which can be completed as options under the program’s existing contract. However, the program was required to re-baseline to account for its expanded scope and conduct an acquisition decision event (ADE) to obtain approval for additional deployments. As of January 2018, the program had not yet conducted its ADE or obtained DHS approval for an acquisition program baseline (APB) that established cost, schedule, and performance goals for the expanded program. In September 2017, CBP officials told us that they had drafted the APB and other required documentation, such as a life-cycle cost estimate (LCCE), but were unsure when the ADE would occur because the program had not received funding for the additional deployments. In addition, the ADE may have been delayed because DHS leadership directed CBP to develop a comprehensive border plan in October 2016 that includes RVSS capabilities. In September 2017, DHS leadership approved the RVSS’s revised LCCE which totaled nearly $4 billion for all program costs from fiscal years 2011 through 2042, including expansion along the southwest border and new initiatives such as a pilot for relocatable RVSS towers. DHS conducted an independent cost estimate for the program, which DHS cost estimating officials stated was within 2 percent of the program’s LCCE. RVSS was not included in DHS’s funding plan to Congress for fiscal years 2018 to 2022 because it had not yet been elevated to a level 1 program at the time the plan was developed. CBP officials stated that the program has received acquisition funding to cover the approved RGV deployments. However, CBP officials told GAO that the program may also assume responsibility for maintaining all legacy RVSS, but has not received adequate operations and maintenance funding to do so. Customs and Border Protection (CBP) REMOTE VIDEO SURVEILLANCE SYSTEM (RVSS) In July 2013, CBP awarded a firm fixed-price contract for a commercially available, non-developmental system. This contract covered the program’s initial scope to deploy upgraded RVSS in Arizona and two stations within the RGV sector, which can be completed as options. According to CBP officials, the program will need to award a new contract to cover expansion to the remaining six sectors along the southwest border. In September 2017, CBP officials said that the request for proposals for the new contract had been drafted but it cannot be released until the program receives funding. CBP officials told GAO that RVSS is coordinating with CBP’s Border Wall System Program on some planned deployments within the RGV sector. For example, CBP is considering moving 2 of the planned RVSS towers to be co-located with the planned barrier, which officials stated may provide better surveillance. If the Border Wall System Program does not receive funding, CBP officials said the towers will be placed in the originally planned locations. CBP officials stated that the RVSS program requires additional staff for contracting activities, maintenance activities for legacy RVSS, and for relocatable tower pilot deployments. To mitigate the staffing gap, CBP officials said they prioritize responsibilities of current personnel to meet program execution needs. CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. CUSTOMS AND BORDER PROTECTION (CBP) The TACCOM program is intended to upgrade land mobile radio infrastructure and equipment to support approximately 95,000 users at CBP and other federal agencies. It is replacing obsolete radio systems with modern digital systems across various sectors located in 19 different service areas, linking these service areas to one another through a nationwide network, and building new communications towers to expand coverage in 5 of the 19 service areas. Issues related to security requirements have delayed full operational capability by more than a year. Program is being re-organized under Border Patrol, but still faces staffing challenges. GAO last reported on this program in April 2017 (GAO-17-346SP). In November 2017, Department of Homeland Security (DHS) leadership re-baselined the TACCOM program, removing it from breach status after the program experienced a schedule slip and cost growth. In July 2017, CBP officials notified DHS leadership that the program would not achieve full operational capability (FOC) as planned due to issues related to federal information security requirements. The program now plans to achieve FOC by March 2019—more than a year later than its initial acquisition program baseline (APB) deadline. According to CBP officials, FOC will include planned upgrades to the San Diego system, which requires transitioning management of the legacy system from the Department of Justice to DHS. In August 2017, CBP officials stated that both agencies were reviewing an agreement with plans to complete the transition in fiscal year 2018. CBP officials stated that the program realized it would exceed its initial APB cost thresholds as it was developing its annual life-cycle cost estimate (LCCE) update and subsequently submitted a revised LCCE for DHS leadership approval. The program’s costs primarily grew because of increases in costs for contractor labor and support for facilities and infrastructure. CBP officials said the program’s initial estimates were immature; however, DHS leadership approved the initial LCCE in December 2015—4 years after the program began sustaining capabilities. DHS’s Chief Financial Officer (CFO) approved the program’s revised LCCE in November 2017, but noted that the program’s estimate exceeded its available funding and requested that the program address the affordability gap before it was re-baselined. CBP officials said that they are conducting an affordability analysis, which they anticipate will be completed by March 2018. Nevertheless, DHS leadership approved the program’s re-baseline in November 2017. CBP officials subsequently identified errors in the approved APB cost threshold tables and provided revised amounts, which are presented here. The program was not included in DHS’s funding plan to Congress for fiscal years 2018 to 2022 because DHS did not report operations and maintenance (O&M) funding for individual programs. CBP officials anticipate receiving approximately $120 million in O&M funding over this 5-year period. Customs and Border Protection (CBP) CBP officials told GAO that in January 2018, the program will move from a mission support office to a joint program office under Border Patrol as a part of CBP’s reorganization that started more than a year ago. The goal of this move is to make CBP land mobile radio capabilities seamless by combining the mission critical voice functions of Air and Marine Operations, the Border Patrol, and the Office of Field Operations—the TACCOM program’s primary customers—under one organizational leader, the Border Patrol Chief. CBP officials anticipate that the current TACCOM program structure will remain in place after this move with the exception of the program’s engineers, which will move to CBP’s Office of Information and Technology but be assigned to support TACCOM full time. In August 2017, CBP officials told GAO they were in the process of hiring staff to fill the program’s vacant positions. They added that the fiscal year 2019 budget contains plans for additional infrastructure enhancements, which will require technical staff to assist in the planning and execution of these efforts and may put additional strain on the program’s limited government technical staff. They noted that the hiring and retention of qualified land mobile radio engineers and information technology technical staff is a challenge because of competition with the private sector, among other factors. In addition to maintenance of the CBP Land Mobile Radio System that provides critical communication needs for CBP agents and officers protecting U.S. borders, CBP officials stated the TACCOM program is providing infrastructure, such as building an engineering lab to facilitate design, development, test, and evaluation activities, to support improvements in CBP’s current and future Land Mobile Radio Systems. CBP officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. CUSTOMS AND BORDER PROTECTION (CBP) TECS (not an acronym) is a law-enforcement information system that has been in place since the 1980s and helps CBP officials determine the admissibility of persons entering the United States at border crossings, ports of entry, and prescreening sites located abroad. CBP initiated efforts to modernize TECS to provide users with enhanced capabilities for accessing and managing data. Immigration and Customs Enforcement has a separate TECS Modernization program. System operationally effective and suitable, but cybersecurity testing needed. CBP working to address and prevent major system outages. GAO last reported on this program in April 2017 (GAO-17-346SP). In July 2017, Department of Homeland Security (DHS) leadership granted the program acquisition decision event (ADE) 3 approval, but required CBP to conduct follow-on operational test and evaluation (OT&E) before declaring full operational capability (FOC). This is more than a 2-year delay from CBP’s initial FOC date and a 9-month delay from its most recent revised FOC date. DHS approved the fourth version of the program’s acquisition program baseline (APB) in July 2016. In this APB, CBP split FOC into two separate operational capability milestones at its data centers to better reflect the program’s activities. CBP delivered operational capability at the primary data center in Decemberas scheduled—which provides redundant TECS access to minimize downtime during system maintenance or unscheduled outages. However, not all test results were available in time for the program’s ADE 3 decision, which contributed to DHS leadership’s decision to delay declaring FOC. 2016, which included transitioning all TECS users to the modernized system. CBP delivered operational capability at the secondary data center in June 2017—The program updated its life-cycle cost estimate (LCCE) for ADE 3, which is within its current APB cost thresholds. However, the LCCE only included costs through fiscal year 2021—7 years short of DHS’s guidance that states program cost estimates should cover at least 10 years from the FOC date. Nevertheless, DHS granted the program ADE 3 approval without an understanding of the program’s full life-cycle costs, as required by its acquisition policy. CBP officials plan to update the LCCE by the end of calendar year 2018 to include costs for future years and other items, such as costs associated with follow-on OT&E and moving the data centers to a cloud environment—a CBP-wide initiative. The program was not included in DHS’s funding plan to Congress for fiscal years 2018 to 2022 because DHS did not report operations and maintenance (O&M) funding for individual programs. CBP officials anticipate receiving approximately $205 million in O&M funding over the next 4 years and have identified carryover for each year. However, CBP officials said there may be a small funding gap starting in fiscal year 2020, but they expect to achieve savings by migrating the data centers to a cloud environment. Customs and Border Protection (CBP) Since the program has completed development, CBP is focused on ensuring that the modernized TECS system works as intended by addressing operational issues as they are identified. For example, on January 2, 2017, a primary TECS Modernization application experienced a major outage that resulted in long airport delays. In August 2017, CBP officials said they continually monitor system health through a 24/7 operations center and have established a group dedicated to addressing the issues related to the January 2, 2017, outage. In September 2017, DHS’s Office of Inspector General (OIG) found that nearly 100 outages, periods of latency, or degraded service were reported for three TECS Modernization applications between June 2016 and March 2017. The OIG also found that CBP’s monthly reports on TECS system availability did not include periods of slowness or service interruptions that were caused by external factors. For example, the January 2, 2017, incident was identified in CBP outage reports, but was not captured in the monthly report because it was caused by a change to an external feed to the TECS system. CBP officials clarified that the monthly reports only account for interruptions that result in a full loss of operations for all TECS system users. The OIG recommended that CBP develop a plan to address factors that contributed to challenges regarding availability of primary traveler screening applications, among other things. CBP concurred with the recommendations. On January 1, 2018, the TECS system experienced another major outage that caused long airport delays; CBP officials said this incident is under review. CBP officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. LOGISTICS SUPPLY CHAIN MANAGEMENT SYSTEM (LSCMS) FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) LSCMS is a computer-based tracking system that FEMA officials use to track shipments during disaster-response efforts. It is largely based on commercial-off-the- shelf software. FEMA initially deployed LSCMS in 2005, and initiated efforts to enhance the system in 2009. According to FEMA officials, LSCMS can identify when a shipment leaves a warehouse and the location of a shipment after it reaches a FEMA staging area near a disaster location. FEMA now anticipates reaching full operational capability by June 2019, up to 6 months late. Recent testing shows progress, but additional operational testing delayed to May 2018. GAO last reported on this program in April 2017 (GAO-17-346SP). In November 2017, Department of Homeland Security (DHS) leadership approved a revised acquisition program baseline (APB) after the LSCMS program experienced a schedule breach. In September 2017, FEMA officials notified DHS leadership that it would not complete all required activities—including follow-on operational test and evaluation (OT&E)—to achieve acquisition decision event (ADE) 3 and full operational capability (FOC) by its initial APB dates of September 2018 and December 2018, respectively. According to FEMA officials, the delay was primarily caused by the need to deploy LSCMS program personnel in support of response and recovery efforts during the 2017 hurricane season. The program now plans to achieve FOC by June 2019—up to 6 months later than initially planned. DHS leadership authorized LSCMS to resume all development and acquisition efforts in March 2016 after a nearly 2-year program pause following program management issues. In October 2017, FEMA officials told GAO that they had completed several development efforts—such as integration with DHS’s asset management system—and were in the process of adding Electronic Data Interchange (EDI) to allow LSCMS to interface with its partners’ information systems. The program’s annual life-cycle cost estimate (LCCE) update continued to be within its APB cost thresholds. However, the program’s APB thresholds are not adjusted to account for risk, which increases the chance that the program could experience a cost breach. As of November 2017, FEMA officials did not anticipate that its schedule delays would lead to a cost breach. Federal Emergency Management Agency (FEMA) LOGISTICS SUPPLY CHAIN MANAGEMENT SYSTEM (LSCMS) The LSCMS program previously experienced significant execution challenges because of poor governance. FEMA initially deployed the enhanced LSCMS in 2013 without DHS leadership approval, a DOT&E letter of assessment, or a DHS-approved APB documenting the program’s costs, schedule, and performance parameters, as required by DHS’s acquisition policy. DHS’s Office of Inspector General also found that neither DHS nor FEMA leadership ensured the program office identified all mission needs before selecting a solution. In response, DHS leadership paused all LSCMS development efforts in April 2014 until the program addressed these issues, among others. FEMA subsequently completed an analysis of alternatives and developed an APB based on this assessment. DHS leadership approved the APB in December 2015 and authorized FEMA to resume all LSCMS development and acquisition efforts in March 2016. In October 2017, FEMA officials told GAO that the LSCMS program had minimal staffing shortages and was working to recruit additional staff. Officials previously attributed the program’s governance and testing challenges, in part, to staffing shortages and we previously found that it only had 7 of the 22.5 full time equivalents it needed in fiscal year 2014. Although the program has obtained more staff since then, FEMA officials noted in October 2017 that during disasters—such as 2017 hurricanes Harvey, Irma, and Maria—LSCMS program personnel are deployed to support response and recovery efforts, which leave program positions vacant for the duration of the deployment. FEMA officials stated that during the response to hurricanes Harvey, Irma and Maria in 2017, LSCMS processed supply chain transactions that exceeded the total number of transactions from the preceding 12 years—which includes the response to Hurricane Katrina. They added that the program provided support for nearly 130 million meals in 2017 compared to a total of approximately 84 million from the 12 previous years. FEMA officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. IMMIGRATION AND CUSTOMS ENFORCEMENT (ICE) Since the 1980s, TECS (not an acronym) has provided case management, intelligence reporting, and information sharing capabilities to support ICE’s mission to investigate and enforce border control, customs, and immigration laws. ICE initiated efforts to modernize TECS in 2009 to replace aging functionality and provide end users with additional functionality to meet mission needs. Customs and Border Protection (CBP) executes a separate TECS Modernization program. Conducted additional testing of a revised key performance parameter and cybersecurity. Program has improved integration with external systems. GAO last reported on this program in April 2017 (GAO-17-346SP). In November 2017, Department of Homeland Security (DHS) leadership approved a revised life-cycle cost estimate (LCCE) and acquisition program baseline (APB) in preparation for the program’s acquisition decision event (ADE) 3 following deployment of final functionality. According to ICE officials, the program completed deployment of full operational capability (FOC) functionality in August 2017—4 months earlier than initially planned. FOC functionality included enhancements to case management capabilities, such as improved system search capabilities. The functionality was deployed in conjunction with enhancements and fixes for initial operational capability (IOC) functionality. The program achieved IOC in June 2016, which entailed delivering 80 percent of the modernized TECS functionality and successfully transitioning ICE off the legacy system. The overall cost thresholds in the current APB increased compared to the program’s prior APB from July 2016. Specifically, the acquisition cost threshold decreased by $14 million and the operations and maintenance (O&M) cost threshold increased by $147 million. These costs changed for various reasons, such as the following: The acquisition cost threshold decreased when ICE included actual costs through fiscal year 2016 and accounted for funding shortfalls. ICE officials told GAO that the program experienced a funding shortfall in fiscal year 2017 that led it to adjust spending under multiple contracts and shift some costs to fiscal year 2018. The O&M cost threshold increased when ICE extended the estimate from fiscal years 2024 to 2028 and continued contractor and systems engineering support for an additional 11 years. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained O&M funding for individual programs. ICE officials anticipate receiving approximately $94 million in O&M funding to cover an estimated $105 million in O&M costs over this 5-year period. ICE officials said that they are pursuing strategies to reduce future O&M costs, such as awarding a competitive contract in March 2018 for O&M activities and any future enhancements. ICE officials continue to work closely with CBP to provide users access to various systems through the modernized TECS system. The program previously worked to resolve technical problems with CBP support services that emerged during final integration testing of the ICE and CBP modernized TECS systems, which contributed to a 3-month delay in achieving IOC. Users reported during initial OT&E that the modernized ICE TECS system was an improvement over the legacy system but they requested better integration with external systems, such as CBP’s Seized Assets and Case Tracking System (SEACATS), which they use to determine the disposition of seized assets for case management and reporting purposes. According to ICE officials, CBP subsequently decided to modernize SEACATS. ICE officials stated that they have coordinated closely with CBP to integrate the two modernized systems and ensure un-interrupted access to SEACATS for TECS users. For example, ICE developed a workaround so that TECS users maintain access to the latest seizure data available from the modernized SEACATS. ICE officials added that they continue to make improvements in interfaces with other external systems as prioritized by end users. In July 2017, ICE reported that the program was fully staffed. ICE officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. CONTINUOUS DIAGNOSTICS AND MITIGATION (CDM) NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD) The CDM program aims to strengthen the cybersecurity of the federal government’s networks at more than 65 participating civilian agencies by providing tools and dashboards that continually monitor and report on network vulnerabilities. Tools are delivered in four phases: phase 1 and 2 tools report vulnerabilities in hardware and software, and user access controls, respectively; phase 3 tools will report on efforts to prevent attacks; and phase 4 tools will provide encryption to protect network data. Program revised its key performance parameters and test and evaluation master plan as a part of its rebaseline. Program plans to change its acquisition strategy and continues to face workforce challenges. GAO last reported on this program in April 2017 (GAO-17-346SP). In June 2017, Department of Homeland Security (DHS) leadership re-baselined the CDM program for the third time to approve initiating development of phase 3 and to address challenges encountered during phase 1. Specifically, contractors previously found large gaps—ranging from 19 to 384 percent—in the actual number of devices needing phase 1 tools than what was originally reported by 12 agencies. The operations and maintenance (O&M) cost thresholds increased by $631 million when the program shifted some potential acquisition costs to beThe program’s new acquisition program baseline (APB) modified the program’s cost, schedule, and performance parameters. For example: consistent with DHS’s new appropriation structure, among other things. The O&M cost thresholds previously decreased by $1.2 billion, in part, because DHS leadership determined the program would only fund CDM tools for the first 2 years after deployment. The acquisition costs did not increase despite phase 1 challenges, in part, because coverage for the U.S. Postal Service— The program’s full operational capability (FOC) date slipped almost 4 years after which had the largest gap in estimated devices—will no longer be funded by the CDM program. it was redefined from deployment of phase 1-3 tools at 5 agencies to the availability of these tools to all participating agencies. However, the program’s costs will increase and its FOC date may slip further once the program establishes goals for phase 4. NPPD officials said they were unable to complete planning efforts for phase 4 in time to incorporate it into the most recent APB revision and, therefore, plan to re-baseline the CDM program again in 2018. The CDM program identified a potential acquisition affordability gap in fiscal year 2018 based on its revised life-cycle cost estimate, which it addressed by adjusting the phase 3 schedule to shift some acquisition costs out to fiscal year 2020. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained O&M funding for individual programs. However, the program anticipates receiving approximately $281 million in O&M funding over the 5-year period. 12/16 Phase 1 initial operational capability (IOC) National Protection and Programs Directorate (NPPD) CONTINUOUS DIAGNOSTICS AND MITIGATION (CDM) The CDM program updated its acquisition plan as a part of its re-baselining efforts, which reflects a change in strategy for procuring CDM tools and integration services for participating agencies through the General Services Administration (GSA). Previously, the CDM program issued task orders for these tools and services through blanket purchase agreements established under vendors’ GSA Federal Supply Schedule contracts. These agreements are set to expire in August 2018. Going forward, the program plans to use an existing GSA government-wide acquisition contract—known as Alliant—to obtain CDM tools and services. According to NPPD officials, the new acquisition strategy is intended to provide greater flexibility in contracting for current capabilities and to support future capabilities. It will also allow participating agencies to order additional CDM-approved products or services from GSA’s schedule for information technology equipment, software, and services; however, as of September 2017, NPPD officials stated they were in the process of determining how this process will work. NPPD officials said that the program continues to face workforce challenges related to managing the program’s change in contracts and planning for phase 4. In February 2018, NPPD officials stated that they had on-boarded 5 staff to help address the program’s reported fiscal year 2017 gap of 16 full time equivalents. They noted that another 5 candidates were in the hiring process and that NPPD continues to work with officials from DHS’s Office of the Chief Security Officer to reduce continued challenges in onboarding new staff due to the lengthy security clearance process. In addition to activities outlined in this assessment, NPPD officials stated that the CDM program continues to manage its budget to ensure program costs match available funding, and is leveraging the collective buying power of federal agencies and strategic sourcing to achieve government cost savings on CDM products. NPPD officials also stated that, as of December 2017, CDM has deployed agency dashboards to 23 agencies and was conducting and testing information exchanges of data between agency dashboards and the federal dashboard. HOMELAND ADVANCED RECOGNITION TECHNOLOGY (HART) NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD) HART will replace and modernize the Department of Homeland Security’s (DHS) legacy biometric identification system—known as IDENT—which shares information on foreign nationals with U.S. government and foreign partners to facilitate legitimate travel, trade, and immigration. NPPD plans to develop HART in four increments: increments 1 and 2 will replace and enhance IDENT functionality; increments 3 and 4 will provide additional biometric services, as well as a web portal and new tools for analysis and reporting. Key performance parameters will be demonstrated as capability is developed. Program has developed mitigation plans to address workforce risks. GAO last reported on this program in April 2017 (GAO-17-346SP). In June 2017, NPPD declared a schedule breach when it determined the HART program would not be able to meet its initial acquisition program baseline (APB) milestones. DHS leadership approved the program’s APB in April 2016 and authorized the program to initiate development efforts for increments 1 and 2 in October 2016. NPPD officials attribute the schedule slip to multiple delays in awarding the contract for increments 1 and 2 as a result of issues with the request for proposals (RFP). The program released the RFP in February 2017 and awarded the contract in September 2017—approximately 9 months later than NPPD officials had planned. However, the program experienced additional delays after a bid protest to the contract award was filed with GAO in October 2017. GAO subsequently denied the protest and NPPD officials said the program plans to initiate work with the contractor in March 2018. HART initially planned to achieve initial operational capability (IOC) with the deployment of increment 1 in December 2018, at which point program officials anticipated beginning to transition users from IDENT to HART. However, it is unclear when this will now occur, which is a significant challenge because IDENT is at risk of failure and may be unable to fully support requirements related to new programs— such as Customs and Border Protection’s Biometric Entry-Exit. As a result, delays in HART could contribute to delays in other DHS acquisition programs. The program updated its life-cycle cost estimate (LCCE) in June 2017 to inform the budget process. This LCCE is within its current APB cost thresholds, but does not account for the contractor’s solution. The program plans to update its LCCE and other acquisition documentation, such as its APB, after initiating work with the contractor. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. However, the program anticipates receiving approximately $1.3 billion in O&M funding to cover $1.5 billion in O&M costs. NPPD officials explained that the current O&M cost estimate includes costs for maintaining IDENT. Future LCCE updates will reflect delivery of services through HART, which NPPD officials anticipate will be more cost effective. National Protection and Programs Directorate (NPPD) HOMELAND ADVANCED RECOGNITION TECHNOLOGY (HART) NPPD officials told GAO they are currently planning for increments 3 and 4 and plan to refine the cost, schedule, and performance goals for these increments in its next APB. NPPD plans to pursue a separate contract for the development and delivery of increments 3 and 4. However, the program will require DHS leadership approval prior to initiating these development efforts. In September 2017, NPPD officials told GAO they had hired two staff and planned to hire additional staff to address the program’s staffing gap of 5.5 full time equivalents. In response to DHS leadership’s direction, the program coordinated with DHS’s Chief Technology Officer to assess the skills and functions of staff necessary to execute the program and to develop the HART staffing plan. In its June 2017 staffing plan, the program identified workforce risks, including the potential for experiencing insufficient technical skillsets and inadequate resources to simultaneously execute development of HART and operate IDENT. To mitigate these risks, the program plans to develop a training plan to address the gap in skills, leverage support within the program by cross- training staff, and issue contracts for additional support as needed, among other things. However, if the program does not have adequate staff to complete these efforts, it may experience further schedule delays. NPPD officials stated that the program’s schedule delays pose a challenge because IDENT remains at risk of failure despite incremental improvements to extend its service life and may be unable to fully support new customer requirements or requirements related to new programs. They added that the program has a risk management process, which it is using to manage a variety of identified risks—including several related to workforce. They noted that these risks have not yet materialized. NPPD officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. NATIONAL CYBERSECURITY PROTECTION SYSTEM (NCPS) NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD) NCPS is intended to defend the federal civilian government from cyber threats. NCPS develops and delivers capabilities through a series of “blocks.” Blocks 1.0, 2.0, and 2.1 are fully deployed and provide intrusion-detection and analytic capabilities across the government. The NCPS program is currently deploying EINSTEIN 3 Accelerated (EA) to provide intrusion-prevention capabilities and plans to deliver block 2.2 to improve information sharing across agencies. A at 95 percent of agencies and departments. GAO last reported on this program in April 2017 (GAO-17-346SP). NPPD officials said the program is on track to meet the schedule and cost goals in its current acquisition program baseline (APB), which reflected changes resulting from the adoption of some of the Department of Homeland Security’s (DHS) Homeland Security Information Network (HSIN) capabilities for block 2.2 rather than developing custom solutions. However, challenges in completing test plans delayed testing: Initial operational test and evaluation (OT&E) for EA transition to sustainment— slipped from September 2016 to May 2017. The initial test event for block 2.2—intended to inform the ADE 2C for deploying additional block 2.2 capabilities—slipped from March 2017 to September 2017. As of August 2017, NPPD officials said NCPS had adopted all planned HSIN capabilities but one because of security concerns, which HSIN is addressing by piloting a new tool. The program updated its life-cycle cost estimate (LCCE) in June 2017 to inform the budget process, which is within its current APB cost thresholds. However, the program plans to update the LCCE again to support the EA, and costs through fiscal year 2022. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan no longer contained O&M funding for individual programs. NPPD officials anticipate receiving $1.8 billion in O&M funding over this 5-year period. The program is also projected to have an $83 million surplus in acquisition funding over this 5-year period, which NPPD officials anticipate will be less once the LCCE revision is complete. National Protection and Programs Directorate (NPPD) NATIONAL CYBERSECURITY PROTECTION SYSTEM (NCPS) A intrusion-prevention capabilities have been primarily provided through sole source contracts with internet service providers (ISP) and a contract to provide basic intrusion-prevention services. In December 2015, Congress required DHS to make available for use by federal agencies, certain capabilities, such as those provided by NCPS’s EA at approximately 93 percent of civilian federal agencies and departments and, in January 2018, NPPD officials said NCPS was up to 95 percent. According to NPPD officials, the program first focused on integrating EA for individual agencies and departments, but stated that they continue to work with all agencies and departments to provide EA services and approximately 95 percent of the federal civilian .gov user population is protected by at least one EA and an OA of NCPS block 2.2 information sharing capabilities in 2017. NPPD officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. NEXT GENERATION NETWORKS PRIORITY SERVICES (NGN-PS) NATIONAL PROTECTION AND PROGRAMS DIRECTORATE (NPPD) NGN-PS is intended to address an emerging capability gap in the government’s emergency telecommunications service, which prioritizes select officials’ phone calls when networks are overwhelmed. NPPD executes NGN-PS through commercial telecommunications service providers, which addresses the government’s requirements as they modernize their own networks. NPPD is executing NGN-PS in two phases—(1) voice and (2) data and video. Initial operational capability for voice phase wireless capabilities achieved in August 2017. Acquisition of data and video phase capabilities to begin in September 2021. GAO last reported on this program in April 2017 (GAO-17-346SP). In November 2017, the Department of Homeland Security’s (DHS) Chief Financial Officer approved a revised life-cycle cost estimate (LCCE) for NGN-PS, which includes costs for the entire program’s voice phase and eliminates operations and maintenance (O&M) costs. The program removed O&M costs because capabilities acquired through NGN-PS are transferred to and funded through NPPD’s Priority Telecommunications Service (PTS) once they become operational. NGN-PS is currently focused on delivering its voice phase, which is divided into three increments: Increment 1 maintains current priority service on long distance calls as commercial service providers update their networks; Increment 2 delivers wireless capabilities; and Increment 3 is intended to address landline capabilities. The program’s previous LCCE and current acquisition program baseline (APB) only include costs associated with increments 1 and 2. NPPD officials told GAO they plan to update the program’s APB in January 2018 to include costs, schedule, and performance goals for increment 3 and expect to receive DHS leadership approval to initiate development by August 2018. NGN-PS remains on track to meet its cost and schedule goals for the first two increments of the voice phase. The program’s full operational capability (FOC) for increment 1 previously slipped from June 2017 to March 2019, which NPPD officials attributed to funding shortfalls. NGN-PS achieved initial operational capability (IOC) for increment 2 wireless capabilities in August 2017 when priority service via cellular towers was demonstrated by the program’s largest service provider. The program projects an acquisition affordability gap of $92 million from fiscal years 2018 to 2022. However, DHS’s current funding plan does not include funding for increment 3, which accounts for the funding shortfall in fiscal years 2021 and 2022. NPPD officials said they anticipate receiving an additional $79 million in acquisition funding over this 2-year period, but will continue to prioritize capabilities if additional funding is not provided. These officials also said the program has achieved cost savings on increments 1 and 2 that will mitigate some of the projected shortfall in fiscal years 2018 and 2019. National Protection and Programs Directorate (NPPD) NEXT GENERATION NETWORKS PRIORITY SERVICES (NGN-PS) NGN-PS was established in response to an Executive Order requiring the federal government to have the ability to communicate at all times during all circumstances to ensure national security and manage emergencies. A Presidential Policy Directive issued in July 2016 superseded previous directives requiring continuous communication services for select government officials. According to NPPD officials, the new directive validates the program’s requirements for the voice phase and was used to develop requirements for the video and data phase. The program expects to begin the acquisition of the phase 2 for video and data in September 2021. In July 2017, NPPD reported that the program needed a systems engineer and was mitigating the vacancy with contracted support staff. The program also identified a need for an additional systems engineer and program support staff starting in fiscal year 2019 to support the start of increment 3. In August 2017, NPPD officials told GAO they continue to face challenges hiring and retaining engineers with adequate experience because of competition with the private sector. The program has historically mitigated staffing gaps by leveraging support from contracted and PTS program staff, as needed. In addition to activities identified in this assessment, NPPD officials stated that the program has received Joint Requirements Council validation of the phase 2 concept of operations and DHS leadership approval of the phase 2 operational requirements document. As of January 2018, the updated APB was in the approval process. NPPD officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. NATIONAL BIO AND AGRO-DEFENSE FACILITY (NBAF) SCIENCE AND TECHNOLOGY DIRECTORATE (S&T) The NBAF program is constructing a state-of-the-art laboratory in Manhattan, Kansas to replace the Plum Island Animal Disease Center. The facility will enable the Department of Homeland Security (DHS) and the Department of Agriculture (USDA) to conduct research, develop vaccines, and provide enhanced diagnostic capabilities to protect against foreign animal, emerging, and zoonotic diseases that threaten the nation’s food supply, agricultural economy, and public health. Commissioning process underway, but performance will not be demonstrated until construction is complete. NBAF adequately staffed, but staffing needs will change as operational stand-up activities begin. GAO last reported on this program in April 2017 (GAO-17-346SP). The program’s annual life-cycle cost estimate (LCCE) update is within its current acquisition program baseline (APB) cost thresholds and, according to NBAF officials, the program remains on track to meet its schedule goals. In August 2017, NBAF officials said that construction activities thus far—such as pouring concrete for the main laboratory and steel framing—have proceeded as anticipated and will continue through December 2020. NBAF officials told GAO the program has already received full acquisition funding for facility construction efforts through federal appropriations and gift funds from the state of Kansas. As construction continues, the program plans to begin operational stand-up activities for the facility. However, a potential affordability gap may delay the program’s ability to complete these stand-up activities, which are needed to begin conducting laboratory operations. The program was not included in DHS’s funding plan to Congress for fiscal years 2018 to 2022 because DHS did not report operations and maintenance (O&M) funding for individual programs. However, NBAF officials anticipate receiving only $149 million in O&M funding to cover an estimated $239 million in O&M costs over the next 5 years, resulting in a projected shortfall of approximately $90 million. NBAF officials stated the O&M funding gap could delay a number of operational stand-up activities, including plans to award a management operations and research support contract in October 2018, the purchase of laboratory and information technology equipment, and hiring of operations management staff. According to NBAF officials, if operational stand-up activities are delayed, there is a risk the facility will not be fully operational by December 2022, as is currently planned. This may delay the transition from the Plum Island Animal Disease Center, which is nearing the end of its useful life. NBAF officials reported that S&T plans to communicate the program’s future funding needs to DHS leadership through the annual budget process. If the program does not receive the funding it requests, these officials stated that S&T will prioritize the operational stand-up activities that best reduce the risk of schedule delays. Science and Technology Directorate (S&T) NATIONAL BIO AND AGRO-DEFENSE FACILITY (NBAF) NBAF officials reported that they coordinate regularly with key stakeholders. For example, they hold regular coordination meetings with USDA officials to discuss NBAF operations, including operational stand-up activities and future procurement. The NBAF program office has also begun outreach to the federal regulators responsible for awarding the registrations needed for NBAF to conduct laboratory operations to begin planning for this authorization process. The NBAF program office is currently fully staffed. However, NBAF officials reported the program’s staffing needs will change in the coming years, as the program progresses through construction and begins operational stand-up of the facility. For example, over the next 5 years, the program will need to hire an operations director, bio-risk manager, chief information officer, and facility manager, among others, for NBAF operations management. However, the projected O&M funding shortfall during this same period could affect the program’s ability to hire new staff when needed and complete operational stand-up activities on time. NBAF officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. ELECTRONIC BAGGAGE SCREENING PROGRAM (EBSP) TRANSPORTATION SECURITY ADMINISTRATION (TSA) Established in response to the terrorist attacks of September 11, 2001, EBSP tests, procures, and deploys transportation security equipment, such as explosives trace detectors and explosives detection systems, across approximately 440 U.S. airports to ensure 100 percent of checked baggage is screened for explosives. EBSP is primarily focused on delivering new systems with enhanced screening capabilities and developing software upgrades for existing systems. Program is incorporating requirements to address cybersecurity risk for existing systems. EBSP plans to pursue a new procurement approach in 2018, and staffing challenges exist. GAO last reported on this program in April 2017 (GAO-17-346SP). In the program’s annual life-cycle cost estimate update, its operations and maintenance (O&M) costs exceeded the acquisition program baseline (APB) cost threshold, which constitutes a breach under the Department of Homeland Security’s (DHS) acquisition policy. The O&M costs increased when TSA accounted for updated maintenance costs and quantities, and shifted salaries from acquisition to O&M to align with DHS’s new appropriation structure. TSA officials said they did not submit a breach notification because they considered the movement of salaries to be an administrative change. The program plans to update its APB in calendar year 2018 to reflect a new plan for procuring equipment under its current acquisition strategy. TSA officials said this APB will also reflect the cost changes. In May 2016, DHS leadership approved a revised APB for EBSP, which reflects its current acquisition strategy to competitively procure systems on an ongoing basis using qualified product lists. The program’s revised APB cost thresholds decreased compared to its initial APB, which TSA officials attributed to various reasons, including shortening the program’s end date by 3 years and lower than anticipated actual costs, among other things. TSA officials told GAO that one of their primary challenges is funding, and the program is projected to face a $72 million acquisition funding shortfall in fiscal year 2018. TSA identified $70 million in carryover funding to address this gap. To mitigate anticipated funding gaps in future years, TSA officials said they may shift projects from one fiscal year to another or cancel them altogether, which may result in the delay or elimination of screening capabilities. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained O&M funding for individual programs. TSA anticipates receiving $980 million in O&M funding over this 5-year period to cover $1 billion in O&M costs. TSA officials anticipate achieving the program’s final APB milestone—initial operational capability (IOC) for systems that detect additional materials and provide an advanced threat detection algorithm—by its revised threshold date. Previously, EBSP planned to award contracts for these systems in September 2015 and September 2018, respectively. Transportation Security Administration (TSA) ELECTRONIC BAGGAGE SCREENING PROGRAM (EBSP) As of December 2017, EBSP had deployed 1,664 explosives detection systems and 2,638 explosives trace detectors nationwide. In 2018, EBSP plans to pursue a new competitive procurement approach to replace and update existing systems that will include: New contract vehicles to better align EBSP procurement activities with the program’s strategic roadmap. Updates to EBSP’s vendor qualification process to allow for vendor collaboration before testing. Transitioning from procuring systems with different sizes and speeds to two types: (1) inline systems that integrate with a baggage handling system and are linked through a network and (2) standalone systems that may be integrated with a baggage handling system, but not linked to a network. The program is in the process of updating its acquisition documentation to reflect this new procurement approach and TSA officials anticipate opening a qualified products list for new systems starting in June 2018. TSA officials said that staffing remains a challenge for the program because of cuts in government and contracted mission support staff and critical vacancies, including a division director. In September 2017, TSA reported that existing personnel across the program have assumed responsibilities of these positions, but workloads are unsustainable at current staffing levels. TSA officials stated that EBSP continues to procure, test, and deploy equipment and capabilities to recapitalize older equipment, improve security screening capability at airports, and enhance the detection capabilities of the fleet. They added that TSA employs extensive testing to verify the suitability and effectiveness of equipment to meet requirements. Moving forward, EBSP intends to establish IOC milestones for new technologies and capabilities, while allowing TSA the flexibility to make risk-based decisions. TSA officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. PASSENGER SCREENING PROGRAM (PSP) TRANSPORTATION SECURITY ADMINISTRATION (TSA) The Department of Homeland Security (DHS) established PSP in response to the terrorist attacks of September 11, 2001. PSP identifies, tests, procures, deploys, and sustains transportation security equipment across approximately 440 U.S. airports to help TSA officers identify threats concealed on people and in their carryon items. The program aims to increase threat detection capabilities, improve the efficiency of passenger screening, and balance passenger privacy and security. Started testing on the Credential Authentication Technology in TSA Precheck lanes during 2017. Critical staffing vacancies persist and may delay followon acquisition planning efforts. GAO last reported on this program in April 2017 (GAO-17-346SP). In May 2017, the DHS Under Secretary for Management (USM) approved the sixth version of the PSP acquisition program baseline (APB) and subsequently removed the program from breach status. In January 2016, TSA declared a schedule breach of a key milestone—acquisition decision event (ADE) 3—for the Credential Authentication Technology (CAT) because of delays in incorporating new cybersecurity requirements. Consistent with previous versions of the program’s APB, the new baseline modified the program’s cost, schedule, and performance parameters. For example, the program established the following: Separate CAT milestone dates for TSA Precheck and standard lanes. TSA officials stated there is no capability difference between screening lanes, but an initial focus on TSA Precheck lanes will assist with demonstrating CAT requirements and resolving past testing issues that contributed to an initial 4-year delay to CAT’s full operational capability (FOC) date. PSP now plans to reach FOC for CAT more than 5 years later than its revised target of June 2018 and more than 9 years later than initially planned. New FOC dates for other technologies, which TSA officials said are expected to be more realistic about delivery dates and account for changes in some FOC quantities. For example, TSA requested and received approval in September 2017 to increase FOC quantities for second generation Advanced Technology (AT-2) TierI systems to meet increasing passenger volume and expected airport growth. In May 2017, the USM also directed the program to revise its life-cycle cost estimate (LCCE) in response to less-than-expected funding levels. The new LCCE also shifted some acquisition costs to operations and maintenance (O&M) to be consistent with DHS’s new appropriation structure. TSA officials believe the new funding profile will be sufficient to sustain legacy PSP equipment, but will significantly limit the program’s ability to enhance existing equipment capabilities and support operational needs. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained O&M funding for individual programs. TSA anticipates receiving $906 million in O&M funding over this 5-year period to cover $923 million in O&M costs. 05/17 APB version 6.0 approved 03/20 CAT ADE 3 (precheck lanes) 09/21 CAT ADE 3 (standard lanes) 12/21 CAT FOC (precheck lanes) 12/23 CAT FOC (standard lanes) Transportation Security Administration (TSA) PASSENGER SCREENING PROGRAM (PSP) Automated screening lanes operational utility assessment AT-2 tier II follow-on operational test & evaluation (OT&E) TSA employs two acquisition strategies to acquire PSP systems: Qualified Product List (QPL) approach—used for proven technologies when capability requirements are rigid and contractors’ systems are mature. Any contractors’ systems that demonstrate they meet the capability requirements are added to the QPL. TSA has used this approach to acquire the second generation AT-2 systems, Bottled Liquid Scanners, and Explosive Trace Detectors. Low Rate Initial Production (LRIP) approach—used when capability requirements are flexible and contractors’ systems are evolving. Under this approach, PSP uses a series of development contracts to enhance systems’ capabilities over time. PSP is currently using this approach to acquire CAT. TSA planned to initiate new acquisition programs starting in fiscal year 2018 that will replace PSP, but this effort may be at risk because of understaffing. In August 2017, TSA reported that its checkpoint screening division—whose staff is concurrently responsible for PSP and its follow-on programs—continued to have staffing vacancies, including project managers, analysts, and a deputy program manager. TSA is mitigating these gaps with existing staff and, according to TSA officials, the staffing challenges may decrease because the new programs may be delayed in response to funding cuts. TSA officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. TECHNOLOGY INFRASTRUCTURE MODERNIZATION (TIM) TRANSPORTATION SECURITY ADMINISTRATION (TSA) The TIM program was initiated to address shortfalls in TSA’s threat assessment screening and vetting functions by providing a modern and centralized end-to-end credentialing system. The TIM system will manage credential applications and the review process for millions of transportation workers and travelers across three segment populations: maritime, surface, and aviation. It will support large programs, such as TSA Precheck and the Transportation Worker Identification Credential. Operational testing identified limitations with the system; cybersecurity has not been assessed. Staffing gaps in key areas, such as systems engineering and testing, are a significant program risk. GAO last reported on this program in October and April 2017 (GAO-18-46, GAO-17- 346SP). The TIM program is on track to meet the cost and schedule goals in its current acquisition program baseline (APB). In September 2016, the Department of Homeland Security’s (DHS) Under Secretary for Management approved the TIM program’s revised APB—which reflected a new technical approach to deploy capabilities using an agile development methodology—and subsequently removed the program from breach status, authorizing TSA to resume new development after a nearly 22-month pause. DHS leadership paused new development in January 2015 after the program breached its initial APB goals for various reasons, including technical challenges, insufficient contractor performance, and the addition of new requirements after DHS leadership had approved the program’s initial acquisition strategy. The program now plans to achieve full operational capability (FOC) in March 2022 and its life-cycle cost estimate (LCCE) increased to account for this 6-year schedule slip and integration with the Transportation Vetting System, among other things. Since the program’s re-baseline, it has been developing and deploying capabilities in 2-month incremental agile releases, such as functionality to transition TSA Precheck program to the TIM system. The program updated its LCCE in November 2017 to inform a program review with DHS leadership, which is within its current APB cost thresholds. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained operations and maintenance (O&M) funding for individual programs. TSA officials anticipate receiving approximately $318 million in O&M funding over this 5-year period, which includes nearly $118 million in fees from vetting programs. TSA officials plan to realign $57 million to cover the projected acquisition shortfall, and said any additional surplus funding available in fiscal year 2022 would be used to implement new system requirements identified by the program’s customers. In November 2017, TSA officials identified several program and technical risks that could affect the program’s cost, schedule, and performance. These risks include an increase in new requirements and increased risk of system vulnerabilities and cyberattacks if the program does not identify a provider to perform software updates on open source code. TSA officials are working to mitigate these risks. Transportation Security Administration (TSA) TECHNOLOGY INFRASTRUCTURE MODERNIZATION (TIM) Under the program’s new technical approach, TSA plans to replace the TIM system’s existing commercial-off-the-shelf applications with open source applications—software that can be accessed, used, modified, and shared by anyone—and move to a new virtual environment. The program’s new agile development methodology develops, tests, and deploys capabilities using an iterative, rather than a sequential approach. Consistent with this strategy, TSA awarded task orders in 2016 and 2017 totaling $34.5 million to the program’s existing contractor for agile design and development services, and plans to competitively award a new contract by May 2018. In October 2017, GAO found that TSA had not fully implemented several leading practices to ensure successful agile adoption. GAO also found that TSA and DHS needed to conduct more effective oversight of the TIM program to reduce the risk of repeating past mistakes. DHS concurred with all 14 recommendations made by GAO to improve program execution and oversight, and identified actions DHS and TSA can take to address them. TSA reported that staffing challenges are a significant risk to the program’s success and identified gaps in key areas—such as systems engineering, testing, and agile development. Program officials told GAO these positions cannot be filled because of a hiring freeze within TSA, which the component has imposed to assess their current workforce and restructure, if necessary. Program officials told GAO they requested waivers from the hiring freeze and, as of January 2018, they had received approval to hire 4 additional staff. TSA officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. FAST RESPONSE CUTTER (FRC) UNITED STATES COAST GUARD (USCG) The USCG uses the FRC to conduct search and rescue, migrant and drug interdiction, and other law enforcement missions. The FRC carries one cutter boat on board and is able to conduct operations in moderate sea conditions. The FRC replaces the USCG’s Island Class patrol boat and provides improved fuel capacity, surveillance, and communications interoperability with other Department of Homeland Security (DHS) and Department of Defense assets. FRC found operationally effective and suitable, and all key performance parameters validated. Main diesel engine issues persist, which may require further retrofits. GAO last reported on this program in March and April 2017 (GAO-17-218, GAO-17- 346SP). According to USCG officials, the FRC program is on track to meet its current cost and schedule goals. The USCG plans to acquire 58 FRCs and, as of September 2017, 25 had been delivered and 19 were on contract. To inform the budget process, the program updated its life-cycle cost estimate in June 2017, which is within its current acquisition program baseline (APB) cost thresholds. Previously, the program’s initial operational capability (IOC) date slipped after a bid protest related to the program’s initial contract award—now known as phase 1—and the need for structural modifications. USCG officials attributed the 5-year slip in the program’s full operational capability (FOC) date to a decrease in annual procurement quantities under the phase 1 contract. Specifically, in fiscal years 2010 and 2011, the quantities decreased from 6 FRCs per year to 4. In May 2014, the USCG determined that it would procure only 32 of the 58 FRCs through this contract and initiated efforts to conduct a full and open competition for the remaining 26 vessels—known as phase 2. In May 2016, the USCG awarded the phase 2 contract for the remaining 26 FRCs, which has a potential value of $1.42 billion. Under the phase 2 contract, the USCG can procure 4 to 6 FRCs per option period. The USCG ordered 6 FRCs at the time of the phase 2 award and, in June 2017, exercised an option for an additional 6 FRCs. The USCG has established that the annual procurement quantity will be dictated by funding levels, and funding shortfalls could cause further schedule delays. The affordability gap from fiscal years 2018 to 2022 may be overstated because—as we found in April 2015—DHS’s funding plan to Congress does not contain operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving $1.6 billion in O&M funding over this 5-year period. USCG officials stated that they expect to exercise an option for 4 FRCs in fiscal year 2018 and that the USCG plans to prioritize acquisition funding in fiscal years 2019 and 2020 to procure the final 10 hulls and complete procurement of all 58 FRCs. United States Coast Guard (USCG) FAST RESPONSE CUTTER (FRC) The USCG continues to work with the contractor—Bollinger Shipyards, LLC—to address issues covered by the warranty and acceptance clauses for each ship. For example, 18 engines—9 operational engines and 9 spare engines—have been replaced under the program’s warranty. According to USCG documentation, 65 percent of the current issues with the engines have been resolved through retrofits; however, additional problems with the engines have been identified since our April 2017 review. For example, issues with water pump shafts are currently being examined through a root cause analysis and will be redesigned and are scheduled to undergo retrofits starting in December 2018. We previously found that the FRC’s warranty resulted in improved cost and quality by requiring the shipbuilder to pay for the repair of defects. As of September 2017, USCG officials said the replacements and retrofits completed under the program’s warranty allowed the USCG to avoid an estimated $104 million in potential unplanned costs—of which $63 million is related to the engines. The FRC program does not have any critical staffing vacancies, but the USCG identified insufficient staffing for shore-side support groups as a potential risk that could affect the asset’s operations. These groups provide maintenance to the FRCs while they are in port. In order to mitigate this staffing issue, the USCG is using commercial contracts for maintenance to supplement the capacity of the USCG’s maintenance staff. USCG officials stated that the FRC program is fully funded, executable, and on track to reach FOC by March of 2027. They added that FRCs were recently delivered to locations in Mississippi, Alaska, and Hawaii. USCG officials stated that FRCs are integral to USCG operations, such as providing critical support during the recent hurricane season, and that the program office continues to work with the contractor and stakeholders to quickly and properly address issues with FRCs as they are identified. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. H-65 CONVERSION/SUSTAINMENT PROGRAM (H-65) UNITED STATES COAST GUARD (USCG) The H-65 aircraft is a short-range helicopter that the USCG uses to fulfill its missions, including search and rescue, ports and waterways security, marine safety, and defense readiness. The H-65 acquisition program increased the fleet’s size by 7 aircraft, added armament capabilities, upgraded navigation systems, and replaced each of the helicopters’ engines. The program is currently focused on upgrades to radar sensors, the automatic flight control system (AFCS), and avionics. Operational assessment of avionics upgrade planned to start in February 2018. Program fully staffed, but schedule slips raise risks with future staffing requirements. GAO last reported on this program in April 2017 (GAO-17-346SP). As of November 2017, the program remains in breach of its current acquisition program baseline (APB). In November 2016, the USCG notified Department of Homeland Security (DHS) leadership that it would not complete all activities required—including developmental testing and an operational assessment—to achieve acquisition decision event (ADE) 2C for low-rate initial production of the avionics and AFCS upgrades by its current APB threshold date of March 2017. USCG officials primarily attributed these delays to an underestimation of the technical effort necessary to meet the requirements and have subsequently worked with the contractor to continue development of avionic upgrades. In January 2017, DHS leadership directed the program to update its APB, life-cycle cost estimate (LCCE) and test and evaluation master plan by May 2017. However, the USCG did not meet this deadline, in part, because it decided to add a service life extension program (SLEP) to the H-65 program. The SLEP is expected to extend the current 20,000 flight hour service life of each aircraft by another 10,000 flight hours by replacing obsolete aircraft components. USCG officials stated that this will allow the USCG to delay purchasing new aircraft to prioritize funding for the Offshore Patrol Cutter. USCG officials plan to obtain approval for the SLEP when the program submits its revised APB for DHS approval, which is expected by March 2018. The program is revising its LCCE, but provided an update in June 2017 to inform the budget process. This update exceeds its current APB thresholds because it includes an initial estimate for the SLEP. The USCG estimates that the SLEP will cost $54 million for the entire fleet. USCG officials attributed the increase in operations and maintenance (O&M) costs to the additional extension of the aircraft’s operational life. The program’s O&M costs previously increased due to the USCG’s decision to extend the aircraft’s operational life from 2030 to 2039. The affordability gap from fiscal years 2018 to 2022 may be overstated because— as we found in April 2015—DHS’s funding plan to Congress does not contain O&M funding for USCG programs. USCG officials anticipate receiving $1.6 billion in O&M funding over this 5-year period. United States Coast Guard (USCG) H-65 CONVERSION/SUSTAINMENT PROGRAM (H-65) The USCG awarded new contracts to Rockwell Collins—the original equipment manufacturer of the legacy AFCS and avionics—to address the challenges encountered with development of the new upgrades. Specifically, the program awarded new contracts to support continued development of the AFCS and avionics upgrades in July 2016 and March 2017, respectively. As of September 2017, the combined value of both contracts totaled more than $15 million. The USCG cancelled development of a dedicated surface search radar capability for the H-65 in 2014, but USCG officials said a commercial off-the-shelf weather radar with surface search capability will be installed as part of the avionics upgrade. USCG officials said there is some risk involved with extending the aircrafts’ service life beyond 20,000 flight hours since it has never been done by other agencies that operate the H-65. However, USCG officials stated that the aircraft manufacturer, Airbus, assisted the USCG’s chief aeronautical engineer in identifying specific parts needing replacement and is providing support. In July 2017, the USCG reported that the program was fully staffed, but that the schedule slips have introduced potential risks with future staffing requirements. The program is mitigating these risks by extending some military personnel and ensuring rotating personnel are replaced by new staff with the expertise needed to complete the program’s planned activities, such as testing. USCG officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. UNITED STATES COAST GUARD (USCG) The program is intended to assist the USCG in maintaining the capability to access the Arctic and Antarctic polar regions. The USCG requires its icebreaking fleet to conduct multiple missions, including defense readiness; marine environmental protection; ports, waterway, and coastal security; and search and rescue. The USCG plans to acquire three heavy icebreakers to recapitalize the only existing operational heavy icebreaker, which is nearing the end of its service life. Program initiated model testing of hull and propulsion systems, which will inform design decisions. Program office integrates USCG and Navy personnel, but funding responsibilities may cause challenges. GAO last reported on this program in September 2017 (GAO-17-698R). In June 2014, Department of Homeland Security (DHS) leadership granted the program acquisition decision event (ADE) 1 approval. The Acting Under Secretary for Management also acknowledged the USCG’s need to accelerate the acquisition process to mitigate gaps in the heavy icebreaking capability because the service life of the USCG’s only heavy polar icebreaker, which had already been extended, could end as early as 2020. In January 2018, DHS leadership approved the program’s initial acquisition program baseline (APB) establishing cost, schedule, and performance goals. The USCG planned to achieve a combined ADE 2A and 2B by December 2017, which would authorize the initiation of development efforts. According to DHS officials, this milestone was delayed to February 2018 to allow for the completion of required acquisition documents to inform the decision, such as the program’s life-cycle cost estimate and APB. The USCG is partnering with the Navy to leverage shipbuilding expertise and engaging early with potential shipbuilders through industry studies to mitigate some risks associated with the program’s accelerated acquisition schedule. However, GAO previously found that the program faces challenges in implementing the accelerated schedule. For example, the first icebreaker—which is preliminarily estimated to cost about $750 million to design and construct—would need to be fully funded in fiscal year 2019 at the same time the USCG is expecting to prioritize funding for the Offshore Patrol Cutter. In fiscal year 2017, the Consolidated Appropriations Act or associated explanatory materials, reflected funding for the program, including $150 million for advance procurement of heavy polar icebreakers and $25 million to the USCG for programmatic costs, respectively. USCG officials stated that the Navy funding could cover most of the design costs but would not cover long lead items or construction costs for any of the ships. They further stated that uncertainties with the amount and source of future appropriations have made planning the icebreaker acquisition challenging. United States Coast Guard (USCG) DHS leadership approved four key performance parameters (KPP) related to the ship’s ability to independently break through ice, the ship’s operating duration, and communications. In May 2017, the USCG began model testing of potential hull designs and propulsion configurations. USCG officials explained that the hulls of icebreakers are unique from other ships because they must balance a hull design optimized for icebreaking, which are generally broad and blunt, against a hull design optimized for seakeeping, which are generally narrow and streamlined. USCG officials noted that the power demands and propulsion system for the ship are dependent on the hull design. USCG officials stated that maneuverability was identified as a challenge during model testing and explained that azimuthing propulsors—propellers that sit below the ship and can rotate 360 degrees—offered better maneuverability than traditional propulsion systems. USCG officials said these propulsors are widely used on commercial ships, but may need modification to meet the USCG’s requirements. USCG officials anticipate results from the model testing to be completed by March 2018 and plan to use these results to inform the final specifications for the ships. The USCG established an integrated heavy polar icebreaker program office with the Navy and in 2017, DHS, the USCG, and Navy entered into several agreements that outline oversight roles, among other things. For example, these agreements state that the program will follow DHS acquisition policies with DHS leadership serving as the acquisition decision authority for program milestones. However, the Navy will review and approve acquisition documents before the program seeks DHS approval. These agreements also state that the program’s contracting actions could be funded by either USCG or Navy appropriations, and the source of the appropriations will award the contract. The program plans to competitively award a contract, which would include options for the detail design and construction for all three ships to a single shipbuilder by June 2019. Program officials stated they plan to award the contract under full and open competition to obtain competitive prices and include the construction of the three ships as options to accommodate the program’s funding uncertainties. In February 2017, the USCG awarded contracts to five shipbuilders—valued at approximately $4 million each—for design studies which will inform program decisions. Program officials stated that under these design studies contracts, the shipbuilders developed several potential ship designs and preliminary costs, with a focus on alternative propulsion options and hull designs. In August 2017, USCG officials told GAO that the program’s staffing gap was not negatively impacting program efforts. USCG officials stated that the program office had completed requirements for ADE 2A and 2B, and is on track to release the request for proposals for the detail design and construction contract by March 2018. These officials added that, during 2017, the program office refined the program’s requirements, completed ice and open water model testing, and partnered with five industry teams to evaluate multiple design solutions. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. LONG RANGE SURVEILLANCE AIRCRAFT (HC-130H/J) UNITED STATES COAST GUARD (USCG) The USCG uses HC-130H and HC-130J aircraft to conduct search and rescue missions, transport cargo and personnel, support law enforcement, and execute other operations. Both aircraft are quad-engine propeller-driven platforms. The HC-130J is a modernized version of the HC-130H, which has advanced engines, propellers, and equipment that provide enhanced speed, altitude, range, and surveillance capabilities. Performance testing of new mission system processor complete. Transfer of HC-130H aircraft to other agencies ongoing. GAO last reported on this program in April 2017 (GAO-17-346SP). During 2017, the USCG continued a nearly 3-year effort to re-baseline the program— which includes revisions to the program’s life-cycle cost estimate (LCCE) and acquisition program baseline (APB)—to account for significant changes. Specifically, the USCG decided to pursue an all HC-130J fleet and, in fiscal year 2014, Congress directed the transfer of 7 HC-130H aircraft to the U.S. Air Force. The USCG was in the process of upgrading these aircraft, but cancelled further HC-130H upgrades. In September 2017, Department of Homeland Security (DHS) leadership directed the USCG to submit the revised APB by January 2018. According to USCG officials, the re-baseline has been delayed, in part, because Congress also directed the USCG to conduct a multi-phased analysis of its mission needs. In November 2016, the USCG submitted the results of its analysis for fixed- wing aircraft, which confirmed the planned total quantity of 22 HC-130J aircraft and an annual flight-hour goal of 800 hours per aircraft. USCG officials said the results of the analysis will be reflected in the program’s revised LCCE and subsequent APB, but noted that challenges with the vendor hired to complete the LCCE revision have also contributed to delays. The program submitted cost information in June 2017 to inform the budget process, but it reflected no updates from the program’s November 2011 LCCE. USCG officials previously attributed the acquisition cost growth and schedule slip from the program’s initial APB to the increase in HC-130J quantities from 6 to 22. However, when the revised LCCE is complete, estimated costs may decrease since the HC-130J aircraft are less expensive to maintain. As of December 2017, USCG officials stated they had received 11 HC-130J aircraft and had awarded contracts for 3 more—some of which were not requested. USCG officials previously stated that the program needs to acquire 1-2 HC-130J aircraft per year to meet its full operational capability (FOC) date. However, it is unclear how the USCG will meet its FOC date because it only requested funding for 1 aircraft over the next 5 years. The affordability gap from fiscal years 2018 to 2022 may be overstated because—as we found in April 2015—DHS’s funding plan to Congress does not contain operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving approximately $1.4 billion in O&M funding over this 5- year period. United States Coast Guard (USCG) LONG RANGE SURVEILLANCE AIRCRAFT (HC-130H/J) In December 2013, Congress directed the transfer of 7 HC-130H aircraft to the U.S. Air Force for modifications—which consists of upgrades and installing a fire retardant delivery system—and subsequent transfer to the U.S. Forest Service. This direction factored into the USCG’s decision to pursue an all HC-130J fleet. As of December 2017, the Forest Service had not yet received any modified aircraft primarily because of issues with contractors. According to USCG officials, the original contract the Air Force awarded to install the fire retardant delivery system in May 2016 was terminated 7 months later due to an unqualified vendor and a new contract has not yet been awarded. In the meantime, the Forest Service is using 2 of the 7 HC-130Hs. USCG officials said these aircraft are not modified, but outfitted with a less effective firefighting device. As of November 2017, the USCG plans to operate 14 of its HC-130H aircraft until the end of their service lives or until they can be replaced with new HC-130J aircraft. However, as previously discussed, the USCG has not requested funding for the additional HC-130J aircraft to support this plan. In October 2017, USCG officials reported that they were in the process of hiring staff to address the program’s staffing gap. USCG officials provided technical comments on a draft of this assessment, which GAO incorporated, as appropriate. MEDIUM RANGE SURVEILLANCE AIRCRAFT (HC-144A/ C-27J) UNITED STATES COAST GUARD (USCG) The USCG uses HC-144A and C-27J aircraft to conduct all types of missions, including search and rescue and disaster response. All 32 aircraft—18 HC-144A aircraft and 14 C-27J aircraft—are twin-engine propeller driven platforms. The interior of both aircraft are able to be re-configured to accommodate cargo, personnel or medical transports. Developmental testing of new mission system processor is ongoing. Program continues to face challenges related to purchasing spare parts and accessing technical data. GAO last reported on this program in April 2017 and March 2015 (GAO-17-346SP, GAO-15-325). USCG officials said the program is on track to meet the cost and schedule goals in its current acquisition program baseline (APB), which Department of Homeland Security (DHS) leadership approved in August 2016 to reflect the restructuring of the HC-144A acquisition program. The USCG initially planned to procure a total of 36 HC-144A aircraft, but reduced that number to the 18 it had already procured after Congress directed the transfer of 14 C-27J aircraft from the U.S. Air Force to the USCG in fiscal year 2014. The program’s APB divides the program into two phases: phase 1 includes acceptance of the 18 HC-144A aircraft and upgrades to the aircraft’s mission and flight management systems, and phase 2 includes acceptance of and modifications to the C-27J aircraft to meet the USCG’s mission needs. In October 2017, USCG officials told GAO that the program had initiated phase 1 efforts to upgrade the first HC-144A aircraft. The USCG plans to complete upgrades on all HC-144As by the end of fiscal year 2021. For phase 2, the USCG has accepted all 14 C-27Js from the U.S. Air Force and plans to complete the modification of all C-27Js by March 2025 to achieve full operational capability (FOC). To inform the budget process, the program updated its life-cycle cost estimate (LCCE) in June 2017, which is within its current APB cost thresholds. This estimate includes C-27J modification costs, such as installation of a new sensor package and new mission system processor. The program’s LCCE for the 36 HC-144A aircraft previously increased to $28.7 billion in 2012 when the USCG accounted for 5 years of additional costs, among other things. The current LCCE represents a considerable decrease, but also reflects a reduction in the number of aircraft and planned flight hours. The affordability gap from fiscal years 2018 to 2022 may be overstated because—as we found in April 2015—DHS’s funding plan to Congress does not contain operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving nearly $1.7 billion in total funding over this 5-year period to cover nearly $1.8 billion in total costs. United States Coast Guard (USCG) MEDIUM RANGE SURVEILLANCE AIRCRAFT (HC-144A/C-27J) The USCG still faces challenges in transitioning the C-27J into the USCG fleet. In March 2015, GAO found that the successful and cost-effective fielding of the C-27J aircraft is contingent on the USCG’s ability to address risk areas including, purchasing spare parts and accessing technical data, among other issues. According to USCG officials, the program continues to face challenges purchasing spare parts and accessing technical data. The program is reliant on the aircraft original equipment manufacturer for about 35 percent of spare C-27J parts. For other parts, USCG officials said that the USCG continues to look for ways to provide the same or similar parts for the aircraft at a faster rate and the USCG plans to award contracts to two additional manufacturers in calendar year 2018. USCG officials stated that retrieving technical data for the C-27J aircraft remains a challenge, but the USCG is working with the Department of Defense to obtain rights to data currently owned by the original equipment manufacturer. Once the USCG receives appropriate rights to C-27J technical data, the USCG officials said they can begin modification of the aircraft. The USCG also plans to purchase the same surface search radar used on the HC-144A or the HC-130J for the C-27J, which will give the USCG some commonality in maintenance, logistics, and training for this aspect of the aircraft. In October 2017, USCG officials told GAO that the program’s staffing is adequate and the gap has not negatively affected the program. USCG officials stated that the program remains on track to meet the cost, schedule, and performance goals outlined in its current APB and that they monitor APB key parameters in accordance with DHS guidance. These officials added that market research continues to increase supply chain sources and to identify products for new mission systems. USCG officials also provided technical comments, which GAO incorporated as appropriate. NATIONAL SECURITY CUTTER (NSC) UNITED STATES COAST GUARD (USCG) The USCG uses the NSC to conduct search and rescue, migrant and drug interdiction, environmental protection, and other missions. The NSC replaces and provides improved capabilities over the USCG’s High Endurance Cutters. The NSC carries helicopters and cutter boats, provides an extended on-scene presence at forward deployed locations, and operates worldwide. Follow-on operational testing began in October 2017, but cybersecurity testing delayed. The USCG is conducting a study to determine root cause of propulsion system issues. GAO last reported on this program in March and April 2017 (GAO-17-218, GAO-17- 346SP). In November 2017, Department of Homeland Security (DHS) leadership approved a revised acquisition program baseline (APB), which accounted for the addition of a ninth NSC to the program of record. The USCG originally planned to acquire only eight NSCs; however, in the Consolidated Appropriations Act of 2016, Congress directed that not less than $640 million be immediately available and allotted to contract for the production of a ninth NSC. In December 2016, the USCG awarded a contract to produce the ninth NSC and, as of November 2017, six NSCs had been delivered and three were under construction. The USCG anticipates delivery of the ninth NSC in September 2020, which coincides with the program’s prior APB threshold date for full operational capability (FOC). However, the revised APB extends this date by 1 year to account for any risks in delivering the additional ship. The program’s FOC date previously slipped 4 years, which USCG officials attributed to funding shortfalls, among other things. The ninth NSC contributed to a $453 million and $123 million increase in the program’s APB cost thresholds for acquisition and operations and maintenance (O&M), respectively. However, the program’s revised life-cycle cost estimate (LCCE) is still lower than its initial estimate for eight ships, which USCG officials attribute to more accurate estimates. The revised LCCE also included costs for several design changes the USCG has had to implement on equipment with known issues. As of September 2017, 12 equipment systems required design changes, which totaled an estimated cost of over $260 million. This work includes structural enhancement work on the first two NSCs and the replacement of the gantry crane, which aids in the deployment of cutter boats. The affordability gap from fiscal years 2018 to 2022 may be overstated because— as we found in April 2015—DHS’s funding plan to Congress does not contain O&M funding for USCG programs. USCG officials anticipate receiving approximately $2.1 billion in O&M funding over this 5-year period to cover the NSC’s estimated $1.8 billion in O&M costs, but stated it will refine its annual budget request based on the program’s needs each year. The USCG also identified carryover funding to cover the projected acquisition funding shortfall in fiscal year 2018. United States Coast Guard (USCG) NATIONAL SECURITY CUTTER (NSC) The NSC program does not have any critical staffing vacancies. However, in July 2017, the program reported that the greatest staffing challenge is a potential extension to the program’s end date if the USCG acquires more than 9 NSCs. If this occurs, the program office must reassess future staffing requirements to ensure adequate program oversight continues until the last NSC completes post-delivery activities. In addition, the USCG has made changes to its staffing model for operating the NSCs. The USCG initially planned to implement a crew rotational concept in which crews would rotate while NSCs were underway to achieve a goal of 230 days away from the cutter’s homeport. In February 2018, USCG officials told GAO they abandoned the crew rotational concept because the concept did not provide the USCG with the expected return on investment. Instead, USCG officials said a new plan has been implemented that does not rotate crew and is anticipated to increase the days away from home port from the current capability of 185 days to 200 days. USCG officials stated that NSCs had a record year of narcotics seizures in 2017. In addition to the test activities identified in this assessment, USCG officials stated that the first follow-on OT&E event was completed in December 2017 and the first cybersecurity test event is scheduled for February 2018. They also noted that the shipbuilder continues to show improving cost performance and is completing construction within budget. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. OFFSHORE PATROL CUTTER (OPC) UNITED STATES COAST GUARD (USCG) The USCG plans to use the OPC to conduct patrols for homeland security, law enforcement, and search and rescue operations. The OPC is being designed for long-distance transit, extended on-scene presence, and operations with deployable aircraft and small boats. It is intended to replace the USCG’s aging Medium Endurance Cutters (MEC) and bridge the operational capabilities provided by the Fast Response Cutters and National Security Cutters (NSC). Program plans to refine the ship’s design, as needed, based on early operational assessment results. Program’s acquisition strategy incorporated some best practices. GAO last reported on this program in April and June 2017 (GAO-17-346SP, GAO-17-654T). According to USCG officials, the OPC program is on track to meet its cost and schedule goals. In September 2014, Department of Homeland Security (DHS) leadership approved the program’s current acquisition program baseline (APB), which accounts for schedule slips resulting from delays in awarding the program’s initial contracts and a subsequent bid protest. The USCG expects to start construction of the first OPC in fiscal year 2019 and procure a total of 25 ships. The USCG plans to initially fund one OPC per year and eventually two OPCs per year until all 25 OPCs are delivered. USCG officials have stated that additional OPC delays will decrease the USCG’s operational capacity because the MECs will likely require increased downtime for maintenance and other issues, reducing their availability. In January 2016, DHS leadership directed the USCG to revise the OPC life-cycle cost estimate (LCCE) and submit it for approval within 6 months of awarding the detailed design and construction contract for the ships—which the USCG subsequently awarded in September 2016. In June 2017, the program submitted an updated LCCE to inform the budget process that—while not approved by DHS leadership—accounts for the contract award and the program’s schedule slips. As of December 2017, the program’s revised LCCE still had not been approved. It is unclear whether it will address other issues, such as an increase in the estimated weight of each ship. The OPC’s initial LCCE was based in large part on the estimated weight of each ship. However, in November 2017, USCG officials said the ship is expected to weigh up to 35 percent more than originally estimated. Nevertheless, USCG officials expect to procure all 25 OPCs for the program’s APB objective cost of $10.5 billion because the contractor identified cost efficiencies to compensate for the increased weight. GAO previously raised questions about the OPC’s affordability and its effect on other USCG acquisition programs, such as the Heavy Polar Icebreaker. Specifically, GAO noted that the OPC procurement will consume about two-thirds of the USCG’s planned acquisition budget between fiscal years 2018 and 2032 based on recent funding history. The program’s affordability gap from fiscal years 2020 to 2022 may be overstated because—as we found in April 2015—DHS’s funding plan to Congress does not report operations and maintenance (O&M) funding for USCG programs. USCG officials anticipate receiving $103 million in O&M funding over this 5-year period. United States Coast Guard (USCG) OFFSHORE PATROL CUTTER (OPC) The USCG is in the process of completing the design of the OPC before starting construction, which is in-line with GAO shipbuilding best practices. In addition, USCG officials stated that the program is using state-of-the-market technology that has been proven on other ships as opposed to state-of-the-art technology, which lowers the risk of the program. The USCG used a two-phased down-select strategy to select a contractor to deliver the OPC. For phase 1, the USCG conducted a full and open competition and selected three contractors to perform preliminary design work. For phase 2, the USCG selected one of the phase 1 contractors—Eastern Shipbuilding—to develop a detailed design of the OPC and construct no more than the first 11 ships. The contract—worth approximately $110 million—includes separate options for each ship. The options for ships 10 and 11 were unpriced and included in the solicitation as an incentive to convert the contract type from fixed price incentive to firm fixed price. These options will be included in a repricing proposal submitted by the contractor for ships 6-9 after delivery of the first ship. USCG officials have stated the USCG will decide whether to exercise the option for ships 10 and 11 based on the contractor’s re-pricing proposal for ships 6-9. The USCG plans to re-compete the contract for the remaining 14-16 ships. The OPC program continued to increase its required staffing level and the USCG reported that adjustments to staffing will continue as the program matures. The program faces shortages including engineers, a logistics manager, and a technical director, but USCG officials said they are hiring staff to address these gaps. USCG officials stated that the OPC program is fully funded, executable, and on track to award construction for the first OPC in September 2018. These officials said design efforts are on track and the contractor is meeting the milestones to deliver the first OPC in 2021. USCG officials noted that they are continuing to increase staff at the contractor’s facility to prepare for the start of construction for the first OPC. USCG officials also provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. UNITED STATES CITIZENSHIP AND IMMIGRATION SERVICES (USCIS) The Transformation program was established in 2006 to transition USCIS from a fragmented, paper-based filing environment to a consolidated, paperless environment for processing immigration and citizenship applications. The program developed a new system architecture and delivers capability through releases that correspond to new product lines within four lines of business: Citizenship, Immigrant, Non-Immigrant, and Humanitarian. Revision of key performance parameters and test and evaluation master plan in progress. Program is reorganizing to leverage expertise within USCIS and revise its approach. GAO last reported on this program in April 2017 and July 2016 (GAO-17-346SP, GAO-16- 467). The program remains in breach of its current acquisition program baseline (APB). In September 2016, the Transformation program experienced a schedule breach when it failed to complete deployment of all the product lines associated with the Citizenship line of business. The deployment was delayed because of challenges processing new product lines on the new system architecture and other technical issues with the case management system. Prior to the breach, the program deployed six product lines, which supported approximately 24 percent of the total workload processed by USCIS in fiscal year 2016. Department of Homeland Security (DHS) leadership previously re- baselined the program in April 2015 after USCIS determined that it could not use any of the architecture delivered under its initial strategy, despite having invested more than $475 million in its development. In December 2016, DHS leadership directed USCIS to stop planning and development for new product lines, develop a breach remediation plan, and update its acquisition documentation. In February 2017, DHS leadership approved the program’s remediation plan and the program has since made progress in implementing this plan. However, DHS leadership elected to continue with the program’s pause in new development following program reviews in March 2017, July 2017, and October 2017. USCIS officials said they are revising the program’s acquisition documents—including its APB and life-cycle cost estimate (LCCE)—and plan to re-baseline by March 2018. The program updated the total costs in its LCCE to inform the budget process, but these costs do not reflect the program’s re-baselining plans. As a result, the status of the program against its cost and schedule goals is unclear. However, the program is more than 3 years past its original full operational capability (FOC) date. The affordability gap from fiscal years 2018 to 2022 may be overstated because DHS’s funding plan to Congress no longer contained operations and maintenance funding for individual programs. USCIS uses revenue from premium processing fees to fund the Transformation program and routinely collects more fees than the program’s estimated costs. USCIS officials told GAO that the program office underwent a reorganization in January 2017 to help address the program’s recent challenges. This effort included dismantling the program office and repositioning Transformation under the USCIS Office of Information Technology so the program could leverage expertise in areas such as engineering within USCIS. USCIS officials reported that the program no longer plans to deliver capability by product lines because this strategy focused too narrowly on the automation of forms associated with the lines of business. Going forward, USCIS officials said the program plans to develop capabilities that will address broader objectives, such as reducing the time it takes to process applications and decisions. The program previously made significant changes after it experienced a 5-month delay with its first release, which was deployed in May 2012. DHS attributed this delay to weak contractor performance and pursuing an unnecessarily complex system, among other things. To address these issues, the Office of Management and Budget, DHS, and USCIS determined the program should implement a new acquisition strategy, which allowed for an agile software development methodology and increased competition for development work. This strategy was reflected in the program’s April 2015 re-baseline. USCIS officials told GAO that they plan to address the Transformation program’s staffing gap now that the reorganization is complete. USCIS officials provided technical comments on a draft of this assessment, which GAO incorporated as appropriate. To help determine the extent to which the Department of Homeland Security (DHS) has taken actions to enhance its policies and processes to better reflect key portfolio management practices, we assessed the department’s requirements, acquisition management, and resource allocation policies using key practices we established in September 2012. These key practices are based on our past work, in which we examined the practices that private sector entities use to achieve a balanced mix of new projects and found that successful commercial companies use a disciplined and integrated approach to prioritize needs and allocate resources. As a result, these organizations can avoid pursuing more projects than their resources can support and better optimize the return on their investments. This approach, known as portfolio management, requires companies to view each of their investments as contributing to a collective whole, rather than as independent and unrelated. The objectives of this audit were designed to provide congressional committees insight into the Department of Homeland Security’s (DHS) major acquisition programs. We assessed the extent to which (1) DHS’s major acquisition programs are on track to meet their schedule and cost goals and (2) DHS has taken actions to enhance its policies and processes to better reflect key portfolio management practices. To answer these questions, we reviewed 28 of DHS’s 79 major acquisition programs. We reviewed all 16 of DHS’s Level 1 acquisition programs— those with life-cycle cost estimates (LCCE) of $1 billion or more—that had at least one project, increment, or segment in the Obtain phase—the stage in the acquisition life cycle when programs develop, test, and evaluate systems—at the initiation of our audit. Additionally, we reviewed 12 other major acquisition programs—including 8 Level 1 programs that either had not yet entered or were beyond the Obtain phase, and 4 Level 2 programs that have LCCEs between $300 million and less than $1 billion—that we identified were at risk of not meeting their cost estimates, schedules, or capability requirements based on our past work and discussions with DHS officials. Specifically, we met with representatives from DHS’s Office of Program Accountability and Risk Management (PARM)—DHS’s main body for acquisition oversight—as a part of our scoping effort to determine which programs (if any) were facing difficulties in meeting their cost estimates, schedules, or capability requirements. The 28 selected programs were sponsored by eight different components, and they are identified in table 7, along with our rationale for selecting them. To determine the extent to which DHS’s major acquisition programs are on track to meet their schedule and cost goals, we collected key acquisition documentation for each of the 28 programs, such as all LCCEs and acquisition program baselines (APB) approved at the department level since DHS’s current acquisition management policy went into effect in November 2008. DHS policy establishes that all major acquisition programs should have a department-approved APB, which establishes a program’s critical cost, schedule, and performance parameters, before they initiate efforts to obtain new capabilities. Twenty four of the 28 programs had one or more department-approved LCCEs and APBs between November 2008 and December 31, 2017. We used these APBs to establish the initial and current cost and schedule goals for the programs. We then developed a data collection instrument to help validate the information from the APBs and collect similar information from programs without department-approved APBs. Specifically, for each program, we pre-populated a data collection instrument to the extent possible with the schedule and cost information we had collected from the APBs and our 2017 assessment (if applicable) to identify schedule and cost goal changes, if any, since (a) the program’s initial baseline was approved and (b) January 2017—the data cut-off date of the report we issued in April 2017. We shared our data collection instruments with officials from the program offices to confirm or correct our initial analysis and to collect additional information to enhance the timeliness and comprehensiveness of our data sets. We then met with program officials to identify causes and effects associated with any identified schedule and cost goal changes. Subsequently, we drafted preliminary assessments for each of the 28 programs, shared them with program and component officials, and gave these officials an opportunity to submit comments to help us correct any inaccuracies, which we accounted for as appropriate (such as when new information was available). Additionally, in July 2017, we collected copies of the detailed data on affordability that programs submitted to inform the fiscal year 2019 resource allocation process. We also collected copies of any annual LCCE updates programs submitted in fiscal year 2017. For each of the 24 programs with a department-approved APB, we compared (a) the most recent cost data we collected (i.e., a department-approved LCCE, the detailed LCCE information submitted during the resource allocation process, a fiscal year 2017 annual LCCE update, or an update provided by the program office) to (b) DHS’s funding plan presented in the Future Years Homeland Security Program (FYHSP) report to Congress for fiscal years 2018–2022, which presents 5-year funding plans for DHS’s major acquisition programs, to assess the extent to which a program was projected to have an acquisition funding gap in fiscal year 2018. Through this process, we determined that our data elements were sufficiently reliable for the purpose of this engagement. The FYHSP reports information by the department’s new common appropriation structure, which created standard appropriation fund types including (1) procurement, construction, and improvements and (2) operations and support. We refer to these types of funding as (1) acquisition and (2) operations and maintenance throughout this report. which are listed in appendix II—and identified any significant shortfalls. Specifically, we assessed the joint requirements directives and instruction manual; DHS’s Acquisition Management Directive 102-01, Acquisition Management Instruction 102-01-001, and other related guidance; and DHS’s resource allocation directive, instruction, and handbook. First, we assessed each group of policies against the key practices using the following ratings: Met—the documents fully reflected the key practice. Partially met—the documents reflected some, but not all parts of the key practice. Not met—the documents did not reflect the key practice. We shared our preliminary analysis for each group of policies with the DHS officials responsible for implementing them—specifically, the Joint Requirements Council (JRC), PARM, and the Office of Program Analysis and Evaluation (PA&E)—to discuss our findings, identify relevant sections of the documents we had not yet accounted for, and solicit their thoughts on those key practices that were not reflected in the policies. Second, we used the scores for each group of policies to develop a department-wide rating for each key practice. When applicable, we weighted the department-wide rating based on the intent of the key practice. For example, the department-wide rating for the key practice related to resource allocation across the portfolio was based more heavily on the rating for the resource allocation policies, rather than the ratings for the requirements or acquisition management policies. Third, we rolled-up the ratings for all the key practices in a particular area—as identified in appendix II—to establish a department-wide overall rating for each key practice area. We concluded that a key practice area was met if all ratings for the individual key practices in that area were met; partially met if the ratings for the individual key practices in that area were all partially met or a mix of met and not met; or not met if the ratings for the individual key practices in that area were all not met. In addition, we reviewed documentation that resulted from DHS’s requirements, acquisition management, and resource allocation processes since January 2016 to get a sense of how the department has implemented its current policies. For example, we reviewed JRC- validated requirements documents; acquisition decision memorandums; Acquisition Program Health Assessment reports; and documentation related to the development of DHS’s fiscal year 2018 budget request and the fiscal year 2018–2022 FYHSP report, including resource allocation guidance, presentations to DHS leadership, and preliminary decisions. We also interviewed officials from the JRC, PARM, PA&E, and the Deputy’s Management Action Group to identify any current and planned initiatives to improve management of the department’s portfolio of major acquisition programs. We then compared our assessment of DHS’s current policies, practices, and planned initiatives to our previous findings and the Standards for Internal Control in the Federal Government. We conducted this performance audit from March 2017 through May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact listed above, Rick Cederholm (Assistant Director), Aryn Ehlow (Analyst-in-Charge), Pete Anderson, Lorraine Ettaro, Helena Johnson, TyAnn Lee, Alexis Olson, Sylvia Schatz, Roxanna Sun, and Lindsay Taylor made key contributions to this report. Other contributors included Mathew Bader, Carissa Bryant, Andrew Burton, Erin Butkowski, Lisa Canini, Jenny Chow, John Crawford, Lindsey Cross, Laurier R. Fish, Betsy Gregory-Hosler, Claire Li, Sarah Martin, Marycella Mierez, Erin O’Brien, Katherine Pfeiffer, John Rastler, Ashley Rawson, Andrew Redd, Jill Schofield, Charlie Shivers III, and Jeanne Sung. DHS Program Costs: Reporting Program-Level Operations and Support Costs to Congress Would Improve Oversight. GAO-18-344. Washington, D.C.: April 25, 2018. Homeland Security Acquisitions: Identifying All Non-Major Acquisitions Would Advance Ongoing Efforts to Improve Management. GAO-17-396. Washington, D.C.: April 13, 2017. Homeland Security Acquisitions: Earlier Requirements Definition and Clear Documentation of Key Decisions Could Facilitate Ongoing Progress. GAO-17-346SP. Washington, D.C.: April 6, 2017. Coast Guard Cutters: Depot Maintenance Is Affecting Operational Availability and Cost Estimates Should Reflect Actual Expenditures. GAO-17-218. Washington, D.C.: March 2, 2017. Homeland Security Acquisitions: Joint Requirements Council’s Initial Approach Is Generally Sound and It Is Developing a Process to Inform Investment Priorities. GAO-17-171. Washington, D.C.: October 24, 2016. Homeland Security Acquisitions: DHS Has Strengthened Management, but Execution and Affordability Concerns Endure. GAO-16-338SP. Washington, D.C.: March 31, 2016. National Security Cutter: Enhanced Oversight Needed to Ensure Problems Discovered during Testing and Operations Are Addressed. GAO-16-148. Washington, D.C.: January 12, 2016. TSA Acquisitions: Further Actions Needed to Improve Efficiency of Screening Technology Test and Evaluation. GAO-16-117. Washington, D.C.: December 17, 2015. Homeland Security Acquisitions: Major Program Assessments Reveal Actions Needed to Improve Accountability. GAO-15-171SP. Washington, D.C.: April 22, 2015. Coast Guard Aircraft: Transfer of Fixed-Wing C-27J Aircraft Is Complex and Further Fleet Purchases Should Coincide with Study Results. GAO-15-325. Washington, D.C.: March 26, 2015. Homeland Security Acquisitions: DHS Should Better Define Oversight Roles and Improve Program Reporting to Congress. GAO-15-292. Washington, D.C.: March 12, 2015. Coast Guard Acquisitions: Better Information on Performance and Funding Needed to Address Shortfalls. GAO-14-450. Washington, D.C.: June 5, 2014. Homeland Security Acquisitions: DHS Could Better Manage Its Portfolio to Address Funding Gaps and Improve Communications with Congress. GAO-14-332. Washington, D.C.: April 17, 2014. Homeland Security: DHS Requires More Disciplined Investment Management to Help Meet Mission Needs. GAO-12-833. Washington, D.C.: September 18, 2012. Department of Homeland Security: Assessments of Selected Complex Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010. Department of Homeland Security: Billions Invested in Major Programs Lack Appropriate Oversight. GAO-09-29. Washington, D.C.: November 18, 2008.", "summary": "Each year, the DHS invests billions of dollars in a diverse portfolio of major acquisition programs to help execute its many critical missions. DHS's acquisition activities are on GAO's High Risk List, in part, because of management and funding issues. The Explanatory Statement accompanying the DHS Appropriations Act, 2015 included a provision for GAO to review DHS's major acquisitions. This report, GAO's fourth annual review, assesses the extent to which: (1) DHS's major acquisition programs are on track to meet their schedule and cost goals, and (2) DHS has taken actions to enhance its policies and processes to better reflect key practices for effectively managing a portfolio of investments. GAO reviewed 28 acquisition programs, including DHS's largest programs that were in the process of obtaining new capabilities as of April 2017, and programs GAO or DHS identified as at risk of poor outcomes. GAO assessed cost and schedule progress against baselines, assessed DHS's policies and processes against GAO's key portfolio management practices, and met with relevant DHS officials. During 2017, 10 of the Department of Homeland Security (DHS) programs GAO assessed that had approved schedule and cost goals were on track to meet those goals. GAO reviewed 28 programs in total, 4 of which were new programs that GAO did not assess because they did not establish cost and schedule goals before the end of calendar year 2017 as planned. The table shows the status of the 24 programs GAO assessed. Reasons for schedule delays or cost increases included technical challenges, changes in requirements, and external factors. Recent enhancements to DHS's acquisition management, resource allocation, and requirements policies largely reflect key portfolio management practices (see table). However, DHS is in the early stages of implementing these policies. GAO identified two areas where DHS could strengthen its portfolio management policies and implementation efforts: DHS's policies do not reflect the key practice to reassess a program that breaches—or exceeds—its cost, schedule, or performance goals in the context of the portfolio to ensure it is still relevant or affordable. Acquisition management officials said that, in practice, they do so based on a certification of funds memorandum—a tool GAO has found to be effective for DHS leadership to assess program affordability—submitted by the component when one of its programs re-baselines in response to a breach. Documenting this practice in policy would help ensure DHS makes strategic investment decisions within its limited budget. DHS is not leveraging information gathered from reviews once programs complete implementation to manage its portfolio of active acquisition programs. DHS's acquisition policy requires programs to conduct post-implementation reviews after initial capabilities are deployed, which is in line with GAO's key practices. Acquisition management officials said they do not consider the results of these reviews in managing DHS's portfolio because the reviews are typically conducted after oversight for a program shifts to the components. Leveraging these results across DHS could enable DHS to address potential issues that may contribute to poor outcomes, such as schedule slips and cost growth, for other programs in its acquisition portfolio. GAO recommends DHS update its acquisition policy to require certification of fund memorandums when programs re-baseline as a result of a breach and assess programs' post-implementation reviews to improve performance across the acquisition portfolio. DHS concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Medicaid is jointly financed by the federal government and the states, with the federal government reimbursing states for a share of their expenditures for Medicaid covered services provided to eligible beneficiaries. The federal share of spending is based on a statutory formula that determines a federal matching rate for each state. States may provide Medicaid services under either or both a fee-for- service model and a managed care model. Under a fee-for-service delivery model, states make payments directly to providers for services provided, and the federal government reimburses the state its share of spending based on these payments. Under a managed care service delivery model, states pay MCOs a capitation payment, which is a fixed periodic payment per beneficiary enrolled in an MCO—typically, per member per month. The federal government reimburses its share of spending based on the capitation payments states made to the MCO. In return for the capitated payment, each MCO is responsible for arranging for and paying providers’ claims for all covered services provided to Medicaid beneficiaries. For example, MCOs may pay providers on a fee- for-service basis or with a monthly capitation payment per beneficiary, or through some other payment approach in which the provider assumes some risk for providing covered services. In either case, MCOs are required to report to the states information on services utilized by Medicaid beneficiaries—information typically referred to as encounter data. Figure 1 illustrates these models. Program integrity refers to the proper management and function of the Medicaid program to ensure that quality and efficient care is being provided, while Medicaid payments are used appropriately and with minimal waste. Program integrity efforts encompass a variety of administrative, review, and law enforcement strategies. State stakeholders—Medicaid managed care offices, state Medicaid program integrity units, Medicaid Fraud Control Units (MFCUs), and in many cases state auditors—and MCO stakeholders—MCOs that contract with states to deliver Medicaid services—play important roles in the oversight of managed care payment risks and have a variety of program integrity responsibilities. A stakeholder’s program integrity responsibilities can be specialized—such as for MFCUs, which focus on fraudulent behavior—or varied—such as for state Medicaid managed care offices and MCOs, which are responsible for monitoring fraud and other issues, such as compliance with quality standards or ensuring MCOs meet contract requirements. (See table 1.) Two of the stakeholders—state Medicaid managed care offices and MCOs—have responsibilities for program operation in addition to program integrity oversight responsibilities. For example, state Medicaid managed care offices’ program operations responsibilities include enrolling beneficiaries, negotiating contracts with MCOs, developing capitation rates, and making monthly capitation payments to MCOs. MCOs’ program operation responsibilities include establishing contracts with providers, creating provider networks, ensuring that enrollees have an ongoing source of primary care and timely access to needed services, and processing and paying provider claims. In a previous report, we found that state Medicaid program integrity efforts focus primarily on payments and services delivered under fee-for- service, and do not closely examine program integrity in managed care. For example, officials from five of seven states that we spoke to for that report said that they primarily focused their program integrity efforts on fee-for-service claims. They also noted that program integrity in Medicaid managed care was more complex than for fee-for-service. CMS’s program integrity responsibilities take a variety of forms. CMS issues program requirements for states through regulations and guidance; for example, regulations requiring states to establish actuarially sound capitation rates and to ensure that MCOs have an adequate network of providers, as well as to ensure that all covered services are available and accessible to beneficiaries in a timely manner. CMS also requires states to submit MCO contracts and capitation rates to CMS for review and approval, and report key information such as encounter data collected from MCOs. The agency provides technical assistance and educational support to states, including having staff available to help states with specific issues or questions, and providing courses on program integrity issues. The agency also conducts periodic reviews to assess state program integrity policies, processes, and capabilities. In addition, CMS has engaged audit contractors to help states audit providers receiving Medicaid payments, including payments made by MCOs to providers. We identified six types of payment risks through our review of Medicaid audit reports and other sources. Most of the stakeholders we spoke to agreed that these payment risks exist in Medicaid managed care. Four of these risks relate to the payments state Medicaid agencies make to MCOs, and two relate to payments that MCOs make to providers. (See figs. 2 and 3.) In terms of the relative importance of these payment risks, two payment risks were more frequently cited by stakeholders as having a higher level of risk than other types—incorrect MCO fee-for-service payments to providers and inaccurate state capitation rates. The remaining four payment risks were more frequently cited as having lower or unknown levels of risk: improper state capitation payments, state payments to noncompliant MCOs, incorrect MCO capitation payments, and duplicate state payments. (See fig. 4.) When we asked stakeholders to designate a level of risk, stakeholders whose primary responsibility is program integrity—state auditors, MFCU officials, and state Medicaid program integrity staff—were more likely to assign a higher level of risk for certain types of payment risks than state Medicaid managed care officials and MCO officials. (See app. I for additional information on risk level designation by stakeholder group.) Stakeholders provided the following examples of payment risks that they rated as having “some” or “high” risk in the state. (See table 2.) See appendix II for further examples of payment risks identified as part of our review of audits and other reports. We identified six challenges to effective program integrity oversight in Medicaid managed care based on our review of Medicaid audit reports and other sources. Among these six challenges, stakeholders most frequently cited allocation of resources, quality of data and technology, and adequacy of state policies and practices as key challenges. Some stakeholders also described strategies to address these challenges. Through our research on examples of payment risks in Medicaid managed care, we identified six areas that can present challenges to program integrity oversight, including (1) availability and allocation of resources; (2) access to and quality of data and technology; (3) state policies and practices; (4) provider compliance with program requirements; (5) MCO management of program integrity; and (6) federal regulations, guidance, and review. Allocation of resources, quality of data and technology, and state policies and practices were the three most commonly cited challenges to program integrity oversight by stakeholders. (See fig. 5.) Stakeholders described the following examples of challenges to program integrity oversight they had observed. See appendix III for more information on the particular challenges for each of the payment risks. Availability and allocation of resources. Stakeholders who cited resource allocation as an oversight challenge to managed care cited several key issues, such as the number of staff allocated to an activity, the expertise needed, and the ability to retain and replace staff. (See table 3.) Some stakeholders identified resource issues within their own organizations, while some identified resource issues they said existed in other organizations. Access to and quality of data and technology. Stakeholders who cited the quality of data and technology as oversight challenges to managed care provided examples related to timely access to data, inaccurate and unreliable data, and problems with information systems and interfaces. (See table 4.) State policies and practices. Stakeholders who cited state policies and practices as an oversight challenge to managed care described insufficient contract requirements, lack of state monitoring, and problems with state oversight. (See table 5.) Stakeholders from the state program integrity office, the MFCU, and the state auditor’s office more frequently identified state policies and practices as a challenge than stakeholders from the state Medicaid managed care agency. MCO management of program integrity. Stakeholders who cited MCO management as an oversight challenge to managed care described how inadequate MCO oversight and monitoring—as well as incomplete MCO reporting to the state agency—can increase the risk of different types of payment risks. (See table 6.) Stakeholders from the state Medicaid managed care agency, the state program integrity office, and the MFCU were more likely than MCO stakeholders to cite these issues as challenges. In particular, a few state officials noted that there was variation in size and resources among the MCOs in their respective states. Provider compliance with program requirements. Stakeholders who cited provider compliance as a challenge to oversight indicated that providers are the primary source of inaccurate payments, because of improper billing, which may include fraudulent billing. These stakeholders also stated that some types of providers presented a higher risk than others in their state. Several stakeholders pointed out that certain providers intentionally commit fraud, while others may be unaware of changes in policies or procedures and therefore unintentionally submit inaccurate claims. Several stakeholders noted that it is the responsibility of providers to bill correctly, while a few others pointed out that because the payment process is complicated, MCOs and state agencies may not identify inaccurate payments. Stakeholders also selected from a list of 19 types of providers the 3 or 4 that in their view represented the highest payment risks in the state. The two most frequently mentioned health care providers or services were (1) durable medical equipment, and (2) psychiatric and behavioral health care providers. (See table 7.) Federal regulations, guidance, and review. Over half of the stakeholders who identified federal regulations, guidance, and review as oversight challenges to managed care cited the complexity of federal regulations and the lack of federal guidance as key issues. For example, one stakeholder said that there needed to be more clarity about the new regulations for setting capitation rates for MCOs, while another said that there was a lack of clarity about the respective roles of states and MCOs in program integrity oversight. One stakeholder noted that most of the responsibility for operating the Medicaid program lies with the state, not with the federal government. Some stakeholders we interviewed identified strategies, controls, or best practices to address the challenges to oversight of Medicaid managed care payment risks. As shown in table 8, they identified a variety of strategies such as ensuring high quality data, collaboration among state agencies and MCOs, imposing sanctions on noncompliant MCOs, enhancing contract requirements, and conducting regular monitoring. CMS has taken important steps to address payment risks in Medicaid managed care, issuing a final rule, increasing guidance, and conducting oversight activities. However, some efforts are incomplete, and there are gaps in key oversight activities. In May 2016, CMS issued a final rule on Medicaid managed care. According to CMS, the rule is intended to enhance regulatory provisions related to program integrity and payment risks, among other things. These regulatory provisions varied in terms of when the requirements were applicable. For example, for contracts beginning on or after July 1, 2017, the rule requires state contracts with MCOs to require MCOs to promptly report all overpayments made to providers, and to specify the overpayments due to potential fraud; states to account for overpayments when setting capitation payment amounts; and states to establish procedures and quality assurance protocols to ensure that MCOs submit encounter data that is complete and accurate. These requirements have the potential to enhance MCO and state oversight of managed care, and address payment risks involving incorrect MCO payments to providers and inaccurate state capitation rates for MCOs. CMS is currently reviewing the rule for possible revision of its requirements and an announcement on the results of the review is expected in 2018. Most stakeholders we spoke to identified ways in which the managed care rule could have a positive impact on managed care program integrity oversight. Of the 49 stakeholders we spoke to, 28 made positive statements about the rule’s potential impact on program integrity oversight of payment risks in managed care, 9 stakeholders said they were not familiar enough with the managed care rule to comment on it, and the remaining 12 stakeholders provided a range of comments about the rule. The 28 stakeholders with positive comments identified a variety of ways in which they said the managed care rule would help, including establishing transparency in setting state capitation rates; providing clear guidelines for MCO reporting, and clear authority for states to require reporting; obtaining information on overpayments identified and collected by holding MCO leadership accountable for meeting program reducing medical costs, despite additional short-term administrative costs. Comments by the other 12 stakeholders who were familiar with the rule included statements that the rule should have been more aggressive in requiring MCOs to implement efforts related to program integrity; would have limited impact for them, because many of its requirements were already in place in their state; and set time frames for implementation that were hard to meet. In addition to issuing the rule, CMS has sought to increase guidance available to states through training, technical assistance, and other educational resources. (See table 9.) Lastly, CMS efforts have included updating the requirements used in capitation rate setting reviews, contract oversight, and other types of audits and reviews, as described below. Review of state capitation rates for Medicaid MCOs. CMS reviews states’ capitation rates at least once every year, and in 2017 made revisions to its rate review guidance to states, incorporating new requirements from the managed care rule. According to CMS officials, the agency typically conducts between 250 and 300 rate reviews annually to determine whether states’ rate development methodologies meet generally accepted actuarial principles, as well as federal laws and requirements. Review of state Medicaid MCO contracts. CMS regularly reviews state contracts with MCOs to ensure that contract provisions meet federal requirements. In 2017, CMS updated its criteria for Medicaid managed care contract review and approval, and revised the guide that it provides to states to help them develop effective MCO contracts. CMS contracted audits. In 2016, CMS began to transition and consolidate audits of providers to a type of contractor called Unified Program Integrity Contractors (UPIC). This transition is intended to integrate contracted audit activities across CMS health care programs, such as Medicaid and Medicare, according to CMS. Additionally, UPIC audits can include health care providers who participate in multiple federal programs. Within the Medicaid program, UPICs may conduct audits with states interested in pursuing what are called “collaborative audits.” CMS’s contract with UPICs allows for audits of providers in MCO networks. Focused program integrity reviews. CMS officials said that in 2016, the agency updated the review guide used to conduct focused program integrity reviews of state Medicaid managed care programs. CMS program integrity reviews have identified some common issues, such as a low number of investigations of overpayments conducted by managed care plans and a low amount of recoveries by plans. However, CMS officials stated these reviews are not focused primarily on assessing specific payment risks. For example, these reviews do not involve an actual review or audit of MCO payments to providers to assess the extent that inaccurate payments were made. Instead, they review program integrity policies and processes, such as whether and how the state monitors overpayments, and whether MCOs comply with state requirements. Despite CMS’s efforts to improve oversight of program integrity in Medicaid managed care, there have been delays in issuing guidance, and gaps in key auditing and monitoring activities. These delays and gaps are inconsistent with the agency’s current program integrity plan, which established goals for improving state oversight of program integrity in Medicaid managed care, as well as the financial accountability of Medicaid MCOs. Publication of CMS guidance that would assist states in oversight of payment risks has been delayed. CMS officials told us in April 2017 that they planned to issue a compendium of guidance related to the managed care rule’s program integrity regulations. The compendium is intended to provide guidance on (1) MCO program integrity requirements, (2) state audits of MCO encounter data that must be conducted at least every 3 years, and (3) MCO overpayments to providers. However, in September 2017, CMS officials told us that although they had a draft of the compendium, they did not have a timeline for issuing it, because the managed care rule was under review. As of May 2018, no issuance date has been set for the guidance. Over half of the stakeholders we interviewed who identified federal responsibilities as an oversight challenge to managed care cited the complexity of federal regulations and the lack of federal guidance as key issues. The lack of available federal guidance resulting from delays in issuing such guidance is inconsistent with federal internal control standards that call for federal agencies to communicate quality information to those responsible for program implementation for the purposes of achieving program objectives and addressing program risks. Until such guidance is issued, stakeholders’ ability to effectively address challenges to payment risks in Medicaid managed care will continue to be hindered. Although audits of providers that bill and are paid by MCOs can provide important information about payment risks and are included in the UPIC statement of work, only 14 of the 762 audits initiated by CMS contractors during the period of fiscal year 2014 through 2017 were managed care audits. Our review of three CMS contracted managed care audits indicated that the amount of inaccurate MCO payments to providers—as well as MCO and provider noncompliance with contracts—can be significant. For example, one audit of an MCO’s payments to selected providers found that 8.94 percent of payments were in error, representing over $4 million in overpayments for a 6-month period. This audit also identified a lack of provider compliance with requirements to provide preventive care services and care coordination to members, and a lack of MCO compliance with requirements to monitor member enrollment, resulting in the MCO paying providers for individuals who were not enrolled. CMS officials shared plans to increase collaborative audits in managed care in the future. CMS officials said the agency is in the early planning stages to pilot an audit of MCO providers in one state, with the goal of addressing challenges encountered in prior managed care audits. CMS is also in discussions with states and audit contractors to conduct potential audits and investigations in fiscal years 2018 and 2019. However, CMS and audit contractor officials identified several circumstances related to states’ contracts with MCOs that they said have created gaps in their auditing activity. According to CMS officials, states have reported a reluctance to conduct provider audits when states’ contracts with MCOs (1) allow the MCO to retain identified overpayments, or (2) do not explicitly discuss how identified overpayments are addressed. Officials with the two operating UPICs told us that CMS’s general guidance to them was to restrict their audits to states with MCO contracts where the states can recoup overpayments from the MCOs. According to one contractor, because few states have such contracts, the vast majority of the contractors’ audits are of providers paid on a fee-for-service basis. However, overpayments to providers can affect state and federal expenditures regardless of a state’s particular recoupment policy, because if they are not accounted for, they may increase future capitation rates paid to MCOs. Audit contractor officials also said the lack of access to MCO coverage and policy materials, and the inability to directly access encounter or claims data, prevent them from doing analyses to identify potential provider fraud, abuse, and waste for investigation. While CMS officials said they encourage states to participate in additional collaborative audits of managed care, they did not identify steps the agency is taking to address the circumstances that limit collaborative audits conducted. The lack of sufficient auditing in managed care is inconsistent with federal internal control standards that require federal agencies to identify risks through such activities as auditing. CMS has incomplete information on the scope and extent of MCO overpayments to providers, which results in a gap in monitoring MCO payments. Gaps in monitoring also exist because CMS lacks a process for consistently collecting information about overpayments and documenting that states account for overpayments when setting capitation rates. A few examples of these issues include the following: While CMS regularly reviews states’ proposed capitation rates, it lacks a process to consistently ensure any overpayments are accounted for by the states. According to an official with CMS’s Office of the Actuary, their review of state capitation rates does not require documentation of the amount of overpayments that occurred the prior year, how they were determined, or how they were incorporated into setting capitation rates. According to this official, issues between states and MCOs—such as contractual issues related to how overpayments are handled—are beyond the scope of their review and responsibilities. However, such information could be important to program integrity oversight; for example, 11 stakeholders we interviewed said that state capitation rates did not account for overpayments, because they had observed that overpayments were not reported by MCOs, were not monitored by the state, or both. Although some of CMS’s focused program integrity reviews have suggested that there is under-reporting of MCO overpayments to providers, CMS officials explained that these reviews are intended to assess state compliance with regulations, and not to determine the extent of under-reporting or why overpayments are under- reported. States’ and CMS’s contracted auditors have conducted only a few collaborative audits in managed care, even though such audits can identify overpayments made by MCOs to providers. These gaps in monitoring of overpayments are inconsistent with federal internal control standards that require federal agencies to monitor operating effectiveness through audits and reviews. Without more complete information on the extent of overpayments and a process to ensure they are accounted for in state capitation rates, CMS is unable to ensure that MCOs are effectively identifying overpayments and documenting that they are accounted for when reviewing and approving state capitation rates. As a result, CMS cannot be sure that states are holding MCOs financially accountable for making proper payments, that states are paying accurate capitation payments to MCOs, or that the federal government’s share of Medicaid expenditures is accurate. Managed care has the potential to help states reduce Medicaid program costs and better manage utilization of health care services. However, oversight of managed care is critical to achieving these goals. Payment risks are not eliminated under managed care; in fact, they are more complex and difficult to oversee. While CMS has taken important steps to improve program integrity in managed care—including strengthening regulations, developing guidance for states on provider enrollment in Medicaid managed care, and beginning to include managed care in the monitoring and auditing process—the efforts remain incomplete, because of delays and limited implementation. To date, CMS has not issued its planned compendium with guidance on program integrity in Medicaid managed care, taken steps to address known factors limiting collaborative audits, or developed a process to help ensure that overpayments to providers are identified by the states. Without taking actions to address these issues, CMS is missing an opportunity to develop more robust program integrity safeguards that will best mitigate payment risks in managed care. We are making the following three recommendations to CMS: The Administrator of CMS should expedite the planned efforts to communicate guidance, such as its compendium on Medicaid managed care program integrity, to state stakeholders related to Medicaid managed care program integrity. (Recommendation 1) The Administrator of CMS should eliminate impediments to collaborative audits in managed care conducted by audit contractors and states, by ensuring that managed care audits are conducted regardless of which entity—the state or the managed care organization—recoups any identified overpayments. (Recommendation 2) The Administrator of CMS should require states to report and document the amount of MCO overpayments to providers and how they are accounted for in capitation rate-setting. (Recommendation 3) We provided a draft of this product to the Department of Health and Human Services for comment. HHS concurred with these recommendations, stating that it is committed to Medicaid program integrity. HHS also cited examples of activities underway to improve oversight of the Medicaid program, such as training offered through the Medicaid Integrity Institute, and guidance provided in the Medicaid Provider Enrollment Compendium. The full text of HHS’s comments is reproduced in appendix IV. HHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Health and Human Services and the Administrator of CMS. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or at yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix V. We asked stakeholders involved in program integrity oversight to assign a level of risk—either low, some, or high—to six types of payment risks in Medicaid managed care. We interviewed officials in the following five organizations in each of 10 states: state Medicaid managed care office, state program integrity unit, Medicaid Fraud Control Unit (MFCU), state auditor’s office, and a managed care organization (MCO). (See table 1 for a description of each of these entities.) Figures 6 through 9 below illustrate the risk level stakeholders assigned to the four types of payment risk that are associated with states’ periodic capitation payments to MCOs. Figures 10 and 11 illustrate the risk level stakeholders assigned the two types of payment risks associated with MCO payments to providers. In some cases, stakeholders said they did not have enough information to assign a level of risk (“Don’t know”) or that one of the payment risks did not apply in their state (“Not applicable”). For some payment risks, the stakeholders whose primary responsibility is program integrity—state auditors, MFCU officials, and state Medicaid program integrity staff—were more likely to assign a higher level of risk than state Medicaid managed care officials and MCO officials who have responsibilities both for program operation and program integrity. For example, some of the risk levels cited in our interviews by state auditors, MFCU officials, and state Medicaid program integrity staff included the following: State auditors most frequently cited improper state capitation payments as high risk in the state. Three state auditors identified duplicate state payments as high risk. Just over half of all state auditors, MFCU officials, and state Medicaid program integrity staff identified inaccurate state capitation rates as some or high risk. In contrast, state Medicaid managed care officials and MCO officials were less likely to assign high risk to payment types. Some examples include the following: No state Medicaid managed care officials cited a high level of risk for any of the six payment types. Two MCO officials cited a high level of risk for incorrect MCO fee- for-service payments. No other MCO officials cited a high level of risk for any of the other payment types. Stakeholder views on the risk level of different payment risks are outlined in the figures that follow. Improper state capitation payments may occur when the state makes monthly capitation payments to an MCO for beneficiaries who are ineligible for or not enrolled in Medicaid, or who have died. (See fig. 6.) Inaccurate state capitation rates occur when a state established a capitation rate that is inaccurate primarily due to issues with the data used to set the rates. Data issues could include inaccurate encounter data, unallowable costs, overpayments that are not adjusted for in the rate, or older data that do not reflect changes in care delivery practices that affect MCO costs. (See fig. 7.) State payments to noncompliant MCOs occur when a state pays MCOs a periodic capitation per beneficiary even though the MCO has not fulfilled state contract requirements. Examples of unfulfilled contract requirements include an MCO failing to establish an adequate provider network, reporting inaccurate encounter data for services, or failing to report the amount of overpayments the MCO has made to providers. (See fig. 8.) Duplicate state payments to an MCO occur when a health care provider submits a fee-for-service claim to the state Medicaid program for services that were covered under the MCO contract. (See fig. 9.) Incorrect MCO fee-for-service payments occur when the MCO pays providers for improper claims, such as claims for services (1) not provided, or provided by ineligible providers; or (2) that represent inappropriate billing, such as billing individually for bundled services or for a higher intensity of services than needed. (See fig. 10.) Incorrect MCO capitation payments occur when MCOs pay providers a periodic fixed payment without assurances they have provided needed services. (See fig. 11.) To identify examples of payment risks in Medicaid managed care, we reviewed Department of Health and Human Services’ (HHS) Office of Inspector General (HHS-OIG) publications and our prior work; obtained input from the National State Auditor’s Association; and conducted literature searches and key word searches of online databases, which identified additional state audits and investigations involving Medicaid managed care payment. We grouped these examples of payment risks into six broad categories or types based on similar key characteristics. Tables 10 through 15 provide examples of each of the six types of payment risks we identified: (1) improper state capitation payments, which are state capitation payments to MCOs for ineligible or deceased individuals; (2) inaccurate state capitation rates; (3) state payments to non-compliant managed care organizations (MCO); (4) duplicate state payments to MCOs and providers; (5) incorrect MCO fee-for-service payments to providers; and (6) incorrect MCO capitation payments to providers that have not complied with program requirements. We asked 49 stakeholders involved in program integrity oversight to consider the following six challenges to effective program integrity oversight: (1) availability and allocation of resources; (2) access to and quality of data and technology; (3) state policies and practices; (4) provider compliance with program requirements; (5) managed care organization (MCO) management of program integrity; and (6) federal regulations, guidance, and review. Stakeholders were asked whether any of these presented a challenge to each of six types of payment risks in Medicaid managed care in their state, including (1) improper state capitation payments to MCOs for ineligible or deceased individuals; (2) inaccurate state capitation rates; (3) state payments to MCOs that have not fulfilled contract requirements; (4) state duplicate payments to MCOs and providers; (5) incorrect MCO fee-for-service payments to providers for improper claims; and (6) incorrect MCO capitation payments to providers that have not complied with program requirements. Figure 12 illustrates the number of times stakeholders cited a particular challenge for each of the payment risks. The frequency with which each of the challenges was identified differed to some extent for different payment risks. Some examples include the following: Quality of data and technology was the most cited challenge for duplicate state payments. State policies and practices was the most cited challenge for inaccurate state capitation rates. Provider compliance with program requirements was the most cited challenge for two payment types: (1) incorrect MCO fee-for- service payments to providers, and (2) incorrect MCO capitation payments to providers. Resource allocation was the second most cited challenge for five of the six payment risk types, although it was not the most cited challenge for any one payment risk type. In addition to the contact name above, Tim Bushfield (Assistant Director), Mary Giffin (Analyst-in-Charge), Arushi Kumar, Julie Flowers, Drew Long, Vikki Porter, Katie Thomson made key contributions to this report. Other staff who made contributions to the report were Jessica Broadus, Barbie Hansen and Erika Huber.", "summary": "Federal spending on services paid for under Medicaid managed care was $171 billion in 2017, almost half of the total federal Medicaid expenditures for that year. Federal and state program integrity efforts have largely focused on Medicaid fee-for-service delivery where the state pays providers directly, rather than managed care, where it pays MCOs. As a result, less is known about the types of payment risks under managed care. GAO was asked to examine payment risks in Medicaid managed care. In this report, GAO (1) identified payment risks; (2) identified any challenges to state oversight and strategies to address them; and (3) assessed CMS efforts to help states address payment risks and oversight challenges. To do this work, GAO reviewed findings on managed care payment risks and oversight challenges from federal and state audits and other sources. GAO also interviewed 49 state program integrity stakeholders in 10 states selected based on size, the percent of population in managed care, and geography. Stakeholders included the state Medicaid managed care office, state Medicaid program integrity unit, state auditor, Medicaid Fraud Control Unit, and an MCO. Under Medicaid managed care, managed care organizations (MCO) receive a periodic payment per beneficiary in order to provide health care services. Managed care has the potential to help states reduce Medicaid program costs and better manage the use of health care services. However, managed care payments also have the potential to create program integrity risks. GAO identified six types of payment risks associated with managed care, including four related to payments that state Medicaid agencies make to MCOs, and two related to payments that MCOs make to providers. Of the six payment risks GAO identified, state stakeholders responsible for ensuring Medicaid program integrity more often cited the following two as having a higher level of risk: incorrect fee-for-service payments from MCOs, where the MCO paid providers for improper claims, such as claims for services not provided; and inaccurate state payments to MCOs resulting from using data that are not accurate or including costs that should be excluded in setting payment rates. GAO also identified multiple challenges to program integrity oversight for managed care programs. Stakeholders most frequently cited challenges related to (1) appropriate allocation of resources, (2) quality of the data and technology used, and (3) adequacy of state policies and practices. Some stakeholders offered strategies to address these challenges, including collaborating with other entities to identify problem providers and fraud schemes, as well as having effective data systems to better manage risks. The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, has initiated efforts to assist states with program integrity oversight for managed care. However, some of these efforts have been delayed, and there are also gaps in oversight. CMS's planned Medicaid managed care guidance to states has been delayed due to the agency's internal review of the regulations; as of May 2018, no issuance date had been set for the guidance. CMS established a new approach for conducting managed care audits beginning in 2016. However, only a few audits have been conducted, with none initiated in the past 2 years. In part, this is due to certain impediments identified by states, such as the lack of some provisions in MCO contracts. CMS has updated standards for its periodic reviews of the state capitation rates set for MCOs. However, overpayments to providers by MCOs are not consistently accounted for in determining future state payments to MCOs, which can result in states' payments to MCOs being too high. Lack of guidance and gaps in program integrity oversight are inconsistent with federal internal control standards, as well as with CMS's goals to (1) improve states' oversight of managed care; (2) use audits to investigate fraud, waste, and abuse of providers paid by MCOs; and (3) hold MCOs financially accountable. Without taking action to address these issues, CMS is missing an opportunity to develop more robust program integrity safeguards that will help mitigate payment risks in Medicaid managed care. GAO recommends that CMS (1) expedite issuing planned guidance on Medicaid managed care program integrity, (2) address impediments to managed care audits, and (3) ensure states account for overpayments in setting future MCO payment rates. The Department of Health and Human Services concurred with these recommendations.", "document_type": "gao"}
{"report": "Congress provided statutory authority in 1997 for the privatization of utility systems on military installations to address DOD’s need to supply reliable, safe, and efficient utility services to its installations. In defining a utility system, the authority includes systems for the generation and supply of electric power; the treatment or supply of water; the collection or treatment of wastewater; the generation or supply of steam, hot water, and chilled water; the supply of natural gas; and the transmission of telecommunications. Included in a utility system are the associated equipment, fixtures, structures, and other improvements, as well as real property, easements, and rights-of-way. The authority states that the Secretary of a military department may convey a utility system to a municipal, private, regional, district, or cooperative utility company or other entity. DOD’s policy permits the military departments to maintain ownership of utility systems and not privatize them for unique security reasons, such as installations with highly sensitive missions, or when privatization is uneconomical. ASD (EI&E) oversees DOD’s utilities privatization program, which is part of the department’s installation energy management portfolio. In this capacity, ASD (EI&E) is responsible for developing policies and overseeing the program. There are two main sources of guidance for utilities privatization— a DOD instruction on energy management at the installation level, DOD Instruction 4170.11, Installation Energy Management, and a series of memorandums specific to utilities privatization. The instruction and memorandums direct the military departments to attempt to privatize all utility systems, unless the Secretary of the military department determines that the system is exempt from privatization for security or economic reasons. Some of the memorandums were issued to provide the military departments with guidance to implement certain changes to the statutory authority related to utilities privatization. For example, the congressional authority was amended in 2006 to require the Secretary of Defense’s (or a designee’s) approval for utilities privatization contracts with terms longer than 10 years, but not to exceed 50 years. The subsequent guidance memo delegated the approval from the Secretary of Defense to the Secretaries of the military departments and the Director of the DLA. The military departments have the responsibility for program implementation, as the statutory authority to privatize utility systems is granted to the Secretaries of the military departments. As such, the military departments determine which systems will be privatized and which systems may be exempted from privatization due to economic or security reasons. According to military department officials, each military department considers utilities privatization as an option for the recapitalization of utility infrastructure. The Army views utilities privatization as the preferred option, while the Navy and the Air Force consider utilities privatization to be one option among others. Specifically, Army officials stated that they follow the statute and ASD EI&E program guidance documents. Those documents state that utilities privatization is the preferred method for recapitalizing utility infrastructure and officials stated that the Army plans to assess all of its utility systems for privatization. The Army prioritizes systems in the worst condition and systems with important missions for privatization. According to Army officials, in cases where the utility system is in poor condition and the installation performs important missions, the Army may privatize utility systems even if the costs in the contractor’s proposal exceed the costs in the government’s “should cost” estimate by as much as 15 percent. The Air Force’s utilities privatization policy states that the program’s goal is to permanently convey utility systems on Air Force active, reserve, and guard installations to private or public utility companies in conjunction with an award of a long-term utility services contract for the operation and maintenance of those systems. The purpose of privatizing a utility system is to restore utility infrastructure to industry standards for operations, maintenance, recapitalization, health, and safety while achieving a monetary savings over the cost of continued Air Force ownership. According to Navy officials, the Navy has not pursued utilities privatization in recent years but is currently in the process of assessing utility systems for potential conveyance. Any decisions to convey utility systems will be based on a business case analysis for total ownership cost and the ability to improve reliability, resilience, and efficiency for priority missions. Navy officials noted that the Navy follows DOD policy for utility conveyance authority. DLA works with the military departments to plan for utilities privatization and procures and administers 61 utilities privatization contracts for the Departments of the Army and Air Force from the pre-solicitation phase and into the post-award phase. According to DLA officials, the entire pre- award process takes approximately 915 days, based on the assumption that the solicitation receives 1 to 6 proposals from contractors. Once an award decision is made, privatization involves two transactions with the successful contractor—the conveyance of the utility system infrastructure and the acquisition of utility services for upgrades, operations, and maintenance under a long-term contract of up to 50 years. According to DLA officials, the contract term can be up to 50 years because it allows the military departments the opportunity to spread the high costs to repair and replace existing utility infrastructure over a long period of time. The Department of the Navy administers its own utilities privatization contracts for Navy and Marine Corps installations. As of January 2017, the military departments have privatized approximately 23 percent (601 of 2,574) of their utility systems. As shown in table 1, the Army has privatized the most systems (369), followed by the Air Force (174), and then the Navy (58). In addition, table 1 shows the number of utility systems the military departments have exempted for either economic or security reasons. As of January 2017, the military departments have 600 systems that have not been privatized or exempted from privatization. The Army and the Air Force have plans to privatize more systems in the coming years. According to an ASD (EI&E) official, information residing on ICS associated with privatized utilities systems, and more broadly, information on any ICS, may be used by adversaries to gain insights into operations on installations or to conduct a cyberattack. According to U.S. Cyber Command, DOD’s ICS are a potential target and an adversary could gain unauthorized access and attack DOD in a variety of ways, including removing data from an ICS, inserting false data to corrupt the monitoring and control of utility infrastructure through ICS, and physically destroying utility infrastructure controlled by an ICS. As such, DOD’s 2015 Cyber Strategy recognizes the need to protect DOD information regardless of where it resides—on DOD’s own information systems and ICS or on contractor-owned information systems and ICS— so that DOD capabilities are not exploited, misdirected, countered, or cloned. Figure 1 illustrates a potential cyberattack using false data in an ICS. In addition, there have been reports of successful attacks using ICS associated with infrastructure. Specifically, the Office of the Director of National Intelligence issued a report in 2017 describing several of these attacks. For example, the report noted that in 2010, Stuxnet was the first computer virus specifically targeting ICS, and it allowed attackers to take control of the systems and manipulate real-world equipment without the operators knowing. The attacker targeted certain equipment at the Natanz uranium enrichment plant in Iran, manipulated computer systems that control and monitor the speed of the centrifuges, and reportedly destroyed roughly one-fifth of Iran’s nuclear centrifuges by causing them to spin out of control. The attacker increased the pressure on spinning centrifuges while showing the control room that everything appeared normal by replaying recordings of the plant’s protection system values during the attack. In another example, the report noted that in 2012, a U.S. power utility’s ICS was infected with a virus when a third-party technician used an infected USB drive to upload software to the systems. The virus resulted in downtime for the systems and delayed plant restart by approximately 3 weeks. In recognition of these threats, DOD has developed cybersecurity policies and guidance for ICS that apply to both DOD-owned ICS and contractor- owned ICS. Specifically, For DOD-owned ICS, the department has issued several policies and guidance for the cybersecurity of ICS. For example, in 2016, in response to one of our prior recommendations that ASD (EI&E) address challenges the military services faced in implementing the risk management framework guidance, ASD (EI&E) directed the services to develop plans identifying the goals, milestones, and resources needed to identify, register and implement cybersecurity controls on DOD facility-related ICS. Further, DOD issued additional guidance that was intended to assist the military services in developing implementation plans to meet these requirements. In 2016, DOD issued guidance, in the form of Unified Facilities Criteria, which provides criteria for the inclusion of cybersecurity in the design of control systems in order to address appropriate security controls during design and subsequent construction. Also, in 2016, the U.S. Cyber Command and the Office of the Secretary of Defense issued guidance that identifies device anomalies that could indicate a cyber incident, specific detection procedures to assess the anomaly, and procedures to recover electronic devices, including removing and replacing the device. For contractor-owned ICS, including ICS owned by privatized utility system owners, DOD has a Defense Federal Acquisition Regulation Supplement clause to require that contractors take steps to ensure safeguards are put in place to protect covered defense information, which is defined as unclassified controlled technical information or other information that is processed, stored, or transmitted on the contractor’s information system or ICS. Controlled unclassified information is information that requires safeguarding or dissemination controls pursuant to and consistent with law, regulations, and government-wide policies. The clause also requires the contractor to report cyber incidents. The military departments have information about utility systems that have been privatized, but they have not tracked utilities privatization contract performance or developed measurable performance standards for these contracts. Specifically, for the systems in our sample the military departments have some information on the costs for utility infrastructure improvements and commodities, system reliability, and contractor performance evaluations. Costs for Utility Infrastructure Improvements: The military departments have information on the estimated cost avoidance at the time of contract award for utility infrastructure improvements; however, none of the military departments have determined whether the utilities privatization contracts are on track to achieve those cost avoidance estimates. For example, officials at Fort Bragg, North Carolina, estimated at the time of contract award that it would have cost the Army $61.4 million to provide natural gas utility services over the life of the utilities privatization contract, while the successful proposal from the contractor estimated a cost of $52.3 million for the same services. Therefore, the Army initially projected that it would avoid an estimated cost of $9.1 million for natural gas utility services at Fort Bragg over the life of the contract. However, the estimate at the time of contract award used by each military department does not account for changes in the cost of the contract over time. Moreover, none of the military departments measure actual cost avoidance over time, and some utilities privatization contracts have experienced cost increases. Specifically, we found that six of the nine utilities privatization contracts in our sample included modifications, which increased the original cost of the contract by more than 5 percent after adjusting for inflation. For example, the contract to privatize electric and water services at Tyndall Air Force Base, Florida, had 59 modifications, which have increased the total estimated contract value by 36 percent ($42 million) to $159 million since it was awarded in September 2010. In addition, the water and wastewater privatization contract at Fort Bragg had 219 modifications, which has increased the total estimated contract value by 96 percent ($552 million) to about $1.1 billion since it was awarded in September 2007. According to military department and DLA officials, there are limitations to using the information in the modifications to analyze changes in cost over time associated with the utilities privatization contracts because some cost changes may have occurred even if the government had retained ownership of the utility system. DLA officials stated that the modifications are made for a number of different reasons, including changes in mission requirements, changes to the utility service requirements, and capital upgrade projects on the installation. According to military department officials, cost changes associated with changes in the installation’s mission would likely have occurred had the military department retained ownership and would not be a cost increase due to privatization. Thus, it is difficult to determine the extent to which cost increases affect the cost avoidance estimated at the time of contract award. In 2006, we reported that cost growth in DOD’s utilities privatization contracts may become a concern because once a utility system is privatized, the government enters into a sole-source relationship with the privatized utilities system owner, which may put the government at a disadvantage when negotiating prices for utility system changes. To mitigate this disadvantage, DLA and Air Force officials stated that they use experts who review proposals from the privatized utility system owners to help ensure that costs are fair and reasonable. Costs for Utility Commodities: Military department officials stated that they have observed reduced usage of the commodity provided by the utility, such as water usage, and thus decreased commodity costs through utilities privatization; however, installation officials have not tracked the data and associated savings. Furthermore, the officials have not determined whether any savings were fully attributable to utilities privatization, recognizing that other factors may have affected commodity usage. For example, officials at Tyndall Air Force Base, Florida, stated that repairs to their privatized water system infrastructure have resulted in less water usage, and that there has been a decrease in the number of leaks. An Army official estimated commodity cost savings by comparing commodity costs prior to utilities privatization with commodity costs after utilities privatization. This approach was based on the assumption that any such savings were primarily due to utilities privatization. However, an Army official stated that the commodity cost savings the Army estimated could be attributed to other factors outside of utilities privatization, such as decreases in base population or execution of Energy Savings Performance Contracts. Air Force and Navy officials stated they did not estimate commodity cost savings. System Reliability: Military department officials stated that they have perceived improvements in utility system reliability since utilities privatization and have access to contractor-provided data to assess reliability; however, the military departments have not used the contractor-provided data to determine reliability trends over time. For example, Army officials at Arlington National Cemetery, Virginia, stated that they could not recall an unscheduled outage since the privatization of the electric system in 2015. In addition, officials at Tyndall Air Force Base, Florida, stated that there was a significant drop in outages after the electric system was privatized in 2010. However, we found that none of the military departments have formally measured improvements in reliability due to utilities privatization, because, according to military installation officials, they did not track reliability statistics prior to utilities privatization nor were they required to do so. In addition, we found that not all installations in our sample of cases have analyzed contractor-provided outage data, which includes information on the number of scheduled and unscheduled outages and the causes of the outages, to verify perceived reliability improvements. However, officials at Hill Air Force Base, Utah, stated that the system owner provides reports that track reliability over time and trends could be determined through this data collection. As we previously reported, there are benefits to collecting utility disruption information since it can be used to identify repairs and to prioritize funding for those repairs. Contractor Performance Evaluations: The military departments use the Contractor Performance Assessment Reporting System to subjectively evaluate each utility system owner’s performance across several categories, including management, schedule, and cost control, among others; however, based on our review of the evaluations associated with the nine contracts in our sample, we found that the evaluations were anecdotal and varied in frequency and quality. While we found that the assessing officials generally reported satisfactory system owner performance, the performance periods in the evaluations varied. For example, one evaluation for the water privatization contract at Naval Air Station Key West, Florida, covered 4 years, while the subsequent evaluation for the same contract covered 1 year. Another evaluation for the natural gas privatization contract at Fort Bragg, North Carolina, covered a performance period of 1 year and 4 months. Guidance for these contractor assessments indicates that agencies should conduct contractor performance evaluations on an interim annual basis and upon final completion of the contract. In addition, evaluation information supporting ratings varied. In one evaluation for the electric and water privatization contract at Tyndall Air Force Base, Florida, an assessing official cited multiple concerns in the supporting narrative for an evaluation area and rated it as “unsatisfactory,” while the subsequent evaluation for the same contract provided an “exceptional” rating for the same evaluation area with no explanation of how previous concerns were addressed. The military departments have not tracked utilities privatization contract performance and have not developed measurable performance standards because ASD (EI&E) has not issued guidance requiring the military departments to develop metrics and measurable performance standards. Standards for Internal Control in the Federal Government state that management should design control activities—such as the establishment of performance measures and indicators—to achieve objectives. In addition, our prior work has shown that an element of sound planning focuses on developing a set of metrics that will be applied to gauge progress toward attainment of the plan’s long-term goals. The metrics can be used to evaluate the plan through objective measurement and systematic analysis to determine the manner and extent to which privatized utility systems meet measurable performance standards. According to our prior work, performance measurement focuses on whether a program has achieved its objectives, expressed as measurable performance standards. Moreover, DOD’s guidebook for the acquisition of services states that services acquisition is about acquiring performance results that meet performance requirements needed to successfully execute an organization’s mission. Those performance requirements and how the government will assess the contractor’s performance must be determined before the contract is awarded. DOD has guidance that requires the military departments to conduct a post-conveyance review for each privatized utility system. That guidance states that the military departments shall compare utilities privatization costs after the contract award to projected costs to identify whether there is a problem with cost growth. The guidance does not require the development of metrics and associated measurable performance standards to report on the performance of utilities privatization contracts. ASD (EI&E) officials stated that performance metrics are needed to improve DOD’s oversight of utilities privatization efforts. According to Standards for Internal Control in the Federal Government, it is important for management to design performance metrics and standards because they help the entity achieve its goals. For example, ASD (EI&E) officials stated that they issued a data call to the military departments in January 2017 requesting information about the performance of utilities privatization contracts. Officials noted that they received different information from each military department and did not believe that the information would enable the department to determine whether the privatized utilities systems are improving reliability or achieving the cost savings originally estimated. For example, these officials stated that some installations provided contractor performance evaluation ratings, but these ratings were anecdotal and could not be used to determine improved reliability or estimated cost savings. Air Force officials also stated that they needed performance metrics to improve their management of utilities privatization. Officials explained that the information they receive from contracting officers and contracting officer representatives specific to privatized utilities is anecdotal and qualitative, and they have no metrics in place that allow the Air Force to track the performance of utilities privatization contracts over time or to identify trends and issues that would enable the Air Force to take steps to improve utilities privatization. However, Air Force officials stated that the Air Force is working on developing a standardized reporting template, called the Monthly System Performance Report, which will enable the Air Force to track reliability for its privatized utility systems and to identify reliability trends over time. DOD’s utilities privatization program has been in place for 21 years and some information, such as the contractor-provided reliability data, is available that could be used to track performance over time. Performance metrics and standards would help ASD (EI&E) track the outcomes of the utilities privatization program. In addition, the life of utilities privatization contracts can extend to 50 years, producing a long-term, one-to-one relationship between the utility system owner and the government. The ability of ASD (EI&E), DLA, and the military departments to track performance over the life of utilities privatization contracts may help mitigate the risks of being in a one-to-one relationship with the utility system owner. Without issuing guidance that requires the military departments and DLA to develop and implement metrics and measurable performance standards to track contract performance for future utilities privatization contracts and to develop similar guidance for current utilities privatization contracts, the department will lack information on the performance of utilities privatization contracts. As a result, ASD (EI&E), the military departments, and DLA may not be able to perform effective program management and oversight for these long-term utilities privatization contracts. In November 2013, DOD issued guidance in the form of a Defense Federal Acquisition Regulation Supplement clause to establish minimum requirements for safeguarding covered defense information on a contractor’s ICS. The clause requires contractors to implement a minimum set of security controls on contractor information technology and ICS, to report cyber incidents, and to support DOD damage assessments as needed. According to DOD, the Defense Federal Acquisition Regulation Supplement clause for safeguarding covered defense information is required to be added to all new solicitations and contracts as of November 2013. The clause is not required to be incorporated retroactively into DOD contracts awarded prior to 2013, but that does not preclude a contracting officer from modifying existing contracts to incorporate the clause. To implement the clause for safeguarding covered defense information, the contractor must apply a minimum set of security controls on its ICS. For the contractor to know what the appropriate security controls are, DOD first must identify what, if any, covered defense information is provided to or developed by the contractor in performance of the contract. If the requiring activity determines that covered defense information is provided to or developed by the contractor, then the contracting officer notifies the contractor by documenting what information is considered covered defense information. Then, to secure DOD’s covered defense information, the contractor must apply adequate security to its ICS on which that information resides and document, in a system security plan, how the requirements were met or how the contractor plans to meet the requirements. When requested by the requiring activity, the system security plan should be submitted to demonstrate that adequate security has been implemented. Figure 2 shows the responsibilities for identifying, marking, and securing DOD’s covered defense information on contractor information and industrial control systems. DOD officials stated that while they have taken steps to incorporate the clause requiring the safeguarding of covered defense information into many of their utilities privatization contracts, they have not begun to implement the cybersecurity requirement in the clause to ensure that covered defense information is appropriately safeguarded for those contracts. DLA, Army, and Air Force officials stated that they have added cybersecurity requirements to some of the utilities privatization contracts they administer, but the Navy has not. Specifically: DLA: According to DLA officials, of the 61 privatized utility contracts DLA manages on behalf of the Army and Air Force, officials have incorporated the clause requiring the safeguarding of DOD covered defense information into 60 contracts, and are in the process of modifying one contract to incorporate the clause. According to DLA officials, beginning in June 2015, they determined that the utilities privatization contracts needed to be modified to incorporate the cybersecurity requirements to safeguard DOD covered defense information associated with its utilities privatization contracts for two reasons. First, DLA officials stated that they interpreted DLA- contracting guidance issued in 2015 to direct them to incorporate the clause into all contracts. Second, DLA officials stated that the clause should be applied to all utilities privatization contracts so that there was consistency across the program. Since the issuance of the DLA contracting guidance in 2015, DLA officials stated that they have provided direction to the utilities privatization contracting officers on multiple occasions to incorporate the clause into all contracts and plan to ensure that the remaining contracts are modified to include the clause. DLA officials stated that most of the contract modifications to include this clause were completed in 2015 and 2016; however, some modifications occurred as late as 2017. Army: Army officials who manage the Army’s other utilities privatization contracts stated that the clause requiring the safeguarding of covered defense information has been added to some contracts, but could not state definitively that the clause was added to all of the utilities privatization contracts that the Army manages. Army officials stated that Army contracting guidance issued in 2015 did not specifically address utilities privatization; however, the guidance did require that the clause be added to several different types of contracts, including all contracts for programs where officials expect covered defense information to be furnished by the government or developed by the contractor, and contracts that were active in fiscal year 2016 and later, among other contracts, or provide a rationale for not including the clause. Army officials stated that they did not know if their utilities privatization contracts contained covered defense information. However, Army officials determined that the guidance required the clause to be added to utilities privatization contracts because these contracts fell into the category of contracts that were active in fiscal year 2016 and later. Another contracting officer for several Army privatization contracts stated that he does not recall how information about the guidance to incorporate the clause into utilities privatization contracts was shared. However, he stated that the issue was discussed at utilities privatization meetings, and he believed that it was implied at these meetings that the clause should be incorporated into existing utilities privatization contracts. Air Force: The Air Force official who manages the Air Force’s utilities privatization program stated that two of the nine contracts managed by the Air Force included the clause, and the clause was being added to two additional contracts at the time of our review. Further, the Air Force stated that it was planning on adding the clause to the remaining five contracts. An Air Force official stated that it was not clear whether the clause was required to be incorporated into all existing utilities privatization contracts. However, since DLA added the clause across all of the utilities privatization contracts it managed, the Air Force official assumed that all non-DLA managed utilities privatization contracts should do the same. Navy: Navy officials stated that they have not taken steps to incorporate the requirement into any of their utilities privatization contracts. According to Navy officials, they have not added the cybersecurity clause to the Navy’s utilities privatization contracts because they are waiting for guidance from ASD (EI&E) regarding whether the clause is necessary for all utilities privatization contracts and, if so, additional guidance on how to implement the clause. DLA, Army, and Air Force officials stated that while they have taken steps to incorporate the clause requiring the safeguarding of covered defense information into many of their utilities privatization contracts, they have not begun to implement the cybersecurity requirement for those contracts. As previously discussed, DOD acquisition guidance states that the requiring activity, which in the case of utilities privatization contracts is the military departments, must identify what information is considered covered defense information and provide that information to the contractor. However, before officials can fully implement these requirements, they must first identify what information is considered covered defense information. According to an ASD (EI&E) official, information residing on ICS associated with privatized utility systems could be considered covered defense information because it could be used by adversaries to gain insights into operations on installations or to conduct a cyberattack. For example, information about energy or other commodity usage, water or gas pressure in pipes, or the amount of chemicals that need to be added during water treatment processes might be useful information to an adversary seeking to disrupt operations on a military installation. In one example of a cyber incident on an ICS associated with the operation of a dam in New York, a threat actor repeatedly obtained information on the status and operation of the dam, including information about the water levels, temperature, and status of the gate that controls water levels and flow rates. This access would allow the attacker to remotely operate and manipulate the dam’s gate. However, in this instance, the gate had been manually disconnected for maintenance at the time of the intrusion. In another example, threat actors obtained control-level access to a water treatment ICS and altered settings that controlled the amount of chemicals used to treat tap water and water flow rates, disrupting water distribution. The activity triggered an alert within the ICS, notifying the water treatment utility to quickly identify and reverse the chemical and flow changes, largely minimizing the impact on customers. Had the threat actors been more familiar with the flow control system, the attack could have been far more consequential. However, DLA officials stated that there are currently no procedures that state what, if any, information associated with utilities privatization contracts is considered covered defense information. DLA officials stated that they conferred with Army and Air Force officials, and DLA’s own policy division, and reached out to ASD (EI&E) to obtain a clear definition on what information associated with DOD’s utilities privatization contracts might be considered covered defense information. DLA’s efforts to obtain clarification from ASD (EI&E) on how to implement the clause for utilities privatization contracts began in 2016. For example, in 2016, DLA officials stated they met with ASD (EI&E) officials to discuss the issue of covered defense information specific to the utilities privatization program, discussing what, if any, information on ICS associated with privatized utilities should be identified as covered defense information. Further, DLA officials asked for procedures regarding what steps to take to evaluate a contractor’s compliance with the provision. In addition, DLA officials asked privatized utilities system owners to conduct a self-assessment of the cybersecurity controls they currently use for their ICS. DLA officials stated that they provided this information to ASD (EI&E) to aid decision making on how to approach cybersecurity for these systems. However, DLA officials stated that they did not receive a clear response from ASD (EI&E). DLA officials stated that because there are no procedures that definitively state which, if any, utilities privatization- related information should be categorized as covered defense information, they have been unable to provide clear procedures to the utilities privatization contractors who must implement the clause to safeguard any such information. Moreover, according to DLA officials, some of the utilities privatization contractors were reluctant to modify the contract to incorporate the clause for safeguarding DOD covered defense information because it was unclear how it was to be implemented. Also, Navy officials stated that they have not yet incorporated the clause into any of their utilities privatization contracts because they are waiting for procedures from ASD (EI&E). In addition, DLA and military department officials stated that the current costs associated with implementing the clause are unknown. Standards for Internal Control in the Federal Government require management to evaluate security threats to information technology, which can come from both internal and external sources, and periodically review policies and procedures for continued relevance and effectiveness in addressing related risks. Information technology refers to processes that are enabled by technology, including ICS, which are computer-controlled systems that monitor or operate physical utility infrastructure, among other things. DLA and military department officials stated they have not begun to implement the requirements in the clause because they are waiting for ASD (EI&E) officials to issue procedures concerning how the military departments are to determine what, if any, covered defense information associated with utilities privatization contracts is provided or developed by the contractor in performance of the contract. Such procedures are needed to help the military departments and DLA take the appropriate steps to implement the defense acquisition regulation clause for their utilities privatization contracts and safeguard covered defense information. An ASD (EI&E) official acknowledged that specific procedures concerning how the military departments are to determine what, if any, information associated with utilities privatization contracts is considered covered defense information are lacking and the office plans to update the policies. However, at the time of our review, it was not clear what that guidance will require. In the absence of a clear understanding of how to implement the clause requiring the safeguarding of covered defense information, both installation officials and some system owners reported having taken various actions to address and enhance the cybersecurity of ICS associated with privatized utility systems. For example, An Air Force installation official stated that he and an employee of the privatized utility system worked closely with the installation’s office that handles cybersecurity and followed service guidance to try to ensure mitigation of risks to and the security of the ICS. For example, officials ensured that the ICS could not be accessed remotely and that authorized users are required to use strong passwords. The Air Force official stated that the privatized utility system owner may be required to apply additional cybersecurity measures in the future, depending on what decisions are made regarding the provision to safeguard covered defense information. A Navy installation official stated that he had no knowledge of what, if any, cybersecurity practices the privatized utility system owner had implemented for the ICS it uses to help operate an electrical distribution system. However, an official from the privatized utility system owner stated that the company has adopted some cybersecurity practices, which have been audited by an independent organization for 3 of the last 4 years, and the company plans to make this a standard part of business operations. Army officials stated that the installation relies on the privatized utility system owner to employ industry practices for cybersecurity efforts. Officials from the privatized utility system owner stated that the company has robust cybersecurity practices and the ability to continuously monitor the system to detect any unusual activities. While installation officials and some system owners reported having taken some steps to address and enhance the cybersecurity of ICS associated with privatized utility systems, the lack of procedures may result in uncertainty as to whether covered defense information across utilities privatization contracts is safeguarded by the military departments and DLA. As previously reported, vulnerabilities in ICS can be exploited by various methods, causing loss of data, denial of service, or the physical destruction of infrastructure. Without procedures concerning how the military departments are to determine what, if any, covered defense information is provided to or developed by the contractor in the performance of the utilities privatization contract, the military departments and DLA may not be able to take steps to adequately and consistently protect DOD’s information associated with utilities privatization contracts. As of January 2017, the military departments have privatized over 600 utility systems, and the Army and the Air Force have plans to privatize more systems in the coming years. While the military departments have some types of information on their privatized utilities, they have not tracked utilities privatization contract performance or developed measurable performance standards, as asked for in the Standards for Internal Control in the Federal Government. In addition, while military department officials stated that they have perceived improvements in utility system reliability since utilities privatization, the military departments have not used contractor-provided data to determine reliability trends over time. Without issuing guidance that requires the military departments and DLA to develop and implement metrics and measurable performance standards to track contract performance for future utilities privatization contracts and to develop similar guidance for current utilities privatization contracts, the department will lack information on the performance of utilities privatization contracts. As a result, ASD (EI&E), the military departments, and DLA may not be able to perform effective program management and oversight for these long-term utilities privatization contracts. DOD officials stated that they have taken steps to incorporate the clause requiring the safeguarding of covered defense information into many of their utilities privatization contracts, but they have not begun to implement the cybersecurity requirement for those contracts. DLA, Army, and Air Force officials stated they have not begun to implement the cybersecurity requirement for those contracts that include the clause because ASD (EI&E) has not issued specific procedures regarding how the military departments are to determine whether covered defense information is provided to or developed by the contractor in the performance of the utilities privatization contract. The lack of procedures may result in uncertainty as to whether covered defense information across utilities privatization contracts is safeguarded by the military departments and DLA. As previously reported, vulnerabilities in ICS can be exploited by various methods, causing loss of data, denial of service, or the physical destruction of infrastructure. Without procedures concerning how the military departments are to determine what, if any, types of information are considered covered defense information and are provided to or developed by the contractor in the performance of the utilities privatization contract, the military departments and DLA will not be able to adequately and consistently protect DOD’s information associated with utilities privatization contracts. We are making two recommendations to the Secretary of Defense. The Secretary of Defense should ensure that the Assistant Secretary of Defense for Energy, Installations, and Environment, in consultation with the military departments, issues guidance requiring the military departments and DLA to develop and implement performance metrics and measurable performance standards to track utilities privatization contract performance for future utilities privatization contracts, and develops similar guidance for current utilities privatization contracts. (Recommendation 1) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Energy, Installations, and Environment (a) issues procedures concerning how the military departments are to determine what constitutes covered defense information and what, if any, of this information is provided to or developed by the contractor in the performance of utilities privatization contracts, and (b) takes appropriate steps to protect such information. (Recommendation 2) We provided a draft of this report to DOD for review and comment. In written comments, DOD concurred with both of our recommendations. DOD’s comments are reprinted in their entirety in appendix II. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Secretaries of the military departments. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact Brian Lepore at (202) 512-4523 or LeporeB@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This appendix provides information on the nine utilities privatization contracts that we selected as case studies to review. Each of seven contracts privatized one utility system, and each of two contracts privatized two utility systems, for a total of 11 utility systems covered by the nine contracts. Table 2 lists selected characteristics of each contract. In addition to the contact named above, Kristy Williams (Assistant Director), Michael Armes, John Bauckman, Emily Biskup, Vincent Buquicchio, Cаrolyṇn Cаvanаugh, Desiree Cunningham, Michael Gilmore, Simon Hirschfeld, Gina Hoover, Kush Malhotra, Richard Powelson, and Jack Wang made key contributions to this report. Defense Infrastructure: Actions Needed to Strengthen Utility Resilience Planning. GAO-17-27. Washington, D.C., November 14, 2016. Defense Infrastructure: Improvements in DOD Reporting and Cybersecurity Implementation Needed to Enhance Utility Resilience Planning. GAO-15-749. Washington, D.C., July 23, 2015. GAO, Defense Infrastructure: Actions Taken to Improve the Management of Utility Privatization, but Some Concerns Remain. GAO-06-914. Washington, D.C.: September 5, 2006. Defense Infrastructure: Management Issues Requiring Attention in Utility Privatization. GAO-05-433. Washington, D.C.: May 12, 2005.", "summary": "Since Congress provided statutory authority in 1997 for the privatization of utility systems at military installations, the military departments have privatized nearly 600 utility systems. According to DOD officials, utilities privatization enables military installations to obtain safe, reliable, and technologically current utility systems at a relatively lower cost than they would under continued government ownership. The Senate report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review DOD's utilities privatization program. This report assesses the extent to which DOD has (1) tracked utilities privatization contract performance and developed measureable performance standards, and (2) implemented cybersecurity guidance for industrial control systems associated with privatized utility systems. GAO reviewed relevant policies and internal control standards, analyzed a non-generalizable sample of utilities privatization contract documents, and interviewed DOD and selected military installation officials and privatized utility system owners. The military departments have some types of information about privatized utility systems, but they have not tracked contract performance or developed measurable performance standards for these contracts. Specifically: Costs for Utility Infrastructure Improvements: The military departments estimated the cost avoidance at the time of contract award; however, none of the military departments have determined whether the utilities privatization contracts are on track to achieve those estimates. Costs for Utility Commodities: Military department officials stated that they have observed reduced usage of commodity utilities, such as water usage, and thus decreased commodity costs, through utilities privatization; however, the officials have not tracked the data and any associated savings. Furthermore, the officials have not determined whether any savings were fully attributable to utilities privatization, recognizing that other factors may have affected commodity usage. System Reliability: Military department officials stated that they have perceived improvements in utility system reliability since utilities privatization and have access to contractor-provided data to assess reliability; however, the military departments have not used this data to determine reliability trends over time. Contractor Performance Evaluations: The military departments use the Contractor Performance Assessment Reporting System to evaluate each utility system owner's performance; however, based on GAO's review of the evaluations associated with the contracts in its sample, the evaluations were anecdotal and varied in frequency and quality. Department of Defense (DOD) guidance does not require the development of metrics and associated measurable performance standards to track utilities privatization contract performance. Without a requirement to develop these metrics and standards, DOD will lack information on the performance of utilities privatization contracts and thus may not be able to perform effective program management and oversight for these long-term contracts. DOD has taken steps to add a cybersecurity clause to its utilities privatization contracts that requires contractors take steps to ensure safeguards are put in place to protect covered defense information, which is defined as information that is processed, stored, or transmitted on the contractor's information system or industrial control systems. To implement the clause, DOD first must identify what, if any, covered defense information is provided to or developed by the contractor in performance of the contract. However, the Defense Logistics Agency (DLA) and military department officials stated that they have not begun to implement the clause because they need DOD to issue procedures concerning how the military departments are to determine what, if any, covered defense information associated with utilities privatization contracts is provided or developed by the contractor in performance of the contract. Without these procedures, the military departments and DLA will not have assurance that such information is being safeguarded. GAO recommends that DOD issue guidance requiring the military departments and DLA to develop metrics to track utilities privatization contract performance, and issue procedures concerning how the military departments are to determine what constitutes covered defense information as it relates to utilities privatization contracts. DOD concurred with both recommendations.", "document_type": "gao"}
{"report": "In recent decades, economic and demographic factors have contributed to an increase in the number of SSDI beneficiaries and increased program costs, which has reduced the size of the Disability Insurance Trust Fund reserves from a peak of $215.8 billion in 2008 to $46.3 billion in 2016. Over the past 26 years, the total number of SSDI beneficiaries more than doubled, from 4.2 million in calendar year 1990 to nearly 11 million in calendar year 2016. By contrast, during that same time, the number of workers covered by SSDI increased by less than a third—from 133 million to 171 million. In calendar year 2016, around 8.8 million workers with disabilities and 1.8 million dependents (spouses and children) received SSDI payments, totaling $142.7 billion, of which $133.6 billion was paid to the workers and $9.1 billion to their dependents. In most cases, long-term employer-sponsored private disability insurance (PDI) is paid for by the employer and provided as part of a package of benefits for employees, although sometimes employees are required to pay some of or the entire PDI premium. According to one industry survey (the most recent available), in 2013, 19 PDI companies covering about 75 percent of the PDI market policies provided PDI benefits to around 653,000 individuals, with annual payments totaling around $9.8 billion. Another industry survey estimated that the five largest insurers in the PDI market held about half of the market share of premiums paid. PDI policies can be offered either on an opt-in basis, in which employees who choose to pay for PDI receive it, or on an opt-out basis, where employees are automatically enrolled in PDI, but can decline (opt-out of) the insurance. Beyond the insurance market for PDI, workers may be eligible for other types of disability protection through their employment. For example, 38 percent of workers have employer-sponsored short-term disability coverage according to BLS, but unlike SSDI, this coverage typically lasts 6 months. In addition, state workers’ compensation programs generally provide payments and assistance to individuals who are injured on the job, while both SSDI and PDI are designed to replace lost income from the onset of any disability regardless of whether it was work-related. Also, some workers may be eligible for disability payments through defined benefit pension plans. These benefits, commonly known as disability retirement benefits, provide eligible workers with early retirement payments if they can no longer work because of the onset of a disability. According to BLS data, many workers covered by defined benefit pension plans are state and local workers, though these data do not show what portion of them are not covered by SSDI. From our literature review, we identified three distinct proposals for expanding PDI in order to potentially alleviate financial challenges facing the SSDI program. These proposals were made in studies authored by: David Babbel and Mark Meyer (Babbel and Meyer) of Charles River Associates, Rachel Greszler (Greszler) of The Heritage Foundation, and David Autor and Mark Duggan (Autor and Duggan) for The Center for American Progress and the Hamilton Project. While the proposals differed in how PDI expansion might be achieved, each proposal assumes or requires that PDI coverage would provide vocational assistance, workplace accommodations, and partial income replacement to employees with work-limiting disabilities. Each proposal assumed that PDI expansion would result in the provision of effective return–to-work assistance earlier than would occur under SSDI. According to the authors, their proposals would slow the growth of the SSDI program by increasing work attachment of potential applicants or beneficiaries of SSDI and reversing the decline in employment rates of work-capable adults with disabilities, thereby improving the long-term solvency of the Social Security system. Two of the proposals suggested piloting the approaches to assess potential savings and implementation issues. According to our analysis of SSA and BLS data, nearly all American workers pay Social Security taxes and are potentially covered by SSDI, while only a third of workers have PDI coverage. For SSDI, an estimated 96 percent of American workers, along with their employers, pay Social Security payroll taxes, a portion of which are used to fund SSDI. Of individuals aged 20 or older in 2016, 87 percent met the SSA work requirements to be eligible for benefits in the event of a disability. By contrast, as of March 2017, the Bureau of Labor Statistics (BLS) estimates that approximately 33 percent of the workforce is insured by employer-sponsored PDI where the employer pays at least some of the premium. Employees may also pay the entire premium of employer- sponsored PDI—and researchers we interviewed from three private sector organizations that survey the PDI market told us that these plans are a minority of the PDI market. However, neither BLS nor industry surveys comprehensively track the extent of PDI coverage where employees pay 100 percent of the premium cost. In addition, while SSDI coverage is higher across all industries and income levels, PDI coverage is much more prevalent at higher wage levels and in certain occupations and industries than others. In particular, as of March 2017, 60 percent of those in the highest 10 percent of wage earners had PDI, whereas 4 percent of those in the lowest 10 percent did (see fig. 1). Our analysis of BLS data found that differences in PDI coverage also exist by occupation and industry. Specifically, 60 percent of workers in business and financial operations occupations have PDI coverage, compared to 16 percent of workers in construction, extraction, farming, fishing, and forestry occupations that have PDI (see fig. 2). Broad differences in PDI coverage also exist by industry; for example, 83 percent of workers in utilities have PDI, but only 5 percent of workers in leisure and hospitality have PDI (see fig. 3). According to researchers from one organization with whom we spoke, the higher rates of PDI coverage reflect areas where labor markets are more competitive, leading employers to offer PDI to attract employees. Our review of SSDI program rules and PDI policies indicates that eligibility for PDI is similar in some ways to eligibility for SSDI. For example, both allow individuals with many types of disabilities to receive benefits until retirement, recovery, or death. However, there are also some significant differences, as SSDI and PDI have different definitions and employment requirements. According to SSDI program rules, to meet SSDI’s definition of disability, an individual must have a medically determinable physical or mental impairment that (1) has lasted or is expected to last at least 1 year or to result in death and (2) prevents the individual from engaging in substantial gainful activity. SSA uses a list of medical conditions—established in regulations—that it considers severe enough to entirely prevent an individual from working. Benefits can also be provided for medical conditions that are not on the list if the medical condition or combination of medical conditions meets or equals the severity of those on the list. SSA also considers additional factors— such as an individual’s residual functional capacity, relevant past work, age, education, and work experience. SSA can determine that the medical conditions combined with the applicable factors preclude the individual from performing his or her prior work or any other work in the national economy. Eligibility for granted SSDI benefits continues until retirement or death, or until SSA deems that the underlying medical conditions have sufficiently improved or that the individual has become gainfully employed. In contrast, typical PDI policies have provisions related to inability to work that may compensate workers in a wider range of circumstances than SSDI does, although these provisions become more strict after 2 years. For the first 2 years of PDI benefits, policies generally define disability as the inability of an individual to work his or her own occupation. For disabilities that last for more than 2 years, a typical PDI policy changes how it defines disability from the inability to work in one’s previous occupation, to the inability to work in any occupation offering a reasonable income, which was 60 percent of pre-disability earnings in the three sample policies we examined. Similar to SSDI, PDI benefit payments generally continue for the length of the disability or until retirement; however, unlike SSDI, benefits paid for certain conditions, such as mental health conditions, are generally limited to 2 years. Also unlike SSDI, PDI policies typically include a pre-existing condition provision, whereby benefits are not paid if the applicant received treatment, services, or consultation or took medication for the condition in the 3 months prior to being insured. The requisite time period between the onset of a disability and when benefits can begin is comparable between SSDI and PDI, according to our review of SSDI program rules and PDI policies; however, the time it takes to process and make decisions on claims may run longer for SSDI. For both SSDI and PDI, benefits do not usually start immediately upon disability onset. SSDI and PDI applicants must apply for benefits and usually wait for a period of time—known as a waiting period for SSDI and as an elimination period for PDI—for payments to begin. The waiting period for SSDI benefits is 5 months after disability onset. For the PDI policies we examined, the elimination period ranged from 3 to 6 months after onset. Another factor affecting the time to receipt of benefits is the time it takes to award the benefit. For PDI, federal regulations under the Employee Retirement Income Security Act of 1974 (ERISA) that govern claims in ERISA-covered plans, including disability claims, generally require initial claims to be decided within 45 days after receipt of the claim by the plan, with some ability to extend for two 30 day periods based on reasons beyond the plan’s control. PDI claimants may also appeal the initial decision. On the other hand, based on our review of SSDI program rules, claims for SSDI are not subject to timing requirements established by law. Further, denied claimants may appeal the initial decisions. The average decision time for appeals before Administrative Law Judges in fiscal year 2017 was 605 days, according to SSA’s fiscal year 2017 performance report. Our review of SSDI program rules and PDI policies also indicates that individuals are required to have longer employment periods for SSDI eligibility than for PDI, but PDI is generally not portable if the individual leaves the employer offering PDI. According to SSA guidance, individuals become eligible to receive SSDI payments after they have paid the Social Security payroll tax long enough—about 10 years for many—and recently enough to accumulate the required number of credits. In contrast, the three sample PDI policies we reviewed contained 30-day waiting periods for coverage to begin. Further, part-time status and job changes affect PDI more than SSDI eligibility. SSDI’s program rules generally allow for the work credits that an individual has accumulated to continue to count toward SSDI eligibility even if the individual is working part-time, changes jobs, or becomes unemployed or otherwise leaves the workforce. In comparison, PDI coverage, which is offered at the discretion of employers, is not generally portable, and may exclude part-time workers altogether—as was the case for the three “typical” PDI policies we reviewed. Nationally, PDI coverage is much more prevalent among full- time workers than part-time workers. According to BLS data, 42 percent of full-time workers and 5 percent of part-time workers have PDI where the employer pays for all or part of the premiums. See Table 1 for a comparison of SSDI and PDI eligibility features. Our review of SSDI program rules and PDI policies indicates that SSDI benefit levels for individuals are generally lower than PDI but are designed to provide more income replacement for low-income workers than higher-income workers. Under federal law, SSA determines benefit amounts using a progressive formula, whereby low-income beneficiaries receive relatively higher benefit payments based on their average monthly earnings over the course of their career. For calendar year 2018, the formula pays 90 percent of the first $896 of the individual’s average monthly earnings, plus 32 percent of the earnings between $896 and $5,399, plus 15 percent of earnings over $5,399. (See fig. 4 for the amount of benefits SSA paid in 2018 according to prior income levels.) Using the formula, we calculated that at an average indexed annual earnings of $44,000, the monthly benefit would be $1,693, which is 46 percent of prior average monthly earnings. Under the formula, workers earning less would receive a higher proportion of their prior average, while workers earning the taxable maximum (set at $128,400 for 2018) or more would be eligible to receive $3,042 per month, which is at most 28 percent of their earnings. Under federal law, disabled workers with qualifying dependents may receive additional SSDI payments, up to 50 percent of their individual benefit amount. Therefore, according to our calculations, the maximum family benefit for average annual indexed earnings of $44,000 would be $2,540, which is 69 percent of prior average monthly earnings. By contrast, up to certain income levels, PDI policies typically replace 60 percent of an employee’s current salary if the employee is unable to continue working his or her prior job. Therefore, a worker earning $44,000 annually in their prior job would receive $2,200 per month. For high-income workers, PDI policies typically have a monthly maximum payment. In one PDI policy we reviewed, this monthly maximum was $5,000. Employers and employees pay for SSDI through payroll taxes on employees’ wages and salaries, so the cost to employers and employees only varies based on employees’ wages and salaries. Federal law also determines the part of the payroll tax that is allocated for SSDI, half of which is contributed by the employee and half by the employer. For PDI, either employers, employees, or a combination of the two make premium payments, depending on the policy negotiated between the insurer and the employer. According to industry representatives with whom we spoke, premiums may vary based on many factors, such as wages and salaries, the length of the elimination period, rate of income replacement, type of industry, and a company’s prior claim experience. Another difference between SSDI and PDI benefit levels is their treatment of partial benefits or partial disability determinations. SSDI program rules do not provide partial payments to individuals who have lost some but not all of their ability to earn income in the national economy. In contrast, some PDI policies may pay benefits for a partial disability. For example, in one of three policies we examined, workers could qualify for partial benefits, at lower levels, if they were partially unable to achieve their previous earnings because of a disability. PDI policies generally require beneficiaries to apply for SSDI and, if found eligible, PDI payments are typically adjusted downward (offset) by the amount of SSDI payments. There is no similar requirement or payment adjustment for SSDI beneficiaries. In cases where PDI beneficiaries are not required to or do not apply for SSDI, PDI policies we reviewed would still reduce their PDI payment by the SSDI amount that the beneficiaries may have been entitled to receive. The PDI payments would be reduced for the full amount of the SSDI payments, including any SSDI payments for the worker’s spouse and dependents, but will typically maintain a minimum PDI benefit. The three PDI policies we reviewed provide a minimum $100 monthly benefit when the SSDI offset would otherwise totally eliminate the PDI benefit or reduce it below $100 a month. According to insurers we interviewed and PDI policies we reviewed, insurers will assist PDI beneficiaries with their SSDI applications, and if necessary, provide legal assistance for SSDI appeals processes. According to one industry survey, 72 percent of PDI beneficiaries also qualified for SSDI. PDI benefits may also be reduced by the amount of income from other sources such as workers’ compensation payments, sick leave, or severance pay from an employer. Additionally, under federal law, SSDI confers Medicare eligibility after 2 years. In contrast, insurance associations and our review of PDI policies indicate that PDI policies do not typically provide health care benefits. Table 2 provides a summary of SSDI and PDI benefit features. Both SSDI and PDI policies include incentives to return to work, such as allowing beneficiaries to retain some earnings when they return to work, but PDI policies may provide return-to-work services sooner than SSDI. As long as they continue to meet SSDI’s eligibility criteria, beneficiaries can earn up to the substantial gainful activity amount each month, without any impact on their SSDI benefit, according to SSDI program rules. SSDI program rules also provide work incentives in the form of a trial work period, which allows the beneficiary to receive full disability benefits while potentially earning more than the substantial gainful activity amount, for up to 9 months. SSDI beneficiaries who earn above the substantial gainful activity threshold after 9 months of a trial work period will no longer receive SSDI cash benefits, but will continue to receive Medicare coverage, if enrolled, for up to 7 years and 9 months. After the trial work period ends, the 36-month extended period of eligibility begins, during which SSDI beneficiaries are entitled to receive benefits so long as they continue to meet the definition of disability and their earnings are below the substantial gainful activity monthly earnings limit. Moreover, individuals whose benefits stopped due to work may have their benefits reinstated under an expedited reinstatement if for medical reasons they are unable to work again at some point within 5 years. Under this expedited reinstatement, beneficiaries receive up to 6 months of temporary cash benefits while SSA conducts a medical review. Despite these SSDI provisions, participants of a 2013 Social Security Advisory Board Forum have criticized the SSDI program for having poorly structured work incentives, and we have previously reported that complex SSDI rules related to these work incentives may result in overpayments to beneficiaries. PDI policies we reviewed also provide for continued payments while beneficiaries participate in the insurer’s return-to-work program or find other employment. However, in contrast to what is referred to as SSDI’s “cash cliff,” PDI payments are gradually reduced in some ways to account for the beneficiaries’ earnings. For example, in one policy we reviewed, if the beneficiary participates in the insurer’s return-to-work program, the beneficiary may continue receiving benefit payments in addition to any employment earnings. However, unlike SSDI, the combination of the employment earnings plus the PDI payment would be capped at 110 percent of the beneficiary’s pre-disability earnings. Under this same policy, after the first 12 months that the beneficiary is disabled and working at a reduced capacity, the partial PDI payment decreases proportionally as the employment earnings increase until the beneficiary earns 80 percent of their pre-disability earnings, at which point they are no longer considered to be disabled. The other two policies we reviewed provided pro-rated PDI payments as soon as a beneficiary had some work earnings, until those earnings reach a threshold, such as 80 or 100 percent of their pre-disability earnings. Both SSDI and PDI policies offer services and supports to beneficiaries to help them return to work, but PDI policies may focus more on early provision of services and, depending on the policy, earlier intervention and case management. SSDI program rules allow beneficiaries access to return-to-work services and supports through the Ticket to Work (TTW) program, which helps interested beneficiaries transition to self-sufficiency through work. When individuals become eligible for SSDI, SSA guidance calls for sending them information about public or private employment networks or state vocational rehabilitation agencies. According to SSA’s guidance, beneficiaries can choose to work with one of these service providers and develop a plan for work goals that may involve services such as training, career counseling, vocational rehabilitation, and job placement. The TTW program then pays for those services and ensures that participating beneficiaries will not be subject to a review of their disability while they continue to work with the service provider. However, the SSA Office of the Inspector General reported that fewer than 3 percent of beneficiaries were participating in TTW in 2015. In addition, SSA-funded evaluations have found that TTW has had limited success in returning SSA beneficiaries to work and reducing their dependence on SSDI. In addition to return-to-work services through TTW, SSA officials told us that beneficiaries may use services provided through or by other federal, state, and local programs or provider networks, such as the Department of Labor’s Stay-at-Work/Return-to-Work initiative. However, we have previously reported that the large number of federal agencies and programs providing employment supports to individuals with disabilities represents a fragmented system of services, and little is known about their effectiveness. In contrast, according to insurance representatives and the three PDI policies we reviewed, PDI policies may provide early interventions, funding for workplace accommodations, and case management to help beneficiaries return to work. For example, one policy we reviewed explicitly offered an early intervention program to covered employees even when the PDI insurer was not also the short-term disability insurer, to identify workers who might benefit from vocational analyses and rehabilitation services before they are eligible for long-term disability benefits. Separately, this policy also had a return-to-work program with case managers who coordinate services and refer beneficiaries to clinical specialists, such as nurse consultants, psychiatric clinical specialists or vocational rehabilitation consultants. According to this policy, if the insurer determined that beneficiaries were capable of participating in the return- to-work program, but did not, their benefits could cease. Information on how many PDI beneficiaries receive work assistance, such as worksite modifications, and insurers’ aggregate expenditures for such assistance is also generally unknown. While participation in and the impact of SSA’s TTW program has been extensively evaluated, the insurance representatives and researchers with whom we spoke could not provide us with data or studies showing the extent or cost of work assistance provided by PDI insurers, so the impact of these investments is not publicly known. See Table 3 for a comparison of SSDI and PDI policies’ work incentives and assistance. Our literature review identified three distinct proposals to expand PDI— through some type of federal action—as a way to provide savings for SSDI; however, we were unable to assess the implications of these proposals on SSDI. Based on our review, there is an array of complex factors that could influence PDI expansion and SSDI cost savings— factors for which data, methods, and assumptions for projecting SSDI savings are either unreliable and unsupported, or unavailable. In addition, insurer, employer, and employee stakeholders we spoke with identified other implications of expanding PDI—but these implications cannot be ascertained because the proposals are not sufficiently detailed. The three distinct PDI expansion proposals we identified include the following: David Babbel and Mark Meyer (Babbel and Meyer) of Charles River Associates proposed that voluntary employer-sponsored PDI coverage could be extended to more working Americans through congressional action and the federal government facilitating education and outreach efforts. Specifically, they recommended the enactment of legislation to make it clear to employers that automatic enrollment with “opt-out” arrangements under employer-sponsored group disability plans is legal. The authors believe this will address confusion and uncertainty that is holding employers back from providing PDI. Rachel Greszler (Greszler) of The Heritage Foundation proposed encouraging employers to voluntarily provide PDI in exchange for a payroll tax credit. Under this proposal, participating employers would qualify for the tax credit by covering the first 2 or 3 years of PDI benefits at least equivalent to SSDI benefits to employees. Workers awarded benefits under the employers’ PDI would transfer to the SSDI program if their disability continued beyond the first 2 or 3 years and they qualified for SSDI. PDI would then cease to provide benefits, unless employers chose to extend the PDI policies. According to the author, if an individual is denied PDI benefits, the individual could apply for SSDI. David Autor and Mark Duggan (Autor and Duggan) proposed extending coverage of PDI to all workers through a statutory mandate. Employers would be required to provide PDI benefits for 2 years to individuals with disabilities who are unable to work. At the end of this period, PDI benefits would cease and SSDI would provide benefits for individuals qualifying for SSDI. Under the proposal, individuals with extremely disabling conditions with very limited prospects of returning to work (e.g. stroke, late stages of certain cancers, etc.) would be eligible to apply for SSDI at the onset of their disability, in lieu of PDI. Table 4 summarizes key features of the three proposals to expand PDI that we identified. Existing differences in the SSDI and PDI covered populations may play a role in determining the potential impacts of expanding PDI. As previously noted, SSDI covers almost all workers, whereas PDI coverage tended to be for those with higher wages and was more prevalent in certain industries. Based on our review of BLS data, in order to expand significantly, PDI would need to cover more lower-wage workers and other occupations and industries where it is currently less common, such as in retail and construction. However, as indicated in the Autor and Duggan proposal, expanding PDI to workers currently not covered could affect PDI premiums, based on the type of industry and wage levels. According to various stakeholder groups we interviewed, changes in PDI premiums would, in turn, have implications for the attractiveness of PDI to employers and employees under voluntary proposals. The overlap in PDI with the SSDI beneficiary population also plays a role in determining any potential impact of expanding PDI. As previously noted, one industry survey reported that 72 percent of PDI beneficiaries of its member companies also received SSDI. One insurer told us that the longer PDI beneficiaries remain on PDI, the more likely they will also receive SSDI. In fact, for beneficiaries on PDI for 2 years, 58 percent also get SSDI benefits; and for beneficiaries on PDI for more than 5 years, more than 90 percent also receive SSDI. Our review of these data suggests that for those receiving both SSDI and PDI benefits, it may be difficult to attribute return to work and other changes in circumstances, such as changes in health, to either PDI or SSDI. For example, it is possible that any differences in return-to-work outcomes for SSDI beneficiaries who receive PDI versus those who do not may have more to do with the specific characteristics and circumstances of the beneficiaries than as a result of having PDI coverage. To achieve SSDI cost savings, the three proposals assume that insurers will provide or reimburse employers for providing vocational rehabilitation, workplace accommodation, and return-to-work services, but the proposals provide few, if any details about how this would occur. For example, the two proposals that describe voluntary PDI enrollment do not explicitly require that such services be provided through PDI. The Autor and Duggan proposal, which includes a mandate for enrollment, requires that PDI provide workplace accommodations consistent with the Americans with Disabilities Act (ADA) and vocational rehabilitation services. The proposal includes a list of vocational rehabilitation services that insurers could provide, but the authors acknowledge that in practice it is not always “clear-cut” when a “reasonable accommodation” under the ADA is required and what the accommodation should be. As noted previously, we were unable to find public data on the extent to which PDI policies currently provide such services and insurance representatives and researchers we contacted that collect and report PDI data said that they do not collect such data from insurance companies. According to our review of PDI policy provisions that allow for rehabilitation and workplace accommodation services, the decision of what assistance will be provided through the PDI policy, if any, and the extent of such assistance the insurer provides or helps the employer provide, is at the discretion of the insurer. It is also possible that insurers would make less of an investment in return-to-work services for PDI beneficiaries under the two time-limited proposals because the insurers are only responsible for 2 to 3 years of disability payments, compared to traditional PDI policies where the employer may have financial responsibility to make payments to beneficiaries until they reach retirement age, unless insurers can help them return to work. Several stakeholders said that additional uncertainty exists with respect to effectiveness or attractiveness of PDI expansion proposals for populations currently not covered by PDI, such as low-wage workers and those with physically demanding jobs. BLS data show that PDI is currently less prevalent among these workers, and therefore less is known about the type and effectiveness of return-to-work services that would be offered to them under PDI expansion. For example, researchers report that lower-wage workers may have jobs that offer limited opportunities to adjust work schedules—a flexibility that one research group said could assist workers in the case of disability. In addition, researchers stated that lower paying jobs tend to not offer sick leave and other key benefits, and the absence of such benefits may present another potential obstacle for successful rehabilitation and workplace accommodation efforts. According to various stakeholder groups we interviewed, employers in low-paying industries or who otherwise do not offer these benefits would have less of an incentive to offer PDI or other supports to help retain their workers compared to employers who compete for skilled employees that are also typically more difficult to replace. These factors—in combination with previously discussed unknowns related to the cost of PDI in non-traditional sectors— reflect complexity and uncertainty about the extent to which PDI may be expanded through a voluntary system. The proposals assert that expanded PDI would provide financial support, accommodations, and rehabilitation services much sooner than SSDI. However, based on our review, it is not clear if this would happen for two of the proposals. As previously noted, the SSDI elimination period is 5 months, after which SSDI beneficiaries become eligible for return-to-work assistance through the TTW program and financial incentives, but lengthy SSA decision times may significantly delay when individuals receive return-to-work supports. The Autor and Duggan mandatory proposal has PDI benefits commencing within 3 months of disability onset, which is sooner than SSDI, and therefore, depending on the circumstances, may allow for the provision of return-to-work services sooner than under SSDI. The Babbel and Meyer and Greszler voluntary proposals do not specify the length of elimination periods. While the Babbel and Meyer and Greszler proposals indicate PDI will provide return-to-work services sooner than SSDI, it is unclear whether or how the timing of return-to- work services might evolve under the two voluntary proposals. Moreover, while data exist on SSDI initial and appeal decision times, we were unable to find current industry-wide data on the average decision period for PDI, or on the extent of appeals and how long on average these take to decide. Based on our review of the PDI expansion proposals and interviews with stakeholder groups, we identified several additional factors that could affect the extent to which the PDI proposals could increase PDI coverage and result in SSDI cost savings, especially under the two voluntary proposals (Babbel and Meyer and Greszler). Such factors include the likelihood that efforts to encourage PDI enrollment might be successful, the effect of policy premiums and tax credits on employers’ willingness to offer PDI policies, and whether expanded PDI might lead to more people also going on to SSDI. Babbel and Meyer asserted that congressional action and federal outreach would clarify for employers that automatic enrollment with opt- out arrangements is legally permissible and thereby result in voluntary PDI expansion. According to the authors, their approach was motivated by the success of similar automatic enrollment provisions in the Pension Protection Act of 2006 in raising the participation and savings rates in 401(k) defined contribution savings programs. However, since PDI automatic enrollment is already available, it is not clear how their proposal for congressional action and federal outreach would result in more employers adopting it and employees participating. The Babbel and Meyer proposal is also based on requiring employees to pay part or all of the insurance premiums. According to employee advocacy groups, workers at the lowest end of the wage spectrum in particular may have little, if any, disposable income to pay for PDI, and also little incentive to participate when SSDI already replaces a relatively high proportion of their wages. Further, in an employer discussion session we heard that employees willing to contribute in part or the entire premium may also have a greater risk of needing PDI benefits, and adverse selection could result in higher premiums, which in turn, fewer workers may be willing to pay. The Greszler proposal anticipates potential significant savings for SSDI assuming that employers who had not previously offered PDI to their employees would opt to offer PDI in exchange for a payroll tax credit. According to an employer association, in making this choice, employers would need to compare the financial benefit of a payroll tax credit with the cost of PDI premiums, among other things—which may evolve under the proposal, according to insurers in a discussion group we held. According to insurance industry representatives, the direction of possible premium changes under the Greszler proposal is unclear because the proposal reduces employers’ financial responsibility to 2 to 3 years of potential disability benefit costs. This shorter benefit period could reduce premiums typical for longer term policies. However, since persons would not generally be able to receive SSDI benefits during this period under the proposal, there would be no offset of SSDI benefits against PDI benefits (as discussed earlier). According to an industry association and an insurer discussion group we held, the absence of the SSDI offset could increase premiums, possibly substantially. Another consideration raised by SSA officials is whether PDI expansion would increase SSDI applications and benefits paid, which would reduce potential SSDI savings from the proposals and could increase the cost of the SSDI program. Typical PDI policies may effectively require PDI beneficiaries to apply for SSDI, and PDI insurers may assist beneficiaries with SSDI applications. Insurance association representatives told us that in addition to helping keep PDI premiums attractively low, such practices benefit those who become eligible for SSDI benefits by providing health care benefits that they might not otherwise be able to access. One insurance association further noted that by helping PDI beneficiaries complete SSDI applications, SSA may receive well- supported applications that are more efficient to process. On the other hand, researchers and SSA officials indicated that such PDI practices may result in some individuals applying for and receiving SSDI who would not have otherwise done so. Each proposal states that expanding PDI would reduce SSDI costs. The proposals indicate that this would be achieved mainly through PDI early intervention after employees’ onset of disabilities and a resulting reduction in the number of SSDI claimants or duration of SSDI beneficiaries’ status. Only the Babbel and Meyer proposal developed an estimate of potential savings. In forecasting SSDI savings, The Babbel and Meyer proposal estimated cost savings by assuming that automatic enrollment would result in PDI coverage increasing from 33 percent to just over 50 percent of private sector employees. Comparing PDI disability termination rates from the Society of Actuaries with SSDI termination rates, Babbel and Meyer estimated that PDI expansion would save the federal government an additional $500 million to $700 million per year, with a 10-year cumulative savings of $5 billion to $7 billion. They said that because they were unable to conduct a rigorous and comprehensive study of disability, recovery, and reemployment, their proposal “quantifies the benefits of group disability insurance indirectly, using publicly available data that are sparse, aggregated, and often difficult to interpret.” The Greszler proposal relied on the Babbel and Meyer analysis in concluding that there would be significant SSDI savings. According to Greszler, early intervention would keep individuals on the job and reduce the number of potential SSDI beneficiaries. Further, Greszler assumes that the loss of tax revenue from the proposed payroll tax credit would be made up by lower SSDI expenditures incurred during the 2 – 3 years that employees are covered by PDI instead of SSDI. However, the Greszler proposal did not quantify the magnitude of the tax credit or the overall savings to SSDI. The Autor and Dugan proposal noted that SSDI expenditures would be lower because mandated PDI policies would pay the first 2 years of benefits, instead of SSDI. The authors also noted that, over the longer-term, 2-year mandated PDI for employees has the potential to pay for itself and generate SSDI savings if the proposed mandate succeeds in allowing 1 in 11 would-be SSDI beneficiaries to remain gainfully employed. However, Autor and Duggan’s proposal did not include an explanation of how, or data or evidence supporting that, the proposed PDI mandate would achieve employment for 1 in 11 would-be SSDI beneficiaries. Our analysis of the Babbel and Meyer proposal found that the available data used to develop the SSDI cost savings estimates due to PDI expansion were not comparable and therefore did not result in a reliable estimate of the financial impact of current or expanded PDI on SSDI. In their proposal, Babbel and Meyer estimated cost savings by comparing SSDI’s and PDI’s recovery rates. For SSDI, Babbel and Meyer used an SSDI work termination rate that includes the number of SSDI beneficiaries terminated during the year due to having earnings that exceeded the substantial gainful activity amount, divided by the total number of SSDI beneficiaries during the year. For PDI, Babbel and Meyer used a PDI recovery rate that includes the number of PDI benefit awards terminated during the year for multiple reasons, divided by the cumulative number of months all PDI benefits were received by PDI beneficiaries who received PDI benefits during the year. However, we found that the numerators and denominators used to compare SSDI and PDI recovery rates are not comparable. For example, the PDI numerator reflects a much broader definition of recovery than the SSDI numerator, which may contribute to overestimating PDI’s relative recovery rate. Specifically, the SSDI numerator is limited to those terminated from SSDI for earnings exceeding SGA, whereas the PDI numerator includes terminations for reasons besides return to work, such as medical improvement (even if an individual did not return to work), failure to submit required documents to continue receiving benefits, changes in coverage from inability to perform own occupation to any occupation coverage, and other non-specified terminations. The denominator used in the comparison also differs. For SSDI, it is the number of people receiving SSDI benefits during the year. For PDI, it is the cumulative number of months of all PDI benefits that were received by PDI beneficiaries who received PDI benefits during the year. Because the denominators are different, we were unable to determine whether they contributed to an under- or overestimate of PDI’s relative recovery rate. Regardless, we determined that the non-comparable rates in Babbel and Meyer’s proposal affect the reliability of its cost savings estimate. SSA’s Office of the Chief Actuary also reviewed the proposal at our request and concluded that the SSDI and PDI termination rates shown in the proposal were comparable neither in concept nor in unit of analysis. Even with common units of analysis in SSDI and PDI termination rates, estimates of the impact of PDI on SSDI would also need to consider the other differences that we described above, such as differences in covered populations. The authors of two proposals we spoke to suggested that any proposal to expand PDI should be pilot tested before being implemented nationwide due to the number and complexity of factors involved and their potential effect on SSDI. For example, in their proposal, Autor and Duggan noted that, given the inevitable challenges and uncertainties associated with rolling out a major program innovation, it would be desirable to phase in such a plan and to run pilot programs in a limited number of states. They also suggested that pilot programs could be targeted, such as to larger firms. In discussing the Greszler proposal with the author, she told us that a pilot test of her proposal might help show if the program works better in some industries or occupations than others, as well as determine how employers respond to the tax incentive and if employees feel they are treated fairly by private insurers. Similarly, we have previously reported that changes affecting the SSDI program may raise particular implementation challenges, given the program’s inherent complexity; any changes may require pilot testing to evaluate the potential effects or unintended consequences that the Congress, the administration, SSA, and the broader public will need to know to make an informed decision about whether to implement program changes nationwide. SSA and DOL have funded and overseen pilot programs to test other proposals to help individuals with disabilities participate in the workforce. Employee advocacy groups, employers, and insurance companies we spoke with raised various questions and concerns about the potential impacts of expanding PDI—implications that the proposals did not explicitly or fully address and therefore remain uncertain. The proposals also provided few details on any oversight role that would be needed by federal or state governments. The proposals assert that employees could potentially benefit in the event of a disability from PDI cash benefits that may be higher than SSDI benefits; however this outcome is not certain. Based on our review of SSDI and PDI policies and interviews with employee and advocacy groups, whether or not workers would opt for PDI benefits under voluntary expansion would depend on the attractiveness of PDI relative to SSDI and other benefits. For example, an employee benefits survey and several stakeholder groups we spoke with suggested that employees tend to value other benefits, such as health insurance, more than disability insurance. According to employee groups, lower-wage workers, in particular, may opt-out of PDI under the Babbel and Meyer proposal in favor of paying for other benefits, or forgo benefits entirely, especially if premiums are high. In addition, based on our review, PDI may not provide much additional benefit for lower-wage workers, and employee groups told us that, given a choice, lower-wage workers might choose not to participate in PDI since SSDI benefits replace a relatively high share of their wages. Based on our review of SSDI and PDI policies, current PDI policies typically do not include dependent and spousal benefits offered by SSDI, and unlike SSDI have exclusions and pre-existing condition provisions, as well as have time limits on benefit payments for some conditions, which may result in workers finding SSDI more attractive than PDI. To the extent that employees see PDI benefits as less attractive than SSDI and their willingness to participate in PDI declines, cost savings to SSDI resulting from voluntary PDI proposals would likely be affected. Two employee advocacy groups also expressed concern that all three proposals focus on employer-provided PDI, and two of three proposals do not explicitly address self-employed and part-time workers. As we have previously noted, an increasing number of people are part of the contingent workforce, with limited access to employer-sponsored benefits. Other individuals may have already left the workforce or otherwise be unemployed and thus have no connection to an employer. Further, two employee advocacy groups explained that individuals who will eventually be unable to work due to a disability initially experience symptoms that may cause them to work part-time or take a different position or job, which may affect their access to PDI through their current or new employer. On the other hand, the proposals allow for persons not covered under the proposals to apply for SSDI. Two employee advocacy groups also expressed concern that workers who are auto-enrolled under the Babbel and Meyer proposal may not make an informed choice about participating due to the complexity of disability contracts. One employee advocacy group was particularly concerned for low-wage workers who may be struggling financially and cannot afford disability insurance, but do not initially opt-out of coverage because of inertia, language barriers, or not understanding the product, including the tradeoffs involved in choosing to keep it or opt out. Employee advocacy groups told us that more needs to be done to get SSDI beneficiaries back to work, but noted a range of concerns about using PDI to do this. Their concerns included the following: Employers are moving away from providing other key employee benefits, such as health care benefits (which may be more important to workers than PDI and without which PDI would be less effective). Employers are moving away from full-time employment (which is usually a stipulation of PDI policies). Employers might discriminate in not hiring individuals at higher risk of disability under proposals that make employers responsible for the first few years of providing disability assistance. The transition from receiving PDI to qualifying and getting approved for SSDI under the proposals might delay receipt of SSDI. Insurers might not actually provide rehabilitative and accommodation services. There would not be standardization of PDI eligibility determination, coverage, and appeal processes to ensure fair and equitable treatment of workers. All employee advocacy groups we spoke to emphasized the need for consumer protections and strong oversight under the PDI proposals. One employee advocacy group said that there are too many problems, gaps, and concerns with the proposals to expand PDI, when SSDI already provides near universal coverage and is a system that is up and running. Moreover, the employee advocacy group said that SSA could identify the key reasons that PDI has had success in getting people back to work and incorporate those lessons into SSDI, because more effort needs to be spent improving SSDI and increasing its return-to-work efforts. Individual employers and employer associations we spoke to said that more details would be needed to determine how they might be impacted by the proposals. Regarding the Babel and Meyer proposal (which as previously discussed, cites the need for congressional action to address potential legal uncertainties regarding automatic enrollment) one employer association representative expressed concern about whether state garnishment laws would prohibit employers from making automatic deductions for PDI premiums from employees’ pay without their permission. Regarding the Greszler proposal, employers and representatives of an employer association we spoke to indicated they would need to know more details, such as the exact amount of the tax credits and how insurance premiums might be affected. Regarding the Autor and Duggan proposal, representatives of the two employer associations stated that their members would oppose a mandate. One employer association said there are often additional requirements that come along with any mandates, even for actions that employers are already taking, such as offering PDI. The employer association also expressed concern that doing more than is required under any mandate generally exposes employers to liability, which could result in employers providing only the minimum benefits and assistance required by law. One employer said that mandated PDI could crowd out the amount of other benefits an employer is willing to provide, such as the amount of medical coverage that it offers to employees. In addition, one employer association we spoke with was concerned about the potential administrative burdens associated with expanding PDI, particularly for small employers. They noted that administering any benefit requires financial resources to provide, monitor, and maintain the benefit, stating that once employers provide a benefit to employees, they are generally reluctant to take it away. Employers in one discussion group we held were also concerned that providing disability assistance through a PDI policy for 2 to 3 years under two of the proposals would require that they retain employees and provide benefits even when employees are unable to continue work. Employers in a discussion group and an employer association we spoke to also wanted to know how the PDI plans would be overseen at the state and federal levels under the proposals, and what additional requirements that would entail. Insurance companies and associations we spoke to generally supported efforts to expand PDI, but also expressed some concerns about related unknowns. In particular, insurers in one of our discussion groups and both insurance associations we spoke with supported the Babbel and Meyer proposal to encourage employers to automatically enroll employees, with an opt-out provision, which came out of a study funded by America’s Health Insurance Plans (AHIP) and the American Council of Life Insurers (ACLI). One insurance association said that, relative to the other proposals that provide a tax credit or mandate coverage, the Babbel and Meyer proposal to expand PDI would not be a problem for insurers’ capacity. Representatives from this insurance association suggested first taking initial steps proposed by Babbel and Meyer through encouraging automatic enrollment before considering a more major restructuring of PDI that would supplant SSDI for 2 to 3 years. On the other hand, two insurance associations expressed concerns about the potential for additional requirements that could result from implementing the Babbel and Meyer proposal, for example in relation to employee consent or the quality of coverage offered. Insurance associations and insurers we spoke with also raised concerns about the other two proposals (Autor and Duggan, and Greszler), especially related to how they would fundamentally and unpredictably change the PDI market. On the one hand, one insurance association pointed out that these proposals would eliminate the SSDI offset from PDI payments for the 2 to 3 year period, which could lead insurance companies to significantly increase PDI premiums for such policies. On the other hand, if the insurance company is only liable for 2-3 years of benefit payments and services, this could reduce insurers’ costs. In addition, in one insurer discussion group that we held, insurers said that if there was not an SSDI offset of PDI benefits during the 2 to 3 year period, the industry would be more aggressive about return to work efforts. However, in another insurer discussion group we heard that they would do less for return to work under such policies, because future savings to the insurance company are not as great under a 2 to 3 year policy as if the insurance company is liable for paying benefits until an individual reaches normal SSA retirement age, as with current policies. Finally, representatives from one insurance association said that the Greszler and Autor and Duggan proposed PDI expansions would create extreme capacity problems for insurers. Under the Autor and Duggan proposal nearly all employees would need to be covered. One insurance association also noted its view that SSDI might benefit under the proposals to expand PDI. Specifically, the insurance association said that after someone goes through the PDI claim process, a subsequent claim for SSDI may be of higher quality, potentially reducing the administrative costs of a subsequent SSDI determination. The three proposals we reviewed did not specify the government’s role in overseeing the expanded PDI market. Babbel and Meyer proposed a stronger federal role in encouraging automatic enrollment by passing a law to clarify its permissibility, but the proposal did not provide details on implementation and oversight. Greszler proposed that participating employers provide benefits at least equivalent to SSDI benefits, but provided no other details on how compliance would be overseen. Neither the Autor and Duggan nor the Greszler proposals addressed whether individuals denied PDI could apply for SSDI within the 2 to 3 year period covered by their proposals. Stakeholders we spoke to expressed divergent perspectives on whether federal and state governments would need to provide additional regulation, supervision, and/or oversight related to expanded PDI markets. One insurance association said that insurance providers are already very well regulated by ERISA and by states, and a major insurer said that there already exists an array of federal and state laws governing employer-sponsored PDI coverage that establishes a robust regulatory framework for protecting participants. In contrast, representatives from all employee advocacy groups we spoke with cited problems identified with private insurance company practices and stressed the need for additional consumer protections and government oversight. We found instances of federal and state enforcement actions regarding disability insurance improper practices in the past potentially affecting hundreds of thousands of people over many years, as well as more recent rulemaking by DOL that said that “disability cases dominate the ERISA litigation landscape.” These actions suggest that expanding PDI or including new PDI requirements, in lieu of SSDI, would likely involve some degree of additional federal and state oversight. Any costs associated with expanded state and federal roles would reduce potential cost savings from the proposals, although the extent to which this might affect the Disability Insurance Trust Fund is unclear. According to DOL officials, an expansion in the number of private disability benefit plans and an increase in the complexity in the legal requirements governing the design and operation of such plans would require DOL to provide proportionally more interpretive guidance, compliance assistance, and enforcement and oversight activities. Estimating the potential impact of the proposals on DOL’s functions and capabilities would require more specific information on the statutory and regulatory changes envisioned by the proposals and the likely impact of those changes on the private disability plan marketplace. SSA officials said that whether or not SSA would experience an expanded role would depend on any changes in law regarding the proposals. We provided a draft of this report for review and comment to SSA and DOL. Neither SSA nor DOL provided written comments, although both provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Commissioner of Social Security, Secretary of Labor, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the individual named above, key contributors to this report included Michele Grgich (Assistant Director), Dan Meyer (Analyst-in- Charge), Lucas Alvarez, and Seyda Wentworth. Other contributors include: James Bennett, Ramona Burton, Holly Dye, Sarah Gilliland, Emei Li, Dan Meyer, Carol Petersen, Monica Savoy, Almeta Spencer, and Adam Wendel.", "summary": "SSDI, which is administered by SSA, provides financial and other assistance to qualifying individuals who are unable to work due to their disabilities. SSDI is primarily funded by employee and employer payroll taxes that are placed in the Disability Insurance Trust Fund, which is currently projected to not be able to pay full benefits starting in 2028. While there are a number of ways to address the fiscal condition of the Disability Insurance Trust Fund, some researchers have proposed expanding employer-provided PDI. GAO was asked to review whether expanding PDI could result in potential savings to the Disability Insurance Trust Fund. This report examines (1) what is known about how coverage and key features of SSDI and PDI compare, and (2) the potential implications of three distinct proposals to expand employer-sponsored PDI on the Disability Insurance Trust Fund and various stakeholders. GAO analyzed data on SSDI and PDI coverage from SSA and BLS for 2016 and 2017; reviewed relevant federal laws, regulations, and guidance; reviewed three PDI policies that three large insurers we selected described as typical for their companies; reviewed three distinct proposals to expand PDI identified through a literature review; and interviewed SSA and Department of Labor officials, authors, researchers, and representatives of insurance, employer, employee, and disability groups for a range of perspectives. GAO's analysis found that coverage and key features of Social Security Disability Insurance (SSDI) and long-term employer-sponsored private disability insurance (PDI) differ in a number of ways. Key differences include the number of workers covered; characteristics of covered workers; and eligibility, benefits, and return to work assistance. For example: According to GAO's analysis of Bureau of Labor Statistics and Social Security Administration (SSA) data, SSDI covers an estimated 96 percent of workers, while 33 percent of workers have PDI coverage through their employers. Also, PDI coverage is more prevalent among workers with higher wages (e.g., management positions) and in certain business sectors (e.g., finance). GAO's review of SSDI and PDI policies found that some PDI policies may pay benefits for medical conditions that SSDI would not. However, these PDI policies may time limit payments for mental health and musculoskeletal disorders, while SSDI does not. In addition, while both SSDI and PDI policies include features designed to help beneficiaries return to work, PDI policies may provide such supports more quickly than SSDI. GAO's review of the literature identified three distinct proposals for expanding PDI that the proposals' authors believe would address SSDI's fiscal challenges. Specifically, all three proposals suggest that cost savings for the Disability Insurance Trust Fund could be expected by expanding PDI. According to the proposals, this would happen because expanding PDI would provide workers earlier access to cash and employment supports, which would reduce the number of SSDI claims or the length of time SSDI benefits are paid to claimants. However, GAO's review of the three proposals noted that none of them provide enough information to assess how SSDI enrollment and costs might be affected with an expansion of PDI. Therefore, it is unclear whether cost savings to the Disability Insurance Trust Fund would actually be realized. For example, the proposals do not provide information on the type and timing of return-to-work services that would be provided under expanded PDI, nor do they take into account the differences in the populations served by SSDI and PDI policies. Moreover, stakeholders that GAO interviewed about these proposals raised a number of issues about other implications of PDI expansion that the proposals do not explicitly or fully address. For example: Insurers told GAO that is was unclear how expanding PDI would affect PDI premiums and the impact this would have on enrollment. Employers told GAO they were concerned about potential additional requirements or administrative burdens that would be placed on them if PDI were expanded. Employee and disability advocacy groups told GAO they were concerned about whether PDI expansion would provide standard services or employee protections currently available under SSDI, especially with respect to PDI expansion proposals that would replace SSDI for 2 years.", "document_type": "gao"}
{"report": "The Services Acquisition Reform Act of 2003 required the Administrator for Federal Procurement Policy to establish an acquisition advisory panel (referred to as the Panel) to review federal acquisition laws, regulations, and policies; and identify opportunities to enhance how agencies award and administer contracts for the acquisition of goods and services. The Administrator for Federal Procurement Policy appointed the Panel members in February 2005, and the Panel issued its final report in 2007. We have a long history of reporting on the key issue areas that the Panel addressed in 2007. In 2007, we reported that the Panel’s findings were largely consistent with our prior work. For example, the Panel found that defining requirements is key to achieving the benefits of competition. Similarly, we have issued numerous reports that address the importance of robust requirements definition. Panel members also recognized a significant mismatch between the demands placed on the acquisition workforce and the personnel and skills available to meet those demands. In 2006, we testified that DOD’s acquisition workforce, the largest component of the government’s acquisition workforce, remained relatively unchanged while the amount and complexity of contract activity had increased. Since then, we have issued many reports and testimonies on topics ranging from requirements development at DOD, government-wide competition rates, small business, and the acquisition workforce, among others. We also track a number of key acquisition issues—such as DOD contract management and weapons systems acquisitions—through our high-risk program. Our high-risk program identifies government operations with greater vulnerabilities to fraud, waste, abuse, and mismanagement. Twelve years after the Services Acquisition Reform Act of 2003 required the Administrator for Federal Procurement Policy to establish the Panel, Congress required the establishment of another advisory panel by the Secretary of Defense in section 809 of the National Defense Authorization Act (NDAA) for Fiscal Year 2016 (referred to as the Section 809 Panel), and tasked it with reviewing applicable defense acquisition regulations and finding ways to streamline and improve the defense acquisition process, among other things. The Section 809 Panel is reporting on a number of topics related to areas covered by the 2007 Acquisition Advisory Panel report, including competition, acquisition workforce and small business participation. The Section 809 Panel issued an interim report in May 2017. Volumes I and II of its final report were issued in January 2018 and June 2018, respectively. Its final volume is expected in January 2019. Issue Area Context Acquisition requirements describe the government’s needs when agencies procure products (such as major weapon systems) and services (such as engineering support) from contractors. Federal statute, policy and best practices emphasize the need for valid, clear, and achievable requirements early in the acquisition process. An example of a requirement for a major weapon system could include the range that a missile must be able to travel, while a requirement for a service acquisition could include an engineer’s experience and education. In 2007, the Panel found that defining requirements is key to achieving the benefits of competition because procurements with clear requirements are far more likely to produce competitive, fixed-price offers that meet customer needs. The Panel also found that the government invested in requirements definition less than the private sector, and that better requirements definition would help facilitate implementation of performance- based acquisition (PBA). PBA is a preferred acquisition approach that focuses on contractors’ deliverables rather than how they perform the work. We have found that federal agencies continue to face challenges involving acquisition requirements definition. Congress passed a defense acquisition reform law with requirements- related provisions in 2009, but our work shows that DOD often begins programs with unrealistic requirements. Agencies have not consistently complied with OMB’s requirements relating to key provisions from an information technology (IT) acquisition reform law. Numerous efforts have been made to improve and encourage commercial item procurements in an attempt to take advantage of market innovations and reduce acquisition costs. DOD and GSA have taken steps to improve how personnel define requirements for service acquisitions, and to focus more on contractors’ deliverables than on how the contractors perform the work, but officials told us that some acquisition officials are reluctant to cede control of the acquisition to contractors. We elaborate on these points below. The 2009 Weapon Systems Acquisition Reform Act (WSARA) included provisions related to requirements definition for major defense acquisition programs. In December 2012, we found that WSARA was helping program offices identify and mitigate requirements-related risks earlier in the acquisition process based on our analysis of 11 weapon acquisition programs. Section 809 Panel In its June 2018 report, the Section 809 Panel suggested that the Department of Defense better align its acquisition, requirements, and budget processes. It also suggested that the requirements system focus on capabilities needed to achieve strategic objectives instead of predefined systems. However, we have also observed and reported that DOD has struggled to adequately define requirements for its largest acquisition programs. For example, in 2014, we found that cost and schedule growth in major acquisition programs can, in part, be traced to a culture in which the military services begin programs with unrealistic requirements. This cost and schedule growth decreases DOD’s buying power, reducing the aggregate military capability the department can deliver over time. In 2017, we found that the Army’s requirements development workforce had decreased by 22 percent since 2008, with some requirements development centers reporting more significant reductions. We recommended that the Secretary of the Army conduct a comprehensive assessment to better understand the resources necessary for the requirements development process and determine the extent to which the shortfalls can be addressed given other funding priorities. While the Army agreed with the recommendation, it remains unaddressed. WSARA also required that DOD use competitive prototyping, which we generally define as two or more competing vendors producing prototypes for weapon systems before a design is selected for further development, in major defense acquisition programs as applicable. We have found that prototyping has benefited acquisition programs by, among other things, helping programs understand their requirements, and we have found that competitive prototyping has generated additional benefits, such as improving the quality of systems offered. Even though Congress repealed WSARA’s competitive prototyping requirement in 2015, Congress simultaneously codified a preference for prototyping—including competitive prototyping—as a risk mitigation technique, which has been implemented in DOD policy. Further, the fiscal year 2017 and 2018 NDAAs included several new prototyping-related provisions. As of 2018, DOD Weapons System Acquisitions remains on our High Risk list. Among other things, we reported that DOD needs to build on existing reforms intended to improve requirements definition and, specifically, examine best practices to better integrate critical requirements. The 2014 Federal Information Technology Acquisition Reform Act (commonly referred to as FITARA) expanded the role of certain agency Chief Information Officers (CIOs) to improve acquisitions of information technology (IT) products and services. Several aspects of FITARA target requirements definition and OMB has expanded upon and reinforced these aspects in a number of ways through government-wide guidance. However, as of 2018, Improving the Management of IT Acquisitions and Operations remains on our High Risk List because agencies have not completely implemented certain FITARA requirements as implemented by OMB or addressed a number of our recommendations, including several that target requirements definition. FITARA includes a provision generally requiring that agency heads ensure CIOs review and approve all IT contracts prior to award, unless that contract is associated with a non-major investment. Additionally, OMB’s implementing guidance states that CIOs—or other authorized officials, as appropriate—should review and approve IT acquisition plans or strategies as applicable. These reviews can provide CIOs greater insight into IT acquisition requirements. However, in January 2018, we found that officials at 14 of 22 selected agencies did not identify, or help identify, IT acquisitions for CIO review as required by OMB’s guidance. The same number of agencies did not fully satisfy OMB’s requirement that the CIO or other appropriate parties review and approve IT acquisition plans or strategies. As a result, agencies increased the risk that they were awarding IT contracts that were duplicative, wasteful, or poorly conceived. FITARA requires that CIOs certify that their agencies are adequately implementing incremental IT development, as defined in capital planning guidance issued by OMB. We previously reported that OMB has emphasized the need to deliver investments in smaller parts, or increments, to reduce risk, deliver capabilities more quickly, and facilitate the adoption of emerging technologies. We have previously reported that a key step in implementing incremental development methods can include defining requirements appropriately, such as by involving end users and stakeholders. We have found that agencies have struggled to adhere to FITARA’s incremental development requirements, as implemented in OMB’s capital planning guidance. In 2017, we found less than 65 percent of major IT software development investments were reported as being certified by the agency CIO for implementing adequate incremental development. FITARA also includes provisions addressing government software license management, calling for the identification and development of a strategic sourcing initiative to enhance government-wide acquisition, shared use, and dissemination of software. In May 2014, we found that 22 of 24 major agencies did not have comprehensive license policies and only 2 had comprehensive license inventories. Without comprehensive policies and inventories, agencies are poorly positioned to understand their requirements for software licenses. We recommended that OMB issue a directive to help guide agencies in managing licenses and that the 24 agencies improve their policies and practices for managing licenses. As of July 2018, OMB had addressed our recommendation, but many of the recommendations to other agencies remained unaddressed. Purchasing commercial items helps an agency take advantage of market innovations, increase its supplier base, and reduce acquisition costs. The commercial item definition includes items customarily used by and sold (or offered) to the general public, including products with minor modifications. Federal agencies can purchase commercial items to meet many requirements, from the relatively simple, such as office furnishings and housekeeping services, to the more complex, such as maintenance services and space vehicles. Further, contracting officers can use streamlined solicitation procedures—which can reduce the time needed to solicit offers from vendors—if they determine that the product or service being procured is commercial. We reported that federal agencies used commercial item procedures for over $100 billion of goods and services in 2015. The issue of commercial item procurements has been a concern of Congress for a number of years. In the fiscal year 2018 NDAA, and four of its predecessor acts, Congress specified how DOD is to define and purchase commercial items. For example, a fiscal year 2017 provision set a preference for certain commercial services, such as facilities-related or knowledge-based services, by prohibiting defense agencies from entering into non-commercial contracts above $10 million to meet those requirements without a written determination that no commercial services can meet the agency’s needs. Section 809 Panel In its January 2018 report, the Section 809 Panel proposed a new approach for using commercial items to meet requirements. The panel proposed that Congress and the Department of Defense (DOD) tailor the department’s acquisition approach based on the level of customization a given product entails. For readily available commercial items, or those requiring minor customization, the panel stated that DOD should be willing and able to reduce management and oversight to capitalize on the nondefense marketplace. In its June 2018 report, the Section 809 Panel suggested additional statutory and regulatory changes to simplify commercial item procurements. In January 2018, DOD revised its regulations and corresponding procedures, guidance, and information related to the procurement of commercial items to reflect recent legislative changes. DOD also updated its acquisition regulations to provide guidance to contracting officers for making price reasonableness determinations, promoting consistency in making commercial item determinations, and expanding opportunities for nontraditional defense contractors to do business with DOD. The Department also updated its Guidebook for Acquiring Commercial Items, which includes information on how to define, determine, and price commercial items, to reflect the regulatory changes. DOD has also created six commercial item Centers of Excellence to provide analytical support and assist in both the timeliness and consistency of commercial item determinations. The centers are staffed with engineers and price/cost analysts to help contracting officers with market analysis, commercial item reviews and determinations, and commercial pricing analysis. The centers also provide training and assistance to the DOD acquisition community on various techniques and tools used to evaluate commercial items and commercial item pricing. Finally, the fiscal year 2018 NDAA directed GSA to establish a program to procure commercial items through commercial e-commerce portals, which can generally be described as online marketplaces. OMB was charged with carrying out the program’s implementation phases. GSA issued the initial implementation plan in March 2018, and the next phase of implementation will entail market analysis and consultation with industry and agencies. In 2017, we found that federal agencies procured over $272 billion in services in fiscal year 2015, which was approximately 60 percent of total contract obligations for that year. We’ve also previously reported that services contracts are sometimes awarded for professional and management support services that can put contractors in a position to inappropriately influence government decisionmaking if proper oversight is not provided. As we previously reported, in 2009, DOD’s Defense Acquisition University introduced a Services Acquisition Workshop to provide training and guidance on developing service acquisition requirements. The workshop brings together the key personnel responsible for an acquisition to discuss the requirements and how they will know if a contractor has met those requirements. During the workshop, the teams develop the language that will articulate the requirements, and by the end of the process, the goal is to have draft acquisition documents. We reported in 2013 that DOD mandated the use of the workshop for service acquisitions valued at $1 billion and above, and encouraged its use for acquisitions valued at $100 million or more. Performance-based acquisition (PBA) is, as the Panel reported in 2007, a preferred commercial technique. PBA focuses on contractors’ deliverables rather than how they perform the work. Rather than using traditional statements of work that define requirements in great detail, PBA uses performance work statements (PWS) that define requirements more generally based on desired outcomes. We have reported that defining requirements this way has been a struggle for DOD for several years. Additionally, we have found that implementing PBA can be particularly challenging when acquiring certain services. Services differ from products in several aspects and can offer challenges when attempting to define requirements and establish measurable, performance-based outcomes. In 2012, we found that the Defense Acquisition University developed an Acquisition Requirements Roadmap Tool, which is an online resource designed to help personnel write requirements for PBA and create pre- award documents, including requirements documents, using a standardized template. Additionally, in 2018, GSA updated its Steps to Performance-Based Acquisition guidance for managing PBAs and made sample PBA planning documents available to contracting officers across the federal government. The updated PBA guidance is a start-to-finish set of instructions for planning and executing a PBA, and the planning documents include examples of requirements documents, such as performance work statements, which set forth the contractor’s expected outcomes for the acquisition. During the course of this review, we identified that some cultural resistance to PBA has endured. Under PBA, which is structured around the results to be achieved as opposed to the manner in which the work is to be performed, a PWS may be prepared by a contractor in response to an agency’s statement of objectives. A PWS is a type of statement of work that describes the required results in clear, specific and objective terms with measurable outcomes. While some DOD and GSA officials reported that PBA has become an increasingly standard approach, other DOD officials told us that some acquisition officials are still reluctant to give contractors control over how agencies’ requirements will be met under PBA because they fear that they may not get what they need. The officials we spoke with asserted it is difficult to overcome decades of conducting federal acquisition using government-drafted statements of work that outline—often in precise detail—how an agency expects a contractor to perform work. Issue Area Context Federal regulations generally require that agencies determine that the prices proposed by contractors are fair and reasonable before purchasing goods or services. Agencies normally establish a fair and reasonable price through competitions where multiple offerors submit proposals. Competition is considered the cornerstone of a sound acquisition process and a critical tool for the government. It helps agencies achieve the best prices and return on investment for taxpayers. Federal statutes and regulations permit agencies to award contracts noncompetitively in certain circumstances. Under those circumstances, agencies may obtain other types of data—for example via market research—to determine whether prices proposed by contractors are fair and reasonable. In 2007, the Panel found that the private sector relied heavily on competition and rigorous market research to effectively and efficiently buy products and services. The Panel also found the federal government could improve competition and pricing through greater adoption of commercial practices. Further, the Panel cited our prior findings about interagency contracting—a contracting approach in which an agency either places an order directly against another agency’s indefinite-delivery contract, or uses another agency’s contracting operation to obtain goods or services. This approach can reduce the prices the government pays for goods and services, but we had found that interagency contracts did not always adhere to federal procurement laws, regulations, and sound contracting practices. We have found that federal agencies’ efforts to increase competition and improve pricing have had limited success. OFPP and DOD have taken steps to increase competition rates, but the government-wide competition rate has remained steady, while DOD’s rate has declined over the past 5 years. Agencies facing acquisition planning obstacles are sometimes using bridge contracts, which we have generally defined as extensions to existing contracts or new short-term, sole-source contracts to avoid a lapse in service caused by a delay in awarding a follow-on contract. In some instances, bridge contract awards delay opportunities for competition and can place the government at risk of paying higher prices for multiple years. In response to our recommendations, several agencies have taken steps to improve how they conduct market research and determine price reasonableness. GSA has developed new pricing tools, but is not collecting pricing data as it had planned. GSA officials told us pricing data helps contracting officers conduct market research and negotiate prices. OFPP has promoted consolidated purchasing approaches to improve pricing, but low adoption rates diminish potential savings. The federal government has made significant progress addressing challenges related to interagency contracting, where one agency uses another’s contract or contracting support to obtain goods or services. We elaborate on these points below. Despite the existence of OFPP memoranda directing agencies to increase competition, we found that competition rates—the percentage of total obligations reported for competitive contracts versus noncompetitive contracts—have remained largely unchanged. We previously reported that, in 2009, OFPP directed agencies to increase competition and reduce their spending on sole-source contracts. However, in 2017, we found that the government-wide competition rates had remained relatively steady, at just below two-thirds of all contract obligations from fiscal years 2013 through 2017. Furthermore, during the same time period, DOD’s rate declined by over 4 percent, and civilian agency rates increased by 1.6 percent. See figure 2. We have previously identified various factors that affect competition rates, including the government’s preference for a specific vendor, inadequate acquisition planning, and overly restrictive government requirements. We have also identified a number of reasons why DOD’s competition rates have been particularly low: In 2017, we found that some companies that had not done business with DOD reported several barriers preventing them from competing for DOD contracts, including the complexity of DOD’s contracting process. In 2014, we found that that 7 of the 14 justifications in a non- generalizable sample of non-competitive DOD contracts cited the “lack of data rights” as a barrier to competition. Obtaining adequate data rights, such as unlimited rights in technical data, for instance, can allow the government to use, modify, and release the technical data used to design, produce, support, maintain, or operate an item, among other things. A long-standing factor impacting DOD’s competition rate has been its reliance on original equipment manufacturers throughout the life cycle of a program because of a previous decision not to purchase adequate data rights. In 2013, we found that DOD may be missing opportunities to effectively facilitate competition in future acquisitions for products and services previously acquired non-competitively. We reviewed justifications for why awards were non-competitive and found that some of them provided limited insight into reasons for the noncompetitive award, or did not fully describe actions that the agency could take to bring about competitive awards in future acquisitions of the same goods or services. We recommended that DOD identify, track, and consider the specific factors that affect competition when setting competition goals and develop guidance to apply lessons learned from past procurements to help achieve competition in the future. We also recommended DOD collect reliable data on one-offer awards. DOD agreed with these recommendations, and implemented them in 2014. Between 2010 and 2015, DOD’s then-Under Secretary for Acquisition, Technology and Logistics issued a series of Better Buying Power memos intended to promote competition, among other things. For example, some memos provide guidance on the effective management of technical data rights, which can include acquiring rights in data, as appropriate, to avoid future reliance on original equipment manufacturers. In 2017, we found that more large DOD weapon system programs were implementing “Better Buying Power” initiatives among other reforms, which led to better acquisition outcomes for some programs. In 2018, we further found that DOD programs initiated after 2010, and therefore subject to Better Buying Power guidance, gained nearly $5 billion in buying power—which is the amount of goods or services that can be purchased given a specified level of funding. The fiscal year 2018 NDAA directed the Secretary of Defense to ensure that DOD negotiates prices for technical data to be delivered under development or production contracts before selecting a contractor to engineer and manufacture a major weapon system, among other things. When an existing contract is set to expire but the follow-on contract is not ready to be awarded, the government may simply extend the existing contract beyond the period of performance (including option years). Alternatively, an agency may award a new short-term sole-source contract to the incumbent contractor to avoid a gap in service caused by a delay in awarding a follow-on contract. These contract extensions and short-term sole-source contracts are often referred to as “bridge contracts”. Bridge contracts can be necessary tools, but they can also delay opportunities for competition, which we and others have noted is the cornerstone of a sound acquisition process. Additionally, bridge contracts are typically envisioned as short-term, but we found in 2015 that some bridge contracts spanned multiple years, potentially undetected by agency management. For example, of the 29 contracts we reviewed in-depth in 2015, six were longer than three years. As figure 3 illustrates, an Army bridge contract for computer support services was initially planned as a 12-month bridge, but because of subsequent bridges, ultimately spanned 42 months. Obstacles during the pre-award phase, including poor acquisition planning, delayed completion of requirements documents, bid protests, and an inexperienced and overwhelmed acquisition workforce largely drove the use of bridge contracts in the cases we studied. We further found that in the sample we reviewed, increased periods of performance sometimes corresponded to increased contract values, and that— consistent with best practices—agencies paid lower prices in several instances after subsequent contracts were competed. We recommended that OFPP take steps to amend acquisition regulations to incorporate a definition of bridge contracts, and, in the interim, provide guidance for agencies to track and manage their use. OFPP agreed with the recommendation to provide guidance for managing bridge contracts, and has drafted management guidance, but has not yet finalized it as of July 2018. This guidance includes a definition of bridge contracts. Market research helps agencies obtain knowledge about pricing that can be critical to the government’s ability to determine that prices are fair and reasonable. Market research can include: Contacting knowledgeable government and industry officials, Obtaining information about similar items from other agencies, Querying government-wide databases for contract prices, and Reviewing the results of recent market research undertaken to meet similar requirements. However, in 2014, we found that four agencies—DOD, the Department of Homeland Security, the Department of Transportation, and the Federal Aviation Administration—did not leverage many available market research techniques on lower dollar contracts, and, as a result, may have missed opportunities to promote competition. We recommended that the Secretaries of Defense and Homeland Security take action to ensure their acquisition personnel more clearly document the market research activities they conduct, and that the Secretary of Transportation (the Federal Aviation Administration falls under this department) update its market research guidance to include more detail on which elements of market research should be documented. All three agencies agreed with and addressed our recommendations. In July 2018, we issued a report on DOD’s efforts to determine whether prices are fair and reasonable for commercial items, and we have found that dealing with a limited marketplace and limited price data can be a challenge. Limited market information can hinder contracting officers’ ability to make commercial item and price reasonableness determinations. Additionally, the inability to obtain contractor data can make it difficult for acquisition staff to make commercial item and price reasonableness determinations. We also found that better information sharing efforts could address some of the challenges, and recommended that DOD develop a strategy to better share commerciality and price reasonableness information across the department. DOD agreed with our recommendation. GSA has developed a number of web-based tools that, according to GSA officials, are intended to enhance contracting officers’ understanding of the basis of contractors’ proposed prices, improve contracting officers’ leverage during contract negotiations, and ultimately reduce the cost of some government contracts. These tools are housed under GSA’s Acquisition Gateway, a website intended to provide federal contracting professionals with access to tools and resources. GSA has developed the Contract-Awarded Labor Category (CALC) tool that is intended to help federal contracting officers find awarded prices to use in negotiations for labor contacts. It currently contains pricing data from professional services and IT contracts. GSA has developed an independent cost estimate tool that is intended to help contracting personnel develop cost estimates prior to contract award. GSA has developed a Prices Paid Portal to capture how much the government has previously paid for certain goods and services. Additionally, in 2016, GSA issued a Transactional Data Reporting Rule that requires contractors to report more granular transactional data, including pricing information, to the government. GSA officials told us they anticipate that the collection of this transactional pricing data will greatly enhance the government’s price analyses, and provide pricing data for the Prices Paid Portal. GSA officials also told us that transactional data reporting will provide contracting officers real-time, prices-paid information that should help them conduct market research and negotiate prices faster and easier. However, GSA officials told us that agencies do not collect and share pricing data in a standardized manner, and that this makes pricing analysis challenging. Furthermore, the Transactional Data Rule may provide less data than initially expected since GSA has decided to make reporting these data optional for contractors under certain circumstances. According to OMB staff, GSA is also collecting transactional data from all “best-in-class” contracting vehicles—those that are recommended for agency use as part of the OMB-directed category management effort. We will continue to monitor GSA’s efforts to collect pricing data. As we have reported, category management is a multi-pronged acquisition approach that includes a broad set of strategies such as consolidated purchasing, supplier management, and improving data analysis and information sharing. Federal category management efforts are intended to manage entire categories of spending across the federal government for commonly purchased goods and services in order to maximize the government’s buying power and improve pricing for all federal buyers. In December 2014, OFPP issued a memo that directed GSA to develop guidance to provide agencies with consistent standards for the development and execution of category management. Category management follows a similar government-wide effort known as strategic sourcing, which also strove to consolidate purchasing activities. According to OMB and GSA guidance, a tenet of strategic sourcing is that higher volume generally translates to lower prices. As we have reported, a key characteristic of strategic sourcing is the use of tiered pricing, where unit prices are reduced as cumulative sales volume increases. Table 1 illustrates an example of a tiered pricing model. As we have reported, it is unclear whether the government will fully realize consolidated purchasing approaches’ potential to reduce prices. We have found that agencies’ adoption of strategic sourcing has historically been low, and that tiered price discounts negotiated with vendors were not reached in most instances. For example, we reported in 2016 that, in fiscal year 2015, federal agencies spent an estimated $6.9 billion on the types of commodities—goods and services—available through federal strategic sourcing initiatives, but they only saved $129 million because of low adoption rates. We estimated the government could have saved $1.3 billion if agencies had directed more spending to strategic sourcing initiatives. See figure 4. In our 2016 report, we found that agencies’ adoption of the federal strategic sourcing initiatives was low, in part, because individual agencies were not held accountable for complying with their own commitment letters. In these commitment letters, agencies identified how much spending they planned to direct to strategic sourcing vehicles. Additionally, agencies were not held accountable for implementing transition plans that specified timelines for redirecting their relevant spending to strategic sourcing vehicles. In 2016, we made six recommendations to OMB’s OFPP and GSA in order to better promote agency accountability for implementing the strategic sourcing initiatives and category management effort. OMB and GSA have taken actions to address all six recommendations, including a recommendation for OFPP to report on agency-specific targets for the use of category management that. Although agency adoption of strategic sourcing initiatives has been low, we reported in 2012 and 2016 that strategic sourcing has still achieved significant savings for the government, and resulted in savings rates that are comparable to those reported by leading companies. For example, GSA officials reported that federal agencies directed almost $2 billion of spending through strategic sourcing contracts between fiscal years 2011 and 2015, and achieved an estimated $470 million in savings—which represents an overall savings rate of about 25 percent. By comparison, leading companies typically achieved savings rates between 10 and 20 percent by using strategic sourcing. Since our 2016 analysis of savings under strategic sourcing, category management efforts have continued. OMB staff told us that statistics show early progress in category management. Interagency contracting refers to instances when an agency either places an order directly against another agency’s indefinite-delivery contract, or uses another agency’s contracting operation to obtain goods or services. Interagency contracting can leverage the government’s buying power and allow agencies to meet the demands for goods and services efficiently. This method of contracting can reduce the prices the government pays for goods and services when properly managed, but it also poses a variety of risks. In 2005 we reported that DOD used a Department of the Interior contract for information technology to obtain interrogation services quickly during the Iraq War, and, as a result, six task orders for interrogation, screening, and other intelligence-related services were placed on an information technology contract. Our additional work found that interagency contracting deficiencies stemmed from increasing demands on the acquisition workforce, insufficient training, and—in some cases— inadequate guidance; as well as questionable lines of responsibility for key functions such as requirements definition, contract negotiation, and contractor oversight. For these reasons, we added the management of interagency contracts to our High Risk list in 2005. In 2013, we found that the federal government had made significant progress in addressing challenges involving interagency contracting. Specifically, we found that agencies had adopted new oversight requirements for interagency contracts, and that OMB and GSA had taken steps to improve the reliability of data on interagency contracts, increasing transparency into how agencies used them. Therefore, we removed interagency contracting from our High Risk list in February 2013. Issue Area Context The government uses contracts to procure a wide range of services, some of which warrant increased management attention because there is an increased risk that the contractors may perform tasks reserved for the government. The responsibility for overseeing contractors often falls to contracting officers’ representatives, who are expected to help ensure contractors perform their work in accordance with contractual requirements. Additionally, the Federal Acquisition Regulation (FAR) contains a prohibition on using personal services contracts, which are characterized by the employer-employee relationships they create. In 2007, the Panel found that uncertainty about inherently governmental functions led to confusion about the necessary amount of contractor oversight, and it raised questions about federal agencies’ capacity to oversee contractors. Additionally, the Panel asserted that the FAR prohibition on personal services contracts should be removed and that new guidance should be provided to define where, to what extent, under what circumstances, and how agencies may procure personal services by contract. We have found that contracts requiring increased management attention have posed contractor oversight challenges for federal agencies. Agencies across the federal government award contracts requiring increased management attention, such as contracts for professional and management support services. DOD is not leveraging its annual reports to Congress on its portfolio of contracted services to systematically identify contracts requiring increased management attention. DOD has taken steps to improve the reliability of data on personal services contracts, which could help ensure contractors are supervised appropriately. We elaborate on these points below. There are benefits to using contractors to provide services, such as addressing surge capacity needs and providing needed expertise. But we and OFPP have identified the need for increased management attention on certain types of contracted services. These contracted services include professional and management support services, such as intelligence services and policy development. Additionally, some of these services can be closely associated with inherently governmental functions. In 2009, we found that federal agencies introduce the risk that contractors may inappropriately influence government authority when performing contracts for services “closely associated” with inherently governmental functions. In 2017, we found that agencies continued to award service contracts warranting increased management attention at a steady rate. See figure 5. From fiscal years 2013 through 2017, the share of government-wide obligations for these services remained consistent for civilian agencies at around 20 percent, and grew for DOD from about 18 percent to 20 percent. OMB has taken steps to help agencies reduce some of the risks associated with contracts warranting increased management attention. In 2011, OMB emphasized the importance of adequate management by government employees when contractors perform work that is closely associated with inherently governmental functions. For example, OMB directed agencies to employ and train a sufficient number of qualified government personnel to provide active and informed management and oversight of contractor performance where contracts have been awarded for functions closely associated with the performance of inherently governmental functions. We have found that some agencies face other challenges overseeing their contractors. In 2010 and 2012, we reported that DOD lacked sufficient numbers of adequately trained personnel, including contracting officer’s representatives (CORs), to oversee contractors in contingency operations like those in Afghanistan and Iraq. In 2013, at the Department of Veterans Affairs, we found that heavy workloads and competing demands made it difficult for CORs to effectively monitor contractors and ensure they were executing their work in accordance with contract terms. In addition, we have found that these CORs often lacked the technical knowledge and training needed to effectively oversee certain technical aspects of a contractor’s performance. We recommended that the Department of Veterans Affairs develop tools to help the officials oversee contracts. The department agreed and did so. In 2008 and again in 2009, Congress mandated that defense and certain civilian agencies start providing annual reports on certain service contract actions. These inventories can improve agency insight into the number of contractor personnel providing services and the functions they are performing, among other things, and help agencies determine whether any of these functions require increased management attention. Despite the increased reporting requirements, we have found that DOD has not always used available inventory information to improve contractor oversight. In March 2018, for example, we found that the military departments generally had not developed plans to use the inventory to inform management decisions as required. We did not make any new recommendations at the time, noting that seven of our 18 prior recommendations related to the inventory remained open, including a recommendation for DOD to identify officials at the military departments responsible for developing plans and enforcement mechanisms to use the inventory. In its comments on our March 2018 report, DOD stated it was committed to improving its inventory processes. A personal services contract is one that creates an employer-employee relationship between the government and contractor personnel. Because such contracts could be used to circumvent the competitive hiring procedures of the civil service laws, the use of personal services contracts requires specific statutory authority. Section 809 Panel In its June 2018 report, the Section 809 Panel suggested eliminating statutory and regulatory distinctions between personal services contracts and non-personal services contracts to increase managerial flexibility in determining how to fulfill requirements. As of July 2017, we could not verify how often DOD awarded personal services contacts because more than one third (17 of 45) of the contracts we reviewed that had been designated personal services contracts in the government’s primary acquisition-data repository (the Federal Procurement Data System-Next Generation) were incorrectly recorded. DOD concurred with our recommendation to address this issue and has taken steps to do so. As we found in 2017, agencies need accurate information about their personal services contracts in order to ensure that they are supervising contractors work appropriately. Issue Area Context The federal acquisition workforce manages and oversees billions of dollars in acquisition programs and contracts to help federal agencies get what they need at the right time and at a reasonable price. The acquisition workforce consists of contracting officers, contracting officer’s representatives, program and project managers; and may include others such as, engineers, logisticians, and cost estimators. A number of governmental organizations play critical roles in assisting agencies in building and sustaining their acquisition workforces. Among these agencies, OFPP provides government-wide guidance on acquisition workforce issues, GSA’s Federal Acquisition Institute promotes the development of the civilian acquisition workforce, and the Defense Acquisition University provides training for DOD’s acquisition workforce. In 2007, the Panel found the federal acquisition workforce was understaffed, overworked, and undertrained. The Panel also found that most agencies were not carrying out appropriate workforce planning activities and had not assessed the skills of their current acquisition workforce or the number of individuals with relevant skills that would be needed in the future. We found that steps have been taken to address acquisition workforce issues, but workforce gaps endure. Congress established the Defense Acquisition Workforce Development Fund (DAWDF) in 2008 which helps DOD recruit, train, and retain acquisition personnel. It has helped DOD close some staffing gaps. The acquisition workforce faces skill gaps due to the increasing complexity of acquisitions, particularly IT acquisition. OFPP, GSA, and DOD have introduced new training programs to help improve the skills of the federal acquisition workforce. Congress and OMB have taken several actions intended to ensure agencies conduct adequate workforce planning, but agencies have not done so consistently. We elaborate on these points below. In 2008, Congress established the Defense Acquisition Workforce Development Fund (DAWDF), which provides resources for the recruitment, training, and retention of DOD acquisition personnel. In 2017 we reported that, as of September 2016, DOD obligated more than $3.5 billion for these purposes and that DAWDF had helped increase the total size of the DOD acquisition workforce by about 24 percent from 2008 to 2016, among other things. However, DOD did not achieve its growth targets for each of its acquisition career fields. In December 2015, we reported that DOD had exceeded its planned growth for seven career fields by about 11,300 personnel, including the priority career fields of auditing and program management. However, DOD had not reached its growth targets for six other career fields, falling about 4,400 personnel short. These included the additional priority career fields of contracting, business, and engineering. We recommended that DOD issue an updated acquisition workforce plan that includes revised career field goals as a guide to ensure that the most critical acquisition needs are being met. Since that time, DOD has continued to hire more people in its acquisition workforce, including the contracting and engineering career fields. It also issued an updated strategic plan in October 2016. However, as we reported in 2017, the plan does not include workforce targets for each career field, so the sizes of DOD’s current staffing shortfalls, if any, are unclear. DOD officials stated that determining which career fields were a priority was most appropriately determined by the components rather than at the department level. Section 809 Panel In its June 2018 report, the Section 809 Panel made recommendations to improve the resourcing, allocation, and management of the Defense Acquisition Workforce Development Fund (DAWDF). In 2017, we also reported on the amount of unobligated balances in the DAWDF account that have been carried over from one fiscal year to the next. According to DOD officials, these balances—which totaled $875 million at the beginning of fiscal year 2016—were the result of several factors. For example, DOD officials generally did not begin the process of collecting and distributing DAWDF funds before DOD received its annual appropriations. Other factors that affected DAWDF execution included hiring freezes and imbalances between DOD’s DAWDF requirements and the minimum amount that DOD was required to put into DAWDF. In order to improve fund management, we recommended that DOD officials clarify whether and under what conditions DAWDF funds could be used to pay for personnel to help manage the fund. DOD indicated that it planned to address the recommendation. We continue to highlight DOD acquisition workforce issues in our High- Risk List, through the DOD Contract Management area, because agencies continue to face challenges in maintaining sufficient staff levels and monitoring the competencies of their acquisition workforce. In our 2017 High Risk report, we determined that DOD should continue efforts to ensure that its acquisition workforce is appropriately sized and trained to meet the department’s needs, among other actions. The acquisition workforce faces skill gaps due to the increasing complexity of acquisitions, particularly IT acquisitions, according to officials we spoke with for this review. Officials from DOD, GSA, and one industry group indicated that a lack of technical knowledge presents challenges for effectively planning and executing complex IT acquisitions. Additionally, we have reported that the government’s ability to respond to evolving cybersecurity threats depends in part on the skills and abilities of the IT acquisition workforce. Cross-functional or multidisciplinary teams may help to address the acquisition skill gaps because they can provide a broad range of specialized skills. In 2014, Congress included provisions in FITARA to ensure timely progress by federal agencies toward developing, strengthening and deploying IT acquisition cadres consisting of personnel with highly specialized skills in IT acquisitions. This legislation followed an initiative OMB started in 2010 when OMB’s United States Chief Information Officer issued a 25 point implementation plan requiring each major IT investment to establish an integrated program team to include, at a minimum, a dedicated, full-time program manager and an IT acquisition specialist. In 2016, we reported on three characteristics that contribute to the creation and operation of a comprehensive integrated program team. We also found that shortfalls in these characteristics— leadership, team competition and team processes—had contributed to significant problems in major IT acquisitions. Over the past 10 years, OFPP, GSA and DOD have introduced new training programs to help improve the skills of the federal acquisition workforce. In fiscal year 2007, OFPP launched two new certification programs for civilian agencies: (1) the program/project managers’ certification, and (2) the contracting officers’ representatives’ certification. In 2011, GSA introduced the Federal Acquisition Institute Training Application System, which includes continuous learning modules, certification modules, and a learning management system. In 2013, OFPP issued a memo requiring all civilian federal agencies to increase use of the system. In 2015, OFPP and the United States Digital Service jointly developed the Digital Information Technology Acquisition Professional Training Program to help make acquisition personnel better IT buyers. In 2015, GSA established the Center for Acquisition Professional Excellence to improve training for GSA’s own acquisition personnel. In 2016, DOD reported that, since 2008, its Defense Acquisition University increased its capacity with a 28 percent increase in classroom graduates and a 15 percent increase in online training graduates. In addition, DOD reports that its overall acquisition workforce certification level increased from 58.3 percent in fiscal year 2008 to 76 percent in fiscal year 2017. In 2018, OFPP established a new certification program for digital services as part of the overall effort to increase expertise in buying technology. Workforce planning involves identifying critical occupations, skills, and competencies; analyzing workforce gaps; building the capabilities needed to support workforce strategies; and monitoring and evaluating progress toward achieving workforce planning and strategic goals, among other things. Since 2009, Congress and OMB have taken several steps involving agencies’ acquisition workforce planning efforts. In the fiscal year 2009 NDAA, Congress directed OMB to prepare a 5- year Acquisition Workforce Development Strategic Plan for civilian agencies to increase the size of the federal acquisition workforce, among other things. In response, OMB issued the plan in October 2009. From 2011 to 2016, Congress required DOD to develop biennial plans to improve the defense acquisition workforce. However, DOD did not always meet this biennial requirement, issuing an acquisition strategic plan in 2010 and then not issuing another until October 2016. In 2016, we reported that DOD officials cited budget uncertainties as the primary reason for the delay. In July 2016, OMB released its Federal Cybersecurity Workforce Strategy, which cited the need for agencies to examine specific IT, cybersecurity, and cyber-related work roles, and to identify personnel skills gaps. We have ongoing work reviewing federal agencies’ IT and cybersecurity workforce planning. Nonetheless, we have found gaps in agency workforce planning efforts. In December 2015, we found that DOD had assessed workforce competencies for 12 of its 13 career acquisition fields, but had not established a timeline for reassessing competencies in 10 of those fields to gauge progress in addressing previously identified gaps. We made four recommendations to DOD as a result. DOD concurred with all four recommendations, including the recommendation that the department issue an updated acquisition workforce plan in fiscal year 2016, which DOD implemented. The other three recommendations remain unaddressed as of June 2018, including the recommendation to establish a timeframe for reassessment. Similarly, in 2017, we found that the Department of Homeland Security was continuing to refine its acquisition workforce planning efforts. In April 2017, we reported that the department’s 2016 staffing assessments did not take into account all acquisition-related positions, which could limit its insight into the size and nature of potential staffing shortfalls. Additionally, in November 2016, we found that the five departments in our review—the Departments of Defense, Commerce, Health and Human Services, Transportation, and the Treasury—had not fully implemented key workforce planning steps and activities for IT acquisitions. For example, four of these agencies had not demonstrated an established IT workforce planning process, which should include training for acquisition personnel. In addition, none of these agencies had fully developed strategies and plans to address IT workforce gaps. We recommended that the selected departments implement IT workforce planning practices to facilitate (1) more rigorous analyses of gaps between current skills and future needs, and (2) the development of strategies for filling the gaps. As of June 2018, all five recommendations remain open. Issue Area Context The Federal Procurement Data System-Next Generation (FPDS-NG) is the federal government’s primary repository for procurement data. Government officials and others use FPDS-NG for a variety of analytical and reporting purposes, such as examining data across government agencies, providing managers a mechanism for determining where contract dollars are being spent, and populating USASpending.gov, a website that contains data on federal awards. The General Services Administration, with guidance from the Office of Federal Procurement Policy, established and administers FPDS-NG. In 2007, the Panel found that FPDS-NG contained unreliable data at the granular level, didn’t have appropriate validation rules in place, and lacked appropriate administration. We found that OMB, GSA, and federal agencies have taken steps to improve data reliability, but the government’s primary repository for acquisition data still faces capability limitations. OMB and GSA have taken steps to improve FPDS-NG data quality. FPDS-NG’s current capabilities face limitations. OMB’s IT Dashboard provides detailed information on major IT acquisitions at 26 agencies, but accuracy and reliability issues endure. We elaborate on these points below. From 2008 to 2011, OMB repeatedly directed agencies to take specific actions to improve the quality of the data they report in FPDS-NG. In May 2008, OMB provided agencies guidance on how to verify, validate, and certify their FPDS-NG data. In October 2009, OMB directed agencies to explicitly describe their data quality improvement and validation activities. In May 2011, OMB directed agencies to verify that they have the policies, procedures, and internal controls in place to monitor and improve procurement data quality generally, and that they have similar controls for ensuring that contractors comply with their reporting requirements. Since 2007, GSA has reported improvements in FPDS-NG data quality. Agencies are responsible for developing a process and monitoring results to ensure timely and accurate reporting of contractual transactions in FPDS-NG and are required to submit certifications about the accuracy of contract reporting to GSA. In 2017, GSA reported that these certifications collectively demonstrate that the data in FPDS-NG have an overall accuracy rate of 95 percent. GSA also reports that the overall completeness rate for FPDS-NG data has increased from 98.0 percent in fiscal year 2009 to 99.2 percent in fiscal year 2016. Nonetheless, our work has recently identified data reliability challenges with FPDS-NG data. For example, in 2017 we found that FPDS-NG did not accurately identify some indefinite delivery contracts. And in March 2016, we identified some FPDS-NG data limitations, including the misclassification of some contractors as small businesses, and some incorrect obligations data. GSA has updated the FPDS-NG system to expand its capabilities several times since the Panel issued its 2007 report. The most recent version was released in October 2017, and it increased the type of data that could be collected. For example, FPDS-NG now collects more detailed information on women-owned business types, inherently governmental services, and legislative mandates. A previous update in 2009 standardized how FPDS- NG tracks and reports competition data. Despite these changes, FPDS-NG has limitations in the type of acquisition data it can track. For example, in November 2017, we reported that agencies were unable to use FPDS-NG to track and report specific contract award data elements in accordance with OMB guidance because the required data had no corresponding data-entry field in FPDS-NG. We recommended that OMB take steps to improve how agencies collect certain procurement data. OMB generally agreed, but has not yet addressed the recommendation. Similarly, in 2014 we found limitations in FPDS-NG with regard to tracking small business subcontractors. Specifically, we found that FPDS-NG did not contain data on subcontracts, and was not designed to identify the type of subcontracting plan used or to link small business subcontractors to particular prime contracts. In fiscal year 2020, GSA plans to fully integrate FPDS-NG with nine other legacy systems operated by the agency’s Integrated Award Environment (IAE). IAE was initiated in 2001 to bring together 10 different acquisition data systems into a unified system. GSA, DOD, and OMB staff expect that the IAE will contribute to improved FPDS-NG data reliability and better system governance. Integration with other systems will reduce the need to input the same data multiple times, which creates opportunities for errors. DOD and OMB staff also stated that FPDS-NG is currently managed through the IAE governance model, which offers a clear governance structure, including strategic planning, conflict resolution, and decision-making. In 2009, OMB deployed a public website, known as the IT Dashboard, to provide detailed information on major IT acquisitions at 26 agencies, including ratings of the IT acquisitions’ performance against cost and schedule targets. Among other things, agencies are to submit investment risk ratings from their CIOs. For more than 6 years, we have issued a series of reports about the IT Dashboard, noting the significant steps OMB has taken to enhance the oversight, transparency, and accountability of federal IT acquisitions. We have also reported concerns about the accuracy and reliability of IT Dashboard data. We have made 47 recommendations to OMB and federal agencies to help improve the accuracy and reliability of this data and to increase its availability. As of March 2018, 19 of the recommendations remain open, including recommendations that agencies factor active risks into their IT Dashboard ratings, and ensure that major IT investments are included on the Dashboard. Issue Area Context The federal government has a long-standing policy to maximize contracting opportunities for small businesses. Congress has established, and the Small Business Administration (SBA) maintains, goals for small business participation in federal contracting. SBA also manages several programs targeted at increasing participation by particular business types, including: Small Disadvantaged Businesses, Service- Disabled Veteran-Owned Small Businesses, Women-Owned Small Businesses, and those in Historically Underutilized Business Zones (HUBZone). Agency-specific goals are established through negotiation between SBA and the respective agency. In 2007, the Panel found a number of challenges hindering agencies’ efforts to achieve small business participation goals. In particular, the Panel made recommendations focused on a lack of parity across small business types (identifying that some statutes appeared to prioritize certain small business programs over others), consolidation or bundling of contract requirements, and how small businesses are prioritized under multiple award contracts (contracts awarded to two or more contractors under a single solicitation). We found that small business participation in government contracting has increased over the past few years, but small business advocates report emerging concerns, and agencies struggle with policy compliance. Executive branch agencies have increased small business participation over time. Small business advocates have expressed concerns that category management will reduce the number of small businesses eligible for a given opportunity; the executive branch has taken some steps to address such concerns. Most agencies did not demonstrate that they are in full compliance with requirements involving their small business offices. SBA has improved how it assesses firms’ eligibility for small business programs, but we found it should do more to oversee its women- owned small business program and its HUBZone program. We elaborate on these points below. Section 809 Panel Federal agencies continue to address challenges related to small business participation. For example, the Department of Defense (DOD) did not meet all of its small business goals in 2017. In its January 2018 report, the Section 809 Panel recommended that DOD refocus its small business policies and programs to prioritize the department’s mission, among other things. Since the Panel issued its report in 2007, Congress and executive branch agencies have continued efforts to encourage small business participation, with improved results over time. In the 2010 Small Business Jobs Act, Congress addressed the three primary small business issues raised by the Panel. These issues included taking action on issues of parity, requiring justifications and reporting for contract bundling, and addressing small business concerns about multiple award contracts, among other things. Meanwhile, executive branch agencies have also taken steps to encourage small business participation. For example: GSA strongly supports small business participation in its Federal Supply Schedules program. The schedule program provides federal agencies a simplified method of purchasing commercial products and services at prices associated with volume buying. GSA set aside some specific schedule categories—such as photographic services and library furniture—for small businesses. GSA also developed a forecasting tool in 2016, intended to give small businesses a preview of upcoming federal contracting opportunities. In a 2013 rule, SBA clarified how contracting officers should assign small business codes under multiple award contracts. North American Industry Classification System (NAICS) codes are the basis for SBA’s size standards; therefore, the NAICS code that a contracting officer assigns determines whether a firm is eligible for small business set-asides. In its rule, SBA observed that when NAICS codes are assigned to a multiple award contract solicitation, a business concern may be small for one or some of the NAICS codes, but not all. In that situation, an agency could receive small business credit on an order for an award to a “small business” where a firm qualifies as small for any NAICS code assigned to the contract, even though the business is not small for the NAICS code that was assigned or that should have been assigned to that particular order. SBA’s rule stated that, to ensure small businesses receive the awards that are intended for them, contracting officers should assign NAICS codes to discrete components of a contract in certain circumstances. The contracting officers we interviewed stated that assigning a NAICS code can be challenging when one or more codes could apply to a contract and we noted that SBA’s rule may further clarify code assignment for these officials. However, updates to the FAR are required to fully implement SBA’s final rule. This FAR rule-making process is ongoing. In fiscal year 2017, the federal government met three of its five government-wide small business participation goals. This is progress compared to fiscal year 2007, when the government met just one of its five small business goals. While individual agencies’ success varied, there was significant improvement in the number of agencies meeting service-disabled veteran-owned and women-owned small business goals. Additionally, the number of agencies meeting all of their small business goals increased from two to seven. Meanwhile, HUBZone goals have remained unmet for a majority of agencies. See figure 6. According to OMB guidance, under category management the federal government should “buy as one.” Specifically, agencies are expected to move away from making numerous individual procurements to purchasing through a broader aggregate approach. Small business advocates we spoke with have reported a number of concerns to us about the government-wide category management effort. Because category management includes streamlining the number of available contracts, small business advocates—including officials at DOD and SBA—have told us that they worry the initiative will reduce the number of small businesses eligible for a given opportunity, and that the number of small businesses awarded federal contracts may fall. The executive branch has taken some steps to provide small businesses with contracting opportunities through category management. For example, the category management effort includes a set of cross-agency priority goals that include small business utilization. Another element of category management identifies best-in-class contracting vehicles that are recommended for agency use. Some best-in-class vehicles under category management focus on small business providers, including GSA’s Alliant Small Business vehicle that provides IT solutions. Additionally, in 2015, we found that DHS’s “on-ramp/off-ramp” mechanisms offered an option to help maintain a pool of eligible small businesses by reopening an indefinite-delivery, indefinite-quantity vehicle’s solicitation to new small business vendors after participating businesses outgrew their small size status and left the program. GSA recently reported that two of its small business interagency contracts— OASIS Small Business and 8(a) Stars II—used on-ramp procedures in 2017 and 2018. However, in 2014 we analyzed small business participation in strategic sourcing, a predecessor to category management, and found that agencies had not implemented OMB requirements to develop performance measures to determine how strategic sourcing initiatives had affected small business participation. As of June 2018, four of the six contracting agencies we reviewed had implemented our recommendation to do so. In the Small Business Act, Congress required certain agencies to create and appropriately staff Offices of Small and Disadvantaged Business Utilization (OSDBUs) to advocate for small businesses. Throughout the years, Congress amended the requirements on multiple occasions, generally expanding the areas for the OSDBU to maintain involvement in, and providing details on how the OSDBU office should function. However, among other results, we have found that many agencies have not demonstrated that they are in full compliance with a number of requirements related to the functions and duties of these offices, such as establishing a direct reporting relationship between the OSDBU director and the agency head or deputy head, and specifying that the director must have supervisory authority over staff performing certain duties. As we reported in August 2017, noncompliance with these legislative requirements may limit the extent to which an office can advocate for small businesses, and we made recommendations to 19 agencies to come into full compliance with these OSDBU requirements or report to Congress on why they have not. Most agencies that provided comments agreed or partially agreed with the recommendations. As of June 2018, two of the 19 agencies—the National Aeronautics and Space Administration and the U.S. Agency for International Development—had implemented our recommendations. Over the past decade, we have identified a number of weaknesses in the processes SBA uses to certify and recertify businesses as being eligible to participate in its selected programs—specifically HUBZone and women-owned programs, and the 8(a) program for small disadvantaged businesses—and made recommendations to SBA to address them. SBA has taken steps to address these weaknesses, but some remain. In March 2010, we made six recommendations to improve how SBA assesses the continuing eligibility of firms to participate in the 8(a) program, and we have closed all six recommendations as implemented. In 2014, we made two recommendations to improve SBA’s oversight of firms’ participation in its women-owned small business program. We had found that SBA had not yet developed procedures that provided reasonable assurance that only eligible businesses obtained set-aside contracts. Then in 2015, we made two recommendations to improve SBA’s oversight of firms’ participation in the HUBZone program. We had found that SBA lacked an effective way to communicate program changes to small businesses as well as key oversight controls over the process that small businesses used to recertify that they are eligible to participate. The four recommendations in these two reports remained open as of May 2018. We provided a draft of this report to OMB, DOD, GSA and SBA for review and comment. We received written comments from DOD, which are reprinted in appendix II, and one technical comment via e-mail. OMB and GSA provided technical comments via e-mail. We addressed OMB’s, DOD's and GSA's comments as appropriate. SBA told us that they had no comments on the draft report. We also offered three third party organizations—two industry groups and the Section 809 Panel—the opportunity to provide their views on sections of the report that relate to them. They confirmed these sections of the report are accurate. We are sending copies of this report to the appropriate congressional committees, the Director of the Office of Management and Budget, the Secretary of Defense, the Administrator of General Services, the Administrator of the Small Business Administration, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or WoodsW@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report identifies actions the federal government has taken to address the key issues the Acquisition Advisory Panel (the Panel) raised in its 2007 report, and some of the acquisition challenges that remain. To frame the key issues the Panel identified in its 2007 report, we worked with internal subject matter experts and officials from the Office of Management and Budget’s (OMB) Office of Federal Procurement Policy (OFPP), Department of Defense (DOD), General Services Administration (GSA), and Small Business Administration (SBA) to categorize the Panel’s 89 recommendations into six higher-level issue areas: Competition and pricing, Federal procurement data, and Small business participation. To identify progress made and challenges that remain in each of these issue areas, we reviewed relevant GAO reports and testimonies; key legislation such as the Weapon Systems Acquisition Reform Act of 2009, and the Small Business Jobs Act of 2010; acquisition guidance issued by OMB, DOD, GSA, and SBA; and interim reports from the Section 809 Panel, which is addressing acquisition challenges at DOD, and plans to issue its final report in January 2019. We also interviewed officials from OMB, DOD, GSA, and SBA; and Section 809 Panel staff. Further, we collected input from members of the Chief Acquisition Officers Council and two industry groups: the Professional Services Council and the Coalition for Government Procurement. The GAO reports cited throughout this report include detailed information on the scope and methodology from our prior reviews. For findings based on analyses of data from the Federal Procurement Data System-Next Generation (FPDS-NG) in our prior work, we updated the previous analyses to include the most recent years available. We reviewed current documentation for FPDS-NG in order to identify any changes that might impact our analyses. We determined that the FPDS-NG data were sufficiently reliable for the purpose of updating previous analyses. We conducted this performance audit from July 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. In addition to the contact named above, Nathan Tranquilli (Assistant Director), Betsy Gregory-Hosler (Analyst-in-Charge), Holly Williams, George Bustamante, and Brandon Voss made key contributions to this report. Ted Alexander, Cheryl Andrew, Peter Del Toro, Brenna Derritt, Alexandra Dew Silva, Tim DiNapoli, Jennifer Dougherty, Kathleen Drennan, Lorraine Ettaro, Stephanie Gustafson, Dave Hinchman, Javier Irizarry, Justin Jaynes, Julia Kennon, Sherrice Kerns, Emily Kuhn, Heather B. Miller, Angie Nichols-Friedman, Shannin O’Neill, Miranda Riemer, William Russell, Bill Shear, Roxanna T. Sun, and Katherine Trimble also made contributions to the report.", "summary": "In fiscal year 2017, federal agencies obligated more than $500 billion to acquire products and services. These products and services included military aircraft, information technology software, and maintenance services. Amid this large spending, the federal government has taken steps to reform federal acquisitions, increase efficiencies, and improve results. For example, in the Services Acquisition Reform Act of 2003, Congress established the Acquisition Advisory Panel to review federal acquisition laws, regulations, and policies; and identify opportunities for improvement. The Panel issued its final report in 2007, addressing topics that span all three phases of the contracting life cycle identified by GAO: pre-contract award, contract award, and post-contract award. GAO was asked to follow up on the Panel's report and identify progress made since 2007. This report identifies the actions the federal government has taken to address key issues raised in the Panel's report, and the challenges that remain. GAO reviewed documentation and interviewed personnel from federal agencies and the private sector. These personnel included staff from OMB that are responsible for federal procurement policy, as well as staff supporting a panel addressing DOD's acquisition regulations and processes, known as the Section 809 Panel. GAO also leveraged its large body of work on federal acquisitions. Congress and the executive branch have taken numerous actions to address key issues the Acquisition Advisory Panel (Panel) identified in its 2007 report, but these actions have not eliminated some enduring challenges. The figure below presents the key issues the Panel addressed in relation to the life cycle of a typical contract as identified by GAO. Three of the key issues, and the corresponding challenges, align with specific phases in the contracting life cycle: Requirements Definition: The Panel found that fully identifying requirements before a contract is awarded is key to achieving the benefits of competition. GAO has found that unrealistic requirements have contributed to poor program outcomes at the Department of Defense (DOD), and that the Army's requirements development workforce decreased by 22 percent from 2008 to 2017. Competition and Pricing: The Panel said that competition can help reduce prices. GAO's work shows that competition rates have remained steady government-wide, and declined at DOD. See figure below. GAO has also found that agencies are sometimes using bridge contracts—which GAO has generally defined as either extensions to existing contracts or new short-term, sole-source contracts—to avoid a lapse in service caused by delay of a follow-on contract award. In some instances, bridge contract awards delay opportunities for competition and can place the government at risk of paying higher prices for multiple years. The figure below depicts how an Army bridge contract for computer support services planned for 12 months was extended to 42 months. Contractor Oversight: The Panel raised questions about the capacity of federal agencies to oversee contractors. GAO has found that agencies continue to award contracts warranting increased management attention at a steady rate, such as contracts for management support services. With contracts like those for management support services, there is an increased risk that contractors may perform tasks reserved for the government. Additionally, GAO found that heavy workloads at the Department of Veterans Affairs have made it difficult for officials who oversee contractors to ensure contractors adhere to contract terms. Three of the key issues, and the corresponding challenges, cut across all the phases of the contracting life cycle: Acquisition Workforce: The Panel found that the federal acquisition workforce faces workload and training challenges. GAO's work has shown that DOD has enhanced its workforce, but some workforce gaps endure at DOD and across agencies. Federal Procurement Data: The Panel found that the government's primary repository for acquisition data contained some unreliable data. Also, GAO has found that the system has demonstrated limitations. For example, guidance from the Office of Management Budget (OMB) required that agencies collect specific contract award data, but the system did not have the capability to do so. Small Business Participation: The Panel found a number of challenges hindering agencies' efforts to meet small business goals. GAO has found small business participation has increased, but many agencies are not in full compliance with requirements governing Offices of Small and Disadvantaged Business Utilization (OSDBUs). For example, the directors of these offices should report directly to agency heads or their deputies, but not all agencies have established this type of direct reporting relationship. GAO is not making any new recommendations in this report, but it has made numerous recommendations in the past. The agencies have agreed with many of GAO's recommendations, and have implemented some of them but not others. For example, GAO has made the following recommendations. The Army should assess the resources needed for the requirements development process. The Army agreed, but it has not yet done so. OMB should provide guidance for agencies to manage bridge contracts. OMB agreed and has drafted management guidance but has not yet finalized it. Certain federal agencies should take steps to document how they conduct market research. The agencies agreed and did so. The Department of Veterans Affairs should develop tools to help oversee contracts. The department agreed and did so. DOD should have issued an updated acquisition workforce plan in fiscal year 2016. DOD agreed and issued the plan. OMB should take steps to improve how agencies collect certain procurement data. OMB generally agreed, but has not yet addressed the recommendation. Certain federal agencies should take steps to comply with OSDBU-related requirements. Most agencies that provided comments agreed or partially agreed. Two agencies—the National Aeronautics and Space Administration, and the U.S. Agency for International Development—have addressed the recommendations. GAO continues to believe the agencies should implement all of these recommendations.", "document_type": "gao"}
{"report": "USDA’s Food and Nutrition Service (FNS) is responsible for promulgating SNAP program regulations, ensuring that state officials administer the program in compliance with program rules, and authorizing and monitoring retailers from which recipients may purchase food. States are responsible for determining applicant eligibility, calculating the amount of their benefits, issuing benefits on Electronic Benefit Transfer (EBT) cards—which can be used like debit cards to purchase food from authorized retailers—and investigating possible program violations by recipients. SNAP recipients are subject to various work requirements. Generally, all SNAP recipients ages 16 through 59, unless exempted by law or regulation, must comply with work requirements, including registering for work, reporting to an employer if referred by a state agency, accepting a bona fide offer of a suitable job, not voluntarily quitting a job or reducing work hours below 30 hours a week, and participating in a SNAP E&T program or a workfare program—in which recipients perform work on behalf of the state—if assigned by the state agency. SNAP recipients are generally exempt from complying with these work requirements if they are physically or mentally unfit, responsible for caring for a dependent child under age 6 or an incapacitated person, employed for 30 or more hours per week or receive weekly earnings which equal the minimum hourly rate set under federal law multiplied by 30, or are a bona fide student enrolled half-time or more in any recognized school training program, or institution of higher education, amongst other exemptions. SNAP recipients subject to the work requirements—known as work registrants— may lose their eligibility for benefits if they fail to comply with these requirements without good cause. One segment of the work registrant population, SNAP recipients ages 18 through 49 who are “able-bodied,” not responsible for a dependent child, and do not meet other exemptions—able-bodied adults without dependents (ABAWDs)—are generally subject to additional work requirements. In addition to meeting the general work requirements, ABAWDs must work or participate in a work program 20 hours or more per week, or participate in workfare, in which ABAWDs perform work to earn the value of their SNAP benefits. Participation in SNAP E&T, which is a type of work program, is one way for ABAWDs to meet the 20 hour per week ABAWD work requirement, but other work programs are acceptable as well. Unless ABAWDs meet these work requirements or are determined to be exempt, they are limited to 3 months of SNAP benefits in a 36-month period. At the request of states, FNS may waive the ABAWD time limit for ABAWDs located in certain areas of a state or an entire state under certain circumstances. A waiver may be granted if the area has an unemployment rate of over 10 percent or there are an insufficient number of jobs to provide employment for these individuals. If the time limit is waived, ABAWDs are not required to meet the ABAWD work requirement in order to receive SNAP for more than 3 months in a 36-month period yet they must still comply with the general work requirements. Federal requirements for state SNAP E&T programs were first enacted in 1985 and provide state SNAP agencies with flexibility in how they design their SNAP E&T programs, including who to serve and what services to offer. The state has the option to offer SNAP E&T services on a voluntary basis to some or all SNAP recipients, an approach commonly referred to as a voluntary program. Alternatively, the state can require some or all SNAP work registrants to participate in the SNAP E&T program as a condition of eligibility, an approach commonly referred to as a mandatory program. Further, states determine which service components to provide participants through their SNAP E&T programs, although they must provide at least one from a federally determined list. This list includes job search programs, job search training programs, workfare, programs designed to improve employability through work experience or training, education programs to improve basic skills and employability, job retention services, and programs to improve self-sufficiency through self- employment. Total federal expenditures on SNAP E&T programs were more than $337 million in fiscal year 2016. States are eligible to receive three types of federal funding available for state SNAP E&T programs: 100 percent funds—formula grants for program administration, 50 percent federal reimbursement funds, and ABAWD pledge funds—grants to states that pledge to serve all of their at-risk ABAWDs. The Office of Management and Budget has designated SNAP as a high- priority program due to the estimated dollar amount in improper payments—any payments that should not have been made or were made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. According to USDA’s fiscal year 2015 agency financial report, $2.6 billion, or 3.66 percent, of all SNAP benefits paid in fiscal year 2014 were improper, the most recent year for which data are available. SNAP improper payments are caused by variances in any of the key factors involved in determining SNAP eligibility and benefit amounts, and, according to USDA, household income was the most common primary cause of dollar errors. States review the accuracy of SNAP payments to recipients on an ongoing basis, and FNS assesses the accuracy of state reviews and determines a national improper payment rate annually. FNS and states share responsibility for addressing SNAP fraud, which can occur through the eligibility process and when benefits are being used. Specifically, recipients may commit eligibility fraud when they misrepresent their household size, income, or expenses in order to fraudulently obtain SNAP benefits. Another type of fraud—trafficking— occurs when recipients exchange benefits with authorized retailers or other individuals for cash or non-food items (e.g. rent or transportation). In a typical retailer trafficking situation, for example, a retailer may charge $100 to a recipient’s EBT card and give the recipient $50 in cash instead of $100 in food. The federal government reimburses the retailer $100, which results in a fraudulent $50 profit to the retailer. State agencies are directly responsible for preventing, detecting, investigating, and prosecuting recipient fraud, including eligibility fraud and trafficking by SNAP recipients, under the oversight and guidance of FNS. States play a key role in preventing fraud when determining eligibility for SNAP. State agencies collect applicant information, such as household income and employment, and verify it through data matches with other information sources. After benefits are issued, the agencies may monitor EBT transaction data to identify spending patterns that may indicate trafficking. If an individual or household intentionally violates SNAP rules, such as by trafficking or making false or misleading statements in order to obtain benefits, states conduct administrative disqualification hearings or, in some cases, refer the case for criminal prosecution. FNS is responsible for authorizing and overseeing retailers who participate in the program—totaling more than 263,000 in fiscal year 2017—including investigating potential retailer trafficking. In order to participate in SNAP, a retailer applies to FNS and demonstrates that they meet program requirements, such as those on the amount and types of food that authorized stores must carry. FNS verifies a retailer’s compliance with these requirements and generally authorizes retailers for 5 years. FNS then monitors retailers’ continued compliance with program requirements and administratively disqualifies, or assesses money penalties on, those who are found to have trafficked benefits. To this end, FNS officials collect and monitor EBT transaction data to detect irregular patterns of transactions that may indicate trafficking and also conduct undercover investigations. If found to be trafficking, retailers are generally permanently disqualified from SNAP or incur a monetary penalty in lieu of permanent disqualification. According to FNS data, about 14 percent of SNAP recipients, or about 6.1 million, were work registrants who were subject to work requirements, and about 0.5 percent of SNAP recipients, or about 200,000, participated in state SNAP E&T programs, in an average month of fiscal year 2016. (See fig. 1.) According to FNS, most SNAP recipients are exempt from work requirements. For example, according to FNS, almost two-thirds of SNAP recipients were children, elderly, or adults with a disability in an average month of fiscal year 2016—groups that are generally exempt. Further, adults who are already working at least 30 hours a week are also exempt from SNAP work requirements, and according to FNS data, more than 31 percent of non-elderly adult SNAP recipients were employed in an average month of fiscal year 2016. SNAP work registrants who are not participating in SNAP E&T programs may be participating in other activities to meet work requirements or eligible for other exemptions. FNS officials told us that the state data reported to FNS on SNAP E&T participants are the best and most recent data available on this group, yet they also have limitations, which we will continue to explore in our ongoing work. In recent years, the number and percentage of SNAP recipients and work registrants participating in SNAP E&T programs appears to have decreased, according to FNS data. From fiscal year 2008 through fiscal year 2016, the average monthly number of SNAP E&T participants decreased from about 256,000 to about 207,000, or by 19 percent, according to state data on SNAP E&T participants reported to FNS. (See fig. 2.) However, over the same time period, the average monthly number of SNAP recipients appears to have increased from about 27.8 million to about 43.5 million, and work registrants appears to have increased from about 3 million to about 6.1 million, according to FNS data. As a result, the percentage of total SNAP recipients participating in SNAP E&T programs decreased from about 0.9 to about 0.5 percent, and the percentage of SNAP work registrants participating in these programs decreased from approximately 8.1 percent to 3.4 percent, from fiscal year 2008 through fiscal year 2016. Available information suggests the characteristics of SNAP E&T participants are generally similar to those of SNAP work registrants who do not participate in these programs. A recent FNS study, which surveyed SNAP E&T participants and SNAP work registrants who had not participated in SNAP E&T, found that members of the two groups had similar demographic characteristics, including age and gender, and received similar monthly SNAP benefit amounts. Further, at the time they were surveyed, about one third of each group were employed, and their average wage rates were similar, at about $10 per hour. State SNAP agencies have broad flexibility in how they design their SNAP E&T programs, and the characteristics of these programs have changed in several ways over the last decade. For example, states have increasingly moved from mandatory to voluntary programs, focused on serving ABAWDs, and partnered with state and local organizations to deliver services. According to FNS data, states have increasingly moved from mandatory to voluntary SNAP E&T programs in recent years. In fiscal year 2010, 17 states operated voluntary programs; however, by fiscal year 2017, 35 states operated voluntary programs, according to FNS data. (See fig. 3.) FNS officials told us that they have been actively encouraging states to provide more robust employment and training services, such as vocational training or work experience, through voluntary programs. They said that they believe these types of robust services are more effective in moving participants toward self-sufficiency, but that funding may not be sufficient to provide these to the large numbers of participants served in mandatory programs. In addition, FNS officials told us that voluntary programs are less administratively burdensome than mandatory programs, as they allow states to focus on serving motivated participants rather than sanctioning non-compliant individuals. According to FNS officials, when states move to a voluntary program, they generally experience a decline in SNAP E&T participation—a trend consistent with our analysis of FNS data—which may have contributed to the decline in overall SNAP E&T participation. Of the 22 states or territories that changed from a mandatory to a voluntary program from fiscal year 2010 through fiscal year 2016, according to FNS data, 13 experienced a decrease in SNAP E&T participation—ranging from a 21 percent decrease to a 93 percent decrease. Overall, voluntary programs are generally smaller than mandatory programs, according to our analysis of FNS data. In fiscal year 2016, for example, the 32 states or territories operating voluntary programs together served less than half of the total number of SNAP E&T participants served by the 21 states or territories operating mandatory programs, although these two groups of states had similar numbers of new work registrants. Furthermore, states operating voluntary programs served an average of nearly 7,000 SNAP E&T participants per state, while states operating mandatory programs served an average of 23,000 SNAP E&T participants per state. Evidence suggests that states have increased their focus on serving ABAWDs—a sub-population of SNAP recipients subject to benefit time limits and additional work requirements—through SNAP E&T, as related waivers have expired in recent years, according to FNS data. During and after the 2007-2009 recession, the majority of states operated under statewide waivers of the ABAWD time limit due to economic conditions. However, as the economy recovered, most statewide waivers expired, and the ABAWD time limit was reinstated. For example, according to FNS data, in fiscal year 2011, 45 states or territories had a statewide waiver and 7 states had a partial waiver—one applying to certain localities. By fiscal year 2017, the number of states or territories with a statewide waiver had decreased to 9, while 27 states had partial waivers. FNS officials and state SNAP agency officials we spoke with in some states told us that, as the waivers have ended, state SNAP E&T programs have become increasingly focused on serving ABAWDs. Although state data on SNAP E&T programs reported to FNS suggest a greater percentage of ABAWDs have been participating in these programs in recent years, according to FNS officials, these data have limited usefulness in assessing state trends in serving ABAWDs for several reasons. For example, in recent years, FNS officials learned that there was widespread confusion among states regarding the need to track ABAWDs when waivers were in place, and that as a result, some states had not been tracking ABAWDs or properly documenting SNAP recipients’ ABAWD status. This is consistent with what some of the selected states we spoke with reported. As part of our ongoing work, we are continuing to explore the availability and reliability of data on ABAWDs. State SNAP agencies have increasingly partnered with other state and local organizations, such as workforce agencies, community-based social service providers, and community colleges, to provide services to SNAP E&T participants in recent years, according to FNS and states we selected for our review. In fiscal year 2018, nearly all states partnered with at least one other organization to deliver SNAP E&T services, with the majority partnering with more than one, according to an analysis by FNS. In recent years, FNS has urged states to make use of the broad network of American Job Centers. The American Job Centers, also known as one- stop centers, are funded through the Department of Labor’s Employment and Training Administration and designed to provide a range of employment-related services, such as training referrals, career counseling, job listings, and similar employment-related services, to job seekers under one roof. Our prior work has highlighted the value of coordination between federally funded employment and training programs to ensure the efficient and effective use of resources. Despite encouraging such partnerships, FNS officials said that American Job Centers typically provide lighter touch services to SNAP E&T participants, such as job search and job search training, and they therefore may not be well suited for SNAP E&T participants who have multiple barriers to employment. In our 2003 work on SNAP E&T, we found that while workforce system programs offered some of the activities needed by SNAP E&T participants, officials from 12 of the 15 states we contacted said that most participants were not ready for these activities, in part, because they lacked basic skills, such as reading and computer literacy, that would allow them to successfully participate. An alternative service delivery strategy that FNS has promoted is the development of third party partnerships with community-based social service providers, community colleges, and other entities to help states enhance their SNAP E&T programs. According to FNS, in this model, third party organizations use non-federal funding to provide allowable SNAP E&T services and supports, which are then eligible for 50 percent federal reimbursement funds through the state’s SNAP E&T program. According to FNS officials, third party partnerships enable states to leverage additional resources, grow their SNAP E&T programs, and reach more SNAP participants. In addition, FNS officials said that these partnerships allow states to improve their program outcomes by tapping into providers currently serving communities that include SNAP recipients. Federal 50 percent reimbursement funds expended increased from nearly $182 million to more than $223 million, or by 23 percent, from fiscal year 2007 to fiscal year 2016. FNS has taken steps to increase federal support of states’ SNAP E&T programs by increasing the number of federal staff responsible for SNAP E&T and providing additional technical assistance to states. Specifically, FNS officials said that in 2014, they created the Office of Employment and Training to provide support and oversight for the SNAP E&T program and expanded SNAP E&T staff in FNS headquarters from one to five fulltime employees. FNS has also taken steps to increase technical assistance to states. For example, they have developed tools, including the SNAP E&T Operations Handbook, intended to help states implement and grow their program, and by adding a dedicated SNAP E&T official in each of FNS’s seven regional offices. According to FNS, regional officials have targeted technical assistance to states on, for example, developing third-party partnerships, and they have emphasized evidence-based approaches to administering the program, such as providing skills-based training for in-demand occupations. FNS officials rely on various information sources to oversee states’ SNAP E&T programs, including participant outcome data reported by states for the first time in January 2018. For example, FNS officials conduct management evaluation reviews of states, annually review states’ SNAP E&T plans for compliance, and collect data from states on program participation and expenditures. In addition, as of January 2018, FNS has begun receiving new data on SNAP E&T program participants and outcomes from states. These data include employment outcomes, such as the number of SNAP E&T participants in unsubsidized employment after participation in the program, and participant characteristics, such as the number of participants entering the program with a high school degree or equivalent. FNS officials said that although states generally submitted the new data on time, states experienced challenges that likely affected the accuracy of the data. For example, some states needed to manually collect data on participant characteristics due to the limited capacity of their data systems. Further, according to FNS officials, some states did not correctly interpret certain reporting definitions or time periods. To address these challenges, FNS officials have been providing technical assistance to states to help them refine their participant and outcome data reports. Officials told us that they expect the states to submit revised reports by May 2018; we will examine these data and related issues in our ongoing work. FNS and the states partner to address issues that affect program integrity, including improper payments and fraud, and FNS has taken some steps to address challenges in these areas, but concerns remain. For example, regarding SNAP recipient and retailer fraud, FNS has taken some steps to address challenges identified in our 2006 and 2014 reports related to fraud committed by SNAP recipients and authorized retailers, but more remains to be done. We currently have ongoing work to assess the steps FNS and states have taken to address our recommendations related to recipient and retailer fraud and other program vulnerabilities. In 2016, we reviewed SNAP improper payment rates and found that states’ adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. For example, when states adopted available SNAP policy flexibilities that simplified or lessened participant reporting requirements, these changes reduced the opportunity for error and led to a decline in the improper payment rate, according to a USDA study. In addition, we found that the methodology SNAP used to calculate its improper payment rate was generally similar to the methodologies used for other large federal programs for low- income individuals, including Medicaid, Earned Income Tax Credit, and Supplemental Security Income. However, we also found that some of the procedural and methodological differences in the rate calculation among these programs likely affected the resulting improper payment rates, such as how cases with insufficient information or certain kinds of errors were factored into the improper payment rate. In 2014, USDA identified SNAP improper payment data quality issues in some states and has since been working with the states to improve improper payment estimates. Although USDA reported national SNAP improper payment estimates for benefits paid through fiscal year 2014, USDA did not report a national SNAP improper payment estimate for benefits paid in fiscal years 2015 or 2016. In response to a report from USDA’s Office of Inspector General that identified concerns in the application of SNAP’s quality control process, which is used to identify improper payments, USDA began a review of state quality control systems in all states in 2014. According to USDA, due to the data quality issues uncovered in 42 of 53 states during the reviews, the improper payment rates for those states could not be validated, and the department was unable to calculate a national improper payment rate for benefits paid in fiscal year 2015. To address the data quality concerns, USDA updated guidance, provided training to relevant state and federal staff, and worked with states to update their procedures to ensure consistency with federal guidelines. According to USDA, the department also required individual states to develop corrective action plans to address issues identified and monitored progress to ensure states took identified actions. On June 30, 2017, USDA notified the states that the department would not release a national SNAP improper payment rate for benefits paid in fiscal year 2016 and remained focused on conducting the fiscal year 2017 review. FNS has increased its oversight of state anti-fraud activities in recent years by developing new guidance and providing training and technical assistance to states on detecting fraud by SNAP recipients and reporting on anti-fraud activities to FNS. In 2014, we reported on 11 selected states’ efforts to combat SNAP recipient fraud and made several recommendations to FNS to address the challenges states faced. We found that FNS and states faced challenges in the following areas: Guidance on use of data tools to detect fraud: States faced challenges using FNS-recommended data tools to detect fraud, and FNS is in the process of developing improved guidance to address this concern. Specifically, FNS’s guidance on the use of EBT transaction data to uncover potential patterns of benefit trafficking lacked the specificity states needed to uncover such activity, and we recommended FNS develop additional guidance. Since then, FNS contracted with a private consulting firm to provide 10 states with technical assistance in recipient fraud prevention and detection, which included exploring the use of data analytics to analyze and interpret eligibility and transaction data to identify patterns or trends and create models that incorporate predictive analytics. FNS officials also recently told us that the agency is developing a SNAP Fraud Framework to provide guidance to states on improving fraud prevention and detection. FNS officials anticipated releasing the framework in mid- 2018. Tools for monitoring e-commerce websites: We also found FNS- recommended tools for automatically monitoring potential SNAP trafficking on e-commerce websites to be of limited use and less effective than manual searches, and FNS has developed but not finalized guidance on using such tools. We recommended that FNS reassess the effectiveness of its current guidance and tools for states to monitor e-commerce and social media websites. In August 2017, FNS officials told us that they had developed revised guidance for states on using social media in detection of SNAP trafficking. According to FNS, the guidance will be incorporated into the SNAP Fraud Framework. Staff levels: During the time of our 2014 work, most of our 11 selected states reported difficulties conducting fraud investigations due to reduced or stagnant staff levels while numbers of SNAP recipients had greatly increased, but FNS decided not to make changes to address this issue. Specifically, 8 of the 11 states we reviewed reported inadequate staffing due to attrition, turnover, or lack of funding. Some states suggested changing the financial incentive structure to promote fraud investigations because agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible people from receiving benefits. Specifically, when fraud by a SNAP recipient is discovered, a state may generally retain 35 percent of any recovered overpayments. However, there are no recovered funds when a state detects potential fraud by an applicant and denies the application. To help address states’ concerns about resources needed to conduct investigations, we recommended in our 2014 report that FNS explore ways that federal financial incentives could be used to better support cost-effective anti-fraud strategies. FNS reported that it took some steps to explore alternative financial incentives, through a review of responses to a Request for Information in the Federal Register. However, FNS decided not to pursue bonus awards for anti-fraud and program integrity activities. Given that FNS has not made changes in this area, state SNAP fraud agencies may continue to report resource concerns in addressing fraud. Reporting guidance: We also found that FNS did not have consistent and reliable data on states’ activities because of unclear reporting guidance, and FNS has since revised its data collection form and provided training on the changes. To improve FNS’s ability to monitor states and obtain information about more efficient and effective ways to combat recipient fraud, we recommended in 2014 that FNS take steps, such as providing guidance and training, to enhance the consistency of what states report on their anti-fraud activities. In response, FNS revised the form used to collect recipient integrity information and changed the reporting frequency from annual to quarterly, effective fiscal year 2017. FNS officials also reported providing training to approximately 400 state agency and FNS regional office personnel on the updates to the form and related instructions. In our ongoing work, we are further reviewing states’ use of data analytics to identify SNAP recipient fraud, including that which may be occurring during out-of-state transactions. Because transactions that may appear suspicious—such as those made out-of-state—may in fact be legitimate, states may use data analytic techniques to include additional factors that may help them better target their efforts to identify potential fraud. However, states may have different levels of capacity for using data analytics to detect fraud. We are examining how 7 selected states are using data analytics and identifying the advantages and challenges states have experienced in doing so. We are also assessing FNS’s efforts to assist states in implementing GAO’s leading practices for data analytics outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs. In addition, we are conducting our own analysis of EBT out-of-state SNAP transaction data. We expect to report on our findings later this year. FNS has taken some steps to prevent, detect, and respond to retailers who traffic SNAP benefits since our last report on the issue in 2006, but trafficking continues to be a problem. For example, in February 2018, a federal jury convicted a grocery store operator in Baltimore on charges of wire fraud in connection with a scheme to traffic more than $1.6 million in SNAP benefits for food sales that never occurred. The grocery store operator paid cash for SNAP benefits, typically paying the recipient half the value of the benefits and keeping the other half for himself. In our 2006 report, we found that SNAP was vulnerable to retailer trafficking in several areas, including: Requirements for food that retailers must stock to participate in SNAP: In 2006, we found that FNS had minimal requirements for the amounts of food that retailers must stock, which could allow retailers more likely to traffic into the program, although the agency has since taken steps to increase these requirements. In our 2006 report, FNS officials said that they authorized stores with limited food stock to provide access to food in low-income areas where large grocery stores were scarce. At that time, retailers were generally required to stock a minimum of 12 food items (at least 3 varieties of 4 staple food categories, such as fruits and vegetables), but FNS rules did not specify how many items of each variety would constitute sufficient stock. FNS officials told us that a retailer that only carries small quantities of food, such as a few cans of one kind of vegetable, may intend to traffic. In 2016, FNS promulgated a final rule increasing food stock requirements. FNS officials told us that these new rules are designed to encourage stores to provide more healthy food options for recipients and discourage trafficking. According to FNS, retailers are now generally required to stock at least 36 food items (a certain variety and quantity of staple foods in each of the 4 staple food categories). Focus on high-risk retailers: We also found in 2006 that FNS had not conducted analyses to identify characteristics of retailers at high risk of trafficking and to target its resources—a shortcoming FNS has since taken some steps to address. For example, we reported that some stores may be at risk of trafficking because one or more previous owners had been found trafficking at the same location. However, FNS did not have a system in place to ensure that these retailers were quickly targeted for heightened attention. In addition, once a store was authorized to participate in the program, FNS staff typically would not inspect the store again until it applied for reauthorization 5 years later. We recommended that FNS identify the stores most likely to traffic and provide earlier, more targeted oversight to those stores. In 2009, FNS began establishing risk levels for each authorized retailer, identifying high-risk stores as those with a prior permanent disqualification at that location or a nearby location. In 2013, FNS required all high-risk retailers to go through reauthorization and to provide additional documentation regarding store ownership. That same year, FNS also consolidated its retailer management functions, including those for authorizing stores and analyzing EBT transaction data, into a single national structure known as the Retailer Operations Division. FNS officials told us that this structure enables the agency to identify and deploy their investigative resources to the areas of highest risk nationally, rather than within a given region. Penalties to deter retailer trafficking: We also found in our 2006 report that FNS’s penalties for retailer trafficking may be insufficient to deter traffickers, and since then, FNS has proposed—but not finalized—rules to increase them. FNS imposes administrative penalties for retailer trafficking—generally a permanent disqualification from the program or a monetary penalty. FNS relies on the USDA Office of Inspector General (OIG) and other law enforcement entities to conduct investigations that can lead to criminal prosecutions. In our 2006 report, we recommended that FNS develop a strategy to increase penalties for trafficking. The Food, Conservation, and Energy Act of 2008 (known as the 2008 Farm Bill) gave USDA authority to impose higher monetary penalties, and the authority to impose both a monetary penalty and program disqualification on retailers found to have violated relevant law or regulations (which includes those found to have trafficked). In 2012, FNS proposed regulatory changes to implement these authorities. However, FNS has not finalized these rules, and as of fall 2017, the rules were considered “inactive.” In our ongoing work, we are continuing to assess FNS’s efforts to prevent, detect, and respond to retailer trafficking, as well as examining what is known about the extent of retailer trafficking nationwide. As part of this work, we are continuing to review FNS’s response to our prior recommendations, as well as related recommendations made by USDA’s OIG. We are also studying FNS’s periodic estimates of the rate of retailer trafficking, expressed as the dollar value and percentage of all SNAP benefits that were trafficked and the percentage of retailers involved. These data suggest an increase in the estimated rate of retailer trafficking since our 2006 report. However, we and others, including a group of experts convened by FNS, have identified some limitations with the retailer trafficking estimates. For example, the trafficking rate is calculated based on a sample of retailers that FNS considers most likely to traffic. Although FNS adjusts the data to better represent the broader population of authorized retailers, it is uncertain whether the resulting estimates accurately reflect the extent of trafficking nationwide. We are reviewing these limitations and FNS’s efforts to address them in our ongoing work. Chairman Jordan, Chairman Palmer, Ranking Member Krishnamoorthi, Ranking Member Raskin, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Kathryn Larin, Director, Education, Workforce, and Income Security Issues at (202) 512-7215 or LarinK@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony include Rachael Chamberlin, Celina Davidson, Swati Deo, Rachel Frisk, Alexander Galuten, Danielle Giese, Kristen Jones, Morgan Jones, Lara Laufer, Monica Savoy, and Kelly Snow. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "SNAP is the largest federally funded nutrition assistance program. In fiscal year 2017, it provided about $63 billion in benefits. USDA and the states jointly administer SNAP and partner to address issues that affect program integrity, including improper payments and fraud. GAO has previously reported on various aspects of SNAP, including state SNAP E&T programs, improper payment rates, recipient fraud, and retailer trafficking. This testimony discusses GAO's prior and ongoing work on (1) SNAP E&T programs, including program participants, design, and USDA oversight, and (2) USDA's efforts to address SNAP program integrity, including improper payments, as well as recipient and retailer fraud. As part of its ongoing work on SNAP E&T programs, GAO analyzed E&T expenditures and participation data from fiscal years 2007 through 2016, the most recent data available; reviewed relevant research from USDA; and interviewed USDA and selected state and local officials. The prior work discussed in this testimony is based on four GAO products on E&T programs (GAO-03-388), improper payments (GAO-16-708T), recipient fraud (GAO-14-641), and retailer trafficking (GAO-07-53). Information on the scope and methodology of our prior work is available in each product. Overseen by the U.S. Department of Agriculture (USDA) and administered by states, Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T) programs served about 0.5 percent of the approximately 43.5 million SNAP recipients in an average month of fiscal year 2016, according to the most recent USDA data available. These programs are generally designed to help SNAP recipients increase their ability to obtain regular employment through services such as job search and training. Some recipients may be required to participate. According to USDA, about 14 percent of SNAP recipients were subject to work requirements in an average month of fiscal year 2016, while others, such as children and the elderly, were generally exempt from these requirements. States have flexibility in how they design their E&T programs. Over the last several years, states have 1) increasingly moved away from programs that mandate participation, 2) focused on serving able-bodied adults without dependents whose benefits are generally time-limited unless they comply with work requirements, and 3) partnered with state and local organizations to deliver services. USDA has taken steps to increase support and oversight of SNAP E&T since 2014, including collecting new data on participant outcomes from states. GAO has ongoing work reviewing SNAP E&T programs, including USDA oversight. USDA and the states partner to address issues that affect program integrity, including improper payments and fraud, and USDA has taken some steps to address challenges in these areas, but issues remain. Improper Payments. In 2016, GAO reviewed SNAP improper payment rates and found that states' adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. Although USDA reported improper payment estimates for SNAP in previous years, USDA did not report an estimate for benefits paid in fiscal years 2015 or 2016 due to data quality issues in some states. USDA has since been working with the states to improve improper payment estimates for the fiscal year 2017 review. Recipient Fraud. In 2014, GAO made recommendations to USDA to address challenges states faced in combatting recipient fraud. For example, GAO found that USDA's guidance on the use of transaction data to uncover potential trafficking lacked specificity and recommended USDA develop additional guidance. Since then, USDA has provided technical assistance to some states, including on the use of data analytics. GAO has ongoing work reviewing states' use of data analytics to identify SNAP recipient fraud. Retailer Trafficking. In 2006, GAO identified several ways in which SNAP was vulnerable to retailer trafficking—a practice involving the exchange of benefits for cash or non-food items. For example, USDA had not conducted analyses to identify high-risk retailers and target its resources. Since then, USDA has established risk levels for retailers based on various factors. GAO has ongoing work assessing how USDA prevents, detects, and responds to retailer trafficking and reviewing the usefulness of USDA's estimates of the extent of SNAP retailer trafficking. GAO is not making new recommendations. USDA generally concurred with GAO's prior recommendations.", "document_type": "gao"}
{"report": "Personnel security clearances are required for access to certain national security information. National security information may be classified at one of three levels: confidential, secret, or top secret. The level of classification denotes the degree of protection required for information and the amount of damage that unauthorized disclosure could reasonably be expected to cause to national security. Specifically, unauthorized disclosure could reasonably be expected to cause (1) “damage,” in the case of confidential information; (2) “serious damage,” in the case of secret information; and (3) “exceptionally grave damage,” in the case of top secret information. As part of the security clearance process, individuals granted security clearances are investigated periodically—for as long as they remain in a position requiring access to classified information—to ensure their continued eligibility. As of October 1, 2015, the latest date for which data are available, approximately 4.2 million government and contractor employees, at nearly 80 executive branch agencies, were eligible to hold a security clearance. IRTPA. As noted earlier, IRTPA initiated a reform effort that includes goals and requirements for improving the personnel security clearance process government-wide. For example, IRTPA established specific objectives for the timeliness of security clearance processing. It also required that all security clearance background investigations and determinations completed by an authorized investigative agency or authorized adjudicative agency be accepted by all agencies (known as reciprocity), subject to certain exceptions. Appendix II provides additional details on IRTPA as it relates to personnel security clearances. Relevant Executive Orders. The personnel security clearance process and reform efforts are governed by various executive orders. Key executive orders affecting personnel security clearance reform include Executive Orders 12968, 13467, 13741, and 13764, which, among other things, provide definitions, processes, responsibilities, and authorities related to eligibility for access to classified information, suitability and fitness for government employment, and security clearance reform. Aspects of the reform effort covered by the Executive Orders include the establishment of the PAC and NBIB, the transfer of IT responsibilities to DOD, the definition of continuous evaluation, and the addition and amendment of certain roles and responsibilities. Recent legislation. Section 951 of the National Defense Authorization Act for Fiscal Year 2017 requires, among other things, the Secretary of Defense to develop an implementation plan for the Defense Security Service to conduct background investigations for certain DOD personnel—presently conducted by OPM—after October 1, 2017. The Secretary of Defense was to submit the plan to the congressional defense committees by August 1, 2017. DOD provided the plan to the congressional defense committees on August 25, 2017. Section 951 also requires the Secretary of Defense and the Director of OPM to develop a plan by October 1, 2017, to transfer investigative personnel and contracted resources to DOD in proportion to the workload if the plan for the department to conduct background investigations were implemented. In November 2017, after the conclusion of our audit work, Congress passed a bill for the National Defense Authorization Act for Fiscal Year 2018. The bill includes a provision that, among other things, would authorize DOD to conduct its own background investigations and would require DOD to begin carrying out the implementation plan required by section 951 of the National Defense Authorization Act for Fiscal Year 2017 by October 1, 2020. It would also require the Secretary of Defense, in consultation with the Director of OPM, to provide for a phased transition. To help guide the personnel security clearance reform effort, in June 2007, the Director of National Intelligence and the Under Secretary of Defense for Intelligence established the Joint Reform Team through a memorandum of agreement to execute joint reform efforts to achieve IRTPA timeliness objectives and improve the processes related to granting security clearances and determining suitability for government employment. The team consisted of cognizant entities within OMB, OPM, ODNI, and DOD. The team worked on improving the security clearance process governmentwide, including providing progress reports on the reform effort, recommendations for research priorities, and oversight of the development and implementation of an information technology strategy, among other things. In June 2008, Executive Order 13467 established the PAC as the government-wide governance structure responsible for driving the implementation of and overseeing security and suitability reform efforts. Its specific responsibilities include ensuring the enterprise-wide alignment of suitability, security, credentialing, and, as appropriate, fitness processes; working with agencies to implement continuous performance improvement programs, policies, and procedures; establishing annual goals and progress metrics; and preparing annual reports on results. In addition, the PAC is to develop and continuously reevaluate and revise outcome-based metrics that measure the quality, efficiency, and effectiveness of the vetting enterprise, among other things. As noted above, the Deputy Director for Management of OMB serves as the Chair of the PAC and has authority, direction, and control over its functions. In addition to the Deputy Director for Management of OMB, the PAC has three additional principal members: the Director of National Intelligence, the Director of OPM, and the Under Secretary of Defense for Intelligence. Director of National Intelligence: The Director of National Intelligence serves as the Security Executive Agent and is responsible for, among other things, developing and issuing uniform and consistent policies and procedures to ensure the effective, efficient, timely, and secure completion of investigations, polygraphs, and adjudications related to determinations of eligibility for access to classified information or eligibility to hold a sensitive position. In this role, the Director of National Intelligence is also to direct the oversight of such investigations, reinvestigations, and adjudications. Director of OPM: The Director of OPM serves as the Suitability and Credentialing Executive Agent and is responsible for, among other things, prescribing suitability standards and minimum standards of fitness for employment. Under Secretary of Defense for Intelligence: The Under Secretary of Defense for Intelligence became the fourth principal member of the PAC with the issuance of Executive Order 13741 in September 2016. Additionally, Executive Order 13467, as amended, assigns DOD responsibility for designing, developing, operating, defending, and continuously updating and modernizing, as necessary, IT systems that support all background investigation processes conducted by NBIB. In addition, in April 2014, the PAC established the Program Management Office to implement personnel security clearance reforms. This office includes subject-matter experts with knowledge of personnel security clearances and suitability determinations from OMB, ODNI, OPM, DOD, the Department of Homeland Security, the Department of Justice, the Department of the Treasury, and the Federal Bureau of Investigation. Prior to the establishment of the Program Management Office, the PAC was supported by the Joint Reform Team as well as various subcommittees that addressed specific tasks, such as investigator and adjudicator training and the development of performance measures. Since 2014, there have been a number of key efforts to reform the personnel security clearance process. For example, following the September 2013 shooting at the Washington Navy Yard, the PAC conducted a 120-day interagency review to assess risks inherent in the federal government’s security, suitability, and credentialing processes. The February 2014 report resulting from that review highlighted 37 recommendations to improve, among other things, the federal government’s processes for granting security clearances. Some of the recommendations address longstanding issues of the reform effort—such as improving data sharing between local, state, and federal law enforcement; and others are consistent with previous GAO recommendations—such as reporting measures for the quality of background investigations. The status of the implementation of these recommendations is discussed later in this report. In addition, in March 2014, OMB established Insider Threat and Security Clearance Reform as a government-wide, cross-agency priority goal in part to improve interagency coordination and implementation within the area of personnel security clearances. Through this goal, the PAC and executive-branch agencies are to work to improve oversight to ensure that investigations and adjudications meet government-wide quality standards. From the second quarter of fiscal year 2014 to the fourth quarter of fiscal year 2016, the PAC has reported quarterly on, among other things, the status of key milestones and the timeliness of initial investigations and periodic reinvestigations for the executive branch as a whole. As part of the cross-agency priority goal, the PAC identified various sub goals on which to focus its work. The sub goals were originally based on recommendations from the 120-day review and, according to PAC Program Management Office officials, were later updated to reflect the PAC’s strategic plans. The current sub goals are as follows: trusted workforce, modern vetting, secure and mission-capable IT, and continuous process improvement. Further, in 2015, in response to the OPM data breach and at the request of the President, the PAC conducted a second review—a 90-day review—of the government’s suitability and security processes. In the January 2016 summary of the review, the administration identified four actions to create a more secure and effective federal background investigations infrastructure. Specifically, it identified the need to: (1) establish NBIB as the new federal entity to strengthen how the government performed background investigations; (2) leverage IT expertise at DOD for processing background investigations and protecting against threats; (3) update governance authorities, roles, and responsibilities; and (4) drive continuous performance improvement to address evolving threats. The status of these actions is discussed later in this report. NBIB maintains an in-house federal investigator workforce, but according to NBIB, as of July 2017, it relied on contract investigators to conduct about 60 percent of the background investigations it provides to customer agencies, such as DOD. In 2011, OPM awarded three indefinite delivery/indefinite quantity contracts to three contractors to conduct investigation fieldwork services—CACI Premier Technology, Inc., KeyPoint Government Solutions, Inc., and U.S. Investigations Services, LLC (USIS). According to NBIB, USIS was responsible for about 65 percent of the contractor workload. In September 2014, OPM decided not to exercise the option for the USIS contract for fiscal year 2015. Eleven months prior, in October 2013, the Department of Justice had announced that the government would intervene in a civil suit against USIS, filed by a former employee under the False Claims Act. The government alleged that the contractor had circumvented contractually required quality reviews of completed background investigations to increase the company’s revenues and profits. In August 2015, the Department of Justice announced that USIS and its parent company had agreed to a $30 million settlement in exchange for a release of liability under the False Claims Act; accordingly, the claims resolved by the settlement agreement were allegations only, and there was no determination of liability. In June 2015, OPM conducted a review of USIS cases and found that the investigations for which USIS did not conduct the quality review were generally less complex cases. In addition, these cases had a lower return rate from OPM reviewers. In September 2016, OPM awarded new indefinite delivery/indefinite quantity contracts for investigation fieldwork services to four companies— CACI Premier Technology, Inc., KeyPoint Government Solutions, Inc., CSRA LLC, and Securitas Critical Infrastructure Services, Inc. The 2-year base period for these contracts runs to the end of fiscal year 2018, and OPM may exercise three 1-year option periods for each contract, with the first beginning on October 1, 2018. Executive branch agencies have made progress in reforming the personnel security clearance process by, for example, issuing guidance, such as Quality Assessment Standards to guide background investigations, updated strategic documents to sustain the momentum of the reform effort, and adjudicative guidelines to establish single, common adjudicative criteria for security clearances. However, agencies face challenges in implementing certain aspects of the 2012 Federal Investigative Standards, including full implementation of continuous evaluation, and the issuance of a reciprocity policy remains incomplete. In addition, while the executive branch has taken steps toward establishing performance measures for the quality of government-wide personnel security clearance investigations, there is no milestone for their completion. The PAC has made progress in reforming the personnel security clearance process, as demonstrated through actions taken in response to recommendations and milestones outlined in four key reform effort documents: (1) the February 2014 120-day review; (2) the 2015 90-day review; (3) the Insider Threat and Security Clearance Reform cross- agency priority goal quarterly progress updates; and (4) the PAC’s strategic framework for fiscal years 2017 through 2021. 120-day review. According to PAC documentation, as of August 2017, the PAC had implemented 73 percent of the 120-day review recommendations. For example, in response to a recommendation from the review, ODNI and OPM jointly issued Quality Assessment Standards in January 2015, which establish federal guidelines for assessing the quality of national security and suitability investigations. The establishment of the standards is intended to facilitate the measurement and continued improvement of investigative quality across the executive branch. In response to another related recommendation, ODNI developed the Quality Assessment Reporting Tool (QART), through which agencies will report on the completeness of investigations. According to ODNI officials, the QART was implemented in October 2016, and full implementation is expected by the end of calendar year 2017. 90-day review. By January 2017, the PAC had taken steps to implement all of the actions identified in the January 2016 summary of the 90-day review. Specifically, Executive Order 13741, issued in September 2016, established NBIB, within OPM, to replace FIS as the primary executive branch service provider for background investigations. It also identified DOD as the entity responsible for designing, developing, operating, and securing IT systems that support NBIB’s background investigations. Additionally, the Executive Order elevated the Under Secretary of Defense for Intelligence to a full principal member of the PAC and directed the PAC to review and update governance, authorities, roles, and responsibilities. Subsequently, Executive Order 13764, issued in January 2017, further clarified relevant authorities, roles, and responsibilities, among other things. Further, according to PAC Program Management Office officials, the PAC has taken steps to implement continuous process improvements, such as developing a research and innovation program through which it has undertaken a number of projects aimed at improving the personnel security clearance process. In addition, the PAC established a continuous performance improvement initiative to develop mechanisms to improve the quality and efficiency of the end-to- end security, suitability, and credentialing vetting processes. As of July 2017, the PAC had identified seven categories of performance measures for the end-to-end security, suitability, and credentialing processes—such as timeliness, volume, and cost-efficiency—which it planned to implement in a phased approach. Cross-agency priority goal. From the second quarter of fiscal year 2014 through the fourth quarter of fiscal year 2016, the PAC reported quarterly on the status of key initiatives, among other things, as part of the Insider Threat and Security Clearance Reform cross-agency priority goal. For each initiative, the PAC reported the milestone due date, the milestone status—on track, complete, at risk, missed, or not started—and the responsible agencies. As of the PAC’s last publicly reported quarterly update, for the fourth quarter of fiscal year 2016, 8 of 33 initiatives were listed as complete. According to PAC Program Management Office officials, they have continued to track the status of these milestones internally, and almost half of the initiatives—16 of 33—were listed as complete as of the third quarter of fiscal year 2017. These initiatives include the establishment of a Federal Background Investigations Liaison Office within NBIB to oversee and resolve issues between federal, state, and local law enforcement entities when collecting criminal history record information for background investigations, and developing plans to implement improved investigator and adjudicator training. Strategic framework. The PAC has issued three documents that serve as its updated strategic framework for the next 5 years. In July 2016, it issued its Strategic Intent for Fiscal Years 2017 through 2021, which identifies the overall vision, goals, and 5-year business direction to achieve an entrusted workforce. In October 2016, it issued an updated PAC Enterprise IT Strategy, which provides the technical direction to provide mission-capable and secure security, suitability, and credentialing IT systems. According to PAC Program Management Office officials, the third document—the PAC Strategic Intent and Enterprise IT Strategy Implementation Plan (Implementation Plan)—was distributed to executive branch agencies in February 2017. The Implementation Plan documents the key initiatives, targets, and measures for achieving the strategic vision. In March 2009, the Joint Reform Team issued an Enterprise IT Strategy, but the PAC’s own February 2014 120-day review found that this strategy stopped short of actions needed to develop enterprise-wide IT capabilities to modernize, integrate, and automate agency capabilities and retire legacy systems. It further stated that absent a strategy for integrated IT capabilities, agencies created disparate tools designed only to meet their specific requirements and recommended the development and execution of an enterprise reform IT strategy to ensure interoperability and improved sharing of relevant information. We compared the PAC’s 2016 Enterprise IT Strategy against leading practices for comprehensive and effective IT strategies and found that it generally aligns with such practices. For example, it contains results-oriented goals and strategies for agencies to achieve desired results, and describes interdependencies within and across projects. In addition to these four key areas, PAC members noted additional progress in reforming the personnel security clearance process. Specifically, ODNI officials highlighted the development of seven Security Executive Agent Directives, five of which have been issued as of August 2017, related to the use of polygraphs and social media in the investigative process, among other things. For example, in December 2016, the Director of National Intelligence issued Security Executive Agent Directive 4, National Security Adjudicative Guidelines. Effective in June 2017, the directive is meant to establish the single, common adjudicative criteria for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position. DOD officials stated that having standardized adjudicative criteria such as these guidelines constitutes an important step in helping to ensure reciprocity. Additionally, a senior PAC Program Management Office official noted that the PAC has designated eight executive branch-wide IT shared service capabilities, such as the electronic adjudication of certain background investigations and a new electronic questionnaire for national security positions. According to this official, the latter two shared services are expected to be rolled out in 2017, with the remaining six shared services being rolled out as they become available. While the PAC has reformed many parts of the personnel security clearance process, implementing certain key aspects of the 2012 Federal Investigative Standards, including changing the frequency of periodic reinvestigations for certain clearance holders and establishing a continuous evaluation program, remain incomplete. In addition, the issuance of ODNI’s draft reciprocity policy has been delayed. 2012 Federal Investigative Standards. These standards outline criteria for conducting background investigations to determine eligibility for a security clearance and are intended to ensure cost-effective, timely, and efficient protection of national interests and to facilitate reciprocal recognition of the resulting investigations. In April 2015, we reported that executive branch agencies with responsibilities for security clearances and suitability determinations had twice approved updated Federal Investigative Standards to replace the 1997 Standards, but that progress in implementing the updated standards had been limited. Specifically, as part of the reform effort that began after the passage of IRTPA, the Director of National Intelligence and the Acting Director of OPM, in their roles as Security and Suitability Executive Agents, signed new Federal Investigative Standards on December 13, 2008, and stated that the anticipated initial deployment of the standards was to begin in the third quarter of fiscal year 2009. However, the 2008 Federal Investigative Standards were not implemented, according to ODNI officials, because key terms were not clearly defined and required further clarification. In December 2012, the Director of National Intelligence and Director of OPM approved updated Federal Investigative Standards. Among other things, the 2012 Federal Investigative Standards identify five investigative tiers. According to OPM Federal Investigations Notice 16-02, tier 3 investigations are required for eligibility for access to secret and confidential information, or for noncritical sensitive positions, or “L” access. OPM Federal Investigations Notice 16-07 indicates that tier 5 investigations are required for eligibility for access to top secret or Sensitive Compartmented Information, or for critical sensitive or special sensitive positions, or “Q” access. The updated standards also changed the frequency of periodic reinvestigations for certain clearance holders. The Federal Investigative Standards milestone for full operating capability is the end of fiscal year 2017. Specific details on this topic were omitted because the information is sensitive. See figure 1 for a timeline of efforts made since 1997 to implement updated Federal Investigative Standards. The 2012 standards include continuous evaluation as a new requirement for certain clearance holders. This is a key executive branch initiative to more frequently identify and assess security-relevant information between periodic reinvestigations. Efforts to implement a continuous evaluation program were included in the implementation documents from the prior reform effort following approval of the 2008 Federal Investigative Standards, including an operational milestone for implementing a continuous evaluation program by the fourth quarter of fiscal year 2010. ODNI has adjusted the milestones for implementing the program and issuing a Security Executive Agent Directive for continuous evaluation several times. For example, in April 2015, we reported that ODNI planned to issue a continuous evaluation policy by September 2016 and to implement a continuous evaluation capability for certain clearance holders by December 2016. However, in November 2017 we found that while ODNI has taken an initial step to implement continuous evaluation in a phased approach across the executive branch, it has not yet issued a Security Executive Agent Directive for continuous evaluation or determined when the future phases of implementation will occur. According to ODNI officials, as of August 2017, this directive was undergoing interagency coordination and would be issued upon completion of that process. As of August 2017, continuous evaluation had not yet been fully implemented and ODNI had not set a new milestone for when it would occur. In November 2017, we recommended, among other things, that the Director of National Intelligence issue a continuous evaluation directive and develop an implementation plan. ODNI generally concurred with those recommendations. Figure 2 provides an overview of the adjusted executive branch milestones for issuing a continuous evaluation policy and implementing a continuous evaluation program, including developing a technical capability. Reciprocity policy. In 2004, IRTPA required that all security clearance background investigations and determinations completed by an authorized investigative agency or authorized adjudicative agency be accepted by all agencies, subject to certain exceptions. As reported in a cross-agency priority goal quarterly update in fiscal year 2016, the milestone for ODNI to issue and promulgate an updated national security reciprocity policy was September 2016. Security clearance reciprocity is statutorily required by IRTPA, subject to certain exceptions, and it is currently implemented by executive orders and guidance across executive-branch agencies. To consolidate existing reciprocity guidance, ODNI planned to issue a comprehensive, national-level security clearance reciprocity policy intended to resolve challenges associated with consistent, timely reciprocity processing across the executive branch. However, the issuance date has been postponed multiple times—the original milestone was September 2013—and as of July 2017, ODNI had not yet issued a reciprocity policy or identified a new milestone for its issuance. In July 2017, ODNI officials stated that a draft reciprocity policy was pending entry into the formal interagency coordination process and would be issued upon completion of that process. However, ODNI officials were unable to provide an estimated issuance date because, according to the officials, the length of the interagency coordination process can vary. PAC Program Management Office officials noted that issuance delays are due, in part, to the development of related personnel security policies, including continuous evaluation, with which the reciprocity policy must be aligned. Figure 3 shows milestones for the issuance of the reciprocity policy. In November 2010, we found that although executive-branch agency officials stated that reciprocity is regularly granted, agencies did not have complete records on the extent to which previously granted security clearance investigations and adjudications are honored government- wide. Further, we found that agencies lacked a standard metric for tracking reciprocity. We recommended that the Deputy Director for Management, OMB, in the capacity as chair of the PAC, develop comprehensive metrics to track when reciprocity is granted and report the findings from the expanded tracking to Congress. OMB concurred with our recommendation. However, in April 2015, we found that executive branch agencies still did not consistently track when reciprocity is or is not granted, nor did they have metrics in place to measure how often reciprocity occurs. ODNI officials stated that they planned to develop them by 2016. Although the Director of National Intelligence had requested Intelligence Community elements take steps to begin capturing reciprocity data in December 2014, such baseline data needed to support measures for reciprocity were not being collected government-wide. We recommended, in 2015, that the Director of National Intelligence require the development of baseline data to support measures for reciprocity. These data would help to identify and monitor changes in reciprocity government-wide. ODNI did not state whether it concurred with the recommendation, and as of November 2017, it had not been implemented. PAC officials stated that the greatest challenge of the reform effort is the breadth and complexity of the issues it is trying to resolve, noting that the reform effort involves nearly every executive branch agency. In addition, these officials stated that sometimes agencies focus on short-term high- visibility issues instead of longer-term efforts, which are needed for systemic change. ODNI officials also noted the complexities of reforming the personnel security clearance process and working toward a whole-of- government solution. These officials noted that the reform efforts involve coordination among a number of agencies across the executive branch, which is both time and resource intensive. Both PAC Program Management Office and ODNI officials also identified limited agency resources and competing priorities—across executive branch agencies— as additional challenges. The PAC has taken recent steps to help address some of these challenges to continued progress, which could facilitate the completion of the key initiatives discussed above. For example, in its Implementation Plan the PAC has identified approximately 50 initiatives on which it will focus its work over the next 5 fiscal years and has aligned those activities with its four strategic categories of initiatives—trusted workforce, modern vetting, secure and modern mission-capable IT, and continuous performance improvement. However, according to ODNI officials, during their review of a draft of the Implementation Plan, they raised concerns about the number of initiatives and highlighted the need to provide greater prioritization of the initiatives to help better focus efforts. For example, some agencies are assigned as a primary owner of multiple initiatives. Specific details of the number of initiatives to which agencies are assigned were omitted because the information is sensitive. PAC Program Management Officials stated that, to alleviate these concerns, they subsequently identified two to four priority initiatives within each of the four categories to help focus agency efforts. These officials further stated that the PAC intends to update and reissue a condensed version of its Implementation Plan annually so that it can make revisions as issues that affect these priorities, such as reduced budgets, occur. These 11 priority initiatives are identified in the PAC’s Implementation Plan which, according to PAC Program Management Office officials, the PAC finalized and circulated to executive branch agencies in February 2017. For example, establishing a continuous evaluation capability and strengthening and aligning guidelines for the reciprocal recognition of existing vetting decisions are listed among the PAC’s priority initiatives. Given the limited agency resources cited by ODNI and PAC Program Management Office officials and other key competing efforts, such as improving investigation timeliness, the PAC’s prioritization of initiatives could help to refocus efforts on the most critical areas of the reform effort, and could provide agencies with a manageable number of initiatives on which to prioritize their efforts. Our prior work on personnel security clearances has identified concerns about the quality of background investigations and has highlighted the need to build quality throughout the process for almost 20 years. Additionally, we found that executive branch reports on the personnel security clearance process contained limited information on quality in the process. In May 2009, we recommended, among other things, that the Deputy Director for Management of OMB, in the capacity as Chair of the PAC, include in an IRTPA-required report to Congress quality metrics to provide more transparency on personnel security clearances. OMB concurred with that recommendation. However, the 2010 report to Congress did not include quality metrics, and the IRTPA reporting requirement expired in 2011. Appendix III provides an overview of our work in this area and of executive branch efforts to establish government- wide performance measures for the quality of background investigations. According to Executive Order 13467, the PAC is to establish annual goals and progress metrics related to security and suitability processes and continuous performance improvement. This focus on performance measures is consistent with our body of work on using results-oriented management tools to help achieve desired program outcomes—derived from our work on how to effectively implement the Government Performance and Results Act (GPRA) and the GPRA Modernization Act of 2010. This body of work provides agencies with a framework for effectively managing program performance to achieve desired outcomes, including establishing performance measures. In addition, Standards for Internal Control in the Federal Government states that management should establish and review performance measures and monitor internal control systems. Further, we found in previous work that interim milestones can be used to show progress toward implementing efforts or to make adjustments when necessary. Developing and using specific milestones and timelines to guide and gauge progress toward achieving an agency’s desired results informs management of the rate of progress toward achieving goals, and whether adjustments need to be made in order to maintain progress within given timeframes. As of July 2017, the executive branch had taken two of three steps to establish government-wide measures for the quality of investigations. First, as previously discussed, ODNI and OPM issued Quality Assessment Standards for background investigations in January 2015 to establish standard criteria for agencies to consistently evaluate complete investigations. The standards were developed through an interagency effort chaired by ODNI, OPM, and DOD. These standards define complete investigations as those in which all required components were obtained in full and any known issues—such as criminal activity—were resolved per the standards. DOD officials highlighted issue resolution— having enough useful information about the circumstances surrounding a given issue to make an adjudicative determination—as a persistent challenge with background investigations for personnel security clearances, and as key to determining investigation quality. Second, ODNI developed the QART, through which agencies will be able to report on the completeness of investigations, to include whether adjudicators considered issues identified during an investigation to have been sufficiently resolved. According to ODNI officials, they began to implement the QART in October 2016, and full implementation is expected by the end of calendar year 2017. ODNI officials stated that they are collecting sufficient data from the QART in order to develop measures for the quality of investigations. In ODNI’s review of a draft of this report, officials stated that it is premature to set a milestone for completing government-wide performance measures for the quality of investigations and that ODNI will set such a milestone when the QART data have been fully analyzed. Specific details on this topic were omitted because the information is sensitive. Figure 4 provides an overview of the timeline for the executive branch’s three-step process to develop measures for the quality of investigations. Although ODNI has developed the QART, and ODNI and OPM have issued the Quality Assessment Standards, there are still challenges to resolve as measures for the quality of investigations are established. For example, DOD officials stated that they do not intend for all of their adjudicators to use the QART, and that they have not developed an interface between their Rapid Assessment of Incomplete Security Evaluations system and the QART. DOD officials also stated that they will continue to use their tool until the QART is automated for use in a new Defense Information System for Security. If DOD investigations— which represent the majority of the background investigations conducted by NBIB—are not captured by the QART, it is unclear how ODNI will have sufficient data to develop government-wide measures for the quality of investigations. Further, NBIB officials noted that if their largest customer is not utilizing the QART, they are not positioned to receive comprehensive feedback. In April 2015 we recommended, among other things, that the Director of National Intelligence, in his capacity as Security Executive Agent, develop, implement, and report to Congress on government-wide, results- oriented performance measures for security clearance background investigation quality. ODNI did not state whether it concurred with that recommendation, and the recommendation has not been implemented. We continue to believe that measures for the quality of background investigations are needed to provide decision-makers, including OMB and Congress, with information on the quality of personnel security clearance background investigations, and to help ensure the quality of investigations. Without establishing a milestone for the completion of government-wide performance measures for the quality of investigations, their completion may be further delayed, and executive branch agencies will not have a schedule against which they can track progress or to which they are accountable. Executive branch agencies have experienced challenges in meeting timeliness objectives for investigation and adjudication of initial personnel security clearances, and their reporting on timeliness has been limited. The number of executive branch agencies meeting established timeliness objectives for both initial secret and initial top secret clearances decreased from fiscal year 2012 through fiscal year 2016. While ODNI has taken steps to address timeliness challenges, it has not developed a government-wide approach to help agencies improve the timeliness of initial personnel security clearances. In addition, the executive branch’s reporting on timeliness has been limited, which inhibits both transparency and oversight of the personnel security clearance process. Our analysis of timeliness data for specific executive branch agencies showed that the percent of agencies meeting established investigation and adjudication timeliness objectives for initial secret and top secret personnel security clearances decreased from fiscal year 2012 through 2016. Specifically, in fiscal year 2012, 27 percent of the agencies for which we obtained data met investigation and adjudication objectives for at least three of four quarters for initial secret clearances, and 59 percent met those objectives for initial top secret clearances. By fiscal year 2016, that decreased to 2 percent and 10 percent, respectively. IRTPA established an objective for each authorized adjudicative agency to make a determination on at least 90 percent of all applications for a personnel security clearance within an average of 60 days after the date of receipt of the completed application by an authorized investigative agency—not longer than 40 days to complete the investigative phase, and 20 days to complete the adjudicative phase. In assessing timeliness under these objectives, executive branch agencies exclude the slowest 10 percent and report on the average of the remaining 90 percent (referred to as the fastest 90 percent). In 2012, ODNI, in coordination with interagency participation, modified the timeliness goals for certain background investigations and established new timeliness goals. As part of the Insider Threat and Security Clearance Reform cross- agency priority goal, from the second quarter of fiscal year 2014 until the fourth quarter of fiscal year 2016, the PAC reported quarterly on the average number of days to initiate, investigate, adjudicate, and complete the end-to-end process for initial secret and initial top secret cases for the executive branch as a whole. It reported this information as compared with the IRTPA-established timeliness objectives for initial secret clearances and ODNI’s revised timeliness objectives for initial top secret clearances. For fiscal year 2016, the PAC reported that the government- wide average for executive branch agencies: Did not meet the 40-day investigation objective for the fastest 90 percent of initial secret clearances for any quarter. The averages ranged from 92 days to 135 days. Did not meet ODNI’s revised investigation objective for the fastest 90 percent of initial top secret clearances for any quarter. The averages ranged from 168 days to 208 days. With regard to the timeliness of investigations, our analysis of timeliness data reported by specific executive branch agencies showed that the percent of agencies that met timeliness objectives decreased from fiscal year 2012 through 2016. Specifically, our analysis showed: While 27 percent of the agencies met the 40-day IRTPA-established investigation objective for at least three of four quarters for the fastest 90 percent of initial secret cases in fiscal year 2012, only 2 percent met the objective for at least three of four quarters in fiscal year 2016. While 78 percent of the agencies met ODNI’s revised investigation objective for at least three of four quarters for the fastest 90 percent of initial top secret cases in fiscal year 2012, only 12 percent met the objective for at least three of four quarters in fiscal year 2016. Across the agencies we reviewed, the average number of days to complete the investigation phase of the fastest 90 percent of initial top secret cases for the fourth quarter of fiscal year 2016 ranged from 26 days to 459 days. Furthermore, our analysis showed that, for the executive branch agencies included in our review, the time required to investigate initial personnel security clearances increased from fiscal year 2012 through fiscal year 2016, often exceeding the investigation phase objective established by IRTPA. In addition, we found that both agencies with delegated authority to conduct their own investigations and those that used FIS (now NBIB) as their investigative service provider experienced challenges in meeting established investigation timeliness objectives. However, the only agencies that met investigation timeliness objectives for at least three of four quarters of fiscal year 2016—for the fastest 90 percent of initial secret and initial top secret clearances—have delegated authority to conduct their own investigations. The executive branch’s challenges in meeting investigation timeliness objectives for initial personnel security clearances have contributed to a significant backlog of background investigations at the primary entity responsible for background investigations, NBIB. NBIB documentation shows that its backlog of pending investigations increased from about 190,000 in August 2014 to more than 709,000 investigations, as of September 2017. NBIB officials stated that more than 70 percent of the bureau’s pending background investigations had been pending for longer than the established timeliness objectives, as of June 2017. Additional details about NBIB’s investigation backlog and actions the bureau is taking to address it are discussed later in this report. With regard to the timeliness of adjudications, our analysis showed: While 51 percent of the agencies met the 20-day adjudication objective for at least three of four quarters for the fastest 90 percent of initial secret cases in fiscal year 2012, only 35 percent met the objective for at least three of four quarters in fiscal year 2016. While 65 percent of the agencies met the 20-day adjudication objective for at least three of four quarters for the fastest 90 percent of initial top secret cases in fiscal year 2012, only 43 percent met the objective for at least three of four quarters in fiscal year 2016. Across the executive branch agencies included in our review, the average number of days to adjudicate the fastest 90 percent of initial top secret cases for the fourth quarter of fiscal year 2016 ranged from 3 days to 175 days. Table 1 shows the percent of agencies meeting the investigation and adjudication objectives for the fastest 90 percent of initial secret and initial top secret cases for at least three of four quarters from fiscal years 2012 through 2016. In November 2017, we reported that the percent of executive branch agencies meeting established timeliness goals for completing periodic reinvestigations also decreased from fiscal years 2012 through 2016. Appendix IV provides information on executive branch agency periodic reinvestigations from fiscal years 2012 through 2016. ODNI has taken steps to address challenges in meeting established timeliness objectives, such as revising the timeliness objective for top secret investigations in 2012; however, it has not developed a government-wide approach to help agencies improve the timeliness of initial personnel security clearances. ODNI officials stated that several significant events contributed to agency challenges in meeting timeliness objectives over the past 5 fiscal years, including a government shutdown, the 2015 OPM data breach, a loss of OPM contractor support, and OPM’s review of the security of its IT systems, which resulted in the temporary suspension of the web-based platform used to complete and submit background investigation forms. In addition, executive branch agencies noted the increased investigative requirements stemming from the 2012 Federal Investigative Standards as a further challenge to meeting established timeliness objectives in the future. Standards for Internal Control in the Federal Government states that management evaluates and, if necessary, revises defined objectives so that they are consistent with requirements and expectations. In addition, the standards state that management should use quality information to achieve the entity’s objectives, including relevant data from internal and external sources. As previously discussed, ODNI, in coordination with interagency participation, modified the timeliness goals for certain background investigations and established new timeliness goals. Since then, meeting timeliness objectives has become even more challenging due, for example, to updated investigation standards. However, since 2012, ODNI has not revisited the investigation or adjudication timeliness objectives for secret and top secret clearances. Specifically, ODNI has not conducted an evidence-based review, using relevant data, to ensure that these objectives are appropriate, given changes to the investigative requirements and other stated challenges. In addition, while ODNI and interagency partners modified certain timeliness goals in 2012, the number of executive branch agencies able to consistently meet the revised objectives also decreased over the past 5 fiscal years. Without conducting an evidence-based review of the investigation and adjudication timeliness objectives for both secret and top secret clearances to ensure that they are appropriate, agencies may experience further timeliness challenges and delays in determining eligibility. According to ODNI officials, they are aware of each agency that does not meet timeliness objectives and, in the capacity as Security Executive Agent, the Director of National Intelligence has taken steps to help these agencies improve their timeliness. Specifically, ODNI officials stated that the Director of National Intelligence issues annual agency performance letters to heads of agencies when security clearance timeliness objectives are not met. In the letters, the Director of National Intelligence requests that the agency submit an action plan, within 60 days of the date of the letter, identifying the factors that prevented the agency from meeting established timeliness objectives and the actions the agency will take to remedy those impediments. Officials stated that since the letter comes directly from the Director, this helps to attract the maximum amount of attention possible. In addition to establishing the current timeliness objectives for initial security clearances, IRTPA also established a 5-year timeframe and an interim milestone for the executive branch to implement those objectives. Specifically, the act required the development of a plan to reduce the length of the personnel security clearance process, including the IRTPA- established timeliness objectives described above. The plan was to be developed in consultation with appropriate committees of Congress and each authorized adjudicative agency, and to take effect 5 years after the date of enactment. Beginning no later than 2 years after the enactment of IRTPA and ending on the date the plan took effect, authorized adjudicative agencies were to make a determination on at least 80 percent of all applications within an average of 120 days after receipt by an authorized investigative agency—not longer than 90 days to investigate and 30 days to adjudicate. In November 2005, the executive branch submitted a plan to improve the timeliness of personnel security clearance processes government-wide. The Joint Reform Team submitted its first reform plan to the President on April 30, 2008, which proposed a new process for determining clearance eligibility. Standards for Internal Control in the Federal Government establishes that management should define objectives clearly to enable the identification of risks and define risk tolerances. In our prior work on interagency collaboration, we found that overarching plans can help agencies overcome differences in missions, cultures, and ways of doing business, and help agencies better align their activities, processes, and resources to collaborate effectively to accomplish a commonly defined outcome. Additionally, to help sustain and enhance collaboration among federal agencies, we found that agencies that create a means to monitor, evaluate, and report the results of collaborative efforts can better identify areas for improvement. Further, we have found in previous work, including our prior work on personnel security clearances, that interim milestones can be used to show progress toward implementing efforts or to make adjustments when necessary. Developing and using specific milestones to guide and gauge progress toward achieving an agency’s desired results informs management of the rate of progress toward achieving goals, and whether adjustments need to be made in order to maintain progress within given time frames. While ODNI requests individual corrective action plans from agencies not meeting security clearance timeliness objectives, the executive branch has not developed a government-wide plan, with goals and interim milestones, to meet established timeliness objectives for initial security clearances that takes into consideration increased investigative requirements and other stated challenges. A coordinated approach, in addition to the ODNI-requested agency-specific plans, could help to improve timeliness, given that: (1) both agencies that use NBIB as their investigative service provider and those that have delegated authority to conduct their own investigations have experienced challenges in meeting established investigation and adjudication timeliness objectives over the past 5 fiscal years; and (2) timeliness challenges include government- wide challenges, such as the increased requirements stemming from the 2012 Federal Investigative Standards and past challenges in relation to OPM contractor support, as discussed above, and not just agency- specific challenges, such as staffing shortfalls. While the individual agency action plans represent a positive step toward helping to improve timeliness, agencies across the executive branch continue to experience timeliness challenges. A government-wide plan would better position ODNI to identify and address any systemic issues. Without a government- wide plan, including goals and interim milestones, for achieving timeliness objectives for initial secret and top secret investigations and adjudications—similar to the plan previously required by IRTPA—there could be continued delays in determining individuals’ eligibility for access to classified information. Ultimately, such delays may leave agencies unable to fill critical positions that require a security clearance. Since 2011, the executive branch’s reporting on the timeliness of personnel security clearances has provided limited transparency and oversight of the overall reform effort. Specifically, IRTPA required the executive branch to submit an annual report, through 2011, to the appropriate congressional committees on the progress made toward meeting the act’s requirements, including timeliness data and a discussion of any impediments to the smooth and timely functioning of its requirements. With respect to timeliness data, the act required that those reports include the periods of time required by the authorized investigative agencies and authorized adjudicative agencies for conducting investigations, adjudicating cases, and granting clearances, from date of submission to ultimate disposition and notification to the subject and the subject’s employer. In response to this requirement, the executive branch provided a series of reports from 2006 through 2011 on the timeliness of executive branch agencies’ initial investigations and periodic reinvestigations. For example, ODNI’s IRTPA Title III Annual Report for 2010 specified the average number of days by quarter it took for selected individual agencies to initiate, investigate, adjudicate, and complete the end-to-end process for the fastest 90 percent of security clearances. The report also included average timeliness data for the executive branch as a whole. However, since the IRTPA requirement ended in 2011, executive branch reporting has been limited. For example, as previously discussed, the PAC did not begin its quarterly reporting on the timeliness of executive branch agencies’ personnel security clearances until the second quarter of fiscal year 2014 through the Insider Threat and Security Clearance Reform cross-agency priority goal. In addition, while these reports include the timeliness of both initial investigations and periodic reinvestigations, they provide the average timeliness of the executive branch as a whole and not the timeliness of individual executive branch agencies—as was provided under the prior IRTPA reporting—which makes it difficult to identify specific agencies that may be experiencing challenges. Additionally, the Intelligence Authorization Act for Fiscal Year 2010 requires the President to submit an annual report on security clearance determinations to Congress. Among other things, the report is to include, for the preceding fiscal year, the number of federal and contractor employees who held a security clearance at each level and the number of employees who were approved for a security clearance at each level, as well as in-depth security clearance determination timeliness information for each element of the intelligence community. However, the annual reports that ODNI provides to the congressional intelligence committees in response to this requirement include only limited data as compared with reports that were completed in response to IRTPA. Specifically, the Intelligence Authorization Act for Fiscal Year 2010 requires information on the total amount of time for the longest and shortest determinations, and the age of pending investigations, not average timeliness. The reports are also limited in that they capture data for only a portion of the intelligence community. Specifically, ODNI’s 2015 Annual Report on Security Clearance Determinations states that the report includes information for 7 of 15 elements of the intelligence community and that the other 8 elements reported that collecting the information would be a manual, resource-intensive process that was not viable due primarily to technology restrictions. Standards for Internal Control in the Federal Government states that management should externally communicate the necessary quality information to achieve the entity’s objectives through reporting lines so that external parties can help the entity achieve its objectives and address related risks. In addition, our high-risk criteria for monitoring and demonstrated progress call for agencies to report on program progress and related risks as well as show that issues are being effectively managed. However, since the IRTPA annual reporting requirement ended in 2011, the executive branch has provided limited reporting on the timeliness of individual agencies’ initial investigations or periodic reinvestigations for personnel security clearances. In addition, while the PAC had regularly reported publicly on timeliness for the executive branch as a whole on a quarterly basis, it has not provided a public quarterly status update since the fourth quarter of fiscal year 2016. According to performance.gov, the website through which the PAC distributes its quarterly updates, the content—including the PAC’s quarterly updates—is undergoing an overhaul as agencies develop updated goals and objectives for release in February 2018 with the President’s next budget submission to Congress. It is unclear whether the new administration will continue to designate personnel security clearance reform as a cross-agency priority goal. PAC Program Management Office officials stated that they continue to track and report this information internally within the executive branch. These officials stated that they were uncertain as to whether performance.gov would remain a vehicle by which they would report on the status of the reform effort, including executive branch-wide timeliness. However, the officials also stated that it is important for the information to be reported in order to maintain transparency and the momentum of the reform effort. Without transparent reporting by the executive branch on investigation and adjudication timeliness for both initial investigations and periodic reinvestigations, Congress will not be able to effectively execute its oversight role and monitor individual executive branch agency progress in meeting timeliness objectives. In addition, the absence of comprehensive reporting on personnel security clearance timeliness limits the ability of congressional decision makers to thoroughly evaluate and precisely identify where and why delays exist within the process, as well as to identify corrections as necessary. In addition, should the PAC’s quarterly progress updates be suspended indefinitely, Congress and the public will have limited transparency into the status of key reform effort initiatives, which may delay the timely identification of problems, and ultimately disrupt the momentum of the reform effort as a whole. The transition from FIS to NBIB has involved organizational changes intended to improve the background investigation process, but the bureau faces operational challenges in addressing the investigation backlog and associated workforce planning. NBIB’s organizational changes include the creation of some new departments, and DOD is now responsible for designing, developing, and maintaining a new IT system for the bureau, but must contend with risks posed by vulnerabilities in OPM’s legacy IT systems, which NBIB still utilizes. As NBIB transitions, it has taken steps to improve its oversight of background investigations contracts and measure the completeness of background investigations; however, it faces operational challenges in developing a plan to reduce the size of the investigation backlog to a manageable level and in ensuring that its overall workforce is sized and structured to meet its mission. The transition from FIS to NBIB involved some organizational changes, such as the creation of new departments designed to enhance information sharing and contract oversight, among other things. NBIB also made changes to existing departments, such as enhancing its counterintelligence division to foster greater collaboration with the intelligence community. In addition, NBIB is subject to oversight from multiple entities, such as OPM, ODNI, and the PAC. Further, DOD is now responsible for designing, developing, and maintaining a new IT system for NBIB that can provide increased security. However, vulnerabilities in OPM’s legacy systems pose risks to the security of the new system and could delay its implementation. NBIB was established to replace FIS, and the transition has involved changes to the organizational structure. In response to the results of 90- day review that were announced in January 2016, in September 2016, Executive Order 13741 amended Executive Order 13467 to establish the roles and responsibilities of NBIB within OPM and made the Director of NBIB a member of the PAC. According to Executive Order 13467, as amended, NBIB is to serve as the primary executive branch service provider for background investigations for, among other things, eligibility for access to classified information; eligibility to hold a sensitive position; suitability or fitness for government employment; and authorization to be issued a federal credential for logical and physical access to federally controlled facilities or information systems. Among other things, the bureau is to also provide effective, efficient, and secure personnel background investigations for the federal government. When announcing the establishment of NBIB, in January 2016, the administration reported the intention to create a dedicated transition team headquartered in Washington, D.C., to develop and implement a transition plan to: (1) stand up the bureau; (2) ensure that the transition timeline fully aligns with business needs; (3) transition the management of FIS IT systems to DOD; (4) migrate the existing mission, functions, personnel, and support structure of FIS to NBIB; and (5) provide continuity of service to customer agencies during the transition. According to its charter, the transition team was composed of current OPM employees, and federal employees detailed or assigned to OPM or DOD from other executive branch agencies and departments. NBIB officials noted that employees from across the executive branch with relevant experience and qualifications were recruited to ensure that stakeholder agencies’ equities were represented, and that the transition team leader was recruited from outside of OPM and reported directly to the OPM Director throughout the transition process. OPM reported that NBIB became operational on October 1, 2016, but that the complete transition will take some time. For example, the transition plan specifies activities throughout fiscal year 2017 and into fiscal year 2018 to implement the transition from FIS to NBIB. NBIB officials said they expect that the bureau will have migrated to the new organizational structure substantially by mid-2018. The transition also involved some organizational changes intended to streamline certain business processes or more effectively manage background investigations as the organization has continued to evolve. NBIB officials stated that the transition team established the organizational structure by assessing essential FIS functions in coordination with key community stakeholders—including new and external customers—through the PAC as well as FIS personnel. The officials said that the transition team then linked similar functions and interdependencies to establish each of the offices. Additionally, NBIB officials stated that the 2015 90-day review helped to determine the organizational structure because it identified a need for a business process reengineering analysis. Through its establishment, NBIB absorbed FIS and assumed its mission. NBIB’s organizational structure has several changes from the structure of FIS, to include the establishment of the following four new departments: 1. Federal Investigative Records Enterprise. The functions of this department include a new law enforcement and records outreach group to improve outreach and more effectively collect information with state and local law enforcement offices. 2. Policy, Strategy and Business Transformation. The functions of this department include expanding existing performance reporting to incorporate metrics regarding effectiveness; and researching and identifying systemic issues in workload, processes, and products to determine where process improvement could be achieved. 3. Contracting and Business Solutions. The functions of this department include enhancing and consolidating administration of NBIB contracts to provide consistent oversight. 4. Information Technology Management Office. The functions of this department include supporting the delivery and enhancement of quality IT systems to NBIB in a timely and effective manner, gathering and communicating needs and requirements for new applications, and coordinating implementation of changes to current systems. In addition to the creation of these new departments, NBIB also made changes to several other departments from FIS. For example, according to NBIB documents, the Field Operations department added a “Field Contracts” division that is designed to oversee and monitor the contractor workforce performing background investigations, to ensure quality and timely products. This department also enhanced its counterintelligence division to focus on counterintelligence and insider threat support and to foster greater collaboration with the intelligence community. Further, NBIB created a new financial office to oversee budgeting, pricing and funding models, financial reporting, data accuracy, and internal controls monitoring. Moreover, NBIB created a new Integrity Assurance, Compliance, and Inspection division by merging the FIS Integrity Assurance and Inspection divisions to streamline similar functions and improve processes and efficiencies. Executive Order 13741 provided some guidelines governing the structure and location of NBIB. Specifically, it required that NBIB be headquartered in or near Washington, D.C., and that NBIB have dedicated resources, including but not limited to a senior privacy official. NBIB’s headquarters is located in Washington, D.C., but according to NBIB officials, as of July 2017, only 48—including both occupied and vacant positions—of NBIB’s 3,260 positions, or about 1.5 percent, were located in Washington, D.C. In addition, although the position of the senior privacy official has been established in the NBIB organization chart, according to NBIB officials, this position had not been filled as of July 2017. NBIB officials explained that they work closely with OPM’s senior privacy officer, and so they decided to prioritize filling other leadership positions within NBIB. NBIB is subject to oversight from multiple entities, such as OPM, ODNI, and the PAC. Executive Order 13741 provided that the bureau would be established within OPM. NBIB officials stated that the bureau is part of OPM and is governed in a manner consistent with its other operational components. They also said that although the structure of NBIB is different from that of FIS, its general relationship with OPM and its leadership reporting chain are similar. Specifically, comparing the organizational charts of FIS and NBIB, FIS was led by an Associate Director who reported to the Director of OPM, while NBIB is led by a Director who reports to the Director of OPM. According to NBIB, the OPM Director has delegated certain authorities to NBIB; additionally, the OPM Senior Procurement Executive delegated to NBIB certain administrative and acquisition authorities. NBIB officials said that this makes its structure more flexible. NBIB officials said that where support is provided from other OPM offices—such as communications, legislative affairs, legal, procurement, security, facilities, and the office of the Chief Information Officer—there is continual dialogue between that office’s leadership and the staff directly supporting the bureau. The officials also noted a variety of regular meetings, such as a weekly meeting between the Acting Director of OPM and the NBIB Director and Chief of Staff, attendance at daily OPM senior staff meetings, and briefings every other month with the OPM Inspector General, among others. In addition, as previously discussed, as the Security Executive Agent, the Director of National Intelligence is responsible for various matters related to security clearance investigation oversight, programs, policies, and processes. Executive Order 13467, as amended by Executive Orders 13741 and 13764, provides that NBIB, through the Director of OPM, is subject to the oversight of the Security Executive Agent with respect to the conduct of investigations for eligibility for access to classified information or to hold a sensitive position. Similarly, Executive Order 13467, as amended, provides that NBIB is responsible for conducting background investigations in accordance with policies, procedures, standards, and requirements established by the Security Executive Agent and Suitability Executive Agent. In February 2017, the Acting Director of OPM testified that the bureau has been working closely with ODNI to identify policy and process changes to address the investigation backlog. NBIB officials stated that the bureau and ODNI are active partners, and that the bureau participates in many of ODNI’s working groups in the development of policies or processes related to personnel security clearances. In addition, the officials said that the bureau reports timeliness, quality, and performance metrics to ODNI on no less than a quarterly basis, and that its personnel collaborate with ODNI on reviews of processes, such as those related to social media, continuous evaluation, insider threat, and counterintelligence. ODNI officials told us that in its oversight role of NBIB, ODNI collects quarterly timeliness data and requests that agencies using NBIB as their investigative service provider enter the investigations into the QART to assess the quality of the investigations. Further, Executive Order 13467, as amended by Executive Order 13741, describes an oversight relationship between the PAC and NBIB. It requires the PAC to hold NBIB accountable for the fulfillment of the bureau’s responsibilities set out in the Executive Order. It further provides that NBIB is to provide the PAC with information, to the extent permitted by law, on matters of performance, timeliness, capacity, IT modernization, continuous performance improvement, and other relevant aspects of NBIB operations. PAC Program Management Office officials told us that they worked with NBIB during the transition from FIS and answered a lot of questions, and have helped to fill in staffing and organization holes that were identified by the transition team. Executive Order 13467, as amended, assigns the Secretary of Defense the role of developing and securely operating IT systems that support all background investigation processes conducted by NBIB. According to officials from the Office of the DOD Chief Information Officer (CIO), NBIS will be built to NBIB specifications, and OPM will remain the owner of the data and processes. In testimony before the House Oversight and Government Reform Committee in February 2017, the DOD CIO estimated that NBIS would have several “prototype” capabilities by the end of fiscal year 2017, and an initial capability covering the full investigative process sometime in the fourth quarter of 2018. According to DOD officials, full capability for NBIS is scheduled for some time in 2019. However, a NBIB official noted the existence of challenges regarding the IT infrastructure and stated that it is more realistic for NBIS to be fully operational in 2020. According to DOD CIO officials, unexpected complications have arisen since beginning development of NBIS. Specifically, these officials stated that they have discovered that NBIS may require many more inter- connections to OPM legacy systems than originally planned. According to these officials, NBIB will continue to rely on OPM legacy systems for investigations of any complexity until NBIS becomes fully operational. Further, according to DOD CIO officials, when the executive branch begins to use NBIS, complex background investigations would begin in NBIS’s electronic application, but would then need to pass through or draw data from multiple OPM legacy systems before returning to NBIS for adjudication. According to DOD CIO officials, since OPM has 43 back- office functions fed by various systems that are often inter-related, a simple one-to-one system swap of NBIS for an OPM legacy system is not feasible. DOD CIO officials stated that the project management team building NBIS is currently working to fully understand how OPM’s various back-office functions are tied together, and also evaluating the cyber- security risks inherent in connecting to OPM’s legacy systems. DOD CIO officials explained that this connection, as well as logistical challenges associated with data migration from the legacy systems to NBIS, raises concerns about risks to NBIS. Until these risks are properly evaluated, any connection to the legacy systems could present vulnerabilities, according to DOD CIO officials. OPM officials disagreed, stating that OPM and DOD already have IT connection points with the OPM legacy systems, and that the security of OPM’s systems and data continues to be an OPM priority. Securing the legacy systems will be a joint effort by DOD and OPM, according to an October 2016 Memorandum of Agreement between the two agencies regarding the roles, responsibilities, and expectations of each party throughout the entire lifecycle of OPM’s use of DOD’s IT systems in support of the background investigation process. Under the agreement, OPM will retain ownership and responsibility for the operation and performance of all system authorization activities for OPM legacy systems throughout their lifecycle. The agreement provides that OPM will maintain security documentation and information and interconnection exchange agreements, own control selection and security role assignment processes, and perform risk executive functions. The memorandum further states that the security of the legacy OPM IT environment will be a joint effort between OPM and DOD, with DOD assisting in a comprehensive security assessment of all OPM legacy IT systems and related infrastructure on a reimbursable basis. According to DOD CIO and NBIB officials, there is close coordination on a technical level between the two agencies on securing the OPM legacy systems used by NBIB. The officials said that weekly coordination meetings are held between the two agencies, and that DOD has embedded staff at OPM who are under the direct supervision of the OPM CIO. Both GAO and the OPM Inspector General have raised concerns on multiple occasions about various aspects of IT security at OPM, including OPM legacy systems used by NBIB. For example, in August 2017, we reported on OPM’s progress in implementing 19 recommendations made by the United States Computer Emergency Readiness Team to bolster its information security practices and controls in the wake of the 2015 breaches. We found that, as of May 2017, OPM had fully implemented 11 of the recommendations. For the remaining 8 recommendations, actions for 4 were still in progress, and for the other 4, OPM indicated it had completed actions to address them, but we noted further improvements were needed. We further reported that since the 2015 data breaches, which included a compromise of OPM’s systems and files related to background investigations for 21.5 million individuals, OPM has made progress in improving its security to prevent, mitigate, and respond to data breaches involving sensitive personal records and background investigations information. However, we also found that OPM did not effectively monitor actions taken to remediate identified weaknesses. OMB requires agencies to create a Plan of Action and Milestones to track efforts to remediate identified weaknesses, such as those leading to the 19 recommendations made by the United States Computer Emergency Readiness Team. In addition, OPM’s policy requires that scheduled completion dates be included in the plan. The policy also requires a system’s Information System Security Officer to develop a weakness closure package containing evidence of how an open Plan of Action and Milestones has been remediated before the issue, or recommendation in this case, can be closed. Although OPM has a Plan of Action and Milestones to address the 19 recommendations, we found that it had not validated actions taken in a timely manner or updated completion dates in the plan. Because the United States Computer Emergency Readiness Team recommendations are intended to improve the agency’s security posture, we recommended that more timely validation of the effectiveness of the actions taken is warranted. Until closure packages are created and the evidence of such actions is validated, OPM has limited assurance that the actions taken have effectively mitigated vulnerabilities that can expose its systems to cybersecurity incidents. Additionally, in May 2016 we reported on the implementation of OPM’s information security program and the security of selected high-impact systems. We found that OPM, one of four agencies reviewed, had implemented numerous controls to protect selected systems, but that access controls had not always been implemented effectively. We reported that weaknesses also existed in patching known software vulnerabilities and planning for contingencies, and that an underlying reason for these weaknesses was that OPM had not fully implemented key elements of its information security program. We recommended that OPM fully implement key elements of its program, including addressing shortcomings related to its security plans, training, and system testing. According to OPM officials, the agency is taking actions to address these recommendations. In August 2016, we issued a restricted version of our May 2016 report that identified vulnerabilities specific to each of the two systems we reviewed and made recommendations to resolve access control weaknesses in those systems. In December 2016, OPM indicated its concurrence with the recommendations and provided timeframes for implementing them. OPM officials expressed concern that the information from our 2016 reports was now dated, stating that it no longer reflects the current security posture at OPM, and said that they had taken actions to address these recommendations. However, all of the recommendations directed to OPM from the two reports remained open as of November 2017. We had not received any documentation regarding these actions as of November 2017 and thus could not validate the extent that any of these recommendations have been addressed. OPM’s Office of the Inspector General has also raised related concerns, most recently in its October 2017 report on OPM’s security program and practices. Overall, the OPM Inspector General found that OPM’s cybersecurity maturity level was measured at a level 2, “Defined”, meaning that its policies, procedures and strategy were formalized and documented but were not consistently implemented. According to the report, OPM has made improvements in its security assessment and authorization program, and its previous material weakness related to authorizations is now considered a significant deficiency for fiscal year 2017. The report noted that there are still widespread issues related to system authorizations, primarily related to documentation inconsistencies and incomplete or inadequate testing of the systems’ security controls. In addition, the report identified a significant deficiency in OPM’s information security management structure, and found that OPM was not making substantial progress in implementing prior Inspector General recommendations. The report noted that OPM had only closed 34 percent of its findings issued in the past 2 years. In addition to these IT security concerns, funding uncertainties have also complicated the development of NBIS. The President’s fiscal year 2017 budget included $95 million for the development of the system; however, according to DOD CIO officials, of the $95 million that was appropriated, DOD had provided only $31 million for NBIS as of June 2017. According to DOD CIO officials, the fiscal year 2017 continuing resolution had complicated decisions about the funding and disbursement schedule with consequences for planning and the apportioning of resources. A draft funding profile covering fiscal years 2017-2023 estimates funding needs of $175.7 million for research, development, test and evaluation, and $709.4 million for operation and maintenance, over this 7-year period, for a total of $885.2 million. As NBIB transitions, it has taken steps to improve its operations but continues to face workforce challenges that may hinder its ability to address the backlog of investigation cases and strengthen the background investigation process. The bureau has taken positive steps to improve its oversight of background investigation contracts, including changing contract oversight processes and measuring the completeness of background investigations. However, it faces operational challenges in developing a plan to reduce the size of the investigation backlog and in ensuring that its overall workforce is sized and structured to address it. Contractors are responsible for about 60 percent of NBIB’s background investigation fieldwork, according to NBIB officials. Since 2014, OPM has taken steps to improve its oversight of contracts. NBIB officials stated that changes were made in response to OPM Inspector General recommendations, and that some others were made in response to lessons learned after issues that led to the loss of OPM’s largest fieldwork contractor in 2014. These changes included (1) having federal employees review all background investigation reports, (2) increasing the number of individuals responsible for monitoring contractors’ compliance with contractually established requirements, and (3) establishing a contracting activity within NBIB. Since February 2014, federal employees have reviewed 100 percent of background investigation reports produced by contractors. In contrast, prior to February 2014, federal employees at FIS or a support contractor would review a subset of all of the investigations before releasing them to the respective customer agencies for adjudication. As currently structured, NBIB officials stated that there are now about 350 federal employees within NBIB’s Quality Oversight department who conduct these reviews for both contractor- and federal investigator-conducted cases to determine whether an investigation meets investigative standards for completeness before being released to the customer agency for adjudication. Using an internal database, OPM reviewers identify what, if any, elements of the investigative reports are incomplete and do not meet standards, and they return cases to the investigators for rework as necessary. When OPM reviewers determine that a case meets investigative standards, they close the case and submit it to an adjudicator. Contractors are evaluated for quality performance based on the number of times a case is returned by OPM reviewers for rework as a percentage of the total number of cases completed. According to NBIB data from its internal quality database, the percentage of cases conducted by contractors requiring rework decreased between the last quarters of fiscal years 2014 and 2016 from about 6 percent to 3.2 percent. According to NBIB officials, in 2014, OPM established an independent inspections branch to help the agency’s contracting officer’s representatives (CORs) oversee the background investigation fieldwork contracts. CORs, who are designated in writing by contracting officers, assist in the technical monitoring or administration of a contract. Under NBIB’s current background investigation fieldwork contracts, the COR provides technical direction and control during contractor performance, monitors contract progress, and determines for payment approval purposes whether performance is acceptable with respect to content, quality of services and materials, cost, and timeliness. NBIB officials stated that prior to the establishment of the inspections branch, the CORs were responsible for monitoring all aspects of contract compliance as well as a range of administrative duties, such as tracking performance data, IT support, and billing. Under the current NBIB structure, 16 inspectors in the Integrity Assurance, Compliance and Inspections division focus on contract oversight, according to NBIB officials. In addition to the inspectors, the officials said that there are 17 CORs—one in the Integrity Assurance, Compliance and Inspections division and 16 in the Field Operations department. Additionally, according to NBIB officials, FIS, NBIB’s predecessor, did not have its own contracting division, and instead relied on OPM’s centralized Office of Procurement Operations for contracting support. NBIB’s new organizational structure includes a Contracting and Business Solutions department. According to NBIB officials, they filled the new Head of Contracting Activity position in January 2017. NBIB officials stated that OPM established this new position and department in an effort to strengthen the bureau’s contracting function by creating dedicated positions more narrowly focused on overseeing the contracting function for background investigations and support services. NBIB has developed quality assurance processes and tools to measure the completeness of its investigations. Specifically, NBIB has developed an internal quality database through which federal case reviewers can determine the completeness of investigations, in accordance with investigative standards, that are being produced by both its federal and contract investigators, and can rate cases as either “meets standards” or “below standards.” Cases that are marked as “below standards” are returned to the contractor for rework prior to being finalized and sent to the customer for adjudication. NBIB then monitors, through its Key Performance Indicators, the percentage of investigations that are returned by customer agencies and that NBIB agrees require additional work. Our prior work found that relying on agencies to provide information on investigation quality, by itself, may not provide an accurate reflection of the quality of background investigations. We have reported in the past that officials from several agencies have stated that to avoid further costs or delays, agencies often choose to perform additional steps internally to obtain missing information, clarify or explain issues identified in investigative reports, or gather evidence for issue resolution or mitigation. As recently as July 2017, DOD officials stated that issue resolution was still a concern for them. However, NBIB officials stated that they conduct background investigations in accordance with the Federal Investigative Standards, and that while adjudicators may want more or different details, these are considered outside the scope of background investigations, but can be provided on a case-by-case basis. NBIB leadership has not developed a plan to reduce the size of the investigation backlog to a manageable level. NBIB’s Key Performance Indicators report states that a “healthy” inventory of work, representing approximately 6 weeks of work and allowing NBIB to meet timeliness objectives, is around 180,000 pending investigations. According to NBIB, the backlog of pending investigations increased from about 190,000 in August 2014, before OPM decided not to exercise subsequent option periods for its largest investigative fieldwork contract at the time, to more than 709,000 investigations as of September 2017, as shown in figure 5. NBIB estimated the backlog grew at an average rate of about 3,600 investigations each week from October 2016 through July 2017. As we reported when placing DOD’s personnel security clearance program on the high-risk list, problems related to backlogs and the resulting delays in determining clearance eligibility and issuing initial clearances can result in millions of dollars of additional costs to the federal government, longer periods of time needed to complete national security-related contracts, lost opportunity costs if prospective employees decide to work elsewhere rather than wait to get a clearance, and diminishing quality of the work because industrial contractors may be performing government contracts with personnel who have the necessary security clearances but are not the most experienced and best-qualified personnel for the positions involved. Delays in renewing previously- issued clearances can lead to heightened risk of national security breaches because the longer individuals hold a clearance, the more likely they are to be working with critical information and systems. As the backlog has grown, NBIB has taken steps to increase its capacity to conduct background investigations by increasing its own investigator staff as well as awarding new contracts, effective in December 2016, to four contractors for investigation fieldwork services. NBIB officials said that NBIB has a goal to increase its total number of investigators—federal employees and contractors—to about 7,200 by the end of fiscal year 2017. Specifically, to help address the backlog, NBIB officials reported that NBIB increased its authorized federal investigator workforce by adding 400 federal investigator positions in fiscal year 2016 and 200 positions in fiscal year 2017—an increase from 1,375 to 1,975 authorized positions. As of July 2017, NBIB had filled 1,620 of the 1,975 positions, and 1,513 of its federal investigators were fully trained. NBIB officials explained that they do not plan to increase the federal investigator capacity beyond the currently approved 1,975 because they do not have the ability to absorb more staff. According to the officials, new investigators must be trained by experienced investigators which reduces the amount of time the experienced investigators have to conduct investigative work. When estimating federal investigator capacity, NBIB assumes it will have 277 full-time equivalent vacancies at any given time due to high attrition rates. Further, NBIB officials could not project the federal investigator workforce past April 2018 due to high attrition rates. Given challenges with increasing its federal investigative staff, NBIB continues to rely on contractors to conduct the majority of investigations. NBIB officials noted that contractors perform about 60 percent of NBIB’s total investigative cases. OPM awarded four new investigative fieldwork services contracts that became effective in December 2016—two to incumbent contractors and two to new vendors. In July 2017, OPM officials told us that the contractor and federal staff capacity they currently possess enables them to complete a sufficient number of investigations to prevent the number of pending investigations from increasing further. However, they acknowledged that the four contracts and federal investigator staff do not currently provide OPM enough capacity to reduce the pending number of investigations to the “healthy” inventory level of 180,000 cases. NBIB officials have conducted analyses to determine how changes in the total number of investigators could affect the backlog over time, accounting for current and projected investigator capacity, prior time studies, historical data, geographic location, and other factors. Specifically, NBIB officials assessed four scenarios, from the status quo— assuming no additional contractor or federal investigator hires—to an aggressive contractor staffing plan beyond January 2018, but in July 2017 they determined that the aggressive plan was not feasible. The two scenarios that NBIB identified as most feasible would not result in a “healthy” inventory level until fiscal year 2022 at the earliest. For example, under one scenario, each contractor would increase investigator capacity under current staffing projections through early 2018. Assuming that the contractors adhere to these projections, NBIB would have the capacity to address incoming cases and begin to reduce the backlog, but the backlog would not reach a “healthy” inventory level until sometime after fiscal year 2022. However, NBIB leadership has not determined whether the costs and benefits of any one scenario are preferable to the costs and benefits of the others. Standards for Internal Control in the Federal Government establishes that management should clearly define objectives to enable the identification of risks and define risk tolerances. In addition, our high-risk criteria for capacity call for agencies to ensure they have the capacity, in terms of people and resources, to address and resolve risks. We have also found in previous work that milestones can be used to show progress toward implementing efforts, or to make adjustments when necessary. Developing and using specific milestones to guide and gauge progress toward achieving an agency’s desired results informs management of the rate of progress toward achieving goals or whether adjustments need to be made in order to maintain progress within given timeframes. However, NBIB leadership has not established goals or milestones for reducing the size of the investigation backlog, or goals for increasing total investigator capacity—for both federal employees and contractor personnel. As a result, the value of NBIB’s backlog analysis is limited, because it is not part of a broader plan to address the backlog and achieve timeliness objectives. Further, the extent to which NBIB should adjust its investigator capacity in the future remains unclear, as the currently projected capacity levels are not tied to any established goals or milestones to address the backlog or achieve the timeliness objectives. In addition to increasing investigative capacity, NBIB personnel are attempting to decrease the backlog by making the background investigation process more effective and efficient. To do so, NBIB conducted a business process reengineering effort that was intended to identify challenges in the process and their root causes. This effort identified 57 challenges, which were divided into five main categories that affected multiple phases of the background investigation process. NBIB then developed five portfolios, with 21 initiatives, to address the identified challenges. For example, one of the categories of challenges was poor data quality at the start of the investigation, which was described as related to issues such as no auto-validation of information, no pre- population of forms, and variable quality of submissions. NBIB developed four initiatives related to automation and digitization to improve the quality of this information. NBIB officials said that this business process reengineering effort is working to reduce the investigative level of effort across the community. Specifically, NBIB officials cited efforts that have been implemented to reduce the number of personnel hours necessary to complete an investigation, such as centralizing interviews and using video-teleconferencing for overseas investigations (to decrease travel time), automated record checks, and focused writing (to make reports more succinct and less time-consuming to prepare). However, NBIB has not identified how the implementation of the business process reengineering effort will affect the backlog or the need for additional investigators in the future. Without a plan, including goals and milestones, for reducing the backlog, which includes a determination of the effect of the business process reengineering efforts on the backlog, NBIB will lack the information and a course of action needed to effectively manage the inventory of pending investigations it conducts on behalf of other executive branch agencies. Further, without establishing goals for increasing total investigator capacity—for both federal employees and contractor personnel—in accordance with the plan for reducing the backlog, NBIB may not be positioned to achieve the goals and milestones outlined in that plan. Ultimately, if NBIB is unable to reduce the backlog, executive branch agencies will continue to lack the cleared personnel needed to help execute their respective missions, which could decrease the agencies’ overall effectiveness and efficiency, and pose risks to national security. Our review of NBIB planning and workforce documents indicates that it has taken workforce planning steps. For example, the bureau developed a transition plan to help guide the transition from FIS to NBIB. This plan includes a request for a personnel study for its new Contracting and Business Solutions department to determine any needs or realignment of resources, skills, or qualification gaps; however, the transition plan does not mention a personnel study to address the needs of any other departments within NBIB. NBIB officials stated that the bureau conducted this study in early fiscal year 2017, and those results are being used to build the Contracting and Business Solutions department. NBIB officials said that NBIB plans to conduct a personnel study for its other departments once there is greater clarity and direction regarding the conduct of background investigations as a result of the plan developed by DOD to conduct its own investigations and any subsequent direction from Congress and the Administration. The officials stated that the personnel study was needed for the contracting department because this work had not been done in NBIB before and so they needed to establish a baseline for staffing it. As previously discussed, section 951 of the National Defense Authorization Act for Fiscal Year 2017 required, among other things, the Secretary of Defense to develop an implementation plan for the Defense Security Service to conduct background investigations for certain DOD personnel—presently conducted by OPM—after October 1, 2017. Additionally, in November 2017, as this report was in its final stages, Congress passed a bill for the National Defense Authorization Act for Fiscal Year 2018, which includes a provision that, among other things, would authorize DOD to conduct its own background investigations. It would also require DOD to begin carrying out the implementation plan developed in response to section 951 by October 1, 2020. The legislation would further require the Secretary of Defense, in consultation with the Director of OPM, to provide for a phased transition of the conduct of investigations from NBIB to the Defense Security Service. Moreover, this legislation would require the Secretary of Defense to conduct a comprehensive assessment of workforce requirements for both DOD and NBIB as part of planning for the transfer of certain functions from OPM to DOD. In addition, the NBIB transition team developed a talent acquisition strategy for the establishment of the bureau; however, this strategy was focused solely on filling nine key leadership positions (according to NBIB officials, four positions are senior executive service positions, and five are general schedule grade 14 and 15 positions). As of July 2017, NBIB officials said that six of these positions had been filled, and that another position was in the process of being staffed. The only mention of other positions in this strategy was a statement that once these key leadership positions have been filled, executives should build their respective departments consistent with mission needs and aligned with the NBIB strategic plan, and that NBIB use current FIS leadership for field operations, engagements and customer service, and integrity assurance. According to NBIB officials, NBIB has 3,260 positions authorized by OPM but had 495 vacancies as of July 1, 2017—approximately a 15 percent vacancy rate. NBIB officials said that most positions were not affected by the recent executive-branch hiring freeze, including investigators and investigative assistants, because they qualified for national security waivers; however, some positions, such as administrative support, were not covered by the waivers. The greatest total number of vacancies within NBIB is in its field operations department, which as of July 2017 had almost 400 vacancies, or a vacancy rate of about 17 percent. The Field Operations department provides contractor oversight, including program and project managers for fieldwork and CORs; it also includes federal investigator staff. NBIB officials stated that their greatest challenge in filling vacancies has been with their investigative workforce, and that as they fill their investigator positions, they will be able to better perform their mission of delivering completed background investigations in a timely manner due to having greater capacity. NBIB officials told us that they plan to hire another 200 federal investigators in fiscal year 2017 to help address the backlog of investigations; however, hiring 200 new federal investigator positions was not listed as a step on the transition plan for the Field Operations department, and these new investigator positions also are not included in the planned new hires listing of personnel hiring priorities. NBIB officials said that these new investigator positions were not included in the transition plan because the decision to hire for these positions had already been made and the hiring was being executed when the transition plan was developed. Furthermore, NBIB has developed detailed plans to hire new personnel. NBIB’s listing of personnel hiring priorities showed that NBIB initially planned to hire 155 new personnel. NBIB officials explained that in developing this initial hiring plan, organizational leaders assessed OPM legacy resources that would align with NBIB’s mission, roles and responsibilities, and identified gaps. These officials stated that at a leadership offsite held in December 2016, small groups identified existing and notional resources, prioritized resource gaps for identified programs, and briefed out their assessment of priorities. These officials said that the offsite participants then selected the top priorities for fiscal years 2017 and 2018, and that NBIB leadership subsequently developed individualized proposals outlining revisions and changes to personnel requirements and organization of each of the program areas. NBIB officials said that they subsequently refined these plans and reduced the number of planned new hires. The officials stated that in 2017, NBIB established a transitional hiring committee to further prioritize and select the final NBIB personnel structure, and that through a series of meetings in March, May, and June 2017, they refined their plans to reduce the number of planned new positions. As of July 2017, they said that NBIB planned to create and fill 49 new positions. According to NBIB officials, 13 of the new positions would involve an increase to the budget. Of those 49 new positions, they said that 21 had been filled as of July 2017. In addition, NBIB uses contractor support to fill some positions in its Field Operations, Federal Investigative Records Enterprise, and customer service departments, but NBIB officials did not provide documentation explaining the determinations for which tasks should be performed by contractors versus federal employees. NBIB officials stated that they followed a deliberative process requiring a thoughtful assessment of the personnel resource skills and competencies required to address the new NBIB objectives, but they could not provide any supporting documentation to that effect. A key principle of strategic workforce planning is determining the critical skills and competencies needed to achieve current and future programmatic results, such as identifying how the agency will obtain the workforce skills and competencies that are critical to achieving its strategic goals. In addition, OPM’s workforce planning best practices include forecasting the optimal headcount and competencies needed to meet the needs of the organization in the future, and a gap analysis to identify headcount surpluses and deficiencies for current and future demand levels. Further, OMB policy requires agencies to take actions to ensure they have sufficient internal capability to maintain control over functions that are core to the agency’s mission and operations. However, NBIB officials were unable to provide us with documentation that identified any of the gaps or explained the rationale for its determinations about the specific number and positions of additional staff needed. The documents they did provide appeared to be summaries of the revisions and changes decided upon, and included detailed information about the identified staffing requirements, such as information about the number of positions, position titles and types, grade levels, and hiring priority. While this information reflects detailed planning and thought, it does not illuminate whether the quantities and types of positions identified are the appropriate positions with the right critical skills and competencies needed to address any gaps in the bureau’s workforce. NBIB officials said that the hiring plans were originally determined at the leadership offsite, where the rationale for the specific number and positions of additional staff was discussed orally, and then further refined at a series of meetings beginning in March 2017. The officials told us that extensive review went into determining the rationale for the requests for new staff, and that these requests were the subject of robust and sometimes contentious debate, after which the requests were voted on by senior leadership. Although NBIB has taken some steps to develop and implement certain strategic workforce planning elements, it has not created a comprehensive, formal workforce plan that is focused on workforce needs to reduce the backlog. Such a plan should include the workforce skills and competencies that are critical to achieving NBIB’s strategic goals. As we previously reported, the most important consideration in identifying needed skills and competencies is that they are clearly linked to the agency’s mission and long-term goals developed jointly with key congressional and other stakeholders during the strategic planning process. If an agency identifies staff needs without linking the needs to strategic goals, or if the agency has not obtained agreement from key stakeholders on the goals, the needs assessment may be incomplete and premature. In addition, a strategic workforce plan could enable NBIB to (1) develop hiring, training, staff development, succession planning, performance management, use of flexibilities, and other human capital strategies and tools that could be implemented with the resources that can be reasonably expected to be available; and (2) eliminate gaps and improve the contribution of critical skills and competencies that they have identified between the future and current skills and competencies needed for mission success. NBIB officials explained that a strategic workforce plan is something they should create, but that as a new organization the bureau was focused on other priorities, such as hiring a director, selecting the headquarters location, addressing the backlog, and filling vacant positions. However, after being operational for almost a year, NBIB still lacks a comprehensive workforce plan. While it has taken several other steps intended to strengthen the background investigation process, without a formal strategic workforce plan, NBIB does not know whether the identified needs in its new hires, transition plan, and overall workforce vacancies will provide the appropriate mix of personnel. Specifically, it does not know whether it has the appropriate mix of federal employees and contractors, with the right critical skills and competencies, to address any staffing gaps and better enable the bureau to fulfill its mission. A comprehensive strategic workforce plan that focuses on the workforce and organizational elements needed and addresses capacity issues related to its vacancies would better position NBIB to address its investigation backlog. Additionally, a comprehensive strategic workforce plan would better position the bureau to execute its roles and responsibilities related to overseeing the background investigations for DOD and other executive branch agencies that rely on NBIB as their investigative service provider. The PAC has made progress in reforming the personnel security clearance process. However, 13 years after the passage of IRTPA, it is now at a crossroads. The backlog of background investigations totaled over 700,000 cases as of September 2017 and while the executive branch is taking actions to help address it, there are no indications that the government can readily do so. We have noted in prior work concerns about the quality of background investigations and have emphasized the need to build quality throughout the personnel security clearance process for nearly two decades. Even though it has made significant attempts, the executive branch has still not established government-wide performance measures for the quality of background investigations to help ensure that critical security-relevant information is identified and mitigated when granting a security clearance. Over the past 2 years, the executive branch has taken steps toward establishing such measures. However, ODNI, as the Security Executive Agent, and the PAC have not prioritized setting a milestone for their completion. Without a milestone for establishing government-wide performance measures for the quality of investigations, their completion may be further delayed, and executive branch agencies will not have a schedule against which they can track progress or to which they are accountable. Executive branch timeliness in completing initial secret and initial top secret clearances has declined over the past 5 years. While ODNI has taken some steps to correct this downward trend on an agency-by- agency basis, neither ODNI nor the PAC have led a government-wide approach to improve the timeliness of initial personnel security clearances. While ODNI requests that agencies submit corrective action plans when they are not meeting timeliness objectives, it has not developed a comprehensive, government-wide plan with goals and milestones. A government-wide plan would help position ODNI, as the Security Executive Agent, as well as the PAC, to better identify and address systemic issues across the executive branch that affect the ability of agencies to meet timeliness objectives. IRTPA also created greater transparency and oversight of the overall reform effort by mandating annual reports to the appropriate congressional committees on the progress made toward meeting the act’s requirements, including reporting timeliness data. However, since the IRTPA reporting requirement ended in 2011, executive branch reporting has been limited, which makes it difficult to thoroughly evaluate and precisely identify where and why delays exist within the process, as well as to direct corrections as necessary. Without transparent reporting on investigation and adjudication timeliness, for both initial investigations and periodic reinvestigations, Congress will not be able to effectively execute its oversight role and monitor individual executive branch agency progress in meeting timeliness objectives. The establishment of NBIB in 2016, to strengthen the background investigation process, involved a number of organizational changes and efforts to improve the process. While NBIB has taken steps to increase its investigative capacity, it faces challenges in developing a comprehensive plan, with goals and milestones, to address the investigation backlog. Without such a plan, NBIB lacks a necessary course of action to reduce the backlog to a manageable level. Relatedly, NBIB has not established goals for increasing total investigator capacity. Establishing such goals, in accordance with the plan for reducing the backlog, may better position NBIB to achieve the goals and milestones outlined in that plan. Ultimately, if NBIB is unable to reduce the investigation backlog, executive branch agencies will continue to lack the cleared personnel needed to help execute their respective missions, which poses potential risks to national security. Demonstrated leadership from ODNI, in the capacity as the Security Executive Agent, and the PAC, by assisting NBIB as it works to reduce the investigation backlog could better position NBIB to reach a manageable level of investigations. Additionally, NBIB faces operational challenges related to workforce planning. While the bureau has taken a number of workforce planning steps, such as identifying specific hiring needs, it has not developed a strategic workforce plan. As a result, it may not know whether it has planned for the appropriate mix of personnel, with the right critical skills and competencies, and it has experienced delays in addressing its hiring needs. A comprehensive strategic workforce plan that focuses on the workforce and organizational elements needed and addresses capacity issues related to its vacancies would better position NBIB to address its investigation backlog and strengthen the investigation process. Congress should consider reinstating the Intelligence Reform and Terrorism Prevention Act of 2004’s requirement for the executive branch to report annually to appropriate committees of Congress on the amount of time required by authorized investigative and adjudicative agencies to conduct investigations, adjudicate cases, and grant initial personnel security clearances. Congress should also consider adding to this reporting requirement the amount of time required to investigate and adjudicate periodic reinvestigations and any other information deemed relevant, such as the status of the investigation backlog and implementing government-wide measures for the quality of investigations or other reform efforts. (Matter for Consideration 1) We are making a total of six recommendations, including three to ODNI, in coordination with the PAC, and three to NBIB. Specifically, The Director of National Intelligence, in his capacity as Security Executive Agent, and in coordination with the other Security, Suitability, and Credentialing Performance Accountability Council Principals—the Deputy Director for Management of OMB in his capacity as Chair of the PAC, the Director of OPM, and the Under Secretary of Defense for Intelligence—should take the following three actions: establish a milestone for the completion of government-wide performance measures for the quality of investigations; (Recommendation 1) conduct an evidence-based review of the investigation and adjudication timeliness objectives for completing the fastest 90 percent of initial secret and initial top secret security clearances, and take action to adjust the objectives if appropriate; (Recommendation 2) and develop a government-wide plan, including goals and interim milestones, to meet those timeliness objectives for initial personnel security clearance investigations and adjudications. (Recommendation 3) The Director of NBIB, in coordination with the Deputy Director for Management of OMB, in the capacity as Chair of the PAC, and the Director of National Intelligence, in the capacity as Security Executive Agent, should take the following two actions: develop a plan, including goals and milestones, that includes a determination of the effect of the business process reengineering efforts for reducing the backlog to a “healthy” inventory of work, representing approximately 6 weeks of work; (Recommendation 4) and establish goals for increasing total investigator capacity—federal employees and contractor personnel—in accordance with the plan for reducing the backlog of investigations. (Recommendation 5) The Director of NBIB should build upon NBIB’s current workforce planning efforts by developing and implementing a comprehensive strategic workforce plan that focuses on what workforce and organizational needs and changes will enable the bureau to meet the current and future demand for its services. (Recommendation 6) We provided a draft of this report to OMB, ODNI, OPM, DOD, the Department of Justice, and the Department of Homeland Security for review and comment. OMB provided its comments via email, and the comments are summarized below. Written comments from ODNI and OPM are reprinted in their entirety in appendixes V and VI, respectively. OMB, ODNI, OPM, and the Department of Homeland Security provided additional technical comments, which we incorporated in the report as appropriate. DOD and the Department of Justice did not provide comments. OMB and OPM concurred with the recommendations directed to them. ODNI stated that it did not concur with the report’s conclusions and recommendations, but did not specifically state with which recommendations it did not concur. In comments e-mailed to us on November 9, 2017, the Acting Deputy Director for Management of OMB concurred with the report’s findings, conclusions, and recommendations. The comments also stated that the administration is committed to renewing public reporting of security clearance timeliness, once the government-wide reform initiatives are announced in early 2018, either as one of the administration’s cross- cutting priority goals or via another approach. While the PAC’s prior public reporting on the status of security clearance reform efforts was beneficial and helped to provide for transparency of the process, we believe that security clearance timeliness information should be reported—whether publicly or via reporting to Congress—broken out by individual executive branch agency and not only as an executive branch-wide average, as noted in our Matter for Congressional Consideration. As discussed in the report, such detailed reporting could help congressional decision-makers and OMB to thoroughly evaluate and precisely identify where and why delays exist within the process, as well as to direct corrections as necessary. In addition, OMB stated that the PAC is committed to ensuring that its Implementation Plan is continually updated to reflect the current status of reform efforts and that it incorporates any new initiatives arising from our review. In its written comments, ODNI stated that the report appears to draw negative inferences from the facts and that the conclusions do not present an accurate assessment of the current status of the personnel security clearance process. ODNI also stated that the conclusions do not include the significant progress ODNI has achieved in coordination with executive branch agencies. We disagree with these statements. The report discusses in detail the progress that the PAC—of which ODNI is a Principal member—has made to reform the personnel security clearance process, including the implementation of recommendations and milestones from the 120-day and 90-day reviews, and cross-agency priority goal updates. The report also discusses areas of progress highlighted by ODNI officials, such as the development of seven Security Executive Agent Directives, the issuance of Quality Assessment Standards for background investigations, and the implementation of the QART. In its comments, ODNI further stated that while it generally concurred with the factual observations in the report, it did not concur with our recommendations. While ODNI did not specifically state with which recommendations it disagreed, it discussed each of the three recommendations addressed to it. In addition, ODNI stated that it did not concur with our conclusions, and provided specific observations in the following three areas, which lead to the three recommendations. First, ODNI disagreed with our conclusion that it has not prioritized setting a milestone for the completion of government-wide performance measures for the quality of background investigations. ODNI also stated that the report ignores significant progress that ODNI has made in this area; specifically, the approval of Quality Assessment Standards for background investigations and the implementation of the QART. We disagree with ODNI’s position, as the report discusses in detail both the Quality Assessment Standards and the QART, and identifies these as the two steps toward the development of performance measures for the quality of background investigations. Additionally, ODNI stated that it has the ability to determine trends in background investigative quality from the data collected by the QART. However, as we note in the report, DOD background investigations—which represent the majority of the investigations conducted by NBIB—are not captured by the QART. We further noted that according to NBIB officials, they are not positioned to receive comprehensive feedback if their largest customer, DOD, is not utilizing the QART. Therefore, as we concluded in the report, it is unclear how ODNI will have sufficient data to develop government-wide measures for the quality of investigations since it will lack data for a significant portion of the executive branch’s background investigations. Regarding our recommendation that the Director of National Intelligence, in coordination with the other PAC Principals, establish a milestone for the completion of government-wide performance measures for the quality of investigations, ODNI stated that it is premature to do so and that it will set a milestone once the QART metrics discussed above have been fully analyzed. However, in its written comments, ODNI did not state when it anticipates the QART metrics will be fully analyzed. We recognize that fully analyzing the QART data may take time and that initial performance measures may be refined as ODNI collects and assesses data regarding the quality of background investigations. However, setting a milestone— that takes into consideration the amount of time needed to analyze QART data—will help to ensure that the analysis is completed, that initial performance measures are developed, and that agencies will have a greater understanding of what they are being measured against. We identify in the report that the executive branch previously set a milestone for the completion of government-wide performance measure for quality, which was adjusted over time and most recently set as October 2015. We further identify that the PAC has set milestones for the completion of nearly 50 other initiatives in its Implementation Plan, and that in the aftermath of the 2013 Washington Navy Yard shooting, the PAC (which includes ODNI) issued a 120-day review report that, among other things, recommended reporting on measures for quality. We continue to believe that setting a milestone could help to prevent further delays to their completion and provide the executive branch with a schedule against which it would be accountable. Second, ODNI did not agree with our conclusion that neither ODNI nor the PAC have led a government-wide approach to improve timeliness of initial personnel security clearances. In its written comments, ODNI discusses actions it has taken to improve timeliness since the passage of IRTPA, including resetting timeliness goals for certain clearances in 2012, in coordination with interagency stakeholders, issuing annual memorandums to agencies on their performance, and requesting that agencies develop agency-specific corrective action plans. We discuss all of these actions in the report and while we agree that they are positive actions, the executive branch would further benefit from a more coordinated approach. For example, even with the cited actions, the executive branch is experiencing significant challenges related to the timely processing of initial personnel security clearances. Specifically, as discussed in the report, in fiscal year 2016, only 2 percent of the agencies for which ODNI provided timeliness data met the 40-day IRTPA- established investigation objective for at least three of four quarters for the fastest 90 percent of initial secret cases; and only 12 percent met ODNI’s revised investigation objective for at least three of four quarters for the fastest 90 percent of initial top secret cases. In addition, as discussed in the report, timeliness challenges are not only an issue for agencies that use NBIB as their investigative service provider. Agencies with delegated authority to conduct their own investigations have also experienced timeliness challenges over the past 5 fiscal years. Further, the timeliness challenges cited by agencies to GAO include government- wide challenges, such as the increased investigative requirements—not just agency-specific challenges, such as staffing shortfalls. A government- wide plan would better position ODNI to identify and address any systemic government-wide issues. Regarding our recommendation that the Director of National Intelligence, in coordination with the other PAC Principals, conduct an evidence-based review of the timeliness objectives for completing initial secret and initial top secret security clearances, and take action to adjust the objectives if appropriate, ODNI stated that it is premature to revise the existing timeliness goals until NBIB’s backlog is resolved. In its written comments, ODNI states that while timeliness has exceeded the established standards, this is not necessarily an indication of a flaw in timeliness goals, but an indicator of the impact of the backlog and that as such, the current challenge in meeting timeliness should not serve as the sole basis for modifying existing goals. Our recommendation is to conduct an evidence-based review of the timeliness objectives, through which ODNI could determine whether there are any issues with the timeliness goals or, as ODNI suggests, whether the timeliness challenges are just a reflection of the backlog. At the conclusion of that review, ODNI can determine if it is appropriate to adjust the timeliness objectives, and take action if necessary. We do not suggest that ODNI should immediately revise the timeliness objectives without first determining if there is an evidence-based need to do so. ODNI further notes that other agencies that are not supported by NBIB are still achieving or very close to achieving current standards. However, as discussed in the report, even agencies with delegated authority to conduct their own investigations are experiencing challenges meeting established timeliness objectives. ODNI further stated in response to our recommendation that the Director of National Intelligence will continue to assess the impact of the implementation of the 2012 Federal Investigative Standards and modify the timeliness goals as appropriate. Given that ODNI has not comprehensively revisited the investigation or adjudication timeliness objectives for initial security clearances since 2012 despite the increased investigative requirements stemming from the implementation of the 2012 Federal Investigative Standards, we continue to believe that our recommendation to conduct an evidence-based review, using relevant data, is valid. Third, ODNI disagreed with our conclusion that demonstrated leadership from ODNI, in the capacity as the Security Executive Agent, and the PAC, by assisting NBIB as it works to reduce the investigation backlog could better position NBIB to reach a manageable level of investigations. ODNI stated that it has demonstrated leadership in this area and has worked closely as the Security Executive Agent with NBIB to reduce its investigation backlog and noted recent efforts by the Director of National Intelligence and the other PAC Principals to help reduce the backlog. We believe that these recent actions, which have taken place since the completion of our review, are positive steps that, along with our recommendations to NBIB, could help to reduce the backlog of background investigations. However, as discussed in the report, prior to these recent actions, ODNI had not demonstrated the leadership necessary to improve executive branch timeliness, as evidenced by the decrease in the number of agencies meeting timeliness objectives from fiscal years 2012 through 2016 and a backlog of over 700,000 investigations as of September 2017. Additionally, while the recent actions could help to reduce the backlog, sustained demonstrated leadership by the Director of National Intelligence and the other PAC Principals will be crucial to maintaining and increasing momentum, and ultimately critical to comprehensively addressing the current timeliness challenges and reducing the investigation backlog. Regarding our recommendation that the Director of National Intelligence develop a government-wide plan, including goals and interim milestones, to meet timeliness objectives for initial personnel security clearances, ODNI stated that it has already established timeliness goals for the security clearance process and that prior to the investigation backlog, which was created, in part, due to a loss of OPM investigator capacity, the executive branch met those goals. ODNI further stated that until NBIB reduces its backlog, departments and agencies that use NBIB cannot accurately predict budgetary requirements for the phases of the security clearance process under their control, which complicates the development of a government-wide plan at this time. However, as discussed in the report, the most feasible date by which NBIB could reduce the backlog of background investigations to a “healthy” inventory level is fiscal year 2022 at the earliest. Given the significant timeliness challenges that the executive branch is currently experiencing, agencies would benefit from developing a government-wide plan now, rather than waiting at least 5 years for the reduction of the backlog to do so. In addition, through the development of a government-wide plan, ODNI could help to identify additional actions to more quickly reduce the investigation backlog. Without such a plan, continued delays in processing clearances may leave agencies unable to fill critical positions that require a security clearance. Ultimately, developing a government- wide plan, including goals and interim milestones, will better ensure timely determinations of individuals’ eligibility for access to classified information. As such, we continue to believe that the recommendation is valid. In its written comments, OPM concurred with the three recommendations directed to NBIB, and described some actions it plans to take to address them. Separate from the recommendations, OPM also provided comments related to the discussion in the draft report regarding DOD’s development of NBIS and the security of OPM’s IT systems and data. Specifically, OPM expressed concerns about some of the statements by DOD officials, stating that they were unverified opinions. We agree that including the countering views of OPM officials could provide some helpful context. As a result, we have added language to the report to include OPM’s perspectives on the statements made by the DOD CIO officials. In addition, OPM stated that the prior GAO and OPM Inspector General audits referenced in the IT discussion were outdated audit assessments. We agree that some information in the draft report from the prior audits was based on reports from 2016 or earlier in 2017, and we understand that circumstances may have changed since those reports were issued. Specifically, the OPM Inspector General released a new audit report in October 2017, when this report was with the agency for comment, regarding the state of security of OPM IT systems. Accordingly, we replaced the discussion of the older OPM Inspector General reports in the draft report with a discussion of the OPM Inspector General’s October 2017 report. This latest OPM Inspector General report found, among other things, that OPM had made improvements in its security assessment and authorization program, and its previous “material weakness” related to authorizations has been upgraded to a “significant deficiency” for fiscal year 2017. Overall, the OPM Inspector General found that OPM’s cybersecurity maturity level was measured at a level 2, “Defined”, meaning that its policies, procedures and strategy were formalized and documented, but were not consistently implemented. We also added language to emphasize the date of the 2016 GAO reports, and added information about the status of the recommendations from those two reports, because none of the recommendations directed to OPM from the two 2016 GAO reports had been closed as implemented as of November 2017. OPM further stated that it has implemented critical enhancements to strengthen the security of OPM’s networks and has improved its security and assessment authorization process. In the draft report, we stated that OPM has strengthened the security of its networks, and we noted that— as stated in our 2017 report—OPM has made progress in improving its security to prevent, mitigate, and respond to data breaches involving sensitive personal records and background investigations information. However, as we noted our 2017 report, we also found that OPM did not effectively monitor actions taken to remediate identified weaknesses, and we continue to believe that discussion of the deficiencies we identified in our prior reports is appropriate in this report. In November 2017, after the conclusion of our audit work, Congress passed a bill for the National Defense Authorization Act for Fiscal Year 2018. Among other things, the bill includes a provision that would authorize DOD to conduct its own background investigations and require DOD to begin carrying out the implementation plan required by section 951 of the National Defense Authorization Act for Fiscal Year 2017 by October 1, 2020. It would also require the Secretary of Defense, in consultation with the Director of OPM, to provide for a phased transition. While this pending legislation may affect how some background investigations are conducted, we believe that our recommendations remain important points on which the executive branch should focus in order to help improve the security clearance process as these legislative changes are implemented. We are sending copies of this report to the appropriate congressional committees, the Director of National Intelligence, the Secretary of Defense, the Director of OMB, the Secretary of Homeland Security, the Director of OPM, the Director of NBIB, the Attorney General of the United States, the Director of the Federal Bureau of Intelligence, and the Director of the Bureau of Alcohol, Tobacco, Firearms, and Explosives. In addition, this report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your members of your staff have any questions regarding this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VII. Since May 2009, we have made 37 recommendations to appropriate executive branch agencies—the Office of Management and Budget (OMB), Office of Personnel Management (OPM), Office of the Director of National Intelligence (ODNI), Department of Defense (DOD), and Department of Homeland Security (DHS)—to improve the personnel security clearance process. As of November 2017, these agencies had implemented 12 of those recommendations; we closed 4 due to the inaction of the responsible agencies; and 21 remained open. Examples of implemented recommendations include DOD’s issuance of adjudication guidance related to incomplete investigative reports, ODNI and OPM’s jointly proposed chapter and part to the Code of Federal Regulations clarifying, among other things, the position sensitivity designation of national security positions, and DHS’s issuance of new standards for tracking information on security clearance revocations and appeals. The 21 recommendations that remain open as of November 2017 focused on different aspects of the personnel security clearance process. First, in February 2012, we reported on background investigation pricing and costs, and we found, among other things, that the Performance Accountability Council had not provided the executive branch with guidance on cost savings. Second, in September 2014, we reported on the security clearance revocation processes at DHS and DOD. We found that DHS and DOD data systems did not track complete revocation information; there was inconsistent implementation of the requirements in the governing executive orders by DHS, DOD, and some of their components; and there was limited oversight over the revocation process, among other things. Third, in April 2015, we reported on the status of government-wide security clearance reform efforts. We found, among other things, that limited progress had been achieved in implementing updated Federal Investigative Standards, and that the extent to which reciprocity is granted government-wide was unknown. Fourth, in November 2017, we found that ODNI had taken an initial step to implement continuous evaluation across the executive branch, but it had not yet determined key aspects of the program; and it lacked plans for implementing, monitoring, and measuring program performance. See table 2 for the 21 open recommendations from these four reports as of November 2017. Appendix II: Overview of Selected Personnel Security Clearance Provisions in the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA) The 2004 enactment of IRTPA initiated a reform effort that includes goals and requirements for improving the personnel security clearance process government-wide. Specifically, among other things, IRTPA required that: The President select a single entity—currently designated as the Office of the Director of National Intelligence—to be responsible for, among other things, the development and implementation of uniform and consistent policies and procedures to ensure the effective, efficient, and timely completion of security clearances. The President, in consultation with the head of the entity above, select a single agency—currently designated as the National Background Investigations Bureau within the Office of Personnel Management (OPM)—tasked with conducting, to the maximum extent practicable, security clearance investigations of federal employees and contractor personnel, among other things. It also required this entity to ensure that investigations are conducted in accordance with uniform standards and requirements. All security clearance background investigations and determinations completed by an authorized investigative agency or authorized adjudicative agency be accepted by all agencies (known as reciprocity), subject to certain exceptions. Not later than 12 months after the date of enactment of the act, the Director of OPM in cooperation with the heads of the entities selected above, establish and commence operating and maintaining an integrated, secure database of personnel security clearance information. The executive branch evaluate the use of available information technology and databases to expedite investigative and adjudicative processes and to verify standard information submitted as part of an application for a security clearance and, not later than 1 year after enactment, submit a report to the President and the appropriate committees of Congress on the results of that evaluation. The executive branch submit an annual report, through 2011, to the appropriate congressional committees on the progress made toward meeting IRTPA requirements, including timeliness data and a discussion of any impediments to the smooth and timely functioning of IRTPA requirements. IRTPA also established specific objectives for the timeliness of security clearance processing. Specifically, the act required the entity selected under section 3001(b) to develop a plan to reduce the length of the personnel security clearance process, in consultation with appropriate committees of Congress and each authorized adjudicative agency. To the extent practical, the plan was to require that each authorized adjudicative agency make a determination on at least 90 percent of all applications for a personnel security clearance within an average of 60 days after the date of receipt of the completed application by an authorized investigative agency—not longer than 40 days to complete the investigative phase and 20 days to complete the adjudicative phase. IRTPA required the plan to take effect December 17, 2009. Since 1999 we have reported on issues related to investigative quality at the Department of Defense and the Office of Personnel Management and have issued recommendations to help ensure the personnel security clearance reform effort results in the development of metrics to track quality. Figure 6 provides an overview of our work in this area and executive branch efforts to establish government-wide performance measures for investigation quality. In November 2017, we reported on the timeliness of the executive branch’s periodic reinvestigations for fiscal years 2012 through 2016, among other things. Our analysis of timeliness data for select executive branch agencies showed that the percent of agencies meeting timeliness goals decreased from fiscal year 2012 through 2016. The timeliness goals for periodic reinvestigations are outlined in a 2008 Joint Security and Suitability Reform Team report to the President entitled Security and Suitability Process Reform. Specifically, the report includes Office of Management and Budget-issued interim government-wide processing goals for security clearances for calendar year 2008. The calendar year 2008 government-wide goal for the fastest 90 percent of periodic reinvestigations is the same as the goal currently in place: 15 days to initiate a case, 150 days to conduct the investigation, and 30 days to adjudicate—totaling 195 days to complete the end-to-end processing of the periodic reinvestigation. Table 3 shows the percent of executive branch agencies meeting the timeliness goals for investigating, adjudicating, and completing the fastest 90 percent of periodic reinvestigations for at least three of four quarters from fiscal years 2012 through 2016. Specific details of the timeliness of initial secret and initial top secret clearances for select individual executive branch agencies were omitted because the information is sensitive. In addition to the contact named above, Kimberly Seay (Assistant Director), Nathan Tranquilli (Assistant Director), Renee S. Brown, Chris Businsky, Molly Callaghan, Jenny Chanley, Katheryn Hubbell, Saida Hussain, Jeffrey L. Knott, James Krustapentus, Caryn E. Kuebler, Michael Shaughnessy, Rachel Stoiko, Paul Sturm, John Van Schaik, Cheryl Weissman, and Jina Yu made significant contributions to this report. Personnel Security Clearances: Additional Actions Needed to Address Quality, Timeliness, and Investigation Backlog. GAO-18-26SU. Washington, D.C.: December 7, 2017 (FOUO). Personnel Security Clearances: Additional Planning Needed to Fully Implement and Oversee Continuous Evaluation of Clearance Holders. GAO-18-159SU. Washington, D.C.: November 21, 2017 (FOUO). Personnel Security Clearances: Plans Needed to Fully Implement and Oversee Continuous Evaluation of Clearance Holders. GAO-18-117. Washington, D.C.: November 21, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Personnel Security Clearances: Funding Estimates and Government- Wide Metrics Are Needed to Implement Long-Standing Reform Efforts. GAO-15-179SU. Washington, D.C.: April 23, 2015. Personnel Security Clearances: Additional Guidance and Oversight Needed at DHS and DOD to Ensure Consistent Application of Revocation Process. GAO-14-640. Washington, D. C.: September 8, 2014. Personnel Security Clearances: Actions Needed to Ensure Quality of Background Investigations and Resulting Decisions. GAO-14-138T. Washington, D.C.: February 11, 2014. Personnel Security Clearances: Actions Needed to Help Ensure Correct Designations of National Security Positions. GAO-14-139T. Washington, D.C.: November 20, 2013. Personnel Security Clearances: Opportunities Exist to Improve Quality Throughout the Process. GAO-14-186T. Washington, D.C.: November 13, 2013. Personnel Security Clearances: Full Development and Implementation of Metrics Needed to Measure Quality of Process. GAO-14-157T. Washington, D.C.: October 31, 2013. Personnel Security Clearances: Further Actions Needed to Improve the Process and Realize Efficiencies. GAO-13-728T. Washington, D.C.: June 20, 2013. Managing for Results: Agencies Should More Fully Develop Priority Goals under the GPRA Modernization Act. GAO-13-174. Washington, D.C.: April 19, 2013. Security Clearances: Agencies Need Clearly Defined Policy for Determining Civilian Position Requirements. GAO-12-800. Washington, D.C.: July 12, 2012. Personnel Security Clearances: Continuing Leadership and Attention Can Enhance Momentum Gained from Reform Effort. GAO-12-815T. Washington, D.C.: June 21, 2012. 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. Washington, D.C.: February 28, 2012. Background Investigations: Office of Personnel Management Needs to Improve Transparency of Its Pricing and Seek Cost Savings. GAO-12-197. Washington, D.C.: February 28, 2012. GAO’s 2011 High-Risk Series: An Update. GAO-11-394T. Washington, D.C.: February 17, 2011. High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 16, 2011. Personnel Security Clearances: Overall Progress Has Been Made to Reform the Governmentwide Security Clearance Process. GAO-11-232T. Washington, D.C.: December 1, 2010. Personnel Security Clearances: Progress Has Been Made to Improve Timeliness but Continued Oversight Is Needed to Sustain Momentum. GAO-11-65. Washington, D.C.: November 19, 2010. DOD Personnel Clearances: Preliminary Observations on DOD’s Progress on Addressing Timeliness and Quality Issues. GAO-11-185T. Washington, D.C.: November 16, 2010. Personnel Security Clearances: An Outcome-Focused Strategy and Comprehensive Reporting of Timeliness and Quality Would Provide Greater Visibility over the Clearance Process. GAO-10-117T. Washington, D.C.: October 1, 2009. Personnel Security Clearances: Progress Has Been Made to Reduce Delays but Further Actions Are Needed to Enhance Quality and Sustain Reform Efforts. GAO-09-684T. Washington, D.C.: September 15, 2009. Personnel Security Clearances: An Outcome-Focused Strategy Is Needed to Guide Implementation of the Reformed Clearance Process. GAO-09-488. Washington, D.C.: May 19, 2009. DOD Personnel Clearances: Comprehensive Timeliness Reporting, Complete Clearance Documentation, and Quality Measures Are Needed to Further Improve the Clearance Process. GAO-09-400. Washington, D.C.: May 19, 2009. High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 2009. Personnel Security Clearances: Preliminary Observations on Joint Reform Efforts to Improve the Governmentwide Clearance Eligibility Process. GAO-08-1050T. Washington, D.C.: July 30, 2008. Personnel Clearances: Key Factors for Reforming the Security Clearance Process. GAO-08-776T. Washington, D.C.: May 22, 2008. Employee Security: Implementation of Identification Cards and DOD’s Personnel Security Clearance Program Need Improvement. GAO-08-551T. Washington, D.C.: April 9, 2008. Personnel Clearances: Key Factors to Consider in Efforts to Reform Security Clearance Processes. GAO-08-352T. Washington, D.C.: February 27, 2008. DOD Personnel Clearances: DOD Faces Multiple Challenges in Its Efforts to Improve Clearance Processes for Industry Personnel. GAO-08-470T. Washington, D.C.: February 13, 2008. DOD Personnel Clearances: Improved Annual Reporting Would Enable More Informed Congressional Oversight. GAO-08-350. Washington, D.C.: February 13, 2008. DOD Personnel Clearances: Delays and Inadequate Documentation Found for Industry Personnel. GAO-07-842T. Washington, D.C.: May 17, 2007. High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 2007. DOD Personnel Clearances: Additional OMB Actions Are Needed to Improve the Security Clearance Process. GAO-06-1070. Washington, D.C.: September 28, 2006. DOD Personnel Clearances: New Concerns Slow Processing of Clearances for Industry Personnel. GAO-06-748T. Washington, D.C.: May 17, 2006. DOD Personnel Clearances: Some Progress Has Been Made but Hurdles Remain to Overcome the Challenges That Led to GAO’s High-Risk Designation. GAO-05-842T. Washington, D.C.: June 28, 2005. High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 2005.", "summary": "A high-quality personnel security clearance process is necessary to minimize the risks of unauthorized disclosures of classified information and to help ensure that security-relevant information is identified and assessed. The passage of IRTPA initiated an effort to reform the security clearance process government-wide. This report assesses the extent to which (1) executive branch agencies made progress reforming the security clearance process; (2) executive branch agencies completed timely initial clearances from fiscal years 2012-2016, and reported on timeliness; and (3) NBIB has taken steps to improve the background investigation process and address the backlog. GAO reviewed documentation; analyzed timeliness data; and interviewed officials from the four PAC Principals and NBIB. This is a public version of a sensitive report that GAO issued in December 2017. Information that the DNI and OPM deemed sensitive has been omitted. Executive branch agencies have made progress reforming the security clearance process, but long-standing key initiatives remain incomplete. Progress includes the issuance of common federal adjudicative guidelines and updated strategic documents to help sustain the reform effort. However, agencies face challenges in implementing certain aspects of the 2012 Federal Investigative Standards—criteria for conducting background investigations—including establishing a continuous evaluation program, and the issuance of a reciprocity policy to guide agencies in honoring previously granted clearances by other agencies remains incomplete. Executive branch agencies have taken recent steps to prioritize over 50 reform initiatives to help focus agency efforts and facilitate their completion. In addition, while agencies have taken steps to establish government-wide performance measures for the quality of investigations, neither the Director of National Intelligence (DNI) nor the Security, Suitability, and Credentialing Performance Accountability Council (PAC) have set a milestone for their completion. Without establishing such a milestone, completion may be further delayed and agencies will not have a schedule against which they can track progress or to which they are accountable. The number of executive branch agencies meeting established timeliness objectives for initial security clearances decreased from fiscal years 2012 through 2016, and reporting has been limited. For example, 59 percent of the executive branch agencies reviewed by GAO reported meeting investigation and adjudication timeliness objectives for initial top secret clearances in fiscal year 2012, compared with 10 percent in fiscal year 2016. The Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA) required the executive branch to submit an annual report, through 2011, to appropriate congressional committees on, among other things, the time required to conduct investigations, adjudicate cases, and grant clearances. Since the requirement ended, reporting has been limited to a portion of the intelligence community. Without comprehensive reporting, Congress will not be able to monitor agencies' progress in meeting timeliness objectives, identify corrections, or effectively execute its oversight role. The National Background Investigations Bureau (NBIB), within the Office of Personnel Management (OPM), has taken steps to improve the background investigation process, but it faces operational challenges in addressing the investigation backlog and increasing investigator capacity. While NBIB has taken positive steps to improve its oversight of background investigation contracts, it faces operational challenges in reducing the investigation backlog—which grew from 190,000 cases in August 2014 to more than 709,000 in September 2017. To increase capacity NBIB has hired additional federal investigators and increased the number of its investigative fieldwork contracts, but it has not developed a plan for reducing the backlog or established goals for increasing total investigator capacity. Without such a plan and goals, the backlog may persist and executive branch agencies will continue to lack the cleared personnel needed to help execute their respective missions. The bill for the National Defense Authorization Act for Fiscal Year 2018, passed by Congress in November 2017, would authorize DOD to conduct its own background investigations. Congress should consider reinstating the IRTPA requirement for clearance timeliness reporting. GAO is also making six recommendations, including that the DNI and other PAC Principals set a milestone for establishing measures for investigation quality, and that NBIB develop a plan to reduce the backlog and establish goals for increasing total investigator capacity. NBIB concurred with the recommendations made to it. The DNI did not concur with GAO's conclusions and recommendations. GAO continues to believe they are valid, as discussed in the report.", "document_type": "gao"}
{"report": "Imported goods flow into the U.S. market through a process that CBP facilitates and enforces, in collaboration with other federal agencies and with companies, including customs brokers, engaged in international trade. Imported goods enter the United States at more than 300 ports by air, land, or sea. The processing of imported goods includes three stages: pre-arrival, arrival/cargo release, and post-release. Pre-arrival. Before goods leave their country of origin, importers and shipping companies file paperwork and provide required advance electronic information for CBP to review. Arrival/cargo release. Importers or brokers file entry documents when goods reach a U.S. port of entry. At the ports, CBP and other agencies with regulatory responsibilities review documents and may examine the goods for import security and trade enforcement purposes. Some goods selected for examination may be deemed nonadmissible because of trade law or other violations. Admissible goods are released from the port and enter into U.S. commerce. Post-release. After goods are released from a port, importers or brokers file additional entry summary documents, which CBP reviews to ensure compliance with trade laws. CBP verifies importers’ cargo classifications and calculation of customs duties, taxes, and fees owed, taking action when needed. CBP and other agencies may determine that entered goods are noncompliant, thus triggering post- release enforcement action. Figure1 summarizes agency roles at these three stages of import processing. CBP initiated planning and preliminary development of ACE in 1994, following the enactment of the North American Free Trade Agreement Implementation Act. Title VI of the act required the creation of a national customs automation program that would allow electronic processing of commercial imports. According to CBP, its existing electronic system for processing imports—the Automated Commercial System (ACS), which became operational in 1984—used antiquated hardware and software and, because of limited processing capability, was increasingly difficult and expensive to operate. In addition, despite ACS’s availability, CBP continued to rely heavily on paper documents. The following year, a multi-agency task force launched an effort to develop the International Trade Data System—a government-wide system for reporting data used to clear imports and exports—and efforts to develop ITDS and ACE were subsequently integrated. The 2006 SAFE Port Act mandated the creation of ITDS to provide a “single portal” trade data system, to be implemented no later than the date when ACE is fully implemented. CBP initially planned to deploy ACE incrementally from 1998 through 2005. According to CBP officials, after substantial difficulties, CBP awarded a contract to begin implementing ACE in 2001 and began deploying ACE capabilities in 2003. However, continued slow progress led DHS to halt all new ACE development in 2010. A CBP acquisition decision memorandum issued at that time stated that the scope and complexity of ACE projects had been consistently underestimated during the period leading up to this decision. DHS authorized CBP to renew work on ACE in 2013, after CBP had completed a revision of ACE’s schedule, cost, and performance goals. This “rebaselining” of ACE included adopting the agile approach to system development, which involves segmenting development and deployment into small consecutive stages, with frequent opportunities to test new capabilities and confirm that they meet requirements. CBP’s new plan called for completing core ACE capabilities to allow CBP and partner agencies to employ the system in all phases of import and export processing by November 2016, 11 years later than initially planned. A February 2014 Executive Order, as well as provisions in TFTEA, subsequently reinforced this commitment to complete the system before the end of 2016. In rebaselining ACE, CBP consulted with partner agencies and trade community representatives to identify the core trade processing capabilities needed for the system to achieve full operational capacity, according to CBP officials. CBP officials stated that these capabilities are laid out in an internal 2013 CBP document describing, in general terms, key activities, processes, and functions that must be performed to automate import and export processing and improve targeting and security. We use “core ACE capabilities” to refer to activities, processes, and functions that CBP has defined as core. After revising its schedule, cost, and performance goals for ACE in 2013, CBP developed and deployed most of the capabilities that it defined as core ACE. On February 27, 2018, CBP announced that it had deployed the last of the major scheduled core trade processing capabilities. However, CBP delayed completion of these capabilities several times and has deferred deployment of collections—a capability for collecting import duties, taxes, and fees—while it considers alternative approaches to make this capability operational. Using the agile approach, CBP began deploying new ACE capabilities in November 2013, introducing elements iteratively every few months. For example, the November 2013 deployment included functions related to the pre-arrival and arrival/cargo release phases of import processing, initial steps to support two agencies in pilot testing ACE participation, and a number of efforts to resolve technical problems. By mid-2016, CBP had deployed all core pre-arrival and arrival/cargo release capabilities, but several post-release capabilities remained to be deployed. In June 2016, CBP officials reported that the program would not complete several key events by November 2016 as planned and declared a cost and schedule breach; in November 2016, CBP rebaselined ACE again. CBP subsequently reported that it expected to finish deploying post-release core ACE capabilities by January 2017, but the agency was unable to complete this deployment as planned. In April 2017, CBP officials reported that the program was again in breach, and CBP subsequently moved the target date for completing deployment of remaining core capabilities to July 2017. Reconciliation, Liquidation, and Drawback During reconciliation, preliminary data on import transactions provided to CBP at the time of entry (such as the dollar value of imported goods) may be updated. During liquidation, import transactions are finalized and duty, taxes, and fees due to CBP are determined. During drawback, exporters may be able to claim and recover certain duties, taxes, or fees upon the exportation or destruction of imported merchandise under CBP supervision. February 2018. The February 2018 deployment completed most core capabilities for post-release, including reconciliation, liquidation, and drawback—functions related to the final determination and payment of duties to CBP (see sidebar). CBP initially intended to implement collections in ACE along with other post-release core capabilities. However, CBP officials told us that after a series of unsuccessful attempts to move collections from ACS to ACE, the agency decided in July 2017 to decouple collections from the other remaining post-release capabilities. Agency officials explained that this would allow deployment of other post-release capabilities by the end of February 2018. CBP officials observed that technical challenges involved in moving the current collections function—which is needed to complete post-release functions such as liquidation—from ACS into ACE primarily accounted for CBP’s inability to finish deploying core ACE capabilities in 2017. CBP officials stated that the agency will continue to link the newly deployed post-release capabilities to collections in ACS while deciding how to proceed. According to CBP officials, the agency expects to select one of three options for collections by the end of March 2018: (1) add a collections capability to ACE, (2) retain collections in ACS, or (3) develop a separate collections system. CBP officials stated that the agency would revise its estimate of the overall cost of completing and maintaining ACE through the system’s expected life cycle after reaching this decision. The timeline in figure 2 summarizes CBP’s efforts to develop and deploy core ACE capabilities since 2013. All partner agencies that CBP identified as bearing responsibility for clearing or licensing goods for import or export have been granted some access to ACE data. However, as our case studies of five partner agencies illustrate, the extent to which these agencies use the system varies, and agencies are continuing efforts to enhance their use of ACE. Each of the 22 partner agencies with responsibility for clearing or licensing cargo has signed a memorandum of understanding with CBP that allows access to ACE and details the information the agency will receive through the system, according to CBP officials. Table 1 lists the 22 partner agencies CBP identified as having responsibility for clearing or licensing cargo and as having signed a memorandum of understanding with CBP According to CBP, each memorandum of understanding specifies data that the partner agency may access in accordance with its responsibilities and as allowed by statute. Agencies may obtain these data through ACE in the following ways: Agencies may specify data elements to be included in the ACE partner government agency message set—that is, the consolidated set of data that importers and exporters submit electronically. In many cases, the message set includes data elements formerly collected through paper forms, according to CBP officials. Agencies may require submission of supporting documents (e.g., cargo manifests) as image files through the ACE Document Image System. Agencies may access these data directly through ACE or may establish web linkages between ACE and their own data processing systems that will allow their systems to receive automatic transmissions of ACE data. CBP documents show that among the 22 agencies CBP identified as having responsibility for clearing or licensing cargo, 16 have established web linkages between ACE and their own data 14 obtain agency-specific data through the ACE message set, and 17 receive document image files from importers through ACE. In addition, 15 of the 22 agencies have completed, or are conducting, pilots to initiate or expand their participation in ACE. While all of the 22 agencies that CBP identified as having responsibility for clearing or licensing cargo have access to ACE data, our case studies of 5 agencies found considerable variation in the extent to which they use ACE for import processing. As table 2 shows, 4 of these agencies (FDA, NHTSA, CPSC, and APHIS) have established linkages between ACE and their own import data analysis systems, apply ACE data in those systems, and have completed pilots to begin or expand their use of ACE. Agency staff also may access ACE directly to obtain additional information that is not available in their agencies’ systems. Nonetheless, we found significant differences in the agencies’ use of ACE to obtain agency- specific data from importers: While FDA and NHTSA have largely transitioned to using ACE for this purpose, CPSC and APHIS use it to a more limited extent, and FWS continues to obtain data on imported goods largely without using ACE. All five agencies reported ongoing efforts to resolve difficulties related to using ACE and make greater use of the system. According to CBP documents, several of these 27 other agencies have not concluded an ACE memorandum of understanding with CBP and do not appear to be accessing ACE—in some cases because ACE does not generate information that serves an agency need, according to CBP and Treasury Department officials. Food and Drug Administration (FDA) FDA applies health and safety standards to a variety of imported products, including food, drugs, cosmetics, medical devices, biologics, tobacco, and radiation-emitting electronic products. To carry out these functions, FDA maintains a nationwide network of port-based staff with authority to review and, if necessary, refuse entry to goods that do not comply with pertinent laws and regulations that it enforces. FDA maintains two internal information technology systems to assist these efforts: the Operational and Administrative System for Import Support, for admissibility review of imports, and the Predictive Risk Evaluation for Dynamic Import Targeting system, a risk-based screening tool that performs an initial electronic screening of import entries containing FDA regulated articles to target those items with potentially higher public health risk for a manual admissibility review. FDA has integrated its internal systems with ACE and uses ACE data to review imports under its jurisdiction, targeting FDA-regulated imports that pose higher public health risks for manual review to determine the imports’ admissibility, according to FDA officials. FDA has worked with CBP to establish bilateral transmission of import entry data between CBP and FDA since 1997, when the two agencies linked FDA’s earlier import operations system with CBP’s ACS, according to FDA. Consequently, FDA officials described the transition to ACE as an upgrade, substantially expanding the information available to the agency, rather than a new approach to processing imports. FDA officials stated that they coordinated with the trade community and CBP to complete the transition to using ACE. For example, the officials said that they consulted with the trade community to develop FDA’s ACE message set, with the goal of improving the clearance process. According to FDA officials, the data that the agency required through the message set included more information than it had previously required from importers through ACS. FDA officials explained that their intent in adding data elements was to facilitate the automated admissibility review of low- risk FDA-regulated articles and thus focus agency resources on articles associated with a higher public health risk. Additionally, FDA worked with the trade community to develop recommendations for technical enhancements to ACE. Finally, FDA tested the new systems and the viability of the message set in a pilot that it successfully concluded in 2016. According to agency officials, in November 2016, FDA issued a final rule requiring that the trade community, when electronically submitting an entry in ACE, provide certain information on all incoming cargo that is subject to FDA regulation. In most cases, FDA finds this information sufficient to determine admissibility. However, in about 3 percent of cases, FDA requests additional information directly from importers, using the agency’s Import Trade Auxiliary Communications System. FDA officials stated that the agency is pursuing improvements in its ability to communicate with importers via ACE. National Highway Safety Transportation Administration (NHTSA) NHTSA works to ensure that imported motor vehicles and equipment (e.g., tires) meet U.S. safety standards. According to agency officials, because NHTSA does not have independent authority to hold incoming cargo and does not have any staff at U.S. ports, it relies on U.S. Customs and Border Protection officials to hold and inspect cargo and to take enforcement action if indicated (e.g., seizing goods or denying entry) in consultation with NHTSA. To fulfill its tasks, NHTSA uses its Motor Vehicle Importation Information database to assist in admissibility and targeting decisions. NHTSA is using ACE data to review and clear imported motor vehicles and equipment for entry into the U.S. market and works with CBP to assess the compliance of certain products offered for importation. NHTSA established an electronic link between its internal system and CBP’s ACS in 1992. At that time, NHTSA and CBP arranged for importers to submit NHTSA’s required paper form electronically through ACS. In 2015, NHTSA began transitioning to ACE by pilot-testing submission of data for a large ACE message set. According to NHTSA officials, the testing process revealed significant technical problems. Prior to the pilot testing, the trade community expressed concern about the number of data elements that NHTSA asked CBP to collect from the trade community. The Office of Management and Budget determined that certain proposed requirements were burdensome for the trade community and asked NHTSA to eliminate some of these requirements. Subsequently, in March 2016, NHTSA completed its transition to ACE with fewer data requirements. In addition to using ACE data, NHTSA continues to obtain information directly from importers, when necessary, through its Motor Vehicle Importation Information system. For example, according to NHTSA officials, the agency requests information through its system when it identifies reporting errors in ACE or when additional information is needed for certain temporary imports, such as vehicles or equipment imported for research or demonstration purposes. NHTSA officials stated that they are working with CBP to overcome a major challenge to efficient collaboration: NHTSA uses vehicle identification numbers to track imported vehicles, while ACE does not. According to NHTSA officials, NHTSA has developed a database to provide public access to manufacturer identification and vehicle identification number-deciphering information submitted by manufacturers. According to NHTSA, CBP port staff have begun accessing the database but it has not yet been linked to ACE. Consumer Product Safety Commission (CPSC) CPSC protects the public from unreasonable risk of injury or death associated with consumer products, including over two-thirds of all categories of imported goods, such as toys, children’s sleepwear, and household electronics. CPSC expanded examination of. imported goods in 2008 following passage of the Consumer Product Safety Improvement Act of 2008, which required the agency to develop a risk-assessment methodology for certain imports. CPSC maintains a limited presence at U.S. ports and has independent authority to hold incoming cargo for inspection. The agency employs its Risk Assessment Methodology targeting system to assist in its import oversight responsibilities by generating potential targets for inspection. CPSC uses only ACE data collected under CBP authority to support its oversight of consumer product imports and is considering expanding the information it receives from ACE. CPSC’s internal Risk Assessment Methodology targeting system focuses on 300 high-risk categories of imports listed by CPSC, using U.S. Harmonized Tariff Schedule codes, and currently receives the standard data that CBP obtains via ACE on all imported goods under the agency’s jurisdiction, according to CPSC officials. After launching an initial pilot version of its system in 2011, CPSC initiated discussion with the trade community in 2014 about expanding its electronic data reporting requirements to add certain data elements to the ACE message set that would assist the agency in determining whether incoming products meet applicable standards. However, CPSC reduced the scope of the proposed expansion of reporting requirements after trade community representatives expressed concerns. In 2016, CPSC concluded an initial, limited pilot test of electronic filing of several additional data elements. According to CPSC officials, the agency plans to study the benefits of adding these elements before it initiates a second pilot and has not reached a final decision about requiring importers to submit any additional information through ACE. CPSC staff continue to rely primarily on the agency’s internal targeting system to target incoming shipments for review and possible inspection, with contributions from CPSC staff at CBP’s Commercial Targeting and Analysis Center and at ports, according to CPSC officials. These officials stated that the agency’s representative at the Commercial Targeting and Analysis Center employs CBP and CPSC resources to generate about 30 percent of the targeting orders disseminated to CPSC staff at ports. Agency staff at two New York ports told us that ACE can be a useful source of additional information for their local targeting efforts. Animal and Plant Health Inspection Service (APHIS) APHIS collaborates with Customs and Border Protection agricultural specialists to keep agricultural pests and diseases out of the United States. In pursuit of this mission, the agency maintains Plant Protection and Quarantine and Veterinary Services units at some ports of entry and operates its own data analysis system, the Agriculture Risk Management system. APHIS also implements a requirement to file a plant and plant produce import declaration on arrival in the United States, as mandated under the 2008 Lacey Act. Importers may file the declaration in ACE or in APHIS’s Lacey Act Web Governance System. APHIS’s use of ACE data remains limited while the agency works to expand linkages between its data processing systems and ACE. According to APHIS officials, the agency did not establish an electronic link to ACS, ACE’s precursor system, and instead used paper forms in its import review processes. In 2016, the agency pilot-tested electronic submission of APHIS-specific partner agency message set data through ACE and subsequently announced that data could be submitted through ACE for APHIS compliance review. However, trade community participation remains voluntary except for Lacey Act–covered imports. According to APHIS officials, companies that import APHIS-regulated products have been slow to invest the resources required to transition to reporting through ACE and, as a result, use paper forms to submit information about most shipments of such products. However, APHIS officials observed that reporting through ACE occurs for a small but growing share of all imports subject to APHIS regulation. APHIS has been collaborating with CBP to provide for the effective flow of information between ACE and APHIS’s systems, but these efforts remain incomplete. While staff of APHIS’s Veterinary Services unit may access ACE data directly to complete their import review processes, APHIS intends for its Plant Protection and Quarantine staff to access ACE data through the agency’s Agriculture Risk Management system, according to APHIS officials. However, these officials informed us that the functionality required for accessing ACE data through that system is still under development. They explained that Plant Protection and Quarantine staff will use ACE to receive and reply to inquiries from, and provide assistance to, CBP agricultural specialists regarding incoming cargo requiring inspection and that significant coordination is required to fully integrate the two agencies’ data processing systems. APHIS officials observed that a CBP requirement for partner agencies to complete extensive background checks of staff before they can receive access to ACE has presented another obstacle to greater use of the system by staff of both Plant Protection and Quarantine and Veterinary Services. In November 2017, APHIS officials informed us that more than 100 agency staff had completed these background checks and thus had access to ACE but that the current number of users remained insufficient to process many APHIS-regulated goods in ACE. Fish and Wildlife Service (FWS) FWS monitors wildlife trade and works to prevent the illegal importation or exportation of species (including parts and products thereof) that are regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora and U.S. wildlife laws and regulations, according to U.S. Customs and Border Protection (CBP). Virtually all wildlife imports and exports must be declared to FWS and cleared by FWS wildlife officers, according to CBP. To carry out its responsibilities, FWS maintains staff at 38 U.S. ports and generally requires that all internationally traded wildlife and wildlife products be routed through designated ports. FWS staff are able to place holds on, to inspect, and to deny entry or exit to incoming or outgoing cargo, according to agency officials. FWS staff obtain information about incoming or outgoing cargo from data filed by the trade community in the agency’s own data analysis and targeting system, the Law Enforcement Management Information System. FWS use of ACE data in its import review and regulation activities has been minimal, in part because of technical challenges. According to FWS officials, the agency attempted during the 1990s to integrate its activities with ACS. After concluding that ACS did not meet FWS needs, the agency discontinued these efforts in 2000 and developed its own Electronic Declarations system for the trade community to submit data to the agency’s data analysis and targeting system. Agency officials told us that FWS port staff may access ACE and that some find it a useful source of additional information on incoming cargo. However, FWS has not yet integrated ACE into FWS operations. FWS officials told us that lack of alignment between the Harmonized Tariff Schedule codes that CBP uses to organize its work and FWS’s regulatory responsibilities constitutes a significant challenge in integrating ACE into FWS operations. For example, the tariff schedule may indicate only that an import is leather footwear, while FWS operations may also require additional information about the leather’s source, such as the type of animal, its nation of origin, and its domestication status. According to FWS and CBP officials, FWS has so far been unable to overcome this difficulty. According to FWS officials, the agency pilot-tested participation in ACE during 2016 but suspended the test in January 2017 in light of trade community concerns about expanded reporting requirements, lack of clarity in the requirements, and uncertainty regarding FWS’s authority to collect data electronically. According to FWS officials, the agency subsequently began efforts to reach agreement with trade community representatives and CBP on an approach to data collection through ACE that will meet the needs of both FWS and the trade community. FWS officials stated in November 2017 that these discussions had produced an interim solution and were continuing and that FWS and CBP planned to resume pilot testing in March or April 2018. CBP and partner agency officials and trade community representatives told us that their use of ACE has reduced costs by increasing the efficiency of trade processing. CBP and partner agency officials also reported that the system has strengthened their ability to enforce trade laws and regulations. CBP has developed metrics for itself and the trade community that estimate savings associated with the increased efficiency of some processes in ACE. According to CBP documents and officials, the agency plans to expand its metrics for capturing ACE benefits—for example, to estimate the value of increased efficiencies for partner agencies and to measure any savings associated with the remaining core ACE capabilities after they are implemented. CBP, partner agencies, and trade community representatives who use ACE to conduct their work told us that the use of ACE had improved the efficiency of import processing and brought associated cost savings. Fewer paper records. According to CBP officials at the Port of New York, the use of ACE for electronic data submission has significantly reduced reliance on paper forms in processing imports. The officials noted that before ACE was implemented, their reception area was typically filled with couriers delivering large volumes of paper for manual processing. CBP officials told us that electronic data submission through ACE had allowed CBP and partner agencies to automate over 250 paper forms. In addition, one trade community representative we spoke with said that elimination of paper records had been the primary benefit realized through ACE implementation. CBP has estimated, on the basis of an informal poll survey of private companies, that eliminating document delivery to CBP offices would save $25 per courier trip. Faster processing. According to CBP and partner agency officials, ACE’s automated review of data submitted by importing companies speeds the agencies’ processing and clearing of eligible shipments for release. CBP officials at the Port of New York commented that although reviewing and clearing incoming cargo for release through ACS required approximately 24 hours, performing this process through ACE takes only a few minutes if data are complete and properly formatted and if the cargo does not require inspection. For example, CBP officials stated that the Environmental Protection Agency formerly took an average of about 4 days to clear cargo for release into the U.S. market but now takes only seconds to clear nonproblematic shipments. CBP officials further observed that the reduction in document processing and the elimination of manual data review for nonproblematic imports increases the time available for CBP officials at ports to engage in tasks such as examining cargo that may violate U.S. trade and customs laws. In addition, NHTSA officials stated that ACE had substantially speeded their review and clearance process. Further, FDA reported that since the agency’s cargo review and clearance process had been linked to ACE, the portion of incoming FDA-regulated cargo receiving an automated “may proceed” had increased from 26 to 62 percent and processing time for these entries averaged less than 2 minutes. According to trade community representatives and CBP officials, ACE has also dramatically reduced the time required to file bond applications, from several days to a few seconds. Reduced labor and storage costs. CBP officials and trade community representatives reported that efficiency improvements resulting from the use of ACE can lead to substantial labor- and storage-cost savings for the trade community. CBP officials observed that expedited processing can reduce storage and demurrage costs for importers. For example, CBP officials commented that companies in the Newark, N.J., area could be charged $250 to $300 per day to store a container awaiting clearance to enter the U.S. market. Fewer supply chain disruptions. CBP and trade community representatives reported that ACE had reduced the negative impacts that import processing delays can have on company supply chains. For example, a pharmaceutical company representative stated that ACE had reduced delays in processing incoming cargo that, before ACE was implemented, sometimes lasted for 10 days or longer, resulting in costly supply chain failures. According to this representative, a longer-than-expected delay of an imported material that is a vital ingredient in a time-sensitive clinical trial or a treatment could result in significant material losses. While ACE is not a targeting system, the data that ACE provides has improved CBP’s and partner agencies’ ability to identify and examine incoming cargo for inspection, according to CBP and partner agency officials. For example, ACE, in addition to other sources, provides data that CBP uses in its Automated Targeting System and that most of the partner agencies we examined use in their data analysis and targeting systems to flag relatively high-risk cargo for possible inspection by port officials. (See text box for examples of CBP’s and partner agencies’ targeting efforts.) Examples of CBP and Partner Agency Efforts to Target High-Risk Imports U.S. Customs and Border Protection (CBP) and its partner agencies perform targeting of imports at the national and local levels. For example: CBP. At the national level, CBP maintains the Automated Targeting System, which compares traveler, cargo, and conveyance information against law enforcement, intelligence, and other enforcement data, using risk-based targeting scenarios and assessments to identify relatively high-risk cargo. CBP also operates the Commercial Targeting and Analysis Center, which facilitates targeting and enforcement information sharing among partner agencies involved in clearing or licensing cargo. In addition, CBP maintains five National Targeting and Analysis Groups, each targeting higher-risk imports related to one of the CBP’s priority trade issues. For instance, the National Targeting and Analysis Group for Trade Agreements targets shipments for which the country of origin has been misrepresented to avoid import duties. CBP officials at ports of entry also conduct locally focused targeting efforts. Partner agencies. All five of the partner agencies we selected for our review—the Food and Drug Administration, the National Highway Traffic Safety Administration, the Consumer Product Safety Commission, the Animal and Plant Health Inspection Service, and the Fish and Wildlife Service—work with CBP in the Commercial Targeting and Analysis Center while also employing their own import data analysis and targeting systems. In addition, agencies with personnel at U.S. ports of entry may conduct locally focused targeting efforts. CBP officials indicated that ACE had improved their trade enforcement efforts. For example: CBP officials stated that ACE’s streamlining of import processing helps to better ensure compliance with trade laws and regulations. CBP port staff stated that reduction in the time required to process paper forms has allowed them to devote more time to higher value- added activities such as inspecting incoming cargo. In addition, CBP officials at the Commercial Targeting and Analysis Center said that it was easier to access and generate reports in ACE than in ACS. CBP officials observed that ACE’s collection of additional information facilitates trade enforcement. Officials in the agency’s National Targeting and Analysis Groups explained that ACE functions as a valuable system of record that can be employed to refine and focus targeting efforts, as the results of each examination undertaken are recorded in ACE for future reference. Similarly, CBP officers in the New York area said that ACE was a valuable source of additional information—for example, data on particular products or importing companies—that helped them in their local targeting efforts. In addition, partner agency officials at ports indicated that ACE data were indirectly or directly useful in their enforcement efforts. For example, FDA officials in the New York area told us that, while they do not access ACE directly, FDA’s targeting system, on which they primarily rely, does access ACE data. FDA headquarters officials noted that ACE provides the agency’s targeting system with more data elements than it received through ACS and that this has led to greater processing efficiency. A CPSC port official stated that he found ACE a very useful source of information that helped him to refine his local targeting efforts. CBP expects the use of ACE to also yield indirect, economy-wide benefits by improving the targeting of shipments that violate U.S. trade policy, according to a CBP official and a CBP analysis. For example, according to a CBP official we interviewed, more-thorough enforcement of U.S. anti- dumping and countervailing duty orders would reduce the entry of products that unfairly compete with U.S. producers. Similarly, a cost- benefit analysis that CBP conducted in 2002 cited reduced predatory or unfair trade practices as a potential benefit of ACE. In addition, the CBP official observed that the use of ACE for targeting shipments could help to prevent injuries to American consumers by reducing the number of unsafe foreign products that enter the U.S. market. CBP has developed metrics to estimate the value of efficiency gains associated with the use of some of the implemented ACE capabilities for itself and the trade community. CBP’s metrics capture reductions in the time required for CBP staff to complete certain import processes now included in ACE and translate these efficiency gains into dollar values. CBP performs similar calculations for the trade community, using survey data from companies on the savings they estimate are realized when import processes are transitioned into ACE. For fiscal year 2017, CBP estimated that efficiencies gained through the implemented core ACE capabilities for which it had developed metrics had a total value of nearly $28 million for itself and about $52 million for the trade community. These metrics estimate potential cost savings associated with efficiency gains resulting from the use of ACE, according to CBP officials; the estimates do not account for CBP’s costs for developing and maintaining ACE, which, according to CBP, amounted to about $118 million in fiscal year 2017. In addition, the estimates do not account for costs that the trade community has sustained in adapting to ACE. For example, one representative of a large company estimated that the total cost of developing appropriate software had exceeded $12 million. CBP’s metrics capture increased efficiency gains in a number of areas. For example, ACE includes a feature that allows members of the trade community to submit corrections to data on incoming shipments after the data have been summarized and presented to, and accepted by, CBP. Importers formerly requested such “post summary corrections” by submitting a paper form for CBP’s review. To capture the value of this procedural change for CBP, the agency surveys CBP officials to determine their time savings on each post summary correction and multiplies the average per-transaction time saved by the number of summaries submitted and the CBP officials’ average hourly compensation rate. To capture the value of the change for members of the trade community, CBP surveys importers, brokers, and shippers to determine their average savings for each transaction and multiplies the reported savings by the number of summaries submitted. CBP’s metrics also capture reductions in the time that CBP officers devote to completing primary processing for incoming cargo, the time that trucks must spend waiting at border crossings for clearance to enter the United States, and the time that CBP and members of the trade community devote to processing applications for customs bonds, among other things. CBP’s estimate of the value of efficiencies resulting from the use of ACE has grown over time. For example, for fiscal year 2014, CBP estimated the total value of these efficiencies for CBP and the trade community at about $33 million—about 40 percent of the total value of such efficiencies CBP reported for fiscal year 2017. This increase reflects CBP’s progress in deploying core capabilities and in developing and applying metrics to capture the capabilities’ value to CBP and the trade community. The increase in the estimated value also reflects growing use of ACE by partner agencies and members of the trade community. For example, the number of import entry summaries that partner agencies filed in ACE increased fourfold in the 3-year period from January 2014 through January 2017. According to CBP officials, CBP and partner agencies are unable to develop metrics to quantify trade enforcement benefits that may have resulted from their use of ACE, in part because of a lack of baseline information and the difficulty of isolating such impacts. For example, an increase in seizures may reflect increased efforts, increased efficiency in those efforts, or an increase in the volume of imports subject to seizure. Similarly, according to a CBP official, a lack of baseline information makes it difficult to assess any broader impacts of improved trade enforcement resulting from the use of ACE, such as prevention of injuries to American consumers through better targeting of harmful foreign products. CBP reported that it is working to expand its metrics for estimating cost savings associated with improved trade processing efficiencies and other benefits resulting from the use of ACE. CBP officials stated that they expect to have collected sufficient data in the near future to begin reporting on the estimated dollar value of efficiencies that partner agencies are realizing through ACE. While CBP measures efficiency improvements and associated savings resulting from CBP and the trade community’s use of ACE, CBP and most partner agencies currently do not collect or report information about efficiency improvements or associated savings that the partner agencies may have realized. CBP has prepared baseline information that will allow it to measure efficiency improvements and estimate any savings associated with several post-release core ACE capabilities, including reconciliation, liquidation, and drawback, after they are implemented. For example, on the basis of an internal study completed in late 2016, CBP has determined that agency officials take about 1.8 hours, on average, to process a drawback entry summary. Comparing this average time with the average time required after this post-release capability is implemented in ACE will allow CBP to calculate the average time saved per transaction. CBP plans to obtain comparable information from the trade community to allow similar calculations of efficiency improvements for importing companies. CBP officials stated that, while the agency does not currently measure any improvement in revenue collection that may have resulted from the implemented capabilities, CBP plans to undertake efforts to better understand the current revenue collection environment and to explore ways to collect baseline information on revenue collections. The officials said that CBP intends to identify revenue collection metrics that are quantifiable and reportable after it deploys the liquidation and reconciliation capabilities in ACE and completes deployment of collections. According to CBP documents, CBP’s Office of Trade has outlined a strategy for improving the agency’s ability to measure benefits resulting from the use of ACE. CBP documents indicate that this strategy will include efforts to measure, to the extent that data are available, the impact of any enhancements to the system after implementation of core capabilities is complete, including enhancements identified as critical components in improving import or export operations. CBP does not have a process in place to manage the continued development of ACE after February 2018, when it finished implementing most of the capabilities it identified as core. ACE users in CBP, partner agencies, and the trade community have identified a number of shortcomings in ACE and have suggested enhancements to address them. CBP has identified a small number of enhancements suggested by CBP and the trade community as near-term priorities and identified a number of others to consider for priority status. However, a substantial number of additional suggested enhancements, including submissions from partner agencies, remain unaddressed. Further, a process for prioritizing all suggested enhancements has not been established. Moreover, funding for the continued development of ACE after fiscal year 2018—including funding to address most of the suggested enhancements—has not been identified. CBP and its partner agencies are working to establish a management approach that includes processes for prioritizing and funding enhancements from all sources, but it is unclear when these discussions will conclude or the extent to which they will resolve outstanding issues. Federal guidance calls for establishing the organizational structure necessary to achieve objectives, including compatible means of operating across agency boundaries. ACE users in CBP, the trade community, and partner agencies have identified a variety of shortcomings in ACE and have suggested enhancements to address them. Examples of reported shortcomings include the following: CBP officials tasked with validating data in ACE to assess compliance with trade laws and with processing importers’ protests of duty assessments told us that performing those tasks in ACE is labor intensive and cumbersome. CBP and agency officials noted that ACE has not yet been updated to respond to a number of legal requirements, including several TFTEA provisions and agency regulations necessitating certain enhancements to ACE. Some partner agency officials cited capabilities that were included in ACS but, despite being needed by the agencies for their import review and enforcement responsibilities, had not been deployed in ACE. CBP agriculture specialists identified a number of shortcomings in ACE capabilities for processing imported agricultural goods. ACE contains a “workspace” specifically designed for agricultural goods, but it is incomplete. Trade community officials highlighted the need for a variety of improvements in the arrival/cargo-release and post-release phases of the import process, such as improving the ability of agency officials and the trade community to send messages in ACE and increasing the size of files that the trade community can submit. A 2016 CBP survey of ACE users, including trade community representatives and partner agency officials, found that while the majority of respondents were satisfied with the ease of using ACE, substantial minorities (29 percent of CBP respondents, 36 percent of partner agency respondents, and 31 percent of trade community respondents) were dissatisfied, citing concern with navigation and functional limitations. In response to such shortcomings, ACE users have submitted a large number of suggestions for enhancements to ACE. According to a CBP document, as of July 2017, 671 enhancements had been submitted since the early 2000s and many of these had been addressed; however, a third of those submitted (223) remained to be addressed. Of the unaddressed enhancements, nearly three-quarters were submitted by trade community representatives (see fig. 3). According to CBP officials, funding constraints, as well as the effort required to complete deployment of core ACE capabilities within established time frames, largely precluded efforts to address enhancements over the last year. CBP officials stated that, because ACE is not funded to support enhancements, funding for enhancements suggested by CBP or the trade community must be provided by a CBP unit and funding for enhancements suggested by a partner agency must be provided by that agency. While postponing action on these suggestions, as of November 2017 CBP had prioritized seven enhancements suggested by CBP staff or the trade community to be implemented in the near term, most of them in response to legal or technical requirements. CBP also had identified 22 additional enhancements suggested by CBP staff or the trade community for consideration as priorities. Prioritized enhancements. CBP’s seven prioritized ACE enhancements include two that had been scheduled for implementation in fiscal year 2017 and five that were scheduled for implementation as post-core activities begin. According to CBP officials, the agency prioritized three of the seven enhancements in response to provisions in TFTEA; one of these three, pertaining to drawback processes, was necessitated by changes in the act, and the other two were intended to support changes in CBP procedure mandated by the act, according to CBP officials (see table 3). The CBP officials said that a fourth enhancement was required to comply with a new electronic filing rule by the U.S. Court of International Trade and that a fifth was needed to correct technical obsolescence. As table 3 shows, the information that CBP officials provided identified in general terms the enforcement or other benefits that could be realized through addressing these prioritized enhancements. As the table shows, as of September 2017, CBP had identified funding for three of these seven priorities. Accepted but unprioritized enhancements. CBP officials also provided us with a list of 22 unprioritized enhancements suggested by CBP staff and the trade community that had been presented to CBP’s Product Management Committee for assessment and possible prioritization. Several of these enhancements are aimed at strengthening ACE provisions for processing agricultural imports. For example, one enhancement would improve the interface between ACE and various Department of Agriculture subsystems, reducing the need to manually enter data in multiple systems. Another enhancement would integrate the ACE agricultural workspace and CBP’s Automated Targeting System, strengthening targeting for agricultural imports. The list of unprioritized enhancements also includes initiatives to simplify several import processing steps for the trade community, allowing faster processing and associated cost savings. While CBP has a process for prioritizing enhancements suggested by its own staff or by members of the trade community (see text box), no process has been established for prioritizing enhancements suggested by partner agencies or for making priority decisions among all suggested enhancements, including those submitted by partner agencies. Enhancements suggested by partner agencies are provided to the Border Interagency Executive Council (BIEC) for prioritization. The BIEC, which CBP chairs, was created to improve coordination among ITDS partner agencies. The BIEC’s responsibilities extend to reviewing and prioritizing partner agency suggestions for enhancing ACE, according to CBP officials. However, CBP officials told us in September 2017 that the BIEC did not have explicit criteria for prioritizing partner agency suggestions and had not yet agreed on a cost-sharing strategy that would allow multiple agencies to share the cost of enhancements that might benefit those agencies. In the absence of such a process, CBP has been evaluating partner agency–suggested enhancements on a first-come, first-served basis, and partner agencies requesting such enhancements are required to pay for them on a fee-for-service basis, according to CBP officials. CBP’s Documented Process for Prioritizing ACE Enhancements Suggested by CBP Staff or the Trade Community CBP policy offices consider six criteria to decide whether to accept or reject enhancements suggested by CBP and the trade community: (1) completion of technical requirements to assess the required level of effort; (2) legal and regulatory provisions; (3) overlap with, or connection to, other enhancements in development or already deployed; (4) availability of funding and contract vehicles; (5) possible burden on trade, especially on existing coding or business processes; and (6) possible burden on CBP. CBP adds accepted enhancements to a list of “unprioritized initiatives.” CBP’s Product Management Committee considers four criteria in assessing unprioritized initiatives for placement on the agency’s “short list” of priorities: (1) the enhancement aligns with a CBP mission priority, (2) the enhancement meets a legislative or regulatory requirement, (3) the enhancement is associated with a security protocol or gap, and (4) funding for the enhancement is available. According to CBP officials, an affirmative response to one or more of these criteria yields a higher probability that the enhancement will be deemed a priority. To prepare enhancements for development and deployment, CBP estimates the level of effort required, gathers high-level requirements, and conducts impact assessments. Once planning is complete, the CBP policy office sponsoring the priority develops a business case for initiatives on the “short list” of priorities, including budget justification and information on potential benefits/return on investment. Although CBP identified funding to complete the implementation of core ACE capabilities as defined by CBP in fiscal year 2018, officials of CBP and its partner agencies stated that they have not identified funding for the continued development of ACE, including most of the enhancements that have been suggested by CBP, the trade community, or partner agencies. Through fiscal year 2017, CBP maintained separate accounts to support ACE operations and maintenance and ACE acquisitions—that is, development and deployment of new ACE capabilities. According to CBP officials, the agency’s ACE acquisition funds were used exclusively to develop and deploy ACE capabilities that the agency defined as core. Neither acquisition funds nor operations and maintenance funds were available for enhancements to the core system, according to the officials. However, CBP officials told us in November 2017 that, beginning in fiscal year 2018, the agency’s planned annual budgets for ACE would include funds only for operations and maintenance and would no longer include funds to support acquisitions. CBP officials stated that the agency had identified additional funding to complete core ACE capabilities, other than collections, in fiscal year 2018 and to ensure that these capabilities operate in concert with ACS, which the agency uses for collections. However, the agency had not yet identified funding for several enhancements that CBP considered near-term priorities (see table 3) or for the longer list of accepted but unprioritized enhancements suggested by CBP staff or the trade community. CBP officials estimated that supporting post-core development will require about $7 million in additional funds in fiscal year 2019 and slightly more than $14 million annually in additional funds in the succeeding 3 years. Figure 4 summarizes CBP’s anticipated ACE funding requirements for fiscal years 2019 through 2022, as identified by CBP in November 2016 and September 2017. CBP is working with its partner agencies in the BIEC to reach agreement on an approach to managing ACE’s continued development after completing the implementation of core capabilities, but this approach has not been finalized. According to CBP officials and some partner agency officials, the BIEC is seeking agreement on processes for prioritizing all suggested enhancements and for sharing the costs of maintaining and enhancing the system. Process for prioritizing enhancements. According to CBP officials, the BIEC is developing a process for prioritizing enhancements, including criteria to be applied and a governance process to guide decision making. CBP officials stated that this process would be applied to all suggested enhancements, regardless of their source. Process for sharing costs. According to CBP officials, the BIEC agreed in early 2016 to begin working toward consensus among CBP and its partner agencies on an approach to sharing future ACE operations and maintenance and development costs. This consensus is to include an agreement on criteria for classifying suggested enhancements as operations and maintenance or as new capabilities and on funding arrangements for both categories. Additionally, the Office of Management and Budget requested the Department of Homeland Security and CBP to develop a cost-sharing framework, according to CBP. However, the BIEC has not yet finalized a management approach to address these tasks. According to CBP, in early December 2017 the BIEC produced a document, titled “BIEC Principals Single Window Sustainment Decision Memorandum,” proposing a “sustainment model” for ACE and received partner agency comments on this document later that month. CBP did not provide us with copies of the memorandum or the partner agencies’ comments but stated that the comments covered the following areas: acceptance of a proposed definition of operations and maintenance and a “pay as you go” funding model, evaluation criteria for prioritizing suggested enhancements, and an overall process for making prioritization decisions. According to CBP officials, a draft cost-sharing and prioritization process plan was distributed to the BIEC principals and discussed in detail at a principals meeting on January 30, 2018, and work on refining and finalizing this plan is continuing. CBP officials estimated that this process would be completed by October 31, 2018. In light of funding constraints and the need for broad interagency agreement to adopt processes such as those reportedly under discussion in the BIEC, it is unclear whether these discussions will conclude within the specified time frame or whether the sustainment model will resolve all outstanding issues in a manner satisfactory to participating agencies. For example, according to FDA and Treasury officials, some partner agencies maintain that certain improvements to ACE suggested by partner agencies should be regarded as part of the core system—traditionally supported by CBP acquisition funds—rather than treated as enhancements that must be supported by the agencies that suggest them. It remains unclear how such enhancements will be categorized or funded, since CBP has indicated that it will no longer allocate funds to ACE acquisition and that operations and maintenance funds have traditionally not been used for such purposes. The solutions to these unresolved issues will affect both CBP and its partner agencies, according to agency officials. FDA officials observed that CBP will not fund or implement additional capabilities without funding for these efforts, whether through its own budget or from partner agencies. Treasury officials observed that interagency coordination and transfers of funding are cumbersome, costly processes. FDA officials also commented that, rather than try to arrange cost sharing with other agencies that may have funding constraints, partner agencies might develop alternative systems to compensate for capabilities lacking in ACE. FDA officials observed that this could result in multiple agencies’ developing separate systems to meet similar needs. According to Standards for Internal Control in the Federal Government, management should establish an appropriate organizational structure and communicate effectively to achieve agency objectives. In addition, key practices to enhance and sustain interagency collaboration include articulating a common outcome, establishing mutually reinforcing or joint strategies, and establishing compatible means of operating across agency boundaries. Until CBP, in collaboration with partner agencies, finalizes its management approach to ACE, including processes for prioritizing, and sharing costs for, critical enhancements, U.S. agencies and the trade community will not realize the system’s full potential benefits. The need for an international trade data system to enhance U.S. agencies’ efficiency and effectiveness in processing cargo and enforcing U.S. trade laws has long been clear. Indeed, information available from CBP, partner agencies, and the trade community points to savings and enforcement benefits resulting from the implemented core ACE capabilities, including faster import processing; improved targeting; and other benefits to partner agencies, the trade community, and consumers. However, realization of the full benefits of transitioning to ACE continues to be hampered by a variety of functional shortcomings’. CBP and its partner agencies recognize the need to agree on an approach to maintaining and continuing to develop the system after core ACE is completed. While CBP recently completed deployment of most of the capabilities that it identified as core, CBP and its partner agencies in the BIEC have not yet agreed on processes for prioritizing enhancements—including those that ACE users have suggested to improve the system—and for sharing the costs of operating and enhancing the system. Until CBP, in collaboration with its partner agencies, finalizes an approach to post-core management of ACE that includes such processes, as well as time frames for implementing them, CBP, its partner agencies, and the trade community will not realize the full potential benefits of the substantial investment ACE represents. We are making the following recommendation to DHS: The Secretary of Homeland Security should ensure that the Commissioner of CBP, in collaboration with partner agencies, finalizes an interagency approach to the post-core management of ACE that includes (1) processes for prioritizing enhancements to ACE and for sharing ACE operations and maintenance and development costs, including the costs of suggested enhancements among partner agencies that may benefit, and (2) time frames for implementing such processes. (Recommendation 1) We provided a draft of this report to DHS; the Departments of Agriculture, Health and Human Services, the Interior, the Treasury, and Transportation; and CPSC. DHS provided substantive comments, which are reproduced in appendix III. In addition, DHS; the Departments of Health and Human Services, the Interior, Transportation, and the Treasury; and CPSC provided technical comments, which we incorporated as appropriate. The Department of Agriculture did not provide comments. In its substantive comments, DHS concurred with our recommendation. DHS also reported that some steps toward developing an interagency approach to post-core management of ACE had been taken after we distributed our draft report for agency comment. DHS estimated that the process would be completed by the end of October 2018. We updated our report accordingly. We are sending copies of this report to the appropriate congressional committees, the Commissioner of CBP, the Secretaries of the Departments of Agriculture, Health and Human Services, the Interior, the Treasury, and Transportation. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8612 or gianopoulosk.gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. In this report, we examine (1) the status of U.S. Customs and Border Protection’s (CBP) efforts to implement core Automated Commercial Environment (ACE) capabilities since 2013, (2) CBP partner agencies’ access to ACE and use of the system for import processing, (3) available information about any cost savings and trade enforcement benefits that have resulted from using ACE, and (4) the approach that will be used to manage ACE after core capabilities have been completed. To examine CBP’s efforts to implement ACE since 2013, we obtained information from CBP’s Office of Information Technology and Office of Trade, which have been responsible for developing and administering ACE. CBP documents reviewed include ACE deployment schedules, acquisition decision memos, remediation plans, cost estimates, and a staff post mortem report on the ACE acquisition process. We also interviewed officials from CBP and five partner agencies regarding the ACE acquisition process since 2013: the Department of Health and Human Services’ Food and Drug Administration (FDA), the Department of Transportation’s National Highway Traffic Safety Administration (NHTSA), the Consumer Product Safety Commission (CPSC), the Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS), and the Department of the Interior’s Fish and Wildlife Service (FWS). We selected these five agencies on the basis of their size (to include both large and small agencies), the degree to which they require documentation for clearing or licensing cargo, and recommendations from officials of CBP and the Department of the Treasury regarding agencies that would provide a range of experience in transitioning to ACE. We also reviewed prior GAO reports on ACE acquisition. While ACE is designed to permit management of both exports and imports, we focused on the implementation of ACE capabilities to manage imports, because CBP’s efforts to complete and improve ACE functionality are currently focused primarily on import trade. To examine other agencies’ progress in accessing and using ACE data, we obtained summary information on ACE usage for CBP’s 49 partner agencies, including information such as whether an agency had a memorandum of understanding with CBP regarding ACE access, whether it accessed trade data through ACE data and how it did so. While we collected information on all 49 partner agencies, we focused our analysis on the 22 partner agencies that CBP identified as requiring documentation for clearing or licensing cargo for import or export. To collect this information, we identified and reviewed Federal Register notices posted by the agencies. We obtained documentation on agency participation in ACE from CBP officials and from the Department of the Treasury. We also discussed the documentation and our descriptions with CBP officials and partner agency officials. To understand how the five selected agencies used ACE, we conducted case studies that included reviewing CBP user guidance documents and documents from the respective agencies on their transitions and interviewing agency officials in Washington, D.C., and at the ports of New York and Newark. To examine available information about actual and potential cost savings and enforcement benefits from using ACE, we obtained information on efforts by CBP, partner agencies, and companies involved in international trade to identify and measure efficiency gains and potential cost savings. The CBP documents we reviewed included listings and definitions of metrics for determining efficiency gains and CBP’s method for using those to calculate potential cost savings, and also documentation of CBP’s process for determining the reliability of the data and measures. In addition, we reviewed a 2015 report on CBP’s ACE metrics by the DHS Office of the Inspector General, which recommended that CBP strengthen its metrics; the Inspector General subsequently closed those recommendations as implemented. On the basis of our review of the available information, we determined that CBP’s metrics were sufficiently reliable for the purpose of conveying the estimated value of these efficiency gains. To understand earlier CBP estimates of potential cost savings from ACE, we reviewed a cost-benefit analysis conducted and revised by CBP during 2002-2004. We also reviewed a more recent cost benefit analysis conducted by FDA. In addition, we interviewed officials at CBP and the 5 case study partner agencies regarding information on potential cost savings and other benefits from ACE, including officials in CBP’s Office of Enforcement who discussed challenges with developing metrics to measure enforcement benefits. In addition, to obtain information on observed and potentials benefits and cost savings of ACE to importers and exporters, and related companies, we interviewed representatives of these companies. We also obtained information from CBP regarding their preparations to assess the benefits of enhancements to ACE after core ACE capabilities are completed. We interviewed CBP and agency officials in Washington, D.C., and at the ports of New York, N.Y., and Newark, N.J., concerning benefits and challenges associated with using ACE. We selected these ports because they allowed us to interview CBP officials charged with processing a large volume of diverse imported goods, representing both air and sea cargo. These ports also afforded an opportunity to interview field staff representing four of our five case-study agencies (APHIS, CPSC, FDA, and FWS). We also discussed these issues with CBP officials with the agency’s Center for Commercial Targeting and Analysis, each of CBP’s five National Targeting and Analysis Groups, and six of the agency’s 10 Centers of Excellence and Expertise (national-level CBP units responsible for processing imported goods associated with designated industry sectors), which we judgmentally selected. We also discussed these issues with 16 trade community representatives—that is, representatives of companies that buy and sell internationally traded products as well as brokers and shippers that work for and with these companies—some of whom participate in organizations that advise CBP regarding its operations. These 16 representatives included members of the Trade Support Network, a private sector group created to provide input to CBP on its business processes, including ACE; the Commercial Customs Operations Advisory Committee, a private sector group created to advise the Departments of the Treasury and Homeland Security on CBP’s commercial operations; and the National Customs Brokers and Freight Forwarders Association. To analyze the approach that will be used to manage ACE after core capabilities have been completed, we obtained information on CBP processes to identify, evaluate, and operationalize changes to enhance ACE. We also obtained information from CBP about its projected “post- core” budgetary needs. In addition, we reviewed documentation from CBP regarding interagency dialogue on post-core management of ACE and interviewed officials from CBP and other agencies to obtain their views on the challenges to be addressed and progress toward addressing them. We conducted this performance audit from January 2017 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 4 provides information about participation in U.S. Customs and Border Protection’s (CBP) Automated Commercial Environment (ACE) by the 22 partner agencies that CBP identified as requiring documentation to clear or license cargo. Table 5 provides information about participation in ACE by the 27 partner agencies that CBP did not identify as requiring such documentation. In addition to the contact named above, Celia Thomas (Assistant Director), Michael McAtee (Analyst-in-Charge), Marybeth Acac, Ryan Deloughry, Philip Farah, Reid Lowe, Scott McClinton, Maria Stattel, Bryant Torres, and Alex Welsh made key contributions to this report. Neil Doherty and Justine Lazaro provided technical assistance.", "summary": "CBP began work on ACE in 1994 to update the agency's existing electronic trade processing system. In 2006, Congress broadened this effort by mandating creation of a “single portal” International Trade Data System to, among other things, efficiently regulate the flow of commerce and more effectively enforce laws and regulations relating to international trade. Performance problems halted implementation of ACE from 2010 to 2013. In 2014, the President set a deadline of December 31, 2016, for completing the system. The Trade Facilitation and Trade Enforcement Act of 2015 included a provision for GAO to report on issues related to ACE implementation. In this report, GAO examines (1) CBP efforts to complete core ACE capabilities since 2013; (2) agencies' access to ACE and use of the system to process imports; (3) any cost savings and trade enforcement benefits from using ACE; and (4) the approach that will be used to manage ACE after core capabilities are completed. GAO reviewed information from 22 agencies as well as importers, exporters, and brokers and interviewed agency and trade community representatives. Since renewing efforts to implement the Automated Commercial Environment (ACE) in 2013, U.S. Customs and Border Protection (CBP) has deployed a number of key ACE activities, processes, and functions that it terms core capabilities. After several delays, CBP reported that it had finished implementing these capabilities—other than a capability for revenue collections—in February 2018. CBP expects to decide how to proceed with collections by the end of March 2018, according to agency officials. The 22 agencies CBP identified as requiring documentation to clear or license cargo are all authorized to access ACE, although GAO found considerable variation in their use of the system for import processing. For example, the Food and Drug Administration has integrated its systems with ACE and uses ACE data to review imports under its jurisdiction and target public health risks. In contrast, the Fish and Wildlife Service has not yet integrated ACE into its operations. ACE users at CBP and partner agencies and in the trade community told GAO that using ACE has reduced costs by making trade processing more efficient and has strengthened enforcement of trade laws and regulations. CBP has developed metrics for itself and the trade community and estimated savings that could result from the increased efficiency of some processes in ACE. CBP also reported efforts to expand its metrics to capture more ACE benefits—for example, to estimate the value of increased efficiencies for partner agencies. CBP has not yet established an approach for the management of ACE after February 2018. The agency plans to enhance ACE to address shortcomings ACE users have identified—such as difficulty in transmitting messages and required information —but has not established a process for prioritizing all suggested enhancements. CBP also has not identified funding for continued ACE development, including enhancements, after fiscal year 2018. CBP is leading an interagency effort to develop an ACE management approach that includes processes for prioritizing enhancements and sharing costs, but this approach has not been finalized. Federal guidance calls for establishing the organizational structure necessary to operate effectively and for examining efforts as needed to adopt coordinated approaches. Until processes for prioritizing ACE enhancements and sharing costs are finalized, agencies and the trade community will not realize the system's full potential benefits. The Secretary of Homeland Security should ensure that the Commissioner of CBP, in collaboration with partner agencies, finalizes an interagency approach to managing ACE that includes processes for prioritizing enhancements and sharing system costs. CBP concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "Shortly after the September 11, 2001, terrorist attacks, Congress passed and the President signed into law the Aviation and Transportation Security Act (ATSA), which established TSA and gave the agency responsibility for securing all modes of transportation, including the nation’s civil aviation system, which includes the operations of U.S. and foreign-flagged air carriers to, from, and within the United States, as well as the foreign point-to-point operations of U.S.-flagged carriers. Consistent with ATSA and in accordance with existing statutory requirements, TSA is to assess the effectiveness of security measures at foreign airports (1) served by a U.S. air carrier, (2) from which a foreign air carrier serves the United States, (3) that pose a high risk of introducing danger to international air travel, and (4) that are otherwise deemed appropriate by the Secretary of Homeland Security. In carrying out this function, the statute identifies measures that the Secretary must take in the event that he or she determines that an airport is not maintaining and carrying out effective security measures based on TSA assessments. In addition, consistent with ATSA and in accordance with existing statutory requirements, TSA is to conduct inspections of U.S. air carriers and foreign air carriers servicing the United States from foreign airports to ensure that they meet applicable security requirements, including those set forth in an air carrier’s TSA-approved security program. The Secretary of DHS delegated to the TSA Administrator the responsibility for conducting foreign airport assessments but retained responsibility for making the determination that a foreign airport does not maintain and carry out effective security measures. Currently, the Global Compliance Directorate, within OGS, is responsible for conducting foreign airport assessments and air carrier inspections. Table 1 highlights the roles and responsibilities of certain TSA positions within OGS that are responsible for implementing the foreign airport assessment and air carrier inspection programs. TSA assesses the effectiveness of security measures at foreign airports using select aviation security standards and recommended practices adopted by ICAO, a United Nations organization representing 191 countries. ICAO standards and recommended practices (referred to collectively in this report as ICAO standards unless otherwise noted) address operational issues at an airport, such as ensuring that passengers and baggage are properly screened and that unauthorized individuals do not have access to restricted areas of an airport. ICAO standards also address non-operational issues, such as whether a foreign government has implemented a national civil aviation security program for regulating security procedures at its airports and whether airport officials implementing security controls are subject to background investigations, are appropriately trained, and are certified according to a foreign government’s national civil aviation security program. TSA utilizes the 44 ICAO standards it sees as most critical in conducting its foreign airport assessments, which cover the following areas: airport operations; quality control; access control; aircraft security; passenger and cabin baggage screening; hold baggage screening; security measures relating to cargo, mail and other goods; security measures relating to special categories of passengers; prevention; and security measures relating to the landside. TSA uses a risk-informed approach to schedule foreign airport assessments by categorizing airports into three risk tiers, with high risk airports assessed more frequently than medium and low risk airports. TSA’s assessments of foreign airports are conducted by a team of inspectors, which generally includes one team leader and one team member. According to TSA, it generally takes 3 to 7 days to complete a foreign airport assessment. However, the amount of time and number of team members required to conduct an assessment varies based on several factors, including the size of the airport, the number of air carrier inspections to be conducted at the airport, and the threat level to civil aviation in the host country. TSA uses a multistep process to plan, conduct, and record assessments of foreign airports. Specifically, the TSAR must obtain approval from the host government to allow TSA to conduct an airport assessment, and schedule the date for the on-site assessment. After conducting an entry briefing with State, host country officials, and airport officials, the team conducts an on-site visit to the airport. During the assessment, the team of inspectors uses several methods to determine a foreign airport’s level of compliance with ICAO standards, including conducting interviews with airport officials, examining documents pertaining to the airport’s security measures, and conducting a physical inspection of the airport. For example, inspectors are to examine the integrity of fences, lighting, and locks by walking the grounds of the airport. Inspectors also make observations on access control procedures, such as examining employee and vehicle identification methods in secure areas, as well as monitoring passenger and baggage screening procedures in the airport. At the close of an airport assessment, inspectors brief foreign airport and government officials on the results. TSA inspectors also prepare a report detailing their findings on the airport’s overall security posture and security measures, which may contain recommendations for corrective action and must be reviewed by the TSAR, the ROC manager, and TSA headquarters officials. Afterward, a summary of the results is shared with the foreign airport and host government officials. In some cases, TSA requires air carriers to adopt security procedures, such as additional passenger screening, to compensate for deficiencies that TSA identified during a foreign airport assessment. Along with conducting airport assessments, the same TSA inspection team also conducts air carrier inspections when visiting a foreign airport to ensure that air carriers are in compliance with TSA security requirements. The frequency of air carrier inspections at each airport depends on a risk-informed approach and is influenced, in part, by the airport’s vulnerability to security breaches, since the security posture of each airport varies. In general, TSA procedures require TSA to inspect all air carriers at each airport annually or semi-annually depending on the vulnerability level of the airport, with some exceptions. For example, TSA may elect to inspect all air carriers at a particular airport on an 18-month cycle if the airport has no documented vulnerabilities for the three previous visits and all air carriers at that location have demonstrated full compliance over the past five years. When conducting inspections, TSA inspectors examine compliance with applicable security requirements, including TSA-approved security programs, security directives, and emergency amendments to the security programs. As in the case of airport assessments, air carrier inspections are conducted by a team of inspectors, which generally includes one team leader and one team member. An inspection of an air carrier typically takes 1 or 2 days, but can take longer depending on the extent of service by the air carrier. Inspection teams may spend several days at a foreign airport inspecting air carriers if there are multiple carriers serving the United States from that location. During an air carrier inspection, inspectors are to review applicable security manuals, procedures, and records; interview air carrier station personnel; and observe air carrier employees processing passengers from at least one flight from passenger check-in until the flight departs the gate to ensure that the air carrier is in compliance with applicable requirements. Inspectors evaluate a variety of security measures, such as passenger processing (e.g., use of No Fly and Selectee lists), checked baggage acceptance and control, aircraft security, passenger screening, cargo and mail screening, and catering security. Inspectors record inspection results into TSA’s Performance and Results Information System (PARIS), a database containing security compliance information on TSA-regulated entities. If an inspector finds that an air carrier is violating any applicable security requirements, additional steps are to be taken to record those specific violations and, in some cases, pursue them with further investigation. In 2011, we reported on TSA’s foreign airport assessment program, including TSA’s steps taken to enhance its program, the results of TSA’s foreign airport assessments, and opportunities for TSA to make program improvements in several key areas, such as developing criteria and guidance for determining foreign airport vulnerability ratings. We reported that TSA had not taken steps to evaluate its assessment results to identify regional and other trends over time. In addition, we found that TSA had not developed criteria or guidance for determining foreign airport vulnerability ratings. We also reported that there were opportunities for TSA to increase program efficiency and effectiveness by, for example, conducting more targeted foreign airport assessments and systematically compiling and analyzing security best practices. As a result, we recommended that TSA (1) develop a mechanism for trend analysis, (2) establish criteria and guidance to help decision makers with vulnerability ratings, and (3) consider the feasibility of conducting more targeted foreign airport assessments and compiling best practices. DHS concurred with the three recommendations and has since taken several actions to address them all, including developing a mechanism to compile and analyze best practices. TSA established the Northern Virginia ROC. In 2012, TSA created a dedicated ROC in Northern Virginia to oversee North Africa and the Middle East given the high risk associated with many airports in the region. The creation of the Northern Virginia ROC alleviated resource burdens on the Frankfurt ROC, which previously had oversight for both the Europe and Africa-Middle East regions. In addition, the Northern Virginia ROC Manager stated that the small size of the ROC has facilitated strong working relationships because foreign airport officials in the region tend to meet with the same inspectors more frequently. TSA created the Analysis and Risk Mitigation (ARM) Directorate. In 2013, TSA established a working group to evaluate ways to better integrate risk management in the foreign airport assessment and air carrier inspection programs. This working group developed a risk framework, which, according to TSA documentation, provides a systematic approach for analyzing risk at international airports, supports OGS decision making, and informs efforts to mitigate security deficiencies. In 2015, OGS created the ARM Directorate, which formalized the risk mitigation responsibilities of the working group and serves as the data analysis and evaluation arm of OGS. OGS officials stated that ARM helps the program focus its resources based on risk. For example, ARM analyzes and prioritizes activities, such as training, that are designed to mitigate security vulnerabilities at foreign airports. TSA conducts more targeted foreign airport assessments. Based on a recommendation in our 2011 report, TSA has taken actions to conduct more targeted foreign airport assessments. For example, TSA developed the Pre-Visit Questionnaire, which host foreign airport officials fill out prior to TSA’s visit. This information enables each TSA foreign airport assessment team to tailor the on-site assessment at each airport and focus TSA’s assessment efforts on specific areas of concern. Additionally, TSA implemented more focused airport assessments, known as targeted risk assessments, in locations where risk is high or there are other factors that require a more focused evaluation of the site’s security posture. For the focused assessments, inspection teams place emphasis on observations, interviews, document reviews, and thorough analysis of specific ICAO standards. TSA implemented cross-directorate reviews. In 2015, TSA implemented cross-directorate reviews, which bring together experts across the OGS components, such as inspectors and TSARs, to identify critical vulnerabilities at foreign airports and outline an initial plan to mitigate those vulnerabilities. Overall, TSA completed 28 cross- directorate reviews in 2015 and 2016. TSA took steps to resolve foreign airport access issues. Since our 2011 review, TSA has faced delays in scheduling some foreign airport assessments and obstacles in obtaining full access to airport operations at certain locations. According to TSA officials, TSA has used several tactics to resolve access issues, including deploying the same inspectors over multiple assessments to build rapport with foreign airport officials. For example, in one country in the Western Hemisphere region, TSA’s access to airport operations was initially limited by the host government. However, over time, TSA used a small pool of inspectors who officials said were able to build trust with the host government and gain better access, including the ability to conduct interviews of airport officials and take photographs of the security environment. Additionally, in 2011, we reported on TSA’s challenges in obtaining access to airports in Venezuela. Specifically, we reported that TSA had not been able to assess airports in Venezuela or conduct TSA compliance inspections for air carriers, including U.S. carriers, flying from Venezuela to the United States since 2006. According to TSA officials, in 2014, TSA regained access in Venezuela after establishing dialogue with the new government in place and emphasizing the benefits of the evaluation process. TSA increased the number of joint airport assessments in Europe. In 2011, we reported that TSA took a number of actions to assess foreign airports in Europe, including conducting joint assessments with the EC, performing bi-lateral assessments, and executing table-top reviews in place of on-site airports visits. According to EC officials, the main goal under this arrangement was to better leverage resources and reduce the number of TSA visits per year to European airports because of concerns from EU member states about the frequency of visits from EC and U.S. audit teams. However, since our previous review, TSA has limited the use of table-top reviews and now primarily assesses foreign airports in Europe through joint assessments with the EC. Frankfurt ROC officials we met with indicated that TSA’s strong relationship with the EC has afforded the agency excellent access to foreign airports in Europe and a better understanding of vulnerabilities at these locations, which has resulted in more comprehensive assessments. For example, according to TSA, through the joint assessments, inspectors have better access to airport training documents, the ability to observe tests conducted by EC inspectors, and more time at checkpoints to observe screening operations. TSA developed airport assessment and air carrier inspection job aids. In 2012, TSA developed job aids that provide inspectors with a set of detailed areas to assess for each ICAO standard. For example, a job aid for passenger and cabin baggage screening includes several prompts related to screening roles and responsibilities, the resolution process if a suspicious item is detected, and alternative procedures if screening equipment is not working as intended. TSA also developed job aids for the air carrier inspection process to better ensure that inspectors cover all requirements associated with air carrier security programs. According to OGS officials, these actions have led to more comprehensive evaluations and a better understanding of foreign airport and air carrier vulnerabilities. TSA established the Honolulu ROC. In 2012, TSA eliminated the Los Angeles ROC and established the Honolulu ROC given its proximity to the Pacific Islands, which allowed the agency to reduce costs and travel time to airports in these locations. Specifically according to TSA documentation, inspectors in the Los Angeles ROC often spent more than 20 hours traveling to and from sites in the Asia-Pacific region because of in-flight transit time and connection requirements. With the creation of the Honolulu ROC, TSA officials told us that inspectors have been better able to meet deadlines for completing foreign airport assessment reports and conduct follow-up visits to resolve noted issues. TSA developed the Global Risk Analysis and Decision Support System. In 2012, TSA developed the Global Risk Analysis and Decision Support System (GRADS) to streamline the assessment report writing process and strengthen OGS’s data analysis capabilities of its foreign airport assessment results. According to TSA officials, GRADS has provided OGS personnel with a number of benefits, including the ability to run standardized reports, extract and analyze key data, and manage airport operational information, such as data on security screening equipment. According to TSA documentation, prior to 2012, the agency captured the results of its foreign airport assessments in narrative form that often amounted to more than 80 pages, hampering the ability to perform data analysis. TSA standardized processes. Between 2012 and 2016, TSA deployed standardization teams, called Standardization Effort Teams, to help ensure more consistency among inspectors when conducting air carrier inspections and airport assessments, and to identify and develop best practices in areas such as training, among others. For example, in 2016, a team developed a tool to facilitate performance evaluations of inspectors. TSA assesses the overall vulnerability level at each foreign airport using a rating system, ranging from a category “1,” which represents full compliance with ICAO standards, to a “4” or “5,” which involve more serious or egregious issues. Based on our analysis of TSA’s foreign airport assessment data, we found that compliance with ICAO standards varied by region. For example, our analysis showed that some regions of the world had a higher percentage of airports in vulnerability categories 4 and 5. Our analysis also showed that there are differences in compliance across the ICAO standards. Specific information related to TSA’s airport assessment results is deemed Sensitive Security Information. According to TSA officials, it is difficult to draw conclusions about the cumulative foreign airport assessment results—such as whether the results are generally positive or negative—because the primary concern is not whether security deficiencies are identified, but whether foreign countries are capable and willing to address security deficiencies. Specifically, there is considerable regional variation in the level of compliance because some foreign countries face challenges due to lack of resources or technical knowledge, among other factors. TSA officials stated that while these challenges are not easy to overcome, agency efforts, such as training host country staff, can help foreign airports reduce their vulnerability scores over time. Our analysis of TSA’s foreign airport assessment data confirms that point. Specifically, we found that of the foreign airports categorized with a vulnerability rating of 4 of 5 in fiscal year 2012, the majority of these airports improved their vulnerability score in at least one follow-up assessment during fiscal years 2012 through 2016. According to TSA documentation, in some cases, foreign airports are able to take immediate measures to resolve security deficiencies. On the other hand, there are situations in which foreign airports may struggle to take corrective actions or sustain the improvements over time. Accordingly, TSA’s regulatory authority over air carriers is an important tool. TSA officials indicated that the agency commonly requires air carriers to adopt security procedures, such as passenger screening, to compensate for foreign airport security deficiencies. Moreover, if appropriate, DHS can take secretarial action, which includes the option to prohibit air carriers operating at a foreign airport from providing last point of departure flights to the United States. According to air carrier inspection data maintained by TSA, between fiscal years 2012 and 2016, air carriers providing last point of departure service to the United States from foreign airports complied with all TSA security requirements in most inspections. For those inspections that identified noncompliance, data from TSA showed that the majority of violations were corrected or addressed immediately through on-the-spot counseling. Inspectors submitted a certain number of violations for investigation because the violations were considered serious enough to potentially warrant an enforcement action. TSA can impose two general types of enforcement actions on air carriers that violate security requirements—an administrative action, such as a warning notice, or a monetary civil penalty. Based on information included in TSA’s investigation module within PARIS, TSA took administrative action in the majority of cases and levied 44 fines during fiscal years 2012 through 2016, which totaled about $575,000 and ranged from $1,000 to $40,500. According to TSA officials, they rely on a system of progressive enforcement and carefully consider whether a civil penalty is warranted based on the compliance history of an air carrier, among other factors. As part of assisting foreign airports, inspectors work to transfer knowledge on how to mitigate identified airport security deficiencies to foreign airport officials and provide TSA program officials with suggestions for capacity development that could be effective in addressing these deficiencies. Specifically, TSA capacity development assistance to foreign airports includes on-the-spot counseling, training, technical assistance and consultation, and provision of security equipment. Inspectors counsel foreign airport staff on-the-spot. According to TSA officials, inspectors typically offer counseling during airport assessments when they discover deficiencies, usually of an infrequent, less serious, or technical nature, that can be addressed immediately. For example, during a 2013 assessment of an airport in the Europe region, inspectors observed a total of 53 employees within the restricted area, of which one was not displaying his badge. Airport officials immediately requested that the individual display his badge and informed the TSA inspection team that they will remind all staff to properly display their airport media while in the restricted area. For the remainder of the airport visit, no badge display issues were noted. In another example, during an assessment in the Western Hemisphere region, inspectors observed persons entering a restricted area without undergoing screening. The inspectors counseled the airport’s security officials on the importance of adhering to the airport’s security program, and observed the airport officials take immediate action by implementing escort and screening procedures. TSA provides security training. TSA may provide training to foreign airport staff to address deeper problems with staff security knowledge or to strengthen staff knowledge in an evolving threat environment. Training may take several forms, including traditional classroom courses or interactive workshops, and can range in length from one or two days to more than one week. Course topics include risk management, screening operations, and airport security, with a broad variety of sub-topics, such as insider risk, cargo security, and inspection techniques. According to TSA, new courses are in development to meet the changing security landscape. New course topics include landside security, behavioral awareness, and the effective use of canines. TSA arranges for technical assistance and consultation. TSA assists foreign governments in securing technical assistance and consultation provided by TSA and other U.S. and foreign government agencies to help improve security at foreign airports, particularly after security incidents or at airports in developing countries. For example, after the 2016 terrorist attack on Brussels Airport, TSA was invited by airport officials to provide on-site consultation during the reconstitution of the airport facilities. In another example, TSA provided a country in the Africa-Middle East region with on-site technical assistance for configuring and testing explosives detection equipment at baggage screening checkpoints. In addition, State’s Anti-Terrorism Assistance Program augments TSA’s resources in building the aviation security capacity of foreign governments. For instance, State provides recipient nations with courses focused on airport security management, quality control, and fraudulent document recognition as well as multi-day passenger and cargo security consultations. In addition, with regard to capacity development TSA collaborates with other countries. Partners may promote common aviation security goals to other countries when political considerations preclude TSA from doing so, or combine resources with TSA for joint efforts. For example, in one collaboration, a country in the Asia-Pacific region provided resources and facilities, while TSA provided staff so that neighboring countries could attend aviation security training. TSA loans and donates security equipment. TSA may loan or donate security equipment such as explosives detection devices and metal detection hand wands to lower-income countries. Since fiscal year 2012, TSA has loaned X-ray screening equipment and explosives detection devices to five countries. Enacted in July 2016, the Aviation Security Act expressly authorizes TSA to donate security screening equipment to a foreign last point of departure airport if such equipment can be reasonably expected to mitigate a specific vulnerability to the security of the United States or U.S. citizens. TSA may also provide staff at foreign airports with demonstrations for using equipment that has been loaned or donated by TSA, as well as equipment otherwise acquired by host governments. For instance, in 2016 TSA provided operator training and maintenance assistance to a country in the Africa-Middle East region that had procured passenger body scanners. TSA also takes steps to help air carriers address security deficiencies identified during air carrier inspections. TSA primarily offers capacity development support to air carriers through on-the-spot counseling and consultation with IIRs. Inspectors counsel air carrier representatives on-the-spot. TSA assists air carrier representatives in addressing security deficiencies identified during air carrier inspections. According to TSA, since carriers have TSA-approved security programs, additional training may not be necessary to correct small issues. Rather, officials said that counseling air carrier staff on the proper procedures and follow up observations of them practicing the procedures may suffice. TSA data show that of the instances in which inspectors identified noncompliance with TSA security requirements during fiscal years 2012 through 2016, the majority of instances were resolved through counseling—that is, the security deficiencies were resolved with on-site assistance or consultation provided by TSA. For example, during an air carrier inspection in the Europe region, inspectors observed that a passenger wearing sandals was not screened properly. TSA counseled the screening staff that footwear screening requirements apply to all shoes, including sandals. The inspectors then observed proper rescreening of the passenger. TSA also discussed the matter with airline security representatives, who concurred with TSA. IIRs assist air carriers with compliance. In addition to counseling provided by inspectors when deficiencies are identified, TSA assigns each air carrier to a representative who assists the carriers in complying with TSA security requirements. Although these representatives, called IIRs, do not participate in air carrier inspections, they do receive inspection results for the carriers with whom they work. IIRs counsel the air carriers and provide clarification regarding TSA security requirements when necessary. For example, they provide air carriers with clarification on the requirements contained in security directives and emergency amendments issued by TSA. In other instances, when an air carrier cannot comply with a TSA security requirement—such as when complying with a TSA security requirement would cause the air carrier to violate a host government security requirement—the air carrier works with its IIR to develop alternative security procedures in a manner consistent with TSA regulations. With alternative procedures, air carriers can deviate from their TSA-approved security program while still meeting the intent of TSA requirements. According to some IIRs with whom we spoke, these alternative procedures are intended to provide a level of security that is equivalent to the level of security provided by TSA’s standard requirements while also affording air carriers with some flexibility in how they achieve the intended security benefit of the TSA requirement. Alternative security procedures are reviewed by the IIR, who submits them to TSA headquarters and field officials for final review and approval. TSA has taken a number of steps to strengthen its analytical processes and better understand the impact of the foreign airport assessment and air carrier inspection programs. According to OGS officials, the establishment and evolution of the ARM Directorate has facilitated better data analysis and enhanced decision making pertaining to capacity development. Specifically, TSA now conducts regional strategy meetings, produces regional risk reports, and approves requests for assistance based on risk. OGS conducts regional strategy meetings. Since fiscal year 2012, OGS has held strategy meetings to address aviation security threats and vulnerabilities within each region. During these meetings, OGS officials examine trend data for both airport assessments and air carrier inspections, including vulnerability ratings over a multi-year period, identify common areas of non-compliance, and develop capacity building approaches customized to each region. According to agency documentation, these meetings led OGS to recognize that each geographic region faces its own particular challenges and risks and requires unique mitigation approaches, such as at the country or airport level. ARM develops regional risk reports. In 2016, the ARM Directorate began producing regional risk reports for use by other teams within OGS. The purpose of these reports is to provide OGS personnel operating within each of the four regions with an understanding of known vulnerabilities in the region and their associated risk in order to inform mitigation planning efforts. These reports include such information as key risks at each location and region-wide trends on vulnerabilities. For example, the reports show patterns in noncompliance related to critical ICAO standards. In addition, the reports compare airports by risk level and examine how individual airports compare to a regional average. According to ARM staff, one of the top priorities this year is to centralize analysis results within a web portal that allows users across OGS to sort and filter data. ARM expects the portal to include comprehensive airport profiles that capture the primary details for each location, such as the largest carriers and main risks. OGS approves requests for assistance based on risk. Requests for capacity development assistance are submitted by OGS personnel, including TSARs and inspectors. TSA’s Capacity Development Branch (CDB) in ARM assesses these requests according to a standardized criterion that includes an airport’s past and present vulnerabilities, the root causes of these vulnerabilities, the timing of the assistance delivery, and the suitability of the intended recipient. For instance, TSA assesses the capabilities of the government or airport that would receive the assistance, and considers such factors as whether the intended recipient has the commitment necessary to institutionalize TSA-sponsored training and the technical expertise to use any equipment that may be loaned or donated by TSA. In addition, according to TSA officials, TSA considers the extent to which the intended recipient has been a cooperative partner in the past and implemented TSA’s previous security recommendations. After CDB’s risk-based assessment of assistance requests, OGS management makes a final determination regarding the provision of assistance. While TSA has taken steps to leverage the results of foreign airport assessments and air carrier inspections to monitor system-wide vulnerabilities and inform capacity development, TSA lacks key information for decision making. For instance, we found that the Open Standards and Recommended Practices Findings Tool (OSFT) — a database for tracking the resolution status of identified foreign airport deficiencies — has gaps and its system for categorization does not result in sufficient specificity of information related to security deficiencies’ root causes and corrective actions. Root causes represent the underlying reason why an airport is not meeting an ICAO standard and, according to TSA documentation, fall into three general categories: lack of knowledge, lack of infrastructure, and lack of will. For example, a foreign airport might fail to meet an ICAO standard because of lack of knowledge stemming from insufficient training programs or a high rate of staff turnover. According to OGS officials, an understanding of root causes is important because the challenges to addressing security deficiencies at foreign airports vary extensively from country to country and corrective actions need to be tailored to addressing the unique root causes of deficiencies that TSA identifies. Corrective actions are efforts to mitigate security deficiencies and might include training and other capacity building efforts. Corrective actions can be designed to help a foreign airport add a new security capability, enhance an existing capability, or increase the deployment of security measures. Although root causes and corrective actions are important variables for decision making, we found that the OSFT has gaps in this information. TSARs—the primary liaisons between the U.S. government and foreign governments on transportation security issues—are responsible for following up on progress made by foreign officials in addressing security deficiencies identified during TSA assessments. Specifically, the Foreign Airport Assessment Program SOP states that, for each foreign airport assessed, the assigned TSAR is responsible for entering and updating key information in the OSFT, including root cause and corrective action information. According to the SOP, a thorough understanding of the underlying reasons for each deficiency is critical to selecting the appropriate mitigation activities. However, we found that around two thirds of fiscal year 2016 records in the OSFT exhibited empty fields pertaining to root cause or recommended corrective action. More specifically, root cause data and recommended corrective action data were each not recorded for 70 percent of findings. During our interviews with TSARs, half (4 out of 8) indicated that they believed the OSFT to be a cumbersome tool that has limitations for recording status updates, among other issues, or that they preferred to use other mechanisms, such as spreadsheets stored locally, in order to avoid using the OSFT for certain functions. TSA headquarters officials indicated that OGS began requiring staff to record root cause and corrective action information in 2015 and that institutionalizing this requirement to facilitate consistent data entry will take time. However, complete data on root causes and corrective actions would help TSA systematically monitor airport performance in addressing deficiencies and leverage information for decision making regarding capacity development. For example, with complete information TSA would be in a better position to determine the extent to which airports were able to effectively close security vulnerabilities based on TSA’s capacity building efforts, as well as conduct trend analysis within and across its four regions, including identifying potential linkages between root causes and corrective actions. Specifically, TSA could determine the extent to which corrective actions seem to align best with certain root causes. For example, while training might be an appropriate remedy if foreign airport personnel lack knowledge, it might not be an appropriate solution for lack of will. We also found that the OSFT has limitations related to the categorization of root causes and corrective actions. The Foreign Airport Assessment Program SOP indicates that root causes may relate to three broad categories, as explained earlier, and twelve subcategories: aviation security infrastructure, communication, cultural factors, human factors, management systems, physical infrastructure, procedures, quality control, resources, supervision, technology, and training. However, the OSFT does not include a field to categorize root causes according to these subcategories or other more specific areas. As a result, it does not capture more granular information that would better explain the specific root cause of an identified security issue. Moreover, information on recommended corrective actions is stored entirely in OSFT narrative fields without a drop-down list or other type of categorization mechanism. For example, according to OSFT data, in one Western Hemisphere region country, inspectors observed insufficient employee screening and access control. The recommended corrective action—”Fencing around the terminal area will be enhanced and airport personnel counseled about employee screening”—would be difficult to include in quantitative analysis without manual intervention. The OSFT also includes a field for the final corrective action—how an airport ultimately resolved a security issue. However, the categories in the OSFT for final corrective action do not account for many key types of TSA’s mitigation efforts (e.g., training, loaning or donating equipment, and directing an air carrier to mitigate an airport vulnerability). Specifically, for fiscal year 2016, we found that the OSFT only included data for three high-level categories of final corrective actions: “airport authorities resolved,” “national authorities resolved,” and “other.” ARM staff stated that they recognize that the classification of data currently contained in the OSFT could be improved, but that they have not had an opportunity to address the issues because they have been focused on developing the newest release of GRADS. TSA staff also indicated that they are exploring opportunities to better classify data in future releases of GRADS. However, according to the Foreign Airport Assessment Program SOP, a thorough understanding of the underlying reasons for each deficiency is critical to properly selecting the appropriate mitigation activities. Moreover, federal internal control standards suggest that agencies should design information systems to obtain and process information to meet each operational process’s data requirements and to respond to the entity’s objectives and risks. By classifying information on root causes and corrective actions with additional specificity, and through a standard system of categorization that would allow for system- wide analysis, TSA would be better positioned to assure that corrective actions accurately address the specific, underlying reasons for security vulnerabilities. TSA’s foreign airport assessment and air carrier inspection programs play a vital role in ensuring the security of the aviation system. TSA has taken a number of steps to enhance foreign airport assessments and air carrier inspections since 2011, including targeting resources based on risk, strengthening access to foreign airports and the comprehensiveness of its assessments and inspections, and creating operational efficiencies. While TSA does not have authority to impose or otherwise enforce security requirements at foreign airports, the agency makes a concerted effort to help foreign airports improve their security posture and address security deficiencies identified during assessments. Moreover, TSA is commonly able to resolve air carrier security deficiencies with on-the-spot counseling. While TSA uses various mechanisms for capacity building, better data management would help strengthen analysis and decision making. Specifically, fully capturing and more specifically categorizing data on the root causes of security deficiencies that TSA identifies and the associated corrective actions would provide the agency with a more comprehensive understanding of the security environment at foreign airports. For example, TSA could leverage this information for trend analysis, including evaluating potential linkages between root causes and corrective actions, and determining the extent to which airports that received specific types of capacity development services were able to close security vulnerabilities. Accordingly, TSA would have better visibility over the different types of capacity development that the agency offers and the overall return on investment for these efforts. We are making the following two recommendations to TSA: The Assistant Administrator for the Office of Global Strategies should ensure that data regarding the root causes of security deficiencies and corrective actions are consistently captured in accordance with TSA guidance. (Recommendation 1) The Assistant Administrator for the Office of Global Strategies should update TSA’s data systems to include more specific categories for TSA’s data on the root causes and corrective actions related to security deficiencies. (Recommendation 2) We provided a draft of our report to DHS for its review and comment. DHS provided written comments, which are noted below and reproduced in full in appendix II. DHS concurred with both recommendations in the report and described actions underway or planned to address them. With regard to the first recommendation that TSA ensure that data regarding the root causes of security deficiencies and corrective actions are consistently captured in accordance with TSA guidance, DHS concurred and stated that TSA will use a new tool, the Vulnerability Resolution Tool (VRT), to capture and categorize root causes and corrective actions. During the next fiscal year, TSA plans to train its staff in the use and importance of the VRT, and estimates that it will complete this process by October 31, 2018. If TSA consistently captures root causes and corrective actions in the new tool, TSA’s planned actions would address the intent of the recommendation. With regard to the second recommendation that TSA update TSA’s data systems to include more specific categories for TSA’s data on the root causes and corrective actions related to security deficiencies, DHS concurred and stated that TSA plans to include more specific categories for root causes and corrective actions in a future iteration of GRADS, and expects to complete the updates by October 31, 2018. If fully implemented, these actions should address the intent of the recommendation. We are sending copies of this report to interested congressional committees and the Secretary of Homeland Security, the Secretary of State, the Administrator of the Transportation Security Administration, and the TSA Assistant Administrator for the Office of Global Strategies. In addition, the report is available at no charge on the GAO website at http://gao.gov. If you or your staff members have any questions about this report, please contact Jennifer Grover at (202) 512-7141 or groverj@gao.gov, or Jessica Farb at (202) 512-6991 or farbj@gao.gov. Key contributors to this report are listed in appendix III. The Aviation Security Act of 2016 includes a provision for GAO to review the efforts, capabilities, and effectiveness of TSA to enhance security capabilities at foreign airports and determine if the implementation of such efforts and capabilities effectively secures international-inbound aviation. This report (1) describes steps TSA has taken to enhance foreign airport assessments and air carrier inspections since 2011, (2) describes the results of TSA’s foreign airport assessments and air carrier inspections, and (3) examines steps TSA takes to address any deficiencies identified during foreign airport assessments and air carrier inspections. To collectively address all three objectives, we reviewed the relevant laws and regulations pursuant to which TSA conducts foreign airport assessments and air carrier inspections. We reviewed various TSA documents on program management and strategic planning and interviewed TSA officials located at TSA headquarters and in the field. We interviewed other federal and nonfederal stakeholders, such as the Department of State (State), the European Commission (EC), and airport and air carrier representatives. We outline the specific steps taken to answer each objective below. To obtain a greater understanding of the foreign airport assessment and air carrier inspection processes, including how TSA works with host nation officials and air carrier representatives, we accompanied a team of TSA inspectors during an air carrier inspection at an airport in Europe. We based our site selection on several factors, including the air carrier locations TSA had plans to inspect during the course of our audit work and host government willingness to allow us to accompany TSA. In addition, we spoke with officials at a separate European airport, including the airport operator and representatives from two air carriers. To understand how TSA assesses and manages its foreign airport and air carrier risk information, we obtained and reviewed documents on TSA’s methodology for assigning individual risk rankings (called tier rankings) to each foreign airport it assesses. TSA’s rankings are based on the likelihood of a location being targeted, the protective measures in place at that location, and the potential impact of an attack on the international transportation system. Airports are then categorized as high, medium, or low risk. We also reviewed TSA’s methodology for grouping air carriers based on risk, which is influenced by the foreign airport risk tiers. To describe the steps that TSA has taken to enhance foreign airport assessments and air carrier inspections since 2011, we reviewed various TSA documents on program management and strategic planning. Specifically, we reviewed TSA’s 2016 Foreign Airport Assessment Program Standard Operating Procedures (SOP), which prescribes program and operational guidance for assessing security measures at foreign airports, and informs TSA personnel at all levels of what is expected of them in the implementation of the program. We also reviewed the job aids that TSA inspectors use during each assessment and inspection, which ensure that the TSA-specified International Civil Aviation Organization (ICAO) aviation security standards and recommended practices (referred to collectively in this report as ICAO standards unless otherwise noted) and air carrier security program requirements are fully evaluated during each assessment. In addition, we reviewed TSA’s Office of Global Strategies (OGS) Strategic Plan for fiscal years 2014 through 2018, and documents describing changes to the OGS organizational structure since 2011. To obtain stakeholder views and perspectives on steps TSA has taken to enhance its foreign airport assessment program since 2011, we interviewed and obtained information from various federal stakeholders. Specifically, we interviewed OGS officials located in the Global Compliance (GC), Global Affairs, and Analysis and Risk Mitigation (ARM) directorates. In addition, we also conducted site visits to three of the six TSA regional operations centers (ROC), located in Reston, Miami, and Frankfurt, where we met with ROC managers, transportation security specialists (henceforth referred to as inspectors) who conduct TSA’s foreign airport assessments and air carrier inspections, TSARs who follow up on host governments’ progress in addressing identified security deficiencies, international industry representatives (IIR) who liaise with air carriers, and regional directors (RD). We based our site visit selections on the number and type of staff available at each location and geographic dispersion. We also conducted telephone interviews with personnel from the Honolulu ROC and other OGS staff stationed worldwide. In total, we interviewed 4 of the 6 ROC managers, 19 of the 94 inspectors, 8 of the 29 TSARs, 8 of the 16 IIRs, and all 4 RDs. During these interviews, we discussed these officials’ responsibilities related to the assessment and inspection programs. To describe the results of TSA’s foreign airport assessments and air carrier inspections, we interviewed TSA officials on the results of its evaluations, obtained and reviewed relevant program documents, and conducted our own independent analysis of TSA’s assessment and inspection results. Specifically, we obtained and reviewed TSA’s foreign airport assessment program vulnerability results tracking sheet used by GC to compile and track current and prior-year assessment results. This tracking sheet included records of TSA’s compliance assessments for each airport that TSA assessed from fiscal years 2012 through 2016. Specifically, the tracking sheet recorded assessment results for each of the ICAO standards used in the airport assessments, as well as an overall vulnerability score of 1 through 5 assigned after each assessment. This overall vulnerability score is a representation of compliance or noncompliance with all the ICAO standards against which TSA assesses foreign airports. We interviewed OGS officials on the steps taken to develop the tracking sheet, including how TSA manages and updates data. In addition, we conducted our own independent analysis of TSA’s assessment results from fiscal years 2012 through 2016, the five-year period since our previous review. Specifically, we analyzed data from TSA’s foreign airport assessment program vulnerability results tracking sheet to identify the number of airports in each vulnerability category by region. We also analyzed TSA assessment results data to determine the frequency with which foreign airports complied with particular ICAO standards, such as access control, quality control, passenger screening, and baggage screening, among others. For air carrier inspection results, we analyzed data from PARIS on each air carrier that TSA inspected from fiscal years 2012 through 2016. Our analysis included the overall level of compliance, as well as the frequency with which each air carrier complied with particular security program requirements, such as aircraft search and passenger screening. We also interviewed TSA managers, inspectors, and TSARs about their roles and responsibilities in determining and documenting assessment and inspection results. To assess the reliability of TSA’s assessment and inspection data, we reviewed program documentation on system controls, interviewed knowledgeable officials from OGS and checked TSA’s data for any potential gaps and errors. Based on our overall analysis of the data, we determined that the data were sufficiently reliable to provide a general indication, by type or category, of the standards TSA assesses against and the level of compliance, and frequency of compliance, for TSA’s foreign airport assessments and air carrier inspections over the period of our analysis. To examine the steps TSA takes to address deficiencies identified during foreign airport assessments and air carrier inspections, we interviewed ARM and other TSA staff. Specifically, we discussed the full range of options that are available to TSA for addressing airport and air carrier security deficiencies, including a variety of capacity development tools and collaboration with domestic agencies, such as State, and foreign partners, such as Australia, Canada, Chile, New Zealand, Singapore, South Africa, and the United Kingdom. During these interviews, we discussed the circumstances in which each option is typically used and the factors determining when an option is used. We also reviewed program management tools TSA uses to track and manage the status of foreign airport security deficiencies and records pertaining to capacity development assistance deliveries from fiscal years 2012 through 2016, including equipment loaned or donated, training courses provided, and technical assistance delivered. To obtain information on the extent to which TSA provided oversight of its assessment and inspection efforts, we obtained and reviewed various TSA program management documents and tools that TSA uses to track and manage information for the programs. Specifically, we reviewed the fiscal year 2017 Global Compliance Master Work Plan, which TSA uses to track its foreign airport assessment schedule, including when various airports are due to be assessed. We also reviewed the Open Standards and Recommended Practices Findings Tool, which the TSA Representatives (TSAR) use to monitor and track a foreign airport’s progress in resolving security deficiencies identified by TSA inspectors during previous assessments. In addition, we reviewed the tracking sheet TSA uses to compile and track airport assessment results, including individual airport vulnerability scores and information on which specific ICAO standards were in noncompliance. Finally, we reviewed the results of air carrier inspections that are contained in the inspections and investigations modules of TSA’s Performance and Results Information System (PARIS). To identify challenges affecting TSA’s foreign airport assessment program, we interviewed TSA officials, such as TSA’s Director of Global Compliance, and field officials located at the TSA ROCs about the challenges they experience obtaining access to foreign airports to conduct assessments, the performance of data management systems, and the provision of aviation security capacity development assistance to foreign governments. We also obtained their perspectives on foreign governments that have been reluctant to allow TSA inspectors to visit their airports. We also interviewed TSA’s Director of Global Compliance and headquarters and field staff on the agency’s use of databases and other tracking mechanisms to manage assessment and inspection results. In addition, we obtained the perspective of TSARs on challenges to ensuring that foreign airports address security deficiencies. We also interviewed officials within TSA’s Capacity Development Branch to better understand the scope and types of requests for assistance that they receive from foreign countries, the challenges that they experience in attempting to provide assistance, and their experience collaborating with State. We met with State officials to better understand how they coordinate with TSA through their Office of Anti-Terrorism Assistance and other related efforts aimed at assisting foreign partners’ capacity to secure their airports. In addition, we met with officials from the EC and the International Air Transport Association to discuss efforts and programs these organizations have in place to enhance international aviation security. In addition, during our interviews with ARM staff, we discussed the extent to which TSA uses information at its disposal to inform capacity development efforts. We also compared these efforts to criteria for obtaining and processing information in federal internal control standards. To identify opportunities for TSA to better leverage information to inform capacity development, we reviewed relevant program management documentation and tools that TSA uses to track and analyze assessment results. Specifically, we reviewed the 2016 Foreign Airport Assessment Program SOP and program management tools TSA uses to track and manage the status of foreign airport security deficiencies. We also reviewed our prior work concerning how risk- informed and priority driven decisions can help inform agency decision makers in allocating finite resources to the areas of greatest need. Information from our interviews with government officials and members of the aviation industry provide insight into their perspectives on TSA’s foreign airport assessment and air carrier inspection programs. However, this information cannot be generalized beyond those with whom we spoke because we did not use statistical sampling techniques in selecting individuals to interview. The performance audit upon which this report is based was conducted from August 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate, evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with TSA from September 2017 to December 2017 to prepare this nonsensitive version of the original sensitive report for public release. This public version was also prepared in accordance with these standards. In addition to the contacts above, Jason Bair and Chris Ferencik (Assistant Directors); Anthony C. Fernandez (Analyst-in-Charge); Bryan Bourgault; Elizabeth Dretsch; Jesse Elrod; Eric Hauswirth; Christopher Lee; Tom Lombardi; Amanda Miller; and Adam Vogt made key contributions to this report.", "summary": "Approximately 300 foreign airports offer last point of departure flights to the United States. TSA is the federal agency with primary responsibility for securing the nation's civil aviation system and assesses foreign airports and inspects air carriers to ensure they have in place effective security measures. While TSA is authorized under U.S. law to conduct foreign airport assessments, it does not have authority to impose or otherwise enforce security requirements at foreign airports. TSA is authorized to impose and enforce requirements on air carriers. The Aviation Security Act of 2016 includes a provision for GAO to review TSA's effort to enhance security at foreign airports. This report addresses (1) steps TSA has taken to enhance foreign airport assessments and air carrier inspections since 2011, (2) the results of TSA's foreign airport assessments and air carrier inspections, and (3) steps TSA takes to address any deficiencies identified during foreign airport assessments and air carrier inspections. GAO reviewed TSA program data, interviewed TSA officials, and conducted site visits to TSA field locations that manage assessments and inspections. The Transportation Security Administration (TSA) has taken steps to enhance its foreign airport assessments and air carrier inspections since 2011, including aligning resources based on risk, resolving airport access issues, making evaluations more comprehensive, and creating operational efficiencies. For example, TSA has implemented targeted foreign airport assessments in locations where risk is high and developed the Global Risk Analysis and Decision Support System to strengthen data analysis. In addition, TSA has increased the number of joint airport assessments with the European Commission. Specifically, TSA officials GAO met with indicated that TSA's strong relationship with the European Commission has afforded the agency excellent access to foreign airports in Europe and a better understanding of vulnerabilities at these locations, which has resulted in more comprehensive assessments. In its analysis of TSA foreign airport assessment results, GAO found that during fiscal years 2012 through 2016 there was considerable regional variation among last point of departure airports in the level of compliance with select International Civil Aviation Organization security standards and recommended practices. TSA attributed this regional variation to lack of airport resources or technical knowledge, among other factors. TSA officials also stated that while these challenges are not easy to overcome, agency efforts, such as training host country staff, can help foreign airports reduce their vulnerability scores over time. GAO's analysis of TSA's foreign airport assessment data confirmed that point by demonstrating that most foreign airports categorized with poor vulnerability ratings in fiscal year 2012 improved their vulnerability score in at least one follow-up assessment during fiscal years 2012 through 2016. Meanwhile, U.S. and foreign-flagged air carriers providing last point of departure service to the United States from foreign airports complied with all TSA security requirements in most inspections, and TSA was able to resolve the majority of security deficiencies it identified with on-the-spot counseling. In some cases, TSA inspectors submitted violations for investigation because the violations were considered serious enough to potentially warrant an enforcement action. TSA addresses identified deficiencies at foreign airports through capacity development, such as training and on-the-spot counseling. However, GAO found that TSA's database for tracking the resolution status of security deficiencies did not have comprehensive data on security deficiencies' root causes and corrective actions. In addition, the database lacked adequate categorization mechanisms. For example, while it captures three broad categories of root causes (e.g., lack of knowledge) it does not capture subcategories (e.g., supervision) that would better explain the root causes of security deficiencies. Fully collecting these data and improving the specificity of categorization would help TSA strengthen analysis and decision making. For example, TSA would be better positioned to determine the extent to which airports that received particular types of capacity development assistance were able to close security vulnerabilities. This is a public version of a sensitive report issued in October 2017. Information that TSA deemed to be sensitive is omitted from this report. To help strengthen TSA's analysis and decision making, GAO recommends that TSA fully capture and more specifically categorize data on the root causes of security deficiencies that it identifies and corrective actions. TSA concurred with the recommendations.", "document_type": "gao"}
{"report": "Securing U.S. borders is the responsibility of DHS, in collaboration with other federal, state, local, and tribal entities. CBP, a component within DHS, is the lead agency for U.S. border security, and one of its top priorities is preventing, detecting, and apprehending illegal border crossers, and interdicting other illicit cross-border activity. The U.S. Border Patrol is the CBP component charged with ensuring security along border areas between ports of entry. To secure the nearly 2,000-mile southwest border, Border Patrol divides responsibility for border security operations geographically among nine sectors, as shown in figure 1. Within each sector, Border Patrol agents at stations are responsible for patrolling and responding to emerging threats within defined geographic areas, using CBP-owned roads and a network of roads owned by other federal, state, local, tribal, and private landowners. Agents are to identify and report any needed maintenance and repair requirements of the roads they use to patrol and respond to threats, according to CBP officials. Within CBP, the Office of Facilities and Asset Management and Border Patrol each have offices that oversee the maintenance and repair of roads and other TI that Border Patrol agents need to conduct operations. Office of Facilities and Asset Management’s FM&E oversees the necessary environmental and real estate plans, maintenance and repair contracts, and funding distribution. Within Border Patrol, ORMD oversees operational planning by collecting and managing maintenance requirements identified by sectors. ORMD also collaborates with FM&E in determining the amount of funding and resources each sector needs to address identified TI maintenance needs. Within ORMD, the Director of TI and support staff oversee all TI requirements and programs across all Border Patrol sectors. The area along the southwest border is composed of federal, state, local, tribal, and private lands. Federal and tribal lands make up 632 miles, or approximately 33 percent, of the nearly 2,000 total border miles. State, local, and private lands constitute the remaining 67 percent of the border. Each of these entities, including CBP, owns and maintains roads that Border Patrol may use to patrol or to access TI along the border; however, Border Patrol’s ability to use these roads depends on various factors, including its statutory authorities. Border Patrol may access public roads—i.e., roads under the jurisdiction of a public authority such as a federal, state, local, or tribal entity, and open to public travel—to the same extent as other users. CBP may seek permission of the owner in order to use nonpublic roads (roads owned by a public entity but not open to the public) or private roads (roads owned by a private entity) located beyond 25 miles of the border. In addition, Border Patrol generally makes arrangements with landowners in order to address maintenance of their roads. As mentioned previously, owned operational roads are those roads that CBP owns, leases, or has an irrevocable interest in, and therefore has a right to maintain. Non-owned operational roads are roads that CBP may maintain through a license or permit, though the landowner may revoke the license or permit at any time. Therefore, CBP is not obligated to maintain these non-owned operational roads; any work to maintain and repair these roads is based on Border Patrol’s operational requirements. Certain authorities allow federal agencies to enter into agreements with other federal agencies for various goods and services. Under such authorities, CBP may be able to use its appropriated funds to contribute to the maintenance of public roads owned by other federal agencies, but not to the maintenance of public roads owned by state and local entities. State and local public roads, which CBP is under no obligation to maintain regardless of use, are not considered owned or non-owned operational roads, and therefore, are not included in the approximately 5,200 miles of roads used by CBP. Figure 2 shows an example of a CBP owned operational road providing direct access to CBP fencing, and figure 3 shows an example of a road owned by U.S. Fish and Wildlife Service and used by Border Patrol for patrolling. CBP received $25 million in fiscal year 2016 for necessary repairs to border fencing and border roads. For fiscal year 2017, CBP received an additional appropriation for operations and support, of which $22.4 million is for border road maintenance. CBP uses Comprehensive Tactical Infrastructure Maintenance and Repair (CTIMR) contracts to address maintenance of TI assets along the southwest border, including owned and non-owned operational roads. CTIMR contracts provide a mechanism for CBP to address both routine and urgent maintenance and repair of the roads Border Patrol uses for its operations by providing funds to contractors who perform the required maintenance. Routine maintenance and repair include work that is required due to normal wear and tear, deterioration due to age, and other damage not caused by severe weather events or suspected intentional sabotage. Urgent repair requirements are typically the result of severe weather events or suspected intentional damage. For the purposes of maintenance requirements and funding distribution, CBP divides the nine southwest border sectors into four work areas, with each work area operating under a separate CTIMR contract. The four work areas consist of the following sector groupings: (1) San Diego and El Centro sectors; (2) Yuma and Tucson sectors; (3) El Paso and Big Bend sectors; and (4) Del Rio, Laredo, and Rio Grande Valley sectors. CBP’s FM&E determines the contract amount for each work area over a 5-year contract period. Table 1 provides a breakdown of the cost incurred by CBP for road maintenance and repair by work area and sector for fiscal year 2016. Border Patrol generally has access to public roads to the same extent as other users, and has certain authorities to use other federal, state, local, tribal, and private owned roads. According to local, tribal, and Border Patrol sector officials, CBP uses and is sometimes the primary user of roads owned by states, counties, cities, and localities, but does not have a specific appropriation to engage in public improvements, including the maintenance and repair of such roads it uses for border security operations. Public roads. Border Patrol has access to public roads—those under the jurisdiction of and maintained by a public authority (federal, state, local, or tribal entity) and open to public travel—to the same extent as other users of such public routes. While Border Patrol has authority to use such public roads for border security operations, CBP is statutorily prohibited from maintaining and repairing nonfederal (state, local, county, and city) public roads because performing such work without a specific appropriation could violate the Anti-Deficiency Act and 41 U.S.C. § 6303 which prohibits the U.S. government from making or authorizing an expenditure exceeding available appropriated funds. To ensure access to TI in proximity to the border by way of lands that are owned by public entities but not open to public use, Border Patrol uses various different arrangements, including easements, special use permits, and multiple use agreements, to gain access to such property. For example, Border Patrol obtained various easements from a city located at the border, granting it access to strategic locations to conduct surveillance of high illegal traffic areas, according to the city’s public works director. Other federal agency roads. CBP may obtain a special use permit or enter into interagency agreements with other federal agencies to address maintenance and repair of federal roads and land. CBP may also enter into informal cooperative and undocumented arrangements with other federal agencies to access certain roads the agencies use for conducting their operations but that are not open to the public (e.g., administrative roads). For example, Bureau of Land Management (BLM) officials in Tucson, Arizona, told us that Border Patrol uses BLM administrative roads that are open to other law enforcement agencies in the area, but not to the public. According to these BLM officials, maintenance agreements or reimbursements are not needed from Border Patrol or the other agencies that use the roads. Further, Border Patrol has access to all federal lands, as necessary, under a January 2017 Executive Order that requires the Secretary of Homeland Security, the Secretary of the Interior, and other relevant agency heads to grant Border Patrol, as well as authorized state and local officers, access to such lands. Private roads. Border Patrol has statutory authority to, without a warrant, access private lands (i.e., privately owned or otherwise nonpublic roads and land), but not dwellings, within 25 miles of the international border to prevent illegal entry of foreign nationals. According to CBP FM&E officials, no further real estate action is required to access these roads; however, this authority does not permit CBP to maintain and repair such private roads. Access to private roads and land beyond 25 miles from the border generally requires a warrant or permission of the landowner, and all maintenance would be provided for in an arrangement with the landowner. CBP may seek to establish mutually beneficial relationships, including through various arrangements with private landowners, to use, and as appropriate, maintain and repair certain private roads based on Border Patrol’s operational requirements, such as to enhance Border Patrol’s ability to perform operations. These arrangements include, but are not limited to licenses and permits, which are written and revocable consent from landowners for CBP’s specified use of their land. CBP may seek to maintain and repair the privately owned roads leading to TI located in proximity to the border. To do so, CBP secures land rights to maintain and repair these access roads through fee interests, easements, and leases. Border Patrol leverages various mechanisms to ensure access to the privately owned roads it needs to conduct its operations on the southwest border. For example, Border Patrol officials told us that they cultivate and maintain good relations with private landowners to ensure access to roads. CBP addresses maintenance of roads, as well as all other TI it uses for its operations, through CTIMR contracts and agreements. CTIMR road maintenance involves a collaborative process that uses a prioritization scheme which, according to CBP’s 2015 Roads Policy Memo, ensures that in an environment of limited funding, CBP would fund maintenance and repair of owned operational roads first, followed by non-owned operational roads, where permitted. According to CBP officials, this process entails the following three steps: Step 1: Border Patrol stations identify road maintenance requirements on an ongoing basis and provide those requirements to sector and headquarters leadership for approval. Step 2: Once approved, sector road maintenance requirements are forwarded to FM&E for real estate and environmental clearance. Step 3: Environmentally cleared sector road maintenance requirements are prioritized and added to quarterly CTIMR maintenance work plans as the plans are developed. According to CBP FM&E officials, in order for sectors’ requested road maintenance to occur, three criteria must be met. First, CBP must obtain an agreement from the landowner (for non-owned operational roads) authorizing maintenance of the road. Second, the road must undergo an environmental analysis and obtain environmental clearance. Third, appropriated funds must be available for the maintenance. If all three criteria are met, CBP places the road requirement in its Work Management System—a database CBP uses to track and oversee all TI maintenance and repair work for its work plans, which are prioritized and executed every 90 days. Sector officials are responsible for reviewing each work plan and prioritizing maintenance and repair that are critical to border security operations, and communicating any updates to CBP officials for execution. Road requirements that are not funded in a given period are pushed to the next work plan, according to CBP officials. CBP enters into various arrangements with federal, state, and local agencies and with some private landowners to maintain the roads it uses for its operations; however, it has not consistently documented its arrangements with these landowners or shared the arrangements it has documented with Border Patrol sector officials. Officials of six of the nine southwest Border Patrol sectors we contacted indicated that they do not document all arrangements for private road maintenance, while officials of one sector said they were unsure if all such arrangements were documented. Federal, state, and local agencies. CBP has documented arrangements with federal, state, and local agencies, including, but not limited to, interagency agreements and memorandums of understanding (MOU) with other federal agencies, and easements with state and local agencies. For example, CBP has an agreement with the U.S. Forest Service, through which it allocates $1.5 million to the U.S. Forest Service annually to maintain roads the Border Patrol Tucson sector uses in the Coronado National Forest. Tucson sector officials said that providing the funding to the U.S. Forest Service to do the actual road maintenance was less expensive than paying a private contractor to do the maintenance. This process is also more efficient because U.S. Forest Service employees are more familiar with the roads and forest area, according to sector officials. CBP also entered into an MOU with the National Park Service in 2012 that authorizes CBP to maintain and repair certain roads that Border Patrol uses for its operations in the Organ Pipe Cactus National Monument in southern Arizona. Although CBP has arrangements with some landowners to address road maintenance, it has not consistently documented arrangements with all such owners. Further, CBP has not shared documented arrangements with all relevant Border Patrol sector officials, including officials responsible for prioritizing sector road maintenance funding needs, which could hinder efforts to maintain roads. Officials of six of the nine southwest Border Patrol sectors we contacted indicated that they do not document all arrangements for private road maintenance while officials of one sector said they were unsure if all such arrangements were documented. Tucson sector officials told us that their sector works with other federal, state, local, tribal, and private landowners to address road maintenance; however, such maintenance is not always addressed through written arrangements. For example, the sector has documented agreements with the Arizona Department of Transportation for maintenance of 11 checkpoints Border Patrol has established on its roads. Conversely, it does not have a written agreement with the Tohono O’odham Nation, a federally recognized tribe, whose reservation straddles the border. Rather, sector officials have had informal arrangements with the tribe and the Bureau of Indian Affairs (BIA) for several years on maintenance of several of the tribe’s roads, including two frontage roads which BIA manages and Border Patrol uses routinely for its operations. Border Patrol sector officials cited various reasons for using and addressing non-owned operational road maintenance without documenting arrangements with the road owners. For instance, officials noted that maintaining roads can facilitate good relations with landowners thereby enabling Border Patrol’s access to roads. Officials also explained that keeping roads in good working condition, even in the absence of a documented agreement, is mutually beneficial to both Border Patrol and landowners. For example, according to Yuma sector officials, the sector addresses maintenance of the Marine Corps roads it uses for its operations although it does not have a documented agreement for maintenance. Yuma sector officials said that CBP FM&E drafted an MOU between CBP and the Marine Corps in 2013 that would allow Border Patrol maintenance personnel (or personnel contracted by Border Patrol) to access border roads for maintenance; however, the Department of Navy, on behalf of the Marine Corps, has not yet signed the MOU. In the absence of a written agreement, a CBP employee at Yuma sector performs maintenance on Marine Corps roads, at Marine Corps’ request, because according to officials, Border Patrol agents benefit from accessible roads. In some instances, CBP has documented arrangements with federal agencies, but has not shared those arrangements with all relevant Border Patrol sector officials, particularly those responsible for planning for and prioritizing sector road maintenance needs. For example, road maintenance planning officials at Big Bend sector told us that they do not have a documented agreement with the Big Bend National Park in western Texas to address maintenance and do not contribute toward maintenance of any of the park’s roads which Border Patrol uses routinely. They added that FM&E is working on a current project to determine how CBP and the National Park Service could share maintenance costs for their joint use of the park’s roads—an agreement that could extend to other parks in other sectors. However, CBP later provided us with a copy of an agreement it entered into with Big Bend National Park in July 2016. The agreement was effective from October 2016 through September 2017; however, Big Bend sector officials were not aware of this agreement at the time of our March 2017 meeting with them. Similarly, Yuma sector officials said that Border Patrol also helps maintain a DOI-owned road the sector uses routinely for its operations without a written agreement, because it is mutually beneficial and helps maintain good relations with DOI. However, CBP officials later provided us with a copy of an agreement with BLM, a component of DOI, which addresses maintenance of the BLM roads in question. The agreement, which was effective from September 2016 through September 2017, was executed in August 2016, 6 months prior to our March 2017 interview with Yuma officials; however, sector officials were not aware of the agreement at the time of our interview. In addition to CBP not consistently sharing documented arrangements with relevant Border Patrol sector officials, we identified instances where written maintenance agreements between CBP and the federal landowners had expired, despite Border Patrol’s continued need to access the roads covered by the expired agreements. For example, the U.S. International Boundary and Water Commission entered into a maintenance agreement with CBP in December 2005 for the resurfacing of approximately 100 miles of a levee road the Rio Grande Valley sector uses along the Rio Grande River. While this agreement expired in September 2015, the commission was allowing Rio Grande Valley sector officials to continue using the levee road at the time of our January 2017 visit to the sector, while a new MOU was being negotiated. International Boundary and Water Commission officials characterized the undocumented agreement Border Patrol was operating under as a verbal “gentleman’s agreement.” Similarly, El Centro sector officials told us that the sector does not have a documented agreement with BLM for use and maintenance of certain BLM roads and land. According to sector officials, agents work to maintain good relations with BLM even though Border Patrol can and does leverage its statutory authority and law enforcement mission to access BLM roads and land. CBP officials later provided us with a copy of an agreement with BLM that addresses maintenance of BLM roads in El Centro sector; however, the agreement had expired in December 2016, 3 months prior to our meeting with El Centro sector officials. Private landowners. CBP has obtained licenses from some, but not all, of the private owners whose roads the agency maintains. Also, it has not consistently shared the documented road maintenance arrangements it has with private landowners with Border Patrol sector officials. For example, CBP obtained a revocable license in July 2015 from a private gravel company that allows the Laredo Border Patrol sector to maintain and repair roadways on the company’s property for use in patrolling the border area. Laredo sector officials stated that sometimes they receive pushback from landowners regarding Border Patrol accessing their land, but in general, most landowners want Border Patrol on their property. Conversely, El Centro and El Paso sector officials reported that they do not have documented license agreements with private landowners regarding the maintenance of privately owned roads. In the El Centro sector, officials stated that they typically have verbal and not documented agreements with private landowners for maintenance. These officials stated, however, that documenting agreements would provide a clearer understanding of how privately owned roads are to be maintained. A number of factors contribute to the lack of documented road maintenance arrangements between Border Patrol and private landowners. First, some landowners choose not to pursue a license agreement with Border Patrol to address maintenance of their roads as a condition of access to the roads because they support Border Patrol’s mission and need the security provided by the agency. In these instances, landowners have no concerns about Border Patrol agents accessing their land without a documented agreement. For example, five private landowners we met with individually, as well as others we met with in three separate community group meetings, told us they did not have a documented license agreement with Border Patrol; but some of them nonetheless allow Border Patrol to continue using their roads without addressing maintenance. However, one private landowner we interviewed told us that regardless of whether a ranch owner wants Border Patrol agents on his or her property for the security they provide, the additional money the owner must spend to maintain his or her roads used by Border Patrol is a financial burden. Second, some landowners are not aware that Border Patrol can enter into arrangements with them to address maintenance of their roads. For example, two of the five landowners who lack documented license agreements with Border Patrol told us this. Third, some landowners are interested in maintenance agreements but have not received them. For example, three landowners told us they had requested an agreement to address maintenance of their roads; however, Border Patrol had not worked with them on such an agreement. Two of these landowners said they generally incur an additional maintenance cost due to Border Patrol’s regular use and lack of maintenance of their roads. For example, on our site visit to the Tucson sector, one landowner told us that Border Patrol uses approximately 37 miles of road on his ranch without a written license agreement to maintain the roads, although he had requested one from Border Patrol. He estimated that he spends approximately $3,000 per mile annually to repair the roads that Border Patrol predominantly uses. He, as well as two other landowners we interviewed, told us they have considered preventing Border Patrol from using their roads. Fourth, some private landowners do not want a documented maintenance agreement with Border Patrol. According to Border Patrol sector officials, some of these landowners would rather not have to be in compliance with any environmental regulations that may come with signing a formal license agreement with a federal agency and instead prefer a “handshake agreement.” In addition to not consistently documenting arrangements, Border Patrol sectors were not consistently aware of the documented arrangements CBP has with private landowners. For example, Big Bend sector officials told us that CBP does not have a documented license agreement with any private landowner in their sector. According to sector officials, the sector consists predominantly of private land, a vast majority of which is located beyond 25 miles of the border and therefore outside the area for which Border Patrol does not need a warrant to access private land. As such, to prevent these owners from denying access to their roads, sector officials told us they try to maintain good relationships with the owners of the roads Border Patrol uses but does not maintain, by addressing damage agents cause to their roads. Big Bend sector officials added that they discuss and verbally agree with landowners on any required road maintenance, relying on the relationships agents have established with those landowners to come to agreement. However, CBP headquarters officials subsequently provided us copies of five license agreements, all executed in August 2016, that CBP has with private landowners in the Big Bend sector. CBP officials also told us that an additional two license agreements were in the process of being finalized. They added that Border Patrol’s ranch liaisons, who serve as Border Patrol’s conduits to landowners, are typically aware of these and other license agreements with landowners in their sectors, and are responsible for making other sector officials aware of the existence of the agreements. We asked CBP FM&E and Border Patrol officials why arrangements for road maintenance are not consistently documented or shared with Border Patrol sectors. Officials from CBP FM&E, the office primarily responsible for managing documented road maintenance arrangements, including license agreements, said that agreements are documented based on operational need by Border Patrol and added that FM&E works with Border Patrol sectors to determine which roads need licensees. They also stated that all licenses and agreements are held in the FITT system and tracked in the eGIS. Officials from ORMD provided the following rationales regarding documenting and sharing agreements. First, ORMD officials stated that license agreements for road maintenance with private landowners are managed on a case-by-case basis, depending on the needs of the landowners and the Border Patrol sector. The standard is that a road must have both real estate and environmental clearance prior to receiving maintenance and repair. Second, according to these officials, not every legacy road license agreement has been transitioned over to CBP’s new system for documenting road maintenance, which may explain why neither the owner (especially of land that has been passed on from one generation to the next) nor sector officials know it exists and seek to renew it. In other instances, some historical use agreements have yet to be formally documented. According to ORMD officials, the operational impact to Border Patrol of undocumented agreements can be determined only on a case-by-case basis and will likely depend on the location of the road and the ability to use adjacent alternate roads. They added, however, that in general, the lack of documentation can slow Border Patrol’s access to some roads. ORMD officials stated that in the absence of documented agreements, Border Patrol takes great effort in maintaining relationships with landowners to ensure continued access to the roads it needs. In cases where landowners are apprehensive about entering into formal license agreements with the government, Border Patrol’s ranch liaisons continue to work with landowners to further engage the landowners about entering into a documented agreement. Standards for Internal Control in the Federal Government requires that agencies clearly document and communicate all transactions and other significant events, and make the documentation readily available for examination. According to these standards, the documentation may appear in management directives, administrative policies, or operating manuals and may be in paper or electronic form. Those standards also require that management internally communicate the necessary quality information throughout an agency, using established reporting lines to achieve the agency’s objectives. Without documenting and communicating the arrangements it has with landowners, Border Patrol has no record of what was agreed to with owners in terms of maintenance of roads, which could hinder Border Patrol efforts to access and maintain certain roads. Developing a policy and related guidance for documenting arrangements with landowners, as needed, and ensuring that the documented agreements are shared with all relevant Border Patrol sector officials could help Border Patrol work with road and land owners more consistently to address road maintenance. Such a policy could also better provide opportunities to owners who want formalized arrangements, and enhance the sectors’ ability to plan for road maintenance requirements. Border Patrol uses any funding that remains after owned operational road requirements are addressed to maintain non-owned operational roads; however, Border Patrol has not clearly documented or shared the process and criteria it uses for prioritizing maintenance of the non-owned operational requirements with sector officials. After distributing CTIMR funds to address its owned operational road maintenance, there are thousands of miles of non-owned operational roads that do not receive funding for maintenance. CBP FM&E officials explained that there is not a dedicated budget for non-owned operational roads, and therefore, not sufficient funding to address all the roads in need of maintenance. Also, because CBP does not collect data on the frequency of its road use, CBP is limited in its ability to effectively dedicate funding for road maintenance. The funding to address maintenance and repair of non-owned operational roads is derived from two main sources. First, CBP has the option of redistributing excess funding from any unneeded owned operational road maintenance project, among the sectors. For example, if the roads in Tucson sector are not damaged as much as anticipated during the annual monsoon season, CBP can redistribute funds originally designated for Tucson sector for other road maintenance projects in other sectors within the same work areas. The redistribution of such funds is determined by Border Patrol’s Director of TI. Second, officials said that if funding from an additional appropriation is made available, as was the case in fiscal year 2016, they can use it to address non-owned operational road maintenance. Border Patrol makes decisions on how to prioritize maintenance of non- owned operational roads; however, the process and criteria it uses for making such funding decisions are not clearly documented and are not shared with Border Patrol sector officials. During the course of our review, we requested that ORMD provide a description of its prioritization process both verbally and in writing. ORMD officials provided us with a written description that included the following six steps for prioritizing non-owned road maintenance: Step 1: Review sectors’ past year priorities utilizing a road requirements working group composed of representatives of all divisions of the three Border Patrol directorates. Step 2: Receive and review planning guidance from Border Patrol senior leadership. Step 3: Identify current and emerging threats. Step 4: Review State of the Border Risk Methodology for updated risk levels. Step 5: Draft priority lists, utilizing the road requirements working group. Step 6: Brief, adjust, and obtain concurrence for priority lists utilizing the road requirements working group and executive governance. The document ORMD prepared for us also cites various criteria for making funding decisions about non-owned roads, including whether each proposed road requirement is considered a vulnerability. If it is considered a vulnerability, ORMD determines whether it is documented in the Capability Gap Analysis Process, and how the vulnerability ranks among other identified vulnerabilities within the station and sector where the road is located, and in the nation as a whole, to inform leadership. Further, according to the document, ORMD officials determine the urgency of funding the road requirement and whether it can be funded given available resources. ORMD officials identified various other factors that go into the decision- making process for prioritizing non-owned road maintenance. However, these factors were different from those criteria included in the document they prepared for us. For example, ORMD officials said that when prioritizing sectors’ non-owned road maintenance, planners must first consider sectors’ ranking on Border Patrol’s annual investment prioritization list, which is based on intelligence, threat level, and other information pertaining to each sector. ORMD officials stated that this list serves as a starting point for the decision-making process to prioritize sectors’ non-owned operational road maintenance requirements. Officials added that the investment prioritization list is intended to help them with the six-step maintenance prioritization process described above; however, not all factors they consider when making the decision as to which non-owned operational roads to maintain in each sector are documented. They explained that the majority of their personnel have been trained on the road maintenance planning process and are familiar with all factors that go into the decision-making process. ORMD officials said that sectors’ investment prioritization rankings are not shared with the sectors. They explained that they prefer to not share the list or sectors’ ranking with the sectors because this information is intended to guide their decision-making, but is not the only factor they use in determining sectors that should receive remaining funding for non- owned operational road maintenance. None of the nine sector officials we contacted reported that they were aware of the process and criteria ORMD uses to prioritize and fund maintenance of non-owned operational roads. Rio Grande Valley sector officials told us that funding of maintenance requirements for the Rio Grande Valley sector takes priority over funding of other sectors’ non- owned operational road requirements. However, these officials stated that they were unsure why this was the case, primarily because Border Patrol had not shared the process and criteria it uses for non-owned operational road maintenance decision-making. Standards for Internal Control in the Federal Government requires that agencies clearly document all transactions and other significant events, and make the documentation readily available for examination. According to these standards, the documentation may appear in management directives, administrative policies, or operating manuals and may be in paper or electronic form. Those standards also require that management internally communicate the necessary quality information throughout an agency, using established reporting lines to achieve the agency’s objectives. By clearly documenting and communicating the process and criteria it uses for making decisions on funding non-owned operational requirements, ORMD could better ensure that sector officials are aware of the process and criteria, and can therefore better plan for and anticipate funding to meet their sector road maintenance needs. Moreover, documenting and communicating the process and criteria by which it makes non-owned operational road requirements funding decisions would ensure Border Patrol has a record of the process not dependent on the persons with current knowledge of the process being in the same positions. Border Patrol sector officials we interviewed reported that poorly maintained public roads negatively affect their ability to conduct security operations. Officials from six of the nine southwest border sectors reported that poorly maintained public roads negatively affect their ability to respond to threats because of limited road access or increased response times, and cause additional wear and tear on vehicles. For example, El Paso sector officials said that a 14-mile stretch of a public, county road they use to access a forward operating base is severely rutted, limiting agents’ ability to access the southernmost points of their patrol area. In addition, officials from Laredo sector told us that a 40- mile county-owned road in the western part of the sector is in such poor condition agents cannot always use it. The alternative route agents take adds approximately 90 minutes to their patrol time. Laredo sector officials also said that when agents do use roads like this one, it results in wear and tear on vehicles. Laredo sector officials reported that they had to contract for outside mechanics as a result of additional demands for vehicle repairs. Figure 4 documents the poor condition of the county road in Laredo sector. The extent to which Border Patrol operations are negatively affected by the poor conditions of certain public roads is unknown because, according to CBP and Border Patrol officials, Border Patrol does not collect or maintain data on the extent of its use of any non-owned roads, including public roads. According to officials, Border Patrol does not collect such data because it does not make road maintenance decisions based on how frequently it uses a road, but rather, on how critical the road is to its operations. Border Patrol officials said that they have assessed various ongoing or planned CBP data collection initiatives that Border Patrol could leverage to collect data that could identify how often it uses non-owned roads. For example, officials with CBP Enforcement Systems Division—the office responsible for integrating technology initiatives with operations in support of Border Patrol’s mission—said that CBP’s Blue Force initiative—a method, usually using Global Positioning System (GPS), of tracking the locations in real time of operational assets, including vehicles and agents, to better coordinate operations—would collect GPS tracking data. However, Border Patrol officials stated the Blue Force initiative and other GPS tracking initiatives have not received all planned funding amounts. As CBP and Border Patrol officials said they do not have data that identify the extent of Border Patrol’s use of non-owned roads, we gathered examples from each of the nine southwest Border Patrol sectors of state, county, city, and tribal public roads in poor condition that CBP is unable to maintain and that sector officials said negatively affect their ability to conduct operations. Table 2 provides examples of the public roads sector officials identified, including a description of the roads, and how the road conditions negatively affect Border Patrol’s operations. CBP’s inability to address the maintenance of certain public roads Border Patrol regularly uses can negatively affect Border Patrol’s relations with local governments, according to CBP officials. Officials from two counties and one tribe we spoke with told us that in certain rural areas along the border, Border Patrol uses some public roads heavily or is the primary user, and its use creates more wear and tear on the roads than would ordinarily be caused by general public use. These officials said that their agencies are responsible for fully funding required maintenance of the roads they own; however, they may not address needed maintenance for two reasons. First, their agencies do not have sufficient funding because they do not have the necessary tax base to generate funds for extensive road maintenance. Second, with limited funding, agencies may prioritize roads the general public uses more frequently over rural roads used regularly by Border Patrol. These county officials and Border Patrol sector officials told us that CBP’s inability to offer any maintenance assistance for public roads Border Patrol needs for operations makes collaboration with local governments challenging and hurts Border Patrol’s credibility. For example, officials we met with in an Arizona county identified a 5-mile stretch of road within their county that Border Patrol uses frequently because it provides access to the border. County officials told us they currently spend $23,000 more each year to maintain the 5-mile road than they would typically spend on a similar stretch of road as a result of the wear and tear they attribute to Border Patrol’s use. Figure 5 shows potholes and deteriorating shoulders on the county road. In addition, officials from the Tohono O’odham Nation told us they do not have sufficient BIA funding to maintain a 28-mile, major, public thoroughfare leading to a Border Patrol forward operating base and the border. Tucson sector officials said they are likely the primary user of the southern end of the road and may create heavy wear and tear. These officials reported that BIA would require approximately $14.5 million to repair the 28-mile road; however, BIA receives approximately $26 million for road repairs annually to cover 29,000 miles of roads under its jurisdiction. Figure 6 shows the eroded condition of this tribal road. Officials from the Arizona county and tribe have requested Border Patrol’s assistance in maintaining public roads. As of July 2017, however, Border Patrol had not provided such assistance. Border Patrol sector officials also said relations between Border Patrol and local border communities can be negatively affected by poor road conditions, because the communities attribute the conditions to Border Patrol’s use. These relations are important as Border Patrol relies on good relations with communities to access roads owned by private landowners in the community to conduct operations, according to Border Patrol officials. Members of a community coalition in Arizona that meets regularly to discuss options for addressing maintenance of a poorly maintained public road that Border Patrol uses routinely told us that Border Patrol’s use of the public road creates conditions that negatively affect the local community and damage relations with Border Patrol. Similar to the negative effects Border Patrol officials reported, members of this community coalition told us they experience slower response times by emergency response vehicles and damage to vehicles from poor road conditions, resulting in higher vehicle maintenance costs. In addition, these private landowners told us poor road conditions have negatively affected the local economy. For example, residents of a town we met with that is located near recreational amenities reported a decline in tourism revenue. They stated that, in their view, the poor condition of roads Border Patrol routinely uses has contributed to declines in tourism. CBP and Border Patrol officials have discussed two options that, if implemented, could offer possible mechanisms for addressing maintenance of nonfederal public roads. However, officials also discussed challenges each option would present to CBP, and CBP has not assessed these or other options for addressing maintenance of the state, county, city, and other local roads it uses for its operations. First, CBP officials told us they have considered seeking a specific appropriation to maintain state and local (i.e., nonfederal) public roads through financial or labor assistance. However, CBP officials said that involvement in public road maintenance may raise liability considerations and potential conflicts with the agency’s primary mission. For example, CBP officials indicated that if CBP maintained nonfederal public roads, it could be subject to negligence claims in relation to the repairs it conducts. Additionally, CBP would require additional resources to negotiate necessary contracts with public authorities to ensure they spend money appropriately and to oversee the network of their roads that could be necessary for CBP’s operations, according to officials. In addition, the time and resources spent on road maintenance could divert Border Patrol from its primary mission of securing the borders, according to CBP officials. Second, CBP and local officials we met with discussed two grant options that could be informative in considering options to address the maintenance of public roads Border Patrol uses routinely. While the specific grants discussed may not apply to CBP or road maintenance, the officials provided them as examples of grants that promote cooperation between federal agencies and local governments. First, after securing necessary legal authorities, CBP could establish a grant program, which would allow CBP to provide funding to state and local entities for road maintenance. Officials suggested that such a program could also allow the public entities that own the roads to conduct the maintenance themselves, alleviating Border Patrol’s liability and resources concerns. For example, Border Patrol officials discussed the success they have experienced using Operation Stonegarden to leverage state and local resources for border security while building relations with local law enforcement. Operation Stonegarden provides funds for joint CBP, Border Patrol, and federal, state, local, and tribal law enforcement agency efforts to secure U.S. borders. These officials offered that a similar program could enable CBP to provide funding to public entities to maintain certain roads. Second, CBP and local officials identified federal funding for road maintenance available to public agencies and executed through other federal agencies that CBP may be able to contribute to. For example, officials of a public water drainage district and town we met with said they had previously applied for a Federal Lands Access grant. The Federal Lands Access Program supplements state and local resources for public roads, among other transportation related infrastructure, with an emphasis on high-use recreation sites and economic generators. The Federal Lands Access Program requires applicants to provide at least a 20 percent match of the project cost. Officials from the public water drainage district and town said another local public entity planned to help it with the match for this grant. If Border Patrol had an appropriation for non-owned road maintenance, it could potentially help public entities, like the water drainage district, meet the match for federal grants. As of July 2017, CBP and Border Patrol have not assessed or implemented any of the options described above for two predominant reasons. First, CBP officials said the options each have accompanying challenges, in addition to the liability and management issues discussed above. For example, an appropriation to maintain public roads would not likely be sufficient to cover all road maintenance for state, local, and tribal roads Border Patrol uses, according to CBP officials. They added that limited funding to maintain the roads would put CBP in a position to prioritize some public roads over others, which may further strain relations with some public entities. Second, as discussed above, CBP officials told us they do not currently have data that demonstrate the extent to which Border Patrol relies on all non-owned roads, including public roads, to conduct its operations. CBP officials also said they do not keep data on the condition of roads owned by public entities. Without data on CBP’s use of non-owned roads, determining a maintenance solution that uses an appropriate amount of resources would be challenging. Standards for program management call for program managers to assess programs on an ongoing basis. To ensure continued success, program managers can use feasibility studies to determine whether implementing program changes could help mitigate any negative impacts. Assessing the feasibility of options to ensure adequate maintenance of nonfederal public roads, where necessary, including data needs for determining the extent of its reliance on non-owned roads for border security operations, could lead to a possible solution for enhancing Border Patrol’s operations and its community relationships. Border Patrol’s access to roads plays a key role in its ability to secure the nation’s land borders from terrorism and other threats. While Border Patrol has entered into maintenance arrangements with the federal, state, and private landowners whose roads it uses for its operations, CBP and Border Patrol officials told us they have not consistently documented these arrangements because the need for an agreement with a landowner is determined on a case-by-case basis. By not documenting the arrangements it has with landowners, Border Patrol has no record of what was agreed to with owners in terms of maintenance of roads, which could hinder Border Patrol efforts to access and maintain certain roads. Similarly, Border Patrol has not clearly documented or shared its process and criteria for determining which non-owned roads to maintain with its limited funding. By not clearly documenting and communicating the process and criteria it uses for making decisions on funding non-owned operational requirements, ORMD cannot reasonably ensure that sector officials are aware of the process and criteria, and therefore cannot ensure adequate planning for and anticipation of funding to meet sectors’ road maintenance needs requirements. In addition, Border Patrol generally has access to public roads and has certain authorities to use other nonpublic federal, tribal, and private owned roads; however, it does not have a specific appropriation for public improvements. Border Patrol agents reported experiencing negative effects to their operations, such as delayed response times, from using public roads that are generally in poor condition due to Border Patrol’s use and inability to maintain the roads; however, CBP has not assessed options for maintaining these roads, partly because it does not collect data that indicates the extent of its reliance on all non-owned roads. Without assessing options, including data needs, that may exist for addressing maintenance of nonfederal public roads, CBP may be missing feasible opportunities for addressing maintenance of the roads, thereby foregoing an opportunity to enhance Border Patrol’s ability to rapidly respond to threats at the border. We are making the following three recommendations to CBP: The Commissioner of CBP should develop and implement a policy and related guidance for documenting arrangements with landowners, as needed, on Border Patrol’s maintenance of roads it uses to conduct its operations, and share these documented arrangements with its sectors. (Recommendation 1) The Commissioner of CBP should clearly document the process and criteria for making decisions on funding non-owned operational requirements and communicate this process to Border Patrol sectors. (Recommendation 2) The Commissioner of CBP should assess the feasibility of options for addressing the maintenance of nonfederal public roads. This should include a review of data needed to determine the extent of its reliance on non-owned roads for border security operations. (Recommendation 3) We provided a draft of this report to DHS, DOD, DOI, and USDA for review and comment. DHS agreed with our three recommendations. The department’s response is reprinted in appendix II. DHS and DOI also provided technical comments that we incorporated, as appropriate. In response to our first recommendation that CBP develop and implement a policy and related guidance for documenting road maintenance arrangements with landowners, and share these documented arrangements with its sectors, DHS concurred, stating that FM&E will issue updated guidance on addressing maintenance of assets on private land to Border Patrol and FM&E personnel located at the sectors. The updated guidance, according to DHS, will reference the agency’s 2011 and 2015 policy and procedures for owned and non-owned road maintenance, as well as points of contact for additional information on landowner maintenance agreements. DHS also concurred with our second recommendation that CBP clearly document the process and criteria for making decisions on funding non-owned operational requirements and communicate this process to Border Patrol sectors. DHS stated that Border Patrol will outline the process and criteria for making these funding decisions and communicate the process to Border Patrol sectors. DHS concurred with our third recommendation that CBP assess the feasibility of options for addressing the maintenance of non- federal public roads, including a review of data needed to determine the extent of its reliance on non-owned roads. DHS stated that Border Patrol, in collaboration with CBP FM&E, will review data on the extent of Border Patrol's use of non-owned roads for border security operations and develop a strategy that outlines options and assesses the feasibility for maintaining roads, as appropriate. These actions, if implemented effectively, should address the intent of our three recommendations. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Homeland Security, Agriculture, Defense, and the Interior, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions, please contact me at (202) 512- 8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VI. We reviewed relevant authorities, policies, and procedures of three selected departments that maintain roads owned by others (non-owned roads) for conducting their operations—the Department of Defense (DOD), the U.S. Department of Agriculture (USDA), and the Department of the Interior (DOI). DOD addresses maintenance of all non-owned roads through its Defense Access Roads (DAR) program. The U.S. Forest Service (Forest Service) is a USDA component we identified that addresses maintenance of non-owned roads. While DOI officials stated that DOI is not authorized to directly address maintenance of the non- owned roads it uses for its operations, the Bureau of Indian Affairs (BIA), a component of DOI, partners with public agencies to address maintenance of non-owned roads that provide access to or within tribal lands, through the Tribal Transportation Program. We discuss the authorities, policies, and procedures utilized by the DAR program, the Forest Service, and BIA in more detail in the following sections. These authorities, policies, and procedures are specific to the respective programs, and therefore are not applicable to the U.S. Border Patrol (Border Patrol). In addition, U.S. Forest Service and BIA officials said that unlike the U.S. Forest Service and the BIA, Border Patrol is not a public road agency—a federal, state, local, or Indian government or instrumentality with jurisdiction over, and authority to finance, build, operate, or maintain, public roads. Further, Border Patrol has various authorities including the ability to access private land, and therefore roads on such land, located within 25 miles of the border, without a warrant. The information presented below is intended to illustrate how other selected federal departments and agencies address maintenance of non- owned roads. DOD and the Department of Transportation are jointly responsible for administering the DAR program. Established in 1956, the DAR program authorizes the Secretary of Transportation to use funds appropriated for the Department of Defense to fully or partially fund public road improvements and maintenance that are certified as important to national defense. The program provides a means for the military to pay its “fair share” of the cost of public road improvements and maintenance needed in response to sudden and unusual defense-generated traffic or road surface impacts, such as a significant increase in personnel at a military installation, or use of a road by an oversized or overweight military vehicle, and to help ensure adequate transportation capacity is in place when needed. According to DOD officials, the DAR program is primarily used to fund road construction to provide installation access and alternate routes to reduce congestion caused by an installation and for the maintenance of roads to support transportation of specialized military equipment traveling on public roads. Through the DAR program, DOD is authorized to address the construction and maintenance of certain defense access roads which are certified to the Secretary of Transportation as important to the national defense. To implement its authorities, in 1978 DOD and the Federal Highway Administration (FHWA) together developed a set of DAR program eligibility criteria that specifies the types of roads DOD can improve. These roads include (1) a replacement road; (2) a public road that creates new access to a military facility; (3) a road on which traffic has doubled as a result of the military’s use; and (4) a rural county road that has limited carrying capacity and requires upgrade to sustain consistent movements of military equipment. DOD officials said that they use public roads like everyone else in the general public—that is, DOD components use the roads while the public owners (for example, a state, county, or city) maintain the roads—and are not authorized to address maintenance of a public road unless the road is determined by the DAR program to be a defense access road. DOD officials said they were not aware of any instances involving DOD’s use of private roads. If there is any such use, DOD officials stated that there would be an agreement in place for addressing maintenance of the private roads. DAR projects are funded from two sources—Military Construction funds and Operation and Maintenance funds. The particular source used for a project depends on the project’s work classification and dollar amount. Projects for new construction that exceed $1 million are submitted as line item requests in the President’s budget for authorization and appropriation in the Military Construction program. Maintenance and repair of existing roads under the DAR program is funded with Operation and Maintenance funds. Minor military construction projects costing $1 million or less may also be funded with Operation and Maintenance funds. DOD officials said that because there is not a dedicated funding for the DAR program, it competes with every other military requirement (including on-base construction requirements). Ultimately, funding is based on a project’s merit to meet a military mission. Under DAR program regulations, military installation commanders can initiate a request for assistance from DAR if there is a defense-related transportation need affecting the surrounding community. To initiate a DAR project, the local military base identifies the access or mobility requirement and submits a DAR needs report to the U.S. Army Military Surface Deployment and Distribution Command (SDDC). SDDC will then either conduct a DAR needs evaluation or request FHWA to make an evaluation of improvements that may be necessary, determine the scope of work to address the deficiencies, and develop a cost estimate. According to a document DOD officials provided on the DAR program, SDDC will determine if the proposed work meets the DAR program qualification criteria and if so, certify the road as important to national defense, thereby making it eligible for DOD funds. The military service operating the base is then responsible for submitting the budget request for the project funds through its normal planning, programming, and budgeting process. Once programmed by the military service, if the work is classified as new construction and exceeds $1 million, the funds must be authorized and appropriated by Congress. After Congressional approval, the funds are transferred to FHWA and allocated to the agency administering the project (federal, state, county or other local transportation authority). A project memorandum of agreement (MOA) establishes specific roles and responsibilities for the officials involved in the DAR project. Upon completion, long-term maintenance of the improvement becomes the responsibility of the owning highway authority. According to DOD officials, the most common DAR program maintenance projects involve maintenance and repair of rural county roads used by the Department of the Air Force to transport intercontinental ballistic missiles from their main base to remote locations. These roads are often gravel roads, but also include portions of paved roads. For operational reasons, missile equipment cannot be transported over roads that are rutted or washboarded; therefore, DOD is forced to maintain these roads to its standards, which are typically higher than the standards of the counties that own them, to ensure access and safety. DOD missile engineers coordinate with state and county transportation departments, as well as the FHWA, to execute the maintenance requirements. There are approximately 1,500 miles of gravel roads to be kept at missile transporter standards used by DOD. There is another 1,500 miles of paved roads used by DOD for the missile transporter mission; however, DOD does not generally maintain these roads, except in cases of an emergency (e.g., surface washout or extreme snow removal). In support of the missile transport requirement, DOD has an MOA with each county and state it works with under the DAR program. These MOAs are general in nature, outlining mostly the roles and responsibilities of DOD, as well as those of the state or county. DOD officials explained that if paved roads fall into disrepair, DAR missile engineers are generally in close contact with state and local officials and have a very good relationship with them to ensure the state or county maintains the road. Typically, the state and local transportation officials adequately maintain paved roads, while DOD generally maintains the unpaved roads. If the responsible state and local agencies do not have the necessary funds to maintain paved roads, DOD will look into using alternate routes for transporting the missiles, or other alternatives, but would not generally provide funding for the maintenance of paved roads, according to DOD officials. The mission of the U.S. Forest Service, a component of USDA, is to sustain the health, diversity, and productivity of the nation’s forests and grasslands to meet present and future needs. To accomplish this mission, the Forest Service manages and protects 154 national forests and 20 national grasslands in 43 states and Puerto Rico. The Forest Service uses a wide variety of roads to access national forest system lands. A large portion of these roads are owned and managed by the Forest Service; however, the agency also relies on roads which cross land managed and owned by other federal, state, local, and private landowners authorized by various types of easements, road use permits, or road rental agreements, to conduct its operations. According to Forest Service officials, the Forest Service is a public road agency and therefore operates and maintains roads that are open to the public. In addition to these roads, Forest Service uses public roads like the general public—with the relevant public road agency bearing responsibility for maintenance of such roads. However, if traveling on a public road with a vehicle that is not standard for the particular road type, Forest Service would generally need to obtain a special-use permit as required by the relevant public road agency. Forest Service must also enter into agreements to use and maintain private roads. Conversely, if a road is located on an existing right of way that is owned by the Forest Service, and through private property, Forest Service does not need additional permission to access and maintain the road. Also, according to Forest Service officials, in the event of an emergency (fire, pursuit), Forest Service can access a private road without permission. Forest Service addresses maintenance of the owned and non-owned roads it uses for its operations using allocated funding used for most road restoration, maintenance, and repair, as well as funding from the FHWA (funding to address maintenance of a smaller subset of roads). Forest Service can enter into agreements with other public agencies for use and maintenance of the agency’s roads or land under various authorities. Funds available for forest development roads and trails are to be used by the Secretary of Agriculture to cover costs of construction and maintenance of such roads and trails, including those on experimental and other areas under Forest Service administration. A set formula is used to allocate Roads, Capital Improvement, Maintenance (CMRD) funding to each of nine Forest Service regions, and then to each forest. While CMRD funds can be shifted from one region to another, as needed, officials said that there are restrictions on how funding from the Federal Highway Administration can be distributed and spent. In the case of either funding source, each forest determines how to spend the funding it receives for road maintenance. The criteria used for making this road maintenance decision takes into account, among other things, other road construction and maintenance plans for the region where the forest is located, according to Forest Service officials. According to Forest Service officials, the agency predominantly maintains its own roads and expects other entities, such as counties, to maintain their own roads, regardless of how frequently Forest Service uses a particular road. Forest Service’s policy is to enter into road maintenance agreements with public agencies where there is a sufficient reason and available funding to do so. Forest Service meets annually with public road agencies and landowners to discuss existing and new road use agreements and maintenance plans, as well as shared road maintenance responsibilities, activities, and scheduled maintenance events. According to Forest Service officials, as of July 2017, the agency had issued 5,854 Forest Road and Trail Act Easements to public road agencies and landowners nationwide. These easements have clauses which direct the Forest Service and the grantees to enter into agreements to use and maintain each other’s roads. Individual forests are responsible for forming any agreements they need for road maintenance. The specific terms of these agreements are economically driven, primarily based on beneficial need to the Forest Service and the availability of funding, according to Forest Service officials. Officials said that Forest Service will maintain a public road if it enables needed access. Officials said they can execute MOUs with entities, such as counties, to share road maintenance costs. Forest Service also partners with other federal agencies on use of federal highways. The roads Forest Service typically uses are public-use and multi-use roads. According to Forest Service officials, there are not many instances in which Forest Service needs to access private roads. In instances where it does, Forest Service’s policy is to obtain a perpetual, motorized, public use easement; however, most private owners are hesitant to grant ownership interest. Officials said that they use one-time agreements on a small subset of roads to address wear and tear in specific instances and based upon the Forest Service commensurate road use. For example, officials said if Forest Service acquires land, but has not yet acquired the roads leading to the property, Forest Service will enter into a short-term agreement to maintain the roads until it acquires ownership of the roads. All agreements are made on a case-by-case basis, according to officials, but the focus for Forest Service is always on the needs of the agency. According to Forest Service officials, maintenance agreements are rare because most of the roads the Forest Service needs are already maintained at the level it needs them to be. There are not many examples of Forest Service needing the roads to be maintained at a higher standard than they already are. Forest Service officials also told us that the agency prioritizes maintenance of the roads it owns over maintenance of roads that are owned by others. Given the large network of roads under Forest Service’s jurisdiction, there is rarely excess funding available to contribute to the maintenance of roads owned by local government agencies, officials said. To compensate for its limited funding, officials added that Forest Service has helped local government agencies address maintenance of their roads by providing a funding match to help qualify these agencies for federal road maintenance grants. However, they said that they do this only on a case-by-case basis, and only when Forest Service and the local government agencies’ priorities align. Forest Service officials said that a lot of collaboration occurs between the Forest Service and other federal, state, and local agencies in order to finance road improvements and maintenance. Most of its collaboration is with states and counties. Forest Service collaborates with FHWA because the latter grants the necessary easements to states for forest highways which the Forest Service uses. Because counties get FHWA funds as well to maintain forest highways along with county road intersections, Forest Service works with counties on these roads to meet forest needs. DOI’s Bureau of Indian Affairs (BIA) is responsible for the administration and management of approximately 56 million acres of land held in trust by the United States for American Indians, Indian tribes, and Alaska Natives. BIA provides services, including transportation services, directly or through contracts, cooperative agreements, and grants, to approximately 1.9 million American Indians and Alaska Natives from the 567 federally recognized tribes. One of BIA’s mechanisms for addressing maintenance of non-tribal and non-BIA owned public roads is the Tribal Transportation Program (TTP). Through the TTP, the Secretaries of Transportation and the Interior pay the costs of eligible transportation projects involving tribal transportation facilities, and other appropriate public road facilities, among other activities. Public roads whose maintenance is addressed through the TTP include roads owned by states, cities, counties, and other federal agencies. The TTP is jointly administered by the BIA Division of Transportation and the FHWA Federal Lands Highway Office. According to BIA officials, BIA and tribal governments are public authorities and are authorized to enter into agreements with other public agencies to maintain non-owned roads that meet the definition of transportation facilities that are eligible for assistance under the TTP. The responsibility to maintain roads owned by another public authority belongs to such authority with jurisdiction over the route (unless otherwise provided for in an agreement or other usage permit). According to BIA officials, a tribe or BIA may use TTP funds to maintain roads owned by others, but only in accordance with an agreement allowing the tribe or BIA to carry out maintenance activities on the roads and provided the public authority that owns the road cannot or will not use its funds to maintain its own road. BIA is organized into 12 regions, each of which has a TTP component that provides engineering, construction, and road maintenance services for highways, roads, bridges, trails, or transit systems that are located on or provide access to tribal land and appear on the National Tribal Transportation Facility Inventory. The 12 regions can enter into agreements with state and local governments to provide funding to maintain public roads the state and local governments own and that provide access to tribal lands when tribes have not assumed responsibility for administering the TTP. BIA enters into and administers these agreements for those tribes which do not have an agreement with BIA for transportation funding, known as “direct service tribes.” Tribes that have such an agreement with BIA, or FHWA, are responsible for administering the TTP and would enter into and administer agreements with state and local governments for maintenance of the roads they own that provide access to tribal lands. According to BIA officials, of the approximately 160,000 miles of roads that are eligible for TTP funding, BIA owns approximately 29,000 miles. The amount of funding distributed via the TTP is determined by a statutory formula based on several factors including historic funding, miles of roads in the National Tribal Transportation Facility Inventory in 2004 and 2012, population, and a supplemental takedown designed to assist certain tribes with small shares of funding relative to their fiscal year 2011 funding base. Prior to 2012, BIA allocated funding based on a regulatory formula that included needs data continuously updated by tribes. TTP funding can be used as the funding match state and local agencies need to qualify for federal transportation improvement grants, depending on the transportation needs of tribal governments. According to 23 U.S.C § 202(f), TTP funding is not intended to replace the funding state and local governments receive for planning, design, construction, and maintenance for their public roads. In addition to the contact named above, Meg Ullengren (Assistant Director), Edith Sohna, and Colleen Corcoran made key contributions to this report. Also contributing to the report were David Alexander, Eric Hauswirth, Terence Lam, John Mingus, Sasan J. “Jon” Najmi, Claire Peachey, and Adam Vogt.", "summary": "To secure the southwest border between ports of entry, Border Patrol uses approximately 5,200 miles of roads, most of which are owned by other entities, both private and public. CBP estimates spending $12.5 million in fiscal year 2016 to maintain and repair roads Border Patrol uses for its operations, including roads CBP does not own. GAO was asked to review Border Patrol's use and maintenance of roads for its border security operations. This report examines the extent to which (1) CBP has processes and authorities to access and maintain roads for its security operations and (2) CBP's operations are affected by its use of public roads it cannot maintain, and options CBP could consider to address any needed maintenance. GAO selected three southwest border sectors to visit based on the sectors' total mileage of non-owned roads and number of apprehensions of illegal border crossers. GAO interviewed officials from Border Patrol, and from selected federal, state, local, tribal, and private and community organizations. The information collected from these entities is not generalizable, but provides valuable insights. U.S. Border Patrol, within the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP), generally has access to public roads and has certain processes and authorities to use other federal, state, local, tribal, and private owned roads for its operations. CBP may enter into arrangements or agreements to address maintenance of certain federal, state, local, and private roads, but CBP has not consistently documented these arrangements, or shared them with all relevant Border Patrol sector officials. This could hinder maintenance efforts and, therefore, Border Patrol's access to the roads. Six of the nine southwest Border Patrol sectors reported that they do not document all road maintenance arrangements and agreements. Developing a policy and guidance for documenting maintenance arrangements and agreements, as needed, could help all sectors more consistently work with landowners to address road maintenance. CBP has two categories for the roads it maintains: (1) roads that CBP owns and has a right to maintain (owned operational roads) and (2) roads that CBP does not own, but may maintain through a license or permit (non-owned operational roads). Border Patrol has established a process for prioritizing maintenance of owned operational roads, but it has not clearly documented the process and criteria for non-owned operational roads, or shared this information with sector officials. Moreover, no sector official GAO spoke with reported being aware of the process and criteria. By clearly documenting and communicating the process and criteria it uses to prioritize non-owned operational roads, Border Patrol could enable sectors to more adequately plan for and better anticipate funding to meet road maintenance needs. Border Patrol sector officials reported negative effects from using public roads in poor condition that they cannot maintain, such as limited road access and poor relations with local governments and border communities that attribute the poor road conditions to Border Patrol's regular use. However, the full extent of these effects is unknown due to lack of data on Border Patrol's use of non-owned roads. While CBP officials discussed options for addressing maintenance of non-federal public roads, including a specific appropriation or a grant program, it has not assessed the feasibility of these or other options. Assessing the feasibility of options, including a review of data needed to show Border Patrol's reliance on non-owned roads, including public roads, could lead to a possible solution for enhancing Border Patrol's operations and its community relationships. GAO recommends that CBP develop policy and guidance for documenting arrangements with landowners, as needed, and share the arrangements with its sectors; document and communicate the process and criteria for prioritizing funding of non-owned operational roads; and assess the feasibility of options, including data needs, for addressing the maintenance of non-federal public roads. DHS concurred with the recommendations.", "document_type": "gao"}
{"report": "The inventories of the selected Air Force and Navy fixed-wing aircraft in our review totaled 2,823 aircraft and required approximately $20 billion to operate and support in fiscal year 2016. The inventory, aircraft status, initial operational capability, and service life forecast for each of the 12 selected fixed-wing aircraft are shown in figure 1. Sustainment of fixed-wing aircraft and other weapon systems comprises the logistics and personnel services required to maintain and prolong operations, and DOD policy provides direction to service components on sustainment planning across the life cycle of the weapon system. Specifically, DOD policy requires the services to develop and implement a sustainment strategy, such as a Life-cycle Sustainment Plan, for sustaining its weapon systems. According to DOD’s policy, this strategy should be the basis for all sustainment efforts, including sustainment metrics mapped to key performance parameters and key system attributes, such as aircraft availability, to manage sustainment performance. The policy states that, after initial operating capability, programs should update the sustainment plan whenever there are major changes to its strategy for sustaining the weapon system, or every 5 years, whichever occurs first. The Air Force and the Navy also have guidance that implements the requirements of the DOD guidance. These services’ guidance include sustainment-planning requirements for life-cycle sustainment and assurance of affordability. There are a variety of DOD offices that have roles and responsibilities related to sustaining fixed-wing aircraft. For instance, the Under Secretary of Defense for Acquisition and Sustainment (USD ), is the principal staff assistant and advisor to the Secretary of Defense for all matters concerning acquisition and sustainment. Specifically, USD (A&S) is responsible for establishing policies for logistics, maintenance, and sustainment support for all elements of DOD, including fixed-wing aircraft. The Assistant Secretary of Defense for Logistics and Materiel Readiness (ASD ) serves as the principal staff assistant and advisor to the USD (A&S) on logistics and materiel readiness within DOD. Specifically, the ASD (L&MR) is responsible for (1) establishing DOD policies and procedures for logistics, maintenance, materiel readiness, strategic mobility, and sustainment support; (2) providing related guidance to the Secretaries of the military departments, including developing the Life- cycle Sustainment Plan outline; and (3) monitoring and reviewing programs associated with these areas, among other duties and responsibilities. For the Air Force, the Air Force Materiel Command develops, acquires, and sustains weapon systems through research, development, testing, evaluation, acquisition, maintenance, and program management of the systems and their components. This command provides acquisition and life-cycle management services and logistics support, among other things. The Air Force Life Cycle Management Center within the Air Force Materiel Command is responsible for the life-cycle management of weapon systems from inception to retirement. A Program Executive Officer—responsible for managing a specific portfolio of weapon systems—is responsible for each of the selected fixed-wing aircraft. The Program Executive Officer oversees the program office that manages each weapon system. For the Navy and Marine Corps, the Naval Air Systems Command is responsible for providing the full life-cycle support of naval aviation aircraft, weapons, and systems. This support includes research, design, development and systems engineering; acquisition; test and evaluation; training facilities and equipment; repair and modification; and in-service engineering and logistics support. As with the Air Force, Program Executive Officers oversee their assigned program managers. DOD relies on program managers to lead the development, delivery, and sustainment of individual weapon systems through their life cycles. The program managers are the designated individuals with responsibility for and authority to accomplish the program’s sustainment objectives to meet the users’ operational needs. Product support managers, who work within the program offices, are responsible for developing and implementing support strategies for weapon systems that maintain readiness and control life-cycle costs. Weapon systems are sustained under various arrangements that may include contractors, DOD organic facilities, or some combination of the two. For example, the Air Force Sustainment Center provides depot maintenance through its Air Logistics Complexes for weapon systems. Naval Air Systems Command is responsible for the Navy Fleet Readiness Centers, which provide depot-level maintenance for Navy and Marine Corps fixed-wing aircraft. Additionally, the Air Force Sustainment Center and the Navy Supply Systems Command, as well as the Defense Logistics Agency, manage inventories of repair parts, and individual weapon systems programs are typically supported by a complex supplier network that includes a prime contractor, subcontractors, and various tiers of parts suppliers. On the other hand, sustainment responsibilities—in their entirety or particular elements—may be contracted out as part of a public-private partnership or a performance-based logistics agreement, such as with the F-22 Raptor. The Air Force and Navy monitor the readiness status of selected fixed- wing aircraft through numerous performance metrics. Specifically, the Air Force measures how well a fleet is performing by calculating the availability of the fleets’ aircraft, which is the number of aircraft that are available for flight operations. The Navy measures its aircraft availability through two metrics: (1) Ready-Basic-Aircraft (RBA)—the number of aircraft that are able to safely fly—and (2) Ready-for-Tasking (RFT)—the number of aircraft that are able to conduct specific missions. Both the Air Force and Navy have established goals associated with aircraft availability. In addition to measuring the availability of the aircraft against the associated goals, the Air Force and Navy track the reasons for aircraft not being available or able to conduct missions. Specifically, the Air Force and Navy track the following: Aircraft in depot: Aircraft unavailable to conduct missions because of scheduled or unscheduled depot maintenance or modification. Not mission capable maintenance: Aircraft that are not in depot and not capable of performing any of their assigned missions because of maintenance. Not mission capable supply: Aircraft that are not in depot and not capable of performing any of their assigned missions because of the lack of a repair part. In addition to these three metrics, the Air Force also tracks the following: Not mission capable for both supply and maintenance: Aircraft that are not in depot and not capable of performing any of their assigned missions because of both maintenance and the lack of a repair part. Units possessed not reported: Aircraft that are not available for use for reasons other than depot and not mission capable status, but possessed by the squadron. There are various costs associated with operating and supporting weapon systems. DOD’s Operating and Support Cost-Estimating Guide provides direction to the service components on developing estimates to support various analyses and reviews throughout the program life cycle. According to the guide, as a program matures, it remains necessary to continue to track and assess O&S costs and trends to ensure that the program remains sustainable, affordable, and properly funded. Each military department maintains a database that collects historical data on the O&S costs for major fielded weapon systems. DOD’s Office of Cost Assessment and Program Evaluation provides policy guidance on this requirement, known as the Visibility and Management of Operating and Support Costs program; specifies the common format in which the data are to be reported; and monitors its implementation by each of the military departments. O&S costs are categorized using the following six overarching elements: unit level manpower—cost of operators, maintainers, and other support manpower assigned to operating units; unit operations—cost of unit operating materiel such as fuel, and training material, unit support services, and unit travel; maintenance—cost of system maintenance including depot- and sustaining support—cost of system support activities that are provided by organizations other than the system’s operating units; continuing system improvements—cost of system hardware and software modifications; and indirect support—cost of activities that provide general services that lack the visibility of actual support to specific force units or systems. For the selected Air Force and Navy fixed-wing aircraft in our review, aircraft availability and O&S cost trends varied over the 6-year period between fiscal years 2011 and 2016, and the aircraft generally did not meet availability goals. We found that 6 of 12 fixed-wing aircraft—3 from each service—experienced decreased aircraft availability between fiscal years 2011 and 2016. One aircraft met availability goals each year between fiscal year 2011 and 2016. Conversely, six aircraft met the goals in some years but not others, and five aircraft did not meet the goals in any year. In the latest year included in our review—fiscal year 2016—9 of 12 of the fixed-wing aircraft did not meet their associated availability goals. With respect to O&S costs, the overall O&S total for all 12 aircraft was about $20 billion annually over the 6-year period; some aircraft experienced increases while the costs to operate and support others decreased. The reasons for changes in costs included increases in maintenance costs for 8 of 12 fixed-wing aircraft. Below we summarize these trends, and the “Sustainment Quick Looks” in appendices II–XIII provide detailed information on the trends associated with each of the 12 fixed-wing aircraft and appendix XV provides additional information on operating and support cost per aircraft. Our analysis found that: between fiscal years 2011 and 2016, aircraft availability for two of five selected Air Force fixed-wing aircraft fluctuated and for three decreased; between fiscal 2011 and 2016, two aircraft met availability goals in some years, and three aircraft did not meet availability goals in any of the years; and in fiscal year 2016, four of the five aircraft did not meet availability goals. Specific details regarding aircraft availability and not mission capable status for maintenance, supply, and both maintenance and supply were omitted because DOD deemed this information as sensitive (i.e., For Official Use Only). According to officials, when aircraft availability goals are not met, training and operational missions may not be fulfilled as timely as needed. For example, F-22 squadron officials explained that the lack of available aircraft creates a shortage of trained pilots. F-22 pilots need extensive training to fulfill their air-superiority role. Further, command officials explained that when aircraft availability goals are not met, there may not be enough aircraft to respond to contingency requirements. Officials expressed concern that, given the capability and expectation of the F-22 to be available to create air superiority in any operation, missions may not be met. Additionally, E-8C program office officials stated that missions are often limited to top priority, which means supported combatant commands may not obtain all needed capabilities, such as the E-8C not being able to provide surveillance capability to particular combatant commands. From fiscal years 2011 through 2016, O&S costs for the Air Force aircraft in our review totaled about $13 billion annually. These costs decreased for the C-17, F-16, and the F-22, but increased for the B-52 and E-8C, as shown in figure 2. For example, the F-16’s total annual O&S costs decreased by about $943 million (or about 19 percent) because of decreases in all cost elements—the largest decrease being unit operations—except sustaining support. According to officials, the decrease in unit operations can be attributed to the retiring of aircraft and the consolidation of squadrons. The C-17’s and F-22’s O&S costs decreased mainly because of decreases in two cost elements: continuing system improvements and unit operations. In contrast, the B-52’s and the E-8C’s O&S costs increased, by $76 million (or about 6 percent) and $41 million (or about 6 percent), respectively. The increases occurred because two of the cost elements—continuing system improvements and maintenance costs—increased more than the other costs elements decreased. Based on our analysis of the O&S cost elements, maintenance cost generally is one of the largest portions—on average about 36 percent—of total O&S costs for each aircraft. As shown in figure 3, maintenance costs for four of the five aircraft generally have increased from fiscal years 2011 through 2016. Specifically, maintenance costs for the C-17, E-8C, and F- 22 increased because of additional depot maintenance needs. B-52 maintenance costs fluctuated year to year, but increased overall during this period. The overall maintenance costs for the F-16 decreased by approximately $140 million. According to our analysis, even though there was an increase in some of the F-16 maintenance cost elements, the fleet’s executed flying hours decreased. Therefore, the flying hour depot- level reparable costs decreased by approximately $123 million and engine repair decreased by $115 million, causing the overall maintenance cost to decrease. Our analysis found that: between fiscal years 2011 and 2016, aircraft availability increased for three of the seven Navy fixed-wing aircraft, fluctuated for one, and decreased for the remaining three aircraft; between fiscal 2011 and 2016, one aircraft met aircraft availability goals in each year, and four aircraft met goals in some years, while two aircraft did not meet goals in any of the years; and in fiscal year 2016, the Navy did not meet aircraft availability goals for five of the seven aircraft. Specific details regarding aircraft availability and not mission capable status for maintenance and supply were omitted because DOD deemed this information as sensitive (i.e., For Official Use Only). To address decreases in aircraft availability, the Navy has moved available aircraft between squadrons to help ensure deploying squadrons are fully equipped for their assigned missions. In November 2017, the Commander of Naval Air Forces testified before the House Armed Services Committee that to equip the air wings with the required number of mission capable aircraft for the deployment of three aircraft carriers in 2017, the Navy had to transfer 94 strike fighters to and from the maintenance depots or between squadrons. This transfer included pulling aircraft from fleet replacement squadrons, where the focus should be on training new aviators. The Commander of Naval Air Forces, in his November 2017 testimony, summarized the issue: “That strike fighter inventory management, or shell game, leaves non-deployed squadrons well below the number of jets required to keep aviators proficient and progressing toward their career qualifications and milestones, with detrimental impacts to both retention and future experience levels.” Furthermore, based on our analysis, F/A- 18A-D squadrons have underexecuted their flight hours by an average of 4 percent from fiscal years 2011 through 2016. According to officials, this is largely due to low aircraft availability. Additionally, placing further strain on aircraft availability, the F/A-18A-D inventory has decreased from 581 aircraft in fiscal year 2011 to 537 aircraft in fiscal year 2016. From fiscal years 2011 through 2016, O&S costs for the Navy’s seven selected fixed-wing aircraft totaled about $7 billion annually. Also, the Navy has experienced varying O&S and maintenance costs since fiscal year 2011 for these aircraft. Specifically, annual O&S costs decreased for the AV-8B, C-2A, E-2C, and F/A-18A-D, and increased for the E-2D, EA- 18G, and F/A-18E-F, as shown in figure 4. We found that O&S costs for the F/A-18A-D decreased by about 22 percent from about $3.1 billion in fiscal year 2011 to about $2.4 billion in fiscal year 2016. According to officials, this decrease can be attributed to the decrease in inventory as aircraft are retired and squadrons transition to the F-35 Joint Strike Fighter. In another example, O&S costs for the E- 2D increased from about $1.6 million in fiscal year 2012 to about $125 million in fiscal year 2016. The size of the fleet has increased by 17 aircraft—from 3 to 20 since fiscal year 2011. According to officials, this aircraft remains in production with a projected fleet size of 75; as inventory increases, so will O&S costs. Based on our analysis of the O&S cost elements, maintenance cost generally is one of the largest portions—about 42 percent—of total O&S costs for the seven aircraft in our review. Annual maintenance costs have increased for the C-2A, E-2D, EA-18G, and F/A-18E-F, and decreased for the AV-8B, E-2C, and F/A-18A-D, as shown in figure 5. We found that maintenance cost for the C-2A increased by about 7 percent from about $89 million in fiscal year 2011 to about $95 million in fiscal year 2016. According to officials, the increase in maintenance cost can be attributed to increased demand for outer wing panels, which resulted in a $16 million increase in depot-level repair costs and a more than 10 percent increase in executed flight hours, among other things. In another example, maintenance cost for the AV-8B decreased by about 9 percent from about $375 million in fiscal year 2011 to about $341 million in fiscal year 2016. According to officials, these decreases can be attributed to the AV-8B no longer being used in Operation Enduring Freedom in 2012, the loss of six aircraft, and the transition of AV-8B squadrons to the F-35 Joint Strike Fighter. The Air Force and Navy face similar sustainment challenges that relate to aging, maintenance, and supply support that affect aircraft availability and O&S costs for the 12 aircraft selected in our review, as shown in figure 6. Specifically, 10 of 12 aircraft are experiencing sustainment challenges related to aging; all 12 are experiencing challenges related to maintenance; and all 12 are also experiencing challenges related to supply support. Below is a brief overview of these challenges: Aging: A number of these aircraft are aging and operating beyond their planned service life, partly because of delays in replacement aircraft. Specifically, the Air Force and Navy plan to replace the F-16, AV-8B, and F/A-18A-D with the F-35 Joint Strike Fighter. The Navy is expected to transition the F/A-18A-D through 2030 and the Marine Corps is planning to use the F/A-18A-D beyond 2030 (although these time frames have been extended several times already). The Navy plans to retire the AV-8B in 2026. On the other hand, the Air Force is not expected to retire the F-16 until at least 2040. Because of aging, according to officials, there are parts on some aircraft that need to be repaired and replaced that were not accounted for during initial sustainment analysis. To mitigate some challenges associated with the age of the fixed-wing aircraft, the Air Force and Navy program officials have decided to extend the service life of some aircraft by repairing and overhauling airframes and components, as well as developing the engineering specifications for parts that were never planned to be repaired or replaced. Maintenance: Delays in getting aircraft into and through depot maintenance, as well as shortages of skilled maintainers, are contributing to some aircraft missing their availability goals. Both services reported losing experienced maintainers, either to retirement or to other programs such as the F-35 Joint Strike Fighter. To address maintenance challenges, program offices for the selected aircraft have improved the efficiency and speed of depot maintenance, as well as are working to ensure there are sufficient numbers of trained maintainers. Supply Support: Some aircraft are encountering supply shortages as a result of parts not being available, in some cases due to obsolescence issues or diminishing manufacturer sources. Overcoming part shortages through either searching for replacement parts or reengineering parts takes time, which can contribute to aircraft being unavailable for longer periods. To mitigate supply challenges, officials have proactively upgraded aircraft before obsolescence occurs or located available parts and reengineered parts that are no longer in production, as well as identified suitable manufacturers in advance, among other things. For more specific information on sustainment challenges related to aging aircraft, maintenance, and supply support for each of the fixed-wing aircraft, see the “Sustainment Quick Looks” in appendixes II–XIII. The Air Force has documented sustainment strategies for its five selected aircraft in our review, but the Navy has not documented sustainment strategies or updated the strategies for four of seven of its aircraft in our review. The Air Force and Navy also regularly reviewed sustainment metrics and have implemented plans to improve aircraft availability. The Air Force has documented sustainment strategies for the five selected fixed-wing aircraft and updated them in accordance with Air Force guidance. However, the Navy has not documented a sustainment strategy or updated the strategies for four of the seven aircraft in our review since 2012. See figure 7 for the year of the most recent update to the sustainment strategy for the aircraft in our review. While sustainment strategies do not guarantee successful outcomes, they serve as a tool to guide operations as well as support planning and implementation of activities through the life-cycle of the aircraft. Specifically, at a high-level the strategy is aimed at integrating requirements, product support elements, funding, and risk management to provide oversight of the aircraft. For example, these sustainment strategies can be documented in a life-cycle sustainment plan, postproduction support plan, or an in-service support plan, among other types of documented strategies. Additionally, program officials stated that an aircraft’s sustainment strategy is an important management tool for the sustainment of the aircraft by documenting requirements that are known by all stakeholders, including good practices identified in sustaining each aircraft. For example: The strategy for the Air Force B-52 has been updated several times in recent years because of several major modifications. For example, in 2014 the Air Force issued an updated sustainment plan within the life- cycle management plan to update the combat network communications technology program because the B-52’s communications system is still the original from the 1950s and has limitations related to making mission or target changes in flight. The plan addresses the testing, resource management, and numerous program performance indicators and requirements of the system. The strategy for the Air Force F-16 outlines plans for the aircraft’s service life extension and includes proactive measures and data forecasting to bundle depot modifications in order to minimize fleet- wide effects on aircraft availability. The service life extension for the F- 16 is designed to extend the service life of 300 F-16 aircraft from 8,000 to 13,856 flight hours at an estimated cost of $740 million (as of June 2016). The strategy for the Navy E-2D provides a systematic approach to ensure that a comprehensive support package is in place to support the sustainment of the aircraft. Also, it describes the overall plan for the management and execution of the product support package by communicating the sustainment strategy to stakeholders in the acquisition, engineering, and logistics communities. However, the Navy had not documented a sustainment strategy for the C- 2A because a strategy was not required when the aircraft, now a legacy system, was going through the acquisition process prior to 1965. According to Navy officials, while they have not documented a strategy for the C-2A, they are undertaking efforts, such as updating technical publications, performing maintenance analysis on the landing gear, and evaluating depot tasks to decrease turnaround time, among other efforts, to sustain the aircraft. However, a documented sustainment strategy for the C-2A would help guide the planning and implementation of these efforts, as well as serve as a management tool by documenting these requirements that are known by all stakeholders. In addition, the Navy’s sustainment strategies for the E-2C (2011), EA- 18G (2006), and F/A-18A-D (2001) were developed prior to 2012 and thus have not been updated in over 5 years. With respect to the EA-18G, Navy officials told us that the sustainment strategy should be updated in accordance with DOD’s acquisition policy—DOD Instruction 5000.02— since the EA-18G is still in the acquisition process, as it continues to be produced. For the E-2C and F/A-18A-D, Naval Air Systems Command officials and program office officials told us that they were not required to document sustainment strategies because these aircraft were legacy systems at the time the requirement to develop and maintain a sustainment strategy was implemented. Therefore, according to these officials, the DOD requirements to document and update sustainment strategies every 5 years in DOD Instruction 5000.02 were not applicable. DOD Instruction 5000.02 requires weapon systems to have some form of a sustainment strategy that is not older than 5 years; however, it is unclear whether this policy is applicable to legacy weapon systems. Specifically, the policy states that program managers for all programs are responsible for developing and maintaining a sustainment strategy, such as a Life-cycle Sustainment Plan, beginning at the risk-reduction decision point (i.e., Milestone A of the acquisition process). However, based on our discussions with Navy program officials for our selected aircraft and our review of the policy, it is unclear whether the policy—as currently written—is applicable to legacy systems that were no longer in production and thus had completed the risk-reduction decision point (or Milestone A) prior to the requirement to update a sustainment strategy every 5 years. According to DOD officials, the intent of the policy is for all programs, including legacy weapon systems, to develop and maintain a sustainment strategy; however, the policy does not explicitly state that legacy systems are expected to fulfill this requirement. In May 2017, the Air Force updated its sustainment guidance to require sustainment strategies for legacy systems and for those strategies to be updated every 5 years. Air Force officials told us that they did this because the DOD policy was unclear whether it was applicable to legacy systems and it was a good practice to ensure the guidance was explicit for all weapon systems to document and update a sustainment strategy. This instruction explicitly states that the requirement to document a sustainment strategy and update it every 5 years is applicable to all weapon systems, including legacy systems that are in the O&S phase of their life cycles. Additionally, the Air Force Instruction states that these legacy systems are not required to retroactively meet requirements identified for previous phases of the acquisition life-cycle, but should meet the requirements needed for continued operations of the system. However, the Navy has not made the requirement explicit for legacy systems in its guidance. Specifically, Navy guidance does not explicitly state that documenting a sustainment strategy and updating that strategy every 5 years is a requirement for legacy systems. While Navy guidance requires the development and use of sustainment metrics for legacy systems and requires the Naval Air Systems Command be responsible for aviation weapon systems in sustainment, the Navy does not address any requirement for sustainment strategies for legacy systems. The lack of clarity in DOD Instruction 5000.02 and the Navy guidance regarding whether legacy systems are required to document a sustainment strategy and update that strategy every 5 years has resulted in confusion regarding sustainment planning requirements among Navy program offices and could cause confusion with other weapon system program offices across DOD. Standards for Internal Control in the Federal Government state that management should define objectives in specific terms so they are understood at all levels of the entity. The standards also state that guidance should clearly define what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. As indicated by the Air Force’s 2017 update to its sustainment guidance, clarifying DOD and Navy guidance and the applicability of sustainment strategy requirements to legacy systems could be done through very small additions and clarifications to the applicable guidance documents. Until DOD and the Navy update or issue new guidance clarifying the requirements for documenting sustainment strategies for legacy systems, weapon system program offices, such as those for fixed-wing aircraft, as well as Naval Air Systems Command and DOD may not have full visibility of necessary requirements to achieve program objectives or any related risks associated with the sustainment of these weapon systems. While the DOD policy and Navy guidance is unclear, Naval Air Systems Command and Navy program offices for the four aircraft—C-2A, E-2C, EA-18G, and F/A-18A-D—that either do not have a sustainment strategy or have not updated the strategy within the last 5 years are taking actions to document or update the sustainment strategies for these aircraft. According to Naval Air Systems Command officials, once it was brought to their attention that the intent of DOD Instruction 5000.02 was for legacy systems to have an updated documented sustainment strategy, they began to take action to develop or update the respective sustainment strategies. Specifically, according to C-2A, E-2C, and E-2D program officials, they are currently updating the E-2D strategy for its 5-year update, which is due in fiscal year 2018, and it will include updates for the C-2A and E-2C since the airframe for all three aircraft are very similar. Also, program officials for the EA-18G and F/A-18A-D told us that they are currently updating the strategies for these aircraft and are expected to complete the process in fiscal year 2018. Given that the Navy is already taking action to update its sustainment strategies and has established timelines for these updates, we are not making any recommendations to the Navy regarding updating the respective sustainment strategies. The Air Force and the Navy have (1) regularly reviewed sustainment metrics for fixed-wing aircraft and (2) implemented improvement plans to address aircraft availability. The Air Force and Navy have regularly monitored the condition of their fixed-wing aircraft, which includes measuring aircraft availability against planned goals as well as monitoring other sustainment metrics. Specifically, the Air Force Materiel Command monitors aircraft availability and other sustainment metrics through quarterly Weapon System Enterprise Review (WSER) briefings. The program office in conjunction with the Air Force Life Cycle Management Center generates the WSER, which is briefed through Air Force Materiel Command and the Program Executive Offices to the Air Force Chief of Staff. The WSER delivers insight into the comprehensive health of a system by flagging gaps in performance and identifying mitigating actions, which is used to conduct crosscutting enterprise analysis and provide input into readiness reviews. In addition to the WSER, the program offices manage their performance through their Health of the Fleet briefs. These briefs—conducted monthly or quarterly depending upon the aircraft—include readiness assessments that provide insight on maintenance and management practices. The assessment is delivered by the program’s maintenance group, and includes aircraft performance metrics, issues, actions, and schedules to inform program leadership on fleet status and to help prioritize and make decisions concerning the issues. The Navy monitors aircraft availability through its aircraft status dashboard for each aircraft, which provides specific information, such as goals, actual availability, and gaps between the two. More specifically, the Navy tracks the status of each of its aircraft through the dashboard, including those aircraft that are available (i.e., Ready-Basic-Aircraft ), are in depot maintenance, or are not mission capable due to maintenance or supply, among other metrics. The dashboard is updated monthly, and there are weekly meetings with key stakeholders, including Naval Air Systems Command officials, industry partners, and depot officials, to monitor the performance of each aircraft and make adjustments to improve aircraft availability. Additionally, all program offices have processes in place to manage the fleet within their portfolios, including semiannual or annual program reviews such as Program Management Reviews and Executive Steering Reviews. These reviews focus on readiness, cost drivers, and initiatives to address program risk and ways to resolve issues affecting each aircraft. Further, the Marine Corps Commandant for Aviation leads biannual Executive Steering Summits to assess readiness issues affecting Marine Corps aircraft. The Air Force and Navy have implemented improvement plans to address aircraft availability for each of the selected fixed-wing aircraft. Air Force program offices for the fixed-wing aircraft in our review have plans for improving availability. Since 2005, the Air Force Materiel Command has had an annual process to improve aircraft availability, which is known as the Aircraft Availability Improvement Program. The process enables the program offices to assess and limit risk, incorporate available support funding, and specifically address where there are effects on availability, such as aircraft in depot. This process also incorporates projecting historical and goal rates in order to leverage scheduled and modernization maintenance. Program offices create plans, known as aircraft availability improvement plans, based on these projections to forecast improvements that can facilitate increased availability and reduction of costs, among other things. The Air Force provides guidance in the form of a template to ensure consistency amongst the plans, which typically must include improvement initiatives with milestone goals. This information includes projected aircraft availability rates for mission capable, units possessed not reported, not mission capable for supply, not mission capable for maintenance, and depot possession. Officials noted that the program office creates an improvement plan each year, regardless of whether it is short of its availability goal, since the plan serves as a forecasting measure. The program is designed to ensure the program offices have plans in place to meet target goals, and the information and milestones laid out in the plans feed into the WSER briefings to senior management. For example: The B-52 plan for fiscal year 2017 discusses the process and milestones for replacing actuator seals for the fleet, the costs of the repair, and the expected benefit to B-52 availability—1.05 percent improvement to the not mission capable supply metric. The C-17 plan for fiscal year 2017 identifies the current and future modifications, timelines for beginning and completion, and the effect on availability. For example, the future replacement of a legacy computer system with a modernized system and display is set to begin in fiscal year 2019 with an estimated completion date of 2026. This replacement is planned to be done concurrently with other maintenance, and to prevent future declines in the C-17’s availability. The F-22 plan for fiscal year 2017 identifies several projects taking place between 2016 and 2021 that are expected to improve availability by almost 2 percent. Further, officials said they are currently working with the Assistant Secretary of the Air Force (Acquisition) to develop an Air Force manual that would make developing an Aircraft Availability Improvement Plan a requirement. This manual will become a supplement to Air Force Instruction 63-101/20-101, according to the officials. Navy program offices for all seven fixed-wing aircraft in our review also have plans for improving availability. According to Navy officials, they started preparing “summary playbooks,” which is the Navy’s term for improvement plans, in late 2015 and started implementing these plans in early 2016 to increase aircraft availability. Officials told us that there was a limitation in funding because of sequestration prior to fiscal year 2017, which hampered their ability to fully implement the playbooks. At a broad level, the Navy’s playbooks include efforts such as maintenance planning, supply support, aircraft material condition and management, and technical data, among other things. These efforts are linked to specific initiatives such as working with the manufacturer and contractors to provide maintenance support, identifying obsolete parts, conducting aircraft fatigue analysis, and updating technical publications, among other things, which have been identified by the program office as ways to improve aircraft availability. Additionally, these playbooks include the extent to which these initiatives are funded, underfunded, or partially funded and the appropriation account that would fund each initiative. The playbooks include the status of each initiative, and some of the playbooks also provide an approximate time frame for implementing each initiative. For example: The playbook for the C-2A has a fatigue analysis initiative focused on analyzing the landing gear to update its design, provide a depot repair manual, and increase its service life, among other things. This initiative is considered funded, is expected to improve aircraft availability, and has an estimated time frame for implementation between fiscal years 2017 and 2021. The playbook for the E-2D contains a maintenance initiative focused on improving the maintenance planning process of the C-2A, E-2C, and E-2D aircraft by completing elements of the product support package, such as training, publications, support equipment, and tools, among others. This initiative is considered partially funded, is expected to improve aircraft availability by decreasing the not mission- capable rates related to maintenance and supply and decreasing maintenance down time, and has an estimated time frame for implementation between fiscal years 2017 through 2019. The playbook for the F/A-18A-D includes a product improvement initiative to conduct a case study to assess the condition of the wiring of the aircraft in the fleet. This initiative is considered funded and is expected to help to sustain aircraft availability. However, there is no time frame for implementing this initiative. The playbook for the F/A-18E-F contains a service life modification initiative focused on extending the service life of the aircraft through modifications. According to officials, this initiative is considered partially funded, is expected to help to sustain aircraft availability, and is expected to help the fleet realize an 80 percent cost avoidance because the Navy will not have to pay the cost to replace these aircraft. Also, this initiative has an estimated time frame for implementation between fiscal years 2018 through 2040. The Departments of the Air Force and Navy spend tens of billions of dollars each year to sustain their fixed-wing aircraft, which need expensive logistics support, including maintenance and repair, to meet goals for availability. The departments spent at least $20 billion annually since 2011 to sustain the 12 aircraft that we examined. The Air Force and Navy share a variety of sustainment challenges, including the age of their aircraft as well as maintenance and supply support issues. These challenges have led to half (6 of 12) of the aircraft in our review experiencing decreasing availability and to the aircraft in general not being able to meet aircraft availability goals. For example, 9 of 12 aircraft did not meet availability goals in fiscal year 2016. These trends are occurring even though the Air Force and Navy regularly review sustainment metrics for the aircraft and are implementing plans for improving aircraft availability. However, DOD’s policy and the Navy’s guidance are not clear on whether the services should have a current sustainment strategy for legacy weapon systems, including fixed-wing aircraft, and on whether the strategies are required to be updated every 5 years. Without clarity about whether the DOD instruction and the Navy guidance apply to legacy systems, program officials will not know whether they are required to have a sustainment strategy or are required to update the plan for their respective fixed-wing aircraft. Furthermore, the program offices, the services, and DOD may not have full visibility of necessary requirements to document program objectives, related risks, and the effectiveness of the program, ultimately jeopardizing the sustainability and affordability of each of the programs. We are making the following two recommendations to DOD: The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment updates or issues new policy clarifying the requirements for documenting sustainment strategies for legacy weapon systems, including fixed-wing aircraft. (Recommendation 1) The Secretary of the Navy should update or issue new guidance clarifying the requirements for documenting sustainment strategies for legacy weapon systems, including fixed-wing aircraft. (Recommendation 2) We provided a draft of the sensitive report to DOD for review and comment. In written comments that are reproduced in appendix XVI, DOD concurred with our recommendations and noted planned actions to address each recommendation. The Air Force and Navy also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Navy and Air Force; the Commandant of the Marine Corps; the Under Secretary of Defense for Acquisition and Sustainment; and the Director, Defense Logistics Agency. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at merrittz@gao.gov or (202) 512-5257. GAO staff who made key contributions to this report are listed in appendix XVII. Over the past several years, we have conducted work on a number of issues that affect the ability of the Department of Defense (DOD) to sustain its weapon systems. In September 2017, we found that several factors were important to the success of Product Support Managers. These factors included teamwork and collaboration, early implementation of the Product Support Manager position, and organizational support and emphasis on sustainment. We also found that in response to our 2014 recommendations regarding the implementation of the Product Support Manager position, DOD had developed a comprehensive career path and associated guidance to develop, train, and support future Product Support Managers. Additionally, DOD revised guidance to define roles, responsibilities, and reporting relationships between support staff and Product Support Managers. However, DOD was still in the process of implementing our other three recommendations, such as issuing clear, comprehensive, centralized guidance regarding the roles and responsibilities of PSMs and collecting and evaluating information on the effects, if any, that Product Support Managers are having on life-cycle sustainment decisions for their assigned weapon systems. In September 2017, we also found that DOD does not have complete information to identify and manage single-source-of-supply risks. Specifically, some parts are provided by a single source of supply (e.g., one manufacturing facility), and if that single source were no longer able to provide the part, DOD could face challenges in maintaining weapon systems. DOD concurred with our six recommendations focused on improving the completeness of information for single-source-of-supply risks, including issuing department-wide policy that clearly defines requirements of Diminishing Manufacturing Sources and Material Shortages management, and details responsibilities and procedures to be followed to implement the policy. DOD is in the process of taking action to implement these recommendations. In June 2016, we found that the Defense Logistics Agency and the military services have not adopted metrics to measure the accuracy of planning factors, such as the accuracy of part lists, or the costs created by backorders. As a result, depot maintenance may not be efficient or cost-effective, resulting in unnecessary delays in the repair of weapon systems. DOD concurred with our six recommendations to develop metrics to monitor the accuracy of demand planning factors and disruption costs created by the lack of parts at depot maintenance sites and is in the process of taking action to implement these recommendations. For a listing of relevant past GAO work, see the Related GAO Products list at the end of this report. Sustainment: Depot maintenance conducted organically at the designated air logistics complex and contractually for some depot- level repairs at contractor facilities. The B-52 is a long-range, heavy bomber that can perform a variety of missions, including strategic attack, close air support, air interdiction, maritime operations, and offensive counter-air missions. It can carry nuclear or precision-guided conventional ordnance with worldwide precision navigation capability. However, the B-52s are some of the oldest aircraft in the Air Force’s fleet, and will continue to operate until at least 2040 (see fig. 8). Operating and support (O&S) costs for the B-52s have remained relatively steady, generally fluctuating around $1.2 billion–$1.3 billion per year. As a predominantly military-maintained system, most of that O&S cost is related to maintenance and manpower, with depot maintenance and depot-level reparables—direct labor and materials for item repairs, transportation, and storage, among other things—accounting for most of the maintenance cost. Technology Program (2014) is focused on upgrading outdated communications technology. The communications modification requires 7,000 hours of work and is estimated to be complete by 2020. The fleet has active sustainment plans for other components of the aircraft, such as the B-52 Anti-skid Replacement Life Cycle Sustainment Plan (2015), which is estimated to cost over $40 million and be completed by 2019. The B-52 faces sustainment challenges related to its age and, according to officials, replacement parts are difficult to obtain. Several modernization efforts are under way (communications, engines, etc.), and is working with vendors and its own service engineers to identify problem areas and plan ahead so that replacement parts will be available. Depot maintenance on the B-52 is managed by the program office and conducted at Oklahoma City Air Logistics Complex depot. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. The C-17 is a long-range, heavy logistic transport aircraft powered by four F-117 turbofan engines with air-refueling capability that was first manufactured in 1987 (see fig. 10). It is capable of rapid strategic delivery of troops and all types of cargo to main operating bases or to bases in any forward deployment area. The C-17 can perform tactical airlift and airdrop missions and can transport ambulatory patients during aeromedical evacuations, when required. The C-17 can carry virtually all air-transportable equipment. Total operating and support (O&S) costs for the C-17 have decreased from about $5.3 billion in fiscal 2011 to about $4.0 billion in fiscal year 2016. Specifically, unit operations decreased, while maintenance costs have generally increased during this period due to contractor logistics support because the C-17 is a predominantly contractor-managed aircraft. The C-17 Enterprise Life Cycle Management Plan and Life Cycle Sustainment Plan (2014) documents current and future acquisition, sustainment, and integration efforts of the aircraft. It also addresses contractual arrangements and partnership support agreements between Air Force, Boeing, and other service providers for aircraft sustainment. Boeing provides continued sole-source life-cycle support for the C-17 under the terms of the Globemaster Integrated Sustainment Program (2013). Under this program, Boeing is responsible for sustainment, to include material management and depot maintenance support. The C-17 participates in a virtual fleet arrangement, a global network of 43 additional C-17 aircraft, which allows participants total aircraft parts access from any fleet participant worldwide. The C-17 is an aircraft being modified to meet its requirements as well as to address maintenance and supply issues. The Air Force’s actions to mitigate these challenges include processes to increase the service life of the aircraft, allowing managers to quickly hire skilled workers for critical positions, and locating other vendor source for parts. Logistics Complex, and at its facility in San Antonio; landing gear overhaul occurs at Ogden Air Logistics Complex, and engine overhaul occurs at Oklahoma City Air Logistics Complex in partnership with Pratt & Whitney, the original equipment manufacturer on the F-117 turbofan engine. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. Sustainment: Depot maintenance conducted by Northrop Grumman, and field maintenance conducted organically, by the National Guard. The E-8C Joint Surveillance Target Attack Radar System (E-8C) was first manufactured in 1967 (see fig. 12). Its primary mission is to provide theater ground and air commanders with ground surveillance to support attack operations and targeting that contributes to the delay, disruption, and destruction of enemy forces. Total operating and support (O&S) costs for the E-8C have generally increased from about $686 million in fiscal year 2011 to about $734 million in fiscal year 2016. Specifically, maintenance cost has increased partly because of increases in contractor logistics support since the E-8C is maintained by Northrop Grumman. E-8C aircraft were formerly used as commercial airliners and purchased by the Air Force. Therefore, the exact usage of the aircraft was unknown with any degree of specificity. The program office has utilized new analysis conducted by Boeing to develop an improved method of determining and tracking service life for the E-8C aircraft. The new method uses a quantitative analysis capability to identify safety of flight structural concerns, allowing for planning and execution of risk mitigation. The E-8C is an aircraft with significant maintenance and supply issues according to Air Force officials. The Air Force’s actions to mitigate these challenges include updating the Maintenance Plan and the Corrosion Plan for the E-8C (formerly a commercial airframe) to bring them in line with military standards. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. Sustainment: Depot maintenance conducted organically at the designated air logistics complex, and field maintenance conducted organically and by contractors. The F-16 Fighting Falcon is a compact, single-engine, multirole fighter aircraft first manufactured in 1978 (see figure 14). It is highly maneuverable and participates in air-to-air combat and air-to-surface attack. There are four versions of the F-16: A, single-seat model; B, two-seat model with tandem cockpits; C and D, single- and two-seat models, respectively, incorporating newer capabilities. Total operating and support (O&S) cost for the F-16 decreased from about $5 billion in fiscal year 2011 to about $4 billion in fiscal year 2016 because of a 6 percent reduction of inventory. Specifically, maintenance cost has generally decreased during this same period as a result of a decrease in cost of depot maintenance. Sustainment: Performance-based logistics contract with depot maintenance subcontracted to Ogden Air Logistics Complex, Utah, and field maintenance performed organically. and is designed to project air dominance, rapidly and at great distances, and defeat threats. Overall operating and support costs (O&S) for the F-22 have decreased about $248 million overall since fiscal year 2011. Maintenance issues continue to be an area of concern for the aircraft, and these costs increased approximately $255 million from fiscal years 2011 to 2016, due to increases in contractor logistics costs. maintaining a comprehensive diminishing manufacturing sources program and proactively supporting the continued sustainment of component parts of the aircraft through various replacement programs, such as the F-22 Reliability and Maintainability Maturation. This initiative is an ongoing effort to drive continuous improvement in availability. The F-22 faces issues with its low- observable coating and supply funding. Actions to mitigate these challenges include contracting a repair facility to conduct coating reversion repair and securing additional spares funding. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. The AV-8B Harrier (AV-8B) is a Vertical/Short Take-off and Landing attack aircraft first manufactured in 1984 (see fig. 18). The AV-8B has the capability of conducting close air support using conventional weapons for intermediate range intercept and attack missions. The AV-8B is capable of deploying and operating on aircraft carriers and other suitable seagoing platforms, advanced bases, expeditionary airfields, and remote tactical landing sites. Total operating and support (O&S) costs for the AV-8B have decreased from about $815 million in fiscal year 2011 to about $646 million in fiscal year 2016. Specifically, unit-level manpower and operations as well as maintenance costs have decreased partly because the inventory is decreasing as AV-8B squadrons transition to the F-35 Joint Strike Fighter. Average number of flying hours: 4,711 hours per aircraft Operating and support cost: $646 million Depot maintenance activity and squadron locations: AV-8B Program Strategic Sustainment and Warfighting Relevance Plan (2013) addresses strategic sustainment and warfighting requirements to ensure relevance, reliability, safety, and sustainability through five pillars: recruit and retain high-quality people, develop a comprehensive readiness and sustainment plan, meet combatant commander requirements, retain and sustain government and industry agencies to support engineering and logistics requirements, and integrate capabilities to remain tactically relevant and operationally effective. AV-8B is maintained organically at Navy Fleet Readiness Centers under planned maintenance intervals occurring every 1,500 flight hours; supply support is provided organically by Naval Supply Systems Command and Defense Logistics Agency; contractor support services are provided by Boeing. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. Manufacturer: Grumman Corporation (acquired by Northrop Grumman) The C-2A Greyhound Logistics Aircraft (C-2A) is a high-wing, twin-engine monoplane cargo aircraft first manufactured in 1965 (see fig. 20). It is designed to land on aircraft carriers, with a primary mission of providing critical logistics support to Carrier Strike Groups by transporting high-priority cargo, mail, and passengers between carriers and shore bases. The original C-2A aircraft were overhauled to extend their operational life in 1973 and again from 2004 through 2011. Total operating and support (O&S) costs for the C-2A have generally decreased from about $233 million in fiscal year 2011 to about $207 million in fiscal year 2016. Specifically, unit-level manpower, unit operations, and continuing system improvements have decreased, while maintenance costs have increased. landing gear, and avionics system, among others. The Navy will include an appendix for the C-2A when it updates the sustainment strategy for the E 2D for its 5-year update. C-2A completed a service life extension program from 2004 through 2011 to increase flight hours from 10,000 to 15,000 and landings from 16,020 to 36,000, among other things. Aircraft are maintained organically by field maintainers and at Navy Fleet Readiness Centers under a planned maintenance interval cycle with three planned maintenance interval events occurring consecutively every 24 months, and supply support is provided organically by the Naval Supply Systems Command and Defense Logistics Agency. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. The E-2 Hawkeye (E-2C) is the Navy’s all-weather, carrier-based tactical battle management, surface surveillance coordination and airborne early warning, command and control aircraft, with a planned sunset in 2026 when the last E-2D is delivered (see fig. 22). The E-2 is a twin-engine, five- crewmember, high-wing turboprop aircraft with a 24-foot diameter radar rotodome attached to the upper fuselage. Total operating and support (O&S) costs for the E-2 have decreased from about $536 million in fiscal year 2011 to about $345 million in fiscal year 2016. Specifically, unit manpower and maintenance costs have decreased, partly because E-2C inventory is decreasing as E-2C squadrons transition to the E-2D fleet. comprehensive sustainment logistics, engineering programs, and financial resources necessary to ensure continued platform sustainment and attainment of readiness and safety operations. The Navy will include an appendix for the E-2C when it updates the sustainment strategy for the E-2D for its 5-year update. E-2C is maintained organically by field maintainers and at Navy Fleet Readiness Centers under a planned maintenance interval cycle: initial planned maintenance interval is performed by field maintainers at 42 months and the second cycle is performed at a Fleet Readiness Center 46 months after the initial planned maintenance interval. Supply support is provided organically by the Naval Supply Systems Command and Defense Logistics Agency; contractor support services are provided by General Dynamics and Wyle Labs. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. The E-2 Advanced Hawkeye (E-2D) is the newest variant of the E-2 aircraft platform, expecting to reach full operational capability by 2027 (see fig. 24). Using the same configuration as the E-2C, the E-2D aircraft is used for surface-surveillance coordination and airborne early warning, and command control. Its mission is to provide advanced warning of approaching enemy surface units, and cruise missiles and aircraft, among other things. Total operating and support (O&S) costs for the E-2D have increased consistently since fiscal year 2011 to about $125 million in fiscal year 2016. This increase is driven by the addition of aircraft to the inventory as the Navy continues to produce E-2D aircraft through 2026. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. The EA-18G Growler is the fourth major variant of the F/A-18 family of aircraft manufactured in 2007 to replace the EA-6B Prowler (see fig. 26). The EA-18G is the first newly designed electronic warfare aircraft produced in more than 35 years and combines the proven F/A-18 Super Hornet platform with a sophisticated electronic warfare suite. Total O&S costs for the EA-18G have consistently increased from about $334 million in fiscal year 2011 to about $868 million in fiscal year 2016. Specifically, unit manpower and maintenance costs have increased partly because the inventory is increasing, as EA-18Gs are still in production. design, development, and fielding of the aircraft. Some of the key support program elements include developing support equipment and technical data, testing requirements for avionics, and facilities requirements, among others. The Navy is updating this plan and expects to finalize it in 2018. The aircraft are maintained organically at Navy Fleet Readiness Centers under planned maintenance intervals, which typically occur every 72 months. Also, the Navy partners with Boeing to provide wholesale supply and depot repair support for major components, such as the engine. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. The F/A-18A-D Hornet Strike Fighter is a twin-engine, mid-wing, multimission tactical aircraft initially fielded in the 1980s (see fig. 28). In its fighter mode, it is used primarily as a fighter escort and for air defense; in its attack mode, it is used for force projection, interdiction, and air support. Total operating and support (O&S) costs for the F/A-18A-D have decreased consistently from about $3.1 billion in fiscal year 2011 to about $2.4 billion in fiscal year 2016. Specifically, unit manpower, operations, and maintenance costs have decreased, partly because the F/A-18A-Ds are being permanently transitioned out of service to be replaced by the F-35 Joint Strike Fighter.. and financial resources necessary to ensure continued readiness and supportability for the remainder of the aircraft’s service life. The Navy is currently updating this plan and expects to finalize it in 2018. The aircraft are maintained organically at Navy Fleet Readiness Centers under planned maintenance intervals, which typically occur every 48 months for carrier-deploying aircraft, and every 72 months for land-based aircraft. The Navy implemented the High-Flight-Hour program in 2006 to extend the service life from 8,000 to 10,000 flight hours by inspecting and repairing airframes, and replacing major components and parts. The High-Flight-Hour program, along with other factors, has led to maintenance carryover (i.e., into the next fiscal year) due to maintenance events taking longer than planned. In 1999, the Navy entered into a contract with Boeing for engineering support to leverage resources within the technology and industrial base to improve efficiency of the maintenance process and address the maintenance backlog. The F/A-18A-D is operating beyond its planned service life with maintenance and supply issues. The Navy’s actions to mitigate these challenges include extending the service life of the aircraft, allowing maintainers to work overtime to reduce backlog, and cannibalizing parts—moving parts from one aircraft to another. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. The F/A-18E-F Super Hornet was first manufactured in 1998 (see fig. 30). The F/A-18E-F is highly capable across the full mission spectrum: air superiority, fighter escort, reconnaissance, aerial refueling, close air support, air defense suppression, and day/night precision strike. The F/A-18E-F provides aircrew the capability and performance necessary to face 21st century threats. Total operating and support (O&S) costs for the F/A-18E-4 have increased from about $2.2 billion in fiscal year 2011 to about $3.1 billion in fiscal year 2016. Specifically, unit manpower, maintenance, and continuing system support have increased, partly because the inventory is increasing, as the F/A-18E-F is still in production. the Navy is conducting an assessment to determine the number of flight hours the aircraft can safely continue to fly, and then extend the service life of the program through inspections, repairs, and modifications, among other things. The Navy contracted with Boeing to potentially begin these efforts by fiscal year 2018. The F/A-18E-F is a high operational tempo aircraft supporting contingency operations with maintenance and supply issues. The Navy’s actions to mitigate these challenges include plans to extend the service life of the aircraft, training maintainers to transition to vacated positions, and cannibalizing parts—removing parts from one aircraft to another. This report is a public version of a sensitive report that we issued on April 25, 2018. DOD deemed some of the information, such as aircraft availability, not mission capable rates, number of aircraft in depots, and budgeted and executed flight hours to be sensitive (i.e., For Official Use Only). This public report omits the information that DOD deemed to be sensitive. To examine the trends in aircraft availability and operating and support (O&S) costs for selected Air Force and Navy fixed-wing aircraft, including whether the aircraft met availability goals, we selected a nongeneralizable sample of 12 fixed-wing aircraft managed by the Departments of the Air Force and the Navy. These included two Marine Corps aircraft that are managed by the Department of the Navy. This nongeneralizable sample was selected to ensure a mix of aircraft, including type of aircraft (fighter, bomber, cargo, etc.), age of the aircraft, and size of inventory, and whether the aircraft were sustained organically by the Department of Defense (DOD) or through contract arrangements, such as public-private partnerships or performance-based logistics, among other factors. For the Air Force, we selected five fixed-wing aircraft—the B-52 Stratofortress, C-17 Globemaster III, E-8C Joint Surveillance and Target Attack Radar System (JSTARS), F-16 Fighting Falcon, and F-22 Raptor. For the Navy, including the Marine Corps, we selected seven fixed-wing aircraft—the AV-8B Harrier, C-2A Greyhound Logistics Aircraft, E-2 Hawkeye Early Warning and Control Aircraft, E-2 Advanced Hawkeye Early Warning and Control Aircraft, EA-18G Growler, F/A-18 Hornet Strike Fighter A-D, and F/A-18 Super Hornet E-F. The Marine Corps uses the AV-8B Harrier and also uses a variant of the F/A-18A-D. For the selected aircraft, we obtained and reviewed the aircraft availability, sustainment, and O&S data for accuracy and completeness, interviewed officials regarding their data-collection processes, and reviewed available related policies and procedures associated with the collection of the data. As a result, we found the information to be sufficiently reliable for the purposes of presenting sustainment metrics, such as aircraft availability and O&S costs. status due to maintenance, supply, and both. With respect to O&S costs, we collected and analyzed data from fiscal years 2011 through 2016. We conducted data-reliability assessments for the data provided by the Air Force and the Navy. To do this, we sent data-reliability questionnaires to both departments requesting information on the sources that generated the data. For the Air Force, we conducted data-reliability assessments on the Air Force Total Ownership Cost system and the Logistics Installation and Mission Support system. For the Navy, we conducted data-reliability assessments on the Aviation Management Supply and Readiness Reporting—Type Model Series Integrated Database, the Decision Knowledge Programming for Logistics Analysis and Technical Evaluation system, the Flying Hour Projection System / Cost Adjustment and Visibility Tracking System, and the Visibility and Management of Operating and Support Costs system. We reviewed responses from both departments on these sources as well as documentation—such as guidance, user manuals, and data dictionaries—provided to corroborate questionnaire responses, and interviewed knowledgeable officials to discuss the data. We concluded that the data provided by the Air Force and the Navy were sufficiently reliable for the purposes of reporting condition metrics such as aircraft availability; not mission capable status due to maintenance, supply, and both; depot inductions; budgeted and executed flight hours; and O&S costs for the selected fixed-wing aircraft in our review. To identify the sustainment challenges and mitigation actions for the selected aircraft, we reviewed sustainment metrics data, performance briefings, and other relevant documentation to identify specific challenges for each of the 12 aircraft in our review. We also reviewed ongoing and planned actions to address those challenges. Additionally, we interviewed program officials, depot officials, field maintainers, and squadron personnel to obtain their views on the challenges they face in sustaining the aircraft and the actions they take to mitigate those challenges. In some instances, we visited depots and squadrons to observe aircraft undergoing maintenance, discuss the respective maintenance processes, and discuss challenges and mitigation actions with officials. We then grouped the identified challenges into categories and represented them in a table to demonstrate which aircraft are experiencing specific challenges. To assess the extent to which the Air Force and the Navy have sustainment strategies, regularly review sustainment metrics, and have plans to improve aircraft availability for the selected fixed-wing aircraft, we obtained and analyzed sustainment strategies, performance management frameworks (i.e., sustainment metrics collected and monitored as well as the levels of management review), and improvement plans for each of the selected 12 fixed-wing aircraft. We also identified and reviewed DOD, Air Force, and Navy guidance to analyze the departments’ efforts in sustaining these aircraft and to determine whether these were consistent with federal standards for internal control that deal with management defining objectives in specific terms. Specifically, we reviewed DOD Instruction 5000.02, Operation of the Defense Acquisition System, which provides management principles and mandatory policies for defense acquisition systems such as fixed- wing aircraft. These policies incorporate decision processes and assessing of readiness, which includes the creation of and requirements for a Life-cycle Sustainment Plan. We also reviewed Air Force Instruction 63-101/20-101, Integrated Life Cycle Management, which implements various Air Force and DOD policy directives, including DOD Instruction 5000.02. It establishes the integrated life-cycle management guidelines and procedures for Air Force personnel who develop, review, approve, or manage the systems, subsystems, end-items, services, and activities procured by the Air Force. For the Navy, we reviewed Secretary of the Navy M-5000.2, Department of the Navy Acquisition and Capabilities Guidebook, which provides guidance for the operation of the defense acquisition system and the joint capabilities integration and development system. It also implements DOD Instruction 5000.02 for the Navy and Marine Corps, including guidance on the management and execution of a sustainment strategy. and service guidance. We also reviewed the Air Force’s and the Navy’s performance metric briefings and improvement plans to determine whether the departments regularly reviewed sustainment metrics and had plans aimed at improving aircraft availability. We interviewed DOD, Air Force, and Navy officials knowledgeable about sustainment of these selected fixed-wing aircraft to discuss DOD’s and the departments’ efforts in sustaining these aircraft, including historical information on each aircraft, applicability of policy and guidance for legacy aircraft, and overviews of performance management frameworks identified by the departments to monitor and improve aircraft availability. To develop the fixed-wing aircraft sustainment summary documents (i.e., “Sustainment Quick Looks”) in appendixes II–XIII we obtained historical and current information including background on aircraft capabilities, manufacturer, sustainment strategy, depot maintenance and squadron locations, and key dates in the life cycle of each aircraft (i.e., first manufactured, initial and full operational capability, last production, and planned sunset year). We collected and analyzed the following metrics: aircraft availability, not mission capable maintenance, not mission capable supply, and not mission capable aircraft from fiscal year 2011 through March 2017; the number of aircraft in depots for fiscal years 2011 through 2016; budgeted and executed flight hours from fiscal years 2011 through overall O&S and maintenance costs for fiscal years 2011 through 2016. We compared availability actuals to goals, aircraft in depots to availability trends, and budgeted and executed flight hours to availability trends. We analyzed O&S cost by reviewing its six elements and compared them to availability trends. We also analyzed the subcategories of the maintenance costs element. Through interviews with knowledgeable officials and reviewing documentation, we identified sustainment challenges (i.e., aging, maintenance and supply support) and mitigation actions to address these challenges for each selected fixed-wing aircraft. DOD deemed some of the information, such as aircraft availability, not mission capable status, number of aircraft in depots, and budgeted and executed flight hours, to be sensitive (i.e., For Official Use Only), which must be protected from public disclosure. This public report omits the information that DOD deemed to be sensitive. Additionally, to support our work for each objective we conducted site visits and interviewed officials to discuss data trends and identify specific sustainment challenges such as aging, maintenance, and supply support, among other challenges affecting aircraft availability, and mitigation actions to address these challenges. For the Air Force, we met with the following entities: Headquarters—Secretary of the Air Force, Logistics and Product Support and Deputy Assistant Secretary for Cost and Economics, Air Force Cost Analysis Agency; Materiel Commands—Air Force Materiel Command and Air Force Life Cycle Management Center; Program Offices—B-52 Program Office, C-17 Program Office, E-8C Program Office, F-16 Program Office, and F-22 Program Office; Depots—Tinker Air Force Base at Oklahoma City, Oklahoma (B-52); Robins Air Force Base at Warner Robbins, Georgia (C-17); Northrop Grumman facility at Lake Charles, Louisiana (E-8C); Ogden Air Logistics Center / Hill Air Force Base at Ogden, Utah (F-16 and F-22); and Squadrons—437th Maintenance Group, Joint Base Charleston, South Carolina (C-17); 461st Air Control Wing, Robins Air Force Base Georgia (E-8C); 20th Fighter Wing, Shaw Air Force Base, South Carolina (F-16); and 325th Maintenance Group, Tyndall Air Force Base, Florida (F-22). For the Navy, we met with the following entities: Headquarters—Deputy Assistant Secretary of the Navy— Expeditionary Programs and Logistics Management, Marine Corps Aviation Plans and Policy Branch, and Air Warfare Division; Materiel Commands—Commander, Fleet Readiness Center; Naval Air Systems Command; and Naval Supply Systems Command; Program Offices—Program Manager–Air (PMA)-231 (C-2A, E-2C, and E-2D); PMA- 257 (AV-8B); and PMA-265 (F/A-18A-F, and EA- 18G); Depots—Fleet Readiness Center–East at Cherry Point, North Carolina; Fleet Readiness Center–Mid Atlantic at Naval Air Station Norfolk, Virginia, and Naval Air Station Oceana, Virginia; Squadrons—Marine Corps Air Station Cherry Point, North Carolina; Marine Corps Air Station Miramar, California; Naval Air Station Norfolk, Virginia; and Naval Air Station Oceana, Virginia; and Other—Naval Center for Cost Analysis. The performance audit upon which this report is based was conducted from September 2016 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate, evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with DOD from April 2018 to September 2018 to prepare this unclassified version of the original sensitive report for public release. This public version was also prepared in accordance with these standards. For fiscal year 2016, total operating and support (O&S) costs for the five Air Force fixed-wing aircraft selected in our review were about $12 billion, and the average O&S cost per aircraft across all five fleets was about $96 million, as shown in figure 32. Each of the C-17 and F-16 fleets accounted for about 33 percent of the total O&S cost, and the E-8C’s average cost per aircraft accounted for about 48 percent of the total average cost per aircraft. For fiscal year 2016, total O&S costs for the seven Navy fixed-wing aircraft selected in our review were about $7.7 billion, and the average O&S cost per aircraft across all seven fleets was about $44 million, as shown in figure 33. The F/A-18E-F fleet accounted for about 40 percent of the total O&S cost, and the E-2C’s average cost per aircraft accounted for about 19 percent of the total average cost per aircraft. In addition to the contact named above, John Bumgarner (Assistant Director), Clarine Allen, Ron Aribo, Vincent Buquicchio, Amie Lesser, Richard Powelson, Steven Putansu, Matt Spiers, and Natasha Wilder made key contributions to this report. Defense Supply Chain: DOD Needs Complete Information on Single Sources of Supply to Proactively Manage the Risks. GAO-17-768. Washington, D.C.: September 27, 2017. Weapon Systems Management: Product Support Managers’ Perspectives on Factors Critical to Influencing Sustainment-Related Decisions. GAO-17-744R. Washington, D.C.: September 12, 2017. Defense Acquisitions: Assessments of Selected Weapon Programs. GAO-17-333SP. Washington, D.C.: March 30, 2017. Depot Maintenance: Executed Workload and Maintenance Operations at DOD Depots. GAO-17-82R. Washington, D.C.: February 3, 2017. Defense Inventory: Further Analysis and Enhanced Metrics Could Improve Service Supply and Depot Operations. GAO-16-450. Washington, D.C.: June 9, 2016. Weapon Systems Management: DOD Has Taken Steps to Implement Product Support Managers but Needs to Evaluate Their Effects. GAO-14-326. Washington, D.C.: April 29, 2014.", "summary": "DOD spends billions of dollars annually to sustain its weapon systems to support current and future operations. The Air Force and Navy are operating many of their fixed-wing aircraft well beyond their original designed service lives and therefore are confronted with sustainment challenges. House Report 114-537 included a provision for GAO to evaluate the sustainment of major weapon systems. This report, among other things, (1) examines the trends in availability and O&S costs for selected Air Force and Navy fixed-wing aircraft since fiscal year 2011, including whether they met availability goals, and (2) assesses the extent that the departments documented sustainment strategies, reviewed sustainment metrics, and implemented plans to improve aircraft availability. GAO selected a nongeneralizable sample of 12 fixed-wing aircraft by considering a variety of factors, such as the type, age, and manufacturer of the aircraft, among other factors, and analyzed condition and availability data, O&S costs, and sustainment challenges from fiscal year 2011 through March 2017 for each aircraft in a “Sustainment Quick Look.” GAO also analyzed policies, strategies, and plans, and interviewed Navy and Air Force officials in program offices, squadrons, and maintenance depots. Between fiscal years 2011 and 2016, the Air Force and Navy generally did not meet aircraft availability goals, and operating and support (O&S) cost trends for GAO's selected fixed-wing aircraft varied. Specifically, GAO found that availability declined for 6 of 12 aircraft—3 from each service—between fiscal years 2011 and 2016; availability fell short of goals for 9 of 12 aircraft in fiscal year 2016; and O&S costs increased for 5 of the aircraft, and maintenance costs—the largest share—increased for 8 of 12 aircraft. GAO found, and officials agreed, that these aircraft face similar challenges. a Obsolescence means a part is unavailable due to its lack of usefulness or it is no longer current or available for production. b Diminishing manufacturing sources is a loss or impending loss of manufacturers or suppliers. The Air Force and Navy have documented sustainment strategies for some aircraft, regularly reviewed sustainment metrics, and implemented improvement plans. The Air Force has documented sustainment strategies for all aircraft GAO reviewed; however, the Navy has not documented or updated its sustainment strategies for four aircraft. Specifically, the Navy does not have a documented sustainment strategy for the C-2A, and has not updated the strategies for the E2C, EA-18G, and F/A-18A-D since before 2012. The Navy is in the process of documenting its strategies, but Department of Defense (DOD) policy is unclear on whether a sustainment strategy is required and has to be updated every 5 years for weapon systems that are in the operations and support phase of their life cycle (i.e., legacy systems). Also, Navy guidance does not specify a requirement for legacy systems, although Air Force guidance does. Clarifying the requirements to document sustainment strategies for legacy systems, and documenting those strategies, would add additional visibility over the availability and O&S costs of DOD aircraft and any associated sustainment risks. This is a public version of a sensitive report issued in April 2018. Information on aircraft availability and other related information was deemed to be sensitive and has been omitted from this report. GAO is recommending that DOD and the Navy update or issue new policy and guidance clarifying the requirements for documenting sustainment strategies for legacy weapon systems. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "This section includes information about seismic surveys, oil and gas activities in the four OCS regions, and the potential effects of seismic activities on the environment and marine mammals as well as related requirements. Seismic surveys use mechanically generated sound waves from an acoustic source such as an airgun to transmit energy into the subsurface. Some of this energy is reflected or refracted back to recording sensors, and data are transformed into representative images of the layers in the subsurface of the earth. Entities use seismic surveys for several purposes. For example, oil and gas companies use both onshore and offshore seismic surveys to collect data on geology that may indicate the presence of oil and gas. Other entities, such as research institutions, use seismic surveys for a variety of purposes, such as helping to detect groundwater, identifying archaeological resources and fault zones, and conducting other research. There are two main types of seismic surveys used on the OCS: (1) deep- penetration and (2) high-resolution seismic surveys. Deep-penetration seismic surveys are conducted by vessels towing an array of airguns that use a low frequency source and emit high-energy acoustic pulses into the seafloor over long durations. Deep-penetration seismic surveys can penetrate several thousand meters into the subsurface and are then reflected and recorded by receivers to image deep geological features. Deep-penetration seismic surveys are often acquired prior to the drilling phase of oil and gas exploration. High-resolution seismic surveys typically use high-frequency acoustic signals to image the sea bottom and shallow parts right below the ocean bottom with a higher level of detail. Seismic surveys vary in technologies used, as well as in their size and scope, with towed gear in some cases spanning several miles (see fig. 1). The OCS refers to the submerged lands outside the territorial jurisdiction of all 50 states but that appertain to the United States and are under its jurisdiction and control. State submerged lands generally extend from the shore to 3 geographical miles offshore. Federal submerged lands, which are lands under the jurisdiction of the federal government—generally extend from 3 geographical miles to 200 nautical miles offshore. With certain exceptions, waters and submerged lands beyond 200 nautical miles offshore are considered international. The OCS is divided into four regions managed by BOEM—Alaska, Atlantic, Gulf of Mexico, and Pacific—each with its own histories and concerns and levels of commercial activities, including oil and gas development and history of using seismic surveys. The Gulf of Mexico OCS region has had the most oil and gas activity. The Alaska OCS encompasses the Arctic submerged lands, Cook Inlet planning area, and the Gulf of Alaska. The Arctic waters of the Alaska OCS include the Beaufort and Chukchi planning areas and the Bering Sea. In the last 25 years, seismic activities in the Alaska OCS have generally taken place in the Cook Inlet and the Chukchi and Beaufort Seas. The Atlantic OCS region is divided into four areas for administrative purposes under BOEM’s oil and gas leasing program: the North Atlantic, Mid-Atlantic, South Atlantic, and the Straits of Florida. At present, no active OCS oil and gas leases exist in any of these four planning areas. The most recent geological and geophysical seismic data for the Mid- and South Atlantic OCS were gathered more than 30 years ago. The Gulf of Mexico’s central and western planning areas—offshore Texas, Louisiana, Mississippi and Alabama—remain the United States’ primary offshore source of oil and gas, generating about 97 percent of all OCS oil and gas production. BOEM oversees offshore oil and gas resource-management activities, including preparing the 5-year OCS oil and gas leasing program, conducting lease sales and issuing leases, and receiving, reviewing, and approving oil and gas exploration and development and production plans. As part of its role, BOEM also issues permits for geological and geophysical data acquisition on the OCS, including seismic surveys, under the Outer Continental Shelf Lands Act and regulations under the act. BOEM does not have statutory review time frame requirements for issuing geological and geophysical seismic survey permits. Entities seeking to conduct geological and geophysical scientific research related to oil and gas but not associated with oil and gas exploration and development, including seismic surveys, generally do not need to obtain a permit from BOEM, but they are generally required to file a Notice of Scientific Research with the Regional Director of BOEM at least 30 days before beginning such research. Man-made sources of ocean noise—such as from commercial shipping, marine pile driving, sonar, and seismic activities—may have a variety of impacts on marine mammals ranging from minor disturbance to injury or death. Effects of noise on marine mammals depend on a variety of factors including the species and behavior, as well as the frequency, intensity, and duration of the noise. NMFS and FWS evaluate the potential effects of activities, such as seismic surveys, on marine mammals in determining whether to authorize incidental take under the MMPA when such authorization is requested by entities engaging in those activities. Agencies are required to evaluate potential environmental effects of their actions, such as approval of seismic survey permits, under the National Environmental Policy Act (NEPA), and in cases where Endangered Species Act listed species may be affected, conduct Endangered Species Act section 7 consultations. The MMPA was enacted in 1972 to ensure that marine mammals are maintained at or restored to their optimum sustainable population. NMFS and FWS implement the MMPA, which generally prohibits the “taking” of marine mammals. However, the MMPA provides a mechanism for NMFS and FWS, upon request, to authorize the incidental take of small numbers of marine mammals by U.S. citizens engaging in a specified activity, other than commercial fishing, within a specified geographic region. Specifically, NMFS and FWS issue incidental take authorizations after finding that the activities will cause the taking of only small numbers of marine mammals of a species or stock, the taking will have a negligible impact on such marine mammal species or stocks, and the taking will not have an unmitigable adverse impact on the availability of the species or stock for taking for subsistence uses. Entities whose seismic survey activities may result in incidental take of marine mammals obtain an incidental take authorization from NMFS or FWS, or both, depending on the affected species. If operators incidentally take a marine mammal and do not have authorization to cover the incidental take, they would be in violation of the MMPA. By statute, incidental take authorizations must also include permissible methods of taking and means of affecting the least practicable adverse impact on affected species and stocks and their habitat, monitoring requirements, and reporting requirements. Under NEPA, federal agencies are required to evaluate the potential environmental effects of actions they propose to carry out, fund, or approve (e.g., by permit). NEPA and implementing regulations set out an environmental review process that has two principal purposes: (1) to ensure that an agency carefully considers information concerning the potential environmental effects of proposed actions and alternatives to proposed actions and (2) to ensure that this information will be made available to the public. Under NEPA, before approving any oil and gas leasing, exploration, geological and geophysical permits, or development activities, BOEM must evaluate the potential environmental effects of approving or permitting those activities. NMFS and FWS also must evaluate potential environmental effects under NEPA of issuing the MMPA incidental take authorization as part of their review of the proposed authorizations. Generally, the scope of the proposed permit or authorization—that is, the federal action—determines whether the federal agency prepares either an environmental assessment or a more detailed environmental impact statement. Agencies may prepare an environmental assessment to determine whether a proposed action is expected to have a potentially significant impact on the human environment. If the agency determines that the action will not have significant environmental impacts following the environmental assessment, the agency will issue a Finding of No Significant Impact. If prior to or during the development of an environmental assessment, the agency determines that the action may cause significant environmental impacts, an environmental impact statement should be prepared. In implementing NEPA, federal agencies may rely on “tiering”, in which prior broader, earlier NEPA reviews are incorporated into subsequent site-specific analyses. Tiering is used to avoid duplication of analysis as a proposed activity moves through the NEPA process, from a broad assessment to a site-specific analysis. If an agency would like to evaluate the potential significant environmental impacts of multiple similar or recurring activities, the agency can prepare a programmatic environmental assessment or environmental impact statement. Because BOEM prepares a site specific environmental analysis for each geological and geophysical permit application, to increase efficiency, BOEM uses this tiering process and tiers from either an existing environmental impact statement or environmental assessment during its site specific environmental analysis review. The Endangered Species Act provides programs for conserving threatened and endangered species. Under section 7 of the act, federal agencies must ensure that any action they authorize, fund, or carry out is not likely to jeopardize the continued existence of any endangered or threatened species or result in the destruction or adverse modification of its critical habitat. To fulfill this responsibility, federal agencies must consult with NMFS or FWS, depending on the affected species, to assess the potential effects of proposed actions, including approval of seismic survey permits and authorization of incidental take under the MMPA, on threatened and endangered species. The Endangered Species Act allows NMFS and FWS to exempt incidental takings from the taking prohibition for endangered and threatened species as provided through an incidental take statement. The statement is to include the amount or extent of anticipated take, reasonable and prudent measures to minimize the effects of incidental take, and the terms and conditions that must be observed. Formal consultations between federal agencies and NMFS or FWS are required where a proposed action could have an adverse effect on listed species or designated critical habitat and are concluded with issuance by NMFS or FWS of biological opinions. The biological opinion is to discuss in detail the effects of the proposed action on listed species and their critical habitat and contain NMFS’s or FWS’s opinion on whether the proposed action is likely to jeopardize the continued existence of the species or destroy or adversely modify any designated critical habitat. For consultations involving marine mammals, an Endangered Species Act section 7 incidental take statement cannot be issued until the incidental take has been authorized under the MMPA. Agencies may informally consult with NMFS or FWS, and if it is determined by the federal agency during such informal consultation that the proposed action is not likely to adversely affect endangered or threatened species or critical habitat, the informal consultation process is concluded upon written concurrence of NMFS or FWS, and no further action is necessary. If an action agency would like to evaluate the impacts of multiple similar or recurring activities on endangered and threatened species, NMFS or FWS can prepare a programmatic biological opinion for the OCS region. BOEM has a documented process for reviewing seismic survey applications in each of the three selected OCS regions that differs at the final step (see fig. 2), depending on the region. For the Alaska and Atlantic regions, the applicant generally submits an application to BOEM for a seismic survey permit at the same time that the applicant submits an application to NMFS or FWS for an incidental take authorization. For the Gulf of Mexico region, the applicant has generally only submitted an application to BOEM for a seismic survey permit. In all three regions, BOEM is required to conduct environmental reviews under NEPA, and Endangered Species Act Section 7 consultations as necessary to help ensure agency actions, such as permit approvals, do not jeopardize the continued existence of a species or destroy or adversely modify critical habitat. In all three regions, when appropriate, BOEM is also to coordinate with relevant stakeholders, such as state officials, the Department of Defense and the National Aeronautics and Space Administration, if proposed activities have the potential to interfere with defense or civil aerospace activities in the same area. The final step in BOEM’s process for reviewing seismic survey permit applications differs among the three selected OCS regions. In the Atlantic region, prior to issuing a permit, BOEM intends to require incidental take authorizations related to the seismic survey activities proposed in the permit application to be in place before issuing permits, but BOEM issues conditional permits while waiting for incidental take authorizations in the Alaska region. In the Gulf of Mexico region, BOEM generally issues permits without requiring incidental take authorizations to be in place. Stakeholders from industry groups and BOEM officials we interviewed stated that differences in the review process were the natural result of the process adapting to the three different OCS regions and their history of oil and gas exploration. For example, agency officials stated that, in terms of oil and gas activity, the Atlantic is a “frontier region,” and, according to a stakeholder group, has vocal coastal communities that are uncomfortable with offshore energy development and, relatedly, the potential impacts of seismic surveys on marine mammals and commercial fishing. If certain activities are considered controversial or have more vocal public opponents, they may result in an increased number of public comments the agency must review, which in turn may result in BOEM taking extra time to review applications for permits or NMFS requiring more time to review incidental take authorization applications, agency officials said. For example, in the Atlantic OCS, there was a large vocal public opposition to the seismic surveys proposed. Specifically, 126 municipalities, 1,200 officials, and over 40,000 businesses representing Republicans and Democrats opposed seismic surveying, according to testimony at a July 2017 hearing of the House Committee on Natural Resources. By contrast, according to BOEM officials and industry stakeholders we interviewed, the Gulf of Mexico region has a long history of offshore energy development and seismic survey activity. BOEM has issued permits in the Gulf of Mexico region without requiring an applicant to already have an incidental take authorization in place. According to two industry stakeholders we interviewed, obtaining permits in the Gulf of Mexico has been a fairly routine process. BOEM has made a policy decision to generally require an incidental take authorization in Alaska and the Atlantic but not in the Gulf of Mexico, agency officials said. While historically, BOEM has not required incidental take authorizations in the Gulf of Mexico to be in place prior to issuing seismic survey permits, around 2002, ocean noise emerged as an environmental concern in the region, according to BOEM officials. At that time, BOEM requested incidental take regulations from NMFS for the Gulf of Mexico at the request of NMFS and on behalf of the industry and submitted revised requests in 2004, 2011, and 2016. According to BOEM officials we interviewed, the agency has been working with NMFS since 2002 to get incidental take regulations in place. According to NMFS officials, BOEM’s 2002 request only addressed 1 of the 21 species present in the Gulf of Mexico, so NMFS requested that BOEM revise its request. The 2004 request included all marine mammals present in the area, according to NMFS officials. BOEM and NMFS agreed to require mitigation measures on all deep penetration seismic surveys in lieu of the formal authorization until completion of the pending rulemaking, according to BOEM officials. Meanwhile, in 2010, a consortium of environmental organizations sued Interior, alleging that BOEM permitted seismic activities in the Gulf of Mexico in violation of NEPA. In correspondence with BOEM, plaintiffs also alleged that seismic activities permitted by BOEM in the Gulf of Mexico resulted in the unauthorized take of marine mammals in violation of the MMPA. In June 2013, the parties reached an agreement providing for a temporary stay of all proceedings in the lawsuit until Final Action, as defined in the settlement agreement, with respect to BOEM’s application for incidental take regulations or until the expiration of 30 months, whichever occurs first. In addition, BOEM agreed to consider the appropriateness of prescribing additional mitigation measures for industry applicants related to seismic survey permits during the stay, including seasonal restrictions for coastal waters and certain monitoring and reporting requirements; the plaintiffs agreed not to challenge such permits for surveys implementing the mitigations during the stay. In February 2016, the parties agreed to extend the stay through September 25, 2017, subject to BOEM’s consideration of certain additional conditions on seismic surveys permitted in the Gulf of Mexico. In October 2016, BOEM submitted a revised request to NMFS for incidental take regulations governing geophysical surveys in the Gulf of Mexico. In December 2016, NMFS published in the Federal Register a notice of receipt and request for comments and information in response to BOEM’s revised request for incidental take regulations. According to NMFS officials, the agency is currently working on developing incidental take regulations for the Gulf of Mexico region. In September 2017, the parties agreed to extend the stay through November 1, 2018. From 2011 through 2016, BOEM Reviewed 297 Applications for Seismic Survey Permit Applications and Issued 264 Permits Based on our review of agency data, from 2011 through 2016, BOEM reviewed 297 applications for seismic survey permits. Of the 297 seismic survey permit applications reviewed, BOEM issued 264 permits during this period, and the number of applications reviewed and permits issued varied by OCS region (see table 1). For the Gulf of Mexico region, which has had the most oil and gas activity, BOEM reviewed the most permit applications (268) and issued the most permits (250). BOEM does not have statutory review time frame requirements for issuing geological and geophysical seismic survey permits. The range of BOEM’s review time frames—from the date the agency determined that an application was complete to when BOEM issued a seismic survey permit—varied by OCS region (see table 2 and fig. 3). This table does not include pending, denied, or withdrawn applications or Notices of Scientific Research. This table also does not include the Pacific Outer Continental Shelf region because the Bureau of Ocean Energy Management did not issue any seismic survey permits there from 2011 through 2016. The six permits issued in the Atlantic region were for high-resolution seismic surveys for non-oil and gas mineral resources. Internally, according to BOEM officials, BOEM’s goal in the Gulf of Mexico OCS region is to issue high-resolution seismic survey permits within 40 days and to issue deep penetration (airgun) permits within 70 days. Our analysis of BOEM data on seismic survey permits found that, in the Gulf of Mexico OCS region, for high-resolution seismic survey permits, the agency issued 103 permits out of 108 permits (95 percent) within 40 days; for deep penetration permits, the agency issued 90 permits out of 142 permits (63 percent) within 70 days. NMFS and FWS follow a similar application review process for reviewing incidental take authorization applications, and from 2011 through 2016, the agencies reviewed a total of 35 applications. However, neither agency was able to provide accurate data for the dates on which it began its formal processing of these applications because neither agency’s guidance sufficiently describes how to record certain review dates. As a result, it is not possible to determine whether the agencies were meeting their statutory time frames for the type of incidental take authorization application that has such time frames—the incidental harassment authorizations. Based on our review of agency guidance, NMFS and FWS follow a similar general process in reviewing applications for incidental take authorizations—both incidental harassment authorizations and letters of authorization with associated incidental take regulations—related to seismic survey activities (see fig. 4). According to NMFS and FWS officials we interviewed, the incidental take authorization process is concurrent with, but separate from, BOEM’s process for issuing seismic survey permits, and entities seeking to conduct seismic surveys apply separately with each agency, as appropriate. When applicants apply for an incidental take authorization, they are first to decide which type of authorization they need—an incidental harassment authorization or a letter of authorization associated with incidental take regulations, depending on the expected effect on marine mammals. Specifically, if the proposed activity has the potential to result in the taking of marine mammals by harassment only, applicants can request an incidental harassment authorization. Incidental harassment authorizations can be issued for up to 1 year. The MMPA provides that NMFS or FWS shall issue incidental harassment authorizations within 120 days of receiving an application. If an activity has the potential to result in serious injury to marine mammals, the applicant would request incidental take regulations, which can be issued for up to 5 years. Letters of authorization are required to conduct activities pursuant to incidental take regulations. Once incidental take regulations are finalized, the applicant can submit a request for a letter of authorization, which is issued under the incidental take regulations. Once NMFS or FWS initially receives an application for an incidental harassment authorization or incidental take regulation, agency officials said that they begin their review and determine whether the application is adequate and complete. They also work with the applicant to obtain any additional required or clarifying information, according to agency officials we interviewed. According to agency regulations and guidance, once the agency deems an application to be adequate and complete, it begins to formally process the application and may initiate several review actions, including a NEPA environmental review and, if appropriate, an Endangered Species Act Section 7 consultation. In the case of NMFS, the agency publishes a notice of receipt of a request for incidental take regulations in the Federal Register. The agencies then publish in the Federal Register a proposed incidental harassment authorization or proposed incidental take regulations. For incidental harassment authorizations, the MMPA provides that NMFS or FWS, or both, are to publish a proposed incidental harassment authorization and request public comment in the Federal Register no later than 45 days after receiving an application. Following a 30-day public comment period for proposed incidental harassment authorizations, the agencies would make their final determination on the authorization, based on: the findings of their NEPA review, the Endangered Species Act consultation, an assessment of whether the proposed activity is consistent with the requirements of other statutes, as necessary, an analysis of the applicant’s ability to implement any necessary mitigation measures to reduce potential effects on marine mammals, and a review of the formal public comments submitted regarding the proposed application. Not later than 45 days after the close of the public comment period, NMFS and/or FWS is to, under the MMPA, issue an incidental harassment authorization, including any appropriate conditions. In order to issue an incidental harassment authorization, the relevant agency must make the required findings that the activity will result in a taking by harassment only of small numbers of marine mammals, that the anticipated take will have a negligible impact on the species or stock, and the anticipated take will not have an unmitigable adverse impact on the availability of the species or stock for subsistence uses. For incidental take regulations, the agencies are to publish proposed regulations in the Federal Register and generally provide a public comment period of 30-to-60 days, depending on the type of authorization requested and circumstances that may warrant a shorter or longer period. The agencies then publish a final rule in the Federal Register, which includes the agencies’ response to public comments received. Generally, 30 days after the final rule is published, an approved incidental take regulation becomes effective. Once the regulation becomes effective, the agencies may issue letters of authorization, the applications for which may have been received at the same time as the submission of the incidental take regulation request or following the implementation of the regulations, and then determine whether the activities in the letter of authorization application are within the scope of the activities analyzed in the regulations. The relevant agency can issue a letter of authorization based on a determination under the agency’s regulations that the level of any incidental takings will be consistent with the findings used to determine the total taking allowable under the specific regulations. From 2011 through 2016, based on our analysis of agency data, NMFS reviewed 28 applications for incidental take authorizations and issued 21 incidental take authorizations across the Alaska, Atlantic, and Gulf of Mexico OCS regions, and FWS reviewed and issued 7 authorizations only in the Alaska OCS, in part because the marine species under FWS’ jurisdiction do not tend to occur in waters of the OCS in the other regions. Of the 28 applications NMFS reviewed, it reviewed the most applications (18) and issued the most authorizations (16) related to seismic surveys in the Alaska region (see table 3). With regard to incidental take regulations, NMFS reviewed and issued one set of incidental take regulations related to seismic surveys in Alaska but did not receive applications for—and as a result has not issued—any letters of authorization associated with the incidental take regulations, agency officials said. There were no requests for incidental take regulations related to seismic surveys in the Atlantic region, and NMFS is currently developing incidental take regulations for the Gulf of Mexico, in response to BOEM’s request, as noted previously. From 2011 through 2016, FWS reviewed applications for and issued incidental take authorizations related to seismic surveys only in the Alaska region, in part because the species under FWS’ jurisdiction do not tend to occur in waters of the OCS in the other regions or there has not been industry interest in applying for incidental take authorizations in those regions, according to agency officials. Specifically, FWS reviewed and issued two incidental harassment authorizations and two incidental take regulations, which had five associated letters of authorization, for seismic activities in the Alaska OCS. From 2011 through 2016, NMFS did not accurately record the dates on which it determined applications to be adequate and complete, and FWS did not record those dates at all; therefore, it is not possible to determine NMFS and FWS time frames for reviewing incidental take authorization applications. As noted previously, both agencies, per their guidance and regulations, are to begin their formal processing of a request for an incidental take authorization once an application is determined to be “adequate and complete.” NMFS has general guidance on what constitutes an adequate and complete incidental take authorization application—for both incidental harassment authorization and incidental take regulation applications, as well as associated letter of authorization applications. Specifically, NMFS’ regulations and website outline 14 sections of information required in an incidental take authorization application, such as the anticipated impact of the activity to the species or stock of marine mammal. The agency’s website also notes that adequate and complete means “with enough information for the agency to analyze the potential impacts on marine mammals, their habitats, and on the availability of marine mammals for subsistence uses.” FWS also has general guidance on what constitutes an adequate and complete incidental take authorization application, for both incidental harassment authorization and incidental take regulations, as well as associated letters of authorization. Specifically, FWS regulations and guidance specify that all applications must include certain pieces of information and note that if an application is determined to be incomplete, FWS staff are to notify the applicant within 30 days of receiving the application that information is lacking. However, neither NMFS nor FWS guidance sufficiently describes how agency staff should record the date on which an application is determined to be adequate and complete, which would start the time frame for reviewing incidental take authorization applications. Specifically, NMFS’ guidance provides information on what should be included in an adequate and complete application but does not include information on how or when staff should record the date an application is determined to be adequate and complete. NMFS officials we interviewed told us that while they generally record these dates, they are not sufficiently accurate to be used for an analysis of review time frames. These officials said that determinations of whether an application is adequate and complete have historically varied by staff member, with some staff waiting until all outstanding questions are resolved with an applicant before deeming the application adequate and complete, and others considering an application to be adequate and complete if more substantive questions are answered (e.g., the dates, duration, specified geographic region of, and estimated take for the proposed activity), even if some less substantive questions are still outstanding (e.g., contact information). In addition, NMFS officials told us that, in some cases, staff might not enter into their system the date they determine an application to be adequate and complete and might instead enter the information in batches once they have a few applications that are ready for data entry. This might mean that, in cases where a staff member waits until an application is done being processed and reviewed, the date recorded for the determination of adequate and complete, and the date the incidental take authorization is published, may be zero to a few days apart. Based on our review of NMFS data, in at least two cases, the date NMFS recorded for the determination of adequacy and completeness of an application was after the date when the proposed incidental take authorization was published in the Federal Register. While FWS has guidance on what applicants should include in an incidental take authorization application, the guidance does not specify how or when staff should record the date on which they determine an application is adequate and complete. One FWS official we interviewed told us that the agency does not record this date in the spreadsheet for tracking incidental take authorization applications. According to this FWS official, agency officials do not record this date because they do not wait until the application is considered adequate and complete to begin their review. Instead, they begin processing the application while working with applicants to provide missing information and clarifications. By the time FWS officials consider an application to be adequate and complete, the officials said that they usually have a well-developed draft incidental take authorization and are typically finalizing details with the applicant. According to FWS officials, recording an adequate and complete date would have little meaning. NMFS’s and FWS’s guidance does not specify how or when staff should record the date an application is determined to be adequate and complete to help ensure that such a date is recorded consistently. As a result, the agencies are either not accurately recording the date an application is adequate and complete or not recording that date. Thus, the agencies are not able to determine how long their formal processing takes. This outcome is inconsistent with federal internal control standards, which call for management to use quality information to achieve agency objectives and design control activities, such as accurate and timely recording of transactions, to achieve objectives and respond to risk. Officials we interviewed at both agencies told us that they work to help meet applicants’ project timelines—for example, applicants might need an incidental harassment authorization to be in place when their seismic survey vessel becomes available to begin operations. Until NMFS and FWS develop guidance that clarifies how and when staff should record the date on which the agency determines the “adequacy and completeness” of an application, the agencies and applicants will continue to have uncertainty around review time frames for incidental take authorizations. Further, NMFS and FWS do not know if they are meeting their statutory time frames for reviewing one type of incidental take authorization application—incidental harassment authorization applications—because they do not assess the time it takes their agencies to review applications and make authorization decisions. As noted previously, the MMPA provides that NMFS or FWS shall issue incidental harassment authorizations within 120 days of receiving an application. Industry representatives, scientific researchers, and agency officials we interviewed noted, however, that the agencies often take longer than 120 days to make a decision about whether to issue an incidental harassment authorization. For example, NMFS and FWS officials we interviewed told us they often do not complete incidental harassment authorization reviews within the 120-day statutory time frame. According to NMFS and FWS officials, reviews may take longer than 120 days in cases where the agency determines that a threatened or endangered species under the Endangered Species Act may be affected, because the agency generally must request the initiation of a section 7 consultation, which by regulation can take up to 135 days. More specifically, NMFS and FWS officials we interviewed were unable to provide accurate estimates of how long it takes their agency to review incidental harassment authorization applications because they said that they do not conduct analyses of their review time frames. This practice is inconsistent with federal standards for internal control, which call for agency management to design control activities to achieve objectives and respond to risks, including by comparing actual performance to planned or expected results throughout the organization and analyzing significant differences. Without analyzing how long it takes to review incidental harassment authorization applications, from the date the agency determines that an application is adequate and complete until the date an application is approved or denied, and comparing it to the statutory review time frame, NMFS and FWS will be unable to determine whether they are meeting their objectives of completing reviews within the statutory time frame of 120 days. As of October 2017, in addition to the six permits BOEM issued in the Atlantic OCS from 2011 through 2016, another six permits were pending a decision. Five related incidental harassment authorizations have also been pending a decision by NMFS, as of October 2017. As of October 2017, in addition to the six permits BOEM issued in the Atlantic OCS from 2011 through 2016, another six permits were pending a decision. From March to May 2014, BOEM received these six applications for seismic survey permits in the Atlantic region (see fig. 5). Of the six applicants that applied to BOEM during that time, five also applied to NMFS for incidental harassment authorizations related to their seismic survey permit applications, from August 2014 to January 2016. The sixth applicant that applied to BOEM for a seismic survey permit in the Atlantic OCS region did not apply for an incidental harassment authorization with NMFS, according to NMFS officials. BOEM officials we interviewed stated that beginning in August 2014, the agency began conducting outreach to Atlantic state officials to explain the geological and geophysical permitting process and the seismic technologies involved in the applications. In addition, according to BOEM officials, the agency began coordinating with the Department of Defense and the National Aeronautics and Space Administration to ensure that the proposed seismic surveys did not interfere with any of their activities. According to BOEM data we reviewed, the agency had determined that all six applications to be “accepted,” or complete in late April to early June 2014. In March 2015, BOEM made the applications available for public comment for 10 or 30 days, depending on the type of activity proposed. According to BOEM officials, while the agency does not generally provide a similar public comment period for the Gulf of Mexico or Alaska OCS regions, once the Atlantic applications were considered “accepted,” BOEM decided to provide a public comment period for them because the region is considered a “frontier area”—a region without a long history of oil and gas development—and local communities in Atlantic states are less familiar with the impacts of seismic surveys than communities in the Gulf states. From March 2015 until January 2017, BOEM had no further data on its review activities that took place. BOEM officials we interviewed told us that their seismic survey permit reviews were complete, but the agency did not issue the seismic survey permits because it had made a policy decision to wait for NMFS to issue incidental harassment authorizations before doing so. In January 2017, BOEM denied the six applications for deep-penetration seismic survey permits in the Atlantic OCS region after reviewing the applications for 948 to 982 days. In May 2017, BOEM announced it would reconsider the six applications for seismic survey permits in the Atlantic region, after the new administration rescinded the permit denials. As of August 2017, BOEM officials we interviewed were unable to provide estimates of when the agency’s reviews would be completed. In addition to the four incidental harassment authorizations NMFS approved in the Atlantic OCS region from 2011 through 2016, there are five authorization applications related to seismic survey permits that are pending a decision by NMFS, as of October 2017. NMFS received three incidental harassment authorization applications related to seismic surveys in the Atlantic OCS region from August to September 2014, a fourth in March 2015, and a fifth in January 2016 (see fig. 6). In fall 2014, NMFS redirected staff reviewing the Atlantic incidental harassment authorization applications to work on issues related to the agency’s Fisheries Science Center, according to a NMFS official we interviewed. According to this official, review of the Atlantic applications resumed in February 2015. In spring 2015, NMFS became aware of some academic studies concerning the impacts of seismic surveys on marine mammals that they felt would be important to consider with the Atlantic OCS applications under review, according to agency officials we interviewed. According to these officials, NMFS notified applicants of these studies, and one applicant voluntarily revised its impact estimates based on the studies. In summer 2015, NMFS officials said they determined the three applications were sufficiently complete to begin processing. The agency also published a formal notice of receipt and request for comments in the Federal Register. According to NMFS officials we interviewed, this procedure is not a required step in the incidental harassment authorization review process, but NMFS officials thought it was important to solicit the input, given potential local community concern over the surveys in the Atlantic OCS region. Also according to NMFS officials, based on comments received during the public comment period, NMFS determined one application had been erroneously considered complete and returned the application to the applicant. In fall 2015, NMFS officials informed applicants that NMFS would need revised applications based on the new academic studies. In addition to the applicant noted above who updated its application in spring 2015, one additional applicant chose to update its application in fall 2015, and NMFS updated two additional remaining applications. NMFS officials told us they received the last major revisions to the applications in May 2016 and were reviewing and drafting mitigation and monitoring proposals throughout 2016. In November 2016, according to NMFS officials, the five proposed incidental harassment authorizations were ready to be published in the Federal Register, but internal leadership placed the process on hold due to uncertainty regarding BOEM’s actions on the permits. Following BOEM’s denials in January 2017, NMFS suspended the five incidental harassment authorization applications related to the denied seismic survey permits; according to NMFS officials, NMFS determined there was no longer a valid basis for any proposed activity following BOEM’s denial of permits for the actual activity. Agency officials informed applicants that NMFS may resume its incidental harassment authorization review if BOEM resumed its permit review at some point in the future. Once BOEM announced it would reconsider the six applications for seismic survey permits in the Atlantic region, NMFS published five proposed incidental harassment authorizations related to the permits being reconsidered by BOEM in June 2017. In July 2017, NMFS extended the public comment period an additional 15 calendar days for a total of 45 days. After the close of the public comment period, under the MMPA, NMFS is to finalize its decision regarding the applications and either publish the final incidental harassment authorizations or deny the applications. As of October 2017, officials we spoke with at NMFS were unable to provide estimates of when the agency’s reviews would be completed. Offshore seismic surveys provide federal agencies and commercial entities with a wide range of information, including data on fault zones and geology that may indicate the presence of oil and gas. This information can help inform regulatory and resource development decisions. In reviewing applications for seismic survey permits, BOEM records the date on which an application for a seismic survey permit is “accepted”, or complete, which may be weeks or months after an application is received. NMFS and FWS, however, were unable to provide accurate data on the dates that they determined applications for incidental take authorizations were adequate and complete because the agencies’ guidance does not specify how or when staff should record this date. Until NMFS and FWS develop guidance that clarifies how and when staff should record the date the agency determines the “adequacy and completeness” of an application, the agencies and applicants will continue to have uncertainty around review time frames for incidental take authorizations. Moreover, NMFS and FWS officials we interviewed said that they do not analyze their review time frames, a practice that is inconsistent with federal standards for internal control. Without analyzing how long it takes to review incidental harassment authorization applications and comparing time frames to the statutory review time frame, NMFS and FWS will be unable to determine whether they are meeting their statutory review time frame of 120 days. We are making the following four recommendations, including two to NMFS and two to FWS. Specifically: The Assistant Administrator for Fisheries of NMFS should develop guidance that clarifies how and when staff should record the date on which the agency determines the “adequacy and completeness” of an incidental take authorization application. (Recommendation 1). The Principal Deputy Director of FWS should develop guidance that clarifies how and when to record the date on which the agency determines the “adequacy and completeness” of an incidental take authorization application. (Recommendation 2). The Assistant Administrator for Fisheries of NMFS should analyze the agency’s time frames for reviewing incidental harassment authorization applications—from the date the agency determines that an application is adequate and complete until the date an application is approved or denied—and compare the agency’s review time frames to the statutory review time frame. (Recommendation 3). The Principal Deputy Director of FWS should analyze the agency’s time frames for reviewing incidental harassment authorization applications— from the date the agency determines that an application is adequate and complete until the date an application is approved or denied—and compare the agency’s review time frames to the statutory review time frame. (Recommendation 4). We provided a copy of this report to the Departments of Commerce and the Interior for review and comment. The Department of Commerce provided comments on behalf of the National Marine Fisheries Service (NMFS). NMFS agreed with our recommendations but recommended changes to some of the terms used in our report and stated that our characterization of the statutory and mandated requirements did not fully describe the extent of review and analysis required during their review. While we believe that our description of the extent and complexity of NMFS’ review and analysis, including the terms we use to describe NMFS’ process, was sufficient for this report, we revised the report as appropriate. In its letter, NMFS acknowledged that it does not consistently record the date that an application is deemed ”adequate and complete,” and agreed with our recommendations, including describing the steps it plans to take to address them. The Department of Commerce also provided technical comments, which we incorporated throughout our report as appropriate. The Department of Commerce’s letter can be found in appendix II. The Department of the Interior provided comments on behalf of the Bureau of Ocean Energy Management (BOEM) and the U.S. Fish and Wildlife Service (FWS). The FWS partially concurred with our first recommendation and fully concurred with our second. Regarding the first recommendation, FWS noted that it plans to develop guidance for recording the “adequate and complete” date of incidental harassment authorization applications; however, it did not indicate that it would develop such guidance for the other type of incidental take authorization—the incidental take regulations. We believe that FWS should develop guidance for both. Such guidance is necessary to maintain consistency with federal internal control standards, which call for management to use quality information to achieve agency objectives and design control activities, such as accurate and timely recording of transactions, to achieve objectives and respond to risk. The Department of the Interior also provided technical comments, which we incorporated throughout our report as appropriate. The Department of the Interior’s letter can be found in appendix III. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Acting Director of BOEM, the Assistant Administrator for Fisheries of NMFS, and the Principal Deputy Director of FWS. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made significant contributions to this report are listed in appendix IV. This report examines (1) BOEM’s process for reviewing seismic survey permit applications in each OCS region, the number of applications reviewed from 2011 through 2016, and BOEM’s review time frames; (2) NMFS’s and FWS’s processes for reviewing incidental-take authorization applications related to seismic surveys in each OCS region, the number of such applications reviewed by the agencies from 2011 through 2016, and their review time frames; and (3) the status of pending seismic survey permit applications and related incidental take authorizations in the Atlantic OCS region. In our preliminary review of all four OCS regions— Alaska, the Atlantic, the Gulf of Mexico, and the Pacific—we determined that there had been no new oil and gas and related seismic activity in the Pacific OCS region for the last two decades; as a result, we excluded the Pacific OCS region from our review. To examine BOEM’s, NMFS’s, and FWS’s processes for reviewing seismic survey permit applications and related incidental take authorizations, we analyzed relevant laws and regulations that govern the processes and reviewed and analyzed agency guidance, such as process flowcharts, and other documents, including Federal Register notices. We also interviewed BOEM, NMFS, and FWS agency officials, in their headquarters and regional offices, responsible for overseeing seismic permitting and incidental take authorization reviews in each selected OCS region. In addition, we interviewed a range of stakeholders, identified and selected because of their knowledge of the seismic survey permit and incidental take authorization application processes, to obtain their views. Specifically, we interviewed representatives from 10 stakeholder groups, which included industry groups, a research institution, and environmental organizations. Because this was a nonprobability sample of stakeholders, the views of stakeholders we spoke with are not generalizable beyond those groups that we interviewed. To examine the number of seismic survey permit applications and related incidental take authorizations that BOEM, NMFS, and FWS reviewed from 2011 through 2016, we obtained data from BOEM, NMFS, and FWS on the number of permit and authorization applications each agency reviewed and the number of permits and authorizations the agencies issued in each selected OCS region. We asked the agencies to categorize their data with different types of seismic survey technologies (e.g., deep-penetration seismic surveys, high-resolution seismic surveys, or other seismic survey technology such as vertical seismic profile technology). As a result, we identified the number of relevant permits and authorizations that were identified by these agencies as having used seismic survey technologies. We used publicly available information on the number of permit and authorization applications on agency websites to check the reliability of BOEM, NMFS, and FWS data and found the data on the number of permits and authorizations to be sufficiently reliable for our purposes. To examine the review time frames for seismic survey permit applications and related incidental take authorizations from 2011 through 2016, as well as pending applications, and the extent to which NMFS and FWS are meeting their statutory time frames for reviewing incidental harassment authorization applications related to seismic survey permits, we obtained data from BOEM, NMFS, and FWS. We also interviewed agency officials knowledgeable about the data and analyzed the data to determine the range of review time frames by agency and by selected OCS region. We focused our review of pending applications on the Atlantic OCS region because it was the only region with applications that had been pending review for several years. We used information on the dates applications were received and issued as listed in the Federal Register or publicly available documentation to check the reliability of BOEM, NMFS, and FWS data. For BOEM, we found the dates the agency gave us generally were consistent with the dates listed in the Federal Register. As a result, we used BOEM’s dates from the time an application was deemed “accepted,” or adequate and complete, until the permit was issued. We found the data to be sufficiently reliable for our purposes. For NMFS and FWS, we found errors between the dates the agencies gave us and the dates listed in the Federal Register. In addition, the agencies told us they did not have reliable information on the dates that applications were determined to be adequate and complete. We also examined NMFS and FWS guidance on review time frames, agency communication with applicants, and data- recording procedures. We also interviewed agency officials as well as industry stakeholders to learn more about time frames for seismic survey permit applications and related incidental take authorizations. In addition to the contact named above, Christine Kehr (Assistant Director), Nirmal Chaudhary, Maggie Childs, John Delicath, Marissa Dondoe, Cindy Gilbert, Jessica Lewis, Greg Marchand, Patricia Moye, Katrina Pekar-Carpenter, Caroline Prado, Dan Royer, and Kiki Theodoropoulos made key contributions to this report.", "summary": "Offshore seismic surveys provide federal agencies and other entities with a wide range of data, from research on fault zones to geology that may indicate the presence of oil and gas. Companies seeking to conduct such surveys to find oil and gas resources in the OCS must obtain a permit from BOEM—which oversees offshore oil and gas activities. Man-made sources of ocean noise, such as seismic surveys, may harm marine mammals. Entities whose activities may cause the taking of marine mammals, which includes harassing or injuring an animal, may obtain incidental take authorizations for seismic surveys from NMFS or FWS, depending on the potentially affected species. GAO was asked to provide information on the seismic permitting process. This report examines (1) BOEM's review process, the number of permit applications reviewed from 2011 through 2016, and its review time frames; and (2) NMFS's and FWS's review process, the number of incidental take authorization applications reviewed from 2011 through 2016, and their review time frames, among other objectives. GAO reviewed laws and regulations and agency documents, analyzed data on applications to BOEM, NMFS, and FWS, and interviewed agency officials. The Department of the Interior's Bureau of Ocean Energy Management's (BOEM) process and time frames for reviewing seismic survey applications differ by region along the Outer Continental Shelf (OCS). From 2011 through 2016, BOEM reviewed 297 applications and issued 264 seismic survey permits, and the reviews' time frames differed by region (see table). As part of the process, BOEM may require approved “incidental take” authorizations from the Department of Commerce's National Marine Fisheries Service (NMFS) or Interior's U.S. Fish and Wildlife Service (FWS), given the possibility such surveys may disturb or injure marine mammals. BOEM does not have statutory review time frame requirements for issuing permits, and officials said the agency starts its formal review once it determines that an application is complete. In some cases, the agency issued a permit on the same day it determined an application was complete. NMFS and FWS follow a similar general process for reviewing incidental take authorization applications related to seismic survey activities. From 2011 through 2016, NMFS and FWS reviewed 35 and approved 28 such applications across the three OCS regions, including some authorizations related to BOEM permits as well as research seismic surveys not associated with BOEM permits. NMFS was unable to provide accurate data for the dates the agency determines an application is adequate and complete—and FWS does not record this date. For example, based on GAO's review of NMFS data, in at least two cases, the date NMFS recorded the application had been determined adequate and complete was after the date when the proposed authorization was published in the Federal Register . Federal internal control standards call for agencies to use quality information. Without guidance on how to accurately record review dates, agencies and applicants will continue to have uncertainty around review time frames. Further, under the Marine Mammal Protection Act, the agencies are to review one type of incidental take authorization application—incidental harassment authorization applications—within 120 days of receiving an application for such authorizations. NMFS and FWS have not conducted an analysis of their review time frames. Not conducting such an analysis is inconsistent with federal internal control standards that call for agency management to design control activities to achieve objectives and respond to risks. Without analyzing the review time frames for incidental harassment authorization applications and comparing them to statutory review time frames, NMFS and FWS are unable to determine whether they are meeting their objectives to complete reviews in the 120-day statutory time frame. GAO is recommending that both NMFS and FWS develop guidance clarifying how and when staff should record review dates of incidental take authorization applications and analyze how long the reviews take. NMFS agreed and FWS partially agreed with our recommendations.", "document_type": "gao"}
{"report": "This section discusses the purpose, types, and locations of natural gas storage sites; leaks from such sites; safety enforcement prior to 2017; and the PIPES Act. Natural gas storage sites—geologic formations where natural gas is stored deep underground and retrieved for later use—are key parts of our energy system. Natural gas provides about 30 percent of U.S. energy needs, is used to generate a third of the nation’s electricity, is widely used for heating homes and businesses, and is used in a variety of industrial processes, according to Energy Information Administration (EIA) information. Natural gas storage sites provide a way to meet peak energy needs—such as during a cold spell in the winter or during periods of high electricity demand in the summer—more quickly than would be possible if relying solely on pipelines that transport natural gas from distant production fields. Natural gas storage sites are privately owned and operated by a variety of companies in the energy industry, including local utilities, independent companies that store gas for sale at peak times to other companies, and interstate pipeline companies. There are three major types of underground geologic formations where natural gas storage sites are found: (1) underground salt caverns, (2) depleted aquifers, and (3) depleted oil and gas reservoirs. The wells that inject or withdraw natural gas from the underground formations can extend thousands of feet underground. The 415 natural gas storage sites in the United States contain about 17,000 wells, ranging from a few wells per site to over a hundred wells at some larger sites. Figure 1 illustrates the types of geologic formations where natural gas storage sites are constructed and operated. Natural gas storage sites are found in 31 states across the country, according to EIA data. Over 300 cities, towns, and other populated areas are located near a natural gas storage site, according to a DOE analysis. Operators often locate natural gas storage sites near major population centers or large gas pipelines to improve their ability to deliver natural gas when needed. Figure 2 shows the approximate location of natural gas storage sites located within counties populated by 100,000 or more people. Leaks from natural gas storage sites can be caused by a variety of factors—such as underground fissures or inadequately designed or damaged wells—and have the potential to affect human health, cause economic disruption, and harm the environment. For example, natural gas poses the risk of explosion and asphyxiation within enclosed spaces. In addition, other components of natural gas can cause short-term neurological, gastrointestinal, and respiratory symptoms, according to the Los Angeles County Department of Public Health. Moreover, if a large gas storage facility unexpectedly goes offline due to a major leak, it can disrupt the natural gas supply system, which in turn may affect the flow of gas to heat homes and businesses or may cause electrical blackouts due to the loss of fuel for gas-fired electrical generators. According to a DOE report, the natural gas stored in geologic formations is under high pressure and may find its way to the surface if underground fissures or unplugged oil and gas wells allow the geologic formation to be breached. Leaks can also occur if the wells used to inject and withdraw natural gas from geologic formations lose integrity due to cracking of cement used to seal the well or other factors. Older wells used for natural gas storage were often drilled for other reasons, such as oil and gas production, and are more likely to have age-related degradation, according to DOE. About half of the about 17,000 wells that inject and withdraw natural gas from storage sites are more than 50 years old, and many wells are more than 100 years old, according to DOE. In addition, DOE reported that other factors may contribute to leaks, such as earthquake activity, nearby drilling activity, or other mechanical stresses and undetected corrosion that may not be known by the natural gas storage site operators. Further, DOE has reported that operators can sustain safety by regularly maintaining site equipment, monitoring and repairing leaks, keeping records about the site, and planning for possible emergencies, among other things. Leaks from natural gas storage sites can result in significant and harmful effects on public health and safety, the environment, and the energy system. DOE, PHMSA, and others have identified three major leaks from natural gas storage sites since 2000 that illustrate these potential negative effects: The Aliso Canyon leak, which was detected in October 2015 and continued for nearly 4 months, focused national attention on natural gas storage safety. As of August 2017, the cause of the leak had not been conclusively determined. However, the leak occurred in a well that, at the time, was about 60 years old, according to DOE. The operator of the Aliso Canyon site unsuccessfully attempted to stop the leak several times over the 4-month event and eventually was able to do so in February 2016 by permanently sealing the well. According to the private operator, it temporarily relocated about 8,000 neighboring families until the leak was abated. Also, the leak disrupted the Aliso Canyon site’s ability to supply natural gas to electricity generating plants. Because the Aliso Canyon site supplies gas for nearly 10 gigawatts of electricity in the Los Angeles basin, the leak led to concerns that there may not be enough gas to serve the electricity needs of the surrounding region during peak times. In July 2017, California state regulators announced that the operator had conducted a comprehensive safety review and that the regulators would allow Aliso Canyon to reopen at a greatly reduced capacity in order to prevent energy shortages. In August 2004, the Moss Bluff natural gas storage site in Liberty County, Texas, experienced a major leak due to a damaged well. The leaking gas caught fire and burned for over 6 days, according to DOE and PHMSA documents. As a result, the gas was released into the atmosphere as carbon dioxide, which, according to an EPA analysis, is a less potent greenhouse gas than natural gas, which was released by the Aliso Canyon leak. In January 2001, the Yaggy natural gas storage site leaked through underground fissures from the site’s salt caverns into the nearby city of Hutchinson, Kansas, eventually causing an explosion in the city’s downtown business district, DOE reported. Two people were killed, and several businesses were damaged or destroyed by the explosion. Before 2017, many natural gas storage sites were subject to varied, state- by-state safety enforcement. States were responsible for regulating and enforcing safety at sites that were located solely within their boundaries and only linked to pipelines within the state. Agencies representing 26 state governments licensed 211 such sites, which amounted to about half of the 415 active sites in the United States. Prior to 2017, these state governments applied various safety standards that addressed underground conditions, such as the integrity of the geologic formations that store natural gas, or the construction and maintenance of wells that inject and withdraw gas. For example, according to a DOE report, some states’ standards specified how site operators should safely construct the wells. Other states’ standards specified how wells were to be maintained during their useful life, or how they were to be safely plugged and abandoned after their useful life ended. Prior to 2017, the remaining 204 interstate natural gas storage sites were subject solely to federal oversight. However, the federal government had not issued safety standards for them. The Federal Energy Regulatory Commission (FERC) licenses storage sites that serve the interstate natural gas market—a market regulated by FERC. However, according to FERC, its licensing process focuses on whether a proposed site serves an economic need, and it does not review the safety conditions of a site when reviewing whether to grant a license. In this role, FERC has licensed 204 sites in 24 states. As part of its mission to ensure the safety of the interstate natural gas pipeline system—of which natural gas storage sites are a part—PHMSA had the regulatory authority to issue and enforce safety standards for interstate natural gas storage sites. However, PHMSA’s interstate pipeline safety regulations did not extend to underground natural gas storage facilities, even when connected to interstate pipelines. Moreover, because interstate sites were under federal jurisdiction, state safety standards could not be applied to such sites. Other federal agencies had responsibilities that addressed limited aspects of safety at natural gas storage sites. DOE provided technical assistance to California during the Aliso Canyon incident, and has researched the effects of natural gas storage leaks on the reliability of the electricity grid. The Bureau of Land Management (BLM), within the Department of the Interior, manages public lands that overlap, either partially or fully, with 33 natural gas storage sites. EPA provides funding and oversight to help states and local pollution control agencies meet their responsibility to monitor air quality within their jurisdictions, according to EPA officials. EPA can also provide its expertise and support to states and local communities in the event of natural gas storage leaks, as it did during the leak at Aliso Canyon. However, EPA does not regulate underground conditions at gas storage sites. In June 2016, Congress passed and the President signed the PIPES Act, which, among other things, directed DOT to establish minimum safety standards for all natural gas storage sites by June 2018 after considering recommendations from a federal task force and industry standards. PHMSA sets and enforces these standards. The PIPES Act also directed DOE to establish and lead the task force, which was charged with analyzing the Aliso Canyon incident and making recommendations to reduce the occurrence of similar incidents in the future. The task force published its report in October 2016. The report included findings in three areas—well integrity, environmental and health protection, and energy reliability. The report also made 44 recommendations to enhance natural gas storage safety, including 3 key recommendations: Operators of natural gas storage sites should make advance preparations with appropriate federal, state, and local governments to mitigate potential future leaks. Electrical grid operators should prepare for the risks that potential gas storage disruptions create for the electric system. Operators of natural gas storage sites should begin a rigorous program to evaluate the status of the wells, establish risk management planning, and, in most cases, phase out old wells with single-point-of-failure designs. The PIPES Act directed DOT to consider industry consensus standards to the extent practicable in establishing its minimum safety standards. Consensus standards for the oil and gas industry—including those for natural gas storage—are issued by various entities, including the American Petroleum Institute (API). API consensus standards describe how to safely perform technical procedures, such as drilling wells for oil and gas production, refining produced natural gas into usable gas for heating and electricity generation, and conducting “workover” operations to refurbish existing wells. API develops its consensus standards involving industry, manufacturers, engineering firms, the public, academia, and government, and API’s recommended practices are frequently adopted by a majority of the industry, according to API and PHMSA. Following several years of study and discussion by industry experts and government officials, including participation by PHMSA, API issued two documents outlining recommended practices for the development and operations of natural gas storage sites. These recommended practices describe the procedures for designing, locating, constructing, and operating natural gas storage sites, and include such activities as inspecting and testing the wells used to inject and withdraw gas from natural gas storage sites and monitoring the integrity of the underground formations where natural gas is stored. The API documents also recommend that operators prepare for emergencies and train the personnel who operate the sites. Under the PIPES Act, state governments also have a continuing role in enforcing natural gas storage safety for the sites in their states. The act allows states to certify with PHMSA that they have adopted state standards that meet or exceed the federal standards and can enforce these standards. Once a state certifies that it has met these conditions, the state is responsible for enforcing safety standards on state-regulated intrastate natural gas underground storage sites through inspections conducted by state employees, according to PHMSA officials. In addition, PHMSA officials told us that they would periodically assess whether states are meeting these conditions. PHMSA officials told us that PHMSA will have direct responsibility for inspecting federally-licensed interstate facilities for the next few years because federal safety standards are still being established, but officials noted that state inspectors could eventually seek permission from PHMSA to assume the role of inspecting interstate natural gas storage sites on behalf of PHMSA in the future. PHMSA officials also noted that PHMSA does not force states to participate in their pipeline safety program, and so in cases where a state chooses not to certify its safety enforcement program, PHMSA has stated that it will assign its own inspectors and staff to enforce federal natural gas storage safety standards in that state. The PIPES Act also requires PHMSA to set and charge user fees to operators that it can use for activities related to underground natural gas storage facility safety, subject to the expenditure of these fees being provided in advance in an appropriations act. Citing an urgent need to improve safety at natural gas storage sites, PHMSA issued an interim final rule that includes minimum safety standards based largely on API recommended practices in December 2016. The rule took effect in January 2017 and provided that existing facilities (and those constructed by July 18, 2017) must meet the standards by January 18, 2018. PHMSA is now considering public comments on its interim standards, and it plans to finalize them by issuing a final rule by January 2018. PHMSA also has stated that it will delay enforcement of certain standards in the interim final rule until 1 year after issuance of the final rule. To meet the requirement under the PIPES Act, PHMSA issued minimum safety standards for natural gas storage through an interim final rule in December 2016, which took effect in January 2017. PHMSA issued the interim final rule—which allowed the safety standards to take effect more quickly than under the conventional regulatory process—and stated that any delay in adopting the standards would jeopardize the public interest through risks to public safety and the environment. As a result, all 415 natural gas storage sites are for the first time subject to federal regulation, including minimum safety standards as set forth in the interim final rule, and subject to revision in a final rule. To develop the minimum safety standards, PHMSA considered industry consensus standards, as required by the PIPES Act. PHMSA had already advised operators to follow industry-recommended practices published by API, which develops consensus standards for the oil and gas industry. Specifically, in February 2016, before the passage of the PIPES Act, PHMSA issued a bulletin encouraging operators to follow the API recommended practices to update their safety programs. The API recommended practices contain many provisions that are mandatory, and other provisions that are nonmandatory. The interim final rule provides that the nonmandatory provisions of the recommended practices that are incorporated by reference in the rule are adopted as mandatory. PHMSA’s interim final rule requires operators of existing natural gas sites, and those constructed by July 18, 2017, to meet the requirements of certain sections of the API recommended practices identified in the rule by January 18, 2018. The API recommended practices address, among other things, general operations, monitoring the sites for potential leaks, and emergency response and preparedness. For new storage sites starting construction after July 18, 2017, the rule requires operators to meet all sections of the applicable API recommended practices. According to PHMSA officials, PHMSA considered the recommendations of the task force in developing its minimum safety standards, as required by the PIPES Act, and continues to do so. PHMSA’s minimum safety standards addressed certain recommendations made by the task force, according to an analysis performed by PHMSA. However, PHMSA did not require operators to implement one key recommendation of the task force report with its minimum standards, according to PHMSA officials. In particular, the October 2016 task force report recommended that operators phase out most storage wells with single-point-of-failure designs—where the failure of a single component, such as a well casing, could lead to a large release of gas—by installing multiple points of control at each well. According to an API official, its recommended practices do not direct operators to phase out such wells because this practice may not significantly improve safety in all cases; for example, this practice may not have prevented the leak at Aliso Canyon. The API official and PHMSA officials noted that API recommended practices direct operators to assess the risks at their sites and to take steps to address these risks. According to PHMSA officials, assessing the risks of a site could include identifying wells with a single point of failure and developing steps to mitigate this risk. Mitigating the risk could include installing multiple points of control for certain wells, among other possible mitigation steps. Neither PHMSA nor API officials could tell us how many of the approximately 17,000 wells at the nation’s 415 natural gas storage sites have single-point-of-failure designs, because this information has not been centrally gathered to date. However, PHMSA plans to gather information about how many storage wells have single-point-of-failure designs by asking operators to provide this information as part of a required annual report. To fund its enforcement of its minimum safety standards, PHMSA also issued a notice to set the user fees that PHMSA charges operators, as required by the PIPES Act. In November 2016, PHMSA published a notice of agency action and request for comment, describing its user fee structure. PHMSA collected public comments, evaluated them, and finalized its user fee structure in April 2017. As set forth in this notice, PHMSA will charge each operator based on the size of the operator’s storage sites as measured by working gas capacity range. The notice stated that PHMSA plans to collect a total of up to $8 million annually in fees from all operators combined; however, PHMSA may seek authority to increase or decrease the amount it charges operators if it finds that the cost of inspection and enforcement is more or less than it initially estimated, according to PHMSA officials. Following enactment of an appropriations act provision, PHMSA is authorized to use the fees it collects to fund its enforcement activities and plans to use a portion of the fees to reimburse states for enforcing its minimum safety standards, according to PHMSA officials. Table 1 provides a timeline of key events in the development of PHMSA’s minimum safety standards. Since issuing its interim final rule, PHMSA has been collecting public comments and plans to adjust some aspects of the rule in response to comments from the public, industry representatives, and others. PHMSA plans to finalize its minimum safety standards by replacing its interim final rule with a final rule in January 2018, and has delayed some dates for when it expects operators to comply with some aspects of its standards. PHMSA’s interim final rule states that, with respect to incorporation by reference of the standards, the nonmandatory provisions it adopted are adopted as mandatory provisions. API and two other organizations representing natural gas utilities and transmission companies submitted comments asking PHMSA to reconsider how it used the API recommended practices in its minimum safety standards. While API and the other industry representatives agreed that it was appropriate for PHMSA to use API recommended practices for its minimum safety standards, they stated that making all portions mandatory would make the standards burdensome. In June 2017, PHMSA published a notice in the Federal Register stating that it would consider these comments as it finalized its minimum safety standards, which it stated it expects to issue by January 2018. The notice stated further that PHMSA will not issue any enforcement citations to operators for failure to meet any standards that were nonmandatory but that were converted to mandatory by provisions of the interim final rule until 1 year after it issues the final rule. PHMSA also provided additional guidance and clarifications to operators about scheduling and its plans for enforcement. During the development of its interim final rule, PHMSA noted that some of the provisions in the minimum safety standards may take operators several years to fully implement. According to PHMSA officials, these provisions recommend that operators carefully inspect their natural gas storage sites, identify any conditions that do not meet industry-recommended practices, and then improve conditions at the sites by prioritizing the greatest risks and implementing preventative measures to mitigate and remediate these risks over a number of years. As a result, PHMSA published guidance on its website stating that it expects operators to make and implement plans to inspect and remediate risks found at their sites within 3 to 8 years following the effective date of the interim final rule. To enforce PHMSA’s safety standards, the agency’s officials have taken a variety of steps to establish a safety enforcement program for natural gas storage sites, but they have not yet followed certain leading practices of strategic planning in starting PHMSA’s natural gas storage program. Specifically, PHMSA officials have started developing a training program for natural gas storage inspectors. They also have established a strategic goal and begun developing a training performance goal for their natural gas safety enforcement program. However, they have not yet followed certain leading practices for strategic planning—the systematic process for defining desired outcomes and translating this vision into goals and steps to achieve them. For example, PHMSA’s training performance goal does not define the level of performance officials hope to achieve or address all core program activities, such as conducting effective inspections. In addition, PHMSA has not used baseline data or budgetary information to inform the development of performance goals. PHMSA officials explained that they are still developing performance goals for their new program and collecting relevant data. To enforce the agency’s safety standards, PHMSA officials have taken a variety of steps to establish a safety enforcement program for natural gas storage sites by January of 2018. For example, PHMSA officials have started developing a training program for natural gas storage inspectors. They have identified learning objectives for the program and have begun developing learning materials. According to PHMSA officials, developing a training program for inspectors is central to safety enforcement efforts, in part because PHMSA has a limited number of staff members with expertise in natural gas storage. For example, PHMSA had 10 employees with natural gas storage experience as of August 2017, according to PHMSA officials. In addition, PHMSA officials have completed eight safety assessments of selected natural gas storage operators to document the initial condition of gas storage sites and safety practices. According to PHMSA officials, their methodology for conducting these assessments involved visiting a cross section of operators, including operators of interstate and intrastate sites and multiple types of facilities. PHMSA officials also have developed workload and budget estimates for their new program, according to PHMSA documentation. In recent years, the Office of Pipeline Safety, which will be responsible for natural gas storage inspections in addition to pipeline inspections and other activities, has initiated about 1,100 inspections annually, according to PHMSA data. When natural gas storage site inspections begin, PHMSA officials estimate that the Office of Pipeline Safety’s inspection workload could increase 14 percent due to their new responsibilities. They reached this estimate by dividing the 203 new natural gas storage units they anticipate needing to inspect by the total number of inspection units they currently inspect. To meet the demands of this increased workload, officials estimate that PHMSA will need $2 million annually to fund 6 new inspector positions, training, travel, and other expenses associated with managing the natural gas storage safety enforcement program. With this number of inspectors, PHMSA officials believe that they can inspect all 203 natural gas storage units within about 4 years. Because PHMSA officials expect that many states that have previously conducted similar inspections will help PHMSA conduct inspections, officials also estimate that PHMSA will need to provide $6 million annually to states. However, PHMSA officials noted that their estimates may change as they gain additional information about the program. Specifically, after PHMSA begins initial inspections in early 2018, officials will have more information about the time it takes to inspect natural gas storage sites. By the end of fiscal year 2018, they will have even more information with which to develop more precise workload and budget estimates for the program, according to these officials. To ensure that the states assisting PHMSA are fully qualified to enforce the federal government’s minimum safety standards, PHMSA officials have begun developing a state certification program. This has involved drafting certification documents and contacting potential state partners. As of June 2017, PHMSA officials expected all states with intrastate natural gas storage sites to pursue certification. However, officials explained that they may not know until the end of fiscal year 2017 exactly how many states will pursue certification. If some states choose not to pursue certification or are not approved by PHMSA, PHMSA will be responsible for inspecting natural gas storage sites in those states, which could increase its inspection workload beyond the level it has estimated. For states that choose certification and are approved, PHMSA plans to use grants to fund up to 80 percent of state inspection costs. However, PHMSA officials told us that PHMSA may not be able to fund states to this level, depending on the approved costs requested by all states and levels of funding PHMSA receives through the appropriations process. In either circumstance, PHMSA’s grant program for certified state partners leverages state dollars, since it requires states to fund the portions of their programs not covered by grant funding. PHMSA also has established a strategic goal for its natural gas safety enforcement program, but it has not yet followed other leading practices for strategic planning. Specifically, PHMSA officials told us that their new enforcement program will be guided by one of PHMSA’s existing strategic goals—to promote continuous improvement in safety performance. PHMSA officials also told us that they are developing a performance goal for their training program and that other performance goals are still being identified and developed. The Government Performance and Results Act of 1993 (GPRA), as amended—which seeks to improve the effectiveness of federal programs by establishing a system for agencies to set goals for program performance and measure results—defines a performance goal as the target level of performance expressed as a tangible, measurable objective against which actual achievement is to be compared. For example, in the area of weather forecasting, we have previously reported that such a goal could be to increase the lead time for predicting tornadoes from 7 to 9 minutes. PHMSA has not yet followed certain leading practices for strategic planning, as it has not: (1) defined the level of performance or fully addressed core program activities with its existing performance goal; or (2) used baseline data and other data or budget information to inform and refine performance goals. Our prior work has identified several leading practices for strategic planning that PHMSA has not yet followed, such as setting goals that define a certain level of performance and address all core program activities. Some of this prior work has examined requirements under GPRA and the GPRA Modernization Act of 2010. GPRA, which was significantly enhanced by the GPRA Modernization Act of 2010, requires agencies to develop annual performance plans that, among other things, establish performance goals to define the level of performance to be achieved. We have previously reported that requirements under these acts can serve as leading practices for planning at lower levels of the agency. As one of several operating administrations within DOT, PHMSA would be considered a lower level of the agency. In addition, we have found that a key attribute of successful performance measures is that they reflect the full range of core program activities. Moreover, we have found that a key practice for helping federal agencies enhance and sustain collaborative efforts with other agencies is to define and articulate a common outcome or purpose they are seeking to achieve. While PHMSA has taken some steps to plan strategically for its new program, it has not followed certain leading practices of strategic planning. For example, PHMSA has developed a performance goal for its training program, and agency officials told us that they plan to review the number of students who pass their gas storage training course as a measure of the agency’s training performance goal. However, with this measure PHMSA has not defined the level of performance to be achieved. An example of a measure of the agency’s training performance goal that defines the level of performance could be one that specifies that a certain percentage of students will pass the course on their first attempt. In addition, PHMSA has not yet developed performance goals for other core program activities, such as conducting effective inspections. According to PHMSA subject-matter experts, one of the critical tasks associated with inspecting a gas storage site will be determining whether the operator has met all well monitoring requirements specified in API’s Recommended Practice 1171, which addresses the functional integrity of gas storage in depleted hydrocarbon reservoirs and aquifers. An example of a performance goal that could indicate whether PHMSA’s inspections are effective could be to annually reduce, by a certain percentage, the number of operators that do not meet the well monitoring requirements of Recommended Practice 1171. Another critical task identified by PHMSA’s subject-matter experts will be to determine whether the operator has followed its own risk management plan for gas storage sites—another area where PHMSA has not developed a performance goal. An example of a performance goal in this area could be to annually reduce, by a certain percentage, the number of gas storage operators that have not followed their own risk management plans. PHMSA officials acknowledged that their performance goals are not yet complete and said that they would strive to refine performance goals as they continue developing the program; however, PHMSA has not yet done so. As they do so, ensuring that their performance goals define the level of performance to be achieved and address core program activities could help them ensure that they effectively track progress toward their strategic goal and make adjustments to activities and resources, if needed, to better meet the goal. In addition, because PHMSA plans to leverage state resources to oversee gas storage sites, the success of its gas storage program will depend, in part, on collaboration with state partners. Establishing performance goals for the program could help PHMSA coordinate efforts and resources with the states that are expected to assist PHMSA with inspections. Another leading practice of strategic planning involves using baseline and trend data to inform performance goals, according to our prior work. Baseline data—data collected about operations before oversight begins— can serve as a basis for comparison with subsequently collected trend data. We have previously reported that baseline and trend data can provide a context for drawing conclusions about whether performance goals are reasonable and appropriate. For example, we found in 1999 that the Department of Education was able to use such information to gauge the appropriateness of its goals for reducing the default rate on student loans provided through the Federal Family Education Loan program. The program’s annual plan provided baseline and trend data for the default rate, which indicated that the rate declined from 22.4 percent to 10.4 percent from fiscal years 1990 to 1995. According to Education’s analysis of the data, future declines were likely to be steady but smaller because of the large number of high-default schools that had already been eliminated from the program. For fiscal year 1999, Education set a goal of reducing the default rate to 10.1 percent of borrowers. For PHMSA’s natural gas storage program, PHMSA will have access to baseline data—and eventually trend data—over time that could inform the development of performance goals and subsequent refinement of them. PHMSA officials told us that they have not yet used such data to inform the development of their performance goal because they are still in the process of collecting relevant data. For example, officials told us that, over time, they will have access to data about operators’ facilities, functional integrity work, and operations and maintenance procedures starting in early 2018. These data will likely include the number of wells that have leaked and been repaired during the last calendar year. As specified in PHMSA’s minimum safety standards, PHMSA also plans to collect safety and incident reports to track gas releases, deaths, and injuries resulting in hospitalizations. In addition, in August of 2017, PHMSA officials completed eight industry safety assessments, which involved visiting natural gas storage sites and studying sites’ safety procedures. As previously mentioned, these assessments aimed, in part, to document the initial condition of gas storage sites and safety practices. Agency officials told us that they had planned to use the data they collect from these assessments to inform the agency’s state certification and inspection programs. They did not specify whether or how they intend to use these data to inform their performance goals. As PHMSA continues developing performance goals for its natural gas storage program, using available data to inform and refine these goals could help the agency ensure that its goals are reasonable and appropriate. We also have reported that comparing information about budgetary resources with information about performance goals can help decisionmakers determine whether their performance goals are achievable. Specifically, we have reported that decisionmakers can better compare planned levels of accomplishment with the resources requested if they have information about how funding levels are expected to achieve a discrete set of performance goals. For example, we reported in a best practices report about strategic planning that the Internal Revenue Service (IRS) included in its performance plan for 1999 the budget amounts that corresponded with past performance levels. Table 2 illustrates how IRS used this information to inform proposed performance levels for the upcoming year. Moreover, GPRA requires agencies to prepare an annual performance plan covering each program activity set forth in the budget and, among other things, describe the resources required to meet performance goals. As previously mentioned, we have found that GPRA requirements can serve as leading practices for planning at lower levels of the agency. Assessing whether the new program’s performance goals are achievable given budgetary resources is important at a time when PHMSA officials are managing other new resources and responsibilities. For example, in addition to requiring DOT to establish minimum safety standards for natural gas storage sites, the PIPES Act of 2016 also requires DOT to update minimum safety standards for small-scale liquefied natural gas pipeline facilities. To carry out its responsibilities, PHMSA has received additional resources in recent years. As shown in figure 3, PHMSA’s Pipeline Safety Program has seen its total budgetary resources available increase from about $95 million in fiscal year 2007 to about $175 million in fiscal year 2016. In addition, the Consolidated Appropriations Act for fiscal year 2017 included a provision allowing for the obligation of up to $8 million from fees collected in fiscal year 2017 from operators for PHMSA’s natural gas storage program. These fees will be deposited in an Underground Natural Gas Storage Facility Safety account within PHMSA’s Pipeline Safety Fund and will be added to the Pipeline Safety Program’s total budgetary resources available for fiscal year 2017. PHMSA is not yet in a position to use budget information to inform or refine performance goals for its natural gas storage program because PHMSA officials are still developing these goals and PHMSA lacks key data, such as data on the time it takes—and therefore the budgetary resources required—to inspect natural gas storage sites. As previously mentioned, PHMSA will begin inspections in early 2018, and officials will have a better understanding of how long it takes to inspect natural gas storage sites by the end of fiscal year 2018. As PHMSA officials continue developing performance goals and finish collecting relevant data, using information about budgetary resources to inform and refine these goals may help PHMSA ensure that its goals are achievable. Natural gas storage sites are key elements of our nation’s energy system, helping ensure that natural gas is available when demand peaks. As evidenced by the large-scale leak of natural gas outside Los Angeles that started in 2015 and extended into 2016, leaks from these sites can cause economic disruptions and environmental damage. These sites recently became subject to national safety standards, which are subject to further revision. PHMSA has taken a variety of steps to meet its new responsibilities for overseeing natural gas storage sites, such as developing a training program for inspectors and a performance goal for training. However, PHMSA has not yet followed certain leading practices of strategic planning in starting PHMSA’s new safety enforcement program. For example, PHMSA’s only current performance goal does not define the level of performance officials are working to achieve, and PHMSA does not currently have goals that address other core program activities, such as conducting effective inspections. PHMSA also has not yet used the baseline data it is collecting to develop its performance goals. PHMSA officials explained that they are still developing performance goals for their new program and collecting data. As the agency continues to develop these goals, ensuring that performance goals define the level of performance and address all core program activities could help the agency better track progress toward its strategic goal and adjust activities and resources, if needed, to better meet the goal. Using baseline data to develop these goals could help PHMSA ensure that its goals are reasonable and appropriate. Finally, once PHMSA finalizes performance goals for the program and collects relevant data over time as well as budgetary information, using these data and information when available to inform and refine performance goals may help PHMSA ensure that its goals are achievable. We are making the following two recommendations to PHMSA. The Administrator of PHMSA should ensure that PHMSA defines levels of performance, addresses core program activities, and uses baseline data as it continues developing performance goals for its natural gas storage program. (Recommendation 1) The Administrator of PHMSA should ensure that PHMSA uses other data and information about budgetary resources as they become available to inform and refine its performance goals. (Recommendation 2) We provided a draft of this report to DOT for review and comment. In written comments, DOT concurred with the report’s recommendations and provided additional information on steps they are taking or plan to take as part of their oversight of natural gas storage sites. In addition, DOT stated that it would provide a detailed response to each recommendation within 60 days of our final report’s issuance. The complete comment letter is reproduced in appendix III. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Transportation, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or members of your staff have any questions about this report, please contact us at (202) 512-3841, gomezj@gao.gov, or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. In this report, we examine (1) the status of the Pipeline and Hazardous Materials Administration’s (PHMSA) efforts to implement the requirement under the Protecting Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2016 to issue minimum safety standards for natural gas storage sites, and (2) the extent to which PHMSA has planned strategically to enforce its safety standards for natural gas storage sites. To examine the status of PHMSA’s efforts to implement the requirement to issue minimum safety standards for natural gas storage sites, we examined laws, regulations, and agency documents that describe the authority, time frames, and enforcement goals for implementing new federal rules under the PIPES Act. Specifically, we reviewed the PIPES Act to identify requirements that the act directed to the Department of Transportation (DOT), or PHMSA. To understand PHMSA’s implementation of DOT’s requirements under the act, we reviewed PHMSA notices and regulations as presented in the Federal Register and discussed the information in these documents with agency officials. We also reviewed guidance documents on the PHMSA website intended to provide natural gas storage operators with more detailed guidance and discussed the documents with agency officials. We reviewed an October 2016 report, mandated by the act, which was issued by a task force led by the Department of Energy (DOE). We also obtained and reviewed copies of recommended practices issued by the American Petroleum Institute (API), which issues industry consensus standards for the oil and gas industry, and interviewed API officials to better understand these recommended practices. We also interviewed agency officials. Specifically, we interviewed officials with PHMSA, the Federal Energy Regulatory Commission, the Bureau of Land Management within the Department of the Interior, and the Environmental Protection Agency, to understand how they participated in the task force and to what degree they have responsibilities related to natural gas storage safety enforcement. In addition, we obtained data from PHMSA and DOE’s Energy Information Administration about natural gas storage sites to gain an estimate of the number and regulatory status of various natural gas storage sites, their locations, and other details. We assessed the reliability of these data by (1) corroborating these data with other sources, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data. We determined that these data were sufficiently reliable for the purposes of this report. We also interviewed agency officials at DOT and PHMSA, including discussing agency requirements under the PIPES Act and how PHMSA planned to implement its responsibilities. To better understand the operation and control of natural gas storage sites, we conducted a site visit to the Aliso Canyon Gas Storage Facility in California and spoke to officials representing the operator of the site, and state government officials responsible for safety enforcement at the site. To examine the extent to which PHMSA has planned strategically to enforce safety standards for natural gas storage sites, we compared information we gathered from PHMSA officials and documents with leading practices for strategic planning identified by our prior work, which were identified by examining requirements under the Government Performance and Results Act (GPRA) of 1993. We have previously reported that requirements under GPRA and the GPRA Modernization Act of 2010 can serve as leading practices for planning at lower levels of the agency. We also interviewed PHMSA officials—including budgetary, policy, and programmatic officials—about their planning efforts for the natural gas storage program. In addition, we reviewed regulations and documents that reflect agency planning efforts, including: PHMSA’s interim final rule on the safety of underground natural gas storage facilities; agency guidance, such as frequently asked questions for operators of natural gas storage sites; and agency planning documents, such as the Training Implementation Plan for Natural Gas Underground Storage Regulation Training, PHMSA 2021 Business Plan - 2017, and workload and budget estimates for the program. Using information obtained from these sources about PHMSA’s efforts to plan for its natural gas storage program, we compared PHMSA’s planning efforts with leading practices for strategic planning identified in our prior reports. We conducted this performance audit from November 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Table 3 identifies the 415 natural gas storage sites active as of January 2016, by state and jurisdiction. The number of natural gas storage sites that fall under federal or state jurisdiction in each state is presented, along with the total storage capacity of the sites. A natural gas storage site is considered to be under federal jurisdiction—also known as “interstate”—if the site is linked to a federally-regulated interstate pipeline permitted by the Federal Energy Regulatory Commission. Otherwise, sites are under state jurisdiction. The sites represented in this table were compiled by the Department of Energy’s Energy Information Administration in 2016, and provided by the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA). EIA collects these data using a survey of natural gas storage site operators. According to a PHMSA document, PHMSA used these data to, among other things, identify natural gas storage sites and calculate the amount of user fees that it charged operators in 2017 (the first year PHMSA collected these user fees) to fund its inspection and enforcement programs. PHMSA plans to update its information about natural gas storage sites using data submitted by operators, as required by its interim final rule. This rule requires natural gas storage site operators to submit these data on or before July 18, 2017. PHMSA plans to require operators to annually submit this information using a form. According to PHMSA officials, the Office of Management and Budget recently approved this form. As a result, PHMSA will begin collecting data that reflect calendar year 2017 by its due date of March 15, 2018. PHMSA officials told us that it will take about 5 to 6 months to develop a website that will allow PHMSA to efficiently collect these data from operators for all sites this year and in future years. In addition to the individuals named above, Mike Hix and Jon Ludwigson (Assistant Directors), Richard Burkard, Lee Carroll, Nirmal Chaudhary, Ellen Fried, Cindy Gilbert, Carol Henn, Mary Koenen, Jessica Lemke, Ben Licht, Greg Marchand, John Mingus, Katrina Pekar-Carpenter, Sara Sullivan, and Kiki Theodoropoulos made important contributions to this report.", "summary": "Natural gas storage is important for ensuring that natural gas is available when demand increases. There are 415 storage sites—including underground caverns and depleted aquifers and oil and gas reservoirs—located in 31 states, often near population centers (see fig.). Leaks from these sites, such as one near Los Angeles that led to the temporary relocation of about 8,000 families in 2015, can result in environmental and economic damage. Until 2016, states set standards for 211 sites, but there were no standards for 204 sites connected to interstate pipelines subject to federal jurisdiction. With passage of the PIPES Act of 2016, PHMSA, an agency within DOT that sets and enforces standards for energy pipelines, among other things, was tasked with issuing minimum standards for all gas storage sites. GAO was asked to review natural gas storage safety standards. This report examines (1) PHMSA's efforts to implement the requirement to issue minimum safety standards for natural gas storage sites and (2) the extent to which PHMSA has planned strategically to enforce its safety standards for these sites. GAO reviewed PHMSA documents and plans, compared them to leading planning practices, and interviewed PHMSA officials. To meet its requirement under the Protecting Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2016, the Department of Transportation's (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) issued minimum safety standards in an interim rule and plans to finalize them by January 2018. Under the interim standards, site operators are to follow industry-developed best practices to detect and prevent leaks and plan for emergencies, among other things. Since the interim rule went into effect in January 2017, the minimum safety standards apply to all 415 natural gas storage sites, and the rule will be subject to further revision before it is final. To enforce its safety standards, PHMSA has taken steps to establish a natural gas storage safety enforcement program. For example, PHMSA has started developing a training program for its inspectors. PHMSA also has identified a strategic goal for its program—to promote continuous improvement in safety performance—and is developing a performance goal for its training program. However, PHMSA has not yet followed certain leading strategic planning practices. For example, PHMSA has not yet defined the level of performance to be achieved, fully addressed all core program activities, or used baseline data to develop its performance goal. GAO has previously reported that requirements under the Government Performance and Results Act (GPRA) and GPRA Modernization Act of 2010—which include establishing performance goals to define the level of performance—can serve as leading practices for lower levels of an agency, such as PHMSA. GAO also has found that successful performance goals address all core program activities. PHMSA's goal focuses on training and does not address other core program activities, such as conducting effective inspections. For example, a goal to evaluate whether PHMSA's inspections are effective could be to annually reduce, by a certain percentage, the number of sites not meeting minimum standards. PHMSA officials told GAO that they will strive to add and refine performance goals as the program evolves. As they do so, ensuring that these goals define the level of performance, address all core program activities, and use baseline data could help PHMSA better track progress toward its strategic goal. GAO is making two recommendations, which are that PHMSA (1) define levels of performance and address all core program activities and (2) use budget data to refine performance goals for its gas storage program. DOT concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The Secretary of Defense established goals for BRAC 2005 in a November 2002 memorandum issuing initial guidance for BRAC 2005 and again in a March 2004 report to Congress certifying the need for a BRAC round. Specifically, the Secretary reported that the BRAC 2005 round would be used to (1) dispose of excess facilities, (2) promote force transformation, and (3) enhance jointness. Although DOD did not specifically define these three goals, we have generally described them in prior reports as follows. Dispose of excess facilities: Eliminating unneeded infrastructure to achieve savings. Promote force transformation: Correlating base infrastructure to the force structure and defense strategy. In the late 1990s, DOD embarked on a major effort to transform its business processes, human capital, and military capabilities. Transformation is also seen as a process intended to provide continuous improvements to military capabilities. For example, the Army used the BRAC process to transform the Army’s force structure from an organization based on divisions to more rapidly deployable, brigade-based units and to accommodate rebasing of overseas units. Enhance jointness: Improving joint utilization to meet current and future threats. According to DOD, “joint” connotes activities, operations, and organizations, among others, in which elements of two or more military departments participate. Congress established clear time frames in the BRAC statute for many of the milestones involved with base realignments and closures. The BRAC 2005 process took 10 years from authorization through implementation. Congress authorized the BRAC 2005 round on December 28, 2001. The BRAC Commission submitted its recommendations to the President in 2005 and the round ended on September 15, 2011—6 years from the date the President submitted his certification of approval of the recommendations to Congress. The statute allows environmental cleanup and property caretaker and transfer actions associated with BRAC sites to exceed the 6-year time limit and does not set a deadline for the completion of these activities. Figure 1 displays the three phases of the BRAC 2005 round—analysis, implementation, and disposal—and key events involving Congress, DOD, and the BRAC Commission. During the analysis phase, DOD developed selection criteria, created a force structure plan and infrastructure inventory, collected and analyzed data, and proposed recommendations for base realignments and closures. The BRAC statute authorizing the BRAC 2005 round directed DOD to propose and adopt selection criteria to develop and evaluate candidate recommendations, with military value as the primary consideration. The BRAC statute also required DOD to develop a force structure plan based on an assessment of probable threats to national security during a 20-year period beginning with fiscal year 2005. Based on the statute’s requirements, the selection criteria were adopted as final in February 2004, and the force structure plan was provided to Congress in March 2004. To help inform its decision-making process during the analysis phase, the three military departments and the seven joint cross-service groups collected capacity and military value data that were certified as accurate by senior leaders. In testimony before the BRAC Commission in May 2005, the Secretary of Defense said that DOD collected approximately 25 million pieces of data as part of the BRAC 2005 process. Given the extensive volume of requested data, we noted in July 2005 that the data- collection process was lengthy and required significant efforts to help ensure data accuracy, particularly from joint cross-service groups that were attempting to obtain common data across multiple military components. We reported that, in some cases, coordinating data requests, clarifying questions and answers, controlling database entries, and other issues led to delays in the data-driven analysis DOD originally envisioned. As time progressed, however, these groups reported that they obtained the needed data, for the most part, to inform and support their scenarios. We ultimately reported that DOD’s process for conducting its analysis was generally logical, reasoned, and well documented. After taking these plans and accompanying analyses into consideration, the Secretary of Defense was then required to certify whether DOD should close or realign military installations. The BRAC Commission assessed DOD’s closure and realignment recommendations for consistency with the eight selection criteria and DOD’s Force Structure Plan. Ultimately, the BRAC Commission accepted over 86 percent of DOD’s proposed internal recommendations; rejected, modified, or added additional recommendations; and adjusted some costs of BRAC recommendations. After the BRAC Commission released its recommendations, and the recommendations became binding, the implementation phase started. During this phase, which started on November 9, 2005, and continued to September 15, 2011 (as required by the statute authorizing BRAC), DOD took steps to implement the BRAC Commission’s 198 recommendations. Also during this phase, the military departments were responsible for completing environmental impact studies to determine how to enact the BRAC Commission’s relevant recommendations. The military departments implemented their respective recommendations to close and realign installations, establish joint bases, and construct new facilities. The large number and variety of BRAC actions resulted in DOD requiring BRAC oversight mechanisms to improve accountability for implementation. The BRAC 2005 round had more individual actions (813) than the four prior rounds combined (387). Thus, in the BRAC 2005 round, the Office of the Secretary of Defense for the first time required the military departments to develop business plans to better inform the Office of the Secretary of Defense of the status of implementation and financial details for each of the BRAC 2005 recommendations. These business plans included: (1) information such as a listing of all actions needed to implement each recommendation, (2) schedules for personnel relocations between installations, and (3) updated cost and savings estimates by DOD based on current information. This approach permitted senior-level intervention if warranted to ensure completion of the BRAC recommendations by the statutory completion date. The disposal phase began soon after the BRAC recommendations became binding and has continued to today. During the disposal phase, DOD’s policy was to act in an expeditious manner to dispose of closed properties. Such disposal actions included transferring the property to other DOD components and federal agencies, homeless-assistance providers, or local communities for the purposes of job generation, among other actions. In doing so, DOD has incurred caretaker and environmental cleanup costs. For example, DOD reported to Congress that, as of September 2016, the military departments had spent $735 million on environmental cleanup associated with BRAC 2005 sites, and had $482 million left to spend on BRAC 2005 sites. Overall, the military departments reported that they had disposed of 59,499 acres and still needed to dispose of 30,239 acres from BRAC 2005 as of September 30, 2016. ASD (EI&E), the military services, and 25 of the 26 military units or organizations we met with did not measure the achievement of the BRAC 2005 goals—reducing excess infrastructure, transforming the military, and promoting jointness. Specifically, a senior ASD (EI&E) official stated that no performance measures existed to evaluate the achievement of goals and the office did not create baselines to measure performance. Air Force officials stated that they did not measure the achievement of goals but that it would have been helpful to have metrics to measure success, especially as DOD had requested from Congress another BRAC round. Army officials similarly stated it did not measure the achievement of goals, noting that measuring excess capacity would have been important to help DOD get authorization for another BRAC round. Navy and Marine Corps officials said that they did not track performance measures or otherwise measure the achievement of the BRAC 2005 goals. Moreover, 25 of the 26 military units or organizations we met with stated that they did not measure the achievement of BRAC 2005 goals. The one exception in our selected sample was the command at Joint Base Charleston, which stated that it measured jointness through common output or performance-level standards for installation support, as required for installations affected by the BRAC 2005 recommendation on joint basing. By measuring jointness, officials were able to identify that the base met 86 percent of its common output level standards in the second quarter of fiscal year 2017, and it has identified recommendations to improve on those standards not met. Instead of measuring the achievement of BRAC 2005 goals, officials with ASD (EI&E) and the military departments stated that they tracked completion of the BRAC recommendations by the statutory deadline of September 2011 and measured the cost savings associated with the recommendations. Senior ASD (EI&E) officials stated that the primary measure of success was completing the recommendations as detailed by the implementation actions documented in the business plans. In addition, officials from the Army, Navy, and Air Force stated that they measured the savings produced as a result of BRAC 2005. For example, Army officials stated that closing bases in BRAC 2005 significantly reduced base operations support costs, such as by eliminating costs for trash collection, utilities, and information technology services. However, tracking completion of the recommendations and measuring savings did not enable the department to determine the success of the BRAC round in achieving its goals. For example, tracking completion of the recommendations establishing joint training centers did not give DOD insight into whether the military departments achieved the jointness goal by conducting more joint activities or operations. Similarly, measuring savings did not allow DOD to know whether it achieved the goal of reducing excess infrastructure, and in reviewing DOD’s data we found that the department ultimately did not have the needed data to calculate excess infrastructure disposed of during BRAC 2005. Key practices on monitoring performance and results highlight the importance of using performance measures to track an agency’s progress and performance, and stress that performance measures should include a baseline and target; should be objective, measurable, and quantifiable; and should include a time frame. The Standards for Internal Control in the Federal Government emphasizes that an agency’s management should track major agency achievements and compare these to the agencies’ plans, goals, and objectives. During BRAC 2005, DOD was not required to identify appropriate measures of effectiveness and track achievement of its goals. As a result, in March 2013, we recommended that, in the event of any future BRAC round, DOD identify appropriate measures of effectiveness and develop a plan to demonstrate the extent to which the department achieved the results intended from the implementation of the BRAC round. DOD did not concur with our recommendation, stating that military value should be the key driver for BRAC. However, we noted at the time that our recommendation does not undermine DOD’s reliance on military value as the primary selection criteria for DOD’s base realignment and closure candidate recommendations, and DOD can still prioritize military value while identifying measures that help determine whether DOD achieved the military value that it seeks. As of October 2017, DOD officials stated that no action to implement our recommendation is expected. We continue to believe that, if any future BRAC round is authorized, the department would benefit from measuring its achievement of goals. Further, this information would assist Congress in assessing the outcomes of any future BRAC rounds. Given that DOD did not concur with our 2013 recommendation and does not plan to act upon it, DOD is not currently required to identify appropriate measures of effectiveness and track achievement of its BRAC goals in future rounds. Without a requirement to identify and measure the achievement of goals for a BRAC round, DOD cannot demonstrate to Congress whether the implementation of any future BRAC round will improve efficiency and effectiveness or otherwise have the effect that the department says its proposed recommendations will achieve. If Congress would like to increase its oversight for any future BRAC round, requiring DOD to identify appropriate measures of effectiveness and track achievement of its goals would provide it with improved visibility over the expected outcomes. DOD has implemented 33 of the 65 prior recommendations that we identified in our work since 2004, and it has the opportunity to address additional challenges regarding communications and monitoring to improve any future BRAC round. Specifically, for the BRAC analysis phase, DOD implemented 1 of 12 recommendations, and it has agreed to implement another 7 recommendations should Congress authorize any future BRAC round. Additionally, we found that DOD can improve its communications during the analysis phase. For the implementation phase, DOD implemented 28 of 39 recommendations, and it has agreed to implement another 3 recommendations. Further, we found it can improve monitoring of mission-related changes. For the disposal phase, DOD implemented 4 of 14 recommendations, and it has agreed to implement another 8 recommendations. Of the 12 recommendations we made from 2004 to 2016 to help DOD improve the BRAC analysis phase, DOD generally agreed with 6 of them and, as of October 2017, DOD had implemented 1. Specifically, DOD implemented our May 2004 recommendation to provide a more detailed discussion on assumptions used in its May 2005 report on BRAC recommendations. In addition, DOD stated it would address seven recommendations—the other five recommendations it agreed with and two it had previously nonconcurred with—affecting BRAC’s analysis phase in the event of any future BRAC round. These recommendations included better estimating information technology costs and improving ways of describing and entering cost data. DOD reported that the department is awaiting authorization of a future BRAC round prior to implementing these recommendations. Appendix III provides more information on our recommendations, DOD’s response, and DOD’s actions to date concerning the BRAC analysis phase. DOD officials cited an additional challenge with communications during the BRAC 2005 analysis phase. Specifically, some military organizations we met with stated that they could not communicate to BRAC decision makers information outside of the data-collection process, which ultimately hindered analysis. For example: Officials from the Army Human Resources Command in Fort Knox, Kentucky, said that facilities data submitted during the data-collection process did not convey a complete picture of excess capacity at the installation, and officials at Fort Knox were unable to share the appropriate context or details because nondisclosure agreements prevented communication. Specifically, they stated that the data showed an overall estimate of Fort Knox’s excess capacity, but the data did not detail that the excess was not contiguous but rather based on space at 40 buildings spread throughout the installation. The officials stated that there was no way to communicate to decision makers during the data collection process that the facilities were ill- suited for relocating the Human Resources Command and would require significant renovation costs to host the command’s information technology infrastructure. The officials said that, because the needed details on the facility data were not communicated, the relocation moved forward without full consideration of alternatives for using better-suited excess space at other locations that would not require significant costs to renovate. As a result, the Army ultimately constructed a new headquarters building for the Human Resources Command at Fort Knox and DOD spent approximately $55 million more than estimated to complete this action. Officials at the Naval Consolidated Brig Charleston, South Carolina, told us that the lack of communication outside of the data-collection process resulted in decision makers not taking into account declining numbers of prisoners, leading to the construction of a new, oversized building in which to house prisoners. The officials said that the decision makers analyzing the facilities data did not consider the current correctional population; rather, the decision makers considered a correctional model based on the type of military fielded in World War II and the Korean and Vietnam wars—a force comprised of conscripted personnel that served longer tours and had higher correctional needs. Further, the officials said the decision makers did not consider that, in the 2000 to 2005 period, DOD increased the use of administrative separations from military service rather than incarcerate service members convicted of offenses, such as drug- related crimes or unauthorized absence, further reducing correctional needs. The officials said they did not have a mechanism to communicate this information outside of the data-collection process when decision makers were analyzing the facilities data. As a result, the BRAC Commission recommendation added 680 beds throughout the corrections system, increasing the Navy’s total confinement capacity to 1,200 posttrial beds. Specifically at Naval Consolidated Brig Charleston, the BRAC recommendation added 80 beds at a cost of approximately $10 million. However, the facility already had excess capacity prior to the 2005 BRAC recommendation, and its excess capacity further increased after adding 80 beds (see fig. 2). Air National Guard officials said that the lack of communication outside of the data-collection process in the BRAC analysis phase meant that they could not identify the specific location of excess facilities. Specifically, they said the facilities data showed that Elmendorf Air Force Base, Alaska, had sufficient preexisting space to accept units relocating from Kulis Air Guard Station, Alaska, a base slated for closure. However, without communicating with base officials, Air National Guard officials did not know that the space was not contiguous. As a result, officials stated that DOD ultimately needed to complete additional military construction to move the mission from Kulis Air Guard Station. The BRAC Commission increased the Air Force’s initial cost estimate by approximately $66 million in additional funds to implement the BRAC recommendation. U.S. Army Central officials stated that there was no communication outside of the data-collection process to allow DOD to fully consider workforce recruitment-related issues in deciding to move the U.S. Army Central headquarters to Shaw Air Force Base, South Carolina. While other criteria, such as military value, enhancing jointness, and enabling business process transformation, were considered in developing the recommendation, the officials stated that they were unable to communicate concerns regarding civilian hiring and military transfers. The officials said that since the headquarters’ move to Shaw Air Force Base from Fort McPherson, Georgia, they have had difficulties recruiting civilian employees, such as information technology personnel, to their facility because of its location. They also said that it has been harder to encourage Army personnel to move to Shaw Air Force Base due to a perception that there is a lack of promotional opportunities at an Army organization on an Air Force base. As a result, U.S. Army Central officials said morale surveys have indicated that these workforce issues have negatively affected mission accomplishment. The military departments and organizations we met with said that these concerns regarding the BRAC 2005 analysis phase were because DOD did not establish clear and consistent communications throughout different levels of authority in the department during data collection. According to Standards for Internal Control in the Federal Government, management should use relevant data from reliable sources and process these data into quality information that is complete and accurate. Further, management should communicate quality information down, across, up, and around reporting lines to all levels of the department. Given the unclear and inconsistent communications in the department during data collection, DOD decision makers had data that may have been outdated or incomplete. Additionally, the outdated and incomplete data hindered the BRAC 2005 analysis and contributed to additional costs and recruitment problems at some locations affected by BRAC 2005, as previously discussed. Officials stated that clear and consistent communications would have improved the flow of information between on-the-ground personnel and decision makers and could have better informed the BRAC decision-making process. For example, Army officials said that nondisclosure agreements hindered their ability to call personnel at some installations to confirm details about buildings and facilities in question. The Air Force’s Lessons Learned: BRAC 2005 report stated that site surveys could have communicated additional detail and generated more specific requirements than those generated in an automated software tool that the Air Force used for BRAC-related analysis. Navy officials said that, with limited communication, there were shortfalls in the decision-making process. Overall, officials from ASD (EI&E) and the military departments agreed that communication could be improved in the analysis phase of any future BRAC round. They also cited improved technology, such as geographic information system software and a new base stationing tool, as well as an increase in the amount of data collected as factors that may mitigate any effects of reduced communication if Congress authorizes any future BRAC round. Without taking steps to establish clear and consistent communication throughout the department during data collection, DOD risks collecting outdated and incomplete data in any future BRAC rounds that may hinder its analysis and the achievement of its stated goals for BRAC. To improve the implementation phase of the BRAC 2005 round, we made 39 recommendations between 2005 and 2016. DOD generally agreed with 32 and did not concur with 7 recommendations. As of October 2017, DOD had implemented 28 of these recommendations. DOD stated that it does not plan on implementing 8 of the recommendations, and action on 3 of the recommendations is pending. Our previous recommendations relate to issues including providing guidance for consolidating training, refining cost and performance data, and periodic reviews of installation- support standards, among others. Appendix IV provides more information on our recommendations, DOD’s response, and DOD’s actions to date concerning the BRAC implementation phase. DOD officials identified challenges related to monitoring mission-related changes during the implementation of the BRAC 2005 recommendations, specifically when unforeseen circumstances developed that affected units’ ability to carry out their missions following implementation or added difficulties to fulfilling the intent of the recommendation. For example: During the implementation process, a final environmental impact statement at Eglin Air Force Base, Florida, contributed to the decision that only a portion of the initial proposed aircraft and operations would be established to fulfill the Joint Strike Fighter Initial Joint Training Site recommendation. Marine Corps officials stated that as a result of this environmental impact statement and the subsequent limitations, the Marine Corps decided to eventually move its training from Eglin Air Force Base to Marine Corps Air Station Beaufort, South Carolina. Despite these limitations, the Air Force constructed infrastructure for the Marine Corps’ use at Eglin Air Force Base in order to fulfill the minimum legal requirements of the recommendation. Specifically, the BRAC 2005 recommendation realigned the Air Force, Navy, and Marine Corps portions of the F-35 Joint Strike Fighter Initial Joint Training Site to Eglin Air Force Base. The Air Force’s goal and the initial proposal for the Joint Strike Fighter Initial Joint Training Site at Eglin Air Force Base was to accommodate 107 F-35 aircraft, with three Air Force squadrons of 24 F-35 aircraft each, one Navy squadron with 15 F-35 aircraft, and one Marine Corps squadron of 20 F-35 aircraft. In 2008, after the implementation phase began, DOD completed an environmental impact statement for the proposed implementation of the BRAC recommendations at Eglin Air Force Base. Based on the environmental impact statement and other factors, a final decision was issued in February 2009, stating that the Air Force would only implement a portion of the proposed actions for the recommendation, with a limit of 59 F-35 aircraft and reduced planned flight operations due to potential noise impacts, among other factors. This decision stated that the subsequent operational limitations would not be practical for use on a long-term basis but would remain in place until a supplemental environmental impact statement could be completed. After the final supplemental environmental impact statement was released, in June 2014 DOD decided to continue the limited operations established in the February 2009 decision. Marine Corps officials stated that, as a result of the February 2009 decision, the Marine Corps decided that it would eventually move its F-35 aircraft from Eglin Air Force Base to Marine Corps Air Station Beaufort. According to Marine Corps officials, by September 2009 the Marine Corps had developed a concept to prepare Marine Corps Air Station Beaufort to host its F-35 aircraft. A September 2010 draft supplemental environmental impact statement included updated operational data and found that the Marine Corps total airfield operations at Eglin Air Force Base would be reduced by 30.7 percent from the proposals first assessed in the 2008 final environmental impact statement. However, to abide by the BRAC recommendation, Marine Corps officials stated that the Marine Corps temporarily established an F-35 training squadron at Eglin Air Force Base in April 2010. Using fiscal year 2010 military construction funding, DOD spent approximately $27.7 million to create a landing field for use by the new Marine Corps F-35 training squadron mission at Eglin Air Force Base. Marine Corps officials stated that this construction occurred during the same period as the decision to relocate the F-35 training squadron to Marine Corps Air Station Beaufort. However, ASD (EI&E) officials stated that they did not know about this mission- related change, adding that they expected any change to be reported from the units to the responsible military department through the chain of command. However, the military departments did not have guidance to report in the business plans to ASD (EI&E) these mission- related changes during implementation; without this guidance, the changes related to the Marine Corps F-35 mission were not relayed to ASD (EI&E) through the Air Force. Officials from the Joint Strike Fighter training program at Eglin Air Force Base stated that this construction was finished in June 2012 and that it was never used by the Marine Corps. In February 2014, the Marine Corps F-35 training squadron left Eglin Air Force Base and was established at Marine Corps Air Station Beaufort. The Marine Corps does not plan on returning any F-35 aircraft from Marine Corps Air Station Beaufort to Eglin Air Force Base for joint training activities. Additionally, officials from the Armed Forces Chaplaincy Center stated that studies undertaken during the implementation phase determined that it would be difficult to fulfill the intent of a recommendation creating a joint center for religious training and education, yet the recommendation was implemented and included new construction with significantly greater costs than initial estimates. The BRAC 2005 recommendation consolidated Army, Navy, and Air Force religious training and education at Fort Jackson, South Carolina, establishing a Joint Center of Excellence for Religious Training and Education. Prior to the construction of facilities to accommodate this recommendation, the Interservice Training Review Organization conducted a study published in November 2006 that assessed the resource requirements and costs of consolidating and colocating the joint chaplaincy training at Fort Jackson. This study identified limitations in the feasibility of consolidating a joint training mission for the chaplains, including differences within the services’ training schedules and the limited availability of specific administrative requirements for each service, as well as limited instructors and curriculum development personnel. Despite the results of this study, in 2008 an approximately $11.5 million construction project began to build facilities for the Joint Center of Excellence for Religious Training and Education. However, ASD (EI&E) officials stated that they did not know about the results of the study. The military departments did not have guidance to report these mission-related changes, which ultimately were not relayed from the units to ASD (EI&E). Officials from the Armed Forces Chaplaincy Center stated that following the start of construction to accommodate the recommendation, the services completed additional studies in 2008 and 2011 that further identified limitations to the feasibility of joint training for the services’ chaplains. Overall, the services discovered that 95 percent of the religious training could not be conducted jointly. Moreover, the military departments have faced additional impediments to their respective missions for religious training and education. For example, the Army stated it could not house its junior soldiers alongside the senior Air Force chaplaincy students, and both the Navy and Air Force had to transport their chaplains to other nearby bases to receive service- specific training. Due to these challenges, officials from the Armed Forces Chaplaincy Center stated that the Air Force chaplains left Fort Jackson and returned to Maxwell Air Force Base, Alabama, in 2017, and the Navy has also discussed leaving Fort Jackson and returning to Naval Station Newport, Rhode Island. Standards for Internal Control in the Federal Government emphasizes the importance of monitoring the changes an entity faces so that the entity’s internal controls can remain aligned with changing objectives, environment, laws, resources, and risks. During the implementation phase of BRAC 2005, DOD did not have specific guidance for the military services to monitor mission-related changes that added difficulties to fulfilling the intent of BRAC recommendations. The Office of the Secretary of Defense required BRAC recommendation business plans to be submitted every 6 months and include information such as a listing of all actions needed to implement each recommendation, schedules for personnel movements between installations, updated cost and savings estimates based on better and updated information, and implementation completion time frames. In addition, in November 2008, the Deputy Under Secretary of Defense (Installations and Environment) issued a memorandum requiring the military departments and certain defense agencies to present periodic status briefings to the Office of the Secretary of Defense on implementation progress and to identify any significant issues impacting the ability to implement BRAC recommendations by the September 15, 2011, statutory deadline. The 6-month business plan updates and the memorandum on periodic briefings focused primarily on changes affecting the ability to fully implement the BRAC recommendations and on meeting the statutory deadline, but they did not provide specific guidance to inform ASD (EI&E) of mission-related changes that arose from unforeseen challenges during the implementation phase. According to a senior official with ASD (EI&E), if the organization responsible for a business plan identified a need to change the plan to fulfill the legal obligation of the recommendation by the statutory deadline, ASD (EI&E) reviewed any proposed changes through meetings with stakeholders involved in implementation. According to this official, the office typically only got involved with the implementation if the business plan was substantively out of line with the intent of the recommendation or if there was a dispute between two DOD organizations, such as two military departments. The official stated that any installation-level concerns had to be raised to the attention of ASD (EI&E) through the responsible military department’s chain of command. If a mission-related change was not raised through the military department’s chain of command, then ASD (EI&E) officials were not always aware of the details of such changes. ASD (EI&E) officials acknowledged that they did not know about all mission-related changes during implementation, such as with the Joint Strike Fighter recommendations, and they stated that there was no explicit guidance informing the military departments to report challenges and mission-related changes to ASD (EI&E). Senior officials from ASD (EI&E) stated that additional guidance would be appropriate in the event of any future BRAC round. This lack of specific guidance to monitor and report mission-related changes that arose during BRAC 2005 implementation ultimately resulted in inefficient use of space and extra costs for DOD. Without providing specific guidance to monitor and report mission-related changes that require significant changes to the recommendation business plans, DOD will not be able to effectively monitor the efficient use of space and the costs associated with implementing any future BRAC recommendations. Furthermore, DOD may not be able to effectively make adjustments in its plans to ensure that the department achieves its overall goals in any future BRAC rounds. Of the 14 recommendations we made from 2007 to 2017 to help DOD address challenges affecting BRAC’s disposal phase, DOD generally agreed with 12 of them. As of October 2017, DOD had implemented 4 of the recommendations, with actions on 8 others pending. Our previous recommendations relate to three primary issues: guidance for communities managing the effects of the reduction or growth of DOD installations, the environmental cleanup process for closed properties, and the process for reusing closed properties for homeless assistance. Appendix V provides more information on our recommendations, DOD’s response, and DOD’s actions to date concerning the BRAC disposal phase. During our review, we identified an additional example of challenges in the disposal phase related to the environmental cleanup process. Specifically, officials representing Portsmouth, Rhode Island, stated that the city had issues with the environmental cleanup process resulting from BRAC 2005 changes at Naval Station Newport, Rhode Island. According to the site’s environmental impact statement, the land Portsmouth is to receive is contaminated and requires cleanup prior to transfer, and officials from the community stated that the Navy has not provided them with a clear understanding of a time frame for the environmental cleanup process needed to transfer the property. However, a senior official from the Navy stated that uncertainties in available funds and unforeseen environmental obstacles are common and prevent the Navy from projecting specific estimates for environmental cleanup time frames. The officials representing Portsmouth stated that, due to the lack of information from the Navy on a projected time frame for cleaning and transferring the property, representatives in the community have begun to discuss not wanting to take over the land and letting the Navy hold a public sale. We had previously recommended in January 2017 that DOD create a repository or method to record and share lessons learned about how various locations have successfully addressed environmental cleanup challenges. DOD concurred and actions are pending. Moreover, during our review we identified additional examples of challenges in the disposal phase related to the homeless assistance program. For example, officials representing the community of Wilmington, North Carolina, stated that they had issues with the homeless-assistance process regarding a closed Armed Forces Reserve Center. According to the officials, they did not know that there were legal alternatives to providing on-base property for homeless assistance. Wilmington officials stated that the city would have been willing to construct a homeless-assistance facility in a nonbase location, and use the closed property for a different purpose, which would have expedited the overall redevelopment process. According to the officials, the organization that took over the property for homeless-assistance purposes lacks the financial means to complete the entire project plan, and as of July 2017 it remains unfinished. We had previously recommended that DOD and the Department of Housing and Urban Development—which, with DOD, develops the implementing regulations for the BRAC homeless-assistance process—include information on legal alternatives to providing on-base property to expedite the redevelopment process, but DOD did not concur and stated no action is expected. Additionally, officials from New Haven, Connecticut, stated that the process of finding land suitable for a homeless assistance provider and converting an Army Reserve Center into a police academy took an undesirably long amount of time to complete. The officials stated that the process of preparing its redevelopment plan and transferring the property from DOD to the community lasted roughly 5 years from 2008 to 2013, and they suggested streamlining or expediting this process. As a result of these types of delays, many properties have not yet been transferred from DOD to the communities, and undisposed properties continue to increase caretaker costs. As of September 30, 2016, DOD had received approximately $172 million in payments for transfers, and it had spent approximately $275 million for caretaker costs of buildings and land prior to transferring property on closed installations during BRAC 2005. Implementing our prior recommendations related to the BRAC environmental cleanup and homeless-assistance process could help DOD expedite the disposal of unneeded and costly BRAC property, reduce its continuing fiscal exposure stemming from continuing to hold these properties, and ultimately improve the effectiveness of the disposal phase. DOD has long faced challenges in reducing unneeded infrastructure, and on five different occasions DOD has used the BRAC process to reduce excess capacity and better match needed infrastructure to the force structure and to support military missions. In addition to using BRAC to reduce excess capacity, DOD also sought to promote jointness across the military departments and realign installations in the 2005 round, making the round the biggest, costliest, and most complex ever. While DOD finished its implementation of BRAC 2005 in September 2011 and continues to prepare some remaining sites for disposal, it did not measure whether and to what extent it achieved the round’s goals of reducing excess infrastructure, transforming the military, and promoting jointness. Because it did not measure whether the BRAC actions achieved these goals, DOD cannot demonstrate whether the military departments have improved their efficiency or effectiveness as a result of the BRAC 2005 actions. In October 2017, DOD officials stated the department does not plan to take action on our March 2013 recommendation to measure goals for any future BRAC round. Congress can take steps to improve its oversight of any future BRAC round, specifically by requiring DOD to identify and track appropriate measures of effectiveness. Congress would have enhanced information to make decisions about approving any future BRAC rounds, while DOD would be in a stronger position to demonstrate the benefits it achieves relative to the up-front implementation costs incurred for holding any future BRAC rounds. In addition, challenges in the analysis, implementation, and disposal phases of BRAC 2005 led to unintended consequences, such as increases in costs, workforce recruitment issues, and delayed disposal of closed properties. Limited or restricted communications throughout different levels of authority in the department during data collection hampered the ability of decision makers to receive as much relevant information as possible during BRAC 2005. If Congress authorizes any future BRAC round, ASD (EI&E) can encourage clear and consistent communication throughout DOD during the analysis phase, thereby helping personnel to address any potential problems that may arise. In addition, without specific guidance to monitor mission-related changes during the BRAC implementation phase, DOD did not fulfill the intent of some recommendations and spent millions of dollars to build infrastructure that was ultimately unused or underutilized. This lack of specific guidance meant that ASD (EI&E) was not aware of all mission- related changes. By instituting improvements to the analysis, implementation, and disposal phases in any future BRAC round, DOD could better inform decision making, better ensure that its infrastructure meets the needs of its force structure, and better position itself to gain congressional approval for additional rounds of BRAC in the future. Congress should consider, in any future BRAC authorization, a requirement for DOD to identify appropriate measures of effectiveness and to track the achievement of its goals. (Matter for Consideration 1) We are making the following two recommendations to the Secretary of Defense. In the event of any future BRAC round, the Secretary of Defense should ensure that ASD (EI&E) and the military departments take steps to establish clear and consistent communications throughout the department during data collection. (Recommendation 1) In the event of any future BRAC round, the Secretary of Defense should ensure that ASD (EI&E) provides specific guidance for the military departments to monitor and report on mission-related changes that require significant changes to the recommendation business plans. (Recommendation 2) We provided a draft of this report for review and comment to DOD. In written comments, DOD objected to our matter for congressional consideration and concurred with both recommendations. DOD’s comments are summarized below and reprinted in their entirety in appendix VI. DOD also provided technical comments, which we incorporated as appropriate. DOD objected to our matter for congressional consideration that Congress should consider, in any future BRAC authorization, a requirement for DOD to identify appropriate measures of effectiveness and to track the achievement of its goals. DOD stated that, as advised by BRAC counsel, it believes this requirement would subvert the statutory requirement that military value be the priority consideration. However, as we noted when we originally directed this recommendation to the department in March 2013, our recommendation does not undermine DOD’s reliance on military value as the primary selection criteria for DOD’s BRAC candidate recommendations, and DOD can still prioritize military value while identifying measures that help determine whether DOD achieved the military value that it seeks. Congress enacting a requirement for DOD to identify appropriate measures of effectiveness and to track the achievement of its goals, alongside the requirement to prioritize military value, would address DOD’s concern about subverting a statutory requirement related to military value. Moreover, the department will likely have a better understanding of whether it achieved its intended results while still continuing to enhance military value. DOD concurred with our first recommendation that, in the event of any future BRAC round, the Secretary of Defense should ensure that ASD (EI&E) and the military departments take steps to establish clear and consistent communications throughout the department during data collection. In its letter, however, DOD stated it did not agree with our assertion that the perceptions of lower-level personnel are necessarily indicative of the process as a whole. We disagree with DOD’s statement that we relied on the perceptions of lower-level personnel. We obtained perceptions from senior personnel in the various military organizations deemed by DOD leadership to be the most knowledgeable. We then corroborated these perceptions with those from senior officials from the military departments, along with evidence obtained from the Air Force and Army lessons-learned reports. Moreover, DOD stated that the ability to gather data was not limited by the nondisclosure agreements or an inability to communicate with those participating in the BRAC process. While DOD concurred with our recommendation, we continue to believe it should consider the perceptions obtained from knowledgeable personnel that data gathering was limited by nondisclosure agreements or an inability to communicate throughout different levels of authority in the department during data collection. DOD also concurred with our second recommendation that, in the event of any future BRAC round, the Secretary of Defense should ensure that ASD (EI&E) provides specific guidance for the military departments to monitor and report on mission-related changes that require significant changes to the recommendation business plans. In its letter, DOD stated it would continue to provide guidance, as it did in the 2005 BRAC round, to encourage resolution at the lowest possible level, with Office of the Secretary of Defense involvement limited to review and approval of any necessary changes to the business plans. However, as we reported, if a mission-related change was not raised through the military department’s chain of command, ASD (EI&E) officials stated that they were not always aware of the details of such changes, hence the need for our recommendation. By providing specific guidance to monitor and report mission-related changes that require significant changes to the recommendation business plans, DOD may be able to more effectively make adjustments in its plans to ensure that the department achieves its overall goals in any future BRAC rounds. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 15 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; and the Commandant of the Marine Corps. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. Selected economic indicators for the 20 communities surrounding the 23 Department of Defense (DOD) installations closed in the 2005 Base Realignment and Closure (BRAC) round vary compared to national averages. In our analysis, we used annual unemployment and real per capita income growth rates compiled by the U.S. Bureau of Labor Statistics and the U.S. Bureau of Economic Analysis as broad indicators of the economic health of those communities where installation closures occurred. Our analyses of the U.S. Bureau of Labor Statistics annual unemployment data for 2016, the most recent data available, showed that 11 of the 20 closure communities had unemployment rates at or below the national average of 4.9 percent for the period from January through December 2016. Another seven communities had unemployment rates that were higher than the national average but at or below 6.0 percent. Only two communities had unemployment rates above 8.0 percent (see fig. 3). Of the 20 closure communities, Portland-South Portland, Maine (Naval Air Station Brunswick) had the lowest unemployment rate at 3.0 percent and Yukon-Koyukuk, Alaska (Galena Forward Operating Location) had the highest rate at 17.2 percent. We also used per capita income data from the U.S. Bureau of Economic Analysis between 2006 and 2016 to calculate annualized growth rates and found that 11 of the 20 closure communities had annualized real per capita income growth rates that were higher than the national average of 1.0 percent (see fig. 4). The other 9 communities had rates that were below the national average. Of the 20 communities affected, Yukon- Koyukuk, Alaska (Galena Forward Operating Location) had the highest annualized growth rate at 4.6 percent and Gulfport-Biloxi-Pascagoula, Mississippi (Mississippi Army Ammunition Plant and Naval Station Pascagoula) had the lowest rate at -0.1 percent. The objectives of our review were to assess the extent that the Department of Defense (DOD) (1) measured the achievement of goals for reducing excess infrastructure, transforming the military, and promoting jointness for the 2005 Base Realignment and Closure (BRAC) round and (2) implemented prior GAO recommendations and addressed any additional challenges faced in BRAC 2005 to improve performance for any future BRAC round. In addition, we describe how current economic indicators for the communities surrounding the 23 closed bases in BRAC 2005 compare to national averages. For all objectives, we reviewed the 2005 BRAC Commission’s September 2005 report to the President, policy memorandums, and guidance on conducting BRAC 2005. We also reviewed other relevant documentation such as supporting BRAC analyses prepared by the military services or units related to the development of BRAC 2005 recommendations. We interviewed officials with the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment; the Army; the Navy; the Air Force; the Marine Corps; the U.S. Army Reserve Command; and the National Guard Bureau. We also conducted site visits to Connecticut, Indiana, Kentucky, Massachusetts, North Carolina, Rhode Island, and South Carolina. We met with 26 military units or organizations, such as Air Force wings and Army and Navy installations’ Departments of Public Works, and 12 communities involved with BRAC 2005 recommendations. These interviews provide examples of any challenges faced by each individual party, but information obtained is not generalizable to all parties involved in the BRAC process. We selected locations for site visits based on ensuring geographic diversity and a mix of types of BRAC recommendations (closures, transformation, or jointness), and having at least one installation from or community associated with each military department. To assess the extent that DOD measured the achievement of goals for reducing excess infrastructure, transforming the military, and promoting jointness for BRAC 2005, we met with officials to discuss measurement of goals and requested any related documentation. We compared DOD’s efforts to Standards for Internal Control in the Federal Government, which emphasizes that an agency’s management should track major agency achievements and compare these to the agencies’ plans, goals, and objectives. We also tried to calculate the excess infrastructure disposed of during BRAC 2005; however, DOD’s data were incomplete. Specifically, in reviewing the square footage and plant replacement value data from DOD’s Cost of Base Realignment Actions model, we found that data from several bases were not included. Additionally, a senior official with the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment stated the data provided were not the most current data used during BRAC 2005 and the office did not have access to the complete data. We also tried to corroborate the square footage and plant replacement value data from the Cost of Base Realignment Actions model to DOD’s 2005 Base Structure Report, but we found the data to be incomparable. As such, we determined that the incomplete and outdated data were not sufficiently reliable to calculate the excess infrastructure disposed of during BRAC 2005. To assess the extent that DOD implemented prior GAO recommendations on BRAC 2005 and addressed any additional challenges faced in BRAC 2005 to improve performance for any future BRAC round, we reviewed our prior reports and testimonies on BRAC 2005 to identify recommendations made and determined whether those recommendations applied to the analysis, implementation, or disposal phase of BRAC 2005. We then identified whether DOD implemented recommendations we made by discussing the status of recommendations with agency officials and obtaining copies of agency documents supporting the recommendations’ implementation. We also met with officials to identify what challenges, if any, continue to be faced and what opportunities exist to improve the analysis, implementation, and disposal phases for any future BRAC round. For the analysis phase, we reviewed military service lessons-learned documents. For the implementation phase, we reviewed business plans supporting the implementation of the BRAC 2005 recommendations and other applicable documentation, such as a workforce planning study and an environmental impact statement affecting the implementation of some recommendations. For the disposal phase, we analyzed DOD’s caretaker costs for closed bases that it has not yet transferred. We compared information about challenges in the analysis, implementation, and disposal phases to criteria for communications, monitoring, and risk assessments in Standards for Internal Control in the Federal Government. To describe how current economic indicators for the communities surrounding the 23 closed bases in BRAC 2005 compare to national averages, we collected economic indicator data on the communities surrounding closed bases from the Bureau of Labor Statistics and the Bureau of Economic Analysis in order to compare them with national averages. To identify the communities surrounding closed bases, we focused our review on the 23 major DOD installations closed in the BRAC 2005 round and their surrounding communities. For BRAC 2005, DOD defined major installation closures as those that had a plant replacement value exceeding $100 million. We used information from our 2013 report, which identified the major closure installations. We then defined the “community” surrounding each major installation by (1) identifying the economic area in DOD’s Base Closure and Realignment Report, which linked a metropolitan statistical area, a metropolitan division, or a micropolitan statistical area to each installation, and then (2) updating those economic areas based on the most current statistical areas or divisions, as appropriate. Because DOD’s BRAC report did not identify the census area for the Galena Forward Operating Location in Alaska or the Naval Weapons Station Seal Beach Detachment in Concord, California, we identified the town of Galena as within the Yukon-Koyukuk Census Area and the city of Concord in the Oakland-Hayward-Berkeley, CA Metropolitan Division, and our analyses used the economic data for these areas. See table 1 for a list of the major DOD installations closed in BRAC 2005 and their corresponding economic areas. To compare the economic indicator data of the communities surrounding the 23 major DOD installations closed in the BRAC 2005 round to U.S. national averages, we collected and analyzed calendar year 2016 unemployment data from the U.S. Bureau of Labor Statistics and calendar year 2006 through 2016 per capita income growth data, along with data on inflation, from the U.S. Bureau of Economic Analysis which we used to calculate annualized real per capita income growth rates. Calendar year 2016 was the most current year for which local area data were available from these databases. We assessed the reliability of these data by reviewing U.S. Bureau of Labor Statistics and U.S. Bureau of Economic Analysis documentation regarding the methods used by each agency in producing their data and found the data to be sufficiently reliable to report 2016 annual unemployment rates and 2006 through 2016 real per capita income growth. We used unemployment and annualized real per capita income growth rates as key performance indicators because (1) DOD used these measures in its community economic impact analysis during the BRAC location selection process and (2) economists commonly use these measures in assessing the economic health of an area over time. While our assessment provides an overall picture of how these communities compare with the national averages, it does not isolate the condition, or the changes in that condition, that may be attributed to a specific BRAC action. We conducted this performance audit from April 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To improve the analysis phase of the 2005 Base Realignment and Closure (BRAC) round, we made 12 recommendations between 2004 and 2016. The Department of Defense (DOD) fully concurred with 4, partially concurred with 2, and did not concur with 6 recommendations. It implemented 1 of the 12 recommendations (see table 2). According to DOD officials, DOD will be unable to take actions on 7 recommendations unless Congress authorizes any future BRAC round. To improve the implementation phase of the 2005 Base Realignment and Closure (BRAC) round, we made 39 recommendations between 2005 and 2016. The Department of Defense (DOD) fully concurred with 17, partially concurred with 15, and did not concur with 7 recommendations. DOD implemented 28 of them (see table 3). To improve the disposal phase of the 2005 Base Realignment and Closure (BRAC) round, we made 14 recommendations between 2007 and 2017. The Department of Defense (DOD) fully concurred with 7, partially concurred with 5, and did not concur with 2 recommendations. DOD implemented 4 of them with 8 recommendations pending further action (see table 4). According to DOD officials, DOD will be unable to take actions on 5 of the 8 pending recommendations until another BRAC round is authorized. In addition to the contact named above, Gina Hoffman (Assistant Director), Tracy Barnes, Irina Bukharin, Timothy Carr, Amie Lesser, John Mingus, Kevin Newak, Carol Petersen, Richard Powelson, Clarice Ransom, Jodie Sandel, Eric Schwab, Michael Silver, and Ardith Spence made key contributions to this report. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Military Base Realignments and Closures: DOD Has Improved Environmental Cleanup Reporting but Should Obtain and Share More Information. GAO-17-151. Washington, D.C.: January 19, 2017. Military Base Realignments and Closures: More Guidance and Information Needed to Take Advantage of Opportunities to Consolidate Training. GAO-16-45. Washington, D.C.: February 18, 2016. Military Base Realignments and Closures: Process for Reusing Property for Homeless Assistance Needs Improvements. GAO-15-274. Washington, D.C.: March 16, 2015. DOD Joint Bases: Implementation Challenges Demonstrate Need to Reevaluate the Program. GAO-14-577. Washington, D.C.: September 19, 2014. Defense Health Care Reform: Actions Needed to Help Realize Potential Cost Savings from Medical Education and Training. GAO-14-630. Washington, D.C: July 31, 2014. Defense Infrastructure: DOD’s Excess Capacity Estimating Methods Have Limitations. GAO-13-535. Washington, D.C.: June 20, 2013. Defense Infrastructure: Communities Need Additional Guidance and Information to Improve Their Ability to Adjust to DOD Installation Closure or Growth. GAO-13-436. Washington, D.C.: May 14, 2013. Military Bases: Opportunities Exist to Improve Future Base Realignment and Closure Rounds. GAO-13-149. Washington, D.C.: March 7, 2013. DOD Joint Bases: Management Improvements Needed to Achieve Greater Efficiencies. GAO-13-134. Washington, D.C.: November 15, 2012. Military Base Realignments and Closures: The National Geospatial- Intelligence Agency’s Technology Center Construction Project. GAO-12-770R. Washington, D.C.: June 29, 2012. Military Base Realignments and Closures: Updated Costs and Savings Estimates from BRAC 2005. GAO-12-709R. Washington, D.C.: June 29, 2012. Military Base Realignments and Closures: Key Factors Contributing to BRAC 2005 Results. GAO-12-513T. Washington, D.C.: March 8, 2012. Excess Facilities: DOD Needs More Complete Information and a Strategy to Guide Its Future Disposal Efforts. GAO-11-814. Washington, D.C.: September 19, 2011. Military Base Realignments and Closures: Review of the Iowa and Milan Army Ammunition Plants. GAO-11-488R. Washington, D.C.: April 1, 2011. Defense Infrastructure: High-Level Federal Interagency Coordination Is Warranted to Address Transportation Needs beyond the Scope of the Defense Access Roads Program. GAO-11-165. Washington, D.C.: January 26, 2011. Military Base Realignments and Closures: DOD Is Taking Steps to Mitigate Challenges but Is Not Fully Reporting Some Additional Costs. GAO-10-725R. Washington, D.C.: July 21, 2010. Defense Infrastructure: Army Needs to Improve Its Facility Planning Systems to Better Support Installations Experiencing Significant Growth. GAO-10-602. Washington, D.C.: June 24, 2010. Military Base Realignments and Closures: Estimated Costs Have Increased While Savings Estimates Have Decreased Since Fiscal Year 2009. GAO-10-98R. Washington, D.C.: November 13, 2009. Military Base Realignments and Closures: Transportation Impact of Personnel Increases Will Be Significant, but Long-Term Costs Are Uncertain and Direct Federal Support Is Limited. GAO-09-750. Washington, D.C.: September 9, 2009. Military Base Realignments and Closures: DOD Needs to Update Savings Estimates and Continue to Address Challenges in Consolidating Supply- Related Functions at Depot Maintenance Locations. GAO-09-703. Washington, D.C.: July 9, 2009. Defense Infrastructure: DOD Needs to Periodically Review Support Standards and Costs at Joint Bases and Better Inform Congress of Facility Sustainment Funding Uses. GAO-09-336. Washington, D.C.: March 30, 2009. Military Base Realignments and Closures: DOD Faces Challenges in Implementing Recommendations on Time and Is Not Consistently Updating Savings Estimates. GAO-09-217. Washington, D.C.: January 30, 2009. Military Base Realignments and Closures: Army Is Developing Plans to Transfer Functions from Fort Monmouth, New Jersey, to Aberdeen Proving Ground, Maryland, but Challenges Remain. GAO-08-1010R. Washington, D.C.: August 13, 2008. Defense Infrastructure: High-Level Leadership Needed to Help Communities Address Challenges Caused by DOD-Related Growth. GAO-08-665. Washington, D.C.: June 17, 2008. Defense Infrastructure: DOD Funding for Infrastructure and Road Improvements Surrounding Growth Installations. GAO-08-602R. Washington, D.C.: April 1, 2008. Military Base Realignments and Closures: Higher Costs and Lower Savings Projected for Implementing Two Key Supply-Related BRAC Recommendations. GAO-08-315. Washington, D.C.: March 5, 2008. Defense Infrastructure: Realignment of Air Force Special Operations Command Units to Cannon Air Force Base, New Mexico. GAO-08-244R. Washington, D.C.: January 18, 2008. Military Base Realignments and Closures: Estimated Costs Have Increased and Estimated Savings Have Decreased. GAO-08-341T. Washington, D.C.: December 12, 2007. Military Base Realignments and Closures: Cost Estimates Have Increased and Are Likely to Continue to Evolve. GAO-08-159. Washington, D.C.: December 11, 2007. Military Base Realignments and Closures: Impact of Terminating, Relocating, or Outsourcing the Services of the Armed Forces Institute of Pathology. GAO-08-20. Washington, D.C.: November 9, 2007. Military Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency. GAO-08-121R. Washington, D.C.: October 26, 2007. Defense Infrastructure: Challenges Increase Risks for Providing Timely Infrastructure Support for Army Installations Expecting Substantial Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007. Military Base Realignments and Closures: Plan Needed to Monitor Challenges for Completing More Than 100 Armed Forces Reserve Centers. GAO-07-1040. Washington, D.C.: September 13, 2007. Military Base Realignments and Closures: Observations Related to the 2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007. Military Base Closures: Projected Savings from Fleet Readiness Centers Likely Overstated and Actions Needed to Track Actual Savings and Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29, 2007. Military Base Closures: Management Strategy Needed to Mitigate Challenges and Improve Communication to Help Ensure Timely Implementation of Air National Guard Recommendations. GAO-07-641. Washington, D.C.: May 16, 2007. Military Base Closures: Opportunities Exist to Improve Environmental Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property. GAO-07-166. Washington, D.C.: January 30, 2007. Military Bases: Observations on DOD’s 2005 Base Realignment and Closure Selection Process and Recommendations. GAO-05-905. Washington, D.C.: July 18, 2005. Military Bases: Analysis of DOD’s 2005 Selection Process and Recommendations for Base Closures and Realignments. GAO-05-785. Washington, D.C.: July 1, 2005. Military Base Closures: Observations on Prior and Current BRAC Rounds. GAO-05-614. Washington, D.C.: May 3, 2005. Military Base Closures: Assessment of DOD’s 2004 Report on the Need for a Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May 17, 2004.", "summary": "The 2005 BRAC round was the costliest and most complex BRAC round ever. In contrast to prior rounds, which focused on the goal of reducing excess infrastructure, DOD's goals for BRAC 2005 also included transforming the military and fostering joint activities. GAO was asked to review DOD's performance outcomes from BRAC 2005. This report examines the extent to which DOD has (1) measured the achievement of its goals for BRAC 2005 and (2) implemented prior GAO recommendations on BRAC 2005 and addressed any additional challenges to improve performance for any future BRAC round. GAO reviewed relevant documents and guidance; met with a nongeneralizable selection of 26 military organizations and 12 communities involved with BRAC 2005; and interviewed DOD officials. The Department of Defense (DOD) components generally did not measure the achievement of goals—reducing excess infrastructure, transforming the military, and promoting joint activities among the military departments—for the 2005 Base Realignment and Closure (BRAC) round. In March 2013, GAO recommended that, for any future BRAC round, DOD identify measures of effectiveness and develop a plan to demonstrate achieved results. DOD did not concur and stated that no action is expected. Without a requirement for DOD to identify measures of effectiveness and track achievement of its goals, Congress will not have full visibility over the expected outcomes or achievements of any future BRAC rounds. Of the 65 recommendations GAO has made to help DOD address challenges it faced in BRAC 2005, as of October 2017 DOD had implemented 33 of them (with 18 pending DOD action). DOD has not addressed challenges associated with communication and monitoring mission-related changes. Specifically: Some military organizations stated that they could not communicate to BRAC decision makers information outside of the data-collection process because DOD did not establish clear and consistent communications. For example, Army officials at Fort Knox, Kentucky, stated that there was no way to communicate that excess facilities were ill-suited for relocating the Human Resources Command and moved forward without full consideration of alternatives for using better-suited excess space at other locations. As a result, DOD spent about $55 million more than estimated to construct a new building at Fort Knox. DOD implemented BRAC recommendations that affected units' ability to carry out their missions because DOD lacked specific guidance to monitor and report on mission-related changes. For example, DOD spent about $27.7 million on a landing field for a Marine Corps F-35 training squadron at Eglin Air Force Base, Florida, even though it had been previously decided to station the F-35 aircraft and personnel at another base. By addressing its communication and monitoring challenges, DOD could better inform decision making, better ensure that its infrastructure meets the need of its force structure, and better position itself to achieve its goals in any future BRAC round. Congress should consider requiring DOD to identify and track appropriate measures of effectiveness in any future BRAC round. Also, GAO recommends that in any future BRAC round DOD (1) take steps to establish clear and consistent communications while collecting data and (2) provide specific guidance to the military departments to monitor and report on mission-related changes during implementation. GAO also continues to believe that DOD should fully implement GAO's prior recommendations on BRAC 2005. DOD objected to Congress requiring DOD to identify and track performance measures, but GAO continues to believe this to be an appropriate action for the reasons discussed in the report. Lastly, DOD concurred with the two recommendations.", "document_type": "gao"}
{"report": "In November 2002, Congress passed and the President signed the Improper Payments Information Act of 2002 (IPIA), which was later amended by IPERA and the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA). The amended legislation requires executive branch agencies to (1) review all programs and activities and identify those that may be susceptible to significant improper payments (commonly referred to as a risk assessment), (2) publish improper payment estimates for those programs and activities that the agency identified as being susceptible to significant improper payments, (3) implement corrective actions to reduce improper payments and set reduction targets, and (4) report on the results of addressing the foregoing requirements. In addition to the agencies’ identifying programs and activities that are susceptible to significant improper payments, OMB designates as high priority the programs with the most egregious cases of improper payments. Specifically, under a provision added to IPIA by IPERIA, OMB is required to annually identify a list of high-priority federal programs in need of greater oversight and review. In general, for fiscal years 2014 through 2017, OMB implemented this requirement by designating high- priority programs based on a threshold of $750 million in estimated improper payments for a given fiscal year. OMB also plays a key role in implementing laws related to improper payment reporting. Specifically, OMB is directed by statute to provide guidance to federal agencies on estimating, reporting, reducing, and recovering improper payments. IPERA also requires executive agencies’ IGs to annually determine and report on whether their respective agencies complied with certain IPERA- related criteria. If an agency does not meet one or more of the six IPERA criteria for any of its programs or activities, the agency is considered noncompliant overall. The six criteria are as follows: 1. publish a report in the form and content required by OMB—typically an agency financial report (AFR) or a performance and accountability report (PAR)—for the most recent fiscal year, and post that report on the agency website; 2. conduct a program-specific risk assessment, if required, for each program or activity that conforms with IPIA as amended; 3. publish improper payment estimates for all programs and activities deemed susceptible to significant improper payments under the agency’s risk assessments; 4. publish corrective action plans for those programs and activities assessed to be at risk for significant improper payments; 5. publish and meet annual reduction targets for all programs and activities assessed to be at risk for significant improper payments; and 6. report a gross improper payment rate of less than 10 percent for each program and activity for which an improper payment estimate was published. Under IPERA, agencies reported by their IG as not in compliance with any of these criteria in a fiscal year are required to submit a plan to Congress describing the actions they will take to come into compliance, and such plans shall include measureable milestones, the designation of senior accountable officials, and the establishment of accountability mechanisms to achieve compliance. OMB guidance states that agencies are required to submit these plans to Congress and OMB in the first year of reported noncompliance. When agency programs are reported as noncompliant for consecutive years, IPERA and OMB guidance requires agencies and OMB to take additional actions. Specifically, an agency with a program reported as noncompliant for 3 or more consecutive years is required to submit to Congress within 30 days of the IG’s report either (1) a reauthorization proposal for the program or (2) the proposed statutory changes necessary to bring the program or activity into compliance. We previously recommended that when agencies determine that reauthorization or statutory changes are not necessary to bring the programs into compliance, the agencies should state so in their notifications to Congress. Effective starting with fiscal year 2018 reporting, OMB updated its guidance to instruct agencies with programs reported as noncompliant for 3 consecutive years to explain what the agency is doing to achieve compliance if a reauthorization proposal or proposed statutory change will not bring a program into compliance with IPERA. The updated guidance also instructs agencies with programs reported as noncompliant for 4 or more consecutive years to submit a report to Congress and OMB (within 30 days of the IG’s determination of noncompliance) detailing the activities taken and still being pursued to prevent and reduce improper payments. If agency programs are reported as noncompliant under IPERA for 2 consecutive years, and the Director of OMB determines that additional funding would help the agency come into compliance, the head of the agency must obligate additional funding in the amount determined by the Director to intensify compliance efforts. IPERA directs the agency to exercise any reprogramming or transfer authority that the agency may have to provide additional funding to meet the level determined by OMB and, if necessary, submit a request to Congress for additional reprogramming or transfer authority to meet the full level of funding determined by OMB. Table 1 summarizes agency and OMB requirements related to agency programs that are noncompliant under IPERA, as reported by their IGs. Seven years after the initial implementation of IPERA, over half of the 24 CFO Act agencies were reported as noncompliant by their IGs for fiscal years 2016 and 2017. Specifically, 13 agencies were reported as noncompliant with one or more IPERA criteria for fiscal year 2016, and 14 agencies were reported as noncompliant for fiscal year 2017 (see fig. 1). Nine of these agencies have been reported as noncompliant in one or more programs every year since IPERA was implemented in 2011 (see app. II for additional details on CFO Act agencies’ compliance under IPERA for fiscal years 2011 through 2017, as reported by their IGs). Although the number of agencies reported as noncompliant under IPERA has varied slightly since fiscal year 2011, the total instances of noncompliance for all six criteria substantially improved after fiscal year 2011, when IPERA was first implemented. As shown in figure 2, the total instances decreased from 38 instances (for 14 noncompliant agencies) for fiscal year 2011 to 26 instances (for 14 noncompliant agencies) for fiscal year 2017. Also, for fiscal year 2017, 7 of 14 agencies were reported as noncompliant for only one criterion per noncompliant program. Of these, 6 agencies—the Departments of Homeland Security (DHS), Education (Education), Commerce, and Transportation; the General Services Administration; and the Social Security Administration (SSA)—were only reported as noncompliant with the IPERA criterion that requires agencies to publish and meet reduction targets. In addition, the Department of the Treasury (Treasury) was only reported as noncompliant with the IPERA criterion that requires agencies to report improper payment rates below 10 percent. Furthermore, the programs reported as noncompliant for fiscal year 2017 accounted for a significantly smaller portion of the total reported estimated improper payments as compared to the noncompliant programs for fiscal year 2015. Specifically, we previously reported that 52 noncompliant programs accounted for $132 billion (or about 96 percent) of the $137 billion total reported estimated improper payments for fiscal year 2015, whereas 58 noncompliant programs accounted for $80 billion (or about 57 percent) of the $141 billion total reported estimated improper payments for fiscal year 2017. Although improper payment estimates associated with noncompliant programs vary from year to year, this decrease (approximately $52 billion) was primarily due to two programs. Specifically, the Department of Health and Human Services’ (HHS) Medicare Fee-for-Service (Parts A and B) and Medicare Part C programs were reported as noncompliant and accounted for approximately $43 billion and $14 billion, respectively, of estimated improper payments for fiscal year 2015. These programs were reported as compliant for fiscal year 2017 and accounted for approximately $36 billion and $14 billion, respectively, or about 36 percent of the $141 billion total reported improper payments for fiscal year 2017. Almost a third (18 programs) of the 58 programs that contributed to 14 CFO Act agencies’ noncompliance under IPERA, as of fiscal year 2017, were reported as noncompliant for 3 or more consecutive years. The number of programs noncompliant for 3 or more consecutive years has continually increased since fiscal year 2015, as shown in figure 3. Specifically, 12 programs (associated with 7 agencies) were reported as noncompliant for 3 or more consecutive years, as of fiscal year 2015, and the number increased to 14 programs (associated with 8 agencies) and 18 programs (associated with 9 agencies), as of fiscal years 2016 and 2017, respectively. These programs accounted for a substantial portion of the $141 billion total estimated improper payments for fiscal year 2017. As shown in table 2, 14 of the 18 programs that were reported as noncompliant for 3 or more consecutive years reported improper payment estimates that accounted for an estimated $74.4 billion (about 53 percent) of the $141 billion, while the other 4 programs did not report improper payment estimates for fiscal year 2017 and were reported by their respective IGs as noncompliant with the IPERA criterion to publish improper payment estimates. The $74.4 billion is primarily composed of estimates reported for 2 noncompliant programs—HHS’s Medicaid program ($36.7 billion) and Treasury’s Earned Income Tax Credit program ($16.2 billion)— totaling $52.9 billion (or approximately 71 percent of the $74.4 billion). Improper payments associated with these two noncompliant programs are also a central part of two areas included in our 2017 High-Risk List, which includes federal programs and operations that are especially vulnerable to waste, fraud, abuse, and mismanagement, or that need transformative change. Eight of the 18 noncompliant programs have been reported as noncompliant since the implementation of IPERA in fiscal year 2011, for a total of 7 consecutive years, as shown in table 2. Reported compliance for Treasury’s Earned Income Tax Credit improved from being reported as noncompliant with multiple IPERA criteria in fiscal year 2013 to noncompliance with only one criterion for the last 4 years (fiscal years 2014 through 2017). Eight CFO Act agencies’ programs were reported as noncompliant under IPERA for 3 or more consecutive years, as of fiscal year 2016. Three of these agencies did not notify Congress of their program’s continued noncompliance as required. In addition to submitting the required notifications for their noncompliant programs, the other five agencies also included additional information in their notifications—such as measurable milestones, designation of senior officials, and accountability mechanisms—useful for assessing their efforts to achieve compliance. In June 2018, OMB updated its guidance to clarify agency reporting requirements for each consecutive year a program is reported as noncompliant. However, OMB’s updated guidance did not direct agencies to include other types of quality information in their notifications for programs reported as noncompliant for 3 or more consecutive years that could help Congress to more effectively assess their efforts to address long-standing challenges and other issues affecting these programs and to achieve compliance. Of the eight agencies with programs reported as noncompliant under IPERA for 3 or more consecutive years as of fiscal year 2016, we found that five agencies notified Congress of their noncompliance as required. Specifically, the Department of Defense (DOD), Education, HHS, DHS, and SSA notified Congress of their programs’ reported noncompliance for 3 or more consecutive years as of fiscal year 2016 as required by IPERA and OMB guidance. The remaining three agencies—the U.S. Department of Agriculture (USDA), the Department of Labor (DOL), and Treasury— did not notify Congress as required. Additional information regarding the three agencies that did not submit their required notifications to Congress is summarized below: USDA: In May 2017, the USDA IG reported that four USDA Food and Nutrition Service programs—Child and Adult Care Food Program; National School Lunch Program; School Breakfast Program; and Special Supplemental Nutrition Program for Women, Infants, and Children—had been noncompliant for 6 consecutive years, as of fiscal year 2016. However, USDA has not notified Congress of these programs’ continued noncompliance with IPERA as of fiscal year 2016, despite prior recommendations that we, and the USDA IG, made to USDA to do so. USDA staff stated in May 2018 that USDA drafted, but had not submitted, a letter to Congress regarding these programs’ noncompliance. DOL: In June 2017, the DOL IG reported that the Unemployment Insurance Benefit program had been noncompliant for 6 consecutive years, as of fiscal year 2016. In October 2016, DOL included proposed legislation in its last notification to Congress regarding this program, approximately 8 months prior to the DOL IG’s IPERA compliance report. However, because the requirement for agencies to notify Congress is triggered by IG reporting of programs that are noncompliant for 3 or more consecutive years, DOL should have also notified Congress regarding the program’s continued noncompliance in fiscal year 2016 after the IG’s report was issued in June 2017. DOL staff stated in August 2018 that the proposed legislation included in its October 2016 notification had not been enacted and that DOL is currently working to develop a new report to Congress and OMB detailing corrective actions taken to bring the program into compliance. Treasury: In May 2017, the Treasury IG reported that the Earned Income Tax Credit (EITC) program had been noncompliant for 6 consecutive years, as of fiscal year 2016. We previously reported that Treasury submitted proposed statutory changes to Congress for this program in August 2014 and in June 2015. As stated in the Treasury IG’s fiscal year 2016 IPERA compliance report, the proposed statutory changes would help prevent the improper issuance of billions of dollars in refunds as it would provide the Internal Revenue Service (IRS) with expanded authority to systematically correct erroneous claims that are identified when tax returns are processed and allow IRS to deny erroneous EITC refund claims before they are paid. Further, Treasury stated that IRS has repeatedly requested authority to correct such errors in subsequent fiscal year budgets, including its fiscal year 2019 budget submission. In June 2018, Treasury staff stated that the Consolidated Appropriations Act, 2016 provided IRS with additional tools for reducing EITC improper payments; however, the act did not expand IRS’s authority to systematically correct the erroneous claims that are identified when tax returns are processed. Treasury staff also stated that the department has continued to coordinate with OMB on required reporting for the EITC program because of the program’s complexity, and that OMB has not requested additional actions or documentation regarding the program’s noncompliance. Although continued coordination with OMB is important, Treasury did not notify Congress regarding the EITC program’s continued noncompliance as required. In summary, despite reporting requirements in IPERA and OMB guidance, one agency (USDA) has not notified Congress about four programs being reported as noncompliant for 6 consecutive years, as of fiscal year 2016. The remaining two agencies (DOL and Treasury) that did not notify Congress of their programs’ consecutive noncompliance, as of fiscal year 2016, submitted notifications to Congress prior to their respective IGs’ fiscal year 2016 compliance results. However, IPERA requires agencies to notify Congress when programs are reported as noncompliant for more than 3 consecutive years and thus DOL and Treasury should have also notified Congress about their programs’ being reported as noncompliant for 6 consecutive years, as of fiscal year 2016. It is important that agencies continue to notify Congress of their programs’ consecutive noncompliance each year after the third consecutive year as the information related to their proposals or regarding their IPERA compliance efforts included in prior years’ notifications to Congress may significantly change over time. Unless agencies continue to notify Congress in subsequent years, Congress may lack the current and relevant information needed to effectively assess agencies’ proposals or monitor their efforts to address problematic programs in a timely manner. OMB updated its guidance in June 2018 to provide more clarity regarding the notification requirements for each consecutive year a program is reported as noncompliant. Effective implementation of this guidance may help ensure that agencies consistently provide required information to Congress on these programs in future years. We found that the five agencies—DOD, DHS, Education, HHS, and SSA—that notified Congress regarding their programs’ reported noncompliance for 3 or more consecutive years, as of fiscal year 2016, also included additional information about their efforts to achieve IPERA compliance. Although IPERA does not specifically require that agency proposals for reauthorization or other statutory change provide such information, including it could help Congress to better assess the agencies’ proposals included in these notifications and to oversee agency efforts to address long-standing challenges and compliance issues associated with these programs. In many instances, the types of additional information provided by these agencies are similar to information that agencies are required to provide to Congress or OMB in other required notifications or other reports, such as annual AFRs or PARs. For example, all improper payment estimates reported under IPIA, as amended, must be accompanied by information on what the agency is doing to reduce improper payments, including a description of root causes and the steps the agency has taken to ensure accountability. Further, IPERA and OMB guidance require agencies to provide corrective action plans to Congress for programs reported as noncompliant for 1 year. Such plans should include actions planned or taken to address the program’s noncompliance, measurable milestones, a senior official designated to oversee progress, and the accountability mechanisms in place to hold the senior official accountable. In addition, GAO’s Standards for Internal Control in the Federal Government emphasizes the importance of communicating quality information, such as significant matters related to risks, changes, or issues affecting agencies’ efforts to achieve compliance objectives, to external parties—such as legislators, oversight bodies, and the general public. Furthermore, in our fiscal year 2017 High-Risk Update, we also highlight the importance of these types of information when assessing agency efforts to address issues associated with programs included on our High-Risk List. Examples of such information include (1) action plans that are accessible and transparent with clear milestones and metrics, including established goals and performance measures to address identified root causes; (2) leadership commitment of top (or senior) officials to establish long-term priorities and goals and continued oversight and accountability; (3) monitoring progress against goals, assessing program performance, or reporting potential risks; and (4) demonstrated progress, through recommendations implemented, actions taken for improvement, and effectively addressing identified root causes and managing high-risk issues. Table 3 summarizes the types of additional information described above that the five agencies provided in their fiscal year 2016 notifications to Congress to address programs with 3 or more consecutive years of noncompliance. All five agencies informed Congress of (1) root causes that directly lead to improper payments or hindered the program’s ability to achieve compliance; (2) certain risks, significant changes, or issues affecting their efforts; and (3) their corrective actions or strategies to achieve compliance. Three of the five agencies—DOD, Education, and DHS—also included the other types of additional information described above in their notifications, including measurable milestones, designated senior officials to oversee progress, and accountability mechanisms established to help achieve compliance. For example, all three agencies designated their chief financial officers (CFO) to oversee progress toward achieving measurable milestones and expanded their official roles and responsibilities to hold them accountable. Education and DHS stated that these responsibilities were added to their respective CFOs’ individual performance plans. Although OMB updated its guidance in June 2018 to clarify agency reporting requirements related to programs reported as noncompliant for 3 or more consecutive years, the updated guidance did not direct agencies to include other types of quality information in their notifications, such as those described above. In addition, information related to measurable milestones, corrective actions, risks, issues, or other items affecting agencies’ efforts may change significantly over time. With this additional information, Congress could have more complete information to effectively oversee agency efforts to address long-standing challenges and other issues that have contributed to programs being reported as noncompliant for 3 or more consecutive years. Fifteen programs in seven agencies and 12 programs in six agencies were reported as noncompliant for 2 consecutive years as of fiscal years 2016 and 2017, respectively. For agencies reported as noncompliant under IPERA for 2 consecutive years for the same program, IPERA gives the Director of OMB the authority to determine whether additional funding would help the agencies come into compliance. If the OMB Director determines that such funding would help, the agency is required to use any available reprogramming or transfer authority to meet the funding level that the OMB Director specified and, if such authorities are not sufficient, submit a request to Congress for additional reprogramming or transfer authority. According to OMB staff, OMB determined that no additional funding was needed for programs reported as noncompliant for 2 consecutive years as of fiscal year 2016. As of September 2018, OMB was in the process of making funding determinations for 12 programs that were reported as noncompliant as of fiscal year 2017 and stated that any determinations made would be developed in the President’s Budget for fiscal year 2020. The 12 programs reported as noncompliant for 2 consecutive years, as of fiscal year 2017, accounted for approximately $3 billion (2 percent) of the $141 billion total improper payment estimate for that year. Of these 12 programs, more than half (or 7 of the 12) were attributable to DOD; however, Education’s Pell Grant program accounted for $2.2 billion (or 74 percent) of the $3 billion in improper payment estimates for programs reported as noncompliant programs for 2 consecutive years, for fiscal year 2017. In addition, as shown in table 4, the 12 programs reported as noncompliant for 2 consecutive years, as of fiscal year 2017, were primarily noncompliant with the IPERA criteria that required agencies to publish information in their PAR or AFR or publish and meet reduction targets. As noted previously, IPERA gives OMB authority to determine whether additional funding for intensified compliance efforts would help the agency come into compliance under IPERA. Therefore, an established process for making timely, well-informed funding determinations is an essential part of ensuring that agencies have sufficient resources and take steps to intensify their compliance efforts in a timely manner. In April 2018, OMB staff stated that when making funding determinations, they primarily rely on the IGs’ recommendations in their annual IPERA compliance reports. OMB staff also stated that for its fiscal year 2016 determinations, OMB determined that additional funding was not needed because the IGs’ recommendations did not specify that additional funding was needed to help resolve the programs’ noncompliance. The IGs’ annual reports provide information on agencies’ IPERA compliance and may be useful to OMB as a tool to help them make determinations for additional funding. However, IPERA does not require IGs to address funding levels in their annual compliance reports, and OMB’s guidance does not inform the IGs that their work might be relied upon in this manner. We reviewed the IGs’ fiscal years 2016 and 2017 IPERA compliance reports for the agencies with programs reported as noncompliant for 2 consecutive years and found that the IGs did not make any recommendations regarding additional funding needed to bring these programs into compliance. In addition, as specifically stated by the IGs for Education and USDA in their IPERA reports, OMB has the statutory responsibility to make these funding determinations. Education IG’s fiscal year 2017 IPERA compliance report stated that “If OMB recommends that the Department needs additional funding or should take any other actions to become compliant with IPERA, we recommend that the Department implement OMB’s recommendations.” Also, the USDA IG’s fiscal year 2016 IPERA compliance report stated, “For agencies that are not compliant for 2 consecutive years for the same program, the Director of OMB will determine if additional funding would help these programs come into compliance.” As a result, OMB’s reliance on IG recommendations as the source of information to support additional funding determinations may not provide sufficient information to effectively assess agencies’ funding needs to address noncompliance. OMB staff subsequently stated that they no longer need to conduct a detailed review of the IGs’ IPERA compliance reports to identify recommendations related to additional funding needs. Instead, OMB Memorandum M-18-20, issued in June 2018, updated OMB Circular No. A-123, Appendix C, and clarified that the funding determination process will unfold as part of the annual development of the President’s Budget, as described in OMB Circular No. A-11. This updated guidance also directs agencies to submit proposals to OMB regarding additional funding needs that may help them address IPERA noncompliance. To illustrate, under this new guidance, the IGs’ fiscal year 2018 IPERA compliance reports will be due in May 2019, and any funding needs to address noncompliance would be incorporated in the next annual budget preparation process, the results of which are due to be submitted to Congress in February 2020 for the President’s Budget for fiscal year 2021. Once OMB’s determinations have been made and communicated to agencies, agencies would respond by performing the required reprogramming and making transfers under existing authority, where available. Any requests for additional transfer authority may be incorporated into subsequent appropriations legislation. Estimated improper payments reported government-wide total almost $1.4 trillion from fiscal year 2003 through fiscal year 2017. The number of programs reported as noncompliant under IPERA for 3 or more consecutive years has continued to increase, from 12 programs (associated with 7 agencies) to 18 programs (associated with 9 agencies) as of fiscal years 2015 and 2017, respectively. Including additional useful, up-to-date information—such as measurable milestones, risks, or other issues affecting agency efforts to achieve compliance—in notifications to Congress, which are required when programs are reported as noncompliant for 3 or more consecutive years, could help Congress better assess agency efforts to address long-standing challenges and other issues associated with them. Although certain agencies included certain types of additional information in their notifications as of fiscal year 2016, OMB guidance does not require agencies to include such information in their notifications. As a result, Congress may lack sufficient information to effectively oversee agency efforts and take prompt action to help address long-standing challenges or other issues associated with these programs. The Director of OMB should take steps to update OMB guidance to specify other types of quality information that agencies with programs noncompliant for 3 or more consecutive years should include in their notifications to Congress, such as significant matters related to risks, issues, root causes, measurable milestones, designated senior officials, accountability mechanisms, and corrective actions or strategies planned or taken by agencies to achieve compliance. (Recommendation 1) We provided a draft of this report to OMB and requested comments, and OMB said that it had no comments. We also provided a draft of this report to the 24 CFO Act agencies and their IGs and requested comments. We received letters from the DHS Office of Inspector General (OIG), SSA, and the United States Agency for International Development. These letters are reproduced in appendixes V through VII. We also received technical comments from DOL, the Department of Veterans Affairs, the General Services Administration, HHS, the Department of Housing and Urban Development, and the Treasury OIG, which we incorporated in the report as appropriate. The remaining agencies and OIGs either did not provide comments or notified us via email that they had no comments. In its comments, SSA stated that it provided information to Congress on measurable milestones, designated senior officials, and accountability mechanisms in its AFR. In the report, we acknowledge that these types of additional information are similar to information that agencies are required to provide to Congress or OMB in other reports, such as annual AFRs. However, our analysis was based on SSA’s fiscal year 2016 notifications to Congress for programs reported as noncompliant under IPERA, in which this specific information was not reported. As such, we continue to believe that OMB should take steps to update OMB guidance to help ensure that agencies report such significant information and include it in their notifications to Congress. We are sending copies of this report to the appropriate congressional committees, the Director of the Office of Management and Budget, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VIII. Our objectives were to determine the following: 1. The extent to which the 24 agencies listed in the Chief Financial Officers Act of 1990, as amended (CFO Act), complied with the six criteria listed in the Improper Payments Elimination and Recovery Act of 2010 (IPERA), for fiscal years 2016 and 2017, and the trends evident since 2011, as reported by their inspectors general (IG). 2. The extent to which CFO Act agencies addressed requirements for programs and activities reported as noncompliant with IPERA criteria for 3 or more consecutive years, as of fiscal year 2016, and communicated their strategies to Congress for reducing improper payments and achieving compliance. 3. The extent to which the Office of Management and Budget (OMB) made determinations regarding whether additional funding would help CFO Act programs and activities reported as noncompliant with IPERA criteria for 2 consecutive years, as of fiscal years 2016 and 2017, come into compliance. Although the responsibility for complying with provisions of improper payment-related statutes rests with the head of each executive agency, we focused on the 24 agencies listed in the CFO Act because estimates of their improper payments represent over 99 percent of the total reported estimated improper payments for fiscal years 2016 and 2017. Our work did not include validating or retesting the data or methodologies that the IGs used to determine and report compliance. We corroborated all of our findings with OMB and all 24 CFO Act agencies and IGs. To address our first objective, we identified the requirements that agencies must meet by reviewing the Improper Payments Information Act of 2002 (IPIA), IPERA, and OMB guidance. We reviewed the CFO Act agency IGs’ IPERA compliance reports for fiscal years 2016 and 2017, which were the most current reports available at the time of our review. We summarized the overall agency and program-specific compliance determinations with the six IPERA criteria, as reported by the IGs. For fiscal years 2011 through 2015, we relied on and reviewed prior year supporting documentation and analyses of CFO Act agencies’ IPERA compliance, as reported in our prior reports, in order to identify compliance trends since 2011, as reported by the IGs. Based on these reports, we summarized the programs and the number of consecutive years that they were reported as noncompliant. For each IG report that did not specifically state that the agency had programs noncompliant for consecutive years, we compared the list of programs reported as noncompliant for fiscal years 2016 and 2017 to the list of programs reported as noncompliant for fiscal years 2014 and 2015 in our prior reports. Lastly, we corroborated our findings with OMB and all 24 CFO Act agencies and IGs. To address our second objective, we determined if the agencies responsible for programs and activities reported as noncompliant for 3 or more consecutive years as of fiscal year 2016 had submitted the required proposals (reauthorizations or statutory changes) to Congress by requesting and reviewing documentation of the required submissions and relevant notifications to Congress obtained from each applicable agency. Further, we reviewed the content of each agency notification to evaluate agencies’ efforts to communicate quality information to Congress concerning their strategies for achieving compliance consistent with Standards for Internal Control in the Federal Government. Principle 15 of these standards emphasizes the need for an entity’s management to communicate necessary quality information, such as significant matters related to risks, changes, or issues affecting agencies’ efforts, to achieve compliance objectives, to external parties—such as legislators, oversight bodies, and the general public. To identify other types of information useful for this purpose, we reviewed IPIA, as amended; IPERA; and OMB guidance for information agencies are required to provide to Congress or OMB in other notifications and reports, such as their corrective action plans or strategies, measurable milestones, designated senior officials, and accountability mechanisms for achieving compliance. We also reviewed information used to assess agency efforts to address issues associated with programs on our High-Risk List. To determine the extent to which agencies’ notifications to Congress included these additional types of useful information for their applicable program(s), we used a data collection instrument to document our determinations regarding the additional types of quality information included in each notification. In addition, two GAO analysts independently reviewed each agency’s notification and documented their determinations regarding the types of information included in the notifications. Differences between the analysts’ determinations were identified and resolved to ensure that the types of additional information were consistently identified and categorized. We did not evaluate the sufficiency and completeness of the agency-provided information. Lastly, we corroborated our findings with the respective agencies and IGs. To address our third objective, we identified provisions in IPIA, IPERA, and OMB guidance that are applicable to OMB for programs reported as noncompliant for 2 consecutive years. To determine if OMB made additional funding determinations for agency programs and activities reported as noncompliant for 2 consecutive years as of fiscal years 2016 and 2017, we requested relevant information and communications from OMB and the applicable agencies and IGs. We also interviewed key OMB staff on their process for determining additional funding needs for noncompliant programs and activities as of fiscal years 2016 and 2017 and related results. In addition, we reviewed the applicable fiscal years 2016 and 2017 CFO Act agency IG IPERA compliance reports, which OMB staff stated they relied on for determining whether noncompliant programs and activities required additional funding. We also asked the agencies whether they coordinated with OMB regarding their need for additional funding for programs and activities reported as noncompliant for 2 consecutive years as of fiscal years 2016 and 2017. Lastly, we corroborated our findings with OMB and the respective agencies and IGs. We conducted this performance audit from November 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Figure 4 details the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies’ overall compliance under the Improper Payments Elimination and Recovery Act of 2010 (IPERA), as reported by their inspectors general, for fiscal years 2011 through 2017. We previously reported on CFO Act agencies’ overall reported compliance for fiscal years 2011 through 2015. Tables 5 and 6 detail the Chief Financial Officers Act of 1990 (CFO Act) agencies and programs reported by their inspectors general as noncompliant with the six criteria specified by the Improper Payments Elimination and Recovery Act of 2010 (IPERA), for fiscal years 2016 and 2017. We previously reported on CFO Act agencies’ reported compliance with the six IPERA criteria for fiscal year 2015. Table 7 details the Chief Financial Officers Act of 1990 (CFO Act) agencies and programs reported by their inspectors general as noncompliant under the Improper Payments Elimination and Recovery Act of 2010 (IPERA) for 2 or more consecutive years, as of fiscal years 2016 and 2017. We previously reported on CFO Act agencies’ reported compliance for fiscal year 2015. In addition to the contact named above, Michelle Philpott (Assistant Director), Matthew Valenta (Assistant Director), Vivian Ly (Auditor in Charge), Juvy Chaney, John Craig, Caitlin Cusati, Francine DelVecchio, Patrick Frey, Maria Hasan, Maxine Hattery, Jason Kelly, Jim Kernen, Jason Kirwan, Sharon Kittrell, Lisa Motley, Heena Patel, Anne Rhodes- Kline, and Kailey Schoenholtz made key contributions to this report.", "summary": "Government-wide estimated improper payments totaled almost $1.4 trillion from fiscal year 2003 through fiscal year 2017. IPERA requires IGs to annually assess and report on whether executive branch agencies complied with the six criteria to (1) publish an agency financial report or performance accountability report, (2) conduct program-specific improper payment risk assessments, (3) publish improper payment estimates, (4) publish corrective action plans, (5) publish and meet annual improper payment reduction targets, and (6) report a gross improper payment rate of less than 10 percent. This report examines the extent to which 1. CFO Act agencies complied with IPERA criteria for fiscal years 2016 and 2017, and the trends evident since 2011, as reported by their IGs; 2. CFO Act agencies addressed requirements for programs reported as noncompliant with IPERA criteria for 3 or more consecutive years, as of fiscal year 2016, and communicated their strategies to Congress for reducing improper payments and achieving compliance; and 3. OMB made determinations regarding whether additional funding would help CFO Act agency programs reported as noncompliant with IPERA criteria for 2 consecutive years, as of fiscal years 2016 and 2017, come into compliance. GAO analyzed the IGs' fiscal years 2016 and 2017 IPERA compliance reports; reviewed prior GAO reports on agencies' IPERA compliance; reviewed agency information submitted to Congress; and made inquiries to OMB, applicable agencies, and IGs; and assessed such information based on relevant IPERA provisions and OMB and other guidance. Over half of the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies were reported by their inspectors general (IG) as noncompliant with one or more criteria under the Improper Payments Elimination and Recovery Act of 2010 (IPERA) for fiscal years 2016 and 2017. Nine CFO Act agencies have been reported as noncompliant in one or more programs every year since the implementation of IPERA in fiscal year 2011, totaling 7 consecutive years of noncompliance. The IGs of the 14 noncompliant agencies reported that a total of 58 programs were responsible for the identified instances of noncompliance in fiscal year 2017. Further, 18 of the 58 programs at 9 agencies were reported as noncompliant for 3 or more consecutive years. Fourteen of these 18 programs accounted for an estimated $74.4 billion of the $141 billion total estimated improper payments for fiscal year 2017; the other 4 programs did not report improper payment estimates. This sum may include estimates that are of unknown reliability. The $74.4 billion is primarily composed of estimates reported for two noncompliant programs, the Department of Health and Human Services' Medicaid program and the Department of the Treasury's (Treasury) Earned Income Tax Credit program; estimated improper payments for these two programs are also a central part of certain high-risk areas in GAO's 2017 High-Risk List. Agencies with any program reported as noncompliant for 3 or more consecutive years are required to notify Congress of their program's consecutive noncompliance and submit a proposal for reauthorization or statutory change to bring that program into compliance. GAO found that three agencies with one or more programs reported as noncompliant for 3 or more consecutive years, as of fiscal year 2016, did not notify Congress or submit the required proposals. The Departments of Labor and the Treasury submitted proposed legislative changes in response to their programs being previously reported as noncompliant, but did not notify Congress of the programs' continued noncompliance as of fiscal year 2016. The U.S. Department of Agriculture (USDA) has not notified Congress despite prior GAO and USDA IG recommendations to do so. To address these issues, in June 2018 the Office of Management and Budget (OMB) updated its guidance to clarify the notification requirements for each consecutive year a program is reported as noncompliant. GAO found that five agencies did notify Congress as required, and included additional quality information that is not specifically required, but could be useful in updating Congress on their compliance efforts. For example, all five agencies provided information on the root causes, risks, changes, or issues affecting their efforts and corrective actions or strategies to address them; three agencies provided other quality information on accountability mechanisms, designated senior officials, and measurable milestones. In June 2018, OMB updated its guidance to clarify agency reporting requirements for programs reported as noncompliant for 3 or more consecutive years. However, the updated guidance does not direct agencies to include the types of quality information included in these five agencies' notifications for fiscal year 2016. GAO's Standards for Internal Control in the Federal Government emphasizes the importance of communicating quality information, such as significant matters affecting agencies' efforts to achieve compliance objectives. Such information could be useful in understanding the current challenges of these programs and is essential for assessing agency efforts to address high-risk and other issues. As a result, Congress could have more complete information to effectively oversee agency efforts to address program noncompliance for 3 or more consecutive years. When programs are reported as noncompliant for 2 consecutive years, IPERA gives OMB authority to determine whether additional funding is needed to help resolve the noncompliance. In April 2018, OMB staff stated that they determined that no additional funding was needed for the 15 programs that were reported as noncompliant for 2 consecutive years, as of fiscal year 2016, and that they primarily rely on the IGs' recommendations in their annual IPERA compliance reports when making funding determinations. OMB staff subsequently stated that they no longer need to conduct a detailed review of the IGs' IPERA compliance reports to identify recommendations related to additional funding needs. Instead, OMB updated its guidance in June 2018 to direct agencies to submit proposals to OMB regarding additional funding needs to help address IPERA noncompliance and clarified that the funding determination process will unfold as part of the annual development of the President's Budget. As of September 2018, OMB was in the process of making funding determinations for 12 programs that were reported as noncompliant as of fiscal year 2017 and stated that any determinations made would be developed in the President's Budget for fiscal year 2020. GAO recommends that OMB update its guidance to specify other types of quality information that agencies with programs noncompliant for 3 or more consecutive years should include in their notifications to Congress, such as significant matters related to risks, issues, root causes, measurable milestones, designated senior officials, accountability mechanisms, and corrective actions or strategies planned or taken by agencies to achieve compliance. GAO provided a draft of this report to OMB and requested comments, and OMB said that it had no comments. GAO also provided a draft of this report to the 24 CFO Act agencies and their IGs and requested comments. In its written comments, the Social Security Administration (SSA) stated that it provided information on measurable milestones, designated senior officials, and accountability mechanisms in its agency financial report. However, SSA did not provide this information in its notifications to Congress for programs reported as noncompliant under IPERA as of fiscal year 2016. GAO believes that OMB should take steps to update OMB's guidance to help ensure that agencies report such significant information and include it in their notifications to Congress. In addition, several agencies and IGs provided technical comments, which were incorporated in the report as appropriate.", "document_type": "gao"}
{"report": "CFPB’s Research, Markets, and Regulations Division has primary responsibility for CFPB’s efforts to monitor market developments and risks to consumers and to retrospectively assess rules. As shown in figure 1, the division is composed of the Office of Research, the Office of Regulations, and the following four offices (collectively known as the “Markets Offices”), which are focused on different consumer financial markets: The Office of Card, Payment, and Deposit Markets monitors credit cards, deposit accounts, prepaid cards, and remittances, as well as other emerging forms of payment and related technologies, such as mobile payments and virtual currencies. It also monitors data aggregation services. The Office of Consumer Lending, Reporting, and Collection Markets monitors debt collection, debt relief, and consumer reporting and scoring, as well as student, auto, and the small-dollar and personal lending markets. The Office of Mortgage Markets monitors the mortgage markets, including originations, servicing, and secondary markets. The Office of Small Business Lending Markets monitors credit to small businesses, including traditional lenders, specialty financing, and emerging technologies. The four Markets Offices are responsible for collecting and sharing market intelligence, helping to shape CFPB policy (including through participation on rulemaking teams), and helping to inform the marketplace through research and outreach. The Office of Research is responsible for conducting research to support the design and implementation of CFPB’s consumer protection policies, including developing and writing any required cost-benefit analyses for rulemakings. Among other things, these offices research, analyze, and report on consumer financial markets issues. These offices also help inform the work of the Office of Regulations, which supports and provides strategic direction for CFPB’s rulemaking, guidance, and regulatory implementation functions. The Markets Offices and the Office of Research contribute to CFPB’s efforts to address the Dodd-Frank Act requirement that CFPB monitor for certain risks to consumers in support of its rulemaking and other functions. This provision states that CFPB may consider a number of factors in allocating its resources for risk-monitoring efforts with regard to consumer financial products and the markets for those products, such as consumers’ understanding of a type of product’s risks, the extent to which existing law is likely to protect consumers, and any disproportionate effects on traditionally underserved consumers. Further, the Dodd-Frank Act gives CFPB authority in connection with such monitoring to gather information from time to time regarding the organization, business conduct, markets, and activities of covered persons or service providers from a variety of sources, including several sources specified in the act. Finally, this provision requires CFPB to issue at least one report of significant findings from its risk monitoring each calendar year. The Office of Research has led CFPB’s efforts to address the Dodd-Frank Act requirement that CFPB conduct assessments of each significant final rule or order it adopts and publish a report of the assessment no later than 5 years after the rule or order’s effective date. Before publishing a report of its assessment, CFPB must invite public comment on whether the rule or order should be modified, expanded, or eliminated. In addition, the Dodd-Frank Act provides CFPB authority to require covered persons or service providers to provide information to help support these assessments, as well as to support its risk-monitoring activities. In addition to the Research, Markets, and Regulations Division, other CFPB divisions and offices conduct outreach to help inform CFPB policy making. For example, CFPB’s External Affairs Division facilitates conversation with stakeholders, such as Congress, financial institutions, state governments, and the public. In addition, in the Consumer Education and Engagement Division, the Office of Consumer Response manages the intake of and response to complaints about consumer financial products and services. All of the divisions report to the Director. In November 2017, the President designated a new Acting Director of CFPB, and in December 2018, the Senate voted to confirm a new Director of the bureau. To address the Dodd-Frank Act consumer risk-monitoring requirement, CFPB routinely monitors consumer financial markets through a variety of methods. It also conducts more targeted market monitoring to support rulemaking and other agency functions. CFPB collects and monitors routine market data and other market intelligence through a combination of internal and external data sources and outreach (see fig. 2). Markets Offices staff use information from these sources to analyze market trends and identify emerging risks that may require greater attention. Staff produce monthly and quarterly reports that summarize or analyze observed market developments and trends, and they distribute them bureau-wide. CFPB internal data and research. Staff in CFPB’s Markets Offices use CFPB data and research to identify and monitor risks. For example, in our review of CFPB’s market intelligence reports from July 2016 through July 2018, we observed the following frequently cited internal CFPB data sources: Consumer complaints submitted to CFPB. Markets Offices staff monitor consumer complaints to track trends and potential problems in the marketplace. For example, monthly mortgage trend reports we reviewed cited changes in total numbers of mortgage complaints, as well as in complaints related to private mortgage insurance, escrow accounts, and other mortgage-related topics. Consumer Credit Trends tool. This tool is based on a nationally representative sample of commercially available, anonymized credit records. Markets Offices staff use this tool to monitor conditions and outcomes for specific groups of consumers in markets for mortgages, credit cards, auto loans, and student loans. For example, CFPB monthly auto market trend reports cited the tool as a source for information on changes in the volume of auto loans by neighborhood income. Home Mortgage Disclosure Act data. CFPB maintains loan-level data that mortgage lenders report pursuant to the Home Mortgage Disclosure Act. According to CFPB, Markets Offices staff use the data for their market monitoring, which can include analysis to determine whether lenders are serving the housing needs of their communities and to identify potentially discriminatory lending patterns. External data and research. In addition to its internal databases, CFPB obtains external market data from a number of public and proprietary data sources. The market intelligence reports we reviewed included the following commonly cited external sources, among others: federal databases and research, such as the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit; publicly available information from sources such as industry websites, mainstream news publications, and publicly traded companies’ financial statements. proprietary data from sources such as data analytics services and credit reporting agencies. Engagement with industry representatives. CFPB also gathers market intelligence from engagement with industry representatives. Market intelligence reports we reviewed cited several meetings with industry representatives and regular CFPB attendance at industry conferences. Representatives of two trade groups we interviewed told us that CFPB had sometimes proactively reached out to them regarding areas of potential risk. According to CFPB, in fiscal year 2018, Markets Offices staff conducted an average of about 50 meetings with industry per month and held intelligence-gathering meetings across various consumer financial markets throughout the year. Engagement with consumer organizations. CFPB’s External Affairs Division, which is responsible for engagement with the nonprofit sector, facilitates most communication between Markets Offices staff and consumer organizations to help inform staff’s risk monitoring efforts. According to CFPB, between January and September 2018, staff from the External Affairs and Research, Markets, and Regulation divisions held an average of about four meetings per month with consumer organizations and nonprofit stakeholders, and Markets Offices staff said these meetings provided information useful in monitoring markets. Two of the three consumer organizations we interviewed noted that their communication with CFPB had decreased since late 2017. However, one group noted that external engagement has typically been greater when CFPB is going through a rulemaking and that rulemaking activity had slowed in the last year. Advisory committees and other formal outreach. CFPB obtains information on consumer financial issues and emerging market trends from various advisory groups and other formal outreach. In 2012, CFPB established a consumer advisory board, in accordance with a Dodd-Frank Act requirement. It also established three additional advisory councils (community bank, credit union, and academic) to obtain external perspectives on issues affecting its mission. The groups, which include subgroups focused on various consumer financial market areas or issues, met regularly through 2017. CFPB dismissed the existing members of the consumer advisory board and community bank and credit union advisory councils in June 2018 and reconstituted the groups with new, smaller memberships that resumed meeting in September 2018. In addition, from July 2016 to mid-November 2018, CFPB solicited public input through public field hearings and town hall meetings on issues such as debt collection, consumer access to financial records, and elder financial abuse, among other issues. Coordination with other regulators. CFPB engages with the federal prudential regulators and other federal and state agencies to inform its routine market-monitoring efforts. This engagement can occur through mechanisms such as working groups, task forces, and information- sharing agreements. For example, CFPB is a member of a working group of federal housing agencies, whose members share market intelligence and discuss risks they have observed in the mortgage markets. Markets Offices staff also receive quarterly, publicly available bank and credit union call report data through the Federal Financial Institutions Examination Council and the National Credit Union Administration, with which it has information-sharing agreements. CFPB has supplemented its routine monitoring by conducting targeted research and data collection to inform rulemaking efforts, meet statutory reporting requirements, and learn more about a particular market for consumer financial products. As noted earlier, the Dodd-Frank Act authorizes CFPB to collect certain data from covered persons and service providers. Since July 2016, to support bureau rulemaking efforts, Markets Offices staff have augmented their routine monitoring with targeted use of supervisory data collected through CFPB’s examinations of covered persons and service providers. The Research, Markets, and Regulations Division has a formal information-sharing agreement with CFPB’s Supervision, Enforcement, and Fair Lending Division. Under this agreement, staff in the Office of Small Business Lending Markets used supervisory information on common data terminology used by business lenders to inform recommendations on data elements that should be included in a potential small business data collection rule. In addition, as discussed below, Markets Offices staff reviewed aggregated and anonymized supervisory information from CFPB’s examinations of payday lenders for research that informed the November 2017 Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule, also referred to as the Payday Rule. In addition to rulemaking, CFPB has conducted targeted risk-monitoring activities to support certain statutory reporting requirements. For its mandated biennial credit card study, CFPB used its data-collection authorities under the Dodd-Frank Act to make four mandatory information requests to a total of 15 credit card issuers. According to CFPB officials, this study and other statutory reporting efforts—such as the bureau’s annual report on the Fair Debt Collection Practices Act—also support their market-monitoring efforts under the Dodd-Frank Act. CFPB notified the relevant federal and state regulators of its impending requests to the credit card issuers under those regulators’ supervision. Finally, CFPB has sometimes engaged in targeted data collection to learn more about specific areas of potential consumer financial risk. In some cases, CFPB has used its Dodd-Frank Act data collection authority under Section 1022 to require a company to provide data. For example, to understand developments with respect to person-to-person payments, CFPB required a payment processing company to provide certain information regarding its system. In other cases, CFPB has obtained targeted data through voluntary agreements with other regulators. For instance, in January 2018, CFPB reached an agreement with the Federal Reserve to obtain supervisory data on bank holding companies’ and intermediate holding companies’ mortgage and home equity loan portfolios. According to CFPB officials, they plan to use the data to monitor trends and risks in the mortgage market and inform bureau policy making. The market monitoring conducted by CFPB’s Markets Offices staff contributes to bureau rulemaking and other functions, such as supervision, guidance to industry, consumer education, and reporting. Rulemaking. Since July 2016, CFPB’s market-monitoring efforts have informed certain rulemaking efforts. For example, Markets Offices analysis of the small-dollar lending market informed CFPB’s November 2017 Payday Rule, according to staff and the proposed and final rules. Staff said they had found that some borrowers were caught in a cycle of using payday loan products without the ability to repay the loans. Under the final rule, lenders for certain loans must reasonably determine up front that borrowers can afford to make the payments on their loans without needing to re-borrow within 30 days, while still meeting their basic living and other expenses. In addition, CFPB’s November 2016 Prepaid Accounts Rule reflected market-monitoring information and other research that staff helped collect on prepaid accounts. The rule incorporated findings from CFPB’s 2014 analysis of prepaid account agreements, which CFPB conducted to understand the potential costs and benefits of extending existing regulatory provisions—such as error resolution protections—to such agreements. Further, CFPB’s market intelligence reports we reviewed from 2017 and 2018 reflected Markets Offices staff’s communication with industry regarding a debt-collection rule—a topic that has been on CFPB’s public rulemaking agenda since 2013, based in part on market-monitoring findings. Industry supervision and policy positions. Markets Offices staff’s market-monitoring findings have informed CFPB’s efforts to supervise institutions and communicate policy positions to industry participants. Staff assist the Supervision, Enforcement, and Fair Lending Division in its annual risk-based prioritization process. In 2018, for example, staff provided information on market size and risk for more than a dozen market areas, which helped the supervision division prioritize its coverage of those market areas in its examination schedule. Markets Offices staff told us they also have met frequently with supervision staff to share issues identified through monitoring and determine whether supervisory guidance or related actions would be appropriate to address them. Further, according to CFPB, market-monitoring information supported bureau leadership’s public statements on selected market developments and informed policy documents, such as consumer protection principles on financial technology. Consumer education. CFPB’s risk monitoring has informed its broader consumer education efforts. CFPB’s Consumer Education and Engagement Division provides financial education tools, including blogs and print and online guides on financial topics such as buying a home, choosing a bank or credit union, or responding to debt collectors. Markets Offices staff provided us with several examples of consumer education materials for which they had contributed subject-matter expertise since July 2016. Examples included a consumer advisory on credit repair services and blog posts on mortgage closing scams and tax refund advance loans. Public reports. CFPB’s market-monitoring findings have informed several of its public reports since July 2016. According to CFPB officials, when Markets Offices staff identify risks they think could be mitigated by public communications to consumers, they work with the Consumer Education and Engagement Division, as well as other divisions, to publish relevant material. As noted earlier, the Dodd-Frank Act requires CFPB to issue at least one report annually of significant findings from its monitoring of risks to consumers in the offering or provision of consumer financial products or services. CFPB officials stated that this requirement is addressed by the first section of CFPB’s semiannual reports to Congress, which discusses significant problems consumers face in shopping for or obtaining consumer financial products and services. CFPB officials further noted that other public CFPB reports include information related to risks to consumers and may also respond to the annual Dodd-Frank Act reporting requirement. For example, CFPB’s December 2017 biennial report on the consumer credit card market discussed credit card debt collection and persistent indebtedness faced by some consumers, among other consumer financial risks. In addition, CFPB’s quarterly consumer credit trend reports have discussed risks related to consumers financing auto purchases with longer-term loans. CFPB currently lacks a systematic, bureau-wide process for prioritizing financial risks facing consumers—using information from its market monitoring, among other sources—and for considering how it will use its tools to address those risks. In 2015, CFPB initiated such a process, but CFPB officials said that the most recent round of this process was completed in 2017 and that its leadership has not yet decided whether to continue using the process. In a February 2016 public report, CFPB described this process (which CFPB refers to internally as “One Bureau”) for deploying shared bureau-wide resources to address some of the most troubling problems facing consumers. According to the report, through this One Bureau process, CFPB prioritized problems that pose risks to consumers based on the extent of the consumer harm CFPB had identified and its capacity to eliminate or mitigate that harm. The report identified near-term priority goals in nine areas where CFPB hoped to make substantial progress within 2 years. It provided evidence of the nature or extent of risks facing consumers and described how CFPB planned to use its tools—such as rulemaking, supervision, enforcement, research, and consumer education—to address the priority goals. As part of the One Bureau process, CFPB created several cross-bureau working groups, which were focused on specific market areas and tasked with helping ensure progress toward CFPB’s near-term priority goals, among other responsibilities. The bureau revisited its stated priorities in June 2017 to guide its work through fiscal year 2018. However, officials said that while the working groups continue to facilitate communication, informal collaboration, and strategy-setting across the bureau, CFPB has not decided whether to engage in a third round of prioritization under the One Bureau process. The bureau was without a permanent Director from November 2017 until December 2018, when the Senate confirmed a new Director. CFPB officials told us that CFPB may revise its approach to prioritization under new leadership. Federal internal control standards state that management should use quality information to achieve agency objectives, such as by using quality information to make informed decisions. In addition, the standards state that management should identify, analyze, and respond to risks related to achieving the defined objectives. Through One Bureau, CFPB had a process to use the large amount of data and market intelligence it collected on consumer risks to make informed decisions about its bureau- wide policy priorities and how it would address them. CFPB has mechanisms in place for the Markets Offices to inform the work of individual divisions. For example, as noted, Markets Offices staff contribute to rulemaking efforts (including through participation on rulemaking teams) and to the annual setting of supervisory priorities. However, although the Markets Offices continue to collect market intelligence and contribute to cross-bureau working groups, CFPB currently lacks a process for systematically prioritizing risks or problems facing consumers and identifying the most effective tools to address those risks. CFPB officials noted that the bureau issued 12 requests for information in early 2018 to seek public input to inform its priorities. Topics covered by these requests for public input have included the bureau’s rulemaking process and its inherited and adopted rules. In an October 2018 statement, CFPB announced that it expected to publish an updated statement of rulemaking priorities by spring 2019 based on consideration of various activities, including its ongoing market monitoring and its analysis of the public comments from the requests for information. However, this prioritization effort focuses on setting rulemaking priorities and does not incorporate all of CFPB’s other tools to respond to consumer financial risks. While CFPB has continued to take steps to consider information to inform its policy priorities, a systematic, bureau-wide process to prioritize risks to consumers and consider how CFPB will use its full set of tools to address them could help to ensure that CFPB effectively focuses its resources on the most significant risks to consumers. This, in turn, could enhance CFPB’s capacity to meet its statutory consumer protection objectives. In two internal memorandums, CFPB documented an initial process for meeting the Dodd-Frank Act requirement to retrospectively assess significant rules or orders and issue reports of such assessments within 5 years of the rule or order’s effective date. According to CFPB officials, the bureau may modify the process for future work after it has completed its first three assessments. The assessments will be in addition to other regulatory reviews conducted by CFPB. To determine which of its final rules were significant for purposes of the Dodd-Frank Act retrospective assessment requirement, CFPB created a four-factor test. In applying this test, CFPB analyzes the rule’s 1. cumulative annual cost to covered persons of over $100 million, 2. effects on the features of consumer financial products and services, 3. effects on business operations of providers that support the product or 4. effects on the market, including the availability of consumer financial products and services. The memorandums recommended weighing the first factor more heavily and considering factors two through four cumulatively, so that high-cost rules tend to be considered significant. If a rule’s cumulative annual costs exceed $100 million, CFPB may consider the rule to be significant even if the cumulative effect from factors two through four is small. If the rule’s costs do not exceed $100 million, there must be a large cumulative effect from factors two through four for the rule to be considered significant. After applying the test to nine rules in early 2017, CFPB determined that three were significant for retrospective assessment purposes: Remittance Rule. This rule covers remittances, which are a cross- border transfer of funds. Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule). This rule covers consumers’ ability to repay mortgage loans and categories of mortgage loans that meet the ability-to-repay requirement (qualified mortgages). Real Estate Settlement Procedures Act (RESPA) Servicing Rule. This rule covers loan servicing requirements under RESPA. CFPB staff told us that in the future they plan to apply the four-factor test to rules not already subject to an assessment within 3 years of the rules’ effective dates, pending new leadership’s review of the test. As of November 2018, staff told us they had not yet formally applied the test to any additional rules. However, they told us that they plan to apply the test to the TILA-RESPA Integrated Disclosure Rule in 2019. If CFPB determines that the rule is significant, CFPB officials said they plan to complete an assessment in late 2020. In addition to outlining the four-factor test, a March 2016 memorandum documented CFPB’s decision to generally focus any significant new data collection efforts on a rule’s effects on consumer and market-wide outcomes rather than effects on businesses. In the memorandum, CFPB noted that the objectives of many of its rules focus on improved consumer experiences and outcomes, such as reductions in loan-default risk and improved access to financial product information and credit. However, the memorandum also noted that CFPB would assess outcomes for businesses when data were available at minimal cost. In addition, the memorandum explained that CFPB would consider spending additional resources to collect data on business outcomes under certain conditions, such as when unfavorable outcomes for businesses could meaningfully affect significant numbers of consumers. Although CFPB stated in its March 2016 memorandum that it did not plan to formally assess the previously mentioned three rules’ costs or benefits to providers, it stated in its October 2018 Remittance Rule Assessment Report that it may reconsider that decision for future rule assessments. In the March 2016 memorandum, CFPB also documented a decision to not make specific policy recommendations in the final reports for the retrospective assessments. CFPB expects the findings from its final assessment reports to inform its policy development process, through which it makes decisions about future rulemaking efforts. In the March 2016 memorandum, CFPB explained that separating the assessments from policy recommendations would keep the assessments focused on evidence-based descriptions. As previously described, CFPB also issued requests for information to obtain public input on effects of its inherited and adopted rules, in addition to the required retrospective assessments. CFPB staff stated that they plan to use the lessons learned from the initial assessment process to inform their procedures for future assessments. According to CFPB, a future procedures document is to outline its process for the retrospective assessments required by the Dodd-Frank Act as well as for similar assessments CFPB may conduct pursuant to other statutes or executive orders. For each of the three rules it determined to be significant, CFPB created detailed assessment plans and a timeline for completion (see table 1). Each plan defined which aspects of the rules the assessment would focus on; outlined the scope and methodology, including challenges for the assessment and potential limitations of methodology; and identified data CFPB planned to gather and compile, including CFPB’s own and third-party data, and explained how the data will be used to evaluate the effects of the rule. CFPB issued requests for information between March and June of 2017 to collect public input on each assessment and created plans for incorporating the comments in each assessment report. As required by the Dodd-Frank Act, these requests solicited comments on modifying, expanding, or eliminating the rules. In addition, CFPB requested comments on the assessment plans and invited suggestions on other data that might be useful for evaluating the rules’ effects. In a document provided to us, CFPB described its preliminary plan to summarize comments received from the public and use the information received. CFPB staff told us they adjusted their research questions and data sources on all three assessments in response to comments. For example, based on comments, they added a question to an industry survey about a provision of the Remittance Rule and incorporated a new data source into the ATR/QM Rule and RESPA Servicing Rule assessments. Other data sources used for the assessments include federal and state agencies, voluntary surveys of providers of consumer financial products, and loan data from servicers. For example, for the Remittance Rule assessment, CFPB sent a voluntary industry survey to 600 money transmitters, banks, and credit unions on how the rule has affected their business practices and costs, as well as potential problems in specific market segments. For the RESPA Servicing Rule assessment, CFPB conducted qualitative structured interviews with mortgage servicers to learn about changes servicers had to make in response to the rule. CFPB published its Remittance Rule Assessment Report in October 2018. The report analyzed trends in the volume of remittance transfers, the number of providers, and the price of transfers. For example, CFPB found that declining remittance prices and an increase in the volume of remittances—trends that had begun before the rule’s effective date— continued afterward. However, CFPB was unable to conclude whether these trends would have changed without the rule. In addition, the report noted that new technology has increased access to remittances but has also complicated CFPB’s attempts to measure the effects of the Remittance Rule on consumers. The report also estimated the rule’s initial and continued compliance costs for businesses, estimating that they added between 30 and 33 cents for the one-time cost in 2014 and between 7 and 37 cents in continuing costs per remittance in 2017. In addition, the report summarized comments and information CFPB received from a request for information in March 2017. In monitoring risks of financial products and services to consumers, CFPB has drawn from a wide range of sources, and its findings have informed its key consumer protection tools, such as rulemakings and consumer education materials. In 2016 and 2017, CFPB’s One Bureau process allowed it to consider the market information it collected to prioritize the most important risks to consumers and determine how to most effectively address those risks on a bureau-wide basis. However, CFPB has not yet decided whether to use the One Bureau process to reexamine its priorities and has instead relied on prioritization mechanisms that focus on its use of individual policy tools, such as its processes for setting rulemaking and supervision priorities. Putting a systematic bureau-wide prioritization process in place could help CFPB ensure that it focuses on the most significant risks to consumers and effectively meets its statutory consumer protection objectives. The Director of CFPB should implement a systematic process for prioritizing risks to consumers and considering how to use the bureau’s available policy tools—such as rulemaking, supervision, enforcement, and consumer education—to address these risks. Such a process could incorporate principles from the prior One Bureau process, such as an assessment of the extent of potential harm to consumers in financial markets, to prioritize the most significant risks. (Recommendation 1) We provided a draft of this product to CFPB for comment. We also provided the relevant excerpts of the draft report to the Federal Housing Finance Agency, the Federal Reserve, and the Office of the Comptroller of the Currency for their review and technical comments. CFPB provided oral and written comments, which are summarized below. CFPB’s written comments are reproduced in appendix I. In addition, CFPB and the Federal Housing Finance Agency provided technical comments, which we incorporated as appropriate. The Federal Reserve and the Office of the Comptroller of the Currency had no comments. In oral comments provided on November 29, 2018, CFPB’s Acting Deputy Director and other CFPB officials clarified the status of the One Bureau process. The officials clarified that while CFPB officials had previously told us that the One Bureau process was on hold, work on One Bureau priorities has continued with support from a set of cross-bureau working groups. The officials noted that CFPB had not yet determined whether to engage in another round of the One Bureau priority-setting process. In addition, in its written comments, CFPB highlighted the role of the cross- bureau working groups in its market monitoring and other efforts. In response to these comments, we made edits to clarify the status of the One Bureau process and describe the role of the cross-bureau working groups. In its written comments, CFPB did not agree or disagree with our recommendation but stated that it will endeavor to improve its processes for identifying and addressing consumer financial risks. CFPB stated that it recognizes the importance of having processes in place to prioritize and address risks to consumers in the financial marketplace. CFPB cited examples of existing processes—such as its processes for setting its rulemaking agenda and supervisory priorities—that were designed to ensure that its risk monitoring informs its work. In the oral comments, CFPB officials expressed concern that the draft report’s characterization of a lack of a systematic process for prioritizing risks to consumers might suggest that CFPB entirely lacks processes in this regard. We note that the draft report described CFPB’s existing processes for setting rulemaking and supervisory priorities. While we agree that these processes help CFPB to prioritize work in these areas, we maintain that these processes do not reflect a systematic, bureau-wide process for prioritizing risks to consumers and determining how to most effectively address them. We made minor edits to the report to clarify that the process CFPB lacks is a bureau-wide process that considers how it will use its full set of tools to address risks to consumers. We maintain that having such a process would help to ensure that CFPB focuses its resources on the most significant consumer risks and is well positioned to meet its consumer protection objectives. We are sending copies of this report to CFPB, the Federal Housing Finance Agency, the Federal Reserve, the Office of the Comptroller of the Currency, the appropriate congressional committees and members, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8678 or clementsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact above, John Fisher (Assistant Director), Lisa Reynolds (Analyst-in-Charge), Bethany Benitez, Joseph Hackett, Marc Molino, Jennifer Schwartz, and Tyler Spunaugle made key contributions to this report.", "summary": "The Dodd-Frank Act created CFPB to regulate the provision of consumer financial products and services. Congress included a provision in statute for GAO to study financial services regulations annually, including CFPB’s related activities. This eighth annual report examines steps CFPB has taken to (1) identify, monitor, and report on risks to consumers in support of its rulemakings and other functions and (2) retrospectively assess the effectiveness of certain rules within 5 years of their effective dates. GAO reviewed CFPB policies and procedures, internal and public reports, and memorandums documenting key decisions, assessment plans, and requests for public comment. GAO also interviewed officials from CFPB, three federal agencies with which it coordinated, and representatives of consumer and industry groups. In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Consumer Financial Protection Bureau (CFPB) has routinely monitored the consumer financial markets to identify potential risks to consumers related to financial products and services. CFPB monitors consumer complaints, analyzes market data, and gathers market intelligence from external groups (see figure for sources of CFPB’s monitoring). CFPB has used risk-monitoring findings to inform its rulemakings, supervision, and other functions. In 2015, CFPB initiated a bureau-wide process for using market data and other information to set policy priorities related to addressing risks to consumers. However, CFPB has not yet decided whether it will continue to use this process to set priorities. CFPB currently lacks a systematic, bureau-wide process for prioritizing financial risks to consumers and considering how it will use its tools—such as rulemaking, supervision, and consumer education—to address them. Federal internal control standards state that management should use quality information to achieve agency objectives and that it should also identify, analyze, and respond to risks related to achieving those objectives. Implementing a bureau-wide prioritization process could help to ensure that CFPB effectively focuses its resources on the most significant financial risks to consumers and enhances its ability to meet its statutory consumer protection objectives. CFPB has taken steps to retrospectively assess its significant rules within 5 years of these rules becoming effective, as required by the Dodd-Frank Act. CFPB developed and applied criteria to identify three rules as significant and requiring a retrospective assessment. For these three rules, CFPB created assessment plans, issued public requests for comment and information, and reached out to external parties for additional data and evidence. In October 2018, CFPB issued its first assessment report on a rule related to cross-border money transfers. Among other things, the report found that certain trends, such as increasing volume of these transfers, continued after the rule took effect. CFPB expects to complete the other two assessments by the January 2019 deadline. GAO recommends that CFPB implement a systematic process for prioritizing risks to consumers and considering how to use its available policy tools—such as rulemaking, supervision, enforcement, and consumer education—to address these risks. CFPB did not agree or disagree with the recommendation but agreed with the importance of having processes in place to prioritize and address consumer financial risks.", "document_type": "gao"}
{"report": "We found that from October 2013 through March 2017, the five selected VA medical centers required reviews of a total of 148 providers’ clinical care after concerns were raised about their care, but officials at these medical centers could not provide documentation to show that almost half of these reviews were conducted. We found that all five VA medical centers lacked at least some documentation of the reviews they told us they conducted, and in some cases, we found that the required reviews were not conducted at all. Specifically, across the five VA medical centers, we found the following: The medical centers lacked documentation showing that one type of review—focused professional practice evaluations (FPPE) for cause—had been conducted for 26 providers after concerns had been raised about their care. FPPEs for cause are reviews of providers’ care over a specified period of time, during which the provider continues to see patients and has the opportunity to demonstrate improvement. Documentation of these reviews is explicitly required under VHA policy. Additionally, VA medical center officials confirmed that FPPEs for cause that were required for another 21 providers were never conducted. The medical centers lacked documentation showing that retrospective reviews—which assess the care previously delivered by a provider during a specific period of time— had been conducted for 8 providers after concerns had been raised about their clinical care. One medical center lacked documentation showing that reviews had been conducted for another 12 providers after concerns had been raised about their care. In the absence of any documentation, we were unable to identify the types of reviews, if any, that were conducted for these 12 providers. We also found that the five selected VA medical centers did not always conduct reviews of providers’ clinical care in a timely manner. Specifically, of the 148 providers, the VA medical centers did not initiate reviews of 16 providers for 3 months, and in some cases, for multiple years, after concerns had been raised about the providers’ care. In a few of these cases, additional concerns about the providers’ clinical care were raised before the reviews began. We found that two factors were largely responsible for the inadequate documentation and untimely reviews of providers’ clinical care we identified at the selected VA medical centers. First, VHA policy does not require VA medical centers to document all types of reviews of providers’ clinical care, including retrospective reviews, and VHA has not established a timeliness requirement for initiating reviews of providers’ clinical care. Second, VHA’s oversight of the reviews of providers’ clinical care is inadequate. Under VHA policy, networks are responsible for overseeing the credentialing and privileging processes at their respective VA medical centers. While reviews of providers’ clinical care after concerns are raised are a component of credentialing and privileging, we found that none of the network officials we spoke with described any routine oversight of such reviews. This may be in part because the standardized tool that VHA requires the networks to use during their routine audits does not direct network officials to ensure that all reviews of providers’ clinical care have been conducted and documented. Further, some of the VISN officials we interviewed told us they were not using the standardized audit tool as required. Without adequate documentation and timely completion of reviews of providers’ clinical care, VA medical center officials lack the information they need to make decisions about providers’ privileges, including whether or not to take adverse privileging actions against providers. Furthermore, because of its inadequate oversight, VHA lacks reasonable assurance that VA medical center officials are reviewing all providers about whom clinical care concerns have been raised and are taking adverse privileging actions against the providers when appropriate. To address these shortcomings, we recommended that VHA 1) require documentation of all reviews of providers’ clinical care after concerns have been raised, 2) establish a timeliness requirement for initiating such reviews, and 3) strengthen its oversight by requiring networks to oversee VA medical centers to ensure that such reviews are documented and initiated in a timely manner. VA concurred with these recommendations and described plans for VHA to revise existing policy and update the standardized audit tool used by the networks to include more comprehensive oversight of VA medical centers’ reviews of providers’ clinical care after concerns have been raised. We found that from October 2013 through March 2017, the five VA medical centers we reviewed had only reported one of nine providers required to be reported to the NPDB under VHA policy. These nine providers either had adverse privileging actions taken against them or resigned or retired while under investigation before an adverse privileging action could be taken. None of these nine providers were reported to state licensing boards as required by VHA policy. The VA medical centers documented that these nine providers had significant clinical deficiencies that sometimes resulted in adverse outcomes for veterans. For example, the documentation shows that one provider’s surgical incompetence resulted in numerous repeat surgeries for veterans. Another provider’s opportunity to improve through an FPPE for cause had to be halted and the provider was removed from providing care after only a week due to concerns that continuing the review would potentially harm patients. In addition to these nine providers, one VA medical center terminated the services of four contract providers based on deficiencies in the providers’ clinical performance, but the facility did not follow any of the required steps for reporting providers to the NPDB or relevant state licensing boards. This is concerning, given that the VA medical center documented that one of these providers was terminated for cause related to patient abuse after only 2 weeks of work at the facility. Two of the five VA medical centers we reviewed each reported one provider to the state licensing boards for failing to meet generally accepted standards of clinical practice to the point that it raised concerns for the safety of veterans. However, we found that the medical centers’ reporting to the state licensing board took over 500 days to complete in both cases, which was significantly longer than the 100 days suggested in VHA policy. Across the five VA medical centers, we found that providers were not reported to the NPDB and state licensing boards as required for two reasons. First, VA medical center officials were generally not familiar with or misinterpreted VHA policies related to NPDB and state licensing board reporting. For example, at one VA medical center, we found that officials failed to report six providers to the NPDB because they were unaware that they had been delegated responsibility for NPDB reporting. Officials at two other VA medical centers incorrectly told us that VHA cannot report contract providers to the NDPB. At another VA medical facility, officials did not report a provider to the NPDB or to any of the state licensing boards where the provider held a medical license because medical center officials learned that one state licensing board had already found out about the issue independently. Therefore, VA officials did not believe that they needed to report the provider. This misinterpretation of VHA policy meant that the NPDB and the state licensing boards in other states where the provider held licenses were not alerted to concerns about the provider’s clinical practice. Second, VHA policy does not require the networks to oversee whether VA medical centers are reporting providers to the NPDB or state licensing boards when warranted. We found, for example, that network officials were unaware of situations in which VA medical center officials failed to report providers to the NPDB. We concluded that VHA lacks reasonable assurance that all providers who should be reported to these entities are reported. VHA’s failure to report providers to the NPDB and state licensing boards as required facilitates providers who provide substandard care at one facility obtaining privileges at another VA medical center or at hospitals outside of VA’s health care system. We found several cases of this occurring among the providers who were not reported to the NPDB or state licensing boards by the five VA medical centers we reviewed. For example, we found that two of the four contract providers whose contracts were terminated for clinical deficiencies remained eligible to provide care to veterans outside of that VA medical center. At the time of our review, one of these providers held privileges at another VA medical center, and another participated in the network of providers that can provide care for veterans in the community. We also found that a provider who was not reported as required to the NPDB during the period we reviewed had their privileges revoked 2 years later by a non-VA hospital in the same city for the same reason the provider was under investigation at the VA medical center. Officials at this VA medical center did not report this provider following a settlement agreement under which the provider agreed to resign. A committee within the VA medical center had recommended that the provider’s privileges be revoked prior to the agreement. There was no documentation of the reasons why this provider was not reported to the NPDB under VHA policy. To improve VA medical centers’ reporting of providers to the NPDB and state licensing boards and VHA oversight of these processes, we recommended that VHA require its networks to establish a process for overseeing VA medical centers to ensure they are reporting to the NPDB and to state licensing boards and to ensure that this reporting is timely. VA concurred with this recommendation and told us that it plans to include oversight of timely reporting to the NPDB and state licensing boards as part of the standard audit tool used by the networks. If you or your staff members have any questions concerning this testimony, please contact me at (202) 512-7114 (williamsonr@gao.gov). Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Marcia A. Mann (Assistant Director), Kaitlin M. McConnell (Analyst-in-Charge), Summar C. Corley, Krister Friday, and Jacquelyn Hamilton. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's November 2017 report, entitled VA Health Care: Improved Policies and Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns ( GAO-18-63 ). Department of Veterans Affairs (VA) medical center (VAMC) officials are responsible for reviewing the clinical care delivered by their privileged providers—physicians and dentists who are approved to independently perform specific services—after concerns are raised. The five VAMCs GAO selected for review collectively required review of 148 providers from October 2013 through March 2017 after concerns were raised about their clinical care. GAO found that these reviews were not always documented or conducted in a timely manner. GAO identified these providers by reviewing meeting minutes from the committee responsible for requiring these types of reviews at the respective VAMCs, and through interviews with VAMC officials. The selected VAMCs were unable to provide documentation of these reviews for almost half of the 148 providers. Additionally, the VAMCs did not start the reviews of 16 providers for 3 months to multiple years after the concerns were identified. GAO found that VHA policies do not require documentation of all types of clinical care reviews and do not establish timeliness requirements. GAO also found that the Veterans Health Administration (VHA) does not adequately oversee these reviews at VAMCs through its Veterans Integrated Service Networks (VISN), which are responsible for overseeing the VAMCs. Without documentation and timely reviews of providers' clinical care, VAMC officials may lack information needed to reasonably ensure that VA providers are competent to provide safe, high quality care to veterans and to make appropriate decisions about these providers' privileges. GAO also found that from October 2013 through March 2017, the five selected VAMCs did not report most of the providers who should have been reported to the National Practitioner Data Bank (NPDB) or state licensing boards (SLB) in accordance with VHA policy. The NPDB is an electronic repository for critical information about the professional conduct and competence of providers. GAO found that selected VAMCs did not report to the NPDB eight of nine providers who had adverse privileging actions taken against them or who resigned during an investigation related to professional competence or conduct, as required by VHA policy, and none of these nine providers had been reported to SLBs. GAO found that officials at the selected VAMCs misinterpreted or were not aware of VHA policies and guidance related to NPDB and SLB reporting processes resulting in providers not being reported. GAO also found that VHA and the VISNs do not conduct adequate oversight of NPDB and SLB reporting practices and cannot reasonably ensure appropriate reporting of providers. As a result, VHA's ability to provide safe, high quality care to veterans is hindered because other VAMCs, as well as non-VA health care entities, will be unaware of serious concerns raised about a provider's care. For example, GAO found that after one VAMC failed to report to the NPDB or SLBs a provider who resigned to avoid an adverse privileging action, a non-VA hospital in the same city took an adverse privileging action against that same provider for the same reason 2 years later.", "document_type": "gao"}
{"report": "DOD uses working capital funds to focus management’s attention on the total costs of carrying out critical business operations and encourage DOD support organizations to provide quality goods and services at the lowest cost. The ability of working capital funds to operate on a break- even basis depends on accurately projecting workload, estimating costs, and setting rates to recover the full costs of producing goods and services. Generally, customers use appropriated funds to finance orders placed with working capital funds. DOD sets the rates charged for goods and services during the budget preparation process, which generally occurs approximately 18 months before the rates go into effect. To develop rates, working capital fund managers review projected costs such as labor and materials, as well as projected customer requirements. The rates are intended to remain fixed during the fiscal year in accordance with DOD policy. DOD’s stabilized price policy serves to protect customers from unforeseen inflationary increases and other cost uncertainties and better assures customers that they will not have to reduce programs to pay for potentially higher-than- anticipated prices. Because working capital fund managers base rates charged on assumptions formulated in advance of rates going into effect, some variance is expected between projected and actual costs and revenues. The TWCF is dedicated to TRANSCOM’s mission to provide air, land, and sea transportation for DOD in times of peace and war, with a primary focus on wartime readiness. Specifically, TWCF is used to provide air transportation and services for passengers or cargo in support of DOD operations or along established routes. The TWCF is also used to finance Air Force and joint training requirements. Examples of joint capabilities supported by the TWCF are depicted in figure 2. The TWCF uses rates for airlift services that do not cover the full cost of airlift operations. The military services may choose between TRANSCOM and commercial service providers along established routes. Thus, fund managers set rates for some airlift services to remain competitive with commercial airlift carriers, which historically, do not result in revenue sufficient to cover the full cost of airlift operations. DOD must maintain airlift capacity and must remain ready and available to support mobilization for war and contingencies. Providing an incentive for customers to use DOD airlift capacity helps TRANSCOM maintain military airlift capabilities not available from commercial providers. TWCF cash balances are managed as a component of the Air Force Working Capital Fund. Although the TWCF is managed on a day-to-day basis by TRANSCOM, it is part of the Air Force Working Capital Fund for cash management purposes. The relationship of the TWCF to the Air Force Working Capital Fund provides a cash management benefit. According to Air Force officials, retaining the TWCF within the Air Force Working Capital Fund for cash management purposes provides flexibility while minimizing the need for additional funding. According to month-end cash balance data, the TWCF has been able to operate using cash available in the Air Force Working Capital Fund when no funds were available in the TWCF. For example, the TWCF month-end cash balance was negative fifteen times during fiscal years 2007-2017, but there was sufficient cash in the Air Force Working Capital Fund to allow the TWCF to continue to operate and execute its missions. For more information on the cash balances of the Air Force Working Capital Fund and the TWCF see appendix II. Multiple DOD organizations have roles in managing various aspects of the TWCF: The Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer is generally responsible for coordinating DOD budget preparation, issuing guidance, issuing working capital fund annual financial reports, and overseeing the implementation of working capital funds across DOD. The Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer is also responsible for approving rates developed for the budget process and charged to the military services. The Air Force assumed responsibility for TWCF cash management in fiscal year 1998 and the TWCF cash balance is included in the Air Force Working Capital Fund cash balance. The Air Force is also responsible for developing Operations and Maintenance budget requests that include requests for funds to pay TRANSCOM for airlift services financed through the TWCF and the ARA. The Assistant Secretary of the Air Force (Financial Management and Comptroller) is responsible for directing and managing all comptroller, programming, and financial management functions, activities, and operations of the Air Force. TRANSCOM is responsible for the day-to-day financial management of the TWCF and has financial reporting responsibility for the TWCF, including setting rates for airlift services. TRANSCOM is also responsible for providing defense components with transportation services to meet national security needs; providing guidance for forecasting; and providing guidance for the standardization of rates, regulations, operational policies, and procedures. Air Mobility Command is a major Air Force command and is responsible to TRANSCOM for providing airlift services paid for by the TWCF. To fulfill its responsibility for providing airlift services to defense components, TRANSCOM and Air Mobility Command use a combination of military and commercial aircraft. The Air Force requested, allotted, and expended billions of dollars for ARA for fiscal years 2007 through 2017. These amounts varied annually, in some cases, by hundreds of millions of dollars. Our analysis of Air Force and TRANSCOM budget and financial information showed that for fiscal years 2007 through 2017, the Air Force requested $2.8 billion from Congress for ARA requirements, as part of its annual Operations and Maintenance appropriation. The Air Force allotted $2.8 billion (i.e., directed the use of the appropriated funds) and expended $2.4 billion of the ARA appropriated funds). During this period, the total allotted amount was about $400 million dollars more than the expended amount. According to Air Force officials, this $400 million was used to pay for other Air Force readiness priorities. ARA amounts requested, allotted, and expended for fiscal years 2007 through 2017 are shown in figure 3. In five fiscal years (2008-2009, 2013-2014, and 2017) the Air Force allotted less than the amount ultimately expended for the ARA. In these fiscal years, Air Force officials stated that they used available Operations and Maintenance appropriations to support the ARA. For example, in fiscal year 2013, the Air Force requested and allotted less than a million dollars for the ARA. However, the Air Force expended $294 million for the ARA in fiscal year 2013. According to Air Force officials, the Air Force used Air Force Operation and Maintenance mobilization funding to provide the ARA funds to the TWCF to cover this gap. Furthermore, in five fiscal years (2010-2012 and 2015-2016) the Air Force did not expend the total amounts allotted for the ARA, because the allotments exceeded ARA funding needs. According to Air Force officials, they expended amounts initially allotted for ARA requirements to support other readiness priorities, such as training and sustainment requirements. For additional information related to TWCF costs and revenues for airlift services see appendix III. Based on our analysis and interviews with Air Force and TRANSCOM officials, we determined that the Air Force’s ARA budget request, the ARA amount allotted, and the amount expended by the Air Force can vary for a number of reasons. For example, Workload variations occurred due to changes in the global security environment, natural disasters, and force structure changes: For example, in fiscal year 2010, airlift services workload increased 8 percent over the previous year’s level and 39 percent over budgeted levels as a result of force structure changes in Iraq and Afghanistan. This occurred because during fiscal year 2010 the number of U.S. armed forces personnel in Iraq declined by about 81,000, and the number of U.S. armed forces personnel in Afghanistan increased by about 34,000. These changes required additional airlift services, and resulted in more revenue than was originally estimated for the TWCF. The TWCF also received additional funding from the military services to offset increased fuel costs. As a result, TRANSCOM did not issue a bill for the ARA for fiscal year 2010, and the Air Force used the $262 million allotted for ARA requirements for other readiness priorities. ARA budget requests and subsequent expenditures in the fiscal year of availability may be affected by other revenue sources: From fiscal years 2007 through 2017, the TWCF received $6.5 billion from other revenue sources, such as amounts from cash recovery charges, fuel supplement charges, and cash transfers from the Air Force. For example, cash recovery charges were paid by the military services, including the Air Force, using Overseas Contingency Operations funding to cover cash shortages in the TWCF in the early part of the Global War on Terrorism. TRANSCOM charged its customers cash recovery charges in fiscal years 2007 through 2014, with the exception of 2010. ARA expenditures in the fiscal year of availability may be more or less than budgeted: For example, in fiscal year 2015, TRANSCOM did not receive revenue from other sources, resulting in the Air Force expending $404 million dollars more from its Operations and Maintenance funds than requested to cover the ARA bill for that fiscal year. On the other hand, in the fiscal year 2016 Air Force Operations and Maintenance budget request, the Air Force requested $657 million for the ARA, and subsequently allotted $406 million to the ARA—about $251 million less than requested. This occurred because the cost of fuel declined in fiscal year 2016, and TRANSCOM did not bill the Air Force for the full amount allotted for ARA by the Air Force. As a result, the Air Force contributed $122 million of the $406 million to the TWCF and used the remaining available amount for other readiness priorities. DOD and its components have considerable flexibility in using Operation and Maintenance funds and can redesignate funds appropriated among activity and subactivity groups in various ways. Air Force budget requests include some information on the ARA but omit details provided in budget requests prior to fiscal year 2010. Air Force budget officials stated the ARA budget information that was included for fiscal years 2007 through 2009 was changed for the fiscal year 2010 budget request as part of a DOD initiative to reduce the overall number of budget line items. For fiscal years 2007 through 2009 Air Force Operations and Maintenance budget requests, the amounts requested by the Air Force for the ARA were explicitly stated in the budget justification documents as part of a separate subactivity group line item. For fiscal years 2010 through 2017, the ARA amount was bundled with funding requests for other training requirements in the Air Force Operations and Maintenance budget justification documents, thus omitting specific details with respect to the ARA. Specifically, Air Force budget justification materials included the amount the ARA changed from one fiscal year to the next, but did not include the total ARA amount. In the annual President’s budget request submission, DOD requests specific amounts for Operations and Maintenance activities and includes information about (1) amounts for the next fiscal year for which estimates are submitted, (2) revisions to the amounts for the fiscal year in progress, and (3) reports on the actual amounts allotted to a particular activity or subactivity for the last completed fiscal year. The Standards for Internal Control in the Federal Government state that management should communicate the necessary quality information (internally and externally). According to Air Force budget officials there is no requirement from the Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer to separately identify the ARA amount and related details in the Air Force Operations and Maintenance annual budget requests. Nevertheless, officials from the Air Force and the Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer agreed that it would be helpful to include additional information in the budget, because of DOD and congressional interest. Without establishing specific requirements to present detailed ARA information in the annual Air Force Operations and Maintenance budget request, DOD and congressional decision-makers do not have sufficient information to make informed decisions about the level of funding necessary to cover airlift costs not recovered by the rates charged by TRANSCOM. TRANSCOM has not provided ARA estimates in time to inform Air Force budget requests. Air Force officials stated that they need to have TRANSCOM’s estimates by mid-June to be able to conduct analysis to strengthen confidence in the ARA budget request and obtain senior leadership approval. The Air Force submits its Operations and Maintenance annual budget request to DOD in early July. However, TRANSCOM was not providing its ARA estimate until August. As a result, Air Force officials stated they have been developing their own ARA estimate based on historical average trends because they have not received information from TRANSCOM on time. TRANSCOM and Air Force officials agree that TRANSCOM—as the provider of transportation services—is in the best position to understand transportation workload demands. The Standards for Internal Control in the Federal Government state that management should use quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis to achieve the entity’s objectives. Furthermore, management should use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks and should design control activities, such as policies, procedures, techniques, and mechanisms as needed to enforce management’s directives. In October 2017, Air Force and TRANSCOM officials told us they were working on a memorandum of understanding to improve the timing and communication of budgetary information from TRANSCOM to support the Air Force ARA budget request. Officials stated that the memorandum of understanding is expected to be completed by the end of fiscal year 2018. However, in May 2018, the draft memorandum that the Air Force provided for our review consisted of a 2-page template with a list of potential topics, and no substantive details regarding formalizing processes. Without developing sufficient detail on the formal processes and subsequently finalizing the memorandum of understanding, the Air Force and TRANSCOM will not be able to reasonably assure that the timing and communication of budgetary information from TRANSCOM are sufficient to support the Air Force Operations and Maintenance ARA annual budget request. TRANSCOM has a rate-setting process for airlift services, but producing accurate workload forecasts is challenging. Our analysis of TRANSCOM data showed that the airlift forecasting process produced increasingly inaccurate projections of actual workload. Producing accurate forecasts is challenging because TRANSCOM has not fully implemented: (1) an effective process to gather workload projections from customers, (2) forecasting goals and metrics and the review of its performance, and (3) an action plan to improve workload forecasts. TRANSCOM has a rate-setting process for airlift services that is generally established to be competitive with commercial airlift services, according to DOD guidance. Specifically, TRANSCOM operates five categories of airlift services, and according to documents and TRANSCOM officials the rate-setting process for each category is as follows: Channel Cargo rates apply to military air cargo along established routes. The rates for this category generally cover about 65 percent of the cost to provide airlift cargo services, and do not vary based on the type of aircraft used. Rates are benchmarked against commercial prices based on the weight of cargo using the following step-by-step process. Initially, International Heavyweight Air Tender price data from the prior year are checked for commercial rates on various routes. If no data are available for some routes, data from the closest country are used to develop average country-to-country rates or a weighted average when there is more than one country-to-country combination. Once rates are developed they are adjusted based on budget exhibits. The TRANSCOM Operations and Plans directorate is responsible for Channel Cargo forecasts to inform rate-setting for this category of service. Channel Passenger rates apply when military and civilian passengers are flying on established routes. The rates are benchmarked against commercial prices, recover about 85 percent of costs, and do not vary based on the type of aircraft used. Channel passenger rate-setting guidance also uses a step-by-step process. General Services Administration city pairs are checked for comparable prices. If no General Services Administration rate is found, the Defense Travel System is checked. If the Defense Travel System does not have a rate, online travel websites are checked. If the online travel sites do not have a rate, then a prior standard rate per mile for that route is adjusted based on budget exhibits. The TRANSCOM Strategic Plans, Policy, and Logistics directorate is responsible for channel passenger forecasts to inform rate-setting. Special Assignment Airlift Missions/Contingency rates apply for the use of full-plane charters performing and providing exclusive services for specific users. Rates are generally determined by the type of aircraft and those rates recover about 91 percent of costs for military aircraft and 100 percent of costs for commercial aircraft. Flight hour rates for military aircraft, flight length (miles), and capacity used for commercial aircraft are considered in the rate determinations. The TRANSCOM Operations and Plans Directorate is responsible for Special Assignment Airlift Missions/Contingency workload forecasts to inform rate-setting for this category of service. Joint Exercise Transportation Program rates apply to airlift services in support of realistic operational joint training. Rates are generally set in the same manner as the rates for the Special Assignment Airlift Missions/Contingency category, except that the TRANSCOM Operations and Plans Directorate is responsible for workload forecasting for the Joint Exercise Transportation Program. Training rates apply to those activities used to conduct programmed flying training, which generally includes a required number of sorties, flying hours, and aircrew training to support readiness. Rates are set to recover 100 percent of the recorded costs because the Air Force is the sole customer for these missions, according to TRANSCOM and Air Force officials. Training rates are generally based on the type of aircraft, and the cost per flight hour. According to TRANSCOM officials, the Air Mobility Command Air, Space and Information Operations Directorate is responsible for the flying hour model that determines requirements for this category of airlift services. TRANSCOM produces a forecast of its airlift workload to inform the development of the ARA budget request. According to TRANSCOM’s guidance, workload forecasts are to be developed using future demand derived from a combination of statistical methods and necessary adjustments for expected operational conditions. The basic principles used for workload forecasting are generally the same for all five categories of airlift services. According to TRANSCOM officials, forecasting methods are applied with some variation. This practice is allowed under the forecasting instruction, depending on the category, and which TRANSCOM or Air Mobility Command entity is responsible for developing the forecast. For example, forecasts for the Joint Exercise Transportation Program and Training are affected more by requirements to support readiness and funding constraints. On the other hand, the basic forecasting process for Channel Cargo, Channel Passenger, and Special Assignment Airlift Missions/Contingency are affected by the transportation needs of the military services and combatant commands and generally based on historical workload. Based on our analysis, workload forecasts have been increasingly inaccurate for fiscal years 2007 through 2017. Specifically, we found that forecast inaccuracy (i.e., the variance between the forecast and the actual workload amounts aggregated across all five workload categories) averaged about 25 percent and was trending upward in absolute value for fiscal years 2007 through 2017, as shown in figure 4. In addition to the aggregate workload forecast being increasingly inaccurate, the accuracy of the workload forecasts across each of the five categories varies from year to year. For example, In fiscal year 2008, channel cargo actual workload was about 17 percent lower than the forecast, and Special Assignment Airlift Missions/Contingency actual workload was about 12 percent higher than the forecast; and In fiscal year 2016 Special Assignment Airlift Missions/Contingency actual workload was about 116 percent higher than the forecast and the Joint Exercise Transportation Program actual workload was about 45 percent lower than forecasts. For fiscal years 2007 through 2017, the workload categories with the largest absolute forecast inaccuracy include Special Assignment Airlift Missions/Contingency, Channel Cargo, and the Joint Exercise Transportation Program. Two of these categories (Special Assignment Airlift Missions/Contingency and Channel Cargo) also have the largest share of airlift services. However, all five workload categories had forecast inaccuracy of more than 15 percent in at least three of the eleven years we reviewed. The variance of forecasted workload from actual workload by airlift service category is presented in figure 5 below. Based on our analysis and discussions with TRANSCOM officials, TRANSCOM has not taken sustained actions to improve forecasting accuracy. Specifically, we found that TRANSCOM has not fully implemented (1) an effective process to collect projected airlift workload information from its customers (i.e., military services) to inform its forecasts, (2) metrics and goals for measuring and reviewing forecast accuracy, and (3) an action plan to improve workload forecasting. Specifically, TRANSCOM has not implemented an effective process for collecting projected airlift workload information: TRANSCOM officials told us they use historic workload data to establish a baseline, and perform statistical analysis to estimate averages and trends according to their instructions. Next, forecasters use information from the military services and combatant commands that may affect each category of workload, if available, and adjust workload estimates as needed. However, according to TRANSCOM officials, personnel conducting forecasts have limited visibility over factors that may influence forecasts, such as demand for transportation services, due to the lack of information obtained from their customers (i.e., the military services and Combatant Commands). Attempts to collect information from the military services and combatant commands have been made on an ad hoc basis. For example, in April 2016 TRANSCOM’s Commander solicited information from the military services’ senior leadership regarding their future transportation requirements, including airlift needs. The message emphasized the importance of forecasting to inform budget requests and management decisions to improve operational efficiency. However, according to TRANSCOM officials, the Air Force—who is TRANSCOM’s largest customer for airlift services—was the only military service that provided the requested information in response to the TRANSCOM’s Commander’s one-time request. According to TRANSCOM officials, the other military services have not provided the requested information for workload projections because the services do not understand how they would benefit from providing the information and TRANSCOM’s terminology and processes are not familiar to the services. As a result, TRANSCOM’s ad hoc approach has not obtained quality information from its customers to use in forecasting workload. Standards for Internal Control in the Federal Government state that management should use quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis to achieve the entity’s objectives. Furthermore, we found other defense organizations have provided a mechanism for customers to routinely communicate projected workload information. For example, the Defense Logistics Agency and their customers work together to evaluate historical demand data for spare parts and tailor forecast plans for those spare parts based on projected future usage. To this end, communications with customers are expected to be consistent and to use terminology shared in common with customers. Options are presented in a manner that is readily understood by customers in a format determined by customers’ needs to encourage the most efficient and effective solutions available. TRANSCOM no longer uses forecast accuracy metrics and has not established forecast accuracy goals: In 2012, TRANSCOM developed a forecasting process, and according to officials started providing forecast performance metric briefings to TRANSCOM senior leadership on a quarterly basis in fiscal year 2014. TRANSCOM’s overall forecast accuracy improved slightly in 2015. However, according to TRANSCOM officials, these forecast briefings were canceled after the first quarter of fiscal year 2016 because they were viewed as minimally useful for budgeting, and were not used to position airlift capacity to meet operational needs. In addition, TRANSCOM officials stated that they no longer measure forecast performance. We found that overall forecast inaccuracy was higher for fiscal years 2016 and 2017 than any other year we reviewed, as indicated above in figure 4. However, TRANSCOM’s January 2015 forecasting instruction requires forecast accuracy metrics to be developed to support management decisions and forecast variance from actual workload to be reviewed. Furthermore, the Standards for Internal Control in the Federal Government state that management should define objectives in specific and measurable terms to enable the design of internal control for related risks, establish activities to monitor performance measures and indicators, and assess performance against plans, goals, and objectives set by the entity. TRANSCOM does not have a corrective action plan for improving workload forecasts: TRANSCOM officials acknowledge that workload forecasting needs improvement, and told us that TRANSCOM does not have an action plan to improve its forecasting processes to inform budgetary and operational decisions. In October 2013, TRANSCOM considered, but did not adopt, a process designed to help ensure senior management has visibility over issues, including forecasting, known as Sales and Operations Planning (S&OP). We reported that the Army implemented this process in 2013 after Army officials concluded that they could leverage commercial best practices to improve logistics performance (see sidebar). We discussed the S&OP process with TRANSCOM officials, and they told us that the possibility of adapting the process to military logistics was not readily accepted at TRANSCOM because of organizational resistance to change. Initial organizational resistance to change was also experienced by the Army, as discussed in our prior report. However, according to the Army, the benefits of implementing S&OP resulted in a 50 percent reduction in forecast error, and a decision was made to deploy the S&OP process for use across all Army depots and arsenals by the end of fiscal year 2018. Adopting a corrective action plan, or approach such as S&OP can help TRANSCOM focus and improve planning efforts resulting in improved and more accurate workload forecasting. Furthermore, according to TRANSCOM’s January 2015 forecasting instruction, opportunities to improve forecasts should be assessed. Additionally, Standards for Internal Control in the Federal Government state that management should complete and document corrective actions to remediate internal control deficiencies on a timely basis to achieve established objectives. Our prior work has also shown that organizations benefit from corrective action plans for improvement. TRANSCOM officials told us that producing accurate workload forecasts is challenging, and we agree that there are some inherent difficulties in accurately forecasting airlift workload on an annual basis. However, our prior work on aviation forecasting has noted that forecasting is inherently uncertain, but managing the risk related to that uncertainty is essential to making informed decisions. Improved forecasting by addressing the weaknesses identified could allow for more effective financial planning and enable more efficient airlift operations. For example, TRANSCOM estimated needing an ARA amount of $772 million for fiscal year 2016. However, according to our analysis of TRANSCOM financial records, the TWCF did not require support from ARA funds because actual revenue from airlift services exceeded its costs by $148 million in fiscal year 2016. Inaccurate forecasts can lead to unreliable budget requests and hinder effective and efficient operational planning necessary to provide customers with the service they need. For example, according to a 2017 Air Force Audit Agency report, flying channel passenger flights at 85 percent of capacity may result in estimated savings of about $30 million over a 6-year period. Our past work also shows that underutilization of cargo airlift capacity is a longstanding issue. Improving forecast accuracy would help TRANSCOM manage airlift services more efficiently, make better use of budgetary resources to maximize airlift capacity more effectively, and result in an ARA budget estimate that is more accurate. In response to our findings and discussions, TRANSCOM officials stated they plan to begin reviewing TRANSCOM’s workload forecasting process and determine a path ahead in June 2018. However, the outcome and timeframes for this review are uncertain. Furthermore, TRANSCOM leadership still must approve and fully implement changes to forecasting processes, metrics, and goals. Unless TRANSCOM fully implements an effective process to obtain projected workload requirements from its customers on a routine basis, uses forecast accuracy metrics and establishes goals, and develops an action plan, airlift workload forecasting will not improve. We acknowledge that eliminating volatility entirely in the ARA budget request is unlikely given that there will be unexpected and unpredictable workload adjustments due to changes in the global security environment or natural disasters. We also understand improving workload forecasts through the use of goals, metrics, and an action plan for improvement will not eliminate the inherent volatility associated with the ARA budget request amount. However, these improvements would allow TRANSCOM to better manage the inherent risks associated with the accuracy of forecasts and improve ARA estimates used to inform future Air Force Operations and Maintenance budget requests. Each year DOD spends billions of dollars on airlift services flying personnel and cargo worldwide. The clarity of budget estimates and the accuracy of forecasts for airlift services are essential for Congress and DOD to make informed decisions. Accordingly, Congress would benefit from detailed ARA information in its budget requests, and this information would be improved by TRANSCOM providing timely information on the annual ARA estimate to the Air Force. Additionally, TRANSCOM continues to face challenges in forecasting its workload, which is a key factor in estimating the ARA. Until TRANSCOM establishes a process to collect projected workload information from its customers, uses forecast accuracy metrics and goals to monitor its performance, and implements a corrective action plan, forecast accuracy and ARA estimates are not likely to improve. We are making a total of five recommendations to DOD. The Secretary of Defense should ensure that the Undersecretary of Defense (Comptroller)/Chief Financial Officer establishes requirements to present details related to the ARA in the annual Air Force Operations and Maintenance budget request including (1) amounts for the next fiscal year for which estimates are submitted, (2) revisions to the amounts for the fiscal year in progress, and (3) the actual amounts allotted for the last completed fiscal year. (Recommendation 1) The Secretary of Defense should ensure that the Secretary of the Air Force and the Commander, U.S. Transportation Command, in collaboration, develop sufficient detail on the formal processes and finalize their memorandum of understanding to improve the timing and communication of budgetary information to support the Air Force Operations and Maintenance Airlift Readiness Account annual budget request. (Recommendation 2) The Secretary of Defense should ensure that the Commander, U.S. Transportation Command, fully implements a process to obtain projected airlift workload from the military services and Combatant Commanders on a routine basis to improve the accuracy of its workload forecasts. (Recommendation 3) The Secretary of Defense should ensure that the Commander, U.S. Transportation Command, uses forecast performance metrics and establishes forecast accuracy goals for the airlift workload. (Recommendation 4) The Secretary of Defense should ensure that the Commander, U.S. Transportation Command, develops a corrective action plan to improve the accuracy of its workload forecasting. (Recommendation 5) We provided a draft of this report to DOD for review and comment. In written comments, which are reprinted in appendix IV, DOD concurred with our recommendations and stated that it plans to take specific actions in response to our recommendations. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Diana Maurer at (202) 512-9627 or maurerd@gao.gov, or Asif Khan at (202) 512-9869, or khana@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix V. To determine the extent to which ARA funds were requested, allotted, and expended by the Air Force from fiscal years 2007 through 2017, we analyzed Air Force budget request documents and underlying support documentation. We also analyzed information from the Air Force’s Automated Budget Interactive Data Environment Systems to determine the appropriated amounts allotted for ARA activities. Furthermore, we analyzed summary-level documents detailing expenditures from the Air Force and TRANSCOM for fiscal years 2007 through 2017 to establish trends. Moreover, we reviewed TRANSCOM’s procedures and supporting documentation for billing the Air Force for payment of the ARA. Lastly, we interviewed DOD, Air Force and TRANSCOM officials to gain an understanding of general reasons variances from year to year occurred or between the requested and expended amounts. To determine the extent to which the Air Force provided ARA information in its budget request to Congress and informed its request with information from TRANSCOM, we analyzed Air Force Operations and Maintenance budget justification documents to determine the type of ARA information (i.e., total budget request amount, changes from year to year, and other information) provided in the fiscal years 2007 through 2017 President budget submissions. To understand the differences, if any, between the ARA information provided from year to year, we interviewed Air Force budget officials to obtain an explanation for changes in the reported information. In addition, we analyzed Air Force Operations and Maintenance budget justification documents, and Transportation Working Capital Fund budget documents to determine if the ARA was based on available information. We also discussed with Air Force and TRANSCOM officials future plans to change their procedures and the information considered in the development of the ARA estimate. Further, we compared the Air Force and TRANSCOM processes and procedures against Standards for Internal Controls in the Federal Government, specifically standards regarding internal and external reporting and mechanisms to enforce management directives. To determine the extent to which TRANSCOM has implemented a process to set rates for airlift services and use workload forecasts to estimate the annual ARA funding request, we analyzed the processes TRANSCOM used to set rates it charges customers in various airlift workload categories for fiscal years 2007 through 2017. We also reviewed forecasting procedures and analyzed supporting documents provided by TRANSCOM; interviewed TRANSCOM officials to gain an understanding of how they implement these rate setting and forecasting procedures; and analyzed forecast and actual workload data provided by TRANSCOM for the same timeframe. We compared TRANSCOM’s processes against rate-setting and forecasting guidance and reviewed whether TRANSCOM used quality information to establish workload projections, established any performance measures and goals for forecasting its workload, and developed any efforts to improve its forecasting of workload. In addition, we interviewed TRANSCOM and Air Mobility Command officials and reviewed supporting documentation to gain an understanding of challenges that exist to producing accurate workload forecasts, and the relationship with the rate-setting and budgeting process. We obtained revenue, cost, workload, and ARA data in this report from budget documents, accounting reports, and Air Force and TRANSCOM records for fiscal years 2007 through 2017. We assessed the reliability of the data by (1) interviewing Air Force and TRANSCOM officials to gain an understanding of the processes used to produce the cash, revenue, cost, workload and ARA data; (2) reviewing prior work to determine if there were reported concerns with TRANSCOM’s data; (3) comparing cash balances, revenue, costs and workload data provided by TRANSCOM to the same data presented in the Air Force Working Capital Fund budgets for fiscal years 2007 through 2017; and (4) comparing ARA data to Air Force and TRANSCOM supporting documentation, or to Air Force Operations and Maintenance budget execution reports to support ARA reported amounts for fiscal years 2007 through 2017. On the basis of these procedures, we have concluded that these data were sufficiently reliable for the purposes of this report. To address all of our objectives, we conducted a site visit to U.S. Transportation Command Headquarters and Air Mobility Command at Scott Air Force Base, Illinois, and interviewed officials with the Office of the Undersecretary of Defense (Comptroller)/Chief Financial Officer, the Assistant Secretary of the Air Force (Financial Management and Comptroller), the U.S. Transportation Command, and the Air Mobility Command. We conducted this performance audit from August 2017 through September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Air Force Working Capital Fund maintained a positive monthly cash balance throughout fiscal years 2007 through 2017. The Transportation Working Capital Fund (TWCF) is a part of the Air Force Working Capital Fund for cash management purposes. DOD working capital funds are authorized to charge amounts necessary to recover the full costs of goods and services provided. However, the TWCF is authorized to establish airlift customer rates to be competitive with commercial air carriers. Due to mobilization requirements, the resulting revenue does not always cover the full costs of airlift operations provided through the TWCF. To the extent customer revenue is insufficient to support the costs of maintaining airlift capability the Air Force shall provide appropriated funds. The Air Force Working Capital Fund and TWCF monthly cash balances are depicted in figure 6 below. Total costs for airlift services for fiscal years 2007 through 2017 were less than revenue collected for airlift services. Revenue came from rates charged to customers for services performed (workload related revenue), the Airlift Readiness Account (ARA), and other revenue sources. For seven of the eleven years we reviewed, revenues exceeded costs, and for four of the eleven years, costs exceeded revenue. For the eleven year period we reviewed, workload related revenue ($73 billion) was not sufficient to pay for the full costs of airlift services. The remaining revenue included $2 billion from the ARA and $7 billion from other revenue sources. Diana Maurer, (202) 512-9627 or maurerd@gao.gov, or Asif A. Khan, at (202) 512-9869, or khana@gao.gov. In addition to the contacts named above, John Bumgarner (Assistant Director), Doris Yanger (Assistant Director), John E. “Jet” Trubey (Analyst In Charge), Pedro Almoguera, John Craig, Jason Kirwan, Amie Lesser, Felicia Lopez, Keith McDaniel, Clarice Ransom, and Mike Silver made key contributions to this report.", "summary": "TRANSCOM reported spending about $81 billion flying personnel and cargo worldwide in fiscal years 2007-2017. TRANSCOM manages the Transportation Working Capital Fund (TWCF) to provide air, land, and sea transportation for the Department of Defense (DOD). TRANSCOM sets some rates it charges below costs to be competitive with commercial air service providers. The Air Force generally pays for expenses not covered by TWCF rates through the ARA. A House Report accompanying the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the ARA and the TWCF. GAO's report discusses the extent to which (1) ARA funds were requested, allotted, and expended for airlift activities; (2) the Air Force provided ARA information in its budget requests and informed its requests with information from TRANSCOM; and (3) TRANSCOM has implemented a rate-setting process for airlift services and uses workload forecasts to estimate the annual ARA funding request. GAO analyzed ARA funds and costs and revenues for airlift services for fiscal years 2007-2017; interviewed officials about the ARA budget preparation process; and analyzed TRANSCOM rate-setting and forecasting guidance and results. For fiscal years 2007 through 2017, the Air Force requested $2.8 billion from Congress for Airlift Readiness Account (ARA) requirements, as part of its annual Operations and Maintenance appropriation. The Air Force allotted $2.8 billion (i.e., directed the use of the appropriated funds) and expended $2.4 billion of these funds for the ARA. U.S. Transportation Command (TRANSCOM) uses ARA funds to support airlift operations. Specifically, the Air Force requests ARA funds in its annual Operations and Maintenance budget request and subsequently provides these funds to TRANSCOM to assist in paying for airlift services (see figure). Amounts requested, allotted, and expended varied from year-to-year, in some cases by hundreds of millions of dollars, in part due to changes in the amount of airlift services provided by TRANSCOM. The Air Force has not been including specific ARA information in its budget requests since fiscal year 2010. For fiscal years 2007 through 2009, Air Force budget requests explicitly stated ARA amounts. Air Force officials stated their budget presentation was changed to reduce the overall number of budget line items. In addition, TRANSCOM has not been providing cost estimates in time to support Air Force budget preparations. Specifically, TRANSCOM has been providing this information 2 months later than the Air Force needs it to support budget deliberations. The Air Force and TRANSCOM have taken some initial steps to address this issue, but these efforts lack substantive details regarding formalizing the necessary processes to ensure timely information. Until the Air Force and TRANSCOM resolve this issue, Congress will not have sufficient and complete information to inform its decisions on appropriating funds for ARA. TRANSCOM has a rate-setting process, but faces challenges producing accurate workload forecasts. To provide information to its customers during the annual budget development process, TRANSCOM sets airlift rates in advance of the fiscal year of expenditure. Workload forecasts influence the rate-setting process. Inaccurate forecasts can lead to unreliable budget requests and hinder effective and efficient operational planning. GAO found that forecast inaccuracy (i.e., the variance between the forecast and the actual workload) averaged 25 percent and was becoming increasingly inaccurate since fiscal year 2007. GAO found that TRANSCOM has several workload forecasting challenges. Specifically, TRANSCOM lacks an effective process to gather workload projections from customers. It also no longer uses forecasting accuracy metrics and has not established forecast accuracy goals to monitor its performance. Furthermore, TRANSCOM does not have an action plan to improve its increasingly inaccurate workload forecasts. Taking steps to address these issues would enable TRANSCOM to improve the accuracy of workload forecasts. GAO is making five recommendations to DOD, including improving the clarity and completeness of budget estimates, and taking steps to improve the accuracy of airlift workload forecasts. DOD concurs with GAO's recommendations.", "document_type": "gao"}
{"report": "Effective communication is vital to first responders’ ability to respond to emergencies and to ensure their safety. For example, first responders use public-safety communications systems to gather information, coordinate a response, and request additional resources and assistance from neighboring jurisdictions and the federal government. OEC has taken a number of steps aimed at supporting and promoting the ability of public-safety officials to communicate in emergencies and work toward operable and interoperable emergency communications nationwide. OEC develops policy and guidance supporting emergency communications across all levels of government and across various types of emerging technologies such as broadband, Wi-Fi, and NextGen 911, among others. OEC also provides technical assistance—including training, tools, and online and on-site assistance—for federal, state, local, and tribal first responders. First responders use different communications systems, such as land mobile radio (LMR), commercial wireless services, and FirstNet’s network. LMR: These systems are the primary means for first responders to use voice communications to gather and share information while conducting their daily operations and coordinating their emergency response efforts. LMR systems are intended to provide secure, reliable voice communications in a variety of environments, scenarios, and emergencies. Across the nation, there are thousands of separate LMR systems. Commercial wireless services: Public-safety entities often pay for commercial wireless services to send data transmissions such as location information, images, and video. Some jurisdictions also use commercial wireless services for voice communications. Nationwide dedicated-broadband network: Consistent with the law, FirstNet is working to establish a nationwide dedicated network for public-safety use that is intended to foster greater interoperability, support important data transmissions, and meet public-safety officials’ reliability needs. In creating FirstNet in 2012, Congress provided it with $7 billion in federal funds for the network’s initial build-out and valuable spectrum for the network to operate on. Unlike current LMR systems, the devices operating on FirstNet’s network will use the same radio frequency band nationwide. It is expected that these devices will be interoperable among first responders using the network because the devices will be built using the same open, non- proprietary, commercially available standards. Communications systems must work together, or be interoperable, even though the systems or equipment vendors may differ. The interoperability of emergency communications enables first responders and public-safety officials to use their radios and other equipment to communicate with each other across agencies and jurisdictions when needed and as authorized, as shown in figure 1. OEC is tasked with developing and implementing a comprehensive national approach to advance interoperable communications capabilities. For example, according to OEC, it supports and promotes communications used by emergency responders and government officials and leads the nation’s operable and interoperable public-safety and national security/emergency preparedness communications efforts. OEC notes that it plays a key role in ensuring federal, state, local, tribal, and territorial agencies have the necessary plans, resources, and training needed to support operable and interoperable emergency communications. To help in this effort, OEC instituted a coordination program that established regional coordinators across the nation. According to OEC, its coordinators work to build trusted relationships, enhance collaboration, and stimulate the sharing of best practices and information between all levels of government, critical infrastructure owners and operators, and key non-government organizations. OEC developed the National Emergency Communications Plan in 2008 and worked with federal, state, local, and tribal jurisdictions to update it in 2014 to reflect an evolving communications environment. The long-term vision of the plan—which OEC views as the nation’s current strategic plan for emergency communications—is to enable the nation’s emergency- response community to communicate and share information across all levels of government, jurisdictions, disciplines, and organizations for all threats and hazards, as needed and when authorized. To help it accomplish this mission, OEC works with three emergency communications advisory groups: SAFECOM, the Emergency Communications Preparedness Center (ECPC), and the National Council of Statewide Interoperability Coordinators (NCSWIC). These organizations promote the interoperability of emergency communications systems by focusing on technologies including, but not limited to, LMR and satellite technology. SAFECOM: According to the 2018 SAFECOM Strategic Plan, SAFECOM develops products and completes a range of activities each year in support of its vision and mission, including providing a national view of public-safety priorities and challenges, developing resources and tools aligned to the 2014 National Emergency Communications Plan, and collaborating with partner organizations to promote the interoperability of emergency communications. One of the products developed by SAFECOM each year is the Guidance on Emergency Communications Grants. SAFECOM consists of more than 50 members that represent local, tribal, and state governments; federal agencies; state emergency responders; and intergovernmental and national public-safety organizations. ECPC: The ECPC is an interagency collaborative group that provides a venue for coordinating federal emergency-communications efforts. The ECPC works to improve coordination and information sharing among federal emergency-communications programs. The ECPC does this by serving as the focal point for emergency communications issues across the federal agencies; supporting the coordination of federal programs, such as grant programs; and serving as a clearing house for emergency communications information, among other responsibilities. The ECPC has 14 member agencies that are responsible for setting its priorities. NCSWIC: This council consists of SWICs and their alternates from 50 states, 5 territories, and the District of Columbia. According to SAFECOM, NCSWIC develops products and services to assist the SWICs with leveraging their relationships, professional knowledge, and experience with public-safety partners involved in interoperable communications at all levels of government. Additionally, in 2013, FirstNet established the PSAC to provide advice to FirstNet. The committee is composed of members who represent local, tribal, and state public-safety organizations; federal agencies; and national public-safety organizations. FEMA is responsible for coordinating government-wide disaster response efforts, including on-the-ground emergency communications support and some technical assistance. For example, FEMA’s regional emergency- communications coordinator is responsible for providing emergency communications assistance on an as-needed basis and coordinating FEMA’s tactical communications support during a disaster or emergency. FEMA also provides a range of grant assistance to state, local, tribal, and territorial entities, including preparedness grants that can be used for emergency communications. As noted above, in November 2018, legislation was signed into law that reorganized and renamed NPPD and OEC. Previously, OEC was one of five divisions under the Office of Cyber Security and Communications which in turn was one of five divisions within NPPD. However, NPPD has been renamed the Cybersecurity and Infrastructure Security Agency, and OEC was renamed the Emergency Communications Division and was elevated to one of three direct reporting divisions within the new agency. See figure 2 for an illustration of changes made to OEC’s organizational placement. OEC and FEMA have responsibilities for developing and implementing grant guidance for grantees using federal funds for interoperable emergency communications. Specifically, OEC and FEMA officials told us FEMA is responsible for administering the grants, and OEC coordinates emergency communications grant guidance annually through SAFECOM’s Guidance on Emergency Communications Grants. We reviewed OEC’s and FEMA’s collaborative efforts related to grant guidance and found that their efforts generally follow our previously identified leading practices for effective interagency collaboration, as described below. Written Guidance and Agreements. Agencies that formally document their agreements can strengthen their commitment to working collaboratively. OEC and FEMA formalized their coordination efforts for interoperable emergency communications grants in a memorandum of agreement in 2014. This memorandum assigned OEC and FEMA responsibilities and established a joint working group to develop standard operating procedures, which OEC said were drafted the following year but not formally approved by FEMA, that govern coordination between the agencies. We also reported that written agreements are most effective when the collaborators regularly monitor and update them. When we started our review, OEC and FEMA officials told us that they had not updated the memorandum of agreement, which included the draft standard operating procedures as an appendix. However, the agencies approved an updated memorandum of agreement and standard operating procedures, and OEC provided them to us in July 2018. Leadership. When buy-in is required from multiple agencies, involving leadership from each can convey the agencies’ support for the collaborative effort. According to OEC and FEMA officials, their grants coordination efforts include high-level leadership. Specifically, senior leaders from both agencies signed the 2014 and 2018 memorandums of agreement. Also, OEC officials told us that their leaders in the grants program office are responsible for overseeing the collaborative effort. Bridging Organizational Culture. Collaborating agencies should establish ways to operate across agency boundaries and address their different organizational cultures. OEC and FEMA operate across agency boundaries in several ways. First, both agencies told us that they participate in the ECPC Grants Focus Group, whose members coordinate across federal grant programs to support interoperable emergency communications. The group reviews SAFECOM guidance and, according to FEMA officials, meets on a quarterly basis. Second, OEC officials said the agencies foster open lines of direct communication via conference calls, e-mail correspondence, and in-person meetings. OEC and FEMA officials told us their communications include sharing and reviewing language in FEMA’s notices that announce grant opportunities and OEC’s SAFECOM guidance. Third, the agencies said that OEC officials conduct emergency-communications-related trainings and briefings for FEMA at least once a year. According to OEC officials, these trainings have included a discussion on the movement toward broadband and FirstNet. Finally, FEMA officials told us that their program analysts have attended conferences with OEC to speak to the SWICs about grant programs. They said the program analysts explained how the grant money can be leveraged to support projects within the individual states and answered questions about the grants. OEC officials said having FEMA attend conferences to discuss specific grant information is useful for public-safety stakeholders. Clarity of Roles and Responsibilities. Collaborating agencies can get clarity when they define and agree upon their respective roles and responsibilities. As part of the 2014 and 2018 memorandums of agreement, OEC and FEMA established clear responsibilities for how each agency will support the grants coordination effort. For example, both offices were responsible for assigning experienced program staff and contributing to the development of standard operating procedures by attending meetings and conducting research. Also, the standard operating procedures clarify how OEC and FEMA will share information, solicit input on grants guidance language, and review grant applications. Participants. Including relevant participants helps ensure individuals with the necessary knowledge, skills, and abilities will contribute to the collaborative effort. OEC and FEMA identify points of contact in their memorandums of agreement. According to OEC officials, they did not always work with the correct FEMA staff before the 2014 memorandum was developed. Also, FEMA officials told us that their grants program staff who participate in the coordination effort with OEC perform those specific responsibilities as a collateral duty on an as needed basis. According to OEC officials, OEC’s performance plans outline coordination with FEMA and areas related to the agencies’ memorandum of agreement for the staff who handle grant issues. OEC and FEMA officials said participants’ responsibilities include serving as technical subject matter experts and reviewing language for grants guidance and notices of funding opportunities. Resources. Collaborating agencies should identify the human, financial, and technological resources they need to initiate or sustain their efforts. OEC and FEMA staff their collaborative effort with employees from their grants offices to address their human resource needs. These employees perform work related to emergency communications grants as outlined in their performance plans or as a collateral duty. The agencies also provide OEC access to FEMA’s non-disaster grants system to share grantee information. According to OEC and FEMA officials, their collaboration efforts do not require either agency to obligate funds or use special technology, such as online information-sharing tools. Outcomes and Accountability. Collaborating agencies that create a means to monitor and evaluate their efforts can better identify areas for improvement. According to OEC and FEMA documentation, the primary goal of the draft standard operating procedures was to prevent grantees from improperly using federal funds, such as purchasing equipment that is not interoperable. OEC officials said the biggest gap in those standard operating procedures was that they did not include a monitoring program to ensure grantees were compliant with grant guidance, which include requirements for interoperability. OEC’s and FEMA’s July 2018 standard operating procedures established a process to track and monitor grantee compliance. They also identified a process for assessing the information they collect and how it will be shared among OEC and FEMA, and when appropriate, other stakeholders. At the time of our review, OEC and FEMA officials told us they had not implemented the monitoring procedures because the grants for the 2018 grant cycle were not yet awarded. Accordingly, we could not evaluate the effectiveness of the new procedures to monitor and assess grantee compliance, and without conducting such an evaluation, we could not determine whether OEC’s and FEMA’s efforts align with the key practice in this area. Senior officials from both agencies said the monitoring procedures would be updated if they do not work as intended. After being established in 2007, OEC initially focused on enhancing the interoperability and continuity of LMR systems. However, according to OEC officials, its programs, products, and services have adapted and evolved to incorporate new modes of communications and technologies. Additionally, OEC’s technical assistance offerings for emergency communications technology have evolved over time as new technologies have come into use. For example, OEC’s technical assistance catalog contains new or enhanced offerings on topics related to broadband issues such as FirstNet’s network, Next Generation 911, alerts and warnings, and incident management. In 2014, DHS released its second National Emergency Communications Plan, which identified the need to focus on broadband technologies, including FirstNet’s nationwide public-safety broadband network. One of the plan’s top priorities is “ensuring emergency responders and government officials plan and prepare for the adoption, integration, and use of broadband technologies, including the planning and deployment of the nationwide public-safety broadband network.” To meet this priority, OEC officials told us that they provide stakeholders with a wide range of products and services to help prepare for the adoption, integration, and use of broadband. For instance, officials said that they leverage OEC’s governance groups—SAFECOM, NCSWIC, and ECPC—to develop products and services and to identify specific challenges and requirements regarding broadband. Additionally, OEC officials told us that they coordinate regularly with FirstNet staff and invite FirstNet to meet and brief the stakeholder community on the latest deployment information. However, OEC officials told us that FirstNet’s network is one option available to public-safety and government officials to access broadband communications and information sharing and explained that OEC maintains a neutral position for all technologies and vendors. Accordingly, OEC is not responsible for promoting any vendor solutions, including FirstNet’s network, and there is no requirement for OEC to do so. Additionally, five of six OEC coordinators we interviewed told us that FirstNet’s network is only one of several emergency-communications technology options and that OEC should continue to provide information to public-safety stakeholders regarding other providers. For example, there are commercial carriers that provide wireless broadband services, and we have previously reported that these commercial carriers could choose to compete with FirstNet. According to OEC officials, prior to the start of each fiscal year, OEC engages with stakeholders to gather feedback on new or revised technical assistance offerings, as well as updates to existing plans and documents. OEC officials told us that they expect an increase in technical assistance requests that focus on issues related to mobile data use, broadband governance, standard operating procedures, and policies and procedures. According to OEC officials, OEC has delivered more than 2,000 technical-assistance-training courses and workshops since 2007, and OEC will continually update its technical assistance offerings to incorporate new modes of communications and technologies into training, exercises, and standard operating procedures for its stakeholders. The majority (7 of 10) of public-safety organizations that we interviewed told us that OEC sufficiently incorporates information regarding FirstNet’s network into its guidance and offerings. For example, officials from 6 of 10 organizations that we interviewed told us that OEC must strike a balance between FirstNet’s network and other emerging technologies, and that OEC has successfully accomplished this task. Additionally, the majority of SWICs responded to our survey that it is at least moderately important for OEC to incorporate the FirstNet network and emerging technologies into its written guidance, technical assistance offerings, training opportunities, workshops, and grant guidance, Furthermore, in most cases, SWICs responded that OEC has incorporated FirstNet’s network and emerging technologies into these areas, as follows: FirstNet network. In our survey, the majority of SWICs responded that OEC has incorporated, to a large or moderate extent, FirstNet’s network into its written guidance (65 percent) and technical assistance offerings (59 percent), and half of SWICs said the same for OEC’s workshops. However, fewer SWICs reported that OEC incorporated FirstNet’s network, to a large or moderate extent, into its training opportunities (39 percent) and grant guidance (33 percent). Emerging technologies. The majority of SWICs reported that OEC has incorporated, to a large or moderate extent, emerging technologies into its written guidance (87 percent); technical assistance offerings (81 percent); training opportunities (74 percent); workshops (78 percent); and grant guidance (56 percent). See figure 3 for complete survey data regarding SWICs’ views on the extent that OEC has incorporated FirstNet’s network and emerging technologies into its offerings. In surveying SWICs on the usefulness of OEC’s efforts to incorporate FirstNet’s network and emerging technologies into its offerings, we found the following: FirstNet network. The majority of SWICs reported that OEC’s efforts to incorporate FirstNet’s network into its written guidance (67 percent), technical assistance offerings (59 percent), and workshops (59 percent) have been very or moderately useful. However, less than a majority of SWICs reported that OEC’s efforts to incorporate FirstNet’s network into its training opportunities (46 percent) and grant guidance (40 percent) have been very or moderately useful. Emerging technologies. The majority of SWICs reported that OEC’s efforts to incorporate emerging technologies into its written guidance (93 percent), technical assistance offerings (85 percent), training opportunities (74 percent), workshops (85 percent), and grant guidance (72 percent) have been very or moderately useful. See figure 4 for complete survey data regarding SWICs’ views on the usefulness of OEC’s efforts to incorporate FirstNet’s network and emerging technologies into its offerings. Even following the implementation of FirstNet, public-safety stakeholders told us they expect OEC will play an important role in ensuring interoperable emergency communications, both regarding the FirstNet network and other technologies. For example, 45 of 54 (83 percent) of SWICs we surveyed reported that OEC will likely have a large or moderate role for ensuring interoperable emergency communications once FirstNet’s network is fully operational. Additionally, nearly all (9 of 10) of public-safety organizations we interviewed said that they believe OEC will continue to play an important role in ensuring interoperable emergency communications after the implementation of FirstNet’s network. OEC is required to conduct extensive nationwide outreach to support and promote interoperable emergency-communications capabilities by state, regional, local, and tribal governments and public-safety agencies in the event of natural disasters and acts of terrorism and other man-made disasters. According to federal standards for internal control, management should externally communicate the necessary quality information to achieve the entity’s objectives. This includes communicating with external parties and using the appropriate methods of communication. The federal standards state that management should periodically assess the entity’s methods of communication so that the organization has the appropriate tools to communicate quality information throughout and outside of the entity on a timely basis. Most public-safety organizations we interviewed told us that OEC communicates with their organization frequently through committee meetings and other means. For example, 9 of the 10 organizations told us that a key form of communication between their organization and OEC is participation in emergency-communications advisory groups such as SAFECOM, NCSWIC, and PSAC. Furthermore, OEC officials reported that OEC’s guidance documents, plans, tools, and technical assistance offerings are formally provided to the public-safety community through the SAFECOM, NCSWIC, and ECPC distribution lists. Governing body representatives then distribute the information to their organizations and stakeholders. These documents are also available on DHS’s website. Furthermore, 4 of the 10 organizations told us that they regularly have direct communications with OEC staff. The large majority of SWICs responded that they are very or moderately satisfied with the communication efforts from both OEC headquarters (81 percent) and OEC coordinators (93 percent). However, some stakeholders identified communication challenges as well as opportunities for OEC to improve communication. For example, approximately one quarter (26 percent) of SWICs said that OEC does not communicate training well, and these SWICs reported that they are either unaware of OEC training opportunities related to FirstNet’s network and other emerging technologies, or that they mostly learn about OEC training opportunities from other sources. See figure 5 below for additional survey information regarding SWICs’ views on how well OEC communicates training opportunities related to FirstNet’s network and other emerging technologies. Also with respect to OEC’s communication efforts with stakeholders, four of six OEC coordinators and 3 of 10 public-safety organizations we interviewed, along with 26 of 54 (48 percent) of the SWICs we surveyed, identified the need for OEC to use additional tools or approaches for improving communication with SWICs and the public-safety community. For example, one coordinator said that there are public-safety stakeholders who are unaware of OEC. Similarly, representatives from a public-safety organization we interviewed told us that OEC should help public-safety stakeholders better understand what OEC does. Both the OEC coordinator and public-safety stakeholders in these examples identified the need for OEC to use social media to improve public-safety stakeholders’ understanding of OEC and its offerings. Additionally, an OEC coordinator told us that each region is different, and unless there is an OEC coordinator who is proactive about communicating information to the public-safety community, then important information does not get out to the appropriate people. The coordinator also said that it is difficult to communicate information to all of the needed stakeholders because he is solely responsible for communicating with many public-safety entities and jurisdictions within multiple states. Furthermore, a SWIC reported that other organizations use social media for communicating during disasters and for notifying interested parties about events and trainings, and that OEC should do the same. OEC officials told us that NPPD recently established a Twitter account that OEC has used to increase awareness of programs, products, and services. However, since the establishment of the account in February 2018 through September 2018, only 23 of NPPD’s 280 tweets and retweets (8.2 percent) made mention of OEC, 15 of which occurred in March 2018. In addition to social media, some public-safety organizations and SWICs identified additional tools or approaches that OEC could use to improve communication with the public-safety community. These tools and approaches include designating an intergovernmental specialist or liaison within OEC to coordinate with public-safety stakeholders, developing additional regional-focused meetings such as conferences and workshops, and creating online or distance-learning opportunities (e.g., online training, webinars, online chat or bulletin board services, etc.). Although OEC officials told us that they employ mechanisms to understand the effectiveness of OEC’s programs, products, and services, we found OEC has not specifically assessed its methods of communication. For example, OEC analyzes feedback forms provided at meetings and stakeholder engagements, gathers direct input from stakeholders through in-person and phone discussions and e-mail, tracks the open rate of e-mails and website and blog post traffic, and reviews social media analytics for specific event campaigns. At the time of our review, OEC officials told us that they were developing a formal performance-management program to measure the impact of OEC’s programs on the public-safety and national security/emergency preparedness communities. However, these broad efforts aimed at reviewing the overall programs are not designed for the specific purpose of assessing OEC’s methods of communication, and OEC does not have any plans in place for doing so. Lacking an assessment of its methods of communication, OEC may be missing opportunities to learn which tools and approaches are the most effective and to use those to deliver timely information to public-safety stakeholders. As noted above, this can result in public-safety officials missing trainings or not receiving other helpful information. Furthermore, not using additional methods of communication or tools could contribute to uncertainty among the public-safety community about OEC’s mission and its efforts to improve the interoperability of emergency communications. OEC has multiple efforts supporting interoperable emergency communications that the public-safety community relies on to better respond to emergency situations. Although public-safety stakeholders we contacted were generally satisfied with OEC’s communications efforts, OEC could be missing opportunities to use additional tools and approaches, such as social media, to improve communication with public- safety officials. Absent an assessment of its methods of communication, OEC cannot ensure it is using the best methods to provide relevant and timely information on training opportunities, workshops, technical assistance offerings, and other emergency-communications information to the public-safety community. OEC should assess its methods of communication to help ensure it has the appropriate tools and approaches to communicate quality information to public-safety stakeholders, and as appropriate, make adjustments to its communications strategy. (Recommendation 1) We provided a draft of this report to DHS for review and comment. In response, DHS provided written comments, which are reprinted in appendix III. DHS concurred with our recommendation and provided an attachment describing the actions it would take to implement the recommendation. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) the Office of Emergency Communications’ (OEC) and the Federal Emergency Management Agency’s (FEMA) collaborative efforts to develop and implement guidance for grantees using federal grants for interoperable emergency communications; (2) how OEC incorporates FirstNet’s nationwide public-safety broadband network and other emerging technologies into its plans and offerings, and stakeholders’ views regarding those efforts; and (3) the extent to which OEC has assessed its methods of communication. To evaluate OEC’s and FEMA’s collaborative efforts to develop and implement grant guidance, we collected and reviewed documentation relevant to the collaborative effort, including memorandums of agreements, standard operating procedures, and meeting agendas. We assessed OEC’s and FEMA’s actions against the seven key considerations for interagency collaborations. We also interviewed OEC and FEMA Grant Programs Directorate officials who have responsibilities for Department of Homeland Security (DHS) grants. We asked them to discuss their approach to interagency collaboration, including the process to jointly develop grant guidance language. We asked agency officials questions that were based on the key considerations for implementing interagency collaborative mechanisms that we identified in a prior report. To determine how OEC has incorporated FirstNet’s network and other emerging technologies into its plans and offerings, we reviewed relevant OEC documentation, including fact sheets and technical assistance guides. We also reviewed the 2014 National Emergency Communications Plan (NECP) and OEC’s March 2017 biennial report to Congress on the progress toward meeting NECP goals. We interviewed OEC headquarters officials about the agency’s efforts to date, including how OEC develops its offerings and workshops and communicates this information to the public-safety community. We also interviewed 6 of 10 OEC coordinators using a semi-structured interview format to get on-the- ground perspectives from OEC staff who serve as points of contact for public-safety stakeholders. We selected OEC coordinators to achieve variety across geography, population density, tribal presence, and territory representation. We interviewed OEC coordinators to obtain their perspectives as subject matter experts, but their views should not be attributed to OEC’s official agency position. In addition, to obtain stakeholders’ views on OEC’s efforts to incorporate FirstNet’s network and other emerging technologies into plans and offerings, we surveyed all 54 statewide interoperability coordinators (SWIC) from 48 states, five territories, and the District of Columbia. We obtained a list of SWICs from DHS and confirmed additional contact information via e-mail. We conducted a web-based survey to learn SWICs’ perspectives on issues including the importance of incorporating FirstNet’s network and other emerging technologies into OEC’s plans and offerings, OEC’s communication with the public-safety community, and SWICs’ level of satisfaction with OEC’s efforts. To ensure the survey questions were clear and accurately addressed the relevant terms and concepts, we pretested the survey with SWICs from three states: Illinois, Massachusetts, and Texas. These SWICs were selected to get perspectives from officials who have served in the role for at least several years and SWICs who are new to the position. We administered our survey from May 2018 to July 2018 and received 54 responses for a 100 percent response rate. We also used a semi-structured interview format to obtain views from representatives from 10 public-safety organizations who have expertise in public-safety and federal emergency-communications efforts (see table 1). To identify relevant organizations, we reviewed our prior report that identified 34 organizations that are members of both OEC’s SAFECOM advisory group and FirstNet’s Public Safety Advisory Committee (PSAC). We researched the members to help determine the extent to which each organization is involved in issues related to our review. We selected 10 public-safety organizations to interview on the basis of: (1) this research, (2) information from DHS, and (3) a literature review. Because one association declined our request for an interview, we contacted and interviewed another relevant organization from the original list of 34 member organizations. The views shared by the representatives we interviewed are not generalizable to all public-safety organizations that interact with OEC; however, we were able to secure the participation of organizations that focus on various public-safety issues across federal, state, local, and tribal jurisdictions and thus believe their views provide a balanced and informed perspective on the topics discussed. To evaluate the extent that OEC has assessed its methods of communication, we reviewed OEC’s documentation for collecting stakeholders’ feedback. We also reviewed the interview responses from OEC officials and the public-safety organizations listed in table 1 and the SWIC survey data pertaining to OEC’s communications efforts. We assessed OEC’s efforts against federal standards for internal control regarding external communications and periodic evaluation of its methods of communication. The questions we asked in our survey of statewide interoperability coordinators (SWIC) and the aggregate results of responses to the closed-ended questions are shown below. We do not provide results for the open-ended questions. We surveyed all SWICs from 48 states, five territories, and the District of Columbia. We administered our survey from May 2018 to July 2018 and received 54 responses for a 100 percent response rate. Due to rounding, the aggregated results for each closed- ended question may not add up to exactly 100 percent. For a more detailed discussion of our survey methodology see appendix I. 1. What best describes the Statewide Interoperability Coordinator (SWIC) in your state? 1a. If you selected “Other,” please explain. (Written responses not included) 2. Does the SWIC also serve in the role of the FirstNet State Point of Contact (SPOC)? 0% 2a. If no, how often does the SWIC coordinate with the SPOC on FirstNet’s nationwide public safety broadband network? 2b. If you selected “rarely or never,” please explain. (Written responses not included) The questions in this section ask your opinion about OEC’s efforts to help the public safety community improve interoperable emergency communications capabilities. This section will be about FirstNet’s nationwide public safety broadband network. 3. In your opinion, how important is it for OEC to incorporate FirstNet’s nationwide public safety broadband network into the following areas? Please specify the other area in the box below. (Written responses not included) 4. To what extent has OEC incorporated FirstNet’s nationwide public safety broadband network into the following areas? Please specify the other area in the box below. (Written responses not included) 5. In your opinion, how useful have OEC’s efforts to incorporate FirstNet’s nationwide public safety broadband network into the following areas been in helping your state address challenges with its emergency communications? Please specify the other area in the box below. (Written responses not included) 6. Please provide any additional comments you have on OEC’s efforts to address FirstNet’s nationwide public safety broadband network as part of interoperable emergency communications. (Written responses not included) 7. What, if anything, could OEC do to further address FirstNet’s nationwide public-safety broadband network in its interoperable emergency communications efforts? (Written responses not included) 8. In your opinion, to what extent will OEC have a role for ensuring interoperable emergency communications once FirstNet’s nationwide public-safety broadband network is fully operational? 8a. Please explain your response to question 8 in the box below. (Written responses not included) The questions in this section ask your opinion about OEC’s efforts to help the public safety community improve interoperable emergency- communications capabilities. This section will be about other emerging technologies. 9. Should OEC address the following emerging technologies in its interoperable emergency communications efforts? Wireless Local Area Networks (e.g., Wi-Fi) 9a. If you responded “Yes” to other, please specify in the box below. (Written responses not included) 10. In your opinion, how important is it for OEC to incorporate emerging technologies into the following areas? Please specify the other area in the box below. (Written responses not included) 11. To what extent has OEC incorporated emerging technologies into the following areas? Please specify the other area in the box below. (Written responses not included) 12. In your opinion, how useful have OEC’s efforts to incorporate emerging technologies into the following areas been in helping your state address challenges with its emergency communications? Please specify the other area in the box below. (Written responses not included) 13. Please provide any additional comments you have on the usefulness of OEC’s efforts to incorporate emerging technologies into interoperable emergency communications. (Written responses not included) 14. What, if anything, could OEC do to further incorporate emerging technologies into its interoperable emergency communications efforts? (Written responses not included) The following questions are about OEC’s communication efforts with SWICs and the public safety community. 15. In your opinion, how well does OEC communicate to SWICs training opportunities in the following areas? Emerging technologies (i.e., Wi-Fi, NextGen 911, etc.) 15a. If you responded to other, please specify in the box below. (Written responses not included) 16. How satisfied or dissatisfied are you with the communication efforts from the following OEC organizational levels? 16a. If you responded to other, please specify in the box below. (Written responses not included) 17. In your opinion, are there additional tools or approaches that OEC could use to improve communication with SWICs and the public-safety stakeholder community? 17a. Please identify and describe additional tools and approaches in the box below. (Written responses not included) 18. In your opinion, does OEC face any challenges that affect its ability to meet the needs of the public safety community? 18a. Please explain in the box below. (Written responses not included) The following questions ask your opinion about SAFECOM grant guidance for interoperable emergency communications equipment. OEC develops annual SAFECOM guidance in an effort to provide current information on emergency communications policies, eligible costs, best practices, and technical standards for state, local, tribal, and territorial grantees investing federal funds in emergency communications projects. 19. In your opinion, how clear are the following aspects of the SAFECOM grant guidance for interoperable emergency communications equipment? 19a. If you responded to other, please specify in the box below. (Written responses not included) 20. In the past 2 years, has your state developed supplemental statewide guidance to clarify the SAFECOM grant guidance for interoperable emergency communications equipment? 20a. Please explain in the box below, why your state developed supplemental statewide guidance. (Written responses not included) 21. In your opinion, is there a need to improve the SAFECOM grant guidance for interoperable emergency communications equipment? 21a. If yes, please explain in the box below. (Written responses not included) 22. If you would like to expand upon any of your responses to the questions above, or if you have any other comments about OEC’s interoperable emergency communications efforts, please write them in the box below. (Written responses not included) In addition to the individual named above, Sally Moino (Assistant Director); Ray Griffith (Analyst in Charge); Josh Ormond; Cheryl Peterson; Kelly Rubin; Andrew Stavisky; Sarah Veale; Michelle Weathers; and Ralanda Winborn made key contributions to this report.", "summary": "Public-safety communications systems are used by thousands of federal, state, and local jurisdictions. It is vital that first responders have communications systems that allow them to connect with their counterparts in other agencies and jurisdictions. OEC offers written guidance, governance planning, and technical assistance to help ensure public-safety entities have the necessary plans, resources, and training to support emergency communications. FirstNet, an independent authority within the Department of Commerce, is establishing a public-safety network. GAO was asked to review OEC's efforts related to interoperable emergency communications. This report examines (1) OEC's and FEMA's collaborative efforts to develop grant guidance; (2) how OEC incorporates FirstNet's network and other emerging technologies into its plans and offerings; and (3) the extent to which OEC has assessed its methods of communication. GAO evaluated OEC's and FEMA's coordination against GAO's leading practices for interagency collaboration; surveyed all 54 state-designated SWICs; evaluated OEC's communications efforts against federal internal control standards; and interviewed officials that represented various areas of public safety. The Department of Homeland Security's (DHS) Office of Emergency Communications (OEC) and the Federal Emergency Management Agency (FEMA) collaborate on grant guidance to help public-safety stakeholders use federal funds for interoperable emergency communications. GAO found that OEC's and FEMA's efforts generally align with GAO's leading practices for effective interagency collaboration. For example, OEC's and FEMA's memorandum of agreement and standard operating procedures articulate their agreement in formal documents, define their respective responsibilities, and include relevant participants. During this review, the agencies established a process to monitor and assess grantees' compliance with the grant guidance. However, because the grants for 2018 were not yet awarded at the time of GAO's review, GAO was unable to assess the effectiveness of the new process. OEC incorporates the First Responder Network Authority's (FirstNet) nationwide public-safety broadband network and other emerging technologies into various offerings such as written guidance, governance planning, and technical assistance. Public-safety organizations GAO interviewed and statewide interoperability coordinators (SWIC) GAO surveyed were generally satisfied with OEC's communication efforts. OEC has not assessed its methods for communicating with external stakeholders. According to federal internal control standards, management should externally communicate the necessary quality information to achieve the entity's objectives and periodically assess its methods of communication so that the organization has the appropriate tools to communicate quality information on a timely basis. Some SWIC survey respondents and public-safety representatives identified an opportunity for OEC to improve its methods of communication. For example, 26 of the 54 SWICs responded that OEC could use additional tools or approaches, such as social media, for improving communication with its stakeholders. In addition, public-safety officials reported that they have missed training because they were unaware of opportunities. Because OEC has not assessed its methods of communication, OEC may not be using the best tools and approaches to provide timely information on training opportunities, workshops, and other emergency communications information to the public-safety community. OEC should assess its methods of communication to help ensure it is using the appropriate tools in communicating with external stakeholders. DHS concurred with the recommendation.", "document_type": "gao"}
{"report": "The Judicial Conference of the United States is the national policy-making body of the federal courts. The Chief Justice of the United States is the presiding officer of the Judicial Conference. The Conference operates through a network of 20 committees, including the Committee on Financial Disclosure. The Judicial Conference delegated authority to redact information from a financial disclosure report to the Committee on Financial Disclosure. Upon request from a judicial official, the committee, in consultation with the USMS, redacts the information when it decides that revealing such personal or sensitive information could endanger the judicial official or a member of his or her family. Responsibilities of the Committee on Financial Disclosure include reviewing reports filed, adjudicating requests for redactions of information from the report, approving and modifying reporting forms and instructions, and monitoring the release of reports to ensure compliance with statute and the committee’s guidance. The Judicial Conference of the United States is responsible for implementing the judiciary’s redaction authority in a manner that provides judicial officials with the intended security measures without compromising timely public access to judicial officials’ financial disclosure reports. AOUSC is the agency within the judicial branch that provides a broad range of legislative, legal, financial, technology, management, administrative, and program support services to federal courts. It is responsible for carrying out Judicial Conference policies, and one of its primary responsibilities is to provide staff support and counsel to the Judicial Conference and its committees, including the Committee on Financial Disclosure. The Director of AOUSC serves as the Secretary to the Judicial Conference and is an ex officio member of the Executive Committee. The Ethics in Government Act of 1978, as amended, requires specified judicial, legislative, and executive branch officials to file annual financial disclosure reports in the spring of each year. These reports include financial information for the previous calendar year. Financial disclosure reports are made up of nine parts—positions, agreements, non- investment income, reimbursements, gifts, liabilities, investments and trusts, explanatory comments, and certification and signature. (See appendix I for a copy of a blank annual financial disclosure report). In addition to filing an annual report, covered judicial officials are required to file financial disclosure reports when nominated (nomination report); within 30 days of taking office (initial report); and within 30 days of leaving their position (final report)—see table 1. Federal law also requires that copies of judicial officials’ financial disclosure reports be made available, upon written request, to members of the public. Judicial officials may request that certain information be redacted before their financial disclosure reports are sent to the requesting individuals. The judiciary’s authority to redact information from financial disclosure reports was established in 1998 and was initially authorized for a 3-year period. That legislation also instituted an annual congressional reporting requirement for the judiciary on the operation of the redaction authority. Over the past 20 years, the judiciary’s redaction authority and reporting requirement have been successively reauthorized for various periods of time, but have lapsed on occasion. The authority was most recently reauthorized on March 23, 2018 through the end of 2027. According to AOUSC officials, while the redaction authority lapsed, the Committee on Financial Disclosure did not grant any new redaction requests, but it did grant requests to continue redactions that were approved prior to December 31, 2017. The Judicial Conference, through its Committee on Financial Disclosure, has developed a multistep process for reviewing federal judges’ requests for redactions of information from their financial disclosure reports and requests for copies of these reports, as shown in figure 1. While the committee encourages judicial officials to request redactions at the time they file their financial disclosure reports, AOUSC officials stated that most redaction requests were made after judicial officials were notified that copies of their reports had been requested. A judicial official may request a redaction of information when his or her financial disclosure report is filed or after receiving a notification of a request for a copy of his or her financial disclosure report. When requesting a redaction, the judicial official must state specifically what information is sought to be redacted and the justification for the redaction. The Committee on Financial Disclosure will determine, in consultation with the USMS, if the information could endanger the judicial official or an immediate family member. For redaction requests involving information pertaining to the unsecured location of (1) a spouse’s employer, (2) a child’s school, or (3) a primary or secondary residence, a separate security consultation is not required based on an agreement AOUSC reached with the USMS memorialized in a 2004 letter that, in essence, serves as a security consultation. For all other types of information requested to be redacted, a further USMS security consultation is required. Taking into account the information provided by the judicial officials, as well as results from the USMS security consultations, members of the Subcommittee on Public Access and Security, a subcommittee under the Committee on Financial Disclosure, decide—by majority vote—to either grant (in whole or in part) or deny each redaction request. Such redactions are good until the end of the calendar year in which they are granted. The Committee on Financial Disclosure notifies the judicial official if the information requested to be redacted has been granted, granted in part, or denied. Judicial officials can appeal a redaction decision; however, according to AOUSC officials, there were no appeals from 2012 through 2016, the time period covered by our review. The Judicial Conference’s Committee on Financial Disclosure has developed an electronic report filing system, written guidance, and a compliance process to help ensure judicial officials file their financial disclosure reports. Specifically, in 2011, AOUSC switched from having judicial officials file financial disclosure reports in hard copy to electronic filing through an online electronic depository, Financial Disclosure Online Filing System (FiDO). AOUSC also uses a separate internal electronic database (LEGO) to track compliance with financial disclosure report filings. LEGO contains the entire database of judicial filers, including what reports should be filed, the dates financial disclosure reports are due, and which are in process. The Committee on Financial Disclosure stated in September 2014 that FiDO had been upgraded, but committee members continued to experience limitations with the system. For example, according to AOUSC officials, FiDO does not keep track of which reports are in process or when they are due. Accordingly, the committee members authorized an assessment to look for an alternative system that would meet their needs and, by 2016, had selected software currently being used by the government to be customized for the judiciary. According to AOUSC officials, the plan is for the Judiciary Electronic Filing System (JEFS) to replace both FiDO and LEGO and be used for filing financial disclosure reports and tracking compliance with filing requirements beginning in 2019. The Committee on Financial Disclosure also provides guidance to judicial officials to ensure that financial disclosure reports are filed correctly. The types of guidance provided include the Guide to Judiciary Policy, Filing Instructions for Judicial Officers and Employees, and a Step by Step Guide for the Preparation and Electronic Filing of Financial Disclosure Reports. Additionally, members of the Committee on Financial Disclosure are to review each filed financial disclosure report to confirm that required items have been sufficiently reported and that the filer is in compliance with applicable laws and regulations. In addition, for some sections, members of the committee will compare information provided in a filed report with what was reported in a prior year’s report to ensure the information reported is accurate and consistent. The Committee on Financial Disclosure also provides guidance on the process to be followed if a judicial official fails to file a required financial disclosure report. Specifically, the Guide to Judiciary Policy states that a late filing fee of $200 will be assessed if a report is filed more than 30 days after the report is due. Further, the Chairman of the Committee on Financial Disclosure is to write a letter to any noncompliant filer. In addition to the guidance described above, in 2013, the Committee on Financial Disclosure reported that it would establish specific procedures for securing filer compliance with all reporting requirements and the late filing assessments. In 2014, the Committee reported on the successful implementation of these new policies. Part of this effort included developing templates for three successive communications that are to be provided to a noncompliant filer. The communications reflect a progressively increasing level of urgency in language and content, culminating in explicit warnings that if a noncompliant filer does not comply, the matter can be referred to the Attorney General. From calendar years 2012 through 2016, more than 4,000 financial disclosure reports were required to be filed each year by judicial officials, as shown in table 2. Most of the reports filed were annual reports. According to AOUSC officials, as of March 2018, all annual financial disclosure reports required to be filed from calendar years 2012 through 2016 were filed, except for one for calendar year 2015. Additionally, all nominee and initial financial disclosure reports required to be filed during this time period were filed, and all but one final financial disclosure report, for calendar year 2016, were filed. The AOUSC officials stated that the remaining final report is still pending and the compliance process is being followed to ensure the report will be filed. The judiciary is complying with the Judicial Conference’s Guide to Judiciary Policy (Volume 2, Part D, Chapters 3-4), which sets forth the process for releasing financial disclosure reports. First, members of the public may request financial disclosure reports by submitting Form AO 10A (see appendix II for a blank copy of the Form AO 10A). The Committee on Financial Disclosure notifies the judicial official that a Form AO 10A has been received and provides the official with a copy. At that time, the judicial official has up to 10 days to decide whether or not to request that information from the financial disclosure report be redacted. Once the members of the Subcommittee on Public Access and Security have reviewed any redaction requests and any accompanying USMS security consultation results, the members vote on whether or not to grant redactions and then forward the results to AOUSC staff for final processing. In March 2017, the Judicial Conference approved the release of financial disclosure reports by electronic storage device free of charge in order to expedite the release of requested reports. As a result, once AOUSC staff receive the redaction decisions from the Subcommittee, AOUSC staff are to ensure that approved redactions are made to the financial disclosure reports, and then download the reports to electronic storage devices to mail to the requesting parties. The AOUSC received, on average, about 70 requests for copies of judicial officials’ financial disclosure reports each year from calendar years 2012 through 2016 using the AO 10A request form. The form can include a request for the financial disclosure report of one judicial official, or for multiple judicial officials. Additionally, the form could include a request for multiple years of financial disclosure reports. Based on the AO Form 10As received from calendar years 2012 through 2016, AOUSC released approximately 16,000 financial disclosure reports. The number of financial disclosure reports released each year varied during this time period, as shown in table 3. According to AOUSC officials, the number of financial disclosure reports released each year varies based on the number of requests received and the time of year the requests are submitted. For example, a requester might submit a Form AO 10A late in the calendar year and the requested reports could be released the following calendar year based on how long it takes to process the request. AOUSC officials noted that there are two organizations that have requested copies of the financial disclosure reports for all federal judges every year. In 2016 AOUSC received the requests late in the year and, therefore, were not able to release the reports until 2017. The number of judicial officials who requested redactions represents a small percentage of the total number of financial disclosure reports filed in recent years. As shown in table 4, the number of redaction requests ranged from a low of 112 in 2014 to a high of 162 in 2012 and 2015. For calendar years 2012 through 2016, there were a total of 716 requests for redaction of information from judicial officials’ financial disclosure reports—711 from judges and 5 from judicial employees—with a yearly average of about 143 redaction requests. In particular, for calendar years 2012 through 2016, judicial officials’ redaction requests accounted for, on average, 3.2 percent of the total financial disclosure reports filed during this time period, as shown in table 5. When we segregated the results by judges and judicial employees, we found that, on average, 5.8 percent of judges requested redactions compared to 0.1 percent of judicial employees over the 5 year time period. Of the 3.2 percent of financial disclosure reports that included redaction requests made from 2012 through 2016, on average, about 85 percent were granted, 3 percent were partially granted, and 12 percent were denied, as seen in figure 2. We analyzed AOUSC data on redaction requests made from calendar years 2012 through 2016 by type of information requested to be redacted and found that the majority (about 76 percent) of the requested redactions pertained to information related to the unsecured location of a judicial official or an immediate family member. The next biggest category of information requested to be redacted was the “other” category, with 10.4 percent. Three categories—asset value, gifts, and reimbursement—each accounted for less than 1 percent of the redaction requests, as shown in Figure 3. We requested copies of the annual redaction reports submitted to Congress for calendar years 2012 through 2016 and determined that AOUSC had not submitted the annual redaction reports to congressional committees of jurisdiction in a timely manner. Specifically, we found that AOUSC submitted the annual report covering 2012 in May 2014 and submitted four annual reports (for calendar years 2013 through 2016) in February and August of 2017, as shown in table 6. For the 2013 and 2014 annual reports, AOUSC prepared and submitted them to the congressional committees of jurisdiction after we asked for them. AOUSC officials told us that they could not find evidence that they had submitted the annual reports for calendar years 2013 and 2014 to the committees of jurisdiction in a timely manner. However, AOUSC staff sent a 5-year report to congressional committees of jurisdiction in March 2017 that included information on redaction requests and results for calendar years 2012 through 2016. Thus, the congressional committees of jurisdiction had received no reports from AOUSC on redaction requests and results from May 2014 to February 2017. While the Ethics in Government Act of 1978, as amended, does not set a specific submission date, it requires that AOUSC submit an annual report (i.e., occurring once every year) to congressional committees of jurisdiction on the operation of the judiciary’s redaction authority. As shown in table 8 above, AOUSC did not submit an annual report every year, and there was an interval of almost three years (from May 2014 to February 2017) in which there is no record of AOUSC providing any annual redaction reports to Congress. AOUSC officials stated that although there are no reporting time frames specified in legislation for preparing and submitting the reports to the congressional committees of jurisdiction (other than annual submission), beginning in 2016, AOUSC staff began to work on preparing the redaction report for the previous year by February of the following year. The AOUSC officials acknowledged, though, that they have not implemented a formal process, with designated steps and time frames, to ensure they consistently produce the annual redaction reports in a timely manner. The AOUSC officials also stated that since 2013, the Financial Disclosure Office—the office responsible for preparing the reports—had experienced a series of changes in management, as well as staff turnover in key positions, which contributed to the inconsistent process for developing and completing the annual redaction reports in a timely manner. Given that AOUSC experienced staff turnover in the past, and could experience it in the future, it is important that AOUSC has the necessary controls in place to overcome staffing issues and ensure that it consistently prepares and submits the annual redaction reports to the committees in a timely manner. Standards for Internal Control in the Federal Government state that management should implement control activities by documenting responsibilities through policies for each unit. With guidance from management, each unit determines the policies necessary to achieve the desired objectives. Management should also define objectives in specific terms so they are understood at all levels. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. AOUSC officials stated that the annual reports cannot be compiled until after the close of the previous calendar year and after all data have been reviewed. While this is true, without a formal process for ensuring that staff complete the reports in a timely manner, there are no assurances that the process will consistently occur on a regular schedule, or at all. Implementing a more formal process, with specified steps and time frames, would ensure staff are fully informed of their responsibilities and allow AOUSC to be better positioned to provide the congressional committees of jurisdiction with timely redaction reports that can be used to conduct oversight of the federal judiciary’s use of its redaction authority. The Ethics in Government Act of 1978, as amended, serves the public interest by providing access to selected information from financial disclosure reports filed by judicial officials that could represent conflicts of interest for these officials. At the same time, the law accounts for the security threats faced by judicial officials and grants the judiciary authority to redact personal and sensitive information from their financial disclosure reports if a finding is made that the release of the information could endanger these officials or members of their families. Thus, the Judicial Conference has a responsibility to balance the goals of safeguarding judicial officials’ information and providing timely public access. The Judicial Conference developed a compliance process to ensure judicial officials were filing financial disclosure reports that adhere to applicable laws and regulations, and also had procedures in place to ensure the public had access to copies of judicial officials’ financial disclosure reports when requested. While the Ethics in Government Act of 1978, as amended, provides the Judicial Conference with authority to redact information that could pose a security threat to judicial officials, this authority has been used sparingly. From 2012 through 2016, about 3.2 percent of financial disclosure reports included a redaction request and about 85 percent of those were approved. Nevertheless, the law requires AOUSC to submit an annual report to congressional committees of jurisdiction on the operation of the judiciary’s redaction authority, including information on the total number of reports with redactions and the types of information redacted. Our review of available guidance and documentation shows that AOUSC has not implemented a formal process for producing annual redaction reports and has not submitted these reports to Congress in a timely manner. Implementing a more formal process, with specified steps and timeframes, would allow AOUSC to be better positioned to provide congressional committees of jurisdiction with the required annual redaction reports that can be used to conduct oversight of the federal judiciary’s use of its redaction authority. This is particularly important given that Congress recently passed an extension to the judiciary’s redaction authority through the end of 2027. The Director of AOUSC should develop and implement a formal process, with specified steps and associated time frames, to better ensure that required annual redaction reports are completed and submitted to Congress within the following year. In April 2018, we requested comments on a draft of this report from DOJ, USMS, and AOUSC. Neither DOJ nor USMS had any comments. AOUSC provided technical comments, which we have incorporated into the report, as appropriate. In particular, based on AOUSC comments, we amended the report title to provide greater clarity into the subject matter of the report and added additional text to the conclusions section to better address all aspects of the report’s findings. In addition to its technical comments, AOUSC provided an official letter for inclusion in the report, which can be seen in appendix III. In its letter, AOUSC stated it concurred with the recommendation and will determine how best to implement a more formalized process to better ensure it can submit annual redaction reports to Congress in a timely manner. We are sending copies of this report to the Administrative Office of the U.S. Courts, the Attorney General, the United States Marshals Service, selected congressional committees, and other interested parties. In addition, this report is also available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any further questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributions to this reported are listed in appendix III. In addition to the contact named above, Christopher Conrad (Assistant Director) and Valerie Kasindi (Analyst-in-Charge) managed this assignment. Kristiana Moore, Dominick Dale, Melissa Hargy, Eric Hauswirth, Amanda Miller, Jerry Sandau, and Janet Temko-Blinder made key contributions to this report.", "summary": "Under the Ethics in Government Act of 1978, as amended, federal judges and certain judicial employees must file financial disclosure reports that can be made available to the public. Federal law accounts for the potential security risks of the judiciary and authorizes the redaction of information from judicial officials' reports if the Judicial Conference, in consultation with the United States Marshals Service (USMS), finds that revealing certain information could endanger judicial officials or members of their families. This report addresses the following for calendar years 2012 through 2016, the most recent years for which full data were available: (1) Actions taken by the Judicial Conference to ensure judicial officials file financial disclosure reports, and the number of reports filed; (2) The judiciary's compliance with procedures for responding to requests for financial disclosure reports and the number of reports released; and (3) The number of redaction requests made, the types of information requested to be redacted, and the judiciary's consistency in reporting results to Congress in a timely manner. GAO interviewed AOUSC and USMS officials, reviewed relevant laws and guidance, and analyzed data on redaction requests. The Judicial Conference, the federal judiciary's principle policy-making body, developed an electronic filing system, guidance, and a compliance process to help ensure judicial officials file financial disclosure reports that adhere to applicable laws and regulations, and data provided by the Administrative Office of the U.S. Courts (AOUSC) show that more than 4,000 reports were required to be filed annually from 2012 through 2016. According to AOUSC officials, as of March 2018, all financial disclosure reports required to be filed from 2012 through 2016 were filed, except for one in 2015 and one in 2016. AOUSC officials are working with the filers to ensure these reports will be filed. The Judicial Conference established procedures for responding to requests for copies of financial disclosure reports, and the number of reports released has varied. From 2012 through 2016, AOUSC annually received, on average, about 70 requests for copies of judicial officials' reports and released approximately 16,000 reports during this time. Each request can vary—from a request for a single judicial official's report to a request for multiple judicial officials' reports. From 2012 through 2016, a small percentage of judicial officials requested redactions from their financial disclosure reports. On average, 3.2 percent of financial disclosure reports filed included a redaction request and about 85 percent of those requests were granted. Of the information requested to be redacted, about 76 percent was related to the unsecured location of a judicial official's spouse, child, or residence. AOUSC is required by federal law to submit annual reports to Congress on use of the judicial redaction authority, such as the number of reports with redactions and types of information redacted, but AOUSC has not consistently submitted the reports on an annual basis in recent years. GAO found that AOUSC does not have a formal process for preparing and submitting the reports to Congress. Implementing a more formal process, with specified steps and timeframes, would better position AOUSC to provide Congress with more timely reports. GAO recommends that AOUSC develop and implement a formal process, with steps and timeframes, to better ensure that required annual reports are submitted to Congress within the following year. AOUSC concurred with the recommendation.", "document_type": "gao"}
{"report": "VA provides education benefits to eligible veterans and their beneficiaries enrolled in approved programs of education and training to help them afford postsecondary education. VA staff conduct oversight of schools receiving these benefits. In addition, each year, VA contracts with state agencies to help provide this school oversight. In fiscal year 2017, there were about 14,460 schools receiving VA education benefits for about 750,000 veterans and their beneficiaries across the country. State agencies’ core oversight functions, as generally required by statute, VA regulations, and their VA contracts, include approval of schools to receive VA education benefits, annual compliance surveys of schools— which are reviews to ensure schools’ compliance with program requirements—and technical assistance to schools, among other things (see fig. 1). VA and state agencies both conduct annual compliance surveys of selected schools, which generally entail a visit to the school. For veterans to receive the education benefits, school employees must certify to VA that they are enrolled in classes and notify VA of any changes in enrollment. NASAA was founded to coordinate the efforts of state agencies and is managed and administered by an executive board and several leadership committees, such as a contract committee and a legislative committee. All members of NASAA leadership are also either directors or have other roles at individual state agencies. VA’s Education Service is led by a Director and is under the Veterans Benefits Administration. This office works with NASAA to prepare annual contracts to allocate federal funding and specify workload requirements for each state agency. For over a decade, funding provided by VA to state agencies remained at the same level of $19 million. In fiscal year 2018, VA allocated $21 million for state agencies—the first increase in funds allocated to states since fiscal year 2006 (see fig. 2). Each year, state agencies can also request supplemental funding from VA if their costs exceed their allocated funding amount. VA has the discretion to approve an agency’s request based on its justification of need and the amount of VA funding available for supplemental requests. NASAA officials said that supplemental funding is helpful, but that it is not a reliable funding source because there is no guarantee that VA will be able to provide states with the requested amount. According to NASAA officials, some state agencies also receive additional funding from their state governments if they request these funds, but many states do not provide this additional funding. NASAA officials also noted that in some cases, states do not want to provide their own funds to state agencies because their view is that the agencies already receive VA funding through their federal contracts. VA recently changed its method of allocating funding to state agencies. VA hired an external contractor to develop a new funding allocation method. Before fiscal year 2017, VA funded state agencies primarily based on the number of schools in the state with at least one veteran student receiving VA education benefits in the previous year. In fiscal year 2017, VA implemented a new funding allocation method. VA officials told us this new method was a significant improvement over the previous method they used, which was very limited. For example, VA officials said the prior funding method did not estimate how long it took state agencies to perform certain oversight activities. The officials said this limitation was a key reason they decided to develop a new funding method. VA’s new method to fund states more equitably is based on their work requirements, i.e., their school oversight activities and the amount of time needed to complete them. The new funding method factors in, among other things: the number of staff needed to complete a state’s workload in overseeing schools; national salary averages ($80,000 for professional and $50,000 for support staff), including benefits; a national travel allowance based on the number of professional staff required to complete work requirements; the number of schools receiving VA education benefits in the state; and the estimated time needed to review different school types, the type of review (such as approvals vs. compliance surveys), and the number of student veterans enrolled. VA, NASAA, and selected state agency officials we spoke with said that limited funding before and after the recent changes to the funding method has impacted state agencies’ ability to fulfill their oversight responsibilities in three areas: (1) ability to pay and train oversight staff, (2) ability to visit geographically dispersed schools due to travel costs, and (3) ability to provide technical assistance and training to schools. Under their contracts with VA, state agencies have been meeting their core school oversight functions, according to NASAA officials. VA and NASAA officials we interviewed, however, said state agencies have been underfunded for many years. They said states’ funding concerns and challenges existed prior to the new method to allocate funds to state agencies and remain despite a total funding increase to state agencies from about $19 million to $21 million in fiscal year 2018. NASAA officials we interviewed said some state agencies have difficulty paying for the number of staff they need because there is a mismatch between VA’s average salary and benefits used to calculate states’ funding and the actual salaries and benefits some state agencies are required to pay under state laws. VA officials acknowledged that some states have required salary and benefit levels that exceed the average levels used in VA’s new funding allocation method. VA’s new funding method uses an average salary of $80,000 (including benefits) for professional staff. VA officials noted that some states have annual salaries for professional staff of over $100,000 excluding benefits. A state agency official we spoke with said the salary and benefit costs for professional staff in her state average $130,000, with some salary and benefits costing up to about $150,000. The official said this can make it difficult for the state agency to be able to pay a sufficient number of staff, which hinders its ability to fulfill its VA-contracted oversight. In another case, a NASAA official said his state agency did not have enough funds to pay for a second full-time employee because the state’s required salary and benefits were higher than VA’s $80,000 allotment for professional staff. Limited funding for state agency oversight staff has led to state requests for additional funds, as well as higher turnover and less training of the staff. VA officials said that the primary reason that some state agencies requested supplemental funding from VA in fiscal years 2016 and 2017 was that their initial allocation was not sufficient to cover salary, benefits, and travel expenses. Some state governments have had to cover those costs, hoping that VA would reimburse the state at the end of the fiscal year, according to VA officials. In addition, some state agencies have had significant turnover due, in part, to the uncertainty about the amount of annual VA funding, according to NASAA officials. NASAA officials also said that funding amounts limit the professional development provided to state agency staff, including travel to conferences. VA officials said that they support professional development and routinely provide funding for travel to conferences. However, according to VA officials, VA has denied requests from state agencies for travel to additional, repetitious conferences during the same year. NASAA officials said limited VA funding also makes it difficult for state agencies in geographically large states to pay travel expenses to visit schools as part of their oversight responsibilities. For example, NASAA officials said state agencies in Alaska, Montana, and Washington find it difficult to afford mileage and hotel costs for school visits that require travelling long distances—sometimes over mountain ranges—and overnight stays. NASAA officials also said VA’s new funding method does not allocate sufficient funding for travel. Officials we interviewed at selected state agencies have had mixed experiences with travel costs. One state agency official told us her agency selected schools to visit that were physically near her office because of insufficient travel funds. In contrast, a state agency official in a geographically small state said the agency has sufficient funding to travel throughout the state to visit schools, mainly because overnight stays are unnecessary. VA and NASAA officials said some state agencies have been able to address travel costs by stationing agency staff in different parts of the state. VA officials, however, acknowledged that this is not possible in all states because some states require agency staff to be located in a central office. VA’s new funding allocation method calculates a national travel allowance for all states based on the total number of professional staff it estimates would be required to complete work requirements in all states. VA officials explained that this travel allowance does not account for individual differences in geographic size among states. VA officials said that in developing the new funding method, the contractor reviewed the historical travel costs of states and determined that a distinction by the geographic size of a state did not need to be factored into the funding method. The contractor based this decision on several factors, including that some state agencies: (1) paid their travel costs using state funds, not VA funds; (2) have located their staff in offices across the state and, as a result, their travel costs were lower than in other states; and (3) planned their travel so they visited schools within a short timeframe, which reduced travel costs. When faced with funding difficulties, many state agencies reduce their technical assistance to schools and outreach activities because they need to use available funds on salaries, benefits, and travel related to compliance survey and approval workloads, according to NASAA officials. For example, one state agency official told us her agency has significantly reduced its technical assistance to schools because it does not have the funds to travel across the large, rural state to provide it. A NASAA official said available funding has reduced his state agency’s ability to conduct outreach, such as connecting veterans with education and benefit resources, or holding in-person meetings to educate employers on providing apprenticeships to veterans using VA education benefits. NASAA officials also said that many state agencies have reduced the number of visits to train school employees on VA education benefits requirements. They noted that this training is important because it helps reduce over- and under-payments and the misuse of VA education benefits. A 2016 report from VA’s Inspector General estimated that VA makes $247.6 million in improper payments of VA education benefits annually, mostly over-payments. The Inspector General found that many of the improper payments occurred because school employees provided VA incorrect or incomplete information on student enrollment. NASAA officials told us that they continue to have concerns that the new funding method’s time estimates for completing certain oversight activities are inaccurate and, as a result, this method does not allocate sufficient funds. For example, NASAA officials said the funding method does not properly estimate the time it takes state officials to travel to schools and carry out oversight functions, including conducting certain school approvals, and providing schools with technical assistance and training. NASAA officials said the time estimates used to fund approvals are inaccurate and need to be revised because different types of schools and education programs—including flight schools, degree programs, and non- degree programs—take different amounts of time to review and approve. For example, NASAA officials said that state agencies need less time to conduct an approval for an on-the-job training program than for a large public university. VA officials said they are aware of the concerns that NASAA and state agencies have raised that the time estimates for oversight in the new funding method are inaccurate—with some being too high and others too low. They are also aware that NASAA and state agencies believe that the analysis to develop these estimates should have more accurately factored in the time needed to approve and review different types of schools and education programs. To address the concerns states have raised about its new funding allocation method, VA provided documentation to us of its plans to hire a contractor in fiscal year 2018 to improve and update its funding method. In September 2018, VA hired a contractor to carry out a contract with a 6- month period of performance. VA reported that the contractor would review the new funding allocation method to determine if any specific changes are needed to more equitably distribute funding across state agencies. Specifically, VA officials said the contractor would review the accuracy of the funding method’s allowances for state agencies’ salary, benefits, and travel costs, and its time estimates for states to conduct oversight activities to determine if changes are needed. VA officials reiterated that allowances for salaries and travel, and the time estimates are critical factors in the funding method. VA officials noted, however, that regardless of how VA divides the funding up among the state agencies, the total amount of program funding to these agencies will remain the same within any one fiscal year. States have the option of not renewing their school oversight contracts with VA, and two have exercised this option in recent years, citing insufficient funding levels from VA to fulfill their responsibilities. When this happens and the state withdraws from its school oversight role, VA must perform all oversight responsibilities for VA education benefits in that state. New Mexico—which currently has 4,754 veteran students and 107 schools receiving VA education benefits—did not renew its contract with VA in fiscal year 2018 because funding was not sufficient to cover its costs for salaries, travel, and technical assistance to schools, according to VA officials (see text box). New Mexico Did Not Renew Department of Veterans Affairs (VA) Contract Due to Lack of Funding New Mexico’s state agency began to face significant funding difficulties starting in fiscal year 2015, according to a state official, and it did not renew its VA contract to oversee schools receiving VA education benefits in fiscal year 2018. Although the state agency was able to conduct the oversight activities required by its VA contract in fiscal year 2017, the official said the agency had to reduce its staff, and the one remaining employee was frequently required to work long hours and weekends to meet contract requirements. Further, New Mexico did not receive adequate funding for travel costs to visit schools in its geographically large, rural state, the state official noted. As a result, the official said the state agency opted not to renew its VA contract in fiscal year 2018. VA and New Mexico officials have differing views on how well VA staff will be able to provide effective oversight of schools receiving veterans’ education benefits in the state. In January 2018, New Mexico state officials stated that although VA regional staff have assumed the former state agency’s oversight responsibilities, they are unlikely to be able to provide the same level of oversight the state agency did because the VA staff are also responsible for overseeing schools in three other states in addition to New Mexico. As a result, state agency officials said schools in New Mexico would likely receive fewer oversight visits. VA officials, on the other hand, believe that their regional staff are handling oversight of schools in New Mexico effectively, although they acknowledged the staff may be conducting fewer compliance surveys and providing schools less technical assistance. Other states have also expressed concerns about their ability to conduct oversight given available funding levels. For example, Alaska—which currently has 4,011 veteran students and 53 schools receiving VA education benefits—also chose not to contract with VA for about 5½ years (fiscal year 2012 through January 2017), according to VA officials and the director of Alaska’s veterans affairs office. Alaska’s director also said that a major reason that Alaska did not renew its contract was limited VA funding. During this time, regional VA staff based in Oklahoma handled Alaska’s oversight, which VA officials said often had to be conducted remotely given that schools are spread throughout the state, and travel to those areas can be expensive as well as challenging given weather conditions. VA officials said that VA’s presence was not as strong in Alaska as in other states because VA staff overseeing Alaska are located in another state and in a different time zone. Further, according to VA data for fiscal years 2014 and 2015, VA staff were unable to complete all the compliance surveys they were assigned in Alaska. In addition, California officials told us they almost did not renew their oversight contract in fiscal year 2018 due in part to funding concerns. California has the largest number of veteran students (86,926) and schools receiving VA education benefits (1,091) of any state, yet state agency officials told us that they lacked sufficient funding to pay salaries for staff to conduct necessary oversight of these schools, including approvals and technical assistance visits. VA officials noted, however, that California receives the most funding of any state and has received the greatest increases of any state in the last two years. Although VA stepped in to provide oversight of schools in New Mexico and Alaska, the agency does not have a plan for how it will oversee additional schools if other states choose not to renew their oversight contracts. VA officials told us their current approach is to assign the state agency’s workload to regional VA staff who already have their own school oversight responsibilities. However, providing oversight in states without a contract in addition to VA staffs’ existing workload is likely to stretch agency resources. For example, existing VA regional staff may not be able to oversee all schools in states with a large number of schools. In addition, VA staff may be strained in providing oversight in geographically large states where schools are widely dispersed because school visits would be time consuming and costly. VA has begun some initial steps to identify and assess how it would handle additional oversight. In August 2017, VA began working with its Office of General Counsel regarding what options the agency has when a state agency chooses not to contract with VA, and the Office issued a legal opinion in September 2017. In April 2018, VA formed a workgroup, which also met a few times in May and once in July, to prepare a draft paper of possible scenarios and response options based on this legal opinion. In August 2018, the workgroup followed up with the field supervisor responsible for approval, compliance, and liaison and produced a new draft paper of scenarios and options. As of September 2018, VA’s Education Service Director is holding discussions with VA leadership regarding assessing the options and developing a formal plan. However, VA has not completed an assessment to ensure the agency can handle additional school oversight responsibilities in states that do not renew their contracts and has yet to prepare a contingency plan. Federal standards for internal control state that agencies should identify, assess, and respond to risks related to achieving objectives. After identifying risks, the agency should assess the significance—or effect on achieving the objective—of these risks, which provides a basis for responding to the risks. Then, in responding to these risks, the standards state that agencies should define contingency plans for assigning responsibilities if key roles are vacated to help the entity continue to achieve its objectives. Specifically, if the agency relies on a separate organization to fulfill key roles, then the agency should assess whether this organization can continue in these key roles, identify others to fill these roles as needed, and implement knowledge sharing with replacement personnel. Without fully identifying and assessing the risks of additional state withdrawals, and without a contingency plan to address how VA can oversee additional schools, the agency runs the risk that if more states withdraw from their oversight responsibilities, then VA will be unprepared to oversee the schools in these states. Each year, VA uses findings from prior compliance surveys and other information to develop a strategy for prioritizing a sample of schools to receive annual reviews, according to VA officials. VA is generally required by statute to conduct an annual compliance survey of schools with 20 or more enrolled veterans at least once every 2 years. VA officials said with the help of state agencies, VA uses these surveys to determine if schools are meeting legal requirements and are using VA education benefits funds appropriately, including whether they are making over- or under-payments on students’ education expenses. According to a VA document, in conducting the surveys, VA and state agencies review various statutory and regulatory requirements, such as the accuracy of a school’s student enrollment records, tuition payments, and whether a school has corrected deficiencies identified in previous compliance surveys. According to VA officials, the agency has taken steps to incorporate risk factors into its compliance survey strategy in response to recommendations from our prior work and recent VA studies. The examples below show how VA has responded to recommendations to use risk in overseeing schools. In 2011, we recommended that VA adopt risk-based approaches to ensure proper oversight of schools. As part of the agency’s official response to this recommendation, VA reported to us that in fiscal year 2012 the agency began prioritizing compliance surveys at for-profit schools. Further, VA officials said that the agency added this focus to its written annual compliance survey strategy for fiscal years 2016 and 2017 based on prior years’ compliance survey findings and congressional priorities. In a 2016 report, VA’s Inspector General recommended that VA consider particular risk factors in selecting schools for compliance surveys. Specifically, the report recommended that VA prioritize schools at risk of payment errors including (1) making errors resulting in over- or under-payments of VA education benefits, and (2) neglecting to recover unspent VA education benefit funds, such as when students receive funds but then reduce their course loads or repeat classes. In response, VA officials stated that the agency began using data on these payment errors to prioritize schools with high error rates. For example, VA officials said that when data revealed that flight schools were particularly prone to such errors—along with charging high tuition and fees and failing to meet some VA education benefits criteria, among other issues—VA decided to prioritize these schools for compliance surveys in its fiscal year 2018 strategy (see text box). VA’s Compliance Survey Strategy for Schools Receiving VA Education Benefits for Fiscal Year 2018 The Department of Veterans Affairs (VA) is generally required by statute to conduct an annual compliance survey of schools receiving VA education benefits and that have 20 or more enrolled veterans at least once every 2 years. For its fiscal year 2018 compliance survey strategy, VA prioritized the following types of schools for review: 100 percent of schools with flight programs; 100 percent of schools with fewer than 20 veterans, with priority to those that had not received surveys for the longest time period; 100 percent of federal on-the-job training and apprenticeship programs; schools with serious deficiencies identified in previous compliance surveys; schools newly approved for the program with enrolled VA beneficiaries; schools that have never received a compliance survey (for example, VA officials said some schools have not received a compliance survey due to a shortage of VA oversight staff or due to the fact that in prior years, the statute did not require VA to conduct compliance surveys at schools with fewer than 300 veterans); and a sample of foreign schools receiving VA education benefits for students from the United States (conducted by VA via remote survey). An August 2017 study, conducted by an external contractor hired by VA, reviewed ways to strengthen VA’s compliance survey process and outcomes. The report found that VA has not placed enough emphasis on improving school compliance over time. For example, VA has historically prioritized completing a certain number of surveys each year rather than ensuring that schools are actually demonstrating compliance. Among other recommendations, the report identified the need for VA to more effectively use data to measure schools’ compliance over time and to establish priorities to select schools for compliance surveys based on their risk level. As of July 2018, VA officials said that the agency has begun analyzing the study’s recommendations to improve its compliance survey process and that its new compliance survey strategy for fiscal year 2019 and future years will address many of these study recommendations. VA officials said that in 2014 they began conducting targeted reviews of schools in response to complaints received from students, government officials, or others. VA’s policies and procedures state that, in addition to complaints, other factors that could trigger a targeted review include compliance survey results, management mandates, and a school self- reporting a violation, among others. VA officials said, however, that VA has not initiated a targeted review in response to anything other than a complaint. To determine whether to conduct a targeted review, VA officials said they review each complaint and may corroborate it with other sources of information, such as compliance survey data on that school and input from states or other agencies. According to VA’s policies and procedures, the focus of targeted reviews varies based on the nature of the complaint, and VA assigns a higher priority to complaints that are higher risk, i.e., those that allege fraud, waste, or abuse (see table 1). As of July 2018, VA and state agencies have conducted about 160 targeted reviews of schools in response to complaints since 2014, resulting in the withdrawal of program approval for 21 schools, according to data provided by VA officials. VA has taken steps to adopt a new risk-based approach to overseeing schools receiving VA education benefits, including selecting schools based on risk factors such as those identified in the Colmery Act. Among other things, the Colmery Act explicitly authorizes VA to use the state agencies for risk-based surveys and other oversight based on a school’s level of risk, and identifies specific risk factors that can be used for school oversight (see text box). Risk Factors Identified in the Harry W. Colmery Veterans Educational Assistance Act of 2017 The Colmery Act explicitly authorizes the Department of Veterans Affairs (VA) and state agencies to use risk-based surveys (reviews) in oversight of schools receiving VA education benefits. The Colmery Act identifies specific risk factors that can be used for school oversight, but does not require VA or state agencies to use these risk factors in their oversight of these schools: rapid increases in veteran enrollment, increases in the amount of VA education benefits a school receives per veteran student, volume of student complaints, rates of federal student loan defaults of veterans, veteran completion rates, deficiencies identified by accreditors and other state agencies, and deficiencies in VA program administration compliance. VA officials told us that they have not yet used the risk factors cited in the Colmery Act in conducting their compliance surveys. VA officials acknowledged, however, that adopting a more risk-based oversight approach could help prevent problems, such as some schools’ use of deceptive practices in recruiting veterans and receipt of overpayments from VA. VA officials said that the agency is exploring risk factors to consider in developing its compliance survey strategy for selecting schools in fiscal years 2019 to 2021. State agency officials we spoke to said that they use the risk factors cited in the Colmery Act to varying degrees in their oversight of schools receiving VA education benefits. For example, one state agency official said that he tracks all of the risk factors cited in the Colmery Act except the rates of veterans’ student loan defaults. On the other hand, a NASAA official said that her state agency tracks the volume of student complaints and deficiencies identified by accreditors and other state agencies. States generally have limited opportunities to select specific schools for compliance surveys, because VA develops the annual priorities for compliance surveys, according to NASAA officials. In some cases, NASAA officials told us, state agency staff work with regional VA staff to select schools for visits based on VA’s priorities. VA has recently taken steps to explore a new risk-based approach to oversee schools receiving VA education benefits that would be in addition to compliance surveys, according to VA officials. Specifically, VA officials told us that VA has participated in a joint working group with NASAA officials focused on developing a new type of school review in which VA would select schools based on specific risk factors, including those identified in the Colmery Act. NASAA officials told us they were supportive of VA’s efforts in this area. As of February 2018, NASAA officials had drafted a possible approach to state agencies’ oversight to monitor one risk factor—rapid increases in veteran enrollment for VA’s consideration. VA officials told us the working group plans to build on this effort in reviewing other risk factors. In May 2018, VA prepared a draft charter for the working group, which, among other things, outlines the potential scope and implementation of new risk-based surveys, and provided it to NASAA for review. Documentation we reviewed from a VA and NASAA working group meeting held in May 2018 stated that in its upcoming meetings, the working group plans to continue developing the charter, including agreeing to roles and responsibilities, establishing the risk factors to be used, and identifying data sources related to these risk factors. VA officials said that at an August 2018 joint working group meeting, the charter was deemed to have served its purpose and the decision was made to establish a risk-based review policy and procedures moving forward. According to VA officials, as of mid-October 2018, VA used this strategy to select five schools to undergo risk-based reviews. VA officials said they expect these five reviews to be completed by late December 2018. VA and state agencies coordinate to divide responsibility for who will conduct compliance surveys of schools receiving VA education benefits in a variety of ways, according to VA and NASAA officials. After VA provides state agencies information about its annual strategy for selecting schools for these surveys, VA regional staff work with state agency staff to select the specific schools for that year, according to these officials. NASAA officials we interviewed said their working relationships with regional VA staff are excellent—they have good communication and understand and help each other. For example, one state official we interviewed said the state agency and regional VA staff in the state coordinate to make sure they alternate who visits which schools to obtain multiple perspectives. They also have discussions before and after each visit, the official said. In some cases, VA officials said, VA and state agency officials collaborate to conduct compliance surveys together. VA also provides information to states on how to conduct and report on compliance surveys, including a checklist to help guide the states’ review of items tied to specific statutory requirements, as well as a template for reporting compliance survey results. VA leadership also holds conferences twice a year that NASAA and state agency staff can attend, and communicates throughout the year on school oversight issues, according to officials from these entities. In addition, VA officials told us they collaborate with NASAA on providing training for state agency staff that NASAA provides through the National Training Institute. According to NASAA’s website, the Institute provides an overview of state agency responsibilities and activities, including information on public laws, accreditation, VA education benefits approval criteria, and compliance surveys. New state agency staff must attend this training, according to NASAA officials. NASAA officials told us that VA has not provided state agencies with sufficient information on how to conduct targeted school reviews in response to complaints, and as a result it is difficult for states to conduct these types of reviews. VA officials acknowledged this lack of information. NASAA officials reported that many state agencies want more direction on how to conduct and report on targeted school reviews in response to complaints. A policy and procedures document on targeted school reviews that VA developed in 2014 describes the criteria to use in determining when to conduct targeted, complaint-based reviews, including what issues to prioritize. VA officials acknowledged, however, that the document is outdated and does not provide sufficient detail. VA officials said the agency is in the process of revising the document to provide more clarity. In July 2018, VA provided a draft document to us showing the changes it plans to make in its policy and procedures on targeted, complaint-based school reviews, which includes specific information about how state agencies should conduct and report on these reviews. As of late October 2018, VA officials said these procedures were undergoing internal review. VA officials said they are open to state agency feedback on the new procedures. In addition, VA officials said they are currently updating their database for complaint-based reviews to add specific, standard data fields for states to use in reporting the results of these reviews. VA officials told us that the revised database and procedures will allow state agencies to develop their own template to electronically report information collected during these reviews in a standardized way. We believe that when implemented, VA’s new procedures could help enhance VA’s and state agencies’ efforts in responding to complaints about schools receiving VA education benefits. It is critical for VA to ensure that schools receiving VA education benefits are complying with program requirements and that veterans receive the education they have been promised. Because funding concerns have led to states withdrawing from their oversight roles, decisions by other states to not renew their school oversight contracts could result in VA taking on additional school oversight responsibilities. However, VA has neither completed identification nor assessment of the risks posed by any future state withdrawals that could leave VA unprepared to conduct oversight in these states. Further, VA’s lack of a contingency plan for assuming the responsibilities of state agencies in these cases raises the risk that schools receiving VA education benefits would not be overseen and student veterans could be adversely affected. We recommend that the Secretary of Veterans Affairs direct the Under Secretary for Benefits to: (1) Complete efforts to identify and assess risks related to future withdrawals by state agencies in overseeing schools and (2) address these risks by preparing a contingency plan for how VA will oversee additional schools if more states choose not to renew their oversight contracts. (Recommendation 1) We provided a draft of this report to VA for review and comment. VA’s comments are reproduced in appendix I. VA agreed with our recommendation. VA also provided technical comments, which we considered and incorporated as appropriate. In addition, we provided relevant excerpts from a draft of this report to NASAA leadership for review and comment. NASAA provided technical comments, which we considered and incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Veterans Affairs and Education; and other interested parties. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Elizabeth Sirois (Assistant Director), Linda L. Siegel (Analyst-in-Charge), Jessica Ard, and Rachel Pittenger made key contributions to this report. Also contributing to this report were Susan Aschoff, James Bennett, Deborah Bland, Sheila R. McCoy, Jean McSween, Benjamin Sinoff, and Sarah Veale.", "summary": "In fiscal year 2017, VA provided about $11 billion in education benefits to about 14,460 schools to help eligible veterans and their beneficiaries pay for postsecondary education and training. VA typically contracts with state agencies to help it provide oversight of schools participating in this education benefit program. The Harry W. Colmery Veterans Educational Assistance Act of 2017 included a provision for GAO to review VA's and states' oversight of schools receiving VA education benefits. This report examines (1) how, if at all, the available level of funding to state agencies has affected states' and VA's ability to carry out their oversight responsibilities, (2) to what extent VA and state agencies use risk-based approaches to oversee schools, and (3) to what extent VA coordinates and shares information with the states to support their oversight activities. GAO reviewed VA documents; assessed VA funding data for fiscal years 2003-2018; interviewed VA and selected state agency officials; and reviewed correspondence between these officials. GAO interviewed officials from eight state agencies who were past or present officials at the association representing state agencies, and officials from three other states, including one that did not renew its contract with VA in fiscal year 2018. The Department of Veterans Affairs (VA) is responsible for overseeing schools nationwide that provide VA education benefits to veterans. To help provide this oversight, VA contracts with state agencies to oversee schools in their states and provide outreach and training to school officials and allocates them funding to cover the cost of oversight, outreach, and training activities. However, since fiscal year 2006, funding for oversight, outreach, and training has remained at about $19 million, and only recently increased in fiscal year 2018 to $21 million. State agency officials told GAO that the limited level of funding they have received from VA has been a long-standing problem that has strained their ability to (1) adequately cover staff costs, (2) pay for travel for school visits, and (3) provide needed technical assistance and training to the schools about VA education benefit requirements. As a result, a few states, such as New Mexico, have chosen to withdraw from their school oversight roles. When this happens, VA must take over the state agencies' oversight responsibilities. GAO found that assuming additional oversight responsibilities is likely to stretch VA's staff resources, especially in large states, where schools are geographically dispersed and school visits are time consuming and costly. VA has begun but has not completed an assessment of the risks that potential future state agency withdrawals could have on its ability to provide school oversight. Moreover, VA has not developed a contingency plan for how it will oversee more schools if additional states do not renew their oversight contracts. Federal standards for internal control state that agencies should identify and assess risks related to achieving objectives, and define contingency plans for assigning responsibilities if key roles are vacated. Until VA takes these steps, the agency runs the risk of being unprepared to conduct effective oversight in the event that more state agencies withdraw from their contracts in the future. VA and state agencies use certain risk factors to select schools for oversight. VA officials said that they prioritize schools for annual reviews of compliance with program requirements based on findings from prior reviews as well as other risk factors, such as schools with a history of VA benefit payment errors. GAO found that VA and state agencies have recently begun a joint effort to explore a new strategy that they expect will strengthen the school review selection and prioritization process. According to VA officials, as of mid-October 2018, VA used this strategy to select five schools to undergo risk-based reviews. VA officials said they expect these five reviews to be completed by late December 2018. VA and state agencies coordinate and share information about their oversight activities in a variety of ways. For example, VA has shared information with the state agencies on how to conduct annual reviews of schools in their states. However, according to officials at the association representing state agencies, VA has not provided specific direction on conducting targeted reviews in response to complaints. VA officials acknowledged that the procedures they currently have in place are outdated and said that they are being revised to provide state agencies with more details. As of late October 2018, VA officials said these procedures were undergoing internal review. Once implemented, VA's new procedures have the potential to enhance VA's and state agencies' efforts to conduct reviews at those schools for which they have received complaints. GAO recommends that VA complete the identification and assessment of oversight risks, and prepare a contingency plan for overseeing schools if additional states do not renew their oversight contracts. VA concurred with the recommendation.", "document_type": "gao"}
{"report": "Since 1993, USAID has obligated more than $5 billion in bilateral assistance to the Palestinians in the West Bank and Gaza, primarily using funds appropriated through the ESF. According to State officials, through the ESF, USAID provides project assistance and debt relief payments to PA creditors. USAID, with overall foreign policy guidance from State, implements most ESF programs, including programs related to private sector development, health, water and road infrastructure, local governance, civil society, rule of law, education, and youth development. According to USAID officials, this assistance to the West Bank and Gaza contributes to building a more democratic, stable, prosperous, and secure Palestinian society—a goal that USAID described as being in the interest of the Palestinians, the United States, and Israel. Figure 1 shows the location of the West Bank and Gaza relative to surrounding countries. USAID assistance to the West Bank and Gaza is conducted under antiterrorism policies and procedures outlined in an administrative policy document known as Mission Order 21. The stated purpose of the mission order, as amended, is to describe policies and procedures to ensure that the mission’s program assistance does not inadvertently provide support to entities or individuals associated with terrorism. We have previously reported on the status of ESF assistance to the Palestinians and USAID’s antiterrorism policies and procedures in the West Bank and Gaza. As of March 31, 2018, USAID had obligated about $544.1 million (over 99 percent) and expended about $350.6 million (over 64 percent) of approximately $544.5 million in ESF assistance allocated for the West Bank and Gaza in fiscal years 2015 and 2016 (see table 1). USAID obligated portions of the allocated funds for direct payments to PA creditors—specifically, payments to two Israeli fuel companies, to cover debts for petroleum purchases, and to a local Palestinian bank, to pay off a line of credit used for PA medical referrals to six hospitals in the East Jerusalem Hospital network. Project assistance obligated for fiscal years 2015 and 2016 accounted for about $215 million (74 percent) and $184 million (72 percent), respectively, of USAID’s obligations of ESF assistance for the West Bank and Gaza for those fiscal years (see fig. 1). Payments to the PA’s creditors accounted for the remaining obligations—about $75 million (26 percent) of fiscal year 2015 obligations and about $70 million (28 percent) of fiscal year 2016 obligations. According to USAID documents, ESF project assistance for the West Bank and Gaza for fiscal years 2015 and 2016 was obligated for three USAID development objectives: Economic Growth and Infrastructure (about $239 million), Investing in the Next Generation (about $107 million), and Governance and Civic Engagement (about $25 million). Program support—which sustains all development objectives, according to USAID—accounted for about $29 million (see table 2). Economic Growth and Infrastructure. The largest share—about 60 percent—of USAID’s ESF project assistance for the West Bank and Gaza for fiscal years 2015 and 2016 supported the agency’s Economic Growth and Infrastructure development objective. According to USAID documents, as of March 31, 2018, the agency had obligated about $239 million and expended approximately $89 million (about 37 percent) for projects under this objective. USAID officials stated that the agency funded these projects under the following standard State-budgeted program areas: health (including water), infrastructure, private sector competiveness, and stabilization operations and security sector reform. The largest project—the Architecture and Engineering Services project—received about $20 million of fiscal year 2015 ESF assistance and $17 million of fiscal year 2016 ESF assistance. The purpose of the project was to rehabilitate and construct infrastructure through the procurement of infrastructure services, including engineering design and construction management, among other things. The contractor was required to coordinate with relevant PA and Israeli entities, as well as with USAID, to assist in the selection of PA water and wastewater projects and in the planning and design of water projects such as small- to large-scale water distribution systems, water treatment systems, and institutional capacity building. Investing in the Next Generation. The second-largest share—about 27 percent—of USAID’s fiscal years 2015 and 2016 ESF project assistance for the West Bank and Gaza supported the agency’s Investing in the Next Generation development objective. According to USAID documents, as of March 31, 2018, the agency had obligated about $107 million and expended approximately $79 million (about 74 percent) for projects under this objective. Program areas funded included education, health, social and economic services and protection of vulnerable populations. The largest project funded under this objective—a grant to the World Food Program for assistance to vulnerable groups—received $12 million in fiscal year 2015 and $15 million in fiscal year 2016 ESF assistance. The project focused on ensuring food security, including meeting food needs, of the nonrefugee population; increasing food availability and dietary diversity for the most vulnerable and food-insecure nonrefugee population; and establishing linkages with the Palestinian private sector (shopkeepers, farms, and factories) to produce and deliver the aid being provided to Palestinians. For example, the project directly distributed a standard food ration through both direct food distribution and electronic food vouchers to vulnerable nonrefugee families. Governance and Civic Engagement. The smallest share—about 6 percent—of USAID’s fiscal years 2015 and 2016 ESF project assistance for the West Bank and Gaza supported the agency’s Governance and Civic Engagement development objective. According to USAID documents, as of March 31, 2018, USAID had obligated about $24.6 million and expended approximately $14.5 million (about 60 percent) for projects in program areas that included civil society, good governance, and rule of law. The largest project funded under this objective—a contract for the Communities Thrive Project— received about $5.2 million and $8 million in fiscal years 2015 and 2016 ESF assistance, respectively. The project aimed to help 55 West Bank municipalities improve fiscal management, fiscal accountability and transparency, and delivery and management of municipal services, among other things. Under debt relief grant agreements with the PA, USAID made direct payments of ESF assistance to PA creditors totaling about $75 million from fiscal year 2015 funds and $70 million from fiscal year 2016 funds. USAID paid about $40 million from fiscal year 2015 funds and $45 million from fiscal year 2016 funds to two oil companies to cover debts for petroleum purchases. In addition, USAID paid about $35 million from fiscal year 2015 funds and $25 million from fiscal year 2016 funds to the Bank of Palestine, to pay off a PA line of credit that was used to cover PA medical referrals to six hospitals in the East Jerusalem Hospital network. Before using fiscal years 2015 and 2016 ESF assistance to pay PA creditors, USAID vetted the creditors to ensure that the assistance would not provide support to entities or individuals associated with terrorism, as required by its policies and procedures. USAID determined that certain legal requirements, including the requirement for an assessment of the PA Ministry of Finance and Planning, were not applicable for direct payments of these funds to PA creditors. Nevertheless, USAID continued to commission external assessments and financial audits of the PA Ministries of Health and Finance and Planning. USAID documentation for payments to creditors shows that before signing debt relief agreements with the PA, mission officials checked, as required by Mission Order 21, the vetting status of PA creditors who would receive direct payments under the agreements, to ensure their eligibility before any payment was made. USAID Mission Order 21 requires that before payments to PA creditors are executed, the creditors must be vetted—that is, the creditors’ key individuals and other identifying information must be checked against the federal Terrorist Screening Center database and other information sources to determine whether they have links to terrorism. According to USAID policies and procedures, each PA creditor must be vetted if more than 12 months have passed since the last time the creditor was vetted and approved to receive ESF payments. We found that for payments made to PA creditors using fiscal years 2015 and 2016 ESF assistance, USAID vetted each PA creditor that received payments and completed the vetting during the 12- month period before the debt relief agreements with the PA were signed (see table 3). USAID determined that certain legal requirements applicable to cash transfers to the PA were not applicable to direct payments to PA creditors of fiscal years 2015 and 2016 ESF assistance. In September 2015, we reported that USAID ceased making cash payments directly to the PA in 2014 and began making payments of ESF assistance directly to PA creditors. In reviewing USAID’s compliance with key legal requirements, we found that USAID had complied with the requirements when making cash transfers to the PA in fiscal year 2013. However, USAID had determined that some requirements were not applicable to direct payments made to PA creditors in fiscal year 2014, because no funds were being provided directly to the PA. After fiscal year 2015, USAID further defined the scope of statutory requirements it deemed applicable to payments to PA creditors using fiscal years 2015 and 2016 ESF assistance, under the rationale that these payments do not constitute direct payments to the PA. Specifically, according to USAID, the agency determined that the following statutory requirements discussed in our prior report were not applicable to direct payments to PA creditors. A requirement to notify the Committees on Appropriations 15 days before obligating funds for a cash transfer to the PA A requirement for the PA to maintain cash transfer funds in a separate account A requirement for the President to waive the prohibition on providing funds to the PA and to submit an accompanying report to the Committees on Appropriations A requirement for the Secretary of State to provide a certification and accompanying report to the Committees on Appropriations when the President waives the prohibition on providing funds to the PA Requirements for direct government-to-government assistance, including an assessment of the PA Ministry of Finance and Planning According to USAID officials, they currently do not plan to resume cash payments to the PA, because making direct payments to creditors minimizes the misuse of funds and assures full transparency and appropriateness of transfers. Although USAID concluded that the statutory requirement mandating assessments of the PA Ministry of Finance and Planning did not apply to direct payments to PA creditors, the West Bank and Gaza mission commissioned external assessments of the PA Ministry of Health’s medical referral services and Ministry of Finance and Planning’s petroleum procurement system. According to a USAID document, while the payments to the creditors did not constitute direct budget support to the PA, the agency chose to commission external assessments to determine whether the PA’s financial systems were sufficient to ensure adequate accountability for USAID funds consistent with legislative requirements for direct budget support funds. These external assessments identified weaknesses in both systems. Ministry of Health medical referrals. The assessment report stated that the ministry did not have approved policies and procedures for the medical referral process, a list of medical services covered by the referral system, and written criteria for selecting referral hospitals in the medical referral systems. In response, in a January 2016 internal memorandum, the West Bank and Gaza mission officials concluded, among other things, that the findings did not pose a significant risk to USAID funds. They also stated that the Ministry of Health’s medical referral system had adequate policies and procedures for referrals to local hospitals. However, after the assessment report was issued, a USAID contractor worked with the Ministry of Health to update, revise, and approve guidelines for medical referrals. Ministry of Finance and Planning petroleum procurements. The assessment report stated that the ministry lacked specific policies and procedures to prevent or detect fraud in the petroleum procurement systems. In the West Bank and Gaza mission’s January 2016 memorandum, USAID mission officials disagreed with the assessment’s findings regarding the petroleum procurement system, stating that the assessment did not take into account sufficient and adequate internal controls at the ministry as a first line of defense against fraud. The memorandum also stated that the finding did not affect USAID debt relief payments to the PA creditors. USAID officials told us that, while they did not believe the external assessments’ findings affected the integrity of USAID’s debt relief payment process, they took four additional steps to mitigate findings noted in the assessment of the Ministry of Finance and Planning’s fuel procurement processes. According to USAID officials, they (1) confirmed that the fuel companies had controls and systems to ensure an objective and transparent system in receiving and recording PA orders, (2) dispatched orders with official and properly signed shipping delivery and receipt documents, (3) obtained written confirmation from the fuel companies of the costs of the fuel provided to the PA, and (4) confirmed the PA’s petroleum debt with the fuel companies before initiating the payments and after making the payments. In addition, in 2016, USAID commissioned two routine financial audits of the debt relief grant agreed to by USAID and the PA for the use of fiscal year 2015 ESF assistance to make direct payments to PA creditors. According to USAID officials, the auditors were to examine the PA Ministry of Finance and Planning’s recording of USAID payments to PA creditors in its financial records as well as the ministry’s and USAID’s compliance with the terms of the grant agreement and related implementation letters. The audits did not identify any questioned or ineligible costs, reportable material weaknesses in internal control, or material instances of noncompliance with the terms of the debt relief grant. Also, in 2017, USAID contracted for a financial audit of the fiscal year 2016 debt relief grant agreed to by USAID and the PA. According to a USAID document, in May 2018, USAID held an entrance conference with the PA Ministry of Finance and Planning for the audit of the fiscal year 2016 grant. In July 2018, USAID sent the final audit report to the Regional Inspector General for review. According to the USAID document, the report did not identify any questioned or ineligible costs, reportable material weaknesses in internal controls, or material instances of noncompliance with the terms of the grant. We provided a draft of this report to USAID and State for review and comment. USAID provided comments, which we have reproduced in appendix II, as well as technical comments, which we incorporated as appropriate. State did not provide comments. We are sending copies of this report to the appropriate congressional committees, the Administrator of USAID, and the Secretary of State. In addition, the report is available at no charge on the GAO website at http://www.gao.gov If you or your staff have any questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who contributed to this report are listed in appendix III. Appropriations acts for fiscal years 2015 and 2016 included provisions for GAO to review the treatment, handling, and uses of funds provided through the ESF for assistance to the West Bank and Gaza. This report examines (1) the status of ESF assistance and projects provided to the West Bank and Gaza for fiscal years 2015 and 2016, including payments to PA creditors, and (2) the extent to which USAID conducted required vetting of PA creditors to ensure that assistance would not support entities or individuals associated with terrorism and assessed PA ministries’ capacity to use ESF assistance as intended. To address our first objective, we reviewed appropriations legislation, related budget justification documents, and financial data for fiscal years 2015 and 2016, including expenditures as of March 31, 2018, provided by USAID’s West Bank and Gaza mission in Tel Aviv, Israel. We reviewed data that USAID provided on obligations and expenditures of all ESF assistance for the West Bank and Gaza as of March 31, 2018, from annual allocations for fiscal years 2015 and 2016. We also reviewed relevant USAID documents, including notifications to Congress regarding the use of appropriated funds. In addition, we interviewed USAID and State officials in Washington, D.C., and Tel Aviv. To determine whether the data were sufficiently reliable for the purposes of this report, we requested and reviewed information from USAID officials about their procedures for entering contract and financial information into USAID’s data system. We determined that the USAID data were sufficiently reliable. For the project information included in this report, we relied on data that USAID provided, showing its obligations and expenditures of fiscal year 2015 and 2016 ESF assistance for West Bank and Gaza. For illustrative purposes, we requested and obtained from USAID descriptions of projects that, according to USAID officials, represented the largest financial obligations for each development objective in fiscal years 2015 and 2016. To address our second objective, we identified and reviewed relevant legal requirements as well as USAID policies and procedures to comply with those requirements. USAID Mission Order 21 is the primary document that details USAID procedures to ensure that the mission’s assistance program does not provide support to entities or individuals associated with terrorism, consistent with the prohibition on such support found in relevant laws and executive orders. In addition, we reviewed 27 USAID determinations of compliance for payments to PA creditors and discussed with USAID mission officials their efforts to comply with the policies and procedures in Mission Order 21 before executing payments to hospitals, companies, and banks that facilitated the payments. We also reviewed the timing of USAID’s vetting of each PA creditor that received payments, to ensure that, as required by Mission Order 21, the vetting occurred within 12 months before USAID signed the relevant debt relief grant agreement with the PA. Further, we reviewed external assessments of the PA Ministries of Health and Finance and Planning and financial audits of the PA Ministry of Finance and Planning, and we discussed the assessments’ and audits with USAID officials responsible for payments to PA creditors. We conducted this performance audit from September 2017 to August 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for findings and conclusions based on our audit objectives. In addition to the contact named above, Judith McCloskey (Assistant Director), Tom Zingale (Analyst-in-Charge), Eddie Uyekawa, Jeff Isaacs, and Nicole Willems made significant contributions to this report. David Dornisch, Neil Doherty, Reid Lowe, and Roger Stoltz also contributed to the report.", "summary": "Since 1993, the U.S. government has committed more than $5 billion in bilateral assistance to the Palestinians in the West Bank and Gaza. According to the Department of State, this assistance to the Palestinians promotes U.S. economic and political foreign policy interests by supporting Middle East peace negotiations and financing economic stabilization programs. USAID is primarily responsible for administering ESF assistance to the West Bank and Gaza. Appropriations acts for fiscal years 2015 and 2016 included provisions for GAO to review the treatment, handling, and uses of funds provided through the ESF for assistance to the West Bank and Gaza. This report examines (1) the status of ESF assistance and projects provided to the West Bank and Gaza for fiscal years 2015 and 2016, including project assistance and payments to PA creditors, and (2) the extent to which USAID conducted required vetting of PA creditors to ensure that this assistance would not support entities or individuals associated with terrorism and assessed PA ministries' capacity to use ESF assistance as intended. GAO reviewed relevant laws and regulations and USAID financial data, policies, procedures, and documents. GAO also interviewed USAID and State Department officials. As of March 2018, the U.S. Agency for International Development (USAID) had allocated about $545 million of funding appropriated to the Economic Support Fund (ESF) for assistance in the West Bank and Gaza for fiscal years 2015 and 2016. USAID obligated about $544 million (over 99 percent) and expended about $351 million (over 64 percent) of the total allocations. Project assistance accounted for approximately $399 million of the obligated funds, while payments to Palestinian Authority (PA) creditors accounted for $145 million (see figure). USAID's obligations for project assistance in the West Bank and Gaza for fiscal years 2015 and 2016 supported three development objectives—Economic Growth and Infrastructure ($239 million), Investing in the Next Generation ($107 million), and Governance and Civic Engagement (about $25 million). In fiscal years 2015 and 2016, USAID made payments directly to PA creditors—two Israeli fuel companies, to cover debts for petroleum purchases, and a local Palestinian bank, to pay off a line of credit used for PA medical referrals to six hospitals in the East Jerusalem Hospital network. USAID vetted PA creditors to ensure that the program assistance would not provide support to entities or individuals associated with terrorism and also conducted external assessments and financial audits of PA ministries of Health and Finance and Planning. USAID documentation showed that, as required, officials checked the vetting status of each PA creditor within 12 months before USAID signed its debt relief grant agreements with the PA. In addition, although USAID determined that it was not legally required to assess the PA Ministry of Health's medical referral services and the Ministry of Finance and Planning's petroleum procurement system, the agency commissioned external assessments of both ministries. These assessments found some weaknesses in both ministries' systems; however, USAID mission officials stated that these weaknesses did not affect USAID debt relief payments to the PA creditors. Nevertheless, USAID took additional steps to mitigate the identified weaknesses. For example, a USAID contractor worked with the Ministry of Health to update, revise, and approve guidelines for medical referrals. In addition, USAID commissioned financial audits of the debt relief grant agreements between USAID and the PA for direct payments to PA creditors in fiscal year 2015 and 2016. The audits did not identify any ineligible costs, reportable material weaknesses in internal control, or material instances of noncompliance with the terms of the agreements. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "Performance management systems can be powerful tools in helping an agency achieve its mission and ensuring employees at every level of the organization are working toward common ends. According to OPM regulations, performance management is a systematic process by which an agency involves its employees, both as individuals and members of a group, in improving organizational effectiveness in the accomplishment of agency mission and goals. An agency’s performance management system defines policies and parameters established by an agency for the administration of performance appraisal programs. Under federal law and corresponding regulations, agencies are required to develop at least one employee performance appraisal system. OPM is required to review and approve an agency’s performance appraisal system(s) to ensure it is consistent with the requirements of applicable law, regulation, and OPM policy, and defines the general policies and parameters the agency will use to rate employees. Once the appraisal system is approved, the agency establishes a performance appraisal program. The agency’s performance appraisal program—which does not require OPM review or approval— defines the specific procedures, methods, and requirements for planning, monitoring, and rating employee performance. The program is tailored to the agency’s needs. OPM policy identifies five phases to the performance management cycle: (1) planning work and setting expectations; (2) continually monitoring performance; (3) developing the capacity to perform; (4) rating periodically to summarize performance; and (5) rewarding good performance (see table 1). According to OPM, performance management is a continuous cycle in which an agency involves its employees, both, as individuals and members of a group, in improving organizational effectiveness in accomplishing agency mission and goals (see figure 1). Each phase of the performance management cycle plays an important part in helping to provide structure and focus to an employee’s roles and responsibilities within the organization. Within each phase of the cycle, employees are given the opportunity to provide input, ask questions, and request feedback from their supervisors on their performance. One of the tools agencies can use to determine the effectiveness of their performance management cycle is data from OPM’s annual FEVS. To help understand federal employees’ opinions about what matters most to them and how they feel about their jobs, their supervisors, and their agencies, FEVS scores can help agencies identify challenges and improve guidance. FEVS measures employees’ perceptions of whether, and to what extent, conditions characterizing successful organizations are present in their agencies. According to OPM, the federal workforce is the backbone of the government. Employee opinions shared through FEVS provide an essential catalyst to achieving effective government. From 2010 through 2017, surveyed employees generally demonstrated positive responses to FEVS statements related to four of OPM’s five performance management phases, including: planning and setting expectations, monitoring performance, developing the capacity to perform, and rating performance (as shown in figure 2). Employees had the lowest levels of agreement with statements related to rewarding performance (or an estimated 39 percent positive response). We have previously reported that an explicit alignment of daily activities with broader results is one of the defining features of effective performance management systems in high-performing organizations. These organizations use their performance management systems to improve performance by helping individuals see the connection between their daily activities and organizational goals, a line of sight, and encouraging individuals to focus on their roles and responsibilities to help achieve these goals. Such organizations continuously review and revise their performance management systems to support their strategic and performance goals, as well as their core values and transformational objectives. Based on surveyed employees’ responses, agencies were more successful at planning and setting expectations, which includes how an employee’s work relates to the agency’s goals and priorities, than at all other phases of performance management. The response to these statements highlights the role agencies have in providing information to employees about their responsibilities within the organization. Of the three selected FEVS statements for this phase, “I know how my work relates to the agency’s goals and priorities,” was the statement with the highest percent of employees who agreed or strongly agreed across all of our selected FEVS statements from 2010 to 2017 (see figure 3). Performance management and feedback should be used to help employees improve so that they can do the work or—in the event they cannot do the work—so management can take appropriate action for unacceptable performance. The first opportunity a supervisor has to observe and correct poor performance is in day-to-day performance management activities. We have previously reported that, in general, agencies have three means to address employees’ poor performance, with dismissal as a last resort: (1) day-to-day performance management activities (which should be provided to all employees, regardless of their performance levels); (2) dismissal during probationary periods; and (3) use of formal procedures to dismiss employees. We have also reported that supervisors who take performance management seriously and have the necessary training and support can help poorly performing employees either improve or realize they are not a good fit for the position. However, some supervisors may lack experience and training in performance management, as well as the understanding of the procedures for taking corrective actions against poor performers. We previously recommended that OPM, in conjunction with the Chief Human Capital Officers (CHCO) Council, assess the adequacy of leadership training that agencies provide to supervisors to help ensure supervisors obtain the skills needed to effectively conduct performance management responsibilities. In response, OPM conducted a survey to assess the adequacy of leadership training that agencies provide to supervisors. Based on the survey results, OPM issued a memorandum in May 2018 recommending a number of actions agencies should take to improve the accessibility, adequacy, and effectiveness of supervisory training. Of the FEVS statements we analyzed, the statement, “In my work unit, steps are taken to deal with a poor performer who cannot or will not improve,” had the lowest percent positive agreement by surveyed employees each year from 2010 to 2017 government-wide. However, the other two statements selected for this phase were viewed much more positively by surveyed employees (see figure 4). When we further analyzed the responses to the statement on poor performance, employee responses differed in agreement based on the respondent’s supervisory level. On average, an estimated 25 percent of surveyed employees who identified themselves as nonsupervisors and team leaders agreed with this statement from 2010 through 2017, compared with an estimated average of 54 percent of surveyed employees who identified themselves as managers (see figure 5). According to OPM guidance, the capacity to perform means having the competencies, the resources, and the opportunities available to complete the job. We have previously reported that the essential aim of training and development programs is to assist an agency in achieving its mission and goals by improving individual and, ultimately, organizational performance. In addition, constrained budgets and the need to address gaps in critical federal skills and competencies make it essential that agencies identify the appropriate level of investment and establish priorities for employee training and development. This allows the most important training needs to be addressed first. However, fewer surveyed employees agreed with the statement, “My training needs are assessed,” than with the other statements in this phase (see figure 6). Supervisors should establish performance standards that clearly express what is expected of the employee. An average estimated 82 percent of surveyed employees agreed or strongly agreed with the statement, “I am held accountable for achieving results,” from 2010 to 2017 (see figure 7). Overall, this statement had the second highest level of agreement of the 15 statements selected for our review. According to OPM’s website for performance management, while accountability means being held answerable for accomplishing a goal or assignment, the guidance cautions against using accountability only for punishing employees as fear and anxiety may permeate the work environment. This may prevent employees from trying new methods or proposing new ideas for fear of failure. According to OPM’s website for performance management, if approached correctly, accountability can produce positive, valuable results. According to OPM guidance, rewards are used often and well in an effective organization. We have previously reported that high-performing organizations seek to create effective incentive and reward systems that clearly link employee knowledge, skills, and contributions to organizational results. Rewarding means recognizing employees, individually and as members of groups, for their performance and acknowledging their contributions to the agency’s mission. According to OPM’s website for performance management, the types of awards include: cash; honorary recognition; informal recognition; or time off without charge to leave or loss of pay. From 2010 to 2017, an estimated 39 percent of surveyed employees consistently agreed when asked statements related to how their agency rewards performance (see figure 8). Of the five phases of performance management, the statements related to this phase consistently had the least positive agreement of surveyed employees. We have previously reported that effective performance management requires the organization’s leadership to make meaningful distinctions between acceptable and outstanding performance of individuals. Approximately one-third of surveyed employees agreed or strongly agreed with the statement, “In my work unit, differences in performance are recognized in a meaningful way.” Meaningful distinctions in performance ratings are the starting point for candid and constructive conversations between supervisors and staff. These distinctions also add transparency to the ratings and rewards process. In addition, such distinctions help employees better understand their relative contributions to organizational success, areas where they are doing well, and areas where improvements are needed. We also found that, across our selected statements, many of the largest gaps between supervisors and other employees were related to rewarding performance. Specifically, the responses to the statement, “Promotions in my work unit are based on merit,” varied the most based upon the supervisory status of the employee (see figure 9). Senior leaders agreed or strongly agreed with this statement at an average estimated 40 percentage points more than employees in a nonsupervisory role. We have previously reported that agencies must design and administer merit promotion programs to ensure a systematic means of selection for promotion based on merit. We have also previously reported that perceptions of favoritism, particularly when combined with unclear guidance, a lack of transparency, and limited feedback, negatively impact employee morale. Senior leaders and managers agreed or strongly agreed with the statement, “In my work unit, differences in performance are recognized in a meaningful way,” more frequently than surveyed employees who identified themselves as nonsupervisors (see figure 10). Those who identified themselves as team leaders and nonsupervisors agreed with the statement less frequently than all of the other categories of supervisory status. For example, in 2017, an estimated 69 percent of senior leaders agreed or strongly agreed with the statement, compared to an estimated 48 percent of supervisors and an estimated 33 percent of nonsupervisors and team leaders. Finally, senior leaders and managers agreed or strongly agreed with the statement, “Employees are recognized for providing high quality products and services,” more frequently than nonsupervisors (see figure 11). An effective performance management system can be a strategic tool to improve employee engagement and achieve an agency’s desired results. We found that selected agencies demonstrated some similar practices. This may have been a contributing factor in having relatively high scores on FEVS performance management related statements. Specifically, employees at the Bureau of Labor Statistics (BLS), the Centers for Disease Control and Prevention (CDC), the Drug Enforcement Administration (DEA), and the Office of the Comptroller of the Currency (OCC) consistently agreed or strongly agreed to selected FEVS statements related to the five phases of OPM’s performance management cycle. While these agencies developed different performance management systems to reflect their specific structures and priorities, we found a number of practices common to all four agencies that are intended to help reinforce effective employee performance management and improve agency performance (see figure 12). All four agencies agreed that these practices helped contribute to their employees’ responses to the selected FEVS statements and improved performance management. We have previously reported that organizations with more constructive cultures generally perform better and are more effective. Within constructive cultures, employees exhibit a stronger commitment to mission focus, accountability, coordination, and adaptability. According to OPM FEVS guidance, climate assessments like FEVS are, consequently, important to organizational improvement largely because of the key role culture plays in directing organizational performance. Each of the agencies in our review cited a strong organizational culture that was based on and tied to their agency’s mission. Table 2 highlights examples from CDC and DEA. Each of the four selected agencies in our review demonstrated a focus on analyzing FEVS data to identify areas of improvement and create action plans around the analysis. According to OPM guidance on FEVS, the results from the survey can be used by agency leaders to assist in identifying areas in need of improvement as well as highlight important agency successes. FEVS findings allow agencies to assess trends by comparing earlier results with the 2017 results to (1) compare agency results with the government-wide results, (2) identify current strengths and challenges, and (3) focus on short- and long-term action targets that will help agencies reach their strategic human resource management goals. The recommended approach to assessing and driving change in agencies utilizes FEVS results in conjunction with other resources, such as results from other internal surveys, administrative data, focus groups, exit interviews, and so on. We have previously reported that for agencies to attain the ultimate goal of improving organizational performance, they must take a holistic approach—analyzing data, developing and implementing strategies to improve engagement, and linking their efforts to improved performance. We have also previously reported that OPM stated that agencies are increasingly using FEVS as a management tool to help them understand issues at all levels of an organization, and to take specific action to improve employee engagement and performance. Further, OPM officials noted that if agencies, managers, and supervisors know that their employees will have the opportunity to provide feedback each year, they are more likely to take responsibility for influencing positive change. We found that all four of the selected agencies were building a culture of analyzing their FEVS results to identify areas of improvement, and develop action plans to achieve results, including improving performance management (see table 3). In addition, three of the four selected agencies also used other practices. These practices include using other available survey results to corroborate identified action plans and identify additional areas needing support to create a more complete picture of the employee perspective. We have previously reported that an agency’s FEVS scores should be used as one of several data sources as leaders attempt to develop a comprehensive picture of engagement within an organization, and better target their engagement efforts, particularly in times of limited resources. The key is identifying what practices to implement and how to implement them. This can and should come from multiple sources. Three of four of the case study agencies—BLS, CDC, and DEA—use supplemental survey data to help focus agency efforts to improve performance management. For example, DEA developed its own internal survey—Leadership Engagement Survey—in 2016 because it identified leadership as a key driver for organizational climate and employee engagement. According to agency officials, there was a strong internal push to use the survey results to identify areas of improvement. The fourth agency, OCC, had administered a separate internal engagement survey from 2013 to 2016. According to agency officials, however, they discontinued this effort to focus exclusively on FEVS as the primary survey data source, and to reduce the redundancy of two surveys. However, OCC emphasized the need to consider FEVS data as only one source of data, at a point in time, and to use a diversity of other data (quantitative and qualitative) to inform the survey results. As we have previously reported, agencies invest significant time and resources in recruiting potential employees, training them, and providing them with institutional knowledge that may not be easily or cost-effectively replaceable. Therefore, effective performance management–which consists of activities such as expectation-setting, coaching, and feedback—can help sustain and improve employee performance management. We have also reported that good supervisors are key to the success of any performance management system. Supervisors provide the day-to-day performance management activities that can help sustain and improve the performance of more talented staff, and can help marginal performers to become better. However, agencies may not be providing supervisors with the appropriate training that prepares them for success, such as having difficult performance management conversations. Moreover, we have previously reported that mission- critical skills gaps across the federal government pose a high risk because they impede the government from cost effectively serving the public and achieving results. Strategies to address these gaps include training and development activities focused on improving employees’ skills needed for mission success. All four selected agencies had taken steps in identifying appropriate training for not only supervisors, but also all employees. For example, BLS conducted a general training needs assessment (TNA) for all employees in 2016. The officials stated that the purpose of the TNA was to give employees an avenue to express their interests in various kinds of training. Employee responses were used to inform elements of the BLS training plan for fiscal year 2017. As a result of the TNA, BLS is conducting a training evaluation of its vendor-provided writing courses. During this evaluation, BLS hopes to determine if the techniques and material taught in these courses have actually resulted in expected improvements in the writing of those employees who have taken the course as observed by their supervisors and managers. TNA results showed that managers also expressed a strong interest in additional training on employee leave, labor relations, and employee relations. BLS officials stated that courses on these topics were provided as part of the agency’s fiscal year 2017 training plan. As another example, CDC recently developed two onboarding checklists for new executives in 2017 for training purposes. The intent was to provide a comprehensive, consistent onboarding experience so that new executives are more engaged and knowledgeable. In addition, within the last year, the agency developed a mentoring circle for new supervisors that meets monthly. The purpose of the circle is to provide new supervisors with insider help from their peers, such as how to handle difficult situations. Supervisors are also provided assistance through the agency’s performance management appraisal working group. This group meets quarterly to discuss how to better assist supervisors and employees with performance management related questions. We have previously reported that successful organizations empower and involve their employees to gain insights about operations from a frontline perspective, increase their understanding and acceptance of organizational goals and objectives, and improve motivation and morale. We have also previously reported that what matters most in improving engagement levels is valuing employees—that is, an authentic focus on their performance, career development, and inclusion and involvement in decisions affecting their work. Each of the selected agencies in our review stated that they had made efforts over the last few years to improve internal communication between management and employees, as well as increase the transparency of actions taken and decisions made by management. For instance, BLS hosts quarterly breakfast sessions with the BLS Commissioner in which employees have access to agency leadership where they can offer suggestions or feedback. BLS also provides agency information through its intranet website, which is updated almost daily. Examples include features such as the BLS Daily Report, What’s Up at BLS, and BLS tweets. Specifically, the What’s Up at BLS feature of the BLS intranet is an internal communications hub that includes four sections, including “Employee and Team Spotlight”—highlighting the work of employees and teams across the agency—and “Changing Lanes,” which features stories about employees who decided to switch their career paths by changing occupations or programs within BLS. According to OCC officials, the agency has increased the frequency of agency-wide communications and those from middle management that cascade priorities, decisions, and organizational changes to employees. OCC has also executed enterprise change management to manage the people side of change, including building awareness, knowledge, and ability through stakeholder analysis and communications planning. It also maintains an engagement portal for teams to document action plans related to employee engagement—of which there are more than 200 action items related to improved communications using a top-down and two-way approach. As the government’s chief human resources agency and personnel policy leader, OPM’s role in the federal government is to, among other things, design and promulgate regulations, policy, and guidance covering all aspects of the employee life cycle from hire to retire, including performance management. OPM provides such performance management guidance and resources to agencies on its website, as shown in figure 13, as well as in a new Performance Management Portal (portal) accessible through the Office of Management and Budget’s (OMB) MAX Information System (MAX). Examples of guidance and resources include information for the five phases of the performance management cycle, descriptions on the how to write performance standards, critical components of effective and timely feedback, answers to performance management frequently asked questions, and a list of the various award programs open to employees from all federal agencies. In addition, the Chief Human Capital Officers (CHCO) Council’s website includes information provided by OPM on performance management as well as various OPM memorandums to CHCOs, human resource directors, and agency leaders. According to OPM officials, information on the performance management website is reserved for policy guidance based on current and applicable law and regulation. As such, only minor updates have been made to the website because the law and regulatory requirements for performance management have not recently changed. However, there is no date included on the website that indicates when it was last updated. OPM officials stated that the last update made to the website was in June 2016 when an external entity requested that a public service award be added to OPM’s awards list page. However, OPM has issued training, guidance, and other performance management related resources since the last website update in June 2016. Specifically, we examined more than 100 performance management related online links on both OPM’s and the CHCO Council’s websites, and found that in some instances, the CHCO Council’s website included more up-to-date information issued by OPM that was not found on OPM’s performance management website. Some examples include: The release of OPM’s web-based training course, “Basic Employee Relations: Your Accountability as a Supervisor or Manager,” dated October 12, 2016; Management Tools for Maximizing Employee Performance, dated January 11, 2017; Performance Management Guidance and Successful Practices in Support of Agency Plans for Maximizing Employee Performance, dated July 17, 2017; The release of OPM’s web-based training course, “Performance Management Plus—Engaging for Success,” dated October 6, 2017; Federal Supervisory Training Program Survey Results, dated May 21, Guidance for Implementation of Executive Order 13839 - Promoting Accountability and Streamlining Removal Procedures Consistent with Merit System Principles, dated July 5, 2018. According to OPM officials, the agency does not coordinate with the CHCO Council on its website postings. However, OPM officials stated that performance management guidance approved by OPM is provided to the CHCO Council. We did not find any reference to the CHCO Council’s website using OPM’s internal search engine with the term “performance management” (see figure 14). As a result, agency officials and federal employees who are looking for comprehensive information on performance management using OPM’s website may be unable to easily find or access related performance management guidance or resources. A 2016 Office of Management and Budget memorandum on federal agency public websites and digital services states that federal agency public websites and digital services are the primary means by which the public receives information from and interacts with the federal government, provides government information or services to a specific user group across a variety of delivery platform and devices, and supports the proper performance of an agency function. The memorandum states that, “Federal websites and digital services should provide quality information that is readily accessible to all.” In addition, federal internal control standards state that management should use quality information to achieve the entity’s objective. Quality information should be appropriate, current, complete, accurate, accessible, and timely. However, OPM does not have a process for regularly updating its performance management website with new guidance and resources to ensure that the information is readily available. Agency employees, such as human capital specialists, who visit OPM’s performance management website may be unable to find or access the most recent guidance and training available. In addition to its website, OPM officials stated that the agency recently launched the Performance Management Portal (portal) in September 2017 on OMB MAX to communicate with agencies and provide information and resources related to non-SES performance management, as highlighted earlier. OPM officials said that the portal will be updated with information regarding announcements or updated guidance as needed, or when it is released and becomes available. Although not as comprehensive as the information included on OPM’s performance management website, the portal included slides from OPM’s semiannual facilitated performance management forums and updated information on awards guidance for non-SES employees for fiscal year 2017—neither of which were on OPM’s website. As the government’s chief human resources agency, agencies may see OPM as their primary source of performance management guidance. By establishing a process to ensure that information on the performance management website is regularly updated to include the most recent guidance, agencies would have access to the most current information. OPM provides opportunities for agencies to share promising practices. For example, OPM has several efforts in place that allow agencies to share promising information with each other such as at its semiannual Performance Management Forums (forums), annual Performance Management Steering Committee meetings, and through the previously mentioned portal. According to OPM, the forums provide agencies with updated information, guidance, and support to encourage performance excellence amongst employees. In 2017, OPM began holding annual steering committee meetings which allow interagency representatives to discuss the needs of the federal performance management community, to identify and/or request potential content for future forums, and to share promising practices and lessons learned regarding performance management, according to OPM officials. However, there is no formal process in place or mechanism for agencies to routinely and independently share their own experiences and lessons learned in implementing performance management efforts. For instance, the portal does not currently allow for agencies to post and share their own promising practices with each other in a centralized location. Instead, agencies must rely on OPM to post such information on the portal. OPM officials stated that, although permission to view the portal is granted to all users in the executive branch with a MAX account, OPM is the only agency that has permission to make edits to the portal. OPM officials said they are exploring options to allow for an interactive experience with other agencies. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objective. Additionally, our prior work on collaboration practices has shown that agencies can enhance and sustain collaborative efforts, and identify and address needs by leveraging resources, such as through sharing information. Establishing a mechanism to allow agencies to routinely share promising practices and lessons learned from their experiences could assist agencies that are undertaking or considering similar efforts and help inform agencies’ decision-making related to performance management. In addition to driving modernization, OPM identified innovation as one of its five values in its most recent strategic plan for fiscal years 2018 through 2022. Specifically, OPM stated that the agency “constantly seeks new ways to accomplish its work and generate extraordinary results. OPM is dedicated to delivering creative and forward-looking solutions and advancing the modernization of human resources management.” OPM officials stated that innovation was included as one of OPM’s values because the agency seeks to embrace forward-leaning policies and practices within all aspects of human capital management. While OPM officials told us that they maintain a constant scan of the environment to identify and follow promising practices—which could include innovative concepts—in the private sector and other sources to include performance management and performance management systems, they did not specifically identify which promising practices they incorporated into guidance or training. In addition, when we asked OPM to identify innovative performance management practices based on its own research, officials provided us with articles from leading experts that focused on eliminating performance ratings, using a growth mindset concept, and the SCARF model—status, certainty, autonomy, relatedness, and fairness—for collaborating with and influencing others. They also provided references and their notes on new performance management system programs at three corporations. OPM officials said they have not placed these articles, references, or notes on their performance management website or shared them with agencies, and have no plans to do so at this time. Instead, OPM officials stated they were monitoring the progress of these new practices to assess if the methods were effective in maximizing employee and organizational outcomes, in addition to stimulating collaboration and innovation. However, OPM provided no criteria in use to determine when the results would be considered effective or when they could be shared with agencies. Without OPM sharing their research results, agencies may be unaware of current practices in the performance management field because they may not be conducting their own research. Including innovation as an agency value is not sufficient to change an organization’s culture for it to become innovative; it is necessary to also introduce, for example, a strategy to identify and address emerging research and promising practices in performance management. Such a strategic approach could include criteria that identify what research results to share with agencies, when to share them, and by which process (for example, by website). It would also enable OPM to increase transparency and consistency in identifying emerging innovations. One of our case study agencies told us that in the absence of OPM providing research results, the agency used its own resources to research and identify leading practices in the private sector that could potentially apply to their own performance management system, such as focusing on ongoing performance conversations and recognition to increase engagement and performance, while reducing burdensome administrative requirements that do not add value. Officials at this agency stated that OPM’s guidance was not modernized to the extent that the human capital and performance management industry was changing. Without OPM taking the lead to share emerging and innovative research, agencies, and therefore their employees, may not benefit from the best information available. Although OPM identified innovation as one of its five values, we were unable to find any recent information on innovation for performance management in the government on OPM’s website. Specifically, we used “innovation performance management” as a search term on the website and found the “Promoting Innovation in Government” web page, which included archived material and was no longer being updated (see figure 15). As a result, agencies that use OPM’s website as a source of performance management guidance would be unable to find any current resources on performance management innovation. OPM officials explained that older material is archived based on the current leadership’s vision. The officials also confirmed that OPM did not have other active websites that contained innovative performance management practices gathered from external sources, which could be shared with other federal agencies. Implementing a strategic approach to sharing innovation in performance management would then allow OPM to provide relevant and updated information that agencies could use to modernize their performance management systems. Managing employee performance has been a long-standing government- wide issue. As the current administration moves to reform the federal government to become leaner, accountable, and efficient, an effective performance management system is necessary to increase productivity, sustain transformation, and foster a culture of engagement that enables high performance. Federal agencies have a primary responsibility for managing their employees’ performance, but OPM maintains a key role in developing and overseeing human resources programs and policies that support the needs of federal agencies. As the government’s chief human resources agency and personnel policy leader, OPM is responsible for designing and promulgating regulations, policy, and guidance covering all aspects of the employee life cycle, including performance management. While OPM provides performance management resources on its website, some information is not regularly updated and can be challenging to find. Establishing a process to provide agencies with current, accurate, and easy access to guidance and resources would provide them with the most recent guidance and resources available. To be at the forefront of innovation, OPM must consistently challenge traditional performance management practices, and identify opportunities to present and promote new and creative solutions to agencies. Although OPM has identified potential innovative and promising practices for performance management through its own research, OPM has not actively shared these practices with agencies. In addition, agencies do not have access to a common forum by which they could routinely and independently share their own promising practices and lessons learned to avoid common pitfalls. In times of limited resources, developing a strategic approach to identify and share emerging research and innovations in performance management would help agencies inform and, as needed, reform their performance management approaches. As a result, federal employees may have more opportunities to maximize their performance. We are making the following three recommendations to OPM. Specifically: 1. The Director of OPM, in consultation with the CHCO Council, should establish and implement a process for regularly updating the performance management website to include all available guidance and resources, making this information easily accessible, and providing links to other related websites. (Recommendation 1) 2. The Director of OPM, in consultation with the CHCO Council, should develop and implement a mechanism for agencies to routinely and independently share promising practices and lessons learned, such as through allowing agencies to post such information on OPM’s Performance Management portal. (Recommendation 2) 3. The Director of OPM, in consultation with the CHCO Council, should develop a strategic approach for identifying and sharing emerging research and innovations in performance management. (Recommendation 3) We provided a draft of this report to the Secretaries of the Departments of Health and Human Services (Centers for Disease Control and Prevention), Labor (Bureau of Labor Statistics), and Treasury (Office of the Comptroller of the Currency), the Acting Attorney General (Drug Enforcement Administration) and the Acting Director of OPM. In its written comments, reproduced in appendix II, OPM agreed with our findings and concurred with our recommendations. It added that it would establish and implement a process for regularly updating its performance management website, among other things. OPM and the Departments of Health and Human Services, Labor, and Treasury also provided technical comments that we incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretaries of the Departments of Health and Human Services, the Department of Labor, the Department of the Treasury, the Acting Attorney General, the Acting Director of OPM, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report (1) describes federal employee perceptions of performance management as measured by the results of selected statements from the Office of Personnel Management’s (OPM) annual survey of federal employees, the Federal Employment Viewpoint Survey (FEVS); (2) identifies practices that selected agencies use to develop and implement strategies to improve performance management; and (3) evaluates OPM’s guidance and resources to support agency efforts to improve performance management government-wide. FEVS provides a snapshot of employees’ perceptions about how effectively agencies manage their workforce. Topic areas are employees’ (1) work experience, (2) work unit, (3) agency, (4) supervisor, (5) leadership, (6) satisfaction, (7) work-life, and (8) demographics. OPM has administered FEVS annually since 2010. From 2002 to 2010, OPM administered the survey biennially. FEVS includes a core set of statements. Agencies have the option of adding questions to the surveys sent to their employees. FEVS is based on a sample of full- and part-time, permanent, non-seasonal employees of departments and large, small, and independent agencies. According to OPM, the sample is designed to ensure representative survey results would be reported by agency, subagency, and senior leader status as well as for the overall federal workforce. Once the necessary sample size is determined for an agency, if more than 75 percent of the workforce would be sampled, OPM conducts a full census of all permanent, nonseasonal employees. To describe government-wide trends in employee perceptions of performance management, we selected 15 FEVS statements that generally align with OPM’s five phases of performance management cycle: (1) planning and setting expectations; (2) continually monitoring performance; (3) developing the capacity to perform; (4) rating periodically to summarize performance; and (5) rewarding good performance (see table 4). We used indexes such as the Employee Engagement Index, the Human Capital Assessment and Accountability Framework Results-Oriented Performance Culture Index, and the Public Partnership for Public Service’s Best Places to Work categories to help guide our selection process of three FEVS statements per OPM performance management phase. We did not look at how surveyed employees responded to the statements when considering which ones to select. Upon selection of our statements, we consulted with our internal human capital (HC) experts as well as external HC experts at OPM and the Merit Systems Protection Board to determine the appropriateness of our FEVS statement selection and categorization. They generally agreed that these statements aligned with the phases. However, FEVS was not designed to measure performance management and, although these statements all provide useful insights, they do not necessarily represent all key aspects of performance management. In addition, we analyzed the 15 FEVS performance management-related questions by supervisory status for the 24 Chief Financial Officers Act (CFO Act) departments and agencies for the years 2010 through 2017. We conducted this analysis because our prior work had shown that supervisory status was the employee population variable that displayed the greatest degree of difference in responses between the categories of respondents in it. For this report, we did not analyze the extent of differences in responses in the performance management questions by other employee population groups, such as age or gender, because that was outside the scope of our engagement. We examined the results for the 15 FEVS questions by supervisory groups, and report the 4 that had the greatest degree of differences by supervisory levels. All of these 4 had differences of at least 28 percentage points between the most and least favorable categories of respondents while the remaining 11 had differences in the range of 2 to 25 percentage points between the views of senior leaders and nonsupervisory employees. We calculated the average percent of employees who agreed or strongly agreed with the three statements comprising the phase for those who answered all three statements to identify trends. Survey respondents who did not answer one or more of the phase statements were not included. Because OPM followed a probability procedure based on random selections for most agencies, the FEVS sample is only one of a large number of samples that could have been drawn. Since each sample could have provided different estimates, we express our confidence in the precision of the FEVS statement estimates using the margin of error at the 95 percent level of confidence. This margin of error is the half-width of the 95 percent confidence interval for a FEVS estimate. A 95 percent confidence interval is the interval that would contain the actual population value for 95 percent of the samples that OPM could have been drawn. To assess the reliability of the FEVS data, in addition to assessing the sampling error associated with the estimates we examined descriptive summary statistics and the distribution of both the survey data and the human capital framework indexes, and assessed the extent of item- missing data. We also reviewed FEVS technical documentation. On the basis of these procedures, we believe the data were sufficiently reliable for use in the analysis presented in this report. To identify practices used by selected agencies to develop and implement strategies to improve performance management, we complemented our government-wide analysis with an additional analysis of agencies (those agencies and units within 1 of the 24 CFO Act departments). Specifically, we analyzed agency results for the same 15 statements in 2015 (the most recent data available at the time) to select a nongeneralizable sample of four agencies to obtain illustrative examples of how they approached performance management and their strategies to improve performance within their agencies. We calculated averages for the agencies based on their scores for our selected statements, and rank ordered them based on these averages. Among other attributes, these agencies had the highest levels of employee agreement with FEVS statements dealing with their performance management processes. We selected agencies that had the highest average scores for the performance management phases. In addition to the FEVS data, we also used secondary factors such as the number of respondents, agency size, mission, and types of employees to identify the following agencies: (1) Bureau of Labor Statistics, Department of Labor; (2) Centers for Disease Control and Prevention, Department of Health and Human Services; (3) Drug Enforcement Administration, Department of Justice; and the (4) Office of the Comptroller of the Currency, Department of the Treasury. We developed a set of standard questions that asked about agency strategies to improve performance management and relevant successes, which we administered to human resources/human capital officials and other officials responsible for performance management at the agencies. We reviewed and analyzed the responses the agencies provided, and identified and reported examples of practices that all four described, which are intended to improve performance management. We also asked agencies about the types of guidance and resources they obtained from OPM. The four common practices we identified do not represent the only practices these agencies employ to improve performance management at their agency. In addition, the practices are not intended to be representative of all those employed by all other federal agencies. To evaluate the guidance and resources OPM provides to agencies to improve performance management government-wide, we reviewed both OPM’s performance management website and the Chief Human Capital Officers (CHCO) Council’s website to identify available guidance, resources, and tools. We compared these documents to OMB’s memorandum on federal agency public websites, OPM’s strategic plan for fiscal years 2018 through 2022, and internal controls. We observed the Performance Management Portal, hosted on OMB’s MAX website, in July 2018 with an OPM official as we did not have access to the portal. We also reviewed agency documentation and other OPM-referenced websites that contained performance management-related information. We used OPM’s internal site search engines and search terms, such as “performance management” and “performance management innovation,” to identify relevant guidance. During the course of our review, we compared performance management guidance posted on the OPM and CHCO websites as well as the portal, and identified discrepancies between what we found on the respective websites. We discussed the discrepancies with OPM officials and included their responses within the report. To supplement the documentary evidence obtained, we also interviewed officials from OPM, the CHCO Council, and selected case study agencies to describe the extent to which OPM assists agencies on performance management. We conducted this performance audit from December 2016 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Thomas Gilbert, Assistant Director; Dewi Djunaidy, Analyst-in-Charge; Jehan Chase; Martin DeAlteriis; Krista Loose; and Susan Sato made major contributions to this report. Also contributing to this report were Carl Barden; Won Lee; Robert Robinson; and Stewart Small. Federal Employee Misconduct: Actions Needed to Ensure Agencies Have Tools to Effectively Address Misconduct. GAO-18-48. Washington, D.C.: July 16, 2018. Federal Workforce: Distribution of Performance Ratings Across the Federal Government, 2013. GAO-16-520R. Washington, D.C.: May 9, 2016. Federal Workforce: Additional Analysis and Sharing of Promising Practices Could Improve Employee Engagement and Performance. GAO-15-585. Washington, D.C.: July 14, 2015. Federal Workforce: Improved Supervision and Better Use of Probationary Periods Are Needed to Address Substandard Employee Performance. GAO-15-191. Washington, D.C.: February 6, 2015. Results-Oriented Management: OPM Needs to Do More to Ensure Meaningful Distinctions Are Made in SES Ratings and Performance Awards. GAO-15-189. Washington, D.C.: January 22, 2015. Federal Workforce: OPM and Agencies Need to Strengthen Efforts to Identify and Close Mission-Critical Skills Gaps. GAO-15-223. Washington, D.C.: January 30, 2015. Federal Workforce: Human Capital Management Challenges and the Path to Reform. GAO-14-723T. Washington, D.C.: July 15, 2014. Office of Personnel Management: Agency Needs to Improve Outcome Measures to Demonstrate the Value of Its Innovation Lab. GAO-14-306. Washington, D.C.: March 31, 2014. Federal Employees: Opportunities Exist to Strengthen Performance Management Pilot. GAO-13-755. Washington, D.C.: September 12, 2013. Results-Oriented Cultures: Creating a Clear Linkage between Individual Performance and Organizational Success. GAO-03-488. Washington, D.C.: March 14, 2003.", "summary": "Managing employee performance has been a long-standing government-wide issue and the subject of numerous reforms since the beginning of the modern civil service. Without effective performance management, agencies risk not only losing the skills of top talent, they also risk missing the opportunity to effectively address increasingly complex and evolving mission challenges. GAO was asked to examine federal non-Senior Executive Service performance management systems. This report examines (1) government-wide trends in employee perceptions of performance management as measured by the results of selected FEVS statements, (2) practices that selected agencies use to improve performance management, and (3) OPM's guidance and resources to support agency efforts to improve performance management government-wide. GAO analyzed responses to selected FEVS statements related to the five performance management phases from 2010 through 2017; selected four agencies based on the highest average scores for the five phases, among other criteria, to identify practices which may contribute to improved performance management; reviewed OPM documents; and interviewed OPM and other agency officials. GAO found that from 2010 through 2017, surveyed employees generally demonstrated positive responses to selected Federal Employee Viewpoint Survey (FEVS) statements related to four of the Office of Personnel Management's (OPM) five performance management phases, including: planning and setting expectations, monitoring performance, developing the capacity to perform, and rating performance. Employees responded least positively to statements related to rewarding performance, with only 39 percent of employees, on average, agreeing with statements regarding this phase. Of the four agencies with among the highest average scores for the performance management phases (Bureau of Labor Statistics, Centers for Disease Control and Prevention, Drug Enforcement Administration, and Office of the Comptroller of the Currency), GAO identified practices that may contribute to improved performance management including strong organizational culture and dedication to mission; use of FEVS and other survey data; and a focus on training. OPM provides guidance and opportunities for agencies to share promising practices on performance management; however, some of this information is not easily accessible on its performance management website. In addition, OPM does not leverage its leadership position to formally identify and share emerging performance management research and innovation with agencies. As a result, agencies, and therefore their employees, may not benefit from the best information available. GAO is making three recommendations, including that OPM improve its website and share innovations in performance management with agencies. OPM agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "In general, the process for managing inventories of medications at VAMCs and non-VA pharmacies in hospital settings is similar. The steps of the process are (1) procuring medications from vendors or other suppliers, (2) receiving and storing medications, (3) tracking medications to account for all items and prevent diversion, (4) dispensing medications to patients, and (5) disposing of expired or wasted medications. Hospital settings include both inpatient and outpatient pharmacies. Procurement. Pharmacies use a procurement process to order medications for pharmacy inventory, which includes activities such as medication selection, cost analysis, purchasing procedures, and record keeping. As part of medication selection, pharmacies may use a formulary, which is a list of medications that have been approved for prescription within a hospital or health care system. A prime vendor or wholesaler is one of the most commonly used sources to obtain medications for the pharmacy. Prime vendors order large quantities of medications from manufacturers, allowing pharmacies to purchase various products from many drug manufacturers at once. Orders for products that are not carried by the prime vendor may need to be ordered through another source, such as directly from the manufacturer. Receipt and storage. When medications are delivered to the pharmacy, staff are to take several steps to properly receive and store the shipment. For example, to ensure there is segregation of duties, the person responsible for ordering and purchasing the medications is supposed to be different than the person receiving and stocking pharmacy inventory. Additionally, any delivered products that require special storage conditions, such as freezing or refrigeration, are to be checked in first to maintain the stability of the medication. Tracking. Once in storage, pharmacies use a variety of tools to account for the filling, dispensing, and removal of medications in both inpatient and outpatient settings. Some pharmacies have software that allows them to track inventory in real time, an ability known as maintaining perpetual inventory. A perpetual inventory system is a method of recording the quantity of a particular medication continuously as prescriptions are filled and dispensed. After each prescription is filled and dispensed to the patient, the amount of medication used for the prescription is removed from the inventory to ensure the quantity on hand recorded by the software is always current. Many medications have barcodes on their packaging to allow for easy identification of the medication in a computer system. The barcode generally includes the product’s National Drug Code, which indicates the name and package size of the medication. In the hospital setting, medications can be scanned out of the pharmacy and into machines for storage on hospital wards. Dispensing. In both inpatient wards and outpatient pharmacies, automated dispensing machines and barcode technology can assist staff in maintaining and dispensing medications to patients. Automated dispensing machines generally include several drawers and cabinets that have pockets or trays that hold preset levels of a variety of common medications. They may also be used to hold controlled substances, generally in locked boxes or cubes within the machine. On hospital wards medication in automated dispensing machines is often packaged in unit doses—individually packaged medications for patient use. Barcodes can help verify a prescription before nurses give medication to a patient. Hospitals that do not have automatic dispensing machines use carts with drawers filled with each patient’s medication. Outpatient pharmacies use automated dispensing machines to assist with filling prescriptions. Depending on the type of automated dispensing machine, the capabilities can include label printing, pill counting, pouring pills into prescription bottles, and applying the label to the prescription bottle. Return or disposal. Medication waste and expired medications are to be pulled from pharmacy inventory and either returned to a reverse distributor or manufacturer for credit or, if not eligible for return, disposed of by the pharmacy or sent to an outside company for destruction. Reverse distributors charge a fee, which is generally a percentage of the refund that is automatically deducted from the final refund amount. Figure 1 provides an overview of the steps of the pharmacy inventory management process. VA’s health care system is organized into entities at the headquarters, regional, and local levels. At the headquarters level, PBM is responsible for supporting VISNs and VAMCs with a broad range of pharmacy services, such as promoting appropriate drug therapy, ensuring medication safety, providing clinical guidance to pharmacists and other clinicians, and maintaining VA’s formulary of medications and supplies VAMCs use to deliver pharmacy benefits. VA’s OIT is responsible for providing technology services across the department, including the development and management of all IT assets and resources. As such, the office supports VA’s health care system in planning for and acquiring IT capabilities within VA’s health care system network of hospitals, outpatient facilities, and pharmacies. VA’s NAC is responsible for administering various health care-related acquisition and logistics programs across VA. At the regional level, VAMCs are located in one of 18 VISNs. Each VISN is responsible for overseeing VAMC pharmacies within a defined geographic region. At the local level, there are approximately 170 VAMCs. Each VAMC is responsible for implementing VA’s pharmacy policies and programming. VA policy establishes parameters for VAMCs to follow when managing their pharmacy inventories. These policies address various aspects of pharmacy services, including inpatient and outpatient pharmacy services, general pharmacy requirements, supply chain management, controlled substances management, and the formulary management process. For example, the Supply Chain Inventory Management directive states that all VAMC pharmacies should use the prime vendor inventory management software to calculate the amount of each inventory item they need to reorder. However, the directive also states that there are additional pharmacy inventory tools available to VAMC pharmacies and that each pharmacy has the option to use its own automated inventory management systems to generate orders for its prime vendor. VA policy does not specify minimum quantities to order; instead, VAMC procurement staff is authorized to use their expertise to determine the appropriate quantity to order. In general, all five of the selected VAMCs we reviewed take similar approaches for the various steps included in the pharmacy inventory management process—that is, procuring medications from vendors or other suppliers, receiving and storing these medications, tracking medications at the pharmacy to account for all items and prevent diversion, dispensing medications to patients, and disposing of expired medications. (See fig. 2). We found that while the five selected VAMCs have similar approaches for receiving and storing, dispensing, and disposing of medications, some VAMCs have also taken unique approaches in implementing two steps of the pharmacy inventory management process: procurement and tracking. VA policy outlines parameters for VAMCs to manage their pharmacy inventories, and VA officials told us that VAMC pharmacy staff can use discretion to implement their own approaches for managing their pharmacy inventories. All five of the selected VAMC pharmacies we reviewed use several sources of information to inform future orders—including past purchase order history reports from VA’s prime vendor, manual inventory counts by pharmacy staff, and automated dispensing machine inventory information. VA officials told us that all VAMCs also track procurement spending and its impact on the VAMCs’ budget and spending. However, pharmacy officials at one of the selected VAMCs we visited told us they use VA’s health information system—Veterans Health Information Systems and Technology Architecture (VistA)—and additional prime vendor reports to identify specific information regarding 1) expiring medications that may need to be re-purchased, 2) medications that account for the top 80 percent of pharmacy costs, and 3) all medications that are purchased daily. VAMC officials told us these reports help them to better manage pharmacy inventory and track pharmacy spending. To better anticipate and address potential medication shortages, officials at another selected VAMC pharmacy told us they established a shortage committee that meets on a weekly basis. Established in September 2017, the committee includes the Director of Pharmacy and other pharmacy staff. Our review of meeting notes shows that the committee discusses which medications could experience or are experiencing shortages and how the VAMC could adjust to these shortages by, for example, developing clinical and logistical solutions to help maintain optimal patient care. According to the officials at the selected VAMC pharmacy, the committee has been an effective resource to help manage pharmacy inventory problems should they occur. Several VAMC officials also told us that the procurement technicians, who are responsible for ordering pharmacy inventory, are very important because they possess valuable institutional knowledge based on many years of experience and training. However, VAMC officials told us the salaries and potential career advancement opportunities for procurement technicians can be limited, and the officials expressed concern that these technicians could find better opportunities within the VAMC or with external employers. To help retain procurement technicians, two of the selected VAMC pharmacies we visited have created higher paying procurement technician positions (General Schedule level 8 positions, instead of GS-6 or GS-7). To better identify potential instances of diversion, two of the selected VAMC pharmacies use enhanced analytics software on the automated dispensing machines in their inpatient wards to track how frequently controlled substances and other frequently utilized medications are prescribed. For example, one of the pharmacies uses data from these reports to identify how often individual staff members are accessing automated dispensing machines. Additionally, officials at a third VAMC recently deployed automated dispensing machines that are equipped with an enhanced analytics program that can identify trends associated with diversion. The remaining two VAMCs we visited do not have enhanced analytic software that could help them to identify instances of potential diversion. Across all 5 selected VAMCs, we observed several different IT systems used to help manage non-controlled inpatient inventory. One of the selected VAMC pharmacies uses a modular automated dispensing machine together with inventory management software that maintains a perpetual inventory for most non-controlled substances stored in its inpatient pharmacy. (See fig. 3). According to officials, this software has allowed the pharmacy to reduce waste and improve staff workflow, as staff do not have to spend time tracking down inventory. None of the other VAMC pharmacies we visited have the capability to track non- controlled substances in real time. Additionally, to more efficiently identify medication lot numbers during recalls, one VAMC pharmacy we visited was in the process of implementing a technology that allows pharmacy staff to scan a case of medication with the same national drug code, lot number, and expiration date and then print and attach a radio frequency identification tag to each medication bottle. The tag allows for quick electronic identification of the medication for disposal. Other selected VAMC pharmacies manually identify recalled medications from inventory based on the name of the medication and lot number. VA does not yet have a VA-wide pharmacy inventory management system in place that would allow it to monitor VAMC pharmacy inventory in real time and provide better oversight of how VAMC pharmacies manage their inventories. We found that VACO and the five VISNs we reviewed provide some oversight related to VAMC pharmacy inventory management. However, that oversight is limited, as no entity has been assigned responsibility for overseeing system-wide performance of VAMC pharmacies in managing their inventories. VA’s oversight of VAMC pharmacy inventory management is limited in part because VA currently lacks a comprehensive system that would allow the department and its VAMCs to monitor pharmacy inventory in real time. According to PBM officials, the lack of a VA-wide system makes it difficult to oversee VAMC pharmacy inventory management, and PBM has recognized the lack of such a system as a material weakness for several years. PBM officials said that implementation of a VA-wide pharmacy inventory management system would allow them to monitor each VAMC’s pharmacy inventory in real time, which would, in turn, allow them to better manage inventory and help alleviate shortages at the national level by facilitating transfers of inventory between VAMCs as needed. Additionally, officials said that such a system would lead to better planning and projections for purchasing decisions, allow PBM to track medication expiration dates and lot numbers more effectively, and improve VAMC staff response to medication recalls. Although VA has acknowledged the need for a VA-wide pharmacy inventory management system, such a system may not be available for the foreseeable future. PBM officials told us they have requested this system since the early 2000s. However, despite the documented technological challenges VA faces in overseeing its VAMC pharmacies, changing IT priorities, funding challenges, and the narrowing of the scope of a Pharmacy Re-engineering Project have prevented the system’s development. In 2017, we reported that VA’s pharmacy systems could not maintain a real-time inventory across the VAMCs, and we recommended that VA assess the priority for establishing an inventory management system capable of monitoring medication inventory levels and indicating when medications needed to be reordered. VA concurred with our recommendation. In June 2017, VA announced its intention to replace VistA— VA’s health information system—with an off-the-shelf electronic health record system. VA officials told us that the new system will have the capability to monitor pharmacy inventory in real time across VA. VA signed the contract for this new system in May 2018; however, full implementation is expected to take up to 10 years. In the interim, VA officials told us that while they will maintain current pharmacy systems, they do not plan to build any new systems—including a VA-wide pharmacy inventory management system—so they can efficiently manage resources in preparation for the transition to the new system. VACO and the five VISNs we spoke with provide some limited oversight related to VAMC pharmacy inventory management, but no entity has system-wide responsibility for overseeing the performance of VAMC pharmacies in managing their inventories. Instead, responsibility for overseeing pharmacy inventory management is largely delegated to each VAMC’s leadership. (See fig. 4 for a description of VACO headquarters, VISN, and VAMCs’ roles and responsibilities in managing pharmacy inventory.) In absence of a VA-wide inventory management system, PBM officials told us that they have employed manual workaround mechanisms to oversee pharmacy management processes. Specifically, PBM requires VAMC pharmacies to conduct an annual inventory of all medications and a quarterly inventory of 5 selected high-value non-controlled medications at risk of diversion. PBM officials told us they remind VAMCs of the requirement to conduct these inventories, collect and aggregate the data from these inventories, and make summary reports from these data available as a resource to the VPEs and VAMC Chiefs of Pharmacy. PBM officials acknowledged that these manual workarounds are inefficient, increase labor costs, and leave the agency with an inability to see on- hand inventory across the system in real time. Additionally, the manual workarounds may be implemented differently at each VAMC, resulting in varying degrees of data reliability and limited opportunities for high-level oversight and data consolidation. PBM officials said that they do not independently analyze these data to identify trends, and they acknowledged that both the quarterly and annual inventories have limited usefulness for overseeing inventory management system-wide. Additionally, officials at some of the selected VAMCs told us they found the quarterly and annual inventories to have limited usefulness for managing their pharmacy inventories. PBM officials told us they also hold regular meetings with VPEs and VAMCs, which provide the opportunity for discussion of pharmacy inventory management issues. However, our review of the minutes of the meetings between PBM and VPEs found that, over the past 3 years, pharmacy inventory management was rarely a topic of discussion. PBM officials noted that there is always an opportunity for open discussion at these meetings for VPEs to raise any issues, including issues related to pharmacy inventory management, but these discussions may or may not be captured in the meeting minutes. PBM officials said they also regularly discuss various topics with the VAMC Chiefs of Pharmacy and other staff, but none of these calls are directly related to pharmacy inventory management. Officials from VACO’s NAC and OIT told us that they provide some assistance related to pharmacy inventory management but do not take part in the day-to-day management at the VAMC level and also do not have any oversight responsibilities. For example, a NAC official said the office coordinates with PBM on medication shortage issues and establishes national contracts for medications. NAC also sends out a weekly shortages report to various pharmacy groups as a tool to help them with known or expected shortages. Additionally, NAC’s Pharmaceutical Prime Vendor team is responsible for administering the contract with the prime vendor through daily monitoring of issues and quarterly reviews with the prime vendor and PBM. OIT develops pharmacy-related applications for VistA based on requirements from PBM, and officials said that the majority of OIT’s support to VAMCs consists of assisting them with issues related to VistA. At the VISN level, VPEs we interviewed also said they conduct some pharmacy inventory management oversight activities for the VAMCs within their network. While in general VA policy does not outline any specific roles for VPEs related to oversight of pharmacy inventory management, all five VPEs told us that they review the results of their VAMCs’ annual inventories and discuss any issues that arise from this exercise with VAMCs as needed. VPEs told us that they also review the results of the quarterly inventory of five selected high-value, non- controlled substances and may follow-up with the VAMCs if their actual inventory of the medications is inconsistent with expected levels. Additionally, some VPEs reported that they have undertaken additional oversight activities apart from reviewing results of the mandatory inventories. For example, one VPE told us he has developed a dashboard with 53 measures that, while focused on formulary management, also have inventory management implications. Additionally, this VPE said that a VISN-wide procurement work group meets on a monthly basis and serves as a venue for procurement technicians to share inventory management best practices. Such additional activities may be helpful, but since VPEs only have responsibility for VAMC pharmacies within their network, they may not be aware of pharmacy inventory management approaches being used at other VAMCs across VA. Although VA offices at the headquarters and regional levels provide some assistance and oversight of how VAMCs manage pharmacy inventory at the local level, VA has not designated a focal point with defined responsibilities for system-wide oversight; instead they rely on local leadership to oversee pharmacy inventory management at the VAMCs. As a result, VA cannot assess the overall performance of VAMCs’ management of their pharmacy inventories. The lack of a focal point with defined oversight responsibilities is inconsistent with federal internal control standards for establishing structure and authority to achieve the entity’s objectives and internal controls related to monitoring. Specifically, internal controls state that management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives. Also, internal controls state that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. VA’s actions are also inconsistent with the Office of Management and Budget’s guidance for enterprise risk management and internal control in managing an agency. Enterprise risk management is intended to yield an “enterprise- wide,” strategically aligned portfolio view of organizational challenges that provides better insight about how to most effectively prioritize resource allocations to ensure successful mission delivery. Without a focal point for system-wide oversight of VAMC pharmacy inventory management, VA has limited awareness of the unique approaches that VAMCs use to manage their inventories and is missing an opportunity to evaluate these approaches. Additionally, VA cannot effectively share and standardize pharmacy inventory management best practices as appropriate. Having a focal point for system-wide oversight could allow VA to identify potential best practices that could be disseminated more widely across its facilities. Due to the decentralized nature of VA’s organization, VA policy gives VAMC pharmacies latitude in managing their pharmacy inventories. Several of the VAMCs we visited have taken unique approaches to procuring or tracking their inventory. However, because VA does not have a focal point to systematically oversee VAMCs’ pharmacy management efforts, VA is missing opportunities to evaluate the effectiveness of these efforts, as well as share best practices and standardize them across VA as appropriate. PBM officials told us that the lack of a VA-wide pharmacy inventory management system limits their ability to oversee VAMC pharmacy inventory management. However, our review shows that even without this system there are existing mechanisms that a focal point could leverage to more systematically oversee how VAMC pharmacies manage their inventories. For example, a focal point could ensure that PBM officials, the VPEs, and VAMC pharmacy staff devote time to discussing pharmacy inventory management approaches and related issues during regularly scheduled telephone meetings. Leveraging these existing mechanisms is especially important given that VAMCs have historically had challenges in managing their inventories, and also because a VA- wide pharmacy inventory management system may not be available for the foreseeable future. We are making the following recommendation to the Department of Veterans Affairs: The Secretary of the VA should direct the Undersecretary for Health to designate a focal point for overseeing VAMCs’ pharmacy inventory management system-wide and define the focal point’s responsibilities. (Recommendation 1) We provided a draft of this report to VA for review and comment. In its written comments, reproduced in appendix I, VA stated that it concurred in principle with our recommendation. VA also provided technical comments, which we incorporated as appropriate. In response to our recommendation, VA stated it plans to establish by December 31, 2018, a committee of internal stakeholders and subject matter experts to provide options for overseeing VAMCs’ pharmacy inventory management. However, it was unclear from VA’s response whether the planned committee will recommend or designate an entity or focal point with system-wide oversight responsibilities. VA noted in its general comments that it does have entities or individuals—referred to as focal points by VA—responsible for specific functions. However, these entities do not provide system-wide oversight that could allow the department to better understand VAMCs’ approaches to pharmacy inventory management. As we noted in our report, without a focal point for system-wide oversight, VA has limited awareness of the unique approaches that VAMCs use to manage their inventories and is missing an opportunity to evaluate these approaches and standardize them across VA as appropriate. Additionally, in its general comments, VA raised concerns regarding our characterization in the draft report of medication shortages and the use of automated dispensing units in the context of controlled substances. In response, we updated the report to include more information about one VAMC’s use of a committee to address medication shortages. We also clarified that three VAMCs are using (or will soon have the capability to use) enhanced analytic software to better leverage data generated through their automated dispensing machines, which allows them to more easily identify potential diversion. Finally, VA noted that we did not discuss PBM’s multiple requests for an enterprise-management system since the early 2000s; however, this information was included as part of the draft report sent to VA for review and remains in our final report on page 14 as part of our finding on the lack of a VA-wide pharmacy inventory management system. We are sending copies of this report to the Secretary of the Department of Veterans Affairs and appropriate congressional committees. The report is also available at no charge on GAO’s website at http://www.gao.gov. If you or your staff has any questions regarding this report, please contact Sharon M. Silas at (202) 512-7114 or silass@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Rashmi Agarwal, Assistant Director; Nick Bartine, Analyst-in-Charge; Muriel Brown; Kaitlin Farquharson; Krister Friday; Sandra George; Courtney Liesener; Diona Martyn; and Michelle Paluga made key contributions to this report.", "summary": "VA provides health care services, including pharmacy services, to approximately 9 million veterans each year. Since 2000, VAMCs have faced recurring challenges in managing their pharmacy inventories, including difficulties with accurately accounting for and updating inventory totals through their pharmacy systems. GAO was asked to review VA pharmacy inventory management. This report (1) describes approaches selected VAMCs use to manage their pharmacy inventories and (2) assesses the extent to which VA oversees VAMCs' efforts to manage their pharmacy inventories. To conduct this work, GAO visited a non-generalizable selection of five VAMCs chosen for the complexity of services offered and variation in location. GAO also reviewed VA national policies and local polices for the selected VAMCs and interviewed VA officials at the headquarters, regional, and local levels. GAO assessed VA's oversight of pharmacy management in the context of federal internal control standards. Selected Department of Veterans Affairs' (VA) medical centers (VAMC) use generally similar approaches for managing their pharmacy inventories. For example, all VAMCs store certain medications in secured areas. However, GAO found that VAMCs have also taken unique approaches for procuring and tracking medications, as allowed under VA policy. For example, to better address medication shortages, one VAMC pharmacy GAO visited established a shortage committee that meets on a weekly basis. Another VAMC pharmacy uses an automated dispensing machine together with compatible software that allows the pharmacy to track the location of most inpatient medications in real-time (see figure). GAO also found that VA's oversight of VAMCs' pharmacy inventory management is limited as VA lacks a comprehensive inventory management system or a focal point for system-wide oversight. In May 2018, VA signed a contract for a new electronic health records system that should allow VA to monitor VAMCs' inventories; however, VA officials expect implementation of this system to take up to 10 years. Based on a review of VA policies and interviews with VA officials, GAO found that VA has not designated a focal point with defined responsibilities for system-wide oversight of VAMCs' pharmacy inventory management. This is inconsistent with federal internal control standards for monitoring and establishing structure and authority to achieve an entity's objectives. Without a focal point for system-wide oversight, VA has limited awareness of the unique approaches that VAMCs use to manage their inventories and is missing an opportunity to evaluate these approaches. Additionally, VA cannot effectively share and standardize inventory management best practices as appropriate. Having a focal point is especially important given that VAMCs have historically had challenges in managing their inventories and a comprehensive pharmacy inventory management system may not be available for the foreseeable future. GAO recommends that VA designate a focal point for overseeing VAMCs' pharmacy inventory management efforts system-wide and define the focal point's responsibilities. VA concurred in principle with the recommendation.", "document_type": "gao"}
{"report": "While no commonly accepted definition of a community bank exists, they are generally smaller banks that provide banking services to the local community and have management and board members who reside in the local community. In some of our past reports, we often defined community banks as those with under $10 billion in total assets. However, many banks have assets well below $10 billion as data from the financial condition reports that institutions submit to regulators (Call Reports) indicated that of the more than 6,100 banks in the United States, about 90 percent had assets below about $1.2 billion as of March 2016. Based on our prior interviews and reviews of documents, regulators and others have observed that small banks tend to differ from larger banks in their relationships with customers. Large banks are more likely to engage in transactional banking, which focuses on the provision of highly standardized products that require little human input to manage and are underwritten using statistical information. Small banks are more likely to engage in what is known as relationship banking in which banks consider not only data models but also information acquired by working with the banking customer over time. Using this banking model, small banks may be able to extend credit to customers such as small business owners who might not receive a loan from a larger bank. Small business lending appears to be an important activity for community banks. As of June 2017, community banks had almost $300 billion outstanding in loans with an original principal balance of under $1 million (which banking regulators define as small business lending), or about 20 percent of these institutions’ total lending. In that same month, non- community banks had about $390 billion outstanding in business loans under $1 million representing 5 percent of their total lending. Credit unions are nonprofit member-owned institutions that take deposits and make loans. Unlike banks, credit unions are subject to limits on their membership because members must have a “common bond”—for example, working for the same employer or living in the same community. Financial reports submitted to NCUA (the regulator that oversees federally-insured credit unions) indicated that of the more than 6,000 credit unions in the United States, 90 percent had assets below about $393 million as of March 2016. In addition to providing consumer products to their members, credit unions are also allowed to make loans for business activities subject to certain restrictions. These member business loans are defined as a loan, line of credit, or letter of credit that a credit union extends to a borrower for a commercial, industrial, agricultural, or professional purpose, subject to certain exclusions. In accordance with rules effective January 2017, the total amount of business lending credit unions can do is not to generally exceed 1.75 times the actual net worth of the credit union. Federal banking and credit union regulators have responsibility for ensuring the safety and soundness of the institutions they oversee, protecting federal deposit insurance funds, promoting stability in financial markets, and enforcing compliance with applicable consumer protection laws. All depository institutions that have federal deposit insurance have a federal prudential regulator. The regulator responsible for overseeing a community bank or credit union varies depending on how the institution is chartered, whether it is federally insured, and whether it is a Federal Reserve member (see table 1). Other federal agencies also impose regulatory requirements on banks and credit unions. These include rules issued by CFPB, which has supervision and enforcement authority for various federal consumer protection laws for depository institutions with more than $10 billion in assets and their affiliates. The Federal Reserve, OCC, FDIC, and NCUA continue to supervise for consumer protection compliance at institutions that have $10 billion or less in assets. Although community banks and credit unions with less than $10 billion in assets typically would not be subject to CFPB examinations, they generally are required to comply with CFPB rules related to consumer protection. In addition, FinCEN also issues requirements that financial institutions, including banks and credit unions, must follow. FinCEN is a component of Treasury’s Office of Terrorism and Financial Intelligence that supports government agencies by collecting, analyzing, and disseminating financial intelligence information to combat money laundering. It is responsible for administering the Bank Secrecy Act, which, with its implementing regulations, generally requires banks, credit unions, and other financial institutions, to collect and retain various records of customer transactions, verify customers’ identities in certain situations, maintain AML programs, and report suspicious and large cash transactions. FinCEN relies on financial regulators and others to examine U.S. financial institutions to determine compliance with these requirements. In addition, financial institutions also have to comply with requirements by Treasury’s Office of Foreign Asset Control to review transactions to ensure that business is not being done with sanctioned countries or individuals. In response to the 2007-2009 financial crisis, Congress passed the Dodd- Frank Act, which became law on July 21, 2010. The act includes numerous reforms to strengthen oversight of financial services firms, including consolidating consumer protection responsibilities within CFPB. Under the Dodd-Frank Act, federal financial regulatory agencies were directed to or granted authority to issue hundreds of regulations to implement the act’s reforms. Many of the provisions in the Dodd-Frank Act target the largest and most complex financial institutions, and regulators have noted that much of the act is not meant to apply to community banks. Although the Dodd-Frank Act exempts small institutions, such as community banks and credit unions, from several of its provisions, and authorizes federal regulators to provide small institutions with relief from certain regulations, it also contains provisions that impose additional restrictions and compliance costs on these institutions. As we reported in 2012, federal regulators, state regulatory associations, and industry associations collectively identified provisions within 7 of the act’s 16 titles that they expected to affect community banks and credit unions. The provisions they identified as likely to affect these institutions included some of the act’s mortgage reforms, such as those requiring institutions to ensure that a consumer obtaining a residential mortgage loan has the reasonable ability to repay the loan at the time the loan is consummated; comply with a new CFPB rule that combines two different mortgage loan disclosures that had been required by the Truth-in-Lending Act and the Real Estate Settlement Procedures Act of 1974; and ensure that property appraisers are sufficiently independent. In addition to the regulations that have arisen from provisions in the Dodd-Frank Act, we reported that other regulations have created potential burdens for community banks. For example, the depository institution regulators also issued changes to the capital requirements applicable to these institutions. Many of these changes were consistent with the Basel III framework, which is a comprehensive set of reforms to strengthen global capital and liquidity standards issued by an international body consisting of representatives of many nations’ central banks and regulators. These new requirements significantly changed the risk-based capital standards for banks and bank holding companies. As we reported in November 2014, officials interviewed from community banks did not anticipate any difficulties in meeting the U.S. Basel III capital requirements but expected to incur additional compliance costs. In addition to regulatory changes that could increase burden or costs on community banks, some of the Dodd-Frank Act provisions have likely resulted in reduced costs for these institutions. For example, revisions to the way that deposit insurance premiums are calculated reduced the amount paid by banks with less than $10 billion in assets by $342 million or 33 percent from the first to second quarter of 2011 after the change became effective. Another change reduced the audit-related costs that some banks were incurring in complying with provisions of the Sarbanes- Oxley Act. A literature search indicated that prior studies by other entities, including regulators, trade associations or others, which examined how to measure regulatory burden generally focused on direct costs resulting from compliance with regulations, and our analysis of them identified various limitations that restrict their usefulness in assessing regulatory burden. For example, researchers commissioned by the Credit Union National Association, which advocates for credit unions, found costs attributable to regulations totaled a median of 0.54 percent of assets in 2014 for a non- random sample of the 53 small, medium, and large credit unions responding to a nationwide survey. However, one of the study’s limitations was its use of a small, non-random sample of credit unions. In addition, the research was not designed to conclusively link changes in regulatory costs for the sampled credit unions to any one regulation or set of regulations. CFPB also conducted a study of regulatory costs associated with specific regulations applicable to checking accounts, traditional savings accounts, debit cards, and overdraft programs. Through case studies involving 200 interviews with staff at seven commercial banks with assets over $1 billion, the agency’s staff determined that the banks’ costs related to ongoing regulatory compliance were concentrated in operations, information technology, human resources, and compliance and retail functions, with operations and information technology contributing the highest costs. While providing detailed information about the case study institutions, reliance on a small sample of mostly large commercial banks limits the conclusions that can be drawn about banks’ regulatory costs generally. In addition, the study notes several challenges to quantifying compliance costs that made their cost estimates subject to some measurement error, and the study’s design limits the extent to which a causal relationship between financial regulations and costs could be fully established. Researchers from the Mercatus Center at George Mason University used a nongeneralizable survey of banks to find that respondents believed they were spending more money and staff time on compliance than before due to Dodd-Frank regulations. From a universe of banks with less than $10 billion of assets, the center’s researchers used a non-random sample to collect 200 responses to a survey sent to 500 banks with assets less than $10 billion about the burden of complying with regulations arising from the Dodd-Frank Act. The survey sought information on the respondents’ characteristics, products, and services and the effects various regulatory and compliance activities had on operations and decisions, including those related to bank profitability, staffing, and products. About 83 percent of the respondents reported increased compliance costs of greater than or equal to 5 percent due to regulatory requirements stemming from the Dodd-Frank Act. The study’s limitations include use of a non-random sample selection, small response rate, and use of questions that asked about the Dodd-Frank Act in general. In addition, the self-reported survey items used to capture regulatory burden—compliance costs and profitability—have an increased risk of measurement error and the causal relationship between Dodd- Frank Act requirements and changes in these indicators is not well- established. Community bank and credit union representatives that we interviewed identified three sets of regulations as most burdensome to their institutions: (1) data reporting requirements related to loan applicants and loan terms under the Home Mortgage Disclosure Act of 1975 (HMDA); (2) transaction reporting and customer due diligence requirements as part of the Bank Secrecy Act and related anti-money laundering laws and regulations (collectively, BSA/AML); and (3) disclosures of mortgage loan fees and terms to consumers under the TILA-RESPA Integrated Disclosure (TRID) regulations. In focus groups and interviews, many of the institution representatives said these regulations were time- consuming and costly to comply with, in part because the requirements were complex, required preparation of individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes. However, federal regulators and consumer advocacy groups said that benefits from these regulations were significant. Representatives of community banks and credit unions in all our focus groups and in most of our interviews told us that HMDA’s data collection and reporting requirements were burdensome. Under HMDA and its implementing Regulation C, banks and credit unions with more than $45 million in assets that do not meet regulatory exemptions must collect, record, and report to the appropriate federal regulator, data about applicable mortgage lending activity. For every covered mortgage application, origination, or purchase of a covered loan, lenders must collect information such as the loan’s principal amount, the property location, the income relied on in making the credit decision, and the applicants’ race, ethnicity, and sex. Institutions record this on a form called the loan/application register, compile these data each calendar year, and submit them to CFPB. Institutions have also been required to make these data available to the public upon request, after modifying them to protect the privacy of applicants and borrowers. Representatives of many community banks and credit unions with whom we spoke said that complying with HMDA regulations was time consuming. For example, representatives from one community bank we interviewed said it completed about 1,100 transactions that required HMDA reporting in 2016, and that its staff spent about 16 hours per week complying with Regulation C. In one focus group, participants discussed how HMDA compliance was time consuming because the regulations were complex, which made determining whether a loan was covered and should be reported difficult. As a part of that discussion, one bank representative told us that it was not always clear whether a residence that was used as collateral for a commercial loan was a reportable mortgage under HMDA. In addition, representatives in all of our focus groups in which HMDA was discussed and in some interviews said that they had to provide additional staff training for HMDA compliance. Among the 28 community banks and credit unions whose representatives commented on HMDA in our focus groups, 61 percent noted having to conduct additional HMDA-related training. In most of our focus groups and three of our interviews, representatives of community banks and credit unions also expressed concerns about how federal bank examiners review HMDA data for errors. When regulatory examiners conducting compliance examinations determine that an institution’s HMDA data has errors above prescribed thresholds, the institution has to correct and resubmit its data, further adding to the time required for compliance. While regulators have revised their procedures for assessing errors as discussed later, prior to 2018, if 10 percent or more of the loan/application registers that examiners reviewed had errors, an institution was required to review all of their data, correct any errors, and resubmit them. If 5 percent or more of the reviewed loan/application registers had errors in a single data field, an institution had to review all other registers and correct the data in that field. Participants in one focus group discussed how HMDA’s requirements left them little room for error and that they were concerned that examiners weigh all HMDA fields equally when assessing errors. For example, representatives of one institution noted that for purposes of fair lending enforcement, errors in fields such as race and ethnicity can be more important than errors in the action taken date (the field for the date when a loan was originated or when an application not resulting in an origination was received). Representatives of one institution also noted that they no longer have access to data submission software that allowed them to verify the accuracy of some HMDA data, and this has led to more errors in their submissions. Representatives of another institution told us that they had to have staff conduct multiple checks of HMDA data to ensure the data met accuracy standards, which added to the time needed for compliance. Representatives of many community banks and credit unions with whom we spoke also expressed concerns that compliance requirements for HMDA were increasing. The Dodd-Frank Act included provisions to expand the information institutions must collect and submit under HMDA, and CFPB issued rules implementing these new requirements that mostly became effective January 2018. In addition to certain new data requirements specified in the act, such as age and the total points and fees payable at origination, CFPB’s amendments to the HMDA reporting requirements also added additional data points, including some intended to collect more information about borrowers such as credit scores, as well as more information about the features of loans, such as fees and terms. In the final rule implementing the new requirements, CFPB also expanded the types of loans on which some institutions must report HMDA data to include open-ended lines of credit and reverse mortgages. Participants in two of our focus groups with credit unions said reporting this expanded information will require more staff time and training and cause them to purchase new or upgraded computer software. In most of our focus groups, participants said that changes should be made to reduce the burdens associated with reporting HMDA data. For example, in some focus groups, participants suggested raising the threshold for institutions that have to file HMDA reports above the then current $44 million in assets, which would reduce the number of small banks and credit unions that are required to comply. Representatives of two institutions noted that because small institutions make very few loans compared to large ones, their contribution to the overall HMDA data was of limited value in contrast to the significant costs to the institutions to collect and report the data. Another participant said their institution sometimes make as few as three loans per month. In most of our focus groups, participants also suggested that regulators could collect mortgage data in other ways. For example, one participant discussed how it would be less burdensome for lenders if federal examiners collected data on loan characteristics during compliance examinations. However, staff of federal regulators and consumer groups said that HMDA data are essential for enforcement of fair lending laws and regulations. Representatives of CFPB, FDIC, NCUA, and OCC and groups that advocate for consumer protection issues said that HMDA data has helped address discriminatory practices. For example, some representatives noted a decrease in “redlining” (refusing to make loans to certain neighborhoods or communities). CFPB staff noted that HMDA data provides transparency about lending markets, and that HMDA data from community banks and credit unions is critical for this purpose, especially in some rural parts of the country where they make the majority of mortgage loans. While any individual institution’s HMDA reporting might not make up a large portion of HMDA data for an area, CFPB staff told us that if all smaller institutions were exempted from HMDA requirements, regulators would have little or no data on the types of mortgages or on lending patterns in some areas. Agency officials also told us that few good alternatives to HMDA data exist and that the current collection regime is the most effective available option for collecting the data. NCUA officials noted that collecting mortgage data directly from credit unions during examinations to enforce fair lending rules likely would be more burdensome for the institutions. CFPB staff and consumer advocates we spoke with also said that HMDA provides a low-cost data source for researchers and local policy makers, which leads to other benefits that cannot be directly measured but are included in HMDA’s statutory goals—such as allowing local policymakers to target community investments to areas with housing needs. While representatives of some community banks and credit unions argued that HMDA data were no longer necessary because practices such as redlining have been reduced and they receive few requests for HMDA data from the public, representatives of some consumer advocate groups responded that eliminating the transparency that HMDA data creates could allow discriminatory practices to become more common. CFPB staff and representatives of one of these consumer groups also said that before the financial crisis of 2007–2009, some groups were not being denied credit outright but instead were given mortgages with terms, such as high interest rates, which made them more likely to default. The expanded HMDA data will allow regulators to detect such problematic lending practices for mortgage terms. CFPB and FDIC staff also told us that while lenders will have to collect and report more information, the new fields will add context to lending practices and should reduce the likelihood of incorrectly flagging institutions for potential discrimination. For example, with current data, a lender may appear to be denying mortgage applications to a particular racial or ethnic group, but with expanded data that includes applicant credit scores, regulators may determine that the denials were appropriate based on credit score underwriting. CFPB staff acknowledged that HMDA data collection and reporting may be time consuming, and said they have taken steps to reduce the associated burdens for community banks and credit unions. First, in its final rule implementing the Dodd-Frank Act’s expanded HMDA data requirements, CFPB added exclusions for banks and credit unions that make very few mortgage loans. Effective January 2018, an institution will be subject to HMDA requirements only if it has originated at least 25 closed-end mortgage loans or at least 100 covered open-end lines of credit in each of the 2 preceding calendar years and also has met other applicable requirements. In response to concerns about the burden associated with the new requirement for reporting open-end lines of credit, in 2017. CFPB temporarily increased the threshold for collecting and reporting data for open-end lines of credit from 100 to 500 for the 2018 and 2019 calendar years. CFPB estimated that roughly 25 percent of covered depository institutions will no longer be subject to HMDA as a result of these exclusions. Second, the Federal Financial Institutions Examination Council (FFIEC), which includes CFPB, announced the new FFIEC HMDA Examiner Transaction Testing Guidelines that specify when agency examiners should direct an institution to correct and resubmit its HMDA data due to errors found during supervisory examinations. CFPB said these revisions should greatly reduce the burden associated with resubmissions. Under the revised standards, institutions will no longer be directed to resubmit all their HMDA data if they exceeded the threshold for HMDA files with errors, but will still be directed to correct specific data fields that have errors exceeding the specified threshold. The revised guidelines also include new tolerances for some data fields, such as application date and loan amount. Third, CFPB also introduced a new online system for submitting HMDA data in November 2017. CFPB staff said that the new system, the HMDA Platform, will reduce errors by including features to allow institutions to validate the accuracy and correct the formatting of their data before submitting. They also noted that this platform will reduce burdens associated with the previous system for submitting HMDA data. For example, institutions no longer will have to regularly download software, and multiple users within an institution will be able to access the platform. NCUA officials added that some credit unions had tested the system and reported that it reduced their reporting burden. Finally, on December 21, 2017, CFPB issued a public statement announcing that, for HMDA data collected in 2018, CFPB does not intend to require resubmission of HMDA data unless errors are material, and does not intend to assess penalties for errors in submitted data. CFPB also announced that it intends to open a rule making to reconsider various aspects of the 2015 HMDA rule, such as the thresholds for compliance and data points that are not required by statute. In all our focus groups and many of our interviews, participants said they found BSA/AML requirements to be burdensome due to the staff time and other costs associated with their compliance efforts. To provide regulators and law enforcement with information that can aid in pursuing criminal, tax, and regulatory investigations, BSA/AML statutes and regulations require covered financial institutions to file Currency Transaction Reports (CTR) for cash transactions conducted by a customer for aggregate amounts of more than $10,000 per day and Suspicious Activity Reports (SAR) for activity that might signal criminal activity (such as money laundering or tax evasion); and establish BSA/AML compliance programs that include efforts to identify and verify customers’ identities and monitor transactions to report, for example, transactions that appear to violate federal law. Participants in all of our focus groups discussed how BSA/AML compliance was time-consuming, and in most focus groups participants said this took time away from serving customers. For example, representatives of one institution we interviewed told us that completing a single SAR could take 4 hours, and that they might complete 2 to 5 SARs per month. However, representatives of another institution said that at some times of the year it has filed more than 300 SARs per month. In a few cases, representatives of institutions saw BSA/AML compliance as burdensome because they had to take actions that seemed unnecessary based on the nature of the transactions. For example, one institution’s representatives said that filing a CTR because a high school band deposited more than $10,000 after a fundraising activity seemed unnecessary, while another’s said that it did not see the need to file SARs for charitable organizations that are well known in their community. Representatives of institutions in most of our focus groups also noted that BSA/AML regulations required additional staff training. Some of these representatives noted that the requirements are complex and the activities, such as identifying transactions potentially associated with terrorism, are outside of their frontline staff’s core competencies. Representatives in all focus groups and a majority of interviews said BSA imposes financial costs on community banks and credit unions that must be absorbed by those institutions or passed along to customers. In most of our focus groups, representatives said that they had to purchase or upgrade software systems to comply with BSA/AML requirements, which can be expensive. Some representatives also said they had to hire third parties to comply with BSA/AML regulations. Representatives of some institutions also noted that the compliance requirements do not produce any material benefits for their institutions. In most of our focus groups, participants were particularly concerned that the compliance burden associated with BSA/AML regulations was increasing. In 2016, FinCEN—the bureau in the Department of the Treasury that administers BSA/AML rules—issued a final rule that expanded due-diligence requirements for customer identification. The final rule was intended to strengthen customer identification programs by requiring institutions to obtain information about the identities of the beneficial owners of businesses opening accounts at their institutions. The institutions covered by the rule are expected to be in compliance by May 11, 2018. Some representatives of community banks and credit unions that we spoke with said that this new requirement will be burdensome. For example, one community bank’s representatives said the new due-diligence requirements will require more staff time and training and cause them to purchase new or upgraded computer systems. Representatives of some institutions also noted that accessing beneficial ownership information about companies can be difficult, and that entities that issue business licenses or tax identification numbers could perform this task more easily than financial institutions. In some of our focus groups, and in some comment letters that we reviewed that community banks and credit unions submitted to bank regulators and NCUA as part of the EGRPRA process, representatives of community banks and credit unions said regulators should take steps to reduce the burdens associated with BSA/AML. Participants in two of our focus groups and representatives of two institutions we interviewed said that the $10,000 CTR threshold, which was established in 1972, should be increased, noting it had not been adjusted for inflation. One participant told us that if this threshold had been adjusted for inflation over time, it likely would be filing about half of the number of CTRs that it currently files. In several focus groups, participants also indicated that transactions that must be checked against the Office of Foreign Assets Control list also should be subject to a threshold amount. Representatives of one institution noted that they have to complete time-consuming compliance work for even very small transactions (such as less than $1). Representatives of some institutions suggested that the BSA/AML requirements be streamlined to make it easier for community banks and credit unions to comply. For example, representatives of one institution that participated in the EGRPRA review suggested that institutions could provide regulators with data on all cash transactions in the format in which they keep these records rather than filing CTRs. Finally, participants in one focus group said that regulators should better communicate how the information that institutions submit contributes to law enforcement successes in preventing or prosecuting crimes. Staff from FinCEN told us that the reports and due-diligence programs required in BSA/AML rules are critical to safeguarding the U.S. financial sector from illicit activity, including illegal narcotics and terrorist financing activities. They said they rely on CTRs and SARs that financial institutions file for the financial intelligence they disseminate to law enforcement agencies, and noted that they saw all BSA/AML requirements as essential because activities are designed to complement each other. Officials also pointed out that entities conducting terrorism, human trafficking, or fraud all rely heavily on cash, and reporting frequently made deposits makes tracking criminals easier. They said that significant reductions in BSA/AML reporting requirements would hinder law enforcement, especially because depositing cash through ATMs has become very easy. FinCEN staff said they utilize a continuous evaluation process to look for ways to reduce burden associated with BSA/AML requirements, and noted actions taken as a result. They said that FinCEN has several means of soliciting feedback about potential burdens, including through its Bank Secrecy Act Advisory Group that consists of industry, regulatory, and law enforcement representatives who meet twice a year, and also through public reporting and comments received through FinCEN’s regulatory process. FinCEN officials said that based on this advisory group’s recommendations, the agency provided SAR filing relief by reducing the frequency of submission for written SAR summaries on ongoing activity from 90 days to 120 days. FinCEN also has recognized that financial institutions do not generally see the beneficial impacts of their BSA/AML efforts, and officials said they have begun several different feedback programs to address this issue. FinCEN staff said they have been discussing ways to improve the CTR filing process, but in response to comments obtained as part of a recent review of regulatory burden they noted that the staff of law enforcement agencies do not support changing the $10,000 threshold for CTR reporting. FinCEN officials said that they have taken some steps to reduce the burden related to CTR reporting, such as by expanding the ability of institutions to seek CTR filing exemptions, especially for low-risk customers. FinCEN is also utilizing its advisory group to examine aspects of the CTR reporting obligations to assess ways to reduce reporting burden, but officials said it is too early to know the outcomes of the effort. However, FinCEN officials said that while evaluation of certain reporting thresholds may be appropriate, any changes to them or other CTR requirements to reduce burden on financial institutions, must still meet the needs of regulators and law enforcement, and prevent misuse of the financial system. FinCEN staff also said that some of the concerns raised about the upcoming requirements on beneficial ownership may be based on misunderstandings of the rule. FinCEN officials told us that under the final rule, financial institutions can rely on the beneficial ownership information provided to them by the entity seeking to open the account. Under the final rule, the party opening an account on behalf of the legal entity customer is responsible for providing beneficial ownership information, and the financial institution may rely on the representations of the customer unless it has information that calls into question the accuracy of those representations. The financial institution does not have to confirm ownership; rather, it has to verify the identity of the beneficial owners as reported by the individual seeking to open the account, which can be done with photocopies of identifying documents such as a driver’s license. FinCEN issued guidance explaining this aspect of the final rule in 2016. In all of our focus groups and many of our interviews, representatives of community banks and credit unions said that new requirements mandating consolidated disclosures to consumers for mortgage terms and fees have increased the time their staff spend on compliance, increased the cost of providing mortgage lending services, and delayed the completion of mortgages for customers. The Dodd Frank Act directed CFPB to issue new requirements to integrate mortgage loan disclosures that previously had been separately required by the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), and their implementing regulations, Regulation Z and X, respectively. Effective in October 2015, the combined TILA-RESPA Integrated Disclosure (known as TRID) requires mortgage lenders to disclose certain mortgage terms, conditions, and fees to loan applicants during the origination process for certain mortgage loans and prescribe how the disclosures should be made. The disclosure provisions also require lenders, in the absence of specified exceptions, to reimburse or refund to borrowers portions of certain fees that exceed the estimates previously provided in order to comply with the revised regulations. Under TRID, lenders generally must provide residential mortgage loan applicants with two forms, and deliver these documents within specified time frames (as shown in fig. 1). Within 3 business days of an application and at least 7 business days before a loan is consummated, lenders must provide the applicant with the loan estimate, which includes estimates for all financing costs and fees and other terms and conditions associated with the potential loan. If circumstances change after the loan estimate has been provided (for example, if a borrower needs to change the loan amount), a new loan estimate may be required. At least 3 days before a loan is consummated, lenders must provide the applicant with the closing disclosure, which has the loan’s actual terms, conditions, and associated fees. If the closing disclosure is mailed to an applicant, lenders must wait an additional 3 days for the applicant to receive it before they can execute the loan, unless they can demonstrate that the applicant has received the closing disclosure. If the annual percentage rate or the type of loan change after the closing disclosure is provided, or if a prepayment penalty is added, a new closing disclosure must be provided and a new 3-day waiting period is required. Other changes made to the closing disclosure require the provision of a revised closing disclosure, but a new 3-day waiting period is not required. If the fees in the closing disclosure are more than the fees in the loan estimate (subject to some exceptions and tolerances discussed later in this section), the lender must reimburse the applicant for the amount of the increase in order to comply with the applicable regulations. In all of our focus groups and most of our interviews, representatives of community banks and credit unions said that TRID has increased the time required to comply with mortgage disclosure requirements and increased the cost of mortgage lending. In half of our focus groups, participants discussed how they have had to spend additional time ensuring the accuracy of their initial estimates of mortgage costs, including fees charged by third parties, in part because they are now financially responsible for changes in fees during the closing process. Some participants also discussed how they have had to hire additional staff to meet TRID’s requirements. In one focus group of community banks, participants described how mortgage loans frequently involve the use of multiple third parties, such as appraisers and inspectors, and obtaining accurate estimates of the amounts these parties will charge for their services within the 3-day period prescribed by TRID can be difficult. The community banks we spoke with also discussed how fees from these parties often change at closing, and ensuring an accurate estimate at the beginning of the process was not always possible. As a result, some representatives said that community banks and credit unions have had to pay to cure or correct the difference in changed third-party fees that are outside their control. In most of our focus groups and some of our interviews, representatives told us that this TRID requirement has made originating a mortgage more costly for community banks and credit unions. Community banks and credit unions in half of our focus groups and some of our interviews also told us that TRID’s requirements are complex and difficult to understand, which adds to their compliance burden. Participants in one focus group noted that CFPB’s final rule implementing TRID was very long—the rule available on CFPB’s website is more than 1,800 pages including the rule’s preamble—and has many scenarios that require different actions by mortgage lenders or trigger different responsibilities as the following examples illustrate. Some fees in the loan estimate, such as prepaid interest, may be subsequently changed provided that the estimates were in good faith. Other fees, such as for third-party services where the charge is not paid to the lender or the lender’s affiliate, may be changed by as much as 10 percent in aggregate before the lender becomes liable for the difference. However, for some charges the lender must reimburse or refund to the borrower portions of subsequent increases, such as fees paid to the creditor, mortgage broker, or a lender affiliate, without any percentage tolerance. Based on a poll we conducted in all six focus groups, 40 of 43 participants said that they had to provide additional training to staff to ensure that TRID’s requirements were understood, which takes additional time from serving customers. In all of our focus groups and most of our interviews, community banks and credit unions also said that TRID’s mandatory waiting periods and disclosure schedules increased the time required to close mortgage loans, which created burdens for the institutions and their customers. Several representatives we interviewed told us that TRID’s waiting periods led to delays in closings of about 15 days. The regulation mandates that mortgage loans generally cannot be consummated sooner than 7 business days after the loan estimate is provided to an applicant, and no sooner than 3 business days after the closing disclosure is received by the applicant. If the closing disclosure is mailed, the lender must add another 3 business days to the closing period to allow for delivery. Representatives in some of our focus groups said that when changes needed to be made to a loan during the closing period, TRID requires them to restart the waiting periods, which can increase delays. For example, if the closing disclosure had been provided, and the loan product needed to be changed, a new closing disclosure would have to be provided and the applicant given at least 3 days to review it. Some representatives we interviewed said that their customers are frustrated by these delays and would like to close their mortgages sooner than TRID allows. Others said that TRID’s waiting periods decreased flexibility in scheduling the closing date, which caused problems for homebuyers and sellers (for instance, because transactions frequently have to occur on the same day). However, CFPB officials and staff of a consumer group said that TRID has streamlined previous disclosure requirements and is important for ensuring that consumers obtaining mortgages are protected. CFPB reported that for more than 30 years lenders have been required by law to provide mortgage disclosures to borrowers, and CFPB staff noted that prior time frames were similar to those required by TRID and Regulation Z. CFPB also noted that information on the disclosure forms that TRID replaced was sometimes overlapping, used inconsistent terminology, and could confuse consumers. In addition, CFPB staff and staff of a consumer group said that the previous disclosures allowed some mortgage-related fees to be combined, which prevented borrowers from knowing what charges for specific services were. They said that TRID disclosures better highlight important items for home buyers, allowing them to more readily compare loan options. Furthermore, CFPB staff told us that before TRID, lenders and other parties commonly increased a mortgage loan’s fees during the closing process, and then gave borrowers a “take it or leave it” choice just before closing. As a result, borrowers often just accepted the increased costs. CFPB representatives said that TRID protects consumers from this practice by shifting the responsibility for most fee increases to lenders, and increases transparency in the lending process. CFPB staff told us that it is too early to definitively identify what impact TRID has had on borrowers’ understanding of mortgage terms, but told us that some information they have seen indicated that it has been helpful. For example, CFPB staff said that preliminary results from the National Survey of Mortgage Originations conducted in 2017 found that consumer confidence in mortgage lending increased. While CFPB staff said that this may indicate that TRID, which became effective in October 2015, has helped consumers better understand mortgage terms, they noted that the complete survey results are not expected to be released until 2018. CFPB staff said that these results should provide valuable information on how well consumers generally understood mortgage terms and whether borrowers were comparison shopping for loans that could be used to analyze TRID’s effects on consumer understanding of mortgage products. CFPB staff also told us that complying with TRID should not result in significant time being added to the mortgage closing process. Based on the final rule, they noted that TRID’s waiting periods should not lead to delays of more than 3 days. CFPB staff also pointed out that the overall 7-day waiting period and the 3-day waiting period can be modified or waived if the consumer has a bona fide personal financial emergency, and thus should not be creating delays for those consumers. To waive the waiting period, consumers have to provide the lender with a written statement that describes the emergency. CFPB staff also said that closing times are affected by a variety of factors and can vary substantially, and that the delays that community banks and credit unions we spoke with reported may not be representative of the experiences of other lenders. A preliminary CFPB analysis of industry-published mortgage closing data found that closing times increased after it first implemented TRID, but that the delays subsequently declined. CFPB staff also said that they plan to analyze closing times using HMDA data now that they are collecting these data, and that they expect that delays that community banks and credit unions may have experienced so far would decrease as institutions adjusted to the new requirements. Based on our review of TRID’s requirements and discussions with community banks and credit unions, some of the burden related to TRID that community banks and credit unions described appeared to result from institutions taking actions not required by regulations, and community banks and credit unions told us they still were confused about TRID requirements. For example, representatives of some institutions we interviewed said that they believed TRID requires the entire closing disclosure process to be restarted any time any changes were made to a loan’s amount. CFPB staff told us that this is not the case, and that revised loan estimates can be made in such cases without additional waiting periods. Representatives of several other community banks and credit unions cited 5- and 10-day waiting periods not in TRID requirements, or believed that the 7-day waiting period begins after the closing disclosure is received by the applicant, rather than when the loan estimate is provided. Participants in one focus group discussed that they were confused about when to provide disclosures and what needs to be provided. Representatives of one credit union said that if they did not understand a requirement, it was in their best interest to delay closing to ensure they were in compliance. CFPB staff said that they have taken several steps to help lenders understand TRID requirements. CFPB has published a Small Entity Compliance Guide and a Guide to the Loan Estimate and Closing Disclosure Forms. As of December 2017, these guides were accessible on a TRID implementation website that has links to other information about the rule, as well as blank forms and completed samples. CFPB staff told us that the bureau conducted several well-attended, in-depth webinars to explain different aspects of TRID, including one with more than 20,000 participants, and that recordings of the presentations remained available on the bureau’s TRID website. CFPB also encourages institutions to submit questions about TRID through the website, and the staff said that they review submitted questions for any patterns that may indicate that an aspect of the regulation is overly burdensome. However, the Mortgage Bankers Association reported that CFPB’s guidance for TRID had not met the needs of mortgage lenders. In a 2017 report on reforming CFPB, this association stated that timely and accessible answers to frequently asked questions about TRID were still needed, noting that while CFPB had assigned staff to answer questions, these answers were not widely circulated. The association also reported that it had made repeated requests for additional guidance related to TRID, but the agency largely did not respond with additional materials in response to these requests. Although we found that misunderstandings of TRID requirements could be creating unnecessary compliance burdens for some small institutions, CFPB had not assessed the effectiveness of the guidance it provided to community banks and credit unions. Under the Dodd-Frank Act, CFPB has a general responsibility to ensure its regulations are not unduly burdensome, and internal control standards direct federal agencies to analyze and respond to risks related to achieving their defined objectives. However, CFPB staff said that they have not directly assessed how well community banks and credit unions have understood TRID requirements and acknowledged that some of these institutions may be applying the regulations improperly. They said that CFPB intends to review the effectiveness of its guidance, but did not indicate when this review would be completed. Until the agency assesses how well community banks and credit unions understand TRID requirements, CFPB may not be able to effectively respond to the risk that some smaller institutions have implemented TRID incorrectly, unnecessarily burdening their staff and delaying consumers’ home purchases. We did not find that regulators directed institutions to comply with regulations from which they were exempt, although institutions were concerned about the appropriateness of examiner expectations. To provide regulatory relief to community banks and credit unions, Congress and regulators have sometimes exempted smaller institutions from the need to comply with all or part of some regulations. Such exemptions are often based on the size of the financial institution or the level of particular activities. For example, CFPB exempted institutions with less than $45 million in assets and fewer than 25 closed-end mortgage loans or 500 open-end lines of credit from the expanded HMDA reporting requirements. In January 2013, CFPB also included exemptions for some institutions in a rule related to originating loans that meet certain characteristics—known as qualified mortgages—in order for the institutions to receive certain liability protections if the loans later go into default. To qualify for this treatment, the lenders must make a good faith effort to determine a borrower’s ability to repay a loan and the loan must not include certain risky features (such as interest-only or balloon payments). In its final rule, CFPB included exemptions that allow small creditors to originate loans with certain otherwise restricted features (such as balloon payments) and still be considered qualified mortgage loans. Concerns expressed to legislators about exemptions not being applied appeared to be based on misunderstandings of certain regulations. For example, in June 2016, a bank official testified that he thought his bank would be exempt from all of CFPB’s requirements. However, CFPB’s rules applicable to banks apply generally to all depository institutions, although CFPB only conducts compliance examinations for institutions with assets exceeding $10 billion. The depository institution regulators continue to examine institutions with assets below this amount (the overwhelming majority of banks and credit unions) for compliance with regulations enacted by CFPB. Although not generalizable, our analysis of select examinations did not find that regulators directed institutions to comply with requirements from which they were exempt. In our interviews with representatives from 17 community banks and credit unions, none of the institutions’ representatives identified any cases in which regulators required their institution to comply with a regulatory requirement from which they should have been exempt. We also randomly selected and reviewed examination reports and supporting material for 28 examinations conducted by the regulators to identify any instances in which the regulators had not applied exemptions. From our review of the 28 examinations, we found no instances in the examination reports or the scoping memorandums indicating that examiners had required these institutions to comply with the regulations covered by the eight selected exemptions. Because of the limited number of the examinations we reviewed, we cannot generalize our findings to the regulatory treatment of all institutions qualifying for exemptions. Although not identifying issues relating to exemptions, representatives of community banks and credit unions in about half of our interviews and focus groups expressed concerns that their regulators expected them to follow practices they did not feel corresponded to the size or risks posed by their institutions. For example, representatives from one institution we interviewed said that examiners directed them to increase BSA/AML activities or staff, whereas they did not see such expectations as appropriate for institutions of their size. Similarly, in public forums held by regulators as part of their EGRPRA reviews (discussed in the next section) a few bank representatives stated that regulators sometimes considered compliance activities by large banks to be best practices, and then expected smaller banks to follow such practices. However, institution representatives in the public forums and in our interviews and focus groups that said sometimes regulators’ expectations for their institutions were not appropriate, but did not identify specific regulations or practices they had been asked to consider following when citing these concerns. To help ensure that applicable exemptions and regulatory expectations are appropriately applied, federal depository institution regulators told us they train their staff in applicable requirements and conduct senior-level reviews of examinations to help ensure that examiners only apply appropriate requirements and expectations on banks and credit unions. Regulators said that they do not conduct examinations in a one-size-fits- all manner, and aim to ensure that community banks and credit unions are held to standards appropriate to their size and business model. To achieve this, they said that examiners undergo rigorous training. For example, FDIC staff said that its examiners have to complete four core trainings and then receive ongoing on-the-job instruction. Each of the four regulators also said they have established quality assurance programs to review and assess their examination programs periodically. For example, each Federal Reserve Bank reviews its programs for examination inconsistency and the Federal Reserve Board staff conducts continuous and point-in-time oversight reviews of Reserve Banks’ examination programs to identify issues or problems, such as examination inconsistency. The depository institution regulators also said that they have processes for depository institutions to appeal examination findings if they feel they were held to inappropriate standards. In addition to less formal steps, such as contacting a regional office, each of the four regulators have an ombudsman office to which institutions can submit complaints or concerns about examination findings. Staffs of the various offices are independent from the regulators’ management and work with the depository institutions to resolve examination issues and concerns. If the ombudsman is unable to resolve the complaints, then the institutions can further appeal their complaints through established processes. Federal depository institution regulators address regulatory burden of their regulated institutions through the rulemaking process and also through retrospective reviews that may provide some regulatory relief to community banks. However, the retrospective review process has some limitations that limit its effectiveness in assessing and addressing regulatory burden on community banks and credit unions. Federal depository institution regulators can address the regulatory burden of their regulated institutions throughout the rulemaking process and through mandated, retrospective or “look back” reviews. According to the regulators, attempts to reduce regulatory burden start during the initial rulemaking process. Staff from FDIC, Federal Reserve, NCUA, and OCC all noted that when promulgating rules, their staff seek input from institutions and others throughout the process to design requirements that achieve the goals of the regulation at the most reasonable cost and effort for regulated entities. Once a rule has been drafted, the regulators publish it in the Federal Register for public comment. The staff noted that regulators often make revisions in response to the comments received to try to reduce compliance burdens in the final regulation. After regulations are implemented, banking regulators also address regulatory burdens by periodically conducting mandated reviews of their regulations. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) directs three regulators (Federal Reserve, FDIC, and OCC, as agencies represented on the Federal Financial Institutions Examination Council) to review at least every 10 years all of their regulations and through public comment identify areas of the regulations that are outdated, unnecessary or unduly burdensome on insured depository institutions. Under the act, the regulators are to categorize their regulations and provide notice and solicit public comment on all the regulations for which they have regulatory authority. The act also includes a number of requirements on how the regulators should conduct the review, including reporting results to Congress. The first EGRPRA review was completed in 2007. The second EGRPRA review began in 2014 and the report summarizing its results was submitted to Congress in March 2017. While NCUA is not required to participate in the EGRPRA review (because EGRPRA did not include the agency in the list of agencies that must conduct the reviews), NCUA has been participating voluntarily. NCUA’s assessment of its regulations appears in separate sections of the reports provided to Congress for each of the 2007 and 2017 reviews. Regulators began the most recent EGRPRA review by providing notice and soliciting comments in 2014–2016. The Federal Reserve, FDIC, and OCC issued four public notices in the Federal Register seeking comments from regulated institutions and interested parties on 12 categories of regulations they promulgated. The regulators published a list of all the regulations they administer in the notices and asked for comments, including comments on the extent to which regulations were burdensome. Although not specifically required under EGRPRA, the regulators also held six public meetings across the country with several panels of banks and community groups. At each public meeting, at least three panels of bank officials represented banks with assets of generally less than $5 billion and a large number of the panels included banks with less than $2 billion in assets. Panels were dedicated to specific regulations or sets of regulations. For example, one panel covered capital-related rules, consumer protection, and director-related rules, and another addressed BSA/AML requirements. Although panels were dedicated to specific regulations or sets of regulations, the regulators invited comment on all of their regulations at all public meetings. The regulators then assessed the public comments they received and described actions they intended to take in response. EGRPRA requires that the regulators identify the significant issues raised by the comments. The regulators generally deemed the issues that received the most public comments as significant. For the 2017 report, representatives at the Federal Reserve, FDIC, and OCC reviewed, evaluated, and summarized more than 200 comment letters and numerous oral comments they received. For interagency regulations that received numerous comments, such as those relating to capital and BSA/AML requirements, the comment letters for each were provided to staff of one of the three regulators or to previously established interagency working groups to conduct the initial assessments. The regulators’ comment assessments also included reviews by each agency’s subject-matter experts, who prepared draft summaries of the concerns and proposed agency responses for each of the rules that received comments. According to one bank regulator, the subject-matter experts assessed the comments across three aspects: (1) whether a suggested change to the regulation would reduce bank burdens; (2) how the change to the regulation would affect the safety and soundness of the banking system; and (3) whether a statutory change would be required to address the comment. The summaries drafted by the subject-matter experts then were shared with staff representing all three regulators and further revised. The staff of the three regulators said they then met jointly to analyze the merits of the comments and finalize the comment responses and the proposed actions for approval by senior management at all three regulators. In the 2017 report summarizing their assessment of the comments received, the regulators identified six significant areas in which commenters raised concerns: (1) capital rules, (2) financial condition reporting (Call Reports), (3) appraisal requirements, (4) examination frequency, (5) Community Reinvestment Act, and (6) BSA/AML. Based on our analysis of the 2017 report, the Federal Reserve, FDIC, and OCC had taken or pledged to take actions to address 11 of the 28 specific concerns commenters had raised across these six areas. We focused our analysis on issues within the six significant issues that affected the smaller institution and defined an action taken by the regulators as a change or revision to a regulation or the issuance of guidance. Capital rules. The regulators noted in the 2017 EGRPRA report that they received comment letters from more than 30 commenters on the recently revised capital requirements. Although some of the concerns commenters expressed related to issues affecting large institutions, some commenters sought to have regulators completely exempt smaller institutions from the requirements. Others objected to the amounts of capital that had to be held for loans made involving more volatile commercial real estate. In response, the regulators stated that the more than 500 failures of banks in the recent crisis, most of which were community banks, justified requiring all banks to meet the new capital requirements. However, they pledged in the report to make some changes, and have recently proposed rules that would alter some of the requirements. For example, on September 27, 2017, the regulators proposed several revisions to the capital requirements that would apply to banks not subject to the advanced approach requirements under the capital rules (generally, banks with less than $250 billion in assets and less than $10 billion in total foreign exposure). For example, the proposed rule simplifies the capital treatment for certain commercial acquisition, development, and construction loans, and would change the treatment of mortgage servicing assets. Call Reports. The regulators also received more than 30 comments relating to the reports—known as Call Reports—that banks file with the regulators outlining their financial condition and performance. Generally, the commenters requested relief (reducing the number of items required to be reported) for smaller banks and also asked that the frequency of reporting for some items be reduced. In response to these concerns, the regulators described a review of the Call Report requirements intended to reduce the number of items to be reported to the regulators. The regulators had started this effort to address Call Report issues soon after the most recent EGRPRA process had begun in June 2014. In the 2017 EGRPRA report, the regulators noted that they developed a new Call Report form for banks with assets of less than $1 billion and domestic offices only. For instance, according to the regulators, the new form reduced the number of items such banks had to report by 40 percent. Staff from the regulators told us that about 3,500 banks used the new small-bank reporting form in March 2017, which represented about 68 percent of the banks eligible to use the new form. OCC officials told us that an additional 100 federally chartered banks submitted the form for the 2017 second quarter reporting period. After the issuance of the 2017 EGRPRA report, in June 2017 the regulators issued additional proposed revisions to the three Call Report forms that banks are required to complete. These proposed changes are to become effective in June 2018. For example, one of the proposed changes to the new community bank Call Report form would change the frequency of reporting certain data on non-accrual assets— nonperforming loans that are not generating their stated interest rate— from quarterly to semi-annually. In November 2017, the agencies issued further proposed revision to the community bank Call Report that would delete or consolidate a number of items and add a new, or raise certain existing, reporting thresholds. The proposed revision would take effect as of June 2018. Appraisals. The three bank regulators and NCUA received more than 160 comments during the 2017 EGRPRA process related to appraisal requirements. The commenters included banks and others that sought to raise the size of the loans that require appraisals, and a large number of appraisers that objected to any changes in the requirements According to the EGRPRA report, several professional appraiser associations argued that raising the threshold could undermine the safety and soundness of lenders and diminish consumer protection for mortgage financing. These commenters argued that increasing the thresholds could encourage banks to neglect collateral risk-management responsibilities. In response, in July 2017, the regulators proposed raising the threshold for when an appraisal is required from $250,000 to $400,000 for commercial real estate loans. The regulators indicated that the appraisal requirements for 1-4 family residential mortgage loans above the current $250,000 would not be appropriate at the this time because they believed having such appraisals for loans above that level increased the safety of those loans and better protected consumers and because other participants in the housing market, such as the Department of Housing and Urban Development and the government-sponsored enterprises, also required appraisals for loans above that amount. However, the depository institution regulators included in the proposal a request for comment about the appraisal requirements for residential real estate and what banks think are other factors that should be included when considering the threshold for these loans. As part of the 2017 EGRPRA process, the regulators also received comments indicating that banks in rural areas were having difficulty securing appraisers. In the EGRPRA report, the regulators acknowledged this difficulty and in May 2017, the bank regulators and NCUA issued agency guidance on how institutions could obtain temporary waivers and use other means to expand the pool of persons eligible to prepare appraisals in cases in which suitable appraiser staff were unavailable. The agencies also responded to commenters who found the evaluation process confusing by issuing an interagency advisory on the process in March 2016. Evaluations may be used instead of an appraisal for certain transactions including those under the threshold. Frequency of safety and soundness examinations. As part of the 2017 EGRPRA process, the agencies also received comments requesting that they raise the total asset threshold for an insured depository institution to qualify for the extended 18-month examination cycle from $1 billion to $2 billion and to further extend the examinations cycle from 18 months to 36 months. During the EGRPRA process, Congress took legislative action to reduce examination frequency for smaller, well-capitalized banks. In 2015, the FAST Act raised the threshold for the 18-month examination cycle from less than $500 million to less than $1 billion for certain well-capitalized and well-managed depository institutions with an “outstanding” composite rating and gave the agencies discretion to similarly raise this threshold for certain depository institutions with an “outstanding” or “good” composite rating. The agencies exercised this discretion and issued a final rule in 2016 making qualifying depository institutions with less than $1 billion in total assets eligible for an 18-month (rather than a 12-month) examination cycle. According to the EGRPRA report, agency staff estimated that the final rules allowed approximately 600 more institutions to qualify for an extended 18-month examination cycle, bringing the total number of qualifying institutions to 4,793. Community Reinvestment Act. The commenters in the 2017 EGRPRA process also raised various issues relating to the Community Reinvestment Act, including the geographic areas in which institutions were expected to provide loans to low- and moderate-income borrowers and whether credit unions should be required to comply with the act’s requirements. The regulators noted that they were not intending to take any actions to revise regulations relating to this act because many of the revisions the commenters suggested would require changes to the statute (that is, legislative action). The regulators also noted that they had addressed some of the concerns by revising the Interagency Questions and Answers relating to this act in 2016. Furthermore, the agencies noted that they have been reviewing their existing examination procedures and practices to identify policy and process improvements. BSA/AML. The regulators also received a number of comments as part of the 2017 EGRPRA process on the burden institutions encounter in complying with BSA/AML requirements. These included the threshold for reporting currency transactions and suspicious activities. The regulators also received comments on both BSA/AML examination frequency and the frequency of safety and soundness examinations generally. Agencies typically review BSA/AML compliance programs during safety and soundness examinations. As discussed previously, regulators allowed more institutions of outstanding or good composite condition to be examined every 18 months instead of every 12 months. Institutions that qualify for less frequent safety-and-soundness examinations also will be eligible for less frequent BSA/AML examinations. For the remainder of the issues raised by commenters, the regulators noted they do not have the regulatory authority to revise the requirements but provided the comments to FinCEN, which has authority for these regulations. A letter with FinCEN’s response to the comments was included as an appendix of the EGRPRA report. In the letter, the FinCEN Acting Director stated that FinCEN would work through the issues raised by the comments with its advisory group consisting of regulators, law enforcement staff, and representatives of financial institutions. Additional Burden Reduction Actions. In addition to describing some changes in response to the comments deemed significant, the regulators’ 2017 report also includes descriptions of additional actions the individual agencies have taken or planned to take to reduce the regulatory burden for banks, including community banks. The Federal Reserve Board noted that it changed its Small Bank Holding Company Policy Statement that allows small bank holding companies to hold more debt than permitted for larger bank holding companies. In addition, the Federal Reserve noted that it had made changes to certain supervisory policies, such as issuing guidance on assessing risk management for banks with less than $50 billion in assets and launching an electronic application filing system for banks and bank holding companies. OCC noted that it had issued two final rules amending its regulations for licensing/chartering and securities-related filings, among other things. According to OCC staff, the agency conducted an internal review of its agency-specific regulations and many of the changes to these regulations came from the internal review. The agency also noted that it integrated its rules for national banks and federal savings associations where possible. In addition, OCC noted that it removed redundant and unnecessary information requests from those made to banks before examinations. FDIC noted that it had rescinded enhanced supervisory procedures for newly insured banks and reduced the consumer examination frequency for small and newly insured banks. Similarly to OCC, FDIC is integrating its rules for both non-state member banks and state- chartered savings and loans associations. In addition, FDIC noted it had issued new guidance on banks’ deposit insurance filings and reduced paperwork for new bank applications. The 2017 report also presents the results of NCUA’s concurrent efforts to obtain and respond to comments as part of the EGRPRA process. NCUA conducts its review separately from the bank regulators’ review. In four Federal Register notices in 2015, NCUA sought comments on 76 regulations that it administers. NCUA received about 25 comments raising concerns about 29 of its regulations, most of which were submitted by credit union associations. NCUA received no comments on 47 regulations. NCUA’s methodology for its regulatory review was similar to the bank regulators’ methodology. According to NCUA, all comment letters responding to a particular notice were collected and reviewed by NCUA’s Special Counsel to the General Counsel, an experienced, senior-level attorney with overall responsibility for EGRPRA compliance. NCUA staff told us that criteria applied by the Special Counsel in his review included relevance, depth of understanding and analysis exhibited by the comment, and degree to which multiple commenters expressed the same or similar views on an issue. The Special Counsel prepared a report summarizing the substance of each comment. The comment summary was reviewed by the General Counsel and circulated to the NCUA Board and reviewed by the Board members and staff. NCUA identified in its report the following as significant issues relating to credit union regulation: (1) field of membership and chartering; (2) member business lending; (3) federal credit union ownership of fixed assets; (4) expansion of national credit union share insurance coverage; and (5) expanded powers for credit unions. For these, NCUA took various actions to address the issues raised in the comments. For example, NCUA modified and updated its field of credit union membership by revising the definition of a local community, rural district and underserved area, which provided greater flexibility to federal credit unions seeking to add a rural district to their field of membership. NCUA also lessened some of the restrictions on member lending to small business; and raised some of the asset thresholds for what would be defined as a small credit union so that fewer requirements would apply to these credit unions. Also, in April 2016, the NCUA Board issued a proposed rule that would eliminate the requirement that federal credit unions must have a plan by which they will achieve full occupancy of premises within an explicit time frame. The proposal would allow for federal credit unions to plan for and manage their use of office space and related premises in accordance with their own strategic plans and risk-management policies. The bank and credit union regulators’ process for the 2007 EGRPRA review also began with Federal Register notices that requested comments on regulations. The regulators then reviewed and assessed the comments and issued a report in 2007 to Congress in which they noted actions they took in some of the areas raised by commenters. Our analysis of the regulators’ responses indicated that the regulators took responsive actions in a few areas. The regulators noted they already had taken action in some cases (including after completion of a pending study and as a result of efforts to work with Congress to obtain statutory changes). However, for the remaining specific concerns, the four regulators indicated that they would not be taking actions. Similar to its response in 2017, NCUA discussed its responses to the significant issues raised about regulations in a separate section of the 2007 report. Our analysis indicated that NCUA took responsive actions in about half of the areas. For example, NCUA adjusted regulations in one case and in another case noted previously taken actions. For comments related to three other areas, NCUA took actions not reflected in the 2007 report because the actions were taken over a longer time frame (in some cases, after 8 years). In the remaining areas, NCUA deemed actions as not being desirable in four cases and outside of its authority in two other cases. The bank regulators do not conduct other retrospective reviews of regulations outside of the EGRPRA process. We requested information from the Federal Reserve, FDIC, and OCC about any discretionary regulatory retrospective reviews that they performed in addition to the EGRPRA review during 2012–2016. All three regulators reported to us they have not conducted any retrospective regulatory reviews outside of EGRPRA since 2012. However, under the Regulatory Flexibility Act (RFA), federal agencies are required to conduct what are referred to as section 610 reviews. The purpose of these reviews is to determine whether certain rules should be continued without change, amended, or rescinded consistent with the objectives of applicable statutes, to minimize any significant economic impact of the rules upon a substantial number of small entities. Section 610 reviews are to be conducted within 10 years of an applicable rule’s publication. As part of other work, we assessed the bank regulators’ section 610 reviews and found that the Federal Reserve, FDIC, and OCC conducted retrospective reviews that did not fully align with the Regulatory Flexibility Act’s requirements. Officials at each of the agencies stated that they satisfy the requirements to perform section 610 reviews through the EGRPRA review process. However, we found that the requirements of the EGRPRA reviews differ from those of the RFA-required section 610 reviews, and we made recommendations to these regulators to help ensure their compliance with this act in a separate report issued in January 2018. In addition to participating in the EGRPRA review, NCUA also reviews one-third of its regulations every year (each regulation is reviewed every 3 years). NCUA’s “one-third” review employs a public notice and comment process similar to the EGRPRA review. If a specific regulation does not receive any comments, NCUA does not review the regulation. For the 2016 one-third review, NCUA did not receive comments on 5 of 16 regulations and thus these regulations were not reviewed. NCUA made technical changes to 4 of the 11 regulations that received comments. In August 2017, NCUA staff announced they developed a task force for conducting additional regulatory reviews, including developing a 4-year agenda for reviewing and revising NCUA’s regulations. The primary factors they said they intend to use to evaluate their regulations will be the magnitude of the benefit and the degree of effort that credit unions must expend to comply with the regulations. Because the 4-year reviews will be conducted on all of NCUA’s regulations, staff noted that the annual one-third regulatory review process will not be conducted again until 2020. Our analysis of the EGRPRA review found three limitations to the current process. First, the EGRPRA statute does not include CFPB and thus the significant mortgage-related regulations and other regulations that it administers— regulations that banks and credit unions must follow—were not included in the EGRPRA review. Under the Dodd-Frank Act, CFPB was given financial regulatory authority, including for regulations implementing the Home Mortgage Disclosure Act (Regulation C); the Truth-in-Lending Act (Regulation Z); and the Truth-in-Savings Act (Regulation DD). These regulations apply to many of the activities that banks and credit unions conduct; the four depository institution regulators conduct the large majority of examinations of these institutions’ compliance with these CFPB-administered regulations. However, EGRPRA was not amended after the Dodd-Frank Act to include CFPB as one of the agencies that must conduct the EGRPRA review. During the 2017 EGRPRA review, the bank regulators only requested public comments on consumer protection regulations for which they have regulatory authority. But the banking regulators still received some comments on the key mortgage regulations and the other regulations that CFPB now administers. Our review of 2017 forum transcripts identified almost 60 comments on mortgage regulations, such as HMDA and TRID. The bank regulators could not address these mortgage regulation-related comments because they no longer had regulatory authority over these regulations; instead, they forwarded these comment letters to CFPB staff. According to CFPB staff, their role in the most recent EGRPRA process was very limited. CFPB staff told us they had no role in assessing the public comments received for purposes of the final 2017 EGRPRA report. According to one bank regulator, the bank regulators did not share non- mortgage regulation-related letters with CFPB staff because those comment letters did not involve CFPB regulations. Another bank regulator told us that CFPB was offered the opportunity to participate in the outreach meetings and were kept informed of the EGRPRA review during the quarterly FFIEC meetings that occurred during the review. Before the report was sent to Congress, CFPB staff said that they reviewed several late-stage drafts, but generally limited their review to ensuring that references to CFPB’s authority and regulations and its role in the EGRPRA process were properly characterized and explained. As a member of FFIEC, which issued the final report, CFPB’s Director was given an opportunity to review the report again just prior to its approval by FFIEC. CFPB must conduct its own reviews of regulations after they are implemented. Section 1022(d) of the Dodd-Frank Act requires CFPB to conduct an assessment of each significant rule or order adopted by the bureau under federal consumer financial law. CFPB must publish a report of the assessment not later than 5 years after the effective date of such rule or order. The assessment must address, among other relevant factors, the rule’s effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act and specific goals stated by CFPB. The assessment also must reflect available evidence and any data that CFPB reasonably may collect. Before publishing a report of its assessment, CFPB must invite public comment on recommendations for modifying, expanding, or eliminating the significant rule or order. CFPB announced in Federal Register notices in spring 2017 that it was commencing assessments of rules related to Qualified Mortgage/Ability- to-Repay requirements, remittances, and mortgage servicing regulations. The notices described how CFPB planned to assess the regulations. In each notice, CFPB requested comment from the public on the feasibility and effectiveness of the assessment plan, data, and other factual information that may be useful for executing the plan; recommendations to improve the plan and relevant data; and data and other factual information about the benefits, costs, impacts, and effectiveness of the significant rule. Reports of these assessments are due in late 2018 and early 2019. According to CFPB staff, the requests for data and other factual information are consistent with the statutory requirement that the assessment must reflect available evidence and any data that CFPB reasonably may collect. The Federal Register notices also describe other data sources that CFPB has in-house or has been collecting pursuant to this requirement. CFPB staff told us that they have not yet determined whether certain other regulations that apply to banks and credit unions, such as the revisions to TRID and HMDA requirements, will be designated as significant and thus subjected to the one-time assessments. CFPB staff also told us they anticipate that within approximately 3 years after the effective date of a rule, it generally will have determined whether the rule is a significant rule for section 1022(d) assessment purposes. In tasking the bank regulators with conducting the EGRPRA reviews, Congress indicated its intent was to require these regulators to review all regulations that could be creating undue burden on regulated institutions. According to a Senate committee report relating to EGRPRA, the purpose of the legislation was to minimize unnecessary regulatory impediments for lenders, in a manner consistent with safety and soundness, consumer protection, and other public policy goals, so as to produce greater operational efficiency. Some in Congress have recognized that the omission of CFPB in the EGRPRA process is problematic, and in 2015 legislation was introduced to require that CFPB—and NCUA—formally participate in the EGRPRA review. Currently, without CFPB’s participation, key regulations that affect banks and credit unions may not be subject to the review process. In addition, these regulations may not be reviewed if CFPB does not deem them significant. Further, if reviewed, CFPB’s mandate is for a one-time, not recurring, review. CFPB staff told us that they have two additional initiatives designed to review its regulations, both of which have been announced in CFPB’s spring and fall 2017 Semiannual Regulatory Agendas. First, CFPB launched a program to periodically review individual existing regulations—or portions of large regulations—to identify opportunities to clarify ambiguities, address developments in the marketplace, or modernize or streamline provisions. Second, CFPB launched an internal task force to coordinate and bolster their continuing efforts to identify and relieve regulatory burdens, including with regard to small businesses such as community banks that potentially will address any regulation the agency has under its jurisdiction. Staff told us the agency has been considering suggestions it received from community banks and others on ways to reduce regulatory burden. However, CFPB has not provided public information specifically on the extent to which it intends to review regulations applicable to community banks and credit unions and other institutions or provided information on the timing and frequency of the reviews. In addition, it has not indicated the extent to which it will coordinate the reviews with the federal depository institution regulators as part of the EGRPRA reviews. Until CFPB publicly provides additional information indicating its commitment to periodically review the burden of all its regulations, community banks, credit unions, and other depository institutions may face diminished opportunities for relief from regulatory burden. Second, the federal depository institution regulators have not conducted or reported on quantitative analyses during the EGRPRA process to help them determine if changes to regulations would be warranted. Our analysis of the 2017 report indicated that in responses to comments in which the regulators did not take any actions, the regulators generally only provided their arguments against taking actions and did not cite analysis or data to support their narrative. In contrast, other federal agencies that are similarly tasked with conducting retrospective regulatory reviews are required to follow certain practices for such reviews that could serve as best practices for the depository institution regulators. For example, the Office of Management and Budget’s Circular A-4 guidance on regulatory analysis notes that a good analysis is transparent and should allow qualified third parties reviewing such analyses to clearly see how estimates and conclusions were determined. In addition, executive branch agencies that are tasked under executive orders to conduct retrospective reviews of regulations they issue generally are required under these orders to collect and analyze quantitative data as part of assessing the costs and benefits of changing existing regulations. However, EGRPRA does not require the regulators to collect and report on any quantitative data they collected or analyzed as part of assessing the potential burden of regulations. Conducting and reporting on how they analyzed the impact of potential regulatory changes to address burden could assist the depository institution regulators in conducting their EGRPRA reviews. For example, as discussed previously, Community Reinvestment Act regulations were deemed a significant issue, with commenters questioning the relevance of requiring small banks to make community development loans and suggesting that the asset threshold for this requirement be raised from $1 billion to $5 billion. The regulators told us that if the thresholds were raised, then community development loans would decline, particularly in underserved communities. However, regulators did not collect and analyze data for the EGRPRA review to determine the amount of community development loans provided by banks with assets of less than $1 billion; including a discussion of quantitative analysis might have helped show that community development loans from smaller community banks provided additional credit in communities—and thus helped to demonstrate the benefits of not changing the requirement as commenters requested. By not performing and reporting quantitative analyses where appropriate in the EGRPRA review, the regulators may be missing opportunities to better assess regulatory impacts after a regulation has been implemented, including identifying the need for any changes or benefits from the regulations and making their analyses more transparent to stakeholders. As the Office of Management and Budget’s Circular A-4 guidance on the development of regulatory analysis noted, sound quantitative estimates of costs and benefits, where feasible, are preferable to qualitative descriptions of benefits and costs because they help decision makers understand the magnitudes of the effects of alternative actions. By not fully describing their rationale for the analyses that supported their decisions, regulators may be missing opportunities to better communicate their decisions to stakeholders and the public. Lastly, in the EGRPRA process, the federal depository institution regulators have not assessed the ways that the cumulative burden of the regulations they administer may have created overlapping or duplicative requirements. Under the current process, the regulators have responded to issues raised about individual regulations based on comments they have received, not on bodies of regulations. However, congressional intent in tasking the depository institution regulators with the EGRPRA reviews was to ensure that they considered the cumulative effect of financial regulations. A 1995 Senate Committee on Banking, Housing, and Urban Affairs report stated while no one regulation can be singled out as being the most burdensome, and most have meritorious goals, the aggregate burden of banking regulations ultimately affects a bank’s operations, its profitability, and the cost of credit to customers. For example, financial regulations may have created overlapping or duplicative regulations in the areas of safety and soundness. One primary concern noted in the EGRPRA 2017 report was the amount of information or data banks are required to provide to regulators. For example, the cumulative burden of information collection was raised by commenters in relation to Call Reports, Community Reinvestment Act, and BSA/AML requirements. But in the EGRPRA report, the regulators did not examine how the various reporting requirements might relate to each other or how they might collectively affect institutions. In contrast, the executive branch agencies that conduct retrospective regulatory reviews must consider the cumulative effects of their own regulations, including cumulative burdens. For example, Executive Order 13563 directs agencies, to the extent practicable, to consider the costs of cumulative regulations. Executive Order 13563 does not apply to independent regulatory agencies such as the Federal Reserve, FDIC, OCC, NCUA, or CFPB. A memorandum from the Office of Management and Budget provided guidance to the agencies required to follow this order for assessing the cumulative burden and costs of regulations. The actions suggested for careful consideration include conducting early consultations with affected stakeholders to discuss potential interactions between rulemaking under consideration and existing regulations as well as other anticipated regulatory requirements. The executive order also directs agencies to consider regulations that appear to be attempting to achieve the same goal. However, other researchers often acknowledge that cumulative assessments of burden are difficult. Nevertheless, until the Federal Reserve, FDIC, OCC, and NCUA identify ways to consider the cumulative burden of regulations, they may miss opportunities to streamline bodies of regulations to reduce the overall compliance burden among financial institutions, including community banks and credit unions. For example, regulations applicable to specific activities of banks, such as lending or capital, could be assessed to determine if they have overlapping or duplicative requirements that could be revised without materially reducing the benefits sought by the regulations. New regulations for financial institutions enacted in recent years have helped protect mortgage borrowers, increase the safety and soundness of the financial system, and facilitate anti-terrorism and anti-money laundering efforts. But the regulations also entail compliance burdens, particularly for smaller institutions such as community banks and credit unions, and the cumulative burden on these institutions can be significant. Representatives from the institutions with which we spoke cited three sets of regulations—HMDA, BSA/AML, and TRID—as most burdensome for reasons that included their complexity. In particular, the complexity of TRID regulations appears to have contributed to misunderstandings that in turn caused institutions to take unnecessary actions. While regulators have acted to reduce burdens associated with the regulations, CFPB has not assessed the effectiveness of its TRID guidance. Federal internal control standards require agencies to analyze and respond to risks to achieving their objectives, and CFPB’s objectives include addressing regulations that are unduly burdensome. Assessing the effectiveness of TRID guidance represents an opportunity to reduce misunderstandings that create additional burden for institutions and also affect individual consumers (for instance, by delaying mortgage closings). The federal depository institution regulators (FDIC, Federal Reserve, OCC, as well as NCUA) also have opportunities to enhance the activities they undertake during EGRPRA reviews. Congress intended that the burden of all regulations applicable to depository institutions would be periodically assessed and reduced through the EGRPRA process. But because CFPB has not been included in this process, the regulations for which it is responsible were not assessed, and CFPB has not yet provided public information about what regulations it will review, and when, and whether it will coordinate with other regulators during EGPRA reviews. Until such information is publicly available, the extent to which the regulatory burden of CFPB regulation will be periodically addressed remains unclear. The effectiveness of the EGRPRA process also has been hampered by other limitations, including not conducting and reporting on depository institution regulators’ analysis of quantitative data and assessing the cumulative effect of regulations on institutions. Addressing these limitations in their EGRPRA processes likely would make the analyses the regulators perform more transparent, and potentially result in additional burden reduction. We make a total of 10 recommendations, which consist of 2 recommendations to CFPB, 2 to FDIC, 2 to the Federal Reserve, 2 to OCC, and 2 to NCUA. The Director of CFPB should assess the effectiveness of TRID guidance to determine the extent to which TRID’s requirements are accurately understood and take steps to address any issues as necessary. (Recommendation 1) The Director of CFPB should issue public information on its plans for reviewing regulations applicable to banks and credit unions, including information describing the scope of regulations the timing and frequency of the reviews, and the extent to which the reviews will be coordinated with the federal depository institution regulators as part of their periodic EGRPRA reviews. (Recommendation 2) The Chairman, FDIC, should, as part of the EGRPRA process, develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 3) The Chairman, FDIC, should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities for streamlining bodies of regulation. (Recommendation 4) The Chair, Board of Governors of the Federal Reserve System, should, as part of the EGRPRA process develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 5) The Chair, Board of Governors of the Federal Reserve System, should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities to streamline bodies of regulation. (Recommendation 6) The Comptroller of the Currency should, as part of the EGRPRA process, develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 7) The Comptroller of the Currency should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities to streamline bodies of regulation. (Recommendation 8) The Chair of NCUA should, as part of the EGRPRA process, develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 9) The Chair of NCUA should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities to streamline bodies of regulation. (Recommendation 10) We provided a draft of this report to CFPB, FDIC, FinCEN, the Federal Reserve, NCUA, and OCC. We received written comments from CFPB, FDIC, the Federal Reserve, NCUA, and OCC that we have reprinted in appendixes II through VI, respectively. CFPB, FDIC, FinCEN, the Federal Reserve, NCUA, and OCC also provided technical comments, which we incorporated as appropriate. In its written comments, CFPB agreed with the recommendation to assess its TRID guidance to determine the extent to which it is understood. CFPB stated it intends to solicit public input on how it can improve its regulatory guidance and implementation support. In addition, CFPB agreed with the recommendation on issuing public information on its plan for reviewing regulations. CFPB committed to developing additional plans with respect to their reviews of key regulations and to publicly releasing such information and in the interim, CFPB stated it intends to solicit public input on how it should approach reviewing regulations. FDIC stated that it appreciated the two recommendations and stated that it would work with the Federal Reserve and OCC to find the most appropriate ways to ensure that the three regulators continue to enhance their rulemaking analyses as part of the EGRPRA process. In addition, FDIC stated that as part of the EGRPRA review process, it would continue to monitor the cumulative effects of regulation through for example, a review of the community and quarterly banking studies and community bank Call Report data. The Federal Reserve agreed with the two recommendations pertaining to the EGRPRA process. Regarding the need conduct and report on quantitative analysis whenever feasible to strengthen and to increase the transparency of the EGRPRA process, the Federal Reserve plans to coordinate with FDIC and OCC to identify opportunities to conduct quantitative analyses where feasible during future EGRPRA reviews. With respect to the second recommendation, the Federal Reserve agreed that the cumulative impact of regulations on depository institutions is important and plans to coordinate with FDIC and OCC to identify further opportunities to seek comment on bodies of regulations and how they could be streamlined. NCUA acknowledged the report’s conclusions as part of their voluntary compliance with the EGRPRA process; NCUA should improve its qualitative analysis and develop plans for continued reductions to regulatory burden within the credit union industry. In its letter, NCUA noted it has appointed a regulatory review task force charged with reviewing and developing a four-year plan for revising their regulations and the review will consider the benefits of NCUA’s regulations as well as the burden they have on credit unions. In its written comments, OCC stated that it understood the importance of GAO’s recommendations. They stated they OCC will consult and coordinate with the Federal Reserve and FDIC to develop plans for regulatory analysis, including how the regulators should conduct and report on quantitative analysis and also, will work with these regulators to increase the transparency of the EGRPRA process. OCC also stated it will consult with these regulators to develop plans, as part of the EGRPRA process, to conduct evaluations that identify ways to decrease the regulatory burden created by bodies of regulations. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to CFPB, FDIC, FinCEN, the Federal Reserve, NCUA, and OCC. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. This report examines the burdens that regulatory compliance places on community banks and credit unions and actions that federal regulators have taken to reduce these burdens; specifically: (1) the financial regulations that community banks and credit unions reported viewing as the most burdensome, the characteristics of those regulations that make them burdensome, and the benefits are associated with those regulations and (2) federal financial regulators’ efforts to reduce any existing regulatory burden on community banks and credit unions. To identify the regulations that community banks and credit unions viewed as the most burdensome, we first constructed a sample frame of financial institutions that met certain criteria for being classified as community banks or community-focused credit unions for the purposes of this review. These sample frames were then used as the basis for drawing our non-probability samples of institutions for purposes of interviews, focus group participation, and document review. Defining a community bank is important because, as we have reported, regulatory compliance may be more burdensome for community banks and credit unions than for larger banks because they are not as able to benefit from economies of scale in compliance resources. While there is no single consensus definition for what constitutes a community bank, we reviewed criteria for defining community banks developed by the Federal Deposit Insurance Corporation (FDIC), officials from the Independent Community Bankers Association, the Office of the Comptroller of the Currency (OCC). Based on this review, we determined that institutions that had the following characteristics would be the most appropriate to include in our universe of institutions, (1) fewer total assets, (2) engage in traditional lending and deposit taking activities, have limited geographic scope, and (3) did not have complex operating structures. To identify banks that met these characteristics, we began with all banks that filed a Consolidated Reports of Condition and Income (Call Report) for the first quarter of 2016 (March 31, 2016) and are not themselves subsidiaries of another bank that filed a Call Report. We then excluded banks using an asset-size threshold, to ensure we are including only small institutions. Based on interviews with regulators and our review of the FDIC’s community bank study, we targeted institutions around the $1 billion in assets as the group that could be relatively representative of the experiences of many community banks in complying with regulations. Upon review of the Call Reports data, we found that the banks in the 90th percentile by asset size were had about $1.2 billion, and we selected this to be an appropriate cutoff for our sample frame. In addition we excluded institutions with characteristics suggesting they do not engage in typical community banking activities like such as deposit-taking and lending; and those with characteristics suggesting they conduct more specialized operations not typical of community banking, such as credit card banks. In addition to ensure that we excluded banks whose views of regulatory compliance might be influenced by being part of a large and/or complex organization, we also excluded banks with foreign offices and banks that are subsidiaries of either foreign banks or of holding companies with $50 billion or more in consolidated assets. Finally, as a practical matter, we excluded banks for which we could not obtain data on one or more of the characteristics listed below. We also relied on a similar framework to construct a sample frame for credit unions. We sought to identify credit unions that were relatively small, engaged in traditional lending and deposit taking activities, and had limited geographic scope. To do this, we began with all insured credit unions that filed a Call Report for the first quarter of 2016 (March 31, 2016). We then excluded credit unions using an asset-size threshold of $860 million, which is the 95th percentile of credit unions, to ensure we are including only smaller institutions. The percentile of credit unions was higher than the percentile of banks because there are more large banks than there are credit unions. We then excluded credit unions that did not engage in activities that are typical of community lending, such as taking deposits, making loans and leases, and providing consumer checking accounts, as well as those credit unions with headquarters outside of the United States. We assessed the reliability of data from FFIEC, FDIC, the Federal Reserve Bank of Chicago, and NCUA by reviewing relevant documentation and electronically testing the data for missing values or obvious errors, and we found the data from these sources to be sufficiently reliable for the purpose of creating sample frames of community banks and credit unions. The sample frames were then used as the basis for drawing our nonprobability samples of institutions for purposes of interviews and focus groups. To identify regulations that community banks and credit unions viewed as among the most burdensome, we conducted structured interviews and focus groups with a sample of a total of 64 community banks and credit unions. To reduce the possibility of bias, we selected the institutions to ensure that banks and credit unions with different asset sizes and from different regions of the country were included. We also included at least one bank overseen by each of the three primary federal depository institution regulators, Federal Reserve, FDIC, NCUA, and OCC in the sample. We interviewed 17 institutions (10 banks and 7 credit unions) about which regulations their institutions experienced the most compliance burden. On the basis of the results of these interviews, we determined that considerable consensus existed among these institutions as to which regulations were seen as most burdensome, including those relating to mortgage fees and terms disclosures to consumers, mortgage borrower and loan characteristics reporting, and anti-money laundering activities. As a result, we determined to conduct focus groups with institutions to identify the characteristics of the regulations identified in our interviews that made these regulations burdensome. To identify the burdensome characteristics of the regulations identified in our preliminary interviews, we selected institutions to participate in three focus groups of community banks and three focus groups of credit unions. For the first focus group of community banks, we randomly selected 20 banks among 647 banks between $500 million and $1 billion located in nine U.S. census geographical areas using the sample frame of community banks we developed, and contacted them asking for their participation. Seven of the 20 banks agreed to participate in the first focus group. However, mortgages represented a low percentage of the assets of two participants in the first focus group, so we revised our selection criteria because two of the regulations identified as burdensome were related to mortgages. For the remaining two focus groups with community banks, we randomly selected institutions with more than $45 million and no more than $1.2 billion in assets to ensure that they would be required to comply with the mortgage characteristics reporting and with at least a 10 percent mortgage to asset ratio to better ensure that they would be sufficiently experienced with mortgage regulations. After identifying the large percentage of FDIC regulated banks in the first 20 banks we contacted, we decided to prioritize contact with banks regulated by OCC and the Federal Reserve for the institutions on our list. When banks declined or when we determined an institution merged or was acquired, we selected a new institution from that state and preferenced institutions regulated by OCC and the Federal Reserve. The three focus groups totaled 23 community banks with a range of assets. We used a similar selection process for three focus groups of credit unions consisting of 23 credit unions. We selected credit unions with at least $45 million in assets so that they would be required to comply with the mortgage regulations and with at least a 10 percent mortgage-to-asset ratio. During each of the focus groups, we asked the representatives from participating institutions what characteristics of the relevant regulations made them burdensome with which to comply. We also polled them about the extent to which they had to take various actions to comply with regulations, including hiring or expanding staff resources, investing in additional information technology resources, or conducting staff training. During the focus groups, we also confirmed with the participants that the three sets of regulations (on mortgage fee and other disclosures to consumers, reporting of mortgage borrower and loan characteristics, and anti-money laundering activities) were generally the ones they found most burdensome. To identify in more detail the steps a community bank or credit union may take to comply with the regulations identified as among the most burdensome, we also conducted an in-depth on-site interview with one community bank. We selected this institution by limiting the community bank sample to only those banks in the middle 80 percent of the distribution in terms of assets, mortgage lending, small business lending, and lending in general that were no more than 70 miles from Washington, D.C. We limited the sample in this way to ensure that the institution was not an outlier in terms of activities or size, and to limit the travel resources needed to conduct the site visit. We also interviewed associations representing consumers to understand the benefits of these regulations. These groups were selected using professional judgement of their knowledge of relevant banking regulations. We interviewed associations representing banks and credit unions. To identify the requirements of the regulations identified as among the most burdensome, we reviewed the Home Mortgage Disclosure Act (HMDA) and its implementing regulation, Regulation C; Bank Secrecy Act and anti-money laundering (BSA/AML) regulations, including those deriving from the Currency and Foreign Transactions Reporting Act, commonly known as the Bank Secrecy Act (BSA), and the 2001 USA PATRIOT Act; and the Integrated Mortgage Disclosure Rule Under the Real Estate Settlement Procedures Act (RESPA) with the implementing Regulation X; and the Truth-in-Lending Act (TILA) with implementing Regulation Z. We reviewed the Consumer Financial Protection Bureau’s (CFPB) small entity guidance and supporting materials on the TILA- RESPA Integrated Disclosure (TRID) regulation and HMDA to clarify the specific requirements of each rule and to analyze the information included in the CFPB guidance. We interviewed staff from each of the federal regulators responsible for implementing the regulations, as well as from the federal regulators responsible for examining community banks and credit unions. To identify the potential benefits of the regulations that were considered burdensome by community banks and credit unions, we interviewed representatives from four community groups to document their perspectives on the benefits provided by the identified regulations. To determine whether the bank regulators had required banks to comply with certain provisions from which the institutions might be exempt, we identified eight exemptions from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 from which community banks and credit unions should be exempt and reviewed a small group of the most recent examinations to identify instances in which a regulator may not have applied an exemption for which a bank was eligible. We reviewed 20 safety and soundness and consumer compliance examination reports of community banks and eight safety and soundness examination reports of credit unions. The bank examination reports we reviewed were for the first 20 community banks we contacted requesting participation in the first focus group. The bank examination reports included examinations from all three bank regulators (FDIC, Federal Reserve, and OCC). The NCUA examination reports we reviewed were for the eight credit unions that participated in the second focus group of credit unions. Because of the limited number of the examinations we reviewed, we cannot generalize whether regulators extended the exemptions to all qualifying institutions. To assess the federal financial regulators’ efforts to reduce the existing regulatory burden on community banks and credit unions, we identified the mechanisms the regulators used to identify burdensome regulations and actions to reduce potential burden. We reviewed laws and congressional and agency documentation. More specifically, we reviewed the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) that requires the Federal Reserve, FDIC, and OCC to review all their regulations every 10 years and identify areas of the regulations that are outdated, unnecessary, or unduly burdensome and reviewed the 1995 Senate Banking Committee report, which described the intent of the legislation. We reviewed the Federal Register notices that bank regulators and NCUA published requesting comments on their regulations. We also reviewed over 200 comment letters that the regulators had received through the EGRPRA process from community banks, credit unions, their trade associations, and others, as well as the transcripts of all six public forums regulators held as part the 2017 EGRPRA regulatory review efforts they conducted. We analyzed the extent to which the depository institutions regulators addressed the issues raised in comments received for the review. In assessing the 2017 and 2007 EGRPRA reports sent to Congress, we reviewed the significant issues identified by the regulators and determined the extent to which the regulators proposed or took actions in response to the comments relating to burden on small entities. We compared the requirements of Executive Orders 12866, 13563, and 13610 issued by Office of Management and Budget with the actions taken by the regulators in implementing their 10-year regulatory retrospective review. The executive orders included requirements on how executive branch agencies should conduct retrospective reviews of their regulations. For both objectives, we interviewed representatives from CFPB, FDIC, Federal Reserve, Financial Crimes Enforcement Network, NCUA, and OCC to identify any steps that regulators took to reduce the compliance burden associated with each of the identified regulations and to understand how they conduct retrospective reviews. We also interviewed representatives of the Small Business Administration’s Office of Advocacy, which reviews and comments on the burdens of regulations affecting small businesses, including community banks. We conducted this performance audit from March 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact name above, Cody J. Goebel (Assistant Director); Nancy Eibeck (Analyst in Charge); Bethany Benitez; Kathleen Boggs; Jeremy A. Conley; Pamela R. Davidson; Courtney L. LaFountain; William V. Lamping; Barbara M. Roesmann; and Jena Y. Sinkfield made key contributions to this report.", "summary": "In recent decades, many new regulations intended to strengthen financial soundness, improve consumer protections, and aid anti-money laundering efforts were implemented for financial institutions. Smaller community banks and credit unions must comply with some of the regulations, but compliance can be more challenging and costly for these institutions. GAO examined (1) the regulations community banks and credit unions viewed as most burdensome and why, and (2) efforts by depository institution regulators to reduce any regulatory burden. GAO analyzed regulations and interviewed more than 60 community banks and credit unions (selected based on asset size and financial activities), regulators, and industry associations and consumer groups. GAO also analyzed letters and transcripts commenting on regulatory burden that regulators prepared responding to the comments. Interviews and focus groups GAO conducted with representatives of over 60 community banks and credit unions indicated regulations for reporting mortgage characteristics, reviewing transactions for potentially illicit activity, and disclosing mortgage terms and costs to consumers were the most burdensome. Institution representatives said these regulations were time-consuming and costly to comply with, in part because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes. However, regulators and others noted that the regulations were essential to preventing lending discrimination and use of the banking system for illicit activity, and they were acting to reduce compliance burdens. Institution representatives also said that the new mortgage disclosure regulations increased compliance costs, added significant time to loan closings, and resulted in institutions absorbing costs when others, such as appraisers and inspectors, changed disclosed fees. The Consumer Financial Protection Bureau (CFPB) issued guidance and conducted other outreach to educate institutions after issuing these regulations in 2013. But GAO found that some compliance burdens arose from misunderstanding the disclosure regulations—which in turn may have led institutions to take actions not actually required. Assessing the effectiveness of the guidance for the disclosure regulations could help mitigate the misunderstandings and thus also reduce compliance burdens. Regulators of community banks and credit unions—the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration—conduct decennial reviews to obtain industry comments on regulatory burden. But the reviews, conducted under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), had the following limitations: CFPB and the consumer financial regulations for which it is responsible were not included. Unlike executive branch agencies, the depository institution regulators are not required to analyze and report quantitative-based rationales for their responses to comments. Regulators do not assess the cumulative burden of the regulations they administer. CFPB has formed an internal group that will be tasked with reviewing regulations it administers, but the agency has not publicly announced the scope of regulations included, the timing and frequency of the reviews, and the extent to which they will be coordinated with the other federal banking and credit union regulators as part of their periodic EGRPRA reviews. Congressional intent in mandating that these regulators review their regulations was that the cumulative effect of all federal financial regulations be considered. In addition, sound practices required of other federal agencies require them to analyze and report their assessments when reviewing regulations. Documenting in plans how the depository institution regulators would address these EGRPRA limitations would better ensure that all regulations relevant to community banks and credit unions were reviewed, likely improve the analyses the regulators perform, and potentially result in additional burden reduction. GAO makes a total of 10 recommendations to CFPB and the depository institution regulators. CFPB should assess the effectiveness of guidance on mortgage disclosure regulations and publicly issue its plans for the scope and timing of its regulation reviews and coordinate these with the other regulators' review process. As part of their burden reviews, the depository institution regulators should develop plans to report quantitative rationales for their actions and addressing the cumulative burden of regulations. In written comments, CFPB and the four depository institution regulators generally agreed with the recommendations.", "document_type": "gao"}
{"report": "EXIM is an independent executive branch agency and a wholly owned U.S. government corporation. EXIM is the official export credit agency (ECA) of the United States, and its mission is to support the export of U.S. goods and services, thereby supporting U.S. jobs. EXIM’s charter states that it should not compete with the private sector. Rather, EXIM’s role is to assume the credit and country risks that the private sector is unable or unwilling to accept, while still maintaining a reasonable assurance of repayment. EXIM must operate within the parameters and limits authorized by law, including, for example, statutory mandates that it support small business and promote sub–Saharan African and environmentally beneficial exports. In addition, EXIM is authorized to provide financing on a competitive basis with other ECAs and must submit annual reports to Congress on its actions. EXIM operates under the leadership of a president who also serves as Chairman of EXIM’s Board of Directors. The board is structured to include five members. All positions are appointed for 4-year terms by the President of the United States with the advice and consent of the Senate. The board is responsible for adopting and amending bylaws for the proper management and functioning of EXIM. Furthermore, the board approves EXIM’s financing either directly or through delegated authority. On May 8, 2019, the Senate confirmed a new president and two other board members, ending the lack of a quorum needed to approve transactions over $10 million that had existed since July 20, 2015. EXIM’s organizational structure includes various offices and divisions operating under its president. The Office of Board Authorized Finance is subdivided into business divisions that are responsible for underwriting related to loans and loan guarantees, including processing applications, evaluating the compliance of transactions with credit and other policies, performing financial analyses, negotiating financing terms, coordinating and synthesizing input to credit recommendations from other divisions, and presenting credit recommendations for approvals. EXIM facilitates support for U.S. exports through three major products: (1) loans; (2) loan guarantees, which include working capital guarantees; and (3) export credit insurance. All EXIM obligations carry the full faith and credit of the U.S. government. Based on its mission to support U.S. employment, EXIM currently requires a certain amount of U.S. content for an export contract to receive EXIM financing. EXIM’s loans generally carry fixed-interest rate terms under the Arrangement on Officially Supported Export Credits negotiated among OECD members. EXIM’s loan guarantees cover loans disbursed by private lenders by committing to pay the lenders if the borrower defaults. Both loans and loan guarantees may be classified as short-, medium-, or long-term. From fiscal year 2008 to fiscal year 2017, EXIM was “self-financing” for budgetary purposes—financing its operations from receipts collected from its customers—and operating within the parameters and limits authorized by Congress. However, according to EXIM, because of the lack of quorum on the Board of Directors, in fiscal year 2018 it was unable to approve transactions over $10 million and, as a result, was not able to generate sufficient cash inflows to fully self-finance program and administrative costs. EXIM reported that when it is back to being fully operational, it plans to regain full self-financing status. See figure 1 for additional details on EXIM’s loans and loan guarantees. Short-term loans and loan guarantees: Short-term financing consists of all transactions with repayment terms of less than 1 year, while Working Capital Guarantee program short-term financing may be approved for a single loan or a revolving line of credit that can be renewed for up to 3 years. In general, if the financed eligible product contains at least 50 percent U.S. content, then the entire transaction value is eligible for a working capital guarantee. Generally, for working capital guarantees, EXIM guarantees 90 percent of the loan’s principal and interest if the borrower defaults. Therefore, the lender maintains the risk of the remaining 10 percent. EXIM’s payment of working capital claims is conditional upon transaction participants’ compliance with EXIM requirements such as underwriting policies, deadlines for filing claims, payment of premiums and fees, and submission of proper documentation. EXIM has reported that over 80 percent of its working capital guarantee transactions are approved by lenders with delegated authority, which means that commercial lenders approve the guaranteed loans in accordance with agreed- upon underwriting requirements without first obtaining EXIM approval. If a lender does not have delegated authority, EXIM performs its own underwriting procedures and approves the guaranteed loans. Medium- and long-term loans and loan guarantees: For medium- and long-term loan and loan guarantee transactions, EXIM provides up to 85 percent financing with the remaining 15 percent paid by the borrower or financed separately. The financing could be less than 85 percent depending on the U.S. content. EXIM’s medium- and long- term loan guarantees generally cover 100 percent of the financed amount if the borrower defaults. EXIM’s guarantee to the lender is transferable and unconditional, meaning that EXIM must pay submitted claims regardless of the cause of default. EXIM generally underwrites medium- and long-term loans and loan guarantees for $10 million and less, and EXIM officials with delegated authority approve the transactions. Further, EXIM has provided certain lenders delegated authority to underwrite and approve these guarantees. EXIM underwrites long-term loans and loan guarantees greater than $10 million, and its Board of Directors approves the transactions. As noted earlier, EXIM’s authority to approve transactions lapsed from July 1, 2015, to December 4, 2015. Further, from July 20, 2015 to May 8, 2019, EXIM’s Board of Directors lacked a quorum, and, as a result, EXIM was unable to approve transactions greater than $10 million. Consequently, EXIM’s annual authorizations for loans, loan guarantees, and export credit insurance decreased from about $20 billion in 2014 to about $3 billion in 2018, a decrease of about 83 percent. See figure 2 for EXIM’s total authorizations by type and length of term for 2014 through 2018. EXIM’s Manual describes EXIM’s underwriting policies and procedures for each of its products offered, including short-, medium-, and long-term loans and loan guarantees. The Manual describes the responsibilities of EXIM’s divisions (e.g., Transportation, Structured and Project Finance, or Working Capital Finance) involved in the underwriting process. EXIM’s Office of Board Authorized Finance is in the process of streamlining the Manual, which is over 1,400 pages. A goal of this process is to separate procedures from policies, thus allowing for policies and procedures to be continuously reviewed. An EXIM official told us that these steps should improve the agency’s efficiency, transparency, and accountability. The underwriting sections of the Manual are tentatively scheduled for review in 2019. EXIM loan officers perform the underwriting for loans and long-term loan guarantees. The underwriting of medium-term or working capital loans guaranteed by EXIM is performed by either EXIM loan officers or qualified lenders with delegated authority, which allows the lender to authorize a loan that EXIM guarantees in accordance with agreed-upon underwriting requirements without first obtaining EXIM approval. When the underwriting and credit decision is delegated to approved lenders, EXIM does not perform the underwriting procedures. EXIM’s underwriting process calls for thorough credit assessments by subject matter experts and loan officers. These assessments evaluate key transactional risks, such as the borrower’s industry, competitive position, operating performance, liquidity position, leverage, and ability to service debt obligations. Frequently, credit enhancements are included in the structure of long-term financing (often in the form of collateral) in order to decrease the risk of a borrower default but also to increase the recovery in the event of a default. A risk rating is assigned to the transaction based on this evaluation which, in turn, determines the transaction fee that a borrower pays and assists in establishing the level of loss reserves EXIM must set aside. The credit assessments undergo multiple levels of internal review. All transactions of EXIM carry some risk; however, transactions approved through delegated authority lenders potentially carry a higher level of inherent risk because third-party financial institutions make the decisions. To mitigate the risk, EXIM reviews medium-term transactions approved by delegated authority lenders before the transactions are executed to assure compliance with EXIM’s delegated authority lending policies. For working capital guarantee delegated authority, EXIM conducts periodic examinations of the lenders, reviewing ongoing transactions and lender compliance with the delegated authority program. The examinations are intended to identify lenders that are not satisfactorily managing the requirements of the delegated authority program. To mitigate the risk for its internal credit process, EXIM developed and documented underwriting processing steps from the time the application is received through the approval of the appropriate credit structure. These steps serve to (1) establish a framework for sound credit decisions, (2) communicate to EXIM employees the requirements governing the extension of credit, and (3) encourage documentation and the consistent application of EXIM’s credit policies and procedures. According to EXIM officials, the underwriting process also serves as EXIM’s primary method for preventing fraud because of the due diligence performed on the proposed transaction. Figure 3 summarizes EXIM’s underwriting process. Application intake. When an application is initially received, it is screened for basic completeness, follow-up on incomplete or unacceptable applications is performed, and it is assigned to a processing division. Application screening. After an application is determined to be complete, it is assigned to the applicable EXIM division that oversees the applicable type of project. For example, an application for the purchase of an aircraft would be assigned to the Transportation Division. Once assigned, a loan officer in that division is to assess the eligibility of the transaction. To ensure compliance with laws and regulations, the loan officer is to obtain and assess various certifications from transaction participants. Loan officers are also required to submit the corporate and individual names and addresses of lenders, borrowers, guarantors, and other transaction participants to the EXIM Library. Library staff are then to conduct a Character, Reputational, and Transaction Integrity (CRTI) review—a procedure designed to provide a level of due diligence over various risks and to help prevent fraud by checking loan participants’ information against 28 databases. Risk assessment and due diligence. Once the transaction is considered minimally eligible for EXIM support, the loan officer is required to perform a series of due diligence activities to determine (1) whether the transaction provides a reasonable assurance of repayment, (2) any potential material issues regarding the transaction or the participants that would preclude EXIM support, and (3) the appropriate risk level and pricing for the transaction. As part of the financial evaluation of the transaction, the loan officer is required to obtain and analyze the borrower’s financial statements, credit reports or rating agency reports, financial projections, and other relevant information. As applicable, the loan officer is required to obtain input from other EXIM staff, such as attorneys or engineers, to conclude on the legal, technical, economic, or environmental risks of the transaction. Based on this due diligence, the loan officer is to assess the transaction for risk and assign an overall risk rating. This rating is used to calculate the exposure fee EXIM will charge the borrower for guaranteeing the transaction. Greater perceived risks result in higher fees. Credit structure. After the risk assessment and due diligence is performed, the loan officer determines the financing terms and conditions to be recommended. The loan officer is generally required to structure the transaction to include a security interest (collateral) in the financed goods or other assets of the borrower. If it is determined that collateral is not necessary, the loan officer is to document the explanation and mitigating factors (e.g., EXIM support is small relative to a borrower’s size). For all aircraft transactions, the loan officer is required to perform an assessment and loan-to-value analysis of the collateral, and the financing terms must include requirements for the borrower to maintain ownership and condition of the collateral. Credit decision. The loan officer is to document the due diligence in a credit or board memo, which includes the loan officer’s recommendation to approve or decline the transaction. These memos and applicable supporting documentation are then to be forwarded to the approving party. The credit memo applicable to working capital or medium-term transactions is to be provided to EXIM officials with individual delegated authority to approve transactions of $10 million and less. Board memos for long-term transactions or transactions greater than $10 million are to be provided to the EXIM Board of Directors for approval. From July 2015 to May 2019, EXIM lacked a quorum on its Board of Directors, and as a result, EXIM was unable to approve new transactions greater than $10 million. Government-wide guidance for federal agencies to follow for the management and operation of federal credit programs, such as loan and loan guarantee programs, include the following: OMB Circular A-129, Policies for Federal Credit Programs and Non- Tax Receivables, revised in January 2013, describes policies and procedures for designing and managing federal credit programs. The guidance addresses various standards for applicant screening, loan documentation, collateral requirements, determining and monitoring lender and servicer eligibility, and lender and borrower stake in full repayment. In addition, it details risk sharing practices that agencies should follow, such as ensuring that lenders and borrowers who participate in federal credit programs have a substantial stake in full repayment in accordance with the loan contract. Treasury’s Bureau of the Fiscal Service’s Managing Federal Receivables provides federal agencies with an overview of standards, guidance, and procedures for successful management of credit activities, including screening applicants for creditworthiness and financial responsibility, and managing, processing, evaluating and documenting loan applications and awards for loan assistance. Furthermore, it details how federal agencies should manage lenders and servicers that participate in federally insured guaranteed loan programs. We found that EXIM’s process for updating its underwriting policies and procedures was properly designed and implemented. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel. Management should clearly document internal control in a manner that allows the documentation to be readily available and properly managed and maintained. Further, management should also implement control activities through policies and periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. Underwriting policies and procedures are documented in EXIM’s Manual, which consists of 26 chapters, covering various topics by product (e.g., long-term loans and loan guarantees) or process (e.g., application intake or credit structure). We found that the Manual provides EXIM’s divisions involved in the underwriting process with direction and guidance for making credit decisions and is to be updated at least annually, except for material changes, which are required to be incorporated as soon as possible. The Credit Policy Division (Credit Policy) maintains and manages the process for updating of the Manual and relies on EXIM’s divisions for additions, updates, and revisions to it. Credit Policy maintains an assignment list of the primary officer, the primary reviewer, and the Office of General Counsel (OGC) reviewer, who are responsible for each chapter in the Manual. Each year, the process calls for Credit Policy to send an email to the primary officer and two reviewers assigned to each chapter. This communication requests that the officer review the assigned chapters for any needed changes. After the assigned officer has reviewed the chapter, if there are no contemplated changes, the primary officer assigned to the chapter is required to notify Credit Policy of this determination by email with the concurrence of the respective primary and OGC reviewers. If changes are needed, the assigned officer is required to provide the updated chapter to Credit Policy by email with the concurrence of the primary and OGC reviewers. According to EXIM’s process, when material changes to the Manual are needed, the necessary revisions do not wait for the annual update. Instead, the responsible division is required to incorporate such changes into the applicable chapter(s) of the Manual and submit them to Credit Policy as soon as possible. EXIM officials stated that examples of material changes that would be addressed immediately include recommendations from oversight bodies, such as the EXIM OIG or GAO, and changes resulting from legislative actions, such as updates to EXIM’s charter or changes in compliance procedures related to sanctions. The underwriting policies and procedures in EXIM’s Manual for its loan and loan guarantee transactions were mostly consistent with OMB and Treasury guidance for managing federal credit programs. We evaluated these policies and procedures for (1) applicant screening, (2) loan documentation, (3) collateral requirements, (4) lender and servicer eligibility, and (5) risk sharing practices. As shown in table 1, EXIM’s underwriting policies and procedures for the loan and loan guarantee programs were consistent with 12 of 15 applicable standards for managing federal credit programs and were partially consistent with three. Three other standards were not applicable to EXIM’s underwriting. Applicant screening refers to determining an applicant’s eligibility and creditworthiness for a loan or loan guarantee. Federal guidance for applicant screening includes specific standards related to the applicant’s (1) program eligibility, (2) delinquency on federal debt, (3) creditworthiness, (4) delinquent child support, and (5) taxpayer identification number (TIN). As shown in table 2, EXIM’s underwriting policies and procedures were consistent with federal guidance for applicant screening. For all loan and loan guarantee applications, EXIM requires applicants to provide identifying information, such as name, address, phone number, and Dun & Bradstreet Data Universal Numbering System (DUNS) number. Applicants are also required to provide relevant financial information, such as income, assets, cash flows, liabilities, financial statements, and credit reports. EXIM’s underwriting process requires screening of applicants for eligibility, which is partly completed through the CRTI review. As part of the CRTI review, EXIM screens the corporate and individual names and addresses of lenders, borrowers, guarantors, and other transaction participants against 28 databases that include various U.S. government and international debarment and sanctions lists for red flags. If a match is identified, EXIM’s Credit Review and Compliance Division works with the loan officers to determine the legitimacy of the match and, as necessary, works with OGC to determine what additional due diligence measures may be required and whether to continue the underwriting process. In addition to the CRTI review process, loan officers must obtain and use credit reports to assess creditworthiness and identify whether transaction applicants are delinquent on federal tax or nontax debts, including judgment liens against property for a debt to the federal government, and are therefore not eligible to receive federal loans and loan guarantees. EXIM’s policies and procedures contain instructions to suspend application processing and contact OGC for further guidance upon finding federal debt delinquencies or other insufficient or negative information on applicant credit reports. Loan officers must document any issues encountered on applicant credit reports and explain why a transaction is creditworthy if they recommend it for approval. Lastly, OMB Circular A-129 requires agencies to obtain the TIN of all persons doing business with the agency. The working capital guarantee application form requests the TIN for transaction applicants, which an EXIM official stated are used to obtain applicant credit reports. EXIM does not require the TIN for medium- and long-term applications. EXIM officials stated that applicants for medium- and long-term transactions are likely foreign entities and thus would not have federal TINs. However, all applications request the DUNS number which EXIM must use to perform the credit review and CRTI due diligence procedures. Federal guidance calls for the maintenance of loan files containing key information used in loan underwriting. As shown in table 3, EXIM’s underwriting policies and procedures were consistent with the federal guidance related to loan documentation. EXIM’s underwriting policies and procedures state that loan officers must maintain a loan file on the transaction applicant and other participants, which includes the completed application, credit bureau reports, credit analysis, certifications, verifications and other legal documents, and loan or service agreements with the debtor, as appropriate. EXIM’s process calls for obtaining debt collection certification statements for the working capital guarantee applications because the applicants are domestic entities. While the debt collection certification statement is not applicable for medium- and long-term applications, because the applicants are foreign entities, EXIM’s executed credit agreements and promissory notes define the terms of the transactions, including defaults and the remedies EXIM may take, such as declaring default and accelerating debt repayment, and pursuing restructuring or recovery actions, including possible litigation. Collateral refers to the assets used to secure a loan. For many types of loans, the government can reduce its risk of default and potential losses through well-managed collateral requirements. However, several of the collateral requirements contained in federal guidance relate specifically to real property. Since EXIM’s mission is to support U.S. exports, it does not finance real property and, accordingly, does not accept real property as the primary collateral. As a result, three of the four federal guidance standards were not applicable to EXIM’s underwriting. As shown in table 4, EXIM’s underwriting policies and procedures were consistent with the applicable federal guidance related to collateral. EXIM’s underwriting policies and procedures state that it should have a security interest in the financed export items. The loan officer and a transaction engineer will evaluate the export sales contracts, and this evaluation will be used as the assessment of collateral for the transaction. If using the financed export items as collateral is not possible, the loan officer should secure the EXIM financing with other assets owned by the primary source of repayment that are at least of comparable value to the financed items. Collateral that could be considered includes fixed assets, inventory, accounts receivable, or a third-party guarantee. While OMB Circular A-129 requires a real property appraisal and contains specific criteria defining acceptable appraisals, the standard was not applicable to EXIM’s loans and loan guarantees. According to EXIM officials, EXIM rarely takes real property as collateral because the primary collateral for EXIM’s transactions is the asset financed, and EXIM does not finance real property. Further, EXIM officials stated that the U.S. appraisal standards cannot be applied to foreign real property. However, if real property is taken as collateral, it would be as secondary or additional collateral. When EXIM accepts real property as additional collateral for a transaction, EXIM officials stated that an independent third-party appraisal in accordance with regional practices is obtained. Federal guidance calls for policies and procedures related to lender and servicer eligibility, monitoring, and recertification. As shown in table 5, EXIM’s policies and procedures were consistent with three and partially consistent with two of five federal standards for lender and servicer eligibility. OMB Circular A-129 calls for agencies to establish specific procedures to continuously review lender and servicer eligibility and decertify lenders and servicers that fail to meet the agency’s standards for continued participation. EXIM’s policies and procedures related to requirements for working capital guarantee delegated authority lenders were consistent with federal guidance. However, for medium-term delegated authority lenders, EXIM has not established documented policies and procedures for (1) determining their eligibility for continued participation in the program and (2) decertifying or taking other appropriate actions for those that do not meet compliance or eligibility standards. EXIM officials told us that currently EXIM has only three medium-term delegated authority lenders: two were renewed for continued participation and one became inactive in 2018. Further, according to EXIM officials, since 2009 only 2.3 percent of all medium- term guarantee authorizations have been delegated authority authorizations ($71 million out of $3.1 billion). EXIM reviews the performance of its primary medium-term lenders quarterly. In these reviews, EXIM officials evaluate the lenders’ portfolio performance, underwriting capabilities, and a set of qualitative factors. However, without documented policies and procedures for determining the eligibility of the medium-term delegated authority lenders’ continued participation in the program and for decertifying such lenders, as appropriate, EXIM may allow lenders who are not qualified to underwrite transactions, thus increasing the risk for improper underwriting and defaults. EXIM officials stated that they are in the process of updating and enhancing the Manual and will include procedures for medium-term delegated authority lender reviews and the consequences of an unfavorable assessment. OMB Circular A-129 calls for lenders and borrowers who participate in federal credit programs to have a substantial stake in full repayment but also states that the level of guarantee should be no more than necessary to achieve program purposes. As shown in table 6, EXIM’s underwriting policies and procedures were generally consistent with the federal guidance related to certain risk sharing practices for lenders and borrowers to have a stake in full repayment and were partially consistent with the federal guidance related to periodic program reviews. Although OMB Circular A-129 calls for lenders who extend credit to have substantial stake in full repayment and bear at least 20 percent of any loss from a default, it also states that the level of guarantee should be no more than necessary to achieve program purposes. However, consistent with its charter, EXIM is authorized to provide terms that are competitive with those of other ECAs, such as up to 100 percent loan guarantee coverage. EXIM does not require lenders to bear 20 percent of the risk of default. For working capital guarantees, EXIM offers 90 percent guarantee coverage and lenders retain 10 percent risk. For medium- and long-term loan guarantees, EXIM provides up to 85 percent financing with the remaining 15 percent paid by the borrower or financed separately. EXIM financing could be less than 85 percent depending on the U.S. content. According to EXIM, guaranteeing 100 percent of the amount it finances permits it to explore capital markets and is more desirable to banks for large and long-term projects. As a result, the lender may not retain any risk of default in the transaction. According to an OECD official, guaranteeing 100 percent of the financed amount is consistent with other ECAs. For example, the ECAs of Canada, Germany, and the United Kingdom also provide guarantees up to 100 percent of the financed amount on certain products. OMB Circular A-129 states that borrowers should have equity interest in assets financed with credit assistance and substantial capital or equity at risk in their business. However, consistent with its charter, EXIM is authorized to provide terms that are competitive with those of other ECAs. EXIM does not specifically require borrowers to have an equity interest in the transaction or to contribute the minimum cash payment. EXIM’s policies and procedures state that in practice, buyers often secure alternative financing for the cash payment, which is permissible as long as the financing is not officially supported by EXIM or another U.S. government agency. EXIM officials noted that during the analysis of creditworthiness, loan officers examine supporting documents for the alternative financing to assure that it is not guaranteed by EXIM or another U.S. government agency. OMB Circular A-129 states that the agency should periodically review programs in which the government bears more than 80 percent of any loss. The review is intended to evaluate the extent to which credit programs achieve intended objectives and whether the private sector has become able to bear a greater share of the risk. EXIM officials stated that EXIM performs program reviews through annual budget justifications submitted to OMB and annual competitiveness reports submitted to Congress. EXIM officials also stated that there are established timelines for preparing these reviews that must be followed to ensure that EXIM meets deadlines for submitting its budget documentation and the June 30 deadline for the annual competitiveness report. In addition, EXIM employs a detailed summary of the products and terms that other countries’ official ECAs offer. However, EXIM does not have documented policies or procedures related to performing periodic program reviews. As a result, EXIM runs the risk that it will not effectively review its programs to determine whether the private sector could bear a greater share of the risk. EXIM’s Manual provides a framework for making credit decisions so that only qualified applicants that demonstrate reasonable assurance of repayment are provided loans or loan guarantees. This framework helps ensure consistent application of procedures for assessing an applicant’s creditworthiness and for overseeing certain delegated authority lenders. However, EXIM’s underwriting process could be improved by additional procedures. For example, the Manual did not address medium-term delegated authority lenders’ eligibility requirements for continued participation and decertification procedures for lenders who fail to meet agency’s standards. Further, EXIM has not documented its process for periodic program reviews to determine whether the private sector could bear a greater share of the risk. Improvements in these areas could help enhance the oversight of lenders and the usefulness of program reviews. We are making the following two recommendations to EXIM: The Chief Operating Officer of EXIM should consider establishing documented policies and procedures for (1) determining medium-term delegated authority lenders’ eligibility for continued participation in EXIM’s programs and (2) decertifying or taking other appropriate actions for such lenders that do not meet compliance or eligibility standards. (Recommendation 1) The Chief Operating Officer of EXIM should establish documented policies and procedures for periodically reviewing credit programs in which the government bears more than 80 percent of any loss to determine whether private sector lenders should bear a greater share of the risk. (Recommendation 2) We provided a draft of this report to EXIM for review and comment. In written comments on a draft of this report, which are reproduced in appendix II, EXIM concurred with our two recommendations. EXIM also provided technical comments that we incorporated into the final report, as appropriate. In its written comments, EXIM described planned actions to address our recommendations. Specifically, EXIM stated that it will consider establishing documented policies and procedures for determining medium-term delegated authority lenders' eligibility for continued participation in EXIM's programs and decertifying or taking other appropriate actions for such lenders that do not meet compliance or eligibility standards. Further, EXIM will establish documented policies and procedures for periodically reviewing credit programs in which the government bears more than 80 percent of any loss to determine whether private sector lenders should bear a greater share of the risk. If implemented effectively, EXIM’s planned actions should address the intent of our recommendations. We are sending copies of this report to appropriate congressional committees, the Chairman of the Export-Import Bank, and the EXIM Inspector General. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3133 or dalkinj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to determine the extent to which Export-Import Bank’s (EXIM) (1) process for updating its underwriting policies and procedures is properly designed and implemented and (2) underwriting policies and procedures for loan and loan guarantee transactions are consistent with guidance for managing federal credit programs. To assess the extent to which EXIM’s process for updating its underwriting policies and procedures was properly designed and implemented, we reviewed EXIM’s policies and procedures for updating its Loan, Guarantee and Insurance Manual (Manual) and interviewed EXIM officials. We assessed EXIM’s process to determine whether it sufficiently communicated the procedures to be performed and documentation to be prepared and was consistent with Standards for Internal Control in the Federal Government. We did not evaluate EXIM’s compliance with its process for updating its underwriting policies and procedures or assess their operating effectiveness. To assess the extent to which EXIM’s underwriting policies and procedures for loan and loan guarantee transactions were consistent with guidance for managing federal credit programs, we reviewed relevant requirements and guidance, including the Office of Management and Budget’s (OMB) Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables, and the Department of the Treasury’s Bureau of the Fiscal Service’s Managing Federal Receivables: A Guide for Managing Loans and Administrative Debt. Specifically, we focused on OMB Circular A-129’s Section II (C)(1)(a) through (c), Section III (A)(1) through (3), and Section III (C)(1)(a) through (e)), which contain standards pertinent to risk management for loan and loan guarantee programs, including standards for (1) applicant screening (program eligibility, delinquency on federal debt, creditworthiness, delinquent child support, and taxpayer identification number); (2) loan documentation; (3) collateral (appraisal of real property, loan-to-value ratio, liquidation of real property collateral, and asset management standards and systems for real property disposal); (4) lender and servicer eligibility (participation criteria, review of eligibility, fees, decertification, and loan servicers); and (5) risk sharing practices (private lenders stake in full repayment, borrowers stake in full repayment, and program reviews). From the Bureau of the Fiscal Service’s Managing Federal Receivables, we identified key guidance related to credit extension (ch. 3) and management of guaranteed lenders and servicers (ch. 5). We reviewed EXIM’s policies and procedures related to underwriting for the loan and loan guarantee programs contained in its Manual and other documentation, such as its charter. We also discussed EXIM’s policies and procedures related to underwriting with EXIM officials. We compared EXIM’s underwriting processes to federal guidance for managing federal credit programs. As part of this comparison, we assessed whether policies and procedures included in EXIM’s Manual were consistent with federal guidance. However, because of EXIM’s limited lending authority during the period of our audit, we did not verify EXIM’s compliance with its underwriting policies and procedures or assess their operating effectiveness. In areas where we found EXIM’s policies and procedures to be consistent with federal guidance, there may still be opportunities to improve operating effectiveness. Further, guidance for managing federal credit programs includes additional requirements not related to underwriting, which we did not assess. In addition, we reviewed EXIM’s Office of Inspector General (OIG) reports since 2014 related to underwriting issues, various laws applicable to EXIM, and GAO reports related to EXIM. We also reviewed EXIM’s annual reports and competitiveness reports. We also discussed EXIM underwriting process with EXIM OIG officials and export credit financing and risk sharing practices with an official from the Organisation for Economic Co-operation and Development. We conducted this performance audit from January 2017 to May 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Marcia Carlsen (Assistant Director), Dragan Matic (Analyst in Charge), Sarah Lisk, Erika Szatmari, and Jingxiong Wu made key contributions to this report.", "summary": "EXIM serves as the official export credit agency of the United States, providing a range of financial products to support the export of U.S. goods and services. Following the 2007–2009 financial crisis, demand for EXIM support increased. However, from July 2015 to May 2019, EXIM lacked a quorum on its Board of Directors and, as a result, was unable to approve medium- and long-term transactions greater than $10 million. The Export-Import Bank Reauthorization Act of 2012 includes a provision for GAO to evaluate EXIM's underwriting process. This report discusses the extent to which EXIM's (1) process for updating its underwriting policies and procedures is properly designed and implemented and (2) underwriting policies and procedures for loan and loan guarantee transactions are consistent with guidance for managing federal credit programs. To address these objectives, GAO evaluated EXIM's underwriting policies and procedures against federal guidance and discussed the underwriting process with EXIM officials. GAO found that Export-Import Bank's (EXIM) process for updating its underwriting policies and procedures was properly designed and implemented. EXIM's Loan, Guarantee and Insurance Manual (Manual) describes EXIM's underwriting policies and procedures for its short-, medium-, and long-term loans and loan guarantees. The Manual describes the responsibilities of divisions and loan officers involved in the underwriting process and is required to be updated at least annually, except for material changes (e.g., changes resulting from legislative actions or compliance with sanctions), which are required to be made as soon as possible. EXIM has initiated a process to streamline the Manual, which consists of over 1,400 pages, by separating the policies and procedures, thus allowing for continuous reviews. The underwriting sections of the Manual are tentatively scheduled for review in 2019. The primary guidance for designing and managing federal credit programs is Office of Management and Budget Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables . GAO found that EXIM‘s policies and procedures were consistent with three of five areas of federal guidance; two areas related to lender and servicer eligibility and risk sharing practices were partially consistent with federal guidance. Applicant screening. EXIM's policies and procedures were consistent with guidance in that they require applicants to provide relevant financial information and assessments of applicant eligibility and creditworthiness. Loan documentation. EXIM's process was consistent with guidance in that it requires the preparation of loan files, which include the application, credit reports, and related analyses, as well as collateral documentation and loan agreements. Collateral requirements. EXIM's process was consistent with guidance in that it requires a security interest in the financed export items. Lender and servicer eligibility. EXIM established eligibility and decertification procedures for short-term delegated authority lenders that were consistent with guidance. However, it did not establish similar procedures for medium-term delegated authority lenders. Risk sharing practices. EXIM's process was generally consistent with guidance in that EXIM provides loan guarantee terms that officials stated were necessary to achieve program purposes. However, federal guidance also calls for an agency to periodically review programs in which the government bears more than 80 percent of any loss. While EXIM prepares various program reviews, it has not developed procedures to help ensure that its risk sharing practices are routinely reviewed. Without enhancements to its policies and procedures, EXIM may allow lenders that are not qualified to underwrite transactions and runs the risk that it will not effectively review its programs. GAO is making two recommendations to enhance EXIM's policies and procedures related to (1) the use of medium-term delegated authority lenders and (2) periodic program reviews. EXIM concurred with GAO's recommendations and described actions planned to address them.", "document_type": "gao"}
{"report": "Opioids, such as hydrocodone, oxycodone, morphine, and methadone, can be prescribed to treat both acute and chronic pain. Because many opioids have a high potential for abuse and may lead to severe psychological or physical dependence, many of them are classified as Schedule II drugs under the Controlled Substances Act. The abuse of opioids has been associated with serious consequences, including addiction, overdose, and death. Medicare Part D plan sponsors are private organizations, such as health insurance companies and pharmacy benefit managers, contracted by CMS to provide outpatient drug benefit plans to Medicare beneficiaries. CMS provides guidance to plan sponsors that are responsible for establishing reasonable and appropriate drug utilization review (DUR) programs that assist in preventing misuse of prescribed medications in general, including the unsafe use of opioid pain medications. In 2013, CMS implemented the Medicare Part D opioid overutilization policy intended to improve medication safety. Through the Overutilization Monitoring System (OMS), CMS seeks to ensure that plan sponsors establish reasonable and appropriate DUR programs to prevent overutilization of opioids. CMS uses criteria in the OMS to identify high- risk use of opioids. Plan sponsors may, but are not required to, use these guidelines as part of their DUR. CMS’s Center for Program Integrity (CPI) oversees Part D program integrity and coordinates with other parts of CMS that monitor plan sponsor compliance with the Part D program. CPI has primary responsibility for overseeing NBI MEDIC, which is responsible for identifying and investigating potential Part D fraud, waste, and abuse, in general. NBI MEDIC handles complaints from beneficiaries and others, as well as requests from law enforcement; investigates providers and refers them to law enforcement as appropriate; and analyzes Part D program prescription drug event records and other data to identify patterns that may indicate fraud, waste, or abuse. NBI MEDIC’s responsibilities are for all Part D drugs and are not opioid-specific. One concern associated with prescribed opioids is their diversion—that is, the redirection of prescription drugs for an illegal purpose such as recreational use or resale. Diversion can include selling prescription drugs that were obtained legally, transferring a legitimately prescribed opioid to family or friends who may be trying to self-medicate, or pretending to be in pain to obtain a prescription opioid due to an addiction. It is often associated with “doctor shopping,” the attempt to obtain large amounts of opioids through multiple providers, or from multiple pharmacies. Doctor shopping can be used to help support an individual’s addiction or to obtain opioids for resale on the black market. Drug diversion can also include illicit prescribing, whereby providers—commonly known as “pill mills”—write unnecessary prescriptions or prescribe larger quantities than are medically necessary. Opioids are among the drugs with the highest potential for drug diversion. In 2016, CDC issued guidelines with recommendations for prescribing opioids in outpatient settings for chronic pain, based on consultation with experts and a review of scientific evidence. CDC noted in the guidelines that primary care physicians have reported concerns about opioid misuse and addiction, and find managing patients with chronic pain a challenge, possibly because of insufficient training in prescribing opioids. According to the guidelines, most experts agreed that long-term opioid dosage of 50 milligrams (mg) morphine equivalent dose (MED) per day or more generally increases overdose risk without necessarily adding benefits for pain control or function. Experts also noted that daily opioid dosages close to or greater than 100 mg MED per day are associated with significant risks. The guidelines therefore recommended that providers use caution when prescribing opioids at any dose, carefully reassess evidence of individual benefits and risks when increasing the dosage to 50 mg MED per day or more, and either avoid or carefully justify dosage at 90 mg MED or more. In making these recommendations, CDC noted that there is not a dosage threshold below which the risk of overdose is eliminated, but found that dosages less than 50 mg MED would reduce the risk for a large portion of patients. CDC also noted that providers should use additional caution in prescribing opioids to patients aged 65 and older, because the drugs can accumulate in the body to toxic levels. CMS provides guidance to plan sponsors on how they should monitor opioid overutilization problems among Part D beneficiaries. The agency includes this guidance in its annual letters to plan sponsors, known as call letters; it also provided a supplemental memo to plan sponsors in 2012. Among other things, these guidance documents instructed plan sponsors to implement a retrospective drug utilization review (DUR) system to monitor beneficiary utilization starting in 2013. As part of the DUR systems, CMS requires plan sponsors to have methods to identify beneficiaries who are potentially overusing specific drugs or groups of drugs, including opioids. Also in 2013, CMS created the Overutilization Monitoring System (OMS), which outlines criteria to identify beneficiaries with high-risk use of opioids and to oversee sponsors’ compliance with CMS’s opioid overutilization policy. Plan sponsors may use the OMS criteria for their DUR systems, but they have some flexibility to develop their own targeting criteria, within CMS guidance. The OMS considers beneficiaries to be at a high risk of opioid overuse when they meet all three of the following criteria: (1) receive a total daily MED greater than 120 mg for 90 consecutive days, (2) receive opioids prescriptions from four or more providers in the previous 12 months, and (3) receive opioids from four or more pharmacies in the previous 12 months. The criteria exclude beneficiaries with a cancer diagnosis and those in hospice care, for whom higher doses of opioids may be appropriate. Officials from all six plan sponsors we interviewed confirmed they have a DUR system that specifically looks at opioids. In addition, to be consistent with CMS, all of the plan sponsors adopted criteria similar to the OMS, with some minor modifications—typically involving the number of months in which they measured beneficiaries’ opioid prescriptions. Through the OMS, CMS generates quarterly reports that list beneficiaries who meet all of the criteria and who are identified as high-risk and then distributes the reports to the plan sponsors. Plan sponsors are expected to review the list of identified beneficiaries, determine appropriate action, and then respond to CMS with information on their actions within 30 days. According to CMS officials, the agency also expects that plan sponsors will share any information with CMS on beneficiaries that they identify through their own DUR systems. Some actions plan sponsors may take include Case management. After plan sponsors identify beneficiaries with patterns of inappropriate opioid use and possible coordination of care issues through their DUR analysis, they may conduct case management. Case management may include an attempt to improve coordination issues, and often involves provider outreach, whereby the plan sponsor will contact the providers associated with the beneficiary to let them know that the beneficiary is receiving high levels of opioids and may be at risk of harm. In addition to outreach, officials from two of the six plan sponsors we interviewed told us they focus on provider education and one plan sponsor said they may direct the providers to the CDC guidelines or other information to help reduce overutilization. Officials from two plan sponsors reported that they also reach out to beneficiaries to let them know they are receiving high levels of opioids and may be at risk of harm. Beneficiary-specific point-of-sale (POS) edits. When plan sponsors determine that a beneficiary is at risk for opioid harm, they may choose to implement a beneficiary-specific POS edit to prevent overutilization. Beneficiary-specific POS edits are restrictions that limit these beneficiaries to certain opioids and amounts. Pharmacists receive a message when a beneficiary attempts to fill a prescription that exceeds the limit in place for that beneficiary. CMS expects plan sponsors to report on the POS edits they use through CMS’s Medicare Advantage and Prescription Drug System for information sharing and monitoring purposes. That way, if a beneficiary changes plans, the new plan sponsor will receive an alert about the beneficiary’s record of POS edits. From February 2014 through March 10, 2016, there were 2,693 POS edits reported in that system for 2,520 beneficiaries. Formulary-level POS edits. CMS expects plan sponsors to use formulary-level POS edits to prospectively prevent opioid overutilization. These edits alert providers who may not have been aware that their patients are receiving high levels of opioids from other doctors. CMS recommends these formulary-level edits to be used when a beneficiary has a cumulative opioid MED of at least 90 mg. Referrals for investigation. According to the six plan sponsors we interviewed, the referrals can be made to NBI MEDIC or to the plan sponsor’s own internal investigative unit, if they have one. After investigating a particular case, if a plan sponsor or NBI MEDIC determines that a beneficiary is suspected of diverting opioids, they may refer the case to the HHS-OIG, or a law enforcement agency, according to CMS, NBI MEDIC, and one plan sponsor. Pharmacy lock-ins. Beginning in 2019, Medicare Part D plan sponsors will be able to restrict certain beneficiaries identified as at- risk for prescription drug abuse to a single pharmacy for all their opioid prescriptions, known as a pharmacy “lock in.” Some plan sponsors explained that they use pharmacy lock-ins for their commercial and Medicaid lines of business, and generally found them to be a useful tool for controlling opioid use. Based on CMS’s use of the OMS and the actions taken by plan sponsors, CMS reported a decrease in the number of beneficiaries meeting the OMS criteria of high-risk—which agency officials consider an indication of success toward its goal of decreasing opioid use disorder. From calendar years 2011 through 2016, there was a 61 percent decrease in the number of beneficiaries meeting the OMS criteria. (See table 1.) In addition to using the OMS as a monitoring tool to oversee plan sponsors’ compliance with their DUR system requirements, CMS relies on patient safety measures to assess how well Part D plan sponsors are monitoring beneficiaries and taking appropriate actions. Specifically, CMS tracks data on plan sponsors’ performance for 15 measures related to Part D patient safety that are developed and maintained by the Pharmacy Quality Alliance, and CMS communicates with plan sponsors about their performance. In 2016, CMS started tracking plan sponsors’ performance on three Pharmacy Quality Alliance-approved patient safety measures that are directly related to opioids, which were 1. The proportion of beneficiaries that use opioids at high dosages (more than 120 mg MED for 90 days or longer) in persons without cancer or not in hospice care. 2. The proportion of beneficiaries that use opioids from multiple providers (four or more providers and four or more pharmacies) in persons without cancer or not in hospice care. 3. The proportion of beneficiaries that use opioids at high dosage and from multiple providers in persons without cancer or not in hospice care, and that meet both of the other measures. The three measures are similar to the OMS criteria in that they identify beneficiaries with high dosages of opioids (120 mg MED) from multiple providers and pharmacies (four or more of each). However, there are a number of differences between these measures and the OMS. For example, the OMS counts actual beneficiaries, while the patient safety measures report member-years, which are adjusted to account for beneficiaries who are enrolled in a plan for only part of a year. In addition, these measures separately identify beneficiaries who fulfill each of those criteria individually. For example, data gathered on the first measure indicate that about 285,119 beneficiaries, counted as member- years across all Part D plans, received high doses (more than 120 mg MED) of opioids for 90 days or longer during calendar year 2016. CMS also uses these data in different ways from how it uses OMS data. The OMS criteria were developed and maintained by CMS to identify patients at risk for harm who may warrant case management and to examine opioid use trends across the Part D program, including progress toward its goal of decreasing opioid use disorder. In contrast, CMS officials told us that the agency uses the patient safety measures to assess plan sponsor performance. The patient safety measures also serve as a tool for Part D sponsors to compare their performance to overall averages, and to track progress in improving these measures over time. CMS also tracks sponsors’ progress in improving the measures, according to agency officials. Each quarter, CMS contacts plan sponsors who have the lowest performance on each measure and expects them to respond about actions they take to improve performance. Beginning in April 2017, the agency began distributing to plan sponsors the beneficiary-level files for the patient safety measures. CMS officials said that these files provide a complete list of beneficiaries included in each of the measures. While CMS tracks the total number of beneficiaries who meet all three OMS criteria as part of its opioid overutilization oversight across the Part D program, it does not have comparable information on most beneficiaries who may be at risk for harm. CMS has goals to reduce the risk of opioid use disorders, overdoses, inappropriate prescribing, and drug diversion in its Opioid Misuse Strategy, but OMS does not track the number of beneficiaries with prescriptions for high doses of opioids unless those beneficiaries are also receiving them both from four or more providers and from four or more pharmacies; and agency officials told us that CMS has no plans for OMS to begin doing so. According to CDC guidelines, long-term use of high opioid dosages—those above a MED of 90 mg per day—are associated with significant risk of harm and should be avoided if possible. Based on the CDC guidelines, outreach to Part D plan sponsors, and CMS analyses of Part D data, CMS has revised its current OMS criteria to include more at-risk beneficiaries beginning in 2018. The new OMS criteria define a high user as having an average daily MED greater than 90 mg for any duration, and who receives opioids from four or more providers and four or more pharmacies, or from six or more providers regardless of the number of pharmacies, for the prior 6 months. According to CMS officials, the revised OMS criteria, like the current criteria, are intended to identify the beneficiaries it determined are at the greatest risk of harm: those who may lack coordinated care as a result of using multiple pharmacies and providers. CMS officials also noted that the revised criteria are intended to limit the increase in the number of beneficiaries for whom plan sponsors are expected to take action, such as case management, to avoid overburdening plan sponsors with unreasonable workload levels. While the revised criteria will help identify beneficiaries who CMS determined are at the highest risk of opioid misuse and therefore may need case management by plan sponsors, they will not provide information on most Part D beneficiaries who may also be at risk of harm. In developing the revised criteria, CMS conducted a one-time analysis that estimated there were 727,016 beneficiaries with an average MED of 90 mg or more, for any length of time during a 6 month measurement period in 2015, regardless of the number of providers or pharmacies used. These beneficiaries may be at risk of harm from opioids, according to CDC guidelines, and therefore tracking the number of these beneficiaries over time could help CMS to determine whether it is making progress toward meeting the goals specified in its Opioid Misuse Strategy. However, CMS officials told us that the agency does not keep track of these beneficiaries, and does not have plans to do so as part of OMS. Instead, CMS uses the number of beneficiaries who meet the OMS criteria as an indicator of progress toward its goals. CMS estimated that 33,223 beneficiaries would have met its revised criteria based on 2015 data, which is a much smaller number than the estimated 727,016 beneficiaries at risk of harm from opioids. (See fig. 1.) In 2016, CMS began to gather information from its patient safety measures on the number of beneficiaries who use more than 120 mg MED of opioids for 90 days or longer, regardless of the number of providers and pharmacies. However, this information does not include all at-risk beneficiaries, because the threshold is more lenient than indicated in CDC guidelines and CMS’s new criteria for OMS. Specifically, CMS’s one-time analysis of 2015 data indicated that 727,016 beneficiaries received prescriptions with an average MED of 90 mg or more for any length of time during a 6-month measurement period. In contrast, the 2016 patient safety measures reports identified significantly fewer beneficiaries, 285,119, in its most comparable measure—member years for opioid prescriptions at 120 mg MED for 90 consecutive days or longer. According to CMS officials, CMS shared feedback with the Pharmacy Quality Alliance to consider updating the threshold to 90 mg MED to align with CDC guidelines and the revised OMS criteria. CMS officials said the agency will consider adopting these updates once complete. In addition, while CMS monitors the patient safety measure data, these data are relatively new. CMS officials told us that, as a result, the agency does not yet have enough data to report changes over time toward its goals to reduce the risk of opioid use disorders, overdoses, and inappropriate prescribing. Neither the data gathered as part of OMS, nor patient safety measures gathered so far are adequate to provide CMS with the information necessary to track progress toward meeting its goal of reducing harm from opioids. While tracking a smaller number of beneficiaries in OMS is useful for targeting resource-intensive plan sponsor actions, keeping track of the larger number of beneficiaries at risk of harm from high doses of opioids—greater than 90 mg MED for any duration regardless of the number of providers and pharmacies—could provide CMS with information on progress toward its goals without additional monitoring by plan sponsors. Doing so would also be consistent with federal internal control standards, which require agencies to use quality information to achieve objectives and address risks. Without tracking the number of beneficiaries who receive potentially dangerous levels of opioids regardless of the number of providers or pharmacies, and then examining changes in that number over time, CMS lacks key information that would be useful to determine if it is making progress toward reducing the risk of opioid harm for Part D beneficiaries. CMS oversees providers who prescribe opioids to Medicare Part D beneficiaries through its contractor, NBI MEDIC, and the Part D plan sponsors. CMS requires NBI MEDIC to identify providers who prescribe high amounts of drugs classified as Schedule II under the Controlled Substances Act, which indicates a high potential for abuse and includes many opioids. Using prescription drug event data, NBI MEDIC conducts a peer comparison of providers’ prescribing practices to identify outlier providers—the highest prescribers of Schedule II drugs, which include, but are not limited to, opioids. NBI MEDIC’s initial analyses focuses on providers associated with at least 100 prescription drug event records or at least $100,000 in total Part D payments for Schedule II drugs over the course of one year. These providers are then classified as outliers if they are listed as high in both the number of prescription drug records per prescriber and prescriptions per beneficiary by specialty within each state. NBI MEDIC reports to CMS on the providers with the highest number of prescriptions identified by the analysis. Beginning with the October 2016 report, CMS began sharing NBI MEDIC’s prescriber outlier report with the plan sponsors quarterly to supplement their own investigations of potential fraud, waste, and abuse. According to data from NBI MEDIC, the number of outlier providers identified has generally remained stable except for an increase in 2015. NBI MEDIC and CMS officials said this increase occurred when a commonly used opioid, hydrocodone, was added to the analysis after it was reclassified as a Schedule II drug. NBI MEDIC gathers data on Medicare Part C and Part D and uses its Predictive Learning Analytics Tracking Outcome (PLATO) system to conduct a number of data analysis projects. According to NBI MEDIC officials, these PLATO projects seek to identify potential fraud by examining data on provider behaviors. In addition, according to officials, PLATO is capable of allowing NBI MEDIC to share information on providers with plan sponsors. NBI MEDIC officials stated there are two current PLATO projects that include a focus on some opioids. The TRIO data project identifies providers who prescribe beneficiaries a combination of an opioid, a benzodiazepine, and the muscle relaxant Carisoprodol. This well-known combination of drugs is used to increase the effects of opioids. The Pill Mill data project identifies providers with abnormal prescribing behavior in authorizing controlled substances, including opioids, absent medical necessity. To identify providers potentially operating a pill mill, 17 risk factors are considered, including the number of beneficiaries for whom a provider prescribed controlled substances, the quantity of these medications, the number of beneficiaries who travel long distances to receive medications, and the number of beneficiaries treated for drug abuse or misuse at emergency rooms. Another analysis that NBI MEDIC conducts, according to its officials, is the Transmucosal Immediate Release Fentanyl project, which identifies potential improper payments for medicines containing fentanyl, a prescription opioid pain reliever. NBI MEDIC looks for instances of this drug being prescribed to beneficiaries who do not have cancer combined with breakthrough pain, the only approved use for this drug. NBI MEDIC officials said they conduct investigations to assist CMS in identifying cases of potential fraud, waste, and abuse among providers for Medicare Part C and Part D. The investigations are prompted by complaints from plan sponsors, calls to NBI MEDIC’s call center, NBI MEDIC’s analysis of outlier providers, or from one of its other data analysis projects. As part of its investigations, NBI MEDIC officials said they may access data from Medicare Part B, which includes coverage for doctors’ services and outpatient care, to determine whether providers’ diagnoses coincide with their prescriptions. Officials added that they investigate inappropriate prescribing by reviewing Part D prescription records, medical records, or PLATO data; or by conducting background checks, interviewing beneficiaries, or conducting site visits, among other activities. NBI MEDIC data indicates that the total number of its investigations decreased from 2013 to 2016, which, according to NBI MEDIC officials, occurred because it increased activities related to data analysis and collaboration with plan sponsors. After identifying providers engaged in potential fraudulent overprescribing, NBI MEDIC officials said they may refer cases to agencies for further investigation and potential prosecution, such as the HHS-OIG, state and local law enforcement, the Federal Bureau of Investigations, or the Drug Enforcement Administration. In 2016, NBI MEDIC data showed that it referred a total of 119 cases to the HHS-OIG and 48 to agencies within the Department of Justice, including the Federal Bureau of Investigations and the Drug Enforcement Agency. CMS officials told us that they do not routinely track the results of individual cases referred by NBI MEDIC to other agencies. A 2016 Senate committee report indicated that the HHS- OIG declined and returned more than half of the cases referred to it from 2013 through 2015. According to NBI MEDIC officials, cases may be rejected for reasons such as not meeting prosecutorial thresholds for evidence, or HHS-OIG does not having enough staff to take on the workload. NBI MEDIC officials told us that HHS-OIG does not always inform NBI MEDIC of its reasons for declining the referrals. CMS requires all plan sponsors to adopt and implement an effective compliance program, which must include measures to prevent, detect, and correct Part C or Part D program noncompliance, as well as fraud, waste, and abuse. CMS communicates guidance for plan sponsor’s compliance programs through Chapter 9 of CMS’s Prescription Drug Benefit Manual and in annual letters. CMS’s guidance focuses broadly on prescription drugs, and does not specifically address opioids. To detect fraud, waste, and abuse among providers, plan sponsors told us they use their own data analysis and criteria, as well as NBI MEDIC’s list of outlier providers. For example, plan sponsors identify providers suspected of fraud, waste, or abuse by looking for certain characteristics, such as providers who have a large number of beneficiaries traveling from a different zip code to receive prescriptions, or providers who prescribe large quantities of commonly abused drugs with no associated medical claims to support the prescriptions. Once the suspected providers are identified, plan sponsors said that they conduct their own investigations to determine if there is sufficient evidence of inappropriate prescribing. Plan sponsors told us they may choose to take a number of actions based on these investigations, including choosing to refer the case to NBI MEDIC. Additionally, if appropriate, plan sponsors can educate providers about prescribing guidelines and best practices, or notify them that their patients may be doctor shopping, in order to improve coordination of care. They may also terminate a provider from their plan if they find evidence of fraud or abuse. CMS lacks the information necessary to adequately determine the number providers potentially overprescribing opioids, and therefore cannot determine the effectiveness of efforts to achieve the agency’s goals of reducing the risk of opioid use disorders, overdoses, inappropriate prescribing, and drug diversion. CMS’s oversight actions focus broadly on Schedule II drugs rather than specifically on opioids. For example, NBI MEDIC’s analyses to identify outlier providers do not indicate the extent to which they may be overprescribing opioids specifically. According to CMS officials, they direct NBI MEDIC to focus on Schedule II drugs, because they have a high potential for abuse, whether they are opioids or other drugs. However, without specifically identifying opioids in these analyses—or an alternate source of data— CMS lacks data on providers who prescribe high amounts of opioids, and therefore cannot assess progress toward meeting its goals related to opioid use. CMS also lacks key information necessary for oversight of opioid prescribing, because it does not require plan sponsors to report to NBI MEDIC or CMS cases of fraud, waste, and abuse; cases of overprescribing; or any actions taken against providers. Plan sponsors collect information on cases of fraud, waste, and abuse, and can choose to report this information to NBI MEDIC or CMS. PLATO, a voluntary reporting system, is one way that plan sponsors can report information to NBI MEDIC or CMS, and share with other plan sponsors about providers they investigate and about actions they take. While CMS receives some information from plan sponsors who voluntarily report their actions, it does not know the full extent to which plan sponsors have identified providers who have prescribed high amounts of opioids and taken action to reduce overprescribing. Without this information, CMS cannot determine the extent to which plan sponsors are taking action to reduce overprescribing, making it difficult to assess progress in this area. CMS officials told us that they receive reports on what information plan sponsors enter into PLATO. However, according to these officials, they do not have information on all actions taken by plan sponsors; therefore, CMS does not know how often plan sponsors use PLATO or what proportion of actions they report. A 2015 HHS-OIG report recommended that CMS require plan sponsors to report all potential fraud and abuse to CMS and/or NBI MEDIC. CMS disagreed with this recommendation, and stated that plan sponsors currently have several options for referring incidents, that CMS has worked with plan sponsors to improve organizational performance, and that plan sponsors regularly share information on best practices for prevention and detection of fraud. The HHS-OIG continues to recommend that CMS require reporting due to the lack of a comprehensive set of data needed to monitor providers’ inappropriate prescribing. Without specifically monitoring providers’ overprescribing of opioids, CMS cannot determine if its efforts, or the efforts of NBI MEDIC and plan sponsors, are helping to contribute to its goals related to opioid use. Federal internal control standards require agencies to conduct monitoring activities and to use quality information to achieve objectives and address risks. Without adequate information on providers’ opioid prescribing patterns in Part D, CMS is unable to determine whether its related oversight efforts—including such efforts by NBI MEDIC or Part D plan sponsors—are effective or should be adjusted. A large number of Medicare Part D beneficiaries use prescription opioids, and reducing the inappropriate prescribing of these drugs is a key part of CMS’s strategy to decrease the risk of opioid use disorder, overdoses, and deaths. Despite working to identify and decrease egregious opioid use behavior—such as doctor shopping—among beneficiaries in Medicare Part D, CMS lacks the necessary information to effectively determine the full number of beneficiaries at risk of opioid harm. CMS recently expanded the number of beneficiaries for whom it expects plan sponsors to conduct intervention efforts, such as case management, and has begun to collect additional patient safety measure data on beneficiaries at risk of harm from opioids. However, these efforts have not yet provided CMS with sufficient data to track how many beneficiaries are receiving large doses of opioids, and therefore are at risk of harm. Without expanding and enhancing its data collection efforts to include information on more at-risk beneficiaries, CMS cannot fully assess whether it is making sufficient progress toward its goals of reducing opioid use disorders, overdoses, inappropriate prescribing, and drug diversion. CMS’s efforts to oversee opioid prescribing specifically are also inadequate. CMS directs NBI MEDIC to focus its analyses on providers who prescribe any drugs with a high risk of abuse, but NBI MEDIC does not specifically track those providers who prescribe opioids. Absent opioid-specific monitoring, CMS cannot assess whether its efforts to reduce opioid overprescribing are effective, or if opioid prescribing patterns are changing over time. In addition, neither CMS nor NBI MEDIC can be sure they have complete information about providers potentially overprescribing opioids to Part D beneficiaries, because plan sponsors are not required to report to CMS or NBI MEDIC all potential fraud and abuse incidents or actions sponsors have taken against providers. As a result, CMS lacks information about plan sponsors’ monitoring of providers who overprescribe opioids, and is therefore unable to determine if the agency’s and plan sponsors’ efforts are successful in achieving CMS’s goals. We are making the following three recommendations to CMS. The Administrator of CMS should gather information over time on the number of beneficiaries at risk of harm from opioids, including those who receive high opioid morphine equivalent doses regardless of the number of pharmacies or providers, as part of assessing progress over time in reaching the agency’s goals related to reducing opioid use. (Recommendation 1) The Administrator of CMS should require its contractor, NBI MEDIC, to identify and conduct analyses on providers who prescribe high amounts of opioids separately from providers who prescribe high amounts of any Schedule II drug. (Recommendation 2) The Administrator of CMS should require plan sponsors to report to CMS on investigations and other actions taken related to providers who prescribe high amounts of opioids. (Recommendation 3) We provided a draft of this report to HHS for comment. HHS provided written comments, which are reprinted in appendix I, and technical comments, which we incorporated as appropriate. In its written comments, HHS described its efforts to reduce opioid overutilization in Medicare Part D. HHS noted that these efforts include a medication safety approach to improve care coordination for high-risk beneficiaries using opioids, quality metrics for plan sponsors, and data analysis of prescribing patterns to target potential fraud, waste, and abuse. For example, HHS noted that CMS adopted a Medicare Part D opioid overutilization policy in 2013 that provided specific guidance to Part D plans on effective drug utilization review programs to reduce overutilization of opioids. As described in our report, CMS’s opioid overutilization policy requires sponsors to implement retrospective drug utilization review programs to identify beneficiaries who are potentially overusing opioids. Among other things, sponsors may choose to implement beneficiary-specific edits that limit high-risk beneficiaries to certain opioids and amounts, and CMS expects them to use formulary- level edits to alert providers when their patients are receiving high levels of opioids from other doctors. HHS also concurred with two of our three recommendations. HHS concurred with our recommendation that CMS gather information over time on the number of beneficiaries at risk of harm from opioids, as part of assessing progress toward agency goals. HHS commented that CMS tracks beneficiaries who meet these criteria through the patient safety measures. However, while these patient safety measures are a potential source of this information, they currently do not include all at-risk beneficiaries, because the opioid use threshold they use (120 mg MED for 90 days or longer) is more lenient than indicated in CDC guidelines or in CMS’s revised OMS criteria. In addition, while CMS uses the patient safety measures to assess plan sponsor performance, the data are relatively new, and CMS has not yet used them to report progress over time toward its goals. HHS concurred with our recommendation that CMS require NBI MEDIC to gather separate data on providers who prescribe high amounts of opioids, and HHS noted that it intends to work with NBI MEDIC to identify trends in outlier prescribers of opioids. HHS did not concur with our recommendation that CMS require plan sponsors to report on investigations and other actions taken related to providers who prescribe high amounts of opioids. HHS noted that plan sponsors have the responsibility to detect and prevent fraud, waste, and abuse and that CMS reviews cases when it conducts audits. HHS also stated that it seeks to balance requirements on plan sponsors when considering new regulatory requirements. As noted in our report, plan sponsors conduct investigations and take actions against providers, and some plan sponsors report actions to CMS and NBI MEDIC. However, without complete reporting, such as reporting from all plan sponsors on the actions they take to reduce overprescribing, CMS is missing key information that could help assess progress in this area. Due to the importance of this information, we continue to believe that CMS should require plan sponsors to report on the actions they take. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS and the Administrator of CMS. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or CurdaE@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Will Simerl (Assistant Director), Carolyn Feis Korman (Analyst-in-Charge), Amy Andresen, Samantha Pawlak, and Patricia Roy made key contributions to this report. Also contributing were Muriel Brown, Drew Long, and Emily Wilson.", "summary": "Misuse of prescription opioids can lead to overdose and death. In 2016, over 14 million Medicare Part D beneficiaries received opioid prescriptions, and spending for opioids was almost $4.1 billion. GAO and others have reported on inappropriate activities and risks associated with these prescriptions, such as receiving multiple opioid prescriptions from different providers. GAO was asked to describe what is known about CMS’s oversight of Medicare Part D opioid use and prescribing. This report examines (1) CMS oversight of beneficiaries who receive opioid prescriptions under Part D, and (2) CMS oversight of providers who prescribe opioids to Medicare Part D beneficiaries.GAO reviewed CMS opioid utilization and prescriber data, CMS guidance for plan sponsors, and CMS’s strategy to prevent opioid misuse. GAO also interviewed CMS officials, the six largest Part D plan sponsors, and 12 national associations selected to represent insurance plans, pharmacy benefit managers, physicians, patients, and regulatory and law enforcement authorities. The Centers for Medicare & Medicaid Services (CMS) provides guidance on the monitoring of Medicare beneficiaries who receive opioid prescriptions to plan sponsors—private organizations that implement the Medicare drug benefit, Part D—but lacks information on most beneficiaries at risk of harm. CMS provides plan sponsors guidance on how they should monitor opioid overutilization among Medicare Part D beneficiaries and requires them to implement drug utilization review systems that use criteria similar to CMS's. CMS's criteria focus on beneficiaries who (1) receive prescriptions of high doses of opioids, (2) receive prescriptions from four or more providers, and (3) fill the prescriptions at four or more pharmacies. According to CMS officials, this approach allows plan sponsors to focus their actions on those beneficiaries it determined to have the highest risk of harm from opioid use. CMS’s criteria, including recent revisions, do not provide sufficient information about the larger population of potentially at-risk beneficiaries. CMS estimates that while 33,223 beneficiaries would have met the revised criteria in 2015, 727,016 would have received high doses of opioids regardless of the number of providers or pharmacies. In 2016, CMS began to collect information on some of these beneficiaries using a higher dosage threshold for opioid use. This approach misses some who could be at risk of harm, based on Centers for Disease Control and Prevention guidelines. As a result, CMS is limited in its ability to assess progress toward meeting the broader goals of its Opioid Misuse Strategy, which includes activities to reduce the risk of harm from opioid use. CMS Estimates of 2015 Part D Beneficiaries with High Opioid Doses and Those Who Would Have Met Revised Overutilization Monitoring Criteria CMS oversees the prescribing of drugs at high risk of abuse through a variety of projects, but does not analyze data specifically on opioids. According to CMS officials, CMS and plan sponsors identify providers who prescribe large amounts of drugs with a high risk of abuse, and those suspected of fraud or abuse may be referred to law enforcement. However, GAO found that CMS does not identify providers who may be inappropriately prescribing large amounts of opioids separately from other drugs, and does not require plan sponsors to report actions they take when they identify such providers. As a result, CMS is lacking information that it could use to assess how opioid prescribing patterns are changing over time, and whether its efforts to reduce harm are effective. GAO recommends that CMS (1) gather information on the full number of at-risk beneficiaries receiving high doses of opioids, (2) identify providers who prescribe high amounts of opioids, and (3) require plan sponsors to report to CMS on actions related to providers who inappropriately prescribe opioids. HHS concurred with the first two recommendations, but not with the third. GAO continues to believe the recommendation is valid, as discussed in the report.", "document_type": "gao"}
{"report": "Major disaster declarations can trigger a variety of federal response and recovery programs for government and nongovernmental entities, households, and individuals. FEMA’s Office of Response and Recovery manages the PA grant program, providing funds to states, territorial governments, local government agencies, Indian tribes, authorized tribal organizations, and certain private nonprofit organizations in response to presidentially declared disaster declarations to repair damaged public infrastructure such as roads, schools, and bridges. Figure 1 shows the total amount of PA funds obligated by county from January 2009 through February 2017 for federal disaster declarations. To implement the PA program, FEMA’s staff includes a mix of temporary, reservist, and permanent employees under two authorities, the Stafford Act and Title 5. Reservists make up the largest share of the PA workforce, which consisted of 1,852 employees––1,041 reservists, 634 full-time equivalents, and 177 temporary Cadre of On-Call Response/Recovery Employees––as of June 2017, according to PA officials. Figure 2 summarizes the key characteristics for each type of employee. After a disaster, FEMA sends PA program staff to the affected area to work with state and local officials to assess the damage prior to a disaster declaration. FEMA officials establish a temporary Joint Field Office (JFO) to house staff who will manage response and recovery functions after a declared disaster (including operations, emergency response and support teams, planning, administration, finance, and logistics). Once the President has declared a disaster, PA staff work with grant applicants to help them document damages, identify eligible costs and work, and prepare requests for PA grant funds by developing project proposals. These proposals may include proposals for hazard mitigation if the hazard mitigation work is related to the repair of damaged facilities, referred to as permanent work projects. Immediate emergency measures, such as debris removal, are not eligible for hazard mitigation. Officials then review and obtain approval of the projects prior to FEMA obligating funds to state grantees. Figure 3 describes the process used to develop, review, and obligate PA projects. In addition to rebuilding and restoring infrastructure to its predisaster state, the PA program can be used to fund hazard mitigation measures that will reduce future risk to the infrastructure in conjunction with the repair of disaster-damaged facilities. There is no preset limit to the amount of PA funds a community may receive; however, PA hazard mitigation measures must be determined to be cost effective. Some examples of hazard mitigation measures that FEMA has predetermined to be cost effective, if they meet certain requirements, include installing shut-off valves on underground pipelines so that damaged sections can be isolated during or following a disaster; securing a roof using straps, clips, or other anchoring systems in locations subject to high winds; and installing shutters on windows or replacing glass with impact-resistant material. Applicants can also propose mitigation measures that are separate from the damaged portions of a facility, such as constructing floodwalls around damaged facilities to avoid future flooding. FEMA evaluates these proposals, considering how the proposed measure protects damaged portions of a facility and whether the measure is reasonable based on the extent of the damage, and determines eligibility on a case-by-case basis. FEMA’s Federal Insurance and Mitigation Administration (FIMA) deploys a cadre of mitigation staff to help coordinate and implement hazard mitigation activities during disaster recovery, including PA hazard mitigation. A primary task of these staff is to identify and assess opportunities to incorporate hazard mitigation into PA projects. Generally, if an applicant seeks to incorporate hazard mitigation measures into a PA project, FIMA’s hazard mitigation staff develop a hazard mitigation proposal. We, the DHS OIG, and others have reported past challenges with FEMA’s management of the PA program related to workforce management, information sharing, and hazard mitigation. For example, we reported in 2008 that the PA program had a shortage of experienced and knowledgeable staff, relied on temporary rotating staff, and provided limited training to their workforce, which impaired PA program delivery and delayed recovery efforts after Hurricanes Katrina and Rita. We found that staff turnover, coupled with information sharing challenges, delayed projects when applicants had to provide the same information each time FEMA assigned new staff and that poorly trained staff provided incomplete and inaccurate information during their initial meetings with applicants or made inaccurate eligibility determinations, which also caused processing delays. We recommended that FEMA strengthen continuity among staff involved in administering the PA program by developing protocols to improve information and document sharing among FEMA staff. In response, in 2013 FEMA instituted a PA Consistency Initiative, which included hiring new managers for FEMA regional offices, stakeholder training on PA program administration, and using a newly developed internal website to allow staff to post and share information to address continuity and knowledge sharing concerns during disaster operations. FEMA also developed the Public Assistance Program Delivery Transition Standard Operating Procedure to facilitate the transfer of responsibility for PA program activities during cases of staff turnover during recovery operations. Despite FEMA’s efforts to implement our recommendations, the DHS-OIG, in 2016, found continuing challenges after Hurricane Sandy with workforce levels, skills, and performance of reservists, who make up the majority of the PA workforce. Regarding information sharing, in 2008, we also identified difficulties sharing documents among federal, state, and local participants in the PA process and difficulties tracking the status of projects. We recommended that FEMA improve information sharing within the PA process by identifying and disseminating practices that facilitate more effective communication among federal, state, and local entities. In response, FEMA proceeded with the implementation of a grant tracking and management system, called EMMIE, which was used previously in 2007. However, in subsequent years we found weaknesses in how FEMA developed the system and the DHS-OIG found that information sharing problems similar to the ones identified in our 2008 report persisted. Regarding hazard mitigation, we reported in 2015 that state and local officials experienced challenges in using PA hazard mitigation during the Hurricane Sandy recovery efforts because PA officials did not consistently prioritize hazard mitigation, and in some cases discouraged mitigation projects during the PA grant application process, among other challenges. We recommended that FEMA assess the challenges state and local officials reported, including the extent to which they can be addressed, and implement corrective actions, as needed. In response to our recommendation, FEMA developed a corrective action plan that included actions and milestones for reviewing, updating, and implementing PA hazard mitigation policy. FEMA also identified the PA new delivery model as a solution for some of the challenges state and local officials reported. Previously, the OIG also reported that PA program officials did not consistently identify eligible PA hazard mitigation projects, and that PA officials did not prioritize the identification of PA hazard mitigation opportunities at the onset of recovery efforts after the 2005 Gulf Coast hurricanes. See appendix I for a summary of findings and the status of our past recommendations on challenges with workforce management, information sharing, and hazard mitigation related to the PA program since our last review in December 2008. FEMA’s own internal reviews and outreach efforts have also identified similar challenges. For example, at FEMA’s request the Homeland Security Studies and Analysis Institute assessed the effectiveness and efficiency of the PA program in 2011. The institute’s report outlined 3 key findings and 23 recommendations relating to the PA preaward process. For example, the report found that FEMA could enhance training programs to develop a skilled and experienced workforce; utilize technology and employ web-based tools to support centralized processing, transparency, and efficient decision making; and identify and address potential special considerations, such as hazard mitigation proposals, as early as possible in the preaward process to improve consistency. In 2014, PA program officials analyzed the PA grant process and used input from agency staff and officials involved in various aspects of the program to identify potential improvements. The resulting Public Assistance Program Realignment report found that challenges in workforce management, information sharing, and hazard mitigation continued, and included recommendations for improvement. For example, the report concluded that a shortage of qualified staff, high turnover, unclear organizational responsibilities, and inconsistent training were long-standing and continuing challenges that impaired the PA pre-award process. In addition, from January 2015 to April 2015, FEMA conducted extensive outreach with more than 260 stakeholders across FEMA headquarters, all 10 regions, 43 states, and 4 tribal nations to discuss challenges in the PA program and opportunities for improvement. For example, stakeholders identified challenges with ineffective information collection during the preaward process and suggested identifying special considerations, such as hazard mitigation, earlier in the PA process as an idea for improvement. In response, FEMA began redesigning the PA preaward process to operationalize the results of its 2014 report and address areas for improvement identified through its outreach efforts. FEMA awarded a contract for program support to help PA officials implement a redesigned PA program in 2015. This included a new process to develop and review grant applications, and obligate PA funds to states affected by disasters; new positions, such as a new program delivery manager who is the single point of contact throughout the grant application process; a new Consolidated Resource Center (CRC) to support field operations by supplementing project development, validation, and review of proposed PA project applications; and a new information system to maintain and share PA grant application documents. As part of the new process, PA program officials identified the need to ensure that staff emphasize special considerations, such as hazard mitigation, earlier in the process. Taken together, these efforts represent FEMA’s “new delivery model” for awarding PA program grants. Enhancements in the PA program under the new delivery model are presented in figure 4. Regarding the new delivery model process, FEMA introduced several changes to enhance outreach to applicants during the “exploratory call”— the first contact between FEMA and local officials—and during the first in- person meeting, called the “recovery scoping meeting.” FEMA also revised decision points during the process, when program officials can request more information from applicants, and applicants can review and approve the completion of project development steps. FEMA also incorporated special considerations, such as hazard mitigation, earlier in the new process during the exploratory calls and recovery scoping meetings. The changes and enhancements to the PA grant award process in the new delivery model are presented in figure 5. The new process divides proposed PA projects based on complexity and type of work into three categories—100 percent completed, standard, and specialized—that PA staff manage to expedite review or assign skilled staff to technical projects as needed. If the applicant has already completed work following a disaster, such as debris removal, it is considered “100 percent completed” and JFO staff collect the necessary documents and provide the information to the CRC staff who complete the development of project applications, validate the information, and complete all necessary reviews. Projects that require repairs and further assistance from PA program staff at the JFO include “standard” and “specialized” projects, which include a site inspection to document damages, before the JFO staff provide the information to the CRC. Further, PA program officials assign PA staff based on their skills and experience to standard projects, which are less technically complex to develop, and specialized projects, which are more technically complex and costly. We discuss the new workforce positions FEMA developed for JFOs and CRCs, the new information system FEMA developed to maintain and share PA grant documents with applicants, and FEMA’s efforts to incorporate hazard mitigation into PA projects later in this report. Since 2015, FEMA has invested almost $9 million to redesign the PA program through the reengineering and implementation of the new delivery model, including about $4.7 million for contract support for implementation, and $4 million for acquisition of the new information system. FEMA tested the new delivery model in a series of selected disasters, using a continuous process improvement approach to assess and improve the process, workforce changes, and information system requirements, prior to implementing the new model for all future disasters. For example, FEMA first tested the new process in Iowa in July 2015 and, in February 2016, PA program officials expanded their test to include all of the new staff positions. In October 2016, PA program officials added the new information system to achieve a comprehensive implementation of all of the elements of the new delivery model for the agency’s response to Hurricane Matthew in Georgia, two additional disasters in Georgia in January 2017, and in Missouri, North Dakota, Wyoming, Vermont, and two disasters in New Hampshire from June through August 2017. The timeline for PA’s implementation of the new delivery model is shown in figure 6. According to program officials, FEMA planned to implement the new model for all future disasters beginning in January 2018. However, historic disaster activity during the 2017 hurricane season accelerated full implementation. As a result, on September 12, 2017, FEMA officials announced that, unless officials determined it would be infeasible in an individual disaster, the program would use the new delivery model in all future disasters. According to FEMA’s 2014 PA Program Realignment report and other program documents, PA officials designed the new delivery model to respond to persistent workforce management challenges related to identifying the required number of staff and needed skills and training, among other things, to improve the efficiency and effectiveness of the PA preaward process. To address these challenges, PA program officials centralized much of the responsibility for processing PA projects in the CRCs, created additional new positions with specialized roles and responsibilities in JFOs, and established training and mentoring programs to help build the new staffs’ skills. In 2016, PA program officials centralized some of the project activities that otherwise were being carried out at individual JFOs at FEMA’s first new CRC in Denton, Texas. Officials did so by establishing 18 new positions, many of which directly correlated with positions that FEMA deployed to individual JFOs in the legacy PA delivery model. According to PA officials, centralizing positions will improve standardization in project processing, and result in a higher quality work product. As part of the new delivery model, PA program officials created a new hazard mitigation liaison position for PA program staff at the CRC that did not previously exist at individual JFOs. The other new positions that PA program officials either created or centralized at the CRC included two specialized positions responsible for costing and validating PA projects. Previously, the PA project specialist deployed to the JFO would complete these tasks and others; however, the consistency of project development varied across the regions and disasters. In contrast, CRC staff are full-time employees who receive training to specialize in completing standardized project development steps for PA projects from multiple disasters on an ongoing basis. Program officials anticipate that centralizing new specialized staff at the CRCs will also reduce PA administrative costs and staffing levels at the JFOs. For example, staff at the CRCs, such as the new hazard mitigation liaisons and insurance and costing specialists, could support project development for multiple disasters and regions simultaneously, whereas PA previously needed to deploy staff to each JFO to fulfill these roles. In addition, once JFOs operating under the new model send projects to the CRCs for processing and review, FEMA can more rapidly close its JFOs, reducing associated administrative costs. For example, following Hurricane Matthew, FEMA credited the new delivery model, in part, with its ability to close the JFO in Georgia sooner than several other JFOs in neighboring states not involved in the implementation of the new delivery model. PA program officials created new positions with more specialized roles and responsibilities to help PA staff at JFOs provide more consistency in the project development process and guidance to applicants. Program officials split the broad responsibilities previously managed at the JFOs by PA crew leaders and project specialists, into two new, specialized positions—the program delivery manager and site inspector. The program delivery manager serves as the applicant’s single point-of-contact throughout the preaward process, manages communication with the applicant, and oversees document collection. All three PA grant applicants we spoke to following Hurricane Matthew in Georgia greatly appreciated the knowledge and assistance provided by their program delivery managers. Site inspectors are responsible for conducting the site inspection to document all disaster-related damages; determining the applicant’s plans for recovery, coordinating with other specialists, and verifying the information collected with the applicant. Officials expect deployed staff at JFOs can complete the fieldwork faster and provide greater continuity of service to applicants. Further, program officials believe that specializing roles will enable them to provide more targeted training, and improve employee satisfaction. Site inspection, hazard mitigation, and environmental and historic preservation specialists, along with a new Public Assistance program mentor, conduct a site inspection with the applicant to document damages to a historic cemetery in Savannah, Georgia, following Hurricane Matthew in 2016. PA program officials designed new training and mentoring programs for the new positions at the CRCs and JFOs and used a continuous feedback process to update and improve the training, position guides, and task books throughout the implementation of the new delivery model, according to PA officials. According to a June 2017 update of the PA Cadre Training Plan, training for the new model has five major focuses: required training and skills for position qualification; on-site refresher training; mentor training; regional-based state, local, tribal, and territorial training; and training on the new information system. Specifically, officials developed six new training courses, and identified which are required for each position under the new delivery model. For example, a program delivery manager at the JFO is required to complete both the program delivery manager and site inspector specialist courses. As of June 2017, PA program officials had provided at least one new model training course to 93 percent of their cadre (including program delivery manager training to 366 individuals and site inspector training to 1,172 individuals) and planned to provide 28 additional courses through September 2017 to the PA cadre. According to regional and CRC officials, the training courses and mentoring from experienced staff helped maximize new staff’s capabilities in the new process. Throughout the third implementation of the new delivery model, JFO and CRC staff, as well as regional PA staff, stakeholders, and applicants, identified staff skills and training as a key area that needed more attention for full implementation of the new delivery model. Our work and FEMA’s after-action reports from the third test in Georgia identified problems with site inspector skills, which affected the timeliness and accuracy of projects. Specialists and managers at the CRC noted that poorly trained site inspectors did not consistently provide the necessary information from the field, which resulted in delays for the CRC staff to process projects, and after-action reports also identified challenges with site inspector skills. According to a PA applicant in Georgia, the inconsistency of skills and experience of their site inspector resulted in the need to conduct a “do-over” site inspection on one of the applicant’s projects, causing delays. PA staff and state officials attribute much of the site inspectors’ skill gaps to their lack of training and experience in the program. According to PA Region officials, providing timely training will be a resource-intensive challenge for implementing the new delivery model for all future disasters. For example, it can be difficult to train reservists before FEMA deploys them to disasters, and many of the program’s experienced reservists have retired or resigned, resulting in few mentors for the program and a high need to provide training to inexperienced and newly hired staff. PA officials and stakeholders also emphasized the need for FEMA to provide additional training for state and local officials to build capacity and support the goals of the new delivery model. For example, according to JFO officials at the third implementation, the new delivery model increases responsibilities for applicants, who will require more applicant training than FEMA currently provides. According to state officials, applicant capabilities vary, and FEMA should provide training to state and local officials on the new delivery model and the information system before a disaster. Skill gaps among applicants could result in inconsistent implementation of the new process, according to PA staff and stakeholders, and PA staff said that training was important to prevent applicants from reverting back to the legacy PA grant application process. To support full implementation of the new delivery model for all disasters, PA program officials have updated training courses for PA staff and applicants, and planned additional training to address these challenges and other lessons learned through the test implementation. For example, PA officials told us they updated the site inspector training program in May 2017 and scheduled a new site inspector training session in August 2017 to include more hands-on training to help address the skill gaps identified for site inspectors. PA officials created a new training course for FEMA’s regional offices, in part to enable regional PA staff to provide new delivery model training to state and local officials. PA officials also planned to develop a self-paced, online course for state and local officials by the end of 2017. PA officials have not fully assessed the workforce needed for JFO field operations, CRC staff, or FIMA’s hazard mitigation staff to support implementation of the new delivery model for all future disasters. PA program officials developed an initial assessment of the total number of staff needed in the field and the CRCs in 2016 to estimate cost savings associated with consolidating and specializing positions at the CRCs and deploying fewer staff to JFOs. However, the assessment did not identify the number of staff required to fill specific positions, including program delivery managers and hazard mitigation specialists, needed to support the new delivery model for full implementation. In reviewing the test implementations of the new delivery model, we found that inadequate staffing levels at the JFOs and CRCs, and with FIMA’s hazard mitigation staff, affected staffs’ ability to achieve the goals of the new delivery model. Staff levels at the JFO. We identified challenges with having the right number of program delivery managers and site inspection specialists to achieve program goals for customer satisfaction, efficiency, and quality in test implementations of the new delivery model. For example, in the second test implementation of the new delivery model in Oregon in 2016, PA did not deploy enough program delivery managers to the disaster, which resulted in unmanageable caseloads for program delivery managers, according to state and PA officials. PA program officials assigned program delivery managers an average caseload of 12 PA applicants, which was more than they could effectively manage, according to PA staff, and program officials aim for a caseload of 8 to 10 applicants. According to state officials, local officials reported they did not always receive the support they needed from program delivery managers who managed caseloads consisting of dozens of projects at multiple sites for each applicant during the Oregon implementation. As a result of overwhelmed program delivery managers, local officials faced challenges understanding their responsibilities, such as recognizing when they needed to provide information for the project development to proceed, according to state officials. PA staff involved with the third test implementation in Georgia in 2016 and 2017 said there were not enough site inspectors or program delivery managers to fully manage the workload at the JFO. Because of the specialization of roles, projects could not move forward when there were not enough staff to execute the next step in the process. For example, PA staff at the JFO said program delivery managers completed recovery scoping meetings rapidly, but faced a bottleneck in scheduling site inspections because there were more applicants awaiting site inspections than could be fulfilled by the number of site inspection specialists available. Staff levels at the CRC. Staff at the CRC reported challenges with staffing levels during the Oregon and Georgia test implementations, and expressed concerns about when PA officials will staff the CRCs to support full implementation of the new model for all disasters. During the Oregon test implementation, a CRC specialist said there were not enough technical specialists to manage the workload and, as a result, PA program officials had to redeploy site inspectors from their JFO field operations to the CRC to complete costing estimates. During the third test in Georgia, quality assurance specialists said that their workload resulted in added stress trying to complete the work in time while adhering to quality standards. According to CRC specialists in Denton, Texas, PA officials had not determined required staff levels for full implementation, but agreed that workload was too high and program officials needed to determine the appropriate staff levels for each CRC to support full implementation. PA officials were still evaluating CRC processing times and workload management from the Oregon and Georgia test implementations to determine staffing needs, according to PA officials. Further, PA program officials plan to establish a second CRC in Winchester, Virginia, before the end of 2017, but have not determined the number of additional permanent full-time staff needed to support the CRCs for full implementation of the new delivery model. Staff levels for the hazard mitigation specialists. PA officials have not identified the number of hazard mitigation specialists in FIMA’s hazard mitigation cadre needed for full implementation of the new delivery model. According to JFO staff, current hazard mitigation staff levels are insufficient to provide the desired in-person participation of hazard mitigation staff on all recovery scoping meetings to share information on hazard mitigation with applicants and help them identify potential mitigation opportunities. A PA program official said officials missed opportunities to pursue hazard mitigation during the test implementation after Hurricane Matthew in Georgia due to lack of hazard mitigation specialists. In addition, for the test implementation in Oregon, there were not enough hazard mitigation specialists to cover all site inspections and implement their new delivery model responsibilities, according to FEMA’s after-action reports. The absence of hazard mitigation specialists in the early stages of PA project development may cause delays in officials’ identifying hazard mitigation opportunities, according to a FIMA official. PA program officials said they did not work with FIMA to determine the appropriate levels of hazard mitigation staff under the new delivery model because they were refining the new process, but as of June 2017 were working with FIMA to do so. One of the key implementation activities in our Business Process Reengineering Assessment Guide includes addressing workforce management issues. Specifically, this includes identifying how many and which employees will be affected by the position changes and retraining. Further, our prior work has found that high-performing organizations identify their current and future workforce needs—including the appropriate number and deployment of staff across the organization— and address workforce gaps, to improve the contribution of critical skills and competencies needed for mission success. According to a PA program official, their initial workforce assessment was not comprehensive because they were still collecting data required to make informed decisions. PA officials agreed that updating their workforce assessments prior to full implementation could be helpful, and acknowledged that program officials needed to be more proactive applying the lessons learned as they pivot from testing to full implementation of the new delivery model in 2018. FEMA also conducts a standard agency wide workforce structure review every 2 to 3 years, which helps officials determine the appropriate disaster workforce levels. As of June 2017, PA officials were working with other offices within FEMA to expedite the agency-wide assessment of the PA and FIMA hazard mitigation cadres, but did not know when they would complete the assessment. PA officials also acknowledged that they faced an aggressive schedule to complete various planned activities for workforce management, training, and other efforts, in support of full implementation, and that they may not be able to complete all efforts as thoroughly as they would like in order to expedite the transition of the PA program to the new delivery model. The gaps in PA workforce assessment in the JFOs, CRCs, and for FIMA’s hazard mitigation cadre present a risk that PA program managers will not have a sufficient workforce to support the goals of the new delivery model. In addition, the timing and implementation of the hiring and training activities for new PA program staff could take multiple months, and program officials will need to know what staff levels are necessary for full implementation of the new delivery model to inform resource decisions for the program in coordination with other agency offices. According to PA program officials, workforce assessment efforts have been delayed as a result of disaster response and recovery efforts related to Hurricanes Harvey, Irma, and Maria. Completing a workforce assessment will help program officials identify gaps in their workforce and skills, which could help PA program officials minimize the effects of long- standing workforce staffing and training challenges on the PA program delivery and inform full implementation for all disasters. costs. For example, EMMIE does not collect information on all of the preaward activities that are part of the PA grant application process. As a result, PA program officials said they, and applicants, must use ad hoc reports and personal tracking documents to manage and monitor the progress of grant applications. PA officials added that EMMIE is not user- friendly and applicants often struggle to access the system. In response to these ongoing challenges, PA program officials developed FAC-Trax— a separate information system from EMMIE—with new capabilities designed to improve transparency, efficiency, and management of the PA program. Specifically, FAC-Trax allows FEMA staff (PA Grants Manager) and applicants (PA Grants Portal), to review, manage, and track current PA project status and documentation. For example, applicants can use FAC- Trax to submit requests for public assistance, upload required project documentation, approve grant application items, and send and receive notifications on grant progress and activities. In addition, the FAC-Trax system includes standardized forms, as well as required fields and tasks that PA program staff and applicants must complete before moving on to the next steps in the PA preaward process. According to PA officials, these capabilities increase transparency, encourage greater applicant involvement, and enhance collaboration and communication between FEMA and grant applicants, to improve efficiency in processing and awarding grant applications and enhance the quality of project development. Further, PA officials said that FAC-Trax could reduce challenges associated with staff turnover during the project development process because the system stores and maintains applicant information and project documentation, making it easier for transitioning staff to assist an applicant. They also said they use FAC-Trax to gather and analyze data that supports management of the PA process, including measuring the timeliness of the grant application process. For example, during the test implementation of the new delivery model in Georgia following Hurricane Matthew, officials were able to document that, on average, program delivery managers took 5 days to conduct the exploratory call and 14 days to hold the recovery scoping meeting with applicants, and CRC officials took 33 days to develop and review grant proposals. Managers use this data to assess staffing needs and identify bottlenecks in the PA process, according to PA officials. FAC-Trax is critical to the new PA delivery model and will be a primary means of sharing grant application documents, tracking ongoing PA projects, and ensuring that FEMA staff and applicants follow PA grant policies and procedures. Given the importance of developing and testing this new information sharing system, we evaluated its development against four key IT management controls—(1) project planning; (2) risk management; (3) requirements development; and (4) systems testing and integration. When implemented effectively, these controls provide assurance that IT systems will be delivered within cost and schedule and meet the capabilities needed by its users. We found that FEMA’s development of FAC-Trax fully satisfied best practices for project planning and risk management, but additional steps are needed to fully satisfy the areas of requirements development and systems testing and integration, as discussed below. See appendix II for the full assessment of each IT management control. PA program officials fully satisfied all five practices in the project planning control area, according to our assessment. Key project planning practices are (1) establishing and maintaining the program’s acquisition strategy, (2) developing and maintaining the overall project plan and obtaining commitment from relevant stakeholders, (3) developing and maintaining the program’s cost estimate, (4) establishing and maintaining the program’s schedule estimate, and (5) identifying the necessary knowledge and skills needed to carry out the program. To address the first and second practices, program officials established detailed plans that describe the acquisition strategy and objectives, the program’s scope, and its framework for using an Agile software development approach, among other key actions. Agile is a method of software development that utilizes an iterative process and constantly improves software based on user needs and feedback. Program officials also developed a plan detailing the program’s approach to deploy and maintain FAC-Trax and established stakeholder groups and an integrated product team to support and oversee the development of FAC-Trax. To address the third and fourth practices, they developed and maintained a master schedule of all implementation tasks and milestones through project completion, and developed a life-cycle cost estimate of over $19 million. Additionally, FAC-Trax’s acquisition performance baseline describes the system’s minimum acceptable and desired baselines for performance, schedule, and cost. Lastly, in regards to the fifth practice, program officials identified the knowledge and skills needed to carry out the program in the FAC-Trax Request for Proposal and FAC-Trax Capability Development Plan. PA program officials fully satisfied all four practices in the risk management control area, according to our assessment. Key risk management practices are (1) identifying risks, threats, and vulnerabilities that could negatively affect work efforts, (2) evaluating and categorizing each identified risk using defined risk categories and parameters, (3) developing risk mitigation plans for selected risks, and (4) monitoring the status of each risk periodically and implementing the risk mitigation plan as appropriate. To address the first and second practices, program officials identified key risks that could negatively affect FAC-Trax in a “risk register”—an online site used to track risks, issues, and mitigating actions. As of May 2017, officials had identified 13 risks in the risk register—four open and nine closed—and evaluated and categorized the identified risks based on the probability of occurrence and scope, schedule, and cost impacts. For example, program officials reported that two of its open risks have a “medium” risk rating—meaning the risk has the potential to slightly affect project cost, schedule, or performance. To address the third and fourth practices, program officials developed and documented risk mitigation plans for all identified risks. For example, program officials planned to mitigate the risk of limited engagement of subject matter experts by identifying and engaging with appropriate experts through workshops, and monitoring the capability development process to identify any issues that may cause project delays. In addition, PA program officials documented the responsible officials, reevaluation date, and risk status, among other things, for each risk in the register, and reviewed and updated risks during weekly and monthly program reviews with stakeholders throughout FEMA. PA program officials fully satisfied four out of five practices in the requirements development control area, according to our assessment. Key requirements development practices are (1) eliciting stakeholder needs, expectations, and constraints, and transforming them into prioritized customer requirements; (2) developing and reviewing operational concepts and scenarios to refine and discover requirements; (3) analyzing requirements to ensure that they are complete, feasible, and verifiable; (4) analyzing requirements to balance stakeholder needs and constraints; and (5) testing and validating the system as it is being developed. To address the first and second practices, program officials developed a requirements management plan outlining how officials capture, assess, and plan for FAC-Trax enhancements, and established a change control process to review, prioritize, and verify user requests for changes to the system and feedback. As of May 2017, the PA program office received 734 change requests related to FAC-Trax, of which program officials completed 420 changes and planned to address an additional 277 entries. Program officials also developed a functional requirements document outlining the high-level requirements for FAC- Trax and detailed operational concepts and scenarios for each phase of the preaward process in the system’s concept of operations. To address the fourth practice, program officials created a standard template to analyze and document the user needs and acceptance criteria for planned system capabilities in March 2017. In addition, PA program officials identified risks and dependencies for recommended changes to FAC-Trax, and balanced the cost and priority of system enhancements as part of the change control process. Lastly, regarding the fifth practice, program officials tested and evaluated FAC-Trax during development, which included validating system enhancements through user acceptance testing. However, program officials did not fully address the third practice— analyzing requirements to ensure they are complete, feasible, and verifiable—because they did not ensure detailed user requirements were necessary and sufficient by tracking them back to higher-level requirements. For example, although program officials reviewed change requests for completeness and followed up with users to verify requirements, officials did not track system enhancements, made in response to detailed user requirements (e.g., allowing users to search PA projects by project number), back to the high-level requirements (e.g., storing data and information provided by the applicant) identified in the FAC-Trax functional requirements document and performance work statement. Officials did not track system enhancements back to high-level requirements because they did not have a complete understanding of basic user needs and system requirements at the beginning of the FAC- Trax effort, according to the PA program manager. A PA official also said the change control process was a way to identify the basic capabilities FAC-Trax needed to have and that tracking enhancements back to high- level requirements could have made the change control process more difficult to manage, and reduced user participation if, for example, users needed to understand how their change requests related to high-level requirements. However, program officials could have tracked enhancements back to high-level requirements themselves using the change control process without putting any additional burden on users. Despite not having a complete understanding of user needs and system requirements at the beginning of the FAC-Trax effort, analyzing whether users’ change requests satisfy higher-level requirements identified in key design and planning documents would have provided officials with a basis for more detailed and precise requirements throughout project development and helped them better manage the project, according to IT management controls. Further, according to the PMBOK® Guide, tracking or measuring system capabilities against approved requirements is a key process for managing a project’s scope, measuring project completion, and ensuring the project meets user needs and expectations. Program officials acknowledged the importance of tracking system enhancements back to documented system requirements. Ensuring that FAC-Trax meets user needs and expectations is especially important because the information system is key to the success of the new delivery model, according to PA officials. By analyzing progress made on documented, high-level requirements, a step that reflects a key IT management control for requirements development, the PA program will have greater assurance that FAC-Trax will provide functionality that meets user needs and expectations. PA program officials did not fully satisfy either of the two practices in the systems testing and integration control area, according to our assessment. Key systems testing and integration practices are (1) developing test plans and test cases, which include a description of the overall approach for system testing, the set of tasks necessary to prepare for and perform testing, the roles and responsibilities for individuals or groups responsible for testing, and criteria to determine whether the system has passed or failed testing; and (2) developing a systems integration plan to identify all systems to be integrated, describe how integration problems are to be documented and resolved, define roles and responsibilities of all relevant participants, and establish a sequence and schedule for every integration step. In regards to the first practice, PA program officials and the FAC-Trax contractor established a test plan that identifies the method and strategy to perform testing, including the necessary tasks, such as responding to user feedback and testing errors, and incorporating necessary resolutions into future work, testing parameters, and the roles and responsibilities of the individuals responsible for testing. However, program officials have not developed system testing criteria to evaluate FAC-Trax, which would align with the practice described above of using criteria to determine whether the system has passed or failed testing. A key feature of Agile software development is the “definition of done”—a set of clear, comprehensive, and objective criteria, that the government should use to evaluate software after each iteration of development. PA program officials said they did not establish a definition of done because officials initially managing the FAC-Trax effort lacked familiarity with system development in the Agile environment. Officials acknowledged the importance of establishing a definition of done and said they are planning to develop one, but have not identified how or when to incorporate it into the development process. According to the TechFAR—the government’s handbook for procuring digital services using Agile processes—the government and vendor should establish this definition after contract award at the beginning of each cycle of software development. By establishing criteria, such as a definition of done, to evaluate the system—a step that reflects a key IT management control for system testing and is an effective practice for applying Agile to software development—the PA program will have greater assurance that FAC- Trax is usable and responsive to specified requirements. In regards to the second practice, PA program officials developed a systems integration plan in June 2017 that identified the potential for integration of FAC-Trax with four FEMA systems, including EMMIE. In addition, program officials included a description of how staff should document integration problems and the resolution of problems in FAC- Trax development and test plans. However, the systems integration plan does not define roles and responsibilities of all participants for system integration activities or establish a sequence and schedule for every integration step for the four FEMA systems. PA officials said that system integration planning for FAC-Trax is in the early stages, but acknowledged the importance of these elements of system integration planning. Officials plan to define roles and responsibilities of all participants for system integration activities and develop the sequence and schedule for every integration step as they add new systems to the FAC-Trax development plan and obtain funding needed for their integration. Nonetheless, FEMA has used FAC-Trax for selected PA disasters since October 2016 and plans to use FAC-Trax for all future disasters. According to IT management controls, agencies should establish the systems integration plan early in the project and revise it to reflect evolving and emerging user needs. By ensuring that the FAC- Trax systems integration plan defines the roles and responsibilities of relevant participants for all integration relationships and establishes a sequence and schedule for every integration step, the PA program will have greater assurance that FAC-Trax functions properly with other systems and meets user needs. FEMA’s new delivery model enhances participation of hazard mitigation staff with the goal of identifying opportunities for mitigation earlier in the PA preaward process, according to PA officials. Two key changes related to hazard mitigation under the new model include (1) an emphasis on engaging with hazard mitigation specialists at the JFO earlier in the PA process and involving them in specific PA preaward activities and (2) the establishment of the PA program’s hazard mitigation liaison at the CRC. For example, position guides direct program delivery managers to coordinate with FIMA’s hazard mitigation specialists prior to recovery scoping meetings, and site inspectors to coordinate with hazard mitigation specialists prior to site inspections to discuss a PA grant applicant’s damages and any potential mitigation opportunities. PA program officials also developed guidance for conducting the exploratory call and the recovery scoping meeting with applicants, which include questions for PA staff to ask on the applicant’s interest in or plans for incorporating hazard mitigation into potential projects. In addition, a new hazard mitigation liaison at the CRC is responsible for reviewing PA projects for hazard mitigation opportunities and serving as a mitigation subject matter expert for the PA program. According to data provided by FEMA, PA grant applicants incorporated hazard mitigation into approximately 18 percent of permanent work projects for all disasters nationwide from 2012 to 2015. During test implementation of the new delivery model, state, PA, and FIMA officials all reported an increase in the number of hazard mitigation activities on PA permanent work projects. For example, state officials who participated in the second new model test in Oregon said that effective communication and coordination between PA and hazard mitigation staff resulted in applicants incorporating hazard mitigation into over 60 percent of permanent work projects. Furthermore, PA officials reported an increase in hazard mitigation during the third test implementation of the new model in Georgia following Hurricane Matthew, where approximately 16 percent of permanent work projects included mitigation, as of June 2017. This represents an increase compared to the PA program’s estimate for the proportion of projects that incorporate hazard mitigation among previous PA hurricane disasters in Georgia, which was about 3 percent, according to PA officials. While PA officials are trying to increase hazard mitigation through the new delivery model, not all disasters present the same number of opportunities to incorporate hazard mitigation. First, the PA program only incorporates hazard mitigation measures for permanent work projects, such as repairs to roads, bridges, and buildings. For example, as of June 2017, approximately 60 percent of the projects FEMA funded in Georgia for the third test implementation after Hurricane Matthew were for emergency work, which is not eligible for hazard mitigation measures. Second, the PA program only funds mitigation measures that officials determine to be cost-effective. In addition, we have previously reported on other factors that affect whether applicants incorporate hazard mitigation into PA projects, such as their capacity to manage and ability to fund hazard mitigation projects. National Planning for Hazard Mitigation In our 2015 report on disaster resilience following Hurricane Sandy, we noted that disaster affected areas have different threats and vulnerabilities, and local stakeholders make the ultimate determination whether or not to incorporate hazard mitigation into a project. Further, without a strategic approach to making disaster resilience investments, the federal government and its nonfederal partners may be unable to fully capitalize on opportunities for mitigation on the greatest known threats and hazards. We recommended that the Mitigation Framework Leadership Group develop an investment strategy to help ensure that federal funds expended to enhance disaster resilience achieve the goal of reducing the nation’s fiscal exposure because of climate change and the rise in the number of federal major disaster declarations as effectively and efficiently as possible. In response, the Federal Emergency Management Agency (FEMA) plans to issue a final National Mitigation Investment Strategy in 2018. The goals of this strategy include increasing the effectiveness of investments in reducing disaster losses and increasing resilience, and improving coordination of disaster risk management among federal, state, local, tribal, territorial, and private entities. Although the new model establishes hazard mitigation activities for PA and FIMA staff in the preaward process, it does not standardize and prioritize hazard mitigation planning at JFOs in the way FEMA has done with prior PA program policy. Specifically, FEMA’s 2007 PA program policy standardized planning for hazard mitigation across PA recovery efforts by stating that agency and state officials should issue a memorandum of understanding (MOU) early in the disaster, outlining how PA hazard mitigation will be addressed for the disaster, including what mitigation measures will be emphasized, and identifying applicable codes and standards, and any potential integration with other mitigation grant programs. However, PA program officials did not include guidance that standardizes planning for hazard mitigation, such as encouraging the use of an MOU, in FEMA’s 2010 PA program policy, the most recent update to the Public Assistance Program and Policy Guide in April 2017, or the New Delivery Model Operations Manual. As a result, FIMA officials said FEMA and state officials do not consistently issue MOUs that outline how FEMA and the state plan to promote PA hazard mitigation during the recovery effort, explaining that the use of the MOU is based on the preferences and priorities of the FEMA officials involved. When not issuing an MOU, FIMA hazard mitigation staff and PA officials at the JFO meet to determine the extent which hazard mitigation staff interact directly with applicants regarding PA hazard mitigation during the recovery process, according to a FIMA official. Having a consistent approach to planning for and prioritizing hazard mitigation across all disasters is important for FEMA, given that FEMA experienced challenges consistently prioritizing and integrating hazard mitigation across PA recovery efforts, according to GAO and others. For example, in our 2015 report on resilience in the Hurricane Sandy recovery, we found that state and local officials experienced challenges maximizing disaster resilience in the recovery effort because PA officials did not consistently prioritize hazard mitigation during project development. According to FEMA’s National Mitigation Framework, planning is vital for mitigation efforts during disaster recovery, and federal, state, and local officials should establish procedures that emphasize a coordinated delivery of mitigation activities and capitalize on opportunities to reduce future disaster losses. Similarly, the Recovery Federal Interagency Operational Plan, which supports FEMA’s National Disaster Recovery Framework, identifies planning as a key task for identifying mitigation opportunities and integrating risk reduction considerations into decisions and investments during the recovery process. FIMA officials agreed that including the development of a formal plan, such as the historical 2007 PA program policy regarding the use of MOUs, for PA hazard mitigation in operations guidance would help program officials plan for and prioritize hazard mitigation. They noted that FIMA’s hazard mitigation field operations guide includes procedures for implementing proposed MOUs to achieve mitigation goals. PA program officials said that, in light of changes to the PA process under the new model and subsequent updates to program policies, the MOU policy from the 2007 PA program policy was outdated. But officials agreed that planning for and prioritizing hazard mitigation at the operational level is important and said they were examining additional ways to incorporate these activities early in the PA process. As FEMA continues to implement the new model, establishing procedures to standardize hazard mitigation planning for each disaster, as it did through prior policy, could improve the prioritization of hazard mitigation in PA recovery efforts and increase the effectiveness of mitigation for reducing disaster losses and increasing resilience. PA program officials developed performance objectives and measures for hazard mitigation in the new delivery model, but could add measures to better align performance assessment for the PA program with FEMA’s broader strategic goals for hazard mitigation. In its strategic plan for 2014–2018, FEMA established an agency-wide goal to increase the percentage of FEMA-funded disaster projects, such as those under the PA program, that provide mitigation above local, state, and federal building code requirements by 5 percentage points by the end of fiscal year 2018. For example, local building codes may require measures for new construction to mitigate against future damage. To align with FEMA’s strategic goal, PA officials would also need to measure the number of PA projects that included mitigation measures that bring any repaired infrastructure to a level above applicable building codes. However, under the new model, FEMA officials developed performance objectives (and associated measures) to increase the number of projects that include hazard mitigation by 5 percent, and increase the total dollars spent on hazard mitigation by 2 percent. While these measures could help to incentivize mitigation, they are not tied to building codes and do not include specific information that FEMA could use to continually assess the PA program’s contributions to meeting the agency’s strategic goal. According to Standards for Internal Control in the Federal Government, agency management should design control activities, such as establishing and reviewing performance measures, to achieve the agency’s objectives. In addition, our work on leading public sector organizations has found that such organizations assess the extent to which their programs and activities contribute to meeting their mission and desired outcomes, and strive to establish clear hierarchies of performance goals and measures. A clear connection between performance measures and program offices helps to both reinforce accountability and ensure that, in their day-to-day activities, managers keep in mind the outcomes their organization is striving to achieve. FEMA’s ability to evaluate and report on PA hazard mitigation data is constrained, but officials are addressing this challenge through the development of data reporting and analytics capabilities for the PA program’s new information system, according to PA officials. PA program officials developed measures they could use to evaluate the new model during test implementation and compare new model performance to the legacy PA process, and agreed that aligning PA program hazard mitigation goals with FEMA’s agency-wide strategic goals would be helpful. As FEMA continues to develop and implement the new model, developing performance measures and objectives to better inform and support the agency’s broader strategic goals could help to ensure that FEMA capitalizes on hazard mitigation opportunities in PA recovery efforts. FEMA’s Public Assistance grant program is a complicated, multi-billion dollar program that is critical to helping state and local communities rebuild and recover after a major disaster. In recent years, FEMA has undertaken a major reengineering effort to make the PA preaward process simpler and more efficient for applicants and to address challenges encountered during recovery from past disasters. FEMA’s new delivery model represents a significant opportunity to strengthen the PA program and address these past challenges, and growing pains are to be expected when implementing any large reengineering effort. Further, FEMA officials work to implement these changes while supporting response and recovery following disasters, including the catastrophic flooding from Hurricane Harvey in August 2017 and widespread damages from Hurricanes Irma and Maria in September 2017. As such, it is critical that feedback obtained and lessons learned while testing the new model inform decisions and actions as FEMA proceeds with full implementation for all disasters, including the complex recovery efforts in the states and territories affected by Hurricanes Harvey, Irma, and Maria. FEMA has redesigned the PA delivery model to address various challenges related to workforce management, information sharing with state and local grantees, and incorporating hazard mitigation into PA projects. FEMA has developed new workforce processes, training, and positions to address past challenges, but completing a workforce assessment that identifies the number of staff needed will inform workforce management and resource allocation decisions to help FEMA ensure a more successful implementation. This is particularly important as FEMA is using the new model for the long-term recovery from the 2017 hurricanes, and FEMA faces capacity challenges as its workforce is stretched thin. Further, FEMA’s new FAC-Trax information sharing system provides FEMA and state and local applicants and grantees with better capabilities to address past challenges in managing and tracking PA projects. In developing FAC-Trax, FEMA implemented many of the key IT management controls that can help ensure that new IT systems are implemented effectively. However, additional steps are needed to fully satisfy the areas of requirements development and systems testing and integration. Finally, FEMA has taken some actions to better promote hazard mitigation as part of its new PA model. However, more consistent planning for hazard mitigation following a PA disaster and developing specific performance measures and objectives that better align with and support the agency’s broader strategic goals related to hazard mitigation could help to ensure that mitigation is incorporated into recovery efforts, which presents an opportunity to encourage disaster resilience and reduce federal fiscal exposure from recurring catastrophic natural disasters. We are making the following five recommendations to FEMA’s Assistant Administrator for Recovery: The FEMA Assistant Administrator for Recovery should complete a workforce staffing assessment that identifies the appropriate number of staff needed at joint field offices, Consolidated Resource Centers, and in FIMA’s hazard mitigation cadre to implement the new delivery model nationwide. (Recommendation 1) The FEMA Assistant Administrator for Recovery should establish controls for tracking FAC-Trax capabilities to the system’s functional and operational requirements to more fully satisfy requirements development controls and ensure that the new information system provides capabilities that meets users’ needs and expectations. (Recommendation 2) The FEMA Assistant Administrator for Recovery should establish system testing criteria, such as a “definition of done,” to assess FAC- Trax as it is developed; define the roles and responsibilities of all participants; and develop the sequence and schedule for integration of other systems with FAC-Trax to more fully satisfy systems testing and integration controls. (Recommendation 3) The FEMA Assistant Administrator for Recovery, in coordination with the Associate Administrator of the Federal Insurance and Mitigation Administration, should implement procedures to standardize planning for addressing PA hazard mitigation at the joint field offices, for example, by requiring FEMA and state officials to develop a memorandum of understanding outlining how they will prioritize and address hazard mitigation following a disaster as it did through prior policy. (Recommendation 4) The FEMA Assistant Administrator for Recovery, in coordination with the Associate Administrator of the Federal Insurance and Mitigation Administration, should develop performance measures and associated objectives for the new delivery model to better align with FEMA’s strategic goal for hazard mitigation in the recovery process. (Recommendation 5) We provided a draft of this report to DHS and FEMA for review and comment. DHS provided written comments, which are reproduced in appendix III. In its comments, DHS concurred with our recommendations and described actions planned to address them. FEMA also provided technical comments, which we incorporated as appropriate. With regard to our first recommendation, that FEMA complete a workforce staffing assessment that identifies the number of staff needed at joint field offices, Consolidated Resource Centers, and FIMA’s hazard mitigation cadre, DHS stated that PA, in coordination with the Field Operations Directorate and FIMA, will continue to refine and evaluate staffing needs and update the cadre force structures under the new delivery model. DHS estimated that this effort would be completed by June 28, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our second recommendation, that FEMA establish controls for tracking FAC-Trax capabilities to ensure the new information system meets users’ needs, DHS stated that Recovery program managers will update the FAC-Trax Requirements Management Plan and the FAC-Trax Release Plan to ensure the tracking and traceability of FAC-Trax functional and operational requirements. DHS estimated that this effort would be completed by January 31, 2018. This action, if fully implemented, should address the intent of the recommendation. With regard to our third recommendation, that FEMA establish systems testing criteria to assess the development of FAC-Trax; and define the roles and responsibilities, and sequence and schedule for system integration, DHS stated that Recovery program managers will update the FAC-Trax System Integration Plan to include integration with the Deployment Tracking System, Enterprise Data Warehouse, Preliminary Damage Assessment interface, and State Grants Management system interface. DHS estimated that this effort would be completed by June 29, 2018. This action, if fully implemented, should address the intent of the recommendation. With regard to our fourth recommendation, that FEMA implement procedures to standardize planning for addressing PA hazard mitigation at the JFO, DHS stated that PA will update current process documents or develop new documents to better incorporate mitigation into the operational planning phase of the new delivery model. DHS estimated that this effort would be completed by July 31, 2018. This action, if fully implemented, should address the intent of the recommendation. With regard to our fifth recommendation, that PA coordinate with FIMA to develop performance measures and associated objectives for the new delivery model that better align with FEMA’s strategic goals for hazard mitigation in the recovery process, DHS stated that PA will reconvene the PA-Mitigation working group to develop and refine PA related hazard mitigation performance measures. DHS estimated that this effort would be completed by June 29, 2018. This action, if fully implemented, should address the intent of the recommendation. We are sending copies of this report to the Secretary of Homeland Security and interested congressional committees. If you or your staff have any questions about this report, please contact me at (404) 679-1875 or CurrieC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix II: Assessment of Information Technology Management Controls for the FEMA Applicant Case Tracker (FAC-Trax) Table 2 shows details on the Federal Emergency Management Agency (FEMA) Public Assistance (PA) program office’s implementation of key practices across four information technology (IT) management control areas for its new information system, the FEMA Applicant Case Tracker (FAC-Trax). PA developed FAC-Trax as a web-based project tracking and case management system to supplement the Emergency Management Mission Integrated Environment (EMMIE) and help resolve long-standing information sharing challenges. To determine the extent to which the FAC-Trax program office implemented IT management controls, we reviewed documentation from the FAC-Trax program and compared it to key management best practices, including the Software Engineering Institute’s Capability Maturity Model® Integration for Acquisition and Development, the Project Management Institute’s Guide to the Project Management Body of Knowledge (PMBOK® Guide), and the Institute of Electrical and Electronics Engineers’ Standard for Software and System Test Documentation. We assessed the program as having fully implemented a practice if the agency provided evidence that it fully addressed the practice; partially implemented if the agency provided evidence that it addressed some, but not all, portions of the practice; and not implemented if the agency did not provide any evidence that it addressed the practice. Table 2. Public Assistance (PA) Program Office’s Implementation of Key Information Technology Management Controls for FAC-Trax PA program officials developed an acquisition plan for FAC-Trax identifying the capabilities the system is intended to deliver, the acquisition approach, and acquisition objectives. Additionally, program officials developed a capability development plan outlining a strategy for the program to obtain approval to acquire FAC-Trax. Lastly, program officials developed a systems engineering plan describing the program’s scope and its framework for using an Agile development approach, as well as a deployment, support, and maintenance plan for FAC-Trax. PA program officials developed an acquisition program baseline detailing FAC-Trax’s cost parameters and a life-cycle cost estimate for the system. As of May 2017, the life- cycle cost estimate for FAC-Trax through fiscal year (FY) 2023 is approximately $19.3 million. PA program officials updated the life-cycle cost estimate for FYs 2016 and 2017 after price negotiations with the FAC-Trax contractor, and will continue to update the estimate as annual budgets are approved, according to the Integrated Logistic Support Plan. The contracting officer’s representative for FAC-Trax performs a cost review at the end of each month, according to program officials. Furthermore, the contractor’s weekly status report includes information on the number of hours worked and the percent of contract value spent. Program officials also review program costs with Office of Response and Recovery, PA, Office of the Chief Information Officer (OCIO), and other program office stakeholders during a weekly program review. PA program officials developed an acquisition program baseline detailing FAC-Trax’s schedule parameters, as well as an integrated master schedule for the system. The integrated master schedule identifies tasks, major milestones, and task dependencies. The PA program manager reviews and updates the integrated master schedule on a weekly basis. Program officials also review FAC-Trax’s schedule with Office of Response and Recovery, PA, OCIO, and other program office stakeholders during a weekly program review. PA program officials identified the knowledge and skills needed to carry out the program in FAC-Trax contract documentation and the capability development plan. Specifically, program officials included an attachment to the FAC-Trax contract listing the required labor categories and corresponding functional position descriptions. Program officials also described the role, position type, minimum grade, and minimum certification for required personnel resources for the acquisition, development, and implementation of FAC-Trax. PA program officials developed, reviewed, and maintained project planning documents and obtained commitment from relevant stakeholders. For example, program officials reviewed and updated the integrated master schedule and costs on a weekly and monthly basis, respectively. Further, program officials reviewed the status of project elements, such as the schedule, quality and technical issues, stakeholders, staffing, cost, and risks, with Office of Response and Recovery, PA, OCIO, and other program office stakeholders during a weekly program review. PA program officials also established tactical, functional, and stakeholder groups, as well as an Integrated Product Team to support and oversee the development of FAC-Trax. FEMA’s Recovery Technology Programs Division (RTPD) has a division-level risk management plan that serves as guidance for all Recovery systems, including FAC- Trax. Program officials identified key risks that could negatively affect FAC-Trax work efforts in RTPD’s “risk register”—an online site used to track risks, issues, and mitigating actions for the division and each program office. Program officials also identified five technical, cost, and schedule risks in the FAC-Trax acquisition plan. Program officials included one of these risks in the risk register, while the remaining four were managed outside of the register. As of May 2017, program officials had identified 13 risks in its risk register—four open and nine closed. The four open risks were (1) limited subject matter expert engagement during requirements development, (2) vacancies in program management office support positions, (3) unresolved service level agreement support and funding issues, and (4) the loss of the authority to operate due to a Trusted Internet Connection that is not compliant with Department of Homeland Security security policy. Program officials evaluated and categorized the identified risks based on the probability of occurrence and scope, schedule, and cost impacts. These four points of measurement are used to calculate an overall risk score. The risk score helps program officials determine a risk’s risk rating—low, medium, or high. For example, program officials reported that two of its open risks have a “medium” risk rating—meaning the risk has the potential to slightly impact project cost, schedule, or performance. In addition, program officials detailed the risk category, probability, and impact for the five risks identified in the FAC-Trax acquisition plan. Program officials developed risk mitigation and contingency plans for each risk in the risk register. For example, program officials planned to mitigate the open risk concerning subject matter expert engagement, by identifying and engaging with appropriate subject matter experts through requirements development workshops scheduled in advance of the sprint they are to support, and monitoring the development of user stories to identify any issues that may cause delays. In addition, program officials described the risk management plan and responsible officials for the five risks identified in the FAC-Trax acquisition plan. PA program officials review and update program risks during a monthly program meeting. Program officials also review program risks with Office of Response and Recovery, PA, OCIO, and other program office stakeholders during a weekly program review. Furthermore, the FAC-Trax contractor provides a weekly status update which includes a section on identified risks. Program officials established re-evaluation dates and recorded updates, including any actions taken, for each risk in the risk register. In addition, program officials were able to provide updates on the four risks identified in the FAC-Trax acquisition plan and managed outside of the register. According to PA officials, these risks were addressed and closed by the approval of program planning documents, such as the mission needs statement, concept of operations, and operational requirements document, following the solutions engineering review, which demonstrates the readiness of the program to proceed with the procurement, in September 2016. Program officials established a requirements management plan outlining how it captures, assesses, and plans for FAC-Trax enhancements, and established a change control process to review, prioritize, and verify user requests for changes to the system and feedback. As of May 2017, the PA program office received 734 change requests related to FAC-Trax, of which program officials completed 420 changes and planned to address an additional 277 entries. PA program officials also facilitated workshops to gather requirements for specific user groups and obtained additional requirements for FAC-Trax through customer feedback on a temporary technology tool— an Access database referred to as the Public Assistance Recovery Information System—used to support an early stage of the new model implementation. Further, program officials developed a functional requirements document outlining the high-level functional and operational requirements for FAC-Trax. PA program officials developed a concept of operations for FAC-Trax detailing operating concepts and scenarios for each phase of the PA preaward process. Program officials also detailed the workflow, phases, business functions, and data inputs and outputs for the re-engineered PA process in FAC-Trax’s functional requirements document. In March 2017, program officials developed a standard template to describe the process, tasks, and data inputs and outputs for specific system capabilities. As part of the change control process, PA program officials meet three times a week to discuss and prioritize change requests. Specifically, program officials review submissions to the change control form to ensure completeness, validate impacts and root cause, and research details for incoming requests. PA program officials also follow up with users to understand and verify requirements. In March 2017, program officials developed a standard template to capture acceptance criteria for specific requirements. However, PA program officials do not track system enhancements back to the high-level requirements identified in FAC-Trax’s operational and functional requirements documentation and performance work statement. PA program officials identified system requirements and constraints in the FAC-Trax concept of operations and functional and operational requirements documents. Further, through its change control process, program officials collect suggestions, issues, and feedback on FAC-Trax and system enhancements from stakeholders, identify risks for change requests, and balance prioritized requirements and estimated level of efforts with projected costs prior to each sprint. In March 2017, program officials developed a standard template to analyze and document the urgency and need for specific requirements. PA program officials and the FAC-Trax contractor established a testing and evaluation plan for the system, developed acceptance criteria for user stories, and obtained feedback from users during and after testing. The testing process concludes with user acceptance testing (UAT). If a change request fails during UAT or a new requirement is discovered during development, the PA program will capture the failed request or new requirement in the product backlog for implementation in a future product release. Key practices Systems testing and integration Developing test plans and test cases PA program officials and the FAC-Trax contractor tested and evaluated the system during development. The FAC-Trax test plan identifies the method and strategy to perform the testing, including the necessary tasks, testing parameters, and the roles and responsibilities of the individuals responsible for testing. However, program officials did not develop system testing criteria to evaluate FAC-Trax. A key feature of Agile software development is the “definition of done”—a set of clear, comprehensive, and objective criteria, that the government should use to evaluate software after each iteration of development. PA program officials developed a systems integration plan in June 2017 that identifies potential integration of FAC-Trax and four FEMA systems, including the Emergency Management Mission Integrated Environment. Specifically, the plan includes data requirements and standards; descriptions of the four systems FEMA plans to integrate with FAC-Trax and the proposed relationship for each connection; and security and access management requirements. In addition, program officials included a description of how integration problems are to be documented and resolved in FAC-Trax development and test plans. However, the systems integration plan does not define roles and responsibilities of all participants for system integration activities or establish a sequence and schedule for every integration step for the four FEMA systems. ● Fully implemented: The agency provided evidence that it fully addressed this practice. ◐ Partially implemented: The agency provided evidence that it addressed some, but not all, portions of this practice. ◌ Not implemented: The agency did not provide any evidence that it addressed this practice. In addition to the contact named above, Chris Keisling (Assistant Director), Amanda R. Parker (Analyst-in-Charge), Mathew Bader, Allison Bawden, Anthony Bova, Eric Hauswirth, Susan Hsu, Rianna Jansen, Justin Jaynes, Tracey King, Matthew T. Lowney, Heidi Nielson, Claire Peachey, Brenda Rabinowitz, Ryan Siegel, Martin Skorczynski, Niti Tandon, Walter K. Vance, James T. Williams, and Eric Winter made key contributions to this report.", "summary": "FEMA, an agency of the Department of Homeland Security (DHS), has obligated more than $36 billion in PA grants to state, local, and tribal governments to help communities recover and rebuild after major disasters since 2009. Further, costs are rising with disasters, such as Hurricanes Harvey, Irma, and Maria in 2017. FEMA recently redesigned how the PA program delivers assistance to state and local grantees to improve operations and address past challenges identified by GAO and others. FEMA tested the new delivery model in selected disasters and announced implementation in September 2017. GAO was asked to assess the redesigned PA program. This report examines, among other things, the extent to which FEMA's new delivery model addresses (1) past workforce management challenges and assesses future workforce needs; and (2) past information sharing challenges and key IT management controls. GAO reviewed FEMA policy, strategy, and implementation documents; interviewed FEMA and state officials, PA program applicants, and other stakeholders; and observed implementation of the new model at one test location following Hurricane Matthew in 2016. The Federal Emergency Management Agency (FEMA) redesigned the Public Assistance (PA) grant program delivery model to address past challenges in workforce management, but has not fully assessed future workforce staffing needs. GAO and others have previously identified challenges related to shortages in experienced and trained FEMA PA staff and high turnover among these staff. These challenges often led to applicants receiving inconsistent guidance and to PA project delays. As part of its new model, FEMA is creating consolidated resource centers to standardize and centralize PA staff responsible for managing grant applications, and new specialized positions, such as hazard mitigation liaisons, program delivery managers, and site inspectors, to ensure more consistent guidance to applicants. However, FEMA has not assessed the workforce needed to fully implement the new model, such as the number of staff needed to fill certain new positions, or to achieve staffing goals for supporting hazard mitigation on PA projects. Fully assessing workforce needs will help to ensure that FEMA has the people and the skills needed to fully implement the new PA model and help to avoid the long-standing workforce challenges the program encountered in the past. FEMA designed a new PA information and case management system—called the FEMA Applicant Case Tracker (FAC-Trax)—to address past information sharing challenges, such as difficulties in sharing grant documentation among FEMA, state, and local officials and tracking the status of PA projects, but additional actions could better ensure effective implementation. Both FEMA and state officials involved in testing of the new model stated that the new information system allows them to better manage and track PA applications and documentation, which could lead to greater transparency and efficiencies in the program. Further, GAO found that this new system fully addresses two of four key information technology (IT) management controls—project planning and risk management—that are necessary to ensure systems work effectively and meet user needs. However, GAO found that FEMA has not fully addressed the other two controls—requirements development and systems testing and integration. By better analyzing progress on high-level user requirements, for example, FEMA will have greater assurance that FAC-Trax will meet user needs and achieve the goals of the new delivery model. GAO is making five recommendations, including that FEMA assess the workforce needed for the new delivery model and improve key IT management controls for its new information sharing and case management system, FAC-Trax. DHS concurred with all recommendations.", "document_type": "gao"}
{"report": "Remittances can be sent through money transmitters and depository institutions, among other organizations. A typical remittance sent through a bank may be in the thousands of dollars, while the typical remittance sent by money transmitters is usually in the hundreds of dollars. International remittances through money transmitters and banks may include cash-to-cash money transfers, international wire transfers, some prepaid money card transfers, and automated clearinghouse transactions. Transfers through money transmitters. Historically, many consumers have chosen to send remittances through money transmitters due to convenience, cost, familiarity, or tradition. Money transmitters typically work through agents—separate business entities generally authorized to, among other things, send and receive money transfers. Most remittance transfers are initiated in person at retail outlets that offer these services. Money transmitters generally operate through their own retail storefronts, or through grocery stores, financial services outlets, convenience stores, and other retailers that serve as agents. In one type of common money transmitter transaction—known as a cash-to-cash transfer—a sender walks into a money transmitter agent location and provides cash to cover the transfer amount and fees. Generally, for transfers at or above $3,000, senders must provide basic information about themselves (typically a name and address, among other information) at the time of the transfer request. The agent processes the transaction, and the money transmitter’s headquarters screens it for BSA compliance. The money is then transferred to a recipient, usually through a distributor agent in the destination country. The money may be wired through the money transmitter’s bank to the distributor agent’s bank (see fig. 1), or transferred by other means to a specified agent in the recipient’s country. The distributor agent pays out cash to the recipient in either U.S. dollars or local currency. Money transmitters also offer other transfer methods, including online or mobile technology, prepaid money cards or international money orders sent by U.S. Postal Service, cash courier services, or informal value transfer systems such as hawala. Transfers through banks. Another method which remittance senders use to send funds is through bank to bank transfers. Figure 2 is an example of a simple funds transfer between two customers with only the remittance sender’s and remittance recipient’s banks involved. If a remittance sender’s bank does not have a direct relationship with the remittance recipient’s bank, the bank-to-bank transfer scenario becomes more complicated. In such cases, one or more financial institutions may rely upon correspondent banking relationships to complete the transaction, as illustrated in figure 3. Both federal and state agencies oversee money transmitters and banks. In general, money transmitters must register with FinCEN and provide information on their structure and ownership. According to Treasury, in all states except one, money transmitters are required to obtain licenses from states in which they are incorporated or conducting business. Banks are supervised by state and federal banking regulators according to how they are chartered, and the banks provide related information when obtaining their charter. The key federal banking regulators include OCC, FDIC, the Federal Reserve, and National Credit Union Administration (NCUA). FinCEN often works with federal and state regulators. For example, as administrator of the BSA, FinCEN issues BSA regulations and has delegated examination authority for BSA compliance to the federal banking regulators for banks within their jurisdictions. Further, the federal banking regulators have issued regulations requiring institutions under their supervision to establish and maintain a BSA compliance program. FinCEN has also delegated examination authority for BSA compliance for money transmitters to the Internal Revenue Service (IRS). Money transmitters are subject to the BSA but are not examined by federal regulators for safety and soundness. To ensure consistency in the application of BSA requirements, in 2005 the federal banking regulators collaborated with FinCEN on a BSA examination manual that was issued by the Federal Financial Institutions Examination Council for federal bank examiners conducting BSA examinations of banks. Similarly, in 2008 FinCEN issued a BSA examination manual to guide reviews of money transmitters, including reviews by the IRS and state regulators. The manual for BSA examinations of banks was updated in 2014 to further clarify supervisory expectations and regulatory changes. FinCEN has authority for enforcement and compliance under the BSA and may impose civil penalties and seek injunctions to compel compliance. In addition, each of the federal banking regulators has the authority to initiate enforcement actions against supervised institutions for violations of law and also impose civil money penalties for BSA violations. Under the BSA, the IRS also has authority for investigating criminal violations. The U.S. Department of Justice prosecutes violations of federal criminal money laundering statutes and violations of the BSA, and several law enforcement agencies can conduct BSA-related criminal investigations. Money transmitters and banks are subject to requirements under the BSA. They are generally required to design and implement a written anti- money laundering (AML) program, report certain transactions to Treasury, and meet recordkeeping and identity documentation requirements for funds transfers of $3,000 or more. All financial institutions subject to the BSA—including banks and money transmitters—are required to establish an anti-money laundering program. At a minimum, each AML program must establish written AML compliance policies, procedures, and internal designate an individual to coordinate and monitor day-to-day provide training for appropriate personnel; and provide for an independent audit function to test for compliance. Bank Secrecy Act anti-money laundering (BSA/AML) regulations require that each financial institution tailor a compliance program that is specific to its own risks based on factors such as the products and services offered, customers, and locations served. BSA/AML compliance programs are expected to address the following: Customer Identification Program. Banks must have written procedures for opening accounts and must specify what identifying information they will obtain from each customer. At a minimum, the bank must obtain the following identifying information from each customer before opening the account: name, date of birth, address, and identification number. In addition, banks’ Customer Identification Programs must also include risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable. Customer Due Diligence. These procedures enable banks to predict, with relative certainty, the types of transactions in which a customer is likely to engage, which assists banks in determining when transactions are potentially suspicious. Banks must document their process for performing Customer Due Diligence. Enhanced Due Diligence. Customers who banks determine may pose a higher risk for money laundering or terrorist financing are subject to these procedures. Enhanced Due Diligence for higher-risk customers helps banks understand these customers’ anticipated transactions and implement an appropriate suspicious activity monitoring system. Banks review higher-risk customers and their transactions more closely at account opening and more frequently throughout the term of their relationship with the bank. Suspicious Activity Monitoring. Banks and money transmitters must also have policies and procedures in place to monitor and identify unusual activity. They generally use two types of monitoring systems to identify or alert staff of unusual activity: manual transaction monitoring systems, which involve manual review of transaction summary reports to identify suspicious transactions, and automated monitoring systems that use computer algorithms to identify patterns of unusual activity. Large-volume banks typically use automated monitoring systems. Banks and money transmitters also must comply with certain reporting requirements, including: Currency Transaction Report. Banks and money transmitters must electronically file this type of report for each transaction in currency— such as a deposit, withdrawal, exchange, or other payment or transfer—of more than $10,000. Suspicious Activity Report. Banks and money transmitters are required to electronically file this type of report when (1) a transaction involves or aggregates at least $5,000 in funds or other assets (for banks) or at least $2,000 in funds or other assets (for money transmitters), and (2) the institution knows, suspects, or has reason to suspect that the transaction is suspicious. Remittances from the United States are an important source of funds for our case-study countries—Haiti, Liberia, Nepal, and Somalia. The Organisation for Economic Co-operation and Development identified these countries as fragile states because of weak capacity to carry out basic governance functions, among other things, and their vulnerability to internal and external shocks such as economic crises or natural disasters. Haiti. Currently the poorest country in the western hemisphere, Haiti has experienced political instability for most of its history. In January 2010, a catastrophic earthquake killed an estimated 300,000 people and left close to 1.5 million people homeless. Haiti has a population of approximately 11 million, of which roughly 25 percent live on less than the international poverty line of $1.90 per day. Nearly 701,000 Haitians live in the United States. In 2015, estimated remittances from the United States to Haiti totaled roughly $1.3 billion, or about 61 percent of Haiti’s overall remittances. Official development assistance for Haiti in 2015 totaled slightly more than $1 billion. Liberia. In 2003, Liberia officially ended a 14-year period of civil war but continued to face challenges with rebuilding its economy, particularly following the Ebola epidemic in 2014. Liberia has a population of nearly 5 million people, of which roughly 39 percent live on less than $1.90 per day. There are roughly 79,000 Liberians in the United States. In 2015, remittances from the United States to Liberia were estimated to be roughly $328 million, which represented over half of that country’s estimated total remittances. In 2015, Liberia reported roughly $1.1 billion in official development assistance. Nepal. In 2006, Nepal ended a 10-year civil war between Maoist and government forces, which led to a peace accord, and ultimately a constitution that came into effect 9 years later. In April 2015, Nepal was struck by a 7.8 magnitude earthquake, which resulted in widespread destruction and left at least 2 million people in need of food assistance from the World Food Programme 6 weeks following the earthquake. Nepal has a population of nearly 29 million people, of which 15 percent live on less than $1.90 per day. In 2015, the foreign- born population of Nepalese in the United States was nearly 125,000, and roughly $320 million in remittances flowed from the United States to Nepal. For 2015, Nepal received over $1.2 billion in official development assistance. Somalia. Since 1969, Somalia has endured political instability and civil conflict, and is the third largest source of refugees, after Syria and Afghanistan. According to a 2017 State report, Somalia remained a safe haven for terrorists who used their relative freedom of movement to obtain resources and funds to recruit fighters, and plan and mount operations within Somalia and neighboring countries. Somalia has an estimated population of over 11 million people, of which about half the population live on less than $1.90 per day, and roughly 82,000 Somalis reside in the United States. Oxfam estimated global remittances to Somalia in 2015 at $1.3 billion, of which $215 million originated from the United States. In 2015, Somalia received nearly $1.3 billion in official development assistance. Figure 4 shows the estimated U.S. remittances to each of our case-study countries as a total amount in U.S. dollars and as a percentage of the country’s GDP. Money transmitters serving Haiti, Liberia, Nepal, and especially Somalia reported losing bank accounts or having restrictions placed on them, which some banks confirmed. As a result, some money transmitters have relied on non-banking channels, such as cash couriers, to transfer remittances. All of the 12 money transmitters we interviewed reported losing some banking relationships in the last 10 years. Some money transmitters, including all 4 that served Somalia, said they relied on non- banking channels, such as moving cash, to transfer funds, which increased their operational costs and exposure to risks. Further, in our interviews some banks reported that they had closed the accounts of money transmitters because of the high cost of due diligence actions they considered necessary to minimize the risk of fines under BSA/AML regulations. Treasury officials noted that despite information that some money transmitters have lost banking accounts, Treasury sees no evidence that the volume of remittances is falling or that costs of sending remittances are rising. In addition, U.S.-based remittance senders who send money to our case-study countries reported no significant difficulties in using money transmitters to remit funds. All 12 money transmitters we interviewed reported that they or their agents had lost accounts with banks during the last 10 years. All 4 Somali money transmitters and many agents of the 2 Haitian money transmitters we spoke with had lost bank accounts and were facilitating remittance transfers without using bank accounts. Additionally, all 4 large money transmitters that process transfers globally (including to our case-study countries of Haiti, Liberia, and Nepal) also reported that their agents had lost accounts. Almost all of the money transmitters said they also faced difficulties in getting new accounts. Somali money transmitters were most affected by the loss of bank accounts, as 2 of the 4 Somali money transmitters had lost all corporate accounts. While some money transmitters said the banks that closed their accounts did not provide a reason, in other cases, money transmitters said the banks told them that they had received pressure from regulators to terminate money transmitter accounts. As a result of losing access to bank accounts, several money transmitters, including all of the Somali money transmitters, reported that they were using non-banking channels to transfer funds. In some cases the money transmitter was forced to conduct operations in cash, which has increased the risk of theft and forfeitures, and led to increased risk for agents and couriers. Nine of the money transmitters that we interviewed, including 3 of the 4 Somali money transmitters, some agents of one Haitian money transmitter, and some agents of the 4 larger money transmitters, rely on couriers or armored trucks to transport cash domestically (to the money transmitter’s main offices or bank) or internationally (see fig. 5). Money transmitters use cash couriers either because the money transmitter or their agents had lost bank accounts or because it was cheaper to use armored trucks than banks to move funds. In addition to the safety risks money transmitters face when they only accept cash, customers who remit large sums of money also face safety risks because they must transport cash to the money transmitter. For example, in our interviews with remittance senders to Somalia, some of them shared concerns about having to carry cash to money transmitters. Money transmitters we interviewed reported increased costs associated with moving cash and bank fees. For example, one Haitian money transmitter reported that use of couriers and trucks has increased its cost of moving money from its agents to its primary bank account by about $75,000 per month (increasing from approximately $15,000 per month using bank transfers to move funds, to $90,000 per month with the addition of couriers and trucks). Two of the money transmitters we spoke to stated that they did not have options other than to pay any fees the bank required due to the difficulty in finding new bank accounts. Money transmitters with access to bank accounts reported that bank charges for services such as cash counting, wire transfers, and monthly compliance fees had in some cases doubled or tripled, or were so high that it was less expensive to use a cash courier. For example, some money transmitters stated that their banks charged a monthly fee for compliance related costs that ranged from $100 a month to several thousand dollars a month. Over half of the money transmitters we interviewed said the loss of bank accounts limits their growth potential. The 4 larger money transmitters reported that in some cases, the relationship between the agent and money transmitter was terminated, either by the agent or the money transmitter, if the agent no longer had a bank account. In other cases, some large money transmitters compensated for their agents’ lost bank accounts by using armored vehicles to transfer cash from the agents’ locations to the bank. However, the agents need to have a high volume of transactions in order to make the expense of a cash courier worthwhile. The money transmitters that we spoke with said that they have not passed their increased operational and banking costs on to remittance senders. Most said that they have not increased their fees for sending remittances or have increased fees only slightly. Some of the money transmitters said that they have compensated for higher costs by finding cost-savings in other areas or that they have reduced their profit margin. Most of the banks we interviewed expressed concerns regarding account holders who are money transmitters because they tend to be low-profit, high-risk clients. Some banks in our survey reported that constraints in accessing domestic and foreign correspondent banks were also a reason for restricting the number or percentage of money transmitter accounts. Banks have closed accounts of money transmitters serving our case- study countries. Some banks we surveyed reported terminating accounts of money transmitters who transfer funds to Haiti, Nepal, and Somalia. While 7 of the 193 banks that responded to our survey noted that during the 3-year period from 2014 to 2016 they provided services to money transmitters that facilitated transfers to at least one of our case-study countries, 3 of these 7 banks also reported closing at least one account of a money transmitter serving at least one of the case-study countries. Risks associated with the countries or regions that the money transmitter served was given as one reason (among others) for the closure of the account by 2 out of the 3 banks. Money transmitters are generally low-profit clients for banks. Most of the banks we interviewed that currently offer money transmitter services stated that BSA/AML compliance costs have significantly increased in the last 10 years due to the need to hire additional staff and upgrade information systems to conduct electronic monitoring of all transactions that are processed through their system. Some banks indicated in our survey and interviews that the revenue from money transmitter accounts was at times not sufficient to offset the costs of BSA/AML compliance, leading to terminations and restrictions on money transmitter accounts. A few banks we interviewed stated that they do not allow money transmitters to open accounts because of the BSA/AML compliance resources they require. Moreover, according to one credit union we interviewed, money transmitters require labor- intensive banking services—such as counting cash and processing checks—that are more expensive for the banks than providing basic services to businesses that are not cash intensive. Banks expressed concerns over the adequacy of money transmitters’ ability to conduct due diligence on the money transmitter’s customers. In our survey, one bank stated that being unable to verify the identity of beneficiaries, the source of the funds, or the subsequent use of the funds was a challenge the bank faced in managing accounts for money transmitters that remit to fragile countries such as Haiti, Liberia, Nepal, and Somalia. Another bank in our survey noted that it closed some money transmitter accounts because it was unable to get any detail on the purpose of individual remittances. In addition, another bank noted that unlike bank clients, money transmitters’ customers may not have ongoing relationships with them, so money transmitters tend to know less about their customers than banks know about theirs. A few banks we interviewed expressed concern that they would be held responsible if, despite the bank carrying out due diligence, authorities detect an illicit transaction has been processed through the bank on behalf of a money transmitter. In addition, one extra-large bank indicated that differences in state regulators’ assessments of money transmitters are a challenge for the bank. Banks we surveyed reported reduced access to correspondent banks. Banks responding to our survey cited reduced access to correspondent banks as a reason for restricting the number of money transmitter accounts. Out of the 193 banks that answered our survey, 30 indicated they have relied on a correspondent bank to transfer funds to our case-study countries (25 to Haiti, 16 to Liberia, 23 to Nepal, and 9 to Somalia). While not specific to our case-study countries, of the 29 banks in our survey that said they had restricted the number or percentage of money transmitter accounts, 8 said that they did so because of difficulty in maintaining correspondent banking relationships, while 3 said they did so due to loss of a correspondent banking relationship. The absence of direct relations with foreign banks can cause electronic money transfers to take longer to process or in some cases to be rejected. One bank official told us that the reduction in correspondent banking relations may not stop funds from being transferred but may increase the cost or time to process the transfer. However, one bank that responded to our survey identified multiple transactions with our case- study countries in recent years that were terminated because a correspondent bank could not be located or had closed. Customer due diligence is a challenge for correspondent banks. Some banks told us that exposure to risk related to the customers of banks they serve was a key challenge to providing foreign correspondent banking services. Some banks expressed concern that violations of anti-money laundering and terrorism financing guidelines by a customer’s customer may result in fines for the bank even when the bank has conducted enhanced due diligence and monitoring of transactions. Two extra-large banks that do not provide foreign correspondent banking services cited due diligence concerns as one reason they choose not to offer such services. Some of the banks that provide correspondent banking services said they conduct more due diligence on the customers of the banks they serve than regulatory guidance requires. Several of the correspondent banks noted that this additional due diligence was challenging to conduct due to the distance between the correspondent bank and the customers of the banks they serve. For example, one bank told us that the farther removed a customer is from being its direct customer, the greater the risk to the bank due to a lack of confidence in the originating institution’s procedures to conduct due diligence on its customers. Banks identified country-level risk as a factor. For banks that responded to our survey, country-level risk was noted as a factor in account closures. Two out of the three banks that had closed accounts for money transmitters serving at least one of our case- study countries noted that risks associated with the countries or regions that the money transmitter served was a contributing reason for the account closures. Additionally, in our interviews with extra-large banks that serve as a correspondent bank for foreign banks all said that they consider risk related to the country served by a foreign bank when deciding whether to allow the foreign bank to open and maintain accounts. However, most of these extra-large banks also said that the country or region where a foreign bank is located is only one of several factors in determining whether the foreign bank is considered high risk. One of the extra-large banks noted that Somalia was an exception because the lack of a banking infrastructure, which compounded concerns that money transmitters serving Somalia pose a higher risk to the bank. While banks in general told us that they did not make exit decisions regarding correspondent banking at the country level, seven of the eight extra-large banks we interviewed did not currently have correspondent banking relationships with any of our case-study countries, and the one remaining bank served only one country (Haiti). Two of the extra-large banks mentioned closing correspondent banking relationships during the last 10 years in Haiti, Nepal, or Somalia. One extra-large bank indicated that, with the exception of Somalia, funds can still be sent to foreign countries with limited correspondent banking access through banking channels; however, the transaction may need to be routed through multiple banks in order to be processed. Treasury officials reported that remittances continue to flow to fragile countries even though money transmitters face challenges, including some evidence of money transmitter bank account closures. Furthermore, U.S.-based individuals we interviewed who send remittances to Haiti, Liberia, Nepal, and Somalia told us that they are still able to send funds to these countries using money transmitters. Treasury reported money transmitters’ banking access difficulties have not affected the estimated volume of remittance flows to fragile countries. Treasury has collected information through engagement with money transmitters and banks about closures of money transmitter bank accounts and foreign correspondent banking relationships. Treasury officials indicated that remittance flows to fragile countries have not been impacted by such account closures. According to Treasury officials, World Bank estimates of remittance flows show that the volume of international transfers from the United States has continued to increase. At the same time, World Bank data indicate that the global average cost of sending remittances has continued to decrease. In regards to our case study countries, Treasury officials noted that they were not aware of any decrease in remittance volume to any of these fragile countries. Citing these trends, and anecdotal evidence from Treasury’s engagement with banks, the officials stated that there are no clear systemic impacts on the flow of remittances from closures of money transmitter bank accounts and correspondent banking relations. Treasury officials added that the scope of money transmitter bank account closures is largely unknown, but they acknowledged that such closures can be a significant challenge for money transmitters that serve certain regions or countries, including Somalia. Regarding a possible reduction in the number of correspondent banks, which can make it more challenging to transfer remittances, Treasury officials noted that to the extent there has been consolidation in this sector, it could be a natural process unrelated to correspondent banking risk management processes. Moreover, if consolidation results in stronger banking institutions and lower compliance costs, that would be a positive development for the sector, according to these officials. Treasury officials noted unique challenges in remitting funds to Somalia. Officials acknowledged that U.S.-based money transmitters transferring funds to Somalia have lost accounts with U.S.-based banks. According to Treasury, Somalia’s financial system is uniquely underdeveloped, as the country has not had a functioning government for about 20 years, and the terrorist financing threat is pronounced. Officials said that some Somali money transmitters have in the past moved money to assist al-Shabaab, a terrorist organization, increasing the need for stringent controls specific to anti-money laundering and combating terrorist financing efforts. As a result of these and other factors, Treasury officials stated that difficulties remitting to Somalia are not generalizable to other countries. Further, Treasury officials said they were aware that some Somali money transmitters have resorted to non-banking channels by carrying cash overseas. They noted that although physically moving cash is risky, it is not unlawful. Additionally, Treasury officials stated that the use of cash couriers to remit funds has not been a concern for regulators because this practice has not increased the remittance fees that money transmitters charge their consumers. Reasons Senders Reported General Satisfaction with Money Transmitters The remittance senders for Haiti, Liberia, Nepal, and Somalia told us that they are generally satisfied using money transmitters over other methods to transfer money abroad because money transmitters quickly deliver the funds to recipients; are cheaper than banks; can be used even if the recipient lacks a bank account; and tend to have more locations in recipient countries compared to banks. specialized Somali money transmitters cost less than transmitters that serve many countries, and overseas agents of the Somali money transmitters are knowledgeable about the communities where they operate and have earned the trust of the community members. U.S.-based remittance senders we interviewed are generally satisfied with their money transmitters. The U.S.-based remittance senders we spoke with from each of our case-study countries reported that they frequently use money transmitters and have not encountered major difficulties in sending remittances. In general, these senders expressed satisfaction with their money transmitters and stated that they had not experienced major problems in sending money via money transmitters. Senders told us that they generally preferred using money transmitters because money transmitters were cheaper than banks and were quicker in delivering the funds. In addition, money transmitters were often more accessible for recipients collecting the remittances because the money transmitters had more locations than banks in recipient countries. However, some remittance senders told us that they experienced delays or were unable to send large amounts of money through money transmitters. In addition, some Somali senders told us that they were dissatisfied with being unable to use personal checks or online methods due to a requirement to pay in cash. U.S. agencies, including Treasury, Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and National Credit Union Administration (NCUA), have issued guidance to the financial institutions they regulate to clarify expectations for providing banking services to money transmitters. In addition, Treasury’s Office of Technical Assistance (OTA) is engaged in long-term capacity building efforts in Haiti, Liberia, and Somalia to improve those countries’ weak financial institutions and regulatory mechanisms, factors that may cause banks to consider money transmitters remitting to these countries to be more risky clients. However, agency officials disagreed with some suggestions for government action proposed by banks and others because such actions would contravene agencies’ Bank Secrecy Act anti-money laundering (BSA/AML) compliance goals. Treasury, including FinCEN and OCC, as well as FDIC, the Federal Reserve, and NCUA have issued various guidance documents intended to ensure BSA/AML compliance while mitigating negative impacts on money transmitter banking access. Since 2011, Group of Twenty (G20) leaders, including the U.S. government, have committed to increasing financial inclusion through actions aimed at reducing the global average cost of sending remittances to 5 percent. According to Treasury officials, financial inclusion and BSA/AML compliance are complementary goals. In published statements, Treasury has affirmed that money transmitters provide essential financial services, including to low-income people who are less likely or unable to make use of traditional banking services to support family members abroad. Treasury has also acknowledged that leaving money transmitters without access to banking channels can lead to an overall reduction in financial sector transparency to the extent that money transmitters resort to non-banking channels for transferring funds. Nonetheless, Treasury officials we spoke to noted that in implementing BSA/AML regulations, banks retain the flexibility to make business decisions such as which clients to accept, since banks are in the best position to know whether they are able to implement controls to manage the risk associated with any given client. These officials indicated that Treasury pursues market-driven solutions and cannot order banks to open or maintain accounts. Treasury officials noted that Treasury works through existing multilateral bodies to promote policies that will support market driven solutions to banking access challenges and deepen financial inclusion globally. To clarify how banks assess BSA/AML risks posed by money transmitters and foreign banks, Treasury and other regulators have issued various guidance documents that, among other things, describe best practices for assessing such risks (see table 1). Some of the guidance emphasizes that risk should be assessed on a case-by-case basis and should not be applied broadly to a class of customers when making decisions to open or close accounts. The agencies issuing these guidance documents have taken some steps to assess the impact of guidance on bank behavior. For example, Treasury officials told us that Treasury periodically engages with banks and money transmitters on an ad hoc basis to learn their views and gain insight into their concerns. According to Federal Reserve officials, anecdotal information suggests that some money transmitters lost bank accounts after issuance of the 2005 joint guidance summarized above in table 1, and that outcome was contrary to the regulators’ intent. To address concerns about the guidance, according to these officials, Treasury held several public discussions on money transmitter account terminations. OCC officials stated that they have not conducted a separate assessment of the effects of their October 2016 correspondent banking guidance on banks’ risk assessment practices. However, they noted that OCC examiners evaluate banks’ policies, procedures, and processes for risk reevaluation, including processes for assessing individual foreign correspondent bank customer risks, as a part of OCC’s regular bank examination process. Bank officials we spoke to noted that while the guidance from regulators provides broad direction for banks’ risk assessments of foreign banks and money transmitter clients, the guidance does not provide specific details to clarify how banks can ensure BSA/AML compliance for specific higher- risk clients. According to Treasury officials, there is no feasible short-term solution to address the loss of banking services facing money transmitters involved in transferring funds to certain fragile countries, especially Somalia. These officials explained that U.S. banks may be reluctant to transfer funds to fragile countries because key governmental and financial institutions in these countries have weak oversight and therefore may face difficulties in detecting and preventing money laundering and terrorism financing. As of September 2017, Treasury’s OTA is providing capacity building support to fragile countries, including Haiti, Liberia, and Somalia, with some of its efforts aimed at addressing long-term factors affecting these countries’ BSA/AML supervisory capability. Table 2 identifies and describes the status of OTA projects in our case- study countries of Haiti, Liberia, and Somalia. OTA does not currently have a project in Nepal. Banks, money transmitters, trade associations, and state regulators we interviewed, as well as third parties such as the World Bank and Center for Global Development, have proposed several actions to address banking access challenges money transmitters face in transferring funds through banks from the United States to fragile countries. Use of public sector transfer methods. Most banks we spoke to mentioned regulatory risk as a challenge to creating or maintaining money transmitter accounts. These banks stated that the ultimate risk for conducting transactions for money transmitter accounts falls on the bank, and that banks face substantial risk of regulatory action for such transactions. Therefore, one extra-large bank and one credit union we spoke to suggested using public sector transfer methods such as the Fedwire Funds Service (Fedwire) or FedGlobal Automated Clearing House Payments (FedGlobal) to process remittances to fragile countries, thereby mitigating the regulatory risk posed to banks that transfer such funds. Providing regulatory immunity, given appropriate oversight. To mitigate the regulatory risk to banks posed by money transmitter clients that send remittances to fragile countries, one extra-large bank, one credit union, and several money transmitters we spoke to suggested that regulators provide forms of regulatory immunity or regulator assurances that banks would not face enforcement actions if they carried out a specified level of due diligence to process remittances to fragile countries. Issuing more specific guidance. About half of the banks we spoke to mentioned fear of regulatory scrutiny due to ambiguities in regulatory agencies’ guidance or examiner practices. This fear of regulatory scrutiny served as a disincentive for these banks to maintain money transmitter accounts. While officials from about half of the banks we spoke to stated that additional guidance issued by Treasury and other agencies was helpful to clarify regulatory expectations and that examiner practices were consistent with guidance, others stated that they were uncertain about how much due diligence constituted enough for regulatory purposes, because regulations incorporated ambiguous language or because examiner practices exceeded regulations. These bank officials suggested that regulators could provide more specific guidance for banks on risk management, for instance, by including example scenarios and answers to frequently asked questions. The World Bank recommended in 2015 that regulators provide banks with additional guidance on assessing the risk of different money transmitter clients. U.S. agency officials stated that they disagreed with implementing these proposals for reasons specific to each one, as discussed below. Use of public sector transfer methods. Treasury officials told us that they prefer market-based solutions to the challenges of transferring remittances to fragile countries, rather than a solution in which the U.S. government assumes the risk in transferring these remittances, such as using the Federal Reserve to directly transfer payments from money transmitters. Federal Reserve officials told us that Fedwire is reserved for domestic wire transfers, and while the Federal Reserve continues to evaluate the scope of the FedGlobal service, no decisions have been made to expand the service to additional countries at this time. Federal Reserve officials told us they seek to increase remittance flows to the countries the program already serves. Providing regulatory immunity, given appropriate oversight. Treasury officials told us that while they would need to see the suggested duration and conditions pertaining to any proposal for regulatory immunity or exemptions in order to judge its feasibility, implementing this suggestion could raise a number of legal and policy concerns. Officials told us that while Treasury has the authority to provide regulatory exemptions, creating particular conditions for regulatory immunity would stray from Treasury’s intended risk-based approach to BSA/AML compliance, and bad actors might take advantage of any such exemptions for criminal activity. Issuing more specific guidance. OCC informed us that it is not currently considering implementing more specific guidance. Treasury officials told us that existing guidance clarifies that Treasury does not have a zero tolerance approach to BSA/AML compliance and that Treasury does not expect banks to know their customers’ customers. These officials told us that they prefer not to issue further amplifying guidance with very specific examples as to what constitutes “compliance” by financial institutions, because Treasury does not wish to institute a “check the boxes” approach to regulatory compliance. Treasury cannot assess the effects of money transmitters’ loss of banking access on remittance flows because existing data do not allow Treasury to identify remittances transferred through banking and non-banking channels. Recent efforts to collect international remittance data from banks and credit unions do not include transfers these institutions make on behalf of money transmitters. Since these data collection efforts are designed to protect U.S. consumers, the remittance data that banks and credit unions report are limited to remittances individual consumers send directly through these institutions. Additionally, a few state regulators recently began requiring money transmitters to report remittance data by destination country, but these data do not distinguish money transmitters’ use of banking and non-banking channels to transfer funds. Finally, while Treasury has a long-standing effort to collect information on travelers transporting cash from U.S. ports of exit, this information does not to identify cash transported for remittances. Without information on remittances sent through banking and non-banking channels, Treasury cannot assess the effects of money transmitter and foreign bank account closures on remittances, especially shifts in remittance transfers from banking to non-banking channels for fragile countries. Non-banking channels are generally less transparent than banking channels and thus more susceptible to the risk of money laundering and other illicit financial transactions. Federal regulators recently began collecting data on international remittances from banks and credit unions by requiring these institutions to provide more information in pre-existing routine reports. However, these reports do not require banks and credit unions to include information on remittance transfers these institutions make on behalf of money transmitters, among other business clients. According to officials from the Office of the Comptroller of the Currency (OCC) and from the Consumer Financial Protection Bureau, the additional reporting requirements for remittances were intended to help regulators monitor compliance with rules aimed at protecting U.S. consumers who use remittance services offered by banks and credit unions. Furthermore, banks and credit unions are not required to report on destination countries for remittance flows. Specifically: Beginning in 2014, Federal banking regulators—FDIC, the Federal Reserve, and OCC— required banks to provide data on international remittances in regular reporting known as the Consolidated Reports of Condition and Income (Call Reports). These reports, which are required on a quarterly basis from FDIC-insured banks, generally include banks’ financial information such as assets and liabilities, and are submitted through the Federal Financial Institutions Examination Council, a coordinating body. Specifically, the agencies required banks to indicate whether they offered consumers mechanisms, including international wire transfers, international automated clearinghouse transactions, or other propriety services, to send international remittances. The Consumer Financial Protection Bureau uses the remittance data in Call Reports to better understand the effects of its rules regarding remittance transfers including its rules on disclosure, error resolution, and cancellation rights. Additionally, according to bureau officials, they also use the data for other purposes, for example, to monitor markets and to identify banks for remittance exams and, if needed, additional supervision. The Call Reports do not require a bank to report remittances for which the bank is providing such service to business customers, including money transmitters. According to OCC officials, because the remittance regulation that the Consumer Protection Financial Bureau enforces originated in response to consumer-focused legislation, a bank is required to report only those remittances for which the bank is the direct service provider to the individual consumer. Consequently, remittances reported in the Call Reports do not include remittances for which the banks served as a correspondent bank or as a provider for a money transmitter. Furthermore, banks are not required to report remittance data by destination country. In 2013, the National Credit Union Administration (NCUA) began requiring credit unions to provide data on the number of remittance transactions, but not data on the dollar amount transferred, in their Call Reports to NCUA. Similarly, and consistent with its treatment of banks, the Consumer Financial Protection Bureau uses the remittance data submitted by credit unions in Call Reports, for example, to better understand the effects of its rules and for market monitoring. The credit unions are also not required to include transactions they process on behalf of business clients, such as money transmitters, and do not provide remittance data by destination country. In 2017 some states began collecting remittance data from money transmitters by state and destination country through the Money Services Business Call Report. The purpose of these reports is to enhance and standardize the information available to state financial regulators concerning the activities of their Money Services Business licensees to effectively supervise these organizations. However, money transmitters are not required to distinguish whether the remittances they transferred were sent through banking or other channels. Additionally, while these reports collect remittance data by destination country, these data are not comprehensive because, according to the Nationwide Multistate Listing System, as of the first quarter of 2018, about half the states (24) had adopted the reports for money transmitters and of these 12 states had made it mandatory to report the remittances by destination country. Due to a lack of reporting on money transmitters’ use of banking channels to transfer remittances, Treasury cannot assess the extent of the decline in money transmitters’ use of banking channels to transfer remittances to fragile countries, including the four we selected as case-study countries: Haiti, Liberia, Nepal, and Somalia. While Treasury has a long-standing effort to collect information on travelers transporting cash from U.S. ports of exit, this information is not designed to enable Treasury to identify cash transported for remittances or the intended final destination of the cash. For financial transfers through non-banking channels, Treasury requires persons or businesses to report the export of currency and monetary instruments at ports of exit, which include remittances sent through money transmitters carried out in cash. Specifically, Treasury requires persons or businesses, including money transmitters, who physically transport currency or other monetary instruments exceeding $10,000 at one time, from the United States to any place outside of the United States, to file a Report of International Transportation of Currency or Monetary Instruments (CMIR) with U.S. Customs and Border Protection at the port of departure. The CMIR collects information such as the name of the person or business on whose behalf the importation or exportation of funds was conducted, the date, the amount of currency, U.S. port or city of arrival or departure, and country of origin or destination, among other information. The forms are filled out manually by individuals carrying cash. U.S. Customs and Border Protection officers collect the forms at ports of exit, and that agency’s contractors manually enter the data reported on these forms into a central database. Money transmitters and their agents who carry cash in excess of $10,000 from the United States are required to submit the CMIR to U.S. Customs and Border Protection upon departure. Thus, to some extent, CMIR data include data on remittances transferred by money transmitters in cash; however, the CMIR is not intended to capture information specific to remittances, and thus its usefulness is limited for agencies in tracking the flow of remittances through non-banking channels. First, the destination country reported on the CMIR may not be the final destination of the cash or other monetary instrument being transported. For example, money transmitters we interviewed told us that they use cash couriers to transfer funds to Somalia via the United Arab Emirates, where the funds may enter a clearinghouse that can transfer the funds to Somalia. While the ultimate destination of the remittances is Somalia, the CMIR may list the United Arab Emirates as the destination because it is the first destination out of the United States. Second, FinCEN officials acknowledged they do not know the extent of underreporting in general with regard to the CMIR; however, money transmitters we interviewed indicated that they have incentives to file CMIR for their own protection in case they have to file an insurance claim. Finally, CMIR does not ask if the currency or monetary instruments are remittances, which makes it difficult if not impossible to separate out the data on remittances from the overall data. Existing data do not enable Treasury to identify remittances transferred by money transmitters through banking and non-banking channels. Non- banking channels are generally less transparent than banking channels and thus more susceptible to the risk of money laundering and terrorist financing. FinCEN’s mission is to safeguard the financial system from illicit use, combat money laundering, and promote national security by, among other things, receiving and maintaining financial transactions data and analyzing that data for law enforcement purposes. Additionally, federal standards for internal control state that agency managers should comprehensively identify risks and analyze them for their possible effects. A lack of data on remittances sent through banking and non-banking channels limits the ability of Treasury to assess the effects of money transmitter and foreign bank account closures on remittances, in particular shifts of remittances to non-banking channels for fragile countries. The risks associated with shifts of remittances to non-banking channels may vary by country and are likely greater for fragile countries such as Somalia where the United States has concerns about terrorism financing. Remittances continue to flow to fragile countries, but the loss of banking services for money transmitters, as well as a decline in foreign banking relationships, has likely resulted in shifts to non-banking channels for remittances to some of these countries. While money transmitters who have lost bank accounts may adapt by moving remittances in cash or other non-banking channels, the lack of a bank account presents operational risks for these organizations. Moreover, the flow of funds such as remittances from banking to non-banking channels decreases the transparency of these transactions. While U.S. regulators have issued guidance to banks indicating that they should not terminate accounts of money transmitters without a case-by-case assessment, several banks we contacted remain apprehensive and are reluctant to incur additional costs for low-profit customers such as money transmitters. At the same time, senders of remittances still prefer to use money transmitters to send funds, which the senders regard as a critical lifeline for family and friends in fragile countries. Although federal and state regulators have undertaken recent efforts to obtain remittance data from financial institutions such as banks and money transmitters, these efforts are designed for consumer protection and the regulatory supervision of financial institutions, rather than to track remittances sent by money transmitters using banking channels. As a result, the available data are not sufficient for the purposes of tracking changes in money transmitters’ use of banks to transfer funds. Similarly, while Treasury has a long- standing effort to collect information on large amounts of cash physically transported by travelers at U.S. ports of exit, this information collection is not intended to track the flow of remittances through non-banking channels. Consequently, to the extent money transmitters losing banking access switch to non-bank methods to transport remittances, Treasury may not be able to monitor these remittance flows. This, in turn could increase the risk of terrorism financing or money laundering, especially for remittances to fragile countries where risks related to illicit use of funds are considered higher. We are making one recommendation to Treasury. The Secretary of Treasury should assess the extent to which shifts in remittance flows from banking to non-banking channels for fragile countries may affect Treasury’s ability to monitor for money laundering and terrorist financing and, if necessary, should identify corrective actions. We provided a draft of this product for comment to Treasury, FDIC, the Federal Reserve, CFPB, U.S. Customs and Border Protection, Commerce, NCUA, State, and USAID. Treasury, FDIC, the Federal Reserve, CFPB, and U.S. Customs and Border Protection, provided technical comments, which we have incorporated, as appropriate. We requested that Treasury provide a response to our recommendation, but Treasury declined to do so. Commerce, NCUA, State, and USAID, did not provide comments on the draft of this report. We are sending copies of this report to the appropriate congressional committees; the Secretary of the Treasury; the Chairman of the Federal Deposit Insurance Corporation; the Chair of the Board of Governors of the Federal Reserve System; the Acting Director of the Consumer Financial Protection Bureau; the Secretaries of Commerce, Homeland Security, and State; the Administrators of the U.S. Agency for International Development and the National Credit Union Administration; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-9601, or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) what stakeholders believe are the challenges facing money transmitters in remitting funds from the United States to selected fragile countries, (2) what actions U.S. agencies have taken to address identified challenges, and (3) U.S. efforts to assess the effects of such challenges on remittance flows from the United States to fragile countries. To address the objectives, we identified four case-study countries: Haiti, Liberia, Nepal, and Somalia. We selected these countries based on their inclusion in the Organisation for Economic Co-operation and Development’s States of Fragility reports from 2013 to 2015. In addition, we limited our selection to countries that have a foreign-born population of 50,000 or more living in the United States. Finally, we considered the size of estimated total remittances from the United States relative to the recipient countries’ gross domestic products (GDP). We rank ordered the 17 countries that met these criteria and selected the top four. For our first objective, to understand the challenges that stakeholders believe money transmitters face in remitting funds from the United States to fragile countries, we surveyed banks and interviewed U.S. agency officials, money transmitters, banks, credit unions, and remittance senders. To obtain insights from U.S agency officials, we interviewed and received written responses from officials of the Department of the Treasury (Treasury)—including the Office of Technical Assistance (OTA), the Financial Crimes Enforcement Network (FinCEN), the Office of Terrorism and Financial Intelligence, and the Office of the Comptroller of the Currency (OCC). To obtain insights from money transmitters, we used the World Bank’s Remittance Prices Worldwide database to select U.S.-based money transmitters serving our case-study countries. The World Bank database includes a sample of money transmitters, which the World Bank reported it selected to cover the maximum remittance market share possible and survey a minimum aggregated market share of 80 percent for each country. We attempted to contact the 18 money transmitters that the World Bank identified as the major service providers for our case-study countries. We interviewed 12 of these 18 money transmitters, of which 8 provided services to only one of our case-study countries (2 money transmitters provided services to Haiti, 4 provided services to Somalia, and 2 provided services to Nepal) and 4 provided remittance services from the United States to at least three of our case-study countries. To obtain insights from individuals that remit to fragile states, we conducted six small-group interviews, and one additional interview, of individuals that remit to our selected case-study countries. From 3 to 6 individuals participated in our small group interviews. We interviewed one Haitian small group, one Liberian small group, one Nepali small group, and three Somali small groups. To set up these interviews, we identified community-based organizations (CBOs) and other groups that work with remittance senders to these countries and obtained contact information for these groups. We identified the CBOs through searching Internal Revenue Service (IRS) lists of tax- exempt community organizations for the names of our case-study countries or their populations. To focus our search efforts, we concentrated on the five areas in the United States with the largest populations of immigrants from each case-study country. The five areas were identified using information on immigrant populations from the U.S. Census Bureau’s 2015 American Community Survey 1-year Public Use Microdata Samples. We sent emails outlining our research goals and soliciting interest in participating in interviews to 287 CBOs and related groups and obtained positive responses from 46. Of the 46 that responded positively, we were able to schedule meetings with seven CBOs covering the four case-study countries. The groups that agreed to participate in our interviews cannot be considered representative of all CBOs and remittance senders to the four selected countries, and their views and insights are not generalizable to those of all individuals that remit to these four countries. We asked the CBO points-of-contact to invite individuals with experience remitting funds to the case-study countries to participate in telephone interviews. We pre-tested our methodology by emailing contacts at the CBOs and requesting they provide feedback on the questions. We also pre-tested the questions with a group located in Virginia because the location was close to the GAO headquarters and allowed for in-person testing. In the interviews, we asked semi-structured questions about the ease or difficulty of remitting funds to the participants’ home countries, the costs of remitting, and any recent changes they had noticed. We asked the participants to provide us with their personal experiences rather than to speak for their CBO, group, or community. We used two methods—a web-based survey of a nationally representative sample of banks and semi-structured interviews of bank officials—to examine what banks identify as challenges, if any, in offering bank accounts for money transmitters and correspondent banks serving fragile countries. In the survey, we asked banks about limitations and terminations of accounts related to BSA/AML risk, the types of customer categories being limited or terminated, and the factors influencing these decisions. We administered the survey from July 2017 to September 2017, and collected information for the 3-year time period of January 1, 2014 to December 31, 2016. Aggregate responses for the close-ended survey questions that are related to this report are included in appendix II. The survey also collected information for two additional GAO reports: one reviewing closure of bank branches along the southwest border of the United States, and another assessing the causes of bank account terminations involving money transmitters. To identify the universe of banks, we used the bank asset data from FDIC’s Statistics on Depository Institutions database. Our initial population list contained 5,922 banks downloaded from FDIC’s Statistics on Depository Institutions database as of December 31, 2016. We stratified the population into five sampling strata, and used a stratified random sample. In order to meet the sampling needs of related reviews, we used a hybrid stratification scheme. First, banks that did not operate in the Southwest border region were stratified into four asset sizes (small, medium, large, and extra-large). Next, by using FDIC’s Summary of Deposit database we identified 115 Southwest border banks as of June 30, 2016. Our initial sample size allocation was designed to achieve a stratum-level margin of error no greater than plus or minus 10 percentage points for an attribute level at the 95 percent level of confidence. Based upon prior surveys of financial institutions, we assumed a response rate of 75 percent to determine the sample size for the asset size strata. Because there are only 17 extra-large banks in the population, we included all of them in the sample. We also included the entire population of 115 Southwest border banks as a separate certainty stratum. We reviewed the initial population list of banks in order to identify nontraditional banks not eligible for this survey. We treated nontraditional banks as out-of- scope. In addition, during the administration of our survey, we identified 27 banks that were either no longer in business or that had been bought and acquired by another bank, as well as 2 additional banks that were nontraditional banks and, therefore, not eligible for this survey. We treated these sample cases as out-of-scope; this adjusted our population of banks to 5,805 and reduced our sample size to 406. We obtained a weighted survey response rate of 46.5 percent. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (for example, plus or minus 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Confidence intervals are provided along with each sample estimate in the report. For survey questions that are not statistically reliable, we present only the number of responses to each survey question and the results are not generalizable to the population of banks. The practical difficulties of conducting any survey may introduce errors, commonly referred to as nonsampling errors. For example, difficulties in interpreting a particular question or sources of information available to respondents can introduce unwanted variability into the survey results. We took steps in developing the questionnaire, collecting the data, and analyzing the results to minimize such nonsampling error. We conducted pretests with four banks. We selected these banks to achieve variation in geographic location and asset size (small, medium, large, extra-large). The pretests of the survey were conducted to ensure that the survey questions were clear, to obtain any suggestions for clarification, and to determine whether representatives would be able to provide responses to questions with minimal burden. To supplement the results of the survey, we conducted interviews with eight extra-large banks regarding correspondent banking and money transmitter accounts and with two credit unions regarding money transmitter accounts. We selected the eight banks to interview using the following criteria: (1) the bank was in the extra-large asset size group (banks with greater than $50 billion in assets), and (2) the bank was mentioned by at least one of the money transmitters that we interviewed as terminating accounts with them or the bank was listed in an internal Treasury study on correspondent banking. Of the banks in the extra- large asset size group, 7 were mentioned in our interviews with money transmitters as having closed accounts with them. Nearly all of these banks, plus one additional bank were also mentioned as correspondent banks in the Treasury study. In addition, we selected two credit unions to interview based on information from our interviews with money transmitters. Money transmitters identified four credit unions in our interviews; of these, we selected for interviews two that were mentioned as closing accounts with money transmitters. We did not contact the other two credit unions that currently have money transmitter accounts. The results of the survey and the interviews only provide illustrative examples and are not generalizable to all banks or credit unions. For our second objective, we analyzed U.S. agency information and documentation about relevant projects and activities. We also interviewed officials and obtained relevant guidance documents from Treasury, including OCC, OTA, FinCEN, and Terrorism and Financial Intelligence; the Federal Deposit Insurance Corporation (FDIC); the U.S. Department of State; the U.S. Agency for International Development; the Board of Governors of the Federal Reserve System (Federal Reserve); and the National Credit Union Administration (NCUA). Additionally, we also interviewed officials from the World Bank and International Monetary Fund to understand the data, methodology, and findings contained within reports by those organizations, as well as to understand the International Monetary Fund’s role in technical assistance in our case-study countries. To gather information on solutions proposed by banks and others to address challenges money transmitters face in transferring funds through banks from the United States to fragile countries, we interviewed banks and credit unions as noted above. We also reviewed reports by the World Bank, the Center for Global Development, and Oxfam to gather recommendations addressing challenges in transferring remittances to fragile countries. We interviewed officials from Treasury, FDIC, the Federal Reserve, and the U.S. Agency for International Development to gain their perspectives on these proposed solutions. For our third objective on U.S. agencies’ efforts to assess the effects of challenges facing U.S. money transmitters on remittance flows to fragile countries, we interviewed agency officials and analyzed available data on flows going through banking and non-banking channels. For available data on flows through the banking channel, we analyzed the Consolidated Reports of Condition and Income (Call Report) data from the Federal Financial Institutions Examination Council, which started collecting these data in 2014. These remittance data are reported on a semiannual basis. We also reviewed Call Report data on remittances for credit unions, which started to be collected in 2013, as well as data collected from Money Service Businesses, which some states started collecting in 2017. For data on remittance flows through non-banking channels, we obtained and analyzed data on filings of FinCEN’s Form 105 – Report of International Transportation of Currency or Monetary Instruments. This report is required of individuals who physically transport currency or other monetary instruments exceeding $10,000 at one time from the United States to any place outside the United States, or into the United States from any place outside the United States. The paper form is collected by the Department of Homeland Security’s U.S. Customs and Border Protection at the port of entry or departure. We obtained the tabulated Form 105 data from FinCEN by arrival country, state of U.S. exit port, and for calendar years 2006 through 2016. We also interviewed officials and obtained written responses from FinCEN and the Federal Financial Institutions Examination Council. We compared the results of our data analysis and information from interviews with agency officials against FinCEN’s mission to safeguard the financial system from illicit use by, among other things, obtaining and analyzing financial transactions data. Additionally, we also compared the results of our analysis and information obtained from agencies against the federal standards for internal control, which state that agency managers should comprehensively identify risks and analyze them for their possible effects. We conducted this performance audit from September 2016 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. From July 2017 to September 2017, we administered a web-based survey to a nationally representative sample of banks. In the survey, we asked banks about the number of account terminations for reasons related to Bank Secrecy Act anti-money laundering (BSA/AML) risk; whether banks are terminating, limiting, or not offering accounts to certain types of customer categories; and the factors influencing these decisions. We collected information for the 3-year period from January 1, 2014, to December 31, 2016. We obtained a weighted survey response rate of 46.5 percent. The survey included 44 questions, 16 of which were directly applicable to the research objectives in this report. Responses to the questions that were directly applicable to the research objectives in this report are shown below (see tables 3 through 16). When our estimates are from a generalizable sample, we express our confidence in the precision of our particular estimates as 95 percent confidence intervals. Survey results presented in this appendix are aggregated for banks of all asset sizes, unless otherwise noted. Results for some of the survey questions were not statistically reliable. In those cases we present only the number of responses to each survey question. These results are not generalizable to the population of banks. Our survey included closed- and open-ended questions. We do not provide information on responses provided to the open-ended questions. For a more detailed discussion of our survey methodology, see appendix I. The following open-ended question was only asked to banks that responded “Yes” to question 33: Please provide any additional comments or challenges the bank may face in managing accounts for money transmitters that remit to fragile countries such as Haiti, Liberia, Nepal or Somalia. (Question 36) The following open-ended question was only asked to banks that responded “Yes” to question 37: Please provide any additional comments on how changes (increase or decrease) in correspondent banking services facilitating the transfer of funds to Haiti, Liberia, Nepal or Somalia has impacted your bank’s ability to provide services to money transmitters. (Question 41) The following open-ended question was only asked to banks that responded “Yes” to using a correspondent bank to facilitate the transfer of funds Somalia (question 38, response d): If your bank relied on a respondent bank to facilitate the transfer of funds to Somalia, in what country was the respondent bank located? (Question 39) Thomas Melito, (202) 512-9601, or melitot@gao.gov. In addition to the contact named above, Mona Sehgal (Assistant Director), Kyerion Printup (Analyst-in-Charge), Sushmita Srikanth, Madeline Messick, Ming Chen, Lilia Chaidez, Natarajan Subramanian, Carl Barden, James Dalkin, David Dayton, Martin De Alteriis, Mark Dowling, Rebecca Gambler, Tonita Gillich, Stefanie Jonkman, Christopher Keblitis, Jill Lacey, Michael Moran, Verginie Tarpinian, and Patricia Weng made key contributions to this report.", "summary": "The United States is the largest source of remittances, with an estimated $67 billion sent globally in 2016, according to the World Bank. Many individuals send remittances through money transmitters, a type of business that facilitates global money transfers. Recent reports found that some money transmitters have lost access to banking services due to derisking—the practice of banks restricting services to customers to, in part, avoid perceived regulatory concerns about facilitating criminal activity. GAO was asked to review the possible effects of derisking on remittances to fragile countries. This report examines (1) what stakeholders believe are the challenges facing money transmitters in remitting funds from the United States to selected fragile countries, (2) actions U.S. agencies have taken to address identified challenges, and (3) U.S. efforts to assess the effects of such challenges on remittance flows to fragile countries. GAO selected four case-study countries—Haiti, Liberia, Nepal, and Somalia—based on factors including the large size of U.S. remittance flows to them. GAO interviewed U.S.-based money transmitters, banks, U.S. agencies, and individuals remitting to these countries and also surveyed banks. Stakeholders, including money transmitters, banks, and U.S. Department of the Treasury (Treasury) officials, reported a loss of banking access for money transmitters as a key challenge, although remittances continue to flow to selected fragile countries. All 12 of the money transmitters GAO interviewed, which served Haiti, Liberia, Nepal, and particularly Somalia, reported losing some banking relationships during the last 10 years. As a result, 9 of the 12 money transmitters reported using channels outside the banking system (hereafter referred to as non-banking channels), such as cash couriers, to move funds domestically or, in the case of Somalia, for cross-border transfer of remittances (see figure). Several banks reported that they had closed the accounts of money transmitters because of the high cost of due diligence actions they considered necessary to minimize the risk of fines under Bank Secrecy Act regulations. Treasury officials noted that despite some money transmitters losing bank accounts, they see no evidence that the volume of remittances is falling. Example of a Cash-to-Cash Remittance Transfer Using a Cash Courier U.S. agencies have taken steps that may mitigate money transmitters' loss of banking access. For example, several agencies have issued guidance to clarify expectations for providing banking services to money transmitters. In addition, Treasury is implementing projects to strengthen financial institutions in some fragile countries. However, U.S. agencies disagreed with other suggestions, such as immunity from enforcement actions for banks serving money transmitters, since those actions could adversely affect goals related to preventing money laundering and terrorism financing. Treasury cannot assess the effects of money transmitters' loss of banking access on remittance flows because existing data do not allow Treasury to identify remittances transferred through banking and non-banking channels. Remittance data that U.S. agencies collect from banks do not include transfers that banks make on behalf of money transmitters. Additionally, the information Treasury collects on transportation of cash from U.S. ports of exit does not identify remittances sent as cash. Therefore, Treasury cannot assess the extent to which money transmitters are shifting from banking to non-banking channels to transfer funds due to loss of banking access. Non-banking channels are generally less transparent than banking channels and thus more susceptible to the risk of money laundering and terrorism financing. Treasury should assess the extent to which shifts in remittance flows to non-banking channels for fragile countries may affect Treasury's ability to monitor for financial crimes and, if necessary, should identify corrective actions. GAO requested comments from Treasury on the recommendation, but none were provided.", "document_type": "gao"}
{"report": "VA pays monthly disability compensation to veterans with service- connected disabilities according to the severity of the disability. VA’s disability compensation claims process starts when a veteran submits a claim to VA (see fig. 1). A claims processor then reviews the claim and helps the veteran gather the relevant evidence needed to evaluate the claim. Such evidence includes the veteran’s military service records, medical exams, and treatment records from VHA medical facilities and private medical service providers. If necessary to provide support to substantiate a claim, VA will also provide a medical exam for the veteran, either through a provider at a VHA medical facility or through a VBA contractor. According to VBA officials, VBA monitors a VHA facility’s capacity to conduct exams and in instances when the facility may not have capacity to conduct a timely exam, VBA will send an exam request to one of its contractors instead. For exams assigned to a VBA contractor, VBA sends an exam request to the contractor, who then rejects or accepts the exam request. Once the contractor accepts the exam, it assigns a contracted examiner to conduct the exam and complete an exam report designed to capture essential medical information for purposes of determining entitlement to disability benefits. The contractors send the completed report to VBA, which uses the information as part of the evidence to evaluate the claim and determine whether the veteran is eligible for benefits. According to contractor officials, if they need clarification on an exam request, they might reject the request and send it back to VBA who, in turn, will revise the request before sending it back to the contractor. VA has used contracted examiners—through VBA and VHA contracts—to supplement VHA-provided exams for at least two decades. VBA began using contractors to conduct disability compensation exams at 10 VBA regional offices in the late 1990s through a pilot program authorized under federal law. In 2014, federal law authorized VBA to expand the pilot to all its regional offices starting in fiscal year 2017. Before fiscal year 2017, VHA and VBA both administered disability exam contracts. However, since fiscal year 2017, all such contracts have been administered by VBA and none have been administered by VHA. VBA awarded 12 contracts to five contractors to begin providing exams in 2016. According to VA officials, performance under 10 of these contracts was delayed until late September 2017 due, in part, to multiple contract bid protests. During this delay, VA officials told us that the agency awarded short-term contracts to allow existing contractors to perform exams until the bid protests were resolved. VBA’s current contracts cover exams for veterans in five U.S. geographic districts, one district for overseas exams, and one district for servicemembers participating in special programs, such as the Benefits Delivery at Discharge and Integrated Disability Evaluation System programs (see fig. 2). VBA awarded two contracts in each of its five U.S. geographic districts and one contract each in districts 6 and 7, which include special programs and overseas exams, respectively. VBA also awarded two additional short- term contracts in December 2017 to help address workload issues in districts 1-5. With the addition of these two contracts, VBA has a total of 14 contracts currently in place. According to agency officials, because VBA wanted to update performance measures for its contractors, VA issued a Request for Proposals in May 2018 with plans to award new contracts in fall 2018 for its U.S. geographic districts. Until it awards the new contracts, VBA will continue to use the current contracts. According to VBA officials, VA plans to continue using VBA contractors in the long term to conduct exams that exceed VHA’s capacity. In recent years, VBA contractors have completed an increasing number of exams, from roughly 178,000 in fiscal year 2012 to almost 600,000 in fiscal year 2017, according to VBA- provided data. VA estimates that in fiscal year 2019, contractors will complete over 1.8 million exam reports for almost 800,000 veterans. However, VBA officials noted that future projections for contracted exams might change based on the need to supplement VHA capacity to ensure timely exams. In 2016, VBA established an exam program office to manage and oversee contractors, monitor their performance, and ensure that they meet contract requirements. For example, the contracts require that contractors develop plans outlining how they will ensure examiners are adequately trained. Contractors are also required to provide VBA with monthly exam status reports, which include the number of canceled, rescheduled, and completed exams, among other things. VBA also has an office dedicated to completing quality reviews of contractors’ exam reports, which are used to assess contractor performance. The contracts require that VBA conduct quality reviews of a sample of contractors’ exam reports. According to VA documents and officials, the results of these quality reviews, and contractor timeliness scores in completing exams, are included in quarterly performance reports. The contracts require that VBA provide these performance reports to the contractors. VBA holds quarterly meetings with the contractors to discuss their quarterly performance based on these reports. VBA contracts require that contracted examiners have full, current, valid, and unrestricted licenses, and current and valid State Medical Board certifications, before conducting any exams—the same requirements that apply to VHA medical providers. According to agency officials, VBA also requires that contracted examiners complete the same training that VHA providers must take before they can conduct any disability medical exams. The required training consists of a set of online courses developed by VHA’s Disability Medical Assessment Office, such as courses on VA’s disability claims process and one on completing exam reports. In addition, examiners who provide some specialized exams, such as posttraumatic stress disorder exams and traumatic brain injury exams, are required to take additional courses. In addition to VHA- developed training, VBA contracts require that contractors provide examiners with a basic overview of VA programs. The contracts also outline quality and timeliness performance targets that VBA uses to assess contractor performance (see table 1). VBA can use contractors’ performance in meeting these targets to determine financial incentives. VBA’s performance measures are as follows: Contractor quality: VBA calculates quality scores for each contractor based on a sample of exam reports that VBA’s quality office selects for review on a quarterly basis for each contract. According to VBA documents, the quality score represents the percentage of exam reports reviewed that had no errors as measured against specific criteria. Errors identified in quality reviews could range from incomplete information (e.g., an examiner’s medical specialty information is not listed on exam report) to completing the wrong exam report for a given condition. Contractor timeliness: VBA calculates timeliness scores for each contractor based on the average timeliness of all exams completed in a given quarter for each contract. VBA measures timeliness as the number of calendar days between the date the contractor accepts an exam request and the date the contractor initially sends the completed exam report to VBA. VBA reported that almost all contractors missed VBA’s quality target of 92 percent in the first half of calendar year 2017, and more recent data are not yet available for most districts. More specifically, VBA-determined quarterly quality scores—the percentage of disability compensation exam reports with no errors as measured against VBA criteria—for the seven contracts used by VBA in calendar year 2017 showed that contractors were frequently well below the quality target. Quarterly quality scores ranged from 62 percent to 92 percent (see fig. 3). According to VBA data, only one contractor’s quality score in one quarter met VBA’s target of 92 percent while the vast majority of contractors’ scores were classified by VBA as “unsatisfactory” performance. VBA has not yet completed all of the quality reviews used to calculate contractor quality scores, particularly for exams that were completed in the second half of 2017. VBA is hiring and training additional quality review staff to complete these reviews and help manage the workload moving forward. According to VBA officials, staff will complete the remaining quality reviews and finalize the quality scores for 2017 by December 2018. According to agency officials, VBA has not calculated contractor timeliness as it is outlined in the contracts. VBA measures timeliness as the number of days between the date the contractor accepts an exam request and the date the contractor initially sends the completed exam report to VBA. According to officials, this measure does not include any time contractors may spend correcting an exam report returned to them by VBA. Returned exam reports are few in number, VBA officials said. However, once a contractor submitted a corrected or clarified exam report, VBA officials said the exam management system did not preserve the date the exam was initially completed. At that point, the system only tracked the date VBA received the corrected or clarified report. As a result, the number of days in VBA’s system could include time contractors took to correct any issues identified by VBA after submitting the initial report. While VBA’s data does not allow it to reliably assess contractor performance against the targets in the contracts, VBA’s data can be used to measure timeliness in other ways. For example, we were able to use the data to calculate the entire amount of time it took to complete exams, which includes time contractors took to correct any issues identified by VBA. As such, the results of our analysis should not be interpreted as reflecting contractor compliance with timeliness targets under the contracts. However, to provide timeframes that are similar to VBA’s targets, we chose 20 days for districts 1-5 and 30 days for districts 6-7 as timeframes for our analysis. Moreover, we analyzed timeliness across all contractors rather than for individual contractors. In particular, we analyzed VBA data on 646,005 contracted exams completed from February 2017 to January 2018, which included 575,739 exams in districts 1-5 and 70,266 exams in districts 6-7. Our analysis of VBA data shows that 53 percent of exams were completed within 20 days for districts 1-5, and 56 percent were completed within 30 days for districts 6-7. However, some exams took at least twice as long to complete. For example, 12 percent of exams in districts 1-5 took more than 40 days to complete (see fig. 4). Contractor officials described a number of reasons why exams might take longer in some cases. For example, they said that scheduling delays might occur due to a veteran’s availability or severe weather, and that it can be challenging to find specialists for certain exam types in rural locations. Our analysis of timeliness focused on exams that were completed, and it did not include exams that have been requested and not yet completed by a contractor. For example, a contractor may have accepted an exam request from VBA, but not yet scheduled an appointment with the veteran. Alternatively, a contractor may have conducted an exam with the veteran, but not yet sent the exam report to VBA. As of late June 2018, VBA-calculated data showed that 87,768 requested exams had not yet been completed, including 37,077 exams that had already exceeded VBA’s timeliness targets. Tracking these exams is important because a large volume of such exams could ultimately increase the amount of time veterans have to wait for their claims to be processed. VBA officials stated that the agency closely monitors contractors’ workloads and helps expedite requested exams that have exceeded VBA’s targets for completing exams. In addition, VBA included a performance measure in its May 2018 Request for Proposals to track the percentage of requested exams that have been with a contractor for more than seven days. Such a measure could help VBA identify whether contractors have a backlog of exams and better assess whether veterans are receiving timely exams. VBA’s contract exam program office, primarily through its Contracting Officer’s Representatives (COR), has identified some contractor performance problems, such as delays in completing specific exams, through its oversight of contractor performance. This oversight includes day-to-day monitoring of contractor workloads and frequent contact with contractor officials. Through such contact and reviews of contractors’ daily and weekly exam status updates, the CORs work with contractor officials to identify ways to expedite disability compensation exams for veterans who have been waiting longer than VBA’s 20-day or 30-day targets. In addition, VBA contract quality staff who review samples of contractor exam reports hold teleconferences with the CORs and contractor officials to provide feedback and discuss issues arising from their reviews, such as specific types of errors. The VBA contract exam program office also oversees and manages contractors through supplemental guidance memos, contractor site visits, and reviews of veteran customer satisfaction surveys. For example, in November 2017, VBA sent a supplemental guidance memo to all contractors to clarify guidance on conducting and documenting hearing loss exams. Further, VBA has conducted site visits to all five contractors’ headquarters or clinic sites since September 2017. Headquarters visits include reviews of contractors’ procedures, such as those for assigning exam requests, and contractors’ information systems, such as those for tracking the status of exams. VBA visits to contractor clinics focus on facility issues, such as accessibility and safety. According to VBA officials, the CORs also review reports on satisfaction surveys completed by veterans after their exam appointments to identify veterans’ concerns regarding contractors and to follow up with contractors, when needed. For example, in response to one veteran’s survey comment regarding a contracted examiner who did not show up to conduct a scheduled exam, VBA officials told us they followed up with the contractor and learned that the examiner’s car broke down. According to VBA, it reimbursed the veteran for round-trip transportation costs to the clinic. Additionally, VBA’s contract quality review staff have conducted special focused reviews to investigate concerns raised by veterans and by staff in VBA regional offices and VHA medical facilities. For example, VBA conducted a review of one contracted examiner who had high rates of diagnosing severe posttraumatic stress disorder. After reviewing this examiner’s reports, VBA found their overall quality to be poor. As a result, VBA requested that the contractor no longer use this examiner. In addition to identifying and addressing problems with individual exams and examiners, VBA has identified broader challenges faced by contractors in meeting VBA’s demand for exams and providing timely reports. For example, VBA identified two contractors who were not prepared to perform all of their assigned exams because they did not have enough examiners, particularly in rural locations, which led to delays and a backlog of exam requests, according to VBA officials. VBA officials described how they worked with these contractors over several months to adjust and closely monitor the volume of exams sent to the contractors to address the backlog. However, according to VBA officials, by December 2017, VBA determined that one of the contractors was not able to meet the demand for exams, and the agency stopped sending new exam requests to this contractor. According to VBA, by late June 2018, it had discontinued all work with this contractor. VA officials said that to obtain additional exam capacity to make up for the two contractors’ shortages, they awarded short-term contracts in December 2017 to two other contractors who were providing exams in other VBA districts. VBA has not completed all required quarterly quality reviews and accompanying quarterly performance reports on contractors, according to VBA officials. These reviews and reports are key components to effectively assessing contractor performance in a timely manner. Specifically, in late June 2018, VBA officials said that they had conducted almost all their quality reviews for contracted exams completed in districts 1-5 during the second half of 2017, but that they needed to finalize the quality scores. They also said that they were beginning their quality reviews for contracted exams completed in 2018. At the time of our review, VBA had released one quarterly performance report for the fourth quarter of calendar year 2017, and officials said they were drafting others. VBA officials attributed delays in completing quality reviews and quarterly performance reports primarily to a lack of VBA quality review staff. The quarterly performance reports provide contractors with information on their performance against VBA quality and timeliness targets. For example, prior reports included detailed breakouts of quality errors by type and suggestions for performance improvements. As officials of one contractor said, delays in receiving quarterly performance reports limit VBA’s ability to provide contractors with timely and valuable feedback they can use to improve the quality of their exams. The delay in completing the quarterly reviews and reports also has implications for VBA’s ability to allocate exam requests across contractors and administer potential financial incentives across contractors. More specifically, VBA can use performance data to help determine how to allocate exams in each district that has two contractors, as outlined in the contracts. For example, VBA can decide to allocate more exams to the contractor with higher performance results. Further, the contracts outline how VBA can use performance data to administer financial incentives linked to performance targets. For example, VA is to provide a bonus to a contractor who meets or exceeds the 92 percent quality standard for a quarter, and meets or exceeds the 20- or 30-day timeliness standard. However, because of its delays in completing quality reviews and the lack of reliable data on contractor timeliness, VA has not yet administered these incentives. VA officials told us that the agency will determine if it will administer the 2017 incentives after it completes its performance assessments of contractors. VBA officials said they are currently hiring more staff to address the lag in quality reviews and subsequent reports to contractors, as well as to provide more oversight of contractors. At the time of our review, VBA did not have its authorized level of 15 quality analysts and 2 senior quality reviewers, but VBA officials said that they expected to complete hiring to bring the quality reviewer staff up to 17 full-time positions by the end of fiscal year 2018. In addition, VBA officials acknowledged that they did not have enough CORs in VBA’s exam program office to oversee the 14 exam contracts (including the two short-term contracts). As of April 2018, VBA officials said the office had 3 CORs, but hiring was expected to bring the number up to 14 by the end of fiscal year 2018. VBA officials said that they determined staffing levels for VBA’s contract exam program office—including CORs and exam quality reviewers—based on an assessment of the resources needed to expand the program, among other factors. Although VBA did not provide documentation outlining how it determined its workforce needs, the agency provided us with updated organizational charts in June 2018 demonstrating increased staff levels for the exam program office. VBA’s lack of reliable data on the status of exams, including insufficient exams—exam reports that VBA returns to contractors to be corrected or clarified—limits its ability to effectively oversee certain contract provisions. VBA officials acknowledged that they could not calculate the number of completed exams that were once marked as insufficient or how long they had remained in that status due to the data limitations of the exam management system the agency used until spring 2018. The contracts require that contractors correct insufficient exams within a certain number of days and bill VBA for these exams at half price. However, VBA’s lack of complete and reliable information on insufficient exams hinders its ability to ensure that either of these requirements is met. VBA officials also indicated that they were unable to fully assess individual contractor timeliness against VBA’s performance targets because the exam management system did not include the date the initial exam report was submitted to VBA, which is needed to calculate timeliness as outlined in the contracts. In March 2018, VBA began implementing a new exam management system designed to collect more comprehensive and accurate information on the status of exams. VA documentation on the new system shows that it will include detailed data on insufficient exams, which, according to VBA officials, should allow VBA to track whether contractors are properly discounting their invoices for those exams. However, in June 2018, VBA stated that three of its five contractors did not have complete functionality with VBA’s new exam management system. As a result, VBA officials said the agency still did not have complete data in the new system that would allow it to track insufficient exams. Officials said they were working to address these issues. More broadly, as described in VA system documents, the new system is designed to allow VBA to track more detailed data on exam completion dates and on other points throughout the exam process, such as dates for initial requests for clarification from contractors, and dates when appointments are scheduled. However, VBA is in the early stage of this transition, and agency officials stated that unexpected technical issues have affected communication between the new exam management system and other VBA systems. While they work to resolve the issues, VBA officials said that they have been manually moving some exam requests through the system each day. Further, VBA has not documented how it plans to ensure the additional data is accurate and use it to oversee contractor performance as outlined in the contracts, particularly for insufficient exams. Federal internal control standards state that management should use quality information to achieve key objectives. In addition, management should formulate plans to achieve those objectives. For example, agencies should assess collected data and ensure it is accurate so that it can be used to provide quality information to evaluate performance. In the absence of a plan for how it will capture and use data in its new exam management system to assess performance, VBA risks overpaying contractors for insufficient exams and continuing to inaccurately measure contractor timeliness. Further, according to agency officials, VBA has not conducted comprehensive analyses of performance data that would allow it to identify and address higher-level trends and program-wide challenges across contractors, geographic districts, exam types, or other relevant factors. Agency officials told us they have no plans to conduct such analyses. Federal internal control standards state that management should establish and operate monitoring activities and evaluate the results of those activities. In addition, management should evaluate deficiencies both at the individual and aggregate level. While VBA officials acknowledged that higher-level analyses could improve program oversight, they explained that analyzing performance data has been challenging due to the limitations of the exam management system. Thus, VBA has prioritized addressing contractor-specific problems and resolving long-standing pending exams over in-depth analysis of the performance data. However, with the expected improvements provided by VBA’s new exam management system and increased staff to manage the program and conduct quality reviews, VBA should be better positioned to conduct analyses of performance data in the future. By conducting higher-level analyses across contractors, geographic districts, exam types, or other relevant factors, VBA could make a more informed assessment of the challenges contractors and examiners face and where additional workload capacity and training may be needed. In addition, better analyses would allow VBA to determine if the contract exam program is achieving its quality and timeliness goals in a cost effective manner. VBA has a third-party auditor who verifies that all active contracted examiners have a current, valid, and unrestricted medical license in the state where they examined a veteran. The auditor provides regular reports of its audits to VBA. Specifically, the auditor verifies the license numbers of all active contracted examiners in the states where they perform VA disability compensation exams; National Provider Identifiers; and any prior or current sanctions or restrictions resulting in a revoked or suspended license at the time of a VA exam. In addition, contractors send VBA monthly reports of examiners’ medical license, specialty, and accreditation based on the contractors’ verification of this information. Every 2 months, VBA sends the auditor a consolidated report of this information covering all five contractors. The auditor verifies examiners’ information in that report before sending a final audit report to VBA, noting if the auditor was or was not able to verify examiners’ licenses. After reviewing the report, VBA contacts the contractors to gather additional information to resolve any issues, and in cases in which licensing requirements are not met, VBA stops using the examiner and offers new exams to veterans who have been seen by the examiner. VBA and auditing firm officials noted that audit results show that almost all examiners have current and valid licenses, and contractors are required to stop using those who do not meet licensing requirements. VBA and auditing firm officials said that issues identified in the audits are usually due to typos or differences in how information is captured across different licensing databases. However, based on an audit, VBA provided an example of an examiner with a restricted medical license who had completed exams for one contractor. In this case, VBA notified the contractor, who then stopped using the examiner and said it was taking action to prevent errors in its license verification process from occurring again. In addition, the contractor reimbursed VBA for the cost of exams conducted by the examiner and also offered new exams to veterans who had been seen by the examiner. VBA relies on contractors to verify that their examiners complete required training, and agency and contractor officials told us that VBA does not review contractors’ self-reported training reports for accuracy or request supporting documentation, such as training certificates, from contractors. As required by the contracts, contractors must track and maintain records demonstrating each examiner has completed required training. Each of VBA’s five contractors has its own process for ensuring that required training is provided to and completed by their examiners, but generally, contractors export the courses from VA’s online training system into their own online training systems for their examiners to access. The contractors, rather than VBA, access the contractor training systems to verify that examiners have completed the required training before they are approved to conduct exams. When requested by VBA, contractors are required to send VBA reports demonstrating that their examiners have met training requirements. As stated in the latest version of the contracts, contractors must immediately stop using any examiner found to have not completed required training, notify VBA, and re-examine the involved veterans at no cost to VBA, if requested by the agency. Although VBA currently does not verify the accuracy of training self- reported by contractors to the agency, VBA officials said that they plan to enhance monitoring through spot checks of training records and a new training system. Specifically, in fiscal year 2019, VBA officials said they plan to start conducting spot checks of some examiners’ training records for accuracy and compliance during site visits to contractor headquarters and clinics. However, VBA has not provided details or documentation on these planned checks, such as how it will determine which records to review or the steps it will take to verify the accuracy of training records. VBA officials also said they are planning to develop an online system that would allow VBA to certify that examiners have completed required training, rather than relying on contractors for this information. However, as of July 2018, VBA had yet to determine when this system would be developed and had not documented plans to do so in order to use such information for monitoring training. VBA also said it would hire staff to manage contractor training, but has yet to do so. GAO’s prior work has emphasized tracking and other control mechanisms to ensure that all employees receive appropriate training. While VBA said it would enhance its monitoring of training records, documenting and implementing a plan and processes to verify training could help ensure examiners have met training requirements. Without such a plan, VBA risks using contracted examiners who are unaware of the agency’s process for conducting exams and reporting the results, which could lead to delays for veterans as a result of poor-quality exams that need to be redone and insufficient exam reports that need to be corrected. VBA does not collect information from contractors or examiners to help determine if required training effectively prepares examiners to conduct high quality exams and complete exam reports. VBA has provided additional guidance to contractors for some specialty exams. However, VBA identified these issues after some contractors requested guidance in monthly meetings, rather than through VBA efforts to proactively or regularly collect information from contractors or examiners to inform potential changes to training. VBA is considering including a component in the online training system that would collect information on the effectiveness of required training. However, VBA has not outlined additional details on collecting such information. VBA officials said that VBA did not collect such information in the past, in part, because staff were focused on program oversight. To assess progress toward achieving results and to make changes to training if needed, GAO has found that evaluation is a key component of any training program. Given that VBA officials told us that the agency plans to issue new contracts in fall 2018, the number of contracted examiners who are new to VA processes may increase. Thus, collecting and assessing regular feedback on training from contractors and examiners, such as through surveys, discussion groups, or interviews, could help VBA determine if training effectively prepares examiners to conduct exams and complete exam reports. Further, information on the effectiveness of training could supplement data on contractor performance and results from VBA’s quality reviews to help assess if additional training courses are needed across contractors or for specific exam types. As VBA increasingly relies on contractors to perform veterans’ disability compensation exams, it is important that the agency ensures proper oversight of these contractors. VBA’s lack of accurate and up-to-date data and reports on contractor performance hampers its ability to oversee the quality and timeliness of exams provided through contractors. VBA’s new exam management system provides opportunities to improve oversight through more comprehensive and accurate data. These improvements might be limited, however, without a plan to use the data to produce the quality information needed by VBA to monitor insufficient exams, ensure it pays contractors the correct amount for those exams, and help it accurately calculate contractor timeliness. Further, the new system provides an opportunity for VBA to conduct analyses that could identify high-level trends and challenges facing the program across contractors and districts, such as delays in completing exams in specific parts of the country or contractor performance issues related to specific exam types. Despite these capabilities, VBA has not outlined plans for using improved information in this manner. Without doing so, the agency may miss opportunities to improve the program and, ultimately, its service to veterans. VBA could better prepare contracted examiners for their role by taking actions to ensure required training has been completed and by collecting information to assess and improve training. Such actions could help improve the quality of exams and exam reports, which could mitigate the need for exam rework and, ultimately, delays in determining veterans’ benefits. With VBA planning to award new contracts and potentially more new contracted examiners coming on board, verifying that required training is completed and collecting information on the effectiveness of training are critical. As VA continues to rely on contracted examiners, it is important that the agency is well positioned to carry out effective oversight of contractors to help ensure that veterans receive high-quality and timely exams. We are making the following four recommendations regarding contracted disability compensation exams to VA. The Under Secretary for Benefits should develop and implement a plan for how VBA will use data from the new exam management system to oversee contractors, including how it will capture accurate data on the status of exams and use it to (1) assess contractor timeliness, (2) monitor time spent correcting inadequate and insufficient exams, and (3) verify proper exam invoicing. (Recommendation 1) The Under Secretary for Benefits should regularly monitor and assess aggregate performance data and trends over time to identify higher-level trends and program-wide challenges. (Recommendation 2) The Under Secretary for Benefits should document and implement a plan and processes to verify that contracted examiners have completed required training. (Recommendation 3) The Under Secretary for Benefits should collect information from contractors or examiners on training and use this information to assess training and make improvements as needed. (Recommendation 4) We provided a draft of our report to the Department of Veterans Affairs (VA) for its review and comment. VA provided written comments, which are reproduced in appendix II. VA concurred with all our recommendations and described the Veterans Benefits Administration’s (VBA) plans for taking action to address them. Regarding our first recommendation, VA outlined improvements in the information collected through VBA’s new exam management system, and said that VBA is currently testing a mechanism to validate exam invoices submitted by contractors. We noted these improvements to the system in our draft report sent to the agency for comment. We maintain that it will be important for VBA to take the next step of developing and implementing a plan for how it will use information from the new system to ensure both accurate timeliness data and proper exam invoicing. Regarding our second recommendation, VA stated that VBA will use improved data in the new exam management system to regularly monitor and assess aggregate performance data, identify error trends, and monitor contractor performance and program-wide challenges. Regarding our third and fourth recommendations, VA stated that VBA plans to develop and implement a training plan for contractors that will include a mechanism to validate that required training has been completed and to assess the effectiveness of this training through feedback from trainees, contractors, and quality review staff in VBA’s contract exam program office. VA stated that VBA will use this data to improve the implementation and content of training. VA requested that GAO combine these two recommendations into one. However, we believe they are two distinct recommendations and have kept them as such. VBA could meet the intent of each recommendation with the development and implementation of one plan that covers both training verification and assessment, as outlined in its comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions, please contact me at (202) 512- 7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in Appendix III. To evaluate VBA monitoring of contractor performance and VBA oversight of contracted examiners’ qualifications and training, we reviewed relevant federal laws, regulations, and VA guidance on the use of contracted examiners for disability compensation exams. To identify relevant contract provisions and requirements related to contractor performance, monitoring of such performance, licensing, and training, among other areas, we reviewed selected provisions of selected versions of the 12 current VA Medical Disability Examination contracts originally awarded in 2016, of 5 short-term contracts VA awarded in early 2017, and of 2 short-term contracts VA awarded in December 2017. With regard to the 12 current contracts, we reviewed the selected provisions in the originally awarded contract from 2016 and in the most recently amended version of the contract (as provided to us by VBA officials). Based on our review of these two versions of the contract, the selected provisions appeared to remain in place, unless noted otherwise in this report. However, we did not review the various contract modifications that, according to VBA, occurred in the interim period to confirm whether the selected provisions we focused on in our review actually remained in place during the period between the original contract and the most recent amendment. With regard to the 2 short-term contracts awarded in December 2017, we reviewed the selected provisions in the original December contract. According to VBA officials, there have been no subsequent modifications to these short-term contracts. With regard to the 5 short-term contracts awarded in early 2017, we only reviewed selected provisions relating to contractor quality and timeliness performance. Thus, any statements in this report relating to other aspects of the contracts are not based on these short-term contracts. Further, we only reviewed such provisions in the originally awarded short-term contract, and we did not review the various contract modifications that, according to VBA, occurred subsequently, to confirm that those provisions remained in place over time. However, we found that those selected provisions were generally in place in all of the various contracts we reviewed. To answer what is known about the timeliness of VBA contracted exams, we analyzed VBA data on disability compensation exams completed by five contractors between February 2017 and January 2018. VBA’s Office of Performance Analysis and Integrity provided exam-level data that it maintains in the agency’s Enterprise Data Warehouse, including data on the exam request date, the date the contractor accepted the request, the date the contractor completed the exam, and the VBA district where the exam was conducted, among other information. These data were created from data originally collected in VBA’s Centralized Administrative Accounting Transaction System (CAATS), which is the system that VBA used to request exams from contractors until spring 2018. According to VBA officials, the status of exam requests (e.g., pending, completed, cancelled) was not always accurate in CAATS. To create more reliable data and identify the most current information on the status of exams, the Office of Performance Analysis and Integrity identified and replaced missing or incorrect data in CAATS by running checks against other VBA systems, including the Veterans Benefits Management System, which maintains veterans’ benefits claims records. We assessed the reliability of the data we received from VBA by conducting electronic testing for missing data and errors, and by interviewing VBA officials about their data collection and quality control procedures. We determined that the data were sufficiently reliable for our purposes of reporting the time it took to complete exams within districts. Our analysis included 646,005 contracted exams completed between February 2017 and January 2018. We selected February 2017 as our starting point because it was the first full month of data available that covered most of VBA’s current contractors. To allow for 12 full months of data, we selected January 2018 as our ending point. In addition, we limited our population to include exams that were requested on or after January 13, 2017 in districts 1-5 or on or after April 1, 2016 in districts 6- 7, based on the periods of performance in the contracts for those districts. We calculated timeliness at the level of the exam request. We calculated the number of days between the date an exam request was accepted by the contractor and the date the exam report was completed by the contractor. The timeliness values we calculated may include additional time needed to request and receive contractors’ corrections or clarifications on previously submitted exam reports. In our report, we refer to these exams as “insufficient exams.” VBA officials acknowledged that due to data limitations the new exam management system is intended to resolve, VBA’s CAATS system did not retain data on the number of exams that were once marked as insufficient or how long they remained in that status. While VBA officials acknowledged that this data limitation affects the agency’s ability to assess individual contractor timeliness on VBA’s performance targets outlined in the contracts, the limitation did not prevent us from analyzing the timeliness of contracted exams overall. The overall timeliness values we calculated represent the total time taken to complete exams regardless of whether additional time was needed for corrections. To put the timeliness values we calculated in context, we calculated the percentage of exams that were completed within VBA’s timeliness targets of 20 days for districts 1-5 and 30 days for districts 6-7 for the entire 12- month period of our analysis. We also calculated the percentage of exams that were completed within other timeframes (e.g., 21-40 days, more than 40 days). According to the contracts, contractors are not expected to complete all exams within the timeliness target, but rather should meet the timeliness target on average in a given quarter, so our analysis was different from one that VBA might conduct in order to determine contract compliance. Because VBA does not retain detailed data on exam completion dates necessary to assess contractor performance against VBA’s timeliness targets, and because we calculated timeliness across contractors, the percentages we calculated do not represent an assessment of whether contractors met VBA’s timeliness targets. GAO did not conduct a legal analysis of the various contractors’ compliance with the contract requirements. Given that the start of VBA’s timeliness measure is the date the contractor accepts the exam request (rather than the date VBA requests the exam), we calculated alternate timeliness values to account for potential delays in accepting exam requests. VBA officials stated that VBA requests contractors accept or reject exam requests within 3 days. For all exam requests that contractors took more than 3 days to accept, we calculated alternate totals that included the additional days. For example, if a contractor took 5 days to accept the exam request and completed the exam 20 days later, we calculated an alternate total of 22 days to complete the exam. We used these alternate values to calculate adjusted percentages for each category presented in Figure 4 of our report. For example, using the alternate timeliness values, about 50 percent of exams in districts 1-5 would have been completed in 20 days and 53 percent in districts 6-7 would have been completed within 30 days, rather than the respective 53 percent and 56 percent shown in Figure 4. Moreover, we found that about 82 percent of exam requests during our period of analysis were accepted within 3 days. To report more recent data on exams that were accepted but not yet completed by contractors—pending contracted exams—VBA provided aggregate data on the number of pending exams as of June 25, 2018. For example, for districts 1-5, it provided data on the number of exams that had been pending for 20 days or fewer, 21-40 days, 41-60 days, 61- 100 days, and more than 100 days. We calculated percentages based on the VBA-provided totals. Elizabeth Curda, (202) 512-7215 or curdae@gao.gov. In addition to the contact named above, Nyree Ryder Tee (Assistant Director); Teresa Heger (Analyst-in-Charge); Alex Galuten; Justin Gordinas; and Greg Whitney made key contributions to this report. Also contributing to this report were James Bennett, Matthew T. Crosby, Teague Lyons, Sheila R. McCoy, Jessica Orr, Claudine Pauselli, Samuel Portnow, Monica Savoy, Almeta Spencer, and April Van Cleef.", "summary": "In 2016, VBA awarded 12 contracts to five private firms for up to $6.8 billion lasting up to 5 years to conduct veterans' disability medical exams. Both VBA contracted medical examiners and medical providers from the Veterans Health Administration perform these exams, with a growing number of exams being completed by contractors. Starting in 2017, VBA contracted examiners conducted about half of all exams. GAO was asked to review the performance and oversight of VBA's disability medical exam contractors. This report examines (1) what is known about the quality and timeliness of VBA contracted exams; (2) the extent to which VBA monitors contractors' performance; and (3) how VBA ensures that its contractors provide qualified and well-trained examiners. GAO analyzed the most recent reliable data available on the quality and timeliness of exams (January 2017 to February 2018), reviewed VBA and selected contract documents and relevant federal laws and regulations, and interviewed agency officials, exam contractors, an audit firm that checks examiners' licenses, and selected veterans service organizations. The Veterans Benefits Administration (VBA) has limited information on whether contractors who conduct disability compensation medical exams are meeting the agency's quality and timeliness targets. VBA contracted examiners have completed a growing number of exams in recent years (see figure). VBA uses completed exam reports to help determine if a veteran should receive disability benefits. VBA reported that the vast majority of contractors' quality scores fell well below VBA's target—92 percent of exam reports with no errors—for the first half of 2017. Since then, VBA has not completed all its quality reviews, but has hired more staff to do them. VBA officials acknowledged that VBA also does not have accurate information on contractor timeliness. VBA officials said the exam management system used until spring 2018 did not always retain the initial exam report completion date, which is used to calculate timeliness. In spring 2018, VBA implemented a new system designed to capture this information. VBA monitoring has addressed some problems with contractors, such as reassigning exams from contractors that did not have enough examiners to those that did. However, the issues GAO identified with VBA's quality and timeliness information limit VBA's ability to effectively oversee contractors. For example, VBA officials said they were unable to track the timeliness of exam reports sent back to contractors for corrections, which is needed to determine if VBA should reduce payment to a contractor. The new system implemented in spring 2018 tracks more detailed data on exam timeliness. However, VBA has not documented how it will ensure the data are accurate or how it will use the data to track the timeliness and billing of corrected exam reports. VBA also has no plans to use the new system to analyze performance data to identify trends or other program-wide issues. Without such plans, VBA may miss opportunities to improve contractor oversight and the program overall. A third-party auditor verifies that contracted examiners have valid medical licenses, but VBA does not verify if examiners have completed training nor does it collect information to assess training effectiveness in preparing examiners. While VBA plans to improve monitoring of training, it has not documented plans for tracking or collecting information to assess training. These actions could help ensure that VBA contractors provide veterans with high-quality exams and help VBA determine if additional training is needed. GAO recommends VBA (1) develop a plan for using its new data system to monitor contractors' quality and timeliness performance, (2) analyze overall program performance, (3) verify that contracted examiners complete required training, and (4) collect information to assess the effectiveness of that training. The Department of Veterans Affairs agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "As part of the annual budget formulation process for each fiscal year, DOD establishes for each of nine foreign currencies, a foreign currency budget rate (units of foreign currency per one United States (U.S.) Dollar) to use when developing O&M and MILPERS funding requirements for overseas expenditures. Foreign currency budget rates for a particular fiscal year are established approximately 18 months prior to the fiscal year when overseas obligations will be incurred and disbursements made. For example, in June 2015, OUSD(C) issued guidance to, in part, instruct the services on the foreign currency rates to use in building their fiscal year 2017 budgets. In February 2016, as part of the President’s budget, DOD submitted its proposed fiscal year 2017 budget to Congress, and it began incurring obligations against subsequently appropriated amounts on October 1, 2016. DOD has used various methodologies for establishing the foreign currency budget rates. In 2005, we reviewed DOD’s methodology for developing its foreign currency budget rates and reported that DOD’s approach for estimating its foreign currency requirements for the fiscal year 2006 budget was a reasonable approach for forecasting foreign currency rates that could produce a more realistic estimate than its historical approach. In its fiscal year 2006 through 2016 budget requests, DOD used a centered weighted average model that combined both a 5-year average of exchange rates and an average of the most recently observed 12 months of exchange rates. For its fiscal year 2017 request, DOD adjusted its methodology to establish the foreign currency budget rates. Specifically, DOD established its foreign currency rates by calculating a 6-month average of Wall Street Journal rates published every Monday from May 25, 2015, to November 16, 2015. According to an OUSD(C) official, the 6-month average more closely represented foreign currency exchange rates experienced by the department during budget formulation, and it accounted for the strength of the U.S. Dollar, which had increased as compared with its historical 5- year average. DOD’s analysis found that the use of the 5-year historical average would have resulted in substantial gains when compared with gains expected from application of the 6-month average. More specifically, DOD projected gains of about $1 billion using the 5-year average of rates. During the fiscal year for which a budget is developed, DOD incurs obligations for its overseas O&M and MILPERS activities. Those obligations are recorded using the foreign currency budget rates. DOD uses various methods for selecting foreign currency rates to liquidate those obligations through disbursements, which may differ from the budget rates. DOD’s preferred payment method for foreign currency transactions is the Department of Treasury’s (Treasury) comprehensive international payment and collection system—the International Treasury Services (ITS.gov) system—which serves federal agencies making payments in nearly 200 countries. ITS.gov offers a number of rates, including advanced rates available up to 5 days in advance of disbursement, and the spot rate. The spot rate is the price for foreign currencies for delivery in 2 business days. While advanced rates, like spot rates, are based on the current market rate, advanced rates at the time they are selected are generally higher than the spot rate, with the 5-day advanced rate being the highest, because the rates are locked in ahead of the actual value date. While the spot rate can be more cost-effective, it requires immediate transaction processing, which may not be feasible for all disbursements. Differences between obligations incurred at the foreign currency budget rates and the amounts that DOD actually disburses drive gains or losses in the appropriated amounts DOD has available for its planned overseas expenditures. For example, if DOD budgeted for the U.K. Pound at a rate of .6289 (that is, 1 U.S. Dollar buys .6289 U.K. Pounds) as it did in fiscal year 2016, and the rate experienced at the time of disbursement was .6845, then DOD would have requested more funds than were actually needed for transactions involving the U.K. Pound. That would have resulted in a gain from the transaction—meaning that DOD would need less funds than were budgeted for the transaction. Conversely, a current rate that is lower than what was budgeted will result in a loss—and DOD would require more funds than were budgeted for the transaction. Within each of the services’ O&M and MILPERS appropriations accounts, amounts are available for overseas activities. Amounts obligated for overseas activities, along with associated foreign currency gains and losses, are managed by the services as part of the overall management of their O&M and MILPERS appropriations accounts. Service components use foreign currency fluctuation accounts within their O&M and MILPERs appropriations to manage realized gains and losses in direct programs due to fluctuations in foreign exchange rates. The service-level foreign currency fluctuation accounts are maintained at various budgetary levels within the service components. In fiscal year 1979, Congress appropriated $500 million to establish the FCFD account for purposes of maintaining the budgeted level of operations in the MILPERS and O&M appropriation accounts by mitigating substantial gains or losses to those appropriations caused by foreign currency rate fluctuations. FCFD appropriations are different from the O&M and MILPERS appropriations in two ways. First, FCFD account amounts are no-year amounts, meaning that they are available until expended, while in general, O&M and MILPERS appropriations are 1-year amounts and expire at the end of the fiscal year for which they were appropriated. Expired O&M and MILPERS amounts remain available only for limited purposes for 5 additional fiscal years. At the end of the 5-year expired period, any remaining O&M or MILPERS amounts, obligated or unobligated, are canceled and returned to Treasury. Second, FCFD account amounts may be used only to pay obligations incurred because of fluctuations in currency exchange rates of foreign countries, while O&M amounts are available for diverse expenses necessary for the operation and maintenance of the services and MILPERS amounts are available for service personnel-related expenses, such as pay, permanent changes of station travel, and expenses of temporary duty travel, among other purposes. Amounts from the FCFD account may be transferred to service-level foreign currency fluctuation accounts within O&M and MILPERS appropriation accounts to offset losses in buying power due to unfavorable differences between the budget rate and the foreign currency exchange rate prevailing at the time of disbursement. The FCFD account may be replenished in several ways. Amounts transferred from the FCFD to O&M and MILPERS appropriations may be returned when not needed to liquidate obligations because of subsequent favorable foreign currency rates in relation to the budget rate, or because other amounts have become available to cover obligations. A transfer back to the FCFD of unneeded amounts must be made before the end of the second fiscal year of expiration following the fiscal year of availability of the O&M or MILPERS appropriation to which the funds were originally transferred. Amounts may also be transferred to the FCFD account even if they did not originate there. Specifically, DOD may transfer to the FCFD account any unobligated O&M and MILPERS amounts unrelated to foreign currency exchange fluctuations so long as the transfers are made not later than the end of the second fiscal year of expiration of the appropriation. While multiple transfers of these unobligated amounts may be made during a fiscal year, any such transfer is limited so that the amount in the FCFD account does not exceed the statutory maximum of $970 million at the time of transfer. When the FCFD account balance is at the maximum balance, the services normally retain in their service- level O&M and MILPERs foreign currency fluctuation accounts any gains resulting from favorable foreign currency rates. Finally, any amounts transferred, whether from the FCFD account to an O&M or MILPERS account, or from an O&M or MILPERS account to the FCFD, are merged with the account and assume the characteristics of that account, including the period of availability of the funds contained in the account. Visibility of service-level foreign currency fluctuation account and FCFD transactions is maintained through the services’ accounting systems and execution reports. DOD uses the following reports to track its foreign currency funds: Foreign Currency Fluctuations, Defense Report (O&M): provides data on O&M foreign currency gains and losses for each service, by currency, including data on projected gains or losses for any remaining obligations that have not yet been liquidated and disbursed at the time of the report. Foreign Currency Fluctuation, Defense Report (MILPERS): provides data on MILPERS foreign currency gains and losses for each service, by currency, including data on projected gains or losses for any remaining obligations that have not yet been disbursed at the time of the report. In 2013 we analyzed and reported on carryover balances in federal accounts, which amounted to $2.2 trillion in fiscal year 2012, and we found that greater examination of carryover balances by an agency provides opportunities for enhanced oversight of their management of federal funds and may help identify opportunities for potential budgetary savings. Carryover balances are composed of both obligated and unobligated amounts. Only accounts with multi-year or no-year amounts, such as the FCFD, may carry over amounts that remain legally available for new obligations from one fiscal year to the next. DOD’s carryover balances would include FCFD account balances carried from one year to the next. DOD’s FCFD account is composed of unobligated carryover amounts that accumulate when unneeded for transfer to O&M and MILPERS accounts to cover foreign currency fluctuations. FCFD unobligated carryover balances include any expired, unobligated balances from the military services’ O&M and MILPERS accounts, which can include any gains due to favorable foreign currency fluctuations that are not used to cover other losses and that are transferred into the FCFD. DOD revised its foreign currency budget rates in fiscal years 2014 through 2016, which resulted in budget rates in these years that were more closely aligned with rates published by Treasury. Furthermore, the revised budget rates in fiscal years 2014 through 2016 decreased DOD’s projected O&M and MILPERS funding needs. The revised budget rates also decreased potential gains and losses in the amount of funds that DOD had available for its planned overseas expenditures. DOD revised its foreign currency budget rates in fiscal year 2014 and continued to do so in fiscal years 2015 and 2016 before making adjustments to its methodology in fiscal year 2017. According to an OUSD(C) official, the methodology developed in 2017 resulted in budget rates that were more closely aligned with market rates than in previous years, making revision of the 2017 budget rates unnecessary. DOD’s revisions to its foreign currency budget rates in fiscal years 2014 through 2016 resulted in rates that more closely aligned with those published by Treasury. Further, they decreased the expected gains that would have otherwise resulted from a substantial increase in the strength of the U.S. Dollar, in fiscal years 2014 through 2016, relative to other foreign currencies from the time the budget rates were set as compared with the rates available once the fiscal year began. Prior to fiscal year 2014, DOD did not revise its foreign currency budget rates. DOD officials did not provide an explanation for why the budget rates for fiscal years 2009 through 2013 were not revised. DOD developed, in November 2015, a set of standard operating procedures that describe the methodology it used for formulating budget rates for the nine foreign currencies included in its budget submission. These procedures also state that DOD is required to update the budget rates once an appropriation is enacted for the fiscal year. For example, if Congress reduces DOD’s appropriations due to favorable foreign currency rates, such as the $1.5 billion reduction in DOD’s total fiscal year 2016 appropriations, OUSD(C) then revises the budget rates to absorb the reduced funding levels. OUSD(C) officials stated that other factors are also considered when determining whether to revise the foreign currency budget rates, and that the department communicates the revised budget rates to the DOD components and Congress. For example, OUSD(C) assesses the value of each of the nine foreign currencies used to develop the budget request relative to the strength of the U.S. Dollar during the fiscal year. An OUSD(C) official also noted that the effects that the rate changes would have across these foreign currencies are also considered prior to submitting recommended rate revisions to the OUSD(C) leadership for approval. The official stated that one currency may be experiencing a loss, while another is experiencing a gain, which can affect whether to revise the rates and what those revisions should be. Additionally, the OUSD(C) official stated that “significant” projected gains or losses could drive a revision to the foreign currency budget rates, and that an informal $10 million threshold for projected gains and losses is used to determine when the foreign currency budget rates are revised. According to OUSD(C) officials, DOD components and Congress were notified when the budget rates were revised during fiscal years 2014 through 2016, including an explanation for why the rates were revised. OUSD(C) also includes the budget rates for each of the nine foreign currencies on its website and identifies any instances in which the budget rates were revised with the effective date of any rate revisions. Our analysis of DOD’s use of revised budget rates during fiscal years 2014 through 2016 found that the revised budget rates for those years were more closely aligned with rates published by Treasury. More specifically, for the nine foreign currencies included in DOD’s budget, our analysis comparing DOD’s initial and revised budget rates for fiscal years 2009 through 2017 with average Treasury rates for these years found that DOD’s budget rates differed from Treasury rates by less than 10 percent in about 64 percent of the total 162 occurrences we examined. While we are unaware of any criteria that suggest how closely DOD’s foreign currency budget rates should align with market rates, we used 10 percent as a basis for our analysis because Treasury’s guidance states that amendments to its published exchange rates are required if rates differ from current rates by 10 percent or more. We further examined these occurrences to determine what the differences were between the DOD and Treasury rates before and after DOD began revising its budget rates in fiscal year 2014. Of the 162 occurrences we reviewed, there were 90 occurrences included in our comparison for fiscal years 2009 through 2013, and 72 occurrences were included in our comparison for fiscal years 2014 through 2017. Our analysis shows the following: For fiscal years 2014 through 2017, DOD’s budget rates for its nine foreign currencies differed from Treasury rates by less than 10 percent in about 71 percent of the occurrences. This increased from about 59 percent of the occurrences for the period of fiscal years 2009 through 2013, before DOD began revising its rates after the fiscal year began. For fiscal years 2014 through 2017, DOD’s budget rates differed from Treasury’s rates by 10 percent or more after DOD began revising its rates in fiscal year 2014 in about 29 percent of the occurrences, which is a decrease from about 41 percent of the occurrences prior to fiscal year 2014. Figure 2 below shows the number of occurrences in which DOD’s initial and revised rates differed from Treasury rates by less than 10 percent, and the occurrences in which DOD’s rates differed from Treasury rates by 10 percent or more. The occurrences that are less than 10 percent of Treasury rates are most closely aligned with Treasury rates. According to DOD officials, the differences between DOD’s foreign currency budget rates and Treasury rates are driven primarily by market volatility (that is, the differences in the foreign currency rates from when DOD formulates its budget rates, prior to the fiscal year, and the foreign currency rates determined by Treasury when obligated amounts are liquidated through disbursements during the fiscal year). According to the OUSD(C) official responsible for formulating and revising the foreign currency budget rates, the delay that occurs between the time when a budget rate is set (approximately 18 months prior to the beginning of a particular fiscal year) and the actual fiscal year is a major factor for why the budget rate may be revised. According to the official, the market rates experienced during fiscal years 2014 through 2016 were substantially different from those expected when the budget rates for those years were developed. Therefore, DOD revised its budget rates during these years to more closely align with market rates experienced. Specifically, this official stated that DOD revised its budget rates during fiscal years 2014 through 2016 to decrease the expected gains that would have otherwise resulted during these fiscal years from a substantial increase in the strength of the U.S. Dollar relative to other foreign currencies from the time the budget rates were set as compared with more favorable rates available once the fiscal year began. In order to more closely align its budget rates with market rates, DOD introduced a new methodology to establish the foreign currency budget rates for fiscal year 2017 because DOD anticipated approximately $1 billion in projected gains if it used the prior methodology. As a result of this change in the methodology, according to the OUSD(C) official, DOD did not experience substantial gains or losses in fiscal year 2017. Therefore, DOD did not revise its foreign currency budget rates during fiscal year 2017. However, as previously stated, the official did not provide an explanation as to why the budget rates for fiscal years 2009 through 2013 were not revised. DOD’s use of revised foreign currency budget rates decreased DOD’s projected O&M and MILPERS funding needs and any potential gains and losses that would have occurred due to foreign currency fluctuations during fiscal years 2014 through 2016. Because DOD uses its budget rates to establish its projected annual O&M and MILPERS funding requirements for planned overseas expenditures, any revisions to the budget rates affect DOD’s estimate of its funding needs. For example, our analysis shows that as a result of revising its budget rates during fiscal years 2014 through 2016, DOD’s projected funding needs for the period of fiscal years 2009 through 2017 decreased from about $60.2 billion to about $57.5 billion—a decrease of about $2.7 billion. To further show the effect that changing foreign currency rates could have on DOD’s projected funding for planned overseas expenditures for fiscal years 2009 through 2017, we also compared DOD’s projected O&M and MILPERS funding needs, based on its initial and revised foreign currency budget rates, against projected funding needs based on the use of foreign currency rates published by Treasury during the fiscal year. Our analysis shows that DOD’s projected O&M and MILPERS foreign currency funding needs using Treasury rates would have been about $58.4 billion, or about $885 million more than the $57.5 billion that DOD had projected using its initial and revised budget rates. DOD also uses foreign currency budget rates to calculate gains or losses attributable to foreign currency fluctuations. Specifically, DOD determines gains and losses due to foreign currency fluctuations by comparing the budget rate (that is, initial or revised budget rate) used to incur obligations against a more current market rate at the time it liquidates its obligations through disbursements. Therefore, revisions to the budget rates not only change DOD’s projected O&M and MILPERS funding requirements for the fiscal year in which the revisions occur, but also change the baseline from which the potential gains or losses would result when DOD liquidates its overseas O&M and MILPERS obligations through disbursements. For example, in fiscal year 2016, Congress reduced DOD’s total appropriations by $1.5 billion. As a result of this reduction and favorable foreign currency rates, DOD revised its fiscal year 2016 budget rates in February 2016 and applied the revised foreign currency budget rates in its calculations of gains and losses due to foreign currency fluctuations since the beginning of the fiscal year to absorb the reduced funding level. In applying the revised budget rates, a $30 million gain DOD had previously projected became a projected loss of about $186.2 million. The use of revised budget rates also affects the movement of funds from the FCFD account. For example, if the use of the revised budget rate creates a loss and DOD is unable to cover the increased costs to its O&M or MILPERS appropriations, funds from the FCFD account may be used to cover its planned overseas expenditures. DOD has taken some steps to reduce costs in selecting foreign currency rates to liquidate its obligations through disbursements. However, DOD organizations are not always selecting the most cost-effective rates to convert U.S. Dollars, and DOD has not determined whether opportunities exist to achieve additional efficiencies when making disbursements. DOD liquidates its obligations through disbursements for overseas expenditures using Treasury’s ITS.gov system, which provides DOD organizations with a choice of foreign currency rates to apply when making disbursements in a foreign currency. The foreign currency rate chosen determines how many U.S. Dollars must be paid for the transaction. Treasury officials explained that customers may choose either the spot rate or an advanced rate. The spot rate is the price for foreign currencies for delivery in 2 business days. Treasury officials explained that advanced rates are exchange rates that are “locked in” and guaranteed by the bank processing the disbursement 5, 4, or 3 days in advance of payment processing, which is known as the “value date” of a disbursement. Normally, the cost of the rate increases the further from the date of disbursement that it is locked in. While DOD often uses a 5-day advanced rate to make its disbursements, the other rate options available, such as a 3-day advanced and a spot rate, can be more cost-effective. We analyzed data provided by Treasury from its ITS.gov system and found that for disbursements made during the period of June and July 2017, the 5-day advanced rate was more costly than the 3-day advanced rate. In instances where the spot rate was available, we found that it was also more cost-effective than either the 3- day or 5-day advanced rates. For example, for those transactions processed through ITS.gov on June 13, 2017, DOD would have paid 1 U.S. Dollar for .881 European Euros if using the 5-day advanced rate; .883 European Euros if using the 3-day advanced rate; and .889 European Euros if using the spot rate. In the case of the Army, an Army Financial Management Command official provided us information indicating that the service has estimated potential cost savings that would result from more consistently selecting 3-day advanced rates through the ITS.gov system to make overseas disbursements of amounts, rather than the 5-day advanced rate. More specifically, the Army estimated between $8 million and $10 million in annual savings by transitioning from a 5-day to a 3-day advanced rate when selecting foreign currency rates. According to officials, the Army has transitioned all paying locations to the 3-day advanced rate. The Army estimates that these locations have produced $6.04 million in savings through February 2018. Although the Army indicated that it also planned to analyze whether use of the spot rate was feasible, it had not conducted this review at the time of our review. Data provided to us by Treasury from its ITS.gov system indicate that in June and July of 2017, the Air Force used the 5-day advanced rate exclusively for its disbursements, while the Navy and Marine Corps relied on both the 5-day and the 3-day advanced rates. Our analysis of these data show the Air Force would have achieved total savings for those 2 months of about $258,000 if it had made its disbursements using the 3- day versus the 5-day advanced rate. The savings resulting from each transaction varied based on the amount of the transaction. For example, on June 13, 2017, the Air Force disbursed a payment exceeding $3.7 million and would have saved more than $9,000 for that transaction if the 3-day advanced rate had been used. For the same single transaction, if the spot rate had been used instead of the 5-day advanced rate, the Air Force would have saved more than $31,000. The savings associated with the Navy’s and Marine Corps’ disbursements for the same 2-month period showed the potential for less dramatic savings of less than $100 because the Navy and Marine Corps used the 3-day advanced rate as opposed to the 5-day advanced rate for most of its disbursements. Where information on the spot rate was available, its use, as opposed to either the 5-day or 3-day advanced rate, would have resulted in additional savings opportunities for those 2 months. While these examples are illustrative of cost savings opportunities in June and July 2017, Treasury data show that in fiscal year 2016, DOD disbursed more than $11.8 billion through ITS.gov and, as of July 2017, had disbursed more than $9.6 billion through ITS.gov. Our analysis suggests that DOD could achieve further cost savings by more consistently selecting cost-effective foreign currency rates, such as the 3-day advanced or spot rates, with which to make disbursements. In selecting foreign currency rates, DOD’s Financial Management Regulation states that disbursements should be computed to avoid gains or deficiencies (losses) due to fluctuations in rates of exchange to the greatest extent possible. If there is no rate of exchange established by agreement between the U.S. government and the foreign country, then foreign currency transactions are to be conducted at the prevailing rate. The prevailing rate of exchange is the most favorable rate legally available for acquisition of foreign currency for official disbursement and other exchange transactions. Additionally, GAO’s Standards for Internal Control in the Federal Government calls for management to periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. DOD disbursement organizations have flexibility in selecting foreign currency rates to use when making disbursements using ITS.gov. There is no DOD-wide requirement for the services to review the rates used to make disbursements and, except for the Army, the services have not conducted such a review. This step is necessary to determine whether there are opportunities for savings by more consistently selecting cost- effective foreign currency rates. We discussed disbursement processes with DOD and Air Force, Navy, and Marine Corps financial management officials, including the factors considered when selecting foreign currency rates. In addition, a Defense Finance and Accounting Service official noted that currencies can have criteria specifying when a payment is made and provided us the ITS.gov user’s guide, which addresses “special currency requirements,” such as those that would drive advanced payment for a currency. For example, the user’s guide indicates that payment for transactions involving the Afghanistan Afghani must be made 2 days in advance of the value date, and cannot be made on a Friday. However, information that is contained in the ITS.gov user’s guide and that we received from a Treasury official indicate that none of the nine foreign currencies for which DOD budgets place restrictions on when payment must be made; and therefore, this consideration should not drive the use of a specific rate at disbursement. Marine Corps financial management officials told us that the foreign currency rate selected at disbursement is at the discretion of the disbursing officer based on operational requirements, with the understanding that the most favorable rate for the government is the preference, while balancing mission requirements and the time necessary to process the transaction. These officials acknowledged that the 3-day advanced rate can be more cost-effective to the government but indicated that there are occasions when the 5-day advanced rate should be used because it provides more time to process the payments from deployed locations operating in different time zones or with limited communication capabilities. However, we found that OUSD (C) officials and financial management officials with the headquarters of the Air Force, Navy, and Marine Corps were not involved in disbursement, were unaware of what rates were being used at disbursement, and had not reviewed the rationale for selecting one rate over another. For example, Air Force and Navy headquarters officials we spoke with were unable to provide insight as to what drives the decision to use one rate over another. One Navy financial management official told us that he was unaware of any Navy policy that directs a specific rate to be used when disbursing funds, and suggested that the absence of such a policy provides the flexibility for officials to determine which approach is best. Headquarters, Marine Corps officials also stated that they did not monitor foreign currency rates used for disbursements or the reasons why one rate was selected over another. Based on our inquiry, officials indicated that they would analyze the foreign currency rates used for disbursements in 2017 and whether opportunities existed to achieve savings by using other rates available through ITS.gov. A Marine Corps official subsequently provided us with information that showed that two of three disbursing offices that currently utilize ITS.gov for disbursements use the 3-day advanced rate exclusively and one uses the 5-day advanced rate. The official noted that a technical issue within ITS.gov has restricted the disbursing office currently using the 5-day advanced rate from choosing any other rate, but that the service was further assessing options to correct the issue. In our conversations with an official in OUSD(C) about why the other services had not reviewed the foreign currency rates used for disbursements to determine what was being paid through ITS.gov and whether there was an opportunity for savings, the official commented that OUSD(C) had not directed the services to conduct any reviews in this area. This official was unaware that different foreign currency rates were used to make disbursements, and assumed that the military services all make disbursements in the same way. However, as discussed above, the services are using different rates resulting in inconsistency across the department. The official further indicated that DOD could perform a review to determine the cost differences of using one disbursement rate over another. Absent a review of the rates the services are using in making disbursements and whether cost savings could be achieved by more consistently selecting the most cost-effective foreign currency rates available for use at disbursement, DOD is at risk for paying more to convert U.S. Dollars for overseas expenditures than would otherwise be required. In fiscal years 2009 through 2016, DOD used the FCFD account to cover losses that the services experienced due to foreign currency fluctuations in 6 of the 8 years we reviewed. However, DOD does not effectively manage the FCFD account balance based on projected gains or losses. Transfers of expired unobligated balances from MILPERS and O&M accounts into the FCFD account have been made to replenish the account balance to the statutory limit of $970 million, without consideration of projected losses due to foreign currency fluctuations. Furthermore, DOD’s financial reporting on foreign currency fluctuations for fiscal years 2009 through 2016 contains incomplete and inaccurate information. In fiscal years 2009 through 2016, DOD transferred approximately $1.92 billion out of the FCFD account to cover losses that the services experienced due to foreign currency fluctuations in 6 of the 8 years we reviewed. For these years, DOD transferred funds from the FCFD account to the services’ MILPERS and O&M accounts during the fiscal year in which the funds were obligated for overseas expenses. The transfer amounts were based on both losses realized from actual disbursements and projected losses for any remaining obligations to be liquidated. The projected losses were calculated based on the current foreign currency market rates as of the time of the calculation. Based on the service-level data we reviewed, all of the services reported that they experienced losses in at least 5 of the fiscal years we reviewed. For example, the Army reported that it experienced losses in its MILPERS account for 5 of 8 years, while the Marine Corps reported that it experienced losses in its O&M and MILPERS accounts in each of the 8 years. In addition to the transfers to cover losses within the services’ MILPERS and O&M accounts, in fiscal year 2013 DOD transferred an additional $969 million to the Defense Working Capital Fund to offset fuel cost losses. Since fiscal year 2012, DOD has maintained the FCFD end-of-year account balance at $970 million—the maximum allowed by statute. To replenish the funds that were transferred out of the FCFD account, DOD transferred unobligated balances to the FCFD account from the services’ O&M and MILPERS accounts. While DOD can also replenish the FCFD account or absorb foreign currency losses in certain currencies by transferring to the FCFD account any gains experienced by the services, our analysis found that DOD did not transfer any gains into the FCFD account for fiscal years 2009 through 2016. Figure 3 shows the transfers into and out of the FCFD account and the end-of-year FCFD account balance for fiscal years 2009 through 2016. Our analysis also shows that DOD transferred funds to maintain the FCFD account at its maximum balance since 2012, despite experiencing fewer losses due to foreign currency fluctuations than it had experienced in fiscal years 2009 to 2011. Of the $1.92 billion transferred from the FCFD account to the services’ MILPERS and O&M accounts to cover losses, $464.5 million was transferred since fiscal year 2012, when DOD began maintaining its FCFD account at the maximum level. During that time, some of the services experienced foreign currency gains, while others experienced losses. For example, at the end of fiscal year 2013 the Navy reported a total realized and projected cumulative gain for its O&M and MILPERS accounts of about $98.6 million. In that same year, the Marine Corps reported a cumulative realized and projected loss for its O&M and MILPERS accounts of approximately $12.7 million. Had DOD not transferred unobligated funds back into the FCFD account, it would have retained a positive balance of approximately $505.5 million. However, DOD maintained the account balance at $970 million by transferring approximately $495.3 million in unobligated balances into the account. As part of its management of the FCFD account balance, DOD analyzes data on realized and projected losses as the basis for transferring funds from the FCFD account to the services’ MILPERS and O&M accounts to cover losses. However, DOD does not consider projected losses when making transfers of unobligated O&M and MILPERS balances into the FCFD account. Figure 4 below shows the FCFD account balance that DOD has maintained in relation to the transfers out of the account to cover losses. Specifically, according to the OUSD(C) official responsible for managing the FCFD account, DOD maintains the FCFD account balance at $970 million to maximize unobligated balances within the military services’ O&M and MILPERS accounts before they are canceled and are no longer available to DOD. In addition, this official stated that DOD prefers to maintain the maximum balance in case it is needed due to sudden, unfavorable swings in foreign currency exchange rates. Our review of the documentation used to make transfers into and out of the FCFD account corroborates that DOD maintains the FCFD account balance to maximize the retention of unobligated balances. Specifically, we found instances in which the documentation states that the transfers of unobligated balances into the FCFD account were made for the purpose of replenishing the account balance to the statutory limit. For example, DOD transferred $89 million from the FCFD account to the Army for losses it had realized and projected in fiscal year 2014, and later transferred unobligated balances of the same amount back into the account. DOD’s documentation states that this transfer of unobligated balances was made for the purpose of replenishing the account to $970 million in order to finance estimated foreign currency losses resulting from the decline in value of the U.S. Dollar. However, the transfer to the Army already covered the realized losses and projected losses for any remaining disbursements. In other words, estimated foreign currency losses had already been accounted for at the time of the transfer to the Army. In addition, based on data reported by the Air Force, Marine Corps, and Navy, DOD had an estimated cumulative gain of about $30 million for fiscal year 2014 based on the other services’ gains and losses, which could have been transferred to the FCFD account to absorb any additional foreign currency losses elsewhere. However, DOD did not transfer those gains to the FCFD account. Similarly, based on data reported by these services, DOD experienced cumulative realized and projected gains of more than $200 million in fiscal year 2013 and about $92.6 million in fiscal year 2015, but it did not transfer any gains to the FCFD account because the account balance had already reached its maximum using transferred unobligated balances. Despite replenishing the account balance to the maximum amount for the purpose of covering additional losses, the FCFD transfers have not been made to fully offset losses in some years, further raising questions about the need to maintain the balance at the statutory cap of $970 million annually. Specifically, in 3 of the 6 years in which DOD transferred funds from the FCFD account to the services’ MILPERS and O&M accounts, DOD did not use the FCFD account to fully cover the losses that the Air Force, Marine Corps, and Navy experienced. In fiscal year 2011, for example, DOD’s transfers out of the FCFD account to these services covered about 88 percent of the reported MILPERS and O&M losses that these services had realized and projected to lose by the end of the fiscal year. In fiscal year 2012, FCFD transfers covered almost 72 percent of the MILPERS and O&M realized and projected losses reported by the Air Force, Marine Corps, and Navy, as of the end of the fiscal year. In fiscal year 2016, DOD FCFD transfers to these services covered approximately 55 percent of their reported MILPERS and O&M realized and projected losses by the end of the fiscal year. The OUSD(C) official we spoke with stated that FCFD transfers to cover losses begin with a request from the services, and the OUSD(C) office and the services then coordinate on the final transfer amount. In addition, some service officials told us that they try to cover their losses using each service’s available funding before reaching out for assistance from the FCFD account. Therefore, based on a service’s ability to cover the loss, it may not always request an FCFD transfer to cover the full amount of realized and projected losses. Further, according to an OUSD(C) official, the timing of a service’s request for an FCFD transfer may also affect any differences between the amount transferred and the actual losses experienced. Specifically, if a service requests a transfer early in the fiscal year based on realized and projected losses, actual losses experienced as of the end of the fiscal year may be greater than or less than the transfer amount due to foreign currency fluctuations. Using transfers of unobligated balances, DOD has maintained its FCFD account balance at the maximum level allowed by statute because it has not analyzed realized and projected losses to determine what size account balance is necessary to meet the intended purpose of the account. In our prior work, we have developed key questions for evaluating federal account balances that agencies may use to identify the amount of the balance necessary to maintain agency or program operations. Through examination of carryover balances, oversight of agencies’ management of federal funds may be enhanced. Specifically, we reported that understanding an agency’s processes for estimating and managing carryover balances provides information to assess how effectively agencies anticipate program needs, and ensure the most efficient use of resources. To estimate and manage carryover balances, agencies may consider such factors as future needs of the account, economic indicators, and historical data. If an agency does not have a robust strategy in place to manage carryover balances or is unable to adequately explain or support the reported carryover balance, then a more in-depth review is warranted. In those cases, balances may either fall too low to efficiently manage operations or rise to unnecessarily high levels, producing potential opportunities for those funds to be used more efficiently elsewhere. When asked about maintaining the balance at a level necessary to cover losses, rather than at the maximum level allowed by statute, the OUSD(C) official indicated that the OUSD(C) takes a cautious approach and prefers to have the additional flexibility allowed by the higher balance. Further, the official stated that it would be difficult for DOD to attempt to base its unobligated balance transfers and the FCFD account balance on analysis and evaluation, given the unpredictable nature and constant volatility of foreign currency rates. Our guidelines on evaluating carryover balances acknowledge that external events beyond an agency’s control can dramatically affect carryover balances. However, the challenges that are inherent in predicting foreign currency rates do not preclude DOD from conducting analysis to glean insight as to the appropriate size for the balance of the account and what potential opportunities for savings might exist. Specifically, our guidelines suggest that agencies would benefit from considering the sources and fiscal characteristics of an account with carryover balances. In this case, the FCFD account can receive funds from transfers of unobligated balances and realized foreign currency gains. In addition, DOD can make multiple transfers throughout a fiscal year and can transfer funds from the FCFD to and from the services’ O&M and MILPERS accounts simultaneously, if necessary. These characteristics of the FCFD account already provide the department with flexibility, indicating that DOD may be positioned to manage the FCFD balance in a more analytical manner based on any projected losses. Without analyzing any realized or projected losses to determine what balance may be needed to meet the FCFD account’s intended purpose, the account balance may be kept at a higher level than is necessary. As a result, although an exact amount is unknown, DOD may be maintaining balances in the FCFD account that are hundreds of millions of dollars higher than needed to cover any losses it has experienced, and these funds may have been more efficiently used in supporting other defense activities or returned to Treasury after the account is canceled by law. DOD prepares financial reports to monitor the status of its foreign currency funds, but some of DOD’s financial reporting on foreign currency fluctuations for fiscal years 2009 through 2016 is incomplete and inaccurate. DOD’s Financial Management Regulation establishes reporting requirements specifically for tracking all transactions that increase or decrease the FCFD. In accordance with that guidance, the services provide data from their accounting systems to the Defense Finance and Accounting Service to generate reports that are used as a tool with which the services and OUSD(C) can monitor how they are expending funds appropriated for overseas expenditures. For O&M appropriations, the Foreign Currency Fluctuations, Defense (O&M) report provides data on foreign currency gains and losses for each service, by currency, including data on projected gains or losses for any remaining obligations that have not yet been disbursed at the time of the report. The Foreign Currency Fluctuations, Defense Report (MILPERS) provides similar information for the MILPERS appropriation. We reviewed end-of-year Foreign Currency Fluctuations, Defense (O&M) and (MILPERS) reports for fiscal years 2009 through 2016 and found that some of the reporting for O&M was incomplete and inaccurate, which hampers the quality of information available to manage the FCFD account. For instance, we found the following: Incomplete data in the Foreign Currency Fluctuations Defense (O&M) reports: In our review of the end-of-year Foreign Currency Fluctuations Defense (O&M) and (MILPERS) reports we observed several instances of incomplete data in the O&M reports, and these affect managers’ ability to make sound decisions to manage foreign currency gains and losses. First, for the Navy, we found that the report data showed, for multiple currencies across fiscal years 2011 through 2016, values in the realized variance column, indicating that the service had experienced a gain or loss in a particular currency; however, the reports showed values of zero in other columns that are necessary for calculating the gain or loss. Second, the Air Force data for the Turkey Lira, in fiscal year 2012, showed a gain or loss without any data indicating what would have driven the gain or loss. Third, in one instance, Marine Corps data on obligations for fiscal year 2011 were missing from the end-of-year reports until 2014. Missing obligation data for these end-of-year reports indicate a limitation in using these reports for tracking actual gains and losses. Inaccurate data in the Army’s Foreign Currency Fluctuations Defense (O&M) reports: The Army’s Foreign Currency Fluctuation Defense (O&M) reports are inaccurate and cannot be used to reliably track gains or losses, and this hinders managers from making sound decisions regarding the Army’s foreign currency gains and losses. The reports are inaccurate in that the Army’s accounting system charges disbursements to the current fiscal year appropriation rather than to the fiscal year appropriation that incurred the obligation, as required by the Financial Management Regulation. According to officials from the Army Budget Office, the Army designed its General Fund Enterprise Business System (GFEBS) to record disbursements to the current fiscal year based on differing interpretations of a previous version of the Regulation. Because the Army is not recording its disbursements to the fiscal year appropriation as the other services are, Army data are inaccurate and cannot be used by the OUSD(C) official responsible for overseeing DOD’s foreign currency program to track the Army’s foreign currency transactions and maintain full visibility of DOD’s overall gains and losses in a given fiscal year. Army Budget Office officials acknowledged that the Army will need to modify its system to record disbursements consistent with Financial Management Regulation guidance, but it has not developed a plan or timeline for doing so. Without accurate reporting of the Army’s foreign currency transactions, DOD lacks information for tracking and helping to manage the Army’s foreign currency gain and losses. DOD’s Financial Management Regulation specifies the data that must be included in the Foreign Currency Fluctuations Defense (O&M) and (MILPERS) reports and the roles and responsibilities of the services as well as the Defense Finance and Accounting Service for ensuring the quality of those data. However, we identified data issues in our analysis that indicate that quality is inconsistent. For example, officials from the Navy stated that they had observed the incomplete data for some currencies and speculated that the incompleteness was attributable to data entry errors. Similarly, according to an OUSD(C) official, the Defense Finance and Accounting Service is notified when discrepancies are found in the reports and the Defense Finance and Accounting Service officials coordinate with the services to correct the data. However, neither Navy nor the Defense Finance and Accounting Service officials have corrected the data. Although DOD’s Financial Management Regulation specifies the data that are to be included, as well as roles and responsibilities of the services and the Defense Finance and Accounting Service, it does not identify who is responsible for correcting erroneous or missing data. According to an OUSD(C) official, correcting reporting issues is an area that OUSD(C), the Defense Finance and Accounting Service, and the services can improve on, and they would benefit from guidance in the Financial Management Regulation that establishes the steps that should be taken for making such corrections. Further, GAO’s Standards for Internal Control in the Federal Government and the Federal Accounting Standards Advisory Board’s Handbook of Federal Accounting Standards and Other Pronouncements, as Amended, both establish the importance of using reliable and complete information for making decisions. In addition, DOD’s Financial Management Regulation establishes responsibilities for both the DOD components and the Defense Finance and Accounting Service to establish appropriate internal controls to ensure that financial reporting data are complete, accurate, and supportable, in order for managers to make sound decisions and exercise proper stewardship over these resources. Effectively managing foreign currency gains and losses as well as any projected gains or losses for any remaining obligations that have not yet been liquidated through disbursement requires complete and accurate data. OUSD(C) and service officials recognize the importance of reliable data, as well as the need to take steps to improve the quality of the foreign currency gains and losses data. Without OUSD(C) establishing guidance to ensure that the Foreign Currency Fluctuation Defense (O&M) report data that tracks foreign currency gains and losses are complete, DOD and Congress do not have information to make sound decisions and exercise proper stewardship over resources due to foreign currency fluctuations. Furthermore, until the Army establishes a plan and timeline for modifying its system to record foreign currency disbursements in an accurate manner, the Army and DOD will lack quality information for tracking and helping to manage the Army’s and DOD’s foreign currency gain and losses. Congress provides DOD with a significant amount of funding each year to purchase goods and services overseas and to pay service-members stationed abroad. DOD develops and can revise foreign currency budget rates to determine its funding needs and calculate any gains or losses that result from DOD’s overseas expenditures. The Army has estimated potential cost savings that would result from more consistently selecting a more cost-effective foreign currency rate for making disbursements to liquidate its overseas O&M obligations. However, DOD has not fully determined whether additional cost-saving opportunities exist because the services have not reviewed the rates used for foreign currency disbursements. Absent a review of the foreign currency rates the services are using at disbursement, including whether cost-saving opportunities exist, by more consistently selecting cost-effective foreign currency rates, DOD risks paying more than would be required otherwise. Further, while DOD has used the FCFD account to cover losses that resulted from foreign currency fluctuations, it has not managed the FCFD account balance by basing the transfers of unobligated balances into the FCFD account on an analysis of realized and projected losses. Without basing its FCFD account balance on such analyses, DOD may be maintaining balances in the FCFD account that are hundreds of millions of dollars higher than needed to cover any losses it has experienced, and these amounts may have been more efficiently used supporting other defense activities or ultimately returned to Treasury, once expired. Moreover, DOD has not established guidance and other procedures to ensure that complete and accurate data are included in financial reporting on foreign currency funds, and this limits the quality of information available to effectively manage the FCFD account. We are making the following four recommendations to DOD. The Secretary of Defense ensures that: The Under Secretary of Defense (Comptroller), in coordination with the U.S. Army, Air Force, Navy, and Marine Corps, should conduct a review of the foreign currency rates used at disbursement to determine whether cost-saving opportunities exist by more consistently selecting cost- effective rates at disbursement. (Recommendation 1) The Under Secretary of Defense (Comptroller) should analyze realized and projected losses to determine the necessary size of the FCFD account balance and use the results of this analysis as the basis for transfers of unobligated balances to the account. (Recommendation 2) The Under Secretary of Defense (Comptroller) should revise the Financial Management Regulation to include guidance on ensuring that data are complete and accurate, including assignment of responsibility for correcting erroneous data in its Foreign Currency Fluctuations Defense (O&M) reports. (Recommendation 3) The Secretary of the Army should develop a plan with timelines for implementing changes to its General Fund Enterprise Business System to accurately record its disbursements, consistent with DOD Financial Management Regulation guidance. (Recommendation 4) We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix II, DOD concurred with our first, third, and fourth recommendations and outlined its plan to address them. DOD partially concurred with our second recommendation that the Under Secretary of Defense (Comptroller) analyze realized and projected losses to determine the necessary size of the FCFD account balance and use the results of the analysis as the basis for transfers of unobligated balances to the account. DOD also provided technical comments, which we incorporated in the report, where appropriate. In partially concurring with our second recommendation, DOD stated that projecting foreign currency gains or losses can be difficult given that foreign currency rates can be volatile due to various factors, such as trade balances, money supply, and national income, as well as arbitrary disturbances that affect foreign currency rates that cannot be predicted or forecasted, such as the departure of the United Kingdom from the European Union. DOD noted that because of the risk and volatility associated with foreign currency rates, the Congress established the FCFD account. We agree that forecasting foreign currency rates is challenging due to market volatility and include examples in our report of the effect of foreign currency rate fluctuations on DOD’s planned foreign currency obligations. Our report also describes the relationship between gains and losses and foreign currency fluctuations, and the movement of funds from the FCFD account to offset any losses. As our report also discusses, DOD calculates actual and projected losses due to foreign currency fluctuations and uses those projections as the basis, at least in part, for any transfers out of the FCFD account to cover losses experienced in the military services’ O&M and MILPERS appropriations. However, our report also notes that DOD does not consider its calculations of actual and future projected losses when making transfers of unobligated O&M and MILPERS balances to replenish the FCFD account. Instead, since fiscal year 2012, DOD has kept the FCFD account balance at the maximum level allowed by statute by using unobligated balances before they are canceled and are no longer available to DOD, regardless of whether the funds were needed in the account to offset any projected losses. DOD’s comments also stated that projecting gains or losses for foreign currency to determine the size of the FCFD account opens the door to greater uncertainty and risk at a time when the department is working to rebuild readiness and implement the National Defense Strategy. Our report describes the characteristics of the FCFD account that provide DOD with flexibility to manage market volatility, thereby helping to address uncertainty and reduce risk. For example, DOD can make multiple transfers of funds to the FCFD account throughout a fiscal year in response to unforeseen foreign currency fluctuations. The FCFD account can also receive funds from transfers of actual foreign currency gains and/or unobligated balances. As we also noted, DOD made use of its authority to transfer expired unobligated MILPERS and O&M amounts into the FCFD account in the event that actual losses exceeded the projected amounts and additional transfers were deemed necessary. We continue to believe that by analyzing actual and projected losses and basing the transfer of any unobligated balances on these losses, DOD would be better positioned to determine the size of the FCFD account balance that is necessary to meet its intended purpose. Further, such analyses would provide opportunities to more efficiently use unobligated balances for other defense activities or return the balances to Treasury. We are sending copies of this report to the Secretary of Defense, the Under Secretary of Defense (Comptroller), the Secretary of the Army, the Secretary of the Navy, the Secretary of the Air Force, the Commandant of the Marine Corps, and appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-5431 or russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. To describe the Department of Defense’s (DOD) revised foreign currency budget rates since 2009 and the relationship between the revised budget rates and DOD’s projected Operation and Maintenance (O&M) and Military Personnel (MILPERS) funding needs, we reviewed DOD’s foreign currency budget rates for the period of fiscal years 2009 through 2017, and we identified any years during which DOD revised the initial budget rates. We compared DOD’s initial foreign currency budget rates and revised foreign currency budget rates with rates published by the U.S. Treasury Department (Treasury) for fiscal years 2009 through 2017. This period corresponded with data available to us on DOD’s initial and revised rates and allowed for use of the most current data available, since DOD had not yet decided whether or not to revise the fiscal year 2018 budget rates, while we were conducting our audit work. We chose rates published by Treasury for this comparison because Treasury has the sole authority to establish for all foreign currencies or credits the exchange rates at which such currencies are to be reported by all agencies of the government. Because Treasury rates are issued quarterly, we averaged Treasury’s first and second quarter rates for each currency and compared the Treasury average with DOD’s initial budget rates. Similarly, we computed an average of the third and fourth quarter Treasury rates for each currency and compared them with the DOD initial or revised budget rates, where applicable. These comparisons are meant to show the difference between DOD’s budget rates and Treasury rates for the first 6 months of the fiscal year, and the difference between DOD’s revised exchange rates and Treasury rates for the last 6 months of the fiscal year. Further, we analyzed the extent to which DOD’s budget rates were within 10 percent of Treasury rates during these same years. We chose 10 percent as the basis for our analysis because Treasury’s guidance states that amendments to the quarterly rates will be published during the quarter to reflect significant changes in the quarterly data, such as rate changes of 10 percent or more. Additionally, to understand the effect that revising the budget rates had on DOD’s O&M and MILPERS funding estimates and on potential gains or losses due to foreign currency fluctuations, we used a three-step approach. First, we identified the amount of O&M and MILPERS funds DOD requested for each currency. We converted the U.S. Dollars requested to the total amount of foreign currency needed by multiplying the U.S. Dollars requested by DOD’s initial budget rate. Second, we determined the total amount of U.S. Dollars required using the revised rates by dividing the total amount of foreign currency needed using DOD’s initial budget rate by DOD’s revised budget rate. We used this same approach to determine the total amount of U.S. Dollars required using the average Treasury rates. Third, we computed the differences in DOD’s O&M and MILPERS foreign currency funding needs by subtracting the U.S. Dollars required to meet its foreign currency needs based on the average Treasury rates from the amounts required based on DOD’s initial budget rates and DOD’s revised budget rates, respectively. We discussed further with officials from the Office of the Under Secretary of Defense, Comptroller (OUSD(C)) the factors considered in revising the rates and whether those factors are communicated within and outside of the department. To evaluate the extent to which DOD has taken steps to reduce costs in selecting foreign currency rates at which to make disbursements and determine whether opportunities exist to gain additional savings, we reviewed accounting standards and any guidelines that exist regarding disbursements and calculations of foreign currency gains and losses, such as DOD’s Financial Management Regulation 7000.14-R, which calls for the use of prevailing foreign currency rates to make disbursements. We also discussed with agency officials how those guidelines are being carried out, and whether DOD or the services have developed guidance that instructs the services in selecting rates used for disbursements in foreign currencies. Additionally, we examined a non-generalizable selection of data for DOD disbursements made during the months June and July 2017 from Treasury’s International Treasury Service (ITS.gov) system to determine which rates DOD used during this period and what savings might be achievable from using alternate rates. We chose data from those 2 months because it was the most recent data available on disbursements at the time Treasury provided the data for our review. Additionally, we discussed with officials from OUSD(C) and the services any analysis and ongoing efforts to transition to more cost-effective rates, including savings that may result. To assess the extent to which DOD has effectively managed the Foreign Currency Fluctuations, Defense (FCFD) account to cover losses, and maintained quality information to manage these funds, we analyzed DOD data for fiscal years 2009 through 2016 on foreign currency gains and losses reported by each of the services as reported in their Foreign Currency Fluctuation, Defense (O&M) and (MILPERS) reports; movements of funds between the FCFD account and the services’ O&M and MILPERS accounts; and the end-of-year FCFD account balances. We chose this time period in order to capture years in which both gains and losses were experienced, and for which DOD had complete data on gains and losses, fund transfers, and end-of-year balances for the FCFD account. Because the Army charges disbursements to the current fiscal year appropriation instead of the fiscal year appropriation that incurred the obligation, we requested that the Army adjust its reported data on foreign currency gains and losses and provide information consistent with how the other services report them, and with DOD’s Financial Management Regulation. However, the Army was unable to provide us with data that were consistent with what was provided by the other services at the time of our review. We, therefore, were unable to use Army data for purposes of comparison with data provided by the other services. We compared the end-of-year FCFD account balances and the use of the account with guidelines established in our prior work on the importance of examining unobligated balances. Additionally, we reviewed and analyzed DOD financial reports on foreign currency gains or losses and compared the reports, including any identified discrepancies, against best practices and standards on accurate reporting and maintaining quality information, such as those in GAO’s Standards for Internal Control in the Federal Government, and the Federal Accounting Standards Advisory Board’s Handbook of Federal Accounting Standards and Other Pronouncements, as Amended. To determine the reliability of the data used in addressing these objectives, we analyzed DOD and Treasury foreign currency rates, data on DOD foreign currency disbursements, and DOD financial reporting data on foreign currency gains and losses to identify any missing or inaccurate information, and we discussed with agency officials any identified abnormalities and how the information was extracted from systems, when appropriate. We found the data to be sufficiently reliable for the purposes of our reporting objectives, with the exception of the financial reporting on financial gains and losses. Specifically, based on problems with the completeness and accuracy of DOD’s financial reporting on foreign currency gains and losses, we found that these data were not sufficiently reliable for the purpose of computing exact totals for the gains and losses DOD experienced. However, because DOD uses these data as the basis for decisions related to management of the FCFD account, we included the data in our analysis to provide insight into the scope of gains and losses experienced. We also spoke with OUSD(C), military service, and Treasury officials regarding the process and systems used to input the reviewed data and generate the foreign currency reports we reviewed. We conducted this performance audit from February 2017 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Matt Ullengren, Assistant Director; and Tulsi Bhojwani, Justin Bolivar, Carol Bray, Amie Lesser, Kelly Liptan, Felicia Lopez, Leah Nash, Randy Neice, Jacqueline McColl, Mike Silver, Roger Stoltz, Susan Tindall, John Trubey, Elaine Vaurio, and Cheryl Weissman made key contributions to this report.", "summary": "DOD requested about $60 billion for fiscal years 2009 - 2017 to purchase goods and services overseas and reimburse service-members for costs incurred while stationed abroad. DOD uses foreign currency exchange rates to budget and pay (that is, disburse amounts) for these expenses. It also manages the FCFD account to mitigate a loss in buying power that results from foreign currency rate changes. GAO was asked to examine DOD's processes to budget for and manage foreign currency fluctuations. This report (1) describes DOD's revision of its foreign currency budget rates since 2009 and the relationship between the revised rates and projected O&M and MILPERS funding needs; (2) evaluates the extent to which DOD has taken steps to reduce costs in selecting foreign currency rates to disburse funds to liquidate O&M obligations, and determined whether opportunities exist to gain additional savings; and (3) assesses the extent to which DOD has effectively managed the FCFD account balance. GAO analyzed data on foreign currency rates, DOD financial management regulations, a non-generalizable sample of foreign currency disbursement data, and FCFD account balances. The Department of Defense (DOD) revised its foreign currency exchange rates (“budget rates”) during fiscal years 2014 through 2016 for each of the nine foreign currencies it uses to develop its Operation and Maintenance (O&M) and Military Personnel (MILPERS) budget request. These revisions decreased DOD's projected O&M and MILPERS funding needs. DOD's revision of the budget rates during these years also decreased the expected gains (that is, buying power) that would have resulted from an increase in the strength of the U.S. Dollar relative to other foreign currencies. DOD did not revise its budget rates in fiscal years 2009 through 2013. For fiscal year 2017, DOD changed its methodology for producing budget rates, resulting in rates that were more closely aligned with market rates. According to officials, that change made it unnecessary to revise the budget rates during the fiscal year. DOD has taken some steps to reduce costs in selecting foreign currency rates used to pay (that is, disburse amounts) for goods and services, but DOD has not fully determined whether opportunities exist to achieve additional savings. The Army has estimated potential savings of up to $10 million annually by using a foreign currency rate available 3 days in advance of paying for goods or services rather than a more costly rate available up to 5 days in advance. The Army has converted to the use of a 3-day advanced rate. GAO's analysis suggests that DOD could achieve cost savings if the services reviewed and consistently selected the most cost-effective foreign currency rates when paying for their goods and services. Absent a review, DOD is at risk for paying more than it would otherwise be required to conduct its transactions. DOD used the Foreign Currency Fluctuations, Defense (FCFD) account to cover losses (that is, less buying power) due to unfavorable foreign currency fluctuations in 6 of the 8 years GAO reviewed. Since 2012, DOD has maintained the FCFD account balance at the statutory limit of $970 million, largely by transferring unobligated balances before they are cancelled from certain DOD accounts into the FCFD. However, DOD has not identified the appropriate FCFD account balance needed to maintain program operations by routinely analyzing projected losses and basing any transfers into the account on those expected losses. Thus, DOD may be maintaining balances that are hundreds of millions of dollars higher than needed, and that could have been used for other purposes or returned to the Treasury Department (see figure). GAO is making four recommendations, including that DOD review opportunities to achieve cost savings by more consistently selecting the most cost-effective foreign currency rates used for the payment of goods and services, and analyze projected losses to manage the FCFD account balance. DOD generally concurred with the recommendations.", "document_type": "gao"}
{"report": "Scientific research on and projections of the changes taking place in the Arctic vary, but there is a general consensus that the Arctic is warming and that its sea ice is diminishing. For example, scientists at the National Snow and Ice Data Center reported that for 2018 the minimum amount of sea ice coverage in the Arctic—typically occurring in September each year—was the sixth lowest in the satellite record and 656,000 square miles fewer than the mean for the 1981 through 2010 time frame. Further, the scientists found that the 12 lowest recordings of September ice coverage on satellite record have all occurred in the past 12 years. Figure 1 shows the sea ice coverage (i.e., extent) in the Arctic for September 2018 compared with the median ice edge for 1981 through 2010. While much of the Arctic Ocean remains ice-covered for the majority of the year, most scientific estimates predict there will be a continued decrease in sea ice coverage in the Arctic Ocean in the summer sometime in the next 20 to 40 years. According to the Navy’s Arctic Roadmap for 2014 to 2030, while there may be less sea ice there in the future, the ice that remains will continue to be a challenge to those operating in the area. Most commercial ship activity in the Arctic is regional—shipping into or out of the Arctic, mainly in support of commercial activity—not trans- Arctic. However, according to the official Navy estimate from 2013, the decreasing coverage of sea ice will result in more open water allowing increased maritime activity along three trans-Arctic routes from 2012 through 2030: the Northern Sea Route, the Northwest Passage, and the Trans-Polar Route (see fig. 2). This development could, for example, reduce by thousands of miles and by several days of travel the shipping of goods between countries in Asia and North America. Increased economic activity in the Arctic could potentially increase the need for military capabilities there to safeguard U.S. interests. For example, estimates of significant oil, gas, and mineral deposits in the Arctic have increased the interest in exploration opportunities in the region. These resources include an estimated 13 percent of the world’s undiscovered oil; 30 percent of the world’s undiscovered gas; and approximately $1 trillion of minerals including gold, zinc, nickel, and platinum. According to information provided by the Department of State, the vast majority of these resources are within the undisputed continental shelf of the respective coastal states. Officials from the Department of State stated that disputed claims related to the small remaining portions of the Arctic seabed may be addressed within the international framework established by the United Nations Convention on the Law of the Sea. However, as we reported in 2015, even with the changing climate and growing interest in the region, several enduring characteristics will continue to provide challenges to surface navigation in the Arctic for the foreseeable future. These include large amounts of winter ice and increased movement of ice from spring to fall. Increased movement of sea ice makes its location less predictable, a situation that increases the risk that ships can become trapped or damaged by ice impacts. In addition, the lack of infrastructure in the Arctic region affects the reliability of shipping through the area. Economic factors such as risk costs, as well as changes in the shipping market resulting from the Panama Canal expansion may also affect the amount of shipping along these routes. As figure 3 shows, even as the seasonal ice decreases over time, the Navy has projected that the Arctic will remain impassable for most commercial ships for most of the year from 2012 through 2030. These factors combined are likely to affect the pace at which commercial activity will increase. We have previously examined emerging issues and challenges for the United States in the Arctic. See figure 4 for a timeline of our prior reports related to Arctic issues. We also include a list of our prior work related to the Arctic at the end of this report. The Navy’s June 2018 report aligns with DOD’s assessments that the Arctic threat level remains low and that DOD has the capabilities required to execute its 2016 DOD Arctic Strategy. Specifically, the June 2018 report and the information it provides for each of the reporting elements discusses how the department can execute the 2016 DOD Arctic Strategy. The strategy contains two overarching objectives: to (1) ensure security, support safety, and promote defense cooperation and (2) prepare to respond to a wide range of challenges and contingencies to maintain stability in the region. These objectives reflect DOD’s assessment that there is a low level of military threat in the Arctic, as well as the stated commitment of the Arctic nations to work within a common framework of diplomatic engagement. In the strategy, DOD identifies the types of investments that will need to be made over time as activity in the region increases; however, DOD also discusses the importance of assessing the needs in the Arctic and of balancing potential Arctic-specific capabilities investments against other national security priorities and fiscal realities. The Arctic threat assessment briefings we received from officials at the U.S. Northern Command and the Office of Naval Intelligence also reflected the low risk for conflict in the Arctic referenced in the Navy’s June 2018 report. Below, we summarize the Navy’s response to each reporting element, and our evaluation of whether the response aligns with current assessments of Arctic threat levels and capabilities required to execute DOD’s 2016 Arctic Strategy. Reporting Element One: The Navy was required to report on the current naval capabilities of the Department of Defense in the Arctic region, with a particular emphasis on surface capabilities. The June 2018 report provides information on this required element, with the Navy stating that it relies on the submarine force as well as on aviation assets and surface operations when necessary to operate in the Arctic. These capabilities in the Arctic region are consistent with those identified in The United States Navy Arctic Roadmap for 2014 to 2030 to execute the 2016 DOD Arctic Strategy, and as corroborated in our discussions with U.S. Northern Command and Navy officials. In addition, the Navy discusses the significant limitations of its surface ships for Arctic operations in the June 2018 report. The limitations identified are consistent with information contained in the U.S. Navy Cold Weather Handbook for Surface Ships and with information we discussed with Naval Sea Systems Command officials who oversee modifications to the fleet and the acquisition of new ships. For example, Navy officials told us that top-side icing has detrimental effects on ships. As sea spray accumulates on a ship deck and freezes, a ship can lose some of the capabilities of its external sensors and radars and a ship’s stability in the water decreases as the ship’s center of gravity becomes top heavy. Navy and Coast Guard officials told us that while the Coast Guard regularly operates in the Arctic given its ice-breaking and maritime safety missions, among others, Navy surface ships have not been designed to maneuver and operate in icy waters. Although some of the Navy’s T-class ships have some capability to operate in light or broken first-year ice due to the inherent strength of their hulls, traditional surface combatant ships (e.g., Cruisers, Destroyers, or Frigates) are not designed to operate in icy waters. Reporting Element Two: The Navy was required to report on any gaps that exist between the current naval capabilities and the ability of the department to fully execute its updated strategy for the Arctic region. The June 2018 report provides information on this required element, with the Navy stating that the department can execute the 2016 DOD Arctic Strategy with current naval capabilities. The June 2018 report is similarly aligned with Navy assessments of Arctic capabilities and gaps contained in its plan, The United States Navy Arctic Roadmap for 2014 to 2030 that the Office of the Chief of Naval Operations issued in February 2014. This plan provides guidance to prepare the Navy to respond effectively to future Arctic Region contingencies, delineates the Navy’s leadership role, and articulates the Navy’s support to achieve national priorities in the region. At the time of our review, DOD was in the process of drafting another report—on DOD arctic capability and resource gaps—as required by section 1054 of the National Defense Authorization Act for Fiscal Year 2018. In addition, according to Navy officials, the Navy was also drafting its Arctic Strategic Outlook, which is a follow-up to The United States Navy Arctic Roadmap for 2014 to 2030. According to DOD and Navy officials, both forthcoming reports will focus on contextualizing Arctic needs within the framework of the 2018 National Defense Strategy. Because these efforts were not complete at the time of our review, we were unable to determine whether the Navy’s June 2018 report aligns with these assessments. Reporting Element Three: The Navy was required to report on any gaps in the current naval capabilities that require ice-hardening of existing vessels or the construction of new vessels to preserve freedom of navigation in the Arctic region whenever and wherever necessary. The June 2018 report provides information on this required element, with the Navy stating that there are currently no validated capability gaps that require the Navy to ice-harden existing vessels or construct new ice- capable vessels to preserve freedom of navigation in the Arctic. Furthermore, the Navy stated that its current assets are sufficient to execute the 2016 DOD Arctic Strategy. As noted above, freedom of navigation operations are undertaken to, among other things, promote maritime stability and to challenge excessive sovereignty claims. In addition, DOD officials stated that the United States already has options other than Navy surface ships for demonstrating the United States’ freedom to operate in the Arctic, including using Coast Guard vessels, Navy submarines, or military aircraft. Reporting Elements Four and Five: The Navy was required to provide an analysis and recommendation of which Navy vessels could be ice-hardened to effectively preserve freedom of navigation in the Arctic region when and where necessary, in all seasons and weather conditions, and an analysis of any cost increases or schedule adjustments that may result from ice-hardening existing or new Navy vessels. The June 2018 report provides some information on these required elements, with the Navy stating that it is not pursuing ice-hardening or the winterization of surface ships. According to the Navy, because there is no specific capability requirement for the Navy to ice-harden ships, the report does not list or name potential ice-hardening candidates among existing vessels or provide cost or schedule estimates for ice-hardening vessels. Officials with the Naval Sea Systems Command, which develops cost and schedule estimates for ship modifications and new construction, told us that they had not conducted life-cycle cost studies for ice-hardening existing ships because there is no capability requirement for an ice- hardened ship and, therefore, no ship design on which to base such a study or estimate. Furthermore, the June 2018 report states that the Navy is leveraging cooperative research with international partner-nations such as Canada, Denmark, Finland, and Norway, to better understand how other Arctic nations are meeting additional requirements for Arctic operations. Navy officials from the Naval Sea Systems Command stated that ships built to operate in ice and extreme cold environments have unique features, including stronger, thicker construction of all portions of the hull that would come into contact with ice; different hull form design; redesigned propellers constructed of higher than traditional strength material; increased strength ship parts, such as rudders and seawater intakes and discharges designed to resist the formation or accumulation of ice; and more powerful heating and ventilation to accommodate sustained operations in extreme cold environments, among other things. They also noted that research completed to date has advanced the Navy’s knowledge in several of these areas including hull form and propeller design. Navy officials estimated that a new ship design might require 20 years to reach initial operational capability. They noted the process might take only 10 years if the Navy can leverage an ongoing program, such as the DDG-51 Class program. Navy officials cautioned that the combination of features that enable ice-capable ships to sustain operating in extreme cold environments could compromise other performance areas such as speed, range, and ship motion. Officials told us that this would add to the Navy’s already strained efforts to maintain existing global naval presence requirements. Although the June 2018 report did not discuss any cost and schedule adjustments that might arise from ice-hardening or new ship construction, we have previously reported that the Navy has faced challenges meeting its shipbuilding cost, schedule, and performance goals over the past decade. Specifically, we found that the 11 lead ships most recently delivered to the Navy cost $8 billion more to construct than initially budgeted for. Navy officials stated that the Navy contractor construction yards currently lack expertise in the design for construction of winterized, ice-capable surface combatant and amphibious warfare ships. Accordingly ice-hardening and winterization design practices could introduce cost and schedule risk, challenging the execution of an ice- hardened new construction ship building program for an ice-capable ship. If the Navy executes this potential program without the requisite knowledge at key points it could be at risk of cost and schedule growth that we have seen in recent Navy shipbuilding programs. The Navy has faced these challenges in part because the department has proceeded with construction prior to completing technology development and ship design. We have found that successful ship building programs are based on sound business cases, starting with the lead ship, and on the attainment of critical levels of knowledge at key points in the process prior to making significant investments. Navy officials said that the Navy does not currently have a specific capability requirement for ice-hardening existing vessels or for the construction of new ones, and stated that the Navy or Joint Force is unlikely to produce such a requirement in the near term. Navy officials told us that the Navy will continue to use DOD’s established process, the Joint Capabilities Integration and Development System (JCIDS), which governs the department’s requirements process, to assess Arctic-related capability requirements in the near and long term (see fig. 5). All DOD components use the JCIDS process or variations of the process within their organizations to identify, assess, validate, and prioritize joint military requirements. Before starting the JCIDS process, the military services, combatant commanders, and other DOD components conduct capabilities-based assessments or other studies to assess capability requirements and associated capability gaps and the associated risks. In October 2017, the Joint Requirements Oversight Council (JROC) validated U.S. Northern Command’s initial capabilities document identifying three gaps in the ability to exercise/deploy, position, and conduct deterrence/decisive operations in ice-diminished Arctic waters. At the time of our review, the JROC had reviewed and validated the U.S. Northern Command’s Arctic initial capabilities document and designated it for further study by the Navy. The validation of an initial capabilities document by the JROC is an early part of the JCIDS process, and informs updates to capability requirement documents related to specific materiel and nonmateriel capability solutions to be pursued. A Navy official stated that the capability gaps identified in the U.S. Northern Command’s validated initial capabilities document will now compete for resources with other issues designated for study across the Navy. According to a Navy official, whenever the Navy initiates a study, this triggers the analysis of alternatives phase of the JCIDS process. Under this process, each alternative would need to be specifically evaluated for its costs and benefits. DOD officials noted that there are several analytical steps in the JCIDS process during which potential solutions for any identified gaps are analyzed. They told us that potential solutions might also include alternatives other than ice-hardening or new ship construction, such as adding capabilities to Coast Guard ships or partnering with allies to achieve common strategic goals in the Arctic. Even as the seasonal ice decreases over time, according to Navy officials, the Arctic will remain impassable for most commercial ships for most of the year. For these reasons, projections of increased Arctic sea activity remain uncertain. DOD, U.S. Northern Command, Navy, and Coast Guard officials told us that even as Arctic maritime activity is expected to increase, several enduring characteristics will continue to provide challenges to surface navigation in the Arctic for the foreseeable future. These challenges include large amounts of winter ice and increased movement of ice from spring to fall. As mentioned earlier, the increased movement of sea ice makes its location less predictable, a situation that is likely to increase the risk that ships can become trapped or damaged by ice impacts. Coast Guard officials noted that a challenging environment like the Arctic may result in a higher likelihood of incidents occurring. Further, responding to incidents with search and rescue operations are riskier to execute than in non-polar environments. In addition, the lack of infrastructure and logistical support in the Arctic affects maritime activities through that region. We are not making any recommendations in this report. We provided a draft of our report to DOD, Department of Homeland Security, and the Department of State for comment. DOD, Department of Homeland Security, and Department of State provided technical comments, which we incorporated into this report as appropriate. We are sending copies of this report to the appropriate congressional committees. We are also sending copies to the Secretary of Defense, Secretary of State, and the Secretary of Homeland Security. In addition, this report will be available at no charge on our website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Suzanne Wren (Assistant Director), Delia Zee (Analyst-in-Charge), John Beauchamp, Mae Jones, Amie Lesser, Ned Malone, and Shahrzad Nikoo made key contributions to this report. Coast Guard Acquisitions: Polar Icebreaker Program Needs to Address Risks before Committing Resources. GAO-18-600. Washington, D.C.: September 4, 2018. Navy Shipbuilding: Past Performance Provides Valuable Lessons for Future Investments. GAO-18-238SP. Washington, D.C.: June 6, 2018. Coast Guard Acquisitions: Status of Coast Guard’s Heavy Polar Icebreaker Acquisition. GAO-18-385R. Washington, D.C.: April 13, 2018. Coast Guard: Status of Polar Icebreaking Fleet Capability and Recapitalization Plan. GAO-17-698R. Washington, D.C.: September 25, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Arctic Planning: DOD Expects to Play a Supporting Role to Other Federal Agencies and Has Efforts Under Way to Address Capability Needs and Update Plans. GAO-15-566. Washington, D.C.: June 19, 2015. Climate Change Adaptation: DOD Can Improve Infrastructure Planning and Processes to Better Account for Potential Impacts. GAO-14-446. Washington, D.C.: May 30, 2014. Arctic Issues: Better Direction and Management of Voluntary Recommendations Could Enhance U.S. Arctic Council Participation. GAO-14-435. Washington, D.C.: May 16, 2014. Maritime Infrastructure: Key Issues Related to Commercial Activity in the U.S. Arctic over the Next Decade. GAO-14-299. Washington, D.C.: March 19, 2014. Managing for Results: Implementation Approaches Used to Enhance Collaboration in Interagency Groups. GAO-14-220. Washington, D.C.: February 14, 2014. Managing for Results: Key Considerations for Implementing Interagency Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September 27, 2012. Arctic Capabilities: DOD Addressed Many Specified Reporting Elements in Its 2011 Arctic Report but Should Take Steps to Meet Near- and Long- term Needs. GAO-12-180. Washington, D.C.: January 13, 2012. Coast Guard: Efforts to Identify Arctic Requirements Are Ongoing, but More Communication about Agency Planning Efforts Would Be Beneficial. GAO-10-870. Washington, D.C.: September 15, 2010. Alaska Native Villages: Limited Progress Has Been Made on Relocating Villages Threatened by Flooding and Erosion. GAO-09-551. Washington, D.C.: June 3, 2009.", "summary": "The Navy is responsible for providing ready forces for current operations and contingency response in the Arctic Ocean. According to data from the National Snow and Ice Data Center, the coverage of sea ice in the Arctic has diminished significantly since 1981. This could potentially increase maritime activities there, leading to a need for a greater U.S. military and homeland security presence in the region. Public Law 115-91 required the Navy to report to Congress on the Navy's capabilities in the Arctic, including any capability gaps and requirements for ice-hardened vessels. It also included a provision for GAO to review the Navy's report. This report (1) assesses the extent to which the Navy's report aligns with current assessments of Arctic threat levels and capabilities required to execute DOD's 2016 Arctic Strategy and (2) describes any current requirements for ice-hardened vessels and DOD's approach for evaluating the capabilities needed as Arctic requirements evolve. GAO reviewed the Navy's report along with DOD's assessments of Arctic threats and naval capabilities. GAO also reviewed the 2016 DOD Arctic Strategy— the most current strategy, DOD and Department of State information on the freedom of navigation program as well as DOD's processes for developing capabilities and assessing Arctic capability gaps. GAO is not making any recommendations in this report. DOD provided written technical comments which were incorporated as appropriate. The Navy's June 2018 report aligns with Department of Defense (DOD) assessments that the Arctic is at low risk for conflict and that DOD has the capabilities to execute the 2016 DOD Arctic Strategy . The June 2018 report also aligns with assessments of Arctic capabilities and gaps in the Navy's 2014 roadmap for implementing the strategy. The June 2018 report states that the Navy can execute the strategy with subsurface, aviation, and surface assets. The report notes the significant limitations for operating surface ships in the Arctic, but states that the Navy has the capabilities required for executing the strategy , and so has no plan to design ice-hardened surface ships. In addition, DOD officials stated that the United States has options other than Navy surface ships for demonstrating the U.S. right to operate in the Arctic, including using Coast Guard vessels, Navy submarines, or military aircraft. Navy officials said that the Navy does not have a specific requirement for ice-hardening existing vessels or constructing new ones. The Navy plans to continue to use DOD's established process, the Joint Capabilities Integration and Development System to reassess Arctic-related requirements as conditions evolve (see fig.). In October 2017, the Joint Requirements Oversight Council validated U.S. Northern Command's initial capabilities document identifying three gaps in the ability to exercise/deploy, position, and conduct deterrence/decisive operations in ice-diminished Arctic waters. At the time of GAO's review, the Joint Staff had validated the capability gaps, which will now compete for resources with other issues designated for further study. Officials said additional study may identify alternative solutions such as adding capabilities to Coast Guard ships or partnering with allies to achieve common strategic goals in the Arctic.", "document_type": "gao"}
{"report": "IRS administration of the LIHTC program involves overseeing compliance on the part of allocating agencies and taxpayers and developing and publishing regulations and guidance. IRS is responsible for reviewing LIHTC information on three IRS forms that are the basis of LIHTC program reporting and then determining whether program requirements have been met. Taxpayer noncompliance with LIHTC requirements may result in IRS denying claims for the credit in the current year or recapturing—taking back—credits claimed in prior years. Published guidance may include revenue rulings and procedures, notices, and announcements. Other guidance for the program includes an Audit Technique Guide for Completing Form 8823 that includes specific instructions for allocating agencies, including when site visits and file reviews are to be performed, and guidelines for determining noncompliance in areas such as health and safety standards, rent ceilings, income limits, and tenant qualifications. State and local allocating agencies are responsible for day-to-day administration of the LIHTC program based on Section 42 of the Internal Revenue Code and Treasury regulations. More specifically, allocating agencies are responsible for Awarding tax credits. Each state receives an annual allocation of LIHTCs, determined by statutory formula. Allocating agencies then competitively award the tax credits to owners of qualified rental housing projects that reserve all or a portion of their units for low-income tenants, consistent with the agencies’ QAPs. Developers typically attempt to obtain funding for their projects by attracting third-party investors willing to contribute equity to the projects; the project investors then can claim the tax credits. Monitoring costs. Section 42 states that allocating agencies must consider the reasonableness of costs and their uses for proposed LIHTC projects, allows for agency discretion in making this determination, and also states that credits allocated to a project may not exceed the amount necessary to assure its feasibility and its viability as a low-income housing project. However, Section 42 does not provide a definition or offer guidance on determining how to calculate these amounts. Monitoring compliance. After credits are awarded, Treasury regulations state that allocating agencies must conduct regular site visits to physically inspect units and review tenant files for eligibility information. The agencies also have reporting and notification requirements. For example, allocating agencies must notify IRS of any noncompliance found during inspections and ensure that owners of LIHTC properties annually certify they met certain requirements for the preceding 12-month period. Developers of awarded projects typically attempt to obtain funding for their projects by attracting third-parties willing to invest in the project in exchange for the ability to claim tax credits. The developer sells an ownership interest in the project to one or more investors, or in many instances, to a fund managed by a syndicator who acts as an intermediary between the developer and investors. Investors and syndicators play several roles in the LIHTC market. For example, syndicators help initially connect investors and developers and oversee acquisition of projects. Once a project is acquired, syndicators perform ongoing monitoring and asset management to help ensure the project complies with LIHTC requirements and is financially sound. Syndicators attempt to identify potential problems and intercede if necessary, such as replacing under- or nonperforming general partners, and may use their own reserves to help resolve problems. In exchange for these services, syndicators typically are compensated through an initial acquisition fee—usually a percentage of the gross equity raised— and an annual asset management fee. Syndicators that we surveyed for our 2017 report were nonprofit or for- profit entities, generally had multistate operations, and averaged more than 20 years of experience with the LIHTC program. Of the 32 syndicators we surveyed, the syndicators collectively had raised more than $100 billion in LIHTC equity since 1986, helping to fund more than 20,000 properties and about 1.4 million units placed-in-service through 2014. Projects for which these syndicators raised equity in 2005–2014 represented an estimated 75 percent of all LIHTC properties placed-in- service in that period. As we reported in 2016, allocating agencies implemented requirements for QAPs in varying ways and had processes in place to meet requirements for credit awards. Allocating agencies also had procedures to assess costs, but determined award amounts for projects differently, used various cost limits and benchmarks to determine reasonableness of costs, and used widely varying criteria for basis boosts. Agencies also had processes in place to monitor compliance. However, some of these practices raised concerns. In our 2016 report, we generally found that allocating agencies implemented requirements for QAPs in varying ways and had processes in place to meet requirements for awarding the tax credit. Based on our 2016 review of 58 QAPs and our nine site visits, we found the QAPs did not always contain, address, or mention preferences and selection criteria required in Section 42. Rather, some allocating agencies incorporated the information into other LIHTC program documents, or implemented the requirements in practice. While Section 42 specifies some selection criteria (such as project location or tenant populations with special housing needs), it also more broadly states that a QAP set forth selection criteria “appropriate to local conditions.” As a result, allocating agencies have the flexibility to create their own methods and rating systems for evaluating applicants. We found that nearly all the allocating agencies that we reviewed used points or a threshold system for evaluating applicants. They used criteria such as qualifications of the development team, cost effectiveness, or leveraging of funds from other federal or state programs. According to Section 42, allocating agencies must notify the chief executive officer (or the equivalent) of the local jurisdiction in which the project is to be located. However, some agencies imposed an additional requirement of letters of support from local officials. Specifically, as of 2013, we found that of the 58 agencies in our review,12 agencies noted that their review or approval of applications was contingent on letters of support, and another 10 agencies awarded points for letters of local support. HUD officials have cited fair housing concerns in relation to any preferences or requirements for local approval or support because of the discriminatory influence these factors could have on where affordable housing is built. In December 2016, IRS issued a revenue ruling that clarified that Section 42 neither requires nor encourages allocating agencies to reject all proposals that do not obtain the approval of the locality where the project developer proposes to place the project. Allocating agencies we visited for our 2016 report had processes in place to meet other Section 42 requirements, including awarding credit to nonprofits and long-term affordability of projects. Allocating agencies must allocate at least 10 percent of the state housing credit ceiling to projects involving qualified nonprofit organizations. All nine allocating agencies we visited had a set-aside of at least 10 percent of credits to be awarded to projects involving nonprofits. Section 42 also requires allocating agencies to execute an extended low-income housing commitment of at least 30 years before a building can receive credits. For example, one allocating agency we visited required developers to sign agreements for longer extended-use periods, while some agencies awarded points to applications whose developers elect longer periods. Allocating agencies we reviewed for our 2016 report had procedures to assess costs, but determined award amounts for projects differently and used various cost limits and benchmarks to determine reasonableness of costs. All nine allocating agencies we visited required applicants to submit detailed cost and funding estimates, an explanation of sources and uses, and expected revenues as part of their applications. These costs were then evaluated to determine a project’s eligible basis (total allowable costs associated with depreciable costs in the project), which in turn determined the qualified basis and ultimately the amount of tax credits to be awarded. Reasonableness of costs. We found that allocating agencies had different ways for determining the reasonableness of project costs. Based on our analysis of 58 QAPs and our nine site visits, agencies had established various limits against which to evaluate the reasonableness of submitted costs, such as applying limits on development costs, total credit awards, developer fees, and builder’s fees. Section 42 does not provide a definition of reasonableness of costs, giving allocating agencies discretion on how best to determine what costs are appropriate for their respective localities. Discretionary basis boosts. Allocating agencies commonly “boosted” the basis for projects, but used widely varying criteria for doing so. Section 42 notes that an increase or “boost” of up to 130 percent in the eligible basis can be awarded by an allocating agency to a housing development in a qualified census tract or difficult development area. According to our QAP analysis, 44 of 58 plans we reviewed included criteria for awarding discretionary basis boosts, with 16 plans explicitly specifying the use of basis boosts for projects as needed for financial or economic feasibility. The discretionary boosts were applied to different types of projects and on different scales (for example, statewide or citywide). For example, we found one development that received a boost to the eligible basis for having received certain green building certifications, although the applicant did not demonstrate financial need or request the boost. The allocating agency told us that all projects with specified green building certifications received the boost automatically, as laid out in its QAP. At the time of our review, agency officials said that the agency had changed its practices to prevent automatic basis boosts from being applied and required additional checks for financial need. In another QAP we reviewed, one agency described an automatic 130 percent statewide boost for all LIHTC developments. According to the officials, the automatic statewide boost remained in effect because officials made the determination that nearly all projects would need it for financial feasibility. Section 42 requires that allocating agencies determine that “discretionary basis boosts” were necessary for buildings to be financially feasible before granting them to developers. Section 42 does not require allocating agencies to document their analysis for financial feasibility (with or without the basis boost). However, legislative history for the Housing and Economic Recovery Act of 2008 included expectations that allocating agencies would set standards in their QAPs for which projects would be allocated additional credits, communicate the reasons for designating such criteria, and publicly express the basis for allocating additional credits to a project. In addition, NCSHA (a nonprofit advocating for state allocating agencies) recommends that allocating agencies set standards in their QAPs to determine eligibility for discretionary basis boosts and make the determinations publicly available. In our 2016 report we found that the allocating agencies we visited had processes for and conducted compliance monitoring of projects consistent with Section 42 and Treasury regulations. Treasury regulations require allocating agencies to conduct on-site physical inspections for at least 20 percent of the project’s low-income units and file reviews for the tenants in these units at least once every 3 years. In addition, allocating agencies must annually review owner certifications that affirm that properties continue to meet LIHTC program requirements. Allocating agencies we visited followed regulatory requirements on when to conduct physical inspections and tenant file reviews. Allocating agencies we visited generally used electronic databases to track the frequency of inspections, file reviews, and certifications, although most of these agencies documented these reviews on paper. All the allocating agencies we visited had inspection and review processes in place to monitor projects following the 15-year compliance period, as required under Section 42. Allocating agencies must execute an extended low-income housing commitment to remain affordable for a minimum of 30 years before a tax credit project can receive credits. After the compliance period is over, the obligation for allocating agencies to report to IRS on compliance issues ends and investors are no longer at risk for tax credit recapture. Our prior reports found IRS conducted few reviews of allocating agencies and had not reviewed how agencies determined basis boosts. Data on noncompliance were not reliable and IRS used little of the reported program information. IRS had not directly participated in an interagency initiative to augment HUD’s databases with LIHTC property inspection data. Both our 2015 and 2016 reports concluded that opportunities existed to enhance oversight of the LIHTC program, specifically by leveraging the knowledge and experience of HUD. Few reviews of allocating agencies. In our 2015 report, we found that IRS had conducted seven audits (reviews) of allocating agencies from 1986 (inception of the program) through May 2015. In the audits, IRS found issues related to QAPs, including missing preferences and selection criteria. But in both our 2015 and 2016 reports, IRS officials stated that they did not regard a regular review of QAPs as part of their responsibilities as outlined in Section 42 and therefore did not regularly review the plans. IRS officials said that allocating agencies have primary responsibility to ensure that the plans meet Section 42 preferences and selection criteria. IRS officials noted that review of a QAP to determine if the plan incorporated the elements specified in Section 42 could occur if IRS were to audit an allocating agency. No review of agencies’ discretionary basis boosts. In our 2016 report, we found IRS had not reviewed the criteria allocating agencies used to award discretionary basis boosts. The use of basis boosts has implications for LIHTC housing production because of the risk of oversubsidizing projects, which would reduce the amount of the remaining allocable subsidies and yield fewer LIHTC projects overall within a state. IRS also had not provided guidance to agencies on how to determine the need for the additional basis to make projects financially feasible. IRS officials told us that Section 42 gives allocating agencies the discretion to determine if projects receive a basis boost and does not require documentation of financial feasibility. Additionally, IRS officials explained that because the overall amount of subsidies allocated to a state is limited, the inherent structure of the program discourages states from oversubsidizing projects. However, during our 2016 review, we observed a range of practices for awarding discretionary basis boosts, including a blanket basis boost that could result in fewer projects being subsidized and provide more credits than necessary for financial feasibility. We concluded that because IRS did not regularly review QAPs, many of which list criteria for discretionary basis boosts, IRS was unable to determine the extent to which agency policies could result in oversubsidizing of projects. Unreliable data. We reported in 2015 that IRS had not comprehensively captured information reported for the program in its Low-Income Housing Credit database and the existing data were not complete and reliable. IRS guidance requires the collection of data on the LIHTC program in an IRS database, which records information submitted by allocating agencies and taxpayers on three forms. The forms include Credit allocation and certification (Form 8609). The two-part form is completed by the allocating agency and the taxpayer. Agencies report the allocated amount of tax credits available over a 10-year period for each building in a project. The taxpayer reports the date on which the building was placed-in-service (suitable for occupancy). Noncompliance or building disposition (Form 8823). Allocating agencies must complete and submit this form to IRS if an on-site physical inspection of a LIHTC project finds any noncompliance. The form records any findings (and corrections of previous findings) based on the inspection of units and review of the low-income tenant certifications. Annual report (Form 8610). IRS staff review the reports to ensure allocations do not exceed a statutorily prescribed ceiling for that year. Based on our analysis of the information in the database, we found in 2015 that the data on credit allocation and certification information were not sufficiently reliable to determine if basic requirements for the LIHTC program were being achieved. For example, we could not determine how often LIHTC projects were placed-in-service within required time frames. We concluded that without improvements to the data quality of credit allocation and certification information, it was difficult to determine if credit allocation and placed-in-service requirements had been met by allocating agencies and taxpayers, respectively. Thus, we recommended that IRS should address weaknesses identified in data entry and programming controls to ensure reliable data are collected on credit allocations. At the time of our 2015 report, IRS acknowledged the need for improvements in its controls and procedures (including data entry and quality reviews). IRS officials agreed that these problems should be corrected and data quality reviews should be conducted on an ongoing basis. As of March 2017, in response to our recommendation, IRS officials said that they had explored possibilities to improve the database, which not only houses credit allocation information, but also data from noncompliance and building disposition forms. Specifically, IRS is working to move the database to a new and updated server, which will address weaknesses identified in data entry and programming controls. IRS expects to complete the data migration step by early fall of 2017. Until IRS implements its plan to improve the data, this recommendation will remain open. Limited noncompliance data, analysis, and guidance on reporting. We found in our 2015 and 2016 reports that IRS had done little with the information it collects on noncompliance. IRS had captured little information from the Form 8823 submissions in its database and had not tracked the resolution of noncompliance issues or analyzed trends in noncompliance. As of April 2016, the database included information from about 4,200 of the nearly 214,000 Form 8823s IRS received since 2009 (less than 2 percent of forms received). For our 2015 report, officials told us the decision was made during the 2008–2009 timeframe to input information only from forms that indicated a change in building disposition, such as a foreclosure. IRS focused on forms indicating this change for reasons including the serious nature of the occurrence for the program and impacts on taxpayers’ ability to receive credit. Officials also stated it was not cost effective to input all the form information and trend analysis on all types of noncompliance was not useful for purposes of ensuring compliance with the tax code. In addition, as we reported in both 2015 and 2016, IRS had assessed little of the noncompliance information collected on the Form 8823 or routinely used it to determine trends in noncompliance. Because little information was captured in the Low-Income Housing Credit database, IRS was unable to provide us with program-wide information on the most common types of noncompliance. Furthermore, IRS had no method to determine if issues reported as uncorrected had been resolved or if properties had recurring noncompliance issues. In our 2016 report, we also found inconsistent reporting on the noncompliance forms, the reasons for which included conflicting IRS guidance, different interpretations of the guidance by allocating agencies, and lack of IRS feedback about agency submissions. IRS developed guidelines for allocating agencies to use when completing the Form 8823, the “fundamental purpose” of which was identified as providing standardized operational definitions for the noncompliance categories listed on the form. The IRS guide adds that it is important that noncompliance be consistently identified, categorized, and reported and notes that the benefits of consistency included enhanced program administration by IRS. Allocating agencies we visited had various practices for submitting Form 8823 to IRS, including different timing of submissions, reporting on all violations (whether minor or corrected during inspections) or not, and amounts of additional detail provided. Partly because of these different practices, the number of forms each of the nine agencies told us they sent to IRS in 2013 varied from 1 to more than 1,700. We concluded that without IRS clarification of when to send in the Form 8823, allocating agencies will continue to submit inconsistent noncompliance data to IRS, which will make it difficult for IRS to efficiently distinguish between minor violations and severe noncompliance, such as properties with health and safety issues. We recommended that IRS should clarify what to submit and when—in collaboration with the allocating agencies and Treasury—to help IRS improve the quality of the noncompliance information it receives and help ensure that any new guidance is consistent with Treasury regulations. In August 2016, IRS stated it would review the Form 8823 Audit Technique Guide to determine whether additional guidance and clarification were needed for allocating agencies to report noncompliance information on the form. If published legal guidance is required, IRS stated that it will submit a proposal for such guidance for prioritization. IRS indicated an expected implementation date by November 2017. In addition, in March 2017, officials stated that IRS Counsel attended an industry conference with allocating agencies at which issues related to the Form 8823 were discussed. Lack of participation in data initiative. Moreover, in our 2016 report we found IRS had not taken advantage of the important progress HUD made through the Rental Policy Working Group (working group)—which was established to better align the operation of federal rental policies across the administration—to augment its databases with LIHTC property inspection data. This data collection effort created opportunities for HUD to share inspection data with IRS that could improve the effectiveness of reviews for LIHTC noncompliance. However, the IRS Small Business/Self-Employed Division managing the LIHTC program had not been involved in the working group. We concluded that such involvement would allow IRS to leverage existing resources, augment its information on noncompliance, and better understand the prevalence of noncompliance. We recommended that staff from the division participate in the physical inspection initiative of the working group and also recommended that the IRS Commissioner evaluate how IRS could use HUD’s real estate database, including how the information might be used to reassess reporting categories on Form 8823 and reassess which categories of noncompliance information to review for audit potential. As of March 2017, IRS had implemented our recommendation to include the appropriate staff at the working group meetings. However, IRS officials stated that since HUD’s database with property inspection data was not complete as of March 2017 and contained data from 30 states, it was unclear how the database could be used. IRS officials said they would continue exploring the HUD database if the data for all LIHTC properties were included and it was possible to isolate the LIHTC property data from other rental properties in the HUD database. Both our 2015 and 2016 reports found that opportunities existed to enhance oversight of the LIHTC program, specifically by leveraging the knowledge and experience of HUD. We found in 2015 that while LIHTC is the largest federal program for increasing the supply of affordable rental housing, LIHTC is a peripheral program in IRS in terms of resources and mission. Oversight responsibilities for the program include monitoring allocating agencies and taxpayer compliance. However, as we have discussed previously, IRS oversight has been minimal and IRS has captured and used little program information. As we previously stated, such information could help program managers and congressional decision makers assess the program’s effectiveness. HUD─which has a housing mission─collects and analyzes information on low-income rental housing, including LIHTC-funded projects. As we reported in 2015, HUD’s role in the LIHTC program is generally limited to the collection of information on tenant characteristics (mandated by the Housing and Economic Recovery Act of 2008). However, it has voluntarily collected project-level information on the program since 1996 because of the importance of LIHTC as a source of funding for affordable housing. HUD also has sponsored studies of the LIHTC program that use these data. HUD’s LIHTC databases, the largest federal source of information on the LIHTC program, aggregates project-level data that allocating agencies voluntarily submit and information on tenant characteristics that HUD must collect. Since 2014, HUD also has published annual reports analyzing data it must collect on tenants residing in LIHTC properties. As part of this report, HUD compares property information in its tenant database to the information in its property database to help assess the completeness of both databases. In our 2015 report, we also discussed HUD’s experience in working with allocating agencies. While multiple federal agencies administer housing- related programs, HUD is the lead federal agency for providing affordable rental housing. Much like LIHTC, HUD’s rental housing programs rely on state and local agencies to implement programs. HUD is responsible for overseeing these agencies, including reviewing state and local consolidated plans for the HOME Investment Partnership and Community Development Block Grant programs—large grant programs that also are used to fund LIHTC projects. HUD also has experience in directly overseeing allocating agencies in their roles as contract administrators for project-based Section 8 rental assistance. HUD has processes, procedures, and staff in place for program evaluation and oversight of state and local agencies that could be built upon and strengthened. In our 2015 report, we concluded that significant resource constraints affected IRS’s ability to oversee taxpayer compliance and precluded wide-ranging improvement to such functions, but that IRS still had an opportunity to enhance oversight of LIHTC. We also concluded that leveraging the experience and expertise of another agency with a housing mission, such as HUD, might help offset some of IRS’s limitations in relation to program oversight. HUD’s existing processes and procedures for overseeing allocating agencies could constitute a framework on which further changes and improvements in LIHTC could be effected. However, enhancing HUD’s role could involve additional staff and other resources. An estimate of potential costs and funding options for financing enhanced federal oversight of the LIHTC program would be integral to determining an appropriate funding mechanism. We asked that Congress consider designating HUD as a joint administrator of the program responsible for oversight. As part of the deliberation, we suggested that Congress direct HUD to estimate the costs to monitor and perform the additional oversight responsibilities, including a discussion of funding options. Treasury agreed that it would be useful for HUD to receive ongoing responsibility for, and resources to perform, research and analysis on the effectiveness of LIHTCs in increasing the availability of affordable rental housing. Treasury noted that such research and analysis are not part of IRS’s responsibilities or consistent with its expertise in interpreting and enforcing tax laws. However, Treasury stated that responsibility for interpreting and enforcing the code should remain entirely with IRS. Our report noted that if program administration were changed, IRS could retain certain key responsibilities consistent with its tax administration mission. In our 2016 report, we concluded that IRS oversight of allocating agencies continued to be minimal, particularly in reviewing QAPs and allocating agencies’ practices for awarding discretionary basis boosts. As a result, we reiterated the recommendation from our 2015 report that Congress should consider designating HUD as a joint administrator of the program responsible for oversight due to its experience and expertise as an agency with a housing mission. In response to our 2016 report, HUD stated it remains supportive of mechanisms to use its significant expertise and experience administering housing programs for enhanced effectiveness of LIHTC. HUD also stated that enhanced interagency coordination could better ensure compliance with fair housing requirements and improve alignment of LIHTC with national housing priorities. As of July 2017, Congress had not enacted legislation to give HUD an oversight role for LIHTC. Chairman Hatch, Ranking Member Wyden, and Members of the Committee, this concludes my prepared statement. I would be happy to respond to any questions that you may have at this time. For further information about this testimony, please contact me at 202-512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony include Nadine Garrick Raidbard, Assistant Director; Anar N. Jessani, Analyst in Charge; William R. Chatlos; Farrah Graham; Daniel Newman; John McGrail; Barbara Roesmann; and MaryLynn Sergent. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The LIHTC program, established under the Tax Reform Act of 1986, is the largest source of federal assistance for developing affordable rental housing and will represent an estimated $8.5 billion in forgone revenue in 2017. LIHTC encourages private-equity investment in low-income rental housing through tax credits. The program is administered by IRS and allocating agencies, which are typically state or local housing finance agencies established to meet affordable housing needs of their jurisdictions. Responsibilities of allocating agencies (in Section 42 of the Internal Revenue Code and regulations of the Department of the Treasury) encompass awarding credits, assessing the reasonableness of project costs, and monitoring projects. In this testimony, GAO discusses (1) how allocating agencies implement federal requirements for awarding LIHTCs, assess reasonableness of property costs, and monitor properties' ongoing compliance; and (2) IRS oversight of the LIHTC program. This statement is based primarily on three reports GAO issued in July 2015 ( GAO-15-330 ), May 2016 ( GAO-16-360 ), and February 2017 ( GAO-17-285R ). GAO also updated the status of recommendations made in these reports by reviewing new or revised IRS policies, procedures, and reports and interviewing IRS officials. In its May 2016 report on the Low-Income Housing Tax Credit (LIHTC) program of the Internal Revenue Service (IRS), GAO found that state and local housing finance agencies (allocating agencies) implemented requirements for allocating credits, reviewing costs, and monitoring projects in varying ways. Moreover, some allocating agencies' day-to-day practices to administer LIHTCs also raised concerns. For example, qualified allocation plans (developed by 58 allocating agencies) that GAO analyzed did not always mention all selection criteria and preferences that Section 42 of the Internal Revenue Code requires; and allocating agencies could increase (boost) the eligible basis used to determine allocation amounts for certain buildings if needed for financial feasibility. However, they were not required to document the justification for the increases. The criteria used to award boosts varied, with some allocating agencies allowing boosts for specific types of projects and one allowing boosts for all projects in its state. In its 2015 and 2016 reports, GAO found IRS oversight of the LIHTC program was minimal. Additionally, IRS collected little data on or performed limited analysis of compliance in the program. Specifically, GAO found that Since 1986, IRS conducted seven audits of the 58 allocating agencies we reviewed. Reasons for the minimal oversight may include LIHTC being viewed as a peripheral program in IRS in terms of its mission and priorities for resources and staffing. IRS had not reviewed the criteria allocating agencies used to award discretionary basis “boosts,” which raised concerns about oversubsidizing projects (and reducing the number of projects funded). IRS guidance to allocating agencies on reporting noncompliance was conflicting. As a result, allocating agencies' reporting of property noncompliance was inconsistent. IRS had not participated in and leveraged the work of the physical inspection initiative of the Rental Policy Working Group—established to better align the operations of federal rental assistance programs—to augment its databases with physical inspection data on LIHTC properties that the Department of Housing and Urban Development (HUD) maintains. In its prior reports, GAO made a total of four recommendations to IRS. As of July 2017, IRS had implemented one recommendation to include relevant IRS staff in the working group. IRS has not implemented the remaining three recommendations, including improving the data quality of its LIHTC database, clarifying guidance to agencies on reporting noncompliance, and evaluating how the information HUD collects could be used for identifying noncompliance issues. In addition, because of the limited oversight of LIHTC, in its 2015 report GAO asked that Congress consider designating certain oversight responsibilities to HUD because the agency has experience working with allocating agencies and has processes in place to oversee the agencies. As of July 2017, Congress had not enacted legislation to give HUD an oversight role for LIHTC.", "document_type": "gao"}
{"report": "The mission of IRS, a bureau within the Department of the Treasury, is to (1) provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and (2) enforce the law with integrity and fairness to all. In carrying out its mission, IRS annually collects over $3 trillion in taxes from millions of taxpayers, and manages the distribution of over $400 billion in refunds. To guide its future direction, the agency has two strategic goals: (1) deliver high quality and timely service to reduce taxpayer burden and encourage voluntary compliance; and (2) effectively enforce the law to ensure compliance with tax responsibilities and combat fraud. Effective management of IT is critical for agencies to achieve successful outcomes. This is particularly true for IRS, given the role of IT in enabling the agency to carry out its mission and responsibilities. For example, IRS relies on information systems to process tax returns; account for tax revenues collected; send bills for taxes owed; issue refunds; assist in the selection of tax returns for audit; and provide telecommunications services for all business activities, including the public’s toll-free access to tax information. For fiscal year 2016, IRS was pursuing 23 major and 114 non-major IT investments to carry out its mission. According to the agency, it expended approximately $2.7 billion on these investments during fiscal year 2016, including $1.9 billion, or 70 percent, for operations and maintenance activities, and approximately $800 million, or 30 percent, for development, modernization, and enhancement. We have previously reported on a number of the agency’s major investments, to include the following investments in development, modernization, and enhancement: The Affordable Care Act investment encompasses the planning, development, and implementation of IT systems needed to support tax administration responsibilities associated with key provisions of the Patient Protection and Affordable Care Act. IRS expended $253 million on this investment in fiscal year 2016. Customer Account Data Engine 2 is being developed to replace the Individual Master File investment, IRS’s authoritative data source for individual tax account data. A major component of the program is a modernized database for all individual taxpayers that is intended to provide the foundation for more efficient and effective tax administration and help address financial material weaknesses for individual taxpayer accounts. Customer Account Data Engine 2 data is also expected to be made available for access by downstream systems, such as the Integrated Data Retrieval System for online transaction processing by IRS customer service representatives. IRS expended $182.6 million on this investment in fiscal year 2016. The Return Review Program is IRS’s system of record for fraud detection. As such, it is intended to enhance the agency’s capabilities to detect, resolve, and prevent criminal and civil tax noncompliance. In addition, it is intended to allow analysis and support of complex case processing requirements for compliance and criminal investigation programs during prosecution, revenue protection, accounts management, and taxpayer communications processes. According to IRS, as of May 2017, the system has helped protect over $4.5 billion in revenue. IRS expended $100.2 million on this investment in fiscal year 2016. We have also reported on the following investments in operations and maintenance: Mainframes and Servers Services and Support provides for the design, development, and deployment of server; middleware; and large systems and enterprise storage infrastructures, including supporting systems software products, databases, and operating systems. This investment has been operational since 1970. IRS expended $499.4 million on this investment in fiscal year 2016. Telecommunications Systems and Support provides for IRS’s network infrastructure services such as network equipment, video conference service, enterprise fax service, and voice service for over 85,000 employees at about 1,000 locations. According to IRS, the investment supports the delivery of services and products to employees, which translates into service to taxpayers. IRS expended $336.4 million on this investment in fiscal year 2016. Individual Master File is the authoritative data source for individual taxpayer accounts. Using this system, accounts are updated, taxes are assessed, and refunds are generated as required during each tax filing period. Virtually all IRS information system applications and processes depend on output, directly or indirectly, from this data source. IRS expended $14.3 million on this investment in fiscal year 2016. In fiscal year 2017, the federal government planned to spend more than $89 billion for IT that is critical to the health, economy, and security of the nation. However, we have reported that prior IT expenditures have often resulted in significant cost overruns, schedule delays, and questionable mission-related achievements. In light of these ongoing challenges, in February 2015, we added improving the management of IT acquisitions and operations to our list of high-risk areas for the federal government. This area highlights several critical IT initiatives in need of additional congressional oversight, including (1) reviews of troubled projects; (2) efforts to increase the use of incremental development; (3) efforts to provide transparency relative to the cost, schedule, and risk levels for major IT investments; (4) reviews of agencies’ operational investments; (5) data center consolidation; and (6) efforts to streamline agencies’ portfolios of IT investments. We noted that implementation of these initiatives has been inconsistent and more work remains to demonstrate progress in achieving acquisitions and operations outcomes. Between fiscal years 2010 and 2015, we made about 800 recommendations related to this high-risk area to the Office of Management and Budget and agencies. As of September, 2017, about 54 percent of these recommendations had been implemented. The Federal Information Technology Acquisition Reform provisions (commonly referred to as FITARA), enacted as a part of the Carl Levin and Howard P. ‘Buck’ McKeon National Defense Authorization Act for Fiscal Year 2015, aimed to improve federal IT acquisitions and operations and recognized the importance of the initiatives mentioned above by incorporating certain requirements into the law. For example, among other things, the act requires the Office of Management and Budget to publicly display investment performance information and review federal agencies’ IT investment portfolios. The current administration has also initiated additional efforts aimed at improving federal IT. Specifically, in March 2017, the administration established the Office of American Innovation, which has a mission to, among other things, make recommendations to the President on policies and plans aimed at improving federal government operations and services and modernizing federal IT. Further, in May 2017, the administration established the American Technology Council, which has a goal of helping to transform and modernize federal agency IT and how the federal government uses and delivers digital services. Recently this council worked with several agencies to develop a draft report on modernizing IT in the federal government. The council released the draft report for public comment in August 2017. In reviews that we have undertaken over the past several years, we have identified various opportunities for the IRS to improve the management of its IT investments. These reviews have identified a number of weaknesses with the agency’s reporting on the performance of its modernization investments to Congress and other stakeholders. In this regard, we have pointed out that information on investments’ performance in meeting cost, schedule, and scope goals is critical to determining the agency’s progress in completing key IT investments. We have also stressed the importance of the agency addressing weaknesses in its process for prioritizing modernization activities. Accordingly, we have made a number of related recommendations, which IRS is in various stages of implementing. In our June 2012 report on IRS’s performance in meeting cost, schedule, and scope goals for selected investments, we noted that, while IRS reported on the cost and schedule of its major IT investments, the agency did not have a quantitative measure of scope—a measure that shows whether these investments delivered planned functionality. We stressed that having such a measure is a good practice as it provides information about whether an investment has delivered the functionality that was paid for. Accordingly, we recommended that the agency develop a quantitative measure of scope for its major IT investments, to have more complete information on the performance of these investments. In response, IRS started developing a quantitative measure of scope for selected investments in December 2015 and has been working to gradually expand the measure to other investments. In April 2013, based on another review of IRS’s performance in meeting cost, schedule, and scope goals, we reported that there were weaknesses, to varying degrees, in the reliability of IRS’s investment performance information. Specifically, we found that IRS had not updated investment cost and schedule variance information with actual amounts on a timely basis (i.e., within the 60-day time frame required by the Department of Treasury) in about 25 percent of the activities associated with the investments selected in our review. In addition, the agency had not specified how project managers should estimate the cost and schedule performance of ongoing projects. As a result of these findings, we recommended that IRS ensure that its projects consistently follow guidance for updating performance information 60 days after completion of an activity and develop and implement guidance that specifies best practices to consider when estimating ongoing projects’ progress in meeting cost and schedule goals. IRS agreed with, and subsequently addressed, the recommendation related to updating performance information on a timely basis. However, the agency partially disagreed with the recommendation to develop guidance on estimating progress in meeting cost and schedule goals for ongoing projects. In this regard, we had suggested the use of earned value management data as a best practice to determine projected cost and schedule amounts. IRS did not agree with the use of the technique, stating that it was not part of the agency’s current program management processes and that the cost and burden to use earned value management would outweigh the value added. We disagreed with the agency’s view of earned value management because best practices have found that its value generally outweighs the cost and burden of its implementation (although we suggested it as one of several examples of practices that could be used to determine projected amounts). We also stressed that implementing our recommendation would help improve the reliability of reported cost and schedule variance information, and that IRS had flexibility in determining which best practices to use to calculate projected amounts. For those reasons, we maintained that our recommendation was warranted. However, IRS has yet to address the recommendation. We reported in April 2014, that the cost and schedule performance information that IRS reported for its major investments was for the fiscal year only. We noted that this reporting would be more meaningful if supplemented with cumulative cost and schedule performance information in order to better indicate progress toward meeting goals. In addition, we noted that the reported variances for selected investments were not always reliable because the estimated and actual cost and schedule amounts on which they depended had not been consistently updated in accordance with Department of Treasury reporting requirements as we had previously recommended. We recommended that IRS report more comprehensive and reliable cost and schedule information for its major investments. The agency agreed with our recommendation and said it believed it had addressed the recommendation in its quarterly reports to Congress. We disagreed with IRS’s assertion, however, noting that, while the report includes cumulative costs, they are cumulative for the fiscal year, not for the investment or investment segment as we recommended and they therefore do not account for cost variances from prior fiscal years. We therefore maintained our recommendation. In February 2015, after assessing the status and plans of the Return Review Program and Customer Account Data Engine 2, we reported that these investments had experienced significant variances from initial cost, schedule, and scope plans; yet, IRS did not include these variances in its reports to Congress because the agency had not addressed our prior recommendations. Specifically, IRS had not addressed our recommendation to report on how delivered scope compared to what was planned, and it also did not address guidance for determining projected cost and schedule amounts, or the reporting of cumulative cost and schedule performance information. We stressed that implementing these recommendations would improve the transparency of congressional reporting so that Congress has the appropriate information needed to make informed decisions. We made additional recommendations for the agency to improve the reliability and reporting of investment performance information and management of selected major investments. IRS agreed with the recommendations and has since addressed them. In our most recent report in June 2016, we assessed IRS’s process for determining its funding priorities for both modernization and operations. We found that the agency had developed a structured process for allocating funding to its operations activities consistent with best practices, which specify that an organization should document policies and procedures for selecting new and reselecting ongoing IT investments, and include criteria for making selection and prioritization decisions. However, IRS did not have a similarly structured process for prioritizing its modernization activities, to which the agency allocated hundreds of millions of dollars for fiscal year 2016. Agency officials stated that discussions were held to determine the modernization efforts that were of highest priority to meet IRS’s future state vision and technology roadmap. The officials reported that staffing resources and lifecycle stage were considered, but there were no formal criteria for making final determinations. Senior IRS officials said they did not have a structured process for the selection and prioritization of business systems modernization activities because the projects were established; and there were fewer competing activities than for operations support. Nevertheless, we stressed that, while there may have been fewer competing activities, a structured, albeit simpler, process that is documented and consistent with best practices would provide transparency into the agency’s needs and priorities for appropriated funds. We concluded that such a process would better assist Congress and other decision makers in carrying out their oversight responsibilities. Accordingly, we recommended that IRS develop and document its processes for prioritizing IT funding. The agency agreed with the recommendations and has taken steps to address them. Further, we found that IRS had reported complete performance information for two of the six selected investments in our review, to include a measure of progress in delivering scope, which we have been recommending since 2012. However, the agency did not always use best practices for determining the amount of work completed by its own staff, resulting in inaccurate reports of work performed. Consequently, we recommended that IRS modify its processes for determining the work performed by its staff. The agency disagreed with the recommendation, stating that the costs involved would outweigh the value provided. Specifically, IRS stated that modifying the use of the level of effort measure would equate to a certified earned value management system, which would add immense burden on IRS’s programs on various fronts and would outweigh the value it provides. However, we did not specify the use of an earned value management system in our report and believe other methods could be used to more reliably measure work performed.. In addition, we believed that it is a reasonable expectation for IRS to reliably determine the actual work completed, as opposed to assuming that work is always completed as planned since, as noted in our report, 22 to 100 percent of the work for selected projects was performed by IRS staff. Accordingly, we maintained that the recommendation was still warranted. Our work has also emphasized the importance of IRS more effectively managing its aging legacy systems. For example, in November 2013, we reported on the extent to which 10 of the agency’s large investments had undergone operational analyses—a key performance evaluation and oversight mechanism required by the Office of Management and Budget to ensure investments in operations and maintenance continue to meet agency needs. We noted that IRS’s Mainframe and Servers Services and Support had not had an operational analysis for fiscal year 2012. As a result, we recommended that the Secretary of Treasury direct appropriate officials to perform an operational analysis for the investment, including ensuring that the analysis addressed the 17 key factors identified in the Office of Management and Budget’s guidance for performing operational analyses. The department did not comment on our recommendation but subsequently implemented it. In addition, we previously reported on legacy IT systems across the federal government, noting that these systems were becoming increasingly obsolete and that many of them used outdated software languages and hardware parts that were unsupported. As part of that work, we noted that the Department of the Treasury used assembly language code—a computer language initially used in the 1950s and typically tied to the hardware for which it was developed—and Common Business Oriented Language (COBOL)—a programming language developed in the late 1950s and early 1960s—to program its legacy systems. It is widely known that agencies need to move to more modern, maintainable languages, as appropriate and feasible. For example, the Gartner Group, a leading IT research and advisory company, has reported that organizations using COBOL should consider replacing the language and, in 2010, noted that there should be a shift in focus to using more modern languages for new products. The use of COBOL presents challenges for agencies such as IRS given that procurement and operating costs associated with this language will steadily rise, and because fewer people with the proper skill sets are available to support the language. Further, we reported that IRS’s Individual Master File was over 50 years old and, although IRS was working to modernize it, the agency did not have a time frame for completing the modernization or replacement. Thus, we recommended that the Secretary of the Treasury direct the Chief Information Officer to identify and plan to modernize and replace legacy systems, as needed, and consistent with the Office of Management and Budget’s draft guidance on IT modernization, including time frames, activities to be performed, and functions to be replaced or enhanced. The department had no comments on our recommendation. We will continue to follow-up with the agency to determine the extent to which this recommendation has been addressed. In addition, we have ongoing work identifying risks associated with IRS’s legacy IT systems, and the agency’s management of these risks. In summary, IRS faces longstanding challenges in managing its IT systems. While effective IT management has been a prevalent issue throughout the federal government, it is especially concerning at IRS given the agency’s extensive reliance on IT to carry out its mission of providing service to America’s taxpayers in meeting their tax obligations. Thus, it is important that the agency establish, document, and implement policies and procedures for prioritizing its modernization efforts, as we have recently recommended, and provide Congress with accurate information on progress in delivering such modernization efforts. In addition, we have emphasized the need for IRS to address the inherent challenges associated with aging legacy systems so that it does not continue to maintain investments that have outlived their effectiveness and are consuming resources that outweigh their benefits. Continued attention to implementing our recommendations will be vital to helping IRS ensure the effective management of its efforts to modernize its aging IT systems and ensure its multibillion dollar investment in IT is meeting the needs of the agency. Chairman Buchanan, Ranking Member Lewis, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staffs have any questions about this testimony, please contact me at (202) 512-9286 or at pownerd@gao.gov. Individuals who made key contributions to this testimony are Sabine Paul (Assistant Director), Rebecca Eyler, and Bradley Roach (Analyst in Charge). IRS 2013 Budget: Continuing to Improve Information on Program Costs and Results Could Aid in Resource Decision Making, GAO-12-603 (Washington, D.C.: June 8, 2012) Information Technology: Consistently Applying Best Practices Could Help IRS Improve the Reliability of Reported Cost and Schedule Information, GAO-13-401 (Washington, D.C.: April 17, 2013) Information Technology: Agencies Need to Strengthen Oversight of Multibillion Dollar Investments in Operations and Maintenance, GAO-14-66 (Washington, D.C.: Nov. 6, 2013) Information Technology: IRS Needs to Improve the Reliability and Transparency of Reported Investment Information, GAO-14-298 (Washington, D.C.: April 2, 2014) Information Technology: Management Needs to Address Reporting of IRS Investments’ Cost, Schedule, and Scope Information, GAO-15-297 (Washington, D.C.: February 25, 2015) Information Technology: Federal Agencies Need to Address Aging Legacy Systems, GAO-16-468 (Washington, D.C.: May 25, 2016) This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The IRS, a bureau of the Department of the Treasury, relies extensively on IT to annually collect more than $3 trillion in taxes, distribute more than $400 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. For fiscal year 2016, IRS expended approximately $2.7 billion for IT investments, 70 percent of which was allocated for operational systems. GAO has long reported that the effective and efficient management of IT acquisitions and operational investments has been a challenge in the federal government. Accordingly, in February 2015, GAO introduced a new government-wide high-risk area, Improving the Management of IT Acquisitions and Operations. GAO has also reported on challenges IRS has faced in managing its IT acquisitions and operations, and identified opportunities for IRS to improve the management of these investments. In light of these challenges, GAO was asked to testify about IT management at IRS. To do so, GAO summarized its prior work regarding IRS's IT management, including the agency's management of operational, or legacy, IT systems. GAO has issued a series of reports in recent years which have identified numerous opportunities for the Internal Revenue Service (IRS) to improve the management of its major acquisitions and operational, or legacy, information technology (IT) investments. For example, In June 2016, GAO reported that IRS had developed a structured process for allocating funding to its operations activities, consistent with best practices; however, GAO found that IRS did not have a similarly structured process for prioritizing modernization activities to which the agency allocated hundreds of millions of dollars for fiscal year 2016. Instead, IRS officials stated that they held discussions to determine the modernization efforts that were of highest priority to meet IRS's future state vision and technology roadmap, and considered staffing resources and lifecycle stage. However, they did not use formal criteria for making final determinations. GAO concluded that establishing a structured process for prioritizing modernization activities would better assist Congress and other decision makers in ensuring that the right priorities are funded. Accordingly, GAO recommended that IRS establish, document, and implement policies and procedures for prioritizing modernization activities. IRS agreed with the recommendation and has efforts underway to address it. In the same report, GAO noted that IRS could improve the accuracy of reported performance information for key development investments to provide Congress and other external parties with pertinent information about the delivery of these investments. This included investments such as Customer Account Data Engine 2, which IRS is developing to replace its 50-year old repository of individual tax account data, and the Return Review Program, IRS's system of record for fraud detection. GAO recommended that IRS take steps to improve reported investment performance information. IRS agreed with the recommendation, and has efforts underway to address it. In a May 2016 report on legacy IT systems across the federal government, GAO noted that IRS used assembly language code to program key legacy systems. Assembly language code is a computer language initially used in the 1950s that is typically tied to the hardware for which it was developed; it has become difficult to code and maintain. One investment that used this language is IRS's Individual Master File which serves as the authoritative data source for individual taxpayer accounts. GAO noted that, although IRS has been working to replace the Individual Master File, the bureau did not have time frames for its modernization or replacement. Therefore, GAO recommended that the Department of Treasury identify and plan to modernize and replace this legacy system, consistent with applicable guidance from the Office of Management and Budget. The department had no comments on the recommendation. GAO has made a number of recommendations to IRS to improve its management of IT acquisitions and operations. IRS has generally agreed with the recommendations and is in various stages of implementing them.", "document_type": "gao"}
{"report": "The Bureau’s address canvassing operation updates its address list and maps, which are the foundation of the decennial census. An accurate address list both identifies all households that are to receive a notice by mail requesting participation in the census (by Internet, phone, or mailed- in questionnaire) and serves as the control mechanism for following up with households that fail to respond to the initial request. Precise maps are critical for counting the population in the proper locations—the basis of congressional apportionment and redistricting. Our prior work has shown that developing an accurate address list is challenging—in part because people can reside in unconventional dwellings, such as converted garages, basements, and other forms of hidden housing. For example, as shown in figure 1, what appears to be a single-family house could contain an apartment, as suggested by its two doorbells. During address canvassing, the Bureau verifies that its master address list and maps are accurate to ensure the tabulation for all housing units and group quarters is correct. For the 2010 Census, the address canvassing operation mobilized almost 150,000 field workers to canvass almost every street in the United States and Puerto Rico to update the Bureau’s address list and map data—and in 2012 reported the cost at nearly $450 million. The cost of going door-to-door in 2010, along with the emerging availability of imagery data, led the Bureau to explore an approach for 2020 address canvassing that would allow for fewer boots on the ground. Traditionally, the Bureau went door-to-door to homes across the country to verify addresses. This “in-field address canvassing” is a labor-intensive and expensive operation. To achieve cost savings, in September 2014 the Bureau decided to use a reengineered approach for building its address list for the 2020 Census and not go door-to-door (or “in-field”) across the country, as it has in prior decennial censuses. Rather, some areas (known as “blocks”) would only need a review of their address and map information using computer imagery and third-party data sources— what the Bureau calls “in-office” address canvassing procedures. According to the Bureau’s address canvassing operational plan, in-office canvassing had two phases: During the first phase, known as “Interactive Review,” Bureau employees use current aerial imagery to determine if areas have housing changes, such as new residential developments or repurposed structures, or if the areas match what is in the Bureau’s master address file. The Bureau assesses the extent to which the number of housing units in the master address file is consistent with the number of units visible in the current imagery. If the housing shown in the imagery matches what is listed in the master address file, then those areas are considered to be resolved or stable and would not be canvassed in-field. During the second phase, known as “Active Block Resolution,” employees would try to resolve coverage concerns identified during the first phase and verify every housing unit by virtually canvassing the entire area. As part of this virtual canvass, the Bureau would compare what is found in imagery to the master address file data and other data sources in an attempt to resolve any discrepancies. If Bureau employees still could not reconcile the discrepancies, such as housing unit count or street locations with what is on the address list, then they would refer these blocks to in-field address canvassing. However, in March 2017, citing budget uncertainty the Bureau decided to discontinue the second phase of in-office review for the 2020 Census. According to the Bureau, in order to ensure that the operations implemented in the 2018 End-to-End Test were consistent with operations planned for the 2020 Census, the Bureau added the blocks originally resolved during the second phase of in-office review back into the in-field workload for the test. The cancellation of Active Block Resolution is expected to increase the national workload of the in-field canvassing workload by 5 percentage points (25 percent to 30 percent). During in-field address canvassing, listers use laptop computers to compare what they see on the ground to what is on the address list and map. Listers confirm, add, delete, or move addresses to their correct map positions. At each housing unit, listers are trained to speak with a knowledgeable resident to confirm or update address data, ask about hidden housing units, confirm the housing unit location on the map, (known as the map spot) and collect a map spot using global positioning systems (GPS). If no one is available, listers are to use house numbers and street signs to verify the address data. The data are transmitted electronically to the Bureau. The Census Bureau expects that the End-to-End Test for address canvassing will identify areas for improvement and changes that need to be made for the 2020 Census. Our prior work has shown the importance of robust testing. Rigorous testing is a critical risk mitigation strategy because it provides information on the feasibility and performance of individual census-taking activities, their potential for achieving desired results, and the extent to which they are able to function together under full operational conditions. In February 2017, we added the 2020 Census to GAO’s High-Risk List because operational and other issues are threatening the Bureau’s ability to deliver a cost-effective enumeration. We reported on concerns about the Bureau’s capacity to implement innovative census-taking methods, uncertainties surrounding critical information technology systems, and the quality of the Bureau’s cost-estimates. Underlying these issues are challenges in such essential management functions as the Bureau’s ability to: collect and use real-time indicators of cost, performance, and schedule; follow leading practices for cost estimation; scheduling; risk management; IT acquisition, development, testing, and security; and cost-effectively deal with contingencies including, for example, fiscal constraints, potential changes in design, and natural disasters. The Bureau completed in-field address canvassing as scheduled by September 29, 2017, canvassing approximately 340,400 addresses. Most of the listers we observed generally followed procedures. For example, 15 of 18 listers knocked on doors, and 16 of 18 looked for hidden housing units, which is important for establishing that address lists and maps are accurate and for identifying hard-to-count populations. Those procedures include taking such steps as: comparing the housing units they see on the “ground” to the housing units on the address list, knocking on all doors so they could speak with a resident to confirm the address (even if the address is visible on the mailbox or house) and to confirm that there are no other living quarters such as a basement apartment, looking for “hidden housing units”, looking for group quarters such as group homes or dormitories, and confirming the location of the housing unit on a map with GPS coordinates collected on the doorstep. To the extent procedures were not followed, it generally occurred when listers did not go up to the door and speak with a resident or take a map spot on the doorstep. Failure to follow procedures could adversely affect a complete count, as addresses could be missed or a group quarter could be misclassified as a residential address. After we alerted the Bureau to our observations, the Bureau agreed moving forward, to emphasize the importance of following procedures during training for in-field address canvassing. Address canvassing has tight time frames, so work needs to be assigned efficiently. Sometimes this means the Bureau needs to reassign work from one lister to another. During address canvassing, the Bureau discovered that reassigned census blocks sometimes would appear in both the new and the original listers’ work assignments. In some cases, this led to blocks being worked more than once, which decreased efficiency, increased costs, and could create confusion and credibility issues when two different listers visit a house. According to Bureau procedures, listers were instructed to connect to the Bureau’s Mobile Case Management (MCM) system to download work assignments (address blocks) and to transmit their completed work at the beginning and end of the work day but not during the work day. Thus during the work day, they were unaware when unworked blocks had been reassigned to another lister. Bureau officials also told us that the Listing and Mapping Application (LiMA) software used to update the address file and maps was supposed to have the functionality to prevent blocks from being worked more than once, but this functionality was not developed because of budget cuts. For 2020, Bureau officials told us they plan to create operational procedures for reassigning work. According to Bureau officials, they plan to require supervisors to contact the original lister when work is reassigned. We have requested a copy of those procedures; however, the Bureau has not finalized them. Standards for Internal Control in the Federal Government (Standards for Internal Control) call for management to design control activities, such as policies and procedures to achieve objectives. Finalizing these procedures should help prevent blocks from being canvassed more than once. The Bureau conducts tests under census-like conditions, in part, to verify 2020 Census planning assumptions, such as workload, how many houses per hour a lister can verify (also known as a lister’s productivity rate), and how many people the Bureau needs to hire for an operation. Moreover, one of the objectives of the test is to validate that the operations being tested are ready at the scale needed for the 2020 Census. For the 2018 End-to-End Test, the Bureau completed in-field address canvassing on time at two sites and early at one site; despite workload increases at all three test sites and hiring shortfalls at two sites. The Bureau credits this success to better than expected productivity. As the Bureau reviews the results of address canvassing, evaluating the factors that affected workload, productivity rates, and staffing and making adjustments to its estimates, if necessary, before the 2020 Census would help the Bureau ensure that address canvassing has the appropriate number of staff and equipment to complete the work in the required time frame. For the 2020 Census, the Bureau estimates it will have to send 30 percent of addresses to the field for listers to verify. However, at the three test sites, the workload was higher than this estimate (see table 1). At one test site, the percent of addresses verified through in-field address canvassing was 76 percent or 46 percentage points more than the Bureau’s expected 2020 Census in-field address canvassing workload estimate of 30 percent. Bureau officials told us that the 30 percent in-field workload estimate is a national average and is not specific to any of the three test sites. Prior to the test, officials said that the Bureau also knew that the West Virginia site was assigning new addresses to some of the test site’s housing units due to local government emergency 911 address conversion and that the in-field workload would be greater in West Virginia when compared to the other test sites. We requested documentation for the Bureau’s original estimate that 30 percent of the 133.8 million expected addresses would be canvassed in- field for the 2020 Census. However, the Bureau was unable to provide us with documentation to support how they arrived at the 30 percent estimate. Instead, the Bureau provided us with a November 2017 methodology document that showed three in-field address canvassing workload scenarios, whereby, between 41.9 and 45.1 percent of housing units would need to go to the field for address canvassing. The three scenarios consider a range of stability in the address file as well as different workload estimates for in-field follow-up. At 30 percent the Bureau would need to canvass about 40.2 million addresses; however, at 41.9 and 45.1 percent the Bureau would need to canvass between 56 million and 60.4 million addresses, respectively. According to Bureau officials, they are continuing to assess whether changes to its in-office address canvassing procedures would be able to reduce the in-field address canvassing workload to 30 percent, while at the same time maintaining address quality. However, Bureau officials did not provide us with documentation to show how the in-field address canvassing workload would be reduced because the proposed changes were still being reviewed internally. Workload for address canvassing directly affects cost – the greater the workload the more people as well as laptop computers needed to carry out the operation. We found that the 30 percent workload threshold is what is reflected in the December 2017 updated 2020 Census cost estimate that was used to support the fiscal year 2019 budget request. Thus, if the 30 percent threshold is not achieved then the in-field canvassing workload will likely increase for the 2020 Census and the Bureau would be at risk of exceeding its proposed budget for the address canvassing operation. Standards for Internal Control call for organizations to use quality information to achieve their objectives. Thus, continuing to evaluate and finalize workload estimates for in-field address canvassing with the most current information will help ensure the Bureau is well-positioned to conduct addressing canvassing for the 2020 Census. For example, according to Bureau officials, preliminary workload estimates will need to be delivered by January 2019 for hiring purposes and the final in-field workload numbers for address canvassing will need to be determined by June 2019 for the start of address canvassing, which is set to begin in August 2019. Moreover, by February 2019 the Bureau’s schedule calls for it to determine how many laptops will be needed to conduct 2020 Census address canvassing. At the test sites, listers were substantially more productive than the Bureau expected. The expected production rate is defined as the number of addresses expected to be completed per hour, and it affects the cost of the address canvassing operation. This rate includes time for actions other than actually updating addresses, such as travel time. In the 2010 Census the rates reflected different geographic areas, and the country was subdivided into three areas: urban/suburban, rural, and very rural. According to Bureau officials, for the 2020 Census the Bureau will have variable production rates based on geography, similar to the design used in the 2010 Census. The Bureau told us they have not finalized the 2020 Census address canvassing production rates. Table 2 shows the expected and actual productivity rates (addresses per hour) for the in-field address canvassing operation at all three test sites. To ensure address canvassing for the test was consistent with the 2020 Census, Bureau officials told us they included the blocks resolved during the now discontinued second phase of in-office review, into the in-field workload for the test. The Bureau attributed the greater productivity to this discontinued second phase. Bureau officials told us that they believe that listers spent less time updating those blocks because they had already been resolved, and any necessary changes were already incorporated. Moreover, while benefitting from the second phase of in-office address canvassing may be one explanation for why listers were more productive. Bureau officials told us that they are unable to evaluate the differences in expected versus actual productivity for blocks added to the workload as a result of the discontinued second phase because of limitations with the data. However, there could be other reasons as well such as travel time and geography. Standards for Internal Control require that organizations use quality information to achieve their objectives. Therefore, continuing to evaluate other factors from the 2018 End-to-End Test that may have increased or could potentially decrease productivity will be important for informing lister productivity rates for 2020, as productivity affects the number of listers needed to carry out the operation, the number of staff hours charged to the operation, and the number of laptops to be procured. For the 2018 End-to-End Test address canvassing operation, the Bureau hired fewer listers than it assumed it needed at two sites and hired more at the other site. In West Virginia, 60 percent of the required field staff was hired and in Washington, 74.5 percent of the required field staff was hired. Nevertheless, the operation finished on schedule at both these sites. In contrast in Rhode Island the Bureau hired 112 percent of the required field staff and finished early. According to Bureau officials, both the West Virginia and Washington state test sites started hiring field staff later than expected because of uncertainty surrounding whether the Bureau would have sufficient funding to open all three test sites for the 2018 End-to-End Test. When a decision was made to open all three sites for the address canvassing operation only, that decision came late, and Bureau officials told us that once they were behind in hiring and were never able to catch up because of low unemployment rates and the short duration of the operation. According to Bureau officials, their approach to hiring for the 2018 End-to-End Test was similar to that used for the 2010 and 2000 Censuses. In both censuses the Bureau’s goal was to recruit and hire more workers than it needed because of immutable deadlines and attrition. After the 2010 Census we reported that the Bureau had over recruited; conversely, for the 2000 Census the Bureau had recruited in the midst of one of the tightest labor markets in three decades. Thus we recommended, and the Bureau agreed to evaluate current economic factors that are associated with and predictive of employee interest in census work, such as national and regional unemployment levels, and use these available data to determine the potential temporary workforce pool and adjust its recruiting approach. The Bureau implemented this recommendation, and used unemployment and 2010 Census data to determine a base recruiting goal at both the Los Angeles, California and Houston, Texas 2016 census test sites. Specifically, the recruiting goal for Los Angeles was reduced by 30 percent. Bureau officials told us that it continues to gather staffing data from the 2018 End-to-End Test that will be important to consider looking forward to 2020. Although address canvassing generally finished on schedule even while short staffed, Bureau officials told us they are carefully monitoring recruiting and hiring data to ensure they have sufficient staff for the test’s next census field operation non-response follow-up, when census workers go door-to-door to follow up with housing units that have not responded. Non-response follow-up is set to begin in May 2018. According to test data as of March 2018, the Bureau is short of its recruiting goal for this operation which is being conducted in Providence County, Rhode Island. The Bureau’s goal is to recruit 5,300 census workers and as of March 2018, the Bureau had only recruited 2,732 qualified applicants to fill 1,166 spots for training and deploy 1,049 census workers to conduct non-response follow-up. Bureau officials told us they believe that low unemployment is making it difficult to meet its recruiting goals in Providence County, Rhode Island, but they are confident they will be able to hire sufficient staff without having to increase pay rates. Recruiting and retaining sufficient staff to carry out operations as labor- intensive as address canvassing and nonresponse follow-up for the 2020 Census is a huge undertaking with implications for cost and accuracy. Therefore, striking the right staffing balance for the 2020 Census is important for ensuring deadlines are met and costs are controlled. Bureau officials told us that during the test 11 out of 330 laptop computers did not properly transmit address and map data collected for 25 blocks. The lister-collected address file and map data are supposed to be electronically transmitted from the listers’ laptops to the Bureau’s data processing center in Jeffersonville, Indiana. The data are encrypted and remain on the laptop until the laptops are returned to the Bureau where the encrypted data are deleted. Prior to learning that not all data had properly transmitted off the laptops, data on seven of the laptops was deleted. Data on the remaining four laptops were still available. In Providence, Rhode Island, where the full test will take place, the Bureau recanvassed blocks where data were lost to ensure that the address and map information for nonresponse follow-up was correct. Recanvassing blocks increases costs and can lead to credibility problems for the Bureau when listers visit a home twice. Going into address canvassing for the End-to-End Test, Bureau officials said they knew there was a problem with the LiMA software used to update the Bureau’s address lists and maps. Specifically, address and map updates would not always transfer when a lister transmitted their completed work assignments from the laptop to headquarters. Other census surveys using LiMA had also encountered the same software problem. Moreover, listers were not aware that data had not transmitted because there was no system-generated warning. Bureau officials are working to fix the LiMA software problem, but told us that the software problem has been persistent across other census surveys that use LiMA and they are not certain it will be fixed. Bureau officials told us that prior to the start of address canvassing they created an alert report to notify Bureau staff managing the operation at headquarters if data were not properly transmitted. When transmission problems were reported, staff was supposed to remotely retrieve the data that were not transmitted. This workaround was designed to safeguard the data but according to officials was not used. Bureau officials told us that they do not know whether this was because the alert reports were not viewed by responsible staff or whether the alert report to notify the Bureau staff managing the operation was not triggered. Bureau officials told us they recognize the importance of following procedures to monitor alert reports, and acknowledge that the loss of data on seven of the laptops may have been avoided had the procedures that alert reports get triggered and monitored been followed; however, officials did not know why the procedures were not followed. For 2020, if the software problem is not resolved, then officials said the Bureau plans to create two new alert reports to monitor the transmission of data. One report would be triggered when the problem occurs and a second report would capture a one-to-one match between data on the laptop and data transmitted to the data center so that discrepancies would be immediately obvious. While these new reports should help ensure that Bureau staff are alerted when data has not properly transmitted, the Bureau has not determined and addressed why the procedures that required an alert report get triggered and then reviewed by Bureau staff did not work as intended. Standards for Internal Control require that organizations safeguard data and follow policies and procedures to achieve their objectives. Thus, either fixing the LiMA software problem, or if the software problem cannot be fixed, then determining and addressing why procedures that alert reports get triggered and monitored were not followed would position the Bureau to help prevent future data losses. To effectively manage address canvassing, the Bureau needs to be able to monitor the operation’s progress in near real time. Operational issues such as listers not working assigned hours or falling behind schedule need to be resolved quickly because of the tight time frames of the address canvassing and subsequent operations. During the address canvassing test, the Bureau encountered several challenges that hindered its efforts to efficiently monitor lister activities as well as the progress of the address canvassing operation. The Bureau provides data-driven tools for the census field supervisors to manage listers, including system alerts that identify issues that require the supervisor to follow-up with a lister. For the address canvassing operation, the system could generate 14 action codes that covered a variety of operational issues such as unusually high or low productivity (which may be a sign of fraud or failure to follow procedures) and administrative issues such as compliance with overtime and completion of expense reports and time cards. During the operation, over 8,250 alerts were sent to CFSs or about 13 alerts were sent per day per CFS. Each alert requires the CFS to take action and then record how the alert was resolved. CFSs told us and the Bureau during debriefing sessions that they believed many of the administrative alerts were erroneous and they dismissed them. For example, during our site visit one CFS showed us an alert that incorrectly identified that a timecard had not been completed. The CFS then showed us that the lister’s timecard had indeed been properly completed and submitted. CFSs we spoke to said that they often dismissed alerts related to expense reports and timecards and did not pay attention to them or manage them. Bureau officials reported that one CFS was fired for not using the alerts to properly manage the operation. To assist supervisors, these alerts need to be reliable and properly used. Bureau officials said that they examined alerts for errors after we told them about our observation. They reported that they did not find any errors in the alerts. They believe that CFSs may not fully understand that the alerts stay active until they are marked as resolved by the CFS. For example, if a CFS gets an alert that a lister has not completed a timecard the alert will remain active until the CFS resolves the alert by stating the time card was completed. The Bureau’s current CFS manual does not address that by the time a CFS sees the alert a lister may have already taken action to resolve it. Because this was a reoccurring situation, CFSs told us they had a difficult time managing the alerts. Standards for Internal Control call for an agency to use quality information to achieve objectives. Bureau officials acknowledge that it is a problem that some CFSs view the alerts as erroneous and told us they plan to address the importance of alerts in training. We spoke to Bureau officials about making the alerts more useful to CFSs, such as by differentiating between critical and noncritical alerts and streamlining alerts by perhaps combining some of them. Bureau officials told us they would monitor the alerts during the 2018 End-to-End Test’s nonresponse follow-up operation and make adjustments if appropriate. However, while the Bureau told us it will monitor alerts for the non-response follow-up operation, the Bureau does not have a plan for how it will examine and make alerts more useful. Ensuring alerts are properly followed up on is critical to the oversight and management of an operation. If the CFSs view the alerts as unreliable, they could be likely to miss key indicators of fraud such as unusually high or low productivity or an unusually high or low number of miles driven. Moreover, monitoring overtime alerts and the submission of daily time cards and expense reports is also important to ensure that overtime is appropriately approved before worked and that listers get paid on time. Another tool the Bureau uses to monitor operations is its Unified Tracking System (UTS), a management dashboard that combines data from a variety of Census systems, bringing the data to one place where the users can run or create reports. It was designed to track metrics such as the number and percentage of blocks assigned and blocks completed as well as the actual expenditures of an operation compared to the budgeted expenditures. However, information in UTS was not always accurate during address canvassing. For example UTS did not always report the correct number of addresses assigned and completed by site. As a result, Bureau managers reported they did not rely on UTS and instead used data from the source systems that fed into it. Bureau officials agreed that inaccurate data is a problem and that this workaround was inefficient as users had to take extra time to go to multiple systems to get the correct data. Bureau officials reported problems importing information from the feeder systems into UTS because of data mismatches. They said that address canvassing event codes were not processed sequentially, as they should have been, which led to inaccurate reporting. Bureau officials told us that they did not specify that the codes needed to be processed in chronological order as part of the requirements for UTS. Bureau officials said UTS passed the requisite readiness reviews and tests. However, Bureau officials also acknowledged that some of these problems could have been caught by exception testing which was not done prior to production. To resolve this issue for 2020, Bureau officials stated they are developing new requirements for UTS to automatically consider the chronological order of event codes. The Bureau told us they are working on these UTS requirements and will provide us with documentation when they are complete. They also said the Bureau plans to implement a process which compares field management reports with UTS reports to help ensure that the reports have the same definitions and are reporting accurate information. Standards for Internal Control call for an organization’s data be complete and accurate and processed into quality information to achieve their objectives. Thus, finalizing UTS requirements for the address canvassing reporting should help increase efficiency for the 2020 Census by avoiding time consuming workarounds. The Bureau has taken significant steps to use technology to reduce census costs. These steps include using electronic systems to transmit listers’ assignments and address and map data. However, during the address canvassing test, several listers and CFSs at the three test sites experienced problems with Internet connections primarily during training. The West Virginia site, which was more rural than the other sites, experienced the most problems with Internet connectivity. All six West Virginia CFSs reported Internet connectivity problems during the operation. As a work around, CFSs told us that a couple of their listers transmitted their work assignments from libraries where they could access the Internet. Bureau officials stated that the laptops in the 2018 End-to-End Test only used two broadband Internet service providers, which may have contributed to some of the Internet access issues. Bureau officials added that despite the reported Internet connectivity issues, the 2018 End-to- End Test for address canvassing finished on schedule and without any major problems. While this might be true for the test, we have previously reported that minor problems can become big challenges when the census scales up to the entire nation. Therefore, it is important that these issues get resolved before August 2019 when in-field address canvassing for the 2020 Census is set to begin. The Bureau is analyzing the cellular network coverage across all 2020 Census areas using coverage maps and other methods to determine which carrier is appropriate (including a backup carrier) for geographic areas where network coverage is limited. According to Bureau officials, they anticipate identifying the cellular carriers for each of its 248 area census offices by the summer of 2018. The officials said they are considering both national and regional carriers to provide service in some geographic areas because the best service provider in a certain geographic area may not be one of the national providers, but a regional provider. In those cases, listers and other staff in those areas will receive devices with the regional carrier. According to Bureau officials, for the 2020 Census, the ability to access multiple carriers should provide field staff with better connectivity around the country. We also found that there was no guidance for listers and CFSs on what to do if they experienced Internet connectivity problems and were unable to access the Internet. Bureau officials told us that staff in the field can use different methods to access the Internet, such as using home wireless networks or mobile hotspots located at libraries, or coffee shops to transmit data. However, the Bureau did not provide such instructions to listers. In addition, the Bureau also does not define what constitutes a secure Internet public connection. Ensuring data are safeguarded is important because census data are confidential. Bureau officials told us that the Bureau plans to provide instructions to field staff on what to do if they are unable to access census systems and what constitutes a secure Internet connection for the next 2018 End-to-End Test field operation, non-response follow-up. However, the Bureau has not finalized or documented these instructions. Standards for Internal Control call for management to design control activities, such as providing instructions to employees to achieve objectives. Finalizing these instructions to field staff will help ensure listers have complete information on how to handle problems with Internet connectivity and that data are securely transmitted. Some listers had difficulty accessing the Internet to take online training for address canvassing. This is the first decennial census that the Bureau is using online training, in previous decennials training was instructor-led in a class room. According to the Bureau, in addition to the Bureau provided laptop, listers also needed a personal home computer or laptop and Internet access at their home in order to complete the training. However, while the Bureau reported that listers had access to a personal computer to complete the training, we found some listers did not have access to the Internet at their home and were forced to find workarounds to access the training. According to American Community Survey data from 2015, among all households, 77 percent had a broadband Internet subscription. Bureau officials told us they are aware that not all households have access to the Internet and that the Bureau’s field division is working on back-up plans for accessing online training. Specifically, Bureau officials told us for 2020 they plan to identify areas of the country that could potentially have connectivity issues and plan to identify alternative locations such as libraries or community centers where Internet connections are available to ensure all staff has access to training. However, they have not finalized those plans to identify locations for training sites. Standards for Internal Control call for management to design control activities, such as having plans in place to achieve objectives. Finalizing these plans to identify alternative training locations will help ensure listers have a place to access training. The Bureau’s re-engineered approach for address canvassing shows promise for controlling costs and maintaining accuracy. However, the address canvassing operation in the 2018 End-to-End test identified the need to reexamine assumptions and make some procedural and technological improvements. For example, at a time when plans for in- field address canvassing should be almost finalized, the Bureau is in the process of evaluating workload and productivity assumptions to ensure sufficient staff are hired and that enough laptop computers are procured. Moreover, Bureau officials have not finalized (1) procedures for reassigning work from one lister to another to prevent the unnecessary duplication of work assignments, (2) instructions for using the Internet when connectivity is a problem to ensure listers have access to training and the secure transmission of data to and from the laptops, and (3) plans for alternate training locations. To ensure address and map data are not lost during transmission, Bureau officials will also need to either (1) fix the problem with the LiMA software used to update the address and map files or (2) determine and address why procedures that alert reports be triggered and monitored were not followed. Finally, the Bureau has made progress in using data driven technology to manage address canvassing operations. However, ensuring data used by supervisors to oversee and monitor operations are both useful and accurate will help field supervisors take appropriate action to address supervisor alerts and will help managers monitor the real-time progress of the address canvassing operation. With little time remaining it will be important to resolve these issues. Making these improvements will better ensure address canvassing for the actual enumeration, beginning in August 2019, fully functions as planned and achieves desired results. We are making the following seven recommendations to the Department of Commerce and the Census Bureau: Secretary of Commerce should ensure the Director of the U.S. Census Bureau continues to evaluate and finalize workload estimates for in-field address canvassing as well as evaluates the factors that impacted productivity rates during the 2018 End-to-End Test and, if necessary, make changes to workload and productivity assumptions before the 2020 Census in-field address canvassing operation to help ensure that assumptions that impact staffing and the number of laptops to be procured are accurate. (Recommendation 1) Secretary of Commerce should ensure the Director of the U.S. Census Bureau finalizes procedures for reassigning blocks to prevent the duplication of work. (Recommendation 2) Secretary of Commerce should ensure the Director of the U.S. Census Bureau finalizes backup instructions for the secure transmission of data when the Bureau’s contracted mobile carriers are unavailable. (Recommendation 3) Secretary of Commerce should ensure the Director of the U.S. Census Bureau finalizes plans for alternate training locations in areas where Internet access is a barrier to completing training. (Recommendation 4) Secretary of Commerce should ensure the Director of the U.S. Census Bureau takes action to either fix the software problem that prevented the successful transmission of data, or if that cannot be fixed, then determine and address why procedures that alert reports be triggered and monitored were not followed. (Recommendation 5) Secretary of Commerce should ensure the Director of the U.S. Census Bureau develops a plan to examine how to make CFS alerts more useful so that CFSs take appropriate action, including alerts a CFS determines are no longer valid because of timing differences. (Recommendation 6) Secretary of Commerce should ensure the Director of the U.S. Census Bureau finalizes UTS requirements for address canvassing reporting to ensure that the data used by census managers who are responsible for monitoring real-time progress of address canvassing are accurate before the 2020 Census. (Recommendation 7) We provided a draft of this report to the Department of Commerce. In its written comments, reproduced in appendix I the Department of Commerce agreed with our recommendations. The Census Bureau also provided technical comments that we incorporated, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we are sending copies of this report to the Secretary of Commerce, the Under Secretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and interested congressional committees. The report also will be available at no charge on GAO’s website at http://www.gao.gov. If you have any questions about this report please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made major contributions to this report are listed in appendix II. In addition to the contact named above, Lisa Pearson, Assistant Director; Kate Wulff, Analyst-in-Charge; Mark Abraham; Devin Braun; Karen Cassidy; Robert Gebhart; Richard Hung; Kirsten Lauber; Krista Loose; Ty Mitchell; Kayla Robinson; Kate Sharkey; Stewart Small; Jon Ticehurst; and Timothy Wexler made key contributions to this report.", "summary": "The success of the decennial census depends in large part on the Bureau's ability to locate every household in the United States. To accomplish this monumental task, the Bureau must maintain accurate address and map information for every location where a person could reside. For the 2018 End-to-End Test, census workers known as listers went door-to-door to verify and update address lists and associated maps in selected areas of three test sites—Bluefield-Beckley-Oak Hill, West Virginia; Pierce County, Washington; and Providence County, Rhode Island. GAO was asked to review in-field address canvassing during the End-to-End Test. This report determines whether key address listing activities functioned as planned during the End-to-End Test and identifies any lessons learned that could inform pending decisions for the 2020 Census. To address these objectives, GAO reviewed key documents including test plans and training manuals, as well as workload, productivity and hiring data. At the three test sites, GAO observed listers conducting address canvassing. The Census Bureau (Bureau) recently completed in-field address canvassing for the 2018 End-to-End Test. GAO found that field staff known as listers generally followed procedures when identifying and updating the address file; however, some address blocks were worked twice by different listers because the Bureau did not have procedures for reassigning work from one lister to another while listers work offline. Bureau officials told GAO that they plan to develop procedures to avoid duplication but these procedures have not been finalized. Duplicating work decreases efficiency and increases costs. GAO also found differences between actual and projected data for workload, lister productivity, and hiring. For the 2020 Census, the Bureau estimates it will have to verify 30 percent of addresses in the field. However, at the test sites, the actual workload ranged from 37 to 76 percent of addresses. Bureau officials told GAO the 30 percent was a nationwide average and not site specific; however, the Bureau could not provide documentation to support the 30 percent workload estimate. At all three test sites listers were significantly more productive than expected possibly because a design change provided better quality address and map data in the field, according to the Bureau. Hiring, however, lagged behind Bureau goals. For example, at the West Virginia site hiring was only at 60 percent of its goal. Bureau officials attributed the shortfall to a late start and low unemployment rates. Workload and productivity affect the cost of address canvassing. The Bureau has taken some steps to evaluate factors affecting its estimates, but continuing to so would help the Bureau refine its assumptions to better manage the operation's cost and hiring. Listers used laptops to connect to the Internet and download assignments. They worked offline and went door-to-door to update the address file, then reconnected to the Internet to transmit their completed assignments. Bureau officials told GAO that during the test 11 out of 330 laptops did not properly transmit address and map data collected for 25 blocks. Data were deleted on 7 laptops. Because the Bureau had known there was a problem with software used to transmit address data, it created an alert report to notify the Bureau staff if data were not properly transmitted. However, Bureau officials said that either responsible staff did not follow procedures to look at the alert reports or the reports were not triggered. The Bureau is working to fix the software problem and develop new alert reports, but has not yet determined and addressed why these procedures were not followed. The Bureau's data management reporting system did not always provide accurate information because of a software issue. The system was supposed to pull data from several systems to create a set of real-time cost and progress reports for managers to use. Because the data were not accurate, Bureau staff had to rely on multiple systems to manage address canvassing. The Bureau agreed that not only is inaccurate data problematic, but that creating workarounds is inefficient. The Bureau is developing new requirements to ensure data are accurate but these requirements have not been finalized. GAO is making seven recommendations to the Department of Commerce and Bureau including to: (1) finalize procedures for reassigning work, (2) continue to evaluate workload and productivity data, (3) fix software problem, or determine and address why procedures were not followed, and (4) finalize report requirements to ensure data are accurate. The Department of Commerce agreed with GAO's recommendations, and the Bureau provided technical comments that were incorporated, as appropriate.", "document_type": "gao"}
{"report": "This section describes DOE’s tank waste treatment approach at Hanford and DOE’s quality assurance framework and requirements. Cleanup of the Hanford Site is governed by two main compliance agreements: (1) the 1989 Hanford Federal Facility Agreement and Consent Order, or Tri-Party Agreement, an agreement between DOE, the Washington State Department of Ecology, and the Environmental Protection Agency, and (2) a 2010 consent decree. The Tri-Party Agreement was signed in May 1989 and lays out a series of legally enforceable milestones for completing major activities in Hanford’s waste treatment and cleanup process. The Tri-Party Agreement has been amended a number of times to establish additional enforceable milestones for certain WTP construction and tank waste retrieval activities, among other things. Under the Tri-Party Agreement, DOE must complete waste treatment at the Hanford Site by 2047. The overall mission of the WTP is to treat and immobilize a large part of 54 million gallons of radioactive and chemical waste stored in 177 underground storage tanks. The WTP is the most technically complex and largest construction project within DOE’s Office of Environmental Management, occupying 65 acres of the Hanford Site. Some of DOE’s tank waste is highly radioactive material—known as high-level waste— mixed with hazardous waste. Under current law, this waste must be vitrified—a process in which the waste is immobilized in glass—prior to disposal. Low-activity waste is DOE’s term for the portion of the tank waste at Hanford with low levels of radioactivity. Low-activity waste is primarily the liquid portion of the tank waste that remains after as much radioactive material as technically and economically practical has been removed. The WTP consists of the following set of facilities that are designed to separate waste into low-activity and high-level waste streams and, once completed, treat these waste streams in separate facilities using vitrification. Pretreatment Facility. This facility is to receive the waste from the tanks and separate it into high-level and low-activity waste streams. Low-Activity Waste Facility. This facility is to receive the low-activity waste from the Pretreatment facility and immobilize it by vitrification. The canisters of vitrified waste will be permanently disposed of at another facility at Hanford. High-Level Waste Facility. This facility is to receive the high-level waste from the Pretreatment Facility and immobilize it by vitrification. The canisters of vitrified waste will be stored on-site until a final repository is established. Effluent Management Facility. The Effluent Management Facility is being built to evaporate much of the secondary waste produced during low-activity waste processing and vitrification at the Low- Activity Waste Facility. Analytical Laboratory. This facility will conduct analyses as needed, such as testing samples of the vitrified waste to ensure that it meets certain criteria and regulatory requirements for disposal. Balance of Facilities. These facilities consist of the 22 support facilities that make up the plant infrastructure, such as cooling water systems and silos that hold vitrifying materials. In part because of the 2012 work stoppage at the WTP’s Pretreatment and High-Level Waste Facilities, in 2012 DOE adopted a phased waste treatment strategy through which the department aims to begin treating some of the low-activity waste before resolving all WTP technical issues. During the first phase of this strategy, DOE plans to implement a Direct Feed Low-Activity Waste (DFLAW) approach to transfer some low- activity waste from the tanks to the WTP’s Low-Activity Waste Facility for vitrification before the Pretreatment Facility is completed. The approach relies on construction of a new facility—the Low-Activity Waste Pretreatment System—designed to remove highly radioactive particles from liquid tank waste before sending the waste stream to the Low- Activity Waste Facility. During later phases, DOE intends to complete the WTP Pretreatment Facility and High-Level Waste Facilities. DOE also plans to construct a Tank Waste Characterization and Staging Facility under a different contract to stage, mix, sample, and characterize high- level waste from the tanks prior to delivery to the Pretreatment Facility. Figure 1 illustrates WTP and other facilities planned for Hanford tank waste treatment. A set of federal regulations, DOE orders, and ORP procedures collectively make up DOE’s quality assurance framework that aims to ensure that all WTP quality assurance problems can be identified and that identified problems do not recur. DOE’s quality assurance regulations require DOE contractors to establish DOE-approved quality assurance programs. The regulations specify that under an approved program, the contractor’s quality assurance program must, among other things, (1) establish and implement processes to detect and prevent quality problems; (2) identify, control, and correct items, services, and processes that do not meet established requirements; (3) procure items and services that meet established requirements and perform as specified; (4) plan and conduct independent assessments to measure item and service quality, to measure the adequacy of work performance, and to promote improvement; and (5) maintain items to prevent damage, loss, or deterioration. In addition, DOE Order 226.1B requires that DOE’s organizations and contractors implement oversight processes that ensure that relevant quality assurance problems are evaluated and corrected on a timely basis to prevent recurrence. The WTP contract requires compliance with these regulations and requirements. The WTP contract specifies that as the owner of the WTP project, DOE is responsible for providing quality assurance oversight of the WTP. ORP’s Quality Assurance Division provides such oversight, for example, by doing the following: Reviewing a sampling of the contractor’s documentation on the WTP’s engineering, procurement, and construction. Conducting audits and assessments to ensure that the contractor’s work complies with applicable quality assurance requirements. Assessing the effectiveness of the contractor’s Corrective Action Management Program, which involves identifying, documenting, planning, addressing, and tracking actions required to resolve or correct problems. Both the contractor’s and ORP’s quality assurance programs require that corrective actions to address significant problems with the quality of the work must include a determination of the extent to which the problematic conditions exist (known as an extent-of-condition review) as well as the underlying causes of those conditions. If corrective actions do not address the conditions, ORP’s quality assurance policy allows the office to call for a suspension of work. ORP’s stop work procedure includes the process ORP is to follow when the Quality Assurance Division Director, in consultation with ORP management, determines that work needs to be suspended as a result of the occurrence or reoccurrence of significant quality assurance problems. ORP updated this procedure in February 2016 to describe the type of quality assurance deficiencies that should trigger consideration of work stoppage. According to the updated procedure, characteristics of a deficiency that can trigger an order to stop work include, but are not limited to, problems that will result in $25 million or more in loss of productivity, construction rework, or environmental damage or a significant quality problem that if left uncorrected can result in construction delays or create adverse safety conditions. Until February 2016, ORP did not have precise criteria describing the conditions under which it should evaluate work for possible stoppage, according to a DOE headquarters report. ORP has taken several actions to identify and address quality assurance problems at the WTP, but all planned actions have not been completed. In 2013 ORP conducted a comprehensive audit, which resulted in several actions, including when the office had the contractor begin implementing a Managed Improvement Plan (MIP) in 2014. The MIP is intended to ensure that the WTP could operate in compliance with DOE-approved safety and quality requirements. Implementation of the MIP was to be completed by April 2016. Although the contractor reported that the implementation was complete, some of the plan’s corrective measures have not been fully implemented, according to contractor documents we reviewed and quality assurance experts we spoke to. In addition, ORP’s effort to verify the extent to which the contractor has implemented MIP corrective measures is not scheduled to be complete until at least December 2018. ORP has taken several actions to identify and address quality assurance problems at the WTP. After the partial work stoppage in 2012, ORP conducted an audit in 2013 to evaluate the adequacy, implementation, and effectiveness of the contractor’s quality assurance program. The audit found that the contractor’s quality assurance program was generally adequate. However, it also found that the contractor’s quality assurance program was not fully effective in several areas. In response to the audit, ORP and the WTP contractor took the following actions: Developed compensatory measures. At ORP’s request, in 2013, the contractor started implementing “compensatory measures” to ensure that ongoing WTP work during a 2-year performance improvement period would meet DOE quality and safety requirements. For example, in September 2013, the contractor implemented a measure requiring senior management review of all condition reports and their associated levels of significance. According to ORP officials, the compensatory measures were intended to be additional, temporary internal controls to ensure that work at the WTP did not result in new or recurring quality assurance problems. Initiated the MIP. To systematically integrate compensatory measures, the contractor developed the MIP to address all quality assurance problems identified in the two Priority Level One findings and the seven Priority Level One findings associated with engineering and nuclear safety. In August 2014, the contractor started implementing the MIP. The MIP is a set of 52 corrective measures intended to establish processes, procedures, and metrics to produce an overall quality program that ensures that the WTP can safely operate in compliance with DOE-approved nuclear safety requirements, according to the contractor. The measures include the following: Actions to enhance external independent oversight. This measure calls for the contractor to conduct assessments using external subject matter experts to evaluate the ability of the contractor’s quality assurance program to identify precursors to potential problems and their causes. This measure responds to the 2013 audit in which DOE concluded that the contractor’s quality assurance program could not ensure compliance with requirements. Specifically, the audit found that the contractor’s quality assurance program was not fully effective in several areas, including, but not limited to, design, software quality, procurement, and ensuring that identified problems are corrected. Actions to ensure that procured items and services meet requirements and perform as specified. This measure is intended to ensure that the contractor’s processes and procedures to identify and ensure the quality of technical products meet requirements. The nuclear industry uses “commercial grade dedication” to refer to the process by which the contractor or subcontractor verifies that an item (e.g., an electric switch) or service (e.g., design of an electrical system) can meet commercial quality and safety requirements and be approved for use in a nuclear facility. It requires the contractor to perform source verification, perform inspections and tests, and assess the processes that control the quality of purchased items and services to help ensure that critical components of procured items and services are designed, fabricated, assembled, installed, and tested with appropriate documentation to support their compliance with WTP safety requirements. This measure also responds to DOE’s 2013 audit, which found that the contractor had inadequate control over the quality of purchased items and services. Actions to control and correct items and processes that do not meet requirements. This measure is intended to allow the contractor to identify and ensure that materials and equipment that have been received, and that will be received in the future, meet requirements. The contractor is to conduct comprehensive reviews of previously received material and equipment, as well as all future deliveries, to help ensure the verification, accuracy, and completeness of documentation for materials and equipment received from suppliers. This measure also responds to DOE’s 2013 audit, which found that the contractor had received components that did not comply with safety requirements. Performed targeted audits to test compensatory measures and the implementation of the MIP. To assess the effectiveness of the compensatory measures and the MIP, ORP performed targeted audits. For example, to assess the extent to which the contractor has addressed quality assurance program deficiencies, in early 2017 ORP’s Quality Assurance Division conducted a “vertical slice audit.” This audit reviewed engineering, procurement, and construction of a key system that will be needed for initial WTP operations. Because of the long-standing quality assurance problems at the WTP, DOE required ORP to closely monitor the contractor’s implementation of the MIP. Specifically, as a result of a DOE Office of Enforcement investigation into the contractor’s quality assurance and corrective action management programs, DOE entered into a Consent Order with the contractor in 2015. The Consent Order required the contractor to complete the actions identified in the MIP to the extent necessary to restore quality assurance program to full effectiveness by April 30, 2016. The Consent Order does not preclude DOE from reopening the investigation or issuing an enforcement action if there is a recurrence of nuclear safety deficiencies similar to those identified in the Consent Order or the if contractor fails to complete actions required by the Consent Order in a timely and effective manner to prevent recurrence of the identified issues. The contractor has not fully implemented corrective measures for all identified quality assurance problems, according to contractor documents we reviewed. In August 2017, the contractor reported that it had finished its actions to implement the MIP. However, according to the contractor’s MIP status update accompanying the contractor’s report, 13 of the 52 corrective measures specified in the MIP had not been fully implemented. Our review of these 13 MIP corrective measures we found that 9 were intended to exclusively or partially address weaknesses in the contractor’s quality assurance program. For example, the two corrective measures to ensure that WTP facilities’ computer software meets requirements were not complete, according to the MIP status update. These corrective measures included improving the software procurement process and revising the quality assurance manual. In addition, of the 39 measures that the contractor considers complete, some do not appear to be fully implemented, according to one ORP quality assurance expert that we spoke to. For example, one ORP quality assurance expert disagreed with the contractor’s assessment that a corrective measure for documentation pertaining to radiographic film— which is needed for conducting quality assurance reviews of certain equipment—was fully implemented. This corrective measure calls for the contractor to review purchase orders for radiographic film and then store the radiographic film as documentation of compliance with nuclear quality standards. According to the expert, radiographic film reviews are still not consistently conducted, and radiographic film documentation is still not consistently stored. In cases where such documentation is incomplete or missing, the contractor is at times forced to re-create the documentation at considerable cost to DOE. According to ORP’s MIP oversight plan, it will take the office until at least December 2018 to verify the extent to which the contractor has implemented each of the 52 MIP corrective measures. According to DOE documents we reviewed and ORP quality assurance experts we spoke with, ORP’s actions have not ensured that all quality assurance problems have been identified at the WTP, and some previously identified problems are recurring. Specifically, according to DOE documents and the experts we spoke with, ORP’s oversight has not ensured that the contractor has identified all quality assurance problems in structures, systems, and components that were completed and installed before the 2012 work stoppage or identified all such problems in newer structures, systems, and components needed for initial WTP operations. In addition, according to the documents we reviewed and experts we interviewed, previously identified quality assurance problems are recurring. Recent DOE reviews have found that ORP has not ensured that all quality assurance problems have been identified at the WTP. First, a 2016 DOE Office of Enterprise Assessment report found quality assurance deficiencies that neither ORP nor the contractor had identified at the time the work was conducted. The report identified numerous construction deficiencies, procurement and supplier deficiencies, engineering errors, maintenance issues, and materials with expired shelf lives. For example, the report identified welding deficiencies on tanks designed to hold nuclear waste that were identified in a WTP facility several years after the tanks were installed. The report concluded that the contractor is aware that significant quality assurance problems likely exist in older structures, systems, and components. This report noted that much of the equipment in older structures, systems, and components was manufactured and delivered to the project from 5 to 10 years ago—and some of this equipment was supplied by vendors or manufacturers that are no longer in business—which could lead to costly rework. Second, a 2015 DOE Inspector General report found that the contractor had procured $4 billion in parts and materials through fiscal year 2014, but ORP and the contractor had not always identified problems with the quality of procured items in a timely manner. For example, the report found that in about 45 percent of the nearly 1,400 procurement problems reviewed, the contractor did not identify the problems until at least 2 years after the items arrived on site. The report also found that in many cases the contractor canceled its efforts to recover the costs to resolve the problems because of the length of time that had passed. The report concluded that these problems were caused by weaknesses in the contractor’s quality assurance program and that the contractor’s procedures to prevent or identify problems with procured items were not always followed effectively. The findings of these reports are consistent with the views of ORP quality assurance experts we spoke with who stated that ORP oversight has not ensured that the contractor has identified all quality assurance problems in structures, systems, and components—particularly those that were completed and installed before the 2012 work stoppage. These quality assurance experts said that because quality assurance problems have not been identified, they expect significant rework will be needed for work that was completed before 2012. Specifically, most of the ORP quality assurance experts (seven of the nine) told us that they expect rework will be needed for existing WTP facilities, such as the Pretreatment and High- Level Waste Facilities. One of these seven quality assurance experts noted that the contractor does not have a complete record of the documentation for key systems and equipment, which is required for demonstrating compliance with nuclear safety standards and eventual permitting of WTP facilities for operation. According to this expert, the extent of this shortcoming is not known, but fixing it—that is, creating a complete record of required documentation—may lead to years of delays. ORP Quality Assurance Division officials told us that because ORP’s focus is on ensuring that facilities needed for initial operations will be ready to operate by December 2023, they have not been directed by ORP management to focus on identifying all quality assurance problems for work completed before 2012 for facilities needed for later phases of WTP operations, such as structures, systems, and components of the Pretreatment and High-Level Waste Facilities. In addition, they stated that there may be significant changes to these facilities needed for the WTP’s later phases, making it unnecessary for them to review the extent of quality assurance problems until it is known what parts of the facilities will remain and which parts will not. However, similar problems appear to exist in WTP facilities needed for initial operations. ORP quality assurance experts that we interviewed also stated that ORP oversight has not always ensured that all quality assurance problems in facilities needed for the initial WTP operations, or DFLAW, have been identified. Five experts told us that issues such as identifying problematic items, services, and processes had not been fully resolved. Specifically, these ORP quality assurance experts told us that when quality assurance problems are identified in structures, systems, or components needed for DFLAW, ORP does not always ensure that the contractor identifies the extent to which such problems may exist in other areas affected by the same structures, systems, or components. For example, an ORP quality assurance expert cited an instance in which an ORP quality assurance team reviewed a sample of 25 procurement “packages” (out of thousands) for a DFLAW facility and identified 143 problems—significantly more problems than the team expected for such a small sample. Consistent with ORP quality assurance requirements, this ORP quality assurance expert recommended to ORP upper management that the contractor determine the extent to which such problems could affect other structures, systems, and components needed for DFLAW. However, according to an ORP memo, ORP upper management did not require the contractor to implement this recommendation, instead citing “extenuating circumstances” and requiring a lesser corrective action than what was recommended. Three ORP quality assurance experts told us that they believe that because problems have not been comprehensively assessed, there may be equipment and systems within DFLAW that will fail to meet their intended functions. We also found that although ORP conducted its vertical slice audit in 2017 to test its compensatory measures and the MIP to improve quality assurance, the audit report notes that it was focused on only one system within the Low-Activity Waste Facility. According to ORP officials, there are numerous structures, systems, and components in facilities needed for DFLAW that have not been audited or reviewed in a manner similar to the vertical slice audit. Both the contractor’s and ORP’s quality assurance programs require that corrective actions to address significant problems with the quality of the work include a determination of the extent to which the problematic conditions exist as well as the underlying causes of those conditions. Until ORP requires the WTP contractor to determine the full extent to which problems exist in all WTP structures, systems, and components, DOE lacks a comprehensive understanding of all potential quality assurance problems at all WTP facilities. DOE requires its program offices, such as ORP, and contractors to have oversight processes to ensure that quality assurance problems are evaluated and corrected in a timely basis to prevent recurrence. However, several DOE documents we reviewed show that previously identified quality assurance problems have recurred in recent years, including the following: In 2015, an ORP audit report identified recurring weaknesses in quality assurance for the contractor’s process for procuring commercial items for use in a nuclear facility. For example, ORP found that the contractor’s internal controls for this process were not consistently performed; did not consistently comply with procedural requirements; and, in many cases, did not establish reasonable assurance that procured systems, services, and components acquired from 2010 to 2014 would perform their intended safety functions. In a 2015 report on the design and operability of key systems and components for the Low-Activity Waste Facility, ORP found that the quality of computer systems software was not in full compliance with DOE requirements, leading to conditions where personnel and the environment may not be adequately protected. ORP had identified a similar problem in 2008, when it found that the contractor’s computer programs used in engineering calculations were not always verified to show that they produced correct solutions within defined limits for all parameters, as required by the contractor’s quality assurance manual. ORP had also previously identified WTP computer software quality problems in 2010 when it issued a Priority Level Two finding on software procedures and another Priority Level Two finding on software testing. In 2017, ORP’s Quality Assurance Division issued a report that examined the contractor’s quality assurance program and found problems in quality assurance areas that had been previously identified. The report noted that in 6 of 19 quality assurance program areas, the contractor’s performance was marginal—and in need of improvement—or indeterminate. These 6 areas included identifying, controlling, and correcting items, services, and processes that do not meet established requirements; maintaining items to prevent damage, loss, or deterioration; and procuring items and services that meet established requirements and perform as specified. ORP quality assurance experts that we spoke with also stated that previously identified quality assurance problems are recurring, including some in areas where the contractor had implemented corrective measures. These quality assurance experts told us that quality assurance problems are recurring in several key areas, including those areas identified in the documents described above: (1) procurement of items and services that do not meet established requirements or perform as specified; (2) software that does not meet established requirements; and (3) a maintenance program that does not prevent damage, loss, or deterioration of WTP structures, systems, and components. For example, see the following. Procurement of items and services that do not meet requirements or perform as specified. Four out of the five ORP quality assurance experts we interviewed who had recent experience with the procurement of items and services told us that problems with procured items and services that do not meet established requirements or perform as specified are not fully resolved. One of these ORP quality assurance experts stated that an ORP team recently reviewed a random sample of 45 of the roughly 30,000 procurements the contractor had made for the WTP and identified a number of instances where materials did not meet requirements, which resulted in one Priority Level Two finding—which represents a serious issue that indicates an adverse condition, such as a noncompliance or breakdown of a management system—and five Priority Level Three findings. The expert noted that this was many more deficiencies than the team expected for such a small sample. Settlement of Allegations of Contractors Knowingly Mischarging Costs at the Waste Treatment and Immobilization Plant (WTP) In November 2016, the WTP contractor and certain subcontractors agreed to pay $125 million to resolve allegations under the False Claims Act that they made false statements and claims to the Department of Energy (DOE) by charging DOE for deficient nuclear quality materials, services, and testing that were provided to the WTP at DOE’s Hanford Site. The contract required materials, testing, and services to meet certain nuclear quality standards. The Department of Justice alleged that the defendants violated the False Claims Act by charging the government the cost of complying with these standards when they failed to do so. In particular, the Department of Justice alleged that the defendants improperly billed the government for materials and services from vendors that did not meet quality control requirements, for piping and waste vessels that did not meet quality standards, and for testing from vendors that did not have compliant quality programs. As part of the settlement, the contractors admitted no wrongdoing, and the United States did not concede that its claims were not well founded. Software that does not meet requirements. ORP quality assurance experts told us that problems are recurring in certain areas where items and processes do not meet requirements, such as computer software quality assurance, despite the contractor developing two MIP corrective measures in this area. Two ORP quality assurance experts reported that problems with software quality are recurring. One ORP quality assurance expert added that the contractor often fails to develop software quality documentation that is needed to demonstrate compliance with quality requirements when permitting facilities for operation. As a result, the contractor will have to re-create this documentation at some cost. A maintenance program that does not prevent damage, loss, or deterioration. Each of the three ORP quality assurance experts with knowledge in this area told us that the contractor had not established a fully effective WTP maintenance program, particularly for the Pretreatment and High-Level Waste Facilities, and as a result, structures, systems, and components at these facilities have deteriorated and been damaged. Such statements are consistent with findings of the Defense Nuclear Facilities Safety Board, which reported in April 2016 that systems and components stored in an outdoor storage yard were not properly covered and showed signs of being affected by water, sand, or animals. In March 2016, ORP reported significant water intrusion into several areas of the High- Level Waste Facility. As a result, some of the facility’s structures, systems, and components had deteriorated and will require costly rework. The contractor notified DOE in April 2017 that because DOE’s focus is on completing facilities needed for initial WTP operations, it would submit a proposal to change the WTP contract to account for the increased scope, cost, and schedule of long-term maintenance, storage, and management of procured and partially installed structures, systems, and components at those facilities not needed for initial WTP operations. Consistent with its quality assurance procedures, ORP can use its authorities—such as those under the Consent Order and its quality assurance policy—to stop work if corrective measures do not prevent quality assurance problems from recurring. However, ORP has not used such authorities. ORP senior officials told us that they did not consider it necessary to stop work because of the recurrence of problems in certain areas because they plan to evaluate the extent of the contractor’s implementation of MIP corrective measures over the next year and have allowed work to continue because they believe that the contractor’s quality assurance program is generally adequate. Without directing ORP to use its authorities to stop work in areas where quality assurance problems are recurring until it can verify that the problems are corrected and will not recur, DOE may face future rework that could increase costs and schedule delays for the WTP. A 2017 assessment from DOE headquarters and our interviews with nine ORP quality assurance experts suggest that ORP’s organizational structure does not provide the quality assurance function with sufficient independence from upper management—which includes the ORP Manager and the WTP Federal Project Director—to effectively oversee the contractor’s quality assurance program. Our prior work has found that to be independent, an oversight organization should be structurally distinct and separate from program offices responsible for achieving the program’s mission to avoid management interference or conflict between program office mission objectives and safety. At ORP, however, the Quality Assurance Division is not fully separate and independent from the upper management of the WTP project, which manages cost and schedule performance. We believe that such a structure has the potential to create a conflict of interest. Specifically, we found that ORP’s Quality Assurance Division performs assessments of the contractor’s quality assurance program, among other things, and reports its findings to ORP upper management, including the ORP Manager, who has the discretion to determine whether and to what extent to require the contractor to take action in response to findings. When quality assurance issues are identified, ORP upper management must balance its mission of meeting cost and schedule targets with its responsibility to ensure that nuclear safety and quality standards are met. However, these are two potentially conflicting responsibilities because meeting WTP cost and schedule targets may be threatened if serious quality assurance problems are identified. A February 2017 external assessment from DOE headquarters noted that ORP’s Quality Assurance Division’s effectiveness has been limited because, in some instances, its findings have been mischaracterized by ORP upper management, and in others, ORP upper management has not used this division effectively to evaluate the extent of potential quality assurance problems. This assessment found that ORP had not performed adequate oversight of the contractor’s MIP and that some critical quality assurance areas were not receiving the necessary scrutiny from ORP. Further, the assessment found that ORP management sometimes mischaracterized the seriousness of the Quality Assurance Division’s findings and, as a result, did not require the contractor to conduct extent-of-condition review for significant quality assurance problems. While this assessment stated that ORP had an effective quality assurance program, it concluded that three of the eight quality assurance areas the assessment team reviewed were not fully effective, including ORP’s ability to conduct assessments of the contractor’s quality assurance program. A Cautionary Tale: Quality Assurance Problems Doom Commercial Nuclear Power Plant In the commercial nuclear industry, there is a notable example of a construction project that faced significant quality assurance challenges. In the 1970s and early 1980s, Cincinnati Gas & Electric attempted to construct a commercial nuclear power plant, known as the Zimmer Plant, near Moscow, Ohio. After 10 years of construction and more than $2 billion spent, the company abandoned its effort to construct the plant. An independent review mandated by the Nuclear Regulatory Commission in 1982 concluded that several issues impeded successful construction of the Zimmer Plant as a commercial nuclear power plant. These issues included (1) the company’s failure to elevate its commitment to quality and quality assurance to an equal status with cost and schedule, (2) the regulator’s failure to hold the company accountable for quality in design and construction, and (3) the company’s inadequate quality assurance procedures. To recoup some of the $2 billion spent in attempting to construct this commercial nuclear power plant, Cincinnati Gas & Electric later converted facilities built at the site for use in a coal-fired power plant. management and the contractor place cost and schedule performance above identifying and resolving quality assurance issues. One quality assurance expert specified that ORP’s culture does not encourage staff to identify quality assurance problems or ineffective corrective measures. This expert said that people who discover problems are not rewarded; rather, their findings are met with resistance, which has created a culture where quality assurance staff are hesitant to identify quality assurance problems or problems with corrective measures. This expert added that quality assurance is subordinate to cost and schedule—that is, senior managers responsible for approving quality assurance findings are more concerned with whether WTP construction meets schedule milestones than identifying and resolving quality assurance issues. This expert compared the WTP to the Zimmer Power Plant—a power plant in Ohio that was designed to be a nuclear power plant but that was never licensed because of unresolved quality assurance problems and a focus on schedule over construction quality. As stated earlier, in October 2008, we identified key elements that any nuclear safety oversight organization should have in order for it to provide effective independent oversight. For example, we found that an organization should be structurally distinct and separate from DOE program offices to avoid management interference or conflict between program office mission objectives, such as cost and schedule performance and safety. We also found that the organization should have sufficient authority to require program offices to effectively address its findings and recommendations. ORP’s Assistant Manager for Technical and Regulatory Support and ORP senior quality assurance staff told us that ORP’s organizational structure ensures that the quality assurance function is sufficiently independent of ORP management. These officials and the ORP Quality Assurance Program Description state that the Quality Assurance Division is structured to report directly to the ORP Assistant Manager for Technical and Regulatory Support and the ORP Manager. They also cited the ORP Quality Assurance Program policy, which states that the Quality Assurance Division has the authority and overall responsibility to independently audit the contractor’s quality assurance program to verify the achievement of quality. According to these officials, this organizational structure ensures independence from cost and schedule considerations and ensures objectivity in quality assurance evaluations, and they added that the ORP Manager evaluates differing opinions without any hindrances or organizational bias. Given that some previously identified problems are recurring at the WTP, including some in areas where the contractor had implemented corrective measures, and given the findings of the 2017 headquarters assessment and the statements of ORP’s quality assurance experts outlined above, we are concerned that ORP’s organizational structure may not entirely ensure that the Quality Assurance Division meets key elements for a nuclear safety oversight organization to provide effective independent oversight. According to ORP reports and officials, in ORP’s current organizational structure, upper level management retains discretion in how to resolve quality assurance problems. As a result, the Quality Assurance Division does not have sufficient authority to ensure that its findings are addressed and its recommendations are implemented. By revising ORP’s organizational structure so that the quality assurance function is independent of ORP upper-level management, DOE can have better assurance that compliance with nuclear safety requirements will not be subordinated to meeting cost and schedule targets. For years DOE has faced quality assurance problems at the WTP. Upon learning in 2012 that it could not verify that engineering, procurement, and construction at the WTP met nuclear safety and quality requirements, ORP directed the contractor to implement quality assurance corrective measures to ensure that problems would be identified and prevented from recurring. However, 5 years later, the contractor has not fully implemented all planned corrective measures. Moreover, in some areas where the contractor has stated that corrective measures are now in place, ORP continues to encounter quality assurance problems similar to those it encountered in the past. When and where problems have recurred, ORP has not always required the contractor to determine the extent to which the problems may affect all parts of the WTP. By directing ORP to require the WTP contractor, where quality assurance problems have been identified, to determine the full extent to which problems exist in all WTP structures, systems, and components, DOE will gain a comprehensive understanding of all quality assurance problems at all WTP facilities. In addition, ORP has not always used its authorities to stop work when problems are detected before they are fully corrected. Without directing ORP to use its authorities to stop work in areas where quality assurance problems are recurring until it can verify that the problems are corrected and will not recur, DOE may face future rework that could increase costs and schedule delays for the WTP. Also of concern is the potential lack of sufficient independence of ORP’s Quality Assurance Division from ORP’s upper management. This has resulted in ORP upper management not always allowing its own experts to fully examine the contractor’s work even when problems have recurred. At other times, this has resulted in the significance of identified problems—and strength of associated corrective measures—being reduced. DOE’s ability to effectively self-regulate a high-hazard nuclear facility not only depends on vigorous oversight of the contractor by the program office but also on active oversight by an independent group. The WTP is the largest and most technically complex cleanup project managed by DOE, and we recognize that meeting its cost and schedule targets places immense pressure on ORP upper management. However, meeting those targets is further threatened when quality assurance problems are downgraded. By revising ORP’s organizational structure so that the quality assurance function is independent of ORP upper management, DOE can have better assurance that compliance with nuclear safety requirements will not be subordinated to meeting cost and schedule targets. We are making the following three recommendations to DOE: The Secretary of Energy should direct ORP to require the WTP contractor to determine the full extent to which problems exist in all WTP structures, systems, and components. The Secretary of Energy should direct ORP to use its authorities to stop work in areas where quality assurance problems are recurring until ORP’s Quality Assurance Division can verify that the problems are corrected and will not recur. The Secretary of Energy should revise ORP’s organizational structure so that the quality assurance function is independent of ORP upper management. We provided DOE with a draft of this report for its review and comment. In its written comments, reproduced in appendix I, DOE generally agreed with the findings in the report and its recommendations. DOE agreed with our first two recommendations and described actions it has under way and planned to address them. In addition, DOE agreed with our third recommendation—to revise ORP’s organizational structure so that the quality assurance function is independent of ORP upper management—in principle. While DOE states that it believes that the current ORP quality assurance reporting relationship meets all established requirements, it also states that the report identifies instances that indicate that ORP could be strengthened to improve the effectiveness and independence of its quality assurance functions. In response to our recommendation, DOE plans to direct ORP to assess the quality assurance functional reporting lines, responsibilities, and processes to enhance the independence of the quality function from cost and schedule influences and to strengthen and clarify quality assurance reporting to the ORP Manager. This planned action is a positive first step toward implementing our recommendation. We are sending copies of this report to the appropriate congressional committees; the Secretary of Energy; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix II. In addition to the contact named above, Nathan Anderson (Assistant Director), Mark Braza, Scott Fletcher, Ellen Fried, Richard Johnson, Paul Kazemersky, and Peter Ruedel made key contributions to this report.", "summary": "DOE and its contractor are building the WTP—which consists of multiple facilities—to treat a large portion of nuclear waste at Hanford. The project has faced persistent challenges, including quality assurance problems that have delayed it by decades and more than tripled its costs, to nearly $17 billion. DOE's quality assurance framework aims to ensure that all problems are identified and do not recur. Senate Report 114-49 accompanying the National Defense Authorization Act for Fiscal Year 2016 included a provision for GAO to carry out an ongoing evaluation of the WTP. This first report examines (1) the actions DOE has taken to identify and address WTP quality assurance problems, (2) the extent to which DOE has ensured that quality assurance problems have been identified and do not recur, and (3) the extent to which DOE's organizational structure at ORP provides the Quality Assurance Division with independence to effectively oversee the contractor's quality assurance program. GAO reviewed DOE documents and obtained the insights of ORP's internal experts on WTP quality assurance efforts and outcomes. The Department of Energy (DOE) has taken several actions to identify and address quality assurance problems at the Waste Treatment and Immobilization Plant (WTP) at its Hanford site in Washington. Among the actions taken is the implementation of the Managed Improvement Plan by DOE's Office of River Protection (ORP) and the WTP contactor. The plan is intended to ensure that the WTP can operate in compliance with DOE-approved safety and quality requirements. The contractor has stated that the plan is fully implemented, but GAO found that a number of key activities may be incomplete and ORP officials will not be able to verify the extent of implementation until December 2018. According to DOE documents that GAO reviewed and ORP quality assurance experts GAO spoke with, ORP has not ensured that all WTP quality assurance problems have been identified and some previously identified problems are recurring. For example, a 2016 DOE report found quality assurance problems, such as engineering errors and construction deficiencies, that neither ORP nor the contractor had identified when the work was conducted. ORP quality assurance experts GAO spoke with reiterated the issues identified in reports. In addition, DOE audits have found that previously identified quality assurance problems have recurred in key areas, such as the procurement of items that do not meet requirements or perform as specified. These problems were also raised by several of the ORP quality assurance experts GAO interviewed. According to these experts, such recurring problems may lead to significant rework at WTP facilities in the future if work is not stopped and the issues addressed. ORP's quality assurance framework requires the contractor to determine the extent to which quality assurance problems exist in all WTP structures, systems, and components when such problems are identified, and allows ORP to stop work at a facility if recurring issues arise. However, ORP has neither directed the contractor to make this determination nor stopped work when problems recur because it has confidence in the Managed Improvement Plan. ORP's organizational structure may not provide its Quality Assurance Division with sufficient independence from the office's upper management to oversee the contractor's quality assurance program effectively. GAO has previously found that an oversight organization should be structurally distinct and separate from program offices responsible for cost and schedule performance to avoid conflict between mission objectives and safety. However, a 2017 DOE headquarters assessment found that ORP's Quality Assurance Division's effectiveness has been limited. This is because in some cases ORP upper management had mischaracterized its findings, and in other instances, ORP upper management had not used this division to evaluate the extent of potential quality assurance problems. ORP quality assurance experts GAO spoke to were also concerned that ORP's organizational structure does not always ensure the independence of the division. For example, two of these experts described instances when ORP upper management had downgraded the division's findings so that the contractor could take less stringent corrective measures. By providing the Quality Assurance Division adequate independence, DOE can better ensure that compliance with nuclear safety requirements will not be subordinated to other project management goals, such as meeting cost and schedule targets. GAO recommends that DOE direct the WTP contractor to determine the extent of problems in WTP structures, systems, and components and order work stops when problems recur, and DOE should direct ORP to revise its organizational structure to ensure the independence of the Quality Assurance Division. DOE generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Human spaceflight at NASA began in the 1960s with the Mercury and Gemini programs leading up to the Apollo moon landings. After the last lunar landing, Apollo 17, in 1972, NASA shifted its attention to low earth orbit operations with human spaceflight efforts that included the Space Shuttle and International Space Station programs through the remainder of the 20th century. In the early 2000s, NASA once again turned its attention to cislunar and deep space destinations, and in 2005 initiated the Constellation program, a human exploration program that was intended to be the successor to the Space Shuttle. The Constellation program was canceled, however, in 2010 due to factors that included cost and schedule growth and funding gaps. Following Constellation, the National Aeronautics and Space Administration Authorization Act of 2010 directed NASA to develop a Space Launch System, to continue development of a crew vehicle, and prepare infrastructure at Kennedy Space Center to enable processing and launch of the launch system. To fulfill this direction, NASA formally established the SLS program in 2011. Then, in 2012, the Orion project transitioned from its development under the Constellation program to a new development program aligned with SLS. To transition Orion from Constellation, NASA adapted the requirements from the former Orion plan with those of the newly created SLS and the associated ground systems programs. In addition, NASA and the European Space Agency agreed that it would provide a portion of the service module for Orion. Figure 1 provides details about the heritage of each SLS hardware element and its source as well as identifies the major portions of the Orion crew vehicle. The EGS program was established to modernize the Kennedy Space Center to prepare for integrating hardware from the three programs as well as processing and launching SLS and Orion and recovery of the Orion crew capsule. EGS is made up of nine major components, including: the Vehicle Assembly Building, Mobile Launcher, Launch Control Center and software, Launch Pad 39B, Crawler-Transporter, Launch Equipment Test Facility, Spacecraft Offline Processing, Launch Vehicle Offline Processing, and Landing and Recovery. See figure 2 for pictures of the Mobile Launcher, Vehicle Assembly Building, Launch Pad 39B, and Crawler-Transporter. NASA’s Exploration Systems Development (ESD) organization is responsible for directing development of the three individual human spaceflight programs—SLS, Orion, and EGS—into a human space exploration system. The integration of these programs is key because all three systems must work together for a successful launch. The integration activities for ESD’s portfolio occur at two levels in parallel throughout the life of the programs: as individual efforts to integrate the various elements managed within the separate programs and as a joint effort to integrate the three programs into an exploration system. The three ESD programs support NASA’s long term goal of sending humans to distant destinations, including Mars. NASA’s approach to developing and demonstrating the technologies and capabilities to support their long term plans for a crewed mission to Mars includes three general stages of activities—Earth Reliant, Proving Ground, and Earth Independent. Earth Reliant: From 2016 to 2024, NASA’s planned exploration is focused on research aboard the International Space Station. On the International Space Station, NASA is testing technologies and advancing human health and performance research that will enable deep space, long duration missions. Proving Ground: From the mid-2020s to early-2030s, NASA plans to learn to conduct complex operations in a deep space environment that allows crews to return to Earth in a matter of days. Primarily operating in cislunar space—the volume of space around the moon featuring multiple possible stable staging orbits for future deep space missions—NASA will advance and validate capabilities required for humans to live and work at distances much farther away from our home planet, such as on Mars. Earth Independent: From the early-2030s to the mid-2040s, planned activities will build on what NASA learns on the space station and in deep space to enable human missions to the vicinity of Mars, possibly to low-Mars orbit or one of the Martian moons, and eventually the Martian surface. The first launch of the integrated ESD systems, EM-1, is a Proving Ground mission. EM-1 is planned as an uncrewed test flight currently planned for no earlier than October 2019 that will fly about 70,000 kilometers beyond the moon. The second launch, Exploration Mission 2 (EM-2), which will utilize an evolved SLS variant with a more capable upper stage, is also a Proving Ground mission planned for no later than April 2023. EM-2 is expected to be a 10- to 14-day crewed flight with up to four astronauts that will orbit the moon and return to Earth to demonstrate the baseline Orion vehicle capability. NASA eventually plans to develop larger and more capable versions of the SLS to support Proving Ground and Earth Independent missions after EM-2. As noted above, in April 2017 we found that given the combined effects of ongoing technical challenges in conjunction with limited cost and schedule reserves, it was unlikely that the ESD programs would achieve the November 2018 launch readiness date. We recommended that NASA confirm whether the EM-1 launch readiness date of November 2018 was achievable, as soon as practicable but no later than as part of its fiscal year 2018 budget submission process. We also recommended that NASA propose a new, more realistic EM-1 date if warranted. NASA agreed with both recommendations and stated that it was no longer in its best interest to pursue the November 2018 launch readiness date. Further, NASA stated that, in fall 2017, it planned to establish a new launch readiness date. Subsequently, in June 2017, NASA sent notification to Congress that EM-1’s recommended launch date would be no earlier than October 2019. The life cycle for NASA space flight projects consists of two phases— formulation, which takes a project from concept to preliminary design, and implementation, which includes building, launching, and operating the system, among other activities. NASA further divides formulation and implementation into pre-phase A through phase F. Major projects must get approval from senior NASA officials at key decision points before they can enter each new phase. The three ESD programs are completing design and fabrication efforts prior to beginning Phase D system assembly, integration and test, launch and checkout. Figure 3 depicts NASA’s life cycle for space flight projects. NASA’s approach for integrating and assessing programmatic and technical readiness, executed by ESD, differs from prior NASA human spaceflight programs. This new approach offers some cost and potential efficiency benefits. However, it also brings challenges specific to its structure. In particular, there are oversight challenges because only one of the three programs, Orion, has a cost and schedule estimate for EM-2. NASA is already contractually obligating money on SLS and EGS for EM- 2, but the lack of cost and schedule baselines for these programs will make it difficult to assess progress over time. Additionally, the approach creates an environment of competing interests because it relies on dual- hatted staff to manage technical and safety aspects on behalf of ESD while also serving as independent oversight of those same areas. NASA is managing the human spaceflight effort differently than it has in the past. Historically, NASA used a central management structure to manage human spaceflight efforts for the Space Shuttle and the Constellation programs. For example, both the Shuttle and Constellation programs were organized under a single program manager and used a contractor to support integration efforts. Additionally, the Constellation program was part of a three-level organization—the Exploration Systems Mission Directorate within NASA headquarters, the Constellation program, and then projects, including the launch vehicle, crew capsule, ground systems, and other lunar-focused projects, managed under the umbrella of Constellation. Figure 4 illustrates the three-level structure used in the Constellation program. In the Constellation program, the programmatic workforce was distributed within the program and projects. For example, systems engineering and integration organizations—those offices responsible for making separate technical designs, analyses, organizations and hardware come together to deliver a complete functioning system—were embedded within both the Constellation program and within each of the projects. NASA’s current approach is organized with ESD, rather than a contractor, as the overarching integrator for the three separate human spaceflight programs—SLS, Orion, and EGS. ESD manages both the programmatic and technical cross-program integration, and primarily relies on personnel within each program to implement its integration efforts. Exploration Systems Integration, an office within ESD, leads the integration effort from NASA headquarters. ESD officials stated that this approach is similar to that used by the Apollo program, wherein the program was also managed out of NASA headquarters. Within Exploration Systems Integration, the Cross-Program Systems Integration sub-office is responsible for technical integration and the Programmatic and Strategic Integration sub-office is responsible for integrating the financial, schedule, risk management, and other programmatic activities of the three programs. The three programs themselves perform the hardware and software integration activities. This organizational structure that consists of two levels is shown in figure 5. ESD is executing a series of six unique integration-focused programmatic and technical reviews at key points within NASA’s acquisition life cycle, as shown in figure 6, to assess whether NASA cost, schedule, and technical commitments are being met for the three-program enterprise. These reviews cover the life cycle of the integrated programs to EM-1, from formulation to readiness to launch. Some of these reviews are unique to ESD’s role as integration manager, For example, ESD established two checkpoints—Design to Sync in 2015 and Build to Sync in 2016. The purpose of Design to Sync was to assess the ability of the integrated preliminary design to meet system requirements, similar to a preliminary design review and the purpose of Build to Sync was to assess the maturity of the integrated design in readiness for assembly, integration, and test, similar to a critical design review (CDR). At both events, NASA assessed the designs as ready to proceed. Key participants in these integration reviews include ESD program personnel and the Cross-Program Systems Integration and Programmatic and Strategic Integration staff that are responsible for producing and managing the integration activities. ESD’s integration approach offers some benefits in terms of cost avoidance relative to NASA’s most recent human spaceflight effort, the Constellation program. NASA estimated it would need $190 million per year for the Constellation program integration budget. By comparison, between fiscal years 2012 and 2017, NASA requested an average of about $84 million per year for the combined integration budgets of the Orion, SLS, EGS, and ESD. This combined average of about $84 million per year represents a significant decrease from the expected integration budget of $190 million per year under the Constellation program. In addition, as figure 7 shows, NASA’s initial estimates for ESD’s required budget for integration are close to the actuals for fiscal years 2012-2017. NASA originally estimated that ESD’s budget for integration would require approximately $30 million per year. ESD’s integration budget was less than $30 million in fiscal years 2012 and 2013 and increased to about $40 million in fiscal year 2017—an average of about $30 million a year. According to NASA officials, some of the cost avoidance can be attributed to the difference in workforce size. The Constellation program’s systems engineering and integration workforce was about 800 people in 2009, the last full year of the program; whereas ESD’s total systems engineering and integration workforce in 2017 was about 500 people, including staff resident in the individual programs. ESD officials also stated that, in addition to cost avoidance, their approach provides greater efficiency. For example, ESD officials said that decision making is much more efficient in the two-level ESD organization than Constellation’s three-level organization because the chain of command required to make decisions is shorter and more direct. ESD officials also indicated that the post-Constellation elimination of redundant systems engineering and integration staff at program and project levels contributed to efficiency. Additionally, they stated that program staff are invested in both their respective programs and the integrated system because they work on behalf of the programs and on integration issues for ESD. Finally, they said another contribution to increased efficiency was NASA’s decision to establish SLS, Orion, and EGS as separate programs, which allowed each program to proceed at its own pace. One caveat to this benefit, however, is that ESD’s leaner organization is likely to face challenges to its efficiency in the integration and test phases of the SLS, Orion, and EGS programs. We analyzed the rate at which ESD has reviewed and approved the different types of launch operations and ground processing configuration management records for integrated SLS, Orion, and EGS operations, and found that the process is proceeding more slowly than ESD anticipated. For example, as figure 8 illustrates, ESD approved 403 fewer configuration management records than originally planned in the period from March 2016 through June 2017. According to an ESD official, the lower-than-planned approval rate resulted from the time necessary to establish and implement a new review process as well as final records being slower to arrive from the programs for review than ESD anticipated. Additionally, the official stated that the records required differing review timelines because they varied in size and scope. As figure 8 shows, ESD originally expected the number of items that needed review and approval to increase and create a “bow wave” during 2017 and 2018. In spring 2017, ESD re-planned its review and approval process and flattened the bow wave. The final date for review completion is now aligned with the new planned launch readiness date of no earlier than October 2019, which added an extra year to ESD’s timeframe to complete the record reviews. While the bow wave is not as steep as it was under the original plan, ESD will continue to have a large number of records that require approval in order to support the launch readiness date. An ESD official stated that NASA had gained experience managing such a bow wave as it prepared for Orion’s 2014 exploration flight test launch aboard a Delta IV rocket and as part of the Constellation program’s prototype Ares launch in 2009, but acknowledged that ESD will need to be cautious that its leaner staff is not overwhelmed with documentation, which could slow down the review process. ESD is responsible for overall affordability for SLS, Orion, and EGS, while each of the programs develops and maintains an individual cost and schedule baseline. The baseline is created at the point when a program receives NASA management approval to proceed into final design and production. In their respective baselines, as shown in table 1, SLS and EGS cost and schedule are baselined to EM-1, and Orion’s are baselined to EM-2. NASA documentation indicates that Orion’s baselines are tied to EM-2 because that is the first point at which it will fulfill its purpose of carrying crew. Should NASA determine it is likely to exceed its cost estimate baseline by 15 percent or miss a milestone by 6 months or more, NASA is required to report those increases and delays—along with their impacts—to Congress. In June 2017, NASA sent notification to Congress that the schedule for EM-1 has slipped beyond the allowed 6- month threshold, but stated that cost is expected to remain within the 15 percent threshold. NASA has not established EM-2 cost baselines or expected total life- cycle costs for SLS and EGS, including costs related to the larger and more capable versions of SLS needed to implement the agency’s plans to send crewed missions to Mars. GAO’s Cost Estimating and Assessment Guide, a guidebook of cost estimating best practices developed in concert with the public and private sectors, identifies baselines as a critical means for measuring program performance over time and addresses how a baseline backed by a realistic cost estimate increases the probability of a program’s success. In addition, prior GAO work offers insight into the benefits of how baselines enhance a program’s transparency. For example, we found in 2009 that costs for the Missile Defense Agency’s (MDA) ballistic missile defense system had grown by at least $1 billion, and that lack of baselines for each block of capability hampered efforts to measure progress and limited congressional oversight of MDA’s work. MDA responded to our recommendation to establish these baselines and, in 2011, we reported that MDA had a new process for setting detailed baselines, which had resulted in a progress report to Congress more comprehensive than the one it provided in 2009. To that end, we have made recommendations in the past on the need for NASA to baseline the programs’ costs for capabilities beyond EM-1; however, a significant amount of time has passed without NASA taking steps to fully implement these recommendations. Specifically, in May 2014, we recommended that, to provide Congress with the necessary insight into program affordability, ensure its ability to effectively monitor total program costs and execution, and to facilitate investment decisions, NASA’s Administrator should direct the Human Exploration and Operations Mission Directorate to: Establish a separate cost and schedule baseline for work required to support the SLS for EM-2 and report this information to the Congress through NASA’s annual budget submission. If NASA decides to fly the SLS configuration used in EM-2 beyond EM-2, establish separate life cycle cost and schedule baseline estimates for those efforts, to include funding for operations and sustainment, and report this information annually to Congress via the agency’s budget submission; and Establish separate cost and schedule baselines for each additional capability that encompass all life cycle costs, to include operations and sustainment, because NASA intends to use the increased capabilities of the SLS, Orion, and ground support efforts well into the future and has chosen to estimate costs associated with achieving the capabilities. As part of the latter recommendation, we stated that, when NASA could not fully specify costs due to lack of well-defined missions or flight manifests, the agency instead should forecast a cost estimate range— including life cycle costs—having minimum and maximum boundaries and report these baselines or ranges annually to Congress via the agency’s budget submission. In its comments on our 2014 report, NASA partially concurred with these two recommendations, noting that much of what it had already done or expected to do would address them. For example, the agency stated that establishing the three programs as separate efforts with individual cost and schedule commitments met GAO’s intent as would its plans to track and report development, operations, and sustainment costs in its budget to Congress as the capabilities evolved. In our response, we stated that while NASA’s prior establishment of three separate programs lends some insight into expected costs and schedule at the broader program level, it does not meet the intent of the two recommendations because cost and schedule identified at that level is unlikely to provide the detail necessary to monitor the progress of each block against a baseline. Further, reporting the costs via the budget process alone will not provide information about potential costs over the long term because budget requests neither offer all the same information as life-cycle cost estimates nor serve the same purpose. Life-cycle cost estimates establish a full accounting of all program costs for planning, procurement, operations and maintenance, and disposal and provide a long-term means to measure progress over a program’s life span. In 2016, NASA requested closure of these recommendations, citing, among other factors, changes to the programs’ requirements, design, architecture, and concept of operations. However, NASA’s request did not identify any steps taken to meet the intent of these two recommendations, such as establishing cost and schedule baselines for EM-2, baselines for each increment of SLS, Orion, or ground systems capability, or documentation of life cycle cost estimates with minimum and maximum boundaries. Further, a senior level ESD official told us that NASA does not intend to establish a baseline for EM-2 because it is not required to do so. The limited scope that NASA has chosen to use as the basis for formulating the programs’ cost baselines does not provide the transparency necessary to assess long-term affordability. Plainly, progress cannot be assessed without a baseline that serves as a means to compare current costs against expected costs; consequently, it becomes difficult to assess program affordability and for Congress to make informed budgetary decisions. NASA’s lack of action in regards to our 2014 recommendations means that it is now contractually obligating NASA to spend billions of dollars in potential costs for EM-2 and beyond without a baseline against which to assess progress. For example: in fiscal year 2016, the SLS program awarded two contracts to Aerojet Rocketdyne: a $175 million contract for RL-10 engines to power the exploration upper stage during EM-2 and EM-3 and a $1.2 billion contract to restart the RS-25 production line required for engines for use beyond EM-4, and to produce at least 4 additional RS-25 engines; in 2017, SLS modified the existing Boeing contract upwards by $962 million for work on the exploration upper stage that SLS will use during EM-2 and future flights; and on a smaller scale, in fiscal year 2016 the EGS program obligated $4.8 million to support the exploration upper stage and EM-2. As illustrated by these contracting activities, the SLS program is obligating more funds for activities beyond EM-1 than Congress directed. Specifically, of approximately $2 billion appropriated for the SLS program, the Consolidated Appropriations Act, 2016 directed that NASA spend not less than $85 million for enhanced upper stage development for EM-2. NASA has chosen to allocate about $360 million of its fiscal year 2016 SLS appropriations towards EM-2, including enhanced upper stage development, additional performance upgrades, and payload adapters, without a baseline to measure progress and ensure transparency. The NASA Inspector General (IG) also recently reported that NASA is spending funds on EM-2 efforts without a baseline in place and expressed concerns about the need for EM-2 cost estimates. Because NASA has not implemented our recommendations, it may now be appropriate for Congress to take action to require EM-2 cost and schedule baselines for SLS and EGS, and separate cost and schedule baselines for additional capabilities developed for Orion, SLS, and EGS for missions beyond EM-2. These baselines would be important tools for Congress to make informed, long-term budgetary decisions with respect to NASA’s future exploration missions, including Mars. NASA’s governance model prescribes a management structure that employs checks and balances among key organizations to ensure that decisions have the benefit of different points of view and are not made in isolation. As part of this structure, NASA established the technical authority process as a system of checks and balances to provide independent oversight of programs and projects in support of safety and mission success through the selection of specific individuals with delegated levels of authority. The technical authority process has been used in other parts of the government for acquisitions, including the Department of Defense and Department of Homeland Security. ESD is organizationally connected to three technical authorities within NASA. The Office of the Chief Engineer technical authority is responsible for ensuring from an independent standpoint that the ESD engineering work meets NASA standards, The Office of Safety and Mission Assurance technical authority is responsible for ensuring from an independent standpoint that ESD products and processes satisfy NASA’s safety, reliability, and mission assurance policies, and The Office of Chief Health and Medical technical authority is responsible for ensuring from an independent standpoint that ESD programs meet NASA’s health and medical standards. These NASA technical authorities have delegated responsibility for their respective technical authority functions directly to ESD staff. According to NASA’s project management requirements, the program or project manager is ultimately responsible for the safe conduct and successful outcome of the program or project in conformance with governing requirements and those responsibilities are not diminished by the implementation of technical authority. ESD has established an organizational structure in which the technical authorities for engineering and safety and mission assurance (S&MA) are dual hatted to also serve simultaneously in programmatic positions. The chief engineer technical authority also serves as the Director of ESD’s Cross Program System Integration Office and the S&MA technical authority also serves as the ESD Safety and Mission Assurance Manager. In their programmatic roles for ESD, the individuals manage resources, including budget and schedule, to address engineering and safety issues. In their technical authority roles, these same individuals are to provide independent oversight of programs and projects in support of safety and mission success. Having the same individual simultaneously fill both a technical authority role and a program role creates an environment of competing interests where the technical authority may be subject to impairments in their ability to impartially and objectively assess the programs while at the same time acting on behalf of ESD in programmatic capacities. This duality makes them more subject to program pressures of cost and schedule in their technical authority roles. Figure 9 describes some of the conflicting roles and responsibilities of these officials in their two different positions. The concurrency of duties leaves the positions open to conflicting goals of safety, cost, and schedule and increases the potential for the technical authorities to become subject to cost and schedule pressures. For example: the dual-hatted engineering and S&MA technical authorities serve on decision-making boards both in technical authority and programmatic capacities, making them responsible for providing input on technical and safety decisions while also keeping an eye on the bottom line for ESD’s cost and schedule; and the technical authorities are positioned such that they have been the reviewers of the ESD programmatic areas they manage—in essence, “grading their own homework.” For example, at ESD’s Build to Sync review in 2016, the engineering and S&MA technical authorities evaluated the areas that they manage in their respective capacities as ESD Director of Cross Program System Integration and ESD Safety and Mission Assurance Manager. This process relied on their abilities as individuals to completely separate the two hats—using one hand to put on the ESD hat and manage technical and safety issues within programmatic cost and schedule constraints and using the other hand to take off that hat and assess the same issues with an independent eye. NASA officials identified several reasons why the dual-hat structure works for their purposes. Agency officials stated that one critical factor to successful dual-hatting is having the “right” people in those dual-hat positions—that is, personnel with the appropriate technical knowledge to do the work and the ability to act both on behalf of ESD and independent of it. Officials also indicated that technical authorities retain independence because their technical authority reporting paths and performance reviews are all within their technical authority chain of command rather than under the purview of the ESD chain of command. Additionally, agency officials said that dual-hat roles are a commonplace practice at NASA and cited other factors in support of the approach, including that: it would not be an efficient use of resources to have an independent technical authority with no program responsibilities because that person would be unlikely to have sufficient program knowledge to provide useful insight and could slow the program’s progress; a technical authority that does not consider cost and schedule is not helpful to the program because it is unrealistic to disregard those aspects of program management; a strong dissenting opinion process is in place and allows for issues to be raised through various levels to the Administrator level within NASA; and ESD receives additional independent oversight through three NASA internal organizations—the independent review teams that provide independent assessments of a program’s technical and programmatic status and health at key points in its life cycle; the NASA Engineering and Safety Center that conducts independent safety and mission success-related testing, analysis, and assessments of NASA’s high- risk projects; and the Aerospace Safety Advisory Panel (ASAP) that independently oversees NASA’s safety performance. These factors that NASA officials cite in support of the dual-hat approach minimize the importance of having independent oversight and place ESD at risk of fostering an environment in which there is no longer a balance between preserving safety with the demands of maintaining cost and schedule. The Columbia Accident Investigation Board (CAIB) report—the result of an in-depth assessment of the technical and organizational causes of the Columbia accident—concluded that NASA’s organization for the Shuttle program combined, among other things, all authority and responsibility for schedule, cost, safety, and technical requirements and that this was not an effective check and balance. The CAIB report recommended that NASA establish a technical authority to serve independently of the Space Shuttle program so that employees would not feel hampered to bring forward safety concerns or disagreements with programmatic decisions. The Board’s findings that led to this recommendation included a broken safety culture in which it was difficult for minority and dissenting opinions to percolate up through the hierarchy; dual Center and programmatic roles vested in one person that had confused lines of authority, responsibility, and accountability and made the oversight process susceptible to conflicts of interest; and oversight personnel in positions within the program, increasing the risk that these staffs’ perspectives would be hindered by too much familiarity with the programs they were overseeing. ESD officials stated that they had carefully and thoughtfully implemented the intent of the CAIB; they said they had not disregarded its finding and recommendations but instead established a technical authority in such a way that it best fit the context of ESD’s efforts. These officials did acknowledge, though, that the dual hat approach does not align with the CAIB report’s recommendation to separate programmatic and technical authority or with NASA’s governance framework. Further, over the course of our review, we spoke with various high-ranking officials outside and within NASA who expressed some reservations about ESD’s dual hat approach. For example: The former Chairman of the CAIB stated that, even though the ESD programs are still in development, he believes the technical authority should be institutionally protected against the pressures of cost and schedule and added that NASA should never be lulled into dispensing of engineering and safety independence because human spaceflight is an extremely risky enterprise. Both NASA’s Chief Engineer and Chief of S&MA acknowledged there is inherent conflict in the concurrent roles of the dual hats, while also expressing great confidence in the ESD staff now in the dual roles. NASA’s Chief of S&MA indicated that the dual-hat S&MA structure is working well within ESD, but he believes these dual-hatted roles may not necessarily meet the intent of the CAIB’s recommendation because the Board envisioned an independent safety organization completely outside the programs. NASA’s Chief Engineer stated that he believes technical authority should become a separate responsibility and position as ESD moves forward with integration of the three programs and into their operation as a system. As these individuals made clear, ensuring the ESD engineering and S&MA technical authorities remain independent of cost and schedule conflicts is key to human spaceflight success and safety. Along these lines, the ASAP previously conveyed concerns about NASA’s implementation of technical authority that continue to be valid today. In particular, the ASAP stated in a 2013 report that NASA’s technical authority was working at that time in large measure due to the well- qualified, strong personnel that had been assigned to the process. The panel noted, however, that should there be a conflict or weakening of the placement of strong individuals in the technical authority position, this could introduce greater risk into a program. Although a current ASAP official stated she had no concerns with ESD’s present approach to technical authority, the panel’s prior caution remains applicable, and the risk that the ASAP identified earlier could be realized if not mitigated by eliminating the potential for competing interests within the ESD engineering and S&MA positions. NASA is currently concluding an assessment of the implementation of the technical authority role to determine how well that function is working across the agency. According to the official responsible for leading the study, the assessment includes examining the evolution of the technical authority role over the years and whether NASA is spending the right amount of funds for those positions. NASA expects to have recommendations in 2017 on how to improve the technical authority function, but does not expect to address the dual hat construct. A principle of federal internal controls is that an agency should design control activities to achieve objectives and respond to risks, which includes segregation of key duties and responsibilities to reduce the risk of error, misuse, or fraud. By overlapping technical authority and programmatic responsibilities, NASA will continue to run the risk of creating an environment of competing interests for the ESD engineering and S&MA technical authorities. Despite the development and integration challenges associated with a new human spaceflight capability, ESD has improved its overall cross- program risk posture over the past 2 years. Nonetheless, it still faces key integration risk areas within software development and verification and validation (V&V). Both are critical to readiness for EM-1 because software acts as the “brain” that ties SLS, Orion, and EGS together in a functioning body, while V&V ensures the integrated body works as expected. The success of these efforts forms the foundation for a launch, no matter the date of EM-1. We have previously reported on individual SLS, Orion, and EGS program risks that were contributing to potential delays within each program. For example, in July 2016, we found that delays with the European Service Module—which will provide services to the Orion crew module in the form of propulsion, consumables storage, and heat rejection and power—could potentially affect the Orion program’s schedule. Subsequently, in April 2017, we found that those delays had worsened and were contributing to the program likely not making a November 2018 launch readiness date. All three programs continue to manage such individual program risks, which is to be expected of programs of this size and complexity. The programs may choose to retain these risks in their own risk databases or elevate them to ESD to track mitigation steps. A program would elevate a risk to ESD when decisions are needed by ESD management, such as a need for additional resources or requirement changes. Risks with the greatest potential for negative impacts are categorized as top ESD risks. In addition to these individual programs risks that are elevated to ESD, ESD is also responsible for overseeing cross-program risks that affect multiple programs. An example of a cross-program risk is the potential for delayed delivery of data from SLS and Orion to affect the EGS software development schedule. ESD has made progress reducing risks over the last 2 years, from the point of the Design to Sync preliminary design review equivalent for the integrated programs to the Build to Sync critical design review equivalent. As figure 10 illustrates, ESD has reduced its combined total of ESD and cross program risks from 39 to 25 over this period, and reduced the number of high risks from about 49 percent of the total to about 36 percent of the total. The ESD risk system is dynamic, with risks coming into and dropping out of the system over time as development proceeds and risk mitigation is completed. A total of 29 of the 39 risks within the ESD risk portfolio were removed from the register and 15 risks were added to the register between November 2014, prior to Design to Sync, and March 2017, after Build to Sync. Examples of risks removed over this time period include risks associated with late delivery of Orion and SLS ground support equipment hardware to EGS and establishing a management process to identify risks stemming from the programs being at differing points in development. Nine risks remained active in the system over the 2-year period we analyzed, and NASA experienced delays in the length of time it anticipated it would take to complete mitigation of the majority of these nine risks. Three of these nine risks that have remained active in the risk system since before Design to Sync are still classified as high risk; the remaining six are classified as medium risk. Mitigation is an action taken to eliminate or reduce the potential severity of a risk, either by reducing the probability of it occurring, by reducing the level of impact if it does occur, or both. ESD officials indicated a number of reasons why risks could take longer to mitigate. For instance, risks with long-term mitigation strategies may go for extended periods of time without score changes. In addition, ESD may conduct additional risk assessments and determine that certain risks need to be reprioritized over time and that resources should be focused towards higher risks. In addition, some risk mitigation steps are tied to hardware delivery and launch dates, and as those delay, the risk mitigation steps will as well. As illustrated in table 2, we found that six of these nine risks were related to software and V&V and represented some of the primary causes in terms of estimated completion delays. On average, the estimated completion dates for these six risks were delayed about 16 months. In addition, the two V&V risks that have remained active since before Design to Sync were still considered top ESD risks as of March 2017 when we completed this analysis. Software development is one of the top cross-program technical issues facing ESD as the programs approach EM-1. Software is a key enabling technology required to tie the human spaceflight systems together. Specifically, for ESD to achieve EM-1 launch readiness, software developed within each of the programs has to be able to link and communicate with software developed in other programs in order to enable a successful launch. Furthermore, software development continues after hardware development and is often used to help resolve hardware deficiencies discovered during systems integration and test. ESD has defined six critical paths—the path of longest duration through the sequence of activities that determines the program’s earliest completion date—for its programs to reach EM-1, and three are related to software development. These three software critical paths support interaction and communication between the systems the individual programs are developing—SLS to EGS software, Orion to EGS software, and the Integrated Test Laboratory (ITL) facility that supports Orion software and avionics testing as well as some SLS and EGS testing. The other critical paths are development of the Orion crew service module, SLS core stage, and the EGS Mobile Launcher. Because of software’s importance to EM-1 launch readiness, ESD is putting a new method in place to measure how well these software efforts are progressing along their respective critical paths. To that end, it is currently developing a set of “Key Progress Indicators” milestones that will include baseline and forecast dates. Officials indicated that these metrics will allow ESD to better track progress of the critical path software efforts toward EM-1 during the remainder of the system integration and test phase. ESD officials have indicated, however, that identifying and establishing appropriate indicators is taking longer than expected and proving more difficult than anticipated. One of the software testing critical paths, the ITL, has already experienced delays that slipped completion of planned software testing from September 2018 until March 2019, a delay of 6 months. Officials told us that this delay was primarily due to a series of late avionics and software deliveries by the European Space Agency for Orion’s European Service Module. The delay in the Orion testing in turn affects SLS and EGS software testing and integration because those activities are informed by the completion of the Orion software testing. Furthermore, some EGS and SLS software testing scheduled to be conducted within the ITL has been re-planned as a result of the Orion delays. The Orion program indicates that it has taken action to mitigate ITL issues as they arise. For example, the European Service Module avionics and software delivery delay opened a 125-day gap between completion of crew module testing and service module testing. Orion officials indicated that the program had planned to proceed directly into testing of the integrated crew module and service module software and systems, but the integrated testing cannot be conducted until the service module testing is complete. As illustrated by figure 11, to mitigate the impact of the delay, Orion officials indicated that the program filled this gap by rescheduling other activities at the ITL such as software integration testing and dry runs for the three programs. These adjustments narrowed the ITL schedule gap from 125 days to 24 days. The officials stated that they will continue to adjust the schedule to eliminate gaps. The other two software critical paths—SLS to EGS and Orion to EGS software development—are also experiencing software development issues. In July 2016, for example, we found that delays in SLS and Orion requirements development, as well as the programs’ decisions to defer software content to later in development, were delaying EGS’s efforts to develop ground command and control software and increasing cost and schedule. Furthermore, ESD reports show that delays and content deferral in the Orion and SLS software development continue to affect EGS software development and could delay launch readiness. For example, the EGS data throughput risk that both ESD and EGS are tracking is that the ground control system software is currently not designed to process the amount of telemetry it will receive and provide commands to SLS and ground equipment as required during launch operations. EGS officials stated that, if not addressed, the risk is that if there is a SLS or Orion failure, the ground control system software may not display the necessary data to launch operations technicians. EGS officials told us that the reason for the mismatch between the data throughput being sent to the ground control software and how much is it designed to process is that no program was constrained in identifying its data throughput. These officials stated that retrospectively, they should have established an interface control document to manage the process. The officials also stated that the program is taking steps to mitigate this risk, including defining or constraining the data parameters and buying more hardware to increase the amount of data throughput that can be managed, but will not know if the risk is fully mitigated until additional data are received and analyzed during upcoming tests. For example, EGS officials stated that the green run test will provide additional data to help determine if the steps they are taking address this throughput risk. If the program determines the risk is not fully mitigated and additional software redesign is required, it could lead to schedule delays. ESD officials overseeing software development acknowledged that software development for the integrated systems is a difficult task and said they expect to continue to encounter and resolve software development issues during cross-program integration and testing. As we have found in past reviews of NASA and Department of Defense systems, software development is a key risk area during system integration and testing. For example, we found in April 2017 that software delivery delays and development problems with the U.S. Air Force’s F-35 program experienced during system integration and testing were likely to extend that program’s development by 12 months and increase its costs by more than $1.7 billion. Verification and validation (V&V) is acknowledged by ESD as a top cross- program integration risk that NASA must monitor as it establishes and works toward a new EM-1 launch readiness date. V&V is a culminating development activity prior to launch for determining whether integrated hardware and software will perform as expected. V&V consists of two equally important aspects: verification is the process for determining whether or not a product fulfills the requirements or specifications established for it at the start of the development phase; and validation is the assessment of a planned or delivered system ability to meet the sponsor’s operational need in the most realistic environment achievable during the course of development or at the end of development. Like software development and testing, V&V is typically complex and made even more so by the need to verify and validate how SLS, Orion, and EGS work together as an integrated system. ESD’s V&V plans for the integrated system have been slow to mature. In March 2016, leading up to ESD’s Build to Sync review, ESD performed an audit of V&V-related documentation for the program CDRs and ESD Build to Sync. The audit found that 54 of 257 auditable areas (21 percent) were not mature enough to meet NASA engineering policy guidance for that point in development. According to ESD documentation, there were several causes of this immaturity, including incomplete documentation and inconsistent requirements across the three programs. NASA officials told us that our review prompted ESD to conduct a follow-up and track the status of these areas. As of June 2017, 53 of the 54 auditable areas were closed, which means these areas are at or have exceeded CDR level of maturity—6 months after Build to Sync was completed. NASA officials indicated that the remaining one auditable area, which is related to the test plan for the integrated communication network, was closed in August 2017. Nevertheless, other potential V&V issues still remain. According to ESD officials, distributing responsibility for V&V across the three programs has created an increased potential for gaps in testing. If gaps are discovered during testing, or if integrated systems do not perform as planned, money and time for modifications to hardware and/or software may be necessary, as well as time for retesting. This could result in delayed launch readiness. As a result, mature V&V plans are needed to ensure there are no gaps in planned testing. ESD officials indicated that a NASA Engineering and Safety Center review of their V&V plans, requested by ESD’s Chief Engineer to address concerns about V&V planning, would help define the path forward for maturing V&V plans. V&V issues add to cost and schedule risk for the program because they may take more time and money to resolve than ESD anticipates. In some cases, they may have a safety impact as well. For example, if the structural models are not sufficiently verified, it increases flight safety risks. Each of the programs bases its individual analyses on the models of the other programs. As a result, any deficiencies discovered in one can have cascading effects through the other systems and programs. We will continue to monitor ESD’s progress mitigating risks as NASA approaches EM-1. NASA is at the beginning of the path leading to human exploration of Mars. The first phase along that path, the integration of SLS, Orion, and EGS, is likely to set the stage for the success or failure of the rest of the endeavor. Establishing a cost and schedule baseline for NASA’s second mission is an important initial step in understanding and gaining support for the costs of SLS, Orion, and EGS, not just for that one mission but for the Mars plan overall. NASA’s ongoing refusal to establish this baseline is short-sighted, because EM-2 is part of a larger conversation about the affordability of a crewed mission to Mars. While later stages of the Mars mission are well in the future, getting to that point in time will require a funding commitment from the Congress and other stakeholders. Much of their willingness to make that commitment is likely to be based on the ability to assess the extent to which NASA has met prior goals within predicted cost and schedule targets. Furthermore, as ESD moves SLS, Orion, and EGS from development to integrated operations, its efforts will reach the point when human lives will be placed at risk. Space is a severe and unforgiving environment; the Columbia accident showed the disastrous consequences of mistakes. As the Columbia Accident Investigation Board report made clear, a program’s management approach is an integral part of ensuring that human spaceflight is as safe and successful as possible. The report also characterized independence as key to achieving that safety and success. ESD’s approach, however, tethers independent oversight to program management by vesting key individuals to wear both hats at the same time. As a result, NASA is relying heavily on the personality and capability of those individuals to maintain independence rather than on an institutional process, which diminishes lessons learned from the Columbia accident. We are making the following matter for congressional consideration. Congress should consider requiring the NASA Administrator to direct the Exploration Systems Development organization within the Human Exploration and Operations Mission Directorate to establish separate cost and schedule baselines for work required to support SLS and EGS for Exploration Mission 2 and establish separate cost and schedule baselines for each additional capability that encompass all life cycle costs, to include operations and sustainment. (Matter for Consideration 1) We are making the following recommendation to the Exploration Systems Development organization. Exploration Systems Development should no longer dual-hat individuals with both programmatic and technical authority responsibilities. Specifically, the technical authority structure within Exploration Systems Development should be restructured to ensure that technical authorities for the Offices of the Chief Engineer and Safety and Mission Assurance are not fettered with programmatic responsibilities that create an environment of competing interests that may impair their independence. (Recommendation 1) NASA provided written comments on a draft of this report. These comments are reprinted in appendix II. NASA also provided technical comments, which were incorporated as appropriate. In responding to a draft of our report, NASA partially concurred with our recommendation that the Exploration Systems Development (ESD) organization should no longer dual-hat individuals with both programmatic and technical authority responsibilities. Specifically, we recommended that the technical authority structure within ESD should be restructured to ensure that technical authorities for the Offices of Chief Engineer and Safety and Mission Assurance are not fettered with programmatic responsibilities that create an environment of competing interests that may impair their independence. In response to this recommendation, NASA stated that it created the technical authority governance structure after the Columbia Accident Investigation Board report and that the dual- hat technical authority structure has been understood and successfully implemented within ESD. NASA recognized, however, that as the program moves from the design and development phase into the integration and test phase, it anticipates that the ESD environment will encounter more technical issues that will, by necessity, need to be quickly evaluated and resolved. NASA asserted that within this changed environment it would be beneficial for the Engineering Technical Authority role to be performed by the Human Exploration and Operations Chief Engineer (who reports to the Office of the Chief Engineer). NASA stated that over the next year or so, it would solicit detailed input from these organizations and determine how to best support the program while managing the transition to integration and test and anticipated closing this recommendation by September 30, 2018. We agree that NASA should solicit detailed input from key organizations within the agency as it transitions away from the dual hat technical authority structure to help ensure successful implementation of a new structure. In order to implement this recommendation, however, NASA needs to assign the technical authority role to a person who does not have programmatic responsibilities to ensure they are independent of responsibilities related to cost and schedule performance. To fulfill this, this person may need to reside outside of the Human Exploration and Operations Mission Directorate and NASA should solicit input from the Office of the Chief Engineer when making this decision to ensure that there are no competing interests for the technical authority. Moreover, in its response, NASA does not address the dual-hat technical authority role for Safety and Mission Assurance. We continue to believe that similar changes for this role would be appropriate as well. Further, in response to this recommendation, NASA makes two statements that require additional context. First, NASA stated that GAO’s recommendation was focused on overall Agency technical authority management. While this review involved meeting with the heads of the Office of Chief Engineer and the Office of Safety and Mission Assurance, the scope of this review and the associated recommendation are limited to ESD. Second, NASA stated “As you found, we agree that having the right personnel in senior leadership positions is essential for a Technical Authority to be successful regardless of how the Technical Authority is implemented.” To clarify, this perspective is attributed to NASA officials in our report and does not represent GAO’s position. We are sending copies of this report to NASA’s Administrator and to appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report assesses (1) the benefits and challenges of the National Aeronautics and Space Administration’s (NASA) approach for integrating and assessing the programmatic and technical readiness of Orion, SLS, and EGS; and (2) the extent to which the Exploration Systems Development (ESD) organization is managing cross-program risks that could affect launch readiness. To assess the benefits and challenges of NASA’s approach for integrating and assessing the programmatic and technical readiness of its current human spaceflight programs relative to other selected programs, we reviewed and analyzed NASA policies governing program and technical integration, including cost, schedule, and risk. We obtained and analyzed ESD implementation plans to assess the role of ESD in cross program integration of the three programs. We reviewed the 2003 Columbia Accident Investigation Board’s Report’s findings and recommendations related to culture and organizational management of human spaceflight programs as well as the Constellation program’s lessons learned report. We reviewed detailed briefings and documentation from Cross-Program Systems Integration and Programmatic and Strategic Integration teams explaining ESD’s approach to programmatic and technical integration, including implementation of systems engineering and integration. We interviewed NASA officials to discuss the benefits and challenges of NASA’s integration approach and their roles and responsibilities in managing and overseeing the integration process. We met with the technical authorities and other representatives from the NASA Office of the Chief Engineer, Office of Safety and Mission Assurance, Crew Health and Safety, addressed cost and budgeting issues with the Chief Financial Officer and discussed and documented their roles in executing and overseeing the ESD programs. We also interviewed outside subject matter experts to gain their insight of ESD’s implementation of NASA’s program management policies on the independent technical authority structure. Additionally, we compared historical budget data from the now- cancelled Constellation program to ESD budget data and quantified systems engineering and integration budget savings through preliminary design review, the point at which the Constellation program was cancelled. In addition, we assessed the scope of NASA’s funding estimates for the second exploration mission and beyond against best practices criteria outlined in GAO’s cost estimating guidebook. We assessed the reliability of the budget data obtained using GAO reliability standards as appropriate. We compared the benefits and challenges of NASA’s integration approach to that of other complex, large-scale government programs, including NASA’s Constellation and the Department of Defense’s Missile Defense Agency programs. To determine the extent to which ESD is managing cross-program risks that could affect launch readiness, we obtained and reviewed NASA and ESD risk management policies; detailed monthly and quarterly briefings; and documentation from Cross-Program Systems Integration and Programmatic and Strategic Integration teams explaining ESD’s approach to identifying, tracking, and mitigating cross-program risks. We reviewed Cross-Program Systems Integration systems engineering and systems integration areas as well as Programmatic and Strategic Integration risks, cost, and schedule to determine what efforts presented the highest risk to cross program cost and schedule. We conducted an analysis of ESD’s risk dataset and the programs’ detailed risk reports, which list program risks and their potential schedule impacts, including mitigation efforts to date. We examined risk report data from Design to Sync to Build to Sync and focused our analyses to identify risks with current mitigation plans to determine if risk mitigation plans are proceeding on schedule. We did not analyze risks that were categorized under “Accept,” “Candidate,” “Research,” “Unknown,” or “Watch” because these risks were not assigned an active mitigation plan by ESD. To assess the reliability of the data, we reviewed related documentation and interviewed knowledgeable agency officials. We determined the data was sufficiently reliable for identifying risks and schedule delays associated with those risks. We examined ESD integrated testing facility schedules to determine the extent to which they can accommodate deviation in ESD’s planned integrated test schedule. We also interviewed program and contractor officials on technical risks, potential impacts, and risk mitigation efforts underway and planned. We conducted this performance audit from August 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact name above, Molly Traci (Assistant Director), LaTonya Miller, John S. Warren Jr., Tana Davis, Laura Greifner, Roxanna T. Sun, Samuel Woo, Marie P. Ahearn, and Lorraine Ettaro made key contributions to this report.", "summary": "NASA is undertaking a trio of closely related programs to continue human space exploration beyond low-Earth orbit. All three programs (SLS, Orion, and EGS) are working toward a launch readiness date of no earlier than October 2019 for the first test flight. Each program is a complex technical and programmatic endeavor. Because all three programs must work together for launch, NASA must integrate the hardware and software from the separate programs into a working system capable of meeting its goals for deep space exploration. The House Committee on Appropriations report accompanying H.R. 2578 included a provision for GAO to assess the progress of NASA's human space exploration programs. This report assesses (1) the benefits and challenges of NASA's approach for integrating these three programs and (2) the extent to which cross-program risks could affect launch readiness. GAO examined NASA policies, the results of design reviews, risk data, and other program documentation and interviewed NASA and other officials. The approach that the National Aeronautics and Space Administration (NASA) is using to integrate its three human spaceflight programs into one system ready for launch offers some benefits, but it also introduces oversight challenges. To manage and integrate the three programs—the Space Launch System (SLS) vehicle; the Orion crew capsule; and supporting ground systems (EGS)—NASA's Exploration Systems Development (ESD) organization is using a more streamlined approach than has been used with other programs, and officials GAO spoke with believe that this approach provides cost savings and greater efficiency. However, GAO found two key challenges to the approach: The approach makes it difficult to assess progress against cost and schedule baselines. SLS and EGS are baselined only to the first test flight. In May 2014, GAO recommended that NASA baseline the programs' cost and schedule beyond the first test flight. NASA has not implemented these recommendations nor does it plan to; hence, it is contractually obligating billions of dollars for capabilities for the second flight and beyond without establishing baselines necessary to measure program performance. The approach has dual-hatted positions, with individuals in two programmatic engineering and safety roles also performing oversight of those areas. As the image below shows, this presents an environment of competing interests. These dual roles subject the technical authorities to cost and schedule pressures that potentially impair their independence. The Columbia Accident Investigation Board found in 2003 that this type of tenuous balance between programmatic and technical pressures was a contributing factor to that Space Shuttle accident. NASA has lowered its overall cross-program risk posture over the past 2 years, but risk areas—related to software development and verification and validation, which are critical to ensuring the integrated body works as expected—remain. For example, delays and content deferral in Orion and SLS software development continue to affect ground systems software development and could delay launch readiness. GAO will continue to monitor these risks. Congress should consider directing NASA to establish baselines for SLS and EGS's missions beyond the first test flight. NASA's ESD organization should no longer dual-hat officials with programmatic and technical authority responsibilities. NASA partially concurred with our recommendation and plans to address it in the next year. But NASA did not address the need for the technical authority to be independent from programmatic responsibilities for cost and schedule. GAO continues to believe that this component of the recommendation is critical.", "document_type": "gao"}
{"report": "In December 2003 Congress enacted the Century of Aviation Reauthorization Act, laying the foundation for NextGen. The intent of NextGen is to increase air transportation-system capacity, enhance airspace safety, reduce delays experienced by airlines and passengers, lower fuel consumption, and lessen adverse environmental effects from aviation, among other benefits. This effort is a multi-year, incrementally iterative transformation that will introduce new technologies and leverage existing technologies to affect every part of the national airspace system. These new technologies will use an Internet Protocol-based network to communicate. NextGen consists of components that provide digital communications between controllers and pilots, and that also use satellite-based surveillance to aid in airspace navigation. Because of these new communication methods, NextGen increases reliance on integrated information systems and distribution of information, digital communication methods, and global positioning system (GPS) technology that may put the air traffic control system at greater risk for intentional or unintentional information-system failures and breaches. We have previously reported on progress that FAA has made in implementing NextGen. For example, in 2015 we found that FAA faces cybersecurity challenges in at least three areas: (1) protecting air-traffic control information systems, (2) protecting aircraft avionics used to operate and guide aircraft, and (3) clarifying cybersecurity roles and responsibilities among multiple FAA offices. Among other recommendations, we recommended—and FAA concurred—that the agency should assess developing a cybersecurity threat model. Historically, FAA and DOD capabilities have allowed both agencies—as well as NORAD—to monitor and track military aircraft flying in the national airspace. For example, FAA maintains two layers of radar—primary surveillance radar and secondary surveillance radar—to track and identify aircraft flying in the national airspace system. Primary surveillance radar identifies the location of aircraft flying in the national airspace by transmitting a signal and calculating the amount of time that passes until that signal bounces off the aircraft and returns to the radar. FAA also uses secondary surveillance radar that transmits an interrogation signal to aircraft flying in the national airspace. A receiver on the aircraft receives the interrogation signal and then transmits a broadcast back to this radar with flight information. Table 1 shows the evolution and capabilities of different transponders that broadcast aircraft information to receivers. The fields identified in the table are critical for identifying and tracking aircraft. Of the different transponder modes and technology, ADS-B Out provides the most precise and comprehensive data. ADS-B Out makes it easier for third parties to identify and track aircraft, as ADS-B Out broadcasts include registration number, precise location, aircraft dimensions, and other information. This additional information reduces the need to identify aircraft using private databases and to determine aircraft location by comparing time difference of arrival among receivers. The content of these aircraft broadcasts varies depending on the type of transmitter providing the information from the aircraft. For example, earlier broadcast systems, including the Mode 3/A and Mode C systems, transmit a temporary four-digit transmit code (commonly referred to as a squawk code) assigned by air traffic control that facilitates aircraft tracking during a single flight. Since FAA was the sole source of flight data for systems preceding Mode S, the agency could filter out military aircraft flight information for security reasons before providing information to the public about other aircraft flying in the national airspace. Mode S transponders provide more information than do the Mode 3/A and Mode C transponders. For example, the Mode S transponder broadcast identifies an aircraft-specific, 24-bit fixed address (commonly known as the ICAO address) assigned under International Civil Aviation Organization (ICAO) standards. An aircraft retains this fixed address based on its registration, and thereby facilitates aircraft identification until the aircraft is reregistered and receives a new ICAO address. FAA and aviation groups have reported that with the proliferation of commercial and amateur receivers, the public can now track individual aircraft by receiving the aircraft’s ICAO address, squawk code, and altitude. In addition, these entities have reported that since aviation groups and hobbyists have connected the receivers, the networked receivers can calculate and identify the latitude and longitude of the aircraft they are tracking. In addition, according to these reports, some groups maintain aircraft information databases and receiver networks that can identify aircraft by ICAO address and can locate aircraft by comparing the time difference of arrival of Mode S signals between three or more receivers. Using data derived from this work, interested parties— including adversaries (for example, foreign intelligence entities, terrorists, and criminals)—can identify military aircraft by type and registration number, and can track the aircraft while in flight through Mode S fixed address broadcasts. Using this readily available public information, we were able to track various kinds of military aircraft that were equipped with Mode S transponders. ADS-B consists of two distinct aircraft information services, ADS-B Out and ADS-B In. As previously stated, ADS-B Out technology is one of the main components of FAA’s NextGen effort. It is a performance-based surveillance technology using GPS-enabled satellites to produce flight information, such as an aircraft’s location and velocity, and according to FAA, it is more precise than radar. These precise data provide air traffic controllers and pilots with more accurate information to keep aircraft safely separated in the national airspace. This technology combines aircraft avionics, a positioning capability, and ground infrastructure to enable accurate transmission of information from aircraft to the air traffic control system. This technology periodically transmits information without a pilot or operator involved (that is, Automatic); collects information from GPS or other suitable navigation systems (that is, Dependent); provides a method of determining 3-dimensional position and identification of aircraft, vehicles, or other assets (that is, Surveillance); and transmits the information available to anyone with the appropriate receiving equipment (that is, Broadcast). Using this readily available public information, we were able to track various kinds of military aircraft that were equipped with ADS-B transponders. ADS-B In is the technology that enables receivers to have direct access to information broadcasted through ADS- B Out transponders. FAA’s final rule requiring all aircraft that fly in certain categories of airspace to equip with ADS-B by January 1, 2020, applies to the ADS-B Out technology. FAA has not issued a rule or requirement for aircraft to equip with the ADS-B In technology, as of July 2017. However, according to representatives from Airlines for America, an airline industry advocacy organization, airlines have begun to install the ADS-B In capability on commercial aircraft due to the benefits they anticipate from the capability (for example, the ability of passenger airliners to reduce separation standards to save time and reduce fuel consumption). In addition, according to Air Force officials, the Air Force plans to install ADS-B In on future KC-46 transport/tanker aircraft. This report focuses on the ADS-B Out requirement when referencing ADS-B technology unless otherwise noted. According to DOD and FAA documents and officials, FAA has identified ADS-B implementation as providing an opportunity to save costs by divesting a number of secondary-surveillance radars. According to FAA officials, as of April 2017 the agency was re-evaluating its original ADS-B backup strategy and the need for retaining additional secondary- surveillance radars. According to these officials, FAA plans to maintain all high-altitude secondary-surveillance radars and the low-altitude secondary-surveillance radars around 30 or more of the busiest airports. The FAA and DOD are to cooperate in order to regulate airspace use. Specifically, the FAA is responsible for providing air navigation services, including air traffic control across most of the United States, and is leading the overall NextGen efforts in the United States. The FAA’s air traffic control system works to prevent collisions involving aircraft operating in the national airspace system, while also facilitating the flow of air traffic and supporting national security and homeland defense missions. In addition, in accordance with International Civil Aviation Organization guidelines, the FAA has categorized airspace as controlled, uncontrolled, or not used in the United States. According to the ADS-B Out rule, after January 1, 2020, no person may operate an aircraft in certain categories of airspace defined by the rule unless otherwise authorized by air traffic control authorities. DOD conducts its missions within the national airspace system as both an aircraft operator and, as delegated by the FAA, as provider of air traffic control and other air navigation services. DOD has the authority to certify its own aircraft, manage airspace, and provide air traffic control-related services in accordance with FAA requirements. DOD also provides guidance to FAA concerning security matters pertaining to the national airspace system. DOD is responsible for ensuring that DOD components, such as the military services, have sufficient access to airspace to meet security requirements, and that civilian and military aircraft can operate safely both domestically and abroad. DOD also releases airspace to the FAA when it does not need the space for military purposes. The FAA also works with DOD to ensure aviation safety between civil and military aircraft. The FAA designates airspace over certain parts of the United States as Special Use Airspace, because the areas may have prohibited airspace, restricted airspace, warning areas, or alert areas. It might be hazardous for civil aircraft to operate in that restricted airspace due to these designations. Special Use Airspace allows military aircraft to operate safely in separate, clearly defined airspace in order to conduct missions in support of the National Security Strategy and the National Military Strategy. The FAA also issues safety briefings that could identify military-protected, temporarily flight-restricted areas, to prevent civil pilots from flying into the airspace. These briefings also include information such as flight safety advice and information on air traffic technology, such as ADS-B. The FAA also shares radar information with NORAD to support the defense of North America over areas such as the National Capital Region surrounding Washington, D.C. The FAA is responsible for providing airspace navigation services within the United States and has a particular entity—the FAA Office of NextGen—that directs its NextGen requirements. In 2007 the Deputy Secretary of Defense designated the Air Force as the lead service for representing DOD and for leading and coordinating efforts across DOD. To accomplish this responsibility, the Air Force established a Lead Service Office, hereinafter referred to as the DOD Lead Service Office. These and numerous other entities have a role in implementing NextGen and ADS-B, as shown in table 2 below. Since 2008, DOD and FAA have identified a variety of ADS-B- related risks that could adversely affect military security and missions. While DOD and FAA have identified some potential mitigations for these risks, the departments have not approved any solutions. Documents we reviewed and officials we met with identified a variety of operations and physical security risks that could adversely affect DOD missions. These risks arise from information broadcast by ADS-B itself, as well as from potential ADS-B vulnerabilities to electronic warfare- and cyber-attacks, and from the potential divestment of secondary- surveillance radars. Information broadcasted from ADS-B transponders poses an operations security risk for military aircraft. For example, a 2015 assessment that RAND conducted on behalf of the U.S. Air Force stated that the broadcasting of detailed and unencrypted position data for fighter aircraft, in particular for a stealth aircraft such as the F-22, may present an operations security risk. The report noted that information about the F- 22’s precise position is classified Secret, which means that unauthorized disclosure of this information could reasonably be expected to cause serious damage to the national security. Similarly, in 2012 MITRE issued a report on behalf of the DOD Lead Service Office that identified a number of risks—including the ability to track movement in and out of restricted airspaces and changes in operations—to ADS-B-equipped aircraft. In addition to these documents, DOD officials identified a number of increased operations and physical security risks associated with aircraft equipped with ADS-B technology. In DOD’s 2008 comments about FAA’s draft rule requiring ADS-B Out technology, the department informed FAA that DOD aircraft could be identified conducting special flights for sensitive missions in the United States and potentially compromised due to ADS-B technology. Such sensitive missions could include low-observable surveillance, combat air patrol, counter-drug, counter-terrorism, and key personnel transport. While some military aircraft are currently equipped with Mode S transponders that provide individuals who have tracking technology the altitude of the aircraft, ADS- B poses an increased risk. Specifically, according to documents we reviewed and officials we met with, a confluence of the following three issues has led to ADS-B technology presenting more risks to DOD aircraft, personnel, equipment, and operations: Additional information. The additional information provided through ADS-B technology— including the aircraft’s precise location, velocity, and airframe dimensions—increases both direct physical risks to DOD aircraft, personnel, and equipment, and long-term risks to DOD air operations. Accessibility of information. ADS-B technology also introduces risks to aircraft, personnel, equipment, and operations, because it provides information to the public that was not previously accessible. FAA filters information about DOD’s flights so that the information is not available to the public via any FAA data feed. According to FAA officials, this filtering was effective for protecting such information for Mode-S equipped DOD aircraft until the 2012 timeframe, when the capability of third-party networked receivers started to allow position determination for such aircraft. With ADS-B, aircraft location and other information is broadcast from the aircraft, where FAA cannot filter it. While individuals and groups could obtain additional information about DOD flights operating with Mode S, such as an aircraft’s fixed address, information such as geographic location and velocity was not included in broadcasts. Individuals could estimate location and velocity of DOD flights by locating the signal through privately owned receiver networks. By equipping military aircraft with ADS-B technology, individuals and groups would receive additional identifiers, location information, and airframe information through aircraft broadcasts and, as a result, could identify and track aircraft without the use of fixed address databases and with less receiver infrastructure. Historical data. ADS-B technology better enables individuals and groups to track flights in real time and use computer programs to log ADS-B transmissions over time. Therefore, individuals or groups could observe flight paths in detail, identify patterns-of-life, or counter or exploit DOD operations. While NORAD and DOD officials told us that they will benefit from information provided by ADS-B technology, NORAD, DOD, and professional organizations’ documents and officials also noted that electronic warfare- and cyber-attacks—and the potential divestment of secondary-surveillance radars as a result of reliance on ADS-B—could adversely affect current and future air operations. For example, a 2015 Institute of Electrical and Electronics Engineers article about ADS-B stated that ADS-B is vulnerable to an electronic- warfare attack—such as a jamming attack—whereby an adversary can effectively disable the sending and receiving of messages between an ADS-B transmitter and receiver by transmitting a higher power signal on the ADS-B frequencies. The article notes that while jamming is a problem common to all wireless communication, the effect is severe in aviation due to the system’s inherently wide-open spaces, which are impossible to control, as well as to the importance and criticality of the transmitted data. As a stand-alone method, jamming could create problems within the national airspace. Jamming can also be used to initiate a cyber-attack on aircraft or ADS-B systems. According to the article in the 2015 Institute of Electrical and Electronics Engineers publication, adversaries could use a cyber-attack to inject false ADS-B messages (that is, create “ghost” aircraft on the ground or air); delete ADS-B messages (that is, make an aircraft disappear from the air traffic controller screens); and modify messages (that is, change the reported path of the aircraft). The article states that jamming attacks against ADS- B systems would be simple, and that ADS-B data do not include verification measures to filter out false messages, such as those used in spoofing attacks. FAA officials stated that the agency is aware of these possible attacks, and that it addresses such vulnerabilities by validating ADS-B data against primary- and secondary-surveillance radar tracks. Both FAA and DOD have identified a potential solution to address this vulnerability. However, this solution has not been tested and as of November 2017, no testing has been scheduled. In addition to electronic warfare- and cyber-attacks, both NORAD and DOD officials expressed concerns that the air defense and military air traffic control missions would be affected if FAA were to divest secondary- surveillance radars following ADS-B implementation. According to DOD and FAA documents and officials, FAA has identified ADS-B implementation as an opportunity to save costs by divesting a number of secondary-surveillance radars. However, according to NORAD and DOD officials, in those locations where FAA divests of radars, the missions would be at higher risk if an aircraft operator were to turn off the aircraft’s ADS-B technology; if an adversary were to conduct an electronic or cyber-attack on the ADS-B system; or if the ADS-B system were to experience a technical failure. According to NORAD command officials, the command relies on information from FAA radars to monitor air traffic in the national airspace system. If an aircraft is operating without ADS-B, if a GPS or ADS-B system fails, or if an adversary has jammed an aircraft’s GPS signal or ADS-B transmissions, then the command will have to rely on primary- and secondary-surveillance radar to track the aircraft’s location. FAA officials stated that FAA is chiefly responsible for air safety, while NORAD and DOD are chiefly responsible for air defense, and that they believe there will be sufficient radar coverage for DOD to conduct its missions. FAA officials stated that they will maintain sufficient backup systems to ensure air traffic safety for all flights, and will maintain radar in excess of their needs to support NORAD’s missions. FAA officials stated that they will maintain all primary-surveillance radar, all high-altitude secondary-surveillance radar, and low-altitude secondary-surveillance radar near at least thirty major flight terminals. However, according to NORAD and DOD officials, FAA has not proposed an updated legacy primary- and secondary-surveillance radar divestment plan since 2012 for use by NORAD and DOD in assessing potential effects on the mission. NORAD is a bi-national command that requires support from U.S. federal agencies—not just DOD—and relies on FAA radar to support its mission, and it will need to ensure that sufficient air surveillance resources are in place. Although DOD, FAA, and other organizations have identified risks to military security and missions since 2008, DOD and FAA have not approved any solutions to address these risks. This is because DOD and FAA have focused on equipping military aircraft with ADS-B technology and have not focused on solving or mitigating security risks from ADS-B. The approach being taken by FAA and DOD will not address key security risks that have been identified, and delays in producing an interagency agreement have significantly reduced the time available to implement any agreed-upon solutions before January 1, 2020, when the full deployment of ADS-B Out is required. Federal internal control standards state that federal agencies should make risk-based decisions in a timely manner. Specifically, OMB Circular A-123 states that management should evaluate and document internal control issues and determine appropriate corrective actions for internal control deficiencies on a timely basis. In the case of equipping military aircraft with ADS-B technology and addressing any risks associated with it, DOD and FAA have shared responsibility. In 2008 DOD informed FAA that military aircraft would need special accommodations to the ADS-B Out rule due to national security concerns, such as sensitive missions and electronic warfare vulnerabilities. In 2010 FAA responded to DOD’s comments to the draft ADS-B Out rule stating that the agency would collaborate with departments or agencies, including DOD and the Department of Homeland Security, to develop memorandums of agreement to accommodate their national defense mission requirements while supporting the needs of all other national airspace system users. Since that time, DOD components have identified actions that could mitigate some of the risks. For example, DOD and others have identified such mitigations as masking DOD aircraft identifiers, maintaining current inventory of primary-surveillance radars, allowing pilots to turn off ADS-B broadcasts, and seeking an exemption from installing ADS-B technology on select military aircraft (for example, fighter and bomber aircraft). However, as of June 2017—almost 7 years after FAA acknowledged that it would address DOD’s concerns (and less than 3 years before full deployment of ADS-B Out is required)—DOD and FAA have not approved any solutions to these risks. The DOD’s Lead Service Office and FAA have focused on developing a memorandum of agreement that they hope will create a framework for future collaboration at the local level. However, our work and that of NORAD and other DOD components identified a number of limitations to DOD’s Lead Service Office and FAA’s dependence on this draft memorandum of agreement. For example, the draft memorandum does not address the following: the details necessary to establish solutions or mitigations between DOD and FAA for identified security risks. The draft memorandum focuses on equipage of ADS-B technology on military aircraft, cost estimates, and agency and office responsibilities. DOD acknowledges that it will equip military aircraft with ADS-B technology and operate to the greatest extent possible by the January 1, 2020, compliance date. However, the draft memorandum does not identify solutions for the identified operations and physical security risks. the electronic warfare and cyber-attack concerns and the effect on sensitive defense missions that DOD has identified. the flexibility required by NORAD to support freedom of movement within the continental United States, Alaska, and Canada airspace for military missions. The draft memorandum would place negotiating accommodations for NORAD’s bi-national mission at the local level— an act that NORAD officials characterized as unfeasible because military aircraft supporting NORAD missions require uninhibited airspace access throughout the United States and Canada, as a response may be required anywhere and at any time. According to NORAD officials, the command would incur a significant burden to finalize memorandums of agreement with more than 600 air traffic control facilities and ensure commonality with all facilities in the continental United States and Alaska. Furthermore, NORAD officials stated that these missions should not be limited by local restrictions created by the ADS-B Out rule. For example, DOD aircraft flying over one state while supporting an Operation Noble Eagle mission could be stationed at a military base in another state and thus not have an agreement with local FAA controllers. potential mission risks associated with the divestment of secondary- surveillance radars. Delays in the completion of a memorandum of agreement have exacerbated uncertainty as to whether security issues will be addressed in any manner. DOD and FAA have met to discuss the existing draft memorandum of agreement since December 2016. In April 2017 officials from DOD Lead Service Office told us that they expected DOD and FAA to finalize the memorandum of agreement by June 2017; however, in May 2017 DOD officials informed us that the estimated completion date had slipped to February 2018. A significant amount of work will likely need to be accomplished between the eventual approval of the memorandum and implementation in a timely manner. For example, FAA officials acknowledged that the agency would need to issue, update, or both issue and update internal guidance once the memorandum is signed prior to local FAA officials being able to negotiate and agree to arrangements with local military commanders. Similarly, the draft memorandum, if approved, would place a significant burden on local DOD entities to negotiate agreements. For example, the Army expressed concerns that local negotiations—at 76 locations, according to Army estimates—would take from 1 to 2 years to complete after FAA and DOD have signed the memorandum of agreement. Army officials also highlight concerns that local FAA air traffic controllers may not enter into agreements with Army units, or that local agreements will be contingent upon the density of local air traffic or the personalities of those negotiating the agreements. Additionally, assuming that actions are agreed upon among the key stakeholders—DOD, FAA, and NORAD—to resolve or mitigate the identified security risks, DOD, FAA and NORAD will need sufficient time to implement these actions. This is due to the complexity of the ADS-B vulnerabilities and potential mitigations for operations and physical security, electronic warfare, cyber-attack, and potential effects of secondary-radar divestment. As of June 2017, DOD and FAA had not identified any other solutions that could address the risks and concerns identified by DOD and others since 2008. Unless FAA and DOD approve one or more solutions that address all the risks associated with ADS-B technology, DOD security and military missions could face unmitigated risks. These include physical, cyber- attack, and electronic warfare security risks, as well as risks associated with divesting secondary-surveillance radars. Furthermore, unless FAA and DOD focus on the security risks of ADS-B and approve one or more solutions in a timely fashion, they may not have time to plan for and execute any technical, programmatic, or policy actions that may be necessary before all of DOD’s aircraft are required to be equipped with ADS-B technology on January 1, 2020. Of the eight tasks associated with the implementation of ADS-B Out technology in the 2007 DOD NextGen memorandum—issued by the Deputy Secretary of Defense to ensure that the NextGen vision for the future national airspace system met DOD’s requirements and the appropriate management of DOD’s resources—DOD has implemented two, has partially implemented four, and has not implemented two. Specifically, we found that DOD has implemented the following two tasks: Establishing a Joint Program Office. The Deputy Secretary of Defense directed the Secretary of the Air Force to establish and provide administrative support for a DOD Joint Program Office for NextGen. According to the 2007 NextGen memorandum, the office is responsible for coordinating DOD activities related to the NextGen effort, facilitating technology transfer for those research and development activities with potential NextGen application, and advocate for DOD interests, requirements, and capabilities in NextGen. The Air Force established a Joint Program Office to provide services to the entire military aviation community on communication navigation surveillance/air traffic management issues in various capacities. Officials from the DOD Joint Program Office told us that the office has tested various avionic systems for methods of meeting ADS-B requirements. The office has also established an Internet portal for the services to order avionics, including those associated with ADS-B technology. Appointing a DOD representative to the FAA’s interagency Joint Planning and Development Office. The 2007 NextGen memorandum directed that the Secretary of the Air Force appoint a DOD representative to the Joint Planning and Development Office’s board of directors responsible for assisting in the development and coordination of DOD-wide policies and decisions concerning NextGen. In March 2012 DOD’s Lead Service Office appointed an Air Force officer who also manages the DOD Lead Service Office as the DOD representative to the FAA’s interagency Joint Planning and Development Office. DOD partially implemented the following four tasks: Validating NextGen program requirements. The 2007 NextGen memorandum directed that the Secretary of the Air Force document and seek validation for NextGen program requirements through the Joint Capabilities Integration Development System process. The Air Force took the initial step in having its NextGen program requirements validated through DOD’s Joint Capabilities Integration Development System process in October 2014. However, the focus of the assessment was on the Air Force’s requirements and not that of other military services or components. This is not fully consistent with the 2007 memo, which states that the Air Force—as the lead service— should integrate the needs and requirements of the DOD components into cohesive plans and policies for inclusion in NextGen joint planning and development. Establishing guidance on DOD NextGen responsibilities and objectives. The 2007 NextGen memorandum directed the Assistant Secretary of Defense for Homeland Defense and Global Security, the DOD Chief Information Officer, and the Director of Administration, in consultation with the DOD Lead Service, to submit a proposed DOD directive within 180 days specifying the department’s objectives with respect to NextGen and the continuing roles and responsibilities of the Lead Service and the DOD Policy Board on Federal Aviation. In 2013, about 5 years after the original due date for the180-day requirement, DOD updated its DOD Directive 5030.19, DOD Responsibilities on Federal Aviation. While the updated directive references the responsibilities of the DOD Policy Board on Federal Aviation and the Secretary of the Air Force, per the 2007 NextGen memorandum, the directive does not specify DOD’s objectives with respect to NextGen, as required by the memorandum. Developing an initial plan defining actions, responsibilities, and milestones for DOD’s NextGen efforts: The 2007 NextGen memorandum required DOD’s Lead Service, in coordination with the principal members of the DOD Policy Board on Federal Aviation, to develop an initial plan defining actions, responsibilities, and milestones for DOD’s participation in the NextGen efforts and FAA’s Joint Planning and Development Office. This initial plan was to include an implementation plan for the NextGen Joint Program Office and was to be updated semiannually. In 2013 the Air Force, in executing its responsibilities as Lead Service, issued a DOD NextGen Implementation Plan to describe the strategy, principles, and actions for the transition of DOD aviation operations (air and ground) to the national airspace system environment defined by FAA in its NextGen Implementation Plan. We found that the 2013 plan identified responsibilities of DOD components and established indicators meant to give a sense of progress made in NextGen implementation. However, the plan did not include detailed transition planning for ADS- B and was not updated semiannually, as required. Incorporating NextGen into the planning, budgeting, and programming process: According to the 2007 NextGen memorandum, the Secretary of the Air Force is to coordinate DOD- wide NextGen planning, budgeting, and programing guidance in conjunction with the Under Secretary of Defense for Policy and the Director of Program Analysis and Evaluation for consideration in the formulation of planning and programming guidance documents. The memorandum also directed DOD components to coordinate with the Air Force on NextGen programs they agreed to support using inter- service memorandums of understanding, and to fund procurement through service annual program objective memorandum processes. DOD provided evidence that the military departments used the program objective memorandum process to fund ADS-B Out. However, the DOD Lead Service Office did not provide department- wide planning, budgeting, and programming guidance for ADS-B or any other NextGen elements to DOD components. Similarly, DOD did not provide any inter-service memorandums of understanding that would document NextGen programs that the services agreed to fund. According to officials from the DOD Lead Service Office, this office is not responsible for planning, budgeting, and programming because the office is organizationally located within the Air Force Headquarters Office of the Deputy Chief of Staff for Operations. However, while the office may not be responsible for planning, budgeting, and programming within the Air Force, the office can issue—or coordinate the issuance—of such guidance, as directed by the Deputy Secretary of Defense. DOD had not taken significant action or fully implemented the following two actions: Integrating NextGen requirements into plans and policies: The Secretary of the Air Force, in executing the service’s responsibilities as Lead Service, did not integrate the needs and requirements of DOD components related to ADS-B into cohesive plans and policies for inclusion in NextGen joint planning and development, as directed by the Deputy Secretary of Defense in 2007. According to officials from the DOD Lead Service Office, they met the intent of these tasks through the 2012 United States Air Force Next Generation Air Transportation System Keystone Document, the 2013 Department of Defense (DOD) Mid-Term NextGen Concept of Operations, and the 2013 Department of Defense (DOD) Mid-Term Next Generation (NextGen) Implementation Plan. However, the Air Force NextGen Keystone Document applies to the Air Force and not to NORAD or other DOD components. In addition, the DOD Mid-Term NextGen Concept of Operations and the DOD Mid-Term NextGen Implementation Plan do not discuss planning for ADS-B Out requirements, which are critical to NextGen. Providing periodic and recurring NextGen progress reports: The Assistant Secretary of Defense for Homeland Defense and Global Security did not provide periodic and recurring NextGen progress reports to the Deputy Secretary of Defense, as instructed in the 2007 NextGen memorandum. According to the memorandum, the Assistant Secretary was designated as the principal staff assistant for NextGen and was responsible for oversight, support, and advocacy for the lead service with respect to the interagency and Joint Planning and Development Office. Officials from the Office of the Deputy Assistant Secretary of Defense for Homeland Defense Integration and from Defense Support to Civil Authorities acknowledged that the Office of the Assistant Secretary of Defense for Homeland Defense and Global Security had not tracked ADS-B implementation or provided progress reports to the Deputy Secretary of Defense—with the exception of advocating for ADS-B installation exemptions for aircraft that could not comply with the mandate—for retention of ground-based radars, and some minimal advocacy related to compliance with the FAA ADS-B Out rule. DOD could not provide a clear explanation with regard to those requirements that we determined not to have been fully implemented. Officials from the DOD Lead Service Office provided a number of potential reasons to explain why the memorandum’s tasks might not have been fully implemented. For example, as noted earlier, officials stated that other documents captured those requirements. Further, officials told us they believe that implementation of many of the preceding tasks was accomplished through other means, although our analysis concluded that the task was either not implemented or was partially implemented, as noted previously. These officials also noted that—although there is no expiration date on the 2007 NextGen memorandum—many DOD officials consider such memorandums to be applicable for 12 to 18 months. In addition, DOD Lead Service Office officials noted that many DOD components had not assigned a high level of priority to NextGen implementation. As a result of DOD’s not fully implementing the 2007 NextGen memorandum—including developing or revising a DOD directive that specifies DOD’s objectives with respect to NextGen, issuing an implementation plan that includes detailed transition planning for ADS-B and is updated semiannually, and providing recurring progress reports to the Deputy Secretary of Defense—DOD components have lacked direction and cohesion while trying to address FAA’s requirement to equip military aircraft. For example: Officials from the Air Force Life Cycle Management Center’s Fighters and Bombers Directorate told us that they have not been provided any guidance. The directorate does not intend to install ADS-B technology on Air Force fighters or bombers until they receive DOD guidance. Yet, the deadline to equip DOD aircraft that will fly in the national airspace remains January 1, 2020. DOD does not have a coordinated or accurate schedule for equipping ADS-B technology on military aircraft. Although DOD submitted a schedule to Congress in June 2015, officials from the DOD Lead Service Office told us that the timeframes for that plan were no longer accurate, and that the plan would be updated as part of the memorandum of agreement in February 2018. Some DOD components have installed or plan to install civilian GPS receivers on their aircraft to meet FAA’s ADS-B technical requirements. According to DOD officials, DOD aircraft that equip with commercial GPS receivers will not be as protected from GPS security issues as they would have been had they used a military GPS receiver. According to officials from the Office of the DOD Chief Information Officer, the office with primary responsibility for GPS receiver security policy, no one within DOD—including the DOD Lead Service Office or other DOD components—had made them aware that DOD components were installing civilian receivers on aircraft. Since—according to an official within the DOD Lead Service Office— neither the Office of the Assistant Secretary of Defense for Homeland Defense and Global Security nor any other elements of the Office of the Under Secretary of Defense for Policy were engaged in discussion regarding the draft memorandum of agreement with the DOD Lead Service Office and FAA, the Secretary of Defense’s senior policy advisor may not be aware of provisions that may be incorporated in the agreement. For example, the draft memorandum of agreement contains a provision that could result in the department’s being financially responsible for sharing the costs of sustaining secondary- surveillance radars. According to a 2007 FAA document, it will cost FAA approximately $442 million to maintain these radars from fiscal years 2017 to 2035. If DOD components do not fully implement key tasks that would facilitate assurance of DOD requirements in the future NextGen system and appropriate management of DOD resources—such as those tasks that the Deputy Secretary of Defense originally directed in 2007, or any tasks that the Secretary deems appropriate—DOD may risk having less efficient and less effective implementation of NextGen requirements, increased costs of implementation, or missed opportunities to address operations risks. The NextGen system has the potential to increase the efficiency and effectiveness of the nation’s expanding air traffic. As with many such procedural and technological innovations, DOD stands to benefit from NextGen’s vision. As is the case with all such electronic and cyber systems in the information age, this must be balanced with sufficient consideration of the operations and security effects for DOD. DOD and FAA have not approved any solutions that address risks resulting from ADS-B on DOD aircraft—including operations, physical, cyber, and electronic warfare security risks, as well as risks associated with divesting secondary-surveillance radars. Unless DOD and FAA focus their efforts on the security aspects of ADS-B on DOD aircraft and produce one or more solutions to these risks, DOD aircraft and missions will be exposed to unmitigated risks that could jeopardize safety, security, and mission success. Also, unless DOD fully implements the tasks that would facilitate consistent, long-term planning and implementation of NextGen throughout the department, DOD’s full integration into the NextGen system and the integrity and security of DOD’s forces and missions will be hindered. Given the amount of time that has transpired since DOD initially raised security concerns in 2008 and the amount of time it will take to formalize, operationalize, and train employees to implement any agreements prior to the January 1, 2020, deadline, it is critical that both DOD and FAA make this a high priority. We are making two recommendations, including one to the Secretaries of Defense and Transportation, and one to the Secretary of Defense: We recommend that the Secretaries of Defense and of Transportation address ADS-B Out security concerns by approving one or more solutions that address ADS-B Out -related security risks or incorporating mitigations for security risks into the existing draft memorandum of agreement. These approved solutions should address operations, physical, cyber-attack, and electronic warfare security risks; and risks associated with divesting secondary-surveillance radars. The solution or mitigations should be approved as soon as possible in order to allow sufficient time for implementation. We recommend that the Secretary of Defense direct DOD components to implement key tasks that would facilitate consistent, long-term planning and implementation of NextGen—such as those tasks that the Deputy Secretary of Defense originally directed in 2007, or any tasks that the Secretary deems appropriate based on a current assessment of the original tasks. We provided a draft of the report to DOD and the Department of Transportation for review and comment. Written comments from DOD on the classified draft and from the Department of Transportation on this report are reprinted in their entirety in appendixes II and III, respectively, and summarized below. DOD and the Department of Transportation also provided technical comments, which we incorporated as appropriate. The Department of Transportation concurred and DOD partially concurred with the first recommendation to approve one or more solutions that address ADS-B Out security risks or incorporating mitigations for security risks into the existing draft memorandum of agreement and that these solutions should address operations, physical, cyber-attack, and electronic warfare security risks as well as risks associated with divesting secondary-surveillance radar. In its written comments, the Department of Transportation stated that it has recently developed and is now in the process of validating military flight tracking risk mitigation solutions that are technologically viable and operationally effective. Both the Department of Transportation and DOD stated that they would approve one or more solutions to address ADS-B Out related security risks. For example, both departments stated that among other actions, they would complete a memorandum of agreement between FAA and DOD that would incorporate security concerns identified in the report. DOD estimated that the memorandum of agreement will be signed in February 2018. We believe the steps identified by both the Department of Transportation and DOD, if implemented as planned, would meet the intent of our recommendation. DOD partially concurred with the second recommendation to implement key tasks that would facilitate consistent, long-term planning and implementation of NextGen—such as those tasks that the Deputy Secretary of Defense originally directed in 2007 or any tasks that the Secretary deems appropriate based on a current assessment of the original tasks. DOD stated the Secretary of the Air Force would identify within the next 120 days which relevant key tasks would facilitate the implementation of NextGen to include assessing the status of tasks that were directed in the Deputy Secretary of Defense memorandum, “Implementation of the Next Generation Air Transportation within the Department of Defense 2007.” DOD stated that the assessment would include a comprehensive review of modernization efforts regarding NextGen and other global initiatives and that includes suitable security and cybersecurity mitigation measures. DOD also stated that the Policy Board for Federal Aviation would track key task implementation in coordination with the Secretary of the Air Force and other appropriate DOD officials. This would also include periodic updates to the Deputy Secretary of Defense. We believe these steps would meet the intent of our recommendation if implemented as planned. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretary of Homeland Security; the Secretary of Transportation; and the commander of NORAD. We are also sending copies to the Under Secretary of Defense for Policy; the Under Secretary of Defense for Acquisition, Technology, and Logistics; the Chairman of the Joint Chiefs of Staff; the Secretaries of the military departments; and the Administrator of FAA. In addition, the report is available at no charge on the GAO website http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9971 or kirschbaumj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Senate Report 114-255, accompanying a bill for the National Defense Authorization Act of Fiscal Year 2017, included a provision that we assess issues related to the defense implications of implementation of the Federal Aviation Administration’s (FAA) Next Generation Air Transportation System (NextGen) and Automatic Dependent Surveillance—Broadcast (ADS-B), a main component of NextGen. This report assesses the extent to which (1) the Department of Defense (DOD) and the FAA have identified security and operations risks and approved solutions to address these risks to military aircraft equipped with ADS-B Out technology; and (2) DOD has implemented key tasks in the 2007 Deputy Secretary of Defense memorandum on implementing NextGen. The scope of our review included all DOD and Department of Transportation offices responsible for oversight or administration of ADS- B implementation by DOD as part of the NextGen program. Our review also included Airlines for America, as it represented a significant portion of the civil aviation industry in negotiations with FAA on ADS-B implementation. Table 3 contains a list of the organizations and offices we contacted during the course of our review. To assess the extent to which DOD and FAA have identified security and operations risks and approved solutions to address these risks to military aircraft equipped with ADS-B Out technology, we reviewed policies, procedures, guidance, assessments, and other relevant documents from DOD, FAA, and NORAD that address ADS-B Out implementation, acquisition, operations, and cybersecurity risk management and mitigation, and any other issues that might be pertinent to identifying and addressing operations and security risks resulting from ADS-B Out. We also reviewed publicly available literature discussing potential ADS-B Out cybersecurity vulnerabilities. Specifically, we conducted a literature review of work related to vulnerabilities in ADS-B technology. To identify studies that potentially highlighted vulnerabilities that we could discuss with agency officials, we conducted key-word searches of government and private databases to identify public, private, academic, and other professional research related to ADS-B vulnerabilities. The government databases we searched included those of GAO, the Congressional Research Service, the Congressional Budget Office, and agency Inspectors General. The private databases searched include Web of Science, ProQuest, and ProQuest Professional. To determine relevance to our review, we assessed whether article subjects were related to vulnerabilities or vulnerability mitigations for ADS-B systems. We reviewed those studies cited in our report and found their methodologies to be sufficient. To further address our objective, we interviewed officials from NORAD, DOD, the military services, and FAA on potential risks, vulnerabilities, and mitigation strategies. We did not conduct independent security and vulnerability assessments of ADS-B technology to corroborate or validate security risks identified by NORAD, DOD, FAA, and others. While military aircraft and existing radar systems may be equipped with devices (including Mode S transponders) that could also pose security risks, this report focused on risks and potential solutions associated with ADS-B Out technology that FAA mandated DOD to install on its aircraft by January 1, 2020. We also visited multiple public websites to understand the extent to which the public could track current military flights over the United States. We met with a representative from one of these websites to understand the underlying sources of information and how the information was used to compile the images. To understand DOD and FAA coordination, we reviewed laws, guidance, and directives related to agency cooperation for the NextGen system and implementation of ADS-B technology. This included the 2010 FAA Federal Register entry that provided guidelines and requirements for coordination between agencies and the 2007 Deputy Secretary of Defense memorandum on implementing NextGen, which states that DOD components must develop cohesive plans and policies. To assess the extent to which DOD has implemented key tasks in the 2007 Deputy Secretary of Defense memorandum on implementing NextGen, we reviewed the Deputy Secretary of Defense’s 2007 NextGen memorandum and identified 20 tasks that were directed by the Deputy Secretary for the purpose of ensuring that NextGen meets DOD requirements, and that DOD’s resources are appropriately focused and managed. We focused on the 8 tasks wherein the accomplishment of the task would be significant to the development of plans and policies related to the implementation of the FAA’s ADS-B Out technology requirement. To evaluate the implementation status of these 8 tasks, we collected relevant documentation, interviewed officials from DOD, and reviewed this information. Initially, two analysts separately reviewed this information to determine whether each of the 8 tasks was implemented or not implemented. Later, a panel of four analysts collectively reviewed both sets of analyses completed for each task and determined whether a task would be better categorized as partially implemented, instead of implemented, or as not implemented. We conducted this performance audit from June 2016 to January 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Tommy Baril (Assistant Director), Tracy Barnes, David Beardwood, Virginia Chanley, Benjamin Emmel, Kevin Newak, Joshua Ormond, Matthew Sakrekoff, Amanda Weldon, and Edwin Yuen made major contributions to this report. Colleen Candrl, Mark Canter, Raj Chitikila, Tracy Harris, Kirk Kiester, Amie Lesser, Nicholas Marinos, Madhav Panwar, John Shumann, James Tallon, and Cheryl Weissman also made contributions to this report. Next Generation Air Transportation System: Improved Risk Analysis Could Strengthen FAA’s Global Interoperability Efforts. GAO-15-608. Washington, D.C.: July 29, 2015 Air Traffic Control: FAA Needs a More Comprehensive Approach to Address Cybersecurity As Agency Transitions to NextGen. GAO-15-370. Washington D.C.: April 14, 2015. National Airspace System: Improved Budgeting Could Help FAA Better Determine Future Operations and Maintenance Priorities. GAO-13-693. Washington, D.C.: August 22, 2013. NextGen Air Transportation System: FAA Has Made Some Progress in Midterm Implementation, but Ongoing Challenges Limit Expected Benefits, GAO-13-264. Washington D.C.: April 8, 2013. Next Generation Air Transportation System: FAA Faces Implementation Challenges. GAO-12-1011T. Washington, D.C.: September 12, 2012. Next Generation Air Transportation: Collaborative Efforts with European Union Generally Mirror Effective Practices, but Near-Term Challenges Could Delay Implementation, GAO-12-48. Washington, D.C.: November 3, 2011.", "summary": "DOD has until January 1, 2020, to equip its aircraft with ADS-B Out technology that would provide DOD, FAA, and private citizens the ability to track their flights in real-time and track flight patterns over time. This technology is a component of NextGen, a broader FAA initiative that seeks to modernize the current radar-driven, ground-based air transportation system into a satellite-driven space-based system. Senate Report 114-255 included a provision for GAO to assess the national defense implications of FAA's implementation of ADS-B. This report assesses the extent to which (1) DOD and FAA have identified operations and security risks and approved solutions to address these risks to ADS-B Out -equipped military aircraft; and (2) DOD has implemented key tasks in the 2007 memorandum on implementing NextGen. GAO analyzed risks identified by DOD and FAA related to ADS-B vulnerabilities, and how they could affect current and future air defense and air traffic missions. GAO also reviewed the tasks in the 2007 NextGen Memorandum and assessed whether the eight tasks specifically related to ADS-B were implemented. Since 2008, the Department of Defense (DOD) and the Department of Transportation's Federal Aviation Administration (FAA) have identified a variety of risks related to Automatic Dependent Surveillance-Broadcast (ADS-B) Out technology that could adversely affect DOD security and missions. However, they have not approved any solutions to address these risks. Compared with other tracking technology, ADS-B Out provides more information, such as an aircraft's precise location, velocity, and airframe dimensions, and better enables real-time and historical flight tracking. Individuals—including adversaries—could track military aircraft equipped with ADS-B Out technology, presenting risks to physical security and operations. This readily available public information allowed GAO to track various kinds of military aircraft. ADS-B Out is also vulnerable to electronic warfare and cyber-attacks. Since FAA is planning to divest radars as part of ADS-B implementation, homeland defense could also be at risk, since the North American Aerospace Defense Command relies on information from FAA radars to monitor air traffic. DOD and FAA have drafted a memorandum of agreement that focuses on equipping aircraft with ADS-B Out but does not address specific security risks. Unless DOD and FAA focus on these risks and approve one or more solutions in a timely manner, they may not have time to plan and execute actions that may be needed before January 1, 2020—when all aircraft are required to be equipped with ADS-B Out technology. Of the eight tasks associated with the implementation of ADS-B Out technology in the 2007 DOD NextGen memorandum—issued by the Deputy Secretary of Defense to ensure that the NextGen vision for the future national airspace system met DOD's requirements and the appropriate management of DOD's resources—DOD has implemented two, has partially implemented four, and has not implemented two. DOD has established a joint program office and identified a lead service, but it has only partially validated ADS-B Out requirements, developed a directive, issued an implementation plan, and incorporated NextGen into the planning, budgeting, and programming process. DOD has not taken significant action to integrate the needs and requirements of DOD components related to ADS-B into cohesive plans and policies for inclusion in NextGen joint planning and development, and has not provided periodic and recurring NextGen progress reports to the Deputy Secretary of Defense. As a result of DOD not fully implementing the 2007 NextGen memorandum, DOD components have lacked direction and cohesion while trying to address FAA's requirement to equip military aircraft. This is a public version of a classified report GAO issued in January 2018. GAO is recommending that DOD and FAA approve one or more solutions to address ADS-B -related security risks; and that DOD implement key tasks to facilitate consistent, long-term planning and implementation of NextGen. DOD and the Department of Transportation generally concurred and described planned actions to implement the recommendations.", "document_type": "gao"}
{"report": "VA has undertaken a number of initiatives to help prevent veteran suicide, including identifying suicide prevention as VA’s highest clinical priority in its strategic plan for fiscal years 2018 through 2024 (see fig. 2). VA uses CDC’s research on risk factors and prevention techniques to inform its approach to suicide prevention in the veteran community. There is no single determining cause for suicide; instead, suicide occurs in response to biological, psychological, interpersonal, environmental, and societal influences, according to the CDC. Specifically, suicide is associated with risk factors that exist at the individual level (such as a history of mental illness or substance abuse, or stressful life events, such as divorce or the death of a loved one), community level (such as barriers to health care), or societal level (such as the way suicide is portrayed in the media and stigma associated with seeking help for mental illness). According to VA, veterans may possess risk factors related to their military service, such as a service-related injury or a difficult transition to civilian life. CDC reports that protective factors—influences that help protect against the risk for suicide—include effective coping and problem- solving skills, strong and supportive relationships with friends and family, availability of health care, and connectedness to social institutions such as school and community. VA’s 2018 National Strategy for Suicide Prevention identifies four focus areas: (1) healthy and empowered veterans, families, and communities; (2) clinical and community preventative services; (3) treatment and support services; and (4) surveillance, research, and evaluation. Collectively, these four areas encompass 14 goals for preventing veteran suicide, one of which is implementing communication designed to prevent veteran suicide by changing knowledge, attitude, and behaviors. VHA’s suicide prevention media outreach campaign is just one of its initiatives intended to reduce veteran suicide. For example, in 2007, VHA established the Veteran’s Crisis Line (VCL), a national toll-free hotline that supports veterans in emotional crisis. Veterans, as well as their family and friends, can access the VCL by calling a national toll-free number—1-800-273-8255—and pressing “1” to be connected with a VCL responder, regardless of whether these veterans receive health care through VHA. VHA added the option to communicate with VCL responders via online chat in 2009, followed by text messaging in 2011. Another VHA suicide prevention initiative is the Recovery Engagement and Coordination for Health – Veterans Enhanced Treatment initiative, or REACH VET. Established in 2016, REACH VET uses predictive modeling to analyze existing data from veterans’ health records to identify veterans at increased risk for adverse outcomes, such as suicide, hospitalization, or illness. Suicide prevention officials within VHA’s Office of Mental Health and Suicide Prevention (OMHSP) are responsible for implementing the suicide prevention media outreach campaign. Since 2010, VHA has used a contractor to develop suicide prevention media outreach content and monitor its effectiveness. In September 2016, VHA awarded a new contract to the same contractor to provide both suicide prevention and mental health media outreach. Under the 2016 contract, the suicide prevention and mental health outreach campaigns remain separate and are overseen by separate suicide prevention and mental health officials, both within OMHSP. VHA officials told us that beginning in fiscal year 2019, VHA will separate the contract for suicide prevention and mental health media outreach. Specifically, VHA will utilize an existing agreement with a different contractor for suicide prevention media outreach while the existing contractor will continue to provide mental health media outreach. According to VHA, the purpose of its suicide prevention media outreach campaign is to raise awareness among veterans, their families and friends, and the general public about VHA resources that are available to veterans who may be at risk for suicide. The primary focus of the outreach campaign since 2010 has been to raise awareness of the services available through the VCL. VHA’s suicide prevention media outreach falls into two main categories: unpaid and paid. Unpaid media outreach content is typically displayed on platforms owned by VA or VHA, or is disseminated by external organizations or individuals that share VHA suicide prevention content at no cost, as discussed below (see fig. 3). Social media. VA and VHA each maintain national social media accounts on platforms such as Facebook, Twitter, and Instagram, and post content, including suicide prevention content developed by VHA’s contractor. VHA also works with other federal agencies, non-governmental organizations, and individuals that post its suicide prevention content periodically. Public service announcements (PSA). VHA’s contractor typically develops two PSAs per year, which various local and national media networks display at no cost to VHA. Website. VHA’s contractor maintains the content displayed on the VCL website (veteranscrisisline.net), including much of the content it develops for other platforms, such as PSAs and social media content. Visitors to the website can both view the content on the website and share it on their own platforms. Paid digital media. An example of paid digital media includes online keyword searches, in which VHA pays a search engine a fee for its website to appear as a top result in response to selected keywords, such as “veterans crisis line” or “veteran suicide.” Paid digital media also includes social media posts for which VHA pays a fee to display its content to a widespread audience, such as users with a military affiliation. Paid “out-of-home” media: “Out-of-home” refers to the locations where this type of content is typically displayed. Examples include billboards, bus and transit advertisements, and local and national radio commercials. VHA recognizes September as Suicide Prevention Month each year. During this month, VHA establishes a theme and increases its outreach activities, including a combination of both paid and unpaid media outreach. According to VHA, it typically incorporates additional outreach techniques during this month, such as enlisting the support of celebrities or hosting live chat sessions on social media platforms, including Facebook and Twitter. VHA’s suicide prevention media outreach activities declined in fiscal years 2017 and 2018 compared to earlier years of the campaign. We identified declines in social media postings, PSAs, paid media, and suicide prevention month activities, as discussed below. Social media. The amount of social media content developed by VHA’s contractor decreased in 2017 and 2018, after increasing in each of the prior four years. Specifically, VHA reported that its contractor developed 339 pieces of social media content in fiscal year 2016, compared with 159 in fiscal year 2017, and 47 during the first 10 months of fiscal year 2018 (see fig. 5.). PSAs. VHA’s contractor is required to develop two suicide prevention PSAs in each fiscal year. VHA officials said that the development of the two PSAs was delayed in fiscal year 2018. Specifically, as of August 2018, VHA reported that one PSA was completed, but had not yet aired, and another PSA was in development. As a result of this delay, VHA had not aired a suicide prevention PSA on television or radio in over a year; this is the first time there has been a gap of more than a month since June 2012. Paid media. VHA had a total budget of $17.7 million for its suicide prevention and mental health media outreach for fiscal year 2018, of which $6.2 million was obligated for suicide prevention paid media. As of September 2018, VHA said it had spent $57,000 of its $6.2 million paid media budget. VHA officials estimated that they would spend a total of $1.5 million on suicide prevention paid media for fiscal year 2018 and indicated that the remaining funds would be de-obligated from the contract at the end of the fiscal year and not used for suicide prevention media outreach. VHA officials indicated that the reason they did not spend the remaining funds on suicide prevention paid media in fiscal year 2018 was that the approval of the paid media plan was delayed due to changes in leadership and organizational realignment of the suicide prevention program. As a result, VHA officials said they limited the paid media outreach in fiscal year 2018 to activities that were already in place, including 25 keyword search advertisements, and 20 billboards and 8 radio advertisements in selected cities across the United States. In prior fiscal years, VHA conducted a variety of digital and out-of- home suicide prevention paid media. For example, in fiscal year 2015, with a suicide prevention paid media budget of more than $4 million, VHA reported that it ran 58 advertisements on Google, Bing, and Facebook, and ran 30 billboards, 180 bus advertisements, more than 19,000 radio advertisements, 252 print advertisements, and 39 movie theatre placements in selected cities across the United States. VHA ran similar types of paid media in fiscal years 2013, 2014, and 2016 with variation in quantities based on the approved budget in each of these years. In fiscal year 2017, VHA had a budget of approximately $1.7 million to spend on paid media for both the suicide prevention and mental health outreach campaigns. However, VHA spent less than 10 percent of the funds (approximately $136,000) to run paid advertisements on Google and Bing for suicide prevention in fiscal year 2017; the remainder was spent on mental health outreach. Suicide Prevention Month. VHA documentation indicated that Suicide Prevention Month 2017 was a limited effort. VHA officials said that this was because they did not begin preparing early enough. In May 2018, VHA officials indicated that they were similarly behind schedule for planning Suicide Prevention Month 2018, though they told us in August 2018 that they had caught up. VHA officials told us that the decrease in suicide prevention media outreach activities was due to leadership turnover and reorganization since 2017. For example, VHA officials said the National Director for Suicide Prevention position was vacant from July 2017 through April 2018. VHA filled the role temporarily with a 6-month detail from another agency from October 2017 through March 2018 and then hired this individual as the permanent director on April 30, 2018. VHA officials that worked on the campaign told us they did not have leadership available to make decisions about the suicide prevention campaign during this time. For example, VHA officials said they did not have a kick-off meeting between VHA leadership and VHA’s contractor at the beginning of fiscal year 2018—a requirement of the contract—because there was no leadership available to participate in this meeting. The officials also reported that suicide prevention leadership was not available for weekly meetings to discuss suicide prevention outreach activities, even after the suicide prevention program obtained an acting director on detail from another agency. VHA staff said that at that time, they focused their suicide prevention media outreach efforts on areas that did not require leadership input, such as updating the VCL website. The absence of leadership available to provide direction and make decisions on the suicide prevention media outreach campaign is inconsistent with federal internal control standards for control environment, which require agencies to assign responsibilities to achieve its objectives. If a key role is vacant, management needs to determine by whom and how those responsibilities will be fulfilled in order to meet its objectives. Officials that worked on the campaign told us they shifted their focus away from the suicide prevention media outreach campaign toward the mental health outreach campaign due to reorganization of the offices responsible for suicide prevention activities in 2017. Specifically, under the new organization, and in the absence of suicide prevention program leadership, the officials began reporting directly to mental health program leadership and became more focused on the mental health outreach aspects of the contract. Following the reorganization, officials that worked on the campaign did not have a clear line of reporting to the suicide prevention program. This is also inconsistent with federal internal control standards for control environment, which require agencies to establish an organizational structure and assign responsibilities, such as establishing lines of reporting necessary information to management. VHA officials told us that one of the highest priorities for the suicide prevention program since the beginning of fiscal year 2018 was to establish a national strategy for preventing veteran suicides. The national strategy, issued in June 2018, includes suicide prevention outreach as one of the strategy’s 14 goals. The national strategy also emphasizes VHA’s plans to shift to a public health approach to suicide prevention outreach. The public health approach focuses less on raising awareness of the VCL and more on reaching veterans before the point of crisis. VHA officials told us they have been trying to shift to a public health approach since 2016. Some of the campaign themes and messages have reflected this shift; for example, the “Be There” campaign theme that was adopted in fiscal year 2016—and has remained the theme since— emphasizes the message that everyone has a role in helping veterans in crisis feel less alone and connecting them to resources. However, VHA officials told us in May 2018 that they were just beginning to conceptualize what the suicide prevention outreach campaign should look like moving forward. Leadership officials also said that while they were developing the national strategy, they delegated the responsibility for implementing the suicide prevention outreach campaign to other officials working on the campaign. The decline in VHA’s suicide prevention media outreach activities over the past 2 fiscal years is inconsistent with VA’s strategic goals, which identify suicide prevention as the agency’s top clinical priority for fiscal years 2018 through 2024. Further, VHA has continued to obligate millions of dollars to its suicide prevention media outreach campaign each year. Since fiscal year 2017, VHA has obligated $24.6 million to the contract for media outreach related to both suicide prevention and mental health. By not assigning key leadership responsibilities and clear lines of reporting, VHA’s ability to oversee the suicide prevention media outreach activities was hindered and these outreach activities decreased. As a result, VHA may not have exposed as many people in the community, such as veterans at risk for suicide, or their families and friends, to its suicide prevention outreach content. Additionally, without establishing responsibility and clear lines of reporting, VHA lacks assurance that it will have continuous oversight of its suicide prevention media outreach activities in the event of additional turnover and reorganization in the future, particularly as VHA begins implementing the suicide prevention media outreach campaign under its new agreement that begins in fiscal year 2019. VHA works with its contractor to create and monitor metrics to help gauge the effectiveness of its suicide prevention media outreach campaign in raising awareness among veterans and others about VHA services, such as the VCL. The metrics primarily focus on the number of individuals who were exposed to or interacted with VHA’s suicide prevention content across various forms of outreach, including social media, PSAs, and websites. According to VHA, the metrics are intended to help VHA ensure that its media outreach activities achieve intended results, such as increasing awareness and use of the resources identified on the VCL website. Examples of metrics monitored by VHA and its contractor include those related to (1) social media, such as the number of times a piece of outreach content is displayed on social media; (2) PSAs, such as the total number of markets and television stations airing a PSA; and (3) the VCL website, such as the total traffic to the website, as well as the average amount of time spent on a page and average number of pages viewed per visit. VHA’s contractor is required to monitor the metrics and report results on a monthly basis. Specifically, the contractor provides monthly monitoring reports to VHA that summarize how outreach is performing, such as the number of visits to the VCL website that were driven from paid media sources. Officials noted these reports are key sources of information for VHA on the results of its outreach. VHA officials also told us they informally discuss certain metrics during weekly meetings with VHA’s contractor. In addition, VHA works with its contractor to conduct a more in-depth analysis of outreach efforts during and after Suicide Prevention Month each year. VHA has not established targets for the majority of the metrics it uses to help gauge the effectiveness of its suicide prevention media outreach campaign. As a result, VHA does not have the information it needs to fully evaluate the campaign’s effectiveness in raising awareness of VHA’s suicide prevention resources among veterans, including the VCL. For example, we found that VHA’s contractor’s monitoring reports—a summary of key metrics that VHA uses to routinely monitor information regarding the campaign—generally focused on outreach “highlights” and positive results. The reports did not set expectations based on past outreach or targets for new outreach, and lacked more comprehensive information on whether outreach performed against these expectations. For example: A monitoring report from 2018 showed that during one month, there were 21,000 social media mentions of keywords specific to VA suicide prevention, such as “VCL” or “veteran suicide,” across social media platforms. These mentions earned 120 million impressions; however, there was no indication of the number of keyword mentions or impressions that VHA expected based on its media outreach activities. In addition, the report did not indicate the proportion of mentions that VHA believed were specifically driven by its outreach activities, and there also was no indication of whether these mentions were positive or negative, or what actions to take based on this information. Another monitoring report from January 2017 showed that paid advertising drove 39 percent of overall website traffic during one month, while unpaid sources drove the remaining 61 percent. However, there was no information indicating the amounts of paid advertising that VHA conducted during this monitoring period, and whether this amount of website traffic from paid advertising met expectations. VHA’s 2016 Suicide Prevention Month summary report showed that there were 194,536 visits to the VCL website, roughly an 8 percent increase from the Suicide Prevention Month in 2015. However, the report did not indicate whether this increase from the prior year met expectations, or a different result was expected. VHA officials told us that they have not established targets for most of the suicide prevention media outreach campaign because they lack meaningful targets for the metrics to help evaluate the campaign. VHA officials said that the only target they have established is for each PSA to rank in the top 10 percent of the Nielsen ratings because this is the only meaningful target available that is accepted industry-wide. VHA officials stated that using any other targets would be arbitrary. For the remaining metrics, VHA officials told us they assess the outcomes of their campaign by comparing data from year to year, and examining any changes in the outcomes over time. However, VHA could set targets that capture the number of people who viewed or interacted with its outreach content, similar to its Nielsen target set for television viewership. Doing so would help VHA evaluate whether the campaign has been effective in raising awareness of VHA’s suicide prevention resources. Further, creating targets for these additional metrics need not be arbitrary, because VHA could use information about how its metrics performed in the past to develop reasonable and meaningful targets for future performance. VHA could also adjust the targets over time to reflect changes in its metrics or approach to the campaign, such as changes to its paid media budget each year. Federal internal control standards for monitoring require agencies to assess the quality of its performance by evaluating the results of activities. Agencies can then use these evaluations to determine the effectiveness of its programs or need for any corrective actions. Further, VA’s June 2018 National Strategy for Preventing Veteran Suicide also emphasizes the importance of the agency evaluating the effectiveness of its outreach. The absence of established targets leaves VHA without a framework to effectively evaluate its campaign. Our prior work has shown that establishing targets allows agencies to track their progress toward specific goals. In particular, we have developed several key attributes of performance goals and measures including, when appropriate, the development of quantifiable, numerical targets for performance goals and measures. Such targets can facilitate future evaluations of whether overall goals and objectives were achieved by allowing for comparisons between projected performance and actual results. Further, establishing targets for its outreach metrics will enable VHA officials to determine whether outreach performed as expected and raised awareness of VHA resources such as the VCL, including identifying outreach efforts that worked particularly well and those that did not. In doing so, VHA officials will have the opportunity to make better informed decisions in their suicide prevention media outreach campaign to support VA’s overall goal of reducing veteran suicides. VA has stated that preventing veteran suicide is its top clinical priority; yet VHA’s lack of leadership attention to its suicide prevention media outreach campaign in recent years has resulted in less outreach to veterans. While VHA identifies the campaign as its primary method of raising suicide prevention awareness, it has not established an effective oversight approach to ensure outreach continuity. This became particularly evident during a recent period of turnover and reorganization in the office responsible for the suicide prevention outreach campaign. Moving forward, VHA has an opportunity to improve its oversight to ensure that its outreach content reaches veterans and others in the community to raise awareness of VHA’s suicide prevention services, particularly as VHA begins working with a new contractor beginning in fiscal year 2019. VHA is responsible for evaluating the effectiveness of its suicide prevention media outreach campaign in raising awareness about VHA services that are available to veterans who may be at risk for suicide. To do so, VHA collects and monitors data on campaign metrics to help gauge the effectiveness of its suicide prevention media outreach campaign in raising such awareness, but has not established targets for the majority of these metrics because officials reported that there are no meaningful, industry-wide targets for them. We disagree with VHA’s assertion that other targets would not be meaningful; VHA collects data on its metrics that it can use to develop reasonable and meaningful targets for future performance. In the absence of established targets, VHA cannot evaluate the effectiveness of the campaign, and make informed decisions about which activities should be continued to support VA’s overall goal of reducing veteran suicides. We are making the following two recommendations to VA: 1. The Under Secretary for Health should establish an approach for overseeing its suicide prevention media outreach efforts that includes clear delineation of roles and responsibilities for those in leadership and contract oversight roles, including during periods of staff turnover or program changes. (Recommendation 1) 2. The Under Secretary for Health should require officials within the Office of Suicide Prevention and Mental Health to establish targets for the metrics the office uses to evaluate the effectiveness of its suicide prevention media outreach campaign. (Recommendation 2) We provided a draft of this report to VA for review and comment. In its written comments, summarized below and reprinted in Appendix I, VA concurred with our recommendations. VA described ongoing and planned actions and provided a timeline for addressing our recommendations. VA also provided technical comments, which we incorporated as appropriate. In response to our first recommendation, to establish an oversight approach that includes delineation of roles and responsibilities, VA acknowledged that organizational transitions and realignments within OMHSP contributed to unclear roles and responsibilities in 2017 and 2018. VA said that OMHSP has made organizational improvements, including hiring a permanent Director for Suicide Prevention and establishing a new organizational structure. In its comments, VA requested closure of the first recommendation based on these actions. However, to fully implement this recommendation, VA will need to provide evidence that it has established an oversight approach for the suicide prevention media outreach campaign. This would include providing information about the roles and responsibilities, as well as reporting requirements, for contract and leadership officials involved in the suicide prevention media outreach campaign under the new organizational structure and the new contract. VA will also need to demonstrate that it has a plan in place to ensure continued oversight of the suicide prevention media campaign in the event of staff turnover or program changes. In response to our second recommendation, to establish targets against which to evaluate suicide prevention metrics, VA said it has plans to work with communications experts to develop metrics, targets, and an evaluation strategy to improve its evaluation of its suicide prevention program efforts, including outreach. VA expects to complete these actions by April 2019. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of Veterans Affairs. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at DraperD@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the contact named above, Marcia A. Mann (Assistant Director), Kaitlin McConnell (Analyst-in-Charge), Kaitlin Asaly, and Jane Eyre made key contributions to this report. Also contributing were Jennie Apter, Emily Bippus, Valerie Caracelli, Lisa Gardner, Jacquelyn Hamilton, Teague Lyons, Vikki Porter, and Eden Savino.", "summary": "Veterans suffer a disproportionately higher rate of suicide than the civilian population. VA has estimated that an average of 20 veterans die by suicide per day, and in 2018, VA identified suicide prevention as its highest clinical priority. VHA's suicide prevention media outreach campaign—its collective suicide prevention outreach activities—helps raise awareness among veterans and others in the community about suicide prevention resources. VHA has contracted with an outside vendor to develop suicide prevention media outreach content. GAO was asked to examine VHA's suicide prevention media outreach campaign. This report examines the extent to which VHA (1) conducts activities for its suicide prevention media outreach campaign, and (2) evaluates the effectiveness of its campaign. GAO reviewed relevant VHA documents and data on the amount, type, and cost of suicide prevention outreach activities since fiscal year 2013. GAO also reviewed VHA's contract for developing suicide prevention outreach content and interviewed VA and VHA officials. The Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) conducts national suicide prevention media outreach on various platforms to raise awareness about VHA's suicide prevention resources. The primary focus of this campaign since 2010 has been to raise awareness of the Veterans Crisis Line (VCL), VHA's national hotline established in 2007 to provide support to veterans in emotional crisis. GAO found that VHA's suicide prevention media outreach activities declined in recent years due to leadership turnover and reorganization. For example, the amount of suicide prevention content developed by VHA's contractor for social media decreased in fiscal years 2017 and the first 10 months of 2018 after increasing in each of the 4 prior years. VHA officials reported not having leadership available for a period of time to make decisions about the suicide prevention media outreach campaign. GAO found that VHA did not assign key leadership responsibilities or establish clear lines of reporting, and as a result, its ability to oversee the outreach campaign was hindered. Consequently, VHA may not be maximizing its reach with suicide prevention media content to veterans, especially those who are at-risk. VHA evaluates the effectiveness of its suicide prevention media outreach campaign by collecting data on metrics, such as the number of people that visit the VCL website. However, VHA has not established targets for the majority of these metrics. Officials said they have not established targets because, apart from one industry-wide target they use, they lack meaningful targets for evaluating the campaign. However, VHA could use information about how its metrics performed in the past to develop reasonable and meaningful targets for future performance. Without established targets for its metrics, VHA is missing an opportunity to better evaluate the effectiveness of its suicide prevention media outreach campaign. VHA should (1) establish an approach to oversee its suicide prevention media outreach campaign that includes clear delineation of roles and responsibilities, and (2) establish targets for its metrics to improve evaluation efforts. VA concurred with GAO's recommendations and described steps it will take to implement them.", "document_type": "gao"}
{"report": "DOD acquires new weapons for its warfighters through a management process known as the defense acquisition process. This process has multiple phases, including: (1) technology maturation and risk reduction, (2) engineering and manufacturing development, and (3) production and deployment. In this report we refer to these three phases as concept development, system development, and production. Programs typically complete a series of milestone reviews and other key decision points that authorize entry into a new acquisition phase. DOD Instruction 5000.02 delegates responsibility for developing and procuring weapon systems to the military departments and other defense agencies. This policy does not specify a standard organizational structure—or program structure—to manage acquisition programs, but rather states that programs are to be tailored as much as possible to the characteristics of the product being acquired, and to the totality of circumstances associated with the program including operational urgency and risk factors. In addition, DOD’s guidance for managing its workforce states that the approach should be flexible, adaptive to program changes, and responsive to new management strategies. DOD decides how many personnel and how much program funding to request for each military department through the Planning, Programming, Budgeting, and Execution (PPBE) process. DOD programming policy requires the military departments and defense agencies to develop a program objective memorandum that identifies and prioritizes requirements and total funding needs for the current budget year and 4 additional years into the future. As a part of this process, the departments also estimate the personnel requirements and program funding needed to execute their mission, including support for the commands and PEOs that are responsible for managing acquisition programs. The results of the PPBE process, including proposed funding levels for programs, are captured in the President’s annual budget request to Congress. For example, in its budget request, DOD identifies and requests the total number of civilian full-time equivalent personnel, among other things. Congress then authorizes and appropriates the funding to pay for civilian personnel for each military department. When budgeting for contracted services, DOD estimates the cost of the tasks to be performed but not the number of individuals that may perform those tasks. The military departments, commands and PEOs then distribute approved funding (which, in part, is used to pay for civilian personnel and contractor support) to the various organizations including the programs that are responsible for managing and supporting defense acquisitions. Each military department has a different approach to developing its budget request, and program budgets may be spread across multiple types of appropriations that are organized into various categories based on their purpose such as research, development, testing and evaluation, or procurement. Similarly, the military departments fund their personnel through several different types of appropriations, including (1) operation and maintenance; (2) military personnel; and (3) research, development, test, and evaluation. Requests for funding are included in different documents and often presented in multiple volumes that can be hundreds of pages long. DOD’s Financial Management Regulation provides instructions for the formulation and presentation of the budget request to Congress, including general categories of costs that might be included in program specific budgets. In addition, the regulation requires DOD components to include specific budget exhibits for certain acquisition programs to provide more insight into those programs’ funding needs. Several interrelated factors influenced the workforce size, composition, and mix, as well as the organizational structure of the 11 major defense acquisition programs we reviewed. We found the following: Program workforce size and composition were influenced by the degree to which the program assumed responsibility for technical development and integration, as well as the program’s stage within the acquisition life cycle. Program workforce mix varied depending on the use of contractor personnel, which was based on the workload requirements and the availability of government personnel to provide the skills needed. Programs were generally structured as either stand-alone—new, high priority, complex weapon system platforms with dedicated personnel—or as part of a portfolio of related programs to share personnel across programs. The number and composition of personnel that supported the selected major defense acquisition programs varied considerably. As shown in figure 1, the total number of personnel supporting the 11 selected programs ranged from 30 to 397, and the composition of those personnel varied based on the needs of the program. While program officials cited a number of factors that influenced the selected programs’ workforce size and composition, including department priority and complexity, we identified two overarching factors—(1) the level of program responsibility for technical development and integration, and (2) the stage of the acquisition life cycle. First, we found programs that assume more responsibility for technical development and integration have more personnel—primarily those that perform engineering as well as test and evaluation functions. The two largest of the selected programs we reviewed, the Navy’s Next- Generation Jammer Mid-Band (NGJ Mid-Band) and Columbia Class Ballistic Missile Submarine (Columbia), assumed significant responsibility for system development and integration, activities a prime contractor often undertook for the other programs we reviewed. For example, NGJ Mid-Band officials explained that the program is responsible for overseeing software integration and other efforts directly. In this case, in addition to personnel assigned to the program office, the Navy relies on personnel from other organizations such as the Naval Air Warfare Center Aircraft Division instead of a prime contractor to develop the software needed to operate the system, conduct system testing, and manage integration into the platform. Similarly, the Columbia program maintains responsibility for many aspects of development and integration of the submarine including most hull, mechanical, and electrical components. As a result, about two-thirds of the 309 personnel supporting the program are performing engineering and technical tasks. In contrast, two programs with fewer personnel, the Air Force’s B-2 Defensive Management System Modernization program (DMS-M) and Navy’s John Lewis Class Fleet Replenishment Oiler (T-AO), assigned significant responsibility for development and integration to their respective prime contractors. The Defensive Management System Modernization program reported to us that it has a total of 11 engineering and technical personnel, and T-AO reported that it has 35 engineering and technical personnel. Secondly, we found that program workforce size and composition changed in response to the amount and nature of the work programs perform at different stages of the acquisition life cycle. For example, officials from our selected programs stated they generally planned to increase in size as they progressed from concept development to system development and also planned to concurrently increase the proportion of engineering and technical personnel. Program officials stated that as the program progresses into the logistics support stage, the number of personnel supporting the program generally decreases as programs release some personnel to other assignments while retaining enough personnel to manage the logistics support stage. Figure 2 shows how the size and composition of Army’s Joint-Air-to-Ground Missile (JAGM) program changed from concept development into production. A program’s total development and procurement cost was not necessarily related to the number of personnel supporting the program for the 11 programs we reviewed. All 11 selected programs are classified as major defense acquisition programs and ranged in total acquisitions cost from $1.5 billion to $103.2 billion. Our analysis, shown in table 1 below, indicates that total cost did not significantly influence the number of personnel supporting these programs. All 11 selected programs used contractors to help meet workload requirements, but the level of contractor support varied from approximately 5 percent to 72 percent of total program personnel, as shown in figure 3. Program officials told us that while they generally try to use civilian or military personnel to meet workload requirements, they use contractor support when the number of government personnel allocated to the program is not sufficient to meet their needs, the technical skills are not available or are limited within the government, or to fulfill short-term tasks that are too brief to justify hiring government personnel. Program officials stated the extent to which their programs use contractor support often depends on the number civilians allocated to the program by the command or PEO. In the case of the three selected programs with the fewest personnel, the officials stated that the number of personnel authorizations allocated to the program by their respective command or PEO did not meet their estimated workload requirements. For example, the B-2 Defensive Management System Modernization program estimated it needed 82 personnel in fiscal year 2018, but was only allocated 13 personnel. As a result, program officials stated that they used program funds to pay for contractor support personnel to partially offset the government civilian staffing shortfalls. Officials at the Air Force Life Cycle Management Center, the organization that allocated personnel to the B-2 program office, told us that civilian personnel are allocated based on the risk associated with each program. Program officials told us that contractor support personnel are used to augment civilian and military personnel by providing skills or technical expertise that are limited or not available in the government. We found that over two-thirds of the contractors that supported the 11 selected programs we reviewed were performing engineering and technical functions. For example, the John Lewis Class Fleet Replenishment Oiler (T-AO) is a commercially-derived ship design. As such, program officials stated that the required engineering expertise resides in the commercial sector, which resulted in contracted engineers comprising about 77 percent of the program’s total engineering personnel. Program officials also stated that it is more effective to use contractor support personnel to perform tasks that are relatively short in duration than to go through the lengthy process of hiring government personnel. Contracting for support allows the program to grow and shrink to meet personnel requirements as they change. For example, Joint Air-to-Ground Missile program officials stated they contracted for support to execute tasks that are not recurring, such as developing the required documents to get approval to start production. Among the 11 programs we reviewed, the Air Force’s Military Global Positioning System User Equipment (MGUE) program has a unique workforce mix. Twenty-four percent of MGUE’s program personnel were military, and MGUE was the only one of the 11 selected programs that had FFRDC personnel. Program officials stated that the challenge of obtaining civilian personnel with the required technical skills in a high cost-of-living area around Los Angeles, California required the program to rely more heavily on military personnel and contractors to support the program. Program officials stated this is in part because it is easier to assign military personnel in high cost-of-living areas than it is to hire civilian personnel. In addition, programs in the Air Force’s Space and Missile Systems Center often rely on FFRDC personnel from Aerospace Corporation, which is located in the Los Angeles area and provides technical expertise that is specific to space systems. Program officials from the other 10 programs we reviewed reported that they did not have FFRDC personnel. While differences existed in the organizational structure of the 11 programs we reviewed, we identified factors that affected which of the two common approaches the military departments used to leverage available personnel with the necessary skills: New, high priority, complex weapon system platforms that require a significant amount of development and integration, such as the Navy’s Columbia and the Army’s Armored Multi-Purpose Vehicle, are structured as distinct standalone program offices with dedicated program personnel. Nine of the 11 selected programs were managed in a portfolio-based program structure which included multiple related acquisition programs. For these portfolio-based programs, personnel were shared across the related programs to help meet fluctuating workload requirements and maximize personnel resources. Figure 4 compares the structure of a standalone program to the structure of a portfolio-based program with multiple acquisition programs managed under it. The figure also illustrates how the Air Force’s MGUE program was situated within the Air Force’s Global Positioning Systems portfolio of programs. In both types of organizational structures illustrated above, the PEO and the program office have personnel that oversee and support the programs. These personnel may be dedicated to one program or may split time between multiple portfolio-based programs. For example, the Air Force PEO for Space has more than 5,000 military, civilian, and contractor personnel and is responsible for managing 41 programs, the responsibility for which is distributed among multiple program offices. One of these program offices, the Global Positioning Systems program office, has 628 personnel. This program office is responsible for overseeing and supplementing the staff of several programs, including the Military Global Positioning System User Equipment Program, which has about 70 personnel. According to PEO and program officials, acquisition programs may be managed within portfolios for several different reasons: Programs are part of the same weapon system platform. The B-2 Defensive Management System Modernization program and the F-15 Eagle Passive Active Warning Survivability System program are examples of upgrades to existing systems on mature aircraft and are managed within a portfolio of programs within the B-2 and F-15 system program offices, respectively. Programs have interrelated technologies. The Air Force’s MGUE program is managed within the GPS program office, which also manages other GPS satellite and ground system programs. Programs have related acquisition strategies. The Navy’s John Lewis Class Fleet Replenishment Oiler (T-AO) program is managed within a portfolio of commercially designed and developed ships. This program is managed within a program office that oversees approximately 85 types of commercially derived auxiliary ships, boats, service craft, and special mission ships. Regardless of how the acquisition program is structured, other DOD organizations also provide personnel to support a program’s workload requirements. There are various specialized DOD organizations that support programs and provide specific acquisition functions or skill sets, such as contracting, cost estimating, and engineering. For the 11 selected programs we reviewed, these organizations supported multiple programs and were either structured (1) within the PEO that was responsible for the programs we reviewed or (2) external to the PEO. These external support organizations include contracting commands, warfare centers, and engineering organizations that are intended to provide the program specialized technical expertise from across the military department. Program officials stated that these organizations may share personnel with a program on a full or part-time basis, and the shared personnel may or may not be co-located with the program. Figure 5 is a notional representation of the way that programs are supported by different organizations. The major defense acquisition programs we reviewed used different approaches to organizing and leveraging support organizations. For example: The Navy programs we reviewed relied on naval warfare centers to provide the engineering expertise necessary to design, build, maintain, and repair the Navy’s aircraft, ships, and submarines. For example, the Navy’s NGJ Mid-Band relies heavily on warfare centers, including the Naval Air Warfare Center Weapons Division and the Naval Air Warfare Center Aircraft Division, to support the program. We found that about 60 percent of the total number of personnel supporting the program office were from these organizations. The Army programs we reviewed relied on support organizations such as the Army Contracting Command for contracting functions, the Aviation and Missile Research Development and Engineering Center for engineering expertise, and others to provide life cycle management support. The Air Force programs we reviewed relied on support organizations established within their command. For example, Air Force’s Life Cycle Management Center has organizations dedicated to supporting all of its programs. These organizations provide support, such as contracting and cost estimating expertise, to programs managed under the Air Force’s Life Cycle Management Center. Personnel within these organizations are not staffed to one particular program, but share their time among many of the programs the Center is responsible for managing. The personnel costs for each major defense acquisition program we reviewed are included in different parts of the President’s annual budget request, including budget justification documents, but are not always clearly identifiable due to different approaches used to report such costs. The DOD Financial Management Regulation gives the military departments flexibility in how they submit program personnel costs. For example, it suggests the use of “typical” personnel cost categories for research, development, test, and evaluation programs to include in their individual program budget exhibits, but it also allows the departments to use the personnel cost categories they deem to be the most appropriate when formulating the budget request. In reviewing DOD’s budget requests for fiscal years 2018 and 2019 associated with the 11 selected programs, we found that personnel costs are budgeted for in two main wayscentrally by the military department, or by an individual programdepending on whether the requests are for military, civilian, or contractor support services. Personnel costs that are program-funded are included in individual program budget justification requests, whereas personnel costs that are centrally funded by the military departments are aggregated into one or more line items in the military department’s specific appropriation request. Table 2 shows how each military department funds military and civilian personnel and contractor support services for major defense acquisition programs. Each military department centrally budgets for military personnel through its respective Military Personnel appropriation requests, which aggregate personnel funding. These requests include funding for pay, travel, and other personnel-related costs. As these costs are combined and not associated with a specific program, we could not determine the costs of the military personnel supporting the 11 selected programs by reviewing DOD’s budget justification documentation. In contrast, support contractor costs were included in each program’s individual budget request. The military departments also centrally budget for some civilian personnel, but there are differences between the departments regarding which appropriations categories they use to request these funds. Regardless of the appropriation, we found that the budget requests do not identify civilian personnel costs by specific program; therefore, we could not determine the costs of the centrally funded civilian personnel supporting the 11 programs we selected. For example, in fiscal year 2019, the Air Force requested funding for the civilian personnel supporting its acquisition programs in development through the Research, Development, Test, and Evaluation appropriation. It grouped the costs into eight categories that represent various missions such as Cyber, Network, and Business Systems; Global Battle Management; and Nuclear Systems. The Air Force budget request indicates the total amount of funds requested, but does not identify the estimated number of personnel that these funds will support. Figure 6 illustrates how the Air Force requested funds for its civilian acquisition workforce in fiscal year 2019. The Navy and Army request funds for civilian personnel primarily through their respective operation and maintenance appropriations. This appropriation is used to fund a wide range of costs necessary to manage, operate and maintain worldwide facilities and military operations. These operation and maintenance budgets are divided into numerous categories related to various missions, functions, or activities. For example, the Navy’s Operation and Maintenance budget requests funding for civilian personnel in several categories, such as “Ship Operational Support and Training” and “Administration.” The Army Operation and Maintenance budget requests funding for civilian acquisition personnel in one combined category labeled as “Other Service Support.” Apart from the portions of the budget described above, certain DOD programs have specific budget exhibits that identify its funding requirements. In reviewing the exhibits for the 11 selected programs, we found that individual program requests include personnel costs that are not funded centrally such as contractor support services costs, but these costs are generally not specifically identified as personnel costs. For example, according to program officials, the Air Force’s B-2 Defensive Management Modernization program requested funds in its exhibit accompanying the fiscal year 2019 Research Development, Test, and Evaluation budget request labeled “PMA,” which stands for Program Management Administration. According to program officials, PMA includes costs for contractor support services, government travel, and other costs but does not include civilian personnel costs (see figure 7). In reviewing and discussing the budget exhibits for the 11 selected programs with program officials, we found that personnel costs, including civilian, contractor, and FFRDC, were generally spread across multiple budget request lines that were associated with various tasks but were not specifically identified as personnel costs. These include the following: Development Test & Evaluation For example, the Navy’s Joint Precision Approach and Landing System’s fiscal year 2019 Research Development, Test and Evaluation budget exhibit included personnel costs across seven lines that represented various efforts including ship integration, test and evaluation, systems engineering, and program management support, as shown in figure 8. Of the 11 program’s fiscal year 2019 budgets we reviewed, one identified personnel costs on a single line, and the remaining 10 programs included personnel costs in two or more budget lines. We provided a draft of this report to DOD for comment. DOD provided technical comments that we incorporated into this report as appropriate. We are sending copies of this report to the appropriate congressional committees; the Acting Secretary of Defense and the Secretaries of the Army, Navy, and Air Force, as well as the Under Secretary of Defense for Personnel and Readiness. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Justin Jaynes (Assistant Director); Bradley Terry (Analyst-in-Charge); Matthew T. Crosby; Stephanie Gustafson; Heather B. Miller; Karen Richey; Miranda Riemer; Robin Wilson; and Chris Zakroff made significant contributions to this review.", "summary": "In 2018, DOD estimated that its 82 major defense acquisition programs would cost over $1.69 trillion in total to acquire. DOD relies on program offices—composed of civilian, military and contractor support personnel—to manage and oversee these technically complex programs. GAO was asked to review factors affecting DOD's personnel needs for its acquisition programs and how DOD budgets for the costs associated with these personnel. This report describes (1) factors affecting the workforce size, composition, and mix of contractor and government personnel, as well as organizational structure for selected programs; and (2) how personnel costs associated with those selected programs are included in DOD's budget justification documents. GAO reviewed DOD acquisition, workforce, and financial management policies and regulations and identified a non-generalizable sample of 11 major defense acquisition programs, including programs from each military department that were recently approved to enter into system development. GAO requested information from each of these programs to identify the number and type of personnel supporting the program, reviewed program documentation, and interviewed program officials. GAO also reviewed DOD's budget justification documents for fiscal years 2018 and 2019. The workforce size, composition, and mix, as well as the organizational structure of the 11 Department of Defense (DOD) major defense acquisition programs GAO reviewed were influenced by several interrelated factors. These factors include the government's role in developing and integrating key technologies, the availability of government personnel to provide the skills needed, and whether the program was managed as part of a portfolio of related programs or as a stand-alone program. For example, programs that assumed more responsibility for developing and integrating key technologies generally had a larger workforce, which was primarily composed of engineering and technical personnel. Program officials GAO met with stated that they generally prefer to use government personnel, but use contractor support when the number of government personnel allocated to the program is not sufficient to meet their needs, the technical skills are not available or are limited within the government, or to fulfill short-term tasks that are too brief to justify hiring government personnel. GAO also found that DOD structured the 11 programs to allow them to leverage available personnel with the necessary skills. Two programs were structured as standalone programs because they were new, high priority, and complex. The other nine programs were managed as a part of a portfolio of related programs. For example, the Air Force's F-15 program office manages a number of programs that add capabilities to the existing system. DOD's Financial Management Regulation, which governs the formulation and presentation of DOD's budget request, gives DOD flexibility in how it submits program personnel costs. Consequently, the personnel costs for the 11 programs GAO reviewed were not separately and distinctly identified from other costs. For example, costs for civilian and military personnel are often centrally funded through appropriations categories that support many DOD activities and do not provide information on specific program personnel costs. GAO also found that costs for contractor support are often combined with other costs in individual program budget exhibits.", "document_type": "gao"}
{"report": "Our October 2017 report found that CMS provides guidance to Medicare Part D plan sponsors on how the plan sponsors should monitor opioid overutilization problems among Part D beneficiaries. The agency includes this guidance in its annual letters to plan sponsors, known as call letters; it also provided a supplemental memo to plan sponsors in 2012. Among other things, these guidance documents instructed plan sponsors to implement a retrospective drug utilization review (DUR) system to monitor beneficiary utilization starting in 2013. As part of the DUR systems, CMS requires plan sponsors to have methods to identify beneficiaries who are potentially overusing specific drugs or groups of drugs, including opioids. Also in 2013, CMS created the Overutilization Monitoring System (OMS), which outlines criteria to identify beneficiaries with high-risk use of opioids and to oversee sponsors’ compliance with CMS’s opioid overutilization policy. Plan sponsors may use the OMS criteria for their DUR systems, but they have some flexibility to develop their own targeting criteria within CMS guidance. At the time of our review, the OMS considered beneficiaries to be at a high risk of opioid overuse when they met all three of the following criteria: 1. received a total daily MED greater than 120 mg for 90 consecutive 2. received opioid prescriptions from four or more providers in the previous 12 months, and 3. received opioids from four or more pharmacies in the previous 12 months. The criteria excluded beneficiaries with a cancer diagnosis and those in hospice care, for whom higher doses of opioids may be appropriate. Through the OMS, CMS generates quarterly reports that list beneficiaries who meet all of the criteria and who are identified as high-risk, and then distributes the reports to the plan sponsors. Plan sponsors are expected to review the list of identified beneficiaries, determine appropriate action, and then respond to CMS with information on their actions within 30 days. According to CMS officials, the agency also expects that plan sponsors will share any information with CMS on beneficiaries that they identify through their own DUR systems. We found that some actions plan sponsors may take include Case management. Case management may include an attempt to improve coordination issues, and often involves provider outreach, whereby the plan sponsor will contact the providers associated with the beneficiary to let them know that the beneficiary is receiving high levels of opioids and may be at risk of harm. Beneficiary-specific point-of-sale (POS) edits. Beneficiary-specific POS edits are restrictions that limit these beneficiaries to certain opioids and amounts. Pharmacists receive a message when a beneficiary attempts to fill a prescription that exceeds the limit in place for that beneficiary. Formulary-level POS edits. These edits alert providers who may not have been aware that their patients are receiving high levels of opioids from other doctors. Referrals for investigation. According to the six plan sponsors we interviewed, the referrals can be made to CMS’s National Benefit Integrity Medicare Drug Integrity Contractor (NBI MEDIC), which is responsible for identifying and investigating potential Part D fraud, waste, and abuse, or to the plan sponsor’s own internal investigative unit, if they have one. After investigating a particular case, they may refer the case to the HHS-OIG or a law enforcement agency, according to CMS, NBI MEDIC, and one plan sponsor. Based on CMS’s use of the OMS and the actions taken by plan sponsors, CMS reported a 61 percent decrease from calendar years 2011 through 2016 in the number of beneficiaries meeting the OMS criteria of high risk—from 29,404 to 11,594 beneficiaries—which agency officials consider an indication of success toward its goal of decreasing opioid use disorder. In addition, we found that CMS relies on separate patient safety measures developed and maintained by the Pharmacy Quality Alliance to assess how well Part D plan sponsors are monitoring beneficiaries and taking appropriate actions. In 2016, CMS started tracking plan sponsors’ performance on three patient safety measures that are directly related to opioids. The three measures are similar to the OMS criteria in that they identify beneficiaries with high dosages of opioids (120 mg MED), beneficiaries that use opioids from multiple providers and pharmacies, and beneficiaries that do both. However, one difference between these approaches is that the patient safety measures separately identify beneficiaries who fulfill each criterion individually. Our October 2017 report also found that while CMS tracks the total number of beneficiaries who meet all three OMS criteria as part of its opioid overutilization oversight across the Part D program, it does not have comparable information on most beneficiaries who receive high doses of opioids—regardless of the number of providers and pharmacies used—and who therefore may be at risk for harm, according to CDC guidelines. These guidelines note that long-term use of high doses of opioids—those above a MED of 90 mg per day—are associated with significant risk of harm and should be avoided if possible. Based on the CDC guidelines, outreach to Part D plan sponsors, and CMS analyses of Part D data, CMS has revised its current OMS criteria to include more at-risk beneficiaries beginning in 2018. The new OMS criteria define a high user as having an average daily MED greater than 90 mg for any duration, and who receives opioids from four or more providers and four or more pharmacies, or from six or more providers regardless of the number of pharmacies, for the prior 6 months. Based on 2015 data, CMS found that 33,223 beneficiaries would have met these revised criteria. While the revised criteria will help identify beneficiaries who CMS determined are at the highest risk of opioid misuse and therefore may need case management by plan sponsors, OMS will not provide information on the total number of Part D beneficiaries who may also be at risk of harm. In developing the revised criteria, CMS conducted a one-time analysis that estimated there were 727,016 beneficiaries with an average MED of 90 mg or more, for any length of time during a 6 month measurement period in 2015, regardless of the number of providers or pharmacies used. These beneficiaries may be at risk of harm from opioids, according to CDC guidelines, and therefore tracking the total number of these beneficiaries over time could help CMS to determine whether it is making progress toward meeting the goals specified in its Opioid Misuse Strategy to reduce the risk of opioid use disorders, overdoses, inappropriate prescribing, and drug diversion. However, CMS officials told us that the agency does not keep track of the total number of these beneficiaries, and does not have plans to do so as part of OMS. (See fig. 1.) We also found that in 2016, CMS began to gather information from its patient safety measures on the number of beneficiaries who use more than 120 mg MED of opioids for 90 days or longer, regardless of the number of providers and pharmacies. The patient safety measures identified 285,119 such beneficiaries—counted as member-years—in 2016. However, this information does not include all at-risk beneficiaries, because the threshold is more lenient than indicated in CDC guidelines and CMS’s new OMS criteria. Because neither the OMS criteria nor the patient safety measures include all beneficiaries potentially at risk of harm from high opioid doses, we recommended that CMS should gather information over time on the total number of beneficiaries who receive high opioid morphine equivalent doses regardless of the number of pharmacies or providers, as part of assessing progress over time in reaching the agency’s goals related to reducing opioid use. HHS concurred with our recommendation. Our October 2017 report found that CMS oversees providers who prescribe opioids to Medicare Part D beneficiaries through its contractor, NBI MEDIC, and the Part D plan sponsors. NBI MEDIC’s data analyses to identify outlier providers. CMS requires NBI MEDIC to identify providers who prescribe high amounts of Schedule II drugs, which include but are not limited to opioids. Using prescription drug data, NBI MEDIC conducts a peer comparison of providers’ prescribing practices to identify outlier providers—the highest prescribers of Schedule II drugs. NBI MEDIC reports the results to CMS. NBI MEDIC’s other projects. NBI MEDIC gathers and analyzes data on Medicare Part C and Part D, including projects using the Predictive Learning Analytics Tracking Outcome (PLATO) system. According to NBI MEDIC officials, these PLATO projects seek to identify potential fraud by examining data on provider behaviors. NBI MEDIC’s investigations to identify fraud, waste, and abuse. NBI MEDIC officials conduct investigations to assist CMS in identifying cases of potential fraud, waste, and abuse among providers for Medicare Part C and Part D. The investigations are prompted by complaints from plan sponsors; suspected fraud, waste, or abuse reported to NBI MEDIC’s call center; NBI MEDIC’s analysis of outlier providers; or from one of its other data analysis projects. NBI MEDIC’s referrals. After identifying providers engaged in potential fraudulent overprescribing, NBI MEDIC officials said they may refer cases to law enforcement agencies or the HHS-OIG for further investigation and potential prosecution. Plan sponsors’ monitoring of providers. CMS requires all plan sponsors to adopt and implement an effective compliance program, which must include measures to prevent, detect, and correct Part C or Part D program noncompliance, as well as fraud, waste, and abuse. CMS’s guidance focuses broadly on prescription drugs, and does not specifically address opioids. Our report concluded that although these efforts provide valuable information, CMS lacks all the information necessary to adequately oversee opioid prescribing. CMS’s oversight actions focus broadly on Schedule II drugs rather than specifically on opioids. For example, NBI MEDIC’s analyses to identify outlier providers do not indicate the extent to which they may be overprescribing opioids specifically. According to CMS officials, they direct NBI MEDIC to focus on Schedule II drugs, because these drugs have a high potential for abuse, whether they are opioids or other drugs. However, without specifically identifying opioids in these analyses—or an alternate source of data—CMS lacks data on providers who prescribe high amounts of opioids, and therefore cannot assess progress toward meeting its goals related to reducing opioid use, which would be consistent with federal internal control standards. Federal internal control standards require agencies to conduct monitoring activities and to use quality information to achieve objectives and address risks. As a result, we recommended that CMS require NBI MEDIC to gather separate data on providers who prescribe high amounts of opioids. This would allow CMS to better identify those providers who are inappropriately and potentially fraudulently overprescribing opioids. HHS agreed, and noted that it intends to work with NBI MEDIC to identify trends in outlier prescribers of opioids. Our report also found that CMS also lacks key information necessary for oversight of opioid prescribing, because it does not require plan sponsors to report to NBI MEDIC or CMS cases of fraud, waste, and abuse; cases of overprescribing; or any actions taken against providers. Plan sponsors collect information on cases of fraud, waste, and abuse, and can choose to report this information to NBI MEDIC or CMS. While CMS receives information from plan sponsors who voluntarily report their actions, it does not know the full extent to which plan sponsors have identified providers who prescribe high amounts of opioids, or the full extent to which sponsors have taken action to reduce overprescribing. We concluded that without this information, it is difficult for CMS to assess progress in this area, which would be consistent with federal internal control standards. In our report, we recommended that CMS require plan sponsors to report on investigations and other actions taken related to providers who prescribe high amounts of opioids. HHS did not concur with this recommendation. HHS noted that plan sponsors have the responsibility to detect and prevent fraud, waste, and abuse, and that CMS reviews cases when it conducts audits. HHS also stated that it seeks to balance requirements on plan sponsors when considering new regulatory requirements. However, without complete reporting—such as reporting from all plan sponsors on the actions they take to reduce overprescribing—we believe that CMS is missing key information that could help assess progress in this area. Due to the importance of this information for achieving the agency’s goals, we continue to believe that CMS should require plan sponsors to report on the actions they take to reduce overprescribing. - - - - - In conclusion, a large number of Medicare Part D beneficiaries use potentially harmful levels of prescription opioids, and reducing the inappropriate prescribing of these drugs is a key part of CMS’s strategy to decrease the risk of opioid use disorder, overdoses, and deaths. Despite working to identify and decrease egregious opioid use behavior—such as doctor shopping—among Medicare Part D beneficiaries, CMS lacks the necessary information to effectively determine the full number of beneficiaries at risk of harm, as well as other information that could help CMS assess whether its efforts to reduce opioid overprescribing are effective. It is important that health care providers help patients to receive appropriate pain treatment, including opioids, based on the consideration of benefits and risks. Access to information on the risks that Medicare patients face from inappropriate or poorly monitored prescriptions, as well as information on providers who may be inappropriately prescribing opioids, could help CMS as it works to improve care. Chairman Jenkins, Ranking Member Lewis, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff members have any questions concerning this testimony, please contact me at (202) 512-7114 or CurdaE@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Will Simerl (Assistant Director), Carolyn Feis Korman (Analyst-in-Charge), Amy Andresen, Drew Long, Samantha Pawlak, Vikki Porter, and Emily Wilson. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Misuse of prescription opioids can lead to overdose and death. In 2016, over 14 million Medicare Part D beneficiaries received opioid prescriptions, and spending for opioids was almost $4.1 billion. GAO and others have reported on inappropriate activities and risks associated with these prescriptions. This statement is based on GAO's October 2017 report (GAO-18-15) and discusses (1) CMS oversight of beneficiaries who receive opioid prescriptions under Part D, and (2) CMS oversight of providers who prescribe opioids to Medicare Part D beneficiaries. For the October 2017 report, GAO reviewed CMS opioid utilization and prescriber data, CMS guidance for plan sponsors, and CMS's strategy to prevent opioid misuse. GAO also interviewed CMS officials, the six largest Part D plan sponsors, and 12 national associations selected to represent insurance plans, pharmacy benefit managers, physicians, patients, and regulatory and law enforcement authorities. The Centers for Medicare & Medicaid Services (CMS), within the Department of Health and Human Services (HHS), provides guidance on the monitoring of Medicare beneficiaries who receive opioid prescriptions to plan sponsors—private organizations that implement the Medicare drug benefit, Part D—but lacks information on most beneficiaries at risk of harm from opioid use. CMS provides guidance to plan sponsors on how they should monitor opioid overutilization among Medicare Part D beneficiaries, and requires them to implement drug utilization review systems that use criteria similar to CMS's. CMS's criteria focused on beneficiaries who do all the following: (1) receive prescriptions of high doses of opioids, (2) receive prescriptions from four or more providers, and (3) fill prescriptions at four or more pharmacies. According to CMS, this approach focused actions on beneficiaries the agency determined to have the highest risk of harm. CMS's criteria, including recent revisions, do not provide sufficient information about the larger population of potentially at-risk beneficiaries. CMS estimates that while 33,223 beneficiaries would have met the revised criteria in 2015, 727,016 would have received high doses of opioids regardless of the number of providers or pharmacies. In 2016, CMS began to collect information on some of these beneficiaries using a higher dosage threshold for opioid use. This approach misses some who could be at risk of harm, based on Centers for Disease Control and Prevention guidelines. As a result, CMS is limited in its ability to assess progress toward meeting the broader goals of its Opioid Misuse Strategy for the Medicare and Medicaid programs, which includes activities to reduce the risk of harm to beneficiaries from opioid use. CMS oversees the prescribing of drugs at high risk of abuse through a variety of projects, but does not analyze data specifically on opioids. According to CMS officials, CMS and plan sponsors identify providers who prescribe large amounts of drugs with a high risk of abuse, and those suspected of fraud or abuse may be referred to law enforcement. However, GAO found that CMS does not identify providers who may be inappropriately prescribing large amounts of opioids separately from other drugs, and does not require plan sponsors to report actions they take when they identify such providers. As a result, CMS is lacking information that it could use to assess how opioid prescribing patterns are changing over time, and whether its efforts to reduce harm are effective. In the October 2017 report, GAO made three recommendations that CMS (1) gather information on the full number of at-risk beneficiaries receiving high doses of opioids, (2) identify providers who prescribe high amounts of opioids, and (3) require plan sponsors to report to CMS on actions related to providers who inappropriately prescribe opioids. HHS concurred with the first two recommendations, but not with the third. GAO continues to believe the recommendation is valid, as discussed in the report and in this statement.", "document_type": "gao"}
{"report": "An amphibious operation is a military operation launched from the sea by an amphibious force, embarked in ships or craft, with the primary purpose of introducing a landing force ashore to accomplish an assigned mission. An amphibious force is comprised of an (1) amphibious task force and (2) landing force together with other forces that are trained, organized, and equipped for amphibious operations. The amphibious task force is a group of Navy amphibious ships, most frequently deployed as an Amphibious Ready Group (ARG). The landing force is a Marine Air- Ground Task Force—which includes certain elements, such as command, aviation, ground, and logistics—embarked aboard the Navy amphibious ships. A Marine Expeditionary Unit (MEU) is the most-commonly deployed Marine Air-Ground Task Force. Together, this amphibious force is referred to as an ARG-MEU. The Navy’s amphibious ships are part of its surface force. An ARG consists of a minimum of three amphibious ships, typically an amphibious assault ship, an amphibious transport dock ship, and an amphibious dock landing ship. Figure 1 shows the current number of amphibious ships by class and a description of their capabilities. The primary function of amphibious ships is to provide transport to Marines and their equipment and supplies. The ARG includes an amphibious squadron that is comprised of a squadron staff, tactical air control squadron detachment, and fleet surgical team. This task organization also includes a naval support element that is comprised of a helicopter squadron for search and rescue and antisurface warfare, two landing craft detachments for cargo lift, and a beachmaster unit detachment to control beach traffic. An MEU consists of around 2,000 Marines, their aircraft, their landing craft, their combat equipment, and about 15 days’ worth of supplies. The MEU includes a standing command element; a ground element consisting of a battalion landing team; an aviation element consisting of a composite aviation squadron of multiple types of aircraft; and a logistics element consisting of a combat logistics battalion. Figure 2 provides an overview of the components of a standard ARG-MEU. An amphibious force can be scaled to include a larger amphibious task force, such as an Expeditionary Strike Group, and a larger landing force, such as a Marine Expeditionary Brigade or Marine Expeditionary Force (MEF) for larger operations. A Marine Expeditionary Brigade is comprised of 3,000 to 20,000 personnel and is organized to respond to a full range of crises, such as forcible entry and humanitarian assistance. A MEF is the largest standing Marine Air-Ground Task Force and the principal Marine Corps warfighting organization. Each MEF consists of 20,000 to 90,000 Marines. MEFs are used in major theater war and other missions across the range of military operations. There are three standing MEFs—I MEF at Camp Pendleton, California; II MEF at Camp Lejeune, North Carolina; and III MEF in Okinawa, Japan. Navy ships train to a list of mission-essential tasks that are assigned based on the ship’s required operational capabilities and projected operational environments. Most surface combatants, including cruisers, destroyers, and all amphibious ships, have mission-essential tasks related to amphibious operations. The Navy uses a phased approach to training, known as the Fleet Response Training Plan. The training plan for amphibious ships is broken up into five phases: maintenance, basic, advanced, integrated, and sustainment. The maintenance phase is focused on the completion of ship maintenance, with a secondary focus on individual and team training. The basic phase focuses on development of core capabilities and skills through the completion of basic-level inspections, assessments, and training requirements, among other things. This phase can include certification in areas such as mobility, communications, amphibious well-deck operations, aviation operations, and warfare training. The basic phase of training requires limited Marine Corps involvement—mainly to certify amphibious ships for well-deck and flight-deck operations. The advanced phase focuses on advanced tactical training, including amphibious planning. The integrated phase is where individual units and staffs are aggregated into an Amphibious Ready Group (ARG) and train with an embarked MEU or other combat units. The sustainment phase includes training to sustain core skills and provides an additional opportunity for training with Marine Corps units, when possible. Marine Corps units train to accomplish a set of mission-essential tasks for the designed capabilities of the unit. For example, the mission-essential tasks for a Marine Corps infantry battalion include amphibious operations, offensive operations, defensive operations, and stability operations. Many Marine Corps units within the command, aviation, ground, and logistics elements have an amphibious-related mission-essential task. The Marine Corps uses a building-block approach to accomplish training, progressing from individual through collective training. For example, an assault amphibian vehicle battalion will progress through foundational, individual, and basic amphibious training—such as waterborne movement and ship familiarization—to advanced amphibious training, such as live training involving ship-to-shore movement conducted under realistic conditions. Marine Corps unit commanders use Training and Readiness manuals to help develop their training plans. Training and Readiness manuals describe the training events, frequency of training required to sustain skills, and the conditions and standards that a unit must accomplish to be certified in a mission-essential task. To be certified in the mission- essential task of amphibious operations, Marine Corps units must train to a standard that may require the use of amphibious ships. For example, ground units with amphibious-related mission-essential tasks will not be certified until live training involving sea-based operations and ship-to- shore movement has been conducted under realistic conditions. Similarly, for aviation squadrons, training for amphibious operations (called sea- based aviation operations) will not be certified until live training involving sea-based operations has been conducted under realistic conditions, including aviation operations from an amphibious platform. Similar types of units, such as all infantry battalions, may train on the same mission- essential tasks. However, unit commanders are ultimately responsible for their units’ training, and a variety of factors can lead commanders to adopt different approaches to training, such as the units’ assigned missions or deployment locations. Marine Corps units that are scheduled to deploy as part of an ARG-MEU will follow a standardized 6-month predeployment training program that gradually builds collective skill sets over three phases, as depicted in figure 3. The Marine Corps’ use of virtual training devices has increased over time. Virtual training devices were first incorporated into training for the aviation community, which has used simulators for more than half a century. The Marine Corps’ ground units did not begin using simulators and simulations until later. Specifically, until the 1980s, training in the ground community was primarily live training. Further advances in technology resulted in the acquisition of simulators and simulations with additional capabilities designed to help individual Marines and units acquire and refine skills through more concentrated and repetitive training. For example, the Marine Corps began using devices that allowed individual Marines to conduct training in basic and advanced marksmanship and weapons employment tactics. More recently, during operations in Iraq and Afghanistan, the Marine Corps introduced a number of new virtual training devices to prepare Marines for conditions on the ground and for emerging threats. For example, to provide initial and sustainment driver training, the Marine Corps began using simulators that can be reconfigured to replicate a variety of vehicles. In addition, in response to an increase in vehicle rollovers, the Marine Corps began using egress trainers to train Marines to safely evacuate their vehicles. The Marine Corps has also developed virtual training devices that can be used to train Marines in collective training, such as amphibious operations. For example, the Marine Air-Ground Task Force Tactical Warfare Simulation is a constructive simulation that provides training on planning and tactical decision making for the Marine Corps’ command element. See figure 4 for a description of examples of Marine Corps devices that can be used for individual through collective training. Navy and Marine Corps units that are deploying as part of an ARG-MEU completed their required training for amphibious operations, but several factors have limited the ability of Marine Corps units to conduct training for other amphibious operations–related priorities. The Navy and Marine Corps have taken steps to identify and address amphibious training shortfalls, but their efforts to mitigate these shortfalls have not prioritized available training resources, systematically evaluated among potential training resource alternatives to accomplish the services’ amphibious operations training priorities, or monitored progress toward achieving the priorities. Navy and Marine Corps units deploying as part of ARG-MEUs have completed required training for amphibious operations, but the Marine Corps has been unable to consistently accomplish training for other service amphibious operations priorities. We found that Navy amphibious ships have completed training for amphibious operations. Specifically, based on our review of deployment certification messages from 2014 through 2016, we found that each deploying Navy ARG completed training for the amphibious operations mission in accordance with training standards. Similarly, we found that each MEU completed all of its mission-essential tasks that are required during the predeployment training program. These mission-essential tasks cover areas such as amphibious raid, amphibious assault, and noncombatant evacuation operations, among other operations. However, while the Marine Corps has completed amphibious operations training for the MEU, based on our review of unit-level readiness data from fiscal year 2014 through 2016 we found that the service has been unable to fully accomplish training for its other amphibious operations priorities, which include home-station unit training to support contingency requirements, service-level exercises, and experimentation and concept development for amphibious operations. Specific details of these shortfalls were omitted because the information is classified. Additionally, Marine Corps officials cited shortfalls in their ability to conduct service-level exercises that train individuals and units on amphibious operations-related skills, as well as provide opportunities to conduct experimentation and concept development for amphibious operations. In particular, officials responsible for planning and executing these exercises told us that one of the biggest challenges is aligning enough training resources, such as amphibious ships, to accurately replicate a large-scale amphibious operation. For example, officials from III MEF told us that the large-scale amphibious exercise Ssang Yong is planned to be conducted every other year, but that the exercise requires the availability and alignment of two ARG-MEUs in order to have enough forces to conduct the exercise. These officials stated that this alignment may only happen every 3 years, instead of every other year, as planned. In addition, officials from I MEF and II MEF told us that their large-scale amphibious exercises are intended to be a Marine Expeditionary Brigade–level training exercise, however, these exercises are typically only able to include enough amphibious ships to support a MEU, while the other forces must be simulated. Despite these limitations, Navy and Marine Corps officials have identified these service-level exercises as a critical training venue to support training for the Marine Expeditionary Brigade command element and to rebuild the capability to command and control forces participating in amphibious operations. Based on our analysis of interviews with 23 Marine Corps units, we found that all 23 units cited the lack of available amphibious ships as the primary factor limiting training for home-station units. The Navy’s fleet of amphibious ships has declined by half in the last 25 years, from 62 in 1990 to 31 today, with current shipbuilding plans calling for four additional amphibious ships to be added by fiscal year 2024, increasing the total number of amphibious ships to 35 (see fig. 5). Navy and Marine Corps officials noted a number of issues that can affect the amount of training time that is available with the current amphibious fleet. In particular, the current fleet of ships is in a continuous cycle of maintenance, ARG-MEU predeployment training, and sustainment periods, leaving little additional time for training with home-station units and participation in service-level exercises. Navy officials told us that the Optimized Fleet Response Plan may provide additional training opportunities for Marine Corps units during the amphibious ships’ sustainment periods. Given the availability of the current inventory of amphibious ships, Marine Corps requests to the Navy for amphibious ships and other craft have been difficult to fulfill. For example, data from I MEF showed that the Navy was unable to fulfill 293 of 314 (93 percent) of I MEF requests for Navy ship support for training in fiscal year 2016. Similarly, data from II MEF showed that in fiscal year 2016 the Navy was unable to fulfill 19 of 40 requests for ship services. We identified issues with the completeness of this request data. Specifically, we found that the data may not fully capture the Marine Corps’ demand for amphibious ships. As a result, this information may overstate the ability of the Navy to fulfill these requests. We discuss these data-reliability issues further below. Marine Corps officials from the 23 units we interviewed also cited other factors that limit opportunities for amphibious operations training, such as the following: Access to range space: Seventeen of 23 Marine Corps units we interviewed identified access to range space as a factor that can limit their ability to conduct amphibious operations training. Unit officials told us that priority for training resources, including range access, is given to units that will be part of a MEU deployment, leaving little range time available for other units. In addition, unit officials told us that the amount of range space available can affect the scope and realism of the training that they are able to conduct. Training for amphibious operations can require a large amount of range space, because the operational area extends from the offshore waters onto the landing beach and further inland. A complete range capability requires maneuver space, tactical approaches, and air routes that allow for maneuverability and evasive actions. However, officials from II MEF told us that the size of the landing beach near Camp Lejeune, North Carolina makes conducting beach-clearing operations infeasible. Adequate ranges have been identified as a challenge across DOD. For example, according to DOD’s 2016 Report to Congress on Sustainable Ranges, some Marine Corps installations lack fully developed maneuver corridors, training areas, and airspace to adequately support ground and air maneuver inland from landing beaches. Maintenance delays, bad weather, and transit time: Ten of 23 Marine Corps units told us that changes to an amphibious ship’s schedule resulting from maintenance overruns or bad weather can also reduce the time available for a ship to be used for training. In addition, the transit time a ship needs to reach Marine Corps units can further reduce the time available for training. This is a particular challenge for II MEF units stationed in North Carolina and South Carolina that train with amphibious ships stationed in Virginia and Florida. According to II MEF officials, transit time to Marine Corps units can take up to 18 hours in good weather, using up almost a full day of available training time for transit. High pace of deployments: Five of 23 Marine Corps units told us that the high pace of deployments and need to prepare for upcoming deployments limited their opportunity to conduct training for amphibious operations. For example, II MEF officials told us that an infantry battalion that is scheduled to deploy as part of a Special Purpose Marine Air-Ground Task Force to Africa generally does not embark on an amphibious ship or have amphibious operations as part of its assigned missions. As a result, the unit will likely not conduct amphibious operations during its predeployment training. The Navy and Marine Corps have taken some steps to mitigate the training shortfall for their amphibious operations priorities, but these efforts are incomplete because they have not prioritized available training resources, systematically evaluated among potential training resource alternatives to accomplish the services’ amphibious operations training priorities, or monitored progress toward achieving the priorities. The Navy and Marine Corps are in the process of identifying (1) the amount of amphibious operations capabilities and capacity that are needed to achieve the services’ wartime requirements, and (2) the training resources and funding required to meet the amphibious operations- related training priorities. First, in December 2016, the Navy conducted a force structure assessment that established a need for a fleet of 38 amphibious ships. Based on the assessment, the Chief of Naval Operations and the Commandant of the Marine Corps determined that increasing the Navy’s amphibious fleet from a 31-ship to a 38-ship amphibious fleet would allow the Marine Corps to meet its wartime needs of having enough combined capacity to transport two Marine Expeditionary Brigades. Specifically, a 38-ship fleet would provide 17 amphibious ships for each Marine Expeditionary Brigade, plus four additional ships to account for ships that are unavailable due to maintenance. According to Navy and Marine Corps officials, an increase in the number of amphibious ships should create additional opportunities for the Navy and Marine Corps to accomplish amphibious operations training. Second, the Marine Corps has also recognized a need to improve the capacity and experience of its forces to conduct amphibious operations and is taking steps to identify the training resources and funding required to meet its amphibious operations–related training priorities. To accomplish this task, in 2016 the Marine Corps initiated the Amphibious Operations Training Requirements review. As a part of this review, the Marine Corps has comprehensively determined units that require amphibious operations training and is in the process of refining the training and readiness manuals for each type of Marine Corps unit to include an amphibious-related mission-essential task as appropriate, and better emphasizing the types of conditions and standards for amphibious training in the manuals. According to officials, as of May 2017, Marine Corps Forces Command has reviewed the mission-essential tasks for 60 unit types and found 31 unit types already had a mission-essential task for amphibious operations, while another 5 unit types required that an amphibious-related mission-essential task be added. The review further found that the other 24 unit types do not require a mission-essential task for amphibious operations. In addition, the Marine Corps Training and Education Command noted in its review that certain training standards within the training manuals are being refined in order to distinguish between levels of training accomplished. For example, for ground-based units, such as infantry battalions, an additional training standard was added for all amphibious-related mission-essential tasks that a unit would not be considered both trained and certified unless live training using amphibious ships has been conducted under realistic conditions. The Amphibious Operations Training Requirements review is also intended to accomplish other actions to better define the services’ amphibious operations training priorities, but these actions were incomplete at the time of our review. Specifically, the review will also establish an objective for the number of Marine Corps forces that must be trained and ready to conduct amphibious operations at a given point in time, and the amount of funding for ship steaming days that is required to provide training for the services’ amphibious operations priorities. According to officials responsible for the Amphibious Operations Training Requirements review, an outcome of the review is expected to be a combined Navy and Marine Corps directive signed by the Chief of Naval Operations and the Commandant of the Marine Corps that should provide guidance to better define a naval objective for amphibious readiness and required ship steaming days. Marine Corps officials estimated that the issuance of the directive will be in the summer of 2017. With these two efforts, the Navy and Marine Corps have been proactive in identifying the underlying problems with training for amphibious operations, and their ongoing efforts indicate that addressing this training shortfall is a key priority for the two services. In particular, the proposed Navy and Marine Corps directive that will result from the Amphibious Operation Training Requirements review should help establish a naval objective for amphibious readiness with the corresponding units that need to be trained and ready in amphibious operations, as well as a basis for estimating the required amount of training resources, such as ship steaming days, to meet amphibious operations training priorities. When completed, the development of this directive is an important first step to clearly identify the total resources needed for amphibious operations training. However, the Navy’s and Marine Corps’ current approach for amphibious operations training does not incorporate strategic training and leading risk-management practices. Specifically, we found the following: The Marine Corps does not prioritize all available training resources: Based on our prior work on strategic training, we found that agencies need to align their training processes and available resources to support outcomes related to the agency’s missions and goals, and that those resources should be prioritized so that the most- important training needs are addressed first. For certain units that are scheduled to deploy as part of an ARG-MEU, the Navy and Marine Corps have a formal training program that specifies the timing and resource needs across all phases of the training, including the number of days embarked on amphibious ships that the Navy and Marine Corps need to complete their training events. Officials stated that available training resources, including access to amphibious ships for training, are prioritized for these units. However, for other Marine Corps units not scheduled for a MEU deployment, officials described an ad hoc process to allocate any remaining availabilities of amphibious ship training time among home- station units. Specifically, officials stated that the current process identifies units that are available for training when an amphibious ship becomes available rather than a process that aligns the next highest- priority units with available training resources. For example, officials at Headquarters Marine Corps told us that the Navy will identify training opportunities with amphibious ships at quarterly scheduling conferences. The Marine Corps will fill these training opportunities with units that are available to accomplish training during that period, but not based on a process that identifies its highest-priority home- station units for training. Similarly, a senior officer with First Marine Division told us that he would prioritize home-station units that have gone the longest without conducting amphibious-related training, which may not be the units with the highest priority for amphibious operations training. The Navy and Marine Corps have recognized the need for reinstituting a recurring training program for home-station units, but efforts to implement such a program have not been started at the time of our review. According to Navy officials, the Navy and Marine Corps have had a recurring training program in the past to provide home- station units with amphibious operations training called the Type Commander Amphibious Training series, or TCAT, but this program was phased out 15 years ago with the implementation of the Fleet Response Training Plan that is more focused on ARG-MEU training. Navy and Marine Corps officials told us that reinstituting a similar training program would allow the services to better prioritize training resources and align units to achieve the services’ proposed naval objective for amphibious readiness. Without establishing a process to prioritize available training resources for home-station units, the Navy and Marine Corps cannot be certain that scarce training opportunities are being aligned with their highest-priority needs. The Navy and Marine Corps do not systematically evaluate a full range of training resource alternatives to achieve amphibious operations training priorities: Our prior work on risk management has found that evaluating and selecting alternatives are critical steps for addressing operational capability gaps. Based on our interviews with officials across the Marine Expeditionary Forces and review of documentation, we identified a number of alternatives that could help mitigate the risk to the services’ amphibious capability due to limited training opportunities. These alternatives include utilizing additional training opportunities during an amphibious ship’s basic phase of training; using alternative platforms for training, such as Marine Prepositioning Force ships, or the amphibious ships of allies; utilizing smaller Navy craft or pier-side ships to meet training requirements; and leveraging developmental and operational test events. However, the Navy and Marine Corps have not developed a systematic approach to explore and incorporate selected training resource alternatives into home-station training plans. Specifically, officials told us that the combined Navy and Marine Corps directive that is expected to be completed later this year will better define a naval objective for amphibious readiness and the required training resources to achieve it, and will provide guidance to the two services to better identify training resource alternatives for home-station training. Based on our review of briefing materials on the Amphibious Operations Training Requirements review, however, we found that the services have discussed using some training resource alternatives to mitigate amphibious operations training shortfalls, such as pier-side ships to minimize the required number of ship steaming days, but the services have not systematically evaluated potential alternatives. Marine Corps officials told us that fully evaluating resource alternatives, particularly the use of simulated training and pier-side ships, could allow for more amphibious training without the need for additional steaming days. Fully exploring alternatives, such as utilizing alterative platforms and pier-side ships, and incorporating a broader range of training resource alternatives into training will be important as the Navy and Marine Corps try to achieve their training priorities and could help bridge the time gap until more amphibious ships are introduced into the fleet. The Navy and Marine Corps have not developed a process or set of metrics to monitor progress toward achieving its amphibious operations training priorities and mitigating existing shortfalls: Our prior work on risk management has found that monitoring the progress made and results achieved are other critical steps for addressing operational capability gaps. Marine Corps officials told us that the service uses the readiness reporting system (Defense Readiness Reporting System—Marine Corps) to measure the capabilities and capacity of its units to perform amphibious operations. While this reporting system allows the Marine Corps to assess the current readiness of units to perform the amphibious operations mission-essential task—an important measure—the system does not provide other information. For example, it does not allow officials to assess the status of service-wide progress in achieving its amphibious operations priorities or monitor efforts by the Marine Expeditionary Forces in establishing comprehensive amphibious operations training programs. Marine Corps officials told us that they may need to capture and track additional information, such as the number of amphibious training events scheduled and completed. However, as noted above, we found that the Marine Corps does not capture complete data that could be used for these assessments, such as demand for training time with amphibious ships. For example, officials from I MEF told us they do not capture the full demand for training time with Navy ships because unit commanders will not always submit a request that they believe is unlikely to be filled. In addition, these officials stated that their requests are prescreened before being submitted to the Navy to ensure that the requests align with known periods of available ship time. As a result, requests for amphibious ships and crafts are supply- driven, instead of demand-driven, which could affect the services’ ability to monitor progress in accomplishing unit training because an underlying metric is incomplete. Establishing a process to monitor progress in achieving amphibious operations training priorities will better enable the Navy and Marine Corps to ensure that their efforts are accomplishing the intended results and help assess the extent to which the services have mitigated any amphibious operations training shortfalls. The Navy and Marine Corps have taken some steps to improve coordination between the two services, but the services have not fully incorporated leading collaboration practices that would help drive efforts to improve naval integration for amphibious operations. Our prior work on interagency collaboration has found that certain practices can help enhance and sustain collaboration among federal agencies. These key practices include (1) defining and articulating a common outcome; (2) establishing mutually reinforcing or joint strategies; (3) identifying and addressing needs by leveraging resources; (4) agreeing on roles and responsibilities; (5) establishing compatible policies, procedures, systems, and other means to operate across agency boundaries; (6) developing mechanisms to monitor, evaluate, and report on results; and (7) reinforcing agency accountability for collaborative efforts through plans and reports, among others. Common outcomes and joint strategy: The Navy and Marine Corps have issued strategic documents that discuss the importance of improving naval integration, but the services have not developed a joint strategy that defines and articulates common outcomes to achieve naval integration. We have found that collaborative efforts require agency staff working across agency lines to define and articulate the common outcome or purpose they are seeking to achieve that is consistent with their respective agency goals and mission. In addition, collaborating agencies need to develop strategies that work in concert with those of their partners. These strategies can help in aligning the partner agencies’ activities, processes, and resources to accomplish common outcomes. Further, joint strategies can benefit from establishing specific objectives, related actions, and subtasks with measurable outcomes, target audiences, and agency leads. Based on our review of Navy and Marine Corps strategic-level documents, both services identify the importance of improving naval integration, but these documents do not define and articulate outcomes that are common among the services or identify actions and time frames to achieve common outcomes that would be included a joint strategy. Instead, the documents describe naval integration in varying ways, including as a means to improve the capabilities of naval forces to perform essential functions, such as sea control and maritime security; exercise command and control for large-scale operations, including amphibious operations; and establish concepts to conduct naval operations in contested environments, among other areas. For example, strategic documents developed by the Navy only broadly discuss naval integration. In March 2015, the Department of the Navy issued an updated version of A Cooperative Strategy for 21st Century Seapower. This document discusses building the future naval force, including the need to organize and equip the Marine Expeditionary Brigade to exercise command and control of joint and multinational task forces for larger operations and enable the MEF for larger operations. In January 2016, the Department of the Navy published A Design for Maintaining Maritime Superiority, stating the need to deepen operational relationships with other services to include current and future planning, concept and capability development, and assessment. Marine Corps strategic documents provide a more-detailed and expansive list of areas for improved integration with the Navy, but do not provide guidance on how to achieve those areas. For example, in March 2014, the Marine Corps issued Expeditionary Force 21, which describes the need to increase naval integration, including operational integration between the Marine Expeditionary Brigade and the Navy’s Expeditionary Strike Group. Further, in September 2016 the Marine Corps issued a Marine Corps Operating Concept that establishes five tasks needed for the Marine Corps to build its future force, including integrating the naval force to fight at and from the sea. According to Navy and Marine Corps officials, naval integration is a broad term, has different meanings across various service organizations, and is not commonly understood. For example, officials told us that the services have identified the need to develop more-precise language around the term naval integration and articulate common outcomes to create a more- integrated approach to develop naval capabilities. Another senior Marine Corps training official told us that clear guidance is needed on how to define outcomes for naval integration for Navy and Marine Corps command-level staff. In particular, the official stated that without guidance it is unclear how an integrated staff should be composed—whether as two separate Navy and Marine Corps command staffs that should work together, or as one staff composed of both Navy and Marine Corps personnel. The continuing lack of common outcomes and a joint strategy could limit the Navy and Marine Corps ability to achieve their goals for naval integration. Further, joint strategies for improving naval integration could help ensure that services efforts are aligned to maximize available training opportunities and resources. Compatible policies, procedures, and systems: The Navy and Marine Corps have established several mechanisms to better coordinate their respective capabilities for amphibious operations training, but have not fully established compatible policies, procedures, and systems to foster and build naval integration. We have found that agencies need to address the compatibility of standards, policies, procedures, and data systems that will be used in the collaborative effort. These policies can be used to provide clarity about roles and responsibilities, including how the collaborative effort will be led. The Marine Corps has established a working group that provides a forum for collaboration for amphibious operations. Specifically, Marine Corps Forces Command established a Maritime Working Group to develop and manage a continuing Navy–Marine Corps quarterly collaborative process that is comprised of officials from the services’ headquarters, components, and operating forces. According to its mission statement, the Maritime Working Group is intended to align naval amphibious exercise planning to inform force development, war games, experimentation, and coalition participation in order to advance concepts; influence doctrine; inform naval exercise design and sourcing; inform capabilities development; and increase naval warfighting readiness. Based on our observation of the Maritime Working Group in September 2016, we found that the forum covered a broad range of topics including exercise prioritization, experimentation, and planning for future Navy exercises. Following the meeting, a summary of the topics discussed was provided to all participants as well as follow-on actions to be completed. However, we found that the Navy and Marine Corps have not fully established compatible policies and procedures, such as common training tasks and standards and agreed-upon roles and responsibilities, to ensure their efforts to achieve improved naval integration are consistent and sustained. For example, on the West Coast, the Navy and Marine Corps organizations 3rd Fleet and I MEF have issued guidance that formalizes policies that assign 1st Marine Expeditionary Brigade and Expeditionary Strike Group 3 with the responsibilities to conduct joint training. This guidance addresses the importance of Navy and Marine Corps interoperability by formalizing procedures, assigning responsibility, and providing general policy regarding training certification standards for these units. Officials from Fleet Forces Command noted that there is not similar guidance for East Coast–based units for the 2nd Marine Expeditionary Brigade and Expeditionary Strike Group 2. According to a Navy inspection report, Fleet Forces Command officials stated that they did not institute a deployment certification program for Expeditionary Strike Group 2 because of changing priorities at the command. As a result, the services lack clarity on the roles and responsibilities for these organizations—another key collaboration practice—that is needed to ensure these improvements are prioritized to further and sustain the collaborative effort. Both the Navy and Marine Corps have also identified areas where more- compatible training is needed to improve the skills and abilities of naval forces to perform certain missions. For example, Marine Corps training guidance from III MEF identifies a number of areas where Marine Corps units could improve collective naval capabilities by expanding training with the Navy, including areas such as joint maneuver, seizure and defense of forward naval bases, and facilitating maritime maneuver, among others. The Marine Corps Operating Concept also identifies other areas where integration with the Navy should be enhanced, including for intelligence, surveillance, and reconnaissance; operating in a distributed or disaggregated environment; and employment of fifth-generation aviation, such as the F-35. However, the services have been limited in their efforts to improve naval integration in these areas because they have not established compatible training tasks and standards that would institutionalize Navy and Marine Corps unit-level training requirements. Marine Corps officials told us that without compatible training tasks and standards, there is not a mechanism to force continued integration between the services outside of forces deploying as part of an ARG-MEU to help develop integrated naval capabilities. We also found that some of the Navy and Marine Corps’ systems for managing and conducting integrated training are incompatible, leading to inefficiencies in the process to manage training events involving Navy and Marine Corps units. For example, the Marine Corps has developed a system called Playbook to help align Navy and Marine Corps resources for training exercises that have been scheduled through the Force Synchronization process. At the time of our review, the Marine Corps was in the process of inputting data for all of its scheduled training exercises, including experiments and war games, into the system in order to align training resources and capabilities to its highest priority exercises and help build a training and exercise plan through 2020. However, the Navy uses several other data systems to track and capture its training resource requirements, and these systems are incompatible with Playbook. The lack of interface requires the Marine Corps to manually input and reconcile Navy information into its system. This can cause certain inefficiencies in arranging training. For example, officials from III MEF told us that adjustments to the Navy’s maintenance schedule for amphibious ships are not always communicated in advance, which can create a misalignment in the availability of amphibious ships and Marine Corps units to conduct training exercises. The Marine Corps has identified the need to define the Navy’s use of Playbook and explore a potential interface with Navy systems, but, as of May 2017, officials said that any evaluation, including potential cost-benefit analyses for addressing the interoperability issues, had not yet taken place. By having incompatible systems to schedule training, the services remain at risk of missing opportunities to maximize training opportunities for amphibious operations. Leverage resources to maximize training opportunities: The Navy and Marine Corps have identified certain opportunities where the two services can better leverage resources to conduct additional amphibious operations training together, but these opportunities have not been fully maximized. We have found that collaborating agencies should look for opportunities to address needs by leveraging each other’s resources, thus obtaining additional benefits that would not be available if they were working separately. Marine Corps Forces Command and Fleet Forces Command, as well as Marine Corps Forces Pacific and Pacific Fleet, have each established a Campaign Plan for Amphibious Operations Training. The purpose of these plans is to align resources for larger, service-level exercises for amphibious operations over a 5-year period. The goal of these exercises is to develop operational proficiency for a Marine Expeditionary Brigade–level contingency or crisis, but the specific focus of the exercise can change from year to year. For example, in 2017 the Bold Alligator exercise will focus on joint forcible entry operations and anti-access / area denial, whereas in prior years the focus has been on other operational areas, such as crisis response. We found that the Navy and Marine Corps also use mechanisms, such as scheduling conferences, to coordinate and prioritize requests for ship services for these exercises, as well as for other training events. The services are looking to better leverage available training resources for amphibious operations, but enhancing their collaborative efforts could take greater advantage of potential training opportunities. For example, Navy officials have stated that the Surface Warfare Advanced Tactical Training initiative could provide an additional training opportunity for Marine Corps units to train with Navy ships. This initiative is intended to provide amphibious ships with a period of training focused on advanced tactical training, such as defense of the amphibious task force, and multiunit ship-to-shore movement, among other objectives. According to a Navy official responsible for the development of this initiative, its primary focus is on advanced tactical training for Navy personnel, but greater integration with the Marine Corps may be needed to accomplish certain training objectives, such as air defense. Further, it would provide an opportunity for the Marine Corps to achieve additional amphibious operations training. However, according to this official, the Marine Corps did not provide input into how its capabilities could be fully incorporated into the Navy’s advanced tactics training or identify potential opportunities to maximize amphibious operations training for both services. Further, the Marine Corps officials told us that there are opportunities to use transit time during Navy community-relations events, such as port visits, to conduct amphibious training for home-station units, but these events are not always identified with enough lead time to take full advantage of the training opportunity. According to officials at II MEF, Marine Corps units typically need at least 6 months of advance notice to align their forces and equipment for the potential training opportunity. Further, Marine Corps officials told us that the Navy does not always have a fully trained staff with the amphibious ship during these events, which can limit the comprehensiveness of the training that Marine Corps units are able to accomplish. These officials also stated that the flight deck or well deck may not be certified for use at the time of these community- relations events, further limiting their utility for Marine Corps training. Despite these limitations, Marine Corps officials have told us that these events can still provide training benefits, such as ship familiarization for Marines, but that these opportunities still require advanced notice. By improving coordination over its training resources, the services will be better positioned to take full advantage of these scarce training opportunities. Mechanisms to monitor results and reinforce accountability: The Navy and Marine Corps have processes to evaluate and report on the results of specific training exercises, but have not developed mechanisms to monitor, evaluate, and report on results nor jointly reinforced accountability for their naval integration efforts through agency plans and reports. We have found that agencies need to monitor and evaluate their efforts to enable them to identify areas for improvement and help decision makers obtain feedback for improving operational effectiveness. Further, agency plans and reports can reinforce accountability by aligning goals and strategies with the collaborative effort. For large-scale exercises, such as Bold Alligator, the Marine Corps conducts reviews that identify actions that should be sustained moving forward, as well as areas that should be improved in future exercises, including issues related to naval integration. However, the services have not established other processes or mechanisms to monitor, evaluate, and report on results that are needed to measure progress in achieving service-level goals for naval integration and to align efforts to maximize training opportunities for amphibious operations. For example, the Marine Corps does not have a process to monitor and report on results for the critical tasks identified in its Marine Corps Operating Concept, including those tasks related to naval integration, such as integrating command structures, developing concepts for littoral operations in a contested environment, and conducting expeditionary advanced base operations. Monitoring progress against these tasks, as well as common outcomes, once defined, should help the Navy and Marine Corps track progress toward achieving improved naval integration. While the Navy and Marine Corps have taken some steps to improve naval integration in recent years, these efforts are still in the early stages. In particular, Navy and Marine Corps officials stated that the services have not yet defined or articulated common outcomes needed to achieve naval integration because they have not determined who would be responsible for this effort or when to begin its development. Defining and articulating common outcomes for naval integration would allow the services to more effectively incorporate other leading collaboration practices aimed at those common outcomes, to the extent deemed appropriate, such as developing a joint strategy, establishing compatible policies, leveraging resources, and monitoring results. The Marine Corps has taken some steps to better integrate virtual training devices into its operational training. However, the Marine Corps’ process to manage the development and use of its virtual training devices in operational training plans has gaps. The Marine Corps has taken some steps to integrate virtual training devices into operational training and has other efforts under way. In 2013, we reported that the Marine Corps did not have information on the performance and cost of virtual training that would assist the service in assessing and comparing the benefits of virtual training as it sought to optimize the mix of live and virtual training to meet requirements and prioritize training investments. We also found that the Marine Corps had not developed overall metrics or indicators to measure how the use of virtual training devices had contributed to improving the effectiveness of training, or identified a methodology to identify the costs associated with using virtual training. We recommended that the Marine Corps develop outcome-oriented performance metrics for assessing the effect of virtual training on improving performance or proficiency and develop a methodology to identify the costs of virtual training in order to compare the costs of using live and virtual training. Further, in 2015 the Commandant of the Marine Corps issued guidance that stated the service will focus on better leveraging virtual training technology and that all types of Marine Corps forces should make extensive use of virtual training where appropriate. In response to our recommendations and the Commandant’s guidance, in 2015 the Marine Corps Training and Education Command created a Simulation Assessment Working Group with stakeholders from across the Marine Corps to identify training events that could be supported by virtual training devices and incorporate those devices into Training and Readiness manuals. The working group found that over 7,000 of the 12,000 training events reviewed could use a virtual training device to either fully or partially meet the training standard of that event. The group also identified 135 events that may only be performed using the virtual training device or must be performed with the device as a prerequisite to live training. Based on the results of the working group, Training and Education Command updated the corresponding unit-specific Training and Readiness manuals to identify where a training event could be completed using a virtual training device. While this action represents some progress toward better incorporating virtual training devices into operational training, our recommendations remain open because the Marine Corps’ efforts to develop specific outcome-oriented performance metrics to assess virtual training or a methodology to make more- informed comparisons between the costs of live and virtual training are not yet complete. According to a senior Training and Education Command official, the Marine Corps is working to update its training information management system to better capture this information. In 2015, the Marine Corps also issued a Concept of Operations (CONOPS) for the United States Marine Corps Live, Virtual, and Constructive – Training Environment (LVC-TE) (hereafter referred to as Concept of Operations) that is intended to describe the live, virtual, and constructive training environment based on operational requirements in sufficient detail to continue the development of this training capability. According to the Concept of Operations, the goal in implementing the live, virtual, and constructive training environment is to expand training opportunities, reduce training costs, improve safety, and maintain high levels of proficiency and readiness. The Concept of Operations estimates that the live, virtual, and constructive training environment will be implemented in 2022. Lastly, the Marine Corps has an ongoing effort to better inform users of the availability of virtual training devices that support ground-based units. Specifically, the Marine Corps Training and Education Command is developing a Ground Training Simulations Implementation Plan that is intended to provide a framework for the use of current and future virtual training devices for ground units. The Ground Training Simulations Implementation Plan is modeled after the processes used by the Marine Corps’ aviation community to integrate simulators into aviation training. The Marine Corps estimates that the plan will be finalized in the summer of 2017. According to a Training and Education Command official involved in the plan’s development, the plan will help address a challenge the Marine Corps has faced in educating commanders on the availability and capabilities of available virtual training devices. This challenge is consistent with information we gathered during our visit to selected Marine Corps installations. Officials at the two Battle Simulation Centers we visited, for example, told us that unit commanders do not always know what virtual training devices are available and how they can be used to meet training requirements. The Marine Corps process to manage the development and use of virtual training devices in operational training plans has gaps due to a lack of guidance. Specifically, the Marine Corps does not (1) include consideration of critical factors for integrating virtual training devices into operational training in its front-end planning to support the acquisition of its virtual training devices, (2) consistently consider expected and actual usage data for virtual training devices to support its investment decisions, or (3) consistently evaluate the effectiveness of its virtual training devices for operational training. The Marine Corps’ process for conducting front-end planning and analysis to support the acquisition of its virtual training devices does not include consideration of critical factors for integrating virtual training devices into operational training, such as the specific training tasks the device is intended to address, how the device would be used to meet proficiency goals, or available time for units to train with the device. DOD’s Strategic Plan for the Next Generation of Training for the Department of Defense states that the right mix of live, virtual, and constructive training capabilities will depend on training tasks and objectives, required proficiency, and available training time, among other factors. In addition, we have previously found that part of the front-end analysis process for training and development programs should include a determination of the skills and competencies in need of training and how training will build proficiency for those skills and competencies. Based on our analysis of the Marine Corps’ front-end planning documents (called system development documents) for the six virtual training devices included in our review, we found that documentation for five of the six devices did not include specific training tasks. In addition, the documentation for two devices specified that specific training tasks would be identified during the verification and validation phase, which is a type of analysis that typically takes place after the device has already been acquired, according to a senior Training and Education Command official. While the documentation for all of the devices included a high- level discussion of relevant mission areas, documentation for five out of six devices did not identify specific training tasks, such as specific training events in a unit’s Training and Readiness manual, that the device was intended to address. For example, documentation for the Combined Arms Command and Control Training Upgrade System includes a high-level discussion of mission areas that the device supports, such as force application, command and control, and battlespace awareness. It also states that the device is to support training events, but it does not specify what those events are. In addition, none of the system development documents we reviewed identified proficiency goals or considered available training time for the units to use the device. According to officials at Training and Education Command, many virtual training devices in the Marine Corps’ inventory were developed based on urgent needs to meet capability gaps identified by warfighters and were not based on training requirements. Of the six devices included in our review, three of the devices were acquired to meet urgent warfighter needs—the Family of Egress Trainers—Modular Amphibious Egress Trainer, the Operator Driver Simulator, and the Supporting Arms Virtual Trainer. However, the system development documents we reviewed for those three devices were completed after the devices had been fielded to meet the urgent needs, but still did not identify specific training tasks or proficiency goals, or consider available training time for the units to use the device. Moreover, the system development documents for two of the remaining three devices we reviewed did not contain this information. While the Marine Corps did not identify and assess these factors in the front-end planning process, the Marine Corps has begun taking steps to identify these factors through efforts such as the Simulation Assessment Working Group. However, these efforts are occurring after the devices have already been acquired and fielded, leading to decisions that have potential cost implications. For example, in its analysis, the Simulation Assessment Working Group did not fully consider alternative devices that could be used to achieve specific training tasks because its methodology was to identify the one virtual training device that was considered the “best in breed” simulator for conducting each training event rather than considering all devices that could be used for the event, including those that might be more cost-effective. Officials at II MEF told us that this methodology did not include an evaluation of the device’s cost compared to other devices that could achieve similar training outcomes. For example, these officials told us that the Supporting Arms Virtual Trainer was identified as a “best in breed” device for a number of training events, including calls for fire and close air support. However, these officials stated that the Deployable Virtual Training Environment device is a lower- cost alternative that could achieve similar outcomes for many of the training events that do not require the level of realism provided by the Supporting Arms Virtual Trainer. Based on information provided by Training and Education Command, the acquisition cost for the Supporting Arms Virtual Trainer is about $4.5 million per system while the acquisition cost for the Deployable Virtual Training Environment laptop is around $3,700 (see fig. 6). The Marine Corps’ front-end planning process to support the acquisition of virtual training devices has gaps because the service does not have specific policies to ensure the process considers key factors. Specifically, Navy and Marine Corps acquisition policies we reviewed do not require that front-end planning consider specific training tasks the device is intended to address, how the device would be used to meet proficiency goals, or available time for units to train with the device. Training and Education Command officials acknowledged the gaps in the Marine Corps’ process and stated that the front-end process for future device acquisitions would identify specific training tasks that a device will address. However, without guidance that specifically addresses these factors, the Marine Corps does not have a reasonable basis to ensure that it is acquiring the right number and type of virtual training devices to meet its operational training needs. The Marine Corps does not consistently consider expected and actual usage data for virtual training devices to support its investment decisions. Our prior work has found that agencies should establish measures that they can use in assessing training programs, such as expected training hours, which reflect the usage rates of the training program. However, the Marine Corps did not establish expected usage rates in its system development documents for five of the six virtual training devices included in our review, and a senior Training and Education Command official said it also has not established expected usage rates since acquiring the devices. For example, the system development document for the Supporting Arms Virtual Trainer stated that the usage of the device could replace up to 33 percent of the live-fire missions required to retain annual currency, but the document does not specify that units are expected to use the device to replace that high of a percentage of the live-fire missions. As a result, the Marine Corps does not have a baseline against which to assess actual usage of the device. Only the system development document for the Marine Air-Ground Task Force Tactical Warfare Simulation included usage targets, stating that usage is expected to be extensive and estimates that the device will be used for 700 hours per system per year. However, the system development documents for the other four devices we reviewed did not include any information on expected usage rates. Additionally, the Marine Corps has not consistently collected actual usage data for its virtual training devices, which could be used to inform continued investments in existing virtual training devices. During our review, a senior Marine Corps Training and Education Command official told us that Training and Education Command collects data for about two- thirds of the Marine Corps’ total inventory of virtual training devices, but usage data are not available for certain devices. More specifically, the Marine Corps provided usage data for three of the six devices that were included in our review, but it was unable to provide usage data for certain systems, such as the Marine Air-Ground Task Force Tactical Warfare Simulation and the Combined Arms Command and Control Training Upgrade System. This official stated that contractors collect data on these devices, but there is no Marine Corps’ system to collect data on the number of Marines or hours trained. Specifically, contractors submit spreadsheets on a monthly basis showing the number of Marines who have used the device, but these data are not included in any formal reports and there is no standard database for collecting or evaluating them. The Marine Corps has not considered actual usage data in its decision making for additional investments in certain virtual training devices, despite low usage rates for a number of those devices. For example, according to available contractor data, actual usage for the Operator Driver Simulator was significantly lower than the current available hours. Based on data provided by Training and Education Command, the Operator Driver Simulator was used for approximately 7,600 hours in fiscal year 2015 and 5,600 hours in fiscal year 2016, but was available for use for approximately 192,000 hours. However, based on the results of the Simulation Assessment Working Group, Training and Education Command estimated that to accomplish all training events linked to the Operator Driver Simulator would require about 570,000 available training hours. As a result, the Simulator Assessment Working Group recommended various investment options for the Operator Driver Simulator that ranged from $56 million to $121 million, despite the current low utilization and excess capacity. Officials from Training and Education Command told us that they anticipate an increase in user demand for the Operator Driver Simulator based on guidance from the Commandant of the Marine Corps to make driver certification more rigorous. However, officials from Marine Corps Systems Command stated that current Operator Driver Simulators have deficiencies in supporting driver training and, therefore, Marines choose to drive live vehicles instead. The Marine Corps has not considered expected and actual usage of its virtual training devices to support investment decisions due to a lack of guidance on establishing and collecting usage data. Marine Corps training guidance for ground units states that virtual training devices shall be used, as applicable, when constraints limit the use of realistic training conditions, but it does not identify the extent to which virtual training devices are expected to be used. Without guidance on setting usage- rate expectations and assessing actual usage, the Marine Corps risks sustained investment in virtual training devices that do not meet operational training needs. We also found that the Marine Corps was not consistently evaluating the effectiveness of its virtual training devices to accomplish operational training. Our prior work has shown that agencies need to develop processes that systematically plan for and evaluate the effectiveness of their training and development efforts. These evaluations should include data measures, both quantitative and qualitative, to assess training results in areas such as increased user proficiency. Further, evaluations of training effectiveness should be used to make decisions on whether resources should be reallocated or redirected. The Marine Corps uses the verification and validation report process as its primary assessment of a virtual training device after it has been fielded, according to the senior Training and Education Command official with whom we spoke. However, based on our review of postfielding analyses for the virtual training devices included in our review, we found that the Marine Corps does not have a consistent process for selecting devices for which to complete these analyses or how the analysis should be conducted. More specifically, we were provided with verification and validation reports for only three of the six devices in our review—the Supporting Arms Virtual Trainer, the Family of Egress Trainers—Modular Amphibious Egress Trainer, and the Operator Driver Simulator—as well as plans to complete these reports for two other devices. According to a senior Training and Education Command official, Training and Education Command considers certain factors to prioritize the completion of verification and validation reports, such as planned investments for major upgrades on a device. The official also stated that Training and Education Command prioritized completing reports for these virtual training devices to specifically align with recommendations made by the Simulation Assessment Working Group. However, the Simulation Assessment Working Group does not take place on a recurrent basis, and therefore the recommendations from the group do not establish a process for prioritizing future verification and validation reports. Officials from Marine Corps Systems Command told us that program managers are now trying to perform verification and validation reports for future acquisitions prior to full acceptance of the training systems, but that this step is not mandatory. Additionally, there is not a consistent process to include training effectiveness evaluations within the verification and validation report itself. The verification and validation process is not required to include an evaluation of effectiveness based on current guidance, but as noted in the verification and validation report for the Family of Egress Trainers— Modular Amphibious Egress Trainer, such an evaluation is essential to determine whether the capabilities of a virtual training device satisfy requirements to improve training performance and combat readiness. In two instances, the verification and validation reports for the Operator Driver Simulator and Family of Egress Trainers—Modular Amphibious Egress Trainer both included evaluations of the effectiveness of the devices in improving user proficiency, which concluded that the devices enabled Marines to successfully pass related training courses. In another instance, the Marine Corps did not conduct a training effectiveness analysis as part of the verification and validation process. Specifically, for the Supporting Arms Virtual Trainer, Marine Corps Systems Command attempted to conduct a training effectiveness evaluation, but training activity data for a statistically significant sampling of the target training audience were unavailable, which suggests the need for improved data on device usage. We further found that the training effectiveness evaluations that the Marine Corps did complete differed in how they were conducted, which can affect the quality of the information the evaluations provide. For example, the training effectiveness evaluation for the Operator Driver Simulator was conducted to determine whether the device effectively trained Marines to perform tasks required for one specific training and readiness event. The methodology included collecting training activity data from 1 fiscal year in one location and for one of the Operator Driver Simulator vehicle variants. The report noted that conducting a more- complete evaluation, along with additional data collection, would better identify opportunities to improve and enhance training. In contrast, the training effectiveness evaluation for the Family of Egress Trainers— Modular Amphibious Egress Trainer also collected training activity data, but collected data from multiple training sites and for all training courses conducted during the 1-year period used for the evaluation. According to officials from Marine Corps Systems Command, the effectiveness evaluation methods may vary based on the type of training being executed and how well the training requirements are defined. These officials stated that when the device’s training requirements have been more thoroughly defined, the effectiveness evaluation can be more targeted. The Navy and Marine Corps acquisition policy and guidance documents we reviewed do not establish a process to consistently evaluate the training effectiveness of virtual training devices, including identifying the devices to be evaluated and determining what data should be collected and assessed. According to a senior Training and Education Command official, evaluating effectiveness is not a required part of the verification and validation process and is an area that needs to be addressed. The Marine Corps’ Concept of Operations also identified a lack of guidance for conducting effectiveness analyses. Specifically, the Concept of Operations identifies a lack of policy guiding live, virtual, and constructive training capabilities and benefits. It also identifies a training gap on the linkages between live, virtual, and constructive training, as well as a policy gap around the lack of guidance on analysis of virtual training devices after they have been fielded. Without guidance establishing a well-defined process to consistently evaluate the effectiveness of virtual training devices for training—including the selection of devices, guidelines on conducting the analysis, and the data that should be collected and assessed—the Marine Corps risks investing in devices whose value to operational training is undetermined. The Navy and Marine Corps have identified the need to rebuild the capability to conduct amphibious operations and to reinvigorate naval integration between the services toward that end. However, the Navy and Marine Corps have not completed efforts needed to mitigate their training shortfalls for amphibious operations. Specifically, the services have not developed an approach to prioritize available training resources, systematically evaluate among training resource alternatives to achieve amphibious operations priorities, and monitor progress toward achieving them. Without such an approach, the services are not well positioned to mitigate existing amphibious operations training shortfalls and begin to rebuild their amphibious capability as the services await the arrival of additional amphibious ships into the fleet. In addition, while the Navy and Marine Corps have taken a number of positive steps to improve coordination between the two services, they need to define and articulate common outcomes for naval integration. This first critical step will enable them to fully incorporate other leading collaboration practices aimed at a common purpose, such as developing a joint strategy; more fully establishing compatible policies, procedures, and systems; better leveraging resources; and establishing mechanisms to monitor results that are needed to achieve service-level goals for naval integration and to align efforts to maximize training opportunities for amphibious operations. Further, the Marine Corps’ process to integrate virtual training devices into operational training has gaps. Developing guidance for the development and use of virtual training devices would help close these gaps, which is critical as virtual training will become increasingly important to the development of the capability of Marines, including the capability for conducting amphibious operations, among other mission areas. To better mitigate amphibious operations training shortfalls, we recommend the Secretary of Defense direct the Secretary of the Navy, in coordination with the Chief of Naval Operations and Commandant of the Marine Corps, to develop an approach, such as building upon the Amphibious Operations Training Requirements review, to prioritize available training resources, systematically evaluate among training resource alternatives to achieve amphibious operations priorities, and monitor progress toward achieving them. To achieve desired goals and align efforts to maximize training opportunities for amphibious operations, we recommend the Secretary of Defense direct the Secretary of the Navy, in coordination with the Chief of Naval Operations and Commandant of the Marine Corps, to clarify the organizations responsible and time frames to define and articulate common outcomes for naval integration, and use those outcomes to develop a joint strategy; more fully establish compatible policies, procedures, and systems; better leverage training resources; and establish mechanisms to monitor results. To more effectively and efficiently integrate virtual training devices into operational training, we recommend that the Secretary of Defense direct the Commandant of the Marine Corps to develop guidance for the development and use of virtual training devices that includes developing requirements for virtual training devices that consider and document training tasks and objectives, required proficiency, and available training time; setting target usage rates and collecting usage data; and conducting effectiveness analysis of virtual training devices that defines a consistent process for performing the analysis, including the selection of the devices to be evaluated, guidelines on conducting the analysis, and the data that should be collected and assessed. We provided a draft of the classified report to DOD for review and comment. The department’s comments on the classified report are reprinted in Appendix II. In its comments, DOD concurred with all three recommendations. DOD stated that it will review the status of actions the Navy and Marine Corps plan to take in response to all three recommendations within the next twelve months. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Office of the Under Secretary of Defense for Personnel and Readiness, the Secretary of the Navy, and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you have any questions about this report or need additional information, please contact me at (202) 512-5431 or russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. The objectives of this report are to determine the extent to which (1) the Navy and Marine Corps have completed training for amphibious operations priorities and taken steps to mitigate any training shortfalls, (2) the Navy’s and Marine Corps’ efforts to improve naval integration for amphibious operations incorporate leading collaborative practices, and (3) the Marine Corps has integrated selected virtual training devices into its operational training. This report is a public version of a classified report that we issued in August 2017. DOD deemed some of the information in our August report to be classified, which must be protected from loss, compromise, or inadvertent disclosure. Therefore, this report omits classified information on select Marine Corps units’ ability to complete training for amphibious operations. Although the information provided in this report is more limited, the report addresses the same objectives as the classified report and uses the same methodology. We focused our review on Navy and Marine Corps organizations and units that have a role in the development and execution of training requirements for amphibious operations. For the Navy, we focused on the training requirements and accomplished training for amphibious ships. For the Marine Corps, we focused on selected active-component units that have identified training requirement for amphibious operations, including Marine Expeditionary Units (MEU) and other units with a mission-essential task for amphibious operations. We selected a nongeneralizable sample of 23 Marine Corps units to speak with in order to interview geographically dispersed units under each Marine Expeditionary Force, as well as units across all elements of the Marine Air-Ground Task Force (i.e., command, ground combat, aviation combat, and logistics combat forces). See below for the list of 23 Marine Corps units. We focused on the Marine Corps’ integration of virtual training devices into operational training because the Navy does not have virtual training devices that simulate amphibious operations, including ship-to- shore movement, according to Navy officials. In addition, we focused on Marine Corps virtual training devices that are used to support the command and ground elements of the Marine Air-Ground Task Force. We selected a nongeneralizable sample of six virtual training devices based on the target training audience, applicability to amphibious operations training, location, and type of training events (individual or collective training) for which the devices are used. The devices included in our review are the Combined Arms Command and Control Training Upgrade System, Marine Air-Ground Task Force Tactical Warfare Simulation, Supporting Arms Virtual Trainer, Amphibious Assault Vehicle Turret Trainer, Family of Egress Trainers—Modular Amphibious Egress Trainer, and Operator Driver Simulator. To determine the extent to which the Navy and Marine Corps have completed training for amphibious operations priorities and taken steps to mitigate any training shortfalls, we analyzed deployment certification reports for all Amphibious Ready Group (ARG)—Marine Expeditionary Unit (MEU) deployments over the most-recent 3-year period. We also analyzed unit-level readiness data for all Marine Corps’ infantry battalions, assault amphibian vehicle battalions, Osprey tilt-rotor aircraft squadrons, and Marine Expeditionary Brigades over the most-recent 3- year period—from fiscal years 2014 through 2016—and compared those data against unit-level training requirements for amphibious operations. We analyzed 3 years of training data because training requirements for Marine Corps units are reviewed and updated on a 3-year cycle. We performed data-reliability procedures on the unit-level readiness data by comparing the data against related documentation and surveying knowledgeable officials on controls over reporting systems and determined that the data presented in our findings were sufficiently reliable for the purposes of this report. We interviewed Navy and Marine Corps officials to discuss any factors that limited their ability to conduct training for amphibious operations. We assessed the reliability of data on amphibious ship requests by speaking with knowledgeable officials and determined the data were sufficiently reliable for the purposes of presenting the number of actual requests submitted and fulfilled. In addition, we reviewed processes and initiatives established by the Navy and Marine Corps to identify and assess training shortfalls for amphibious operations, including the Marine Corps’ Amphibious Operations Training Requirements review, and evaluated these processes and initiatives against our prior work on strategic training and risk management. To determine the extent to which the Navy’s and Marine Corps’ efforts to improve naval integration for amphibious operations incorporate leading collaboration practices, we reviewed the Navy and Marine Corps documents, including A Cooperative Strategy for 21st Century Seapower and the Marine Corps Operating Concept, that discuss the goal of improving naval integration. We also reviewed mechanisms that have been established to coordinate training, including campaign plans for amphibious operations; observed a working group focused on amphibious operations; and interviewed officials with both services to discuss efforts to improve naval integration. We assessed the extent to which the Navy’s and Marine Corps’ efforts toward improving naval integration have followed leading practices for collaboration that we have identified in our prior work. Specifically, we have identified eight practices described in our prior work that can help enhance and sustain collaboration. We selected seven of the eight practices most relevant to issues we identified in our prior work on collaboration to assess the status of Navy and Marine Corps collaborative efforts to improve naval integration. Based on our analysis, we selected the following seven practices: define and articulate a common outcome; establish mutually reinforcing or joint strategies; identify and address needs by leveraging resources; agree on roles and responsibilities; establish compatible policies, procedures, and other means to operate across agency boundaries; develop mechanisms to monitor, evaluate, and report on results; and reinforce agency accountability for collaborative efforts through agency plans and reports. To determine the extent to which the Marine Corps has integrated selected virtual training devices into its operational training, we collected information on the development, usage, and evaluation of virtual training devices, and their integration into operational training plans. We reviewed documentation on actions the Marine Corps has taken to integrate its virtual training devices into operational training, including documentation on the Simulation Assessment Working Groups and the Ground Training Systems Plan. We reviewed DOD and Marine Corps acquisition policies and interviewed Marine Corps officials responsible for the acquisition and oversight of virtual training devices at Training and Education Command and Marine Corps Systems Command and officials responsible for management of the virtual training devices at the Battle Simulation Centers at Camp Lejeune, North Carolina, and Camp Pendleton, California. We reviewed acquisition documents for each of the selected devices, including Capability Production Documents and Capability Development Documents, and assessed the extent to which these documents included key information as identified in leading practices for managing strategic training and DOD’s Strategic Plan for the Next Generation of Training for the Department of Defense. We also reviewed documentation on the Marine Corps process to include expected and actual usage data for virtual training devices to support investment decisions. Further, we reviewed analyses conducted after the selected devices had been fielded through Verification and Validation Reports and evaluated the extent these documents assessed the effectiveness of the virtual training devices for improving user proficiency. The performance audit upon which this report is based was conducted from May 2016 to August 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate, evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with DOD from August 2017 to September 2017 to prepare this unclassified version of the original classified report for public release. This public version was also prepared in accordance with these standards. In addition to the contact name above, Matthew Ullengren, Assistant Director; Russell Bryan; William Carpluk; Ron La Due Lake; Joanne Landesman; Kelly Liptan; Shahrzad Nikoo; and Roxanna Sun made key contributions to this report.", "summary": "The Navy and Marine Corps have identified a need to improve their ability to conduct amphibious operations—an operation launched from the sea by an amphibious force. Senate and House reports accompanying bills for the National Defense Authorization Act for Fiscal Year 2017 included provisions for GAO to review Navy and Marine Corps training. This report examines the extent to which (1) the Navy and Marine Corps have completed training for amphibious operations priorities and taken steps to mitigate any training shortfalls, (2) these services' efforts to improve naval integration for amphibious operations incorporate leading collaboration practices, and (3) the Marine Corps has integrated selected virtual training devices into operational training. GAO analyzed training initiatives; interviewed a nongeneralizable sample of officials from 23 units that were selected based on their training plans; analyzed training completion data; and selected a nongeneralizable sample of six virtual training devices to review based on factors such as target audience. This is a public version of a classified report GAO issued in August 2017. Information that DOD deemed classified has been omitted. Navy and Marine Corps units that are deploying as part of an Amphibious Ready Group and Marine Expeditionary Unit (ARG-MEU) completed their required training for amphibious operations, but other Marine Corps units have been limited in their ability to conduct training for other amphibious operations–related priorities. GAO found that several factors, to include the decline in the fleet of the Navy's amphibious ships from 62 in 1990 to 31 today limited the ability of Marine Corps units to conduct training for other priorities, such as recurring training for home-station units (see figure). As a result, training completion for amphibious operations was low for some but not all Marine Corps units from fiscal years 2014 through 2016. The services have taken steps to address amphibious training shortfalls, such as more comprehensively determining units that require training. However, these efforts are incomplete because the services do not have an approach to prioritize available training resources, evaluate training resource alternatives, and monitor progress towards achieving priorities. Thus, the services are not well positioned to mitigate any training shortfalls. The Navy and Marine Corps have taken some steps to improve coordination between the two services, but have not fully incorporated leading collaboration practices to improve integration of the two services—naval integration—for amphibious operations. For example, the Navy and Marine Corps have not defined and articulated common outcomes for naval integration that would help them align efforts to maximize training opportunities for amphibious operations. The Marine Corps has taken steps to better integrate virtual training devices into operational training, but gaps remain in its process to develop and use them. GAO found that for selected virtual training devices, the Marine Corps did not conduct front-end analysis that considered key factors, such as the specific training tasks that a device would accomplish; consider device usage data to support its investment decisions; or evaluate the effectiveness of existing virtual training devices because of weaknesses in the service's guidance. As a result, the Marine Corps risks investing in devices that are not cost-effective and whose value to operational training is undetermined. GAO recommends that the Navy and Marine Corps develop an approach for amphibious operations training and define and articulate common outcomes for naval integration; and that the Marine Corps develop guidance for the development and use of its virtual training devices. The Department of Defense concurred.", "document_type": "gao"}
{"report": "The mission of IRS’s HCO includes providing “human capital strategies and tools for recruiting, hiring, developing, retaining, and transitioning a highly-skilled and high-performing workforce to support IRS mission accomplishments,” and developing and implementing “technology- enabled systems and processes to improve human capital planning and management and empower employees to achieve their potential.” HCO is headed by the Human Capital Officer who reports to the Deputy Commissioner for Operations Support and is to “provide executive leadership and direction in all matters relating to the Service’s employees, overseeing the design, development, and delivery of comprehensive, agency-wide human capital management and development programs that contribute to the Service’s vision and mission.” Worklife Benefits and Performance (WBP) and Employment, Talent and Security (ETS) are two subdivisions within HCO responsible for supporting many of IRS’s strategic human capital management activities. Among WBP’s responsibilities are: agency-wide strategic workforce planning; workforce planning consultation and support; OPM/Treasury/IRS workforce planning pilots, projects, and initiatives; IRS workforce data reporting; analyzing workforce projections; and attrition analysis. ETS is responsible for providing policies, products, and services that support business efforts to identify, recruit, hire, and advance a workforce with the competencies necessary to achieve current and future organizational performance goals. In particular, ETS “partners with business units to develop strategic hiring plans that drive the hiring decision by planning, executing and evaluating the type of position to be filled based on agency-wide workforce, attrition and workload needs.” Strategic human capital management, which includes workforce planning activities, is a persistent challenge across the federal government. We designated strategic human capital management across the government as a high-risk issue in 2001 because of the federal government’s long- standing lack of a consistent strategic approach to human capital management. In February 2011, we narrowed the focus of this high-risk issue to the need for agencies to close skills gaps in mission-critical occupations. Agencies can have skills gaps for different reasons: they may have an insufficient number of employees or their employees may not have the appropriate skills or abilities to accomplish mission-critical work. Moreover, current budget and long-term fiscal pressures, the changing nature of federal work, and a potential wave of employee retirements that could produce gaps in leadership and institutional knowledge threaten to aggravate the problems created by existing skills gaps. Mission-critical skills gaps both within federal agencies and across the federal workforce continue pose a high risk to the nation because they can impede the government from cost-effectively serving the public and achieving results. IRS’s budget declined by about $2.1 billion (15.7 percent) from fiscal years 2011 through 2018 (see figure 1). The President’s fiscal year 2019 budget request was $11.135 billion. This amount is less than the fiscal year 2000 level for IRS, after adjusting for inflation. IRS requested an additional $397 million to cover implementation expenses for Tax Cuts and Jobs Act over the next 2 years and received $320 million for implementation pending submission of a spending plan, which IRS provided in June 2018. We previously reported IRS would direct the majority of the money toward technological updates. The Tax Cuts and Jobs Act made a number of significant changes to the tax law affecting both individuals and corporations. For example, for individual taxpayers, for tax years 2018 through 2025, tax rates were lowered for nearly all income levels, personal exemptions were eliminated while the standard deduction was increased, and certain credits, such as the child tax credit, were expanded. To implement the changes, IRS must (1) interpret the law; (2) create or revise hundreds of tax forms, publications, and instructions; (3) publish guidance and additional materials; (4) reprogram return processing systems; and (5) hire additional staff and train its workforce to help taxpayers understand the law. IRS’s HCO estimated that the agency would need to hire and train new staff to fill approximately 1,100 positions requiring a variety of competencies, and provide additional training on tax law changes for current employees. HCO will be responsible for recruiting and hiring new employees with the needed skills. IRS has scaled back strategic workforce planning activities in recent years. Prior to 2011, IRS staff within its HCO or other dedicated program office conducted and coordinated agency-wide strategic workforce planning efforts. IRS officials told us that resource constraints and fewer staff with strategic workforce planning skills due to attrition since 2011 required HCO to largely abandon strategic workforce planning activities. Instead, HCO generally focused its efforts on completing HR transactions, such as retirements and benefits processing, meeting legal compliance activities, and facilitating hiring of seasonal employees. Since 2011, key human capital activities—such as developing an inventory of skills, identifying skills gaps, and attrition forecasting— became increasingly fragmented and shifted to the individual business divisions and program offices. IRS officials cited management familiarity of programmatic needs, challenges, processes, and culture as a benefit of workforce planning autonomy at business divisions and program offices. However, the officials told us these activities were often performed only to the extent those divisions had the time, resources, and top management interest. As a result, the quality of key human capital activities was uneven across the agency, if performed at all. In addition, HCO officials told us the lack of an agency-wide strategy and HCO authority to manage and coordinate strategic workforce planning efforts put the agency at greater risk for unnecessary duplication of effort in HR activities; development of redundant and generally noninteroperable systems used to maintain human capital information; and failure to effectively identify and retain personnel with critical skills and experience across the agency. IRS’s Information Technology (IT) is an example of an individual program office that has taken steps to address skills needs. IT developed a skills and competency inventory of its workforce. IRS officials told us maintaining and updating the inventory has been particularly helpful to informing IT hiring and training decisions, given the rapid nature of change in the technology industry and competition for top talent from the private sector. In June 2018, we found IRS had not fully implemented any of the key IT workforce planning practices we have previously identified. We recommended IRS should fully implement IT workforce planning practices, including (1) setting the strategic direction for workforce planning; (2) analyzing the workforce to identify skills gaps; (3) developing strategies and implementing activities to address skills gaps; and (4) monitoring and reporting on progress in addressing skills gaps. IRS agreed with our recommendation, but stated its efforts to address these issues were limited solely due to diversion of IT resources to implementation of the Tax Cuts and Jobs Act. We concluded that until the agency fully implemented these practices, it would continue to face challenges in assessing and addressing the gaps in knowledge and skills that are critical to the success of its key IT investments. A number of indicators led IRS to determine that continuing to make short-term, largely nonstrategic human capital decisions was unsustainable, according to IRS officials. For example, IRS has relatively high rates of employees eligible to retire. Nearly half of IRS’s Senior Executive Service (SES) is eligible to retire (see figure 2). Retirement eligibility rates among both SES and non-SES employees is not only greater than the rate at other federal agencies, but are also trending higher according to our analysis of OPM data. We have previously reported that the high rate of federal employees eligible for retirement creates both an opportunity and a challenge for agencies. If accompanied with appropriate strategic and workforce planning, it may create an opportunity for agencies to align their workforce with needed skills and leadership levels to meet their existing and evolving mission requirements. However, it means agencies will need succession planning efforts as well as effective sources and methods for recruiting and retaining candidates to avoid the loss of technical expertise in mission-critical skills. IRS is trying to mitigate the loss of institutional memory and meet its current obligations by re-employing recently retired employees (also known as re-employed annuitants). However, according to HCO officials, as of October 2018, the agency is struggling to bring recently retired employees back in part because many had taken other employment. HCO is focusing on other activities, such as contract staffing services, to meet workload demands. As we discuss later in this report, IRS is taking a number of actions to address staffing shortages, but the effectiveness of those efforts are not yet known. IRS’s FEVS results also indicate the agency is at risk of losing employees with critical skills. For example, IRS’s results for the Global Satisfaction Index—a measure generated by OPM that combines employees’ responses about satisfaction with their job, pay, the organization, and their willingness to recommend their organization as a good place to work—fell below the government-wide average in 2013. Relatedly, our analysis of fiscal year 2016 IRS exit survey results found 32 percent of separating employees indicated poor office morale strongly influenced their decision to leave. Though improving since 2015, IRS continued to lag behind the government-wide average as of 2017, the most recent year of data available at the time of this study (see figure 3). In 2016, IRS determined the agency needed to develop a strategic workforce plan and conduct related workforce planning activities to help mitigate the risks associated with fragmented human capital activities as discussed above, according to HCO officials. IRS provided authority to HCO to be the central coordinating body to lead that effort, hereafter referred to as the workforce planning initiative. In March 2018, IRS issued an update to its Internal Revenue Manual stating HCO’s responsibilities. For example, IRS provided HCO authority to: conduct strategic workforce planning annually that is aligned with Treasury’s mission, goals, and objectives; perform data analysis of the current and future workforce, identify gaps, and submit solutions that will enable the organization to meet its mission, goals, and objectives; ensure the existence and integration of human capital planning functions into the workforce planning process, including skills assessments, competency models, recruitment planning, training and development, and retention and succession planning; provide guidance and direction for IRS-wide workforce planning ensure the implementation of an agency-wide skills assessment and competency model framework; and communicate commitment for a consistent, repeatable, and systematic workforce planning process to enable improved and integrated management of human capital initiatives. The IRM also describes IRS’s workforce planning process, which includes a five-phase strategic workforce planning model that is intended to align with OPM’s workforce planning model (see figure 4). Implementing the strategic workforce planning model and conducting related initiative activities could help the agency ensure its human capital programs align with its mission, goals, and objectives through analysis, planning, investment, and measurement, as required in federal regulation. Furthermore, we determined elements of the initiative addressed key principles we have previously identified for effective workforce planning. For example, the model includes steps to analyze the workforce to determine the critical skills and competencies the agency needs to achieve current and future programmatic results, and to monitor and evaluate the agency’s progress toward its human capital goals. As a result, the initiative could position IRS to systematically identify the workforce needed for the future, develop strategies for identifying and closing skills gaps, and shape its workforce. However, IRS’s implementation of its workforce planning initiative has been delayed. Phase 1 (Enterprise Strategy and Planning) of the workforce planning initiative was underway as of the first quarter of fiscal year 2018, and IRS was scheduled to complete this phase by the second quarter of fiscal year 2018. IRS reports show the agency originally anticipated completing all five phases by June 2018. According to IRS officials, however, IRS now anticipates Phase 1 activities to resume after the opening of the 2020 tax filing season and, as of November 2018, could not estimate a completion date for any of the five phases. The workforce planning initiative has been delayed for three primary reasons, according to IRS documents and officials: 1. Redirection of resources to Tax Cuts and Jobs Act implementation. IRS granted extensions at the request of business divisions and commissioner-level organizations that needed to redirect resources to support the implementation of Tax Cuts and Jobs Act. To implement the 119 provisions of the Tax Cuts and Jobs Act, we reported that IRS would need to (1) interpret the law; (2) create or revise nearly 500 tax forms, publications, and instructions; (3) publish guidance and additional materials; (4) reprogram 140 interrelated return processing systems; (5) hire additional staff and train its workforce to help taxpayers understand the law and how it applies to them; and (6) conduct extensive taxpayer outreach. In addition to redirecting staff, IRS has used overtime and compensatory hours to complete necessary activities in time for the 2019 filing season. 2. Lack of workforce planning skills. As part of a Treasury pilot, IRS conducted a self-assessment of key competencies within HCO as well as within business division-based HR offices. The assessment found competency around workforce planning was among the lowest ranked skills within HCO. According to HCO officials, IRS lacks training and resources available to help its human capital staff develop competency in workforce planning. HCO officials told us they plan to leverage IRS’s Workforce Planning Council to develop strategic workforce planning skills. HCO officials told us the council has training designed to help the HR staff understand how to gather data, use technology, and perform other activities that contribute to IRS’s strategic workforce planning efforts. In addition to a lack of strategic workforce planning skills, a number of key HCO personnel with strategic workforce planning expertise have recently separated from IRS, according to HCO officials. 3. Information system deployment delay. Treasury is developing the Integrated Talent Management system (ITM). Treasury intends ITM to provide the agency with greater visibility of its total workforce, and help its bureaus, including IRS, with workforce planning activities such as succession planning and competency management. Treasury officials told us as of November 2018, ITM is still in development and its deployment has been delayed for a number of reasons, including the need for Treasury to complete system implementation plans and user guides, and address system administration issues at the bureaus. IRS HCO officials told us they opted to wait on ITM rather than moving forward with a number of Phase 2 (Workforce Analysis) activities. IRS HCO officials said they needed this, or a similar software tool, to ensure reliable data capture, make analysis more efficient, and help managers conduct routine updates of workforce planning efforts rather than static, one-time data calls. HCO also opted to wait for ITM to avoid potentially redundant reprogramming of existing systems. However, HCO officials noted that even when ITM is eventually deployed, IRS would need to train business divisions on its use, further lengthening the time needed before conducting Phase 2 activities. Treasury officials told us that ITM would complement rather than replace existing systems and processes. Our analysis of Treasury documents and interviews with Treasury and IRS HCO officials found it was unclear when an ITM module related to talent management and strategic workforce planning will be deployed and available for IRS’s use, the functions it will include, and how IRS’s existing systems and processes would be affected. As a result, IRS lacks the information needed to make staffing and technology decisions related to the workforce planning initiative, putting the initiative at risk of further delay. Treasury is required to conduct data-driven reviews via HRstat. HRStat is a strategic human capital performance evaluation process that identifies, measures, and analyzes human capital data to inform the impact of an agency’s human capital management on organizational results with the intent to improve human capital outcomes. HRstat is also a proven leadership strategy that can help agency officials monitor their progress towards addressing important human capital efforts, such as closing skills gaps. Treasury uses HRstat to monitor the progress of its bureaus in meeting their human capital goals, including IRS’s implementation of the workforce planning initiative. In preparation for the data-driven reviews, each bureau, including IRS, submits HRStat information to Treasury. Treasury and bureau officials discuss the results and make related strategic decisions during bi-monthly Human Capital Advisory Council meetings. Our review of IRS HRstat reports, however, found additional information is needed to more fully reflect the status of the workforce planning initiative and related challenges. For example: in the January, March, May and July 2018 HRstat submissions, IRS 1) reported a status of green (on schedule) for “Increased efforts for development of long-term IRS workforce staffing plan”, and 2) indicated under Key Issues/Challenges that completing the initiative was dependent on ITM deployment; in the July 2018 HRstat submission, IRS moved several milestones to future fiscal years, and identified ITM delays as a significant risk to the workforce planning initiative schedule; in the September 2018 HRstat submission, IRS reported the status of the workforce planning initiative was no longer on schedule. The report identified ITM delays as the cause, but did not include other reasons for the delay, specifically the redirection of resources to Tax Cuts and Jobs Act implementation and a lack of strategic workforce planning skills within HCO. Federal strategic human capital standards state agencies are to communicate in an open and transparent manner to facilitate cross- agency collaboration to achieve mission objectives. In addition, agency leaders should hold managers accountable for knowing the progress being made in achieving goals and, if progress is insufficient, understand why and having a plan for improvement. More complete HRStat information could help IRS and Treasury take fuller advantage of a key opportunity to discuss and address workforce planning initiative delays at Human Capital Advisory Council meetings. IRS full-time equivalents (FTE) have declined each year since 2011, and declines have been uneven across different mission areas (see figure 5). From fiscal years 2011 through 2017, IRS FTEs declined from 95,501 to an estimated 77,685, an 18.7 percent reduction. Our analysis of the President’s Budget data produced by OMB found the reductions have been most significant within IRS Enforcement, where staffing declined by 27 percent (fiscal years 2011 through 2017). In comparison, staff supporting Taxpayer Service activities declined by 8.2 percent, while staff within Operations Support declined by 12.7 percent (fiscal years 2011 through 2017.) IRS estimated FTEs would continue to decline across the three areas in fiscal year 2018. IRS attributed staffing declines primarily to a policy decision to strictly limit hiring. According to IRS, declining budgets over multiple years necessitated decisions for how to reduce and control labor and labor- related costs, which accounted for around 74 percent of its budget allocations in fiscal year 2017. One way IRS sought to control costs was its decision to implement the Exception Hiring Process beginning in fiscal year 2011. The process effectively froze replacement of employees lost to attrition in most program areas, placed limits on external (nonseasonal) hiring, added additional approval steps for new hires, and placed priority on acquiring information technology and cybersecurity staff, according to IRS officials. The Exception Hiring Process remains in place, but as we discuss later, has evolved over time because IRS has received supplemental funding and other priority areas have emerged. IRS also limited overtime and training as a means of controlling costs. Available staff was a key factor in decisions to scale back a number of program activities, most predominantly in enforcement, according to IRS officials. IRS officials told us that, unlike other areas where the agency is legally required to perform certain functions, the agency has flexibility to curtail many enforcement activities when attrition rates increase. Auditing tax returns, for example, is a critical part of IRS’s strategy to ensure tax compliance and address the tax gap, or the difference between taxes owed and those paid on time. Our analysis of IRS data shows the number of individual returns audited has declined each year between fiscal years 2011 through 2017, a 40 percent decline (see figure 6). Reduced audit rates were not limited to individual returns. IRS data show that audit rates of large corporations with assets $10 million or greater declined from 17.7 percent in fiscal year 2011 to 7.9 percent in fiscal year 2017. We have previously reported on other areas in which staffing declines affected IRS operations, including fewer nonfiler investigations, private letter rulings, elimination of a bankruptcy program, and increases in the time needed to close innocent spouse appeals. In addition, we have made recommendations to IRS to better target its limited enforcement resources so it can, for example, 1) maximize revenue yield of the income tax, and 2) more effectively audit large partnerships. IRS agreed with the recommendations and took some action to close them. As of October and July 2018, respectively, those recommendations have not been fully addressed. As previously discussed, IRS is in the initial stages of implementing a strategic workforce planning model, which could provide IRS with information needed to understand what critical skills and competencies are needed to meet its mission. However, according to IRS officials, the agency has not used such a framework in recent years, making it difficult to determine where skills gaps exist. Nonetheless, our analysis of Treasury documents, Enterprise Human Resources Integration data, and interviews with agency officials found IRS currently has skills gaps in key occupations. In fiscal year 2017, Treasury conducted a department-wide analysis of mission critical occupations (MCO) at risk of skills gaps. Treasury analyzed four factors to determine and rank MCOs at highest risk for skills gaps: 1) 2-year retention rate, 2) quit rate, 3) retirement rate, and 4) applicant quality. Analysis of these factors can help build the predictive capacity of agencies to identify mission critical skills gaps as they emerge. The following are the MCOs relevant to IRS that Treasury determined to be at medium or moderate risk for skills gaps, in order of risk: human resources specialist, tax law specialist. In light of staff attrition since 2011, particularly within enforcement occupations, we selected tax examiners and revenue officers to demonstrate how IRS has implemented strategies, policies, and processes for identifying and addressing skills gaps, and to identify critical instances where those efforts have affected IRS’s ability to identify and close critical skills gaps. Tax examiners are responsible for responding to taxpayer’s inquiries regarding preparation of a variety of tax returns, related schedules and other documentation; resolving account inquiries; advising taxpayers of enforcement actions; and managing sensitive case problems designated as requiring special case handling. In addition, tax examiners analyze and resolve tax-processing problems; adjust taxpayer accounts; prepare and issue manual refunds; and compute tax, penalty, and interest. IRS documents note that the level of supervision, complexity, contacts, and the scope of assigned workload varies for tax examiners across performance levels. At the entry level, tax examiners are responsible for receiving and initiating contacts with taxpayers to gather information and resolve issues, and to gain compliance with laws and regulations while dealing with taxpayers that may be evasive under sensitive situations. At the intermediate level, tax examiners are responsible for handling a wide variety of the most difficult or sensitive tax processing problems. Their work products affect the taxpayer’s filing status and tax liability for current, prior, and future reporting requirements. At the senior—or expert—level, tax examiners serve as a work leader over employees engaged in accomplishing tax examining work, as well as perform a full range of examination duties that include adjusting tax, penalty, and interest on taxpayers’ accounts and closing cases. Our analysis of OPM data found that, from fiscal years 2011 through 2017, the agency lost 18 percent of its total tax examiner workforce (see figure 7). Additionally, the number of tax examiners in the intermediate level declined by 34 percent during that same period. IRS officials told us replacing tax examiners is particularly difficult not only because of the general hiring restrictions affecting the entire IRS, but also because of the significant amount of specialized expertise that must be developed to perform in a specific area of tax law. According to IRS officials, in 2018 and in response to declining tax examiner personnel, IRS doubled the dollar amount thresholds tax examiners use to select refunds for additional audit. IRS officials told us this means thousands of refunds that would have received additional scrutiny due to errors or anomalies are no longer considered for follow-up review by tax examiners, and the government is potentially missing significant opportunities to collect revenue and enforce tax laws. Three of the four business divisions within IRS identified skill gaps among its tax examiners. Large Business and International (LB&I). According to LB&I officials, long-term vulnerability with their tax examiners is a major concern, in part because LB&I has been unable to replenish its tax examiner workforce given external hiring constraints and internal promotion concerns (i.e., internal promotions can leave staffing gaps at the lower ranks putting them at risk for skills gaps). According to LB&I officials, having fewer tax examiners—specifically fewer tax examiners in key geographic locations—is affecting its mission. For example, LB&I reviews tax returns of foreign nationals and overseas taxpayers, which are predominantly paper-based returns and have to be processed manually. LB&I officials told us manual paper return processing is time intensive and, with fewer tax examiners, puts IRS at greater risk of having to pay interest to taxpayers for withholding refunds due to processing delays. Small Business/Self-Employed (SB/SE). According to SB/SE officials, gaps among tax examiners are evident and, as a result, SB/SE has reduced work plans and increased the use of overtime. Within SB/SE’s Campus Exam/Automated Underreporter program, officials identified staffing gaps that they attributed to the general inability to hire behind attrition. According to SB/SE officials, as managers and lead vacancies arise, tax examiners are often detailed to fill the positions, which reduce the number of tax examiners available to perform the work. Wage and Investment (W&I). According to W&I officials, they have identified tax examiner skills gaps within their Accounts Management, Submission Processing, and Return Integrity and Compliance Services programs. To address identified skills gaps within W&I, officials said they conduct annual Strategic Hiring Summits bringing together stakeholders and business partners to jointly address filing season staffing needs, staffing barriers and gaps, and hiring lessons learned from prior filing seasons. According to W&I officials, these efforts continue to improve their targeted hiring and timeliness of its onboarding efforts. Other strategies that W&I plans to implement are to bring in tax examiners earlier and provide them with the full spectrum of training upfront rather than spreading the training out over months or years. Additionally, they said tax examiners are going to be cross trained on multiple types of inventory to increase their skills and to address inventory backlogs. Revenue officers are IRS civil enforcement employees who are trained to conduct face-to-face contact with business and individual taxpayers who have not resolved their tax obligations in response to prior correspondence or contact. The role of revenue officers involves explaining to taxpayers why they are not in compliance, advising them of their financial obligation, and when necessary, taking appropriate enforcement action. According to IRS, the goal is voluntary taxpayer compliance through payment arrangements or compromises. However, for taxpayers that remain noncompliant, revenue officers are trained to take civil enforcement actions, such as filing a notice of lien to protect the government’s interest, including and up to seizing personal and business property. According to IRS officials, it takes 4 to 5 years to train a new hire to become an experienced senior or expert revenue officer. The senior or expert levels are of particular importance to IRS’s enforcement efforts. An internal IRS study completed in June 2018 found that 84 percent of all successful fraud referrals came from revenue officers at the senior/expert skill level. Senior revenue officers also serve as classroom instructors and perform on-the-job training of intermediate and entry-level staff. According to IRS officials, this additional responsibility directly affects senior revenue officers’ ability to work fraud cases. Our analysis of OPM data shows that the total number of revenue officers at IRS declined by nearly 40 percent from fiscal years 2011 through 2017, and entry-level revenue officers declined by 86 percent during that same period (see figure 8). IRS officials told us the declines were due to a combination of attrition, limited hiring, and promotions. IRS decided to scale back nonfiler investigations in light of declining staffing, according to IRS officials. We reported in tax year 2010 that IRS started 3.5 million individual nonfiler cases and 4.3 million business nonfiler cases. In tax year 2014, nonfiler cases dropped to 2 million for individuals and 1.8 million for businesses, a reduction of 43 percent and 58 percent, respectively. More recently in fiscal year 2018, IRS data show nonfiler investigations declined to 0.8 million for individuals and 0.4 million for businesses. Since we designated addressing agencies’ mission critical occupation skills gaps as a high-risk area in 2011, OPM and agencies have launched a number of initiatives to close skills gaps. For example, in 2011, OPM and the Chief Human Capital Officer Council established an interagency working group to identify mission critical occupations (MCO) at high risk for skills gaps. The working group, also known as the Federal Agency Skills Team (FAST), identified skills gaps in six government-wide occupations, such as cybersecurity, human resources (HR) specialists, and acquisition. The FAST also identified agency-specific MCOs at high risk for skills gaps, which included IRS revenue agents. Subsequently, Treasury was designated leader of a FAST subteam to develop a plan for closing skills gaps among revenue agents. Treasury convened a group of revenue agents from each of IRS’s business divisions, IRS human resource specialists with workforce planning expertise, and members of IRS’s training group. Table 1 shows the process the subteam used to identify and address the causes of revenue agent skills gaps. The FAST brainstormed potential causes for skills gaps among revenue agents (see figure 9). According to FAST documents, this process helped the team understand the range of contributing factors that led to lower than acceptable 2-year retention rates and a high quit rate among revenue agents. Now that FAST identified the potential causes for the two indicators, Treasury officials told us IRS is responsible for developing and implementing strategies to close skills gaps among its revenue agents and reporting on its progress. According to IRS documents, as of July 2018, the agency established communications with revenue agents to increase awareness about detail and developmental opportunities that are posted on IRS’s Service-wide Detail Opportunities web page, and is developing a plan for more effectively including revenue agents in management training. Related IRS performance measures show that posted detail opportunities for revenue agents have increased from 24 in fiscal year 2016 to 69 in fiscal year 2018. For a limited number of mission critical occupations, HCO provides support to business divisions and program offices that need help addressing workforce capacity concerns. For example, HCO conducts competency assessments when a business division or program is seeking to identify the top candidates for hire or promotion. Determining critical competencies can help agencies effectively meet demographic, technological, and other forces that are challenging government agencies to change activities they perform and the goals that they must achieve, how they do their business, and even who does the government’s business. HCO also conducts skills assessments when a division or program office needs to determine the skill level of their existing employees for the purposes of training, hiring, retention, or staffing decisions. Agencies can use both competency and skills assessments to help identify and address skills gaps. For competency assessments, HCO officials told us they develop annual work plans that prioritize assessment scheduling for certain occupations based on factors including available funding, business division, or program office staff availability to assist HCO with subject matter expertise, and the age of the competency model or assessment. For example, in 2017, HCO supported a competency assessment for special agents within its Criminal Investigations (CI) division. CI special agents are forensic accountants searching for evidence of criminal conduct. HCO officials told us competency assessments for special agents are a priority due to rapidly evolving sophistication of schemes to defraud the government and increasing use of automated financial records. IRS used information resulting from the competency assessment to revamp the special agent hiring process. According to HCO officials, results from the competency assessment have helped IRS reduce the cost and time to assess applicants while improving the overall candidate pool. Skills assessments supported by HCO have been used in some limited cases to help IRS identify and address skills gaps among certain MCOs. According to HCO officials, they provide skills assessments upon request by a business division and program office, assuming personnel and funding resources are available. IRS business divisions or program offices cover costs associated with large-scale assessments where contractor support is needed to supplement HCO’s staff. Skills assessments among occupations with smaller populations usually do not incur costs to the divisions. HCO has supported requested skills assessments of information technology specialists, revenue agents, and human resources specialists in recent years. IRS documents show these assessments were used in part to identify and address skills gaps within these occupations. Unlike competency assessments, however, IRS does not create a work plan or otherwise prioritize skills assessments to address those occupations most in need. As discussed above, Treasury has identified MCOs at moderate to high risk for skills gaps, yet skills assessments have not addressed all the occupations identified as highest risk. Leading practices in strategic workforce management state that agencies should determine the critical skills and competencies its workforce needs to achieve current and future agency goals and missions, and identify gaps, including those that training and development strategies can help address. A work plan for addressing skills gaps could help IRS remediate gaps on a timely basis. Without a plan, IRS risks having to continue scaling back mission-critical activities as it has done in recent years. As previously discussed, Treasury found IRS is at risk of skills gaps among its mission critical occupations, including its HR specialists. In light of related agency-wide hiring limits, IRS offered early retirement incentives for eligible hiring specialists and did not backfill other specialists when they left the agency. HCO has lost more than half of its hiring specialists since 2011. According to HCO, the hiring skills of remaining specialists atrophied as those specialists were redirected to other priority HR areas. Many of HCO’s hiring and other HR responsibilities, however, have remained constant or increased. For example, in fiscal year 2017, IRS hired around 6,700 seasonal employees to assist with the filing season and HCO expects that number to increase in future fiscal years. HCO officials told us the pace of internal hiring (i.e., promotions) remained constant over the past several years. IRS has recently prioritized hiring to address information technology and cybersecurity areas, as well as implementation of the Tax Cuts and Jobs Act. As a result of the combination of fewer hiring specialists and new hiring requirements, HCO officials said its capacity to hire and carry out other important human capital and HR functions is highly strained. In 2018, HCO identified improving hiring capacity as its top priority and is exploring a variety of options, including: HCO surge contracting: Contractors will be used in locations across the employment offices to assist with hiring and personnel security. Leverage Administrative Resource Center (ARC) services. ARC is part of Treasury and provides administrative services, including HR support for various federal agencies. HCO engaged ARC in May 2018 to assist with developing hiring qualifications. OPM shared services. IRS is exploring use of OPM shared services for help in the hiring process. Business-based HR teams: Teams within the divisions have been given authority to post internal merit promotion supervisory vacancy announcements, which will reduce HCO’s workload for this function. HCO will retain responsibility for building positions, setting pay, and processing personnel actions, and will provide a dedicated point of contact for questions and quality review. Federal Executive Board team: A group of Interagency Agreement detailees supported by Wage and Investment (W&I) to work W&I vacancy announcement backlogs. IRS officials told us that, as of November 2018, this option had not been successful. HCO interagency detail opportunity: Employees detailed from other federal agencies into HR positions throughout HCO using interagency agreements. HCO officials told us they are generally monitoring the status of these activities, but cited competing priorities as a reason they have not determined how each activity will be evaluated in achieving increased hiring capacity and associated outcomes. Periodic measurement of an agency’s progress toward human capital goals and the extent that human capital activities contributed to achieving programmatic goals provides information for effective oversight by identifying performance shortfalls and appropriate corrective actions. Without a means for gauging the relative success of its capacity-building activities, IRS risks spending its limited HCO resources on activities that may not help the agency meet its desired hiring outcomes. IRS established a risk register as part of efforts to identify, prioritize, and mitigate risks to IRS’s implementation of the Tax Cuts and Jobs Act, including a number of risks related to its ability to hire. A risk register is used to identify the source of risks, owners to manage the treatment of those risks, and track the success of risk mitigation strategies over time. Risk registers or other comprehensive risk reports are an essential element of a successful enterprise risk management program. The risk register shows that a lack of strategic workforce planning in recent years is contributing to a number of risks IRS has faced in implementing the Tax Cuts and Jobs Act. For example: Large Business and International (LB&I) is having difficulty hiring senior advisors needed to develop training and compliance strategies. The risk register indicates mitigation efforts in this area, such as extending detail opportunities, have failed and there are potential major impacts to the program. According to LB&I officials, staffing declines in related skills prior to the Tax Cuts and Jobs Act have exacerbated difficulties in this area. Business units have been unable to identify critical hiring needs for the Tax Cuts and Jobs Act. As of October 2018, HCO is coordinating with business units to help determine hiring needs so that it can prioritize agency hiring efforts. In a related risk, IRS determined the lack of personnel and resources within W&I may hinder its ability to identify hiring needs for the fiscal year 2019 filing season. According to IRS, “the filing season may be impacted by significant resource constraints largely due to onboarding concerns, resulting in lost revenue, increased cost, and significant reputational impact to the IRS.” As of October 2018, IRS stated it has completed necessary hiring plans and determined this risk has minimal to no impact to IRS’s ability to carry out the upcoming filing season. Table 2 shows additional examples of risks related to hiring identified by IRS, steps the agency is taking to mitigate those risks, and the status as of October 2018. In September 2018, the Treasury Inspector General for Tax Administration (TIGTA) reviewed IRS’s information technology readiness for implementing Tax Cuts and Jobs Act. TIGTA reported IRS used standard position descriptions for hiring efforts and had not defined specific knowledge, skills, abilities, and other requirements necessary for positions it expects to hire for Tax Cuts and Jobs Act implementation, and/or back-filling existing positions due to personnel performing related activities. We did not review position descriptions for the purposes of this report. However, as previously discussed, without information about what skills and skills gaps exist across the agency, IRS lacks important information needed to inform hiring and training resource decisions. It can take a year or longer from the time when a supervisor notifies his or her division of a staffing need to the time the employee is on board, according to IRS documents and our interviews. HCO officials attributed much of this time to gathering required information and approvals associated with IRS’s “Exception Hiring Process.” In fiscal year 2011, IRS instituted the process in part to help the agency prioritize hiring decisions in a highly constrained budget environment. The Exception Hiring Process added approval layers to IRS’s regular hiring requirements, including direct approval from the Deputy Commissioner for Operations Support, the Deputy Commissioner for Services and Enforcement, or the Chief of Staff for direct reports to the Commissioner. Also as part of this process, the Chief Financial Officer performs a cost assessment to determine the affordability of any requested new hire, and HCO determines if multiple hiring requests can be consolidated into a smaller number of positions. Our review of IRS budget operating guidance and interviews found Exception Hiring Process requirements have changed over time. Initially in 2011, every new hire was subject to the Exception Hiring Process. Since 2011, hiring requirements have eased in some circumstances. For example, in 2014, business division directors were given authority to approve internal hires (i.e., promotions) within their own business division. More recently, new hires in cybersecurity, information technology, or those needed to implement the Tax Cuts and Jobs Act were not subject to the same requirements as hiring requests in other occupations. According to HCO officials, easing hiring requirements in certain circumstances was necessary to help the agency bring on critical hires more quickly. However, based on their interactions with managers in the business divisions, HCO officials said the evolving and nonuniform Exception Hiring Process requirements has been confusing to managers requesting new hires. Business divisions and program offices often submitted hiring requests without required information or approvals. This has resulted in hiring delays, according to HCO officials. HCO officials told us that issuing clearer guidance to business managers would help ensure business divisions submit hiring requests that are complete, which would reduce the risk of hiring delays. In light of declining resources and increasing requirements, IRS is taking the initial steps to reinstate a strategic approach to workforce planning that the agency scaled back in recent years. IRS has recently provided its HCO with authority to lead and coordinate agency-wide strategic workforce planning efforts. However, full implementation of an IRS initiative to conduct agency-wide strategic workforce planning has been put on hold as other activities have taken priority, and a key workforce planning system being developed by Treasury has been delayed. As a result, these efforts remain fragmented, and IRS lacks an inventory of its current workforce, has neither developed the competency and staffing requirements nor conducted agency-wide activities associated with analyzing the workforce to identify skills gaps, or developed strategies to address skills gaps. Additionally, IRS could improve reporting of its progress in addressing skills gaps. This critical information will help provide assurance that its fragmented human capital activities are well managed or that resources are being effectively allocated. High attrition among IRS employees, particularly in complex enforcement occupations and lower-than-average employee satisfaction rates, puts IRS at continued risk of skills gaps. These skills gaps have already been a significant contributor to IRS’s decisions to scale back important enforcement activities that are critical to promoting voluntary compliance and closing the tax gap. However, IRS has not targeted its limited resources to addressing issues among the mission critical occupations most at risk of skills gaps. Instead, activities such as skills gaps assessments are only conducted to the extent business divisions and program offices make resources available, and management is aware of and inclined to seek assistance from IRS’s HCO. Reporting on the results of efforts to close skills gap and developing a work plan or other mechanism for prioritizing assessments would better position IRS to address key gaps. Additionally, the results of an interagency working group effort intended to address skill gaps among IRS revenue agents and other occupations with skills gaps across the government may hold important lessons for addressing skills gaps among mission critical occupations at IRS. Each of these issues is exacerbated by limited capacity within HCO, which has redirected its resources to implementing the Tax Cuts and Jobs Act and meeting other routine transactional human resource requirements. HCO is leveraging a range of activities intended to help the agency meet immediate hiring needs. Measuring the extent to which each of activities is effective would help HCO target resources to the most effective activities as it seeks to improve its capacity for hiring employees in hard to fill positions in the future. In addition, issuing clear guidance on hiring request requirements would better position IRS to avoid hiring delays for mission-critical occupations. We are making seven recommendations, six to IRS and one to Treasury. Specifically: The Commissioner of the IRS should fully implement the workforce planning initiative, including taking the following actions: (1) conducting enterprise strategy and planning, (2) conducting workforce analysis, (3) creating a workforce plan, (4) implementing the workforce plan, and (5) monitoring and evaluating the results. (Recommendation 1) The Secretary of the Treasury should issue clarifying guidance to IRS about the Integrated Talent Management system, including when the workforce planning and talent management modules will be deployed and available for IRS’s use, the functions it will include, and how IRS’s existing systems and processes within business divisions and program offices will be affected. (Recommendation 2) The Commissioner of IRS should ensure the Human Capital Officer improves reporting for its workforce planning initiative in its bi-monthly HRstat information submissions to Treasury. The submissions should include the original implementation schedule, changes to the original schedule, delays in implementation and each of their causes, and IRS’s strategy to address the causes of those delays. (Recommendation 3) The Commissioner of IRS should ensure the Human Capital Officer and Deputy Commissioner for Services and Enforcement report the results of efforts to close skills gaps among revenue agents, including lessons learned, that may help inform strategies for conducting skills gap assessment efforts for other mission critical occupations. (Recommendation 4) The Commissioner of IRS should ensure the Human Capital Officer and Deputy Commissioner for Services and Enforcement collaborate to develop a work plan or other mechanism that prioritizes and schedules skills assessments for mission critical occupations at highest risk of skills gaps, such as those identified by Treasury or where key activities have been scaled back, for the purposes of developing a strategy to close the gaps. (Recommendation 5) The Commissioner of IRS should direct the Human Capital Officer to measure the extent to which each of its activities for improving hiring capacity are effective in producing desired hiring capacity outcomes, including strategies used to mitigate hiring risks associated with Tax Cuts and Jobs Act implementation hiring. (Recommendation 6) The Commissioner of IRS should direct the Human Capital Officer and Chief Financial Officer to issue clarifying guidance on the current Exception Hiring Process, including clarifying areas where hiring limitations that were used in previous years are no longer applicable. (Recommendation 7) We provided a draft of this report to the Commissioner of the Internal Revenue Service, the Secretary of the Treasury, and the Acting Director of the Office of Personnel Management for review and comment. In a letter from IRS’s Deputy Commissioner for Operations Support, reproduced in appendix II, IRS agreed with our six recommendations directed to it. The letter states there is room for improvement in implementing its strategic workforce plan and the associated workforce planning initiative, and IRS will provide a detailed corrective action plan in their 180-day response to Congress. IRS also provided technical comments, which we incorporated as appropriate. For Treasury, the Acting Director, Human Capital Strategic Management, the Office of the Deputy Assistant Secretary for Human Resources and Chief Human Capital Officer, emailed comments stating Treasury agreed with the one recommendation directed to it. In the comments, Treasury wrote, “the [Deputy Assistant Secretary for Human Resources and Chief Human Capital Officer] will continue to provide guidance, policy and direction on how the ITM is used to meet Workforce Planning objectives.” Treasury provided technical comments on the recommendation directed to it, and we revised the recommendation as appropriate to recognize that bureaus, not Treasury, implement the ITM. OPM did not have comments. We are sending copies of this report to interested congressional committees, the Commissioner of IRS, the Secretary of the Treasury, and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512- 9110 or McTigueJ@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. You asked us to review the Internal Revenue Service’s (IRS) enterprise- wide strategic workforce planning efforts. In this report, we assess (1) how IRS defines its workforce needs and develops strategies for shaping its workforce; (2) the extent to which IRS identified the critical skills and competencies it will require to meet its goals, and describe its strategy to address skills gaps in its workforce; and (3) the extent to which IRS’s Human Capital Office has the capacity to hire employees in hard to fill positions. For our first objective, to determine how IRS defines its workforce needs, we conducted a review of IRS’s implementation of its strategic workforce planning process. We compared IRS’s strategic workforce planning guidance, policies, and procedures, as well as the Department of the Treasury’s (Treasury) guidance and policies to (1) Office of Personnel Management (OPM) regulations and guidance on strategic workforce planning, (2) our reports on key principles for effective strategic workforce planning, and (3) standards for internal controls. To describe how IRS workforce planning process aligns with standards, we reviewed IRS’s documentation of its programs, policies, and practices for recruiting, developing, and retaining the staff needed to achieve program goals. We compared that information with requirements articulated in OPM regulations and best practices we has identified. To include prior actions and concerns previously identified as related to IRS’s strategic human capital planning, we reviewed our prior relevant reports and those from the Treasury Inspector General for Tax Administration. We also used several databases to examine IRS’s workforce trends. To analyze trends in IRS’s full-time equivalent employment, we used the Office of Management and Budget’s (OMB) budget database, MAX Information System (MAX), for fiscal years 2011 through 2017. To analyze employee engagement and employee global satisfaction at IRS, we analyzed IRS results from OPM’s fiscal years 2011 through 2017 Federal Employee Viewpoint Survey (FEVS). To determine retirement eligibility of SES and non-SES IRS staff, we analyzed data in OPM’s Enterprise Human Resources Integration (EHRI) database. To assess the reliability of EHRI, OMB Max, and FEVS data, we reviewed our past data reliability assessments and conducted electronic testing to evaluate the accuracy and completeness of the data used in our analyses. For EHRI and FEVS, we also interviewed knowledgeable agency officials. We determined the data used from these three systems to be sufficiently reliable for our purposes. We supplemented our review of documentation by interviewing relevant IRS, Treasury, and OPM officials. We interviewed IRS officials from the Human Capital Office including the Human Capital Officer, Large Business & International (LB&I), Small Business Self Employed (SB/SE), Tax Exempt and Government Entities (TE/GE), and Wage & Investment (W&I) business divisions to understand how IRS assesses its workforce needs and develops strategies for shaping its workforce. We interviewed OPM officials about regulatory requirements and their perspective on strategic human capital planning requirements, as well as their experience working with Treasury and IRS. We met with Treasury and Taxpayer Advocate Service officials to understand their role and responsibilities for coordinating with and providing oversight of IRS activities. We reviewed IRS’s practices and related documentation for monitoring and evaluating progress toward human capital goals, including Treasury’s HRStat reports. For objective 2, to assess the extent IRS identified and described critical skills required to meet its goals, in addition to activities performed to address objective 1, we selected a nongeneralizable sample of occupations identified by IRS as mission critical to illustrate how IRS has implemented strategies, policies, and processes for identifying and addressing skills gaps, and to identify critical instances where those efforts have affected IRS’s ability to identify and close critical skills gaps. Because IRS’s workforce planning efforts are generally conducted by mission critical occupations (MCO), we selected MCOs as our unit of analysis. We excluded MCOs with characteristics that made them unlikely to yield new or useful information for the purposes of our report. MCOs were excluded from our analysis if they (1) were under review as part of our recent or ongoing work, (2) had small numbers of staff (less than 100), or (3) were assessed by Treasury to be at low risk for skills gaps. The Treasury assessment ranked MCOs in order of risk for skills gaps based on 2-year retention rate, applicant quality. Based on these criteria, we selected revenue officers and tax examiners as occupational case illustrations representing tax enforcement activities. These two occupations, in tandem with discussion of Treasury’s efforts to close skills gaps among revenue agents, while not generalizable, provided illustrative examples for this objective. We analyzed IRS’s audit rate of individual and corporate returns to show a change in the number of audits for fiscal years 2011 through 2017 based on data reported by IRS in its annual Data Book. To obtain information to illustrate the current state of the selected MCOs located within the four business divisions, we sent the business divisions a semistructured set of written questions coupled with a request to provide corroborating documents to support their responses. We asked each business division for information about related MCOs, including: hiring data and retirement eligibility rates for MCOs; skills, competency, or staffing gaps identified among its MCOs; and any resource tradeoff decisions made as a result of skills gaps. To supplement the information we gathered from responses to our written question responses, we also reviewed IRS and Treasury documents for addressing skills gaps for revenue agents that were conducted after we identified mission critical skills gaps as a government-wide high-risk issue in 2011. For objective 3, to assess the extent IRS’s Human Capital Office has the capacity to hire employees in hard to fill positions, we reviewed documentation related to IRS hiring requirements, including the Internal Revenue Manual and policy explaining the Exception Hiring Process. We interviewed division directors from each of IRS’s major business divisions (W&I, LB&I, TE/GE, and SBSE) to understand their hiring experience and impressions of time-to-hire and candidate quality results related to the exception hiring process. We interviewed senior officials responsible for IRS’s hiring function. We reviewed documentation related to systems used to process and onboard new hires. We conducted this performance audit from August 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Tom Gilbert (Assistant Director), Shea Bader (Analyst-in-Charge), Crystal Bernard, Jacqueline Chapin, James Andrew Howard, Meredith Moles, Steven Putansu, and Robert Robinson made major contributions to this report. Devin Braun, Regina Morrison, Erin Saunders-Rath, and Sarah Wilson provided key assistance.", "summary": "IRS faces a number of challenges that pose risks to meeting its mission if not managed effectively. Key to addressing IRS's challenges is its workforce. Cultivating a well-equipped, diverse, flexible, and engaged workforce requires strategic human capital management. GAO was asked to review IRS's enterprise-wide strategic workforce planning efforts. GAO assessed (1) how IRS defines its workforce needs and develops strategies for shaping its workforce; (2) the extent to which IRS identified the critical skills and competencies it will require to meet its goals, and its strategy to address skills gaps in its workforce; and (3) the extent to which IRS's Human Capital Office has the capacity to hire employees in hard to fill positions. GAO analyzed trends in staffing across IRS and in selected mission critical occupations; compared IRS strategic workforce management processes, practices, and activities with federal regulations and leading practices; analyzed IRS documents and interviewed agency officials. The Internal Revenue Service (IRS) has scaled back strategic workforce planning activities in recent years. IRS officials told GAO that resource constraints and fewer staff with strategic workforce planning skills due to attrition required IRS to largely abandon strategic workforce planning activities. However, a number of indicators, such as increasing rates of retirement eligible employees and declining employee satisfaction, led IRS to determine that continuing to make short-term, largely nonstrategic human capital decisions was unsustainable. One way IRS sought to address these issues was to develop a strategic workforce plan and associated workforce planning initiative. Initiative implementation, however, is behind schedule and on hold. IRS attributed the delay to a combination of: 1) personnel resources redirected to implement Public Law 115-97—commonly referred to as the Tax Cuts and Jobs Act, 2) lack of workforce planning skills within its Human Capital Office, and 3) delayed deployment at the Department of the Treasury (Treasury) related to a new workforce planning system. As a result, IRS lacks information about what mission critical skills it has on board, where skills gaps exist, and what skills will be needed in the future. IRS staffing has declined each year since 2011, and declines have been uneven across different mission areas. GAO found the reductions have been most significant among those who performed enforcement activities, where staffing declined by around 27 percent (fiscal years 2011 through 2017). IRS attributed staffing declines primarily to a policy decision to strictly limit hiring. Agency officials told GAO that declining staffing was a key contributor in decisions to scale back activities in a number of program and operational areas, particularly in enforcement, where the number of individual returns audited from fiscal years 2011 through 2017 declined by nearly 40 percent. IRS has skills gaps in mission critical occupations, and the agency's efforts to address these skills gaps do not target the occupations in greatest need, such as tax examiners and revenue officers. However, the results of an interagency working group effort that began in 2011, and was intended to address skill gaps among IRS revenue agents and other occupations with skills gaps across the government, may hold important lessons for addressing skills gaps in other mission critical occupations at IRS. IRS's Human Capital Office has limited staffing capacity to hire employees in hard to fill positions, which holds risks for the agency's ability to implement the Tax Cuts and Jobs Act. IRS is undertaking a variety of activities to improve its hiring capacity, but has not determined how each activity will be evaluated and will contribute to increased hiring capacity or associated outcomes. In addition, changes in the agency's hiring processes have been confusing to managers and contributed to hiring delays. Clear guidance on hiring request requirements would better position IRS to avoid the risk of hiring delays for mission critical occupations. GAO is making six recommendations to IRS that include implementing its delayed workforce planning initiative, evaluate actions to improve the agency's hiring capacity, and address changes in its processes that have contributed to hiring delays. IRS agreed with GAO's recommendations. GAO also recommends Treasury clarify guidance to IRS on a forthcoming workforce planning system. Treasury agreed with the recommendation.", "document_type": "gao"}
{"report": "The Forest Service’s mission includes sustaining the nation’s forests and grasslands; managing the productivity of those lands for the benefit of citizens; conserving open space; enhancing outdoor recreation opportunities; and conducting research and development in the biological, physical, and social sciences. The agency carries out its responsibilities in three main program areas: (1) managing public lands, known collectively as the National Forest System, through nine regional offices, 154 national forests, 20 national grasslands, and over 600 ranger districts; (2) conducting research through its network of seven research stations, multiple associated research laboratories, and 81 experimental forests and ranges; and (3) working with state and local governments, forest industries, and private landowners and forest users in the management, protection, and development of forest land in nonfederal ownership, largely through its nine regional offices. According to the Forest Service, it employs a workforce of over 30,000 employees across the country. However, this number grows by thousands in the summer months, when the agency hires seasonal employees to conduct fieldwork, respond to wildland fires, and meet the visiting public’s needs. The Office of the Chief of the Forest Service is located in Washington, D.C., with 27 offices reporting directly to the Office of the Chief, as illustrated in figure 1. The nine national forest regions, each led by a regional forester, oversee the national forests and grasslands located in their respective regions. Each national forest or grassland is headed by a supervisor, the seven research stations are each led by a station director, and a state and private forestry area is headed by an area director. The Forest Service collectively refers to its forest regions, research stations, and area as RSAs. The RSAs are organized differently according to their operations, and comparable operations within the RSAs, such as collections from reimbursable agreements, may be processed differently in the various regions and stations, resulting in highly decentralized operations. In addition, the offices of the Chief Financial Officer (CFO); Deputy Chief of Business Operations (includes the budget office); and eight other offices located in the Washington, D.C., headquarters also report directly to the Office of the Chief of the Forest Service. The Forest Service receives appropriations for its various programs and for specific purposes to meet its mission goals. Prior to fiscal year 2017, the Forest Service’s budgetary resources consisted primarily of no-year funds. Its budget office in Washington, D.C., initiates apportionment requests and monitors the receipt of Department of the Treasury (Treasury) warrants. Upon receipt of the warrant, the apportionment is recorded in the financial system and then the budget office develops an allocation summary detailing the allocation of its budget authority by fund, programs within the funds, and distribution of funds at the regional, station, and area levels. The Forest Service may also transfer funds from other appropriations to the appropriations account that funds its fire suppression activities when available funds appropriated for fire suppression and the Federal Land Assistance, Management, and Enhancement (FLAME) fund will be exhausted within 30 days. The Forest Service’s administrative policies, practices, and procedures are issued in its Directive System, which provides a unified system for issuing, storing, and retrieving internal direction that governs Forest Service programs and activities. The Directive System consists of the Forest Service’s manuals and handbooks. The manuals contain management objectives, policies, and responsibilities and provide general direction to Forest Service line officers and staff directors for planning and executing their assigned programs and activities. The handbooks provide detailed direction to employees and are the principal source of specialized guidance and instruction for carrying out directions issued in the manuals. Line officers at the national and RSA levels have authority to issue directives in the manuals and handbooks under their respective jurisdictions. The Forest Service’s policy states that the Directive System is the only place where Forest Service policy and procedures are issued. In addition to the Directive System, Forest Service staff have also developed standard operating procedures (SOP) and desk guides to supplement guidance provided in directives. However, the SOPs and desk guides are not part of the Forest Service Directive System and therefore are not official policy and procedures. While the Forest Service had documented processes for allotting its budgetary resources, it did not have an adequate process and related control activities for reasonably assuring that (1) amounts designated in appropriations acts for specific purposes are used as designated and (2) unobligated no-year appropriation balances from prior years were reviewed for their continuing need. In addition, the Forest Service did not have a properly designed and documented system for administrative control of funds. Finally, the Forest Service had not properly designed control activities for fund transfers for fire suppression activities under its Wildland Fire Management program. While the Forest Service had documented processes for allotting its budgetary resources, it did not have an adequate process and related control activities to reasonably assure that amounts designated in appropriations acts for specific purposes are used as designated—as required by the purpose statute, which states that “appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law.” We reviewed Forest Service documents about its budget authority processes, which included control objectives, related control activities, and processes over the allotment of its budgetary resources. We found that these documents, including manuals and handbooks, did not include an adequate process and related control activities for assuring that appropriated amounts are used for the purposes designated. For example, such a process would include the Forest Service allotting appropriated funds for specific programs or objects as provided in the applicable appropriation act, by either using specific budget line items already defined in the Forest Service’s financial system or creating new budget line items, as needed. Standards for Internal Control in the Federal Government states that management should define objectives clearly to enable the identification of risks and design appropriate control activities to achieve objectives and respond to the risks identified. As a result of the Forest Service not having an adequate process and related control activities for assuring that appropriated amounts are used for the purposes designated, the Forest Service did not properly allocate certain funds for specific purposes detailed in the appropriations acts for fiscal years 2015 and 2016. For example, in fiscal year 2015, the Forest Service did not set aside in its financial system the $65 million specified in the fiscal year 2015 appropriations act for acquiring aircraft for the next- generation airtanker fleet. According to Forest Service documents, as of January 6, 2016, $35 million of the designated funds was used for other purposes. In February 2017, we issued a legal opinion, related to the Forest Service’s use of the $65 million, which concluded that the Forest Service had failed to comply with the purpose statute. According to USDA’s Office of General Counsel, “this lack of any separate apportionment or account for the next-generation airtanker fleet was due to the fact that it was a new item, not included in the agency’s budget request, and added late in the appropriations process.” Similarly, in fiscal year 2016, the Forest Service did not create new budget line items to reserve in its financial system $75 million for the Forest Inventory and Analysis Program specified in the fiscal year 2016 appropriations act. Rather than creating a new budget line item for the program specified in the appropriations act, the funds were combined with an existing budget line item, making it difficult to track related budget amounts and actual expenditures. The lack of an adequate process and related control activities to reasonably assure that appropriated amounts are used for the purpose designated also increases the risk that the Forest Service may violate the Antideficiency Act. The Forest Service did not have a process and related control activities to reasonably assure that unobligated, no-year funds from prior years were reviewed for continuing need. We reviewed the Forest Service’s budget authority process document and related manuals and handbooks, which documented control objectives and procedures over its budgetary resources and the guidance for administrative control of funds. We found that these documents did not include a process for reviewing the Forest Service’s unobligated, no-year funds from prior years and related control activities to reasonably assure that such funds were reviewed for continuing need. Such reviews, if performed, may identify unneeded funds that could be reallocated to other programs needing additional budgetary resources, if consistent with the purposes designated in appropriations acts. The USDA Budget Manual states as a department policy that “agencies of the Department have a responsibility to review their programs continually and recommend, when appropriate, deferrals or rescissions.” The USDA Budget Manual further states the following: “Agency officials should remain alert to this responsibility since the establishment of reserves is an important phase of budgetary administration. If it becomes evident during the fiscal year that any amount of funds available will not be needed to carry out foreseeable program requirements, it is in the interest of good management to recommend appropriate actions, thereby maintaining a realistic relationship between apportionments, allotments, and obligations.” However, the Forest Service did not develop a directive addressing the control objectives, related risks, and control activities for implementing this USDA policy. Up until fiscal year 2017, Forest Service budgetary resources consisted primarily of no-year funds. At the beginning of each fiscal year, unobligated balances of no-year funds are carried forward and reapportioned to become part of budget authority available for obligation in the new fiscal year. Unobligated balances can increase during the fiscal year due to deobligation of prior years’ unliquidated obligations that the Forest Service determines it no longer needs. These resources are immediately available to the Forest Service to the extent authorized by law without further legislation or action from Office of Management and Budget (OMB) unless the apportionment states otherwise. According to Forest Service officials, unobligated funds reported in the Forest Service’s September 30, 2016, Statement of Budgetary Resources included $351 million in discretionary unobligated no-year funds, appropriated as far back as fiscal year 1999. The Forest Service did not identify and define a process and control objectives related to its review of unobligated no-year funds from prior years for continuing need. As a result, the Forest Service did not have reasonable assurance that prior no-year unobligated balances were properly managed and considered in its annual budget requests. This increased the risk that the Forest Service may make budget requests in excess of its needs. Additionally, the Forest Service could miss opportunities to use its prior year unobligated no-year funds more timely and effectively, for example, using these funds for other Forest Service program needs, if consistent with the purposes designated in appropriations acts. During our work, we brought this issue to management’s attention, and in response, Forest Service officials stated that the Forest Service is planning to develop a quarterly process to review available balances and, as needed, redirect funds to agency priorities. However, as of July 2017, the Forest Service had not yet developed this review process. Further, Congress rescinded about $18 million of the Forest Service’s prior year unobligated balances and required it to report unobligated balances quarterly within 30 days after the close of each quarter and appropriated multi-year funds instead of no- year funds to the Forest Service for fiscal year 2017. The Forest Service issued guidance related to administrative control of funds in manuals and handbooks, which USDA did not review and approve prior to their issuance. Based on our review of these documents, we found that the processes and related control activities over the administrative control of funds were dispersed in numerous manuals and handbooks, which may hamper a clear understanding of the overall system. Further, the system lacked key elements that would allow it to serve as an adequate system of administrative control of funds. For example, in its manuals and handbooks the Forest Service did not identify, by title or office, those officials with the authority and responsibility for obligating the service’s appropriated funds, such as funds for contracts, travel, and training. As a result, the responsibility for obligating funds was not clearly described and properly assigned in Forest Service policy as required by the USDA Budget Manual and OMB Circular No. A-11. OMB Circular No. A-11 states that the Antideficiency Act requires that the agency head prescribe, by regulation, a system of administrative control of funds, and OMB provided a checklist in appendix H to the circular that agencies can use for drafting their fund control regulations. This requirement is consistent with those in the USDA Budget Manual, which prescribes budgetary administration through a system of administrative controls for its component agencies, including the Forest Service. The USDA Budget Manual states that to the extent necessary for effective administration, (1) the heads of USDA component agencies may delegate to subordinate officials responsibilities in connection with the administrative distribution of funds within apportionments and allotments and the monitoring, control, and reporting of the occurrence of obligations and expenditures under apportionments and allotments and (2) the chain of such responsibility shall be clearly defined. In addition, USDA requires its component agencies to promulgate and maintain administrative control of funds regulation and to send such regulation to USDA’s Office of Program and Budget Analysis for review and approval prior to issuance. Because the Forest Service has not developed and issued a comprehensive system for administrative control of funds that considers all aspects of the budget execution processes, it cannot reasonably assure that (1) programs will achieve their intended results; (2) the use of resources is consistent with the agency’s mission; (3) programs and resources are protected from waste, fraud, and mismanagement; and (4) laws and regulations are followed. We also found that the Forest Service had not reviewed and updated most of its administrative control of funds guidance in the manuals and handbooks for over 5 years. The USDA Budget Manual requires each component to periodically review its funds control system for overall effectiveness and to assure that it is consistent with its agency programs and organizational structures. Further, Forest Service policy also requires routine review, every 5 years, of policies and procedures in its Directive System. According to Forest Service officials, when directives are up for review and update, a staff from the Office of Regulatory and Management Services (ORMS) sends an e-mail reminder to notify responsible personnel that updates to applicable directives are needed. However, we found that the Forest Service does not have adequate controls in place to monitor the reviews and any updates of the manuals and handbooks in its Directive System to reasonably assure that their efforts resulted in timely updates. As a result, the Forest Service is at risk that guidance for its system for administrative control of funds may lose relevance as processes change over time and control activities may become inadequate. The Forest Service did not have properly designed control activities over its process for fund transfers related to wildland fire suppression activities. The Forest Service receives appropriations for necessary expenses for (1) fire suppression activities on National Forest System lands, (2) emergency fire suppression on or adjacent to such lands or other lands under fire protection agreement, (3) hazardous fuels management on or adjacent to such lands, and (4) state and volunteer fire assistance. Transfer of funds from other Forest Service programs to its fire suppression activities occurs when the Forest Service has exhausted all available funds appropriated for the purpose of fire suppression and the FLAME fund. A key aspect of this process is assessing the FLAME forecast, which the Forest Service uses to predict the costs of fighting wildland fires for a given season, and developing a strategy to identify specific programs and the amounts that may be transferred to pay for fire suppression activities when needed. The process for reviewing the FLAME forecast and strategizing the fund transfers was documented in the Basic Budget Desk Guide created by staff in the Forest Service’s Strategic Planning and Budget Analysis Office. However, the desk guide did not contain evidence of review by responsible officials. As a result, the Forest Service lacked reasonable assurance that the desk guide was complete and appropriate for its use. The Basic Budget Desk Guide included a listing of actions to be performed by the analyst for reviewing the FLAME forecast report and developing a strategy for fund transfer from other programs. However, the desk guide did not specify the factors to be considered when developing the strategy. For example, it did not call for documentation addressing the rationale for the strategy or an assessment of the risk that the fund transfer could have on the programs from which the funds would be transferred. The desk guide also did not describe the review and approval of the strategy by a responsible official(s) prior to the fund transfer request sent to the Chief of the Forest Service. According to Standards for Internal Control in the Federal Government, management should design control activities to achieve objectives and respond to risks and that such control activities should be designed at the appropriate levels in the organizational structure. Further, management may design a variety of transaction control activities for operational processes, which may include verifications, authorizations and approvals, and supervisory control activities. The lack of properly designed control activities for supervisory review of the desk guide and strategy to identify the amounts for fund transfers does not provide the Forest Service reasonable assurance that the objectives of the fund transfers—including mitigating the risk of a shortfall of funding for other critical Forest Service program activities, such as payroll or other day-to-day operating costs—will be efficiently and effectively achieved. The Forest Service enters into various reimbursable agreements with agencies within USDA, other federal agencies, state and local government agencies, and nongovernment entities to carry out its mission for public benefit. The reimbursable agreements may be for the Forest Service to provide goods and services to a third party or to receive goods and services from a third party, or may be a partnership agreement with a third party for a common goal. According to Forest Service officials, the two distinct types of Forest Service reimbursable agreements are (1) fire incident cooperative agreements and (2) reimbursable and advanced collection agreements (RACA). The Forest Service did not have documented processes and related control activities for its fire incident cooperative agreements to reasonably assure the effectiveness and efficiency of its related fire incident operations. In addition, processes and related control activities applicable to RACAs were not adequately described in applicable manuals and handbooks in the Directive System, to reasonably assure that control activities could be performed consistently and effectively. Further, certain RACA processes in the Directive System had not been timely reviewed by management and did not reflect current processes. Moreover, as previously discussed, SOPs and desk guides developed in field offices related to RACA processes were not in the Forest Service’s Directive System. Finally, the Forest Service lacked control activities segregating incompatible duties performed by line officers and program managers in creating reimbursable agreements and the final disposition of related receivables. The Forest Service did not have documented processes and related control activities for its fire incident cooperative agreements to reasonably assure the effectiveness and efficiency of its related fire incident operations and reliable reporting internally and externally. As part of the service’s mission objective to suppress wildland fires, Forest Service officials stated that they enter into 5-year agreements referred to as master cooperative agreements with federal, state, and other entities. These agreements document the framework for commitment and support efficient and effective coordination and cooperation among the parties in suppressing fires, when they occur. The master cooperative agreements do not require specific funding commitments as amounts are not yet known. These agreements vary from region to region because of the differing laws and regulations pertaining to the participating states and other entities. These variations can also result in different billing and collection processes between regions. When a fire occurs, supplemental agreements, which are based on the framework established in the applicable master cooperative agreements, are signed by relevant parties for each fire incident. These agreements establish the share of fire suppression costs incurred by the Forest Service and amounts related to entities that benefitted from those fire suppression efforts. These supplemental agreements require commitment and obligation of funds. As indicated in figure 2, the Forest Service’s obligations for fire suppression activities ranged from $412 million to $1.4 billion over the 10-year period from fiscal years 2007 through 2016. In response to our request for documentation of processes and related control activities over its fire incident cooperative agreements, Forest Service officials stated that processes and related control activities over reimbursable agreements were applicable to both fire incident cooperative agreements and RACAs. However, based on our review of the Forest Service’s processes and related control activities over its reimbursable agreements, we found that the unique features of fire incident cooperative agreements (as compared to features of RACAs) were not addressed in the processes and related controls for reimbursable agreements. For example, there was no process and related control activities over the negotiation and review of (1) a fire incident master cooperative agreement, which is developed before a fire occurs, and (2) supplemental agreements, which are signed by all relevant parties after the start of a fire incident. These supplemental agreements detail, among other things, the terms for (1) fire department resource use, (2) financial arrangements, and (3) specific cost-sharing agreements. Another unique feature of fire incident cooperative agreements, which was not covered in process documents for its reimbursable agreements, was the preparation of the Cost Settlement Package. The preparation of this package does not start until after the fire has ended and the Forest Service has received and paid all bills. According to Forest Service officials, a fire incident is deemed to have ended when there are no more resources (firefighters and equipment) on the ground putting out the fire. However, this definition was not documented in the Forest Service’s manuals and handbooks in the Directive System. Based on our review of documentation that the Forest Service provided for four fire incidents, we found that for these incidents the Cost Settlement Packages and the billings took several months to years to complete after the fire incident. According to Forest Service officials, delays in preparing the Cost Settlement Package in many cases were due to parties involved in suppressing the fires taking a long time to submit their invoices to the Forest Service for payment. Because the preparation of Cost Settlement Packages was not included in the process documents, the Forest Service did not have a defined time frame for when, in relation to the end of the fire, the Cost Settlement Package must be completed. For example, in one case we reviewed, the bill for a cost settlement was sent 9 months after the fire occurred, and in another case, settlement occurred approximately 2 years after the fire occurred. For both fire incidents, based on the reports we reviewed, the fires were contained within a week or two, but the Forest Service does not have a policy for documenting the date when the fire incident is deemed to have ended. Because of the complexity of the process for negotiating and determining the reimbursable amounts from all the costs that the Forest Service pays for a fire incident, the reimbursable amounts may take time to negotiate, and subsequent billing to and collection from parties may take much longer. Forest Service officials stated that some receivables that were not going to be collected until after its financial system’s aging process for receivables deemed such receivables uncollectible and a bad debt are tracked in a spreadsheet outside its financial system. We found that the Forest Service did not have a documented process and related control activities to reasonably assure that its Budget Office was informed of these older receivables being tracked in a spreadsheet and the related progress of collection activities that local program managers and line officers perform, which could affect the reliability of the reported reimbursable receivable amounts. According to Standards for Internal Control in the Federal Government, management should internally communicate the necessary quality information to achieve the entity’s objectives. Without proper communication, important information, such as amounts that the Forest Service will receive from fire incident cost settlement negotiations, may not be considered in the Forest Service’s strategy for the effective and efficient management of fund transfers for fire suppression activities. Processes and related control activities applicable to RACAs were not adequately described in Forest Service manuals and handbooks in its Directive System. RACAs, which may be for research or other nonemergency purposes, are billed and collected based on previously agreed upon billing and collection terms. In accordance with the Forest Service’s Directive System, policies related to business processes, such as RACAs, are documented in its manuals while procedures for performing specialized activities are documented in its handbooks. We found that the manuals and handbooks in the Directive System did not adequately describe the processes and related control activities over the RACA processes to enable efficient and effective performance of the work by appropriate and responsible personnel. The manuals and handbooks related to RACAs state that a manager review the documentation to ensure that the funding supports the objective of the agreement, the agreement is the correct instrument for funding the project, all relevant terms and conditions have been included in the agreement, the entity’s financial strength and capability are acceptable, and all applicable regulations and OMB circulars have been addressed. However, there was no discussion in the manuals and handbooks about when the manager needs to perform the reviews and how these reviews were to be documented. Further, in response to our inquiry regarding procedures performed to assess the entity’s financial strength and capability are acceptable before a RACA is signed, Forest Service officials stated that there is currently no formal process for determining financial capability for RACAs. For reimbursable agreements, the Forest Service’s process documented in its handbook consisted of completing a creditworthiness checklist. However, the handbook did not describe procedures for (1) completing the checklist and (2) documenting responsible personnel’s review and approval of an entity’s acceptable financial capability. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel. Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel. Further, the standards also explain that management clearly document internal control in a manner that allows the documentation to be readily available and properly managed and maintained. In addition, the manuals and handbooks applicable to the RACAs have not been timely reviewed by management, and had not been updated to reflect current processes. For example, the document that serves as direction for Forest Service personnel on how to enter into RACAs referred to an outdated financial system that was replaced in fiscal year 2013. Further, the manuals and handbooks for the RACA processes had no indication that they had been reviewed within the past 5 years. Forest Service policy requires routine review, every 5 years, of policies and procedures in its Directive System. According to Forest Service officials, a staff member from ORMS sends an e-mail to officials responsible for updating these policies and procedures. However, appropriate control activities have not been designed to reasonably assure that updates were made, reviewed, approved, and issued as needed for continued relevance and effectiveness. Without adequate descriptions of processes and related control activities in its manuals and handbooks over RACAs, the Forest Service is at risk that processes and related control activities may not be properly, consistently, and timely performed. Further, because it lacks a process and related controls for monitoring and reviewing the updates of the guidance and various process documents in the Directive System, the Forest Service is at risk that its policies and procedures may not provide appropriate agency-wide direction in achieving control objectives, particularly when financial systems change and old processes may no longer be applicable. SOPs and desk guides related to RACA processes were not in the Directive System and are not considered official Forest Service policy and procedures. Forest Service field staff responsible for various processes generally developed SOPs and desk guides to document day-to-day procedures for employees in carrying out RACA processes to supplement the manuals and handbooks. However, the SOPs and desk guides did not reference the applicable manuals and handbooks they supplemented. Further, the SOPs and desk guides did not provide descriptions of (1) review procedures for authorization, completeness, and validity of RACAs and related receivables; (2) detailed review procedures to be performed and by whom; (3) timing of review procedures; and (4) how to document the completion of the review procedures. Finally, SOPs and desk guides did not have evidence that responsible officials reviewed and approved them to authorize their use. These SOPs and desk guides are only available in the field office where these were developed, and if similar SOPs and desk guides were developed in other field offices, control activities and how they are performed could vary. We also noted that these SOPs and desk guides were not timely updated to reflect processes and systems currently in use. For example, there were many instances where the SOPs and desk guides referred to systems that the Forest Service no longer used. Standards for Internal Control in the Federal Government states that management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives. Effective documentation assists in management’s design of internal control by establishing and communicating the who, what, when, where, and why of internal control execution to personnel. Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel and to achieve the entity’s objectives. Management assigns responsibility and delegates authority to key roles throughout the entity. As a result of the issues discussed above, the Forest Service is at risk that control activities may not be properly and consistently performed and its related control objectives may not be achieved efficiently and effectively. In addition, the Forest Service is at risk that knowledge for performing the control activities may be limited to a few personnel or lost altogether in the event of employee turnover. The Forest Service lacked control activities over the segregation of incompatible duties performed by line officers and program managers for reimbursable agreements and any adjustments affecting the final disposition of related receivables. Field offices manage the majority of Forest Service projects, including authorizing the agreements and monitoring related collection. The Forest Service line officer for fire incident cooperative agreements and program managers for RACA at the RSA, unit, or field levels initiate and develop the terms of the agreements and are also responsible for any subsequent negotiation of the agreements. In the process of negotiating and settling costs, the line officer or program manager has the authority to cancel or change related receivables that they deemed uncollectible. For example, in a fire incident, the line officer at the region or field level is involved in both developing a Cost Share Agreement and after the fire incident has ended, negotiating the Cost Settlement Package with parties involved in the agreement to determine the final settlement amount that the Forest Service will be reimbursed for expenses paid in suppressing the fire incident. Therefore, the line officer is responsible for initiating the Cost Share Agreement, modifying the Cost Settlement Package, and changing or canceling the related receivable, which represent conflicting duties. We also found that the Forest Service did not have any mitigating controls, such as independent approval of any adjustments affecting the final disposition of receivables, to mitigate the risk of these incompatible duties. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Segregation of duties contributes to the design, implementation, and operating effectiveness of control activities. To achieve segregation of key functions, management can divide responsibilities among different people to reduce the risk of error, misuse, or fraud. This may include separating the responsibilities for authorizing or approving transactions, processing and recording them, and reviewing the transactions so that no one individual controls all key aspects of a transaction or event. Forest Service officials stated they did not consider segregating the conflicting duties related to reimbursable agreements because these line officers and program managers were most familiar with the terms of the agreement and the activities performed. However, a lack of adequate segregation of conflicting duties or proper monitoring and review of conflicting duties for receivables from reimbursable agreements could result in receivables not being collected, and an increased risk of fraud. The Forest Service’s processes and related control activities over review of unliquidated obligations were not properly designed to reasonably assure optimum utilization of funds and were inconsistent with USDA and Forest Service policy. Further, Forest Service manuals and handbooks related to the review of unliquidated obligations did not clearly describe control activities and were not timely reviewed by management. The Forest Service reported unliquidated obligations of approximately $2.6 billion and $2.5 billion in its financial statements as of September 30, 2015, and 2016, respectively. In fiscal year 2016, the Forest Service deobligated about $319 million of its unliquidated obligations from prior years. The Forest Service’s procedures related to the review of unliquidated obligations were not properly designed and were inconsistent with USDA and Forest Service policy. In accordance with USDA Departmental Regulation (Regulation 2230-001) and related Forest Service policy, the Forest Service identifies and reviews unliquidated obligations that have been inactive for at least 12 months to determine whether delivery or performance of goods or services is still expected to occur. Once a determination has been made that an unliquidated obligation can be deobligated, program or procurement personnel are to notify finance personnel, in writing, within 5 days of the determination to process the deobligation. Within 15 days of receipt of the written notification, the unliquidated obligations are to be adjusted in the financial management system. The Forest Service CFO is then to be notified in writing that the deobligation was processed. Within 1 month of the close of each quarter, the Forest Service CFO is to submit to USDA’s Associate CFO for Financial Operations a certification stating that the Forest Service has performed reviews of its unliquidated obligations and taken appropriate actions, such as promptly deobligating an unliquidated obligation that is no longer needed. However, the Forest Service’s quarterly certifications are inconsistent with USDA and Forest Service policy because the months included in each quarterly review do not line up with the months outlined in policy. For example, as shown in table 1, based on policy the certification due on October 31, covers the months July through September. However in practice, the certification that the Forest Service prepared for October 31 covers May through July. As a result, the review and certification for August and September would be delayed an entire quarter. According to Forest Service officials, it takes considerable time to produce accurate unliquidated obligations reports from USDA’s financial system and then distribute them to field offices. Therefore, there is not sufficient time for the field offices to review and deobligate amounts not needed from the unliquidated obligations balances to meet USDA’s certification timing and requirements. However, the Forest Service has not developed other processes and control activities that could help meet USDA and Forest Service policy and reasonably assure that unliquidated obligations are reviewed timely and appropriate actions are taken. As a result, there is an increased risk that the Forest Service may not achieve its control objectives of optimum utilization of funds and timely adjustments of obligated balances. The Forest Service’s process and related control activities over its review of unliquidated obligations and resulting certifications were not adequately described in manuals and handbooks in its Directive System. Further, the manuals and handbooks were not timely reviewed and updated to reflect processes and systems currently in use. In accordance with the Forest Service’s Directive System, policies are documented in its manuals while procedures for performing specialized activities are documented in its handbooks. However, we found that the Forest Service’s processes and related control activities for reviewing unliquidated obligations were not adequately described and documented in such manuals and handbooks. Although parts of the applicable section of the handbook referred to procedures, there were no detailed descriptions of the processes, and only references to objectives of the procedures for reviewing unliquidated obligations were listed. For example, in identifying unliquidated obligations for review, the narrative description of the procedures in the handbook states that the responsible obligating official must review each selected unliquidated obligation to determine whether (1) delivery or performance of goods or services has occurred or is expected to occur and (2) accounting corrections to the obligation data in the accounting system are necessary. The handbook also refers to an unliquidated obligations report listing the unliquidated obligations that must be reviewed. The narrative does not provide any detailed procedures that obligating officials or responsible personnel need to perform, how to perform those procedures, and how those control activities are to be documented. The guidance in the handbook was supplemented by two desk guides. However, the desk guides are outside the Forest Service’s Directive System and, as previously noted, the Directive System is the only place where the Forest Service’s policy and procedures are issued. In addition, these desk guides did not reference the applicable guidance in the Directive System that they were supplementing. Further, the process and related control activities for adjusting unliquidated obligations within 15 days of receipt of written notification, as stated in USDA’s policy, were not described in either the handbooks or the desk guides. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks to achieve an effective internal control system. Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel. Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel. Further, the standards also explain that management clearly document internal control in a manner that allows documentation to be readily available and that documentation be properly managed and maintained. In addition, manuals and handbooks for processes related to review and certification of unliquidated obligations had no evidence that they had been reviewed within the past 5 years for ongoing relevance and effectiveness. According to a Forest Service manual, all service-wide directives, except interim directives, shall be reviewed at least once every 5 years. The Forest Service does not have an effective process in place to monitor the reviews and any updates of the manuals and handbooks in its Directive System. As previously discussed, while ORMS sends an e- mail requesting that the applicable officials review and update the guidance in the manuals and handbooks, there is no follow-up process to help ensure that documents were reviewed and updated as needed. Because the Forest Service’s process and related control activities over its review and certification of unliquidated obligations were not adequately described in its manuals and handbooks, the Forest Service is at risk that its control activities may not reasonably assure that control objectives provide (1) optimum utilization of funds and (2) for unliquidated obligations that are no longer needed to be efficiently and effectively deobligated and made available for other program needs. Adequate processes and related control activities over the Forest Service’s budgetary resources are critical in reasonably assuring that these resources are timely and effectively available for its mission operations, including fire suppression. However, we identified deficiencies in the Forest Service’s processes and related controls over allotments, unobligated no-year funds from prior years, administrative control of funds, fund transfers, reimbursable agreements, and available funds from deobligation of unliquidated obligations. Deficiencies ranged from a lack of processes to control activities that were not properly designed, resulting in an increased risk that Forest Service funds may not be effectively and efficiently monitored and used. In addition, the Forest Service’s manuals and handbooks, which provide the directives for the areas we reviewed, had not been reviewed by management in accordance with the Forest Service’s 5-year review policy. Further, Forest Service staff prepared SOPs and desk guides that documented control activities, but they were not issued as official policy and had not been reviewed and approved by responsible officials. As a result, the Forest Service is at increased risk that the control activities may not be consistently performed across the agency and that the guidance in the SOPs and desk guides may not comply with agency policy in the Directive System. To improve internal controls over the Forest Service’s budget execution processes, we are making the following 11 recommendations: The Chief of the Forest Service should (1) revise its process and (2) design, document, and implement related control activities to reasonably assure that amounts designated in appropriations acts for specific purposes are properly used for the purposes specifically designated. (Recommendation 1) The Chief of the Forest Service should (1) develop a process and (2) design, document, and implement related control activities to reasonably assure that unobligated no-year funds from prior years are reviewed for continuing need. (Recommendation 2) The Chief of the Forest Service should (1) design, document, and implement a comprehensive system for administrative control of funds and (2) submit it for review and approval by USDA before issuance, as required by the USDA Budget Manual. (Recommendation 3) The Chief of the Forest Service should design, document, and implement control activities over the preparation and approval of a fire suppression fund transfers strategy, to specify all appropriate factors to be considered in developing and documenting the strategy, and incorporate these control activities into the Directive System. (Recommendation 4) The Chief of the Forest Service should design, document, and implement processes and related control activities for its fire incident cooperative agreements to reasonably assure efficient and effective operations and timely and reliable reporting of reimbursable receivables related to fire incident cooperative agreements, and incorporate them in the Directive System. (Recommendation 5) The Chief of the Forest Service should update the RACA manuals and handbooks to adequately describe the processes and related control activities applicable to RACAs to reasonably assure that staff will know (1) how and when to perform processes and control activities and (2) how to document their performance. (Recommendation 6) The Chief of the Forest Service should design, document, and implement segregation of duties or mitigating control activities over reimbursable agreements and any adjustments affecting the final disposition of related receivables. (Recommendation 7) The Chief of the Forest Service should modify, document, and implement control activities consistent with USDA and Forest Service policy to reasonably assure that unliquidated obligations are reviewed timely and appropriate actions are taken. (Recommendation 8) The Chief of the Forest Service should adequately describe the processes and related control activities for unliquidated obligations review and certification processes in manuals and handbooks within the Directive System. (Recommendation 9) The Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that manuals and handbooks for allotments, reimbursable agreements, and review of unliquidated obligations are reviewed and updated every 5 years, consistent with Forest Service policy. (Recommendation 10) The Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that SOPs and desk guides (1) clearly refer to guidance in the Directive System for allotments, reimbursable agreements, and review of unliquidated obligations and (2) are reviewed and approved by responsible officials prior to use. (Recommendation 11) We provided a draft of this report to USDA for comment. In its comments, reproduced in appendix III, the Forest Service stated that it generally agreed with the report and that it has made significant progress to address the report’s findings. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We are sending copies of this report to the appropriate congressional committees and to the Secretary of Agriculture and the Chief of the Forest Service. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-9869 or khana@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix IV. Our objectives were to determine the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) unliquidated obligations. We reviewed the Forest Service’s process documents and control activities, policies and procedures from its manual and handbooks in its Directive System, and other guidance in the form of standard operating procedures (SOP) and desk guides to obtain an understanding of internal controls at the Forest Service related to our three objectives. We reviewed the control activities that the Forest Service identified to determine whether the activities would achieve the control objectives that the service identified and whether the activities were consistent with Standards for Internal Control in the Federal Government. We also reviewed recent relevant GAO and U.S. Department of Agriculture (USDA) Office of Inspector General reports to obtain background information related to the Forest Service’s budget execution processes. We evaluated the design of the Forest Service’s control activities based on data for fiscal year 2016. To address our first objective, we reviewed Forest Service process documents related to allotments and budget authority to obtain an understanding of control activities over the allotments of budgetary resources, its system for administrative control of funds, and any related fund transfers between Forest Service appropriations. The process documents included a list of control objectives and related control activities that the Forest Service had used to assess its internal controls. We also reviewed the related guidance in appendix H to Office of Management and Budget Circular No. A-11, Preparation, Submission, and Execution of the Budget for Administrative Control of Funds, to identify requirements that agencies must meet to ascertain whether their controls over funds management are properly designed. We interviewed key officials from the Forest Service’s Strategic Planning, Budget and Accountability Office to gain an understanding of their processes for allotments of budgetary resources, its system for administrative control of funds, and fund transfers between Forest Service appropriations for wildland fire suppression activities, including how each of their risk assessments were performed and their plans to mitigate the risks. We reviewed and analyzed the processes documented in the manuals and handbooks collectively referred to as directives to determine whether the processes and control activities were designed to achieve the Forest Service’s stated objectives. Specifically, we examined the Forest Service’s control activities to determine whether these sufficiently communicated the procedures to be performed and the documentation to be prepared. We also reviewed USDA Budget Manual to determine whether Forest Service guidance was consistent with USDA’s requirements for all of its component agencies, specifically requirements related to the administrative control of funds. To address our second objective, we reviewed the Forest Service’s policies, procedures, and other documentation and interviewed agency officials to develop an understanding of its processes related to reimbursable agreements and related collection activities. We first identified, through interviews with Forest Service officials, the different kinds of reimbursable agreements that the Forest Service enters into with other USDA components, other federal agencies, state and local government agencies, and nongovernment entities to carry out its mission for the benefit of the public. Two distinct types of reimbursable agreements include (1) fire incident cooperative agreements and (2) reimbursable and advanced collection agreements. We reviewed Forest Service process documents and templates related to these two types of reimbursable agreements provided to obtain an understanding of control activities over reimbursable processes. We reviewed the list of control objectives and related control activities that the Forest Service identified to determine whether the control activities were designed to achieve the applicable control objectives. To address our third objective, we reviewed the Forest Service’s policies, procedures, and other documentation related to and interviewed agency officials about unliquidated obligations to develop an understanding of the Forest Service’s review and certification processes for unliquidated obligations balances. We reviewed the Forest Service’s control activities related to its process for reviewing unliquidated obligations to obtain an understanding of control activities around its process and to determine whether the control activities were designed to achieve the applicable control objectives. Based on the results of our evaluation of the Forest Service’s design of internal control activities over the budget execution processes, we did not evaluate the implementation of the control activities or whether they were operating as designed. While our audit objectives focused on certain control activities related to (1) allotments of budgetary resources, the Forest Service’s system for administrative control of funds, and related fund transfers; (2) reimbursables and related collections for reimbursable agreements; and (3) unliquidated obligations, we did not evaluate all control activities and other components of internal control. If we had done so, additional deficiencies may or may not have been identified that could impair the effectiveness of the control activities evaluated as part of this audit. We conducted this performance audit from August 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Standards for Internal Control in the Federal Government provides the overall framework for establishing and maintaining internal control. Internal control represents an agency’s plans, methods, policies, and procedures used to fulfill its mission, strategic plan, goals, and objectives. Internal control is a process by an entity’s oversight body, management, and other personnel to provide reasonable assurance that the objectives of the entity will be achieved. When properly designed, implemented, and operating effectively, it provides reasonable assurance that the following objectives are achieved: (1) effectiveness and efficiency of operations, (2) reliability of internal and external reporting, and (3) compliance with applicable laws and regulations. Internal control is not one event, but a series of actions that occur throughout an entity’s operations. The five components of internal control are as follows: Control Environment - The foundation for an internal control system that provides the discipline and structure to help an entity achieve its objectives. Risk Assessment - Assesses the risks facing the entity as it seeks to achieve its objectives and provides the basis for developing appropriate risk responses. Control Activities - The actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system, which includes the entity’s information system. Information and Communication - The quality information management and personnel communicate and use to support the internal control system. Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews. An effective internal control system has each of the five components of internal control effectively designed, implemented, and operating with the components operating together in an integrated manner. In this audit, we assessed the design of control activities at the Forest Service related to its (1) allotments of budgetary resources and any related fund transfers between Forest Service appropriations, (2) reimbursables and related collections, and (3) review of unliquidated obligations. In addition to the contact named above, the following individuals made key contributions to this report: Roger Stoltz (Assistant Director), Meafelia P. Gusukuma (Auditor-in-Charge), Tulsi Bhojwani, Cory Mazer, Sabrina Rivera, and Randy Voorhees.", "summary": "The Forest Service, an agency within USDA, performs a variety of tasks as steward of 193 million acres of public forests and grasslands. Its budget execution process for carrying out its mission includes (1) allotments, which are authorizations by an agency to incur obligations within a specified amount, and (2) unliquidated obligations, which represent budgetary resources that have been committed but not yet paid. Deobligation refers to an agency's cancellation or downward adjustments of previously incurred obligations, which may result in funds that may be available for reobligation. GAO was asked to review the Forest Service's internal controls over its budget execution processes. This report examines the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) review and certification of unliquidated obligations. GAO reviewed the Forest Service's policies, procedures, and other documentation and interviewed agency officials. In fiscal years 2015 and 2016, the Forest Service received discretionary no-year appropriations of $5.1 billion and $5.7 billion, respectively. It is critical for the Forest Service to manage its budgetary resources efficiently and effectively. While the Forest Service had processes over certain of its budget execution activities, GAO found the following internal control deficiencies: Budgetary resources . The purpose statute requires that amounts designated in appropriations acts for specific purposes are used as designated. The Forest Service did not have an adequate process and related control activities to reasonably assure that amounts were used as designated. In fiscal year 2017, GAO issued a legal opinion that the Forest Service had failed to comply with the purpose statute with regard to a $65 million line-item appropriation specifically provided for the purpose of acquiring aircraft for the next-generation airtanker fleet. Further, the Forest Service lacked a process and related control activities to reasonably assure that unobligated no-year appropriation balances from prior years were reviewed for their continuing need; did not have a properly designed system for administrative control of funds, which keeps obligations and expenditures from exceeding limits authorized by law; and had not properly designed control activities for fund transfers to its Wildland Fire Management program. These deficiencies increase the risk that the Forest Service may make budget requests in excess of its needs. Reimbursable agreements . To carry out its mission, the Forest Service enters into reimbursable agreements with agencies within the U.S. Department of Agriculture (USDA), other federal agencies, state and local government agencies, and nongovernment entities. The Forest Service (1) did not have adequately described processes and related control activities in manuals and handbooks for its reimbursable agreement processes and (2) lacked control activities related to segregating incompatible duties performed by line officers and program managers. For example, line officers may be responsible for initiating cost sharing agreements, modifying cost settlement packages, and changing or canceling the related receivable, which represent incompatible duties. As a result, programs and resources may not be protected from waste, fraud, and mismanagement. Unliquidated obligations . The Forest Service's processes and control activities over the review and certification of unliquidated obligations were not properly designed to reasonably assure the best use of funds and that unliquidated obligations would be efficiently and effectively deobligated and made available for other program needs. Further, the current process, as designed, was inconsistent with USDA and Forest Service policy. In addition, the Forest Service's manuals and handbooks, which provide directives for the areas that GAO reviewed, had not been reviewed by management in accordance with the Forest Service's 5-year review policy. Further, standard operating procedures and desk guides prepared by staff to supplement the manuals and handbooks were not issued as directives and therefore were not considered official policy. This increases the risk that control activities may not be consistently performed across the agency. GAO is making 11 recommendations to improve processes and related internal control activities over the management of the Forest Service's budgetary resources, reimbursable receivables and collections, and its process for reviewing unliquidated obligations. The Forest Service generally agreed with the report and stated that it has made significant progress to address the report findings.", "document_type": "gao"}
{"report": "In fiscal year 2017, approximately 24,000 CBP officers performed a variety of functions at over 300 air, land, and sea POEs, including inspecting travelers and cargo containers, among other activities. According to CBP, increases in passenger and cargo volumes are outpacing CBP’s staffing resources, resulting in increased passenger wait times and cargo backups, among other things. For example, in fiscal year 2017, CBP identified a need for an additional 2,516 CBP officers across all POEs. Further, as of 2017, CBP estimated that it needed approximately $5 billion to meet infrastructure and technology requirements at about 167 land POEs. To help identify and mitigate resource challenges, CBP developed its Resource Optimization Strategy, an integrated, long-term plan to improve operations at all POEs. The Strategy consists of three components: Business transformation: utilize new technology, such as Automated Passport Control kiosks, or new processes, such as trusted traveler programs, to increase CBP operational efficiencies; Workload Staffing Model: utilize modeling techniques to help ensure that existing staffing resources are appropriately aligned with threat environments while maximizing cost efficiencies; and Alternative funding strategies: utilize public-private partnership agreements, such as RSP and DAP, to supplement regular appropriated resources. The RSP enables partnerships between CBP and private sector or government entities, allowing CBP to provide new or additional services upon the request of partners. These services can include customs, immigration, or agricultural processing; border security and support at any facility where CBP provides, or will provide, services; and may cover costs such as salaries, benefits, overtime expenses, administration, and transportation costs. According to authorizing legislation, RSP agreements are subject to certain limitations, including that they may not unduly and permanently impact existing services funded by an appropriations act or fee collection. According to AFP officials, the purpose of the RSP is to provide new or additional CBP services at POEs that the component would otherwise not have been able to provide. From 2013 to 2017, the number of RSP agreements has increased as new authorizing legislation has expanded participant eligibility and made the program permanent. Table 1 below outlines the evolution of RSP through its different legislative authorities. The DAP permits CBP and GSA to accept donations from private and public sector entities, such as private or municipally-owned seaports or land border crossings. Donations may include real property, personal property, money, and non-personal services, such as design and construction services. Donated resources may include improvements to existing facilities, new facilities, equipment and technology, and operations and maintenance costs, among other things. In terms of the types of locations that may accept donations, donations may be used for activities related to land acquisition, design, construction, repair, alteration, operations, and maintenance, including installation or deployment of furniture, fixtures, equipment or technology, at an existing CBP-owned land POE; a new or existing space at a CBP air or sea POE; or a new or existing GSA-owned land POE. CBP and GSA may not accept donations at a leased land POE, nor is CBP able to accept a donation at or for a new land POE if the combined fair market value of the POE and donation exceeds $50 million. Additionally, CBP may not use monetary donations accepted under the DAP to pay salaries of CBP employees performing inspection services. Finally, CBP may not accept donations on foreign soil. Table 2 below depicts the evolution of DAP authorizing legislation since the program’s inception in 2014. Figures 1 and 2 depict the location and number of RSP and DAP agreements in place through fiscal year 2017. CBP has developed detailed guidance on the RSP application process, including application timeframes, requirements, and evaluation criteria, and this guidance is on CBP’s website. According to this guidance, in 2017, CBP expanded the RSP application submission period. Whereas in prior years applications were accepted during a single one-month window, prospective partners may now submit applications throughout the year. Under this new process, CBP evaluates submissions three times per year—beginning in March, July, and November. According to CBP, the submission period was expanded in part because new legislative authorities removed previous restrictions on the number of RSP agreements CBP can enter into each year. The overarching RSP application process—from application submission through CBP evaluation and applicant notification—is depicted in figure 3. According to CBP’s procedures for accepting and reviewing applications, potential partners first submit a letter of application that includes a variety of logistical information concerning the stakeholders, services to be requested, location of services to be requested, available facilities, and funding. For example, in submitting a letter of application, an applicant is to estimate how many hours of services it may request per month and identify the applicant’s available budget for the first fiscal year of the partnership, among other things. According to the application guidance, prospective applicants are encouraged to work with local CBP officials at individual POEs to develop letters of application. After submission, CBP officials at the affected POEs, including affected CBP Field Offices, review applications and communicate their findings and recommendations to the AFP office. In addition, the CBP Office of Chief Counsel reviews the applications for legal sufficiency and may suggest that CBP request additional information from applicants. Next, CBP convenes an expert panel consisting of two senior CBP officials who are not part of the AFP office to consider POE and legal comments on the applications, among other information provided by AFP officials. The panel deliberates and scores each proposal based on seven criteria, and all proposals that achieve a certain minimum score are accepted. The seven evaluation criteria used to weigh the merits of potential new partnership agreements are listed in table 3. The scoring scale ranges from -5 to 5, and the 7 criteria are weighted based on potential impact. For example, impact to CBP operations is weighted more heavily than other agency support. In September 2017, we observed an RSP application review panel. Among other things, we observed senior CBP officials, who were independent from the AFP office, score 31 RSP applications that impacted 46 CBP Field Office locations. The panel members based their deliberations on set criteria and reached consensus on which applications to approve. Finally, Congress and approved partners are notified of the selections. Where CBP denies a proposal for an agreement, it is to provide the reason for denial unless such reason is law enforcement sensitive or withholding the reason for denial is in the national security interests of the United States. Once CBP approves an application, CBP and its prospective new partners follow documented procedures to formalize the agreements and prepare all involved stakeholders, including new partners and local CBP officials, for Reimbursable Services Agreement implementation. The process to establish new RSP partnerships at specific POEs is depicted in figure 4 below. After CBP notifies the applicant of its selection, officials from the AFP office schedule a site visit to meet with local CBP officials at the POEs and the new partners. According to CBP program requirements, the purpose of the site visit is to discuss workload and services, and to verify that the POE facilities and equipment meet CBP’s required specifications. AFP officials also provide program training to CBP Field Office and POE officials, as well as to new partners on the processes to request and fulfill RSP service requests, among other things. We attended an AFP office visit to CBP’s Baltimore Field Office in October 2017 and observed AFP officials sharing best practices with local CBP officials and new RSP partners. According to CBP’s procedures, before any RSP services can be provided, CBP and the prospective partners must sign a legally binding Reimbursable Services Agreement. Among other things, the Reimbursable Services Agreement establishes that the partner will reimburse CBP for the costs of services provided under the RSP authorizing legislation, including the officer overtime rates, benefits, and a 15 percent administrative fee. Further, the partner agrees to reimburse CBP for these services within 15 days of billing through a Department of the Treasury system. Finally, local CBP Field Office and partner officials negotiate a local MOU that outlines the services, schedules, and other conditions for the POE location(s) covered by the Reimbursable Services Agreement. Similar to the RSP application process, CBP, in conjunction with GSA, utilizes criteria and documented processes to evaluate DAP proposals and implement the program. More specifically, in alignment with the most recent DAP authorizing legislation, CBP and GSA developed the Section 482 Donation Acceptance Authority Proposal Evaluation Procedures & Criteria Framework (Framework) for receiving, evaluating, approving, planning, developing, and formally accepting donations under the program. The initial steps of the Framework, which encompass the DAP application process, are depicted in figure 5. In prior years, CBP accepted large-scale proposals, defined by CBP as $5 million or more, during one application and evaluation cycle per year. Beginning in fiscal year 2017, CBP accepts large-scale proposals on a rolling basis, using a streamlined process for expedited review. CBP also accepts small-scale proposals, defined by CBP as less than $5 million, on a rolling basis. According to AFP officials, CBP undertakes considerable effort to provide early education about the program to potential partners who plan to apply for a DAP agreement, including discussing CBP’s operational needs at the POEs. The Framework notes that this outreach helps prospective donors gauge their willingness and ability to work cooperatively with CBP and GSA on potential POE improvements and also helps applicants enhance the viability of their submissions. After a DAP proposal is submitted and checked for completeness, CBP and GSA subject matter experts evaluate the proposal against seven operational and six technical criteria (see table 4 below). The evaluators reach consensus on proposed recommendations and submit their evaluation results to CBP and GSA senior leadership for consideration. Leadership reviews the recommendations and other pertinent information and determines whether or not to select proposals. In accordance with legislative requirements, CBP must notify DAP applicants of the determination to approve or deny a proposal not later than 180 days after receiving the completed proposal. Figure 6 depicts all three phases of the DAP Framework from selecting a proposal to signing a formal Donations Acceptance Agreement. Phase 2 of the Framework begins shortly after CBP notifies new partners of DAP selections. CBP officials then initiate a series of biweekly calls with GSA officials, if applicable, and the partner. AFP officials provide partners with documentation in the form of a high-level roadmap which contains a sequence of activities and deliverables CBP expects from the partners, and all stakeholders convene to track progress against planned activities and milestones. CBP, GSA, and the partner also meet to discuss the technical implementation of the donation. AFP and GSA officials conduct a site visit to meet with new partners; obtain a visual understanding of how CBP, GSA, and the partner will implement the donation; and help the partner begin the planning and development phase. CBP, GSA, and the partner negotiate a MOU on roles and responsibilities and terms and conditions of the donation. CBP then provides the partner with its technical standards and other operational requirements, such as space and staffing needs, under a non- disclosure agreement. The partner then begins to plan and develop its conceptual proposal into an executable project in close coordination with CBP and GSA. By the end of Phase 2, CBP, GSA, as applicable, and the partner confirm that all pre-construction development activities are complete, no outstanding critical risks exist, and that the appropriate agencies are prepared to request future funding, as applicable. Finally, stakeholders move to Phase 3 of the Framework to formalize the terms and conditions under which either CBP, GSA, or both, may accept the proposed donation. After CBP, GSA and the partner agree to the provisions of the project plan, they sign the legally binding Donations Acceptance Agreement, and stakeholders proceed to project execution. CBP has documented standard operating procedures, roadmaps, and other formally documented policies and procedures to administer the RSP and DAP. In addition, as mentioned above, AFP officials conduct site visits to the POEs with new RSP and DAP agreements, and provide formal training for CBP personnel at Field Offices and POEs. The general process for administering RSP–from requesting and fulfilling services to billing and collecting payments–is dictated by standard operating procedures, as shown in figure 7. In general, RSP partners submit a formal request for services by completing an electronic form and calendar access via CBP’s Service Request Portal. Once the partner submits the request, the portal sends an electronic copy of the request to the partner’s email and the port’s RSP email inbox. CBP supervisors at the POE access the Service Request Portal to review, edit, approve, deny, or cancel requests. The system tracks and requires CBP officials to comment on any requests that CBP edits, denies, or cancels, and sends an email notification of CBP’s decision to the partner. If CBP approves the request, the Service Request Portal creates a line item with information about the request, such as codes for the location and partner, as well as the hours CBP officers will work. Next, CBP officers enter line item information—information on accounting codes for the location and partner and the actual hours CBP officers worked to fulfill the request—into CBP’s overtime management system. At the end of every shift, CBP supervisors review and approve the amount of overtime and other data entered into the overtime management system. In addition, data from this system is checked for accuracy and certified weekly by both CBP POE and AFP officials. After the overtime and request information is checked, payroll data generated from the overtime management system, including salary and benefits information for each officer that worked RSP overtime, uploads to CBP’s financial accounting system at the end of each pay period, or every 14 days. CBP bills its partners for two full pay periods, and the partner has 15 days to make a full payment through the partner’s account with the Department of the Treasury. After the partner makes the payment through the Department of the Treasury collection system, CBP National Finance Center officials reimburse the CBP annual Operations & Support account initially used to pay its officers for all of the RSP overtime worked during that pay cycle by moving the expenses to the RSP officer payroll fund. Although the general request and billing processes for RSP services are the same across all POEs regardless of location or mode—air, land, or, sea—CBP and its partners have flexibility to tailor RSP implementation based on local conditions or needs. Some of this implementation variation is documented in locally negotiated MOUs. For example, CBP’s partner at Miami International Airport in Florida relies on CBP to schedule RSP overtime daily based on CBP expertise. CBP officials at the airport developed their own software templates to plan, track, and manage CBP officers for RSP overtime for a given amount of available overtime funding. At the Pharr land POE in Texas, CBP staff at the POE submit recommended RSP overtime request proposals to the partner based on local conditions, including staffing, and the partner decides whether to submit a formal request to CBP. In all of these instances, RSP partners and CBP Field Office and POE officials expressed satisfaction with their more customized administration processes. CBP and its partners also noted some challenges to implementing RSP and DAP agreements, but partners generally agreed that the program benefits outweighed the challenges. For example, some DAP partners we met with mentioned that navigating GSA requirements was difficult and sometimes caused delays. GSA officials we met with noted that they are educating partners on GSA building standards and the GSA approvals process for donations, among other things, to help partners manage their timelines and expectations. GSA officials noted that they are working with CBP and partner officials to manage and learn from these early implementation challenges. CBP, GSA, and DAP partners also acknowledged a lack of clarity about which entity or entities are responsible for the long-term operations and maintenance costs of DAP infrastructure projects, although CBP has taken steps to address this issue. GSA pricing procedures dictate that once a POE receives an improvement, it charges the customer (CBP) for the additional operating costs, such as utilities. CBP officials acknowledged that the long term sustainability of donations, specifically the costs of operations, maintenance, and technology for infrastructure- based donations, needs to be addressed, and officials reported taking initial steps. For example, once CBP and its partner complete the planning of a project and GSA has calculated the project’s estimated operating expenses, the AFP office begins working with the CBP Office of Facilities & Asset Management to budget for such costs with the goal of reaching a mutually acceptable partnership for donations that will have long-term sustainability. CBP officials noted that the agency cannot commit to funding that is not guaranteed for the future. To mitigate budget uncertainty, CBP now includes language in its MOU and Donations Acceptance Agreement templates stating that upon project completion, the partner will be responsible for all costs and expenses related to the operations and maintenance of the donation until the federal government has the available funding and resources to cover such costs. According to AFP officials, CBP also makes efforts to educate its DAP partners on the budgeting process and associated timeframes with project completion. CBP officials noted that the majority of projects are in the early stages of development, and it will be years before the projects are complete. Furthermore, GSA officials stated that the actual operating and maintenance costs associated with DAP projects will not be known until about 1 year after the projects are completed. As noted previously, as CBP’s authorities to enter into new RSP agreements expanded to an unlimited number of agreements per year, and in total, for all types of POEs in 2017, the number of applications that CBP has selected has also increased. For example, in fiscal year 2013, CBP received 16 applications from interested stakeholders and selected five of these applications for partnerships, while in fiscal year 2017 cycle 2, CBP received 31 applications from interested stakeholders and tentatively selected 30 for partnerships. From fiscal year 2013 through fiscal year 2017 cycle 2, CBP has tentatively selected over 100 partners for RSP agreements. This figure includes RSP agreements under the authorities provided in Section 481 that allow CBP to enter into agreements with small airports to pay for additional CBP officers above the number of officers assigned at the time the agreement was reached. Figure 8 details this information for each application cycle. As mentioned above, once CBP selects an application for a new reimbursable services partnership, CBP and its partner sign a legally binding Reimbursable Services Agreement. From fiscal years 2013 through 2017 cycle 2, CBP selected 114 applications and entered into 69 Reimbursable Services Agreements with partners. As mentioned previously, local CBP officials also work with the partner to negotiate the terms of an MOU, which outlines how the partnership will work at the POE. As of November 2017, CBP and its partners were implementing 54 MOUs from partnerships that they entered into from fiscal years 2013 through 2017. Of those 54 MOUs, 10 cover agreements at land POEs, 22 cover agreements at sea POEs, and 23 cover agreements at air POEs. According to AFP officials, during the process of negotiating the MOUs with its partners, CBP and the partner often agree to include a variety of services that the partner can request, so that if a need arises, there is a record that CBP has agreed to provide those services under the MOU. CBP and its partners also negotiate a variety of other terms for the agreements in the MOUs, including the types of requests for services the partner can make, expectations for how often CBP and its partners communicate, and how to amend the MOU, among others terms. Table 5 provides details about the existing 54 MOUs. As noted in the above table, MOUs detail a variety of services that CBP officers can provide at the POEs, and the types of services vary by POE type. For example, most MOUs across land, air, and sea POEs allow partners to request services for freight or cargo processing, while a majority of the MOUs at air POEs allow CBP to provide services for traveler processing and to address unanticipated irregular operations or diversions. In addition, all MOUs allow partners to submit ad-hoc requests that partners make for services in advance. Most of these MOUs also allow partners to make urgent requests for immediate services. In examining the MOUs, we found that 44 of the 54 MOUs, or 81 percent, indicate that CBP and its partner meet at least quarterly to discuss how the partnership is going. Further, CBP and some of its partners meet more often. For example, CBP and its partners agreed to meet monthly in accordance with 23 MOUs, while CBP and its partners agreed to meet weekly according to 3 MOUs. All partners we interviewed that have utilized their RSP agreements reported that maintaining strong communication between CBP and the partner is important to implementing the RSP agreements at the POEs. Appendix I has additional information about each of the 54 current MOUs. Tables 6 and 7 provide the amount that partners reimbursed CBP for overtime services, the total number of overtime hours that CBP officers worked for each fiscal year from 2014 through 2017, and the total number of travelers and vehicles that CBP officers inspected during RSP partner requests for services from fiscal years 2014 through 2017 respectively. Similar to the RSP, the number of DAP partnerships more than doubled in fiscal year 2017. In fiscal years 2015 and 2016, CBP selected seven DAP proposals. In fiscal year 2017, CBP selected 9 DAP proposals. Combined, these 16 DAP projects affect 13 POEs. The donations that partners will provide CBP and GSA, as applicable, include a variety of POE improvements such as the installation of new inspection booths and equipment, removal of traffic medians, and new cold inspection facilities, as well as smaller items such as a high-capacity perforating machine, which reduces document processing time and allows CBP officers to focus on more critical operational duties, among other donations. According to CBP, these 16 donation proposals combined are intended to support over $150 million in infrastructure improvements at U.S. POEs. CBP also expects a variety of benefits from these donations, including support for local and regional trade industries and tourism, reductions in border wait times, and increased border security and officer safety, among others. Table 8 provides information on the scope and status of DAP projects that CBP and GSA have selected since CBP established the DAP in fiscal year 2015. As noted in the table above, CBP has fully accepted six donations, including the donation of a high capacity perforating machine to facilitate the processing of titles and other documents at the Freeport Sea POE in fiscal year 2016, the removal of traffic medians at the Ysleta Land POE, and recurring luggage donations in fiscal year 2017. Figure 9 is a photo of the high capacity perforating machine that CBP accepted at the Port of Freeport Sea POE from its partner Red Hook Terminals in 2016. As mentioned above, once CBP selects an application for a new donation partnership, CBP, GSA, if applicable, and partner officials negotiate the terms of a MOU, which outlines intentions of the partnerships for projects that require coordinated planning and development. CBP currently has MOUs for 9 of its 16 DAP projects. The MOUs contain a variety of project- specific information, including the scope of the project, a list of documents that CBP and GSA may request to determine whether the project is ready for execution, and details on donor warranty and continuing financial responsibility after CBP and GSA accepts the donation. As mentioned previously, CBP classifies donations under the DAP into two categories: small-scale donations, which are reviewed on an expedited basis, and large-scale donations. For example, the Salvation Army’s recurring donation of six to nine pieces of luggage per year to support Office of Field Operations canine training activities is a small-scale donation. Large-scale donations are donations with an estimated value of $5 million or more and are moderate to significant in size, scope, and complexity. For example, the City of Laredo’s donation for construction of four additional commercial vehicle lanes and booths, roadways and infrastructure, and exit booths and related technologies is a large-scale donation. Given that partner requests for RSP services are predominately for the purposes of CBP officer overtime, CBP primarily monitors the RSP through audits. Specifically, CBP conducts regular audits using information from its Service Request Portal, its overtime management system, and its internal accounting system to ensure partners appropriately reimburse CBP for the overtime services officers provide under the RSP. Figure 10 describes how and when CBP uses these tools to conduct audits as part of the RSP request, fulfillment, and billing processes. As noted previously, CBP officers who work RSP overtime enter information from the Service Request Portal, such as the partner code and POE code, into CBP’s overtime management system for the actual hours that the officer worked to complete the request. At the end of every shift, CBP supervisors review and approve the information entered into the overtime management system, which contains the information needed for CBP to bill its RSP partner for the services that it performed, such as the number of hours each CBP officer worked to fulfill RSP requests and the salary and benefits information for those officers. POE supervisors then update the Service Request Portal records so that they reflect what CBP officers actually worked. On Mondays, AFP officials and CBP POE supervisors conduct concurrent audits of weekly overtime management system reports and reconcile these data with the information from the Service Request Portal to ensure that CBP will bill the partner appropriately. At the end of two pay period cycles, or every 28 days, officials at CBP’s National Finance Center review the payroll and benefits information that was uploaded from the overtime management system into CBP’s financial management system to confirm that it matches the appropriate partner code. This ensures that the correct partner is billed for the reimbursable services that CBP provided. Generally, CBP and partner officials we met with did not have any problems with the billing and payment process, and CBP officials noted that any discrepancies in the billing information between the Service Request Portal, the overtime management system, or the financial accounting system, such as the partner code or the number of hours that CBP officers worked, are usually identified and corrected during the weekly audits. Further, in October 2017, we received a demonstration of how partners and CBP manage requests for services in the Service Request Portal, how CBP officers and supervisors at the POEs enter and review overtime information, and how CBP runs reports in its financial accounting system during the audit process. In addition, we conducted a test of the data from the overtime management system and the billing information from the financial accounting system for a selection of partners across eight pay periods from fiscal years 2014 through 2017 to determine if CBP billed its partners appropriately. Specifically, for each of the eight selected pay periods, we randomly selected one RSP partner from the universe of partners who used RSP services during the period. We then compared the number of RSP overtime hours logged in CBP’s overtime management system for the selected partners and pay periods with the number of hours on the corresponding partner bills. In all eight cases, the amount of RSP overtime hours logged by CBP officials matched the overtime hours billed to the partners. Our observations, review of applicable documentation, and testing provided reasonable assurance that CBP is being appropriately reimbursed by partners for the services that it provided under the RSP. To evaluate the benefits of RSP services, the AFP office develops metrics reports on the services that CBP performed while fulfilling RSP requests throughout the billing cycle that it provides its partners. These metrics reports include data, such as the number of overtime hours CBP officers worked, the number of travelers CBP processed, the number of containers CBP inspected, and the average wait times CBP recorded during RSP overtime services, among other data. According to AFP officials, this information about the impact of reimbursable services helps partners make informed decisions when assessing their future requests. The AFP office works with partners to ensure that the information CBP provides in these reports is useful and will provide additional data upon the partners’ request, as applicable. CBP also conducts annual RSP partner satisfaction surveys to obtain feedback and evaluate overall satisfaction with program implementation. In 2015 and 2016, RSP partners expressed high levels of satisfaction about the level of services CBP provided, the request and fulfilment process, the billing and payment process, the monthly and annual metrics reports that CBP provides its partners, and the program’s ability to meet partner goals. Additionally, partners generally responded that the program allowed them to achieve their goals, which primarily focused on reducing wait times and increasing their own customer satisfaction levels. CBP has guidance that it follows to monitor and evaluate the implementation of DAP projects, and CBP and its partners use tools such as implementation roadmaps and other policy documents, such as standard operating procedures, to administer and monitor the progress of DAP projects at the POEs. For example, CBP develops project roadmaps for all donation projects in close collaboration with its partner, GSA (as applicable), and other entities involved in the project, and shares them with project participants. The roadmap identifies a variety of project milestones and tasks, such as drafting the MOU and completing the technical requirements package, among other things. The roadmap also tracks the number of days that CBP expects will be required to complete each task, which helps CBP to ensure that all stakeholders meet project milestones. CBP also monitors overall DAP implementation by collecting quantitative data on the efficiency of DAP processes to inform program and process improvements. For example, from 2015 to 2016, CBP consolidated certain elements of its application evaluation process to reduce the number of days it takes to evaluate and approve applications from an average of 144 days to 75 days for large-scale donations. Similarly, from 2015 to 2016, CBP determined that it could gain efficiencies by establishing a separate application evaluation and approval process for small-scale donation applications to better accommodate small-scale donations, and delegated approval and acceptance authority to the Office of Field Operations Executive Assistant Commissioner. This new process expedited the proposal evaluation timeline for small-scale donations from approximately 27 days to 14 days. In addition, GSA implemented a similar delegation authority for approval and acceptance of small-scale donations in fiscal year 2017, which decreased GSA’s application evaluation process from approximately 57 days to 25 days from fiscal year 2016 to 2017. In addition to monitoring the implementation of the overall program and the progress of specific DAP projects, CBP works with its partners to evaluate the benefits of each project. Specifically, during the planning and development phase of a donation, AFP officials coordinate with local CBP officials and DAP partners to develop a plan for identifying, measuring, and reporting on the local benefits to be derived from accepted donations upon project completion. CBP has completed its evaluation of the benefits of one completed small-scale project. For example, CBP estimated that the donated perforating machine at the Freeport Sea POE will save CBP 166 officer hours and approximately $7,450 in salary and maintenance costs per year. For large-scale projects, CBP is working with its partners to develop these evaluation plans, but it is too early for CBP to evaluate the benefits given that most of these projects are in the early planning and development phases. CBP shares its findings on benefits with its partners to help them assess their return on investment and so that they can share that information with their own local stakeholders. CBP is taking steps to monitor the existing use and impacts of RSP and DAP and to plan for further expansion of these programs. For example, in addition to the monthly metrics reports that CBP provides its RSP partners, AFP officials told us that they monitor the fulfillment rates of formal partner requests for RSP services. The current fulfillment rate across all of CBP’s RSP agreements is over 99 percent. In addition, as noted previously, AFP officials coordinate with local CBP officials and DAP partners to develop a plan for identifying, measuring, and reporting on the local benefits to be derived from accepted donations upon project completion. Furthermore, with regard to planning for future program expansion, CBP has taken steps to plan for the additional oversight activities that it expects at the headquarters level as the RSP expands. For example, CBP is hiring new staff members and contractors for the AFP office, as well as reimbursing the Office of Finance for one staff position and embedding one staff member in the Budget Office to help complete the increased number of financial transactions and audits. In addition, the AFP office is considering the future impact of DAP projects on staffing and other resources at the affected POEs, and is working with Field Office, POE, and partner officials to identify and budget for anticipated operational needs, with assistance from CBP’s Workload Staffing Model and Planning, Program Analysis and Evaluation offices. These efforts to monitor and evaluate the impacts of the programs and plan for further expansion are positive steps that should help position CBP to manage anticipated increases in the number of agreements going forward. Furthermore, prior to Sections 481 and 482 authorities, in accordance with the report of the Senate Appropriations Committee accompanying the Department of Homeland Security Appropriations Act, 2013, CBP submitted semiannual reports to Congress on its Section 560 partnerships for fiscal years 2014 through 2016. CBP included information in these reports on the benefits of RSP services. For example, CBP compared baseline traveler and vehicle volume and wait times at participating POEs from previous years to the traveler and vehicle volume and wait times during time periods when CBP provided reimbursable services. Subsequently, in accordance with the Consolidated Appropriations Act, 2014, CBP developed an evaluation plan with objectives, criteria, evaluation methodologies, and data collection plans to be used to evaluate RSP and DAP performance on an annual and aggregated basis. However, the provision requiring that an evaluation plan be established for the section 559 pilot program was repealed by the Cross- Border Trade Enhancement Act of 2016. This Act requires that CBP report to Congress annually to identify the activities undertaken and the agreements entered into under the RSP and DAP but does not require that CBP develop or report on an evaluation plan for these programs. As of November 2017, CBP had not decided whether it will use a performance evaluation plan going forward. However, in December 2017, AFP officials acknowledged that such a plan—that examines RSP and DAP performance at the programmatic level—could benefit program management and augment evaluation activities already conducted by the AFP office. We reviewed draft versions of CBP’s fiscal year 2017 reports to Congress on new Section 481 fee agreements and new Section 482 donation agreements. Both reports detailed how CBP responded to changes in legislative authorities for the RSP and DAP and listed its fiscal year 2017 selections for public-private partnership agreements, but did not include an evaluation plan or identify measures for tracking program performance going forward. Further, while the AFP office tracks the fulfillment rates of requests for RSP services and is working with its partners and other CBP components to monitor and plan for program expansion, CBP could benefit from a more robust assessment of possible impacts of staffing challenges on program expansion. As mentioned above, as of fiscal year 2017, CBP has an overall staffing shortage of 2,516 officers, according to CBP’s Workload Staffing Model analysis, and CBP officer hiring remains an agency-wide challenge. We identified some staffing challenges that could affect CBP’s management and implementation of its RSP and DAP programs, which roughly doubled in the number of agreements from fiscal year 2016 to 2017. As of November 2017, public-private partnership agreements were in place at approximately one-third of all U.S. POEs. With the removal of the limit on the number of air agreements that CBP can enter each year, some POEs have or are anticipated by CBP to have more than one RSP agreement in place. According to AFP officials, if there are multiple RSP partnerships at the same POE, CBP will try to accommodate all partner requests. Generally, the AFP office expects the POEs to handle requests on a first-come, first-serve basis. As the number of RSP partners increase across POEs, requests for services are likely to also increase, according to CBP officials. While it is too soon for CBP to assess the extent to which fulfillment rates may change over time, if at all, with the expansion of the program, officials noted that RSP agreements do not guarantee that CBP will be able provide all services that partners request, and that RSP services are above and beyond what CBP would normally provide. According to CBP, the recent increase in the mandated cap on officer overtime pay from $35,000 to $45,000 has allowed CBP officers to work more RSP overtime. Nevertheless, it is unclear how CBP will evaluate and address any increase in RSP agreements that may outpace the staff available to fulfill service requests. As noted previously, new authorities for the RSP also allow CBP to enter into agreements that allow partners to reimburse CBP for up to five additional officers, above the number assigned at the time the agreement was reached, at small airports. In fiscal year 2017, CBP selected four partners for this type of reimbursable services agreement. For its agreement with the Rhode Island Airport Corporation, CBP relocated three officers from the Boston-Logan International Airport, one of the busiest U.S. international airports, to T.F. Green State International Airport, which inspects less than 100,000 international travelers annually. AFP officials noted that, in accordance with legislation, the Port Director overseeing the port of origin for the CBP officer(s) added to small airports must determine that the movement of the officer(s) from one POE to another in fulfilling RSP agreements for additional CBP officers does not permanently affect operations at any other POE, including the POE that the officer(s) depart. However, CBP has not planned for how individual POEs or the agency more broadly would make these determinations or how CBP would evaluate any longer term impacts on overall CBP officer staffing resulting from the movement of officers among POEs. Office of Management and Budget guidance for making program expansion decisions indicates that agencies should evaluate cost- effectiveness in a manner that presents facts and supporting details among competing alternatives, including relative costs, benefits, and performance tradeoffs. Further, in September 2016 we developed a list of leading practices for evaluation based on the American Evaluation Association’s An Evaluation Roadmap for a More Effective Government, including development of an evaluation plan or agenda, a description of methods and data sources in evaluation reports, procedures for assuring evaluation quality, and tracking the use of evaluation findings in management or reforms, among others. CBP is taking steps to monitor its RSP and DAP and plan for program expansion. However, given its staffing challenges, CBP could benefit from developing and implementing an evaluation plan for assessing overall RSP and DAP performance. Such a plan could further integrate evaluation activities into program management and could better position CBP to assess relative costs, benefits, and performance trade-offs as CBP expands its RSP and DAP, and consider the extent to which any future program changes may be needed. The amount of legitimate travel and trade entering through the nation’s POEs continues to increase each year. To date, CBP and its partners have utilized public-private partnerships to help meet an increased demand for CBP services and infrastructure improvements at POEs, and agency officials and program partners have generally concurred that the RSP and DAP have been effective in helping to bridge CBP resource gaps and improve partner operations. However, given CBP’s officer hiring and retention challenges and its finite resources for addressing infrastructure needs at POEs, CBP’s ability to monitor and evaluate the implementation of its public-private partnership programs is essential to ensuring that CBP leaders have the information that they need to make program decisions and identify and respond to challenges as the programs expand. As CBP continues to expand its public-private partnership programs, evaluating the RSP and DAP at the program level could better position CBP leaders to assess the relative costs, benefits, and performance trade-offs of continuing to expand the programs. It could also better position CBP to identify and respond to expansion challenges, such as CBP officer staffing. The CBP Commissioner should develop and implement an evaluation plan to be used to assess the overall performance of the RSP and DAP, which could include, among other things, measurable objectives, performance criteria, evaluation methodologies, and data collection plans to inform future program decisions. (Recommendation 1) We provided a draft of this report to DHS and GSA for their review and comment. GSA indicated that it did not have any comments on the draft report via e-mail. DHS provided written comments, which are noted below and reproduced in full in appendix II, and technical comments, which we incorporated as appropriate. DHS concurred with our recommendation and described the actions it plans to take in response. Specifically, DHS stated that CBP will develop and implement a plan to assess the overall performance of the RSP and DAP to inform future program decisions. The plan will evaluate current partnerships, including but not limited to: service denial rate; trend analysis of frequency and type of requests; annual stakeholder survey results; impact of multiple stakeholders in one port location on levels of service provided; impact of unanticipated operations and maintenance costs associated with property donations; and staffing implications on donations of upgraded port infrastructure. If implemented effectively, these planned actions should address the intent of our recommendation. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Administrator of the General Services Administration, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Since 2013, U.S. Customs and Border Protection (CBP) has entered into public-private partnerships with private sector or government entities under its Reimbursable Services Program (RSP) to cover CBP’s cost of providing certain services at U.S. ports of entry (POE) upon the request of partners. As of the end of fiscal year 2017, CBP approved 114 applications for reimbursable fee agreements. These services can include customs, immigration, agricultural processing, border security and support at any facility where CBP provides, or will provide services and may cover costs such as salaries, benefits, overtime expenses, administration, and transportation costs. Once CBP selects an application for a new reimbursable services partnership, CBP and its partner sign a legally binding Reimbursable Services Agreement, which is a standard legal form that CBP uses for all new RSP agreements. Local CBP officials then work with the partner to negotiate the terms of a Memorandum of Understanding (MOU), which outlines how the partnership will work at the POE. In the following table, we provide select details from the 54 existing MOUs between CBP and its partners in the RSP. In addition to the partners listed in the table above, CBP has also signed Reimbursable Services Agreements with the following partners, but has not completed negotiating the terms of an MOU as of the end of fiscal year 2017. Fiscal year 2016 partners: 1. City of Charlotte Aviation Department 2. Dole Fresh Fruit Company (Port of Wilmington, Delaware; Port Everglades; and Port of Freeport) 3. GT USA LLC 4. Port of Galveston 5. Presidio Port Authority Local Government Corporation 6. Red Hook Container Terminal, LLC 7. United Parcel Service Co. In addition to the contact named above, Kirk Kiester (Assistant Director), Dominick Dale, Michele Fejfar, Eric Hauswirth, Stephanie Heiken, Susan Hsu, Elizabeth Leibinger, David Lutter, and Sasan J. “Jon” Najmi made significant contributions to this report.", "summary": "International trade and travel to the United States is increasing. On a typical day in fiscal year 2016, CBP officers inspected nearly 1.1 million passengers and pedestrians and over 74,000 truck, rail, and sea containers at 328 U.S. land, sea, and air ports of entry, according to CBP. To help meet the increased demand for these types of CBP services, since 2013, CBP has entered into public-private partnerships under RSP and DAP. The RSP allows partners to reimburse CBP for providing services that exceed CBP's normal operations, such as paying overtime for CBP personnel that provide services at ports of entry outside normal business hours. The DAP enables partners to donate property or provide funding for port of entry infrastructure improvements. The Cross-Border Trade Enhancement Act of 2016 included a provision for GAO to review the RSP and DAP. This report examines: (1) how CBP approves and administers RSP and DAP agreements, (2) the status of RSP and DAP agreements, including the purposes for which CBP has used funds and donations, and (3) the extent to which CBP monitors and evaluates program implementation. GAO reviewed partnership agreements and data on program usage. GAO also interviewed CBP and partner officials at 11 ports of entry selected based on a mix of port of entry and agreement types. Within the Department of Homeland Security, U.S. Customs and Border Protection (CBP) uses criteria and follows documented procedures to evaluate and approve public-private partnership applications and administer the Reimbursable Services Program (RSP) and Donations Acceptance Program (DAP). For example, RSP applications undergo an initial review by CBP officials at the affected ports of entry before they are scored by an expert panel of CBP officials at headquarters. The panel evaluates RSP applications against seven criteria, such as impact on CBP operations. Similarly, DAP proposals are evaluated by CBP officials against seven operational and six technical criteria, such as real estate implications. Further, if the proposal involves real estate controlled by the General Services Administration (GSA), CBP and GSA officials collaborate on DAP selection decisions and project implementation. To administer the RSP and DAP, CBP has documented policies and procedures, such as standard operating procedures and implementation frameworks. For example, CBP uses a standard procedure to guide the process for RSP partners to request services and to provide reimbursement. For DAP projects, CBP, GSA (if applicable), and partners follow an implementation framework that includes a project planning and design phase. The number of public-private partnerships is increasing, and partnerships provide a variety of additional services and infrastructure improvements at ports of entry. From fiscal years 2013 through 2017, CBP selected over 100 partners for RSP agreements that could impact 112 ports of entry and other CBP-staffed locations, and the total number of RSP partnerships doubled from fiscal year 2016 to 2017. According to CBP, since partners began requesting reimbursable services in 2014, CBP has provided its partners nearly 370,000 officer overtime hours of services, which led to over $45 million in reimbursed funds. As a result, CBP inspected an additional 8 million travelers and over 1 million personal and commercial vehicles at ports of entry. Similar to the RSP, the number of DAP partnerships more than doubled from fiscal year 2016 to 2017, and totals 16 projects that impact 13 ports of entry as of November 2017. The donations include improvements, such as the installation of new inspection booths and equipment and removal of traffic medians, and are intended to support over $150 million in infrastructure improvements. CBP uses various processes to monitor and evaluate its partnerships, but could benefit from establishing an evaluation plan to assess overall program performance. For example, CBP conducts regular audits of RSP records to help ensure that CBP bills and collects funds from its partners accurately, and uses guidance, such as the DAP Implementation Roadmap, to identify and monitor project milestones and tasks. However, as of November 2017, CBP had not developed an evaluation plan—which could include, among other things, measurable objectives, performance criteria, and data collection plans—to assess the overall performance of the RSP and DAP, consistent with Office of Management and Budget guidance and leading practices. Given CBP's staffing challenges and anticipated growth of the RSP and DAP, an evaluation plan could better position CBP to further integrate evaluation activities into program management. GAO recommends that CBP develop an evaluation plan to assess the overall performance of the RSP and DAP. DHS concurred with the recommendation.", "document_type": "gao"}
{"report": "VA’s mission is to promote the health, welfare, and dignity of all veterans in recognition of their service to the nation by ensuring that they receive medical care, benefits, social support, and lasting memorials. In carrying out this mission, the department operates one of the largest health care delivery systems in America, providing health care to millions of veterans and their families at more than 1,500 facilities. The department’s three major components—the Veterans Health Administration (VHA), the Veterans Benefits Administration (VBA), and the National Cemetery Administration (NCA)—are primarily responsible for carrying out its mission. More specifically, VHA provides health care services, including primary care and specialized care, and it performs research and development to improve veterans’ needs. VBA provides a variety of benefits to veterans and their families, including disability compensation, educational opportunities, assistance with home ownership, and life insurance. Further, NCA provides burial and memorial benefits to veterans and their families. Collectively, the three components rely on approximately 340,000 employees to provide services and benefits. These employees work in VA’s Washington, D.C. headquarters, as well as 170 medical centers, approximately 750 community-based outpatient clinics, 300 veterans centers, 56 regional offices, and more than 130 cemeteries situated throughout the nation. The use of IT is critically important to VA’s efforts to provide benefits and services to veterans. As such, the department operates and maintains an IT infrastructure that is intended to provide the backbone necessary to meet the day-to-day operational needs of its medical centers, veteran- facing systems, benefits delivery systems, memorial services, and all other systems supporting the department’s mission. The infrastructure is to provide for data storage, transmission, and communications requirements necessary to ensure the delivery of reliable, available, and responsive support to all VA staff offices and administration customers, as well as veterans. According to department data as of October 2016, there were 576 active or in-development systems in VA’s inventory of IT systems. These systems are intended to be used for the determination of benefits, benefits claims processing, and access to health records, among other services. VHA is the parent organization for 319 of these systems. Of the 319 systems, 244 were considered mission-related and provide capabilities related to veterans’ health care delivery. For example, VHA’s systems provide capabilities to establish and maintain electronic health records that health care providers and other clinical staff use to view patient information in inpatient, outpatient, and long-term care settings. VistA serves an essential role in helping the department to fulfill its health care delivery mission. Specifically, VistA is an integrated medical information system for all veterans’ health information. It was developed in-house by the department’s clinicians and IT personnel and has been in operation since the early 1980s. As such, the system has long been vital to helping ensure the quality of health care received by the nation’s veterans and their dependents. VistA is comprised of more than 200 applications that assist in the delivery of health care and perform other important functions within the department, including financial management, enrollment, and registration. Some of these applications have been in operation for over 30 years and, according to VA, have become increasingly difficult and costly to maintain. As such, the department has expended extensive resources to modernize the system and increase its ability to allow for the viewing or exchange of patient information with the Department of Defense (DOD) and private sector health providers. In addition, as we recently reported, VHA has unaddressed needs that indicate its current health IT systems, including VistA, do not fully support the organization’s business functions. Specifically, about 39 percent of all requests related to health IT needs have remained unaddressed after more than 5 years. Electronic health records are particularly crucial for optimizing the health care provided to veterans, many of whom may have health records residing at multiple medical facilities within and outside the United States. Taking steps toward interoperability—that is, collecting, storing, retrieving, and transferring veterans’ health records electronically—is significant to improving the quality and efficiency of care. One of the goals of interoperability is to ensure that patients’ electronic health information is available from provider to provider, regardless of where it originated or resides. Since 2007, VA has been operating a centralized organization, the Office of Information and Technology (OI&T), in which most key functions intended for effective management of IT are performed. This office is led by the Assistant Secretary for Information and Technology—VA’s Chief Information Officer (CIO). The office is responsible for providing strategy and technical direction, guidance, and policy related to how IT resources are to be acquired and managed for the department, and for working closely with its business partners—such as VHA—to identify and prioritize business needs and requirements for IT systems. Among other things, OI&T has responsibility for managing the majority of VA’s IT-related functions, including the maintenance and modernization of VistA. As of 2016, OI&T was comprised of more than 15,000 staff, with more than half of these positions filled by contractors. For fiscal year 2018, the department’s budget request included nearly $4.1 billion for IT. The department requested approximately $359 million for new systems development or modernization efforts, approximately $2.5 billion for maintaining existing systems, and approximately $1.2 billion for payroll and administration. For example, in its fiscal year 2018 budget submission, the department requested appropriations to support five IT portfolios, including the development and operations and maintenance for programs and projects related to the: Medical portfolio, which provides technology solutions to deliver modern, high-quality medical care capabilities to veterans ($944.2 million); Benefit portfolio, which addresses the technology needs managed by the Veterans Benefit Administration ($296.9 million); Memorial Affairs portfolio, which provides support for the modernization of applications and services for National Cemeteries at 133 locations nationwide ($24.5 million); Corporate portfolio, which consists of back office operations supporting the major business lines and department management ($270.6 million); and Enterprise IT, which provides the underlying infrastructure to enable the other portfolios to operate and includes such things as cybersecurity, data centers, cloud services, telephony, enterprise software, and data connectivity ($1.289 billion). In 2015, we designated VA Health Care as a high-risk area for the federal government and, currently, we continue to be concerned about the department’s ability to ensure that its resources are being used cost- effectively and efficiently to improve veterans’ timely access to health care. In part, we identified limitations in the capacity of VA’s existing systems, including the outdated, inefficient nature of certain systems and a lack of system interoperability—that is, the ability to exchange and use electronic health information—as contributors to the department’s IT challenges related to health care. These challenges present risks to the timeliness, quality, and safety of the health care. While we recently reported that the department has begun to demonstrate leadership commitment to addressing IT challenges, more work remains. Also, in February 2015, we added Improving the Management of IT Acquisitions and Operations to our list of high-risk areas. Specifically, federal IT investments too frequently fail or incur cost overruns and schedule slippages while contributing little to mission-related outcomes. We have previously testified that the federal government has spent billions of dollars on failed IT investments, including, for example, VA’s Scheduling Replacement Project, which was terminated in September 2009 after spending an estimated $127 million over 9 years; and its Financial and Logistics Integrated Technology Enterprise program, which was intended to be delivered by 2014 at a total estimated cost of $609 million, but was terminated in October 2011 due to challenges in managing the program. This high-risk area highlighted several critical IT initiatives in need of additional congressional oversight, including (1) reviews of troubled projects; (2) efforts to increase the use of incremental development; (3) efforts to provide transparency relative to the cost, schedule, and risk levels for major IT investments; (4) reviews of agencies’ operational investments; (5) data center consolidation; and (6) efforts to streamline agencies’ portfolios of investments. We noted that agencies’ implementation of these initiatives was inconsistent and that more work remained to demonstrate progress in achieving IT acquisition and operation outcomes. We also recently issued an update to our high-risk report and noted that, while progress has been made in addressing the high-risk area of IT acquisitions and operations, significant work remains to be completed. For example, we noted, among other things, that additional work was needed to establish action plans for federal agencies to modernize or replace obsolete systems. Specifically, we pointed out that many federal systems use outdated software languages and hardware, which has increased spending on operations and maintenance of technology investments. VA was among a handful of departments with one or more archaic legacy systems. As discussed in our recent report on legacy systems used by federal agencies, we identified 2 of the department’s systems as being over 50 years old, and among the 10 oldest investments and/or systems that were reported by 12 selected agencies. Personnel and Accounting Integrated Data (PAID)—This 53-year old system automates time and attendance for employees, timekeepers, payroll, and supervisors. It is written in Common Business Oriented Language (COBOL), a programming language developed in the late 1950s and early 1960s, and runs on IBM mainframes. Benefits Delivery Network (BDN)—This 51-year old system tracks claims filed by veterans for benefits, eligibility, and dates of death. It is a suite of COBOL mainframe applications. Ongoing uses of antiquated systems, such as PAID and BDN, contribute to agencies spending a large, and increasing, proportion of their IT budgets on operations and maintenance of systems that have outlived their effectiveness and are consuming resources that outweigh their benefits. Accordingly, we have recommended that VA identify and plan to modernize or replace its legacy systems. The department concurred with our recommendation and stated that it plans to retire and replace PAID with the Human Resources Information System Shared Service Center in 2017. The department also stated that it has general plans to roll the capabilities of BDN into another system and to retire BDN in 2018. Congress enacted federal IT acquisition reform legislation (commonly referred to as the Federal Information Technology Acquisition Reform Act, or FITARA) in December 2014. This legislation was intended to improve agencies’ acquisitions of IT and enable Congress to monitor agencies’ progress and hold them accountable for reducing duplication and achieving cost savings. The law applies to VA and other covered agencies. It includes specific requirements related to seven areas, including data center consolidation and optimization, agency CIO authority, and government-wide software purchasing. Federal data center consolidation initiative (FDCCI). Agencies are required to provide the Office of Management and Budget (OMB) with a data center inventory, a strategy for consolidating and optimizing their data centers (to include planned cost savings), and quarterly updates on progress made. The law also requires OMB to develop a goal for how much is to be saved through this initiative, and provide annual reports on cost savings achieved. Agency CIO authority enhancements. CIOs at covered agencies are required to (1) approve the IT budget requests of their respective agencies, (2) certify that IT investments are adequately implementing incremental development, as defined in capital planning guidance issued by OMB, (3) review and approve contracts for IT, and (4) approve the appointment of other agency employees with the title of CIO. Government-wide software purchasing program. The General Services Administration is to develop a strategic sourcing initiative to enhance government-wide acquisition and management of software. In doing so, the law requires that, to the maximum extent practicable, the General Services Administration should allow for the purchase of a software license agreement that is available for use by all executive branch agencies as a single user. Expanding upon FITARA, the Making Electronic Government Accountable by Yielding Tangible Efficiencies Act of 2016, or the “MEGABYTE Act,” further enhanced CIOs’ management of software licenses by requiring agency CIOs to establish an agency software licensing policy and a comprehensive software license inventory to track and maintain licenses, among other requirements. In June 2015, OMB released guidance describing how agencies are to implement FITARA. This guidance is intended to, among other things: assist agencies in aligning their IT resources with statutory establish government-wide IT management controls that will meet the law’s requirements, while providing agencies with flexibility to adapt to unique agency processes and requirements; clarify the CIO’s role and strengthen the relationship between agency CIOs and bureau CIOs; and strengthen CIO accountability for IT costs, schedules, performance, and security. In our draft report that is currently with VA for comments, we discuss the history of VA’s efforts to modernize its health information system, VistA. These four efforts—HealtheVet, the integrated Electronic Health Record (iEHR), VistA Evolution, and the Electronic Health Record Modernization (EHRM)—reflect varying approaches that the department has considered to achieve a modernized health care system over the course of nearly two decades. The modernization efforts are described as follows. In 2001, VA undertook its first VistA modernization project, the HealtheVet initiative, with the goals of standardizing the department’s health care system and eliminating the approximately 130 different systems used by its field locations at that time. HealtheVet was scheduled to be fully implemented by 2018 at a total estimated development and deployment cost of about $11 billion. As part of the effort, the department had planned to develop or enhance specific areas of system functionality through six projects, which were to be completed between 2006 and 2012. Specifically, these projects were to provide capabilities to support VA’s Health Data Repository and Patient Financial Services System, as well as the Laboratory, Pharmacy, Imaging, and Scheduling functions. In June 2008, we reported that the department had made progress on the HealtheVet initiative, but noted issues with project planning and governance. In June 2009, the Secretary of Veterans Affairs announced that VA would stop financing failed projects and improve the management of its IT development projects. Subsequently, in August 2010, the department reported that it had terminated the HealtheVet initiative. In February 2011, VA began its second modernization initiative, the iEHR program, in conjunction with DOD. The program was intended to replace the two separate electronic health record systems used by the two departments with a single, shared system. Moreover, because both departments would be using the same system, this approach was expected to largely sidestep the challenges that had been encountered in trying to achieve interoperability between their two separate systems. Initial plans called for the development of a single, joint system consisting of 54 clinical capabilities to be delivered in six increments between 2014 and 2017. Among the agreed-upon capabilities to be delivered were those supporting laboratory, anatomic pathology, pharmacy, and immunizations. According to VA and DOD, the single iEHR system had an estimated life cycle cost of $29 billion through the end of fiscal year 2029. However, in February 2013, the Secretaries of VA and DOD announced that they would not continue with their joint development of a single electronic health record system. This decision resulted from an assessment of the iEHR program that the secretaries had requested in December 2012 because of their concerns about the program facing challenges in meeting deadlines, costing too much, and taking too long to deliver capabilities. In 2013, the departments abandoned their plan to develop the integrated system and stated that they would again pursue separate modernization efforts. In December 2013, VA initiated its VistA Evolution program as a joint effort of VHA and OI&T that was to be completed by the end of fiscal year 2018. The program was to be comprised of a collection of projects and efforts focused on improving the efficiency and quality of veterans’ health care by modernizing the department’s health information systems, increasing the department’s data exchange and interoperability with DOD and private sector health care partners, and reducing the time it takes to deploy new health information management capabilities. Further, the program was intended to result in lower costs for system upgrades, maintenance, and sustainment. According to the department’s March 2017 cost estimate, VistA Evolution was to have a life cycle cost of about $4 billion through fiscal year 2028. Since initiating VistA Evolution in December 2013, VA has completed a number of key activities that were called for in its plans. For example, the department delivered capabilities, such as the ability for health providers to have an integrated, real-time view of electronic health record data through the Joint Legacy Viewer, as well as the ability for health care providers to view sensitive DOD notes and highlight abnormal test results for patients. VA also initiated work to standardize VistA across the 130 VA facilities and released enhancements to its legacy scheduling, pharmacy, and immunization systems. In addition, the department released the enterprise Health Management Platform, which is a web- based user interface that assembles patient clinical data from all VistA instances and DOD. Although VistA Evolution is ongoing, VA is currently in the process of revising its plan for the program as a result of the department recently announcing its pursuit of a fourth VistA modernization program (discussed below). For example, the department determined that it would no longer pursue additional development or deployment of the enterprise Health Management Platform—a major VistA Evolution component— because the new modernization program is envisioned to provide similar capabilities. In June 2017, the VA Secretary announced a significant shift in the department’s approach to modernizing VistA. Specifically, rather than continue to use VistA, the Secretary stated that the department plans to acquire the same electronic health record system that DOD is implementing. In this regard, DOD has contracted with the Cerner Corporation to provide a new integrated electronic health record system. According to the Secretary, VA has chosen to acquire this same product because it would allow all of VA’s and DOD’s patient data to reside in one system, thus enabling seamless care between the department and DOD without the manual and electronic exchange and reconciliation of data between two separate systems. The VA Secretary added that this fourth modernization initiative is intended to minimize customization and system differences that currently exist within the department’s medical facilities, and ensure the consistency of processes and practices within VA and DOD. When fully operational, the system is intended to be the single source for patients to access their medical history and for clinicians to use that history in real time at any VA or DOD medical facility, which may result in improved health care outcomes. According to VA’s Chief Technology Officer, Cerner is expected to provide integration, configuration, testing, deployment, hosting, organizational change management, training, sustainment, and licenses necessary to deploy the system in a manner that meets the department’s needs. To expedite the acquisition, in June 2017, the Secretary signed a “Determination and Findings,” which noted a public interest exception to the requirement for full and open competition, and authorized VA to issue a solicitation directly to the Cerner Corporation. According to the Secretary, VA expects to award a contract to Cerner in December 2017, and deployment of the new system is anticipated to begin 18 months after the contract has been signed. VA’s Executive Director for the Electronic Health Records Modernization System stated that the department intends to incrementally deploy the new system to its medical facilities. Each facility is expected to continue using VistA until the new system has been deployed at that location. All VA medical facilities are anticipated to have the new system implemented within 7 to 8 years after the first deployment. Figure 1 shows a timeline of the four efforts that VA has pursued to modernize VistA since 2001. For iEHR and VistA Evolution, the two modernization initiatives for which VA could provide contract data, the department obligated approximately $1.1 billion for contracts with 138 different contractors during fiscal years 2011 through 2016. Specifically, the department obligated approximately $224 million and $880 million, respectively, for contracts associated with these efforts. Of the 138 contractors, 34 of them performed work supporting both iEHR and VistA Evolution. The remaining 104 contractors worked exclusively on either iEHR or VistA Evolution. Funding for the 34 contractors that worked on both iEHR and VistA Evolution totaled about $793 million of the $1.1 billion obligated for contracts on the two initiatives. Obligations for contracts awarded to the top 15 of these 34 contractors (which we designated as key contractors) accounted for about $741 million (about 67 percent) of the total obligated for contracts on the two initiatives. The remaining 123 contractors were obligated about $364 million for their contracts. The 15 key contractors were obligated about $564 million and $177 million for VistA Evolution and iEHR contracts, respectively. Table 1 identifies the key contractors and their obligated dollar totals for the two efforts. Additionally, we determined that, of the $741 million obligated to the key contractors, $411 million (about 55 percent) was obligated for contracts supporting the development of new system capabilities, $256 million (about 35 percent) was obligated for contracts supporting project management activities, and $74 million (about 10 percent) was obligated for contracts supporting operations and maintenance for iEHR and VistA Evolution. VA obligated funds to all 15 of the key contractors for system development, 13 of the key contractors for project management, and 12 of the key contractors for operations and maintenance. Figure 2 shows the amounts obligated for each of these areas. Further, based on the key contractors’ documentation, for the iEHR program, VA obligated $102 million for development, $65 million for project management, and $10 million for operations and maintenance. For the VistA Evolution Program, VA obligated $309 million for development, $191 million for project management, and $64 million for operations and maintenance. Figure 3 shows the amounts obligated for contracts on the VistA Evolution and iEHR programs for development, project management, and operations and maintenance. In addition, table 2 shows the amounts that each of the 15 key contractors were obligated for the three types of contract activities performed on iEHR and VistA Evolution. Industry best practices and IT project management principles stress the importance of sound planning for system modernization projects. These plans should identify key aspects of a project, such as the scope, responsible organizations, costs, schedules, and risks. Additionally, planning should begin early in the project’s lifecycle and be updated as the project progresses. Since the VA Secretary announced that the department would acquire the same electronic health record system as DOD, VA has begun planning for the transition from VistA Evolution to EHRM. However, the department is still early in its efforts, pending the contract award. In this regard, the department has begun developing plans that are intended to guide the new EHRM program. For example, the department has developed a preliminary description of the organizations that are to be responsible for governing the EHRM program. Further, the VA Secretary announced in congressional testimony in November 2017, a key reporting responsibility for the program—stating that the Executive Director for the Electronic Health Records Modernization System will report directly to the department’s Deputy Secretary. In addition, the department has developed a preliminary timeline for deploying its new electronic health record system to VA’s medical facilities, and a 90-day schedule that depicts key program activities. The department also has begun documenting the EHRM program risks. Beyond the aforementioned planning activities undertaken thus far, the Executive Director stated that the department intends to complete a full suite of planning and acquisition management documents to guide the program, including a life cycle cost estimate and an integrated master schedule to establish key milestones over the life of the project. To this end, the Executive Director told us that VA has awarded two program management contracts to support the development of these plans to MITRE Corporation and Booz Allen Hamilton. According to the Executive Director, VA also has begun reviewing the VistA Evolution Roadmap, which is the key plan that the department has used to guide VistA Evolution since 2014. This review is expected to result in an updated plan that is to prioritize any remaining VistA enhancements needed to support the transition from VistA Evolution to the new system. According to the Executive Director, the department intends to complete the development of its plans for EHRM within 90 days after award of the Cerner contract, which is anticipated to occur in December 2017. Further, beyond the development of plans, VA has begun to staff an organizational structure for the modernization initiative, with the Under Secretary of Health and the Assistant Secretary for Information and Technology (VA’s Chief Information Officer) designated as executive sponsors. It has also appointed a Chief Technology Officer from OI&T, and a Chief Medical Officer from VHA, both of whom are to report to the Executive Director. VA’s efforts to develop plans for EHRM and to staff an organization to manage the program encompass key aspects of project planning that are important to ensuring effective management of the department’s latest modernization initiative. However, the department remains early in its modernization planning efforts, many of which are dependent on the system acquisition contract award, which has not yet occurred. The department’s continued dedication to completing and effectively executing the planning activities that it has identified will be essential to helping minimize program risks and guide this latest electronic health record modernization initiative to a successful outcome—one which VA, for almost two decades, has yet to achieve. Beyond managing its system modernization efforts, such as VistA, VA has to ensure the effective implementation of the IT acquisition requirements called for in FITARA. Pursuant to FITARA, in August 2016, the Federal CIO issued a memorandum that announced the Data Center Optimization Initiative (DCOI). According to OMB, this new initiative supersedes and builds on the results of FDCCI, and is also intended to improve the performance of federal data centers in areas such as facility utilization and power usage. Among other things, DCOI requires 24 federal departments and agencies, including VA, to develop plans and report on strategies (referred to as DCOI strategic plans) to consolidate inefficient infrastructure, optimize existing facilities, improve security posture, and achieve costs savings. Further, the memorandum establishes a set of five data center optimization metrics and performance targets intended to measure agency’s progress in the areas of (1) server utilization and automated monitoring, (2) energy metering, (3) power usage effectiveness, (4) facility utilization, and (5) virtualization. The guidance also indicates that OMB is to maintain a public dashboard that will display consolidation-related costs savings and optimization performance information for the agencies. However, in a series of reports that we issued from July 2011 through August 2017, we noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies’ data center consolidation plans, data center optimization, and OMB’s tracking and reporting on related cost savings. Further, we previously reported that VA’s progress toward closing data centers, and realizing the associated cost savings, lagged behind that of other covered agencies. More recently, VA reported a total inventory of 415 data centers, of which 39 had been closed as of August 2017. While the department anticipates another 10 data centers will be closed by the end of fiscal year 2018, these closures fall short of the targets set by OMB. Specifically, even if VA meets all of its planned targets for closure, it will only close about 9 percent of its tiered data centers and about 18.7 percent of its non-tiered data centers by the end of fiscal year 2018, which is short of the respective 25 and 60 percent targets set by OMB. Further, while VA has reported $23.61 million in data center-related cost savings and avoidances for 2012 through August 2017, the department does not expect to realize further savings from the additional 10 data center closures in the next year. In addition, in August 2017 we reported that agencies needed to address challenges in optimizing their data centers in order to achieve cost savings. Specifically, we noted that, according to the 24 agencies’ data center consolidation initiative strategic plans as of April 2017, most agencies were not planning to meet OMB’s optimization targets by the end of fiscal year 2018. As of February 2017, VA reported meeting one of the five data center optimization metrics related to power usage effectiveness. Also, the department’s data center optimization strategic plan indicates that the department plans to meet three of the five metrics by the end of fiscal year 2018. Further, while OMB directed agencies to replace manual collection and reporting of metrics with automated tools no later than fiscal year 2018, VA had only implemented automated tools at 6 percent of its data centers. OMB has emphasized the need to deliver investments in smaller parts, or increments, in order to reduce risk, deliver capabilities more quickly, and facilitate the adoption of emerging technologies. In 2010, it called for agencies’ major investments to deliver functionality every 12 months and, since 2012, every 6 months. Subsequently, FITARA codified a requirement that agency CIOs certify that IT investments are adequately implementing incremental development, as defined in the capital planning guidance issued by OMB. Later OMB guidance on the law’s implementation—issued in June 2015—directed agency CIOs to define processes and policies for their agencies which ensure that they certify that IT resources are adequately implementing incremental development. Between May 2014 and November 2017, we reported on agencies’ efforts to utilize incremental development practices for selected major investments. In November 2017, we noted that agencies reported that 62 percent of major IT software development investments were certified by the agency CIO as using adequate incremental development in fiscal year 2017, as required by FITARA. VA’s CIO certified the use of adequate incremental development for all 10 of its major IT investments. However, VA had not yet updated the department’s policy and process for the CIO’s certification of major IT investments’ adequate use of incremental development, in accordance with OMB’s guidance on the implementation of FITARA as we recommended. The department stated that it plans to address our recommendation to establish a policy and that the policy is targeted for completion in 2017. Federal agencies engage in thousands of licensing agreements annually. Effective management of software licenses can help organizations avoid purchasing too many licenses that result in unused software. In addition, effective management can help avoid purchasing too few licenses, which results in noncompliance with license terms and causes the imposition of additional fees. Federal agencies are responsible for managing their IT investment portfolios, including the risks from their major information system initiatives, in order to maximize the value of these investments to the agency. OMB developed a policy that requires agencies to conduct an annual, agency-wide IT portfolio review to, among other things, reduce commodity IT spending. Such areas of spending could include software licenses. We previously identified seven elements that a comprehensive software licensing policy should address: identify clear roles, responsibilities, and central oversight authority within the department for managing enterprise software license agreements and commercial software licenses; establish a comprehensive inventory (at least 80 percent of software license spending and/or enterprise licenses in the department) by identifying and collecting information about software license agreements using automated discovery and inventory tools; regularly track and maintain software licenses to assist the agency in implementing decisions throughout the software license management life cycle; analyze software usage and other data to make cost-effective provide training relevant to software license management; establish goals and objectives of the software license management consider the software license management life-cycle phases (i.e., requisition, reception, deployment and maintenance, retirement, and disposal phases) to implement effective decision making and incorporate existing standards, processes, and metrics. We previously made recommendations to VA to (1) develop an agency- wide comprehensive policy for the management of software licenses that includes guidance for using analysis to better inform investment decision making, (2) employ a centralized software license management approach that is coordinated and integrated with key personnel, (3) establish a comprehensive inventory of software licenses using automated tools, (4) track and maintain a comprehensive inventory of software licenses using automated tools and metrics, (5) analyze agency-wide software license data to identify opportunities to reduce costs and better inform investment decision making, and (6) provide software license management training to appropriate personnel. Consistent with our recommendation, in July 2015, VA issued a comprehensive software licensing policy that addressed weaknesses we previously identified. The department also issued a directive that documents VA’s software license management policy and responsibilities for central management of agency-wide software licenses, consistent with our recommendations. By implementing our recommendations, VA should be better positioned to consistently and cost-effectively manage software throughout the agency. In August 2017, the department also provided documentation showing that it had generated a comprehensive inventory of software licenses using automated tools for the majority of agency software license spending or enterprise-wide licenses. This inventory can serve to reduce redundant applications and help identify other cost saving opportunities. Further, the department implemented a solution to analyze agency-wide software license data, including usage and costs. This solution should allow VA to identify cost saving opportunities and inform future investment decisions. In addition, the department has provided information indicating that appropriate personnel receive software license management training. In conclusion, VA has made extensive use of numerous contractors and has obligated more than $1 billion for contracts that supported two of four VistA modernization programs that the department has initiated. VA has recently begun the fourth modernization program in which it plans to replace VistA with the same commercially available electronic health record system that is used by DOD. However, the department’s latest modernization effort is in the early stages of planning and is dependent on the system acquisition contract award in December 2017. VA’s completion and effective execution of plans will be essential to guiding this latest electronic health record modernization initiative to a successful outcome. Beyond VistA, the department continues to make progress on key FITARA-related initiatives. Although the department has made progress in the area of software licensing, additional actions in the areas of data center consolidation and optimization, as well as incremental system development can better position VA to effectively manage its IT. We plan to continue to monitor the department’s progress on these important activities. Chairman Hurd, Ranking Member Kelly, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have. If you or your staffs have any questions about this testimony, please contact David A. Powner at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony statement. GAO staff who made key contributions to this statement are Mark Bird (Assistant Director), Jacqueline Mai (Analyst in Charge), Justin Booth, Chris Businsky, Rebecca Eyler, Paris Hawkins, Valerie Hopkins, Brandon S. Pettis, Jennifer Stavros-Turner, Eric Trout, Christy Tyson, Eric Winter, and Charles Youman. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The use of IT is crucial to helping VA effectively serve the nation's veterans and, each year, the department spends billions of dollars on its information systems and assets. However, VA has faced challenges spanning a number of critical initiatives related to modernizing its major systems. To improve all major federal agencies' acquisitions and hold them accountable for reducing duplication and achieving cost savings, in December 2014 Congress enacted federal IT acquisition reform legislation (commonly referred to as the Federal Information Technology Acquisition Reform Act , or FITARA). GAO was asked to summarize its previous and ongoing work regarding VA's history of efforts to modernize VistA, including past use of contractors, and the department's recent effort to acquire a commercial electronic health record system to replace VistA. GAO was also asked to provide an update on VA's progress in key FITARA-related areas, including (1) data center consolidation and optimization, (2) incremental system development practices, and (3) software license management. VA generally agreed with the information upon which this statement is based. For nearly two decades, the Department of Veterans Affairs (VA) has undertaken multiple efforts to modernize its health information system—the Veterans Health Information Systems and Technology Architecture (known as VistA). Two of VA's most recent efforts included the Integrated Electronic Health Record (iEHR) program, a joint program with the Department of Defense (DOD) intended to replace separate systems used by VA and DOD with a single system; and the VistA Evolution program, which was to modernize VistA with additional capabilities and a better interface for all users. VA has relied extensively on assistance from contractors for these efforts. VA obligated over $1.1 billion for contracts with 138 contractors during fiscal years 2011 through 2016 for iEHR and VistA Evolution. Contract data showed that the 15 key contractors that worked on both programs accounted for $741 million of the funding obligated for system development, project management, and operations and maintenance to support the two programs (see figure). VA recently announced that it intends to change its VistA modernization approach and acquire the same electronic health record system that DOD is implementing. With respect to key FITARA-related areas, the department has reported progress on consolidating and optimizing its data centers, although this progress has fallen short of targets set by the Office of Management and Budget. VA has also reported $23.61 million in data center-related cost savings, yet does not expect to realize further savings from additional closures. In addition, VA's Chief Information Officer (CIO) certified the use of adequate incremental development for 10 of the department's major IT investments; however, VA has not yet updated its policy and process for CIO certification as GAO recommended. Finally, VA has issued a software licensing policy and has generated an inventory of its software licenses to inform future investment decisions. GAO has made multiple recommendations to VA aimed at improving the department's IT management. VA has generally agreed with the recommendations and begun taking responsive actions.", "document_type": "gao"}
{"report": "The U.S. government supports various types of democracy assistance activities, which USAID and State categorize under the DRG portfolio. USAID and State use their Updated Foreign Assistance Standardized Program Structure and Definitions to categorize and define DRG program areas. As updated in April 2016, this document defines the aims of DRG as “to advance freedom and dignity by assisting governments and citizens to establish, consolidate, and protect democratic institutions, processes, and values, including participatory and accountable governance, rule of law, authentic political competition, civil society, human rights, and the free flow of information.” Prior to the 2016 update, DRG program areas were (1) rule of law and human rights, (2) good governance, (3) political competition and consensus-building, and (4) civil society. Each program area features different program elements, as shown in table 1. Multiple bureaus and offices in USAID and State, as well as NED, provide funding for democracy assistance programs, as shown in table 2. USAID provides democracy assistance through contracts, grants, and cooperative agreements, while NED provides democracy assistance only through grants. INL was the only State bureau that reported providing a significant amount of democracy assistance through contracts in addition to grants and cooperative agreements, while other bureaus primarily use grants and cooperative agreements. Combined allocations for democracy assistance administered by USAID and State ranged from about $2 billion to about $3 billion per year, and NED funding ranged from about $100 million to about $170 million annually during fiscal years 2012 through 2016, as shown in figure 1. USAID’s and State’s combined allocations for democracy assistance varied by account in fiscal years 2012 through 2016. Economic Support Fund was the largest account ranging from 50 to 63 percent of the total in fiscal years 2012 through 2016, as shown in figure 2. The following laws, regulations, and policies are related to agencies’ decisions to use a contract, grant, or cooperative agreement to implement democracy assistance programming: According to the Federal Grant and Cooperative Agreement Act of 1977, one of the purposes of the act is to promote a better understanding of government expenditures and help eliminate unnecessary administrative requirements on recipients of government awards by characterizing the relationship between executive agencies and contractors, states, local governments, and other recipients in acquiring property and services and in providing government assistance. The act provides agencies with criteria to be considered when making award-type decisions, including the intended nature of the relationship between the agency and recipient, as well as whether the principal purpose of the award is to benefit the federal government or to transfer a thing of value to a recipient to carry out a public purpose of support or stimulation authorized by law. The Competition in Contracting Act of 1984 requires agencies to obtain full and open competition for contracts through the use of competitive procedures in procurements unless otherwise authorized by law. The Federal Acquisition Regulation (FAR) establishes uniform policies and procedures for all executive agencies for acquisition through contracts. For example, the FAR includes policies and procedures to promote the requirement to obtain full and open competition for contracts. It defines the circumstances under which it is permissible for agencies to limit competition for contracts, including when there is an unusual or compelling urgency or when doing so is necessary for reasons of public interest or national security. The Office of Management and Budget’s “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,” as codified in the Code of Federal Regulations (C.F.R.), establishes government-wide requirements for federal agencies administering grants and cooperative agreements with nonfederal entities. This regulation includes policies and procedures for award elements, including monitoring and reporting as well as cost sharing. USAID established agencywide guidance for making award-type decisions in its Automated Directives System (ADS), Chapter 304 (ADS 304). In addition to referencing the criteria established in the Federal Grant and Cooperative Agreement Act, this ADS guidance lists indications for when a specific award type should be used and also identifies factors that should not be primary considerations in making award-type decisions. According to USAID guidance, agreement officers and contract officers are individuals representing the U.S. government who are responsible for documenting the final determination of award-type decisions. USAID further outlines policies and procedures for administration of grants and cooperative agreements in ADS Chapter 303 (ADS 303) and for contracts in ADS Chapter 302 (ADS 302). State also established agencywide guidance for making award-type decisions in its Federal Assistance Directive. It references relevant legislation and instructs contracting and agreement officers to consult with State’s Office of the Procurement Executive if disagreements regarding award-type decisions arise. The Consolidated Appropriations Act, 2016, required USAID and State to each establish guidelines for clarifying program design and objectives for democracy programs, including the use of contracts versus grants and cooperative agreements, for programs carried out with funds appropriated by the act. For more information on USAID and State guidance related to award-type decisions, see appendix III. USAID officials are to make award-type decisions based on applicable laws, regulations, and policies, some of which are described above. Figure 3 provides an overview of the considerations in making this determination based on USAID guidance. ADS 304 provides the following definitions and guidance to USAID personnel as to what award type to select: A contract is a mutually binding legal instrument in which the principal purpose is the acquisition, by purchase, lease, or barter, of property or services for the direct benefit or use of the federal government, or in the case of a host country contract, the host government agency that is a principal, signatory party to the instrument. According to ADS 304, USAID personnel shall use a contract when the principal purpose of this legal relationship is the acquisition of property or services for the direct benefit of a federal government agency. A grant is a legal instrument used when the principal purpose is the transfer of money, property, services or anything of value to a recipient in order to accomplish a public purpose of support or stimulation authorized by Federal statute and when substantial involvement by USAID is not anticipated. USAID personnel are instructed to use a grant when the principal purpose of the relationship with an awardee is to transfer money, property, services, or anything of value to that awardee to carry out a public purpose of support or stimulation authorized by federal statute; and the agency does not anticipate substantial involvement between itself and the awardee during the performance of the activity. A cooperative agreement is a legal instrument used when the principal purpose is the transfer of money, property, services, or anything of value to a recipient in order to accomplish a public purpose of support or stimulation authorized by federal statute and when substantial involvement by USAID is anticipated. According to ADS 304, USAID personnel must use a cooperative agreement when the principal purpose of the relationship with an awardee is to transfer a thing of value to that awardee in order to carry out a public purpose; and the agency anticipates substantial involvement between itself and the awardee during the performance of the activity. The active engagement of USAID officials with awardees in certain programmatic elements of a project constitutes substantial involvement. Such activities include approval of the awardee’s implementation plan and of specified key personnel. In addition to awarding contracts, grants and cooperative agreements to private organizations (such as a for-profit business or a nongovernmental organization), USAID makes awards to federal agencies and public international organizations. Under USAID guidance, a public international organization is an international organization composed principally of countries or other related organizations designated by USAID. USAID maintains a list of public international organizations and international agricultural research centers that are considered public international organizations. These organizations include the United Nations and related organizations, such as the Food and Agriculture Organization, and international financial institutions, such as the World Bank Group. USAID officials noted that public international organizations normally receive grants. Under USAID guidance, awards to public international organizations and interagency agreements do not require the same award-type decisions as those required by ADS 304 for contracts, grants, and cooperative agreements. Awards made to public international organizations are governed by USAID guidance separate from the guidance that applies to awards to other types of organizations, and interagency agreements are governed by guidance separate from contracts, grants, and cooperative agreements. According to USAID’s guidance, the award-type decision should occur early in the preaward stage within the life cycle of an award. Award type- decisions impact other elements of awards because different regulations and guidance are applicable based on award type. For example, competition and oversight requirements differ for contracts compared with grants and cooperative agreements. Similarly, award-type decisions affect whether the recipient of an award is eligible to make a profit. The award life cycle contains preaward and award implementation stages, as shown in figure 4. During fiscal years 2012 through 2016, USAID obligated $5.5 billion and NED obligated $610.2 million in democracy assistance funding, and the total such funding that State obligated cannot be reliably determined. In providing democracy assistance, USAID obligated more through grants and cooperative agreements combined than contracts, but its obligations through different award types varied by fiscal year and DRG program area. NED provided democracy assistance only through grants, and its obligations remained generally constant by fiscal year but varied by DRG program area. State bureaus that were able to provide reliable data provided democracy assistance primarily through grants and cooperative agreements. INL was the only State bureau that reported providing a significant amount of democracy assistance through contracts in addition to grants and cooperative agreements, but INL was one of the three State bureaus unable to provide reliable data. USAID obligated $5.5 billion in democracy assistance funding during fiscal years 2012 through 2016, about 31 percent through contracts; about 33 percent through cooperative agreements; about 4 percent through grants, excluding grants to public international organizations (PIO); and about 32 percent through grants to PIOs. Of the $5.5 billion in democracy assistance, USAID obligated over $1.7 billion of all its democracy assistance through grants to PIOs. The three countries for which USAID obligated the most funds for democracy assistance projects were Afghanistan, Iraq, and South Sudan. Democracy assistance projects in Afghanistan received over $2 billion or 37 percent of USAID’s total democracy assistance obligations during fiscal years 2012 through 2016. Moreover, two grants to the World Bank for the Afghanistan Reconstruction Trust Fund totaling $1.5 billion during fiscal years 2012 through 2016 accounted for 85 percent of the total democracy assistance funds USAID obligated through grants to PIOs during that period. For both total obligations and number of awards, USAID awarded more of its democracy assistance through grants and cooperative agreements combined than through contracts, as shown in figure 5. Contracts and cooperative agreements each accounted for roughly one- third of total obligations, while grants, excluding those to PIOs, accounted for 4 percent of total obligations during fiscal years 2012 through 2016. Excluding grants to PIOs, the number of grants and obligations for grants on average were significantly less than cooperative agreements, as shown in table 3. USAID’s democracy assistance obligations through contracts, grants, and cooperative agreements have varied during fiscal years 2012 to 2016, with significant increases in USAID’s obligations through grants to the World Bank in fiscal years 2012 and 2015, as shown in figure 6. These increases were driven by two large grants to the World Bank for the Afghanistan Reconstruction Trust Fund. Specifically, the World Bank received more than $820 million in fiscal year 2012 and more than $360 million in fiscal year 2015. During fiscal years 2012 to 2016, the World Bank accounted for 93 percent of grants to PIOs. For more details on USAID obligations through different award types by fiscal year and DRG program area, see appendix IV. USAID’s democracy assistance obligations for good governance varied the most compared with the other three DRG program areas, rule of law and human rights, political competition and consensus-building, and civil society, as shown in figure 7. This variation was again due to two large grants to the World Bank for the Afghanistan Reconstruction Trust Fund, which were categorized under good governance. As shown in figure 8, USAID provided more democracy assistance in the area of good governance, over $2 billion more than the next largest program area. Excluding USAID obligations through grants to PIOs, USAID obligated more democracy assistance through contracts than through grants and cooperative agreements combined for the two program areas of good governance and rule of law and human rights. For the two other program areas—civil society and political competition and consensus-building—USAID obligated less through contracts. NED obligated over $610.2 million in democracy assistance funding through a single award type—grants—during fiscal years 2012 through 2016. The three countries for which NED obligated the most funds for democracy assistance are in Eurasia and Asia. NED’s obligations remained generally constant in the past few fiscal years, as shown in figure 9. NED’s approved funding varied across the four DRG program areas. According to NED officials, NED does not maintain obligations data for awards by DRG program areas, as defined by USAID and State. Therefore, NED categorized its grants into DRG program areas for projects when funds were approved rather than when funds were obligated to provide a general sense of funding by DRG program area. NED approved the most funding in the area of good governance followed closely by political competition and consensus-building and then by civil society. NED’s approved funding in all program areas, except for civil society, increased over the years, as shown in figure 10. State reported obligating approximately $3 billion in democracy assistance funding during fiscal years 2012 through 2016 primarily through grants and cooperative agreements, but also through contracts. Seven of 10 State bureaus that were able to provide reliable data obligated $1.7 billion primarily through grants and cooperative agreements; the remaining three bureaus that were unable to provide reliable data reported obligating about $1.4 billion through all three award types. The seven State bureaus that were able to provide reliable data collectively obligated $1.7 billion for fiscal years 2012 through 2016 primarily through grants and cooperative agreements, as shown in table 4. Of these State bureaus, the Bureau of Democracy, Human Rights, and Labor obligated the most with about $1.2 billion in democracy assistance through 547 grants and 56 cooperative agreements for that period. The three regions for which the Bureau of Democracy, Human Rights, and Labor obligated the most funds for democracy assistance were the Near East, East Asia and Pacific, and the Western Hemisphere. Three State bureaus—INL, EUR, and SCA—were unable to provide reliable data on democracy assistance obligations for fiscal years 2012 through 2016. Collectively, these three bureaus reported obligating about $1.4 billion in democracy assistance during this period: INL, about $1.1 billion; EUR, about $150 million; and SCA, about $160 million. INL was the only State bureau that reported providing a significant amount of democracy assistance through contracts in addition to grants and cooperative agreements. We deemed data from these three bureaus unreliable because the data were incomplete, nonstandard, or inaccurate. For example, INL did not provide democracy assistance data for Colombia, Egypt, and Kenya until we identified these countries as potentially missing based on our comparison of INL data with USAID data. According to data INL subsequently provided, the democracy assistance projects in these three countries received about $49 million of the approximately $1.1 billion in democracy assistance obligated by INL in fiscal years 2012 through 2016. According to INL officials, the initial data INL provided did not include records of awards for these countries because awards were miscoded when the data were entered; for example, some awards were coded under the broad category of law enforcement rather than under specific DRG program areas. According to INL officials, this erroneous law enforcement code was used for all of Colombia’s programs and for some programs in other countries such as Egypt and Kenya. According to INL officials, for two additional countries, Tunisia and Morocco, the regional post did not always use codes associated with DRG program areas or personnel entered incorrect codes. INL also provided incomplete data for multiple data fields, including the dates for periods of performance. INL was missing the start date for 74 percent of records and the end date for almost 75 percent of records for fiscal years 2012 through 2015. A September 2014 State Office of Inspector General report on INL found, among other things, that because State’s budgeting and accounting systems are not designed to manage foreign assistance, INL staff were required to engage in time-consuming, inefficient, and parallel processes to track the bureau’s finances. According to INL officials, INL has made improvements in its data since the Inspector General report was published. However, INL was missing the start date for 69 percent of records and the end date for almost 71 percent of records for fiscal year 2016. According to INL, data fields such as these were incomplete because contract officers and agreement officers were not required to enter values for these data fields into State systems until October 2016. EUR and SCA also initially provided incomplete, inaccurate, or nonstandard data for multiple data fields. According to State officials, this was due to manual data entry and transfer errors. For example, dates were in various formats and recipient names were sometimes listed in the field intended for recipient categories, which did not allow for the systematic analysis of records. While EUR generally provided more complete and standard data for fiscal year 2016 compared with fiscal years 2012 through 2015, EUR still provided nonstandard codes to identify award subtype for 5.3 percent of its fiscal year 2016 records. For example, “ESF,” an abbreviation for the Economic Support Fund, was listed as the award subtype for multiple contracts. Furthermore, we identified 145 duplicate EUR records. EUR officials in Washington, D.C., noted that some of the duplicates resulted from their efforts to validate the data they had collected from staff in each country. Subsequently, these officials—who manually merged, analyzed, and validated data to correct it—identified additional duplicates beyond the 145 that we had identified. According to EUR officials, the bureau’s obligation data for democracy assistance awards were maintained in separate databases at posts, rather than in a centralized database. In validating the data they had collected, EUR officials identified duplicate records amounting to at least 5 percent of the records during fiscal years 2012 through 2016. On the basis of our independent analysis of the same dataset, we were able to confirm that about 4 percent of the EUR records were duplicate records. Data on democracy assistance awards are maintained in the countries where the awards are made. To obtain award level data, EUR headquarters personnel had to ask staff in each country to manually compile and report award data. In addition, SCA did not initially provide data for Afghanistan and Pakistan, including award-type data. Records associated with these two countries accounted for about 92 percent of SCA’s total democracy assistance funding. We identified these countries as potentially missing based on our comparison of SCA data with USAID data. SCA subsequently provided the missing data on democracy assistance awards made in Afghanistan and Pakistan; the data resided within a separate database. SCA democracy assistance awards are allocated across three offices within SCA and EUR, and information regarding democracy assistance programs is not currently managed through a centralized database. According to SCA officials, due to the lack of a centralized database, they would need to carefully coordinate across the three offices. However, despite the coordination efforts of these offices, SCA did not include Afghanistan and Pakistan in their initial submission of data to us, and the additional data SCA subsequently submitted through EUR for Central Asia still contained nonstandard and missing values. A June 2017 State Office of Inspector General report determined that State cannot obtain timely and accurate data necessary to provide central oversight of foreign assistance activities and meet statutory and regulatory reporting requirements. For example, the report said that State cannot readily analyze its foreign assistance by country or programmatic sector. Similarly, we found that State cannot readily analyze its foreign assistance agencywide by country or for its DRG portfolio since INL, EUR, and SCA did not provide reliable DRG award data, including incomplete or duplicative data associated with certain countries. According to the report, this lack of data hinders State’s leadership from strategically managing foreign assistance resources, identifying whether programs are achieving their objectives, and determining how well bureaus and offices implement foreign assistance programs. In September 2014, State began the Foreign Assistance Data Review to better understand and document issues with its agencywide data and multiple budget, financial, and program management systems, but State does not plan to complete its Foreign Assistance Data Review until fiscal year 2021. The Consolidated Appropriations Act, 2016, requires State to report on its use of the various award types, and the Office of Management and Budget’s Bulletin No. 12-01 requires State to report quarterly on its foreign assistance activities. Given these reporting requirements, State would not be able to provide accurate and complete data on democracy assistance unless INL, EUR, and SCA took immediate steps to address their data deficiencies. Federal internal control standards call for agencies to use quality information from reliable sources to achieve intended objectives and to effectively monitor activities. Without reliable democracy assistance data from all relevant bureaus, State cannot effectively monitor its democracy assistance programming and report reliable data externally. USAID generally did not document award-type decisions in a complete and timely manner for the awards in our sample. Specifically, USAID provided complete and timely documentation of the award-type decision for 5 of the 41 awards we reviewed. For the remaining 36 awards, the documentation was either incomplete, not timely, or both. According to ADS 304, contract and agreement officers must determine whether to use a contract, grant, or cooperative agreement, including a rationale based on criteria outlined in the Federal Grant and Cooperative Agreement Act. Consistent with the requirements of ADS 304, USAID personnel documented the rationale for using a contract, grant, or cooperative agreement for 27 of the 41 awards we reviewed. As table 5 shows, the number of awards in our sample with complete and incomplete documentation of the award-type decision varies by award type. ADS 304 requires contract and agreement officers to document the selection of an award type, including the rationale for the award-type decisions based on the requirements of the Federal Grant and Cooperative Agreement Act. USAID provided documentation of the award-type decision for 31 of the awards in our sample but lacked such documentation for 10 awards. However, for 4 of the 31 awards with documentation of the award-type decision, the documentation was not complete because it did not include a rationale for choosing between grants, cooperative agreements, and contracts on the basis of criteria in the Federal Grant and Cooperative Agreement Act, as required by USAID guidance. The documentation of the award-type decision for these 4 awards, which were all contracts, outlined the rationale for selecting a particular type of contract, information that is required by the FAR. However, the documentation for these 4 awards did not address the decision to use a contract rather than a grant or cooperative agreement, including a rationale based on the requirements outlined in the Federal Grant and Cooperative Agreement Act, as required by ADS 304. For example, documentation for one contract provided a rationale for selecting a firm- fixed-price contract based on the level of risk, which is in accordance with requirements of the FAR. However, the documentation did not indicate the rationale for deciding to use a contract rather than a grant or cooperative agreement as required by ADS 304. Without documentation of the rationale for award-type decisions as required under USAID guidance, USAID cannot demonstrate that award-type decisions are made based on the requirements outlined in the Federal Grant and Cooperative Agreement Act. For the 31 awards in our sample for which USAID provided documentation of the award-type decision, 6 met the timeliness standard set by USAID guidance, and 25 did not, as shown in table 6. While 5 award-type decisions were both timely and complete, one award that met the timeliness standard lacked a required component. According to ADS 304, contract and agreement officers must document the final award-type decision before a solicitation is issued or before USAID initiates communications with a potential sole source recipient. We found that 25 awards lacked timely documentation of the award-type decision because the decision was documented after the solicitation was issued or timeliness was indeterminate because the documentation lacked a date or other indication of when in the process this determination was documented. Without this, we could not determine whether the award-type decisions were documented prior to solicitation or before USAID initiated communications with a potential sole source recipient. Instances in which final award-type decisions were documented after the issuance of a solicitation or communication with a potential sole source recipient include the following: Solicitation for one of the contracts in our sample occurred in 2011, but the award-type decision was not documented until 2013. The award-type decision for one of the grants in our sample was documented after the grant was awarded, which occurs after the solicitation is issued. Solicitation for one cooperative agreement in our sample occurred in 2010, but the award-type decision was not documented until 2012. According to USAID officials, the agency’s practice prior to October 2016 was to include award-type decisions in a comprehensive document that was intended to record all key decisions made throughout the award process. This document was finalized at the end of the award process. However, USAID officials also stated that they have introduced new processes and procedures, including making updates to relevant guidance, templates, and instructions that they believe will result in more timely and complete documentation of award-type decisions. Specifically, in 2016 USAID issued an update to ADS 304 that includes examples of when to use contracts, grants, and cooperative agreements and provides additional information about the legal framework for making award-type decisions. In 2017, USAID also issued revised templates to guide the documentation of award-type decisions. According to USAID officials, in addition to clarifying the ADS 304 guidance and developing new templates, USAID is also developing specific guidance for DRG programs that it expects to release at a future date. For additional information about this DRG-specific guidance, see app. III. USAID has taken steps to improve documentation for award-type decisions by updating its guidance and templates but has not assessed whether these updates have resulted in timely and complete documentation of award-type decisions. USAID officials stated that assessments are conducted at the sub-bureau or mission level, rather than by specific sectors, such as for DRG programs. As a result, USAID officials do not have plans to assess whether the newly updated processes and procedures have resulted in more timely documentation of DRG award-type decisions. It is important that USAID document the award-type decision before it publishes a solicitation for the award because award-type decisions impact other award elements, such as the requirements for competition and oversight and whether profit is permissible under the award. Until USAID assesses its updated processes and procedures, it cannot know if the steps it has taken have resulted in complete and timely documentation of award-type decisions as required by USAID guidance. For the awards in our sample, contracts generally differed from grants and cooperative agreements in terms of competition, scope of work, cost sharing and profit, and oversight requirements, among other characteristics. We identified differences in three award elements— competition, cost sharing and profit, and oversight requirements—that were generally consistent with the unique requirements provided for in procurement regulations and agency guidance. We also identified differences between the award types with regard to scope of work, and found certain activities were conducted under all three award types. USAID awarded most, but not all, of the contracts in our sample using full and open competition, according to USAID data. Different federal and USAID requirements are in place regarding the use of competition procedures to award contracts than apply to grants and cooperative agreements. In accordance with the FAR, executive agencies such as USAID are required to promote and provide for full and open competition in awarding contracts, with only limited exemptions. USAID did not require full competition for any of the grants in our sample and required it for only about one-third of the cooperative agreements, according to USAID data. For the 41 awards in our sample, table 7 shows how many of each award type used full competition, limited competition, or no competition, based on USAID data. Below are examples of the rationale USAID provided for limiting competition for selected contracts, grants, and cooperative agreements: USAID limited competition for one of the contracts in our sample because of potential impairment to a foreign aid program, and another contract was limited to local competitors. This exemption to full and open competition is based on a unique statutory authority available to USAID and other agencies operating foreign assistance programs, which has been implemented in the USAID Supplement to the FAR. USAID also exempted one of the contracts in our sample from full and open competition using a provision in the FAR that allows for solicitation from a single source when the purchase falls below a threshold of $150,000. However, USAID officials indicated that they erroneously cited FAR 13.106-1(b), which permits sole source awards for acquisitions not exceeding the simplified acquisition threshold if only one source is reasonably available, when they should have cited FAR 13.501(a)(2)(i), which permits sole source acquisitions of commercial items (including brand-name items) for acquisitions greater than $150,000. For two of the grants in our sample, USAID limited the awards to local competition, according to USAID officials. For one cooperative agreement in our sample, competition was limited, according to USAID data, but USAID did not provide additional information on how the award competition was limited. The recipient of this award had submitted an unsolicited application, which under ADS 303, may be included in a relevant competition for an award, if USAID finds that the unsolicited application reasonably fits an existing program. USAID found that this unsolicited application was responsive to an existing solicitation and thus provided no additional justification. For more information on the rationales USAID used to exempt contracts, grants, and cooperative agreements in our sample from full and open competition, see appendix V. We found that the scope of work for contracts, grants, and cooperative agreements included similar types of activities. We also found that contracts more often included a greater number of activities working with the host-country government or other major national institutions, and grants and cooperative agreements more often included a greater number of activities working with civil society organizations. Seven of the 13 contracts in our sample included more activities focused on engaging with host-country governments and national institutions, while only 2 of the 13 contracts included more activities focused on engaging civil society organizations. Grants and cooperative agreements, by contrast, more often included a greater number of activities to support civil society organizations and media organizations than government or major national institutions of the country of performance. Three of the 5 grants in our sample included more objectives or activities focused on engaging civil society organizations, rather than engaging with host government or other major national institutions, while none of the grants included more objectives or activities related to the host government or other major national institutions. Cooperative agreements slightly more often included a greater number of objectives or activities to engage civil society organizations than they did to work with host government and national institutions, with 9 cooperative agreements including more objectives or activities focused on engaging civil society organizations and 7 with more objectives or activities focused on engaging host governments or other national institutions. Below are some examples of the activities and types of parties engaged with as stated in the awards in our sample: One contract in our sample provided various advisors to assist the government of a foreign country in implementing transparent policies, laws, and systems to strengthen public financial management and provide for a well-regulated financial sector, among other things. For more information on program objectives for selected democracy assistance awards by contract type, see appendix VI. A grant in our sample sought to increase the capacity of civil society organizations and the media to promote transparent democratic elections and political processes, among other things. Activities under the scope of work for this award included building alliances with stakeholders, conducting election-day observations, and analyzing electoral results. A cooperative agreement in our sample was intended to support a political transition through, among other things, organizational capacity development and grant-making opportunities for civil society organizations working to raise awareness about electoral events. In addition, for our award sample, we found that activities such as technical assistance, training, and local capacity building were conducted under grants, cooperative agreements, and contracts. Eight of the 13 contracts in our sample were cost-plus-fixed-fee contracts, under which the contractor is reimbursed its costs in implementing the program in addition to a fee (profit) that is fixed at the outset. For these 8 contracts, the estimated percentage of profit ranged from about 1 to 6 percent of the estimated contract cost. According to the FAR, under cost-plus-fixed-fee contracts, the fee cannot exceed 10 percent of the contract’s estimated cost excluding fee. The average estimated fixed fee percentage for these contracts was about 5 percent of the estimated contract cost. While USAID contracts may be structured to provide for contractor profit in accordance with the FAR, USAID guidance does not allow profit under grants and cooperative agreements. For the grants and cooperative agreements in our sample, the awards did not specifically provide any fee (profit), and the awardees often agreed to contribute to the cost of the program through cost sharing. In addition, USAID guidance identifies cost sharing—whereby an awardee contributes to the total cost of an agreement—as an important element of the USAID-awardee relationship for grants and cooperative agreements. According to this guidance, although there is no general requirement for the awardees of grants and cooperative agreements to share in providing the costs of programs, cost sharing can be a mechanism to help awardees build their organizational capacity. For the awards in our sample, USAID included provisions for cost sharing in 3 of the 5 grants, and the awardees agreed to contribute about 11 percent, 13 percent, and 74 percent of the respective total award funding, including the cost share amount. USAID also included cost sharing provisions in 10 of the 23 cooperative agreements, with the awardee contribution ranging from less than 1 percent to 36 percent of the total award funding, including the cost share amount. All of the grants and cooperative agreements that included cost sharing provisions were awarded to nonprofit organizations, according to USAID data. Some of these awardees agreed to contribute to cost sharing by covering in-kind costs, such as donated time from volunteer legal specialists, and others agreed to contribute cash to cover some of the direct costs of implementing programs, such as personnel and benefits. According to USAID officials, cost sharing is rarely used under USAID contracts because under a cost sharing contract the contractor agrees to absorb a portion of its costs in expectation of substantial compensating benefits, such as certain research and development efforts, and these circumstances rarely occur under USAID’s programming. USAID did not include cost sharing provisions in any of the 13 contracts in our sample. For additional information about profit in our sample, see table 8. Table 9 provides additional information about cost sharing under the awards in our sample. Below are some examples of profit and cost sharing arrangements included in contracts, grants, and cooperative agreements in our sample: A contract in our sample sought to, among other things, improve the access of vulnerable and disadvantaged populations to the country’s legal system by engaging in activities such as working to build the capacity of government and civil society organizations to be more responsive to the needs of these populations. Under this award, the contractor was to receive approximately $1.7 million in profit, which was 4 percent of the estimated value of the award. The awardee for a grant in our sample agreed to provide $2.1 million of the program costs, about 74 percent of the total cost of the program, which sought to develop public opinion survey research capacity in the host country, among other things. USAID’s grant to this awardee funded additional support for the program, which the awardee was already executing prior to USAID assistance. A cooperative agreement in our sample included a requirement for the awardee to contribute about 9 percent of program expenditures, or about $3 million, for a program that sought to improve access to health services, as well as strengthen health delivery systems and health governance. We found that USAID oversight requirements differed for contracts compared with grants and cooperative agreements for the awards in our sample. This is because contracts (1) at times required more frequent reporting and (2) more often required evaluations of the contractor’s performance. Reporting requirements: We found that while most awards in our sample required quarterly financial and performance reporting, some contracts required these reports to be submitted monthly. USAID required quarterly financial and performance reporting for the majority of grants and cooperative agreements in our sample. None of the grants or cooperative agreements in our sample included requirements for financial reporting more frequently than quarterly, and no grants and only one cooperative agreement included a more frequent performance reporting requirement. According to Title 2 of the Code of Federal Regulations (C.F.R.), Section 200.327, under grants and cooperative agreements, financial reports must be collected by agencies with the frequency required by the award, but no less frequently than annually and no more frequently than quarterly, except in unusual circumstances, such as where more frequent reporting is necessary for effective monitoring of the award. USAID officials confirmed that there would have to be a reason to justify quarterly or more frequent reporting requirements for grants or cooperative agreements. For example, considerations related to risk could result in the need for more frequent reporting for grants and cooperative agreements. Table 10 shows the financial and performance reporting requirements for the contracts, grants, and cooperative agreements in our sample. Evaluations of performance: For the majority of contracts in our sample, USAID included provisions for evaluation of the contractor’s performance at the conclusion of performance. According to the FAR, evaluations of a contractor’s performance shall be prepared at the time the work under the contract is completed, and, for contracts longer than 1 year, interim evaluations should be prepared at least annually. USAID officials indicated that there is no similar government-wide or USAID requirement for grants and cooperative agreements. None of the grants and only a few of the cooperative agreements in our sample included such evaluation provisions. However, USAID officials noted that, in accordance with USAID policy, the past performance of a potential awardee is considered in conducting risk assessments for grants and cooperative agreements. Table 11 shows the number of USAID contracts, grants, and cooperative agreements in our sample that included provisions for evaluation of the contractor or awardee’s performance. For most of the contracts in our sample, award documentation indicated that the contractor’s performance would be assessed on a variety of factors such as quality of service, cost control, timeliness of performance, and effectiveness of key personnel. These evaluations form the basis of the contractor’s performance record for the contract. Only one contract in our sample had no requirement for a performance evaluation of the contractor, and that award was for the rental of a hotel ballroom and related services for an event. For three of the cooperative agreements in our sample that included provisions for the evaluation of the awardee’s performance, the award documentation indicated that USAID officials were to ensure prudent management of the award and to make the achievement of program objectives easier by, among other things, evaluating the awardee and its performance. One cooperative agreement included a provision that USAID will fund or conduct an external midterm evaluation during the second year of the project. For the one remaining cooperative agreement with an evaluation provision, documentation indicated that the evaluation would be used to inform a decision about a potential follow-on award. Democracy assistance has been a key component of U.S. foreign assistance, supporting activities related to rule of law and human rights, good governance, political competition and consensus-building, and civil society. USAID and State together have allocated about $2 billion annually for democracy assistance in fiscal years 2012 through 2016. USAID’s information systems enable it to track and report the amount of democracy assistance funding through contracts, grants, and cooperative agreements. However, State lacks the ability to provide comparable agencywide data. The quality of democracy assistance award data provided by 10 State bureaus and offices varied, and three of these bureaus were unable to provide reliable data. Of the State bureaus, INL is the only bureau that regularly makes use of contracts, and it provided unreliable data. Without reliable data from INL, State cannot accurately report on its use of the various award types. In addition, since EUR’s and SCA’s award data are maintained across embassies, offices, and the two bureaus, opportunities for data errors may increase when regional data needs to be compiled. Without reliable data from all relevant bureaus, State cannot be sure that it is fully and accurately reporting on democracy assistance awards, which limits, among other things, congressional oversight of democracy assistance funding. While USAID requirements for complete and timely documentation of award-type decisions have existed since at least 2011, for our sample of 41 USAID awards for which an award-type decision was required, only 5, or about 12 percent, had both complete and timely documentation of the award-type decision. USAID recently introduced processes and procedures to improve the documentation of these decisions. However, until USAID assesses its updated processes and procedures, it cannot know if the changes resulted in award-type decisions being documented in a complete and timely manner, as required by its guidance, or if additional steps are needed. We are making three recommendations, two to State and one to USAID. The Secretary of State should direct the Bureau of International Narcotics and Law Enforcement Affairs to identify and address factors that affect the reliability of its democracy assistance data, such as miscoded or missing data. (Recommendation 1) The Secretary of State should direct the Director of the Office of U.S. Foreign Assistance Resources to implement a process to improve the reliability, accessibility, and standardization of democracy assistance data across the geographic regions of the Bureaus of European and Eurasian Affairs and South and Central Asian Affairs, such as utilizing a centralized database for award data. (Recommendation 2) The USAID Administrator should direct the Office of Acquisition and Assistance to assess whether current processes and procedures as outlined in revised guidance result in complete and timely documentation of award-type decisions for democracy assistance. (Recommendation 3) We provided a draft of this report to State, USAID, and NED for review and comment. State, USAID, and NED provided technical comments on the draft, which we incorporated as appropriate. State and USAID also provided written comments in letters that are reproduced in appendices VII and VIII, respectively. In their written comments, both State and USAID concurred with our recommendations. State also requested that the report provide more information about its commitment and efforts to improve accountability of foreign assistance under its Foreign Assistance Data Review process. We have added more details about these efforts, including a discussion of State’s recent report to Congress on the outcomes of Phases One and Two of its four-phase review, which is expected to be completed in fiscal year 2021. State’s letter also described other efforts to improve the quality and accessibility of data at the bureau- level and at posts. In its written comments, USAID stated that it will take steps to assess documentation of award-type decisions and planned to complete this assessment by September 30, 2018. USAID also underscored certain details regarding required documentation of award-type decisions for some awards in our sample of 41 USAID democracy assistance awards. USAID noted that three contracts in our sample consisted of task orders, which do not require award-type decision documentation separate from their base awards under USAID guidance, according to agency officials. The draft report included these details, and we added more information to the report to further clarify them. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of the U.S. Agency for International Development, and the President of the National Endowment for Democracy. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. This report (1) examines funding that the U.S. Agency for International Development (USAID), National Endowment for Democracy (NED), and U.S. Department of State (State) obligated for democracy assistance through contracts, grants, and cooperative agreements; (2) evaluates USAID documentation of award-type decisions; and (3) compares USAID contracts with grants and cooperative agreements across selected award elements. To examine funds obligated by USAID, NED, and State for democracy assistance by award types, we obtained data on awards that USAID, NED, and State administered during fiscal years 2012 through 2016 under the Democracy, Human Rights, and Governance (DRG) portfolio. The data we obtained included awards to public international organizations (PIO). However, awards to PIOs are governed by USAID guidance separate from the guidance that applies to awards to other types of organizations. The data we obtained also included interagency agreements. However, interagency agreements are governed by separate USAID guidance that does not require the same award-type decision as when agencies obligate funds to entities through contracts, grants, and cooperative agreements. We analyzed the award data for fiscal years 2012 through 2016 but did not include fiscal year 2011 data in our analysis because State did not consistently track obligations data at the award level prior to fiscal year 2012, according to State officials. We assessed the reliability of these data by reviewing related documentation; interviewing knowledgeable officials; and conducting electronic or manual data testing for missing, nonstandard, or duplicative data; among other things. We determined that data provided by USAID, NED, and State, except for data from State’s Bureau of International Narcotics and Law Enforcement Affairs (INL), Bureau of European and Eurasian Affairs (EUR), and Bureau of South and Central Asian Affairs (SCA), were sufficiently reliable for the purposes of our report. For the USAID, NED, and State data that were sufficiently reliable, we analyzed the amount of funding by award type, among other variables. We assessed State’s data reliability challenges against federal internal control standards. To evaluate USAID’s award-type decisions, we reviewed relevant regulations and agency policies, and we interviewed knowledgeable agency officials about these polices. State and NED were not included in our sample because most State bureaus did not regularly use all three types of awards and NED only provides assistance through grants. In addition, three State bureaus were unable to provide reliable data from which to select a sample. We also selected a roughly proportional, random, nongeneralizable sample of 41 awards—13 contracts, 5 grants, and 23 cooperative agreements. These awards were selected based on characteristics, such as award type, DRG program area, and place of performance. The sample focused on the 14 countries for which USAID obligated the most democracy funding. Democracy assistance projects in these 14 countries received over 70 percent of USAID’s democracy assistance funding. The sample was also limited to contracts, grants, and cooperative agreements that were awarded by USAID in fiscal years 2012 through 2015 because fiscal year 2015 was the most recent fiscal year for which data were available at the time of our sample selection. We excluded (1) grants made to PIOs because these awards are governed by USAID guidance separate from the guidance that applies to awards to other types of organizations; (2) interagency agreements because engaging other federal agencies through interagency agreements does not require the same award-type decision under USAID guidance as when agencies obligate funds to entities through contracts, grants, and cooperative agreements; and (3) awards that fell below the simplified acquisition threshold, which is $150,000, because there are different acquisition procedures allowable for awards that fall below the threshold. For the selected awards, we obtained and analyzed preaward documentation relevant to the award-type decision and evaluated this documentation against the relevant regulations and agency guidance. To ensure accuracy, we cross-checked information from the documentation for the selected awards with USAID’s award data. In collaboration with subject-matter experts, we selected four award elements—competition, cost sharing and profit, scope of work, and oversight requirements—for a comparison of contracts with grants and cooperative agreements. To compare USAID contracts with grants and cooperative agreements across selected award elements, we obtained and conducted a review of documentation associated with the same sample of 41 USAID awards. Additionally, we obtained information about award recipients from a public database maintained at SAM.gov. Using information collected from the documentation, we analyzed the selected awards’ competition, cost sharing and profit, scope of work, and oversight activities. Subsequently, we reviewed the documentation and applicable legal frameworks, including federal regulations and guidance pertaining to the award elements we selected, to compare differences between award types. We also interviewed relevant agency officials as well as the leading industry organizations that represent implementers of foreign assistance programs to better understand the use of various award types. We conducted this performance audit from July 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Our nongeneralizable sample of U.S. Agency for International Development (USAID) awards was limited to fiscal years 2012 through 2015 and to the 14 countries for which USAID obligated the most democracy funding, which accounted for over 70 percent of USAID’s democracy assistance funding. Total USAID democracy assistance funding for projects in Afghanistan was greater than for any other country, amounting to almost 39 percent of USAID’s total democracy assistance obligations during fiscal years 2012 through 2015. The total USAID democracy assistance funding for projects in Afghanistan included obligations to public international organizations (PIOs) of more than $827 million in fiscal year 2012, more than $55 million in fiscal year 2013, more than $48 million in fiscal year 2014, and more than $369 million in fiscal year 2015. USAID’s use of award types for democracy assistance varied across these 14 countries during fiscal years 2012 through 2015, as shown in figure 11. The Consolidated Appropriations Act, 2016, states that not later than 90 days after enactment of the act, the U.S. Department of State (State) and U.S. Agency for International Development (USAID), following consultation with democracy program implementing partners, shall each establish guidelines for clarifying program design and objectives for democracy programs, including the use of contracts versus grants and cooperative agreements in the conduct of democracy programs carried out with funds appropriated by the act. The joint explanatory statement accompanying the act further elaborated that the act requires the development of guidelines for the use of contracts versus grants and cooperative agreements for the unique objectives of democracy programs, and that the guidelines should assist contracting and agreement officers in selecting the most appropriate mechanism for democracy programs, among other things. In 2016, USAID released its revised agencywide guidance, Automated Directives System (ADS) Chapter 304 (ADS 304), on how to make award- type decisions between contracts, grants, and cooperative agreements. According to USAID officials, USAID expects to release guidance further clarifying ADS 304 at a future date. USAID intends to issue the guidance after it completes final consultations with implementing partners, the Congress, and other stakeholders. It includes scenarios and examples to further clarify existing government-wide and agencywide guidance. According to USAID officials, in drafting its guidance to further clarify ADS 304, USAID pursued multiple rounds of review within USAID, and with implementing partners, the Congress, and other stakeholders. According to State, it met the requirement to establish additional guidelines for democracy assistance through State’s release of a Program Design and Performance Management Toolkit in fall 2016 and State’s updating of its Federal Assistance Directive in May 2017. The aim of the Program Design and Performance Management Toolkit was to clarify program design and objectives for foreign assistance programs broadly. The Federal Assistance Directive combined both policies and procedures from the Federal Assistance Policy Directive and the Procedural Desk Guide into one document and clarified appropriate mechanisms for all programs. Although applicable to democracy programs, neither of these actions was specific to democracy programs. According to State, the Bureau of Democracy, Human Rights, and Labor; the Bureau of International Narcotics and Law Enforcement; and other relevant State bureaus that work closely with democracy assistance implementing partners consult regularly with and provide guidance to implementing partners on the use of the guidelines. U.S. Agency for International Development (USAID) democracy assistance obligations through different award types varied by fiscal year and DRG program area, as shown in tables 12, 13, and 14. Regulations, law, and policy enable the U.S. Agency for International Development (USAID) to limit competition in awarding contracts, grants, and cooperative agreements under certain circumstances. One source of USAID’s authority to limit competition for contracts is the Competition in Contracting Act of 1984, as implemented in the Federal Acquisition Regulation (FAR), which outlines policies and procedures for acquisition by all federal agencies, including policies and procedures pertaining to exemptions from competition. In addition, for contracts awarded under USAID programs, the FAR, among other regulations and legislation, contains specific provisions on exemptions from competition. For grants and cooperative agreements, USAID’s Automated Directives System Chapter 303 outlines circumstances under which competition can be limited. In accordance with applicable policies, procedures, and guidance, USAID can use some exemptions from competition only for contracts and others only for grants and cooperative agreements. For example, USAID can limit competition for contracts for the sake of public interest or when circumstances are such that competition would compromise U.S. national security; however, according to USAID officials, they rarely have cause to use these grounds for limiting competition. USAID guidance outlines some unique exemptions to competition for grants and cooperative agreements. For example, USAID can exempt follow-on awards, which are the same or substantively similar to recently completed awards, if the awardee will be the same, or can exempt awards from competition in certain instances when USAID has received an unsolicited application. For the awards in our sample, USAID limited competition for only 3 of the 13 contracts, based on USAID data. However, for one of these contracts, USAID officials indicated that they erroneously cited FAR 13.106-1(b), which permits sole source awards for acquisitions not exceeding the simplified acquisition threshold if only one source is reasonably available, when they should have cited FAR 13.501(a)(2)(i), which permits sole source acquisitions of commercial items (including brand-name items) for acquisitions greater than $150,000. For the exemptions from competition that USAID used for these awards, see table 15. USAID exempted from full competition all five of the grants and 15 of the 23 cooperative agreements in our sample. Table 16 outlines exemptions from competition that USAID may use for grants and cooperative agreements in our sample. For the contracts in our sample, we found that program objectives varied by type of contract. For example, the firm fixed price award and three of the four indefinite quantity awards in our sample procured goods and services with specific deliverables that were directly for the U.S. Agency for International Development’s (USAID) benefit. Nearly all of the cost- plus-fixed-fee contracts sought to achieve improvements in the public sector of the country of performance through activities such as supporting developments in public policy or strengthening national institutions. For examples of differences in program objectives by contract type in our sample, see table 17. In addition to the contact named above, Mona Sehgal (Assistant Director), Justine Lazaro (Analyst-in-Charge), Lindsey Cross, Christopher Hayes, Carl Barden, Karen Cassidy, David Dayton, Timothy DiNapoli, Justin Fisher, Alexandra Jeszeck, Heather Latta, Madeline Messick, Natarajan Subramanian, Alex Welsh, and Bill Woods made key contributions to this report.", "summary": "Supporting efforts to promote democracy has been a foreign policy priority for the U.S. government. In recent years, USAID and State have allocated about $2 billion per year toward democracy assistance overseas. Congress required USAID and State to each establish guidelines for and report on the use of contracts, grants, and cooperative agreements for certain democracy programs. GAO was asked to review U.S. democracy assistance. This report (1) examines funding USAID, NED, and State obligated for democracy assistance primarily through contracts, grants, and cooperative agreements and (2) evaluates documentation of USAID award-type decisions, among other objectives. GAO analyzed USAID, NED, and State democracy assistance award data for fiscal years 2012–2016. GAO also reviewed relevant regulation and agency policies and analyzed documentation for a nongeneralizable sample of USAID awards selected based on factors such as award type, program area, and country. In fiscal years 2012–2016, the U.S. Agency for International Development (USAID) obligated $5.5 billion and the National Endowment for Democracy (NED) obligated $610.2 million in democracy assistance funding. The total funding the Department of State (State) obligated for democracy assistance could not be reliably determined. One-third of all USAID obligations were provided through public international organizations (PIOs), which under USAID guidance are composed principally of countries or other organizations designated by USAID; 94 percent of PIO obligations were provided to the World Bank for democracy assistance projects in Afghanistan. The remaining two-thirds of USAID obligations were provided through contracts, grants (excluding PIOs), and cooperative agreements. Of the 10 State bureaus providing democracy assistance, 3 were unable to provide reliable funding data for fiscal years 2012–2016. Data from these bureaus were incomplete, nonstandard, or inaccurate. Federal internal control standards call for agencies to use quality information from reliable sources to achieve intended objectives and to monitor activities. Without such data, State cannot effectively monitor its democracy assistance programming and report reliable data externally. For the awards GAO sampled, USAID generally did not document decisions about whether to award a contract, grant, or cooperative agreement (known as award-type decisions) in a complete and timely manner. According to applicable USAID guidance, agency officials were required to (1) document the final award-type decision with their written determination, including a rationale based on the requirements of the Federal Grant and Cooperative Agreement Act, and (2) complete this documentation before award solicitation occurs or, for noncompetitive awards, before USAID initiated communications with a potential sole-source awardee. However, USAID provided both complete and timely documentation of the award-type decision for 5 of the 41 awards GAO sampled. For the remaining 36 awards, the documentation was either incomplete, not timely or timeliness was indeterminate, or both (see table). While USAID has taken steps to improve documentation for award-type decisions by updating its guidance and templates, it has not assessed whether these updates have resulted in complete and timely documentation. It is important that USAID document these decisions in advance of solicitation because the selection of an award type may affect requirements for administering the award, including competition and oversight requirements and whether or not profit is permissible. State should improve the reliability and completeness of its democracy assistance funding data, and USAID should assess whether steps taken are resulting in complete and timely documentation of democracy assistance award-type decisions. State and USAID concurred with GAO's recommendations and described actions planned or under way to address them.", "document_type": "gao"}
{"report": "Since September 2012, CMS has subjected selected items and services to prior authorization and pre-claim reviews—a process similar to prior authorization where review takes place after services have begun— through four fixed-length demonstrations and a permanent program. The prior authorization demonstrations are for certain power mobility devices, repetitive scheduled non-emergency ambulance services, non- emergency hyperbaric oxygen therapy, and home health services; while the permanent program is for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) items. By using prior authorization, CMS generally seeks to reduce expenditures, unnecessary utilization, and improper payments, although specific objectives for the programs vary based on the statutory authority CMS used to initiate each. Power mobility devices demonstration: In September 2012, CMS implemented prior authorization for certain scooters and power wheelchairs, items the agency has identified with historically high levels of fraud and improper payments, for Medicare beneficiaries in seven states: California, Florida, Illinois, Michigan, New York, North Carolina, and Texas. The demonstration, established under Section 402(a) of the Social Security Amendments of 1967, is intended to develop or demonstrate improved methods for the investigation and prosecution of fraud in providing care or services under Medicare. In October 2014, CMS expanded the demonstration to 12 additional states: Arizona, Georgia, Indiana, Kentucky, Louisiana, Maryland, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee, and Washington. CMS also extended the program, which was originally scheduled to end in 2015, until August 2018. CMS officials reported that since the prior authorization programs’ implementation, the agency made more than 100 referrals to its contractors that investigate fraud. However, due to the length of time fraud investigations typically take, results from these referrals are not yet available. extended the program, which was originally scheduled to end in 2017, through November 2018. Non-emergency hyperbaric oxygen therapy demonstration: In March 2015, CMS implemented prior authorization for non-emergency hyperbaric oxygen therapy in three states the agency has identified with high utilization and improper payment rates, based on the therapy facility’s location: Illinois, Michigan, and New Jersey. Medicare covers hyperbaric oxygen therapy for certain conditions, such as diabetic wounds of the lower extremities, after there have been 30 days of no measurable signs of healing during standard wound care treatment. According to CMS, previous experience indicates that hyperbaric oxygen therapy has a high potential for improper payments and raises concerns about beneficiaries receiving medically unnecessary care. The demonstration, established under Section 1115A of the Social Security Act, is intended to reduce expenditures while preserving or enhancing quality of care. The demonstration ended in February 2018. Home health services demonstration: In August 2016, CMS implemented prior authorization for home health services in Illinois. The demonstration, established under Section 402(a) of the Social Security Amendments of 1967, is intended to develop or demonstrate improved methods for the investigation and prosecution of fraud in providing care or services under Medicare. The demonstration was originally scheduled to incorporate other states the agency has identified with high rates of fraud and abuse: Florida, Massachusetts, Michigan, and Texas. However, as of April 2017, CMS paused the demonstration while it considered making improvements. As of February 2018, the demonstration has not resumed. Permanent DMEPOS program: In December 2015, CMS established a permanent prior authorization program for certain DMEPOS items under Section 1834(a)(15) of the Social Security Act. This program aims to reduce unnecessary utilization for certain DMEPOS items. To select the items that would be subject to prior authorization, CMS compiled a Master List of items that 1) appear on the DMEPOS Fee Schedule list, 2) have an average purchase fee of $1,000 or greater (adjusted annually for inflation) or an average rental fee schedule of $100 or greater (adjusted annually for inflation), and 3) meet one of these two criteria: the item was identified in a GAO or HHS Office of Inspector General report that is national in scope and published in 2007 or later as having a high rate of fraud or unnecessary utilization, or the item is listed in the 2011 or later published Comprehensive Error Rate Testing program’s annual report. CMS may choose specific items from this Master List to include on the required prior authorization list, and there is no set end date for requiring prior authorization for those items. CMS may suspend prior authorization for those items at any time. (See app. I for the items on the Master List.) In March 2017, CMS began requiring prior authorization for two types of group 3 power wheelchairs from the Master List for beneficiaries with a permanent address in selected states (Illinois, Missouri, New York, and West Virginia) and expanded the program nationwide in July 2017. As of February 2018, CMS has not identified any other items from the Master List for prior authorization. See figure 1 for each prior authorization program’s implementation and end dates. MACs that administer the prior authorization programs review prior authorization requests for items and services, along with supporting documentation, to determine whether all applicable Medicare coverage and payment rules have been met. CMS expects requests for prior authorization to include all documentation necessary to show that coverage requirements have been met, for example face-to-face examination documentation or the detailed product description. The referring physician—or the physician who conducts the face-to-face examination of the beneficiary and orders the item or service—provides this documentation to a provider or supplier who subsequently furnishes the item or service. According to multiple MACs’ officials, the provider or supplier who furnishes the item or service typically submits the prior authorization request. CMS has specified that MACs review initial prior authorization requests and make a determination within 10 business days. MACs make one of the following decisions: Provisionally affirm (approve) – Documentation submitted meets Medicare’s coverage and payment rules. A prior authorization provisional affirmation is a preliminary finding that a future claim submitted to Medicare for the item or service meets Medicare’s coverage and payment requirements and will likely be paid. Non-affirm (deny) – Documentation submitted does not meet Medicare rules or the item or service is not medically necessary. However, a non-affirmed request may be revised and resubmitted for review an unlimited number of times prior to the submission of the claim for payment. CMS has specified that MACs make a determination on a resubmission within 20 business days. For the demonstrations, claims that are submitted without a prior authorization provisional affirmation are subject to prepayment review, which is medical review before the claim is paid. In addition, for the home health services and power mobility devices demonstrations, claims submitted without a prior authorization provisional affirmation that are determined payable during the medical review will be subject to a 25 percent reduction in payment. For the permanent program, claims that are submitted without a prior authorization provisional affirmation are denied. (See fig. 2 for the prior authorization process.) As of March 31, 2017, MACs had processed over 337,000 prior authorization requests—about 264,000 initial requests and about 73,000 resubmissions, as shown in table 1. MACs’ provisional affirmation rates for both initial and resubmitted prior authorization requests rose in each demonstration between their implementation and March 2017, often by 10 percentage points or more. For example, the provisional affirmation rate for initial submissions for repetitive scheduled non-emergency ambulance services rose from 28 percent in the first 6 months after implementation (December 2014 through May 2015) to 66 percent in the most recent 6 months for which data are available (October 2016 through March 2017). Some MAC officials attributed this rise in part to provider and supplier education, which improved documentation being submitted. According to our analysis, expenditures decreased for items and services subject to prior authorization in four demonstrations. For example, expenditure decreases in initial demonstration states from implementation through March 2017 ranged from 17 percent to 74 percent. Figure 3 shows the average monthly expenditures per state from 6 months prior to the start of each demonstration through March 2017 for each of three groups of states: states that were part of the initial demonstration, states that were part of the demonstration expansion, and non-demonstration states. (See app. II for monthly expenditures for items and services covered under each demonstration from their implementation through March 2017.) Our analysis also shows potential savings for items and services subject to prior authorization, based on the difference between actual expenditures and estimates of what expenditures would have been in the absence of the demonstrations. For each demonstration, we estimated expenditures had the demonstration not been implemented by assuming that expenditures would have remained at their average for the 6 months prior to the demonstration starting in each state. We then compared actual expenditures to these estimated expenditures and found that potential savings could be as high as about $1.1 to $1.9 billion. Estimated potential savings in states that were part of the demonstrations since either their initial implementation or expansion may be as high as $1.1 billion. For items and services subject to prior authorization in these states, estimated expenditures in the absence of the demonstrations would have been over $2.1 billion, while actual expenditures were about $1.0 billion. Estimated potential savings may be as high as about $1.9 billion if, for the power mobility device demonstration, we estimate savings in both demonstration states and non-demonstration states since implementation. With this method, estimated savings since the power mobility device demonstration’s implementation change from over $600 million in demonstration states since each state’s implementation to about $1.4 billion in all states since the demonstration began in September 2012, a nearly $800 million increase. This increase is due to including non-demonstration states in the analysis and changing the assumptions for expanded demonstration states in the analysis. CMS officials have reported that certain power mobility device expenditures have declined significantly in both demonstration states and non-demonstration states in part because they think that larger nationwide suppliers improved their compliance with CMS policies in all states based on their experiences with prior authorization. CMS did not make a similar statement for the other demonstrations, and in December 2017, CMS officials said that the agency has not analyzed expenditures in non- demonstration states for the other demonstrations. See table 2 for estimated potential savings for prior authorization demonstrations from implementation through March 2017. According to our analysis, more than half of the reduction in monthly expenditures took place within the first 6 months of each demonstration. We calculated the average monthly expenditures for the 6 months prior to the start of each demonstration, the monthly expenditures in the 6th month after implementation, and the monthly expenditures in March 2017 for initial demonstration states in the power mobility device, repetitive scheduled non-emergency ambulance services, and non-emergency hyperbaric oxygen therapy demonstrations. We compared these expenditures and found that 58, 99, and 91 percent of the reduction in monthly expenditures during this time took place during the first 6 months of each demonstration, respectively. CMS had other program integrity efforts underway before implementing prior authorization, and these efforts may have also contributed to the reduction in expenditures for items and services subject to prior authorization in these demonstrations. CMS officials said that it is likely that prior authorization played a large role in the expenditure reduction for those select items and services. However, CMS officials also reported that it is difficult to separate the effects of prior authorization from other program integrity efforts, and the agency has not developed a methodology for determining the independent effect of prior authorization on expenditures. We found that some of these other program integrity efforts have addressed provider screening and enrollment and certain durable medical equipment, and these may have contributed to the reductions in Medicare expenditures. Provider screening and enrollment: CMS has taken steps to keep potentially fraudulent providers and suppliers from billing Medicare. For example, in September 2011, CMS began revalidating providers’ and suppliers’ enrollment in Medicare to ensure that they continue to be eligible to bill Medicare. Revalidation involves confirming that the provider or supplier continues to meet Medicaid program requirements, including ensuring that a provider or supplier does not employ or contract with individuals who have been excluded from participation in federal health care programs. We previously reported that screening all providers and suppliers—not just the ones subject to prior authorization—resulted in over 23,000 new applications being denied or rejected and over 703,000 existing enrollment records being deactivated or revoked from March 2011 through December 2015. We also reported that CMS estimated the revised process avoided $2.4 billion in total Medicare payments to ineligible providers and suppliers from March 2011 to May 2015, some of which may have been payments for items and services subject to prior authorization. in July 2013, CMS implemented moratoria on enrollment of new providers for home health services and for repetitive, scheduled non- emergency ambulance transport in select counties. As of January 2018, CMS had extended the home health services moratoria statewide to Florida, Illinois, Michigan, and Texas and the repetitive, scheduled non-emergency ambulance transport moratoria statewide to Pennsylvania and New Jersey. During a moratorium, no new applications to enroll as a billing provider of the affected service types are reviewed or approved. In October 2017, CMS officials said that home health and non-emergency ambulance services’ expenditures may have been affected by provider enrollment moratoria. Certain durable medical equipment pricing, payments, and education and outreach: CMS has taken steps to change how certain durable medical equipment is paid for and to provide ongoing durable medical equipment education and outreach. For example, in January 2011, CMS implemented a DMEPOS competitive bidding program required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Under the program, only competitively selected contract suppliers can furnish certain durable medical equipment items at competitively determined prices to Medicare beneficiaries in designated areas. CMS began the program in 9 of the largest metropolitan areas, and in July 2013 expanded to an additional 100 large metropolitan areas. In January 2016, CMS implemented competitive bidding program-based adjusted prices for non-designated areas for durable medical equipment items that were previously, or are currently, included in the competitive bidding program. According to CMS, the program—which generally results in lower competitively bid prices—is reducing expenditures for approximately half of the beneficiaries receiving power mobility devices nationwide. We have previously reported that prices decreased for power mobility devices in the competitive bidding program; some of these devices are also subject to prior authorization. in January 2011, CMS eliminated the lump sum purchase option for standard power wheelchairs. This change reduced expenditures for power wheelchairs used on a short-term basis because payments for short-term rentals are lower than for the purchase of these items. durable medical equipment MACs and CMS provide continuous DMEPOS education and outreach. According to CMS, the education and outreach may have contributed to reducing expenditures for power mobility devices by helping providers and suppliers to understand how to bill correctly and to submit fewer claims that do not meet Medicare coverage and payment requirements. Many of the officials we interviewed representing provider, supplier, and beneficiary groups, as well as CMS and MACs, reported benefits to prior authorization. Officials from some of these groups said that prior authorization is an effective tool to reduce unnecessary utilization and improper payments. Some officials who reported benefits said that prior authorization helps educate providers and suppliers about allowable items and services under Medicare and improves providers’ and suppliers’ documentation. Some officials also said that providers and suppliers appreciate the assurance of knowing that Medicare is likely to pay for these items and services. Officials from three provider and supplier groups said that by getting provisional prior authorization, their claims will likely not be denied, and they can thus avoid the appeals process, for which there are significant delays. In addition, officials from two provider and supplier groups believe that prior authorization may deter fraudulent suppliers from participating in Medicare. Because of these benefits, these provider and supplier group officials recommended that CMS expand its use of prior authorization. In addition, CMS has improved the prior authorization programs by responding to some of the providers’ and suppliers’ initial concerns. For example, for the power mobility device demonstration, CMS and MAC officials that process DMEPOS claims reported that providers and suppliers were initially confused about whether beneficiaries with representative payees—persons or organizations authorized to accept payment on a beneficiary’s behalf—were exempt from the prior authorization program. To address this issue, CMS revised and clarified its guidance related to representative payees. In addition, for the non- emergency hyperbaric oxygen therapy demonstration, officials from CMS and a MAC administering the demonstration said that providers and suppliers raised concerns that a Medicare-covered condition (compromised skin grafts) included in the demonstration required immediate care and therefore should not be subject to prior authorization. In response, CMS removed the condition from the list of conditions subject to prior authorization. Some provider and supplier group officials we interviewed reported that obtaining the documentation necessary to submit a prior authorization request can be difficult. For example, some of these officials told us that providers and suppliers may spend 3 to 7 weeks obtaining necessary documentation from referring physicians and other relevant parties before submitting a prior authorization request. While CMS’s documentation requirements did not change under prior authorization, officials from a provider and supplier group we spoke with said that prior authorization exacerbates existing documentation challenges because they must obtain all required documentation before providing items and services to beneficiaries. As we noted in a previous report, two durable medical equipment MACs said that referring physicians may lack financial incentives to submit proper documentation since they are unaffected if a durable medical equipment or home health claim is denied due to insufficient documentation, while the provider or supplier submitting the claim loses the payment. Furthermore, according to some provider and supplier group representatives, CMS’s documentation requirements can be difficult to meet. Representatives from one supplier and provider group said that there is a high standard of proof to meet the information needed to support their medical necessity requirements. For example, documentation in the medical record is required to show whether the referring physician considered other options. Also, representatives from another provider and suppler group said that, unlike private insurers, CMS has more requirements that providers and suppliers consider administrative. For instance, MACs deny prior authorization requests for missing physician signatures. In addition, representatives from a provider and supplier group said it may be necessary to collect documentation from multiple providers that treated the beneficiary in order to meet CMS’s medical necessity requirements. However, officials from one private insurer said that their medical necessity requirements for certain items and services may necessitate receiving documentation from several providers as well, although this does not occur often. CMS officials acknowledged that the agency’s requirements may be more difficult to meet than those of private health insurers. However, this scrutiny may be beneficial because, unlike private insurers, Medicare must pay for health care delivered by any eligible physician willing to accept Medicare payment and follow Medicare requirements. We found that CMS and the MACs have taken some steps to assist providers and suppliers in obtaining documentation from referring physicians. For example, CMS has created e-clinical templates for home health services and power mobility devices that can be incorporated into progress notes to help ensure physicians meet medical necessity requirements. CMS and the MACs have also created documentation checklists, prior authorization coversheets, and other tools to assist providers and suppliers in verifying that they have obtained the documentation necessary to meet CMS’s documentation requirements. Agency officials have stated that they are working on additional changes to reduce provider and supplier burden, for example, developing e-clinical templates for additional items and services. Furthermore, representatives from each of the MACs said that they call providers and suppliers that receive certain prior authorization non- affirmations to ensure suppliers and providers understand what information is required to obtain a provisional affirmation. Some MAC representatives said that having a phone conversation with suppliers allows them to resolve non-affirmations more expediently and reduces the number of resubmissions. Representatives from one MAC estimated that when they call providers and suppliers, they are able to resolve 50 to 80 percent of the issues that led to the non-affirmations. Several MAC representatives also said calling helps providers and suppliers gain a better understanding of CMS’s documentation requirements, which will increase their likelihood of having future requests provisionally affirmed. In addition, CMS officials said that the agency encourages MACs to call referring physicians directly, when necessary, to remedy curable errors or obtain additional documentation needed to affirm a request because non- affirmation may be resolved faster without providers and suppliers serving as intermediaries. Providers and suppliers reported concerns about whether accessories deemed essential to group 3 power wheelchairs are subject to prior authorization and can be provisionally affirmed under the permanent DMEPOS program. According to CMS, the permanent DMEPOS program requires prior authorization for power wheelchair bases, but not for their accessories. CMS officials said this is because accessories do not meet the criteria for inclusion on the Master List. However, according to CMS, the MACs must review these accessories when they make prior authorization determinations because their decision to provisionally affirm a wheelchair base is based in part on their view of the medical necessity of the accessories. Therefore, if an essential accessory does not meet medical necessity requirements, a MAC will deny a prior authorization request for a power wheelchair base. In other words, in practice these accessories are subject to prior authorization, even though they are not technically included in the permanent DMEPOS program and therefore cannot be provisionally affirmed. As a result, providers and suppliers lack assurance about whether Medicare is likely to pay for these accessories. In December 2017, CMS officials stated that there have been preliminary discussions regarding the feasibility and effect of subjecting accessories essential to the group 3 power wheelchairs in the permanent DMEPOS program to prior authorization. However, CMS officials did not provide a timeframe for reaching a decision about whether they would do so. Federal internal control standards state that agencies should design control activities that enable an agency to achieve its objectives and should respond to any risks related to achieving those objectives. By not including essential accessories in prior authorization so they can be provisionally affirmed as appropriate, CMS may hinder its ability to achieve one of the stated benefits of the prior authorization program—to allow providers and suppliers to know prior to providing the items whether Medicare will likely pay for them. We found that CMS monitoring includes reviewing MAC reports of the results of prior authorization requests, examining MAC timeliness and accuracy, and contracting for independent evaluations of the prior authorization demonstrations. CMS officials told us that they review weekly, monthly, and annual MAC reports that include information such as numbers of requests received, completed, approved, denied, and resubmitted. According to CMS officials, they monitor MAC timeliness through these reports and separately have a contractor review MAC accuracy in processing requests. According to these officials, they have not identified any issues with MAC timeliness, as the MACs currently meet the standards for processing initial requests within 10 business days and resubmissions within 20 business days. In addition, CMS officials said that a sample of MACs’ prior authorization decisions is reviewed each month for accuracy for each of the prior authorization demonstrations, and the reviews have not identified any issues with these decisions. CMS officials said that they meet with providers and supplier groups regularly to solicit feedback, to identify issues that need to be addressed, and to determine whether there are any problems, such as reduced beneficiary access to care. According to CMS officials, they have not identified any negative impact on beneficiary access to care as a result of implementing prior authorization. CMS has contracted for independent evaluations of the power mobility device, repetitive scheduled non-emergency ambulance services, and non-emergency hyperbaric oxygen demonstrations. In December 2017, CMS officials told us that evaluations will be completed and results available after the demonstrations end. In December 2017, officials told us that they also plan to contract for an evaluation of the permanent program after more time has passed. Most prior authorization programs are scheduled to end in 2018, with all the demonstrations concluding and only the limited permanent program remaining. The non-emergency hyperbaric oxygen demonstration ended in February 2018, the power mobility device demonstration in August 2018, and the repetitive scheduled non-emergency ambulance services demonstration in November 2018. The home health services demonstration has been on pause since April 2017 with no plans to resume as of February 2018, although CMS stated that they are considering improvements to the demonstration. The permanent program, which currently consists of two group 3 power wheelchairs, is the only prior authorization program that will remain. According to CMS officials, these wheelchairs are very low volume, and the HHS Office of the Inspector General reported that these wheelchairs represent just a small percentage of all durable medical equipment claims. CMS has not made plans for continuing expiring or paused prior authorization programs or expanding prior authorization. However, officials told us that they would like to see prior authorization for additional items. For example, CMS officials said that they have considered prior authorization for items such as hospital beds and oxygen concentrators, because these have high utilization or improper payment rates. In addition, in December 2017, CMS officials said that the agency is evaluating whether it has met the requirements for nationwide expansion of the repetitive scheduled non-emergency ambulance services demonstration established by the Medicare Access and CHIP Reauthorization Act of 2015. However, CMS officials also said that have not yet determined the next steps for the use of prior authorization. Federal internal control standards state that agencies should identify, analyze, and respond to risks related to achieving objectives. By not taking steps, based on results from the evaluations, to continue prior authorization, CMS risks missed opportunities for achieving its stated goals of reducing costs and realizing program savings by reducing unnecessary utilization and improper payments. Since September 2012, CMS has begun using prior authorization to ensure that Medicare coverage and payment rules have been met before the agency pays for selected items and services. During this time, expenditures for items and services subject to prior authorization have been reduced. We estimate potential savings may be as high as about $1.1 to $1.9 billion, although other CMS program integrity efforts may have contributed to these reductions. Many stakeholders, including providers, suppliers, and MAC officials, support prior authorization, citing benefits such as reduced unnecessary utilization. However, providers and suppliers report concerns about whether accessories deemed essential to group 3 power wheelchairs are subject to prior authorization and can be provisionally affirmed. By not including essential accessories in prior authorization, CMS may hinder its ability to achieve one of the stated benefits of the prior authorization program—to allow providers and suppliers to know prior to providing the items whether Medicare will likely pay for them. All four prior authorization demonstrations are either paused or will end in 2018, and CMS does not have plans to extend these programs or expand the use of prior authorization to additional items and services with high rates of unnecessary utilization or improper payments. By not taking steps, based on results from the evaluations, to continue prior authorization, CMS risks missed opportunities for achieving its stated goals of reducing costs and realizing program savings by reducing unnecessary utilization and improper payments. We are making the following two recommendations to CMS. The Administrator of CMS should subject accessories essential to the group 3 power wheelchairs in the permanent DMEPOS program to prior authorization. (Recommendation 1) The Administrator of CMS should take steps, based on results from evaluations, to continue prior authorization. These steps could include: resuming the paused home health services demonstration; extending current demonstrations; or, identifying new opportunities for expanding prior authorization to additional items and services with high unnecessary utilization and high improper payment rates. (Recommendation 2) We provided a draft of this report to HHS for comment, and its comments are reprinted in appendix III. HHS also provided technical comments, which we incorporated as appropriate. HHS neither agreed nor disagreed with the recommendations but said it would continue to evaluate prior authorization programs and take our findings and recommendations into consideration in developing plans or determining appropriate next steps. In addition, in response to our recommendation to take steps to continue prior authorization, HHS noted that the President’s fiscal year 2019 budget for HHS included a legislative proposal to extend its statutory authority to permanently require prior authorization for specified Medicare fee-for-service items and services to all Medicare fee-for-service items and services. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of the Centers for Medicare & Medicaid Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact A. Nicole Clowers at (202) 512-7114 or clowersa@gao.gov or Kathleen M. King at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix IV. In December 2015, the Centers for Medicare & Medicaid Services (CMS) established a permanent prior authorization program for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). To select the items subject to prior authorization, CMS compiled a Master List of items that 1) appear on the DMEPOS Fee Schedule list, 2) have an average purchase fee of $1,000 or greater (adjusted annually for inflation) or an average rental fee schedule of $100 or greater (adjusted annually for inflation), and 3) meet one of these two criteria: the item was identified in a GAO or Department of Health and Human Services Office of Inspector General report that is national in scope and published in 2007 or later as having a high rate of fraud or unnecessary utilization, or the item is listed in the 2011 or later published Comprehensive Error Rate Testing program’s annual report. The information presented in this appendix was reprinted from information in a December 2015 final rule. We did not edit it in any way, such as to spell out abbreviations. (See table 3 for the Master List.) Tables 4 through 7 present monthly expenditures for items and services subject to prior authorization in initial demonstration states, expansion demonstration states, and non-demonstration states from 6 months prior to each demonstration’s implementation through March 2017, the most recent month for which reliable data is available. In addition to the contact named above, Martin T. Gahart (Assistant Director), Lori Achman (Assistant Director), Peter Mangano (Analyst-in- Charge), Sylvia Diaz Jones, and Mandy Pusey made key contributions to this report. Also contributing were Sam Amrhein, Muriel Brown, Eric Wedum, and Jennifer Whitworth.", "summary": "CMS required prior authorization as a demonstration in 2012 for certain power mobility devices, such as power wheelchairs, in seven states. Under the prior authorization process, MACs review prior authorization requests and make determinations to approve or deny them based on Medicare coverage and payment rules. Approved requests will be paid as long as all other Medicare payment requirements are met. GAO was asked to examine CMS's prior authorization programs. GAO examined 1) the changes in expenditures and the potential savings for items and services subject to prior authorization demonstrations, 2) reported benefits and challenges of prior authorization, and 3) CMS's monitoring of the programs and plans for future prior authorization. To do this, GAO examined prior authorization program data, CMS documentation, and federal internal control standards. GAO also interviewed CMS and MAC officials, as well as selected provider, supplier, and beneficiary groups. Prior authorization is a payment approach used by private insurers that generally requires health care providers and suppliers to first demonstrate compliance with coverage and payment rules before certain items or services are provided to patients, rather than after the items or services have been provided. This approach may be used to reduce expenditures, unnecessary utilization, and improper payments. The Centers for Medicare & Medicaid Services (CMS) has begun using prior authorization in Medicare through a series of fixed-length demonstrations designed to measure their effectiveness, and one permanent program. According to GAO's analyses, expenditures decreased for items and services subject to a demonstration. GAO's analyses of actual expenditures and estimated expenditures in the absence of the demonstrations found that estimated savings from all demonstrations through March 2017 could be as high as about $1.1 to $1.9 billion. While CMS officials said that prior authorization likely played a large role in reducing expenditures, it is difficult to separate the effects of prior authorization from other program integrity efforts. For example, CMS implemented a durable medical equipment competitive bidding program in January 2011, and according to the agency, it resulted in lower expenditures. Many provider, supplier, and beneficiary group officials GAO spoke with reported benefits of prior authorization, such as reducing unnecessary utilization. However, provider and supplier group officials reported that providers and suppliers experienced some challenges. These include difficulty obtaining the necessary documentation from referring physicians to submit a prior authorization request, although CMS has created templates and other tools to address this concern. In addition, providers and suppliers reported concerns about whether accessories deemed essential to the power wheelchairs under the permanent durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) program are subject to prior authorization. In practice, Medicare Administrative Contractors (MAC) that administer prior authorization programs review these accessories when making prior authorization determinations, even though they are not technically included in the program and therefore cannot be provisionally affirmed. As a result, providers and suppliers lack assurance about whether Medicare is likely to pay for these accessories. This is contrary to a CMS stated benefit of prior authorization—to provide assurance about whether Medicare is likely to pay for an item or service—and to federal internal control standards, which call for agencies to design control activities that enable an agency to achieve its objectives. CMS monitors prior authorization through various MAC reports. CMS also reviews MAC accuracy and timeliness in processing prior authorization requests and has contracted for independent evaluations of the demonstrations. Currently, prior authorization demonstrations are scheduled to end in 2018. Despite its interest in using prior authorization for additional items, CMS has not made plans to continue its efforts. Federal internal control standards state that agencies should identify, analyze, and respond to risks related to achieving objectives. CMS risks missed opportunities for achieving its stated goals of reducing costs and realizing program savings by reducing unnecessary utilization and improper payments. GAO recommends that CMS (1) subject accessories essential to the power wheelchairs in the permanent DMEPOS program to prior authorization and (2) take steps, based on results from evaluations, to continue prior authorization. The Department of Health and Human Services neither agreed nor disagreed with GAO's recommendations but said it would continue to evaluate prior authorization programs and take GAO's findings and recommendations into consideration in developing plans or determining appropriate next steps.", "document_type": "gao"}
{"report": "The Aviation and Transportation Security Act designated TSA as the primary federal agency responsible for securing all modes of transportation. In fiscal year 2005, Congress appropriated funds for surface transportation security, and the accompanying conference report directed that some of those funds go to rail compliance inspectors, the predecessors to today’s surface transportation security inspectors— referred to as surface inspectors. Public and private transportation entities have the principal responsibility to carry out safety and security measures for their services. As such, TSA coordinates with public and private transportation entities to identify vulnerabilities, share intelligence information, and work to mitigate security risks to the system. See table 1 for examples of the entities TSA works with to secure the various surface transportation modes. In fiscal year 2005, $10 million of TSA’s surface transportation security appropriation was to hire and deploy up to 100 rail compliance inspectors. TSA assigned inspectors to oversee security and provide oversight and assistance to railroads, and subsequently, other surface transportation modes, including mass transit and passenger rail, freight rail, highway, and pipeline sectors. TSA has since increased the number of surface inspectors, and since 2013 has maintained more than 200 Full Time Equivalent (FTE) positions. See table 2 for additional details on the number of TSA surface inspector FTEs from fiscal years 2013 through 2017. In August 2007, the 9/11 Commission Act was signed into law and required TSA to issue security regulations for freight and passenger rail, among other requirements. TSA also issued regulations governing surface transportation security on its own initiative. As of July 2017, TSA has issued the following regulations related to surface transportation: Rail Inspections: Issued in November 2008, 49 C.F.R. part 1580 requires certain freight railroad carriers and passenger rail operations (passenger railroad carriers and rail transit systems) to designate a rail security coordinator, notify the Transportation Security Operations Center regarding any significant security concerns, and, if applicable, ensure a secure chain of custody of rail cars containing certain hazardous materials, and be able to provide location and shipping information for certain rail cars, among other things. The hazardous materials subject to this regulation include certain explosives, toxic inhalation hazardous materials (TIH), and radioactive materials. See appendix II for additional details. Maritime Inspections: TSA also partners with the U.S. Coast Guard (USCG) in securing maritime ports, facilities and vessels. TSA’s responsibilities include enrolling Transportation Worker Identification Credential (TWIC) applicants, conducting background checks to assess the individual’s security threat, and issuing TWICs. In addition, TSA is authorized to conduct inspections of persons using TWIC to access the secured area of a regulated maritime facility. Surface inspectors work under the direct command authority of the Federal Security Director (FSD) in the field. As of fiscal year 2017, TSA used a staffing model to allocate surface inspector staff to 49 different field offices, separated into seven geographic regions around the country. According to TSA, all but one surface field office locations are at or near major airports. Figure 1 depicts surface field office locations by region. Surface inspector policies and procedures, and operational oversight are managed separately. Program Guidance: Within TSA’s Office of Security Operations, the Surface Compliance Branch plans surface transportation security activities and programs, and develops an annual work plan that lays out the minimum required activities to be completed for surface inspectors in the field. The Office of Security Policy and Industry Engagement (OSPIE) collects and analyzes data on certain surface inspector activities such as the Baseline Assessment for Security Enhancement (BASE) program, TIH attendance rates, and freight rail compliance rates; coordinates with industry stakeholders, and; develops strategic plans, among other things. Operational oversight: The Assistant Federal Security Director for Inspections (ASFD-I) in each field office manages surface inspectors on a day-to-day basis, oversees the scheduling of surface inspector work plan activities, and reviews inspectors’ documentation of activities in PARIS, TSA’s system of record. FSDs are ultimately responsible for ensuring that surface inspectors complete their annual work plan requirements. In 2010, TSA created the Regional Security Inspector (RSI) position in an effort to improve oversight of surface inspectors in the field and standardize inspections across field offices. One RSI is assigned to each of the seven geographic regions and serves as a liaison between TSA headquarters staff and surface inspectors in the field. Each RSI is also assigned to be the lead liaison between TSA and the Class I railroads within their assigned geographic region. See figure 2 for surface inspectors’ command structure as of 2017. TSA documents state that it employs a risk-based approach for securing transportation modes and identifies managing risk as one of its strategic goals to help identify and plan security priorities and activities. According to TSA officials, TSA uses the National Infrastructure Protection Plan (NIPP) risk management framework and the DHS Risk Management Fundamentals as its primary risk guidance. In June 2006, DHS issued the NIPP which established a six-step risk management framework to establish national priorities, goals and requirements. Most recently updated in 2013, the NIPP defines risk as a function of three elements: threat, vulnerability and consequence. Threat is an indication of the likelihood that a specific type of attack will be initiated against a specific target or class of targets. Vulnerability is the probability that a particular attempted attack will succeed against a particular target or class of targets. Consequence is the effect of a successful attack. TSA uses the TSSRA, a bi-annual risk assessment that considers the three elements of risk to measure the risk of various terrorist attack scenarios, evaluate transportation modes, and identify surface security priorities. Surface inspectors conduct a variety of activities to implement TSA’s surface transportation security mission, including (1) regulatory inspections for freight and passenger rail systems, (2) regulatory TWIC inspections, and (3) non-regulatory security assessments and training which surface transportation entities participate in on a voluntary basis. Surface inspector activities are, in part, determined by an annual surface work plan that lays out the minimum required number of surface inspector activities to be completed by each field office. Specifically, the work plan requirements are designed to take up about one-third of inspectors’ available working hours, with the expectation that the other two-thirds of inspectors’ time will be used for related activities, such as documentation and follow-up, or other tasks as determined by local AFSD-Is and FSDs in the field. To develop the annual surface work plan, officials from Office of Security Operation’s Surface Compliance Branch and OSPIE meet with each of the RSIs once a year to determine the requirements for each office. According to TSA officials, they rely on the previous year’s requirements as well as data on surface inspectors’ past activities as logged in PARIS as a starting point to develop the requirements, and adjust the work plan based on their professional judgment of the unique environment in each field office’s area of responsibility. TSA officials stated that they consider variables such as the compliance rates for inspections, the amount of TIH materials being shipped through an area, and any other relevant risk- related information when they develop the work plan. Surface inspectors conduct inspections to enforce several freight and passenger rail security requirements. Table 3 provides descriptions of these inspections and appendix II provides a complete listing of TSA’s regulatory activities. TSA also tracks the rate at which the inspected entities comply with the regulations discussed in table 3. According to TSA data, on average, overall compliance rates for inspections have remained relatively high, and the compliance rates have generally improved over the years as entities have become more familiar with the processes and expectations of each type of inspection. Surface inspectors work with the USCG to conduct inspections of TWIC card holders attempting to access the secured area of maritime facilities regulated by the Maritime Transportation Security Act of 2002 (MTSA). TSA first issued the TWIC regulation in 2007 in cooperation with the USCG, and according to TSA officials, began nationwide implementation of TSA inspection of TWICs at maritime facilities in fiscal year 2017. Surface inspectors scan cards using a TWIC card reader to verify that the card presented is valid and belongs to the card holder. TSA may pursue civil enforcement and can refer violators for criminal proceedings through the USCG. TSA officials stated they set the total minimum required TWIC inspections at 1,315 combined across all surface inspector field offices for fiscal year 2017 as a starting point, and would modify the requirements in subsequent years, as discussed below. According to TSA, it is too soon to determine compliance rates for TWIC inspections. Surface inspectors perform a variety of non-regulatory surface-related activities, such as various types of assessments, which require surface entities’ voluntary participation. Table 4 provides a list of key non- regulatory activities surface inspectors perform. For a full list of activities surface inspectors perform see appendix II. Since 2006, TSA has made adjustments to the BASE program to expand its use to more surface modes and address implementation challenges. To conduct a BASE review, surface inspectors use a standardized checklist to evaluate and score an entity’s security policies and procedures for areas such as employee security training, cybersecurity, and facility access control, among other items. According to TSA officials, the results of the BASE reviews are intended to help track the entity’s progress in implementing specific security measures over time and improve overall security posture among surface transportation entities, as well as inform transportation security grant funding. Surface inspectors also use entities’ BASE review scores to help inform Exercise Information System (EXIS) training programs inspectors facilitate for transportation entities. Initially, the BASE program was designed to assess large mass transit entities in major metropolitan areas that transported 60,000 riders or more daily. TSA officials stated in 2017 that TSA has completed initial and follow up BASE reviews for the top 100 mass transit agencies in the country which comprise approximately 80 percent of the ridership in the United States. In 2012, TSA expanded the BASE reviews to the highway mode to include trucking, motor coach, and school bus operators. Additionally, TSA has taken steps to address challenges related to the implementation of the BASE reviews, including an initial lack of training and guidance for surface inspectors in conducting and evaluating the BASE reviews and difficulty applying the BASE template for smaller mass transit entities and highway entities. For example, surface inspectors we interviewed at six field offices indicated that they received limited to no training to conduct the initial BASE reviews. Office of Security Operations officials acknowledged that the BASE program initially lacked scoring guidance to allow surface inspectors to make objective evaluations. Additionally, two industry entities we spoke with stated that some BASE questions, as initially developed, seemed inappropriate or irrelevant given the scope of their operation, and that their scores reflected areas that they were not able to modify based on their limited size and resources. Further, in 2010, the DHS Office of Inspector General reported that TSA needed to provide increased training and guidance for inspectors to ensure that BASE assessments gather effective, objective data. In response, officials from TSA’s Surface Compliance Branch stated that they established a BASE Advisory Panel and held a series of training workshops throughout the country on how to conduct BASE assessments. Specifically, in fiscal year 2014, TSA established a panel comprised of mass transit experts to adjust the BASE tool by modifying topics and removing outdated questions in an effort to improve the quality and applicability of the assessments for the industry stakeholders. TSA has also modified the BASE template over time to include areas such as cybersecurity and active shooter training, among others. TSA reported that it held a series of 16 workshops in 2015 around the country where headquarters officials met with inspectors to train them on how to conduct BASE assessments and correctly apply scoring guidance to help ensure inspectors applied the BASE criteria consistently. Moreover, in fiscal year 2016, TSA developed a targeted BASE that focuses only on an entity’s areas of concern as identified by surface inspectors in a previous BASE review. Further, TSA is piloting a modified BASE template in fiscal year 2017 that eliminates questions that may not apply for smaller mass transit and highway entities. According to Surface Compliance Branch and OSPIE officials, these changes have led to more consistent and more reliable results in the BASE scores. We believe that TSA efforts to improve training and guidance as well as establishing the BASE Advisory Panel will help address the agency’s previous concerns related to the implementation of the BASE review. According to TSA headquarters and field officials, in addition to surface inspection activities, surface inspectors are tasked, to varying degrees, with aviation activities. However, TSA officials told us that they are unable to identify the total time surface inspectors spend on aviation activities because of data limitations. For example, surface inspectors may perform aviation activities on a regular basis as a “duty agent,” or on an as- needed basis as determined by their local manager—their AFSD-I. TSA guidance directs surface inspectors to report the time they spend on all activities into TSA’s PARIS database. TSA officials responsible for managing PARIS told us that it has two independent modules – aviation and surface – and that surface inspectors enter aviation-related activities in both the aviation and surface modules. Specifically, TSA guidance directs surface inspectors to document their time serving as “duty agent” in the surface module of PARIS, but to document time spent on aviation inspections, incidents, or investigations – including those that take place during an inspector’s time serving as the duty agent – into the aviation module of PARIS. See table 5 for examples of the types of aviation activities surface inspectors record in each separate PARIS module. TSA officials told us that it is not possible to identify the time surface inspectors document in the aviation module of PARIS because there is no efficient, reliable way to distinguish surface inspectors from aviation or cargo inspectors in the data. Since TSA cannot reliably identify activities surface inspectors have entered into the aviation module of PARIS, TSA is only aware of the portion of time surface inspectors spent on aviation activities that was logged in the surface module. As a result, TSA does not have complete information on how surface inspector resources are being used or the extent to which surface inspectors are being used to perform aviation activities. According to some surface inspectors we spoke to, these resources can be substantial. Surface inspectors we interviewed at 16 of the 17 TSA field offices contacted stated that they perform aviation duties. One inspector stated she had received calls to respond to 12 different aviation incidents in one shift as duty inspector, and other inspectors stated that each incident report could subsequently take between 2 and 12 hours to complete. Surface inspectors from another office located near a major airport told us they have to work overtime to complete aviation incident reports and still meet their required surface activities. Further, we met with surface inspectors stationed at four different major airports who each estimated spending 20 percent, 25 percent, 30 percent, and 50 percent of their total working hours on aviation tasks, respectively. Standards for Internal Control in the Federal Government states that agencies should use complete information to make informed decisions and evaluate the agency’s performance in achieving key objectives. As stated previously, one of TSA’s key objectives is to employ a risk-based approach to all operations to identify, manage, and mitigate risk. Standards for Internal Control in the Federal Government also states that agencies should clearly document all activities in a manner that allows the documentation to be readily available for examination. Without having access to complete information on all inspector activities, including aviation activities, TSA cannot monitor how frequently surface inspectors are being used to support aviation. In addition, by not using complete information on how much time surface inspectors spend working in support of aviation, TSA is limited in its ability to make informed future decisions on annual resource needs for surface inspectors, which will be especially important as TSA takes steps to expand its inspection activities with the promulgation of new surface security regulations. By addressing the limitations in the aviation module of PARIS, TSA would be able to more reliably access complete information on all inspector activities. Also, it would have the information it needs to make fully informed decisions about surface inspector resources and activities, and to evaluate surface inspectors’ performance in achieving key surface security objectives. Since there is no way to identify surface inspectors in the aviation module of PARIS at the aggregate level, we were unable to conduct our own analysis of all surface inspector activities. However, we were able to analyze data on how surface inspectors reported spending their time in the surface module of PARIS, including time spent on aviation activities as documented in this particular module. Our analysis showed that from fiscal years 2013 to 2017, surface inspectors reported spending approximately 80 percent of their time on non-regulatory activities, while spending approximately 20 percent on regulatory inspections. Figure 3 shows a breakdown of the time surface inspectors recorded spending in the surface module of PARIS for fiscal year 2016, the most recent complete year of data available. See appendix III for similar breakdowns for each fiscal year from 2013 to 2017. In fiscal year 2017, TSA’s Surface Compliance Branch implemented an updated staffing model to redistribute 222 surface-funded positions across its 49 surface field offices based on the factors described in table 6 below. TSA considered four of these factors – HTUA/Urban Area Security Initiative (UASI), Mass Transit, TWIC, and TIH – to be related to risk. For example, TSA derived its list of HTUAs based on risk assessments conducted under the UASI program. We have previously reported that the UASI methodology for determining risk scores and distributing grant funds is reasonable, and that UASI grant allocations are strongly associated with a city’s current relative risk score. Additionally, according to TSA, inspectors focus on entities within surface transportation modes or shipments of certain hazardous materials the agency determines could pose the greatest security vulnerability and which could potentially be more likely to be targeted by terrorists. The DHS Risk Lexicon 2010 and the 2013 NIPP risk management framework, which are TSA’s primary risk guidance, define risk-informed decision-making as the determination of a course of action predicated on the assessment of risk, the expected impact of that course of action on that risk, as well as other relevant factors. The DHS Risk Lexicon 2010 further states that risk-informed decision-making may also take into account multiple sources of information not included specifically in the assessment of risk. Because TSA considered multiple risk factors in addition to other information, such as the number of regulated entities in an area and the number of required activities, in its staffing model, we determined that TSA used a risk-informed model to allocate surface inspector staff to its 49 offices. TSA surface inspectors perform a wide range of regulatory and non- regulatory activities to fulfill the agency’s objective of employing risk- based security, but we found that between fiscal years 2013 and 2017 surface inspector activities did not align with the risks TSA identified for surface transportation. To inform its security strategy, TSA assesses risk within and across the aviation, freight rail, passenger rail/mass transit, highway, and pipeline modes approximately every 2 years using the TSSRA. According to the TSSRA’s cross-modal risk assessments between fiscal years 2013 and 2017, one particular surface mode consistently posed the highest risk, and another consistently posed the lowest risk out of all surface transportation modes. For example, in fiscal year 2016, TSA found that the lowest risk mode posed approximately 6 percent of domestic total risk while the highest risk mode posed 27 percent of domestic total risk. However, our analysis of data from the surface module of PARIS showed that inspectors reported spending between 35 and 45 percent of their time on the lowest risk mode between fiscal year 2013 and fiscal year 2016 – the most time spent on any surface mode. Of the time reported in the surface module of PARIS in fiscal year 2016, surface inspectors reported spending 38 percent of their time on the lowest risk transportation mode while they reported spending approximately 16 percent of their time on the highest risk surface mode according to the TSSRA. See figure 4 for a comparison between the percent of time inspectors recorded spending on each mode and the percent of risk identified in the TSSRA. We found that TSA did not use the results of risk assessments that measure threat, vulnerability, and consequence, like the TSSRA, when it developed surface inspector work plans, or when it monitored activities inspectors conducted, including those in addition to the minimum work plan requirements. While TSA officials told us that they considered the results of the TSSRA, TSA officials could not provide evidence that they incorporated the results of the TSSRA or other risk assessments when developing the work plan and monitoring inspector activities, as required by DHS risk management guidance. For example, TSA officials could not provide documentation of how and why they selected certain work plan activities to address lower risk modes, or how they monitored the extent to which implemented activities aligned with or addressed risks. We found that TSA did not incorporate the results of the TSSRA or other risk assessments when it monitored how surface inspector activities were implemented beyond the minimum requirements laid out in the work plan. Specifically, we found that between fiscal years 2013 and 2017, inspectors spent about half their working hours fulfilling work plan requirements. Surface Compliance Branch officials told us that they reviewed PARIS data on all surface inspector activities, as reported in the surface module of PARIS, annually to inform staffing decisions and conducted detailed analysis of surface inspector time starting in fiscal year 2015. However, this analysis did not evaluate the extent to which surface inspector time beyond the work plan requirements corresponded to surface transportation risks as identified by the TSSRA or other risk assessments. Further, TSA officials told us that they did not think surface inspector time should be compared to risks identified in cross-modal risk assessments like the TSSRA because required regulatory inspections are unpredictable and can take a significant amount of time. However, as previously discussed, we found that, of the time reported in the surface module of PARIS, inspectors reported spending approximately 20 percent of their time on regulatory inspections, with the remaining 80 percent spent on non-regulatory activities. More than half of the industry representatives we spoke to (9 of 15) identified benefits from inspectors’ activities in surface transportation modes other than freight rail. For example, two of the three representatives of MTSA-regulated companies we spoke to said that TSA’s TWIC inspections had significant benefits for the security of their facilities, and stated that they wanted more TWIC inspections and civil enforcement activities from inspectors because these activities discourage misuse of TWICs at their facilities. Representatives from two maritime companies, one highway company, and three public transportation systems told us that they wanted TSA surface inspectors to do more. Additionally, a representative for one national industry organization stated that his organization was concerned that TSA is mainly focused on freight rail when the principal threat resides in the passenger and mass transit modes, and suggested that TSA deploy inspection resources from the freight rail mode to support more non- regulatory initiatives in the passenger rail/mass transit mode. According to TSA, the agency employs a risk-based approach – which the DHS Risk Lexicon defines as using the assessment of risk as the primary decision driver – to all operations to identify, manage, and mitigate risk in all TSA lines of business. One TSA risk strategy document specifically emphasizes the importance of linking the TSSRA, among other risk assessments, to the identification of risk-reduction activities as part of a risk-based approach to security. Moreover, the NIPP risk management framework and the DHS Risk Management Fundamentals Doctrine, which TSA officials told us are TSA’s primary risk management guidance documents, also state that entities should systematically prioritize and implement activities and resources to mitigate and manage risks identified in risk assessments. These documents also state that monitoring implemented decisions and comparing observed and expected effects to influence subsequent risk management decisions are key steps in the homeland security risk management process. The DHS Risk Management Fundamentals Doctrine further states that agencies should document the development and selection of alternative risk management actions, including assumptions and risk strategies such as the decision to not take action and accept risk, in order to provide decision-makers with a clear picture of the benefits of each action. It also explains that the risk management process allows organizations to clearly explain the rationale behind resource decisions. TSA did not use the results of risk assessments – such as the TSSRA – or other risk information when it developed its surface inspector work plan requirements. Instead, TSA prioritized the lowest-risk surface transportation mode, reducing the amount of surface security resources available to address identified risks in other, higher-risk surface transportation modes. As a result, TSA’s limited surface transportation security resources were not used in a risk-based way. By incorporating the results of its risk assessments when it plans and monitors surface inspector activities, including those not required by the work plan, TSA would be better able to ensure that its limited surface transportation security resources are being used to effectively and efficiently address the highest risks to surface transportation, especially as risks evolve. Incorporating risk assessment results in planning and monitoring surface inspector activities will also allow TSA to ensure that its surface inspectors are making progress toward achieving TSA’s objective of risk- based security. Additionally, by documenting its risk mitigation decisions and strategies, TSA would be able to more clearly explain the rationale for its resource decisions, including when TSA decides to accept risk or prioritize lower-risk activities for any reason. In fiscal year 2012, TSA began developing the Risk Mitigation Activities for Surface Transportation (RMAST) program in support of TSA’s risk- based security initiative. According to TSA’s fiscal year 2017 work plan, the RMAST program incorporates specific risk reduction measures and focuses time and resources on high-risk locations through (1) public observation, (2) site security observations, and (3) stakeholder engagement activities. Though TSA field officials told us that inspectors have been conducting these activities in some format in the past, TSA began piloting this particular program in fiscal year 2014 and made RMAST a work plan requirement for each office starting in fiscal year 2017. In addition to TSA demonstrating its commitment to the RMAST program by adding it as a required work plan activity, we found that inspectors reported spending an increasing amount of time conducting RMASTs since fiscal year 2014, and that RMASTs now comprise a larger percentage of inspector time (see table 7). Although surface inspectors reported spending an increasing amount of time on RMAST activities, we found that TSA has not identified or prioritized the high-risk entities and locations on which the RMAST program is intended to focus time and resources. For example, the fiscal year 2017 surface inspector work plan states that the required number of RMASTs each office should conduct was developed based on the presence of applicable stakeholders in each office’s area, but we found that TSA did not identify any such stakeholders in its work plan. Specifically, while the work plan guidance directed surface inspectors to conduct RMASTs with entities that fit “listed” criteria, this list consisted of all surface modes of transportation for which TSA has authority and did not include any criteria surface inspectors could use to identify the highest-risk and most critical locations, such as by type, characteristics, or location of high-risk entities. TSA officials told us that they have not identified high-risk entities for RMAST because there are too many potential entities and stated that there is no way to provide a full list of all entities in each office’s area. However, the intent of the RMAST program is to focus time and resources on high-risk entities and locations, which precludes the need to provide a complete list of all surface transportation entities in each area. Further, TSA officials told us that TSA has not provided any guidance to the field beyond the work plan on how to identify appropriate entities for RMASTs, but that they rely on surface field offices to identify the highest-risk entities in their own areas. Officials from three field offices told us that inspectors try to conduct RMASTs based on threat information or previous BASE scores, but inspectors in one of those offices said that the intelligence information they receive from TSA is insufficient to help them identify threats and conduct outreach for RMASTs. As previously discussed, the NIPP risk management framework and the DHS Risk Management Fundamentals Doctrine both state that entities should identify and assess risks and prioritize resources to mitigate those risks. If TSA identified and prioritized the types of high-risk entities and locations it intends the RMAST program to reach, surface inspectors would have information that would enable them to implement these activities in a more risk-based manner. While TSA has identified broad objectives for the RMAST program, it has not defined these objectives – and associated program activities – in a measurable and clear way. Specifically, in its description of RMAST in the fiscal year 2017 work plan implementation guidance, TSA stated that the RMAST program will be risk-based, intelligence-driven, and mitigate current threats and vulnerabilities, but did not provide further information that would allow TSA to measure progress toward achieving these objectives. Similarly, in its budget justifications for fiscal years 2014, 2015, and 2016 TSA stated that RMAST is intended to improve security and reduce the need for stakeholders to stretch limited resources to harden security at their most critical and high-risk locations, but TSA did not describe how it would measure whether security had improved, or if stakeholders’ resource needs were reduced. While our review of the fiscal year 2017 work plan guidance showed that TSA identified general categories of activities – public observation, site security observation, and stakeholder engagement – TSA did not identify what specific activities within each of these categories constitute an RMAST, or describe how those activities would help TSA achieve its objectives for the RMAST program. Some inspectors told us that the purpose of RMAST was unclear, that they had not been given the tools to perform RMAST in an effective and efficient way, or that the observation component of RMAST was not a valuable activity. TSA has not defined the RMAST program’s objectives and associated activities in a measurable and clear way because, according to TSA officials, TSA has not identified an approach for determining the effectiveness of activities conducted under the program. Standards for Internal Control in the Federal Government states that management should establish proper controls – including the establishment and review of clearly defined objectives and performance measures – so that program objectives and processes are understood at all levels and progress toward achieving objectives can be assessed. By defining the program’s objectives and associated activities in a measurable and clear way, TSA would be better positioned to measure progress toward achieving the program’s goal of mitigating current threats and vulnerabilities, and surface inspectors may better understand how to effectively carry out the program. TSA has employed surface inspectors for a variety of regulatory and non- regulatory activities intended to mitigate risks to surface transportation and enhance the security of the United States’ surface transportation systems and networks. Working with surface transportation entities, who have the primary responsibility for securing their respective entities, TSA surface inspectors enforce security regulations for the freight and passenger rail modes, but spend the majority of their time conducting non-regulatory activities such as security assessments, exercises, and observations. While TSA uses information on some surface inspector activities to monitor and make decisions on these activities, limitations in the PARIS data system prevent TSA from readily accessing complete information on how much time inspectors spend working in support of aviation. Without addressing these limitations TSA is limited in its ability to make informed future decisions on annual resource needs for surface inspectors, which will be especially important as TSA take steps to expand its inspection activities with the promulgation of new surface security regulations. Given that TSA spends only about 3 percent of its budget on surface activities, it is crucial that the agency have complete information on how resources are being used in order to best allocate these limited federal surface transportation security resources. According to TSA, the agency implements risk-based security – security activities that are driven primarily by the assessment of risk – to deliver the most effective security in the most efficient manner. While TSA has implemented a risk-informed process to allocate surface inspectors to its field offices, it has not taken steps to ensure that surface inspector activities align more closely to the risks TSA has identified in its risk assessments. As a result TSA could continue to prioritize its limited resources to lower risk surface modes, leaving fewer resources available for higher risk modes. By using the results of risk assessments like the TSSRA when it plans and monitors surface inspector activities, TSA would be better able to ensure that limited surface transportation security resources are used to effectively and efficiently address the highest surface transportation security risks. Additionally, by documenting its risk mitigation decisions and strategies, TSA would be able to more clearly explain the rationale for its resource decisions, including when TSA decides to accept risk or prioritize lower-risk activities for any reason. Furthermore, by identifying and prioritizing highest risk entities and locations for its new RMAST program, surface inspectors would have information that would enable them to implement risk mitigation activities in more of a risk-based way. In addition, by clearly defining the program’s goals and activities, TSA would be better able to measure whether RMAST activities are achieving the program’s goal of increasing surface transportation security. We are making the following four recommendations to TSA: The Administrator of TSA should address limitations in TSA’s data system, such as by adding a data element that identifies individuals as surface inspectors, to facilitate ready access to information on all surface inspector activities. (Recommendation 1) The Administrator of TSA should ensure that surface inspector activities align more closely with higher-risk modes by incorporating the results of surface transportation risk assessments, such as the TSSRA, when it plans and monitors surface inspector activities, and that TSA documents its rationale for decisions to prioritize activities in lower-risk modes over higher-risk ones, as applicable. (Recommendation 2) The Administrator of TSA should identify and prioritize high-risk entities and locations for TSA’s Risk Mitigation Activities for Surface Transportation (RMASTs). (Recommendation 3) The Administrator of TSA should define clear and measurable objectives for the RMAST program. (Recommendation 4) We provided a draft of this report to DHS for their review and comment. DHS provided written comments, which are noted below and reproduced in full in appendix IV, and technical comments, which we incorporated as appropriate. DHS concurred with all four recommendations in the report and described actions underway or planned to address them. With regard to the first recommendation that TSA address limitations in its data system to facilitate ready access to information on all surface inspector activities, DHS concurred and stated TSA’s Compliance Division will maintain a staffing tool that identifies the modal assignments of transportation security inspectors that can be used to more effectively analyze all surface inspector activities. If fully implemented, such that data on all activities surface inspectors perform are readily accessible, this system should address the intent of the recommendation. With regard to the second recommendation that TSA align surface inspector activities more closely with higher-risk modes by incorporating the results of surface transportation risk assessments, such as the TSSRA, when it plans inspector activities, and document its rationale for decisions to prioritize activities in lower-risk modes, TSA concurred and stated relevant risk information would be more clearly incorporated into the Surface Work Plan development process. Further, TSA plans to explain decisions and rationale for deviating surface inspector planned activities from mirroring the TSSRA in its program guidance documentation. TSA estimates it will complete this process by January 31, 2018. If TSA is able to fully incorporate risk assessment results, such as the TSSRA, into its decisions for assigning surface inspector tasks across surface transportation modes, and document its rationale if planned inspector activities do not align with risk assessment results, TSA’s planned actions would address the intent of the recommendation. With regard to the third recommendation to identify and prioritize high-risk entities and locations for TSA’s Risk Mitigation Activities for Surface Transportation (RMAST), TSA concurred and stated the Surface Compliance Branch will prioritize entities for RMAST activities within the Surface Work Plan or other applicable program guidance documents using results from the TSSRA and using high threat urban area designations. TSA estimates this process will be completed by January 31, 2018 and if fully implemented, this process should address the intent of the recommendation. With regard to the fourth recommendation that TSA define clear and measurable objectives for the RMAST program, TSA concurred and stated the Surface Compliance Branch has clarified in program guidance documents how to apply and measure certain security outcomes resulting from RMAST activities to security vulnerabilities identified from a previous BASE assessment or other security assessment program. Documentation corroborating these actions was not provided to GAO before the issuance of this report. However, if TSA is able to clearly state the purpose and objectives of RMAST activities, and track the extent to which these objectives have been met, this additional program guidance should address the intent of the recommendation. We are sending copies of this report to interested congressional committees, the Secretary of Homeland Security, and the Administrator of the Transportation Security Administration. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Our objectives were to examine (1) how Transportation Security Administration (TSA) surface inspectors implement the agency’s surface transportation security mission, and (2) the extent to which TSA has used a risk-based approach to prioritize and implement surface inspector activities. This report is a public version of a prior sensitive report that we issued in October 2017. TSA deemed some of the information in the prior report sensitive security information, which must be protected from public disclosure. Therefore, this report omits sensitive information regarding the specific risks facing particular surface transportation modes as determined by TSA. However, the report addresses the same questions as the sensitive report and the overall methodology used for both reports is the same. To obtain background information and answer both questions we (1) reviewed background documents, including TSA strategic documents and previous GAO and Department of Homeland Security (DHS) Inspector General reports, (2) analyzed TSA data on surface inspector activities, and (3) conducted non-generalizable interviews of surface inspectors, their supervisors, and industry stakeholders. To understand TSA’s roles and responsibilities for surface security, as well as its mission, we examined statutes and regulations, including the Aviation and Transportation Security Act, the Implementing Recommendations of the 9/11 Commission Act of 2007, and TSA surface security and related regulations. We also reviewed DHS and TSA strategic documents including TSA’s National Strategy for Transportation Security 2016, the DHS National Infrastructure Protection Plan (NIPP) 2013, and the fiscal years 2016 to 2018 strategic plans for TSA’s Office of Security Operations and the Office of Security Policy and Industry Engagement. Additionally, we reviewed previous GAO and DHS Office of Inspector General reports on TSA’s surface security efforts and surface inspector programs. To evaluate how surface inspectors implemented TSA’s surface security mission and the extent to which this implementation was based on risk, we analyzed data from the surface module of the Performance and Results Information System (PARIS) on the activities of surface inspectors from fiscal year 2013 through March 24, 2017, the most recent data available. Based on TSA documents, regulations, and interviews with TSA data and program officials, we categorized surface inspector activities according to regulatory and non-regulatory activities and by mode, and calculated the total time surface inspectors reported spending for each category. We analyzed data from fiscal years 2013 through 2017 to ensure that we could compare several years of data and analyze data obtained after reorganizations of the surface inspector command structure in fiscal year 2010 and offices in mid-fiscal year 2013. We did not review data from the aviation module of PARIS because, as discussed below, it was not feasible to identify the data surface inspectors entered into this module, and, based on our interviews with TSA data officials and our review of related documentation, we determined that all other surface inspector activities were documented in the surface module of PARIS. To determine the reliability of data from the surface module of PARIS we (1) reviewed related documentation such as data dictionaries, schema, PARIS reliability assessments from previous GAO audits, TSA analyses of PARIS data, and data entry guidance, (2) interviewed TSA officials responsible for entering, reviewing, or using PARIS data, including headquarters officials, field office supervisors, and surface inspectors, (3) electronically and manually tested the data for completeness and obvious errors, such as duplicates and consistency with secondary sources, and (4) conducted internal logic tests on certain time-related fields in the data. Through these steps, we identified some inconsistencies in the data including incomplete data on surface inspectors’ aviation activities and non-specific data elements for inspection activities in fiscal year 2013, among others. However, we determined that for our purposes – to describe how surface inspectors reported spending their time at the summary-level – these inconsistencies did not affect the reliability of the PARIS surface module data and these data were reliable with some limitations. Specifically, based on interviews with TSA data officials and our review of TSA data entry guidance, we determined that the data in the surface module of PARIS did not represent the complete activities conducted by surface inspectors because they enter some aviation activities separately in the aviation module of PARIS. Further, we determined that it was not feasible to distinguish aviation activities documented by surface inspectors in the aviation module from aviation activities documented by cargo or aviation inspectors in this module at the aggregate level. However, based on our testing, review of related documentation, and interviews with TSA data officials, we determined that the data surface inspectors entered into the surface module of PARIS, including data on some aviation activities, were reliable for our purposes. As a result, we reported data on surface inspectors’ aviation activities as documented in the surface module of PARIS, with the limitation that these data represent the minimum aviation activities surface inspectors actually conducted. Additionally, through our analysis of PARIS data on regulatory inspections surface inspectors conducted in fiscal year 2013 and interviews with TSA data officials, we found that 25 percent of the total inspections in fiscal year 2013 (1,990 of 8,083) were documented under data elements that did not specify the type of inspection conducted. According to TSA officials, there are no additional data elements that would allow us to identify the specific type of inspection surface inspectors conducted for these 1,990 inspections. As a result, we determined that this portion of the fiscal year 2013 data was not reliable for our purposes of identifying the number of specific inspection types surface inspectors conducted. However, we found that the remaining 78 percent of inspection data for fiscal year 2013 was reliable for our purposes. As a result, the inspection counts and compliance rates we reported for fiscal year 2013 represent partial year data. To obtain the perspectives of a wide sample of TSA officials on both surface inspector activities and TSA’s use of risk, we conducted semi- structured interviews with surface inspectors and/or their supervisors in 17 of 49 field offices. We also interviewed the 6 Regional Security Inspectors (RSIs), who cover all seven TSA regions. We interviewed inspectors and supervisors from at least 2 offices in each region and selected the offices based on a variety of factors including geographic dispersion, staff level, surface transportation environment, and whether the office was co-located with a major airport. We physically visited 6 offices and conducted the remainder of our interviews remotely. We selected the offices we traveled to based on the location of GAO staff, the availability of industry representatives in the area, and the opportunity to observe surface inspector assessments, tabletop exercises, and other activities. The results of our interviews are not generalizable, but provide insight into how surface inspectors and their supervisors implement TSA surface programs and the challenges they may face, if any. To gain insight into the experience surface transportation industry stakeholders have had with TSA surface inspectors, we interviewed 15 industry stakeholders in four surface modes including 3 freight rail stakeholders, 3 maritime stakeholders, 3 highway stakeholders, and 6 passenger rail/mass transit stakeholders. We selected industry stakeholders based on their involvement and familiarity with TSA surface inspectors, the surface mode in which they operate, their ridership, and TSA recommendation. Three of these stakeholders consisted of national trade associations representing the highway, freight rail, and mass transit modes of transportation. As with our interviews with TSA surface inspectors and supervisors, our interviews with industry stakeholders are not generalizable but provided us with valuable information on the transportation industry’s interaction with TSA surface inspectors. To further address our first objective and describe how TSA surface inspectors implemented the agency’s surface transportation security mission, we examined TSA strategic and program documents including surface inspector work plans and implementation guidance from fiscal years 2013 to 2017, the TSA Inspector Compliance Manual, and TSA surface security regulations, and reviewed public testimony by TSA leadership. To understand how TSA has implemented the Baseline Assessment for Security Enhancement (BASE) program in particular, we reviewed TSA program documents and guidance for the BASE program, including the BASE workbook, and observed a BASE review on a mass transit entity. We also observed a regional Intermodal – Security Training Exercise Program (I-STEP) exercise and an Exercise Information System (EXIS) exercise, and interviewed TSA officials in headquarters, and inspectors and supervisors in the field. We used the results of our analysis of PARIS surface module data, specifically the number of each type of regulatory inspection TSA inspectors conducted from fiscal years 2013 to 2017, and PARIS data on the violations found during those inspections, to calculate regulatory compliance rates. We also used the results of our analysis of PARIS surface module data to describe how surface inspectors reported spending their time. As previously stated, we found the PARIS surface module data to be reliable for this purpose, with the limitation that TSA data on the time surface inspectors reported spending on aviation activities was incomplete because we could not identify surface inspector activities entered into the aviation module of PARIS. To evaluate the effects of this limitation, we compared the results of our data analysis, our reviews of PARIS documentation, and our interviews with TSA officials to Standards for Internal Control in the Federal Government. To further address our second objective, the extent to which TSA has used a risk-based approach to prioritize and implement surface inspector activities, we analyzed TSA’s risk guidance as contained in the NIPP risk management guidance, the DHS 2010 Risk Lexicon, and the DHS Risk Management Fundamentals to understand how TSA should assess and use risk information. To understand the risks TSA has identified for surface transportation modes during the time period we examined, we analyzed TSA’s cross-modal risk assessments in three Transportation Security Sector Risk Assessments (TSSRA) published between May 2013 and July 2016. We reviewed TSA’s fiscal year 2017 surface inspector staffing model and supporting documents and data and interviewed TSA officials responsible for developing and executing staffing. We compared that process to TSA risk guidance to evaluate the extent to which TSA considered risk when it staffed TSA surface inspectors for fiscal year 2017. We assessed only the fiscal year 2017 staffing model because TSA’s previous staffing model was last used in fiscal year 2011, which is outside our scope. To determine the extent to which TSA prioritized surface inspector activities based on risk when it planned these activities, we identified, compiled and analyzed activity requirements from surface inspector work plans and associated implementation guidance from fiscal years 2013 to fiscal year 2017. We (1) compared them to each other to identify changes in planned surface inspector activities over time and (2) compared them to results from the TSSRA, as well as other risk information including unattended rates for Toxic Inhalation Hazard (TIH) rail cars and the presence of Maritime Transportation Security Act of 2002-regulated facilities in each office’s area. We also interviewed TSA officials in headquarters and the field who were responsible for developing the surface inspector work plan about the process and information they considered during work plan development, and compared this information to TSA risk guidance. To determine the extent to which TSA’s implementation of surface inspector activities aligned with risk, we compared the results of our analysis of PARIS surface module data on the time surface inspectors spent in each surface mode to the results of the TSSRA cross-modal risk assessments from fiscal years 2013 to 2017. As previously discussed, we determined the data to be reliable for our purposes. We also compared the results of our analysis of PARIS surface module data to our analysis of work plan requirements to identify the amount of time surface inspectors reported spending on work plan activities. In addition, we identified the types of information TSA used in its fiscal year 2015 analysis of surface inspector time and activities to determine what TSA considered when it monitored how surface inspector activities were implemented. Additionally, we used the results of our analysis of PARIS surface module data to determine the percent of total time surface inspectors reported spending on Risk Mitigation Activities for Surface Transportation (RMAST) between fiscal years 2013 and 2017. To understand TSA’s objectives for the RMAST program, we analyzed program descriptions in TSA congressional budget justifications and TSA’s fiscal year 2017 work plan and work plan implementation guidance. We also conducted interviews with TSA officials in headquarters, and inspectors and supervisors in the field, and observed an RMAST activity to understand how TSA has implemented the program. We compared the results of our analysis and interviews to TSA’s risk guidance and Standards for Internal Control in the Federal Government to evaluate the extent to which the program was risk-based and to which TSA had established measurable goals for the program. The performance audit upon which this report is based was conducted from April 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with TSA from September 2017 to December 2017 to prepare this nonsensitive version of the original report for public release. This public version was also prepared in accordance with these standards. Appendix II: Surface Inspector Activities 2005 High-visibility activities, such as patrols, passenger and baggage screening, and canine activities to introduce unpredictability, increase security, and deter potential terrorist actions on multiple modes of transportation. Managed by the U.S. Federal Air Marshal Service and conducted by TSA personnel, which may include surface inspectors. 2006 A voluntary review in which surface inspectors evaluate the security programs of transportation entities, offer technical assistance, and share best practices. TSA uses BASE to, among other things, determine priorities for allocating mass transit and passenger rail security grants, such as those provided through the Transportation Security Grant Program. 2006 Local field assessments of critical infrastructure, station and other facilities for mass transit, passenger rail, and commuter rail and bus systems. Station profiles provide detailed information of specific station-related intelligence, such as the locations of exits, telephones, CCTV, electrical power, station mangers etc. 2007 Inspectors verify that Toxic Inhalation Hazard (TIH) rail cars at rail yards within high- threat urban areas that transport TIH on a regular and reoccurring basis are being attended by railroad personnel. Inspectors also conduct “wildcard” RRS, during which they observe locations which do not normally handle TIH on a regular and recurring basis to determine if TIH cars are present, and if they are being attended by railroad personnel. 2008 Detailed assessments that focus on the vulnerabilities of high-population areas where TIH materials are moved by rail in significant quantities, and that provide site- specific mitigation strategies and lessons learned. 2008 I-STEP, which is managed through the Office of Security Policy and Industry Engagement, consists of contractor-facilitated exercises designed to help multimodal surface transportation entities closely examine their security programs and operational efforts. TSA facilitates I-STEP exercises across all surface transportation modes to help operators, law enforcement, first responders, and related entities test and evaluate their security plans, including prevention and preparedness capabilities, ability to respond to threats, and interagency coordination. TSA updates I-STEP scenarios as new threats emerge, helping industry partners prepare to implement the most appropriate countermeasures. 2014 Quality assurance assessments of Transportation Worker Identification Credential (TWIC) enrollment centers to, according to TSA officials, review contractor performance. 2015 EXIS consists of exercises facilitated by surface inspectors that utilize software developed by TSA for stakeholder use, generally focus on one entity, and are intended to build on the findings of a previously completed BASE assessment. 2017 A program intended to focus time and resources on high-risk and critical assets, facilities and other infrastructure through the following activities: (1) public observation to identify suspicious activities, security vulnerabilities and/or suspicious behaviors that could be indicative of pre-operational planning related to terrorism; (2) site security observation to determine if the physical security measures and operational deterrence components are in place to effectively mitigate risk, and (3) stakeholder engagement including TSA’s public security awareness programs and improvised explosive device (IED) and intelligence briefings. In this table, passenger rail and rail transit systems consist of: each passenger railroad carrier, including each carrier operating light rail or heavy rail transit service on track that is part of the general railroad system of transportation, each carrier operating or providing intercity passenger train service or commuter or other short-haul railroad passenger service in a metropolitan or suburban area (as described by 49 U.S.C. § 20102), and each public authority operating passenger train service; (b) each passenger railroad carrier hosting an operation described in paragraph (a) of this section; (c) each tourist, scenic, historic, and excursion rail operator, whether operating on or off the general railroad system of transportation; (d) each operator of private cars, including business/office cars and circus trains, on or connected to the general railroad system of transportation, and (e) each operator of a rail transit system that is not operating on track that is part of the general railroad system of transportation, including heavy rail transit, light rail transit, automated guideway, cable car, inclined plane, funicular, and monorail systems. 49 C.F.R. § 1580.200. Jennifer Grover (202) 512-7141 or groverj@gao.gov. In addition to the contact named above, Christopher E. Ferencik, Assistant Director; Brendan Kretzschmar, Analyst in Charge; Nanette Barton, and Katherine Blair made key contributions to this report. Also contributing to the report were, Charles Bausell, Katherine Davis, Eric Erdman, Anthony Fernandez, Eric D. Hauswirth, Paul Hobart, Tracey King, Christopher Lee, Mara McMillen, Amanda Miller, Claudia Rodriguez, Christine San, McKenna Storey, Natalie Swabb, Michelle Vaughn, Adam Vogt, Johanna Wong.", "summary": "The global terrorist threat to surface transportation – freight and passenger rail, mass transit, highway, maritime and pipeline systems – has increased in recent years, as demonstrated by the 2017 London vehicle attacks and a 2016 thwarted attack on mass transit in the New York area. TSA is the primary federal agency responsible for securing surface transportation in the United States. GAO was asked to review TSA surface inspector activities. This report addresses (1) how TSA surface inspectors implement the agency's surface transportation security mission, and (2) the extent to which TSA has used a risk-based approach to prioritize and implement surface inspector activities. GAO analyzed TSA data on surface inspector activities from fiscal year 2013 through March 24, 2017, reviewed TSA program and risk documents and guidance, and observed surface inspectors conducting multiple activities. GAO also interviewed TSA officials in 17 of 49 surface field offices and 15 industry stakeholders. Transportation Security Administration (TSA) surface transportation security inspectors—known as surface inspectors—conduct a variety of activities to implement the agency's surface security mission, including: Regulatory Inspections: Surface inspectors enforce freight rail, passenger rail, and maritime security regulations. GAO found that, according to TSA data, surface inspectors reported spending approximately 20 percent of their time on these activities from fiscal years 2013 to 2017. Non-regulatory assessments and assistance: Surface inspectors conduct voluntary assessments and provide training to surface transportation entities, among other things. GAO found that, according to TSA data, inspectors reported spending approximately 80 percent of their time on these activities. In addition to mission-related activities, surface inspectors can assist with aviation-related activities. However, GAO found that TSA has incomplete information on the total time surface inspectors spend on these activities because of limitations in TSA's data system. Addressing these limitations would provide TSA with complete information when making decisions about inspector activities. GAO also found that TSA prioritized inspector activities in the surface transportation mode with the lowest risk because TSA did not incorporate risk assessment results when planning and monitoring activities. Specifically, in fiscal year 2016, the last full year for which data on inspectors' activities in the surface modes was available, surface inspectors reported spending more than twice as much time on the lowest risk surface transportation mode according to TSA risk assessments than on the highest risk surface transportation mode. Incorporating risk assessment results when prioritizing inspector activities would help TSA ensure that its surface security resources address the highest risks. In fiscal year 2017, TSA fully implemented a new risk mitigation program—Risk Mitigation Activities for Surface Transportation (RMAST)—intended to focus time and resources on high-risk surface transportation entities and locations. However, GAO found that TSA has not identified or prioritized these high-risk entities and locations, or defined the RMAST program's objectives and associated activities in a measurable and clear way. According to TSA officials, they have not done so because there are too many potential entities to list them all for prioritization and TSA has not identified an approach for determining the effectiveness of activities under the program. However, prioritizing high-risk entities, such as by type, characteristics, or location does not require a complete list of entities. By identifying and prioritizing high-risk entities and locations for RMAST, and clearly defining the program's activities and objectives, TSA would be better able to implement RMAST activities in a risk-based manner and measure their effectiveness. This is a public version of a sensitive report that GAO issued in October 2017. Information that TSA deemed sensitive has been omitted. GAO recommends that TSA (1) address limitations in its data system to collect complete information, (2) ensure inspector activities more closely align with the results of risk assessments, (3) identify and prioritize entities and locations for its risk mitigation program, and (4) define measurable and clear objectives for the program. TSA concurred with these recommendations.", "document_type": "gao"}
{"report": "The EFMP provides support to families with special needs at their current and proposed locations. Servicemembers relocate frequently, generally moving every 3 years if in the Army, Marine Corps, and Navy, and every 4 years if in the Air Force. In fiscal year 2016, the Military Services relocated approximately 39,000 servicemembers enrolled in the EFMP to CONUS installations. To implement DOD’s policy on support for families with special needs, DOD requires each Service to establish its own EFMP for active duty servicemembers. EFMPs are to have three components—identification and enrollment, assignment coordination, and family support. Identification and enrollment: Medical and educational personnel at each installation are responsible for identifying eligible family members with special medical or educational needs to enroll in the EFMP. Once identified by a qualified medical provider, active duty servicemembers are required to enroll in their service’s EFMP. Servicemembers are also required to self-identify when they learn a family member has a qualifying condition. Assignment coordination: Before finalizing a servicemember’s assignment to a new location, DOD requires each Military Service to consider any family member’s special needs during this process, including the availability of required medical and special educational services at a new location. Family support: DOD requires each Military Service’s EFMP to include a family support component through which it helps families with special needs identify and gain access to programs and services at their current, as well as proposed, locations. Servicemembers assigned to a joint base would receive family support from the Service that is responsible for leading that installation. For example, an Airman assigned to a joint base where the Army is the lead would receive family support from the Army installation’s EFMP. As required by the NDAA for Fiscal Year 2010, DOD established the Office of Community Support for Military Families with Special Needs (Office of Special Needs or OSN) to develop, implement, and oversee a policy to support these families. Among other things, this policy must (1) address assignment coordination and family support services for families with special needs; (2) incorporate requirements for resources and staffing to ensure appropriate numbers of case managers are available to develop and maintain services plans that support these families; and (3) include requirements regarding the development and continuous updating of a services plan for each military family with special needs. OSN is also responsible for collaborating with the Services to standardize EFMP components as appropriate and for monitoring the Services’ EFMPs. OSN has been delegated the responsibility of implementing DOD’s policy for families with special needs by the Undersecretary of Defense for Personnel and Readiness through the Assistant Secretary for Manpower and Reserve Affairs according to DOD officials. Currently, OSN is administered under the direction of the Deputy Assistant Secretary of Defense for Military Community and Family Policy through the Office of Military Family Readiness Policy. In addition, each Military Service has designated a program manager for its EFMP who is also responsible for working with OSN to implement its EFMP (see fig. 1). DOD’s guidance for the EFMP (1) identifies procedures for assignment coordination and family support services; (2) designates the Assistant Secretary of Defense for Manpower and Reserve Affairs as being responsible for monitoring overall EFMP effectiveness; (3) assigns the OSN oversight responsibility for the EFMP, including data review and monitoring; and (4) directs each Service to develop guidance for overseeing compliance with DOD requirements for their EFMP. Table 1 provides an overview of the procedures each Service must establish for the assignment coordination and family support components of the EFMP. As a part of its guidance for monitoring military family readiness programs, DOD also requires each Military Service to certify or accredit its family readiness services, including family support services provided through the EFMP. In addition, DOD states that each Service must balance the need for overarching consistency across EFMPs with the need for each Service to provide family support that is consistent with their specific mission. To accomplish this, each Service is required to jointly work with DOD to develop a performance strategy, which is a plan that assesses the elements of cost, quality, effectiveness, utilization, accessibility, and customer satisfaction for family readiness services. In addition, each Military Service is required to evaluate their family readiness services using performance goals that are linked to valid and reliable measures such as customer satisfaction and cost. DOD also requires each Service to use the results of these evaluations to inform their assessments of the effectiveness of their family readiness services for families with special needs. According to DOD officials, each Military Service provides family support services in accordance with DOD guidance as well as Service-specific guidance. However, we found wide variation in each Service’s requirements for family support personnel as well as the practices and expectations of EFMP staff. As a result the type, amount, and frequency of assistance enrolled families receive varies from Service to Service and when a servicemember from one Service is assigned to a joint base led by another Service (see table 2). For example, in terms of a minimum level of contact for families with special needs enrolled in the EFMP, the Services vary in the frequency with which they require family support providers to contact families with special needs: The Marine Corps specifies a frequency (quarterly) with which families with special needs should be contacted by their family support providers. The Air Force has each installation obtain a roster of families with special needs enrolled in the EFMP on a monthly basis, but it does not require family support providers to, for example, use this information to regularly contact these families. The Navy assigns one of three service levels to each family member enrolled in the EFMP. These service levels are based on the needs of each family with special needs; family support providers are responsible for assigning a “service level” that directs the frequency with which the family must be contacted. The Army has no requirements for how often families with special needs should be contacted. The Services also vary as to whether they offer legal assistance to families with special needs as follows: The Marine Corps employs two attorneys who can represent families with special needs who fail to receive special education services from local school districts, as specified in their children’s individualized education programs (IEP). They can also advise EFMP-enrolled families on their rights and options if a family believes their child needs special education services from a local school district (e.g., an IEP). The Air Force, Army, and Navy choose not to employ special education attorneys. Officials with whom we spoke said families with special needs in these Services can receive other types of assistance that may help them resolve special education legal issues. For example, Air Force officials said servicemembers and their families can receive support from attorneys that provide general legal assistance on an installation, Army officials said installation EFMP managers can refer families with special needs to other organizations that provide legal support, and Navy officials said families can find support through working with their installation’s School Liaison Officers. The NDAA for Fiscal Year 2010 requires DOD’s policy to include requirements regarding the development and continuous updating of a services plan (SP) for each family with special needs, and DOD has specifically required these plans as part of the provision of family support services. These plans describe the necessary services and support for a family with special needs and document and track progress toward meeting related goals. According to DOD guidance, these plans should also document the support provided to the family, including case notes. In addition, the DOD reference guide for family support providers emphasizes that timely, up-to-date documentation is especially important each time a family relocates, as military families regularly do. Therefore, SPs are an important part of providing family support during the relocation process, and provide a record for the gaining installation. Requiring timely and up-to-date documentation is consistent with federal internal control standards, which state that agencies should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving their objectives. SPs follow families with special needs each time they relocate and without timely and up-to-date documentation, DOD cannot ensure that all families continue to receive required medical and/or special educational services once they relocate to another installation. For every Service the number of SPs was relatively few when compared to the number of servicemembers (known as sponsors) or the number of family members enrolled in the EFMP (see table 3). The Services and OSN provided a range of reasons as to why the Services do not develop and maintain a SP for each family with special needs. For example, Air Force officials said their family support providers consider the needs of each family with special needs before determining whether a SP will help them receive the required services. In addition, Army and Marine Corps officials said they may not develop these plans if families do not request them. Further, according to a Navy official, some families lack the required SPs because installations may not have the staff needed to develop them—even though DOD requires the Services to maintain sufficient staff and certify their EFMPs. OSN officials with whom we spoke also said that the Services may not have developed many SPs during fiscal year 2016 because DOD had not yet approved a standardized form that could be used to meet this requirement. Finally, OSN officials also said that each family with special needs enrolled in the EFMP may not need a SP because their condition does not require this type of family support. To meet requirements of the NDAA for Fiscal Year 2010, in April 2017, DOD issued to the Services guidance that directed them to “rogram, budget, and allocate sufficient funds and other resources, including staffing,” to meet DOD’s policy objectives for the EFMP. According to OSN officials, DOD relies on each Service to determine what level of funds and resources is sufficient and what constitutes an appropriate number of family support personnel. To determine family support providers and related personnel staffing levels, the Service officials with whom we spoke said they consider a number of factors, including the number of families with special needs enrolled in the EFMP at any given installation (see app. II for more information about the EFMP data by installation). See Table 4 for a summary of EFMP family support providers and other key personnel at CONUS installations. As required by DOD, all of the Services employ family support providers to assist families with special needs. In addition, some Services employ additional personnel to support implementation of the EFMP (see sidebar). For example, the Air Force employs family support coordinators to administer its EFMP and no other personnel are dedicated to assisting these coordinators or enrolled families. The Army employs “system navigators” who provide individualized support to families with special needs at selected installations through its EFMP, as well as other personnel to administer the EFMP. workers at most of its CONUS installations to administer individualized support to families with special needs. In addition, the Marine Corps employs program managers, administrative assistants, as well as training and education outreach specialists. The Navy contracts regional case liaisons and case liaisons at selected CONUS installations to administer individualized support to families with special needs. In addition, the Navy employs collateral duty case liaisons who assist with the delivery of family support services at all other CONUS installations. Senior OSN officials said they rely on each Service to determine the extent to which its EFMP complies with DOD’s policy for families with special needs because they consider OSN to be a policy-making organization that is not primarily responsible for assessing compliance. In addition, these officials said the Services need flexibility to implement DOD’s policy for families with special needs because they each have unique needs and the number of enrolled families in the EFMP is constantly changing. However, DOD has not developed a standard for determining the sufficiency of funding and resources each Service allocates for family support. Air Force officials at one of the installations we visited said the Air Force identified the lack of staff and funding to provide individualized support to most families with special needs as an issue. In addition, officials from the Army and Navy said they have not received any guidance from OSN officials about their Service-specific guidance, including requirements for resources and services plans. Further, the Services may not know the extent to which their Service- specific guidance complies with DOD’s policy for families with special needs. The NDAA for Fiscal Year 2010 requires DOD to identify and report annually to the congressional defense committees on gaps in services for military families with special needs and to develop plans to address these gaps. However, DOD’s most recent reports to the congressional defense committees did not address the relatively few SPs being created for families with special needs, or whether the Services are providing sufficient resources to ensure an appropriate number of family support providers. Federal internal control standards require that agencies establish control activities, such as developing clear policies, in order to accomplish agency objectives such as those of the Services’ EFMPs. Without fully identifying and addressing potential gaps in family support across these programs, some families with special needs may not get the assistance they require, particularly when they relocate. Each Service monitors EFMP assignment coordination and family support using a variety of mechanisms, such as regularly produced internal data reports. However, DOD has not yet established common performance measures to track the Services’ progress in implementing its standard procedures over time or developed a process to evaluate the overall effectiveness of each Service’s assignment coordination and family support procedures. DOD requires each Service to monitor implementation of their EFMP, including their procedures for assignment coordination and family support. To comply with this requirement, each Service has developed guidance that establishes monitoring protocols and assigns oversight responsibilities. Officials from each Service told us they use internal data reports from each installation to monitor assignment coordination and family support. To monitor assignment coordination, officials from each Service told us their headquarters reviews proposed assignment locations for families with special needs enrolled in the EFMP. These officials said monitoring proposed assignment locations helps ensure that enrolled families will be able to access required services at their new installations. In addition, Army officials said each Army unit commander is responsible for tracking the number of families with special needs that have expired enrollment paperwork because it affects assignment coordination worldwide. Several years ago, the Army determined that 25 percent of soldiers (over 13,000) enrolled in the EFMP had expired enrollment paperwork, complicating the task of considering each enrolled family’s special medical or educational needs as part of proposed relocations. In response, in August 2011, the Army revised its policies and procedures for updating enrollment paperwork which would help ensure a family member’s special needs are considered during the assignment coordination process. To monitor family support provided by installations worldwide, each Military Service told us they use a variety of mechanisms (see table 5). The Marine Corps pays particular attention to customer satisfaction. Marine Corps officials told us that every three years Marine Corps headquarters administers a survey of family members enrolled in the EFMP. We previously reported that organizations may be able to increase customer satisfaction by better understanding customer needs and organizing services around those needs. This survey is one of the primary ways Marine Corps headquarters measures customer satisfaction with family support services at installations worldwide. Marine Corps officials also said this survey helps ensure its EFMP is based on the current needs of families with special needs. To improve its oversight of the EFMP and implement its policy for families with special needs, DOD, through OSN, has several efforts under way to standardize the Services’ procedures for assignment coordination and family support. However, DOD has not developed common performance measures to monitor its progress toward these efforts and has not developed a process for assessing the Services’ related monitoring activities. Federal internal control standards emphasize the importance of assessing performance over time and evaluating the results of monitoring activities. To help improve family member satisfaction by addressing gaps in support that may exist between Services, OSN has begun to standardize procedures for assignment coordination and family support. To date, OSN’s efforts have focused on ensuring each Service’s EFMP considers the needs of family members during the assignment process and helps family members identify and gain access to community resources. According to OSN’s April 2017 Report to Congress, the long-term goal of these efforts is to help ensure that all families with special needs enrolled in the EFMP receive the same level of service regardless of their Military Service affiliation or geographic location. In addition, OSN officials told us its standardized procedures will also help DOD perform required oversight by improving its access to Service-level data and its ability to validate each Service’s monitoring activities. To date, efforts to standardize assignment coordination and family support have included efforts such as developing new family member travel screening forms which will be the official documents used during the assignment coordination process and completing a DOD-wide customer service satisfaction survey on EFMP family support (see table 6). Despite its efforts to begin standardizing assignment coordination and family support services, DOD is unable to measure its progress in standardizing assignment coordination and family support procedures for families with special needs and assessing the Services’ performance of these processes because it has not yet developed common metrics for doing so. Federal internal control standards emphasize the importance of agencies assessing performance over time. We have also reported on the importance of federal agencies engaging in large projects using performance metrics to determine how well they are achieving their goals and to identify any areas for improvement. By using performance metrics, decision makers can obtain feedback for improving both policy and operational effectiveness. Additionally, by tracking and developing a baseline for all measures, agencies can better evaluate progress made and whether or not goals are being achieved—thus providing valuable information for oversight by identifying areas of program risk and causes of risks or deficiencies to decision makers. Through our body of work on leading performance management practices, we have identified several attributes of effective performance metrics relevant to OSN’s work (see table 7). OSN officials said each Service is currently responsible for assessing the performance of its own EFMP, including the development of Service- specific goals and performance measures. OSN officials said that they recognize the need to continually measure the department’s progress overall in implementing its policy for families with special needs, and are considering ways to do so. They also said they have encountered challenges to developing common performance measures. In addition, OSN officials said its efforts to reach consensus among the Services about performance measures for the overall EFMP are still ongoing because each Service wants to maintain its own measures, and DOD has not required them to reach a consensus. Absent common performance measures, DOD is unlikely to fully determine whether its long-standing efforts to improve support for families with special needs are being implemented as intended. DOD requires each Service to monitor its own family readiness programs, including procedures for assignment coordination and family support through the EFMP, but lacks a systematic process to evaluate the results of these monitoring activities. To monitor family readiness services, as required by DOD, each Service must accredit or certify its family support services, including the EFMP, using standards developed by a national accrediting body not less than once every 4 years. In addition, personnel from each Service’s headquarters are required to periodically visit installations as a part of their monitoring activities for assignment coordination, among other things. The Services initially had the Council on Accreditation accredit family support services provided through their installations’ EFMPs using national standards developed for military and family readiness programs, according to the officials with whom we spoke. However, by 2016, each Service was certifying installations’ family support services using standards that meet those of a national accrediting body, Service-specific standards, and best practices. According to officials from each Service with whom we spoke, this occurred due to changes in the funding levels allocated to this activity. Table 8 provides an overview of the certification process currently being used by each Service. OSN officials said they do not have an ongoing process to systematically review the results of the Services’ activities, including the certification of EFMPs because they choose to rely on the Services to develop their own monitoring activities and ensure they provide the desired outcomes. In doing so, DOD allows each Service to develop its own processes for certifying installations’ family support services, including the selection of standards. In addition, OSN officials told us that efforts to standardize certification of EFMPs are ongoing because the Military Services have not been able to reach consensus on a set of standards that can be used across DOD for installations’ family support services. Further, OSN has not established a process to assess the results of the Services’ processes for certifying installations’ family support services. Federal standards for internal control state that management should evaluate the results of monitoring efforts—such as those the Services are conducting on their own—to help ensure they meet their strategic goals. The lack of such a process hampers OSN’s ability to monitor the Services’ EFMPs and determine the adequacy of such programs as required by the NDAA for Fiscal Year 2010. OSN’s job of developing a policy for families with special needs that will work across DOD’s four Services is challenging given the size, complexity, and mission of the U.S. military. It has had to consider, among other things, the Services’ mission requirements, resource constraints, and the myriad demands on servicemembers and their families during their frequent relocations. Anything that further complicates a relocation—such as not receiving the required family support services for family members with special needs—potentially affects readiness or, at a minimum, makes an already stressful situation worse. By providing little direction on how the Services should provide family support or what the scope of family support services should be, some servicemembers get more—or less—from the EFMP each time they relocate, including when a servicemember from one Service is assigned to a joint base led by another Service. By largely deferring to the Services to design, implement, and monitor their EFMPs’ performance, DOD cannot, as required by the NDAA for Fiscal Year 2010, fully determine the adequacy of the Services’ EFMPs in serving families with special needs, including any gaps in services these families receive, because it has not built a systematic process to do so. Instead, it relies on the Services to self-monitor and address, within each Service, the results of monitoring activities. However, because servicemembers relocate frequently and often depend on the EFMP of a Service other than their own, a view of EFMP performance across all of the Services is essential to ensuring, for example, that relocating servicemembers get consistent EFMP service delivery no matter where they are stationed. Evaluating and developing program improvements based on the results of the Services’ monitoring would help DOD ensure the Services’ EFMPs achieve the desired outcomes and improve its ability to assess the overall effectiveness of the program. We are making the following three recommendations to DOD: We recommend the Secretary of Defense direct the Office of Special Needs (OSN) to assess the extent to which each Service is (1) providing sufficient resources for an appropriate number of family support providers, and (2) developing services plans for each family with special needs, and to include these results as part of OSN’s analysis of any gaps in services for military families with special needs in each annual report issued by the Department to the congressional defense committees. (Recommendation 1) We recommend that the Secretary of Defense direct the Office of Special Needs (OSN) to develop common performance metrics for assignment coordination and family support, in accordance with leading practices for performance measurement. (Recommendation 2) We recommend that the Secretary of Defense implement a systematic process for evaluating the results of monitoring activities conducted by each Service’s EFMP. (Recommendation 3) We provided a draft of this report to the Department of Defense (DOD) for comment. DOD provided written comments, which are reproduced in appendix IV. DOD also provided technical comments, which we incorporated as appropriate. DOD agreed with all three of our recommendations. In its written comments, DOD stated that additional performance metrics need to be developed for assignment coordination and that it is in the process of measuring families’ satisfaction with family support provided through the EFMP. DOD also stated that it is developing plans for evaluating the results of each Service’s monitoring activities for the EFMP. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Defense and Education, and other interested parties. The report also is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. The National Defense Authorization Act (NDAA) for Fiscal Year 2017 includes a provision for GAO to assess the effectiveness of the Department of Defense’s (DOD) Exceptional Family Member Programs (EFMP). This report focuses on the assignment coordination and family support components of the EFMP for dependents with special needs and examines: (1) the extent to which each Service has provided family support as required by DOD, and (2) the extent to which the Services monitor and DOD evaluates assignment coordination and family support. To address these objectives, we used a variety of data collection methods. Key methods are described in greater detail below. For both objectives, we reviewed relevant federal laws, regulations, and DOD guidance and documentation that pertain to the EFMP, including the following: The NDAA for Fiscal Year 2010, which established the Office of Special Needs and defined program requirements for assisting families with special needs, including assignment coordination and family support. DOD’s guidance for administering the EFMP. We assessed how DOD implements the requirements in the NDAA for Fiscal Year 2010; how each Service implements assignment coordination and family support; and how the Services and DOD monitor assignment coordination and family support using performance measures. Specially, we reviewed DOD Instruction 1315.19 - Exceptional Family Member Program; Service-specific guidance and related documents from the Air Force, Army, Marine Corps, and Navy; and DOD Instruction 1342.22 - Military Family Readiness. Standards for internal control in the federal government related to the documentation of responsibilities through policies, performance measures, and evaluating the results of monitoring activities. We compared each Service’s procedures for monitoring assignment coordination and family support to these standards. To determine the extent of the Services’ EFMP family support, we obtained and analyzed fiscal year 2016 EFMP data (the most recent available) for each Service. We reviewed DOD policy to identify data variables that each Service maintains related to its EFMP. We used these data to summarize key characteristics of each Service’s EFMP. The selected variables provided Service-wide and installation-specific EFMP information on, the number of continental United States (CONUS) and outside the continental United States (OCONUS) installations; the number of servicemembers (sponsors) enrolled in the EFMP; the number of family members with special needs enrolled in the EFMP; the number of EFMP family support personnel; and the number of services plans created for families with special needs enrolled in the EFMP. We determined that the selected data variables from each Service are sufficiently reliable for the purposes of providing summary results about family support for fiscal year 2016. To learn more about how the Services implement their EFMPs, we visited seven installations in five states. We selected the seven installations based on their location in states with the largest number of military- connected students in school year 2012-2013 (the most recent available and reliable data) or in states with the largest percentage of students enrolled in U.S. DOD schools as of May 2017, as well as their status as a joint base. At each installation, we interviewed installation officials, EFMP managers, selected family support personnel, and family members and caregivers enrolled in the program. In states we visited that had the largest number of military-connected students, the EFMP personnel we interviewed collectively served 66 percent of students who attend local public schools and 42 percent of the students attending U.S. DOD schools. To obtain illustrative examples about how the EFMP serves families with special needs, we conducted seven group interviews with EFMP-enrolled family members and caregivers (one at each of the seven installations we visited). Using a prepared script, we asked participants to describe how they were identified and enrolled in the EFMP, how they were assigned to new installations, and the types of family support services they received. We also asked about how these services aligned with their family member’s EFMP-eligible condition, the benefits and challenges they experienced, as well as their overall satisfaction. A total of 38 self- selected volunteers participated in the seven group discussions. While the participants in these groups included a variety of family members and caregivers, the number of participants and groups were very small relative to the total number of family members enrolled in the EFMP. Their comments are not intended to represent all EFMP-enrolled family members or caregivers. Other EFMP-enrolled family members and caregivers may have had other experiences with the program during the same period. Finally, for both objectives, we conducted interviews with a variety of DOD, Service-level, and nonfederal officials. We spoke with DOD officials from the Office of the Assistant Secretary of Defense–Offices of Manpower and Reserve Affairs, Military Community and Family Policy, Military Family Readiness Policy, and Special Needs. We also spoke with EFMP Managers from Air Force, Army, Marine Corps, and Navy headquarters. We also met with officials from selected national military family advocacy organizations including the National Military Family Association; the Military Family Advisory Network; and the Military Officers Association of America to discuss the EFMP. We conducted this performance audit from February 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Each Service has an Exceptional Family Member Program (EFMP) that provides support to military families with special needs. The tables below present the following information on selected EFMP and family support categories for each Service’s program at continental United States (CONUS) and outside the continental United States (OCONUS) installations in fiscal year 2016: City, state or country; Number of exceptional family members; Number of family support providers (by Full-Time Equivalent); Number of family support provider vacancies; Number of services plans; Number of indirect contacts; and Number of direct contacts. The information below is listed sequentially in alphabetical order by Service. We held small group discussions with Exceptional Family Member Program (EFMP) participants at the seven military installations we visited. Family members and caregivers who attended each session reported they had children or spouses with EFMP-eligible conditions. The discussion group participants were self-selected; and their comments are not intended to represent all EFMP -enrolled family members or caregivers in fiscal year 2016. In addition, other EFMP -enrolled family members and caregivers may have had different experiences with the program during the same period. There were a total of 38 participants representing all the Services. The following issues were discussed by one or more participants during the small group discussions at the installations we visited. The issues that emerged relate to the current and future overall effectiveness of the EFMP. Overall Satisfaction with EFMP (Discussed by 30 of 38 participants): Measure of participants’ approval of the family support services offered and experience with the EFMP. Many participants expressed overall satisfaction with the EFMP. Several participants expressed dissatisfaction with the EFMP. A participant expressed dissatisfaction with the lack of consistency in the provision of family support services (i.e., special education advocacy) across installations. School Liaison Officers (Discussed by 20 of 38 participants): Serve as the primary point of contact for school-related matters as well as assist military families with school issues. Several participants noted that they received no response to their request for assistance from their School Liaison Officer or they only received general information. Several participants said School Liaison Officers were not helpful. Some participants found School Liaison Officers were helpful. Some participants were unaware of School Liaison Officers being available at their installation and the service(s) they provide. A few participants said School Liaison Officers did not follow up on requests for information. A participant noted there seems to be a disconnect between family support services provided through the EFMP and services provided by School Liaison Officers. Family Support Personnel (Discussed by 12 of 38 participants): Provide information and referral to military families with special needs. Some participants at one installation noted that the EFMP was understaffed. Some participants at one installation noted high turnover of family support personnel. Some participants noted family support personnel did not provide support for their family with special needs. Stigma (Discussed by 12 of 38 participants): A perception that participating in the EFMP may limit a soldier’s assignment opportunities and/or compromise career advancement. Several participants believe there is still stigma associated with participating in the EFMP. Some participants said participating in the EFMP has not affected career advancement. Assignment Coordination (Discussed by 10 of 38 participants): The assignment of military personnel in a manner consistent with the needs of armed forces that considers locations where care and support for family members with special needs are available. Some participants found the assignment coordination process challenging. Some participants described limitations with the assignment coordination process. A few participants noted there is a lack of information among families with special needs regarding how to express the need for stabilization and /or continuity of care. A few participants cited the challenges of assignment coordination as contributing to their decision to retire. One participant commented that the opinion of a medical professional was not reflected in the assignment coordination process. Special Education Services (Discussed by 10 of 38 participants): The provision of staff capable of assisting families with special needs with special education and disability law advice and/or assistance and attendance at individualized education program (IEP) meetings where appropriate. Several participants who had a family support provider assist them with preparing for or attending a school-based meeting, including IEP meetings, spoke positively of their experience(s). Some participants at one installation agreed that assistance from family support providers during meetings with school officials regarding special education services is helpful. A few participants who were unable to get assistance with special education services from the EFMP sought the services of private attorneys at their own expense. Family Support Services (Discussed by 9 of 38 participants): The non-clinical case management delivery of information and referral for families with special needs, including the development and maintenance of a services plan. Some participants found that family support providers were helpful. Some participants could not identify needed resources or were unaware of the resources or services available to them. One participant noted that the family support provider had minimal contact. One participant said navigating the system can be challenging. Surveys (Discussed by 8 of 38 participants): The process of collecting data from a respondent using a structured instrument and survey method to ensure the accurate collection of data. Several participants noted that they had not or rarely had the opportunity to evaluate the family support services provided through the EFMP. One participant noted that comment cards used by each service are not effective for evaluating the EFMP. Warm hand-off (Discussed by 6 of 38 participants): Assistance to identify needed supports or services and facilitating the initial contact or meeting with the next program. Many participants at one installation agreed that the warm hand-off process worked well for them. Several participants said they found the warm hand-off process helpful when moving from one installation to the next. Outreach (Discussed by 5 of 38 participants): Developing partnerships with military and civilian agencies and offices (local, state, and national), improving program awareness, providing information updates to families, and hosting and participating in EFMP family events. Some participants found it difficult to obtain information regarding the types of family support services that are available. A few participants noted that communications regarding the EFMP were not targeted to address their needs. A few participants noted communications regarding the EFMP are untimely, (e.g., newsletters not issued periodically). Joint Base Family Support Services (Discussed by 1 of 38 participants): Family support services provided by the lead Service of the Joint Base that is different from that of the servicemember enrolled in the EFMP. One participant said that using family support services on joint bases may pose a challenge as each Service has different rules and procedures and as a result provides different types of family support services. In addition to the contact named above, Bill MacBlane (Assistant Director), Brian Egger (Analyst-in-Charge), Patricia Donahue, Holly Dye, Robin Marion, James Rebbe, Shelia Thorpe, and Walter Vance made significant contributions to this report. Also contributing to this report were Lucas Alvarez, Bonnie Anderson, Connor Kincaid, Brian Lepore, Daniel Meyer, and Mimi Nguyen.", "summary": "Military families with special medical and educational needs face unique challenges because of their frequent moves. To help assist these families, DOD provides services plans, which document the support a family member requires. The National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to review the Services' EFMPs, including DOD's oversight of these programs. This report examines the extent to which (1) each Service provides family support and (2) the Services monitor and DOD evaluates assignment coordination and family support. GAO analyzed DOD and Service-specific EFMP guidance and documents; analyzed fiscal year 2016 EFMP data (the most recent available); visited seven military installations, selected for their large numbers of military-connected students; and interviewed officials responsible for implementing each Service's EFMP, as well as officials in OSN that administer DOD's EFM policy. The support provided to families with special needs through the Department of Defense's (DOD) Exceptional Family Member Program (EFMP) varies widely for each branch of Military Service. Federal law requires DOD's Office of Special Needs (OSN) to develop a uniform policy that includes requirements for (1) developing and updating a services plan for each family with special needs and (2) resources, such as staffing, to ensure an appropriate number of family support providers. OSN has developed such a policy, but DOD relies on each Service to determine its compliance with the policy. However, Army and Navy officials said they have not received feedback from OSN about the extent to which their Service-specific guidance complies. Federal internal control standards call for developing clear policies to achieve agency goals. In addition, DOD's most recent annual reports to Congress do not indicate the extent to which each Service provides services plans or allocates sufficient resources for family support providers. According to GAO's analysis, the Military Services have developed relatively few services plans, and there is wide variation in the number of family support providers employed, which raises questions about potential gaps in services for families with special needs (see table). Each Service uses various mechanisms to monitor how servicemembers are assigned to installations (assignment coordination) and obtain family support, but DOD has not established common performance measures to assess these activities. DOD has taken steps to better support families with special needs, according to the DOD officials GAO interviewed. For example, DOD established a working group to identify gaps in services. However, OSN officials said that DOD lacks common performance measures for assignment coordination and family support because the Services have not reached consensus on what those measures should be. In addition, OSN does not have a process to systematically evaluate the results of the Services' monitoring activities. Federal internal control standards call for assessing performance over time and evaluating the results of monitoring activities. Without establishing common performance measures and assessing monitoring activities, DOD will be unable to fully determine the effect of its efforts to better support families with special needs and the adequacy of the Services' EFMPs as required by federal law. GAO makes a total of three recommendations to DOD. DOD should assess and report to Congress on the extent to which each Service provides sufficient family support personnel and services plans, develop common performance metrics for assignment coordination and family support, and evaluate the results of the Services' monitoring activities. DOD agreed with these recommendations and plans to develop performance metrics for assignment coordination and develop plans to evaluate the Services' monitoring activities.", "document_type": "gao"}
{"report": "ISO 55000 defines asset management as “the coordinated activity of an organization to realize value from assets.” This approach includes, for example: developing an understanding of how each of an organization’s assets contributes to its success; managing and investing in those assets in such a way as to maximize that success; and fostering a culture of effective decision making through leadership support, policy development, and staff training. While ISO defines an asset as any item, thing, or entity that has potential or actual value to an organization, in this report we focus on real property assets. Asset management can help federal agencies optimize limited funding and make decisions to better target their policy goals and objectives. See fig. 1 for an example of an asset management framework. Asset management as a distinct concept developed in the 1980s, and since that time, organizations around the world have published a number of standards and leading practices. These include: Publicly Available Specification (PAS) 55: The British Standards Institution published this standard in its final form in 2008. This standard focuses on the management of physical assets such as real property and describes leading asset management practices in areas such as life cycle planning, risk management, cost avoidance, and collaborative decision-making. Additionally, the standard provides a checklist for organizations to assess the maturity of their asset management framework. Some public services, utilities, and oil and gas sectors in the United Kingdom and other countries have adopted this standard. The British Standards Institution formally withdrew this standard in 2015 after the publication of ISO 55000, but it remains in use as a reference for many organizations. ISO 55000: This standard, published in 2014, is a series of three documents, collectively referred to as “ISO 55000.” It is based on the earlier PAS 55 standard but with stated applicability to all types of assets as opposed to just the physical assets covered by PAS 55. Committees with members from more than 30 countries identified common asset management practices and developed this international consensus standard that, according to ISO, applies to the broadest possible range of assets, organizations, and cultures. Some public and private sector organizations from around the world including utilities, infrastructure management firms, cities, federal agencies, and others have adopted the standard for their real property assets. See appendix III for a summary of the key elements of the ISO 55000 standards. International Infrastructure Management Manual: Initially published in 2000, this manual became one of the first sets of internationally accepted asset management leading practices. The Institute of Public Works Engineering Australasia published the most recent edition in 2015. The current manual complements the ISO 55000 standards and includes case studies of how organizations in different sectors have approached asset management. It provides detailed information on how to create and implement an effective asset management framework, such as how to incorporate estimates of future demand for services. Various organizations, particularly in sectors that manage physical assets, have adopted the manual as a reference. In the United States, within the federal government’s executive branch, OMB and GSA are responsible for providing leadership in managing federal real property—one of the government’s major assets. OMB is tasked with overseeing how federal agencies devise, implement, manage, and evaluate programs and policies. OMB has provided direction to federal agencies by issuing various government-wide policies, guidance, and memorandums related to asset management. For example: OMB’s 2017 Capital Programming Guide outlines a capital- programming process, including how agencies should effectively and collectively manage a portfolio of capital assets and requirements for agencies strategic asset management plans; OMB’s Circular A-123 directs agencies to conduct enterprise risk management assessments to identify significant risks to agency goals and operations; OMB’s Memorandum 18-21 expands the responsibilities of federal agencies’ senior real property officers in leading and directing the agency’s real property program. GSA’s Office of Government-wide Policy is generally responsible for identifying, evaluating, and promoting best practices to improve the efficiency of real property management processes. This office has provided guidance for federal agencies and published performance measures. In 2004, the President issued Executive Order 13327 directing Chief Financial Officers Act (CFO Act) agencies to designate a senior real property officer responsible for establishing an asset management- planning process and developing a plan to carry out this process. Among other things, this plan was to describe the agency’s process for: identifying and categorizing all real property managed by the agency, prioritizing actions needed to improve the operational and financial management of the agency’s real property inventory, using life-cycle cost estimations for those actions, and identifying asset management goals and measuring progress towards those goals. The order also required agencies to manage their real property assets in a manner that supports the agency’s asset management plan, goals, and strategic objectives. In addition, Executive Order 13327 tasked GSA with providing policy oversight and guidance to inform federal agencies’ real property management efforts and required that OMB review agencies’ efforts in implementing their asset management plans and completing the other requirements specified in the executive order. The executive order also established the Federal Real Property Council (FRPC)—chaired by OMB and composed of senior management officials from CFO agencies—and called for the FRPC to develop guidance, collect best practices, and help federal agencies improve the management of real property assets. In response to this executive order, in 2004 the FRPC developed guidance describing guiding principles that agencies’ asset management practices should align with, requirements for what agencies should include in their asset management plans, and a template for agencies to follow when compiling these plans. Specifically, the guidance stated that each real property asset’s management plan should link the asset management framework to the agency’s strategic goals and objectives, describe a process for periodically evaluating assets, and describe a process for continuously monitoring the agency’s framework. More recent federal asset management initiatives have focused on efficiently managing and reducing federal agencies’ real property holdings. For example, in 2012 OMB directed the 24 CFO Act agencies to maintain their civilian real-estate inventory at or below their then-current levels, a policy known as Freeze the Footprint. In 2015, OMB issued its National Strategy for the Efficient Use of Real Property and its accompanying Reduce the Footprint policy requiring the CFO Act agencies to set annual targets for reducing their portfolio of domestic office and warehouse space. Subsequently, the Federal Assets Sale and Transfer Act of 2016 established the Public Buildings Reform Board to identify opportunities for the federal government to reduce its inventory of civilian real property and reduce its costs. The act also requires the head of each executive agency to provide annually to GSA information describing the nature, use, and extent of the agency’s real property assets. In addition, the Federal Property Management Reform Act of 2016 codified the Federal Real Property Council to, among other things, ensure efficient and effective real-property management while reducing costs to the federal government. The act requires executive branch agencies to annually submit to the Federal Real Property Council a report on all excess and underutilized real property in their inventory. Based on our review of the ISO 55000 standards, asset management literature, and interviews with experts, we identified six key characteristics of an effective asset management framework: (1) establishing formal policies and plans, (2) maximizing an asset portfolio’s value, (3) maintaining leadership support, (4) using quality data, (5) promoting a collaborative organizational culture, and (6) evaluating and improving asset management practices (see fig. 2). See appendix II for a more detailed explanation of how we identified these key characteristics. Each of the six federal agencies we reviewed had a real property asset management framework that included some of these key characteristics. However, agencies varied in how they performed activities in these areas. In addition, the scope and maturity level of the agencies’ asset management frameworks varied. For example, while some agencies’ asset management policies applied to large portions of their portfolios, other agencies’ policies applied to only certain portions of their portfolios. In addition, two agencies—the Corps and Coast Guard—told us they were using the ISO 55000 standards. For example, according to Corps officials, the Corps is in the process of incorporating elements of the ISO 55000 standards into its frameworks. Coast Guard officials told us they were using the ISO 55000 standards as a benchmark to compare against their existing framework. According to OMB and GSA officials, some of the differences in agencies’ asset management frameworks can be attributed to differences such as agency mission needs and the types of assets that each manages. For example, the real property asset portfolios of the six agencies we reviewed differed substantially in the types, numbers, and total replacement values of the assets. See table 1 for more information on the agencies’ asset portfolios and fig. 3 for examples of agency assets and their primary uses. Below we discuss the six key characteristics of an effective asset management framework and how the six selected agencies performed asset management activities in these areas. Formal policies and plans can help agencies utilize their assets to support their missions and strategic objectives. According to literature we reviewed, developing a formal asset management plan can help agencies take a more strategic approach in their asset management decision making and identify key roles and responsibilities, resources required to implement their plans, potential implementation obstacles and strategies for overcoming these obstacles. In addition, several experts we interviewed stated that having an asset management plan that describes the overarching goals of the organization and how the organization’s assets relate to those goals is an important element of an asset management framework. Each of the six agencies we reviewed had some documentation such as asset management plans, investment strategies, or technical orders that lay out how the agency conducts asset management activities. This documentation covered important areas such as collecting data, prioritizing assets, and making investment decisions, along with documentation detailing the roles and responsibilities of key officials, for example: In 2014, the Corps published a Program Management Plan for Civil Works Asset Management that laid out a vision, tenets, and objectives for asset management along with the roles and responsibilities of key officials. Corps officials told us that this document functions as a strategic asset management plan for the Corps’ Civil Works asset portfolio, and the plan contains foundational principles such as how the Corps will assess risk and measure the performance of its framework. Since 2006, the Coast Guard Civil Engineering program has been developing a series of manuals, process guides, and technical orders that provide detailed procedures to support implementation of an overarching asset management model. Coast Guard officials told us this model will cover all of the Coast Guard’s real property assets and reflect the agency’s mission and objectives. In addition, each of the six agencies we reviewed had developed a formal asset management plan in response to Executive Order 13327 from 2004. One agency had a plan that officials said reflected their current practices. Officials from the remaining five agencies told us that the practices contained within their original asset management plans had been superseded by later policy documents. For example: NASA officials told us the agency’s 2008 Real Property Asset Management Plan no longer reflects NASA’s overarching asset management framework. Officials said that NASA instead uses a series of policy documents, procedural requirements, and annual data calls to set out its framework. Park Service officials told us the agency’s 2009 Asset Management Plan is still in place, though some of the practices in that document have been superseded by more recent policy documents including the Capital Investment Strategy. Further, five of the agencies linked their asset management goals and objectives to their agency mission and strategic objectives in their asset management plans. For example, GSA’s 2012 plan states that it supports GSA’s overall mission and goals, as well as the mission of the Public Buildings Service, by organizing real property decision making and supporting the Public Buildings Service’s objectives for owned assets. Prioritizing investments can help agencies better target resources toward assets that will provide the greatest value to the agency in meeting its missions and strategic objectives. Each of the six agencies we reviewed has documentation describing a process for prioritizing asset investments. For example, each agency has documentation describing a scoring process for prioritizing projects based on specific criteria, such as the risks an asset poses to agency operations, asset condition, project cost, and project impact. Some agency officials told us that scoring projects in this manner provides an objective foundation for decision making that can lead to more consistent investment decisions and improved transparency. In addition, each of the six agencies have implemented, or are in the process of implementing, a centralized decision-making process for prioritizing high value projects and delegating approval for lower cost projects to local or regional offices. The agencies vary, however, in the types of projects for which they use centralized decision-making and the degree to which they use the project scores, for example: NASA field centers are authorized to independently prioritize and approve certain projects with total costs under $1 million. For larger projects, however, NASA field centers develop project scores based on a mission dependency index measuring the relative risk an asset poses to NASA’s missions. To prioritize and approve these larger projects, NASA headquarters staff consider projects submitted by centers using the mission dependency scores, asset conditions, and other factors such as flooding risk, and make funding decisions using NASA’s available budget. GSA categorizes each of its assets into tiers based on the asset’s financial performance and capital investment needs. Additionally, since 2017 GSA has been using an Asset Repositioning Tool, which uses more detailed data analysis to rank assets within each tier. GSA uses these designations when prioritizing asset investments. For projects with projected costs below the prospectus level (approximately $3.1 million in fiscal year 2018), GSA regions use each asset’s tier and core designation to allocate funds across the region’s asset portfolio. For larger projects, the GSA Administrator and GSA’s Public Buildings Service Commissioner and Deputy Commissioner are responsible for determining the priority level of projects. The Corps is in the process of implementing a procedure that would base funding decisions for maintenance and repair projects on a portfolio-wide comparison of scores, with the goal of approving the projects that will reduce the greatest amount of risk. This differs from the Corps’ previous system of allocating projects’ funding to local divisions and districts based on historical amounts and staff judgement. To prioritize projects, the Corps calculates a score for each project based on an assessment of the asset’s condition and the risk the asset poses to operations. For example, the Corps measures risk for a lock and dam component such as a gate (see fig. 5) based on the potential economic impact of failure to users (e.g., shipping companies that use the waterway). The Corps has a plan to implement this process by 2020, a plan that Corps officials told us they expect to complete on schedule. Officials from these agencies told us that more centralized decision- making processes can provide improved standardization and clarity in the prioritization process, particularly for high value projects, and can help ensure that mission-critical projects receive funding. As an example, Coast Guard officials cited a project involving a permanent repair to a failed steam heating pipe at the Coast Guard Yard near Baltimore. They said that this failure left several key buildings, including the Coast Guard’s primary ship-painting facility, with intermittent service and an inability to complete certain critical tasks. According to officials, the Coast Guard’s centralized decision-making process scored this project as a high priority because of the importance of the facilities involved, the impact of the failure, and the fragility of the temporary pipe that runs on the surface amongst other equipment (see fig. 4). Leadership buy-in is important for organizational initiatives, and experts told us that management support is vital to implementing an asset management framework. However, officials from two of the six agencies told us that they have received varying levels of leadership support for asset management, for example: Corps officials told us that it can be a challenge to make senior leadership understand the value that improved asset management practices can provide to the agency, value that they said can affect the level of support the program gets. Forest Service officials told us that they have faced challenges obtaining the resources they need to develop their asset management program. In addition, in 2015 the Coast Guard received a report it had commissioned to examine the level of alignment between its asset management framework and the ISO 55000 standards. This report concluded, among other things, that the Coast Guard has faced challenges with strategic leadership related to asset management, including in balancing budgetary support for long-term initiatives—like developing an asset management framework—against short-term infrastructure investment needs and in communicating asset management policies. Using quality information when making decisions about assets can help agencies ensure that they get the most value from their assets. Experts we spoke with cited data elements such as inventory information (e.g., asset age and location); condition information (e.g., how well the asset is performing); replacement value; and level of service (e.g., how the asset helps the agency meet its missions and strategic objectives) as important for maximizing an asset’s value. Each of the six agencies collected inventory and condition data on their assets, and used this data to make decisions about its assets, for example: The Forest Service requires its units, such as national forests and grasslands, to inventory and verify 100 percent of their asset data over a 5-year cycle. It has developed a standardized process for units to collect specific types of data for this inventory, such as condition data and deferred maintenance. According to Forest Service officials, the data tracked in the system informs several investment decisions, such as decisions on decommissioning of assets. GSA developed the Building Assessment Tool Survey to assess the overall condition of its assets and what investments they need. GSA uses the data collected from the survey, conducted every 2 years, to calculate a Facility Condition Index, which is the asset’s current needs divided by its replacement value. The Corps’ 2017 policy for operational condition assessments lays out a methodology for assessing condition based on visible attributes and asset performance, such as the degree to which water is leaking around a lock gate (see fig. 5 for an example of what Corps officials described as a minor water leak). Under this policy, Corps officials assign a letter grade to the performance of each individual component within a Corps’ asset. Corps officials told us that there are key differences between this system and the maintenance management system they used previously. For example, officials said the Corps is now able to more easily compare the condition of its assets across the portfolio, and grade the condition of more types of asset components, a process that Corps officials said gives them a more complete understanding of how their assets are performing. Some agencies told us that they faced challenges related to collecting and maintaining asset data, for example, The Park Service uses data on the condition of its assets to calculate a facility condition index. Park Service officials told us that when they developed their asset management program in the early 2000’s they had to change many of their existing data collection processes and train their staff to manage the new data. NASA field centers are required to assess assets and enter key asset data into NASA’s database, but according to NASA Headquarters officials, they have faced challenges collecting data from some Centers. For example, NASA Centers are required to review and revalidate the mission dependency scores for each of their assets every 3 years, but Headquarters officials told us not all Centers have entered such scores on all assets. Aligning staff activities toward effective asset management and communicating information across traditional agency boundaries can ensure that agencies make effective decisions about their assets. Officials from three of the agencies we reviewed told us that having staff embrace asset management is a key to successful implementation, for example, Park Service officials told us they implemented an organizational change-management process and provided additional training to staff in key asset management areas such as data collection. Finally, they said that they tried to prevent asset management requirements from overwhelming the other tasks staff perform by, for example, considering staff time constraints when developing their data collection processes. Officials told us that they continue to streamline these processes to reduce field staff workload. The Corps’ Program Management Plan includes chapters on communications strategies and organizational change management to promote an asset management culture. While these agency officials told us that obtaining leadership and staff buy-in is important for asset management implementation to be effective, officials from three of our six selected federal agencies cited managing organizational culture changes as an implementation challenge. For example, Corps officials told us that, prior to developing their framework, the different functional areas in the Civil Works Program were each responsible their own assets and were not sharing asset information across areas. As a result, the Corps struggled with getting staff to work together and coordinate on asset management activities. To help mitigate this issue, Corps officials told us they have assigned dedicated asset management staff to each regional district to facilitate communication at the local level between staff in different functional areas, and developed a community of practice to discuss maintenance issues including asset management. Continuously evaluating the performance of an agency’s asset management framework and implementing needed changes can optimize the value the agency’s assets provide. According to literature we reviewed, an asset management plan should be evaluated and continuously improved over time to ensure it still reflects the organization’s goals. Officials from each of the six agencies told us that they collect data to measure the performance of their asset management policies, and two agencies have continuous evaluation processes laid out in their asset management plans. For example: GSA’s asset management plan describes the data GSA uses to track the performance of its framework, including information on operating costs, asset condition, asset utilization, operating income, and energy. The Corps evaluates its program by conducting maturity assessments. According to the Corps’ 2014 Program Management Plan, these assessments measure the maturity level of its asset management program to review and identify gaps in achieving the asset management system’s vision and objectives while efficiently using resources. Corps officials told us they self-assessed their own operations at the low end of the maturity scale, and they are using the results of the assessment to inform revisions to their Program Management Plan. In addition, officials from five of the six agencies told us they are in the process of developing or implementing major changes to their asset management policies, including developing new policies for collecting data, measuring asset criticality, and prioritizing investments, for example: The Coast Guard has been developing its asset management model since 2006 and, as previously mentioned, is in the process of developing manuals, process guides, and technical orders to support this model. NASA officials told us that they are in the midst of developing new policies and guidance for asset management based on a recently completed business process assessment. Officials said that the new process under development would involve more centralized planning and management across NASA instead of the more center-based asset management program they currently use, along with improved data collection practices. Park Service is undertaking a program focused on improving the operation and maintenance of its real property portfolio. Officials told us that there are two major pieces to this effort, one to improve efficiency of their data collection process by streamlining and consolidating systems to reduce the data collection and management burden on staff, and another to expand the Park Service’s investment strategies to reflect the agency's top priorities and strengthen the role of the Developmental Advisory Board to ensure consistent application of investment goals. According to our interviews with asset management experts and practitioners whom we selected, organizations can face challenges implementing an asset management framework. The two challenges most frequently mentioned were managing both organizational culture changes and capacity challenges, such as lack of skills and knowledge of management practices. Almost all the experts and over half of the practitioners we interviewed stated that managing the organizational culture changes that result from implementing a new asset management framework is a challenge. For example, several experts and practitioners stated that an effective framework requires enterprise-wide policies to manage assets and that changing the organizational culture from one in which departments or divisions are used to working independently to one that promotes interdepartmental coordination and information sharing can be challenging. Specifically, one expert representing a U.S. municipality told us that a key implementation challenge it faced was in setting up policies to promote more information sharing across the organization. This expert stated that previously the organization’s data systems were not set up to share information across departments, leading to data silos that hindered coordination across the agency. Similarly, another expert stated that asset management is by nature a multidisciplinary practice, which crosses through many functional silos that are typically present in large organizations. These silos are necessary to allow for the required level of specialization, but if these silos do not communicate, inefficiencies and errors in asset management result. He stated that in these organizations, a key challenge in implementing an asset management framework is getting officials in these different departments to agree upon and transition to a common set of goals and direction for the framework. Several experts and practitioners stated that obtaining the leadership and staff buy-in that is critical for asset management implementation to be effective can be a challenge. For example, one expert representing an organization that had recently implemented a new asset management framework stated that it faced resistance from some of its staff. These employees had been working for the organization for a long time, had not been updating their skills over time and were resistant to having to learn a new process. In addition, it was difficult to convince staff previously invested in the old decision-making process to adjust to a new process. A study examining asset management practices of public agencies in New Zealand found that obtaining buy-in and support from leadership and staff was critical. According to this study, for asset management to be successful, it has to become part of the organization’s culture, and for that to happen, leadership needs to “buy-into” the process, the reason why it is important, and the value of its outputs. Over half of the experts and all of the practitioners we interviewed cited capacity challenges to implementing an effective asset management framework, such as lack of skills, knowledge of management practices, asset data, and resources. Some experts and practitioners stated that implementing an effective framework might require skills and competencies that the organization may not currently have. For example, one expert stated that organizations might not have the in-house expertise needed to implement a risk management approach. Similarly, a practitioner representing an asset management firm that provides consulting services to municipalities noted that lack of in-house expertise could lead to the organization’s over-reliance on consultants; such over- reliance, in turn, can result in the organization’s not following through with the new asset management practices once the consultants finish their work. Several experts and practitioners also stated that some organizations struggle with collecting and managing data needed to conduct asset management. For example, one expert stated that an important first step to implementing an asset management framework is to develop comprehensive records of the organization’s assets. However, according to this expert, it is difficult to actually collect and use good information about assets to deliver robust planning. The age of assets can compound this challenge because with older assets sometimes the original plans and specifications have been lost. Several experts and practitioners also mentioned lack of sufficient resources as an implementation challenge. Specifically, one expert noted that obtaining funding to support asset management activities is a challenge. This expert stated that it is more difficult to secure funding for improving components of an asset management framework, such as improving data collection processes, than it is to secure funding for tangible investments in new assets. As we previously discussed, some of the experts that we interviewed stated that evaluating and continually improving asset management practices is an important characteristic of an effective asset management framework. Experts and practitioners we interviewed identified potential strategies for addressing and overcoming implementation challenges, including strategies for managing culture change and capacity challenges such as lack of skills and resources. See table 2 for the strategies experts and practitioners identified. We have previously reported on practices and implementation steps that can help agencies manage organizational change and transform their cultures to meet current and emerging needs, maximize performance, and ensure accountability. Several of these practices—such as involving employees in the transformation effort, ensuring top leadership drives the transformation effort, and establishing a communication strategy—could address some of the potential change-management challenges that agencies might face when implementing an asset management framework. For example, in our prior work on organizational change we have noted that a successful transformation must involve employees and their representatives from the beginning to increase employees’ understanding and acceptance of organizational goals and objectives, help establish new networks and break down existing organizational silos, and gain their ownership for the changes that are occurring in the organization. Some of the experts we interviewed who had implemented ISO 55000 stated that they involved employees in the transformation effort. For example, one expert representing an organization with recent success in implementing ISO 55000 stated that the managers at person’s organization involved staff in the implementation process, which helped foster ownership of the new asset management program. Asset management experts and practitioners we interviewed cited a number of potential benefits to adopting an asset management framework that aligns with the six characteristics we identified, including: (1) improved data and information about assets, (2) better-informed decisions, and (3) financial benefits. About half of the experts and practitioners we interviewed stated that implementing an asset management framework that aligns with the six characteristics we identified previously and discussed can result in an organization’s collecting more detailed and quality information about assets. For example: One expert representing a U.S. municipality that had recently implemented a new asset management framework stated that it now collects and tracks more detailed asset data, including information about the condition and performance of its assets. According to this expert, this more detailed information provides asset managers with a better understanding of how much asset repairs actually cost in the long term, how long repairs take, and which assets are most critical to repair or replace. Additionally, they are in the process of integrating this data into the organization’s capital-improvement project modeling, a step that in turn has allowed the asset managers to make better investment decisions. This expert also noted that collecting detailed data about the municipality’s assets has enabled the asset managers to provide more information to the public and to decision-makers. Another expert we interviewed representing an organization that had recently adopted a new asset management framework stated that its data have improved as a result. According to this expert, prior to implementing the program, the organization had a good inventory of its assets, but it was missing dynamic information about condition and performance. The managers made several changes to address this situation, including investing in information technology systems and infrastructure to collect and track condition data in real time. As a result, the organization is now able to track trends in asset performance failures and anticipate that over time it will predict future performance failures with this information. Most of the experts and all of the practitioners who responded to this question stated that another benefit of implementing an asset management framework is that it can help organizations make better- informed asset management decisions. For example, some of these experts and practitioners stated that having a framework that includes improving interdepartmental coordination, collecting more detailed data, and having a strategic approach to asset management helps organizations make better-informed decisions about how to maintain and invest in their assets. In addition, about one-half of the experts stated such a framework can also help organizations better understand the risks the organization faces and make informed decisions about the organization’s assets. For example: One expert stated that a benefit to implementing an asset management framework that incorporates interdepartmental coordination is that everyone within the organization is working to achieve the same goals in both the short-term and long-term, which results in better decisions and better customer service. This expert worked with a foreign network operator to implement an asset management system that would support the company’s goals for increasing its electric grid capacity. He found that for different assets, the company had adopted different asset strategies to deal with future demand growth, approaches that resulted in misaligned asset strategies. The differences in the individual asset strategies were identified and realigned. If these differences had not been recognized, this lack of coordination could have resulted in inefficient decision- making and the loss of time and money. Another expert representing a U.S. municipality stated that by implementing an asset management framework, the municipality’s program managers are now able to make better-informed asset management decisions and present information and proposals to the city council and budget committee. In addition, this detailed information has allowed managers to better assess the condition of their assets across the portfolio and to compare it to industry standards in the respective asset classes. Over half of the experts and a third of the practitioners we interviewed stated that effective asset management practices can result in financial benefits to the organization, such as cost avoidance and better management of financial resources. For example, One expert stated that asset management can lead to a greater understanding of budget needs and better long-term capital and lifecycle investment planning. In addition, this expert stated overall that asset management improves clarity in terms of where funds are spent. This enhanced insight can then inform asset management decision-making to produce future cost savings. A practitioner representing a local municipality in Canada stated that since implementing an asset management framework, the municipality is now making better-informed decisions about maintenance and have identified and eliminated unneeded maintenance activities, steps that have resulted in cost savings. For example, by analyzing condition data, the municipality identified an optimal point in time for addressing maintenance issues on its roads and achieved a fivefold-to-tenfold cost reduction over previous repairs. Experts and practitioners we interviewed most often cited the ISO 55000 standards as a useful resource that provided a solid foundation for an asset management framework and could inform federal agencies’ asset management efforts. Specifically, these experts and practitioners stated that the standards are flexible and adaptable to different types of organizations regardless of size or organization mission, applicable to different types of assets, and internationally accepted and credible. About half of the experts we interviewed had used the standards, and some of these experts shared examples of how their organization’s asset management approach improved by implementing ISO 55000. See, for example, the experience of Pacific Gas & Electric below. Pacific Gas and Electric’s (PG&E) experience with International Organization for Standardization (ISO) 55001 standard: In 2014 and 2017, PG&E, a public utility company in California, attained Publicly Available Specification (PAS) 55 and ISO 55001 certification and recertification for its natural gas operations. Its physical assets include gas transmission and distribution pipelines, pressure regulator stations, gas storage facilities, and meters. According to PG&E, a key benefit from implementing the standards is that PG&E has developed a consistent strategy for managing its natural gas operations assets. This, according to PG&E, has enabled the utility to develop a framework for program managers from different parts of the organization, such as finance, operations, engineering and planning, to collaborate more effectively and work together to wards one strategic goal rather than competing with one another for funding. According to PG&E, this new structure allows the program managers to prioritize investment decisions across their asset portfolio to align with corporate objectives. Officials from five of the six agencies we interviewed stated that they were familiar with the ISO 55000 standards, and officials from the Corps stated that they use selected practices from ISO 55000. Corps officials stated that using the standard has provided several benefits to their organization. For example, they stated that using the standard has informed their budget process and has helped them make better-informed decisions about critical reinvestment. In addition, it has allowed them to develop a consistent approach to managing all of their physical assets across different lines of business. However, officials from four agencies raised some concerns about using these standards. These included concerns about upfront costs and resources needed to implement the standards and their applicability to the federal government given the size, scope, and uniqueness of agencies’ assets, and the diverse missions of each agency. For example, officials from one selected agency stated that in their view, the standards are better suited for private organizations because federal agencies have federal requirements they need to meet, such as those for disposition of real property, which may affect their asset management decision making. We have previously reported on challenges federal agencies face with disposing of assets in part due to legal requirements agencies must follow. Several experts and officials from one practitioner organization we interviewed stated that they thought that federal agencies across the government could implement the ISO 55000 standard. The experts stated that key benefits of implementing the standard would be that it would result in a more consistent asset management approach and help federal agencies better manage resources. For example, one expert stated that a key benefit of implementing the standard would be to drive federal agencies to be better stewards of their resources by better utilizing mission assets. In addition, some experts and practitioners also stated that federal agencies do not need to implement the full standard or seek certification to achieve results; agencies can decide which practices in the standard are most relevant to their organization and implement those practices. The ISO technical committee that produced the ISO 55000 standards is drafting a new standard on asset management in the public sector. According to ISO, this standard, expected to be published in December 2019, will provide guidance to any public entity at the federal, state, or local level including more detailed information on how to implement an asset management framework. While OMB has issued government-wide requirements and guidance to federal agencies related to asset management, this guidance does not present a comprehensive approach to asset management because it does not fully align with standards and key characteristics, nor does it provide a clearinghouse of information on best practices for federal real property management to agencies as required by Executive Order 13327. As mentioned earlier, OMB has issued various government-wide policies, guidance, and memorandums related to federal asset management. For example, in response to Executive Order 13327 in 2004, the FRPC— chaired by OMB—developed guiding principles for agencies’ asset management practices and for developing a real property asset management plan. Specifically, the guidance stated that each real property asset management plan should, among other things: link the agency’s asset management framework to the agency’s strategic goals and objectives, describe a process for periodically evaluating assets, and describe a process for continuously monitoring the agency’s framework. In addition, OMB’s Circular A-11 describes requirements for the agency capital planning process, such as prioritizing assets to support agency priorities and objectives, while OMB’s Circular A-123 describes risk management requirements for agencies, and OMB’s Memorandum 18-21 describes requirements for an agency’s senior real property officers, such as coordinating real property planning and budget formulation. Further, the Federal Assets Sale and Transfer Act and the Federal Property Management Reform Act—both of 2016—collectively contain provisions related to asset management including establishing procedures for agencies to follow when disposing of real property assets and requiring agencies to submit data on leases to the FRPC. Taken as a whole, the OMB guidance lacks many of the elements called for by the ISO 55000 standards and the key characteristics we identified. For example, the guidance: covers several different areas of asset management but does not direct agencies to develop a comprehensive approach to asset management that incorporates strategic planning, capital planning, and operations, as recommended by the ISO 55000 standards and the key characteristics we identified. directs agencies to continuously monitor their asset management frameworks and identify performance measures but does not direct agencies to use the results to improve their asset management frameworks in areas such as overall governance, decision making, and data collection, as called for in ISO 55000 standards and the key characteristics we identified. directs agencies to have a senior official in charge of coordinating the real property management activities of the various parts of the organization but does not direct agencies to demonstrate leadership commitment to asset management or to define asset management roles and responsibilities for each element of the agency, as called for in ISO 55000 standards and the key characteristics we identified. directs agencies to ensure that their real property management practices enhance their decision making, but does not direct agencies to actively promote a culture of information sharing or ensure that the agencies’ decisions are made on an enterprise-wide basis, as called for in ISO 55000 standards and the key characteristics we identified. directs agencies to identify asset management goals and enhance decision making, but does not direct agencies to establish the scope of their asset management frameworks by, for example, determining how the agency should group or organize the management of its different types of assets, as called for in ISO 55000 standards. Moreover, OMB staff told us that while the executive order’s requirements for federal agencies to develop an asset management plan and related processes remain in effect, OMB’s real property management focus has shifted to the National Strategy for the Efficient Use of Real Property and its accompanying Reduce the Footprint initiatives issued in 2015. These initiatives emphasize efficiently managing and using space, rather than overall asset management. OMB staff said that they view asset management as a tactical activity, separate from broader strategic and capital planning efforts, where agencies make operational-level policies to support their real property portfolio. However, this approach to asset management differs from ISO’s definition of asset management, which encompasses both the capital-planning and asset management levels of OMB’s policy model. Under the Reduce the Footprint initiative, federal agencies are required to submit annual Real Property Efficiency plans that specify their overall strategic and tactical approach to managing real property, provide a rationale for and justify their optimum portfolio, and direct the identification and execution of real property disposals, efficiency improvements, and cost-savings measures. As a result, according to OMB staff, they no longer require agencies to develop a comprehensive asset management plan. We recognize that reducing, and more efficiently managing government- owned and leased space are important goals. However, effective asset management is a more comprehensive objective that seeks to best leverage assets to meet agencies missions and strategic objectives. For example, some agencies have high-value real property assets that are not building space, such as those at the Corps and the Park Service. See table 2 for examples of these types of assets at the six selected agencies in our review. For example, the Corps has over 700 dams—the age and criticality of which require the Corps to conduct regular maintenance and, in some cases, major repairs to assure continued safe operation. In 2015, the Corps estimated the cost of fixing all of its dams that need repair at $24 billion. Similarly, in 2016, we reported that the Park Service’s deferred maintenance for its assets averaged about $11.3 billion from fiscal year 2009 through fiscal year 2015 and that in each of those years, deferred maintenance for paved roads made up the largest share of the agency’s deferred maintenance—about 44 percent. Assets classified as paved roads in the Park Service’s database include bridges, tunnels, paved parking areas, and paved roadways. For these and other agencies with similar portfolios, the agencies’ Real Property Efficiency plans are not relevant to managing the bulk of their assets, and the guidance primarily focused on buildings and office space is of limited use. In addition, without specific information to help all federal agencies evaluate their current practices and develop more comprehensive asset management approaches, federal agencies may not have the knowledge needed to maximize the value of their limited resources. In addition, while Executive Order 13327 requires the FRPC to provide a clearinghouse of information on best practices for federal real property management, this information is currently lacking from existing guidance or other available sources. GSA officials and OMB staff stated they do not currently have plans to compile this information. Because of this, existing guidance falls short of what an effective asset management framework might include. GSA officials told us that while certain agencies have shared information on asset management at meetings of the FRPC, the council does not take minutes or make this information readily available to agencies outside of the meetings. Given OMB’s shift in focus, OMB staff said that they did not plan to update their guidance. However, Standards for Internal Control in the Federal Government state that communicating information, such as leading practices, is vital for agencies to achieve their objectives. Further, government-wide information in some cases is not available, such as information on practices federal agencies have successfully used to conduct asset management. There is merit to having key information on successful agency practices readily accessible for federal agencies to use. For example, officials from three of the six agencies we spoke with said information on best practices for asset management would be helpful to them in developing their agencies asset management frameworks. Such information could include practices that are described in ISO 55000 and that federal agencies have successfully used to improve asset management. For example, one agency official stated that it would be useful to have a compilation of asset management practices that federal agencies use to determine if any of those practices might be applicable to an agency. Similarly, an official from another agency stated that the agency is currently evaluating opportunities to improve its asset management program and that the agency would be interested in learning more about asset management processes across the federal government in order to inform the agency’s asset management efforts. Without information such as these officials described, federal agencies lack access to practices geared to them on how to develop an asset management plan and other asset management practices. Federal agencies collectively hold billions of dollars in real property assets—ranging from buildings, warehouses, and roads to structures including beacons, locks, and dams—and are charged with managing these assets. The effective management of all of an agency’s real property assets plays an important role in its ability to execute its mission now and into the future. However, because existing federal asset management guidance does not fully reflect standards and the key characteristics, such as, directing agencies to develop a comprehensive approach to asset management that incorporates strategic planning, capital planning, and operations, federal agencies may not have the knowledge needed to maximize the value of their limited resources. In addition, because there is no central clearinghouse of information to support agencies’ asset management efforts, as required by Executive Order 13327, agencies may not know how best to implement asset management activities, including using quality data to inform decisions and prioritize investments. A reliable central source of information on current effective asset management practices could support agencies in making progress in their asset management efforts, helping them more efficiently fulfill their missions and avoid unnecessarily expending resources. Further, sharing experiences across the government could assist agencies’ efforts to adopt, assess, and tailor an asset management approach appropriate to their needs and to support efforts to more strategically manage their real property portfolios. We are making the following recommendation to OMB: The Director of OMB should take steps to improve existing information on federal asset management to reflect leading practices such as those described in ISO 55000 and the key characteristics we identified and make it readily available to federal agencies. These steps could include updating asset management guidance and developing a clearinghouse of information on asset management practices and successful agency experiences. (Recommendation 1) We provided a draft of this report for review to the Office of Management and Budget, the General Services Administration, the National Aeronautics and Space Administration, and the Departments of Agriculture, Defense, Homeland Security, and the Interior. The Forest Service within the Department of Agriculture agreed with our findings and noted that GAO's key characteristics for effective asset management will help the Forest Service manage their assets and resources effectively. Further, the Forest Service stated that asset management leading practices are critical in measuring efficiencies and meeting strategic goals for its diverse and large portfolio. The Forest Service’s written comments are reproduced in appendix IV. The Departments of Homeland Security and the Interior, and the General Services Administration provided technical comments, which we incorporated as appropriate. The Office of Management and Budget, the Department of Defense, and the National Aeronautics and Space Administration had no comments on the draft report. We are sending copies of this report to the appropriate congressional committees, the Secretaries of the Departments of Agriculture, Defense, Homeland Security, and the Interior; the Administrators of the General Services Administration and National Aeronautics and Space Administration; and the Director of the Office of Management and Budget. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. As of 2016, public entities in Canada owned about $800 billion worth of infrastructure assets including roads, bridges, buildings, waste and storm water facilities, and public transportation assets. Municipalities owned the majority of these assets, around 60 percent, with provincial and federal entities owning around 38 percent and 2 percent respectively. The federal government of Canada owns or leases approximately 20,000 properties containing about 37,000 buildings with about 300 million square feet of floor space. In the fiscal year that ended in 2016, the federal government spent around $7.5 billion on managing its real property portfolio, of which about 80 percent went to operating expenditures and about 20 percent went to capital investments such as acquisitions and renovations. This portfolio is managed and controlled by 64 federal agencies, departments, and “Crown corporations” with primary uses including post offices, military facilities, government offices, employee housing, and navigation facilities such as lights. The Treasury Board of Canada, supported by the Treasury Board Secretariat, provides policy direction to agencies and departments for their real property assets along with approving certain larger projects, acquisitions, and disposals. The Treasury Board of Canada Secretariat is currently conducting a portfolio-wide review of the federal government’s real property management in order to develop a road map for the most efficient and effective model for federal real property asset management. Treasury Board Secretariat officials told us that they have preliminarily found that the federal government does not have a government-wide asset management strategy and faces challenges related to the availability of current and consistent asset condition data. Municipalities own and manage most of Canada’s public infrastructure, and in recent years, municipal governments have been leaders in developing and implementing asset management frameworks. By the early 2000’s several large cities including Hamilton, Calgary, and Edmonton began developing frameworks to reduce costs and improve the management of certain types of municipal assets such as those related to water distribution and treatment. More recently, the federal government and several provincial governments have promoted asset management for municipalities in a variety of ways including by awarding grants and attaching requirements to infrastructure funding. Some of these programs have focused on small municipalities that make up the large majority of the total but may face particular challenges in obtaining the resources to develop and implement an asset management framework. The federal government provides infrastructure funding to municipalities through several programs, including the Federal Gas Tax Fund. This fund provides around $1.5 billion in funding to municipalities each year for projects such as water treatment, roads and bridges, broadband connectivity, airports, and public transit, and does not require yearly reauthorization. Each of Canada’s municipalities receives funding through this program by formula, and funds are routed through the provinces, which can attach their own requirements. In the 2014 set of agreements between the federal government and the provinces, provinces were required to institute asset management requirements for municipalities to receive gas tax funds, and each of the provinces developed separate requirements for municipalities under its jurisdiction. These requirements took several forms. For example, Ontario required each municipality to develop an asset management plan by the end of 2016 while Nova Scotia has withheld a small portion of its total provincial gas tax allocation to use toward developing a province-wide asset management framework for municipalities to use. The federal government also provides funding to municipalities for asset management. Through the Municipal Asset Management Program, administered by the Federation of Canadian Municipalities (FCM), Infrastructure Canada made available $38 million over 5 years for Canadian municipalities and partnering not-for-profit organizations to improve municipal asset management practices. The maximum grant amount for municipalities is $38,000. Eligible activities under this program include assessing asset condition, collecting data on asset costs, implementing asset management policies, training staff, and purchasing software. FCM officials told us that, as of March 2018, they had received 253 grant applications and that, of the grants they had disbursed so far, around: 25 percent of grantees used the funds for data projects, 15 percent to develop asset management plans, 2 percent for staff training, 4 percent for asset management system operations, and 60 percent for some combination of these purposes. Canadian provinces have also taken several actions to improve asset management practices at the municipal level by establishing requirements for municipalities in their jurisdiction or by providing funding programs. For example, in 2017, Ontario issued an asset management planning regulation, which requires municipalities to develop a strategic asset management policy by July 1, 2019, and then develop progressively more detailed asset management planning documents in later years. In addition to this regulation, in 2014, Ontario also introduced a funding program for small and rural municipalities to provide long-term, formula and application-based funding for these municipalities to develop and repair their infrastructure. Under the program, municipalities are required to have an asset management plan as a condition of receiving funding. In addition, municipalities can use formula-based program funds for certain asset management activities including purchasing software, staff training, or direct staff activity related to asset management. In 2016, Ontario announced plans to increase the funding available per year from about $75 million to about $150 million in 2019. Much of the federal government’s real property is managed by a federal department known as Public Services and Procurement Canada (PSPC) whose nationwide portfolio includes around 350 owned buildings and an additional 1,200 building leases. PSPC uses a portfolio-wide asset management framework, which begins with developing national portfolio strategies and plans every 5 years. Staff in each of PSPC’s five regional offices then use these plans to develop regional and community-based portfolio strategies and plans, which then inform annual management plans for each PSPC asset. To determine how to best allocate funds across its portfolio of assets, PSPC places each of its assets into one of four tiers based on three major criteria: (1) the asset’s strategic importance to PSPC’s portfolio as measured by criteria such as the asset’s location and design, (2) the asset’s operating and functional performance such as cost per unit area, and (3) the asset’s condition based on a metric called the Liability Condition Index, which measures the risk an asset poses to continuing operations and occupant safety. Using this method, PSPC designates its highest tier assets as those that have excellent financial performance, that have non-financial attributes that support PSPC’s objectives, and that are not expected to need major capital investments in the next 5 years. The lowest tier assets have poor performance and are in need of either major investments or disposal in the next 5 to 10 years. PSPC officials told us that they are in the midst of making major changes to their asset management framework, including by moving to a component-based system of accounting where they will treat each asset as 12 components, including 11 for the building such as roofs or heating and air conditioning systems, and 1 for tenant equipment. Additionally, PSPC plans to move to more modern enterprise systems to eliminate paper records and improve the quality of the data they use to make budgeting decisions. Officials said that they consider the ISO 55000 requirements when evaluating their asset management framework, but they also use other best practices from the private sector that they said better suit their needs by providing more detailed information on how to develop and implement the various elements of an asset management framework. Over the past 20 years, several Canadian municipalities have developed detailed asset management frameworks to improve management efficiency and cost-effectiveness as well as to obtain improved levels of service from municipal infrastructure. In the late 1990’s, the City of Hamilton, Ontario, began developing an asset management framework for its core municipal infrastructure assets, and in 2001, the city established an office dedicated to asset management within its public works department, which produced its most recent municipal asset management plan for public works in 2014. This plan sets a strategic vision and goals for the asset management program, which are designed to align with the city’s overall strategic plan, capital and operating budgets, master plan, and other business documents, and describes how the city’s asset management activities will support the objectives laid out in those documents. Additionally, the asset management plan provides an overview of the current state of Hamilton’s infrastructure assets in four categories: drinking water supply, wastewater management, storm water management, and roads and bridges. The plan states the total value of the assets in each category and, the condition of those assets and has an indicator of the recent trends in the condition of those assets. The plan also defines the levels of service Hamilton aims to provide in each of the four main asset categories and sets goals for each category such as safety, reliability, regulatory compliance, and customer service. Next, the plan defines an asset management strategy for the city, which includes taking an inventory of assets, measuring asset condition, assessing risk, measuring the performance of the asset management framework, making coordinated citywide decisions, and planning for capital investments. Finally, the document contains a plan for managing each of the four main asset categories over their entire life cycles. Hamilton officials stressed the importance of collecting and using quality data when deciding where and when to allocate resources. They told us that the data they have collected under their asset management framework have allowed them to make better-informed investment decisions, and have provided them with the information necessary to make business cases for investment and to better defend their decisions when they solicit funding from the City Council. For example, officials described how the city assesses the condition of its road network and uses the results to prioritize investment in its assets. To assess the condition of each road, the city uses a 100-point scale where, for example, above 60 indicates the road is only in need of preventative maintenance and 20 or less indicates the road is in need of total reconstruction. Officials said that a total reconstruction could cost ten times as much as a minor rehabilitation and that the window of time between when a road needs only a minor rehabilitation and a full reconstruction is only around 10 years. Because of this, Hamilton officials said that it is important to conduct rehabilitation on roads and other infrastructure assets before they deteriorate to the point where they either fail or are in need of a full rehabilitation. For example, Hamilton undertook a major re-lining project for a storm sewer that was in danger of complete collapse, as shown in fig. 6. Officials told us this project would preserve storm sewer service at significantly lower cost than waiting for the structure to fail or completely rebuilding it, either of which would have been cost prohibitive. Additionally, Hamilton officials noted that they do not need all of their assets to be at a 100 rating and that their asset management framework directs them to allow some assets to deteriorate to a certain extent while rehabilitating others by making investment decisions on a system-wide service basis, as opposed to an individual project basis. The City of Calgary, Alberta, began developing its asset management framework in the early 2000’s, first focusing on the Calgary’s municipal water-management assets because they are expensive to maintain and are only funded from water utility customer bills, as opposed to tax revenue. City officials told us that the primary impetus for initially exploring asset management was to be able to maintain levels of service as the city rapidly expanded in both population and physical size; this expansion forced Calgary to make major investments in the water system. Since that time, Calgary has expanded its asset management framework to include nearly all of its assets, including its software, bridges, public recreation facilities, and even its trees. Between 2008 and 2010, the Calgary took steps to align its asset management to its business processes, steps that culminated with the development of the city’s first citywide asset management policy in 2010. Calgary officials told us that between 2004 and 2008 they worked to align their initial asset management framework with the British Standards Institution Publicly Available Specification 55 (PAS 55). After this experience, officials from Calgary participated in the development of the ISO 55000 standards and provided the Standards Committee information about tactics for asset management such as policy development and business strategy. When the ISO 55000 standards were officially published in 2014, the city began working on aligning their asset management framework with the new standards, a process that led to a new framework including a strategic asset management plan, which city officials published in 2016. Calgary officials said that aligning their asset management framework with the ISO 55000 standards has given them support from the city’s top management and has improved their relationship with the various bodies that audit the city’s operations because it gives them a common language to use when describing management processes. Calgary officials told us that the ISO 55000 standards are credible internationally recognized best practices and that in practice they are a good guide for developing an asset management framework. However, Calgary is not planning on certifying its operations to the ISO 55000 standard because officials told us that they are not required to be certified; certification is expensive and needs to be repeated; and they are unsure of what additional value certification to the standards would provide. The City of Ottawa, Ontario, began developing its asset management framework in 2001. Since that time, the city’s asset management framework has gone through several versions, the most recent of which it developed beginning in 2012 based on PAS 55. Ottawa officials told us that implementing their asset management framework has allowed them to collect better information about their assets and improve their long-term financial-infrastructure-planning process. While Ottawa officials developed and implemented an asset management framework, they have a number of ongoing initiatives to further develop some areas of the framework. For example, officials said that they consider determining the levels of service to be provided by each asset class the most difficult aspect of asset management, especially for those assets that do not necessarily provide a measureable service. Ottawa officials are working on ways to better measure the services each of their assets provides and the levels of risk that each asset poses to these service levels. Officials said that accurately measuring service and risk levels is critical for their financial planning and will allow them to improve how they prioritize funding and ensure that funds are spent on priority assets. See fig. 7 for an example of an asset officials said was intended to improve levels of service for Ottawa’s pedestrian multi-use pathways. Another ongoing initiative is an updated report card for the condition of the city’s assets, which officials said they use to transparently communicate to stakeholders the current state of their infrastructure. This report discusses: (1) key characteristics of an effective asset management framework, and how selected federal agencies’ frameworks reflect these characteristics; (2) views of selected asset management experts and practitioners on challenges and benefits to implementing an asset management framework; and (3) whether government-wide asset management guidance and information reflect standards and key characteristics of an effective asset management framework. To obtain information for all three objectives, we reviewed relevant literature, including academic and industry literature on asset management, publications describing asset management leading practices, and the ISO 55000 and related standards. We selected the ISO 55000 standards because they are international consensus standards on asset management practices. We also reviewed laws governing federal real-property asset management, Office of Management and Budget’s (OMB) guidance and prior GAO reports describing agencies’ real-property management and efforts to more efficiently manage their real property portfolios. In addition, to address all three objectives, we collected information from and interviewed a judgmental sample of 22 experts to obtain their perspectives on various asset management issues. To identify possible experts to interview, we first worked to identify relevant literature published in the topic area. Specifically we searched in October 2017 for scholarly and industry trade articles and other publications that examined effective asset management practices. We limited our search to studies and articles published from January 2014 through January 2017. From this search, we screened and identified studies and articles for relevance to our report and selected those that discussed asset management practices and the ISO 55000 standards. In addition, we conducted preliminary interviews with selected asset management practitioners, who included representatives from public and private organizations knowledgeable about asset management practices, to learn about key asset management issues and obtain recommendations about experts in this field. Through these methods, we identified a total of 82 possible candidates to interview. To ensure a diversity of perspectives, we used the following criteria to assess and select a sample from this group: type and depth of an expert’s experience, affiliations with asset management trade associations, experience with government asset management practices, relevance of published work to our topic, and recommendations from other entities. We selected a total of 22 experts representing academia, private industries, foreign private and public entities, and entities that have implemented ISO 55000. See table 3 for a list of experts whom we interviewed. Their views on asset management practices are not generalizable to those of all experts; however, we were able to secure the participation of a diverse, highly qualified group of experts and believe their views provide a balanced and informed perspective on the topics discussed. We interviewed the selected 22 experts between January 2018 and February 2018 and used a semi-structured interview format with open- ended questions for those interviews. We identified the topics that each of the experts would be able to respond to, based on the individual’s area of expertise and each responded to questions in the semi-structured interview guide in the areas in which they had specific knowledge. During these interviews, we asked for experts’ views on key characteristics of an effective asset management system, opportunities for improving federal agencies’ asset management approaches, experiences with using ISO 55000, and their views on the applicability of ISO 55000 to the federal government. After conducting these semi-structured interviews, we conducted a content analysis of the interview data. To conduct this analysis, we organized the responses by interview question, and then one GAO analyst reviewed all of the interview responses to questions and identified recurring themes. Using the identified themes, the analyst then developed categories for coding the interview responses and independently coded the responses for each question. To ensure the accuracy of our content analysis, a second GAO analyst reviewed the first analyst’s coding of the interview responses, and then the two analysts reconciled any discrepancies. To identify key characteristics of an effective asset management framework and how selected federal agencies’ frameworks reflect these characteristics, we obtained and analyzed the ISO 55000 standards, which include leading practices, and asset management literature, and we analyzed information collected from our interviews with experts. We synthesized information from these sources to identify six commonly mentioned characteristics. We then selected six bureau-level and independent agencies as case studies and compared these agencies’ asset management frameworks to the six key characteristics that we identified. Because the agencies are not required to follow the key characteristics we identified, we did not evaluate the extent to which agencies’ efforts met these characteristics. Instead, we provide this information as illustrative examples of how the agencies’ asset management practices reflect these characteristics. We used a variety of criteria to select these agencies, such as: whether the agency was among the agencies that had the largest real property portfolio; replacement value and total square footage of the portfolio; extent to which the bureau or independent agency had a notable asset management program as described by recommendations from practitioners we interviewed; and whether the agency was implementing the ISO 55000 standards. In order to ensure that we had a diversity of experiences and expertise from across the federal government, we limited our selection to independent agencies and one bureau-level entity from each cabinet department. Based on these factors, we selected: (1) U.S. Coast Guard (Coast Guard); (2) U.S. Army Corps of Engineers (Corps); (3) General Service Administration (GSA); (4) National Aeronautics and Space Administration (NASA); (5) National Parks Service (Park Service); and (6) United States Forest Service (Forest Service). While our case-study agencies are not generalizable to all Chief Financial Officers Act (CFO) agencies, they provide a range of examples of agencies’ experiences with implementing asset management practices. We reviewed documents and interviewed officials from each of the six selected agencies to learn about the agency’s practices, its experiences with the ISO 55000 standards, and challenges it has faced in conducting asset management. In addition, we analyzed fiscal year 2017 Federal Real Property Profile (FRPP) data, as managed by GSA, to obtain information about each agency’s portfolio, such as the number of real property assets and total asset-replacement value, and to obtain examples of the types of buildings and structures owned by the six selected agencies. The Corps and Coast Guard noted small differences between our analysis of the FRPP data and the data from their reporting systems. For example, the Corps reported having 139,744 real property assets as of August 2018 with an estimated asset replacement value $273.4 billion as of September 2017. In addition, the Coast Guard reported 44,226 real property assets with an estimated asset replacement value of $17.6 billion as of September 2017. To ensure consistency, and because these differences were small, we relied on FRPP data rather than data from these agencies’ reporting systems. We conducted a data reliability assessment of the FRPP data by reviewing documentation, interviewing GSA officials, and verifying data with officials from our selected agencies, and concluded the data were reliable for the purposes of our reporting objectives. We also visited four locations from our case study agencies to discuss and view examples of how our selected case-study agencies are conducting asset management. Specifically, we visited the Park Service’s Santa Monica, CA, Mountains National Recreation Area; the Coast Guard’s Baltimore Shipyard in Curtis Bay, MD; the Corps’ Washington Aqueduct in Washington, D.C.; and the Brandon Road Lock and Dam in Joliet, IL. We selected these locations based on several factors including geographic and agency diversity, costs to travel to location, recommendations from officials at our case study agencies, and extent to which the location provided illustrative examples of how federal agencies are managing their assets. To determine the 32 experts’ and practitioners’ views on challenges and benefits to implementing an asset management framework, we analyzed information collected from our interviews with the 22 experts previously mentioned. We also reviewed documents from and interviewed asset management practitioners from 10 additional organizations familiar with asset management practices and the ISO 55000 standards. The 10 organizations included representatives from private industry, one federal agency and local municipalities in Canada. We selected these additional 10 organizations by reviewing published materials related to asset management and referrals from our preliminary interviews. We interviewed the 32 experts and practitioners about their views on challenges and benefits to conducting asset management, ISO 55000, and illustrative examples of practices in other countries. The information gathered from our interviews with experts and practitioners is not generalizable but is useful in illustrating a range of views on asset management issues. See table 4 for a list of organizations we interviewed. To assess whether government-wide guidance and information on asset management reflect standards and key characteristics of an effective asset management framework, we reviewed current federal guidance and evaluated the extent to which this guidance incorporates practices described in the ISO 55000 standards and the six key characteristics of an effective asset management framework that we identified. Specifically, we reviewed the Federal Real Property Council’s (FRPC’s) 2004 Guidance for Improved Asset Management, OMB’s, National Strategy for the Efficient Use of Real Property 2015-2020: Reducing the Federal Portfolio through Improved Space Utilization, Consolidation, and Disposal and OMB’s Implementation of OMB Memorandum M-12-12 Section 3: Reduce the Footprint, Management Procedures Memorandum No. 2015- 01. We also reviewed other OMB guidance, such as OMB’s 2017 Capital Programming Guide, OMB’s Circular A-123, OMB’s Memorandum 18- 21 and other guidance. In addition, we reviewed asset management requirements in the Federal Real Property Management Act of 2016 and in the Federal Assets Sale Transfer Act of 2016. We interviewed OMB and GSA officials about their role in supporting federal agencies’ asset management efforts. In addition, we obtained information from our interviews with the 32 asset management experts and practitioners about practices that could be applicable to the federal government and opportunities to improve federal agencies’ asset management approaches. Lastly, we obtained documents and, as previously discussed, interviewed representatives from private organizations, federal agencies, and local municipalities in Canada—a country with over 20 years of experience in conducting asset management—to learn about their asset management practices, including their use of the ISO 55000 standard. We also conducted a site visit to Canada to learn more about their practices and to view examples of assets in local municipalities. See appendix I for more information on Canada’s asset management practices. We conducted this performance audit from August 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Amelia Shachoy, Assistant Director; Maria Mercado, Analyst-in-Charge; Sarah Arnett; Melissa Bodeau; Leia Dickerson; Alex Fedell; Geoffrey Hamilton; Terence Lam; Malika Rice; Kelly Rubin; and Tasha Straszewski made key contributions to this report.", "summary": "The federal government is the largest real property owner in the United States and spends billions of dollars to operate and maintain these assets, which include buildings, roads, bridges, and utility systems. Federal agencies are responsible for developing asset management policies, processes, and plans. In 2014, the ISO 55000 asset management standards were issued. GAO was asked to examine federal agencies' real property asset management practices and the applicability of ISO 55000. This report discusses: (1) key characteristics of an effective asset management framework and how selected federal agencies' frameworks reflect these characteristics, and (2) whether government-wide asset management guidance and information reflect standards and key characteristics of an effective asset management framework, among other objectives. To conduct this work, GAO reviewed the ISO 55000 standards, relevant studies and literature, and interviewed 22 experts and 10 practitioners. GAO selected six federal agencies as case studies, including agencies with the largest real property portfolio and some agencies that were using the ISO 55000 standards. GAO reviewed documentation and interviewed officials from these six agencies, GSA, and OMB. GAO identified six key characteristics of an effective asset management framework (see table 1) that can help federal agencies manage their assets and resources effectively. GAO identified these key characteristics through reviews of the International Organization for Standardization (ISO) 55000 standards—an international consensus standard on asset management—studies and articles on asset management practices, and interviews with experts. GAO reviewed the asset management practices of six federal agencies: the U.S. Coast Guard (Coast Guard); U.S. Army Corps of Engineers (Corps); General Services Administration (GSA); National Park Service (Park Service); National Aeronautics and Space Administration (NASA); and U.S. Forest Service (Forest Service). Each of the six federal-agency frameworks GAO reviewed included some of the key characteristics. Source: GAO analysis of ISO 55000 standards, asset management literature, and comments from experts. | GAO-19-57 While the Office of Management and Budget (OMB) has issued guidance to inform federal agencies' real property management efforts, the existing guidance does not reflect an effective asset management framework because it does not fully align with ISO 55000 standards and the key characteristics. For example, this guidance does not direct agencies to develop a comprehensive approach to asset management that incorporates strategic planning, capital planning, and operations, or maintaining leadership support, promoting a collaborative organizational culture, or evaluating and improving asset management practices. In addition, the guidance does not reflect information on successful agency asset management practices, information that officials from three of the six agencies GAO spoke with said would be helpful to them. OMB staff said that they did not plan to update existing government-wide guidance because OMB's real property management focus has shifted to the Reduce the Footprint initiative, which emphasizes efficiently managing and using buildings and warehouse space, rather than all assets. Without a more comprehensive approach, as described above, federal agencies may not have the knowledge needed to maximize the value of their limited resources. OMB should take steps to improve information on asset management to reflect leading practices. OMB had no comments on this recommendation.", "document_type": "gao"}
{"report": "Chemical attacks have emerged as a prominent homeland security risk because of recent attacks abroad using chemical agents and the interest of ISIS in conducting and inspiring chemical attacks against the West. DHS’s OHA officials have stated that nationwide preparedness for a chemical attack is critical to prevent, protect against, mitigate, respond to, and recover from such an attack because it could occur abruptly, with many victims falling ill quickly, and with a window of opportunity of a few hours to respond effectively. Also, recent incidents in Malaysia and the United Kingdom demonstrate that chemical agents can be used to target individuals and can contaminate other individuals near the attack area. Chemicals that have been used in attacks include chlorine, sarin, and ricin, all of which can have deadly or debilitating consequences for individuals exposed to them; see figure 1. Various laws guide DHS’s efforts to defend the nation from chemical threats and attacks. For example, under the Homeland Security Act of 2002, as amended, the Secretary of Homeland Security, through the Under Secretary for Science and Technology, has various responsibilities, to include conducting national research and developing, testing, evaluating, and procuring technology and systems for preventing the importation of chemical and other weapons and material; and detecting, preventing, protecting against, and responding to terrorist attacks. Under former Section 550 of the DHS Appropriations Act, 2007, DHS established the CFATS program to, among other things, identify chemical facilities and assess the security risk posed by each, categorize the facilities into risk-based tiers, and inspect the high-risk facilities to ensure compliance with regulatory requirements. DHS’s responsibilities with regard to chemical defense are also guided by various presidential directives promulgated following the September 11, 2001, terror attacks against the United States; see table 1. In 2010, Public Law 111-139 included a provision for us to identify and report annually on programs, agencies, offices, and initiatives—either within departments or government-wide—with duplicative goals and activities. In our annual reports to Congress from 2011 through 2018 in fulfillment of this provision, we described areas in which we found evidence of duplication, overlap, and fragmentation among federal programs, including those managed by DHS. To supplement these reports, we developed a guide to identify options to reduce or better manage the negative effects of duplication, overlap, and fragmentation, and evaluate the potential trade-offs and unintended consequences of these options. In this report, we use the following definitions: Duplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries. Overlap occurs when multiple programs have similar goals, engage in similar activities or strategies to achieve those goals, or target similar beneficiaries. Overlap may result from statutory or other limitations beyond the agency’s control. Fragmentation occurs when more than one agency (or more than one organization within an agency) is involved in the same broad area of national interest and opportunities exist to improve service delivery. DHS manages several programs and activities designed to prevent and protect against domestic chemical attacks. Prior to December 2017, for example, three DHS components—OHA, S&T, and NPPD—had specific programs and activities focused on chemical defense. In December 2017, DHS created the CWMD Office, which, as discussed later in this report, consolidated the majority of OHA and some other DHS programs and activities intended to counter weapons of mass destruction such as chemical weapons. Other DHS components—such as CBP, the Coast Guard, and TSA—have chemical defense programs and activities as part of their broader missions. These components address potential chemical attacks as part of an all-hazards approach to address a wide range of threats and hazards. Appendix I discusses in greater detail DHS’s programs and activities that focus on chemical defense, and appendix II discusses DHS components that have chemical defense responsibilities as part of an all-hazards approach. Table 2 identifies the chemical defense responsibilities of each DHS component, and whether that component has a specific chemical defense program or an all-hazards approach to chemical defense. Figure 2 shows that fiscal year 2017 funding levels for three of the programs that focus on chemical defense totaled $77.3 million. Specifically, about $1.3 million in appropriated funds was available for OHA for its Chemical Defense Program activities and S&T had access to about $6.4 million in appropriated funds for its Chemical Security Analysis Center activities. The CFATS program had access to about $69.6 million in appropriated funds—or 90 percent of the $77.3 million for the three programs—to regulate high-risk facilities that produce, store, or use certain chemicals. OHA officials stated that their efforts regarding weapons of mass destruction over the last few years had focused mostly on biological threats rather than chemical threats. For example, $77.2 million in fiscal year 2017 appropriated funds supported OHA’s BioWatch Program to provide detection and early warning of the intentional release of selected aerosolized biological agents in more than 30 jurisdictions nationwide. By contrast, as stated above, OHA and S&T had access to about $7.7 million in fiscal year 2017 appropriated funds for chemical defense efforts. We could not determine the level of funding for components that treated chemical defense as part of their missions under an all-hazards approach because those components do not have chemical defense funding that can be isolated from funding for their other responsibilities. For example, among other things, CBP identifies and interdicts hazardous chemicals at and between ports of entry as part of its overall mission to protect the United States from threats entering the country. DHS’s chemical defense programs and activities have been fragmented and not well coordinated, but DHS recently created the CWMD Office to, among other things, promote better integration and coordination among these programs and activities. While it is too early to tell the extent to which this new office will enhance this integration and coordination, developing a chemical defense strategy and related implementation plan would further assist DHS’s efforts. DHS’s chemical defense programs and activities have been fragmented and not well coordinated across the department. As listed in table 2 above, we identified nine separate DHS organizational units that have roles and responsibilities that involve conducting some chemical defense programs and activities, either as a direct mission activity or as part of their broader missions under an all-hazards approach. We also found examples of components conducting similar but separate chemical defense activities without DHS-wide direction and coordination. OHA and S&T—two components with specific chemical defense programs—both conducted similar but separate projects to assist local jurisdictions with preparedness. Specifically, from fiscal years 2009 to 2017, OHA’s Chemical Defense Program conducted chemical demonstration projects in five jurisdictions—Baltimore, Maryland; Boise, Idaho; Houston, Texas; New Orleans, Louisiana; and Nassau County, New York—to assist the jurisdictions in enhancing their preparedness for a large-scale chemical terrorist attack. According to OHA officials, they worked with local officials in one jurisdiction to install and test chemical detectors without having department-wide direction on these detectors’ requirements. Also, according to S&T officials, the Chemical and Biological Defense Division worked with three jurisdictions in New York and New Jersey to help them purchase and install chemical detectors for their transit systems beginning in 2016 again without having department-wide direction on chemical detector requirements. The Secret Service, CBP, and the Coast Guard—three components with chemical defense activities that are part of their all-hazards approach—also conducted separate acquisitions of chemical detection or identification equipment, according to officials from those components. For example, according to Secret Service officials, the agency has purchased chemical detectors that agents use for personal protection of protectees and assessing the safety of designated fixed sites and temporary venues. Also, according to CBP officials, CBP has purchased chemical detectors for identifying chemical agents at ports of entry nationwide. Finally, according to Coast Guard officials, the agency has purchased chemical detectors for use in maritime locations subject to Coast Guard jurisdiction. Officials from OHA, S&T, and the CWMD Office acknowledged that chemical defense activities had been fragmented and not well- coordinated. They stated that this fragmentation occurred because DHS had no department-wide leadership and direction for chemical defense activities. We recognize that equipment, such as chemical detectors, may be designed to meet the specific needs of components when they carry out their missions under different operating conditions, such as an enclosed space by CBP or on open waterways by the Coast Guard. Nevertheless, when fragmented programs and activities that are within the same department and are responsible for the same or similar functions are executed without a mechanism to coordinate them, the department may miss opportunities to leverage resources and share information that leads to greater effectiveness. As discussed earlier, DHS has taken action to consolidate some chemical defense programs and activities. Specifically, in December 2017, DHS consolidated some of its chemical, biological, radiological, and nuclear defense programs and activities under the CWMD Office. The CWMD Office consolidated the Domestic Nuclear Detection Office; the majority of OHA; selected elements of the Science and Technology Directorate, such as elements involved in chemical, biological, and integrated terrorism risk assessments and material threat assessments; and certain personnel from the DHS Office of Strategy, Policy, and Plans and the Office of Operations Coordination with expertise on chemical, biological, radiological, and nuclear issues. According to officials from the CWMD Office, the fiscal year 2018 funding for the office is $457 million. Of this funding, OHA contributed about $121.6 million and the Domestic Nuclear Detection Office contributed about $335.4 million. Figure 3 shows the initial organizational structure of the CWMD Office as of June 2018. As of July 2018, according to the Assistant Secretary of CWMD, his office supported by DHS leadership is working to develop and implement its initial structure, plans, processes, and procedures. To guide the initial consolidation, officials representing the CWMD Office said they plan to use the key practices for successful transformations and reorganizations identified in our past work. For example, they noted that they intend to establish integrated strategic goals, consistent with one of these key practices—establish a coherent mission and integrated strategic goals to guide the transformation. These officials stated that the goals include those intended to enhance the nation’s ability to prevent attacks using weapons of mass destruction, including toxic chemical agents; support operational components in closing capability gaps; and invest in and develop innovative technologies to meet technical requirements and improve operations. They noted that the latter might include networked chemical detectors that could be used by various components to help them carry out their mission responsibilities in the future. However, the officials stated that all of the new office’s efforts were in the initial planning stages and none had been finalized. They further stated that the initial setup of the CWMD Office covering the efforts to consolidate OHA and the Domestic Nuclear Detection Office may not be completed until the end of fiscal year 2018. It is still too early to determine the extent to which the creation of the CWMD Office will help address the fragmentation and lack of coordination on chemical defense efforts that we have identified. Our prior work on key steps for assisting mergers and transformations shows that transformation can take years to complete. One factor that could complicate this transformation is that the consolidation of chemical defense programs and activities is limited to certain components within DHS, such as OHA, and not others, such as some parts of S&T and NPPD. Officials from the CWMD Office stated that they intend to address this issue by coordinating the office’s chemical security efforts with other DHS components that are not covered by the consolidation, such as those S&T functions that are responsible for developing chemical detector requirements. These officials also stated that they intend to address fragmentation by coordinating with and supporting DHS components that have chemical defense responsibilities as part of their missions under an all-hazards approach, such as the Federal Protective Service, CBP, TSA, the Coast Guard, and the Secret Service. Furthermore, the officials stated that they plan to coordinate DHS’s chemical defense efforts with other government agencies having chemical programs and activities at the federal and local levels. In October 2011, the Secretary of Homeland Security designated FEMA to coordinate the development of a strategy and implementation plan to enhance federal, state, local, tribal and territorial government agencies’ ability to respond to and recover from a catastrophic chemical attack. In November 2012, DHS issued a chemical response and recovery strategy that examined core capabilities and identified areas where improvements were needed. The strategy identified a need for, among other things, (1) a common set of catastrophic chemical attack planning assumptions, (2) a formally established DHS oversight body responsible for chemical incident response and recovery, (3) a more rapid way to identify the wide range of chemical agents and contaminants that comprise chemical threats, and (4) reserve capacity for mass casualty medical care. The strategy also identified the principal actions needed to fill these gaps. For example, with regard to identifying the range of chemical agents and contaminants that comprise chemical threats, the strategy focused on the capacity to screen, search for, and detect chemical hazards (and noted that this area was cross-cutting with prevention and protection). The strategy stated that, among other things, the Centers for Disease Control and Prevention, the Department of Agriculture and Food and Drug Administration, the Department of Defense, the Environmental Protection Agency, and DHS components, including the Coast Guard, provide screening, search, and detection capabilities. However, the strategy noted that “DHS does not have the requirement to test, verify, and validate commercial-off-the-shelf (COTS) chemical detection equipment purchased and fielded by its various constituent agencies and components, nor by the first responder community.” According to a November 2012 memorandum transmitting the response and recovery strategy to DHS employees, the distribution of the strategy was only to be used for internal discussion purposes and was not to be distributed outside of DHS because it had not been vetted by other federal agencies and state, local, tribal, and territorial partners. The memorandum and the strategy further stated that DHS was developing a companion strategy focused on improving the national capacity to prevent, protect against, and mitigate catastrophic chemical threats and attacks and noted that once this document was complete, DHS would engage with its partners to solicit comments and feedback. The strategy also stated that DHS intended to develop a separate implementation plan that would define potential solutions for any gaps identified, program any needed budget initiatives, and discuss programs to enhance DHS’s core capabilities and close any gaps. DHS officials representing OHA and S&T told us that DHS had intended to move forward with the companion strategy and the accompanying implementation plan but the strategy and plan were never completed because of changes in leadership and other competing priorities within DHS. At the time of our discussion and prior to the establishment of the CWMD Office, OHA officials also noted that DHS did not have a singular entity or office responsible for chemical preparedness. An official representing S&T also said that the consolidation of some chemical, biological, radiological, and nuclear efforts may help bring order to chemical defense efforts because DHS did not have an entity in charge of these efforts or a strategy for guiding them. Now that DHS has established the CWMD Office as the focal point for chemical, biological, radiological, and nuclear programs and activities, DHS has an opportunity to develop a chemical defense strategy and related implementation plan to better integrate and coordinate the department’s programs and activities to prevent, protect against, mitigate, respond to, and recover from a chemical attack. The Government Performance and Results Act of 1993 (GPRA), as updated by the GPRA Modernization Act of 2010 (GPRAMA), includes principles for agencies to focus on the performance and results of programs by putting elements of a strategy and plan in place such as (1) establishing measurable goals and related measures, (2) developing strategies and plans for achieving results, and (3) identifying the resources that will be required to achieve the goals. Although GPRAMA applies to the department or agency level, in our prior work we have reported that these provisions can serve as leading practices for strategic planning at lower levels within federal agencies, such as planning for individual divisions, programs, or initiatives. Our past work has also shown that a strategy is a starting point and basic underpinning to better manage federal programs and activities such as DHS’s chemical defense efforts. A strategy can serve as a basis for guiding operations and can help policy makers, including congressional decision makers and agency officials, make decisions about programs and activities. It can also be useful in providing accountability and guiding resource and policy decisions, particularly in relation to issues that are national in scope and cross agency jurisdictions, such as chemical defense. When multiple agencies are working to address aspects of the same problem, there is a risk that duplication, overlap, and fragmentation among programs can result in wasting scarce funds, confuse and frustrate program customers, and limit overall program effectiveness. A strategy and implementation plan for DHS’ chemical defense programs and activities would help mitigate these risks. Specifically, a strategy and implementation plan would help DHS further define its chemical defense capability, including opportunities to leverage resources and capabilities and provide a roadmap for addressing any identified gaps. By defining DHS’s chemical defense capability, a strategy and implementation plan may also better position the CWMD Office and other components to work collaboratively and strategically with other organizations, including other federal agencies and state, local, tribal, and territorial jurisdictions. Officials from the CWMD Office agreed that the establishment of the new office was intended to provide leadership to and help guide, support, integrate, and coordinate DHS’s chemical defense efforts and that a strategy and implementation plan could help DHS better integrate and coordinate its fragmented chemical defense programs and activities. Recent chemical attacks abroad and the threat of ISIS to use chemical weapons against the West have sparked concerns about the potential for chemical attacks occurring in the United States. DHS components have developed and implemented a number of separate chemical defense programs and activities that, according to DHS officials, have been fragmented and not well coordinated within the department. In December 2017, DHS consolidated some of its programs and activities related to weapons of mass destruction, including those related to chemical defense, by establishing the new CWMD Office. It is too early to tell whether and to what extent this office will help address fragmentation and the lack of coordination across all DHS’s weapons of mass destruction efforts, including chemical efforts. However, as part of its consolidation, the CWMD Office would benefit from developing a strategy and implementation plan to guide, support, integrate, and coordinate DHS’s programs and activities to prevent, protect against, mitigate, respond to, and recover from a chemical attack. A strategy and implementation plan would also help the CWMD Office guide DHS’s efforts to address fragmentation and coordination issues and would be consistent with the office’s aim to establish a coherent mission and integrated strategic goals. The Assistant Secretary for Countering Weapons of Mass Destruction should develop a strategy and implementation plan to help the Department of Homeland Security, among other things, guide, support, integrate and coordinate its chemical defense programs and activities; leverage resources and capabilities; and provide a roadmap for addressing any identified gaps. (Recommendation 1) We provided a draft of this report to DHS for review and comment. DHS provided comments, which are reproduced in full in appendix III and technical comments, which we incorporated as appropriate. DHS concurred with our recommendation and noted that the Assistant Secretary for CWMD will coordinate with the DHS Under Secretary for Strategy, Policy, and Plans and other stakeholders to develop a strategy and implementation plan that will better integrate and direct DHS chemical defense programs and activities. DHS estimated that it will complete this effort by September 2019. These actions, if fully implemented, should address the intent of this recommendation. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Homeland Security, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (404) 679-1875 or CurrieC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. At the time our review began, the Department of Homeland Security (DHS) had three headquarters components with programs and activities focused on chemical defense. These were the Office of Health Affairs’ (OHA) Chemical Defense Program; the Science and Technology Directorate’s (S&T) Chemical and Biological Defense Division and Chemical Security Analysis Center (CSAC); and the National Protection and Programs Directorate’s (NPPD) Chemical Facility Anti-Terrorism Standards (CFATS) program and Sector Outreach and Programs Division. Each component had dedicated funding to manage the particular chemical defense program or activity (with the exception of the Sector Outreach and Programs Division because this division funds DHS activities related to all critical infrastructure sectors, including the chemical sector). On December 7, 2017, DHS established the Countering Weapons of Mass Destruction (CWMD) Office, which incorporated most of OHA and selected elements of S&T, together with other DHS programs and activities related to countering chemical, biological, radiological, and nuclear threats. According to DHS, the CWMD Office was created to, among other things, elevate and streamline DHS’s efforts to prevent terrorists and other national security threat actors from using harmful agents, such as chemical agents, to harm Americans and U.S. interests. OHA, which was subsumed by the CWMD Office in December 2017, was responsible for enhancing federal, state, and local risk awareness and planning and response mechanisms in the event of a chemical incident through the Chemical Defense Program. This program provided medical and technical expertise to OHA leadership and chemical defense stakeholders including DHS leadership, DHS components, the intelligence community, federal interagency partners, and professional and academic preparedness organizations. The program’s efforts focused on optimizing local preparedness and response to chemical incidents that exceed the local communities’ capacity and capability to act during the first critical hours by providing guidance and tools for first responders and supporting chemical exercises for preparedness. DHS’s Chief Medical Officer was responsible for managing OHA. The Chemical Defense Program expended about $8.3 million between fiscal years 2009 and 2017 in chemical demonstration projects and follow-on funding to assist five jurisdictions in their chemical preparedness: Baltimore, Maryland; Boise, Idaho; Houston, Texas; New Orleans, Louisiana; and Nassau County, New York. For example, in Baltimore, OHA assisted the Maryland Transit Administration with the selection and installation of chemical detection equipment to integrate new technology into community emergency response and planning. In the other four locales, OHA assisted these partners in conducting multiple scenarios specific to each city based on high-risk factors identified by the Chemical Terrorism Risk Assessment (CTRA), which is a risk assessment produced by CSAC every 2 years. Such scenarios included indoor and outdoor scenarios in which persons were “exposed” to either an inhalant or a substance on their skin. Figure 4 summarizes the scenarios conducted in each city and some of the lessons learned. According to OHA summary documentation, a key finding from this work was that timely decisions and actions save lives and manage resources in response to a chemical incident. Since the completion of the five-city project, OHA has been working to, among other things, continue to develop a lessons learned document based on the project, as well as a related concept of operations, that state and local jurisdictions could use to respond to chemical incidents. As of December 7, 2017, OHA was consolidated into the CWMD Office and its functions transferred to the new office, according to officials from the CWMD Office. The Chief Medical Officer is no longer responsible for managing OHA but serves as an advisor to the Assistant Secretary for Countering Weapons of Mass Destruction and as the principal advisor to the Secretary and the Administrator of FEMA on medical and public health issues related to natural disasters, acts of terrorism, and other man-made disasters, among other things. S&T’s Homeland Security Advanced Research Projects Agency includes the Chemical and Biological Defense Division, which supports state and local jurisdictions by, for example, providing them help in modeling potential chemical attacks. The Chemical and Biological Defense Division worked with the City of New York to develop chemical detection modeling by simulating a chemical attack. As a result of the simulation, New York City officials wanted to implement mechanisms to prevent the potential consequences of a chemical attack in a large city. S&T’s Office of National Laboratories includes the CSAC, which identifies and characterizes the chemical threat against the nation through analysis and scientific assessment. CSAC is responsible for producing, among other things, the CTRA, a comprehensive evaluation of the risks associated with domestic toxic chemical releases produced every 2 years. CSAC officials chair the Interagency Chemical Risk Assessment Working Group that meets to develop the CTRA, identify chemical hazards, and produce a list of priority chemicals. This working group is comprised of DHS components, federal partners, and private industry officials that share industry information to ensure accurate and timely threat and risk information is included in the CTRA. To complement the CTRA, CSAC developed a standalone CTRA desktop tool that DHS components can use to conduct risk-based modeling of a potential chemical attack and provide results to DHS components, such as the U.S. Secret Service, for advance planning of large-scale events. In addition, CSAC conducts tailored risk assessments addressing emerging threats such as fentanyl, a synthetic opioid that has caused numerous deaths across the United States. CSAC sends these assessments, along with other intelligence and threat information, to relevant DHS components, federal agencies, state and local partners, and private entities so this information can be used in planning and decision making. Officials from eight DHS components we spoke with said they use CSAC information in their work and that CSAC products are useful. CSAC conducted two exercises, known as Jack Rabbit I and II, to experimentally characterize the effects of a large-scale chemical release and to understand the reason for the differences seen between real-world events and modeling predictions. These exercises were intended to strengthen industry standards in chemical transportation, as well as response and recovery plans. Outputs and data from these exercises have been used to write first responder guidelines for these types of events and are being taught in nationwide fire and hazmat courses. The fiscal year 2018 President’s Budget request did not ask for an appropriation to fund CSAC. However, the Consolidated Appropriations Act, 2018, did provide funding for CSAC. Furthermore, in May 2018, the Secretary delegated responsibility for conducting the non-research and development functions related to the Chemical Terrorism Risk Assessment to the CWMD Office. The CFATS program uses a multitiered risk assessment process to determine a facility’s risk profile by requiring facilities in possession of specific quantities of designated chemicals of interest to complete an online questionnaire. CFATS program officials said they also use CSAC data as part of the process for making decisions about which facilities should be covered by CFATS, and their level of risk. If CFATS officials make a determination that a facility is high-risk, the facility must submit a vulnerability assessment and a site security plan or an alternative security program for DHS approval that includes security measures to meet risk- based performance standards. We previously reported on various aspects of the CFATS program and identified challenges that DHS was experiencing in implementing and managing the program. We made a number of recommendations to strengthen the program to include, among other things, that DHS verify that certain data reported by facilities is accurate, enhance its risk assessment approach to incorporate all elements of risk, conduct a peer review of the program to validate and verify DHS’s risk assessment approach, and document processes and procedures for managing compliance with site security plans. DHS agreed with all of these recommendations and has either fully implemented them or taken action to address them. The Sector Outreach and Programs Division works to enhance the security and resilience of chemical facilities that may or may not be considered high-risk under the CFATS program and plays a nonregulatory role as the sector-specific agency for the chemical sector. The Sector Outreach and Programs Division works with the chemical sector through the Chemical Sector Coordinating Council, the Chemical Government Coordinating Council, and others in a public-private partnership to share information on facility security and resilience. In addition, the division and the coordinating councils help enhance the security and resilience of chemical facilities that may or may not be considered high-risk under the CFATS program. The division and councils are to collaborate with federal agencies, chemical facilities, and state, local, tribal, and territorial entities to, among other things, assess risks and share information on chemical threats and chemical facility security and resilience. Further, the Protective Security Coordination Division in the Office of Infrastructure Protection works with facility owners and operators to conduct voluntary assessments at facilities. Department of Homeland Security (DHS) components conduct various prevention and protection activities related to chemical defense. These activities are managed by individual components as part of their overall mission under an all-hazards approach. U.S. Coast Guard - The Coast Guard uses fixed and portable chemical detectors to identify and interdict hazardous chemicals as part of its maritime prevention and protection activities. It also responds to hazardous material and chemical releases in U.S. waterways. The Coast Guard also staffs the 24-hour National Response Center, which is the national point of contact for reporting all oil and hazardous materials releases into the water, including chemicals that are discharged into the environment. The National Response Center also takes maritime reports of suspicious activity and security breaches at facilities regulated by the Maritime Transportation Security Act of 2002. Under this act, the Coast Guard regulates security at certain chemical facilities and other facilities possessing hazardous materials. U.S. Customs and Border Protection (CBP) - CBP interdicts hazardous chemicals at U.S. borders and ports of entry as part of its overall mission to protect the United States from threats entering the country. Among other things, CBP has deployed chemical detectors to point of entry nationwide that were intended for narcotics detection, but can also be used by CBP officers to presumptively identify a limited number of chemicals. Also, CBP’s National Targeting Center helps to screen and identify high-risk packages that may contain hazardous materials at ports of entry. In addition, CBP’s Laboratories and Scientific Services Directorate manages seven nationally accredited field laboratories, where staff detect, analyze, and identify hazardous substances, including those that could be weapons of mass destruction. When CBP officers send suspected chemical weapons, narcotics, and other hazardous materials to the labs, the labs use various confirmatory analysis technologies, such as infrared spectroscopy and mass spectrometry, to positively identify them. Also, the Directorate has a 24-hour Teleforensic Center for on-call scientific support for CBP officers who have questions on suspected chemical agents. Federal Emergency Management Agency (FEMA) - FEMA provides preparedness grants to state and local governments for any type of all-hazards preparedness activity, including chemical preparedness. According to FEMA data, in fiscal year 2016, states used about $3.5 million, local municipalities used about $48.5 million, and tribal and territorial municipalities used about $80,000 in preparedness grant funding for chemical defense including prevention and protection activities, as well as mitigation, response, and recovery efforts related to a chemical attack. Office of Intelligence and Analysis (I&A) - I&A gathers intelligence information on all homeland security threats including chemical threats. Such threat information is compiled and disseminated to relevant DHS components and federal agencies. For example, I&A works with CSAC to provide intelligence information for the CTRA and writes the threat portion of that assessment. I&A also receives information from CSAC on high-risk gaps in intelligence to help better inform chemical defense intelligence reporting. Also, the Under Secretary of I&A serves as the Vice-Chair of the Counterterrorism Advisory Board. This board is responsible for coordinating, facilitating, and sharing information regarding DHS’s activities related to mitigating current, emerging, perceived, or possible terrorist threats, including chemical threats; and providing timely and accurate advice and recommendations to the Secretary and Deputy Secretary of Homeland Security on counterterrorism issues. NPPD’s Federal Protective Service (FPS) - FPS secures federally- owned and leased space in various facilities across the country. Federal facilities are assigned a facility security level determination ranging from a Level 1 (low risk) to a Level 5 (high risk). As part of its responsibility, FPS is to conduct Facility Security Assessments of the buildings and properties it protects that cover all types of hazards including a chemical release, in accordance with Interagency Security Committee standards and guidelines. FPS is to conduct these assessments at least once every 5 years for Level 1 and 2 facilities, and at least once every 3 years for Level 3, 4, and 5 facilities. FPS conducts the assessments using a Modified Infrastructure Survey Tool. Transportation Security Administration (TSA) - TSA efforts to address the threat of chemical terrorism have been focused on the commercial transportation of bulk quantities of hazardous materials and testing related to the release of commercially transported chemicals that could be used as weapons of mass destruction. TSA’s activities with respect to hazardous materials transportation aim to reduce the vulnerability of shipments of certain hazardous materials through the voluntary implementation of operational practices by motor carriers and railroads, and ensure a secure transfer of custody of hazardous materials to and from rail cars at chemical facilities. Also, in May 2003, TSA began requiring that all commercial motor vehicle operators licensed to transport hazardous materials, including toxic chemicals, must successfully complete a comprehensive background check conducted by TSA. According to TSA documents, approximately 1.5 million of the nation’s estimated 6 million commercial drivers have successfully completed the vetting process. Additionally, TSA has also recently partnered with five mass transit and passenger rail venues, together with other DHS components such as DHS’s Science and Technology Directorate and the U.S. Secret Service, to test chemical detection technologies for such venues. In addition, TSA is responsible for the Transportation Sector Security Risk Assessment, which examines the potential threat, vulnerabilities, and consequences of a terrorist attack involving the nation’s transportation systems. This assessment’s risk calculations for several hundred specific risk scenarios, including chemical weapons attacks, are based on the elements of threat, vulnerability and consequence using a combination of subject matter expert judgments and modeling results. U.S. Secret Service - The Secret Service is responsible for protecting its protectees and designated fixed sites and temporary venues from all threats and hazards, including chemical threats. For example, the Secret Service conducts security assessments of sites, which may involve chemical detection, and coordinates with other agencies for preparedness or response to threats and hazard incidents. In addition, the Secret Service has a Hazardous Agent Mitigation Medical Emergency Response team, dedicated to responding to numerous hazards, including chemical threats and incidents. In addition to the contact named above, John Mortin (Assistant Director), Juan Tapia-Videla (Analyst-in-Charge), Michelle Fejfar, Ashley Grant, Imoni Hampton, Eric Hauswirth, Tom Lombardi, Sasan J. “Jon” Najmi, Claire Peachey, and Kay Vyas made key contributions to this report.", "summary": "Recent chemical attacks abroad and the threat of using chemical weapons against the West by the Islamic State of Iraq and Syria (ISIS) have raised concerns about the potential for chemical attacks occurring in the United States. DHS's chemical defense responsibilities include, among others, managing and coordinating federal efforts to prevent and protect against domestic chemical attacks. GAO was asked to examine DHS's chemical defense programs and activities. This report examines (1) DHS programs and activities to prevent and protect against domestic chemical attacks and (2) the extent to which DHS has integrated and coordinated all of its chemical defense programs and activities. GAO reviewed documentation and interviewed officials from relevant DHS offices and components and reviewed DHS strategy and planning documents and federal laws and directives related to chemical defense. The Department of Homeland Security (DHS) manages several programs and activities designed to prevent and protect against domestic attacks using chemical agents (see figure). Some DHS components have programs that focus on chemical defense, such as the Science and Technology Directorate's (S&T) chemical hazard characterization. Others have chemical defense responsibilities as part of their broader missions, such as U.S. Customs and Border Protection (CBP), which interdicts chemical agents at the border. DHS recently consolidated some chemical defense programs and activities into a new Countering Weapons of Mass Destruction (CWMD) Office. However, GAO found and DHS officials acknowledged that DHS has not fully integrated and coordinated its chemical defense programs and activities. Several components—including CBP, U.S. Coast Guard, the Office of Health Affairs, and S&T—have conducted similar activities, such as acquiring chemical detectors or assisting local jurisdictions with preparedness, separately, without DHS-wide direction and coordination. As components carry out chemical defense activities to meet mission needs, there is a risk that DHS may miss an opportunity to leverage resources and share information that could lead to greater effectiveness addressing chemical threats. It is too early to tell the extent to which the new CWMD Office will enhance the integration of DHS's chemical defense programs and activities. Given the breadth of DHS's chemical defense responsibilities, a strategy and implementation plan would help the CWMD Office (1) mitigate the risk of fragmentation among DHS programs and activities, and (2) establish goals and identify resources to achieve these goals, consistent with the Government Performance and Results Modernization Act of 2010. This would also be consistent with a 2012 DHS effort, since abandoned, to develop a strategy and implementation plan for all chemical defense activities, from prevention to recovery. DHS officials stated the 2012 effort was not completed because of leadership changes and competing priorities. GAO recommends that the Assistant Secretary for the CWMD Office develop a strategy and implementation plan to help DHS guide, support, integrate, and coordinate chemical defense programs and activities. DHS concurred with the recommendation and identified actions to address it.", "document_type": "gao"}
{"report": "The total number of SFSP meals served nationwide during the summer— one indicator of program participation—increased from 113 million meals in fiscal year 2007 to 149 million meals in fiscal year 2016, or by 32 percent. Although almost half of the total increase in meals served in the summer months was due to increases in lunches, when comparing across each of the meal types, supper and breakfast had the largest percentage increases over the 10-year period, 50 and 48 percent, respectively (see table 1). The increase in SFSP meals over this time period was generally consistent with increases in the number of meals served in the National School Lunch Program (NSLP), the largest child nutrition assistance program, during this period. Although states reported the actual number of SFSP meals served to FNS for reimbursement purposes, they estimated the number of children participating in SFSP, and these participation estimates have been calculated inconsistently, impairing FNS’s ability to inform program implementation and facilitate strategic planning and outreach to areas with low participation. Specifically, state agencies calculated a statewide estimate of children’s participation in the SFSP, referred to as average daily attendance (ADA), using sponsor-reported information on the number of meals served and days of operation in July of each year. However, according to our review of states’ survey responses and FNS documents, states’ methods for calculating ADA have differed from state to state and from year to year. For example, although FNS directed states to include the number of meals served in each site’s primary meal service—which may or may not be lunch—some states calculated ADA using only meals served at lunch. In addition, five states reported in our survey that the method they used to calculate ADA in fiscal year 2016 differed from the one they used previously. While FNS clarified its instructions in May 2017 to help improve the consistency of states’ ADA calculations moving forward, ADA, even if consistently calculated, remained an unreliable estimate of children’s daily participation in SFSP for at least two reasons. First, ADA did not account for existing variation in the number of days that each site serves meals to children. Specifically, because FNS’s instructions indicated that sites’ ADAs were to be combined to provide a statewide ADA estimate, differences in the number of days of meal service at each site were disregarded. As a result, ADA did not reflect the average number of children served SFSP meals daily throughout the month. Second, ADA was an unreliable estimate of children’s participation in SFSP because it did not account for state variation in the month with the greatest number of SFSP meals served. According to FNS officials, the agency instructed states to calculate ADA for July because officials identified this as the month with the largest number of meals served nationwide. However, according to our analysis of nationwide FNS data, in summer 2016, 26 states served more SFSP meals in June or August than in July. Although FNS had taken some steps to identify other data that states collect on the SFSP, at the time of our May 2018 report, FNS had not yet used this information to help improve its estimate of children’s participation in the program. In 2015, FNS published a Request for Information, asking whether states or sponsors collected any SFSP data that were not reported to FNS, and received responses from 15 states. The responses suggested some states collected additional data, such as site-level data, that may allow for an improved estimate of children’s SFSP participation, potentially addressing the issues identified in our analysis. FNS also followed up with several of these states in 2016 and 2017 to explore the feasibility of collecting additional data and improving estimates of children’s SFSP participation. FNS stated in a May 2017 memo to states that it is critical that the agency’s means of estimating children’s participation in the SFSP is as accurate as possible because it helps inform program implementation at the national level and facilitates strategic planning and outreach to areas with low participation. Yet, at the time of our report, FNS had not taken further action to improve the estimate. In our May 2018 report, we concluded that FNS’s limited understanding of children’s participation in the SFSP impaired its ability to both inform program implementation and facilitate strategic planning and outreach to areas with low participation. To improve FNS’s estimate of children’s participation in the SFSP, we recommended that FNS focus on addressing, at a minimum, data reliability issues caused by variations in the number of operating days of meal sites and in the months in which states see the greatest number of meals served. FNS generally agreed with this recommendation. Other federal and nonfederal programs that operate solely in the summer, as well as those operating year-round, helped feed low-income children in the summer months. For example, in 2016, FNS data indicated about 26 million meals were served through the NSLP’s Seamless Summer Option, a separate federal program that streamlines administrative requirements for school meal providers serving summer meals. Some children also received summer meals through nonfederal programs operated by entities such as faith-based organizations and foodbanks, though the reach of these efforts was limited, according to our state survey and interviews with providers and national organizations at the time of our report. For example, of the 27 states that reported in our survey awareness of the geographic coverage of these nonfederal programs, 11 states indicated that they operated in some portions of the state—the most common state response. States and SFSP providers reported challenges with issues related to meal site availability, children’s participation, and program administration, though federal, state, and local entities had taken steps to improve these areas. For example, a lack of available transportation, low population density, and limited meal sites posed challenges for SFSP implementation in rural areas, according to states we surveyed, selected national organizations, and state and local officials in the three states we visited. In response, state and local entities took steps, such as transporting meals to children by bus, to address these issues—efforts that FNS supported through information sharing and grants. States and SFSP providers also reported challenges with meal site safety, and FNS’s efforts to address this area were limited. Seventeen states reported in our survey that ensuring summer meal sites are in safe locations was moderately to very challenging. Some states and sponsors took steps to help address this issue, and FNS also used its available authorities to grant some states and sponsors flexibility with respect to the requirement that children consume summer meals on site, such as when safety at the site is a concern. However, our review of FNS documentation showed FNS had not clearly communicated to all states and sponsors the circumstances it considers when deciding whether to grant this flexibility. These circumstances—described in letters the agency sent to requesting states—generally included verification that violent crime activities occurred within both a 6-block radius of the meal site and 72 hours prior to the meal service. Although FNS officials explained that they reviewed state and sponsor requests for flexibility due to safety concerns on a case-by-case basis, they also acknowledged that the set of circumstances they used to approve state and sponsor requests for flexibility, which we identified in their letters to states, had been used repeatedly. Further, states and sponsors reported challenges obtaining the specific data needed for approval of a site for this type of flexibility, including inconsistent availability of timely data, which hampered some providers’ efforts to ensure safe delivery of meals. We concluded that unless FNS shared information with all states and sponsors on the circumstances it considered when deciding whether to grant flexibility with respect to the requirement that children consume summer meals on site, states and sponsors would likely continue to be challenged to use this flexibility, hindering its usefulness in ensuring safe summer meal delivery to children. We therefore recommended that FNS communicate to all SFSP stakeholders the circumstances it considers in approving requests for flexibility with respect to the requirement that children consume SFSP meals on-site in areas that have experienced crime and violence, taking into account the feasibility of accessing data needed for approval, to ensure safe delivery of meals to children. FNS generally agreed with this recommendation. We also found that while FNS had issued reports to Congress evaluating some of its demonstration projects, as required under its statutory authorities, the agency had not issued any such reports to Congress specifically on the use of flexibilities with respect to the on-site requirement in areas where safety was a concern. As previously discussed, the agency is required to annually submit certain reports to Congress regarding the use of waivers and evaluations of projects carried out under its demonstration authority. FNS officials told us that they had not evaluated or reported on these flexibilities, in part, because they had limited information on their outcomes. We concluded that without understanding the impact of its use of these flexibilities, neither FNS nor Congress knew whether these flexibilities were helping provide meals to children—the goal of the program. Accordingly, we recommended that FNS evaluate and annually report to Congress, as required by statute, on its use of waivers and demonstration projects to grant states and sponsors flexibility with respect to the requirement that children consume SFSP meals on-site in areas experiencing crime or violence, to improve understanding of the use and impact of granting these flexibilities on meeting program goals. FNS generally agreed with this recommendation. Although FNS had established program and policy simplifications to help lessen the administrative burden on sponsors participating in multiple child nutrition programs, challenges in this area persisted, indicating that information had not reached all relevant state agencies. According to officials we spoke with from a national organization involved in summer meals, management of each child nutrition program and the processes related to applications, funding, and oversight were fragmented in many states. For example, in one of the states we visited, a sponsor that provided school meals during the school year told us they had to fill out 60 additional pages of paperwork to provide summer meals, which they described as significant burden. FNS officials told us that some of the duplicative requirements might have been a function of differences in statute, and although FNS provided guidance to states on simplified procedures for sponsors participating in more than one child nutrition program, some states might have chosen not to implement them. We concluded that without further efforts from FNS to disseminate information on current options for streamlining administrative requirements across multiple child nutrition programs, overlapping and duplicative administrative requirements may limit children’s access to meals by discouraging sponsor participation in child nutrition programs. We recommended that FNS disseminate information about the existing streamlining options, and FNS generally agreed with this recommendation. Chairman Rokita, Ranking Member Polis, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. If you or your staff have any questions about this testimony, please contact Kathryn A. Larin at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Rachel Frisk, Melissa Jaynes, and Claudine Pauselli. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes information contained in GAO's May 2018 report entitled Summer Meals: Actions Needed to Improve Participation Estimates and Address Program Challenges , GAO-18-369 . It addresses (1) what is known about SFSP participation, (2) other programs that help feed low-income children over the summer, and (3) challenges in providing summer meals to children and the extent to which USDA provides assistance to address these challenges. For its May 2018 report, GAO reviewed relevant federal laws, regulations, and guidance; analyzed USDA's SFSP data for fiscal years 2007 through 2016; and surveyed state agencies responsible for administering the SFSP in 50 states and the District of Columbia. GAO also visited a nongeneralizable group of 3 states and 30 meal sites, selected based on Census data on child poverty rates and urban and rural locations, and analyzed meal site data from these 3 states. In addition, GAO interviewed USDA, state, and national organization officials, as well as SFSP providers, including sponsors and site operators. Nationwide, the total number of meals served to children in low-income areas through the Summer Food Service Program (SFSP) increased from 113 to 149 million (about 32 percent) from fiscal year 2007 through 2016, according to GAO's May 2018 report. GAO noted that the U.S. Department of Agriculture (USDA) directed states to use the number of meals served, along with other data, to estimate the number of children participating in the SFSP. However, GAO found that participation estimates had been calculated inconsistently from state to state and year to year. In 2017, USDA took steps to improve the consistency of participation estimates, noting they are critical for informing program implementation and strategic planning. However, GAO determined that the method USDA directed states to use would continue to provide unreliable estimates of participation, hindering USDA's ability to use them for these purposes. Other federal and nonfederal programs helped feed low-income children over the summer to some extent, according to states GAO surveyed and SFSP providers and others GAO interviewed for its May 2018 report. For example, GAO found that in July 2016, about 26 million meals were served through a separate federal program that allowed school meal providers to serve summer meals, according to USDA data. Some children also received summer meals through nonfederal programs operated by faith-based organizations and foodbanks, though GAO's state survey and interviews with SFSP meal providers and national organizations indicated the reach of such efforts was limited. In GAO's May 2018 report, states and SFSP meal providers reported challenges with issues related to meal sites, participation, and program administration, though USDA, state, and local officials had taken some steps to address these issues. Seventeen states in GAO's survey and several providers in the states GAO visited reported a challenge with ensuring meal sites were in safe locations. To address this issue, USDA granted some states and providers flexibility from the requirement that children consume meals on-site. However, GAO found that USDA had not broadly communicated the circumstances it considered when granting this flexibility or reported to Congress on the use of flexibilities with respect to the on-site requirement in areas where safety was a concern, per requirements. As a result, neither USDA nor Congress knew whether these flexibilities were helping provide meals to children and meeting program goals. Further, officials from national and regional organizations GAO interviewed, as well as providers GAO visited, reported challenges related to the administrative burden associated with participating in multiple child nutrition programs. Although USDA had established program and policy simplifications to help lessen related burdens, the persistence of challenges in this area suggested that information had not reached all relevant state agencies, potentially limiting children's access to meals by discouraging provider participation. In its May 2018 report, GAO made four recommendations, including that USDA improve estimates of children's participation in SFSP, communicate the circumstances it considers when granting flexibilities to ensure safe meal delivery, evaluate and annually report to Congress on its use of waivers and demonstration projects when granting these flexibilities, and disseminate information about existing flexibilities available to streamline administrative requirements for providers participating in multiple child nutrition programs. USDA generally agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Qualified health plans sold through the exchanges must meet certain minimum requirements, including those related to benefits coverage. Beyond these requirements, many elements of plans can vary, including their cost and availability. Those who opt to enroll in a plan generally pay for their health care in two ways: (1) a premium to purchase the insurance, and (2) cost-sharing for the particular health services they receive (for example, deductibles, coinsurance, and co-payments). Qualified health plans are offered at one of four metal tiers that reflect the out-of-pocket costs that may be incurred by a consumer. These tiers correspond to the plan’s actuarial value—a measure of the relative generosity of a plan’s benefits that is expressed as a percentage of the covered medical expenses expected to be paid, on average, by the issuer for a standard population and set of allowed charges for in-network providers. In general, as actuarial value increases, consumer cost- sharing decreases. The actuarial values of the metal tiers are: bronze (60 percent), silver (70 percent), gold (80 percent), and platinum (90 percent). If an issuer sells a qualified health plan on an exchange, it must offer at least one plan at the silver level and one plan at the gold level; issuers are not required to offer bronze or platinum plans. Individuals purchasing coverage through the exchanges may be eligible, depending on their incomes, to receive financial assistance to offset the costs of their coverage. According to HHS, more than 80 percent of enrollees obtained financial assistance in the first half of 2017, which came in the form of premium tax credits or cost-sharing reductions. Premium tax credits. These are designed to reduce an eligible individual’s premium costs, and can either be paid in advance on a monthly basis to an enrollee’s issuer—referred to as advance premium tax credits—or received after filing federal income taxes for the prior year. To be eligible for premium tax credits, enrollees must generally have household incomes of at least 100, but no more than 400, percent of the federal poverty level. The amount of the premium tax credit varies based on enrollees’ income relative to the cost of premiums for their local benchmark plan—which is the second lowest cost silver plan available—but consumers do not need to be enrolled in the benchmark plan in order to be eligible for these tax credits. Cost-sharing reductions. Enrollees who qualify for premium tax credits, have household incomes between 100 and 250 percent of the federal poverty level, and enroll in a silver tier plan may also be eligible to receive cost-sharing reductions, which lower enrollees’ deductibles, coinsurance, and co-payments. To reimburse issuers for reduced cost-sharing from qualified enrollees, HHS made payments to issuers (referred to as cost-sharing reduction payments) until October 2017, when it discontinued these payments. Despite HHS’s decision to discontinue cost-sharing reduction payments, issuers are still required under PPACA to offer cost-sharing reductions to eligible enrollees. Since consumers who receive these reductions are generally enrolled in silver plans, insurance commissioners in most states instructed the issuers in their states to increase 2018 premiums for silver plans offered on the exchanges to reflect the discontinued federal payments. This has been referred to as “silver-loading” and resulted in substantial increases in exchange-based silver plan premiums for 2018. (See fig.1.) Because the amount of an eligible enrollee’s premium tax credit is based on the premium for the enrollee’s local benchmark plan (the second lowest cost silver plan available to an enrollee), the value of this form of financial assistance also increased significantly for 2018. As we have previously reported, the number and type of plans available in the health insurance exchanges varies from year to year. Issuers can add new plans and adjust or discontinue existing plans from year to year, as long as the plans meet certain minimum requirements—such as covering essential health benefits. Issuers can also extend or restrict the locations in which they offer plans. According to HHS, while individuals seeking 2018 coverage were able to select from an average of 25 plans across the various metal tiers, 29 percent of consumers were able to select from plans from only one issuer. HHS performs outreach to increase awareness of the open enrollment period and facilitate enrollment among healthcare.gov consumers— including those new to the exchanges as well as those returning to renew their coverage. Outreach to these different types of enrollees can vary. For example, while outreach to those new to the exchanges may focus more on the importance of having insurance, outreach to existing enrollees may focus on encouraging them to go back to the exchange to shop for the best option. All exchanges are required to carry out certain functions to assist consumers with their applications for enrollment and financial assistance, among other things. HHS requires exchanges to operate a website and toll-free call center to address the needs of consumers requesting assistance with enrollment, and to conduct outreach and educational activities to help consumers make informed decisions about their health insurance options. HHS administers the federal healthcare.gov website, which allows consumers in states using the website for enrollment to directly compare health plans based on a variety of factors, such as premiums and provider networks. HHS also operates a Marketplace Call Center to respond to consumer questions about enrollment. Consumers may apply for coverage through the call center, the website, via mail, or in person (in some areas), with assistance from navigator organizations or agents and brokers. Navigators. PPACA required all exchanges to establish “navigator” programs to conduct public education activities to raise awareness of the availability of coverage available through the exchanges, among other things. As part of HHS’s funding agreement with navigator organizations in states using the federally facilitated exchange, HHS requires them to maintain relationships with consumers who are uninsured or underinsured. They must also examine consumers’ eligibility for other government health programs, such as Medicaid, and provide other assistance to consumers—for example, by helping them understand how to access their coverage. Agents and Brokers. Licensed by states, agents and brokers may also provide assistance to those seeking to enroll in a health plan sold on the exchanges; however, they are generally paid by issuers. They may sell products for one issuer from which they receive a salary, or from a variety of issuers and be paid a commission for each plan they sell. About 8.7 million consumers enrolled in healthcare.gov plans during the open enrollment period for 2018 coverage, 5 percent less than the 9.2 million who enrolled for 2017. This decline continues a trend from 2016, when a peak of 9.6 million consumers enrolled in such plans. Since that peak, enrollment has decreased by 9 percent. Enrollment in plans sold by state-based exchanges that use their own enrollment website has remained relatively stable during the same time period, with just over 3.0 million enrollees each year since 2016. Overall, enrollment in federal and state exchanges has declined 7 percent from a peak of nearly 12.7 million enrollees in 2016, largely driven by the decrease in enrollment in exchanges using healthcare.gov. (See table 1.) HHS officials told us that they did not want to speculate on the specific factors that affected enrollment this year, but noted that the exchanges are designed for consumers to utilize as needed, which includes degrees of fluctuation from year to year. A decreased demand for exchange-based insurance could be influenced by increases in the numbers of people with other types of health coverage, such as coverage through other public programs, or that which is sponsored by their employers. Enrollees who were new to healthcare.gov coverage comprised a smaller proportion of total enrollees in 2018 than in 2017, continuing a trend seen in prior years. The proportion of new enrollees decreased from 33 percent (3 million) in 2017 to 28 percent (2.5 million) in 2018 (see fig. 2). Some stakeholders noted the importance of enrolling new, healthy enrollees each year to maintain the long-term viability of the exchanges. However, other stakeholders noted that they had expected the number and proportion of new enrollees to decrease over time because a large majority of those who wanted coverage and were eligible for financial assistance had likely already enrolled. The increasing proportion of enrollees who return to the exchanges for their coverage could also demonstrate their need for or satisfaction with this coverage option. The demographic characteristics of enrollees remained largely constant from 2017 through 2018. For example, the proportion of enrollees with household incomes of 100 to 250 percent of the federal poverty level remained similar at 71 percent in 2017 and 70 percent in 2018. In addition, the proportion of enrollees whose households were located in rural areas was 18 percent in both years. However, the proportion of healthcare.gov enrollees aged 55 and older increased from 27 percent in 2017 to 29 percent in 2018. Appendix III provides detailed information on the characteristics of enrollees in 2017 and 2018. According to stakeholders we interviewed, plan affordability likely played a major role in 2018 exchange enrollment—both attracting and detracting from enrollment—and enrollees’ plan selection. In 2018, premiums across all healthcare.gov plans increased an average of 30 percent—more than expected given overall health cost trends. As a result of these premium increases, plans were less affordable in 2018 compared to 2017 for exchange consumers without advance premium tax credits (15 percent in 2018). One driver of these premium increases was the elimination of federal cost-sharing reduction payments to issuers in late 2017, which resulted in larger premium increases for silver tier plans (the most popular healthcare.gov metal tier). For example, among enrollees who did not use advance premium tax credits, the average monthly premium amount paid for silver plans increased 45 percent (from $424 in 2017 to $614 in 2018). Average premiums for these enrollees also increased for bronze and gold plans, but not by as much—22 percent for bronze plans (from $374 in 2017 to $455 in 2018) and 23 percent for gold plans (from $509 in 2017 to $628 in 2018). Most stakeholders we interviewed told us the decreased affordability of plans likely resulted in lower enrollment in exchange plans for these consumers. Some stakeholders we interviewed reported personally encouraging consumers who were not eligible for premium tax credits to purchase their coverage off of the exchanges, where they could often purchase the same health insurance plan for a lower price. However, despite overall premium increases, plans became more affordable for the more than 85 percent of exchange consumers who used advance premium tax credits, because the value of the premium tax credits increased significantly in order to compensate for the higher premiums of silver plans. For example, the average value of monthly advance premium tax credits for those enrolled in any exchange plan increased 44 percent, from $383 in 2017 to $550 in 2018—the largest increase in the program’s history. As a result, enrollees who used advance premium tax credits faced lower net monthly premiums on average in 2018 than they had in 2017—specifically, enrollees’ average net monthly premiums across all plans decreased 16 percent from $106 in 2017 to $89 in 2018. According to most stakeholders we interviewed, the enhanced affordability of net monthly premiums among consumers who used advance premium tax credits likely encouraged enrollment among this group. (See fig. 3). Stakeholders we interviewed also noted that plan affordability likely played a major role in enrollees’ plan selection, including the metal tier of their coverage. This finding is consistent with our prior work which showed that plan cost—including premiums—is a driving factor in exchange enrollees’ selection of a plan. Specifically, we found that while silver plans remained the most popular healthcare.gov metal tier, covering 65 percent of all enrollees in 2018, this proportion decreased 9 percentage points from 2017 as more enrollees selected bronze and gold plans. (See fig. 4.) Stakeholders reported that consumers using advance premium tax credits benefitted from enhanced purchasing power in 2018 due to the impact of silver loading, which likely served as a driving factor in these consumers’ plan selections. Specifically, they noted that the increased availability of free bronze and low-cost gold plans (after tax credits were applied) for such consumers likely explained why many enrollees moved from silver to bronze or gold plans for 2018. While average monthly net premiums paid by these consumers decreased overall from 2017 to 2018 due to the tax credits, the changes were most pronounced for those enrolled in bronze or gold plans (which decreased 36 and 39 percent, respectively), compared to silver plans (which decreased 13 percent). Separately, the enhanced affordability of gold plans, along with the richer benefits they offer, likely led some consumers to move from silver to gold plans in 2018. While the average monthly net premium amount paid for gold plans in 2018 ($207) remained higher than that for less generous silver plans ($88) among those using advance premium tax credits, it was nearly 40 percent lower than the average net premium for gold plans in 2017 ($340). Stakeholders also reported that consumers in some areas were able to access gold plans for a lower cost than silver plans. The proportion of enrollees in gold plans using advance premium tax credits increased from 49 percent to 74 percent—signaling that many enrollees used their higher tax credits to enroll in richer gold plan coverage. As the proportion of enrollees with silver plans declined for 2018, so too did the proportion of enrollees with cost-sharing reductions—which are generally only available to those with silver plans. Specifically, 54 percent of healthcare.gov enrollees received these subsidies in 2018, 6 percentage points lower than the 60 percent who received these subsidies in 2017. Stakeholders we interviewed reported that a variety of factors other than plan affordability also likely affected 2018 exchange enrollment, but opinions on the impact of each factor were mixed. Specifically, most stakeholders we interviewed, including all 4 navigator organizations and 3 professional trade organizations, reported that consumer confusion about PPACA and its status likely played a major role in detracting from 2018 healthcare.gov enrollment. Some of these stakeholders attributed consumers’ confusion about the exchanges to efforts to repeal and replace PPACA. In addition, many stakeholders attributed consumer confusion to the Administration’s negative statements about PPACA. Further, many stakeholders reported that as a result of the public debate during 2017 over whether to repeal and replace PPACA many consumers had questions about whether the law had been repealed and whether insurance coverage was still available through the exchanges. However, other stakeholders reported that this debate likely did not affect enrollment and consumers who were in need of exchange-based coverage were likely able to find the information they required to enroll. In addition, many stakeholders noted that consumer understanding and enrollment was aided through increased outreach and education events conducted by many groups, including some state and local governments, hospitals, issuers, and community groups. Many stakeholders also noted that the volume of exchange-related news increased significantly before and during the open enrollment period for 2018 coverage, in part due to the ongoing political debate about the future of the exchanges. These stakeholders agreed that this increase in reporting about the exchanges likely resulted in increased consumer awareness and enrollment, even in cases where the coverage negatively portrayed the exchanges. Many stakeholders also said that reductions in HHS outreach and advertising of the open enrollment period likely detracted from 2018 enrollment, in part because any reduction in promoting enrollment detracts from overall consumer awareness and understanding of the program and its open enrollment period. In particular, some stakeholders reported that outreach and advertising are especially important for increasing new enrollment, especially among younger and healthier consumers whose enrollment can help ensure the long-term stability of the exchanges. However, other stakeholders reported that these reductions likely had no effect on enrollment, noting that most consumers who needed exchange-based coverage were already enrolled in it and were well aware of the program, and also noting that enrollment in 2018 did not dramatically change compared with that of 2017. Stakeholders we interviewed were largely divided on the effects of other factors on 2018 healthcare.gov enrollment, including the shorter 6-week open enrollment period. For example, about half of the stakeholders said that the shorter open enrollment period likely led fewer to enroll due to lack of consumer awareness of the new deadline, as well as to challenges related to the reduced capacity of those helping consumers to enroll. However, many others said that the shorter open enrollment period likely had no effect. In particular, some of these stakeholders noted that enrollment in 2018 was similar to that for 2017 and that during prior open enrollment periods the majority of consumers had enrolled by December 15, as this was the deadline for coverage that began in January. Figure 5 displays the range of stakeholder views on factors affecting 2018 healthcare.gov enrollment, and appendix IV provides selected stakeholder views of factors affecting 2018 healthcare.gov enrollment. HHS reduced its consumer outreach—including paid advertising and navigator funding—for the 2018 open enrollment period. Further, HHS allocated the navigator funding using a narrower approach and problematic data, including consumer application data that it acknowledged were unreliable and navigator organization-reported goal data that were based on an unclear description of the goal, and which HHS and navigator organizations likely interpreted differently. HHS reduced the amount it spent on paid advertising for the 2018 open enrollment period by 90 percent, spending $10 million as compared to the $100 million it spent for the 2017 open enrollment period. HHS officials reported that their 2018 advertising approach was a success, noting that they cut wasteful spending on advertising, which resulted in a more cost- effective approach. HHS officials told us that the agency elected to reduce funding for paid advertising to better align with its spending on paid advertising for the Medicare open enrollment period. According to the officials, HHS targeted its reduced funding toward low-cost forms of paid advertising that HHS studies showed were effective in driving enrollment, and that could be targeted to specific populations, such as individuals aged 18 to 34 and individuals who had previously visited healthcare.gov. For example, for 2018, HHS spent about 40 percent of its paid advertising budget on two forms of advertising aimed at reaching these populations. Specifically, HHS spent $1.2 million on the creation of two digital advertising videos that were targeted to potential young enrollees, and $2.7 million on search advertising, in which Internet search engines displayed a link to healthcare.gov when individuals used relevant search terms. HHS followed up with individuals that visited the link to encourage them to enroll. Agency officials said they focused some of their paid advertising on individuals aged 18 to 34 because in the prior open enrollment period many individuals in this age range enrolled after December 15—the deadline for the 2018 open enrollment period. HHS officials said they did not use paid television advertising because it was too expensive and because it was not optimal for attracting young enrollees—although a 2017 HHS study found this was one of the most effective forms of paid advertising for enrolling new and returning individuals during the prior open enrollment period. See appendix V for HHS’s expenditures for paid advertising for the 2017 and 2018 open enrollment periods. HHS reduced navigator funding by 42 percent for 2018, spending $37 million compared to the $63 million it spent for 2017. According to HHS officials, the agency reduced this funding due to a shift in the Administration’s priorities. For the 2018 open enrollment period, HHS planned to rely more heavily on agents and brokers—another source of in-person consumer assistance, who, unlike navigator organizations that are funded through federal grants, are generally paid for by the issuers they represent. HHS took steps to highlight their availability to help consumers and enable consumers to enroll through them. For example, for the 2018 open enrollment period, HHS made a new “Help on Demand” tool available on healthcare.gov that connected consumers directly to local agents or brokers. HHS also developed a streamlined enrollment process for those enrolling through agents and brokers. HHS also changed its approach for allocating the navigator funding to focus on a narrower measure of navigator organization performance than it had used in the past. According to HHS officials, in prior years, HHS awarded funding based on navigator organizations’ performance on a variety of tasks, such as the extent to which navigator organizations met their self-imposed goals for numbers of public outreach events and individuals assisted with applications for exchange coverage and selection of exchange plans. HHS officials said the agency previously also took state-specific factors, such as the number of uninsured individuals in a state, into account when awarding funding. HHS calculated preliminary navigator funding awards for 2018 using this approach. However, according to HHS officials, the agency later decided to change both its budget and approach for allocating navigator funding for 2018 to hold navigator organizations more accountable for the number of individuals they enrolled in exchange plans. In its new funding allocation approach, rather than taking into account navigator organization performance on a variety of tasks, HHS only considered performance in achieving one goal—the number of individuals each navigator organization planned to assist with selecting or enrolling in exchange plans for 2017 coverage. In implementing this new approach, HHS compared the number of enrollees whose 2017 exchange coverage applications included navigator identification numbers with each navigator organization’s self-imposed goal. For navigator organizations that did not appear to meet their goals, HHS decreased their preliminary 2018 award amounts proportionately. For navigator organizations that appeared to meet or exceed their goals, HHS left their preliminary 2018 award amounts unchanged. Based on this change in approach, HHS offered 81 of its 98 navigator organizations less funding for 2018, with decreases ranging from less than 1 percent to 98 percent of 2017 funding levels. HHS offered 4 of the 98 navigator organizations increased funding and 13 the same level of funding they received for 2017 (see fig. 6). We found that the data HHS used for its revised funding approach were problematic for multiple reasons. In particular, prior to using the 2017 consumer application data as part of its 2018 funding calculations, HHS had acknowledged that these data were unreliable, in part because navigators were not consistently entering their identification numbers into applications during the 2017 open enrollment period. Specifically, HHS stated in a December 9, 2016, email to navigator organizations that the application data were unreliable and thus could not be used. Over 4 million individuals had enrolled in 2017 coverage by December 10, 2016, so it is likely that many of the applications that HHS used in its 2018 funding calculation included incomplete or inaccurate information with respect to navigator assistance. HHS provided guidance to navigator organizations in the December 2016 email on the importance of, and locations for, entering identification numbers into applications to help improve the reliability of the data. However, some data reliability issues may have remained throughout the 2018 open enrollment period, as two of the navigator organizations we interviewed reported ongoing challenges entering navigator identification numbers into applications during this period. For example, representatives from one navigator organization reported that the application field where navigators enter their identification number was at times pre-populated with an agent or broker’s identification number. Consumer application data may therefore still be unreliable for use in HHS navigator funding decisions that would be expected later this year for 2019. Moreover, the 2017 goal data that HHS used in its funding calculation were also problematic because HHS described the goal in an unclear manner when it asked navigator organizations to set their goals. As a result, HHS’s interpretation of the goal was likely different than how it was interpreted and established by navigator organizations. Specifically, in its award application instructions, HHS asked navigator organizations to provide a goal for the number of individuals that they “expected to be assisted with selecting/enrolling in (including re- enrollments)” but HHS did not provide guidance to navigator organizations on how it would interpret the goal. HHS officials told us that they wanted to allow navigator organizations full discretion in setting their goals, since the organizations know their communities best. In its funding calculation, HHS interpreted this goal as the number of individuals navigator organizations planned to enroll in exchange plans. However, as written in the award application instructions, the goal could be interpreted more broadly, because not all individuals whom navigators assist with the selection of exchange plans ultimately apply and enroll in coverage. Representatives from one navigator organization we spoke with said they did interpret this goal more broadly than how it was ultimately interpreted by HHS—and thus set it as the number of consumers they planned to assist in a variety of ways, not limiting it to those they expected to assist through to the final step of enrollment in coverage. The navigator organization therefore set a higher goal than it otherwise would have, had it understood HHS’s interpretation of the goal, and ultimately received a decrease in funding for 2018. As a result, we found that two of the three inputs in HHS’s calculation of 2018 navigator organization awards were problematic (see fig. 7). HHS’s reduced funding and revised funding allocation approach resulted in a range of implications for navigator organizations. According to HHS officials, eight of the navigator organizations that were offered reduced funding for 2018—with reductions ranging from 50 to 98 percent of 2017 funding levels—declined their awards and withdrew from the program. HHS reported asking the remaining navigator organizations to focus on re-enrolling consumers who had coverage in 2017 and resided in areas where issuers reduced or eliminated plan offerings for 2018, and informing consumers about the shortened open enrollment period for 2018 coverage. Representatives of the navigator community group we interviewed reported that many navigator organizations did focus their resources on enrollment and cut back on outreach efforts, particularly in rural areas. According to self-reported navigator organization data provided by HHS, navigator organizations collectively reported conducting 68 percent fewer outreach events during the 2018 open enrollment period as compared to the 2017 period. Representatives from the navigator organizations we interviewed also reported making changes to their operations; for example, officials from one of the navigator organizations reported cutting staff and rural office locations. Officials from another navigator organization said that they focused their efforts on contacting prior exchange enrollees to assist them with re-enrollment, instead of finding and enrolling new consumers, and de-prioritized assistance with Medicaid enrollment. The three navigator organizations we spoke with that had funding cuts for 2018 also reported that their ability to perform the full range of navigator duties during the rest of the year would be compromised because they needed to make additional cuts in their operations—such as reducing staff and providing less targeted assistance to underserved populations—in order to reduce total costs. One of the three navigator organizations reported that it may go out of business at the end of the 2018 award year. HHS’s narrower approach to awarding funding; lack of reliable, complete data on the extent to which navigator organizations enrolled individuals in exchange plans; and lack of clear guidance to navigator organizations on how to set their goals could hamper the agency’s ability to use the program to meet its objectives. Federal internal control standards state that management should use quality information to achieve the agency’s objectives, such as by using relevant, reliable data for decision-making. Without reliable performance data and accurate goals, HHS will be unable to measure the effectiveness of the navigator program and take informed action as necessary. Further, because HHS calculated awards using problematic data, navigator organizations may have received awards that did not accurately reflect their performance in enrolling individuals in exchange plans. Additionally, HHS’s narrow focus on exchange enrollment limited its ability to make decisions based on relevant information. Moving forward, this may affect navigator organizations’ interests and abilities in providing a full range of services to their communities, including underserved populations. This, in turn, could affect HHS’s ability to meet its objectives, such as its objective of improving Americans’ access to health care. HHS did not set any numeric enrollment targets for 2018 related to total healthcare.gov enrollment, as it had in prior years. In prior years, HHS used numeric targets to monitor enrollment progress during the open enrollment period and focus its resources on those consumers that it believed had a high potential to enroll in exchange coverage. For example, HHS established a target of enrolling a total of 13.8 million individuals during the 2017 open enrollment period and also set numeric enrollment targets for 15 regional markets that the agency identified as presenting strong opportunities for meaningful enrollment increases, partly due to having a high percentage of eligible uninsured individuals. HHS used these regional target markets to focus its outreach, travel, and collaborations with local partners. According to agency officials, during prior open enrollment periods, HHS monitored its performance with respect to its targets and revised its outreach efforts in order to better meet its goals. According to federal internal control standards, agencies should design control activities to achieve their objectives, such as by establishing and monitoring performance measures. HHS has recognized the importance of these internal controls by requiring state-based exchanges to develop performance measures and report on their progress. Without developing numeric targets for healthcare.gov enrollment, HHS’s ability to both perform high level assessments of its performance and progress and to make critical decisions about how to use its resources is hampered. HHS may also be unable to ensure that it meets its objectives—including its current objective of improving Americans’ access to health care, including by stabilizing the market and implementing policies that increase the mix of younger and healthier consumers purchasing plans through the individual market. HHS leadership decided against setting numeric enrollment targets for the 2018 open enrollment period and instead focused on a goal of enhancing the consumer experience, according to HHS officials. Specifically, HHS officials measured the consumer experience based on its assessment of healthcare.gov availability and functionality, and call center availability and customer satisfaction. HHS officials told us that they selected these measures of the consumer experience because healthcare.gov and the call center represent two of the largest channels through which consumers interact with the exchange. HHS reported meeting its goal based on consumers’ improved experiences with these two channels, some of which had been problematic in the past. (See fig. 8.) Healthcare.gov. According to HHS officials, the healthcare.gov website achieved enhanced availability and functionality for the 2018 open enrollment period, continuing a trend in improvements over prior years. While HHS scheduled similar periods of healthcare.gov downtime for maintenance in 2017 and 2018, the website had less total downtime during the 2018 open enrollment period because the agency needed to conduct less maintenance. HHS officials attributed the increased availability in part to an operating system upgrade and comprehensive testing of the website that they conducted before the 2018 open enrollment period began. In addition, unlike prior years, HHS officials said that the agency published scheduled maintenance information for 2018 to reduce scheduling conflicts for consumers and groups providing enrollment assistance. HHS also reported enhancing the functionality of the website for the 2018 open enrollment period, including by adding new tools, such as a “help on demand” feature that links consumers with a local agent or broker willing to assist them, as well as updated content that included more plain language. Many stakeholders we interviewed told us that healthcare.gov functioned well during the open enrollment period and was more available than it had been in prior years. Call Center Assistance. According to HHS officials, the call center reduced wait times and improved customer satisfaction scores in 2018, continuing a trend in improvements over prior years. HHS officials reported average wait times of 5 minutes, 38 seconds for the 2018 open enrollment period—almost four minutes shorter than the average wait time experienced during a comparable timeframe of the 2017 open enrollment period. HHS officials attributed this reduction in wait times to improvements in efficiency, including scripts that used fewer words and generated fewer follow-up questions. In addition, there was a modest reduction in call center volume during similar timeframes of the 2017 and 2018 open enrollment periods. Officials from many stakeholders we interviewed reported that call center assistance was more readily available this year than it had been in prior years. HHS officials also reported an average call center customer satisfaction score of 90 percent in 2018 compared to 85 percent in 2017, based on surveys conducted at the end of customer calls. Although HHS officials reported that the agency met its goal of enhancing specific aspects of the consumer experience for the 2018 open enrollment period, HHS narrowly defined its goal and excluded certain aspects of the consumer experience that it had identified as key as recently as 2017. More specifically, in 2017, HHS reported that successful outreach and education events and the availability of in-person consumer assistance, such as that provided by navigators to help consumers understand plan options, were key aspects of the consumer experience. However, HHS did not include these key items when measuring progress toward their 2018 goal of enhancing the consumer experience. Federal internal control standards state that agencies should identify risks that affect their defined objectives and use quality information to achieve these objectives, including by identifying the information required to achieve the objectives and address related risks. By excluding key aspects of the consumer experience in its evaluation of its performance, HHS’s assessment of the consumer experience may be incomplete. For example, as noted above, some stakeholders we interviewed told us that consumer confusion likely detracted from enrollment for 2018, and some linked this outcome to HHS’s reduced role in promoting exchange enrollment, including navigator support, which may have resulted in less in-person consumer assistance through navigators. HHS’s assessment of the consumer experience, which focused only on consumers who used the website or reached out to the call center during open enrollment, did not account for the experiences of those who interacted with the health insurance exchanges through other channels, such as through navigators or agents and brokers. Some experts have raised questions about the long-term stability of the exchanges absent sufficient enrollment, including among young and healthy consumers. To encourage exchange enrollment, HHS has traditionally conducted a broad outreach and education campaign, including funding navigator organizations that provide in-person enrollment assistance. For the 2018 open enrollment period, HHS reduced its support of navigator organizations and changed its approach for allocating navigator funding to focus on exchange enrollment alone. HHS allocated the funding based on performance data that were problematic for multiple reasons, including because some of the underlying data were unreliable. As a result, navigator organizations received funding that reflected a more limited evaluation of their performance than HHS had used in the past, and that may not have accurately reflected their performance. This raises the risk that navigator organizations will decrease the priority they place on fulfilling a range of other duties for which they are responsible, including providing assistance to traditionally underserved populations, which some navigator organizations we interviewed reported they had either decreased or planned to decrease due to reduced funding. HHS’s lack of complete and reliable data on navigator organization performance hampers the agency’s ability to make appropriately informed decisions about funding. Moreover, its focus on enrollment alone in awarding funding may affect navigator organizations’ ability to fulfill the full range of their responsibilities, which could in turn affect HHS’s ability to use the program as a way to meet its objective of enhancing Americans’ access to health care. In addition, the lack of numeric enrollment targets for HHS to evaluate its performance with respect to the open enrollment period hampers the agency’s ability to make informed decisions about its resources. HHS reported achieving a successful consumer experience for the 2018 open enrollment period based on enhancing its performance in areas that had been problematic in the past. However, the agency’s evaluation of its performance did not include aspects of the consumer experience that it identified in 2017 as key, and for which stakeholders reported problems in 2018. As a result, its assessment of its performance in enhancing the consumer experience was likely incomplete. Absent a more complete assessment, HHS may not have the information it needs to fully understand the consumer experience. We are making the following three recommendations to HHS: The Secretary of HHS should ensure that the approach and data it uses for determining navigator award amounts accurately and appropriately reflect navigator organization performance, for example, by 1. providing clear guidance to navigator organizations on performance goals and other information they must report to HHS that will affect their future awards, 2. ensuring that the fields used to capture the information are functioning properly, and 3. assessing the effect of its current approach to funding navigator organizations to ensure that it is consistent with the agency’s objectives. (Recommendation 1) The Secretary of HHS should establish numeric enrollment targets for healthcare.gov, to ensure it can monitor its performance with respect to its objectives. (Recommendation 2) Should the agency continue to focus on enhancing the consumer experience as a goal for the program, the Secretary of HHS should assess other aspects of the consumer experience, such as those it previously identified as key, to ensure it has quality information to achieve its goal. (Recommendation 3) We provided a draft of this report to HHS for comment. In its comments, reproduced in appendix VI, HHS concurred with two of our three recommendations. HHS also provided technical comments, which we incorporated as appropriate. HHS concurred with our recommendation that it ensure that the approach and data it uses for determining navigator awards accurately and appropriately reflect navigator organization performance. In its comments on our draft report, HHS stated that it had notified navigator organizations that their funding would be linked to the organizations’ self-identified performance goals and their ability to meet those goals. On July 10, 2018, HHS issued its 2019 funding opportunity announcement for the navigator program, which required those applying for the award to set performance goals, including for the number of consumers assisted with enrollment and re-enrollment in exchange plans, and also states that failure to meet such goals may negatively impact a recipient’s application for future funding. In its comments, HHS also noted that it is in the process of updating the healthcare.gov website so that individual applications can hold the identification numbers of multiple entities, such as navigators, agents or brokers, and will work to ensure that the awards align with agency objectives. HHS also concurred with our recommendation that the agency assess other aspects of the consumer experience, such as those it previously identified as key, to ensure it has quality information to achieve its goal. HHS noted that it had assessed the consumer experience based on the availability of the two largest channels supporting exchange operations, and also noted that it will consider focusing on other aspects of the consumer experience as needed. HHS did not concur with our recommendation that the agency establish numeric enrollment targets for healthcare.gov, to ensure that it can monitor its performance with respect to its objectives. Specifically, HHS noted that there are numerous external factors that can affect a consumer’s decision to enroll in exchange coverage that are outside of the control of HHS, including the state of the economy and employment rates. HHS stated that it does not believe that enrollment targets are relevant to assess the performance of a successful open enrollment period related to the consumer experience. Instead, it believes a more informative performance metric would be to measure whether everyone who utilized healthcare.gov, who qualified for coverage, and who desired to purchase coverage, was able to make a plan selection. We continue to believe that the development of numeric enrollment targets is important for effective monitoring of the program and management of its resources. Without establishing numeric enrollment targets for upcoming open enrollment periods, HHS’s ability to evaluate its performance and make informed decisions about how it should deploy its resources is limited. We also believe that these targets could help the agency meet its program objectives of stabilizing the market and of increasing the mix of younger and healthier consumers purchasing plans through the individual market. Furthermore, HHS has previously demonstrated the ability to develop meaningful enrollment targets using available data. For example, in prior years, HHS developed numeric enrollment targets based on a range of factors, including the number of exchange enrollees, number of uninsured individuals, and changes in access to employer-sponsored insurance, Medicaid, and other public sources of coverage. In addition, the agency set numeric enrollment targets for regional markets that took these and other factors into account. Once these targets were established, HHS officials were able to use them to monitor progress throughout the open enrollment period and revise its efforts as needed. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. We identified a list of factors that may have affected 2018 healthcare.gov enrollment based on a review of Department of Health and Human Services information, interviews with health policy experts, and review of recent publications by these experts related to 2018 exchange enrollment. Factors related to the open enrollment period: Open enrollment conducted during a shorter 6-week open enrollment period. Consumer awareness of this year’s open enrollment deadline. Factors related to plan availability and plan choice: Plan affordability for consumers ineligible for financial assistance. Plan affordability for consumers eligible for financial assistance. Consumers’ perceptions of plan affordability. Availability of exchange-based plan choices. Availability of off-exchange plan choices. Consumer reaction to plan choices. Factors related to outreach and education: Reductions in federal funding allocated to outreach and education, and lack of television and other types of advertising. Top Administration and agency officials’ messaging about the health insurance exchanges and open enrollment. National and local media reporting on the exchanges and open enrollment. Local outreach and education events conducted by federally funded navigator organizations. Outreach and education efforts and/or advertising by some states, issuers, advocacy groups, community organizations, and agents and brokers. Factors related to enrollment assistance and tools: Availability of one-on-one enrollment assistance from federally funded navigator organizations. Availability of one-on-one enrollment assistance from agents and brokers. Updates to the content and function of the healthcare.gov website. Availability of the healthcare.gov website during the open enrollment period. Availability of assistance through the call center during the open enrollment period. Consumer understanding of the Patient Protection and Affordable Care Act and its status. Automatic re-enrollment occurred on the last day of the open enrollment period. 4 Navigator organizations were selected to reflect a range in: (1) amount of 2018 award from the Department of Health and Human Services (HHS); (2) change in HHS award amount from 2017; (3) region; and (4) target population. Insurance departments in six states that use the federally facilitated exchanges were selected to reflect a range with respect to: (1) 2018 healthcare.gov enrollment outcomes; (2) strategies used for calculating 2018 premiums to compensate for the loss of federal cost-sharing reduction payments; (3) changes in 2018 navigator organization award amounts; and (4) the number of issuers offering 2018 exchange coverage in the state. 3 Three issuers were selected who offered 2018 plans on healthcare.gov exchanges; two of which sold exchange plans in multiple states. 5 Five research and consumer advocacy organizations were selected to provide a range of perspectives with respect to the law and issues related to exchange outreach and enrollment. 3 Three professional trade associations were selected to collectively represent the perspectives of regulators, issuers, and consumer assisters. 2 Two state-based exchanges were selected based on the length of their open enrollment periods—one had one of the shortest open enrollment periods and the other had one of the longest open enrollment periods for 2018. Navigator organizations, among other things, carry out public education activities and help consumers enroll in a health insurance plan offered through the exchange. HHS awards financial assistance to navigator organizations that provide these services in states using the federally facilitated exchange. An issuer is an insurance company, insurance service, or insurance organization that is required to be licensed to engage in the business of insurance in a state. State-based exchanges are able to set their own budget and strategy for promoting exchange enrollment and set the length of their open enrollment periods. We identified a list of factors that may have affected 2018 healthcare.gov enrollment based on a review of Department of Health and Human Services (HHS) information, interviews with health policy experts, and review of recent publications by these experts related to 2018 exchange enrollment. Using this list, we conducted structured interviews with officials from 23 stakeholder organizations to gather their viewpoints as to whether and how these or other factors affected 2018 health insurance exchange enrollment. Organizations interviewed were selected to reflect a wide range of perspectives and included HHS-funded navigator organizations that provide in-person consumer enrollment assistance, issuers, state insurance departments, professional trade organizations, research and advocacy organizations, and state-based exchanges. Table 2 displays a range in stakeholder views about the impact of these factors. In addition to the contact named above, Gerardine Brennan, Assistant Director; Patricia Roy, Analyst-in-Charge; Priyanka Sethi Bansal; Giao N. Nguyen; and Fatima Sharif made key contributions to this report. Also contributing were Muriel Brown, Laurie Pachter, and Emily Wilson.", "summary": "Since 2014, millions of consumers have purchased health insurance from the exchanges established by the Patient Protection and Affordable Care Act. Consumers can enroll in coverage during an annual open enrollment period. HHS and others conduct outreach during this period to encourage enrollment and ensure the exchanges' long-term stability. HHS announced changes to its 2018 outreach, prompting concerns that fewer could enroll, potentially harming the exchanges' stability. GAO was asked to examine outreach and enrollment for the exchanges using healthcare.gov. This report addresses (1) 2018 open enrollment outcomes and any factors that may have affected these outcomes, (2) HHS's outreach efforts for 2018, and (3) HHS's 2018 enrollment goals. GAO reviewed HHS documents and data on 2018 open enrollment results and outreach. GAO also interviewed officials from HHS and 23 stakeholders representing a range of perspectives, including those from 4 navigator organizations, 3 issuers, and 6 insurance departments, to obtain their non-generalizable views on factors that likely affected 2018 enrollment. About 8.7 million consumers in 39 states enrolled in individual market health insurance plans offered on the exchanges through healthcare.gov during the open enrollment period for 2018 coverage. This was 5 percent less than the 9.2 million who enrolled for 2017 and continued a decline in enrollment from a peak of 9.6 million in 2016. Among the 23 stakeholders we interviewed representing a range of perspectives, most reported that plan affordability played a major role in exchange enrollment—both attracting and detracting from enrollment. In 2018, total premiums increased more than expected, and, as a result, plans may have been less affordable for consumers, which likely detracted from enrollment. However, most consumers receive tax credits to reduce their premiums, and stakeholders reported that plans were often more affordable for these consumers because higher premiums resulted in larger tax credits, which likely aided exchange enrollment. Stakeholders had mixed opinions on the effects that other factors, such as the impact of reductions in federal advertising and the shortened open enrollment period, might have had on enrollment. The Department of Health and Human Services (HHS), which manages healthcare.gov enrollment, reduced consumer outreach for the 2018 open enrollment period: HHS spent 90 percent less on its advertising for 2018 ($10 million) compared to 2017 ($100 million). Officials told us that the agency's approach for 2018 was to focus on low-cost, high-performing forms of advertising. HHS reduced funding by 42 percent for navigator organizations—which provide in-person enrollment assistance for consumers—spending $37 million in 2018 compared to $63 million in 2017 due to a shift in administration priorities. HHS allocated the funding using data that it acknowledged were not reliable in December 2016. The lack of quality data may affect HHS's ability to effectively manage the navigator program. Unlike in prior years, HHS did not set any numeric targets related to 2018 total healthcare.gov enrollment; officials told us that they instead focused on enhancing the consumer experience for the open enrollment period. Setting numeric targets would allow HHS to monitor and evaluate its overall performance, a key aspect of federal internal controls. Further, while HHS reported meeting its goal of enhancing the consumer experience, such as by improving healthcare.gov availability, it did not measure aspects of the consumer experience it had identified as key in 2017, such as successful outreach events. Absent a more complete assessment, HHS may not be able to fully assess its progress toward its goal of enhancing the consumer experience and may miss opportunities to improve other aspects of the consumer experience. GAO is making three recommendations to HHS, including that it ensure the data it uses for determining navigator organization awards are accurate, set numeric enrollment targets, and assess other aspects of the consumer experience. HHS agreed with two recommendations, but disagreed with the need to set numeric targets. GAO maintains that such action is important.", "document_type": "gao"}
{"report": "In 2016, Medicare spent about $380 billion on health care services for beneficiaries enrolled in Medicare FFS, which consists of two separate parts: Medicare Part A, which primarily covers hospital services, and Medicare Part B, which primarily covers outpatient services. The majority of the 38 million Medicare FFS beneficiaries were enrolled in both Part A and Part B, although about 5 million were enrolled in Part A only and 0.3 million were enrolled in Part B only. The general design of Medicare FFS cost-sharing has been largely unchanged since Medicare’s enactment in 1965. It includes separate deductibles for Part A and Part B services, a variety of per-service copayments and coinsurance after the deductibles are met, and no cap on beneficiaries’ cost-sharing responsibilities (see table 1). The current cost-sharing design leaves beneficiaries exposed to potentially catastrophic cost-sharing, and in part because of that, in 2015, 81 percent of Medicare FFS beneficiaries obtained supplemental insurance that covered some or all of their Medicare cost-sharing responsibilities, often in exchange for an additional premium (see table 2). For example, in 2015, 31 percent of Medicare FFS beneficiaries purchased a private Medigap plan, the most common types of which fully insulated them from Medicare cost-sharing responsibilities in exchange for an average annual premium of $2,400. Another 20 percent of Medicare FFS beneficiaries enrolled in Medicaid, which generally covered most of their Medicare cost-sharing responsibilities; however, these low- income beneficiaries generally only paid a limited or no premium for this supplemental coverage. The current Medicare FFS cost-sharing design can be confusing, contribute to beneficiaries’ overuse of services, and leave beneficiaries exposed to catastrophic costs. Modernizing the design could address these concerns, but would involve trade-offs. For example, as shown in four illustrative designs that we evaluated, maintaining Medicare’s share of costs would involve a trade-off between the level of the cap and the deductible (or other cost-sharing). As noted by Medicare advocacy groups and others, the current Medicare FFS cost-sharing design, which includes multiple deductibles, can be confusing for beneficiaries. In 2014, 16 percent of Medicare FFS beneficiaries were responsible for at least one Part A deductible for an episode of inpatient care as well as the annual Part B deductible. (Medicare FFS beneficiaries may be subject to more than one Part A deductible during the year, as the Part A deductible applies to each admission to an inpatient hospital or skilled nursing facility that occurs more than 60 consecutive days after the prior admission.) The Congressional Budget Office has cited the separate deductibles as one way in which Medicare FFS cost-sharing is more complicated than private plans. In 2016, according to a survey conducted by the Kaiser Family Foundation, only 1 percent of workers with employer-sponsored insurance had a separate deductible for inpatient services. Moreover, inpatient services tend to be nondiscretionary, and one or more deductibles for those services can create a financial burden for beneficiaries, while having minimal effect on their use of inpatient services. The cost-sharing design also affects beneficiaries’ utilization of services. For example, as noted by the bipartisan Simpson-Bowles Fiscal Commission, the lack of a coherent cost-sharing system is a significant contributor to overuse and misuse of care. This is particularly true for services such as home health and clinical laboratory services, which currently have no cost-sharing under Medicare FFS and thus do not provide beneficiaries an incentive to decline care of negligible value. Because of these concerns, MedPAC recommended adding a cost- sharing requirement for home health services that were not preceded by hospitalization or post-acute care, noting that the current lack of cost- sharing has likely contributed to the significant rise in utilization for these services, which suggests some overuse. At the same time, the lack of an annual cost-sharing cap prevents Medicare FFS from fulfilling a key purpose of health insurance: protecting beneficiaries from catastrophic medical expenses. While most beneficiaries had cost-sharing responsibilities under $2,000 in 2014, 1 percent—over 300,000 beneficiaries—had responsibilities over $15,000, including several hundred beneficiaries with responsibilities between $100,000 and $3 million. (See fig. 1.) Given the risk of catastrophic medical expenses, a focus group of current and future Medicare beneficiaries convened by MedPAC indicated that an annual cap is the cost-sharing design feature they were most interested in seeing added to the Medicare benefit. Annual caps are a common design feature of private plans, as most are required to have an annual cap, including those participating in MA. Specifically, since 2011, CMS has required most MA plans to have an annual cap of $6,700 or less and grants them additional flexibility in their cost-sharing design if they voluntarily set their cap at or below $3,400. The mandatory and voluntary caps for certain MA plans that provide both in- and out-of-network coverage are the same ($6,700 and $3,400) for in-network services, and 1.5 times higher ($10,000 and $5,100) for combined in- and out-of-network services. In addition to these implications of the cost-sharing design itself, the American Academy of Actuaries and others have noted that the complexity and the possibility of unlimited responsibilities increases demand for supplemental insurance, which can lead to added costs for beneficiaries and the Medicare program. It is uncommon for beneficiaries enrolled in private health insurance to have supplemental coverage. By insulating beneficiaries from some or all cost-sharing responsibilities (and not just catastrophic costs), supplemental insurance further reduces the incentives for beneficiaries to evaluate the need for discretionary care. In part because of these reduced incentives, we previously estimated that both beneficiaries’ average total out-of-pocket costs and average Medicare program spending were higher for Medicare FFS beneficiaries with Medigap than those with FFS only. Modernizing Medicare FFS cost-sharing could address these concerns, but would involve design trade-offs. Specifically, as proposed by various groups, revising Medicare’s cost-sharing design to include a single deductible, modified cost-sharing requirements, and an annual cost- sharing cap could address concerns with the current cost-sharing design. However, there are multiple options for revising within this broad framework, including two key design trade-offs that would affect the extent to which a modernized structure would address concerns about the current design (and possibly also raise new concerns). One trade-off centers on how to modify the existing complicated set of cost-sharing requirements for different services. While the reform proposals have generally suggested moving to a single deductible, they have varied in how to modify the subsequent per-service payments. Some proposals have emphasized the value of simplicity and suggested replacing the complex set of per-service payments above the deductible with a uniform coinsurance. A uniform coinsurance would simplify the cost-sharing design, provide beneficiaries insight into the total cost of each service, and introduce cost-sharing for certain potentially discretionary services, such as home health services. However, as noted by the Medicare Payment Advisory Commission and Congressional Budget Office, uniform coinsurance also has drawbacks, such as a fixed percentage of an unknown bill being harder for beneficiaries to understand and predict than copayments. Other proposals have emphasized the need to set cost-sharing based on the value of services, and have suggested moving Medicare toward a value-based insurance design in which per-service cost-sharing would vary based on the clinical value of the service to an individual beneficiary. While a value-based design would specifically target cost-sharing to promote prudent use of health care services, implementing it is challenging in practice and would be more complicated for beneficiaries to understand and for CMS to administer, though CMS is testing the feasibility of value-based insurance design in MA. A second design trade-off centers on how to set the level of the deductible and the annual cap. As shown in the four illustrative cost- sharing designs we evaluated, the lower the cap, the higher the deductible (or other cost-sharing requirements) would need to be to maintain Medicare’s and beneficiaries’ aggregate share of costs similar to that of the current design. For example, holding utilization and enrollment constant, we found that even without any deductible, a uniform coinsurance of 18 percent (a level below the existing 20 percent coinsurance for most Part B services) would be sufficient to add a cap near $10,000 (the mandatory cap for certain MA plans that allow beneficiaries to see any provider). In contrast, it would take a deductible near $1,225 (a level similar to the existing Part A deductible for each inpatient episode) and a uniform coinsurance of 20 percent to establish a cap of $3,400 (the voluntary cap for most MA plans). (See table 3.) Different levels of the deductible and cap would address certain concerns of the current design raised by GAO and others but also could create new ones. For example, as our analysis of four illustrative cost-sharing designs shows, designs with relatively high caps would provide some additional protection from catastrophic costs while maintaining a deductible and coinsurance near or below the current levels for Part B services. However, per an analysis conducted by Kaiser Family Foundation and the Urban Institute, half of Medicare beneficiaries in 2016 were living on less than $26,200 in income; thus, caps of $6,700 or higher may still leave some beneficiaries vulnerable to costs that are catastrophic for them and may not significantly decrease the associated demand for supplemental insurance. In contrast, designs with relatively low caps would provide greater protection from catastrophic costs. However, as noted by the Congressional Budget Office, beneficiaries who reached the cap would have less incentive to use services prudently. In addition, the higher deductible needed to offset a lower cap while maintaining Medicare’s share of costs could present a financial barrier for some beneficiaries to obtain necessary care. The direct effect of modernizing the Medicare FFS cost-sharing design (i.e., the effect when holding utilization and enrollment constant) on beneficiaries’ cost-sharing responsibilities would depend on the specific revisions and the time horizon examined. As we noted above, modernizing the FFS cost-sharing design while maintaining Medicare’s aggregate share of costs similar to the current design requires a trade-off between the level of the deductible and cap. At the beneficiary level, this design trade-off affects beneficiaries’ annual cost-sharing and the degree to which beneficiaries would be protected from catastrophic costs. One way of viewing how the design trade-off affects beneficiaries is to compare across different designs the median annual cost-sharing responsibility with the level of the cap (see fig. 2). In examining the direct effect of the four illustrative modernized designs we analyzed, we found the following: During year 1, cost-sharing designs that feature relatively low deductibles and relatively high caps would result in a median annual beneficiary cost-sharing responsibility close to or below that of the current design. In contrast, designs with relatively low caps—and therefore greater beneficiary protection from catastrophic costs— would result in a median annual beneficiary cost-sharing responsibility above that of the current design. For example, during year 1 of a design with no deductible, 18 percent coinsurance, and a cap near $10,000, we found that the median annual cost-sharing responsibility would be $479, which is below that of the current design ($621), despite the addition of a cap. In contrast, during year 1 of a design with a $1,225 deductible, 20 percent coinsurance, and a cap near $3,400, the median annual cost-sharing responsibility would be $1,486, which is 2.4 times higher than that of the current design. However, in exchange for this higher median annual cost-sharing responsibility, beneficiaries would have much greater protection from catastrophic costs, as their annual cost-sharing responsibilities would be capped near $3,400. By the end of 8 years, there would still be differences in the median annual beneficiary cost-sharing responsibility across different designs, but they would become less pronounced—despite the significantly different levels of catastrophic protection. As beneficiaries age and become more likely to have catastrophic costs in at least one year, the median annual cost-sharing responsibility would increase, regardless of the cost-sharing design. However, by the end of 8 years the differences in the median annual cost-sharing responsibility across different designs would become less pronounced. For example, the median annual cost-sharing responsibility under the design with a cap near $10,000 would increase from below that of the current design in year 1 to 1.1 times higher than the current design by the end of 8 years. In contrast, the median annual cost-sharing responsibility under the design with the cap near $3,400 would decrease from 2.4 times higher than the current design in year 1 to only 1.6 times higher by the end of 8 years. (See app. I table 4 for more details, including results on our other two illustrative designs and results over 4 years.) The same patterns held when looking at how the design trade-off affects beneficiaries in another way: the percentage of beneficiaries with cost- sharing responsibilities lower and higher than under the current design (see fig. 3). In examining the direct effect of our four illustrative designs, we found the following: During year 1, designs that feature relatively low deductibles and relatively high caps would result in a minority of beneficiaries having cost-sharing responsibilities that are at least $100 higher than under the current design. In contrast, designs with relatively high deductibles and relatively low caps would result in the majority of beneficiaries having cost-sharing responsibilities that are higher than under the current design. For example, during year 1 of a design with no deductible, 18 percent coinsurance, and a cap near $10,000, 16 percent of beneficiaries would have cost-sharing responsibilities at least $100 higher than their responsibilities under the current design. In contrast, during year 1 of a design with a $1,225 deductible, 20 percent coinsurance, and a cap near $3,400, 69 percent of beneficiaries would have cost-sharing responsibilities at least $100 higher than their responsibilities under the current design. By the end of 8 years, there would still be differences across the designs, but they would become less pronounced—despite levels of catastrophic protection that vary significantly. Over a longer time horizon, a larger percentage of beneficiaries would reach the cap at least once, regardless of the cost-sharing design (ranging from 23 percent reaching the cap at least once over 8 years under the design with a cap near $10,000 to 66 percent under the design with a cap near $3,400). However, the subset of these beneficiaries who nonetheless had annual cost-sharing responsibilities at least $100 higher would also increase. Whether this increase would be augmented or offset by the changes over time in the percentage of beneficiaries who never reached the cap and had higher cost-sharing responsibilities would depend on the specific design. For example, the percentage of beneficiaries with annual cost-sharing responsibilities at least $100 higher than the current design would increase from 16 percent in year 1 to 38 percent by year 8 under the design with a cap near $10,000. In contrast, this percentage would decrease from 69 percent in year 1 to 67 percent by year 8 under the design with a cap near $3,400. (See app. I tables 5 and 6 for more details, including results on our other two illustrative designs and results over 4 years.) Modernizing the Medicare FFS cost-sharing design would affect beneficiaries’ costs indirectly through beneficiaries’ and supplemental insurers’ behavioral responses to altered incentives, according to the studies we reviewed and the experts we spoke to. These studies and experts identified several types of behavioral responses that would influence the net effect of a modernized design on beneficiaries’ out-of- pocket costs, including changes in beneficiaries’ demand for, and insurers’ supply of, supplemental insurance; changes in beneficiaries’ utilization of services; changes in Medicare beneficiaries’ enrollment in FFS versus MA; and interactions among these and other behavioral responses, including effects on the price of supplemental insurance. According to studies we reviewed and experts we spoke to, implementing a modernized cost-sharing design would likely trigger changes in the demand for and supply of supplemental insurance. For example, a focus group of current and future Medicare beneficiaries convened by MedPAC and a report from the American Academy of Actuaries stated that the addition of an annual cap would reduce the need of some beneficiaries to purchase supplemental insurance. While beneficiaries who drop their supplemental insurance would then need to pay all their Medicare cost- sharing responsibilities, those might be less than their annual premium for supplemental insurance. Additionally, according to the same MedPAC study and a Congressional Budget Office report, retiree coverage may change under a modernized design. For example, with a cap in place, there would be less difference between employer-sponsored plans and Medicare, and employers may choose to alter the supplemental insurance they offer. CMS officials told us that this would continue the trend of private employers reducing retiree health coverage. Several studies we reviewed and experts we interviewed indicated that implementing a modernized design could also trigger changes in utilization of Medicare services, the extent of which would affect beneficiaries’ out-of-pocket costs. For example, the RAND Health Insurance Experiment (HIE), which some experts consider to be the most comprehensive study on price and utilization, found that patients were “moderately sensitive to price.” The RAND HIE found that patients respond to increases in cost-sharing that they need to pay at least partly out-of-pocket by decreasing their use of some services. Similarly, CMS officials told us that they would expect utilization to decrease as beneficiaries’ out-of-pocket costs increased, while a study in the American Economic Review found that the addition of a copayment led to a decline in office visits. The RAND HIE study suggests that a 10 percent increase in cost-sharing would lead to a 1 to 2 percent decline in patients’ use of services. In the case of the RAND HIE study, cost- sharing affected the number of contacts people initiated with their physician, which impacted preventive care and diagnostic tests. The study found that this could potentially affect patients’ use of both effective and less effective services. According to several studies and interviews with experts, design changes could trigger other behavioral responses. For example, a study by the Kaiser Family Foundation and a report by the Congressional Budget Office both anticipated that a modernized design could change the proportion of Medicare beneficiaries who decide to enroll in FFS or MA. Similarly, officials from the American Academy of Actuaries told us that they would expect a change in demand for MA under a modernized design. Under the current Medicare design, all MA plans have an annual cap that protects beneficiaries from catastrophic medical expenses. Between 2008 and 2017, the percentage of Medicare beneficiaries who chose to enroll in an MA plan increased from 22 to 33 percent. CMS officials told us that the increases in MA enrollment may be due in part to the requirement that MA plans must include an annual cost-sharing cap. The Kaiser Family Foundation study found that a modernized design, similar to that of an MA plan, might incentivize some MA beneficiaries to move back to FFS. According to experts we interviewed and studies we reviewed, different behavioral responses described above would also likely interact and affect beneficiaries’ out-of-pocket costs. CMS officials told us that when all of the factors contributing to out-of-pocket costs are combined, it is difficult to assess the net effect of a modernized cost-sharing design on beneficiaries’ out-of-pocket costs. For example, officials with the National Association of Insurance Commissioners emphasized that as both demand for supplemental insurance and expected utilization changed, supplemental premiums would also change, which would change out-of- pocket costs. Similarly, studies by both MedPAC and the Congressional Budget Office found that changes in beneficiaries’ level of supplemental insurance might trigger additional changes in utilization, which would also result in changes to the pricing of supplemental insurance. Specifically, if a number of relatively healthy beneficiaries dropped their supplemental insurance, and the beneficiaries left were sicker (that is, more costly), premiums for supplemental insurance might increase. Officials from the Congressional Budget Office told us that, conversely, if the more costly beneficiaries dropped their supplemental insurance, premiums might be lower. We provided a draft of this report to the Department of Health and Human Services for comment. The Department provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. The direct effect of modernizing the Medicare fee-for-service (FFS) cost- sharing design (i.e., the effect when holding utilization and enrollment constant) on beneficiaries’ cost-sharing responsibilities would depend on the specific revisions and the time horizon examined. Tables 4, 5, and 6 present the direct effect of modernizing the Medicare FFS cost-sharing design on beneficiaries’ cost-sharing responsibilities under four illustrative designs. Each table presents the direct effect of each illustrative design over 1-, 4-, and 8-year time horizons. In addition to the contact named above, Greg Giusto (Assistant Director), Alison Binkowski, George Bogart, Reed Meyer, Beth Morrison, Brandon Nakawaki, and Brian O’Donnell made key contributions to this report. Also contributing were Todd Anderson, Emei Li, Yesook Merrill, Vikki Porter, and Frank Todisco.", "summary": "To address concerns with the current Medicare FFS cost-sharing design, various groups have proposed modernizing the design to make it simpler and include features found in private plans. These proposals have generally included a single deductible, modified cost-sharing requirements (e.g., a uniform coinsurance), and the addition of a cap on beneficiaries' annual cost-sharing responsibilities. GAO was asked to review how modernized cost-sharing designs would affect beneficiaries' costs over multiple years. This report describes implications of the current cost-sharing design; options for modernizing; and how modernized cost-sharing designs could directly and indirectly affect beneficiaries' costs. GAO reviewed studies related to modernizing Medicare's cost-sharing design and interviewed authors of those studies and other experts. GAO also used summarized Medicare claims data from 2007 to 2014 (the most recent data available) to develop four illustrative modernized designs, each including a single deductible, uniform coinsurance, and an annual cap while maintaining Medicare program spending similar to the current design. For each design, GAO calculated how beneficiaries' annual cost-sharing responsibilities compared with the current design over a 1-, 4-, and 8-year time horizon. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate. GAO and others have raised concerns about the design of Medicare fee-for-service (FFS) cost-sharing—the portion of costs beneficiaries are responsible for when they receive care. The current cost-sharing design has been largely unchanged since Medicare's enactment in 1965, can be confusing for beneficiaries, and can contribute to overuse of services. Additionally, the design leaves some beneficiaries exposed to catastrophic costs that can exceed tens of thousands of dollars annually. The complexity of the design and lack of an annual cap on cost-sharing responsibilities also increases demand for supplemental insurance, which can cost beneficiaries thousands annually and further contribute to overuse of services. Modernizing Medicare FFS's cost-sharing design to include features found in private plans could help address these concerns, but would involve design trade-offs. For example, adding an annual cap on cost-sharing responsibilities while maintaining Medicare's aggregate share of costs similar to the current design would involve a trade-off between the level of the cap and other cost-sharing requirements. In analyzing four illustrative FFS cost-sharing designs, GAO found that the direct effect of modernizing the design on beneficiaries' cost-sharing responsibilities—that is, the effect when holding utilization and enrollment constant—would depend on the specific revisions and the time horizon examined. For example, GAO found that During year 1, cost-sharing designs that feature relatively low deductibles (costs a beneficiary is responsible for before Medicare starts to pay) and relatively high caps would result in a median annual beneficiary cost-sharing responsibility close to or below that of the current design. In contrast, designs with relatively low caps—and therefore greater beneficiary protection from catastrophic costs—would result in a median annual cost-sharing responsibility above that of the current design. By the end of 8 years, there would still be differences in the median annual beneficiary cost-sharing responsibility across different designs, but they would become less pronounced. Modernizing the Medicare FFS cost-sharing design would also affect beneficiaries' costs indirectly through altered incentives. The studies GAO reviewed and experts GAO interviewed identified several types of behavioral responses that would influence the net effect of a modernized design on beneficiaries' out-of-pocket costs, including changes in beneficiaries' demand for and insurers' supply of supplemental insurance; changes in beneficiaries' use of services; changes in Medicare beneficiaries' enrollment in FFS versus Medicare's private plan alternative; and interactions among these and other behavioral responses, including effects on the price of supplemental insurance.", "document_type": "gao"}
{"report": "At TSA headquarters, the Office of Security Operations (OSO) has primary responsibility for operation of the RAP and allocation of TSOs across airports. Within OSO, the Staffing and Scheduling Division oversees the RAP. To allocate staff to the nearly 440 TSA-regulated airports in the United States, OSO is to use a combination of computer- based modeling and line-item adjustments based on airport-specific information. First, the agency is to work with a contractor to evaluate the assumptions—such as rates of expedited screening—used by the computer-based staffing allocation model (model) to determine the optimal number of TSOs at each airport based on airport size and configuration, flight schedules, and the time it takes to perform checkpoint and baggage screening tasks. Second, after the model has determined how many TSOs are required for each airport, headquarters-level staff are to make line item adjustments to account for factors such as differences in staff availability and training needs that affect each airport. Figure 1 below provides additional details regarding TSA’s process to determine the number of TSOs at airports. As previously discussed, in 2007, we recommended that TSA establish a mechanism to periodically assess the assumptions in the RAP (prior to fiscal year 2017, known as the Staffing Allocation Model) to ensure that staffing allocations accurately reflect operating conditions that may change over time. TSA implemented this recommendation by developing an evaluation plan for regularly assessing the assumptions used in the staffing model. Assumptions include the number of passengers or bags that can be screened each hour by TSA equipment and the time TSOs require to operate discrete sections of the screening process, such as conducting pat-downs or searches of passengers’ carry-on baggage. The evaluation plan states that TSA is to assess (1) the time it takes to screen passengers using TSA equipment and (2) the number of staff needed to operate the equipment. Results from these assessments are to inform the assumptions used in the model to determine the base allocation of TSOs to U.S. airports. TSA uses the evaluation plan as well as airport-level characteristics to systematically evaluate the assumptions used in the model on a regular basis: Evaluation plan: TSA’s evaluation plan recommends evaluating the time it takes to perform 19 aspects of passenger and checked baggage screening processes at least every two years and includes detailed procedures for doing so. For instance, the evaluation of passenger screening processes involves observing operations at selected airports to determine the average time it takes for one passenger to remove items of clothing and prepare his or her belongings for screening. Similarly, the evaluation determines how many passengers can be processed each hour during selected aspects of screening, such as by travel document checkers or via advanced imaging technology (AIT), often referred to as body scanners. Individual airport characteristics: Each year, TSA airport-level staff, such as FSDs or their designees, are to review the information in the model to ensure that information on the number of checkpoints and each checkpoint configuration and the number of flights departing the airport each day is accurate. At the airport level, FSDs and their designees are responsible for overseeing TSA security activities, including passenger and checked baggage screening. TSOs at airports follow standard operating procedures that guide screening processes and utilize technology such as AITs or walk through metal detectors (WTMD) to screen passengers and their accessible property. TSOs also inspect checked baggage to deter, detect, and prevent the carriage of any unauthorized explosive, incendiary, or weapon onboard an aircraft. Checked baggage screening is conducted in accordance with standard operating procedures and generally is accomplished through the use of explosives detection systems or explosives trace detection systems. TSA employs an expedited screening program, known as TSA Pre® that assesses passenger risk to aviation security prior to their arrival at an airport checkpoint. According to TSA, expedited screening involves a relatively more efficient and convenient screening process for individuals from whom TSA has obtained sufficient information to determine them to be of lower risk and thus undergo an expedited screening process, compared to the standard screening process a traveler may undergo, for whom TSA does not have such information in advance. Finally, at each airport, TSA is to collect throughput data on the number of passengers screened under both expedited and standard screening and monitor passenger wait times at screening checkpoints. TSA airport officials are to submit passenger throughput and wait time data on a daily basis to OSO’s Performance Management Division at TSA headquarters, which compiles the data through the Performance Measurement Information System (PMIS), TSA’s web-based data collection system. TSA’s OSO and the Office of Security Policy and Industry Engagement (OSPIE) are both responsible for sharing information with stakeholders about airport operations. In response to the Aviation Security Act, OSO issued guidance in October 2016 intended to ensure that FSDs share information with stakeholders. OSPIE communicates TSA information about airport operations, such as how TSOs are allocated across airports, to stakeholders. In fiscal years 2016 and 2017, TSA modified the assumptions used in its model, as needed, to reflect changes identified through annual evaluations performed by a contractor. The contractor is specifically tasked with evaluating the assumptions related to the time needed to screen passengers and their baggage. For example, TSA officials stated that they increased the expected time needed to screen passengers for one type of passenger screening equipment in fiscal year 2017 because the contractor found that the actual time needed was more than the assumption TSA used in fiscal year 2016. Similarly, in fiscal year 2016, TSA allocated fewer staff to review images of checked baggage, compared to previous years, because the contractor’s evaluation determined it took TSOs less time to review the images than the time observed in previous years. In addition to modifying its model based on evaluations performed by contractors, TSA officials at the headquarters level review and modify other assumptions in the model to ensure they are accurate. For example, prompted by the long waits in the spring of 2016, officials stated that they modified the model for the 2017 fiscal year based on their evaluation of the 2016 assumptions. Specifically, TSA assumed that 50 percent of airline passengers would use expedited screening in 2016, but only an average of 27 percent of passengers used expedited screening that year. According to the officials, TSA modified this assumption in fiscal year 2017 and now uses TSA Pre® Program data specific to each individual airport in the model. Similarly, officials told us that, since TSA was established in November 2001, many employees will reach 15 years of service with the federal government in fiscal years 2016 and 2017, resulting in increased annual leave allowances. In response, officials have increased the amount of annual leave they expect employees to use and rely on airport-specific data regarding employee tenure to estimate annual leave for the coming year. TSA has also modified the way it develops assumptions regarding passenger throughput at each airport. For example, beginning in fiscal year 2016, TSA used passenger throughput forecasts to allocate staff commensurate with the expected rate of increase in passenger throughput at each airport. The estimated increase in passenger throughput for each fiscal year is based primarily on national and airport- level data from the previous 3 months from PMIS, TSA’s web-based data collection system, and flight forecast data from the airline industry, as well as additional input from other sources. Prior to fiscal year 2016, TSA planned for passenger throughput during the busiest 28 days from the previous fiscal year and did not adjust the assumption for the annual increase in passenger throughput, which increased two percent in 2014 and four percent in 2015. A TSA headquarters official responsible for overseeing the RAP stated that the agency compared projected passenger throughput to actual passenger throughput for fiscal year 2017 to determine the accuracy of the projections and concluded that no significant changes to the method of forecasting were necessary for fiscal year 2018. According to TSA officials, each airport in the United States has unique characteristics that make it difficult to apply a one-size-fits-all solution to staffing security operations. For instance, officials told us that some airports are allocated additional staff to account for the time needed to transport TSOs to off-site training facilities. Because the staffing allocation resulting from TSA’s model does not reflect the full range of operating conditions at individual airports, TSA headquarters officials use airport-specific information to further adjust allocations by changing individual line items within the allocation after running the model on both an annual and an ad hoc basis. TSA headquarters officials stated that they have developed methodologies for making standard line item adjustments such as training requirements, overtime, and annual and sick leave. Officials told us they review the methodologies each year and use their professional judgement to modify the methodologies to account for changes in airport needs as well as budget constraints. We found that through its process of tailoring staffing allocations to individual airports’ needs, TSA is able to respond to the circumstances at each individual airport. TSA headquarters officials also use airport-specific data on staff availability, training needs, supervisory needs, and additional security layers to manually adjust the model’s staffing allocation output at a line item level. For instance, headquarters officials use the previous years’ data on staff sick leave for each airport to evaluate whether they are allocating the appropriate amount of sick leave to their staff allocations on an individual airport basis. According to TSA headquarters officials, sick leave use can vary by airport and region of the country. Similarly, officials stated that they adjust the model’s output to account for individual airport staff’s training needs so that each airport’s staff can meet TSA’s annual training requirements. In addition, according to TSA officials at both the headquarters and airport levels, airport-level officials can request exceptions—modifications to their staffing allocation—based on unusual airport conditions that are difficult to address, such as problematic checkpoint configurations or lack of space for security operations. For instance, officials at one airport said that they had been granted exceptions for one checkpoint because pillars and curves within the checkpoint prevented the lanes in the checkpoint from screening passengers at the rate assumed by the model. TSA officials at the headquarters level review requests for exceptions and use their professional judgement to determine whether the exception will be granted. Finally, in some cases, TSA may adjust an airport’s staffing allocation outside of the annual staffing allocation process and may do so as the result of significant and unforeseen changes in airport operations. For instance, TSA officials stated that one airport was allocated additional staff for the remainder of the fiscal year when the airport opened a new terminal mid-year so that the additional checkpoints could be properly staffed. Officials at another airport we visited said that they had been allocated additional staff when an airline extended its operational hours to ensure appropriate staffing for the additional hours of operation. TSA collects passenger wait time and throughput data and uses those data to monitor daily operations at airports. TSA’s Operations Directive (directive), Reporting Customer Throughput and Wait Times, provides instructions for collecting and reporting wait time and passenger throughput data for TSA screening lanes. Regarding wait time data, according to the directive, FSDs or their designees at all Category X, I, and II airports must measure wait times every operational hour in all TSA expedited and standard screening lanes. The directive requires wait times to be measured in actual time, using a verifiable system such as wait time cards, closed circuit television monitoring, or another confirmable method. The directive indicates that wait times should be measured from the end of the line in which passengers are waiting to the WTMD or AIT units. FSDs or their designees at Category III and IV airports may estimate wait times initially, but the directive requires them to measure actual wait times when wait times are estimated at 10 minutes or greater. The directive also requires FSDs or their designees to collect passenger throughput data directly from the WTMD and AIT units. According to TSA headquarters officials, the machines have sensors that collect the number of passengers that pass through each hour, and TSOs retrieve the data directly from the units. All airports regardless of category are required to enter their wait time and throughput data daily into PMIS, TSA’s web-based data entry program, no later than 3:30 AM Eastern Time of the next calendar day so that the data can be included in the morning’s Daily Leadership Report (discussed in more detail below). To monitor operations for all airports, TSA compiles a daily report utilizing a variety of PMIS data points, including wait time and throughput data. The Office of Security Operations’ Performance Management Division disseminates the Daily Leadership Report to TSA officials, including regional directors and FSDs and their designees every morning detailing the previous day’s wait times and throughput figures, among other data points. The Performance Management Division includes a quality assurance addendum with each Daily Leadership Report, indicating missing or incorrect data, to include wait time and throughput data, and TSA has procedures in place intended to ensure officials at the airports correct the data in PMIS within 2 weeks. In addition to the Daily Leadership Report, TSA utilizes wait time and throughput data to monitor airport operations at 28 airports in near real time. In May 2016, TSA established the Airport Operations Center (AOC) that conducts near real time monitoring of the operations of 28 airports that, according to TSA headquarters officials, represent the majority of passenger throughput nationwide or are operationally significant. TSA requires the 28 airports monitored by the AOC to enter passenger wait time data and throughput data into PMIS hourly (whereas the remaining airports are only required to submit data once daily, by 3:30 AM Eastern Time, as described above) so that AOC officials can monitor the operations in near real time. In addition, TSA officials at airports are required to report to the AOC when an event occurs—such as equipment malfunctions, weather-related events, or unusually high passenger throughput—that affects airport screening operations and results in wait times that are greater than TSA’s standards of 30 minutes in standard screening lanes or greater than 15 minutes in expedited screening lanes. If an airport is undergoing a period of prolonged wait times, the AOC coordinates with the Regional Director and the FSD to assist in deploying resources. For example, over the course of the summer of 2016, after certain airports experienced long wait times in the spring of 2016 as confirmed by our analysis, the AOC assisted in deploying additional passenger screening canines and TSOs to those airports that experienced longer wait times. The AOC disseminates a morning and evening situational report to TSA airport-level officials and airport stakeholders summarizing nationwide wait times, highlighting wait times at the top airports and any hot spots (unexpected passenger volume or other operational challenges) that may have occurred since the most recent report was issued. In addition to the near real time monitoring of the 28 airports, the AOC also monitors operations at all other airports and disseminates information to airports and stakeholders as needed. To determine the extent to which TSA exceeded its wait time standards, we analyzed wait time data for the 28 airports monitored by the AOC for the period of January 2015 through May 2017 for both standard and expedited screening. Our analysis shows that TSA met its wait time standard of less than 30 minutes in standard screening at the 28 AOC airports 99.3 percent of the time for the period of January 2015 through May 2017. For expedited screening for the same time period at the same airports, we found that 100 percent of the time passengers were reported to have waited 19 minutes or less. Additionally, our analysis confirmed that the percentage of passengers in standard screening waiting over 30 minutes increased in 2016 during the months of March, April, and May as compared to 2015 at all 28 airports monitored by the AOC. FSDs and their staff at the airports we visited identified a variety of tools that they utilize to respond to increases in passenger wait times and/or throughput. TSOs from the National Deployment Force (NDF)—teams of additional TSOs—are available for deployment to airports to support screening operations during major events and seasonal increases in passengers. For example, TSA officials at one airport we visited received NDF officers during busy holiday seasons and officials at another airport received officers during the increase in wait times in the spring and summer of 2016. TSA officials at select airports use passenger screening canines to expedite the screening process and support screening operations during increased passenger throughput and wait time periods. For example, TSA officials at one airport we visited emphasized the importance of passenger screening canines as a useful tool to minimize wait times and meet passenger screening demands at times when throughput is high. Officials at another airport we visited rely on these canines in busy terminals during peak periods. According to officials at two of the airports we visited, the use of passenger screening canines helped them to reduce wait times due to increased passenger volumes in the spring and summer of 2016. TSA officials at airports also utilize part-time TSOs and overtime hours to accommodate increases in passenger throughput and wait times. For example, according to officials at all eight of the airports we visited, they use overtime during peak travel times, such as during holiday travel seasons, and officials usually plan the use of overtime in advance. Additionally, TSA officials at four of the airports we visited told us they use part-time TSOs to help manage peak throughput times throughout the day. According to TSA officials at two of the airports we visited, they move TSOs between checkpoints to accommodate increases in passenger throughput at certain checkpoints and to expedite screening operations. For example, TSA officials at one airport we visited have a team of TSOs that terminal managers can request on short notice. Officials at the other airport estimated that they move TSOs between terminals about 40 times per day. TSA headquarters has taken steps intended to improve information sharing with stakeholders about staffing and related screening procedures at airports. For example, TSA officials hold daily conference calls with industry association, airline, and airport officials at the 28 airports monitored by the AOC. According to TSA headquarters officials, TSA established the daily conference call as a mechanism intended to ensure timely communication with stakeholders and to help identify and address challenges in airport operations such as increases in passenger wait times. Also, TSA headquarters officials stated that they conducted a series of presentations and meetings with industry, airline, and airport officials to discuss TSA’s RAP, security enhancements at airports, and airport screening processes, among other things. For example, TSA’s headquarters officials shared information about the fiscal year 2017 RAP in October 2016 during a briefing at an industry conference and a meeting with airline representatives, airline engineers, and Federal Aviation Administration officials. Additionally, TSA headquarters officials facilitated a stakeholder meeting in May 2017 to discuss planned improvements for the TSA Pre® Program and met with stakeholders in June 2017 to discuss security enhancements and changes to screening procedures for carry-on baggage. In addition to headquarters-level initiatives, at the eight airports we visited, we found that FSDs shared information with airport and airline officials by meeting on an ongoing basis to discuss TSA staffing and related screening procedures. For example, according to the FSDs and airline and airport officials at all eight airports we visited, FSDs met with stakeholders on a daily, weekly, monthly, or quarterly basis. During these meetings, FSDs and airline and airport officials told us that FSDs discussed TSO staffing levels at the airports, instances when passenger screening wait times were long at security checkpoints, and TSA screening equipment performance, among other things. Stakeholders told us that TSA headquarters officials and most FSDs improved information sharing since fiscal year 2016. With regard to TSA headquarters officials’ information sharing efforts, officials from all three industry associations we interviewed stated that, since fiscal year 2016, TSA headquarters improved information sharing with their association member companies and attributed that improvement, in part, to the daily conference call between TSA and stakeholders. For example, officials from one industry association stated that the calls benefited members by facilitating collaboration with TSA to more quickly identify and address problems, such as malfunctioning screening equipment, before the problems negatively affected passengers. An official from another industry association told us that the daily conference call improved communication substantially between TSA and the organization by providing a regular opportunity to discuss airport security issues and TSA’s plans to resolve those issues. Additionally, stakeholders we interviewed generally reported positive relationships or improved information sharing with FSDs, but also noted differences in the type and extent of information that FSDs shared. For example, officials at seven of eight airlines and all eight airports we visited stated that they have positive relationships with their FSDs and that their FSDs were accessible and available when needed, while the remaining airline official noted improving access to information. Furthermore, officials from all three industry associations cited improved information sharing between their members at airports and FSDs since fiscal year 2016, but officials from two association noted that some FSDs still do not regularly share information, such as changes in the number of TSOs staffed at individual airports. According to TSA headquarters officials, stakeholders can elevate any problems they experience with FSDs sharing information to regional directors who are responsible for ensuring that FSDs engage regularly with stakeholders. We provided a draft of this product to DHS for comment. We received technical comments which we incorporated as appropriate. We are sending copies of this report to the Secretary of Homeland Security, the Administrator of TSA and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix I. In addition to the contact named above, Ellen Wolfe, Assistant Director; Joel Aldape, David Alexander, Chuck Bausell, David Beardwood, Wendy Dye, Miriam Hill, Susan Hsu, Thomas Lombardi, Kevin Newak, Heidi Nielson, and Natalie Swabb made significant contributions to this report.", "summary": "TSA employs about 43,000 TSOs who screen over 2 million passengers and their baggage each day at airports in the United States. TSA allocates TSOs to airports using both a computer-based staffing model and information from airports that are intended to provide each airport with the optimum number of TSOs. In the spring of 2016, long screening checkpoint lines at certain U.S. airports raised questions about TSA's process for allocating TSOs to airports. The Aviation Security Act of 2016 includes a provision for GAO to review TSA's process for allocating TSOs. This report examines how (1) TSA modifies staffing assumptions and tailors staffing levels to airports' needs, (2) TSA monitors wait times and throughput and adjusts resources accordingly, and (3) TSA shares information with stakeholders about staffing and related screening procedures at airports. GAO reviewed TSA documentation describing how the agency modifies staffing assumptions and manages stakeholder coordination. GAO also analyzed passenger wait time and throughput data from January 2015 through May 2017 for the 28 airports monitored by headquarters. GAO visited eight airports selected on the basis of passenger volume and other factors and interviewed TSA officials and stakeholders at those locations. GAO is not making any recommendations. The Transportation Security Administration (TSA) modifies staffing assumptions used in its computer-based staffing model (model) and tailors staffing levels to individual airport needs. Specifically, TSA works with a contractor annually to evaluate the assumptions used in the model and modifies the model's assumptions as needed. For example, TSA adjusted its model after contractor evaluations conducted in fiscal years 2016 and 2017 found that transportation security officers (TSO) needed more time to screen passengers and their baggage when using one type of screening equipment. Moreover, in 2016, TSA began using forecasts on the number of passengers screened at each airport's checkpoints (throughput) to better allocate staff commensurate with the expected rate of increase in passenger throughput at each airport. Furthermore, prompted by the long wait times at some airports in 2016, for the 2017 model TSA officials used actual expedited screening data, specific to each individual airport, rather than relying on the system-wide estimate used in 2016. TSA officials also use other information specific to each airport—such as staff training needs—to further tailor the TSO allocation because the initial allocation resulting from the model does not reflect the full range of operating conditions at individual airports. TSA uses data to monitor passenger wait times and throughput on a daily basis and responds to increases. For example, TSA's Airport Operations Center (AOC) monitors daily wait times and passenger throughput from 28 airports that TSA officials say represent the majority of passenger throughput nationwide or are operationally significant. Furthermore, TSA officials at airports are required to report to the AOC when an event occurs—such as equipment malfunctions—that affects airport screening operations and results in wait times that are greater than 30 minutes in standard screening lanes. GAO analyzed wait time data for the AOC-monitored airports for the period of January 2015 through May 2017 and found that TSA's reported wait times met its standard of less than 30 minutes in standard screening 99 percent of the time. Within that time frame, two airports accounted for the longest wait times in the spring of 2016. TSA officials identified several tools, such as passenger screening canines, that they use to respond to increases in passenger wait times at these airports. TSA has taken steps to improve information sharing with airline and airport officials (stakeholders) about staffing and related airport screening operations, and most stakeholders GAO interviewed reported improved satisfaction with information sharing. However, some stakeholders noted differences in the type and extent of information shared. According to TSA officials, stakeholders can elevate any problems they experience with information sharing within TSA to ensure information is shared regularly with stakeholders.", "document_type": "gao"}
{"report": "The National Defense Authorization Act (NDAA) for Fiscal Year 1995 authorized the Secretary of Defense to conduct personnel demonstration projects at the department’s laboratories designated as Science and Technology Reinvention Laboratories. The demonstration projects were established to give laboratory managers more authority and flexibility in managing their civilian personnel. These projects function as the vehicles through which the department can determine whether changes in personnel management concepts, policies, or procedures, such as flexible pay or hiring authorities, would result in improved performance and would contribute to improved DOD or federal personnel management. Table 1 presents a list of the 15 defense laboratories included in the scope of our review. The Defense Laboratories Office—within the Office of the Undersecretary of Defense for Research and Engineering (Research and Engineering)— carries out a range of core functions related to the defense labs, including the aggregation of data, analysis of capabilities, and alignment of activities, as well as advocacy for the defense labs. The National Defense Authorization Act for Fiscal Year 2017 gave authority to conduct and evaluate defense laboratory personnel demonstration projects to the Under Secretary of Defense for Research and Engineering and, accordingly, the Defense Laboratories Office. The Defense Laboratories Office supports the Research and Engineering mission by helping to ensure comprehensive department-level insight into the activities and capabilities of the defense laboratories. The LQEP was chartered on April 15, 1994 to improve productivity and effectiveness of the defense laboratories through changes in, among other things, personnel management and contracting processes. The NDAA for Fiscal Year 2017 established a new organizational structure for the program, adding two new panels while also specifying that two previously existing subpanels on personnel and infrastructure would continue to meet. The NDAA for Fiscal Year 2017 requires the department to maintain a LQEP Panel on Personnel, Workforce Development, and Talent Management—one of the four panels established by a February 14, 2018 charter signed by the Under Secretary of Defense for Research and Engineering. The purpose of the panel is to help the LQEP achieve the following goals: (1) review and make recommendations to the Secretary of Defense on current policies and new initiatives affecting the defense laboratories; (2) support implementation of quality enhancement initiatives; and (3) conduct assessments and data analysis. The LQEP Panel on Personnel, Workforce, Development, and Talent Management includes representatives from each of the defense laboratories, as well as from the Army, Navy, Air Force, appropriate defense agencies, and Office of the Under Secretary of Defense for Research and Engineering. A hiring authority is the law, executive order, or regulation that allows an agency to hire a person into the federal civil service. Among other roles, hiring authorities determine the rules (or a subset of rules within a broader set) that agencies must follow throughout the hiring process. These rules may include whether a vacancy must be announced, who is eligible to apply, how the applicant will be assessed, whether veterans preference applies, and how long the employee may stay in federal service. Hiring authorities may be government-wide or granted to specific agencies. Competitive (Delegated) Examining. This is the traditional method for making appointments to competitive service positions, and it requires adherence to Title 5 competitive examining requirements. The competitive examining process requires agencies to notify the public that the government will accept applications for a job, screen applications against minimum qualification standards, apply selection priorities such as veterans preference, and assess applicants’ relative competencies or knowledge, skills, and abilities against job-related criteria to identify the most qualified applicants. Federal agencies typically assess applicants by rating and ranking them based on their experience, training, and education. Figure 1 depicts the Office of Personnel Management’s (OPM) 80-day standard roadmap for hiring under the competitive process. Governmentwide (Title 5) Direct Hire Authority. This authority allows agencies to appoint candidates to positions without regard to certain requirements in Title 5 of the United States Code, with OPM approval. A direct hire authority expedites hiring by eliminating specific hiring rules. In order for an agency to use direct hire, OPM must determine that there is either a severe shortage of candidates or a critical hiring need for a position or group of positions. When using the direct hire authority, agencies must adhere to certain public notice requirements. The Pathways Programs. These programs were created to ensure that the federal government continues to compete effectively for students and recent graduates. The current Pathways Programs consist of the Internship Program, the Recent Graduates Program, and the Presidential Management Fellows Program. Initial hiring is made in the excepted service, but it may lead to conversion to permanent positions in the competitive service. Veterans-Related Hiring Authorities. These include both the Veterans Recruitment Appointment Authority and the Veterans Employment Opportunities Act authority. The Veterans Recruitment Appointment authority allows for certain exceptions from the competitive examining process. Specifically, agencies may appoint eligible veterans without competition under limited circumstances or otherwise through excepted service hiring procedures. The Veterans Employment Opportunities Act authority is a competitive service appointment authority that allows eligible veterans to apply for positions announced under merit promotion procedures when an agency accepts applications from outside of its own workforce. The Defense Laboratory Direct Hire Authorities. These include the following four types of direct hire authorities granted to the defense laboratories by Congress for hiring STEM personnel: (1) direct hire authority for candidates with advanced degrees; (2) direct hire authority for candidates with bachelor’s degrees; (3) direct hire authority for veterans; and (4) direct hire authority for students currently enrolled in a graduate or undergraduate STEM program. The purpose of these direct hire authorities is to provide a streamlined and accelerated hiring process to allow the labs to successfully compete with private industry and academia for high-quality scientific, engineering, and technician talent. The Expedited Hiring Authority for Acquisition Personnel. This authority permits the Secretary of Defense to designate any category of positions in the acquisition workforce as positions for which there exists a shortage of candidates or there is a critical hiring need; and to utilize specific authorities to recruit and appoint qualified persons directly to positions so designated. The Science, Mathematics, and Research for Transformation (SMART) Scholarship-for-Service Program. This program was established pursuant to 10 USC §2192a, as amended, and is funded through the National Defense Education Program. The SMART scholarship for civilian service program provides academic funding in exchange for completing a period of full-time employment with DOD upon graduation. The labs have used the defense laboratory-specific direct hire authorities more than any other category of agency-specific or government-wide hiring authority. Defense laboratory officials we surveyed reported that these direct hire authorities had been the most helpful to the labs’ efforts to hire highly qualified candidates for STEM positions, and also reported that the use of certain incentives had been helpful in this effort. However, even with access to the authorities, these defense laboratory officials identified challenges associated with the hiring process that affected their ability to hire highly qualified candidates. For fiscal years 2015 through 2017, the defense laboratories used laboratory-specific direct hire authorities more often than any other category of hiring authorities when hiring STEM personnel. Moreover, the defense laboratories’ use of these direct hire authorities increased each year from fiscal year 2015 through fiscal year 2017. Of the 11,562 STEM hiring actions in fiscal years 2015 through 2017, approximately 46 percent were completed using one of the defense laboratory direct hire authorities. The second and third most used hiring authorities were internal hiring actions and the expedited hiring authority for acquisition personnel, each of which comprised approximately 12 percent of the hiring actions during the time period. Table 2 provides information on the overall number of hiring actions by hiring authority for fiscal years 2015 through 2017. The laboratory-specific direct hire authorities include the direct hire authorities for candidates with advanced degrees, candidates with bachelor’s degrees, and candidates who are veterans—authorities were granted by Congress in prior legislation. Among the defense laboratory direct hire authorities, the direct hire authority for candidates with bachelor’s degrees was used for 55 percent of all direct hires, for a total of 2,920 hiring actions for fiscal years 2015 through 2017. During the same time frame, the labs used the direct hire authority for candidates with advanced degrees for approximately 36 percent (1,919 hiring actions) of all direct hires, and the direct hire authority for veteran candidates for approximately 9 percent (455 hiring actions). In addition, for less than one percent of the direct hires, either the labs used another category of laboratory-specific direct hire authority or we were unable to determine which type of direct hire authority was used during those same three fiscal years. See table 3 for information on the defense labs’ use of the defense laboratory-specific direct hire authorities for fiscal years 2015 through 2017. In fiscal year 2017 the defense labs used the defense laboratory direct hire authorities for 54 percent of STEM hiring actions completed, representing an increase of approximately 16 percentage points relative to fiscal year 2015, when 38 percent were hired under defense lab direct hire authorities. For additional information on the labs’ use of hiring authorities in fiscal years 2015 through 2017, as well as hiring authority data by laboratory, see appendix IV. One laboratory official explained that the increased use of the direct hire authorities could be a result of the NDAA for Fiscal Year 2016, which increased the laboratories’ allowable use of the direct hire authority for candidates with bachelor’s degrees from 3 percent to 6 percent, and use of the direct hire authority for veterans from 1 percent to 3 percent, of the total number of scientific and engineering positions at each laboratory at the end of the preceding fiscal year. The direct hire authority for candidates with bachelor’s degrees was used most often—for 1,151 out of 1,835 hiring actions—as compared with the other direct hire authorities in fiscal year 2017. See table 4 for more information on the laboratories’ use of all hiring authorities in fiscal year 2017. In addition, table 5 provides more information on the labs’ use of the direct hire authorities in fiscal year 2017. Defense laboratory officials we surveyed most frequently identified the three defense laboratory-specific direct hire authorities as having helped to hire highly qualified candidates (see figure 2) and to hire quickly (see figure 3). Specifically, 15 of 16 respondents to our survey stated that each of the three direct hire authorities had been helpful in hiring highly qualified candidates, and that the direct hire authorities for veterans and for candidates with an advanced degree had helped them to hire quickly. Moreover, all 16 survey respondents stated that the direct hire authorities for candidates with a bachelor’s degree had helped them to hire quickly. Among the three direct hire authorities, the one for candidates with bachelor’s degrees was reported to be the most helpful to the laboratories’ hiring efforts, according to our survey results. A majority of the laboratory officials we surveyed also stated that the Expedited Hiring Authority and the Science, Mathematics, and Research for Transformation (SMART) Program had both helped facilitate their efforts to hire highly qualified candidates and to hire them quickly. According to our survey, the least helpful hiring authority that lab officials reported using was the delegated examining unit authority. Six of 16 survey respondents stated that the delegated examining unit authority had helped them to hire highly qualified candidates, while 9 of 16 stated that the authority had hindered this effort. Three of 16 survey respondents stated that the delegated examining unit authority had helped them to hire quickly, while 12 of 16 stated that the use of this authority had hindered their ability to hire quickly. During our interviews with laboratory officials, hiring officials and supervisors described the defense laboratory direct hire authorities as being helpful in their hiring efforts. For example, hiring officials from one lab stated that the direct hire authorities were the easiest authorities to use, and that since their lab had started using them, job offer acceptance rates had increased and their workload related to hiring had decreased. A hiring official from another laboratory stated that the use of direct hire authorities had allowed their lab to be more competitive with the private sector in hiring, which is useful due to the high demand for employees in research fields. A supervisor from one lab stated that the use of direct hire authorities was not only faster than the competitive hiring process, but it also allowed supervisors a greater ability to get to know candidates early in the process to determine whether they met the needs of a position. In comparison, hiring managers we interviewed at one laboratory stated that the Pathways Program is not an effective means of hiring students because the program requires a competitive announcement. Supervisors also stated that the application process for Pathways can be cumbersome and confusing for applicants and may cause quality applicants to be screened out early. Defense laboratory officials who responded to our survey also stated that the process takes too long and that quality applicants may drop out of the process due to the length of the process. Defense laboratory hiring data also indicated that use of the defense laboratory direct hire authorities resulted in faster than median hiring times. As shown in table 6, the median time to hire for STEM positions at the defense laboratories in fiscal year 2017 was 88 days. The median time to hire when using the defense laboratories’ direct hire authorities, Pathways, or the SMART program authority was faster than that of the median for all categories combined. The median time to hire when using the competitive hiring process was approximately twice as long as when using the labs’ direct hire authorities. Our full analysis of defense laboratory hiring data, including the time to hire by hiring authority category, for fiscal years 2015 through 2017 can be found in appendix V. Defense laboratory officials also cited the use of incentives as helpful in hiring highly qualified candidates, as shown in figure 4. According to our survey results, the defense laboratories’ flexibility in pay setting under their demonstration project authority was generally considered to be the most helpful incentive, with 13 of 16 survey respondents stating that this incentive had very much helped them to hire highly qualified candidates. During interviews, laboratory officials described the use of these incentives as being particularly helpful if a candidate is considering multiple job offers because the incentives can help make the lab’s offer more competitive with offers from other employers. Multiple hiring officials stated that they would generally not include such incentives in an initial offer, but that if the candidate did not accept that offer, they would consider increasing the salary or offering a bonus. A hiring official from one lab stated that his lab has not offered many recruitment bonuses in recent years, because their acceptance rate has been sufficiently high without the use of that incentive. Many of the recently hired lab employees whom we interviewed also cited incentives, including bonuses and student loan repayment, as factoring into their decisions to accept the employment offers for their current positions. For example, one recently hired employee stated that the lab’s student loan repayment program was a significant factor in his decision to accept employment at the lab rather than with private industry. Recently hired employees also cited less tangible benefits of working at the labs, including the work environment, job stability, and type of work performed, as key factors in their decisions to accept their current positions. One newly hired employee stated that, while she could earn more money in a private-sector job, the defense laboratory position would afford her the freedom to pursue the type of work she is currently doing, and that this was a major consideration in her decision to accept it. Another newly hired employee similarly stated that he was interested in the type of research conducted at the lab where he now works, and that he was attracted to the opportunity to contribute to the national defense, while also taking advantage of benefits that support the pursuit of higher education. Defense laboratory officials we surveyed reported that, although the available hiring authorities and incentives are helpful, they experience a range of challenges to their ability to hire highly qualified candidates, as shown in figure 5, ranging in order from the most to the least frequently cited. In addition, figure 6 shows the extent to which officials reported selected top challenges that hindered their respective labs’ abilities to hire highly qualified candidates. Defense laboratory officials described how hiring challenges identified in our survey affect their ability to hire high quality candidates. Specifically, these challenges are as follows: Losing quality candidates to the private sector: Fifteen of 16 survey respondents stated that this was a challenge, and 12 of the 15 stated that this challenge had somewhat or very much hindered their lab’s ability to hire highly qualified candidates for STEM positions since October 2015. Hiring officials and supervisors we interviewed stated that private-sector employers can make on-the-spot job offers to candidates at college career fairs or other recruiting events, whereas the labs are unable to make a firm job offer until later in the hiring process. Government-wide hiring freeze: Fifteen of 16 survey respondents identified this as a challenge, with 13 of those reporting that it had either somewhat or very much hindered their lab’s ability to hire highly qualified candidates for STEM positions since October 2015. Multiple hiring officials and supervisors we interviewed stated that they had lost candidates whom they were in the process of hiring because the candidates had accepted other offers due to the delays created by the hiring freeze. In addition, some officials stated that, although the freeze had been lifted, their labs’ hiring efforts were still affected by backlogs created by the freeze, or were adapting to new processes that were implemented as a result of the freeze. Delays with the processing of security clearances: Fifteen of 16 survey respondents cited this as a challenge; 12 of the 15 stated that this challenge had somewhat or very much hindered their lab’s ability to hire highly qualified candidates for STEM positions since October 2015. A supervisor from one lab stated that he was in the process of trying to hire two employees whose hiring actions had been delayed due to the security clearance process. The supervisor stated that he had been told it could potentially take an additional 6 months to 1 year to complete the process, and that he believed this may cause the candidates to seek other employment opportunities. In other cases, hiring officials stated that employees may be able to begin work prior to obtaining a clearance, but that they may be limited in the job duties they can perform while waiting for their clearance to be granted. The government-wide personnel security clearance process was added to GAO’s High Risk List in 2018, based on our prior work that identified, among other issues, a significant backlog of background investigations and delays in the timely processing of security clearances. Inability to extend a firm job offer until a final transcript is received: Fourteen of 16 survey respondents stated that this was a challenge, with 10 of the officials responding that it had somewhat or very much hindered their lab’s ability to hire highly qualified candidates. One hiring official stated that top candidates will often receive 5 to 10 job offers prior to graduation, and that his lab’s may be the only one of those offers that is characterized as tentative. Multiple officials noted that career fairs can often occur several months prior to graduation, so the lab would have to wait for the duration of this time before extending a firm offer to a candidate who has been identified. Delays with processing personnel actions by the external human resources office: Thirteen of 16 survey respondents stated that this presented a challenge, and 9 of the 13 stated that this challenge had somewhat or very much hindered their lab’s ability to hire highly qualified candidates for STEM positions since October 2015. Multiple hiring officials stated that employees at their human resource offices may not have an understanding of either the technical nature of the positions being filled at the lab or the lab’s unique hiring authorities, and that this lack of knowledge could create delays. Other officials noted that their servicing human resource offices seemed to be inflexible regarding certain paperwork requirements. For example, officials at one lab stated that their human resource office requires candidates’ resumes to be formatted in a particular way, and that they have been required to ask candidates to make formatting changes to their resumes. An official at another lab stated that the lab has faced similar challenges with regard to the formatting of transcripts and has had to request clarifying documentation from the university. In both cases, the officials described these requirements as embarrassing, and as a delay to the hiring process. Further, both a supervisor and a newly hired employee we interviewed noted that it is difficult to learn the status of an application when it is being processed by the human resource office. Overall length of the hiring process: Twelve of 16 survey respondents cited this as a challenge; 11 of the 12 stated that this challenge had somewhat or very much hindered their lab’s ability to hire highly qualified candidates for STEM positions since October 2015. Hiring officials and supervisors we interviewed stated that their lab had lost candidates due to the length of the hiring process. One supervisor we interviewed stated that he has encountered candidates who really wanted to work at his lab but had had to pursue other opportunities because they could not afford to wait to be hired by the lab. Multiple newly hired employees we interviewed described the process as slow or lengthy, but described reasons why they were willing to wait. For example, some employees were already working at their lab in a contractor or post-doctoral fellowship position, and accordingly they were able to continue in these positions while completing the hiring process for the permanent positions they now hold. One employee stated that if the process had gone on any longer, he likely would have accepted another offer he had received, while another employee stated that he knew of at least two post- doctoral fellows at his lab who chose not to continue in the hiring process for a permanent position at the lab due to the length of the hiring process. The department and the defense laboratories track hiring data that can be used to evaluate some aspects of the individual labs’ hiring efforts, but the Defense Laboratories Office has not routinely obtained or monitored these data or evaluated the effectiveness of hiring, including the use of hiring authorities, across the defense laboratories as a whole. Laboratory hiring data are captured at the department level in the Defense Civilian Personnel Data System (DCPDS)—the department’s system of record for personnel data. In addition, the individual defense laboratories track hiring data, including the type of hiring authority used and certain milestone dates that can be used to measure the length of the hiring process, known as time to hire. According to OPM guidance and our prior work, time to hire is a measure that may inform about the effectiveness of the hiring process, and federal agencies are required to report time to hire for certain types of hiring actions to OPM. Defense laboratory officials stated that, from their perspectives, the time- to-hire metric does not sufficiently inform about the effectiveness of the use of specific authorities, particularly when using the most commonly tracked milestones—from the initiation of a request for personnel action to an employee’s entrance-on-duty date. For example, officials stated that when a direct hire authority is used to hire a candidate who is completing the final year of his or her educational program, the lab may identify and provide a tentative offer to this candidate several months prior to graduation, consistent with private- sector recruitment methods. In this case, officials stated that the length of time between the initiation of the request for personnel action and the candidate’s entrance-on-duty date, following his or her graduation, could span a period of several months. According to defense laboratory officials, the total number of days for this hiring action gives the appearance that the use of the hiring authority was not efficient in this case; however, officials stated that it would have been effective from the supervisor’s perspective, because the use of the hiring authority resulted in the ability to recruit a highly qualified candidate in a manner that was more competitive with the private sector. Further, time-to-hire data, as reflected by the milestone dates that are currently tracked across the defense laboratories, may not reflect a candidate’s perception of the length of the hiring process. More specifically, a candidate may consider the hiring process to be completed upon receiving a job offer (either tentative or final), which could occur weeks or months before the candidate’s entrance-on-duty date, the commonly used end-point for measuring time to hire. According to officials, the length of time from when the offer is extended to entrance on duty can be affected by a candidate’s individual situation and preferences, such as the need to complete an educational program or fulfill family or professional responsibilities prior to beginning work in the new position. In other cases, certain steps of the hiring process, such as completing the initial paperwork or obtaining management approval, may occur after a candidate has been engaged but prior to the initiation of a request for personnel action—the commonly used start-point for measuring time to hire. In this situation, the candidate’s perception of the length of the hiring process may be longer than what is reflected by the time-to-hire data. For the reasons described above, some defense laboratories measure time to hire using milestones that they have determined more appropriately reflect the effectiveness of their hiring efforts. For example, officials from one lab stated that they have sought to measure the length of the hiring process that occurs prior to the request for personnel action, while officials from some labs stated that they measure time to hire using the tentative offer date as an end-point. In addition, some laboratories informally collect other types of data that they use in an effort to evaluate their hiring efforts, such as the reasons why candidates decline a job offer or feedback on the hiring process from newly hired employees. However, officials from the Defense Laboratories Office stated that their office has not conducted any review of the effectiveness of defense laboratory hiring, including the use of hiring authorities, across the labs. The National Defense Authorization Action for Fiscal Year 2017 gave authority to conduct and evaluate defense laboratory personnel demonstration projects to the Office of the Under Secretary of Defense for Research and Engineering, under which the Defense Laboratories Office resides. Defense Laboratories Office officials stated that the office has not evaluated the effectiveness of defense laboratory hiring because it does not have access to defense laboratory hiring data, has not routinely requested these data from the labs or at the department level to monitor the data, and has not developed performance measures to evaluate the labs’ hiring. As noted, laboratory hiring data are captured at the department level in DCPDS and in a variety of service- and laboratory- specific systems and tools. However, the Defense Laboratories Office does not have access to these data and, according to one official, the office would not have access to defense laboratory hiring data unless officials specifically requested them from the labs or from the Defense Manpower Data Center, which maintains DCPDS. According to the official, the Defense Laboratories Office has not routinely requested such data in the past, in part because their role did not require evaluation of such data. In addition, the Defense Laboratories Office has not developed performance measures to evaluate the effectiveness of hiring across the defense laboratories or the labs’ use of hiring authorities. An official from the Defense Laboratories Office stated that the office may begin to oversee the effectiveness of the defense laboratories’ hiring efforts and, in doing so, may consider establishing performance measures to be used consistently across the labs, which could include time-to-hire or other measures. However, as of March 2018, the office had not established such measures for use across the defense laboratories nor provided any documentation on any planned efforts. Standards for Internal Control in the Federal Government states that management should design appropriate types of control activities to achieve the entity’s objectives, including top-level reviews of actual performance and the comparison of actual performance with planned or expected results. Further, consistent with the principles embodied in the GPRA Modernization Act of 2010, establishing a cohesive strategy that includes measurable outcomes can provide agencies with a clear direction for implementation of activities in multi-agency cross-cutting efforts. We have previously reported that agencies are better equipped to address management and performance challenges when managers effectively use performance information for decision making. Without routinely obtaining and monitoring defense laboratory hiring data and developing performance measures, the Defense Laboratories Office cannot effectively oversee the effectiveness of hiring, including the use of hiring authorities, at the defense laboratories. Specifically, without performance measures for evaluating the effectiveness of the defense laboratories’ hiring, and more specifically the use of hiring authorities, the department lacks reasonable assurance that these authorities—in particular, those granted by Congress to the defense laboratories—are resulting in improved hiring outcomes. In addition, without evaluating the effectiveness of the defense laboratories’ hiring efforts, the department cannot understand any challenges experienced by the labs or determine appropriate strategies for mitigating these challenges. As a result, the department and defense laboratories may be unable to demonstrate that they are using their authorities and flexibilities effectively, or that such authorities and flexibilities should be maintained or expanded for future use. DOD does not have clear time frames for its process for approving and implementing new hiring authorities for the defense laboratories. Section 1105 of the Carl Levin and Howard P “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 established a direct hire authority for students enrolled in a scientific, technical, engineering, or mathematics course of study at institutions of higher education on a temporary or term basis. Officials from the Defense Laboratories Office stated that the labs were unable to use the authority because the department’s current process—the publication of a federal register notice—for allowing the laboratories to use the hiring authority took longer than anticipated. On June 28, 2017—2 ½ years after the authority was granted in the NDAA for Fiscal Year 2015—the department published a federal register notice allowing the defense laboratories the authority to use the direct hire for students. DOD officials stated that the department has typically published a federal register notice whenever the defense laboratories are granted a new hiring authority in legislation—for example, when an NDAA is issued, or when certain modifications to the demonstration projects are made. The Defense Civilian Personnel Advisory Service—through its personnel policymaking role for the department—at the time required that the federal register notice process be used to implement any hiring authorities granted to the defense labs by Congress in legislation. These procedures were published in DOD Instruction 1400.37. DOD officials identified coordination issues that occurred during the approval process of the federal register notice across the relevant offices as the cause of the delay associated with this federal register notice. Changes to DOD organizational structures further complicated the process of implementing new hiring authorities for defense laboratories. Specifically, in late 2016 a provision in the NDAA for Fiscal Year 2017 shifted the authority to conduct and evaluate defense laboratory personnel demonstration projects from the Office of the Under Secretary of Defense for Personnel and Readiness to the Office of the Under Secretary of Defense for Research and Engineering. Within the Office of the Under Secretary of Defense for Research and Engineering, the Defense Laboratories Office has been tasked with the responsibility for matters related to the defense laboratories. According to the Director of the Defense Laboratories Office, informal discussions about the transition began shortly after the NDAA for Fiscal Year 2017 was passed in late 2016. According to that official, despite the shift in oversight responsibility, coordination between the offices of the Under Secretaries for Research and Engineering and for Personnel and Readiness is required on issues related to civilian personnel, including defense laboratory federal register notices. Although a formal process for coordination did not exist at the start of our review, officials from the Defense Laboratories Office stated that representatives from the offices have met approximately five times since December 2016 and were taking steps to establish a coordination process for implementing new authorities. According to officials from the Defense Laboratories Office, during those meetings as well as during other, less formal interactions, officials have taken steps to formalize the roles and responsibilities of the relevant offices. According to officials from the Defense Laboratories Office, as of May 2018 the office was drafting a memorandum to formalize the roles and responsibilities of the Defense Laboratories Office and the Office of the Under Secretary of Defense for Personnel and Readiness to correspond to the federal register notice approval process; however, officials did not provide a completion date. The Defense Laboratories Office established and documented its own federal register approval process in spring 2017 and updated it in early 2018. The aforementioned memorandum would further describe the roles and responsibilities for the Offices of the Under Secretary for Research and Engineering and the Deputy Assistant Secretary of Defense for Civilian Personnel Policy in carrying out the updated process. According to officials, this is the process the office will use moving forward for coordination and approval of any future federal register notices. On March 6, 2018, the Office published a federal register notice that rescinds the earlier instruction published by the Defense Civilian Personnel Advisory Service of the Office of the Under Secretary of Personnel and Readiness. By rescinding that instruction—including the earlier process for approving requests from the labs and federal register notices—the Defense Laboratories Office can, according to officials, publish its own process and guidance. In a 2016 presentation to the Joint Acquisition/Human Resources Summit on the defense laboratories, the Chair of the Laboratory Quality Enhancement Program Personnel Subpanel stated that a renewed and streamlined approval process would be beneficial to the creation of new authorities, among other things. Although Defense Laboratories Office officials provided a flowchart of the office’s updated federal register approval process for coordination, this process did not include time frames for specific stages of the coordination. Officials stated that they cannot arbitrarily assign time frames or deadlines for a review process because any time frames will be contingent on the other competing priorities of each office, and other tasks may take priority and thus push review of a federal register notice down in order of priority. Our prior work has found that other federal agencies identify milestones, significant events, or stages in the agency-specific rulemaking process, and track data associated with these milestones. That work also found that, despite variability across federal agencies in the length of time taken by the federal rulemaking process, scheduling and budgeting for rulemaking are useful tools for officials to manage regulation development and control the resources needed to complete a rule. Standards for Internal Control in the Federal Government further establishes that management should design control activities to achieve objectives and respond to risks. Further, management should also establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives. Moreover, documentation is a necessary part of an effective internal control system. The level and nature of documentation may vary based on the size and complexity of the organization and its processes. The standards also underscore that specific terms should be fully and clearly set forth such that they can be easily understood. Our prior work on interagency collaboration has also found that overarching plans can help agencies overcome differences in missions, cultures, and ways of doing business, and can help agencies better align their activities, processes, and resources to collaborate effectively to accomplish a commonly defined outcome. Without establishing and documenting clear time frames for its process for departmental coordination efforts related to the approval and implementation of new hiring authorities, the department cannot be certain that it is acting in the most efficient or effective manner possible. Moreover, the defense laboratories may not promptly benefit from the use of congressionally granted hiring authorities, relying instead on other existing authorities. Doing so could, according to officials, have the unintended consequence of complicating the hiring process, increasing hiring times, or resulting in the loss of highly qualified candidates. The future of the department’s technological capabilities depends, in large part, on its investment in its people—the scientists and engineers who perform research, development, and engineering. To that end, Congress has granted the defense laboratories specific hiring authorities meant to encourage experimentation and innovation in their approaches to building and strengthening their workforces. The defense laboratories have used most of these authorities as a part of their overall hiring efforts. However, without obtaining and monitoring hiring data and developing performance measures, the Defense Laboratories Office may not be in a position to provide effective oversight of the defense laboratories’ hiring, including the use of hiring authorities, or to evaluate the effectiveness of specific hiring authorities. Moreover, the absence of clear time frames to facilitate timely decision-making and implementation of any new hiring authorities may impede the laboratories’ ability to make use of future authorities when authorized by Congress. Until the department addresses these issues, it lacks reasonable assurance that the defense laboratories are taking the most effective approach toward hiring a workforce that is critical to the military’s technological superiority and ability to address existing and emerging threats. We are making three recommendations to DOD. The Secretary of Defense should ensure that the Defense Laboratories Office routinely obtain and monitor defense laboratory hiring data to improve the oversight of the defense laboratories’ use of hiring authorities. (Recommendation 1) The Secretary of Defense should ensure that the Defense Laboratories Office develop performance measures to evaluate the effectiveness of the defense laboratories’ use of hiring authorities as part of the labs’ overall hiring to better inform future decision making about hiring efforts and policies. (Recommendation 2) The Secretary of Defense should ensure that the Defense Laboratories Office, in collaboration with the Under Secretary of Defense for Personnel and Readiness and the Laboratory Quality Enhancement Panel’s Personnel Subpanel, establish and document time frames for its coordination process to direct efforts across the relevant offices and help ensure the timely approval and implementation of hiring authorities. (Recommendation 3) We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix VI, DOD concurred with our recommendations, citing steps the department has begun and plans to take to improve oversight and coordination of the defense laboratories’ hiring efforts. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and other interested parties, including the Defense Laboratories Office and defense laboratories. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions regarding this report, please contact Brenda Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. The term “STEM” refers to the fields of science, technology, engineering, and mathematics. The following figure identifies the Department of Defense’s broad categories of STEM occupations, as well as the specific occupational series within each category. This report examines (1) the defense laboratories use of existing hiring authorities and what officials view as the benefits of authorities and incentives and the challenges in hiring; (2) the extent to which the Department of Defense (DOD) evaluates the effectiveness of hiring, including hiring authorities, at the defense laboratories; and (3) the extent to which DOD has time frames for approving and implementing new hiring authorities. To address these objectives, we included in the scope of our review science, technology, engineering, and mathematics (STEM) hiring at the 15 defense laboratories designated as Science and Technology Reinvention Laboratories (STRL) that were implemented at the time of our review within the Army, Navy, and Air Force. We included 9 Army laboratories: Armament Research, Development, and Engineering Center; Army Research Laboratory; Aviation and Missile Research, Development, and Engineering Center; Communications-Electronics Research, Development, and Engineering Center; Edgewood Chemical and Biological Center; Engineer Research and Development Center; Medical Research and Materiel Command; Natick Soldier Research, Development, and Engineering Center; and Tank Automotive Research, Development, and Engineering Center. We included 5 Navy laboratories: Naval Air Systems Command Warfare Centers, Weapons Division and Aircraft Division; Naval Research Laboratory; Naval Sea Systems Command Warfare Centers, Naval Surface and Undersea Warfare Centers; Office of Naval Research; and Space and Naval Warfare Systems Command, Space and Naval Warfare Systems Center, Atlantic and Pacific. We included 1 Air Force laboratory: Air Force Research Laboratory. We excluded 2 additional defense laboratories within the Army—the Army Research Institute and the Space and Missile Defense Command—because these defense laboratories were in the process of being implemented at the time of our review. For our first objective, we obtained and analyzed documentation, including past National Defense Authorization Acts (fiscal years 1995 through 2017), guidance related to government-wide hiring authorities, and federal register notices on existing hiring authorities used by the defense laboratories to hire STEM personnel. We obtained data that were coordinated by the Defense Manpower Data Center and prepared by the Defense Civilian Personnel Advisory Service’s Planning and Accountability Directorate. These data included, among other things, hiring process milestone dates and type of hiring authority used for each civilian hire at the defense laboratories for fiscal years 2015 through 2017. We selected these years because they were the three most recent years for which hiring data were available, and because doing so would allow us to identify any trends in the use of hiring authorities or the length of time taken to hire. The data we obtained were extracted from DCPDS using the Corporate Management Information System. The team refined the data to include only those hiring actions that were made by the 15 defense laboratories included within the scope of our review. In addition, we excluded hiring actions that used a 700-series nature of action code, which denotes actions that relate to position changes, extensions, and other changes, which we determined should not be included in our analysis. We included actions that used nature of action codes in the 100-series (appointments) and 500-series (conversions to appointments). For the purpose of calculating time to hire, we also excluded records with missing dates and those for which the time-to-hire calculation resulted in negative number (that is, the record’s request for personnel action initiation date occurred after the enter-on- duty date). Specifically, we excluded 92 actions for which no request for personnel action initiation date was recorded and 205 actions for which the date occurred after the enter-on-duty date, for a total of 2.57 percent of all hiring actions. We included in our calculation 7 actions for which the request for personnel action initiation date was the same date as the enter-on-duty date, resulting in a time to hire of zero days. To determine the extent to which the defense laboratories use existing hiring authorities, based on the department’s data, we analyzed the current appointment authority codes identified for individual hiring actions. Current appointment authority codes are designated by the Office of Personnel Management and are used to identify the law, executive order, rule, regulation, or other basis that authorizes an employee’s most recent conversion or accession action. Based on our initial review of the data, we determined that, in some cases, more than one distinct current appointment authority code could be used to indicate the use of a certain hiring authority. Alternately, a single current appointment authority code could in some cases be used for indicating more than one type of authority. In these cases, the details of the specific type of hiring authority that was used for the hiring action can be recorded in the description field associated with the current appointment authority code field. For this reason, in order to determine the type of hiring authority used, it was necessary to analyze the description fields for the current appointment authority code when certain codes were used. Two analysts independently reviewed each description and identified the appropriate hiring authority. Following this process, the two analysts compared their work and resolved any instances in which the results of their analyses differed. A data analyst used the results to produce counts of the number of times various categories of hiring authorities were used, as well as the average time to hire for each hiring authority category. For those instances where the analysts could not identify a hiring authority on the basis of the three digit codes or the description fields, the hiring actions were assigned to an “unknown” category. We note that the “unknown” category included 591 hiring actions, or approximately 5 percent of the total data for fiscal years 2015 through 2017. In addition, within the laboratory-specific direct hire authority category, if a determination could not be made about the specific type of laboratory- specific direct hire authority used, the hiring action was captured in the “direct hire authority, unspecified” category because the action was clearly marked as one of the laboratory-specific direct hire authorities but the type of authority (for example, direct hire for veterans) was unclear. Of the 5,303 hiring actions identified as a laboratory-specific direct hire authority, 0.1 percent of the hiring actions fell into the unspecified category. Based on the aforementioned steps and discussions with officials from the Defense Civilian Personnel Advisory Service and the Defense Manpower Data Center and reviews of additional documentation provided to support the data file, as well as interviews with officials from 13 of the laboratories about their data entry and tracking, we determined that these data were sufficiently reliable for the purposes of reporting the frequency with which the labs used specific hiring authorities and calculating the time it takes the labs to hire, or time to hire, for fiscal years 2015 through 2017. To describe officials’ views of hiring authorities and other incentives, we conducted a survey of officials at each of the defense laboratories on (1) their perceptions of the various hiring authorities and incentives, (2) whether those authorities and incentives have helped or hindered hiring efforts, (3) the extent to which they experienced barriers to using hiring authorities, and (4) any challenges during the hiring process, among other things. We administered the survey to the official at each defense laboratory who was identified as the Laboratory Quality Enhancement Program Personnel, Workforce Development, and Talent Management Panel point of contact, because we determined that this individual would be the most knowledgeable about his or her lab’s hiring process and use of hiring authorities. One laboratory—the Space and Naval Warfare Systems Command Centers—had two designated Laboratory Quality Enhancement Program Personnel, Workforce Development, and Talent Management Panel points of contact, one for each of its command centers (Atlantic and Pacific). Because the contacts would each be knowledgeable about his or her lab’s hiring processes for their respective command centers, we chose to include both command centers in our survey. As a result, we included a total of 16 laboratory officials in our survey. We drafted our questionnaire based on the information obtained from our initial interviews with department, service, and laboratory personnel. We conducted pretests to check that (1) the questions were clear and unambiguous, (2) terminology was used correctly, (3) the questionnaire did not place an undue burden on agency officials, (4) the information could feasibly be obtained, and (5) the survey was comprehensive and unbiased. We conducted five pretests to include representatives from each of the three services, as well as from corporate research laboratories and from research, development, and engineering centers. We conducted the pretests—with the assistance of a GAO survey specialist—by telephone and made changes to the content and format of the questionnaire after each pretest, based on the feedback we received. Key questions from the questionnaire used for this study are presented in appendix II. We sent a survey notification email to each laboratory’s identified point of contact on July 6, 2017. On July 10, 2017, we sent the questionnaire by email as a Microsoft Word attachment that respondents could return electronically after marking checkboxes or entering responses into open answer boxes. One week later, we sent a reminder email, attaching an additional copy of the questionnaire, to everyone who had not responded. We sent a second reminder email and copy of the questionnaire to those who had not responded 2 weeks following the initial distribution of the questionnaire. We received questionnaires from all 16 participants by August 4, 2017, for a 100 percent response rate. Between July 26 and October 5, 2017, we conducted additional follow-up with 11 of the respondents via email to resolve missing or problematic responses. Because we collected data from every lab, there was no sampling error. However, the practical difficulties of conducting any survey may introduce errors, commonly referred to as non-sampling errors. For example, differences in how a particular question is interpreted, the sources of information available to respondents, how the responses were processed and analyzed, or the types of people who do not respond can influence the accuracy of the survey results. We took steps in the development of the survey, the data collection, and the data analysis to minimize these non-sampling errors and help ensure the accuracy of the answers that were obtained. For example, a survey specialist designed the questionnaire, in collaboration with analysts having subject matter expertise. Then, as noted earlier, the draft questionnaire was pretested to ensure that questions were relevant, clearly stated, and easy to comprehend. The questionnaire was also reviewed by internal subject matter experts and an additional survey specialist. Data were electronically extracted from the Microsoft Word questionnaires into a comma-delimited file that was then imported into a statistical program for quantitative analyses and Excel for qualitative analyses. We examined the survey results and performed computer analyses to identify inconsistencies and other indications of error, and we addressed such issues as necessary. Quantitative data analyses were conducted by a survey specialist using statistical software. An independent data analyst checked the statistical computer programs for accuracy. To obtain information on department- and service-level involvement in and perspectives of defense laboratory hiring, we interviewed officials at the Defense Personnel Advisory Service, Defense Laboratories Office, Army Office of the Assistant G-1 for Civilian Personnel, and Navy Office of Civilian Human Resources. In addition, we interviewed hiring officials, first-line supervisors, and newly hired employees from a non- generalizable sample of six defense laboratories or subordinate level entities within a laboratory (for example, division or directorate) to obtain their perspectives on the hiring process. We selected the six laboratories based on the following two criteria: (1) two laboratories from each of the three services, and (2) a mix of both corporate research laboratories and research and engineering centers. In addition, because some hiring activities can occur at subordinate levels within a laboratory—such as a division or directorate—we included at least one subordinate level entity for each service. In total, we selected: Army Research Laboratory Sensors and Electron Devices directorate; Aviation and Missile Research, Development, and Engineering Center (Army); Naval Research Laboratory; Naval Air Warfare Center Weapons Division; Air Force Research Laboratory Information directorate; and Air Force Research Laboratory Space Vehicles directorate. For each lab, we requested to interview the official(s) most knowledgeable about the lab’s hiring process, supervisors who had recently hired, and newly hired employees. We initially requested to interview one group each of supervisors and newly hired employees. Following our first round of interviews at one laboratory, we requested to interview two groups each of supervisors and newly hired employees. Subsequent to this request, at one lab we were able to conduct one supervisor interview and at a second lab we were able to conduct one newly hired employee interview, due to scheduling constraints. The views obtained from these officials, supervisors, and recent hires are not generalizable and are presented solely for illustrative purposes. For our second and third objectives, we reviewed guidance and policies for collecting and analyzing laboratory personnel data related to the implementation and use of hiring authorities by these labs. We interviewed DOD, military service, and defense laboratory officials to discuss and review their hiring processes and procedures for STEM personnel, the use of existing hiring authorities, and efforts to document and evaluate time-to-hire metrics. We also met with DOD officials from the Office of the Under Secretary of Defense for Personnel and Readiness and the Office of the Under Secretary of Defense for Research and Engineering to discuss processes and procedures for implementing new hiring authorities granted by Congress. We evaluated their efforts to determine whether they met federal internal control standards, including that management should design appropriate types of control activities to achieve the entity’s objectives, including top-level reviews of actual performance, and should establish an organizational structure, assigning responsibilities and delegating authority to achieve an organization’s objectives. We conducted this performance audit from November 2016 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We analyzed three years of Department of Defense hiring data obtained from the Defense Civilian Personnel Data System to identify the defense laboratories’ use of hiring authorities. We found that the defense laboratories completed a total of 11,562 STEM hiring actions in fiscal years 2015 through 2017 and used the defense laboratory direct hire authorities the most often when hiring STEM personnel. Table 7 provides information on the laboratories’ use of hiring actions by hiring authority for fiscal years 2015, 2016, and 2017. Table 8 provides a breakdown of the individual labs’ use of hiring authorities in fiscal years 2015 through 2017. We analyzed three years of the DOD hiring data to identify time to hire using various types of hiring authorities when hiring for Science, Technology, Engineering, and Math (STEM) occupations at the defense laboratories. Tables 9, 10, 11, and 12 below show the frequency of actions for each hiring authority category and the average, minimum, maximum, median, 25th percentile, and 75th percentile of the number of days to hire for each category in fiscal years 2015 through 2017 and for all three years combined. In addition to the contact named above, Vincent Balloon (Assistant Director), Isabel Band, Vincent Buquicchio, Joseph Cook, Charles Culverwell, Serena Epstein, Christopher Falcone, Robert Goldenkoff, Cynthia Grant, Chelsa Gurkin, Amie Lesser, Oliver Richard, Michael Silver, John Van Schaik, Jennifer Weber, and Cheryl Weissman made key contributions to this report.", "summary": "DOD's defense labs help sustain, among other things, U.S. technological superiority and the delivery of technical capabilities to the warfighter. Over time Congress has granted unique flexibilities—such as the ability to hire qualified candidates who meet certain criteria using direct hire authorities—to the defense labs to expedite the hiring process and facilitate efforts to compete with the private sector. Senate Report 114-255 included a provision for GAO to examine the labs' hiring structures and effective use of hiring authorities. This report examines (1) the defense labs use of existing hiring authorities and officials' views on the benefits of authorities and challenges of hiring; (2) the extent to which DOD evaluates the effectiveness of hiring, including hiring authorities at the defense labs; and (3) the extent to which DOD has time frames for approving and implementing new hiring authorities. GAO analyzed DOD hiring policies and data; conducted a survey of 16 defense lab officials involved in policy-making; interviewed DOD and service officials; and conducted nongeneralizable interviews with groups of officials, supervisors, and new hires from 6 labs—2 from each of the 3 military services, selected based on the labs' mission. The Department of Defense's (DOD) laboratories (defense labs) have used the laboratory-specific direct hire authorities more than any other category of agency-specific or government-wide hiring authority for science, technology, engineering, and mathematics personnel. As shown below, in fiscal years 2015—2017 the labs hired 5,303 personnel out of 11,562 total hires, or 46 percent using these direct hire authorities. Lab officials, however, identified challenges to hiring highly qualified candidates, such as delays in processing security clearances, despite the use of hiring authorities such as direct hire. Source: GAO analysis of Department of Defense data. | GAO-18-417 . a Other includes all other defense laboratory-specific direct hiring authorities used. b All other includes remaining five categories of hiring authorities. c Percentages may not sum to total due to rounding. DOD and the defense labs track hiring data, but the Defense Laboratories Office (DLO) has not obtained or monitored these data or evaluated the effectiveness of the labs' hiring, including the use of hiring authorities. While existing lab data can be used to show the length of time of the hiring process, effectiveness is not currently evaluated. According to lab officials, timeliness data do not sufficiently inform about the effectiveness of the authorities and may not reflect a candidate's perception of the length of the hiring process. Further, the DLO has not developed performance measures to evaluate the effectiveness of hiring across the defense laboratories. Without routinely obtaining and monitoring hiring data and developing performance measures, DOD lacks reasonable assurance that the labs' hiring and use of hiring authorities—in particular, those granted by Congress to the labs—result in improved hiring outcomes. DOD does not have clear time frames for approving and implementing new hiring authorities. The defense labs were unable to use a direct hire authority granted by Congress in fiscal year 2015 because it took DOD 2½ years to publish a federal register notice—the process used to implement new hiring authorities for the labs—for that authority. DOD officials identified coordination issues associated with the process as the cause of the delay and stated that DOD is taking steps to improve coordination—including meeting to formalize roles and responsibilities for the offices and developing a new approval process—between offices responsible for oversight of the labs and personnel policy. However, DLO's new federal register approval process does not include time frames for specific stages of coordination. Without clear time frames for its departmental coordination efforts related to the approval and implementation of new hiring authorities, officials cannot be certain they are taking action in a timely manner. GAO recommends that DOD (1) routinely obtain and monitor defense lab hiring data to improve oversight; (2) develop performance measures for evaluating the effectiveness of hiring; and (3) establish time frames to guide hiring authority approval and implementation. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "Agencies generally acquire equipment from commercial vendors and through GSA, which contracts for the equipment from commercial vendors. In acquiring heavy equipment from a commercial vendor or GSA, agencies can purchase or lease the equipment. Generally, agencies use the term “lease” to refer to acquisitions that are time-limited and therefore distinct from purchases. The term “lease” is used to refer to both long-term and short-term leases. For example, the three agencies we reviewed in-depth use the term “rental” to refer to short-term leases of varying time periods. According to Air Force officials, they define rentals as leases that are less than 120 days while FWS and NPS officials said they generally use the term rental to refer to leases that are a year or less. For the purposes of this report, we use the term “rental” to refer to short-term leases defined as rentals by the agency and “long-term lease” to refer to a lease that is not considered a rental by the agency. (See fig. 1.) In 2013, GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part to eliminate ownership and maintenance cost for infrequently used heavy equipment. Under this program, agencies can request a short-term equipment rental (less than a year) from GSA, and GSA will work with a network of commercial vendors to provide the requested heavy equipment. Unlike for some other types of federal property, there are no central reporting requirements for agencies’ inventories of heavy equipment. However, each federal agency is required to maintain inventory controls for its property, which includes heavy equipment. Agencies maintain inventory data through the use of agency-specific databases, and each agency can set its own requirements for what data are required and how these data are maintained. For example, while an agency may choose to maintain data in a headquarters database, it could also choose to maintain data at the local level. As another example, an agency may decide to track and maintain data on the utilization of its heavy equipment (such as the hours used) or may choose not to have such data or require any particular utilization levels. The Federal Acquisition Regulation (FAR) governs the acquisition process of executive branch agencies when acquiring certain goods and services, including heavy equipment. Under the FAR, agencies should consider whether to lease equipment instead of purchasing it based on several factors. Specifically, the FAR provides that agency officials should evaluate cost and other factors by conducting a “lease-versus-purchase” analysis before acquiring heavy equipment. Additionally, DOD’s regulations require its component agencies to prepare a justification supporting lease-versus-purchase decisions if the equipment is to be leased for more than 60 days. Twenty agencies reported data on their owned heavy equipment, including the (1) number, (2) types, (3) acquisition year, and (4) location of agencies’ owned heavy equipment in their inventories as of June 2017. The 20 agencies reported owning over 136,000 heavy equipment items. DOD reported owning most of this heavy equipment—over 100,000 items, about 74 percent. (See app. I for more information on agencies’ ownership of these items.) The Department of Agriculture reported owning the second highest number of heavy equipment items—almost 9,000 items, about 6 percent. (See fig. 2.) Four agencies—the Nuclear Regulatory Commission, the Department of Housing and Urban Development, the Office of Personnel Management, and the Agency for International Development—reported owning five or fewer heavy equipment items each. The 20 agencies reported owning various types of heavy equipment, such as cranes, backhoes, and road maintenance equipment in five categories: (1) construction, mining, excavating, and highway maintenance equipment; (2) airfield-specialized trucks and trailers; (3) self-propelled warehouse trucks and tractors; (4) tractors; and (5) soil preparation and harvesting equipment. Thirty-eight percent (almost 52,000 items) were in the construction, mining, excavating, and highway maintenance category (see fig. 3). Fifteen of the 20 agencies reported owning at least some items in this category. Twenty-four percent (over 33,000 items) were in the airfield- specialized trucks and trailers category, generally used to service and re-position aircraft on runways. DOD reported owning 99 percent (over 32,000) of these items, while 9 other agencies, including the Department of Labor and the National Aeronautics and Space Administration, reported owning the other one percent (317 items). Twenty-two percent (over 29,000 items) were in the self-propelled warehouse trucks and tractors category, which includes equipment such as forklift trucks. All 20 agencies reported owning at least one item in this category, and five agencies—the Agency for International Development, Department of Housing and Urban Development, the Environmental Protection Agency, the Nuclear Regulatory Commission, and the Office of Personnel Management—reported owning only items in this category. (For additional information on agencies’ ownership of heavy equipment in various categories, see app. I.) The twenty agencies reported acquiring their owned heavy equipment between 1944 and 2017, with an average of about 13 years since acquisition (see fig. 4). One heavy equipment manager we interviewed reported that a dump truck can last 10 to 15 years, whereas other types of equipment can last for decades if regularly used and well-maintained. The 20 agencies reported that over 117,000 heavy equipment items (86 percent) were located within the United States or its territories. Of these, about one-fifth (over 26,000) were located in California and Virginia, the two states with the most heavy equipment (see fig. 5). Of the equipment located outside of the United States and its territories, 94 percent was owned by the Department of Defense. The rest was owned by the Department of State (714 items in 141 countries from Afghanistan to Zimbabwe) and the National Science Foundation (237 items in areas such as Antarctica). The twenty agencies reported spending over $7.4 billion in 2016 dollars to acquire the heavy equipment they own (see table 1). However, actual spending was higher because this inflation-adjusted figure excludes over 37,000 heavy equipment items for which the agencies did not report acquisition cost or acquisition year, or both. Without this information, we could not determine the inflation-adjusted cost and therefore did not include the cost of these items in our calculation. The Army owns almost all of these items, having not reported acquisition cost or acquisition year, or both, for 36,589 heavy equipment items because, according to Army officials, the data were not available centrally but may have been available at individual Army units and would have been resource- intensive to obtain. The heavy equipment items reported by the 20 agencies ranged in acquisition cost from zero dollars to over $2 million in 2016 dollars, with an average acquisition cost in 2016 dollars of about $78,000, excluding assets with a reported acquisition cost of $0. Of the items which we adjusted to 2016 dollars and for which non-zero acquisition costs were provided: 94 percent cost less than $250,000 and accounted for 57 percent of the total adjusted acquisition costs (See fig. 6.) 6 percent of items cost more than $250,000 and accounted for 43 percent of the adjusted acquisition costs. (See fig. 6.) High-cost items included a $779,000 hydraulic crane acquired by the National Aeronautics and Space Administration in 1997 ($1.2 million in 2016 dollars), a $1.4 million ultra-deep drilling simulator acquired by the Department of Energy in 2009 ($1.6 million in 2016 dollars), and several $2.2 million well-drilling machines acquired by the Air Force in 2013 ($2.3 million in 2016 dollars). In calendar years 2012 through 2016, the Air Force, FWS, and NPS purchased almost 3,500 pieces of heavy equipment through GSA and private vendors at a total cost of about $360 million to support mission needs. (See table 2.) These agencies also spent over $5 million on long- term leases and rentals during this time period. The Air Force spent over $300 million to purchase over 2,600 heavy equipment assets in calendar years 2012 through 2016 that were used to support and maintain its bases globally. For example, according to Air Force officials, heavy equipment is often used to maintain runways and service and reposition aircraft on runways. While the majority of Air Force heavy equipment purchased in this time period is located in the United States, 41 percent of this heavy equipment is located outside the United States and its territories in 17 foreign countries to support global military bases. The Air Force could not provide complete information on its heavy equipment leases for fiscal years 2012 through 2016. Specifically, the Air Force provided data on 33 commercial heavy equipment leases that were ongoing as of August 2017 but could not provide cost data for these leases because this information is not tracked centrally. Additionally, the Air Force could not provide any data on leases that occurred previously because, according to Air Force officials, lease records are removed from the Air Force database upon termination of the lease. Officials said that rentals are generally handled locally and obtaining complete data would require a data call to over 300 base contracting offices. Air Force officials stated that rentals are generally used in unique situations involving short- term needs such as responding to natural disasters. For example, following Hurricane Sandy, staff at Langley Air Force Base in Virginia used rental equipment to clean up and repair the base. Although Air Force did not provide complete information on rentals, data we obtained from GSA’s Short-Term Rental program indicated that Air Force rented heavy equipment in 46 transactions not reflected in the Air Force data we received totaling over $3.7 million since GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part program in 2013. FWS spent over $32 million to purchase 348 heavy equipment assets from calendar years 2012 through 2016. FWS used its heavy equipment to maintain refuge areas throughout the United States and its territories, including maintaining roads and nature trails. FWS also used heavy equipment to respond to inclement weather and natural disasters. Most of the heavy equipment items purchased by FWS were in the construction, mining, excavating, and highway maintenance equipment category and include items such as excavators, which were used for moving soil, supplies, and other resources. FWS officials reported that they did not have any long-term leases for any heavy equipment in fiscal years 2012 through 2016 because they encourage equipment sharing and rentals to avoid long-term leases whenever possible. FWS officials provided data on 228 rentals for this time period with a total cost of over $1 million. Information regarding these rentals is contained in an Interior-wide property management system, the Financial Business Management System (FBMS). FWS officials told us that they have not rented heavy equipment through GSA’s program because they have found lower prices through local equipment rental companies. NPS spent over $27 million to purchase 471 heavy equipment assets from calendar years 2012 through 2016. NPS uses heavy equipment— located throughout the United States and its territories—to maintain national parks and respond to inclement weather and natural disasters. For example, NPS used heavy equipment such as dump trucks, snow plows, road graders, and wheel loaders to clear and salt the George Washington Memorial Parkway in Washington, D.C., following snow and ice storms. Most of the heavy equipment items purchased by NPS were in the construction, mining, excavating, and highway maintenance equipment category and include items such as excavators, which are used for moving soil, supplies, and other resources. NPS reported spending about $360,000 on 230 long-term leases and rentals in fiscal years 2012 through 2016, not including rentals through GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program. As with FWS, NPS leases and rentals are contained in FBMS, which is Interior’s property management system. Data we obtained from GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program indicated that NPS rented heavy equipment in 26 transactions totaling over $200,000 since GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part program in 2013, for a potential total cost of over $560,000 for these long-term leases and rentals. As mentioned earlier, the FAR provides that executive branch agencies seeking to acquire equipment should consider whether it is more economical to lease equipment rather than purchase it and identifies factors agencies should consider in this analysis, such as estimated length of the period that the equipment is to be used, the extent of use in that time period, and maintenance costs. This analysis is commonly referred to as a lease-versus-purchase analysis. While the FAR does not specifically require that agencies document their lease-versus-purchase analyses, according to federal internal control standards, management should clearly document all transactions and other significant events in a manner that allows the documentation to be readily available for examination and also communicate quality information to enable staff to complete their responsibilities. As discussed below, we found that most acquisitions we reviewed from FWS, NPS, and the Air Force did not contain any documentation of a lease-versus-purchase analysis. Specifically, officials were unable to provide documentation of a lease-versus-purchase analysis for six of the eight acquisitions we reviewed. FWS officials were able to provide documentation for the other two. Officials told us that a lease-versus- purchase analysis was not conducted for five of the six acquisitions and did not know if such analysis was conducted for the other acquisition. According to agency officials, the main reason why analyses were not conducted or documented for these six acquisitions is that the circumstances in which such analyses were to be performed or documented were not always clear to FWS, NPS, and Air Force officials. In addition to the FAR, Interior has agency guidance stating that bureaus should conduct and document lease-versus-purchase analyses. This July 2013 guidance—that FWS and NPS are to follow—states that requesters of equipment valued at $15,000 or greater should perform a lease-versus- purchase analysis when requesting heavy equipment. According to the guidance, this analysis should address criteria in the FAR and include a discussion of the financial and operating advantages of alternate approaches that would help contracting officials determine the final appropriate acquisition method. At the time the guidance was issued, Interior also provided a lease-versus-purchase analysis tool to aid officials in conducting this analysis. Additionally, in April 2016, Interior issued a policy to implement the July 2013 guidance. The 2016 policy clarifies that program offices are required to complete Interior’s lease-versus-purchase analysis tool and provide the completed analysis to the relevant contracting officer. Within Interior, bureaus are responsible for ensuring that procurement requirements are met, including the requirements and directives outlined in Interior’s 2013 guidance and 2016 policy on lease-versus-purchase analyses, according to agency officials. Within FWS, local procurement specialists prepare procurement requests and ensure that procurement requirements are met and that all viable options have been considered. Regional equipment managers review these procurement requests, decide whether to purchase or lease the requested equipment, and prepare the lease-versus-purchase analysis tool if the procurement specialist has indicated that it is required. Within NPS, local procurement specialists are responsible for ensuring that all procurements adhere to relevant requirements and directives, including documenting the lease- versus-purchase analysis. Of the three FWS heavy equipment acquisitions we reviewed for which the 2013 Interior guidance was applicable, one included a completed lease-versus-purchase analysis tool; one documented the rationale for purchasing rather than leasing, although it did not include Interior’s lease- versus-purchase analysis tool; and one did not include any documentation related to a lease-versus-purchase analysis. (See table 3.) Regarding the acquisition for which no documentation of a lease-versus- purchase analysis was provided—a 12-month lease of an excavator and associated labor costs for over $19,000—FWS officials initially told us that a lease-versus-purchase analysis was not required because the equipment lease was less than $15,000, and Interior’s guidance required a lease-versus-purchase analysis for procurements of equipment valued at $15,000 or greater. However, we found the guidance did not specify whether the $15,000 threshold includes the cost of labor. We also found that Interior’s guidance did not specify if a lease-versus-purchase analysis was required if the total cost of a rental is less than the purchase price. FWS officials acknowledged that Interior guidance is not clear and that it would be helpful for Interior to clarify whether these leases require a lease-versus-purchase analysis. NPS officials were unable to provide documentation of a lease-versus- purchase analysis for the single heavy equipment acquisition we reviewed—the purchase of a wheeled tractor in 2015 for $43,177. According to these officials, they could not do so because of personnel turnover in the contracting office that would have documented the analysis. In addition, they told us that they believe that such analyses are not always completed for heavy equipment acquisitions because responsibility for completing these analyses is unclear. Specifically, they told us that it was unclear whether the responsibility lies with the official requesting the equipment, the contracting personnel who facilitate the acquisition, or the property personnel who manage inventory data. However, when we discussed our findings with Interior and NPS officials, NPS officials were made aware of the 2016 Interior policy that specifically requires program offices—the officials requesting the equipment—to complete the lease-versus-purchase analysis and provide documentation of this analysis to the contracting officer. As a result, NPS officials told us at the end of our review that program office officials will now be required to complete the lease-versus-purchase analysis tool and document this analysis. According to Air Force officials responsible for managing heavy equipment, financial or budget personnel at individual bases are responsible for conducting lease-versus-purchase analyses, also called economic analyses, to support purchase and lease requests. Air Force fleet officials told us that they then review these requests from a fleet perspective, considering factors such as whether the cost information provided in the request is from a reputable source, expected maintenance costs, and whether a requesting base has the capability to maintain the requested equipment. However, they said they do not check to ensure that a lease-versus-purchase analysis was completed or review the analysis. Equipment rentals can be approved at individual bases. In our review of four Air Force heavy equipment acquisitions, we found no instances in which Air Force officials documented a lease-versus- purchase analysis (see table 4). For the acquisitions that we reviewed, Air Force officials told us they did not believe a lease-versus-purchase analysis was required because the new equipment was either replacing old equipment that was previously approved or could be deployed. Accordingly, the Air Force purchased two forklifts in 2013 without conducting lease-versus-purchase analyses because the forklifts were replacing old forklifts that were authorized in 1997 and 2005. Furthermore, Air Force officials told us that both of these forklifts could be deployed and indicated that lease-versus-purchase analyses are not required for deployable equipment. However, the Air Force does not have guidance that describes the circumstances that require either a lease-versus-purchase analysis or documentation of the rationale for not completing such analysis. Although we identified several instances in which officials in the three selected agencies did not document lease-versus-purchase analyses, officials from these agencies stated that they consider mission needs and equipment availability, among other factors, when making these decisions. For example, Air Force officials told us following Hurricane Sandy, staff at Langley Air Force Base in Virginia used rental equipment to clean and repair the base because the equipment was needed immediately to ensure the base could meet its mission. Moreover, availability of heavy equipment for lease or rental, which can be affected by factors such as geography and competition for equipment, is a key consideration. For example, FWS officials told us that the specialized heavy equipment sometimes needed may not be available for long-term lease or rent in remote areas such as Alaska and the Midway Islands, so the agency purchases the equipment. In addition, some agency officials told us that they may purchase heavy equipment even if that equipment is needed only sporadically if there is likely to be high demand for rental equipment. For example, following inclement weather or a natural disaster, demand for certain heavy equipment rentals can be high and equipment may not be available to rent when it is needed. While we recognize that mission needs and other factors are important considerations, without greater clarity regarding when to conduct or document lease-versus-purchase analyses, officials at FWS, NPS, and Air Force may not be conducting such analyses when appropriate and may not always make the best acquisition decisions. These agencies could be overspending on leased equipment that would be more cost- effective if purchased or overspending to purchase equipment when it would be more cost-effective to lease or rent. Moreover, without documenting decisions on whether to purchase or lease equipment, they lack information that could be used to inform future acquisition decisions for similar types of equipment or projects. Air Force guidance requires that fleet managers collect utilization data for both vehicles and heavy equipment items, such as the number of hours used, miles traveled, and maintenance costs. The Air Force provided us with utilization data for over 18,000 heavy equipment items and uses such data to inform periodic base validations. Specifically, Air Force officials said that every 3 to 5 years each Air Force base reviews the on- base equipment to ensure that the installation has the appropriate heavy equipment to complete its mission and reviews utilization data to identify items that are underutilized. If heavy equipment is considered underutilized, the equipment is relocated—either moved to another location or sent to the Defense Logistics Agency for reuse or transfer to another agency. According to Air Force officials the Air Force has relocated over 700 heavy equipment items based on the results of the validation process and other factors such as replacing older items and agency needs since 2014. Similarly, FWS guidance for managing heavy equipment utilization sets forth minimum utilization hours for certain types of heavy equipment and describes requirements for reporting utilization data. FWS provided us with utilization data on over 3,000 heavy equipment items. According to officials, condition assessments of heavy equipment are required by FWS guidance every 3 to 5 years. According to FWS officials, condition assessments inform regional-level decision making about whether to move equipment to another FWS location or dispose of the equipment. In contrast, NPS does not require the collection of utilization data to evaluate heavy equipment use and does not have guidance for managing heavy equipment utilization. However, NPS officials told us that they recognize the need for such guidance. NPS officials shared with us draft guidance that they have developed, which would require collection of utilization data for heavy equipment such as hours or days of usage each month. According to NPS officials, they plan to send the guidance to the NPS policy office for final review in March 2018. Until this guidance is completed and published, NPS is taking interim actions to manage the utilization of its heavy equipment. For example, NPS officials stated that they have asked NPS locations to collect and post monthly utilization data, discussed the collection of utilization data at fleet meetings, and distributed job aids to support this effort. During the course of our review, NPS officials provided us with some utilization data for about 1,400 of the more than 2,400 NPS heavy equipment items. Specifically, for the 1,459 heavy equipment items for which NPS provided utilization data, 541 items had utilization data for each month. For the remaining 918 items, utilization data were reported for some, but not all months. The federal government has spent billions of dollars to acquire heavy equipment. There is no requirement that agencies report on the inventory of this equipment, as there is no standard definition of heavy equipment. When deciding how to acquire this equipment, agencies’ should conduct a lease-versus-purchase analysis as provided in the FAR, which is a critical mechanism to ensure agencies are acquiring the equipment in the most cost-effective manner. Because FWS, NPS and the Air Force were unclear when such an analysis was required, they did not consistently conduct or document analyses of whether it was more economical to purchase or lease heavy equipment. In the absence of clarity on the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented, the agencies may not be spending funds on heavy equipment cost- effectively. We are making two recommendations—one to the Air Force and one to the Department of the Interior. The Secretary of the Air Force should develop guidance to clarify the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented. (Recommendation 1) The Secretary of the Interior should further clarify in guidance the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented. (Recommendation 2) We provided a draft of this report to the Departments of Agriculture, Defense, Energy, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, and Veterans Affairs; General Services Administration; National Aeronautics and Space Administration; National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; and U.S. Agency for International Development. The departments of Agriculture, Energy, Homeland Security, Housing and Urban Development, Justice, State and Veterans Affairs, as well as the General Services Administration, National Aeronautics and Space Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management; and U.S. Agency for International Development did not have comments. The Department of Labor provided technical comments, which we incorporated as appropriate. In written comments, reproduced in appendix III, the Department of Defense stated that it concurred with our recommendation and plans to issue a bulletin to Air Force contracting officials. In written comments, reproduced in appendix IV, the Department of the Interior stated that it concurred with our recommendation and plans to implement it. If you or members of your staff have any questions about this report, please contact me at (202) 512-2834 or RectanusL@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix V. Specialized Trucks and Trailers 37 . Self-Propelled Warehouse Trucks and Tractors 1,733 3 . . . . . . . . . . . . . . . . . . . Specialized Trucks and Trailers 7 . Self-Propelled Warehouse Trucks and Tractors 2,925 134 . . . . . . . . . . . . . . . . . . Specialized Trucks and Trailers . Self-Propelled Warehouse Trucks and Tractors 146 . . . . . . 7 . . . - 109 . . . Self-Propelled Warehouse Trucks and Tractors 575 64 40 . . . . . . . . . . . 4 . . . . . . . . . Nuclear Regulatory Commission Office of Personnel Management Social Security Administration United States Agency for International Development Grand Total . . . . This report addresses: (1) the number, type, and cost of heavy equipment items that are owned by the 24 CFO Act agencies; (2) the heavy equipment items selected agencies have recently acquired and how selected agencies decided to purchase or lease this equipment; and (3) how selected agencies manage the utilization of their heavy equipment. To identify the number, type, and cost of heavy equipment owned by federal agencies, we first interviewed officials at the General Services Administration to determine whether there were government-wide reporting requirements for owned heavy equipment and learned that there are no such requirements. We then obtained and analyzed data on agencies’ spending on equipment purchases and leases from the Federal Procurement Data System–Next Generation (FPDS-NG), which contains government-wide data on agencies’ contracts. However, in reviewing the data available and identifying issues with the reliability of the data, we determined that data on contracts would not be sufficient to answer the question of what heavy equipment the 24 CFO Act agencies own. We therefore conducted a data collection effort to obtain heavy equipment inventory information from the 24 CFO Act agencies, which are the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs; Environmental Protection Agency; General Services Administration; National Aeronautics and Space Administration; National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; Small Business Administration; Social Security Administration; and Agency for International Development. Because there is no generally accepted definition of heavy equipment, we identified 12 federal supply classes in which the majority of items are self- propelled equipment but not passenger vehicles or items that are specific to combat and tactical purposes, as these items are generally not considered to be heavy equipment. (See table 5.) We then vetted the appropriateness of these selected supply classes with Interior, FWS, NPS, and Air Force agency officials, as well as with representatives from a fleet management consultancy and a rental company, and they generally agreed that items in selected federal supply classes are considered heavy equipment. Federal supply classes are used in FPDS- NG and are widely used in agencies’ inventory systems. Overall, about 90 percent of the heavy equipment items that agencies reported were assigned a federal supply class in the agency’s inventory data. In discussing heavy equipment categories in the report, we use the category titles below. To identify points of contact at the 24 CFO Act agencies, we obtained GSA’s list of contact information for agencies’ national utilization officers, who are agency property officers who coordinate with GSA. As a preliminary step, we contacted these individuals at each of the 24 CFO Act agencies and asked them to either confirm that they were the appropriate contacts or provide contact information for the appropriate contact and to inform us if they do not own heavy equipment. Officials at 4 agencies—Department of Education, Department of the Treasury, General Services Administration, and Small Business Administration— indicated that the agency did not own any items in the relevant federal supply classes. Officials at 16 of these agencies indicated that they would be able to respond on a departmental level because the relevant inventory data are maintained centrally, while officials at 4 agencies indicated that we would need to obtain responses from officials at some other level because the relevant inventory data are not maintained centrally. (See table 7 for a list of organizations within the 20 CFO Act agencies that indicated they own relevant equipment and responded to our data collection effort.) After identifying contacts responsible for agencies’ heavy-equipment inventory data, we prepared data collection instruments for requesting information on heavy equipment and tested these documents with representatives from 4 of the 20 CFO Act agencies that indicated they own heavy equipment to ensure that the documents were clear and logical and that respondents would be able to provide the requested data and answer the questions without undue burden. These agency representatives were selected to provide a variety of spending on federal supply group 38 equipment as reported in FPDS-NG, civilian and military agencies, and different levels at which the agency would be responding to the data collection effort (e.g., at the departmental level or at a sub- departmental level). Our data collection instrument requested the following data on respondent organizations’ owned assets in 12 federal supply classes as of June 2017: Respondents provided data on original acquisition costs in nominal terms, with some acquisitions occurring over 50 years ago. In order to provide a fixed point of reference for appropriate comparison, we present in our report inflation-adjusted acquisition costs using calendar year 2016 as the reference. To adjust these dollar amounts for inflation, we used the Bureau of Labor Statistic’s Producer Price Index by Commodity for Machinery and Equipment: Construction Machinery and Equipment (WPU112), compiled by the Federal Reserve Bank of St. Louis. We conducted the data collection effort from July 2017 through October 2017 and received responses from all 20 agencies that indicated they own heavy equipment. In order to assess the reliability of agencies’ reported data, we collected and reviewed agencies’ responses regarding descriptions of their inventory systems, frequency of data entry, agency uses of the data, and agencies’ opinions on potential limitations of the use of their data in our analysis. We conducted some data cleaning, which included examining the data for obvious errors and eliminating outliers. We did not verify the data or responses received; the results of our data collection effort are used only for descriptive purposes and are not generalizable beyond the 24 CFO Act agencies. Based on the steps we took, we found these data to be sufficiently reliable for our purposes. To determine the heavy equipment items that selected agencies recently acquired and how these agencies decided whether to purchase or lease this equipment, we first used data from the FPDS-NG to identify agencies that appeared to have the highest obligations for construction or heavy equipment, or both, and used this information, along with other factors, to select DOD and Interior. At the time, in the absence of a generally accepted definition of heavy equipment, we reviewed data related to federal supply group 38—construction, mining, excavating, and highway maintenance equipment—because (1) we had not yet defined heavy equipment for the purposes of our review; (2) agency officials had told us that most of what could be considered heavy equipment was in this federal supply group; and (3) our analysis of data from usaspending.gov showed that about 80 percent of spending on items that may be considered heavy equipment were in this federal supply group. In meeting with officials at these departments, we learned that agencies within each department manage heavy equipment independently, so we requested current inventory data for Interior bureaus and the DOD military departments and selected three agencies that had among the largest inventories of construction and/or heavy equipment at the time, among other criteria: the U.S. Air Force (Air Force); the Fish and Wildlife Service (FWS); and the National Park Service (NPS). We then used information from our data collection effort—which included the number, type, cost, acquisition year and other data elements—to determine heavy equipment items that these agencies acquired during 2012 through 2016. We interviewed agency officials to determine what lease data were available from the three selected agencies. We assessed the reliability of these data with agency official interviews and reviewed the data for completeness and potential outliers. We determined that the data provided were sufficiently reliable for the purposes of documenting leased and rental heavy equipment. We also obtained data from GSA’s Short- Term Rental program, which had previously been limited to passenger vehicles, in part program for August 2012, when the first item was rented under this program, to February 2017, when GSA provided the data. We used these data to identify selected agencies’ rentals of heavy equipment through GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program and associated costs. We interviewed officials from GSA’s Short-Term Rental program to discuss the program history as well as the reliability of their data on these rented heavy equipment items. We determined that the data were sufficiently reliable for our purposes. To determine how the three selected agencies decide whether to purchase or lease heavy equipment, we interviewed fleet and property managers at these selected agencies and asked them to describe their process for making these decisions as well as to identify relevant federal and agency regulations and guidance. We reviewed relevant federal and agency regulations and guidance regarding how agencies should make these decisions, including: Federal Acquisition Regulation, Office of Management Budget’s A-94, Guidelines and Discount Rates for Benefit- Cost Analysis of Federal Programs, Defense Federal Acquisition Regulation Supplement, Air Force Manual 65-506, Air Force Guidance Memorandum to Air Force Instruction 65-501, and Interior’s Guidance On Lease Versus Purchase Analysis and Capital Lease Determination for Equipment Leases. We also reviewed the Standards for Internal Control in the Federal Government for guidance on documentation as well as past GAO work that reviewed agencies’ lease-versus-purchase analyses. To determine whether the three selected federal agencies documented lease-versus-purchase decisions for selected acquisitions and adhered to relevant agency guidance, we selected and reviewed a non-generalizable sample of 10 heavy equipment acquisitions—two purchases each from the Air Force, FWS, and NPS, and two leases each from the Air Force and FWS. Specifically, we used inventory data obtained through our data collection effort, described above, to randomly select two heavy equipment purchases from each selected agency using the following criteria: calendar years 2012 through 2016; the two federal supply classes most prevalent in each selected agency’s heavy equipment inventory, as determined by the data collection effort described above; and for NPS and FWS, acquisition costs of over $15,000. In addition, we used lease data provided by the Air Force and FWS to randomly selected two heavy equipment leases per agency. Because NPS could not provide data on heavy equipment leases, we did not select or review any NPS lease decisions. To select the Air Force and FWS leases we used the following criteria: fiscal years 2012 through 2016; for the Air Force, which included federal supply classes in the lease data provided, the two federal supply classes most prevalent in the lease data and for FWS, which did not include federal supply class in the lease data provided, the two federal supply classes most prevalent in the purchase data; and for FWS, leases over $15,000. After selecting these acquisitions, we determined that one FWS lease and one NPS purchase we selected pre-dated Interior’s 2013 guidance on lease-versus-purchase analysis and excluded these acquisitions from our analysis for a total of eight acquisitions. In reviewing agencies’ documentation related to these acquisitions, we developed a data collection instrument to assess the extent to which agencies documented lease-versus-purchase analyses and, in the case of FWS and NPS, adhered to relevant Interior guidance. We supplemented our review of these acquisition decisions with additional information by interviewing officials at the three selected agencies and requesting additional information to understand specific circumstances surrounding each procurement. Our findings are not generalizable across the federal government or within each selected department. To determine how selected agencies manage heavy equipment utilization, we interviewed officials at the three selected agencies to identify departmental and agency-specific guidance and policies and to determine whether utilization requirements exist. We reviewed guidance identified by these officials, including Interior and Air Force vehicle guidance, both of which apply to heavy equipment, and FWS’s Heavy Equipment Utilization and Replacement Handbook. We also compared their practices to relevant Standards for Internal Control in the Federal Government. For the selected agencies with guidance for managing heavy equipment—Air Force and FWS—we reviewed the guidance to determine if and how selected agencies measured and documented heavy equipment utilization. For example, we reviewed whether selected agencies developed reports for managing heavy equipment utilization such as Air Force validation reports and FWS conditional assessment reports. We also reviewed Air Force, FWS, and NPS utilization data for heavy equipment but we did not independently calculate or verify the utilization rate for individual heavy equipment items because each heavy equipment item (backhoe, forklift, tractor, etc.,) has different utilization requirements depending on various factors such as the brand, model, or age of equipment. However, we did request information about agency procedures to develop and verify utilization rates. We assessed the reliability of the utilization data with agency official interviews and a review of the data for completeness and potential outliers. We determined that the data were sufficiently reliable for the purposes of providing evidence of utilization data collection for heavy equipment assets. We also visited the NPS George Washington Memorial Parkway to interview equipment maintenance officials regarding the procurement and management of heavy equipment and to document photos of heavy equipment. We selected this site because of its range of heavy equipment and close proximity to the Capital region. We conducted this performance audit from October 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, John W. Shumann (Assistant Director), Rebecca Rygg (Analyst in Charge), Nelsie Alcoser, Melissa Bodeau, Terence Lam, Ying Long, Josh Ormond, Kelly Rubin, Crystal Wesco, and Elizabeth Wood made key contributions to this report.", "summary": "Federal agencies use heavy equipment such as cranes and forklifts to carry out their missions, but there is no government-wide data on federal agencies' acquisition or management of this equipment. GAO was asked to review federal agencies' management of heavy equipment. This report, among other objectives, examines: (1) the number, type, and costs of heavy equipment items that are owned by 20 federal agencies and (2) the heavy equipment that selected agencies recently acquired as well as how they decided whether to purchase or lease this equipment. GAO collected heavy equipment inventory data as of June 2017 from the 24 agencies that have chief financial officers responsible for overseeing financial management. GAO also selected three agencies (using factors such as the heavy equipment fleet's size) and reviewed their acquisitions of and guidance on heavy equipment. These agencies' practices are not generalizable to all acquisitions but provide insight into what efforts these agencies take to acquire thousands of heavy equipment items. GAO also interviewed officials at the three selected agencies. Of the 24 agencies GAO reviewed, 20 reported owning over 136,000 heavy equipment items such as cranes, backhoes, and forklifts, and spending over $7.4 billion (in 2016 dollars) to acquire this equipment. The remaining 4 agencies reported that they do not own any heavy equipment. The three selected agencies GAO reviewed in-depth—the Air Force within the Department of Defense (DOD), and the Fish and Wildlife Service and the National Park Service within the Department of the Interior (Interior)—spent about $360 million to purchase about 3,500 heavy equipment assets in calendar years 2012 through 2016 and over $5 million to lease heavy equipment from fiscal years 2012 through 2016. Officials from all three agencies stated that they consider mission needs and the availability of equipment leases when deciding whether to lease or purchase heavy equipment. Federal regulations provide that agencies should consider whether it is more economical to lease or purchase equipment when acquiring heavy equipment, and federal internal control standards require that management clearly document all transactions in a manner that allows the documentation to be readily available for examination. However, in reviewing selected leases and purchases of heavy equipment from these three agencies, GAO found that officials did not consistently conduct or document lease-versus-purchase analyses. Officials at the Air Force and Interior said that there was a lack of clarity in agency policies about when they were required to conduct and document such analyses. Without greater clarity on when lease-versus-purchase analyses should be conducted and documented, these agencies may not be spending funds on heavy equipment effectively. The Department of the Interior and the Air Force should clarify the circumstances in which lease-versus-purchases analyses for heavy equipment acquisitions are to be conducted and documented. The Departments of the Interior and Defense concurred with these recommendations.", "document_type": "gao"}
{"report": "In the U.S. commercial airline industry, passengers travel by air on network, low-cost, and regional airlines. With thousands of employees and hundreds of aircraft, network airlines support large, complex hub- and-spoke operations, which provide service at various fare levels to many destinations. Low-cost airlines generally operate less costly point- to-point service using fewer types of aircraft. Regional airlines typically operate small aircraft—turboprops or regional jets with up to 100 seats—and generally provide service to smaller communities on behalf of network airlines. The U.S. airline industry’s financial health has improved greatly in recent years due in part to increased demand for air travel as a result of the improved economy, industry reorganization, and changes in business practices. Starting in 2007, airlines faced a number of major challenges, including volatile fuel prices, the financial crisis, and the ensuing recession of 2007–2009. These events led to a wave of domestic airline bankruptcies, five airline mergers, and changes in airlines’ business practices. In all, these circumstances—such as the improved economy and new airline business practices—contributed to record level profits for airlines. For example, in 2017, U.S. airlines reported an after-tax net profit of $13.4 billion for domestic operations, according to DOT data. As the industry recovered from the recession and passenger traffic began to rebound, airlines began to exercise “capacity restraint” by carefully controlling the number of seats on flights to achieve higher load factors in order to control costs and improve profitability. Because capacity restraint may result in fewer empty seats on many flights, this practice also limits airlines’ ability to rebook passengers if a flight is delayed or cancelled. Airlines have also made changes in their ticket pricing. For example, airlines now generally “unbundle” optional services from the base ticket price and charge ancillary fees for those services. Unbundling may result in passengers paying for services that were previously included in the price of the ticket. Additionally, certain aspects of customer service quality are tied to the class of ticket passengers purchase. For example, purchasing a “basic economy” ticket may include restrictions, such as not allowing passengers to select seats or charging for carry-on bags, that would not apply to a higher priced ticket class. Similarly, the quality of seating varies based on the ticket class purchased—even within the main cabin of the aircraft. Moreover, while the recent airline mergers have resulted in some new service options for passengers in certain markets, they have also reduced consumers’ choice of airlines on some routes and can result in higher ticket prices. At the same time, low-cost airlines provide greater competition in the markets they serve, which may help to keep prices in check. Many factors—from booking a flight through collecting checked baggage—may contribute to passengers’ level of satisfaction with an airline’s service, according to an airline industry association and market research organizations (see fig.1). For example, one industry survey found that passengers most valued affordable airfare, convenient flight schedules, and reliable on-time departures and arrivals. DOT’s regulatory activities include issuing consumer protection regulations. Specifically, DOT may issue or amend consumer protection regulations under its statutory authority to prohibit unfair or deceptive practices, or unfair methods of competition by airlines, among others. As mentioned previously, under this authority DOT has promulgated various regulations to enhance airline consumer protections since 2009 (see table 1). When regulations are promulgated, agency officials must determine how to promote compliance and deter noncompliance. Agencies charged with promoting regulatory compliance, including DOT, usually adopt a program that consists of two types of activities: those that encourage compliance and those that enforce the regulations. Compliance assistance helps regulated entities, such as U.S. airlines, understand and meet regulatory requirements, whereas activities such as monitoring, enforcement, and data reporting deter noncompliance and ensure that entities follow requirements. Agencies choose a mix of compliance activities that will achieve their desired regulatory outcome. DOT promotes airlines’ compliance with consumer protection requirements through a number of activities, and it educates passengers on their rights. For example, DOT has the authority to investigate whether an airline has been, or is engaged, in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation. If DOT finds that an airline has violated consumer protection requirements, DOT may take enforcement action against the airline by, for example, assessing civil penalties. In addition to promoting airlines’ compliance with consumer protection requirements, DOT also conducts activities aimed at educating passengers about their rights and the services provided by airlines. For example, DOT has an aviation consumer protection website where it highlights passengers’ rights and describes how to file complaints with DOT, in addition to other consumer resources. Within DOT’s Office of the Secretary (OST), the Office of the Assistant General Counsel for Aviation Enforcement and Proceedings and its Aviation Consumer Protection Division are responsible for these efforts. According to DOT officials, the annual appropriation to OST’s Office of the General Counsel provides funding for DOT’s consumer protection activities, among other things. At the end of fiscal year 2017, DOT employed 38 staff—including 18 attorneys and 15 analysts—to conduct these activities, according to DOT officials. DOT’s data, which include both operational measures of airline service, as well as passenger complaints received by DOT, provide mixed information on whether service improved from 2008 through 2017. DOT requires reporting airlines to provide operational data, including information on late, cancelled, or diverted flights; mishandled baggage; and denied boardings. These data showed some general improvement in the quality of airline service from 2008 through 2017. However, during the same time period, the total number of passenger complaints filed with DOT increased for “selected” airlines. Moreover, while these data may be imperfect measures of service quality, they do provide some indication of the passenger experience. DOT publishes data on both operational performance and passengers’ complaints in its monthly Air Travel Consumer Report to inform the public about the quality of services provided by airlines. Representatives from all 11 selected airlines highlighted actions they took to enhance passenger service since 2013, including in some of the areas discussed above. While customer service is important for airlines, these actions can also be motivated in part by other factors—including compliance with certain consumer protection requirements or DOT consent orders, or competition with other airlines. For example, one airline developed a wheelchair tracking system in response to DOT enforcement, which also contributed to the airline’s goal to improve its services to passengers with disabilities. Additional examples of service improvements are listed below. On-time performance. Representatives we interviewed from almost all selected airlines (10 of 11) reported taking actions intended to improve on-time performance or mitigate challenges associated with flight delays and cancellations. These actions varied across airlines from those intended to improve operational performance to those intended to improve the comfort of passengers. For example, one airline began tracking flights that were “at-risk” of meeting DOT’s definition of a chronically delayed flight, so it could, among other things, swap crews or substitute aircraft and avoid these types of delays. According to DOT regulations, airlines with a chronically delayed flight for more than four consecutive one-month periods are engaging in a form of unrealistic scheduling, which is an unfair or deceptive practice and an unfair method of competition. Airlines have also used technology, such as text-messaging updates, to communicate with passengers during delays and cancellations (8 of 9); increased the number of situations where passengers are compensated during delays and cancellations (5 of 9); and empowered customer service agents to provide food, beverages, and entertainment to passengers during flight delays (1 of 9). For example, one airline e-mails all passengers that experience long delays with an apology and voucher for future travel, regardless of whether the delay was within the airline’s control. While DOT has some requirements for airlines on delays and cancellations, such as on tarmac delays and chronically delayed flights, it generally does not require airlines to compensate passengers for delays. Baggage handling. Representatives we interviewed from almost all network and low-cost airlines (8 of 9) reported investing resources in order to improve baggage-handling efforts and minimize the effects to passengers whose bags are lost or delayed. Among other things, airlines upgraded baggage technology (5 of 9); modernized the claims process, so passengers could complete forms on-line (3 of 9); and instituted replacement baggage programs, where passengers get a replacement bag at the airport (2 of 9). For example, one airline invested several million dollars to use radio frequency identification technology (RFID) to track bags, as well as allowing passengers to track their baggage via an application on their smartphone. Another airline introduced a policy to use FedEx to deliver delayed bags if the airline cannot return them within 24 hours. Since 2011, DOT has required certain airlines to make every reasonable effort to return mishandled baggage within 24 hours. Quality of interaction with airline staff. Representatives we interviewed from almost all selected airlines (10 of 11) reported improving training programs in an attempt to enhance interactions between airline staff and passengers. For example, one airline worked with the Disney Institute to provide training to staff on relating to guests during travel disruptions and de-escalating conflict. While airlines have increased customer service training, representatives from one industry association said that the training would be more beneficial if it was provided on a more regular basis. Two airlines also expanded their customer service departments’ hours to better match when passengers travel. According to DOT officials, airlines are not required to provide customer service training to staff. Passengers with disabilities. Representatives we interviewed from almost all network and low-cost airlines (8 of 9) reported taking actions intended to improve services for passengers with disabilities. These actions included programs to replace damaged or misplaced wheelchairs or other assistive devices (3 of 9); improving seating and access to lavatories in the aircraft (1 of 9); and using RFID technology to track wheelchairs (1 of 9). For example, representatives from one airline told us they have retrofitted their larger single aisle aircraft lavatories to be wheelchair accessible. Two airlines also reported changing policies pertaining to emotional support animals. For example, one airline has an online registration for emotional support animals where passengers must submit all documentation at least 48 hours in advance of the flight; according to representatives, the process allows the airline to validate the required paperwork, while providing relevant information to passengers with emotional support animals and ensuring the safety of everyone onboard the aircraft. Involuntary denied boardings. Representatives we interviewed from network and low-cost airlines (9) reported taking steps to reduce or eliminate involuntary denied boardings. Representatives from three airlines said they have reduced or stopped overbooking flights, and other representatives (5 of 9) said their airlines have begun soliciting volunteers to be “bumped” off a flight (i.e., give up their seat) earlier in the process. Two conduct reverse auctions where they ask passengers what compensation they would accept to take an alternative flight. Airlines are also offering additional incentives to encourage passengers to voluntarily switch to flights with available seats (5 of 9)—including travel vouchers with fewer restrictions or that cover ancillary fees, gift cards for Amazon and other retailers, or large travel credits of up to $10,000. DOT promotes and monitors airlines’ compliance with consumer protection requirements and deters noncompliance in five key ways, such as by reviewing passenger complaint data and taking enforcement action where it identifies violations. However, we found that DOT could improve its procedures to provide additional assurances that analysts consistently code passengers’ complaints and properly identify potential consumer protection violations, in addition to more fully utilizing data from DOT’s information systems to inform its compliance program. Further, while DOT has objectives for each of its five key compliance activities, it lacks performance measures for three of these objectives. As a result, DOT is limited in its ability to assess progress toward achieving its goal of promoting airlines’ compliance with consumer protection requirements or to identify and make any needed improvements. DOT conducts five key activities to help airlines understand and comply with consumer protection requirements: (1) providing compliance assistance to airlines, (2) processing complaints from passengers, (3) conducting compliance inspections of airlines at headquarters and airports, (4) conducting airline investigations, and (5) enforcing airlines’ compliance with consumer protection requirements. Collectively, these key compliance activities are intended to help airlines understand and meet consumer protection requirements and deter noncompliance. Providing compliance information to airlines. DOT attorneys assist airlines in meeting consumer protection requirements by developing guidance materials and responding to questions. DOT publishes these materials—such as topic-specific webpages and frequently asked questions—on its website. Attorneys and analysts also informally respond to questions or requests for information from airline representatives. Processing complaints from passengers. As previously stated, passengers may file complaints with DOT via its website, by mail, or through DOT’s telephone hotline. DOT analysts use a web application—the Consumer Complaints Application system—to receive, code, and track passenger complaints. In 2017, DOT’s 15 analysts processed about 18,000 air travel-related complaints. Initial processing involves reviewing the information in the complaint, notifying complainants that their complaint was received, and transmitting the complaint to the relevant airline for action. Analysts assign one of 15 high-level complaint category codes (e.g., “advertising” or “discrimination”) to each complaint as well as more specific lower-level complaint codes and codes indicating a potential violation of consumer protection requirements as necessary. Analysts initially code a complaint based on the passenger’s perception of events and not on an assessment of whether the complaint is a potential violation of consumer protections. According to DOT officials, when initially coding passenger complaints, analysts generally use their judgment to code each passenger’s complaint based on the primary issue. While analysts handle a variety of complaints, DOT may designate specific analysts to handle more complex complaint codes, such as disability complaints. On a monthly basis, DOT provides airlines the opportunity to review the complaints received and the agency’s categorization of each complaint. At that time, airlines have an opportunity to challenge DOT’s categorizations. According to DOT officials, a limited number of complaints are recoded as a result of this process. Conducting compliance inspections of airlines at headquarters and airports. DOT analysts and attorneys inspect airlines at airline headquarters and airports to assess their compliance with consumer protection requirements. From 2008 through 2016, analysts and attorneys conducted compliance inspections of airlines at the airlines’ headquarters, but DOT has not conducted any such inspections since September 2016. Beginning in 2015, DOT initiated compliance inspections of airlines at airports, and DOT continued to conduct these inspections through 2018. According to DOT officials, they have exclusively conducted on-site inspections of airlines at airports in recent years due, in part, to limited resources and budget unpredictability. However, officials stated that they would consider conducting more inspections of airlines at airline headquarters in the future. Inspections of airlines at airlines’ headquarters examine customer service policies and passenger complaints received directly by airlines, among other things. According to DOT officials, these inspections represent a “deep dive” into an airline’s relevant policies and involve collecting and analyzing data prior to and after their weeklong visit, as well as interviewing corporate personnel. DOT analysts and attorneys use the agency’s inspection checklist to assess compliance with a variety of regulated areas such as the inclusion of certain information on the airline’s website and the proper reporting of data to DOT (e.g., mishandled baggage and on-time performance data). According to DOT data, between 2008 and 2016 DOT completed inspections at 33 U.S. airlines’ headquarters. These 33 inspections identified 23 systemic violations, resulting in consent orders. Two inspections resulted in warning letters, and eight did not identify any systemic violations. The assessed penalty amounts for these inspections ranged from $40,000 to $1,200,000. Inspections of airlines at airports examine staff’s knowledge of certain consumer protection requirements and the availability and accuracy of signage and documentation. Such inspections provide DOT the opportunity to examine multiple airlines in one visit. According to DOT officials, during these unannounced inspections, attorneys and analysts focus on assessing compliance through observation and interviews with randomly selected airline employees. For example, analysts and attorneys may confirm the availability of information on compensation for denied boarding from an airline gate agent or review an airline’s required signage on compensation for mishandled baggage to determine whether the information is accurate. According to DOT data, DOT inspected 12 to 14 U.S. airlines annually—most multiple times—at 51 domestic airports from 2015 through 2017. In 2017, DOT conducted inspections at 18 domestic airports that included inspecting 12 U.S. airlines multiple times. In total, from 2015 through 2017, DOT found violations of various consumer protection requirements for 13 airlines that DOT addressed through warning letters. In addition, DOT found violations related to incorrect (e.g., out-of-date) or missing notices regarding baggage liability limits or oversales compensation for 8 airlines that were settled by consent orders with penalties between $35,000 and $50,000. Conducting airline investigations. According to DOT officials, attorneys determine whether to open an investigation by weighing numerous factors, including whether they believe an airline is systematically violating consumer protection requirements. Attorneys may initiate an investigation based on findings from trends in passenger complaints, compliance inspections, monitoring of airline websites and news media, or information supplied by other entities, including other DOT offices or governmental agencies. According to DOT officials, after gathering preliminary information, an attorney may notify the airline of his or her investigation, request information for further analysis, and then determine whether a violation has occurred and which enforcement action, if any, is appropriate. Attorneys document these investigations using DOT’s case management system. From 2008 to 2017, DOT initiated almost 2,500 investigations as shown in table 2 below. Enforcing airlines’ compliance with consumer protection requirements. When investigations result in a determination that a violation occurred, DOT may pursue enforcement action against the airline by, for example; (1) seeking corrective actions through warning letters; (2) consent orders (which may include fines); or (3) commencement of a legal action (see table 2). According to DOT officials, attorneys consider a number of factors in determining the appropriate enforcement action, including whether there is evidence of recidivism or systemic misconduct, and the number of passengers affected. According to DOT data, most investigations result in administrative closures and findings of no violation. According to DOT officials, when attorneys decide to issue a consent order, they work with their managers to arrive at an initial civil penalty level and then negotiate with the airline to arrive at a final settlement agreement and civil penalty amount if applicable. DOT has criteria for setting civil penalties, but officials describe the process as “more art than science” because facts and circumstances always vary. Civil penalties assessed in consent orders often include three parts: mandatory penalties, credits, and potential future penalties (see table 3). A mandatory penalty is the portion of the assessed penalty that must be paid immediately or in installments over a specified period of time. A credit is the portion of the assessed penalty that DOT allows an airline to not pay in order to give credit to the airline for spending funds on passenger compensation or toward specific service improvements, both of which must be above and beyond what is required by existing requirements. A potential future penalty is the portion of the assessed penalty that the airline will pay if DOT determines that the airline violated certain requirements during a specified period of time. Our review of 76 consent orders for our 12 selected airlines where a penalty was assessed found that DOT issued penalties totaling $17,967,000 from 2008 through 2017. Of this, 47 percent ($8,437,700) comprised mandatory penalties paid by the airline. The remaining amounts were either credits or potential future penalties. According to DOT officials, credits are a better way to effect positive change than merely assessing a mandatory penalty. For example, one recent consent order included violations of regulations regarding assistance for passengers with disabilities, among other things. The airline and DOT agreed to an assessed civil penalty amount of $400,000, $75,000 of which was credited to the airline for compensation to customers filing disability-related complaints in certain years and for implementation of an application to provide real-time information and response capabilities to a wheelchair dispatch and tracking system, among other things. However, our review found that consent orders do not always ensure future compliance. Specifically, we found 14 instances where an airline received multiple consent orders for the same regulatory violation. Three of these instances—each for different airlines—related to violations of the “full fare rule,” and two—also for different airlines—related to airlines’ failure to adhere to customer service plans. We found that while DOT has some procedures (i.e., guidance documents and on-the-job training) in place for coding passenger complaints, it lacks others that could help ensure that analysts consistently code complaints and that potential consumer protection violations are properly identified. Federal internal control standards state that agencies should design control activities to achieve objectives and establish and operate monitoring activities to evaluate results. By designing and assessing control activities, such as procedures and training, agencies are able to provide management with assurance that the program achieves its objectives, which in this case involve identifying instances of airline noncompliance. DOT has taken some steps to help analysts code passenger complaints and properly identify potential violations of consumer protection requirements: Guidance documents. DOT developed two documents to guide complaint processing and evaluation—a coding sheet that helps analysts determine how to code complaints and identify potential consumer protection violations, and a user guide that describes how analysts should enter complaint information into the web application. However, we found that these documents may not be clear or specific enough to ensure that analysts consistently coded complaints or properly identified potential consumer protection violations. For example, while the coding sheet includes explanatory notes in 9 of the 15 complaint categories, it does not include definitions and examples for each of DOT’s 15 complaint categories that would illustrate appropriate use of a complaint code, a gap that could result in inconsistent coding. On-the-job training. DOT supplements its guidance documents with on-the-job training, which officials told us helps analysts consistently code complaints and identify potential consumer protection violations; however, DOT has not established formal training materials to ensure all new analysts get the same information. DOT pairs each newly- hired analyst with a senior analyst to be their coach and instruct them on how to code complaints. According to DOT officials, senior and supervisory analysts determine when new analysts are able to code and work independently but continue to monitor their work as needed and determined by the senior analyst. DOT officials stated that while the agency does not regularly check the extent to which complaints are consistently coded, supervisory analysts check analysts’ complaint coding on an as-needed basis throughout the year, as well as during semi-annual performance reviews. However, DOT does not provide formal training materials or other guidance to ensure that senior analysts are conveying the same information during these informal, on-the-job training sessions. DOT officials stated that the combination of the existing guidance, procedures, and hands-on training provides adequate assurance that analysts share a common understanding of the complaint categories resulting in complaints being consistently coded. As a result, DOT officials have not developed additional guidance documents or established formal training materials. While DOT officials said they believe their procedures and on-the-job training are sufficient to ensure that complaints are consistently coded and that potential consumer protection violations are properly identified, a recent DOT Office of Inspector General (OIG) report found that DOT analysts did not identify when to code complaints as potential consumer protection violations for a sample of frequent flyer complaints the agency reviewed. As a result, in 2016, the DOT OIG recommended that DOT provide additional training on what constitutes an unfair or deceptive practice to strengthen oversight of airlines’ frequent flyer programs. In response, DOT created a special team to process frequent flyer complaints and developed and provided review team analysts and other members with training on how to review complaints and identify potential violations related to airlines’ frequent flyer programs. Improving DOT’s procedures that analysts use to code complaints and identify potential consumer protection violations could provide DOT with additional assurances that analysts: share a common understanding of the definitions of all the complaint codes, are coding complaints in each category consistently, and are identifying potential consumer protection violations. Consistent coding among analysts is important for a number of reasons. First, according to DOT officials, passengers use complaint data—which are publicly reported in DOT’s Air Travel Consumer Report—to make decisions about air travel, including which airlines to fly. Second, DOT analysts and attorneys use complaint data to guide their compliance activities (e.g., selecting airlines for inspections and investigations, and determining proper enforcement actions). We found that while DOT’s case management system allows attorneys to track investigations, it lacks functionality that would allow DOT officials to more efficiently use data from the system to inform other key activities, such as making compliance and enforcement decisions. Federal internal control principles state that agencies should design an entity’s information system and related control activities to achieve objectives and respond to risks, which in this case involve using data from DOT’s case management system to inform its compliance activities. Our review of DOT’s case management system identified the following limitations that affect DOT’s ability to use data from its case management system to target resources and accurately monitor trends in violations, compliance activities, and the results of its enforcement actions: Key data are optional. Attorneys are not required to complete certain key data fields in the case management system. For example, attorneys are not required to document the outcome of an investigation in the “enforcement action” field. According to officials, while attorneys do not always complete this field, they often choose to document the outcome of investigations in the case notes. Even if that information is captured in the case notes section, attorneys can only access that information by individually reviewing each case file. Data entries are limited. Attorneys cannot record multiple consumer protection violations for a single investigation in the case management system. As a result, when multiple violations occur, attorneys must use their professional judgement to select the primary violation to record. Our review of the 76 consent orders against selected airlines resulting from airline investigations identified 24 instances—or more than 30 percent—where an airline violated multiple consumer protection regulations. While this is a small subset of all investigations (2,464) DOT completed across our timeframe, it suggests investigations could include violations of multiple consumer protection regulations. Data entries do not reflect DOT’s compliance activities. While the case management system includes a field for attorneys to document the source of investigations, the field’s response options do not fully correspond to DOT’s key compliance activities or align to DOT’s documentation listing the sources of investigations. For example, the field that tracks the source of an investigation includes an option to identify passenger complaints as the source but not an inspection of an airline. Officials told us that, like the outcomes of investigations, attorneys often document the source of an investigation in the case notes. However, as mentioned previously, information captured in the case notes section can only be accessed by individually reviewing each case file. Limited reporting capabilities exist. Attorneys are limited in their ability to run reports to understand trends across multiple investigations, according to DOT officials. For example, the case management system lacks a function to run reports by certain data fields. Specifically, according to DOT officials, attorneys cannot run reports by the airline name data field and must instead type in the airline name to create a report, a process that could produce unreliable results if an airline’s name is inconsistently entered into the database. According to DOT officials, the case management system’s capabilities are limited largely because the database was designed as a mechanism for attorneys to manage ongoing investigations. DOT officials told us that, while the database has successfully fulfilled that role, officials have increasingly used data from the case management system to make enforcement decisions. For example, DOT attorneys use information from the case management system to inform civil penalty amounts. In addition, DOT uses data from the case management system to analyze the results of investigations and inspections, as well as the details of consent orders in order to target future compliance activities. However, because of limited reporting capabilities, attorneys and managers must manually create summary documents from the case management system’s data, work that could be time consuming and subject to manual errors, and that does not address the issue that some data are not entered into various data fields in the first place. Recognizing limitations with the case management system, DOT has taken steps to improve the system. Specifically, starting in June 2018, DOT began working with a contractor to update the case management system’s functionality. Among other things, the updates are intended to improve the system’s ability to run reports, which could enhance DOT’s ability to examine trends in enforcement actions and penalty amounts, and allow the system to track investigation milestones. While DOT’s planned updates may help DOT officials better examine trends in enforcement actions, the planned updates do not fully address the issues we identified above, particularly related to collecting complete data. Collecting complete and comprehensive data in the case management system could allow DOT to better track trends in its investigations, inspections, and enforcement actions and to use that information to make data-driven decisions about future compliance activities and enforcement actions. While DOT has five objectives for its key compliance program activities, it has not established performance measures for three of these objectives. Objectives communicate what results the agency seeks to achieve, and performance measures show the progress the agency is making toward achieving those objectives. Federal internal control standards state that agencies should define objectives clearly to enable the identification of risks and define risk tolerances. They further state that management defines objectives in measurable terms, so that performance toward those objectives can be assessed. Additionally, the Government Performance and Results Act of 1993 (GPRA), as enhanced by the GPRA Modernization Act of 2010, requires agencies to develop objective, measurable, and quantifiable performance goals and related measures and to report progress in performance reports in order to promote public and congressional oversight, as well as to improve agency program performance. In fiscal years 2017 and 2018, DOT developed objectives for each of its five key compliance activities; however, as illustrated in table 4 below, DOT does not have performance measures for three of its objectives. For the three objectives for which DOT has not established performance measures, it has documented qualitative measures in internal agency documents. For example, while DOT has not developed a performance measure related to enforcing airlines’ compliance with consumer protection requirements, it summarized enforcement cases in fiscal year 2017 that illustrated actions the agency had taken to achieve this objective. For instance, one enforcement action included a consent order against an airline with an assessed penalty of $1.6 million for violating DOT’s tarmac delay rule. DOT highlighted similar accomplishments for educating airlines and conducting inspections. For example, DOT issued guidance to help airlines understand their legal obligations to not discriminate against passengers in air travel on the basis of race, color, national origin, religion, sex or ancestry, and the agency highlighted identifying unlawful practices by multiple airlines during an inspection of airlines at an airport. While the actions described may provide DOT with some information on whether it is achieving its objectives, they fall short of internal control standards that call for federal agencies to define objectives in measureable terms to assess performance. DOT officials stated that they have not developed performance measures to monitor progress toward achievement of some objectives because it is difficult to develop quantifiable performance measures. We have previously reported that officials from other enforcement agencies with similar objectives found it challenging to develop performance measures in part due to the reactive nature of enforcement as well as the difficultly of quantifying deterrence, but were ultimately able to do so. Developing performance measures for all objectives would allow DOT to more fully assess the effectiveness of its efforts at promoting airlines’ compliance with consumer protection requirements. Specifically: Providing compliance information to airlines. DOT has not developed quantifiable performance measures to assess how well DOT educates airlines about consumer protection requirements. For example, DOT does not have a performance measure for developing and disseminating guidance for specific rules or to issue information on new rules within a certain time frame. Rather, officials told us that they proactively e-mail stakeholders new consumer protection rules— rather than relying on stakeholders having to find them on DOT’s website or Regulations.gov—and if officials receive the same question repeatedly, about the same requirement they might issue guidance on the topic. According to DOT officials, these activities help ensure that stakeholders are complying with relevant consumer protection requirements. DOT officials did not provide a specific reason for why they do not have a performance measure related to this objective. However, without such a measure, DOT cannot be sure that it is providing timely educational materials to clarify new consumer protection requirements and assist airlines in complying with these requirements. Conducting compliance inspections of airlines at headquarters and airports. DOT lacks quantifiable performance measures related to conducting inspections of airlines at airlines’ headquarters and at airports. Having such a measure could help ensure that DOT conducts these activities. Specifically, we found that while DOT continues to conduct inspections of airlines at airports, it has not conducted inspections at airlines’ headquarters since 2016, despite having identified this compliance activity as a key priority in planning documents. According to DOT officials, they have not conducted inspections at airlines’ headquarters for two primary reasons. First, DOT officials said inspections at airlines’ headquarters require significant staff resources, which DOT has allocated to other compliance activities in recent years. Second, officials said that no airline was an obvious choice for an inspection at its headquarters because DOT had not received a disproportionate number of complaints against a specific airline to suggest an inspection was warranted. However, the DOT OIG previously directed the agency to make these inspections a priority and to allocate resources accordingly, and DOT officials themselves have said that these inspections provide incentives for airlines’ continued compliance regardless of whether one airline has an obvious problem. Establishing performance measures for conducting both types of inspections would provide greater assurance that DOT conducts these activities on a regular basis. Moreover, officials told us that inspections at airlines’ headquarters examine specific consumer protection requirements that are not examined during inspections at airports, and that inspections at headquarters help promote compliance. Among other things, inspections at airlines headquarters allow DOT officials to: (1) review training manuals and training records; (2) examine a sample of passengers’ complaint data received directly by the airlines, including disability and discrimination complaints; and (3) verify that airlines are current on reporting data such as on mishandled baggage and denied boardings to DOT. Performance measures related to how often and under what circumstances compliance inspections should take place could provide assurance that DOT conducts these activities, and is not missing opportunities to monitor airlines’ compliance with consumer protection requirements. Enforcing airlines’ compliance with consumer protections. DOT officials told us that they have not developed performance measures for enforcement actions because they would not want to have performance measures that were punitive or reactive by, for example, requiring the agency to collect a certain penalty amount from airlines. While we acknowledge the complexity and risks involved in setting these types of performance measures, as mentioned previously, other agencies have done so. For example, one of the Federal Trade Commission’s performance measures is to focus 80 percent of enforcement actions on consumer complaints. Without a performance measure for enforcement activities, DOT is missing opportunities to assess the effectiveness of these activities and make any needed changes. We have previously reported that performance measurement gives managers crucial information to identify gaps in program performance and plan any needed improvements. DOT’s primary vehicle for educating passengers is its aviation consumer protection website, which it relaunched in November 2017 (see fig. 3). According to DOT officials, as part of the relaunch, DOT improved the navigability and accessibility of the website by, among other things, arranging material by topic, adding icons for various subjects, and including a link for the website on DOT’s aviation homepage. The website now includes summaries of passengers’ rights on a number of issues including tarmac delays, overbookings, mishandled baggage, and disability issues, as well as DOT’s rules, guidance issued to airlines and others, and enforcement orders on key consumer protection issues. Moreover, the website is now accessible to people with disabilities. Moving forward, DOT has a number of additional updates planned through fiscal year 2019. For example, DOT plans to update its website with information on frequent flyer issues, optional services and fees, and codeshare agreements by the end of calendar year 2018. According to DOT officials, while not statutorily required to conduct these education activities, passenger education is a key effort to ensuring airlines’ compliance. DOT also has numerous other efforts to educate passengers on their rights. For example: Establishing resources for passengers. DOT developed Fly Rights—an online brochure that details how passengers can avoid common travel problems—in addition to material on unaccompanied minors, family seating, and a glossary of common air travel terms. DOT also developed training tools (e.g., brochures, digital content, and videos) on the rights of passengers with disabilities under the Air Carrier Access Act of 1986 and its implementing regulations, including wheelchair assistance at airports and onboard aircraft, traveling with a service animal, and traveling with assistive devices. While some of these materials were developed primarily for airline employees and contractor staff, others were developed to directly assist passengers with disabilities by providing helpful tips on airlines’ responsibilities, according to DOT officials. Building consumer education information into existing regulations. Passenger education is built into certain consumer protection requirements, according to DOT officials. For example, when an airline involuntarily denies a passenger boarding, immediately after the denied boarding occurs the airline must provide a written statement explaining the terms, conditions, and limitations of denied boarding compensation, and describing the airline’s boarding priority rules and criteria. Responding to complaints. DOT officials said they include information on an airline’s responsibilities when responding to passenger complaints. For example, if a passenger submits a complaint to DOT about not receiving compensation for a delayed or cancelled flight, the DOT analyst may inform the passenger that airlines are generally not required to compensate passengers in these instances. We compared DOT’s efforts to educate airline passengers about their rights against key practices for consumer outreach GAO identified in prior work and found that DOT’s efforts fully align with five of the nine key practices (see fig. 4). For example, we found that DOT has successfully identified the goals and objectives of its passenger education program and identified the appropriate media mix for disseminating its materials. Similarly, we found that DOT had identified and engaged stakeholders, a step that, according to DOT officials, allowed them to better tailor materials. However, as summarized in the figure below, we found that DOT only partially met or did not meet the remaining four key practices. For example, DOT’s actions do not align with the key practice to “identify resources” and only partially align with the key practice to “develop consistent, clear messages” based on the established budget. According to a senior DOT official, DOT has not identified budgetary resources because, while important, DOT’s educational efforts are secondary to the office’s other efforts. Further, officials said that it has been difficult for the agency to develop a budget when it has been operating under a continuing resolution for some part of the fiscal year for the last decade. However, without identifying short- and long-term budgetary resources and planning activities accordingly, DOT is missing an opportunity to plan educational efforts or prioritize needs based on available resources. In addition, we found DOT’s efforts only partially align with the key practice that calls for an agency to research its target audience. While DOT has solicited some input from stakeholder groups such as those representing passengers with disabilities, DOT has not solicited feedback directly from passengers to understand what they know about their rights. DOT officials said they have not sought such feedback because they have not identified a method for doing so that would be statistically generalizable and not cost prohibitive. While costs are always an issue when considering budget priorities, we have previously reported on other agencies’ direct consumer outreach efforts that while not statistically generalizable were nonetheless useful for understanding the effect of the agencies’ efforts. For example, the Bureau of Consumer Financial Protection has used focus groups to understand its outreach efforts. Bureau of Consumer Financial Protection officials previously told GAO that while obtaining information through such efforts was resource intensive, it allowed them to assess the performance of their outreach activities. In another case, an agency surveyed users that access its website to help it understand whether its outreach efforts were effective. Obtaining input from passengers directly on what information they want or what they know about their rights would provide DOT with greater assurance that educational materials are appropriately tailored to meet a wide range of passengers’ needs. Finally, DOT has not established performance measures to understand the quality of its passenger education materials (i.e., process measures) or the effectiveness of its efforts (i.e., outcome measures). DOT officials said that they receive informal input from stakeholders on the quality of the materials and track website traffic to understand whether materials are reaching passengers. Officials said they believe that these mechanisms provide them with some assurance that the materials are meeting passengers’ needs and that passengers are accessing and using the materials. While these mechanisms may provide DOT with some information on how often materials are accessed online, they do not help it understand the quality of the materials and measure the success of its passenger education efforts. For example, while DOT officials track website traffic, they have not established a related performance measure. A number of different measures could be used to track processes and outcomes related to the use of its website, including the time consumers spend on the website, number of website pages viewed, bounce rate (i.e., percentage of visitors who looked at only one page and immediately left the site), or user’s perception of the experience of their visit. Establishing such measures would provide DOT with greater assurances that its educational efforts are appropriately tailored to passengers and leading to improved understanding of passengers’ rights, including whether any adjustments are needed. To enforce consumer protection requirements, such as those preventing unfair or deceptive practices or unfair methods of competition by airlines, DOT has conducted almost 2,500 investigations and issued about 400 consent orders over the last decade. However, DOT lacks reasonable assurance that its approach is achieving the highest level of airlines’ compliance, given its available resources. For example, DOT has not assessed whether its procedures and training materials help analysts consistently code passengers’ complaints and identify potential consumer protection violations. Additionally, DOT has not fully used data from its case management system to inform its compliance program. Moreover, in the absence of comprehensive performance measures, DOT lacks a full understanding of the extent to which it is achieving its goal of airlines’ compliance with consumer protection requirements and whether any programmatic changes may be warranted. Improvements in these areas would provide DOT with additional information to target its resources and improve compliance. DOT has taken positive steps to educate passengers about their rights— through its revamped website and other educational resources. Nevertheless, DOT could improve its efforts by more fully following key practices GAO previously identified for conducting consumer education, such as by: seeking feedback directly from consumers; identifying short- and long-term budget resources; and establishing performance measures. Taking such actions would provide DOT with greater assurance that its efforts are meeting passengers’ needs. We are making the following six recommendations to DOT: The Office of the Secretary should assess its procedures and training materials for coding airline passengers’ complaints, as appropriate, to help ensure that passengers’ complaints are consistently coded and that potential consumer protection violations are properly identified. (Recommendation 1) The Office of the Secretary should assess the feasibility and cost of updating its airline case management system to address data and reporting limitations, and to undertake those updates that are cost effective and feasible. (Recommendation 2) The Office of the Secretary should establish performance measures for each of its objectives for its five key airline-compliance activities. (Recommendation 3) The Office of the Secretary should capture feedback directly from airline passengers or identify other mechanisms to capture passengers’ perspectives to inform DOT’s education efforts. (Recommendation 4) The Office of the Secretary should identify available short- and long- term budgetary resources for DOT’s airline-passenger education efforts. (Recommendation 5) The Office of the Secretary should develop performance measures for DOT’s efforts to educate airline passengers. (Recommendation 6) We provided a draft of this report to DOT for review and comment. DOT provided written comments, which are reprinted in appendix IV, and technical comments, which we incorporated as appropriate. DOT concurred with our recommendations and officials said that they had begun taking steps to address the recommendations. We are sending copies of this report to the appropriate congressional committees, DOT, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at 202-512-2834 or vonaha@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. Since its deregulation in 1978, numerous studies have examined the effects of competition in the airline industry. Most have examined the link between competition and pricing on specific airline routes—i.e., airline service between two airports or cities. These routes are viewed as the relevant markets for competitive analysis because they reflect the products that consumers purchase and for which airlines set prices. These studies have examined the pricing effect: (1) of route competition, (2) of the extent of an airline’s presence at airports, and (3) of mergers in the evolving airline industry. Studies have generally shown (1) that prices tend to be higher when fewer airlines serve a city-pair market and (2) that airline dominance at airports can be associated with higher market prices. Other studies have also shown that the presence of a low-cost airline on a route—or even the threat of entry by a low-cost airline—is associated with lower fares. In addition, some studies have examined whether there is a link between the level of competition in city-pair markets and certain elements of customer service quality, such as the incidence and length of delays, cancellations, lost baggage, flight frequency, and denied boarding. While competition generally lowers prices, the effect of competition on the quality of service is more ambiguous. On the one hand, firms may compete on quality of service; in this instance, competition leads to higher service, but it is also possible that a firm facing less competition may invest in quality of service to more fully differentiate among passengers. A variety of factors could influence the association between competition and customer service. These factors include, for example: the cost of providing higher levels of quality, the extent to which consumers have full knowledge of quality, the extent to which consumers change future purchasing decisions based on quality, and the value consumers place on product quality relative to product price. In the context of the airline industry, airline investments that underlie the provision of consumer services are not necessarily route-specific as they more likely relate to investments airlines make at airports, or at the overall airline level. For example, airlines make decisions about the extent to which resources—such as the number of aircraft and customer service personnel—are available at a given airport. Moreover, policies regarding training of gate and customer service personnel likely take place at the corporate level as do decisions about the configuration of aircraft, which may have related quality of service factors. Also, because airlines provide a service that involves a large network, some elements of quality may relate to the broad decisions regarding the management of that network. For example, if a flight is delayed on one route, it may affect the timeliness of several downstream flights due to the late arrival of the aircraft, pilots, and flight attendants, and airlines may take these networked effects into consideration in ways that could affect customer service. Still, some decisions that airlines make do have route-specific consequences that could influence customer service, such as decisions on flight scheduling, and which flights to cancel or delay in the face of operational disruptions. Some empirical airline literature on the impact of competition on certain quality factors predates several airline mergers, and some was conducted more recently. In the earlier literature, several studies found a linkage between the competitiveness of airline markets and customer service outcomes such as on-time performance, cancellations, mishandled baggage and flight frequency. These studies generally found that more competitive markets are associated with an improvement in one or more of these aspects of customer service. For example, one study found a small increase in the number of cancelled flights when a route was served by only one airline, and another found that such routes had, on average, slightly longer delays. However, the extent of these improvements has typically been small, such as an association with a small reduction in cancellations or a reduced average delay of just a few minutes. On the other hand, some studies found that delays and cancellations are less common when they involve airlines’ hub airports—especially when a flight is destined for an airline’s hub airport. In order to look more closely at the relationship between market competition and airline customer service in recent years, we reviewed several more current studies. Specifically, because the nature of the airline industry—particularly its competitive landscape—transformed after the 2007–2009 recession, we selected studies that included at least some of the study period post-recession. We identified six studies that met our criteria for inclusion, each of which examined some aspect of the link between airline market competition and one or more element of customer service. As with the earlier studies, these more recent studies generally found greater competition was associated with some improved customer service. Specifically, some studies found that flight delays were, on average, a little longer, and flight cancellations more likely when markets were more highly concentrated or in the aftermath of an airline merger. For example, one study found that a particular level of increased route concentration was associated with about a 4-minute average increase in flight delay. Another study found a similar effect on delay and also found a slightly higher incidence of cancellations on more concentrated routes. These increases in delays and cancellations were generally small. In the case of mergers, the findings are somewhat mixed. One study we reviewed found increased cancellations and more delays after mergers, but the effects tended to diminish over time, while another study did not find an effect of mergers on these measures of customer service. Another study found that the effect of mergers on consumer welfare—as measured by both price and flight frequency—may be idiosyncratic to the specific airlines involved in the merger and the state of competition in the broader market at the time of the merger. Finally, a GAO study that examined the effect of the tarmac delay rule on flight cancellations found that flights on routes where either the originating or destination airport was a hub airport for the airline had a lower likelihood of cancellation, possibly indicating a focus by airlines on maintaining smooth operations as much as possible. Generally, the differing findings on the extent or existence of quality impacts could be the result of varied methodologies in these analyses, including differing model specifications, variable measurements, and analysis time frames. Finally, while these studies provide insight into the link between competition and certain aspects of service quality, some elements of airline’s service quality are harder to explore in this way. For example, there are no data that would be readily usable in empirical analyses on the effect of competition on certain quality measures such as the extent airline websites are user-friendly, the ability to be rebooked on a different flight when a flight is missed or was cancelled, the helpfulness of airline staff, and consumer satisfaction with airline cabin amenities, such as seat comfort and availability and quality of food for sale. Moreover, while studies examine effects of competition at the route level, the national airline industry has become more concentrated in the past decade due to a series of bankruptcies and mergers. The reduced competition at this broad level may also have implications for customer service, such as the level of service provided at airports and policies on flight cancellations and rebooking. Our objectives for this report were to: (1) describe trends in DOT data on airline service from 2008 through 2017 and airlines’ actions to improve service; (2) assess how effectively DOT ensures airlines’ compliance with consumer protection requirements; and (3) assess the extent to which DOT’s airline passenger education efforts align with key practices for consumer outreach. We also examined the relationship between airline competition and customer service (app. I). The scope of this report focused on issues regarding consumer protections for airline passengers (i.e., “consumer protections”) overseen by DOT. We focused our analysis on the time period 2008 through 2017 unless otherwise noted because it encompassed key additions or amendments to consumer protection regulations, including Enhancing Airline Passenger Protections I, II, and III. For each of our objectives, we reviewed documents and data from DOT and airlines, to the extent possible. We also conducted multiple interviews with officials from DOT’s Office of the Assistant General Counsel for Aviation Enforcement and Proceedings and its Aviation Consumer Protection Division, in addition to a non-generalizable sample of 25 stakeholders—including representatives from 11 airlines, 3 market research organizations, 3 aviation academics, and 8 industry associations representing airlines, airline staff, and airline passengers. To describe trends in airline service, we analyzed DOT operational data and passenger complaints submitted to DOT from 2008 through 2017. Specifically, we analyzed DOT’s data on late flights; cancellations; diverted flights (i.e., flights operated from the scheduled origin point to a point other than the scheduled destination point in the airline’s published schedule); voluntary and involuntary denied boardings; and mishandled baggage to describe airlines’ operational performance. From 2008 through 2017, DOT required airlines with at least one percent of domestic scheduled-passenger revenues in the most recently reported 12-month period to report this data for reportable flights—we refer to these airlines as “reporting airlines” throughout our report. We also obtained data for passenger complaints submitted to DOT and analyzed the data to identify the frequency, types, and changes in complaints over time. We limited our analysis of passenger complaint data to “selected” airlines that were required to report operational data to DOT in 2017— the most recent year of available data when we started our review—because they were the 12 largest U.S. domestic passenger airlines in 2016. To assess the reliability of the operational data and complaints, we conducted electronic testing of the data to identify any outliers, compared our results to DOT published data, and interviewed DOT officials about how the data were collected and used. Because our interviews with DOT officials indicated that no changes had been made to the processes used to collect and maintain both data sources, we also relied on our past data reliability assessments from recently issued GAO reports, assessments that found that both data sources are sufficiently reliable for providing information on trends over time. Therefore, we determined that the data were sufficiently reliable for our purposes, including to present high-level trends in service over time. Moreover, we also reviewed analyses from three market research organizations that we identified during the course of our work— J.D. Power and Associates, the American Customer Satisfaction Index, and the Airline Quality Rankings—to provide additional information on airline service quality. We interviewed the authors to understand how they conducted the analyses; however, we did not evaluate the underlying methodologies. We determined that the results were reliable enough to report their high-level trends on passenger satisfaction. To understand airlines’ actions to enhance service, we interviewed or received written responses from 11 of 12 selected airlines. We conducted interviews with airline representatives using a semi-structured interview instrument, which included questions pertaining to business practices aimed at improving service from 2013 through 2017, among other things. We conducted three pretests with one airline and two industry groups. Representatives from each group provided technical comments, which we incorporated, as appropriate. We limited our timeframe to the most recent 5 years because business practices in the industry evolve quickly and we wanted to highlight the most relevant and recent practices. During interviews, we asked selected airline representatives whether these practices were documented in contracts of carriage or other customer commitment documents and reviewed those documents as appropriate. During these interviews, we also asked selected airline representatives if they considered certain aspects of their passenger complaint data they receive directly from passengers to be proprietary, and all airline representatives said the data were proprietary. To inform interviews with selected airlines representatives and to understand recent airlines business practices aimed at improving service for passengers, we also conducted a literature search of trade publications and industry reports from 2013 through 2017. Where relevant, we used information from this literature search as additional context and as a basis for our questions to airline representatives regarding specific business practices. To describe how DOT ensures airlines’ compliance with consumer protection requirements, we reviewed DOT’s documentation of the policies, procedures, and guidance that describe its five key compliance activities. In addition, we conducted multiple interviews with staff from DOT’s Office of the Assistant General Counsel for Aviation Enforcement and Proceedings and its Aviation Consumer Protection Division. To identify trends in DOT’s key compliance activities from 2008 through 2017, we analyzed reports and data DOT provided on the number and results of its airline inspections, investigations, enforcement actions, and civil penalties—including data from DOT’s case management system. To assess the reliability of the data, we interviewed DOT officials to understand how the data are collected and used and the steps DOT takes to ensure the data are accurate, complete, and reliable. We determined that the data were reliable enough to summarize trends in DOT’s investigation and enforcement actions from 2008 through 2017. To determine how effectively DOT implements its compliance program, we assessed selected key compliance activities—i.e., coding passenger complaints, using the case management system to inform compliance activities, and developing objectives and related performance measures—against selected principles of Standards of Internal Control in the Federal Government related to control activities. We also summarized other leading practices for developing performance measures, in addition to our past work, which has identified other agencies with successful performance measures. To understand the extent to which passenger education materials developed by DOT align with key practices for consumer outreach, we reviewed DOT’s educational materials and assessed them against nine key practices we previously developed for consumer education planning. In that prior work, GAO convened an expert panel of 14 senior management-level experts in strategic communications to identify the key practices of a consumer education campaign. We believe the key practices the expert panel identified in 2007 remain relevant today since the practices are not time-sensitive. In addition to reviewing relevant materials, we also conducted interviews with DOT officials to understand their outreach efforts. During these interviews, DOT officials agreed that these criteria were relevant to conducting consumer outreach. For a complete list of the criteria and corresponding definitions, see appendix III. To understand the impact of airline competition on customer service provided to passengers we conducted a literature search of pertinent studies in scholarly, peer-reviewed journals, conference papers, and government publications. We restricted our review to results published between January 1, 2012, and December 31, 2017, and our search yielded 57 academic results and 10 government studies. Of these results, we reviewed each abstract to determine whether it was relevant to our objective based on criteria we established. For example, we limited results to those looking at the U.S. airline system and eliminated results that focused solely on airfares. In total, we found that 5 academic studies and 1 government study were ultimately relevant and sufficiently reliable for our report. Moreover, we also summarized 6 additional studies that we identified by reviewing the bibliographies of our selected studies or that were identified as key pieces of research in the field to summarize prior work in this area. We conducted this performance audit from September 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. GAO previously identified nine key practices that are important to conducting a consumer education campaign (see table 5). Andrew Von Ah, (202) 512-2834 or vonaha@gao.gov. In addition to the individual named above, other key contributors to this report were Jonathan Carver, Assistant Director; Melissa Swearingen, Analyst-in-Charge; Amy Abramowitz; Lacey Coppage; Caitlin Cusati; Delwen Jones; Kelsey Kreider; Ethan Levy; Gail Marnik; SaraAnn Moessbauer; Malika Rice; Minette Richardson; Pamela Snedden; and Laurel Voloder.", "summary": "Airlines recently came under scrutiny for their treatment of passengers—including a high-profile incident in which a passenger was forcibly removed from an overbooked flight. However, airlines maintain that service has improved, citing better on-time performance and lower airfares. DOT has the authority to issue and enforce certain consumer protection requirements. DOT also educates passengers about their rights. GAO was asked to examine airline consumer protection issues. This report examines, among other issues, (1) trends in DOT's data on airline service; (2) the effectiveness of DOT's compliance efforts; and (3) the extent to which DOT's passenger education efforts align with key practices for consumer outreach. GAO reviewed DOT data on airline service and analyzed passenger complaint data for the 12 largest domestic airlines from 2008 through 2017; reviewed relevant documents and data on DOT's compliance program; assessed DOT's educational efforts against key practices for successful consumer outreach; and interviewed DOT officials. GAO interviewed or obtained written information from 11 of the 12 airlines. The Department of Transportation's (DOT) data offered mixed information on whether airlines' service improved from 2008 through 2017. While DOT's operational data on rates of late flights, denied boardings, and mishandled baggage generally suggested improvement, the rate of passenger complaints received by DOT increased about 10 percent—from about 1.1 complaints per 100,000 passengers to 1.2 complaints per 100,000 passengers. DOT conducts five key activities to ensure airlines' compliance with consumer protection requirements (see table). However, GAO found that DOT lacked performance measures to help it evaluate some of these activities and that it could improve its procedures (i.e., guidance documents and training materials), that analysts use to code passenger complaints. Performance measures : DOT has established objectives for each of its five key compliance activities that state what it seeks to achieve; however, DOT lacks performance measures for three objectives. For example, DOT lacks a performance measure for conducting inspections of airlines' compliance with consumer protection requirements at airlines' headquarters and at airports. As a result, DOT is missing opportunities to capture critical information about airlines' compliance with consumer protection requirements. Procedures : DOT has procedures to help analysts code passenger complaints and identify potential consumer protection violations. GAO found that DOT's guidance for coding passenger complaints did not consistently include definitions or examples that illustrate appropriate use or help analysts select among the various complaint categories. Additional procedures would help DOT ensure that complaints are consistently coded and that potential violations are properly identified. GAO found that while DOT has taken steps to educate passengers on their rights, its efforts did not fully align with four of nine key practices GAO previously identified for conducting consumer education. For example, while DOT has defined the goals and objectives of its outreach efforts, it has not used budget information to prioritize efforts or established performance measures to assess the results. DOT has also not solicited input directly from passengers to understand what they know about their rights. Taking such actions would provide DOT with greater assurance that its efforts are meeting passengers' needs. GAO is making six recommendations, including that DOT: develop performance measures for compliance activities, improve its procedures for coding airline passengers' complaints, and improve how passenger education aligns with GAO's key practices. DOT concurred with our recommendations and provided technical comments, which we incorporated as appropriate.", "document_type": "gao"}
{"report": "While HUD has primary responsibility for addressing lead paint hazards in federally-assisted housing, EPA also has responsibilities related to setting federal lead standards for housing. EPA sets federal standards for lead hazards in paint, soil, and dust. Additionally, EPA regulates the training and certification of workers who remediate lead paint hazards. CDC sets a health guideline known as the “blood lead reference value” to identify children exposed to more lead than most other children. As of 2012, CDC began using a blood lead reference value of 5 micrograms of lead per deciliter of blood. For children whose blood lead level is at or above CDC’s blood lead reference value, health care providers and public health agencies can identify those children who may benefit the most from early intervention. CDC’s blood lead reference value is based on the 97.5th percentile of the blood lead distribution in U.S. children (ages 1 to 5), using data from the National Health and Nutrition Examination Survey. Children with blood lead levels above CDC’s blood lead reference value have blood lead levels in the highest 2.5 percent of all U.S. children (ages 1 to 5). HUD, EPA, and the Department of Health and Human Services (HHS) are members of the President’s Task Force on Environmental Health Risks and Safety Risks to Children. HUD co- chairs the lead subcommittee of this task force with EPA and HHS. The task force published the last national lead strategy in 2000. The primary federal legislation to address lead paint hazards and the related requirements for HUD is the Residential Lead-Based Paint Hazard Reduction Act (Title X of the Housing and Community Development Act of 1992). We refer to this law as Title X throughout this report. Title X required HUD to, among other things, promulgate lead paint regulations, implement the lead hazard control grant programs, and conduct research and reporting, as discussed throughout this report. The two key regulations that HUD has issued under Title X are the Lead Disclosure Rule and the Lead Safe Housing Rule: Lead Disclosure Rule. In 1996, HUD and EPA jointly issued the Lead Disclosure Rule. The rule applies to most housing built before 1978 and requires sellers and lessors to disclose any known information, available records, and reports on the presence of lead paint and lead paint hazards and provide an EPA-approved information pamphlet prior to sale or lease. Lead Safe Housing Rule. In 1999, HUD first issued the Lead Safe Housing Rule, which applies only to housing receiving federal assistance or federally-owned housing being sold. The rule established procedures for evaluating whether a lead paint hazard exists, controlling or eliminating the hazard, and notifying occupants of any lead paint hazards identified and related remediation efforts. The rule established an “elevated blood lead level” as a threshold that requires landlords and PHAs to take certain actions if a child’s blood test shows lead levels meeting or exceeding this threshold. In 2017, HUD amended the rule to align its definition of an “elevated blood lead level” with CDC’s blood lead reference value. This change lowered the threshold that generally required landlords and PHAs to act from 20 micrograms to 5 micrograms of lead per deciliter of blood. According to the rule, when a child under age 6 living in HUD-assisted housing has an elevated blood lead level, the housing provider must take several steps. These generally include testing the home and other potential sources of the child’s lead exposure within 15 days, ensuring that identified lead paint hazards are addressed within 30 days of receiving a report detailing the results of that testing, and reporting the case to HUD. Office of Lead Hazard Control and Healthy Homes (Lead Office). HUD’s Lead Office is primarily responsible for administering HUD’s two lead hazard control grant programs, providing guidance on HUD’s lead paint regulations, and tracking HUD’s efforts to make housing lead-safe. The Lead Office collaborates with HUD program offices on its oversight and enforcement of lead paint regulations. For instance, the Lead Office issues guidance, responds to questions about requirements of lead paint regulations, and provides training and technical assistance to HUD program staff, PHA staff, and property owners. The Lead Office’s oversight efforts also include maintaining email and telephone hotlines to receive complaints and tips from tenants or homeowners, among others, as they pertain to lead paint regulations. Additionally, the Lead Office, in collaboration with EPA, contributes to the operation of the National Lead Information Center––a resource that provides the general public and professionals with information about lead, lead hazards, and their prevention. Office of Public and Indian Housing (PIH). HUD’s PIH oversees and enforces HUD’s lead paint regulations for the rental assistance programs. As discussed earlier, this report focuses on the two largest rental assistance programs serving the most families with children––the Housing Choice Voucher and public housing programs. Housing Choice Voucher program. In the voucher program, eligible families and individuals are given vouchers as rental assistance to use in the private housing market. Generally, eligible families with vouchers live in the housing of their choice in the private market. The voucher generally pays the difference between the family’s contribution toward rent and the actual rent for the unit. Vouchers are portable; once a family receives one, it can take the voucher and move to other areas where the voucher program is administered. In 2017, there were roughly 2.5 million vouchers available. Public housing program. Public housing is reduced-rent developments owned and operated by the local PHA and subsidized by the federal government. PHAs receive several streams of funding from HUD to help make up the difference between what tenants pay in rent and what it costs to maintain public housing. For example, PHAs receive operating and capital funds through a formula allocation process. PHAs use operating funds to pay for management, administration, and day-to-day costs of running a housing development. Capital funds are used for modernization needs, such as replacing roofs or remediating lead paint hazards. According to HUD rules, generally families that are income-eligible to live in public housing pay 30 percent of their adjusted income toward rent. In 2017, there were roughly 1 million public housing units available. For both of these rental assistance programs, the Office of Field Operations (OFO) within PIH oversees PHAs’ compliance with lead paint regulations, in conjunction with HUD field office staff. The office has a risk-based approach to overseeing PHAs and performs quarterly risk assessments. Also within PIH, staff from the Real Estate Assessment Center are responsible for inspecting the physical condition of public housing properties. Office of Policy Development and Research (PD&R). HUD’s PD&R is the primary office responsible for data analysis, research, and program evaluations to inform the development and implementation of programs and policies across HUD offices. of the total grant amount, while the Lead Hazard Reduction Demonstration grant program has required at least a 25 percent match. For fiscal years 2013–2017, HUD awarded $527 million for its lead hazard control grants, which included 186 grants to state and local jurisdictions (see fig. 1). In these 5 years, about 40 percent of grants awarded went to jurisdictions in the Northeast and 31 percent to jurisdictions in the Midwest––regions of the country known to have a high prevalence of lead paint hazards. Additionally, in these 5 years, 90 percent of grant awards went to grantees at the local jurisdiction level (cities, counties, and the District of Columbia). The other 10 percent of grant awards went to state governments. During this time period, HUD awarded the most grants to jurisdictions in Ohio (17 grants), Massachusetts and New York (15 grants each), and Connecticut (14 grants). HUD’s Lead-Based Paint Hazard Control grant and the Lead Hazard Reduction Demonstration grant programs have incorporated Title X statutory requirements through recent annual funding notices and their grant processes. Title X contains applicant eligibility requirements and selection criteria HUD should use to award lead grants. To be eligible to receive a grant, applicants need to be a state or local jurisdiction, contribute matching funds to supplement the grant award, have an approved comprehensive affordable housing strategy, and have a certified lead abatement program (if the applicant is a state government). HUD has incorporated these eligibility requirements in its grant programs’ 2017 funding notices, which require applicants to demonstrate that they meet these requirements when they apply for a lead grant. According to the 2017 funding notices, applicants must detail the sources and amounts of their matching contributions in their applications. Similarly, applicants must submit a form certifying that the proposed grant activities are consistent with their local affordable housing strategy. HUD’s 2017 funding notices state that if applicants did not meet these eligibility requirements, HUD would not consider their applications. Additionally, Title X requires HUD to award lead grants according to the following applicant selection criteria: the extent to which an applicant’s proposed activities will reduce the risk of lead poisoning for children under the age of 6; the degree of severity and extent of lead paint hazards in the applicant’s jurisdiction; the applicant’s ability to supplement the grant award with state, local, or private funds; the applicant’s ability to carry out the proposed grant activities; and other factors determined by the HUD Secretary to ensure that the grants are used effectively. In its 2017 funding notices, HUD incorporated the Title X applicant selection criteria through five scoring factors that it used to assess lead grant applications. HUD allocated a certain number of points to each scoring factor. Applicants are required to develop their grant proposals in response to the scoring factors. When reviewing applications, HUD staff evaluated an applicant’s response to the factors and assigned points for each factor. See table 1 for a description of the 2017 lead grant programs’ scoring factors and points. As shown in table 1, HUD awarded the most points (46 out of 100) to the “soundness of approach” scoring factor, according to HUD’s 2017 funding notices. Through this factor, HUD incorporated Title X selection criteria on an applicant’s ability to carry out the proposed grant activities and supplement a grant award with state, local, or private funds. For example, HUD’s 2017 funding notices required applicants to describe their detailed plans to implement grant activities, including how the applicants will establish partnerships to make housing lead-safe. Specifically, HUD began awarding 2 of the 100 points to applicants who demonstrated partnerships with local public health agencies to identify families with children for enrollment in the lead grant programs. Additionally, HUD asked applicants to identify partners that can help provide assistance to complete the lead hazard control work for high-cost housing units. Furthermore, HUD required applicants to identify any nonfederal funding, including funding from the applicants’ partners. Appendix I includes examples of state, local, and nongovernmental funds that selected grantees planned to use to supplement their lead grants. In its lead grant programs, HUD has taken actions that were consistent with OMB’s requirements for competitively awarded grants. OMB generally requires federal agencies to: (1) establish a merit-review process for competitive grants that includes the criteria and process to evaluate applications; and (2) develop a framework to assess the risks posed by applicants for competitive grants, among other things. Through a merit-review process, an agency establishes and applies criteria to evaluate the merit of competitive grant applications. Such a process helps to ensure that the agency reviews grant applications in a fair, competitive, and transparent manner. Consistent with the OMB requirement to establish a merit review process, HUD has issued annual funding notices that communicate clear and explicit evaluative criteria. In addition, HUD has established processes for reviewing and scoring grant applications using these evaluative criteria, and selects grant recipients based on the review scores (see fig. 2). For example, applicants that score at or above 75 points are qualified to receive awards from HUD. Also, HUD awards funds beginning with the highest scoring applicant and proceeds by awarding funds to applicants in a descending order until funds are exhausted. Furthermore, consistent with the OMB requirement to develop a framework to assess applicant risks, HUD has developed a framework to assess the risk posed by lead grant applicants by, among other things, deeming ineligible those applicants with past performance deficiencies or those that do not have a financial management system that meets federal standards. However, HUD has not fully documented or evaluated its lead grant processes in reviewing and scoring the grants and making award decisions: Documenting grant processes and award decisions. While HUD has established processes for its lead grant programs, it lacks documentation, including detailed guidance to help ensure that staff carry out processes consistently and appropriately. Federal internal control standards state that agency management should develop and maintain documentation of its internal control system. Such documentation assists agency management by establishing and communicating the processes to staff. Additionally, documentation of processes can provide a means to retain organizational knowledge and communicate that knowledge as needed to external parties. The Lead Office’s Application Review Guide describes its grant application review and award processes at a high level but does not provide detailed guidance for staff as to how tasks should be performed. For example, the Guide notes that reviewers score eligible applications according to factors contained in the funding notices but does not describe how the reviewers should allocate points to the subfactors that make up each factor. Lead Office staff told us that creating detailed scoring guidance would be challenging because applicants’ proposed grant activities differ widely, and they said that scoring grant applications is a subjective process. While scoring grant applications may involve subjective judgments, improved documentation of grant review and scoring processes, including additional direction to staff, can help staff apply their professional judgment more consistently in evaluating applications. By better documenting processes, HUD can better ensure that staff evaluate applications consistently. Additionally, HUD has not fully documented its rationale for deciding which applicants receive lead grant awards and for deciding the dollar amounts of grant awards to successful applicants. In prior work examining federal grant programs, one recommended practice we identified is that agencies should document the rationale for award decisions, including the reasons individual applicants were selected or not and how award funding amounts were determined. While HUD’s internal memorandums listed the applicants selected and the award amounts, these memorandums did not document the rationale for these decisions or provide information sufficient to help applicants understand award outcomes. Lead Office staff told us that most grantees have received the amount of funding they requested in their applications, which was generally based on HUD’s maximum grant award amount. Lead Office staff said they could use their professional judgment to adjust award amounts to extend funding to more applicants when applicants received similar scores. However, the Lead Office’s documentation we reviewed did not explain this type of decision making. For example, in 2017, when two applicants received identical scores on their applications, HUD awarded each applicant 50 percent of the remaining available funds rather than awarding either applicant the amount they requested. Representatives of one of the two grantees told us they did not know why the Lead Office had not provided them the full amount they had requested. Lead Office staff told us that, to date, HUD has not considered alternative ways to award grant funding amounts. By fully documenting grant award processes, including the rationale for award decisions and amounts, HUD could provide greater transparency to grant applicants about its grant award decisions. Evaluating processes. HUD lacks a formal process for reviewing and updating its lead grant funding notices, including the factors and point allocations used to score applications. Federal internal control standards state that agencies should implement control activities through policies and that periodic review of policies and procedures can provide assurance of their effectiveness in achieving the agency’s objectives. Lead Office staff told us that previous changes to the factors and point allocation used to score applicants have been made based on informal discussions among staff. However, the Lead Office does not have a formal process to review and evaluate the relevance and appropriateness of the factors or points used to score applicants. Lead Office staff told us that they have never analyzed the scores applicants received for the factors to identify areas where applicants may be performing well or poorly or to help inform decisions about whether changes may be needed to the factors or points. Additionally, HUD has not changed the threshold criteria used to make award decisions since the threshold was established in 2003. As previously shown in figure 2, applicants who received at least 75 points (out of 100) have been qualified to receive a grant award. However, HUD grant documentation, including the funding notices and the Application Review Guide, does not explain the significance of this 75-point threshold. Lead Office staff stated that this threshold was first established in 2003 by HUD based on OMB guidance. A formal review of this 75-point threshold can help HUD determine whether it remains appropriate for achieving the grant programs’ objectives. Furthermore, by periodically evaluating processes for reviewing and scoring grant applications, HUD can better determine whether these processes continue to help ensure that lead grants reach areas of the country at greater risk for lead paint hazards. HUD has begun to develop analyses and tools to inform its efforts to target outreach and ensure that grant awards go to areas of the country that are at risk for lead paint hazards. However, HUD has not developed time frames for incorporating the results of the analyses into its lead grant programs’ processes. HUD has required jurisdictions applying for lead grants to include data on the need or extent of the problem in their jurisdiction (i.e., scoring factor 2). Additionally, Lead Office staff told us that HUD uses information from the American Healthy Homes Survey to obtain information on lead paint hazards across the country. However, the staff explained that the survey was designed to provide meaningful results at the regional level and did not include enough homes in its sample to provide information about housing conditions, such as lead paint hazards, at the state or local level. Because HUD awards lead grants to state and local jurisdictions, it cannot effectively use the survey results to help the agency make award decisions or inform decisions about areas for potential outreach. In early 2017, the Lead Office began working with PD&R to develop a model to identify local jurisdictions (at the census-tract level) that may be at heightened risk for lead paint hazards. Lead Office staff said that they hope to use results of this model to develop geographic tools to help target HUD funding to areas of the country at risk for lead paint hazards but not currently receiving a HUD lead grant. Lead Office staff said that they could reach out to these at-risk areas, help them build the capacity needed to administer a grant, and encourage them to apply. For example, HUD has identified that Mississippi and two major metropolitan areas in Florida (Miami and Tampa) had not applied for a lead grant. HUD has conducted outreach to these areas to encourage them to apply for a lead grant. In 2016, the City of Jackson, Mississippi, applied for and received a lead grant. Though the Lead Office has collaborated with PD&R on the model, HUD has not developed specific time frames to operationalize the model and incorporate the results of the model for using local-level data to help better identify areas at risk for lead paint hazards. Federal internal control standards require agencies to define objectives clearly to enable the identification of risks. This includes clearly defining time frames for achieving the objectives. Setting specific time frames could help to ensure that HUD operationalizes this model in a timely manner. By operationalizing a model that incorporates local data on lead paint hazard risk, HUD can better target its limited grant resources towards areas of the country with significant potential for lead hazard control needs. We performed a county-level analysis using HUD and Census Bureau data and found that most lead grants from 2013 through 2017 have gone to counties with at least one indicator of lead paint hazard risk. Information we reviewed, such as relevant literature, suggests that the two common indicators of lead paint hazard risk are the prevalence of housing built before the 1978 lead paint ban and the prevalence of individuals living below the poverty line. We defined areas with lead paint hazard risk as counties that had percentages higher than the corresponding national percentages for both of these indicators. The estimated average percentage nationwide of total U.S. housing stock constructed before 1980 was 56.9 percent and the estimated average percentage nationwide of individuals living below the poverty line was 17.5 percent. As shown in figure 3, our analysis estimated that 18 percent of lead grants from 2013 through 2017 have gone to counties with both indicators above the estimated national percentages, 59 percent of grants have gone to counties with estimated percentages of old housing above the estimated national percentage, and 7 percent of grants have gone to counties that had estimated poverty rates above the estimated national percentage. (For an interactive version of this map, click here.) When HUD finalizes its model and incorporates information into its lead grant processes, HUD will be able to better target its grant resources to areas that may be at heightened risk for lead paint hazards. In 2016, HUD began to incorporate new steps to monitor PHAs’ compliance with lead paint regulations for nearly 4,000 PHAs. Previously, according to PIH staff, HUD required only that PHAs annually self-certify their compliance with lead paint laws and regulations, and HUD’s Real Estate Assessment Center inspectors check for lead paint inspection reports and disclosure forms at public housing properties during physical inspections. Starting in June 2016, PIH began using new tools for HUD field staff to track PHAs’ compliance with lead paint requirements in the voucher and public housing programs. As shown in figure 4, PIH’s compliance oversight processes for the voucher and public housing programs include various monitoring tools for overseeing PHAs. Key components of PIH’s lead paint oversight processes include the following: Tools for tracking lead hazards and cases of elevated blood levels in children. HUD uses two databases to monitor PHAs’ compliance with lead paint regulations: (1) the Lead-Based Paint Response Tracker, which PIH uses to collect and monitor information on the status of lead paint-related documents, including lead inspection reports and disclosure forms, in public housing properties but not in units with voucher assisted households; and (2) the Elevated Blood Lead Level Tracker, which PIH uses to collect and monitor information reported by PHAs on cases of elevated blood levels in children living in voucher and public housing units. In June 2016, OFO began using the Lead-Based Paint Response Tracker database to store information on public housing units and to help HUD field office staff to follow up with PHAs that have properties missing required lead documentation. In July 2017, OFO began using information recorded in the Elevated Blood Lead Level Tracker to track whether PHAs started lead remediation activities in HUD- assisted housing within the time frames required by the Lead Safe Housing Rule. Lead paint hazards included in PHAs’ risk assessment scores. OFO assigns scores to PHAs based on their relative risk in four categories: physical condition, financial condition, management capacity, and governance. OFO uses these scores to identify high- and very high-risk PHAs that will receive on-site full compliance reviews. In July 2017, OFO incorporated data from the Real Estate Assessment Center into the physical condition category of its Risk Assessment Protocol to help account for potential lead paint hazards at public housing properties. Questions about lead paint included as part of on-site full compliance reviews. In fiscal year 2016, HUD field offices began conducting on-site full compliance reviews at high- and very high-risk PHAs as part of HUD’s compliance monitoring program to enhance oversight and accountability of PHAs. In fiscal year 2017, as part of the reviews, HUD field office staff started using a compliance monitoring checklist to determine if PHAs comply with major HUD rules and to gather additional information on the PHAs. This checklist included lead-related questions that PIH field office staff use to determine whether PHAs meet the requirements in lead paint regulations for both the voucher and public housing programs. In 2016, OFO and HUD field offices began using information from the new monitoring efforts to identify potential noncompliance by PHAs with lead paint regulations and help the PHAs resolve the identified issues. According to HUD data, as of November 2017, the Lead-Based Paint Response Tracker indicated that 9 percent (357) of PHAs were missing both lead inspection reports and lead disclosure forms for one or more properties. There were 973 PHAs missing one of the two required documents. OFO staff told us that they prioritized following up with PHAs that were missing both documents. According to OFO staff, PHAs can resolve potential noncompliance by submitting adequate lead documentation to HUD. OFO staff told us the agency considers missing lead documentation as “potential” noncompliance because PHAs may provide the required documentation or they may be exempt from certain requirements (e.g., HUD-designated elderly housing). While HUD has taken steps to strengthen compliance monitoring processes, it does not have a plan to identify and address the risks of noncompliance by PHAs with lead paint regulations. Federal internal control standards state that agencies should identify, analyze, and respond to risks related to achieving the defined objectives. Furthermore, when an agency has made significant changes to its processes—as HUD has done with its compliance monitoring processes—management review of changes to these processes can help the agency determine that its control activities are designed appropriately. Our review found that HUD does not have a plan to help mitigate and address risks related to noncompliance with lead paint regulations by PHAs (i.e., ensuring lead safety in assisted housing). Additionally, our review found several limitations with HUD’s new compliance monitoring approach, which include the following: Reliance on PHA self-certifications. HUD’s compliance monitoring processes rely in part on PHAs self-certifying that they are in compliance with lead paint regulations, but recent investigations have found that some PHAs may have falsely certified that they were in compliance. In November 2017, HUD filed a fraud complaint against two former officials of the Alexander County (Illinois) Housing Authority, alleging that the former official, among other things, falsely certified to HUD that the Housing Authority was in compliance with lead paint regulations. Further, PIH staff told us there are ongoing investigations related to potential noncompliance with lead paint regulations and false certifications at two other housing authorities. Lack of comprehensive data for the public housing program. OFO started to collect data for the public housing program in the Lead-Based Paint Response Tracker in June 2016 and the inventory of all public housing properties includes units inspected since 2012. In addition, HUD primarily relies on the presence of lead inspection reports but does not record in the database when inspections and remediation activities occurred and does not determine whether they are still effective. Because of this, the information contained in the lead inspection reports may no longer be up-to-date. For example, a lead inspection report from the 1990s may provide evidence that abatement work was conducted at that time, but according to PIH staff, the housing may no longer be lead-safe. Lack of readily available data for the voucher program. The voucher program does not have readily available data on housing units’ physical condition and compliance with lead paint regulations because data on the roughly 2.5 million units in the program are kept at the PHA level. According to PIH staff, HUD plans to adopt a new system for the voucher program that will include standardized, electronic data for voucher units. PIH staff said the new system (Uniform Physical Condition Standards for Vouchers Protocol) will allow greater oversight and provide HUD the ability to conduct data analysis for voucher units. Challenges identifying children with elevated blood lead levels. For several reasons, PHAs face ongoing challenges receiving information from state and local public health departments on the number of children identified with elevated blood lead levels. First, children across the U.S. are not consistently screened and tested for exposure to lead. Second, according to CDC data, many states use a less stringent health guideline to identify children compared to the health standard that HUD uses (i.e., CDC’s current blood lead reference value). PIH staff told us that some public health departments may not report children with elevated blood levels to PHAs because they do not know that a child is living in a HUD- assisted unit and needs to be identified using the more stringent HUD standard. Lastly, Lead Office staff told us that privacy laws in some states may impose restrictions on public health departments’ ability to share information with PHAs. Limited coverage of on-site compliance reviews. While full on-site compliance reviews can be used to determine if PHAs are in compliance with lead paint regulations, OFO conducts a limited number of these reviews annually. For example, in Fiscal Year 2017, OFO conducted 72 reviews of the roughly 4,000 total PHAs. Based on OFO information, there are 973 PHAs that are missing either lead inspection reports or lead disclosure forms indicating some level of potential noncompliance. HUD’s steps since June 2016 to enhance monitoring of PHAs’ compliance with lead paint regulations have some limitations that create risks in its new compliance monitoring approach. By developing a plan to help mitigate and address the various limitations associated with the new compliance monitoring approach, HUD could further strengthen its oversight and help ensure that PHAs maintain lead-safe housing units. HUD does not have detailed procedures to address PHA noncompliance with lead paint regulations or to determine when enforcement decisions may be needed. Lead Office staff told us that their enforcement program aims to ensure that PHAs have the information necessary to remain in compliance with lead paint regulations. According to federal internal control standards, agencies should implement control activities through policies and procedures. Effective design of procedures to address noncompliance would include documenting specific actions to be performed by agency staff when deficiencies are identified and related time frames for these actions. While HUD staff stated that they address PHA noncompliance through ongoing communication and technical assistance to PHAs, HUD has not documented specific actions to be performed by staff when deficiencies are identified. OFO staff told us that in general, PIH has not needed to take many enforcement actions because field offices are able to resolve most lead paint regulation compliance concerns with PHAs through ongoing communication and technical assistance. For example, HUD field offices sent letters to PHAs when Real Estate Assessment Center inspectors could not locate required lead inspection reports and lead disclosure forms, and requested that the PHA send the missing documentation within 30 days. However, OFO’s fiscal years 2015–2017 internal memorandums on monitoring and oversight guidance for HUD field offices did not contain detailed procedures, including time frames or criteria HUD staff would use to determine when to consider whether a more formal enforcement action might be warranted. Additionally, Lead Office staff said if efforts to bring a PHA into compliance are unsuccessful, the Lead Office would work in conjunction with PIH and HUD’s Office of General Counsel’s Departmental Enforcement Center to determine if an enforcement action is needed, such as withholding or delaying funds from a PHA or imposing civil money penalties on a PHA. Lead Office staff also told us that instead of imposing a fine on a PHA, HUD would rather work with the PHA to resolve the lead paint hazard. However, the Lead Office provided no documentation detailing the specific steps or time frames HUD staff would follow to determine when a noncompliance case is escalated to the Office of General Counsel. In a March 2018 report to Congress, HUD noted that children continued to test positive for lead in HUD-assisted housing in 2017. In the same report, HUD notes PIH and the Lead Office will continue to work with PHAs to ensure compliance with lead paint regulations. By adopting procedures that clearly describe when lead paint hazard compliance efforts are no longer sufficient and enforcement decisions are needed, HUD can better keep PHAs accountable in a consistent and timely manner. The standard HUD uses to identify children with elevated blood lead levels and initiate lead hazard control activities in its rental assistance aligns with the health guideline set by CDC in 2012. HUD also uses CDC’s health guideline in its lead grant programs. In HUD’s January 2017 amendment to the Lead Safe Housing Rule, HUD made its standard for lead in a child’s blood more stringent by lowering it from 20 micrograms to 5 micrograms of lead per deciliter of blood, matching CDC’s health guideline (i.e., blood lead reference value). Specifically, HUD’s stronger standard allows the agency to respond more quickly when children under 6 years old are exposed to lead paint hazards in voucher and public housing units. The January 2017 rule also established more comprehensive testing for children and evaluation procedures for HUD assisted housing. According to HUD’s press release that accompanied the rule, by aligning HUD’s standard with CDC’s guidance, HUD can respond more quickly in cases when a child who lives in HUD assisted housing shows early signs of lead in their blood. The 2017 rule notes HUD will revise the agency’s elevated blood lead level to align with future changes HHS may make to its recommended environmental intervention level. HUD’s standards for lead dust levels align with EPA standards for its rental assistance programs and exceed EPA standards for the lead grant programs. In 2001, EPA published a final rule on lead paint hazard standards, including lead dust clearance standards. The rule established standards to help property owners, contractors, and government agencies identify lead hazards in residential paint, dust, and soil and address these hazards in and around homes. Under these standards, lead is considered a hazard when equal to or exceeding 40 micrograms of lead in dust per square foot sampled on floors and 250 micrograms of lead in dust per square foot sampled on interior window sills. In 2004, HUD amended the Lead Safe Housing Rule to incorporate the 2001 EPA lead dust standards as HUD’s standards. Since this time, HUD has used EPA’s 2001 lead hazard standards in its rental assistance programs. In February 2017, HUD released policy guidance for its lead grantees requiring them to meet new and more protective requirements for identifying and addressing lead paint hazards in the lead grant programs than those imposed by EPA’s 2001 standards that HUD uses in the rental assistance programs. For example, the policy guidance requires grantees to consider lead dust a hazard on floors at 10 micrograms per square foot sampled (down from 40) and on window sills at 100 micrograms per square foot sampled (down from 250). The policy guidance noted that the new requirements are supported by scientific evidence on the adverse effects of lead exposure at low blood lead levels in children. Further, the policy guidance established a standard for porch floors––an area that EPA has not covered––because porch floors can be both a direct exposure source for children and a source of lead dust that can be tracked into the home. On December 27, 2017, the United States Court of Appeals for the Ninth Circuit ordered EPA to issue a proposed rule updating its lead dust hazard standard and the definition of lead-based paint within 90 days of the decision becoming final and a final rule within 1 year of the proposed rule. Because HUD’s Lead Safe Housing Rule generally defines lead paint hazards and lead dust hazards to mean the levels promulgated by EPA, if EPA changes its 2001 standards those new standards would be used in HUD’s rental assistance programs. On March 16, 2018, EPA filed a request to the court asking for clarification for when EPA is required to issue the proposed rule and followed up with a motion seeking clarification or an extension. In response to EPA’s motion, on March 26, 2018, the court issued an order clarifying time frames and ordered that the proposed rule be issued within 90 days from March 26, 2018. HUD’s Lead Safe Housing Rule requires a stricter lead inspection standard for public housing than for voucher units. According to HUD staff, HUD does not have the authority to require the more stringent inspection in the voucher program. While HUD has acknowledged that moving to a stricter inspection standard for voucher units would provide greater assurance that these units are lead-safe and expressed its plan to support legislative change to authorize it to impose a more stringent inspection standard, HUD has not requested authority from Congress to amend its inspection standard for the voucher program. For voucher units, HUD requires PHAs to ensure that trained inspectors conduct visual assessments to identify deteriorated paint for housing units inhabited by a child under 6 years old. In a visual assessment, an inspector looks for deteriorated paint and visible surface dust but does not conduct any testing of paint chips or dust samples from surfaces to determine the presence of lead in the home’s paint. By contrast, for public housing units, HUD requires a stronger inspection process. Lead- based paint inspections are required for pre-1978 public housing units. If that inspection identifies lead-based paint, PHAs must then perform a risk assessment. In a risk assessment, in addition to conducting a visual inspection, an inspector tests for the presence of lead paint by collecting and testing samples of paint chips and surface dust, and typically using a specialized device (an X-ray fluorescence analyzer) to measure the amount of lead in the paint on a surface, such as a wall, door, or window sill. Staff from HUD’s Lead Office and the Office of General Counsel told us that Title X did not include specific risk assessment requirements for voucher units, and HUD does not believe, therefore, that it has the statutory authority to require an assessment more thorough than a visual assessment of voucher units. As of May 2018, HUD had not requested statutory authority to change the visual assessment standard used in the voucher program. However, HUD previously acknowledged the limitation of the weaker inspection standard in a June 2016 publication titled Lead- Safe Homes, Lead-Free Kids Toolkit. In this publication, HUD noted its plans to support legislative change to strengthen lead safety in voucher units by eliminating reliance on visual-only inspections. Staff from HUD’s Lead Office and Office of General Counsel told us the agency recognizes that risk assessments are more comprehensive than visual assessments. The staff noted that, by definition, a risk assessment is a stronger inspection standard than a visual-only assessment because it includes additional identification and testing. In responding to a draft of this report, HUD cited the need to conduct and evaluate the results of a statistically rigorous study on the impacts of requiring a lead risk assessment versus a visual assessment, such as the impact on leasing times and the availability of housing for low-income families. HUD further noted that such a study could explore whether alternative options to the full risk assessment standard (such as targeted dust sampling) could achieve similar levels of protection for children in the voucher program. Requesting and obtaining authority to amend the standard for the voucher program would not preclude HUD from doing such a study. Such analysis might support a range of options based on consideration of health effects for children, housing availability, and other relevant factors. Because HUD’s Lead Safe Housing Rule contains a weaker lead inspection standard for the voucher program children living in voucher units may be less protected from lead paint hazards than children living in public housing. By requesting and obtaining statutory authority to amend the voucher program inspection standard, HUD would be positioned to take steps to ensure that children in the voucher program are provided better protection as indicated by analysis of the benefits and costs from amending the standard. HUD has taken limited steps to measure, evaluate, and report on the performance of its programmatic efforts to ensure that housing is lead- safe. First, HUD has tracked one performance measure for its lead grant programs but lacks comprehensive performance goals and measures. Second, while HUD has evaluated the effectiveness of its Lead-Based Paint Hazard Control grant program, it has not formalized plans and does not have a time frame for evaluating its lead paint regulations. Third, HUD has not issued an annual report on the results of its lead efforts since 1997. A key aspect to promoting improved federal management and greater efficiency and effectiveness is that agencies set goals and report on performance. We have previously reported that a program performance assessment contains three key elements––program goals, performance measures, and program evaluations (see fig. 5). In our prior work, we have noted that both the executive branch and congressional committees need evaluative information to help them make decisions about the programs they oversee––information that tells them whether, and why, a program is working well or not. Program goals and performance measures. HUD has tracked one performance measure for making private housing units lead-safe as part of its lead grant programs but lacks goals and performance measures that more fully cover the range of its lead efforts. In addition to our prior work on program goals and performance measures, federal internal control standards state that management should define objectives clearly and that defining objectives in measurable terms allows agency management to assess performance toward achieving objectives. According to Lead Office staff, HUD provides information on its goals and performance measures related to its lead efforts in the agency’s annual performance reports. For example, the fiscal year 2016 report contains information about the number of private housing units made lead-safe as part of HUD’s lead grant programs but does not include any performance measures on HUD’s lead efforts for the voucher and public housing programs. Lead Office staff told us HUD does not have systems to count the number of housing units made lead-safe in these two housing programs. The staff said the Lead Office and PIH recently began discussing whether data from an existing HUD database could be used to count units made lead-safe within these programs. However, they could not provide additional details on the status of all these efforts. Without comprehensive goals and performance measures, HUD does not know the results it is achieving with all its lead paint hazard reduction efforts. Moreover, HUD may be missing opportunities to use performance information to improve the results of its lead efforts. Program evaluations. HUD has evaluated the effectiveness of its Lead- Based Paint Hazard Control grant program but has not taken similar steps to evaluate the Lead Safe Housing Rule or Lead Disclosure Rule. As previously stated, our prior work on program performance assessment has noted the importance of program evaluations to know how well a program is working relative to its objectives. Additionally, Title X required HUD to conduct research to evaluate the long-term cost-effectiveness of interim lead hazard control and abatement strategies. For its Lead-Based Paint Hazard Control Grant program, HUD has contracted with outside experts to conduct evaluations. For example, the National Center for Healthy Housing and the University of Cincinnati’s Department of Environmental Health evaluated whether the lead hazard control methods used by grantees continued to be effective 1, 3, 6, and 12 years later. The evaluations concluded that the lead hazard control activities used by grantees substantially reduced lead dust levels and the original evaluation and those completed 1 and 3 years later were also associated with substantial declines in the blood lead levels of children living in the housing remediated using lead grant program funds. HUD has general plans to conduct evaluations of the Lead Safe Housing Rule and the Lead Disclosure Rule, but Lead Office and PD&R staff said they did not know when or if the studies will begin. In a 2016 publication, HUD noted its plans to evaluate the Lead Safe Housing Rule requirements and noted that such an evaluation would contribute toward policy recommendations and program improvements. Additionally, in its 2017 Research Roadmap, PD&R outlined HUD’s plans for two studies to evaluate the effectiveness of requirements within the Lead Safe Housing and Lead Disclosure Rules. However, PD&R and Lead Office staff were not able to provide a time frame for when the studies would begin. PD&R staff told us that the plans noted within the Research Roadmap were HUD’s first step in research planning and prioritization but that appropriations for research have been prescriptive in recent years (i.e., tied to specific research topics) and fell short of the agency’s research needs. By studying the effectiveness of requirements included within the Lead Safe Housing and Lead Disclosure Rules, including the cost- effectiveness of the various lead hazard control methods, HUD could have more complete information to assess how effectively it uses federal dollars to make housing units lead-safe. Reporting. HUD has not reported on its lead efforts as required since 1997. Title X includes annual and biennial reporting requirements for HUD. Staff from HUD’s Lead Office and General Counsel told us that in 1998 the agency agreed with the congressional committees of jurisdiction that HUD could satisfy this reporting requirement by including the required information in its annual performance reports. Lead Office staff told us HUD’s recent annual performance reports do not contain specific information required by law and that HUD has not issued other publicly available reports that contain the Title X reporting requirements. Title X requires HUD to annually provide Congress information on its progress in implementing the lead grant programs; a summary of studies looking at the incidence of lead poisoning in children living in HUD-assisted housing; the results of any required lead technical studies; and estimates of federal funds spent on lead hazard evaluation and reduction in HUD-assisted housing. As previously stated, the annual performance reports have provided information on the number of housing units made lead-safe through the agency’s lead grant programs, but not through the voucher or public housing programs. In March 2018, Lead Office staff told us HUD plans to submit separate reports on the agency’s lead effort, covering the Title X reporting requirements, starting in fiscal year 2019. By HUD complying with Title X statutory reporting requirements, Congress and the public will be in a position to better know the progress HUD is making toward ensuring that housing is lead-safe. Lead exposure can cause serious, irreversible cognitive damage that can impair a child for life. Through its lead grant programs and oversight of lead paint regulations, HUD is helping to address lead paint hazards in housing. However, our review identified specific areas where HUD could improve the effectiveness of its efforts to identify and address lead paint hazards and protect children in low-income housing from lifelong health problems: Documenting and evaluating grant processes. HUD could improve documentation for its lead grant programs’ processes by providing more specific direction to staff and documenting grant award rationale. In doing so, HUD could better ensure that grant program staff score grant applications consistently and appropriately and provide greater transparency about its award decisions. Additionally, periodically evaluating its grant processes and procedures could help HUD better ensure that its lead grants reach areas most at risk for lead paint hazards. Identifying areas at risk for lead hazards. By developing specific time frames to finalize and incorporate the results of its model to more fully identify areas at risk for lead paint hazards, HUD can better identify and conduct outreach to at-risk localities that its lead grant programs have not yet reached. Overseeing compliance with lead paint regulations. False self- certifications of compliance by some PHAs and other limitations in HUD’s compliance monitoring approach make it essential for HUD to develop a plan to mitigate and address limitations, as well as establish procedures to determine when enforcement decisions are needed. These actions could further strengthen HUD’s oversight and keep PHAs accountable for ensuring that housing units are lead-safe. Amending inspection standard in the voucher program. Children living in voucher units may receive less protection from lead paint hazards than children living in public housing units because HUD applies different lead inspection standards to the two programs. HUD could ensure that children in the voucher program are provided better protection from lead by requesting and obtaining statutory authority to amend the voucher program inspection standard as indicated by analysis of the benefits and costs of amending the standard. Assessing and reporting on performance. Fully incorporating key elements of performance assessment—by developing comprehensive goals, improving performance measures, and adhering to reporting requirements—could better enable HUD to assess its own progress and target its resources toward lead efforts that maximize impact. Additionally, HUD may be missing opportunities to inform the Congress and the public about how HUD’s lead efforts have helped reduce lead poisoning in children. We are making the following nine recommendations to HUD: The Director of HUD’s Lead Office should ensure that the office more fully documents its processes for scoring and awarding lead grants and its rationale for award decisions. (Recommendation 1) The Director of HUD’s Lead Office should ensure that the office periodically evaluates its processes for scoring and awarding lead grants. (Recommendation 2) The Director of HUD’s Lead Office, in collaboration with PD&R, should set time frames for incorporating relevant data on lead paint hazard risks into the lead grant programs’ processes. (Recommendation 3) The Director of HUD’s Lead Office and the Assistant Secretary for PIH should collaborate to establish a plan to mitigate and address risks within HUD’s lead paint compliance monitoring processes. (Recommendation 4) The Director of HUD’s Lead Office and the Assistant Secretary for PIH should collaborate to develop and document procedures to ensure that HUD staff take consistent and timely steps to address issues of PHA noncompliance with lead paint regulations. (Recommendation 5) The Secretary of HUD should request authority from Congress to amend the inspection standard to identify lead paint hazards in the Housing Choice Voucher program as indicated by analysis of health effects for children, the impact on landlord participation in the program, and other relevant factors. (Recommendation 6) The Director of the Lead Office should develop performance goals and measures to cover the full range of HUD’s lead efforts, including its efforts to ensure that housing units in its rental assistance programs are lead-safe. (Recommendation 7) The Director of the Lead Office, in conjunction with PD&R, should finalize plans and develop a time frame for evaluating the effectiveness of the Lead Safe Housing and Lead Disclosure Rules, including an evaluation of the long-term cost effectiveness of the lead remediation methods required by the Lead Safe Housing Rule. (Recommendation 8) The Director of the Lead Office should complete statutory reporting requirements, including but not limited to its efforts to make housing lead-safe through its lead grant programs and rental-assistance programs, and make the report publicly available. (Recommendation 9) We provided a draft of this report to HUD for review and comment. We also provided the relevant excerpts of the draft report to CDC and EPA for their review and technical comments. In written comments, reproduced in appendix III, HUD disagreed with one of our recommendations and generally agreed with the remaining eight. HUD and CDC also provided technical comments, which we incorporated as appropriate. EPA did not have any comments on the relevant excerpts of the draft report provided to them. In its general comments, HUD noted that the lead grant programs and HUD’s compliance assistance and enforcement of lead paint regulations have contributed significantly to, among other things, the low prevalence of lead-based paint hazards in HUD-assisted housing. Further, HUD said the lead grant programs and compliance assistance and enforcement of lead paint regulations have played a critical part in developing and maintaining the national lead-based paint safety infrastructure. HUD asked that this contextual information be included in the background of the report. The draft report included detailed information on the purpose and scope of HUD’s lead grant programs, two key regulations related to lead paint hazards, and efforts to make housing lead-safe. Furthermore, the draft report provided context on other federal agencies’ role in establishing relevant standards and guidelines for lead paint hazards. We made no changes in response to this comment because we did not think it was necessary for background purposes. HUD disagreed with the draft report’s sixth recommendation to request authority from Congress to use the risk assessment inspection standard to identify lead paint hazards in the Housing Choice Voucher program. As discussed in the report, HUD’s Lead Safe Housing Rule requires a more stringent lead inspection standard (risk assessments) for public housing than for Housing Choice Voucher units, for which a weaker inspection standard is used (visual assessments). In its written comments, HUD said that before deciding whether to request the statutory authority to implement risk assessments for voucher units, it would need to conduct and evaluate the results of a statistically rigorous study on the impacts of requiring a lead risk assessment versus a visual assessment, such as the impact on leasing times and the availability of housing for low-income families. HUD further noted that such a study could explore whether alternative options to the full risk assessment standard (such as targeted dust sampling) could achieve similar levels of protection for children in the voucher program. We note that requesting and obtaining authority to amend the standard for the Housing Choice Voucher program would not preclude HUD from doing such a study. We acknowledge that the results of such a study might support a range of options. Therefore, we revised our recommendation to provide HUD with greater flexibility in how it might amend the lead inspection standard for the voucher program based on consideration of not only leasing time and availability of housing, as HUD emphasized in its written comments, but also based on the health effects on children. The need for HUD to review the lead inspection standard for the voucher program is underscored by the greater number of households with children served by the voucher program compared to public housing, as well as recent information indicating that more children with elevated blood lead levels are living in voucher units than in public housing. HUD generally agreed with our remaining eight recommendations and provided specific information about planned steps and other considerations related to implementing them. For example, in response to our first three recommendations on the lead grant programs, HUD outlined specific steps it plans to take, such as updating its guidance for scoring grant applications and reviewing its grant application scoring methods to identify potential improvements. In response to our fourth and fifth recommendations to the Director of HUD’s Lead Office on compliance monitoring and enforcement of lead paint regulations, HUD noted that PIH should be the primary office for these recommendations with the Lead Office providing support. While these recommendations had already recognized the need for the Lead Office to collaborate with PIH, we reworded them to clarify that it is not necessary for the Lead Office to have primary responsibility for their implementation. HUD generally agreed with our seventh and eighth recommendations, but noted some considerations for implementing them. For our seventh recommendation about performance goals and measures, HUD noted that it will re-examine the availability of information from the current housing databases to determine whether data on housing unit production can be added to the existing data collected. HUD noted if that information is not sufficient, it would need to obtain Office of Management and Budget approval and have sufficient funds for such an information technology project. For our eighth recommendation about evaluating the Lead Safe Housing and Lead Disclosure Rules, HUD noted if its own resources are insufficient, the time frame for implementing this recommendation may depend on the availability of funding for contracted resources. Finally, in response to our ninth recommendation, HUD said that it will draft and submit annual and biennial reports to the congressional authorizing and appropriations committees and then post the reports on the Lead Office’s public website. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Housing and Urban Development, the Administrator of the Environmental Protection Agency, and the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Under the Department of Housing and Urban Development’s (HUD) Lead-Based Paint Hazard Control and the Lead Hazard Reduction Demonstration grant programs, HUD competitively awards grants to state and local jurisdictions, as authorized by the Residential Lead-Based Paint Hazard Reduction Act (Title X of the Housing and Community Development Act of 1992). Title X requires each grant recipient to make matching contributions with state, local, and private funds (i.e., nonfederal) toward the total cost of activities. For the Lead-Based Paint Hazard Control grant and the Lead Hazard Reduction Demonstration grant programs, the matching contribution has been set at no less than 10 percent and 25 percent, respectively, of the total grant amount. For example, if the total grant amount is $3 million, then state or local jurisdictions must provide at least $300,000 and $750,000, respectively, for each grant program, in additional funding toward the cost of activities. HUD requires lead grant applicants to include information on the sources and amounts of grantees’ matching contributions as part of their grant applications. Additionally, Title X requires HUD to award grants in part based on an applicant’s ability to leverage state, local, and private funds to supplement the federal grant funds. To identify the nonfederal funding sources grantees used in the lead hazard control grants, we selected and reviewed the lead grant applications of 20 HUD grantees and interviewed representatives from 10 of these. We selected these grantees based on their geographic locations; the number of HUD lead grants they had previously received; experience with HUD’s lead hazard control grants; and whether they have received both grants from 2013 through 2017. Grantees we selected included entities at the state, municipality, and county levels. Information from our grant application reviews and interviews of grantees cannot be generalized to all HUD grantees. Based on our review of the selected grant applications and interviews of selected grantees, we found that grantees planned to use the following types of nonfederal funding sources as their matching contributions to support their lead grants activities: State and local funds. Eighteen of the 20 grantees we selected noted that they planned to use state or local funding sources to supplement HUD’s grant funds. The state and local funding sources included state or local general funds and local property taxes or fees. For example, grantees in Connecticut, Baltimore, and Philadelphia used state or local general funds to cover personnel and operating costs. Additionally, grantees in Alameda County (California), Hennepin County (Minnesota), Malden, St. Louis, and Winnebago County (Illinois) planned to use local taxes, including property taxes or fees, such as real estate recording and building permit fees, to cover some costs associated with their lead hazard control grants activities. Community Development Block Grant funds. Ten of the 20 grantees we selected indicated that they planned to use Community Development Block Grant (CDBG) program funds to cover part of the costs of their lead hazard control grants. CDBG program funds can be used by states and local communities for housing; economic development; neighborhood revitalization; and other community development activities. For example, grantees in Baltimore and Memphis noted in their grant applications that they planned to use the funds to cover costs related to personnel, operations, and training. Nongovernmental contributions or discounts. Eight of 20 grantees we selected stated that they anticipated some forms of nongovernmental contributions from nonprofit organizations or discounts from contractors to supplement the lead grants. For example, all eight grantees stated that they expected to receive matching contributions from nonprofit organizations. Table 2 summarizes the nonfederal funds by source that the 20 selected grantees planned to use, based on our review of these grantees’ applications. Furthermore, almost all of the selected grantees stated in their grant applications or told us that they expected to receive or have received other nonfederal funds in excess of their matching contributions. For example, 15 grantees stated that they generally required or encouraged property owners or landlords to contribute toward the lead hazard remediation costs. Also, grantees in Baltimore, District of Columbia, Lewiston, and Providence indicated that they expected to receive monetary or in-kind donations from organizations to help carry out lead hazard remediation, blood lead-level testing, or training. Additionally, the grantee in Alameda County (California) told us that they have received nonfederal funds from a litigation settlement with a private paint manufacturer. This report examines the Department of Housing and Urban Development’s (HUD) efforts to (1) incorporate statutory requirements and other relevant federal standards in its lead grant programs; (2) monitor and enforce compliance with lead paint regulations for its rental assistance programs; (3) adopt federal health guidelines and environmental standards for lead hazards in its lead grant and rental assistance programs; and (4) measure and report on its performance related to making housing lead-safe. In this report, we examine lead paint hazards in housing, and we focus on HUD’s lead hazard control grant programs and its two largest rental assistance programs that serve the most families with children: the Housing Choice Voucher (voucher) and public housing programs. To address all four objectives, we reviewed relevant laws, such as the Residential Lead-Based Paint Hazard Reduction Act (Title X of the Housing and Community Development Act of 1992, referred to as Title X throughout this appendix) and relevant HUD regulations, such as the Lead Safe Housing Rule and a January 2017 amendment to this rule. To examine trends in funding for HUD’s lead grant programs for the past 10 years, we also reviewed HUD’s budget information for fiscal years 2008 through 2017. We interviewed HUD staff from the Office of Lead Hazard Control and Healthy Homes (Lead Office), Office of Public and Indian Housing (PIH), Office of Policy Development and Research (PD&R), and other relevant HUD program and field offices. Finally, we reviewed our prior work and those of HUD’s Office of Inspector General. To address the first objective, we reviewed HUD’s Notices of Funding Availability (funding notices), policies, and procedures to identify HUD’s grant award processes for the Lead-Based Paint Hazard Control grant and Lead Hazard Reduction Demonstration grant programs. For example, we reviewed HUD’s annual notices of funding availability from 2013 through 2017 to identify HUD’s scoring factors for evaluating grant applications. We compared HUD’s grant award processes in 2017 with Title X statutory requirements, the Office of Management and Budget (OMB) requirements for awarding federal grants, and relevant federal internal control standards. We also interviewed HUD staff about the agency’s grant application review and award processes. To determine the extent to which HUD’s grants have gone to counties in the United States potentially at high risk for lead paint hazards, we compared grantee locations from HUD’s lead grant data for grants awarded from 2013 through 2017 with county-level data on two indicators of lead paint hazard risk from the 2011–2015 American Community Survey—a continuous survey of households conducted by the U.S. Census Bureau. We analyzed HUD’s grant data to determine the number and dollar amount of grants received by each grantee, and the grantees’ addresses. We then conducted a geographic analysis to determine whether each HUD lead grant went to a county that met at least one, both, or neither of the two commonly known indicators of lead paint hazard risk—the age of housing and poverty level. We identified these two indicators through a review of relevant academic literature, agency research, and state lead modelling methodologies. We used data from the 2011–2015 American Community Survey because the data covered a time frame that best aligned with the 5 years of lead grant data (2013 through 2017). Using its county-level data, we calculated an estimated average percentage nationwide of housing units built before 1980 (56.9 percent) and an estimated average percentage nationwide of individuals living below the poverty level (17.5 percent). We used 1980 as a benchmark for age of housing because the American Community Survey data for age of housing is separated by the decade of construction and 1980 was closest in time to the 1978 federal lead paint ban. We categorized counties based on whether their levels of pre-1980 housing and poverty were above one, both, or neither of the respective national average percentage for each indicator. The estimated average nationwide and county-level percentages of the two indicators (e.g., older housing and poverty rate) are expressed as a range of values. For the lower and upper ends of the range, we generated a 95 percent confidence interval that was within plus or minus 20 percentage points. We classified a county as above the estimated average percentages nationwide if the county’s confidence interval was higher and did not overlap with the nationwide estimate’s confidence interval. We omitted the data for 12 counties that we determined were unreliable for our purposes. We analyzed data starting in 2013 because that was the first year for which these grant data were available electronically. We also interviewed HUD staff to understand their efforts and plans to perform similar analyses using indicators of lead paint hazard risk. To assess the reliability of HUD’s grant data, we reviewed documentation of HUD’s grant database, interviewed Lead Office staff on the processes HUD used to collect and ensure the reliability of the data, and tested the data for missing values, outliers, and obvious errors. To assess the reliability of the American Community Survey data, we reviewed statistical information from the Census Bureau and other publicly available documentation on the survey and conducted electronic testing of the data. We determined that the HUD grant data and American Community Survey county-level data on age of housing and poverty were sufficiently reliable for identifying areas at risk of lead paint hazards and determining the extent to which lead grants from 2013 through 2017 have gone to at-risk areas. Furthermore, to obtain information about how HUD works with grantees to achieve program objectives, we conducted in-person site visits to five grantees located in five localities (Alameda County, California; Atlanta, Georgia; Baltimore, Maryland; District of Columbia; and San Francisco, California); and interviewed an additional five grantees on the telephone (Hennepin County, Minnesota; Lewiston, Maine; Malden, Massachusetts; Providence, Rhode Island; and Winnebago County, Illinois). In addition, we reviewed the grant applications of the 10 grantees we spoke to and an additional 10 grantees from 10 additional jurisdictions (State of Connecticut; Cuyahoga County, Ohio; Denver, Colorado; Monroe County, New York; Philadelphia, Pennsylvania; Memphis, Tennessee; San Antonio, Texas; St. Louis, Missouri; Tucson, Arizona; and State of Vermont). We selected the 10 grantees for site visits or interviews based on the following criteria: geographic variation, number of years the grantees had HUD’s lead grants, and grantees that have received both types of lead grants from 2013 through 2017. We selected the 10 additional grantees’ applications for review based on geographic diversity and to achieve a total of two applications for each year during our 5-year time frame, with at least one application from each of the two HUD lead grant programs. As part of our review of selected grant applications, we identified nonfederal funding sources used by grantees, such as local tax revenues, contractor discounts, and property owner contributions. Information from the selected grantees and grant applications review cannot be generalized to those grantees we did not include in our review. Additionally, we interviewed representatives from housing organizations to obtain additional examples of any nonfederal funding sources, such as state or local bond measures, or low-interest loans to homeowners. To address the second objective, we also reviewed HUD guidance and internal memorandums related to its efforts to monitor and enforce compliance with lead paint regulations for public housing agencies (PHA), the entities that manage HUD’s voucher and public housing rental assistance programs. In addition, we reviewed HUD’s documentation of databases it uses to monitor compliance, including the Lead-Based Paint Response Tracker and the Elevated Blood Lead Level Tracker, and observed HUD staff’s demonstrations of these databases. HUD staff also provided a demonstration of the Record and Process Inspection Data database (known as “RAPID”) used by HUD’s Real Estate Assessment Center to collect physical inspection data for public housing units. We obtained and reviewed information from HUD about instances of potential noncompliance with lead paint regulations by PHAs as of November 2017 and enforcement actions HUD has taken. We compared HUD’s regulatory compliance monitoring and enforcement approach to federal internal control standards. We interviewed staff from HUD’s Lead Office, Office of General Counsel, Office of Field Operations, and field staff, including four HUD regional directors in areas of the country known to have a high prevalence of lead paint hazards, about internal procedures for monitoring and enforcing compliance with lead paint regulations by the PHAs within their respective regions. To address the third objective on HUD’s adoption of federal health guidelines and environmental standards for lead paint hazards in its lead grant and rental assistance programs, we reviewed relevant rules and HUD documentation. To identify relevant federal health guidelines and environmental standards, we reviewed guidelines and regulations from the Centers for Disease Control and Prevention (CDC) and the Environmental Protection Agency (EPA) and interviewed staff from each agency. To identify state and local laws with different requirements than these federal guidelines and standards, we obtained information from and interviewed staff from CDC’s Public Health Law Program and the National Conference of State Legislatures. We compared HUD’s requirements to CDC’s health guideline known as the “blood lead reference value” and EPA’s standards for lead-based paint hazards and lead-dust clearance standards. Finally, we reviewed information in HUD’s 2017 funding notices and lead grant programs’ policy guidance about requirements for grantees as they pertain to health guidelines and environmental standards. We also interviewed HUD staff about how HUD has used the findings from lead technical study grants to consider changes to HUD’s requirements and processes regarding identifying and addressing lead paint hazards for the grant programs. To address the fourth objective, we reviewed HUD documentation related to performance goals and measures, program evaluations, and reporting. For example, we reviewed HUD’s recent annual performance reports to identify goals and performance measures related to HUD’s efforts to make housing lead-safe. Further, we reviewed Title X to identify requirements related to evaluating and reporting on HUD’s lead efforts. We reviewed program evaluations and related studies completed by outside experts for the lead grant programs and interviewed staff from one of the organizations that conducted the evaluations. In addition, we interviewed Lead Office and PD&R staff about the agency’s plans to evaluate the requirements in the Lead Safe Housing Rule and reviewed corresponding agency documentation about these plans. Additionally, we reviewed the Lead Office’s most recent strategic plan (2009) and annual report (1997) on the agency’s lead efforts. We compared HUD’s use of performance goals and measures, program evaluations, and reporting against leading practices for assessing program performance and federal internal control standards. Finally, we interviewed staff from HUD to understand goals and performance measures used by the agency to assess their lead efforts. We conducted this performance audit from March 2017 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, John Fisher (Assistant Director), Beth Faraguna (Analyst in Charge), Enyinnaya David Aja, Farah Angersola, Carol Bray, William R. Chatlos, Anna Chung, Melinda Cordero, Elizabeth Dretsch, Christopher Lee, Marc Molino, Rebecca Parkhurst, Tovah Rom, Tyler Spunaugle, and Sonya Vartivarian made key contributions to this report.", "summary": "Lead paint in housing is the most common source of lead exposure for U.S. children. HUD awards grants to state and local governments to reduce lead paint hazards in housing and oversees compliance with lead paint regulations in its rental assistance programs. The 2017 Consolidated Appropriations Act, Joint Explanatory Statement, includes a provision that GAO review HUD’s efforts to address lead paint hazards. This report examines HUD’s efforts to (1) incorporate statutory requirements and other relevant federal standards in its lead grant programs, (2) monitor and enforce compliance with lead paint regulations in its rental assistance programs, (3) adopt federal health guidelines and environmental standards for its lead grant and rental assistance programs, and (4) measure and report on the performance of its lead efforts. GAO reviewed HUD documents and data related to its grant programs, compliance efforts, performance measures, and reporting. GAO also interviewed HUD staff and some grantees. The Department of Housing and Urban Development’s (HUD) lead grant and rental assistance programs have taken steps to address lead paint hazards, but opportunities exist for improvement. For example, in 2016, HUD began using new tools to monitor how public housing agencies comply with lead paint regulations. However, HUD could further improve efforts in the following areas: Lead grant programs. While its recent grant award processes incorporate statutory requirements on applicant eligibility and selection criteria, HUD has not fully documented or evaluated these processes. For example, HUD’s guidance is not sufficiently detailed to ensure consistent and appropriate grant award decisions. Better documentation and evaluation of HUD’s grant program processes could help ensure that lead grants reach areas at risk of lead paint hazards. Further, HUD has not developed specific time frames for using available local-level data to better identify areas of the country at risk for lead paint hazards, which could help HUD target its limited resources. Oversight. HUD does not have a plan to mitigate and address risks related to noncompliance with lead paint regulations by public housing agencies. We identified several limitations with HUD’s monitoring efforts, including reliance on public housing agencies’ self-certifying compliance with lead paint regulations and challenges identifying children with elevated blood lead levels. Additionally, HUD lacks detailed procedures for addressing noncompliance consistently and in a timely manner. Developing a plan and detailed procedures to address noncompliance with lead paint regulations could strengthen HUD’s oversight of public housing agencies. Inspections. The lead inspection standard for the Housing Choice Voucher program is less strict than that of the public housing program. By requesting and obtaining statutory authority to amend the standard for the voucher program, HUD would be positioned to take steps to better protect children in voucher units from lead exposure as indicated by analysis of benefits and costs. Performance assessment and reporting. HUD lacks comprehensive goals and performance measures for its lead reduction efforts. In addition, it has not complied with annual statutory reporting requirements, last reporting as required on its lead efforts in 1997. Without better performance assessment and reporting, HUD cannot fully assess the effectiveness of its lead efforts. GAO makes nine recommendations to HUD including to improve lead grant program and compliance monitoring processes, request authority to amend its lead inspection standard in the voucher program, and take additional steps to report on progress. HUD generally agreed with eight of the recommendations. HUD disagreed that it should request authority to use a specific, stricter inspection standard. GAO revised this recommendation to allow HUD greater flexibility to amend its current inspection standard as indicated by analysis of the benefits and costs.", "document_type": "gao"}
{"report": "Cobra Dane and other radar systems can provide capabilities that contribute to a range of missions, such as ballistic missile defense, space surveillance, and intelligence-gathering missions. DOD uses Cobra Dane and other radar systems to provide information over a short period of time to ground-based interceptors so they can hit their targets. Such radar systems contribute to ballistic missile defense by tracking incoming missile threats, classifying the missile threat, and determining if a threat was intercepted successfully. In addition, some radar systems can provide discrimination capabilities, which allow for that radar to identify a warhead when a missile threat deploys decoys at the same time. Radar systems can also have the capability to contribute to a space surveillance mission, which provides an awareness of space objects within or near the Earth’s orbit and their movements, capabilities, and intent. Finally, radars can also contribute intelligence-gathering capabilities. Each radar system’s ability to contribute to various missions can be dependent on that radar’s inherent capabilities and physical location. See table 1 for a description of selected radar systems that can provide some or all of these capabilities. Various offices within the Air Force, in coordination with MDA, are responsible for the operation and sustainment of the Cobra Dane radar. Since 2013, Air Force Space Command has overseen the operation of Cobra Dane, and contributes to the sustainment of Cobra Dane’s site at Shemya Island. The Air Force Life Cycle Management Center has overall responsibility of the sustainment of the Cobra Dane radar. In addition, MDA works in coordination with the Air Force and combatant commands to develop, test, and field ballistic missile defense assets. MDA also shares funding with the Air Force to operate and sustain Cobra Dane. U.S. Northern Command and U.S. Strategic Command define priorities for the overall radar infrastructure and establish the various missions that those radar systems are intended to meet. U.S. Northern Command oversees the homeland ballistic missile defense mission, and establishes operational objectives for radar systems operating in its region. U.S. Northern Command officials told us that they are the end user for Cobra Dane. U.S. Strategic Command has established a ballistic missile defense and a space surveillance mission, both of which are supported by Cobra Dane. Further, U.S. Strategic Command’s components coordinate global missile defense and space operations planning. In its January 2018 report to Congress, the Air Force described how Cobra Dane and LRDR can meet mission requirements through their shared and unique capabilities, as well as how their locations affect their ability to provide those capabilities for DOD’s ballistic missile defense mission. MDA studies we reviewed found that locating LRDR at Clear Air Force Station allows for operational advantages and cost savings. The Air Force included information in its report to Congress on the ballistic missile defense capabilities of Cobra Dane and LRDR, and the effects of each radar’s location on those capabilities. Specifically, the Air Force report stated that both radars have the capabilities to track and classify missile threats. However, the report incorrectly stated that both radar systems have the inherent capability to determine if a missile threat is successfully intercepted. MDA documentation that we reviewed shows that Cobra Dane does not yet have this capability. When we shared our finding with Air Force and MDA officials, they agreed that this reported capability was incorrectly identified in the Air Force report to Congress. MDA officials also told us that Cobra Dane could provide this capability in the future if it implements software changes, but they are unlikely to do this until calendar year 2025. The Air Force report also noted that LRDR would have a unique capability, once it is operational, to discriminate missile threats from any deployed decoys. See table 2 for a summary of what the Air Force reported for the ballistic missile defense capabilities of Cobra Dane and LRDR. In addition to identifying ballistic missile defense capabilities of each radar, the Air Force report noted that both Cobra Dane and LRDR will have the inherent capabilities to support space surveillance and intelligence-gathering missions. DOD officials we spoke to confirmed that they have plans to use those inherent capabilities to support these other missions. For example, U.S. Strategic Command identified that DOD needs Cobra Dane to support its space surveillance mission. Further, Air Force and MDA officials told us that they use Cobra Dane to track small objects that no other radar system can track. MDA officials told us that LRDR could be used for space surveillance. However, Air Force and U.S. Strategic Command officials stated that there are no plans to use LRDR’s space surveillance capabilities as a replacement for Cobra Dane. Additionally, Air Force officials told us that neither Cobra Dane nor LRDR is required to support an intelligence-gathering mission. The Air Force also included information in its report on how the locations of Cobra Dane and LRDR affect their abilities to contribute to the ballistic missile defense mission. For example, the Air Force reported that Cobra Dane’s location at Shemya Island, Alaska, allows it to track missile threats from North Korea earlier in their trajectories than LRDR would be able to track at Clear Air Force Station, Alaska. This is consistent with an MDA analysis that we reviewed that outlined additional advantages provided by Cobra Dane’s location at Shemya Island. According to that analysis, Cobra Dane can begin tracking missile threats approximately 210 seconds earlier than LRDR. Air Force officials told us that the additional time to track missile threats allows the warfighter an earlier opportunity to intercept a missile threat and deploy additional interceptors if the first attempt fails. Further, the MDA analysis described a tracking gap between the areas covered by LRDR—once it is operational at Clear Air Force Station—and the two sets of AN/TPY-2 radars that are currently located in Japan. Without Cobra Dane’s coverage of this gap, the analysis found that the warfighter would have a more limited opportunity to intercept a missile threat from North Korea. Figure 2 shows how Cobra Dane covers a gap between the LRDR (once operational) and the two AN/TPY-2 radars in Japan. The Air Force report also noted that LRDR’s geographic location has its own advantages in contributing to ballistic missile defense compared to Cobra Dane’s location. For example, the Air Force report noted that LRDR’s location would allow it to track missile threats later in their trajectories beyond Cobra Dane’s coverage as those threats make their way to the continental United States. We also found that MDA has determined LRDR will have other advantages due to its location. For example, an MDA analysis that we reviewed found that LRDR’s location will allow for the radar system to contribute to ballistic missile defense from North Korean and Iranian threats. Absent LRDR, this analysis determined that there are no other radar systems that are located in a position to provide the capability to discriminate missile threats and determine if a threat was successfully intercepted. In addition to what the Air Force reported, we found that DOD decided to locate LRDR at Clear Air Force Station in Alaska after considering the advantages and disadvantages of other locations. For example, MDA completed studies that examined how LRDR could perform at various locations in Alaska, and the cost-effectiveness of constructing and sustaining the radar at those sites. In a June 2015 analysis, MDA compared how LRDR could perform in discriminating missile threats when co-locating it with Cobra Dane at Shemya Island or placing it at Clear Air Force Station. MDA determined that LRDR could provide more real-time discrimination information for missile threats targeting Alaska and the continental United States if it constructed the radar at Clear Air Force Station versus Shemya Island. Additionally, MDA identified in an October 2016 study that the department could obtain operational advantages and cost savings by constructing LRDR at Clear Air Force Station, Alaska, when compared to constructing it at Shemya Island, Alaska. Specifically, MDA determined that Clear Air Force Station could provide better results for 11 of the 13 factors it reviewed compared to Shemya Island. For example, MDA determined that locating LRDR at Clear Air Force Station would result in lower costs and enhanced system performance. According to DOD officials and documents we reviewed, other radar investments may reduce the department’s reliance on Cobra Dane for ballistic missile defense and space surveillance, given that U.S. Northern Command identified it has a need for Cobra Dane after DOD begins operating LRDR in fiscal year 2021. Specifically, the Pacific Radar and Space Fence may reduce DOD’s reliance on Cobra Dane to support ballistic missile defense and space surveillance, respectively. Pacific Radar: According to DOD officials, the department may no longer need Cobra Dane to meet the ballistic missile defense mission after MDA fields a new radar in the Pacific region in fiscal year 2025. MDA began developing the Pacific Radar to provide additional missile threat tracking and discrimination capabilities. According to U.S. Northern Command and MDA officials, the Pacific Radar may fill the gap in tracking missile threats currently covered by Cobra Dane. Space Fence: The Air Force has also determined it will no longer have a requirement for Cobra Dane to provide space surveillance once the Space Fence is fully operational. The Air Force plans for the Space Fence to be operational in fiscal year 2019. According to a U.S. Strategic Command briefing, the Space Fence will provide the same capabilities as Cobra Dane. Air Force officials noted that they want to continue relying on Cobra Dane for space surveillance when the Space Fence is operational, as long as the radar is available and used to contribute to ballistic missile defense. In its January 2018 report to Congress, the Air Force noted that Cobra Dane met its requirement for operational availability—i.e., the percentage of time that the radar system is able to meet its ballistic missile defense and space surveillance missions. Specifically, the Air Force report noted that Cobra Dane had been available an average of 91 percent of the time over a 2-year period (January 2016 through December 2017), which exceeded the 90 percent requirement for operational availability. Information that we reviewed from a more recent 2-year period (August 2016 through July 2018) showed that Cobra Dane’s 2-year average for operational availability had declined to approximately 88 percent—below the 90 percent requirement. Air Force officials stated that the decline in the operational availability over the more recent two-year period was due to a few instances where they needed to take Cobra Dane off-line for extended periods of scheduled downtime (e.g., regular operations and maintenance, calibration of instruments). Further, they noted that when Cobra Dane is not operationally available, the reason is usually due to scheduled downtime. Officials also told us there was one instance of unscheduled downtime (e.g., part or system failure) in that 2-year period which required emergency maintenance on the radar’s mission control hardware. We also reviewed Air Force data on the frequency of unscheduled downtime between August 2016 and July 2018, which show that Cobra Dane is able to contribute to its missions without unscheduled downtime 99.7 percent of the time. According to U.S. Northern Command and MDA officials, they can mitigate the effect on the ballistic missile defense mission if they know far enough in advance that Cobra Dane will not be operationally available— such as during scheduled downtime. Officials stated that they do this by moving a transportable radar, known as the Sea-Based X-band radar, to specific locations in the Pacific Ocean to provide additional tracking coverage of missile threats. A U.S. Northern Command analysis that we reviewed describes how DOD can deploy the Sea-Based X-band radar at particular locations in the Pacific Ocean to supplement Cobra Dane. This analysis found that U.S. Northern Command can lose the ability to track some missile threat trajectories if Cobra Dane is not available and the Sea-Based X-band radar is not deployed. We also reviewed Air Force data on space surveillance, which shows that the Air Force would face some limitations in its ability to complete its space surveillance mission when Cobra Dane is not operationally available. According to the data, Cobra Dane tracks 3,300 space objects each day that cannot be tracked by any other radar system. Air Force officials noted that when Cobra Dane is not operationally available for space surveillance for short periods (less than 24 hours), they can overcome that downtime without losing track of those unique objects. However, officials told us that it would take six months to reacquire all of the small space objects that Cobra Dane tracks, if they encounter any significant scheduled or unscheduled downtime. MDA officials told us there are no scheduled plans to take Cobra Dane down long enough to compromise DOD’s ability to conduct space surveillance. In its January 2018 report to Congress, the Air Force projected that the Air Force and MDA would contribute total funding of $278.6 million based on their fiscal year 2019 budget plans for the operation and sustainment of Cobra Dane. According to the report, the Air Force and MDA plan to share funding for the operation and maintenance of the Cobra Dane radar, and for three modernization projects that make up their sustainment plan for the radar. Table 3 outlines the plan for how the Air Force and MDA will share funding for the operation and maintenance of Cobra Dane. In addition, the Air Force included information in its report on how the Air Force and MDA plan to share funding to support Cobra Dane’s three modernization projects. Specifically, the Air Force and MDA plan to redesign parts for three sets of obsolete systems: (1) mission system replacement; (2) traveling wave tubes; and (3) transmitter groups. The Air Force has identified that it no longer has vendors that manufacture some critical parts, and failure of any of the three systems could result in Cobra Dane not being available to meet mission requirements. As such, the Air Force determined that it could sustain these three systems more effectively if they were redesigned. Table 4 summarizes the reported funding for the three projects that make up the Cobra Dane sustainment plan. In addition to what the Air Force reported, we identified that the Air Force developed a total cost estimate for its transmitter group replacement, but not for its other two projects. For the other two projects, Air Force officials stated that they plan to complete estimates for the total costs in conjunction with their fiscal year 2020 budget submission. In August 2016, the Air Force estimated that the transmitter group replacement would have a total cost of $91.2 million, but reported it would fund this project at $94.0 million through fiscal year 2023 (see table 4). Air Force officials plan to request the transfer of any unused funding to the other projects once it completes the transmitter group project. The Air Force also completed a partial cost estimate for the traveling wave tube redesign—covering the redesign of the parts and replacement of 1 of 12 groups of parts—estimating that the first phase would cost $16.0 million. Further, Air Force officials told us that they have not yet developed a total cost estimate for the mission system replacement. We also found that the Air Force and MDA expedited Cobra Dane’s mission system replacement project, but Air Force officials told us they face challenges in expediting the other two projects without compromising Cobra Dane’s operational availability. For the mission system replacement, MDA requested additional funding in fiscal year 2018. Air Force and MDA officials told us that the additional funding they received allowed them to prioritize the mission system replacement and advance its timeline earlier that year. Air Force officials stated that they explored ways to expedite the two other projects: the traveling wave tubes and transmitter groups. However, they stated that replacing too many parts at the same time will result in their having to take Cobra Dane off-line for longer periods of time. According to Air Force and MDA officials, they may look for opportunities to expedite timeframes for their other two projects as long as the amount of scheduled downtime is kept to acceptable levels. In its report to Congress, the Air Force identified that it plans to provide $140 million in funding for the sustainment and maintenance of operational access to Cobra Dane’s site at Shemya Island based on its fiscal year 2019 budget plans. According to the report, the Air Force is solely responsible for funding all work related to the operation and sustainment of Shemya Island, shared between two of its major commands: Air Force Space Command and Pacific Air Forces. Table 5 summarizes the information the Air Force included in its report on how funding will be shared for Shemya Island. We also reviewed a support agreement between Air Force Space Command and Pacific Air Forces that identifies how they will sustain the site and the calculation for sharing costs. The agreement describes the specific work to sustain the site, including maintaining the airfield, support facilities, and communication infrastructure. Air Force officials told us that they are constantly addressing challenges related to operational access to the site at Shemya Island, but Air Force Space Command and Pacific Air Forces work together to address those challenges. We provided a draft of this report to DOD for review and comment. DOD told us that it had no comments on the draft report. We are sending copies of this report to the Secretary of Defense; the Under Secretary of Defense for Acquisitions and Sustainment; the Secretary of the Air Force; the Director of the Missile Defense Agency; and the Commanders of U.S. Northern Command and U.S. Strategic Command. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Joe Kirschbaum at (202) 512-9971 or kirschbaumj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to the report are listed in Appendix I. In addition to the contact named above, Kevin O’Neill (Assistant Director), Scott Bruckner, Vincent Buquicchio, Martin De Alteriis, Amie Lesser, and Richard Powelson made key contributions to the report.", "summary": "First fielded in 1976 on Shemya Island in Alaska, the Cobra Dane radar faces growing sustainment challenges that DOD plans to address through modernization projects. Anticipating future needs, DOD began investing in new radar systems that share capabilities with Cobra Dane to support ballistic missile defense and space surveillance, including the LRDR (Alaska), the Space Fence (Marshall Islands), and the Pacific Radar (location to be determined). The conference report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision that GAO review the Air Force's report to Congress on the operation and sustainment of Cobra Dane. This report identifies information included in the Air Force's report and describes additional information that GAO reviewed on (1) the capabilities of the Cobra Dane radar and other planned radars to meet DOD's mission requirements, (2) Cobra Dane's operational availability and the plan to mitigate the effect on those missions when Cobra Dane is not available, and (3) DOD's funding plan and project cost estimates for the operation and sustainment of Cobra Dane and its site at Shemya Island. GAO reviewed the Air Force report and related documentation, and interviewed relevant officials. In its January 2018 report to Congress, the Air Force reported how the Cobra Dane radar and the Long Range Discrimination Radar (LRDR) have shared and unique capabilities to support ballistic missile defense and space surveillance missions. The report noted that the respective locations of both radar systems affect their ability to provide those capabilities. The Department of Defense (DOD) also has other radar investments—the Pacific Radar and the Space Fence, which, according to DOD officials, may reduce DOD's reliance on Cobra Dane to provide ballistic missile defense and space surveillance capabilities. The Air Force's report to Congress noted that Cobra Dane met its requirement for operational availability, which refers to the percentage of time that the radar is able to meet its missions. GAO found that the Air Force has developed procedures to mitigate risks when Cobra Dane is not available. For example, U.S. Northern Command and Missile Defense Agency (MDA) officials stated that they can mitigate risks when Cobra Dane is not available by using the Sea-Based X-band radar to provide support for ballistic missile defense. The Air Force would face some limitations in its ability to conduct space surveillance if Cobra Dane were not available, as Cobra Dane tracks objects no other radar can track. However, MDA officials noted there are no plans to take Cobra Dane offline long enough to compromise space surveillance. The Air Force and MDA plan to contribute total funding of $278.6 million for the operation and sustainment of Cobra Dane, according to their fiscal year 2019 budget plans. Specifically, the Air Force and MDA plan to share funding for the operation and maintenance of the Cobra Dane radar and for three modernization projects that make up their sustainment plan for the radar. Further, the Air Force report noted that the Air Force also plans to provide $140 million in funding for the sustainment and maintenance of operational access to Cobra Dane's site at Shemya Island. In addition, GAO found that the Air Force developed a total cost estimate for one project—known as the transmitter group replacement—but not for its other two projects. Air Force officials plan to complete cost estimates for those two projects in conjunction with their fiscal year 2020 budget submission.", "document_type": "gao"}
{"report": "Concerned that the federal government was more focused on program activities and processes than the results to be achieved, Congress passed the Government Performance and Results Act of 1993 (GPRA). GPRA sought to focus federal agencies on performance by requiring agencies to develop long-term and annual goals, and measure and report on progress towards those goals annually. Based on our analyses of the act’s implementation, we concluded in March 2004 that GPRA’s requirements had laid a solid foundation for results-oriented management. At that time, we found that performance planning and measurement had slowly yet increasingly become a part of agencies’ cultures. For example, managers reported having significantly more performance measures in 2003 than in 1997, when GPRA took effect government-wide. However, the benefit of collecting performance information is fully realized only when that information is actually used by managers to make decisions aimed at improving results. Although our 2003 survey found greater reported availability of performance information than in 1997, it also showed managers’ use of that information for various management activities generally had remained unchanged. Based on those results, and in response to a request from Congress, in September 2005, we developed a framework intended to help agencies better incorporate performance information into their decision making. As shown in figure 1, we identified five leading practices that can promote the use of performance information for policy and program decisions; and four ways agency managers can use performance information to make program decisions aimed at improving results. Our September 2005 report also highlighted examples of how agencies had used performance information to improve results. For example, we described how the Department of Transportation’s National Highway Traffic Safety Administration used performance information to identify, develop, and share effective strategies that increased national safety belt usage—which can decrease injuries and fatalities from traffic accidents— from 11 percent in 1985 to 80 percent in 2004. Subsequently, the GPRA Modernization Act of 2010 (GPRAMA) was enacted, which significantly expanded and enhanced the statutory framework for federal performance management. The Senate Committee on Homeland Security and Governmental Affairs report accompanying the bill that would become GPRAMA stated that agencies were not consistently using performance information to improve their management and results. The report cited the results of our 2007 survey of federal managers. That survey continued to show little change in managers’ use of performance information. The report further stated that provisions in GPRAMA are intended to address those findings and increase the use of performance information to improve performance and results. For example, GPRAMA requires certain agencies to designate a subset of their respective goals as their highest priorities—known as agency priority goals—and to measure and assess progress toward those goals at least quarterly through data-driven reviews. Our recent work and surveys suggest that data-driven reviews are having their intended effect. For example, in July 2015, we found that agencies reported that their reviews had positive effects on progress toward agency goals and efforts to improve the efficiency of operations, among other things. In addition, for those managers who were familiar with their agencies’ data-driven reviews, our 2013 and 2017 surveys showed that the more managers viewed their programs as being subject to a review, the more likely they were to report their agencies’ reviews were driving results and conducted in line with our leading practices. Recognizing the important role these reviews were playing in improving data-driven decision making, our management agenda for the presidential and congressional transition in 2017 included a key action to expand the use of data-driven reviews beyond agency priority goals to other agency goals. More broadly, our recent surveys of federal managers have continued to show that reported government-wide uses of performance information generally have not changed or in some cases have declined. As we found in September 2017, and as illustrated in figure 2, the 2017 update to our index suggests that government-wide use of performance information did not improve between 2013 and 2017. In addition, it is statistically significantly lower relative to our 2007 survey, when we created the index. Moreover, in looking at the government-wide results on the 11 individual survey questions that comprise the index, we found few statistically significant changes in 2017 when compared to (1) our 2013 survey or (2) the year each question was first introduced. For example, in comparing 2013 and 2017 results, two questions had results that were statistically significantly different: The percentage of managers who reported that employees who report to them pay attention to their agency’s use of performance information was statistically significantly higher (from 40 to 46 percent). The percentage of managers who reported using performance information to adopt new program approaches or change work processes was statistically significantly lower (from 54 to 47 percent). As we stated in our September 2017 report, the decline on the latter question was of particular concern as agencies were developing plans to improve their efficiency, effectiveness, and accountability, as called for by an April 2017 memorandum from OMB. In early 2017, the administration announced several efforts intended to improve government performance. OMB issued several memorandums detailing the administration’s plans to improve government performance by reorganizing the government, reducing the federal workforce, and reducing federal agency burden. As part of the reorganization efforts, OMB and agencies were to develop government-wide and agency reform plans, respectively, designed to leverage various GPRAMA provisions. For instance, the April 2017 memorandum mentioned above stated that OMB intends to monitor implementation of the reforms using, among other things, agency priority goals. While many agency-specific organizational improvements were included in the President’s fiscal year 2019 budget, released in February 2018, OMB published additional government-wide and agency reform proposals in June 2018. The President’s Management Agenda (PMA), released in March 2018, outlines a long-term vision for modernizing federal operations and improving the ability of agencies to achieve outcomes. To address the issues outlined in the PMA, the administration established a number of cross-agency priority (CAP) goals. CAP goals, required by GPRAMA, are to address issues in a limited number of policy areas requiring action across multiple agencies, or management improvements that are needed across the government. The PMA highlights several root causes for the challenges the federal government faces. Among them is that agencies do not consistently apply data-driven decision-making practices. The PMA states that smarter use of data and evidence is needed to orient decisions and accountability around service and results. To that end, in March 2018, the administration established the Leveraging Data as a Strategic Asset CAP goal to improve the use of data in decision making to increase the federal government’s effectiveness. Over the past 25 years, various organizations, roles, and responsibilities have been created by executive action or in law to provide leadership in federal performance management. At individual agencies and across the federal government, these organizations and officials have key responsibilities for improving performance, as outlined below. OMB: At least every four years, OMB is to coordinate with other agencies to develop CAP goals—such as the one described earlier on leveraging data as an asset—to improve the performance and management of the federal government. OMB is also required to coordinate with agencies to develop annual federal government performance plans to define, among other things, the level of performance to be achieved toward the CAP goals. Following GPRAMA’s enactment, OMB issued guidance for initial implementation, as required by the act, and continues to provide updated guidance in its annual Circular No. A-11, additional memorandums, and other means. Chief Operating Officer (COO): The deputy agency head, or equivalent, is designated as the COO, with overall responsibility for improving agency management and performance through, among other things, the use of performance information. President’s Management Council (PMC): The PMC is comprised of OMB’s Deputy Director for Management and the COOs of major departments and agencies, among other individuals. Its responsibilities include improving overall executive branch management and implementing the PMA. Performance Improvement Officer (PIO): Agency heads designate a senior executive as the PIO, who reports directly to the COO. The PIO is responsible for assisting the head of the agency and COO to ensure that agency goals are achieved through, among other things, the use of performance information. Performance Improvement Council (PIC): The PIC is charged with assisting OMB to improve the performance of the federal government. It is chaired by the Deputy Director for Management at OMB and includes PIOs from each of the 24 Chief Financial Officers Act agencies, as well as other PIOs and individuals designated by the chair. Among its responsibilities, the PIC is to work to resolve government-wide or cross-cutting performance issues, and facilitate the exchange among agencies of practices that have led to performance improvements. Previously, the General Service Administration’s (GSA) Office of Executive Councils provided analytical, management, and administrative support for the PIC, the PMC, and other government-wide management councils. In January 2018, the office was abolished and its functions, staff, and authorities, along with those of the Unified Shared Services Management Office, were reallocated to GSA’s newly created Shared Solutions and Performance Improvement Office. As at the government-wide level—where, as described earlier, the use of performance information did not change from 2013 to 2017—managers’ reported use of performance information at most agencies also did not improve since 2013 (illustrated in figure 3). At the agency level, 3 of the 24 agencies had statistically significant changes in their index scores—1 increase (National Science Foundation) and 2 decreases (Social Security Administration and the Office of Personnel Management). Also, in 2017, 6 agencies had results that were statistically significantly different—4 higher and 2 lower—than the government-wide average (see sidebar). Throughout the report, we highlight two different types of statistically significant results—changes from our last survey in 2013 and differences from the 2017 government-wide average. The former indicates when an agency’s reported use of performance information or leading practices has measurably improved or declined. The latter indicates when it is statistically significantly higher or lower than the rest of government. These results suggest agencies have taken actions that led to improvements in their use of performance information. For example, when a result is a statistically significant increase since 2013, as with the National Science Foundation index score in 2017, this suggests that the agency has adopted practices that led to a measurable increase in the use of performance information by managers. When a result is statistically significantly higher than the government-wide average, like GSA’s 2017 index score, this suggests that the agency’s use of performance information is among the highest results when compared to the rest of government. These agencies could also have insights into practices that led to relatively high levels of performance information use. Finally, when a result is a statistically significant decrease since 2013, as with the Social Security Administration’s index score in 2017, or statistically significantly lower than the government-wide average, like the Department of Homeland Security’s 2017 index score, this suggests the agencies face challenges that are hampering their ability to use performance information. Appendix III provides each agency’s index scores from 2007, 2013, and 2017 to show changes between survey years. When we disaggregated the index and analyzed responses from the 11 questions that comprise the index—which could help pinpoint particular actions that improved the use of performance information—we similarly found relatively few changes in agencies’ recent results. Specifically, we identified 16 instances where agency responses on individual questions were statistically significantly different from 2013 to 2017—10 increases and 6 decreases. This represents about 6 percent of the total possible responses to the 11 survey questions from each of the agencies. In addition, we found 12 instances where an agency’s result on a question was statistically significantly higher (11) or lower (1) than the government-wide average in 2017. For example, the percentage of Social Security Administration (SSA) managers reporting that their peers use performance information to share effective approaches was statistically significantly higher than the government-wide average. Although SSA’s index score had a statistically significant decline in 2017 compared to 2013, the agency’s index score remains relatively high, as it has in prior years. The scope of our work has not allowed us to determine definitively what factors caused the decline in SSA’s index score and whether the decline is likely to continue, although its result on this particular question may indicate a continued strength. Each agency’s results on the 11 questions that comprise the index are presented in appendix I. The agencies’ respective statistically significant results are identified in figure 4. While some agencies had statistically significant improvements on individual questions, and could point to actions that led to improvements in their use of performance information, these improvements should be considered in relation to the range of agency results and the government- wide average. In figure 4, there are five agencies with statistically significant increases on responses to individual questions, where those results were not statistically significantly higher than the government-wide average (see arrows without plus signs for the Departments of Agriculture, Defense, and Justice; the Environmental Protection Agency; and the National Science Foundation). While these represent improvements, they should be considered in relation to the range of agency results and the government-wide average (provided in detail in the agency summaries in appendix I). For example, in 2017, the percentage of managers at the Department of Agriculture who reported that upper management use performance information to inform decisions about program changes was statistically significantly higher than in 2013. However, the department’s 2017 result (37 percent) was relatively lower when compared to the maximum agency result on that question (60 percent). Appendix I presents the results on the index and the 11 questions that comprise it for each of the 24 agencies. When we compared government-wide and agency-level results on selected survey questions that reflect practices that promote the use of performance information, we found that results between 2013 and 2017 generally remained unchanged. As described earlier, there are 10 survey questions that both reflect the five leading practices identified in our past work and had statistically significant associations with higher index scores. As shown in figure 5, government-wide results on 2 of the 10 questions were statistically significantly different, both increases, from 2013 to 2017. Despite these two increases, the overall results suggest these practices are not widely followed government-wide. On most of the 10 questions, only about half (or fewer) of the managers reported their agencies were following them to a “great” or “very great” extent. When we analyzed agency-level responses to these 10 questions, we also found relatively few changes in recent results. Specifically, our analysis found 20 instances—16 increases and 4 decreases—where agencies’ responses on individual questions were statistically significantly different from 2013 to 2017. This represents about 8 percent of the total possible responses to the 10 survey questions from each of the agencies. In addition, we found 10 instances where an agency’s result on a question was statistically significantly higher (8) or lower (2) than the government-wide average in 2017. Each agency’s results on these 10 questions are presented in appendix I, and the statistically significant results are identified in figure 6. Those agencies with results on individual questions that are either statistically significantly higher than 2013, higher than the 2017 government-wide average, or both may have taken actions in line with our leading practices for promoting the use of performance information. For example, the National Science Foundation had both types of statistically significant results on a question about having sufficient information on the validity of their performance data. Here, the agency’s result increased 27 percentage points from 2013 to 2017. While the scope of our review does not allow us to definitively determine the reasons for the National Science Foundation’s higher results, they suggest the agency has taken recent actions that greatly improved the availability and accessibility of information on the validity of performance data. In both 2013 and 2017, our analyses found this particular question to be the strongest predictor of higher performance information use when we tested for associations between the questions that reflect leading practices and our index. Our 2017 survey results show that managers who reported their programs were subject to data-driven reviews also were more likely to report using performance information in decision making to a greater extent (see figure 7). For the 35 percent of managers who reported being familiar with data-driven reviews, those who reported their programs had been subject to data-driven reviews to a “great” or “very great” extent had index scores that were statistically significantly higher than those whose programs were subject to these reviews to a lesser extent. Similarly, we found that being subject to data-driven reviews to a greater extent was also related to greater reporting of agencies following practices that can promote the use of performance information. As figure 8 shows, managers who reported their programs were subject to these reviews to a “great” or “very great” extent more frequently reported that their agencies followed the five leading practices that promote the use of performance information, as measured by the 10 related survey questions associated with higher scores on the index. For example, of the estimated 48 percent of managers who reported their programs were subject to data-driven reviews to a “great” or “very great” extent, 72 percent also reported that managers at their level (peers) effectively communicate performance information on a routine basis to a “great” or “very great” extent. Conversely, for the 24 percent of managers who reported their programs were subject to data-driven reviews to a “small” or “no” extent, only 30 percent reported that managers at their level do this to a “great” or “very great” extent. Our past work has found that the Executive Branch has taken steps to improve the use of performance information in decision making by senior leaders at federal agencies. However, our survey results indicate those steps have not led to similar improvements in use by managers at lower levels. Through its guidance to implement GPRAMA, OMB developed a framework for performance management in the federal government that involves agencies setting goals and priorities, measuring performance, and regularly reviewing and reporting on progress. This includes expectations for how agency senior leaders should use performance information to assess progress towards achieving agency priority goals through data-driven reviews, and strategic objectives through strategic reviews. For example, GPRAMA requires, and OMB’s guidance reinforces, that data-driven reviews should involve the agency head, Chief Operating Officer, Performance Improvement Officer, and other senior officials responsible for leading efforts to achieve each goal. OMB’s guidance also identifies ways in which agency leaders should use the results of those reviews to inform various decision-making activities, such as revising strategies, formulating budgets, and managing risks. Our past work also found that agencies made progress in implementing these reviews and using performance information. In July 2015, we found that agencies generally were conducting their data-driven reviews in line with GPRAMA requirements and our related leading practices, including that agency leaders used the reviews to drive performance improvement. In addition, in September 2017, we reported on selected agencies’ experiences in implementing strategic reviews and found that the reviews helped direct leadership attention to progress on strategic objectives. Despite those findings, our survey results continue to show that the reported use of performance information by federal managers has generally not improved, and actually declined at some agencies. This could be because of the two different groups of agency officials covered by our work. GPRAMA’s requirements, and the federal performance management framework established by OMB’s guidance, apply at the agency-wide level and generally involve senior leaders. Our past work reviewing implementation of the act therefore focused on improvements in the use of performance information by senior leaders at the agency- wide level. In contrast, our surveys covered random samples of mid- and upper-level managers within those agencies, including at lower organizational levels such as component agencies. Their responses indicate that the use of performance information more broadly within agencies—at lower organizational levels—generally has not improved over time. The exception to this was managers whose programs were subject to the data-driven reviews required by GPRAMA. As described above, those managers were more likely to report greater use of performance information in their agencies. This reinforces the value of the processes and practices put in place by GPRAMA. Our survey results suggest that limited actions have been taken to diffuse processes and practices related to the use of performance information to lower levels within federal agencies, where mid-level and senior managers make decisions about managing programs and operations. Although OMB staff agreed that diffusing processes and practices to lower levels could lead to improved use of performance information, they told us they have not directed agencies to do so for a few reasons. First, OMB staff expressed concerns about potentially imposing a “one-size-fits- all” approach on agencies. They stated that agencies are best positioned to improve their managers’ use of performance information, given their individual and unique missions and cultures, and the environments in which they operate. We agree that it makes sense for agencies to be able to tailor their approaches for those reasons. OMB’s existing guidance provides an overarching framework that recognizes the need for flexibility and for agencies to tailor their approaches. Moreover, given the long- standing and cross-cutting nature of this challenge, a government-wide approach also would provide a consistent focus on improving the use of performance information more extensively within agencies. OMB staff also told us that they believed it would go beyond their mandate to direct agencies to extend GPRAMA requirements to lower levels. GPRAMA requires OMB to provide guidance to agencies to implement its requirements, which only apply at the agency-wide level. As noted earlier, however, GPRAMA also requires OMB to develop cross- agency priority (CAP) goals to improve the performance and management of the federal government. The President’s Management Agenda established a CAP goal to leverage data as a strategic asset, in part, to improve the use of data for decision making and accountability throughout the federal government. This new CAP goal presents an opportunity for OMB and agencies to identify actions to expand the use of performance information in decision making throughout agencies. As of June 2018, the action plan for implementing the Leveraging Data as a Strategic Asset CAP goal is limited. According to the President’s Management Agenda and initial CAP goal action plan, the goal primarily focuses on developing and implementing a long-term, enterprise-wide federal data strategy to better govern and leverage the federal government’s data. It is through this strategy that, among other things, the administration intends to improve the use of data for decision making and accountability. However, the strategy is under development and not expected to be released until January 2019, with a related plan to implement it expected in April 2019. The existing action plan, released in March 2018 and updated in June 2018, does not yet include specific steps needed to improve the use of data—including performance information—more extensively within agencies. According to the action plan for the goal, potential actions currently under consideration focus on establishing agency “learning agendas” that prioritize the development and use of data and other evidence for decision-making; building agency capacity to use data and other evidence; and improving the timeliness of performance information and other data, and making that information available to decision makers and the public. Although developing learning agendas and building capacity could help improve the use of performance information in agencies, improving availability of data may be less effective. For example, as our past survey results have shown, increasing the availability of performance information has not resulted in corresponding increases in its use in decision making. We recognize that the CAP goal was created in March 2018. Nonetheless, it is important that OMB and its fellow goal leaders develop the action plan and related federal data strategy consistent with all key requirements to better ensure successful implementation. The action plan does not yet include complete information related to the following GPRAMA requirements: performance goals that define the level of performance to be achieved each year for the CAP goal; the various federal agencies, organizations, programs, and other activities that contribute to the CAP goal; performance measures to assess overall progress towards the goal as well as the progress of each agency, program, and other activity contributing to the goal; and clearly defined quarterly targets. Consistent with GPRAMA, Standards for Internal Control in the Federal Government identifies information that agencies are required to include in their plans to help ensure they achieve their goals. The standards state that objectives—such as improving the use of data in decision making— should be clearly defined to enable the identification of risks. Objectives are to be defined in specific terms so they can be understood at all levels of the entity—in this case, government-wide as well as within individual agencies. This involves defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. Ensuring that future updates to the new CAP goal’s action plan includes all required elements is particularly important, as our previous work has found that some past CAP goal teams did not meet all planning and reporting requirements. For example, in May 2016 we found that most of the CAP goal teams we reviewed had not established targets for all performance measures they were tracking. This limited the transparency of their efforts and the ability to track progress toward established goals. We recommended that OMB, working with the Performance Information Council (PIC), report on actions that CAP goal teams are taking, or plan to take, to develop such targets and performance measures. OMB staff generally agreed and, in July 2017, told us they were working, where possible, to assist the development of measures for CAP goals. However, the recommendation has not been addressed and OMB staff said the next opportunity to address it would be when the administration established new CAP goals (which took place in March 2018). Following the initial release of the new CAP goals, CAP goal teams are to more fully develop the related action plans through quarterly updates. Given the ongoing importance of meeting these planning and reporting requirements, we will continue to monitor the status of actions to address this recommendation as implementation of the new CAP goals proceeds. While the PIC, which is chaired by OMB, has contributed to efforts to enhance the use of performance information, our survey results identify additional opportunities to further those efforts. The PIC’s past efforts have included hosting various working groups and learning events for agency officials to provide performance management guidance, and developing resources with relevant practices. For example, the PIC created a working group focused on agency performance reviews, which was used to share recommendations for how agencies can implement reviews, along with a guide with practices for effectively implementing strategic reviews. In January 2018, staff supporting the PIC joined with staff from another GSA office to create a new group called Fed2Fed Solutions. This group consults with agencies and provides tailored support, such as data analysis and performance management training for agency officials, to help them address specific challenges related to organizational transformation, data-driven decision making, and other management improvement efforts. Our survey results identify useful information related to potential promising practices and challenges that OMB and the PIC could use to inform efforts to enhance the use of performance information more extensively within agencies (e.g., at lower levels). As was previously described, the PIC has responsibilities to (1) facilitate the exchange among agencies of proven practices, and (2) work to resolve government- wide or cross-cutting performance issues, such as challenges. Our analyses of 2017 survey results identified instances where agencies may have found effective ways to enhance the use of performance information by agency leaders and managers in decision making, as well as instances where agencies (and their managers) face challenges in doing so. Specifically, based on analyses of our survey responses, we identified 14 agencies that may have insights into specific practices that led to recent improvements in managers’ use of performance information, or ways that they maintain relatively high levels of use by their managers when compared to the rest of the government. Figure 9 summarizes the agencies identified earlier in the report that had statistically significant increases, or results higher than the government-wide average, on our index or individual survey questions. As the figure shows, several agencies had statistically significant results across all three sets of analyses and therefore may have greater insights to offer: the General Services Administration, National Aeronautics and Space Administration, and the National Science Foundation. In addition, our analyses identified nine agencies where results suggest managers face challenges that have hampered their ability to use performance information. Figure 10 summarizes the agencies identified earlier in the report that had statistically significant decreases, or results lower than the government-wide average, on our index or individual survey questions. As the figure shows, the Office of Personnel Management had statistically significant decreases in all three sets of analyses. Four agencies—the Departments of the Treasury and Veterans Affairs, the Nuclear Regulatory Commission, and the Social Security Administration—were common to both of the figures above. That is, they had results that indicate they may have insights on some aspects of using performance information and face challenges in other aspects. As was mentioned earlier, to provide proper context, these results should be considered in relation to the range of agency results and the government- wide average (provided in detail in the agency summaries in appendix I). Given the prioritization of other activities, such as the recent creation of the Fed2Fed Solutions program, the PIC has not yet undertaken a systematic approach that could improve the use of performance information by managers at lower levels within agencies. Such an approach would involve identifying and sharing practices that have led to improved use, as well as identifying common or cross-cutting challenges that have hampered such use. The results of our analyses could help the PIC do so, and in a more targeted manner. By identifying and sharing proven practices, the PIC could further ensure that agency leaders and managers are aware of effective or proven ways they can use performance information to inform their decisions across the spectrum of activities they manage within their agencies. Those proven practices also may help agency leaders and managers resolve any identified challenges. Furthermore, in September 2017, we found that, for the estimated 35 percent of managers who reported familiarity with data-driven reviews, the more they viewed their programs being subject to a review, the more likely they were to report the reviews were driving results and were conducted in line with our leading practices for using performance information. Despite the reported benefits of and results achieved through data-driven reviews, they were not necessarily widespread. As noted above, GPRAMA requires agencies to conduct such reviews for agency priority goals, which represent a small subset of goals, and they are required at the departmental level. These reasons may explain why most managers reported they were not familiar with the reviews. As a result, we recommended that OMB should work with the PIC to identify and share among agencies practices for expanding the use of data-driven reviews. OMB staff agreed with our recommendation but have yet to address it. In June 2018, OMB updated its annual guidance to agencies to explicitly encourage them to expand data-driven reviews to include other goals, priorities, and management areas as applicable to improve organizational performance. However, as of June 2018, OMB and the PIC have yet to take any steps to identify and share practices for expanding the use of these reviews in line with our recommendation. Given the additional analyses we conducted for this report—which show that being subject to data-driven reviews is related to greater reported use of performance information and leading practices that promote such use—we continue to believe these further actions would help agencies implement these reviews more extensively. We reiterate the importance of the September 2017 recommendation and will continue to monitor OMB’s progress to address it. For more than 20 years, our work has highlighted weaknesses in the use of performance information in federal decision making. While the Executive Branch has taken some actions in recent years, such as establishing a framework for performance management across the federal government, our survey results underscore that more needs to be done to improve the use of performance information more extensively within agencies and government-wide. The President’s Management Agenda and its related CAP goal to leverage data as a strategic asset present an opportunity to do so, as it aims to improve data-driven decision making. As OMB and its fellow goal leaders more fully develop the action plan for achieving this goal, providing additional details for its plans to improve data-driven decision making would help provide assurance that it can be achieved. As part of those initiatives, our survey results could provide a useful guide for targeting efforts. Officials at each agency could use these results to identify areas for additional analysis and potential actions that could help improve the use of performance information across the agency and at lower levels. Similarly, OMB and the PIC could use the results to identify broader issues in need of government-wide attention. It will also be important, however, for OMB and the PIC to go beyond this analysis and work with agencies to identify and share proven practices for increasing the use of performance information at lower levels within agencies, as well as challenges that may be hampering agencies’ ability to do so. We are making the following two recommendations to OMB: The Director of OMB should direct the leaders of the Leveraging Data as a Strategic Asset CAP Goal to ensure future updates to the action plan, and the resulting federal data strategy, provide additional details on improving the use of data, including performance information, more extensively within federal agencies. The action plan should identify performance goals; contributing agencies, organizations, programs, and other activities; those responsible for leading implementation within these contributors; planned actions; time frames; and means to assess progress. (Recommendation 1) The Director of OMB, in coordination with the PIC, should prioritize efforts to identify and share among agencies proven practices for increasing, and challenges that hamper, the use of performance information in decision making more extensively within agencies. At a minimum, this effort should involve the agencies that our survey suggests may offer such insights. (Recommendation 2) We provided a draft of this report to the Director of the Office of Management and Budget for review and comment. We also provided a draft of the report to the heads of each of the 24 federal agencies covered by our survey. OMB had no comments, and informed us that it would assess our recommendations and consider how best to respond. We are sending copies of this report to congressional requesters, the Director of the Office of Management and Budget, the heads of each of the 24 agencies, and other interested parties. This report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or mcneilt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix IV. (USDA) (Goverment-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Commerce) (Goverment-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Goverment-wide) (DOD) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Education) (Goverment-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (Energy) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (HHS) (Goverment-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (DHS) (Goverment-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (HUD) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Interior) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (DOJ) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (DOL) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (State) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (DOT) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Treasury) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (VA) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Goverment-wide) (USAID) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (EPA) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (GSA) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (NASA) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (NSF) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (NRC) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (OPM) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (SBA) (Government-wide) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” (Government-wide) (SSA) 10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting “Great” or “Very Great” This report responds to a request that we analyze agency-level results from our 2017 survey of federal managers at the 24 agencies covered by the Chief Financial Officers (CFO) Act of 1990, as amended, to determine the extent agencies are using performance information. This report assesses the extent to which: 1. the reported use of performance information and related leading practices at 24 agencies has changed compared to our prior survey in 2013; 2. being subject to data-driven reviews related to managers’ reported use of performance information and leading practices; and 3. the Executive Branch has taken actions to enhance agencies’ use of performance information in various decision-making activities. From November 2016 through March 2017, we administered our online survey to a stratified random sample of 4,395 individuals from a population of 153,779 mid- and upper-level civilian managers and supervisors at the 24 CFO Act agencies. The management levels covered general schedule (GS) or equivalent schedules at levels comparable to GS-13 through GS-15, and career Senior Executive Service (SES) or equivalent. We obtained the sample from the Office of Personnel Management’s Enterprise Human Resources Integration database as of September 30, 2015—the most recent fiscal year data available at the time. The sample was stratified by agency and whether the manager or supervisor was a member of the SES. To help determine the reliability and accuracy of the database elements used to draw our sample of federal managers for the 2017 survey, we checked the data for reasonableness and the presence of any obvious or potential errors in accuracy and completeness and reviewed our past analyses of the reliability of this database. We concluded in our September 2017 report that the data used to draw our sample were sufficiently reliable for the purpose of the survey. For the 2017 survey, we received usable questionnaires from about 67 percent of the eligible sample. The weighted response rate at each agency generally ranged from 57 percent to 82 percent, except the Department of Justice, which had a weighted response rate of 36 percent. The overall survey results are generalizable to the population of managers government-wide and at each individual agency. To assess the potential bias from agencies with lower response rates, we conducted a nonresponse bias analysis using information from the survey and sampling frame as available. The analysis confirmed discrepancies in the tendency to respond to the survey related to agency and SES status. The analysis also revealed some differences in response propensity by age and GS level; however, the direction and magnitude of the differences on these factors were not consistent across agencies or strata. Our data may be subject to bias from unmeasured sources for which we cannot control. Results, and in particular estimates from agencies with low response rates such as the Department of Justice, should be interpreted with caution. However, the survey’s results are comparable to five previous surveys we conducted in 1997, 2000, 2003, 2007, and 2013. To address the first objective, we used data from our 2017 survey to update agency scores on our use of performance information index. This index, which was last updated using data from our 2013 survey, averages managers’ responses on 11 questions related to the use of performance information for various management activities and decision making. Using 2017 survey data, we conducted statistical analyses to ensure these 11 questions were still positively correlated. That analysis confirmed that no negative correlations existed and therefore no changes to the index were needed. Figure 11 shows the questions that comprise the index. After calculating agency index scores for 2017, we compared them to previous results from 2007 and 2013, and to the government-wide average for 2017, to identify any statistically significant differences. We focus on statistically significant results because these indicate that observed relationships between variables and differences between groups are likely to be valid, after accounting for the effects of sampling and other sources of survey error. For each of the 11 questions that comprise the index, we identified individual agency results, excluding missing and no basis to judge responses, and determined when they were statistically significantly different from (1) the agency’s results on the same question in 2013, or (2) the government-wide average results on the question in 2017. In this report, we analyzed and summarized the results of our 2017 survey of federal managers. Due to the limited scope of the engagement, we did not conduct additional audit work to determine what may have caused statistically significant changes between our 2017 and past survey results. To further address this objective we completed several statistical analyses that allowed us to assess the association between the index and 22 survey questions that we determined relate to leading practices we previously found promote the use of performance information. See figure 12 for the 22 specific questions related to these five practices that we included in the analysis. When we individually tested these 22 survey questions (bivariate regression), we found that each was statistically significantly and positively related to the index in 2017. This means that each question, when tested in isolation from other factors, was associated with higher scores on the index. However, when all 22 questions were tested together (multivariate regression), we found that 5 questions continued to be positively and significantly associated with the index in 2017, after controlling for other factors. To conduct this multivariate analysis, we began with a base model that treated differences in managers’ views of agency performance management use as a function of the agency where they worked. We found, however, that a model based on agency alone had little predictive power (R-squared of 0.04). We next examined whether managers’ responses to these questions reflecting practices that promote the use of performance information related to their perceptions of agency use of performance information, independent of agency. The results of this analysis are presented in table 1 below. Each coefficient reflects the increase in our index associated with a one-unit increase in the value of a particular survey question. Our final multivariate regression model had an R-squared of 0.67, suggesting that the variables in this model explain approximately 67 percent of the variation in the use index. We also tested this model controlling for whether a respondent was a member of the SES and found similar results. As shown above in table 1, five questions related to three of the leading practices that promote agencies’ use of performance information were statistically significant in 2017. These results suggest that, when controlling for other factors, certain specific efforts to increase agency use of performance information—such as providing information on the validity of performance data—may have a higher return and lead to higher index scores. With respect to aligning agency-wide goals, objectives, and measures, we found that each increase in terms of the extent to which individuals felt that managers aligned performance measures with agencywide goals and objectives was associated with a 0.08 increase in their score on the use index. In terms of improving the usefulness of performance information, we found that having information on the validity of performance data for decision making was the strongest predictor in our model (0.18). As measured here, taking steps to ensure the performance information is useful and appropriate was associated with almost as large a change in a managers’ index score (0.16). In terms of developing agency capacity to use performance information, we found that having sufficient analytical tools to collect, analyze, and use performance information (0.07), and providing or paying for training that would help link their programs to achievement of agency strategic goals (0.10), were also statistically significantly related to a manager’s reported use of performance information. When we combined these results with what we previously found through a similar analysis of 2013 survey results in September 2014, we identified 10 questions that have had a statistically significant association with higher index scores. This reinforces the importance of the five leading practices to promote the use of performance information. For each of these questions, which are outlined in figure 13 below, we determined when agency results were statistically significantly different from 2013 results or the 2017 government-wide average. For the second objective, we examined, based on the extent they responded their programs had been subject to agency data-driven reviews, differences in managers’ use index scores and responses on questions related to practices that promote the use of performance information. We grouped managers based on the extent they reported their programs had been subject to these reviews, from “no extent” through “very great extent.” We then calculated the average index scores for the managers in each of those five categories. We also examined differences in how managers responded to the 10 questions reflecting practices that can promote the use of performance information based on the extent they reported their programs had been subject to data-driven reviews. We grouped managers into three categories based on the extent they reported their programs had been subject to these reviews (no-small extent, moderate extent, great-very great extent). We then compared how these groups responded to the ten questions. For the third objective, we reviewed our past work that assessed Executive Branch activities to enhance the use of performance information; various resources (i.e., guidance, guides, and playbooks) developed by the Office of Management and Budget (OMB) and the Performance Improvement Council (PIC) that could support agencies’ use of performance information; and the President’s Management Agenda, and related materials with information on cross-agency efforts to improve the use of data in federal decision making. Lastly, for the third objective we also interviewed OMB and PIC staff about any actions they have taken, or planned to take, to further support the use of performance information across the federal government. We conducted this performance audit from October 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the above contact, Benjamin T. Licht (Assistant Director) and Adam Miles (Analyst-in-Charge) supervised this review and the development of the resulting report. Arpita Chattopadhyay, Caitlin Cusati, Meredith Moles, Dae Park, Amanda Prichard, Steven Putansu, Alan Rozzi, Shane Spencer, and Khristi Wilkins also made key contributions. Robert Robinson developed the graphics for this report. Alexandra Edwards, Jeff DeMarco, Mark Kehoe, Ulyana Panchishin, and Daniel Webb verified the information presented in this report. Results of the Periodic Surveys on Organizational Performance and Management Issues Managing for Results: Further Progress Made in Implementing the GPRA Modernization Act, but Additional Actions Needed to Address Pressing Governance Challenges. GAO-17-775. Washington, D.C.: September 29, 2017. Supplemental Material for GAO-17-775: 2017 Survey of Federal Managers on Organizational Performance and Management Issues. GAO-17-776SP. Washington, D.C.: September 29, 2017. Program Evaluation: Annual Agency-wide Plans Could Enhance Leadership Support for Program Evaluations. GAO-17-743. Washington, D.C.: September 29, 2017. Managing for Results: Agencies’ Trends in the Use of Performance Information to Make Decisions. GAO-14-747. Washington, D.C.: September 26, 2014. Managing for Results: Executive Branch Should More Fully Implement the GPRA Modernization Act to Address Pressing Governance Challenges. GAO-13-518. Washington, D.C.: June 26, 2013. Managing for Results: 2013 Federal Managers Survey on Organizational Performance and Management Issues, an E-supplement to GAO-13-518. GAO-13-519SP. Washington, D.C.: June 26, 2013. Program Evaluation: Strategies to Facilitate Agencies’ Use of Evaluation in Program Management and Policy Making. GAO-13-570. Washington, D.C.: June 26, 2013. Government Performance: Lessons Learned for the Next Administration on Using Performance Information to Improve Results. GAO-08-1026T. Washington, D.C.: July 24, 2008. Government Performance: 2007 Federal Managers Survey on Performance and Management Issues, an E-supplement to GAO-08-1026T. GAO-08-1036SP. Washington, D.C.: July 24, 2008. Results-Oriented Government: GPRA Has Established a Solid Foundation for Achieving Greater Results. GAO-04-38. Washington, D.C.: March 10, 2004. Managing for Results: Federal Managers’ Views on Key Management Issues Vary Widely Across Agencies. GAO-01-592. Washington, D.C.: May 25, 2001. Managing for Results: Federal Managers’ Views Show Need for Ensuring Top Leadership Skills.GAO-01-127. Washington, D.C.: October 20, 2000. The Government Performance and Results Act: 1997 Governmentwide Implementation Will Be Uneven. GAO/GGD-97-109. Washington, D.C.: June 2, 1997.", "summary": "To reform the federal government and make it more efficient and effective, agencies need to use data about program performance. The benefit of collecting performance information is only fully realized when it is used by managers to make decisions aimed at improving results. GAO was asked to review agencies' use of performance information. This report assesses, among other things, the extent to which: (1) 24 agencies' reported use of performance information and related leading practices has changed since 2013 and (2) the Executive Branch has taken actions to enhance the use of performance information. To address the first objective, GAO analyzed results from its 2017 survey of federal managers, and compared them to 2013 results. The survey covered a stratified random sample of 4,395 managers from the 24 Chief Financial Officers Act agencies. The survey had a 67 percent response rate and results can be generalized to the population of managers government-wide and at each agency. For the second objective, GAO reviewed agency documents and interviewed staff from OMB and the PIC. Agencies' reported use of performance information to make decisions, and leading practices that can promote such use, generally has not improved since GAO's last survey of federal managers in 2013. However, GAO's survey results continue to point to certain practices that could help agencies improve managers' use of performance information. For example, as shown in the table below, GAO's survey found that managers whose programs were subject to data-driven reviews (regular reviews used to assess progress on select agency goals) to a greater extent reported statistically significantly greater use of performance information to make decisions. The Executive Branch has begun taking steps to improve the use of performance information within agencies and across the government. For example, In the President's Management Agenda and government-wide reform plan, released in March and June 2018 respectively, the administration acknowledged the need to do more, and announced a goal, among other actions, to improve the use of data in federal decision making. However, the Office of Management and Budget (OMB) and others responsible for this goal have yet to fully develop action plans to hold agencies accountable for achieving it. The Performance Improvement Council (PIC), which is chaired by OMB, has undertaken efforts to improve the use of performance information by, for example, creating a working group on agency performance reviews. But it has not yet taken a systematic approach to identify and share proven practices that led to, or challenges that may be hampering, increased use of performance information by managers. GAO's survey results identified agencies that may have insights into such practices and challenges. More fully developing action plans for the new goal, and identifying and sharing proven practices and challenges, could help ensure the Executive Branch takes further steps to improve the use of performance information by managers within agencies and across the federal government. To improve the use of performance information within agencies and across the federal government, GAO recommends that OMB work with (1) fellow goal leaders to more fully develop action plans for the new goal to improve the use of data and (2) the PIC to prioritize efforts to identify and share proven practices and challenges. OMB had no comments on this report.", "document_type": "gao"}
{"report": "The Marine Corps, within the Department of the Navy, organizes itself into different Marine Air Ground Task Forces. Each Marine Air Ground Task Force consists of a command element that includes a ground combat element, air combat element, and logistics combat element that can conduct operations across a broad range of crisis and conflict situations. As shown in figure 1, there are four types of Marine Air Ground Task Forces: Marine Expeditionary Forces (MEFs), Marine Expeditionary Brigades, Marine Expeditionary Units, and Special Purpose Marine Air Ground Task Forces. The MEF is the principal warfighting organization for the Marine Corps and consists of one or more divisions, including subordinate units such as regiments and battalions. There are three MEFs in the active component of the Marine Corps: I MEF—Camp Pendleton, California; II MEF—Camp Lejeune, North Carolina; and III MEF—Okinawa, Japan. Headquarters Marine Corps consists of the Commandant of the Marine Corps (Commandant) and the staff organizations, which are responsible for advising and assisting the Commandant to carry out duties. For example, the Deputy Commandant for Programs and Resources is responsible for developing, defending, and overseeing the Marine Corps’ financial requirements and the Deputy Commandant for Plans, Policies, and Operations is responsible for establishing policy, procedures, training, and guidance on unit readiness reporting. Marine Corps units train to their core missions—the fundamental missions a unit is organized or designed to perform—and their assigned missions—those missions which an organization or unit is tasked to carry out. Units train to a list of Mission Essential Tasks that are assigned based on the unit’s required operational capabilities and projected operational environments. For example, the Mission Essential Tasks for a Marine Corps infantry battalion include amphibious operations, offensive operations, defensive operations, and stability operations. Marine Corps Training and Readiness manuals describe the training events, frequency of training required to sustain skills, and the conditions and standards that a unit must accomplish to be certified in a Mission Essential Task. Unit commanders are responsible for their units’ readiness, including assessing and reporting their units’ capabilities to accomplish Mission Essential Tasks to specified conditions and standards. Unit readiness assessments are tracked in the Defense Readiness Reporting System– Marine Corps. This information provides Marine Forces Command, Headquarters Marine Corps, the Office of the Secretary of Defense, Joint Staff, and Combatant Commands, among others, a means to assess ground combat forces’ readiness trends and to assist with strategic and operational planning. The Marine Corps’ O&M budget funds a wide range of activities, including the recruiting, organizing, training, sustaining, and equipping of the service. The Department of Defense (DOD) uses the Planning, Programming, Budgeting, and Execution (PPBE) process to allocate resources to provide capabilities necessary to accomplish the department’s missions. In this report, we refer to the PPBE process as the budget cycle. The budget cycle includes the following phases: The planning phase of the budget cycle examines the military role and defense posture of the United States and DOD in the world environment and considers enduring national security objectives, as well as the need for efficient management of defense resources. The programming phase of the budget cycle involves developing proposed programs consistent with planning, programming, and fiscal guidance, reflecting, among other things, the effective allocation of resources. The budgeting phase of the budget cycle refers to developing and submitting detailed budget estimates for programs. The execution phase of the budget cycle involves spending funds. The Marine Corps’ Office of Programs and Resources has multiple divisions that support Program Objective Memorandum (POM) development, strategy, independent analysis, budget justification and legislative coordination, among others. Two key divisions that have responsibilities regarding Marine Corps resources are: The Budget and Execution Division is responsible for leading development and submission of the POM, providing quality control over programmatic and financial data, and allocating funds to major commands. According to a Marine Corps official, the division also assists with defending the Marine Corps’ budget request to Congress and others. The Program Analysis and Evaluation Division is responsible for providing Marine Corps senior leaders with independent and objective analysis to inform resource allocation decisions and assessing institutional risk. The Program Budget Information System (PBIS) is the primary information system used by the Navy and Marine Corps in the programming and budgeting phases of the budget cycle to develop and submit financial plans (i.e., the POM and the budget) to the Office of the Secretary of Defense. Once appropriated, funds are passed via allocation and allotment to subordinate units and executed via the Standard Accounting, Budgeting, and Reporting System (SABRS). SABRS is used to (1) record and report financial information; (2) provide an accounting and reporting system for the execution of appropriations; and (3) record financial transactions that originate from source systems. Our analysis of data from the three MEFs for fiscal year 2017 funds shows that the MEFs had some data available that could be used to track some training funds from budget request to obligation. According to the Marine Corps’ Financial Guidebook for Commanders, as part of the budget cycle, commanders should determine the cost involved in meeting requirements, among other things. To help develop a sound budget, commanders need to know what they were and were not able to accomplish as a result of funding in previous years. However, Marine Corps officials told us they faced limitations tracking training funds, as discussed below. Specifically, as shown in table 1, we found that I MEF and II MEF were able to provide data on their fiscal year 2017 budget request, allotment, and obligations for training exercises directed at the MEF and division level, but data on exercises at smaller unit levels, such as regiments and battalions, were not consistently available because officials at those levels do not always track funds for these exercises. We found that III MEF was able to provide obligations data for fiscal year 2017 training exercises at all unit levels, but was not able to provide data on funds requested and allotted by training exercise. Officials at III MEF stated that these data were not available because III MEF incurs several large one-time expenses that contribute to training, but allocating those costs across specific training exercises is difficult. One of the primary reasons that the Marine Corps cannot fully track all training funds through the budget cycle is that the Office of Programs and Resources has not established the consistent use of fiscal codes to provide greater detail about the use of funds across the budget cycle phases, and the accuracy of these fiscal codes is sometimes questionable. The Marine Corps uses a variety of fiscal codes to track funds in the programming and execution phases of the budget cycle in the PBIS and SABRS systems, respectively. Some of these codes are used across DOD, while others are specific to the Marine Corps. Two key fiscal codes that officials identified as relevant to efforts to track funds for unit-level training are the Marine Corps Programming Code (MCPC) and the Special Interest Code (SIC). However, we identified limitations with how these fiscal codes are applied, as detailed below. MCPCs are used to program funds for intended use, but are not clearly linked to executed funds. When the Marine Corps programs funds for intended use, it uses MCPCs to identify the funds; however, when it executes those funds, it uses a different set of fiscal codes to identify them. As a result, the Marine Corps cannot link the programmed intent of the funds to the execution of the funds, making it difficult to track funds through the budget cycle. In fiscal years 2011, 2012, and 2013, the Marine Corps found in a series of reports that it faced challenges tracking funds through the budget cycle, in part because MCPCs were used to program funds, but not to track them in the execution phase. According to the fiscal year 2012 report, such tracking would enable the Marine Corps to improve financial traceability and add consistently reliable program execution data that would promote an understanding of the current fiscal environment to Marine Corps financial managers, comptrollers and others. In 2014, the Marine Corps implemented a process to include MCPCs in the execution phase of the budget cycle. The process enabled SABRS to automatically generate MCPCs for executed funds, based on the fiscal codes already used in the execution phase of the budget cycle. According to officials in the Office of Programs and Resources, this process increased the amount of executed funding that could be linked to an MCPC. However, Marine Corps officials told us that the mapping of MCPCs used in the programming phase to those used in the execution phase were not cleanly aligned, causing uncertainty about their linkage. The MCPCs associated with executed funds are estimates based on subject matter expert and working group mapping of fiscal codes to an MCPC and require continuous manual validation to ensure their accuracy. Additionally, the data quality of the multiple execution fiscal codes that are used to generate MCPCs is questionable because the data quality of the various underlying systems that feed data into SABRS is poor, according to officials in the Office of Programs and Resources. Senior Marine Corps officials from the Office of Programs and Resources told us that due to these limitations, analysts cannot be certain that executed funds associated with an MCPC as reflected in SABRS correspond to the purpose for which the funds associated with the same MCPC were programmed in the Program Budget Information System. This limits the Marine Corps’ ability to assess the extent to which funds were executed consistent with their programmed intent and track funds through the budget cycle. SICs are not used consistently across units. The Marine Corps uses SICs to track funds associated with individual training exercises. However, units, including the MEF and its subordinate units, do not consistently use SICs in identifying funds associated with all training exercises. Specifically, officials at all three MEFs told us that units generate SICs for large-scale training exercises directed at the MEF or division level, but may not generate SICs to track expenses for small-scale exercises at lower unit levels such as the regiment and battalion, making it difficult to track those funds. Officials at I MEF and II MEF stated that tracking costs associated with small-scale exercises is less consistent because units are not required to use SICs to track funds associated with exercises at those levels, and SICs associated with each exercise may change from year to year. Further, officials at I MEF and II MEF stated that supply officers are responsible for financial management at units below the division level, and they may not prioritize use of SICs. Officials at III MEF stated that tracking costs associated with specific exercises was difficult because officials could not attribute several large one-time training expenses to specific training exercises. Officials at all three MEFs stated that there is currently no systematic way to ensure that SICs are used accurately to associate funds executed with training exercises, which means they do not have complete or consistent data on costs associated with individual training exercises. As a result, commanders may lack accurate data for making resource decisions about training exercises needed to complete Mission Essential Tasks and improve units’ training readiness. In 2014, the Marine Corps issued Marine Corps Order 5230.23, Performance Management Planning, with the mission of linking resources to readiness and requiring the Deputy Commandant for the Office of Programs and Resources to ensure visibility and traceability of funds through the budget cycle and accounting systems for all organizational units and programs. Officials in the Office of Programs and Resources cited one effort to align inconsistent fiscal codes, but this effort will not directly address the challenges we have identified. According to officials in the Office of Programs and Resources, the Marine Corps is currently conducting a fiscal code alignment effort to address inconsistent use of fiscal codes, but this effort is in its early stages, and the Marine Corps has not yet developed clear guidance for implementation of the effort. Further, while the Marine Corps uses a variety of fiscal codes to track funds in the programming and execution phases of the budget cycle, an official from the Budget and Execution division told us that this effort will focus on fiscal codes that are used across DOD due to manpower limitations. However, MCPCs are unique to the Marine Corps and not recognized in larger DOD budgeting systems. As a result, the fiscal code alignment effort will not include aligning MCPCs across the programming and execution phases of the budget cycle, even though the Marine Corps will continue to use MCPCs. Additionally, although an official told us that SIC codes will be a part of this effort, implementation guidance for the effort was still under development and as a result, it is unclear whether the effort will address the inconsistent use of SICs across unit-level training exercises. Without the ability to track unit-level training funds through the budget cycle, including aligning MCPCs and ensuring consistent use of SIC codes, the Marine Corps lacks data to assess the extent to which funds were obligated consistent with their programmed intent and to adequately forecast and defend budget requests for training. As a result, commanders may face challenges making informed resource decisions. Although internal Marine Corps assessments and guidance state that the Marine Corps needs an enterprise-wide process to link resources to readiness, the Marine Corps has made little progress fulfilling this need. The Marine Corps has been aware for years of the challenges it faces in explaining its resource needs in its budget estimates to Congress. As stated in its 2009 Financial Guidebook for Commanders, “Many of the congressional cuts the Marine Corps receives are because of an inability to explain why we spent the money the way we did.” From fiscal years 2009 through 2014, the Marine Corps Office of Programs and Resources issued a series of classified and unclassified reports—referred to as the Marine Corps Strategic Health Assessments—that evaluated the health of the Marine Corps. The reports cited a number of factors inhibiting the Marine Corps’ ability to link funding to readiness, including stove-piped efforts, lack of an analytical framework, limited data availability, and poor data quality. For example, the fiscal year 2013 and 2014 reports found that the lack of a comprehensive model to connect the output of institutional processes to readiness measures hindered the Marine Corps’ ability to link funding to readiness. Table 2 below summarizes some of the key related findings in the reports. In fiscal year 2014, the Marine Corps stopped issuing the Marine Corps Strategic Health Assessments, in part, because the person responsible for preparing the analyses moved to another position. A senior Marine Corps official also told us that the reports were discontinued because producing them was no longer a priority for Marine Corps leadership. However, the Marine Corps also issued guidance in August 2014 calling for an enterprise-wide effort to link institutional resources to readiness. Specifically, Marine Corps Order 5230.23 called for the development and implementation of an enterprise-wide performance management process that links resources to institutional readiness via a robust analytic framework. The order included requirements to, among other things, identify readiness goals, develop strategic performance indicators, and improve data and business processes to include ensuring the visibility and traceability of funds. While implementing this order could address a number of the findings in the Marine Corps Strategic Health Assessments, Marine Corps officials told us that the service had not prioritized implementation of this order. Specifically, the Marine Corps did not designate a single oversight entity with the authority to enforce the order and directly oversee and coordinate efforts to link training funds to readiness. For example, although the order directed the Deputy Commandant for Programs and Resources to organize a quarterly coordination event of key stakeholders to synchronize activities within each major line of effort, officials from this office told us that they have not been given the authority to direct the various efforts. As a result, problems identified in the Marine Corps Strategic Health Assessments have persisted, and the Marine Corps does not have a comprehensive model to connect the output of institutional processes to readiness measures, as called for in the fiscal year 2013 Marine Corps Strategic Health Assessment. According to Standards for Internal Control in the Federal Government, management should establish an organizational structure, assign responsibility, and delegate authority to achieve its objective. Marine Corps officials told us the benefits of having a single entity to oversee efforts to tie funds to readiness include having one authority responsible for ensuring a consistent data architecture—how data will be collected, stored and transferred across the Marine Corps—and data quality. Further, having a single entity would help ensure a unified approach that would help analysts better answer questions about how funds affect readiness. In the absence of a single entity responsible for overseeing the Marine Corps’ efforts to link training funds to readiness, two different organizations within the Marine Corps developed separate and overlapping initiatives. First, in 2012, the Commanding General of II MEF directed the development of C2RAM, a tool that attempts to link funding to readiness for ground combat forces by capturing and correlating resources and requirements associated with specific unit-level training exercises. C2RAM was developed in response to our recommendation that the Marine Corps develop results-oriented performance metrics that can be used to evaluate the effectiveness of its training management initiatives. The tool, a complex excel-based spreadsheet, is used to capture day-to-day operating costs for training exercises to meet a unit’s core and assigned Mission Essential Tasks for training readiness requirements. For example, unit operations and resource officials enter data on training exercise costs and the Mission Essential Tasks expected to be accomplished by each exercise, and the tool uses this data to project the unit’s expected training readiness levels. Further, commanders can use the tool to project the expected effect of decreases in funding on training readiness levels. According to Marine Corps officials, they spent approximately $11 million on the C2RAM initiative from fiscal years 2012 through 2017. Second, in 2015, the Headquarters Marine Corps Office of Programs and Resources adopted and made adjustments for Marine Corps purposes to the Air Force’s Predictive Readiness Assessment system and test-piloted it with Marine Corps units. The Marine Corps’ system was known as the Predictive Readiness Model (PRM). PRM was designed to evaluate the complex interactions between resources and readiness to help inform decisions about resource allocations and readiness outcomes. According to Headquarters Marine Corps officials, PRM attempted to map approximately 500 causal factors related to readiness ratings. The effort involved input from more than 70 subject matter experts from multiple Marine Corps organizations. In addition, data input into PRM was obtained from various authoritative sources, including readiness, financial, and training systems of record, as well as other unauthoritative sources, including C2RAM. According to Marine Corps officials, as of June 2018, the Corps had spent approximately $4 million to develop PRM. In March 2019, while responding to a draft of this report, the Marine Corps stated that it decided to discontinue development of PRM because the model did not meet its objectives. While these initiatives were both designed to help the Marine Corps link dollars to readiness, each had its own particular use and design. For example, unlike C2RAM, which focuses only on the training pillar of readiness for ground combat forces, PRM focused on all pillars of readiness tracked by the Marine Corps for ground combat forces and air combat forces. In addition, while PRM attempted to capture all training data, C2RAM does not. For example, it does not capture data on individual training. Moreover, while C2RAM is primarily used at the MEF level and below to help inform commanders’ decisions about how much training funding to request and identify the effect of funding on readiness, PRM was designed to help officials in Marine Corps Headquarters make service-wide decisions about budget development and resource allocation. During our review, we found data quality and classification challenges faced by both PRM and C2RAM, as discussed below. Data quality limitations. Some Headquarters Marine Corps officials questioned the accuracy and reliability of some of the data planned for use in PRM because the data had to be aggregated from multiple sources that have varying degrees of internal control. In addition, officials told us that existing data were insufficient or are not currently collected, so, in some cases, PRM had to rely on the opinion of subject matter experts to determine how causal factors affect readiness. According to Marine Corps officials at various levels, C2RAM data quality is questionable because data is manually input by various sources with varying degrees of expertise. This is exacerbated by weak processes for conducting quality checks of the data. Moreover, officials stated that cost data may be inaccurate because units may neglect to update cost estimates with actual costs after a training event is completed. Further, C2RAM is not consistently used across all three MEFs. For example, when we visited II MEF, we learned that their resource management officials do not use C2RAM to build their budgets because of concerns about data quality. Classification of Data. Another challenge that both efforts faced is the classification of aggregated data. Readiness data are classified; budget data are generally not. When these data are combined, the resulting data are classified, potentially making the tool less useful and available to officials seeking to make informed decisions about resource allocation. For example, C2RAM is currently an unclassified system that captures fiscal and training data, but not readiness data. However, officials at I Marine Expeditionary Force told us that if readiness data were incorporated into the tool, it could become classified, which would limit its availability and usefulness to lower unit levels. As the Marine Corps found in its Fiscal Year 2012 Strategic Health Assessment, its stove-piped processes often require integration at the senior leadership level to develop a comprehensive view of issues, including the effect of dollars on readiness. Development of C2RAM and PRM, however, was not integrated, resulting in two separate systems— each devoted to tackling the same problem, but in different ways and with similar weaknesses, such as data quality limitations. Moreover, there was some overlap between the two systems. For example, C2RAM was one of the many data sources for PRM. In addition, both PRM and C2RAM used some of the same data sources. For instance, both systems relied on information captured in the Marine Corps Training Information Management System as well as on data captured in SABRS. The Marine Corps assessed the feasibility of moving forward with the PRM tool and, in March 2019, while responding to a draft of this report, the Marine Corps stated that they decided to discontinue its development. However, the Marine Corps has not assessed C2RAM as part of an enterprise wide performance management process that links resources to readiness. For example, the Marine Corps could learn from the experience of commanders at the MEF level who find C2RAM useful and consider the extent to which those usability considerations could and should be brought into a service-wide model. Without conducting this analysis, the Marine Corps is unlikely to make headway in tackling the challenges posed by trying to link resources to readiness. To meet the demands of its missions, the future security environment will require military forces to train across the full range of military operations, according to DOD. While the Marine Corps continues to ask for increased funding, according to a congressional report, the Marine Corps is unable to provide sufficient detail in its O&M budget estimates for training that would allow Congress to determine the benefits gained from additional funding. The Marine Corps has been aware for many years of the importance of providing accurate budget justifications to Congress. A number of factors have made it challenging for the Marine Corps to provide Congress the information it needs. First, the Marine Corps cannot fully track training funds through the budget cycle, making it difficult for the Marine Corps to, among other things, show that training funds were spent as planned. Second, the Marine Corps has not prioritized tackling the longstanding problem of how to link training resources to readiness. Although the Marine Corps has a standing order to develop an enterprise- wide performance management framework that links resources to readiness via a robust analytical framework, no single entity has been assigned the authority to enforce this order. In the absence of that leadership, certain components of the Marine Corps have developed their own, independent initiatives that were designed to achieve the same objective of linking funding to readiness, but had their own specific approaches and intended uses. Moreover, the Marine Corps has not assessed whether C2RAM provides an enterprise-wide performance management process linking resources to readiness. Until the Marine Corps assigns the authority needed to oversee development and implementation of a methodologically sound approach and assesses the degree to which C2RAM could be used, it will continue to face challenges making fully informed decisions about how much money it needs for training purposes and what it can reasonably expect to deliver for that money in terms of readiness gains. We are making the following three recommendations: The Secretary of the Navy should ensure that the Deputy Commandant for the Office of Programs and Resources oversee development and implementation of an approach to enable tracking of unit-level training funds through the budget cycle. This approach should include aligning MCPCs across the Marine Corps and ensuring consistent use of SIC codes. (Recommendation 1) The Secretary of the Navy should ensure that the Commandant of the Marine Corps designates a single entity responsible for directing, overseeing, and coordinating efforts to achieve the objective of establishing an enterprise-wide performance management process that links resources to readiness. (Recommendation 2) The Secretary of the Navy should ensure that the Commandant of the Marine Corps assesses C2RAM to determine the extent to which this system, or elements of this system, should be adapted for use in an enterprise-wide performance management process linking resources to readiness. (Recommendation 3) We provided a draft of this report to DOD for review and comment. In written comments, DOD concurred with all three of the recommendations in the draft report and stated that the Marine Corps would take actions to track unit-level training funds, link resources to readiness, and examine C2RAM, as discussed below. DOD’s comments are reprinted in appendix II. DOD also provided technical comments, which we incorporated as appropriate. DOD concurred with the third recommendation in the draft report that the Secretary of the Navy should ensure that the Commandant of the Marine Corps assesses C2RAM and PRM and determine the extent to which these systems or elements of these systems could and should be adapted for use in the enterprise-wide performance management process linking resources to readiness. In its comments, the Marine Corps stated that work to develop PRM had been discontinued because the model did not satisfy the Marine Corps objectives. Given that the Marine Corps’ decision to stop development of PRM mitigates the potential for overlapping initiatives moving forward, we revised the report and recommendation to focus on the Marine Corps assessing C2RAM for use in the enterprise-wide performance management process linking resources to readiness. The Marine Corps stated in its written response that C2RAM has potential utility for supporting an understanding of resources to readiness and it will examine the system further. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Defense, the Secretary of the Navy, and the Commandant of the Marine Corps. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report evaluates the extent to which the Marine Corps (1) tracks unit- level Operations and Maintenance (O&M) training funds for ground combat forces through the budget cycle; and (2) links unit-level training funds for ground combat forces to readiness. This report focuses on ground combat forces which conduct a myriad of training at the Marine Expeditionary Forces (MEF). For our first objective, we requested and analyzed budget request, allocation, and obligations training exercise data for fiscal year 2017 from I Marine Expeditionary Force (MEF), II MEF, and III MEF. We collected data for this fiscal year because it was the most recently completed fiscal year for which actual obligated amounts could be obtained. We used this data request to determine the Marine Corps’ ability to provide the data as well as determine the source or sources they used to provide the data. We discussed the systems—Cost to Run a Marine Expeditionary Force (C2RAM) and Standard Accounting, Reporting, and Budgeting System (SABRS)—used to provide this data with knowledgeable Marine Corps officials, including discussion of the data reliability concerns with these systems which are identified in this report. We interviewed knowledgeable officials about the systems, reviewed the user guide for one of the systems, and observed how data was input and extracted to form reports. Although we found the data to be insufficient to consistently identify and fully track unit-level O&M training funding data though the budget cycle, we determined that the data we obtained were sufficiently reliable to provide information about the availability of fiscal year 2017 funding amounts requested, allotted, and obligated for unit-level training exercises, as discussed in this report. We also reviewed and analyzed data from a series of classified and unclassified reports that were issued by the Marine Corps from fiscal year 2009 through fiscal year 2014. These reports, known as the Marine Corps Strategic Health Assessment (MCSHA), evaluated the health of the Marine Corps, including its use of fiscal codes, through an enterprise- wide study of resource investments, organizational activities, and readiness outcomes. We also reviewed data about Marine Corps Programming Codes (MCPC) and Special Interest Codes (SIC) in Marine Corps documents such as the MCSHAs as well as the Standard Accounting, Budgeting, and Reporting System (SABRS) Customer Handbook. We assessed this information against Marine Corps Order 5230.23, Performance Management Planning, which requires the Deputy Commandant for Programs and Resources to ensure visibility and traceability of funds through the budget cycle and accounting systems for all organizational units and programs, as well as Standards for Internal Control in the Federal Government, which states that management should design an entity’s information system to ensure, among other things, that data is readily available to users when needed. For our second objective, we reviewed reports and supporting documentation on Marine Corps efforts to evaluate readiness levels achieved from O&M obligations for ground combat forces training and observed the operation of systems used to track training funds and readiness. Specifically, we reviewed and analyzed the MCSHAs to identify challenges that the Marine Corps reported facing in attempting to link training funds to readiness. As a part of our review of supporting documentation, we reviewed and analyzed the MCSHAs from fiscal years 2011 through 2014 issued by the Marine Corps Office of Program Analysis and Evaluation to summarize some of the key findings identified by the Marine Corps related to linking training funds to readiness. We reviewed these reports because they intended to provide a comprehensive overview of the health of the Marine Corps. From these reports, we identified and summarized key findings related to our review. Specifically, one GAO analyst reviewed the four reports to identify reported findings that prevent the Marine Corps from linking resources to readiness, such as stove-piped processes and inconsistent data management processes, while a second analyst confirmed the summary from this review. We shared our summary of key findings with Marine Corps officials and they concurred. In addition, we reviewed guidance and other related documents on the Predictive Readiness Model (PRM) and Cost to Run a Marine Expeditionary Force (C2RAM). We were briefed on and observed data being input into the C2RAM model and queries being run from that data. We were able observe the summary reports that resulted from the queries which helped to enhance our understanding of the Marine Corps efforts to link training funds to readiness. In addition, we reviewed previously issued GAO reports related to the issue. We assessed this information against Marine Corps Order 5230.23, Performance Management Planning, which calls for the development and implementation of an enterprise-wide performance management process that links resources to institutional readiness via a robust analytic framework, as well as Standards for Internal Control in the Federal Government, which states that management should establish an organizational structure, assign responsibility, and delegate authority to achieve its objective. To answer the two objectives for this review, we interviewed knowledgeable officials from the following offices: Office of the Secretary of Defense Cost Assessment and Program Evaluation Personnel and Readiness, Force Readiness Headquarters Marine Corps, Washington, D.C. Office of Programs and Resources Budget and Execution Division Program Analysis and Evaluation Division Command, Control, Communications, and Computers Marine Forces Command – Norfolk, Virginia Marine Corps Training and Education Command – Quantico, Virginia I Marine Expeditionary Force – Camp Pendleton, California II Marine Expeditionary Force – Camp Lejeune, North Carolina III Marine Expeditionary Force – Okinawa, Japan. We conducted this performance audit from August 2017 to April 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact name above, Margaret Best, Assistant Director; William J. Cordrey; Pamela Davidson; Angela Kaylor; Amie Lesser; Tamiya Lunsford; Samuel Moore, III; Shahrzad Nikoo; Clarice Ransom; Cary Russell; Matthew Ullengren; and Sonja Ware made key contributions to this report.", "summary": "Training is key to building readiness—the military's ability to fight and meet the demands of its missions. Through the Department of Defense (DOD) budget cycle, the Marine Corps estimates or programs its funding needs for training and spends funds to accomplish its training mission. Questions have been raised about whether the Marine Corps' training budget estimates are sufficiently detailed to determine training costs at the unit level or the expected readiness generated by those costs. House Report 115-200 included a provision for GAO to examine the military services' budgeting processes to build unit-level training readiness. This report examines the extent to which the Marine Corps (1) tracks unit-level training funds for ground combat forces through the budget cycle, and (2) links ground combat forces' unit-level training funds to readiness. GAO analyzed budget data and studies conducted by the Marine Corps and others, examined tools used by units to link training funds with readiness, and interviewed knowledgeable officials at various levels in the Marine Corps. The Marine Corps cannot fully track all unit-level training funds for ground combat forces through the budget cycle. According to GAO's analysis of data provided by the Marine Expeditionary Forces (MEFs), the principal warfighting organization for the Marine Corps, units can track some, but not all, funds for training exercises from the budget request through use of the funds. The Marine Corps cannot fully track all training funds through the budget cycle, in part, because it has not established the consistent use of fiscal codes. Two key fiscal codes that officials identified as relevant to track funds for unit-level training are the Marine Corps Programming Code (MCPC) and the Special Interest Code (SIC). The Marine Corps uses MCPCs to program funds, but GAO found that when the Marine Corps spends those funds, it uses a different set of fiscal codes. This makes it difficult to link the programmed intent of funds to the execution of those funds. The Marine Corps uses SICs to track funds associated with training exercises, but GAO found that units do not use SICs consistently. For example, officials at all three MEFs told GAO that units generate SICs for large-scale training exercises, but may not do so for small-scale exercises. The Marine Corps is taking steps to align fiscal codes across the budget cycle, but this effort is in its early stages and will not include MCPCs, and may not address the inconsistent use of SICs. Without the ability to track unit-level training funds through the budget cycle, the Marine Corps lacks readily available data to assess whether funds were obligated consistent with their programmed intent and to adequately forecast and defend budget requests for training. Although internal Marine Corps assessments and guidance state that the Marine Corps needs an enterprise-wide process to link resources to readiness, the Marine Corps has made little progress establishing a link between training funds for ground combat forces and readiness. The Marine Corps identified challenges with linking funds to readiness in a series of reports from fiscal years 2009 through 2014, citing factors such as stove-piped efforts and limited data availability and quality. Guidance directed that the Deputy Commandant for Programs and Resources organize quality coordination events with key stakeholders to synchronize activities within major lines of effort, but officials from this office stated that they have not been given the authority to direct the various efforts. Therefore, challenges have persisted, in part, because the Marine Corps has not designated a single entity with authority to oversee and coordinate efforts to link training funds to readiness. In the absence of a single oversight entity, two separate and overlapping tools were developed—the Cost to Run a MEF (C2RAM) tool and the Predictive Readiness Model (PRM). Although each tool had its own particular use and design, both were intended to link resources to readiness. Moreover, both faced similar challenges, such as data quality limitations, and relied on some of the same data sources. The Marine Corps recently assessed and discontinued development of PRM, however, it has not assessed C2RAM and how it could support an enterprise wide performance management process linking resources to readiness. Without dedicating a single entity with authority, and conducting an assessment of C2RAM, the Marine Corps is unlikely to make headway in addressing the challenges posed by trying to link resources to readiness. GAO recommends that the Marine Corps (1) tracks training funds through the budget cycle, (2) designates a single entity to oversee establishment of a process that links resources to readiness, and (3) conducts an assessment of C2RAM. DOD concurred, and based on its comments, GAO modified one recommendation.", "document_type": "gao"}
{"report": "This section describes (1) NNSA’s weapons design and production sites; (2) the framework for managing LEPs, known as the Phase 6.X process, and NNSA’s program execution instruction; and (3) NNSA’s technology development and assessment process. NNSA oversees three national security laboratories—Lawrence Livermore in California, Los Alamos in New Mexico, and Sandia in New Mexico and California. Lawrence Livermore and Los Alamos are the design laboratories for the nuclear components of a weapon, while Sandia works with both to design nonnuclear components and as the system integrator. Los Alamos led the original design of the W78, but Lawrence Livermore is leading current efforts to design the replacement warhead. NNSA also oversees four nuclear weapons production plants—the Pantex Plant in Texas, the Y-12 National Security Complex in Tennessee, the Kansas City National Security Campus in Missouri, and the Savannah River Site in South Carolina. In general, the Pantex Plant assembles, maintains, and dismantles nuclear weapons; the Y-12 National Security Complex produces the secondary and the radiation case; the Kansas City National Security Campus produces nonnuclear components; and the Savannah River Site replenishes a component known as a gas transfer system that transfers boost gas to the primary during detonation. DOD and NNSA have established a process, known as the Phase 6.X process, to manage life extension programs. According to a Nuclear Weapons Council document, NNSA’s Office of Defense Programs will follow this process to manage a W78 replacement program. As shown in figure 1, this process includes key phases or milestones that a nuclear weapon LEP must undertake before proceeding to subsequent steps. In January 2017, while the program was still suspended, NNSA issued a supplemental directive that defines additional activities that NNSA offices should conduct in support of the Phase 6.X process. For example, as discussed below, NNSA’s supplemental directive established a new requirement during Phase 6.1 (Concept Assessment) that NNSA conduct a technology readiness assessment of technologies proposed for potential use in the warhead. In addition, NNSA’s Office of Defense Programs issued a program execution instruction that defines enhanced program management functions for an LEP and other programs. This instruction also describes the level of program management rigor that the LEP must achieve as it advances through the Phase 6.X process. According to NNSA’s Fiscal Year 2018 Stockpile Stewardship Management Plan, NNSA extends the life of existing U.S. nuclear warheads by replacing aged nuclear and non-nuclear components with modern technologies. In replacing these components, NNSA seeks approaches that will increase safety, improve security, and address defects in the warhead. Several technologies are frequently developed concurrently before one approach is selected. According to NNSA’s Fiscal Year 2018 Stockpile Stewardship Management Plan, this approach allows selection of the option which best meets warhead requirements and reduces the risks and costs associated with an LEP. NNSA conducts technology readiness assessments to provide a snapshot in time of the maturity of technologies and their readiness for insertion into a program’s design and schedule, according to NNSA’s guidance. NNSA’s assessments also look at the ability to manufacture the technology. NNSA measures technological maturity using technology readiness levels (TRLs) on a scale from TRL 1 (basic principles developed) through TRL 9 (actual system operation). Similarly, NNSA measures manufacturing readiness using manufacturing readiness levels (MRL) on a scale from MRL 1 (basic manufacturing implications identified) through MRL 9 (capability in place to begin full rate production). According to NNSA’s guidance, NNSA recommends but does not require that an LEP’s critical technologies reach TRL 5 (technology components are integrated with realistic supporting elements) at the beginning of Phase 6.3 (Development Engineering). At the end of Phase 6.3, it recommends that a technology be judged to have achieved MRL 5 (capability to produce prototype components in a production relevant environment). However, according to NNSA officials, lower TRLs and MRLs may be accepted in circumstances where a technology is close to achieving the desired levels or the program team judges that the benefit of the technology is high and worth the increased risk that it may not be sufficiently mature when the program needs it. NNSA has taken steps to prepare to restart a program to replace the W78 nuclear warhead capability. According to NNSA officials, these steps are typically needed to conduct any LEP. Therefore, they can be undertaken despite the uncertainty about whether the final program will develop the warhead for the Air Force only or for both the Air Force and the Navy. Specifically, NNSA has (1) taken initial steps to establish the program management functions needed to execute the program and assemble personnel for a program management team; (2) assessed technologies that have been under development while the program was suspended that could potentially be used to support a W78 replacement; and (3) initiated plans for the facilities and capabilities needed to provide the nuclear and nonnuclear components for the warhead. At the time of our review, NNSA and DOD officials stated that, in response to the 2018 NPR, they planned to restart a program that would focus on replacing the capabilities of the W78 for the Air Force; however, the extent to which the program would focus on providing a nuclear explosive package for the Navy was uncertain. DOD officials said that the Navy plans to complete a study examining the feasibility of using the nuclear explosive package developed for the W78 replacement warhead in its SLBM system by the end of fiscal year 2019. According to DOD officials, the Nuclear Weapons Council will make a decision about developing an interoperable warhead for the Air Force and the Navy based on the results of the study but, as of August 2018, had not established time frames for making that decision. According to Air Force and NNSA officials, if the Nuclear Weapons Council decided that the Navy should participate in the program, then NNSA would not need to redo the work planned for fiscal year 2019. NNSA has taken initial steps to establish the program management functions needed to execute the program and assemble personnel for a program management team, as follows: Program management. In fiscal year 2018, NNSA started to establish the program management functions needed to execute a W78 replacement program, as required in the Office of Defense Programs’ program execution instruction. In preparation for the program restart, NNSA assigned a manager for a W78 replacement program who is taking or plans to take steps to implement these functions. For example, among other steps, the W78 replacement program manager told us that he had started developing the risk management plan to define the process for identifying and mitigating risks that may impact the program. The program manager also said NNSA had started to adapt a standardized work breakdown structure for life extension programs to define and organize the W78 replacement program’s work scope for restart. An initial version of this work breakdown structure would be completed before the program restarts in fiscal year 2019, according to the program manager. Further, as NNSA refines the scope of work, the agency will refine and tailor the work breakdown structure. At the time of our review, this work was under development and therefore we were not able to review these plans and tools. In addition, as of July 2018, NNSA had created a preliminary schedule for a W78 replacement program under the Phase 6.X process (see fig. 2). According to NNSA’s preliminary schedule, the program will: Restart in Phase 6.2 (Feasibility and Design Options) in the third quarter of fiscal year 2019. NNSA previously completed Phase 6.1 and was authorized by the Nuclear Weapons Council to start Phase 6.2 in June 2012. During Phase 6.2, NNSA plans to, among other things, select design options and develop cost estimates of the selected design options. Conduct Phase 6.2A (Design Definition and Cost Study) for one year beginning in the fourth quarter of fiscal year 2021. During this phase, for example, NNSA plans to develop a preliminary cost estimate for the program, called a weapons design and cost report, and also produce an independent cost estimate. Start Phase 6.3 (Development Engineering) in the fourth quarter of fiscal year 2022 and transition to Phase 6.4 (Production Engineering) in the mid-2020s. During these phases, NNSA will develop the final design as well as begin producing selected acquisition reports, which detail the total program cost, schedule, and performance, among other things. According to the W78 program manager, the military characteristics will be finalized in Phase 6.4 and before that point DOD will continue to update the requirements. Achieve production of the first warhead—Phase 6.5—by the second quarter of fiscal year 2030 so that it can be fielded on the Air Force’s planned Ground Based Strategic Deterrent that same year. Start Phase 6.6 (Full Scale Production) by the second quarter of fiscal year 2031. When the program restarts in fiscal year 2019, NNSA intends to develop or finalize initial versions of other plans and tools such as a requirements management plan, according to the program manager. (See appendix I for a detailed description of the steps NNSA is taking or plans to take to establish the program management functions needed to execute a W78 replacement program, according to the manager for the W78 replacement program.) The program manager also told us that as the program progresses through Phases 6.2 (Feasibility and Design Options), 6.2A (Design Definition and Cost Study), and 6.3 (Development Engineering), NNSA will increase the maturity of the program management processes and tools, consistent with the Office of Defense Programs’ program execution instruction. For example, in Phases 6.2 and 6.2A, NNSA intends to establish an earned value management system (EVM)—used to measure the performance of large, complex programs. In Phase 6.3, NNSA will further develop the system to be consistent with DOE and industry standards, as specified in the program execution instruction. NNSA officials said they will need to achieve sufficient program management rigor in Phase 6.3 to effectively report to Congress on the status and performance of the program as NNSA develops cost and schedule baselines. Personnel. At the time of our review, NNSA was reconstituting a program management team. Specifically, as mentioned above, NNSA assigned a new program manager in March 2017. In the spring of 2018, NNSA began assigning additional federal staff and contractor support to help ramp up the program in advance of the fiscal year 2019 restart date. According to the program manager, he expected to complete a plan in the late summer or early fall of 2018 that NNSA could use to hire additional federal staff needed to manage the program in fiscal year 2019. The advanced development and implementation of staffing plans prior to each phase of an LEP was a key lesson learned from an NNSA review of another LEP—the W76- 1. While the program was suspended, NNSA supported other programs that developed weapons technologies—including materials and manufacturing processes—that could potentially be used by the W78 replacement program and potentially by other future life extension programs. Specifically, according to NNSA officials, NNSA supported the development of technologies through ongoing LEPs (such as the W80-4 LEP) and other technology maturation projects (such as the Joint Technology Demonstrator) that could support future LEPs. For example, the W80-4 program has supported development at Lawrence Livermore of certain new materials as a risk mitigation strategy in case certain legacy materials used in the secondary are not available. According to NNSA officials, NNSA will likely continue to develop these new materials for use in future weapons, including the W78 replacement. In addition, contractors at Lawrence Livermore told us that test demonstrations conducted under the Joint Technology Demonstrator have helped to mature potential technologies for a W78 replacement. Examples they cited included additively manufactured mounts and cushions for securing and stabilizing the nuclear explosive package inside the Air Force’s aeroshell. In May 2018, in anticipation of the restart of a W78 replacement program and to retroactively address NNSA’s new supplemental requirement to conduct a technology readiness assessment in Phase 6.1, NNSA’s Office of Systems Engineering and Integration completed a technology readiness assessment that evaluated the maturity of technologies potentially available for the W78 replacement program. According to NNSA officials, the assessment identified and evaluated technologies that NNSA would have available for the next LEP, irrespective of whether the final program will replace the W78 warhead in ICBMs only or will also be used in the Navy’s SLBMs. The assessment evaluated 126 technologies based on proposals from the laboratories and production sites. As shown in table 1 below, the proposals related to key functional areas of the warhead, including the nuclear explosive package and the arming, fuzing, and firing mechanism—which provides signaling that initiates the nuclear explosive chain. For the W78 warhead replacement, DOD divided the military characteristics into two categories: threshold or minimum requirements (or “needs”) and objective or optional requirements (or “wants”). NNSA’s assessment grouped the technologies into one of three categories, as follows. Must do. A technology deemed “must do” means that it is the only technology available that can meet a minimum requirement (or “need”) for the warhead to function. The technology that previously fulfilled this requirement is generally obsolete or no longer produced, and there are no alternatives. Must do (trade space). “Must do (trade space)” technologies fulfill a minimum requirement (or “need”) for the warhead, but there are two or more technologies that could meet this need. NNSA must evaluate and select which technology it will use to fulfill the need. Trade space. “Trade space” technologies are those that can meet an optional requirement (or “want”) for the warhead. Among the nine “must do” technologies that NNSA evaluated, for example, was a new manufacturing process being developed at Sandia to produce a type of magnesium oxide—needed for use in the thermal batteries that power the warhead’s firing mechanism—that is no longer available from a vendor and for which NNSA’s existing supplies are limited. For this new process, the assessment team estimated that it had completed TRL 1 (basic principles developed) but had not yet reached MRL 1 (basic manufacturing implications identified). The technology readiness assessment noted that for technologies with a TRL of 3 or less, an MRL of 1 or less is expected. In addition, according to the report, Sandia estimated that it may cost about $7.1 million to develop the material and manufacturing process to TRL 5 and MRL 4 during fiscal years 2018 through 2023—when the program is slated to reach Phase 6.3—to achieve a level of readiness where it could potentially be included in the design of the W78 replacement warhead. Among the 59 “must do (trade space)” technologies that NNSA evaluated were, for example, two new gas transfer system technologies developed by Sandia that may offer advantages compared with the existing technology. A gas transfer system is a required capability (or “must do”) but, according to the technology readiness assessment report, NNSA needs to compare the costs, benefits, and risks of these new technologies with the traditional technology (i.e., evaluate the “trade space”) and make a selection among them. The first new technology was a gas transfer system bottle made out of aluminum that could be cheaper, weigh less, and last longer than the gas transfer system used in the W78. According to the technology readiness assessment report, the assessment team estimated the aluminum-based bottle had completed TRL 2 but did not have enough information to estimate an MRL. Sandia estimated that it would cost about $6.5 million to achieve TRL 5 and MRL 4 during fiscal years 2018 through 2023. The second Sandia technology involved an advanced gas transfer system technology. The assessment team estimated that this technology had completed TRL 3 but did not have enough information to estimate an MRL. Sandia estimated that it would cost about $5.4 million to achieve TRL 5 and MRL 4 during fiscal years 2018 through 2023. According to the technology readiness assessment report, NNSA will need to further evaluate these approaches as well as the traditional technology to make a selection for a W78 replacement program. The 75 “trade space” technologies that the assessment team evaluated included, for example, several proposed by Lawrence Livermore, Los Alamos, and Sandia for providing an advanced safety feature to prevent unauthorized detonation of the warhead. As mentioned above, when NNSA extends the life of existing U.S. nuclear warheads it also seeks approaches that will increase the safety and improve security of the warhead. According to the report, the laboratories proposed similar concepts that varied in maturity levels and estimated costs for further development. Specifically, the assessment team estimated the Lawrence Livermore and Los Alamos technologies to have completed TRL 4 and Sandia’s proposal to have completed TRL 3. Regarding MRLs, the assessment team also estimated Lawrence Livermore’s technology to have completed MRL 1, Los Alamos’s technology to be at MRL 1, and did not have enough information to estimate the MRL for Sandia’s technology. In addition, according to the report, Lawrence Livermore estimated costs of about $31.2 million to $45.6 million to further mature its technology during fiscal years 2018 through 2023. Los Alamos estimated costs of about $72.1 million to $154.5 million to further mature its technology during the same period. Sandia estimated costs of about $8.2 million to further mature its technology during the same period. Because the feature is not a minimum requirement, NNSA officials told us that they are continuing to evaluate the costs, benefits, and risks of including the feature. According to NNSA’s manager for the W78 replacement program and key staff involved in preparing to restart the program, when the program restarts in fiscal year 2019 they will use the assessment to identify specific technologies or groups of technologies (i.e., trade spaces) to further evaluate for potential use in the warhead. These officials said they will continue evaluating technologies and make selections of preferred options at the same time that the warhead’s program requirements and priorities are refined during Phases 6.2 and 6.2A. According to the program manager, NNSA will produce a technology development plan for technologies selected for a W78 replacement during Phase 6.2 and 6.2A and that will identify the current readiness levels of the technologies, key risks, and estimated costs to bring them to TRL 5 in Phase 6.3. In addition, the technology readiness assessment team made several recommendations to the NNSA Deputy Administrator for Defense Programs regarding the development of technologies that could provide benefits to the nuclear security enterprise overall. For example, the assessment team observed that 21 of the proposed technologies for a W78 replacement involved the use of additive manufacturing. The assessment noted that, if successful, these technologies could reduce component production costs and schedule risks for future LEPs compared to current methods. The team recommended that the Office of Defense Programs conduct an analysis to validate these capabilities and develop a nuclear enterprise-wide effort to address additive manufacturing for a W78 replacement, future LEPs, and other applications. According to the NNSA official who led the assessment, at the time of our review, the assessment team was preparing to present its enterprise-wide recommendations to the Office of Defense Program’s senior leadership; therefore, specific follow-on actions had not yet been decided. The manager of the W78 replacement program said that he has begun to identify the facilities and capabilities at the laboratories and production sites that will be needed to provide the nuclear and nonnuclear components for a W78 replacement, and plans to draft formal agreements to help ensure coordination with them. According to the program manager, collecting the information that identifies facilities and capabilities—including a rough idea of key milestone dates for when the program will need to use them—is the first step in producing a major impact report, which is required upon completion of Phase 6.2 and accompanies the final Phase 6.2 study report delivered to the Nuclear Weapons Council. Among other things, a major impact report identifies aspects of the program—including facilities and capabilities to support it— that could affect the program’s schedule and technical risk, according to the Phase 6.X guidelines. According to an NNSA official and contractor representatives, many of the existing nuclear and nonnuclear components of the W78 are outdated or unusable and a W78 replacement will need all newly manufactured components. As a result, NNSA will need to exercise numerous manufacturing capabilities in support of this effort, and the facilities and capabilities must be ready to support the work. However, many of the facilities that may be needed to provide components for a W78 replacement program are outdated and are undergoing modernization to either build new facilities or repair existing facilities and capabilities, which represents a critical external risk to the program. According to NNSA’s Fiscal Year 2018 Stockpile Stewardship and Management Plan, these planned modernization activities will require sustained and predictable funding over many years to ensure they are available to support the weapons programs. Some examples of NNSA activities to build or repair facilities and capabilities that will provide nuclear or nonnuclear components for a W78 replacement warhead—and which may have schedule, cost, or capacity issues that could impact the program— include: Plutonium pit production facilities. NNSA does not currently have the capability to manufacture sufficient quantities of plutonium pits for a W78 replacement program. NNSA’s Fiscal Year 2018 Stockpile Stewardship and Management Plan stated that the agency will increase its capability to produce new pits over time, from 10 pits per year in fiscal year 2024 to 30 pits per year in fiscal year 2026, and as many as 50 to 80 pits per year by 2030. NNSA is refurbishing its pit production capabilities at Los Alamos to produce at least 30 pits per year. In addition, in May 2018, NNSA announced its intention to repurpose the Mixed Oxide Fuel Fabrication Facility at the Savannah River Site in South Carolina to produce at least an additional 50 pits per year by 2030. NNSA officials told us that they will need both the Los Alamos and Savannah River pit production capabilities to meet anticipated pit requirements for the W78 replacement program and for future warhead programs. Uranium processing facilities. NNSA’s construction of the Uranium Processing Facility at the Y-12 National Security Complex will help ensure NNSA’s continued ability to produce uranium components for the W78 replacement program. NNSA plans to complete the facility for no more than $6.5 billion by the end of 2025—approximately 4 years before the scheduled delivery of the first production unit of a W78 replacement program warhead. This effort is part of a larger NNSA plan to relocate and modernize other enriched uranium capabilities performed in a legacy building at the Y-12 National Security Complex to other existing buildings or in newly constructed buildings. Lithium production facility. NNSA will require lithium for a W78 replacement warhead. The United States no longer maintains full lithium production capabilities and relies on recycling as the only source of lithium for nuclear weapon systems. According to the Fiscal Year 2018 Stockpile Stewardship and Management Plan, NNSA has analyzed options to construct a new lithium production facility, and a conceptual design effort is next, with an estimated completion date of fiscal year 2027 for the new facility. Until the facility is available, NNSA has developed a bridging strategy to fill the interim supply gaps. Radiation-hardened microelectronics facility. Nuclear warheads, such as a W78 replacement warhead, include electronics that must function reliably in a range of operational environments. NNSA has a facility at Sandia that produces custom, strategic radiation-hardened microelectronics for nuclear weapons. In August 2018, NNSA officials told us that this facility, known as Microsystems and Engineering Sciences Applications, can remain viable until 2040—but would need additional investment. The W78 replacement program manager told us that the need for newly manufactured components coupled with the scale of NNSA’s modernization activities means that a comprehensive coordination effort will be necessary to ensure that the facilities and capabilities are ready to provide components for the warhead by the end of the 2020s. Because these activities are separately managed and supported outside the W78 replacement program, NNSA considers progress on them to represent a critical external risk to the program. NNSA is taking or plans to take some action to mitigate this external risk at the program and agency level. One step that the program plans to take to address this risk is to draft formal agreements—called interface requirements agreements—with other NNSA program offices that oversee the deliverables and schedules for the design, production, and test facilities that are needed for the program. These agreements describe the work to be provided by these external programs, including milestone dates for completing the work; funding; and any risks to cost, schedule, or performance. The W78 program manager stated that they are generally drafted toward the end of Phase 6.2 through Phase 6.2A and largely finalized in Phase 6.3—though small adjustments may be made into Phase 6.4 (Production Engineering). At the agency level, in response to a direction in the 2018 NPR, NNSA officials told us that the agency is also developing an agency-wide integrated master schedule that is intended to align NNSA’s enterprise- wide modernization schedule with milestone delivery dates for nuclear weapons components. The W78 program manager and other NNSA officials told us that the information they provide on the facilities and capabilities needed, as well as milestone dates, will be integrated into this schedule and used to help ensure that the facilities and capabilities are ready to support the program. We provided a draft of this report to NNSA and DOD for comment. NNSA and DOD provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Defense and Energy, the Administrator of NNSA, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to the report are listed in appendix II. The table below identifies the steps NNSA is taking or plans to take to establish the program management functions needed to execute a W78 replacement program. NNSA was directed by the Nuclear Weapons Council to suspend the program in fiscal year 2014 and the 2018 Nuclear Posture Review directed NNSA to restart the program in fiscal year 2019. The NNSA Office of Defense Program’s program execution instruction defines enhanced program management functions for a warhead life extension program (LEP) such as the W78 replacement program and other programs. The instruction also describes the level of program management rigor that the LEP must achieve as it advances through the Department of Defense and NNSA process for managing life extension programs called the Phase 6.X process. This process includes key phases or milestones that a nuclear weapon life extension program must undertake before proceeding to subsequent steps. NNSA completed Phase 6.1 (Concept Assessment) and started Phase 6.2 (Feasibility and Design Options) activities before the program was suspended in fiscal year 2014. NNSA, therefore, plans to restart the program in Phase 6.2. Allison B. Bawden, (202) 512-3841 or bawdena@gao.gov. In addition to the individual named above, William Hoehn (Assistant Director), Brian M. Friedman (Analyst in Charge), and Julia T. Coulter made significant contributions to this report. Also contributing to this report were Antoinette Capaccio, Pamela Davidson, Penney Harwell Caramia, Greg Marchand, Diana Moldafsky, Cynthia Norris, Katrina Pekar-Carpenter, and Sara Sullivan.", "summary": "The Department of Defense and NNSA have sought for nearly a decade to replace the capabilities of the aging W78 nuclear warhead used by the U.S. Air Force. NNSA undertakes LEPs to refurbish or replace the capabilities of nuclear weapons components. In fiscal year 2014, NNSA was directed to suspend a program that was evaluating a capability that could replace the W78 and also be used by the U.S. Navy. NNSA's most recent estimate—reported in October 2018—was that the combined program would cost about $10 billion to $15 billion. NNSA has been directed by the 2018 Nuclear Posture Review to restart a program to replace the W78 for the Air Force in fiscal year 2019. The 2018 Nuclear Posture Review also directed NNSA and the Navy to further evaluate whether the Navy could also use the warhead. Senate report 115-125 included a provision for GAO to review NNSA's progress on the program to replace the W78. GAO's report describes NNSA's steps in key early planning areas—including program management, technology assessment, and coordination with facilities and capabilities—to prepare to restart a program to replace the W78. GAO reviewed documentation on areas such as program management, technologies, and facilities needed for the program, and interviewed NNSA and DOD officials. The Department of Energy's National Nuclear Security Administration (NNSA) has taken steps to prepare to restart a life extension program (LEP) to replace the capabilities of the Air Force's W78 nuclear warhead—a program which was previously suspended. According to NNSA officials, these steps are typically needed to conduct any LEP. Therefore, they can be undertaken despite the current uncertainty about whether the final program will develop the warhead for the Air Force only or for both the Air Force and the Navy. Specifically, NNSA has taken the steps described below: Program management. NNSA has begun to establish the program management functions needed to execute a W78 replacement program, as required by NNSA's program execution instruction. For example, NNSA has started to develop a risk management plan to define the process for identifying and mitigating risks. In addition, NNSA has created a preliminary schedule to restart the program in fiscal year 2019 in the feasibility and design options phase with the goal of producing the first unit in fiscal year 2030. (See figure) Technology assessment. In May 2018, NNSA completed an assessment of 126 technologies for potential use in a W78 replacement. These included nine technologies that are needed to replace obsolete or no longer available technologies or materials. These are considered “must-do” because they are the only technologies or materials available to meet minimum warhead requirements established by the Department of Defense and NNSA. NNSA officials said that in fiscal year 2019 they will use the assessment to further evaluate technologies for potential use in the warhead. Coordination with facilities and capabilities. NNSA's program manager is identifying the facilities and capabilities needed to provide components for the warhead. This information will be used to produce a report that identifies aspects of the program—including facilities and capabilities to support it—that could affect the program's schedule and technical risk. However, several of the needed facilities must be built or repaired, and these activities are separately managed and supported outside the W78 replacement program—representing a critical external risk to the program. As mitigation, the program intends to coordinate with the offices that oversee these facilities to draft agreements that describe the work to be performed and timeframes, among other things. GAO is not making recommendations. NNSA and DOD provided technical comments, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "The Navy currently has 51 attack submarines—comprising 33 Los Angeles class, 3 Seawolf class, and 15 Virginia class submarines (see fig. 1). Attack submarines are homeported at bases in the United States: in New London, Connecticut; Pearl Harbor, Hawaii; Norfolk, Virginia; San Diego, California; and Bangor, Washington; 4 are homeported overseas, in the U.S. territory of Guam. Submarine Safety Controls and Culture On April 10, 1963, the USS Thresher (SSN 593) sank during deep submergence tests off the coast of New England. One hundred and twelve officers and enlisted sailors and 17 civilians perished in the tragedy. The accident investigation concluded that the Navy did not have adequate procedures in place to prevent and respond to a catastrophic flooding incident. time, and that maintenance delays reduce the amount of time during which ships and submarines are available for training and operations. Submarine fleet and squadron officials emphasized the strict safety culture that permeates the submarine community. This emphasis on meeting safety certification criteria means that the Navy operates a supply-based submarine force that does not compromise on adherence to training and maintenance standards to meet combatant commander demands, according to these officials (see sidebar). Officials added that the Navy will delay deployment dates if necessary to ensure that these standards are met. As a result, deployed readiness is high and attack submarines are in excellent materiel condition as compared with the rest of the Navy fleet. The loss of the USS Thresher and its crew spurred the Navy to establish stringent safety requirements for submarines to prevent another loss at sea. Following the accident, the Navy established submarine safety certification criteria to provide maximum reasonable assurance that critical systems would protect the crew from flooding and allow the submarine to conduct an emergency surfacing should flooding occur. This program, known as SUBSAFE, is still in use today, to ensure that these critical systems receive a high quality of work and that all work is properly documented. According to the Navy, the SUBSAFE certification status of a submarine is fundamental to its mission capability, as it provides a thorough and systematic approach to quality, and to a culture that permeates the entire submarine community. According to Navy officials, since the SUBSAFE program was established in 1963, no SUBSAFE-certified submarine has ever been lost. The Navy has been unable to begin or complete the vast majority of its attack submarine maintenance periods on time resulting in significant maintenance delays and operating and support cost expenditures. Our analysis of Navy maintenance data shows that between fiscal year 2008 and the end of fiscal year 2018, attack submarines will have incurred 10,363 days of idle time and maintenance delays as a result of delays in getting into and out of the shipyards. Our analysis found that the primary driver affecting attack submarines are delays in completing depot maintenance. For example, of the 10,363 total days of lost time since fiscal year 2008, 8,472 (82 percent) were due to depot maintenance delays. As we previously reported, completing ship and submarine maintenance on time is essential to Navy readiness, as maintenance periods lasting longer than planned could reduce the number of days during which ships and crews are available for training or operations. Attack submarines also face delays in beginning maintenance when the public shipyards have no available capacity, in some cases forcing submarines to idle pierside because they are no longer certified to conduct normal operations. According to Navy officials, the SUBSAFE program—its program to ensure and certify submarine safety—requires submarines to adhere to strict maintenance schedules and pass materiel condition assessments before they are allowed to submerge. Attack submarines that go too long without receiving required maintenance are at risk of having their materiel certification expire. Should this certification expire, these submarines are restricted to sitting idle, pierside, while they wait until a shipyard has the capacity to begin their maintenance period (see fig. 2). We found that since fiscal year 2008, 14 attack submarines have spent a combined 61 months (1,891 days) idling while waiting to enter shipyards for maintenance. Idle time incurred while waiting to begin a maintenance period is often coupled with maintenance delays while at the shipyards, thus compounding total delays. We also found that the Navy incurs significant costs in operating and supporting submarines that are experiencing maintenance delays and idle time. We analyzed the operating and support costs the Navy incurs on average to estimate the costs of crewing, maintaining, and supporting attack submarines that are delayed in getting into and out of the shipyards. Using historical daily cost data the Navy adjusted for inflation, we estimated that since fiscal year 2008 the Navy has spent more than $1.5 billion in fiscal year 2018 constant dollars on attack submarines sitting idle while waiting to enter the shipyards, and on those delayed in completing their maintenance at the shipyards (see table 1). While the Navy would incur these costs regardless of whether the submarine was delayed, idled, or deployed, our estimate of $1.5 billion represents costs incurred from fiscal year 2008 through fiscal year 2018 for attack submarines without receiving any operational capability in return. While acknowledging the magnitude of these costs, Navy officials stated that there may be some benefits that could be realized from these operating and support costs since crews on idle attack submarines can conduct some limited training. Operating and support costs include payment of crew salaries, purchasing of spare parts, and conducting of maintenance, among other things, but they do not represent the full operational impact incurred by the Navy from the idle time and maintenance delays. For example, attack submarine depot-level maintenance requires the use of a drydock, and officials from the three public shipyards we visited told us that their drydock capacity was limited. A delayed attack submarine maintenance period can restrict the use of a drydock for much longer than originally anticipated, thereby preventing the shipyard from using that drydock to maintain other vessels, including other types of ships, or to conduct necessary repairs on the facilities. The Navy has started to address workforce shortages and facilities needs at the public shipyards. These efforts to address the Navy’s maintenance challenges are important steps, but they will require several years of sustained management attention to reach fruition. As we reported in September 2017, maintenance on ships and submarines may be delayed for numerous reasons, including workforce gaps and inexperience, the poor condition of facilities and equipment, parts shortages, changes in planned maintenance work, and weather. According to Navy officials, all of these issues continue to affect the Navy’s ability to complete attack submarine maintenance on time. According to officials, the Navy has begun to address some of these challenges. For example: The public shipyards have been hiring to address workforce shortages. The number of civilian full-time employees at the shipyards increased from 25,087 in 2007 to 34,160 in 2017, with a goal to reach 36,100 by 2020. Navy officials cautioned that this newly hired workforce is largely inexperienced and will require time to attain full proficiency. The Navy has released a plan to guide public shipyard capital investments. In September 2017 we reported that the Navy projected an inability to support 50 planned submarine maintenance periods over the ensuing 23 years, due to capacity and capability shortfalls at the public shipyards. We recommended that the Navy develop a comprehensive plan for shipyard capital investment. In February 2018 the Navy published its shipyard optimization plan, outlining an estimated $21 billion investment needed to address shipyard facility and equipment needs over 20 years to meet the operational needs of the current Navy fleet, but not the larger fleet size planned for the future. While the public shipyards have operated above capacity for the past several years, attack submarine maintenance delays are getting longer and idle time is increasing. The Navy expects the maintenance backlogs at the public shipyards to continue. We estimate that, as a result of these backlogs, the Navy will incur approximately $266 million in operating and support costs in fiscal year 2018 constant dollars for idle submarines from fiscal year 2018 through fiscal year 2023, as well as additional depot maintenance delays. The Navy may have options to mitigate idle time and maintenance delays. For example, officials at the private shipyards—General Dynamics Electric Boat and Huntington Ingalls Industries-Newport News Shipbuilding—told us that they will have available capacity for repair work for at least the next 5 years. Although the Navy has shifted about 8 million man-hours in attack submarine maintenance to private shipyards over the past 5 years, it has done so sporadically, having decided to do so in some cases only after experiencing lengthy periods of idle time. According to private shipyard officials, the sporadic shifts in workload have resulted in repair workload gaps that have disrupted private shipyard workforce, performance, and capital investment—creating costs that are ultimately borne in part by the Navy. We believe that the Navy has not fully mitigated this challenge because it has not completed a comprehensive business case analysis to inform maintenance workload allocation across public and private shipyards, and to proactively minimize attack submarine idle time and maintenance delays. Such an analysis would help the Navy better assess private shipyard capacity to perform attack submarine maintenance and would help it incorporate a complete accounting of all costs, benefits, and risks, including: the large operating and support costs of having attack submarines sitting idle; the qualitative benefits associated with providing additional availability to the combatant commanders; and the potential for additional work at private shipyards to reduce schedule risk to submarine construction programs by allowing the yards to build and maintain a stable shipyard workforce. The April 2011 DOD Product Support Business Case Analysis Guidebook provides standards for DOD’s process for conducting analyses of costs, benefits, and risks. It states that data sources used to conduct a business case analysis should be comprehensive and should include both quantitative and qualitative values. It notes that benefits, such as the availability of a weapon system, may be qualitative in nature, and that DOD should evaluate all possible support options, to include government- and contractor-provided maintenance. Navy leadership has acknowledged that they need to be more proactive in leveraging private shipyard repair capacity, but officials cautioned that maintenance could cost more at a private shipyard than at a public shipyard. However, without a complete accounting of all costs, benefits, and risks, the Navy will remain unable to determine whether the cost of performing a maintenance period at a private shipyard would outweigh the mission benefits of having reduced idle time, additional operational availability, and the potential for reduced risk to submarine construction programs. The nation’s investment in attack submarines provides the United States an asymmetric advantage to gather intelligence undetected, attack enemy targets, and insert special forces, among other capabilities. However, the Navy’s attack submarine fleet has suffered from persistent and costly maintenance delays. Although the Navy has several activities underway to reduce maintenance delays for the attack submarine fleet, it has not yet taken additional steps to maximize attack submarine readiness that fully address challenges such as the allocation of maintenance periods between public and private shipyards. Without addressing this challenge, the Navy will not achieve the full benefit of the nation’s investment in its attack submarines, and it risks continued expenditure of operating and support funding to crew, maintain, and support attack submarines that provide no operational capability because they are delayed in getting into and out of maintenance. The Secretary of the Navy should ensure that the Chief of Naval Operations conducts a business case analysis to inform maintenance workload allocation across public and private shipyards; this analysis should include an assessment of private shipyard capacity to perform attack submarine maintenance, and should incorporate a complete accounting of both (a) the costs and risks associated with attack submarines sitting idle, and (b) the qualitative benefits associated with having the potential to both mitigate risk in new submarine construction and provide additional availability to the combatant commanders. We provided a draft of the classified version of the report to DOD for review and comment. That draft contained the same recommendation as this unclassified version as well as three additional recommendations DOD deemed sensitive. In written comments provided by DOD (reprinted in appendix II), DOD concurred with our recommendation stating that it has taken the first steps to take a more holistic view of submarine maintenance requirements and impacts across both the public and private shipyards. The Navy also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to congressional committees; the Secretary of Defense; the Secretary of the Navy, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. To assess the extent to which the Navy has experienced maintenance delays in its attack submarine fleet, we analyzed attack submarine maintenance delay and idle time data from Naval Sea Systems Command, and we reviewed prior GAO work on shipyard maintenance delays. The Navy determines depot maintenance delays by counting each day in which a submarine maintenance period extends beyond the planned completion date. Two Navy offices within Naval Sea Systems Command—that is, the Logistics, Maintenance, and Industrial Operations office and Program Executive Office Submarines—track days incurred from depot-level maintenance delays and idle time. To determine the total number of days of maintenance delays for each fiscal year within our scope, we subtracted the planned completion date from the actual completion date to produce the number of days of maintenance delays for each maintenance period for each submarine. We added together the days of maintenance delays across all attack submarines for each fiscal year, and then added the fiscal year totals to produce the overall total. Although the data included some maintenance periods that began before fiscal year 2008, we counted days of maintenance delays only from periods that were incurred in fiscal years 2008 through 2018. We also tracked the total number of days that the Navy completed maintenance periods ahead of schedule—that is, 153—but we noted these separately instead of subtracting them from the total number of days of maintenance delays. To estimate costs associated with these delays, we analyzed annual data from fiscal years 2011 through 2017 (the most current data available at the time of our review) from the Navy’s Visibility and Management of Operating and Support Costs system. We also reviewed prior work on determining the operating and support costs of Navy ships. The Navy calculates total operating and support expenditures for each attack submarine on an annual basis, as well as the yearly average expenditure for each attack submarine class, including Los Angeles class, Seawolf class, and Virginia class blocks one and two. For each class, we converted the Navy’s annual class averages into daily average costs by adding the annual class averages together for each year that data were available, fiscal years 2011 through 2017, then dividing that number by the total number of days. We then multiplied the daily class average by the total number of days of maintenance delays and idle time incurred by submarines within that class, according to our calculations outlined above, between fiscal year 2008 and fiscal year 2018, and we added these totals together to produce the total estimated operating and support cost for days of maintenance delays and idle time incurred during this period. The data did not include annual class average costs for fiscal years 2008, 2009, 2010, or 2018. However, the annual class averages for fiscal years 2011 through 2017 did not show significant variation, so we applied these averages to 2008, 2009, 2010, and 2018. To assess the extent to which the Navy has addressed any challenges and developed mitigation plans for any maintenance delays, we reviewed the Navy’s plans to address attack submarine maintenance delays and interviewed Navy headquarters, fleet, and squadron officials, attack submarine crews, and public and private shipyard officials to understand any plans to address attack submarine maintenance delays and idle time. We analyzed data on factors contributing to attack submarine maintenance delays, such as cannibalization rates. We visited three of the four public shipyards, including Pearl Harbor Naval Shipyard and Intermediate Maintenance Facility, Portsmouth Naval Shipyard, and Norfolk Naval Shipyard, to observe operations, training, and the condition of the facilities and equipment, and to interview officials about challenges affecting operational efficiency and performance. We also met with Navy maintainers at Naval Station Norfolk and Naval Submarine Base New London, and with the crew of the submarine tenders USS Frank Cable (AS-40) and USS Emory S. Land (AS-39) in Guam. We toured the two private shipyards that conduct attack submarine repair work—General Dynamics Electric Boat and Huntington Ingalls Industries-Newport News Shipbuilding—and interviewed executives at both locations. We also toured attack submarines and met with crew leadership, selected according to which submarines and crews were available for tours at each of the sites we visited. We visited the USS Boise (SSN 764) at Naval Station Norfolk and four attack submarines in depot-level maintenance: the USS Albany (SSN 753), the USS Jefferson City (SSN 759), the USS New Mexico (SSN 779), and the USS Springfield (SSN 761). We met with the crews of two attack submarines assigned to the operating forces at the time of our visit, the USS Missouri (SSN 780) and the USS North Dakota (SSN 784). We evaluated the Navy’s plans to address any challenges against criteria in federal standards for internal control, which state that agencies should evaluate performance in achieving key objectives and addressing risks; the Department of Defense’s business case analysis guidebook, which provides standards for the process used to conduct analyses of costs, benefits, and risks; the Project Management Book of Knowledge, which provides best practices for project management; and the Secretary of the Navy’s December 2017 Strategic Readiness Review, which calls for the early identification of systemic risks before problems occur. To assess the reliability of the data sources for conducting analyses to address all of the objectives in this report, we reviewed systems documentation and interviewed officials to understand system operating procedures, organizational roles and responsibilities, and error-checking mechanisms. We selected the time frames for each of the data series above after assessing their availability and reliability, to maximize the amount of data available for us to make meaningful comparisons. We assessed the reliability of each of the data sources. The Navy provided information based on our questions regarding data reliability, including information on an overview of the data, data-collection processes and procedures, data quality controls, and overall perceptions of data quality. The Navy provided documentation of how the systems are structured and what written procedures are in place to help ensure that the appropriate information is collected and properly categorized. Additionally, we interviewed Navy officials to obtain further clarification on data reliability, discuss how the data were collected and reported, and explain how we planned to use the data. We also conducted our own error checks to look for inaccurate or questionable data, and we discussed with officials any data irregularities we found. We conducted these assessments on the following data for attack submarines: Navy deployed and surge-ready submarines from fiscal years 2011 through 2018; maintenance timeliness from fiscal years 2000 through 2018; idle time from fiscal years 2008 through 2018; operating and support costs from fiscal years 2011 through 2017; and cannibalization rates from 2012 through 2017. Some of these data were used in prior reports, and their reliability had previously been assessed. After further assessing any data that we had not recently used, we determined that they were sufficiently reliable for the purposes of summarizing attack submarine readiness trends and related information. We interviewed officials, and where appropriate obtained documentation, at the following locations: Office of the Chief of Naval Operations Undersea Warfare Division (N97) Warfare Integration Division (N83) U.S. Fleet Forces Command Commander, Submarine Force, U.S. Atlantic Fleet Commander, Submarine Squadron 4 Commander, Regional Support Group Groton Commander, Submarine Force, U.S. Pacific Fleet Commander, Submarine Squadron 1 Commander, Submarine Squadron 7 Commander, Submarine Squadron 15 Naval Sea Systems Command (NAVSEA) Logistics, Maintenance, and Industrial Operations (NAVSEA 04) Program Executive Office, Submarines Attack Submarine Program Office (PMS 392) Submarine Maintenance Engineering, Planning, and Procurement (SUBMEPP) Supervisor of Shipbuilding, Conversion, and Repair (SUPSHIP) Newport News, Virginia Navy Education and Training Command Submarine Learning Facility Norfolk Navy Board of Inspection and Survey Norfolk Naval Shipyard, Norfolk, Virginia Pearl Harbor Naval Shipyard and Intermediate Maintenance Facility, Pearl Harbor, Hawaii Portsmouth Naval Shipyard, Kittery, Maine Newport News Shipbuilding, Virginia, operated by Huntington Ingalls Industries Electric Boat, Groton, Connecticut, operated by General Dynamics The performance audit upon which this report is based was conducted from August 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We worked with DOD to prepare this unclassified version of the report for public release. This public version was also prepared in accordance with these standards. Report numbers with a C or RC suffix are Classified. Classified reports are available to personnel with the proper clearances and need to know, upon request. Columbia Class Submarine: Immature Technologies Present Risks to Achieving Cost Schedule and Performance Goals. GAO-18-158. Washington, D.C.: Dec. 21, 2017. Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Affecting the Fleet. GAO-17-809T. Washington, D.C.: Sept. 19, 2017. Naval Shipyards: Actions Needed to Improve Poor Conditions that Affect Operations. GAO-17-548. Washington, D.C.: Sept. 12, 2017. Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet. GAO-17-798T. Washington, D.C.: Sept. 7, 2017. Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan. GAO-16-841. Washington, D.C.: Sept. 7, 2016. Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016. (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May 2, 2016. Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports. GAO-15-329. Washington, D.C.: May 29, 2015. In addition to the contact named above, Suzanne Wren, Assistant Director; Chris Watson, Analyst in Charge; Herb Bowsher; Chris Cronin; Ally Gonzalez; Cynthia Grant; Carol Petersen; Amber Sinclair; and Cheryl Weissman made key contributions to this report.", "summary": "According to the Navy, its 51 attack submarines provide the United States an asymmetric advantage to gather intelligence undetected, attack enemy targets, and insert special forces, among others. These capabilities make attack submarines some of the most–requested assets by the global combatant commanders. GAO was asked to review the readiness of the Navy's attack submarine force. This report discusses the extent to which the Navy (1) has experienced maintenance delays in its attack submarine fleet and costs associated with any delays; and (2) has addressed any challenges and developed mitigation plans for any maintenance delays. GAO analyzed readiness information from fiscal years 2008-2018, operating and support costs, maintenance performance, and other data; visited attack submarines and squadrons; and interviewed public and private shipyard and fleet officials. This is a public version of a classified report issued in October 2018. Information the Department of Defense deemed classified or sensitive, such as attack submarine force structure requirements and detailed data on attack submarine maintenance delays, has been omitted. The Navy has been unable to begin or complete the vast majority of its attack submarine maintenance periods on time resulting in significant maintenance delays and operating and support cost expenditures. GAO's analysis of Navy maintenance data shows that between fiscal year 2008 and 2018, attack submarines have incurred 10,363 days of idle time and maintenance delays as a result of delays in getting into and out of the shipyards. For example, the Navy originally scheduled the USS Boise to enter a shipyard for an extended maintenance period in 2013 but, due to heavy shipyard workload, the Navy delayed the start of the maintenance period. In June 2016, the USS Boise could no longer conduct normal operations and the boat has remained idle, pierside for over two years since then waiting to enter a shipyard (see figure). GAO estimated that since fiscal year 2008 the Navy has spent more than $1.5 billion in fiscal year 2018 constant dollars to support attack submarines that provide no operational capability—those sitting idle while waiting to enter the shipyards, and those delayed in completing their maintenance at the shipyards. The Navy has started to address challenges related to workforce shortages and facilities needs at the public shipyards. However, it has not effectively allocated maintenance periods among public shipyards and private shipyards that may also be available to help minimize attack submarine idle time. GAO's analysis found that while the public shipyards have operated above capacity for the past several years, attack submarine maintenance delays are getting longer and idle time is increasing. The Navy may have options to mitigate this idle time and maintenance delays by leveraging private shipyard capacity for repair work. But the Navy has not completed a comprehensive business case analysis as recommended by Department of Defense guidelines to inform maintenance workload allocation across public and private shipyards. Navy leadership has acknowledged that they need to be more proactive in leveraging potential private shipyard repair capacity. Without addressing this challenge, the Navy risks continued expenditure of operating and support funding to crew, maintain, and support attack submarines that provide no operational capability because they are delayed in getting into and out of maintenance. GAO recommends that the Navy conduct a business case analysis to inform maintenance workload allocation across public and private shipyards. The Department of Defense concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "To identity inmates with mental illness, BOP screens inmates prior to designation to a facility by reviewing an inmate’s pre-sentence report and assigning preliminary medical and mental health screening levels. Once an inmate is designated to a BOP institution, the institution staff assesses inmates to provide an accurate mental health diagnosis and determination of the severity of any mental illness as well as determining their suicide risk. BOP also identifies the mental health needs of each inmate and matches the inmate to an institution with the appropriate resources. Institution mental health care levels range from 1 to 4, with 1 being institutions that care for the healthiest inmates and 4 being institutions that care for inmates with the most acute needs. Inmate mental health care levels are also rated in this manner from level 1 to level 4. After an inmate arrives at a BOP institution, during the admission and orientation process, every inmate receives information on mental health services available at that site. Table 1 identifies inmate mental health care levels and the percentage of all inmates by designated level. Throughout an inmate’s incarceration, BOP psychologists, psychiatrists, and qualified mid-level practitioners (i.e., a physician assistant or nurse practitioner who is licensed in the field of medicine and possess specialized training in mental health care) can determine a new mental health care level following a review of records and a face-to-face clinical interview. BOP’s Psychology Services Branch, which the Reentry Services Division oversees, provides most mental health services to inmates in BOP- operated institutions, including providing individualized psychological care and residential and non-residential treatment programs (Figure 1 shows BOP’s organization for providing mental health services). BOP’s Health Services Division manages psychiatry and pharmacy services. Most mental health treatment is provided in what BOP calls its mainline, or regular, institutions. Acutely ill inmates in need of psychiatric hospitalization, such as inmates suffering from schizophrenia or bipolar disorder, may receive these services at one of BOP’s five medical referral centers, which provide inpatient psychiatric services as part of their mission. At BOP institutions, psychologists are available for formal counseling and treatment on an individual or group basis. In addition, staff in an inmate’s housing unit is available for informal counseling. Psychiatric services available at the institution are enhanced by contract services from the community. Prior to the passage of the 21st Century Cures Act, and at the beginning of our work, BOP defined serious mental illness in accordance with the agency’s program statement—which states that classification of an inmate as seriously mentally ill requires consideration of diagnoses; the severity and duration of symptoms; the degree of functional impairment associated with the illness; and treatment history and current treatment needs. In accordance with BOP’s program statement, BOP used this guidance along with other variables to develop six criteria to identify the population of inmates with serious mental illness who were incarcerated in fiscal years 2016 and 2017—the most recent fiscal years for which data on these criteria are available. The additional criteria to identify the population of inmates with serious mental illness are as follows: 1. Inmate was evaluated by BOP and assigned a mental health care level 3: An inmate requires enhanced outpatient mental health care such as weekly psychosocial intervention or residential mental health care. 2. Inmate was evaluated by BOP and assigned a mental health care level 4: An inmate requires acute care in a psychiatric hospital; the inmate is gravely disabled and cannot function in a general population environment. 3. Inmate was assigned a mental health study level 4: This indicated that the inmate was subject to a court ordered forensic study that required an inpatient setting. 4. Inmate was diagnosed to have one or more of 74 Diagnostic and Statistical Manual of Mental Disorders (DSM) diagnoses, both active and in remission, that BOP considers a serious mental illness. 5. Inmate was evaluated by BOP and identified as having a chronic suicide risk, due to the inmate having a history of two or more suicide attempts. 6. Inmate was evaluated by BOP and assigned a psychology alert status. This designation was applied to inmates who were evaluated as having substantial mental health concerns and requiring extra care when changing housing or transferring institutions. On August 15, 2017, in a memorandum for the Comptroller General of the United States from the Acting Director of BOP, BOP defined “serious mental illness” for purposes of section 14016 of the 21st Century Cures Act as follows: Individuals with a serious mental illness are persons: Who currently or at any time during the past year, Have had a diagnosable mental, behavioral, or emotional disorder of sufficient duration to meet diagnostic criteria specified within the most current edition of the Diagnostic and Statistical Manual of Mental Disorders, That has resulted in functional impairment which substantially interferes with or limits one or more major life activities. The memorandum also stated that BOP may further operationalize this definition by identifying specific mental disorders which are to be classified as serious mental illness and providing examples of functional impairment specific to BOP’s settings and/or populations. BOP officials indicated that BOP’s program statement and the six criteria to identify the population of inmates with serious mental illness who were incarcerated in fiscal years 2016 and 2017 would coincide with the definition for “serious mental illness” provided in the memorandum for the Comptroller General of the United States for purposes of the 21st Century Cures Act and identify an identical set of BOP inmates with “serious mental illness” for fiscal years 2016 and 2017. The periods during incarceration in federal and state prisons and reentry into the community are considered to be key periods to implement interventions to reduce recidivism among individuals with serious mental illness, according to public health and correctional stakeholders. The Bureau of Justice Statistics has found that for all offenders, regardless of their mental health status, the highest rate of recidivism occurs during the first year after release from prison. Further, researchers have found that offenders with serious mental illness return to prison sooner than those without serious mental illness. Multiple factors may contribute to the cycle of repeated incarceration among individuals with serious mental illness. SAMHSA reports that individuals with mental illness face additional challenges upon reentering the community, including those associated with finding treatment providers, stable housing, and employment. Federal agencies have established interagency groups and other mechanisms to share information on how to address the challenges related to recidivism among offenders with serious mental illness. Examples of these information sharing mechanisms are described in appendix III. While the periods of incarceration and reentry are the focus of this review, there are other points in the criminal justice system where there are opportunities to intervene to prevent individuals with serious mental illness from becoming further involved with the system, such as during the initial law enforcement response or during court proceedings. Further, SAMHSA has identified connecting those in need of treatment to community mental health services before a behavioral health crisis begins as a way to prevent individuals with mental illness from becoming involved in the criminal justice system. About two-thirds of BOP inmates with a serious mental illness were incarcerated for four types of offenses—drug offenses (23 percent), sex offenses (18 percent), weapons and explosives offenses (17 percent), and robbery (8 percent)—as of May 27, 2017. As shown in figure 2, some differences in offenses exist between inmates with and without serious mental illness in BOP custody. Specifically, our analysis found that BOP inmates with serious mental illness were incarcerated for sex offenses, robbery, and homicide or aggravated assault at about twice the percentage of inmates without serious mental illness, and were incarcerated for drug and immigration offenses at about half or less the rate of inmates without serious mental illness. Additionally, we found some differences between BOP inmates with and without serious mental illness in the length and severity of sentences. Although a similar percentage of inmates with and without serious mental illness have life sentences (2.8 percent and 2.5 percent, respectively), a lower percentage of inmates with serious mental illness had sentences of 10 years or less (43.5 percent and 49.2 percent, respectively). About .06 percent (5 inmates) of inmates with serious mental illness and about .03 percent (52 inmates) of inmates without serious mental illness received a death sentence. See appendix I for additional information on the characteristics of BOP inmates with and without serious mental illness. Based on our analysis of available data provided by selected states’ departments of corrections, the most common crimes committed by inmates with serious mental illness varied from state to state. The difference in types of crimes reported by states and BOP may be due to different priorities, laws, and enforcement priorities across the state and federal criminal justice systems, among other things. The federal and state governments also define serious mental illness differently, and they track different categories of crime in their respective data systems. The percentages and types of crimes committed by incarcerated inmates are shown in figures 3 through 5 below for three selected states’ departments of corrections. The New York State Department of Corrections and Community Supervision (DOCCS) cared for 2,513 inmates with serious mental illness out of a total of 51,436 inmates as of December 31, 2016. Figure 3 shows the categories of offenses committed by inmates defined by DOCCS as having serious mental illness. Three out of four inmates with serious mental illness under the care of DOCCS were incarcerated for violent crimes. According to DOCCS program descriptions, diagnostic criteria for serious mental illness are: (1) an inmate is determined by the New York State Office of Mental Health to have specified mental health diagnoses; (2) an inmate is actively suicidal or has made a recent, serious suicide attempt; or (3) an inmate is diagnosed with serious mental illness, organic brain syndrome, or a severe personality disorder that is manifested in significant functional impairment such as acts of self-harm or other behaviors that have a serious adverse effect on life or on mental or physical health. The Virginia Department of Corrections cared for 527 inmates with serious mental illness out of a total of 30,052 inmates as of September 29, 2017. Figure 4 shows the crimes committed by inmates that Virginia defined as having serious mental illness. About one quarter of the inmates with serious mental illness in Virginia committed rape, sexual assault, and other assault crimes. Virginia policy defines an inmate with serious mental illness as an offender diagnosed with a psychotic disorder, bipolar disorder, major depressive disorder, PTSD or anxiety disorder, or any diagnosed mental disorder (excluding substance use disorders) currently associated with serious impairment in psychological, cognitive, or behavioral functioning that substantially interferes with the person’s ability to meet the ordinary demands of living and requires an individualized treatment plan by a qualified mental health professional(s). The Washington Department of Corrections cared for 1,881 inmates with serious mental illness out of a total of 17,234 inmates as of June 30, 2017. Figure 5 shows the crimes committed by Washington inmates that Washington defined as having serious mental illness. About half of the inmates with serious mental illness in Washington committed assault or sex crimes. The Washington Department of Corrections defines serious mental illness as a substantial disorder of thought or mood which significantly impairs judgment, behavior, or capacity to recognize reality or cope with the ordinary demands of life within the prison environment and is manifested by substantial pain or disability. The Washington Department of Corrections’ definition does not include inmates who are substance abusers or substance dependent—including alcoholics and narcotics addicts—or persons convicted of any sex offense, who are not otherwise diagnosed as seriously mentally ill. According to BOP officials, the agency does not track costs specifically associated with inmates with serious mental illness due to resource restrictions and the administrative burden such tracking would require. BOP officials stated that BOP, unlike a hospital, is not structured to bill individual interactions; and noted that, generally, the correctional industry does not account for costs by tracking individual costs. BOP officials said that requiring BOP staff to gather individual cost data manually would be an extremely time consuming and burdensome process. In addition, BOP does not maintain the mental health care cost data necessary to calculate the individual inmate costs related to specific program areas (i.e., psychology and psychiatric services). BOP tracks the costs associated with incarcerating its overall inmate population and with providing mental health care services to inmates system-wide and separately by institution. For fiscal year 2016, BOP’s institution-level data show that total incarceration costs vary by BOP institution (ranging from $15 million to over $247 million), for a number of reasons, including varying amounts of medical and mental health care available at each institution. Table 2 identifies BOP’s costs for mental health care services provided to all inmates (including inmates with serious mental illness) for fiscal year 2016, the last year for which BOP had complete data during our audit work. The costs below are the most readily available BOP-wide costs directly related to mental health care. BOP’s Psychology Services staff provides most inmate mental health services in BOP-operated institutions, including the provision of individualized psychological care. Psychotropic medication may be used to treat mental illness, although in some instances, BOP uses psychotropic medication to treat individuals with other kinds of health conditions. Residential Reentry Centers, also known as halfway houses, provide assistance to inmates nearing release, including some inmates with serious mental illness. BOP includes psychiatric treatment and services under medical care costs, but BOP does not track psychiatric costs separately. In July 2013, we reported that BOP also does not track its contractors’ costs of providing mental health services to the 13 percent of BOP inmates housed in privately managed facilities. The performance-based, fixed- price contracts that govern the operation of BOP’s privately managed facilities give flexibility to the contractors to decide how to provide mental health services. BOP tracks and maintains information on the number and types of inmate interactions with Psychology Services personnel. These interactions include clinical and non-clinical interactions between Psychology Services staff and inmates that may be crisis-oriented or routine, such as individual and group therapy. Based on our analysis of these data, in fiscal year 2016, BOP inmates with serious mental illness were more likely than other inmates to use 18 of the 20 services or programs tracked by Psychology Services. On average, we found that an inmate with serious mental illness had 9.6 clinical interventions compared to 0.24 clinical interventions for inmates without serious mental illness during fiscal year 2016. As a result, an average BOP inmate with serious mental illness was 40 times more likely to receive a clinical intervention than an average inmate without serious mental illness. BOP data do not capture the time and resources associated with any of the Psychology Services interactions; thus we cannot assign a cost value to differences between populations in receipt of these services. Appendix IV shows the extent to which BOP’s inmate population received specific types of psychology services in fiscal year 2016. The selected state departments of corrections provided us with estimates for different types of mental health care costs, but did not identify mental health care costs specifically for inmates with serious mental illness. Additionally, the states did not provide us with the total cost to incarcerate inmates with serious mental illness. For example, officials from one state said staff did not calculate costs separately for inmates with mental illness compared to inmates without mental illness as they did not believe an accurate comparison could be made. Officials from another state said that they did not track costs of incarceration or mental health services per inmate based on whether or not an inmate has mental illness, while officials from another state said they were not able to track costs for mental health services for inmates at the individual level. The selected state departments of corrections also used different methods to determine the costs of the mental health services they provided to their inmate population. For example: Two state departments of corrections provided us with the average per-inmate costs of incarceration for a mental health treatment unit or treatment center where some inmates with serious mental illness are treated, but these per-inmate costs also included incarceration costs for inmates without serious mental illness who were housed in these facilities. Another state department of corrections provided total psychotropic medication costs for all inmates and mental health care costs per offender. Mental health care costs per offender were averaged across all offenders, not exclusively those with serious mental illness. Two other states provided total costs for one budget item related to mental illness: total mental health program spending in one state, and psychiatric care expenditures in the other state. These costs were for all inmates, not exclusively for inmates with serious mental illness. Another state department of corrections provided an estimate for average mental health care costs per inmate with mental illness, but this estimate included all inmates diagnosed as having a mental illness, not exclusively those inmates diagnosed with serious mental illness. In 2012, the Council of State Governments Justice Center developed the Criminogenic Risk and Behavioral Health Needs Framework in collaboration with DOJ’s National Institute of Corrections and Bureau of Justice Assistance, SAMHSA, and experts from correctional, mental health, and substance abuse associations. The framework is an approach to reduce recidivism and promote recovery among adults under correctional supervision with mental illness, substance use disorders, or both. It calls for correctional agencies to assess individuals’ criminogenic risk (the risk of committing future crimes), substance abuse and mental health needs. The agencies are to use the results of the assessment to target supervision and treatment resources based on these risks and needs. Additionally, the framework states that individuals with the highest criminogenic risks should be prioritized for treatment to achieve the greatest effect on public safety outcomes. Mental health and substance abuse treatment There are a number of different approaches that can be tailored and combined to address an individual’s mental health and substance abuse treatment needs. Examples include: Psychopharmacology. Approach that aims to address dysfunctional thoughts, moods, or behavior through time-limited counseling. To help implement the principles set forth in the framework, SAMHSA developed additional guidance in collaboration with the Council of State Governments Justice Center, the Bureau of Justice Assistance and experts from correctional, mental health, and substance abuse associations. This guidance is for mental health, correctional, and community stakeholders, and uses the Assess, Plan, Identify, Coordinate model to provide procedural guidelines to reduce recidivism and promote recovery at different points during incarceration and reentry. Table 3 below describes selected guidelines and examples of strategies that were identified by BOP and the six selected states that correspond to each element of the model. A residential treatment program for individuals with both substance use and mental disorders that uses a peer community to address substance abuse, psychiatric symptoms, cognitive impairments, and other common impairments. who are in recovery and have previously been involved in the criminal justice system provide support to others who are also involved in the criminal justice system. Forensic intensive case management. A case manager coordinates services in the community to help clients sustain recovery and prevent further involvement with the criminal justice system. Forensic Assertive Community Treatment (FACT). Treatment is coordinated by a multidisciplinary team, which may include psychiatrists, nurses, peer specialists, and probation officers. FACT teams have high staff-to-client ratios and are available around-the-clock to address clients’ case management and treatment needs. Examples of Bureau of Prisons (BOP) and Selected State Strategies booking/intake process as feasible and throughout the criminal justice continuum to detect substance use disorders, mental disorders, co-occurring substance use and mental disorders, and criminogenic risk. Follow up with comprehensive assessment to guide program placement and service delivery. Assessment should include clinical needs, social support needs (e.g., housing, education, employment, and transportation), and risk factors. All six selected states and BOP have developed mental health assessments during the intake process. BOP officials stated that the agency is in the process of enhancing the predictive validity of its criminogenic risk assessment and expects to complete this project in 2018. One of the six selected states uses a multidisciplinary treatment team composed of a clinician, psychiatrist, and correctional counselor, to assess the treatment and programming needs of inmates with serious mental illness. In addition to mental health treatment, the multidisciplinary team assesses if the inmate is ready for and would benefit from institutional services such as academic and vocational education programs, work, or substance abuse counseling. These assessments occur at least annually, but may occur whenever an inmate’s treatment needs have changed. To identify strategies to reduce recidivism among offenders with mental illness during incarceration and reentry, we searched for studies that analyzed the relationship between programs and recidivism among offenders with mental illness. Our search identified about 200 publications. We used a systematic process to conduct the review, which appendix II describes in more detail. We ultimately identified 14 studies that (1) assessed correctional institution or reentry programs for offenders with mental illness implemented in the United States, (2) contained quantitative analyses of the effect of a program on recidivism, and (3) used sufficiently sound methodologies for conducting such analyses. The studies examined different kinds of recidivism outcomes (e.g., re- arrest, re-incarceration, reconviction) and one study often examined more than one recidivism outcome. We categorize the findings for each study as follows: Statistically significant reduction in recidivism: the study reported that one or more outcome measures indicated a statistically significant reduction in recidivism among program participants; the study may also have one or more recidivism outcome measures that were not statistically significant. Statistically significant increase in recidivism: the study reported that one or more outcome measures indicated a statistically significant increase in recidivism among program participants; the study may also have one or more recidivism outcome measures that were not statistically significant. No statistically significant effect on recidivism: the study reported only outcomes indicating no statistically significant effect on recidivism among program participants. The statistical significance finding categories are based on the effect of the program as a whole and do not indicate if or how all individual elements of the programs impacted recidivism. For additional information on recidivism findings, see appendices V and VI. See appendix VII for a bibliography of the studies. The results of the literature review provide insights into factors that can affect recidivism among individuals with mental illness; however, the following considerations should be taken into account: (1) the type of mental illness of program participants varied within and across programs making it difficult to generalize results to individuals with all types of mental illness; (2) the studies may not provide a full description of the programs; (3) not all participants may have used available program services; (4) studies assessed the programs as a whole and did not determine to what extent different elements of the programs impacted recidivism; and (5) some studies used designs which cannot control for all unobserved factors that could affect the recidivism results. Nine of the 14 studies we reviewed found statistically significant reductions in recidivism. The studies that found statistically significant reductions generally involved programs that offered multiple support services, as shown in figure 6. Providing mental health and substance abuse treatment (8 of 9 studies), case management (5 of 9 studies), release planning (5 of 9 studies), housing (6 of 9 studies) and employment assistance (4 of 9 studies) were the most common services across the programs where studies we reviewed found statistically significant reductions in recidivism. In addition, more than half of the programs that resulted in statistically significant reductions in recidivism were coordinated with multidisciplinary stakeholders, such as mental health providers, correctional officials, substance use specialists, social workers, and peer support specialists (7 of 9 studies), and community corrections agencies, such as probation or parole offices (6 of 9 studies). However, other studies found that programs that offered multiple support services did not reduce recidivism, suggesting that other factors may also affect recidivism. Such factors may include the extent to which participants used services, as well as other unique programmatic factors, such as addressing criminogenic risk or criminal thinking. We further discuss examples of programs that did and did not reduce recidivism below. For example, study 9 examined Washington’s Dangerously Mentally Ill Program, in which a multidisciplinary committee determines which offenders meet the program criteria of having a mental illness and are at high risk of being dangerous to themselves or others six months prior to their release from prison. Members of the committee include representatives from the Department of Social and Health Services, Department of Corrections, law enforcement, and community mental health and substance abuse treatment agencies. Offenders designated for participation are immediately assigned a community mental health treatment provider and receive special transition planning prior to their release from prison. After release, and for up to five years, a variety of services are available to participants based on assessed needs. Services may include mental health and substance abuse treatment, housing and medical assistance, training, and other support services. Researchers found that program participants were about 42 percent less likely to be reconvicted of a new felony than similar offenders in the comparison group four years after release (recidivism rates were 28 percent and 48 percent, respectively). Two other studies (numbers 3 and 6) evaluated Colorado’s Modified Therapeutic Community, a residential program that was provided both as a 12-month prison program and 6-month reentry program after release from prison for offenders with co-occurring mental illness and substance use disorders. Participants may have participated in only the prison program, only the reentry program, or both. Both programs use a cognitive-behavioral curriculum designed to help participants recognize and respond to the interrelationship of substance abuse, mental illness, and criminality and to use strategies for symptom management. The reentry program was coordinated with the community corrections agency, which provided the residential facility and monitored medication and compliance with parole terms for both participants and the comparison group. The reentry program also assisted with housing placement and employment. Researchers found that both the prison program and the reentry program resulted in statistically significant reductions in recidivism among participants. Specifically, the studies found that at 12 months post- release, prison program participants had a 9 percent reincarceration rate versus a 33 percent rate for the comparison group that did not participate in either program; and reentry program participants had a 19 percent reincarceration rate versus 38 percent for the comparison group. Further, researchers found that those who participated in both the prison and reentry program experienced the greatest reductions in recidivism, with a reincarceration rate of 5 percent versus a rate of 33 percent for the comparison group that did not participate in either program 12 months after release from prison. Studies that did not find a reduction in recidivism also provide insights on factors that may affect recidivism. For example, study 10 examined a Washington program to help enroll inmates with severe mental illness in Medicaid prior to their release from prison and found that jail and prison stays were higher among program participants than non-participants. The researchers hypothesized that receiving mental health treatment may have led to more interaction with authorities, putting participants at a greater risk of being caught violating the terms of their parole than non- participants. There was some evidence to support this: they found that most of the difference in prison days between participants and non- participants was the result of noncompliance with conditions of parole (technical violations) rather than the commission of new crimes. Further, the researchers conclude that Medicaid benefits alone are not enough to reduce arrests or keep people with severe mental illness out of jail or prison. In addition, study 11 examined Minnesota’s release planning services for inmates with serious and persistent mental illness, which provided some of the same types of services as the programs that did reduce recidivism. For example, while incarcerated, inmates were provided pre-release planning to address vocational, housing, chemical dependency, psychiatric, disability, medical, medication, and transportation needs. However, this program did not result in any significant reduction in recidivism. The researchers conclude that including programming to target criminogenic risks and providing a continuum of care from the institution to the community, instead of only providing services in the institution, may make the program more effective at reducing recidivism. We provided a draft of this report to DOJ and HHS for review and comment. DOJ and HHS did not provide official written comments or technical comments. We are sending copies of this report to the Assistant Attorney General for Administration, Department of Justice, the Secretary of Health and Human Services, selected congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VIII. The population of Federal Bureau of Prisons (BOP) inmates with and without serious mental illness varies in several characteristics, see table 4. To address all three objectives, we reviewed documents, interviewed officials, and analyzed data obtained from the Federal Bureau of Prisons (BOP) and selected states’ departments of corrections. For objective 3, we also reviewed documents and interviewed officials from the Department of Justice’s (DOJ) Office of Justice Programs and the Department of Health and Human Services’ (HHS) Substance Abuse and Mental Health Services Administrations (SAMHSA) and the National Institute of Mental Health. We selected six state departments of corrections (California, New York, Ohio, Texas, Virginia, and Washington) based upon variation in the rate of incarcerated adults per capita to obtain a mix of states with high, medium, and low rates, specialist recommendations on data quality and quality of programs for inmates with serious mental illness, and variation in geography. We contacted officials from SAMHSA and the National Institute of Mental Health and representatives from correctional accreditation organizations, as well as subject matter specialists from Pew Charitable Trusts and the Treatment Advocacy Center that we identified through previous work and asked for their recommendations of states that, in their view, had reliable data sources on the number of incarcerated individuals with serious mental illness and the costs of providing mental health services, as well as noteworthy programming for inmates with serious mental illness. The results from these six states are not generalizable, but provide insights. For purposes of this review, we based our work on the definition(s) of serious mental illness that are provided by each of the selected federal agencies and selected states’ departments of corrections. We analyzed policies and guidance at BOP and the departments of corrections in selected states to determine how, if at all, the agencies define serious mental illness and the processes used to identify incarcerated inmates with serious mental illness. To determine the population of inmates with serious mental illness for the purposes of our work, BOP operationalized its definition of serious mental illness using six criteria, covering the required degree of mental health care, mental illness diagnoses, and suicide risk. BOP defined “serious mental illness” in accordance with the agency’s program statement, BOP Program Statement 5310.16, Treatment and Care of Inmates with Mental Illness, May 1, 2014. On August 15, 2017, in a memorandum for the Comptroller General of the United States from the Acting Director of BOP, BOP defined “serious mental illness” for purposes of section 14016 of the 21st Century Cures Act. BOP officials indicated that BOP’s program statement and the six criteria to identify the population of inmates with serious mental illness who were incarcerated in fiscal years 2016 and 2017 would coincide with the definition for “serious mental illness” provided in the memorandum for the Comptroller General of the United States for purposes of the 21st Century Cures Act and identify an identical set of BOP inmates with “serious mental illness” for fiscal years 2016 and 2017. BOP applied these criteria to inmate information in its SENTRY, Bureau Electronic Medical Record (BEMR), and Psychology Data System (PDS) data systems to identify inmates with serious mental illness. To assess the reliability of the these data, we performed electronic data testing for obvious errors in accuracy and completeness, and interviewed agency officials knowledgeable about these systems to determine the processes in place to ensure the integrity of the data. We determined that the data were sufficiently reliable for identifying the population of BOP inmates with serious mental illness, for the purposes of this report. To determine what types of crimes were committed by inmates with serious mental illness who were incarcerated by the federal and selected state governments we analyzed available data from BOP and the departments of corrections in selected states on the most serious types of crimes for which inmates with serious mental illness were incarcerated during fiscal year 2017. BOP officials track and maintain information on the types of crimes for which inmates have been incarcerated via SENTRY. We interviewed officials from BOP’s Office of Research and Evaluation, Reentry Services Division, and Correctional Programs Division to discuss the number and types of crimes committed by BOP inmates with serious mental illness. To assess the reliability of BOP’s criminal offense data, tracked in BOP’s SENTRY system, we performed electronic data testing for obvious errors in accuracy and completeness, and interviewed agency officials from BOP’s Office of Research and Evaluation knowledgeable about BOP’s inmate tracking system to determine the processes in place to ensure the integrity of the data. We determined that the data were sufficiently reliable for the purposes of this report. We also interviewed and received written responses from officials from the selected state departments of corrections to determine the challenges they faced in recording, tracking, and maintaining data on inmates with serious mental illness, but we did not independently assess the internal controls associated with the selected states’ data systems. We provided state level data as illustrative examples of the crimes committed by inmates with serious mental illness in selected states. To identify what is known about the costs to the federal and selected state governments to incarcerate and provide mental health services to incarcerated individuals with serious mental illness, we interviewed and received written responses from officials from BOP’s Reentry Services Division, Correctional Programs Division, Administration Division, Program Review Division, and Health Services Division, and the departments of corrections in selected states to discuss and obtain documentation on the processes and systems used to track the costs to incarcerate and provide mental health services to inmates with serious mental illness, and obtain their perspectives on the challenges faced, if any, in tracking such costs. We analyzed BOP obligation data from fiscal year 2016 for the following budget categories: Psychology Services, psychotropic medications, and Residential Reentry Center mental health care costs. We included these obligation categories as indicators of BOP mental health care costs because our prior work identified that these services were used by inmates with mental illness. To assess the reliability of BOP’s obligations data, we performed electronic testing for obvious errors in accuracy and completeness, and interviewed agency officials knowledgeable about BOP’s budget to determine the processes in place to ensure the integrity of the data. We determined that the data were sufficiently reliable for the purposes of this report. In response to our inquiries, the selected states provided various data on costs to incarcerate and provide mental health care to inmates under their supervision. We did not independently assess the internal controls associated with the selected states’ data systems. We provided state level data as illustrative examples of the manner in which state correctional agencies tracked costs of incarceration and mental health care services for inmates under their supervision. Additionally, we obtained and analyzed BOP data from PDS on the extent to which inmates interacted with Psychology Services personnel and programs during fiscal year 2016, to calculate the average psychology services interactions (by category) per inmate during fiscal year 2016. To assess the reliability of BOP’s psychology services utilization services data, we performed electronic testing for obvious errors in accuracy and completeness, and interviewed agency officials knowledgeable about BOP’s psychology services to determine the processes in place to ensure the integrity of the data. We determined that the data were sufficiently reliable for the purposes of this report. To determine what strategies for reducing recidivism among individuals with serious mental illness have been identified by the federal and selected state governments and in literature, we obtained and analyzed documents and interviewed officials from BOP and the selected states’ corrections departments, as well as from DOJ and HHS organizations that support research, training, and programs related to mental health and recidivism. These DOJ organizations included the National Institute of Corrections, within BOP, and the Bureau of Justice Assistance and National Institute of Justice, within the Office of Justice Programs. The Department of Health and Human Services (HHS) organizations included SAMHSA and the National Institute of Mental Health. We also interviewed subject matter experts from the Council of State Governments Justice Center, Pew Charitable Trusts, and the Treatment Advocacy Center, which we selected to obtain perspectives from researchers and mental health and criminal justice organizations. Further, we conducted a literature review of studies that have sound methodologies and use primary data collection or secondary analysis to assess the impact of programs or interventions during incarceration or reentry on recidivism among adult offenders with mental illness. To identify relevant studies, we took the following steps: 1. A GAO research librarian conducted searches of various research databases and platforms including ProQuest, MEDLINE, PsycINFO, Social SciSearch, and Scopus, among others, to identify scholarly and peer reviewed publications; government reports; and publications by trade associations, nonprofits and think tanks from 2008 through 2017, a period chosen to identify a comprehensive set of relevant and timely research. 2. We identified and reviewed selected additional studies that were cited within literature reviews, meta analyses and studies referenced on information-sharing websites, including the Council of State Governments’ “What Works in Reentry” website, National Institute of Justice’s “Crime Solutions” website, and SAMHSA’s Registry of Evidence Based Practices and Programs, and other secondary sources published from 2000 through 2017. We chose this time period to ensure we identified key older, reliable studies we may have missed by virtue of our database search timeframe. We identified these secondary resources during the course of our audit through the previously discussed database search, interviews with agency officials and representatives from research, criminal justice, and mental health organizations, and by reviewing websites of relevant agencies. The literature search produced about 200 publications. To select studies that were relevant to our research objective two reviewers independently assessed the abstracts for each publication using the following criteria: 1. Program studied was implemented in the U.S. 2. Study described in the publication includes original data analysis to assess the impact of a program for adults with mental illness on recidivism. For those that met the above two criteria we obtained and reviewed the full text of the publication, using the same criteria. We also further categorized the studies that met the two criteria above into the following categories: 1) studies that evaluated programs implemented during the period of incarceration or reentry, 2) studies that evaluated programs meant to divert individuals with serious mental illness from jail or prison (e.g., mental health courts) and 3) other, for those interventions that did not fall into either of these categories. As our review focused on strategies to reduce recidivism during incarceration and reentry, we excluded the studies on diversion programs (the second category). We evaluated the 31 studies that fell into the incarceration and reentry and the other categories using a data collection instrument. The data collection instrument captured information on the elements of the program, the recidivism effects, and the study’s methodology. The data collection instrument was initially filled out by one individual and then verified for accuracy by another individual; any differences in the individuals’ assessments were discussed and reconciled. To determine if the findings of the 31 studies should be included in our review of the literature, the study reviewers conferred regarding each study and assessed if: 1) the study was sufficiently relevant to the objective; and 2) the study’s methodology was sufficiently rigorous. With regard to the study’s relevance, we included studies that evaluated: a program for individuals with mental illness incarcerated in prison or jail or provided directly upon release from prison or jail; or a program for individuals with mental illness that is not provided in a prison, jail, or directly upon release from prison or jail (e.g., in a psychiatric hospital or in the community after a psychiatric hospitalization), but is hypothesized to impact criminal justice involvement and could potentially be applied in a correctional setting. With regard to methodological rigor, two GAO methodologists used generally accepted social science standards to assess the design and analytic strategy of each study to ensure analyses were sufficiently sound to support the results and conclusions. Specifically, the methodologists examined such factors as how the effects of the programs were isolated (i.e., use of comparison groups and statistical controls); the appropriateness of treatment and comparison group selection, if used; and the statistical analyses used. As a result of this process, we found 18 studies within the scope of our review that used sufficiently sound methodologies. Some studies used a randomized controlled trial methodology or quasi-experimental research designs, and some studies used non-experimental designs to compare recidivism outcomes for a single population before and after the intervention. These studies used various recidivism measures, and some used more than one measure. For each of the 18 studies, we reviewed the study’s findings related to recidivism, and categorized the findings based on statistical significance as follows: Statistically significant reduction in recidivism: the study reported that one or more outcome measures indicated a statistically significant reduction in recidivism among program participants; the study may also have one or more recidivism outcome measures that were not statistically significant. Statistically significant increase in recidivism: the study reported that one or more outcome measures indicated a statistically significant increase in recidivism among program participants; the study may also have one or more recidivism outcome measures that were not statistically significant. No statistically significant effect on recidivism: the study reported only outcomes indicating no statistically significant effect on recidivism among program participants. For a list of the 18 studies, see appendix VII. We conducted this performance audit from February 2017 through February 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Federal agencies have established interagency groups and other mechanisms, such as web-based resources, to share information related to correctional mental health and reducing recidivism among individuals with serious mental illness, among other things. Examples of these information sharing mechanisms are described in table 5 below. Our literature review also identified four studies that met the criteria of (1) containing quantitative analyses of the effect of a program for individuals with mental illness on recidivism, and (2) using sufficiently sound methodologies for conducting such analyses; but were in non-correctional settings, such as in a psychiatric hospital or in the community after a psychiatric hospitalization. While the findings from these studies may not be generalizable to a correctional setting, they may offer insights on effective strategies for reducing recidivism, as many of the program participants had a history of involvement with the criminal justice system. As shown in figure 7, half (2 of 4) of the studies found statistically significant reductions in recidivism. The non-correctional programs that were found to reduce recidivism included some of the same elements as the correctional programs that reduced recidivism, including mental health treatment (2 of 2 studies), substance abuse treatment (1 of 2 studies), case management (2 of 2 studies), release planning (1 of 2 studies), employment assistance (2 of 2 studies), housing assistance (1 of 2 studies), and multidisciplinary coordination among mental health providers, substance use specialists, social workers, and/or peer support specialists, for example (1 of 2 studies). However, similar to the literature on correctional programs, there were also studies that found that programs that offered multiple support services did not reduce recidivism, suggesting other factors may affect recidivism; such factors may include the extent to which participants used services, as previously noted, as well as other unique programmatic factors. We further discuss examples of programs that did and did not reduce recidivism below. For example, study 15 evaluated New York’s Assisted Outpatient Treatment, a court-ordered treatment program for individuals with mental illness and a history of multiple hospitalizations or violence toward self or others. Individuals entering the program are assigned a case manager and prioritized for enhanced services that include housing and vocational services. Researchers found that the comparison group who never received Assisted Outpatient Treatment had nearly double the odds (odds ratio of 1.91) of being arrested than program participants during and shortly after the period of assignment to the program. The programs that were found not to reduce recidivism also provide some insights into factors that affect recidivism. For example, study 18 evaluated a Pennsylvania-based modified outpatient therapeutic community treatment program for individuals with co-occurring substance use disorder and emotional distress or mental illness and found that it had no significant effect on recidivism. Researchers attributed this finding to the program’s emphasis on substance use rather than on addressing criminogenic risks. The 14 studies we identified through our literature review that (1) assessed correctional institution or reentry programs for offenders with mental illness implemented in the United States (2) contained quantitative analyses of the effect of a program on recidivism, and (3) used sufficiently sound methodologies for conducting such analyses, used a number of different recidivism outcome measures, and some assessed more than one recidivism outcome measure. Tables 7, 8, and 9 below show the recidivism results for studies that measured reincarceration rates, reconviction rates, and number of days in jail or prison, which were reported by multiple studies. These do not represent all recidivism findings; some studies used other recidivism measures such as the number of arrests or convictions, odds ratio or hazard ratio of reincarceration, and self-reported criminal activity. This bibliography contains citations for the 18 studies we reviewed regarding programs for individuals with mental illness that may affect recidivism. (See appendix II for more information about how we identified these studies.) Following the citation we include the study numbers that we used to reference the study earlier in this report. Burke, C. and S. Keaton. San Diego County’s Connections Program Board of Corrections Final Report. San Diego, CA: SANDAG, June 2004. (Study 1) Chandler, D.W. and G. Spicer. “Integrated Treatment for Jail Recidivists with Co-occuring Psychiatric and Substance Use Disorders.” Community Mental Health Journal, vol. 42, no. 4 (2006):405-425. (Study 2) Compton, M.T., M.E. Kelley, A. Pope, K. Smith, B. Broussard, T.A. Reed, J.A. DiPolito, B.G. Druss, C. Li, and N.L. Haynes. “Opening Doors to Recovery: Recidivism and Recovery Among Persons With Serious Mental Illnesses and Repeated Hospitalizations.” Psychiatric Services, vol. 62, no. 2 (2016): 169-175. (Study 17) Cusack, K.J., J.P. Morrissey, G.S. Cuddleback, A. Prins, and D.M. Williams. “Criminal Justice Involvement, Behavioral Health Service Use, and Costs of Forensic Assertive Community Treatment: A Randomized Trial.” Community Mental Health Journal, vol. 46 (2010): 356-363. (Study 4) Duwe, G. “Does Release Planning for Serious and Persistent Mental Illness Offenders Reduce Recidivism? Results From an Outcome Evaluation.” Journal of Offender Rehabilitation, vol. 54, no. 1 (2015): 19- 36. (Study 11) Link, B.G., M.W. Epperson, B.E. Perron, D.M. Castille, and L.H. Yang. “Arrest Outcomes Associated with Outpatient Commitment in New York State.” Psychiatric Services, vol. 62, no. 5 (2011): 504-508. (Study 15) Mayfield, J. The Dangerous Mentally Ill Offender Program: Four-Year Felony Recidivism and Cost Effectiveness. Olympia, WA: Washington State Institute for Public Policy, February 2009. (Study 9) Morrissey, J.P., G.S. Cuddeback, A.E. Cuellar, and H.J. Steadman. “The Role of Medicaid Enrollment and Outpatient Service Use in Jail Recidivism Among Persons with Severe Mental Illness.” Psychiatric Services, vol. 58, no. 6 (2007):794-801. (Study 5) Morrissey, J.P., M.E. Domino, and G.S. Cuddeback. “Expedited Medicaid Enrollment, Mental Health Service Use, and Criminal Recidivism Among Released Prisoners With Severe Mental Illness.” Psychiatric Services, vol. 67, no. 8 (2016): 842-849. (Study 10) Sacks, J.Y., K. McKendrick, and Z. Hamilton. “A Randomized Clinical Trial of a Therapeutic Community Treatment for Female Inmates: Outcomes at 6 and 12 Months After Prison Release.” Journal of Addictive Diseases, vol. 31, no. 3 (2012): 258-269. (Study 7) Sacks, S., M. Chaple, J.Y. Sacks, K. McKendrick, C.M. Cleland. “Randomized Trial of a Reentry Modified Therapeutic Community for Offenders with Co-Occuring Disorders: Crime Outcomes.” Journal of Substance Abuse Treatment, vol. 42 (2012): 247-259. (Study 3) Sacks, S, K. McKendrick, J.Y. Sacks, S. Banks, M. Harle. “Enhanced Outpatient Treatment for Co-Occurring Disorders: Main Outcomes.” Journal of Substance Abuse Treatment, vol. 34 (2008): 48-60. (Study 18) Sacks, S., J.Y. Sacks, K. McKendrick, S. Banks, and J. Stommel. “Modified TC for MICA Offenders: Crime Outcomes.” Behavioral Sciences and the Law, vol. 22 (2004): 477-501. (Study 6) Taylor, N. An Analysis of the Effectiveness of Santa Clara County’s Mentally Ill Offender Crime Reduction Program. Anne Arbor, MI: ProQuest Information and Learning Company, May 2005. (Study 14) Theurer, G. and D. Lovell. “Recidivism of Offenders with Mental Illness Released from Prison to an Intensive Community Treatment Program.” Journal of Offender Rehabilitation, vol. 47, no. 4 (2008): 385-406. (Study 8) Van Stelle, K.R., and D.P. Moberg. “Outcome Data for MICA Clients After Participation in an Institutional Therapeutic Community.” Journal of Offender Rehabilitation, vol. 39 no.1 (2004): 37-62. (Study 12) Yates, K.F., M. Kunz, A. Khan, J. Volavka, and S. Rabinowitz. “Psychiatric Patients with Histories of Aggression and Crime Five Years after Discharge from a Cognitive-Behavioral Program.” The Journal of Forensic Psychiatry and Psychology, vol. 21, no. 2 (2010):167-188. (Study 16) Zlotnick, C., J. Johnson, and L.M. Najavits. “Randomized Controlled Pilot Study of Cognitive-Behavioral Therapy in a Sample of Incarcerated Women with Substance Use Disorder and PTSD.” Behavior Therapy, vol. 40 (2009): 325-336. (Study 13) In addition to the contact above, Tom Jessor (Assistant Director); Frederick Lyles, Jr. (Analyst-in-Charge); Pedro Almoguera; David Blanding, Jr.; Billy Commons, III; Thomas C. Corless; Dominick Dale; Michele Fejfar; Eric Hauswirth; Valerie Kasindi; Heather May; Leia J. Dickerson; Sam Portnow; and Cynthia Saunders all made key contributions to this report.", "summary": "In 2016, SAMHSA estimated that about 10.4 million adults in the United States suffered from a serious mental illness, which generally includes conditions such as schizophrenia and bipolar disorder. As of May 27, 2017, BOP was responsible for overseeing 187,910 inmates and 7,831 of these inmates were considered to have a serious mental illness. Research has shown that inmates with serious mental illness are more likely to recidivate than those without. The 21st Century Cures Act directed GAO to report on the prevalence of crimes committed by persons with serious mental illness and the costs to treat these offenders—including identifying strategies for reducing recidivism among these individuals. This report discusses (1) what is known about crimes committed by inmates with serious mental illness incarcerated by the federal and selected state governments; (2) what is known about the costs to the federal and selected state governments to incarcerate and provide mental health care services to those individuals; and (3) what strategies have the federal and selected state governments and studies identified for reducing recidivism among individuals with serious mental illness. GAO selected six states that varied in their adult incarceration rates and provided geographic diversity. At BOP and the six states' departments of corrections, GAO analyzed criminal offense and incarceration and mental health care cost data and interviewed officials about strategies for reducing recidivism for inmates with serious mental illness. The results from these six states are not generalizable, but provide insights. GAO also reviewed studies that analyzed the relationship between various programs and recidivism among offenders with mental illness. About two-thirds of inmates with a serious mental illness in the Department of Justice's (DOJ) Federal Bureau of Prisons (BOP) were incarcerated for four types of offenses—drug (23 percent), sex offenses (18 percent), weapons and explosives (17 percent), and robbery (8 percent)—as of May 27, 2017. GAO's analysis found that BOP inmates with serious mental illness were incarcerated for sex offenses, robbery, and homicide/aggravated assault at about twice the rate of inmates without serious mental illness, and were incarcerated for drug and immigration offenses at about half or less the rate of inmates without serious mental illness. GAO also analyzed available data on three selected states' inmate populations and the most common crimes committed by inmates with serious mental illness varied from state to state due to different law enforcement priorities, definitions of serious mental illness and methods of tracking categories of crime in their respective data systems. BOP does not track costs related to incarcerating or providing mental health care services to inmates with serious mental illness, but BOP and selected states generally track these costs for all inmates. BOP does not track costs for inmates with serious mental illness in part because it does not track costs for individual inmates due to resource restrictions and the administrative burden such tracking would require. BOP does track costs associated with mental health care services system-wide and by institution. System-wide, for fiscal year 2016, BOP spent about $72 million on psychology services, $5.6 million on psychotropic drugs and $4.1 million on mental health care in residential reentry centers. The six state departments of corrections each used different methods and provided GAO with estimates for different types of mental health care costs. For example, two states provided average per-inmate costs of incarceration for mental health treatment units where some inmates with serious mental illness are treated; however, these included costs for inmates without serious mental illness housed in those units. DOJ, Department of Health and Human Service's Substance Abuse and Mental Health Services Administration (SAMHSA), and criminal justice and mental health experts have developed a framework to reduce recidivism among adults with mental illness. The framework calls for correctional agencies to assess individuals' recidivism risk and substance abuse and mental health needs and target treatment to those with the highest risk of reoffending. To help implement this framework, SAMHSA, in collaboration with DOJ and other experts, developed guidance for mental health, correctional, and community stakeholders on (1) assessing risk and clinical needs, (2) planning treatment in custody and upon reentry based on risks and needs, (3) identifying post-release services, and (4) coordinating with community-based providers to avoid gaps in care. BOP and the six states also identified strategies for reducing recidivism consistent with this guidance, such as memoranda of understanding between correctional and mental health agencies to coordinate care. Further, GAO's literature review found that programs that reduced recidivism among offenders with mental illness generally offered multiple support services, such as mental health and substance abuse treatment, case management, and housing assistance.", "document_type": "gao"}
{"report": "Grade-crossing safety has improved significantly since 1975, but since 2009, the number of crashes and fatalities at grade crossings has plateaued (see fig. 1). The yearly number of grade-crossing crashes declined from 12,126 in 1975 to 2,117 in 2017. In that time frame, fatalities dropped from 917 to 273. The most significant reductions in grade-crossing crashes and fatalities were achieved from 1975 to 1985, when states closed or improved the most dangerous crossings. Grade- crossing safety continued to improve until the mid-2000s, though at a slower rate. Since 2009, the number of grade-crossing crashes and fatalities remains at around 2,100 crashes and 250 fatalities a year. These fatalities typically make up less than one percent of all highway- related fatalities. The decrease in crashes and fatalities occurred as the volume of train and highway traffic generally increased over the years. FRA expects the traffic volumes to continue to increase and has expressed concern that grade-crossing crashes and fatalities may also increase. As a set-aside portion of FHWA’s much larger Highway Safety Improvement Program (HSIP), the Section 130 Program provides funds to state DOTs for the elimination of hazards at highway-rail grade crossings. States determine what improvements need to be made at grade crossings. FHWA has oversight responsibilities regarding the use of federal funds as part of its administration of federal-aid highway programs and funding, including HSIP funds. FHWA uses a statutory formula to distribute to states Section 130 Program funds, which averaged $235 million per year during the last 10 years (fiscal years 2009 through 2018). Section 130 Program projects are funded at a 90 percent federal share, with the state or the roadway authority funding the remaining 10 percent. States have 4 years to obligate their program funds before they expire, meaning that in any given fiscal year, states can obligate funds appropriated in that year as well as any unobligated funds from the previous 3 fiscal years. In addition, states may choose to combine funds from multiple years to fund relatively expensive projects. The Section 130 Program’s requirements direct states to establish an implementation schedule for grade-crossing-safety improvement projects that, at a minimum, include warning signs for all public grade crossings. Grade crossings are generally categorized as “active” or “passive” depending on the type of traffic control devices that are present. As of July 2018, according to FRA’s National Highway-Rail Crossing Inventory, there were approximately 68,000 public grade crossings with electronic, or active, traffic control devices in the United States. Another approximately 58,000 public grade crossings have passive traffic-control devices, which include signs and supplementary pavement markings. The requirements also specify that at least 50 percent of Section 130 Program funding must be dedicated to the installation of protective devices at grade crossings, including traffic control devices. States can use remaining program funds for any hazard elimination project. States may also use program funds to improve warning signs and pavement markings or to improve the way the roadway aligns with the tracks (e.g., to ensure low-clearance vehicles do not get stuck on the tracks). In addition, states can use up to 2 percent of the funds to improve their grade-crossing inventories and to collect and analyze data. See figure 2 for examples of the types of projects eligible for Section 130 Program funds and graphical depictions of grade crossings before and after safety improvements have been made. FHWA and FRA are the primary agencies responsible for safety at grade crossings, and they both play key—yet distinct—roles. FHWA oversees the Section 130 Program and monitors states’ uses of program funds through 52 division offices located in each state, the District of Columbia, and Puerto Rico and through headquarters staff in Washington, D.C. In addition, FHWA’s division staff reviews states’ processes for prioritizing and selecting grade-crossing-safety improvement projects. FHWA does not evaluate the appropriateness of individual grade-crossing projects, but instead helps states determine that projects meet program eligibility requirements. Division staff assists in the implementation of Section 130 Program state-administered projects, and they may participate in state- DOT-led, on-site reviews of grade crossings under consideration for Section 130 Program projects. FHWA headquarters staff is responsible for FHWA-wide initiatives, such as working with stakeholders to establish standards for traffic control devices and systems at grade crossings and for engineering oversight of state-administered safety improvement projects. FRA provides safety oversight of both freight and passenger railroads by: collecting and analyzing data; issuing and enforcing numerous safety regulations, including on grade-crossings’ warning systems; conducting focused inspections, audits, and accident providing technical assistance to railroads and other stakeholders. Specifically, FRA oversees rail safety through eight regional offices and through headquarters staff in Washington, D.C. Regional staff monitor railroads’ compliance with federal safety regulations through inspections and provide technical assistance and guidance to states. In 2017, FRA created a new discipline for grade-crossing safety and is hiring new grade-crossing inspectors. These inspectors conduct field investigations, identify regulatory defects and violations, recommend civil penalty assessments when appropriate, and may participate in state- DOT-led teams that conduct on-site reviews of grade crossings to evaluate potential safety improvements. According to FRA documentation, FRA’s new inspectors will also work with a variety of stakeholders to institute new types of training, explore new safety concepts and technologies, and assist in the development of new or modified highway-rail grade-crossing-safety regulations, initiatives, and programs. The inspectors will also work with FHWA and other DOT operating administrations in a cooperative effort to improve grade- crossing safety. FRA regional staff also investigates select railroad crashes, including those at grade crossings, to determine root causation and any contributing factors, so that railroads can implement corrective actions. FRA headquarters staff develops analytical tools for states to use to prioritize grade-crossing projects. In addition, headquarters staff manages research and development to support improved railroad safety, including at grade crossings. FRA’s Office of Railroad Safety maintains the National Highway-Rail Crossing Inventory database and the Railroad Accident/Incident Reporting System on grade-crossing crashes. Both states and railroads submit information to FRA’s crossing inventory, which is designed to contain information on every grade crossing in the nation. Railroads submit information such as train speed and volume; states submit information such as highway speed limits and average annual daily traffic. The Rail Safety Improvement Act of 2008 added requirements for both railroads and states to periodically update the inventory; however, the Moving Ahead for Progress in the 21st Century Act (MAP-21) repealed a provision providing DOT authority to issue implementing regulations that would govern states’ reporting to the inventory. According to FRA officials, while FRA’s regulations do not require states to report the information, FRA encourages them to do so. FRA regulations require railroads to report and update their information in the inventory every 3 years or sooner in some instances, such as if new warning devices are installed or the grade crossing is closed. FRA’s accident system contains details about each grade-crossing accident that has occurred. In addition to submitting immediate reports of fatal grade-crossing crashes, railroads are required to submit accident reports within 30 days after the end of the month in which the accident occurred and describe conditions at the time of the accident (e.g., visibility and weather); information on the grade crossing (e.g., type of warning device); and information on the driver (e.g., gender and age). In its role overseeing grade-crossing safety, FRA has sponsored a number of research efforts to better understand the causes of grade- crossing crashes and identify potential ways to improve engineering, education, and enforcement efforts. For example, FRA sponsored an in- depth data analysis of grade-crossing crashes to better identify which crossing characteristics increase the risk of an accident. The report, issued in 2017, found that the volumes of train and vehicle traffic at a crossing are the biggest predictors of grade-crossing crashes. Changes in vehicle and train traffic therefore affect the annual number of grade- crossing crashes. For example, as highway traffic decreased in 2008, possibly due to the economic recession and higher gas prices, so too did the number of grade-crossing crashes. As previously noted, FRA expects that the number of grade-crossing crashes will likely grow with anticipated increases in future train and highway traffic. As discussed below, vehicle and train volume are included in the U.S. DOT Accident Prediction Model, which some states use to select grade-crossing improvement projects. According to FRA officials, FRA is using the results of this recent in-depth data analysis to, in part, evaluate whether additional risk factors, such as the number of male drivers or trains carrying toxic materials, should be added to the model. FRA has targeted other research into understanding driver behavior at grade crossings, which is the leading cause of crashes. According to FRA’s accident data, in 2017, 71 percent of fatal crashes at public grade crossings occurred at those with gates. In 2004, the DOT Inspector General (IG) reported that 94 percent of grade-crossing crashes from 1994 to 2003 could be attributed to risky driver behavior or poor judgement. State officials we spoke with explained that drivers may become impatient waiting at a grade crossing and decide to go around the gates. Drivers may also line up over the grade crossing in heavy vehicular traffic, and be unable to exit before the gates come down. See figure 3 for examples of risky driver behavior at grade crossings. To better understand driver behavior, FRA sponsored a John A. Volpe National Transportation Systems Center (Volpe Center) study that recorded and analyzed drivers’ actions as they approached grade crossings. The researchers found that almost half of drivers were doing another task, such as eating, and over a third did not look in either direction while approaching passive grade crossings. We have previously reported, and many stakeholders we interviewed agreed, that in light of inappropriate driver behavior, technological solutions alone may not fully resolve safety issues at grade crossings. In addition, public-education and law-enforcement efforts can augment the effectiveness of technological solutions. According to FRA officials, they shared information on driver education with DOT’s National Highway Traffic Safety Administration (NHTSA) as NHTSA works more closely with states on driver education manuals. According to DOT officials, NHTSA updates its driver education materials every 2–3 years and plans to consider including grade-crossing-safety materials in the next versions. FRA is also working with states and localities to research and develop new protective devices and other safety measures targeted at improving driver behavior at grade crossings. As most fatal crashes happen at grade crossings already equipped with gates, FRA and state and local agencies are exploring whether additional safety measures can improve safety at those locations. For example, in 2016 and 2017, FRA’s Grade Crossing Task Force worked with the Volpe Center and the City of Orlando to test whether photo enforcement at grade crossings could reduce risky driver behavior. The City of Orlando installed automated photo-enforcement devices at a grade crossing, and instead of issuing fines to drivers who had violated its warning devices, sent drivers a warning notice and educational safety materials. Eight months after the photo-enforcement system was installed, grade crossing violations decreased by 15 percent. While FRA judged these enforcement efforts successful at changing driver behavior, a 2015 FRA whitepaper noted that photo enforcement equipment is costly—on average costing over $300,000 per crossing to install and operate for 2 years—and may not be cost-effective for most grade crossings. FRA found that due to costs and state laws prohibiting photo-enforcement, only two photo- enforcement cameras were currently in operation at grade crossings across the country. States, localities, and FHWA are also exploring whether new types of pavement markings at grade crossings can improve driver behavior. According to DOT officials, FHWA is working with two states to develop new cross-hatch pavement markings for grade crossings that would comply with the Manual on Uniform Traffic Control Devices, similar to the “don’t block the box” type pavement markings used in intersections. FHWA also worked with a city to test the use of in-roadway lights to delineate the crossing. (See fig. 4). FRA and state DOTs are also trying to improve pedestrian safety at grade crossings by developing new safety measures. Grade-crossing accidents involving pedestrians are less frequent than those involving automobiles at grade crossings but have a higher fatality rate. While pedestrians were involved in only 9 percent of accidents at public crossings in 2017, almost 40 percent of fatal grade-crossing accidents involved pedestrians. To try to improve pedestrian safety, in 2012 the Volpe Center worked with New Jersey Transit to study whether adding additional pedestrian gate skirts— hanging gates that further block a crossing (see fig. 5)—would prevent people from ducking under the gates. The Volpe Center reported that these new gates had mixed success. While incidents of people going under and around the gates decreased, more people chose to cross the tracks in the street rather than at the sidewalk. Finally, FRA is exploring new automated and connected vehicle technologies that could reduce risky driver behavior at grade crossings. FRA, FHWA, and officials from one state we interviewed said they anticipate that such technology will be critical to further improving safety. Specifically, FRA and FHWA are coordinating with DOT’s Intelligent Transportation Systems Joint Program Office to develop pilot technology that would enable crossing infrastructure or trains to communicate wirelessly with vehicles. Vehicles can use this information to warn the driver that a crash or violation is imminent, or integrate with onboard active safety systems. According to FRA officials, they completed a proof of concept in 2013 and completed and tested a prototype of the technology in 2017. DOT officials said that DOT does not have a time frame for when automakers might begin incorporating such connected vehicle technologies and noted that retrofitting older cars with new equipment will likely make this a long-term effort. FRA shares information on its research in various ways with state DOTs, because states are responsible for deciding which safety measures to install at grade crossings. Specifically, FRA and FHWA jointly hold quarterly webinars with stakeholders, including state DOT officials, and conduct presentations at highway-rail safety workshops. Information on safety measures such as grade-crossing devices, signs, and markings are also included in the Railroad-Highway Grade Crossing Handbook. According to DOT officials, the handbook was developed jointly by FHWA and FRA. The last version of the handbook was updated in 2007 and includes some out of date information. FRA and FHWA officials said they began working on an update in 2017, but missed the July 2018 target completion date. According to FHWA officials, updating the handbook is a complex undertaking that has taken more time than they anticipated due to the extensive collaboration required among stakeholders. FHWA officials said they anticipate completing the update during the spring of 2019. The risk of crashes at public grade crossings within a state factors into states’ selection of over 1,000 new Section 130 Program projects nationally each fiscal year. FHWA requires states to develop a grade crossing program that considers relative risk. FHWA officials said they review the methods that states use to select projects to ensure that risk is considered. According to a 2016 academic study of 50 states, most states use mathematical formulas, or “accident prediction models,” to help assess risk and identify grade crossings for potential projects. More specifically, these accident prediction models use factors such as grade crossing characteristics and accident history to rank grade crossings by risk. DOT provides one such model—the Accident Prediction Model—and some states have developed their own models. The study reported that 19 states used DOT’s model and 20 states used a different model. It also found that the DOT and commonly used state models include some similar grade-crossing characteristics to predict accident risk. For example, the selected models reviewed all considered vehicle- and train- traffic volume, which FRA has found to be the strongest predictors of grade-crossing crashes. FRA makes its Accident Prediction Model available to states online through its Web Accident Prediction System. This system is an online tool that uses FRA’s crossing inventory, crossing collision history, and the DOT Accident Prediction Model to predict accident risk for grade crossings in each state. Only one of the eight states in our review used the system as its primary source for ranking grade-crossing risk. Most of the other states perform their own calculations to rank grade crossings. Officials from two states said that they believe their state-maintained data are more reliable than FRA’s crossing inventory and explained that they go directly to their contacts at railroads to get updated information on factors such as train volume. Accident prediction models are only one source of information states use when selecting Section 130 Program projects. According to the state officials we spoke with, a variety of other considerations can also influence their decisions, including the following: Proximity of projects together along a railroad “corridor” in order to gain efficiencies and reduce construction costs. Requests from local jurisdictions or railroads. These stakeholders may have information on upcoming changes at a grade crossing, such as higher train volume or new housing developments nearby, which would increase risk but would not be reflected yet in the accident prediction model. Availability of local funding to provide the required 10 percent match for Section 130 Program projects, while trying to spread the funds fairly across the state. States may also consider grade crossings that have had close calls in the past, such as where a car narrowly avoided being hit by a train. FRA does not require railroads to report on these close calls, or “near misses;” however, according to state officials, railroads sometimes provide this information to states on an ad-hoc basis. State officials from four of the eight states we spoke with said they considered near misses when selecting Section 130 Program projects. A 2004 Volpe Center report noted that studying close calls was a proactive way to improve safety. According to the report, FRA sponsored a workshop to learn about the benefits of collecting and analyzing close calls. However, stakeholders we interviewed noted challenges formalizing near-miss reporting. For example, Volpe Center officials said these reports are subjective in nature—what one engineer considers a close call, others may not. FRA developed another online tool—GradeDec—to allow states to compare the costs and benefits for various grade-crossing improvement projects. GradeDec uses models to analyze a project’s risk and calculate cost-benefit ratios and net present value for potential projects. FRA provides state DOTs with on-site GradeDec workshops upon request. While FRA officials noted that many state and local governments have registered to use the program, none of the state officials we spoke with identified GradeDec as a tool that they use to conduct cost-benefit analysis. Officials from two state DOTs we spoke with said that cost- benefit analyses could help them better identify and select the most cost- effective crossing safety projects in the future. According to the academic study of 50 states noted above, because of limited funding for grade-crossing improvements, states should consider the life-cycle costs of the projects as well as net present value to help select projects. As discussed later in this report, the small number of crashes at grade crossings can make it challenging to distinguish between different projects in terms of their effectiveness in reducing accidents. Finally, after they have considered risk factors and created a list of potential grade crossings for improvement, state officials, along with relevant stakeholders from railroads and local governments, conduct field reviews of the potential projects. According to state officials, these reviews help identify grade-crossing characteristics that may not be included in the accident prediction models, such as vegetation that would obstruct drivers’ views. In 2008, legislation was enacted mandating reporting by states and railroads to the National Highway-Rail Crossing Inventory. However, the fact that reporting to the inventory remained voluntary until 2015 has had lingering effects on the completeness of the data in the inventory. In 2015, as mandated by statute, FRA issued regulations requiring railroads to update certain data elements for all grade crossings every 3 years. However, our analysis of FRA’s crossing inventory found that 4 percent of grade crossings were last updated in 2009 or earlier. In addition, because MAP-21 repealed DOT’s authority to issue regulations that would govern state reporting to the inventory, state reporting of grade-crossing data remains voluntary, according to FRA officials, and all state-reported information is not complete. Our analysis of state-reported data in FRA’s crossing inventory found varying levels of completeness. For example, while some state-reported data fields were almost entirely complete, 33 percent of public grade crossings were missing data on posted highway speed. We also found that of the crossings for which states reported the year when the highway-traffic count was conducted, 64 percent of the highway-traffic counts for public grade crossings, another important risk factor, had not been updated since 2009, or earlier. According to the 2015 final rule, FRA will continue to evaluate whether additional regulations to address state reporting are needed to maintain the crossing inventory’s accuracy. FRA officials told us that improving inventory data will help them better deploy their limited resources, particularly their grade-crossing inspectors, and said that they have taken steps to help improve the data. In 2017, FRA regional officials conducted field reviews to verify the latitude and longitude data for grade crossings in the inventory, data that states are responsible for updating. In addition, FRA expects its grade-crossing inspectors as part of their inspections to review and identify issues with the railroad- and state-reported inventory data. According to FRA officials, FRA has begun to both transition its 19 grade-crossing managers into grade-crossing inspectors and also hire new inspectors, for an eventual total of 24 inspectors and eight regional specialists to supervise their activities. To help ensure railroads’ compliance with crossing inventory regulations, officials said that the inspectors will use spot checks to validate the inventory data by comparing grade-crossing characteristics in the field with the information railroads submitted to the inventory. In addition, FRA has incorporated information on inventory-reporting requirements into the grade-crossing inspectors’ training. Finally, FRA is currently developing guidelines for the grade-crossing inspections similar to those for other FRA safety disciplines. FRA headquarters officials acknowledged that they are still clarifying the details for the inspections that will be included in the compliance manuals that inspectors will use. Specifically, they said they are still determining appropriate inspector workloads and drafting specific guidelines that will need to be integrated into FRA’s regional inspection plans. FRA officials said they are working to develop and make available inventory inspection guidance to the grade-crossing managers and inspectors by December 31, 2018. In the meantime, FRA held training that included information on inventory-reporting requirements. In August 2018, FRA developed guidance for grade-crossing inspections specific to quiet zones in response to a recommendation we made in 2017. It is important that FRA meets its goal to issue similar guidance specific to reviewing the accuracy of the inventory data, as FRA cannot have reasonable assurance that inspections that are already under way are being conducted in such a manner that would allow them to consistently identify data reliability issues at each crossing. About 75 percent of all Section 130 Program projects states implemented in fiscal year 2016 involved installing or updating active grade-crossing equipment, including warning lights and protective gates (see fig. 6). The prevalence of this type of project is in part due to the Section 130 Program requirement that states spend at least 50 percent of funds on protective devices. Other than eliminating a grade crossing, adding protective devices has long been considered the most effective way of reducing the risk of a crash. Officials from six of eight state DOTs we interviewed told us that the numbers and types of grade-crossing projects they implement are dependent on the amount of Section 130 Program funding they receive and the cost of the projects. As previously described, funds are set aside from the Highway Safety Improvement Program and distributed to states by a statutory formula that includes factors such as the number of grade crossings in each state. Officials from six of the eight state DOTs we spoke to agreed that the set-aside nature of the program was crucial in allowing them to implement projects, many of which they said would not have been possible without Section 130 Program funds. For example, many said the formula funding ensures that grade-crossing projects are completed along with highway safety projects, particularly given the fact that fatalities resulting from grade-crossing crashes account for so few when compared to highway deaths. Overall, fatalities resulting from grade-crossing crashes account for less than 1 percent of all highway- related fatalities. In fiscal year 2018, the funds distributed ranged from a low of approximately $1.2 million for eight states and Washington, D.C., to over $16 million for California and over $19 million for Texas. The number of grade crossings in the eight states and Washington, D.C. ranged from 5 to 380, while California had almost 6,000 and Texas had over 9,000. Project implementation costs varied by project type and ranged widely depending on project scope. Based on 2016 DOT data, some typical project costs ranged as follows: adding signs to passive grade crossings—$500 to $1,500; adding flashing lights and two gates to passive grade crossings— $150,000 to $300,000; adding four gates to grade crossings with flashing lights—$250,000 - closing a grade crossing—$25,000 to $100,000; and separating a grade crossing from traffic (Grade Separation)—$5 million to $40 million. State officials we spoke with cited several challenges in pursuing certain types of controversial, innovative, and expensive projects that could help them address the evolving nature of risk at grade crossings and difficulty in measuring the effectiveness of their projects. First, most state DOT officials said that the cost of grade-separation projects and, at times, the controversy of eliminating grade crossings through closure reduces the number of these projects, while acknowledging that they are the most effective ways to improve safety. These types of projects made up only 3 percent of Section 130 Program projects in fiscal year 2016 (see fig. 6). Grade-separation projects are often more expensive than the annual Section 130 Program funding available to states. In 2018, only eight states received annual Section 130 Program funding sufficient to fund a $7-million grade-separation project. As discussed previously, to fund relatively expensive projects, states may choose to combine funds from multiple years. Also, states and railroads may make incentive payments to localities for the permanent closure of a grade crossing. In addition to the cost, most state DOT officials reported challenges obtaining local support for closing grade crossings. They said closures may inconvenience residents who use the road and force emergency responders to take longer routes, potentially slowing response times. Grade-separation projects address these safety concerns and may be more agreeable to residents, but they are substantially more expensive. While up to $7,500 in Section 130 Program funding can be used to help incentivize communities to close grade crossings, officials from some of our selected state DOTs said this amount is generally not enough to persuade local officials to support the closing. Second, officials from many state DOTs we interviewed also reported that the requirements of the Section 130 Program create challenges for them in implementing what they considered to be innovative projects. For example, the program requirement that 50 percent of funds be used on protective devices, combined with what one researcher described to us as the tendency by states to implement “known” projects—i.e., protective devices—may impede states’ selection of new, more innovative safety projects. Officials we interviewed from many state DOTs described challenges related to the program’s requirements. They noted that they are prevented from using Section 130 Program funds for new types of safety technologies not yet incorporated into FHWA’s Manual on Uniform Traffic Control Devices. As noted previously in this report, outside the Section 130 Program FHWA is working with states and localities to explore whether new types of pavement markings at grade crossings, not in the manual, can improve driver behavior. One state DOT official we interviewed suggested changes to allow states to fund one grade- crossing pilot project per year or to use a set percentage of program funds to finance a pilot project that could help them explore promising but as yet unproven technologies. Third, state DOT officials from four of the eight selected states also said it can be difficult to find funding for the required 10 percent state match. As previously mentioned, while certain rail-safety projects are eligible for up to 100 percent federal funding, Section 130 Program projects are funded at a 90 percent federal share. According to DOT documentation we reviewed, only some states have a dedicated source for such a match, and state DOT officials from one of our selected states said their state cannot use state funds for the 10 percent match. Some state DOT officials said this situation can drive project selection. For example, they sometimes chose projects based on which localities or railroads were willing to provide matching funds or offer cost savings. Finally, many state officials cited challenges in measuring the effectiveness of grade crossing projects in reducing crashes or the risk of crashes. In particular, state officials we spoke to said it can be difficult to use before-and-after crash statistics as a measure of effectiveness because of the low number and random nature of crashes. Also, as FRA research has shown and as FHWA and FRA have noted, reporting on before-and-after grade-crossing accident statistics can be misleading, given the infrequency of crashes and crashes that are not the result of grade crossing conditions. States’ required Section 130 Program annual progress reports to the Secretary of DOT call for states to report on the effectiveness of the improvements they made. FHWA reporting guidance suggests they define effectiveness as the reduction in the number of fatalities and serious injuries after grade-crossing projects were implemented, consistent with statutory requirements. In addition, FHWA guidance states that consideration should be given to quantifying effectiveness in the context of fatalities and serious injuries. However, states often report no differences in crashes after specific projects were implemented, and there have been instances where states reported a slight increase in crashes. Such an increase does not necessarily mean that the project was not effective in reducing the overall risk of a crash. Also, not all projects are implemented at grade crossings where there has been a crash. Among other information, states also typically report information on funding and data on the numbers and types of projects implemented. In addition, the extent to which states report projects’ effectiveness varies greatly. Given states’ responsibility for implementing the Section 130 Program and the differences in the amounts of funding they receive, FHWA officials said states should determine and report on the appropriate effectiveness metrics for their programs. According to FHWA officials, during the 2017 reporting year, a few states requested examples of what to include when reporting effectiveness, and FHWA responded with examples of various methods they could use, such as a benefit-cost ratio or the percentage decrease in fatalities, serious injuries, and crashes. Regardless of the difficulty in measuring the effectiveness of specific projects, most state DOT officials we interviewed stressed the importance of the Section 130 Program in funding grade-crossing projects. FHWA’s biennial report to Congress is intended to provide information to Congress on the progress being made by the states in implementing projects to improve safety and, in addition, make recommendations for future implementation of the program. FHWA reviews states’ annual Section 130 Program reports and uses them to formulate the report to Congress every 2 years. FHWA’s 2018 report highlights that the Section 130 Program has seen great success since 1975, with a decrease of approximately 74 percent in fatalities at the same time that there was an increase in vehicle and train traffic. The report described the latest available 10-year trend, from 2007 to 2016, as showing a 31 percent decrease in fatalities. Fatalities have also decreased when adjusted for train traffic. However, FHWA officials acknowledged in interviews with us that crashes and fatalities have remained constant since about 2009, with more recent data showing a slight increase in fatalities over the last 2 to 3 years, data that are consistent with the increases in overall roadway fatalities. The officials said increased train- and vehicle-traffic volumes could be contributing to that increase, in addition to other factors, such as more bicycle riders and pedestrians using grade crossings. As described earlier, states have generally already used Section 130 Program funding to address safety at the riskiest grade crossings by adding protective measures, typically lights and gates. Yet crashes continue to occur at these improved grade crossings. Given these trends and the challenges discussed earlier related to the requirements of the Section 130 Program, it is not clear whether the program remains effective in continuing to reduce the risk of crashes and fatalities at grade crossings. As required, FHWA’s biennial report includes a section on “recommendations for future implementation” of the Section 130 Program. As part of this, FHWA reports on challenges and actions being taken to address them. FHWA’s 2018 report identified one of the same challenges we heard about from state DOT officials related to the inability or unwillingness of local agencies to provide matching funds and the relatively low amount of funding designed to incentivize localities to close crossings. FHWA reported on its efforts to address these challenges, including by providing guidance, resources, and supportive training to states and local agencies and serving as a clearinghouse for innovative methods of supporting projects. However, with the exception of the funding challenge, FHWA’s most recent report does not include the other challenges state officials identified to us related to the requirements of the Section 130 Program discussed above. These include program funding requirements that may impede innovative approaches and the difficulties of using before-and-after crash statistics to measure effectiveness. Many state DOT officials we spoke with said there may be an opportunity to more broadly assess the Section 130 Program at the national level. It could be more informative to comprehensively assess more detailed crash trends, such as those that look forward over multiple years across the more than 1,700 crashes nationwide, rather than on the approximately 35 that occur on average within a state, and identify strategies to address those trends. Doing so could help FHWA learn more about why crashes are continuing and what types of projects may be effective. There could be ways to evaluate the program in a more comprehensive way; many state DOT officials we interviewed told us such a comprehensive evaluation could help improve program effectiveness in a number of ways, including by enabling the program to better keep up with the rapid pace of technological change and re- examining eligibility requirements that limit the flexibility of states to consider other types of projects beyond engineering. Also, most state DOT officials we interviewed agreed that education and enforcement efforts are crucial to further improving safety, as did 8 out of 10 other stakeholders we spoke to, as well as officials from Volpe Center and NTSB. However, according to FHWA officials, those project types are not allowed under the Section 130 Program’s requirements. The officials said FHWA has partnered with FRA and NHTSA on research efforts, such as driver-behavior studies, to inform grade-crossing safety issues. However, the officials said that FHWA has not conducted a program evaluation of the Section 130 Program to consider whether the program’s funding and other requirements allow states to adequately address ongoing safety issues such as driver behavior. FHWA officials said that there is no federal requirement for them to conduct such a program evaluation. We have previously reported that an important component of effective program management is through program performance assessment, which helps establish a program’s effectiveness—the extent to which a program is operating as it was intended and the extent to which a program achieves what the agency proposes to accomplish. This type of evaluative information helps the executive branch and congressional committees make decisions about the programs they oversee. Assessing program performance includes conducting program evaluations, which are individual systematic studies that answer specific questions about how well a program is meeting its objectives. In addition, federal internal-control standards state that management should identify, analyze, and respond to significant changes in a program’s environment that could pose new risks. FHWA officials said the fact that crashes and fatalities have held steady while the volume of train and vehicle traffic has increased is an indication that grade-crossing safety has continued to improve. However, specific to fatalities per million train-miles, FHWA’s 2018 biennial report shows this rate to be fairly constant since 2009. As noted previously, FRA expects train and traffic volumes to continue to increase and has expressed concern that grade-crossing crashes and fatalities may also increase. Without conducting a program evaluation, FHWA cannot ensure that the Section 130 Program is achieving one of the national goals of the federal- aid highway program, to reduce fatalities and injuries. In addition, It is difficult to see how FHWA, in its biennial reports to Congress, could make informed recommendations for future program implementation without conducting a program evaluation to assess, among other things, whether program requirements first established some four decades ago continue to reduce fatalities and injuries. We note that as part of a program evaluation, some changes that FHWA, working with FRA, identifies as potentially having merit to improve the program’s effectiveness could require a statutory change. The continued number of crashes and fatalities at grade crossings with devices intended to warn of a train’s presence calls into question whether the Section 130 Program is structured to help states continue making progress toward the national goal to reduce fatalities and injuries. An evaluation of the program’s requirements could help determine whether Congress should consider better ways to focus federal funds to address the key factor in crashes—risky driver behavior. An FHWA program evaluation could also help determine whether, for example, states could more strategically target emerging safety problems if changes were made to the types of projects eligible for funding under the Section 130 Program. FRA’s new grade-crossing inspectors are meant to increase the effectiveness of FRA’s rail-safety oversight activities, and accordingly, these FRA inspectors, along with FRA researchers, may be well positioned to help FHWA evaluate potential changes to improve the effectiveness of the Section 130 Program. The Administrator of FHWA, working with FRA, should evaluate the Section 130 Program’s requirements to determine whether they allow states sufficient flexibility to adequately address current and emerging grade-crossing safety issues. As part of this evaluation, FHWA should determine whether statutory changes to the program are necessary to improve its effectiveness. (Recommendation 1) We provided a draft of this report to DOT for review and comment. In written comments, reproduced in appendix II, DOT concurred with our recommendation. DOT also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Transportation, the Administrator of the Federal Highway Administration, and the Administrator of the Federal Railroad Administration. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) what has been the focus of Federal Railroad Administration’s (FRA) grade-crossing-safety research, (2) how states select and implement grade-crossing projects and what railroad- and state-reported data are available from FRA to inform states’ decisions, and (3) the challenges states reported in implementing and assessing projects and the extent to which the Federal Highway Administration (FHWA) assesses the program’s effectiveness. The scope of this work focused on the nation’s more than 128,000 public grade crossings. We did not include private grade crossings, as states can only use Railway- Highway Crossings Program (commonly referred to as the Section 130 Program) funds to improve safety at public grade crossings. While FRA provides safety grants to address rail issues, including for grade-crossing projects, we focused our work on the Section 130 Program because it is the primary source of federal funding directed at grade-crossing-safety improvement. For each objective we reviewed: pertinent statutes and FHWA and FRA regulations and documents; interviewed FHWA and FRA program officials in headquarters; and conducted in-depth interviews with a non- generalizable sample of organizations that included officials from 4 freight and passenger railroads, 12 state agencies from 8 states, 6 FRA regional offices, and 8 FHWA state division offices. We also spoke with representatives from relevant associations and officials from NTSB and Volpe Center. We selected these organizations based on our initial background research, prior work, and input from other stakeholders, among other things. See the paragraph below for additional selection details and table 5 for a complete list of organizations we spoke with. We selected eight states as part of our non-generalizable sample for interviews. These states included Arizona, California, Florida, Illinois, Missouri, New Jersey, North Carolina, and Pennsylvania. The states were selected to include a mix of state experiences based on a variety of factors, including the number of grade crossings and crashes at those crossings, and the amount of Section 130 Program funding they received. Specifically, we selected four states from those in the top 25 percent of all states in terms of their number of grade crossings and the amount of Section 130 Program funds they received. We selected the other four states to include a mix of these factors. We also considered geographical diversity and recommendations from FRA and FHWA officials. Within these eight states, we conducted in-depth interviews with FHWA division staff, FRA regional staff, and state officials. A variety of state agencies administer the Section 130 Program within their state; the state officials we spoke with from our eight selected states worked for agencies such as state departments of transportation, corporation commissions, and public utility commissions. We also spoke with a non-generalizable sample of four railroads: Amtrak, CSX, Norfolk Southern, and Sierra Northern. We selected railroads based on a variety of factors including geographic location and stakeholder recommendations. We also conducted additional work related to each of the objectives. To describe the focus of FRA’s grade-crossing-safety research, we examined FRA research aimed at understanding the causes of grade- crossing crashes and identifying potential improvements and described FRA efforts to test new approaches that could improve safety. We did not assess the quality of FRA’s research, as that was beyond the scope of this engagement. Instead, we described the nature of the research. We also spoke with FRA research and development staff, Volpe researchers, and state partners about this work. To describe how states select and implement grade-crossing projects, and what FRA data are available to inform their decisions, we reviewed an academic study that included a literature review and interviews with state officials to describe how states select Section 130 Program projects. We spoke with the researcher and determined the study to be reliable for the purposes of our reporting objectives. We also spoke with officials from our eight selected states, FHWA division staff, and FRA regional staff, and reviewed the states’ 2017 Section 130 Program reports. As part of this objective, we also assessed the reliability of data reported for all railroads in FRA’s National Highway-Rail Crossing Inventory data as of August 31, 2018. For public grade crossings that were not closed, we examined a selection of fields within the database to identify the frequency of missing data (see table 1), data anomalies (see table 2), relational errors, where two related data fields had values that were incompatible (see table 3), and when the data was last updated (see table 4). Specifically, we conducted the following electronic tests on the crossing inventory data to determine if they were within reasonable ranges, were internally consistent, and appeared complete: Before conducting our analysis, we filtered the inventory data to only include open, public, at-grade crossings. To understand FRA’s efforts to improve its crossing inventory data, we interviewed FRA regional and headquarters staff and reviewed job descriptions for FRA’s new grade- crossing inspectors. Finally, to determine the challenges states reported in implementing and assessing grade-crossing safety projects and the extent to which FHWA assesses the program’s effectiveness, we reviewed program requirements and state project data and other components from FHWA’s 2016 and 2018 Section 130 Program biennial reports to Congress. We also reviewed FHWA’s summary of fiscal year 2018 program funds provided to states and federal laws and guidance related to implementing projects and measuring performance. We interviewed state DOT officials from the eight selected states and other stakeholders on the challenges states reported in implementing and assessing projects, and FHWA and FRA officials for their perspectives on managing the program, including how FHWA measures performance and assesses program effectiveness. We compared information collected from FHWA and FRA to federal internal-control standards and criteria on program evaluation identified in our previous work. In addition, we reviewed FHWA and FRA documents designed to guide states, such as the Grade Crossing Handbook, the Manual on Uniform Traffic Control Devices, the Action Plan and Project Prioritization Noteworthy Practices Guide, and other related documents. We conducted this performance audit from November 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Susan A. Fleming, (202) 512-2834, Flemings@gao.gov. In addition to the individual named above, Maria Edelstein (Assistant Director); Gary Guggolz (Analyst in Charge); Steven Campbell; Tim Guinane; Ben Licht; Catrin Jones; Delwen Jones; SaraAnn Moessbauer; Malika Rice; Larry Thomas; and Crystal Wesco made key contributions to this report.", "summary": "Crashes at highway-rail grade crossings are one of the leading causes of railroad-related deaths. According to FRA data, in 2017, there were more than 2,100 crashes resulting in 273 fatalities. Since 2009 crashes have occurred at a fairly constant rate. The federal government provides states funding to improve grade-crossing safety through FHWA's Section 130 Program. The persistence of crashes and deaths raises questions about the effectiveness of the federal grade-crossing-safety program. GAO was asked to review federal efforts to improve grade-crossing safety. This report examines: (1) the focus of FRA's grade-crossing-safety research, (2) how states select and implement grade-crossing projects and what data are available from FRA to inform their decisions, and (3) the challenges states reported in implementing and assessing projects and the extent to which FHWA assesses the program's effectiveness. GAO analyzed FRA data; reviewed FRA's, FHWA's, and states' documents; reviewed a study of states' selection of projects; and interviewed FRA and FHWA headquarters and field staff, and officials from a non-generalizable sample of eight states, selected to include a mix in the number of grade crossings and crashes, and geographic diversity. Research sponsored by the Federal Railroad Administration (FRA) has identified driver behavior as the main cause of highway-rail grade crossing crashes and that factors such as train and traffic volume can contribute to the risk of a crash. (See figure.) Over 70 percent of fatal crashes in 2017 occurred at grade crossings with gates. To meet the requirements of the federal grade-crossing program, states are responsible for selecting and ensuring the implementation of grade-crossing improvement projects. Most state DOT officials and other relevant transportation officials use local knowledge of grade crossings to supplement the results of models that rank grade crossings based on the risk of an accident. These states generally consider the same primary risk factors, such as vehicle and train traffic. FRA is taking steps to improve the data used in its model to help states assess risk factors at grade crossings. For example, FRA's grade-crossing inspectors will review and identify issues with railroad- and state-reported inventory data. FRA is currently developing guidelines, which it plans to finalize by the end of 2018, to implement these inspections as it has for other types of FRA inspections. Officials we spoke with in eight states reported challenges in pursuing certain types of projects that could further enhance safety, in part because of federal requirements. While safety has improved, many crashes occur at grade crossings with gates, and officials said there could be additional ways to focus program requirements to continue improving safety. States' and the Federal Highway Administration's (FHWA) reporting focuses on the program's funding and activity, such as the number and types of projects, yet the low number of crashes makes it difficult to assess the effectiveness of projects in reducing crashes and fatalities. FHWA reports the program has been effective in reducing fatalities by about 74 percent since 1975. However, since 2009, annually there have been about 250 fatalities—almost one percent of total highway fatalities. FRA expects future crashes to grow, in part, due to the anticipated increase in rail and highway traffic. An evaluation of the program should consider whether its funding and other requirements allow states to adequately address ongoing safety issues. FHWA officials said they are not required to perform such evaluations. GAO has previously reported on the importance of program evaluations to determine the extent to which a program is meeting its objectives. An evaluation of the program could lead FHWA to identify changes that could allow states to more strategically address problem areas. GAO recommends that FHWA evaluate the program's requirements to determine if they allow states the flexibility to address ongoing safety issues. The Department of Transportation concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "As we have previously reported, transportation systems and facilities are vulnerable and difficult to secure given their size, easy accessibility, large number of potential targets, and proximity to urban areas. TSA’s mission is to protect the nation’s transportation systems by providing effective and efficient security to ensure freedom of movement for people and commerce. Accordingly, TSA is responsible for managing vetting and credentialing programs to ensure that individuals that transport hazardous materials or have unescorted access to secure or restricted areas of transportation facilities at maritime ports and TSA-regulated airports do not pose a security threat. In order to carry out this responsibility, TSA conducts background checks—known as security threat assessments— on individuals seeking an endorsement, credential, access, and/or privilege (hereafter called a credential). Specifically, TSA reviews applicant information and searches government databases, such as criminal history records from federal, state, and local sources in the Federal Bureau of Investigation’s National Crime Information Center database and Terrorist Screening Database, which is the federal government’s consolidated terrorist watchlist. This information is used to determine whether the applicant has known ties to terrorism and whether the applicant may be otherwise precluded from obtaining a credential based on his or her immigration status and criminal history, among other factors. If TSA determines that an applicant does not pose a security threat, a credential may be supplied by an issuing entity. If it determines an applicant should be denied, the agency issues a preliminary determination of ineligibility letter to the applicant. The applicant may seek redress by appealing the determination or requesting a waiver. TSA’s security threat assessments support over 30 credentialing programs in the maritime, surface, and aviation transportation segments. The largest programs include the Transportation Worker Identification Credential program for maritime workers, Hazardous Materials Endorsement program for commercially licensed drivers, the Aviation Worker program, and TSA Pre® for travelers at airport checkpoints. According to TIM program officials, these transportation programs are collectively estimated to have processed about 12.8 million enrollments by October 2017. Table 1 describes the largest transportation credentialing programs, by segment, and purpose of each. TSA’s legacy IT systems that are currently used to help conduct its security threat assessment and credentialing functions are an aggregation of stove-piped solutions that were developed over a period of time to support individual transportation screening programs. These systems are duplicative and lack needed sophistication to effectively detect, for example, if an individual is attempting to gain access to multiple facilities across different transportation programs in an effort to find any successful entry point. Early detection of this type of threat is difficult and time consuming because many aspects of the current systems are not fully automated. Additionally, we and the DHS Office of Inspector General (OIG) have previously reported numerous shortfalls with TSA’s security threat assessment and credentialing systems. We reported in 2011 that the demand for security threat assessments is expected to continue to grow and the existing credentialing systems will not be able to accommodate this growing enrollment demand. In July 2013, we reported on functional limitations and technical problems with TSA’s legacy credentialing systems that were to be addressed by the TIM system. These limitations included the inability to run reports to measure TSA response times to applicants, track adjudication of cases, and address case workload backlogs. We also reported on delays in processing new cases. We made recommendations to address these issues and DHS agreed with our recommendations. DHS has taken several actions to implement the recommendations, such as establishing a process for developing accurate workload projections and hiring additional adjudicators. In June 2015, DHS’s OIG reported on issues with TSA’s lack of continuous vetting once a credential was issued, referred to as recurrent vetting. For example, the OIG reported on the need for recurrent vetting of aviation workers. Specifically, it found that TSA did not have effective controls in place for ensuring that aviation workers had not committed crimes that would disqualify them from having unescorted access to secure areas of airports, and that they had lawful immigration status and were authorized to work in the United States. Instead, TSA depended on the commercial airports and air carriers to verify criminal histories of workers who already hold credentials, and on the credential holders themselves to report disqualifying crimes to the airports where they worked. The DHS OIG recommended that TSA pilot the Federal Bureau of Investigation’s Rap Back program and take steps to institute recurrent vetting of criminal histories at all commercial airports. TSA concurred with the recommendation and stated that it planned to initiate a pilot Rap Back program to help ensure full implementation across all eligible TSA- regulated populations in the future. In September 2016, DHS’s OIG reported that, although TSA required Transportation Worker Identification Credential cardholders to self- report to the administration and surrender their card when charged with a disqualifying offense, this self-reporting occurred only once between 2007 and 2016. The report also stated that TSA was testing two methods to implement recurrent vetting into its credentialing programs—the Federal Bureau of Investigation’s Rap Back program to check for criminal violations and the use of DHS’s Automated Biometric Identification System to check for both criminal and immigration violations. However, TSA’s plans did not include a method for determining the best approach, and the OIG reported that this would impede TSA’s ability to implement recurrent vetting successfully and efficiently. Accordingly, the OIG recommended that TSA establish measurable and comparable criteria to use in evaluating and selecting the best criminal and immigration recurrent vetting option, and TSA concurred with this recommendation. Also, in September 2016, the DHS OIG reported that the background checks for the Transportation Worker Identification Credential program were not as reliable as they could be. For example, the OIG found that TSA did not have processes in place to ensure the proper separation of duties for adjudicators, who had the ability to assign, review, and perform quality assurance on the same case. The OIG also found missing supervisory review controls in the terrorism vetting process. Accordingly, the OIG recommended that TSA identify and implement additional internal controls and quality assurance procedures; TSA agreed with the recommendation. In response, TSA planned to make improvements to the TIM system to include an additional quality assurance component in which the system would automatically select cases for senior adjudicators to review and to incorporate into the overall reporting and monitoring activities. The TIM system is intended to address the shortfalls identified in these prior reports by providing a modern and centralized end-to-end credentialing system. The system is also intended to provide counter- terrorism and trend analytic capabilities to help identify unusual activities (e.g., credential shopping and using multiple aliases) across the entire credentialing process and all transportation populations supported by TSA’s security threat assessments. In addition, the system is expected to enable automated recurrent vetting of individuals against criminal and immigration databases to ensure that a credential or endorsement is revoked if an individual commits a disqualifying act. The planned credentialing process that is to be supported by the TIM system includes: Registration and enrollment: Individuals seeking a credential or endorsement under one of the transportation programs supported by the system are expected to be able to apply for a security threat assessment at a Universal Enrollment Center or via the system’s online portal. The biographic and biometric information collected from the applicant is to be received and processed by the system. Eligibility vetting and risk assessment: The system is to conduct automated vetting of the applicant’s information against criminal, immigration, and terrorism watchlists to determine the security risk associated with allowing access privileges based on the criteria for the credential or endorsement that the individual is seeking to obtain. If the results return a flag for a potentially disqualifying factor, the applicant’s case is to be sent for adjudication. TSA adjudicators are to use the system to review and adjudicate cases that did not pass automated vetting by comparing the applicant’s information to the criteria for the credential or endorsement that the individual is seeking to obtain. The adjudicators are to determine the applicant’s eligibility for the credential or endorsement, and approve or deny the individual’s application. Issuance: When an applicant is approved through eligibility vetting or adjudication, the system is to notify the applicant of approval and provide instructions on how to receive the credential, which is to be activated by the system and supplied by the issuing entity. The applicant also is to be able to login to the online portal to view the status of the application. Verification and use: Use of the credential in secured areas is to be verified, including determining that the credential is authentic, that the individual is the correct recipient of the credential, and that the credential’s status is valid (not revoked or expired). Revocation and expiration: The system is expected to conduct subsequent automated recurrent vetting of individuals who previously had been approved against criminal, immigration, and terrorist databases on an ongoing basis. If, as a result of recurrent vetting or self-reporting, there is new information indicating that an applicant’s credential should be revoked, the system is to alert the adjudicators who are then to determine if revocation is needed. The system is to prompt credential expiration at the end of a specified period of time. Redress or waiver: An applicant that is denied a credential is to be able to apply to TSA to either appeal the decision, to include providing documentation to prove that he/she is eligible, or request a waiver from having to meet the eligibility criteria. Trend analytics: The system is to allow TSA’s Office of Intelligence and Analysis users to select from a standardized suite of analysis tools that would allow them to identify unusual activities across transportation populations. A key objective would be to identify through analysis those adversaries and terrorists who may attempt to hide behind multiple personas and aliases. Figure 1 provides an overview of the intended future credentialing process which the TIM system is expected to support. TIM program officials decided to adopt an Agile software development approach—a type of incremental development—which calls for the rapid delivery of software in small, short increments rather than in the typically long, sequential phases of a traditional waterfall software development approach. This decision is consistent with OMB’s guidance as specified in its IT Reform Plan, as well as the legislation commonly referred to as the Federal Information Technology Acquisition Reform Act. Agile emphasizes early and continuous software delivery, as well as using collaborative teams and measuring progress with working software. Figure 2 provides a depiction of software development using the Agile approach compared to a waterfall approach. The Agile approach significantly differs in several ways from traditional waterfall software development. Table 2 highlights major differences between the Agile and waterfall software development approaches. Additionally, Agile practices integrate planning continuously throughout the life-cycle. Although Agile requires some high-level, up front planning, in general, planning in Agile focuses on the near term of the next few software releases. Planning sessions are conducted to support each release, iteration, and every work day. For example, development teams have daily meetings, where the team members discuss what they did yesterday and what they plan to do that day. Frequent planning is aimed at ensuring the program is delivering the needed capabilities to the end users. As we have previously reported, numerous frameworks are available to Agile practitioners to guide their Agile software development activities. Scrum is one common framework, which is widely used in the public and private sectors and its terminology is often used in Agile discussions. The following are key Scrum terminology and concepts: Product owners represent the end user community and have the authority to set business priorities, make decisions, and accept completed work. Scrum iterations (also called sprints) are where development teams build a piece of working software during a short, set period of time (e.g., 2 weeks). A collective set of sprints is bundled into a software release. Sprint teams (or development teams) conduct the Agile software development and testing work. These teams collaborate with minimal management direction, often co-located in work rooms. They meet daily and post their task status visibly, such as on wall charts. Scrum masters, similar to project managers, are responsible for removing impediments to the sprint teams’ ability to deliver the product goals and deliverables. User stories convey the customers’ requirements at the smallest and most discrete unit of work that must be done to create working software. Each user story is assigned a level of effort, called story points, which is a relative unit of measure used to communicate complexity and progress between the business and development sides of the project. To ensure that the product is usable at the end of every iteration, teams adhere to an agreed-upon definition of what constitutes acceptable, completed work. Backlogs are lists of requirements, such as user stories, to be addressed by working software. If new requirements or defects are discovered, these can be stored in the backlog to be addressed in future iterations. Velocity is a metric which is used to track the rate of work completed using the number of story points completed or expected to be completed in an iteration (i.e., sprint), or release. For example, if a team completed 100 story points during a 4-week iteration, the velocity for the team would be 100 story points every 4 weeks. Another framework, referred to as the Scaled Agile Framework (SAFe), is a governance model for organizations to use to align and collaborate the product delivery for modest to large numbers of Agile software development teams. The framework is intended to be applied to several organizational levels, including the development team level, the program level, and the portfolio level. It is also intended to provide a scalable and flexible governance framework that defines roles, artifacts, and processes for Agile software development across all levels of an organization. DHS has sought to establish Agile software development as the preferred method for acquiring and delivering IT capabilities. Specifically, in February 2016, the DHS Under Secretary for Management initiated an Agile software development pilot to improve the execution and oversight of the department’s IT acquisitions. The Under Secretary for Management selected five DHS programs that were in various stages of the acquisition life-cycle, including the TIM program, to be part of the pilot. As part of this pilot initiative, DHS established integrated product teams designed to support each of the five programs in their efforts to adopt Agile practices. These teams were directed to focus on effectively planning and executing the pilot programs, as well as developing appropriate documentation to support program execution. According to the Under Secretary for Management, the department plans to use lessons learned from the pilots to develop and update policies and procedures for executing the pilot programs and future IT acquisitions. As of May 2017, department officials had not determined a completion date for the pilot. Additionally, DHS established a headquarters-level Agile team intended to collaborate across the department on improvements to policy, governance, and acquisition guidance. This group is intended to support Agile delivery; codify and publicize process improvement artifacts generated by the program-level integrated product teams; and eliminate redundancies and conflicting guidance so that oversight groups speak with one voice, reducing time through the acquisition process. In addition to the use of Agile software development principles, the TIM program is subject to the department’s oversight framework. Specifically, the program is to adhere to DHS’s acquisition policy, including its systems engineering life-cycle framework, which is intended to support efficient and effective delivery of IT capabilities. The Under Secretary for Management serves as the decision authority for the program, and is responsible for overseeing adherence to DHS’s acquisition policies for the department’s largest acquisition programs (i.e., those with life-cycle cost estimates of $1 billion or more). The Under Secretary for Management is supported by two offices within the department. The first of these offices—the Office of Program Accountability and Risk Management (PARM)—is responsible for DHS’s overall acquisition governance process. PARM is responsible for, among other things, periodically conducting program health assessments to evaluate acquisition programs, in terms of a program’s management, resources, planning and execution activities, requirements, cost and schedule, and how these factors are impacting a program’s ability to deliver a capability. The other key supporting office—the DHS Chief Information Officer (CIO)—is responsible for, among other things, setting departmental IT policies, processes, and standards. The CIO is also responsible for ensuring that acquisitions comply with the department’s IT management processes, technical requirements, and the approved enterprise architecture. Within the Office of the Chief Information Officer (OCIO), the Enterprise Business Management Office is to ensure that the department’s IT investments align with its missions and objectives. As part of its responsibilities, this office periodically assesses investments to gauge how well they are performing through a review of program risk, human capital, cost and schedule, and requirements—referred to as the CIO’s program health assessment. According to the CIO, the Chief Technology Officer, which is responsible for leading the development of IT and standards across the department, and for management of the Agile pilot initiative, offers guidance and assistance to programs to help improve their execution. In addition, the Director of the Office of Test and Evaluation is to provide oversight of components’ independent test and evaluation activities. The DHS Acquisition Review Board is chaired by the Under Secretary for Management and is made up of many executive level members including the CIO, the Executive Director of the Office of PARM, and the Chief Procurement Officer. The board is to meet periodically to oversee programs’ business strategies, resources, management, accountability, and alignment to strategic initiatives. Additionally, the department has established executive steering committees, which generally are comprised of component and DHS executive-level members, such as the component CIO and Chief Financial Officer, as well as the DHS Chief Technology Officer and the Executive Director of the Office of PARM. The committees are to provide governance, oversight, and guidance to programs and their related projects and initiatives to help ensure successful development and operations. Figure 3 shows the organizational structure of the key DHS organizations with IT acquisition management responsibilities. The TIM program office resides within the Mission Operations component of TSA’s Office of Information Technology. The expected users of the TIM system come from multiple offices under the Office of Intelligence and Analysis, including the Security Threat Assessment Operations office, which is responsible for conducting the security threat assessments, and the Program Management office, which is responsible for managing TSA’s maritime, surface, and aviation credentialing programs. The TIM program’s Executive Steering Committee is chaired by the TSA CIO, who is the head of the Office of Information Technology, and the TSA Deputy Component Acquisition Executive, and meets quarterly. In addition, the TSA Operational Test Agent is to perform operational testing and evaluation of the TIM system’s operational effectiveness, interoperability, cybersecurity, and suitability. As previously mentioned, the DHS Director of the Office of Test and Evaluation is to provide oversight of these test and evaluation activities. Figure 4 shows the key TSA organizations involved with the TIM program. The TIM program experienced significant cost, schedule, and performance issues during its initial implementation efforts. Specifically, in May 2014, TSA launched an initial version of a commercial-off-the-shelf (COTS) system for the maritime transportation segment of TIM that was to support the Transportation Worker Identification Credential program. However, as we previously reported, in September 2014, TSA reported to DHS that the program had breached its baseline because it had significant cost, schedule, and performance issues due to, among other things, the addition of newly created credentialing programs that were added to the program’s scope, such as TSA Pre® and Chemical Facility Anti-Terrorism Standards. TIM program officials also reported in the breach remediation plan other issues that led to the breach, including different expectations between TSA officials and the contractor regarding the extent of reuse of system functionality among the different transportation segments. Specifically, TSA expected that it would be able to reuse more of the maritime functionality for the surface and aviation populations, while the contractor expected there to be less reuse. In January 2015, the Acting Under Secretary for Management directed program officials to suspend all planning and development efforts related to the other two segments of the program—surface and aviation—until the issues with the maritime segment could be resolved. In August 2015, program officials prepared a revised life-cycle cost estimate which increased costs to approximately $1.34 billion (about $713 million more than the original 2011 estimate), and delayed full deployment of the TIM system (to include all three transportation segments) to fiscal year 2022 (7 years later than originally planned). Also, in September 2015, the Director of the Office of Test and Evaluation issued a letter of assessment which concluded that initial operational testing of the COTS system for the maritime segment had determined that the system was not operationally effective and not operationally suitable. The Under Secretary for Management directed the DHS CIO to conduct a thorough review of the proposed plans for moving forward with the TIM program. After conducting the review, the CIO did not support the program’s proposal. As a result, in November 2015, the Under Secretary for Management continued the suspension of all developmental efforts for the surface and aviation transportation segments, but authorized the program to continue resolving problems that were identified during initial operational testing for the COTS system being used by the maritime segment. The Under Secretary for Management also directed the CIO to form and lead an integrated product team with senior TSA representatives and the TIM program office to develop a new strategy for the program. In March 2016, DHS and TSA officials completed a new strategy for delivering TIM capabilities. This strategy included the following changes: replace proprietary COTS applications with custom-developed applications using open source code; transition traditional, large development teams using a waterfall system development methodology to an Agile software development framework to enable rapid, incremental development and deployment; and migrate from a defined, fixed data center environment to a scalable Federal Risk and Authorization Management Program (FedRAMP) certified cloud computing environment. Also, according to the new strategy, the move from the COTS product to an open source solution is to include replacing the COTS product that had already been deployed to the maritime segment with the open source solution. It is also to include replacing the legacy systems that support the credentialing programs from the other two transportation segments (surface and aviation) with the open source solution. TSA plans to incrementally transition the program from these legacy systems between fiscal years 2018 and 2021. Additionally, the system is expected to interface with at least 19 other information systems, including the following key systems: TSA’s Transportation Vetting System, which conducts initial and recurrent name-based matching against defined terrorist related data sets. The Federal of Bureau of Investigation’s National Crime Information Center, which is an electronic clearinghouse of crime data. DHS’s Automated Biometric Identification System, also referred to as IDENT, which is the central DHS-wide system for storage and processing of biometric and associated biographic information for national security, law enforcement, immigration and border management, intelligence, and other background investigative purposes. TSA’s Secure Flight, which identifies individuals who may pose a threat to aviation or national security and designates them for enhanced screening or prohibition from boarding an aircraft, as appropriate. The U.S. Citizenship and Immigration Service’s Systematic Alien Verification for Entitlements, which is the primary data source for government agencies to verify legal entry and presence in the United States of a non-U.S. citizen or naturalized U.S. citizen. In April 2016, the Under Secretary for Management approved the TIM program’s new strategy and, in September 2016—almost 2 years after the program was initially suspended—the program was rebaselined to reflect the new strategy. As we previously reported, the estimated cost and schedule in the revised baseline was significantly different than the initial baseline. The revised baseline estimate was for about $1.27 billion (a $74 million decrease from the previous 2015 cost estimate and an overall increase of $639 million from the original 2011 estimate), with full deployment planned for 2021 (a 1-year acceleration from the previous 2015 schedule and an overall delay of 6 years from the original 2011 schedule). Table 3 shows the estimated costs and schedules reflected in the initial and revised estimates. According to TIM officials, in the program’s first 8 years (between October 2008 and September 2016), TSA spent over $280 million to deploy the initial COTS solution to the maritime segment and address critical fixes in the solution (i.e., the solution that TSA determined it needs to replace). Also during 2016, TSA began transitioning to an Agile software development framework. In September 2016, TSA issued two task orders to a contractor to provide Agile software development services. The orders were issued to the same design and development contractor that had assisted with the initial deployment of the TIM COTS solution. From October 2016 to June 2017, the program deployed four software releases using Agile software development practices. These releases were focused on, for example, deploying new functionality to the COTS system to enhance the criminal and immigration vetting data provided to adjudicators. In December 2016, between the first and second Agile releases, the program suspended new development for 1 month while officials reconsidered the order in which they would deliver functionality. Also during this period, the program developed and deployed a smaller release which program officials refer to as a “half release.” According to program officials, this release did not produce any new capabilities and instead addressed operations and maintenance-related fixes to the deployed COTS system. After development of the second software release, at the end of March 2017, the program was reviewed by DHS’s Acquisition Review Board. The purpose was to review the results of follow-on operational testing that was performed to determine whether the program had adequately addressed the prior system and usability issues and implementation of the program’s new strategy. The meeting was also intended to discuss the status of several action items from a prior review board meeting that occurred in September 2016, such as finalizing a test and evaluation master plan, conducting a cybersecurity threat assessment, updating the program’s mission needs statement and concept of operations, and establishing software development cost metrics. Implementation of the new strategy continues to be monitored by DHS and TSA oversight bodies. The new strategy for the TIM program addressed a number of major challenges that the program faced during earlier efforts to develop and deploy the system; nevertheless, key challenges remain. Specifically, of the seven major challenges that the program faced during its initial implementation of a COTS solution for the maritime segment, four challenges have been addressed related to (1) system performance and usability issues, (2) data migration issues, (3) information security testing, and (4) the inadequacy of the program’s previous hosting facility. However, the remaining three challenges regarding constraints with COTS product, significant addition of new transportation programs (e.g., TSA Pre®), and insufficient stakeholder coordination and communication have not been fully addressed. According to DHS guidance, among other things, an operational test and evaluation examines systems for operational effectiveness. Specifically, it tests for the ability of a system to accomplish a mission when used by representative users in the expected environment. The 2015 initial operational testing of the maritime segment (supporting the Transportation Worker Identification Credential program) found that the COTS system was extremely unreliable due to frequent critical failures, and had several system performance and usability issues that limited users’ ability to execute tasks in a timely and accurate manner. These issues included lags, freezes, the need for excessive refreshes, inadequate reporting and case management functionalities, as well as an interface that was not user-friendly. For example, the system was unable to produce accurate reports on case workload and status, so users expended significant effort creating spreadsheets to manually assign cases and manage their progress. The system was also unable to perform certain waiver functions in a timely and complete manner, which resulted in a significant backlog. The program office has addressed the issues identified in the initial operational test report by first identifying a list of over 900 action items. According to TIM officials, they validated this list with the operational test agent and prioritized the action items with the product owners (i.e., end users) to identify which were the most critical to complete. For example, critical items included addressing issues with the waiver functions, assigning cases, and issuing credentials. The program implemented the critical fixes by developing seven software releases from September 2015 to October 2016. In January 2017, the TSA operational test agent reported that follow-on operational testing of the COTS system confirmed that the program had adequately addressed the prior system and usability issues. As a result, according to the test agent, the program’s previously deployed maritime segment of the system performed as intended. According to leading practices, IT programs should identify potential problems before they occur. This allows programs to plan and execute activities to mitigate the risk of such problems having adverse impacts on the program. When the TIM program transitioned maritime users from the legacy system to the COTS system, according to TSA’s breach remediation plan, program officials found that cleaning and properly migrating data was very difficult and time consuming because the legacy systems were old and the data mapping information was not readily evident. Program officials stated that the data migration efforts were also difficult because of the proprietary nature of the COTS product, which impacted the ability to effectively migrate data from legacy systems. The additional time needed for data migration resulted in higher than anticipated costs for the maritime transportation segment. Program officials have taken action to better account for the TIM program’s future data migration efforts. Specifically, as part of the new strategy, the officials plan to defer legacy data migration until after system deployment efforts are complete to avoid disrupting deployment efforts. The strategy focuses on the program migrating only closed case data from the legacy systems to the new system. As such, adjudicators are to continue to complete and close any security threat assessment cases opened in the legacy system even after the new system is deployed, and the new system is to only handle newly opened security threat assessment cases. Once final disposition of the cases in the legacy system is complete, those cases would then be included in the closed case data migration effort, which is planned to occur at the end of development, around fiscal years 2020 to 2021. In addition, the new strategy includes streamlining the data migration by using the open source solutions to help simplify the migration of data on transportation populations from the legacy systems. As a result of the new approach, the program should be better positioned to more effectively migrate data during future transitions between the legacy systems and new system. According to DHS guidance, the operational test and evaluation also should examine the department’s systems for operational suitability, which is the degree to which a system is deployable and sustainable. The evaluation is to take into account factors such as reliability, maintainability, availability, and interoperability. The 2015 initial operational testing of the COTS system found that it was not suitable because the system had significant information security weaknesses. Specifically, the system inappropriately provided users with greater access than was necessary to do their jobs, which undermined the security benefits of controlling what different users were able to do in the system based on their role. The COTS system also contained critical and high-risk system security vulnerabilities which could result in the compromise of sensitive system information, such as passwords, and could hinder TSA officials’ ability to effectively respond to incidents. Program officials took actions to address the security weaknesses previously identified. For example, in response to the findings from the initial operational testing, between September 2015 and October 2016, they developed and released fixes to the significant security weaknesses. In April 2017, the results of the follow-on operational testing confirmed that the COTS system was free of critical or high-risk system security vulnerabilities and that it appropriately restricted access to the system by only allowing users to access areas of the system needed to support their specific business tasks. In addition, critical steps to evaluate the system’s cybersecurity have been planned, but not yet completed. Specifically, testing for realistic cybersecurity threats which is used to help categorize the system’s risk- level in terms of confidentiality, integrity, and availability, was deferred until March 2018. Program officials decided to defer this test until new hosting environments for TIM are implemented, rather than testing TIM in an environment that will soon be retired. These environments are intended to enable the development, testing, and production of the system. However, implementation of those environments has been delayed until December 2017, and as a result, the cybersecurity vulnerability assessment has been deferred to March 2018. The identification of a time frame in which the program plans to conduct this important cybersecurity test is a step in the right direction, and avoiding additional delays will be important. According to OMB, a hosting facility or data center is to process or store data and must meet stringent availability requirements. Additionally, cloud computing can be used as a means for enabling on-demand access to shared and scalable pools of computing resources. During the initial implementation of TIM, the system was hosted in a cloud that operated out of a DHS data center (referred to as DHS Data Center 1). However, the DHS cloud was higher in operations and maintenance costs than the program originally planned, which presented a challenge for the program. To address this challenge, in 2016, TIM program officials decided to move the COTS system that was previously deployed (the maritime segment) out of the DHS cloud and set it up in a public cloud environment. They also planned to use the public cloud environment to develop, test, and operate the future TIM open-source based system. The officials planned to use a phased migration that consisted of first establishing hosting environments at two data centers—DHS Data Center 1 and TSA Colorado Springs Operations Center. The officials planned to use the data centers for the development, testing, and production of the future TIM open-source based system, and then eventually transition to a public or hybrid cloud once the system reaches full operational capability in fiscal year 2021. As part of this approach, officials planned to establish 10 development, testing, and production environments at these data centers from January to July 2017, so that TIM’s development teams did not have to compete for the same environments during Agile software development and testing efforts. While the program experienced delays in setting up its production environment, officials recently took actions to address these delays. Specifically, the program was expected to have a new production environment available at the TSA Colorado Springs Operations Center by March 2017; however, it was delayed until May 2017. Additionally, while migration of the TIM system to the new hosting environments was planned to occur by September 2017, it has been delayed. These delays have contributed, in part, to delays in other aspects of the program, including the execution of the cybersecurity vulnerability assessment, as well as delays in the implementation of automated testing and deployment tools (discussed later in this report). In response to these delays, program officials recently established a revised schedule in May 2017 for setting up the new environments by December 2017. Effectively executing against this updated schedule should help to keep the program on track with delivering these important environments and fully addressing the related challenge that the program experienced during its prior implementation efforts. According to leading practices and guidance, technology decisions should seek to enable services to scale easily and cost-effectively and to avoid vendor lock-in by, for example, using open source solutions. The benefits of using open source solutions can include improved software reliability and security through the identification and elimination of defects from continuous and broad peer review of publicly available source code that might otherwise go unrecognized by a more limited core development team; unrestricted ability to modify software source code; no reliance on a particular software vendor due to proprietary restrictions; reduced software licensing costs; and the ability to “test drive” the software with minimal costs and administrative delays in a rapid prototyping and experimentation environment. Also, according to leading practices, IT programs should ensure that their plans include how they will transition from the current state to the final state of system operations. Such planning provides a mutual understanding to relevant stakeholders of how programs are to accomplish the transition. According to TSA’s breach remediation plan, the TIM program’s use of a COTS solution led to several challenges. For example, program officials reported that the COTS product restricted their ability to make changes to the product to improve system usability and, as previously discussed, impacted the ability to effectively migrate data from legacy systems because of the proprietary COTS product. Program officials also reported that they were highly dependent on the COTS vendor to remediate compatibility issues and resolve problems, which required additional time. The plan also stated that the COTS product required a complex system architecture which prevented the program from implementing modern software development and testing tools. Finally, use of the COTS product resulted in higher software licensing costs. The TIM program’s new strategy is intended to address these challenges by moving away from using a COTS product to a custom-developed open source solution. However, the program’s approach for developing and delivering this new solution has been in a continual state of fluctuation and implementation plans have not been defined. As such, this challenge has yet to be fully addressed. Specifically, In September 2016—after the 2-year pause in the program and completion of its extensive rebaselining effort—DHS and TSA officials decided that TSA would incrementally retire legacy systems as the transportation programs that use those systems are migrated to the open source solution; they also decided to eventually replace the COTS system that was previously deployed to support the maritime Transportation Worker Identification Credential program and migrate to the open source solution. This was to be completed using a staged approach between the migrations, and also by using two versions of the COTS system as well as the open source system. However, the program lacked a plan detailing how it was going to migrate from the current legacy state, to the interim environment (with the two versions of COTS plus an open source system), to the final state. As previously mentioned, in December 2016, new development for the TIM system was paused once again to, among other things, further evaluate the transitioning approach that was agreed to 3 months prior. Four months later (in mid-March 2017), program officials decided to continue pursuing the approach that was agreed to in September. Subsequently, the high-level implementation schedule was revised to adjust for delays that this most recent replanning effort contributed to (other contributing factors for the delay are discussed later in this report). The revised schedule delayed deployment of the initial Pre® capabilities by 6 months and other key functionality up to 12 months. Further adding to the fluctuation in the program, at the end of March 2017, the DHS Acquisition Review Board requested that the program’s implementation approach be revised to accelerate the delivery of the TIM program’s front-end interface for adjudication and redress functions. However, it is unclear how the acceleration of the development and implementation of these functions will impact the delivery of the other planned functionality, and what tradeoffs the program will need to make. Program officials were expected to develop an overview of the acceleration efforts associated with cost, schedule, risk, and impacts on the program and deliver it to PARM and the Office of the Chief Technology Officer in August 2017. As a result, while it has been 8 months since the TIM program was rebaselined, the details of how the program will transition from its current state, to an interim state, then to the final state of full open source, have yet to be determined. This is contrary to leading practices that we have previously identified, which state that when pursuing an IT modernization effort, organizations should develop a plan for transitioning from the current to the target environment. In response to our concerns, program officials stated that after they determine how they will adjust to incorporate the Acquisition Review Board’s recent acceleration request, they will determine the details of how the program will achieve the desired final state. However, until the program establishes and implements specific time frames for determining key implementation details, including how it will transition the program from its current state to an interim state and to the final state, the TIM program office, and TSA and DHS oversight bodies cannot be certain about how the program will ultimately deliver its complete open source solution. According to leading practices, programs should manage changes to requirements as they evolve during the project. Programs should also ensure that planned schedules provide a realistic forecast for completion of activities, including providing reasonable slack (i.e., flexibility in the schedule). After the TIM program was initiated in 2008, it experienced significant increases in scope, such as the addition of TSA Pre® and Chemical Facility Anti-Terrorism Standards populations in 2012, which required more functionality and considerably more processing demands than originally planned. The TIM program was challenged to accommodate the additional work needed to incorporate these new transportation populations and capabilities, and, in part, contributed to a significant breach in its original cost and schedule estimates. To address the challenge, the TIM program incorporated the additional functionality and processing requirements into its cost and schedule rebaseline that was approved in September 2016. In addition, the program’s new strategy addressed the need to be adaptable to accommodate any new transportation populations and capabilities that could be added in the future by taking an enterprise-level approach to providing capabilities. Nevertheless, while the TIM program incorporated TSA Pre® into its new plans, the implementation schedule for the program was very compressed and program officials did not establish a schedule that realistically forecasted when activities would be completed. Specifically, program officials planned to deploy initial TSA Pre® capabilities by May 2017 without any slack in the schedule. According to program officials, the reason for this approach, was because TSA Pre® was considered a high priority for migrating from its legacy system in order to accommodate an expected influx of applicants during the summer months. However, slack was not incorporated in the implementation schedule; therefore, when the program experienced schedule delays, it resulted in the program missing the May 2017 implementation deadline and being rescheduled to November 2017. The 6-month delay in delivering initial Pre® capabilities was due to the delays discussed in the prior section associated with replanning the strategy for transitioning to the open source system, as well as delays in onboarding additional development team members and setting up new development and production environments. The delay in delivering Pre® capabilities is especially problematic because program officials have reported that the legacy system is at risk of exceeding its processing capacity. Additionally, as previously mentioned, the program’s revised schedule shows the delivery dates for almost all (8 of 10) capabilities being significantly pushed back—with 2 capabilities being delayed up to 12 months. Moreover, not only were the implementation dates delayed for these efforts, the time to complete a number of these efforts was reduced by about 1 to 12 months—thus further exacerbating our concerns about unrealistic schedules. Without a schedule that realistically forecasts when activities will be completed, TIM program officials cannot ensure that they will meet the dates that they have committed to, such as when key capabilities for TSA Pre® are to be deployed. According to leading practices, programs should coordinate and collaborate with relevant stakeholders (i.e., those that are affected by or in some way accountable for the outcome of the program, such as program or work group members, suppliers, and end users). Stakeholder coordination includes, for example, involving stakeholders in reviewing and committing to program plans, agreeing on revisions to the plans, and identifying risks. Programs should also identify the needs and expectations of stakeholders and translate them into end user requirements. However, during prior implementation efforts with the COTS solution, the program experienced challenges with effectively coordinating and communicating with end-users. For example, according to program documentation, it had not adequately collaborated with end users in developing and implementing business requirements and conducting post-deployment user satisfaction assessments. This led to frustration among end users who felt inadequately informed and prepared for the new COTS system. To address this challenge, the TIM program’s new strategy includes establishing a product owner role, which, as previously mentioned, is intended to represent the end user community and have the authority to set business priorities, make decisions, and accept completed work. The program’s adoption of the Agile software development approach has also significantly increased the frequency of the program’s engagement with stakeholders to define, test, and implement software releases. In addition, program officials established an organizational change management strategy in October 2016 that is intended to, among other things, focus broadly on establishing overall communication processes for program stakeholders. This strategy identifies key steps such as, establishing a communication team and hiring a communication lead to oversee the development and execution of the communication action plans, establishing a communication working group, and serving as chair of the communication working group. This group is to be responsible for developing four communication action plans for key stakeholder groups (e.g., new transportation populations, existing transportation populations, and management). These particular steps were to be completed from November 2016 through January 2017. However, while as of May 2017, the TIM program had implemented certain steps from the organizational change management strategy, such as establishing a communication team, the program has been delayed in implementing other steps. Specifically, the communication lead position was to be filled in November 2016. However, in March 2017 TIM program officials stated that the position had not yet been filled due to the federal hiring freeze. Additionally, because of the vacancy in the communication lead position, other key actions have been delayed, such as the development and execution of the communication action plans. Program officials have not established new time frames for completing the remaining steps outlined in the organizational change management strategy. Until these time frames are established and effectively executed, program officials will have less assurance that there will be effective communication with stakeholders and customers to ensure that the program is meeting their needs. As discussed previously, transitioning a program from waterfall development to Agile software development is a significant effort, and requires the implementation of fundamental practices to ensure that the transition is successful. According to leading guidance, an organization transitioning to Agile software development should establish critical practices to help ensure successful adoption of the Agile approach, such as obtaining full support from leadership to adopt Agile processes, enhancing Agile knowledge, ensuring product owners are engaged with the development teams and have clearly defined roles, establishing a clear product vision, prioritizing backlogs of requirements, and implementing automated tools to enable rapid system development and deployment. While the TIM program has fully implemented the first two of these leading practices necessary to ensure the successful adoption of Agile, the remaining four practices have not been fully implemented. The gaps we have identified with the program’s implementation of Agile are concerning given that it did not follow key IT acquisition best practices when using its waterfall development approach during the program’s first 8 years and spent over $280 million on a system that TSA has determined it needs to replace. According to leading practices and guidance, an organization transitioning to Agile software development should get and maintain full support from the organization’s leadership to adopt Agile processes. Leadership support helps empower employees to continuously improve the use of Agile software development practices. DHS and TSA leadership have approved the TIM program’s adoption of Agile software development, and continue to support the transition. For example, the DHS OCIO worked closely with TSA officials in 2015 and 2016 to develop the new strategy for the program which included moving away from a waterfall development approach to Agile software development. As previously mentioned, the Under Secretary for Management selected the TIM program to be part of the DHS Agile pilot initiative in February 2016 and approved the program’s new strategy in April 2016. Moreover, the DHS Office of the Chief Technology Officer has continued to provide guidance and resources to the program since it adopted Agile. For example, TIM program officials stated that the DHS Chief Technology Officer added two of the office’s full-time and one part-time staff members to the TIM program. DHS and TSA officials stated that the Chief Technology Officer also provided an Agile coach to assist the TIM Program Manager about 3 days per week with establishing an Agile governance framework. Finally, DHS established an Agile Integrated Product Team that is co-chaired by PARM and the TIM Program Manager. The team meets bi-weekly to provide guidance on adopting Agile processes. As a result of the sustained leadership commitment, the program is better positioned to continuously improve its Agile practices. According to leading practices and guidance, an organization transitioning to Agile software development should ensure that the entire program team receives Agile training. This allows organizations to achieve a faster shift away from the previous culture and processes and toward a more agile culture. Toward this end, the TIM program requires its Agile contractor to ensure that development teams are trained and skilled in Agile methods, as well as in the specific Agile frameworks the program has adopted, which include the Scrum and SAFe frameworks. Additionally, the program provided initial Agile training for key program staff when it began transitioning to Agile software development. Specifically, the program provided a mandatory 2-day Agile workshop in October and December 2016 which covered basic Agile principles and the Scrum and SAFe frameworks. This training was provided to many key staff members, including contractor support staff, a contracting officer representative, and product owners. Further, in December 2016, the program began providing training on the SAFe framework to its government employees. This training was tailored based on different roles, such as Agile practitioner, program manager or product owner, and scrum master. The training courses were provided to key staff members, including TIM program leadership, team leads, branch managers, and scrum masters. As a result of providing Agile training, the program’s staff should be able to more effectively adopt and apply Agile software development processes. According to leading practices and guidance, an organization transitioning to Agile software development should designate a product owner who represents the user community and establishes priorities based on business needs, approves user stories and their acceptance criteria, and decides whether completed work meets the acceptance criteria and can be considered done. The product owner should also maintain close collaboration with the development teams by, among other things, providing daily support to help clarify requirements and attending key Agile meetings, such as sprint- and release-level planning sessions and system demonstrations. Additionally, roles and responsibilities among relevant stakeholders, such as the product owner, should be clearly defined and documented by the organization that is transitioning to Agile software development, so that the stakeholders are aware of their responsibilities and given the authority to perform their roles. The TIM program has two different groups of individuals that collectively share the responsibilities of product owner, and while these groups frequently engage with the development teams, program officials have not yet clearly defined the groups’ roles and responsibilities. Specifically, according to program officials, the first group consists of five product owners that represent end users and are collectively responsible for supporting all development teams, attending all Agile meetings, and prioritizing and approving planned and completed work. In addition, according to program officials, these five individuals are also responsible for approving user stories associated with new system functionality. The other group is referred to as the solutions team, which includes, for example, the TIM Chief Architect and Chief Engineer. According to program officials, the technical work (which is to help enable the system functionality, such as ensuring network connectivity and proper software licenses) is approved by the solutions team. Nevertheless, while program officials told us about these high-level roles and responsibilities, the program’s documentation does not clearly define them among the five product owners and the solutions team. Moreover, program officials have not defined the rules of engagement for these product owners, such as how competing priorities among different product owners should be handled. According to program officials, the lack of clearly defined roles and responsibilities has not been a problem for the program because the product owners and the solutions team regularly communicate and coordinate with each other, and thus far, have been in agreement on the priorities for the program. However, the program recently scaled up the amount of work being conducted simultaneously, which adds to the volume of the decisions that need to be made and the coordination that has to occur among the five product owners and solutions team. Thus, even if the program has not yet experienced issues with coordination, without more clarity in the roles and responsibilities among the groups that are responsible for prioritizing and accepting work, the program risks facing challenges in establishing priorities, approving user stories, and deciding whether completed work meets the acceptance criteria. According to leading practices and guidance, a program transitioning to Agile software development should have a clearly defined vision. This can be in the form of a product roadmap, to guide the development of the product and to help inform the planning and requirements development of Agile software development releases. Consistent with leading practices, TSA established a vision for the TIM program. This vision is articulated in multiple documents—including the Mission Needs Statement, Concept of Operations, and Operational Requirements Document. Officials also use a strategic roadmap to articulate the program’s vision, which specifies the high-level system capabilities that are to be deployed over the life-cycle of the program through 2021. However, the program’s vision has not always informed the planning of requirements for the software releases, as intended by leading practices. Specifically, the capabilities outlined in the program vision documents, such as the strategic roadmap, do not consistently map to program requirements. While 5 of the 10 capabilities in the strategic roadmap align to the high-level and large scope requirements, referred to as epics, the other half of the capabilities do not clearly align to the epics. For example, the adjudication and redress capabilities that are in the strategic roadmap do not align to any epic. In addition, the capability for public-facing portals does not clearly track to any epic. TIM officials recognized the alignment issues, and in August 2017, stated that they are in the process of establishing alignment from the program’s vision down to the lowest level of requirements, by refining the program’s vision and requirements. Officials also stated that they expected this effort to be completed by 2018. Effective execution of this effort should help ensure the program’s vision is informing requirements planning. According to leading practices and guidance, a program transitioning to Agile software development should have a prioritized list of the requirements that are to be delivered—referred to as the backlog. This backlog should be maintained so that the program can ensure it is always working on the highest priority requirements that will deliver the most value to the users. In addition, according to TIM Agile management documentation and program officials, the program’s backlog of features (i.e., mid-sized requirements) is expected to represent the features that are to be delivered over the next several software releases. These features are to be assigned priority levels to help determine which should be selected for development when planning the next release. According to TIM Agile management documentation, the TIM program is expected to manage a backlog for each software release, which is to identify the features and their derived user stories (i.e., the smallest and most detailed requirements) that are to be delivered in a specific release. The documentation also indicates that each feature and user story is to be assigned priority levels to determine which should be included in the development of the next release and associated sprint. Figure 5 illustrates the intended prioritization in the features, releases, and user stories backlogs. However, as of July 2017, the program’s backlogs did not contain specific prioritization levels for each of the features and user stories, as called for in DHS guidance. According to program officials, instead of assigning specific prioritization levels, they had more generally identified which features should be developed within the near-term (e.g., in the next several Agile releases). Program officials recognized that they still needed to prioritize their backlogs by assigning priority levels to all features and user stories, but they did not have a time frame for completing this effort. Without ensuring full prioritization of current and future features and user stories, the program is at risk of delivering functionality that is not aligned with the highest needs of those that are responsible for conducting security threat assessments to protect the nation’s critical transportation infrastructure. According to leading practices and guidance, automating system development and deployment work and avoiding manual work is especially important for Agile programs, as it enhances the ability for rapid development and delivery of high quality software. Specifically, a program transitioning to Agile software development should use an automated tool for managing Agile activities, such as maintaining the product backlog and tracking the status of completed work. The program should also establish automated testing and deployment capabilities to improve the quality of the system. For example, according a DHS’s Agile development instruction manual, the vast majority of software defects are discovered during system integration testing, and—if automated—this testing can be run multiple times on a sprint or release in order to identify more defects sooner. In addition, automated tools can enable more efficient processes for frequently integrating computer code that is developed by different team members (e.g., hourly or daily), in order to quickly detect any code integration errors. Automation of testing can also help decrease the risk of introducing security flaws due to human error. However, program officials deferred implementation of an automated Agile program management tool and many other testing and deployment tools. Specifically, while the program had been using Agile software development practices since October 2016, the program has not used an automated management tool for tracking the status of completed work for its first three Agile software releases. Instead the program has used spreadsheets that require TIM program officials to manually populate and track large amounts of program status information. Program officials had planned to implement an automated management tool by October 2016, but did not do so until the end of April 2017. According to the officials, the delay occurred because they were in the process of tailoring the SAFe governance framework and the management tool needed to be customized to reflect the tailored approach. Regarding tools for testing and deployment, as of May 2017, the program was only using 4 of the16 automated tools that program officials planned to use. These included tools that enable the management of software code development, defect tracking, and components of automated functional testing. However, the remaining 12 testing and deployment tools had not yet been implemented. These include, among others, tools that enable the automated building of software code, frequent merging of an individual piece of software code with the main code repository so that new changes are tested continuously (referred to as continuous integration), small automated tests to verify that each individual unit of code written by the developer works as intended, and installation of application patches to protect against known vulnerabilities. TIM program officials stated that these testing and deployment tools are not expected to be implemented until the new development, testing, and production environments are set up. However, as previously mentioned, the program has experienced challenges in implementing these environments. As a result, the program’s use of manual processes have been time consuming, impeded visibility into the process, and hindered software testing. In addition, without automated tools, program performance metrics were being manually calculated and this increases the risk for incomplete and inaccurate data. While the automated Agile management tool has just been implemented, until the remainder of the automated Agile testing and deployment tools are implemented, the program is likely to continue to operate at reduced efficiency levels, and be limited in its ability to ensure product quality. According to leading practices, to ensure effective program oversight of cost, schedule, and performance, organizations should: ensure that corrective actions are identified and tracked until the desired outcomes are achieved, document relevant governance and oversight policies and monitor program performance and progress, and rely on complete and accurate data to review performance against expectations. While TSA fully implemented the first practice, the remaining three practices were not fully implemented by DHS and TSA. As a result, the effectiveness with which the governance bodies oversee and monitor the program has been limited. According to leading practices, effective program oversight includes ensuring that corrective actions are identified and tracked until the desired outcomes are achieved. In this regard, governance bodies should collect and analyze data on program risks and issues and determine corrective actions to address them and track them to completion. TSA has established a process for ensuring that corrective actions are identified and tracked. Specifically, the program has a process for identifying corrective actions and monitoring the status of these actions in its weekly program status reviews. The program also uses an automated tool to track and maintain a complete list of all actions that have been identified. As of February 2017, the list contained 89 actions and included the status of the actions—83 of which had been tracked to completion. As a result of the program having a process that can identify and track corrective actions, it is better positioned to address significant deviations in cost, schedule, and performance parameters. According to leading practices, effective program oversight includes the use of documented policies and procedures for program governance and oversight, such as reporting and control processes. These processes may include, among others, requiring programs to report on the status and progress of activities; expected or incurred program resource requirements; known risks, risk response plans, and escalation criteria; and benefits realized. Oversight and governance documentation may also include threshold criteria to use when analyzing performance, and the conditions under which a program or project would be terminated. TSA and DHS have documented selected policies and procedures for governance and oversight of the TIM program. Specifically, DHS documented procedures for its Acquisition Review Board and its Executive Steering Committee for the TIM program on how these governance bodies are to review the cost, schedule, and performance of the program. For example, according to the Committee’s charter, it is responsible for assessing the health of the program and identifying major issues and risks, utilizing a standard reporting format at oversight meetings. TSA has also documented processes for the program’s Agile milestone reviews, such as conducting workshops at the end of the release cycle to perform a system demonstration, review qualitative metrics, and promote continuous quality improvement. TSA also developed a risk management plan tailored for the Agile approach to guide TIM staff members in identifying, managing, and mitigating risks and issues impacting cost, schedule, and performance of the program. The agency also developed a test and evaluation master plan that outlines how it and DHS will conduct and oversee testing and evaluation of the program’s capabilities under the new Agile software development approach. However, TSA and DHS have not developed or finalized other key oversight and governance documents. Specifically, three oversight and governance policies have not been finalized and/or appropriately updated: the TIM program’s tailoring plan for SAFe, a DHS-level oversight policy for Agile programs, and DHS Office of the Chief Technology Officer’s guidance for Agile programs to use for collecting and reporting on performance metrics. The TIM program has not updated its Systems Engineering Life Cycle Tailoring Plan (which outlines the Agile governance process and all milestone reviews that are required for planning and deploying Agile releases), to reflect changes in the way officials have reported using the SAFe governance framework. As a result, there are inconsistencies in the governance documentation. For example, the Systems Engineering Life Cycle Tailoring Plan describes four levels of governance—portfolio, value stream, program, and team—while program officials have reported omitting the value stream level from the governance framework. According to TSA officials in May 2017, they planned to update the Systems Engineering Life Cycle Tailoring Plan to reflect the revised governance framework, but they did not have a specific time frame for completing the revision. Until the TIM program fully updates its Systems Engineering Life Cycle Tailoring Plan to reflect the revised governance framework, the program lacks a clearly documented and repeatable governance process to effectively oversee the program. DHS officials stated that they plan to conduct biannual oversight reviews of the five Agile pilot programs (including TIM), instead of the annual reviews that are typically conducted for traditional waterfall development programs. According to the officials, the purpose of moving to biannual reviews is to better ensure cost, schedule, and performance remain on track for these Agile programs. However, officials in the Office of the Chief Technology Officer stated that DHS- level Agile governance and oversight policies and procedures have not been revised to reflect this new oversight approach because consensus among DHS leadership on related changes needs to be established before this new oversight approach can be documented in the department’s guidance. As of May 2017, officials had not specified a time frame for reaching such consensus. Until DHS leadership reaches consensus on needed oversight and governance changes, and then documents and implements associated changes, the program continues to plan as though it is undergoing annual oversight reviews, versus biannual reviews. As of early May 2017, officials in the Office of the Chief Technology Officer were also in the process of drafting guidance for Agile programs to use for collecting and reporting on performance metrics, but did not know when this guidance will be finalized. According to TSA officials, in the absence of complete Agile guidance, the TIM program receives support from DHS’s Agile team supporting the pilot initiative, which, as specified in the team’s charter, is intended to help the program (as well as the other four pilot programs) facilitate Agile software development. However, this team is not intended to perform oversight functions to ensure that the program is meeting cost, schedule, and performance targets. Thus, until the Office of the Chief Technology Officer completes guidance for Agile programs to use for collecting and reporting on performance metrics, TIM program officials may not report the most informative Agile performance metrics to oversight entities. According to leading practices, effective program oversight includes monitoring program performance and progress by comparing actual cost, schedule, and performance data with estimates in the plan and identifying significant deviations from established targets or thresholds for acceptable performance levels. Program reviews are to be conducted at predetermined checkpoints or milestones in order to determine progress by measuring programs against cost, schedule, and performance metrics. In addition, Agile programs should be measured on, among other things, velocity (i.e., number of story points completed per sprint or release), development progression (e.g., the number of features and user stories planned and accepted), product quality (e.g., number of defects and unit test coverage), and user satisfaction. The TIM program management office conducts frequent and regular performance reviews and focuses on several important Agile release- level metrics. Specifically, program management officials monitor TIM’s performance and progress during weekly program status review meetings and in periodic Agile reviews that are conducted at the end of each release. These reviews also include officials from the development teams and program stakeholders. The reviews focus on, among other things, velocity, progress, and product quality. They also include the status of key activities and risks impacting cost, schedule, and performance. Nevertheless, while the program management office uses performance metrics, the program has not established thresholds or targets for acceptable performance levels for these metrics. For example, program status reports showed that about 47 percent of the work that was planned to be completed in the first Agile release was accepted by the product owners. While the program appears to have been improving in this metric—74 percent was accepted in the second Agile release and 94 percent in the third Agile release—program officials have not established the thresholds or targets to determine the acceptable level of performance. Program officials stated that they considered the performance in the first Agile release to be low, but they have not yet established targets or thresholds. According to program officials, they planned to establish targets based on the capacity of work that development teams are expected to complete in a release, which can be better predicted as the teams spend more time together. However, the program has since developed three releases and continues to lack performance thresholds and targets. Until program officials establish performance thresholds or targets, oversight bodies may lack important information to ensure the program is meeting acceptable performance levels. In addition, the program management office’s performance reviews have included limited information on program cost. According to TIM officials, the program manager holds weekly meetings with the contract, finance, and budget groups to review costs associated with TIM’s contracts. However, management does not review or produce reports on overall life- cycle cost performance for the program or Agile software development cost performance. Program officials said they have not yet determined how best to measure cost performance in an Agile software development environment. In September 2016, the Under Secretary for Management instructed the program to collaborate with DHS’s Cost Analysis Division and the headquarters-level Agile integrated product team to establish agreed-upon software development cost metrics as well as a method for collecting and reporting on those metrics by the end of the March 2017. However, as of May 2017, this effort was still in progress. Until the TIM program begins collecting and reporting on Agile-related cost, oversight bodies will have limited information by which to monitor TIM costs. Department-level oversight bodies have focused on reviewing certain program life-cycle metrics for the TIM program. Specifically, the DHS Acquisition Review Board conducts periodic reviews of the program to monitor the program’s performance and hold the program accountable. Since the program was rebaselined in September 2016 and transitioned to Agile software development, the Acquisition Review Board has conducted one review. In addition, the Executive Steering Committee, which is chaired by the TSA CIO and Deputy Component Acquisition Executive, and includes representatives from the DHS Chief Technology Officer and PARM, reviews the program quarterly. As of July 2017, the Executive Steering Committee had conducted three reviews of the TIM program since implementing its new development approach. These oversight bodies reviewed, for example, performance information such as comparisons of the dates that milestones were actually achieved, against the planned schedule, and the burnup charts for the program (i.e., graphical representations of accumulated story points planned and completed per release). However, the Acquisition Review Board and the Executive Steering Committee have not been measuring the program against the rebaselined life-cycle costs, or important Agile release-level metrics, which are essential for providing early indicators of issues with the program. For example, these oversight bodies did not review the program’s velocity, number of features/user stories planned and accepted, product quality, or Agile software development cost metrics. In addition, while we have previously reported that there was overlap in the DHS OCIO’s and the PARM office’s assessments of certain IT programs, neither of these offices assessed the TIM program’s progress against key Agile performance metrics or cost performance. Specifically, the DHS OCIO and the PARM office conducted periodic (monthly or quarterly health assessments) of the program that included, among other things, schedule and system performance indicators for the entire life- cycle of the program (similar to what is used to review traditional waterfall programs). While these metrics are useful for understanding the program’s progress against the full schedule (60 months to full operational capability, or 30 Agile releases), they do not offer insight into the progress of individual Agile releases, which are deploying high-priority capabilities for the TIM program every 2 months. For example, as of April 2017, these two oversight bodies did not include Agile performance metrics which would have offered important insights into the progress of individual releases, such as velocity, progress metrics, quality metrics, post-deployment user satisfaction, or Agile software development costs. Thus, until DHS-level oversight bodies review key Agile performance and cost metrics and use them to inform management oversight decisions, the oversight bodies will be limited in their ability to obtain early indicators of any issues with the program, and to call for course correction, if needed. Recently, the TIM program also began measuring user satisfaction. Specifically, in April 2017, the DHS Acting Under Secretary for Management directed TSA’s Operational Test Agent to implement a continuous evaluation dashboard based on the results from the program’s third Agile release by the end of June 2017. This dashboard was to measure, among other things, post-deployment user satisfaction. TSA subsequently implemented the continuous evaluation dashboard in June 2017. Table 4 summarizes the extent to which performance metrics are reviewed by various oversight bodies. According to leading practices, effective program oversight includes relying on complete and accurate data to review program performance against stated expectations. Complete and accurate data allow oversight bodies to have transparency into the performance of programs and helps them identify when course correction is needed. However, TIM’s reported performance data were not always complete and accurate. Specifically, when reporting on the velocity (i.e., total number of story points completed per sprint and/or release across the development teams) of TIM’s first release after it was deployed, program officials inconsistently reported velocity among the program’s performance reports, thus calling into question the accuracy and completeness of the information. Since the data were being reported on a completed release, the velocity should have been reported as one consistent number that did not change. According to program officials, the reason for inconsistent reporting was that, despite best practices, the program’s methodology for measuring velocity was not consistent and was calculated differently each time. For example, table 5 shows three different numbers that were to represent the collective velocity across the development teams, and that officials reported to program management after the deployment of the first software release. While there was less variation in the velocity data reported after the second software release was deployed, discrepancies were still present. For example, table 6 shows the different numbers that officials reported to TIM program management after the deployment of the second software release. Program officials stated that the reason for the inconsistencies in reported velocity data was that during the first release they were still in the process of adapting Agile and were working to determine how best to calculate velocity. However, as shown in table 6 inconsistent data continued to occur beyond that first release. These inconsistencies in reported data call into question the completeness and accuracy of the velocity numbers reported, and the potential impact on oversight bodies’ ability to hold the program accountable. For example, velocity is most useful when tracked over time to ensure consistent performance and for forecasting how quickly development teams can work through the items in a backlog. However, without a complete and accurate velocity number from each release, it is difficult for oversight bodies to ensure the program is producing work at an acceptable pace to enable the program to meet its cost, schedule, and performance targets. In addition, the program had been reporting inaccurate unit test coverage data using a manual measurement approach. Specifically, from December 2016 to March 2017, program officials were reporting that, for each release, they tested every line of code, based on a manual estimate (i.e., 100 percent). However, testing each line of code manually is unrealistic because with manual tests, it is difficult to determine which function, line of code, or logic decision is executed, and which is not. As such, program officials were reporting that they were testing every line of code, even though they were unable to confirm that they were actually doing so, thus calling into question the reliability and accuracy of the data reported. In response to our concerns, program officials acknowledged that they could not confirm whether they had tested every line of code. Accordingly, program officials stopped estimating this metric manually and stated that they planned to begin measuring unit test coverage again once lines of code could be tracked using automated tools. As previously discussed, program officials stated that the testing and deployment tools are not expected to be implemented until the new development, testing, and production environments are set up. However, until the program has complete and accurate unit test code coverage data, program officials will not know if portions of its code are going untested, which could lead to undetected issues and impact the quality of the product. TSA’s TIM program has taken notable steps to address several of the major issues it faced during prior system development and deployment efforts, such as implementing system fixes to address critical performance and usability issues found in the maritime segment. Nonetheless, a number of significant challenges have not been fully addressed. In particular, until the TIM program establishes specific time frames for determining key implementation details, ensures its schedule provides planned completion dates based on realistic estimates, and establishes new time frames for implementing the actions identified in the strategy, it is at significant risk of repeating past mistakes and experiencing the same pitfalls as it did during its initial implementation attempts. An indication of concern is that the program is currently experiencing a delay of at least 6 months in the rebaselined schedule for delivering TSA Pre® capabilities. While the program has also taken certain steps to successfully make the transition from a waterfall development approach to Agile software development—a substantial and complex effort—TIM has not defined key roles and responsibilities, prioritized features and user stories, or implemented automated capabilities that are essential to ensuring effective adoption of Agile. The gaps we identified with the program’s implementation of Agile are concerning given that it did not follow key IT acquisition best practices when using its waterfall development approach, in which the program spent approximately 8 years and over $280 million on a system that TSA has determined it needs to replace. While selected corrective actions have been taken, until the TIM program is implemented in accordance with leading practices, the program will be putting at risk its ability to deliver a quality system that strengthens and enhances the sophistication of TSA’s security threat assessment and credentialing programs. In addition, while TSA and DHS have implemented certain practices for overseeing and governing the program, the lack of other practices has impeded their oversight effectiveness, including the lack of thresholds or targets for acceptable performance levels, the lack of reporting on Agile- related cost metrics, and inconsistent measuring and reporting of program velocity and unit test coverage for software releases. These gaps limit the ability of DHS oversight bodies to obtain early indicators of any issues with the program, and to call for course corrections, if needed. Further, until DHS leadership reaches consensus on needed oversight and governance changes related to Agile programs, and then documents and implements associated changes to align oversight reviews with the timing of Agile software releases, the department will not be well positioned to hold the program accountable. Moreover, until the Office of the Chief Technology Officer completes guidance for Agile programs to use for collecting and reporting on performance metrics, and DHS-level oversight bodies require the TIM program to report on key Agile performance and cost metrics and use them to inform management oversight decisions, the department will also be limited in its ability to hold the TIM program accountable and ensure that it is meeting its cost, schedule, and performance targets. We are making the following 14 recommendations to DHS: The TSA Administrator should ensure that the TIM program management office establishes and implements specific time frames for determining key strategic implementation details, including how the program will transition from the current state to the final TIM state. (Recommendation 1) The TSA Administrator should ensure that the TIM program management office establishes a schedule that provides planned completion dates based on realistic estimates of how long it will take to deliver capabilities. (Recommendation 2) The TSA Administrator should ensure that the TIM program management office establishes new time frames for implementing the actions identified in the organizational change management strategy and effectively executes against these time frames. (Recommendation 3) The TSA Administrator should ensure that the TIM program management office defines and documents the roles and responsibilities among product owners, the solution team, and any other relevant stakeholders for prioritizing and approving Agile software development work. (Recommendation 4) The TSA Administrator should ensure that the TIM program management office establishes specific prioritization levels for current and future features and user stories. (Recommendation 5) The TSA Administrator should ensure that the TIM program management office implements automated Agile management testing and deployment tools, as soon as possible. (Recommendation 6) The TSA Administrator should ensure that the TIM program management office updates the Systems Engineering Life Cycle Tailoring Plan to reflect the current governance framework and milestone review processes. (Recommendation 7) The TSA Administrator should ensure that the TIM program management office establishes thresholds or targets for acceptable performance-levels. (Recommendation 8) The TSA Administrator should ensure that the TIM program management office begins collecting and reporting on Agile-related cost metrics. (Recommendation 9) The TSA Administrator should ensure that the TIM program management office ensures that program velocity is measured and reported consistently. (Recommendation 10) The TSA Administrator should ensure that the TIM program management office ensures that unit test coverage for software releases is measured and reported accurately. (Recommendation 11) The Secretary of Homeland Security should direct the Under Secretary for Management to ensure that appropriate DHS leadership reaches consensus on needed oversight and governance changes related to the frequency of reviewing Agile programs, and then documents and implements associated changes. (Recommendation 12) The Secretary of Homeland Security should direct the Under Secretary for Management to ensure that the Office of the Chief Technology Officer completes guidance for Agile programs to use for collecting and reporting on performance metrics. (Recommendation 13) The Secretary of Homeland Security should direct the Under Secretary for Management to ensure that DHS-level oversight bodies review key Agile performance and cost metrics for the TIM program and use them to inform management oversight decisions. (Recommendation 14) DHS provided written comments on a draft of this report, which are reprinted in appendix II. In its comments, the department concurred with all 14 of our recommendations and described actions it has planned or taken to address them. For example, with regard to recommendation 6, which calls for DHS to implement automated Agile management testing and deployment tools, the department stated that TSA plans to implement such tools by June 30, 2018. Additionally, for recommendation 14, the department stated that DHS intends to ensure that oversight bodies review key Agile performance and cost metrics for the TIM program by June 30, 2018. If implemented effectively, these actions should address the weaknesses we identified. The department also described recent actions that it and TSA had taken to address three of the recommendations, and requested that we consider these recommendations resolved. Specifically, in response to recommendation 9, calling for TSA to ensure that the TIM program management office begins collecting and reporting on Agile-related cost metrics, the department stated that the program is now reporting these metrics on a monthly basis. In response to recommendation 10, calling for TSA to ensure that the program’s velocity is measured and reported consistently, the department stated that velocity is now being reported consistently and in accordance with DHS guidelines. Further, in response to recommendation 13, which calls for DHS to complete guidance for Agile programs to use for collecting and reporting on performance metrics, the department stated that the guidance had recently been published and provided to us. However, to date, we have received only draft versions of the guidance. We will work with the department to obtain finalized documentation related to the three recommendations, to determine if the recent actions fully address the recommendations. In addition to the aforementioned comments, we received technical comments from DHS and TSA officials, which we incorporated, as appropriate. We are sending copies of this report to the Secretary of Homeland Security and interested congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our objectives were to (1) describe the Transportation Security Administration’s (TSA) past implementation efforts for the Technology Infrastructure Modernization (TIM) program and its new implementation strategy; (2) determine the extent to which TSA’s new strategy for the program addresses the challenges encountered during earlier implementation attempts; (3) determine the extent to which TSA has implemented selected key practices for transitioning to an Agile software development framework for the program; and (4) determine the extent to which the TSA and the Department of Homeland Security (DHS) are effectively overseeing and governing the TIM program to ensure that it is meeting cost, schedule, and performance requirements. To address our first objective, we reviewed program documentation, such as initial and current acquisition program baselines, initial and current life- cycle cost estimates, acquisition decision memorandums, and program plans documenting a new strategy for implementing the program. We used the information in this documentation to summarize the program’s earlier attempts to implement TIM capabilities and its new implementation strategy for delivering the program, including estimated costs, schedule, and key decisions made. We also interviewed TSA officials, including the TIM Director and Deputy Director, on the status of TIM program office efforts. To determine the extent to which the TIM program’s new strategy addresses the challenges encountered during earlier implementation attempts, we reviewed documentation on the challenges the TIM program faced when it breached cost and schedule thresholds and experienced system performance issues, such as those described in initial operational test reports, the breach remediation plan, and the results of a technical evaluation of program challenges. We synthesized the information in these documents to identify a consolidated list of key challenges the program had faced. We did not include challenges that were already being evaluated as part of other objectives, such as the use of the waterfall software development approach. We then reviewed documentation on the program’s new strategy, such as plans documenting the new strategy, follow-on operational test reports, program schedules, program status reports, and identified risks. We assessed the extent to which the new strategy outlined in these documents addressed the prior challenges by comparing them against criteria identified in leading practices and guidance, such as DHS’s Systems Engineering Lifecycle Guide and the Software Engineering Institute’s Capability Maturity Model® Integration for Development. In addition, we conducted a site visit at the TSA Adjudication Center in Reston, Virginia. During this site visit, we observed demonstrations of the current commercial-off-the- shelf system and legacy systems for TSA Pre® and Aviation Workers, and we interviewed adjudicators and supervisors on current security threat assessment processes and limitations. Further, we interviewed TSA officials, including the TIM Director and Deputy Director, on the program office’s efforts to address prior challenges. To determine the extent to which the program has implemented selected key practices for transitioning to an Agile software development framework, we identified leading practices and guidance outlined in the following sources: GAO, Software Development: Effective Practices and Federal Challenges in Applying Agile Methods Software Engineering Institute, Agile Readiness and Fit TechFAR handbook TSA Agile Scrum guidance CMMI® for Development, version 1.3 Software Engineering Institute, Agile Metrics After reviewing the sources listed, in consultation with our internal expert, we grouped practices that were identified as being critical to establish when transitioning to an Agile software development framework, and selected the practices that were most relevant based on the status of the program’s transition and we discussed the practice areas with TSA officials. The practices included: full support from leadership to adopt Agile processes, enhancing Agile knowledge, ensuring product owners are engaged with the development teams and have clearly defined roles, establishing a clear product vision, prioritized backlogs of requirements, and implementing automated tools to enable rapid system development and deployment. We reviewed program management documentation against these practices, such as Agile training records, Agile contracts, program roadmaps, backlogs, test plans, Agile release artifacts, program status reports, and identified risks. Additionally, we observed Agile release and sprint development activities at TSA facilities in Annapolis Junction, Maryland, and at a contractor’s facilities in Beltsville, Maryland, and we observed a demonstration of how user stories map from high-level capabilities and tracked through development and testing. We also interviewed TSA officials, including the TIM Director and Deputy Director and the five TIM product owners, on their efforts to transition the program to an Agile software development framework. Further, we interviewed DHS officials, including the Chief Technology Officer, on their efforts to conduct an Agile pilot to assist programs like TIM in adopting Agile software development processes. We assessed the evidence against leading practices to determine the extent to which TSA met the practices. To determine the extent to which TSA and DHS are effectively overseeing and governing the program to ensure that it is meeting cost, schedule, and performance requirements, we identified leading practices and guidance outlined in the following sources: TSA Agile Scrum guidance CMMI for Development, version 1.3 Software Engineering Institute, Agile Metrics After reviewing the sources listed, we grouped practices related to oversight and governance for programs using Agile software development into four key practice areas and we discussed the practices with DHS and TSA officials. These areas included: Document relevant governance and oversight policies and procedures. Monitor program performance and progress. Rely on complete and accurate data to review performance against expectations. Ensure that corrective actions are identified and tracked until the desired outcomes are achieved. To assess the extent that TSA and DHS had addressed these key practices, we reviewed the most current program management and governance documentation as of April 2017. Specifically, we analyzed documentation on program management processes, such as TIM’s Systems Engineering Life Cycle Tailoring Plan, TIM Agile and Technical Strategy, TIM Agile software development contract, and draft DHS Agile Acquisition Program Delivery Metrics Playbook; and artifacts from TIM’s program execution and review, such as Agile release artifacts, program status reports, contractor status reports, program schedules, life-cycle cost estimates, risk registers, TSA Executive Steering Committee reviews, DHS program health assessments, DHS Agile pilot integrated product team meetings, DHS Office of the Chief Technology Officer Agile pilot reviews, and DHS Acquisition Review Board reviews. Additionally, we interviewed TSA officials, including the TIM Director and Deputy Director, on their efforts to oversee TIM’s development. Further, we interviewed DHS officials, including the Chief Technology Officer, on their efforts to oversee the program’s Agile software development activities. We compared this evidence against leading practices to determine the extent to which TSA and DHS met the practices. To assess the reliability of the data that we used to support the findings in this report, we reviewed relevant program documentation to substantiate evidence obtained through interviews with agency officials. We determined that the data used in this report were sufficiently reliable for the purposes of our reporting objectives. We made appropriate attribution indicating the sources of the data. We conducted this performance audit from September 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, the following staff made key contributions to this report: Shannin G. O’Neill (Assistant Director), Jeanne Sung (Analyst in Charge), Jennifer Beddor, Rebecca Eyler, Bruce Rackliff, and Dwayne Staten.", "summary": "TSA conducts security threat assessment screening and credentialing activities for millions of workers and travelers in the maritime, surface, and aviation transportation industries that are seeking access to transportation systems. In 2008, TSA initiated the TIM program to enhance the sophistication of its security threat assessments and to improve the capacity of its supporting systems. However, the program experienced significant cost and schedule overruns, and performance issues, and was suspended in January 2015 while TSA established a new strategy. The program was rebaselined in September 2016 and is estimated to cost approximately $1.27 billion and be fully operational by 2021 (about $639 million more and 6 years later than originally planned). GAO was asked to review the TIM program's new strategy. This report determined, among other things, the extent to which (1) TSA implemented selected key practices for transitioning to Agile software development for the program; and (2) TSA and DHS are effectively overseeing the program's cost, schedule, and performance. GAO compared program documentation to key practices identified by the Software Engineering Institute and the Office of Management and Budget, as being critical to transitioning to Agile and for overseeing and governing programs. The Transportation Security Administration's (TSA) new strategy for the Technology Infrastructure Modernization (TIM) program includes using Agile software development, but the program only fully implemented two of six leading practices necessary to ensure successful Agile adoption. Specifically, the Department of Homeland Security (DHS) and TSA leadership fully committed to adopt Agile and TSA provided Agile training. Nonetheless, the program had not defined key roles and responsibilities, prioritized system requirements, or implemented automated capabilities that are essential to ensuring effective adoption of Agile. Until TSA adheres to all leading practices for Agile implementation, the program will be putting at risk its ability to deliver a quality system that strengthens and enhances the sophistication of TSA's security threat assessments and credentialing programs. TSA and DHS fully implemented one of the key practices for overseeing the TIM program, by establishing a process for ensuring corrective actions are identified and tracked. However, TSA and DHS did not fully implement the remaining three key practices, which impede the effectiveness of their oversight. Specifically, TSA and DHS documented selected policies and procedures for governance and oversight of the TIM program, but they did not develop or finalize other key oversight and governance documents. For example, TSA officials developed a risk management plan tailored for Agile; however, they did not update the TIM system life-cycle plan to reflect the Agile governance framework they were using. The TIM program management office conducted frequent performance reviews, but did not establish thresholds or targets for oversight bodies to use to ensure that the program was meeting acceptable levels of performance. In addition, department-level oversight bodies have focused on reviewing selected program life-cycle metrics for the TIM program; however, they did not measure the program against the rebaselined cost, or important Agile release-level metrics. TIM's reported performance data were not always complete and accurate. For example, program officials reported that they were testing every line of code, even though they were unable to confirm that they were actually doing so, thus calling into question the accuracy of the data reported. These gaps in oversight and governance of the TIM program were due to, among other things, TSA officials not updating key program management documentation and DHS leadership not obtaining consensus on needed oversight and governance changes related to Agile programs. Given that TIM is a historically troubled program and is at least 6 months behind its rebaselined schedule, it is especially concerning that TSA and DHS have not fully implemented oversight and governance practices for this program. Until TSA and DHS fully implement these practices to ensure the TIM program meets its cost, schedule, and performance targets, the program is at risk of repeating past mistakes and not delivering the capabilities that were initiated 9 years ago to protect the nation's transportation infrastructure. GAO is making 14 recommendations, including that DHS should prioritize requirements and obtain leadership consensus on oversight and governance changes. DHS concurred with all 14 recommendations.", "document_type": "gao"}
{"report": "The Freedom of Information Act establishes a legal right of access to government information on the basis of the principles of openness and accountability in government. Before FOIA’s enactment in 1966, an individual seeking access to federal records faced the burden of establishing a “need to know” before being granted the right to examine a federal record. FOIA established a “right to know” standard, under which an organization or person could receive access to information held by a federal agency without demonstrating a need or reason. The “right to know” standard shifted the burden of proof from the individual to a government agency and required the agency to provide proper justification when denying a request for access to a record. Any person, defined broadly to include attorneys filing on behalf of an individual, corporations, or organizations, can file a FOIA request. For example, an attorney can request labor-related workers’ compensation files on behalf of his or her client, and a commercial requester, such as a data broker who files a request on behalf of another person, may request a copy of a government contract. In response, an agency is required to provide the relevant record(s) in any readily producible form or format specified by the requester, unless the record falls within a permitted exemption that provides limitations on the disclosure of information. Various amendments have been enacted and guidance issued to help improve agencies’ processing of FOIA requests, including: The Electronic Freedom of Information Act Amendments of 1996 (e- FOIA amendments) strengthened the requirement that federal agencies respond to a request in a timely manner and reduce their backlogged requests. The amendments, among other things, made a number of procedural changes, including allowing a requester to limit the scope of a request so that it could be processed more quickly and requiring agencies to determine within 20 working days whether a request would be fulfilled. This was an increase from the previously established time frame of 10 business days. The amendments also authorized agencies to multi-track requests— that is, to process simple and complex requests concurrently on separate tracks to facilitate responding to a relatively simple request more quickly. In addition, the amendment encouraged online, public access to government information by requiring agencies to make specific types of records available in electronic form. Executive Order 13392, issued by the President in 2005, directed each agency to designate a senior official as its chief FOIA officer. This official was to be responsible for ensuring agency-wide compliance with the act by monitoring implementation throughout the agency and recommending changes in policies, practices, staffing, and funding, as needed. The chief FOIA officer was directed to review and report on the agency’s performance in implementing FOIA to agency heads and to Justice on an annual basis. (These are referred to as chief FOIA officer reports.) The OPEN Government Act, which was enacted in 2007, made the 2005 executive order’s requirement for agencies to have a chief FOIA officer a statutory requirement. It also required agencies to submit an annual report to Justice outlining their administration of FOIA, including additional statistics on timeliness. Specifically, the act called for agencies to adequately track their agency’s FOIA request processing information throughout the reporting year and then produce reports on that topic to comply with FOIA reporting requirements and Justice guidance for reporting. The FOIA Improvement Act of 2016 addressed procedural issues, including requiring that agencies: (1) make records available in an electronic format if they have been requested three or more times; (2) notify requesters that they have a minimum of 90 days to file an administrative appeal, and (3) provide dispute resolution services at various times throughout the FOIA process. This act also created more duties for chief FOIA officers, including requiring them to offer training to agency staff regarding FOIA responsibilities. The act also revised and added new obligations for OGIS, and created the Chief FOIA Officers Council to assist in compliance and efficiency. Further, the act required OMB, in consultation with Justice, to create a consolidated online FOIA request portal that allows the public to submit a request to any agency through a single website. In responding to requests, FOIA authorizes agencies to utilize one of nine exemptions to withhold portions of records, or the entire record. Agencies may use an exemption when it has been determined that disclosure of the requested information would harm an interest related to certain protected areas. These nine exemptions can be applied by agencies to withhold various types of information, such as information concerning foreign relations, trade secrets, and matters of personal privacy. One such exemption, the statutory (b)(3) exemption, specifically authorizes withholding information under FOIA on the basis of a law which: requires that matters be withheld from the public in such a manner as to leave no discretion on the issue; or establishes particular criteria for withholding or refers to particular types of matters to be withheld; and if enacted after October 28, 2009, specifically refers to section 552(b)(3) of title 5, United States Code. To account for agencies use of the statutory (b)(3) exemptions, FOIA requires each agency to submit, in its annual report to Justice, a complete listing of all statutes that the agency relied on to withhold information under exemption (b)(3). The act also requires that the agency describe for each statute identified in its report (1) the number of occasions on which each statute was relied upon; (2) a description of whether a court has upheld the decision of the agency to withhold information under each such statute; and (3) a concise description of any information withheld. Further, to provide an overall summary of the statutory (b)(3) exemptions used by agencies in a fiscal year, Justice produces consolidated annual reports that list the statutes used by agencies in conjunction with (b)(3). As previously noted, agencies are generally required by the e-FOIA amendments of 1996 to respond to a FOIA request within 20 working days. Once received, the request is to be processed through multiple phases, which include assigning a tracking number, searching for responsive records, and releasing the records response to the requester. Also, as relevant, FOIA allows a requester to challenge an agency’s final decision on a request through an administrative appeal or a lawsuit. Specifically, a requester has the right to file an administrative appeal if he or she disagrees with the agency’s decision on their request. Agencies have 20 working days to respond to an administrative appeal. Figure 1 provides a simplified overview of the FOIA request and appeals process. In a typical agency, as indicated, during the intake phase, a request is logged into the agency’s FOIA tracking system, and a tracking number is assigned. The request is then reviewed by FOIA staff to determine its scope and level of complexity. The agency then typically sends a letter or email to the requester acknowledging receipt of the request, with a unique tracking number that the requester can use to check the status of the request. Next, FOIA staff (non-custodian) begin the search to retrieve the responsive records by routing the request to the appropriate program office(s).This step may include requesting that the custodian (owner) of the record search and review paper and electronic records from multiple locations and program offices. Agency staff then process the responsive records, which includes determining whether a portion or all of any record should be withheld based on FOIA’s exemptions. If a portion or all of any record is the responsibility of another agency, FOIA staff may consult with the other agency or may send (“refer”) the document(s) to that other agency for processing. After processing and redaction, a request is reviewed for errors and to ensure quality. The documents are then released to the requester, either electronically or by regular mail. In addition, FOIA allows requesters to sue an agency in federal court if the agency does not respond to a request for information within the statutory time frames or if the requesters believe they are entitled to information that is being withheld by the agency. Further, the act requires the Office of Special Counsel (OSC) to initiate a proceeding to determine whether disciplinary action is warranted against agency personnel in cases involving lawsuits where a court has found, among other things that agency personnel may have acted arbitrarily or capriciously in responding to a FOIA request. The act requires Justice to notify OSC when a lawsuit meets this requirement. Responsibility for the oversight of FOIA implementation is spread across several federal offices and other entities. These include Justice’s OIP, NARA’s OGIS, and the Chief FOIA Officers Council. These oversight agencies and the council have taken steps to assist agencies to address the provisions of FOIA. Justice’s OIP is responsible for encouraging agencies’ compliance with FOIA and overseeing their implementation of the act. In this regard, the office, among other things, provides guidance, compiles information on FOIA compliance, provides FOIA training, and prepares annual summary reports on agencies’ FOIA processing and litigation activities. The office also offers FOIA counseling services to government staff and the public. Issuing guidance. OIP has developed guidance, available on its website, to assist federal agencies by instructing them in how to ensure timely determinations on requests, expedite the processing of requests, and reduce backlogs. The guidance also informs agencies on what should be contained in their annual FOIA reports to Justice’s Attorney General. The office also has documented ways for federal agencies to address backlog requests. In March 2009 the Attorney General issued guidance and related policies to encourage agencies to reduce their backlogs of FOIA requests. In addition, in December 2009, OMB issued a memorandum on the OPEN Government Act, which called for a reduction in backlogs and the publishing of plans to reduce backlogs. Further, in August 2014, OIP held a best practices workshop and issued guidance to agencies on reducing FOIA backlogs and improving timeliness of agencies’ responses to FOIA requests. The OIP guidance instructed agencies to obtain leadership support, routinely review FOIA processing metrics, and set up staff training on FOIA. Overseeing agencies’ compliance. OIP collects information on compliance with the act by reviewing agencies’ annual FOIA reports and chief FOIA officer reports. These reports describe the number of FOIA requests received and processed in a fiscal year, as well as the total costs associated with processing and litigating requests. Providing training. The office offers an annual training class that provides a basic overview of the act, as well as hands-on courses about the procedural requirements involved in processing a request from start to finish. In addition, it offers a seminar outlining successful litigation strategies for attorneys who handle FOIA cases. Preparing administrative and legal annual reports. OIP prepares two major reports yearly—one related to agencies’ annual FOIA processing and one related to agencies’ FOIA litigation and compliance. The first report, compiled from agencies’ annual FOIA reports, contains statistics on the number of requests received and processed by each agency, the time taken to respond, and the outcome of each request, as well as other statistics on FOIA administration such as number of backlogs, and the use of exemptions to withhold information from a requestor. The second report describes Justice’s efforts to encourage compliance with the act and provides a listing of all FOIA lawsuits filed or determined in that year, the exemptions and/or dispositions involved in each case, and any court-assessed costs, fees, and penalties. NARA’s OGIS was established by the OPEN Government Act of 2007 to oversee and assist agencies in implementing FOIA. OGIS’s responsibilities include reviewing agency policies and procedures, reviewing agency compliance, recommending policy changes, and offering mediation services. The 2016 FOIA amendments required agencies to update response letters to FOIA requesters to include information concerning the roles of OGIS and agency’s FOIA public liaisons. As such, OGIS and Justice worked together to develop a response letter template that includes the required language for agency letters. In addition, OGIS, charged with reviewing agency’s compliance with FOIA, launched in 2014 a FOIA compliance program. OGIS also developed a FOIA compliance self- assessment program, which is intended to help OGIS look for potential compliance issues across federal agencies. The Chief FOIA Officers Council is co-chaired by the Director of OIP and the Director of OGIS. Council members include senior representatives from OMB, OIP, and OGIS, together with the chief FOIA officers of each agency, among others. The council’s FOIA-related responsibilities include: developing recommendations for increasing compliance and disseminating information about agency experiences, ideas, best practices, and innovative approaches; identifying, developing, and coordinating initiatives to increase transparency and compliance; and promoting the development and use of common performance measures for agency compliance. Selected Agencies Collect and Maintain Records That Can Be Subject to FOIA Requests. The 18 agencies selected for our review are charged with a variety of operations that affect many aspects of federal service to the public. Thus, by the nature of their missions and operations, the agencies have responsibility for vast and varied amounts of information that can be subject to a FOIA request. For example, the Department of Homeland Security’s (DHS) mission is to protect the American people and the United States homeland. As such, the department maintains information covering, among other things, immigration, border crossings, and law enforcement. As another example, the Department of the Interior’s (DOI) mission includes protecting and managing the Nation’s natural resources and, thus, providing scientific information about those resources. Table 1 provides details on each of the 18 selected agencies’ mission and the types of information they maintain. The 18 selected agencies reported that they received and processed more than 2 million FOIA requests from fiscal years 2012 through 2016. Over this 5-year period, the number of reported requests received fluctuated among the agencies. In this regard, some agencies saw a continual rise in the number of requests, while other agencies experienced an increase or decrease from year to year. For example, from fiscal years 2012 through 2014, DHS saw an increase in the number of requests received (from 190,589 to 291,242), but in fiscal year 2015, saw the number of requests received decrease to 281,138. Subsequently, in fiscal year 2016, the department experienced an increase to 325,780 requests received. In addition, from fiscal years 2012 through 2015, the reported numbers of requests processed by the selected agencies showed a relatively steady increase. However, in fiscal year 2016, the reported number of requests processed by these agencies declined. Figure 2 provides a comparison of the total number of requests received and processed in this 5-year period. Among other things, the FOIA Improvement Act of 2016 and the OPEN Government Act of 2007 calls for agencies to (1) update response letters, (2) implement tracking systems, (3) provide FOIA training, (4), provide required records online, (5) designate chief FOIA officers, and (6) update and publish timely and comprehensive regulations. As part of our ongoing work, we determined that the 18 selected agencies included in our review had implemented the majority of the six FOIA requirements evaluated. Specifically, 18 agencies updated response letters, implemented tracking systems, 15 agencies provided required records online, and 12 agencies designated chief FOIA officers. However, only 5 of the agencies published and updated their FOIA regulations in a timely and comprehensive manner. Figure 3 summarizes the extent to which the 18 agencies implemented the selected FOIA requirements. Beyond these selected agencies, Justice’s OIP and OMB also had taken steps to develop a government-wide FOIA request portal that is intended to allow the public to submit a request to any agency from a single website. The 2016 amendments to FOIA required agencies to include specific information in their responses when making their determinations on requests. Specifically, agencies must inform requesters that they may seek assistance from the FOIA Public Liaison, file an appeal to an adverse determination within a period of time that is not less than 90 days after the date of such adverse determination; and seek dispute resolution services from the FOIA Public Liaison of the agency or OGIS. Among the 18 selected agencies, all had updated their FOIA response letters to include this required information. Various FOIA amendments and guidance call for agencies to use automated systems to improve the processing and management of requests. In particular, the OPEN Government Act of 2007 amended FOIA to require that federal agencies establish a system to provide individualized tracking numbers for requests that will take longer than 10 days to process and establish telephone or Internet service to allow requesters to track the status of their requests. Further, the President’s January 2009 Freedom of Information Act memorandum instructed agencies to use modern technology to inform citizens about what is known and done by their government. In addition, FOIA processing systems, like all automated information technology systems, are to comply with the requirements of Section 508 of the Rehabilitation Act (as amended). This act requires federal agencies to make their electronic information accessible to people with disabilities. Each of the 18 selected agencies had implemented a system that provides capabilities for tracking requests received and processed, including an individualized number for tracking the status of a request. Specifically, Ten agencies used commercial automated systems, (DHS, EEOC, FDIC, FTC, Justice, NTSB, NASA, Pension Benefit Guaranty Corporation, and USAID). Three agencies developed their own agency systems (State, DOI, and TVA). Five agencies used Microsoft Excel or Word to track requests (Administrative Conference of the United States, American Battle Monuments Commission, Broadcasting Board of Governors, OMB, and U.S. African Development Foundation). Further, all of the agencies had established telephone or Internet services to assist requesters in tracking the status of requests; and they used modern technology (e.g., mobile applications) to inform citizens about FOIA. For example, the commercial systems allow requesters to submit a request and track the status of that request online. In addition, DHS developed a mobile application that allows FOIA requesters to submit requests and check the status of existing requests. The 2016 FOIA amendments require agencies’ chief FOIA officers to offer training to agency staff regarding their responsibilities under FOIA. In addition, Justice’s OIP has advised every agency to make such training available to all of their FOIA staff at least once each year. The office has also encouraged agencies to take advantage of FOIA training opportunities available throughout the government. The 18 selected agencies’ chief FOIA officers offered FOIA training opportunities to staff in fiscal years 2016 and 2017. For example: Eleven agencies provided training that gave an introduction and overview of FOIA (the American Battle Monuments Commission, EEOC, Justice, FDIC, FTC, NARA, Pension Benefit Guaranty Corporation, State, TVA, U.S. African Development Foundation, and USAID). Three agencies offered training for their agencies’ new online FOIA tracking and processing systems (DOI, NTSB, and Pension Benefit Guaranty Corporation). Three agencies provided training on responding to, handling, and processing FOIA requests (DHS, DOI, and State). Three agencies offered training on understanding and applying the exemptions under FOIA (FDIC, FTC, and U.S. African Development Foundation). Two agencies offered training on the processing of costs and fees (NASA and TVA). Memorandums from both the President and the Attorney General in 2009 highlight the importance of online disclosure of information and further direct agencies to make information available without a specific FOIA request. Further, the 2016 FOIA amendments require online access to government information and require agencies to make information available to the public in electronic form for up to four categories: agency final opinions and orders, administrative staff manuals of interest to the public, and frequently requested records. While all 18 agencies that we reviewed post records online, only 15 of them had posted all categories of information, as required by the FOIA amendments. Specifically, 7 agencies—the American Battle Monuments Commission, the Pension Benefit Guaranty Corporation, and EEOC, FDIC, FTC, DOJ, and State—had, as required, made records in all four categories publicly available online. In addition, 5 agencies that were only required to publish online records in three of the categories—the Administrative Conference of the United States, Broadcasting Board of Governors, DHS, OMB, and USAID— had done so. Further, 3 agencies that were only required to publish online records in two of the categories—U.S. African Development Foundation, NARA, and TVA— had done so. The remaining 3 agencies—DOI, NASA, and NTSB—had posted records online for three of four required categories. Regarding why the three agencies did not post all of their four required categories of online records, DOI officials stated that the agency does not make publically available all FOIA records that have been requested 3 or more times, as it does not have the time to post all such records that have been requested. NASA officials explained that, while the agency issues final opinions, it does not post them online. As for NTSB, while its officials said they try to post information that is frequently requested, they do not post the information on a consistent basis Making the four required categories of information available in electronic form is an important step in allowing the public to easily access to government documents. Until these agencies make all required categories of information available in electronic form, they cannot ensure that they are providing the required openness in government. In 2005, the President issued an executive order that established the role of a Chief FOIA Officer. In 2007, amendments to FOIA required each agency to designate a chief FOIA officer who shall be a senior official at the Assistant Secretary or equivalent level. Of the 18 selected agencies, 12 agencies have Chief FOIA Officers who are senior officials at the Assistant Secretary or equivalent level. The Assistant Secretary level is comparable to senior executive level positions at levels III, IV, and V. Specifically, State has designated its Assistant Secretary of Administration, Bureau DOI and NTSB had designated its Chief Information Officers; Administrative Conference of the United States, Broadcasting Board of Governors, FDIC, NARA, and U.S. African Development Foundation have designated their general counsels; and Justice, NASA, TVA, and USAID designated their Associate Attorney General, Associate Administrator for Communications, the Vice President for Communications, and the Assistant Administrator for the Bureau of Management, respectively. However, 6 agencies — American Battle Monuments Commission DHS, EEOC, Pension Benefit Guaranty Corporation, FTC, and OMB — do not have chief FOIA officers that are senior officials at the Assistant Secretary or equivalent level. According to officials from 5 of these agencies, the agencies all have chief FOIA officers and officials believed they had designated the appropriate officials. Officials at FTC acknowledged that the chief FOIA officer position is not designated at a level equivalent to an Assistant Secretary but a senior position within the agency. However, while there are chief FOIA officers at these agencies, until the chief FOIA officers are designated at the Assistant Secretary or equivalent level, they will lack assurance regarding the necessary authority to make decisions about agency practices, personnel, and funding. FOIA requires federal agencies to publish regulations in the Federal Register that inform the public of their FOIA operations. Specifically, in 2016, FOIA was amended to require agencies to update their regulations regarding their FOIA operations. To assist agencies in meeting this requirement, OIP created a FOIA regulation template for agencies to use as they update their regulations. Among other things, OIP’s guidance encouraged agencies to: describe their dispute resolution processed, describe their administrative appeals process for response letters of notify requesters that they have a minimum of 90 days to file an inform requesters that the agency may charge fees for requests determined as “unusual” circumstances ; and update the regulations in a timely manner (i.e., update regulations by 180 days after the enactment of the 2016 FOIA amendment.) Five agencies in our review—DHS, DOI, FDIC, FTC, and USAID— addressed all five requirements in updating their regulations. In addition, seven agencies addressed four of the five requirements: the Administrative Conference of the United States, EEOC, Justice, NARA, NTSB, Pension Benefit Guaranty Corporation, and TVA did not update their regulations in a timely manner. Further, four agencies addressed three or less requirements (U.S. African Development Foundation, State, NASA, and Broadcasting Board of Governors) and two agencies (American Battle Monuments Commission and OMB) did not address any of the requirements. Figure 4 indicates the extent to which the 18 agencies had addressed the five selected requirements. Agencies that did not address all five requirements provided several explanations as to why their regulations were not updated as required: American Battle Monuments Commission stated that while they updated their draft regulation in August 2017, it is currently unpublished due to internal reviews with the General Counsel in preparation for submission to the Federal Register. No new posting date has been established. American Battle Monuments Commission last updated its regulation in February 26, 2003. State officials noted that their regulation was updated two months prior to the new regulation requirements but did not provide a specific reason for not reissuing its regulation. As such, they explained that they have a working group reviewing their regulation for updates, with no timeline identified. State last updated its regulation on April 6, 2016. NASA officials did not provide a reason for not updating its regulation as required. Officials did, however, state that its draft regulation is with the Office of General Counsel for review. NASA last updated its regulations on August 11, 2017. Broadcasting Board of Governors officials did not provide a reason for not updating its regulation as required. Officials did, however, note that the agency is in the process of updating its regulation and anticipates it will complete this update by the end of 2018. The Broadcasting Board of Governors last updated its regulation on February 2, 2002. OMB officials did not provide a reason for not updating the agency’s regulation as required. Officials did, however, state that due to a change in leadership they do not have a time frame for updating their regulation. OMB last updated its regulation on May 27, 1998. The chief FOIA officer at the U.S. African Development Foundation stated that, while the agency had updated and submitted their regulation to be published in December 2016, they were unpublished due to an error that occurred with the acknowledgement needed to publish the regulation on the federal register. The regulation was subsequently published on February 3, 2017. The official further noted that when the agency responds to FOIA requests it has not charged a fee for unusual circumstances, and therefore they did not believe they had to disclose information regarding fees in its regulation. Until these six agencies publish updated regulations that address the necessary requirements, as called for in FOIA and OIP guidance, they likely will be unable to provide the public with required regulatory and procedural information to ensure transparency and accountability in the government. The 2016 FOIA amendments required OMB to work with Justice to build a consolidated online FOIA request portal. This portal is intended to allow the public to submit a request to any agency from a single website and include other tools to improve the public’s access to the benefits of FOIA. Further, the act required OMB to establish standards for interoperability between the consolidated portal and agency FOIA systems. The 2016 FOIA amendments did not provide a time to develop the portal and standards. With OMB’s support, Justice developed an initial online portal. Justice’s OIP officials stated that they expect to update the portal to provide basic functionality that aligns with requirements of the act, including the ability to make a FOIA request, and technical processes for interoperability amongst agencies’ various FOIA systems. According to OIP officials, in partnership with OMB, OIP was able to identify dedicated funding source to operate and maintain the portal to ensure its success in the long term, with major agencies sharing in the costs to operate, maintain, and fund any future enhancements designed to improve FOIA processes. The first iteration of the National FOIA portal launched on Justice’s foia.gov website on March 8, 2018. In our draft report, we determined that the 18 selected agencies in our review had FOIA request backlogs of varying sizes, ranging from no backlogged requests at some agencies to 45,000 or more requests at other agencies. Generally, the agencies with the largest backlogs had received the most requests. In an effort to aid agencies in reducing their backlogs, Justice’s OIP identified key practices that agencies can use. However, while the agencies reported using these practices and other methods, few of them managed to reduce their backlogs during the period from fiscal year 2012 through 2016. In particular, of the four agencies with the largest backlogs, only one—NARA—reduced its backlog. Agencies attributed their inability to decrease backlogs to the number and complexity of requests, among other factors. However, agencies also lack comprehensive plans to implement practices on an ongoing basis. The selected agencies in our review varied considerably in the size of their FOIA request backlogs. Specifically, from fiscal year 2012 through 2016, of the 18 selected agencies 10 reported a backlog of 60 or fewer requests, and of these 10 agencies, 6 reported having no backlog in at least 1 year. 4 agencies had backlog numbers between 61 and 1,000 per year; and 4 agencies had backlogs of over 1,000 requests per year. The four agencies with backlogs of more than 1,000 requests for each year we examined were Justice, NARA, State and DHS. Table 2 shows the number requests and the number of backlogged request for the 18 selected agencies during the 5-year period. Over the 5-year period, 14 of the 18 selected agencies experienced an increase in their backlogs in at least 1 year. By contrast, 2 agencies (Administrative Conference of the United States and the U.S. African Development Foundation) reported no backlogs, and 3 agencies (American Battle Monument Commission, NASA and NARA) reported reducing their backlogs. Further, of the four agencies with the largest backlogs (DHS, State, Justice, and NARA) only NARA reported a backlog lower in fiscal year 2016 than in fiscal year 2012. Figure 5 shows the trends for the four agencies with the largest backlogs, compared with the rest of the 18 agencies. In most cases, agencies with small or no backlogs (60 or fewer) also received relatively few requests. For example, the Administrative Conference of the United States and the U.S. African Development Foundation reported no backlogged requests during any year but also received fewer than 30 FOIA requests a year. The American Battle Monuments Commission also received fewer than 30 requests a year and only reported 1 backlogged request per year in 2 of the 5 years examined. However, the Pension Benefit Guaranty Corporation and FDIC received thousands of requests over the 5-year period, but maintained zero backlogs in a majority of the years examined. PBGC received a total of 19,120 requests during the 5-year period and only reported a backlog of 8 requests during one year, fiscal year 2013. FDIC received a total of 3,405 requests during the 5-year period and reported a backlog of 13 requests in fiscal year 2015 and 4 in fiscal year 2016. The four agencies with backlogs of 1,000 or more (Justice, NARA, State, and DHS) received significantly more requests each year. For example, NARA received between about 12,000 and 50,000 requests each year, while DHS received from about 190,000 to 325,000 requests. In addition, the number of requests NARA received in fiscal year 2016 was more than double the number received in fiscal year 2012. DHS received the most requests of any agency—a total of 1,320,283 FOIA requests over the 5- year period. The Attorney General’s March 2009 memorandum called on agency chief FOIA officers to review all aspects of their agencies’ FOIA administration and report to Justice on steps that have been taken to improve FOIA operations and disclosure. Subsequent Justice guidance required agencies are to include in their chief FOIA officer reports information on their FOIA request backlogs, including whether the agency experienced a backlog of requests; whether that backlog decreased from the previous year; and, if not, reasons the backlog did not decrease. In addition, agencies that had more than 1,000 backlogged requests in a given year were required to describe their plans to reduce their backlogs. Beginning in fiscal year 2015, these agencies were to describe how they implemented their plans from the previous year and whether that resulted in a backlog reduction. In addition, Justice’s OIP identified best practices for reducing FOIA backlogs. The office held a best practices workshop on reducing backlogs and improving timeliness. The office then issued guidance in August 2014 which highlighted key practices to improve the quality of a FOIA program. OIP identified the following methods in its best practices guidance. Utilize resources effectively. Agencies should allocate their resources effectively by using multi-track processing, making use of available technology, and shifting priorities and staff assignments to address needs and effectively manage workloads. Routinely review metrics. Agencies should regularly review their FOIA data and processes to identify challenges or barriers. Additionally, agencies should identify trends to effectively allocate resources, set goals for staff, and ensure needs are addressed. Emphasize staff training. Agencies should ensure FOIA staff are properly trained so they can process requests more effectively and with more autonomy. Training and engagement of staff can also solidify the importance of the FOIA office’s mission. Obtain leadership support. Agencies should ensure that senior management is involved in and supports the FOIA function in order to increase awareness and accountability, as well as make it easier to obtain necessary resources or personnel. Agencies identified a variety of methods that they used to address their backlogs. These included both the practices identified by Justice, as well as additional methods. Ten agencies maintained relatively small backlogs of 60 or fewer requests and were thus not required to develop plans for reducing backlogs. However, 2 of these 10 agencies, who both received significant numbers of requests, described various methods used to maintain a small backlog: PBGC officials credits its success to training, not only for FOIA staff, but all Incoming personnel, while also awarding staff for going above and beyond in facilitating FOIA processing. Pension Benefit Guaranty Corporation has incorporated all the best practices identified by OIP, including senior leadership involvement that supports FOIA initiatives and program goals, routine review of metrics to optimize workflows, effective utilization of resources and staff training. According to FDIC officials, its overall low backlog numbers are attributed to a trained and experienced FOIA staff, senior management involvement, and coordination among FDIC divisions. However, FDIC stated the reason for the increase in backlogs in fiscal year 2015 was due to increased complexity of requests. The 4 agencies with backlogs greater than 60 but fewer than 1,000 (EEOC, DOI, NTSB, and USAID) reported using various methods to reduce their backlogs. However, all 4 showed an increase over the 5-year period. EEOC officials stated that it had adopted practices recommended by OIP such as multi-track processing, reviewing workloads to ensure sufficient staff, and using temporary assignments to address needs. However, it has seen a large increase in its backlog numbers, going from 131 in fiscal year 2012 to 792 in fiscal year 2016. EEOC attributed the rise in backlogs to an increase in requests received, loss of staff, and the complex and voluminous nature of requests. DOI, according to agency officials, has also tried to incorporate reduction methods and best practices, including proactively releasing information that may be of interest to the public, thus avoiding the need for a FOIA request; enhanced training for its new online FOIA tracking and processing system; improved inter-office collaboration; monthly reports on backlogs and weekly charts on incoming requests to heighten awareness among leadership; and monitoring trends. Yet, DOI has seen an increase in its backlog, from 449 in fiscal year 2012 to 677 in fiscal year 2016, an increase of 51 percent. DOI attributed the increase to loss of FOIA personnel, increase in the complexity of requests, increase in FOIA-related litigation, increase in incoming requests, and staff having additional duties. Officials at NTSB stated that it utilized contractors and temporary staff assignments to augment staffing and address backlogs. Despite the effort, NTSB saw a large increase in backlogs, from 62 in fiscal year 2012 to 602 in fiscal year 2016. Officials stated that reason for the increase was due to increased complexity of requests, including requests for “any and all” documentation related to a specific subject, often involving hundreds to thousands of pages per request. According to USAID officials, the agency conducts and reviews inventories of its backlog and requests to remove duplicates and closed cases, group and classify requests by necessary actions and responsive offices, and initiate immediate action. In addition, USAID seeks to identify tools and solutions to streamline records for review and processing. However, its backlog numbers have continually increased, from 201 in fiscal year 2012 to 318 in fiscal year 2016. USAID attributes that increase to increase in the number of requests, loss of FOIA staff, increased complexity and volume of requests, competing priorities, and world events that may drive surges in requests. Of the four agencies with the largest backlogs, all reported taking steps that in some cases included best practices identified by OIP; however, only NARA successfully reduced its backlog by the end of the 5-year period. Justice made noted that it efforts to reduce its backlog by incorporating best practices. Specifically, OIP worked with components within Justice through the Component Improvement Initiative to identify causes contributing to a backlog and assist components in finding efficiencies and overcoming challenges. The Chief FOIA Officer continued to provide top-level support to reduction efforts by convening the department’s FOIA Council to manage overall FOIA administration. In addition, many of the components created their own reduction plans, which included hiring staff, utilizing technology, and providing more training, requester outreach, and multitrack processing. However, despite these efforts, the number of backlogs steadily increased during the 5-year period, from 5,196 in fiscal year 2012 to 10,644 in fiscal year 2016, an overall increase of 105 percent. Justice attributes the increase in backlogs to several challenges, including an increase of incoming requests and an increase in the complexity of those requests. Other challenges that Justice noted were staff shortages and turnover, reorganization of personnel, time to train incoming staff, and the ability to fill positions previously held by highly qualified professionals. NARA officials stated that one key step NARA took was to make corrections in its Performance Measurement and Reporting System. They noted that this system previously comingled backlogged requests with the number of pending FOIA requests, skewing the backlog numbers higher. The improvements included better accounting for pending and backlogged cases, distinguishing between simple and complex requests, and no longer counting as open cases that were closed within 20 days, but not until the beginning of the following fiscal year. In addition, officials also stated that the FOIA program offices have been successful at working with requesters to narrow the scope of requests. NARA also stated that it was conducting an analysis of FOIA across the agency to identify any barriers in the process. Officials also identified other methods, including using multi-track processing, shifting priorities to address needs, improved communication with agencies, proactive disclosures, and the use of mediation services. NARA has shown significant progress in reducing its backlog. In fiscal year 2012 it had a backlog of 7,610 requests, which spiked to 9,361 in fiscal year 14. However, by fiscal year 2016 the number of backlogged requests had dropped to 2,932 despite an more than doubling of requests received for that fiscal year. However, NARA did note challenges to reducing its backlog numbers, namely, the increase in the number of requests received. State developed and implemented a plan to reduce its backlog in fiscal year 2016. The plan incorporated two best practices by focused on identifying the extent of the backlog problem and developing ways to address the backlog with available resources. According to State officials, effort was dedicated to improve how FOIA data was organized and reported. Expedited and litigation cases were top priorities, whereas in other cases a first in first out method was employed. Even with these efforts, however, State experienced a 117 percent increase in its backlog over the 5-year period. State’s backlog doubled from 10,045 in fiscal year 2014 to 22,664 in fiscal year 2016. Among the challenges to managing its backlog, State reported an increase in incoming requests, a high number of litigation cases, and competing priorities. Specifically, the number of incoming requests for State increase by 51 percent during the 5-year period. State has also reported that it has allocated 80 percent of its FOIA resources to meet court-ordered productions associated with litigation cases, resulting in fewer staff to work on processing routine requests. This included, among other efforts, a significant allocation of resources in fiscal year 2015 to meet court-imposed deadlines to process emails associated with the former Secretary of State, resulting in a surge of backlogs. In 2017 State began an initiative to actively address its backlogs. The Secretary of State issued an agency-wide memorandum stating the department’s renewed efforts by committing more resources and workforce to backlog reduction. The memo states new processes are to be implemented for both the short and long-term, and the FOIA office has plans to work with the various bureaus to outline the tasks, resources, and workforce necessary to ensure success and compliance. With renewed leadership support, State has reported significant progress in its backlog reduction efforts. DHS, in its chief FOIA officer reports, reported that it implemented several plans to reduce backlogs. The DHS Privacy office, which is responsible for oversight of the department’s FOIA program, worked with components to help eliminate the backlog. The Privacy Office sent monthly emails to component FOIA officers on FOIA backlog statistics, convened management meetings, conducted oversight, and reviewed workloads. Leadership met weekly to discuss the oldest pending requests, appeals, and consultations, and determined needed steps to process those requests. In addition, several other DHS components implemented actions to reduce backlogs. Customs and Border Protection hired and trained additional staff, encouraged requesters to file requests online, established productivity goals, updated guidance, and utilized better technology. U.S. Citizenship and Immigration Services, National Protection and Programs Directorate, and Immigration and Customs Enforcement increased staffing or developed methods to better forecast future workloads ensure adequate staffing. Immigration and Customs Enforcement also implemented a commercial off-the-shelf web application, awarded a multi-million dollar contract for backlog reduction, and detailed employees from various other offices to assist in the backlog reduction effort. Due to efforts by the Privacy Office and other components, the backlog dropped 66 percent in fiscal year 2015, decreasing to 35,374. Yet, despite the continued efforts in fiscal year 2016, the backlog numbers increased again, to 46,788. DHS attributes the increases in backlogs to several factors, including an increase in the number of requests received, increased complexity and volume of responsive records for those requests, loss of staff and active litigation with demanding production schedules. One reason the eight agencies with significant backlogs may be struggling to consistently reduce their backlogs is that they lack documented, comprehensive plans that would provide a more reliable, sustainable approach to addressing backlogs. In particular, they do not have documented plans that describe how they will implement best practices for reducing backlogs over time, including specifying how they will use metrics to assess the effectiveness of their backlog reduction efforts and ensure that senior leadership supports backlog reduction efforts, among other best practices identified by OIP. While agencies with backlogs of 1,000 or more are required to describe backlog reduction efforts in their chief FOIA officer reports, these consist of a high-level narrative and do not include a specific discussion of how the agencies will implement best practices over time to reduce their backlog. In addition, agencies with backlogs of fewer than 1,000 requests are not required to report on backlog reduction efforts; however, the selected agencies in our review with backlogs in the hundreds still experienced an increase over the 5-year period. Without a more consistent approach, agencies will continue to struggle to reduce their backlogs to a manageable level, particularly as the number and complexity of requests increase over time. As a result, their FOIA processing may not respond effectively to the needs of requesters and the public. FOIA requires agencies report annually to Justice on their use of statutory (b)(3) exemptions. This includes specifying which statutes they relied on to exempt information from disclosure and the number of times they did so. To assist agencies in asserting and accounting for their use of these statutes, Justice instructs agencies to consult a running list of all the statutes that have been found to qualify as proper (b)(3) statutes by the courts. However, agencies may also use a statute not included in the Justice list, because many statutes that appear to meet the requirements of (b)(3) have not been identified by a court as qualifying statutes. If the agency uses a (b)(3) statute that is not identified in the qualifying list, Justice guidance instructs the agency to include information about that statute in its annual report submission. Justice reviews the statute and provides advice to the agency, but does not make a determination on the appropriateness of using that statute under the (b)(3) exemption. Based on data agencies reported to Justice, during fiscal years 2010 to 2016, agencies claimed 237 statutes as the basis for withholding information. Of these statutes, 75 were included on Justice’s list of qualifying statutes under the (b)(3) exemption. Further, we identified 140 additional statutes that were not identified in our 237 statutes claimed by agencies during fiscal years 2010 to 2016, but have similar provisions to other (b)(3) statutes authorizing an agency to withhold information from the public. We found that the 237 statutes cited as the basis for (b)(3) exemptions during the period from fiscal year 2010 to 2016 to fell into eight general categories of information. These categories were (1) personally identifying information, (2) national security, (3) commercial, (4) law enforcement and investigations, (5) internal agency, (6) financial regulation, (7) international affairs, and (8) environmental. Figure 6 identifies the eight categories and the number of agency-claimed (b)(3) statutes in each of the categories. Of the 237 (b)(3) statutes cited by agencies, the majority—178—fell into four of the eight categories: Forty-nine of these statutes related to withholding personally identifiable information including, for example, a statute related to withholding death certificate information provided to the Social Security Administration. Forty-five statutes related to the national security category. For example, one statute exempted files of foreign intelligence or counterintelligence operations of the National Security Agency. Forty-two statutes were in the law enforcement and investigations category, including a statute that exempts from disclosure information provided to Justice pursuant to civil investigative demands pertaining to antitrust investigations. Forty-two statutes fell into the commercial category. For example, one statute in this category related to withholding trade secrets and other confidential information related to consumer product safety. The remaining 59 statutes were in four categories: internal agency functions and practices, financial regulation, international affairs, and environmental. The environmental category contained the fewest number of statutes and included, for example, a statute related to withholding certain air pollution analysis information. As required by FOIA, agencies also reported the number of times they used each (b)(3) statute. In this regard, 33 FOIA-reporting agencies indicated that they had used 10 of the 237 (b)(3) statutes more than 200,000 times. Of these 10 most-commonly used statutes, the single most-used statute (8 U.S.C § 1202(f)) related to withholding records pertaining to the issuance or refusal of visas to enter the United States. It was used by 4 agencies over 58,000 times. Further, of the 10 most-commonly used statutes, the statute used by the greatest number of agencies (26 U.S.C § 6103) related to the withholding of certain tax return information; it was used by 24 FOIA-reporting agencies about 30,000 times. By contrast, some statutes were only used by a single agency. Specifically, the Department of Veterans Affairs used a statute related to withholding certain confidential veteran medical records (38 U.S.C. § 7332) more than 16,000 times. Similarly, EEOC used a statute related to employment discrimination on the basis of disability (42 U.S.C. § 12117) more than 10,000 times. Table 4 shows the 10 most-used statutes under the (b)(3) exemption, the agency that used each one most frequently, and the number of times they were used by that agency for the period covering fiscal years 2010 through 2016. The OPEN FOIA Act of 2009 amended FOIA to require that any federal statute enacted subsequently must specifically cite paragraph (b)(3) of FOIA to qualify as a (b)(3) exemption statute. Prior to 2009, a federal statute qualified as a statutory (b)(3) exemption if it (1) required that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (2) established particular criteria for withholding or refers to particular types of matters to be withheld. In response to the amendment, in 2010, Justice released guidance to agencies stating that any statute enacted after 2009 must specifically cite to the (b)(3) exemption to qualify as a withholding statute. Further, the guidance encouraged agencies to contact Justice with questions regarding the implementation of the amendment. Even with this guidance, we found that a majority of agency-claimed statutes during fiscal years 2010 through 2016 did not specifically cite the (b)(3) exemption. Specifically, of the 237 (b)(3) statutes claimed by agencies, 103 were enacted or amended after 2009 and, thus, were subject to the requirement of the OPEN FOIA Act. Of those 103 statutes, 86 lacked the required statutory text that cited exemption (b)(3) of FOIA. Figure 7 shows the number of agency-claimed statutes subject to the OPEN FOIA Act of 2009 requirement that did not cite the (b)(3) exemption. Agencies are using these statutes as the basis for withholding information when responding to a FOIA request. This is despite these statutes not having a reference to the (b)(3) exemption as required by the 2009 FOIA amendments. In our report, being issued today, we found that, according to the available information and Justice and OSC officials, since fiscal year 2008, no court orders have been issued that have required OSC to initiate a proceeding to determine whether disciplinary action should be taken against agency FOIA personnel. Specifically, officials in Justice’s Office of Information Policy stated that there have been no lawsuits filed by a FOIA requester that have led the courts to conduct all three requisite actions needed for Justice to refer a court case to OSC. Justice’s litigation and compliance reports identified six court cases (between calendar years 2013 and 2016) in which the requesters sought a referral from the courts in an attempt to have OSC initiate an investigation. However, in all six cases, the courts denied those requests, finding that each case did not result in the courts taking the three actions necessary to involve OSC. Thus, given these circumstances, Justice has not referred any court orders to OSC to initiate a proceeding to determine whether disciplinary action should be taken against agency FOIA personnel. For its part, OSC officials confirmed that the office has neither received, nor acted on, any such referrals from Justice. As such, OSC has not had cause to initiate disciplinary actions for the improper withholding of FOIA records. In summary, the 18 agencies we selected for review fully implemented half of the six FOIA requirements reviewed and the vast majority of agencies implemented two additional requirements. However, 5 agencies published and updated their FOIA regulations in a timely and comprehensive manner. Fully implementing FOIA requirements will better position agencies to provide the public with necessary access to government records and ensure openness in government. The selected agencies in our review varied considerably in the size of their backlogs. While 10 reported a backlog of 60 or fewer requests, 4 had backlogs of over 1,000 per year. Agencies identified a variety of methods that they used to address their backlogs, including practices identified by Justice, as well as additional methods. However, the selected agencies varied in the success achieved for reducing their backlogs. This was due, in part, to a lack of plan that describes how the agencies will implement best practices for reducing backlogs over time. Until agencies develop plans to reduce backlogs, they will be limited in their ability to respond effectively to the needs of requesters and the public. Accordingly, our draft report contains 23 planned recommendations to selected agencies. These recommendations address posting records online, designating chief FOIA officers, updating regulations consistent with requirements, and developing plans to reduce backlogs. Implementation of our recommendations should better position these agencies to address FOIA requirements and ensure the public is provided with access to government information. Chairman Grassley, Ranking Member Feinstein, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you have any questions on matters discussed in this testimony, please contact David A. Powner at (202) 512-9286 or at pownerd@gao.gov. Individuals who made key contributions to this testimony are Anjalique Lawrence (assistant director), Lori Martinez (analyst in charge), Gerard Aflague, David Blanding, Christopher Businsky, Rebecca Eyler, James Andrew Howard, Carlo Mozo, David Plocher, and Sukhjoot Singh. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "FOIA requires federal agencies to provide the public with access to government records and information based on the principles of openness and accountability in government. Each year, individuals and entities file hundreds of thousands of FOIA requests for information on numerous topics that contribute to the understanding of government actions. In the last 9 fiscal years, federal agencies subject to FOIA have received about 6 million requests. GAO was asked to summarize its draft report on federal agencies' compliance with FOIA requirements. GAO's objectives, among others, were to (1) determine the extent to which agencies have implemented selected FOIA requirements; (2) describe the methods established by agencies to reduce backlogged requests and the effectiveness of those methods; and (3) identify any statutory exemptions that have been used by agencies as the basis for withholding (redacting) information from requesters. To do so, GAO selected 18 agencies based on their size and other factors and assessed their policies against six FOIA requirements. GAO also reviewed the agencies' backlog reduction plans and developed a catalog of statutes that agencies have used to withhold information. In its draft report, GAO determined that all 18 selected agencies had implemented three of six Freedom of Information Act (FOIA) requirements reviewed. Specifically, all agencies had updated response letters to inform requesters of the right to seek assistance from FOIA public liaisons, implemented request tracking systems, and provided training to FOIA personnel. For the three additional requirements, 15 agencies had provided online access to government information, such as frequently requested records, 12 agencies had designated chief FOIA officers, and 5 agencies had published and updated their FOIA regulations to inform the public of their operations. Until these agencies address all of the requirements, they increase the risk that the public will lack information that ensures transparency and accountability in government operations. The 18 selected agencies had backlogs of varying sizes, with 4 agencies having backlogs of 1,000 or more requests during fiscal years 2012 through 2016. These 4 agencies reported using best practices identified by the Department of Justice, such as routinely reviewing metrics, as well as other methods, to help reduce their backlogs. Nevertheless, these agencies' backlogs fluctuated over the 5-year period (see figure). The 4 agencies with the largest backlogs attributed challenges in reducing their backlogs to factors such as increases in the number and complexity of FOIA requests. However, these agencies lacked plans that described how they intend to implement best practices to reduce backlogs. Until agencies develop such plans, they will likely continue to struggle to reduce backlogs to a manageable level. Agencies used various types of statutory exemptions to withhold information when processing FOIA requests during fiscal years 2010 to 2016. The majority of these fell into the following categories: personally identifiable information, national security, law enforcement and investigations, and confidential and commercial business information. GAO's draft report contains recommendations to selected agencies to post records online, designate chief FOIA officers, update regulations consistent with requirements, and develop plans to reduce backlogs.", "document_type": "gao"}
{"report": "The BSA established reporting, recordkeeping, and other AML requirements for financial institutions. By complying with BSA/AML requirements, U.S. financial institutions assist government agencies in the detection and prevention of money laundering and terrorist financing by, among other things, maintaining compliance policies, conducting ongoing monitoring of customers and transactions, and reporting suspicious financial activity. Regulation under and enforcement of BSA involves several federal agencies. FinCEN is responsible for administering the BSA, has authority for enforcing compliance with its requirements and implementing regulations, and also has the authority to enforce the act, including through civil money penalties. FinCEN issues regulations under BSA and relies on the examination functions performed by other federal regulators, including the federal banking regulators. FinCEN also collects, analyzes, and maintains the reports and information filed by financial institutions under BSA and makes those reports available to law enforcement and regulators. FinCEN has delegated BSA/AML examination authority for banks to the federal banking regulators. The federal banking regulators have issued their own BSA regulations that require banks to establish and maintain a BSA compliance program which, among other things, requires banks to identify and report suspicious activity. The banking regulators are also required to review compliance with BSA/AML requirements and regulations which they generally do every 12 to 18 months as a part of their routine safety and soundness examinations. Federal banking regulators take a risk-based approach to BSA examinations—that is, they review key customers of risk or specific problems identified by the bank. Among other things, examiners review whether banks have an adequate system of internal controls to ensure ongoing compliance with BSA/AML regulations. The federal banking regulators may take enforcement actions using their prudential authorities for violations of BSA/AML requirements. They may also assess civil money penalties against financial institutions and individuals independently, or concurrently with FinCEN. All banks are required to establish an AML compliance program that includes policies, procedures, and processes which, at a minimum, must provide for: a system of internal controls to ensure ongoing compliance, a designated individual or individuals responsible for managing BSA compliance (BSA compliance officer), training for appropriate personnel, independent testing for BSA/AML compliance, and appropriate risk-based procedures for conducting ongoing customer due diligence. BSA/AML regulations require that each bank tailor a compliance program that is specific to its size and own risks based on factors such as the products and services offered, customers, types of transactions processed, and locations served. BSA/AML compliance programs may include the following components: Customer Identification Program (CIP)—Banks must have written procedures for opening accounts and, at a minimum, must obtain from each customer their name, date of birth, address, and identification number before opening an account. In addition, banks’ CIPs must include risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable. Banks must also collect information on individuals who are beneficial owners of a legal entity customer in addition to the information they are required to collect on the customer under the CIP requirement. Customer Due Diligence (CDD)—CDD procedures enable banks to predict with relative certainty the types of transactions in which a customer is likely to engage, which assists banks in determining when transactions are potentially suspicious. Banks must document their process for performing CDD and implement and maintain appropriate risk-based procedures for conducting ongoing customer due diligence. These procedures include, but are not limited to, understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile, and conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. Enhanced Due Diligence (EDD)—Customers who banks determine pose a higher money laundering or terrorist financing risk are subject to EDD procedures. EDD for higher-risk customers helps banks understand these customers’ anticipated transactions and implement an appropriate suspicious activity monitoring system. Banks review higher-risk customers and their transactions more closely at account opening and more frequently throughout the term of their relationship with the bank. Suspicious Activity Monitoring—Banks must also have policies and procedures in place to monitor transactions and report suspicious activity. Banks use different types of monitoring systems to identify or alert staff of unusual activity. A manual transaction monitoring system typically targets specific types of transactions (for example, those involving large amounts of cash and those to or from foreign areas) and includes a manual review of various reports generated by the bank’s information systems in order to identify unusual activity. An automated monitoring system can cover multiple types of transactions and use various rules, thresholds, and scenarios to identify potentially suspicious activity. These systems typically use computer programs to identify individual transactions, patterns of unusual activity, or deviations from expected activity. Banks that are large, operate in many locations, or have a large volume of higher-risk customers typically use automated monitoring systems. Banks also must comply with certain reporting requirements, including: CTR: A bank must electronically file a CTR for each transaction in currency—such as a deposit or withdrawal—of more than $10,000. SAR: Banks are required to electronically file a SAR when a transaction involves or aggregates at least $5,000 in funds or other assets, and the institution knows, suspects, or has reason to suspect that the transaction meets certain criteria qualifying as suspicious. Generally, the federal banking regulators do not direct banks to open, close, or maintain individual accounts. However, banks generally include policies and procedures to describe criteria for not opening, or closing, an account in their BSA/AML compliance program. For example, although there is no requirement for a bank to close an account that is the subject of a SAR filing, a bank should develop policies and procedures that indicate when it will escalate issues identified as the result of repeat SAR filings on accounts, including criteria on when to close an account. Additionally, a bank’s CIP should contain procedures for circumstances when a bank cannot verify the customer’s identity, including procedures that include circumstances in which the bank should not open an account and when the bank should close an account. Federal banking regulators also cannot prohibit banks from closing branches. However, FDIC-insured banks are required to submit a notice of any proposed branch closing to their primary banking regulator no later than 90 days prior to the date of the proposed branch closing. The notice must include a detailed statement of the reasons for closing the branch and statistical or other information in support of the reasons. Banks are also required to mail a notice to the customers of the branch proposed to be closed at least 90 days prior to the proposed closing and must post a notice to customers in the branch proposed to be closed at least 30 days prior to the proposed closing. The notice should state the proposed date of closing and either identify where branch customers may obtain service following that date or provide a telephone number for customers to call to determine such alternative sites. In October 2017, Mexico was the second largest goods trading partner of the United States in terms of both imports and exports, according to U.S. Census trade data. Trade with Mexico is an important component of Southwest border states’ economies, which benefit from their proximity to the international border and the related seaports and inland ports for the exportation and importation of goods. The fresh produce industry is an example of a key industry in the border region. The fresh produce industry encompasses several activities involved with importation, inspection, transportation, warehousing, and distribution of Mexican- grown produce to North American markets, all of which provide employment opportunities and revenues to local economies. Another key industry in the region is manufacturing. The Southwest border has played a role in a growing trend known as production sharing, in which companies—predominantly based in the United States—locate some operations in Mexico, thus achieving lower costs in the overall production process. Local Southwest border communities also benefit from pedestrians crossing into the United States from Mexico to visit and shop in their communities. For example, Department of Transportation border crossing data show that in September 2017, nearly 750,000 pedestrians entered the United States at the San Ysidro, California, border crossing— the busiest pedestrian port of entry into the country. The Department of State has identified Mexico as a major money laundering country. As a result of its proximity to Mexico, the Southwest border region faces high money laundering and related financial crime risks. The U.S.-Mexico border includes major population centers, transportation hubs, and large tracts of uninhabited desert. According to Treasury’s 2015 National Money Laundering Risk Assessment, criminal organizations have used the vast border to engage in cross-border drug trafficking, human smuggling, and money laundering. The 2015 assessment also states that bulk cash smuggling remains the primary method Mexican drug trafficking organizations use to move illicit proceeds across the Southwest border into Mexico. Some cash collected domestically to pay the drug trafficking organizations for drugs is channeled from distribution cells across the United States to cities and towns along the Southwest border, and from there is smuggled into Mexico. All counties within the Southwest border region have been identified as either a High Intensity Financial Crime Area (HIFCA) or a High Intensity Drug Trafficking Area (HIDTA) with the vast majority being identified as both (see fig. 1). HIFCAs and HIDTAs aim to concentrate law enforcement efforts at the federal, state, and local levels to combat money laundering and drug trafficking in designated high-intensity money laundering zones and in areas determined to be critical drug-trafficking regions of the United States, respectively. Several characteristics of the Southwest border region make the region a high-risk area for money laundering activity. These characteristics, which require additional efforts for Southwest border banks to comply with BSA/AML requirements, include high volumes of cash transactions, cross-border transactions, and foreign accountholders. Bank representatives we spoke with said that they manage these added BSA/AML compliance challenges through activities such as more frequent monitoring and investigating of suspicious activities, but that these efforts require an investment of resources. Money laundering risk is high in the Southwest border region because of the high volume of cash transactions, the number of cross-border transactions, and foreign accountholders, according to bank representatives, federal banking regulators, and others. Cash transactions increase the BSA/AML compliance risk for banks because the greater anonymity associated with using cash results in greater risk for money laundering or terrorist financing. A regional economic development specialist noted, for example, that Mexican nationals who shop in border communities typically use cash as a payment form. Further, representatives from a regional trade group told us that border businesses prefer payment in cash over checks from Mexican banks because of potential variations in the exchange rate before a peso- denominated check clears. The trade group representatives we spoke with also noted that currency exchanges also add to the volume of cash transactions in the region. In June 2010, the Mexican finance ministry published new AML regulations that restricted the amounts of physical cash denominated in U.S. dollars that Mexican financial institutions could receive. According to FinCEN officials and some of the federal bank examiners we spoke with, these regulations altered the BSA/AML risk profile of some U.S. banks, particularly those in the Southwest border region. For example, U.S. banks started receiving bulk shipments of currency directly from Mexican nationals and businesses, rather than from Mexican banks. This increased BSA/AML compliance risk for the U.S. banks because they now had to assess the risk of each individual customer shipping them currency, rather than the collective risk from their Mexican banking counterparts. In addition, according to FinCEN, the regulations added to the level of cash in the Southwest border region because businesses in the region saw higher levels of cash payments from Mexican customers. This also created additional risk for U.S. banks when these businesses deposited the cash payments. Our review of data on banks’ CTR filings confirmed that bank branches that operate in Southwest border region counties handle more large cash transactions than bank branches elsewhere. For example, our analysis found that bank branches in Southwest border region counties generally file more CTRs than bank branches in comparable counties in the same border states or in other high-risk financial crime or drug trafficking counties that are not in border states. Specifically, in 2016, bank branches in Southwest border region counties filed nearly 30 percent more CTRs, on average, than bank branches in comparable counties elsewhere in their same state, and about 60 percent more than those in other high-risk counties outside the region. Similar differences occurred in 2014 and 2015 (see fig. 2). Cross-border transactions are also higher risk for money laundering because international transfers can present an attractive method to disguise the source of funds derived from illegal activity. Certain industries, such as agriculture, that are prevalent in the Southwest border region have legitimate business practices that could appear suspicious without sufficient context, regional representatives said. For example, representatives of one produce industry association we spoke with said produce distributors often import produce from Mexican farmers and pay them via wire transfer, which the farmers may then immediately withdraw in cash to pay laborers. Transactions that involve cross-border wire transfers and immediate withdrawals of cash may raise suspicion of money laundering that requires further scrutiny by the bank. BSA/AML regulations generally require banks to keep additional documentation for domestic and international fund transfers of $3,000 or more, including specific identifying information about the originator and beneficiary of the transaction. If the bank sends or receives funds transfers to or from institutions in other countries, especially those with strict privacy and secrecy laws, the bank should have policies and procedures to determine whether the amounts, the frequency of the transfer, and countries of origin or destination are consistent with the nature of the business or occupation of the customer. Southwest border banks cited foreign accountholders as another type of high-risk customer for money laundering and terrorist financing. These types of customers are prevalent in the Southwest border region, examiners said, and can create challenges for banks to verify and authenticate their identification, source of funds, and source of wealth. Southwest border banks and others cited these types of customers as adding BSA/AML compliance risk for banks, particularly if the accountholders do not reside in the United States. These customers may also have more frequent funds transfers to other countries. Foreign accountholders who are “senior foreign political figures” also create additional money laundering and terrorist financing risk because of the potential for their transactions to involve the proceeds from foreign-official corruption. Some Southwest border banks told us they provide accounts to senior foreign political figures, but may limit the number of those types of accounts. The volume of high-risk customers and cross-border transactions can lead to more intensive account monitoring and investigation of suspicious transactions, Southwest border bank representatives said. Performing effective due diligence and complying with CIP requirements for higher- risk customers and transactions can be more challenging because banks might need specialized processes for higher-risk customers and transactions than for those that are lower-risk. For example, representatives from some Southwest border banks told us their BSA/AML compliance staff travel to Mexico or collect information from sources in Mexico to establish the legitimacy of businesses across the border. Another bank said they ask to see 3 months of some high-risk businesses’ previous bank statements to determine the typical volume of cash and wire transfers and that this type of due diligence is very time- consuming. The bank also collects details about the recipients of the wired funds in an effort to determine the legitimacy of the payments. Some Southwest border banks also described using special processes to evaluate BSA/AML compliance risks for foreign customers and said they used extra caution before accepting them as customers. These special processes included translating business documents from Spanish to English to certify the legitimacy of business customers and developing internal expertise on currently acceptable identity documents issued by foreign governments. Southwest border bank representatives we spoke with said addressing these compliance challenges also can require more resources for monitoring high-risk customers and investigating suspicious transactions. High-risk customers require additional detail to be collected when accounts are opened and on an ongoing basis. Representatives of one Southwest border bank explained that they monitor high-risk customers’ transactions more frequently—every 3 months, compared to every 6 months for medium-risk customers. Further, high volumes of cash activity can generate substantial numbers of alerts in bank monitoring systems, and these alerts are evaluated by banks to determine whether SARs should be filed. Transaction structuring, which involves attempts to evade the $10,000 CTR filing requirement by, for example, making several smaller transactions, is a common source of alerts, some bank representatives said. Several banks we interviewed cited the investigation of potential structuring as one of their common BSA/AML compliance activities. Although many banks have monitoring software to generate suspicious activity alerts, representatives said the flagged transactions generally are investigated manually and can be a labor-intensive part of banks’ overall BSA/AML compliance programs. Southwest border bank representatives we spoke with also told us that their suspicious activity monitoring systems often generate “false positives”—meaning further investigation leads to a determination that no SAR filing is warranted. As a result, the total number of SAR filings can actually understate banks’ total BSA/AML compliance efforts associated with suspicious transaction monitoring. We found that bank branches in Southwest border region counties filed more SARs, on average, from 2014 through 2016 than bank branches in comparable counties in the same border states or in other high-risk financial crime or drug trafficking counties that are not in border states. For example, in 2016, bank branches in Southwest border region counties filed three times as many SARs, on average, as bank branches operating in other counties within Southwest border states and about 2.5 times as many SARs, on average, as bank branches in other high-risk financial crime or drug trafficking counties in nonborder states. These differences in SAR filings showed a similar pattern in 2014 and 2015 (see fig. 3). Federal banking regulators cited some Southwest border banks for noncompliance with BSA/AML requirements from January 2009 through June 2016. Those citations included 41 formal or informal enforcement actions taken against Southwest border banks. FinCEN also took two formal enforcement actions during that period. As part of the bank examination process, the federal banking regulators also cited Southwest border banks for 229 BSA/AML violations from January 2009 through June 2016. Of these, SAR-related violations were the most common type of violation (33 percent). This was followed closely by violations related to BSA/AML monitoring and compliance (31 percent)—a category we defined to include competencies such as having an adequate system of BSA/AML internal controls and providing adequate BSA/AML training (see fig. 4). Our nationally representative survey found that most Southwest border banks terminated accounts for reasons related to BSA/AML risk from January 2014 through December 2016 and limited, or did not offer, accounts to certain customer types, consistent with BSA/AML purposes. However, our survey also found that many Southwest border banks may also be engaging in derisking. Nationally, our econometric analysis suggests that counties that were urban, younger, had higher income, or had higher money laundering-related risk were more likely to lose branches. Money laundering-related risks were likely to have been relatively more important drivers of branch closures in the Southwest border region. Most Southwest border banks reported terminating accounts for reasons related to BSA/AML risk. Based on our survey results, from January 1, 2014, through December 31, 2016, we estimate that almost 80 percent of Southwest border banks had terminated personal or business accounts for reasons related to BSA/AML risk. For the subset of Southwest border banks whose operations extend outside of the Southwest border region, we estimate that almost 60 percent reported that they terminated business or personal accounts domiciled in their Southwest border branches. For banks that did not operate in the Southwest border region (non-Southwest border banks), account terminations related to BSA/AML risk varied by the size of the bank. For example, an estimated 93 percent of medium banks and an estimated 95 percent of large banks terminated accounts for reasons related to BSA/AML risk, compared to an estimated 26 percent of small banks. Among the five types of businesses we identified for our survey as high risk for money laundering and terrorist financing, cash-intensive small businesses (for example, retail stores, restaurants, and used car dealers) were the most common types of business accounts that Southwest border banks reported terminating for reasons related to BSA/AML risk. For example, over 70 percent of Southwest border banks reported terminating cash-intensive small business accounts. Between 45 percent and 58 percent of Southwest border banks cited terminating accounts for the remaining four categories of high-risk business accounts we identified: money services businesses, domestic businesses engaged in cross-border trade, nontrade-related foreign businesses, and foreign businesses engaged in cross-border trade. Bank-Reported Data on Accounts Terminated in 2016 for BSA/AML Reasons In response to our survey, several banks provided data on the number of accounts they terminated in 2016 for reasons related to BSA/AML risk. We found that two extra-large banks (those banks with $50 billion or greater in assets) were responsible for the majority of these account terminations for both business and personal accounts. These terminations accounted for less than half a percent of the extra-large banks’ overall accounts. These numbers only represent account terminations for the banks that provided data and are not generalizable to the population of banks. The most common reason related to BSA/AML risk banks reported for terminating accounts from January 2014 through December 2016 was the filing of SARs associated with the accounts. Based upon our survey, we estimate that 93 percent of Southwest border banks terminated accounts because of the filing of SARs. Through discussions with Southwest border bank representatives, we found that banks vary the level of internal investigations they conduct into the suspicious activity before deciding to terminate an account as a result of a certain number of SAR filings. Representatives from 3 of the 19 Southwest border banks we spoke with told us that their account closure policies generally required the automatic termination of an account when a certain number of SARs—ranging from 1 to 4—were filed for an account. Representatives from two other Southwest border banks said a certain number of SARs filed for one account would lead to an automatic review of the account that would determine whether or not the account should be closed. Other Southwest border bank representatives we interviewed did not indicate having a specific policy for terminating accounts related to the number of SAR filings, but some of these representatives said that SAR filings were one of the factors that could lead to account terminations. Figure 5 shows the survey estimates for the other BSA/AML reasons Southwest border banks cited for terminating accounts. Some commonly cited reasons were the failure of the customer to respond adequately to requests for information as part of customer due diligence processes and the reputational risk associated with the customer type. For example, an estimated 80 percent of Southwest border banks cited the failure of the customer to respond adequately to requests for information as part of customer due diligence processes. Some Southwest border bank representatives told us that sometimes customers do not provide adequate documentation in response to their due diligence inquiries. These representatives said that after a certain number of attempts to obtain the documentation, the lack of customer responsiveness results in them terminating the account. A bank may also terminate an account if the activity of the customer could risk the reputation of the bank. About 68 percent of Southwest border banks that terminated accounts cited the reputational risk associated with the customer type as a reason for terminating an account. Some Southwest border bank representatives we spoke with said they have closed accounts due to the nature of the business. For example, some bank representatives said they have closed accounts for gambling and marijuana businesses. In addition, law enforcement officials from the Southwest Border Anti-Money Laundering Alliance told us that they thought that some of the accounts terminated by Southwest border banks were a result of the information the banks were given from local law enforcement and other federal agencies. For example, when funnel accounts—accounts in one geographic area that receive multiple cash deposits and from which funds are withdrawn in a different geographic area with little time elapsing between the deposits and withdrawals—were first identified by law enforcement as a money laundering method, banks responded by closing these types of accounts. Non-Southwest border banks generally reported the same primary reasons for terminating accounts as Southwest border banks. The top two reasons for terminating accounts cited by non-Southwest border banks that responded to the survey was the filing of SARs associated with the accounts and the failure of the customer to respond adequately to requests for information as part of customer due diligence processes. A majority of Southwest border banks and non-Southwest border banks reported limiting or not offering accounts to certain types of businesses considered high risk for money laundering and terrorist financing, particularly money services businesses and foreign businesses. For example, the estimates for Southwest border banks that have limited, or not offered, accounts to nontrade-related foreign businesses is 76 percent, money service businesses is 75 percent, and foreign businesses engaged in cross-border trade is 72 percent. The most common reason (cited by 88 percent of Southwest border banks) for limiting, or not offering, an account to these types of businesses was that the business type fell outside of the bank’s risk tolerance—the acceptable level of risk an organization is willing to accept around specific objectives. Similarly, 69 percent of Southwest border banks cited the inability to manage the BSA/AML risk associated with the customer (for example, because of resource constraints) as a factor for limiting, or not offering, accounts. Representatives from some Southwest border banks we spoke with explained that they do not have the resources needed to conduct adequate due diligence and monitoring for some of the business types considered high risk for money laundering and terrorist financing. As a result, they told us that they no longer offer accounts for certain business lines. For example, a representative from one Southwest border bank told us that the bank no longer offers accounts to money services businesses because of the BSA/AML compliance requirements and monitoring needed to service those types of accounts. In particular, they stated they do not have the resources to monitor whether the business has the appropriate BSA/AML compliance policies and procedures in place and to conduct site visits to ensure it is operating in compliance with BSA/AML requirements. Another Southwest border bank representative told us they have stopped banking services for used clothing wholesalers who export their product to Mexico because they were unable to mitigate the risk associated with these types of businesses. They explained that these companies’ business models involve many individuals crossing the U.S.- Mexico border to purchase with cash pallets of clothing to import to Mexico. The bank representative explained that the business model for this industry made it very hard to identify the source of the large volumes of cash. Other reasons Southwest border banks reported for limiting, or not offering, certain types of business accounts are shown in figure 6. Similar to the reasons given by Southwest border banks, the most common reason that non-Southwest border banks reported limiting, or not offering accounts, to certain types of businesses considered high risk for money laundering and terrorist financing was that the customer type fell outside of the bank’s risk tolerance. The second most common reason—cited by 80 percent of Southwest border banks—for limiting, or not offering, accounts to certain types of businesses considered high risk for money laundering and terrorist financing, was that the customer type drew heightened BSA/AML regulatory oversight—behavior that could indicate derisking. For example, representatives from one Southwest border bank explained that they no longer offer accounts to money services businesses because they want to be viewed from a good standpoint with their regulator. They added that banking for these types of customers is very high risk for the bank with very little reward. Another bank that operates in the Southwest border region explained that rather than being able to focus on their own BSA/AML risk assessment and the performance of accounts, they feel pressured to make arbitrary decisions to close accounts based on specific concerns of their examiners. Several Southwest border bank representatives also described how recent BSA/AML law enforcement and regulatory enforcement actions have caused them to become more conservative in the types of businesses for which they offer accounts. For example, representatives from one Southwest border bank we spoke with stated that many of the banks that do business in the Southwest border region have stopped servicing cross-border businesses due to a large enforcement action in which the allegations against the bank cited an ineffective AML program that exposed it to illicit United States/Mexico cross-border cash transactions. A representative from another Southwest border bank explained that his bank could have a large banking business in one of the state’s border towns, but the bank has chosen not to provide services there because if BSA/AML compliance deficiencies are identified from servicing that area, the penalties could be high enough to shut down the whole bank. In addition, while banks may terminate accounts because of SAR filings as a method to manage money laundering and terrorist financing risk and to comply with BSA/AML requirements, some of these terminations may be related to derisking. For example, some Southwest border bank representatives we spoke with as part of this review, as well as other banks and credit unions we spoke with in a previous review, told us that they have filed SARs to avoid potential criticism during examinations, not because they thought the observed activity was suspicious. Non-Southwest border banks also commonly cited the inability to manage risk associated with the customer type and heightened regulatory oversight as reasons for limiting, or not offering, accounts. Our survey results and discussions with Southwest border bank representatives are consistent with what a senior Treasury official identified in a 2015 speech as causing correspondent banking and money services business account terminations. The speech noted that a number of interrelated factors may be resulting in the terminations, but that the most frequently mentioned reason related to efforts to comply with AML and terrorist financing requirements. In particular, banks raised concerns about (1) the cost of complying with AML and terrorist financing regulations, (2) uncertainty about supervisors’ expectations regarding what is appropriate due diligence, and (3) the nature of the enforcement and supervisory response if they get it wrong. The speech noted that banks said that they made decisions to close accounts not so much because they were unable to manage the illicit finance risks but because the costs associated with taking on those risks had become too high. It further stated that there is a gap between what supervisory agencies have said about the standards they hold banks to and banks’ assessment of those standards, and that there was still a perception among banks that supervisory and enforcement expectations lack transparency, predictability, and consistency. The senior Treasury official noted this perception feeds into higher anticipated compliance costs and when banks input this perceived risk into their cost-benefit analysis, it may eclipse the potential economic gain of taking on a new relationship. Counties in the Southwest border region have been losing bank branches since 2012, similar to national and regional trends, as well as trends in other high-risk financial crime or drug trafficking counties that are outside the region. Most of the 32 counties (18 counties or nearly 60 percent) comprising the Southwest border region did not lose bank branches from 2013 through 2016, but 5 counties lost 10 percent or more of their branches over this time period (see top panel of fig. 7). Those 5 counties are Cochise, Santa Cruz, and Yuma, Arizona; Imperial, California; and Luna, New Mexico. Within those counties we identified as having the largest percentage loss of branches, sometimes those losses were concentrated in smaller communities within the county (see bottom panel of fig. 7). For example, Calexico in Imperial County, California, lost 5 of its 6 branches from 2013 through 2016. In Santa Cruz County in Arizona, one zip code in Nogales accounted for all of the branch losses in the county from 2013 through 2016, losing 3 of its 9 branches. More generally, branch losses can vary substantially across different zip codes in a county (see for example bottom panel of fig. 7). In other instances, counties that lost a relatively small share of their branches can contain communities that lost a more substantial share—for example San Ysidro in San Diego County lost 5 of its 12 branches (about 42 percent) while the county as a whole lost only 5 percent of its branches from 2013 through 2016. Based on our analysis, counties losing branches in the Southwest border region tended to have substantially higher SAR filings, on average, than Southwest border region counties that did not lose branches. That is, counties that lost branches from 2013 through 2016 had about 600 SAR filings per billion dollars in deposits, on average, and counties that did not lose branches had about 60 SAR filings per billion dollars in deposits, on average (see fig. 8). The econometric models we developed and estimated generally found that demographic and money laundering-related risk factors were important predictors of national bank branch closures. These models are subject to certain limitations, some of which we detail later in this section as well as appendix III, and as such, we interpret the results with some degree of caution. In general, our results suggest that counties were more likely to lose branches, all else equal, if they were (1) urban, had a higher per capita personal income, and had a younger population (proportion under 45); or (2) designated as a HIFCA or HIDTA county, or had higher SAR filings. We term the latter three characteristics (HIFCA, HIDTA, and SAR filings) “money laundering-related risk factors.” While our models are unable to definitively identify the causal effect of BSA/AML regulation on branch closures from these money laundering- related risk factors, the impact of the SAR variables, in particular, could reflect a combination of BSA/AML compliance effort and the underlying level of suspicious or money laundering-related activity in a county. Our econometric models are based on all counties with bank branches in the United States and are designed to predict whether a county will lose a branch the following year based on the characteristics of the county. The models included demographic, economic, and money laundering-related risk factors that might have influenced branch closures nationally since 2010 (see app. III for additional information on our models). The demographic factors included in our models are Rural-Urban Continuum Codes, age profile (proportion of the county over 45), and the level of per capita income. We chose these demographic factors, in particular, because they are associated with the adoption of mobile banking, which may explain the propensity to close branches in a community. The economic factors included in our models—intended to reflect temporary or cyclical economic changes affecting the county—are the growth of per capita income, growth in building permits (a measure of residential housing conditions), and growth of the population. The money laundering- related risk factors, as described previously, are whether a county has been designated a HIFCA or a HIDTA and the level of suspicious or possible money laundering-related activity reported by bank branches in the county, as represented by SAR filings. Demographic characteristics of counties were important predictors of branch closures. Our results were consistent with those demographic characteristics associated with the adoption of mobile banking. As such, our results are consistent with the hypothesis that mobile banking is among the factors leading some banks to close branches. The most urban counties were about 22 percentage points more likely to lose one or more branches over the next year than the most rural counties. A county with 70 percent of the population under 45 was about 9 percentage points more likely to lose one or more branches over the next year than a county with half the population under 45. A county with per capita income of $50,000 was about 7 percentage points more likely to lose one or more branches over the next year than a county with per capita income of $20,000. Money laundering-related characteristics of a county were also important predictors of branch closures in our models. HIDTA counties were about 11 percentage points more likely to lose one or more branches over the next year than non-HIDTA counties (the effect in HIFCA counties is less significant statistically and smaller in magnitude). A county with 200 SARs filed per billion dollars in bank deposits was about 8 percentage points more likely to lose one or more bank branches over the next year than a county where no bank branch had filed a SAR. Southwest border bank officials we spoke with generally said that SAR filings were a time- and resource-intensive process, and that the number of SARs filings—to some extent—reflected the level of effort, and overall BSA compliance risk, faced by the bank. That said, the impact of SAR variables in our models could reflect a combination of (1) the extent of BSA/AML compliance effort and risk faced by the bank, as expressed by bank officials, and (2) the underlying level of suspicious or money laundering- related activity in a county. Money laundering-related risk factors were likely to have been relatively more important drivers of branch closures in the Southwest border region because it had much higher SAR filings and a larger share of counties designated as HIDTAs than the rest of the country. More generally, given the characteristics of Southwest border counties and the rest of the United States, our models suggest that while demographic factors have been important drivers of branch closures in the United States overall, risks associated with money laundering were likely to have been relatively more important in the Southwest border region. Specifically, the Southwest border region is roughly as urban as the rest of the country, has a somewhat lower per capita income (about $35,000 in the Southwest border region versus about $41,000 elsewhere) and is somewhat younger on average (about 40 percent 45 and over in the Southwest border region versus about 45 percent elsewhere), but money laundering-related risk factors were relatively more prevalent, based on our measures, in the Southwest border region. Southwest border bank representatives we interviewed told us they considered a range of factors when deciding whether or not to close a branch. For example, most Southwest border bank representatives that we spoke with about the reasons for branch closures (6 of 10) told us that BSA/AML compliance challenges were not part of the decision to close a branch. However, most Southwest border bank representatives said that the financial performance of the branch is one of the most important factors they consider when deciding to close a branch, and as described previously, BSA/AML compliance can be resource intensive, which may affect the financial performance of a branch. Further, nearly half of the Southwest border bank representatives we spoke with (4 of 10), did mention that BSA/AML compliance costs could be among the factors considered in determining whether or not to close a branch. In addition, at least one bank identified closing a branch as one option to address considerable BSA/AML compliance challenges. Finally, some Southwest border bank representatives (3 of 10) also mentioned customer traffic in the branch or the availability of mobile banking as relevant to their decision to close a branch. Communities we visited in Arizona, California, and Texas experienced multiple bank branch closures from 2013 through 2016. Some local banking customers that participated in the discussion groups we held in these communities also reported experiencing account terminations. While perspectives gathered from our visits to the selected cities cannot be generalized to all locations in Southwest border counties, stakeholders we spoke with noted that these closures affected key businesses and local economies and raised concerns about economic growth. According to some discussion group participants, local businesses, economic development specialists, and other stakeholders (border stakeholders) in the three Southwest border communities we visited, banks in their communities terminated the accounts of longtime established customers, sometimes without notice or explanation. They acknowledged that, because of their proximity to the U.S.-Mexico border, their communities were susceptible to money laundering-related activity and described how banks’ increased efforts to comply with BSA/AML requirements may have influenced banks’ decisions to terminate accounts. Each of the three Southwest border communities we visited— Nogales, Arizona; San Ysidro, California; and McAllen, Texas—also experienced multiple bank branch closures from 2013 through 2016 (see fig. 9). Our analysis shows that from 2013 through 2016, these communities lost a total of 12 bank branches, 9 of which were branches of large or extra- large banks, based on asset size. But the percentage of branch closures in some communities was more significant in locations where there were already a limited number of branch options. For instance, Nogales (3 of its 9 branches closed) and San Ysidro (5 of its 12 branches closed) both lost a third or more of all their bank branches compared to McAllen where approximately 6 percent of its branches were closed (4 of its 63 branches closed). According to border stakeholders we spoke with, businesses engaged in cross-border trade, cash-intensive businesses, and Mexican nationals— all significant parts of the border economy—were affected by account terminations and branch closures in the three communities we visited. For example, the cross-border produce industry accounts for almost 25 percent of jobs and wages in Nogales, according to a 2013 study prepared for Nogales Community Development. One produce business owner who had an account terminated told us that she was told that the volume of funds deposited into the account from her affiliated Mexican business created security risks that the bank was no longer willing to sustain, and she was unable to negotiate with the bank to keep it open. She said that it took almost 7 months to open a new account and that it involved coordination among bankers in multiple cities on both sides of the border. While some produce businesses and economic development specialists we spoke with explained that some regional banks in their communities have opened accounts for some small- to medium-sized produce businesses, they still have concerns about the long-term effects of limited access to banking services on smaller produce firms. One economic development specialist explained that these small companies often rely on local banks for funding, which enables them to develop and bring innovation to the produce industry. Some discussion group participants who we spoke with also described challenges related to account terminations that cash-intensive businesses face in operating in the Southwest border region because of banks’ increased emphasis on BSA/AML compliance. They explained that cash transactions raised suspicions for banks because of their associated money laundering risk; however, cash is a prevalent payment source for legitimate businesses in the region. For example, one money services business owner who participated in our discussion group in San Ysidro said that because his business generates large volumes of cash, he struggles to keep a bank account as a result of banks’ oversight of and caution regarding cash transactions. He said his business account has been closed three times over the past 35 years and that banks have declined his requests to open an account at least half a dozen times. Similarly, another discussion group participant explained that companies that import automobiles into Mexico use cash to pay for cars in the United States and that trying to make these large cash deposits raised suspicions for U.S. banks. Border stakeholders we spoke with also described how challenges associated with branch closures and terminations of accounts of Mexican nationals affected the Southwest border communities we visited. Border communities like San Ysidro are home to retail businesses, such as restaurants and clothing stores. According to our analysis of Bureau of Transportation Statistics data, an average of almost 69,000 personal vehicle passengers and 25,000 pedestrians entered the United States daily in September 2017 through the San Ysidro land port of entry. Economic development specialists told us that these visitors spend money on goods and services in local border communities. For example, one economic development specialist in Arizona estimated that Mexican nationals spend about $1 billion in Pima County alone each year, and another one estimated that 70 percent of the sales taxes collected in Nogales are paid by Mexican customers who cross the border to shop. One of the specialists explained that Mexicans—both Mexican day travelers to Tucson, as well as those who own U.S. real estate and travel to the United States for other investment business—used to visit the region and withdraw money from their U.S. bank accounts and subsequently spend money in border communities. He explained that Mexican nationals find it easier to have U.S. bank accounts to use while visiting and shopping on the U.S. side of the border. However, some discussion group participants said that because Mexican nationals have faced difficulties maintaining U.S. bank accounts, they have made fewer trips across the border and engaged in less commerce, which has affected the economies in their communities. Some participants also said that branch closures have affected businesses’ sales volumes in their communities. For example, one participant said that when branches closed in the San Ysidro Boulevard area—which is at the base of the pedestrian border crossing—businesses have had difficulty thriving due to reduced foot traffic by customers. According to border stakeholders we spoke with, branch closures also resulted in fewer borrowing options and limited investment in the communities, which they thought hindered business growth. For example, one discussion group participant explained that middle-sized businesses, such as those with revenues of approximately $2 million–$25 million, have fewer borrowing options when branches closed in the community because the remaining regional and smaller banks may not have the capital to support the lending needs of businesses that size. One economic development specialist and some discussion group participants also suggested that branch closures limited opportunities for local business expansion when banks outside the community are reluctant to lend to them. For example, in Tucson, Arizona, one specialist said that small businesses are having difficulty getting loans, which affects the ability of businesses to grow. To fill the void, some local businesses have turned to alternative lending options, such as title loan companies, accounts receivable lending companies, and family members as alternative funding sources. Rigorous academic research we reviewed suggests that branch closures reduce small business lending and employment growth in the area immediately around the branch. Our analysis of branch closure data based on estimates from this research suggests closed branches in the communities we visited could have amounted to millions of dollars in reduced lending and hundreds of fewer jobs. For example, in McAllen, Texas, this research suggests that the loss of four bank branches could have reduced employment growth by over 400 jobs and small business lending by nearly $3.5 million. Some discussion group participants said that as a result of branch closures and account terminations in the Southwest border communities we visited, they traveled further to conduct banking activities, paid higher fees for new banking alternatives, and experienced difficulty completing banking transactions. Some participants told us that they had to travel further to their new banking location, which resulted in additional costs and inconvenience for customers. For instance, some participants in Nogales and San Ysidro said they had to travel 20 to 40 minutes further to the next closest bank branch, with one participant noting that this especially created difficulty for elderly bank customers. One discussion group participant said that when their local bank branch closed, they kept their account with that bank and traveled more than 70 miles to the next closest branch because they were afraid that they would not be able to open an account with another bank. Another participant also noted the additional cost of gas and time lost for other important matters as a result of traveling further to a branch. Other participants also noted that they experienced longer lines at their new branches because of the higher volume of customers from closed branches. Some participants also found that some banking alternatives were more expensive than their previous banking options when their accounts were terminated or a local branch closed. For instance, some discussion group participants said they paid higher fees at their new bank and one participant mentioned that she received a lower interest rate on her deposits at her new bank. Some participants also mentioned that some banking alternatives they used, such as currency exchanges, were more expensive than their previous banking options. Some discussion group participants also told us that they experienced difficulty completing banking transactions in their communities as a result of branch closures or banks’ increased efforts to comply with BSA/AML requirements. For example, some participants from one discussion group session said that only an automated teller machine (ATM) was available in their community after their branch closed and it was not appropriate for all types of banking transactions. Further, some participants were unsatisfied with not being able to get in-person assistance from bank staff when their branch closed. For instance, one participant said that without a local branch, there was no nearby bank personnel to help her when the local ATM malfunctioned. Further, while acknowledging banks’ need to comply with BSA/AML requirements, some discussion group participants explained that some banking transactions have become more difficult, such as banks requiring additional forms of identification and limitations placed on cash transactions. Some participants, many who were longtime customers with their bank, also noted their disapproval with banks’ additional questioning and documentation requirements, and that there was little acknowledgment by the bank of their value as a legitimate customer or of their knowledge about them as a customer. Some participants acknowledged that they did not experience this challenge because of the increasing availability of mobile banking options, which allow customers to complete some transactions without going to a physical branch location. As another example, one business owner said she mostly used online banking and has a check reader in her office that she uses to deposit checks directly into her business accounts. The results of our survey (for both Southwest border banks and non- Southwest border banks) and discussions with Southwest border bank representatives indicate that banks are terminating accounts and limiting services, in part, as a way to manage perceived regulatory concerns about facilitating money laundering. In addition, the econometric models we developed and estimated also generally found that money laundering- related risk factors that could be reflective, in part, of BSA/AML compliance effort and risks, were an important predictor of national bank branch closures, and likely to have been relatively more important in the Southwest border region. Regulators have taken some actions in response to derisking, including issuing guidance and conducting some agency reviews. Regulators have also conducted retrospective reviews on some BSA/AML requirements. However, regulators have taken limited steps aimed at addressing how banks’ regulatory concerns and BSA/AML compliance efforts may be influencing banks to engage in derisking or close branches. FinCEN and the federal banking regulators have responded to concerns about derisking on a national level by issuing guidance to banks and conducting some evaluations within their agencies to understand the extent to which derisking is occurring. The guidance issued by regulators has been aimed at clarifying BSA/AML regulatory expectations and discouraging banks from terminating accounts without evaluating risk presented by individual customers or banks’ abilities to manage risks. The guidance has generally encouraged banks to use a risk-based approach to evaluate individual customer risks and not to eliminate entire categories of customers. Some of the guidance issued by regulators attempted to clarify their expectations specifically for banks’ offering of services to money services businesses. For example, in March 2005, the federal banking regulators and FinCEN issued a joint statement on providing banking services to money services businesses to clarify the BSA requirements and supervisory expectations as applied to accounts opened or maintained for this type of customer. The statement acknowledged that money services businesses were losing access to banking services as a result of concerns about regulatory scrutiny, the risks presented by these types of accounts, and the costs and burdens associated with maintaining such accounts. In addition, in November 2014, OCC issued a bulletin which explained that OCC-supervised banks are expected to assess the risks posed by an individual money services business customer on a case-by-case basis and to implement controls to manage the relationship commensurate with the risks associated with each customer. More recently, Treasury and the federal banking regulators issued a joint fact sheet on foreign correspondent banking which summarized key aspects of federal supervisory and enforcement strategy and practices in the area of correspondent banking. In addition to issuing guidance, FDIC and OCC have taken some steps aimed at trying to determine why banks may be terminating accounts because of perceived regulatory concerns. For example, in January 2015, FDIC issued a memorandum to examiners establishing a policy that examiners document and report instances in which they recommend or require banks to terminate accounts during examinations. The memorandum noted that recommendations or requirements to terminate accounts must be made and approved in writing by the Regional Director before being provided to and discussed with bank management and the board of directors. As of December 2017, FDIC officials stated that there were no instances of recommendations or requirements for account terminations being documented by examiners. In 2016, OCC reviewed how the institutions it supervises develop and implement policies and procedures for evaluating customer risks as part of their BSA/AML programs and for making risk-based determinations to close customer accounts. OCC focused its review on certain large banks’ evaluation of risk for foreign correspondent bank accounts. This effort resulted in OCC issuing guidance to banks on periodic evaluation of the risks of foreign correspondent accounts. The guidance describes corporate governance best practices for banks’ consideration when conducting these periodic evaluations of risk and making account retention or termination decisions on their foreign correspondent accounts. Further, OCC’s Fiscal Year 2018 Bank Supervision Operating Plan noted that examiners should be alert to banks’ BSA/AML strategies that may inadvertently impair financial inclusion. However, as of September 2017, OCC officials stated that the agency has not identified any concerns related to financial inclusion. Treasury and the federal banking regulators have also participated in a number of international activities related to concerns about the decline in the number of correspondent banking and money services business accounts. For example, FDIC, OCC, and the Federal Reserve participate in the Basel Committee on Banking Supervision’s Anti-Money Laundering/Counter Financing of Terrorism Experts Group. Recent efforts of the group involved revising guidelines to update and clarify correspondent banking expectations. Treasury leads the U.S. engagement to the Financial Action Task Force (FATF)—an inter- governmental body that sets standards for combating money laundering, financing of terrorism, and other related threats to the integrity of the international financial system—which has issued guidance on correspondent banking and money services businesses. Treasury also participates in the efforts to combat derisking that are occurring through the Financial Stability Board’s Correspondent Banking Coordination Group, the Global Partnership for Financial Inclusion, and the International Monetary Fund. The federal banking regulators also met with residents and businesses in the Southwest border region to discuss concerns related to derisking in the region. For example, FDIC officials hosted a BSA/AML workshop in Nogales, Arizona, in 2015 for banks, businesses, trade organizations, and others. Officials from the Federal Reserve and OCC also participated in the workshop during which the regulators tried to clarify BSA/AML regulatory requirements and expectations. In addition, OCC officials told us that they met with representatives of the Fresh Produce Association of the Americas, who had concerns about banks not providing services in the region. OCC officials spoke to the produce industry representatives about various money laundering schemes and the role of the agency’s examiners during the meeting. Evaluation of BSA/AML regulations and their implementation is essential to ensuring the integrity of the financial system while facilitating financial inclusion. Without oversight of regulations after implementation, they might prove to be less effective than expected in achieving their intended goals, become outdated, or create unnecessary burdens. Regulations may also change the behaviors of regulated entities and the public in ways that cannot be predicted prior to implementation. Some regulators and international standard setters recognize that establishing a balanced BSA/AML regulatory regime is challenging. For example, in a 2016 speech, the then Comptroller of the Currency Curry stated that preventing money laundering and terrorist financing are important goals, but that a banking system that is truly safe and sound must also meet the legitimate needs of its customers and communities. FinCEN officials also told us that while the agency’s mission is to safeguard the financial system from illicit use and combat money laundering, they also must be cautious that their efforts do not prevent people from using the system. Further, FATF acknowledged that AML and counter-terrorism financing safeguards can affect financial inclusion efforts. FATF explained that applying an overly cautious approach to safeguards for money laundering and terrorist financing can have the unintended consequence of excluding legitimate businesses and consumers from the formal financial system. Executive orders encourage and legislation requires agencies to review existing regulations to determine whether they should be retained, amended, or rescinded, among other things. Retrospective reviews of existing rules help agencies evaluate how existing regulations are working in practice. A retrospective review is an important tool that may reveal that an existing rule—while needed—has not operated as well as expected, and that changes may be warranted. Retrospective reviews seek to make regulatory programs more effective or less burdensome in achieving their regulatory objectives. Many recent presidents have directed agencies to evaluate or reconsider existing regulations. For example, in 2011 President Obama issued Executive Orders 13563 and 13579. Among other provisions, Executive Orders 13563 and 13579 require executive branch agencies and encourage independent regulatory agencies, such as the federal banking regulators, respectively, to develop and implement retrospective review plans for existing significant regulations. Further, the Trump Administration has continued to focus on the need for agencies to improve regulatory effectiveness while reducing regulatory burdens. Executive Order 13777, issued by President Trump in February 2017, also reaffirms the objectives of previous executive orders and directs agency task forces to identify regulations which, among other criteria, are outdated, unnecessary, or ineffective. In addition to the executive orders, the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) requires federal banking regulators to review the regulations they prescribe not less than once every 10 years and request comments to identify outdated, unnecessary, or unduly burdensome statutory or regulatory requirements. FinCEN and the federal banking regulators have all participated in retrospective reviews of different parts of the BSA/AML regulations. For example, FinCEN officials told us that they review each new or significantly amended regulation to assess its clarity and effectiveness within 18 months of its effective date. Each assessment is targeted to the specific new regulation, or significant change to existing regulations, and a determination is made on how best to evaluate its effectiveness. FinCEN officials explained that the agency consistently receives feedback from all of the relevant stakeholders, including law enforcement, regulated entities, relevant federal agencies, and the public, which informs their retrospective reviews. Based on the specific findings of an assessment, FinCEN considers whether to publish guidance or whether additional rule making is required. For example, FinCEN officials explained that they revised the money services business definitions to adapt to evolving industry practice as part of the regulatory review process. As part of fulfilling their requirements under EGRPRA, the federal banking regulators—through the Federal Financial Institutions Examination Council (FFIEC)—have also participated in retrospective reviews of BSA/AML regulations. As part of the 2017 EGRPRA review, FFIEC received several public comments on BSA/AML requirements, including increasing the threshold for filing CTRs, the SAR threshold, and the overall increasing cost and burden of BSA compliance. The federal banking regulators referred the comments to FinCEN. FinCEN is not a part of the EGRPRA review and is not required to consider the comments; however, in its response in the 2017 EGRPRA report, the agency stated that it finds the information helpful when assessing BSA requirements. FinCEN officials and the federal banking regulators stated that the agencies are working to address the BSA-related EGRPRA comments—particularly those related to CTR and SAR filing requirements—through the BSA Advisory Group (BSAAG), which established three subcommittees to address some of the concerns raised during the EGRPRA process. One subcommittee is reviewing the metrics used by industry, law enforcement, and FinCEN to assess the value and effectiveness of BSA reporting. Another subcommittee is focusing on how SAR filing requirements could be streamlined or reduced while maintaining the value of the data, and the third subcommittee is focusing on issues related to the filing of CTRs. FinCEN and the federal banking regulators are also considering, through the advisory group, the EGRPRA comments that involve the supervisory process and expectations related to BSA examinations of financial institutions. FinCEN officials stated that there have been significant discussions during two BSAAG meetings since the 2017 EGRPRA report was issued and that, as of November 2017, all of these efforts are ongoing. In addition to the BSAAG, regulators also told us that that the FFIEC BSA/AML working group has discussed EGRPRA and other compliance burden issues at its recent meetings and is trying to promote BSA examination consistency through its monthly meetings and with the interagency FFIEC BSA/AML examination manual. The actions FinCEN and the federal banking regulators have taken related to derisking—issuing guidance, conducting internal agency reviews, and meeting with affected Southwest border residents—have not been aimed at addressing and, if possible ameliorating, the full range of factors that influence banks to engage in derisking, in particular banks’ regulatory concerns and BSA/AML compliance efforts. Further, the actions regulators have taken to address concerns raised in BSA/AML retrospective reviews have focused primarily on the burden resulting from the filing of CTRs and SARs, but again, these actions have not evaluated how regulatory concerns may influence banks to engage in derisking or close branches. Federal internal control standards call for agencies to analyze and respond to risks to achieving their objectives. Further, guidance implementing Executive Orders 13563 and 13579 states that agencies should consider conducting retrospective reviews on rules that unanticipated circumstances have overtaken. Our evidence shows that derisking may be an unanticipated response from the banking industry to BSA/AML regulations and their implementation. For example, our evidence demonstrates that banks not only terminate or limit customer accounts as a way to address legitimate money laundering and terrorist financing threats, but also, in part, as a way to manage regulatory concerns. Further, our econometric models and discussions with bank representatives suggest that BSA/AML compliance costs and risks can play a role in the decision to close a branch. The actions FinCEN and the federal banking regulators have taken to address derisking and the retrospective reviews that have been conducted have not been broad enough to evaluate all of the BSA/AML factors banks consider when they derisk or close branches, including banks’ regulatory concerns which may influence their willingness to provide services. Without assessing the full range of BSA/AML factors that may be influencing banks to derisk or close branches, FinCEN, the federal banking regulators, and Congress do not have the information they need to determine if adjustments are needed to ensure that the BSA/AML regulations and their implementation are achieving their regulatory objectives in the most effective and least burdensome way. BSA/AML regulations promote the integrity of the financial system by helping a number of regulatory and law enforcement agencies detect money laundering, drug trafficking, terrorist financing, and other financial crimes. As with any regulation, oversight after implementation is needed to ensure the goals are being achieved and that unnecessary burdens are identified and ameliorated. The collective findings from our work indicate that BSA/AML regulatory concerns have played a role in banks’ decisions to terminate and limit accounts and close branches. However, the actions taken to address derisking by the federal banking regulators and FinCEN and the retrospective reviews conducted on BSA/AML regulations have not fully considered or addressed these effects. Retrospective reviews help agencies evaluate how existing regulations are working in practice and can assist to make regulatory programs more effective or less burdensome in achieving their regulatory objectives. BSA/AML regulations have helped to detect money laundering and other financial crimes, but there are also real concerns about the unintended effects, such as derisking, that these regulations and their implementation may be having. While it is important to evaluate how effective BSA/AML regulations are in helping to identify money laundering, terrorist financing, and other financial crimes, it is also important to identify and attempt to address any unintended outcomes. We have found that reduced access to banking services can have consequential effects on local communities. However, without evaluating how banks’ regulatory concerns may be affecting their decisions to provide services, the federal banking regulators, FinCEN, and Congress do not have the information to determine if BSA/AML regulations and their implementation can be made more effective or less burdensome in achieving their regulatory objectives. We are making four recommendations to FinCEN and the three federal banking regulators in our review—FDIC, the Federal Reserve, and OCC—to jointly conduct a retrospective review of BSA/AML regulations and their implementation for banks. The Director of FinCEN should jointly conduct a retrospective review of BSA/AML regulations and their implementation for banks with FDIC, the Federal Reserve, and OCC. This review should focus on how banks’ regulatory concerns may be influencing their willingness to provide services. In conducting the review, FDIC, the Federal Reserve, OCC, and FinCEN should take steps, as appropriate, to revise the BSA regulations or the way they are being implemented to help ensure that BSA/AML regulatory objectives are being met in the most effective and least burdensome way. (Recommendation 1) The Chairman of FDIC should jointly conduct a retrospective review of BSA/AML regulations and their implementation for banks with the Federal Reserve, OCC, and FinCEN. This review should focus on how banks’ regulatory concerns may be influencing their willingness to provide services. In conducting the review, FDIC, the Federal Reserve, OCC, and FinCEN should take steps, as appropriate, to revise the BSA regulations or the way they are being implemented to help ensure that BSA/AML regulatory objectives are being met in the most effective and least burdensome way. (Recommendation 2) The Chair of the Federal Reserve should jointly conduct a retrospective review of BSA/AML regulations and their implementation for banks with FDIC, OCC, and FinCEN. This review should focus on how banks’ regulatory concerns may be influencing their willingness to provide services. In conducting the review, FDIC, the Federal Reserve, OCC, and FinCEN should take steps, as appropriate, to revise the BSA regulations or the way they are being implemented to help ensure that BSA/AML regulatory objectives are being met in the most effective and least burdensome way. (Recommendation 3) The Comptroller of the Currency should jointly conduct a retrospective review of BSA/AML regulations and their implementation for banks with FDIC, the Federal Reserve, and FinCEN. This review should focus on how banks’ regulatory concerns may be influencing their willingness to provide services. In conducting the review, FDIC, the Federal Reserve, OCC and FinCEN should take steps, as appropriate, to revise the BSA regulations or the way they are being implemented to help ensure that BSA/AML regulatory objectives are being met in the most effective and least burdensome way. (Recommendation 4) We provided a draft of this report to CFPB, the Department of Justice, the Federal Reserve, FDIC, Treasury/FinCEN, and OCC. The Federal Reserve, FDIC, and OCC provided written comments that have been reproduced in appendixes IV–VI, respectively. Treasury/FinCEN did not provide a written response to the report. FDIC, Treasury/FinCEN, and OCC provided technical comments on the draft report, which we have incorporated, as appropriate. CFPB and the Department of Justice did not have any comments on the draft of this report. In their written responses, the Federal Reserve, FDIC, and OCC agreed to leverage ongoing interagency work reviewing BSA/AML regulations and their implementation for banks to address our recommendation. We agree that using existing interagency efforts is an appropriate means for conducting a retrospective review of BSA/AML regulations that focuses on evaluating how banks’ BSA/AML regulatory concerns may be influencing their willingness to provide services. The Federal Reserve, FDIC, and OCC also raised concerns with some of the findings of our report and the methodologies we used. For example, in their responses, each agency discussed that the report did not take into consideration the extent to which law enforcement activities may be a driver of account terminations and branch closures in the Southwest border region. In response to this comment, we added some information to the report that we received from law enforcement officials about instances in which some account terminations were the result of law enforcement’s identification of suspicious accounts. This type of account termination, however, is not included in our definition of the term “derisking,” because such terminations are consistent with BSA/AML purposes. In addition, when we discuss the role that enforcement actions have played in making Southwest border banks more conservative in their account offerings, we’ve clarified the language to ensure it encompasses both regulatory enforcement actions taken by the federal banking regulators and criminal enforcement actions taken by law enforcement agencies. Treasury/FinCEN’s technical comments also noted that the report did not take into consideration the 2010 Mexican exchange control regulations and their subsequent changes, which it considers to be the most important catalyst of changes to BSA risk profiles for banks in the Southwest border region. To address this comment, we added language describing these regulations and their potential effects on Southwest border banks. In its written response, the Federal Reserve stated that the report does not find a causal linkage between the agency’s regulatory oversight and derisking decisions made by some banks that operate along the Southwest border (see app. IV). OCC made a similar comment in its technical comments on the draft report. While the methodologies used in our report included a nationally representative survey of banks, econometric modeling of potential drivers of branch closures, and discussions with bank representatives, do not on their own allow us to make a definitive causal linkage between regulation and derisking, the collective evidence we gathered indicates that banks’ BSA/AML regulatory concerns have played a role in their decisions to terminate and limit accounts and close branches. We believe that, based on this evidence, further examination by the federal banking regulators and FinCEN into how banks’ perceived regulatory concerns are affecting their offering of services is warranted. OCC’s written response noted that the definition of derisking we used is inconsistent with definitions used by other regulatory bodies and that our definition encompasses a wide range of situations in which banks limit certain services or end customer relationships (see app. VI). Treasury/FinCEN also made a similar comment in its technical comments on the draft report. OCC’s letter notes that FATF and the World Bank define derisking as situations in which financial institutions terminate or restrict business relationships with entire countries or classes of customers in order to avoid, rather than to manage, AML-related risks. We, however, defined derisking for the purposes of our report as the practice of banks limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering because it best described the bank behavior we wanted to examine. While we recognize that there are narrower definitions of derisking that focus solely on the treatment of entire countries or classes of customers, we chose to focus on banks’ perceived regulatory concerns because these concerns could influence banks’ decisions to provide services in a variety of ways. Moreover, including perceived regulatory concerns as a factor enabled us to examine whether there were ways the federal regulators may be able to improve the implementation of BSA/AML to reduce the effects of derisking on different populations of banking customers. Furthermore, our definition is broader and allows us to include individual decisions banks make to terminate or limit accounts, as well as whole categories of customer accounts. Our decision to define derisking in this manner was based on, among other things, discussions we had with representatives of Southwest border banks who indicated such behavior was occurring. We added additional information on the definition of derisking we chose to our scope and methodology section (see app. I). OCC’s response letter also notes that because we focus exclusively on BSA/AML regulatory issues, the report does not take into consideration other reasons that banks terminate account relationships. We recognize that banks may terminate accounts for a variety of reasons, some of which are not related to BSA/AML regulatory issues. However, because the focus of our review was to determine why banks are terminating accounts for BSA/AML regulatory reasons, we did not seek to identify all the potential reasons banks may terminate accounts. Finally, OCC’s letter states that the agency has concerns regarding our econometric analysis and the conclusions that can be drawn from it. FDIC made similar comments in its technical comments on the draft report. In response to these comments, we have clarified how we interpret the effect of money laundering-related risk in our models. We agree that the econometric results on their own do not provide definitive evidence that regulatory burden is causing branch closures, but our econometric models and discussions with bank representatives together suggest that BSA/AML compliance costs and risks can play a role in the decision to close a branch. FDIC’s written letter states that the report does not distinguish account or branch closures resulting from suspected money laundering or other illicit financial transactions from closures that may have resulted from ineffective or burdensome regulations. In response to this concern, we revised language in the report to ensure that we do not imply that instances in which banks limit services or terminate relationships based on credible evidence of suspicious or illegal activity reflects derisking behavior. As noted above, we also clarified how we interpret the effect of money laundering-related risk on branch closures in our models and recognize that our econometric results alone do not provide definitive evidence that regulatory burden is causing branch closures. However, our econometric models coupled with discussions we had with bank representatives suggest that BSA/AML compliance costs and risks can play a role in the decision to close a branch. FDIC’s letter also stated that our report highlighted that 1 in 10 branch closures may be due to “compliance challenges.” This statement is incorrect. The report states that nearly half of the Southwest border bank representatives (4 of 10) we spoke with mentioned that BSA/AML compliance costs could be among the factors considered in whether or not to close a branch. Further, we identified one bank that considered closing a branch as an option to address considerable BSA/AML compliance challenges. In addition, most Southwest border bank representatives we spoke with said that the financial performance of the branch is one of the most important factors they consider when deciding to close a branch, and as we describe in the report, BSA/AML compliance can be resource intensive, which may affect the financial performance of a branch. We are sending copies of this report to the appropriate congressional committees, the Director of Financial Crimes Enforcement Network, the Chairman of the Federal Deposit Insurance Corporation, the Chair of the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Attorney General, the Acting Director of the Bureau of Consumer Financial Protection, and other interested parties. The report will also be available at no charge on our website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are listed on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. The objectives of this report were to (1) describe the types of heightened Bank Secrecy Act/anti-money laundering (BSA/AML) compliance risks that Southwest border banks may face and the BSA/AML compliance challenges they may experience; (2) determine the extent to which banks are terminating accounts and closing bank branches in the Southwest border region and their reasons for any terminations or closures; (3) describe what Southwest border banking customers and others told us about any effects of account terminations and branch closures on Southwest border communities; and (4) evaluate how the Department of the Treasury’s (Treasury) Financial Crimes Enforcement Network (FinCEN) and the federal banking regulators—the Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC)—have assessed and responded to concerns about derisking in the Southwest border region and elsewhere, and the effectiveness of those efforts. We defined “derisking” to mean the practice of banks limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering. We developed this definition by reviewing various existing definitions used by international banking industry standard setters and others, including the Financial Action Task Force (FATF)—an intergovernmental body that, among other things, sets standards for combating money laundering; the Bank for International Settlements; the World Bank; and the Global Partnership for Financial Inclusion. We also reviewed guidance and other documentation issued by the federal banking regulators, Treasury, and FinCEN; research reports on derisking; an industry survey; and testimonial evidence from several banks we interviewed. The methodologies we used allowed us to gather information on a variety of factors that may be causing banks to limit services, while our definition of derisking allowed us to focus on the role played by the federal regulators in implementing BSA/AML requirements. We defined the Southwest border region as all counties that have at least 25 percent of their landmass within 50 miles of the U.S.-Mexico border. Thirty-three counties fell within this definition. They are: Cochise, Pima, Santa Cruz, and Yuma, Arizona; Imperial and San Diego, California; Dona Ana, Hidalgo, and Luna, New Mexico; and Brewster, Brooks, Cameron, Culberson, Dimmit, Edwards, El Paso, Hidalgo, Hudspeth, Jeff Davis, Jim Hogg, Kenedy, Kinney, La Salle, Maverick, Presidio, Starr, Terrell, Uvalde, Val Verde, Webb, Willacy, Zapata, and Zavala, Texas. We excluded credit unions from the scope of our review based on discussions with and information received from the National Credit Union Administration (NCUA)—which oversees credit unions for compliance with BSA/AML requirements—and two regional credit union groups that cover the Southwest border states. These groups noted that neither branch closures nor account terminations by credit unions were prevalent in the Southwest border region. To describe the types of heightened BSA/AML compliance risks that Southwest border banks may face and the BSA/AML compliance challenges they may experience, we analyzed data from FinCEN on the volume of Suspicious Activity Reports (SAR) and Currency Transaction Reports (CTR) filed by bank branches in Southwest border counties and compared the volume of those filings to filings in similar geographic areas outside the Southwest border region from 2014 through 2016. To adjust for variances in the size of counties, which may be reflected in the number of SAR and CTR filings by counties, we standardized the quantity of SARs and CTRs filed by county by calculating the number of SAR and CTR filings per billion dollars in bank branch deposits. We used data from FDIC’s Summary of Deposits database for information on bank branch deposits. To construct comparison groups that were comparable along some key dimensions, we matched Southwest border counties to counties with the same 2013 Rural-Urban Continuum Code (RUCC), which measures how urban or rural a county is, and by population if there was more than one potential matching county. We undertook this process for two comparison groups, one for counties in Southwest border states, but not directly on the U.S.-Mexico border, and one for counties outside the Southwest border states that were designated as High Intensity Financial Crimes Areas (HIFCA) or High Intensity Drug Trafficking Areas (HIDTA). In addition, we analyzed data on BSA/AML bank examination violations using nonpublic data provided by FDIC, OCC, and the Federal Reserve from January 2009 through June 2016. We obtained data for all Southwest border banks (if they had been cited for a BSA/AML compliance violation during the period we reviewed), as well as aggregated data for all banks in the United States that received a BSA/AML compliance violation during the period we reviewed. Because each regulator categorized violations differently, we developed a set of categories to apply to violations across all three regulators. We analyzed the distribution of violations by category. In addition, we analyzed data on BSA/AML informal enforcement actions provided by the federal banking regulators and formal BSA/AML enforcement actions taken by the federal banking regulators and FinCEN from January 2009 through June 2016. We also reviewed documentation from BSA/AML examinations of selected Southwest border banks to gain additional context about BSA/AML violations. We also interviewed representatives from 19 Southwest border banks. Using data from FDIC’s Summary of Deposits database, we identified all Southwest border banks as of June 30, 2016. We then selected banks to interview in the following ways. First, we interviewed four of the five largest Southwest border banks (based on asset size). Second, as part of our site visits to communities in the Southwest border region (described below), we interviewed nine Southwest border banks that operate in or near the communities we visited— Nogales, Arizona; San Ysidro, California; and McAllen, Texas. We selected banks in these communities based on the following criteria: (1) the number of branches the bank operates in the Southwest border region, focusing on banks that operate only a few branches in the region; (2) the size of the bank based on assets; and (3) the bank’s primary federal regulator. We focused our selection on banks that operate fewer branches in the region because we interviewed four of the five largest banks in the region that operate many branches in the region. To the extent that a bank was located in the community and willing to speak with us, we interviewed at least one bank that was regulated by each federal banking regulator (Federal Reserve, FDIC, and OCC). Third, we interviewed six additional Southwest border banks as part of the development of our bank survey (described in more detail below) and also asked them questions related to their efforts to comply with BSA/AML requirements. We selected these banks using the same criteria we used for the selection of banks in our site visit communities: the bank’s primary federal regulator, size of the bank (based on assets), and number of branches. For the interviews, we used a semistructured interview protocol, and responses from bank officials were open-ended to allow for a wide variety of perspectives and responses. Responses from these banks are not generalizable to all Southwest border banks. In addition to the interviews with banks, we also interviewed officials from FDIC, Federal Reserve, and OCC, as well as BSA/AML examination specialists from each federal banking regulator to gain their perspectives on the risks faced by banks in the Southwest border region. To determine the extent to which banks are terminating accounts in the Southwest border region and the reasons for the terminations, we administered a web-based survey to a nationally representative sample of banks to obtain information on bank account terminations for reasons related to BSA/AML risk. In the survey, we asked banks about limitations and terminations of accounts related to BSA/AML risk, the types of customer categories being limited or terminated, and the reasons for these decisions. We administered the survey from July 2017 to September 2017, and collected information for the 3-year time period of January 1, 2014, to December 31, 2016. Appendix II contains information on the survey results. To identify the universe of banks, we used data from FDIC’s Statistics on Depository Institutions database. Our initial population list contained 5,922 banks downloaded from FDIC’s Statistics on Depository Institutions database as of December 31, 2016. We stratified the population into five sampling strata and used a stratified random sample. First, banks that did not operate in the Southwest border region (non-Southwest border banks) were stratified into four asset sizes (small, medium, large, and extra- large). Second, to identify the universe of Southwest border banks, we used FDIC’s Summary of Deposits database as of June 30, 2016. This is a hybrid stratification scheme. Our initial sample size allocation was designed to achieve a stratum-level margin of error no greater than plus or minus 10 percentage points for an attribute level at the 95 percent level of confidence. Based upon prior surveys of financial institutions, we assumed a response rate of 75 percent to determine the sample size for the asset size strata. Because there are only 17 extra-large banks in the population, we included all of them in the sample. We also included the entire population of 115 Southwest border banks as a separate certainty stratum. We reviewed the initial population list of banks in order to identify nontraditional banks not eligible for this survey. We treated nontraditional banks as out-of- scope. We also reviewed the initial population list to determine whether subsidiaries of the same holding company should be included separately in the sample. In addition, during the administration of our survey, we identified six banks that had been bought and acquired by another bank, as well as one additional bank that was nontraditional and, therefore, not eligible for this survey. We treated these sample cases as out-of-scope; this adjusted our population of banks to 5,805 and reduced our sample size to 406. We obtained a weighted survey response rate of 46.5 percent. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (for example, plus or minus 7 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Confidence intervals are provided along with each sample estimate in the report. All survey results presented in the body of this report are generalizable to the estimated population of 5,805 in-scope depository institutions, except where otherwise noted. The practical difficulties of conducting any survey may introduce errors, commonly referred to as nonsampling errors. For example, difficulties in interpreting a particular question or sources of information available to respondents can introduce unwanted variability into the survey results. We took steps in developing the questionnaire, collecting the data, and analyzing the results to minimize such nonsampling error. To inform our methodology approach and our survey development, we conducted interviews with representatives from seven selected Southwest border banks. From these interviews, we gathered information on the type and amount of data banks keep on account terminations for reasons related to BSA/AML risk. The selection process used to identify these banks is described above. We conducted pretests of the survey with four banks. We selected these banks to achieve variation in geographic location (within and outside the Southwest border region) and asset size (small, large, extra large). The pretests of the survey were conducted to ensure that survey questions were clear, to obtain any suggestions for clarification, and to determine whether representatives would be able to provide responses to questions with minimal burden. We also interviewed the federal banking regulators; federal, state, and local law enforcement officials; and bank industry associations, to obtain their perspectives on banks’ experience with account terminations. To determine the extent to which banks have closed branches in the Southwest border region and the reasons for the closures, we analyzed data from a variety of sources and interviewed bank officials. To assess trends in bank branch closures, we analyzed data from FDIC’s Summary of Deposits database on the size and location of bank branches. Our measure of bank branches includes both full-service and limited-service branches. Limited-service branches provide some conveniences to bank customers but generally offer a reduced set of bank services. As of 2016, limited-service branches were about 2.5 percent of branches in the Southwest border region. We compared growth rates for all branches in the Southwest border region and only full-service branches, for 2013 through 2016, and found that they were almost identical (-5.92 percent and -5.93 percent, respectively). We combined the Summary of Deposits data on the size and location of bank branches with demographic, economic, and money laundering-related risk data from the U.S. Census Bureau, U.S. Department of Commerce’s Bureau of Economic Analysis, and FinCEN, among other sources. We then utilized the merged dataset to conduct an econometric analysis of the potential drivers of branch closures (see app. III for information on the econometric analysis). We also compared trends in branch closures in the Southwest border region to national trends, as well as trends in counties in Southwest border states that were not in the Southwest border region, and trends in HIFCA and HIDTA counties not in Southwest border states. We also interviewed representatives from banks that operate in the Southwest border region about the time and resources required to file SARs and how they approached the decision to close a branch. To describe what Southwest border banking customers and others told us about any effects of account terminations and branch closures in Southwest border communities, we conducted site visits to communities in three of the four Southwest border states (Nogales, Arizona; San Ysidro, California; and McAllen, Texas). We selected these communities to achieve a sample of locations that collectively satisfied the following criteria: (1) counties with different classifications of how rural or urban they are based on their RUCC classification; (2) counties that experienced different rates of branch closures from 2013 through 2016; and (3) counties that had received different designations by the federal banking regulators as distressed or underserved as of June 1, 2016. Perspectives gathered from our visits to the selected cities cannot be generalized to all locations in Southwest border counties. During our site visits, we conducted a total of five discussion groups and summarized participants’ responses about how they were affected by account terminations and branch closures in their communities. Discussion groups included a range of 2 to10 participants with varied experiences related to access to banking services in their area, including customers whose accounts were terminated or branch was closed. Participants were selected using a convenience sampling method, whereby we coordinated with local city government and chamber of commerce officials who agreed to help us recruit participants and identify facilities where the discussion groups were held. Local officials disseminated discussion group invitations and gathered demographic data on potential participants. Three of the five discussion group sessions included business banking customers—persons representing businesses that utilize banking services (such as banking accounts or business loans). The other two sessions included nonbusiness retail banking customers—persons with individual experience with banking services (such as a personal checking or savings account) and were conducted in Spanish. Each session was digitally recorded, translated (if necessary), and transcribed by an outside vendor, and we used the transcripts to summarize participant responses. An initial coder assigned a code that best summarized the statements from discussion group participants and provided an explanation of the types of discussion group participant statements that should be assigned to a particular code. A separate individual reviewed and verified the accuracy of the initial coding. The initial coder and reviewer discussed orally and in writing any disagreements about code assignments and documented consensus on the final analysis results. Discussion groups are intended to generate in- depth information about the reasons for the participants’ views on specific topics. The opinions expressed by the participants represent their points of view and may not represent the views of all residents in the Southwest border region. We also interviewed various border stakeholders including economic development specialists, industry and trade organizations that focus on border trade and commerce, as well as chamber of commerce and municipal officials representing border communities. We reviewed recent articles on the effects of account terminations and branch closures on communities as well as research organization, industry, and government reports. Finally, we reviewed academic studies on the effects of branch closings on communities. In particular, we focused our review on one recent paper that estimated the impact of branch closings, using detailed geographic and lending data, on employment growth and small business lending, among other outcomes. We identified the census tracts of all branch closures in our three site visit communities from 2013 through 2016 and applied impact estimates from this research to the level of small business lending and employment in these communities, based on data from Community Reinvestment Act reporting (small-business lending) and the U.S. Census American Community Survey (employment).These results are intended to illustrate an approximate magnitude of effects and not produce precise estimates of local impacts. To evaluate how FinCEN and the federal banking regulators have assessed and responded to concerns about derisking and the effectiveness of those efforts, we reviewed guidance the agencies issued to banks related to derisking, related agency memorandums and documents, and an OCC internal analysis on derisking. We also reviewed guidance from FATF on AML and terrorist financing measures and financial inclusion. In addition, we reviewed various executive orders that require most executive branch agencies, and encourage independent agencies, to develop a plan to conduct retrospective analyses, and Office of Management and Budget guidance implementing those executive orders. We reviewed Treasury documentation on BSA regulatory reviews and the BSA-related components of the 2007 and 2017 Economic Growth and Regulatory Paperwork Reduction Act reports issued by the Federal Financial Institutions Examination Council (FFIEC). We also reviewed federal internal control standards related to risk assessment. Finally, we interviewed officials from FinCEN and the federal banking regulators about the actions they have taken related to derisking, as well as retrospective reviews they had conducted on BSA regulations. We utilized multiple data sources throughout our review and took steps to assess the reliability of each one. First, to assess the reliability of data in FDIC’s Summary of Deposits database we discussed the appropriateness of the database for our purposes with FDIC officials, reviewed related documentation, and conducted electronic testing for missing data, outliers, or any obvious errors. Second, to assess the reliability of FinCEN’s data on SAR and CTR filings, we interviewed knowledgeable agency officials on the appropriateness of the data for our purposes, any limitations associated with the data, and the methods they used to gather the data for us. We also reviewed related documentation and conducted electronic testing to identify missing data, outliers, and any obvious errors. Third, we assessed the reliability of the HIFCA and HIDTA county designations by interviewing officials from FinCEN, the Office of National Drug Control Policy, and the National HIDTA Assistance Center on changes to county designations over time and reviewed related documentation. Fourth, to assess the reliability of FDIC’s Statistics on Depository Institutions database, we reviewed related documentation and conducted electronic testing of the data for missing data, outliers, or any obvious errors. Fifth, we interviewed officials from FDIC, the Federal Reserve, and OCC on the data the agencies collect related to BSA/AML bank exam violations and also asked them questions related to methods they used to gather the data for us and any limitations associated with the data. We also manually reviewed the data for any obvious errors and followed up with agency officials, as needed. Finally, for data we obtained from the U.S. Census Bureau (American Community Survey data on population and age and the Residential Building Permits Survey), the Bureau of Economic Analysis (Local Area Personal Income), and Department of Agriculture (Rural-Urban Continuum Codes), we reviewed related documentation, interviewed knowledgeable officials about the data, when necessary, and conducted electronic testing of the data for missing data, outliers, or any obvious errors. We concluded that all applicable data were sufficiently reliable for the purposes of describing BSA/AML risks and compliance challenges for Southwest border banks; identifying banks to survey on account terminations and limitations; evaluating branch closure trends in the Southwest border region and elsewhere, and the factors driving those closures; and describing the effects for Southwest border communities experiencing branch closures and account terminations. We conducted this performance audit from March 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. From July 2017 to September 2017, we administered a web-based survey to a nationally representative sample of banks. In the survey, we asked banks about the number of account terminations for reasons related to Bank Secrecy Act/anti-money laundering (BSA/AML) risk; whether banks are terminating, limiting, or not offering accounts to certain types of customer categories; and the factors influencing these decisions. We collected information for the 3-year time period of January 1, 2014, to December 31, 2016. All survey results presented in this appendix are generalizable to the population of banks, except where otherwise noted. We obtained a weighted survey response rate of 46.5 percent. Because our estimates are from a generalizable sample, we express our confidence in the precision of our particular estimates as 95 percent confidence intervals. Responses to selected questions we asked in our survey that were directly applicable to the research objectives in this report are shown below. Survey results presented in this appendix are categorized into three groups (1) all banks nationwide, (2) Southwest border banks, and (3) non-Southwest border banks, unless otherwise noted. Our survey was comprised of closed- and open-ended questions. In this appendix, we do not provide information on responses provided to the open-ended questions. For a more detailed discussion of our survey methodology, see appendix I. Questions 15 through 23 applied only to banks in our sample that had branches domiciled both inside and outside of the Southwest border region in order to obtain information on their accounts domiciled in the Southwest border region. All the percentage estimates for this question are not statistically reliable. All the percentage estimates for this question are not statistically reliable. Between January 1, 2014 and December 31, 2016, did the bank terminate any cash-intensive small business checking, savings, or money market accounts domiciled in the bank’s Southwest border branches for reasons related to BSA/AML risk? (Check one.) (Question 21) All the percentage estimates for this question are not statistically reliable. This technical appendix outlines the development, estimation, results, and limitations of the econometric model we described in the report. We undertook this analysis to better understand factors that may have influenced banks to close branches in recent years. We developed a number of econometric models that included demographic, economic, and risk factors that might have influenced branch closures nationally since 2010. We developed these models based on a small number of relevant studies, our discussions with banks and regulators, and our own prior empirical work on banking. Our models are based on all counties with bank branches in the United States and are designed to predict whether a county will lose a branch the following year based on the characteristics of the county. Because we are modeling a binary outcome (whether or not a county lost a branch) we use a specific functional form for our regression models known as a logistic regression (logit). The demographic factors included in our models are rural-urban continuum codes, age profile (proportion of the population of the county over 45), and the level of per capita income. We chose these demographic factors, in particular, because they tend to be associated with the adoption of mobile banking, which may explain the propensity to close branches in a community. The economic factors included in our models—intended to reflect temporary or cyclical economic changes affecting the county—are the growth of per capita income, growth in building permits (a measure of residential housing conditions), and growth of the population. The money laundering-related risk factors are whether a county has been designated a High Intensity Financial Crime Area (HIFCA) or a High Intensity Drug Trafficking Area (HIDTA), and the level of suspicious or possible money laundering-related activity reported by bank branches in the county (known as Suspicious Activity Report (SAR) filings). HIDTA and HIFCA designations in our model could proxy for a number of features of a county, including but not limited to the intensity of criminal activity related to drug trafficking or financial crimes. Bank officials we spoke with generally said that SAR filings were a time and resource-intensive process, and that the number of SARs filings—to some extent—reflected the level of effort, and overall BSA compliance risk, faced by the bank. That said, the impact of SAR variables in our models could reflect a combination of (1) the extent of BSA/AML compliance effort and risk faced by the bank, as described by bank officials, and (2) the underlying level of suspicious or money laundering- related activity in a county. We constructed variables from the following data sources to estimate our models: Net branch closures and the size of deposits in each county, from Federal Deposit Insurance Corporation’s (FDIC) Summary of Deposits; Rural-urban continuum codes, from the U.S. Department of Population growth and age profile in each county, from the Census Bureau’s American Community Survey; Per capita income, from Bureau of Economic Analysis Local Area Building permits by county, from the Census Bureau; HIFCA and HIDTA county designations from the Financial Crimes Enforcement Network (FinCEN) and the Office of National Drug Control Policy, respectively; and SAR filings by depository institution branches, from FinCEN We estimated a large number of econometric models to ensure that our results were generally not sensitive to small changes in our model, in other words, to determine if our results were “robust.” Our results, as described in the body of the report, were highly consistent across models and were generally both statistically and economically significant—that is, results of this size are unlikely to occur at random if there were no underlying relationship (p-values of interest are almost always less than 0.001), and the estimated impacts on the probability of branch closures are substantively relevant. For our baseline model, we estimated branch closures (dependent variable: 1/0 for whether or not a county lost one or more branches, on net, that year) as a function of the 1 year lagged share of the population over 45 in the county, a rural-urban continuum code, level of per capita income, population growth, growth in the value of building permits, growth in per capita income, whether or not the county is a HIDTA, and the level of suspicious activity report filings per billion dollars of deposits held in the county, including time and state fixed effects. Economic variables were adjusted for inflation (converted to constant 2015 dollars) using appropriate price indices. We generally estimated models with cluster robust standard errors, clustering at the county. See the logistic regression equation for our baseline model below, where the c subscript represents the county and the t subscript represents the year. Where f is the cumulative logistic function: 𝑓𝑓(𝑧𝑧)= 𝑦𝑦𝑧𝑧1+𝑦𝑦𝑧𝑧 Full year SAR filings are only available for 2014–2016 which is generally the limiting factor on the time dimension of our panel. Because FinCEN changed reporting requirements as of April 2013, we were able to obtain an additional year of data by calculating SAR filings for 4 truncated years, which is April–December 2013, April–December 2014, April–December 2015, and April–December 2016. As we discussed earlier in the report, this variable is an important geographic measure of money laundering- related risk, based on a bank-reported measure of the extent of suspicious or money-laundering related activity associated with branches located in a particular county. After confirming that results were similar for full year and truncated year SARs, we continued estimation with truncated year SARs to benefit from the additional year of data. We report estimates from the version of our baseline model that includes truncated year SARs. Marginal effects for select coefficients (and associated p- values) are reported in table 20 below along time period, sample size, and goodness-of-fit (pseudo r-squared). Generally speaking, across our baseline specifications and robustness tests, counties were more likely to lose branches, all else equal, if they were (1) urban, high income, and had a younger population (proportion under 45), or (2) designated HIFCA, HIDTA, or had higher SAR filings. Economic variables were generally not statistically significant. Below is a list of robustness tests—changing how or which variables influenced branch closures in the model, over what time period—we performed. Unless specifically noted the results described above were very similar in the models listed below (i.e., robust): As an alternative to total SARs as an indicator of money laundering- related risk, we estimated a model with only those SARs that were classified as money laundering or structuring. Total SARs include suspicious activity that may be unrelated to money laundering or structuring, including, for example, check fraud. As an alternative to HIDTAs as a county risk designation we estimated a model with HIFCA county designations. The impact of HIFCAs in the model was smaller magnitude and less statistically significant. We estimated a model interacting HIDTAs with SARs (the interaction suggests SARs have a larger impact on non-HIDTA counties). We estimated models restricted to only rural counties or only urban counties. SARs and HIDTAs have larger effects in urban counties and the impact of the age profile and per capita income are not statistically significant in the model with only rural counties. We estimated models with MSA fixed effects or state-year fixed effects, in addition to state and year fixed effects. We estimated models that assumed that economic conditions from the previous 2 years were relevant or only economic conditions from 2 years prior. Our baseline model assumed only the prior year’s economic conditions influenced branch closures. We estimated a panel logit with random effects. We estimated a panel logit with county fixed effects. None of the results discussed above are statistically significant when county fixed effects are introduced. This suggests that the model is identified primarily based on cross-sectional (differences between counties that persist over time) rather than time series variation in the relevant variables. The role of county fixed effects here may also indicate the presence of unobserved, county characteristics that are omitted from our models, although it is generally not possible to simultaneously estimate the role of highly persistent factors that influence branch closures while including fixed effects. We estimated models where we omitted small percentage changes in branches from our indicator dependent variable—for example, we estimated models with indicators equal to one only if branch losses were above 3 percent or 5 percent (omitting smaller branch losses from the dependent variable altogether). Generally speaking, demographic factors have less explanatory power for larger loss levels although SARs remains statistically significant and at practically meaningful magnitudes. This suggests that higher SARs are relatively better at explaining larger branch losses while demographic factors are better at explaining smaller branch losses. Despite the robustness of our results and our efforts to control for relevant factors, our results are subject to a number of standard caveats. The variables we use come from a number of datasets, and some of them have sampling error, relied on imputation, or are better thought of as proxy variables that measure underlying factors of interest with some degree error. As such, our statistical measures, including standard errors, p-values, and goodness of fit measures such as pseudo r-squared, should be viewed as approximations. Some of the effects we measure based on these variables may reflect associational rather than causal relationships. Also, our regression models may be subject to omitted variable bias or specification bias—for example, it is unlikely that we have been able to quantify and include all relevant factors in bank branching decisions, and even where we have measured important drivers with sufficient precision the functional form assumptions embedded in our choice of regression model (e.g., logistic regression) are unlikely to be precisely correct. Should omitted variables be correlated with variables that we include, the associated coefficient may be biased. We interpret our results, including our statistical measures and coefficients values, with appropriate caution. In addition to the individual named above, Stefanie Jonkman (Assistant Director), Christine Houle (Analyst in Charge), Carl Barden, Timothy Bober, Rebecca Gambler, Toni Gillich, Michael Hansen, Michael Hoffman, Jill Lacey, Patricia Moye, Erica Miles, Marc Molino, Steve Robblee, Tovah Rom, Jerry Sandau, Mona Sehgal, Tyler Spunaugle, and Verginie Tarpinian made key contributions to this report.", "summary": "Some Southwest border residents and businesses have reported difficulties accessing banking services in the region. GAO was asked to review if Southwest border residents and businesses were losing access to banking services because of derisking and branch closures. This report (1) describes the types of heightened BSA/AML compliance risks that Southwest border banks may face and the BSA/AML compliance challenges they may experience; (2) determines the extent to which banks have terminated accounts and closed branches in the region and the reasons for any terminations and closures; and (3) evaluates how regulators have assessed and responded to concerns about derisking in the region and elsewhere, and how effective their efforts have been; among other objectives. GAO surveyed a nationally representative sample of 406 banks, which included the 115 banks that operate in the Southwest border region; analyzed Suspicious Activity Report filings; developed an econometric model on the drivers of branch closures; and interviewed banks that operate in the region. “Derisking” is the practice of banks limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering. The Southwest border region is a high-risk area for money laundering activity, in part, because of a high volume of cash and cross-border transactions, according to bank representatives and others. These types of transactions may create challenges for Southwest border banks in complying with Bank Secrecy Act/anti-money laundering (BSA/AML) requirements because they can lead to more intensive account monitoring and investigation of suspicious activity. GAO found that, in 2016, bank branches in the Southwest border region filed 2-1/2 times as many reports identifying potential money laundering or other suspicious activity (Suspicious Activity Reports), on average, as bank branches in other high-risk counties outside the region (see figure). According to GAO's survey, an estimated 80 percent (+/- 11 percent margin of error) of Southwest border banks terminated accounts for BSA/AML risk reasons. Further, according to the survey, an estimated 80 percent (+/- 11) limited or did not offer accounts to customers that are considered high risk for money laundering because the customers drew heightened regulatory oversight—behavior that could indicate derisking. Counties in the Southwest border region have been losing bank branches since 2012, similar to national and regional trends. Nationally, GAO's econometric analysis generally found that counties that were urban, younger, had higher income or had higher money laundering-related risk were more likely to lose branches. Money laundering-related risks were likely to have been relatively more important drivers of branch closures in the Southwest border region. Regulators have not fully assessed the BSA/AML factors influencing banks to derisk. Executive orders and legislation task the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and the federal banking regulators with reviewing existing regulations through retrospective reviews to determine whether they should be retained or amended, among other things. FinCEN and federal banking regulators have conducted retrospective reviews of parts of BSA/AML regulations. The reviews, however, have not evaluated how banks' BSA/AML regulatory concerns may influence them to derisk or close branches. GAO's findings indicate that banks do consider BSA/AML regulatory concerns in providing services. Without assessing the full range of BSA/AML factors that may be influencing banks to derisk or close branches, FinCEN, the federal banking regulators, and Congress do not have the information needed to determine if BSA/AML regulations and their implementation can be made more effective or less burdensome. GAO recommends that FinCEN and the federal banking regulators conduct a retrospective review of BSA regulations and their implementation for banks. The review should focus on how banks' regulatory concerns may be influencing their willingness to provide services. The federal banking regulators agreed to the recommendation. FinCEN did not provide written comments.", "document_type": "gao"}
{"report": "CMS has four principal programs: Medicare, Medicaid, CHIP, and the health-insurance marketplaces. See table 1 for information about the four programs. As discussed earlier, Medicare and Medicaid are CMS’s largest programs and have been growing steadily (see fig. 1). CBO projects that, in 2026, under current law, Medicare spending will reach $1.3 trillion. Medicaid is also expected to continue to grow—program spending is projected to increase 66 percent to over $950 billion by fiscal year 2025, and more than half of the states have chosen to expand their Medicaid programs by covering certain low-income adults not historically eligible for Medicaid coverage, as authorized under the Patient Protection and Affordable Care Act of 2010 (PPACA). The two programs’ use of managed-care delivery systems to provide care has also increased. For example, the number and percentage of Medicare beneficiaries enrolled in Medicare Part C has grown steadily over the past several years, increasing from 8.7 million (20 percent of all Medicare beneficiaries) in calendar year 2007 to 17.5 million (32 percent of all Medicare beneficiaries) in calendar year 2015. As of July 1, 2015, nearly two-thirds of all Medicaid beneficiaries were enrolled in managed- care plans and about 40 percent of expenditures in fiscal year 2015 were for health-care services delivered through managed care. CMS receives appropriations to carry out antifraud activities through several funds including the Health Care Fraud and Abuse Control (HCFAC) program and the Medicaid Integrity Program. The HCFAC program was established under the Health Insurance Portability and Accountability Act of 1996 to coordinate federal, state, and local law- enforcement efforts to address health-care fraud and abuse and to conduct investigations and audits, among other things. In fiscal year 2016, CMS received $560 million through the HCFAC program appropriations. The Medicaid Integrity Program, established by the Deficit Reduction Act of 2005, supports contracts to audit and identify overpayments in Medicaid claims, and provides technical assistance for states’ program-integrity efforts. According to CMS, it received $75 million every year since fiscal year 2009 through the Medicaid Integrity Program appropriations. According to CMS, in fiscal year 2016, total program-integrity obligations to address fraud, waste, and abuse for Medicare and Medicaid were $1.45 billion. As mentioned previously, we designated Medicare and Medicaid as high- risk programs starting in 1990 and 2003, respectively, because their size, scope, and complexity make them vulnerable to fraud, waste, and abuse. Similarly, the Office of Management and Budget (OMB) designated all parts of Medicare as well as Medicaid “high-priority” programs because these programs report $750 million or more in estimated improper payments in a given year. We also highlighted challenges associated with improper payments in Medicare and Medicaid in our annual report on duplication and opportunities for cost savings in federal programs. Improper payments are a significant risk to the Medicare and Medicaid programs and can include payments made as a result of fraud. Improper payments are payments that are either made in an incorrect amount (overpayments and underpayments) or those that should not be made at all. For example, CMS estimated in fiscal year 2016 that the Medicare fee-for-service (FFS) improper payment rate was 11 percent (approximately $41 billion) and the Medicaid improper payment rate was 10.5 percent (approximately $36 billion). Improper payment measurement does not specifically identify or estimate improper payments due to fraud. Health-care fraud can take many forms, and a single case can involve more than one scheme. Schemes may include fraudulent billing for services not provided, services provided that were not medically necessary, and services intentionally billed at a higher level than appropriate. These fraud schemes may include compensating providers, beneficiaries, or others for participating in the fraud scheme. Fraud can be regionally focused or can target particular service areas such as home-health services, or durable medical equipment such as wheelchairs. Fraud may also have nonfinancial effects. For example, patients may be subjected to harmful or unnecessary services by fraudulent providers. Fraud can be perpetrated by different actors, such as providers, beneficiaries, health-insurance plans, as well as organized crime. Fraud and “fraud risk” are distinct concepts. Fraud is challenging to detect because of its deceptive nature. Additionally, once suspected fraud is identified, alleged fraud cases may be prosecuted. If the court determines that fraud took place, then fraudulent spending may be recovered. Fraud risk exists when individuals have an opportunity to engage in fraudulent activity, have an incentive or are under pressure to commit fraud, or are able to rationalize committing fraud. When fraud risks can be identified and mitigated, fraud may be less likely to occur. Although the occurrence of one or more cases of health-care fraud indicates there is a fraud risk, a fraud risk can exist even if fraud has not yet been identified or occurred. Suspicious billing patterns, certain types of health-care providers, or complexities in program design may indicate a risk of fraud. Information to help identify potential fraud risks may come from various sources, including whistleblowers, agency officials, contractors, law-enforcement agencies, beneficiaries, or providers. According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks. Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks. Risk management is a formal and disciplined practice for addressing risk and reducing it to an acceptable level. In July 2015, GAO issued the Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. The Fraud Risk Framework describes leading practices in four components: commit, assess, design and implement, and evaluate and adapt, as depicted in figure 2. The Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires OMB to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities. The act further requires OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines. In July 2016, OMB published guidance about enterprise risk management and internal controls in federal executive departments and agencies. Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework. Further, the act requires federal agencies to submit to Congress a progress report each year for 3 consecutive years on the implementation of the controls established under OMB guidelines, among other things. CMS’s antifraud efforts for its four principal programs are part of the agency’s broader program-integrity approach to address fraud, waste, and abuse. CMS’s Center for Program Integrity (CPI) is the agency’s focal point for program integrity across the programs. According to CMS, its approach to program-integrity allows it to “address the whole spectrum of fraud, waste, and abuse.” For example, CMS describes its program- integrity activities as addressing unintentional errors resulting from providers being unaware of recent policy changes on one end of the spectrum, through somewhat more-serious patterns of abuse such as billing for a more-expensive service than was performed (known as upcoding), and finally up to serious fraudulent activities, such as billing for services that were not provided. CMS then aims to target its corrective actions to fit the risk. See figure 3 for CMS’s description of the spectrum of fraud, waste, and abuse that its program-integrity activities aim to address. Within its program-integrity activities, CMS has established several control activities that are specific to managing fraud risks, while others serve broader program-integrity purposes. According to CMS officials, the agency’s antifraud control activities mainly focus on providers in Medicare FFS. Officials told us that when CPI began operating, its primary focus was developing program integrity for Medicare FFS and, as a result, it is the most “mature” of all of CPI’s programs. CMS’s specific fraud control activities include, for example, the Fraud Prevention System (FPS), a predictive-analytics system that helps identify potentially fraudulent payments in Medicare FFS, and the Unified Program Integrity Contractors (UPIC), which detect and investigate aberrant provider behavior and potential fraud in Medicare and Medicaid. Other control activities serve broader program-integrity purposes such as to reduce improper payments resulting from error, waste, and abuse in addition to preventing or detecting potential fraud. For example, CMS provides education and outreach to Medicare providers and beneficiaries on issues identified through data analyses in order to reduce improper payments and to increase their awareness of fraud. HHS and CMS department- and agency-wide strategic plans guide CMS’s program-integrity activities—including antifraud activities. The program-integrity goals identified in the HHS strategic plan primarily focus on improper payments and are driven by statutory requirements. For example, the HHS strategic plan for fiscal years 2014–2018 includes performance goals of reducing the percentage of improper payments made under Medicare FFS and Medicare Parts C and D. One antifraud- focused goal in the HHS strategic plan is to increase the percentage of Medicare providers and suppliers identified as high risk that receive administrative actions, such as suspending payments to providers or revoking providers’ billing privileges. HHS and CMS department- and agency-wide strategic plans also include an emphasis on fraud prevention and early detection—a leading practice in the Fraud Risk Framework—and moving away from a “pay-and-chase” model. For example, the HHS strategic plan calls for “fostering early detection and prevention of improper payments by focusing on preventing bad actors from enrolling or remaining in Medicare and Medicaid” and to “use public-private partnerships to prevent and detect fraud across the health care industry by sharing fraud-related information and data between the public and private sectors.” As a part of this emphasis on prevention, CMS developed FPS in response to the Small Business Jobs Act of 2010, which required CMS to implement predictive-analytics technologies. Also, the Patient Protection and Affordable Care Act of 2010 (PPACA) included provisions to strengthen Medicare and Medicaid’s provider enrollment standards and procedures, among other program-integrity provisions. CMS works with an extensive and complex network of stakeholders to manage fraud risks in its four principal programs. In Medicaid and CHIP, CMS partners with and oversees the 50 states and the District of Columbia. Until the Deficit Reduction Act of 2005 expanded CMS’s role in Medicaid program integrity to provide effective federal support and assistance to states’ efforts to combat fraud, waste, and abuse, states were primarily responsible for Medicaid program integrity. Each state has its own Medicaid program-integrity unit, Medicaid Fraud Control Unit (MFCU), and state audit organization. CMS also uses numerous contractors to conduct the majority of its program-integrity activities. Since the enactment of Medicare in 1965, contractors have played an integral role in the administration of the program. The original Medicare program was designed so that the federal government contracted with health insurers or similar organizations experienced in handling physician and hospital claims to pay Medicare claims. Later, the Health Insurance Portability and Accountability Act of 1996 required the Secretary of Health and Human Services to enter into contracts to promote the integrity of the Medicare program. According to CMS officials, in fiscal year 2016 contractors received 92 percent of CMS’s program-integrity funding. Medicare and Medicaid program- integrity contractors play a variety of roles: (1) processing and reviewing claims, (2) conducting site visits of providers enrolling in Medicare, (3) auditing claims and recovering overpayments, (4) performing data analysis, and (5) investigating aberrant claims and provider behaviors, among other things. States also use contractors in many of these roles for managing program integrity. Additionally, multiple private health-insurance plans in Medicare Parts C and D and over 200 health-insurance plans in Medicaid managed care also carry out program-integrity activities. For the health-insurance marketplaces, CMS is responsible for operating the federally facilitated marketplace and overseeing the state-based marketplaces. CMS also developed the Federal Data Services Hub, which acts as a portal for exchanging information between state-based marketplaces, the federally facilitated marketplace, and state Medicaid agencies, among other entities, as well as other external partners, including other federal agencies, such as the Internal Revenue Service. Finally, law- enforcement groups, including the joint Department of Justice (DOJ) and HHS OIG Medicare Fraud Strike Force Teams, identify, investigate, and prosecute instances of fraud in CMS programs. See figure 4 for a depiction of CMS’s stakeholder network for managing fraud risks. This figure illustrates approximate numbers of stakeholders (through the concentration of dots), but not the extent of individual stakeholder roles. CMS provides oversight to, or partners with, these stakeholders to manage fraud risks. For oversight, CMS creates policies and guidance to direct stakeholders’ antifraud efforts, such as Medicare and Medicaid program-integrity manuals and the Medicaid Provider Enrollment Compendium. CMS also provides technical assistance to states in areas such as provider enrollment and data analysis. In areas where CMS does not have a primary role, it acts as a partner by collaborating and coordinating program-integrity and antifraud activities. For example, CMS is directly responsible for Medicare program integrity, but, in Medicaid and CHIP, states are the first line of program-integrity efforts. Similarly, CMS maintains control over Medicare FFS program integrity, but within Medicare managed care, it provides guidance for health- insurance plans to carry out their own program-integrity activities. In the health-insurance marketplaces, CMS reviews state-based marketplaces’ procedures for verifying applicant eligibility for coverage. For example, it conducts annual reviews of the state-based marketplaces, which include a review of states’ fraud, waste, and abuse policies. See figure 5 for a further description of CMS’s and various stakeholders’ roles and responsibilities in fraud risk management. CMS also facilitates collaboration among federal, state, and private entities for managing fraud risks. In 2012, CMS created the Healthcare Fraud Prevention Partnership (HFPP) to share information with public and private stakeholders and to conduct studies related to health-care fraud, waste, and abuse. According to CMS, as of October 2017, the HFPP included 89 public and private partners, including Medicare- and Medicaid-related federal and state agencies, law-enforcement agencies, private health-insurance plans (payers), and antifraud and other health- care organizations. The HFPP has conducted studies that pool and analyze multiple payers’ claims data to identify providers with patterns of suspect billing across payers. In a recent report, participants separately told us that the HFPP’s studies helped them to identify and take action against potentially fraudulent providers and payment vulnerabilities of which they might not otherwise have been aware, and fostered both formal and informal information sharing. CMS’s relationships with stakeholders were varied in terms of maturity and extent of information sharing, according to stakeholders we interviewed. While some relationships between CMS and stakeholders have been long-standing, some are developing, and others exist on an ad hoc basis. For example, CMS has had a long-standing relationship with state Medicaid program-integrity units, by collaborating through monthly meetings of the Medicaid Fraud and Abuse Technical Advisory Group, sending fraud alerts, and offering courses through the Medicaid Integrity Institute. However, in our interviews with state program-integrity units, and as we recently reported, some state Medicaid agencies shared concerns about the communication, level of policy guidance, and technical support provided by and received from CMS for managing fraud risks in Medicaid. This concern was echoed by state audit officials, with whom CMS recently initiated coordination to build relationships that would facilitate state auditing of Medicaid programs. CMS also has varying relationships with its law-enforcement partners. For example, the relationship between CMS and DOJ’s Health Care Fraud unit, which leads the DOJ and HHS OIG Medicare Fraud Strike Force Teams, has been ad hoc. According to CMS and DOJ officials, the interactions between the agencies have been based on specific fraud cases such as coordination of national takedowns when DOJ provided CMS with the names of providers committing fraud so that CMS could suspend them consistently with the timing of the enforcement efforts. According to CMS officials, they coordinate more with HHS OIG, working together on payment suspensions and revocations for OIG cases, or working with it to take administrative actions against large providers. CMS’s antifraud efforts partially align with the Fraud Risk Framework. Consistent with the framework, CMS has demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts. It has also taken steps to establish a culture conducive to fraud risk management, although it could expand its antifraud training to include all employees. CMS has taken some steps to identify fraud risks in Medicare and Medicaid; however, it has not conducted a fraud risk assessment or developed a risk-based antifraud strategy for Medicare and Medicaid as defined in the Fraud Risk Framework. CMS has established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with a risk-based antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare and Medicaid. The commit component of the Fraud Risk Framework calls for an agency to commit to combating fraud by creating an organizational culture and structure conducive to fraud risk management. This component includes establishing a dedicated entity to lead fraud risk management activities. Within CMS, the Center for Program Integrity (CPI) serves as the dedicated entity for fraud, waste, and abuse issues in Medicare and Medicaid, which is consistent with the Fraud Risk Framework. CPI was established in 2010, in response to a November 2009 Executive Order on reducing improper payments and eliminating waste in federal programs. This formalized role, according to CMS officials, elevated the status of program-integrity efforts, which previously were carried out by other parts of CMS. As an executive-level Center—on the same level with five other executive-level Centers at CMS, such as the Center for Medicare and the Center for Medicaid and CHIP Services—CPI has a direct reporting line to executive-level management at CMS. The Fraud Risk Framework identifies a direct reporting line to senior-level managers within the agency as a leading practice. According to CMS officials, this elevated organizational status offers CPI heightened visibility across CMS, attention by CMS executive leadership, and involvement in executive- level conversations. Additionally, in 2014, CMS established a Program Integrity Board that has brought together senior officials across CMS Centers on a monthly basis to coordinate on fraud and program-integrity vulnerabilities. According to CPI officials, the board is one of the mechanisms through which CPI engages other executive-level offices at CMS. CPI chairs the meetings and typically develops meeting agendas to solicit information from and disseminate information to other CMS units or stakeholders. Further, the board may establish small working groups, known as integrated project teams, to address specific vulnerabilities. For example, according to CMS officials, in 2016 the board established a Marketplace integrated project team to resolve potential fraud eligibility and enrollment issues in the federally facilitated marketplace using the Fraud Risk Framework. CPI has further demonstrated commitment to addressing fraud, waste, and abuse through several organizational changes with the goal of improving coordination and communication of program-integrity activities across Medicare and Medicaid. Most recently, in 2014, CPI reorganized its structure to align functional areas across Medicare and Medicaid, where possible. Previously, separate units within CPI administered their own program-integrity activities for Medicare and Medicaid programs. For example, CPI established a Provider Enrollment and Oversight Group, responsible for provider screening and enrollment functions in both Medicare and Medicaid. According to CMS officials, if CPI employees identify an issue in provider enrollment in Medicare, the same CPI employees also consider how this issue applies to Medicaid. According to CMS officials, the reorganization has helped CPI to look at vulnerabilities in a crosscutting way and to facilitate communication across programs. Similarly, since 2016, CPI began shifting contracting functions from separate Medicare and Medicaid regional contractors that identify and investigate cases of potential fraud and conduct audits to five regional UPICs responsible for a range of program-integrity and fraud-specific activities in both Medicare FFS and Medicaid. According to CMS, the purpose of the UPICs is to coordinate provider investigations across Medicare and Medicaid, improve collaboration with states by providing a mutually beneficial service, and increase contractor accountability through coordinated oversight. CMS officials told us that UPIC integration is a cornerstone of CMS’s contract management strategy and would help to ensure communication and coordination across Medicare and Medicaid program-integrity efforts. CMS plans to award all the UPIC contracts by the end of 2017, ultimately phasing out the ZPICs and Medicaid Integrity Contractors. The commit component of the Fraud Risk Framework also includes creating an organizational culture to combat fraud at all levels of the agency. Consistent with the Fraud Risk Framework, CMS has promoted an antifraud culture by demonstrating a senior-level commitment to combating fraud through public statements, increased resource levels, and internal and external coordination. In addition to HHS and CMS strategic documents discussed earlier, CMS and CPI leaders have testified publicly about CMS’s commitment to preventing fraud and protecting taxpayers and beneficiaries. For example, CPI’s former Director testified in May 2016 before the House Committee on Energy and Commerce’s Subcommittee on Oversight and Investigations that “CMS is deeply committed to our efforts to prevent waste, fraud and abuse in Medicare and Medicaid programs, protecting both taxpayers and the beneficiaries that we serve.” More recently, CMS’s new Administrator testified in her February 2017 confirmation hearing regarding her intent to prioritize efforts around preventing fraud and abuse. CPI’s budget and resources have increased over time to support its ongoing program-integrity mission. According to CMS, program-integrity obligations for Medicare and Medicaid increased from about $1.02 billion in fiscal year 2010 to $1.45 billion in fiscal year 2016. According to CMS officials, the Health Care Fraud and Abuse Control (HCFAC) account, one of the primary sources of CPI funding, has never received a funding reduction. Additionally, in 2015, CPI received additional funding based on a discretionary cap adjustment to HCFAC. Similarly, CPI staff resources have increased over time. According to CMS, CPI’s full-time equivalent positions increased from 177 in 2011 to 419 in 2017. Consistent with leading practices in the Fraud Risk Framework to involve all levels of the agency in setting an antifraud tone, CPI has also worked collaboratively with other CMS Centers. In addition to engaging executive-level officials of other CMS Centers through the Program Integrity Board, CPI has worked collaboratively with other Centers within CMS to incorporate antifraud features into new program design or policy development and established regular communication at the staff level. For example: Center for Medicare and Medicaid Innovation (CMMI). When developing the Medicare Diabetes Prevention Program, CMMI officials told us they worked with CPI’s Provider Enrollment and Oversight Group and Governance Management Group to develop risk-based screening procedures for entities that would enroll in Medicare to provide diabetes-prevention services, among other activities. The program was expanded nationally in 2016, and CMS determined that an entity may enroll in Medicare as a program supplier if it satisfies enrollment requirements, including that the supplier must pass existing high categorical risk-level screening requirements. Center for Medicaid and CHIP Services (CMCS). CMCS officials told us they worked closely with CPI to issue Medicaid guidance and best practices to states on home and community-based services that incorporate program-integrity provisions. A senior CMCS official told us that, to address fraud, CMS has requested that states include provider information on claims to determine whether providers are meeting eligibility criteria. Center for Medicare (CM). In addition to building safeguards into programs and developing policies, CM officials told us that there are several standing meetings, on monthly, biweekly, and weekly bases, between groups within CM and CPI that discuss issues related to provider enrollment, FFS operations, and contractor management. A senior CM official also told us that there are ad hoc meetings taking place between CM and CPI: “We interact multiple times daily at different levels of the organization. Working closely is just a regular part of our business.” CMS has also demonstrated its commitment to addressing fraud, waste, and abuse to its stakeholders. Representatives of CMS’s extensive stakeholder network whom we interviewed—state officials, contractors, and officials from public and private entities—generally recognized the agency’s commitment to combating fraud. In our interviews with stakeholders, officials observed CMS’s increased commitment over time to address fraud, waste, and abuse and cited examples of specific CMS actions. State officials, for example, told us that the Medicaid Integrity Institute, a training center coordinated jointly by CMS and DOJ, has been a helpful resource for states to build capacity to address fraud and program integrity. CMS contractors told us that CMS’s commitment to combating fraud is incorporated into contractual requirements, such as requiring (1) data analysis for potential fraud leads and (2) fraud- awareness training for providers. Officials from entities that are members of the HFPP, specifically, a health-insurance plan and the National Health Care Anti-Fraud Association, added that CMS’s effort to establish the HFPP and its ongoing collaboration and information sharing reflect CMS’s commitment to combat fraud in Medicare and Medicaid. The Fraud Risk Framework identifies training as one way of demonstrating an agency’s commitment to combating fraud. Training and education intended to increase fraud awareness among stakeholders, managers, and employees, serves as a preventive measure to help create a culture of integrity and compliance within the agency. The Fraud Risk Framework discusses requiring all employees to attend training upon hiring and on an ongoing basis thereafter. To increase awareness of fraud risks in Medicare and Medicaid, CMS offers and requires training for stakeholder groups such as providers, beneficiaries, and health-insurance plans. Specifically, through its National Training Program and Medicare Learning Network, CMS makes available training materials on combating Medicare and Medicaid fraud, waste, and abuse. These materials help to identify and report fraud, waste, and abuse in CMS programs and are geared toward providers, beneficiaries, as well as trainers and other stakeholders. Separately, CMS requires health-insurance plans working with CMS to provide annual fraud, waste, and abuse training to their employees. However, CMS does not offer or require similar fraud-awareness training for the majority of its workforce. For a relatively small portion of its overall workforce—specifically, contracting officer representatives who are responsible for certain aspects of the acquisition function—CMS requires completion of fraud and abuse prevention training every 2 years. According to CMS, 638 of its contracting officer representatives (or about 10 percent of its overall workforce) completed such training in 2016 and 2017. Although CMS offers fraud-awareness training to others, the agency does not require fraud-awareness training for new hires or on a regular basis for all employees because the agency has focused on providing process-based internal controls training for its employees. While fraud-awareness training for contracting officer representatives is an important step in helping to promote fraud risk management, fraud- awareness training specific to CMS programs would be beneficial for all employees. Such training would not only be consistent with what CMS offers to or requires of its stakeholders and some of its employees, but would also help to keep the agency’s entire workforce continuously aware of fraud risks and examples of known fraud schemes, such as those identified in successful OIG investigations. Such training would also keep employees informed as they administer CMS programs or develop agency policies and procedures. Considering the vulnerability of Medicare and Medicaid programs to fraud, waste, and abuse, without regular required training CMS cannot be assured that its workforce of over 6,000 employees is continuously aware of risks facing its programs. Although CMS has shown commitment to combating fraud, at times CPI’s efforts to combat fraud compete with other mission priorities, such as (1) ensuring beneficiary access to health-care services and (2) limiting provider burden. CPI leadership has been aware of this inherent challenge. For example, at a congressional hearing in May 2016, CPI’s Director stated that “our efforts strike an important balance: protecting beneficiary access to necessary health care services and reducing the administrative burden on legitimate providers and suppliers, while ensuring that taxpayer dollars are not lost to fraud, waste, and abuse.” Beneficiary access to care. In accordance with its mission statement, providing and improving beneficiaries’ access to health care is a CMS priority. CMS’s commitment to providing access to high-quality care and coverage is reflected in the agency’s mission statement and is one of its four strategic goals. As a result, before taking administrative actions against a Medicare Part A provider, such as a hospice, or providers in rural areas, CMS officials told us that they first look at whether there is a sufficient number of providers in an area by running a provider search by provider county and adjacent counties and considering how heavily populated an area is with Medicare beneficiaries. According to these officials, rather than taking an administrative action against a provider that would limit beneficiaries’ access to services, the agency may enter into a corrective action plan with the provider. CMS officials told us that revoking a provider’s enrollment in Medicare, an option available to CMS in cases of provider noncompliance or misconduct, is rare. Administrative burden on providers. According to CMS documents and officials, concern over placing undue burden on providers—the majority of whom are presumed to be honest—provides a counterforce to implementing program-integrity control activities. CMS’s web page entitled Reducing Provider Burden states: “CMS is committed to reducing improper payments but must be mindful of provider burden because medical review is a resource-intensive process for both the healthcare provider and the Medicare review contractor.” Two CMS contractors told us that they scaled back or did not pursue audits of providers’ documentation because of provider burden or sensitivity considerations. One contractor removed providers from audit samples after some providers opposed having to supply multiple medical records. CPI officials told us that they want to reduce provider burden in a logical manner. For example, according to CMS officials, in the Medicare FFS Recovery Audit Program, CMS established limits on Additional Documentation Requests, which are requests for medical documentation supporting a claim being reviewed. CMS requires such documentation adjustments so that they align with a providers’ claim denial rates. Providers with low denial rates will have lower documentation requirements, while providers with high denial rates will have higher documentation requirements, thus adjusting provider burden based on demonstrated compliance. The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile. Identifying fraud risks is one of the steps included in the Fraud Risk Framework for assessing risks to determine a fraud risk profile. CMS has taken steps to identify some fraud risks through several control activities that target areas the agency has designated as higher risk within Medicare and Medicaid, including specific provider types, such as home health agencies, and specific geographic locations. As discussed earlier, CMS officials told us that CPI initially focused on developing control activities for Medicare FFS and considers these activities to be the most mature of all CPI efforts to address fraud risks. CMS has identified fraud risks in the following selected examples, which are not an exhaustive list of its control activities. Data analytics to assist investigations in Medicare FFS. In 2011, CMS implemented FPS, a data-analytic system that screens all Medicare FFS claims to identify health-care providers with suspect billing patterns for further investigation. Medicare FFS contractors—ZPICs and UPICs— have used FPS to identify and prioritize leads for investigations of potential fraud by high-risk Medicare FFS providers. Contractors told us that FPS allows them to quickly identify and triage leads. CMS’s guidance requires contractors to prioritize investigations with the greatest program impact or urgency and identifies required criteria for prioritizing investigations, such as patient abuse or harm, multistate fraud, and high dollar amount of potential overpayments. One contractor we interviewed developed a risk-prioritization model that incorporated CMS’s required criteria, such as patient harm, as well as additional criteria, such as provider spikes in billing, into a tool that automatically creates a provider risk score to help the contractor focus and prioritize investigative resources. Prior authorization for Medicare FFS services or supplies. CMS published a final rule in December 2015 that identifies a master list of durable medical equipment, prosthetics, orthotics, and supplies for which CMS can require prior authorization before suppliers submit a Medicare FFS claim. In this rule, CMS identified 135 items that are frequently subject to unnecessary utilization and stated that the agency expects the final rule to result in savings in the form of reduced unnecessary utilization, fraud, waste, and abuse. Under this program, prior authorization is a condition of payment for claims. CMS can choose which items on the master list to subject to prior authorization. For example, in March 2017, it began requiring prior authorization for selected power wheelchairs in four states and expanded the prior authorization program for these items to all states in July 2017. CMS also began to test the use of prior authorization on a voluntary basis through a series of fixed-length demonstrations for items and services that have been associated with high levels of improper payments, including high incidences of fraud in some cases, and unnecessary utilization in certain geographic areas. For example, CMS began implementing a voluntary prior authorization demonstration in September 2012 for other power mobility devices, such as power scooters, in seven states where historically there has been extensive evidence of fraud and improper payments. CMS expanded the demonstration to an additional 12 states in October 2014, for a total of 19 states. According to the initial Federal Register notice, CMS planned to use the demonstration to develop improved methods for investigation and prosecution of fraud to protect federal funds from fraudulent actions and the resulting improper payments. Under the demonstration, providers and suppliers are encouraged—but not required—to submit a request for prior authorization for certain items before they provide the item to the beneficiary and submit a claim for payment. Revised provider screening and enrollment processes for Medicare FFS and Medicaid FFS. In response to PPACA, in 2011 CMS implemented a revised screening process for providers and suppliers who enroll in Medicare and Medicaid based on identified provider risk categories. CMS placed all Medicare provider and supplier types into one of three risk categories—limited, moderate, or high—based on its assessment of the potential risk of fraud, waste, and abuse each provider and supplier type poses. For example, CMS designated prospective (newly enrolling) home health agencies and prospective suppliers of durable medical equipment, prosthetics, orthotics, and supplies in the high-risk category. According to the final rule and our interviews with CMS officials, CMS developed these risk-based categories based on its review and synthesis of various information sources about the fraud risks posed by each provider and supplier type, including (1) the agency’s experience with claims data used to identify potentially fraudulent billing practices, (2) expertise of contractors responsible for investigating and identifying Medicare fraud, and (3) GAO and OIG reports. CMS designated specific screening activities for each risk category, with increased requirements for moderate- and high-risk provider and supplier types. For example, moderate- and high-risk providers and suppliers must receive preenrollment site visits, and high-risk providers and suppliers also are subject to fingerprint-based criminal-background checks. As part of the revised screening process, beginning in September 2011, CMS also undertook its first program-wide effort to rescreen, or revalidate, the enrollment records of about 1.5 million existing Medicare FFS providers and suppliers, to determine whether they remain eligible to bill Medicare. Temporary provider enrollment moratoriums for certain providers and geographic areas for Medicare FFS and Medicaid FFS. CMS identified certain provider types and geographic areas as high risk for fraud and used its authority under PPACA to implement temporary moratoriums to suspend enrollment of such Medicare and Medicaid providers in those areas. For example, in July 2016, CMS extended temporary moratoriums statewide on the enrollment of new Medicare Part B nonemergency ambulance suppliers and Medicare home health agencies statewide in six states, as applicable. The statewide moratoriums also apply to Medicaid. According to the Federal Register notice, CMS imposed the temporary moratoriums based on qualitative and quantitative factors suggesting a high risk of fraud, waste, or abuse, such as law-enforcement expertise with emerging fraud trends and investigations. CMS’s data analysis also confirmed the agency’s determination of a high risk of fraud, waste, and abuse for these provider and supplier types within certain geographic areas, according to the notice. Medicaid state program integrity reviews and desk reviews. CMS tailored state Medicaid program-integrity reviews to areas it identified as high risk for improper payments, such as personal care services, which may also be at high risk for fraud. In March 2017, we reported that, from fiscal years 2014 through 2016, CMS conducted focused reviews of state program-integrity efforts in 31 states, reviewing 10 or 11 states annually. For each state, CMS tailored its focused reviews to the state’s managed care plans and relevant other high-risk areas, including provider enrollment and screening, nonemergency medical transportation, and personal care services. CMS and state officials we spoke with as part of that work told us that the tailored oversight had been beneficial and helped identify areas for improvement. CMS has also initiated desk reviews of state program-integrity efforts. According to CMS, these desk reviews allow the agency to provide states with customized program- integrity oversight. Vulnerability tracking system for Medicare. CPI recently initiated an effort to centralize and formalize a vulnerability tracking process for Medicare, which could support identification of specific fraud risks, both in Medicare and possibly Medicaid. As described by CPI officials, the process aims to collect information on fraud-related vulnerabilities from CMS employees, contractors, and other sources, such as GAO and HHS OIG reports. The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and assess risks to determine a fraud risk profile. Furthermore, federal internal control standards call for agency management to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that, as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks. The Fraud Risk Framework states that, in planning the fraud risk assessment, effective managers tailor the fraud risk assessment to the program by, among other things, identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process. Fraud risk assessments that align with the Fraud Risk Framework involve (1) identifying inherent fraud risks affecting the program, (2) assessing the likelihood and impact of those fraud risks, (3) determining fraud risk tolerance, (4) examining the suitability of existing fraud controls and prioritizing residual fraud risks, and (5) documenting the results. (See fig. 6.) Although, as discussed earlier, CMS has identified some fraud risks posed by providers in Medicare FFS and, to a lesser degree, Medicaid FFS, the agency has not conducted a fraud risk assessment for either the Medicare or Medicaid program. Such a risk assessment would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy. According to CMS officials, CMS has not conducted a fraud risk assessment for Medicare or Medicaid because, within CPI’s broader approach of preventing and eliminating improper payments, its focus has been on addressing specific vulnerabilities among provider groups that have shown themselves particularly prone to fraud, waste, and abuse. With this approach, however, it is unlikely that CMS will be able to design and implement the most-appropriate control activities to respond to the full portfolio of fraud risks. A fraud risk assessment consists of discrete activities that build upon each other. Specifically: Identifying inherent fraud risks affecting the program. As discussed earlier, CMS has taken steps to identify fraud risks. However, CMS has not used a process to identify inherent fraud risks from the universe of potential vulnerabilities facing Medicare and Medicaid programs, including threats from various sources. According to CPI officials, most of the agency’s fraud control activities are focused on fraud risks posed by providers. The Fraud Risk Framework discusses fully considering inherent fraud risks from internal and external sources in light of fraud risk factors such as incentives, opportunities, and rationalization to commit fraud. For example, according to CMS officials, the inherent design of the Medicare Part C program may pose fraud risks that are challenging to detect. A fraud risk assessment would help CMS identify all sources of fraudulent behaviors, beyond threats posed by providers, such as those posed by health-insurance plans, contractors, or employees. Assessing the likelihood and impact of fraud risks and determining fraud risk tolerance. CMS has taken steps to prioritize fraud risks in some areas, but it has not assessed the likelihood or impact of fraud risks or determined fraud risk tolerance across all parts of Medicare and Medicaid. Assessing the likelihood and impact of inherent fraud risks would involve consideration of the impact of fraud risks on program finances, reputation, and compliance. Without assessing the likelihood and impact of risks in Medicare or Medicaid or internally determining which fraud risks may fall under the tolerance threshold, CMS cannot be certain that it is aware of the most-significant fraud risks facing these programs and what risks it is willing to tolerate based on the programs’ size and complexity. Examining the suitability of existing fraud controls and prioritizing residual fraud risks. CMS has not assessed existing control activities or prioritized residual fraud risks. According to the Fraud Risk Framework, managers may consider the extent to which existing control activities—whether focused on prevention, detection, or response—mitigate the likelihood and impact of inherent risks and whether the remaining risks exceed managers’ tolerance. This analysis would help CMS to prioritize residual risks and to determine mitigation approaches. For example, CMS has not established preventive fraud control activities in Medicare Part C. Using a fraud risk assessment for Medicare Part C and closely examining existing fraud control activities and residual risks, CMS could be better positioned to address fraud risks facing this growing program and develop preventive control activities. Further, without assessing existing fraud control activities and prioritizing residual fraud risks, CMS cannot be assured that its current control activities are addressing the most-significant risks. Such analysis would also help CMS determine whether additional, preferably preventive, fraud controls are needed to mitigate residual risks, make adjustments to existing control activities, and potentially scale back or remove control activities that are addressing tolerable fraud risks. Documenting the risk-assessment results in a fraud risk profile. CMS has not developed a fraud risk profile that documents key findings and conclusions of the fraud risk assessment. According to the Fraud Risk Framework, the risk profile can also help agencies decide how to allocate resources to respond to residual fraud risks. Given the large size and complexity of Medicare and Medicaid, a documented fraud risk profile could support CMS’s resource-allocation decisions as well as facilitate the transfer of knowledge and continuity across CMS staff and changing administrations. Senior CPI officials told us that the agency plans to start a fraud risk assessment for Medicare and Medicaid after it completes a separate fraud risk assessment of the federally facilitated marketplace. This fraud risk assessment for the federally facilitated marketplace eligibility and enrollment process is being conducted in response to a recommendation we made in February 2016. In April 2017, CPI officials told us that this fraud risk assessment was largely completed, although in September 2017 CPI officials told us that the assessment was undergoing agency review. CPI officials told us that they have informed CM and CMCS officials that there will be future fraud risk assessments for Medicare and Medicaid; however, they could not provide estimated timelines or plans for conducting such assessments, such as the order or programmatic scope of the assessments. Once completed, CMS could use the federally facilitated marketplace fraud risk assessment and apply any lessons learned when planning for and designing fraud risk assessments for Medicare and Medicaid. According to the Fraud Risk Framework, factors such as size, resources, maturity of the agency or program, and experience in managing risks can influence how the entity plans the fraud risk assessment. Additionally, effective managers tailor the fraud risk assessment to the program when planning for it. The large scale and complexity of Medicare and Medicaid as well as time and resources involved in conducting a fraud risk assessment underscore the importance of a well-planned and tailored approach to identifying the assessment’s programmatic scope. Planning and tailoring may involve decisions to conduct a fraud risk assessment for Medicare and Medicaid programs as a whole or divided into several subassessments to reflect their various component parts (e.g., Medicare FFS, Medicaid managed care) as well as determining the timing and order of assessments (e.g., concurrently or consecutively for Medicare and Medicaid). CMS’s existing fraud risk identification efforts as well as communication channels with stakeholders could serve as a foundation for developing a fraud risk assessment for Medicare and Medicaid. The leading practices identified in the Fraud Risk Framework discuss the importance of identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process. CMS’s fraud risk identification efforts discussed earlier could provide key information about fraud risks and their likelihood and impact. Further, existing relationships and communication channels across CMS and its extensive network of stakeholders could support building a comprehensive understanding of known and potential fraud risks for the purposes of a fraud risk assessment. For example, the fraud vulnerabilities identified through data analysis and information sharing with states, health-insurance plans, law-enforcement organizations, and contractors through the HFPP could inform a fraud risk assessment. CPI’s Command Center missions—facilitated collaboration sessions that bring together experts from various disciplines to improve the processes for fraud prevention in Medicare and Medicaid—could bring together experts to identify potential or emerging fraud vulnerabilities or to brainstorm approaches to mitigate residual fraud risks. As CMS makes plans to move forward with a fraud risk assessment for Medicare and Medicaid, it will be important to consider the frequency with which the fraud risk assessment would need to be updated. While, according to the Fraud Risk Framework, the time intervals between updates can vary based on the programmatic and operating environment, assessing fraud risks on an ongoing basis is important to ensure that control activities are continuously addressing fraud risks. The constantly evolving fraud schemes, the size of the programs in terms of beneficiaries and expenditures, as well as continual changes in Medicare and Medicaid programs—such as development of innovative payment models and increasing managed-care enrollment—call for constant vigilance and regular updates to the fraud risk assessment. The design and implement component of the Fraud Risk Framework calls for federal managers to design and implement a strategy with specific control activities to mitigate assessed fraud risks and collaborate to help ensure effective implementation. According to the Fraud Risk Framework, effective managers develop and document an antifraud strategy that describes the program’s approach for addressing the prioritized fraud risks identified during the fraud risk assessment, also referred to as a risk-based antifraud strategy. A risk- based antifraud strategy describes existing fraud control activities as well as any new fraud control activities a program may adopt to address residual fraud risks. In developing a strategy and antifraud control activities, effective managers focus on fraud prevention over detection, develop a plan for responding to identified instances of fraud, establish collaborative relationships with stakeholders, and create incentives to help effectively implement the strategy. Additionally, as part of a documented strategy, management identifies roles and responsibilities of those involved in fraud risk management activities; describes control activities as well as plans for monitoring and evaluation, creates timelines, and communicates the antifraud strategy to employees and stakeholders, among other things. As discussed earlier, CMS has some control activities in place to identify fraud risk in Medicare and Medicaid, particularly in the FFS program. However, CMS has not developed and documented a risk-based antifraud strategy to guide its design and implementation of new antifraud activities and to better align and coordinate its existing activities to ensure it is targeting and mitigating the most-significant fraud risks. Antifraud strategy. CMS officials told us that CPI does not have a documented risk-based antifraud strategy. Although CMS has developed several documents that describe efforts to address fraud, the agency has not developed a risk-based antifraud strategy for Medicare and Medicaid because, as discussed earlier, it has not conducted a fraud risk assessment that would serve as a foundation for such strategy. In 2016, CPI identified five strategic objectives for program integrity, which include antifraud elements and an emphasis on prevention. However, according to CMS officials, these objectives were identified from discussions with CMS leadership and various stakeholders and not through a fraud risk assessment process to identify inherent fraud risks from the universe of potential vulnerabilities, as described earlier and called for in the leading practices. These strategic objectives were presented at an antifraud conference in 2016, but were not announced publicly until the release of the Annual Report to Congress on the Medicare and Medicaid Integrity Programs for Fiscal Year 2015 in June 2017. Stakeholder relationships and communication. CMS has established relationships and communicated with stakeholders, but, without an antifraud strategy, stakeholders we spoke with lacked a common understanding of CMS’s strategic approach. Prior work on practices that can help federal agencies collaborate effectively calls for a strategy that is shared with stakeholders to promote trust and understanding. Once an antifraud strategy is developed, the Fraud Risk Framework calls for managers to collaborate to ensure effective implementation. Although some CMS stakeholders were able to describe various CMS program- integrity priorities and activities, such as home health being a fraud risk priority, the stakeholders could not communicate, articulate, or cite a common CMS strategic approach to address fraud risks in its programs. Incentives. The Fraud Risk Framework discusses creating incentives to help ensure effective implementation of the antifraud strategy once it is developed. Currently, some incentives within stakeholder relationships may complicate CMS’s antifraud efforts. As discussed earlier, CMS is a partner and provides oversight to states’ program-integrity functions. Officials from one state told us that they were reluctant to share their program vulnerabilities because CMS would use this information to later audit the state. Among contractors, CMS encourages information sharing through conferences and workshops; however, competition for CMS business among contractors can be a disincentive to information sharing. CMS officials acknowledged this concern and said that they expect contractors to share information related to fraud schemes, outcomes of investigations, and tips for addressing fraud, but not proprietary information such as algorithms to risk-score providers. Without developing and documenting an antifraud strategy based on a fraud risk assessment, as called for in the design and implement component of the Fraud Risk Framework, CMS cannot ensure that it has a coordinated approach to address the range of fraud risks and to appropriately target and allocate resources for the most-significant risks. Considering fraud risks to which the Medicare and Medicaid programs are most vulnerable, in light of the malicious intent of those who aim to exploit the programs, would help CMS to examine its current control activities and potentially design new ones with recognition of fraudulent behavior it aims to prevent. This focus on fraud is distinct from a broader view of program integrity and improper payments by considering the intentions and incentives of those who aim to deceive rather than well-intentioned providers who make mistakes. Also, continued growth of the programs, such as growth of Medicare Part C and Medicaid managed care, call for consideration of preventive fraud control activities across the entire network of entities involved. Further, considering the large size and complexity of Medicare and Medicaid and the extensive stakeholder network involved in managing fraud in the programs, a strategic approach to managing fraud risks within the programs is essential to ensure that a number of existing control activities and numerous stakeholder relationships and incentives are being aligned to produce desired results. Once developed, an antifraud strategy that is clearly articulated to various CMS stakeholders would help CMS to address fraud risks in a more coordinated and deliberate fashion. Thinking strategically about existing control activities, resources, tools, and information systems could help CMS to leverage resources while continuing to integrate Medicare and Medicaid program-integrity efforts along functional lines. A strategic approach grounded in a comprehensive assessment of fraud risks could also help CMS to identify future enhancements for existing control activities, such as new preventive capabilities for FPS or additional fraud factors in provider enrollment and revalidation, such as provider risk scoring, to stay in step with evolving fraud risks. The evaluate and adapt component of the Fraud Risk Framework calls for federal managers to evaluate outcomes using a risk-based approach and adapt activities to improve fraud risk management. Furthermore, according to federal internal control standards, managers should establish and operate monitoring activities to monitor the internal control system and evaluate the results, which may be compared against an established baseline. Ongoing monitoring and periodic evaluations provide assurances to managers that they are effectively preventing, detecting, and responding to potential fraud. CMS has established monitoring and evaluation mechanisms for its program-integrity activities that it could incorporate into an antifraud strategy. In Medicare, CMS has taken steps to measure the rate of fraud in a particular service area. We have previously reported that agencies may face challenges measuring outcomes of fraud risk management activities in a reliable way. These challenges include the difficulty of measuring the extent of deterred fraud, isolating potential fraud from legitimate activity or other forms of improper payments, and determining the amount of undetected fraud. Despite these challenges, CMS has taken steps to estimate a fraud baseline—meaning the rate of probable fraud—in the home health benefit. In fiscal year 2016, CMS conducted a pretest in the Miami-Dade area of Florida to evaluate its potential measurement approach that could later be used in a nationwide study of probable fraud among home health agencies. The pretest was not a random sample and was not intended to produce a rate of fraud, but instead was intended to test the interview instruments and data-collection methodology CMS might use in a study nationwide. CMS and its contractor collected information from home health agencies, the attending providers, and Medicare beneficiaries in the Miami-Dade area in order to test these interview instruments. CMS completed this pretest, but, according to CMS officials, the agency does not yet have plans to roll out a nationwide study that would estimate a probable fraud rate for the Medicare FFS home health benefit. In its 2015 annual report to Congress, CMS stated that “documenting the baseline amount of fraud in Medicare is of critical importance, as it allows officials to evaluate the success of ongoing fraud prevention activities.” CMS officials working on the pilot told us that having an estimate of the rate of fraud in home health benefits would allow CMS to reliably assess its efforts at eliminating or reducing fraud. Without a baseline, officials said, the agency cannot know whether its antifraud efforts are as effective as they could be. We previously reported that the lack of a baseline for the amount of health-care fraud that exists limits CMS’s ability to determine whether its activities are effectively reducing health care fraud and abuse. A baseline estimate could provide an understanding of the extent of fraud and, with additional information on program activities, could help to inform decision making related to allocation of resources to combat health-care fraud. As described in the Fraud Risk Framework, in the absence of a fraud baseline, agencies can gather additional information on the short-term or intermediate outcomes of some antifraud initiatives, which may be more readily measured. For example, CMS has developed some performance measures to provide a basis for monitoring its progress towards meeting the program-integrity goals set in the HHS Strategic Plan and Annual Performance Plan. Specifically, CMS measures whether it is meeting its goal of “increasing the percentage of Medicare FFS providers and suppliers identified as high risk that receive an administrative action.” CMS does not set specific antifraud goals for other parts of Medicare or Medicaid; other CMS performance measures relate to measuring or reducing improper payments in CHIP, Medicaid, and the various parts of Medicare. CMS uses return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities and FPS. For example, CMS uses return-on-investment to measure the effectiveness of FPS and, in response to a recommendation we made in 2012, CMS developed outcome-based performance targets and milestones for FPS. CMS has also conducted individual evaluations of its program-integrity activities, such as an interim evaluation of the prior-authorization demonstration for power mobility devices that began in 2012 and is currently implemented in 19 states. Commensurate with greater maturity of control activities in Medicare FFS compared to other parts of Medicare and Medicaid, monitoring and evaluation activities for Medicare Parts C and D and Medicaid are more limited. For example, CMS calculates savings for its program-integrity activities in Medicare Parts C and D, but not a full return-on-investment. CMS officials told us that calculating costs for specific activities is challenging because of overlapping activities among contractors. CMS officials said they continue to refine methods and develop new savings estimates for additional program-integrity activities. According to the Fraud Risk Framework, effective managers develop a strategy and evaluate outcomes using a risk-based approach. In developing an effective strategy and antifraud activities, managers consider the benefits and costs of control activities. Ongoing monitoring and periodic evaluations provide reasonable assurance to managers that they are effectively preventing, detecting, and responding to potential fraud. Monitoring and evaluation activities can also support managers’ decisions about allocating resources, and help them to demonstrate their continued commitment to effectively managing fraud risks. As CMS takes steps to develop an antifraud strategy, it could include plans for refining and building on existing methods such as return-on- investment or savings measures, and setting appropriate targets to evaluate the effectiveness of all of CMS’s antifraud efforts. Such a strategy would help CMS to efficiently allocate program-integrity resources and to ensure that the agency is effectively preventing, detecting, and responding to potential fraud. For example, while doing so would involve challenges, CMS’s strategy could detail plans to advance efforts to measure a potential fraud rate through baseline and periodic measures. Fraud rate measurement efforts could also inform risk assessment activities, identify currently unknown fraud risks, align resources to priority risks, and develop effective outcome metrics for antifraud controls. Such a strategy would also help CMS ensure that it has effective performance measures in place to assess its antifraud efforts beyond those related to providers in Medicare FFS, and establish appropriate targets to measure the agency’s progress in addressing fraud risks. As CMS makes plans to move forward with a strategy and to further develop evaluation and monitoring mechanisms, it will be important to share its efforts with stakeholders. The Fraud Risk Framework states that effective managers communicate lessons learned from fraud risk management activities to stakeholders. For example, CMS could be a leader to states in measuring the effectiveness of program-integrity efforts. Officials in three of the four states we spoke with expressed interest in receiving CMS guidance on how to measure the effectiveness of their Medicaid program-integrity efforts, such as by providing models for how to calculate return-on-investment. Medicare and Medicaid provide health insurance to over 129 million Americans, but the size—in terms of number of beneficiaries and amount of expenditures—as well as complexity of these programs make them inherently susceptible to fraud and improper payments. CMS currently manages these risks across its programs as part of a broader approach to identifying and controlling for multiple sources of improper payments and by developing relationships with an extensive network of stakeholders. In Medicare and Medicaid specifically, we note that CMS has taken many important steps toward implementing a strategic approach for managing fraud. However, the agency could benefit by more fully aligning its efforts with the four components of the Fraud Risk Framework. CMS is well positioned to leverage its fraud risk management efforts— such as demonstrated leadership for combating fraud, existing control activities, and stakeholder relationships—to provide additional antifraud training, as well as to develop an antifraud strategy based on fraud risk assessments for Medicare and Medicaid. We recognize that the effort may be challenging, given the size and complexity of Medicare and Medicaid, and the need to balance antifraud activities with CMS’s other mission priorities. However, by not employing the actions identified in the Fraud Risk Framework and incorporating them in its approach to managing fraud risks, CMS is missing a significant opportunity to better ensure employee vigilance against fraud, and to organize and focus its many antifraud and program-integrity activities and related resources into a comprehensive strategy. Such a strategy would (1) provide reasonable assurance that CMS is targeting the most-significant fraud risks in its programs and (2) help protect the government’s substantial and growing investments in these programs. We are making the following three recommendations to CMS: The Administrator of CMS should provide fraud-awareness training relevant to risks facing CMS programs and require new hires to undergo such training and all employees to undergo training on a recurring basis. (Recommendation 1) The Administrator of CMS should conduct fraud risk assessments for Medicare and Medicaid to include respective fraud risk profiles and plans for regularly updating the assessments and profiles. (Recommendation 2) The Administrator of CMS should, using the results of the fraud risk assessments for Medicare and Medicaid, create, document, implement, and communicate an antifraud strategy that is aligned with and responsive to regularly assessed fraud risks. This strategy should include an approach for monitoring and evaluation. (Recommendation 3) We provided a draft of this report to HHS and DOJ for comment. HHS provided written comments, which are reprinted in appendix I. DOJ did not have comments. HHS and DOJ also provided technical comments, which we incorporated as appropriate. In commenting on this report, HHS agreed with our three recommendations. Specifically, in response to our first recommendation to provide required fraud-awareness training to all employees, HHS stated that it will develop and implement a fraud-awareness training plan to ensure all CMS employees receive training. Regarding our second recommendation to conduct fraud risk assessments for Medicare and Medicaid, HHS stated that it is currently conducting a fraud risk assessment on the federally facilitated marketplace and, when this assessment is complete, will apply the lessons learned in assessing this program to fraud risk assessments of Medicare and Medicaid. In response to our third recommendation to create, document, implement, and communicate an antifraud strategy that is aligned with and responsive to regularly assessed fraud risks, HHS stated that it will develop respective risk-based antifraud strategies after completing fraud risk assessments for Medicare and Medicaid. We are sending copies of this report to the Acting Secretary of Health and Human Services, the Administrator of CMS, the Assistant Attorney General for Administration at DOJ, as well as appropriate congressional committees and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix II. In addition to the contact named above, Tonita Gillich (Assistant Director), Irina Carnevale (Analyst-in-Charge), Michael Duane, Laura Sutton Elsberg, and Catrin Jones made key contributions to this report. Also contributing to the report were Lori Achman, James Ashley, Colin Fallon, Leslie V. Gordon, Maria McMullen, Sabrina Streagle, and Shana Wallace.", "summary": "CMS, an agency within the Department of Health and Human Services (HHS), provides health coverage for over 145 million Americans through its four principal programs, with annual outlays of about $1.1 trillion. GAO has designated the two largest programs, Medicare and Medicaid, as high risk partly due to their vulnerability to fraud, waste, and abuse. In fiscal year 2016, improper payment estimates for these programs totaled about $95 billion. GAO's Fraud Risk Framework and the subsequent enactment of the Fraud Reduction and Data Analytics Act of 2015 have called attention to the importance of federal agencies' antifraud efforts. This report examines (1) CMS's approach for managing fraud risks across its four principal programs, and (2) how CMS's efforts managing fraud risks in Medicare and Medicaid align with the Fraud Risk Framework. GAO reviewed laws and regulations and HHS and CMS documents, such as program-integrity manuals. It also interviewed CMS officials and a sample of CMS stakeholders, including state officials and contractors. GAO selected states based on fraud risk and other factors, such as geographic diversity. GAO selected contractors based on a mix of companies and geographic areas served. The approach that the Centers for Medicare & Medicaid Services (CMS) has taken for managing fraud risks across its four principal programs—Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and the health-insurance marketplaces—is incorporated into its broader program-integrity approach. According to CMS officials, this broader program-integrity approach can help the agency develop control activities to address multiple sources of improper payments, including fraud. As the figure below shows, CMS views fraud as part of a spectrum of actions that may result in improper payments. CMS's efforts managing fraud risks in Medicare and Medicaid partially align with GAO's 2015 A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework). This framework describes leading practices in four components: commit , assess , design and implement , and evaluate and adapt . CMS has shown commitment to combating fraud in part by establishing a dedicated entity—the Center for Program Integrity—to lead antifraud efforts. Furthermore, CMS is offering and requiring antifraud training for stakeholder groups such as providers, beneficiaries, and health-insurance plans. However, CMS does not require fraud-awareness training on a regular basis for employees, a practice that the framework identifies as a way agencies can help create a culture of integrity and compliance. Regarding the assess and design and implement components, CMS has taken steps to identify fraud risks, such as by designating specific provider types as high risk and developing associated control activities. However, it has not conducted a fraud risk assessment for Medicare or Medicaid, and has not designed and implemented a risk-based antifraud strategy. A fraud risk assessment allows managers to fully consider fraud risks to their programs, analyze their likelihood and impact, and prioritize risks. Managers can then design and implement a strategy with specific control activities to mitigate these fraud risks, as well as an appropriate evaluation approach consistent with the evaluate and adapt component. By developing a fraud risk assessment and using that assessment to create an antifraud strategy and evaluation approach, CMS could better ensure that it is addressing the full portfolio of risks and strategically targeting the most-significant fraud risks facing Medicare and Medicaid. GAO recommends that CMS (1) provide and require fraud-awareness training to its employees, (2) conduct fraud risk assessments, and (3) create an antifraud strategy for Medicare and Medicaid, including an approach for evaluation. HHS concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The design and development of information systems can be complex undertakings, consisting of a multitude of pieces of equipment and software products, and service providers. Each of the components of an information system may rely on one or more supply chains—that is, the set of organizations, people, activities, information, and resources that create and move a product or service from suppliers to an organization’s customers. Obtaining a full understanding of the sources of a given information system can also be extremely complex. According to the Software Engineering Institute, the identity of each product or service provider may not be visible to others in the supply chain. Typically, an acquirer, such as a federal agency, may only know about the participants to which it is directly connected in the supply chain. Further, the complexity of corporate structures, in which a parent company (or its subsidiaries) may own or control companies that conduct business under different names in multiple countries, presents additional challenges to fully understanding the sources of an information system. As a result, the acquirer may have little visibility into the supply chains of its suppliers. Federal procurement law and policies promote the acquisition of commercial products when they meet the government’s needs. Commercial providers of IT use a global supply chain to design, develop, manufacture, and distribute hardware and software products throughout the world. Consequently, the federal government relies heavily on IT equipment manufactured in foreign nations. Federal information and communications systems can include a multitude of IT equipment, products, and services, each of which may rely on one or more supply chains. These supply chains can be long, complex, and globally distributed and can consist of multiple tiers of outsourcing. As a result, agencies may have little visibility into, understanding of, or control over how the technology that they acquire is developed, integrated, and deployed, as well as the processes, procedures, and practices used to ensure the integrity, security, resilience, and quality of the products and services. Table 1 highlights possible manufacturing locations of typical components of a computer or information systems network. Moreover, many of the manufacturing inputs required for these components—whether physical materials or knowledge—are acquired from various sources around the globe. Figure 1 depicts the potential countries of origin of common suppliers of various components in a commercially available laptop computer. The Federal Information Security Modernization Act (FISMA) of 2014 requires federal agencies to develop, document, and implement an agency-wide information security program to provide information security for the information systems and information that support the operations and assets of the agency. The act also requires that agencies ensure that information security is addressed throughout the life cycle of each agency information system. FISMA assigns NIST the responsibility for providing standards and guidelines on information security to agencies. In addition, the act authorizes DHS to develop and issue binding operational directives to agencies, including directives that specify requirements for the mitigation of exigent risks to information systems. NIST has issued several special publications (SP) that provide guidelines to federal agencies on controls and activities relevant to managing supply chain risk. For example, NIST SP 800-39 provides an approach to organization-wide management of information security risk, which states that organizations should monitor risk on an ongoing basis as part of a comprehensive risk management program. NIST SP 800-53 (Revision 4) provides a catalogue of controls from which agencies are to select controls for their information systems. It also specifies several control activities that organizations could use to provide additional supply chain protections, such as conducting due diligence reviews of suppliers and developing acquisition policy, and implementing procedures that help protect against supply chain threats throughout the system development life cycle. NIST SP 800-161 provides guidance to federal agencies on identifying, assessing, selecting, and implementing risk management processes and mitigating controls throughout their organizations to help manage information and communications technology supply chain risks. In addition, as of June 2018, DHS has issued one binding operational directive related to an IT supply chain-related threat. Specifically, in September 2017, DHS issued a directive to all federal executive branch departments and agencies to remove and discontinue present and future use of Kaspersky-branded products on all federal information systems. In consultation with interagency partners, DHS determined that the risks presented by these products justified their removal. Beyond these guidelines and requirements, the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 also included provisions related to supply chain security. Specifically, Section 806 authorizes the Secretaries of Defense, the Army, the Navy, and the Air Force to exclude a contractor from specific types of procurements on the basis of a determination of significant supply chain risk to a covered system. Section 806 also establishes requirements for limiting disclosure of the basis of such procurement action. In several reports issued since 2012, we have pointed out that the reliance on complex, global IT supply chains introduces multiple risks to federal information and telecommunications systems. This includes the risk of these systems being manipulated or damaged by leading foreign cyber-threat nations such as Russia, China, Iran, and North Korea. Threats and vulnerabilities created by these cyber-threat nations, vendors or suppliers closely linked to cyber-threat nations, and other malicious actors can be sophisticated and difficult to detect and, thus, pose a significant risk to organizations and federal agencies. As we reported in March 2012, supply chain threats are present at various phases of a system’s development life cycle. Key threats that could create an unacceptable risk to federal agencies include the following. Installation of hardware or software containing malicious logic, which is hardware, firmware, or software that is intentionally included or inserted in a system for a harmful purpose. Malicious logic can cause significant damage by allowing attackers to take control of entire systems and, thereby, read, modify, or delete sensitive information; disrupt operations; launch attacks against other organizations’ systems; or destroy systems. Installation of counterfeit hardware or software, which is hardware or software containing non-genuine component parts or code. According to the Defense Department’s Information Assurance Technology Analysis Center, counterfeit IT threatens the integrity, trustworthiness, and reliability of information systems for several reasons, including the facts that (1) counterfeits are usually less reliable and, therefore, may fail more often and more quickly than genuine parts; and (2) counterfeiting presents an opportunity for the counterfeiter to insert malicious logic or backdoors into replicas or copies that would be far more difficult in more secure manufacturing facilities. Failure or disruption in the production or distribution of critical products. Both man-made (e.g., disruptions caused by labor, trade, or political disputes) and natural (e.g., earthquakes, fires, floods, or hurricanes) causes could decrease the availability of material needed to develop systems or disrupt the supply of IT products critical to the operations of federal agencies. Reliance on a malicious or unqualified service provider for the performance of technical services. By virtue of their position, contractors and other service providers may have access to federal data and systems. Service providers could attempt to use their access to obtain sensitive information, commit fraud, disrupt operations, or launch attacks against other computer systems and networks. Installation of hardware or software that contains unintentional vulnerabilities, such as defects in code that can be exploited. Cyber attackers may focus their efforts on, among other things, finding and exploiting existing defects in software code. Such defects are usually the result of unintentional coding errors or misconfigurations, and can facilitate attempts by attackers to gain unauthorized access to an agency’s information systems and data, or disrupt service. We noted in the March 2012 report that threat actors can introduce these threats into federal information systems by exploiting vulnerabilities that could exist at multiple points in the global supply chain. In addition, supply chain vulnerabilities can include weaknesses in agency acquisition or security procedures, controls, or implementation related to an information system. Examples of the types of vulnerabilities that could be exploited include acquisitions of IT products or parts from sources other than the original manufacturer or authorized reseller, such as independent distributors, brokers, or on the gray market; lack of adequate testing for software updates and patches; and incomplete information on IT suppliers. If a threat actor exploits an existing vulnerability, it could lead to the loss of the confidentiality, integrity, or availability of the system and associated information. This, in turn, can adversely affect an agency’s ability to carry out its mission. In March 2012, we reported that the four national security-related agencies (i.e., Defense, Justice, Energy, and DHS) had acknowledged the risks presented by supply chain vulnerabilities. However, the agencies varied in the extent to which they had addressed these risks by (1) defining supply chain protection measures for department information systems, (2) developing implementing procedures for these measures, and (3) establishing capabilities for monitoring compliance with, and the effectiveness of, such measures. Of the four agencies, the Department of Defense had made the most progress addressing the risks. Specifically, the department’s supply chain risk management efforts began in 2003 and included: a policy requiring supply chain risk to be addressed early and across a system’s entire life cycle and calling for an incremental implementation of supply chain risk management through a series of pilot projects; a requirement that every acquisition program submit and update a “program protection plan” that was to, among other things, help manage risks from supply chain exploits or design vulnerabilities; procedures for implementing supply chain protection measures, such as an implementation guide describing 32 specific measures for enhancing supply chain protection and procedures for program protection plans identifying ways in which programs should manage supply chain risk; and a monitoring mechanism to determine the status and effectiveness of supply chain protection pilot projects, as well as monitoring compliance with and effectiveness of program protection policies and procedures for several acquisition programs. Conversely, our report noted that the other three agencies had made limited progress in addressing supply chain risks for their information systems. For example: The Department of Justice had defined specific security measures for protecting against supply chain threats through the use of provisions in vendor contracts and agreements. Officials identified (1) a citizenship and residency requirement and (2) a national security risk questionnaire as two provisions that addressed supply chain risk. However, Justice had not developed procedures for ensuring the effective implementation of these protection measures or a mechanism for verifying compliance with, and the effectiveness of these measures. We stressed that, without such procedures, Justice would have limited assurance that its departmental information systems were being adequately protected against supply chain threats. In May 2011, the Department of Energy revised its information security program, which required Energy components to implement provisions based on NIST and Committee on National Security Systems guidance. However, the department was unable to provide details on implementation progress, milestones for completion, or how supply chain protection measures would be defined. Because it had not defined these measures or associated implementing procedures, we reported that the department was not in a position to monitor compliance or effectiveness. Although its information security guidance mentioned the NIST control related to supply chain protection, DHS had not defined the supply chain protection control activities that system owners should employ. The department’s information security policy manager stated that DHS was in the process of developing policy that would address supply chain protection, but did not provide details on when it would be completed. In the absence of such a policy, DHS was not in a position to develop implementation procedures or to monitor compliance or effectiveness. To assist Justice, Energy, and DHS in better addressing IT supply chain- related security risks for their departmental information systems, we made eight recommendations to these three agencies in our 2012 report. Specifically, we recommended that Energy and DHS: develop and document departmental policy that defines which security measures should be employed to protect against supply chain threats. We also recommended that Justice, Energy, and DHS: develop, document, and disseminate procedures to implement the supply chain protection security measures defined in departmental policy, and develop and implement a monitoring capability to verify compliance with, and assess the effectiveness of, supply chain protection measures. The three agencies generally agreed with our recommendations and, subsequently, implemented seven of the eight recommendations. Specifically, we verified that Justice and Energy had implemented each of the recommendations we made to them by 2016. We also confirmed that DHS had implemented two of the three recommendations we made to that agency by 2015. However, as of fiscal year 2016, DHS had not fully implemented our recommendation to develop and implement a monitoring capability to verify compliance with, and assess the effectiveness of, supply chain protections. Although the department had developed a policy and approach for monitoring supply chain risk management activities, it could not provide evidence that its components had actually implemented the policy. Thus, we were not able to close the recommendation as implemented. Nevertheless, the implementation of the seven recommendations and partial implementation of the eighth recommendation better positioned the three agencies to monitor and mitigate their IT supply chain risks. In addition, we reported in March 2012 that the four national security- related agencies had participated in interagency efforts to address supply chain security, including participation in the Comprehensive National Cybersecurity Initiative, development of technical and policy tools, and collaboration with the intelligence community. In support of the cybersecurity initiative, Defense and DHS jointly led an interagency initiative on supply chain risk management to address issues of globalization affecting the federal government’s IT. Also, DHS had developed a comprehensive portfolio of technical and policy-based product offerings for federal civilian departments and agencies, including technical assessment capabilities, acquisition support, and incident response capabilities. The efforts of the four agencies could benefit all federal agencies in addressing their IT supply chain risks. In summary, the global IT supply chain introduces a myriad of security risks to federal information systems that, if realized, could jeopardize the confidentiality, integrity, and availability of federal information systems. Thus, the potential exists for serious adverse impact on an agency’s operations, assets, and employees. These factors highlight the importance and urgency of federal agencies appropriately assessing, managing, and monitoring IT supply chain risk as part of their agencywide information security programs. Chairmen King and Perry, Ranking Members Rice and Correa, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to answer your questions. If you have any questions regarding this statement, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov. Other key contributors to this statement include Jeffrey Knott (assistant director), Christopher Businsky, Nancy Glover, and Rosanna Guerrero. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "IT systems are essential to the operations of the federal government. The supply chain—the set of organizations, people, activities, and resources that create and move a product from suppliers to end users—for IT systems is complex and global in scope. The exploitation of vulnerabilities in the IT supply chain is a continuing threat. Federal security guidelines provide for managing the risks to the supply chain. This testimony statement highlights information security risks associated with the supply chains used by federal agencies to procure IT systems. The statement also summarizes GAO's 2012 report that assessed the extent to which four national security-related agencies had addressed such risks. To develop this statement, GAO relied on its previous reports, as well as information provided by the national security-related agencies on their actions in response to GAO's previous recommendations. GAO also reviewed federal information security guidelines and directives. Reliance on a global supply chain introduces multiple risks to federal information systems. Supply chain threats are present during the various phases of an information system's development life cycle and could create an unacceptable risk to federal agencies. Information technology (IT) supply chain-related threats are varied and can include: installation of intentionally harmful hardware or software (i.e., containing “malicious logic”); installation of counterfeit hardware or software; failure or disruption in the production or distribution of critical products; reliance on malicious or unqualified service providers for the performance of technical services; and installation of hardware or software containing unintentional vulnerabilities, such as defective code. These threats can have a range of impacts, including allowing adversaries to take control of systems or decreasing the availability of materials needed to develop systems. These threats can be introduced by exploiting vulnerabilities that could exist at multiple points in the supply chain. Examples of such vulnerabilities include the acquisition of products or parts from unauthorized distributors; inadequate testing of software updates and patches; and incomplete information on IT suppliers. Malicious actors could exploit these vulnerabilities, leading to the loss of the confidentiality, integrity, or availability of federal systems and the information they contain. GAO reported in 2012 that the four national security-related agencies in its review—the Departments of Defense, Justice, Energy, Homeland Security (DHS)—varied in the extent to which they had addressed supply chain risks. Of the four agencies, Defense had made the most progress addressing the risks. It had defined and implemented supply chain protection controls, and initiated efforts to monitor the effectiveness of the controls. Conversely, Energy and DHS had not developed or documented policies and procedures that defined security measures for protecting against IT supply chain threats and had not developed capabilities for monitoring the implementation and effectiveness of the measures. Although Justice had defined supply chain protection measures, it also had not developed or documented procedures for implementing or monitoring the measures. Energy and Justice fully implemented the recommendations that GAO made in its 2012 report and resolved the deficiencies that GAO had identified with their supply chain risk management efforts by 2016. DHS also fully implemented two recommendations to document policies and procedures for defining and implementing security measures to protect against supply chain threats by 2015, but could not demonstrate that it had fully implemented the recommendation to develop and implement a monitoring capability to assess the effectiveness of the security measures. In its 2012 report, GAO recommended that Justice, Energy, and DHS take eight actions, as needed, to develop and document policies, procedures, and monitoring capabilities that address IT supply chain risk. The departments generally concurred with the recommendations and subsequently implemented seven recommendations and partially implemented the eighth recommendation.", "document_type": "gao"}
{"report": "In 2016, commercial trucks transported about 70 percent of all U.S. freight, and over 250,000 heavy trucks were sold in the same year. These trucks operate within a diverse industry that can be distinguished in several ways: Long-haul vs. local-haul. Long-haul trucking operations are so named because the drivers frequently drive hundreds of miles for a single route and can be on the road for days or weeks at a time. For these operations, freight is usually shipped from a single customer and may fill an entire trailer by either space or weight. Long-haul trucking also includes “less-than-truckload” freight shipments, or freight combined from multiple customers. In comparison, local-haul trucking operations may involve delivering packages and shipments between a customer and a freight company’s drop-off point, where they are combined with other shipments in preparation to move them over longer distances. This type of operation also includes local cement trucks, as well as moving shipping containers at ports and moving freight a short distance from a train that has transported it long-distance to near its destination. For-hire vs. private (in-house). Different types of companies—or carriers—engage in long-haul and local trucking and are known either as “for-hire” (those that transport goods for others) or “private” (those that transport their own goods in their own trucks). For instance, J.B. Hunt is a for-hire carrier that transports goods for clients, while Walmart is a private carrier that uses its in-house fleet of trucks to transport its own goods between its distribution centers and its stores. Carrier size. In addition, carriers vary in size, with fleets ranging from one truck to tens of thousands of trucks. For example, a person might own and drive one for-hire truck; these are known as “owner- operators.” By contrast, the largest for-hire trucking companies in the country can have fleets of over 20,000 tractors and even more trailers. Operating costs. Driver compensation represents either the largest or second-largest cost component for truck carriers, depending on the price of fuel; each typically accounts for about one-third of total operating costs. Other operating costs include purchasing truck tractors and trailers, as well as repair and maintenance of the trucks and trailers, and insurance. BLS data indicate that in 2017, the United States had nearly 1.9 million truck drivers categorized as “heavy and tractor-trailer truck drivers,” who operate trucks over 26,000 pounds. This category includes many different kinds of drivers, including long-haul and local-haul, along with cement or garbage truck drivers and drivers of specialty loads, such as trucks transporting cars, logs, or livestock. The number of heavy and tractor-trailer truck drivers has increased over the last 5 years, from fewer than 1.6 million in 2012, and is projected to increase to about 2 million drivers by 2026. The trucking industry has also had high annual driver turnover, according to industry reports—approaching 100 percent for large, truckload carriers, though it can be less for small, truckload carriers. This turnover includes drivers who move to other carriers and others who leave the field altogether or retire. Some companies that experience lower turnover rates are able to provide drivers with predictable schedules and coordinate around the various obligations the drivers may have. Firms must balance the costs of scheduling drivers to return home more frequently with the costs of high turnover rates. Industry reports have noted that companies find it difficult to hire and retain sufficient numbers of long-haul drivers, even with wages reportedly rising for many drivers. Heavy and tractor-trailer truck drivers make more on average—$44,500 in 2017—than other types of drivers, according to BLS data. Many drivers, including most drivers working in long-haul trucking, are compensated on a per-mile basis rather than a per-hour basis. The per-mile rate varies from employer to employer and may depend on the type of cargo and the experience of the driver. Some long-haul truck drivers are paid a share of the revenue from shipping. In order to operate certain commercial vehicles, including heavy trucks and tractor-trailers, drivers must obtain a state-issued commercial driver’s license (CDL). DOT administers the federal CDL program through the Federal Motor Carrier Safety Administration by setting federal standards for knowledge and driving skills tests, among other requirements. CDL applicants must have a state motor vehicle driver’s license and must be at least 21 years old to operate in interstate commerce. Prior to receiving a CDL, applicants must first pass the knowledge test and meet other federal requirements, after which they are eligible to pursue a commercial learner’s permit. After receiving the learner’s permit, applicants must wait at least 14 days before taking the skills test. During this period, applicants may train on their own with a CDL holder, with a truck driver training school—a private school or public program run through a community college, for example—or with a motor carrier to prepare for the skills test. Applicants must pass all three parts of the skills test—pre- trip inspection, basic control skills, and an on-the-road driving test—in the type of vehicle they intend to operate with their license. Apart from the CDL requirements, some truck driving jobs (such as those that involve handling hazardous materials) require additional endorsements, and some employers require on-the-job training. DOL and other federal agencies administer programs that can be used to provide training for truck drivers. For example, DOL administers federal employment and training programs, such as those funded through the Workforce Innovation and Opportunity Act (WIOA), which provide training dollars that can be used by prospective truck drivers, among others. Likewise, the Department of Education provides federal student aid funds that can be used at eligible accredited trucking schools, and DOT and the Department of Veterans Affairs both operate programs that can assist veterans interested in becoming truck drivers. Federal regulation of trucking is focused primarily on interstate trucking activity; states can have separate regulations related to intrastate motor carriers. DOT is the lead federal agency responsible for overall vehicle safety, including commercial truck safety. The agency also regulates other aspects of commercial trucking, such as the maximum number of hours truck drivers are allowed to drive. For example, under current hours of service regulations, a truck driver may drive a maximum of 11 total hours within a 14-hour window after coming on duty. In addition, DOT regulates CDL standards and the maximum weight of trucks allowed on the Interstate Highway System, among other things. Until recently, DOT’s National Highway Traffic Safety Administration led automated vehicles policy with a focus on passenger vehicles. However, DOT’s October 2018 federal automated vehicles policy was developed by the Office of the Secretary of Transportation and includes several different modes of transportation, including automated commercial trucks. Automated vehicles can perform certain driving tasks without human input. They encompass diverse automated technologies ranging from relatively simple driver assistance systems to self-driving vehicles. Certain automated features, like adaptive cruise control, can adjust vehicle speed in relation to other objects on the road and are currently available on various truck models. DOT has adopted a framework for automated driving developed by the Society of Automotive Engineers International, which categorizes driving automation into 6 levels (see fig. 1). Commercial trucks with Level 0 and 1 technologies, as outlined in figure 1, are already available for private ownership and are currently used on public roadways. Level 0 encompasses conventional trucks where a human driver controls all aspects of driving and technologies can warn drivers of safety hazards, such as lane departure warning, but do not take control away from the driver and are not considered automated. Level 1 technologies incorporate automatic control over one major driving function, such as steering or speed, and examples include adaptive cruise control and automatic emergency braking. The Society of Automotive Engineers International categorizes vehicles with Level 3, 4, and 5 technologies as Automated Driving Systems. At Level 3, the system can take full control of the vehicle in certain conditions. However, a human driver must maintain situational awareness at all times to ensure the vehicle is functioning safely. At Level 4, automation controls all aspects of driving in certain driving conditions and environments, such as on highways in good weather. In these particular driving conditions and environments, a human driver would not be required to take over the driving task from the automated vehicle and the system would ensure the vehicle is functioning safely. At Level 5, the vehicle can operate fully, in any condition or environment, without a human driver or occupant. There are various automated vehicle technologies that could help guide a vehicle capable of driving itself, including cameras and other sensors (see fig. 2). According to stakeholders we spoke with and literature we reviewed, automated trucks, including self-driving trucks, are being developed, generally for long-haul trucking. Specifically, we found there could be various types of automation for long-haul trucks, including platooning, self-driving for part of a route, and self-driving for an entire route. Platooning. Technology developers and researchers told us there is ongoing development and testing of truck platoons, which involve one or more trucks following closely behind a lead truck, linked by wireless—or vehicle-to-vehicle—communication (see fig. 3). In a platoon, the driver in the lead truck controls the braking and acceleration for all of the connected trucks in the platoon, while the driver in each following truck controls its own steering. Several stakeholders we interviewed and three studies we reviewed identified potential benefits from platooning, including fuel savings and increased safety, for example, due to the trucks’ faster reaction times for braking. Self-driving for part of a route. Most of the technology developers we spoke with said they were developing automated trucks that will be self-driving for part of a long-haul route, such as exit-to-exit on highways (see fig. 4). Representatives from one developer explained that their truck uses self- driving software installed on the truck. The software instructs the truck what to do, such as to steer or brake. In addition, cameras and other sensors on the truck’s exterior provide the self-driving software with a view of the truck’s surroundings to inform the software’s instructions. For example, Light Detection and Ranging (LIDAR) sensors use lasers to map a truck’s surroundings (see fig. 5). Such trucks would operate with no driver intervention under favorable conditions, such as on highways in good weather. Two developers said that in their business models a driver would be in the truck for the first and last portions of the route to assist with picking up and dropping off trailers at hubs outside urban areas. Alternatively, one developer said a remote driver—one not in the truck but operating controls from another location—would drive the first and last portions of a route. Stakeholders identified potential benefits of self-driving for part of a route, such as increased safety, labor cost savings, and addressing what they said is a truck driver shortage. Research funded by industry also suggests that an automated truck could improve productivity by, for example, continuing to drive to a destination while a human in the truck conducts other work or rests. In addition, one study noted that the most likely scenario for widespread adoption of automated trucks is the one in which trucks are capable of self-driving from exit-to-exit. Self-driving for an entire route. None of the technology developers we interviewed told us they are planning to develop automated trucks that are self-driving for an entire route (see fig. 6). Such trucks would be able to drive under all weather and environmental conditions. A person would not be expected to operate these trucks at any time. The potential benefits of these kinds of trucks are similar to those of trucks that are self-driving for part of a route, with higher potential labor savings because a person would not need to drive the first and last portions of a route. Stakeholders we spoke with generally indicated that it will be years to decades before the widespread deployment of automated commercial trucks (see text box). However, many stakeholders also noted the uncertainty of predicting a specific timeframe for particular technologies. Platooning. Many stakeholders said that platooning will likely deploy within the next 5 years and will be the first automated trucking technology to be widely available. Notably, one company that is developing platooning technology said it could begin deployment in 2019. In addition, DOT officials told us that truck platoons are currently being tested, but that it would be difficult to estimate when there might be widespread adoption of platooning technology. Self-driving for part of a route. Automated trucks that are self- driving for part of a route may become available for commercial use within the next 5 to 10 years, according to several stakeholders, including technology developers. While such trucks may begin appearing on roads in that timeframe, other stakeholders, including two researchers, said widespread deployment may take more than 10 years. DOT officials noted that multiple variables make it difficult to develop a precise estimate for the deployment and widespread adoption of trucks that are self-driving for part of a route. Self-driving for an entire route. Although none of the technology developers told us they are developing trucks that would be self- driving for an entire route, other stakeholders we spoke with said such trucks could become available in more than a decade. However, most stakeholders either did not provide a timeframe for, or said they did not know, when such trucks might become available. Similarly, at a listening session in August 2018, DOT officials told attendees that it will be decades before large trucking operations replace their fleets of conventional trucks with trucks that self-drive for an entire route. One Stakeholder’s Description of Anticipated Timeframes for Overall Automated Truck Adoption One researcher described an anticipated timeframe for automated truck adoption in which there is an initial, long period of development and testing, which would include making technological adjustments. This period would then be followed by a period of automated truck adoption—i.e., when such trucks replace human drivers. At that point, technology developers and truck manufacturers would also encounter scenarios in which it may not be desirable to use an automated truck, such as for the transport of hazardous materials, according to the researcher. Such scenarios would limit the extent to which automated trucks could replace human drivers. Stakeholders we interviewed and the literature we examined identified technological, operational, infrastructure, legal, and other factors that may affect automated truck development and deployment. Stakeholders and literature identified several technology-related limitations that may affect the timing of automated truck deployment. Specifically, several stakeholders and a study noted that automated trucks may require simpler operating environments, such as highways, in the near term because they are less complex for the technology to navigate than roads in an urban setting, for example. Even so, a highway presents its own challenges, several stakeholders said. For instance, a developer, a manufacturer, and a researcher we spoke with told us that Light Detection and Ranging (LIDAR)—a costly and complex technology—may not be as useful at higher speeds due to its limited range and its inability to process information about the surrounding environment as quickly as needed at these speeds. Further, one manufacturer told us that LIDAR is not as durable as it needs to be for commercial trucking—for example, able to withstand dirt and debris. Stakeholders also discussed the need to have backup systems built into trucks’ automated systems in case of technology failures, including the ability to guide the truck to a safe stop. Stakeholders identified several operational factors that may pose challenges for the deployment of automated trucks. For example, several stakeholders said that there may be challenges with self-driving trucks with no person inside when responding to a tire blowout or other mechanical problems. Likewise, several stakeholders said there must be ways for a self-driving truck to respond to required safety inspections and communicate with inspectors. Representatives from a safety organization noted that a truck could potentially communicate a unique identification number through an electronic device. This number would give the inspector information about the truck, such as safety information from the sensors on automated trucks. Additionally, several stakeholders said platooning may not be practical for logistical reasons, for instance, if trucks are not traveling on the same routes or if cargo is not ready to depart at the same time. In addition, according to stakeholders we spoke with and literature we reviewed, the lead truck in a platoon will save less on fuel than the following trucks. If trucking fleets adopt platooning systems that work on commercial trucks across different companies—i.e., systems that are interoperable—distributing fuel savings in a manner agreeable to all parties involved may be challenging. Representatives from two fleet owners and one industry association we spoke with raised concerns about platooning across different companies, including that companies might not partner with other fleets to platoon trucks because they would be primarily concerned with their own fuel savings, not with saving fuel for their competitors. In addition to these operational factors, stakeholders noted that automated trucks may be prohibitively expensive for some smaller fleet owners, including owner-operators, particularly when these trucks are first deployed. Several stakeholders and relevant literature noted that certain infrastructure factors may affect the development, testing, and deployment of automated trucks. For example, a few stakeholders said if one truck picks up or drops off trailers for another truck at a location near highways, land acquisition near these highways may be an issue. Representatives from a developer that planned to acquire land for its business model said the land acquisition could take 5 to 10 years. The representatives explained that they found enabling direct access to freeways is more difficult than simply acquiring vacant land. They planned to partner with states to create hubs on under-utilized land with existing freeway access by, for example, repurposing abandoned rest stops. In addition to land acquisition, two technology developers and a study identified the need for widely available data connectivity and the related ability to use connected vehicle technologies as an infrastructure challenge. Connected technologies allow vehicles to communicate with other vehicles (vehicle-to-vehicle), roadway infrastructure (vehicle-to- infrastructure), and personal communication devices. Connectivity has potential implications for, among other things, the maps self-driving trucks use to navigate routes and obstacles, as well as the ability for trucks in a platoon to communicate with one another effectively. However, because the ability for vehicles to communicate with infrastructure is not ubiquitous, two of the developers we spoke with are not taking into account connected infrastructure as they develop and test their automated trucks. Two stakeholders also expressed concern about platooning trucks and the stress they could place on bridges, for example, that were not designed to hold the weight of two or more heavy trucks at once. In addition, stakeholders noted that automated trucks may encounter difficulties with things like road work or construction zones. This may be because the truck relies on pre-built maps, in addition to sensors, that would potentially be outdated or might not reflect current road conditions, including any recent or temporary changes. Several legal factors may affect the timing of development, testing, and deployment for automated trucks, according to our stakeholder interviews and literature review. Many stakeholders expressed concern about the possibility of a “patchwork” of state laws related to automated trucks that could affect interstate trucking, with some saying they would like to see a shared national framework. For example, one technology developer said that this emerging patchwork can make it difficult for an automated truck to travel across the country without a driver, because some states specifically prohibit self-driving vehicles, including trucks. However, this same developer said that some states are less restrictive regarding the need for a driver in a self-driving truck, and that others have ambiguous regulations. Several stakeholders we spoke with and two studies we reviewed noted that liability issues may arise and become more complex for automated trucks. This may be because, for example, more parties may become involved. One of these stakeholders—a fleet owner—said that these parties could include the software developer, the truck manufacturer, the owner of the truck, and, if applicable, the truck driver. These issues could be addressed under the current liability system, and courts would decide the various liability issues on a case-by-case basis. In addition, several stakeholders have requested that DOT clarify whether existing regulations require that human drivers always be present in automated trucks, particularly those capable of Level 4 and 5 driving automation, in which at least some of the driving is done by the automated truck. Two technology developers have requested that DOT confirm that regulations that apply to human drivers do not apply to automated trucks, and one of these developers also requested confirmation that a truck capable of at least Level 4 automation is allowed to operate without a human on board, which could permit testing without a person in the truck. In Preparing for the Future of Transportation: Automated Vehicles 3.0, DOT’s automated vehicles voluntary guidance, the agency laid out its approach to its automated vehicles policy. DOT’s guidance stated that, going forward, DOT will interpret and, consistent with all applicable notice and comment requirements, adapt the definitions of “driver” and “operator” to recognize that such terms do not refer exclusively to a human, but may include an automated system. In the same guidance document, DOT also noted that regulations will no longer assume that the driver of a commercial truck is always human or that a human is necessarily present inside of a truck during its operation. A few stakeholders also said that DOT may have to clarify the hours of service rules if a human driver is in an automated truck that is self-driving for part or all of a route. This is because under current hours of service regulations, a human driver may drive a maximum of 11 total hours within a 14-hour window after coming on duty. However, if a truck self-drives for at least part of a route, it is unclear if a human driver would need to comply with the existing hours of service requirements and, if not, how the driver would account for worked time. For example, if the human driver is not actively engaged in the driving task, whether monitoring the automated driving system or even sleeping, there could be a question about whether that time would be counted toward “driving,” according to the requirements. For a list of potential legal factors identified by stakeholders or in literature that may affect timing for the development and deployment of automated commercial trucks, and related DOT information, see appendix II. Stakeholders and relevant literature identified several other factors, such as public perception and cybersecurity, that could affect timing for the development and deployment of automated trucks. Several stakeholders we interviewed and a study we reviewed noted that public acceptance concerning the safety of platooning and self-driving trucks may pose a challenge to the deployment of these trucks. One researcher we spoke with said interactions between truck platoons and cars may be problematic, because drivers may need to speed in order to change lanes around the platoons of trucks following each other closely. Similarly, other stakeholders told us that it may be difficult for the public to accept large automated commercial trucks. Two of these stakeholders said this is particularly true for a heavy truck without a human driver on board— implying that vehicle size and weight play roles in the public’s acceptance of these types of automated vehicles. Several stakeholders also expressed concerns about cybersecurity and automated trucks’ reliance on wireless communication and self-driving software. They said connectivity could leave automated trucks vulnerable to cyberattacks. Predicting workforce changes in light of future automated trucking is inherently challenging, as it is based on uncertainties about how the trucking industry will respond to new technologies that face operational, regulatory, and other factors that could affect deployment. Many of the stakeholders we interviewed declined to predict various possible workforce effects, because they said to do so was too speculative. However, stakeholders we spoke with and literature we reviewed presented two main scenarios for the future trucking workforce: one in which trucks would be self-driving for part of a route, without a driver or operator, and the other in which trucks would require a driver or operator in the truck for the entire route. An operator would monitor truck operations and may not always function as a traditional driver. Because most stakeholders agreed that the prospect of using fully self-driving trucks for an entire route is either unlikely or at least several decades into the future—and no developer we spoke with was planning to develop a fully self-driving truck—we do not discuss the workforce effects of that scenario in this report. Technology developers we spoke with generally envisioned trucks that are self-driving for part of a route, which they said would potentially lead to significant workforce changes. Several technology developers and researchers, along with two studies, said trucks that are self-driving for part of a route could decrease the number of long-haul drivers, and perhaps decrease wages and affect retention as well. Additionally, any displaced drivers may need new skills if they change jobs, according to several stakeholders we spoke with and studies we reviewed. Employment levels: Technology developers we interviewed generally predicted the number of long-haul jobs would decrease with the adoption of trucks that are self-driving for part of a route. Drivers constitute a significant operational cost, so part of the reported economic rationale for self-driving trucks is to employ fewer drivers, allowing companies to transport the same amount of freight—or more—at lower labor costs. Several studies have analyzed the potential number of driving jobs that might be eliminated in this scenario, but the studies specifically noted the speculative, long-term nature of those estimates and the inability to identify the number of current long-haul truck drivers whose jobs could be lost sometime in the future. Estimates in the studies we reviewed ranged from under 300,000 driver jobs lost to over 900,000 jobs lost—out of a total of nearly 1.9 million heavy and tractor-trailer truck driver jobs, according to BLS data—and in each case over periods of 10 to 20 years or more. Although long-haul jobs would decrease in this scenario, local-haul jobs could increase and offset those losses, according to a study and several stakeholders, including two technology developers. The study, for example, said that automated trucking would drive long-haul trucking costs down, leading more companies to use trucking to ship goods. As a result, demand for trucking could increase, leading to an increased demand for local-haul truck drivers on either end of the long-haul routes, two studies noted. Several stakeholders we spoke with agreed that any decrease in long- haul jobs would likely not affect many current drivers because most will have voluntarily left driving for a different job or retired by the time self-driving trucks are widely deployed. According to the Census Bureau’s American Community Survey data, the average age of truck and sales delivery drivers from 2012 through 2016 was 46. Many stakeholders also said that trucking fleets are currently having difficulty hiring and retaining qualified drivers, and two technology developers said automation could help move goods in an environment in which it is difficult to find workers. Technology developers also told us they are focusing the initial development of automated trucking technology in the southwest United States because of its good weather and long highways. As a result, any future job losses could first occur there. Additionally, BLS data show that the estimated concentration of truck driving jobs varies in different areas of the country (see fig. 7). One study noted that trucking job losses in more regionally concentrated occupations are likely to pose more challenges for workers, because more workers with similar skills in the same labor markets will be out of work at the same time, and thus the whole local economy will be more likely to suffer. Wages: If the truck is self-driving for parts of a route, wages for long- haul drivers could decrease because there would be lower demand for—or greater supply of—such drivers, according to several stakeholders. Moreover, one study noted that average long-haul wages could decrease because the jobs most likely to be automated include those that tend to be unionized and have higher wages and benefits, such as jobs at parcel delivery companies and some private carriers. Similarly, drivers changing occupations might face significant wage reductions in new occupations that do not require retraining, according to a researcher and one study. Wages for local-haul drivers—generally lower than for long-haul drivers—could decrease as well, because transitioning long-haul drivers could increase competition for those jobs, according to two studies. One technology developer presented a different perspective, saying that wages for local-haul drivers could increase from current levels due to increased overall demand for trucking. Retention: Overall, retention of truck drivers could improve if the long-haul portion of the route becomes self-driving, lessening time drivers spend away from home—a key reason long-haul drivers leave the profession, according to many stakeholders. However, retention may depend on several factors, including wages, time at home, and other working conditions, making it more difficult to predict self-driving trucks’ effect on retention. Skills: Long-haul drivers have skills that would transfer to local-haul routes, so additional training may not be needed for those who move to local-haul routes. However, displaced long-haul drivers seeking to move to a different occupation or industry may need additional training, according to several stakeholders and two studies. From 2012-2016, the highest level of education attainment for almost 65 percent of truck and sales delivery drivers was high school or its equivalent. Most officials from truck driver training schools, organizations representing truck drivers, and workforce development boards envisioned automated trucks as continuing to need either a driver or some kind of operator in the truck, with several noting that drivers may need to do non- driving tasks. Automated trucking with an operator in the truck would have a more limited effect on the numbers of truck drivers, but would still result in workforce changes, according to several stakeholders. As with the driverless scenario, many stakeholders said future developments were so uncertain that they could not predict how automated trucking would affect various aspects of the workforce, such as wages or retention. Employment levels: Under this scenario, automated trucking would have a more limited effect on employment levels. Several stakeholders noted, for example, that a person would still be needed in the truck to manage emergencies, repair flat tires, and secure cargo, among other duties. (See text box.) For example, one study noted that even for trucking jobs identified as the most likely to be automated, driving may represent only about half of drivers’ total work time. Additionally, particular kinds of long-haul trucking may present different non-driving tasks that could make automating those driving jobs more difficult. Wages: If the truck has an operator, several stakeholders said that wages might increase if increased skills are needed to operate more sophisticated equipment. However, several other stakeholders said wages might not change significantly or could decrease with fewer driving tasks. Two studies noted that wage changes were difficult to predict and could be affected by specific policy interventions. Truck Drivers: Responsible for More than Just Driving Truck drivers have many responsibilities other than driving a truck. Non-driving tasks for heavy and tractor-trailer truck drivers can include: checking vehicles to ensure that mechanical, safety, and emergency equipment is in good working order; loading or unloading trucks, including checking contents for any damage; inspecting loads to ensure that cargo is secure; and performing basic vehicle maintenance tasks, such as adding fuel or radiator fluid; performing minor repairs; or removing debris from loaded trailers. Retention: Many stakeholders said new technology could help the trucking industry bring in and retain more people—such as women and younger workers—if it could, for example, make truck driving safer, less stressful, and less physically demanding. Others cautioned that automated technology may not decrease truck operators’ time away from home, because they would still have to be in the truck for the entirety of long-haul routes. One stakeholder, who was also a truck driver, said that many truck drivers enjoy driving, so automating aspects of that task would not necessarily entice those drivers to stay in the job. Two other stakeholders noted that some drivers may not want to learn how the new technology works and could leave the field rather than drive automated trucks. Skills: Future truck operators may need new skills to work with automated technology that assists rather than replaces them, many stakeholders noted. For example, operators may need to adapt to technology that takes over a number of the standard driving functions, such as braking, staying in a designated lane, and keeping a safe distance from other vehicles. Operators may also need to understand how to monitor software and hardware used to automate the driving function and how to make appropriate use of advanced safety systems. Furthermore, officials from many truck driver training schools and workforce development boards said additional certification beyond the standard CDL may be needed in order to demonstrate an understanding of how to operate the technology in automated trucks. In some instances, the skills needed may vary across trucking companies and trucks, requiring further on-the-job training. Regardless of their vision for how automated trucking might materialize, many stakeholders said there could be new trucking-related occupations, such as specialized technicians, mechanics, and engineers, which will accompany the deployment of automated trucks. For example, one study noted that these jobs could include producing the technology used by automated trucks, in addition to jobs created as a result of potential greater spending on other consumer goods and services, in the event that automated trucking decreases overall industry transportation costs. Another study noted that autonomous trucks, e-commerce, and economic growth are together poised to create many new trucking jobs. However, new jobs may be located in different geographical areas than any jobs lost, and as noted above, may require different skills than the prior jobs. One study noted this development could potentially leave lower-skilled workers competing for jobs that pay little and have few opportunities for advancement. While many stakeholders we spoke with and several studies we reviewed stated that the potential workforce effects of automated trucking were difficult to predict, they generally agreed that any effect would not occur for at least 5 to 10 years. Several stakeholders and two studies said this time horizon provides an opportunity for federal agencies and workers to prepare for potential workforce changes. One of these studies noted that trucking policy is complex; any changes could take a long time to fully materialize. That same study suggested that now is the appropriate time for policy research and debate. The other study and several stakeholders stated that potential workforce effects are not set in stone, and that public policy could influence specific workforce outcomes. That study said that with advance planning, the federal government and other stakeholders could realize the possible benefits of automated trucks and other vehicles while mitigating potential workforce effects and other costs. DOT and DOL have both taken some steps to prepare for the potential workforce effects of automated trucking. DOT has held events to obtain stakeholder perspectives on automated vehicles policy, including how it affects commercial long-haul trucks. For example, DOT had public listening sessions in 2017 and 2018 to solicit information on the design, development, testing, and integration of Automated Driving Systems, and requests for comment to inform potential rulemaking efforts for the Federal Motor Carrier Safety Regulations. DOT officials said their role during these discussions was to hear stakeholder concerns. They also said that their ongoing goal is to identify barriers in their regulations to safe deployment of automated driving technology. Stakeholders have raised concerns about the potential workforce effects of automated trucks at DOT’s listening sessions. For example, after participants questioned potential job losses at a listening session in August 2018, DOT officials said that automation may eventually change the role of a truck driver from driver to technician and that any changes would probably not be immediate. DOL officials said they have participated in some of DOT’s listening sessions. For its part, DOL has taken steps to study how automated trucking may affect the near-term demand for truck drivers as part of their standard, biennial employment projections for all occupations. DOL officials said they consulted experts and economic studies prior to publishing their most recent projections, covering 2016 to 2026, and included information on possible effects of automation in projections for heavy and tractor- trailer truck drivers. The projections state that the demand for these drivers is expected to grow by 5.8 percent between 2016 and 2026, with an average of over 200,000 job openings each year, of which 10,000 are projected to be new jobs. DOL’s analysis anticipated that automation will not reduce the number of drivers by 2026. DOL officials said that they expect automation to assist drivers rather than displace them in the near term. Unlike estimates developed by other researchers, these numbers do not include potential job losses after 2026, though DOL officials noted that the agency’s next projections, for 2018 to 2028, will incorporate information on how automated trucking technology has evolved since the 2016-2026 projections. Additionally, officials said the agency is transitioning to annual updates of projections to more quickly incorporate developing information. Congress has directed DOT to consult with DOL to study the workforce impacts of automated trucking technology. Specifically, the Explanatory Statement accompanying the Consolidated Appropriations Act, 2018 instructs the Secretary of Transportation to consult with the Secretary of Labor to conduct a comprehensive analysis of the effect of advanced driver-assistance systems and highly automated vehicle technology on drivers and operators of commercial vehicles, including commercial trucks. Congress directed DOT to include stakeholder outreach in its analysis and provide information on workers who may be displaced as a result of such technology, as well as minimum and recommended training requirements for operating vehicles with these systems. DOL officials told us that they have begun collaborating with DOT on this study by consulting with organized labor and other stakeholders. In October 2018, DOT issued a request for information to solicit comments on the scope of this analysis and detailed several potential research questions, including which commercial drivers are likely to be affected and what skills might be needed to operate new vehicles or transition to new jobs. DOT also announced that it is planning to coordinate with the Departments of Commerce and Health and Human Services, in addition to consulting with DOL to conduct this analysis. The Explanatory Statement directs DOT to conduct this analysis by March 23, 2019, and DOT officials told us they expect to meet this deadline and report on the analysis by that date. DOL and DOT have taken some steps to convene stakeholders to inform DOT’s analysis of automated trucking in advance of March 2019. However, DOL and DOT have not made plans to continue collaborating to convene key groups of stakeholders as the technology evolves to gather information about potential workforce effects of automated trucking. Insofar as automated trucking technology is still evolving, convening stakeholders solely to inform the March 2019 analysis will not provide agency officials with sufficient information about important developments that may occur after the analysis is completed. This analysis will be an important step. However, DOT must complete it before potential workforce effects can be more fully predicted. After its completion, developers will likely continue to test their technologies, and issues related to operational and other factors that will affect the deployment of automated trucks may change or be resolved. For the agencies to more fully understand these developments and clarify the range of associated workforce effects, they would need to collaborate and to continue to gather information in the future, for example by continuing to convene key groups of stakeholders as the technology evolves. The majority of stakeholders we spoke with, including representatives from local workforce development boards, truck driver training schools, technology developers, and groups representing truck drivers, told us it would be helpful for federal agencies to play a convening role so that DOL and DOT can better anticipate and understand any potential workforce changes. Several stakeholders also said that convening stakeholders would enable DOL and DOT to surface different parties’ concerns. Additionally, our recent report on emerging technologies found that federal agencies can play an important role in convening stakeholders to gather information in areas where technology is still under development, including information on the research plans of industry stakeholders and ways to address national needs. Continuing to convene stakeholders could also help agencies to identify any information or data gaps that may need to be addressed to understand the potential workforce effects of automated trucking. DOL officials said that because the technology is still advancing, the related workforce effects, including the magnitude of any job losses, are uncertain. They also said they do not have information to identify the number of long-haul truck drivers, whose jobs may be the most likely to be affected by automation. Specifically, the occupational code DOL uses to classify heavy and tractor-trailer truck drivers captures drivers who operate any type of heavy truck. Along with long-haul drivers, this code includes other drivers whose jobs may be harder to automate, such as tow truck operators. Experts who participated in the National Science Foundation-sponsored workshop on the potential workforce effects of automated trucking also identified information gaps. They noted that more information is needed in several areas, including a better understanding of current truck drivers’ skills beyond driving, how those skills might translate to other occupational areas, and new jobs and skills that will be required with the deployment of automated trucks. DOL officials said that the agency provides information on knowledge, skills, and abilities for various driver occupations, as well as detailed work activities, on its Occupational Information Network (O*NET). However, that information is based on surveys to current workers and therefore does not include what skills future drivers may need as automated technology evolves. DOL officials told us they do not typically convene stakeholders on an industry-specific basis. They also said that state and local workforce development boards are best positioned to identify and respond to changes in their local economy and employment needs, because these boards include members from the local business community who know which industries are growing in their local labor markets. However, there are close to 1.9 million heavy and tractor-trailer truck drivers across the country, making the trucking industry an important segment of the national workforce. In addition, one of DOL’s objectives in its fiscal year 2018-2022 strategic plan is to provide timely, accurate, and relevant information on labor market activity, working conditions, and price changes. While DOL officials said they consider the agency’s national labor statistics as the primary tool in understanding macroeconomic changes, they acknowledged that gathering information from local boards and other stakeholders may complement those statistics. DOL officials said they may consider continuing to convene stakeholders to learn more about automated trucking if they find that their current efforts with DOT provide fruitful information, but they currently do not have plans to do so. If DOL waits until the effects of automated trucking on the workforce are widespread enough to affect multiple local economies, the agency will have missed the opportunity to proactively gather information that could help it anticipate large-scale workforce changes in this important industry before they take effect. DOT officials told us they have likewise not made plans to work with DOL to convene stakeholders on an ongoing basis to gather information. Rather, they said they have concentrated on developing the analysis described by the Explanatory Statement accompanying the Consolidated Appropriations Act, 2018 and they do not plan to update that analysis after it is completed. Nonetheless, one of the objectives outlined by DOT in its fiscal year 2018-2022 strategic plan is to promote economic competitiveness by supporting the development of appropriately skilled transportation workers (including truck drivers who transport freight) and strategies to meet emerging workforce challenges. Working with DOL to gather and analyze information from stakeholders as technology continues to develop could assist DOT in meeting this goal. DOT has previously collaborated with DOL on transportation workforce issues. For example, in 2015, DOT and DOL worked with the Department of Education on a blueprint for aligning investments in transportation, including trucking, with career pathways. The report highlighted potential future growth areas in the transportation industry and identified potential jobs that may be in demand through 2022. Unless DOL and DOT continue to gather information from stakeholders as automated trucking technology evolves, they may be unable to fully anticipate the emerging workforce challenges that may result. DOT’s prior efforts to convene stakeholders to address automated vehicles could serve as a model for gathering information from stakeholders about automated trucking. For example, DOT held a series of meetings across the country to gather information, identify key issues, and support the transportation community to integrate automated vehicles onto roads for its National Dialogue on Highway Automation. Further, analyzing information from ongoing meetings with stakeholders could help DOT as it considers potential workforce-related regulatory changes that might be affected by automated truck technologies, such as the requirements to obtain a commercial driver’s license or the maximum number of hours commercial truck drivers are permitted to work. DOL has not provided information to stakeholders about the potential workforce effects of automated trucking technology, including how the skills needed to operate a truck may change in the future. DOL officials told us they have not done so, in part, because they do not yet know how skills and training needed to be a truck driver might change, if at all. Representatives from all of the truck driver training schools and training associations we interviewed said they expect drivers to need new skills to operate or maintain automated trucks, and that future truck drivers may need an additional certification or endorsement to their commercial driver’s license. However, in the absence of specific information about future skill changes, they all said they did not know what specific adjustments would be needed to their curriculum. Additionally, nearly all stakeholders we spoke with—including representatives of technology developers, truck driver training schools, and local workforce development boards—told us that federal agencies can help prepare the future workforce by sharing information with stakeholders about impending workforce changes. In particular, some workforce officials we spoke with said they would benefit from information about technology developers’ plans that would affect future demand or skills for truck drivers. Furthermore, DOL officials told us that heavy and tractor-trailer truck driving was the most common type of occupational training funded through the WIOA Adult and Dislocated Worker programs between April 2017 and March 2018, the most recent period for which data are available. Specifically, local workforce development boards provided funding from these programs to roughly 17,000 individuals for heavy and tractor-trailer truck driver training during that year, or about 15 percent of all individuals who received training services that began within that timeframe. This was more than twice as many individuals as those who received funding for nursing assistant training, the second most frequently funded type of training through these programs. As previously noted, one of DOL’s strategic objectives is to provide timely and accurate labor market information. In addition, according to Standards for Internal Control in the Federal Government, an agency’s management should externally communicate the necessary quality information to achieve the entity’s objective. This includes communicating quality information so that external parties can help the entity address related risks. Additionally, our work has shown that federal agencies can play an important role in sharing information. We have noted that such information sharing is important to help maintain U.S. competiveness. DOT’s strategic plan highlights the agency’s concern that the lack of credentialed workers, combined with projected retirements, threaten to cause significant worker shortages, and that the introduction of innovations and new technologies adds additional complexity for workforce development. Consulting with DOT to provide stakeholders with information about how automated technology could affect the number of trucking jobs and the skills needed to drive or operate commercial trucks would better position local workforce development boards, truck driver training schools, and others to adequately prepare the workforce for future needs. DOL officials said that existing employment and training programs administered by the agency, usually through grants, are generally designed to respond to economic changes that may result in job losses, including any that may result from automated trucking. In addition, DOL officials said that the agency has several resources to support state and local workforce areas to respond to mass layoffs and help workers upgrade their skills. For example, Rapid Response, which is carried out by states and local workforce development agencies, can provide services to employees after a layoff, including career counseling, job search assistance, and information about unemployment insurance and training opportunities. Additionally, under WIOA, local workforce development boards can use up to 20 percent of their Adult and Dislocated Worker allocations to help fund the cost of providing incumbent worker training designed to help avert potential layoffs or increase the skill levels of employees. While these programs may help mitigate any future job losses due to automated trucking, DOL would be better positioned to help local economies leverage them effectively if the agency continued to convene stakeholders, building on its efforts to gather and share good information on when and how those workforce effects are likely to materialize as technology evolves. Automated and self-driving technology for commercial trucks could make the industry safer and more efficient, but it also introduces significant uncertainties for the trucking workforce that DOL and DOT, in consultation with other federal agencies and stakeholders, can help navigate. For example, there is uncertainty about the widespread deployment of self-driving trucks as well as what the resulting effects will be on employment levels, wages, and needed skills. Although technology companies generally envision self-driving trucks being used for long-haul routes—which could result in fewer long-haul trucking jobs—other stakeholders argued that a truck will always need a driver or operator. Stakeholders we interviewed also lacked consensus about what automated trucking might mean for wages and what new skills will be needed to drive or operate automated trucks. Federal agencies have an opportunity to prepare truck drivers for the possible workforce effects of automated trucking. Many stakeholders noted that the effects would be gradual, giving the government time to act, but studies note the effects could eventually be significant, possibly affecting hundreds of thousands of truck driving jobs. DOT is taking an important step toward learning about these workforce effects by consulting with DOL and other stakeholders to inform DOT’s analysis of these developments. However, these agencies have not made plans to continue to convene stakeholders to gather information on an ongoing basis or update their analysis as the technology evolves and the effects become more apparent. Doing so could allow DOL and DOT the foresight to consider whether additional policy changes are needed to prepare for any possible future workforce effects. Similarly, DOL’s publication of routine employment projections and current driver skills and tasks provide useful information. However, DOL has not shared information on what skills drivers might require in the future with other key stakeholders, including technology developers, industry experts, truck driver representatives, training schools, local workforce development boards, and other relevant federal agencies. As a result, those stakeholders may miss an opportunity to better anticipate and plan for changes that may arise from automated trucking technology, including potential labor displacement, wage changes, and the need for new skills. We are making the following four recommendations, including two for the Department of Labor and two for the Department of Transportation: 1. The Secretary of Labor should collaborate with the Secretary of Transportation to continue to convene key groups of stakeholders to gather information on potential workforce changes that may result from automated trucking as the technology evolves, including analyzing needed skills and identifying any information or data gaps, to allow the agencies to fully consider how to respond to any changes. These stakeholders could include, for example, representatives of other relevant federal agencies, technology developers, the trucking industry, organizations that represent truck drivers, truck driver training schools, state workforce agencies, and local workforce development boards. (Recommendation 1) 2. The Secretary of Transportation should collaborate with the Secretary of Labor to continue to convene key groups of stakeholders to gather information on potential workforce changes that may result from automated trucking as the technology evolves, including analyzing needed skills and identifying any information or data gaps, to allow the agencies to fully consider how to respond to any changes. These stakeholders could include, for example, representatives of other relevant federal agencies, technology developers, the trucking industry, organizations that represent truck drivers, truck driver training schools, state workforce agencies, and local workforce development boards. (Recommendation 2) 3. The Secretary of Transportation should consult with the Secretary of Labor to further analyze the potential effects of automated trucking technology on drivers to inform potential workforce-related regulatory changes, such as the requirements to obtain a commercial driver’s license or hours of service requirements (e.g., the maximum hours commercial truck drivers are permitted to work). This could include leveraging the analysis described by the Explanatory Statement accompanying the Consolidated Appropriations Act, 2018 once it is complete, as well as information the department obtains from stakeholders as the technology evolves. (Recommendation 3) 4. The Secretary of Labor should consult with the Secretary of Transportation to share information with key stakeholders on the potential effects of automated trucking on the workforce as the technology evolves. These stakeholders could include, for example, representatives of other relevant federal agencies, technology developers, the trucking industry, organizations that represent truck drivers, truck driver training schools, state workforce agencies, and local workforce development boards. (Recommendation 4) We provided a draft of this report for review and comment to the Departments of Education, Labor (DOL), Transportation (DOT), and Veterans Affairs. We received formal written comments from DOL and DOT, which are reproduced in appendices III and IV, respectively. In addition, DOL and DOT provided technical comments, which we have incorporated as appropriate. The Departments of Education and Veterans Affairs did not have comments on our report. In its written comments, DOL agreed with our recommendations and noted several efforts that it said will help the agency assess and provide information on the potential workforce effects of evolving technologies, such as automated trucking. For example, DOL noted that the agency’s employment projections incorporate expert interviews and other information to identify shifts in industry employment. DOL is also currently consulting with DOT to study these workforce effects, and agreed to consider what other information and stakeholder meetings remain necessary after that study—due in March 2019—is completed. Likewise, DOL agreed to share related information as the technology evolves, and the agency noted it currently publishes employment projections and other occupational information. While useful, these efforts alone will not allow DOL to sufficiently anticipate the future workforce effects of automated trucking. For instance, the broad employment projections do not provide estimates specifically for the long-haul truck drivers who could be affected by automated trucking first. Further, DOL’s occupational information is based on surveys of current workers, so it does not include the skills future drivers will need as automated trucking evolves. Therefore, we continue to believe that convening stakeholders and sharing information about potential workforce effects in the future will position DOL to better understand and inform key stakeholders of these changes. In its written comments, DOT agreed with our recommendations. DOT noted two of its current efforts related to automated trucking technology, namely its October 2018 automated vehicles voluntary guidance, Preparing for the Future of Transportation: Automated Vehicles 3.0, and its forthcoming Congressionally-directed research on the impact of automated vehicle technologies on the workforce. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Education, Labor, Transportation, and Veterans Affairs, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact us at (202) 512-7215 or brownbarnesc@gao.gov or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Our objectives were to examine: (1) what is known about how and when automated vehicle technologies could affect commercial trucks; (2) what is known about how the adoption of automated trucks could affect the commercial trucking workforce; and (3) the extent to which the Department of Transportation (DOT) and Department of Labor (DOL) are preparing to assist drivers whose jobs may be affected by automated trucking. For all the objectives, we reviewed relevant federal laws and regulations as well documentation from DOT and DOL. To determine the extent to which federal agencies are preparing to assist current and future drivers, we compared DOT and DOL’s efforts against their strategic plans as well as Standards for Internal Control in the Federal Government. Additionally, we: Conducted Interviews: We interviewed officials from several federal agencies to obtain relevant information about our objectives, including the Departments of Education, Labor, Transportation, and Veterans Affairs, as well as the National Science Foundation. To obtain information about all of our objectives, we also interviewed other selected stakeholders. We used our initial research and interviews to develop a list of stakeholder categories that would provide informed perspectives, which when taken as a whole, provided a balanced perspective to answer our objectives. We selected stakeholders who had a range of perspectives regarding the timing for adoption of automated trucking technology, and how this adoption could affect the truck driving workforce. We used the following criteria to select interviewees: 1. authored a report, article, book, or paper regarding automated trucking technology or its potential workforce effects; 2. participated in panels, hearings, or roundtables regarding automated trucking or its potential workforce effects; or 3. was recommended by at least one of our interviewees. We interviewed organized labor representatives; researchers; and representatives from three truck manufacturers and three companies operating their own trucking fleet; two national industry organizations; one national safety organization; four truck driver training schools; an association of state and local workforce organizations; and four local workforce development boards. We selected the schools in part based on recommendations from an association of truck driver training schools, and included two accredited and two non-accredited schools in our selection. We selected three of the workforce development boards due to the prevalence of trucking jobs in their areas and the other board because it was in an area that several stakeholders suggested could be early to adopt automated trucking technology. Additionally, we visited California, where we interviewed representatives of four automated truck technology developers and a manufacturer, and viewed demonstrations of automated trucking technology. We selected California because it had the largest number of technology developers that we identified through our research efforts. We asked all of these stakeholders a core set of questions, as well as tailored questions based on their expertise. Some of the questions we asked stakeholders varied, and some stakeholders chose not to answer every question we asked because they either did not think they had sufficient knowledge about the specific question or did not want to make predictions about future industry developments. Therefore, we generally did not report the specific number of stakeholder responses in this report. The views of the stakeholders we interviewed are illustrative examples and may not be generalizable. For a full list of stakeholders we interviewed, see table 1. Analyzed federal data. To examine how the adoption of automated trucks could affect the current and future trucking workforce, we analyzed relevant data from the Bureau of Labor Statistics (BLS) and the Census Bureau on the current trucking workforce. Specifically, we examined BLS’s Occupational Employment Statistics to obtain employment level and wage data for heavy and tractor-trailer truck drivers (Standard Occupational Classification code 53-3032). The Occupational Employment Statistics survey is a federal-state cooperative program between the Bureau of Labor Statistics and State Workforce Agencies. The survey provides estimates regarding occupational employment and wage rates for the nation as a whole, by state, by metropolitan or nonmetropolitan area, and by industry or ownership. Data from self-employed persons are not included in the estimates. For our analysis of geographic concentration of heavy and tractor-trailer truck driving jobs, we carried out a one-sided test at the 0.05 percent level of significance of the null hypothesis that a region’s concentration is equal to or less than twice the national concentration versus the alternative hypothesis, that the region’s concentration is greater than twice the national concentration. We classified the results, excluding any unreliable areas (i.e., areas with a 95 percent confidence level margin of error for the estimated number of truck drivers that was larger than 30 percent of the estimate itself). We used Poisson tests because these are more appropriate for event occurrences in smaller populations or on a small number of cases. In addition, we analyzed data from the Census Bureau’s American Community Survey regarding the education level, sex, and age of current truck drivers and other drivers. The American Community Survey is an ongoing survey that collects information about the U.S. population such as jobs and occupations, educational attainment, income and earnings and other topics. According to the Census Bureau’s description of the American Community Survey, this survey uses a series of monthly samples to produce annually updated estimates for the same small areas (census tracts and block groups) formerly surveyed via the decennial census long-form sample. Based on our review of related documents and interviews with knowledgeable agency officials, we found the data to be reliable for our purposes. Synthesized literature. To explore how and when automated vehicle technologies could affect the current fleet of commercial trucks and gather information about the possible employment effects of this technology, we conducted a review of key research related to automated vehicle technologies for commercial trucks. We searched bibliographic databases for articles that were published between January 1, 2014 and May 22, 2018 and included key terms such as “autonomous”, “automated”, “driverless”, and “truck platoon” to describe the trucking technology. We also asked the researchers we interviewed to identify any studies that may be relevant to our work. Our search initially resulted in over 250 articles with potential relevance to our objectives. Two analysts reviewed the abstracts of these articles to determine if the articles in this initial search were germane to our objectives. We excluded any articles that were not relevant to our objectives or did not meet our standards for empirical analysis. We included articles that were published in peer review journals, by industry, or by government agencies, as well as articles that were recommended by researchers we interviewed. We identified a final list of 12 studies that met our criteria. Although we reviewed each study’s methodological approach, we did not independently assess the evidence in the articles or verify the analysis of the evidence that was used to come to the conclusions these studies reached. Cindy Brown Barnes or Susan Fleming, (202) 512-7215 or brownbarnesc@gao.gov or flemings@gao.gov. GAO staff who made major contributions to this report include Brandon Haller (Assistant Director), Rebecca Woiwode (Assistant Director), Drew Nelson (Analyst-in-Charge), MacKenzie Cooper, Marcia Fernandez, and Hedieh Fusfield. Additional assistance was provided by Susan Aschoff, David Ballard, James Bennett, Melinda Cordero, Patricia Donahue, Philip Farah, Camilo Flores Monckeberg, David Hooper, Angie Jacobs, Michael Kniss, Terence Lam, Ethan Levy, Sheila R. McCoy, Madhav Panwar, James Rebbe, Benjamin Sinoff, Pamela Snedden, Almeta Spencer, John Stambaugh, Walter Vance, Sonya Vartivarian, and Stephen C. Yoder.", "summary": "Automated vehicle technology may eventually make commercial trucking more efficient and safer, but also has the potential to change the employment landscape for nearly 1.9 million heavy and tractor-trailer truck drivers, among others. GAO was asked to examine the potential workforce effects of automated trucking. This report addresses (1) what is known about how and when automated vehicle technologies could affect commercial trucks; (2) what is known about how the adoption of automated trucks could affect the commercial trucking workforce; and (3) the extent to which DOT and DOL are preparing to assist drivers whose jobs may be affected. GAO reviewed research since 2014 on automated trucking technology, viewed demonstrations of this technology, and analyzed federal data on the truck driver workforce. GAO also interviewed officials from DOT and DOL, as well as a range of stakeholders, including technology developers, companies operating their own trucking fleets, truck driver training schools, truck driver associations, and workforce development boards. Automated trucks, including self-driving trucks, are being developed for long-haul trucking operations, but widespread commercial deployment is likely years or decades away, according to stakeholders. Most technology developers said they were developing trucks that can travel without drivers for part of a route, and some stakeholders said such trucks may become available within 5 to 10 years. Various technologies, including sensors and cameras, could help guide a truck capable of driving itself (see figure). However, the adoption of this technology depends on factors such as technological limitations and public acceptance. Stakeholders GAO interviewed predicted two main scenarios for how the adoption of automated trucks could affect the trucking workforce, which varied depending on the future role of drivers or operators. Technology developers, among others, described one scenario in which self-driving trucks are used on highway portions of long-haul trips. Stakeholders noted this scenario would likely reduce the number of long-haul truck drivers needed and could decrease wages because of lower demand for such drivers. In contrast, groups representing truck drivers, among others, predicted a scenario in which a truck would have an operator at all times for complex driving and other non-driving tasks, and the number of drivers or operators would not change as significantly. However, stakeholders lacked consensus on the potential effect this scenario might have on wages and driver retention. Most stakeholders said automated trucking could create new jobs, and that any workforce effects would take time—providing an opportunity for a federal response, such as any needed policy changes. The Department of Transportation (DOT) is consulting with the Department of Labor (DOL) to conduct a congressionally-directed analysis of the workforce impacts of automated trucking by March 2019. As part of this analysis, DOT and DOL have coordinated to conduct stakeholder outreach. However, they do not currently plan to convene stakeholders on a regular basis to gather information because they have focused on completing this analysis first. Continuing to convene stakeholders could provide the agencies foresight about policy changes that may be needed to prepare for any workforce effects as this technology evolves. GAO is making four recommendations, including that both DOT and DOL should continue to convene key stakeholders as the automated trucking technology evolves to help the agencies analyze and respond to potential workforce changes that may result. DOT and DOL agreed with the recommendations.", "document_type": "gao"}
{"report": "EM oversees a nationwide complex of 16 sites. A majority of the sites were created during World War II and the Cold War to research, produce, and test nuclear weapons (see figure 1). Much of the complex is no longer in productive use but still contains vast quantities of radioactive and hazardous materials related to the production of nuclear weapons. In 1989, EM began carrying out activities around the complex to clean up, contain, safely store, and dispose of these materials. Starting at about the same time, DOE documents indicate that EM and state and federal regulators entered into numerous cleanup agreements that defined the scope of cleanup work and established dates for coming into compliance with applicable environmental laws. EM has spent more than $170 billion since it began its cleanup program, but its most challenging and costly cleanup work remains, according to EM documents. The processes that govern the cleanup at EM’s nuclear waste sites are complicated, involving multiple laws, agencies, and administrative steps. EM’s cleanup responsibilities derive from different laws, including CERCLA, RCRA, the Atomic Energy Act, and state hazardous waste laws. Federal facility agreements, compliance orders, and other compliance agreements also govern this cleanup. Federal facility agreements are generally enforceable agreements that DOE enters into with EPA and affected states under CERCLA and applicable state laws. For each federal facility listed on the National Priorities List, EPA’s list of seriously contaminated sites, section 120 of CERCLA requires the relevant federal agency to enter into an interagency agreement with EPA for the completion of all necessary cleanup actions at the facility. The interagency agreement must include, among other things, the selection of the cleanup action and schedule for its completion. Interagency agreement provisions can be renegotiated, as necessary, to incorporate new information, adjust schedules, and address changing conditions. States generally issue federal facility compliance orders to DOE under RCRA and the Federal Facilities Compliance Act. RCRA prohibits the treatment, storage or disposal of hazardous waste without a permit from EPA or a state that EPA has authorized to implement and enforce a hazardous waste management program. Under the Federal Facilities Compliance Act, federal agencies are subject to state hazardous waste laws and state enforcement actions, including compliance orders. RCRA regulations establish detailed and often waste-specific requirements for the management and disposal of hazardous wastes, including the hazardous waste component of mixed waste. Tri-party agreements among DOE, EPA, and the relevant state often serve as both a federal facility agreement and a compliance order. In addition to federal facility agreements, other types of agreements governing cleanup at specific sites may also be in place, including administrative compliance orders, court-ordered agreements, and settlement agreements. Administrative compliance orders are orders from state agencies enforcing state hazardous waste management laws. Court-ordered agreements result from lawsuits initiated primarily by states. Settlement agreements are agreements between parties that end a legal dispute. These agreements may include milestones—dates by which DOE commits to plan and carry out its cleanup work at the sites. DOE has identified two different types of milestones: enforceable and planning milestones. Generally, an enforceable milestone has a fixed, mandatory due date, subject to the availability of appropriated funds, whereas a planning milestone is not enforceable and usually represents a placeholder or shorter term of work. In this report, we are examining any enforceable milestone that derives from either federal facility agreements or other compliance agreements. EM manages its cleanup program based on internal guidance, on milestone commitments to regulators, and in consultation with a variety of stakeholders. First, according to EM officials, EM manages cleanup activities based on requirements listed in a cleanup policy that it issued in July 2017 along with guidance listed in standard operating policies and procedures associated with this policy. The 2017 cleanup policy states that EM will apply DOE’s project management principles described in Order 413.3B to its operations activities in a tailored way. Second, EM’s budget requests are explicit regarding the role the milestones play in the cleanup effort. For example, in its fiscal year 2019 request to Congress, EM stated that the request addresses cleanup “governed through enforceable regulatory milestones.” Third, in addition to the milestone commitments to EPA and state environmental agencies, other stakeholders involved include county and local governmental agencies, citizen groups, and other organizations. These stakeholders advocate their views through various public involvement processes, including site- specific advisory boards. At EM’s 16 cleanup sites, cleanup is governed by 72 agreements and hundreds of cleanup milestones. These agreements include federal facility agreements generally negotiated between DOE, the state, and EPA, and compliance orders from state regulators. These agreements may impose penalties for missing milestones and may amend or modify earlier agreements, including extending or eliminating milestone dates. Within the agreements, hundreds of milestones outline deadlines for specific actions to be taken by EM as it carries out its cleanup work. However, because EM lacks a standard definition of milestones, some sites track milestones differently than EM headquarters, limiting EM’s ability to monitor performance. In total, DOE has entered into 72 cleanup agreements at EM’s 16 cleanup sites. The agreements were initially signed between 1985 and 2009 (see table 1). With the exception of the Moab Uranium Mill Tailings Remedial Action Project in Utah and the Waste Isolation Pilot Plant in New Mexico, each site is governed by at least one cleanup agreement. Twelve are governed by multiple agreements (up to as many as 17 at the Savannah River Site, for example). Twelve sites are governed by federal facility agreements, generally with the relevant state and EPA. These agreements generally set out a sequence for accomplishing the work, tend to cover a relatively large number of cleanup activities, and include milestones that DOE must meet. All of the 12 sites with federal facility agreements are also governed by additional compliance agreements that have been negotiated at each site subsequent to the initial federal facility agreement or other agreement with the state. These agreements may impose penalties for missing milestones and may amend or modify earlier agreements, including extending or eliminating milestone dates. For example, the Hanford Site is subject to three consent decrees that resulted from litigation in which the state of Washington sued DOE for failing to meet certain cleanup milestones. EM headquarters and cleanup site officials provided us with different totals on the number of milestones in place at the four sites we selected for further review. Both federal facility agreements and other compliance agreements contain milestones with which EM must comply and, according to EM officials and our review of the agreements, these agreements collectively contain hundreds of milestones. However, milestone information that EM headquarters and site officials shared with us was not consistent. For example, for milestones due in fiscal years 2018 through 2020, officials at EM headquarters identified 135 enforceable cleanup milestones at the four selected sites, which was less than half of the number of such milestones officials at those sites reported to us (see table 2). These discrepancies result from how headquarters and selected sites define and track milestones. Milestone definitions. EM headquarters officials said that they are primarily concerned with milestones related to on-the-ground cleanup; that is, cleanup activities that actually result in waste being removed, treated, or disposed of. EM officials said they consider these to be major milestones. However, not all sites make the same distinction between major and non-major milestones and, as a result, are not consistently reporting the same types of milestones to EM headquarters. For example, officials at the Savannah River Site track milestones in a federal facility agreement that lists 79 milestones due in fiscal years 2018 through 2020. This agreement makes no distinction between major and non-major milestones and includes administrative activities, such as revisions to cleanup reports, in its milestone totals. EM headquarters officials, on the other hand, do not include these activities as major milestones and list only 43 milestones due in the same time frame. Similarly, Hanford officials do not distinguish between major or other milestones in their internal tracking. As a result, Hanford officials are tracking 178 milestones due in fiscal years 2018 through 2020, whereas EM headquarters officials are tracking 57 for the same time frame at Hanford. Requirements for updating milestones. Sites do not consistently provide EM headquarters with the most up-to-date information on the status of milestones at each site. This is because EM requirements governing the submission of milestone information do not specify when or how often sites are to update this information, so sites have the discretion to choose when to send updated milestone data to headquarters. As a result, the information on the list of milestones used to track cleanup performance by EM headquarters may differ from the more up-to-date information kept by the sites. For example, officials at each of the four sites we examined stated that they try to send updated information on the status of milestones to headquarters on an annual basis, though they sometimes send it less frequently. Officials at EM headquarters acknowledged that their list of milestones is not always up-to-date because of the lag between when a milestone changes at the site and when sites update that information in the EM headquarters’ database. In addition to inconsistencies in tracking and defining milestones, lists of milestones maintained by EM headquarters and the four selected sites may not include all cleanup milestones governing the cleanup work at the site. We found two cases in which permits at two sites included milestones that neither EM headquarters nor site officials included in their list of sites’ cleanup milestones. For example, milestones related to a major construction project at one of the selected sites we reviewed— Savannah River—are not listed in either EM headquarters’ or the Savannah River Site’s list of enforceable milestones. According to South Carolina state environmental officials, milestones associated with this project are part of a separate permit and dispute resolution agreement not connected to the federal facility agreement or one of the sites’ compliance agreements. Recently, DOE acknowledged in its fiscal year 2019 budget request that this project has faced technical challenges, and officials noted that the previously agreed-upon start date for operating this project would be delayed. However, this milestone and its delay are not included in either EM headquarters’ or Savannah River’s list of milestones. Similarly, officials at the Hanford Site said that some milestones governing Hanford’s cleanup are part of the site wide RCRA permit issued by the state, which is separate from its federal facility agreement, and, as a result, officials do not track this information in the same Hanford milestone tracking system and do not report it to EM headquarters. EM does not have a standard definition of milestones for either sites or headquarters to use for reporting and monitoring cleanup milestones or guidance on how often sites should update the status of milestones. EM headquarters officials cited guidance that sites can refer to when entering their milestone data into the headquarters-managed database. This guidance addresses how to submit milestone data but does not include a definition of milestones or specify how often sites should update the information. EM headquarters officials noted that sites have the discretion to input milestones as they choose. EM’s lack of a standard definition of milestones limits management’s ability to use milestones to manage EM’s cleanup mission and monitor its progress. We have previously found that poorly defined, incomplete, or missing requirements make it difficult to hold projects accountable, result in programs or projects that do not meet user needs, and can result in cost and schedule growth. In addition, according to Standards for Internal Control in the Federal Government, information and communication are vital for an entity to achieve its objectives. According to these standards, the first principle of information and communication is that management should define the information requirements at the relevant level and the requisite specificity for appropriate personnel. Without this, EM’s ability to use milestones for managing and measuring the performance of its cleanup program is limited. EM relies on cleanup milestones, among other metrics, to measure the overall performance of its operations activities. However, sites regularly renegotiate milestones they are at risk of missing, and EM does not track data on the history of postponed milestones. As a result, EM cannot accurately track the progress of cleanup activities to meet these milestones. Additionally, EM has not consistently reported required information to Congress, and the information it has reported is incomplete. For example, in its report to Congress on the status of the enforceable milestones, EM includes the latest (meaning the most recently renegotiated) milestone dates with no indication of whether or how often those milestones have been missed or postponed. Site officials typically renegotiate enforceable milestones they are at risk of missing with their regulators, in accordance with the modification procedures established in federal facility agreements. EM officials said that sites have the ability to renegotiate milestones before they are missed. For example, the Hanford Site Federal Facility Agreement allows DOE to request an extension of any milestone; the request must include, among other things, DOE’s explanation of the good cause for the extension. As long as there is consensus among EM and its regulators, the milestone is changed. Similarly, the Los Alamos Federal Facility Agreement requires site officials to negotiate cleanup milestones each fiscal year. Because renegotiated milestones are not technically missed, EM avoids any fines or penalties associated with missed milestones. Site officials we interviewed at the four selected sites stated that it is common for regulators and sites to renegotiate milestones before sites miss them. For example, at the Savannah River Site, both DOE and South Carolina officials said they could not recall any missed milestones among the thousands of milestones completed since the cleanup began. Similarly, Hanford officials told us that since the beginning of the cleanup effort in 1989, more than 1,300 milestones had been completed and only 62 had actually been missed because, in most cases, whenever milestones were at risk of being missed, they were renegotiated. However, officials at these sites could not provide us with the exact number of times milestones had been renegotiated. This is because once milestones are changed, sites are not required to maintain or track the original milestones. As a result, the new milestones become the new agreed-upon time frame, essentially resetting the deadline. Because EM does not track the original baseline schedule for renegotiated milestone dates, milestones do not provide a reliable measure of program performance. According to best practices identified in GAO’s schedule assessment guide, agencies should formally establish a baseline schedule against which performance can be measured. In particular, we have previously found that management does not have the ability to identify and mitigate the effects of unfavorable performance without a formally established baseline schedule against which it can measure performance. We have also found that, without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management’s insight into the true performance of the project. In addition, DOE’s internal project management policies call for steps to maintain a change control process, including setting a baseline schedule for completing certain activities and maintaining a record of any subsequent deviations from that baseline. EM uses milestones as one of its metrics for measuring the performance of its cleanup efforts, since the milestones are effectively schedule targets. However, since neither EM headquarters nor the sites track renegotiated milestones and their baseline dates at the sites, EM cannot accurately use milestones for managing and measuring the performance of its cleanup program. EM has not consistently reported required information to Congress on the status of its milestones. The National Defense Authorization Act for Fiscal Year 2011 established a requirement for EM to annually provide Congress with a future-years defense environmental cleanup plan. This plan is to contain, among other things, information on the current dates for enforceable milestones at specified cleanup sites, including whether each milestone will be met and, if not, an explanation as to why and when it will be met. However, since 2011, EM has only provided Congress with the required annual plan in 2 years—2012 and 2017—and EM officials told us in September 2018 that they were unsure when EM would release the next future-years plan. EM officials said that, instead of the annual plan, they have provided oral briefings to Congressional staff during the 4 years when a formal report was not produced. In addition, our analysis of the 2012 and 2017 plans EM submitted to Congress identified three ways in which the plans provide inaccurate or incomplete information on EM’s enforceable milestones. No historical record. First, the plans contain no indication of whether each milestone date reported is the original date for that milestone or whether or how many times the milestones listed have been missed or postponed. Instead, the plans report the latest (and most recently renegotiated) dates for the milestones without listing the original dates or acknowledging that some of the milestones have been delayed, in some cases by several years, beyond their original agreed-upon completion dates. For example, we found that at least 14 milestones from the 2012 plan were repeated in the 2017 plan with new forecasted completion dates, but the 2017 plan gave no indication that these milestones had been postponed (see table 3). The milestones’ due dates had been pushed back by as many as 6 years without any indication in the 2017 report that they were delayed. As noted above, EM headquarters does not track changes to milestones and EM officials at both headquarters and the sites said that they have not historically kept a record of the original baseline dates for renegotiated milestones they change. As a result, EM officials could not readily provide information on whether the other milestones listed in the 2012 report met their listed due date or whether they were postponed. Headquarters officials stated that to gather this information they would need to survey officials at each site. Inaccurate forecast. Second, the forecast completion dates for milestones listed in the 2012 and 2017 plans may not present an accurate picture of the status of the milestones and EM’s cleanup efforts. For example, in the 2012 plan, DOE reported that four out of 218 milestones were at risk of missing their planned completion date, while the rest were on schedule. As discussed above, we found 14 of the milestones in the 2012 plan had been postponed and listed again in the 2017 plan. Similarly, the 2017 plan listed only one milestone out of 154 as forecasted to miss its due date. However, because EM does not have a historical record of the changes made to the milestones, it is unclear how many of these milestones represented their original due dates. Incomplete list. Third, the plans did not include milestones from all of the 10 DOE cleanup sites that EM is required to report on. In 2012, EM did not report milestone information for two of the 10 sites that were required to be included in the plan. In the 2017 plan, information was missing for one of the 10 required sites. EM headquarters officials said that this could be because some sites did not update their milestone information or some sites may still be renegotiating new milestones. However, neither report indicated that data were missing for these sites. As a result of these issues, DOE’s future-years defense environmental cleanup plans provide only a partial picture of the milestones and overall cleanup progress made across the cleanup complex, and actual progress made in cleanup is not transparent to Congress. The absence of reliable and complete information on the progress of EM’s cleanup mission limits EM’s ability to manage its mission and complicates Congress’s ability to oversee the cleanup work. Best practices and DOE requirements for project management call for a root cause analysis when problems lead to schedule delays, but EM officials at both headquarters and selected sites have not analyzed reasons why milestones are missed or postponed. According to best practices identified in GAO’s cost estimating guide, agencies should identify root causes of problems that lead to schedule delays and renegotiated milestones. Specifically, when risks materialize (i.e., when milestones are missed or delayed), risk management should provide a structure for identifying and analyzing root causes. The benefits of doing so include developing a better understanding of the factors that caused milestones to be missed and providing agencies with information to more effectively address those factors in the future. In addition, DOE has recently emphasized the importance of doing this kind of analysis. In 2015, DOE issued a directive requiring sites to do a root cause analysis when the project team, program office, or independent oversight offices determine that a project has breached its cost or schedule thresholds. This directive, which applies to all programs and projects within DOE, calls for “an independent and objective root cause analysis to determine the underlying contributing causes of cost overruns, schedule delays, and performance shortcomings,” such as missed or postponed milestones. However, EM has not done a complex-wide analysis of the reasons for missed or postponed milestones. Similarly, officials we interviewed at the four selected sites said that they were not aware of any site-wide review of why milestones were missed or postponed. According to headquarters officials, this analysis has not been done because EM has determined that DOE requirements governing this type of analysis apply only to contract schedules, not regulatory milestones, and that missed or postponed milestones are not necessarily an indication of cleanup performance shortcomings. However, as previously noted in this report, missing or postponing milestones is a systemic problem across the cleanup complex that makes it difficult for DOE to accurately identify cleanup performance shortcomings. Because EM has not analyzed why it has missed or postponed milestones, EM cannot address these systemic problems and consider those problems when renegotiating milestones with regulators. Without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones and, as a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work. As we have reported previously, these delays lead to increases in the overall cost of the cleanup. The federal government faces a large and growing future environmental liability, the vast majority of which is related to the cleanup of radioactive and hazardous waste at DOE’s 16 sites around the country. EM has responsibility for addressing the human health and environmental risks presented by this contamination in the most cost-effective way. However, most of EM’s largest projects are significantly delayed and over budget, and state regulators for nearly all of EM’s cleanup sites have responded by initiating enforcement actions, often leading to additional agreements, including administrative orders and court settlements, in addition to initial federal facility agreements to ensure those risks are addressed. EM relies on cleanup milestones, among other metrics, to measure the overall performance of its operations activities, and EM reports that very few of its cleanup milestones over the past 2 decades have been missed. However, EM’s self-reported performance in achieving milestones does not provide an accurate view of actual progress in cleaning up sites. EM has not established clear definitions for tracking and reporting milestones and does not have any requirements governing the way sites are to update milestone information. As a result, EM’s internal tracking of these milestones has inconsistencies. Additionally, since the requirement to annually report on the status of milestones was set in 2011, EM has produced only two reports to Congress, and these were inaccurate and incomplete. Without a clear and consistent approach to collecting and reporting this data, including the history of milestone changes, EM cannot accurately use milestones for managing and measuring the performance of its cleanup program. The absence of reliable and complete information on the progress of EM’s cleanup mission also limits EM’s and Congress’s ability to oversee the cleanup work. In addition, without a root cause analysis of why milestones are missed or postponed, EM and its cleanup regulators lack information to set more realistic and achievable milestones. As a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work, which will likely increase cleanup costs and risks to human health and the environment. We are making the following four recommendations to DOE: The Assistant Secretary of DOE’s Office of Environmental Management should update EM’s policies and procedures to establish a standard definition of milestones and specify requirements for both including and updating information on milestones across the complex. (Recommendation 1) The Assistant Secretary of DOE’s Office of Environmental Management should track original milestone dates as well as changes to its cleanup milestones. (Recommendation 2) The Assistant Secretary of DOE’s Office of Environmental Management should comply with the requirements in the National Defense Authorization Act by reporting annually to Congress on the status of its cleanup milestones and including a complete list of cleanup milestones for all sites required by the act. The annual reports should also include, for each milestone, the original date along with the currently negotiated date. (Recommendation 3) The Assistant Secretary of DOE’s Office of Environmental Management should conduct root cause analyses of missed or postponed milestones. (Recommendation 4) We provided a draft of this report to DOE for review and comment. DOE provided written comments, which are reproduced in appendix II; the agency also provided technical comments that we incorporated in the report as appropriate. Of the four recommendations in the report, DOE agreed with three, and partially agreed with one. Regarding the recommendation that DOE update EM’s policies and procedures to establish a standard definition of milestones and specify requirements for both including and updating information on milestones across the complex, the agency agreed with the recommendation. DOE stated that these policy-driven reforms can improve the efficiency of milestone tracking. Regarding the recommendation that DOE track changes to cleanup milestones, the agency agreed with the recommendation. DOE stated that EM currently monitors milestone status, including changes as the need for changes are identified and as part of its ongoing communication with field offices, and therefore DOE considers the recommendation to be closed. However, as we noted in the report, neither EM headquarters nor the sites track the original baseline schedule for renegotiated milestone dates. We adjusted the language of the recommendation to make clear that the EM Assistant Secretary should track original milestone dates as well as changes to cleanup milestones. DOE stated in its written comments that EM does not believe that tracking original and changed milestones will strengthen EM's ability to use milestones to manage and measure the performance of its cleanup program. However, as we noted in this report, according to best practices identified in GAO's schedule assessment guide, agencies should formally establish a baseline schedule against which performance can be measured. We have found that, without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management's insight into the true performance of the project. In addition, DOE's internal project management policies call for steps to maintain a change control process, including setting a baseline schedule for completing certain activities and maintaining a record of any subsequent deviations from that baseline. Regarding our recommendation that DOE comply with the requirements in the National Defense Authorization Act by reporting annually to Congress on the status of its cleanup milestones and including a complete list of cleanup milestones for all sites required by the act, the agency partially agreed with the recommendation. DOE stated that additional budget and clarification of purpose and scope would be required to fulfill this recommendation. As we point out in our report, DOE has not fully complied with requirements established by the act, including not submitting all required annual reports and, even when DOE did submit these reports, its reporting omitted information about some sites. DOE stated that EM is reviewing options to address this recommendation. Regarding our recommendation that DOE conduct root cause analyses of performance shortcomings that lead to missed or postponed milestones, the agency agreed with the recommendation and stated that EM is evaluating options to implement it. However, DOE stated that there may be multiple reasons why milestones are changed, and not all of the changes are due to DOE performance. To acknowledge the uncertainty in the causes of missed or postponed milestones, we adjusted the language of the recommendation to clarify that the EM Assistant Secretary should conduct root cause analyses of missed or postponed milestones. In addition, in its written comments, DOE disagreed with the draft report's description of the process and authorities related to renegotiating compliance milestones, stating that EM cannot and does not unilaterally delay/postpone milestones and that EPA and state regulator approval of milestone changes is required. We agree, and the report states that it is common for regulators and sites to renegotiate milestones before sites miss them. DOE also disagreed with the draft report’s characterization of the coordination between EM sites and headquarters in tracking milestones. In particular, DOE’s written comments state that site-specific databases include all regulatory compliance milestones drawn from applicable agreements, while the headquarters database tracks major enforceable milestones. However, as our report notes, because not all sites make the same distinction between major and non-major milestones, sites are not consistently reporting the same types of milestones to EM headquarters. In addition, DOE’s written comments state that EM sites and headquarters routinely collaborate and discuss the status of milestones via meetings and EM periodically requests that sites verify the data in the EM headquarters database. Nevertheless, as our report notes, EM requirements governing the submission of milestone information do not specify when or how often sites are to update this information. We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix III. The Brookhaven National Laboratory was established in 1947 by the Atomic Energy Commission. Formerly Camp Upton, a U.S. Army installation site, Brookhaven is located on a 5,263-acre site on Long Island in Upton, NY, approximately 60 miles east of New York City. Historically, Brookhaven was involved in the construction of accelerators and research reactors such as the Cosmotron, the High Flux Beam Reactor, and the Brookhaven Graphite Research Reactor. These accelerators and reactors led the way in high-energy physics experiments and subsequent discoveries but also resulted in radioactive waste. To complete the cleanup mission, DOE is working to build and operate groundwater treatment plants, decontaminate and decommission the High Flux Beam Reactor and the Brookhaven Graphite Research Reactor, and dispose of some wastes off-site. The Energy Technology Engineering Center occupies 90 acres within the 290 acre Santa Susana Field Laboratory 30 miles north of Los Angeles, California. The area was primarily used for DOE research and development activities. In the mid-1950s, part of the area was set aside for nuclear reactor development and testing, primarily related to the development of nuclear power plants and space power systems, using sodium and potassium as coolants. In the mid-1960s, the Energy Technology Engineering Center was established as a DOE laboratory for the development of liquid metal heat transfer systems to support the Office of Nuclear Energy Liquid Metal Fast Breeder Reactor program. DOE is now involved in the deactivation, decommissioning, and dismantlement of contaminated facilities on the site. DOE is responsible for one of the world’s largest environmental cleanup projects: the treatment and disposal of millions of gallons of radioactive and hazardous waste at its 586 square mile Hanford Site in southeastern Washington State. Hanford facilities produced more than 20 million pieces of uranium metal fuel for nine nuclear reactors along the Columbia River. Five plants in the center of the Hanford Site processed 110,000 tons of fuel from the reactors, discharging an estimated 450 billion gallons of liquids to soil disposal sites and 53 million gallons of radioactive waste to 177 large underground tanks. Plutonium production ended in the late 1980s. Hanford cleanup began in 1989 and now involves (1) groundwater monitoring and treatment, (2) deactivation and decommissioning of contaminated facilities, and (3) the construction of the waste treatment and immobilization plant intended, when complete, to treat the waste in the underground tanks. DOE’s Idaho Site is an 890-square-mile federal reserve, situated in the Arco Desert over the Snake River Plain Aquifer in central Idaho. The Idaho Cleanup Project involves the environmental cleanup of the Idaho Site, contaminated with legacy wastes generated from World War II-era conventional weapons testing, government-owned research and defense reactors, spent nuclear fuel reprocessing, laboratory research, and defense missions at other DOE sites. The 1-square-mile Lawrence Livermore National Laboratory site is an active, multi-program DOE research laboratory about 45 miles east of San Francisco. A number of research and support operations at Lawrence Livermore handle, generate, or manage hazardous materials that include radioactive wastes. The site first was used as a Naval Air Station in the 1940s. In 1951, it was transferred to the U.S. Atomic Energy Commission and was established as a nuclear weapons and magnetic fusion energy research facility. Over the past several years, Lawrence Livermore constructed several treatment plants for groundwater pumping and treatment and for soil vapor extraction. These systems will continue to operate until cleanup standards are achieved. Los Alamos National Laboratory is located in Los Alamos County in north central New Mexico. The laboratory, founded in 1943 during World War II, served as a secret facility for research and development of the first nuclear weapon. The site was chosen because the area provided controlled access, steep canyons for testing high explosives, and existing infrastructure. The Manhattan Project’s research and development efforts that were previously spread throughout the nation became centralized at Los Alamos and left a legacy of contamination. Today, the Los Alamos National Laboratory Cleanup Project is responsible for the treatment, storage, and disposition of a variety of radioactive and hazardous waste streams; removal and disposition of buried waste; protection of the regional aquifer; and removal or deactivation of unneeded facilities. The Moab Site is located about 3 miles northwest of the city of Moab in Grand County, Utah. The former mill site encompasses approximately 435 acres, of which about 130 acres is covered by the uranium mill tailings pile. Uranium concentrate (called yellowcake), the milling product, was sold to the U.S. Atomic Energy Commission through December 1970 for use in national defense programs. After 1970, production was primarily for commercial sales to nuclear power plants. During its years of operation, the mill processed an average of about 1,400 tons of ore a day. The milling operations created process-related wastes and tailings, a radioactive sand-like material. The tailings were pumped to an unlined impoundment in the western portion of the Moab Site property that accumulated over time, forming a pile more than 80 feet thick. The tailings, particularly in the center of the pile, have a high water content. Excess water in the pile drains into underlying soils, contaminating the ground water. In 1950, President Truman established what is now known as the Nevada National Security Site in Mercury, Nevada, to perform nuclear weapons testing activities. In support of national defense initiatives, a total of 928 atmospheric and underground nuclear weapons tests were conducted at the site between 1951 and 1992, when a moratorium on nuclear testing went into effect. Today, the site is a large, geographically-diverse research, evaluation, and development complex that supports homeland security, national defense, and nuclear nonproliferation. In Nevada, DOE activities focus on groundwater, soil, and on-site facilities; radioactive, hazardous, and sanitary waste management and disposal; and environmental planning. DOE’s Oak Ridge Reservation is located on approximately 33,500 acres in eastern Tennessee. The reservation was established in the early 1940s by the Manhattan Engineer District of the U. S. Army Corps of Engineers and played a role in the production of enriched uranium during the Manhattan Project and the Cold War. DOE is now working to address excess and contaminated facilities, remove soil and groundwater contamination, and enable modernization that allows the National Nuclear Security Administration to continue its national security and nuclear nonproliferation responsibilities and the Oak Ridge National Laboratory to continue its mission for advancing technology and science. The Paducah Gaseous Diffusion Plant, located within an approximately 650-acre fenced security area in in McCracken County in western Kentucky, opened in 1952 and played a role in the production of enriched uranium during and after the Cold War until ceasing production for commercial reactor fuel purposes in 2013. Decades of uranium enrichment and support activities required the use of a number of typical and special industrial chemicals and materials. Plant operations generated hazardous, radioactive, mixed (both hazardous and radioactive), and nonchemical (sanitary) wastes. Past operations also resulted in soil, groundwater, and surface water contamination at several sites located within plant boundaries. The Portsmouth Gaseous Diffusion Plant is located in Pike County, Ohio, in southern central Ohio, approximately 20 miles north of the city of Portsmouth, Ohio. Like the Paducah Plant, this facility was also initially constructed to produce enriched uranium to support the nation’s nuclear weapons program and was later used by commercial nuclear reactors. Cleanup activities here are similar to those at the Paducah Plant. The Sandia National Laboratories comprises 2,820 acres within the boundaries of the 118 square miles of Kirtland Air Force Base and is located about 6 miles east of downtown Albuquerque, New Mexico. It is managed by the National Nuclear Security Administration. Sandia National Laboratories was established in 1945 for nuclear weapons development, testing, and assembly for the Manhattan Engineering District. Beginning in 1980, the mission shifted toward research and development for nonnuclear components of nuclear weapons. Subsequently, the mission was expanded to research and development on nuclear safeguards and security and multiple areas in science and technology. The Savannah River Site complex covers 198,344 acres, or 310 square miles, encompassing parts of Aiken, Barnwell, and Allendale counties in South Carolina, bordering the Savannah River. The site is a key DOE industrial complex responsible for environmental stewardship, environmental cleanup, waste management, and disposition of nuclear materials. During the early 1950s, the site began to produce materials used in nuclear weapons, primarily tritium and plutonium-239. Five reactors were built to produce nuclear materials and resulted in unusable by-products, such as radioactive waste. About 35 million gallons of radioactive liquid waste are stored in 43 underground tanks. The Defense Waste Processing Facility is processing the high-activity waste, encapsulating radioactive elements in borosilicate glass, a stable storage form. Since the facility began operations in March 1996, it has produced more than 4,000 canisters (more than 16 million pounds) of radioactive glass. The Separations Process Research Unit is an inactive facility located at the Knolls Atomic Power Laboratory in Niskayuna, New York, near Schenectady. The Mohawk River forms the northern boundary of this site. Built in the late 1940s, its mission was to research the chemical process to extract plutonium from irradiated materials. Equipment was flushed and drained, and bulk waste was removed following the shutdown of the facilities in 1953. Today, process vessels and piping have been removed from all the research unit’s facilities. In 2010, cleanup of radioactivity and chemical contamination in the Lower Level Railroad Staging Area, Lower Level Parking Lot, and North Field areas was completed. The Waste Isolation Pilot Plant is an underground repository located near Carlsbad, New Mexico, that is used for disposing of defense transuranic waste. The plant is managed by DOE’s Office of Environmental Management and is the only deep geological repository for the permanent disposal of defense generated transuranic waste. The West Valley Demonstration Project occupies approximately 200 acres within the 3,345 acres of land called the Western New York Nuclear Service Center. The project is located approximately 40 miles south of Buffalo, New York. The West Valley Demonstration Project Act of 1980 established the project. The act directed DOE to solidify and dispose of the high-level waste and decontaminate and decommission the facilities used in the process. The land and facilities are not owned by DOE. Rather, the project premises are the property of the New York State Energy Research and Development Authority. DOE does not have access to the entire 3,345 acres of property. In addition to the contact named above, Nico Sloss (Assistant Director), Jeffrey T. Larson (Analyst in Charge), Natalie M. Block, Antoinette C. Capaccio, R. Scott Fletcher, Cindy K. Gilbert, Richard P. Johnson, Jeffrey R. Rueckhaus, Ilga Semeiks, Sheryl E. Stein, and Joshua G. Wiener made key contributions to this report.", "summary": "EM manages DOE's radioactive and hazardous waste cleanup program using compliance agreements negotiated between DOE and other federal and state agencies. Within the agreements, milestones outline cleanup work to be accomplished by specific deadlines. EM's cleanup program faces nearly $500 billion in future environmental liability, which has grown substantially. GAO was asked to review DOE's cleanup agreements. This report examines the extent to which EM (1) tracks the milestones in cleanup agreements for EM's cleanup sites; (2) has met, missed, or postponed cleanup-related milestones at selected sites and how EM reports information; and (3) has analyzed why milestones are missed or postponed and how EM considers those reasons when renegotiating milestones. GAO reviewed agreements and milestones at EM's 16 cleanup sites and compared information tracked by EM headquarters and these sites; interviewed officials from four selected sites (chosen for variation in location and scope of cleanup, among other factors); and reviewed EM guidance related to milestone negotiations. The cleanup process at the 16 sites overseen by the Department of Energy's (DOE) Office of Environmental Management (EM) is governed by 72 agreements and hundreds of milestones specifying actions EM is to take as it carries out its cleanup work. However, EM headquarters and site officials do not consistently track data on the milestones. EM headquarters and site officials provided GAO with different totals on the number of milestones in place at the four sites GAO selected for review. These discrepancies result from how headquarters and selected sites define and track milestones. First, not all sites make the same distinction between major (i.e., related to on-the-ground cleanup) and non-major milestones and, as a result, are not consistently reporting the same milestones to EM headquarters. Second, sites do not consistently provide EM headquarters with the most up-to-date information on the status of milestones at each site. These inconsistencies limit EM's ability to use milestones to manage the cleanup mission and monitor its progress. EM does not accurately track met, missed, or postponed cleanup-related milestones at the four selected sites, and EM's milestone reporting to Congress is incomplete. EM sites renegotiate milestone dates before they are missed, and EM does not track the history of these changes. This is because once milestones change, sites are not required to maintain or track the original milestone dates. GAO has previously found that without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management's insight into the true performance of the project. Further, since 2011, EM has not consistently reported to Congress on the status of the milestones each year, as required, and the information it has reported is incomplete. EM reports the most recently renegotiated milestone dates with no indication of whether or how often those milestones have been missed or postponed. Since neither EM headquarters nor the sites track renegotiated milestones and their baseline dates at the sites, milestones do not provide a reliable measure of program performance. EM officials at headquarters and selected sites have not conducted root cause analyses on missed or postponed milestones; thus, such analyses are not part of milestone negotiations. Specifically, EM has not done a complex-wide analysis of the reasons for missed or postponed milestones. Similarly, officials GAO interviewed at the four selected sites said that they were not aware of any site-wide review of why milestones were missed or postponed. Best practices for project and program management outlined in GAO's Cost Estimating and Assessment Guide note the importance of identifying root causes of problems that lead to schedule delays. Additionally, in a 2015 directive, DOE emphasized the importance of conducting such analysis. Analyzing the root causes of missed or postponed milestones would better position EM to address systemic problems and consider those problems when renegotiating milestones with regulators. Without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones and, as a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work. As GAO has reported previously, these delays lead to increases in the overall cost of the cleanup. GAO is making four recommendations, including that EM establish a standard definition of milestones across the cleanup sites, track and report original and renegotiated milestone dates, and identify the root causes of why milestones are missed or postponed. In commenting on a draft of this report, DOE agreed with three of the recommendations and partially agreed with a fourth.", "document_type": "gao"}
{"report": "VA serves veterans of the U.S. armed forces and provides health, pension, burial, and other benefits. The department’s three operational administrations—VHA, Veterans Benefits Administration, and National Cemetery Administration—operate largely independently from one another. Each has its own contracting authority, though all three also work with national contracting organizations under the Office of Acquisition, Logistics, and Construction for certain types of purchases, such as medical equipment and information technology. VHA, which provides medical care to about 7 million veterans at 170 medical centers, is by far the largest of the three administrations. These medical centers are organized into 18 VISNs, organizations that manage medical centers and associated clinics across a given geographic area. Each VISN is served by a corresponding Network Contracting Office. Figure 1 shows the organizational structure of the procurement function at VA. For over a decade, each of VA’s 170 medical centers used VHA’s legacy MSPV program to order medical supplies, such as bandages and scalpels. Many of those items were purchased using the Federal Supply Schedules, which provided medical centers with a great deal of flexibility. As we reported in 2016, this legacy program, however, prevented VHA from standardizing items used across its medical centers and affected its ability to leverage its buying power to achieve greater cost avoidance. Standardization is a process of narrowing the range of items purchased to meet a given need in order to improve buying power, simplify supply chain management, and provide clinical consistency. For example, a hospital network might find that it purchases 100 varieties of bandages, but might ultimately determine—with input from clinicians—that it can narrow those choices down to 10 varieties to fill most needs, which would provide greater consistency and allow the hospital to negotiate lower prices. In part because the legacy MSPV program limited standardization, VHA decided to transition to a new iteration, called MSPV-NG. VHA launched the MSPV-NG program in December 2016 but allowed a 4-month transition period. After April 2017, medical centers could no longer use the legacy program. MSPV-NG now restricts ordering to a narrow “formulary”—a list of specific items that medical centers are allowed to purchase. VA has had a formulary in place for pharmaceuticals since 1997, and many leading hospital networks rely on a similar formulary approach when it comes to purchasing their own medical supplies. VHA policy requires medical centers to use MSPV-NG—as opposed to other means such as open market purchase card transactions—when purchasing items that are available in the formulary. Figure 2 illustrates the program structure and key participants involved in the transition to MSPV-NG. VA’s primary MSPV-NG program goals are to: Standardize requirements for supply items for greater clinical consistency. Achieve cost avoidance by leveraging VA’s substantial buying power when making competitive awards; VA set a goal of achieving $150 million in cost avoidance in 2016 through a supply chain transformation effort, of which MSPV-NG is a primary part. Achieve greater efficiency in ordering and supply chain management, including a metric of ordering 40 percent of medical centers’ supplies from the MSPV-NG formulary. Involve clinicians in requirements development to ensure uniform clinical review of medical supplies. VHA gave responsibility for developing and implementing MSPV-NG to its Healthcare Commodity Program Executive Office (program office), an organization within VHA’s Procurement and Logistics Office. According to documentation, the program office and SAC, a VA-wide contracting organization, identified several steps to allow for a successful transition to MSPV-NG. These steps included the following: 1. Identify and develop requirements – Determine which types of medical supplies should be made available to medical centers via the MSPV-NG formulary and their key characteristics. The program office was responsible for this aspect of the transition. 2. Award contracts and establish agreements – SAC was responsible for awarding distribution contracts to a select number of prime vendors within certain geographic areas to deliver supplies to medical centers. SAC was also responsible for awarding contracts and establishing agreements with suppliers that provide the products themselves, which set prices for individual items. 3. Implement MSPV-NG at medical centers – MSPV-NG orders are placed by ordering officers—members of the logistics staff at each medical center that are delegated authority by SAC contracting officers to place orders for medical supplies. Each medical center’s most frequently purchased items—referred to as their core list—vary based on the type of care provided, local preferences, and other factors. We have previously reported that organizational transformations (such as MSPV-NG) require careful planning and implementation to be successful. For instance, one leading practice is for leadership to set clear implementation goals and a timeline to achieve them. Likewise, communicating a strategy and progress to stakeholders—as well as seeking feedback—is a hallmark of successful organizational transformations. We have reported that at the center of any serious change management initiative are the people. Thus, to facilitate success, is to recognize the “people” element and implement strategies to help individuals maximize their full potential in the organization, while simultaneously managing the risk of reduced productivity and effectiveness that often occurs as a result of the changes. Building on the lessons learned from the experiences of large private and public sector organizations, the key practices and implementation steps that we identified in our prior work can help agencies transform their cultures so that they can be more results oriented, customer focused, and collaborative in nature. Standards for Internal Control in the Federal Government also identify related principles, such as the importance of the tone from the top and ensuring that data used in decision-making are reliable. Leading hospital networks we spoke with have similar goals to VA in managing their supply chains, including clinical standardization and reduced costs. In managing their supply chain efforts, the leading hospital networks we identified take consistent approaches to drive change and achieve savings. These hospitals reported they analyze their spending to identify items purchased most frequently, and which ones would be the best candidates to standardize first to yield cost savings. These hospitals also acknowledge that this is an iterative process and do not attempt to standardize all categories of medical supplies at a single time, but instead prioritize categories of supplies based on the potential for standardization. The hospitals’ supply chain managers establish consensus with clinicians through early and frequent collaboration on supply chain standardization. These hospitals also continually involve clinicians in determining key supply characteristics and evaluating potential items, understanding that clinician involvement is critical to the success of any effort to standardize their medical supply chain. For example, a supply chain official from one large hospital we spoke with stated that selecting an item that does not meet clinician needs could damage clinician buy-in for future efforts, so they take great care to be thorough in taking clinician input into account. Supply chain officials from these leading hospitals have reported positive results from these efforts, such as increased cost savings and the potential for improved patient care. By tackling a few specific categories at a time and communicating with clinicians on an ongoing basis about the outcomes of these processes and the decisions taken, these hospitals are able to achieve efficiencies, including significant cost savings in some cases, while maintaining buy-in from their clinicians. Figure 3 depicts the key steps that selected hospitals’ supply chain managers reported following when standardizing their medical supply chains, including the critical role of clinicians throughout the process. The Federal Acquisition Regulation (FAR) generally requires agencies to contract using full and open competition, but permits contracting without full and open competition in specified circumstances, such as when the agency’s need for supplies or services is of unusual and compelling urgency. The VHA Procurement Manual describes an emergency as a situation—such as response to fires or floods—where delay in award of a contract would result in financial or physical injury to the VA or a veteran. The manual also states that neither a lack of advance planning nor concerns about a need to obligate funds before the end of the fiscal year are valid justifications for an urgent or emergency procurement request. For needs that cannot be met through MSPV-NG, medical centers submit purchase requests to their local VHA contracting office—the Network Contracting Office. The contracting office provides medical centers with expected lead times for various types of procurements, which can be from days to months, depending on the complexity of the requested item. However, if a medical center has an urgent need that must be met more quickly than the expected lead times, the customer submitting the request can identify it as an emergency. The purchase request is entered into two VA data systems, the Integrated Funds Distribution Control Point Activity, Accounting and Procurement and VA’s Electronic Contract Management System (eCMS). The medical center designates the priority level of the request as: 1. Emergency: life threatening cases, emergency physical plant repair, and requires acquisition action within 24 hours; 2. Special: urgent, non-life threatening, and requires acquisition action within 72 hours; and 3. Standard: all other cases and requires acquisition action within 40 days. Incoming requests are screened by Network Contracting Office managers and assigned to individual contracting officers, who must prioritize emergency requests over other pending contract actions. Figure 4 illustrates the typical process for submitting and awarding an emergency procurement. VHA’s implementation of the MSPV-NG program—from its initial work to identify a list of supply requirements in 2015, through its roll-out of the formulary to medical centers in December 2016—was not executed in line with leading practices. Despite changes aimed at improving implementation, the agency continues to face challenges that have precluded achievement of program goals. Specifically, VHA lacked a documented program strategy, leadership stability, and workforce capacity for the transition that—if in place—could have facilitated buy-in for the change throughout the organization. Furthermore, the initial requirements development process and tight time frames contributed to ineffective contracting processes. As a result, VHA developed an initial formulary that did not meet the needs of the medical centers. VA made some changes in the second phase of requirements development to address deficiencies identified in the initial roll out, namely by increasing the level of clinical involvement. However, VHA has not yet achieved its goals for utilization and cost avoidance. VA did not document a clear overall strategy for the MSPV-NG program at the start and has not done so to date. According to program office and SAC officials responsible for developing and executing the program, no document existed at the outset of the MSPV-NG program that outlined the overall strategy. About 6 months after our initial requests for a strategy or plan, an official provided us with an October 2015 plan focusing on the mechanics of establishing the MSPV-NG formulary. However, this plan was used only within the VHA Procurement and Logistics Office and had not been approved by VHA or VA leadership. Leading practices for organizational transformation state that agencies must have well-documented plans and strategies for major initiatives (such as MSPV-NG) and communicate them clearly and consistently to all involved—which included VHA headquarters, the SAC, and all 170 medical centers. Without such a strategy, VA could not ensure that all stakeholders understood VHA’s approach for MSPV-NG and worked together in a coordinated manner to achieve program goals. This is also in contrast to the practices of several leading hospital networks we met with, which placed an emphasis on designing and communicating a strategy and governance structure for their medical supply standardization efforts before making any changes to purchasing. If VA continues to move forward with MSPV-NG without an overarching strategy that it communicates to all stakeholders to ensure they understand VHA’s approach for MSPV-NG, VA will continue to face challenges in meeting program goals. Leadership instability and workforce challenges also made it difficult for VA to execute its transition to MSPV-NG. Due to a combination of budget and hiring constraints, and lack of prioritization within VA, the program office, which has primary responsibility for implementing MSPV-NG, has never been fully staffed and has experienced instability in leadership. As of January 2017, 24 of the office’s 40 positions were filled, and program office officials stated that this lack of staff affected their ability to implement certain aspects of the program within the planned time frames. Our work has shown that leadership buy-in is necessary to ensure that major programs like MSPV-NG have the resources and support they need to execute their missions. We have also previously found that leadership must set a tone at the top and demonstrate strong commitment to improve and address key issues. However, leadership of VHA’s Procurement and Logistics Office changed frequently during the implementation of MSPV-NG, and two of its leaders, the Chief Procurement and Logistics Officer and the Deputy Chief Logistics Officer, were serving in an acting capacity. A similar instability in leadership affected the program office itself. Since the inception of MSPV-NG, the program office has had four directors, two of whom were acting and two of whom were fulfilling the director position while performing other collateral duties. For instance, one of the acting MSPV-NG program office directors was on detail from a VISN office to fulfill the position but had to abruptly leave and return to her VISN position due to a federal hiring freeze. Without prioritizing the hiring of the program director position on a permanent basis, this lack of stability could continue to affect execution of MSPV-NG. Moreover, VA’s Chief Acquisition Officer (CAO), whose responsibilities include oversight of VA acquisition programs such as MSPV-NG, is serving in an acting capacity and is not a “non-career employee.” By statute, VA is required to appoint or designate a non-career employee as the agency’s CAO. VA provided information to show that since 2009, VA has designated career employees as “acting” CAOs rather than appointing or designating non-career employees to the CAO position. As we reported in 2012, clear, strong, and effective leadership, including a CAO, is key to an effective acquisition function that can execute complicated procurements like MSPV-NG. By appointing a CAO in a non-acting capacity, VA could improve the effectiveness of its acquisition function. During our 2012 review, VA indicated that it sought to establish an Assistant Secretary for Acquisition, Logistics, and Construction, who would serve as VA’s CAO. In connection with the current review, VA’s Office of General Counsel cited a statutory limitation on the number of assistant secretaries that may be established within VA as the reason it has not established that additional assistant secretary position. VA’s Office of General Counsel indicated that the agency was considering requesting, in the reform plan that VA was required to submit to the Office of Management and Budget in September 2017, a change to the statute that limits the number of VA assistant secretaries. However, subsequently, VA’s Office of General Counsel indicated that the plan will not include such a request. By not appointing or designating a non- career employee as CAO, VA will continue to be noncompliant with the statute. Figure 5 summarizes the history of leadership changes in these positions, which are all currently filled in an acting capacity. Further, according to officials, leadership vacancies at medical centers and competing demands on logistics staff time made implementation of MSPV-NG more challenging at the selected VISNs and medical centers we visited. For instance, longstanding vacancies in the Chief Supply Chain Officer positions existed at one of the VISNs and its medical center that we visited. The VISN-level position was vacant for about 4 years, with Chief Supply Chain Officers from individual medical centers filling in for periods of time, according to the current Chief Supply Chain Officer, who took the position in January 2017. In one medical center within that VISN, the local position was also vacant for several years, according to the current Chief Supply Chain Officer, who took the position in 2016. He stated that he found that the staffing of the office had suffered in the absence of a leader, leaving it poorly-equipped to execute the transition to MSPV-NG. Medical center logistics staff also had several other major transformation efforts to manage alongside the MSPV-NG transition, such as implementing a new system for managing equipment. Several Chief Supply Chain Officers we interviewed stated that these additional demands made it challenging for their staff to implement the MSPV-NG program. The MSPV-NG program office initially developed requirements for medical and surgical supply categories—identifying items to include in the formulary—based almost exclusively on prior supply purchases, with limited clinician involvement. The program office concluded in its October 2015 formulary plan that relying on data on previous clinician purchases would be sufficient and that clinician input would not be required for identifying which items to include in the initial formulary. Further, rather than standardizing purchases of specific categories of supplies—such as bandages or scalpels—program officials told us they identified medical and surgical items on which VA had spent $16,000 or more annually and ordered at least 12 times per year, and made this the basis for the formulary. Officials said this analysis initially yielded a list of about 18,000 items, which the program office further refined to about 6,000 items by removing duplicate items or those that were not considered consumable commodities, such as medical equipment. In 2015, the program office also took the lead in developing requirements for these 6,000 items. In documentation, and as confirmed by agency officials, we found that the program office did not solicit input from clinicians for most items and did not prioritize categories of supplies. Instead, the program office relied on historical purchase data to set requirements across medical and surgical categories because officials said they thought this would provide a good representation of medical centers’ needs. This approach to requirement development stood in sharp contrast to those of the leading hospital networks we met with, which relied heavily on clinicians to help drive the standardization process and focused on individual categories of supplies rather than addressing all categories simultaneously. Based on the requirements developed by the program office, SAC began to issue solicitations for the 6,000 items on the initial formulary in June 2015. From June 2015 to January 2016, medical supply companies responded to only about 30 percent of the solicitations. As a result, according to SAC officials, they conducted outreach and some of these companies told SAC that VHA’s requirements did not appear to be based on clinical input and instead consisted of manufacturer-specific requirements that favored particular products instead of broader descriptions. Furthermore, SAC did not solicit large groups of related items, but rather issued separate solicitations for small groups— consisting of 3 or fewer items—of supply items. This is contrary to industry practices of soliciting large groups of related supplies together. Therefore, according to SAC officials, some medical supply companies told them that submitting responses to SAC’s solicitations required more time and resources than they were willing to commit. By its April 2016 deadline for having 6,000 items on the formulary, SAC had been working on the effort for over a year and had competitively awarded contracts for about 200 items, representing about 3 percent of the items. Without contracts for the items on the formulary in place, VA delayed the launch of the MSPV-NG program until December 2016. To continue the legacy MSPV program through the new launch date, SAC awarded bridge contracts—short-term sole-source contracts—to its legacy prime vendor contractors for a second year. We previously reported that bridge contracts had resulted in higher costs to the government. In part because of these costs, SAC officials stated that VA leadership did not view a third set of bridge contracts for the legacy MSPV program as a viable option. As a result of the pressure not to miss the revised December 2016 deadline, which VA documents we reviewed stated would have been “catastrophic,” SAC abandoned its original goal of using competitive procedures and relied instead on a non-competitive strategy for placing most of the items on the MSPV-NG initial formulary. Starting in August 2016, SAC established 175 limited source blanket purchase agreements with Federal Supply Schedule vendors to complete the initial Phase 1 formulary. While this approach enabled the MSPV- NG program office to establish the formulary more quickly, it did so at the expense of one of the primary goals of the MSPV-NG program— leveraging VA’s buying power to obtain cost avoidance through competition. We previously reported that a senior VA procurement official said VA could save 30 percent, on average, on the prices available under the Federal Supply Schedules when awarding competitive contracts that leveraged VA’s buying power under the legacy MSPV program. The discounts VA obtained from these limited source agreements were generally much less. We reviewed a non-generalizable sample of 10 randomly-selected limited source blanket purchase agreements and found that most items (332 of the 376 items covered by these agreements) were discounted 5 percent or less. Competition is the cornerstone of the acquisition system; its benefits are well established, including saving the taxpayer money. As shown in figure 6, the non- competitive agreements awarded in the last few months before the launch of MSPV-NG accounted for approximately 79 percent of the items on the January 2017 version of the formulary. Once VA’s MSPV-NG initial formulary was established in December 2016, each medical center was charged with implementing it. Previously, medical centers had hundreds of thousands of items they could obtain through the legacy MSPV program. In order to transition to the new formulary—consisting of around 6,000 items at launch—the program office directed medical centers to determine if items they had ordered in the past could be fulfilled by the formulary. To do this, each medical center’s Chief Supply Chain Officer—the head of the logistics office—was to review their center’s core list of previously ordered items to try to identify matches on the MSPV-NG formulary in three different categories: 1. Direct matches – For some items, the exact same item a medical center had been purchasing was available in the formulary. Identifying these matches may not necessarily be simple, as the names and identification numbers were not typically the same. 2. Potential clinical equivalents – Many items that were no longer available under the MSPV-NG formulary had close matches on the formulary. However, because these were not exactly the same, work was required to ensure that they were clinically equivalent—in nearly all cases, this required clinician input. Clinical Product Review Committees at each medical center, which are comprised of clinicians and others, are responsible for approving new supplies before they are introduced to a medical center. 3. Items without matches – Finally, there were some items that medical centers had been purchasing for which logistics staff were not able to identify a clinical equivalent in the MSPV-NG formulary. In these cases, logistics staff sought non-MSPV methods of obtaining the same items they had previously purchased—usually via purchase card transactions and, in a few cases, via requests to their local contracting office to award new contracts for the items. Figure 7 shows the typical process for identifying MSPV-NG matches for core list items at individual VA medical centers, as described by logistics officials at the selected medical centers. According to logistics officials we spoke with, the MSPV-NG formulary matching process was challenging for the selected medical centers, and they had varying levels of success, in part, due to incomplete guidance from the program office. The MSPV-NG program office provided some guidance, including a tool for identifying direct matches, but three of the Chief Supply Chain Officers at the selected medical centers stated that they did not find it very helpful, in part, because it only included matches for the highest-volume items. Based on our discussions with the MSPV- NG program office and selected medical centers, as well as our review of communications provided to medical centers, the program office provided various emails and held conference calls, but did not provide complete guidance to summarize the steps medical centers should take to execute the matching process. Without complete guidance, each selected VISN and medical center approached the process somewhat differently. One medical center devoted a great deal of effort to matching items early on, had completed its review, and determined its purchasing strategy for nearly all core list items before the transition period was complete. Others devoted less attention to this and planned instead to rely on purchase cards to continue buying the same items they had purchased under the legacy MSPV program, which works against VA’s goal of leveraging buying power through MSPV-NG. The amount of clinician input on the matching process varied among medical centers in our review, in part, because the various communications from the program office did not provide complete information on how to involve clinicians and Clinical Product Review Committees at medical centers. While the program office asked medical centers to involve clinicians, it did not specify a process for how to do so, and centers were left to develop their own approaches. For example, in one selected VISN, the Deputy Chief Medical Officer became involved with the logistics office coordination effort and obtained active participation from clinicians at each medical center, who formed working groups to review potential clinical equivalent matches. In other VISNs and medical centers, there was little concerted effort to involve clinicians at this stage of the process, and only a few clinical equivalent items were reviewed and matched with clinical input. Without effective matching to the formulary, VA cannot achieve the MSPV-NG utilization rates it needs to meet the program’s goals. Without complete guidance, these centers may be unable to effectively match their core lists to the MSPV-NG formulary and, thus, increase their utilization of it. The MSPV-NG formulary also continued to change while the medical centers were working to match their core list items, which made the process more challenging. Several clinicians and logistics staff at the medical centers we visited expressed frustration about the frequency by which items were being added and deleted on the formulary and the impact it had on their purchasing strategies. Our analysis found that in April 2017, 690 items were added to the formulary, but, in June, 628 items were deleted. These medical center officials also noted that they had not received any communications from the program office or SAC regarding why items were being added and deleted, and were unsure why the changes were taking place. SAC and MSPV-NG program office officials stated that these continuing changes stemmed from several factors, including elimination of duplicate items from multiple vendors and addition of other items identified as necessary by VHA or medical centers. In some cases, medical center officials told us that that they were less willing to expend effort on the matching process because the formulary was a moving target. Without visibility into or an understanding of the criteria used by the program office on its process for adding or removing items on the formulary, medical centers will likely continue to face challenges in matching their items to the formulary. See Table 1 for the number of items added and deleted from the formulary from January to July 2017. Many medical centers were unable to find direct matches or substitutes for a substantial number of items on their core lists, which negatively impacted utilization rates for the initial formulary. In October 2015, the program office estimated that the items on the initial formulary would meet 80 percent or more of the medical centers’ needs. However, according to SAC, as of June 2017, only about a third of the items on the initial version of the formulary were being ordered in any significant quantity by medical centers, indicating that many items on the formulary may not be those that are needed by medical centers. Senior VHA acquisition officials attributed this mismatch to shortcomings in their initial requirements development process as well as with VA’s purchase data. VA set out a target that medical centers would order 40 percent of their supplies from the MSPV-NG formulary, but utilization rates are below this target with a nationwide average utilization rate across medical centers of about 24 percent as of May 2017. Instead of fully using MSPV-NG, the selected medical centers are purchasing many items through other means, such as purchase cards or new contracts awarded by their local contracting office, in part, because they said the formulary does not meet their needs. These approaches run counter to the goals of the MSPV-NG program and result in VA not making the best use of taxpayer dollars. Specifically, Chief Supply Chain Officers—who are responsible for managing the ordering and stocking of medical supplies at the six selected medical centers—told us that many items they needed were not included in the MSPV-NG formulary. As discussed above, the difficult transition process also created a lack of clinician desire to find substitutes on the formulary. As such, we found that these six medical centers generally fell below VA’s stated utilization target that medical centers order 40 percent of their items from the MSPV-NG formulary. As shown in figure 8, among the six selected medical centers we reviewed, one met the target, while the remaining five were below 25 percent utilization. The one facility that met the target, Hampton VA Medical Center, is categorized by VA as a smaller, less complex facility, and had fewer items to match, which could contribute to its higher utilization. The utilization rate is VA’s primary metric for the success of MSPV-NG— broad usage of the formulary is necessary for VA to meet its goals of more efficient supply purchasing, standardization, and cost avoidance. Utilization is calculated by dividing the purchases made via MSPV-NG by the total purchases under the medical supply budget category. This is the same metric used under the legacy MSPV program, and most medical centers were meeting the 40 percent target prior to the transition to MSPV-NG. Officials stated that the current metric does not provide enough information and, as a result, VHA is in the process of preparing a new metric to more precisely assess MSPV-NG use and effectiveness, and has begun conducting routine surveys of its medical centers to obtain their feedback on MSPV-NG. Greater utilization of MSPV-NG is essential to VA achieving the cost avoidance goal of $150 million for its supply chain transformation effort. Under the legacy MSPV program, the National Acquisition Center tracked cost avoidance achieved by comparing prices for competitively-awarded MSPV supply contracts with prices available elsewhere. However, VHA officials stated that they are not currently tracking cost avoidance related specifically to MSPV-NG. VHA officials told us they plan to use a new cost avoidance metric that compares total supply spending for VHA as a whole across fiscal years. This new metric, however, does not measure whether cost savings are being achieved specifically through MSPV-NG. Officials stated the broader metric was more useful than measuring cost avoidance specific to MSPV-NG. VA’s practices are in contrast with those of the leading hospitals we met with, which maintain detailed, item-level data on cost avoidance and use them to inform future supply requirements and contracting. These hospitals we interviewed reported substantial cost savings from their standardization efforts. For example, the director of supply chain management at one leading hospital network stated that it achieved a goal of $100 million in cost savings on medical supplies in the first 2 years of their standardization effort, and an additional $35 million annually in the several years since. This hospital achieved these results despite its purchasing power being less than VA’s. Without calculating cost avoidance attributable to MSPV-NG, VHA cannot assess whether the program is meeting its goals, nor can it use cost avoidance data to guide future MSPV-NG requirement development and contracting strategy efforts. In Phase 2 of MSPV-NG, the program office has taken some steps to incorporate greater clinical involvement in subsequent requirement development, but both its requirements development and SAC’s contracting efforts have been hampered by staffing and schedule constraints. Work on Phase 2 began while medical centers were implementing Phase 1 and beginning to order from the MSPV-NG formulary. Figure 9 shows key dates in the concurrent requirements development, contracting, and implementation processes for Phases 1 and 2. In the fall of 2016, the program office began to establish panels of clinicians—including physicians, surgeons, and nurses working in the medical centers—to serve on MSPV-NG integrated product teams (IPT) assigned to the task of developing updated requirements for the second phase of the formulary. The IPTs were to review categories of medical supplies such as operating room surgical supplies and patient exam room instruments and supplies. According to VA officials and our analysis, this revised approach was based on a recognition that more robust mechanisms were needed for incorporating clinician input, in part, because VA had sought information on best practices from leading hospital networks, and because of shortcomings with the Phase 1 requirements that became apparent in the contracting process. Similar to the analysis performed in support of the initial formulary, the MSPV-NG program office analyzed updated data on medical center supply purchases to generate a list that had grown from the 6,000 items established for the initial formulary to a new total of about 9,900 items for these new IPTs to review. The program office set a March 2017 deadline to complete this second, IPT-based phase of requirements development—VHA ultimately met this compressed timeline, but in a rushed manner that limited the impact of the clinical involvement. Program officials said they had difficulty recruiting clinicians to participate, and the program office’s first IPTs were not established until the fall of 2016. In December 2016, slightly more than half (20 of the 38) of the IPTs had begun their work to review items and develop updated requirements. Many of the remaining IPTs were still looking for additional clinicians to participate. Program officials said they received assistance from the Assistant Deputy Under Secretary for Health for Administrative Operations in December 2016. According to program officials, this involvement proved critical in successfully recruiting staff to participate in some of the remaining IPTs, which were then able to make progress in reviewing each item in the formulary. However, the program office did not provide training for the IPTs on how to carry out their work until late January 2017, about 2 months before the IPTs were scheduled to complete the development of all medical and surgical requirements. Further, staff on the IPTs had to complete their responsibilities while simultaneously managing their regular workload as physicians, surgeons, or nurses. By early March 2017, the IPTs still had about 4,200 of the 9,900 items to review. Faced with meeting this unrealistic time frame, the MSPV-NG program office had 9 IPT members travel to one location—with an additional 10 members participating virtually—to meet for 5 days to review the remaining items. Members told us that this time pressure limited the extent to which they were able to pursue the goal of standardizing supplies, and that their review ended up being more of a data validation exercise than a standardization review. In addition, the program office attempted to pursue standardization across all supply categories rather than those with the greatest potential for standardization and cost avoidance and continues to lack a strategy for doing so going forward. Standards for Internal Control in the Federal Government state that management should define what is to be achieved and who is to achieve it, how it will be achieved, and the time frames for achievement. In addition, this approach runs counter to how leading hospitals standardize their supply chains by tackling individual categories one at a time and obtaining deep clinician involvement. Without a strategy for how best to prioritize these items by category for future phases of the requirement development process, these IPTs will be limited in fully contributing to VHA’s goals of more efficient supply purchasing, standardization, and cost avoidance. SAC’s ongoing Phase 2 contracting effort also faces an unrealistic schedule. The SAC plans to replace the existing Phase 1 limited source agreements with competitive awards based on the Phase 2 requirements generated by the IPTs, but it may not be able to keep up with expiring agreements. Because they were made on a non-competitive basis, the Phase 1 limited source blanket purchase agreements were established for a period of one year. In order to keep the full formulary available, the SAC director said his staff must award several hundred contracts before the Phase 1 limited source agreements expire later this year. However, the SAC director stated that doing so will be difficult because his staff must award between 200 to 250 contracts in a 3-month period from the end of September 2017 through December 2017. To adhere to this ambitious schedule, each of the 15 contracting staff on the MSPV-NG team would need to award between 13 to 17 contracts within 3 months, equaling one contract per staff member every 5 to 6 days, which is significantly faster than SAC’s typical pace. SAC officials acknowledged that it is unlikely that they will be able to award the 200 to 250 contracts by the time the existing limited source agreements expire. According to SAC officials, they are in the process of hiring more staff to deal with the increased workload. Further, the SAC division director told us that they cancelled all outstanding Phase 2 solicitations in September 2017 due to low response rates, protests from service-disabled veteran-owned small businesses, and changes in overall MSPV-NG strategy. SAC is still assessing alternative approaches, which poses additional challenges for replacing expiring agreements by December 2017. For cases where limited source agreements expire without new contracts in place, SAC officials said they intend to use a different type of agreement called a distribution and pricing agreement as a stopgap. They stated that the use of these agreements with suppliers who have existing limited source agreements would prevent items from falling off the formulary. However, like BPAs, the agreements are not contracts—the supplier informally agrees to continue to sell its products to VA at the same price and terms. SAC officials stated that VA has not used these types of agreements previously, and they pose a risk in that the supplier is not required to perform and VA has no remedy if the supplier opts to end the agreement or raise the price. These agreements also do not allow VA to achieve its goal of achieving greater cost avoidance through supply standardization and competitive contracts. Despite the unrealistic time frames and the risks of the stopgap approach, VA has not developed a plan for how to mitigate these risks, established an achievable schedule for making the competitive Phase 2 contract awards, or prioritized the various categories of supplies. Establishing such a plan would help ensure that VA is better positioned to mitigate risks and prioritize supply categories that are most likely to yield cost avoidance. VA is currently revising its approach to MSPV-NG requirement development to adopt a model that focuses on clinician-driven sourcing, a key step that leading hospital networks reported following in standardizing their medical supply chains. The MSPV-NG program office continues to refine its strategy for requirement development and is seeking greater clinician involvement in future requirement development efforts, which it refers to as clinician-driven sourcing. For example, program officials said they plan to involve VHA’s national clinical program offices—groups of clinicians at VHA that provide national policy and leadership within their clinical specialty—to obtain greater buy-in from senior clinical leaders and to implement a more structured approach for identifying clinicians willing to serve on integrated product teams. This approach, if implemented effectively, could mitigate some of the prior challenges in recruiting clinicians to participate. However, these efforts are in their early stages, and the MSPV-NG program office has not outlined whether or how it will use input from these clinical groups to prioritize its requirements development and standardization efforts. Without input from these national clinical program offices, VA will continue to be challenged to focus on supply categories that offer the best opportunity for standardization and cost avoidance. Senior VHA and MSPV-NG program officials also told us each VA medical center was expected to use a standing committee, known as the Clinical Product Review Committee, to review new items to include on the formulary and to evaluate opportunities to streamline the formulary through standardization. This approach will likely require additional effort on the part of the MSPV-NG program office to implement, as some centers’ clinicians said the Clinical Product Review Committees were not operating as intended. VA is also exploring major changes in its contracting strategy for MSPV- NG. Specifically, MSPV-NG program office and SAC officials plan to replace the current contract and formulary process with a new contract where the vendor would not only provide distribution services, but also develop the formulary. In October 2017, VA sought information from industry on their capabilities to support such a program. VA stated that its target completion date for this new MSPV-NG contracting strategy is December 2018. To date, VA has provided only limited details on this potential new approach, thus, we cannot assess whether it has the potential to address the shortcomings with the current MSPV-NG approach described in this report. Some emergencies are to be expected, as VHA operates one of the largest health care systems in the country. However, VHA designated a substantial number of its procurements in fiscal year 2016 as emergencies, and we found that it frequently uses emergency procurements to buy routine supplies and on-going services that do not warrant the emergency designation defined in VHA guidance. Among the 18 contract actions we reviewed from three VISNs, we found instances of emergency procurements caused by shortcomings in planning, funding, and communication. These emergency procurements strain the capacity of VA’s acquisition workforce and put the government at risk of paying more than it should for goods and services. Based on our analysis of VA data, we found that emergency procurements accounted for approximately 20 percent of VHA’s overall contract actions in fiscal year 2016, with obligations totaling about $1.9 billion. As shown in figure 10, we found that the percentage of requests designated as emergencies varied across the 19 VISNs. We selected a non-generalizable sample of 18 contract actions designated by customers as emergencies. Most of these contracts were not awarded on a competitive basis, and half cited the unusual and compelling urgency exception to full and open competition. Table 2 shows instances in which the 18 contract actions were awarded without competition, those that cited unusual and compelling urgency as the basis for use of non-competitive procedures, and our observations on the main contributing factor to designating these procurements as emergencies. Additional information on each of the contributing factors follows. VHA guidance specifies that neither a lack of acquisition advance planning nor concerns about a need to obligate funds before the end of the fiscal year are valid justifications for an urgent or emergency procurement request. However, among our selected contract actions, lack of planning by customers was a principal contributing cause, leading to 7 of the 18 contract actions being procured as emergencies, resulting in some non-competitive awards to the incumbent vendor for the same requirement. For instance, one medical center procured medical gas on an emergency basis through consecutive non-competitive contracts. The initial contract was terminated because the company was not licensed by the state where services were being provided, which led to a 3-month emergency contract being awarded to a different vendor. This was followed by a series of non-competitive bridge contracts to that incumbent vendor over a 3-year period. In another case, a medical center routinely procured custom surgical packs through consecutive emergency sole- source purchase orders. The contracting officer’s representative told us the medical center may be paying more for custom surgical packs ordered on an emergency basis than it would under a competitive, long- term contract. Funding uncertainty also contributed to three awards being designated as emergencies. For example, one medical center submitted an emergency request to outsource patient laundry due to funding uncertainties for repairs of on-site, VA-owned and operated laundry equipment. The contracting officer’s representative stated that the VISN could not provide funds to repair the equipment, leading to a series of last-minute emergency requests, a few months at a time, for contracted patient laundry services to prevent a gap in service. At another VISN, a large amount of funding became available late in the fiscal year, which led to an emergency request to purchase postage to ensure the funding was spent before it expired at the end of that fiscal year. The contracting office issued an order for $890,000 worth of metered mail postage, which medical center staff told us would cover 1 to 2 years of usage. We found that shortcomings in communication between customers and contracting offices also contributed to eight awards made on an emergency basis for routine items. For one of the contracts in our review, a medical center resubmitted a request in January 2016 to purchase equipment for a new operating room that had previously been submitted as a standard request months earlier. However, the contracting officer’s representative at the medical center told us that no action was taken by the contracting office, and he did not receive a response for 6 months. The medical center then upgraded the request to an emergency since the operating room was scheduled to open in June 2016. The contracting officer’s representative noted that delays procuring the equipment past the scheduled opening date would delay the opening of the new operating room and possibly result in the rescheduling or cancelling of procedures, affecting patient care. After the order was upgraded to an emergency, the equipment was ultimately delivered before the operating room was opened. In another case, an inventory manager routinely submitted emergency purchase requests for cardiac catheters as a strategy to manage stock levels. The reason he cited was that he was uncertain how long it would take the contracting office to fulfill standard requests. He stated that the contracting office’s time frames for standard orders are unpredictable, and more consistent communication about the expected delivery date of any given order would reduce his need to place emergency orders. He noted that being able to plan around delivery dates was important for maintaining stock at designated levels for the various types of catheters used in the cardiology department. Figure 11 shows a medical center stock room and designated stock levels for one type of catheter. The “L” indicates the standard stock level, and “R” indicates the level of stock at which refill is needed. Ordering officers use these levels to inform when they should place orders. In addition to being contrary to VHA guidance, overuse of emergency procurement requests has negative effects on the overall operation of VA’s procurement system. In reviewing the 18 selected contracts, we identified two primary effects—the potential for increased costs and increased burden on the contracting workforce that could take resources away from other important efforts. As noted above, half of the contract actions we reviewed (9 out of 18) cited unusual and compelling urgency as the basis for the use of non- competitive procedures. When unusual and compelling urgency exists, an agency may limit competition to the firms it reasonably believes can perform the work in the time available. In all nine cases, however, there was no competition at all, which puts the government at risk of paying more than it should for goods and services. Promoting competition— even in a limited form—increases the potential for quality goods and services at a lower price. We have previously reported that competition in contracting is a critical tool for achieving the best return on investment and that it can improve contractor performance and promote accountability for results. Emergency procurement requests must be processed quickly, and contracting officers have limited ability to question the validity of an emergency request. Nevertheless, many of the contracting officials we spoke with that had responsibility for our 18 selected contracts told us they generally communicate directly with the requestor to clarify the requirement and assess the nature of the request. As stated in the VHA procurement manual, contracting officers generally must process emergencies within 5 days or less. However, the manual acknowledges that different Network Contracting Offices assign different time frames to priority categories. For instance, officials from all three selected Network Contracting Offices told us they generally process emergencies immediately. Several contracting officials we interviewed stated that, because they do not have clinical expertise, they infrequently question the medical center staff customer about whether their request is truly an emergency. Even if they work with customers to reach a compromise, such as purchasing a smaller quantity to fill just the immediate need, emergencies still require immediate attention and result in deprioritizing other tasks. The impact on the contracting officer workload can be exacerbated by low staffing levels. For example, none of the three Network Contracting Offices we visited were staffed to their authorized levels. Table 3 shows the number of emergency actions processed by each selected Network Contracting Office in fiscal year 2016, along with staff levels. We have previously reported that when contracting officers process frequent and emergency small-dollar transactions, it reduces their ability to plan ahead and take a strategic view of procurement needs. Several of the VA contracting officials we spoke with noted that regularly processing emergency contracts and extensions affects their ability to work on bigger-picture efforts, some of which would reduce workload. For instance, one contracting officer stated that awarding emergency contract extensions has prevented him from competitively awarding more than 40 lab contracts. In these cases, the contracting officer stated that he instead extended the period of performance of the non-competitive contracts to the incumbent vendors. In addition, emergency contracts are generally awarded for short periods of time—often 1 year or less—while competitive contracts often have terms of 5 years. According to some contracting officers we spoke with, this can result in contracting officers spending much of their time tending to a large number of short-term contracts, instead of a smaller number of fully-competed contracts with longer periods of performance. We found that greater planning and coordination between medical center and contracting staff can help to leverage VA’s buying power by employing principles of strategic sourcing—a process that moves away from numerous individual procurements to a broader aggregate approach—and thereby reducing the need for emergencies. For example, inventory managers responsible for two of the selected cardiac catheter contracts in our sample stated that managing catheter inventory was difficult because of the unpredictability of the needs, the high cost of the items, and the long turnaround times from their respective contracting offices. As a result, they had to place frequent emergency orders to keep stock at safe levels. One inventory manager noted, however, that there is no longer a need to place emergency orders for catheters because the SAC has since put in place a purchasing agreement that enabled her to place orders directly, without requiring involvement from the contracting office. In addition to reducing contracting office workload, the supply technician said this agreement greatly reduced the amount of work required to place an order and allowed her to more effectively maintain her inventory with short and predictable turnaround times. She also stated that the agreement protected against the frequent price increases she experienced when purchasing the catheters on the open market through the contracting office. The agreement also reduced workload for the local VISN contracting office. In analyzing eCMS data on awards from fiscal years 2014 through 2016, we identified several types of goods and services that were repeatedly purchased on an emergency basis through stand-alone contract actions. This suggests there may be additional opportunities, at both the VISN and national levels, to reduce emergencies by making supplies and services available through more efficient, competitively-awarded contract vehicles. In addition to reducing burden on logistics and contracting staff, reviewing existing spending to find opportunities to leverage buying power is also in line with strategic sourcing best practices. MSPV-NG is one such contracting mechanism for procuring routine supplies, and a more strategic approach to developing requirements for the formulary could help avoid some emergency procurements. Our analysis of VA eCMS data found that many awards designated as emergencies were for medical-surgical items, some of which could likely be purchased through MSPV-NG. Figure 12 shows the number of medical-surgical procurements designated as emergencies within each VISN in fiscal year 2016. Within our sample of 18 contract actions, we found several instances of reoccurring emergency procurements for medical-surgical supplies, such as custom surgical packs and catheters. Procuring routine supplies on an emergency basis defeats the objectives of MSPV-NG to leverage VA’s large buying power and make the process of ordering supplies more efficient and transparent. However, while data on emergency procurements are available, VHA’s Procurement and Logistics Office does not currently analyze this data to identify items frequently purchased on an emergency basis to determine whether such items could be referred to SAC to be added to the MSPV-NG formulary. In addition, local VISN Network Contracting Offices have also not used available data on emergency purchases to identify items frequently purchased on an emergency basis. Steps by VHA’s Procurement and Logistics Office and individual VISN contracting offices to review such data and identify opportunities for leveraging MSPV-NG or other national contracts could help VA achieve greater efficiency. Purchasing medical supplies through individual emergency contract actions is much less efficient than using MSPV-NG; moreover, by making numerous individual procurements at the local level and not leveraging its aggregate buying power, VA is paying more for items than it needs to. Any major organizational change requires a solid strategic plan that is communicated with stakeholders, stable leadership, and stakeholder involvement and buy-in. VHA was missing all of these elements when it rolled out the MSPV-NG program, which presented obstacles to effective implementation and buy-in and affected the program’s ability to meet its goals. Moving forward, without an overall strategy that is communicated to all stakeholders and enhanced leadership stability, VHA will likely continue to face these challenges. In addition, in the initial requirements development process, VHA relied on prior purchase data—rather than clinician input—and did not prioritize categories of medical supplies, both of which veered from practices employed by leading hospital networks. Once the initial formulary was established, medical centers faced challenges matching supply items to the formulary and took varying approaches, in part, due to incomplete guidance on key aspects of the process and frequent changes in the items on the formulary. Providing complete guidance and communicating the criteria and processes for adding or removing items from the formulary would help centers more effectively match items to the formulary, thereby increasing utilization, which as of May 2017 was below VA’s established target. Further, because it does not calculate cost avoidance attributable to MSPV-NG, VA cannot accurately measure the extent to which the program is contributing to its overall cost avoidance goal. VA made changes during the second phase of requirements development, in particular to encourage greater clinician involvement. However, the program faces an unrealistic contracting schedule and has not yet developed a plan for how to manage or mitigate the associated risks. Establishing such a plan is essential for risk mitigation, and supply category prioritization could help VA target those categories most likely to yield cost avoidance. In addition, while the program is planning to involve national clinical program offices to obtain greater clinician buy-in, it has not outlined whether or how it will use input from these groups to prioritize its requirements development efforts. Without such input, VA will continue to face challenges focusing on those supply categories that offer the best opportunity for standardization and cost avoidance. Further, VA is considering another major change in its MSPV program in which the prime vendor may absorb some of the work currently conducted by SAC. However, VA may face challenges in this new approach until it addresses the existing shortcomings in the MSPV-NG program, such as the absence of a documented overall strategy, insufficient clinician involvement in the requirements development process, and lack of medical center buy-in. Meanwhile, among the 18 contract actions we reviewed, we found shortcomings in planning and communication that led to medical centers’ overreliance on emergency procurements to obtain routine goods and services—some of which could be made available via MSPV-NG— bypassing effective contracting practices like competition. These emergency procurements can be a particular drain on resources, especially those of contracting officers who must respond immediately to fulfill emergency orders. Identifying opportunities to more strategically purchase frequently purchased goods and services—both at the local levels and nationwide through the MSPV-NG program—could help minimize these workforce challenges and minimize costs. We are making 10 recommendations to VA. The Director of the MSPV-NG program office should, with input from the Strategic Acquisition Center (SAC), develop, document, and communicate to stakeholders an overarching strategy for the program, including how the program office will prioritize categories of supplies for future phases of requirement development and contracting. (Recommendation 1) The VHA Chief Procurement and Logistics Officer should take steps to prioritize the hiring of the MSPV-NG program office’s director position on a permanent basis. (Recommendation 2) The Secretary of Veterans Affairs should assign the role of Chief Acquisition Officer to a non-career employee, in line with statute. (Recommendation 3) The Director of the MSPV-NG program office should provide complete guidance to medical centers for matching equivalent supply items, which could include defining the roles of clinicians and local Clinical Product Review Committees. (Recommendation 4) The Director of the MSPV-NG program office should, with input from SAC, communicate to medical centers the criteria and processes for adding or removing items from the formulary. (Recommendation 5) The VHA Chief Procurement and Logistics Officer, in coordination with SAC, should calculate cost avoidance achieved by MSPV-NG on an ongoing basis. (Recommendation 6) The MSPV-NG program office and SAC should establish a plan for how to mitigate the potential risk of gaps in contract coverage while SAC is still working to make competitive Phase 2 awards, which could include prioritizing supply categories that are most likely to yield cost avoidance. (Recommendation 7) The VHA Chief Procurement and Logistics Officer should use input from national clinical program offices to prioritize its MSPV-NG requirements development and standardization efforts beyond Phase 2 to focus on supply categories that offer the best opportunity for standardization and cost avoidance. (Recommendation 8) The VHA Chief Procurement and Logistics Officer should direct VISN Network Contracting Offices to work with medical centers to identify any opportunities to more strategically purchase goods and services frequently purchased on an emergency basis. For example, offices could do this by analyzing existing data. (Recommendation 9) VHA Chief Procurement and Logistics Officer should analyze data on items that are frequently purchased on an emergency basis, determine whether such items are suitable to be added to the MSPV-NG formulary, and work with SAC to make any suitable items available via MSPV-NG. (Recommendation 10) We provided a draft of this report to the Department of Veterans Affairs for review and comment. VA provided written comments on a draft of this report. In its written comments, reprinted in appendix II, VA concurred with all of our 10 recommendations. In its response to our recommendation that VA assign the role of Chief Acquisition Officer to a non-career employee, as required by statute, VA stated that it is unable to implement the recommendation without congressional action and requested closure of the recommendation. We asked VA officials what congressional action they believe is necessary to follow the recommendation. The officials told us they believe the CAO position should be assigned to an assistant secretary, but that the number of assistant secretaries within VA is limited by statute. We decline to close this recommendation. VA should assign the role of CAO to a non-career employee, as required by statute. If VA maintains its view that it cannot meet this requirement without congressional action, then VA should request the specific congressional action that VA believes is necessary. VA provided technical comments on the draft report, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by email at oakleys@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. You requested that we examine the Department of Veterans Affairs’ (VA) transition to the Medical Surgical Prime Vendor-Next Generation (MSPV- NG) program and the extent to which the department contracts for good and services on an emergency basis. This report addresses the extent to which: (1) VA’s implementation of MSPV-NG was effective in meeting program goals, and (2) Veterans Health Administration (VHA) awards contracts on an emergency basis for routine supplies and ongoing services, and what impact, if any, these awards have on VHA’s acquisition function. To review the extent to which implementation of MSPV-NG was effective, we reviewed policy and guidance related to the program. We obtained and analyzed the MSPV-NG program’s formulary development plan, which explained the program’s rationale for pursuing its initial requirements development approach. We also obtained and reviewed additional program documentation, including communications to medical centers and other stakeholders, briefings, and training and tools provided to medical centers. We interviewed leaders in the VHA Procurement and Logistics Office and Healthcare Commodity Program Executive Office (the program office for MSPV-NG), as well as other staff involved in planning and executing aspects of MSPV-NG. We also interviewed VA’s Chief Acquisition Officer during the development of MSPV-NG, cognizant Office of General Counsel staff, and others regarding the program. We also interviewed supply chain managers from four leading hospital networks regarding their medical supply management practices. We selected the hospital networks because they were identified by an industry study as having leading supply chain practices. During interviews, we asked each of these supply chain managers a standard set of questions about processes followed to standardize their hospital networks’ supply chain. VA had also identified two of these hospital networks as having leading supply chain practices and used the industry study to identify these hospital networks. We used this information from the leading hospital networks to compare the key steps—identified by each of the four hospital networks—followed in standardizing their medical supply chains to those steps that VA followed when implementing the MSPV-NG program. We also confirmed these key steps with the leading hospital networks. We conducted site visits at a non-generalizable selection of three Veterans Integrated Service Networks (VISNs), and two medical centers within each selected VISN: VISN 6: Durham, North Carolina Durham, North Carolina VA Medical Center Hampton, Virginia VA Medical Center VISN 8: St. Petersburg, Florida Tampa, Florida VA Medical Center Gainesville, Florida VA Medical Center VISN 22: Long Beach, California Long Beach, California VA Medical Center San Diego, California VA Medical Center The VISNs were selected primarily based on highest total contract obligations in fiscal years 2014 through 2016 and representation of multiple geographic areas and prime vendor contractors. The first site visit to VISN 22 was also chosen based on the rollout schedule for the graphical user interface, an IT system related to MSPV-NG. The final site visit to VISN 6 was also chosen as the VISN with the highest percentage of contract actions designated as emergencies over the fiscal year 2014 through 2016 period. The selected medical centers in each VISN were chosen based on our review of VA Electronic Contract Management System (eCMS) data on emergency procurements within each VISN (see below) and geographic proximity to the VISN office location. At each selected VISN, we interviewed the Chief Supply Chain Officer and other members of leadership. At medical centers in each selected VISN, we met with the Chief Supply Chain Officer, ordering officers, other logistics staff, clinicians involved in the MSPV-NG transition, and on-site representatives of the prime vendor contractors. We evaluated MSPV-NG program office status briefings and integrated product team training briefings, which documented the planned role of clinicians in the Phase 2 requirements development process. We interviewed VHA Procurement and Logistics Office leadership, other MSPV-NG program office staff, and integrated product team managers and clinicians about the evolution of the program office’s requirements development approach, including the role of clinicians in preparing item descriptions and evaluating items. Three integrated product teams were selected for interviews based on those that covered the greatest number of items, as well as for diversity of types of medical supplies. We also met with members of additional integrated product teams during site visits to the selected medical centers. We obtained and analyzed the Strategic Acquisition Center’s acquisition strategy for MSPV-NG supply contracts and discussed its evolution with the Center’s acquisition staff. We analyzed the MSPV-NG formulary as of January 2017 to determine what acquisition instrument was used to add a particular item to the formulary, how the cumulative total of items by award type changed from fiscal year 2014 to fiscal year 2017, and when certain MSPV-NG items would be removed from the formulary because the underlying acquisition instrument had expired. We also analyzed the contents of the formulary monthly from January to July 2017 to determine the number of items added and deleted each month. We determined that the MSPV-NG formulary data were sufficiently reliable for the purposes of our reporting objectives. For the formulary data, we corroborated the supplier’s name, award number, award type, and the award’s effective and expiration dates with data in the Federal Procurement Data System- Next Generation. We were also able to corroborate the total number of items on the January 2017 MSPV-NG formulary through other documentation, such as program briefings. To determine the level of discounts obtained by the MSPV-NG program office, we randomly selected 10 limited source blanket purchase agreements. We reviewed each agreement and compared the price for each item on the supplier’s price list with the item’s Federal Supply Schedule price. We obtained and analyzed the current MSPV-NG indefinite delivery, indefinite quantity solicitations and the Defense Logistics Agency’s documentation on distribution and pricing agreements. We also reviewed related prior GAO reports and relevant parts of the Federal Acquisition Regulation. We obtained information on the metrics used by VA to assess the performance of MSPV-NG, primarily the utilization metric, which is calculated by VA based on budget object code spending data from the financial system and MSPV-NG spending data. We obtained data on the performance of the six selected medical centers for May 2017 and July 2017. We also interviewed officials responsible for maintaining this data to gather information on processes, accuracy, and completeness, as well as on planned changes in the metric. We found the utilization metric data to be sufficiently reliable for our purposes. To assess the extent to which VA has awarded contracts on an emergency basis for routine supplies and ongoing services, and the effect on VA’s acquisition function, we obtained and analyzed VA and VHA policy and guidance documents, reviewed relevant parts of the Federal Acquisition Regulation, and reviewed prior GAO reports. We obtained eCMS data for fiscal years 2014 through 2016, and analyzed these data to determine the number of actions designated by customers as emergencies, the percentage of actions designated as emergencies in each VISN, and the total obligations attributed to these actions. We also calculated the number and value of all actions designated as emergencies in selected Product and Service Codes related to medical supplies and services for fiscal year 2016. We determined that these eCMS data were sufficiently reliable for the purposes of determining the extent of emergency procurements by reviewing information on system controls and conducting validation of data, including tracing selected information to source documents for the contracts that we selected. We selected a non-generalizable sample of 18 contracts from the three selected VISNs. The selection was based primarily on: contracts designated by the customer as emergencies in eCMS data; use of the term “emergency” or “urgent” in the description field; high dollar value; and Product and Service Codes for services and medical supplies. We obtained and reviewed the contract files for each of the selected contracts, which are also stored in eCMS, including signed awards, limited competition justifications, work statements, and other documents. We compared key information, such as extent of competition, against data reported in eCMS. We interviewed the requesters—in most cases the contracting officer’s representative—for all selected contracts. We also visited Network Contracting Offices for each of the three selected VISNs and interviewed leadership at each location, as well as the contracting officials responsible for each selected contract. Finally, we met with a Strategic Acquisition Center contracting officer to discuss a related contract award. We conducted this performance audit from November 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Lisa Gardner, Assistant Director; Emily Bond; Matthew T. Crosby; Lorraine Ettaro; Michael Grogan; Jeff Hartnett; Katherine Lenane; Teague Lyons; Roxanna Sun; and Colleen Taylor made key contributions to this report.", "summary": "VA medical centers spend hundreds of millions of dollars annually on medical supplies and services. In December 2016, VA instituted a major change in how it purchases medical supplies—the MSPV-NG program—to gain effectiveness and efficiencies. GAO was asked to examine VA's transition to the MSPV-NG program and its use of emergency procurements. This report assesses the extent to which (1) VA's implementation of MSPV-NG was effective in meeting program goals, and (2) VA awards contracts on an emergency basis. GAO analyzed VA's MSPV-NG requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also reviewed a non-generalizable sample of 18 contracts designated in VA's database as emergency procurements with high dollar values; and met with contracting, logistics, and clinical officials at 6 medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation. The Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation was flawed, lacked an overarching strategy, stable leadership, and sufficient workforce that could have facilitated medical center buy-in. VA developed requirements for a broad range of MSPV-NG items with limited clinical input. As a result, the program has not met medical centers' needs, and usage remains far below VA's 40 percent target. VA also established cost avoidance as a goal for MSPV-NG, but currently only has a metric in place to measure broader supply chain cost avoidance, not savings specific to MSPV-NG. Also, starting in June 2015, VA planned to award competitive contracts for MSPV-NG items, but instead, 79 percent were added using non-competitive agreements. (See figure.) This was done primarily to meet VA's December 2016 deadline to establish the formulary, the list of items available for purchase through MSPV-NG. The roll-out of MSPV-NG ran counter to practices of leading hospitals that GAO spoke with, which highlighted key steps, such as prioritizing supply categories and obtaining continuing clinician input to guide decision-making. VA has taken steps to address some deficiencies identified in the first phase of implementation and is considering a new approach for this program. However, until VA addresses the existing shortcomings in the MSPV-NG program, such as the lack of medical center buy-in, it will face challenges in meeting its goals. Medical centers often rely on emergency procurements to obtain routine goods and services—some of which could be made available at lower cost via MSPV-NG. Sixteen of the 18 contracts in GAO's sample were not competed, which puts the government at risk of paying more. For instance, one medical center procured medical gas on an emergency basis through consecutive non-competitive contracts over a 3-year period. VA policy clearly defines emergency actions; however, inefficiencies in planning, funding, and communication at the medical centers contributed to emergency procurements, resulting in the contracting officers quickly awarding contracts with no competition. GAO is making 10 recommendations, including that VA expand clinician input in requirements development, calculate MSPV-NG cost avoidance, establish a plan for awarding future competitive contracts, and identify opportunities to strategically procure supplies and services frequently purchased on an emergency basis. VA agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "DOD is the largest U.S. federal department and one of the most complex organizations in the world. In support of its military operations, the department manages many interdependent business functions, including logistics management, procurement, health care management, and financial management. DOD relies extensively on IT to support its business functions. According to its IT investment data, the department has 2,097 business system investments. The department’s fiscal year 2018 IT budget request states that DOD plans to spend about $8.7 billion in fiscal year 2018 on its defense business systems. The IT budget organizes investments by mission areas. The four mission areas are enterprise information environment, business, warfighting, and defense intelligence. Figure 1 shows the amount of DOD’s requested fiscal year 2018 IT budget that the department plans to spend on each mission area. The department further organizes its IT budget by segments. For example, the business mission area includes segments such as financial management, health, and human resource management. Figure 2 shows the department’s projected fiscal year 2018 spending for each segment in the business mission area. GAO designated the department’s business systems modernization efforts as high risk in1995 and has continued to do so in the years since. DOD currently bears responsibility, in whole or in part, for half of the programs (17 of 34 programs) across the federal government that we have designated as high risk. Seven of these areas are specific to the department, and 10 other high-risk areas are shared with other federal agencies. Collectively, these high-risk areas are linked to the department’s ability to perform its overall mission and affect the readiness and capabilities of U.S. military forces. DOD’s business systems modernization is one of the department’s specific high-risk areas and is essential for addressing many of the department’s other high-risk areas. For example, modernized business systems are integral to the department’s efforts to address its financial and supply chain high-risk areas. Since 2005, we have issued 11 reports in response to mandates directing GAO to assess DOD’s actions to respond to business system modernization provisions contained in Section 2222 of Title 10, United States Code. These reports contained 23 recommendations to help strengthen the department’s management of its business systems. As of September 2017, the department had implemented 13 of the recommendations and 2 had been closed as not implemented. The other 8 recommendations remain open. The 11 reports are listed in appendix II. The NDAA for Fiscal Year 2016 included provisions requiring DOD to perform certain activities aimed at ensuring that its business system investments are managed efficiently and effectively. Specifically, the act established requirements for the department related to issuing policy and guidance for managing defense business systems; developing and maintaining a defense business enterprise architecture; establishing a Defense Business Council to provide advice to the Secretary on managing defense business systems; and obtaining approvals before systems proceed into development (or if no development is required, into production or fielding) and related annual reviews. According to the Joint Explanatory Statement accompanying the NDAA for Fiscal Year 2016, the act revised Section 2222 of Title 10, United States Code, to streamline requirements and clarify the responsibilities of senior officials related to acquiring and managing business systems. Key revisions pertain to: Covered defense business systems. The code previously defined a covered defense business system as a system having a total cost of over $1 million over the period of the future-years defense program. As revised, the code now defines a covered defense business system as a system that is expected to have a total amount of budget authority over the period of the current future-years defense program of over $50 million. Priority defense business systems. The act established a new category of system, called a priority defense business system. This is a system that is (1) expected to have a total amount of budget authority of over $250 million over the period of the current future- years defense program, or (2) designated by the DCMO as a priority defense business system based on specific program analyses of factors including complexity, scope, and technical risk, and after notification to Congress of such designation. Thresholds and officials responsible for review and certification of defense business systems. The code previously stated that the DCMO had responsibility for reviewing and certifying all defense business system investments over $1 million over the future-years defense program. The revised code states that, unless otherwise assigned by the Secretary of Defense, military department Chief Management Officers (CMO) are to have approval authority for their covered defense business system investments below $250 million over the future-years defense program. The DCMO is to have approval authority for defense business systems owned by DOD components other than the military departments, systems that will support the business process of more than one military department or other component, and priority defense business systems. Certification requirements. The code previously required that a defense business system program be reviewed and certified, at least annually, on the basis of its compliance with the business enterprise architecture and appropriate business process reengineering. In addition to these requirements, the revised code requires that the business system program be reviewed and certified on the basis of having valid, achievable requirements and a viable plan for implementing the requirements; having an acquisition strategy designed to eliminate or reduce the need to tailor commercial off-the- shelf systems; and being in compliance with the department’s auditability requirements. DOD Instruction 5000.75: Business Systems Requirements and Acquisition assigns roles and responsibilities for managing defense business system investments. Table 1 identifies the key entities and their responsibilities for managing defense business system investments. DOD has taken steps to address provisions of the NDAA for Fiscal Year 2016 related to defense business system investments. Specifically, as called for in the act, the department has established guidance that addresses most legislative requirements for managing its defense business systems; however, the military departments are still developing guidance to fully address certification requirements for their systems. Further, DOD has developed a business enterprise architecture and is in the process of updating the architecture to improve its content. The department also has a plan to improve the usefulness of the business enterprise architecture; however, the department has not delivered the plan’s intended capabilities. In addition, the department is in the process of updating its IT enterprise architecture; however, it does not have a plan for improving the department’s IT and computing infrastructure for each of the major business processes. Further, the department has not yet demonstrated that the business enterprise architecture and the IT enterprise architecture are integrated. The department fully addressed the act’s requirement related to defense business system oversight. Specifically, the department’s governance board, called the Defense Business Council, addressed legislative provisions to provide advice to the Secretary of Defense. Lastly, DOD and the military departments did not apply new legislative requirements when certifying business systems for fiscal year 2017. Instead, the DOD DCMO certified the systems in our sample in accordance with the previous fiscal year’s (fiscal year 2016) certification requirements. The NDAA for Fiscal Year 2016 required the Secretary of Defense to issue guidance by December 31, 2016 to provide for the coordination of, and decision making for, the planning, programming, and control of investments in covered defense business systems. The act required this guidance to address six elements: Policy to ensure DOD business processes are continuously reviewed and revised to implement the most streamlined and efficient business processes practicable and eliminate or reduce the need to tailor commercial off-the-shelf systems to meet or incorporate requirements or interfaces that are unique to the department. A process to establish requirements for covered defense business systems. Mechanisms for planning and controlling investments in covered defense business systems, including a process for the collection and review of programming and budgeting information for covered defense business systems. Policy requiring the periodic review of covered defense business systems that have been fully deployed, by portfolio, to ensure that investments in such portfolios are appropriate. Policy to ensure full consideration of sustainability and technological refreshment requirements, and the appropriate use of open architectures. Policy to ensure that best acquisition and systems engineering practices are used in the procurement and deployment of commercial systems, modified commercial systems, and defense-unique systems to meet DOD missions. Of these six elements called for by the act, the department has issued guidance that fully addresses four elements and partially addresses two elements. Table 2 summarizes our assessment of DOD’s guidance relative to the act’s requirements. DOD fully addressed the element requiring policy to ensure that the business processes of the department are continuously reviewed and revised. For example, DOD Instruction 5000.75 requires the functional sponsor of a defense business system to engage in continuous process improvement throughout all phases of the business capability acquisition cycle. The department also fully addressed the element to provide a process for establishing requirements for covered defense business systems with DOD Instruction 5000.75, which introduces the business capability acquisition cycle for business system requirements and acquisition. In addition, DOD fully addressed the element to provide mechanisms for planning and controlling investments in covered defense business systems. Specifically, the department’s Financial Management Regulation; Directive 7045.14 on its planning, programming, budgeting, and execution process; and the April 2017 Defense Business System Investment Management Guidance provide such mechanisms. For example, the April 2017 investment management guidance includes a process, called the integrated business framework, which the department is to follow for selecting, managing, and evaluating the results of investments in defense business systems. In addition, the directive assigns the DOD CIO responsibility for participating in the department’s annual resource allocation process and for advising the Secretary and Deputy Secretary of the Defense on IT resource allocations and investment decisions. Further, DOD fully addressed the requirement for a policy requiring the periodic review of covered business systems that have been fully deployed, by portfolio, to ensure that investments in such portfolios are appropriate. Specifically, the department’s April 2017 Defense Business System Investment Management Guidance requires the department to annually review an organization’s plan for managing its portfolio of defense business systems over the period of the current future-years defense program (e.g., Army’s plan for its financial management systems) to ensure, among other things, that the portfolio is aligned with applicable functional strategies (e.g., DOD’s strategy for its financial management functional area). DOD partially addressed the element requiring policy to ensure full consideration of sustainability and technological refreshment requirements, and the appropriate use of open architectures. Specifically, the department established policy requiring consideration of open architectures, but it has not established policy requiring consideration of sustainability and technological refreshment requirements. The Office of the DCMO stated that future guidance is expected to provide a policy to ensure full consideration of sustainability and technological refreshment requirements. However, the department could not provide a time frame for when the guidance will be developed and issued. Without a policy requiring full consideration of sustainability and technological refreshment requirements for its defense business system investments, the department may not be able to ensure that it has a full understanding of the costs associated with these requirements. As a result, the department may not be able to effectively manage spending on these systems. DOD has also partially addressed the element requiring policy to ensure that best acquisition and systems engineering practices are used in the procurement and deployment of commercial, modified-commercial, and defense-unique systems. Specifically, the department has established policy requiring the acquisition of business systems to be aligned with commercial best practices and to minimize the need for customization of commercial products to the maximum extent possible. On the other hand, the department has not established policy to ensure the use of best systems engineering practices. With regard to this finding, officials in the Office of the DCMO asserted that DOD Instruction 5000.75 addresses the requirement. However, while the instruction requires the system acquisition strategy to include a description of how the program plans to leverage systems engineering, it does not require the use of best systems engineering practices. Without a policy requiring the use of best systems engineering practices in the procurement and deployment of commercial, modified, and defense- unique systems, the department may be limited in its ability to effectively balance meeting system cost and performance objectives. In addition to guidance for addressing the aforementioned legislative requirements for business systems management, the NDAA for Fiscal Year 2016 requires the Secretary to direct the DCMO and the CMO of each of the military departments to issue and maintain supporting guidance, as appropriate and within their respective areas of responsibility. In this regard, one of the key areas for which the DCMO and military department CMOs are to provide supporting guidance is the review and certification of defense business systems in accordance with specific requirements. Specifically, the act requires that, for any fiscal year in which funds are expended for development or sustainment pursuant to a covered defense business system program, the appropriate approval official is to review the system to determine if the system: has been, or is being, reengineered to be as streamlined and efficient as practicable, and whether the implementation of the system will maximize the elimination of unique software requirements and unique interfaces; is in compliance with the business enterprise architecture or will be in compliance as a result of planned modifications; has valid, achievable requirements, and a viable plan for implementing those requirements (including, as appropriate, market research, business process reengineering, and prototyping activities); has an acquisition strategy designed to eliminate or reduce the need to tailor commercial off-the-shelf systems to meet unique requirements, incorporate unique requirements, or incorporate unique interfaces to the maximum extent practicable; and is in compliance with the department’s auditability requirements. The act and DOD Instruction 5000.75 define the systems that the DOD DCMO is responsible for certifying and the systems that military department CMOs are responsible for certifying. Consistent with the act, in April 2017, the DCMO issued guidance for certifying officials that addresses the certification requirements. Table 3 provides our rating and assessment of the DCMO’s guidance for implementing defense business system certification requirements. By establishing guidance requiring that defense business systems be certified on the basis of the legislative requirements, the department is better positioned to ensure that a covered system does not proceed into development (or, if no development is required, into production or fielding) without the appropriate due diligence. Further, the department has taken steps which should help ensure that funds are limited to systems in development or sustainment that meet these requirements. The military departments have made mixed progress in developing supporting guidance to assist in making certification decisions regarding systems within their respective areas of responsibility. More specifically, the Air Force has issued supporting guidance that addresses three of the act’s five certification requirements, but does not address the remaining two requirements. Navy has issued guidance that addresses two of the certification requirements, partially addresses one requirement, and does not address two requirements. The Army has not yet issued guidance on any of the five certification requirements. Table 4 provides an overview of our assessment of the Air Force’s, Navy’s, and Army’s guidance relative to the NDAA for Fiscal Year 2016 certification requirements. Each department’s efforts are further discussed following the table. Air Force. In April 2017, the Department of the Air Force issued guidance for certifying business systems for fiscal year 2018. The guidance addresses the requirements that a system be certified on the basis of sufficient business process reengineering, business enterprise architecture compliance, and valid requirements and a viable plan to implement them. Specifically, the guidance states that Air Force core defense business systems are required to comply with the business process reengineering guidance prescribed in the DCMO’s February 2015 Defense Business Systems Investment Management Process Guidance and for systems to assert compliance with the architecture through DCMO’s Integrated Business Framework—Data Alignment Portal. In addition, the guidance states that the department must follow DOD Instruction 5000.75, which requires that certifying officials determine that business requirements are valid and capability efforts have feasible implementation plans. However, the Air Force guidance does not address the remaining two certification requirements. Officials in the office of the Air Force DCMO acknowledged that the Air Force’s business system certification guidance does not address determining how the acquisition strategy is designed to eliminate or reduce the need to tailor commercial off-the-shelf systems to meet unique requirements, incorporate unique requirements, or incorporate unique interfaces to the maximum extent practicable or is in compliance with DOD’s auditability requirements. In May 2017, Air Force DCMO officials stated that the department was in the process of developing guidance. However, as of December 2017, the Air Force had not described specific plans to update its business system certification guidance. Navy. The Department of the Navy issued guidance in May 2016. This guidance addresses the requirements that a system be certified on the basis of sufficient business process reengineering and business enterprise architecture compliance. In this regard, the guidance provides guidelines for documenting business process reengineering and requires verification that business process reengineering is complete. The guidance also specifies that defense business systems are to map alignment with the business enterprise architecture in DCMO’s Integrated Business Framework–Data Alignment Portal. Navy’s guidance partially addresses the certification requirement for determining if a defense business system has valid requirements and a viable plan to implement them. Specifically, the guidance includes information on validating requirements; however, it does not include information on determining if a system has a viable plan to implement the requirements. In addition, Navy’s guidance does not address the remaining two certification requirements, which are to determine that the covered defense business system has an acquisition strategy that eliminates or reduces the need to tailor commercial-off-the-shelf systems, and that the system is in compliance with DOD’s auditability requirements. In August 2017, officials in the Office of the Under Secretary of the Navy (Management) stated that the office was in the process of updating its May 2016 Defense Business System Investment Certification Manual. The officials stated that the goal is to issue interim investment certification guidance by May 2018. As of November 2017, however, Navy had not established a plan for when it expects to publish finalized certification guidance. Army. The Department of the Army has not issued guidance that addresses any of the act’s certification requirements. The Army issued a template that was to be used to develop fiscal year 2018 portfolio review submissions. However, the template does not address any of the certification requirements. Officials in the Army’s Office of Business Transformation explained that the Army used DOD DCMO’s 2014 guidance to certify its business systems for fiscal year 2017. In May 2017, they stated that the Army was in the process of developing guidance to implement DOD’s new instruction. In November 2017, an official in the Army’s Office of Business Transformation stated that the office was in the process of completing the guidance and aimed to provide it to the Deputy Under Secretary’s office for signature in January 2018. However, the department has not committed to a specific time frame for when the new guidance is expected to be issued. Without guidance for the certification authority to determine that defense business systems have addressed each of the act’s certification requirements, the Air Force, Navy, and Army risk allowing systems to proceed into development or production that do not meet these requirements. In particular, the military departments risk wasting funds on developing and maintaining systems that do not have valid requirements and a viable plan to implement the requirements, introduce unnecessary complexity, or that do not adequately support the Department of Defense’s efforts to meet its auditability requirements. According to the NDAA for Fiscal Year 2016, DOD is to develop and maintain a defense business enterprise architecture to guide the development of integrated business processes within the department. In addition, the act states that the business architecture must be consistent with the policies and procedures established by the Director of the Office of Management and Budget. Among other things, OMB policy calls for agencies to develop an enterprise architecture that describes the current architecture, target architecture, and a transition plan to get to the target architecture. The act also calls for the business architecture to contain specific content, including policies, procedures, business data standards, business information requirements, and business performance measures that are to apply uniformly throughout the department. DOD has developed a business enterprise architecture that is intended to help guide the development of its defense business systems. The department issued version 10 of the business architecture, which is currently being used to support system certification decisions, in February 2013. The business architecture and related documentation include content describing aspects of the current architecture, target architecture, and a transition plan to get to the target architecture. In addition, the business architecture includes content that addresses the act’s requirements. Table 5 provides examples of required content in DOD’s business enterprise architecture. Nevertheless, some content included in version 10 of the business architecture is outdated and incomplete. For example, version 10 of the business architecture’s repository of laws, regulations, and policies was last updated in February 2013, and officials in the Office of the DOD CIO and Office of the DCMO confirmed that they are not current. Further, the department’s March 2017 business architecture compliance guidance stated that not all relevant business data standards are identified in the business architecture. In addition, based on our review, information about performance measures documented in the architecture is incomplete. For example, target values for performance measures associated with acquisition and logistics initiatives are not identified. According to officials in the Office of the DCMO, the department is working to update the business architecture. Specifically, the department has developed version 11 of the business architecture to, in part, replace outdated architecture content. According to the officials, version 11 of the architecture is currently available online, but version 10 remains the official version of the business enterprise architecture used for system certification decisions. The officials stated that the department continues to add content to version 11, and they expect that it will be used as the basis of system certification decisions for fiscal year 2019. In addition, DOD has ongoing work to address a key recommendation we made in July 2015 associated with improving the usefulness of its business architecture. In particular, we reported that the majority of military department portfolio managers that we surveyed believed that the business architecture had not been effective in meeting intended outcomes. For example, only 25 percent of the survey respondents reported that the business architecture effectively enabled DOD to routinely produce timely, accurate, and reliable business and financial information for management purposes. In addition, only 38 percent reported that the business architecture effectively guided the implementation of interoperable defense business systems. As a result, we reported that the architecture had produced limited value and recommended that the department use the results of our survey to determine additional actions that can improve the department’s management of its business enterprise architecture activities. In response to our recommendation, DOD identified opportunities to address our survey findings and developed a plan for improving its ability to achieve architecture-related outcomes. DOD’s business enterprise architecture improvement plan was signed by the Assistant DCMO in January 2017. However, the department has not yet demonstrated that it has delivered the capabilities described by the plan; thus, we will continue to monitor DOD’s progress to fully address this recommendation. In addition to the business enterprise architecture, according to the act, the DOD CIO is to develop an IT enterprise architecture. This architecture is to describe a plan for improving the IT and computing infrastructure of the department, including for each of the major business processes. Officials in the Office of the DOD CIO stated that the department considers its information enterprise architecture to be its IT enterprise architecture. The DOD CIO approved version 2.0 of its information enterprise architecture in August 2012. According to DOD documentation, this architecture describes the department’s current information enterprise (i.e., information resources, assets, and processes used to share information across the department and with its mission partners) and includes a vision for the target information enterprise; documents required capabilities, and the activities, rules, and services needed to provide them; and includes information for applying and complying with the architecture. Nevertheless, while the architecture includes content describing the department’s current and target information enterprise, which is consistent with OMB guidance, it does not include a transition plan that provides a road map for improving the department’s IT and computing infrastructure. Related to this finding, DCMO officials did not agree with our assessment concerning the department’s IT enterprise architecture transition plan. In this regard, officials in the Office of the DCMO stated that the department’s DOD IT Portfolio Repository includes information for managing efforts to improve IT and computing infrastructure at the system level. According to the repository’s data dictionary, this information can include system life cycle start and end dates, as well as information that supports planning for a target environment. However, documentation describing DOD’s information enterprise architecture does not identify the DOD IT Portfolio Repository as being part of the architecture. Moreover, it does not include a plan for improving the department’s IT and computing infrastructure for each of the major business processes. Officials in the Office of the CIO acknowledged that the architecture does not include such plans. According to the officials, the department is currently developing version 3.0 of its information enterprise architecture (i.e., its IT enterprise architecture). The officials stated that the department does not currently intend for the architecture to include a plan for improving the department’s IT and computing infrastructure that addresses each of the major business processes. They added, however, that there is an effort to ensure that functional areas, such as human resources management, are included. DCMO officials stated that the department has not defined how the DOD IT enterprise architecture needs to be segmented for each major business process because the infrastructure requirements seem to be similar for each of the processes. Without an architecture that includes a plan for improving its IT and computing infrastructure, including for each of the major business processes, DOD risks not ensuring that stakeholders across the department have a consistent understanding of the steps needed to achieve the department’s future vision, agency priorities, potential dependencies among investments, and emerging and available technological opportunities. According to the act, the DOD business enterprise architecture is to be integrated into the DOD IT enterprise architecture. The department’s business architecture compliance guide also recognizes that the business architecture is to be integrated with the IT enterprise architecture. However, the department has not demonstrated that it has integrated the business enterprise architecture into the information enterprise architecture. Specifically, the department did not provide documentation associated with either architecture that describes how the two are, or are to be, integrated. The business enterprise architecture compliance guide states that DOD Directive 8000.01 implements the requirement that the two architectures are to be integrated. However, the directive does not address how they are, or are to be, integrated. Officials in the Offices of the CIO and the DCMO described steps they were taking to coordinate the development of the next versions of the information enterprise architecture (i.e., IT enterprise architecture) and business enterprise architecture. However, these steps were not sufficient to help ensure integration of the two architectures. Specifically, in June 2017, officials in the Office of the DOD CIO stated they were participating in the development of the next version of the business architecture and that the DOD CIO is represented on the Business Enterprise Architecture Configuration Control Board. Officials in the Office of the DCMO confirmed that DOD CIO officials participate on the board. However, officials from the Office of the DCMO said that, until it met in June 2017 the board had not met since 2014. Moreover, documentation of the June 2017 meeting, and a subsequent November 2017 meeting, did not indicate that the board members had discussed integration of the department’s business and information enterprise architectures. In addition, officials in the Office of the DCMO reported that the office has not actively participated in the information enterprise architecture working group. Further, our review of meeting minutes from this working group did not identify participation by officials in the Office of the DCMO, or that integration of the architectures was discussed. The Office of the DCMO described other mechanisms for its sharing of information about architectures with the Office of the DOD CIO. For example, the Office of the DCMO stated that it participates with DOD CIO bodies governing version 3.0 development. Nevertheless, the Office of the DCMO reiterated that technical integration of the architectures has not been designed. Until DOD ensures that its business architecture is integrated into its IT enterprise architecture, the department may not be able to ensure that its business strategies capitalize on technologies and that its IT infrastructure will support DOD’s business priorities and related business strategies. The NDAA for Fiscal Year 2016 requires the Secretary to establish a Defense Business Council, chaired by the DCMO and the DOD CIO, to provide advice to the Secretary on: developing the business enterprise architecture, reengineering the department’s business processes, developing and deploying business systems, and developing requirements for business systems. DOD established the department’s Defense Business Council in October 2012, prior to the act. According to its current charter, dated December 2014, the Council is co-chaired by the DCMO and the DOD CIO. In addition, the Council is to serve as the principal governance body for vetting issues related to managing and improving defense business operations. Among other things, it serves as the investment review board for defense business system investments. The Defense Business Council charter also states that the Council was established as a principal supporting tier of governance to the Deputy’s Management Action Group. The Deputy’s Management Action Group was established by an October 2011 memorandum issued by the Deputy Secretary of Defense. According to information published on DCMO’s website, the group was established to be the primary civilian-military management forum that supports the Secretary of Defense, and is to address top department issues that have resource, management, and broad strategic and/or policy implications. The group’s primary mission is to produce advice for the Deputy Secretary of Defense in a collaborative environment and to ensure that the group’s execution aligns with the Secretary of Defense’s priorities. According to the Office of the DCMO, the Defense Business Council determines whether or not to elevate a topic to the Deputy’s Management Action Group to address on behalf of the Secretary. Based on our review of meeting documentation for 27 meetings that the Defense Business Council held between January 2016 and August 2017, the Council discussed the four topics on which the NDAA for Fiscal Year 2016 requires it to provide advice to the Secretary. According to the Office of the DCMO, during the discussions of these topics, the Council did not identify any issues related to the topics that needed to be elevated to the Deputy’s Management Action Group. Table 6 identifies the number of meetings in which the Council discussed each topic during this time period. By ensuring that the required business system topics are discussed during Defense Business Council meetings, the department should be positioned to raise issues to the Deputy’s Management Action Group, and ultimately, to advise the Secretary of Defense on matters associated with these topics. The NDAA for Fiscal Year 2016 requires that, for any fiscal year in which funds are expended for development or sustainment pursuant to a covered defense business system program, the Secretary of Defense is to ensure that a covered business system not proceed into development (or, if no development is required, into production or fielding) unless the appropriate approval official reviews the system to determine if the system meets five key requirements, as previously discussed in this report. In addition, the act requires that the appropriate approval official certify, certify with conditions, or decline to certify that the system satisfies these five requirements. The department issued DOD Instruction 5000.75, which established business system categories and assigned certifying officials, consistent with the act. Table 7 describes the business system categories and the assigned certifying officials, as defined in DOD Instruction 5000.75. The DOD DCMO certified the five systems in our sample (which included the military departments’ systems) for fiscal year 2017. However, these certifications were issued in accordance with the previous fiscal year’s (fiscal year 2016) certification requirements. Those requirements had stipulated that a defense business system program was to be reviewed and certified on the basis of the system’s compliance with the business enterprise architecture and appropriate business process reengineering, rather than on the basis of having met all five requirements identified in the NDAA for Fiscal Year 2016. Specifically, DCMO certified the systems on the basis of determining that the systems were in compliance with the business enterprise architecture and had been sufficiently reengineered. However, none of the systems were certified on the basis of a determination that they had valid, achievable requirements and a viable plan for implementing them; had an acquisition strategy to reduce or eliminate the need to tailor commercial off-the-shelf systems; or were in compliance with the department’s auditability requirements. Officials in the Offices of the DOD DCMO, the Air Force DCMO, the Under Secretary of the Navy (Management), and Army Business Transformation told us that the systems were not certified relative to three of the requirements because the department did not issue guidance to reflect changes made by the NDAA for Fiscal Year 2016 in time for the fiscal year 2017 certification process. Prior to the NDAA for Fiscal Year 2016, relevant legislation and DOD guidance only called for annual determinations to be made regarding whether a system complied with the business enterprise architecture and whether appropriate business process reengineering had been conducted. In January 2016, the DCMO issued a memorandum stating that the department planned to issue new guidance and policy to implement the new legislation by the end of February 2016. However, the department did not issue additional guidance addressing the new certification requirements until April 2017. The system certifications, which were required by the act to be completed before systems could spend fiscal year 2017 funds, occurred in August and September 2016. In explaining the delay in issuing new guidance on the certification requirements, officials in the Office of the DCMO stated that the statutory deadline for issuing guidance was December 31, 2016. They added that, given this statutory deadline, and the start of fiscal year 2017 on October 1, 2016, it was their determination that Congress did not intend for the NDAA for Fiscal Year 2016’s certification requirements to be fully implemented before fiscal year 2017 started. DCMO officials stated that they intend for the department to use the certification requirements established by the NDAA for Fiscal Year 2016 for future system certifications. While it was reasonable for the department to use the earlier guidance for its fiscal year 2017 certifications, given that the new guidance had not yet been issued, it will be important going forward that the department certifies business systems on the basis of the certification requirements established in the NDAA for Fiscal Year 2016 and its related guidance addressing these requirements. Certifying systems on the basis of the act’s requirements should help ensure that funds are not wasted on developing and maintaining systems that do not have valid requirements and a viable plan to implement the requirements, that introduce unnecessary complexity, or that impede the Department of Defense’s efforts to meet its auditability requirements. Since the NDAA for Fiscal Year 2016 was signed in November 2015, DOD has issued guidance that addresses most provisions of the NDAA for Fiscal Year 2016 related to managing defense business system investments. However, the department has not established policies requiring consideration of sustainability and technology requirements and the use of best systems engineering practices in the procurement and deployment of its systems. Having these policies would better enable the department to ensure it is efficiently and effectively procuring and deploying its business systems. In addition, the Air Force, the Army, and Navy have made mixed progress in issuing guidance to assist in making certification decisions regarding systems within their respective areas of responsibility. Specifically, the Air Force and Navy issued guidance on the certification of business systems that does not fully address new certification requirements, while the Army has not issued any updated guidance for its certifications. As a result, the Air Force, Navy, and Army risk wasting funds on developing and maintaining systems that do not have valid requirements and a viable plan to implement the requirements, introduce unnecessary complexity, or do not adequately support the Department of Defense’s efforts to meet its auditability requirements. Also, DOD has developed an IT architecture, but this architecture does not address the act’s requirement that it include a plan for improving the department’s IT and computing infrastructure, including for each business process. In addition, DOD’s plans for updating its IT architecture do not address how the department intends to integrate its business and IT architectures, as called for by the act. As a result, DOD risks not having a consistent understanding of what is needed to achieve the department’s future vision, agency priorities, potential dependencies among investments, and emerging and available technological opportunities. We are making six recommendations, including three to the Secretary of Defense and one to each of the Secretaries of the Air Force, the Navy and the Army: The Secretary of Defense should define a specific time frame for finalizing, and ensure the issuance of (1) policy requiring full consideration of sustainability and technological refreshment requirements for its defense business system investments; and (2) policy requiring that best systems engineering practices are used in the procurement and deployment of commercial systems, modified commercial systems, and defense-unique systems to meet DOD missions. (Recommendation 1) The Secretary of the Air Force should define a specific time frame for finalizing, and ensure the issuance of guidance for certifying the department’s business systems on the basis of (1) having an acquisition strategy designed to eliminate or reduce the need to tailor commercial off- the-shelf systems to meet unique requirements, incorporate unique requirements, or incorporate unique interfaces to the maximum extent practicable; and (2) being in compliance with DOD’s auditability requirements. (Recommendation 2) The Secretary of the Navy should define a specific time frame for finalizing, and ensure the issuance of guidance for certifying the department’s business systems on the basis of (1) having a viable plan to implement the system’s requirements; (2) having an acquisition strategy designed to eliminate or reduce the need to tailor commercial off-the-shelf systems to meet unique requirements, incorporate unique requirements, or incorporate unique interfaces to the maximum extent practicable; and (3) being in compliance with DOD’s auditability requirements. (Recommendation 3) The Secretary of the Army should define a specific time frame for finalizing, and ensure the issuance of guidance for certifying the department’s business systems on the basis of (1) being reengineered to be as streamlined and efficient as practicable, and determining that implementation of the system will maximize the elimination of unique software requirements and unique interfaces; (2) being in compliance with the business enterprise architecture; (3) having valid, achievable requirements and a viable plan to implement the requirements; (4) having an acquisition strategy designed to eliminate or reduce the need to tailor commercial off-the-shelf systems to meet unique requirements, incorporate unique requirements, or incorporate unique interfaces to the maximum extent practicable; and (5) being in compliance with DOD’s auditability requirements. (Recommendation 4) The Secretary of Defense should ensure that the DOD CIO develops an IT enterprise architecture which includes a transition plan that provides a road map for improving the department’s IT and computing infrastructure, including for each of its business processes. (Recommendation 5) The Secretary of Defense should ensure that the DOD CIO and Chief Management Officer work together to define a specific time frame for when the department plans to integrate its business and IT architectures and ensure that the architectures are integrated. (Recommendation 6) DOD provided written comments on a draft of this report, which are reprinted in appendix III. In the comments, the department stated that it concurred with three of the recommendations and partially concurred with three of the recommendations. DOD also provided evidence that it has fully addressed one of the recommendations. In addition, DOD provided technical comments that we incorporated in the report, as appropriate. DOD stated that it concurred with our first recommendation, which called for it to define a specific time frame for finalizing, and ensure the issuance of, policies that fully address provisions in the NDAA for Fiscal Year 2016. Furthermore, the department stated that it had complied with the recommendation. Specifically, the department stated that it had published its defense business systems investment management guidance in April 2017. This guidance identifies DOD’s Financial Management Regulation, Volume 2B, Chapter 18 “Information Technology” and supporting IT budget policy and guidance as well as DOD Instruction 5000.75 and supporting acquisition policy and guidance. The department stated that the Financial Management Regulation specifically addresses the requirement for sustainability and technological refreshment requirements for its defense business system investments. While DOD reported taking this action, we do not agree that the department has complied with our recommendation. In reviewing the department’s guidance, we found that none of the cited management documents includes a policy requiring consideration of sustainability and technological refreshment requirements for DOD’s defense business systems. Further, none of these documents includes a policy requiring that best systems engineering practices be used in the procurement and deployment of commercial, modified-commercial, and defense unique systems. Without a policy requiring full consideration of sustainability and technological refreshment requirements for its defense business system investments, the department may not be able to ensure that it has a full understanding of the costs associated with these requirements. Further, without a policy requiring the use of best systems engineering practices in systems procurement and deployment, the department may be limited in its ability to effectively balance meeting system cost and performance objectives. Accordingly, we continue to believe that our recommendation is valid. The department concurred with our second recommendation, that the Secretary of the Air Force define a specific time frame for finalizing, and ensure the issuance of, guidance that fully addresses certification requirements, in accordance with the NDAA for Fiscal Year 2016. Moreover, the department stated that the Air Force has complied with the recommendation. Specifically, DOD stated that Air Force Manual 63-144 details the consideration of using existing commercial solutions without modification or tailoring. However, while the manual provides a foundation on which the Air Force can build, it is not sufficient to fully address our recommendation because it does not include guidance on certifying business systems on the basis of having an acquisition strategy that eliminates or reduces the need to tailor commercial-off-the-shelf systems. In addition, the department did not demonstrate that the Air Force has issued guidance for certifying business systems on the basis of being in compliance with DOD’s auditability requirements. Rather, the Air Force stated that it has pending guidance that addresses the acquisition strategy and auditability requirements. We plan to evaluate the guidance to determine the extent to which it addresses our recommendation after it is issued. The department partially agreed with our third recommendation, that the Secretary of the Navy define a specific time frame for finalizing, and ensure the issuance of, guidance that fully addresses certification requirements. Specifically, DOD stated that Navy agreed to issue guidance. Subsequently, on March 8, 2018, Navy issued its updated guidance. However, Navy disagreed with the recommendation, as written, and suggested that GAO revise the recommendation to state that “The Secretary of the Navy should ensure guidance is issued according to established timeline for certifying the department’s business systems. . .” According to Navy, this change would support alignment with the timeline for certifying the department’s business systems driven by the Chief Management Officer investment review timeline. Based on our analysis, we found the guidance that Navy issued to be consistent with our recommendation. Thus, we plan to close the recommendation as fully implemented. We have also annotated this report, where appropriate, to explain that the Navy issued guidance while the draft of this report was at the department for comment. On the other hand, we did not revise the wording of our recommendation, as we believe it appropriately reflected the importance of Navy taking action to ensure the issuance of its guidance. The department stated that it concurred with our fourth recommendation, which called for the Secretary of the Army to define a specific time frame for finalizing, and ensure the issuance of, guidance for certifying the department’s business systems on the basis of the certification requirements. Furthermore, on March 23, 2018, the Army issued its guidance. However, because of the timing of this report relative to when the Army provided its guidance to us (on March 27, 2018), we have not yet completed an assessment of the guidance. We have annotated this report, where appropriate, to reflect the Army’s action on our recommendation. The department stated that it partially concurred with our fifth recommendation. This recommendation called for the DOD CIO to develop an IT enterprise architecture which includes a transition plan that provides a road map for improving the department’s IT and computing infrastructure, including for each of its business processes. Toward this end, the department agreed that the DOD CIO should develop an architecture that enables improving the department’s IT and computing infrastructure for each of its business processes. However, the department also stated that the recommendation is not needed because the goal is already being accomplished by a set of processes, organizations, protocols, and architecture data. For example, the department described processes and relationships between the Office of the DOD CIO and the Office of the Chief Management Officer and the boards that support the department’s business and IT enterprise architectures. In particular, the department stated that information enterprise architecture data relevant to the business enterprise are accessed via the DOD Information Enterprise Architecture Data Selection Wizard and imported into the business enterprise architecture. The department further stated that, if the business capability acquisition cycle process indicates a need to improve the IT or computing infrastructure, the Office of the Chief Management Officer has a protocol to initiate a proposal to change the information enterprise architecture. We agree that the department’s processes, organizations, protocols, and architecture data are keys to successful IT management. However, during the course of our audit, we found that documentation describing DOD’s IT architecture did not include a plan for improving the department’s IT and computing infrastructure for each of the major business processes. Moreover, officials in the Office of the CIO acknowledged that the architecture did not include such a plan. Without a transition plan that provides a road map for improving the department’s IT and computing infrastructure, including for each of its business processes, it will be difficult for the department to rely on its personnel to timely and proactively manage and direct modernization efforts of such a magnitude as DOD’s systems modernization efforts. Further, without such a plan, DOD risks not being able to ensure that stakeholders across the department have a consistent understanding of the steps needed to achieve the department’s future vision, agency priorities, potential dependencies among investments, and emerging and available technological opportunities. Thus, we maintain that the department should fully implement our recommendation. The department stated that it partially concurred with our sixth recommendation, that the DOD CIO and DCMO work together to define a specific time frame for when the department plans to integrate its business and IT architectures. In particular, the department stated that it agrees that the DOD CIO and Chief Management Officer should work together to establish a time frame and ensure coordination and consistency of the IT and business architectures. However, the department disagreed with the use and intent of the term “integrate,” as stated in the recommendation, although it did not explain the reason for this disagreement. Instead, it proposed that we change our recommendation to read “The GAO recommends the Secretary of Defense ensure the DoD CIO and CMO work together to define a specific timeline for coordinating its business and IT architectures to achieve better enterprise alignment among the architectures.” We agree that it is important to achieve coordination and consistency between the business and IT architectures. However, the department did not provide documentation associated with either architecture that describes how the two are, or are to be, integrated, as called for by the NDAA for Fiscal Year 2016 and DOD guidance. Integrating the architectures would help ensure that business strategies better capitalize on existing and planned technologies and that IT solutions and infrastructure support business priorities and related business strategies. Thus, we continue to believe that our recommendation is valid. However, we have updated the recommendation to state that the DOD CIO and the Chief Management Officer should work together. We made this change because, effective February 1, 2018, the Secretary of Defense eliminated the DCMO position and expanded the role of the Chief Management Officer, in accordance with the National Defense Authorization Act for Fiscal Year 2018. We are sending copies of this report to appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; and the Director of the Office of Management and Budget. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix IV. Our objective was to determine the actions taken by the Department of Defense (DOD) to comply with provisions included in the National Defense Authorization Act for Fiscal Year 2016 (NDAA). These provisions require DOD to perform certain activities aimed at ensuring that its business system investments are managed efficiently and effectively. Specifically, we determined to what extent DOD has 1. established guidance for effectively managing its defense business 2. developed and maintained a defense business enterprise architecture and information technology (IT) enterprise architecture, in accordance with relevant laws and Office of Management and Budget (OMB) policies and guidance; 3. used the Defense Business Council to provide advice to the Secretary on developing the business enterprise architecture, reengineering the department’s business processes, developing and deploying business systems, and developing requirements for business systems; and 4. ensured that covered business systems are reviewed and certified in accordance with the act. To address the extent to which DOD has established guidance for effectively managing defense business system investments, we obtained and analyzed the department’s guidance, as well as the guidance established by the Departments of the Air Force, Army, and Navy, for managing defense business systems relative to the act’s requirements. Specifically, the NDAA for Fiscal Year 2016 required the Secretary of Defense to issue guidance, by December 31, 2016, to provide for the coordination of and decision making for the planning, programming, and control of investments in covered defense business systems. The act required this guidance to include the following six elements: Policy to ensure DOD business processes are continuously reviewed and revised to implement the most streamlined and efficient business processes practicable and eliminate or reduce the need to tailor commercial off-the-shelf systems to meet or incorporate requirements or interfaces that are unique to the department. Process to establish requirements for covered defense business systems. Mechanisms for planning and controlling investments in covered defense business systems, including a process for the collection and review of programming and budgeting information for covered defense business systems. Policy requiring the periodic review of covered defense business systems that have been fully deployed, by portfolio, to ensure that investments in such portfolios are appropriate. Policy to ensure full consideration of sustainability and technological refreshment requirements, and the appropriate use of open architectures. Policy to ensure that best acquisition and systems engineering practices are used in the procurement and deployment of commercial systems, modified commercial systems, and defense-unique systems to meet DOD missions. We assessed the February 2017 DOD Instruction 5000.75, Business Systems Requirements and Acquisitions, and April 2017 defense business system investment management guidance, which the department issued to address the act’s requirements. In addition, we assessed the department’s Financial Management Regulation and directive on its planning, programming, budgeting, and execution process, which the department stated also address the act’s provisions. We also assessed DOD’s guidance for managing business system investments relative to the act’s business system certification requirements. The act requires that the Secretary of Defense ensure that a covered defense business system not proceed into development (or, if no development is required, into production or fielding) unless the appropriate approval official determines that the system meets five requirements. The act further requires for any fiscal year in which funds are expended for development or sustainment pursuant to a covered defense business system program, the appropriate approval official to review the system to determine if the system: has been, or is being, reengineered to be as streamlined and efficient as practicable, and whether the implementation of the system will maximize the elimination of unique software requirements and unique interfaces; is in compliance with the business enterprise architecture or will be in compliance as a result of planned modifications; has valid, achievable requirements, and a viable plan for implementing those requirements (including, as appropriate, market research, business process reengineering, and prototyping activities); has an acquisition strategy designed to eliminate or reduce the need to tailor commercial off-the-shelf systems to meet unique requirements, incorporate unique requirements, or incorporate unique interfaces to the maximum extent practicable; and is in compliance with the department’s auditability requirements. We compared Office of the Deputy Chief Management Office (DCMO) certification guidance with the act’s certification requirements. In addition, we compared the guidance established by the Departments of the Air Force, the Army, and the Navy for certifying their business systems with the act’s certification requirements. We also interviewed cognizant officials responsible for managing defense business system investments at DOD, including the military departments. Specifically, we interviewed officials in the Office of the DCMO, the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, the Office of the Chief Information Officer (CIO), and the Offices of the CMOs in the Departments of the Air Force, Army, and Navy. To determine the extent to which DOD has developed and maintained a defense business enterprise architecture and IT enterprise architecture, in accordance with relevant laws and OMB policy and guidance, we assessed the business enterprise architecture against the relevant laws and OMB policy and guidance; the IT enterprise architecture against the relevant laws and OMB policy and guidance; and the department’s efforts to integrate its business and IT architectures against the act’s requirement. To determine the extent to which the department has developed and maintained a business enterprise architecture in accordance with relevant laws and OMB policy and guidance, we reviewed version 10 of its business enterprise architecture, which was released in February 2013, and related information relative to the act’s requirements; U.S. Code, Title 44, Section 3601, which defines an enterprise architecture; and OMB policy and guidance. We also reviewed version 11 of the architecture to determine the extent to which it differed from version 10. Further, we reviewed the department’s business enterprise architecture improvement plan, which it developed in response to a recommendation we made in July 2015. Specifically, we recommended that the department use the results of our portfolio manager survey to determine additional actions that could improve the department’s management of its enterprise architecture activities. In response to our recommendation, the department developed and approved a plan in January 2017. We assessed the extent to which the department had delivered the planned capabilities relative to the plan. We also reviewed the extent to which the delivery dates of the three planned capabilities and associated tasks changed over time relative to the plan. To assess the extent to which the department developed and maintained an IT enterprise architecture in accordance with relevant laws and OMB policy and guidance, we reviewed content from the department’s IT enterprise architecture and compared it with requirements from the act, U.S. Code, Title 44, Section 3601, and OMB policy and guidance. Specifically, we reviewed version 2.0 of the department’s information enterprise architecture, which was released in August 2012, relative to the act’s requirement for the DOD CIO to develop an IT enterprise architecture that is to describe a plan for improving the IT and computing infrastructure of the department, including for each of the major business processes. We reviewed volumes I and II of the information enterprise architecture and the four enterprise-wide reference architectures to determine if the architecture described a plan for improving the IT and computing infrastructure of the department, as called for by the act. We also reviewed whether the architecture included content that described the current and the target environments, and a transition plan to get from the current to the target environment, consistent with OMB policy and guidance. To determine the extent to which the department has integrated its business and IT architectures, as required by the act, we reviewed DOD Directive 8000.01, Management of the Department of Defense Information Enterprise. We also reviewed meeting documentation from the information enterprise architecture working group responsible for the development of an updated architecture. In addition, we reviewed meeting documentation from the Business Enterprise Architecture Configuration Control Board to identify any discussions among CIO and DCMO officials regarding integration of the two architectures, as well as the level of participation by both parties. Finally, we interviewed officials in the Office of the DCMO and the Office of the CIO about efforts to develop and maintain a business enterprise architecture, develop an IT enterprise architecture, and integrate the business and IT architectures. To determine the extent to which the department has used the Defense Business Council to provide advice to the Secretary of Defense on developing the business enterprise architecture, reengineering the department’s business processes, developing and deploying business systems, and developing requirements for business systems, in accordance with the act, we analyzed the department’s December 2014 Defense Business Council Charter and April 2017 defense business systems investment management guidance. We compared information in the charter and guidance to the requirement that the Secretary establish the Defense Business Council to advise the Secretary on the required defense business system topics. In addition, we obtained and analyzed meeting summaries and briefings for 27 Defense Business Council meetings that took place from January 2016 through August 2017. Specifically, we assessed the frequency with which the meetings held during this time period addressed the required topics. We chose this time period because 2016 was the first calendar year following the enactment of the NDAA for Fiscal Year 2016. Further, we chose August 2017 as our end date because it was the last month’s data that we could reasonably expect to obtain and review within our reporting time frame. We also interviewed officials in the Offices of the DCMO and CIO about the Defense Business Council and the Deputy’s Management Action Group, which is the governance entity to which the Council reports. To determine the extent to which DOD has ensured that covered business systems are reviewed and certified in accordance with the act, we reviewed a nongeneralizable sample of business systems from DOD’s two categories of covered defense business systems that require certification. To select the sample, we considered Category I systems, which were systems that were expected to have a total amount of budget authority of more than $250 million over the period of the current future- years defense program, and Category II systems, which were systems that were expected to have a total amount of budget authority of between $50 million and $250 million over the period of the future-years defense program. We further categorized the Category II systems into four groups—those owned by the Air Force, the Army, Navy, and the remaining DOD components. We selected one system with the highest expected cost over the course of the department’s future-years defense program from each group. This resulted in our selection of five systems: one Category I system, one Category II system from each military department, and one Category II system from the remaining DOD components. We reviewed, respectively, DOD’s Healthcare Management System Modernization Program; Air Force’s Maintenance, Repair and Overhaul initiative; Army’s Reserve Component Automation System; Navy’s Electronic Procurement System; and the Defense Logistics Agency’s Defense Agencies Initiative Increment 2. We determined that the number of systems we selected was sufficient for our evaluation. For each system, we assessed the extent to which it had been certified on the basis of the five certification requirements in the act. Specifically, we evaluated investment decision memos and certification assertions to determine if each system had been certified according to the act’s requirements, which include ensuring that the system had been, or was being, reengineered to be as streamlined and efficient as practicable, and the implementation of the system would maximize the elimination of unique software requirements and unique interfaces; was in compliance with the business enterprise architecture or would be in compliance as a result of planned modifications; had valid, achievable requirements, and a viable plan for implementing those requirements; had an acquisition strategy designed to eliminate or reduce the need to tailor commercial off- the-shelf systems to meet unique requirements, incorporate unique requirements, or incorporate unique interfaces to the maximum extent practicable; and was in compliance with the department’s auditability requirements. We did not determine whether the certification assertions were valid. For example, we did not evaluate business process reengineering activities to determine if they were sufficient. We also interviewed DOD DCMO and military department officials about the certification of these systems. To determine the reliability of the business system cost data used to select the systems, we reviewed system documentation for the three systems DOD uses to store data, which include the Defense Information Technology Investment Portal, the DOD Information Technology Portfolio Repository, and the Select and Native Programming-Information Technology system. In this regard, we requested and reviewed department responses to questions about the systems and about how the department ensures the quality and reliability of the data. In addition, we requested and reviewed documentation related to the systems (e.g., data dictionaries, system instructions, and user training manuals) and reviewed the data for obvious issues, including missing or questionable values. We also reviewed available reports on the quality of the inventories (e.g., inspector general reports). We found the data to be sufficiently reliable for our purpose of selecting systems for evaluation. We conducted this performance audit from January 2017 to March 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Since 2005, we have issued 11 reports assessing DOD’s actions to respond to business system modernization provisions contained in U.S. Code, Title 10, Section 2222. The reports are listed below. DOD Business Systems Modernization: Additional Action Needed to Achieve Intended Outcomes, GAO-15-627 (Washington, D.C.: July 16, 2015). Defense Business Systems: Further Refinements Needed to Guide the Investment Management Process, GAO-14-486 (Washington, D.C. May 12, 2014). DOD Business Systems Modernization: Further Actions Needed to Address Challenges and Improve Accountability, GAO-13-557 (Washington, D.C.: May 17, 2013). DOD Business Systems Modernization: Governance Mechanisms for Implementing Management Controls Need to Be Improved, GAO-12-685 (Washington, D.C.: June 1, 2012). Department of Defense: Further Actions Needed to Institutionalize Key Business System Modernization Management Controls, GAO-11-684 (Washington, D.C.: June 29, 2011). Business Systems Modernization: Scope and Content of DOD’s Congressional Report and Executive Oversight of Investments Need to Improve, GAO-10-663 (Washington, D.C.: May 24, 2010). DOD Business Systems Modernization: Recent Slowdown in Institutionalizing Key Management Controls Needs to Be Addressed, GAO-09-586 (Washington, D.C.: May 18, 2009). DOD Business Systems Modernization: Progress in Establishing Corporate Management Controls Needs to Be Replicated Within Military Departments, GAO-08-705 (Washington, D.C.: May 15, 2008). DOD Business Systems Modernization: Progress Continues to Be Made in Establishing Corporate Management Controls, but Further Steps Are Needed, GAO-07-733 (Washington, D.C.: May 14, 2007). Business Systems Modernization: DOD Continues to Improve Institutional Approach, but Further Steps Needed, GAO-06-658 (Washington, D.C.: May 15, 2006). DOD Business Systems Modernization: Important Progress Made in Establishing Foundational Architecture Products and Investment Management Practices, but Much Work Remains, GAO-06-219 (Washington, D.C.: November 23, 2005). In addition to the contact above, individuals making contributions to this report include Michael Holland (Assistant Director), Cheryl Dottermusch (Analyst in Charge), John Bailey, Chris Businsky, Camille Chaires, Nancy Glover, James Houtz, Anh Le, Tyler Mountjoy, Monica Perez-Nelson, Priscilla Smith, and Adam Vodraska.", "summary": "DOD spends billions of dollars each year on systems that support its key business areas, such as personnel and logistics. For fiscal year 2018, DOD reported that these business system investments are expected to cost about $8.7 billion. The NDAA for Fiscal Year 2016 requires DOD to perform activities aimed at ensuring that business system investments are managed efficiently and effectively, to include taking steps to limit their complexity and cost. The NDAA also includes a provision for GAO to report every 2 years on the extent to which DOD is complying with the act's provisions on business systems. For this report, GAO assessed, among other things, the department's guidance for managing defense business system investments and its business and IT enterprise architectures (i.e., descriptions of DOD's current and future business and IT environments and plans for transitioning to future environments). To do so, GAO compared the department's system certification guidance and architectures to the act's requirements. GAO also interviewed cognizant DOD officials. The Department of Defense (DOD) has made progress in complying with most legislative provisions for managing its defense business systems, but additional actions are needed. For example, the National Defense Authorization Act (NDAA) for Fiscal Year 2016 required DOD and the military departments to issue guidance to address five requirements for reviewing and certifying the department's business systems. While DOD has issued guidance addressing all of these requirements, as of February 2018, the military departments had shown mixed progress. ● Fully addressed: The department provided evidence that it fully addressed this requirement. ◐ Partially addressed: The department provided evidence that it addressed some, but not all, portions of this requirement. ◌ Not addressed: The department did not provide any evidence that it addressed this requirement. Source: GAO analysis of Department of Defense documentation. | GAO-18-130 The military departments' officials described plans to address the gaps in their guidance; however, none had defined when planned actions are to be completed. Without guidance that addresses all five requirements, the military departments risk developing systems that, among other things, are overly complex and costly to maintain. DOD has efforts underway to improve its business enterprise architecture, but its information technology (IT) architecture is not complete. Specifically, DOD's business architecture includes content called for by the act. However, efforts to improve this architecture to enable the department to better achieve outcomes described by the act, such as routinely producing reliable business and financial information for management, continue to be in progress. In addition, DOD is updating its IT enterprise architecture, which describes, among other things, the department's computing infrastructure. However, the architecture lacks a road map for improving the department's IT and computing infrastructure for each of the major business processes. Moreover, the business and IT enterprise architectures have yet to be integrated, and DOD has not established a time frame for when it intends to do so. As a result, DOD lacks assurance that its IT infrastructure will support the department's business priorities and related business strategies. GAO is making six recommendations, including that DOD and the military departments establish time frames for, and issue, required guidance; and that DOD develop a complete IT architecture and integrate its business and IT architectures. DOD concurred with three and partially concurred with three recommendations. GAO continues to believe all of the recommendations are warranted as discussed in this report.", "document_type": "gao"}
{"report": "USDA’s APHIS is responsible for implementing the Animal Welfare Act. The act and its implementing regulations govern, among other things, how federal and nonfederal research facilities must treat particular species of warm-blooded animals to ensure their humane treatment when used in research, teaching, testing, or experimentation. The Animal Welfare Act’s definition of “animal” excludes birds, rats of the genus Rattus, and mice of the genus Mus when those animals are bred for use in research. The act also excludes horses not used for research purposes and other farm animals used or intended for use as food or fiber or in certain types of research. The Animal Welfare Act also excludes cold- blooded animals—such as fish, reptiles, or amphibians—and invertebrates. See table 1 for a summary of the animals covered and not covered by the Animal Welfare Act. (Animals covered by the Health Research Extension Act are also included in table 1 and described in the next section.) The Animal Welfare Act and its regulations contain specific standards for research facilities. These include: Registration. Nonfederal research facilities that conduct activities regulated by the Animal Welfare Act must register with APHIS. The act does not require that federal research facilities register with APHIS. APHIS does, however, assign federal research facilities certificate numbers that it uses to track whether they have submitted their required annual report (see below). As of March 2018, APHIS had assigned such numbers to 157 federal research facilities. Some of these federal research facilities, such as VA, have elected to report information to APHIS on an individual basis, while others, such as the HHS’s Centers for Disease Control and Prevention, submit a single report covering research facilities in several states. Annual report. Reporting facilities that used or intended to use live animals in research, tests, experiments, or for teaching must submit a retrospective annual report about those animals to APHIS on or before December 1 of each calendar year. Standards for humane handling, care, treatment, and transportation of animals. The Animal Welfare Act directs research facilities to meet certain standards of care for the animal species that are covered by the act. The standards of care are tailored to particular species of animals or groups of species. Institutional Animal Care and Use Committees. Research facilities must appoint a committee to, at least semi-annually, review the facility’s program for humane care and use of animals, to inspect all facilities, and to prepare reports of its evaluation. The committee is responsible for reviewing research proposals to determine whether the proposed activities are in accordance with the act or there is an acceptable justification for a departure from the act. Federal inspections. APHIS officials have the authority to inspect nonfederal research facilities, records, and animals to enforce the provisions of the act. The Animal Welfare Act does not expressly provide APHIS the authority to inspect federal research facilities, and APHIS will not do so unless invited. The Animal Welfare Act exempts farm animals, other than horses, from its coverage when they are used or intended for use as food or fiber or in agricultural research that is intended to improve animal nutrition, breeding, management, or production efficiency, or to improve the quality of food or fiber. According to officials with USDA’s Agricultural Research Service (ARS), most of the agency’s research activities fall under this exemption. Nevertheless, in February 2016, APHIS and ARS signed a memorandum of understanding concerning laboratory animal welfare. The intent of the memorandum of understanding is to maintain and enhance agency effectiveness and avoid duplication by allowing APHIS to use applicable sections of the Animal Welfare Act’s requirements, regulations, and standards to inspect ARS animal research facilities. Among the provisions of the memorandum, ARS agreed to register its animal research facilities with APHIS and submit an annual report to APHIS. As of March 2018, 35 ARS animal research facilities were voluntarily registered with APHIS, and ARS facilities submitted their first annual reports for activities conducted in fiscal year 2016. NIH, within the Department of Health and Human Services, administers the Health Research Extension Act. The act calls for the Director of NIH to establish guidelines that govern how certain research institutions that conduct activities using animals are to consider animal welfare. In particular, the guidelines govern how those research institutions— including federal facilities—that receive funding from Public Health Service agencies are to ensure the humane treatment of all vertebrate animals used in biomedical or behavioral science research. NIH conducts site visits at selected institutions to assess compliance with the act. Whereas the Animal Welfare Act applies to certain warm-blooded animals, the definition of animals used for the purposes of the Health Research Extension Act covers all vertebrates, including mice, rats, and fish species that are commonly used in laboratory research (see table 1). Under the act, research institutions are required to provide certain information to NIH in order to be eligible for Public Health Service funding. In particular, they must provide for NIH approval a document that describes their animal care and use program and that assures that the facility meets applicable standards. NIH calls for research institutions to provide, among other information, a commitment to comply with all applicable provisions of the Animal Welfare Act and other federal statutes and regulations relating to animals, a description of the facility, and an “average daily inventory” of species housed at the facility. In addition, research institutions approved for Public Health Service funding must annually report changes in their animal use program to NIH. As of September 2017, NIH had approved 111 federal facilities across 8 agencies for funding under the act. As directed by the regulations implementing the Animal Welfare Act, the 10 agencies we reviewed submitted to APHIS the required annual reports on their use of animals covered by the act from fiscal years 2014 through 2016. However, APHIS’s reporting instructions have not ensured consistent and complete reporting because they have been unclear about which animal species, activities, and activity locations are required to be reported for the purposes of the Animal Welfare Act. Federal facilities that conduct activities with animals using Public Health Service funding that we reviewed met NIH requirements to provide assurance documentation about their animal use programs and to provide required annual reports for fiscal years 2014 through 2016. The Animal Welfare Act regulations require federal agencies that use or intend to use live animals in research to report on their use of these animals. As directed by APHIS, these agencies, or their individual research facilities, must submit an annual report to APHIS on or before December 1 of each calendar year. APHIS instructs research facilities to submit an annual report that: includes information about animals covered by the Animal Welfare Act’s regulations and the number of such animals used as well as those held for use but not used, and provides assurances that the facility has met applicable standards, such as standards for the appropriate use of anesthetic, analgesic, and tranquilizing drugs. In addition, facilities must report whether the animals fall into one of three categories related to pain or distress and the efforts the facilities took to relieve pain or distress. Facilities must also attach a summary of any activity that did not meet the standards of the act but that were approved by the facility’s Institutional Animal Care and Use Committee. All 10 of the federal agencies we reviewed submitted annual reports to APHIS showing that their facilities had used animals in research in fiscal years 2014 through 2016. APHIS has procedures in place to track which agencies’ facilities have reported and to notify any that have not done so. For example, APHIS has developed schedules for sending reminders to facilities that have not yet reported. APHIS expects federal research facilities that it has assigned certificate numbers but that did not use any animals in a particular fiscal year to submit a report with that information. APHIS data show that the 10 federal agencies in our review reported that their facilities used more than 210,000 animals covered by the Animal Welfare Act in fiscal years 2014 through 2016. However, in our comparison of federal agencies’ annual reports to APHIS with their responses to our request for information about their activities, we found instances in which agencies did not report activities covered by the act or did not report similar activities consistently across facilities. These conditions resulted, in part, from APHIS not providing sufficient instructions on the research activities that federal agencies are to include in their annual reports. Additionally, we found that facilities reported species not covered by the act. As a result, the data that research facilities submit to APHIS in their annual reports may not accurately reflect the facilities’ uses of animals covered by the act. We identified three areas in which federal agencies’ annual reports were inconsistent or incomplete: birds, animal use outside the United States, and field studies. The Animal Welfare Act and birds Animal Welfare Act The term animal excludes birds bred for use in research. APHIS’s 2017 instructions for completing the annual report “o NOT report the use of … birds, reptiles, fish or other animals w hich are exempt from the regulation under the .” In 2002, Congress amended the definition of animal in the Animal Welfare Act to exclude birds that are bred for use in research. However, APHIS instructs facilities to not report any birds in their annual reports, regardless of whether they were bred for research. Five agencies reported to us that their research facilities used birds in fiscal years 2014 through 2016—including some not bred for research and therefore potentially covered by the act—but that they followed APHIS’s instructions to not report them. According to APHIS officials, since Congress amended the definition of animal in the act, the agency has been aware of the need to define which birds are covered by the act and should, among other things, be reported to APHIS by research facilities. The officials said that until the agency has defined birds covered by the act, they do not believe that it is appropriate to require research facilities to report their use of birds. However, as of February 2018, APHIS had not provided us with a schedule or plan for defining birds covered by the act or for developing reporting requirements for those birds. As a result, it is unclear when, or if, APHIS will require research facilities to report their use and treatment in research of birds that are covered by the Animal Welfare Act. Until APHIS develops such requirements, federal (and other) research facilities will have incomplete information about what information they should include in annual reports submitted to APHIS, and APHIS will not have assurance that annual reports from research facilities fully reflect research activities covered by the act. The Animal Welfare Act and reporting facilities Animal Welfare Act regulations “The reporting facility shall be that segment of the research facility, or that department, agency, or instrumentality of the United States, that uses or intends to use live animals in research, tests, experiments, or for teaching.” APHIS’s 2017 Instructions for completing the annual report The instructions do not instruct federal research facilities to report activities involving animal use outside the United States. The Animal Welfare Act regulations define a reporting facility to include a department, agency, or instrumentality of the United States. Officials from USDA’s Office of the General Counsel told us that there is no exclusion in the act or its regulations for federal research facilities that are located outside of the United States. However, APHIS does not instruct federal research facilities to report activities involving animal use outside the United States. Of the 10 agencies with federal research facilities that submitted annual reports to APHIS, we identified three through our initial contacts and follow-up interviews that conduct activities outside the United States involving animals that may be covered by the Animal Welfare Act: the Departments of Commerce and Defense and the Smithsonian Institution. We found that officials from the three agencies had a different understanding of their obligation to report those activities to APHIS. A senior official from the Department of Commerce’s National Marine Fisheries Service said that he knew of no reason to not report on studies conducted outside the United States and that the agency had reported such activities in fiscal year 2017. On the other hand, officials from the Department of Defense and the Smithsonian Institution told us that APHIS officials have instructed them not to report activities conducted outside of the United States. As a result, the Department of Defense and the Smithsonian Institution did not report animal use in their non-domestic facilities in fiscal years 2014 through 2016. With instructions from APHIS that federal research agencies report all activities covered by the Animal Welfare Act, regardless of location, APHIS and the public would have greater assurance that annual reports fully reflect activities covered by the act and that agencies are reporting such activities consistently. The Animal Welfare Act and field studies Animal Welfare Act regulations “Field study means a study conducted on free-living w ild animals in their natural habitat. How ever, this term excludes any study that involves an invasive procedure, harms, or materially alters the behavior of an animal under study.” APHIS’s 2017 instructions for completing APHIS’s instructions do not sufficiently clarify the conditions under w hich a field study w ould be invasive, harmful, or materially alter behavior and, therefore, be covered under the act. APHIS exempts some research involving wild animals from the requirements of the Animal Welfare Act regulations, including annual reporting. Specifically, in promulgating the current definition of “field studies” in regulation, APHIS stated, “if the research project meets the definition of field studies, the research project would not fall under the regulation.” To qualify for this exemption, a study must take place in a free-living, wild animal’s natural habitat and not involve an invasive procedure, harm, or materially alter the behavior of an animal under study. APHIS’s instructions for annual reporting note this exemption. However, they do not sufficiently clarify the conditions under which a field study would qualify, nor do they point to any source providing clarifying language. For example, the instructions do not describe criteria research facilities could use to identify activities that are invasive, harmful, or materially alter behavior. We found that agencies have interpreted the field study exemption differently. For example, Officials from three agencies within the Department of the Interior told us that the agencies did field research with many species in fiscal years 2014 through 2016, but we found the agencies had different approaches to reporting that research to APHIS. Specifically, the U.S. Geological Survey and National Park Service reported using dozens of animal species to APHIS while the Fish and Wildlife Service did not report any. An official with the Fish and Wildlife Service explained to us that the agency did not report the animals to APHIS because they were only held temporarily. Officials from the Fish and Wildlife Service and U.S. Geological Service told us that APHIS’s guidance on field studies is confusing and causes discrepancies in reporting. NASA conducts research involving temporary capture, blood sampling, and tagging of animals to study any possible effects of NASA’s launch sites on the surrounding ecosystem, but the agency does not include these activities in its annual reports to APHIS. The National Marine Fisheries Service conducts field research also involving temporary capture, blood sampling, and tagging of marine mammals for various purposes. Some of the service’s research facilities have reported these types of activities to APHIS, and according to a service official, the other facilities plan to do so. An official from the service also told us that the agency has received inconsistent guidance from APHIS about what field research to report. The National Marine Fisheries Service’s facilities that have reported animal research to APHIS have represented a large portion of the overall number of animals that federal facilities reported in fiscal years 2014 through 2016. For example, in fiscal year 2016, the agency’s facilities accounted for nearly 16,000 of about 82,000 animals reported to APHIS by the 10 federal agencies in our review. Therefore, whether these activities should or should not be reported will have a large effect on the total number of animals that federal facilities reported using for research. APHIS officials told us that they are developing additional clarifying guidance on field studies and will publish the guidance for public comment in the third quarter of fiscal year 2018. However, APHIS has not yet released a draft of this guidance. A draft with criteria for identifying which field studies are covered by the Animal Welfare Act and therefore should be reported—for example, because the studies are considered to be invasive, harmful, or materially alter behavior—would enable APHIS to ensure that the research community’s views are incorporated. With clearer instructions that include such criteria, APHIS and the public would have greater assurance that annual reports fully reflect activities covered by the act. NIH has provided guidance to federal and nonfederal research facilities about what they are required to report on their animal use, and federal facilities we reviewed met those requirements. In order to obtain funding from the Public Health Service agencies, research facilities must obtain approval from NIH of their animal welfare assurance statement and must provide annual reports to NIH. To obtain an approved assurance, a research facility must provide NIH with information about its animal care and use program. NIH provides facilities with a sample assurance document that describes the required information, including assurances of compliance with animal welfare standards signed by appropriate officials, a roster of Institutional Animal Care and Use Committee membership, an average daily census of animals, and other information. NIH’s approval of an animal care program lasts up to 5 years, and according to NIH officials, the agency typically begins its review of a renewal after 4 years. To help facilities meet the annual report requirement, NIH provides an annual-reporting sample document that directs research facilities to update the animal care and use committee’s roster and to note any change in accreditation from the private accreditation organization AAALAC International and describe any significant changes in their animal care program, such as the species or number of animals maintained in housing. NIH officials told us the purpose of the assurances is to ensure that the proper facilities and procedures are in place to properly care for the animals, and that NIH does not use them as a public reporting tool. Health Research Extension Act of 1985 animal care committees at each entity w hich conducts biomedical and behavioral research with funds provided under this Act (including the National Institutes of Health and the national research institutes) to assure compliance w ith the guidelines established [by the Director of NIH]. NIH has procedures to ensure that facilities that seek to receive funding from Public Health Service agencies have animal care programs with active assurances. NIH provided us with its data for tracking which facilities were receiving Public Health Service funding and which facilities had approved programs. As of November 2017, according to NIH data, all of the federal facilities receiving funding from Public Health Service agencies for activities involving animals had an active assurance. Using a sample of 16 assurances from federal facilities, we found that these assurances contained information called for by NIH, including signatures from institutional officials, rosters of Institutional Animal Care and Use Committees, and animal inventories. NIH data show that all assured facilities submitted annual reports in calendar years 2014, 2015, and 2016. APHIS and NIH publicly report some information about federal agencies’ use of research animals. Although the Animal Welfare Act does not require APHIS to share this information, APHIS posts the following on its website: Annual reports from research facilities. Research facilities’ annual reports include data on the species and numbers of animals held and used for research, categorized by the steps taken to minimize pain and distress to the animal. The annual reports also include the facility’s explanation of any exceptions to the Animal Welfare Act’s standards and regulations during the reporting year. As of April 2018, APHIS’s website included research facilities’ annual reports from fiscal years 1999 through 2017. National summaries of the annual reports. APHIS prepares national summaries using the annual reports submitted by research facilities. APHIS’s annual national-summary reports include data provided by research facilities on species and numbers of animals, categorized by state and by the steps taken to minimize pain and distress to the animal. As of March 2018, APHIS’s website had national summary reports for fiscal years 2008 through 2016. The national summaries do not categorize the data by types of facilities, such as federal or nonfederal research facilities. Reports of APHIS inspections. The APHIS inspection reports— typically of nonfederal facilities—could contain such information as descriptions of non-compliance, the number of animals involved in noncompliance, a correction deadline and a description of what should be done to correct the problem, and the date of the inspection. As of March 2018, APHIS’s website contained reports of inspections at three federal facilities, including a zoo and an aquarium. This number does not include ARS research facilities, which APHIS inspects as part of its 2016 memorandum of understanding with ARS. As of March 2018, APHIS’s website contained inspection reports for 19 ARS research facilities. USDA’s Chief Information Officer has provided guidance directing the department’s agencies and offices to strive to ensure and maximize, among other things, the objectivity of information disseminated to the public. To ensure objectivity, the guidance directs that USDA agencies and offices ensure that the information they disseminate is presented in an accurate, clear, complete, and unbiased manner. APHIS has not fully implemented this guidance for the animal use data it shares publicly. In particular, APHIS does not explain on its website potential limitations related to the accuracy and completeness of the annual reports that it provides to the public or in the national summaries of the annual reports that APHIS prepares. For example, APHIS does not explain that research facilities’ annual reports may contain data on animals used for activities that are not covered by the Animal Welfare Act regulations, such as excluded field studies. Additionally, APHIS does not explain that the annual reports do not include birds not bred for research—and consequently covered by the Animal Welfare Act— because APHIS has instructed facilities to not report any birds. Furthermore, APHIS does not explain that it does not validate the accuracy and completeness of agencies’ reporting. In particular, APHIS officials told us that they have the opportunity to validate reporting when they inspect nonfederal facilities, but do not have the authority to inspect federal research facilities unless invited to do so. Some stakeholders responded to our survey that they use the data that APHIS reports on animal use to identify trends and practices within the research community. By fully implementing USDA guidance by explaining what the data represent and possible issues with their quality, APHIS could have more assurance that it is providing these data to users in a manner that is as accurate, clear, complete and unbiased as possible. Users could then be better equipped to properly analyze or assess the quality of the data, interpret the annual reports, and draw conclusions based on these data. NIH posts a list of federal and nonfederal facilities with active assurances on its website. The Health Research Extension Act does not require NIH to make such information available through a public website, but NIH policy directs the agency to provide to Public Health Service agencies a list of facilities with such assurances. The list includes facilities that receive Public Health Service funding and facilities that have voluntarily requested NIH’s review and approval of their programs. Our review did not identify federal facilities that were missing from or incorrectly included in NIH’s posted list of assured facilities. NIH does not regularly post other information—such as the facilities’ average daily inventory of animals, the date they obtained an assurance, or the date they submitted their most recent annual report.—from research facilities’ assurance documents. Therefore, we did not review in detail the information that agencies provide to NIH to determine its accuracy. Federal agencies may have additional information about their animal use programs. However, stakeholders who responded to our survey had different views about whether federal agencies should proactively and routinely make more information on animal use available to the public on their websites or other means than the data that APHIS and NIH currently provide. Stakeholders other than animal advocacy organizations— including federal agencies, research organizations, academia, and others—generally expressed the view that federal agencies should not routinely make additional information available to the public, citing reasons including the existence of other methods to obtain this information and administrative burden. In contrast, stakeholders from animal advocacy organizations cited the need for more transparency and oversight as reasons that federal agencies should make additional information routinely available to the public, among other reasons. (See app. III for more information about stakeholders’ responses to our questions). More specifically, we asked stakeholders to provide their views on whether federal agencies should proactively and routinely report certain types of information to the public. We selected 10 types of information for stakeholders to consider, including some types of information that federal agencies may have for internal purposes and, in some instances, may provide to other agencies or organizations but that neither they nor others are required to proactively share with the public. The types of information we asked stakeholders to consider included data on vertebrate animals that are not covered by the Animal Welfare Act, internal or external inspection reports, and general descriptions of agencies’ animal use programs. See table 2 for the complete list of types of information we asked stakeholders to consider. For stakeholder groups that generally expressed the view that federal agencies should not make additional information available to the public on a proactive and routine basis, one of the most frequently cited reasons included that the public could obtain this information through other publicly available means. For example, several stakeholders said that agencies’ reports of noncompliance to APHIS or NIH and data on resource expenditures are already available via the FOIA. One federal stakeholder said that it provides the public with information about the nature and extent of field research when it is required by the Marine Mammal Protection Act of 1972 or the Endangered Species Act of 1973 to obtain permits; the permitting processes include public notice and comment. In addition, some stakeholders said that certain types of information, such as the identity of the species used and the purpose and expected benefit of specific research projects are already published in peer-reviewed journals that are accessible to the public. Several stakeholders also responded that providing additional information would impose an administrative burden on agencies. For example, several stakeholders said any potential public benefit from the additional information shared with the public would not justify the effort to collect and share the information, and one stakeholder said that providing certain types of information would reduce the time they have to do actual research. In addition, one stakeholder said that a requirement to make additional information available to the public would be in direct conflict with a 2016 law that directed NIH, the Food and Drug Administration, and USDA to look for ways to reduce administrative burdens associated with animal welfare regulations. Other less frequently cited reasons that stakeholders gave for not believing that agencies should proactively and routinely share additional information with the public included: Certain information, such as expenditures on animal use, could be difficult to collect from disparate sources. For example, one federal agency said that much of its animal use funding is allocated in different areas of research and that it would need guidance to collect data on expenditures separately from each area. Disseminating information could jeopardize the security of facilities or personnel or disclose proprietary data. For example, one stakeholder said agency reports contain key details about federal research facilities that opposition groups could use to target personnel in those facilities. Disseminating information could confuse the public unless appropriate context is provided. One stakeholder said that the passive dissemination of data on animal research on a website, without appropriate context, would potentially increase public confusion and add misplaced scrutiny on animal use in federal research facilities. For those stakeholder groups that generally expressed the view that federal agencies should make additional information available to the public on a proactive and routine basis, the most frequently cited reasons were the importance of transparency to allow the public to assess and understand animal use in federal research facilities and the need for oversight and accountability of federal agencies’ use of animals. For example, some stakeholders responded that sharing additional information with the public would aid their efforts to monitor the reduction, refinement, and replacement of animals used in federal research. One stakeholder also mentioned that sharing additional information could be easily done on a website and would give the public a more complete picture of the use of animals by federal research facilities. Several stakeholders also expressed the need for greater oversight and accountability of federal agencies’ use of animals. For example, two stakeholders said that making additional information available about the degree to which animals experience pain or distress would help them assess whether federal programs’ animal use is in compliance with specific provisions related to pain and distress in the Animal Welfare Act. Stakeholder groups less frequently cited other reasons for favoring routine reporting, such as: FOIA requests can take several months and sometimes years for agencies to fulfil. Certain information, such as the number of all vertebrate animals used by each agency—including those not reported under the Animal Welfare Act—should be easy to disseminate because federal agencies already collect or compile it for internal purposes. Additional reporting would align the federal government with other countries’ practices. For example, according to one stakeholder, the European Union categorizes and publicly releases animal use numbers that are more detailed than those reported in the United States. APHIS and NIH routinely collect information about federal agencies’ research with vertebrate animals and provide the public with related information. Having access to this information can help the public observe trends in animal use in research and learn about facilities’ compliance with standards of humane care. Federal agencies met NIH’s requirements for reporting on their animal use, but the data federal agencies provided to APHIS were not always consistent or complete. This situation resulted in part from APHIS’s not providing sufficient instructions to federal research facilities for reporting on their use of animals covered by the Animal Welfare Act. In particular, APHIS instructs facilities to not report any birds in their annual reports, regardless of whether the birds are covered by the act. Although aware of this limitation, APHIS has not provided a schedule or plan for defining birds covered by the act or for developing reporting requirements for those birds. In addition, APHIS’s instructions have not sufficiently clarified two areas of confusion and differing understanding among federal agencies: first, activities that involve animal use outside the United States and, second, the specific conditions under which field studies are or are not covered by the act. APHIS plans to develop clarifying guidance on field studies and will publish the guidance for public comment. By defining the birds that need to be reported, by instructing federal research facilities to report research activities outside the United States, and by working with the research community to develop clear criteria for identifying field studies, APHIS would have greater assurance that the data it receives from research facilities fully reflect the activities covered by the Animal Welfare Act. APHIS has also not fully implemented the USDA’s information dissemination policy that calls for the department’s agencies to ensure information is presented in an accurate, clear, complete, and unbiased manner. In particular, APHIS does not explain issues related to the completeness and accuracy of the data it provides to the public, for example, issues such as inconsistencies in the types of field studies reported by federal agencies. By fully explaining these issues, the agency would improve users’ ability to accurately interpret and analyze the data. We are making the following four recommendations to APHIS: The Administrator of APHIS should develop a timeline for (1) defining birds that are not bred for research and that are covered by the Animal Welfare Act, and (2) requiring that research facilities report to APHIS their use of birds covered by the act. (Recommendation 1) The Administrator of APHIS should instruct federal agencies to report their use of animals covered by the Animal Welfare Act in federal facilities located outside of the United States. (Recommendation 2) In developing the definition of field studies, the Administrator of APHIS should provide research facilities with clear criteria for identifying field studies that are covered by the Animal Welfare Act’s regulations and that facilities should report to APHIS as well as field studies that facilities should not report. (Recommendation 3) The Administrator of APHIS should ensure APHIS fully describes on its website how the agency compiles annual report data from research facilities, what the data represent, and any potential limitations to the data’s completeness and accuracy. (Recommendation 4) We provided a draft of this report to Commerce, Defense, HHS, DHS, Interior, USDA, VA, EPA, NASA, and the Smithsonian Institution. USDA and VA provided written comments on the draft, which are presented in appendixes IV and V, respectively. In its written comments, USDA said that APHIS provided planned corrective actions and timeframes for implementing three of our four recommendations; APHIS disagreed with one recommendation. In its written comments, VA said that the report’s conclusions were consistent with our findings. Regarding our first recommendation that the Administrator of APHIS develop a timeline for (1) defining birds that are not bred for research and that are covered by the Animal Welfare Act, and (2) requiring that research facilities report to APHIS their use of birds covered by the act, USDA stated that APHIS will submit a recommendation and timeline by September 30, 2018, to USDA officials regarding the development of a definition for birds. USDA’s comments did not specifically respond to our recommendation that APHIS also develop a timeline for requiring that research facilities report their use of birds covered by the act; we continue to believe that APHIS should develop such a timeline. USDA’s written comments stated that APHIS disagreed with our second recommendation that the Administrator of APHIS should instruct federal agencies to report their use of animals covered by the Animal Welfare Act in federal facilities located outside of the United States. USDA provided several reasons for the disagreement: USDA stated that the absence of an exclusion to the requirements of the Animal Welfare Act or its regulations for federal research located outside of the United States does not create a requirement to collect information about such facilities’ use of animals. However, the Animal Welfare Act regulations define a reporting facility to include a department, agency, or instrumentality of the United States. In addition, officials from USDA’s Office of the General Counsel told us that there is no exclusion in the act or its regulations for federal research facilities that are located outside the United States. We have no reason to believe that such facilities should be excluded from the requirements of the Animal Welfare Act or its implementing regulations. We also note that in February 2018, APHIS officials told us that if federal agencies’ activities involving animals outside of the United States are in fact covered by the Animal Welfare Act based on the specific facts and circumstances of their activities, they should report those activities to APHIS. USDA’s comments stated that the collection of information related to research activities outside of the United States does not enable or inform its daily administration of the Animal Welfare Act and its charge to ensure the humane treatment of animals. Rather, USDA stated that our recommendation would impose an additional regulatory burden on federal research facilities. As stated above, we have no reason to believe that such facilities should be excluded from the requirements of the Animal Welfare Act or its implementing regulations. Without such an exclusion, the regulatory burden already exists; our recommendation would simply have APHIS instruct federal agencies to meet that regulatory requirement. Finally, USDA commented that our recommendation would place APHIS in the position of collecting different information from “reporting facilities,” as defined in the regulations, which in turn, would impact any summary presentation of information involving the use of animals. We understand that, if our recommendation were implemented, APHIS may receive “different” information from federal and nonfederal facilities; that is, federal research facilities might report activities outside of the United States while nonfederal facilities would not. However, as stated above, we have no reason to believe that such facilities should be excluded from the requirements of the Animal Welfare Act or its implementing regulations. Without such an exclusion, activities covered by the Animal Welfare Act in federal facilities located outside of the United States must already be reported. We also note that, as we state in our fourth recommendation, APHIS should inform the public about the nature of its data. That information could include describing any differences in reporting by federal and nonfederal research facilities. For the reasons given above, we continue to believe that the Administrator of APHIS should instruct federal agencies to report their use of animals in activities covered by the Animal Welfare Act in federal facilities located outside of the United States. In response to our third recommendation that the Administrator of APHIS take certain steps to clarify the definition of field studies that are covered by the Animal Welfare Act, USDA stated that APHIS agreed to issue a guidance document by December 31, 2018. We appreciate APHIS’s commitment to issuing new guidance on field studies, but note that USDA’s written comments did not directly respond to the language in our draft recommendation that called for the agency to provide research facilities with clear examples of field studies that are covered by the Animal Welfare Act regulations. We also note that the Forest Service stated in technical comments that the extensive number and variation in wildlife species preclude providing specific examples of activities that meet a prescribed definition of a field study. The Forest Service suggested that we modify our recommendation to call for APHIS to provide criteria for how research facilities should determine which studies qualify as an exempted field study. We agreed with that suggestion and modified our recommendation to call on APHIS to provide research facilities with criteria to help research facilities determine which studies are covered by the Animal Welfare Act. APHIS agreed with our fourth recommendation that the Administrator of APHIS direct the agency to fully describe animal use data on its website. USDA’s comments stated that, beginning with the fiscal year 2017 summary activities, APHIS will describe how it compiles annual report data from research facilities, what the data represent, and any potential limitations to the data’s completeness and accuracy. USDA stated that APHIS will update the website with this information by September 30, 2018. In its written comments, VA stated that our overall descriptions of its animal research program were accurate. The agency also stated that it looks forward to a time when the use of animals in research is no longer needed, but until that time, the agency will use all necessary research strategies to reduce and prevent the suffering of veterans. APHIS, HHS, and DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Secretary of Commerce, the Secretary of Defense, the Secretary of Health and Human Services, the Secretary of Homeland Security, the Secretary of the Interior, the Secretary of Veterans Affairs, the Administrator of the Environmental Protection Agency, the Administrator of the National Aeronautics and Space Administration, the Secretary of the Smithsonian Institution, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact us at (202) 512-3841 or morriss@gao.gov or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. Federal agencies conduct research with animals for a variety of purposes, including to benefit human or animal populations. We identified 10 agencies that conducted research using vertebrate animals in fiscal years 2014, 2015, or 2016 with their own staff using their own facilities and equipment. Federal agencies also fund activities that use animals, meaning that the research is done by a nonfederal entity. However, we did not include those activities in our review. In the process of identifying federal agencies that conducted research with animals, we also identified the wide range of vertebrate animal species that these agencies used from fiscal years 2014 through 2016. In response to our survey of agencies, we learned that some agencies conducted research with a dozen or more species of animal while others conducted activities with hundreds of species. For example, NASA reported to GAO that it used 16 species while the National Museum of Natural History—one of the four animal research facilities within the Smithsonian Institution that responded to our survey—reported it conducted research on about 1,400. Table 3 shows groups of vertebrate species the 10 agencies reported to GAO that they used in research in fiscal years 2014 through 2016. Some of the species groups shown in table 3 are not covered by the Animal Welfare Act (i.e., amphibians, fish, and reptiles), while some animal species within a group may not be covered by the act. For example, farm animals are not covered by the Animal Welfare Act if researchers use them for agricultural purposes, such as improving animal nutrition, breeding management, or production efficiency, or for improving the quality of food or fiber, but are covered if researchers use them for human health purposes. Mice and rats are not covered by the Animal Welfare Act if they are of the genus Mus or Rattus and bred for use in research. Similarly, the act does not cover birds bred for use in research. Furthermore, agencies may have used animal species in a field study that is not covered by Animal Welfare Act regulations. Agencies are not required by the Animal Welfare Act to report their use of animals that are not covered by the act to the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS). Nevertheless, the agencies are required by other policies and statutes to ensure that they treat those animals humanely. American Association for Laboratory Animal Science AAALAC International (formerly known as the Association for Assessment and Accreditation of Laboratory Animal Care International) As described in this report, GAO conducted a survey of federal agencies and stakeholder groups regarding their opinions on whether federal agencies should proactively and routinely and publicly share information about their animals on a website or other means. The graphics in this appendix illustrate the responses to our survey by stakeholder group. The stakeholder groups included 20 federal departments, agencies, and sub- agencies that conduct animal research on vertebrate species; eight animal advocacy organizations that advocate on behalf of animals; six research and science organizations; and five other stakeholders including individuals in academia and other knowledgeable entities. Stakeholders from federal agencies, research organizations, and academia and other entities except animal advocacy organizations generally expressed the view that federal agencies should not make additional information made routinely available to the public. (See figs. 1, 2, and 3, respectively.) In contrast, animal advocacy organizations generally expressed the view that federal agencies should make additional information routinely available to the public. (See fig. 4.) Figure 5 provides examples of stakeholders’ statements explaining their views on whether federal agencies should or should not provide additional information to the public. GAO also asked stakeholder groups in the survey about their opinion regarding whether the Animal and Plant Health Inspection Service (APHIS) should modify how it collects and posts annual report data under the Animal Welfare Act. Seventeen of 39 stakeholders responded that they would like to see changes to the way APHIS collects and posts annual report data. Specifically, all stakeholders from animal advocacy organizations and individuals in academia would like to see changes to how APHIS collects and posts annual report data while some stakeholders from federal agencies and research and science organizations also noted that they would like to see changes. Table 4 provides examples of stakeholders’ views and suggestions regarding such changes. In addition to the individuals named above, Mary Denigan-Macauley (Acting Director), Joseph Cook (Assistant Director), Ross Campbell (Analyst-in-Charge), Kevin Bray, Tara Congdon, Hayden Huang, Marc Meyer, Amber Sinclair, and Rajneesh Verma made key contributions to this report.", "summary": "Research facilities, including those managed by federal agencies, use a wide range of animals in research and related activities each year. The Animal Welfare Act and the Health Research Extension Act have varying requirements for federal agencies and others to protect the welfare of and report on the use of different research animals to APHIS and NIH. GAO was asked to review several issues related to animals used in federal research. This report examines (1) the extent to which APHIS and NIH have provided federal facilities with guidance for reporting their animal use programs, (2) the extent to which APHIS and NIH have shared agencies' animal use information with the public, and (3) stakeholder views on federal agencies' sharing additional information. GAO identified federal agencies that used vertebrate animals in research in fiscal years 2014 through 2016, reviewed their reports to APHIS and NIH, and examined publicly available data. GAO also surveyed a nongeneralizable sample of stakeholders from federal agencies and animal advocacy, research and science, and academic organizations. The Department of Health and Human Services' (HHS) National Institutes of Health (NIH) and the U.S. Department of Agriculture's (USDA) Animal and Plant Health Inspection Service (APHIS) have provided guidance to federal research facilities on what they must report about their animal use programs under the Health Research Extension Act and the Animal Welfare Act, respectively. Federal research facilities we reviewed met NIH's reporting instructions. However, APHIS's instructions have not ensured consistent and complete reporting in three areas: research with birds, activities outside the United States, and field studies outside a typical laboratory. By clarifying its instructions, APHIS could improve the quality of animal use data it receives from agencies. APHIS and NIH voluntarily share some information about agencies' animal research with the public. In particular, APHIS posts to its website data on agencies' annual use of animals covered by the Animal Welfare Act, and NIH publicly posts a list of research facilities with approved animal use programs. However, APHIS does not describe potential limitations related to the accuracy and completeness of the data it shares as called for by USDA guidance. For example, APHIS does not explain that the data do not include birds used for activities that are covered by the Animal Welfare Act and may include field studies that are not covered by the act. APHIS could increase the data's usefulness to the public by making such disclosures. Federal agencies may have additional information about their animal use programs, including data on vertebrate species used but not reported to APHIS; the purpose of research activities; and internal inspection reports. However, stakeholders GAO surveyed had different views on agencies' sharing such data with the public. Some stakeholders, particularly animal advocacy organizations, cited the need for more transparency and oversight while others, including federal agencies and research and science organizations, raised concerns about the additional administrative burden on agencies. Source: GAO analysis of the Animal Welfare Act and the Office of Laboratory Animal Welfare's Public Health Service Policy on Humane Care and Use of Laboratory Animals. | GAO-18-459 . a The act covers research funded by the public health service agencies of the U.S. government. GAO recommends that APHIS clarify its reporting instructions and fully describe the potential limitations of the animal use data it makes available to the public. USDA stated that APHIS will take steps to implement GAO's recommendations, with the exception of clarifying reporting instructions for activities outside the United States. GAO continues to believe that APHIS needs to ensure complete reporting of such activities by federal facilities.", "document_type": "gao"}
{"report": "In our prior work, we identified a range of factors that can affect permitting timeliness and efficiency. For the purposes of this statement, we have categorized the factors into five broad categories: 1) coordination and communication, 2) human capital, 3) collecting and analyzing accurate milestone information, 4) incomplete applications, and 5) significant policy changes. Effective coordination and communication between agencies and applicants is a critical factor in an efficient and timely permitting process. Standards for internal control in the federal government call for management to externally communicate the necessary quality information to achieve the entity’s objectives, including by communicating with and obtaining quality information from external parties. We found that better coordination between agencies and applicants could result in more efficient permitting. For example, in our February 2013 review of natural gas pipeline permitting, we reported that virtually all applications for pipeline projects require some level of coordination with one or more federal agencies, as well as others, to satisfy requirements for environmental review. For example, BIA is responsible for, among other things, approving rights of way across lands held in trust for an Indian or Indian tribe and must consult and coordinate with any affected tribe. We have reported on coordination practices that agencies use to streamline the permitting process, including the following. We have found that having a lead agency coordinate efforts of federal, state, and local stakeholders is beneficial to permitting processes. For example, in our February 2013 review on natural gas pipeline permitting, industry representatives and public interest groups told us that the interstate process was more efficient than the intrastate process because in the interstate process FERC was designated the lead agency for the environmental review. Other agencies may also designate lead entities for coordination. For example, in a November 2016 report, we described how BIA had taken steps to form an Indian Energy Service Center that was intended to, among other things, help expedite the permitting process associated with Indian energy development. We recommended that BIA involve other key regulatory agencies in the service center so that it could more effectively act as a lead agency. Establishing coordinating agreements among agencies can streamline the permitting process and reduce time required by routine processes. For example, in our February 2013 review of natural gas pipeline permitting, we reported that FERC and nine other agencies signed an interagency agreement for early coordination of required environmental and historic preservation reviews to encourage the timely development of pipeline projects. Agencies can also use mechanisms to streamline reviews of projects that are routine or less environmentally risky. For example, under NEPA, agencies may categorically exclude actions that an agency has found—in NEPA procedures adopted by the agency—do not individually or cumulatively have a significant effect on the human environment and for which, therefore, neither an environmental assessment nor an environmental impact statement is required. Also under NEPA, agencies may rely on “tiering,” in which broader, earlier NEPA reviews are incorporated into subsequent site-specific analyses. Tiering is used to avoid duplication of analysis as a proposed activity moves through the NEPA process, from a broad assessment to a site-specific analysis. Such a mechanism can reduce the number of required agency reviews and shorten the permitting process. Agency and industry representatives cited human capital factors as affecting the length of permitting reviews. Such factors include having a sufficient number of experts to review applications. Some examples include: In June 2015 and in November 2016, we reported concerns associated with BIA’s long-standing workforce challenges, such as inadequate staff resources and staff at some offices without the skills needed to effectively review energy-related documents. In November 2016 we recommended that Interior direct BIA to incorporate effective workforce planning standards by assessing critical skills and competencies needed to fulfill BIA’s responsibilities related to energy development. For a September 2014 report, representatives of companies applying for permits to construct LNG export facilities told us that staff shortages at the Pipeline and Hazardous Safety Materials Administration delayed spill modeling necessary for LNG facility reviews. In an August 2013 review of Interior’s Bureau of Land Management (BLM) and oil and gas development, industry representatives told us that BLM offices process applications for permit to drill at different rates, and inadequate BLM staffing in offices with large application workloads are one of the reasons for these different rates. Agencies have taken some actions to mitigate human capital issues. For example, we reported in August 2013 that BLM had created special response teams of 10 to 12 oil and gas staff from across BLM field offices to help process applications for permits to drill in locations that were experiencing dramatic increases in submitted applications. In July 2012, we recommended that Interior instruct two of its bureaus to develop human capital plans to help manage and prepare for human capital issues, such as gaps in critical skills and competencies. Our work has shown that a factor that hinders efficiency and timeliness is that agencies often do not track when permitting milestones are achieved, such as the date a project application is submitted or receives final agency approval to determine if they are achieving planned or expected results. In addition, our work has shown that agencies often do not collect accurate information, which prevents them from analyzing their processes in order to improve and streamline them. The following are examples of reports in which we discussed the importance of collecting accurate milestone information: In December 2017, we found that the National Marine Fisheries Service and the U.S. Fish and Wildlife Service were not recording accurate permit milestone dates, so it was not possible to determine whether agencies met statutory review time frames. We recommended that these agencies clarify how and when staff should record review dates so that the agencies could assess the timeliness of reviews. We found in June 2015 that BIA did not have a documented process or the data needed to track its review and response times; to improve the efficiency and transparency of BIA’s review process, we recommended that the agency develop a process to track its review and response times and improve efforts to collect accurate review and response time information. We found in an August 2013 report that BLM did not have complete data on applications for permits to drill, and without accurate data on the time it took to process applications, BLM did not have the information it needed to improve its operations. We recommended that BLM ensure that all key dates associated with the processing of applications for permits to drill are completely and accurately entered into its system to improve the efficiency of the review process. Standards for internal control in the federal government call for management to design control activities to achieve objectives and respond to risks, including by comparing actual performance with planned or expected results and analyzing significant differences. Without tracking performance over time, agencies cannot do so. The standards also call for agency management to use quality information to achieve agency objectives; such information is appropriate, current, complete, accurate, accessible, and provided on a timely basis. As we have found, having quality information on permitting milestones can help agencies identify the duration of the permitting process, analyze process deficiencies, and implement improvements. According to agency officials we spoke with and agency documents we reviewed, incomplete applications are a factor that can affect the duration of reviews. For example, in a 2014 BLM budget document, BLM reported that—due to personnel turnover in the oil and gas industry—operators were submitting inconsistent and incomplete applications for permits to drill, which was delaying the approval of permits. In a February 2013 report, officials we spoke with from Army Corps of Engineers district offices said that incomplete applications may delay their review because applicants are given time to revise their application information. Deficiencies within agency IT systems may also result in incomplete applications. As we noted in a July 2012 report, Interior officials told us that their review of oil and gas exploration and development plans was hindered by limitations in its IT system that allowed operators to submit inaccurate or incomplete plans, after which plans were returned to operators for revision or completion. Agencies can reduce the possibility of incomplete applications by encouraging early coordination between the prospective applicant and the permitting agency. According to agency and industry officials we spoke with, early coordination can make the permitting process more efficient. One example of early coordination is FERC’s pre-filing process, in which an applicant may communicate with FERC staff to ensure an application is complete before formally submitting it to the commission. Changes in U.S. policy unrelated to permitting are a factor that can also affect the duration of federal permitting reviews. For example, in September 2014, we reported that the Department of Energy did not approve liquefied natural gas exports to countries without free-trade agreements with the United States for a period of 16 months. We found that the Department stopped approving applications while it conducted a study of the effect of liquefied natural gas exports on the U.S. economy and the national interest. Exporting liquefied natural gas was an economic reversal from the previous decade in which the United States was expected to become an importer of liquefied natural gas. Policy changes can result from unforeseen events. After the Deepwater Horizon incident and oil spill in 2010, Interior strengthened many of its safety requirements and policies to prevent another offshore incident. For example, Interior put new safety requirements in place related to well control, well casing and cementing, and blowout preventers, among other things. In a July 2012 report, we found that after the new safety requirements went into effect, review times for offshore oil and gas drilling permits increased, as did the number of times that Interior returned a permit to an operator. In conclusion, our past reports have identified varied factors that affect the timeliness and efficiencies of federal energy infrastructure permitting reviews. Federal agencies have implemented a number of our recommendations and taken steps to implement more efficient permitting, but several of our recommendations remain open, presenting opportunities to continue to improve permitting processes. Chairmen Palmer and Gianforte, Ranking Members Raskin and Plaskett, and Members of the Subcommittees, this concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. If you or your staff members have any questions concerning this testimony, please contact Frank Rusco, Director, Natural Resources and Environment, who may be reached at (202) 512-3841 or RuscoF@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this testimony include Christine Kehr (Assistant Director), Dave Messman (Analyst-in-Charge), Patrick Bernard, Marissa Dondoe, Quindi Franco, William Gerard, Rich Johnson, Gwen Kirby, Rebecca Makar, Tahra Nichols, Holly Sasso, and Kiki Theodoropoulos. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Congress recognizes the harmful effects of permitting delays on infrastructure projects and has passed legislation to streamline project reviews and hold agencies accountable. For example, in 2015 Congress passed the Fixing America's Surface Transportation Act, which included provisions streamlining the permitting process. Federal agencies, including the Department of the Interior and FERC, play a critical role by reviewing energy infrastructure projects to ensure they comply with federal statutes and regulations. This testimony discusses factors GAO found that can affect energy infrastructure permitting timeliness and efficiency. To do this work, GAO drew on reports issued from July 2012 to December 2017. GAO reviewed relevant federal laws, regulations, and policies; reviewed and analyzed federal data; and interviewed tribal, federal, state and industry officials, among others. GAO's prior work has found that the timeliness and efficiency of permit reviews may be affected by a range of factors. For the purposes of this testimony, GAO categorized these factors into five categories. Coordination and Communication. GAO found that better coordination between agencies and applicants is a factor that could result in more efficient permitting. Coordination practices that agencies can use to streamline the permitting process include the following: Designating a Lead Coordinating Agency . GAO found having a lead agency to coordinate the efforts of federal, state, and local stakeholders is beneficial to permitting processes. For example, in a February 2013 report on natural gas pipeline permitting, industry representatives and public interest groups told GAO that the interstate process was more efficient than the intrastate process because in the interstate process the Federal Energy Regulatory Commission (FERC) was lead agency for the environmental review. Establishing Coordinating Agreements among Agencies . In the February 2013 report, GAO reported that FERC and nine other agencies signed an interagency agreement for early coordination of required environmental and historic preservation reviews to encourage the timely development of pipeline projects. Human Capital. Agency and industry representatives cited human capital factors as affecting the length of permitting reviews. Such factors include having a sufficient number of experts to review applications. GAO reported in November 2016 on long-standing workforce challenges at the Department of the Interior's Bureau of Indian Affairs (BIA), such as inadequate staff resources and staff at some offices without the skills to effectively conduct such reviews. GAO recommended that Interior incorporate effective workforce planning standards by assessing critical skills and competencies needed to fulfill its responsibilities related to energy development. Interior agreed with this recommendation, and BIA stated that its goal is to develop such standards by the end of fiscal year 2018. Collecting and Analyzing Accurate Milestone Information. GAO's work has shown that a factor that hinders efficiency and timeliness is that agencies often do not track when permitting milestones are achieved, such as the date a project application is submitted or receives final agency approval. Having quality information on permitting milestones can help agencies better analyze process deficiencies and implement improvements. Incomplete Applications. Agency officials and agency documents cited incomplete applications as affecting the duration of reviews. For example, in a 2014 budget document, BLM reported that—due to personnel turnover in the oil and gas industry—operators were submitting inconsistent and incomplete applications for drilling permits, delaying permit approvals. Significant Policy Changes. Policy changes unrelated to permitting can affect permitting time frames. For example, after the 2010 Deepwater Horizon incident and oil spill, Interior issued new safety requirements for offshore drilling. GAO found that review times for offshore oil and gas drilling permits increased after these safety requirements were implemented. GAO has made numerous recommendations about ways to improve energy infrastructure permitting processes. Federal agencies have implemented a number of GAO's recommendations and taken steps to implement more efficient permitting, but several of GAO's recommendations remain open, presenting opportunities to continue to improve permitting processes.", "document_type": "gao"}
{"report": "Children enter foster care when they have been removed from their parents or guardians and placed under the responsibility of a child welfare agency. Reasons for a child’s removal can vary, though 61 percent of nearly 275,000 removals during fiscal year 2016 involved neglect and 34 percent involved drug abuse by the parent(s), according to the most recent available HHS data. Child welfare agencies most commonly place children with unrelated foster parents, with relatives, or in congregate care settings. Coordinating placement and support services for these children, such as physical and mental health services, education, child care, and transportation, is typically the responsibility of child welfare agency caseworkers. Caseworkers may also coordinate placements for children exiting foster care, which most commonly include reunifications with the child’s parents or permanent placements through adoption, legal guardianship, or other living arrangements with a relative. Children who age out of the foster care system without a permanent placement with a family may receive transitional supports, such as housing and job search services. Children placed in foster families—including unrelated foster parents, relatives, and fictive kin (e.g., close family friends who are not relatives)— live in the family’s home and are typically incorporated into an existing family structure. For example, these families may include biological children and other children in foster care. Families may receive a payment from the child welfare agency to help cover the costs of a child’s care, as determined by each state. Families who are trained to provide therapeutic foster care services are supervised and supported by qualified program staff to care for children who need a higher level of care. Therapeutic foster care families may have fewer or no other children in the home, and parents in these families may be required to provide a higher level of care and supervision for the child. In addition, the payment provided to these families may be higher. States are primarily responsible for administering their child welfare programs, consistent with applicable federal laws and regulations. Their responsibilities include recruiting and retaining foster families and finding other appropriate placements for children. In recruiting foster families, states generally require that families undergo a licensing process that includes a home study to assess the suitability of the prospective parents, including their health, finances, and criminal history, and take pre-service training on topics such as the effects of trauma on a child’s behavior. In retaining foster families, states may provide support to families, such as through ongoing training classes and regular visits from child welfare agency caseworkers if a child is placed in their home. State and county child welfare agencies may work with private foster care providers, commonly through contracts, to help them administer child welfare services. Private providers can include non-profit and for-profit organizations that provide a range of public and private services in addition to foster care, such as residential treatment, mental health, and adoption services. For foster care, private providers may be responsible for recruiting foster families, which may involve identifying prospective foster parents, providing information on and helping with the licensing process, and conducting home studies and training. If the child welfare agency places a child with a foster family working with a private provider, the private provider may also be responsible for activities that can help retain foster families, such as conducting regular visits with the family (in addition to visits from child welfare agency caseworkers) and helping them access needed services. Child welfare agencies may pay these providers based on the number of children placed. This payment may include an administrative payment to the private provider, as well as a payment that the private provider passes on to the foster family to help cover the costs of a child’s care. Child welfare agencies and private providers may also work with other entities to recruit and retain foster families. For example, they may collaborate with community partners, such as faith-based organizations and schools, to share information about foster care and recruit families. Child welfare agencies and private providers may also work with direct service providers, such as hospitals and community-based mental health clinics, to obtain services to support children in foster care and their foster families, which can help retain these families. HHS’s Administration for Children and Families (ACF) administers several federal funding sources that states can use to recruit and retain foster families, in addition to state, local, and other funds. For example, funding appropriated for title IV-E of the Social Security Act makes up the large majority of federal funding provided for child welfare, comprising about 89 percent of federal child welfare appropriations in fiscal year 2017 (approximately $7 billion of nearly $7.9 billion), according to ACF. These funds are available to states to help cover the costs of operating their foster care, adoption, and guardianship assistance programs. For example, in their foster care programs, states may use these funds for payments to foster families to help cover the costs of care for eligible children (e.g., food, clothing, and shelter) and for certain administrative expenses, including recruiting and training prospective foster parents. Title IV-E funds appropriated specifically for foster care programs totaled about $4.3 billion in fiscal year 2017, comprising about 61 percent of title IV-E funding, according to ACF. In addition, title IV-B of the Social Security Act is the primary source of federal child welfare funding available for child welfare services. States may use these funds for family support and family preservation services to help keep families together and reduce the need to recruit and retain foster families. Such services can include crisis intervention, family counseling, parent support groups, and mentoring. States may also use title IV-B funds to support activities to recruit and retain foster families. Federal appropriations for title IV-B comprised about 8 percent of federal child welfare appropriations (approximately $650 million of nearly $7.9 billion) in fiscal year 2017, according to ACF. ACF is responsible for monitoring states’ implementation of these programs. For example, ACF monitors state compliance with title IV-B plan requirements through its review of states’ 5-year Child and Family Services Plans and Annual Progress and Services Reports. Child and Family Services Plans set forth a state’s vision, goals, and objectives to strengthen its child welfare system, and Annual Progress and Services Reports provide annual updates on the progress made by states toward those goals and objectives. Child and Family Services Plans are required for a state to receive federal funding under title IV-B, and document the state’s compliance with federal program requirements. One requirement is that states must describe in their plans how they will “provide for the diligent recruitment of potential foster and adoptive families that reflect the ethnic and racial diversity of children in the State for whom foster and adoptive homes are needed.” In addition, ACF conducts Child and Family Services Reviews, generally every 5 years, to assess states’ conformity with requirements under these federal programs. These reviews involve case file reviews and stakeholder interviews, and are structured to help states identify strengths and areas needing improvement within their agencies and programs. States found not to be in substantial conformity with federal requirements must develop a program improvement plan and undergo more frequent review. In addition to the diligent recruitment requirements under title IV-B of the Social Security Act, states receiving federal foster care funds under title IV-E are generally required to search for relatives when a child enters foster care. In the three selected states—California, Georgia, and Indiana—child welfare officials said their first priority is to recruit relatives or fictive kin to care for children entering foster care, when appropriate. Officials in California and Georgia discussed recent initiatives to expand the search for relatives and fictive kin for children already in foster care. For example, county child welfare officials in California said they contracted with a private provider who they also use to recruit and retain foster families to conduct these searches. This particular private provider told us that they can access the child welfare agency’s case management system to review information about each child to determine which relatives or fictive kin have already been contacted. The private provider said they may contact these relatives or fictive kin to see whether circumstances have changed such that they would now be able to care for the child. In addition, the private provider said they may use existing contacts, social media, and an identity search program to locate additional relatives or fictive kin for a child. This private provider reported that from July to September 2017, their searches yielded 36 additional relatives or fictive kin, on average, for each of the 23 children in one county for whom the private provider conducted a search. In addition, officials in Georgia said they initiated pilot projects in two regional offices to train staff on how to search for relatives and fictive kin. Community outreach to a broad population of prospective foster families is a moderately or very useful recruitment strategy, according to 36 states that responded to our survey. In addition, child welfare officials and 11 of the 14 private providers in the three selected states said they engage in community outreach events to recruit prospective foster families. For example, they said they attend local events (e.g., state fairs) or visit local organizations (e.g., faith-based organizations or schools) to provide information about becoming a foster parent. One private provider said they attend local markets and summer festivals to talk with prospective families and provide them with informational materials. Another private provider said they hold meetings for prospective foster parents to answer questions and provide additional information about foster care and the role of the private provider. In addition, 20 states reported in our survey that marketing campaigns, such as mailings and media advertisements, are a moderately or very useful recruitment strategy. In the three selected states, child welfare officials and 12 of the 14 private providers said they use different forms of media, such as newspapers, radio, television, billboards, social media, or printed advertisements, to solicit foster families. Child welfare officials we interviewed in Georgia and Indiana said they have implemented statewide media campaigns that incorporate both traditional and digital media. Officials in Georgia told us the campaigns have successfully increased inquiries through the agency’s website and toll-free phone line. A private provider in one county said they worked with a marketing firm to create advertisements that were shown in movie theaters, which also resulted in additional inquiries from prospective families. With regard to therapeutic foster care services, private providers we spoke with in both of our discussion groups said they use strategies such as yard signs, television commercials, and social media to recruit therapeutic foster care families. In our survey, nearly all states reported having targeted recruitment strategies as part of their recruitment plans or practices, such as strategies that focus on certain populations of prospective foster parents (e.g., those in faith-based communities or of a certain race), families for certain populations of children in foster care (e.g., teenagers and sibling groups), and families living in specific geographic locations. To help inform their recruitment strategies, 39 states reported in our survey that they collect and use information on children awaiting placement, such as their backgrounds and service needs, and 31 states reported that they collect and use information on available foster families, such as their preferences for placements and where they are located. In the three selected states, child welfare officials and 8 of the 14 private providers we interviewed said they use targeted recruitment to identify prospective foster families. In addition, child welfare officials and five private providers said they collect or use demographic data on children needing placement and available foster families to inform their efforts. For example, child welfare officials in one county said they use data to target recruitment efforts in the neighborhoods where children entered foster care. Similarly, one private provider told us they use data on the demographics of successful foster families to target recruitment efforts toward those types of families, such as social workers and parents whose children have grown up and left home (i.e., “empty nesters”). Targeted recruitment can be a particularly useful strategy to identify families who can provide therapeutic foster care services for children who need a higher level of care, such as those who have severe mental health conditions or who are medically fragile. In the three selected states, child welfare officials and four private providers said they use targeted recruitment strategies to search for families who can provide therapeutic foster care services. For example, child welfare officials in one state said they focus on recruiting individuals with specific skillsets, such as doctors and nurses who have experience working with children who need more care. Private providers in both of our discussion groups also said they use targeted recruitment strategies for these purposes. When asked in our survey about the usefulness of various recruitment strategies, states most often cited referrals from current foster families as a moderately or very useful recruitment strategy. In the three selected states, child welfare officials and all 14 private providers said they use referrals from current foster families to recruit new families, and the majority of these officials and private providers said such referrals are the most effective recruitment strategy. One private provider emphasized that current foster families are better recruiters than private providers because these families can speak from first-hand experience about the potential benefits and difficulties of caring for a child in foster care. Another private provider said that referrals occur through regular interactions in the community or through information meetings and events facilitated by private providers, such as movie nights. To encourage referrals, 6 of the 14 private providers in the three states said they offer financial incentives to current foster families who help recruit new families. For example, three of these private providers said they offer incentives ranging from $100 to $500. In regard to therapeutic foster care services, private providers in both of our discussion groups said referrals are the most effective recruitment strategy. Private providers in one group said they offer financial incentives ranging from $200 to $300, which generally are paid after a new family becomes licensed to provide therapeutic foster care services and a child has been placed in their home. Eight of the 14 private providers in the three selected states said they try, in general, to employ multiple types of recruitment strategies. Further, many of these private providers explained that prospective foster parents typically hear about foster care through multiple mediums before applying to become a parent. For example, a prospective parent might hear a radio advertisement, then see a billboard, and later talk to a private provider at a state fair before deciding to apply. Foster parents we spoke with in the three states, as well as in discussion groups on therapeutic foster care services, discussed a number of reasons why they became foster parents, including knowing others who had provided foster care, having the desire to give back, and wanting to expand their family by fostering with the intention to adopt a child (see text box). In our survey, 49 states reported using private providers to recruit foster families, including 44 that use private providers to recruit families who can provide therapeutic foster care services for children who need a higher level of care. Specifically, 30 states reported that they use private providers to recruit both traditional and therapeutic foster care families, 14 reported that they use private providers to recruit therapeutic foster care families exclusively, and the remaining 5 reported that they use private providers to recruit traditional foster families exclusively. In the three selected states, child welfare officials said they initially developed agreements with private providers to recruit families who can provide therapeutic foster care services. However, as state caseloads have risen, these officials said they have also referred children who do not need therapeutic foster care services to private providers. Child welfare officials and private providers in the three selected states said that private providers in their states are responsible for both recruiting and retaining foster families. They said responsibilities of private providers can include helping families become licensed, suggesting possible matches between children and available families, and providing support to help families access services needed to care for children in foster care (see fig. 1). Child welfare officials and private providers in the three selected states described ways they have collaborated to recruit foster families, and discussed the benefits of using private providers to recruit and retain these families. For example, child welfare officials in one county said they collaborated with private providers to create common marketing materials that included information about the child welfare agency and each private provider, which helps prospective foster families decide which entity they want to work with. Officials and private providers in this county said collaborative recruitment efforts are an efficient use of resources and reduce competition in recruiting from the same pool of prospective foster families. Nearly all of the 14 private providers we interviewed in the three selected states said they can help child welfare agencies support foster families, particularly those who care for children who need more care than others, because they can maintain lower caseloads and be more accessible to families than child welfare agencies. These private providers explained that they accept placements for children only when they have available foster families and staff, whereas child welfare agencies cannot choose how many children they have in their caseloads. Specifically, four private providers noted that private providers typically maintain small caseloads, such as 10 children per private provider caseworker. In contrast, seven private providers said child welfare agencies manage larger caseloads—as high as 40 children per caseworker—which can strain their ability to support foster families. In addition, eight private providers said families can contact them 24 hours a day, which may not be the case with child welfare agency caseworkers. All of the 49 states that reported using private providers in our survey also reported having various oversight mechanisms to monitor them. These mechanisms include periodic audits and site visits, regular calls for information sharing, periodic check-ins with foster families working with private providers, and requirements for providers to develop recruitment plans. Child welfare officials in the three selected states provided detail on a range of oversight activities. For example, child welfare officials in Georgia said their agency conducts comprehensive audits of private providers annually, which include an examination of the facility, case file reviews, and staff interviews. In addition, county child welfare officials in California said their agency requires private providers to attend monthly meetings with agency staff and submit quarterly outcome reports. In response to our survey, 34 states reported that limited resources to focus on foster family recruitment made their recruitment efforts moderately or very challenging. In the three selected states, child welfare officials raised concerns about their ability to prioritize foster family recruitment efforts, given large increases in their foster care caseloads and other demands for resources. Nationwide, caseloads increased by over 10 percent from fiscal years 2012 through 2016, according to HHS data. In addition, 8 of the 14 private providers in the three states told us that a lack of dedicated funding for recruitment from child welfare agencies made recruitment efforts challenging. One private provider said they have recently put recruitment efforts on hold to focus on serving children in existing placements. States also reported in our survey that eligibility requirements for federal foster care funding have affected their ability to prioritize resources for recruitment. Specifically, of the 34 states that provided a response on this issue, almost half reported that requirements that tie eligibility for receiving federal funds under title IV-E of the Social Security Act to income eligibility standards under the discontinued Aid to Families with Dependent Children program have affected their recruitment efforts to a moderate or great extent. States may use title IV-E funds to assist with the costs of operating their foster care programs, and are generally entitled to receive these funds based on the number of eligible children they have in their programs. To be eligible for title IV-E foster care funds, a child must have been removed from a home that meets income eligibility standards under the Aid to Families with Dependent Children program as of July 1996, among other criteria. The Aid to Families with Dependent Children program was replaced by the Temporary Assistance for Needy Families program beginning in 1996, and the income eligibility standards for title IV-E foster care funding have not been changed since then. We reported in 2013 that a family of four had to have an annual income below $15,911 to meet the income eligibility threshold in 1996. If adjusted for inflation, the threshold would have been $23,550 in 2013. Due, in part, to fewer families meeting these income eligibility standards, we found that the number of children who currently meet title IV-E eligibility requirements has declined. As a result, we reported that states have received less federal funding under title IV-E and have paid an increasingly larger share of funds for their foster care programs. The percentage of children eligible for title IV-E foster care funds decreased from about 54 percent in fiscal year 1996 to nearly 39 percent in fiscal year 2015, according to data published by the Congressional Research Service (see fig. 2). Given fiscal constraints, child welfare agencies, like other state agencies, may need to make difficult choices about how to allocate their limited resources. The process for licensing foster families can help ensure that children are placed in safe and stable environments that meet their needs. However, 35 states reported in our survey that lengthy licensing processes made it moderately or very challenging to recruit new foster families. In the three selected states, child welfare officials and 7 of the 14 private providers discussed extensive state licensing processes that may discourage prospective foster families, including delays in getting fingerprints, completing background checks, or reviewing applications. Some private providers said delays are likely caused by competing priorities at state licensing agencies or limited staff in child welfare agencies. One private provider told us that families may wait several months for approval after completing an application. Another private provider told us that in the past year, approval time frames for licenses have, in some cases, increased from 1 to 2 weeks to 3 to 6 months. In regard to therapeutic foster care services, private providers in both discussion groups raised similar concerns (see text box). Child welfare officials in California told us they are in the process of restructuring their licensing process to improve efficiencies and reduce burden for foster families. In addition, county child welfare officials in the state told us they are offering families additional support to help them through the licensing process, such as assigning staff to prospective foster families as soon as they initiate the licensing process to help them complete required paperwork and schedule pre-service training. In response to our survey, states reported difficulties finding families who can meet the needs of children, particularly for therapeutic foster care services. Specifically, 37 states reported that the needs of children entering foster care have increased, and 35 reported that there are not enough foster families willing to care for the types of children needing placement. For example, nearly all states cited difficulties finding families for children with aggressive behaviors and severe mental health needs, as well as for teenagers and sibling groups. Consequently, 36 states reported difficulties appropriately matching children with families, and 30 reported having moderately or significantly too few therapeutic foster care families (see text box). In the three selected states, child welfare officials and 7 of 14 private providers discussed similar challenges finding appropriate families for children needing placement. For example, officials in one state said the increased demand for both traditional and therapeutic foster care families has caused them to place children in the first available home rather than match them with families based on the family’s preferences and ability to provide care. One private provider told us that due to the increasing number of referrals for placements, they are not able to be as selective during the matching process as they have been in the past. Another private provider said child welfare agencies may be so pressed to find placements for children that they may call foster families working with the private provider directly, which can put pressure on the family to agree to the placement even when the family does not believe the child is a good fit. One private provider told us that a foster family accepted a child who had been sleeping in the child welfare agency caseworker’s office, but the placement was not a good fit and was eventually disrupted, which was traumatic for both the child and the foster family. Private providers in both of our discussion groups said finding families willing to provide therapeutic foster care services to children can be difficult. They noted that parents may be required to take on more documentation and supervision responsibilities for a child who requires a higher level of care and complete more intensive training, which may be difficult for working parents. In addition to challenges finding appropriate families for children, 34 states reported in our survey that a negative perception of foster care made it moderately or very challenging to recruit new families. Child welfare officials in two states and 5 of the 14 private providers we interviewed raised similar concerns. For example, child welfare officials in one county told us that they recruit foster families in an environment where media reports have highlighted challenges with overburdened caseworkers and turnover of agency directors. These officials also said foster parents may share negative experiences with family and friends, leading to an unfavorable impression of child welfare agencies within the community. In addition, child welfare officials in one state and four private providers said some families who provide foster care services have faced false allegations of child abuse and subsequent investigations. Some private providers said these investigations can be emotionally draining or disruptive to the family, and some said that fear of such allegations and investigations may deter prospective families from becoming a foster family. Other recruitment challenges cited by several child welfare officials, private providers, and foster parents we interviewed included concerns by prospective foster families about caring for children who have high needs or who are certain ages, or that providing foster care will disrupt their nuclear family. While many child welfare officials and private providers we spoke with acknowledged these negative perceptions and fears, parents in all eight foster parent groups we interviewed in the three states also discussed how being a foster family can be a positive experience. For example, several foster parents said providing foster care to different types of children has enhanced their family. Private providers and foster parents also said it is important to share personal experiences to bring understanding about what it is like to be a foster family. For example, one foster parent told us about a blog she writes to describe normal family activities that include children in foster care, such as taking family trips. In response to our survey, 29 states reported that inadequate support for foster families from the child welfare agency made it moderately or very challenging to retain these families. In the three selected states, all 14 private providers we interviewed and foster parents in all eight of the foster parent groups we spoke with emphasized the importance of supporting families in order to retain them. All 14 private providers discussed concerns about communication with child welfare agencies, which they said can affect the quality of services they provide to foster families. For example, 10 of the private providers said they have difficulty contacting or receiving a response from child welfare agency caseworkers when they try to obtain information needed to comply with child welfare agency requirements. One private provider explained that they are required to develop a service plan for each child they place with a family, and the plan must be signed by the child welfare agency caseworker within 5 days of placement. However, this private provider said they often cannot reach the caseworker to have plans reviewed and approved within the required time frame. Seven private providers told us that there often is confusion on the part of child welfare agency caseworkers about the role of private providers. For example, these private providers said child welfare agency caseworkers may not know which tasks the private providers are responsible for or may be unfamiliar with the paperwork they need to give to the private provider. Similarly, foster parents in five groups expressed dissatisfaction with the level of support they have received from child welfare agency caseworkers. These foster parents described instances in which they were unable to reach their caseworker during emergencies, such as when they needed permission to administer medications to their foster child. One foster parent told us she had waited approximately 8 weeks for her caseworker to approve her child’s medication. This parent said she worked with her private provider to email the child welfare agency caseworker on a daily basis, but received no response. Foster parents in our discussion group raised similar concerns (see text box). Reasons why child welfare agency caseworkers may be limited in their ability to support foster families can include high caseloads and caseworker turnover. For example, 33 states reported in our survey that having too few staff and inadequate funding made it moderately or very challenging to retain foster families. In the three selected states, child welfare officials, 9 of 14 private providers, and foster parents in five of the eight foster parent groups noted that high caseloads contribute to a lack of support for foster families. Child welfare officials in one state said although their regulations stipulate a maximum caseload of 12 to 17, many caseworkers have caseloads that exceed those levels. In addition, a private provider in this state told us that child welfare agency caseworkers typically carry about 35 cases. Other private providers explained that the demands on child welfare caseworkers to meet basic paperwork and case planning requirements and conduct visits for a large caseload may prevent them from responding to requests or returning phone calls in a timely manner. Child welfare officials in two states, 11 private providers, and foster parents in three foster parent groups also explained that frequent caseworker turnover can affect the level of support foster families receive, particularly when new caseworkers are unfamiliar with a child’s history and needs. One foster parent told us that she had worked with eight different child welfare agency caseworkers in a 19-month period. Another foster parent said she maintains all of her foster children’s records, since in the past, documents have been lost in transfers between child welfare agency caseworkers. Child welfare officials in the three selected states acknowledged difficulties supporting foster families due to high caseloads or caseworker turnover. Officials in one state said they recently requested additional state funds to add 500 caseworker positions, and officials in another state said they have made efforts to revisit staffing levels following reductions during the economic recession in 2008. In addition, many private providers and foster parents we interviewed noted limitations with other supports for foster families. For example, 10 of 14 private providers and foster parents in three of the eight foster parent groups in the three states discussed their concerns about low payment rates for foster families, which some said may not adequately cover the costs of caring for a child. A 2012 study on payment rates for foster families found that basic payment rates (e.g., for traditional foster care services) in the majority of states fell below estimated costs of caring for a child, based on data from the U.S. Department of Agriculture. Five private providers and foster parents in five foster parent groups also discussed a lack of access to respite care services or a lack of “voice” for foster parents in contributing to decisions regarding children in their care. These private providers and foster parents said these circumstances can be frustrating and cause parents to leave the system. In response to our survey, 31 states reported that inadequate access to services, such as child care and transportation, made it moderately or very challenging to retain foster families. In the three selected states, child welfare officials, 9 of 14 private providers, and foster parents in six of eight foster parent groups discussed similar difficulties. For example, they discussed difficulties accessing child care services, which some said are particularly needed because of the increasing number of opioid- affected infants coming into care. Some officials, private providers, and foster parents said their state may offer child care subsidies, but waitlists can be long, and foster families may have difficulties finding an approved childcare center, particularly for children who need a higher level of care. Further, child welfare officials, private providers, and foster parents discussed challenges accessing transportation services. For example, child welfare officials said children are sometimes moved to homes outside their original community due to a lack of available homes, which places a burden on foster families to transport children to physical and mental health appointments, regular visits with their biological families, and school. A private provider we interviewed said many parents who provide transportation to these various appointments also must go through a burdensome process to claim mileage reimbursement from the child welfare agency, so many parents do not submit a claim. In addition, child welfare officials, private providers, and foster parents discussed challenges accessing mental health services. For example, one private provider said they have been unable to find a qualified mental health provider who accepts Medicaid to deliver needed services to an autistic child. Further, child welfare officials we interviewed in one county discussed difficulties connecting children with therapists who have an understanding of childhood trauma. In addition to these challenges, child welfare officials and private providers we interviewed said many foster families leave the foster care system due to family or life changes, including adoptions of children in their care, retirements, health issues, and relocation to a different state. HHS’s Administration for Children and Families (ACF) provides a number of supports to help state child welfare agencies in their efforts to recruit and retain foster families, according to ACF officials we interviewed and agency documents we reviewed. These supports include technical assistance, guidance and information, and funding. Technical assistance. ACF provided technical assistance through its National Resource Center for Diligent Recruitment (the Center), and subsequently, the Child Welfare Capacity Building Collaborative. The Center provided several types of technical assistance to achieve its aim of helping states develop and implement diligent recruitment programs to achieve outcomes such as improving permanency and placement stability for children in foster care. The Center provided on- and off-site coaching to states in a number of areas, such as developing a mix of general and targeted recruitment strategies, using existing data to target recruitment efforts, and developing a recruitment plan. Staff who worked at the Center reported providing direct technical assistance and training to 30 states. The Center also provided toolkits that guide states through the process of developing a comprehensive diligent recruitment plan to meet federal requirements. For example, the toolkits include discussion questions about the goals states have for their plans, suggestions on which stakeholders to include, and worksheets to help states analyze existing data. ACF officials told us that they also review states’ diligent recruitment plans and may provide feedback to states. In addition, ACF provides technical assistance to states through its Child and Family Services Reviews. These reviews are generally conducted every 5 years and examine a number of factors in states’ foster care programs to assess conformity with federal requirements, including factors related to recruiting and retaining foster families. In its reviews of 24 states in fiscal years 2015 and 2016, ACF reported deficiencies for 18. ACF officials said these deficiencies included a lack of adequate state recruitment plans and data used for recruitment efforts. In addition, they said they will be working with states to address identified deficiencies in subsequent program improvement plans, which are to be developed in consultation with ACF. Guidance and information. ACF provides a wide range of guidance and information to states to support their recruitment and retention efforts. For example, the Center distributed free monthly electronic newsletters that provided information on new tools, resources, and webinars related to foster family recruitment and retention. The Center also developed or provided links to publications on topics such as using data to inform recruitment efforts, taking a customer service approach in working with current and prospective foster families, and lessons learned from related projects funded by ACF. The Center facilitated information sharing among states by holding webinars, such as one on the benefits of implementing a comprehensive diligent recruitment program, and peer-to-peer networking events on topics such as recruiting, developing, and supporting therapeutic foster care families. In addition, ACF’s Child Welfare Information Gateway is a website that provides access to a broad array of electronic publications, websites, databases, and online learning tools for improving child welfare practice. For example, its resources related to recruiting and retaining foster families include publications on strategies and tools, as well as examples from state and local child welfare agencies on promising practices. Funding. HHS administers a number of federal funding sources that states said they used for their foster family recruitment and retention efforts. For example, in our survey, states most often cited using child welfare funds under title IV-E and IV-B of the Social Security Act for these purposes in fiscal year 2016 (see fig. 3). ACF also provided a number of discretionary grants to support state efforts to recruit and retain foster families through the Adoption Opportunities program, which funds projects designed to eliminate barriers to adoption and help find permanent families for children, particularly older children, minority children, and those with special needs. Specifically, ACF awarded cooperative agreements to 22 states, localities, and non-profit organizations in fiscal years 2008 through 2013 for 5-year projects that aim to enhance recruitment efforts and improve permanency outcomes for children, among other things. For example, ACF awarded a cooperative agreement in 2010 to the county child welfare agency in Los Angeles, California to launch a project that targeted recruitment efforts to prospective foster families in African American, Latino, LGBT, and deaf communities to increase permanency outcomes for their foster care population. In addition, it awarded a cooperative agreement in 2013 to Oregon’s state child welfare agency to implement a project that focused on developing customer service concepts in working with foster families, increasing community partnerships, and using data to inform recruitment efforts and outcome measures. In addition, ACF also awarded two cooperative agreements to Spaulding for Children to develop training for prospective and current foster and adoptive families. The first, awarded in fiscal year 2016, was for a 3-year project to develop a foster and adoptive parent training program to prepare families who can care for children who have high needs, such as children needing therapeutic foster care services. The second, awarded in fiscal year 2017, was for a 5-year project to develop a foster and adoptive parent training program for all individuals interested in becoming a foster family or adopting a child from foster care or internationally. In response to our survey, many states reported that they found these federal supports helpful to their recruitment and retention efforts. For example, guidance and information, such as the electronic newsletters, publications, and webinars provided by the Center, were cited most often by states as being moderately or very helpful (31 states). Over half the states reported that networking opportunities, such as peer-to-peer networking events facilitated by the Center, and technical assistance provided by the Center were moderately or very helpful to their efforts (28 and 27 states, respectively). However, similar to concerns raised by all 14 private providers in the three selected states about communication issues with child welfare agencies, several private providers told us they have not received guidance or information from these agencies about recruiting and retaining foster families, and most were unaware of some of the supports provided by ACF. Specifically, 11 of the 14 private providers said they were unaware of the National Resource Center for Diligent Recruitment, and 7 told us that the information offered by the Center would have been useful to their recruitment efforts had they known about it. For example, one private provider told us they have been trying to use data to more effectively recruit foster families, and the Center’s resources on recruitment strategies and tools would have been helpful in these efforts. Another private provider said each private provider in their area conducts recruitment activities based on its own ideas and experiences, and the Center’s resources would have been helpful in ensuring that they use the most effective strategies. ACF officials said they encourage states to involve all relevant stakeholders in their efforts to recruit and retain foster families. They acknowledged that ACF has not provided specific guidance and information to states on working with private providers, but noted that some supports, such as online publications and webinars, are available to private providers working in the public sector. ACF officials explained that their efforts have focused on child welfare agencies because these are the entities that receive federal funds. However, federal internal control standards state that agencies should communicate necessary information, both internally and externally, to achieve their objectives. The mission statement for ACF’s Children’s Bureau is to partner with federal, state, tribal, and local agencies to improve the overall health and well-being of the nation’s children and families. According to its website, the Children’s Bureau carries out a variety of projects to achieve its goals, such as providing guidance on federal law, policy, and program regulations, offering training and technical assistance to improve child welfare service delivery, and sharing research to help child welfare professionals improve their services. Given that almost all states use private providers to help them recruit foster families, and that private providers may be responsible for providing supports to help retain these families, it is important for HHS to determine whether additional information on working more effectively with private providers would be useful to states. This could help HHS better achieve its goals in supporting states’ efforts to recruit and retain foster families. States face challenges recruiting and retaining foster care families and almost all states rely on private providers to help them meet the demand for appropriate foster families, particularly those who can provide therapeutic foster care services. However, private providers used by child welfare agencies in the three states where we conducted interviews raised concerns about the level of communication they have with these agencies. Such communication issues can affect the quality of services provided to support foster families, as well as the level of guidance and information private providers receive from child welfare agencies. Although HHS has provided various supports that states have found useful in their efforts to recruit and retain foster families, many of the private providers we spoke with were unaware of some supports that they said could have helped them. Given the important role private providers play in recruiting and retaining foster families, state feedback to HHS on whether child welfare agencies could benefit from information on how to work more effectively with private providers could help HHS determine whether it needs to take action to better support states’ use of private providers. GAO recommends that the Secretary of Health and Human Services seek feedback from states on whether information on effective ways to work with private providers to recruit and retain foster families would be useful and if so, provide such information. For example, HHS can seek feedback from states through technical assistance and peer-to-peer networking activities. If states determine that information would be useful, examples of HHS actions could include facilitating information sharing among states on successful partnerships between states and private providers and encouraging states to share existing federal guidance and information. (Recommendation 1) We provided a draft of this report to the Secretary of HHS for review and comment. HHS agreed with our recommendation and said it will explore with states whether additional materials specific to private providers would be useful. While HHS noted that it has no authority over private providers, it provided examples of ways the agency has supported states’ efforts to recruit and retain foster families and encouraged them to involve private providers in these efforts. We believe that seeking feedback from states on whether they would like information on effective ways to work with private providers would be a useful first step. With that information, HHS could then determine if additional supports are needed to help states meet the demand for appropriate foster families. A letter conveying HHS’s formal comments is reproduced in appendix II. We are sending copies to the appropriate congressional committees, the Secretary of the Department of Health and Human Services, and other interested parties. The report will also be available at no charge on the GAO website at www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) how state child welfare agencies recruit foster families, including those who provide therapeutic foster care services, (2) challenges, if any, to recruiting and retaining families, and (3) the extent to which the U.S. Department of Health and Human Services (HHS) provides support to child welfare agencies in their efforts to recruit and retain foster families. To address our objectives, we administered a web- based survey of state child welfare agencies in the 50 states and the District of Columbia to obtain national information. To obtain more in- depth information, we interviewed child welfare officials, private providers, and foster parents in three selected states (California, Georgia, and Indiana). To obtain perspectives on providing therapeutic foster care services specifically, we conducted three discussion groups with private providers and foster parents at a national foster care conference. To develop our methodologies, we conducted a literature search related to foster care recruitment and retention, including for therapeutic foster care services, and we interviewed experts with a range of related research, policy, and direct service experience. To examine how HHS supports child welfare agencies in their efforts to recruit and retain foster families, we interviewed officials from HHS’s Administration for Children and Families (ACF), Centers for Medicare & Medicaid Services, Office of the Assistant Secretary for Planning and Evaluation, and Substance Abuse and Mental Health Services Administration. We reviewed relevant documents obtained in these interviews and other information available on HHS’s website, such as from the National Resource Center for Diligent Recruitment and the Child Welfare Information Gateway. We focused on HHS efforts from fiscal years 2012 through 2016. We also reviewed relevant federal laws, regulations, and HHS policies, as well as federal internal control standards. To obtain nationwide information on our objectives, we surveyed officials from state child welfare agencies in the 50 states and the District of Columbia. The survey was administered in September 2017, and we obtained a 100 percent response rate. The survey used a self- administered, Web-based questionnaire, and state respondents received unique usernames and passwords. To develop the survey, we performed a number of steps to ensure the accuracy and completeness of the information collected, including an internal peer review by an independent GAO survey expert, a review by an external foster care expert, and pre-testing of the survey instrument. Pre-tests were conducted over the phone with child welfare officials in four states to check the clarity of the question and answer options, as well as the flow and layout of the survey. The states that participated in pre- testing were selected based on recommendations from foster care experts and variation in child welfare administration systems (i.e., state- versus county-administered) and use of private providers. We revised the survey based on the reviews and pre-tests. The survey was designed to gather information from state child welfare agencies rather than county- level child welfare agencies or private providers. As such, we included questions in the survey to ensure that respondents were knowledgeable about foster family recruitment and retention efforts if the state child welfare agency was not directly involved. Our survey included a range of fixed-choice and open-ended questions related to recruiting and retaining foster families, including those who provide therapeutic foster care services. These questions were grouped into six subsections that covered (1) the states’ administrative structure for recruiting and retaining foster families, including the use of private providers; (2) information on states’ recruitment and retention plans and the usefulness of various strategies in recruiting and retaining foster families; (3) challenges states face in their efforts; (4) perspectives on various federal supports in this area and any additional supports needed; (5) data collected and used in recruitment and retention efforts; and (6) oversight of county child welfare agencies and private providers, if applicable. To obtain our 100 percent response rate, we made multiple follow-up contacts by email and phone in September 2017 with child welfare officials who had not yet completed the survey. While all surveyed officials affirmatively checked “completed” at the end of the web-based survey, not all state child welfare agencies responded to every question or the sub-parts of every question. We conducted additional follow-up with a small number of state child welfare agencies to verify key responses. Because this was not a sample survey, it has no sampling errors. However, the practical difficulties of conducting any survey may introduce errors, commonly referred to as non-sampling errors. For example, unwanted variability can result from differences in how a particular question is interpreted, the sources of information available to respondents, or how data from respondents are processed and analyzed. We tried to minimize these factors through our reviews, pre-tests, and follow-up efforts. In addition, the web-based survey allowed state child welfare agencies to enter their responses directly into an electronic instrument, which created an automatic record for each state in a data file. By using the electronic instrument, we eliminated the errors associated with a manual data entry process. Lastly, data processing and programming for the analysis of survey results was independently verified to avoid any processing errors and to ensure the accuracy of this work. To gather more in-depth information representing a variety of perspectives on our objectives, we interviewed officials from three state and three county child welfare agencies, representatives from 14 private foster care providers working with these agencies, and foster parents working with 8 of these private providers in the three selected states (California, Georgia, and Indiana). The states were selected based on factors such as recent changes in foster care and congregate care caseloads, opioid abuse rates estimated by HHS in June 2016, variation in child welfare administration systems (i.e., state- versus county- administered), and geographic location. Interviews were conducted during in-person site visits in California and Indiana and via phone in Georgia. We used semi-structured interview protocols for child welfare agencies, private providers, and foster parents that included open-ended questions on the strategies and challenges in recruiting and retaining foster families and federal supports in this area, among other topics. We interviewed officials from state-level child welfare agencies in each of these states. In California, the only selected state with a county-administered child welfare system, we selected three counties— Los Angeles, Sacramento, and Sonoma—and conducted interviews with officials from the respective county-level child welfare agency. These counties were selected based on factors similar to those mentioned above as well as variation in population density (i.e., rural versus urban). In addition, we interviewed 14 private providers in the three selected states, including 3 private providers in California (1 in each county we visited), 4 in Georgia, and 7 in Indiana. Private providers were chosen for interviews from a list of all private providers working with state child welfare agencies to recruit foster families. This list was provided by child welfare officials from each selected state. We considered factors such as the number of foster families private providers worked with, their involvement in recruiting families who provide therapeutic foster care services, and geographic location. We interviewed foster parents working with 8 of the private providers mentioned above, including 2 groups of foster parents in California, 1 group in Georgia, and 5 groups in Indiana. Each of these groups included between one and three sets of foster parents (e.g., one foster parent or a couple). Due to the sensitivity of the topics discussed, we worked with private providers to identify foster parents who were able and willing to participate in interviews. We discussed several considerations for selecting foster parents, such as gathering parents with a range of experience providing foster care services to children in both traditional and therapeutic foster care settings. Because foster parents we interviewed self-selected to participate and were all working with private providers we interviewed, their views do not represent the views of all foster parents, such as those working directly with child welfare agencies. We also reviewed relevant documents that corroborated the information obtained in our interviews with child welfare agencies and private providers, such as recruitment plans, marketing materials, and child placement reports. Because we conducted interviews with a non-generalizable sample of child welfare officials, private providers, and foster parents, the information gathered in the three selected states is not generalizable. Although not generalizable, our selection methodologies provide illustrative examples to support our findings. To obtain information specifically about efforts to recruit and retain families who provide therapeutic foster care services, we conducted three discussion groups at a conference hosted by the Family Focused Treatment Association, a non-profit organization that aims to develop, promote, and support therapeutic foster care services. The conference was held in July 2017 in Chicago, Illinois. We held two discussion groups with representatives from 17 private providers and one discussion group with eight sets of foster parents. To solicit participants, we used email to invite all individuals who registered for the conference to participate in our discussion groups. These emails explained our objectives and potential discussion topics related to recruiting and retaining therapeutic foster care families. Participants who volunteered were sorted into the three groups. Discussion groups for private providers and foster parents were guided by a GAO moderator using semi-structured interview protocols. These protocols included open-ended questions that encouraged participants to share their thoughts and experiences on recruiting and retaining therapeutic foster care families, including strategies and challenges in these efforts, as well as differences in providing therapeutic versus traditional foster care services. Discussion groups are not designed to (1) demonstrate the extent of a problem or to generalize results to a larger population, (2) develop a consensus to arrive at an agreed-upon plan or make decisions about what actions to take, or (3) provide statistically representative samples or reliable quantitative estimates. Instead, they are intended to generate in- depth information about the reasons for participants’ attitudes on specific topics and to offer insights into their concerns about and support for an issue. For these reasons, and because discussion group participants were self-selected volunteers, the results of our discussion groups are not generalizable. We conducted this performance audit from January 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact name above, the following staff members made key contributions to this report: Elizabeth Morrison (Assistant Director); Nhi Nguyen (Analyst-in-Charge); Luqman Abdullah; Laura Gibbons; and Elizabeth Hartjes. Also contributing to this report were Sarah Cornetto; Tiffany Johnson Lapuebla; Cheryl Jones; Kirsten Lauber; Serena Lo; Hannah Locke; Mimi Nguyen; Samuel Portnow; Ronni Schwartz; Almeta Spencer, and Kathleen van Gelder.", "summary": "Foster care caseloads have increased in recent years due, in part, to the national opioid epidemic. States have struggled to find foster families for children who can no longer live with their parents, including those who need TFC services. States may use private providers, such as non-profit and for-profit organizations, to help recruit and retain foster families. States may also use federal funds provided by HHS for these efforts. GAO was asked to review states' efforts to recruit and retain foster families. This report examines: (1) how state child welfare agencies recruit foster families, including those who provide TFC services, (2) any challenges in recruiting and retaining foster families, and (3) the extent to which HHS provides support to child welfare agencies in these efforts. GAO reviewed relevant federal laws, regulations, and guidance; interviewed HHS officials; surveyed child welfare agencies in all states and the District of Columbia; held discussion groups with private providers and foster parents who provide TFC services; and conducted interviews with officials in California, Georgia, and Indiana, which were selected for factors such as changes in foster care caseloads, opioid abuse rates, and geographic location. States employ a range of strategies to recruit foster families and nearly all use private providers to recruit, particularly for therapeutic foster care (TFC) services, in which parents receive training and support to care for children who need a higher level of care. Recruitment strategies include searching for relatives, conducting outreach to the community, targeting certain populations, and obtaining referrals from current foster families. In response to GAO's national survey, 49 states reported using private providers to recruit foster families. In the three selected states where GAO conducted interviews, private providers were responsible for both recruiting and retaining foster families, such as helping families become licensed and providing them with support (see fig.). States reported various challenges with recruiting and retaining foster families in response to GAO's survey. In recruiting families, over two-thirds of states reported challenges such as limited funding and staff, which can make prioritizing recruitment efforts difficult; extensive licensing processes; and difficulties finding families willing to care for certain children, such as those with high needs. In retaining families, 29 states reported concerns about inadequate support for foster families, which can include difficulties contacting child welfare agency caseworkers. In addition, 31 states reported limited access to services needed to care for children, such as child care. The U.S. Department of Health and Human Services (HHS) provides a number of supports to help states recruit and retain foster families, including technical assistance with their recruitment programs, guidance and information, and funding. Most states GAO surveyed found HHS's supports moderately or very helpful. However, several private providers GAO interviewed in three selected states said they have not received guidance or information from child welfare agencies about recruiting and retaining foster families. In addition, 11 of the 14 providers said they were unaware of related HHS supports and all of them described concerns about communication with child welfare agencies. HHS officials said they encourage states to involve all relevant stakeholders in their efforts, though HHS has focused on supporting child welfare agencies. Consistent with internal control standards on communication, determining whether information on working with private providers would be useful to states could help HHS better support states' use of private providers in efforts to recruit and retain foster families. GAO recommends HHS seek feedback from states on whether information on effective ways to work with private providers to recruit and retain foster families would be useful and if so, provide such information. HHS agreed with GAO's recommendation.", "document_type": "gao"}
{"report": "With the passage of the NDAA in December 2016, PLCY is to be led by an Under Secretary for Strategy, Policy, and Plans, who is appointed by the President with advice and consent of the Senate. The Under Secretary is to report directly to the Secretary of Homeland Security. Prior to the NDAA, the office was headed by an assistant secretary. Since the passage of the act, the undersecretary position has been vacant, and as of June 5, 2018, the President had not nominated an individual to fill the position. According to PLCY officials, elevating the head of the office to an undersecretary was important because it equalizes PLCY with other DHS management offices and DHS headquarters components. The NDAA further authorizes, but does not require, the Secretary to establish a position of deputy undersecretary within PLCY. If the position is established, the NDAA provides that the Secretary may appoint a career employee to the position (i.e., not a political appointee). In March 2018, the Secretary named a Deputy Under Secretary, who has been performing the duties of the Deputy Under Secretary and the Under Secretary since then. As shown in figure 1, PLCY is divided into five sub- offices, each with a different focus area. As of June 5, 2018, the top position in these sub-offices was an assistant secretary and two of the five positions were vacant. As of June 5, 2018, 6 of PLCY’s 12 deputy assistant secretary positions were vacant or filled by acting staff temporarily performing the duties in the absence of permanent staff placement. The NDAA codified many of the functions and responsibilities that PLCY had been carrying out prior to the act’s enactment and, with a few exceptions as discussed later in this report, were largely consistent with the duties the office was already pursuing. According to the act and PLCY officials, one of the office’s fundamental responsibilities is to lead, conduct, and coordinate departmentwide policy development and implementation, and strategic planning. According to PLCY officials, there are four categories of policy and strategy efforts that PLCY leads, conducts, or coordinates: Statutory responsibilities: among others, the Homeland Security Act, as amended by the NDAA, includes such responsibilities as establishing standards of validity and reliability for statistical data collected by the department, conducting or overseeing analysis and reporting of such data, and maintaining all immigration statistical information of U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, and U.S. Citizenship and Immigration Services; the Immigration and Nationality Act includes such responsibilities as providing for a system for collection and dissemination to Congress and the public of information useful in evaluating the social, economic, environmental, and demographic impact of immigration laws, and reporting annually on trends in lawful immigration flows, naturalizations, and enforcement actions, Representing DHS in interagency efforts: coordinating or representing departmental policy and strategy positions for larger interagency efforts (e.g., interagency policy committees convened by the White House), Secretary’s priorities: leading or coordinating efforts that correspond to the Secretary of Homeland Security’s priorities (e.g., certain immigration or law-enforcement related issues), and Self-initiated activities: opportunities to better harmonize policy and strategy or create additional efficiencies given PLCY’s ability to see across the department. For example, PLCY officials said that DHS observed an increase in e-commerce and small businesses shipping items via carriers other than the U.S. Postal Service, thus exploiting a gap in DHS monitoring, which covers the U.S. Postal Service and other traditional shipping entities. PLCY officials noted that DHS’s interest in addressing e-commerce issues occurred just before opioids and other controlled substances were being mailed through small businesses and the U.S. Postal Service. As a result, PLCY developed an e-commerce strategy for, among other things, the shipping of illegal items and how to provide information to U.S. Customs and Border Protection before parcels are shipped to the United States from abroad. In accordance with the NDAA, as PLCY leads, conducts, and coordinates policy and strategy, it is to do so in a manner that promotes and ensures quality, consistency, and integration across DHS and applies risk-based analysis and planning to departmentwide strategic planning efforts. The NDAA further provides that all component heads are to coordinate with PLCY when establishing or modifying policies or strategic planning guidance to ensure consistency with DHS’s policy priorities. In addition to the roles PLCY plays that are directly related to leading, conducting, and coordinating policy and strategy, the office is responsible for select operational functions. For example, PLCY is charged with operating the REAL ID and Visa Waiver Programs. The NDAA also conferred responsibilities to PLCY that had not been responsibilities of the DHS Office of Policy prior to the NDAA’s enactment. Among other things, the NDAA charged PLCY with responsibility for establishing standards of reliability and validity for statistical data collected and analyzed by the department, and ensuring the accuracy of metrics and statistical data provided to Congress. In conferring this responsibility, the act also transferred to PLCY the maintenance of all immigration statistical information of the U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, and U.S. Citizenship and Immigration Services. PLCY has established five performance goals: build departmental policy-making capacity, coordination, and foster the Unity of Effort, mature the office as a mission-oriented, component-focused organization that is responsive to DHS leadership, effectively engage and leverage stakeholders, enhance productivity and effectiveness of policy personnel through appropriate alignment of knowledge, skills, and abilities, and accountability, transparency, and leadership. PLCY officials stated that the office established the performance goals in fiscal year 2015 and they were still in effect as of fiscal year 2018. As previously discussed, DHS has eight operational components. DHS also has six support components. Although each one has a distinct role to play in helping to secure the homeland, there are operational and support functions that cut across mission areas. For example, nearly every operational component has, as part of its security operations, a need for screening, vetting, and credentialing procedures and risk- targeting mechanisms. Likewise, nearly all operational components have some form of international engagement, deploying staff abroad to help secure the homeland before threats reach U.S. borders. Finally, as shown in figure 2, different aspects of broad mission areas fall under the purview of more than one DHS operational component. PLCY is responsible for coordinating three key DHS strategic efforts: the QHSR, the DHS Strategic Plan, and the Resource Planning Guidance. The QHSR is a comprehensive examination of the homeland security strategy of the nation that is to occur every 4 years and include recommendations regarding the long-term strategy and priorities for homeland security of the nation and guidance on the programs, assets, capabilities, budget, policies, and authorities of DHS. The QHSR is to be conducted in consultation with the heads of other federal agencies, key DHS officials (including the Under Secretary, PLCY), and key officials from other relevant governmental and nongovernmental entities. The DHS Strategic Plan describes how DHS can accomplish the missions it identifies in the QHSR report, identifies high-priority mission areas within DHS, and lays the foundation for DHS to accomplish its Unity of Effort Initiative as well as various cross-agency priority goals in the strategic plan, such as cybersecurity. The Resource Planning Guidance describes DHS’s annual resource allocation process in order to execute the missions and goals of the QHSR and DHS Strategic Plan. The Resource Planning Guidance contains guidance over a 5-year period and informs several forward- looking reports to Congress, including the annual fiscal year Congressional Budget Justification as well as the Future Years Homeland Security Program Report. Although PLCY has effectively carried out key coordination functions at the senior level related to strategy, PLCY’s ability to lead and coordinate policy have been limited due to ambiguous roles and responsibilities and a lack of predictable, accountable, and repeatable procedures. According to our analysis and interviews with operational components, PLCY’s efforts to lead and coordinate departmentwide and crosscutting strategies—a key organizational objective—have been effective in providing opportunities for all relevant stakeholders to learn about and contribute to departmentwide or crosscutting strategy development. In this role, PLCY routinely serves as the executive agent for the Deputies Management Action Group and the Senior Leaders Council, which involve analytical and coordination support. PLCY also provides support for deputy- and principal-level decision making. For example, the Strategy and Policy Executive Steering Committee (S&P ESC) meetings have been used to discuss components’ implementation plans for crosscutting strategies, PLCY’s requests for information from components for an upcoming strategy, and updates on departmentwide strategic planning initiatives. According to PLCY and operational component officials, PLCY also provides leadership for the Resource Planning Guidance and Winter Studies, both of which help inform departmentwide resource decision- making. For example, officials from one operational component stated that PLCY’s leadership of the Resource Planning Guidance is a helpful practice for coordination and collaboration on departmentwide or crosscutting strategies. The officials stated that PLCY reaches out to ensure that the component is covering the Secretary’s priorities and this helps the component to ensure that its budget includes them. Furthermore, PLCY develops and coordinates policy options and opinions for the Secretary to present at the National Security Council and other White House-level meetings. For example, PLCY officials told us that, in light of allegations of Russian involvement in using poisonous nerve agents on two civilians in Great Britain, PLCY coordinated the collection of information to develop a policy recommendation for the Secretary to present at a National Security Council meeting. PLCY has encountered challenges leading and coordinating efforts to develop, update, or harmonize policy—also a key organizational objective—because it does not have clearly-defined roles, responsibilities, and mechanisms to implement these responsibilities in a predictable, repeatable, and accountable way. Standards for Internal Control in the Federal Government states that management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives. As such, an organization’s management should develop an organizational structure with an understanding of the overall responsibilities and assign these responsibilities to discrete units to enable the organization to operate in an efficient and effective manner. An organization’s management should also implement control activities through policies. It is important that an organization’s management document and define policies and communicate those policies and procedures to personnel, so they can implement control activities for their assigned responsibilities. In addition, leading collaboration practices we have identified in our prior work include defining and articulating a common outcome, clarifying roles and responsibilities, and establishing mutually-reinforcing or joint strategies to enhance and sustain collaboration, such as the work that PLCY and the components need to do together to ensure that departmentwide and crosscutting policy is effective for all relevant parties. According to PLCY officials, in general, PLCY is responsible for leading the development of a policy when it crosses multiple components or if there is a national implication, including White House interest in the policy. However, PLCY officials acknowledged that this practice does not always make them the lead and there are no established criteria that define the circumstances under which PLCY (or another organizational unit) should lead development of policies that cut across organizational boundaries. PLCY officials said the lead entity for a policy is often announced in an email from the Secretary’s office, on a case-by-case basis. According to PLCY officials, once components have been assigned responsibility for a policy, they have generally tended to retain it, and PLCY may not have oversight for crosscutting policies that are maintained by operational components. Therefore, there is no established, coordinated system of oversight to periodically monitor the need for policy harmonization, revision, or rescission. In the absence of clear roles and responsibilities, and processes and procedures to support them, PLCY and officials in 5 of the 8 components have encountered challenges in coordinating with each other. Although PLCY and most component officials we interviewed described overall positive experiences in coordinating with each other, we identified multiple instances of (1) confusion about which parties should lead and engage in policy efforts, (2) not engaging components at the right times, (3) incompatible expectations around timelines, and (4) uncertainty about PLCY’s role and the extent to which it can and should identify and drive policy in support of a more cohesive DHS. Confusion about who should lead and engage. Officials from one operational component told us that they were tasked with leading a departmentwide policy development effort they believed was outside their area of responsibility and expertise. Officials in another operational component stated that components sometimes end up coordinating among themselves, but that policy development could be more effective and efficient if PLCY took the role of convener and facilitator to ensure the departmentwide perspective is present and all relevant stakeholders participate. Officials from a third component stated that they spent significant time and resources to develop a policy directly related to their component’s mission. As the component got ready to implement the policy, PLCY became aware of it and asked the component to stop working on the policy, so PLCY could develop a departmentwide policy. According to component officials, while they were supportive of a departmentwide policy, PLCY’s timing delayed implementation of the policy the component had developed and wasted the resources it had invested. Moreover, officials from four operational components told us that sometimes counselors from outside PLCY, such as the Secretary’s office, have led policy efforts that seem like they should be PLCY’s responsibility, which created more confusion about what PLCY’s ongoing role should be. PLCY officials agreed that, at times, it has been challenging to define PLCY’s role relative to counselors for the Secretary, and acknowledged that clear guidance to define who is leading which types of policy development and coordination would be helpful. Not engaging components at the right times. Officials from 5 of 8 operational components told us that they had not always been engaged at the right times by PLCY in departmentwide or crosscutting policies that affected their missions. For example, officials from an operational component described a crosscutting policy that had significant implications for some of its key operational resources, but the component was not made aware of the policy until it was about to be presented at the White House. Officials from another component stated that they learned of a new policy after it was in place and had to find significant training and software resources to implement it even though they viewed the policy as unnecessary for their mission. PLCY officials stated that, while they intend to identify all components that should be involved in a policy, there are times when PLCY is unaware a component is developing a policy that affects other components. PLCY officials said they will involve other components when PLCY becomes aware that a component is developing such a policy. PLCY officials stated that it would be helpful to have a process and procedures for cross-component coordination on policies to help guide engagement regardless of who is developing the policy. Incompatible expectations around timelines. Officials at 4 of 8 operational components stated that short timelines from PLCY to provide input and feedback can prevent PLCY from obtaining thoughtful and complete information from components. For example, officials from one component stated that PLCY asked them to perform an analysis that would inform major, departmental decision-making and quickly provide the analysis. Component officials told us that they did not understand why PLCY needed the analysis on such an accelerated timeline, which seemed inappropriate given the level of importance and purpose of the analysis. Officials from another component told us that PLCY had not always provided enough time to provide thoughtful feedback; therefore, component officials were not sure if PLCY really wanted their feedback. Officials from a third component stated that sometimes PLCY did not provide sufficient time for thoughtful input or feedback that had cleared the component’s legal review, so component officials elected to miss PLCY’s deadline and provide late feedback. PLCY officials told us that, frequently, timelines are not within their control, a situation that some component officials also noted during our interviews with them. However, PLCY officials agreed that a documented, predictable, and repeatable process and procedures for policies may help ensure PLCY provides sufficient comment time when in its control and may provide a basis to help negotiate timelines with DHS leadership in other situations. PLCY officials stated that, even with a documented process and procedures, there would still be circumstances when short timelines are unavoidable. Uncertainty about PLCY’s role in driving policy harmonization. Policy officials at 6 of 8 operational components told us that they were unsure or not aware of PLCY’s role in harmonizing policy across the department, and stated a desire for PLCY to be more involved in harmonizing or enhancing departmentwide and crosscutting policy or for greater clarity about PLCY’s responsibility to play this role. As previously discussed, PLCY’s policy and strategy efforts fall into four categories—statutory responsibilities, interagency efforts, Secretary’s priorities, and self- initiated activities; these activities include efforts to better harmonize policies and strategies. According to PLCY officials, the category with the lowest priority is self-initiated activities. PLCY officials stated that PLCY makes tradeoffs and rarely chooses to work on self-initiated projects over its other three categories of effort. According to the officials, PLCY’s work on the other three higher-priority categories is sufficient to ensure that the office is effectively leading, conducting, and coordinating strategy and policy across the department. Given its organizational position and strategic priorities, PLCY is uniquely situated to identify opportunities to better harmonize or enhance departmentwide and crosscutting policy, a role that is in line with its strategic priority to build departmental policymaking capacity and foster Unity of Effort. In the absence of clear articulation of the department’s expectations for PLCY in this role, it is difficult for PLCY and DHS leadership to make completely informed and deliberate decisions about the tradeoffs they make across any available resources. In addition to statutory authority that PLCY received in the NDAA, PLCY officials stated that a separate, clear delegation of authority—a mechanism by which the Secretary delegates responsibilities to other organizational units within DHS—is needed to help confront the ambiguous roles it has experienced in the past. PLCY officials stated that past efforts to finalize a delegation of authority have stalled during leadership changes and that the initiative has been a lower priority, in part, due to where PLCY is in its maturation process and DHS is in its evolution into a more cohesive department under the Unity of Effort. As of May 2018, the effort had been revived, but it is not clear whether and when DHS will finalize it. According to a senior official in the Office of the Under Secretary for Management, a delegation of authority is important for PLCY. He described the creation of a delegation of authority as a process that does more than simply delegate the Secretary’s authority. He noted that defining PLCY’s roles and responsibilities in relation to other organizational units presents an opportunity to engage all relevant components and agree on appropriate roles. He said that, earlier in the organizational life of the Office of the Under Secretary for Management, it went through a process like this, which has been vital in it being able to carry out its mission. He said now that PLCY has a deputy undersecretary in place, this is a good time to restart the process to develop the delegation of authority. Until the delegation or a similar process clearly and fully articulates PLCY’s roles and responsibilities, PLCY and the operational components are likely to continue to experience limitations in collaboration on crosscutting and departmentwide policy. PLCY determines its workforce needs through the annual budget process, but systematic identification of workforce demand, capacity gaps, and strategies to address them could help ensure that PLCY’s workforce aligns with its and DHS’s priorities and goals. To determine its workforce needs each year, PLCY officials told us that, as part of the annual budget cycle, they work with PLCY staff and operational components to determine the scope of activities required for each PLCY area of responsibility and the associated staffing needs. PLCY officials said there are three skill sets needed to carry out the office’s responsibilities: policy analysis, social science analysis, and regional affairs analysis. PLCY officials explained that the office’s priorities can change rapidly as events occur and the Secretary’s and administration’s priorities shift. Therefore, according to PLCY officials, their staffing model must be flexible. They said that, rather than a defined system of full-time equivalents with set position types and levels, PLCY officials start with their budget allotment and consider current and potential emerging needs to set position types and levels, which may fluctuate significantly from year to year. In addition, PLCY officials stated that PLCY staff are primarily generalists and, given the versatility in skill sets of their workforce, PLCY has a lot of flexibility to move staff around if there is an emerging need. For example, if there is an emerging law enforcement issue that affects all law enforcement agencies, PLCY may be tasked with developing a policy to ensure the issue is addressed quickly and that the resulting policy is harmonized across the department and with other law enforcement agencies, such as the Department of Justice. While PLCY completes some workforce planning activities as part of its annual budgeting process, PLCY does not systematically address several aspects of the DHS Workforce Planning Guide that may create more efficient operations and greater alignment with DHS priorities. According to the DHS Workforce Planning Guide, workforce planning is a process that ensures the right number of people with the right skills are in the right jobs at the right time for DHS to achieve the mission. This process provides a framework to: align workforce planning to the department’s mission and goals, predict, then assess how evolving missions, new processes, or environmental conditions may impact the way that work will be performed at DHS in the future, identify gaps in capacity, develop and implement strategies and action plans to address capacity and capability gaps, and continuously monitor the effectiveness of action plans and modify, as necessary. The DHS Workforce Planning Guide stipulates that an organization’s management should not only lead and show support during the workforce planning process, but ensure alignment with the strategic direction of the agency. Moreover, Standards for Internal Control in the Federal Government states that management should use quality information to achieve the entity’s objectives. For example, management uses an entity’s operational processes to make informed decisions and evaluate the entity’s performance in achieving key agency objectives. According to PLCY officials, the current staffing paradigm involves shifting the office’s staff when new and urgent issues arise from the Secretary or White House, and adding these unexpected tasks to staff’s existing responsibilities. However, this means that tradeoffs are made, resulting in some priority items taking longer to address or not getting attention at all. PLCY officials stated that they have been caught off-guard at times by changes in demands placed on PLCY and had to scramble to address the new needs. Additionally, PLCY officials said they have a number of vacancies, which hamper the office’s ability to meet certain aspects of its mission. For example, PLCY’s Office of Cyber, Infrastructure, and Resilience was created in 2015. According to PLCY officials, PLCY has had some resources to address cyber issues, however, there has not been funding to staff this office and an assistant secretary has not been appointed to lead it. Therefore, PLCY officials stated that PLCY has not been able to address its responsibilities for infrastructure resilience. Similarly, PLCY has limited capacity for risk analysis. A provision of the NDAA provides that PLCY is to: develop and coordinate strategic plans and long-term goals of the department with risk-based analysis and planning to improve operational mission effectiveness, including consultation with the Secretary regarding the quadrennial homeland security review under section 707 [6 U.S.C. § 347]. However, PLCY officials acknowledged that their focus on identifying needs for risk analyses and conducting them has been limited, in part, because DHS disbanded the risk management office. Officials from one component told us that they contribute to a report that PLCY coordinates, called Homeland Security National Risk Characteristics, which is prepared as a precursor to the DHS Strategic Plan. PLCY officials stated that, outside of these foundational documents and some risk-based analyses completed as part of specific policy development efforts, PLCY does not have the capacity to complete any additional risk analysis activities. Although PLCY officials said they conduct some analysis of potential demands as a starting point for how to allocate PLCY’s annual staffing budget, these efforts are largely informal and internal and have not resulted in a systematic analysis that provides PLCY and DHS management with the information they need to understand the effects of resource tradeoffs. Also, PLCY officials said they track accomplishments toward PLCY’s strategic priorities as part of a weekly meeting and report, however, officials acknowledged they do not analyze what role workforce decisions have played in achieving or not achieving strategic priorities. Moreover, although PLCY officials stated that they have intermittent, in- person, informal communication about resource use, they have not used the principles outlined in the DHS Workforce Planning Guide to systematically identify and communicate workforce demands, capacity gaps, and strategies to address workforce issues. According to PLCY officials, they have not conducted such analysis, in part, because the Secretary’s office has not requested it of them or the other DHS offices that are funded in the same part of the DHS budget. Regardless of whether the Secretary expects workforce analysis as part of the budgeting process, the DHS Workforce Planning Guide could be used within and outside of the budgeting process to help inform resource decision making throughout the year. PLCY officials stated that at the PLCY Deputy Under Secretary’s initiative, they recently began a review of all relevant statutory authorities, which they will map against the current organizational structure and day- to-day operations. The Deputy Under Secretary plans to use the results of the review to enhance PLCY’s efficiency and effectiveness, and the results could serve as a foundation for a more holistic and systematic analysis of workforce demand, any capacity gaps, and strategies to address them. Employing workforce planning principles—in particular, systematic identification of workforce demand, capacity gaps, and strategies to address them—consistent with the DHS Workforce Planning Guide could better position PLCY to use its workforce as effectively as possible under uncertain conditions. Moreover, using the DHS guide would help PLCY to systematically communicate information about any workforce gaps to DHS leadership, so there is transparency about how workforce tradeoffs affect PLCY’s ability to support DHS goals. As discussed earlier, officials from PLCY and DHS operational components praised existing mechanisms to coordinate and communicate at the senior level, especially about strategy. However, component officials identified opportunities for PLCY to better connect at the staff level to identify and respond to emerging policy and strategy needs. Leading practices for collaboration that we have identified in our prior work state that it is important to ensure that all relevant participants have been included in a collaborative effort, and positive working relationships among participants from different agencies or offices can bridge organizational cultures. These relationships build trust and foster communication, which facilitate collaboration. Also, as previously stated, PLCY has mechanisms like the S&P ESC to communicate and coordinate with operational components and other DHS stakeholders at the senior level (e.g., Senior Executive Service officials). However, PLCY does not have a mechanism to effectively engage in routine communication and collaboration at the staff level (e.g., program and policy specialists working at operational components to oversee or implement policy and strategy functions). Specifically, officials with responsibility for policy and strategy at 6 of 8 operational components told us that they did not have regular contact with or know who to contact at PLCY for questions about policies or strategies, or that the reason they knew who to contact was because of existing working relationships, not because of efforts PLCY had undertaken to facilitate such contacts. In addition, some component officials noted that, when they tried to use the PLCY website to coordinate, they found it to be out of date and lacking sufficient information. PLCY officials acknowledged that the website needs improvement. They stated that the office has developed improved content for the website, but does not have the necessary staff to update the website. According to the officials, the needed staff should be hired soon and improved content should be on the website by the end of summer 2018. Although officials at 5 of the 8 operational components we interviewed stated that the quality of PLCY’s coordination and collaboration has improved in the past 2 years or so, component officials offered several suggestions to enhance PLCY’s coordination and collaboration, especially at the staff level. Among these were: conduct routine information sharing meetings with staff-level officials who have policy and strategy responsibilities at each operational component, clearly articulate points of contact, their contact information, and their portfolios at PLCY as well as at other policy and strategy stakeholders, ensure the PLCY website is up-to-date with contact information for PLCY and components that work in strategy and policy areas, and with relevant information about crosscutting strategy and policy initiatives underway, host a forum—such as an annual conference—to bring together policy and strategy officials from PLCY and DHS components to share ideas and make contacts, and prepare a standard briefing for component officials with strategy and policy responsibilities to help ensure that staff at all levels understand what PLCY does, how it works, and opportunities for engagement on emerging policy and strategy needs or identified harmonization opportunities. For example, officials from one component told us that they would like PLCY officials to have in-person meetings with component staff to discuss what PLCY does, who to contact in PLCY, where to find information about policies and strategies, and other relevant information to ensure a smooth working relationship between the component and PLCY. According to PLCY officials, the office recognizes the value of creating mechanisms to connect staff, who work on policy and strategy at all levels in DHS. PLCY officials said they have historically done a better job in coordinating at the senior level, but are interested in expanding opportunities to connect other staff with policy and strategy responsibilities. PLCY officials stated that they are considering creating a working group structure that mirrors existing organizational mechanisms to coordinate at the senior level, but have not taken steps to do so. Routine collaboration among PLCY, operational components, and other DHS offices at the staff level is important to ensure that PLCY is able to carry out its functions under the NDAA, including the effective coordination of policies and strategies. A positive working relationship among these stakeholders can build trust, foster communication, and facilitate collaboration. Such enhanced communication and collaboration across PLCY and among component officials with policy and strategy responsibility could help the department more quickly and completely identify emerging, crosscutting strategy and policy needs and opportunities to enhance policy harmonization. PLCY’s efforts to lead, conduct, and coordinate departmentwide and crosscutting policies have sometimes been hampered by the lack of clearly-defined roles and responsibilities. In addition, PLCY does not have a consistent process and procedures for its strategy development and policymaking efforts. Without a delegation of authority or similar documentation from DHS leadership clearly articulating PLCY’s missions, roles, and responsibilities—along with defined processes and procedures to carry them out in a predictable and repeatable manner—there is continuing risk that confusion and uncertainty about PLCY’s authority, missions, roles, and responsibilities will limit its effectiveness. PLCY employs some workforce planning, but does not systematically apply key principles of the DHS Workforce Planning Guide to help predict workforce demand, and identify any workforce gaps and design strategies to address them. Without this analysis, PLCY faces limitations in ensuring that its workforce is aligned with its and DHS’s priorities and goals. Moreover, the results of this analysis would better position PLCY to communicate to DHS leadership any potential tradeoffs in workforce allocation that would affect PLCY’s ability to meet priorities and goals. PLCY could enhance its use of mechanisms for collaboration and communication with DHS stakeholders at the staff level. Implementation of additional mechanisms at the staff level for regular communication and coordination, including providing up-to-date information to stakeholders about the office, could help PLCY and operational components to better connect in order to identify and address emerging policy and strategy needs. We are making the following four recommendations to DHS: The Secretary of Homeland Security should finalize a delegation of authority or similar document that clearly defines PLCY’s mission, roles, and responsibilities relative to DHS’s operational and support components. (Recommendation 1) The Secretary of Homeland Security should create corresponding processes and procedures to help implement the mission, roles, and responsibilities defined in the delegation of authority or similar document to help ensure predictability, repeatability, and accountability in departmentwide and crosscutting strategy and policy efforts. (Recommendation 2) The Under Secretary for Strategy, Policy, and Plans should use the DHS Workforce Planning Guide to help identify and analyze any gaps in PLCY’s workforce, design strategies to address any gaps, and communicate this information to DHS leadership. (Recommendation 3) The Under Secretary for Strategy, Policy, and Plans should enhance the use of collaboration and communication mechanisms to connect with staff in the components with responsibilities for policy and strategy to better identify and address emerging needs. (Recommendation 4) We provided a draft of this report for review and comment to DHS. DHS provided written comments, which are reproduced in appendix I. DHS also provided technical comments, which we incorporated, as appropriate. DHS concurred with three of our recommendations and described actions planned to address them. DHS did not concur with one recommendation. Specifically, DHS did not concur with our recommendation that PLCY should use the DHS Workforce Planning Guide to help identify and analyze any gaps in PLCY’s workforce, design strategies to address any gaps, and communicate this information to DHS leadership. The letter described a number of actions, including actions that are also described in the report, which PLCY takes to help ensure alignment of its staff with organizational needs. In the letter, PLCY officials pointed to the workforce activities PLCY undertakes as part of the annual budgeting cycle. We acknowledge that the actions described to predict upcoming priorities and resource needs as part of the annual budgeting cycle are in line with the DHS workforce planning principles. However, as we noted, there are opportunities to apply the workforce planning principles outside the annual budgeting cycle to provide greater visibility and awareness of resource tradeoffs to management inside PLCY and in the Secretary’s office. In the letter, PLCY officials made note of the dynamic and changing nature of its operational environment, stating that it often required them to shift resources and priorities on a more frequent or ad hoc basis than many organizations. We acknowledged in the report that PLCY’s operating environment requires it to maintain flexibility in its staffing approach. However, PLCY has a number of important duties, including helping foster Unity of Effort throughout the department and helping to ensure the availability of risk information for departmental decision making, that require longer-term, sustained attention and strategic management. During interviews, PLCY officials acknowledged that striking a balance between these needs has been difficult and at times they have faced significant struggles. The report describes some areas where, during the time we were conducting our work, it was clear that some tasks and functions, such as risk analyses, lacked the resources or focus necessary to ensure they received sustained institutional attention. It is because of PLCY’s dynamic operating environment, coupled with the need for sustained institutional attention to other key responsibilities, that we recommended PLCY undertake workforce planning activities that would help generate better information for PLCY and DHS management to have full visibility and awareness of gaps and resource tradeoffs. Finally, the letter stated that because PLCY is a very small and flat organization, it is able to identify capacity gaps and develop action plans without obtaining all of the data collected through each recommended element, worksheet, form, and template of the model proposed in the DHS Workforce Planning Guide. We acknowledge that it would be counterproductive for PLCY to engage in data collection and analysis that are significantly more elaborate than its planning needs. Nevertheless, we continue to believe that PLCY could use the principles more robustly, outside the annual budgeting process, to help ensure that it identifies and communicates the effect that resource tradeoffs have on its ability to accomplish its multifaceted mission. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (404) 679-1875 or CurrieC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in Appendix II. In addition to the contact named above, Kathryn Godfrey (Assistant Director), Joseph E. Dewechter (Analyst-in-Charge), Michelle Loutoo Wilson, Ricki Gaber, Dominick Dale, Thomas Lombardi, Ned Malone, David Alexander, Sarah Veale, and Michael Hansen made key contributions to this report.", "summary": "GAO has designated DHS management as high risk because of challenges in building a cohesive department. PLCY supports cohesiveness by, among other things, coordinating departmentwide policy and strategy. In the past, however, questions have been raised about PLCY's efficacy. In December 2016, the NDAA codified PLCY's organizational structure, roles, and responsibilities. GAO was asked to evaluate PLCY's effectiveness. This report addresses the extent to which (1) DHS established an organizational structure and processes and procedures that position PLCY to be effective, (2) DHS and PLCY have ensured alignment of workforce with priorities, and (3) PLCY has engaged relevant component staff to help identify and respond to emerging needs. GAO analyzed the NDAA, documents describing specific responsibilities, and departmentwide policies and strategies. GAO also interviewed officials in PLCY and all eight operational components. According to our analysis and interviews with operational components, the Department of Homeland Security's (DHS) Office of Strategy, Policy, and Plans' (PLCY) organizational structure and efforts to lead and coordinate departmentwide and crosscutting strategies—a key organizational objective–have been effective. For example, PLCY's coordination efforts for a strategy and policy executive steering committee have been successful, particularly for strategies. However, PLCY has encountered challenges leading and coordinating efforts to develop, update, or harmonize policies that affect multiple DHS components. In large part, these challenges are because DHS does not have clearly-defined roles and responsibilities with accompanying processes and procedures to help PLCY lead and coordinate policy in a predictable, repeatable, and accountable manner. Until PLCY's roles and responsibilities for policy are more clearly defined and corresponding processes and procedures are in place, situations where the lack of clarity hampers PLCY's effectiveness in driving policy are likely to continue. Development of a delegation of authority, which involves reaching agreement about PLCY's roles and responsibilities and clearly documenting them, had been underway. However, it stalled due to changes in department leadership. As of May 2018, the effort had been revived, but it is not clear whether and when DHS will finalize it. PLCY does some workforce planning as part of its annual budgeting process, but does not systematically apply key principles of the DHS Workforce Planning Guide to help ensure that PLCY's workforce aligns with its and DHS's priorities and goals. According to PLCY officials, the nature of its mission requires a flexible staffing approach. As such, a portion of the staff functions as generalists who can be assigned to meet the needs of different situations, including unexpected changing priorities due to an emerging need. However, shifting short-term priorities requires tradeoffs, which may divert attention and resources from longer-term priorities. As of June 5, 2018, PLCY also had a number of vacancies in key leadership positions, which further limited attention to certain priorities. According to PLCY officials, PLCY recently began a review to identify the office's authorities in the National Defense Authorization Act for Fiscal Year 2017 (NDAA) and other statutes, compare these authorities to the current organization and operations, and address any workforce capacity gaps. Employing workforce planning principles—in particular, systematic identification of workforce demand, capacity gaps, and strategies to address them—consistent with the DHS Workforce Planning Guide could better position PLCY to use its workforce as effectively as possible under uncertain conditions and to communicate effectively with DHS leadership about tradeoffs. Officials from PLCY and DHS operational components praised existing mechanisms to coordinate and communicate at the senior level, especially about strategy, but component officials identified opportunities to better connect PLCY and component staff to improve communication flow about emerging policy and strategy needs. Among the ideas offered by component officials to enhance communication and collaboration were holding routine small-group meetings, creating forums for periodic knowledge sharing, and maintaining accurate and up-to-date contact information for all staff-level stakeholders. GAO is making four recommendations. DHS concurred with three recommendations, including that DHS finalize a delegation of authority defining PLCY's roles and responsibilities and develop corresponding processes and procedures. DHS did not concur with a recommendation to apply the DHS Workforce Planning Guide to identify and communicate workforce needs. GAO believes this recommendation is valid as discussed in the report.", "document_type": "gao"}
{"report": "In fiscal year 2016, Medicaid covered an estimated 72.2 million low- income and medically needy individuals in the United States, and Medicaid estimated expenditures totaled over $575.9 billion. The federal government matches most state expenditures for Medicaid services on the basis of a statutory formula. States receive higher federal matching rates for certain services or populations, including an enhanced matching rate for Medicaid expenditures for individuals who became eligible for Medicaid under PPACA. Of the $575.9 billion in estimated expenditures for 2016, the federal share totaled over $363.4 billion and the states’ share totaled $212.5 billion. The Centers for Medicare & Medicaid Services (CMS)—a federal agency within the Department of Health and Human Services (HHS)—and states jointly administer and fund the Medicaid program. States have flexibility within broad federal requirements to design and implement their Medicaid programs. States must submit a state Medicaid plan to CMS for review and approval. A state’s approved Medicaid plan outlines the services provided and the groups of individuals covered. While states must cover certain mandatory populations and benefits, they have the option of covering other categories of individuals and benefits. PPACA permitted states to expand coverage to a new population—non- elderly, non-pregnant adults who are not eligible for Medicare and whose income does not exceed 138 percent of the FPL. This expansion population comprised 20 percent of total Medicaid enrollment in 2017. (See fig. 1.) As of December 2017, 31 states and the District of Columbia had expanded Medicaid eligibility to the new coverage population allowed under PPACA and 19 states had not. Figure 2, an interactive map, illustrates states’ Medicaid expansion status. See appendix II for additional information on figure 2. According to the NHIS estimates, 5.6 million low-income adults were uninsured in 2016. Of these 5.6 million, an estimated 1.9 million uninsured, low-income adults resided in expansion states, compared with an estimated 3.7 million in non-expansion states. Estimates of uninsured, low-income adults comprised less than 1 percent of the total population for all expansion states and 3 percent of the total population for all non- expansion states. NHIS estimates also showed that over half of uninsured, low-income adults were male, over half were employed, and over half had incomes less than 100 percent FPL. For some demographic characteristics, there were some statistically significant differences between uninsured, low- income adults in expansion states compared with these adults in non- expansion states. For example, expansion states had significantly larger percentages of uninsured, low-income males than non-expansion states. (See table 1.) See table 6 in appendix III for additional demographic characteristics of uninsured, low-income adults. Estimates from the 2016 NHIS showed some statistically significant differences in the health status of uninsured, low-income adults in expansion and non-expansion states. In particular, expansion states had a larger percentage of these adults who reported that their health was “good” and a smaller percentage who reported their health as “fair or poor” than those in non-expansion states. However, the percentages of uninsured, low-income adults with responses of “excellent or very good” in both expansion and non-expansion states were large—47 percent or larger, and the differences between the two groups of states were not statistically significant. (See fig. 3.) See table 7 in appendix III for additional information about the health status for uninsured, low-income adults. The 2016 NHIS estimates showed that smaller percentages of low- income adults in expansion states reported having any unmet medical needs compared with those in non-expansion states; and smaller percentages of those who were insured reported having any unmet medical needs compared with those who were uninsured, regardless of where they lived, for example: Low-income adults in expansion and non-expansion states. Access to Health Care: Measuring Any Unmet Medical Needs The National Center for Health Statistics, the federal agency that conducts the National Health Interview Survey (NHIS), developed a composite measure on any unmet medical needs, which was based on six survey questions on respondents’ ability to afford different types of needed health care services. These questions asked whether in the past 12 months respondents could not afford medical care at any time; delayed seeking medical care due to worries about costs; or could not afford needed prescription drugs, mental health or counseling, dental care, or eyeglasses. percent or less of the low-income adults who had Medicaid or private health insurance in expansion or non-expansion states reported having any unmet medical needs, compared with 50 percent or more of those who were uninsured in expansion or non-expansion states. Further, among the uninsured, 50 percent of low-income adults living in expansion states reported any unmet medical needs, compared with 63 percent of those in non-expansion states. (See fig. 4.) See tables 8 and 9 in appendix IV for estimates of the composite measure we reviewed on any unmet medical needs. The 2016 NHIS estimates showed that smaller percentages of low- income adults in expansion states reported financial barriers to needed health care compared with those in non-expansion states; and smaller percentages of those who were insured reported financial barriers to needed health care compared with those who were uninsured, regardless of where they lived, for example: Low-income adults in expansion and non-expansion states. Nine percent of low-income adults in expansion states reported that they could not afford needed medical care, compared with 20 percent of low-income adults in non-expansion states. Low-income adults who were insured and uninsured. Twelve percent or less of low-income adults who had Medicaid or private health insurance in expansion or non-expansion states reported financial barriers to needed medical care, compared with 27 percent or more of those who were uninsured in expansion or non-expansion states. In addition, among low- income adults who were uninsured, a smaller percentage of those who lived in expansion states reported financial barriers to two of the six needed health care services compared with those who lived in non-expansion states. (See fig. 5.) See tables 10 through 13 in appendix V for estimates of all survey questions we reviewed on financial barriers to health care. The 2016 NHIS also collected information on non-financial barriers to health care. Specifically, the survey asked whether respondents had delayed health care due to non-financial reasons, such as they lacked transportation, were unable to get through on the phone, were unable to get a timely appointment, experienced long wait time at the doctor’s office, or were not able to get to a clinic or doctor’s office when it was open. The 2016 NHIS showed that the same or similar percentages of low-income adults in expansion and non-expansion states reported delaying care due to a lack of transportation or other non-financial reasons. Further, generally similar or larger percentages of low-income adults with insurance reported delaying care due to non-financial reasons, compared with those who were uninsured. See tables 14 and 15 in appendix V for estimates of low-income adults in expansion and non- expansion states and by insurance status on non-financial barriers to health care. The 2016 NHIS estimates showed that a larger percentage of low-income adults in expansion states reported having a usual place of care compared with those in non-expansion states; and larger percentages of those who were insured reported having a usual place of care compared with those who were uninsured, regardless of where they lived, for example: Low-income adults in expansion and non-expansion states. Eighty-two percent of the low-income adults in expansion states reported having a usual place of care when they were sick or needed advice about their health, compared with 68 percent of those in non- expansion states. Access to Health Care: Having a Usual Place of Care The 2016 National Health Interview Survey (NHIS) asked respondents about whether they had a place they usually go when sick or need advice about their health. Low-income adults who were insured and uninsured. Seventy- eight percent or more of those who had Medicaid or private health insurance in expansion or non-expansion states reported having a usual place of care, compared with 46 percent or less of those who were uninsured in expansion or non-expansion states. Among the uninsured, similar percentages of low-income adults in expansion and non-expansion states reported having a usual place of care. (See fig. 6.) See tables 16 through 19 in appendix VI for estimates of all survey questions we reviewed on having a usual place of care. The 2016 estimates showed that larger percentages of low-income adults in expansion states reported receiving selected health care services, such as a flu vaccine, compared with those in non-expansion states; and larger percentages of those with insurance reported receiving selected health care services compared with those who were uninsured, regardless of where they lived, for example: Low-income adults in expansion and non-expansion states. Thirty-one percent of low-income adults in expansion states reported receiving flu vaccinations, compared with 24 percent of those in non- expansion states. having their blood cholesterol checked by having their blood pressure checked by a doctor, nurse, or other health professional; visiting a hospital emergency department. percent or more of low-income adults who had Medicaid or private health insurance in expansion or non-expansion states reported receiving blood cholesterol checks, compared with 28 percent or less of low-income adults who were uninsured in expansion or non- expansion states. Among the uninsured, generally similar percentages of low-income adults in expansion and non-expansion states reported blood cholesterol checks, flu vaccines, and other selected services. (See fig. 7.) See tables 20 and 21 in appendix VI for estimates of all survey questions we reviewed on selected health care services. The 2016 NHIS also asked respondents whether they visited or had spoken to a health care professional about their health, including: a general doctor, such as a general practitioner, family doctor, and a nurse practitioner, physician’s assistant, or midwife; and a doctor who specializes in a particular disease, with the exception of obstetricians, gynecologists, psychiatrists, and ophthalmologists. See tables 22 and 23 in appendix VI for estimates of low-income adults in expansion and non-expansion states and by insurance status on contacting health care professionals. We provided a draft of this report to HHS for comment. HHS provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services, the appropriate congressional committee, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you are your staff members have any questions about this report, please contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix VII. To describe national survey estimates of (1) the number and demographic characteristics of uninsured, low-income adults in expansion and non-expansion states; (2) unmet medical needs for low-income adults in expansion and non-expansion states and by insurance status; (3) barriers to health care for low-income adults in expansion and non- expansion states and by insurance status; and (4) having a usual place of care and receiving selected health care services for low-income adults in expansion and non-expansion states and by insurance status, we used data from the 2016 National Health Interview Survey (NHIS). The 2016 NHIS were the most recent data available when we conducted our analyses. This appendix describes the data source, study population, analyses conducted, study limitations, and data reliability assessment. The NHIS collects demographic, health status, health insurance, health care access, and health care service use data for the civilian, noninstitutionalized U.S. population. It is an annual, nationally representative, cross-sectional household interview survey. NHIS interviews are conducted continuously throughout the year for the National Center for Health Statistics (NCHS), which is a federal agency within the Department of Health and Human Services that compiles statistical information to help guide health policy decisions. Interviews are conducted in respondents’ homes, and interviewers may conduct follow- up interviews over the telephone to complete an interview. Information about some NHIS respondents, such as information about their health status, may be obtained through an interview with another family member on behalf of the respondent. NHIS data are organized into several data files. Estimates used for our study are based on data with the 2016 Family and Sample Adult Core components of the 2016 NHIS. Sociodemographic, insurance, and select health care access and utilization variables were defined using data collected in the Family Core component of the survey, which includes data on every household member for the families participating in NHIS. Other measures of health care access and utilization examined in this study are based on data collected in the Sample Adult Core component. In this component, the respondent (i.e., the sample adult) is randomly selected from among all adults aged ≥18 years in the family. A proxy respondent might respond for the sample adult if, because of health reasons, the sample adult is physically or mentally unable to respond themselves. The 2016 imputed income files were used to define poverty thresholds, which is based on reported and imputed family income. The NHIS publicly released data files for 2016 include data for 40,220 households containing 97,169 persons, and the total household response rate was 67.9 percent. For this study we asked NCHS to provide estimates of low-income, non- elderly adults, which we defined as individuals ages 19 to 64, with family incomes that did not exceed 138 percent of the federal poverty level (FPL). We also requested that estimates be provided separately for respondents based on whether they resided in an expansion or non- expansion state, and whether they were covered by private health insurance, Medicaid, or had no insurance. We gave NCHS specifications for the definition of low-income, non-elderly adults; the states that should be classified as expansion or non-expansion states in calendar year 2016; and the respondents who should be classified as having private health insurance, Medicaid, or no insurance. We asked NCHS to exclude respondents who were noncitizens, were covered by Medicare, only received health care services through military health care or through the Indian Health Service, or had Supplemental Social Security Income. We also excluded adult females from the Sample Adult file who responded they were pregnant at the time of the interview. In addition, we asked NCHS to exclude individuals for which information was missing—not recorded or not provided during the interview—on health insurance coverage (Medicaid, private health insurance, Indian Health Service, military health care, or no health insurance), receipt of Supplemental Social Security Income, and U.S. citizenship. We classified individuals in our study population as residing in an expansion or non-expansion state based on their state of residence when they were interviewed for the 2016 NHIS. We classified the 30 states and the District of Columbia that expanded their Medicaid eligibility before July 1, 2016, as expansion states. The remaining 20 states were classified as non-expansion states. Louisiana expanded Medicaid coverage on July 1, 2016; therefore, we classified it as a non-expansion state. We decided not to classify Louisiana as an expansion state because we allowed a 6- month period for the effects of expansion to appear. Therefore, for Louisiana we only included NHIS respondents interviewed from January through June 2016 when Louisiana was a non-expansion state. Similarly, for two expansion states—Alaska and Montana—we only included individuals who were interviewed March through December 2016 and July through December 2016, respectively, after the state expanded Medicaid to allow for a 6-month time period for the effect of expansion to take place. (See table 2.) Table 3 below illustrates the sample size and population estimates of low- income sample adults by expansion state, non-expansion state, and national total. We classified NHIS respondents as having private health insurance, Medicaid, or no insurance based on the health insurance classification approach used by NCHS for NHIS. NCHS assigned NHIS respondents’ health insurance classification based on a hierarchy of mutually exclusive categories in the following order: private health insurance, Medicaid, other coverage, and uninsured. Low-income adults with more than one coverage type were assigned to the first appropriate category in the hierarchy. Respondents were classified as having private health insurance if they reported that they were covered by any comprehensive private health insurance plan (including health maintenance and preferred provider organizations). Private coverage excluded plans that pay for one type of service, such as accidents or dental care. Respondents were classified as having Medicaid if they reported they were covered by Medicaid or by a state-sponsored health plan with no premiums or it was not known whether a premium was charged. Respondents were classified as being uninsured if they did not report having any private health insurance, Medicare, Medicaid, Children’s Health Insurance Program, state-sponsored or other government-sponsored health plan, or military health plan. Respondents were also classified as being uninsured if they only had insurance coverage with a private plan that paid for one type of service, such as accidents or dental care. We gave NCHS officials specifications to calculate estimates from the 2016 NHIS for demographic characteristics, access to care, as well as composite measures of access to health care based on selected survey questions. Composite measures are NCHS-developed measures based on responses to NHIS questions covering related topics. The analysis included two composite measures: 1. any unmet medical needs, which is based on responses to six underlying survey questions that asked respondents about whether during the past 12 months they needed medical care but did not get it because they could not afford it; delayed seeking medical care because of worry about the cost; or did not get prescription medicines, mental health care or counseling, eyeglasses, or dental care due to cost; and 2. any non-financial barriers to health care, which is based on five underlying questions that asked respondents whether they delayed care in the past 12 months for any of the following reasons: could not get through on the telephone; could not get an appointment soon enough; waited too long to see the doctor after arriving at the doctor’s office; the clinic/doctor’s office was not open when respondent could get there; and did not have transportation. NCHS officials calculated our requested estimates of groups within our study population based on whether respondents resided in an expansion or non-expansion state and whether they had private health insurance, Medicaid, or were uninsured at the time of the interview. For each comparison—such as comparisons of access to health care for respondents in expansion versus non-expansion states—we asked NCHS to test for statistically significant differences. We identified a statistically significant difference when the p-value from a t-test of the difference in the estimated proportions between two study subgroups had a value of less than 0.05. To describe the number and demographic characteristics of uninsured, low-income adults, we compared estimates of selected demographic characteristics (race and ethnicity, gender, poverty status, and employment status) and reported health status for this group in expansion and non-expansion states. These and other estimates of demographic characteristics and reported health status from the 2016 NHIS for uninsured, low-income adults by expansion states, non-expansion states, and all states are provided in tables 6 and 7 in appendix III. To describe unmet medical needs, barriers to health care, and having a usual place of care and receiving selected services for all low-income adults in expansion and non-expansion states and by insurance status, we asked NCHS to calculate estimates based on responses to selected NHIS questions and NCHS composite measures. We selected these survey questions and composite measures from the Family and Adult Access to Health Care and Utilization and Adult Health Behaviors sections of the 2016 NHIS. To summarize estimates of low-income adults in expansion and non-expansion states and by insurance status, responses to selected survey questions and composite measures were calculated as an estimated percentage of the relevant group’s total population for eight groups of low-income adults: (1) those in expansion states, (2) those in non-expansion states, (3) those who had Medicaid in expansion states, (4) those who had Medicaid in non-expansion states, (5) those who had private health insurance in expansion states, (6) those who had private health insurance in non-expansion states, (7) those who were uninsured in expansion states, and (8) those who were uninsured in non-expansion states. We asked NCHS to test for statistically significant differences for the estimates of access to care between selected groups of low-income adults. (See table 4.) The results of the tests for statistically significant differences for these comparison groups are in appendixes IV through VI. Our study has some limitations. First, our study did not examine whether statistically significant differences in estimates of access to health care between respondents in expansion and non-expansion states were associated with the choice to expand Medicaid. Second, NHIS data are based on respondent-reported data, which may be subject to potential biases and recall of participants’ use of health services and may be less accurate than administrative data or clinical data. Third, we could not report estimates of access to health care that did not meet NCHS’s standards of reliability or precision. We assessed the reliability of NHIS data by reviewing NHIS data documentation; interviewing knowledgeable NCHS officials and academic researchers; and examining the data for logical errors, missing values, and values outside of expected ranges. We determined that the data were sufficiently reliable for the purposes of these analyses. Under the Patient Protection and Affordable Care Act (PPACA), states may opt to expand their Medicaid programs’ eligibility to cover certain low-income adults beginning January 2014. As of December 2017, 31 states and the District of Columbia had expanded their Medicaid programs as permitted under PPACA and 19 states had not. Table 5 lists the states that expanded Medicaid eligibility and those that did not. It also includes state population and other Medicaid data, which is presented in the roll-over information in interactive figure 2. This appendix provides additional 2016 National Health Interview Survey (NHIS) estimates we obtained from the National Center for Health Statistics (NCHS). Table 6 presents estimates of selected demographic characteristics for low-income adults who were uninsured at the time of the survey interview. The table provides estimates for these adults based on whether they resided in states that expanded Medicaid eligibility as permitted under the Patient Protection and Affordable Care Act (PPACA) (referred to as expansion states) or states that did not (referred to as non- expansion states). We report statistically significant differences when comparing the responses of uninsured, low-income adults in expansion and non-expansion states. Table 7 shows estimates of the reported health status of uninsured, low- income adults based on whether they resided in an expansion or non- expansion state. The table provides the number and percent of these adults who reported that at the time of the interview their health status was excellent or very good; good; or fair or poor. The table also shows the extent to which these adults reported whether their health status was different at the time of the interview compared to the previous year. We report statistically significant differences when comparing the responses of uninsured, low-income adults in expansion and non-expansion states. This appendix provides estimates of any unmet medical needs for low- income adults—individuals ages 19 to 64, with family incomes that did not exceed 138 percent of the federal poverty level (FPL)—from the 2016 National Health Interview Survey (NHIS), which were produced by the National Center for Health Statistics (NCHS). Estimates are based on a composite measure of any unmet medical needs. Table 8 shows estimates of all low-income adults in expansion and non-expansion states. We also report statistically significant differences between low- income adults in expansion and non-expansion states. Table 9 shows estimates of six groups of low-income adults: (1) low- income adults who were uninsured in expansion states; (2) low-income adults who were uninsured in non-expansion states; (3) low-income adults who had Medicaid in expansion states; (4) low-income adults who had Medicaid in non-expansion states; (5) low-income adults who had private health insurance in expansion states; and (6) low-income adults who had private health insurance in non-expansion states. We also report any statistically significant differences when comparing the six groups of low-income adults, specifically: low-income adults who were uninsured in expansion states compared with each of the four groups of low-income adults who were insured— low-income adults who had Medicaid in expansion states, low-income adults who had Medicaid in non-expansion states, low-income adults who had private health insurance in expansion states, and low-income adults who had private insurance in non-expansion states; low-income adults who were uninsured in non-expansion states compared with each of the four groups of low-income adults who were insured; low-income adults who were uninsured in expansion states compared with low-income adults who were uninsured in non-expansion states; low-income adults who had Medicaid in expansion states compared with low-income adults who had Medicaid in non-expansion states; and low-income adults who had private health insurance in expansion states compared with low-income adults who had private health insurance in non-expansion states. This appendix provides estimates of barriers to health care for low- income adults—individuals ages 19 to 64, with family incomes that did not exceed 138 percent of the federal poverty level (FPL)—from the 2016 National Health Interview Survey (NHIS), which we obtained from the National Center for Health Statistics (NCHS). Estimates of financial barriers to needed medical, specialty, and other types of health care and prescription drugs are based on selected survey questions. Estimates of non-financial barriers to health care are based on responses to selected survey questions and a composite measure. Estimates are reported for: All low-income adults in expansion and non-expansion states. We also report statistically significant differences between low-income adults in expansion and non-expansion states. Six groups of low-income adults: (1) low-income adults who were uninsured in expansion states; (2) low-income adults who were uninsured in non-expansion states; (3) low-income adults who had Medicaid in expansion states; (4) low-income adults who had Medicaid in non-expansion states; (5) low-income adults who had private health insurance in expansion states; and (6) low-income adults who had private health insurance in non-expansion states. We also report any statistically significant differences when comparing the six groups of low-income adults, specifically: low-income adults who were uninsured in expansion states compared with each of the four groups of low-income adults who were insured—low-income adults who had Medicaid in expansion states, low-income adults who had Medicaid in non-expansion states, low-income adults who had private health insurance in expansion states, and low-income adults who had private insurance in non-expansion states; low-income adults who were uninsured in non-expansion states compared with each of the four groups of low-income adults who were insured; low-income adults who were uninsured in expansion states compared with low-income adults who were uninsured in non- expansion states; low-income adults who had Medicaid in expansion states compared with low-income adults who had Medicaid in non- expansion states; and low-income adults who had private health insurance in expansion states compared with low-income adults who had private health insurance in non-expansion states. Financial barriers to medical, specialty, and other types of health care. Tables 10 and 11 present estimates and differences in estimates of responses to survey question that asked whether respondents did not obtain different types of needed health care services in the past 12 months because they could not afford it. Financial barriers to prescription drugs. Tables 12 and 13 present estimates and differences in estimates of survey question that asked respondents who had been prescribed medications whether they had taken actions during the past 12 months to save money on medications. Non-financial barriers to health care. Tables 14 and 15 present estimates and differences in estimates of the NCHS composite measure on any non-financial barriers to health care, which was based on responses to five survey questions on whether respondents delayed care in the past 12 months due to long wait times, a lack of transportation, and other non-financial reasons. Additionally, these tables present estimates and differences in estimates of responses to the composite measure’s five underlying survey questions. This appendix provides estimates on having a usual place of care and receiving selected health care services for adults—individuals ages 19 to 64, with family incomes that did not exceed 138 percent of the federal poverty level (FPL)—from the 2016 National Health Interview Survey (NHIS), which we obtained from the National Center for Health Statistics (NCHS). Estimates are based on responses to selected survey questions on having a usual place of care, receiving selected health care services, and contacting health care professionals. Estimates are reported for: All low-income adults in expansion and non-expansion states. We also report statistically significant differences between low-income adults in expansion and non-expansion states. Six groups of low-income adults: (1) low-income adults who were uninsured in expansion states; (2) low-income adults who were uninsured in non-expansion states; (3) low-income adults who had Medicaid in expansion states; (4) low-income adults who had Medicaid in non-expansion states; (5) low-income adults who had private health insurance in expansion states; and (6) low-income adults who had private health insurance in non-expansion states. We also report any statistically significant differences when comparing the six groups of low-income adults, specifically: low-income adults who were uninsured in expansion states compared with each of the four groups of low-income adults who were insured—low-income adults who had Medicaid in expansion states, low-income adults who had Medicaid in non-expansion states, low-income adults who had private health insurance in expansion states, and low-income adults who had private insurance in non-expansion states; low-income adults who were uninsured in non-expansion states compared with each of the four groups of low-income adults who were insured; low-income adults who were uninsured in expansion states compared with low-income adults who were uninsured in non- expansion states; low-income adults who had Medicaid in expansion states compared with low-income adults who had Medicaid in non- expansion states; and low-income adults who had private health insurance in expansion states compared with low-income adults who had private health insurance in non-expansion states. Having a usual place of care. Tables 16 through 19 present estimates and differences in estimates of survey questions that asked respondents about the place of care they usually go to when sick or need advice about their health and the type of place that respondents most often went. Receiving selected health care services. Tables 20 and 21 present estimates and differences in estimates of survey questions that asked respondents whether they had received a blood cholesterol check, flu vaccine, or other selected services. Contacting health care professionals. Tables 22 and 23 present estimates and differences in estimates of survey questions that asked respondents whether they had visited or spoken to a general doctor, specialist, or other health care professionals about their health in the past 12 months. In addition to the contact named above, Katherine M. Iritani (Director), Tim Bushfield (Assistant Director), Deitra H. Lee (Analyst-in-Charge), Kristin Ekelund, Laurie Pachter, Vikki Porter, Merrile Sing, and Emily Wilson made key contributions to this report.", "summary": "Under PPACA, states could choose to expand Medicaid coverage to certain uninsured, low-income adults. As of December 2017, 31 states and the District of Columbia chose to expand Medicaid to cover these adults, and 19 states did not. GAO was asked to provide information about the demographic characteristics of and access to health care services for low-income adults—those with household incomes less than or equal to 138 percent of the federal poverty level—in expansion and non-expansion states. This report describes 2016 national survey estimates of (1) the number and demographic characteristics for low-income adults who were uninsured in expansion and non-expansion states, (2) unmet medical needs for low-income adults in expansion and non-expansion states and by insurance status, (3) barriers to health care for low-income adults in expansion and non-expansion states and by insurance status, and (4) having a usual place of care and receiving selected health care services for low-income adults in expansion and non-expansion states and by insurance status. GAO obtained 2016 NHIS estimates from the National Center for Health Statistics (NCHS), the federal agency within the Department of Health and Human Services that maintains these survey data. NHIS is a household interview survey designed to be a nationally representative sample of the civilian, non-institutionalized population residing in the United States. Estimates were calculated for demographic characteristics for uninsured, low-income adults. In addition, estimates were calculated for unmet medical needs, barriers to health care, and having a usual place of care and receiving selected health services for low-income adults in expansion and non-expansion states and by insurance status The estimates were based on responses to selected survey questions. GAO selected these survey questions from the Family and Adult Access to Health Care and Utilization and another section of the 2016 NHIS. GAO took steps to assess the reliability of the 2016 NHIS estimates, including interviewing NCHS officials and examining the data for logical errors. GAO determined that the data were sufficiently reliable for the purposes of its analyses. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate. According to the 2016 National Health Interview Survey (NHIS), an estimated 5.6 million uninsured, low-income adults—those ages 19 through 64—had incomes at or below the income threshold for expanded Medicaid eligibility as allowed under the Patient Protection and Affordable Care Act (PPACA). Estimates from this nationally representative survey showed that about 1.9 million of the 5.6 million uninsured, low-income adults lived in states that chose to expand Medicaid under PPACA, while the remaining 3.7 million lived in non-expansion states—those that did not choose to expand Medicaid. In 2016, over half of uninsured, low-income adults were male, over half were employed, and over half had incomes less than 100 percent of the federal poverty level in both expansion and non-expansion states. The 2016 NHIS estimates showed that low-income adults in expansion states were less likely to report having any unmet medical needs compared with those in non-expansion states, and low-income adults who were insured were less likely to report having unmet medical needs compared with those who were uninsured. Among the low-income adults who were uninsured, those in expansion states were less likely to report having any unmet medical needs compared with those in non-expansion states. The 2016 NHIS estimates also showed that low-income adults in expansion states were less likely to report financial barriers to needed medical care and other types of health care, such as specialty care, compared with those in non-expansion states, and low-income adults who were insured were less likely to report financial barriers to needed medical care compared with those who were uninsured. Among low-income adults who were uninsured, those in expansion states were less likely to report financial barriers to needed medical care compared with those in non-expansion states. Finally, the 2016 NHIS estimates showed that low-income adults in expansion states were more likely to report having a usual place of care to go when sick or needing advice about their health and receiving selected health care services compared with those in non-expansion states. The estimates also showed that low-income adults who were insured were generally more likely to report having a usual place of care and receiving selected health care services compared with those who were uninsured. Among the uninsured, relatively similar percentages of low-income adults in expansion and non-expansion states reported having a usual place of care. Similarly, estimates showed that relatively similar percentages of low-income adults who were uninsured in expansion and non-expansion states reported receiving selected health care services, such as receiving a flu vaccine or a blood pressure check.", "document_type": "gao"}
{"report": "Federal agencies conduct a variety of procurements that are reserved for small business participation through small business set-asides. The set- asides can be for small businesses in general, or they can be specific to small businesses that meet additional eligibility requirements in the Service-Disabled Veteran-Owned Small Business (SDVOSB), Historically Underutilized Business Zone (HUBZone), 8(a) Business Development (8(a)), and WOSB programs. The WOSB program enables federal contracting officers to identify and establish a sheltered market, or set-aside, for competition among WOSBs and EDWOSBs in certain industries. To determine the industries eligible under the WOSB program, SBA is required to conduct a study to determine which NAICS codes are eligible under the program and to report on such studies every 5 years. WOSBs can receive set-asides in industries in which SBA has determined that women-owned small businesses are substantially underrepresented. EDWOSBs can receive set-asides in WOSB-eligible industries as well as in an additional set of industries in which SBA has determined that women-owned small businesses are underrepresented but not substantially so. As of February 2019, there were a total of 113 four-digit NAICS codes (representing NAICS industry groups) eligible under the WOSB program—92 eligible NAICS codes for WOSBs and 21 for EDWOSBs. Additionally, businesses must be at least 51 percent owned and controlled by one or more women who are U.S. citizens to participate in the WOSB program. The owner must provide documents demonstrating that the business meets program requirements, including a document in which the owner attests to the business’s status as a WOSB or EDWOSB. EDWOSBs are WOSBs that are controlled by one or more women who are citizens and who are economically disadvantaged in accordance with SBA regulations. According to SBA, as of early October 2018, there were 13,224 WOSBs and 4,488 EDWOSBs registered in SBA’s online certification database. SBA’s Office of Government Contracting administers the WOSB program by promulgating regulations, conducting eligibility examinations of businesses that receive contracts under a WOSB or EDWOSB set-aside, deciding protests related to eligibility for a WOSB set-aside, conducting studies to determine eligible industries, and working with other federal agencies in assisting WOSBs and EDWOSBs. According to SBA officials, the Office of Government Contracting also works at the regional and local levels with SBA’s Small Business Development Centers and district offices, and with other organizations (such as Procurement Technical Assistance Centers), to help WOSBs and EDWOSBs obtain contracts with federal agencies. The services SBA coordinates include training, counseling, mentoring, facilitating access to information about federal contracting opportunities, and business financing. According to SBA, as of October 2018, there were two full-time staff within the Office of Government Contracting whose primary responsibility was the WOSB program. Initially, the program’s statutory authority allowed WOSBs to be self- certified by the business owner or certified by an approved third-party national certifying entity as eligible for the program. Self-certification is free, but some third-party certification options require businesses to pay a fee. Each certification process requires businesses to provide signed representations attesting to their WOSB or EDWOSB eligibility. Businesses must provide documents supporting their status before submitting an offer to perform the requirements of a WOSB set-aside contract. In August 2016, SBA launched certify.sba.gov, which is an online portal that allows firms to upload required documents and track their submission and also enables contracting officers to review firms’ eligibility documentation. According to the Federal Acquisition Regulation (FAR), contracting officers are required to verify that all required documentation is present in the online portal when selecting a business for an award. In addition, businesses must register and attest to being a WOSB in the System for Award Management, the primary database of vendors doing business with the federal government. In 2011, SBA approved four organizations to act as third-party certifiers: El Paso Hispanic Chamber of Commerce, NWBOC (previously known as the National Women Business Owners U.S. Women’s Chamber of Commerce, and Women’s Business Enterprise National Council. These organizations have been the WOSB program’s third-party certifiers since 2011. According to SBA data, the Women’s Business Enterprise National Council was the most active third-party certifier in fiscal year 2017—performing 2,638 WOSB certification examinations. The U.S. Women’s Chamber of Commerce, NWBOC, and El Paso Hispanic Chamber of Commerce—completed 644, 105, and 12 certifications, respectively. As discussed previously, in 2014 we reviewed the WOSB program and found a number of deficiencies in SBA’s oversight of the four SBA- approved third-party certifiers and in SBA’s eligibility examination processes and we made related recommendations for SBA. In addition, in 2015 and 2018 the SBA OIG reviewed the WOSB program and also found oversight deficiencies, including evidence of WOSB contracts set aside for ineligible firms. In both reports, the SBA OIG also made recommendations for SBA. Further, in July 2015, we issued GAO’s fraud risk framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. In July 2016, the Office of Management and Budget issued guidelines requiring executive agencies to create controls to identify and respond to fraud risks. These guidelines also affirm that managers should adhere to the leading practices identified in GAO’s fraud risk framework. As of February 2019, SBA had implemented one of the three changes that the 2015 NDAA made to the WOSB program—sole-source authority. The two other changes—authorizing SBA to implement its own certification process for WOSBs and requiring SBA to eliminate the WOSB self-certification option—have not been implemented. The 2015 NDAA did not require a specific time frame for SBA to update its regulations. SBA officials have stated that they will not eliminate self- certification until the new certification process for the WOSB program is in place, which they expect to be completed by January 1, 2020. In September 2015, SBA published a final rule to implement sole-source authority for the WOSB program (effective October 2015). Among other things, the rule authorized contracting officers to award a contract to a WOSB or EDWOSB without competition, provided that the contracting officer’s market research cannot identify two or more WOSBs or EDWOSBs in eligible industries that can perform the requirements of the contract at a fair and reasonable price. In the final rule, SBA explained that it promulgated the sole-source rule before the WOSB certification requirements for two reasons. First, the sole-source rule could be accomplished by simply incorporating the statutory language into the regulations, whereas the WOSB certification requirements would instead require a prolonged rulemaking process. Second, SBA said that addressing all three regulatory changes at the same time would delay the implementation of sole-source authority. SBA described the sole-source mechanism as an additional tool for federal agencies to ensure that women-owned small businesses have an equal opportunity to participate in federal contracting and to ensure consistency among SBA’s socioeconomic small business procurement programs. According to SBA, most of the 495 comments submitted about the sole- source rule supported the agency’s decision to implement the authority quickly. However, the SBA OIG’s June 2018 audit report cautioned that allowing sole-source contracting authority while firms can still self-certify exposes the WOSB program to unnecessary risk of fraud and abuse, and the report recommended that SBA implement a new certification process for the WOSB program per the 2015 NDAA. In addition, our previous report identified risks of program participation by ineligible firms associated with deficiencies in SBA’s oversight structure. As we discuss in detail later, SBA has still not addressed these risks, which may be exacerbated by the implementation of sole-source authority without addressing the other changes made by the 2015 NDAA, including eliminating the self-certification option. As of February 2019, SBA had not published a proposed rule for public comment to establish a new certification process for the WOSB program. Previously, in October 2017, an SBA official stated that SBA was about 1–2 months away from publishing a proposed rule. However, in June 2018, SBA officials stated that a cost analysis would be necessary before the draft could be sent to the Office of Management and Budget for review. Certain stages of the rulemaking process have mandated time periods, such as the required interagency review process for certain rules. In June 2017, we reported that SBA officials said that an increase in the number of statutorily mandated rules in recent years had contributed to delays in the agency’s ability to promulgate rules in a more timely fashion. As of February 2019, SBA had not provided documentation or time frames for issuing a proposed rule or completing the rulemaking process. However, in response to the SBA OIG recommendation that SBA implement the new certification process, SBA stated that it would fulfill the recommendation (meaning implement a new certification process) by January 1, 2020. In December 2015, SBA published an advance notice of proposed rulemaking to solicit public comments to assist the agency with drafting a proposed rule to implement a new WOSB certification program. In the notice, SBA stated that it intends to address the 2015 NDAA changes, including eliminating the self-certification option, through drafting regulations to implement a new certification process. Previously, in its September 2015 final rule implementing sole-source authority, SBA stated that there was no evidence that Congress intended that the existing WOSB program, including self-certification, be halted before establishing the infrastructure and new regulations for a new certification program. The advance notice requested comments on various topics, such as how well the current certification processes were working, which of the certification options were feasible and should be pursued, whether there should be a grace period for self-certified WOSB firms to complete the new certification process, and what documentation should be required. Three third-party certifiers submitted comments in response to the advance notice of proposed rulemaking, and none supported the option of SBA acting as a WOSB certifier. One third-party certifier commented that such an arrangement is a conflict of interest given that SBA is also responsible for oversight of the WOSB program, and two certifiers commented that SBA lacked the required resources. The three third-party certifiers also asserted in their comments that no other federal agency should be allowed to become an authorized WOSB certifier, with one commenting that federal agencies should instead focus on providing contracting opportunities for women-owned businesses. All three certifiers also proposed ways to improve the current system of third-party certification—for example, by strengthening oversight of certifiers or expanding their number. The three certifiers also suggested that SBA move to a process that better leverages existing programs with certification requirements similar to those of the WOSB program, such as the 8(a) program. In the advance notice, SBA asked for comments on alternative certification options, such as SBA acting as a certifier or limiting WOSB program certifications to the 8(a) program and otherwise relying on state or third-party certifiers. Further, in June 2018, SBA officials told us that they were evaluating the potential costs of a new certification program as part of their development of the new certification rule. SBA has not fully addressed deficiencies in its oversight of third-party certifiers that we identified in our October 2014 report. We reported that SBA did not have formal policies for reviewing the performance of its four approved third-party certifiers, including their compliance with their agreements with SBA. Further, we found that SBA had not developed formal policies and procedures for, among other things, reviewing the monthly reports that certifiers submit to SBA. As a result, we recommended that SBA establish comprehensive procedures to monitor and assess the performance of the third-party certifiers in accordance with their agreements with SBA and program regulations. While SBA has taken some steps to address the recommendation, as of February 2019 it remained open. In response to our October 2014 recommendation, in 2016 SBA conducted compliance reviews of the four SBA-approved third-party certifiers. According to SBA, the purpose of the compliance reviews was to ensure the certifiers’ compliance with regulations, their signed third- party certifier certification form (or agreement) with SBA, and other program requirements. The compliance reviews included an assessment of the third-party certifiers’ internal certification procedures and processes, an examination of a sample of applications from businesses that the certifiers deemed eligible and ineligible for certification, and an interview with management staff. SBA officials said that SBA’s review team did not identify significant deficiencies in any of the four certifiers’ processes and found that all were generally complying with their agreements. However, one compliance review report described “grave concerns” that a third-party certifier had arbitrarily established eligibility requirements that did not align with WOSB program regulations and used them to decline firms’ applications. SBA noted in the report that if the third-party certifier failed to correct this practice SBA could terminate the agreement. As directed by SBA, the third-party certifier submitted a letter to SBA outlining actions it had taken to address this issue, among others. The final compliance review reports for the other third-party certifiers also recommended areas for improvement, including providing staff with additional training on how to conduct eligibility examinations and reviewing certification files to ensure they contain complete documentation. In addition, two of the three compliance review reports with recommendations (including the compliance review report for the certifier discussed above) required the certifier to provide a written response within 30 days outlining plans to correct the areas. SBA officials said that they reviewed the written responses and determined that no further action was required. In January 2017, SBA’s Office of Government Contracting updated its written Standard Operating Procedures (SOP) to include policies and procedures for the WOSB program, in part to address our October 2014 recommendation. The 2017 SOP discusses what a third-party-certifier compliance review entails, how often the reviews are to be conducted, and how findings are to be reported. The 2017 SOP notes that SBA may initiate a compliance review “at any time and as frequently as the agency determines is necessary.” In September 2018, SBA officials told us that they were again updating the SOP, in part to address deficiencies we identified in our prior work and during this review. However, as of February 2019, SBA had not provided an updated SOP. In addition, in April 2018, SBA finalized a WOSB Program Desk Guide that, according to SBA, is designed to provide program staff with detailed guidance for conducting oversight procedures, including compliance reviews of third-party certifiers. For example, the Desk Guide discusses how staff should prepare for a compliance review of a third-party certifier, review certification documents, and prepare a final report. However, the Desk Guide does not describe specific activities designed to oversee third-party certifiers on an ongoing basis. In November 2017, SBA officials told us that they planned to conduct additional compliance reviews of the third-party certifiers. However, in June 2018, officials said there were no plans to conduct further compliance reviews until the final rule implementing the new certification process was completed. Further, SBA officials said that the 2016 certifier compliance reviews did not result in significant deficiencies. However, as noted previously, one of the compliance review reports described a potential violation of the third-party certifier’s agreement with SBA. Per written agreements with SBA, third-party certifiers are required to submit monthly reports that include the number of WOSB and EDWOSB applications received, approved, and denied; identifying information for each certified business, such as the business name; concerns about fraud, waste, and abuse; and a description of any changes to the procedures the organizations used to certify businesses as WOSBs or EDWOSBs. In our October 2014 report, we noted that SBA had not followed up on issues raised in the monthly reports and had not developed written procedures for reviewing them. At that time, SBA officials said that they were unaware of the issues identified in the certifiers’ reports and that the agency was developing procedures for reviewing the monthly reports but could not estimate a completion date. In our interviews for this report, SBA officials stated that SBA still does not use the third-party certifiers’ monthly reports to regularly monitor the program. Specifically, SBA does not review the reports to identify any trends in certification deficiencies that could inform program oversight. Officials said the reports generally do not contain information that SBA considers helpful for overseeing the WOSB program, although staff sometimes use the reports to obtain firms’ contact information. SBA officials also said that staff very rarely receive information about potentially fraudulent WOSB firms from the third-party certifiers—maybe three firms per year—and that this information is generally received via email and not as part of the monthly reports. SBA officials said that when they receive information about potentially fraudulent firms, WOSB program staff conduct an examination to determine the firm’s eligibility and report the results back to the certifier. However, a third-party certifier told us it has regularly reported firms it suspected of submitting potentially fraudulent applications in its monthly reports and that SBA has not followed up with them. In addition, two third-party certifiers said that if SBA is not cross-checking the list of firms included in their monthly reports, a firm deemed ineligible by one certifier may submit an application to another certifier and obtain approval. The three third-party certifiers we spoke with said that SBA generally had not communicated with them about their implementation of the program since the 2016 compliance reviews. However, SBA officials noted that three of the four third-party certifiers attended an SBA roundtable in March 2017 to discuss comments on the proposed rulemaking. In addition, SBA officials said that the third-party certifiers may contact them with questions about implementing the WOSB program, but SBA generally does not reach out to them. Although SBA has taken steps to enhance its written policies and procedures for oversight of third-party certifiers, it does not have plans to conduct further compliance reviews of the certifiers and does not intend to review certifiers’ monthly reports on a regular basis. SBA officials said that third-party certifier oversight procedures would be updated, if necessary, after certification options have been clarified in the final WOSB certification rule. However, ongoing oversight activities, such as regular compliance reviews, could help SBA better understand the steps certifiers have taken in response to previous compliance review findings and whether those steps have been effective. In addition, leading fraud risk management practices include identifying specific tools, methods, and sources for gathering information about fraud risks, including data on fraud schemes and trends from monitoring and detection activities, as well as involving relevant stakeholders in the risk assessment process. Without procedures to regularly monitor and oversee third-party certifiers, SBA cannot provide reasonable assurance that certifiers are complying with program requirements and cannot improve its efforts to identify ineligible firms or potential fraud. Further, it is unclear when SBA’s final rule will be implemented. As a result, we maintain that our previous recommendation should be addressed—that is, that the Administrator of SBA should establish and implement comprehensive procedures to monitor and assess the performance of certifiers in accordance with the requirements of the third-party certifier agreement and program regulations. SBA also has not fully addressed deficiencies found in our 2014 review related specifically to eligibility examinations. We found that SBA lacked formalized guidance for its eligibility examination processes and that the examinations continued to identify high rates of potentially ineligible businesses. As a result, we recommended that SBA enhance its examination of businesses that register for the WOSB program to ensure that only eligible businesses obtain WOSB set-asides. Specifically, we suggested that SBA consider (1) completing the development of procedures to conduct annual eligibility examinations and implementing such procedures; (2) analyzing examination results and individual businesses found to be ineligible to better understand the cause of the high rate of ineligibility in annual reviews and determine what actions are needed to address the causes, and (3) implementing ongoing reviews of a sample of all businesses that have represented their eligibility to participate in the program. SBA has taken some steps to implement our recommendation—such as by completing its 2017 SOP and its Desk Guide, both of which include written policies and procedures for WOSB program eligibility examinations. The 2017 SOP includes a brief description of what activities are entailed in the examinations, the staff responsible for conducting them, and how firms are selected. In addition, as noted previously, SBA officials told us in September 2018 that a forthcoming update to the SOP would address deficiencies we identified regarding WOSB eligibility examinations. However, as of February 2019, SBA had not provided an updated SOP. The Desk Guide contains more detailed information on eligibility examinations. It notes that a sample of firms is to be examined annually and it provides selection criteria, which can include whether the agency has received information challenging the firm’s eligibility for the program. The Desk Guide also provides specific instructions on how to determine whether a firm meets the WOSB program’s ownership, control, and financial requirements and what documentation should be consulted or requested. SBA does not collect reliable information on the results of its annual eligibility examinations. According to SBA officials, SBA has conducted eligibility examinations of a sample of businesses that received WOSB program set-aside contracts each year since fiscal year 2012. However, SBA officials told us that the results of annual eligibility examinations— such as the number of businesses found eligible or ineligible—are generally not documented. As a result, we obtained conflicting data from SBA on the number of examinations completed and the percentage of businesses found to be ineligible in fiscal years 2012 through 2018. For example, based on previous information provided by SBA, we reported in October 2014 that in fiscal year 2012, 113 eligibility examinations were conducted and 42 percent of businesses were found to be ineligible for the WOSB program. However, during this review, we received information from SBA that 78 eligibility examinations were conducted and 37 percent of businesses were found ineligible in fiscal year 2012. We found similar disparities when we compared fiscal year 2016 data provided by SBA for this report with a performance memorandum summarizing that fiscal year’s statistics. Regardless of the disparity between the data sources, the rate of ineligible businesses has remained significant. For example, according to documentation SBA provided during this review, in fiscal year 2017, SBA found that about 40 percent of the businesses in its sample were not eligible. In addition, SBA continues to have no mechanism for evaluating examination results in aggregate to inform the WOSB program. In 2014, we reported that SBA officials told us that most businesses that were deemed ineligible did not understand the documentation requirements for establishing eligibility. However, we also reported that SBA officials could not explain how they knew a lack of understanding was the cause of ineligibility among businesses and had not made efforts to confirm that this was the cause. In June 2018, SBA officials told us they did not analyze the annual examinations in aggregate for common eligibility issues because the examination results are unique to each WOSB firm. They noted that this was not necessary as WOSB program staff are familiar with common eligibility issues through the annual eligibility examinations. As we noted in 2014, by not analyzing aggregate examination results, the agency is missing opportunities to obtain meaningful insights into the program, such as the reasons many businesses are deemed ineligible. Also, SBA still conducts eligibility examinations only of firms that have already received a WOSB award. In 2014, we concluded that this sampling practice restricts SBA’s ability to identify potentially ineligible businesses prior to a contract award. Similarly, during this review, SBA officials said that while some aspects of the sample characteristics have changed since 2012, the samples still generally consist only of firms that have been awarded a WOSB set-aside. In addition, officials said that the sample size of the eligibility examinations has varied over time and is largely based on the workload of WOSB program staff. Restricting the samples in this way limits SBA’s ability to better understand the eligibility of businesses before they apply for and are awarded contracts, as well as its ability to detect and prevent potential fraud. SBA officials said that their other means of reducing participation by ineligible firms and mitigating potential fraud is through WOSB or EDWOSB status protests—that is, allegations that a business receiving an award does not meet program eligibility requirements. A federal contractor can file a status protest against any firm receiving an award that represents itself as a WOSB in the System for Award Management for grounds that include failure to provide all required supporting documentation. The penalties for misrepresenting a firm’s status, per regulation, include debarment or suspension. However, one third-party certifier expressed in its comments to the advance notice of proposed rulemaking on certification that status protests alone are not a viable option for protecting the integrity of the WOSB program. The certifier questioned how a firm could have sufficient information about a competitor firm to raise questions about its eligibility. According to SBA officials, 11 status protests were filed under the WOSB program in fiscal year 2018. Of these, four firms were deemed ineligible for the WOSB program, four were deemed eligible, and three status protests were dismissed. In fiscal year 2017, 9 status protests were filed; of these, three firms were found ineligible, two were found eligible, and four status protests were dismissed. We recognize that SBA has made some effort to address our previous recommendation by documenting procedures for conducting annual eligibility examinations of WOSB firms. However, leading fraud risk management practices state that federal program managers should design control activities that focus on fraud prevention over detection and response, to the extent possible. Without maintaining reliable information on the results of eligibility examinations, developing procedures for analyzing results, and expanding the sample of businesses to be examined to include those that did not receive contracts, SBA limits the value of its eligibility examinations and its ability to reduce ineligibility among businesses registered to participate in the WOSB program. These deficiencies also limit SBA’s ability to identify potential fraud risks and develop any additional control activities needed to address these risks. As a result, the program may continue to be exposed to the risk of ineligible businesses receiving set-aside contracts. In addition, in light of these continued oversight deficiencies, the implementation of sole-source authority without addressing the other changes made by the 2015 NDAA could increase program risk. For these reasons, we maintain that our previous recommendation that SBA enhance its WOSB eligibility examination procedures should be addressed. In 2015 and 2018, the SBA OIG reported instances in which WOSB set- asides were awarded using NAICS codes that were not eligible under the WOSB program, and our analysis indicates that this problem persists. In 2015, the SBA OIG reported on its analysis of a sample of 34 WOSB set- aside awards and found that 10 awards were set aside using an ineligible NAICS code. The SBA OIG concluded that this may have been due to contracting officers’ uncertainty about NAICS code requirements under the program and recommended that SBA provide additional, updated training and outreach to federal agencies’ contracting officers on the program’s NAICS code requirements. In response, SBA updated WOSB program training and outreach documents in March 2016 to include information about the program’s NAICS code requirements. In 2018, the SBA OIG issued another report evaluating the WOSB program, with a focus on the use of the program’s sole-source contract authority. Here, the SBA OIG identified additional instances of contracting officers using inaccurate NAICS codes to set aside WOSB contracts. Specifically, the SBA OIG reviewed a sample of 56 awards and found that 4 were awarded under ineligible NAICS codes. The report included two recommendations for SBA aimed at preventing and correcting improper NAICS code data in FPDS-NG: (1) conduct quarterly reviews of FPDS- NG data to ensure contracting officers used the appropriate NAICS codes and (2) in coordination with the Office of Federal Procurement Policy and GSA, strengthen controls in FPDS-NG to prevent contracting officers from using ineligible NAICS codes. SBA disagreed with both of these recommendations. In its response to the first recommendation, SBA stated that it is not responsible for the oversight of other agencies’ contracting officers and therefore is not in a position to implement the corrective actions. With respect to the second recommendation, SBA stated that adding such controls to FPDS-NG would further complicate the WOSB program and increase contracting officers’ reluctance to use it. SBA also stated its preference for focusing its efforts on ensuring that contracting officers select the appropriate NAICS code at the beginning of the award process. In our review, we also found several issues with WOSB program set- asides being awarded under ineligible NAICS codes. Our analysis of FPDS-NG data on all obligations to WOSB program set-asides from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018 found the following: 3.5 percent (or about $76 million) of WOSB program obligations were awarded under NAICS codes that were never eligible for the WOSB program; 10.5 percent (or about $232 million) of WOSB program obligations made under an EDWOSB NAICS code went to women-owned businesses that were not eligible to receive awards in EDWOSB- eligible industries; and 17 of the 47 federal agencies that obligated dollars to WOSB program set-asides during the period used inaccurate NAICS codes in at least 5 percent of their WOSB set-asides (representing about $25 million). According to SBA officials we spoke with during this review, WOSB program set-asides may be awarded under ineligible NAICS codes because of human error when contracting officers are inputting data in FPDS-NG or because a small business contract was misclassified as a WOSB program set-aside. They characterized the extent of the issue as “small” relative to the size of the FPDS-NG database and said that such issues do not affect the program’s purpose. Rather than review FPDS-NG data that are inputted after the contract is awarded, SBA officials said that they have discussed options for working with GSA to add controls defining eligible NAICS codes for WOSB program set-aside opportunities on FedBizOpps.gov—the website that contracting officers use to post announcements about available federal contracting opportunities. Adding controls to this system, officials said, would help contracting officers realize as they are writing the contract requirements that they should not set aside contracts under the WOSB program without reviewing the proper NAICS codes. However, SBA officials said that the feasibility of this option was still being discussed and that the issue was not a high priority. For these reasons, according to officials, SBA’s updated oversight procedures described in the 2017 SOP and the Desk Guide do not include a process for reviewing WOSB program set-aside data in FPDS-NG to determine whether they were awarded under the appropriate NAICS codes. Further, as of November 2018, the WOSB program did not have targeted outreach or training that focused on specific agencies’ use of NAICS codes. As noted previously, in March 2016, SBA updated its WOSB program training materials to address NAICS code requirements in response to a 2015 SBA OIG recommendation. In fiscal year 2018, SBA conducted three WOSB program training sessions for federal contracting officers, including (1) a virtual learning session, (2) a session conducted during WOSB Industry Day at the Department of Housing and Urban Development, and (3) a session conducted during a Department of Defense Small Business Training Conference. However, with the exception of the virtual learning session, these training sessions were requested by the agencies. SBA officials did not identify any targeted outreach or training provided to specific agencies to improve understanding of WOSB NAICS code requirements (or other issues related to the WOSB program). Congress authorized SBA to develop a contract set-aside program specifically for WOSBs and EDWOSBs to address the underrepresentation of such businesses in specific industries. In addition, federal standards for internal control state that management should design control activities to achieve objectives and respond to risks and to establish and operate monitoring activities to monitor and evaluate the results. Because SBA does not review whether contracts are being awarded under the appropriate NAICS codes, it cannot provide reasonable assurance that WOSB program requirements are being met or identify agencies that may require targeted outreach or additional training on eligible NAICS codes. As a result, WOSB contracts may continue to be awarded to groups other than those intended, which can undermine the goals of and confidence in the program. Federal dollars obligated for contracts to all women-owned small businesses increased from $18.2 billion in fiscal year 2012 to $21.4 billion in fiscal year 2017. These figures include contracts for any type of good or service awarded under the WOSB program, under other federal programs, or through full and open competition. Contracts awarded to all women-owned small businesses within WOSB-program-eligible industries also increased during this period—from about $15 billion to $18.8 billion, as shown in figure 1. However, obligations under the WOSB program represented only a small share of this increase. In fiscal year 2012, WOSB program contract obligations were 0.5 percent of contract obligations to all women-owned small businesses for WOSB-program- eligible goods or services (about $73.5 million), and in fiscal year 2017 this percentage had grown to 3.8 percent (about $713.3 million) (see fig. 1). From fiscal years 2012 through 2017, 98 percent of total dollars obligated for contracts to all women-owned small businesses in WOSB-program- eligible industries were not awarded under the WOSB program. Instead, these contracts were awarded without a set-aside or under other, longer- established socioeconomic contracting programs, such as HUBZone, the SDVOSB, and 8(a). For example, during this period, dollars obligated to contracts awarded to women-owned small businesses without a set-aside represented about 34 percent of dollars obligated for contracts to all women-owned small businesses in these industries (see fig. 2). As shown in table 1, six federal agencies—DOD, DHS, Department of Commerce, Department of Agriculture, Department of Health and Human Services, and GSA—collectively accounted for nearly 83 percent of the obligations awarded under the WOSB program from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018, with DOD accounting for about 49 percent of the total. Contracting officers’ use of sole-source authority was relatively limited, representing about 12 percent of WOSB program obligations from January 2016 through June 2018. In fiscal year 2017—the only full fiscal year for which we have data on sole-source authority—about $77 million were obligated using sole-source authority. The share of sole-source awards as a percentage of total WOSB program set-asides also varied considerably by quarter—from as low as 5 percent in the third quarter of 2016 to as high as 21 percent in the first quarter of 2017 (see fig. 3). We spoke with 14 stakeholder groups to obtain their views on usage of the WOSB program. These groups consisted of staff within three federal agencies (DHS, DOD, and GSA), eight contracting offices within these agencies, and three third-party certifiers. Issues stakeholders discussed included the impact of sole-source authority and program-specific NAICS codes on program usage. Stakeholders also noted the potential effect of other program requirements on contracting officers’ willingness to use the program, and some suggested that SBA provide additional guidance and training to contracting officers. Sole-source authority. Participants in 12 of the 14 stakeholder groups commented on the effect of sole-source authority on WOSB program usage. Staff from 4 of the 12 stakeholder groups—including three contracting offices—said that sole-source authority generally had no effect on the use of the WOSB program. One of these stakeholders believed contracting officers seldom use the authority because they lack an understanding of how and when to use it; therefore, in this stakeholder’s opinion, use of the WOSB program has not generally changed since the authority was implemented. However, staff from two contracting offices and one third-party certifier said that sole-source authority was a positive addition because, for example, it can significantly reduce the lead time before a contracting officer can offer a contract award to a firm. Staff from one of these two contracting offices stated that the award process can take between 60 to 90 days using sole-source authority, compared to 6 to 12 months using a competitive WOSB program set-aside. These staff also said that negotiating the terms of a sole-source contract is easier, from a contracting officer’s perspective, because they can communicate directly with the firm. As discussed previously, SBA officials we interviewed said that adding sole-source authority to the WOSB program made the program more consistent with other existing socioeconomic set-aside programs, such as 8(a) and HUBZone. The remaining five stakeholder groups that discussed the effects of WOSB sole-source authority described difficulties with implementing it. Specifically, representatives from DHS, DOD, and one third-party certifier said that executing sole-source authority under the WOSB program is difficult for contracting officers because rules for sole-source authority under WOSB are different from those under other SBA programs, such as 8(a) and HUBZone. For example, the FAR’s requirement that contracting officers justify, in writing, why they do not expect other WOSBs or EDWOSBs to submit offers on a contract is stricter under the WOSB program than it is for the 8(a) program. Further, staff from one contracting office noted that justifications for WOSB set-asides must then be published on a federal website. In contrast, contracting officers generally do not need to prepare and publish a justification under the 8(a) program. According to staff from another contracting office, it may be difficult to find more than one firm qualified to do the work under some WOSB-eligible NAICS codes, but contracting officers would still have to conduct market research and explain why they do not expect additional offers in order to set the contract aside for a WOSB. Program-specific NAICS codes. Participants in 13 of the 14 stakeholder groups we interviewed commented on the requirement that WOSB program set-asides be awarded within certain industries, represented by NAICS codes. For example, two third-party certifiers we interviewed recommended that the NAICS codes be expanded or eliminated to provide greater opportunities for WOSBs to win contracts under the program. Another third-party certifier said that some of its members focus their businesses’ marketing efforts on industries specific to the WOSB program to help them compete for such contracts. Representatives from GSA and DHS made comments about limitations with respect to the WOSB program’s NAICS code requirement. Staff we interviewed from three contracting offices made similar statements, adding that the NAICS codes limit opportunities to award a contract to a WOSB or EDWOSB because they are sufficient in some industry areas but not others. All five of these stakeholder groups suggested that NAICS codes be removed from the program’s requirements to increase opportunities for WOSBs. Conversely, staff from five other contracting offices we interviewed generally expressed positive views about the WOSB program’s NAICS code requirements and stated that eligible codes line up well with the services for which they generally contract. Finally, SBA officials noted that there are no plans to reassess the NAICS codes until about 2020. However, SBA officials also stated that the NAICS code requirements complicate the WOSB program and add confusion for contracting officers who use program, as compared to other socioeconomic programs that do not have such requirements, such as HUBZone or 8(a). Requirement to verify eligibility documentation. Staff from 7 of the 14 stakeholder groups we interviewed discussed the requirement for the contracting officer to review program eligibility documentation and how this requirement affects their decision to use the program. For example, staff from one contracting office said that using the 8(a) or HUBZone programs is easier because 8(a) and HUBZone applicants are already certified by SBA; therefore, the additional step to verify documentation for eligibility is not needed. GSA officials noted that eliminating the need for contracting officers to take additional steps to review eligibility documentation for WOSB-program set-asides—in addition to checking the System for Award Management—could create more opportunities for WOSBs by reducing burden on contracting officers. However, staff from two contracting offices said it is not more difficult to award contracts under the WOSB program versus other socioeconomic programs. WOSB program guidance. Staff from 13 of the14 stakeholder groups we interviewed discussed guidance available to contracting officers under the WOSB program. Most generally said that the program requirements outlined in the FAR are fairly detailed and help contracting officers implement the program. According to SBA officials, SBA provides training on WOSB program requirements to contracting officers in federal agencies by request, through outreach events, and through an annual webinar. SBA officials also said that the training materials include all the regulatory issues that contracting officers must address. However, representatives from two third-party certifiers described feedback received from their members about the need to provide additional training and guidance for contracting officers to better understand and implement the WOSB program. Staff from two contracting offices also expressed the need for SBA to provide additional training and guidance. Staff from one of these contracting offices said that the last time they received training on the WOSB program was in 2011, when the program was first implemented. Staff in the other contracting office added that the most recent version of a WOSB compliance guide they could locate online was at least 6 years old. SBA officials estimated that the WOSB compliance guide was removed from their public website in March 2016 because it was difficult to keep the document current and officials did not want to risk publishing a guide that was out-of-date. SBA officials also said that there are no plans to issue an updated guide as the FAR is sufficient. The stakeholder groups also identified positive aspects of the WOSB program. Specifically, staff from seven stakeholder groups believed that the program provided greater opportunities for women-owned small businesses to obtain contracts in industries in which they are underrepresented. In addition, staff from three stakeholder groups mentioned that SBA-led initiatives, such as the Small Business Procurement Advisory Council and SBA’s co-sponsorship of the ChallengeHER program, help improve collaboration between federal agencies and the small business community and overall government contracting opportunities for women-owned small businesses. The WOSB program aims to enhance federal contracting opportunities for women-owned small businesses. However, weaknesses in SBA’s management of the program continue to hinder its effectiveness. As of February 2019, SBA had not fully implemented comprehensive procedures to monitor the performance of the WOSB program’s third- party certifiers and had not taken steps to provide reasonable assurance that only eligible businesses obtain WOSB set-aside contracts, as recommended in our 2014 report. Without ongoing monitoring and reviews of third-party certifier reports, SBA cannot ensure that the certifiers are fulfilling the requirements of their agreements with SBA, and it is missing opportunities to gain information that could help improve the program’s processes. Further, limitations in SBA’s procedures for conducting, documenting, and analyzing eligibility examinations inhibit its ability to better understand the eligibility of businesses before they apply for and potentially receive contracts, which exposes the program to unnecessary risk of fraud. In addition, given that SBA does not expect to finish implementing the changes in the 2015 NDAA until January 1, 2020, these continued oversight deficiencies increase program risk. As a result, we maintain that our previous recommendations should be addressed. In addition, SBA has not addressed deficiencies that the SBA OIG identified previously—and that we also identified during this review— related to WOSB set-asides being awarded under ineligible industry codes. Although SBA has updated its training and outreach materials for the WOSB program to address NAICS code requirements, it has not developed plans to review FPDS-NG data or provide targeted outreach or training to agencies that may be using ineligible codes. As a result, SBA is not aware of the extent to which individual agencies are following program requirements and which agencies may require targeted outreach or additional training. Reviewing FPDS-NG data would allow SBA to identify those agencies (and contracting offices within them) that could benefit from such training. Without taking these additional steps, SBA cannot provide reasonable assurance that WOSB program requirements are being met. The SBA Administrator or her designee should (1) develop a process for periodically reviewing FPDS-NG data to determine the extent to which agencies are awarding WOSB program set-asides under ineligible NAICS codes and (2) take steps to address any issues identified, such as providing targeted outreach or training to agencies making awards under ineligible codes. (Recommendation 1) We provided a draft of this report to DHS, DOD, GSA, and SBA for review and comment. DHS, DOD, and GSA indicated that they did not have comments. SBA provided a written response, reproduced in appendix II, in which it agreed with our recommendation. SBA stated that it will implement a process to review WOSB program data extracted from FPDS-NG and certified by each agency. Specifically, through the government-wide Small Business Procurement Advisory Council, SBA plans to provide quarterly presentations to contracting agencies’ staff that would include training and an analysis and review of the data. The response also reiterated that SBA has contacted GSA to implement a system change to FedBizOpps.gov that would prevent contracting officers from entering an invalid NAICS code for a WOSB program set-aside. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time we will send copies of this report to appropriate congressional committees and members, the Acting Secretary of DOD, the Secretary of DHS, the Administrator of GSA, the Administrator of SBA, and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. This report examines (1) the extent to which the Small Business Administration (SBA) has implemented changes to the Women-Owned Small Business Program (WOSB program) made by the 2015 National Defense Authorization Act (2015 NDAA); (2) the extent to which SBA has implemented changes to address previously identified oversight deficiencies; and (3) changes in WOSB program use since 2011 and stakeholder views on its use, including since the 2015 implementation of sole-source authority. To describe the extent to which SBA has implemented changes to the WOSB program made by the 2015 NDAA, we reviewed relevant legislation, including the 2015 NDAA; related proposed regulations; and SBA documentation. We reviewed comment letters on the advance notice of proposed rulemaking for the new WOSB program certification process from three of the four SBA-approved third-party certifiers: the El Paso Hispanic Chamber of Commerce, the U.S. Women’s Chamber of Commerce, and the Women’s Business Enterprise National Council. To ensure the accuracy of our characterization of the comment letters, one staff member independently summarized the third-party certifiers’ comments on the advance notice, and a second staff member then reviewed the results. We also interviewed SBA officials, including officials from SBA’s Office of Government Contracting and Business Development. To respond to the second and third objectives, we conducted interviews on SBA’s implementation and oversight of the WOSB program and its use with SBA officials, three of the WOSB program’s four third-party certifiers, three selected agencies (and three agency components within two of the agencies), and a total of eight selected contracting offices within six selected agencies or components. Using data from the Federal Procurement Data System-Next Generation (FPDS-NG), we judgmentally selected the three federal agencies and three components (for a total of six federal agencies and components) because their WOSB program dollar obligations (including competed and sole-source) were among the largest or because we had interviewed them for our prior work. Specifically, we selected the following six agencies or agency components: the Department of Homeland Security (DHS) and, within DHS, the Coast Guard; the Department of Defense (DOD) and, within DOD, the U.S. Army and U.S. Navy; and the General Services Administration (GSA). Within the components and GSA, we judgmentally selected eight contracting offices (two each from Coast Guard, U.S. Army, U.S. Navy, and GSA) based on whether they had a relatively large amount of obligations and had used multiple types of WOSB program set- asides (competed or sole-source) to WOSBs or economically disadvantaged women-owned small businesses (EDWOSB). To address our second objective, we reviewed the findings and recommendations in our October 2014 report and in audit reports issued by the SBA Office of Inspector General (OIG) in May 2015 and June 2018. We also reviewed SBA documentation on the WOSB program, including SBA’s 2017 Standard Operating Procedures and 2018 WOSB Program Desk Guide, results from 2016 compliance reviews of the four third-party certifiers, and SBA eligibility examinations from fiscal years 2012 through 2018. In addition, we analyzed FPDS-NG data on contract obligations to WOSB program set-asides from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018 to determine whether set-asides were made using eligible program-specific North American Industry Classification System (NAICS) codes. To conduct this analysis, we compared contract obligations in FPDS-NG with the NAICS codes eligible under the WOSB program at the time of the award for the time frame under review. The WOSB program’s eligible NAICS codes have changed three times since the program was implemented in 2011, but the eligible industries have changed once. SBA commissioned the RAND Corporation to conduct the first study to assist SBA in determining eligible NAICS codes under the WOSB program. Based on the results of the RAND study, SBA identified 45 four-digit WOSB NAICS codes and 38 four-digit EDWOSB NAICS codes, for a total of 83 four-digit NAICS codes. WOSB and EDWOSB NAICS codes are different and do not overlap. In December 2015, the Department of Commerce issued the next study, which increased the total NAICS codes under the program to 113 four-digit codes, with 92 WOSB NAICS codes and 21 EDWOSB NAICS codes (which became effective March 2016). Often, there is a time lag between the effective date of NAICS codes and when they are entered in FPDS-NG. Therefore, we did not classify a contract as having an ineligible NAICS code if the code eventually became eligible under the WOSB program. We also excluded actions in FPDS-NG coded other than as a small business. These actions represented a small amount of contract obligations—approximately $125,000. We compared SBA information on its oversight activities and responses to previously identified deficiencies, federal internal control standards, and GAO’s fraud risk framework. We assessed the reliability of FPDS-NG data by considering their known strengths and weaknesses, based on our past work and through electronic testing for missing data, outliers, and inconsistent coding in the data elements we used for our analysis. We also reviewed FPDS-NG documentation, including the FPDS-NG data dictionary, FPDS-NG data validation rules, FPDS-NG user manual, prior GAO reliability assessments, and relevant SBA OIG audit reports. Based on these steps, we concluded that the data were sufficiently reliable for the purposes of reporting on trends in the WOSB program and the use of sole-source authority under the program. To describe how participation in the WOSB program has changed since 2011, including since the 2015 implementation of sole-source authority, we analyzed FPDS-NG data from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018. We identified any trends in WOSB program participation using total obligation dollars set aside for competitive and sole-source contracts awarded to WOSBs and EDWOSBs under the program. We also compared data on obligations for set-asides under the WOSB program with federal contract obligations for WOSB-program-eligible goods and services to all women-owned small businesses, including those made under different set-aside programs or with no set-asides, to determine the relative usage of the WOSB program. In our analysis, we excluded from WOSB program set-aside data actions in FPDS-NG coded other than as a small business (representing approximately $125,000) or coded under ineligible NAICS codes that were never eligible under the WOSB program (representing approximately $76.3 million). To describe stakeholder views on WOSB program use, we conducted semistructured interviews to gather responses from 14 stakeholder groups. These groups consisted of staff within three federal agencies (DHS, DOD, and GSA), eight contracting offices within these agencies, and three third-party certifiers (selection criteria described above). One person summarized the results of the interviews, and another person reviewed the summary of the interviews to ensure an accurate depiction of the comments. In addition, a third person then reviewed the summarized results. We conducted this performance audit from October 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Allison Abrams (Assistant Director), Tiffani Humble (Analyst-in-Charge), Pamela Davidson, Jonathan Harmatz, Julia Kennon, Jennifer Schwartz, Rebecca Shea, Jena Sinkfield, Tyler Spunaugle, and Tatiana Winger made key contributions to this report.", "summary": "In 2000, Congress authorized the WOSB program, allowing contracting officers to set aside procurements to women-owned small businesses in industries in which they are substantially underrepresented. To be eligible to participate in the WOSB program, firms have the option to self-certify or be certified by a third-party certifier. However, the 2015 NDAA changed the WOSB program by (1) authorizing SBA to implement sole-source authority, (2) eliminating the option for firms to self-certify as being eligible for the program and (3) allowing SBA to implement a new certification process. GAO was asked to review the WOSB program. This report discusses (1) the extent to which SBA has addressed the 2015 NDAA changes, (2) SBA's efforts to address previously identified deficiencies, and (3) use of the WOSB program. GAO reviewed relevant laws, regulations, and program documents; analyzed federal contracting data from April 2011 through June 2018; and interviewed SBA officials, officials from contracting agencies selected to obtain a range of experience with the WOSB program, and three of the four private third-party certifiers. The Small Business Administration (SBA) has implemented one of the three changes to the Women-Owned Small Business (WOSB) program authorized in the National Defense Authorization Act of 2015 (2015 NDAA). Specifically, in September 2015 SBA published a final rule to implement sole-source authority, effective October 2015. As of February 2019, SBA had not eliminated the option for program participants to self-certify that they are eligible to participate, as required by 2015 NDAA. SBA officials stated that this requirement would be addressed as part of the new certification process for the WOSB program, which they expect to implement by January 1, 2020. SBA has not addressed WOSB program oversight deficiencies identified in GAO's 2014 review (GAO-15-54). For example, GAO previously recommended that SBA establish procedures to assess the performance of four third-party certifiers—private entities approved by SBA to certify the eligibility of WOSB firms. While SBA conducted a compliance review of the certifiers in 2016, it has no plans to regularly monitor them. By not improving its oversight of the WOSB program, SBA is limiting its ability to ensure third-party certifiers are following program requirements. In addition, the implementation of sole-source authority in light of these continued oversight deficiencies can increase program risk. Consequently, GAO maintains that its prior recommendations should be addressed. In addition, similar to previous findings from SBA's Office of Inspector General, GAO found that about 3.5 percent of contracts using a WOSB set-aside were awarded for ineligible goods or services from April 2011 through June 2018. SBA does not review contracting data that could identify this problem and inform SBA which agencies making awards may need targeted outreach or training. As a result, SBA cannot provide reasonable assurance that WOSB program requirements are being met and that the program is meeting its goals. While federal contract obligations to all women-owned small businesses and WOSB program set-asides have increased since fiscal year 2012, WOSB program set-asides remain a small percentage (see figure). GAO recommends that SBA develop a process for periodically reviewing the extent to which WOSB program set-asides are awarded for ineligible goods or services and use the results to address identified issues, such as through targeted outreach or training on the WOSB program. SBA agreed with the recommendation.", "document_type": "gao"}
{"report": "The cost of the census has been escalating over the last several decennials. The 2010 decennial was the costliest U.S. Census in history at about $12.3 billion, and was about 31 percent more costly than the $9.4 billion 2000 Census (in 2020 dollars). The average cost for counting a housing unit increased from about $16 in 1970 to around $92 in 2010 (in 2020 dollars). According to the Department of Commerce (Department), the total cost of the 2020 Census is now estimated to be approximately $15.6 billion dollars, more than $3 billion higher than previously reported by the Bureau. Meanwhile, the return of census questionnaires by mail (the primary mode of data collection) declined over this period from 78 percent in 1970 to 63 percent in 2010 (see figure 1). Declining mail response rates—a key indicator in determining the cost-effectiveness of the census—are significant and lead to higher costs. This is because the Bureau sends temporary workers to each non-responding household to obtain census data. As a result, non-response follow-up is the Bureau’s largest and most costly field operation. In many ways, the Bureau has had to invest substantially more resources each decade to conduct the enumeration. Achieving a complete and accurate census is becoming an increasingly daunting task, in part, because the nation’s population is growing larger, more diverse, and more reluctant to participate. When the census misses a person who should have been included, it results in an undercount; conversely, an overcount occurs when an individual is counted more than once. Such errors are particularly problematic because of their impact on various subgroups. Minorities, renters, and children, for example, are more likely to be undercounted by the census. The challenges to an accurate count can be seen, for example, in the difficulties associated with counting people residing in unconventional and hidden housing units, such as converted basements and attics. In figure 2, what appears to be a small, single-family house could contain an apartment, as suggested by its two doorbells. If an address is not in the Bureau’s address file, its residents are less likely to be included in the census. The Bureau plans to rely heavily on both new and legacy IT systems and infrastructure to support the 2018 End-to-End Test and the 2020 Census operations. For example, the Bureau plans to deploy and use 43 systems in the 2018 End-to-End Test. Eleven of these systems are being developed or modified as part of an enterprise-wide initiative called Census Enterprise Data Collection and Processing (CEDCaP), which is managed within the Bureau’s IT Directorate. This initiative is a large and complex modernization program intended to deliver a system-of-systems to support all of the Bureau’s survey data collection and processing functions, rather than continuing to rely on unique, survey-specific systems with redundant capabilities. According to Bureau officials, the remaining 32 IT systems are being developed or modified by the 2020 Census Directorate or other Bureau divisions. To support the 2018 End-to-End Test, the Bureau plans to incrementally deploy and use the 43 systems for nine operations from December 2016 through the end of the test in April 2019. These nine operations are: (1) in-office address canvassing, (2) recruiting staff for address canvassing, (3) training for address canvassing, (4) in-field address canvassing, (5) recruiting staff for field enumeration, (6) training for field enumeration, (7) self-response (i.e., Internet, phone, or paper), (8) field enumeration, and (9) tabulation and dissemination. We added the 2020 Census to our list of high-risk programs in February, 2017, because (1) innovations never before used in prior enumerations will not be fully tested; (2) the Bureau continues to face challenges in implementing and securing IT systems; and (3) the Bureau needs to control any further cost growth and develop reliable cost estimates. Each of these key risks are discussed in greater detail below; if not sufficiently addressed, these risks could adversely impact the cost and/or quality of the enumeration. Moreover, they compound the inherent challenges of conducting a successful census such as the nation’s increasingly diverse population and concerns over personal privacy. The basic design of the enumeration—mail out and mail back of the census questionnaire with in-person follow-up for non-respondents—has been in use since 1970. However, a key lesson learned from the 2010 Census and earlier enumerations, is that this “traditional” design is no longer capable of cost-effectively counting the population. In response to its own assessments, our recommendations, and studies by other organizations, the Bureau has fundamentally re-examined its approach for conducting the 2020 Census. Specifically, its plan for 2020 includes four broad innovation areas: re-engineering field operations, using administrative records, verifying addresses in-office, and developing an Internet self-response option (see table 1). If they function as planned, the Bureau initially estimated that these innovations could result in savings of over $5 billion (in 2020 dollars) when compared to its estimates of the cost for conducting the census with traditional methods. However, in June 2016, we reported that the Bureau’s life-cycle cost estimate of $12.5 billion, developed in October 2015, was not reliable and did not adequately account for risk. As discussed earlier in this statement, the Department has recently updated this figure and now estimates a life-cycle cost of $15.6 billion. At this higher level, the cost savings would be reduced to around $1.9 billion. While the planned innovations could help control costs, they also introduce new risks, in part, because they include new procedures and technology that have not been used extensively in earlier decennials, if at all. Our prior work has shown the importance of the Bureau conducting a robust testing program, including the 2018 End-to-End Test. Rigorous testing is a critical risk mitigation strategy because it provides information on the feasibility and performance of individual census-taking activities, their potential for achieving desired results, and the extent to which they are able to function together under full operational conditions. To address some of these challenges we have made several recommendations aimed at improving reengineered field operations, using administrative records, verifying the accuracy of the address list, and securing census responses via the Internet The Bureau has held a series of operational tests since 2012, but according to the Bureau, has scaled back recent tests because of funding uncertainties. For example, the Bureau canceled the field components of the 2017 Census Test including non-response follow-up, a key census operation. In November 2016, we reported that the cancelation of the 2017 field test was a lost opportunity to test, refine, and integrate operations and systems, and that it put more pressure on the 2018 End- to-End Test to demonstrate that enumeration activities will function under census-like conditions as needed for 2020. However, in May 2017, the Bureau scaled back the operational scope of the 2018 End-to-End and, of the three planned test sites; only the Rhode Island site would fully implement the 2018 End-to-End Test. The Washington and West Virginia state test sites would test just one field operation, address canvassing. In addition, due to budgetary concerns, the Bureau decided to remove three coverage measurement operations (and the technology that supports them) from the scope of the test. Without sufficient testing, operational problems can go undiscovered and the opportunity to improve operations will be lost, in part because the 2018 End-to-End Test is the last opportunity to demonstrate census technology and procedures across a range of geographic locations, housing types, and demographic groups. On August 28, 2017, temporary census employees known as address listers began implementing the in-field component of address canvassing for the 2018 End-to-End Test. Listers walked the streets of designated census blocks at all three test sites to verify addresses and geographic locations. The operation ended on September 27, 2017. As part of our ongoing work, we visited all three test sites and observed 18 listers conduct address canvassing. Generally, we found that listers were able to conduct address canvassing as planned. However, we also noted several challenges. We shared the following preliminary observations from our site visits with the Bureau: Internet connectivity was problematic at the West Virginia test site. We spoke to four census field supervisors who described certain areas as dead spots where Internet and cell phone service were not available. We also were told by those same supervisors that only certain cell service providers worked in certain areas. In order to access the Internet or cell service in those areas, census workers sometimes needed to drive several miles. The allocation of lister assignments was not always optimal. Listers were supposed to be provided assignments close to where they live in order to optimize their local knowledge and to limit the numbers of miles being driven by listers to and from their assignment area. Bureau officials told us this was a challenge at all three test sites. Moreover, at one site the area census manager told us that some listers were being assigned work in another county even though blocks were still unassigned closer to where they resided. Relying on local knowledge and limiting the number of miles can increase both the efficiency and effectiveness of address canvassing. The assignment of some of the large blocks early in the operations was not occurring as planned. At all three 2018 End-to-End Test sites Bureau managers had to manually assign some large blocks (some blocks had hundreds of housing units). It is important to assign large blocks early on because leaving the large blocks to be canvassed until the end of the operation could jeopardize the timely completion of address canvassing. According to Bureau officials,during the test, completed address and map updates for some blocks did not properly transmit. This happened at all three test sites, and included data on 11 laptops for 25 blocks. The address and map information on seven of the laptops was permanently deleted. However, data on four laptops were still available. The Bureau is examining those laptops to determine what occurred that prevented the data from being transmitted. In Providence, Rhode Island, where the full test will take place, the Bureau recanvassed those blocks where data were lost to ensure that the address and map information going forward was correct. It will be important for the Bureau to understand what happened and ensure all address and map data is properly transmitted for the 2020 Census. We have discussed these challenges with Bureau officials who stated that overall they are satisfied with the implementation of address canvassing but also agreed that resolving challenges discovered during address canvassing, some of which can affect the operation’s efficiency and effectiveness, will be important before the 2020 Census. We plan to issue a report early in 2018 on address canvassing at the three test sites. We have previously reported that the Bureau faced challenges in managing and overseeing IT programs, systems, and contractors supporting the 2020 Census. Specifically, it has been challenged in managing schedules, costs, contracts, governance and internal coordination, and security for its IT systems. As a result of these challenges, the Bureau is at risk of being unable to fully implement key IT systems necessary to support the 2020 Census and conduct a cost- effective enumeration. We have previously recommended that the Bureau take action to improve its implementation and management of IT in areas such as governance and internal coordination. We also have ongoing work reviewing each of these areas. Our ongoing work has indicated that the Bureau faces significant challenges in managing the schedule for developing and testing systems for the 2018 End-to-End Test that began in August 2017. In this regard, the Bureau still has significant development and testing work that remains to be completed. As of August 2017, of the 43 systems in the test, the Bureau reported that 4 systems had completed development and integration testing, while the remaining 39 systems had not completed these activities. Of these 39 systems, the Bureau reported that it had deployed a portion of the functionality for 21 systems to support address canvassing for the 2018 End-to-End Test; however, it had not yet deployed any functionality for the remaining 18 systems for the test. Figure 3 summarizes the development and testing status for the 43 systems planned for the 2018 End-to-End Test. Moreover, due to challenges experienced during systems development, the Bureau has delayed key IT milestone dates (e.g., dates to begin integration testing) by several months for several of the systems in the 2018 End-to-End Test. Figure 4 depicts the delays to the deployment dates for the operations in the 2018 End-to-End Test, as of August 2017. Our ongoing work also indicates that the Bureau is at risk of not meeting the updated milestone dates. For example, in June 2017 the Bureau reported that at least two of the systems expected to be used in the self- response operation (the Internet self-response system and the call center system) are at risk of not meeting the delayed milestone dates. In addition, in September 2017 the Bureau reported that at least two of the systems expected to be used in the field enumeration operation (the enumeration system and the operational control system) are at risk of not meeting their delayed dates. Combined, these delays reduce the time available to conduct the security reviews and approvals for the systems being used in the 2018 End-to- End Test. We previously testified in May 2017 that the Bureau faced similar challenges leading up to the 2017 Census Test, including experiencing delays in system development that led to compressed time frames for security reviews and approvals. Specifically, we noted that the Bureau did not have time to thoroughly assess the low-impact components of one system and complete penetration testing for another system prior to the test, but accepted the security risks and uncertainty due to compressed time frames. We concluded that, for the 2018 End-to- End Test, it will be important that these security assessments are completed in a timely manner and that risks are at an acceptable level before the systems are deployed. The Bureau noted that, if it continues to be behind schedule, key field operations for the 2018 End-to-End Test (such as non-response follow- up) could be delayed or canceled, which may affect the Bureau’s ability to meet the test’s objectives. As we stated earlier, without sufficient testing, operational problems can go undiscovered and the opportunity to improve operations will be lost. Bureau officials are evaluating options to decrease the impact of these delays on integration testing and security review activities by, for example, utilizing additional staff. We have ongoing work reviewing the Bureau’s development and testing delays and the impacts of these delays on systems readiness for the 2018 End-to-End Test. The Bureau faces challenges in reporting and controlling IT cost growth. In April 2017, the Bureau briefed us on its efforts to estimate the costs for the 2020 Census, during which it presented IT costs of about $2.4 billion from fiscal years 2018 through 2021. Based on this information and other corroborating IT contract information provided by the Bureau, we testified in May 2017 that the Bureau had identified at least $2 billion in IT costs. However, in June 2017, Bureau officials in the 2020 Census Directorate told us that the data they provided in April 2017 did not reflect all IT costs for the 2020 program. The officials provided us with an analysis of the Bureau’s October 2015 cost estimate that identified $3.4 billion in total IT costs from fiscal years 2012 through 2023. These costs included, among other things, those associated with system engineering, test and evaluation, and infrastructure, as well as a portion of the costs for the CEDCaP program. Yet, our ongoing work determined the Bureau’s $3.4 billion cost estimate from October 2015 did not reflect its current plans for acquiring IT to be used during the 2020 Census and that the related costs are likely to increase: In August 2016, the Bureau awarded a technical integration contract for about $886 million, a cost that was not reflected in the $3.4 billion expected IT costs. More recently, in May 2017, we testified that the scope of work for this contract had increased since the contract was awarded; thus, the corresponding contract costs were likely to rise above $886 million, as well. In March 2017, the Bureau reported that the contract associated with the call center and IT system to support the collection of census data over the phone was projected to overrun its initial estimated cost by at least $40 million. In May 2017, the Bureau reported that the CEDCaP program’s cost estimate was increasing by more than $400 million—from its original estimate of $548 million in 2013 to a revised estimate of $965 million in May 2017. In June 2017, the Bureau awarded a contract for mobile devices and associated services for about $283 million, an amount that is about $137 million higher than the cost for these devices and services identified in its October 2015 estimate. As a result of these factors, the Bureau’s $3.4 billion estimate of IT costs is likely to be at least $1.4 billion higher, thus increasing the total costs to at least $4.8 billion. Figure 5 identifies the Bureau estimate of total IT costs associated with the 2020 program as of October 2015, as well as anticipated cost increases as of August 2017. IT cost information that is accurately reported and clearly communicated is necessary so that Congress and the public have confidence that taxpayer funds are being spent in an appropriate manner. However, changes in the Bureau’s reporting of these total costs, combined with cost growth since the October 2015 estimate, raise questions as to whether the Bureau has a complete understanding of the IT costs associated with the 2020 program. In early October 2017, the Secretary of Commerce testified that he expected the total IT costs for the 2020 Census to be about $4.96 billion. This estimate of IT costs is approximately $1.6 billion higher than the Bureau’s October 2015 estimate and further confirms our analysis of expected IT cost increases discussed above. As of late October 2017, the Bureau and Department were still finalizing the documentation used to develop the new cost estimate. After these documents are complete and made available for inspection, as part of our ongoing work, we plan to evaluate whether this updated IT cost estimate includes the cost increases, discussed above, that were not included in the October 2015 estimate. Our ongoing work also determined that the Bureau faces challenges in managing its significant contractor support. The Bureau is relying on contractor support in many key areas of the 2020 Census. For example, it is relying on contractors to develop a number of key systems and components of the IT infrastructure. These activities include (1) developing the IT platform that is intended to be used to collect data from those responding via the Internet, telephone, and non-response follow-up activities; (2) procuring the mobile devices and cellular service to be used for non-response follow-up; and (3) developing the infrastructure in the field offices. According to Bureau officials, contractors are also providing support in areas such as fraud detection, cloud computing services, and disaster recovery. In addition to the development of key technology, the Bureau is relying on contractor support for integrating all of the key systems and infrastructure. The Bureau awarded a contract to integrate the 2020 Census systems and infrastructure in August 2016. The contractor’s work was to include evaluating the systems and infrastructure and acquiring the infrastructure (e.g., cloud or data center) to meet the Bureau’s scalability and performance needs. It was also to include integrating all of the systems, supporting technical testing activities, and developing plans for ensuring the continuity of operations. Since the contract was awarded, the Bureau has modified the scope to also include assisting with operational testing activities, conducting performance testing for two Internet self-response systems, and technical support for the implementation of the paper data capture system. However, our ongoing work has indicated that the Bureau is facing staffing challenges that could impact its ability to manage and oversee the technical integration contractor. Specifically, the Bureau is managing the integration contractor through a government program management office, but this office is still filling vacancies. As of October 2017, the Bureau reported that 35 of the office’s 58 federal employee positions were vacant. As a result, this program management office may not be able to provide adequate oversight of contractor cost, schedule, and performance. The delays during the 2017 Test and preparations for the 2018 End-to- End Test raises concerns regarding the Bureau’s ability to effectively perform contractor management. As we reported in November 2016, a greater reliance on contractors for these key components of the 2020 Census requires the Bureau to focus on sound management and oversight of the key contracts, projects, and systems. As part of our ongoing work, we plan to monitor the Bureau’s progress in managing its contractor support. Effective IT governance can drive change, provide oversight, and ensure accountability for results. Further, effective IT governance was envisioned in the provisions referred to as the 2014 Federal Information Technology Acquisition Reform Act (FITARA), which strengthened and reinforced the role of the departmental CIO. The component CIO also plays a role in effective IT governance as subject to the oversight and policies of the parent department or agency implementing FITARA. To ensure executive-level oversight of the key systems and technology, the Bureau’s CIO (or a representative) is a member of the governance boards that oversee all of the operations and technology for the 2020 Census. However, in August 2016 we reported on challenges the Bureau has had with IT governance and internal coordination, including weaknesses in its ability to monitor and control IT project costs, schedules, and performance. We made several recommendations to the Department of Commerce to direct the Bureau to, among other things, better ensure that risks are adequately identified and schedules are aligned. The Department agreed with our recommendations. However, as of October 2017, the Bureau had only fully implemented one recommendation and had taken initial steps toward implementing others. Further, given the schedule delays and cost increases previously mentioned, and the vast amount of development, testing, and security assessments left to be completed, we remain concerned about executive- level oversight of systems and security. Moving forward, it will be important that the CIO and other Bureau executives continue to use a collaborative governance approach to effectively manage risks and ensure that the IT solutions meet the needs of the agency within cost and schedule. As part of our ongoing work, we plan to monitor the steps the Bureau is taking to effectively oversee and manage the development and acquisition of its IT systems. In November 2016, we described the significant challenges that the Bureau faced in securing systems and data for the 2020 Census, and we noted that tight time frames could exacerbate these challenges. Two such challenges were (1) ensuring that individuals gain only limited and appropriate access to the 2020 Census data, including personally identifiable information (PII) (e.g., name, personal address, and date of birth), and (2) making certain that security assessments were completed in a timely manner and that risks were at an acceptable level. Protecting PII, for example, is especially important because a majority of the 43 systems to be used in the 2018 End-to-End Test contain PII, as reflected in figure 6. To address these and other challenges, federal law and guidance specify requirements for protecting federal information and information systems, such as those to be used in the 2020 Census. Specifically, the Federal Information Security Management Act of 2002 and the Federal Information Security Modernization Act of 2014 (FISMA) require executive branch agencies to develop, document, and implement an agency-wide program to provide security for the information and information systems that support operations and assets of the agency. Accordingly, the National Institute of Standards and Technology (NIST) developed risk management framework guidance for agencies to follow in developing information security programs. Additionally, the Office of Management and Budget’s (OMB) revised Circular A-130 on managing federal information resources required agencies to implement the NIST risk management framework to integrate information security and risk management activities into the system development life cycle. In accordance with FISMA, NIST guidance, and OMB guidance, the Office of the CIO established a risk management framework. This framework requires that system developers ensure that each of the systems undergoes a full security assessment, and that system developers remediate critical deficiencies. In addition, according to the Bureau’s framework, system developers must ensure that each component of a system has its own system security plan, which documents how the Bureau plans to implement security controls. As a result, system developers for a single system might develop multiple system security plans which all have to be approved as part of the system’s complete security documentation. We have ongoing work that is reviewing the extent to which the Bureau’s framework meets the specific requirements of the NIST guidance. According to the Bureau’s framework, each of the 43 systems in the 2018 End-to-End Test will need to have complete security documentation (such as system security plans) and an approved authorization to operate prior to their use in the 2018 End-to-End Test. However, our ongoing work indicates that, while the Bureau is completing these steps for the 43 systems to be used in the 2018 End-to-End Test, significant work remains. Specifically, as we reported in October 2017: None of the 43 systems are fully authorized to operate through the completion of the 2018 End-to-End Test. Bureau officials from the CIO’s Office of Information Security stated that these systems will need to be reauthorized because, among other things, they have additional development work planned that may require the systems to be reauthorized; are being moved to a different infrastructure environment (e.g., from a data center to a cloud-based environment); or have a current authorization that expires before the completion of the 2018 End-to-End Test. The amount of work remaining is concerning because the test has already begun and the delays experienced in system development and testing mentioned earlier reduce the time available for performing the security assessments needed to fully authorize these systems before the completion of the 2018 End-to-End test. Thirty-seven systems have a current authorization to operate, but the Bureau will need to reauthorize these systems before the completion of the 2018 End-to-End Test. This is due to the reasons mentioned previously, such as additional development work planned and changes to the infrastructure environments. Two systems have not yet obtained an authorization to operate. For the remaining four systems, the Bureau has not yet provided us with documentation about the current authorization status. Figure 7 depicts the authorization to operate status for the systems being used in the 2018 End-to-End Test, as reported by the Bureau. Because many of the systems that will be a part of the 2018 End-to-End Test are not yet fully developed, the Bureau has not finalized all of the security controls to be implemented; assessed those controls; developed plans to remediate control weaknesses; and determined whether there is time to fully remediate any deficiencies before the systems are needed for the test. In addition, as discussed earlier, the Bureau is facing system development challenges that are delaying the completion of milestones and compressing the time available for security testing activities. While the large-scale technological changes (such as Internet self- response) increase the likelihood of efficiency and effectiveness gains, they also introduce many information security challenges. The 2018 End- to-End Test also involves collecting PII on hundreds of thousands of households across the country, which further increases the need to properly secure these systems. Thus, it will be important that the Bureau provides adequate time to perform these security assessments, completes them in a timely manner, and ensures that risks are at an acceptable level before the systems are deployed. We plan to continue monitoring the Bureau’s progress in securing its IT systems and data as part of our ongoing work. Earlier this month, the Department announced that it had updated the October 2015 life-cycle cost estimate and now projects the life-cycle cost of the 2020 Census will be $15.6 billion, more than a $3 billion (27 percent) increase over the Bureau’s earlier estimate. The higher estimated life-cycle cost is due, in part, as we reported in June 2016, to the Bureau’s failure to meet best practices for a quality cost-estimate. Specifically, we reported that, although the Bureau had taken steps to improve its capacity to carry out an effective cost estimate, such as establishing an independent cost estimation office, its October 2015 version of the estimate for the 2020 Census only partially met the characteristics of two best practices (comprehensive and accurate) and minimally met the other two (well-documented and credible). We also reported that risks were not properly accounted for in the cost estimate. We recommended that the Bureau take action to ensure its 2020 Census cost estimate meets all four characteristics of a reliable cost estimate, as well as properly account for risk to ensure there are appropriate levels for budgeted contingencies. The Bureau agreed with our recommendations. In response, the Department of Commerce reported that in May 2017, a multidisciplinary team was created to evaluate the 2020 Census program and to produce an independent cost estimate. Factors driving the increased cost-estimate include changes to assumptions relating to self- response rates, wage levels for temporary census workers, as well as the fact that major contracts and IT scale-up plans and procedures were not effectively planned, managed, and executed. The new estimate also includes a contingency of 10 percent of estimated costs per year as insurance against “unknown-unknowns”, such as a major cybersecurity event. The Bureau and Department are still finalizing the documentation used to develop the $15.6 billion cost-estimate. Until these documents are complete and made available for inspection, we cannot determine the reliability of the estimate. We will review the documentation when it is available. In order for the estimate to be deemed high quality, and thus the basis for any 2020 Census annual budgetary figures, the new cost- estimate will need to address the following four best practices, and do so as quickly as possible given the expected ramp-up in spending: Comprehensive. To be comprehensive an estimate should have enough detail to ensure that cost elements are neither omitted nor double-counted, and all cost-influencing assumptions are detailed in the estimate’s documentation, among other things, according to best practices. In June 2016, we reported that, while Bureau officials were able to provide us with several documents that included projections and assumptions that were used in the cost estimate, we found the estimate to be partially comprehensive because it was unclear if all life-cycle costs were included in the estimate or if the cost estimate completely defined the program. Accurate. Accurate estimates are unbiased and contain few mathematical mistakes. We reported in June 2016 that the estimate partially met best practices for this characteristic, in part because we could not independently verify the calculations the Bureau used within its cost model, which the Bureau did not have documented or explained. Well-documented. Cost estimates are considered valid if they are well-documented to the point they can be easily repeated or updated and can be traced to original sources through auditing, according to best practices. In June 2016, we reported that, while the Bureau provided some documentation of supporting data, it did not describe how the source data were incorporated. Credible. Credible cost estimates must clearly identify limitations due to uncertainty or bias surrounding the data or assumptions, according to best practices. In June 2016, we reported that the estimate minimally met best practices for this characteristic in part because the Bureau carried out its risk and uncertainty analysis only for about $4.6 billion (37 percent) of the $12.5 billion total estimated life-cycle cost, excluding, for example, consideration of uncertainty over what the decennial census’s estimated part will be of the total cost of CEDCaP. The difficulties facing the Bureau’s preparation for the decennial in such areas as planning and testing; managing and overseeing IT programs, systems, and contractors supporting the enumeration; developing reliable cost estimates; prioritizing decisions; managing schedules; and other challenges, are symptomatic of deeper organizational issues. Following the 2010 Census, a key lesson learned for 2020 we identified was ensuring that the Bureau’s organizational culture and structure, as well as its approach to strategic planning, human capital management, internal collaboration, knowledge sharing, capital decision-making, risk and change management, and other internal functions are aligned toward delivering more cost-effective outcomes. The Bureau has made improvements over the last decade, and continued progress will depend in part on sustaining efforts to strengthen risk management activities, enhancing systems testing, bringing in experienced personnel to key positions, implementing our recommendations, and meeting regularly with officials from its parent agency, the Department of Commerce. Going forward, our experience has shown that the key elements needed to make progress in high-risk areas are top-level attention by the administration and agency officials to (1) leadership commitment, (2) ensuring capacity, (3) developing a corrective action plan, (4) regular monitoring, and (5) demonstrated progress. Although important steps have been taken in at least some of these areas, overall, far more work is needed. On the one hand, the Secretary of Commerce has taken several actions towards demonstrating leadership commitment. For example, the previously noted multidisciplinary review team included members with Bureau leadership experience, as well as members with private sector technology management experience. Additional program evaluation and the independent cost estimate was produced by a team from the Commerce Secretary’s Office of Acquisition Management that included a member detailed from OMB. Commerce also reports senior officials are now actively involved in the management and oversight of the decennial. Likewise, with respect to monitoring, the Commerce Secretary reports having weekly 2020 Census oversight reviews with senior Bureau staff and will require metric tracking and program execution status on a real- time basis. On the other hand, demonstrating the capacity to address high risk concerns remains a challenge. For example, our ongoing work has indicated that the Bureau is facing staffing challenges that could impact its ability to manage and oversee the technical integration contractor. Specifically, the Bureau is managing the integration contractor through a government program management office, but this office is still filling vacancies. As of October 2017, the Bureau reported that 35 of 58, or 60 percent, of the office’s federal employee positions were vacant. As a result, this program management office may not be able to provide adequate oversight of contractor cost, schedule, and performance. In the months ahead, we will continue to monitor the Bureau’s progress in addressing in each of the 5 elements essential for reducing the risk to a cost-effective enumeration. At a time when strong Bureau management is needed, vacancies in the agency’s two top positions—Director and Deputy Director—are not helpful for keeping 2020 preparations on-track. These vacancies are due to the previous director’s retirement on June 30, 2017, and the previous deputy director’s appointment to be the Chief Statistician of the United States within the Office of Management and Budget in January 2017. Although interim leadership has since been named, in our prior work we have noted how openings in the Bureau’s top position makes it difficult to ensure accountability and continuity, as well as to develop and sustain efforts that foster change, produce results, mitigate risks, and control costs over the long term. The census director is appointed by the President, by and with the advice and consent of the Senate, without regard to political affiliation. The director’s term is a fixed 5-year term of office, and runs in 5-year increments. An individual may be reappointed and serve 2 full terms as director. The director’s position was first filled this way beginning on January 1, 2012, and cycles every fifth year thereafter. Because the new term began on January 1, 2017, the time that elapses until a new director is confirmed counts against the 5-year term of office. As a result, the next director’s tenure will be less than 5 years. Going forward, filling these top two slots should be an important priority. On the basis of our prior work, key attributes of a census director, in addition to the obvious ones of technical expertise and the ability to lead large, long-term, and high risk programs, could include abilities in the following areas: Strategic Vision. The Director needs to build a long-term vision for the Bureau that extends beyond the current decennial census. Strategic planning, human-capital succession planning, and life-cycle cost estimates for the Bureau all span the decade. Sustaining Stakeholder Relationships. The Director needs to continually expand and develop working relationships and partnerships with governmental, political, and other professional officials in both the public and private sectors to obtain their input, support, and participation in the Bureau’s activities. Accountability. The life-cycle cost for a decennial census spans a decade, and decisions made early in the decade about the next decennial census guide the research, investments, and tests carried out throughout the decennial census. Institutionalizing accountability over an extended period may help long-term decennial initiatives provide meaningful and sustainable results. Over the past several years we have issued numerous reports that underscored the fact that if the Bureau was to successfully meet its cost savings goal for the 2020 Census, the Bureau needs to take significant actions to improve its research, testing, planning, scheduling, cost estimation, system development, and IT security practices. Over the past decade, we have made 84 recommendations specific to the 2020 Census to help address these and other issues. The Bureau has generally agreed with those recommendations; however 36 of them had not been implemented as of October 2017. We have designated 20 of these recommendations as a priority for the Department of Commerce and 5 have been implemented. In August 2017, we sent the Secretary of Commerce a letter that identified our open priority recommendations at the Department, 15 of which concern the 2020 Census. We believe that attention to these recommendations is essential for a cost-effective enumeration. The recommendations included implementing reliable cost estimation and scheduling practices in order to establish better control over program costs, as well as taking steps to better position the Bureau to develop an Internet response option for the 2020 Census. Appendix I summarizes our priority recommendations related to the 2020 Census and the actions the Department has taken to address them. On October 3, 2017, in response to our August 2017 letter, the Commerce Secretary noted that he shared our concerns about the 2020 Census and acknowledged that some of the programs had not worked as planned, and are not delivering the savings that were promised. The Commerce Secretary also stated that he intends to improve the timeliness for implementing our recommendations. We meet quarterly with Bureau officials to discuss the progress and status of open recommendations related to the 2020 Census. We are encouraged by the actions taken by the Department and the Bureau in addressing our recommendations. Implementing our recommendations in a complete and timely manner is important because it would improve the management of the 2020 Census and help to mitigate continued risks. In conclusion, while the Bureau has made progress in revamping its approach to the census, it faces considerable challenges and uncertainties in (1) implementing key cost-saving innovations and ensuring they function under operational conditions; (2) managing the development and security of key IT systems; and (3) developing a quality cost estimate for the 2020 Census and preventing further cost increases. Without timely and appropriate actions, these challenges could adversely affect the cost, accuracy, and schedule of the enumeration. For these reasons, the 2020 Census is a GAO high risk area. Going forward, continued management and Congressional attention—such as hearings like this one—will be vital for ensuring risks are managed, preparations stay on-track, and the Bureau is held accountable for implementing the enumeration as planned. We will continue to assess the Bureau’s efforts to conduct a cost-effective enumeration and look forward to keeping Congress informed of the Bureau’s progress. Chairman Johnson, Ranking Member McCaskill, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have. If you have any questions about this statement, please contact Robert Goldenkoff at (202) 512-2757 or by e-mail at goldenkoffr@gao.gov or David A. Powner at (202) 512-9286 or by e-mail at pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other key contributors to this testimony include Lisa Pearson (Assistant Director); Jon Ticehurst (Assistant Director); Katherine Wulff (Analyst in Charge); Mark Abraham; Brian Bothwell; Jeffrey DeMarco; Hoyt Lacy; Jason Lee; Ty Mitchell; LaSonya Roberts; Kate Sharkey; Andrea Starosciak; Umesh Thakkar; and Timothy Wexler. The Department of Commerce and Census Bureau have taken some actions to address our recommendations related to implementation of the 2020 Census; however, a large number of recommendations remain open. Since just prior to the 2010 Census, we have made 84 recommendations in 23 reports to the Department of Commerce and Census Bureau aimed at helping the Bureau prepare for and implement a successful 2020 Census (table 1). Of those 84, the Department of Commerce and the Census Bureau have implemented 48 recommendations. Thirty-six recommendations require additional action. Of these 84 recommendations, we have designated 20 as priorities for Commerce to address. The Census Bureau has taken some action on our priority recommendations, implementing 5 of the 20 priority recommendations we have made. The following table presents each of the 20 priority recommendations along with a summary of actions taken to address it.", "summary": "One of the Bureau's most important functions is to conduct a complete and accurate decennial census of the U.S. population. The decennial census is mandated by the Constitution and provides vital data for the nation. A complete count of the nation's population is an enormous undertaking as the Bureau seeks to control the cost of the census, implement operational innovations, and use new and modified IT systems. In recent years, GAO has identified challenges that raise serious concerns about the Bureau's ability to conduct a cost-effective count. For these reasons, GAO added the 2020 Census to its High-Risk list in February 2017. In light of these challenges, GAO was asked to testify about the reasons the 2020 Census was placed on the High-Risk List. To do so, GAO summarized its prior work regarding the Bureau's planning efforts for the 2020 Census. GAO also included observations from its ongoing work on the 2018 End-to-End Test. This information is related to, among other things, recent decisions on preparations for the 2020 Census; progress on key systems to be used for the 2018 End-to-End Test, including the status of IT security assessments; execution of the address canvassing operation at the test sites; and efforts to update the life-cycle cost estimate. GAO added the 2020 Census to its high-risk list because of challenges associated with (1) developing and testing key innovations; (2) implementing and securing IT systems; and (3) controlling any further cost growth and preparing reliable cost estimates. The Census Bureau (Bureau) is planning several innovations for the 2020 Decennial Census, including re-engineering field operations by relying on automation, using administrative records to supplement census data, verifying addresses in-office using on-screen imagery, and allowing the public to respond using the Internet. These innovations show promise for controlling costs, but they also introduce new risks, in part because they have not been used extensively in earlier enumerations, if at all. As a result, robust testing is needed to ensure that key systems and operations will function as planned. However, citing budgetary uncertainties, the Bureau canceled its 2017 field test and then scaled back its 2018 End-to End Test. Without sufficient testing, operational problems can go undiscovered and the opportunity to improve operations will be lost, as key census-taking activities will not be tested across a range of geographic locations, housing types, and demographic groups. The Bureau continues to face challenges in managing and overseeing the information technology (IT) programs, systems, and contracts supporting the 2020 Census. For example, GAO's ongoing work indicates that the system development schedule leading up to the 2018 End-to-End test has experienced several delays. Further, the Bureau has not addressed several security risks and challenges to secure its systems and data, including making certain that security assessments are completed in a timely manner and that risks are at an acceptable level. Given that certain operations for the 2018 End-to-End Test began in August 2017, it is important that the Bureau quickly address these challenges. GAO plans to monitor the Bureau's progress as part of its ongoing work. In addition, the Bureau needs to control any further cost growth and develop cost estimates that reflect best practices. Earlier this month, the Department of Commerce (Department) announced that it had updated the October 2015 life-cycle cost-estimate and now projects the life-cycle cost of the 2020 Census will be $15.6 billion, more than $3 billion (27 percent) increase over its earlier estimate. The higher estimated life-cycle cost is due, in part, to the Bureau's failure to meet best practices for a quality cost-estimate. The Bureau and Department are still finalizing the documentation used to develop the $15.6 billion cost-estimate. Until these documents are complete and made available for inspection, GAO cannot determine the reliability of the estimate. Over the past decade, we have made 84 recommendations specific to the 2020 Census to address the issues raised in this testimony and others. The Bureau generally has agreed with our recommendations. As of October 2017, 36 recommendations had not been implemented.", "document_type": "gao"}
{"report": "Collectively, the ongoing GPS acquisition effort aims to (1) modernize and sustain the existing GPS capability and (2) enhance the current GPS system by adding an anti-jam, anti-spoof cybersecure M-code capability. Figure 1 below shows how GPS satellites, ground control, and user equipment—in the form of receiver cards embedded in systems—function together as an operational system. Modernizing and sustaining the current GPS broadcast capability requires launching new satellites to replace the existing satellites that are near the end of their intended operational life as well as developing a ground control system that can launch and control both existing and new satellites. Sustaining the current GPS broadcast capability is necessary to ensure the quality and availability of the existing broadcast signals for civilian and military GPS receivers. The ongoing modernization of GPS began with three programs: (1) GPS III satellites; (2) OCX to control the satellites; and (3) MGUE increment 1 (which develops initial receiver test cards for military ships, ground vehicles, or aircraft). Table 1 describes these programs. Delays to OCX of more than 5 years led the Air Force to create two additional programs in 2016 and 2017 to modify the current GPS ground system to control GPS III satellites and provide a limited M-code broadcast. As a result, there are currently five total GPS modernization programs. Table 2 provides a description of the two new programs. All of the original GPS modernization programs—GPS III, OCX, and MGUE—have experienced significant schedule growth during development. Table 3 outlines several schedule challenges in the modernized GPS programs. We found in 2015 that unrealistic cost and schedule estimates of the new ground control system and receiver card development delays could pose significant risks to sustaining the GPS constellation and delivering M- code. At that time, we also made five recommendations so that DOD would have the information necessary to make decisions on how best to improve GPS modernization and to mitigate risks to sustaining the GPS constellation. We made four OCX-specific recommendations targeted to identify underlying problems, establish a high confidence schedule and cost estimate, and improve management and oversight. For MGUE, we recommended the Air Force add a critical design review before committing resources to allow the military services to fully assess the maturity of the MGUE design before committing test and procurement resources. DOD concurred with the four recommendations on OCX and partially concurred on the MGUE recommendation. Since 2015, our annual assessment of DOD weapon systems has shown that some of the original GPS programs have continued to face cost or schedule challenges, increasing the collective cost to modernize GPS by billions of dollars. Appendix III outlines the cost increases that have resulted. According to our analysis, over the next decade or more, DOD plans to achieve three key GPS modernization points: (1) constellation sustainment, (2) M-code broadcast, and (3) M-code receivers fielded. Figure 2 shows the current sequencing of the three points and the intervals when they are planned to be achieved, if known. Throughout this report, we will use figures based on this one to highlight the separately-managed programs DOD plans to synchronize to achieve each of the three identified modernization points. Some GPS capabilities require the delivery of more than one program, which must compete for limited resources, such as testing simulators. The Air Force coordinates the interdependent activities of the different programs and contractors in order to achieve each modernization point. The satellites in the GPS constellation broadcast encrypted military signals and unencrypted civilian signals and move in six orbital planes approximately 12,500 miles above the earth. What is a Global Positioning System (GPS) satellite orbital plane and how many are there? The GPS constellation availability performance standards commit the U.S. government to at least a 95 percent probability of maintaining a constellation of 24 operational GPS satellites to sustain the positioning services provided to both civilian and military GPS users. Therefore, while the minimum constellation consists of satellites occupying 24 orbital slots—4 slots in each of the six orbital planes—the constellation actually has 31 total satellites, generally with more than four in each plane to meet the 95 percent probability standard. These additional satellites are needed to provide uninterrupted availability in case a satellite fails. The constellation includes three generations of satellites with varying capabilities and design lives. An orbital plane is an imaginary flat disc containing an Earth satellite’s orbit. One orbital plane, as is shown above, represents the trajectory a GPS satellite follows as it circles the Earth in space. The GPS constellation has six orbital planes. Each contains at least 4 satellites that allow the constellation to meet the minimum requirement of 24 satellites. We found in 2010 and 2015 that GPS satellites have proven more reliable than expected, greatly exceeding their initially predicted life expectancies. Nevertheless, the Air Force must regularly replace satellites to meet the availability standard, since operational satellites have a finite lifespan. Excluding random failures, the operational life of a GPS satellite tends to be limited by the amount of power that its solar arrays can produce. This power level declines over time as the solar arrays degrade in the space environment until eventually they cannot produce enough power to maintain all of the satellite’s subsystems. Consequently, the Air Force monitors the performance of operational satellites in order to calculate when new satellites need to be ready to join the constellation. The 10 GPS III satellites currently under contract and in production with Lockheed Martin will provide a range of performance enhancements over prior GPS satellite generations. The GPS III satellites were designed to provide a longer life than previous generations, greater signal accuracy, and improved signal integrity—meaning that the user has greater assurance that the broadcast signal is correct. When they are eventually controlled through the OCX ground control system, the satellites will also offer a stronger M-code signal strength than prior GPS satellite generations. They will also include an additional civilian signal known as L1C, which will permit interoperability with European, Japanese, and other global navigation satellite systems for civilian users. Figure 3 describes the evolution of GPS satellite generations, including capabilities and life-span estimates. The current GPS ground control segment, OCS, primarily consists of software deployed at a master control station at Schriever Air Force Base, Colorado, and at an alternate master control station at Vandenberg Air Force Base, California. The ground control software is supported by 6 Air Force and 11 National Geospatial-Intelligence Agency monitoring stations located around the globe along with four ground antennas that communicate with the moving satellites. Information from the monitoring stations is processed at the master control station to determine satellite clock and orbit status. As each of the three ground control segment programs—COps, MCEU, and OCX—is completed or partially completed, they will each introduce new capabilities, eventually culminating in the delivery of the full M-code broadcast planned for January 2022. GPS receiver cards determine a user’s position and time by calculating the distance from four or more satellites using the navigation signals on the satellites to determine the card’s location. All warfighters currently acquire, train with, and use GPS receivers. Until MGUE receiver cards are developed and available for production, all DOD weapon systems that use GPS will continue to use the current GPS Selective Availability/Anti- Spoofing Module (SAASM) receiver card or an older version. The Ike Skelton National Defense Authorization Act for Fiscal Year 2011 generally prohibits DOD from obligating or expending funds to procure GPS user equipment after fiscal year 2017 unless that equipment is capable of receiving M-code. Under certain circumstances this requirement may be waived or certain exceptions may apply. The increment 1 receiver cards range in size from approximately 2 inches by 3 inches for the ground card up to 6 inches by 6 inches for the aviation/maritime card. Figure 4 below shows an illustration of a MGUE receiver card. DOD has previously transitioned its weapon systems gradually from one generation of GPS receivers to the next. For example, some weapon systems have either upgraded or are still in the process of upgrading to the current SAASM receivers that were introduced in 2003, while others are still equipped with older cards. DOD anticipates that the length of time necessary to transition to MGUE will require users to operate with a mix of receiver cards. Hundreds of different types of weapon systems require GPS receiver cards, including ships, aircraft, ground vehicles, missiles, munitions, and hand-held devices, among others, across all military services. The Air Force funds the MGUE program, providing funding to the military services so they can acquire, integrate, and operationally test the receiver cards on four service-specific lead platforms. These platforms are intended to test the card in the military services’ ground, aviation, and maritime environments: (1) Army—Stryker ground combat vehicle; (2) Air Force—B-2 Spirit bomber; (3) Marine Corps—Joint Light Tactical Vehicle (JLTV); and (4) Navy—DDG-51 Arleigh Burke destroyer. Figure 5 depicts selected weapon systems that will need to install M-code capable receiver cards. The Air Force has made some progress toward ensuring continued constellation sustainment since our September 2015 report and should be able to sustain the current service because of the length of life of the current satellites. The current GPS constellation is now projected to meet its availability performance standard (in the absence of operational GPS III satellites) into June 2021—an increase of nearly 2 years over previous projections. This increase will give the Air Force more schedule buffer in the event of any additional delays to the GPS III satellite program. However, the Air Force still faces technical risks and schedule pressures in both the short and long term. In the short term, schedule compression with the first GPS III satellite is placing the satellite’s launch and operation at risk of further delays. In the long term, most of the satellites under contract will have been launched before operational testing is completed, limiting Air Force corrective options if issues are discovered. Figure 6 shows the schedule for programs that need to be delivered to modernize and sustain the GPS satellite constellation. The Air Force has made progress since our last report in September 2015 on the three programs (GPS III, OCX, and COps) needed to support GPS constellation sustainment, readying both ground control and the satellite for the first GPS III satellite’s launch, testing, and eventual operation. Raytheon delivered OCX block 0, the launch and checkout system for GPS III satellites, in September 2017. The Air Force took possession of OCX block 0 in October 2017 and will finally accept it at a later date after OCX block 1 is delivered. Lockheed Martin completed the assembly, integration, and testing for the first GPS III satellite and in February 2017 the Air Force accepted delivery in advance of its currently scheduled May 2018 launch. As noted earlier, because of delays to OCX block 1, the Air Force initiated the COps program to ensure an interim means to control GPS III satellites. Without COps, no GPS III satellites can join the constellation to sustain it until OCX block 1 is operational in fiscal year 2022. In September 2016, COps formally started development, establishing a cost baseline of approximately $162 million to meet an April 2019 delivery. The COps program began software coding in November 2016, after a design review established that the product design would meet the Air Force’s intended needs. The Air Force continues to struggle with keeping multiple, highly compressed, interdependent, and concurrent program schedules synchronized in order to sustain and modernize the GPS constellation. Figure 7 shows some of the schedule challenges of the three programs needed for constellation sustainment and modernization. Launching and operating the new GPS III satellite is a highly complex effort, since it requires synchronizing the development and testing schedules of OCX block 0, the first GPS III satellite, and the COps programs. For the Air Force to achieve its objective of making the first GPS III satellite operational by September 2019, numerous challenges (discussed below) must be addressed in the next 18 months on all three programs. If any of the three programs cannot resolve their challenges, the operation of the first GPS III satellite—and constellation sustainment—may be delayed. OCX Block 0 and Pre-Launch Testing Schedules With the goal of launching the first GPS III satellite in March 2018, the Air Force restructured its pre-launch integrated satellite and ground system testing in the summer of 2016, compressing the overall testing timeframe from 52 weeks to 42 weeks. More OCX block 0 delays in early fiscal year 2017 complicated Air Force test plans, resulting in changes to the sequence and timing of events, the introduction of concurrency at various points throughout the testing, the use of incomplete software in early testing, and an increase in the likelihood of discovering issues later in pre- launch integrated testing. Air Force officials stated that some pre-launch testing revisions streamlined the overall test plan since the merging of certain test events allowed multiple objectives to be met by the same event. Raytheon delivered OCX block 0, the launch and checkout system for GPS III satellites, in September 2017. The Air Force took possession of OCX block 0 in October 2017 and will finally accept it at a later date after OCX block 1 is delivered. However, if issues requiring corrective work are discovered during subsequent integrated testing, the GPS III launch schedule may be delayed further since there is minimal schedule margin on OCX block 0 for correcting any additional problems that may be found. First GPS III Satellite Capacitors There are hundreds of capacitors—devices used to store energy and release it as electrical power—installed in each GPS III satellite. In 2016, while investigating capacitor failures, the Air Force discovered that the subcontractor, then known as Exelis (now Harris Corporation), had not conducted required qualification testing for the capacitor’s operational use in GPS III satellites. The Air Force conducted a review of the components over many months, delaying program progress while a subcontractor qualified the capacitor design as suitable for use on the GPS III satellite. However, the Air Force concluded that Harris Corporation failed to properly conduct a separate reliability test of the particular production lot from which the questionable capacitors originated. The Air Force directed the contractor to remove and replace the capacitors from that production lot from the second and third GPS III satellites. After weighing the technical data and cost and schedule considerations, the Air Force decided to accept the first satellite and launch it “as is” with the questionable capacitors installed. The COps program is also pursuing a compressed and concurrent development and testing schedule to be operational as planned in September 2019. The COps acquisition strategy document acknowledges that the program’s timeline is aggressive. DOT&E has highlighted the compressed COps schedule as a risk, since the limited time between the developmental and operational testing permits little time for the evaluation of test results and resolution of any deficiencies found. The COps program has already begun drawing from its 60-day schedule margin, with a quarter of this margin used within the first 5 months after development started. According to Air Force officials, this margin use was the result of unplanned delays certifying a software coding lab. Additionally, the program schedule has concurrent development and testing, which in our previous work we have noted is often a high risk approach but is sometimes appropriate for software development. COps faces further schedule risk from its need for shared test assets, particularly the GPS III satellite simulator, a hardware- and software- based ground system that simulates GPS III function, which is also required by the GPS III and OCX programs. According to a DOT&E official, the OCX program receives priority over COps for the use of the GPS III satellite simulator, since the testing asset is heavily needed in the development of the ground control system. Because of the competing demands for this resource, which Air Force and DOT&E officials maintain requires lengthy and complex software reconfigurations to repurpose the simulator from one test event to the next, the Air Force is using a less realistic and purely software-based simulator for the testing of COps, where possible. Recent data show that the current satellites in the GPS constellation are expected to remain operational longer than previously projected, creating an additional, nearly 2-year schedule buffer before the first GPS III satellite needs to be operational to sustain the current GPS constellation capability. The Air Force projected that the first GPS III satellite needed to be operational by September 2019 based on 2014 satellite performance data. However, our analysis of the Air Force’s more recent May 2016 GPS constellation performance data indicates that, in order to continue meeting the constellation availability performance standard without interruption, the operational need for the first GPS satellite is now June 2021. This projection incorporates updated Air Force data from the current satellites that take into account an increase in solar array longevity expected for IIR and IIR-M satellites, according to Air Force officials. The Air Force is likely to meet the constellation’s June 2021 operational requirement because there are seven GPS III satellites planned to be launched by June 2021. Figure 8 shows the events leading to the launch and operation of the first GPS III satellite, achieving constellation sustainment once the first GPS III is operational, and subsequent GPS III launches that continue to support sustainment. The nearly 2-year buffer between planned operation and actual need for the first GPS III satellite permits the Air Force additional time to resolve any development issues. Because of this additional 2-year schedule buffer, we are not making a recommendation at this time to address the short term challenges we have identified but will continue to assess the progress of each of the programs and risks to constellation sustainment in our future work. The Air Force risks additional cost increases, schedule delays, and performance shortfalls because operational testing to confirm that GPS III satellites work as intended with OCX blocks 1 and 2 will not be completed until after the planned launch of 8 of the 10 GPS III satellites currently under contract. Due to delays to the OCX final delivery, the new ground control system will not be completed in time to control the GPS III satellites for the first few years they are in orbit (approximately 3.5 years). Consequently, GPS III operational testing will now occur in three phases— 1. in late fiscal year 2019 to confirm the satellites can perform similarly to the existing GPS satellites with COps; 2. in fiscal year 2020 to confirm the GPS III satellites can perform some of the new M-code capabilities with MCEU; and 3. in fiscal year 2022 to confirm the GPS III satellites can perform all of the new M-code capabilities with OCX blocks 1 and 2. The first GPS III satellite is projected to complete operational testing of legacy signal capabilities in September 2019. By that point, the Air Force plans to have launched 3 of the 10 GPS III satellites, the fourth satellite is expected to be delivered, and major integration work will be underway on satellites 5 through 8. Therefore, if satellite shortcomings are discovered during any phase of the operational testing, the Air Force will be limited to addressing such issues through software corrections to satellites already on orbit. If any of the three phases of operational testing reveals issues, the Air Force may face the need for potentially costly contract modifications and delivery delays for satellites not yet launched. To offset this risk, the Air Force has obtained performance knowledge of GPS III satellites through ground testing of the first satellite, and findings from this testing have driven modifications to all ten satellites. Because of the rigor of the ground testing of the first satellite, Air Force officials maintain that the knowledge that might be obtained through on-orbit operational testing of the first GPS satellite would be minimal. However, a DOT&E official said that ground testing is limited to assessing system responses that are induced through the testing process and therefore may omit phenomena that might be experienced in actual system operation on orbit. We will continue to track the progress of operational testing in our future work. DOD has established high-risk schedules for modernizing the GPS broadcast, or M-code signal, produced by GPS satellites. These risks are manifest in different ways. In the near term, the Air Force plans to provide a limited M-code broadcast—one that does not have all of the capabilities of OCX—in the MCEU program in fiscal year 2020. However, the MCEU schedule is high risk for its dependency on the timely completion of the COps program, for its aggressive schedule, and because of competition for limited test resources. Further, the full M-code broadcast capability, planned for fiscal year 2022, is at high risk of additional delays because (1) it is dependent on unproven efficiencies in software coding, (2) the program has not yet completed a baseline review, which may identify additional time needed to complete currently contracted work, and (3) there are known changes to the program that must be done that are not included in the proposed schedule. As noted above, the Air Force’s plans for delivering the M-code broadcast involve two separate high-risk programs—MCEU and OCX blocks 1 and 2—delivered at separate times to make an operational M-code signal available to the warfighter. Figure 9 highlights the current forecasted operational schedules to deliver limited M-code broadcast capabilities with MCEU and full M-code broadcast with OCX. The MCEU program, created because of multiple delays to OCX and to partially address that program’s remaining schedule risk, is itself a high- risk program that is dependent on the timely development of COps. Estimated to cost approximately $120 million, MCEU formally entered the acquisition process in January 2017 as a software-specific program to modify OCS. To develop MCEU, Lockheed Martin officials stated they will leverage personnel with expertise maintaining and upgrading OCS as well as utilize the staff working on COps. With a planned December 2019 delivery for testing and a September 2020 target to begin operations, the MCEU program faces several schedule risks. The Air Force’s proposed plan anticipates a compressed software development effort, which the Air Force describes as aggressive. The Air Force has also identified potential risks to the MCEU schedule from competing demands by GPS III, OCX, COps, and MCEU for shared test resources. Air Force officials specifically noted competing demands for the GPS III simulator test resource. If development or testing issues arise in these other programs, those issues could delay the availability of the satellite simulator and thereby disrupt the planned MCEU development effort. According to program officials, the Air Force is working to mitigate this threat to the MCEU program through the use of a software-based simulator, when possible. Additionally, MCEU software development work is dependent on the timely conclusion of the COps effort—which, as previously mentioned, itself has an aggressive schedule and faces competition for a limited test resource. Air Force program officials have said that some Lockheed Martin staff planned to support MCEU will need to transfer from the COps effort. However, after reviewing the staffing plans at the MCEU contractor kickoff, Air Force officials said this is no longer viewed as a significant risk. OCX blocks 1 and 2 Raytheon has made some progress starting coding for OCX block 1 and taken the first steps toward implementing and demonstrating initial software development efficiencies that may benefit development for OCX blocks 1 and 2. The software efficiencies are built up in seven phases and need to be completed before the development process reaches each of the phases to take full advantage of the efficiencies they will create. Once ready, the efficiencies are inserted at different points in the software development schedule. For example, as of August 2017, the first of seven phases implementing the software development improvements was nearly complete, while the second phase was approximately two-thirds complete. Both are needed in place for insertion when the next phase of coding begins. Further, the Air Force proposed a new rebaselined schedule in June 2017 as the final step to getting the program back on track after declaring a critical Nunn-McCurdy unit cost breach in 2016 when the program exceeded the original baseline by more than 50 percent. A Nunn- McCurdy unit cost breach classified as critical is the most serious type of breach and requires a program to be terminated unless the Secretary of Defense submits a written certification to Congress that, among other things, the new estimate of the program’s cost is reasonable and takes other actions, including restructuring the program. In October 2016, DOD recertified the program, with a 24-month schedule extension. Under this newer proposed schedule Raytheon forecasts delivering blocks 1 and 2 in December 2020 with 6 months of extra schedule—a 30-month schedule extension—to account for unknown technical issues before OCX blocks 1 and 2 are due to the Air Force in June 2021. The Air Force projects operating OCX in fiscal year 2022 after completing 7 months of operational testing post-delivery. Three factors place delivery of OCX blocks 1 and 2 in June 2021 at high risk for additional schedule delays and cost increases: First, the newly proposed June 2017 rebaselined schedule assumes significant improvements in the speed of software coding and testing that have not yet been proven, but will be introduced at various periods as software development proceeds. Whether Raytheon can achieve the majority of these efficiencies will not be known until the end of fiscal year 2018. However, the Defense Contract Management Agency, which independently oversees Raytheon’s work developing OCX, noted in July 2017 a number of risks to the schedule, including that some initial assumed efficiencies had not been demonstrated. Specifically, they noted for initial coding on block 1 that Raytheon had achieved only 60 percent of the software integration maturity planned to that point in time in conjunction with greater numbers of software deficiencies that will require more time than planned to resolve. Second, the proposed rebaseline schedule has not yet undergone an integrated baseline review (IBR) to verify all of the work that needs to be done is incorporated into that schedule. The IBR is a best practice required by the Office of Management and Budget on programs with earned value management. An IBR ensures a mutual understanding between the government and the contractor of the technical scope, schedule, and resources needed to complete the work. We have found that too often, programs overrun costs and schedule because estimates fail to account for the full technical definition, unexpected changes, and risks. According to prior plans, the IBR would have taken place in early 2017, but it has been delayed multiple times for a number of reasons. A significant and recurring root cause of delays on the OCX program has been a lack of mutual understanding of the work between the Air Force and Raytheon. The IBR start was scheduled for November 2017 with completion in February 2018. Once conducted, the review may identify additional work not in the proposed schedule that needs to be completed before delivery. For example, Raytheon is conducting a review of hardware and software obsolescence. If significant additional obsolescence issues are found that need to be resolved before OCX blocks 1 and 2 are delivered, the projected delivery date may need to be delayed further at additional cost. Third, the OCX contract will likely be modified because the Air Force needs to incorporate into its contract with Raytheon a number of changes that are not currently a part of the proposed schedule. According to Air Force and contractor officials, negotiations are under way to determine which of these changes will be incorporated before OCX blocks 1 and 2 are delivered and which may be added after delivery. Air Force officials said that the incorporation of changes should be completed by February 2018. Schedule risk assessments for OCX blocks 1 and 2 delivery vary, making it unclear when the full M-code broadcast will finally be operational. Government assessments of Raytheon’s performance continue to indicate more schedule delays are likely. Table 4 shows the varying assessments of potential schedule delays by the Defense Contract Management Agency and the Air Force to the proposed June 2021 delivery date and the subsequent operational date that occurs 7 months later. In 2015, we made four recommendations to the Secretary of Defense, one of which was to use outside experts to help identify all underlying problems on OCX and develop high confidence cost and schedule estimates, among others, in order to provide information necessary to make decisions and improve the likelihood of success. To date, none of these recommendations have been fully implemented but DOD has taken steps to address some of them. Further, because the Air Force has undertaken the COps and MCEU programs to provide interim capabilities to mitigate OCX delays for the full broadcast capability, we are not making additional recommendations at this time but will continue to monitor progress and risks to the acquisition of OCX. While technology development for the M-code receiver cards is underway, DOD has developed preliminary—but incomplete—plans to fully develop and field M-code receiver cards across the more than 700 weapon systems that will need to make the transition from the current technology. DOD has prepared initial cost and schedule estimates for department-wide fielding for a fraction of these weapon systems. While the full cost remains unknown, it is likely to be many billions of dollars greater than the $2.5 billion identified through fiscal year 2021 because there is significant work remaining to verify the initial cards work as planned and to develop them further after the MGUE increment 1 program ends. Without greater coordination of integration test results, lessons learned, and design solutions DOD is at risk of duplicated development work as multiple weapon system programs separately mature and field similar technologies on their own. Further, with the full M-code broadcast available in fiscal year 2022, a gap—the extent of which is unknown—between operationally broadcasting and receiving M- code exists. Figure 10 highlights the gap between the time the M-code signal will be operational and the undefined time M-code can be used by the military services. The Air Force program to develop initial M-code receiver test cards has made progress by establishing an acquisition strategy for this effort and maturing receiver test cards. In January 2017, DOD approved the MGUE increment 1 program to formally begin development, and it defined the criteria to end the program as (1) verifying technical requirements on all types of final receiver test cards; (2) certifying readiness for operational testing by the Air Force Program Executive Officer; (3) completing operational testing for the four lead platforms for, at a minimum, at least the first card available; and (4) completing manufacturing readiness assessments for all three contractors. Within the MGUE increment 1 program, contractors are making progress toward delivering final hardware test cards and incremental software capabilities. For example, one contractor has achieved its initial security certification from the Air Force, which is a key step toward making the MGUE increment 1 receiver test card available for continued development and eventual procurement. Further, the MGUE increment 1 program is also conducting risk reduction testing in preparation for formal developmental verification testing, an important step that ensures the receiver cards meet technical requirements. Programs throughout DOD can make risk-based decisions to develop and test the receiver test cards after technical verification of the card’s hardware and software. According to MGUE program officials, this is significant because it allows non-lead platforms to obtain and work with the cards sooner than the end date of operational testing on lead platforms. Although the Air Force has made progress in maturing receiver test cards, significant development work remains to reach the point where the cards can ultimately be fielded on over 700 different weapon systems. For example, for MGUE increment 1, the Air Force must define additional technical requirements in order for the M-code receiver cards to be compatible and communicate with existing weapon systems. The Air Force will also need to conduct operational tests for each of the lead platforms—the Stryker ground combat vehicle; B-2 Spirit bomber; JLTV; and DDG-51 Arleigh Burke destroyer—before the full M-code signal is available with OCX. Because these tests will instead be conducted with the limited signal provided by MCEU, DOD risks discovering issues several years later once full operational testing is conducted. Further, according to military service officials and assessments by DOT&E, this operational testing will only be minimally applicable to other weapon systems because those other weapon systems have different operational requirements and integration challenges than the four lead platforms. As a result, additional development and testing will be necessary on an undetermined number of the remaining weapon systems to ensure the receiver cards address each system’s unique interfaces and requirements. In 2018, DOD will also formally begin development for MGUE increment 2. Increment 2 will provide more compact receiver cards to be used when size, weight, and power must be minimized, such as on handheld receivers, space receivers, and munitions where increment 1 receiver cards are too large to work. The military services are working to mitigate some of these development challenges. For example, Army officials told us they do not plan to field MGUE receiver cards on its lead platform, the Stryker, due to ongoing gaps in technical requirements. In addition, there is not a lead platform to demonstrate increment 1 on munitions since munition requirements were planned to be addressed in increment 2. However, to address its needs, the Army has initiated efforts to modify the MGUE increment 1 receiver card for some munitions that would otherwise need to wait for MGUE increment 2 technologies. Individual munition program offices within other military services have begun to do so as well. According to military service officials from the Army, Navy, and Marine Corps, it is essential that user needs are met by increment 2, or they will have to conduct additional development and testing. The Army previously identified gaps in increment 1 that the Air Force has either addressed in increment 1, has deferred to increment 2, or will need to be addressed outside of the MGUE increment 1 and 2 programs. Army and Navy officials also stated that they were concerned that any disagreements in requirements for increment 2 could lead to further fielding delays. Finally, the transition from existing GPS receiver cards to M-code receiver cards is likely to take many years. We recently reported that transitioning all DOD platforms to the next generation of receiver cards will likely take more than a decade. A lengthy transition has happened before, as previous efforts to modernize GPS to the current receiver cards, begun in 2003, are still underway and the older receiver cards are still being used. As a result, DOD anticipates that warfighters will have to operate with a mix of older and newer receiver cards. DOD has begun collecting preliminary information on M-code requirements for individual weapon systems. In December 2016, the USD AT&L directed the military services, the Missile Defense Agency (MDA), and Special Operations Command (SOCOM) to submit implementation plans with M-code investment priorities across weapon systems and munitions, including projected costs and schedules. According to DOD, these M-code implementation plans are intended to provide DOD with a management and oversight tool for the fielding effort. In February 2017, each organization submitted its own implementation plan to USD AT&L. These plans were then briefed to the PNT Executive Management Board and PNT Oversight Council in February and March, respectively. However, these implementation plans are preliminary and based on assumptions about the Air Force’s ability to achieve MGUE increment 1 and 2 technical requirements, the timeline required to do so, and the amount of development and test work that will remain for the receiver cards to be ready for production and fielding after the programs end. Since the MGUE increment 2 program has not started development, it has not yet finalized requirements. Once approved, the increment 2 program office will produce an acquisition strategy, schedule, and cost estimate. However, after the MGUE increment 2 program ends there is no detailed plan for completing development, testing, and fielding of M-code receiver cards for weapon systems across the department. DOD has preliminary cost and schedule estimates for some weapon programs, but lacks a total cost at this point because the department does not include all efforts initiated by programs to meet specific needs, including those outside the MGUE increment 1 and 2 programs. The initial M-code implementation plans responded to what was requested but do not individually identify what the total cost will be for each organization to develop and field M-code receiver cards, so a total cost can be determined across DOD. Because USD AT&L required that the implementation plans include funding and schedule estimates for 2 to 3 years while directing that plans be resubmitted, at a minimum, every 2 years, weapon systems that will need M-code but were not considered an immediate priority were not included in the initial submissions. In addition, the military services, MDA, and SOCOM provided only initial cost estimates. According to military service officials, these estimates were based on the current MGUE increment 1 program schedule and technical development and include risk-based decisions to partially fund specific programs until the MGUE increment 1 program matures. According to a USD AT&L official, the plans would both facilitate M-code implementation planning for the department and inform the issuance of waivers. The official stated that as the acquisition programs critical to providing M-code capability mature, future implementations plans should provide more comprehensive estimates of cost and schedule to achieve M-code implementation for the department. Our analysis of the M-code receiver card implementation plans found that initial funding estimates indicate a cost of over $2.5 billion to integrate and procure M-code receiver cards on only a small number of weapon systems out of the hundreds of types that need M-code receiver cards. The full cost will be much larger—likely many billions of dollars because the majority of the weapon systems that need M-code receiver cards are not funded yet or are only partially funded, according to the M-code implementation plans. Specifically, the military services, MDA, and SOCOM identified 716 types of weapon systems in their February 2017 implementation plans that require almost a million M-code receiver cards. For example, the JLTV fleet—which provides protection for passengers against current and future battlefield threats for multiple military services—is one type of weapon system that will eventually need almost 25,000 receiver cards. Of the 716 types of weapon systems that will need M-code receiver cards, only 28—or less than 4 percent—are fully funded through fiscal year 2021. The remainder have either partially funded M- code development and integration efforts (72 weapon systems), or do not yet have funding planned (616 weapon systems). Additionally, the preliminary estimates to develop and procure M-code receivers on selected weapon systems do not all include funding beyond fiscal year 2021 that will be needed for further development, integration, and procurement. This means that DOD and Congress do not have visibility into how much additional funding could be needed to fully fund the remaining 96 percent of all weapon systems that need M-code receivers. Figure 11 shows the M-code development and integration efforts that are funded, partially funded, or unfunded through fiscal year 2021 across DOD weapon systems that will need M-code receiver cards. Because the implementation plans are a first step toward providing DOD leadership insight on this large set of acquisitions and they will be updated at least every 2 years by the different organizations within DOD, we are not making a recommendation at this time. However, we will continue to monitor DOD’s cost and schedule planning. The level of development and procurement effort beyond MGUE increments 1 and 2 is significant and will require close coordination among the military services, MDA, and SOCOM. While Joint Staff officials stated that the DOD Chief Information Officer is working with the military services and Joint Staff to produce a user equipment roadmap to help guide that coordination, they said that these efforts are not yet complete. DOD has designated the Air Force to lead initial development of both larger and smaller test cards that other organizations will need to develop further to meet their individual needs. After the Air Force develops initial cards for both sizes, the breadth and complexity of this acquisition will multiply, as the offices responsible for upgrading hundreds of weapon systems begin their own individual efforts to further develop and test the cards so they work for the unique needs of their specific system. While some common solutions are being developed, Air Force officials said the military services and individual weapon systems will have the freedom to go to the contractors and begin their own development efforts. DOD does not have a developed plan in place to help ensure that common design solutions are employed and that DOD avoids duplication of effort as multiple entities separately mature receiver cards. We previously found that duplication occurs when two or more agencies or programs are engaged in the same activities. In this case, because the individual organizations and program offices are likely to be pursuing individual and uncoordinated receiver card programs at different times with different contractors, DOD is at risk for significant duplication of effort. We previously found that establishing formal mechanisms for coordination and information sharing across DOD programs reduces the risk of gaps and results in more efficient and more effective use of resources. Internal control standards also state that establishing clear responsibilities and roles in achieving objectives is key for effective management. Further, DOD previously reported clear leadership ensures that programs and stakeholders are aligned with common goals. According to MGUE program officials, the MGUE increment 1 program is already capturing all issues observed in receiver test card risk reduction testing and sharing this information through a joint reporting system. However, while non-lead platforms may also report deficiencies in this system, there is no requirement that they do so, nor is there an entity responsible for ensuring data from testing, design, and development is shared between programs. We previously found that the absence of a formal process for coordination results in the potential for duplication, overlap, and fragmentation. DOD therefore risks paying to repeatedly find design solutions to solve common problems because each program office is likely to undertake its own uncoordinated development effort. Some duplicated effort may already be occurring. Air Force officials have expressed concern that work is already being duplicated across the military services in developing embedded GPS systems to be integrated into aircraft. According to multiple DOT&E assessments, the absence of a plan across the wide variety of intended interfaces leaves significant risk in integrating the receiver cards, and therefore fielding cost and schedule risk for DOD. GPS is a national asset for civilians and the military service members who depend upon it each day. Any disruption to the system would have severe economic and military consequences. In keeping the system sustained and modernizing it with additional capabilities, DOD has spent billions of dollars more than planned developing five interdependent GPS programs. Developing these technologies is complex work with the collective effort already years behind initial estimates to provide the warfighter with a means to counter known threats, such as jamming, to the current system. It will be many years before M-code receiver cards are fielded at a cost that remains unknown but that will be substantially higher than the estimated $2.5 billion already identified through fiscal year 2021. In the short term, it is unclear when there will be a receiver card ready for production after the end of operational testing, and in the long term DOD risks wasting resources duplicating development efforts on weapon systems with similar requirements. Without better coordination of this effort, DOD risks unnecessary cost increases and schedule delays because there is no established process or place for collecting and sharing development and integration practices and solutions between programs. We are making the following recommendation to DOD: The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition, Technology, and Logistics, as part of M-code receiver card acquisition planning, assign an organization with responsibility for systematically collecting integration test data, lessons learned, and design solutions and making them available to all programs expected to integrate M-code receiver cards. (Recommendation 1) We provided a draft of this report to the Department of Defense for review and comment. In its written comments, reproduced in appendix II, DOD concurred with the recommendation. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of the Air Force, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by email at chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. To determine the extent to which there are acquisition risks to sustaining the Global Positioning System (GPS) satellite constellation, we reviewed the Air Force GPS quarterly reports, program acquisition baselines, integrated master schedules, acquisition strategies, software development plans, test plans, and other documents to the extent they existed for GPS III, Next Generation Operational Control System (OCX), and Contingency Operations (COps) programs. We also interviewed officials from the GPS III, OCX, and COps programs; the Air Force Space and Missile Systems Center’s (SMC) GPS Enterprise Integrator office; the prime contractors from all three programs; the Defense Contract Management Agency; the Office of Cost Assessment and Program Evaluation; and the Office of the Director, Operational Test and Evaluation (DOT&E). We also reviewed briefings and other documents from each to evaluate program progress in development. We assessed the status of the currently operational GPS satellite constellation, interviewing officials from the Air Force SMC GPS program office and Air Force Space Command. To assess the risks that a delay in the acquisition and fielding of GPS III satellites could result in the GPS constellation falling below the 24 satellites required by the standard positioning service and precise positioning service performance standards, we employed a methodology very similar to the one we had used to assess constellation performance in 2009, 2010, and 2015. We obtained information dated May 2016 from the Air Force predicting the reliability for 63 GPS satellites—each of the 31 current (on-orbit as of July 2017) and 32 future GPS satellites—as a function of time. Each satellite’s total reliability curve defines the probability that the satellite will still be operational at a given time in the future. It is generated from the product of two reliability curves—a wear- out reliability curve defined by the cumulative normal distribution, and a random reliability curve defined by the cumulative Weibull distribution. For each of the 63 satellites, we obtained the two parameters defining the cumulative normal distribution, and the two parameters defining the cumulative Weibull distribution. For each of the 32 unlaunched satellites we included in our model, we also obtained a parameter defining its probability of successful launch, and its current scheduled launch date. The 32 unlaunched satellites include 10 GPS III satellites currently under contract and 22 GPS III satellites planned for contract award in late 2018; launch of the final GPS III satellite we included in our model is scheduled for October 2031. Using this information, we generated overall reliability curves for each of the 63 GPS satellites. We discussed with Air Force and Aerospace Corporation representatives, in general terms, how each satellite’s normal and Weibull parameters were calculated. However, we did not analyze any of the data used to calculate these Air Force provided parameters. Using the reliability curves for each of the 63 GPS satellites, we developed a Monte Carlo simulation to predict the probability that at least a given number of satellites would be operational as a function of time, based on the GPS launch schedule as of May 2016. We conducted several runs of our simulation—each run consisting of 10,000 trials—and generated “sawtoothed” curves depicting the probability that at least 24 satellites would still be operational as a function of time. We then used our Monte Carlo simulation model to examine the effect of delays to the operational induction of the GPS III satellites into the constellation. We reran the model based on month/year delay scenarios, calculating new probabilities that at least 24 satellites would still be operational as a function of time, determining in terms of month/year the point at which a satellite would be required to enter operations to maintain an uninterrupted maintenance of the 95 percent probability of 24 satellites in operation. The Air Force satellite parameters we used for the Monte Carlo simulation pre-dated the Air Force investigation into navigation payload capacitors and the subsequent decision to launch the first satellite “as is” with questionable parts. Therefore, the reliability parameters for this satellite were not informed by any possible subsequent Air Force consideration of the decision to launch the first GPS III satellite “as is” with these parts. To determine the extent to which the Department of Defense (DOD) faces acquisition challenges developing a new ground system to control the broadcast of a modernized GPS signal, we reviewed Air Force program plans and documentation related to cost, schedule, acquisition strategies, technology development, and major challenges to delivering M-code Early Use (MCEU) and OCX blocks 1 and 2. We interviewed officials from the MCEU and OCX program offices, SMC GPS Enterprise Integrator office, DOT&E, and the prime contractors for the two programs. For OCX, we also reviewed quarterly reviews, monthly program assessments, and slides provided by Raytheon on topics of our request. We also interviewed Office of Performance Assessments and Root Cause Analyses officials regarding root causes of the OCX program’s cost and schedule baseline breach and Defense Contract Management Agency officials charged with oversight of the OCX contractor regarding cost and schedule issues facing the program’s development efforts, major program risks, and technical challenges. To determine the extent to which DOD faces acquisition challenges developing and fielding modernized receiver cards across the department, we reviewed Air Force program plans and documentation related to M-code GPS User Equipment (MGUE) increment 1 cost, schedule, acquisition strategy, and technology development. We interviewed officials at the Air Force SMC GPS program office, MGUE program office, DOT&E, and the three MGUE increment 1 contractors— L3 Technologies, Raytheon, and Rockwell Collins. To identify the military services’ respective development efforts and challenges in integrating MGUE with their lead platforms, we interviewed officials from the lead program offices for the Army’s Defense Advanced GPS Receiver Distributed Device/Stryker, Air Force’s B-2 aircraft, Navy’s DDG-51 Arleigh Burke class destroyer, and Marine Corps Joint Light Tactical Vehicle. Additionally, to understand the extent to which DOD has a plan for implementing M-code for the warfighter, we analyzed DOD Positioning, Navigation, and Timing (PNT) plans and other DOD memorandum on GPS receiver cards. We also held discussions with and received information from officials at Office of the Undersecretary of Defense for Acquisition, Technology, and Logistics; Joint Staff / J-6 Space Branch; and military service officials from the offices responsible for developing M-code receiver card implementation plans. We conducted this performance audit from February 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, David Best, Assistant Director; Jay Tallon, Assistant Director; Karen Richey, Assistant Director; Pete Anderson; Andrew Berglund; Brandon Booth; Brian Bothwell; Patrick Breiding; Erin Carson; Connor Kincaid; Jonathan Mulcare; Sean Sannwaldt; Alyssa Weir; Robin Wilson and Marie P. Ahearn made key contributions to this report.", "summary": "GPS provides positioning, navigation, and timing data to civilian and military users who depend on this satellite-based system. Since 2000, DOD—led by the Air Force—has been working to modernize GPS and to keep the current system of satellites—known as the GPS constellation—operational, although these efforts have experienced cost and schedule growth. The National Defense Authorization Act for Fiscal Year 2016 contained a provision that the Air Force provide reports to GAO on GPS acquisition programs and that GAO brief the congressional defense committees. GAO briefed the committees in 2016 and 2017. This report summarizes and expands on information presented in those briefings. This report assesses the extent to which DOD faces acquisition challenges (1) sustaining the GPS constellation; (2) developing a new ground control system; and (3) developing and fielding modernized receivers. GAO analyzed GPS quarterly acquisition reports and data, acquisition strategies, software and test plans, and other documents, and interviewed DOD and contractor officials. The Department of Defense's (DOD) acquisition of the next generation Global Positioning System (GPS) satellites, known as GPS III, faces a number of acquisition challenges, but these challenges do not threaten DOD's ability to continue operating the current GPS system, which DOD refers to as the constellation, in the near term. Projections for how long the current constellation will be fully capable have increased by nearly 2 years to June 2021, affording some buffer to offset any additional satellite delays. While the first GPS III satellite has a known parts problem, six follow-on satellites—which do not—are currently scheduled to be launched by June 2021. DOD is relying on a high-risk acquisition schedule to develop a new ground system, known as OCX, to control the broadcast of a modernized military GPS signal. OCX remains at risk for further delays and cost growth. To mitigate continuing delays to the new ground control system, the Air Force has begun a second new program—Military-code (M-code) Early Use—to deliver an interim, limited broadcast encrypted GPS signal for military use by modifying the current ground system. GAO will continue to monitor OCX progress. DOD has made some progress on initial testing of the receiver cards needed to utilize the M-code signal. However, additional development is necessary to make M-code work with over 700 weapon systems that require it. DOD has begun initial planning for some weapon systems, but more remains to be done to understand the cost and schedule needed to transition to M-code receivers. The preliminary estimate for integrating and testing a fraction of the weapon systems that need the receiver cards is over $2.5 billion through fiscal year 2021 with only 28 fully and 72 partially funded (see figure). The cost will increase by billions when as yet unfunded weapon systems are included. The level of development and procurement effort beyond the initial receiver cards is significant and will require close coordination across DOD. After the Air Force develops initial cards, the breadth and complexity of this acquisition will multiply, as the offices responsible for upgrading hundreds of weapon systems begin their own individual efforts to further develop and test the cards. However, DOD does not have an organization assigned to collect test data, lessons learned, and design solutions so that common design solutions are employed to avoid duplication of effort as multiple entities separately mature receiver cards. DOD therefore risks paying to repeatedly find design solutions to solve common problems because each program office is likely to undertake its own uncoordinated development effort. DOD should assign responsibility to an organization to collect test data, lessons learned, and design solutions so they may be shared. DOD concurred with the recommendation.", "document_type": "gao"}
{"report": "The federal government obligates tens of billions annually on IT. Prior IT expenditures, however, have too often produced failed projects—that is, projects with multimillion dollar cost overruns and schedule delays and with questionable mission-related achievements. In our 2017 high risk series update, we reported that improving the management of IT acquisitions and operations remains a high risk area because the federal government has spent billions of dollars on failed IT investments. Agencies are generally required to use full and open competition— meaning all responsible sources are permitted to compete—when awarding contracts. However, the Competition in Contracting Act of 1984 recognizes that full and open competition is not feasible in all circumstances and authorizes contracting without full and open competition under certain conditions. In addition, there are competition- related requirements for other types of contract vehicles, including multiple award indefinite-delivery/indefinite-quantity (IDIQ) contracts and the General Services Administration’s (GSA) Federal Supply Schedule (FSS). The rules regarding exceptions to full and open competition and other competition-related requirements are outlined in various parts of the Federal Acquisition Regulation (FAR). For example: Contracting officers may award a contract without providing for full and open competition if one of seven exceptions listed in FAR Subpart 6.3 apply. Examples of allowable exceptions include circumstances when products or services required by the agency are available from only one source, when disclosure of the agency’s need would compromise national security, or when the need for products and services is of such an unusual and compelling urgency that the federal government faces the risk of serious financial or other injury. Generally, exceptions to full and open competition under FAR subpart 6.3 must be supported by written justifications that contain sufficient facts and rationale to justify use of the specific exception. Depending on the proposed value of the contract, the justifications require review and approval at successively higher approval levels within the agency. Contracting officers are also authorized to issue orders under multiple award IDIQ contracts noncompetitively. Generally contracting officers must provide each IDIQ contract holder with a fair opportunity to be considered for each order unless exceptions apply. Contracting officers who issue orders over certain thresholds under an exception to fair opportunity are required to provide written justification for doing so. In April 2017 we found that government-wide, more than 85 percent of all order obligations under multiple-award IDIQ contracts were competed from fiscal years 2011 through 2015. Orders placed under GSA’s FSS program are also exempt from FAR part 6 requirements. However, ordering procedures require certain FSS orders exceeding the simplified acquisition threshold to be placed on a “competitive basis,” which includes requesting proposals from as many schedule contractors as practicable. If a contracting officer decides not to provide opportunity to all contract holders when placing an FSS order over the simplified acquisition threshold, that decision must be documented and approved. The FAR allows for orders to be placed under these circumstances based on the following justifications: when an urgent and compelling need exists; when only one source is capable of providing the supplies or services because they are unique or highly specialized; when in the interest of economy and efficiency, the new work is a logical follow-on to an original FSS order that was placed on a “competitive basis;” and when an item is “peculiar to one manufacturer.” Agencies may also award contracts on a sole-source basis in coordination with the Small Business Administration (SBA) to eligible 8(a) program participants. While agencies are generally not required to justify these sole-source awards, contracts that exceed a total value of $22 million require a written justification in accordance with FAR Subpart 6.3. In certain situations, it may become evident that services could lapse before a subsequent contract can be awarded. In these cases, because of time constraints, contracting officers generally use one of two options: (1) extend the existing contract or (2) award a short-term stand-alone contract to the incumbent contractor on a sole-source basis to avoid a lapse in services. While no government-wide definition of bridge contracts exists, we developed the following definitions related to bridge contracts that we used for our October 2015 report: Bridge contract. An extension to an existing contract beyond the period of performance (including base and option years), or a new, short-term contract awarded on a sole-source basis to an incumbent contractor to avoid a lapse in service caused by a delay in awarding a follow-on contract. Predecessor contract. The contract in place prior to the award of a bridge contract. Follow-on contract. A longer-term contract that follows a bridge contract for the same or similar services. This contract can be competitively awarded or awarded on a sole-source basis. Contracts, orders, and extensions (both competitive and noncompetitive) are included in our definition of a “bridge contract” because the focus of the definition is on the intent of the contract, order, or extension. DOD and some of its components, including the Navy, the Defense Logistics Agency (DLA), and the Defense Information Systems Agency (DISA), have established their own bridge contract definitions and policies. Congress enacted legislation in 2017 that established a definition of “bridge contracts” for DOD and its components. For the purposes of this report, we use the same definition as we used in our October 2015 report to define bridge contracts, unless otherwise specified. We acknowledge that in the absence of a government-wide definition, agencies may have differing views of what constitutes a bridge contract. We discuss these views further in the body of this report. In our October 2015 report on bridge contracts, we found that the agencies included in our review—DOD, HHS, and the Department of Justice—had limited or no insight into their use of bridge contracts. In addition, we found that while bridge contracts are typically envisioned as short term, some bridge contracts included in our review involved one or more bridges that spanned multiple years—potentially undetected by approving officials. The fact that the full length of a bridge contract, or multiple bridge contracts for the same requirement, is not readily apparent from documents that may require review and approval, such as an individual J&A, presents a challenge for those agency officials responsible for approving the use of bridge contracts. Approving officials signing off on individual J&As may not have insight into the total number of bridge contracts that may be put in place by looking at individual J&As alone. In October 2015, we recommended that the Administrator of the Office of Federal Procurement Policy (OFPP) take the following two actions: (1) take appropriate steps to develop a standard definition for bridge contracts and incorporate it as appropriate into relevant FAR sections; and (2) as an interim measure until the FAR is amended, provide guidance to agencies on: a definition of bridge contracts, with consideration of contract extensions as well as stand-alone bridge contracts; and suggestions for agencies to track and manage their use of these contracts, such as identifying a contract as a bridge in a J&A when it meets the definition, and listing the history of previous extensions and stand-alone bridge contracts. OFPP concurred with our recommendation to provide guidance to agencies on bridge contracts, and stated its intention is to work with members of the FAR Council to explore the value of incorporating a definition of bridge contracts in the FAR. As of November 2018, OFPP had not yet implemented our recommendations but has taken steps to develop guidance on bridge contracts. Specifically, OFPP staff told us they have drafted management guidance, which includes a definition of bridge contracts, and provided it to agencies’ Chief Acquisition Officers and Senior Procurement Executives for review. OFPP staff told us they received many comments on the draft guidance and were in the process of addressing those comments. Federal agencies reported annually obligating between $53 billion in fiscal year 2013 to $59 billion in fiscal year 2017 on IT-related products and services. Of that amount, agencies reported that more than $15 billion each year—or about 30 percent of all obligations for IT products and services—were awarded noncompetitively. However, in a generalizable sample of contracts and orders, we found significant errors in certain types of orders, which call into question the reliability of competition data associated with roughly $3 billion per year in obligations. As a result, the actual amount agencies obligated on noncompetitive contract awards for IT products and services is unknown. From fiscal years 2013 through 2017, we found that total IT obligations reported by federal agencies ranged from nearly $53 billion in fiscal year 2013 to $59 billion in fiscal year 2017. The amount obligated on IT products and services generally accounted for about one-tenth of total federal contract spending (see figure 1). For fiscal years 2013 through 2017, the three agencies we reviewed in more depth—DOD, DHS and HHS––collectively accounted for about two- thirds of federal IT spending (see figure 2). From fiscal years 2013 through 2017, agencies reported in FPDS-NG obligating more than $15 billion—about 30 percent of all annual IT obligations—each year on noncompetitively awarded contracts and orders. We determined, however, that the agencies’ reporting of certain competition data was unreliable (see figure 3). Specifically, we found that contracting officers miscoded 22 out of 41 orders in our sample, of which 21 cited “follow-on action following competitive initial action” or “other statutory authority” as the legal authority for using an exception to fair opportunity. DOD contracting officers had miscoded 11 of the 21 orders, while DHS and HHS contracting officers had miscoded 4 and 6 orders, respectively. This miscoding occurred at such a high rate that it put into question the reliability of the competition data on orders totaling roughly $3 billion per year in annual obligations. In each of these cases, contracting officers identified these orders as being noncompetitively awarded when they were, in fact, competitively awarded. As an assessment of the extent to which contracts and orders that were identified as being competitively awarded were properly coded was outside the scope of our review, we are not in a position to assess the overall reliability of competition information of IT-related contracts. For these 21 orders, we found that DHS was aware of issues surrounding most of their miscodings and had taken actions to fix the problems, while DOD and HHS generally had limited insights as to why these errors occurred. DHS miscoded 4 orders, 3 of which were orders awarded under single award contracts. DHS officials told us that orders issued from single award contracts should inherit the competition characteristics of the parent contract. However, as FPDS-NG currently operates, contracting officers have the ability to input a different competition code for these orders. In this case, each of the single award contracts was competitively awarded and therefore all the subsequent orders issued from these contracts should be considered competitively awarded, as there are no additional opportunities for competition. DHS has taken actions to address this issue. DHS officials stated that in conjunction with DOD they have asked GSA, which manages the FPDS-NG data system, to modify FPDS-NG to automatically prefill competition codes for orders awarded under single award contracts. DHS officials noted that GSA expects to correct the issue in the first quarter of fiscal year 2019, which should mitigate the risks of agencies miscoding orders issued under single award contracts in the future. DHS officials have also provided training to their contracting personnel that single award orders must inherit the characteristics of the parent contract. DOD and HHS officials, on the other hand, had limited insights as to why their orders were miscoded. For example, DOD miscoded a total of 11 orders (5 orders awarded under single award contracts and 6 awarded under multiple award contracts). For 8 of these orders, contracting officers did not provide the reasons as to why these errors occurred. For the remaining 3 orders awarded—each of which were issued under single award contracts—contracting officials told us that they had used the “follow-on action following competitive initial action” because the underlying contract had been competed. Similarly, at HHS, which miscoded a total of 6 orders (4 awarded under single award contracts and 2 awarded under multiple award contracts), component officials told us that these errors were accidental and could not provide any additional insight as to why these errors were made. While GSA’s changes in the FPDS-NG system, when implemented, may help address the issue of miscoding competition data on orders issued from single award contracts, it will not address errors in coding for multiple award orders that cited exceptions to competition even when they were competed. The FAR notes that FPDS-NG data are used in a variety of ways, including assessing the effects of policies and management initiatives, yet we have previously reported on the shortcomings of the FPDS-NG system, including issues with the accuracy of the data. Miscoding of competition requirements may hinder the accomplishment of certain statutory, policy, and regulatory requirements. For example, The FAR requires agency competition advocates, among other duties and responsibilities, to prepare and submit an annual report to their agencies’ senior procurement executive and chief acquisition officer on actions taken to achieve full and open competition in the agency and recommend goals and plans for increasing competition. OMB required agencies to reduce their reliance on noncompetitive contracts, which it categorized as high-risk, because, absent competition, agencies must negotiate contracts without a direct market mechanism to help determine price. Federal internal control standards state that management should use quality information to achieve an entity’s objectives. Without identifying the reasons why contracting officers are miscoding these orders in FPDS-NG, DOD and HHS are unable to take action to ensure that competition data are accurately recorded, and are at risk of using inaccurate information to assess whether they are achieving their competition objectives. After excluding the $3 billion in annual obligations we determined was not sufficiently reliable, we found that from fiscal years 2013 through 2017 about 90 percent of noncompetitive IT obligations reported in FPDS-NG were used to buy services, hardware, and software (see figure 4). Services include the maintenance and repair of IT equipment as well as professional technology support. Hardware includes products such as fiber optic cables and computers, and software includes items such as information technology software and maintenance service plans. The documentation for the contracts and orders at the three agencies we reviewed generally cited either that only one source could meet their needs or that they were awarding the contract sole-source to an 8(a) small business participant when noncompetitively awarding IT contracts or orders. Specifically, based on our generalizable sample, we estimate that nearly 60 percent of fiscal year 2016 noncompetitive contracts and orders at DOD, DHS, and HHS were awarded noncompetitively because agencies cited that only one contractor could meet the need, and approximately 26 percent of contracts and orders were awarded sole- source to an 8(a) small business participant. We estimate that agencies cited a variety of other reasons for not competing approximately 16 percent of noncompetitive contracts and orders, such as unusual and compelling urgency, international agreement, and national security. Within our sample of 142 contracts and orders, we analyzed J&As or similar documents to obtain additional detail as to why the contracts and orders were awarded noncompetitively. See table 2 for a breakdown of the overall reasons cited for awarding contracts noncompetitively within our sample. For 79 of the 142 contracts and orders we reviewed, agencies cited that only one source could meet the need. We found that this exception was the most commonly cited reason for a sole-source IT contract or order at DOD and DHS, but not at HHS. At HHS, the most common reason was that the contract or order was awarded on a sole source basis to an 8(a), which we discuss in more detail later. Agencies justified use of the “only one source” exception on the basis that the contractor owned the proprietary technical or data rights; the contractor had unique qualifications or experience; compatibility issues; or that a brand-name product was needed (see figure 5). The following examples illustrate the reasons cited by the agencies as to why only one contractor could meet their needs: Proprietary data rights issues and compatibility issues. The Navy issued a 9-month, approximately $350,000 order under an IDIQ contract for two data terminal sets. The terminal sets, which according to Navy officials, have been used by the Navy since the 1990s to exchange radar tracking and other information among airborne, land- based, and ship-board tactical data systems and with certain allies. The Navy’s J&A document noted that the contractor owned the proprietary data rights to the transmitting equipment and software, and the Navy required the equipment to be compatible and interchangeable with systems currently fielded throughout the Navy. Furthermore, the document noted that seeking competition through the development of a new source would result in additional costs that would far exceed any possible cost savings that another source could provide and would cause unacceptable schedule delays. This example illustrates that decisions the program officials make during the acquisition process to acquire or not acquire certain rights to technical data can have far-reaching implications for DOD’s ability to sustain and competitively procure parts and services for those systems, as we have previously reported. In our May 2014 report on competition in defense contracting, we found that 7 of 14 justifications we reviewed explained that the awards could not be competed due to a lack of technical data. All 7 of these justifications or supporting documents described situations, ranging from 3 to 30 years in duration, where DOD was unable to conduct a competition because data rights were not purchased with the initial award. We recommended in May 2014 that DOD ensure that existing acquisition planning guidance promotes early vendor engagement and allows both the government and vendors adequate time to prepare for competition. DOD concurred with our recommendation. In April 2015, DOD updated its acquisition guidance to incorporate new guidelines for creating and maintaining a competitive environment. These guidelines emphasize acquisition planning steps including involvement with industry in obtaining feedback on draft solicitations, market research, and requirements development. Unique qualifications and experience. DHS placed four separate orders under an IDIQ contract for data center support totaling approximately $7 million. The requirement was to maintain mission critical services during a data center support pilot, prototype, and transition period starting in fiscal year 2015. Among other things, DHS’s J&A noted that no other contractors had sufficient experience with DHS’s infrastructure and requirements necessary to maintain services at the required level during the transition period. HHS awarded an approximately $4 million contract to buy support services for an IT center for a 12-month ordering period, including options. HHS’s J&A noted that only the incumbent contractor had the requisite knowledge and experience to operate and maintain the mission and business systems in the IT center during the transition of operations from one location to another. The justification further stated that HHS had no efforts underway to increase competition in the future as this requirement is not anticipated to be a recurring requirement. Program officials stated that they are migrating from legacy IT systems to a new commercial off-the-shelf system. Brand-name products. DOD awarded a 5-month, approximately $500,000 contract for brand name equipment and installation that supported various video-teleconference systems. The J&A stated that this particular brand name product was the only product that would be compatible with current configurations installed in one of its complexes. To increase competition in the future, the J&A stated that technical personnel will continue to evaluate the marketplace for commercially available supplies and installation that can meet DOD’s requirements. For 42 of the 142 contracts and orders we reviewed, we found that agencies awarded a sole-source contract or order to 8(a) small business participants. HHS awarded 13 of its 23 sole-source contracts and orders we reviewed to 8(a) small business participants, DOD awarded 25 of 95, and DHS 4 of 24. We found that all contracts and orders in our review that were awarded on a sole-source basis to 8(a) small business participants were below the applicable competitive thresholds or otherwise below the FAR thresholds that require a written justification. As previously discussed, agencies may award contracts on a sole-source basis to eligible 8(a) participants, either in coordination with SBA or when they are below the competitive threshold. While agencies are generally not required to justify these smaller dollar value sole-source 8(a) awards, contracts that exceed a total value of $22 million require a written justification. Since none of the 8(a) sole source contracts and orders in our review required written justifications, the contract files generally did not provide the rationale behind the sole-source award. Policy and contracting officials from all three agencies we reviewed stated they made sole-source awards to 8(a) small business participants to help meet the agency’s small business contracting goals and save time. HHS officials further stated that they consider their awards to 8(a) small business participants a success because they are supporting small businesses. Officials stated that once a requirement is awarded through the 8(a) program, the FAR requires that requirement be set aside for an 8(a) contractor unless the requirement has changed or that an 8(a) contractor is not capable or available to complete the work. For 23 of the 142 contracts and orders we reviewed, we found that agencies cited other reasons for awarding contracts and orders noncompetitively. For example: Urgent and compelling need. DHS’s Coast Guard awarded an approximately 10-month, $6.5 million order (encompassing all options) for critical payroll services in its human resources management system under a GSA federal supply schedule contract. The Coast Guard justified the award based on an urgent and compelling need. A Coast Guard official explained that the efforts to competitively award a follow-on contract had been delayed as the Coast Guard had not developed a defined statement of work in a timely manner, and that the agency had received a larger number of proposals than initially anticipated. Therefore, the evaluation process took longer than expected. In addition, the Coast Guard’s competitive follow-on contract, which was awarded in June 2018, was protested. In October 2018, GAO denied the protest and the Coast Guard is currently planning to transition to the newly awarded contract. International agreement. The Army placed an approximately 8- month, $1 million order under an IDIQ contract for radio systems and cited international agreement as the reason for a noncompetitive award. This order was part of a foreign military sales contract with the Government of Denmark. Authorized or required by statute. The Defense Logistics Agency (DLA) cited “authorized or required by statute” when it placed an approximately $1.5 million, 12-month order under an IDIQ contract for sustainment support services for an application that is used for planning and initiating contracting requirements in contingency environments. DLA noted that this model was contracted under the Small Business Innovation Research Program, which supports scientific and technological innovation through the investment of federal research funds into various research projects. National security. The U.S. Special Operations Command (SOCOM) placed an approximately 8-month, $1 million order for radio spare parts and cited national security as the reason for a noncompetitive award. We estimate that about 8 percent of contracts and orders above $150,000 in fiscal year 2016 at DOD, DHS, and HHS were bridge contracts. Consistent with our October 2015 findings, agencies we reviewed face continued challenges with oversight of bridge contracts, based on 15 contracts and orders we reviewed in-depth. For example, we found that in 9 of the 15 cases, bridge contracts were associated with additional bridges not apparent in the documentation related to the contract and order we reviewed, such as a J&A, and corresponded with longer periods of performance and higher contract values than initially apparent. Agency officials cited a variety of reasons for needing bridge contracts, including acquisition planning challenges, source selection challenges, and bid protests. Based on our generalizable sample, we estimate that about 8 percent of contracts and orders above $150,000 in fiscal year 2016 at DOD, DHS, and HHS were bridge contracts. We verified, using our definition of bridge contracts as criteria, that 13 of 142 contracts and orders in our generalizable sample were bridge contracts based on reviews of J&As, limited source justifications, or exceptions to fair opportunity, among other documents. In addition, we found two additional bridge contracts related to our generalizable sample while conducting our in-depth review, bringing the total number of bridge contracts we identified during this review to 15. We found that the bridge contracts we reviewed were often longer than initially apparent from our review of related documentation, such as a J&A, and sometimes spanned multiple years. Bridge contracts can be a useful tool in certain circumstances to avoid a gap in providing products and services, but they are typically envisioned to be used for short periods of time. When we conducted an in-depth review of the bridge contracts, such as by reviewing the contract files for the predecessor, bridge, and follow-contracts, we found that in most cases, these involved one or more bridges that spanned longer periods and corresponded with higher contract values than initially apparent. Specifically, we found that 9 of the 15 bridge contracts had additional bridges related to the same requirement that were not initially apparent from documents requiring varying levels of approval by agency officials, such as the J&As. Collectively, agencies awarded bridge contracts associated with these 15 contracts and orders with estimated contract values of about $84 million (see table 3). The following examples illustrate contracts we reviewed in which the periods of performance were longer than initially apparent: HHS’s Indian Health Service (IHS) awarded a 4-month, approximately $1.6 million bridge order for project management and support services for IHS’s resource and patient management system. We found, however, that the predecessor contract had already been extended by 6 months before the award of the bridge order due to acquisition planning challenges associated with delays in developing the acquisition package for the follow-on contract. Subsequently, the 4- month bridge order was extended for an additional 6 months, in part because the follow-on award—which had been awarded to a new contractor—was protested by the incumbent contractor due to concerns over proposal evaluation criteria. Ultimately, the protest was dismissed. Following the resolution of the bid protest, officials awarded an additional 2-month bridge order for transition activities. In total, the bridge orders and extensions spanned 18 months and had an estimated value of about $4.7 million. Figure 6 depicts the bridge orders and extensions and indicates the 4-month bridge and 6-month extension we had initially identified. The Air Force awarded a 3-month, approximately $630,000 bridge contract to support a logistics system used to monitor weapon system availability and readiness. We found, however, that the Air Force had previously awarded a 3-month bridge contract due to delays resulting from a recent reorganization, which, according to Air Force officials, made it unclear which contracting office would assume responsibility for the requirement. The Air Force subsequently awarded an additional 3-month bridge contract due to acquisition planning challenges, such as planning for the award of the follow-on sole- source contract. The total period of performance for the bridges was 9 months with an estimated value of about $1.9 million (see figure 7). As of August 2018, 13 of the 15 bridge contracts had follow-ons in place—5 were awarded competitively and 8 were awarded noncompetitively. Two bridge contracts do not currently have follow-on contracts in place for various reasons. For example, in one instance, the Coast Guard’s requirement for human resources and payroll support services has continued to operate under a bridge contract because the Coast Guard’s planned follow-on contract—a strategic sourcing IDIQ— was awarded in June 2018, and subsequently protested, among other delays. Based on our reviews of contract documentation and information provided by agency officials, we found that acquisition planning challenges were the principal cause for needing to use a bridge contract across the 15 bridge contracts we reviewed. In particular, acquisition packages prepared by program offices to begin developing a solicitation were often not prepared in a timely fashion. Acquisition packages include statements of work and independent government cost estimates, among other documents, and are generally prepared by the program office, with the assistance of the contracting office. In addition to acquisition planning challenges, officials cited delays in source selection and bid protests, among others, as additional reasons justifying the need to use a bridge contract (see figure 8). The following examples illustrate reasons officials cited for needing a bridge contract: DOD’s DISA awarded a bridge contract for IT support services due to acquisition planning challenges, and specifically, the late submission of acquisition packages. According to contracting officials, the bridge contract was originally intended to consolidate 3 of the previous contracts associated with this requirement, but a fourth was added much later in the process. DISA contracting officials said that the program office did not submit acquisition package documentation in a timely manner, and, once submitted, the documentation required numerous revisions. These officials added that they had to award an additional bridge contract to avoid a lapse in service once they received a completed package from the program office because there was not enough time to do a competitive source selection and analysis. DOD’s SOCOM extended an IDIQ contract for radio supplies and services due to source selection delays and acquisition workforce challenges. For example, contracting officials said they extended the IDIQ for 12 months because the contracting office was working on a source selection for the follow-on contract for modernized radios and simply did not have the manpower to award a new sustainment contract for the existing radios at the same time. DHS’s Customs and Border Protection (CBP) awarded an approximately 16-month bridge contract in June 2016 for engineering and operations support of CBP’s Oracle products and services due to bid protests associated with March 2016 orders for this requirement. We found the protests were filed on the basis that CBP had issued the task order on a sole-source basis, which precluded other contractors from competing for the award. GAO dismissed the protest in May 2016 as a result of CBP’s stated intent to terminate the task order and compete the requirement as part of its corrective action plan. According to CBP contracting officials, they awarded the approximately16-month bridge contract to the incumbent contractor to continue services until GAO issued a decision and the services could be transitioned to the awardee. In September 2017, CBP officials awarded the competitive follow-on contract to a new vendor, but this award was also protested due to alleged organizational conflicts of interest, improperly evaluated technical proposals, and an unreasonable best-value tradeoff determination. As a result, CBP officials issued a stop-work order effective October 2017. To continue services during the protest, CBP officials extended the existing bridge contract by 3 months and then again by another 6 months. In January 2018, GAO dismissed the protest in its entirety and the stop-work order was lifted. According to a CBP contracting official, CBP did not exercise the final 3 months of options of the 6-month extension. In 2015, we found that the full length of a bridge contract, or multiple bridge contracts, is not always readily apparent from review of an individual J&A, which presents challenges for approving officials, as they may not have insight into the total number of bridges put into place by looking at individual J&As alone. We found a similar situation in our current review. For example, the J&As for the 8 bridge contracts with J&As did not include complete information on the periods of performance or estimated values of all related bridge contracts. OFPP has not yet taken action to address the challenges related to the use of bridge contracts that we found in October 2015. At that time, we recommended that OFPP take appropriate steps to develop a standard definition of bridge contracts and incorporate it as appropriate into relevant FAR sections, and to provide guidance to federal agencies in the interim. We further recommended that the guidance include (1) a definition of bridge contracts, with consideration of contract extensions as well as stand-alone bridge contracts, and (2) suggestions for agencies to track and manage their use of these contracts, such as identifying a contract as a bridge in a J&A when it meets the definition, and listing the history of previous extensions and stand-alone bridge contracts back to the predecessor contract in the J&A. However, as of November 2018, OFPP had not yet done so. As a result, agencies continue to face similar challenges with regard to the use of bridge contracts that we identified in 2015 and there is a lack of government-wide guidance that could help to address them. In the absence of a federal government-wide definition, others have taken steps to establish a bridge contracts definition. For example, Congress has established a statutory definition of bridge contracts that is applicable to DOD and its components. Specifically, Section 851 of the National Defense Authorization Act for Fiscal Year 2018 defined a bridge contract as (1) an extension to an existing contract beyond the period of performance to avoid a lapse in service caused by a delay in awarding a subsequent contract; or (2) a new short-term contract awarded on a sole- source basis to avoid a lapse in service caused by a delay in awarding a subsequent contract. Section 851 requires that, by October 1, 2018, the Secretary of Defense is to ensure that DOD program officials plan appropriately to avoid the use of a bridge contract for services. In instances where bridge contracts were awarded due to poor acquisition planning, the legislation outlines notification requirements with associated monetary thresholds for bridge contracts. Acting on this requirement and in response to our prior bridge contracts report, DOD established a bridge contracts policy memorandum in January 2018. The policy defines bridge contracts as modifications to existing contracts to extend the period of performance, increase the contract ceiling or value or both, or a new, interim sole-source contract awarded to the same or a new contractor to cover the timeframe between the end of the existing contract and the award of a follow-on contract. The DOD policy excludes extensions awarded using the option to extend services clause as bridge contracts unless the extension exceeds 6 - months. In addition, DOD’s bridge contract policy directs the military departments and DOD components to develop a plan to reduce bridge contracts and to report their results annually to the Office of the Under Secretary of Defense for Acquisition and Sustainment. As of August 2018, DHS and HHS did not have component- or department-level policies that define or provide guidance on the use of bridge contracts. Differing definitions of bridge contracts can lead to varying perspectives as to what constitutes a bridge contract. For example: Differing views on whether a contract within the 8(a) program can be a bridge. In one instance, we reviewed a 3-month, approximately $1.9 million bridge contract that DLA awarded to the incumbent contractor for a variety of IT contractor support services for DLA’s Information Operations (J6). This bridge contract was awarded to continue services until DLA could award a 12-month, roughly $2.9 million sole- source contract (including all options) to an 8(a) small business participant to consolidate tasks from 20 contracts as part of a reorganization effort within J6. After that contract expired, DLA awarded a second 12-month, about $3 million contract (including all options) to the same 8(a) small business participant to continue these task consolidation efforts. DLA subsequently awarded a 2-month $122,000 contract extension to continue services until it could award a follow-on order under DLA’s J6 Enterprise Technology Services (JETS) multiple award IDIQ contract, the award of which had also been delayed. Although the 8(a) contracts were not awarded to the incumbent of the initial 3-month bridge, we believe that these contracts could be considered bridge contracts as they were meant to bridge a gap in services until the reorganization efforts were complete and the JETS contract was awarded. DLA contracting officials, however, told us they do not consider the 8(a) contracts to be bridge contracts as these two contracts and the follow-on task order under JETS were awarded sole-source to 8(a) small business participants. DLA officials added that they plan to keep the requirement in the 8(a) program. Differing views as to whether contract extension are bridges. DOD’s policy generally does not include contract extensions using the “option to extend services” clause as bridges, unless the option is extended beyond the 6 months allowed by the clause. Navy policy, however, states that using the option to extend services clause is considered a bridge if the option was not priced at contract award. Similarly, HHS officials stated that the department does not consider contract extensions using the “option to extend services” clause to be bridge contract actions if the total amount of the services covered are evaluated in the initial award, and if the length does not extend beyond the allowable 6 months. The differences among agencies’ views and policies may be due to the extent to which the extensions are considered “competitive”. For the purposes of our definition, if the extension—whether it was competed or not—was used to bridge a gap in service until a follow-on contract could be awarded, then it would be considered a bridge. Without agreement as to what constitutes a bridge contract, agencies’ efforts to improve oversight of and to identify challenges associated with the use of bridge contracts will be hindered. While we are not making any new recommendations in this area, we continue to believe that our October 2015 recommendation to OFPP to establish a government-wide definition and provide guidance to agencies on their use remains valid. An estimated 7 percent of IT noncompetitive contracts and orders at selected agencies in fiscal year 2016 were in support of legacy IT systems as newly defined in statute, which is considerably fewer than we found when using the previous definition of legacy IT. At the time our review began, OMB’s draft definition for legacy IT systems stated that legacy IT spending was spending dedicated to maintaining the existing IT portfolio, excluding provisioned services such as cloud. Using this definition, and based on our generalizable sample, we estimated that about 80 percent of IT noncompetitive contracts and orders over $150,000 in fiscal year 2016 at DOD, DHS, and HHS were awarded in support of legacy IT systems. In December 2017, however, Congress enacted the Modernizing Government Technology Act (MGT) as part of the National Defense Authorization Act for Fiscal Year 2018. This act defined a legacy IT system as an “outdated or obsolete system of information technology.” Using this new statutory definition of a legacy IT system, we requested that each agency reassess how it would characterize the nature of the IT system using the revised definition provided under the MGT Act. For the 142 contracts and orders we reviewed, we found that when using the new definition, agencies significantly reduced the number of contracts and orders identified as supporting legacy IT systems. For example, using the OMB draft definition agencies identified that 118 out of 142 contracts and orders were supporting legacy IT systems. However, when using the more recent MGT Act definition, agencies identified only 10 out of 137 contracts and orders as supporting legacy IT systems (see figure 9). Consequently, using the definition provided under the MGT Act, we estimate that about 7 percent of IT noncompetitive contracts and orders over $150,000 in fiscal year 2016 at DOD, DHS, and HHS were awarded in support of outdated or obsolete legacy IT systems. Agencies’ program officials said that they are still supporting outdated or obsolete legacy IT systems (as defined by the MGT Act) because they are needed for the mission, or they are in the process of buying new updated systems or modernizing current ones. For example: Army officials awarded a 5-year, roughly $1.2 million contract to install, configure, troubleshoot, and replace Land Mobile Radio equipment at Ft. Sill, Oklahoma. An Army official noted that all equipment is older than 12 years and is nearing its end of life. The radio equipment, however, is required to support first responder and emergency service personnel critical communications. An Army official did not indicate any plans to modernize, but noted that the impact of this system not being supported would significantly affect all of Fort Sill’s land mobile radio communications. The Air Force awarded a $218,000 order to buy repair services for the C-130H aircraft’s radar display unit and electronic flight instrument. An Air Force official noted that legacy hardware that was bought through the order is part of critical systems that are required to safely fly the aircraft. The system, however, is obsolete and the associated hardware is no longer supported by the vendor. The official told us that there is currently a re-engineering effort to modernize the systems that use this hardware. HHS issued a 12–month, nearly $2.5 million order to buy operations and maintenance support for a Food and Drug Administration (FDA) system used to review and approve prescription drug applications. According to an FDA program official, efforts are underway to retire the system by gradually transferring current business processes to a commercial-off-the-shelf solution that can better meet government needs. This official, however, told us that the system currently remains in use because FDA’s Office of New Drugs is still heavily reliant on the system. Competition is a cornerstone of the federal acquisition system and a critical tool for achieving the best possible return on investment for taxpayers. In the case of information technology, federal agencies awarded slightly under a third of their contract dollars under some form of noncompetitive contract. Further, our current work was able to quantify that about a tenth of all information technology-related contracts and orders were made under some form of a noncompetitively awarded bridge contract, which provides new context for the issues associated with their use. The challenges themselves, however, remain much the same since we first reported on the issue in 2015. OFPP has yet to issue guidance or promulgate revised regulations to help agencies identify and manage their use of bridge contracts, and our current work finds that the full scope of bridge contracts or the underlying acquisition issues that necessitated their use in the first place may not be readily apparent to agency officials who are approving their use. We continue to believe that our 2015 recommendation would improve the use of bridge contracts, and we encourage OFPP to complete its ongoing efforts in a timely fashion. The frequency of the errors in reporting and their concentration within a specific type of contract action signals the need for more management attention and corrective action. These errors resulted in the potential misreporting of billions of dollars awarded under orders as being noncompetitively awarded when, in fact, they were competed. One agency included in our review—DHS—has taken steps to address the problems that underlie the errors in coding and provided additional training to its staff. DOD and HHS could benefit from additional insight as to the reasons behind the high rates of miscoding to improve the accuracy of this information. We are making a total of two recommendations, one to DOD and one to HHS. The Secretary of Defense should direct the Under Secretary of Defense for Acquisition and Sustainment to identify the reasons behind the high rate of miscoding for orders awarded under multiple award contracts and use this information to identify and take action to improve the reliability of the competition data entered into FPDS-NG. (Recommendation 1) The Secretary of Health and Human Services should direct the Associate Deputy Assistant Secretary for Acquisition to identify the reasons behind the high rate of miscoding for orders awarded under multiple award contracts and use this information to identify and take action to improve the reliability of the competition data entered into FPDS-NG. (Recommendation 2) We provided a draft of this report to DOD, DHS, HHS, and OMB for review and comment. DOD and HHS provided written comments and concurred with the recommendation we made to each department. In its written response, reproduced in appendix II, DOD stated it will analyze FPDS-NG data in an effort to identify why the miscoding of orders on multiple award contracts occurs, and use the information to advise the contracting community of actions to improve the reliability of competition data. In its written response, reproduced in appendix III, HHS stated that the Division of Acquisition within HHS’s Office of Grants and Acquisition Policy and Accountability uses a data quality management platform to ensure data accuracy. HHS is currently in the process of performing the annual data validation and verification of the acquisition community’s contract data for fiscal year 2018. Once this process is complete the Division of Acquisition will contact contracting offices that produced records that were flagged as containing errors and provide recommendations that should help improve the fiscal year 2019 accuracy rating. HHS added that it will closely monitor those checks and all others to ensure contract data are accurate. However, in its letter, HHS did not specify how its annual data validation and verification process would specifically address the fact that we found a high rate of miscoding of competition data for certain orders. OMB staff informed us that they had no comments on this report. DHS, HHS and the Air Force provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of Homeland Security, the Secretary of Health and Human Services, and the Director of the Office of Management and Budget. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Our report examines (1) the extent to which agencies used noncompetitive contracts to procure Information Technology (IT) products and services for fiscal years 2013 through 2017; (2) the reasons for using noncompetitive contracts for selected IT procurements; (3) the extent to which IT procurements at selected agencies were bridge contracts; and (4) the extent to which noncompetitive IT procurements at selected agencies were in support of legacy systems. To examine the extent to which agencies used noncompetitive contracts and orders to procure IT products and services, we analyzed government-wide Federal Procurement Data System-Next Generation (FPDS-NG) data on IT obligations from fiscal years 2013 through 2017. To define IT, we used the Office of Management and Budget’s (OMB) Category Management Leadership Council list of IT products and service codes, which identified a total of 79 IT-related codes for IT services and products. Data were adjusted for inflation to fiscal year 2017 dollars, using the Fiscal Year Gross Domestic Product Price Index. To assess the reliability of the FPDS-NG data, we electronically tested for missing data, outliers, and inconsistent coding. Based on these steps, we determined that FPDS-NG data were sufficiently reliable for describing general trends in government-wide and IT contract obligations data for fiscal years 2013 through 2017. In addition, as we later describe, we compared data for a generalizable sample of 171 noncompetitive contracts and orders to contract documentation, and we determined that 29 of these had been inaccurately coded in FPDS-NG as noncompetitive. As such, we determined that the data were not reliable for the purposes of reporting the actual amount agencies obligated on noncompetitive contracts and orders for IT products and services. Specifically, we determined, that data for IT noncompetitive obligations awarded under multiple award contracts that cited “follow-on action following competitive initial action” or “other statutory authority” as the legal authority for using an exception to fair opportunity for the Departments of Defense (DOD), Homeland Security (DHS), and Health and Human Services (HHS) in fiscal year 2016 were not reliable. Evidence from our review of this sample suggests there was a high rate of miscoding for these orders; thus, we applied these findings to the remaining agencies and fiscal years because we do not have confidence that the data were more reliable than what we had found. To determine the reasons for using noncompetitive contracts for selected IT procurements, we selected the three agencies with the highest reported obligations on IT noncompetitive contracts for fiscal years 2012 through 2016 (the most recent year of data available at the time we began our review)—DOD, DHS and HHS. These three agencies collectively accounted for about 70 percent of all noncompetitively awarded contracts for IT during this period. From these agencies, we selected a generalizable stratified random sample of 171 fiscal year 2016 noncompetitive contracts and orders for IT above the simplified acquisition threshold of $150,000. The sample was proportionate to the amount of noncompetitive contracts and orders for IT at each agency. Based on our review of documentation collected for the generalizable sample, we excluded 29 contracts and orders because they were awarded competitively, but had been miscoded as noncompetitive or as having an exception to fair opportunity. As a result, our sample consisted of 142 contracts and orders. See table 4 for a breakdown by agency. To determine the extent to which IT procurements at selected agencies were bridge contracts or in support of legacy systems, agencies provided information as to whether the contracts and orders met GAO’s definition of a bridge contract—which we defined as an extension to an existing contract beyond the period of performance (including base and option years) or a new, short-term contract awarded on a sole-source basis to an incumbent contractor to avoid a lapse in service caused by a delay in awarding a follow-on contract—and whether they met the definitions of legacy IT systems in OMB’s draft IT Modernization Initiative and the Modernizing Government Technology Act (MGT). OMB’s draft IT Modernization Initiative defined legacy systems as spending dedicated to maintaining the existing IT portfolio but excluding provisioned services, such as cloud, while the MGT Act defines them as outdated or obsolete. We verified the agencies’ determinations of whether a contract or order was a bridge by reviewing documentation, such as justification and approval and exception to fair opportunity documents, for the contracts and orders in our generalizable sample, and conducting follow-up with agency officials as needed. We verified agencies’ determination of whether or not a contract or order was in support of a legacy system, as defined in OMB’s draft IT Modernization Initiative by reviewing the agencies’ determination and comparing these determinations to additional documentation, such as the statement of work, and conducting follow-up with program officials about the nature of the requirement where needed. We verified agencies’ determination of whether a contract or order was in support of a legacy system as defined in the MGT Act by reviewing agencies’ rationale for these determinations and following up with agency officials where we identified discrepancies between the determination and rationale. To obtain additional insights into bridge contracts and legacy systems, we selected a nonprobability sample of 26 contracts and orders from our generalizable sample of 142 contracts and orders for in-depth review. We selected these contracts based on factors such as obtaining a mix of bridge contracts and other contracts used in support of legacy IT systems and location of the contract files. For our in-depth review of contracts and orders, we collected and analyzed contract file documentation for the selected contracts and orders and interviewed contracting and program officials to gain insights into the facts and circumstances surrounding the awards of IT noncompetitive contracts and orders. In cases where we selected a potential bridge contract, we also reviewed the predecessor contract, additional bridge contracts (if any), and, follow-on contract, if awarded at the time of our review. For bridge contracts and orders, we asked about the reasons why bridges were needed and the status of follow-on contracts. We verified, using the definition of bridge contracts that we developed for our October 2015 report as criteria, that 13 of 142 contracts and orders in our generalizable sample were bridge contracts based on reviews of justification and approval documents, limited source justifications, or exceptions to fair opportunity, among other documents. We acknowledge, however, that in the absence of a government-wide definition, agencies may have differing views of what constitutes a bridge contract. In addition, we found 2 additional bridge contracts not included in our generalizable sample while conducting our in-depth review. For example, we selected three noncompetitive orders from our generalizable sample for in-depth review that were used to buy accessories and maintenance for the U.S. Special Operations Command (SOCOM) PRC-152 and 117G radios. We found that although the three orders were not bridge contracts, the underlying indefinite delivery/ indefinite quantity (IDIQ) contract—which outlines the terms and conditions, including pricing for the orders—had been extended 12 months to continue services until the follow-on IDIQ could be awarded. We also selected an Air Force order for equipment for the Joint Strike Fighter instrumentation pallet for in-depth review. Further analysis revealed that the underlying IDIQ was extended for 5 additional months to continue services until officials could award a follow-on contract for this requirement. Including these 2 additional bridge contracts brings the total number of bridge contracts we identified during this review to 15. For legacy contracts and orders we asked about the nature of the requirement and plan to move to newer technologies or systems. The selection process for the generalizable sample is described in detail below. We selected a generalizable stratified random sample of 171 contracts and orders from a sample frame of 3,671 fiscal year 2016 IT noncompetitive contracts and orders, including orders under multiple award indefinite delivery/indefinite quantity contracts over $150,000 to generate percentage estimates to the population. We excluded contracts and orders with estimated values below the simplified acquisition threshold of $150,000 as these contracts have streamlined acquisition procedures. We stratified the sample frame into nine mutually exclusive strata by agency and type of award, i.e. contract, order, and multiple award order for each of the three agencies. We computed the minimum sample size needed for a proportion estimate to achieve an overall precision of at least plus or minus 10 percentage points or fewer at the 95 percent confidence level. We increased the computed sample size to account for about 10 percent of the population to be out of scope, such as competitive or non-IT contracts or orders. We then proportionally allocated the sample size across the defined strata and increased sample sizes where necessary so that each stratum would contain at least 10 sampled contracts or orders. The stratified sample frame and sizes are described in table 5 below. We selected contracts and orders from the following components: DOD: Air Force, Army, Navy, Defense Information Systems Agency, Defense Logistics Agency, Defense Security Service, Defense Threat Reduction Agency, U.S. Special Operations Command, and Washington Headquarter Services; HHS: Centers for Disease Control, Centers for Medicare and Medicaid Services, Food and Drug Administration, Indian Health Service, National Institutes of Health, and the Office of the Assistant Secretary for Administration; DHS: Federal Emergency Management Agency, Office of Procurement Operations, U.S. Citizenship and Immigration Services, U.S. Coast Guard, U.S. Customs and Border Protection, and the U.S. Secret Service. We excluded 29 contracts and orders as we determined they had been miscoded as noncompetitive or as not having an exception to fair opportunity. Based on these exclusions, we estimate the number of noncompetitive contracts and orders in this population was about 3,000 (+/- 6.7 percent). All estimates in this report have a margin of error, at the 95 percent confidence level, of plus or minus 9 percentage points or fewer. We conducted this performance audit from April 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Janet McKelvey (Assistant Director), Pete Anderson, James Ashley, Andrew Burton, Aaron Chua, Andrea Evans, Lorraine Ettaro, Julia Kennon, Miranda Riemer, Guisseli Reyes-Turnell, Roxanna Sun, Alyssa Weir, and Kevin Walsh made key contributions to this report.", "summary": "The federal government spends tens of billions of dollars each year on IT products and services. Competition is a key component to achieving the best return on investment for taxpayers. Federal acquisition regulations allow for noncompetitive contracts in certain circumstances. Some noncompetitive contracts act as “bridge contracts”—which can be a useful tool to avoid a lapse in service but can also increase the risk of the government overpaying. There is currently no government-wide definition of bridge contracts. GAO was asked to review the federal government's use of noncompetitive contracts for IT. This report examines (1) the extent that agencies used noncompetitive contracts for IT, (2) the reasons for using noncompetitive contracts for selected IT procurements, (3) the extent to which IT procurements at selected agencies were bridge contracts, and (4) the extent to which IT procurements were in support of legacy systems. GAO analyzed FPDS-NG data from fiscal years 2013 through 2017 (the most recent and complete data available). GAO developed a generalizable sample of 171 fiscal year 2016 noncompetitive IT contracts and orders awarded by DOD, DHS, and HHS—the agencies with the most spending on IT, to determine the reasons for using noncompetitive contracts and orders, and the extent to which these were bridge contracts or supported legacy systems. From fiscal years 2013 through 2017, federal agencies reported obligating more than $15 billion per year, or about 30 percent, of information technology (IT) contract spending on a noncompetitive basis (see figure). GAO found, however, that Departments of Defense (DOD), Homeland Security (DHS), and Health and Human Services (HHS) contracting officials misreported competition data in the Federal Procurement Data System-Next Generation (FPDS-NG) for 22 of the 41 orders GAO reviewed. GAO's findings call into question competition data associated with nearly $3 billion in annual obligations for IT-related orders. DHS identified underlying issues resulting in the errors for its orders and took corrective action. DOD and HHS, however, had limited insight into why the errors occurred. Without identifying the issues contributing to the errors, DOD and HHS are unable to take action to ensure that competition data are accurately recorded in the future, and are at risk of using inaccurate information to assess whether they are achieving their competition objectives. GAO found that DOD, DHS, and HHS primarily cited two reasons for awarding a noncompetitive contract or order: (1) only one source could meet the need (for example, the contractor owned proprietary technical or data rights) or (2) the agency awarded the contract to a small business to help meet agency goals. GAO estimates that about 8 percent of 2016 noncompetitive IT contracts and orders at DOD, DHS, and HHS were bridge contracts, awarded in part because of acquisition planning challenges. GAO previously recommended that the Office of Federal Procurement Policy define bridge contracts and provide guidance on their use, but it has not yet done so. GAO believes that addressing this recommendation will help agencies better manage their use of bridge contracts. Additionally, GAO estimates that about 7 percent of noncompetitive IT contracts and orders were used to support outdated or obsolete legacy IT systems. Officials from the agencies GAO reviewed stated these systems are needed for their mission or that they are in the process of modernizing the legacy systems or buying new systems. GAO recommended DOD and HHS identify the reasons why competition data for certain orders in FPDS-NG were misreported and take corrective action. DOD and HHS concurred.", "document_type": "gao"}
{"report": "The SBIR program was initiated in 1982 and has four main purposes: (1) use small businesses to meet federal R&D needs, (2) stimulate technological innovation, (3) increase commercialization of innovations derived from federal R&D efforts, and (4) encourage participation in technological innovation by small businesses owned by women and disadvantaged individuals. The STTR program was initiated a decade later, in 1992, and has three main purposes: (1) stimulate technological innovation, (2) foster technology transfer through cooperative R&D between small businesses and research institutions, and (3) increase private-sector commercialization of innovations derived from federal R&D. The SBIR and STTR programs are similar in that participating agencies identify topics for R&D projects and support small businesses, but the STTR program requires the small business to partner with a nonprofit research institution, such as a college or university or a federally funded research and development center. Each participating agency must manage its SBIR and STTR programs in accordance with program laws and regulations and the policy directives issued by SBA. In general, the programs are similar across participating agencies. All of the participating agencies follow the same general process to obtain proposals from and make awards to small businesses for both the SBIR and STTR programs. However, each participating agency has considerable flexibility in designing and managing specific aspects of these programs, such as determining research topics, selecting award recipients, and administering funding agreements. At least once a year, each participating agency issues a solicitation requesting proposals for projects in topic areas determined by the agency. Each participating agency uses its own process to review proposals and determine which proposals should receive awards. The agencies that participate in both SBIR and STTR programs usually use the same process for both programs. Also, each participating agency determines whether to provide the funding for awards as grants or contracts. According to the policy directives, SBA maintains a system that records SBIR and STTR award information—using data submitted by the agencies—as well as commercialization information, such as information about patents, sales, and investments reported by small businesses that received these awards. SBA is to use these data to assess small businesses that received awards against the benchmarks and identify any small businesses that did not meet the benchmarks. SBA is to initially assess the small businesses against the benchmarks and then in April of each year notify those that do not meet the benchmarks so that the businesses can review their award data and work with participating agencies to correct the database if necessary. SBA then is to analyze the award data again to identify, on June 1, those small businesses that still do not meet the benchmarks. These small businesses are then ineligible for certain awards from that date through May 31 of the following year. Data challenges have limited SBA’s and the 11 participating agencies’ efforts to fully implement the benchmarks. Since 2014, SBA and the participating agencies have regularly assessed small businesses against the Transition Rate Benchmark, but the assessments have been based on inaccurate or incomplete data. SBA and the participating agencies have assessed small businesses against the Commercialization Benchmark only once, in 2014, because of challenges in collecting and verifying the accuracy of data. In addition, SBA and the participating agencies have provided inconsistent information to small businesses about the consequence of not meeting the benchmarks. Since 2014, SBA and the participating agencies have regularly assessed small businesses against the Transition Rate Benchmark, which, in general, measures the rate at which businesses move projects from phase I to phase II. From 2014 through 2017, SBA determined that 4 to 7 small businesses did not meet the benchmark each year and placed those businesses on a list of those ineligible to receive certain additional awards. However, we found instances in which the data used to generate the list were inaccurate or incomplete. For example, we identified an instance in which the data in the awards database changed considerably after SBA’s initial assessment, indicating that the data used for that assessment were inaccurate. SBA’s list of small businesses subject to the benchmark in 2015 showed that a small business received 297 phase I awards during the assessment period. However, data received from SBA officials in August 2017 showed that this small business received only 1 phase I award. Agencies can update their data in the awards database at any time to, for example, submit additional award data or correct previously submitted award data, which is what an SBA official stated may have caused this change. Because the small business received only 1 award, it would not have been subject to the Transition Rate Benchmark. In this case, the change meant that SBA did not miss identifying a small business that should have been ineligible for an award; however, in other instances, changes to the data may lead SBA to miss identifying a small business that should have been ineligible for awards. In addition, we identified instances in which the publicly available data on awards were incomplete, including data that were missing or otherwise unusable. For example, based on our review of the award data from 2007 through 2016, we identified more than 2,700 small businesses that had multiple records with different spellings of the same business’s name. Furthermore, we identified more than 1,400 instances in which a unique identification number had errors, such as having an incorrect number of digits, all zeros, or hyphens. SBA officials told us that the quality of the award information in the database has been an issue, and that accurate information is important because small businesses may avoid being identified as subject to the benchmark if their business names and identification numbers are different across multiple records. For example, if the database contains 18 phase I awards made within the assessment period to a small business with a certain unique identification number but also contains 3 other phase I awards within that period with a different or missing unique identification number, the small business may avoid being identified as subject to the benchmark because the data would suggest it did not meet the threshold of receiving more than 20 phase I awards, even if it did. As a result, it could be difficult to determine which small businesses actually received more than 20 awards and should be subject to the benchmark. Standards for Internal Control in the Federal Government state that management should use quality information to achieve the entity’s objectives, and SBA’s Information Quality Guidelines state that SBA seeks to ensure the quality, utility, and integrity of the information it shares with the public, among other things. SBA’s policy directives for the SBIR and STTR programs state that SBA maintains a system that records SBIR and STTR award information, which is publicly available, and uses this information to calculate small businesses’ performance against the benchmark. SBA officials told us they depend on the accuracy of the data received from the participating agencies to perform SBA’s assessment. These officials also acknowledged that confirming the accuracy of SBA’s annual assessments against the benchmarks has been challenging because agencies can update their data over time. SBA officials stated that they have sought to improve the quality of the data after the data are entered into the database, such as fixing instances in which small businesses’ names were spelled differently across multiple records; however, the officials said that correcting the data already entered in the awards database is an ongoing and time-consuming process. SBA officials told us that there are errors in the database, in part because SBA has not worked with participating agencies to ensure that agencies enter high-quality, accurate data into the database. SBA officials provided us guidance on how to enter data that they said is available to agencies, but the errors we found suggest that agencies are not fully utilizing this guidance. As a result, SBA cannot reasonably ensure the quality and reliability of its award data and therefore cannot reasonably ensure that it has correctly assessed small businesses against the Transition Rate Benchmark. The Small Business Act requires agencies to evaluate whether small businesses have met a minimum performance standard for commercializing their technology. SBA and participating agencies do not know the extent to which small businesses are meeting the Commercialization Benchmark because SBA and the agencies have assessed businesses against the benchmark only once, in 2014, when SBA determined that 12 businesses did not meet the benchmark. This is in part because, according to officials from SBA and several agencies, they cannot collect and verify the accuracy of the data needed to implement the benchmark as written. For SBA and participating agencies to assess whether small businesses meet the Commercialization Benchmark, these small businesses must provide data on sales, investments, or patents resulting from the awards. However, agency officials told us about challenges related to obtaining the data they need to implement this benchmark. For example, agency officials told us that the needed data are not consistently applicable across agencies or projects. Specifically, these officials said that an agency may purchase the technology developed as a result of the SBIR or STTR award, while another agency may focus on funding technologies that will be sold on the commercial market, leading to different kinds of data on “sales.” Additionally, officials from SBA and several of the participating agencies told us they have been unable to collect and verify the accuracy of the information from small businesses to assess them against the Commercialization Benchmark. In addition, officials from 2 agencies told us that small businesses can easily circumvent the benchmark by submitting incorrect data. The Small Business Act and the policy directives provide agencies flexibility in how they can implement the Commercialization Benchmark. Officials from participating agencies said that they thought the Commercialization Benchmark should be revised, but they provided differing views on how to do it. Officials from SBA and 2 agencies told us that they would consider having individual agencies develop a benchmark or metric tailored to their agency, in part because the definition of successful commercialization could vary across the agencies. However, officials acknowledged that collecting and verifying the accuracy of the data would still be a concern with this approach. Officials from 2 participating agencies told us that collecting and verifying the accuracy of the data is a significant amount of work, and officials from a third agency added that implementing the benchmark independently is impractical because they do not have the capability to track small businesses’ commercialization efforts. Officials from 1 agency said they preferred to keep a uniform benchmark across the agencies, in part because having varying benchmarks could lead to a small business being eligible to participate in the programs with one agency but not with another. Although views differed across agencies, working together to find a way to implement the benchmark as designed or revising it so that it can be implemented could allow the agencies to fulfill the requirement in the Small Business Act. Officials from 3 agencies told us they would prefer to consider businesses’ prior commercialization experience as part of their overall evaluation of businesses’ proposals, rather than implement the current Commercialization Benchmark. The SBIR and STTR policy directives currently allow agencies to define the benchmark in terms other than revenue or investment, such as using a commercialization scoring system that rates awardees on their past commercialization success. Defining the benchmark in these terms could help agencies to implement the statutory requirement. Officials from SBA said they see the value of allowing reviewers to use professional judgment in determining the commercialization success of applicants, rather than assessing small businesses against standard criteria. Officials from 1 agency said that such a change could help achieve the goal of the benchmark without the challenges of collecting data from all small businesses participating in the programs. Nine of the 11 participating agencies currently consider prior commercialization experience as part of their evaluation when making award selections (see table 2), which shows that evaluating commercialization experience at individual agencies can be feasible. For example, project solicitations from the Department of Agriculture, the Department of Defense, and the National Science Foundation state that these agencies require applicants to provide sales or revenue information for products resulting from SBIR or STTR awards, and the Department of Homeland Security’s solicitation requires applicants to provide a history of previous federal and nonfederal funding and subsequent commercialization of their products. All agencies consider commercialization potential when selecting these awards. The consequence for small businesses not meeting the benchmarks is ineligibility to participate in phase I of the SBIR or STTR program for a year, according to the Small Business Act. SBA officials stated that they and the agencies initially interpreted this to mean that small businesses could not receive awards during the ineligibility period of June 1 through May 31 of the following year, and this is how the consequence is described in the SBIR and STTR policy directives. SBA officials told us that they and the participating agencies sought to change how to implement the consequence of businesses not meeting the benchmarks because of SBA’s and agencies’ difficulties in implementing the benchmarks. Officials from 4 agencies said that they generally evaluate and select awards shortly before SBA releases the list of ineligible companies, leading them to potentially select projects from small businesses that will be on the ineligible list by the time the award period begins. Based on our review of award data from October 2014 to May 2017, we identified 13 phase I awards across 5 small businesses with award start dates during the period that the business was ineligible to receive such awards. According to agency officials, each of these awards was selected before the small business became ineligible to receive the award. SBA and the participating agencies agreed to change how the consequence would be implemented, starting in 2017, so that small businesses that do not meet the benchmarks are ineligible to submit proposals, according to SBA officials. As of November 2017, however, the information available about this new way to implement the consequence was inconsistent because some of the agencies had not updated their project solicitations. Specifically, information in the most recent project solicitations available at that time for 2 agencies and one subunit of an agency stated that businesses that do not meet the benchmarks are ineligible to submit certain proposals, consistent with the revised approach for how to implement the consequence. However, the most recent project solicitations available at that time for 7 other agencies and the other subunit of the agency mentioned above instead stated that those businesses that do not meet the benchmarks are ineligible to receive certain awards, consistent with the prior approach for how to implement the consequence. One other agency directed users to SBA’s website in its solicitation. Table 3 shows the information about the consequence of not meeting the benchmarks that each agency included in its most recent project solicitations as of November 2017. As of November 2017, the SBIR and STTR policy directives stated that the consequence for not meeting these benchmarks is ineligibility to receive certain awards. SBA officials told us they are in the process of updating the policy directives to reflect this change in how the consequence is implemented, but these officials said that it is a long process and they could not provide a timeframe for when the update would be complete. As mentioned earlier in this report, SBA’s Information Quality Guidelines state that SBA seeks to ensure the quality, utility, and integrity of the information it shares with the public, among other things. Until participating agencies update their project solicitations and SBA updates its policy directives to accurately reflect agreed-upon practices about the consequence for small businesses that do not meet the benchmarks, small businesses may be confused about their eligibility to submit proposals and could invest time developing and submitting proposals when they are not eligible to do so. Under the SBIR and STTR programs, federal agencies have awarded billions of dollars to small businesses to help these businesses develop and commercialize innovative technologies. SBA and the participating agencies have assessed these small businesses against the Transition Rate Benchmark, but those assessments have been based on inaccurate or incomplete data. Without ensuring the reliability of its data, SBA cannot reasonably ensure that it has correctly assessed small businesses against the Transition Rate Benchmark. SBA and the participating agencies developed a Commercialization Benchmark across all the participating agencies but have not fully implemented it, in part because they have been unable to collect information from the small businesses and verify the accuracy of that information. Working together to implement the benchmark as written or revise it so that it can be implemented could allow the agencies to fulfill the requirement in the Small Business Act to evaluate whether small businesses have met a minimum performance standard for commercializing their technology. Lastly, SBA and the participating agencies have provided inconsistent information to small businesses about the consequence of not meeting the benchmarks. Officials from SBA and the participating agencies had agreed to change how the consequence would be implemented, starting in 2017, because of difficulties implementing the benchmarks. However, as of November 2017, seven agencies, and a subunit of one agency, had not updated their project solicitations and SBA had not updated its policy directives. Without consistent information on the benchmarks, small businesses may be confused about their eligibility to submit proposals and could invest time developing proposals that they are not eligible to submit. We are making a total of 11 recommendations, including 3 to SBA and 1 each to the Department of Commerce’s National Oceanic and Atmospheric Administration; the Departments of Defense, Education, Energy, Health and Human Services, and Homeland Security; the Environmental Protection Agency; and the National Science Foundation. Specifically: The Director of the Office of Investment and Innovation within SBA should work with participating agencies to improve the reliability of its SBIR and STTR award data (Recommendation 1). The Director of the Office of Investment and Innovation within SBA should work with participating agencies to implement the Commercialization Benchmark or, if that is not feasible, revise the benchmark so that it can be implemented (Recommendation 2). The Director of the Office of Investment and Innovation within SBA should update the SBIR and STTR policy directives to accurately reflect how the consequence of the benchmarks is to be implemented (Recommendation 3). The SBIR Program Manager of the Department of Commerce’s National Oceanic and Atmospheric Administration should update the agency’s SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 4). The SBIR Program Administrator within the Department of Defense should update the agency’s SBIR and STTR project solicitations to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 5). The SBIR Program Manager within the Department of Education should update the agency’s SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 6). The SBIR Program Manager within the Department of Energy should update the agency’s combined SBIR and STTR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 7). The SBIR/STTR Program Coordinator within the Department of Health and Human Services should update the agency’s SBIR and STTR project solicitations to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 8). The SBIR Program Director within the Department of Homeland Security should update the agency’s SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 9). The SBIR Program Manager within the Environmental Protection Agency should update the agency’s SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 10). The SBIR and STTR Program Manager within the National Science Foundation should update the agency’s SBIR and STTR project solicitations to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 11). We provided a draft of this report to SBA and the 11 participating agencies for review and comment. In written comments, the Department of Commerce’s National Oceanic and Atmospheric Administration; the Departments of Defense, Education, Energy, Health and Human Services, and Homeland Security; the Environmental Protection Agency; and SBA agreed with the respective recommendations directed to their agencies. Agencies’ written comments are reproduced in appendixes I through VIII. An official from one agency—the National Science Foundation—stated in an email that the agency concurred with the recommendation and did not have any further comments. Two agencies—the Department of Homeland Security and SBA—also provided technical comments, which we incorporated as appropriate. Three agencies—the Departments of Agriculture and Transportation, and the National Aeronautics and Space Administration—as well as the Department of Commerce’s National Institute of Standards and Technology stated via email that they had no technical or written comments. In its comments, SBA stated that it disagreed with a statement in our draft report that SBA had not worked with agencies to enter high-quality and accurate data into the database and provided us documentation of an instruction guide on entering data that SBA officials said was available to agencies. Based on our review of this information, we clarified the text of the report and modified the draft report’s recommendation by removing the suggested example that SBA provide guidance to the agencies to improve SBIR and STTR award data reliability. SBA agreed with the revised recommendation. After we provided a draft of the report to the agencies for comment, the Departments of Education and Homeland Security took action on their respective recommendations. Specifically, in December 2017, the agencies issued new project solicitations that reflected the updated consequence of not meeting the benchmarks. We agree that these agencies fully implemented the recommendations we made to them in this report. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, and Transportation; the Administrators of the Small Business Administration, the Environmental Protection Agency, and the National Aeronautics and Space Administration; the Director of the National Science Foundation; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. Error! No text of specified style in document. Appendix VII: Comments from the Department of Homeland Security Error! No text of specified style in document. Appendix IX: GAO Contact and Staff Acknowledgments Error! No text of specified style in document. In addition to the contact named above, Hilary Benedict (Assistant Director), John Barrett, Natalie Block, Antoinette Capaccio, Tanya Doriss, Justin Fisher, Ellen Fried, Juan Garay, Cindy Gilbert, Perry Lusk, William Shear, and Elaine Vaurio made key contributions to this report.", "summary": "Through the SBIR and STTR programs, federal agencies have awarded about 162,000 contracts and grants totaling $46 billion to small businesses to help them develop and commercialize new technologies. Eleven federal agencies participate in the SBIR program, and 5 agencies also participate in the STTR program. Each program has three phases, which take projects from initial feasibility studies through commercialization activities. SBA oversees both programs. In response to the 2011 reauthorization of the programs, SBA and the participating agencies developed benchmarks to measure small businesses' progress in developing and commercializing technologies. GAO was asked to review SBA's and the agencies' efforts related to these benchmarks. This report examines the extent to which SBA and the participating agencies have implemented these benchmarks, including assessing businesses against them and establishing the consequence of not meeting them. GAO analyzed award data and interviewed officials from SBA and the 11 participating agencies. Data challenges have limited the Small Business Administration's (SBA) and the 11 participating federal agencies' efforts to assess businesses against two benchmarks—the Transition Rate Benchmark and the Commercialization Benchmark—of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Transition Rate Benchmark. Small businesses that received more than 20 awards for the first phase of the programs in the past 5 fiscal years—excluding the most recent fiscal year—must have received an average of 1 award for the second phase of the programs for every 4 first phase awards. Since 2014, SBA and the agencies participating in the programs have regularly assessed small businesses against this benchmark. From 2014 through 2017, SBA determined that 4 to 7 businesses did not meet the benchmark each year. SBA officials provided GAO guidance on how to enter data into the programs' awards database they said is available to agencies, but GAO found evidence that suggests agencies are not fully utilizing it. For example, GAO found that the database used to perform the assessments contained inaccurate and incomplete data, such as about 2,700 businesses with multiple records with different spellings of their names and more than 1,400 instances in which a unique identification number had errors, such as an incorrect number of digits, all zeros, or hyphens. Thus, it could be difficult to determine which small businesses should be subject to the benchmark. Commercialization Benchmark. Small businesses that received more than 15 awards for the second phase of the programs in the past 10 fiscal years—excluding the most recent 2 fiscal years—must have received a certain amount of sales, investments, or patents resulting from their efforts. SBA and participating agencies have assessed small businesses against this benchmark only once, in 2014, and identified 12 businesses that did not meet the benchmark. This is, in part, due to challenges in collecting and verifying the accuracy of the data that small businesses report and that are needed to implement the benchmark, according to officials from SBA and several agencies. For example, agency officials told GAO that some needed data, such as for reported sales, are not consistently applicable across agencies or projects. The Small Business Act and policy directives provide flexibility in how the agencies can implement the benchmark. Working together to implement it as designed or revise it so that it can be implemented could allow the agencies to fulfill statutory requirements. SBA and the participating agencies have provided inconsistent information to small businesses about the consequence of not meeting the benchmarks. SBA and the agencies agreed to change how the consequence of not meeting the benchmarks was to be implemented, starting in 2017, from ineligibility to receive certain awards to ineligibility to submit certain proposals. However, as of November 2017, some agencies had not updated this information in their project solicitations. Furthermore, SBA has not updated this information in its policy directives. Without consistent information, businesses may be confused about their eligibility to submit proposals or receive awards and could invest time developing and submitting proposals when they are not eligible to do so. GAO is making 11 recommendations to SBA and other agencies to take actions to improve implementation of the benchmarks, including improving the reliability of award data; implementing or revising the Commercialization Benchmark; and updating information about the consequence of not meeting the benchmarks. SBA and these agencies agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "RPA aircrews consist of a pilot and a sensor operator. The Air Force in most cases assigns officers to fly its RPAs. The Air Force relied solely on manned aircraft pilots to fly remotely piloted aircraft until 2010 when it established a RPA pilot career field (designated as Air Force Specialty Code 18X) for officers trained to fly only RPAs. As of December 2013, approximately 42 percent of the RPA pilots were temporarily assigned, manned aircraft pilots and manned aircraft pilot training graduates. Both of those groups of RPA pilots are temporarily assigned to fly RPAs with the assumption that after their tour they will return to flying their manned aircraft. By comparison, as of September 2018, manned aircraft pilots and manned aircraft pilot training graduates comprised only 17 percent of the RPA pilots. Further, the number of permanent RPA pilots has increased from 58 percent of all RPA pilots in December 2013, to 83 percent as of September 2018, as shown in figure 1. Additionally, Air Force enlisted personnel operate the RPAs’ sensors, which provide intelligence, surveillance, and reconnaissance capabilities. As a crewmember, the RPA sensor operators provide assistance to the RPA pilot with all aspects of aircraft use, such as tracking and monitoring airborne, maritime and ground objects and continuously monitoring the aircraft and weapons systems status. The Defense Officer Personnel Management Act, as amended, created a standardized system for managing the promotions for the officer corps of each of the military services. Pursuant to the established promotion system, the secretaries of the military departments must establish the maximum number of officers in each competitive category that may be recommended for promotion by competitive promotion boards. Within the Air Force, there are groups of officers with similar education, training, or experience, and these officers compete among themselves for promotion opportunities. There are several competitive categories including one that contains the bulk of Air Force officers called the Line of the Air Force, which includes RPA pilots, as well as pilots of manned aircraft and other operations-oriented careers. To determine the best-qualified officers for promotion to positions of increased responsibility and authority, the Air Force appoints senior officers to serve as members of a promotion selection board for each competitive category of officer in the Air Force. Promotion selection boards consist of at least five active-duty officers who are senior in grade to the eligible officers and who reflect the eligible population with respect to minorities and women, as well as career field, aviation skills, and command in an attempt to provide a balanced perspective. Promotion boards convene at the Air Force Personnel Center headquarters to perform a subjective assessment of each officer’s relative potential to serve in the next higher grade by reviewing the officer’s entire selection folder. This “whole-person concept” involves the assessment of such factors as job performance, professional qualities, leadership, job responsibility, depth and breadth of experience, specific achievements, and academic and professional military education. The Air Force developmental education programs expand expertise and knowledge as well as a path that helps to ensure that personnel receive the appropriate level of education throughout their careers. Officers have three opportunities to compete for intermediate developmental education programs, which focus on warfighting within the context of operations and leader development, such as at the Air Command and Staff College. Officers have four opportunities to compete for senior developmental education programs, such as at the Air War College, which are designed to educate senior officers to lead at the strategic level in support of national security, and in joint interagency, intergovernmental and multinational environments. A subset of developmental education is Professional Military Education, which includes resident and non-resident attendance options open to officers in both the intermediate and senior developmental education programs. Nonresident programs exist to provide individuals who have not completed resident programs an opportunity to complete them via correspondence, seminar, or other approved methods. Prior to 2017, officers who were identified by their promotion board as a developmental education candidate or “selectee” were assured of the opportunity to attend some form of developmental education in-resident program. However, in March 2017, the Air Force announced changes to its nomination process for officer developmental education by separating in- residence school selection status from promotion decisions. Since that time, commanders nominate candidates for in-residence, developmental education programs based on individual performance. Officers with aviation expertise, including RPA pilots, at various points in their careers, may rotate through both flying and nonflying positions to broaden their career experiences. Operational positions, whether flying or nonflying, include those positions that exist primarily for conducting a military action or carrying out a strategic, tactical, service, training or administrative military mission. Operational positions include a range of flying positions, such as for RPA pilots, operating aircraft to gather intelligence or conduct surveillance, reconnaissance or air strikes against a variety of targets. Operational positions that are non-flying positions could include assignments as a close-air-support duty officer in an Air Operations Center. Non-operational staff positions are generally non-flying positions and include assignments to headquarters or combatant command positions. Certain non-operational staff positions can be filled only by qualified pilots. Other non-operational positions are more general in nature and are divided among officer communities to help carry out support activities, training functions, and other noncombat related activities in a military service. These positions could include positions such as a recruiter, working as an accident investigator, advisor to foreign militaries, or a policy position at an Air Force major command. The Air Force views nonoperational staff positions as a means to develop leaders with the breadth and depth of experience required at the most senior levels inside and outside the Air Force. Various offices within the Air Force have roles and responsibilities for the management of aircrew positions and personnel. The Deputy Chief of Staff for Operations is to establish and oversee policy to organize, train and equip forces for the Department of the Air Force. This specifically includes the responsibility for all matters pertaining to aircrew management. The Directorate of Operations is responsible for developing and overseeing the implementation of policy and guidance governing aircrew training, readiness, and aircrew requirements. The directorate is the approval authority for aircrew distribution plans, rated allocation oversight and any other areas that have significant aircrew management implications. The Operational Training Division produces the official Air Force aircrew personnel requirements projections, and in conjunction with the Military Force Policy Division, develops and publishes the Rated Management Directive, formerly known as the Rated Staff Allocation Plan, as approved by the Chief of Staff of the Air Force as designed to meet near-term operational as well as long-term leadership development requirements. The Office of the Deputy Chief of Staff for Manpower, Personnel, and Services has responsibilities that include developing personnel policies, guidance, programs, and other initiatives to meet the Air Force’s strategic objectives to include accessions, assignments, retention, and career development. The Directorate of Force Management Policy, the Force Management Division analyzes officer, enlisted and civilian personnel issues. The division also maintains a variety of computer models and databases to analyze promotion, retention, accession, compensation and separation policy alternatives. Additionally, it is responsible for providing official aircrew personnel projections for use in various management analyses. The Air Force Personnel Center, one of three field-operating agencies reporting to the Deputy Chief of Staff of the Air Force, Manpower, Personnel and Services, conducts military and civilian personnel operations such as overseeing performance evaluations, promotions, retirements, separations, awards, decorations and education. The Center also directs the overall management and distribution of both military and civilian personnel. Based on our analysis of Air Force promotion data, the percentage of RPA pilots promoted were generally similar in comparison to the promotion rates of pilots in other career fields since 2013. However, it is important to note that since the population of eligible RPA pilots to be considered for promotion was smaller than other pilot populations, the promotion of one or two RPA pilots could have a large effect on their promotion rate. For example, the RPA pilot promotion rates were within 10 percentage points of the promotion rates for the other types of pilots in each year of those years in 8 out of 10 promotion boards to major and to lieutenant colonel held during that time frame. RPA pilot promotion rates from captain to major were generally similar as the promotion rates for other pilots from 2014 through 2017, as shown in figure 2. For example, in 2014, 94 percent of eligible RPA pilots (29 of 31), bomber pilots (47 of 50), fighter pilots (189 of 201) and 91 percent of eligible mobility pilots (355 of 388) were promoted from captain to major. This is an improvement in promotion rates for RPA pilots compared to 2006 through 2012, where RPA pilot promotion rates fell below those for all other pilots in 5 of the 7 promotion boards held. Additionally, the promotion rates for RPA pilots from major to lieutenant colonel relative to other types of pilots in 2013 through 2017 showed a similar improvement compared to 2006 through 2012, as shown in figure 3. For example, in 2017, 75 percent of eligible RPA pilots (15 of 20) were promoted, which is generally similar to the promotion rates for the other pilots—78 percent for bomber pilots (18 of 23), 83 percent for fighter pilots (75 of 90), and 72 percent for mobility pilots (143 of 199). However, in 7 of the 8 promotion boards held from 2006 through 2012, RPA pilot promotion rates from major to lieutenant colonel fell below the promotion rates for all other pilots. The one exception to the promotion rates being generally similar was the rate at which RPA pilots were promoted from lieutenant colonel to colonel. In this case, the rates for RPA pilots diverged notably from the promotion rates of bomber, fighter, and mobility pilots from 2013 to 2017. For example, in 2016, 1 out of the 5 (20 percent) eligible RPA pilots was promoted to colonel. In contrast, 13 of 21 (62 percent), bomber pilots, 32 of 51 (63 percent) fighter pilots, and 34 of 65 (52 percent) mobility pilots were promoted from lieutenant colonel to colonel. However, the promotion rates of RPA pilots from lieutenant colonel to colonel that we calculated should be considered cautiously as fewer than 10 RPA pilots were eligible for promotion boards each year through this time period. The promotion of one or two officers could have a large effect on the promotion rate due to the small number of eligible RPA pilots. In April 2014, we reported that Air Force officials attributed the low RPA pilot promotion rates from 2006 through 2012 generally to the process that it used to staff RPA pilot positions at that time. Specifically, they stated that commanders generally transferred less competitive pilots from other pilot career fields to RPA squadrons to address the increased demand. Air Force officials also stated that these officers generally had in their records fewer of the factors that the Air Force Personnel Center identified that positively influence promotions than their peers. They said that because the bulk of RPA pilots who competed for promotion during the time of our previous review was transferred using this process, these were the reasons that RPA pilots had been promoted at lower rates than their peers. Air Force officials stated that they believed the trend of increased promotion rates for RPA pilots from 2013 through 2017 mostly reflected the change in the population of eligible pilots who were recruited and specialized as an RPA pilot (i.e., the 18X career field). According to Air Force officials, the creation and establishment of this career field resulted in an increase in the number of skilled and more competitive promotion candidates. Specifically, as of September 2018, the number of permanent RPA pilots outnumbered all other types of pilots serving as RPA pilots combined. RPA pilots were nominated to attend developmental education programs, such as professional military education, at rates similar to the rates for other pilots from academic years 2014 through 2018, according to our analysis of Air Force data. An officer’s attendance at developmental education programs can be a factor that is taken into consideration when being assessed for promotion. Our analysis showed that, for the academic years 2014 through 2018, nomination rates for RPA pilots to Intermediate and Senior Developmental Education programs combined ranged from a low of 25 percent for academic year 2016 to a high of 31 percent for academic year 2015. In comparison, nomination rates across the same time period for pilots in other career fields ranged from a low of 21 percent for mobility pilots for academic year 2016 to a high of 35 percent for fighter pilots for academic year 2014. Table 1 provides the various nomination rates for each of the different types of pilots that we analyzed. The Air Force promoted enlisted RPA sensor operators at a rate similar to the rates of all enlisted servicemembers, according to our analysis of Air Force promotion data. Specifically, the Air Force promoted an average of 100 RPA sensor operators (or an average of 26 percent) annually for the period from 2013 through 2017. Similarly, the Air Force annually promoted an average of approximately 27,000 enlisted personnel (or an average of 25 percent) for the same period. Our analysis showed that in 2013 through 2017, promotion rates for RPA sensor operators ranged from a low of 18 percent in 2014 to a high of almost 35 percent in 2017. The promotion rates across the same time period for all other enlisted servicemembers ranged from a low of approximately 19 percent in 2014 to a high of 32 percent in 2017. Table 2 provides the various promotion rates that we analyzed. Air Force enlisted servicemembers in the lowest four levels (grades E1- E4) are selected for promotion based on time in grade and time in service. Selection for promotion to the next two levels, known as the non- commissioned officer levels (grades E5 and E6), is based on the Weighted Airman Promotion System to fill the requirement. This system provides weighted points for an individual’s performance record and service decorations received, and the results of tests to assess an individual’s promotion fitness and job skills and knowledge. Selection for promotion to the senior non-commissioned officer level (grades E7-E9) is based on the same Weighted Airman Promotion System plus the results from a central board evaluation. Servicemembers eligible for promotions to the non-commissioned ranks are assessed and then listed from the highest to lowest scores and offered promotion if they fall above a specific cutoff score established to meet quotas within each career field and for each rank. While enlisted servicemembers must pass knowledge and skills tests to qualify for promotions, officials explained that the resulting promotion rates essentially reflect requirements and are not indicative of competitiveness across career fields as with officer promotion rates. Officials stated that enlisted servicemember promotions are based on the service’s numeric personnel requirements for each enlisted grade. To consider an enlisted servicemember for promotion from among those who are eligible, a vacancy must first be required at the next higher grade within that servicemember’s occupational area, known as their Air Force Specialty Code that needs to be filled. For example, in 2017, the Air Force required promotions for 128 RPA sensor operators, and officials promoted that many enlisted servicemembers from the cohort of 370 eligible servicemembers. For each year since 2013, the Air Force has assigned over 75 percent of the non-operational staff positions that require an RPA pilot to the organizations that had requested those positions, according to our analysis of service headquarters data. However, the overall number of non-operational staff positions that require an RPA pilot is about one- tenth of the number of those requiring pilots in other career fields. For example, in fiscal year 2018 the Air Force had 83 non-operational staff positions that required an RPA pilot compared to 330 positions requiring fighter pilots. Air Force officials stated that the number of RPA positions was smaller than for other pilots because the career field is relatively new and still growing. Non-operational staff positions are generally non-flying positions and include assignments to headquarters or combatant command positions. Certain non-operational staff positions can be filled only by qualified pilots. Other non-operational positions are more general in nature and are divided among officer communities in a military service. Officers with aviation expertise, including RPA pilots, at various points in their careers may rotate through both flying and nonflying positions to broaden their career experiences and Air Force officials stated that staff assignments are essential to the development of officers who will assume greater leadership responsibilities. Headquarters Air Force prepares allocation or “assignment” plans to provide positions requiring aviator expertise to various Air Force commands and other entities. Under this process, these organizations identify the number of non-operational staff positions requiring aviator expertise (e.g., pilots) they require as well as indicate the type of aviator expertise that is needed to fill those positions, (e.g., fighter, bomber, RPA). Headquarters Air Force then determines the extent to which the staff position requirements can be met in accordance with senior leadership priorities designed to equitably manage the shortage of officers with aviation expertise. The results of this process are outlined in the Air Force’s annual Rated Management Directive which reinforces each organization’s flexibility for using their entitlements in non- operational staff and other positions. In some instances, the Air Force is able to assign enough positions to an organization to meet nearly all of its non-operational staff position requirements. For the purposes of our analyses, the assignment rate is determined by the number of positions assigned compared to the number of positions the organization required. For example, in fiscal year 2018 the Air Force assigned 99 percent of the non-operational staff positions that require an RPA pilot to the requesting entities. In other instances, the Air Force assignment rate of non-operational staff positions may be much lower because of competing management priorities or shortages of personnel in a career field. As a result, the Air Force’s assignment of staff positions can vary across the different career fields. For example, the Air Force fighter pilot career field has had fewer fighter pilots than its authorization number since 2013. Therefore, the Air Force assignment rate for staff positions requiring fighter pilots is significantly lower than the rate for staff positions requiring other types of pilots. For example, in fiscal year 2017, the Air Force assignment rate for staff positions requiring a fighter pilot was 18 percent, which was less than a quarter of the rate for staff positions requiring an RPA pilot, as shown in table 3. The Air Force has not reviewed its oversight process to ensure that it is effectively and efficiently managing its review of non-operational staff positions that require aviator expertise, such as RPA pilots. Air Force officials explained that its oversight process for managing these positions requiring pilot expertise consists of a time-consuming, labor-intensive process of exchanging emails and spreadsheets with 57 organizations, such as various Air Force Major commands like the Air Combat Command, the Air Force Special Operations Command, and the National Guard Bureau. According to these officials, this process consists of the maintenance and exchange of spreadsheets and briefing slides with information about every position found throughout the Air Force and in various other entities that are required to be reviewed and validated annually. Additionally, this process is maintained by one official within the Headquarters Air Force who must exchange the spreadsheets via email approximately twice a year with officials from each of the organizations that are responsible for annually justifying their continued need for non- operational staff positions requiring aviator expertise. Air Force officials stated that this process does not always produce complete and accurate information in a timely manner as in some instances the information produced is not relevant by the time a complete review of the positions is accomplished. Headquarters Air Force officials familiar with its oversight responsibilities stated that using a different system would more efficiently and effectively support their ability to manipulate, analyze and share information among the applicable organizations and make informed decisions. For example, these officials explained that over the last 10 years, the Air Force drew down the number of squadrons, but did not do a good job of cross checking that reduced number of squadrons with a revised number of staff positions required for support. Therefore, the number of non- operational staff positions was not adjusted and are now artificially high in some career fields and others may have fewer non-operational staff positions than needed. These officials added that as the new RPA pilot career field has developed, there has been no timely and widely accessible system of checks and balances to establish an accurate number of non-operational staff positions required to support the career field. Further, they said that using a different system that allows them to have more timely and quality information would enhance their ability to manage and make decisions regarding the appropriate mix of expensive pilots and others with aviator expertise between operational line positions and non-operational staff position needs. They said this would better ensure that there is a reasonable range of non-operational staff positions required for each career field, such as for the growing RPA pilot career field. An October 2017 memorandum from the Air Force Chief of Staff stated that the number of non-operational staff positions which require aviation expertise must be brought into balance with the Air Force’s ability to produce the appropriate number of officers with aviator expertise. The memorandum also stated that organizations were strongly encouraged to change their current requirements to meet the available current force levels including converting chronically unfilled non-operational staff positions requiring aviator expertise to positions specifically designated for RPA pilots. As a result of two separate reviews, Air Force officials identified hundreds of these positions that lacked adequate justification or qualifications to support the positions’ requirement to be filled by officers with aviator expertise. For example, in August 2018, out of 2,783 non- operational staff positions, the Air Force found that 513 of these positions were evaluated as lacking adequate justification or mission qualifications to support the need for aviator expertise and 61 positions were eliminated after further review. Prior to 2010, according to officials, the Headquarters Air Force maintained a web-based management oversight system to review and approve the justifications for its non-operational staff positions requiring aviator expertise that allowed for wide access to and manipulation and timely analyses of information. Additionally, this former system provided multilevel coordination among Headquarters Air Force and its major commands for reviewing the justifications of all of the positions. According to Headquarters Air Force officials, the use of this management oversight system was discontinued in 2010 due to a decision to no longer fund the contractor maintaining the system. In October 2018, officials from one of the Air Force’s Major Commands confirmed that the current oversight system in use is time-consuming, does not readily support information analysis and that plans to integrate it with another existing management system had not happened. The Headquarters Air Force official in charge of managing this process told us that he had submitted multiple requests over the last 3 years to integrate the information being managed with spreadsheets and emails into an existing personnel management system to improve the efficiency of the process. However, according to this official, higher priorities and funding issues have precluded the information from being integrated into another existing system. In September, 2018, another Air Force official told us that the Program Management Office that manages a system into which the information could be integrated was behind schedule in implementing several other system updates. Because of these delays, the official acknowledged that no review has yet been done of what is needed to provide the most efficient management oversight process of the information currently being managed via the spreadsheet process. The official said that before any actions could take place, a review of requirements and priorities would be needed in order to make a determination as to what changes could be made. Therefore, he said that there are no decisions or timelines available for reviewing a process that would provide the validation information for non-operational staff positions in a timelier and widely accessible manner. Air Force instructions state that major commands are required to perform annual aircrew requirements reviews including review and revalidation of all aircrew positions, except for rank of colonel or higher, to ensure aviator expertise is required, and report the results to the Headquarters Air Force Operations Training Division. Further, the Headquarters Air Force Operations Training Division has the responsibility to ensure a management process is in place to provide efficient and effective oversight of the major commands’ annual review and revalidation of the aircrew position requirements process. Additionally, Standards for Internal Control in the Federal Government states that management should identify needed information, obtain the relevant information from reliable sources in a timely manner, and process the information into quality data to make informed decisions and evaluate its performance in achieving key objectives and addressing risks. By reviewing its oversight process, the Air Force may be able to identify a more efficient manner to manage its non-operational staff positions that require aviator expertise. A management oversight process that provides timely and widely accessible position justification information may help ensure that the proper type of aviator expertise needed in these positions is up to date. In turn, this could result in a more efficient use of the Air Force’s short supply of expensive pilot resources, particularly fighter pilots, and could potentially improve its ability to assign and develop effective leaders, such as those within the growing RPA career field. The Air Force continues to expand the use of RPAs in its varied missions of intelligence gathering, surveillance and reconnaissance, and combat operations. While the overall number of eligible RPA pilots is much smaller compared to other pilots, over the last 5 years RPA pilots have achieved promotions and nominations to attend developmental education programs at rates that were generally similar in comparison to pilots in other career fields. Additionally, non-operational staff positions requiring RPA pilots have been assigned to entities at high rates since 2013, but the number of positions available to them is smaller than the number that require fighter, bomber, and mobility pilots because the career field is still growing. Air Force officials have noted problems with the current oversight process which may be hindering its ability to efficiently and effectively manage these non-operational staff positions as required by Air Force policy. For example, the Air Force has recently identified that a large number of these positions designated as requiring officers with aviator expertise lacked adequate justification for that requirement. By reviewing the efficiency and effectiveness of its management oversight process that provides information in a timelier and more widely accessible manner, the Air Force could better ensure that it makes informed decisions regarding the need for pilots in certain non-operational staff positions and is in compliance with policy. It also could help ensure that the Air Force more efficiently uses its short supply of expensive pilot resources. Ultimately, this may positively affect its ability to assign and develop effective leaders, such as those within the growing RPA career field. The Secretary of the Air Force should review its management oversight process that provides information and documents the justifications of the Air Force’s non-operational staff positions requiring aviator expertise, including RPA positions, to identify opportunities for increased efficiency and effectiveness and take any necessary actions. (Recommendation 1) In written comments reproduced in appendix II, DOD concurred with comments to the recommendation, and provided separate technical comments, which we incorporated as appropriate. DOD concurred with the recommendation to review the management oversight process that provides information and documents the justifications of the Air Force’s non-operational staff positions requiring aviator expertise, including RPA positions, to identify opportunities for increased efficiency and effectiveness and to take any necessary actions. In its comments, DOD stated that it agrees the current oversight process is time-consuming and could be more efficient. However, it believes this process is effective because the Air Force was able to validate the need for having pilots fill a majority of its non-operational staff positions during a recent congressionally-mandated review of these positions. As we reported, this review of all staff positions requiring aviator expertise across the Air Force and other defense entities discovered more than 500 of approximately 2,800 positions that were initially found to be lacking adequate justifications, and 61 positions eventually were eliminated. We believe the Air Force’s results from this one-time review is an example of how the current process is not consistently yielding up-to-date validations of positions. Further, DOD also stated that while a move to automating the process again has been considered, current funding shortfalls prevent the Air Force from establishing an automated system to increase the process’s efficiency. We continue to believe that the Air Force should review its current process in order to identify any viable means to increase its efficiency and effectiveness. Such a review may provide the Air Force with opportunities to more consistently provide the proper type of aviator expertise needed to fill its staff positions as well as potentially provide more leadership opportunities to those within growing career fields, such as RPA pilots. We provided a draft of this report to DOD for review and comment. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Defense, and the Secretary of the Air Force. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions regarding this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Since 2014, we have issued three reports assessing the Air Force’s remotely piloted aircraft (RPA) workforce management. In April 2014, we found that the Air Force had shortages of pilots of remotely piloted aircraft (RPA) and faced challenges to recruit, develop, and retain pilots and build their morale. We also found that Air Force RPA pilots experienced potentially challenging working conditions and were promoted at lower rates than other career fields. We made seven recommendations, and the Air Force generally concurred with our recommendations. It has fully implemented all but one recommendation to analyze the career field effect of being an RPA pilot to determine whether and how being an RPA pilot is related to promotions. In May 2015, we found that the Air Force faced challenges ensuring that their RPA pilots completed their required training and that the Office of the Deputy Assistant Secretary of Defense for Readiness had not issued a training strategy that addresses if and how the services should coordinate with one another to share information on training pilots who operate unmanned aerial systems. We made one recommendation related to these findings with which DOD concurred. However, in September 2018, an official from the Office of Secretary of Defense for Readiness stated that there are compelling reasons why a training strategy is no longer necessary and that no action is planned to implement the recommendation. In January 2017, we found, among other things, that the Air Force had not fully tailored a strategy to address the UAS pilot shortage and evaluated their workforce mix of military, federal civilian, and private- sector contractor personnel to determine the extent to which these personnel sources could be used to fly UAS. We made five recommendations related to these findings with which the Air Force and DOD generally concurred. As of July 2018, the Air Force has taken some action to address the first three recommendations and officials from the Office of the Under Secretary of Defense for Personnel and Readiness have fully implemented the other two recommendations. In table 4, we present the recommendations that we made to the Air Force and the Under Secretary of Defense for Personnel and Readiness and summarize the actions taken to address those recommendations as of September 2018. In addition to the contact named above, Lori Atkinson (Assistant Director), Rebecca Beale, Amie Lesser, Felicia Lopez, Grant Mallie, Ricardo Marquez, Richard Powelson, Amber Sinclair, and John Van Schaik made key contributions to this report.", "summary": "An increasing number of Air Force missions use unmanned aerial systems, or RPAs, to provide their specialized capabilities in support of combat operations. The demand for crew members for these systems has grown rapidly. For example, RPA pilot requirements increased by 76 percent since fiscal year 2013 while those for fighter pilots stayed about the same. These requirements include pilots who serve in non-operational staff positions, such as trainers. Senate Report 115-125 included a provision that GAO review career advancement for Air Force RPA pilots compared to other pilots. This report, among other things, describes (1) the rates that RPA and other pilots were promoted; (2) the rates that non-operational staff positions requiring RPA pilot expertise were assigned to various organizations, and (3) the extent to which the Air Force has reviewed its oversight process to effectively manage non-operational staff positions requiring aviator expertise. Among other things, GAO analyzed Air Force pilot promotion data from 2006-2017. GAO also analyzed non-operational staff position data from fiscal years 2013-2018 and interviewed officials regarding the management and oversight of these positions. The promotion rates for Air Force Remotely Piloted Aircraft (RPA) pilots have been generally similar to those of other pilots since 2013 and have increased over time. See figure below for promotion rates from major to lieutenant colonel. Air Force officials stated that RPA pilot promotion rates increased because the creation of a dedicated career field resulted in more competitive candidates. Since 2013, over 75 percent of non-operational staff positions requiring RPA pilot expertise were assigned to various organizations within the Air Force, according to GAO's analysis. These positions carry out support and other noncombat-related activities as well as training functions and are essential to the development of officers. However, the overall number of these positions that require a RPA pilot is about one-tenth of the combined number of those requiring other pilots. For example, in fiscal year 2018, 83 non-operational staff positions required RPA pilots compared to 330 requiring fighter pilots. Air Force officials stated that the small number of RPA positions is because the career field is new. The Air Force has not reviewed its oversight process to ensure that it is efficiently managing its non-operational staff positions that require aviator expertise. Air Force officials explained that over the last 10 years, the Air Force reduced the number of squadrons but had not reviewed the number of non-operational staff positions. Similarly, the Air Force has had no widely accessible oversight process to monitor whether it had established an accurate number of non-operational staff positions required to support the new RPA career field. In August 2018, the Air Force identified 513 non-operational staff positions (out of 2,783) as needing further review because they lacked adequate justification of the need for aviator expertise. Officials described the process for managing these positions as time and labor intensive, which can cause delays in obtaining reliable information needed to inform decision-making. By reviewing this process, the Air Force may be able to identify opportunities to create efficiencies and more effectively manage its non-operational staff positions requiring aviator expertise. GAO recommends that the Air Force review its oversight process for managing the non-operational staff positions, including those for RPA pilots, to identify opportunities to increase efficiencies. DOD concurred with this recommendation.", "document_type": "gao"}
{"report": "Enacted in 1970, NEPA, along with subsequent CEQ implementing regulations, sets out an environmental review process that has two principal purposes: (1) to ensure that an agency carefully considers information concerning the potential environmental effects of proposed projects; and (2) to ensure that this information is made available to the public. DOT’s Federal Highway Administration (FHWA) and Federal Transit Administration are generally the federal agencies responsible for NEPA compliance for federally funded highway and transit projects. Project sponsors—typically state DOTs and local transit agencies—may receive DOT funds, oversee the construction of highway and transit projects, develop the environmental review documents that are approved by federal agencies, and collaborate with federal and state stakeholders. In addition, the Clean Water Act and the Endangered Species Act are two key substantive federal environmental protection laws that may be triggered by a proposed transportation project and that may require the federal resource agencies to issue permit decisions or perform consultations before a project can proceed. Section 404 of the Clean Water Act generally prohibits the discharge of dredged or fill material, such as clay, soil or construction debris, into the waters of the United States, except as authorized through permits issued by the Corps. Before the Corps can issue a section 404 permit, it must determine that the discharge of material is in compliance with guidelines established by the Environmental Protection Agency. The Corps issues two types of permits: Individual permits: issued as a standard permit for individual projects, following a case-by-case evaluation of a specific project involving the proposed discharge of dredged or fill material and/or work or structures in navigable water. General permits: issued for categories of projects the Corps has identified as being similar in nature and causing minimal individual and cumulative adverse environmental impacts. General permits may be issued on a state, regional, or nationwide basis. In fiscal year 2016, the Corps completed approximately 250 individual permits and 10,750 general permits for transportation projects, based on agency data. The Corps is not required to complete its permit reviews within a specified time frame; however, it has performance metrics, including target time frames for issuing permit decisions based on permit type. The purpose of the Endangered Species Act is to conserve threatened and endangered species and the ecosystems upon which they depend. Section 7 of the Act directs federal agencies to consult with FWS or NMFS when an action they authorize, fund, or carry out, such as a highway or transit project, could affect listed species or their critical habitat. Section 7 also applies if non-federal entities receive federal funding to carry out actions that may affect listed species. Before authorizing, funding, or carrying out an action, such as a highway or transit project, lead federal agencies must determine whether the action may affect a listed species or its critical habitat. If a lead federal agency determines a proposed action may affect a listed species or its critical habitat, formal consultation is required unless the agency finds, with FWS’ or NMFS’ written concurrence, that the proposed action is not likely to adversely affect the species. Formal consultation is initiated when FWS or NMFS receives a complete application from the lead agency, which may include a biological assessment and other relevant documentation, which describe the proposed action and its likely effects. The formal consultation usually ends with the issuing of a biological opinion by FWS or NMFS, which generally must be completed within time frames specified in the Endangered Species Act and in its implementing regulations. Specifically, FWS and NMFS have 135 days to complete a formal consultation and provide a biological opinion to the lead federal agency and project sponsor in order for the project to proceed. The consultation period can be extended by mutual agreement of the lead federal agency and FWS or NMFS. In fiscal year 2016, FWS completed 179 formal consultations and NMFS completed 29 formal consultations for federally-funded highway and transit projects, based on agency data. The three most recent transportation reauthorization acts include provisions that are intended to streamline various aspects of the environmental review process for highway and transit projects. We identified 18 statutory provisions from these acts that could potentially affect time frames for the environmental permitting and consulting processes for highway and transit projects. Based on our review, we grouped the provisions into two general categories: Administrative and Coordination Changes and NEPA Assignment. See appendix II for a complete list and descriptions of the 18 provisions that we identified. The 16 Administrative and Coordination Changes provisions are process oriented. These provisions, for example: (1) establish time frames for the environmental review process, (2) encourage the use of planning documents and programmatic agreements, and (3) seek to avoid duplication in the preparation of environmental review documents. The two NEPA Assignment provisions authorize DOT to assign its NEPA responsibility to states. Resource agency and state DOT officials told us they believe that some actions called for by the 18 provisions we identified, such as programmatic agreements, have helped streamline the consulting and permitting processes. However, a lack of reliable agency data regarding permitting and consulting time frames hinders a quantitative analysis of the provisions’ impact. Further, limitations in FWS and NMFS data, such as missing or incorrect data and inconsistent data entry, could impair the agencies’ ability to determine whether the agencies are meeting statutory and regulatory requirements, such as the extent to which the agencies complete formal consultations and provide biological opinions within 135 days. FWS and NMFS have limited controls that would help ensure the completeness and accuracy of their data. Resource agency and state DOT officials we interviewed told us they believe that some actions called for by the provisions we identified have helped streamline the consulting and permitting processes. While these officials generally did not quantify or estimate the number of days review times may have been reduced, they did generally explain how the review processes were accelerated, depending upon the action being taken, for example: Programmatic agreements: Officials from 18 of the 23 state DOTs and federal resource agency field offices we spoke with told us that using programmatic agreements has generally helped reduce review times. Programmatic agreements can standardize the consulting and permitting processes for projects that are relatively routine in nature (e.g., repaving an existing highway). For example, one state DOT and an FWS field office have an agreement that establishes a consistent consultation process to address projects, such as pavement marking, that have either a minimal or no effect on certain federally protected species and their critical habitat. Programmatic agreements may contain review time targets that are shorter than those for reviews not subject to the agreements. For example, officials from one FWS field office said that they typically met the 60-day time limit that was established in one such agreement, compared to the standard 135- day period for completing formal consultations and issuing biological opinions. In part, DOT has assisted in establishing programmatic agreements affecting consultation and permit review processes. For example, according to DOT, its Every Day Counts initiative has helped create scores of programmatic agreements through efforts such as identifying best practices, performing outreach, developing new approaches, and improving existing ones. In our 2018 report on highway and transit project delivery, 39 of 52 state DOTs in our survey reported that programmatic agreements had sped up project delivery within their states. Federal liaison positions: Officials from 21 of the 23 selected state DOT and federal resource agency field offices told us that liaison positions at resource agency offices, which are positions held by federal employees who work on consultation and permit reviews for state DOTs, have streamlined the consultation and permit review processes. According to almost all of the selected officials, these positions provide benefits, such as dedicating staff to process the state DOTs’ applications for permits and consultations, allowing state DOTs to prioritize projects, and enabling enhanced coordination between agencies to avoid conflicts and delays in the review process. For example, officials from one state DOT said that having a dedicated liaison at an FWS field office gave the state DOT a responsive point of contact, helped address workload concerns at the FWS field office, and enabled FWS office staff to attend interagency coordination meetings. According to DOT, as of November 2017, states had 43 full-time equivalent positions at FWS and 11 at NMFS. Corps officials stated that states had more than 40 full-time equivalent positions at the Corps in fiscal year 2017. In our 2018 report on highway and transit project delivery, 32 of 52 state DOTs in our survey reported that they had used this provision. We found that 23 of those state DOTs reported that it had sped up project delivery within their states. Early coordination: Officials from 18 of the 23 state DOT and federal resource agency field offices we spoke with told us that early coordination in consultation and permit review processes has generally reduced review times. According to most selected state DOT and resource agency officials, this early coordination can provide benefits, such as improving the quality of applications, avoiding later delays by identifying concerns early in the process, and allowing permitting to be considered in the design phase of projects. For example, officials at one of the Corps’ district offices told us that they routinely hold pre-application meetings with state, DOT, and resource agency contacts to define what the Corps needs to process the application quickly and to avoid later problems. Similarly, in our 2018 report on highway and transit project delivery, 43 of 52 state DOTs in our survey reported that they had used this provision, and 27 of those reported that the provision had sped up project delivery within their states. Although selected federal resource agency and state DOT officials were able to identify actions called for by the provisions that they believe have helped streamline the consulting and permitting processes, officials from all three resource agencies said that their agencies had not analyzed the impact of the streamlining provisions on permit review or consultation time frames and did not have plans to do so in future. For two reasons, we were unable to quantify the impact the 18 streamlining provisions had on the three federal resource agencies’ consultation and permit review time frames. First, factors other than the streamlining provisions may have also affected review times, limiting our ability to discern the extent to which the provisions had an impact. Second, the resource agencies could not provide enough reliable data for us to analyze changes in consultation and permit review durations over time. With respect to the first reason, factors other than the streamlining provisions can influence the durations of permit reviews and consultations, a situation that would make it difficult to establish whether the streamlining provisions in the reauthorization acts had a direct impact. In particular, officials from resource agencies and state DOTs we interviewed informed us that some offices took actions included in some of the various streamlining provisions before the three transportation reauthorizations were enacted. For example, officials at one FWS field office said that the office completed a programmatic agreement in 2004. Officials at one state DOT said that they had funded positions at resource agency offices for two decades. Corps officials said that the Corps implemented early coordination before the provision requiring this action was enacted. DOT officials also said that the provisions generally codified and expanded on existing actions. Further, factors such as staffing shortages at state DOTs and resource agency offices may also affect the length of consultations and permit reviews. Therefore, even if the durations of permit reviews and consultations could be evaluated over time with enough reliable data, it could be difficult to connect changes in the durations to the streamlining provisions with any confidence. Second, none of the three resource agencies could provide enough reliable data to evaluate trends in the duration of consultations and permit reviews after the 15 provisions were introduced in SAFETEA-LU and MAP-21, and the FAST Act was enacted too recently to evaluate any trends following the 3 provisions it introduced. To evaluate trends in permit review and consultation durations before and after the provisions were enacted, we would need sufficient data before and after their enactment. The SAFETEA-LU, MAP-21, and FAST Act provisions were enacted in August 2005, July 2012, and December 2015, respectively. Available Corps’ data could not be used to determine trends in permit review durations before and after the SAFETEA-LU and MAP-21 provisions were enacted. Specifically, Corps officials told us that their data prior to October 2010 should not be used to evaluate trends due to changes in the Corps’ data tracking system and data entry practices. The Corps did not provide more than one full fiscal year of data prior to 2012, and we would need more than one year of data to establish an adequate baseline in order to control for variations that may occur from year to year. Further, FWS and NMFS could not provide reliable data to evaluate trends in the durations of consultations before or after enactment of SAFETEA-LU and MAP-21. FWS and NMFS officials informed us of limitations in their agencies’ consultation data that rendered the data incomplete prior to fiscal year 2009 and calendar year 2012 respectively, a circumstance that would prevent us from evaluating trends following SAFETEA-LU. Specifically, FWS officials told us that use of its data tracking system was not mandatory in all regions for consultation activities prior to fiscal year 2009. NMFS officials told us that data from its tracking system are incomplete prior to 2012, because some prior records did not transfer properly during a migration to a newer version of the database. Further, the weaknesses in more recent FWS and NMFS data that we identify below would also limit an analysis of changes in consultation durations following MAP-21. Finally, since the three agencies provided data through fiscal year 2016, we had less than one fiscal year of data following the December 2015 enactment of the FAST Act, an amount that was insufficient to evaluate trends in consultation and permit review durations following the Act’s enactment. We identified limitations, such as incorrect or missing data and inconsistent data entry practices, in more recent FWS and NMFS data, and such limitations would limit future analysis of trends in the duration of consultations. We did not identify similar limitations in Corps data. These limitations could also hinder analyses of the extent to which the agencies meet statutory and regulatory requirements, such as the extent to which the agencies completed formal consultations and issued biological opinions within 135 days. Standards for internal control in the federal government state that agency management should use quality information to achieve the agency’s objectives and should design appropriate controls for information systems that ensure that all transactions are completely and accurately recorded. Information systems should include controls to achieve validity, completeness, and accuracy of data during processing, including input, processing, and output controls. However, we identified errors in consultation data provided by FWS and NMFS officials. For example, FWS’s data included 1,568 unique transportation-related formal consultations that started and concluded within fiscal years 2009 through 2016. Of those records, 27 had formal consultation initiation dates that followed the conclusion date, resulting in a negative duration; 113 lacked an initiation date, precluding a determination of the duration; and 19 had formal consultation initiation dates that preceded the dates on which FWS could begin work. NMFS officials said that records cannot be removed from the database once saved—including duplicate, incomplete, withdrawn, or otherwise bad records—and that the database does not always retain corrections after they are made. As a result, data exported from the database are manually reviewed for errors, according to NMFS officials. However, data provided to us after this manual review process still contained errors. Further, FWS and NMFS officials described limited controls to ensure the completeness and accuracy of their data. FWS officials said that they do not currently conduct systematic reviews to examine the accuracy of the data. The officials also said that they do not have procedures for follow-up when errors are found, although regional or headquarters staff may conduct outreach to an affected office if errors are found. FWS officials also acknowledged that the database lacks sufficient electronic safeguards on all fields to prevent errors. Similarly, NMFS officials said that NMFS has not tracked the accuracy of its data and that many fields in NMFS’s database do not have safeguards to limit data entry errors. FWS and NMFS also lack procedures to ensure that they consistently track all data associated with consultation time frames. For example, FWS and NMFS officials could not provide data on whether formal consultations and the issuance of biological opinions that exceeded 135 days obtained extensions, data that officials would need to track the extent to which their agencies comply with the requirement to complete consultations and issue biological opinions within 135 days absent an extension. The officials said that the agencies do not require their staff to enter extension data, and that some staff enter extension dates but others do not. In addition, although hundreds of projects may be reviewed under a single programmatic agreement, FWS and NMFS do not record all projects reviewed under programmatic agreements. For example, NMFS officials told us that the agency’s system is not designed for staff to enter individual actions reviewed under programmatic agreements. This process prevents comparisons of review time frames for individual projects under programmatic agreements with projects not reviewed under those agreements. FWS’s database also does not require some critical information for determining consultation time frames, such as the initiation dates for formal consultations. Further, FWS headquarters officials acknowledged that differing field office procedures had contributed to varying record-keeping methods, and officials at five of the seven FWS field offices we interviewed told us that FWS’s database is not used consistently among field offices. The quality of FWS’s and NMFS’s consultation data may limit the ability of the agencies to determine whether they are completing consultations within required time frames, as described above, and may also impact other internal and external uses of the data. For example, the quality of the data may limit the agencies’ evaluation and management of their consultation processes. FWS officials said that FWS uses its data internally in calculating annual performance measures and to answer questions from senior leadership, among other purposes. NMFS officials said that NMFS uses its data internally to examine the agency’s Section 7 workload, help set agency funding priorities, and track projects through the consultation process. FWS and NMFS will also have to ensure that their data systems can provide reliable data to comply with an executive order requiring federal agencies to track major infrastructure projects, including the time required to complete the processing of environmental reviews. The August 2017 executive order directed the Office of Management and Budget, in coordination with the Federal Permitting Improvement Steering Council, to issue guidance for establishing a system to track agencies’ performance in conducting environmental reviews for certain major infrastructure projects. To meet this directive, this system is to include assessments of the time and costs for each agency to complete environmental reviews and authorizations for those projects, among other things. According to a multi-agency plan, system implementation is planned to begin in the fourth quarter of fiscal year 2018, and publishing of performance indicator data is planned to begin in the first quarter of fiscal year 2019. In addition, FWS has provided consultation data to outside researchers who have publicly reported them in a study and a web portal. NMFS makes some data for completed consultations publicly available through the internet. NMFS and FWS officials we interviewed said that the agencies are developing new versions of their databases, and FWS officials said that they will develop new standard-operating procedures and guidance for data entry. Specifically, FWS officials said that they have discussed the development of a new version of their database that would better track consultations chronologically and ensure greater data accuracy and consistency, but that effort is still in the planning stage. Those officials also said that they have formed a team to explore the development of new standard-operating procedures, training, and guidance for consistent data entry and that they are considering how to include data on whether consultations received extensions in the new system. NMFS officials said that the agency is modernizing its database, including improving data entry, error prevention, maintenance, and tracking of actions under programmatic agreements. However, FWS and NMFS officials could not provide specific time frames for implementation or documentation of these efforts. Therefore, it is not clear whether these efforts will include internal controls that address all of the types of issues we identified. Officials at 19 of the 23 federal resource agency field offices and state DOTs we spoke with generally mentioned two additional actions, beyond the 18 provisions we identified, for streamlining the consultation and permitting process: field office assistance to lead federal agencies and project sponsors, including state DOTs, to improve applications for permits and consultations; and electronic systems for environmental screening and document submission. First, officials from some of the 16 federal resource agency field offices we spoke with stated that they provide assistance to lead federal agencies and project sponsors to clarify the information required in permit and consultation applications before they are submitted to the resource agency. Officials from 8 of those 16 offices stated that they provided that assistance in order to improve the quality and completeness of information included in the applications. Resource agency officials stated that the permit or consultation process is delayed when the lead federal agency or project sponsor does not initially provide the quantity or quality of information necessary for resource agencies’ field office staff to complete permits and consultations. These staff must then request additional information from the lead federal agency or project sponsor, extending the permit or consultation reviews. Therefore, officials at 16 of the 23 federal resource agency field offices and state DOTs we spoke with said that field office staff provided training to state DOT staff to specify the information field offices required for initial permit or consultation applications. In addition, officials at 6 of the 23 resource agency field offices and state DOTs we spoke with created or were in the process of creating documents, such as application templates or checklists, that specify information required initially by field offices for applications. For example, according to officials at one FWS field office, a staff member created a standardized form letter for consultation applications that includes information for the state DOT to submit with its applications. Second, officials at federal resource agency field offices and state DOTs also identified electronic systems for environmental screening and document submission as helpful streamlining actions. Some state agencies created electronic systems for permitting and consultation applications, according to officials at 6 of the 23 resource agency field offices and state DOTs we spoke with. Some of those state agencies created systems for submitting application documentation, which can include multiple reports and studies related to an endangered species or its critical habitat. In addition, some of those state agencies created electronic tools that screen potential transportation project areas for environmental impacts. For example, in Pennsylvania, state agencies created two electronic systems. The first system allows application materials to be shared with multiple state and federal agencies while the second allows applicants to screen project areas for potential impacts on endangered species. The Pennsylvania Natural Heritage Program, a partnership between four state agencies, created a system that allows lead federal agencies or project sponsors to determine what potential environmental impacts, if any, exist in a proposed project’s geographic area (fig. 1). According to field office officials who use this resource, it saves time and improves agency coordination on transportation projects. Officials at two additional offices stated that their state agencies were in the process of establishing such electronic systems. In addition, FWS has piloted additional capabilities for its existing electronic system that screens for species information. According to FWS officials, the current pilot is restricted to specific species included in existing programmatic agreements, but this updated system would guide applicants through the consultation application and allow electronic document submission. The federal resource agencies continue to seek out additional opportunities for their field offices to streamline the permitting and consultation processes, according to officials at 11 of the 16 field offices. Officials at four of those offices stated that they discuss additional streamlining opportunities at regular transportation-related meetings with other federal and state agency offices. However, beyond the streamlining actions and provisions cited above, officials at resource agency field offices and state DOTs did not identify additional opportunities used by multiple field offices to streamline permits and consultations. DOT has a role in streamlining the overall NEPA process for transportation projects. Officials from DOT and its modal administrations, in coordination with federal resource agencies, participate in or support several efforts, including the following, to streamline the NEPA process: Coordination meetings: DOT officials participate in some early or regular coordination efforts, according to officials at some federal resource agency field offices and state DOTs we spoke with. For instance, according to officials at one Corps district office, DOT officials participate in some monthly meetings between federal and state agencies to discuss both specific transportation projects and recurring issues that may present streamlining opportunities. Transportation liaisons: As mentioned above, recipients of DOT funds may partially fund the transportation liaison positions at federal resource agency field offices. Officials at some resource agency field offices and state DOTs we spoke with stated that liaisons implemented streamlining actions at those offices. For example, officials at one FWS field office stated that the office’s transportation liaisons are responsible for creating and maintaining programmatic agreements with the state DOT. In addition, DOT currently has interagency agreements to provide national transportation liaisons at resource agencies—including the Corps, FWS, and NMFS—who lead nationwide efforts, such as meetings among field offices where officials can share streamlining actions. Streamlining resource database: DOT maintains an online database of resources created by DOT and transportation liaisons for streamlining the NEPA process. The database, which is part of the Transportation Liaison Community of Practice online portal, includes programmatic agreements, regional streamlining efforts, and liaison- funding agreements, among other resources. The purpose of this database is to provide examples of streamlining actions for transportation liaisons and state DOT officials to use in implementing these actions with state and federal agency offices to streamline NEPA processes. DOT also participates in multi-agency efforts to identify recommendations for streamlining the NEPA process. Those efforts produced two multi- agency reports that have identified best practices for improving streamlining of the NEPA process: Red Book: In 2015, DOT coordinated with multiple federal agencies, including the resource agencies, to update the Red Book, a resource to help both federal and state agencies conduct concurrent environmental review processes and to improve coordination in the NEPA process for major transportation and other infrastructure projects. For instance, the Red Book recommended electronic information systems, including systems that share geographic information with the agencies involved, as a way to streamline the NEPA process. Annual interagency report: DOT and multiple federal agencies, including the resource agencies, contribute to the Federal Permitting Improvement Steering Council’s annual report on recommended actions for federal agencies. In the reports for fiscal years 2017 and 2018, those recommended steps included actions taken by some resource agency field offices. For example, recommended steps in the 2017 report included the creation of electronic application submission systems and training to improve permit and consultation applications. DOT officials stated that they continue to seek additional streamlining opportunities with federal and state entities, including federal resource agencies and state DOTs, through outreach to those agencies. For example, the officials told us that they had reached out to the resource agencies and provided training to help them identify what basic application information is needed for certain types of projects that are unlikely to be fully designed at that point in the project’s design. DOT officials also suggested that expanding the current streamlining actions that resource agencies have taken, such as utilizing the transportation liaison positions, would help streamline the process. CEQ oversees NEPA implementation, reviews and approves federal agency NEPA procedures, and issues regulations and guidance documents that govern and guide federal agencies’ interpretation and implementation of NEPA. In addition, CEQ has focused some of its efforts on furthering the goal of streamlining environmental reviews. Those efforts have included publication of various guidance and memorandums on the effective use of programmatic reviews, according to CEQ officials. For example, CEQ issued regulations that direct agencies, to the fullest extent possible, to integrate the NEPA process into project planning at the earliest possible time to avoid delays and resolve potential issues, and to perform coordinated and concurrent environmental reviews to the extent possible to minimize duplication of effort. CEQ officials also noted that CEQ continues to co-chair the Transportation Rapid Response Team, a working group of federal agencies that facilitates interagency coordination and seeks to improve surface transportation project delivery consistent with environmental guidelines. CEQ periodically reviews and assesses its guidance and regulations to improve the effectiveness and timeliness of NEPA reviews, according to a CEQ official. For example, CEQ reviewed the environmental review processes of selected agencies in 2015 to identify model approaches that simplify the NEPA process and reduce the time and cost involved in preparing NEPA documents. CEQ used this review to identify and recommend changes to modernize NEPA’s implementation, including using information technology, such as a web-based application that identifies environmental data from federal, state, and local sources within a specific location, to improve the efficiency of environmental reviews. On August 15, 2017, the President signed an executive order that directed CEQ to develop a list of actions it will take to enhance and modernize the environmental review and authorization process. In September 2017, CEQ outlined its actions to respond to the executive order in a Federal Register Notice. According to CEQ officials, in response to the executive order, CEQ is in the process of reviewing its existing regulations on the implementation of the provisions of NEPA to identify changes needed to update and clarify its regulations. In June 2018, CEQ published an advance notice of proposed rulemaking to solicit public comment on potential revisions to its regulations to ensure a more efficient, timely, and effective NEPA process consistent with the national environmental policy. In addition, CEQ, along with the Office of Management and Budget, issued guidance for federal agencies for processing environmental reviews and authorizations in accordance with the executive order’s goal of reducing the time for completing environmental reviews for major infrastructure projects. Finally, CEQ officials stated that CEQ is leading an interagency working group, which includes representatives from the resource agencies, to review agency regulations and policies to identify impediments to the processing of environmental review and permitting decisions. CEQ anticipates the working group findings will address a number of issues relating to environmental reviews, including the environmental consulting and permitting processes. The federal government has enacted a number of statutory provisions aimed at streamlining the environmental review process for highway and transit projects. However, while Corps, FWS, and NMFS officials believe that these provisions have helped streamline their permit reviews and consultations, the lack of data hinders quantification of any trends in the duration of those reviews. Furthermore, agency and government-wide efforts to track major infrastructure projects, such as the planned Office of Management and Budget performance tracking system, will be hindered without accurate and reliable data. FWS and NMFS do not have adequate internal control procedures in place to ensure accurate and reliable data and cannot accurately assess their ability to meet statutory and regulatory requirements for completing consultations and issuing biological opinions. Although FWS and NMFS are in the process of upgrading their data systems, the agencies do not have documented plans or time frames that identify what controls they will use to ensure accurate data on the time taken for consultation reviews. We are making a total of two recommendations, one to the Fish and Wildlife Service and one to the National Marine Fisheries Service. Specifically, we are making the following recommendation to the Fish and Wildlife Service: The Principal Deputy Director of the Fish and Wildlife Service should direct the Fish and Wildlife Service to develop plans and time frames for improving its new consultation tracking system and develop appropriate internal controls, such as electronic safeguards and other data-entry procedures, to ensure accurate data on the time taken for consultations. (Recommendation 1) We are making the following recommendation to the National Marine Fisheries Service: The Assistant Administrator for Fisheries should direct the National Marine Fisheries Service to develop plans and time frames for improving its new consultation tracking system and develop appropriate internal controls, such as electronic safeguards and other data-entry procedures, to ensure accurate data on the time taken for consultations. (Recommendation 2) We provided a draft of the report to the Departments of Transportation, Defense, Commerce, and Interior and the Council on Environmental Quality. The Departments of Commerce and Interior each provided written responses, which are reprinted in appendixes III and IV, respectively. The Departments of Commerce and Interior agreed with our recommendations. In addition, the Departments of Transportation, Defense, Commerce, and Interior and the Council on Environmental Quality provided technical comments, which we incorporated as appropriate. We are sending copies of this report to appropriate congressional committees, the Secretary of the Department of Transportation, Secretary of the Department of Defense, Secretary of the Department of the Interior, Secretary of the Department of Commerce, and other interested parties. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Our work focused on federal-aid highway and transit projects and the provisions included in the past three surface-transportation reauthorizations that are intended to streamline the environmental consulting and permitting processes performed by the three federal resource agencies: Fish and Wildlife Service (FWS), National Marine Fisheries Service (NMFS), and the U.S. Army Corps of Engineers (Corps). This report (1) addresses the extent to which identified streamlining provisions had an impact on the time frames for the environmental consulting and permitting processes; (2) identifies actions taken by the resource agencies to streamline their consulting and permitting reviews and identifies additional streamlining opportunities, if any; and (3) describes the actions taken by the Council on Environmental Quality (CEQ) to accelerate highway and transportation projects. To identify relevant provisions that were aimed at streamlining the consulting and permitting processes for highway and transit projects, we reviewed the last three surface transportation reauthorization acts and relevant federal statutes, regulations, and guidance. The three reauthorizations we reviewed are as follows: the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU); the Moving Ahead for Progress in the 21st Century Act (MAP-21); and the Fixing America’s Surface Transportation Act (FAST Act). We identified 18 provisions that are intended to streamline various aspects of the NEPA environmental review process and could potentially affect the permitting and consultation processes of the three federal resource agencies. Provisions were grouped into categories developed in a previous GAO report on project delivery for ease of understanding. In our review we identified relevant statutory provisions as they had been amended by the three surface transportation reauthorization acts. Some of the provisions, as originally enacted, were modified by subsequent legislation. To evaluate the extent to which the streamlining provisions had an impact on the consulting and permitting processes, we requested official responses from each of the three resource agencies on the impact of the 18 provisions we identified on the consulting and permitting processes. We also conducted interviews with resource agency officials in Washington, D.C. and the respective field, district, and regional offices to determine the use and impact of the streamlining provisions from the surface transportation reauthorization acts. To quantify the extent to which the streamlining provisions had an impact on the time frames for completing consultations and permit reviews, we requested data on the time frames of consulting and permitting from FWS, NMFS, and Corps data systems for fiscal years 2005 through 2016 for all federally funded highway and transit projects. We requested data from the resource agencies with a variety of information for each record that included the start and end dates for each consultation and permit decision, the type of consultation or permit decision, the project sponsor or entity requesting the consultation or permit decision, the project type, a description of the project, and the field, district, or regional office that received and entered each record. The agencies provided the most recently available data, which we analyzed. FWS was unable to provide us reliable data prior to fiscal year 2009; the Corps was unable to provide us reliable data prior to fiscal year 2011, and NMFS was unable to provide us reliable data prior to calendar year 2012. Agency officials stated that data prior to those years were unreliable because of various factors, such as NMFS’s performing a data migration to a new system where some records did not transfer properly and Corps changes to its database in 2011 that made earlier data incomparable to post-2011 permit records. We performed checks to determine the reliability of the agency data and to identify potential limitations, such as missing data fields, errors, and discrepancies in calculations between records. We determined that the data provided by FWS and NMFS were not sufficiently reliable for examining the impact of the streamlining provisions on the time frames for completing consultation reviews. We also determined that the data provided by the Corps was sufficiently reliable to conduct analysis of permitting time frames, but because the Corps was unable to provide reliable data prior to fiscal year 2010, we were unable to examine the impact of streamlining provisions on the time frames for completing permit reviews. Our discussion in the report of resource agency data focuses on these limitations. We reviewed agency policies and procedures on ensuring accurate and reliable data and compared them with federal standards for internal controls. To examine the actions used by resource agencies to streamline consulting and permitting reviews, we interviewed officials in seven FWS field offices, seven Corps district offices, two NMFS regional offices, three transit agencies, and seven state departments of transportation (state DOTs) to discuss leading practices and additional opportunities for streamlining the consulting and permitting processes, as well as the use of the respective agency data systems. We reviewed field office documents and policies used to accelerate consulting and permitting. To select the federal resource agency field and district offices for interviews, we used the consultation and permit data collected from the agencies. We selected the offices based on a number of criteria identified through analysis of federal resource agency data between fiscal years 2009 and 2016, including: the most consultations or permit decisions performed; a mix of the average length of time for consultations or permit a mix of the types of consultations (e.g., formal or programmatic) or permit decisions (e.g., general or individual) performed by office; and a mix of geographic regions. For the selection of state DOTs, we used a number of selection criteria including: the most consultations and permit decisions requested by state; a mix of the average consultation or permit decision time by state; a mix of the types of consultations or permit decisions the states a mix of geographic regions. To select the transit agencies for interviews, we used a number of selection criteria including: high ridership numbers, substantial federal capital funding between 2005 and 2015, and a mix of geographic regions. We interviewed officials from these offices to identify actions that the offices use to accelerate the consulting and permitting processes, challenges in the processes, and potential actions that could be implemented to further streamline the consulting and permitting processes. The officials we interviewed from three local transit agencies did not offer any perspectives on the use of streamlining practices or provisions related to environmental consulting and permitting, and are therefore not included in this report. These interviews are not generalizable to all resource agency, state DOT, or transit agency offices. In addition, we met with transportation and environmental advocacy groups to discuss potential additional actions for consulting and permitting. We also reviewed federal reports and recommendations on best practices for streamlining environmental reviews for federal infrastructure projects, including highway and transit. These reports included the Department of Transportation’s Red Book and the Federal Permitting Improvement Steering Council’s annual best practices reports. To describe actions taken by CEQ, we reviewed guidance and regulations issued by CEQ and interviewed CEQ officials on the actions the Council has taken to help streamline the environmental review process for federal transportation projects. We also interviewed officials at the Department of Transportation and resource agencies to discuss the extent to which CEQ actions helped streamline environmental reviews for transportation projects. We conducted this performance audit from March 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Programmatic approaches: Directs the Department of Transportation (DOT) to allow for programmatic approaches to conducting environmental reviews for an environmental impact statement and to the extent determined appropriate, other projects. Requires DOT to seek opportunities with states to enter into programmatic agreements to carry out environmental and other project reviews. MAP-21: §§ 1305(a) and 1318(d) and FAST Act: § 1304(b) (codified at 23 U.S.C. § 139(b)(3) and 23 U.S.C. § 109(note)) Identifying participating agencies: Requires the lead agency to identify, no later than 45 days after the date of publication of a notice of intent to prepare an environmental impact statement or the initiation of an environmental assessment, any other federal and non-federal agencies that may have an interest in the project, and to invite those agencies to become participating agencies in the environmental review process for the project. SAFETEA-LU: § 6002(a) as amended by FAST Act: § 1304(d)(1) (codified at 23 U.S.C. § 139(d)(2)) Concurrent reviews: Requires that each participating and cooperating agency carry out its obligations under other applicable law concurrently and do so in conjunction with the review required under the National Environmental Policy Act (NEPA), unless doing so would impair the ability of the agency to conduct needed analysis or otherwise to carry out those obligations, and that each agency should implement mechanisms to enable the agency to ensure completion of the environmental review process in a timely, coordinated, and environmentally responsible manner. SAFETEA-LU: § 6002(a) as amended by MAP-21: § 1305(c) (codified at 23 U.S.C. § 139(d)(7)) Use single NEPA document: Requires to the maximum extent practicable and consistent with federal law, that the project’s lead agency develop a single NEPA document to satisfy the requirements for federal approval or other federal action, including permits. FAST Act: § 1304(d)(2) (codified at 23 U.S.C. § 139(d)(8)) Limiting participating agency responsibilities: Requires that participating agencies provide comments, responses, studies, or methodologies on areas within the special expertise or jurisdiction of the agency, and that an agency use the environmental review process to address any environmental issues of concern to the agency. FAST Act: § 1304(d)(2) (codified at 23 U.S.C. § 139(d)(9)) Environmental checklist: Requires the development of a checklist by the lead agency, in consultation with participating agencies, as appropriate, to help identify natural, cultural, and historic resources. FAST Act: § 1304(e) (codified at 23 U.S.C. § 139(e)(5)) Alternatives analysis: Requires the lead agency to determine the range of alternatives for consideration in any document that the lead agency is responsible for preparing for a project, and requires that those alternatives should be used to the extent possible in all reviews and permit processes required for the project, unless the alternatives must be modified to address significant new information or circumstances or for the lead agency or a participating agency to fulfill the agency’s responsibilities under NEPA in a timely manner. SAFETEA-LU: § 6002(a) and FAST Act: § 1304(f) (codified at 23 U.S.C. § 139(f)(4)) Coordination and scheduling: Requires a coordination plan for public and agency participation in the environmental review process within 90 days of notice of intent to prepare an EIS or the initiation of an EA, including a schedule for completion of the environmental review process for the project. SAFETEA-LU: § 6002(a) as amended by MAP-21: 1305(e) and FAST Act: § 1304(g) (codified at 23 U.S.C. § 139(g)(1)) Description of the provision and the transportation reauthorization act reference 9. Issue resolution process: Establishes procedures to resolve issues between state DOTs and relevant resource agencies, including those issues that could delay or prevent an agency from granting a permit or approval, and describes lead and participating agency responsibilities. SAFETEA-LU: § 6002(a) as amended by MAP-21: § 1306, and FAST Act: § 1304(h) (codified at 23 U.S.C. § 139(h)) 10. Financial penalty provisions: Can cause a rescission of funding from the applicable office of the head of an agency, or equivalent office to which the authority for rendering the decision has been delegated by law, if that office fails to make a decision within certain time frames under any federal law relating to a project that requires the preparation of an EIS or EA, including the issuance or denial of a permit, license, or other approval. MAP-21: § 1306 as amended by FAST Act: § 1304(h)(3) (codified at 23 U.S.C. § 139(h)(7)) 11. Use of federal highway or transit funds to support agencies participating in the environmental review process: Allows a public entity to use its highway and transit funds to support a federal (including DOT) or state agency or Indian tribe participating in the environmental review process on activities that directly and meaningfully contribute to expediting and improving project planning and delivery. SAFETEA-LU: § 6002(a) as amended by MAP-21: § 1307, and FAST Act: § 1304(i) (codified at 23 U.S.C. § 139(j)) 12. 150-Day statute of limitations: Bars claims seeking judicial review of a permit, license, or approval issued by a federal agency for highway projects unless they are filed within 150 days after publication of a notice in the Federal Register announcing the final agency action, or unless a shorter time is specified in the federal law under which the judicial review is allowed. SAFETEA-LU: § 6002(a) as amended by MAP-21: § 1308 (codified at 23 U.S.C. § 139(l)) 13. Enhanced technical assistance and accelerated project completion: At the request of a project sponsor or a governor of the state in which the project is located, requires DOT to provide additional technical assistance for a project where EIS review has taken 2 years, and establish a schedule for review completion within 4 years. In providing assistance, DOT shall consult, if appropriate, with resource and participating agencies on all methods available to resolve the outstanding issues and projects delays as expeditiously as possible. MAP-21: § 1309 (codified at 23 U.S.C. § 139(m)) 14. Early coordination activities in environmental review process: Encourages early cooperation between DOT and other agencies, including states or local planning agencies, in the environmental review process to avoid delay and duplication, and suggests early coordination activities. Early coordination includes establishment of memorandums of agreement with states or local planning agencies. MAP-21: § 1320 (codified at 23 U.S.C. § 139(note)) 15. Planning documents used in NEPA review: To the maximum extent practicable and appropriate, authorizes the lead agency for a project and cooperating agencies responsible for environmental permits, approvals, reviews, or studies under federal law to use planning products, such as planning decisions, analysis, or studies, in the environmental review process of the project. MAP-21: § 1310 as amended by FAST Act: § 1305 (codified at 23 U.S.C. § 168(b)) 16. Programmatic mitigation plans used in NEPA review: Allows a state DOT or metropolitan planning organization to develop programmatic mitigation plans to address potential environmental impacts of future transportation projects. It also requires that any federal agency responsible for environmental reviews, permits, or approvals for a transportation project give substantial weight to the recommendations in a state or metropolitan programmatic mitigation plan, if one had been developed as part of the transportation planning process, when carrying out responsibilities under NEPA or other environmental law. MAP-21: § 1311 as amended by FAST Act: § 1306 (codified at 23 U.S.C. § 169(f)) Description of the provision and the transportation reauthorization act reference 17. Categorical exclusion determination authority: Authorizes DOT to assign and a state to assume responsibility for determining if projects can be categorically excluded from NEPA review, and allows states that have assumed that responsibility to also assume DOT’s responsibility for environmental review, consultation, or other actions required under federal law applicable to activities classified as categorical exclusions. SAFETEA-LU: § 6004(a), as amended by MAP-21: § 1312, and FAST Act: § 1307 (codified at 23 U.S.C. § 326) 18. Surface transportation project delivery program: Authorizes DOT to assign and a state to assume many federal environmental review responsibilities for highway, public transportation, and railroad projects, to be administered in accordance with a written agreement between DOT and the participating state. SAFETEA-LU: § 6005(a), as amended by MAP-21: § 1313 and FAST Act: § 1308 (codified at 23 U.S.C. § 327) In addition to the contact named above, Brandon Haller (Assistant Director), Lauren Friedman, Tobias Gillett, Rich Johnson, Delwen Jones, Hannah Laufe, Jeff Miller, Cheryl Peterson, Malika Rice, Alison Snyder, Kirsten White, and Elizabeth Wood made significant contributions to this report.", "summary": "Since 2005, the federal government has enacted various statutes aimed at accelerating the environmental review process for highway and transit projects. In addition, the Clean Water Act and the Endangered Species Act may require three federal agencies—the Corps, FWS, and NMFS—to issue permits or perform consultations before a project can proceed. GAO is required by statute to assess the extent to which statutory provisions have accelerated and improved environmental permitting and consulting processes for highway and transit projects. This report examines, among other things: 1) the impact of streamlining provisions on consulting and permitting time frames, and (2) additional actions used by federal resource agencies to streamline their reviews. GAO analyzed permitting and consulting data from the 3 federal agencies and interviewed officials from the 3 agencies, 16 agency field offices, and 7 state DOTs for their perspectives on the effect of streamlining provisions and other efforts. GAO selected these offices to include a range of locations and those with a greater number of permits and consultations, among other factors. Federally funded highway and transit projects must be analyzed for their potential environmental effects, as required by the National Environmental Policy Act, and may be subject to other environmental protection laws, including the Clean Water Act and the Endangered Species Act. These laws may require the U.S. Army Corps of Engineers (Corps) to issue permit decisions and the U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) to conduct consultations before a project can proceed. These three agencies are referred to as “resource agencies” for this report. The three most recent transportation reauthorization acts include provisions that are intended to streamline various aspects of the environmental review process; 18 of these provisions could potentially affect time frames for the environmental permitting and consulting processes for highway and transit projects. While officials GAO interviewed at resource agencies and state departments of transportation (state DOT) noted that some actions called for by the 18 statutory provisions have helped streamline the consultation and permitting processes for highway and transit projects, GAO found that a lack of reliable agency data regarding permitting and consulting time frames hinders a quantitative analysis of the provisions' impact. Officials said, for example, that a provision that allows federal liaison positions at resource agencies to focus solely on processing applications for state DOT projects has helped avoid delays in permit and consultation reviews. However, none of the three resource agencies could provide enough reliable data to analyze changes in the durations of consultations and permit reviews over time for any of the provisions. Further, GAO identified limitations, such as negative or missing values, and inconsistent data entry practices for FWS and NMFS data. FWS and NMFS have limited controls, such as electronic safeguards and other data-entry procedures, to ensure the accuracy and reliability of their data on the duration of consultations. Left unaddressed, these data quality issues may impair the agencies' ability to accurately determine whether they are meeting their 135-day statutory and regulatory deadlines to complete consultations and provide biological opinions, and could affect their ability to provide accurate data on time frames for efforts of the Office of Management and Budget to track agencies' performance in conducting environmental reviews. While FWS and NMFS officials stated that the agencies plan to improve their tracking systems, the agencies do not have documented plans or time frames for the improvements and it is unclear whether the efforts will include internal controls to improve data reliability. Some federal resource agency and state DOT officials GAO interviewed identified additional actions that have been used to streamline the consultation and permitting processes to avoid delays in agency reviews. For example, 16 of the 23 resource agency and state DOT officials said that field office staff provided training to state DOT staff about the information field offices required for permit or consultation applications. Resource agency and state DOT officials also identified electronic systems with environmental data and for submitting documents as streamlining actions that have been helpful. GAO is making two recommendations, one to FWS and one to NMFS, to develop plans and time frames for improving their tracking systems and to develop internal controls to improve data reliability. The Departments of Commerce and Interior concurred with our recommendations.", "document_type": "gao"}
{"report": "Treasury established HHF in February 2010 to help stabilize the housing market and assist homeowners facing foreclosure in the states hardest hit by the housing crisis. The HHF program is implemented by Treasury’s Office of Financial Stability. Treasury obligated funds to 18 states and the District of Columbia. Treasury allocated funds to each state’s HFA to help unemployed homeowners and others affected by house price declines. HFAs, in turn, design their own programs under HHF specific to local economic needs and circumstances pursuant to their contracts with Treasury. Treasury allocated $9.6 billion in HHF funding to 19 HFAs in five rounds. As described below, Treasury allocated $7.6 billion to participating HFAs during the first four rounds of funding, all of which occurred in 2010. HFAs were required to disburse these funds by December 2017. Round one: In February 2010, Treasury allocated $1.5 billion to the HFAs in the five states that had experienced the greatest housing price declines—Arizona, California, Florida, Michigan, and Nevada. Round two: In March 2010, Treasury allocated $600 million to the HFAs in five states with a large proportion of their populations living in counties with unemployment rates above 12 percent in 2009—North Carolina, Ohio, Oregon, Rhode Island, and South Carolina. Round three: In August 2010, Treasury allocated $2 billion to the HFAs in nine of the states funded in the previous rounds, along with the HFAs for eight additional states and the District of Columbia, all of which had unemployment rates higher than the national average in 2009. The additional HFAs that received funding were Alabama, the District of Columbia, Georgia, Illinois, Indiana, Kentucky, Mississippi, New Jersey, and Tennessee. Round four: In September 2010, Treasury allocated an additional $3.5 billion to the same 19 HFAs that received HHF funding through the previous rounds. In December 2015, the Consolidated Appropriations Act, 2016 authorized Treasury to make an additional $2 billion in unused TARP funds available to existing HHF participants. In early 2016, Treasury announced a fifth round of HHF funding. According to Treasury and HFA officials and other stakeholders, by that time some of the participating HFAs had begun to wind down their programs by letting go of program staff or making other changes after they had disbursed most of their funding from the first four rounds. Treasury allocated this additional $2 billion in two phases. Round five, phase one: In February 2016, Treasury allocated $1 billion to 18 of the HFAs that had previously been awarded HHF funds based on each state’s population and utilization of previous HHF funds. In order to qualify for phase one funding, states had to have drawn at least 50 percent of their previously received funding. Round five, phase two: In April 2016, Treasury allocated an additional $1 billion to 13 HFAs that applied and sufficiently demonstrated to Treasury their states’ ongoing housing market needs and the ability to effectively utilize additional funds. The HFAs that received funding were California, District of Columbia, Illinois, Indiana, Kentucky, Michigan, Mississippi, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, and Tennessee. In conjunction with the fifth round of funding, Treasury extended the deadline for disbursement to December 31, 2021. Treasury also determined that HFAs must finish reviewing and underwriting all applications for final approval to participate in the program no later than December 31, 2020. HFAs that do not disburse HHF funds by the December 31, 2021, deadline will have to return the remainder of the funds to Treasury. See figure 1 for an overview of the allocation amounts and disbursement deadlines. Under HHF, HFAs designed locally tailored programs that address HHF’s goals of preventing foreclosures and stabilizing housing markets. These programs had to meet the requirements of the Emergency Economic Stabilization Act of 2008 and be approved by Treasury. Treasury categorizes programs into six types, which are discussed in detail later in this report, including programs that provide monthly mortgage payment assistance and programs that reduce the principal of a mortgage. Programs vary by state in terms of eligibility criteria and other details. HFAs contract with various stakeholders to implement HHF programs, including mortgage servicers and, in some cases, housing counseling agencies and land banks. The types of stakeholders involved vary depending on program design. For example, HFAs with blight elimination programs may choose to provide HHF funding to a local land bank to demolish and green blighted properties in distressed housing markets. Also, HFAs may contract with housing counseling agencies approved by the Department of Housing and Urban Development (HUD) to identify eligible applicants at risk of foreclosure. HFAs are required to report performance information on each of their HHF programs to Treasury on a quarterly basis. This information includes outputs, such as the number of homeowners assisted or properties demolished, as well as outcomes, such as the number of homeowners who are no longer participating in HHF programs. The specific types of performance information that Treasury requires HFAs to report vary depending on the program type and include both intended and unintended consequences of the program. For example, HFAs with mortgage payment assistance programs must report on the number of homeowners who have transitioned out of the program due to specific changes in their circumstances, such as regaining employment. HFAs do not have to report on the number of borrowers who transitioned out of the program into foreclosure sales, short sales, or deeds-in-lieu of foreclosure for their down payment assistance programs because the assistance is provided on behalf of a buyer who is purchasing, not selling or otherwise exiting, the home. Treasury provides HFAs with spreadsheet templates, which HFAs are to fill out and submit back to Treasury. The templates include data-reporting guidance in the form of a data dictionary, which describes the data elements HFAs are to report. Participating HFAs’ HHF programs are governed by a participation agreement, or contract, with Treasury that outlines the terms and conditions in providing services that the HFA must meet as a recipient of HHF funds. Each agreement includes reporting requirements, program deadlines, and descriptions of permitted administrative expenses. Additionally, agreements include detailed descriptions of the HHF programs that Treasury has approved. Program descriptions include details such as eligibility criteria, structure of assistance, and the estimated number of participating homeowners. Participation agreements may be amended with Treasury approval to reflect changes to HHF programs, such as new requirements from Treasury or changes in the amounts HFAs allocate to each program. As an example, in 2015 Treasury added new conditions, called utilization thresholds, to each HFA’s participation agreement. The thresholds establish the percentage of allocated funds each HFA was required to draw from its Treasury account by the end of each year from 2016 through 2018. If an HFA did not meet a threshold, Treasury reallocated a portion of the additional funds received during the fifth round to HFAs that did meet the threshold. If an HFA would like to make a change to an HHF program, the HFA must submit a request to Treasury that outlines the proposed change. Treasury reviews the proposal through an interdisciplinary committee and, if the proposal is approved, amends the participation agreement. As of December 2017, the 19 participating HFAs had each received approval from Treasury and executed between 9 and 21 amendments to their individual participation agreements. Treasury’s policies and procedures to monitor HFAs’ implementation of the HHF program address 10 leading monitoring practices, including practices related to the collection of periodic performance reports and validation of performance through site visits. However, Treasury’s assessment of HFAs’ internal control programs, development of performance indicators, documentation of goals and measures, and documentation of HFAs’ monitoring could better address leading practices (see fig. 2). Treasury created policies and procedures to guide regular oversight of HFAs’ implementation of HHF. According to internal control standards for the federal government, management should design control activities to achieve objectives and implement control activities through policies— such as by periodically reviewing policies, procedures, and related control activities. In addition, management should establish and operate activities to monitor the internal control system and evaluate the results— for example, through ongoing monitoring procedures and separate evaluations. Treasury documented procedures for key areas of its monitoring framework, including providing funds to HFAs, evaluating HFAs’ requests to change their programs, collecting financial and performance information from HFAs, conducting site visits, and addressing fraud detection and mitigation for Treasury’s staff. Treasury regularly updates the policies and procedures it created and reviews its compliance oversight procedures annually. In addition, Treasury regularly conducts site visits to HFAs, as discussed below. Treasury uses a risk-based approach to selecting HFAs for its regular site visits. This approach is consistent with leading practices we have developed for managing fraud risk, which state that agencies should employ a risk-based approach to fraud monitoring by taking into account internal and external factors that can influence the control environment. In 2018, Treasury began using a point-based, 29-factor approach to selecting HFAs for site visits for compliance reviews, taking into account factors such as whether prior fraud was detected or reported, observations from HFAs’ compliance reviews, administrative dollars spent compared to program assistance provided, and whether HFAs have documented blight-specific policies and procedures. According to Treasury staff, during site visits Treasury determines its test and sample sizes for a risk-based review of an HFA’s programs. Treasury also uses a risk-based approach to responding to potentially impermissible payments, and according to Treasury staff, its responses depend on the circumstances. If an HFA notifies Treasury of issues related to inappropriate payments involving fraud, waste, or abuse, Treasury staff notify and work with the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) to provide technical assistance as needed. In 2017, Treasury implemented additional procedures with regard to HFAs’ administrative expenses. If Treasury identifies an administrative expense issue during a site visit, Treasury requires the visited HFA to undertake a multistep review of its administrative expenses, including reviewing additional administrative expenses if similar problems are identified during the initial review. The HFA is required to reimburse HHF for any administrative expenses that were not made in accordance with federal cost principles. Additionally, Treasury may require the HFA to create a plan for corrective action. Treasury collects performance information from participating HFAs on a regular basis, which a compliance team receives and reviews. These efforts are consistent with internal control standards, which state that management should use quality information to achieve the entity’s objectives, such as by obtaining relevant data from reliable sources. Treasury tracks its receipt of agencies’ quarterly performance reports and financial statements, as well as HFAs’ annual internal control certifications. Quarterly performance reports include information about homeowners, such as the number of homeowners who receive or are denied assistance. These reports also include program-specific performance data, such as the median assistance amount, and outcomes, such as the number of program participants who still own their home. According to HFAs’ participation agreements, HFAs are required to report performance information through the end of their programs. In addition, Treasury collects informal monthly updates from HFAs on their program performance and is in frequent contact with HFAs by phone to obtain information on HFAs’ performance, including any challenges states are facing, according to Treasury staff and HFAs with whom we met. Treasury also collects reports on the impact of blight elimination programs, which HFAs with these programs are required to submit to Treasury. Treasury regularly analyzes the performance and financial data that it collects through quarterly performance reports, quarterly unaudited financial statements, and annual audited financial statements that HFAs are required to submit. Periodic analysis of these materials is consistent with standards for internal control, which state that management should design control activities to achieve objectives and respond to risks—for example, by establishing activities to monitor performance measures and indicators. Treasury uses information from quarterly performance reports to produce quarterly reports for the public on the number of homeowners who received or were denied assistance, among other things. Treasury also includes data on the extent to which states have spent their HHF funding in monthly reports to Congress. Additionally, Treasury analyzes quarterly unaudited and annual audited financial statements to monitor HFAs’ spending of program funds and identify any areas of concern. According to Treasury staff, the agency also uses performance information HFAs report quarterly, such as the number of homeowners who receive or are denied assistance, to assess whether HFAs are making sufficient progress in effectively utilizing program funds to reach the targets for assisting homeowners. Treasury has procedures to assess the quality of HFAs’ performance data when reviewing quarterly performance reports and conducting site visits. These procedures are consistent with internal control standards, which state that management should use quality information to achieve the entity’s objectives, such as by evaluating data sources for reliability. According to Treasury staff, beginning in the first quarter of 2018, Treasury required all participating HFAs to upload their performance data into a system that does basic data reliability testing, such as ensuring the numbers submitted by HFAs are consistent with data submitted for previous quarters. This system flags outliers or large changes for further review. Prior to this requirement, HFAs could use the system optionally. HFAs are able to upload their data as frequently as they want to check for errors or inconsistencies. After performance information is uploaded into the system, two Treasury staff review any issues flagged by the system and follow up with HFAs to resolve them. According to Treasury staff, as an additional validation step, Treasury staff conducts a reconciliation by checking whether the funds reported in HFAs’ performance reports match the data in the HFAs’ quarterly financial reports. After Treasury reviews each HFA’s performance data, it combines that information to create quarterly reports. In addition, Treasury staff told us that they do a detailed review of HFAs’ financial statements during site visits, including but not limited to the timeliness of financial reporting, corrections to reports after the reporting cycle, and supporting documentation for all categories of expenditures sampled during the review. Treasury documents the offices that are responsible for receiving and reviewing monitoring materials, the deadlines for receiving this information, and the responsibilities of staff who execute internal control. This documentation is consistent with internal control standards, which state that management should implement control activities through policies, such as by documenting each unit’s internal control responsibilities. The standards also state that management should remediate identified internal control deficiencies on a timely basis, such as by having personnel report internal control issues through established reporting lines. Treasury’s policies and procedures document which offices are in charge of executing its monitoring procedures, such as collecting required documentation, conducting site visits, and evaluating HHF performance. Treasury informs HFAs of reporting lines to Treasury through phone calls and emails. Treasury and HFA staff also noted that they are in frequent contact with each other regarding administration of the program. Treasury uses regular (at least biennial) site visits, biweekly calls with HFAs, and monthly informal performance updates as means of validating HFAs’ performance. These practices are consistent with OMB guidance, which states that a federal awarding agency may make site visits as warranted by program needs. Treasury uses its site visits to assess HFAs’ program implementation, conduct its own analyses of program results, review HFAs’ use of program funds, and review HFAs’ implementation of internal controls. According to Treasury staff, Treasury also uses site visits to corroborate the information HFAs report on their program performance and use of HHF funds. According to HFAs with whom we met, site visits typically last multiple days and include entrance and exit conferences between Treasury and HFA staff. During site visits, Treasury staff review documentation related to homeowners and properties associated with the programs, quality assurance processes, antifraud procedures, information technology and data security, finances, and legal matters. After the site visit, Treasury issues a report documenting its observations. Within 30 days of receiving Treasury’s written report, HFAs are required to provide Treasury with a written response describing how they will address any issues of concern. Treasury included some procedures for project closeout in HFAs’ participation agreements. Creating procedures for project closeout is consistent with OMB guidance, which states that agencies should close out federal awards when they determine that applicable administrative actions and all required work have been completed by the nonfederal entity. Participation agreements describe various procedures for closing out HHF programs, including requirements for the return of unexpended funds to Treasury and final reporting and provisions for reimbursement of expenses. In addition, according to Treasury staff, Treasury is in the process of developing and issuing wind-down guidance for HFAs in stages to address specific areas of program activity. Agency officials also discussed winding down the HHF program during Treasury’s 2018 Annual Hardest Hit Fund Summit. The annual summit is a meeting that HFAs, servicers, and other stakeholders are invited to attend to facilitate information sharing among stakeholders involved in HHF. At the 2018 summit, the agency discussed topics that included final compliance and financial reviews, program change requests, operational timelines, and budgeting and staffing as they relate to the wind-down of HHF programs and operations. In addition, as states have begun to close some of their programs, Treasury has issued clarifying guidance to HFAs in order to effectively wind down the HHF program—including on streamlining the process for requesting changes to programs. Treasury staff also performed outreach to each HFA in April 2018 about their wind-down plans and, according to Treasury staff, the agency expects to prepare written guidelines for HFAs on certain other topics related to winding down the program, including reporting requirements, as appropriate. Treasury uses performance information to assess whether HFAs are performing at a satisfactory level. This practice is consistent with internal control standards, which state that management should establish and operate monitoring activities to monitor the internal control system and evaluate results, which can include evaluating and documenting the results of ongoing monitoring and separate evaluations to identify internal control issues. In addition, management should remediate identified internal control deficiencies on a timely basis. This can entail management completing and documenting corrective actions to remediate internal control deficiencies on a timely basis. Treasury staff described the agency’s process of assessing HFAs’ performance as “holistic.” As a part of this process, Treasury staff review the targets HFAs set for assisting households or demolishing blighted properties and monitor HFAs’ utilization rates. According to Treasury staff, if performance and financial data suggest that an HFA is not making sufficient progress toward its performance targets or is drawing funds too slowly, Treasury collaborates with the HFA and the HFA must create a plan to improve its performance. If an HFA is not responsive to Treasury’s efforts, Treasury issues a performance memorandum requiring the HFA to create a plan to address its deficiencies. As of October 2018, Treasury had issued performance memorandums to seven HFAs—five in 2012 and two in 2015. Additionally, as mentioned previously, Treasury issues a report to each HFA following each site visit describing any issues of concern Treasury identified. Treasury requires HFAs to provide the agency with a written response to the report within 30 days of the report date describing the HFA’s plan for addressing any deficiencies. Treasury regularly communicates with HFAs, servicers, and other stakeholders interested in HHF, which is consistent with internal control standards that state management should externally communicate the necessary quality information to achieve the entity’s objectives. This can include communicating with, and obtaining quality information from, external parties using established reporting lines. According to Treasury staff, Treasury holds biweekly calls with HFAs and servicers, facilitates issue-specific working groups between HFAs and stakeholders, and holds an annual summit related to HHF. HFA staff said Treasury staff are very responsive to program-related questions. Treasury’s annual summit allows interested parties, such as HFAs, servicers, and other stakeholders, to discuss important issues related to HHF. To assist HFAs in designing their internal control activities, including defining program objectives, Treasury created an optional risk assessment matrix to help HFAs and their auditors identify and assess HFAs’ risks. The matrix includes control objectives and example control activities, and it allows HFAs to determine their risk tolerances for each control objective. For example, for the risk of improper use of administrative funds, the matrix includes “ensuring that appropriate documentation exists to support HHF administrative expenses” as a control objective, and it lists routine review of administrative payments by internal auditors as an example control activity. HFAs can identify their risk tolerances as low, medium, or high in the matrix. This matrix is consistent with federal internal control standards, which state that management should define objectives clearly to enable the identification of risks and define risk tolerances. However, Treasury does not systematically collect or evaluate HFAs’ risk assessments. HFAs’ participation agreements require them to submit an annual certification of their internal control programs by an independent auditor to Treasury. According to Treasury staff, independent auditors sometimes choose to include HFAs’ risk assessments with the annual certification, and during site visits Treasury obtains documentation of HFAs’ internal control programs, which sometimes includes their risk assessments. Outside of these instances, Treasury does not routinely collect HFAs’ risk assessments. Further, in those instances when Treasury does collect them, it does not analyze the assessments to evaluate whether the risk levels are appropriate. While Treasury does a more in-depth evaluation of HFAs’ internal controls during site visits, this review does not include evaluating the appropriateness of the risk levels HFAs identified. For example, one of the risk assessment matrixes we reviewed listed the HFAs’ administrative expenses as low-risk despite this HFA having a history of alleged improper-payment related issues with its HHF program, which Treasury’s review would not have evaluated. Treasury officials told us that during site visits they may discuss the risk levels that HFAs determine, but Treasury has not asked or required any HFAs to change a risk level. Failure to collect and evaluate HFAs’ risk assessments is inconsistent with an important practice for preventing fraud we have previously identified—monitoring and evaluating the effectiveness of preventive activities, including fraud risk assessments and the antifraud strategy, as well as controls to detect fraud and response efforts. Further, according to internal control standards, management should identify, analyze, and respond to risks related to achieving the defined objectives, and an oversight body may oversee management’s estimates of significance so that risk tolerances have been properly defined. According to Treasury staff, the risk assessment matrixes are intended for use by HFAs and their independent auditors in preparing for the annual certification. They said that risk tolerances, or levels, are to be assigned by HFAs and their independent auditors, not by Treasury, and that it would be inappropriate for Treasury to interfere with their determination. However, agreed-upon procedures performed by HFAs’ independent auditors do not provide assurance or conclusion as to whether HFAs’ risk levels are appropriate. For example, in two agreed-upon procedures reports we reviewed, the auditors stated that the procedures performed were based on the HFAs’ risk matrixes, but they did not mention assessing whether the risk levels assigned to different controls were appropriate. Treasury staff also said that Treasury expands its sample size and criteria for specific programs or categories of expenses during a compliance review where repeated or significant observations have been previously found. However, by not collecting and evaluating HFAs’ risk assessments, Treasury limits its ability to monitor the effectiveness of HFAs’ preventive activities, controls to detect fraud, and response efforts. In addition, Treasury is missing an opportunity to help ensure that risk levels are appropriate. Treasury’s documentation of its efforts to monitor HFAs is consistent with internal control standards, which state that management should establish and operate activities to monitor the internal control system and evaluate results and remediate deficiencies on a timely basis. More specifically, the standards cite as characteristics of these principles that management evaluate and document the results of ongoing monitoring and separate evaluations to identify internal control issues, and determine appropriate corrective actions for internal control deficiencies on a timely basis. Treasury addresses these criteria by documenting its monitoring findings through site visit reports, as previously discussed. Treasury requires HFAs to provide the agency with a plan to address any issue described in the site visit report within 30 days. In addition, Treasury addresses these criteria by documenting HFAs’ responses and assessing whether the issue has been addressed at the next site visit. Furthermore, Treasury sets deadlines for and documents receipt of HFAs’ annual internal control certifications, quarterly financial and performance reports, and annual audited financial statements. When underperforming HFAs are not responsive to Treasury’s attempts to work with them to improve their performance, Treasury documents the issues it has found and requires the HFAs to create and submit a corrective plan. Treasury also directs HFAs to establish and execute their own internal control system, but it does not require HFAs to consistently document which of their staff are responsible for internal control execution. HFAs were required to submit staffing information within 90 days of joining HHF. However, HFAs are not required to regularly update this information. Further, Treasury’s written procedures for reviewing HFAs’ internal control programs during site visits do not include reviewing documentation of which HFA staff are responsible for responding to or reporting internal control issues. These practices are inconsistent with standards for internal control, which state that management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives. The standards also note that effective documentation can assist management’s design of internal control by establishing the “who, what, when, where, and why” of internal control execution. We asked Treasury if it encouraged HFAs to document which personnel are in charge of executing internal control procedures. Treasury staff referred us to the initial requirement that HFAs submit staffing information within 90 days of joining HHF and stated that there is no requirement that HFAs update this information. Further, Treasury staff said that during site visits they interview key HFA staff who execute internal controls and document these interviews. However, this practice does not help ensure that HFAs consistently provided updated information to their staff about which of their staff are responsible for internal control execution. Without requiring HFAs to routinely update their documentation, particularly as HFAs are winding down their HHF programs and staff begin to turn over, Treasury cannot be assured that HFAs are keeping their staff updated about who is responsible for monitoring issues and internal control execution. Treasury and HFAs created quantitative output and outcome measures to assess HFAs’ performance. For example, Treasury created utilization thresholds to help ensure HFAs spend their HHF funds in a timely manner. Also, HFAs created performance targets to estimate the number of homeowners they could assist (or blighted properties they could demolish) through HHF. These activities are consistent with an attribute of successful performance measures—specifically, that measures should have a numerical goal. However, some of Treasury’s performance measures are not clearly stated, and Treasury did not create consistent methodologies for HFAs to use to assess the performance of their HHF programs. In our previous work on attributes of successful measures, we identified that measures should be clearly stated and that the name and definition should be consistent with the methodology used to calculate them. While Treasury provided HFAs with a data dictionary to describe the information HFAs are required to report, Treasury defined the term “unique applicants” in a manner that allows HFAs to count applicants differently, leading to inconsistencies in HFAs’ methodologies for calculating some performance measures. As discussed later in this report, Treasury also allowed and sometimes required HFAs to self-define some data elements. Additionally, performance measures should indicate how well different organizational levels are achieving goals. However, Treasury did not design a consistent methodology for HFAs to use to develop targets for the number of homeowners and properties their HHF programs may assist, and as discussed later in this report, HFAs we interviewed used different methodologies. Because some of Treasury’s performance measures are not clearly stated and because Treasury did not design consistent methodologies for HFAs to use in setting targets, as HFAs close down their HHF programs, Treasury has a limited ability to compare performance across HFAs or aggregate these data to evaluate how well the HHF program as a whole is achieving its goals. Treasury created goals and measures to assess HHF performance, consistent with a practice we previously identified of creating performance goals and measures that address important dimensions of program performance and balance competing priorities. Treasury addressed this practice by creating utilization thresholds for HFAs and inserting them in HFAs’ participation agreements. Treasury also addressed this practice by documenting its performance measures, using standardized spreadsheets through which HFAs regularly report on outputs and outcomes related to the services provided to distressed homeowners. However, Treasury has not explicitly documented the relationship between program outputs and the overall goals of the HHF program, and it does not generally require HFAs to establish intermediate goals unless the HFA has not met Treasury’s performance expectations. This is inconsistent with practices we previously identified relating to results- oriented performance goals and measures. Among these practices are including explanatory information on goals and measures in performance plans and using intermediate goals to show progress or contributions toward intended results. The main goals of HHF are to prevent foreclosures and stabilize housing markets. However, Treasury has not documented the relationship between many of the program outputs it tracks and the main goals of the HHF program. According to Treasury, the relationship between its outputs and the goals of HHF can be inferred through various memorandums and materials it issued when HHF was created. However, these documents do not explicitly explain the rationale for the use of these output measures to assess HHF’s ability to stabilize neighborhoods and prevent foreclosures. By not documenting the relationship between HHF’s program outputs and services and the overall goals of the HHF program or requiring all HFAs to set intermediate goals, Treasury missed the opportunity to more proactively articulate a results- oriented focus for the HHF program. As of December 2017, the 19 participating HFAs had 71 active HHF programs. Active HHF programs fall under one of six Treasury-defined program types: mortgage assistance, reinstatement, transition assistance, principal reduction, down payment assistance, and blight elimination. Participating HFAs may have implemented additional HHF programs, but these programs had either stopped disbursing funds or had not received a total allocation from Treasury at the time of our review. Individual HFAs may implement multiple programs—for example, the Mississippi HFA had two active programs, and the South Carolina HFA had five. The most common type of HHF program as of December 2017 was mortgage assistance, as shown in table 1. All 19 HFAs had active mortgage payment assistance programs as of December 2017. In contrast, 3 HFAs had active transition assistance programs. As of December 2017, we found that the 71 active HHF programs had assisted approximately 400,000 homeowners and demolished almost 24,000 blighted properties. According to Treasury data, the majority of homeowners who received HHF assistance participated in a mortgage payment assistance program. Treasury data also indicate that transition assistance programs assisted the smallest number of homeowners relative to other HHF program types (see table 2). HHF programs of the same program type can vary in a number of ways, including eligibility criteria, length of time implemented, and number of homeowners assisted. Within each program type, HFAs designed programs that sometimes varied based on specific housing needs. For example, while both the Nevada and Florida HFAs had active reinstatement programs as of December 2017, these programs had different eligibility criteria. The Nevada HFA’s reinstatement program targeted low-to-moderate income homeowners who had fallen behind on their mortgages. The Florida HFA offered a similar reinstatement program for delinquent mortgages but also offered a program for senior homeowners who had fallen behind on property taxes and other fees. HHF programs also varied by duration and the amounts of assistance provided as of December 2017. For instance, since all HFAs initially launched mortgage payment assistance programs at the beginning of HHF, these programs have been active for an average of 7 years. In contrast, HFAs began implementing down payment assistance programs in 2015. Additionally, the median amount of assistance provided varied by program type. According to analysis of Treasury data from 2010 through 2017, assistance ranged from a median amount of $4,000 per household for transition assistance programs to over $42,000 per household for principal reduction programs. The HHF program is beginning to wind down. As of September 2018, Treasury had disbursed $9.1 billion of the $9.6 billion obligated under HHF. According to Treasury officials, although HFAs may continue issuing new approvals through December 31, 2020, most states have already begun to close down HHF programs or will do so by the end of 2018 as they exhaust their available funds. These include California and Florida, the two largest states in the program. According to Treasury officials, during the fifth round of funding Treasury established new conditions for HFAs, called utilization thresholds, to help maximize the use of the $2 billion in newly available funds. According to documentation from Treasury, if an HFA does not meet its utilization threshold, Treasury will reallocate a portion of the unused funds to HFAs that did. The amount reallocated to each HFA is determined by state population, the percentage of funds drawn by HFAs, and other factors. The utilization thresholds for 2016 and 2017 were structured as follows: 2016. If an HFA did not draw at least 70 percent of its funding from rounds one through four by December 31, 2016, 50 percent of its round five funding would have been reallocated. 2017. If an HFA did not draw at least 95 percent of its funding from rounds one through four by December 31, 2017, 75 percent of its round five funding would have been reallocated. Most HFAs have met Treasury’s 2016 and 2017 utilization thresholds. More specifically, the 18 HFAs eligible for round five funding met the 2016 utilization threshold. As a result, Treasury did not reallocate any HHF funds for that year. As of December 2017, 17 of the 18 HFAs eligible for round five funding met the 2017 utilization threshold. The Nevada HFA drew 70 percent of its funding for rounds one through four as of December 31, 2017, and therefore did not meet the 2017 utilization threshold. As a result, Treasury reallocated approximately $6.7 million of the Nevada HFA’s unused fifth round HHF funds to the 17 other HFAs. As of September 2018, all HFAs had met the 2018 utilization threshold, and Treasury had disbursed most of the funds obligated under HHF. If an HFA did not draw at least 80 percent of its participation cap by December 31, 2018, an amount equal to the portion of round five funding that had not been drawn from Treasury would have been reallocated. The targets that HFAs set are of limited use for evaluating the performance of individual programs, program types, HFAs, or the HHF program overall. In their participation agreements, HFAs were required to estimate the number of homeowners they intended to assist and, if they had a blight elimination program, the number of blighted properties they intended to demolish for each of their HHF programs. Treasury refers to these estimates as targets. HFAs that we spoke with used different methodologies to calculate these targets. For instance, one of the HFAs we spoke to calculated targets for the number of homeowners they could assist by dividing the program’s total allocation by the average amount of assistance it anticipated awarding to each homeowner. In contrast, another HFA calculated its target for assisting homeowners by dividing that program’s total allocation by the maximum amount of assistance homeowners could be awarded through the program. According to Treasury staff, they did not develop a consistent methodology for HFAs to use in setting these targets because, in their view, HFAs are most familiar with local conditions and should have flexibility in adjusting the program criteria or creating new programs based on these conditions. Internal control standards state that management should define objectives clearly to enable the identification of risks and define risk tolerances. In particular, the standards note the importance of stating measurable objectives in a form that permits reasonably consistent measurement. Further, our guide to designing evaluations states that where federal programs operate through multiple local public or private agencies, it is important that the data agencies collect are sufficiently consistent to permit aggregation nationwide, which allows evaluation of progress toward national goals. Because Treasury did not develop a consistent methodology for HFAs to use when setting performance targets, the targets HFAs developed do not permit consistent measurement of program performance or an evaluation of how well the HHF program as a whole met its goals. However, with the program beginning to wind down, any changes going forward would not improve the consistency of previously collected data or Treasury’s ability to evaluate the program as a whole. Treasury collects quarterly data on outcomes from HFAs that implement four of the six HHF program types: mortgage payment assistance, principal reduction, reinstatement programs, and transition assistance programs. HFAs must track outcomes, both intended and unintended, until a household is no longer involved with an HHF program. Intended outcomes include, for example, the number of homeowners who completed or transitioned out of an HHF program as a result of regaining employment. Unintended outcomes include the number of homeowners who transitioned out of an HHF program into a foreclosure sale. The type of outcomes Treasury requires HFAs to track depends on the program type. Treasury did not design outcome measures in a way that would permit it to use these data to evaluate whether HFAs or the overall program are achieving the stated goals. More specifically, Treasury officials told us that the data they collect on outcomes cannot be used to compare the outcomes achieved by different HFAs or through different HHF program types. According to Treasury officials, HFAs have historically had different interpretations of Treasury’s outcome measures. Treasury revised its template for HHF reporting in 2015 and 2017 to clarify certain performance-related terms. However, Treasury officials told us that conclusions drawn from HHF data on some outcomes are of limited use because HFAs interpret Treasury’s guidance on these data differently. Additionally, after it made revisions to guidance on performance reporting in 2015, Treasury allowed—and in some cases required—HFAs to self- define certain data elements. For example, Treasury required HFAs to define how they calculate the median principal forgiveness awarded by an HHF program. As previously discussed, a key attribute of effective performance measurement is clearly stated performance measures with names and definitions that are consistent with the methodology used to calculate the measure. Additionally, we have noted in our guide to designing evaluations that a program’s outcomes signal the ultimate benefits achieved by a program and should be considered when evaluating a program. Further, OMB has set the expectation that agencies should conduct evaluations of federal programs. However, because Treasury did not clarify certain outcome measures until 5 years into the program, or take steps to ensure that HFAs calculated alternative outcomes consistently, even after Treasury clarified its reporting guidance, the alternative outcomes data that Treasury collects are of limited use for evaluating the performance of HFAs, HHF programs by program type, or the HHF program overall. As many programs are closing, further clarification or changes would not capture the full scope of the program and would not improve such evaluations. Treasury requires HFAs with blight elimination and down-payment assistance programs to identify indicators that are intended to track and quantify the HHF program’s impact on targeted areas, although HFAs are not required to report outcomes data to Treasury in their quarterly performance reports for these program types. According to Treasury, blight elimination and down payment assistance programs are focused on stabilizing housing markets in targeted distressed areas to prevent foreclosures, and therefore they are not required to report individual-level outcomes for HFAs to report in quarterly performance reports. Treasury officials told us that the impact of these program types upon neighborhoods, such as increases in the values of properties in neighborhoods where down-payment assistance or blight elimination programs were used, may not be observable immediately but may appear over time. As of August 2018, four of eight HFAs with blight elimination programs had submitted impact studies to Treasury. Also, all HFAs with down payment assistance programs have submitted studies to Treasury. Three blight elimination program impact studies suggest that the programs had positive impacts on targeted areas, although two of the studies have important limitations. Studies on the programs in Michigan and Ohio found that home prices increased in communities where blighted properties were demolished. For example, the Ohio study found there was about a 4-dollar increase in home values for every dollar spent on the HHF-funded blight elimination program. However, this study examined only 1 of the 18 counties that were served by the Ohio HFA’s blight elimination program. A study on the Illinois program found that certain key economic indicators had improved over a 6-year period in areas targeted by the program. For example, the percentage of negative equity mortgages in 9 of the 10 areas studied declined by an average of 7 percent between 2010 and 2016. However, the findings of this study do not isolate the independent effect of the Illinois HFA’s blight elimination program because other factors, such as local economic conditions, could also affect the performance of key economic indicators. HHF stakeholders with whom we spoke described challenges in implementing HHF programs related to staffing and multiple funding rounds, program implementation, outreach to borrowers, program accessibility, the variety of programs and their status, and external factors. Both Treasury staff with responsibilities for monitoring HFAs’ implementation of HHF and stakeholders told us that these were the types of topics discussed during regular phone calls and annual meetings. Stakeholders included staff from four HFAs that are implementing HHF programs, mortgage servicers and housing counseling agencies that are involved with HHF, and other interested organizations, including those that work with HFAs. Staffing and multiple funding rounds. All four HFAs and various stakeholders with whom we spoke told us that staff turnover at HFAs presents challenges. In some cases, turnover has been related to the way the HHF program has been funded. For example, staff from two HFAs mentioned that either they let staff go or their temporary staff found more permanent positions as the agencies spent down their initial HHF funds. When Congress authorized Treasury to make additional TARP funds available to HHF beginning in 2016, these HFAs had to hire and train new staff. Treasury officials told us that many HFAs encountered staffing challenges as a result of the program’s fifth funding round. Additionally, staff from two servicers and an organization that advocates for HFAs told us that HFA turnover presents challenges because it takes time for new staff to become familiar with the program and for programs to ramp back up. Program implementation. Staff from most of the HFAs and servicers with whom we spoke, as well as Treasury staff and other stakeholders, told us that implementation of the HHF program was challenging. Specific implementation challenges mentioned by HFAs included creating an in- house information system to manage HHF data; managing refinancing requests from homeowners who have been awarded HHF funds (to help ensure the HFA’s place as a lien-holder); and sharing information with servicers. While Treasury helped to develop a system to facilitate the sharing of loan-level information for the HHF program, one HFA and some servicers noted that the system has not always worked smoothly. Additionally, Treasury staff told us that a challenge HFAs are currently facing is the wind-down of the HHF program. They stated that HFAs must determine how they should advertise to the public, internal staff, and external partners that programs are closing; when they should stop accepting applications; and what resources are available for activities related to program closeout. Outreach to homeowners. All four HFAs and an advocacy organization told us that it can be challenging to effectively reach eligible homeowners. As an example, staff from one HFA told us that housing counseling agencies have been an effective tool for making homeowners aware of HHF programs but that there are fewer foreclosure counselors available to homeowners now compared to when the HHF program started in 2010. Staff from an HFA that closed its HHF programs to new applicants after the initial funding rounds told us that it was challenging to communicate to the public, and therefore to potential clients, that its HHF programs were reopening after they received additional funding. Additionally, a representative of a nonprofit organization that works to address challenges in the mortgage market told us that many people did not know about the HHF program and that program information was hard for consumers to find on many states’ websites. Program accessibility. According to academic research and two stakeholders (an advocacy group and a housing counseling agency), the accessibility of an HFA’s program can affect program participation. A 2014 study of Ohio’s HHF program found that the design of the program hampered accessibility and therefore program participation. The program was designed to require registrants (those who started the application process) to continue the application process by working with a housing counseling agency. The study found that registrants who lived within 5 miles of their assigned housing counseling agency submitted a complete application almost 32 percent of the time, while those who lived over 50 miles away submitted a complete application about 18 percent of the time. Similarly, a representative for an organization that advocates on behalf of low-income homeowners noted that the design of one state HHF program requires applicants to meet with specific housing counseling agencies to complete the application process. However, the housing counseling agencies to which applicants are assigned may not be nearby. The representative stated that in some cases, homeowners are assigned to a housing counseling agency that is located 3 or 4 hours away from where the homeowners live. According to the advocacy group representative, this design is particularly challenging for elderly homeowners who may have trouble applying online and need personal help. Additionally, representatives for a housing counseling agency told us that their state HFA stopped involving community organizations to guide applicants throughout the application process once the HFA received additional HHF funding in 2016 and instead chose to work with applicants directly. They said this design may hurt homeowners who do not live near the HFA and would benefit from in-person assistance that could be provided close to their homes. A representative from the state’s HFA confirmed that the HFA decided to work directly with applicants once it received additional HHF funds in 2016. The representative stated that while homeowners could also apply for HHF assistance online (after the HFA changed the program design in 2016), the HFA’s system did not accept electronic signatures. Thus, homeowners without the ability to print and scan documents would need to come to the HFA’s office to complete the application process. Variety of programs and their status. Treasury officials noted that the wide variety of programs that HFAs are implementing can create operational challenges for HFAs. As an example, the officials explained that HFAs may encounter challenges when their programs require coordination with local partners. For example, land banks can encounter delays in acquiring properties for demolition, and contractors may not do demolition work properly or may attempt to increase the amounts that they charge for their work after winning a contract. Five mortgage servicers with whom we spoke described similar challenges. For example, representatives from one servicer told us that it was challenging to work with the 19 different HFAs because they all implemented different HHF programs. The representative added that it was particularly challenging if an HFA had a change in either leadership or points of contact for the HHF program. Another servicer explained that servicers have to review each HFA’s participation agreement and subsequent updates. This servicer noted that updates to agreements can create challenges, as the servicer needs to determine whether it can provide what the HFA is requesting. Representatives from this and a third servicer told us that it would have been helpful for servicers to have an up-to-date list of active HHF programs. Further, one servicer told us that it is challenging to help homeowners understand that each HFA and program has different requirements and guidelines. As previously discussed, Treasury communicates information to stakeholders, such as servicers, through regular conference calls. However, Treasury expects HFAs to keep their servicers abreast of the status of HHF programs because HFAs contract directly with servicers. Representatives from one HFA noted that it was challenging to keep servicers updated on changes to their HHF programs. For example, they reported that when the HFA made changes to its unemployment program, servicers confused the program with another of the agency’s HHF programs. The representatives also stated that they have had to make many phone calls to try to keep servicers up to date. External factors. Treasury officials and other stakeholders noted that external factors such as changing market needs and natural disasters have created challenges for some HFAs. Treasury officials noted that some HFAs have had to change their HHF programs over time to respond to changes in local housing conditions. An organization that advocates for HFAs as well as an HFA similarly noted that changing housing markets present challenges for HFAs, which have to adjust their program offerings in an effort to continue to serve homeowners. As previously discussed, HFAs must obtain Treasury approval to add or revise their HHF programs, and they must document the changes by amending participation agreements. Treasury officials also noted that natural disasters can affect HHF programs because HFAs have to turn their attention to post-disaster housing needs. Additionally, Treasury officials stated that after a natural disaster it can become difficult to verify the eligibility of applicants, particularly if key documents have been lost or communication channels with homeowners or servicers are affected. Through its on-site monitoring efforts, Treasury has identified issues that participating HFAs must address for their HHF programs. During on-site reviews in 2016 and 2017, Treasury staff assessed selected HFAs’ efforts in one or more Treasury-identified areas. As previously noted, Treasury’s policy at the time of our review was to conduct on-site reviews of each participating HFA at least once every 2 years. In 2016 Treasury conducted on-site monitoring visits for 14 HFAs and identified issues that the HFAs needed to address to improve their HHF programs. Issues Treasury identified primarily fell into two areas. The first of these was monitoring processes and internal controls—for example, Treasury found that one HFA had not developed documentation of its compliance procedures for a down payment assistance program. The other primary area was homeowner eligibility—for example, Treasury found that an HFA had misclassified the reasons that some homeowners were not admitted into the state’s HHF program. In 2017 Treasury conducted site visits to 15 HFAs. For this period, Treasury’s most common issues related to homeowner eligibility and administrative expenses. According to Treasury officials, the increase in issues related to administrative expenses between 2016 and 2017 was a result of greater agency focus on this topic. Treasury observed, for example, that one HFA lacked sufficient documentation to support some administrative expenses and that another HFA had misclassified some administrative expenses. As previously discussed, HFAs are required to provide Treasury with a written plan describing how they will address issues Treasury identifies and reimburse HHF for any impermissible expenses. Through its oversight activities, SIGTARP reported that some participating HFAs have encountered challenges related to appropriate use of administrative expenses, management of their programs, and blight removal. In August 2017, SIGTARP reported that participating HFAs used $3 million in HHF funds for unnecessary expenses. The report maintained that some HFAs were using their administrative funds for expenses that were unnecessary. In a May 2018 hearing, SIGTARP testified that some HFAs were not following federal cost principles related to administrative expenses. Additionally, SIGTARP has issued reports describing mismanagement of the HHF program by specific HFAs, as well as challenges related to blight removal. While Treasury has disagreed with the dollar amount of administrative expenses used inappropriately by HFAs, it has also worked with HFAs and SIGTARP to address SIGTARP’s findings. As HHF programs begin to close and participating HFAs take steps to ensure they spend all of their HHF funds before the program deadline, opportunities exist in two areas for Treasury to manage risk and improve program operation and closeout: By not consistently and routinely collecting HFAs’ risk assessments, Treasury limits its ability to monitor and evaluate the effectiveness of HFAs’ preventive activities, controls to detect fraud, and response efforts. Further, by not evaluating these risk assessments, Treasury is missing an opportunity to help ensure that risk levels are appropriate. As HFAs wind down their HHF programs and HFA staff are relieved of their HHF-related positions, maintaining updated and accurate staffing information can help ensure that HFA staff are informed of who in their own offices is responsible for internal control execution. Because Treasury did not implement the HHF program in a manner that is consistent with standards for program evaluation design we previously identified, the performance data that Treasury collects do not provide significant insights into the program’s effectiveness. More specifically, Treasury did not clearly state some of its performance measures; lacks documentation of the relationship between program outputs and overall goals; did not design consistent methodologies for HFAs to use in setting did not require participating HFAs to use consistent methodologies to calculate outcomes. As a result, Treasury cannot aggregate key performance data or compare performance data across HFAs or HHF program types to demonstrate the results of the HHF program. As we have previously reported, OMB has set the expectation that agencies should conduct evaluations of federal programs. Moreover, our guide to designing evaluations states that where federal programs operate through multiple local public or private agencies, it important to ensure the data these agencies collect are sufficiently consistent to permit aggregation nationwide in order to evaluate progress toward national goals. Although HHF programs must stop disbursing funds by December 31, 2021, many of the programs have already ended or are in the process of winding down, making it too late for changes to Treasury’s approach to performance measurement to have a meaningful impact. However, we note that if Treasury were to extend the current program, as it did after Congress provided additional funding in 2015, or if Congress were to establish a similar program due to a future housing crisis, it would be useful at that time for Treasury to develop a program evaluation design that would allow the agency to assess overall program performance, as well as assess performance across HFAs and program types. We are making the following two recommendations to Treasury: The Assistant Secretary for Financial Institutions should annually collect and evaluate HFAs’ risk assessments, which include HFAs’ risk levels. (Recommendation 1) The Assistant Secretary for Financial Institutions should ensure that the documentation listing the HFA staff responsible for internal control execution is updated routinely. (Recommendation 2) We provided a draft of this report to Treasury for review and comment. In its comments, reproduced in appendix IV, Treasury agreed with our recommendations and stated that it has already taken steps toward addressing them by enhancing the existing review procedures for HFA’s risk assessments and staffing updates. Treasury also provided a technical comment, which we incorporated. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Treasury, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. We will make copies available to others upon request. The report will also be available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or ortiza@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are listed on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. The objectives of this report were to (1) determine the extent to which the Department of the Treasury’s (Treasury) monitoring of the Hardest Hit Fund (HHF) addresses leading practices for program oversight, (2) provide information on housing finance agencies’ (HFA) active programs and the status of HFAs’ progress toward program targets, and (3) describe challenges in implementing HHF programs that HFAs and others identified. To determine the extent to which Treasury’s monitoring of HHF addresses leading practices for program oversight, we used a scorecard methodology to compare Treasury’s monitoring policies and procedures, as implemented by 2016, against leading practices for an effective monitoring framework. To create the framework, we reviewed key reports and guidance related to monitoring, oversight, and performance management. In particular we reviewed relevant leading practices from internal control standards; previous GAO work on results-oriented performance goals and measures, key attributes for successful performance measures, characteristics for successful hierarches of performance measures, and managing fraud risk; and Office of Management and Budget guidance on oversight. Although Treasury is not required to follow all of the guidance that we identified, we determined that the guidance describes practices that are helpful for creating an effective monitoring framework. To select the practices for the scorecard, we focused on practices relevant to the structure of an oversight framework (including fraud risk); performance measures; goal setting; and communication with external parties. We reviewed key reports and guidance and then vetted our selected practices with stakeholders knowledgeable about performance measurement, design methodology, fraud risk, and the law. Based on this review and input, we consolidated identified practices into 14 leading practices to apply to Treasury’s monitoring framework. We then assessed Treasury’s policies and procedures against the framework. Specifically, we reviewed the agencies’ documented policies and procedures, reviewed documentation of how Treasury followed its policies and procedures, conducted interviews with Treasury staff responsible for overseeing HHF, and interviewed stakeholders, such as mortgage servicers, about Treasury’s monitoring of HHF. We also interviewed staff from four HFAs about Treasury’s monitoring of their programs; we selected the HFAs based on their mix of HHF programs, proportion of HHF funds disbursed, and geographic diversity. We also took into account whether stakeholders indicated that an HFA’s implementation of the program was particularly successful or challenging. With regard to the documentation Treasury collects as part of its monitoring, we limited our review to its 2016 and 2017 monitoring activities, and we limited our review of Treasury’s written policies and procedures to those implemented from January 2016 to September 2018. Two analysts independently reviewed agency policies and procedures to determine whether the policies were consistent with the 14 identified leading practices. Any disagreements in the determinations were resolved through discussion or with a third party, including the General Counsel’s office. We categorized each practice as follows: Addressed: Treasury’s policies and procedures reflect each component of the leading practice. Partially addressed: Treasury’s policies and procedures reflect some but not all components of the leading practice. Not addressed: Treasury’s policies and procedures do not reflect any of the components of the leading practice To describe active HHF programs and the status of HFAs’ progress toward program goals, we reviewed program documents, administered a data collection instrument, and spoke with officials at four HFAs (selected as previously described) and Treasury. We defined active programs as those that had a total allocation approved by Treasury and were accepting applications and still disbursing funds to households or blight elimination projects as of December 2017. In order to identify which programs were active, we developed, collected, and reviewed a questionnaire in which HFAs provided information on when each of their HHF programs started and stopped disbursing funds. For each of the 71 active programs we identified, we reviewed quarterly performance reports as of December 2017 to compile descriptive information such as program outputs and outcomes. Through the review of program documentation and interviews with knowledgeable officials, we found that Treasury’s output data were sufficiently reliable for our description of homeowners assisted and properties demolished. We also found that the data Treasury collected from HFAs on program outcomes were not reliable for the purpose of summarizing alternative outcomes by HFA or by program type. Treasury officials noted that the conclusions that can be drawn from alternative outcome data are inherently limited, particularly for the purpose of making comparisons between HFAs or program types, due to HFAs interpreting certain outcome measures differently, among other factors. Additionally, by comparing Treasury’s outcome measures to leading practices, we found that their definitions were not clearly stated. We also identified four studies on the impact of HHF blight elimination programs and reviewed them for reliable methodology. We determined that one of the four studies was not reliable for the purpose of assessing the impact of blight programs on targeted areas. Two of the three studies that we determined to be reliable had important limitations. One study examined 1 of the 18 counties that were served by that HFA’s blight elimination program. The other study did not isolate the independent effect of the HFA’s blight elimination program because other factors, such as local economic conditions, could also affect the performance of key economic indicators. We reviewed each HFA’s contract with Treasury as of December 2017 to identify each program’s target for assisting homeowners or demolishing blighted properties. Through comparison with internal control standards, we found that these targets were not reliable for the purpose of describing HFAs’ progress toward program goals because they were not stated in a form that permitted reasonably consistent measurement. To describe the factors Treasury identified as challenges for the HHF program, we analyzed Treasury’s on-site compliance monitoring reports for 2016 and 2017. As a part of our analysis, we identified the HFAs that Treasury visited in 2016 and 2017 and the extent to which Treasury had observations related to five Treasury-identified areas: monitoring processes and internal controls, eligibility, program expenses and income, administrative expenses, and reporting. We also interviewed key stakeholders regarding their views of challenges related to implementation of the HHF program, particularly since 2012. We discussed challenges with Treasury staff with responsibilities for monitoring HFAs’ implementation of the program; staff from four HFAs that are implementing HHF programs; six mortgage servicers that are involved with the HHF program; and two housing counseling agencies that are involved with the HHF program. For two of the HFAs with blight elimination programs, we conducted site visits to observe activities related to blight elimination. Additionally, we discussed challenges with other interested organizations, including an association for HFAs and an organization that brings together housing counselors, mortgage companies, investors, and other mortgage market participants to help address challenges in the mortgage market. Further, we reviewed reports issued by the Special Inspector General for the Troubled Asset Relief Program. We summarized the challenges that stakeholders described. We conducted this performance audit from November 2017 through December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To determine the extent to which the Department of the Treasury’s (Treasury) policies and procedures for monitoring and oversight address leading monitoring practices, we identified factors for an effective monitoring framework based on a review of key reports and guidance and input from stakeholders knowledgeable about performance measurement, design methodology, fraud risk, and the law. To select the practices for the scorecard, we focused on factors relevant to the structure of an oversight framework (including fraud risk); performance measures; goal setting; and communication with external parties. We consolidated identified factors into 14 leading practices to apply to Treasury’s oversight and monitoring framework. See Table 3 for the 14 leading practices and their underlying factors. As shown in table 4, housing finance agencies (HFA) were implementing from one to seven Hardest Hit Fund (HHF) programs (excluding blight programs) as of the fourth quarter of 2017. We included programs for which HFAs were disbursing funds to homeowners. As of December 2017, individual HFAs had assisted from 807 to 86,220 homeowners. Eight HFAs were implementing active blight elimination programs as of December 2017, as shown in table 5. The number of blighted properties demolished by individual HFAs ranged from 0 to 13,925. The Department of the Treasury’s 2017 utilization threshold requires that HFAs draw at least 95 percent of their HHF funding from rounds one through four by December 31, 2017 (see table 6). As of December 2017, 17 of 18 HFAs had drawn 95 percent or more of their funding from rounds one through four. The Nevada HFA had drawn 70 percent of its funding from rounds one through four. In addition to the contact named above, Jill Naamane, Assistant Director; Lisa Moore, Analyst in Charge; Vida Awumey; Farrah Graham; John Karikari; Moira Lenox; Benjamin Licht; Dan Luo; John McGrail; Marc Molino; Jennifer Schwartz; Shannon Smith; Estelle Tsay-Huang; and Erin Villas made key contributions to this report.", "summary": "Treasury established the HHF program in 2010 to help stabilize the housing market and assist homeowners facing foreclosure in the states hardest hit by the housing crisis. Through HHF, Treasury has obligated a total of $9.6 billion in Trouble Asset Relief Program funds to 19 state HFAs. HFAs use funds to implement programs that address foreclosure and help stabilize local housing markets—for example, by demolishing blighted properties. Congress extended HHF in 2015, and HFAs must disburse all HHF funds by December 31, 2021, or return them to Treasury. The Emergency Economic Stabilization Act of 2008 included a provision for GAO to report on Troubled Asset Relief Program activities. This report focuses on the HHF program and examines, among other objectives, (1) the extent to which Treasury's monitoring addresses leading practices for program oversight and (2) HFAs' progress toward program targets. GAO reviewed documentation of Treasury's HHF monitoring practices, interviewed HFAs (selected based on differences in program types implemented) and Treasury officials, and reviewed information on how HFAs developed program targets. For its Housing Finance Agency Innovation Fund for Hardest Hit Markets (HHF), the Department of the Treasury (Treasury) has addressed or partially addressed all 14 leading monitoring practices that GAO identified. For example, Treasury periodically collects performance data from housing finance agencies (HFA) and analyzes and validates these data. However, while Treasury requires HFAs to regularly assess the risks of their programs, it does not systematically collect or analyze these assessments. As a result, Treasury is missing an opportunity to ensure that HFAs are appropriately assessing their risk. Also, Treasury does not require HFAs to consistently document which of their staff are responsible for internal control execution. This documentation could help HFAs wind down their programs, particularly as staff turn over. Most HFAs met Treasury's goals for drawing down HHF funds, with $9.1 billion disbursed to HFAs as of September 2018. HHF programs have assisted hundreds of thousands of distressed homeowners since 2010. However, the data Treasury has collected are of limited use for determining how well HFAs met their goals for assisting households and demolishing blighted properties, or for evaluating the HHF program overall. For example, Treasury did not develop a consistent methodology for HFAs to use when setting performance targets, which limits Treasury's ability to compare across programs or assess the HHF program as a whole. Further, GAO's guide to designing evaluations states that where federal programs operate through multiple local public or private agencies, it is important that the data these agencies collect are sufficiently consistent to permit aggregation nationwide. Although HFAs have until the end of 2021 to disburse their HHF funds, many programs are beginning to close, making it too late for meaningful changes to Treasury's approach to performance measurement. However, should Congress authorize Treasury to extend the program beyond December 2021 or establish a similar program in the future, it would be useful at that time for Treasury to develop a program evaluation design that would allow the agency to assess overall program performance, as well as performance across HFAs and program types. GAO recommends that Treasury collect and evaluate HFAs' risk assessments and routinely update staffing documentation. Treasury agreed with these recommendations and stated that it has already taken steps toward addressing them.", "document_type": "gao"}
{"report": "IT systems supporting federal agencies and our nation’s critical infrastructures are inherently at risk. These systems are highly complex and dynamic, technologically diverse, and often geographically dispersed. This complexity increases the difficulty in identifying, managing, and protecting the numerous operating systems, applications, and devices comprising the systems and networks. Compounding the risk, federal systems and networks are also often interconnected with other internal and external systems and networks, including the Internet. This increases the number of avenues of attack and expands their attack surface. As systems become more integrated, cyber threats will pose an increasing risk to national security, economic well-being, and public health and safety. Advancements in technology, such as data analytics software for searching and collecting information, have also made it easier for individuals and organizations to correlate data (including PII) and track it across large and numerous databases. For example, social media has been used as a mass communication tool where PII can be gathered in vast amounts. In addition, ubiquitous Internet and cellular connectivity makes it easier to track individuals by allowing easy access to information pinpointing their locations. These advances—combined with the increasing sophistication of hackers and others with malicious intent, and the extent to which both federal agencies and private companies collect sensitive information about individuals—have increased the risk of PII being exposed and compromised. Cybersecurity incidents continue to impact entities across various critical infrastructure sectors. For example, in its 2018 annual data breach investigations report, Verizon reported that 53,308 security incidents and 2,216 data breaches were identified across 65 countries in the 12 months since its prior report. Further, the report noted that cybercriminals can often compromise a system in just a matter of minutes—or even seconds, but that it can take an organization significantly longer to discover the breach. Specifically, the report stated nearly 90 percent of the reported breaches occurred within minutes, while nearly 70 percent went undiscovered for months. These concerns are further highlighted by the number of information security incidents reported by federal executive branch civilian agencies to DHS’s U.S. Computer Emergency Readiness Team (US-CERT). For fiscal year 2017, 35,277 such incidents were reported by the Office of Management and Budget (OMB) in its 2018 annual report to Congress, as mandated by the Federal Information Security Modernization Act (FISMA). These incidents include, for example, web-based attacks, phishing, and the loss or theft of computing equipment. Different types of incidents merit different response strategies. However, if an agency cannot identify the threat vector (or avenue of attack), it could be difficult for that agency to define more specific handling procedures to respond to the incident and take actions to minimize similar future attacks. In this regard, incidents with a threat vector categorized as “other” (which includes avenues of attacks that are unidentified) made up 31 percent of the various incidents reported to US-CERT. Figure 1 shows the percentage of the different types of incidents reported across each of the nine threat vector categories for fiscal year 2017, as reported by OMB. These incidents and others like them can pose a serious challenge to economic, national, and personal privacy and security. The following examples highlight the impact of such incidents: In March 2018, the Mayor of Atlanta, Georgia, reported that the city was victimized by a ransomware cyberattack. As a result, city government officials stated that customers were not able to access multiple applications that are used to pay bills or access court related information. In response to the attack, the officials noted that they were working with numerous private and governmental partners, including DHS, to assess what occurred and determine how best to protect the city from future attacks. In March 2018, the Department of Justice reported that it had indicted nine Iranians for conducting a massive cybersecurity theft campaign on behalf of the Islamic Revolutionary Guard Corps. According to the department, the nine Iranians allegedly stole more than 31 terabytes of documents and data from more than 140 American universities, 30 U.S. companies, and five federal government agencies, among other entities. In March 2018, a joint alert from DHS and the Federal Bureau of Investigation (FBI) stated that, since at least March 2016, Russian government actors had targeted the systems of multiple U.S. government entities and critical infrastructure sectors. Specifically, the alert stated that Russian government actors had affected multiple organizations in the energy, nuclear, water, aviation, construction, and critical manufacturing sectors. In July 2017, a breach at Equifax resulted in the loss of PII for an estimated 148 million U.S. consumers. According to Equifax, the hackers accessed people’s names, Social Security numbers (SSN), birth dates, addresses and, in some instances, driver’s license numbers. In April 2017, the Commissioner of the Internal Revenue Service (IRS) testified that the IRS had disabled its data retrieval tool in early March 2017 after becoming concerned about the misuse of taxpayer data. Specifically, the agency suspected that PII obtained outside the agency’s tax system was used to access the agency’s online federal student aid application in an attempt to secure tax information through the data retrieval tool. In April 2017, the agency began notifying taxpayers who could have been affected by the breach. In June 2015, OPM reported that an intrusion into its systems had affected the personnel records of about 4.2 million current and former federal employees. Then, in July 2015, the agency reported that a separate, but related, incident had compromised its systems and the files related to background investigations for 21.5 million individuals. In total, OPM estimated 22.1 million individuals had some form of PII stolen, with 3.6 million being a victim of both breaches. Safeguarding federal IT systems and the systems that support critical infrastructures has been a long-standing concern of GAO. Due to increasing cyber-based threats and the persistent nature of information security vulnerabilities, we have designated information security as a government-wide high-risk area since 1997. In 2003, we expanded the information security high-risk area to include the protection of critical cyber infrastructure. At that time, we highlighted the need to manage critical infrastructure protection activities that enhance the security of the cyber and physical public and private infrastructures that are essential to national security, national economic security, and/or national public health and safety. We further expanded the information security high-risk area in 2015 to include protecting the privacy of PII. Since then, advances in technology have enhanced the ability of government and private sector entities to collect and process extensive amounts of PII, which has posed challenges to ensuring the privacy of such information. In addition, high- profile PII breaches at commercial entities, such as Equifax, heightened concerns that personal privacy is not being adequately protected. Our experience has shown that the key elements needed to make progress toward being removed from the High-Risk List are top-level attention by the administration and agency leaders grounded in the five criteria for removal, as well as any needed congressional action. The five criteria for removal that we identified in November 2000 are as follows: Leadership Commitment. Demonstrated strong commitment and top leadership support. Capacity. The agency has the capacity (i.e., people and resources) to resolve the risk(s). Action Plan. A corrective action plan exists that defines the root cause, solutions, and provides for substantially completing corrective measures, including steps necessary to implement solutions we recommended. Monitoring. A program has been instituted to monitor and independently validate the effectiveness and sustainability of corrective measures. Demonstrated Progress. Ability to demonstrate progress in implementing corrective measures and in resolving the high-risk area. These five criteria form a road map for efforts to improve and ultimately address high-risk issues. Addressing some of the criteria leads to progress, while satisfying all of the criteria is central to removal from the list. Figure 2 shows the five criteria and illustrative actions taken by agencies to address the criteria. Importantly, the actions listed are not “stand alone” efforts taken in isolation from other actions to address high- risk issues. That is, actions taken under one criterion may be important to meeting other criteria as well. For example, top leadership can demonstrate its commitment by establishing a corrective action plan including long-term priorities and goals to address the high-risk issue and using data to gauge progress—actions which are also vital to monitoring criteria. As we reported in the February 2017 high-risk report, the federal government’s efforts to address information security deficiencies had fully met one of the five criteria for removal from the High-Risk List— leadership commitment—and partially met the other four, as shown in figure 3. We plan to update our assessment of this high-risk area against the five criteria in February 2019. Based on our prior work, we have identified four major cybersecurity challenges: (1) establishing a comprehensive cybersecurity strategy and performing effective oversight, (2) securing federal systems and information, (3) protecting cyber critical infrastructure, and (4) protecting privacy and sensitive data. To address these challenges, we have identified 10 critical actions that the federal government and other entities need to take (see figure 4). The four challenges and the 10 actions needed to address them are summarized following the table. In addition, we also discuss in more detail each of the 10 actions in appendices II through XI. The federal government has been challenged in establishing a comprehensive cybersecurity strategy and in performing effective oversight as called for by federal law and policy. Specifically, we have previously reported that the federal government has faced challenges in establishing a comprehensive strategy to provide a framework for how the United States will engage both domestically and internationally on cybersecurity related matters. We have also reported on challenges in performing oversight, including monitoring the global supply chain, ensuring a highly skilled cyber workforce, and addressing risks associated with emerging technologies. The federal government can take four key actions to improve the nation’s strategic approach to, and oversight of, cybersecurity. Develop and execute a more comprehensive federal strategy for national cybersecurity and global cyberspace. In February 2013 we reported that the government had issued a variety of strategy- related documents that addressed priorities for enhancing cybersecurity within the federal government as well as for encouraging improvements in the cybersecurity of critical infrastructure within the private sector; however, no overarching cybersecurity strategy had been developed that articulated priority actions, assigned responsibilities for performing them, and set time frames for their completion. In October 2015, in response to our recommendation to develop an overarching federal cybersecurity strategy that included all key elements of the desirable characteristics of a national strategy, the Director of OMB and the Federal Chief Information Officer issued a Cybersecurity Strategy and Implementation Plan for the Federal Civilian Government. The plan directed a series of actions to improve capabilities for identifying and detecting vulnerabilities and threats, enhance protections of government assets and information, and further develop robust response and recovery capabilities to ensure readiness and resilience when incidents inevitably occur. The plan also identified key milestones for major activities, resources needed to accomplish milestones, and specific roles and responsibilities of federal organizations related to the strategy’s milestones. Since that time, the executive branch has made progress toward outlining a federal strategy for confronting cyber threats. For example, a May 2017 presidential executive order required federal agencies to take a variety of actions, including better manage their cybersecurity risks and coordinate to meet reporting requirements related to cybersecurity of federal networks, critical infrastructure, and the nation. Additionally, the December 2017 National Security Strategy cites cybersecurity as a national priority and identifies related needed actions, such as including identifying and prioritizing risk, and building defensible government networks. Further, DHS issued a cybersecurity strategy in May 2018, which articulated seven goals the department plans to accomplish in support of its mission related to managing national cybersecurity risks. The strategy is intended to provide DHS with a framework to execute its cybersecurity responsibilities during the next 5 years to keep pace with the evolving cyber risk landscape by reducing vulnerabilities and building resilience; countering malicious actors in cyberspace; responding to incidents; and making the cyber ecosystem more secure and resilient. These efforts provide a good foundation toward establishing a more comprehensive strategy, but more effort is needed to address all of the desirable characteristics of a national strategy that we have previously recommended. The recently issued executive branch strategy documents did not include key elements of desirable characteristics that can enhance the usefulness of a national strategy as guidance for decision makers in allocating resources, defining policies, and helping to ensure accountability. Specifically, the documents generally did not include milestones and performance measures to gauge results, nor did they describe the resources needed to carry out the goals and objective. Further, most of the strategy documents lacked clearly defined roles and responsibilities for key agencies, such as DHS, the Department of Defense (DOD), and OMB, who contribute substantially to the nation’s cybersecurity programs. Ultimately, a more clearly defined, coordinated, and comprehensive approach to planning and executing an overall strategy would likely lead to significant progress in furthering strategic goals and lessening persistent weaknesses. For more information on this action area, see appendix II. Mitigate global supply chain risks. The global, geographically disperse nature of the producers and suppliers of IT products is a growing concern. We have previously reported on potential issues associated with IT supply chain and risks originating from foreign- manufactured equipment. For example, in July 2017, we reported that the Department of State had relied on certain device manufacturers, software developers, and contractor support which had suppliers that were reported to be headquartered in a cyber-threat nation (e.g., China and Russia). We further pointed out that the reliance on complex, global IT supply chains introduces multiple risks to federal agencies, including insertion of counterfeits, tampering, or installation of malicious software or hardware. In July 2018, we testified that if such global IT supply chain risks are realized, they could jeopardize the confidentiality, integrity, and availability of federal information systems. Thus, the potential exists for serious adverse impact on an agency’s operations, assets, and employees. These factors highlight the importance and urgency of federal agencies appropriately assessing, managing, and monitoring IT supply chain risk as part of their agency-wide information security programs. For more information on this action area, see appendix III. Address cybersecurity workforce management challenges. The federal government faces challenges in ensuring that the nation’s cybersecurity workforce has the appropriate skills. For example, in June 2018, we reported on federal efforts to implement the requirements of the Federal Cybersecurity Workforce Assessment Act of 2015. We determined that most of the Chief Financial Officers (CFO) Act agencies had not fully implemented all statutory requirements, such as developing procedures for assigning codes to cybersecurity positions. Further, we have previously reported that DHS and DOD had not addressed cybersecurity workforce management requirements set forth in federal laws. In addition, we have reported in the last 2 years that federal agencies (1) had not identified and closed cybersecurity skills gaps, (2) had been challenged with recruiting and retaining qualified staff, and (3) had difficulty navigating the federal hiring process. A recent executive branch report also discussed challenges associated with the cybersecurity workforce. Specifically, in response to Executive Order 13800, the Department of Commerce and DHS led an interagency working group exploring how to support the growth and sustainment of future cybersecurity employees in the public and private sectors. In May 2018, the departments issued a report that identified key findings, including: the U.S. cybersecurity workforce needs immediate and sustained improvements; the pool of cybersecurity candidates needs to be expanded through retraining and by increasing the participation of women, minorities, and veterans; a shortage exists of cybersecurity teachers at the primary and secondary levels, faculty in higher education, and training instructors; and comprehensive and reliable data about cybersecurity workforce position needs and education and training programs are lacking. The report also included recommendations and proposed actions to address the findings, including that private and public sectors should (1) align education and training with employers’ cybersecurity workforce needs by applying the National Initiative for Cybersecurity Education Cybersecurity Workforce Framework; (2) develop cybersecurity career model paths; and (3) establish a clearinghouse of information on cybersecurity workforce development education, training, and workforce development programs and initiatives. In addition, in June 2018, the executive branch issued a government reform plan and reorganization recommendations that included, among other things, proposals for solving the federal cybersecurity workforce shortage. In particular, the plan notes that the administration intends to prioritize and accelerate ongoing efforts to reform the way that the federal government recruits, evaluates, selects, pays, and places cyber talent across the enterprise. The plan further states that, by the end of the first quarter of fiscal year 2019, all CFO Act agencies, in coordination with DHS and OMB, are to develop a critical list of vacancies across their organizations. Subsequently, OMB and DHS are to analyze these lists and work with OPM to develop a government-wide approach to identifying or recruiting new employees or reskilling existing employees. Regarding cybersecurity training, the plan notes that OMB is to consult with DHS to standardize training for cybersecurity employees, and should work to develop an enterprise-wide training process for government cybersecurity employees. For more information on this action area, see appendix IV. Ensure the security of emerging technologies. As the devices used in daily life become increasingly integrated with technology, the risk to sensitive data and PII also grows. Over the last several years, we have reported on weaknesses in addressing vulnerabilities associated with emerging technologies, including: IoT devices, such as fitness trackers, cameras, and thermostats, that continuously collect and process information are potentially vulnerable to cyber-attacks; IoT devices, such as those acquired and used by DOD employees or that DOD itself acquires (e.g., smartphones), may increase the security risks to the department; vehicles that are potentially susceptible to cyber-attack through technology, such as Bluetooth; the unknown impact of artificial intelligence cybersecurity; and advances in cryptocurrencies and blockchain technologies. Executive branch agencies have also highlighted the challenges associated with ensuring the security of emerging technologies. Specifically, in a May 2018 report issued in response to Executive Order 13800, the Department of Commerce and DHS issued a report on the opportunities and challenges in reducing the botnet threat. The opportunities and challenges are centered on six principal themes, including the global nature of automated, distributed attacks; effective tools; and awareness and education. The report also provides recommended actions, including that federal agencies should increase their understanding of what software components have been incorporated into acquired products and establish a public campaign to support awareness of IoT security. For more information on this action area, see appendix V. In our previously discussed reports related to this cybersecurity challenge, we made a total of 50 recommendations to federal agencies to address the weaknesses identified. As of August 2018, 48 recommendations had not been implemented. These outstanding recommendations include 8 priority recommendations, meaning that we believe that they warrant priority attention from heads of key departments and agencies. These priority recommendations include addressing weaknesses associated with, among other things, agency-specific cybersecurity workforce challenges and agency responsibilities for supporting mitigation of vehicle network attacks. Until our recommendations are fully implemented, federal agencies may be limited in their ability to provide effective oversight of critical government-wide initiatives, address challenges with cybersecurity workforce management, and better ensure the security of emerging technologies. In addition to our prior work related to the federal government’s efforts to establish key strategy documents and implement effective oversight, we also have several ongoing reviews related to this challenge. These include reviews of: the CFO Act agencies’ efforts to submit complete and reliable baseline assessment reports of their cybersecurity workforces; the extent to which DOD has established training standards for cyber mission force personnel, and efforts the department has made to achieve its goal of a trained cyber mission force; and selected agencies’ ability to implement cloud service technologies and notable benefits this might have on agencies. The federal government has been challenged in securing federal systems and information. Specifically, we have reported that federal agencies have experienced challenges in implementing government-wide cybersecurity initiatives, addressing weaknesses in their information systems and responding to cyber incidents on their systems. This is particularly concerning given that the emergence of increasingly sophisticated threats and continuous reporting of cyber incidents underscores the continuing and urgent need for effective information security. As such, it is important that federal agencies take appropriate steps to better ensure they have effectively implemented programs to protect their information and systems. We have identified three actions that the agencies can take. Improve implementation of government-wide cybersecurity initiatives. Specifically, in January 2016, we reported that DHS had not ensured that the National Cybersecurity Protection System (NCPS) had fully satisfied all intended system objectives related to intrusion detection and prevention, information sharing, and analytics. In addition, in February 2017, we reported that the DHS National Cybersecurity and Communications Integration Center’s (NCCIC) functions were not being performed in adherence with the principles set forth in federal laws. We noted that, although NCCIC was sharing information about cyber threats in the way it should, the center did not have metrics to measure that the information was timely, relevant and actionable, as prescribed by law. For more information on this action area, see appendix VI. Address weaknesses in federal information security programs. We have previously identified a number of weaknesses in agencies’ protection of their information and information systems. For example, over the past 2 years, we have reported that: most of the 24 agencies covered by the CFO Act had weaknesses in each of the five major categories of information system controls (i.e., access controls, configuration management controls, segregation of duties, contingency planning, and agency-wide security management); three agencies—the Securities Exchange Commission, the Federal Deposit Insurance Corporation, and the Food and Drug Administration—had not effectively implemented aspects of their information security programs, which resulted in weaknesses in these agencies’ security controls; information security weaknesses in selected high-impact systems at four agencies—the National Aeronautics and Space Administration, the Nuclear Regulatory Commission, OPM, and the Department of Veterans Affairs—were cited as a key reason that the agencies had not effectively implemented elements of their information security programs; DOD’s process for monitoring the implementation of cybersecurity guidance had weaknesses and resulted in the closure of certain tasks (such as completing cyber risk assessments) before they were fully implemented; and agencies had not fully defined the role of their Chief Information Security Officers, as required by FISMA. We also recently testified that, although the government had acted to protect federal information systems, additional work was needed to improve agency security programs and cyber capabilities. In particular, we noted that further efforts were needed by agencies to implement our prior recommendations in order to strengthen their information security programs and technical controls over their computer networks and systems. For more information on this action area, see appendix VII. Enhance the federal response to cyber incidents. We have reported that certain agencies have had weaknesses in responding to cyber incidents. For example, as of August 2017, OPM had not fully implemented controls to address deficiencies identified as a result of its 2015 cyber incidents; DOD had not identified the National Guard’s cyber capabilities (e.g., computer network defense teams) or addressed challenges in its exercises; as of April 2016, DOD had not identified, clarified, or implemented all components of its support of civil authorities during cyber incidents; and as of January 2016, DHS’s NCPS had limited capabilities for detecting and preventing intrusions, conducting analytics, and sharing information. For more information on this action area, see appendix VIII. In the public versions of the reports previously discussed for this challenge area, we made a total of 101 recommendations to federal agencies to address the weaknesses identified. As of August 2018, 61 recommendations had not been implemented. These outstanding recommendations include 14 priority recommendations to address weaknesses associated with, among other things, the information security programs at the National Aeronautics and Space Administration, OPM, and the Security Exchange Commission. Until these recommendations are implemented, these federal agencies will be limited in their ability to ensure the effectiveness of their programs for protecting information and systems. In addition to our prior work, we also have several ongoing reviews related to the federal government’s efforts to protect its information and systems. These include reviews of: Federal Risk and Authorization Management Program (FedRAMP) implementation, including an assessment of the implementation of the program’s authorization process for protecting federal data in cloud environments; the Equifax data breach, including an assessment of federal oversight of credit reporting agencies’ collection, use, and protection of consumer PII; the Federal Communication Commission’s Electronic Comment Filing System security, to include a review of the agency’s detection of and response to a May 2017 incident that reportedly impacted the system; DOD’s efforts to improve the cybersecurity of its major weapon DOD’s whistleblower program, including an assessment of the policies, procedures, and controls related to the access and storage of sensitive and classified information needed for the program; IRS’s efforts to (1) implement security controls and the agency’s information security program, (2) authenticate taxpayers, and (3) secure tax information; and the federal approach and strategy to securing agency information systems, to include federal intrusion detection and prevention capabilities and the intrusion assessment plan. The federal government has been challenged in working with the private sector to protect critical infrastructure. This infrastructure includes both public and private systems vital to national security and other efforts, such as providing the essential services that underpin American society. As the cybersecurity threat to these systems continues to grow, federal agencies have millions of sensitive records that must be protected. Specifically, this critical infrastructure threat could have national security implications and more efforts should be made to ensure that it is not breached. To help address this issue, the National Institute of Standards and Technology (NIST) developed the cybersecurity framework—a voluntary set of cybersecurity standards and procedures for industry to adopt as a means of taking a risk-based approach to managing cybersecurity. However, additional action is needed to strengthen the federal role in protecting the critical infrastructure. Specifically, we have reported on other critical infrastructure protection issues that need to be addressed. For example: DHS did not track vulnerability reduction from the implementation and verification of planned security measures at the high-risk chemical facilities that engage with the department, as a basis for assessing performance. Entities within the 16 critical infrastructure sectors reported encountering four challenges to adopting the cybersecurity framework, such as being limited in their ability to commit necessary resources towards framework adoption and not having the necessary knowledge and skills to effectively implement the framework. DOD and the Federal Aviation Administration identified a variety of operations and physical security risks that could adversely affect DOD missions. Major challenges existed to securing the electricity grid against cyber threats. These challenges included monitoring implementation of cybersecurity standards, ensuring security features are built into smart grid systems, and establishing metrics for cybersecurity. DHS and other agencies needed to enhance cybersecurity in the maritime environment. Specifically, DHS did not include cyber risks in its risk assessments that were already in place nor did it address cyber risks in guidance for port security plans. Sector-specific agencies were not properly addressing progress or metrics to measure their progress in cybersecurity. For more information on this action area, see appendix IX. We made a total of 21 recommendations to federal agencies to address these weaknesses and others. These recommendations include, for example, a total of 9 recommendations to 9 sector-specific agencies to develop methods to determine the level and type of cybersecurity framework adoption across their respective sectors. As of August 2018, all 21 recommendations had not been implemented. Until these recommendations are implemented, the federal government will continue to be challenged in fulfilling its role in protecting the nation’s critical infrastructure. In addition to our prior work related to the federal government’s efforts to protect critical infrastructure, we also have several ongoing reviews focusing on: the physical and cybersecurity risks to pipelines across the country responsible for transmitting oil, natural gas, and other hazardous liquids; the cybersecurity risks to the electric grid; and the privatization of utilities at DOD installations. The federal government has been challenged in protecting privacy and sensitive data. Advances in technology, including powerful search technology and data analytics software, have made it easy to correlate information about individuals across large and numerous databases, which have become very inexpensive to maintain. In addition, ubiquitous Internet connectivity has facilitated sophisticated tracking of individuals and their activities through mobile devices such as smartphones and fitness trackers. Given that access to data is so pervasive, personal privacy hinges on ensuring that databases of PII maintained by government agencies or on their behalf are protected both from inappropriate access (i.e., data breaches) as well as inappropriate use (i.e., for purposes not originally specified when the information was collected). Likewise, the trend in the private sector of collecting extensive and detailed information about individuals needs appropriate limits. The vast number of individuals potentially affected by data breaches at federal agencies and private sector entities in recent years increases concerns that PII is not being properly protected. Federal agencies should take two types of actions to address this challenge area. In addition, we have previously proposed two matters for congressional consideration aimed toward better protecting PII. Improve federal efforts to protect privacy and sensitive data. We have issued several reports noting that agencies had deficiencies in protecting privacy and sensitive data that needed to be addressed. For example: The Department of Health and Human Services’ (HHS) Centers for Medicare and Medicaid Services (CMS) and external entities were at risk of compromising Medicare Beneficiary Data due to a lack of guidance and proper oversight. The Department of Education’s Office of Federal Student Aid had not properly overseen its school partners’ records or information security programs. HHS had not fully addressed key security elements in its guidance for protecting the security and privacy of electronic health information. CMS had not fully protected the privacy of users’ data on state- based marketplaces. Poor planning and ineffective monitoring had resulted in the unsuccessful implementation of government initiatives aimed at eliminating the unnecessary collection, use, and display of SSNs. For more information on this action area, see appendix X. Appropriately limit the collection and use of personal information and ensure that it is obtained with appropriate knowledge or consent. We have issued a series of reports that highlight a number of the key concerns in this area. For example: The emergence of IoT devices can facilitate the collection of information about individuals without their knowledge or consent; Federal laws for smartphone tracking applications have not generally been well enforced; The FBI has not fully ensured privacy and accuracy related to the use of face recognition technology. For more information on this action area, see appendix XI. We have previously suggested that Congress consider amending laws, such as the Privacy Act of 1974 and the E-Government Act of 2002, because they may not consistently protect PII. Specifically, we found that while these laws and guidance set minimum requirements for agencies, they may not consistently protect PII in all circumstances of its collection and use throughout the federal government and may not fully adhere to key privacy principles. However, revisions to the Privacy Act and the E-Government Act have not yet been enacted. Further, we also suggested that Congress consider strengthening the consumer privacy framework and review issues such as the adequacy of consumers’ ability to access, correct, and control their personal information; and privacy controls related to new technologies such as web tracking and mobile devices. However, these suggested changes have not yet been enacted. We also made a total of 29 recommendations to federal agencies to address the weaknesses identified. As of August 2018, 28 recommendations had not been implemented. These outstanding recommendations include 6 priority recommendations to address weaknesses associated with, among other things, publishing privacy impact assessments and improving the accuracy of the FBI’s face recognition services. Until these recommendations are implemented, federal agencies will be challenged in their ability to protect privacy and sensitive data and ensure that its collection and use is appropriately limited. In addition to our prior work, we have several ongoing reviews related to protecting privacy and sensitive data. These include reviews of: IRS’s taxpayer authentication efforts, including what steps the agency is taking to monitor and improve its authentication methods; the extent to which the Department of Education’s Office of Federal Student Aid’s policies and procedures for overseeing non-school partners’ protection of federal student aid data align with federal requirements and guidance; data security issues related to credit reporting agencies, including a review of the causes and impacts of the August 2017 Equifax data breach; the extent to which Equifax assessed, responded to, and recovered from its August 2017 data breach; federal agencies’ efforts to remove PII from shared cyber threat indicators; and how the federal government has overseen Internet privacy, including the roles of the Federal Communications Commission and the Federal Trade Commission, and strengths and weaknesses of the current oversight authorities. In conclusion, since 2010, we have made over 3,000 recommendations to agencies aimed at addressing the four cybersecurity challenges. Nevertheless, many agencies continue to be challenged in safeguarding their information systems and information, in part because many of these recommendations have not been implemented. Of the roughly 3,000 recommendations made since 2010, nearly 1,000 had not been implemented as of August 2018. We have also designated 35 as priority recommendations, and as of August 2018, 31 had not been implemented. The federal government and the nation’s critical infrastructure are dependent on IT systems and electronic data, which make them highly vulnerable to a wide and evolving array of cyber-based threats. Securing these systems and data is vital to the nation’s security, prosperity, and well-being. Nevertheless, the security over these systems and data is inconsistent and urgent actions are needed to address ongoing cybersecurity and privacy challenges. Specifically, the federal government needs to implement a more comprehensive cybersecurity strategy and improve its oversight, including maintaining a qualified cybersecurity workforce; address security weaknesses in federal systems and information and enhance cyber incident response efforts; bolster the protection of cyber critical infrastructure; and prioritize efforts to protect individual’s privacy and PII. Until our recommendations are addressed and actions are taken to address the four challenges we identified, the federal government, the national critical infrastructure, and the personal information of U.S. citizens will be increasingly susceptible to the multitude of cyber-related threats that exist. We are sending copies of this report to the appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Nick Marinos at (202) 512-9342 or marinosn@gao.gov or Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XII. Critical Infrastructure Protection: DHS Should Take Actions to Measure Reduction in Chemical Facility Vulnerability and Share Information with First Responders. GAO-18-538. Washington, D.C.: August 8, 2018. High-Risk Series: Urgent Actions Are Needed to Address Cybersecurity Challenges Facing the Nation. GAO-18-645T. Washington, D.C.: July 25, 2018. Information Security: Supply Chain Risks Affecting Federal Agencies. GAO-18-667T. Washington, D.C.: July 12, 2018. Information Technology: Continued Implementation of High-Risk Recommendations Is Needed to Better Manage Acquisitions, Operations, and Cybersecurity. GAO-18-566T. Washington, D.C.: May 23, 2018. Cybersecurity: DHS Needs to Enhance Efforts to Improve and Promote the Security of Federal and Private-Sector Networks, GAO-18-520T. Washington, D.C.: April 24, 2018. Electronic Health Information: CMS Oversight of Medicare Beneficiary Data Security Needs Improvement. GAO-18-210. Washington, D.C.: March 6, 2018. Technology Assessment: Artificial Intelligence, Emerging Opportunities, Challenges, and Implications. GAO-18-142SP. Washington, D.C.: March 28, 2018. GAO Strategic Plan 2018-2023: Trends Affecting Government and Society. GAO-18-396SP. Washington, D.C.: February 22, 2018. Critical Infrastructure Protection: Additional Actions Are Essential for Assessing Cybersecurity Framework Adoption. GAO-18-211. Washington, D.C.: February 15, 2018. Cybersecurity Workforce: Urgent Need for DHS to Take Actions to Identify Its Position and Critical Skill Requirements. GAO-18-175. Washington, D.C.: February 6, 2018. Homeland Defense: Urgent Need for DOD and FAA to Address Risks and Improve Planning for Technology That Tracks Military Aircraft. GAO-18-177. Washington, D.C.: January 18, 2018. Federal Student Aid: Better Program Management and Oversight of Postsecondary Schools Needed to Protect Student Information. GAO-18-121. Washington, D.C.: December 15, 2017. Defense Civil Support: DOD Needs to Address Cyber Incident Training Requirements. GAO-18-47. Washington, D.C.: November 30, 2017. Federal Information Security: Weaknesses Continue to Indicate Need for Effective Implementation of Policies and Practices. GAO-17-549. Washington, D.C.: September 28, 2017. Information Security: OPM Has Improved Controls, but Further Efforts Are Needed. GAO-17-614. Washington, D.C.: August 3, 2017. Defense Cybersecurity: DOD’s Monitoring of Progress in Implementing Cyber Strategies Can Be Strengthened. GAO-17-512. Washington, D.C.: August 1, 2017. State Department Telecommunications: Information on Vendors and Cyber-Threat Nations. GAO-17-688R. Washington, D.C.: July 27, 2017. Internet of Things: Enhanced Assessments and Guidance Are Needed to Address Security Risks in DOD. GAO-17-668. Washington, D.C.: July 27, 2017. Information Security: SEC Improved Control of Financial Systems but Needs to Take Additional Actions. GAO-17-469. Washington, D.C.: July 27, 2017. Information Security: Control Deficiencies Continue to Limit IRS’s Effectiveness in Protecting Sensitive Financial and Taxpayer Data. GAO-17-395. Washington, D.C.: July 26, 2017. Social Security Numbers: OMB Actions Needed to Strengthen Federal Efforts to Limit Identity Theft Risks by Reducing Collection, Use, and Display. GAO-17-553. Washington, D.C.: July 25, 2017. Information Security: FDIC Needs to Improve Controls over Financial Systems and Information. GAO-17-436. Washington, D.C.: May 31, 2017. Technology Assessment: Internet of Things: Status and implications of an increasingly connected world. GAO-17-75. Washington, D.C.: May 15, 2017. Cybersecurity: DHS’s National Integration Center Generally Performs Required Functions but Needs to Evaluate Its Activities More Completely. GAO-17-163. Washington, D.C.: February 1, 2017. High-Risk Series: An Update. GAO-17-317. Washington, D.C.: February 2017. IT Workforce: Key Practices Help Ensure Strong Integrated Program Teams; Selected Departments Need to Assess Skill Gaps. GAO-17-8. Washington, D.C.: November 30, 2016. Electronic Health Information: HHS Needs to Strengthen Security and Privacy Guidance and Oversight. GAO-16-771. Washington, D.C.: September 26, 2016. Defense Civil Support: DOD Needs to Identify National Guard’s Cyber Capabilities and Address Challenges in Its Exercises. GAO-16-574. Washington, D.C.: September 6, 2016. Information Security: FDA Needs to Rectify Control Weaknesses That Place Industry and Public Health Data at Risk. GAO-16-513. Washington, D.C.: August 30, 2016. Federal Chief Information Security Officers: Opportunities Exist to Improve Roles and Address Challenges to Authority. GAO-16-686. Washington, D.C.: August 26, 2016. Federal Hiring: OPM Needs to Improve Management and Oversight of Hiring Authorities. GAO-16-521. Washington, D.C.: August 2, 2016. Information Security: Agencies Need to Improve Controls over Selected High-Impact Systems. GAO-16-501. Washington, D.C.: May 18, 2016. Face Recognition Technology: FBI Should Better Ensure Privacy and Accuracy. GAO-16-267. Washington, D.C.: May 16, 2016. Smartphone Data: Information and Issues Regarding Surreptitious Tracking Apps That Can Facilitate Stalking. GAO-16-317. Washington, D.C.: May 9, 2016. Vehicle Cybersecurity: DOT and Industry Have Efforts Under Way, but DOT Needs to Define Its Role in Responding to a Real-world Attack. GAO-16-350. Washington, D.C.: April 25, 2016. Civil Support: DOD Needs to Clarify Its Roles and Responsibilities for Defense Support of Civil Authorities during Cyber Incidents. GAO-16-332. Washington, D.C.: April 4, 2016. Healthcare.gov: Actions Needed to Enhance Information Security and Privacy Controls. GAO-16-265. Washington, D.C.: March 23, 2016. Information Security: DHS Needs to Enhance Capabilities, Improve Planning, and Support Greater Adoption of Its National Cybersecurity Protection System. GAO-16-294. Washington, D.C.: January 28, 2016. Critical Infrastructure Protection: Sector-Specific Agencies Need to Better Measure Cybersecurity Progress. GAO-16-79. Washington, D.C.: November 19, 2015. Critical Infrastructure Protection: Cybersecurity of the Nation’s Electricity Grid Requires Continued Attention. GAO-16-174T. Washington, D.C.: October 21, 2015. Maritime Critical Infrastructure Protection: DHS Needs to Enhance Efforts to Address Port Cybersecurity. GAO-16-116T. Washington, D.C.: October 8, 2015. Cybersecurity: National Strategy, Roles, and Responsibilities Need to Be Better Defined and More Effectively Implemented. GAO-13-187. Washington, D.C.: February 14, 2014. Information Resellers: Consumer Privacy Framework Needs to Reflect Changes in Technology and the Marketplace. GAO-13-663. Washington, D.C.: September 25, 2013. Privacy: Alternatives Exist for Enhancing Protection of Personally Identifiable Information. GAO-08-536. Washington, D.C.: May 19, 2008. Federal law and policy call for a risk-based approach to managing cybersecurity within the government, as well as globally. We have previously reported that the federal government has faced challenges in establishing a comprehensive strategy to provide a framework for how the United States will engage both domestically and internationally on cybersecurity related matters. More specifically, in February 2013, we reported that the government had issued a variety of strategy-related documents that addressed priorities for enhancing cybersecurity within the federal government as well as for encouraging improvements in the cybersecurity of critical infrastructure within the private sector; however, no overarching cybersecurity strategy had been developed that articulated priority actions, assigned responsibilities for performing them, and set time frames for their completion. Accordingly, we recommended that the White House Cybersecurity Coordinator in the Executive Office of the President develop an overarching federal cybersecurity strategy that included all key elements of the desirable characteristics of a national strategy including, among other things, milestones and performance measures for major activities to address stated priorities; cost and resources needed to accomplish stated priorities; and specific roles and responsibilities of federal organizations related to the strategy’s stated priorities. In response to our recommendation, in October 2015, the Director of OMB and the Federal Chief Information Officer, issued a Cybersecurity Strategy and Implementation Plan for the Federal Civilian Government. The plan directed a series of actions to improve capabilities for identifying and detecting vulnerabilities and threats, enhance protections of government assets and information, and further develop robust response and recovery capabilities to ensure readiness and resilience when incidents inevitably occur. The plan also identified key milestones for major activities, resources needed to accomplish milestones, and specific roles and responsibilities of federal organizations related to the strategy’s milestones. Since that time, the executive branch has made progress toward outlining a federal strategy for confronting cyber threats. Table 1 identifies these recent efforts and a description of their related contents. These efforts provide a good foundation toward establishing a more comprehensive strategy, but more effort is needed to address all of the desirable characteristics of a national strategy that we recommended. The recently issued executive branch strategy documents did not include key elements of desirable characteristics that can enhance the usefulness of a national strategy as guidance for decision makers in allocating resources, defining policies, and helping to ensure accountability. Specifically: Milestones and performance measures to gauge results were generally not included in strategy documents. For example, although the DHS Cybersecurity Strategy stated that its implementation would be assessed on an annual basis, it did not describe the milestones and performance measures for tracking the effectiveness of the activities intended to meet the stated goals (e.g., protecting critical infrastructure and responding effectively to cyber incidents). Without such performance measures, DHS will lack a means to ensure that the goals and objectives discussed in the document are accomplished and that responsible parties are held accountable. According to officials from DHS’s Office of Cybersecurity and Communications, the department is developing a plan for implementing the DHS Cybersecurity Strategy and expects to issue the plan by the end of calendar year 2018. The officials stated that the plan is expected to identify milestones, roles, and responsibilities across DHS to inform the prioritization of future efforts. The strategy documents generally did not include information regarding the resources needed to carry out the goals and objectives. For example, although the DHS Cybersecurity Strategy identified a variety of actions the agency planned to take to perform their cybersecurity mission, it did not articulate the resources needed to carry out these actions and requirements. Without information on the specific resources needed, federal agencies may not be positioned to allocate such resources and investments and, therefore, may be hindered in their ability meet national priorities. Most of the strategy documents lacked clearly defined roles and responsibilities for key agencies, such as DHS, DOD, and OMB. These agencies contribute substantially to the nation’s cybersecurity programs. For example, although the National Security Strategy discusses multiple priority actions needed to address the nation’s cybersecurity challenges (e.g., building defensible government networks, and deterring and disrupting malicious cyber actors), it does not describe the roles, responsibilities, or the expected coordination of any specific federal agencies, including DHS, DOD, or OMB, or other non-federal entities needed to carry out those actions. Without this information, the federal government may not be able foster effective coordination, particularly where there is overlap in responsibilities, or hold agencies accountable for carrying out planned activities. Ultimately, a more clearly defined, coordinated, and comprehensive approach to planning and executing an overall strategy would likely lead to significant progress in furthering strategic goals and lessening persistent weaknesses. The exploitation of information technology (IT) products and services through the supply chain is an emerging threat. IT supply chain-related threats can be introduced in the manufacturing, assembly, and distribution of hardware, software, and services. Moreover, these threats can appear at each phase of the system development life cycle, when an agency initiates, develops, implements, maintains, and disposes of an information system. As a result, the compromise of an agency’s IT supply chain can degrade the confidentiality, integrity, and availability of its critical and sensitive networks, IT-enabled equipment, and data. Federal regulation and guidance issued by the National Institute of Standards and Technology (NIST) set requirements and best practices for mitigating supply chain risks. The Federal Acquisition Regulation established codification and publication of uniform policies and procedures for acquisition by all executive branch agencies. Agencies are required by the Federal Acquisition Regulation to ensure that contracts include quality requirements that are determined necessary to protect the government’s interest. In addition, the NIST guidance on supply chain risk management practices for federal information systems and organizations intends to assist federal agencies with identifying, assessing, and mitigating information and communications technology supply chain risks at all levels of their organizations. We have previously reported on risks to the IT supply chain and risks originating from foreign-manufactured equipment. For example: In July 2018, we testified that if global IT supply chain risks are realized, they could jeopardize the confidentiality, integrity, and availability of federal information systems. Thus, the potential exists for serious adverse impact on an agency’s operations, assets, and employees. We further stated that in 2012 we determined that four national security-related agencies—the Departments of Defense, Justice, Energy, Homeland Security (DHS)—varied in the extent to which they had addressed supply chain risks. We recommended that three agencies take eight actions, as needed, to develop and document policies, procedures, and monitoring capabilities that address IT supply chain risk. The agencies generally concurred with the recommendations and subsequently implemented seven recommendations and partially implemented the eighth recommendation. In July 2017, we reported that, based on a review of a sample of organizations within the Department of State’s telecommunications supply chain, we were able to identify instances in which device manufacturers, software developers and contractor support were reported to be headquartered in a leading cyber-threat nation. For example, of the 52 telecommunications device manufacturers and software developers in our sample, we were able to identify 12 that had 1 or more suppliers that were reported to be headquartered in a leading cyber-threat nation. We noted that the reliance on complex, global IT supply chains introduces multiple risks to federal agencies, including insertion of counterfeits, tampering, or installation of malicious software or hardware. Figure 5 illustrates possible manufacturing locations of typical network components. Although federal agencies have taken steps to address IT supply chain deficiencies that we previously identified, this area continues to be a potential threat vector for malicious actors to target the federal government. For example, in September 2017, DHS issued a binding operating directive which calls on departments and agencies to identify any use or presence of Kaspersky products on their information systems and to develop detailed plans to remove and discontinue present and future use of the products. DHS expressed concern about the ties between certain Kaspersky officials and Russian intelligence and other government agencies, and requirements under Russian law that allow Russian intelligence agencies to request or compel assistance from Kaspersky and to intercept communications transiting Russian networks. On May 11, 2017, the President issued an executive order on strengthening the cybersecurity of federal networks and critical infrastructure. The order makes it the policy of the United States to support the growth and sustainment of a workforce that is skilled in cybersecurity and related fields as the foundation for achieving our objectives in cyberspace. It directed the Secretaries of Commerce and Homeland Security (DHS), in consultation with other federal agencies, to assess the scope and sufficiency of efforts to educate and train the American cybersecurity workforce of the future, including cybersecurity- related education curricula, training, and apprenticeship programs, from primary through higher education. Nevertheless, the federal government continues to face challenges in addressing the nation’s cybersecurity workforce. Agencies had not effectively conducted baseline assessments of their cybersecurity workforce or fully developed procedures for coding positions. In June 2018, we reported that 21 of the 24 agencies covered by the Chief Financial Officer’s Act had conducted and submitted to Congress a baseline assessment identifying the extent to which their cybersecurity employees held professional certifications, as required by the Federal Cybersecurity Workforce Assessment Act of 2015. However, we found that the results of these assessments may not have been reliable because agencies did not address all of the reportable information and agencies were limited in their ability to obtain complete and consistent information about their cybersecurity employees and the certifications they held. We determined that this was because agencies had not yet fully identified all members of their cybersecurity workforces or did not have a consistent list of appropriate certifications for cybersecurity positions. Further, 23 of the agencies reviewed had established procedures for identifying and assigning the appropriate employment codes to their civilian cybersecurity positions, as called for by the act. However, 6 of the 23 did not address one or more of 7 activities required by OPM in their procedures, such as reviewing all filled and vacant positions and annotating reviewed position descriptions with the appropriate employment code. Accordingly, we made 30 recommendations to 13 agencies to fully implement two of the act’s requirements on baseline assessments and coding procedures. The extent to which these agencies agreed with the recommendations varied. DHS and the Department of Defense (DOD) had not addressed cybersecurity workforce management requirements set forth in federal laws. In February 2018, we reported that, while DHS had taken actions to identify, categorize, and assign employment codes to its cybersecurity positions, as required by the Homeland Security Cybersecurity Workforce Assessment Act of 2014, its actions were not timely and complete. For example, DHS did not establish timely and complete procedures to identify, categorize, and code its cybersecurity position vacancies and responsibilities. Further, DHS had not yet completed its efforts to identify all of its cybersecurity positions and accurately assign codes to all filled and vacant cybersecurity positions. Table 2 shows DHS’s progress in implementing the requirements of the Homeland Security Cybersecurity Workforce Assessment Act of 2014, as of December 2017. Accordingly, we recommended that DHS take six actions, including ensuring that its cybersecurity workforce procedures identify position vacancies and responsibilities; reported workforce data are complete and accurate; and plans for reporting on critical needs are developed. DHS agreed with our six recommendations, but had not implemented them as of August 2018. Regarding DOD, in November 2017, we reported that instead of developing a comprehensive plan for U.S. Cyber Command, the department submitted a report consisting of a collection of documents that did not fully address the required six elements set forth in Section 1648 of the National Defense Authorization Act for Fiscal Year 2016. More specifically, DOD’s 1648 report did not address an element related to cyber incident training. In addition to not addressing the training element in the report, DOD had not ensured that staff were trained as required by the Presidential Policy Directive on United States Cyber Incident Coordination or DOD’s Significant Cyber Incident Coordination Procedures. Accordingly, we made two recommendations to DOD to address these issues. DOD agreed with one of the recommendations and partially agreed with the other, citing ongoing activities related to cyber incident coordination training it believed were sufficient. However, we continued to believe the recommendation was warranted. As of August 2018, both recommendations had not yet been implemented. Agencies had not identified and closed cybersecurity skills gaps. In November 2016, we reported that five selected agencies had made mixed progress in assessing their information technology (IT) skill gaps. These agencies had started focusing on identifying cybersecurity staffing gaps, but more work remained in assessing competency gaps and in broadening the focus to include the entire IT community. Accordingly, we made a total of five recommendations to the agencies to address these issues. Four agencies agreed and one, DOD, partially agreed with our recommendations citing progress made in improving its IT workforce planning. However, we continued to believe our recommendation was warranted. As of August 2018, all five of the recommendations had not been implemented. Agencies had been challenged with recruiting and retaining qualified staff. In August 2016, we reported on the current authorities chief information security officers (CISO) at 24 agencies. Among other things, CISOs identified key challenges they faced in fulfilling their responsibilities. Several of these challenges were related to the cybersecurity workforce, such as not having enough personnel to oversee the implementation of the number and scope of security requirements. In addition, CISOs stated that they were not able to offer salaries that were competitive with the private sector for candidates with high-demand technical skills. Furthermore, CISOs stated that certain security personnel lacked the skill sets needed or were not sufficiently trained. To assist CISOs in carrying out their responsibilities and better define their roles, we made a total of 34 recommendations to the Office of Management and Budget (OMB) and 13 agencies in our review. Agency responses to the recommendations varied; as of August 2018, 18 of the 34 recommendations had not been implemented. Agencies have had difficulty navigating the federal hiring process. In August 2016, we reported on the extent to which federal hiring authorities were meeting agency needs. Although competitive hiring has been the traditional method of hiring, agencies can use additional hiring authorities to expedite the hiring process or achieve certain public policy goals. Among other things, we noted that agencies rely on a relatively small number of hiring authorities (as established by law, executive order, or regulation) to fill the vast majority of hires into the federal civil service. Further, while OPM collects a variety of data to assess the federal hiring process, neither it nor agencies used this information to assess the effectiveness of hiring authorities. Conducting such assessments would be a critical first step in making more strategic use of the available hiring authorities to more effectively meet their hiring needs. Accordingly, we made three recommendations to OPM to work with agencies to strengthen hiring efforts. OPM generally agreed with the recommendations; however, as of August 2018, two of them had not been implemented. The emergence of new technologies can potentially introduce security vulnerabilities for those technologies which were previous unknown. As we have previously reported, additional processes and controls will need to be developed to potentially address these new vulnerabilities. While some progress has been made to address the security and privacy issues associated with these technologies, such as the Internet of Things (IoT) and vehicle networks, there is still much work to be done. For example: IoT devices that continuously collect and process information are potentially vulnerable to cyber-attacks. In May 2017, we reported that the IoT has become increasingly used to communicate and process vast amounts of information using “smart” devices (such as fitness trackers, cameras, and thermostats). However, we noted that this emerging technology also presents new issues in areas such as information security, privacy, and safety. For example, IoT devices, networks, or the cloud servers where they store data can be compromised in a cyberattack. Table 3 provides examples of cyber- attacks that could affect IoT devices and networks. IoT devices may increase the security risks to federal agencies. In July 2017, we reported that IoT devices, such as those acquired and used by Department of Defense (DOD) employees or that DOD itself acquires (e.g., smartphones), may increase the security risks to the department. We noted that these risks can be divided into two categories, risks with the devices themselves, such as limited encryption, and risks with how they are used, such as unauthorized communication of information. The department has also identified notional threat scenarios, based on input from multiple DOD entities, which exemplify how these security risks could adversely impact DOD operations, equipment, or personnel. Figure 6 highlights a few examples of these scenarios. In addition, we reported that DOD had started to examine the security risks of IoT devices, but that the department had not conducted required assessments related to the security of its operations. Further, DOD had issued policies and guidance for these devices, but these did not clearly address all of the risks relating to these devices. To address these issues, we made two recommendations to DOD. The department agreed with our recommendations; however, as of August 2018, they had not yet been implemented. Vehicles are potentially susceptible to cyber-attack through networks, such as Bluetooth. In March 2016, we reported that many stakeholders in the automotive industry acknowledge that in-vehicle networks pose a threat to the safety of the driver, as an external attacker could gain control to critical systems in the car. Further, these industry stakeholders agreed that critical systems and other vehicle systems, such as a Bluetooth connection, should be separate in-vehicle networks so they could not communicate or interfere with one another. Figure 7 identifies the key interfaces that could be exploited in a vehicle cyber-attack. To enhance the Department of Transportation’s ability to effectively respond in the event of a real-world vehicle cyberattack, we made one recommendation to the department to better define its roles and responsibilities. The department agreed with the recommendation but, as of August 2018, had not yet taken action to implement it. Artificial intelligence holds substantial promise for improving cybersecurity, but also posed new risks. In March 2018, we reported on the results of a forum we convened to discuss emerging opportunities, challenges, and implications associated with artificial intelligence. At the forum, participants from industry, government, academia, and nonprofit organizations discussed the potential implications of this emerging technology, including assisting with cybersecurity by helping to identify and patch vulnerabilities and defending against attacks; creating safer automated vehicles; improving the criminal justice system’s allocation of resources; and improving how financial services govern investments. However, forum participants also highlighted a number of challenges and risks related to artificial intelligence. For example, if the data used by artificial intelligence are biased or become corrupted by hackers, the results could be biased or cause harm. Moreover, the collection and sharing of data needed to train artificial intelligence systems, a lack of access to computing resources, and adequate human capital were also challenges facing the development of artificial intelligence. Finally, forum participants noted that the widespread adoption raises questions about the adequacy of current laws and regulations. Cryptocurrencies provide an alternative to traditional government-issued currencies, but have security implications. In February 2018, we reported on trends affecting government and society, including the increased use of cryptocurrencies—digital representations of value that are not government-issued—that operate online and verify transactions using a public ledger called blockchain. We highlighted the potential benefits of this technology, such as anonymity and lower transaction costs, as well as drawbacks, including making it harder to detect money laundering and other financial crimes. Because of these capabilities and others, we noted the potential for virtual currencies and blockchain technology to reshape financial services and affect the security of critical financial infrastructures. Lastly, we pointed out that the use of blockchain technology could have more security vulnerabilities as computing power increases as a result of new advancements in quantum computing, an area of quantum information science. In January 2008, the President issued National Security Presidential Directive 54/Homeland Security Presidential Directive 23. The directive established the Comprehensive National Cybersecurity Initiative, a set of projects with the objective of safeguarding federal executive branch government information systems by reducing potential vulnerabilities, protecting against intrusion attempts, and anticipating future threats against the federal government’s networks. Under the initiative, the Department of Homeland Security (DHS) was to lead several projects to better secure civilian federal government networks. Specifically, the agency established the National Cybersecurity and Communications Integration Center (NCCIC), which functions as the 24/7 cyber monitoring, incident response, and management center. Figure 8 depicts the Watch Floor, which functions as a national focal point of cyber and communications incident integration. The United States Computer Emergency Readiness Team (US-CERT), one of several subcomponents of the NCCIC, is responsible for operating the National Cybersecurity Protection System (NCPS), which provides intrusion detection and prevention capabilities to entities across the federal government. Although DHS is fulfilling its statutorily required mission by establishing the NCCIC and managing the operation of NCPS, we have identified challenges in the agency’s efforts to manage these programs: DHS had not ensured that NCPS has fully satisfied all intended system objectives. In January 2016, we reported that NCPS had a limited ability to detect intrusions across all types of network types. In addition, we reported that the system’s intrusion prevention capability was limited and its information-sharing capability was not fully developed. Furthermore, we reported that DHS’s current metrics did not comprehensively measure the effectiveness of NCPS. Accordingly, we made nine recommendations to DHS to address these issues and others. The department agreed with our recommendations and has taken action to address one of them. However, as of August 2018, eight of these recommendations had not been implemented. DHS had been challenged in measuring how the NCCIC was performing its functions in accordance with mandated implementing principles. In February 2017, we reported instances where, with certain products and services, NCCIC had implemented its functions in adherence with one or more of its principles, as required by the National Cybersecurity Protection Act of 2014 and Cybersecurity Act of 2015. For example, consistent with the principle that it seek and receive appropriate consideration from industry sector-specific, academic, and national laboratory expertise, NCCIC coordinated with contacts from industry, academia, and the national laboratories to develop and disseminate vulnerability alerts. However, we also identified instances where the cybersecurity functions were not performed in adherence with the principles. For example, NCCIC is to provide timely technical assistance, risk management support, and incident response capabilities to federal and nonfederal entities, but it had not established measures or other procedures for ensuring the timeliness of these assessments. Further, we reported that NCCIC faces impediments to performing its cybersecurity functions more efficiently, such as tracking security incidents and working across multiple network platforms. Accordingly, we made nine recommendations to DHS related to implementing the requirements identified in the National Cybersecurity Protection Act of 2014 and the Cybersecurity Act of 2015. The department agreed with our recommendations and has taken action to address two of them. However, as of August 2018, the remaining seven recommendations had not been implemented. The Federal Information Security Modernization Act of 2014 (FISMA) requires federal agencies in the executive branch to develop, document, and implement an information security program and evaluate it for effectiveness. The act retains many of the requirements for federal agencies’ information security programs previously set by the Federal Information Security Management Act of 2002. These agency programs should include periodic risk assessments; information security policies and procedures; plans for protecting the security of networks, facilities, and systems; security awareness training; security control assessments; incident response procedures; a remedial action process, and continuity plans and procedures. In addition, Executive Order 13800 states that the President will hold agency heads accountable for managing cybersecurity risk to their enterprises. In addition, according to the order, it is the policy of the United States to manage cybersecurity risk as an executive branch enterprise because risk management decisions made by agency heads can affect the risk to the executive branch as a whole, and to national security. Over the past several years, we have performed numerous security control audits to determine how well agencies are managing information security risk to federal information systems and data through the implementation of effective security controls. These audits have resulted in the identification of hundreds of deficiencies related to agencies’ implementation of effective security controls. Accordingly, we provided agencies with limited official use only reports identifying technical security control deficiencies for their respective agency. In these reports, we made hundreds of recommendations related to improving agencies’ implementation of those security control deficiencies. In addition to systems and networks maintained by federal agencies, it is also important that agencies ensure the security of federal information systems operated by third party providers, including cloud service providers. Cloud computing is a means for delivering computing services via information technology networks. Since 2009, the government has encouraged agencies to use cloud-based services to store and process data as a cost-savings measure. In this regard, the Office of Management and Budget (OMB) established the Federal Risk and Authorization Management Program (FedRAMP) to provide a standardized approach to security assessment, authorization, and continuous monitoring for cloud products and services. FedRAMP is intended to ensure that cloud computing services have adequate information security, eliminate duplicative efforts, and reduce costs. Although there are requirements and government-wide programs to assist with ensuring the security of federal information systems maintained by federal agencies and third party providers, we have identified weaknesses in agencies’ implementation of information security programs. Federal agencies continued to experience weaknesses in protecting their information and information systems due to ineffective implementation of information security policies and practices. In September 2017, we reported that most of the 24 agencies covered by the Chief Financial Officers (CFO) Act had weaknesses in each of the five major categories of information system controls (i.e., access controls, configuration management controls, segregation of duties, contingency planning, and agency-wide security management). Weaknesses in these security controls indicate that agencies did not adequately or effectively implement information security policies and practices during fiscal year 2016. Figure 9 identifies the number of agencies with information security weaknesses in each of the five categories. In addition, we found that several agencies had not effectively implemented some aspects of its information security program, which resulted in weaknesses in these agencies’ security controls. In July 2017, we reported that the Security Exchange Commission did not always keep system security plans complete and accurate or fully implement continuous monitoring, as required by agency policy. We made two recommendations to the Security Exchange Commission to effectively manage its information security program. The agency agreed with our recommendations; however, as of August 2018, they had not been implemented. In another July 2017 report, we noted that the Internal Revenue Service (IRS) did not effectively support a risk-based decision to accept system deficiencies; fully develop, document, or update information security policies and procedures; update system security plans to reflect changes to the operating environment; perform effective tests and evaluations of policies, procedures, and controls; or address shortcomings in the agency’s remedial process. Accordingly, we made 10 recommendations to IRS to more effectively implement security-related policies and plans. The agency neither agreed nor disagreed with the recommendations; as of August 2018, all 10 recommendations had not been implemented. In May 2017, we reported that the Federal Deposit Insurance Corporation did not include all necessary information in procedures for granting access to a key financial application; fully address its Inspector General findings that security control assessments of outsourced service providers had not been completed in a timely manner; fully address key previously identified weaknesses related to establishing agency-wide configuration baselines and monitoring changes to critical server files; or complete actions to address the Inspector General’s finding that the Federal Deposit Insurance Corporation had not ensured that major security incidents are identified and reported in a timely manner. We made one recommendation to the agency to more fully implement its information security program. The agency agreed with our recommendation and has taken steps to implement it. In August 2016, we reported that the Food and Drug Administration did not fully implement certain security practices involved with assessing risks to systems; complete or review security policies and procedures in a timely manner; complete and review system security plans annually; always track and fully train users with significant security responsibilities; fully test controls or monitor them; remediate identified security weaknesses in a timely fashion based on risk; or fully implement elements of its incident response program. Accordingly, we issued 15 recommendations to the Food and Drug Administration to fully implement its agency-wide information security program. The agency agreed with our recommendations. As of August 2018, all 15 recommendations had been implemented. In May 2016, we reported that a key reason for the information security weaknesses in selected high-impact systems at four agencies—National Aeronautics and Space Administration, Nuclear Regulatory Commission, the Office of Personnel Management, and Department of Veterans Affairs—was that they had not effectively implemented elements of their information security programs. For example, most of the selected agencies had conducted information security control assessments for systems, but not all assessments were comprehensive. We also reported that remedial action plans developed by the agencies did not include all the required elements, and not all agencies had developed a continuous monitoring strategy. Table 4 identifies the extent to which the selected agencies implemented key aspects of their information security programs. Accordingly, we made 19 recommendations to the four selected agencies to correct these weaknesses. Agency responses to the recommendations varied. Further, as of August 2018, 16 of the 19 recommendations had not been implemented. DOD’s monitoring of progress in implementing cyber strategies varied. In August 2017, we reported that the DOD’s progress in implementing key strategic cybersecurity guidance—the DOD Cloud Computing Strategy, DOD Cyber Strategy, and DOD Cybersecurity Campaign—has varied. More specifically, we determined that the department had implemented the cybersecurity objectives identified in the DOD Cloud Computing Strategy and had made progress in implementing the DOD Cyber Strategy and DOD Cybersecurity Campaign. However, the department’s process for monitoring implementation of the DOD Cyber Strategy had resulted in the closure of tasks as implemented before the tasks were fully implemented. In addition, the DOD Cybersecurity Campaign lacked time frames for completion and a process to monitor progress, which together provide accountability to ensure implementation. We made two recommendations to improve DOD’s process of ensuring its cyber strategies are effectively implemented. The department partially concurred with these recommendations and identified actions it planned to take to address them. We noted that, if implemented, the actions would satisfy the intent of our recommendations. However, as of August 2018, DOD had not yet implemented our recommendations. Agencies had not fully defined the role of their Chief Information Security Officers (CISO), as required by FISMA. In August 2016, we reported that 13 of 24 agencies covered by the CFO Act had not fully defined the role of their CISO. For example, these agencies did not always identify a role for the CISO in ensuring that security controls are periodically tested; procedures are in place for detecting, reporting, and responding to security incidents; or contingency plans and procedures for agency information systems are in place. Thus, we determined that the CISOs’ ability to effectively oversee these agencies’ information security activities can be limited. To assist CISOs in carrying out their responsibilities and better define their roles, we made a total of 34 recommendations to OMB and 13 agencies in our review. Agency responses to the recommendations varied; as of August 2018, 18 of the 34 recommendations had not been implemented. Presidential Policy Directive-41 sets forth principles governing the federal government’s response to any cyber incident, whether involving government or private sector entities. According to the directive, federal agencies shall undertake three concurrent lines of effort when responding to any cyber incident: threat response; asset response; and intelligence support and related activities. In addition, when a federal agency is an affected entity, it shall undertake a fourth concurrent line of effort to manage the effects of the cyber incident on its operations, customers, and workforce. We have reviewed federal agencies’ preparation and response to cyber incidents and have identified the following weaknesses: The Office of Personnel Management (OPM) had not fully implemented controls to address deficiencies identified as a result of a cyber incident. In August 2017, we reported that OPM did not fully implement the 19 recommendations made by the Department of Homeland Security’s (DHS) United States Computer Emergency Readiness Team (US-CERT) after the data breaches in 2015. Specifically, we noted that, after breaches of personnel and background investigation information were reported, US-CERT worked with the agency to resolve issues and develop a comprehensive mitigation strategy. In doing so, US-CERT made 19 recommendations to OPM to help the agency improve its overall security posture and, thus, improve its ability to protect its systems and information from security breaches. In our August 2017 report, we determined that OPM had fully implemented 11 of the 19 recommendations. For the remaining 8 recommendations, actions for 4 were still in progress. For the other 4 recommendations, OPM indicated that it had completed actions to address them, but we noted further improvements were needed. Further, OPM had not validated actions taken to address the recommendations in a timely manner. As a result of our review, we made five other recommendations to OPM to improve its response to cyber incidents. The agency agreed with four of these and partially concurred with the one related to validating its corrective action. The agency did not cite a reason for its partial concurrence and we continued to believe that the recommendation was warranted. As of August 2018, three of the five recommendations had not been implemented. The Department of Defense (DOD) had not identified the National Guard’s cyber capabilities (e.g., computer network defense teams) or addressed challenges in its exercises. In September 2016, we reported that DOD had not identified the National Guard’s cyber capabilities or addressed challenges in its exercises. Specifically, DOD had not identified and did not have full visibility into National Guard cyber capabilities that could support civil authorities during a cyber incident because the department has not maintained a database that identifies National Guard cyber capabilities, as required by the National Defense Authorization Act for Fiscal Year 2007. In addition, we identified three types of challenges with DOD’s cyber exercises that could limit the extent to which DOD is prepared to support civilian authorities in a cyber incident: limited access because of classified exercise environments; limited inclusion of other federal agencies and critical infrastructure owners; and inadequate incorporation of joint physical-cyber scenarios. In our September 2016 report, we noted that DOD had not addressed these challenges. Furthermore, we stated that DOD had not addressed its goals by conducting a “tier 1” exercise (i.e., an exercise involving national-level organizations and combatant commanders and staff in highly complex environments), as stated in the DOD Cyber Strategy. Accordingly, we recommended that DOD (1) maintain a database that identifies National Guard cyber capabilities and (2) conduct a tier 1 exercise to prepare its forces in the event of a disaster with cyber effects. The department partially agreed with our recommendations, stating that its current mechanisms and exercises are sufficient to address the issues highlighted in our report. However, we continued to believe the recommendations were valid. As of August 2018, our two recommendations had not been implemented. DOD had not identified, clarified, or implemented all components of its incident response program. In April 2016, we also reported that DOD had not clarified its roles and responsibilities for defense support of civil authorities during cyber incidents. Specifically, we found that DOD’s overarching guidance about how it is to support civil authorities as part of its Defense Support of Civil Authorities mission did not clearly define the roles and responsibilities of key DOD entities, such as DOD components, the supported command, or the dual-status commander, if they are requested to support civil authorities in a cyber incident. Further, we found that, in some cases, DOD guidance provides specific details on other types of Defense Support of Civil Authorities-related responses, such as assigning roles and responsibilities for fire or emergency services support and medical support, but does not provide the same level of detail or assign roles and responsibilities for cyber support. Accordingly, we recommended that DOD issue or update guidance that clarifies DOD roles and responsibilities to support civil authorities in a domestic cyber incident. DOD concurred with the recommendation and stated that the department will issue or update guidance. However, as of August 2018, the department had not implemented our recommendation. DHS’s NCPS had limited capabilities for detecting and preventing intrusions, conducting analytics, and sharing information. In January 2016, we reported that NCPS had a limited ability to detect intrusions across all types of network types. In addition, we reported that the system’s intrusion prevention capability was limited and its information-sharing capability was not fully developed. Furthermore, we reported that DHS’s current metrics did not comprehensively measure the effectiveness of NCPS. Accordingly, we made nine recommendations to DHS to address these issues and others. The department agreed with our recommendations and has taken action to address one of them. However, as of August 2018, eight of these recommendations had not been implemented. The nation’s critical infrastructure include both public and private systems vital to national security and other efforts including providing the essential services, such as banking, water, and electricity—that underpin American society. The cyber threat to critical infrastructure continues to grow and represents a national security challenge. To address this cyber risk, the President issued Executive Order 13636 in February 2013 to enhance the security and resilience of the nation’s critical infrastructure and maintain a cyber environment that promotes safety, security, and privacy. In accordance with requirements in the executive order which were enacted into law in 2014, the National Institute of Standards and Technology (NIST) facilitated the development of a set of voluntary standards and procedures for enhancing cybersecurity of critical infrastructure. This process, which involved stakeholders from the public and private sectors, resulted in NIST’s Framework for Improving Critical Infrastructure Cybersecurity. The framework is to provide a flexible and risk-based approach for entities within the nation’s 16 critical infrastructure sectors to protect their vital assets from cyber-based threats. Since then, progress has been made to protect the critical infrastructure of the nation but we have reported that challenges to ensure the safety and security of our infrastructure exist. The Department of Homeland Security (DHS) had not measured the impact of its efforts to support cyber risk reduction for high- risk chemical sector entities. In August 2018, we reported that DHS had strengthened its processes for identifying high-risk chemical facilities and assigning them to tiers under its Chemical Facility Anti- Terrorism Standards program. However, we found that DHS’s new performance measure methodology did not measure reduction in vulnerability at a facility resulting from the implementation and verification of planned security measures during the compliance inspection process. We concluded that doing so would provide DHS an opportunity to begin assessing how vulnerability is reduced—and by extension, risk lowered—not only for individual high-risk facilities but for the Chemical Facility Anti-Terrorism Standards program as a whole. We also determined that, although DHS shares some Chemical Facility Anti-Terrorism Standards program information, first responders and emergency planners may not have all of the information they need to minimize the risk of injury or death when responding to incidents at high-risk facilities. This was due to first responders at the local level not having access or widely using a secure interface that DHS developed (known as the Infrastructure Protection Gateway) to obtain information about high-risk facilities and the specific chemicals they process. To address the weaknesses we identified, we recommended that DHS take actions to (1) measure reduction in vulnerability of high-risk facilities and use that data to assess program performance, and (2) encourage access to and wider use of the Infrastructure Protection Gateway among first responders and emergency planners. DHS concurred with both recommendations and outlined efforts underway or planned to address them. The federal government had identified major challenges to the adoption of the cybersecurity framework. In February 2018, we reported that there were four different challenges to adopting the cybersecurity framework, including limited resources and competing priorities, reported by entities within their sectors. We further reported that none of the 16 sector-specific agencies were measuring the implementation by these entities, nor did they have qualitative or quantitative measures of framework adoption. While research had been done to determine the use of the framework in the sectors, these efforts had yielded no real results for sector wide adoption. We concluded that, until sector-specific agencies understand the use of the framework by the implementing entities, their ability to understand implementation efforts would be limited. Accordingly, we made a total of nine recommendations to nine sector-specific agencies to address these issues. Five agencies agreed with the recommendations, while four others neither agreed nor disagreed; as of August 2018, all five recommendations had not been implemented. Agencies had not addressed risks to their systems and the information they maintain. In January 2018, we reported that the Department of Defense (DOD) and Federal Aviation Administration (FAA) identified a variety of operations and physical security risks related to Automatic Dependent Surveillance-Broadcast Out technology that could adversely affect DOD missions. These risks came from information broadcast by the system itself, as well as from potential vulnerabilities to electronic warfare- and cyber-attacks, and from the potential divestment of secondary-surveillance radars. However, DOD and FAA had not approved any solutions to address the risks they identified to the system. Accordingly, we recommended that DOD and FAA, among other things, take action to approve one or more solutions to address Automatic Dependent Surveillance- Broadcast Out-related security risks. DOD and FAA generally agreed with our recommendations; however, as of August 2018, they had not been implemented. Major challenges existed to securing the electricity grid against cyber threats. In October 2015, we testified on the status of the electricity grid’s cybersecurity, reporting that entities associated with the grid have encountered several challenges. We noted that these challenges included implementation monitoring, built-in security features in smart grid systems, and establishing metrics for cybersecurity. We concluded that continued attention to these issues and cyber threats in general was required to help mitigate these risks to the electricity grid. DHS and other agencies needed to enhance cybersecurity in the maritime environment. In October 2015, we testified on the status of the cybersecurity of our nation’s ports, concluding that steps needed to be taken to enhance their security. Specifically, we noted that DHS needed to include cyber risks in its risk assessments that are already in place as well as addressing cyber risks in guidance for port security plans. We concluded that, until DHS and the other stakeholders take steps to address cybersecurity in the ports, risk of a cyber-attack with serious consequences are increased. Sector-specific agencies were not properly addressing progress or metrics to measure their progress in cybersecurity. In November 2015, we reported that sector-specific agencies were not comprehensively addressing the cyber risk to the infrastructure, as 11 of the 15 sectors had significant cyber risk. Specifically, we noted that these entities had taken actions to mitigate their cyber risk; however, most had not identified incentives to promote cybersecurity in their sectors. We concluded that while the sector-specific agencies have successfully disseminated the information they possess, there was still work to be done to properly measure cybersecurity implementation progress. Accordingly, we made seven recommendations to six agencies to address these issues. Four of these agencies agreed with our recommendation, while two agencies did not comment on the recommendations. As of August 2018, all seven recommendations had not been implemented. Advancements in technology, such as new search technology and data analytics software for searching and collecting information, have made it easier for individuals and organizations to correlate data and track it across large and numerous databases. In addition, lower data storage costs have made it less expensive to store vast amounts of data. Also, ubiquitous Internet and cellular connectivity make it easier to track individuals by allowing easy access to information pinpointing their locations. the effectiveness of these procedures. Based on a survey of the schools, the majority of the schools had policies in place for records retention but the way these policies were implemented was highly varied for paper and electronic records. We also found that the oversight of the school’s programs was lacking, as Federal Student Aid conducts reviews but does not consider information security as a factor for selecting schools. out provisions of the Patient Protection and Affordable Care Act. We made three recommendations to CMS related to defining procedures for overseeing the security of state-based marketplaces and requiring continuous monitoring of state marketplace controls. HHS concurred with our recommendations. As of August 2018, two of the recommendations had not yet been implemented. Poor planning and ineffective monitoring had resulted in the unsuccessful implementation of government initiatives designed to protect federal data. In July 2017, we reported that government initiatives aimed at eliminating the unnecessary collection, use, and display of Social Security numbers (SSN) have had limited success. Specifically, in agencies’ response to our questionnaire on SSN reduction efforts, the 24 agencies covered by the Chief Financial Officers Act reported successfully curtailing the collection, use, and display of SSNs. Nevertheless, all of the agencies continued to rely on SSNs for important government programs and systems, as seen in figure 10. Given that access to data is so pervasive, personal privacy hinges on ensuring that databases of personally identifiable information (PII) maintained by government agencies or on their behalf are protected both from inappropriate access (i.e., data breaches) as well as inappropriate use (i.e., for purposes not originally specified when the information was collected). Likewise, the trend in the private sector of collecting extensive and detailed information about individuals needs appropriate limits. The vast number of individuals potentially affected by data breaches at federal agencies and private sector entities in recent years increases concerns that PII is not being properly protected. The emergence of IoT devices can facilitate the collection of information about individuals without their knowledge or consent. In May 2017, we reported that the IoT has become increasingly used to communicate and process vast amounts of information using “smart” devices (such as a fitness tracker connected to a smartphone). However, we noted that this emerging technology also presents new issues in areas such as information security, privacy, and safety. Smartphone tracking apps can present serious safety and privacy risks. In April 2016, we reported on smartphone applications that facilitated the surreptitious tracking of a smartphone’s location and other data. Specifically, we noted that some applications could be used to intercept communications and text messages, essentially facilitating the stalking of others. While it is illegal to use these applications for these purposes, stakeholders differed over whether current federal laws needed to be strengthened to combat stalking. We also noted that stakeholders expressed concerns over what they perceived to be limited enforcement of laws related to tracking apps and stalking. In particular, domestic violence groups stated that additional education of law enforcement officials and consumers about how to protect against, detect, and remove tracking apps is needed. The Federal Bureau of Investigation (FBI) has not ensured privacy and accuracy related to the use of face recognition technology. In May 2016, we reported that the Department of Justice had not been timely in publishing and updating privacy documentation for the FBI’s use of face recognition technology. Publishing such documents in a timely manner would better assure the public that the FBI is evaluating risks to privacy when implementing systems. Also, the FBI had taken limited steps to determine whether the face recognition system it was using was sufficiently accurate. We recommended that the department ensure required privacy-related documents are published and that the FBI test and review face recognition systems to ensure that they are sufficiently accurate. Of the six recommendations we made, the Department of Justice agreed with one, partially agreed with two, and disagreed with three. We continued to believe all the recommendations made were valid. As of August 2018, the six recommendations had not been implemented. In addition to the contacts named above, Jon Ticehurst, Assistant Director; Kush K. Malhotra, Analyst-In-Charge; Chris Businsky; Alan Daigle; Rebecca Eyler; Chaz Hubbard; David Plocher; Bradley Roach; Sukhjoot Singh; Di’Mond Spencer; and Umesh Thakkar made key contributions to this report.", "summary": "Federal agencies and the nation's critical infrastructures—such as energy, transportation systems, communications, and financial services—are dependent on information technology systems to carry out operations. The security of these systems and the data they use is vital to public confidence and national security, prosperity, and well-being. The risks to these systems are increasing as security threats evolve and become more sophisticated. GAO first designated information security as a government-wide high-risk area in 1997. This was expanded to include protecting cyber critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015. This report provides an update to the information security high-risk area. To do so, GAO identified the actions the federal government and other entities need to take to address cybersecurity challenges. GAO primarily reviewed prior work issued since the start of fiscal year 2016 related to privacy, critical federal functions, and cybersecurity incidents, among other areas. GAO also reviewed recent cybersecurity policy and strategy documents, as well as information security industry reports of recent cyberattacks and security breaches. GAO has identified four major cybersecurity challenges and 10 critical actions that the federal government and other entities need to take to address them. GAO continues to designate information security as a government-wide high-risk area due to increasing cyber-based threats and the persistent nature of security vulnerabilities. GAO has made over 3,000 recommendations to agencies aimed at addressing cybersecurity shortcomings in each of these action areas, including protecting cyber critical infrastructure, managing the cybersecurity workforce, and responding to cybersecurity incidents. Although many recommendations have been addressed, about 1,000 have not yet been implemented. Until these shortcomings are addressed, federal agencies' information and systems will be increasingly susceptible to the multitude of cyber-related threats that exist. GAO has made over 3,000 recommendations to agencies since 2010 aimed at addressing cybersecurity shortcomings. As of August 2018, about 1,000 still needed to be implemented.", "document_type": "gao"}
{"report": "Human trafficking exploits individuals and often involves transnational criminal organizations, violations of labor and immigration codes, and government corruption. Many forms of trafficking—including sex trafficking and labor trafficking—can take place anywhere in the world and occur without crossing country boundaries. As discussed in State’s annual Trafficking in Persons Report, trafficking victims include, for example, Asian and African women and men who migrate to the Persian Gulf region for domestic labor but then suffer both labor trafficking and sexual abuse in the homes of their employers. Some victims are children. For example, Pakistani children as young as 5 years are sold or kidnapped into forced labor to work in brick kilns, some of which are owned by government officials. Other victims are subjected to sexual exploitation. In some cases, women and girls have been bought and sold as sex slaves by members of the Islamic State. In other cases, adult men and women have been forced to engage in commercial sex, and children induced to do the same. Individuals, including men, are exploited in forced labor in a variety of industries. Burmese men, for example, have been forced to labor 20 hours a day, 7 days a week on fishing boats in Thailand. See figure 1 for examples of victims of trafficking in persons. Among other U.S. agencies involved in counter-trafficking in persons, State, DOL, USAID, DOD, and Treasury have various roles and responsibilities related to international counter-trafficking in persons, including some internationally-focused programs and activities that do not involve awards made to implementing partners, as follows: State. State leads the global engagement of the United States, and supports the coordination of efforts across the U.S government in counter-trafficking in persons. State’s Office to Monitor and Combat Trafficking in Persons (TIP Office), established pursuant to the Trafficking Victims Protection Act of 2000, is responsible for bilateral and multilateral diplomacy, targeted foreign assistance, and public engagement on trafficking in persons. The office also prepares and issues an annual Trafficking in Persons Report that assesses the counter-trafficking efforts of governments and assigns them tier rankings. Furthermore, the TIP Office develops annual regional programming strategies, awards projects to implementing partners and oversees the project award process, and provides technical assistance to implementing partners. Other parts of State, including regional bureaus that cover geographic regions and functional bureaus that cover global issues such as human rights, are also responsible for work related to combating trafficking in persons. DOL. Within DOL, the Bureau of International Labor Affairs’ (ILAB) Office of Child Labor, Forced Labor, and Human Trafficking (OCFT) conducts research, publishes reports, and administers projects awarded to implementing partners on international child labor, forced labor, and trafficking in persons. ILAB’s reports include the annual Findings on the Worst Forms of Child Labor report, which assesses the efforts of approximately 140 countries and territories to eliminate the worst forms of child labor in the areas of laws and regulations, institutional mechanisms for coordinating and enforcement, and government policies and programs. ILAB also reports on the List of Goods Produced by Child Labor or Forced Labor showing goods and their source countries which ILAB has reason to believe are produced by child labor or forced labor in violation of international standards. USAID. USAID administers projects awarded to implementing partners that address counter-trafficking in persons, including increased investments in conflict and crisis areas, and integrating such projects into broader development projects. USAID field missions manage the majority of these counter-trafficking activities through projects that address trafficking challenges specific to the field mission’s region or country. USAID’s Center of Excellence on Democracy, Human Rights and Governance (DRG Center) in Washington, D.C. is responsible for oversight of USAID’s counter- trafficking policy. The DRG Center is responsible for coordinating and reporting on USAID-wide counter-trafficking in persons efforts; oversees the implementation of USAID’s counter-trafficking in persons policy in collaboration with regional bureaus and country missions; works with regional bureaus and country missions to gather counter- trafficking best practices and lessons learned; provides technical assistance and training to field and Washington-based staff on designing, managing, and monitoring and evaluating trafficking in persons projects; and conducts and manages research and learning activities related to combating trafficking in persons to collect data to inform the design of field projects. DOD. DOD’s Combating Trafficking in Persons Program Management Office, under the Under Secretary of Defense for Personnel and Readiness in the Defense Human Resources Activity, develops trafficking awareness and training material for all DOD components. On December 16, 2002, the President signed National Security Presidential Directive 22, which declared the United States had a zero tolerance policy for trafficking in persons. The Combating Trafficking in Persons Program Management Office is responsible for overseeing, developing, and providing the tools necessary for implementing National Security Directive 22 within DOD. The office has developed several different training programs, designed to provide an overview of trafficking in persons (including signs of trafficking, key policies and procedures, and reporting procedures), as well as awareness materials for distribution to DOD components and defense contractors overseas. Treasury. Treasury has activities, but not specific programs, that may support wider U.S. efforts to address counter-trafficking in persons, according to Treasury officials. Pursuant to its mandate, components of Treasury’s Office of Terrorism and Financial Intelligence (TFI), including Financial Crimes Enforcement Network (FinCEN), Office of Terrorist Financing and Financial Crimes (TFFC), and Office of Foreign Assets Control (OFAC) work on addressing illicit finance activities that support the wider goal of combating global trafficking in persons. Pursuant to the Trafficking Victims Protection Act of 2000, the President established the President’s Interagency Task Force to Monitor and Combat Trafficking in Persons (PITF), which is a cabinet-level entity that consists of agencies across the federal government responsible for coordinating implementation of the Trafficking Victims Protection Act of 2000, among other activities. It is chaired by the Secretary of State; State, DOL, USAID, DOD, and Treasury are all PITF agencies. In addition, the Trafficking Victims Protection Act, as amended in 2003, established the Senior Policy Operating Group, which consists of senior officials designated as representatives of the PITF agencies. State, DOL, and USAID managed 120 projects in counter-trafficking in persons carried out by implementing partners during fiscal year 2017, according to information provided by officials with these agencies. These projects, as identified by agency officials, ranged from those focused on counter-trafficking in persons, to those in which counter-trafficking in persons was integrated into but was not the primary goal of the project. At these agencies, project officers work with the implementing partner on the administration and technical guidance of the project, such as reviewing progress reports. Table 1 shows a summary of these agencies’ project information; appendix II provides more detailed information on all 120 projects. During fiscal year 2017, State managed 79 counter-trafficking projects, from those focused on individual countries, to regional and global ones that covered several countries, with a total award amount of approximately $62 million, according to information provided by State officials. State TIP Office managed 75 projects with total awarded amount of around $57 million. Award amounts per project ranged from approximately $150,000 to $2.55 million. For example, State TIP Office had 11 global projects totaling about $10 million and 6 regional projects in Africa amounting to about $4 million. State TIP Office had two projects in Ghana that received the highest amount of awards, approximately $2.5 million for each project. State TIP Office had four projects in India amounting to around $3 million, and four in Thailand totaling around $2.35 million. In addition to State TIP Office’s projects, State’s Bureau of Democracy, Human Rights, and Labor (DRL) managed four counter-trafficking projects with a reported total award amount of about $5 million, with two projects in Mauritania making up around 70 percent of DRL’s total awarded amount. DOL’s ILAB/OCFT managed six projects in fiscal year 2017 with a total award amount of approximately $31 million, according to DOL officials. These projects ranged from one scheduled to last for 5 years with an awarded amount of about $1 million, to one scheduled to last for about 4 years with an awarded amount of about $14 million. Three of DOL’s projects were global projects, while two others focused on two countries each and one project focused on one country. USAID’s projects during fiscal year 2017 consisted of 2 regional projects in Asia, and 33 individual projects in 22 different countries. Some of these USAID-identified projects were integrated projects with a broader development focus that includes USAID programmatic objectives other than counter-trafficking in persons. According to information provided by USAID officials, the award amount for all counter-trafficking in persons projects active in fiscal year 2017, including all integrated projects and standalone projects with a sole focus on combatting trafficking in persons, totaled around $296 million; and USAID’s committed funding to these projects’ activities related to counter-trafficking in persons was about $79 million as of September 2018. During fiscal year 2017, USAID focused on a few countries where the agency awarded multiple counter-trafficking projects, such as four projects in Nepal and four projects in Burma. According to officials, State, DOL, and USAID generally design projects to align with the “3Ps approach”—prevention, protection, and prosecution— and to consider trends and recommendations identified in agency reports on foreign governments’ counter-trafficking efforts. According to State’s publicly available information, the “3Ps” approach serves as the fundamental counter-trafficking in persons framework used around the world, and the U.S. government follows this approach to 1. prevent trafficking in persons through public awareness, outreach, education, and advocacy campaigns; 2. protect and assist victims by providing shelters as well as health, psychological, legal, and vocational services; and 3. investigate and prosecute trafficking in persons crimes by providing training and technical assistance for law enforcement officials, such as police, prosecutors, and judges. State’s publicly available information on the 3Ps noted that prevention, protection, and prosecution efforts are closely intertwined. Prosecution, for example, can function as a deterrent, potentially preventing the occurrence of human trafficking. Likewise, protection can empower those who have been exploited so that they are not victimized again once they re-enter society. A victim-centered prosecution that enables a survivor to participate in the prosecution is integral to protection efforts. In addition to the “3Ps,” a “4th P”—for partnership—serves as a complementary means to achieve progress across the “3Ps” and enlist all segments of society in the fight against human trafficking, according to State’s publicly available information. Addressing the partnerships element, USAID’s counter-trafficking policy seeks to increase coordination across a broad range of national, regional, and global stakeholders from civil society, government, the private sector, labor unions, media, and faith-based organizations. Monitoring is the collecting of data to determine whether a project is being implemented as intended and the tracking of progress through preselected performance indicators during the life of a project. State, DOL, and USAID use a number of similar tools—according to their current policies, guidance, and agency officials—to monitor the performance of their counter-trafficking in persons projects, including monitoring plans, indicators and targets, periodic progress reports, and final progress reports. The agencies also conduct site visits, but their policies vary on whether site visits are required for every project during implementation. Monitoring plan. The monitoring plan—according to monitoring policies of the three agencies—documents, among other things, all of the indicators and targets for the project as well as data collection frequency for each indicator. In addition, according to State TIP Office officials, the monitoring plan’s indicators and targets for TIP Office- managed counter-trafficking in persons projects are to be organized in a logic model, which is a visual representation that shows the linkages among the project’s goals, objectives, activities, outputs, and outcomes (see table 2). The logic model is intended to show relationships between what the project will do and what changes it expects to achieve. Indicators and Targets. Performance indicators—according to monitoring policies of the three agencies—are used to monitor progress and measure actual results compared to expected results. Targets are to be set for each performance indicator to indicate the expected results over the course of each period of performance. According to agency officials, the monitoring plan documents indicators and targets to be tracked and reported on through periodic progress reports to assess whether the project is likely to achieve the desired results. GAO has also found that a key attribute of effective performance measures is having a measurable target. Periodic progress reports. The reporting templates for the three agencies show that periodic progress reports—which are submitted at established intervals during the project’s implementation—compare actual to planned performance and indicate the progress made in accomplishing the goals and objectives of the project, including reporting on progress toward the monitoring plan’s indicator targets. Final progress report. The final progress report—according to monitoring policies of the agencies or agency officials—is a stand- alone report that provides a summary of the progress and achievements made during the life of the project. Site Visits. The three agencies policies vary on whether site visits are required for every project during implementation. For example, State’s policy notes that site visits may be conducted to review and evaluate recipient records, accomplishments, organizational procedures, and financial control systems, as well as to conduct interviews and provide technical assistance as necessary. In 2015, the State TIP Office established a goal to conduct at least one site visit during the life time of every project. While site visits during a project’s implementation are not required under DOL’s policy, DOL officials explained that they use site visits when deemed necessary to supplement information from other forms of oversight. USAID’s policy requires that a site visit be conducted for every project during implementation to provide activity oversight, inspect implementation progress and deliverables, verify monitoring data, and learn from activity implementation. In addition to these monitoring tools, State, USAID, and DOL officials told us that they rely on frequent communication with implementing partners as part of their monitoring process. Overall, monitoring is intended to help agencies determine whether the project is meeting its goals, update and adjust interventions and activities as needed, and ensure that funds are used responsibly. We found, based on our review of 54 selected counter-trafficking in persons projects (37 State, 3 DOL, and 14 USAID), that DOL and USAID had fully documented their performance monitoring activities, while State did not fully document its activities for 16 of 37 (43 percent) of the projects we reviewed with project start dates between fiscal years 2011 to 2016. DOL’s documented monitoring activities included the monitoring plan for each project as well as fiscal year 2017 semi-annual progress reports, including indicators and targets. USAID’s documented monitoring activities included the monitoring plan for each project; fiscal year 2017 progress reports at the reporting frequency specified in the agreements for each project; the final progress report, including indicators and targets, for the three projects that ended as of December 2017; and evidence that at least one site visit was conducted during each project’s implementation. Overall, the three agencies reported having conducted at least one site visit during the life time of the project for 47 of 54 (87 percent) of the selected projects. As shown in table 3, State did not fully document its monitoring activities (monitoring plan; fiscal year 2017 quarterly progress reports; and final progress report, including indicators and targets, for projects that ended as of December 2017) for 16 of the 37 selected projects we reviewed. Specifically, State did not have nine monitoring plans, five complete progress reports, or targets for each indicator in six of seven final progress reports for projects that ended as of December 2017. (See appendix III for detailed information on each of the 37 projects.) For the nine projects for which the monitoring plan was not documented, the State TIP Office indicated that it was unable to locate these documents or they were not completed because the projects were finalized when the TIP Office was beginning to institute the monitoring plan requirement. Although TIP Office officials told us that the TIP Office piloted and began to phase in the monitoring plan requirement over the course of 2014 and early 2015, eight of the nine projects without monitoring plans started in September or October 2015. We found that each of the nine projects had a logic model used to report progress in the fiscal year 2017 quarterly progress reports we reviewed, which would have provided TIP Office officials a basis for monitoring project performance at that point. However, federal standards for internal control call for agency management to design monitoring activities so that all transactions are completely and accurately recorded and so that management can evaluate project results. Specifically, internal controls specify that monitoring should be ongoing throughout the life of the project, which is consistent with State’s current policy that generally requires completion of the monitoring plan prior to award. Without timely documentation of the monitoring plans at the start of the project, TIP Office officials may not be able to ensure that projects are achieving their goals, as intended, from the beginning of project operations. For the three projects for which the quarterly progress report for the first quarter of fiscal year 2017 had been partially completed, the State TIP Office indicated that the implementing partners began to use the TIP Office’s quarterly reporting template for subsequent reports after TIP Office officials instructed the implementing partner to do so. For the one project where the quarterly progress report was not completed for the third quarter of fiscal year 2017, or partially completed for the fourth quarter of fiscal year 2017, the project officer provided possible reasons why the documents were not in the project’s file, including that the implementing partner lacked the capacity to design a logic model. The project ended December 31, 2017. Federal standards for internal control call for agency management to design monitoring activities, such as performance reporting, so that all transactions are completely and accurately recorded, and project results can be continuously evaluated. As previously discussed, performance progress reports should compare actual to planned performance and indicate the progress made in accomplishing the goals and objectives of the project. Therefore, the TIP Office may lack information needed to assess project performance if it does not have access to complete monitoring documentation. For the six projects for which targets were not fully documented in the final progress reports, we found that targets were lacking for 110 of 253 (43 percent) of indicators across the six final progress reports. Our prior work on performance measurement identified 10 key attributes of performance measures—such as having a measurable target—that GAO has found are key to successfully measuring a project’s performance. For example, our prior work has shown that numerical targets or other measurable values facilitate future assessments of whether overall goals and objectives are achieved because comparisons can be easily made between projected performance and actual results. State TIP Office officials explained that the final progress reports we reviewed lacked targets because the TIP Office had not required targets for each indicator for the projects we reviewed that started in fiscal years 2011 to 2016. State TIP Office officials also said that project officers may not have set targets due to limited resources in previous years. A lack of actual targets limits the TIP Office’s ability to assess project performance, including effectiveness, and determine if implementation is on track or if any timely corrections or adjustments may be needed to improve project efficiency or effectiveness. According to State TIP Office officials, the TIP Office has taken steps to improve its documentation of monitoring activities, such as instituting a monitoring plan requirement; increasing staff, including hiring a monitoring and evaluation specialist; and developing standard templates for implementing partners to use for reporting. Moreover, in November 2017, State established a new policy asserting that, building on the logic model or project charter, bureaus and independent offices must set targets for each performance indicator to indicate the expected change over the course of each period of performance. It further notes that bureaus and independent offices should maintain documentation of project design, including the logic model. Additionally, State TIP Office officials said that State is developing a department-wide automated information management system (State Assistance Management System - Domestic, or SAMS-D) that officials expect to standardize entry of performance information and, under the new system targets, must be recorded for each indicator. State TIP Office officials have worked to pilot- test SAMS-D to provide feedback on the system, including suggestions to improve the completeness of data collection, according to TIP Office officials. Despite these efforts, the TIP Office’s documentation of all monitoring activities, and implementation of its November 2017 requirement to set targets for all performance indicators, is uncertain. For example, even though the TIP Office informed us that it began to institute a monitoring plan requirement over the course of 2014 and early 2015, as previously noted, eight projects we reviewed that started in September or October 2015 did not have monitoring plans. In addition, according to State officials, in SAMS-D, targets could be recorded as “to be determined” and there are no controls in place to ensure that “to be determined” entries are replaced with actual targets. State officials said that SAMS-D has the capability to implement controls to alert users to update “to be determined” targets, but pilot users of SAMS-D, which include the TIP Office, have not provided feedback for this capability so far. Furthermore, State TIP Office officials informed us that the TIP Office cannot require all implementing partners to set targets, but that the TIP Office aspires to update relevant targets regularly in the future and would encourage implementing partners to update target values when appropriate. Without controls to ensure full documentation of monitoring activities and established performance targets, State is limited in its ability to assess project performance, including project efficiency or effectiveness. In our review of selected indicators in two State TIP Office and two USAID projects, we found that State and USAID used inconsistent and incomplete performance information to monitor these projects. We found that State TIP Office and USAID do not have sufficient controls in place to ensure that the performance information they use is reliable. In contrast, we found that DOL had consistent and complete performance information in a project we reviewed, and we identified no controls in DOL’s process that were insufficient for assuring the reliability of this information. For selected indicators in two State TIP Office and two USAID projects, we found numerous errors or omissions in progress reports we reviewed, which resulted in inconsistent and incomplete performance information agencies used to monitor these projects. Specifically, we found examples of inconsistent information, which included many instances in which quarterly indicator totals differed from annual or cumulative totals reported separately on the same projects, and numbers reported in narrative information that differed from numbers reported as indicator values. In addition, we found examples of incomplete information, including narrative elements that were missing in whole or in part. Inconsistent Performance Information. We found numerous instances in which quarterly totals differed from annual or cumulative totals reported separately on the same projects. When these errors occurred, it was not possible to independently determine project performance based on report information. For example, For one State TIP Office project, reported cumulative progress overstated quarterly progress for at least 11 indicators (3 of which by 25 percent or more) and understated quarterly progress for at least 5 indicators (once by 25 percent or more). For example, for the indicator “number of standardized reintegration protocols/guidelines/tools developed (case forms, family assessment, etc.,)” State’s cumulative performance report as of the 4th quarter of fiscal year 2017 indicated that two tools had been developed, whereas quarterly reports showed that only one had been developed. For one USAID project, the indicator “number of assisted communes allocating and accessing funds for trafficking in persons prevention activities” showed that annual results were 60, while quarterly report data combined showed that the number was 6, which USAID officials confirmed was the correct figure. For another USAID project, the indicator, “number of food security private enterprises (for profit), producers organizations, water users associations, women’s groups, trade and business associations, and community-based organizations receiving U.S. government assistance” showed an annual result of one, while quarterly totals combined showed a total of three, which USAID officials confirmed was the correct figure. For the projects we reviewed, implementing partners produced narrative descriptions of progress made to accompany indicator results. We found cases in which numbers reported in narrative information were not consistent with numbers reported as indicator values. For example, for the State TIP Office indicator “number of criminal justice practitioners trained” for one project, indicator results for two quarters differed from results presented in the corresponding narrative during fiscal years 2016 to 2017. State officials found that the narrative information was correct for one of these inconsistencies and the indicator result was correct for the other. In addition, for one USAID indicator—number of public awareness tools on trafficking in persons developed and disseminated—the narrative report for one quarter described distributions that added up to 21,765 products, while the reported quantitative indicator total was 21,482. USAID officials confirmed that 21,765 was the correct figure. Incomplete Performance Information. Additionally, some quarterly reports had narrative elements that were incomplete in whole or in part, which made independent interpretation of project performance difficult or impossible. The implementing partner in one State TIP Office project copied and pasted significant portions of narrative information in quarterly reports for 2 years and, according to State TIP Office officials, did not fulfill a request by State TIP Office to include only current quarterly information in formal quarterly reports because it was focused on other activities. For nearly the entire period, the implementing partner indicated that it was “following up” with government entities in three countries to set up counter-trafficking in persons training for government officials, but no indication was made in formal quarterly reports about the results of any of these follow-up activities. For one State TIP Office project, the indicator “number of children receiving care, whose cases are reported to the police” had no narrative information or incomplete narrative information provided for three of the four quarters in which activity occurred during our period of review (comprising almost 90 percent of reported performance under this indicator). For a USAID project, the implementing partner reported a combined performance number of approximately 200 from the first through third quarters of fiscal year 2017 for the indicator “number of members of producer organizations and community based organizations receiving U.S. government assistance.” However, annual performance for fiscal year 2017 was reported as nearly 1,700 organizations. USAID officials explained that this difference was the result of the implementing partner’s misinterpretation of the indicator’s definition when producing the quarterly reports, but the annual report narrative did not explain this correction. Additionally, for USAID’s indicator on the “number of public awareness tools on trafficking in persons developed and disseminated,” no narrative information in the quarterly or annual reports explained how the last quarter of fiscal year 2016 performance approximately doubled from that of the previous quarter. Narrative information in the annual report described performance for the year only in general terms and did not clarify this significant change. In addition to direct project oversight, State TIP Office and USAID officials stated that performance information from progress reports that the agencies use to monitor counter-trafficking in persons projects is regularly used for internal and external reporting, program decisions, and lessons learned. For example, according to officials, this information is used by senior agency officials to inform their decision-making, in reports such as the Attorney General’s Annual Report to Congress and Assessment of U.S. Government Activities to Combat Trafficking in Persons, and to fulfil other requests from Congress. Neither State TIP Office nor USAID has sufficient controls to ensure consistent and complete performance information, and both face challenges to data reliability stemming from information reported in non- standard formats, implementing partners with limited capacities to report performance information, and the time-consuming nature of reviewing reported information. Federal internal control standards state that management should obtain data from reliable internal and external sources. According to these standards, reliable internal and external sources should provide data that are reasonably free from error and bias and faithfully represent what they purport to represent; and management should evaluate both internal and external sources of data for reliability. Without implementing additional controls to ensure that performance information are consistent and complete, State and USAID officials may not fully or accurately understand what projects are, or are not, achieving and, therefore, how their efforts could be altered as needed. Further, reports that are prepared or program decisions that are made using the TIP Office monitoring reports could be based on inconsistent or incomplete information that does not accurately present project results. State TIP Office currently receives performance information using documents submitted by implementing partners, although this information is not compiled into a single data system and is not in a standardized format. While State provides suggested templates for reporting information, officials said that they cannot require implementing organizations to use these templates and we found that implementing partners provided information in varying formats. According to State TIP Office officials, project officers perform manual reviews of quantitative information in monitoring reports but have insufficient time to carry out detailed reviews of data reliability for all indicators. State TIP Office project officers also stated that the process of comparing narrative information to indicator information was time consuming and difficult. According to these officials, the quality of the information in progress reports also depends on the priorities and resources—which can be limited—of the implementing partner. In addition to reviewing progress reports, State project officers we spoke to said that they rely on site visits and frequent, less formal communication as part of their oversight process. Project officers for the State TIP Office projects we reviewed stated that they did not always examine performance trends over time or review consistency in reported cumulative totals—which should be the sums of the previous and current quarters’ reported results—with quarterly totals, for reasons including the difficulty in assembling quarterly information in this manner and resource limitations. State TIP Office officials noted that they are aware of data quality problems in counter-trafficking in persons monitoring reports. State is developing SAMS-D, a system that officials expect to standardize entry of information from common performance indicators and logic models, according to State officials. These officials stated that if SAMS-D is deployed, State TIP Office could find it easier to analyze and revise logic models that implementing partners submit, as well as examine performance indicator results over time, since standardized data would be available in a centralized location. According to State officials, SAMS-D could be programmed with automatic checks or alerts under conditions defined by the TIP Office and the database programmer. For example, the system could require that fields be filled out in particular formats or provide an alert if performance under a certain indicator has significantly deviated from prior quarters or the indicator’s target. State TIP Office officials said they were uncertain whether SAMS-D would become operational in 2019, as currently planned. According to officials, State TIP Office has participated in planning and pilot activities for SAMS- D, including testing monitoring tools with implementing partners. According to these officials, additional work is needed to develop rules and controls necessary to operationalize SAMS-D to meet the TIP Office’s particular needs and ensure improved data. Another challenge to implementation of SAMS-D, according to these officials, is that some implementing partners are unable to maintain consistent internet connections necessary to upload information, impeding full roll-out of the system, and an alternative upload mechanism does not yet exist. According to USAID officials, overseas missions currently set many of their own policies and procedures for data quality oversight. For the two projects we reviewed, USAID relied on implementing partners to manage information, while it reviewed this information in addition to conducting site visits and communicating with implementing partners on a regular basis to monitor the projects. USAID officials attributed errors in the project reports we reviewed to factors including implementing partners’ errors in manual computation and misunderstandings of indicator definitions. According to USAID officials, data quality errors due to factors such as transcription errors can also occur in the performance information USAID uses to monitor counter-trafficking in persons projects. USAID project officers for the projects we reviewed said that they regularly conducted manual analysis of information received from implementing partners, but USAID and implementing partners are often pressed for time during the quarterly reporting cycle. According to these project officers, some of the errors GAO found had already been identified by USAID implementing partners during their annual review process and corrected in the annual reports we reviewed. For example, for the USAID indicator “value of new private sector investments in select value chains,” quarterly totals overstated corrected annual results by more than $120,000—approximately $170,000 instead of approximately $50,000. USAID officials said that they and the implementing partner had identified that the implementing partner was incorrectly including additional, unrelated data when producing its quarterly totals and while the annual total had been corrected to approximately $50,000, the annual report did not indicate that this error had occurred in the quarterly reports. USAID officials noted that the quality of the information in the progress reports also depends on the experience and capacity—which can be limited—of the implementing partner. According to USAID officials, USAID is currently building the Development Information Solution (DIS), an agency-wide information system that would provide USAID’s operating units (such as headquarters bureaus or field missions) with a tool to better collect, track, and analyze information to improve how they manage their projects and overall strategies. Implementing partners would be able to access the DIS via a portal where they would directly enter project information and upload reports and supporting information, according to this official. In addition, this information would better inform USAID’s decision-making at the operating unit level and agency level. A USAID official explained that USAID developed DIS partly as a result of USAID senior management’s concern about the lack of one corporate system to collect data in a timely fashion and improve efficiency. A USAID official responsible for managing DIS informed us that the business case for DIS was approved in fiscal year 2016. Developers have regularly solicited input from across the agency, according to this official, and a pilot with six missions is expected to begin in November 2018. This official explained that USAID plans to have DIS operational by the end of 2019, but DIS’s timeframe has been accelerated by a year, to 2019 from 2020, which may create programming and budget challenges, and unexpected challenges may also arise during the pilot process as mission needs for DIS are more fully assessed. USAID is currently developing training, deployment, and communications plans to prepare the agency for implementing DIS, according to officials. We reviewed selected indicators and targets information in one DOL project and identified no significant consistency or completeness issues beyond early project stages. For example, for the indicator “number of countries that ratify the International Labor Organization Protocol on Forced Labor,” the October 2016 report contained no reported value for this indicator, while the subsequent report (April 2017) updated this figure to indicate a value of “4” for October 2016. DOL officials explained that a data reporting form had not yet been developed as of October 2016, but indicator performance was discussed in the October 2016 narrative and added to the data reporting form when it was developed. While DOL does not require that a project progress report discuss every indicator associated with an activity in the performance report narrative, according to officials, we found that explanations were present for every significant performance-related event that we identified for the fiscal year 2016 and fiscal year 2017 period. We did not identify any controls in DOL’s process that were insufficient to ensure the reliability of performance monitoring information. DOL officials said that they use a system of spreadsheets with automated calculations and validation checks that are intended to standardize information submission and assure consistency and completeness of submitted information. These officials said that the project’s Comprehensive Monitoring and Evaluation Plan defines rules for how information for indicators is to be collected and how indicators are to be computed from this information. According to these officials, DOL develops a customized indicator reporting form for each project in conjunction with implementing partners, which implementing partners complete as part of their regular reporting requirements. According to these officials, these spreadsheets contain formula checks to mitigate the risk of implementing partners making undisclosed changes to indicator results and array information in a standardized manner across reporting periods. Officials also commented that for internal reporting purposes, such as the Government Performance and Results Act, project officers can extract information from indicator templates in a manner that is not overly burdensome. According to officials, DOL is developing an enhancement to existing tools, expected in late 2019, which will provide a traceable way to send and receive reports from grant recipients; timestamps when reports are sent, received, and accepted; and tracking of performance monitoring communications between DOL and implementing partners. They plan to continue to use a spreadsheet-based system for tracking indicator information. State TIP Office does not have a process to regularly review the number and content of indicators for counter-trafficking in persons projects to ensure that these indicators are useful and that collecting and reviewing information for them is not overly burdensome. State TIP Office officials acknowledged there are too many indicators for many counter-trafficking in persons projects. Project officers have the discretion to revise indicators if the scope of the project is not altered, according to State officials. In addition, according to these officials, changes that alter the project scope are possible with the consent of the implementing partner. However, State TIP Office project officers do not formally indicate which indicators they have determined are most useful and informed us that they have insufficient time and resources to do so as projects progress. One official who focuses on monitoring issues stated that, ideally, there should be three to five indicators per activity, and efforts have been made to reduce the number of indicators in some projects. For example, in one of the State TIP Office projects we reviewed—which was designed prior to the hiring of this official—had more than 230 indicators across 20 activities as of the first quarter of fiscal year 2017, which had been reduced to about 150 by the fourth quarter of fiscal year 2017. Our review of two State TIP Office projects showed that indicators did not change in some situations even when the project officer considered the indicator to have become less relevant. State project officers explained that, instead of only relying on indicator information, they regularly spoke with implementing partners for an understanding of what performance level to expect. While acknowledging errors in the numerical information for some indicators, project officers for the two projects we reviewed said that they sometimes overlooked reviews of all reported indicators in the quarterly progress reports because they consider some indicators to be less useful or unimportant and not needed for monitoring purposes, and burdensome to review in depth. These officials said that project officers focus on the indicators that they consider to be most important for project oversight or congressional requests. State TIP Office officials said that logic models, which include indicators, have improved significantly in recent years (including improvements to the suggested logic model template and the glossary of definitions), partly due to hiring additional monitoring staff, but that State has found the analysis of logic models to be difficult because of the absence of centralized and standardized information and a lack of staff capacity. In addition, project officers stated that they often rely on implementing partners for suggestions with regard to changing indicators. However, according to State officials, these implementing partners may be reluctant to bring up challenges they encounter out of concern that doing so may damage their relationship with State. State’s Program Design and Performance Management Toolkit, rolled-out in 2017, states that indicators can be costly to collect and manage and should therefore be “useful,” which includes having a clear utility for learning, tracking, informing decisions, or addressing ongoing program needs. This policy further states that indicators should also be “adequate,” which includes having only as many indicators in overall monitoring plan as are necessary and feasible to track key progress and results, inform decisions, conduct internal learning, and meet any external communication or reporting requirements. Further, federal internal control standards state that management should establish and operate monitoring activities, and, after doing so, may determine how often it is necessary to change the design of the internal control system as conditions change to effectively address objectives. Without a process to ensure that the number and content of counter-trafficking in persons project indicators are reviewed and modified as needed, project monitoring may be less efficient and effective as implementing partners and State TIP Office staff spend time collecting and reviewing indicator information that is not useful for project monitoring and management. DOL and USAID had processes in place to regularly review indicators for the projects we selected. DOL officials told us that project officers work with subject-matter experts to review the relevance of indicators in each semi-annual reporting period. These officials also stated that grantees are required to review their monitoring and evaluation plan annually, which includes the project’s indicators, and to provide the most recent work plan with each semi-annual report. According to DOL officials, while not a DOL requirement, the project we reviewed incorporated a work plan for each component of the project defining when important activities were planned under each output indicator. We found that DOL and the implementing partner made regular changes to these project plans in response to changing conditions. These plans were consistently included in the monitoring documents and most elements were discussed in the associated narrative text. USAID conducts its project oversight primarily out of its overseas missions, according to USAID officials. According to USAID officials associated with the projects we reviewed, these officials should review the project’s indicators annually, as well as when they determine a review is needed, such as when projects have changes in planned activities. USAID officials stated that this annual review process may be explicitly required in some agreements. According to these officials, missions or other operating units are required to manage and update reference sheets for indicators, which officials said are intended to define each indicator and the information to be collected to measure each indicator. Changes to these reference sheets are tracked, according to these officials. Projects we reviewed showed evidence of regular changes to indicators and associated targets. We spoke to project officers about several specific changes that we had identified. For many of these changes, the project officers provided information about their work with implementing partners to appropriately adjust program goals and expectations, such as adapting the project indicators and targets to unexpected or changing conditions. Given the grave suffering of victims and damaging effects on society that trafficking in persons imposes, and the U.S. government’s reliance on implementing partners to carry out its counter-trafficking projects, performance monitoring is important to ensure that the United States funds projects that are effective, efficient, and achieve their intended counter-trafficking goals. In fiscal year 2017, State, DOL, and USAID managed 120 counter-trafficking projects and monitored the performance of the projects. However, weaknesses in State’s and USAID’s monitoring processes limit their ability to collect reliable performance information and assess project performance. First, we found that the State TIP Office did not fully document its monitoring activities for many of the projects we reviewed that started in between fiscal years 2011 to 2016. Monitoring the implementation of projects and fully documenting the results of such monitoring are key management controls to help ensure that project recipients use federal funds appropriately and effectively. The State TIP Office was also not setting targets for some project indicators, which may have limited the TIP Office’s ability to determine if implementation was on track or if corrections needed to be made. Furthermore, we found that the State TIP Office and USAID used project performance information reported by the implementing partners—used for internal and external reporting purposes—that was not always consistent or complete, and did not have sufficient controls to ensure the reliability of performance information. Finally, to ensure effective and efficient monitoring, projects need to establish a reasonable number of indicators and update them as needed. However, we found that the State TIP Office does not regularly evaluate and revise all of its indicators for counter-trafficking in persons projects, which can have large numbers of indicators. As a result, the State TIP Office may be using information to monitor project performance that that is less useful and relevant for understanding project progress, and requires more resources and time for the implementing partners to produce and agency officials to review. State TIP Office officials noted that the TIP Office has taken steps to improve its monitoring process, and State and USAID officials explained that State and USAID are developing information management systems that may increase the quality and usefulness of the monitoring information they use. However, these systems are not fully designed or operational and their capabilities are not yet known. Thus, the potential of these systems to strengthen the ability of State and USAID to collect reliable performance information and assess their efforts to combat the serious problem of global trafficking in persons is unclear. State and USAID could benefit from making additional improvements to ensure their projects are being implemented as intended and achieving project goals to prevent trafficking in persons, protect victims, and prosecute trafficking crimes. We are making a total of five recommendations, including four to State and one to USAID. Specifically: The Secretary of State should ensure that the Director of the TIP Office establishes targets for each performance indicator. (Recommendation 1) The Secretary of State should ensure that the Director of the TIP Office maintains documentation of all required monitoring activities, including monitoring plans, progress reports, and performance targets. (Recommendation 2) The Secretary of State should ensure that the Director of the TIP Office establishes additional controls to improve the consistency and completeness of performance information that the TIP Office uses to monitor counter-trafficking in persons projects. (Recommendation 3) The Secretary of State should ensure that the Director of the TIP Office establishes a process to review and update performance indicators, with the participation of implementing partners, to ensure that project monitoring remains efficient and effective. (Recommendation 4) The Administrator of USAID should establish additional controls to improve the consistency and completeness of performance information that USAID uses to monitor counter-trafficking in persons projects. (Recommendation 5) We provided a draft of this report to State, DOL, USAID, DOD, and the Treasury for review and comments. In State’s and USAID’s letters, reproduced in appendixes IV and V, respectively, both agencies concurred with our recommendations and described their planned actions to address the recommendations. In addition, State’s letter indicated that our draft report did not fully recognize the investment State has made, and the changes underway, to improve the TIP Office’s performance measurement and ensure complete and consistent documentation. State cited additional dedicated financial and personnel resources for monitoring and evaluation added over the past two years. We acknowledge and report on these positive steps, including the hiring of a monitoring and evaluation specialist and other TIP Office staff, in our report. USAID’s letter included other comments that we have responded to in appendix V. Furthermore, State, DOL, USAID, and the Treasury provided technical comments, which we incorporated as appropriate. DOD had no comments. We are sending copies of this report to the appropriate congressional committees; the Secretaries of State, Labor, Defense, and Treasury; and the Administrator of USAID. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7141, or groverj@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VI. The National Defense Authorization Act for Fiscal Year 2017 includes a provision for GAO to report on the programs conducted by the Department of State (State), the Department of Labor (DOL), the United States Agency for International Development (USAID), the Department of Defense (DOD), and the Department of the Treasury (Treasury) that address human trafficking and modern slavery, including a detailed analysis of the effectiveness of such programs in limiting human trafficking and modern slavery. Three of these agencies—State, DOL, and USAID—have programs that design and award counter-trafficking projects to implementing partners, through contracts, grants, or cooperative agreements. These agencies then oversee and monitor these projects. Since DOD and Treasury officials did not identify these types of projects as part of their counter-trafficking in persons efforts, we provided background information on their efforts but did not cover these agencies in our reporting objectives. This report (1) identifies the recent projects in international counter-trafficking in persons that key U.S. agencies have awarded to implementing partners, and for selected projects, assesses the extent to which key agencies have (2) documented their monitoring activities, (3) ensured the reliability of the performance information they use in monitoring projects, and (4) reviewed the usefulness of the performance indicators they use in monitoring projects. To address these objectives, we reviewed relevant agency documents and interviewed agency officials. To report on agencies’ programs, we asked knowledgeable officials at State, DOL, USAID, DOD, and Treasury to identify their projects that (1) had an international focus; (2) were delivered by implementing partners to external recipients, such as trafficking victims or host governments, as project beneficiaries; and (3) addressed trafficking in persons, modern slavery, or forced labor. Because State, DOL, and USAID managed such projects, we focus on them as the three key agencies for the purposes of our reporting objectives. According to officials from these three agencies, the projects they identified range from those with counter- trafficking in persons as a primary goal, to those in which this goal was integrated as part of each agency’s activities. We used the lists of projects that these agencies provided to report the relevant counter- trafficking projects that agencies awarded to implementing partners to carry out the projects. For our first objective, we determined the projects that were active during fiscal year 2017, including those which began, were ongoing, or ended during fiscal year 2017, and interviewed agency officials to confirm project information. To analyze the effectiveness of agencies’ programs in limiting human trafficking and modern slavery, we assessed the key agencies’ monitoring efforts for selected projects by examining the extent to which agencies have documented their monitoring activities, ensured the reliability of the performance information, and reviewed the usefulness of the performance indicators they use in monitoring projects. To assess the extent to which State, DOL, and USAID documented their monitoring activities for selected counter-trafficking in persons projects, we reviewed these agencies’ monitoring policies and related guidance as well as the full agreements for the projects to identify specific required monitoring activities. The policies and related guidance included State’s Grants Policy Directive Number 42 (GPD-42) related to monitoring assistance awards; Federal Assistance Policy Directive (FAPD), which according to a State official superseded State’s grants policy directives, including GPD-42; Federal Assistance Directive, which superseded the FAPD; Program Design and Performance Management Toolkit; and Program and Project Design, Monitoring, and Evaluation Policy. We also reviewed State’s Office to Monitor and Combat Trafficking in Persons standard operating procedures. For DOL, we reviewed its Management Procedures and Guidelines (MPG) as well as the Comprehensive Monitoring and Evaluation Plan Guidance Document referenced in the fiscal year 2017 MPG. For USAID, we reviewed—from its Automated Directives System or ADS—Chapter 203 on Assessing and Learning and Chapter 201 on Program Cycle Operational Policy, which according to USAID officials superseded Chapter 203. Once we determined what tools the agencies use to monitor their counter-trafficking in persons projects, we sought documentation of those tools to determine whether agencies were implementing those tools. To assess the agencies’ monitoring efforts, we identified all of State’s, DOL’s, and USAID’s projects that started before or during October 2015, which corresponds to the first quarter of fiscal year 2016, and were active through September 30, 2017, which corresponds to the fourth and last quarter of fiscal year 2017. This produced a list of a total of 57 State, DOL, and USAID projects. Out of these 57 projects, we excluded 3 projects from our selection for various reasons. We excluded one DOL project because DOL identified the project as being a research project for which certain agency performance monitoring requirements (e.g., indicators, targets) are not applicable. We also excluded two USAID projects because USAID identified each project as including several projects with various start and end dates, thus making it difficult to determine their time frames for inclusion in our report. This resulted in a selection of 54 projects—37 from State, 3 from DOL, and 14 from USAID. We reviewed documentation of key monitoring activities as specified in agency policy or the project award agreements to determine the extent to which the agencies had full documentation of key monitoring activities. We also applied federal standards for internal control, which call for agency management to design monitoring activities so that all transactions are completely and accurately recorded, and GAO’s key attributes of effective performance measures, specifically the attribute of having a numerical target. We made our determinations of the extent to which agencies had full documentation of key monitoring activities, as follows: State (37 projects). To determine whether State had fully documented its monitoring activities, we reviewed the monitoring plan for each project; fiscal year 2017 quarterly progress reports for each project; and the final progress report, including indicators and targets, for the seven projects that ended as of December 2017. We determined that State had “fully documented” the monitoring plan, if State provided a monitoring plan worksheet for the project. If State did not provide a monitoring plan worksheet for the project, we determined the monitoring plan was “not documented.” For each quarterly progress report for fiscal year 2017 as well as the final progress report for projects that ended as of December 2017, we determined that State had “fully documented” the report, if the report included both a qualitative and quantitative summary of progress. For the State TIP Office projects we reviewed, the qualitative summary of progress is captured in a narrative and the quantitative summary of progress is captured in the logic model. For the State DRL project we reviewed, the qualitative summary of progress is captured in a narrative and the quantitative summary of progress is captured in the monitoring plan. If either component—narrative or quantitative summary—was not documented, we determined that the report was “partially documented.” If both components were not documented, we determined that the report was “not documented.” We determined that State had “fully documented” indicators and targets for projects that ended as of December 2017, if the final progress report for the project included indicators as well as targets for each indicator. If the final progress report included indicators but did not specify targets for each indicator, we determined that indicators and targets were “partially documented.” If the final progress report did not include indicators and targets, we determined that indicators and targets were “not documented.” (We did not find any instances of “not documented.”) DOL (3 projects). To determine whether DOL had full documentation of its monitoring activities, we reviewed the monitoring plan as well as fiscal year 2017 semi-annual progress reports for each project. Because DOL’s three projects were ongoing as of December 2017, we reviewed the second semi-annual progress report for fiscal year 2017 to determine whether DOL had “fully documented” indicators and targets for each project. Overall, we determined that DOL had “fully documented” (1) the monitoring plan for each project, if the monitoring plan documented the performance metrics and data collection frequency for the project; (2) each fiscal year 2017 semi- annual progress report for the project, if the report included a qualitative and quantitative summary of progress for the period of performance; and (3) indicators and targets for the project, if the second semi-annual progress report included indicators as well as targets for each applicable indicator. USAID (14 projects). To determine whether USAID had full documentation of its monitoring activities, we reviewed the monitoring plan for each project; fiscal year 2017 progress reports at the reporting frequency specified in the agreements for each project; and the final progress report, including indicators and targets, for the three projects that ended as of December 2017. We also reviewed evidence of site visits conducted during the life time of the projects. Overall, we determined that USAID had “fully documented” (1) the monitoring plan for each project, if the monitoring plan documented performance metrics for the project; (2) the periodic progress reports for fiscal year 2017 as well as the final progress report for projects that ended as of December 2017, if the report included a qualitative and quantitative summary of progress for the period of performance; and (3) indicators and targets for the three projects that ended as of December 2017, if the final progress report included indicators as well as targets for each applicable indicator. We determined that USAID “fully documented” a project’s site visit, if USAID provided evidence of having conducted at least one site visit during the life time of the project. Additionally, we interviewed knowledgeable monitoring officials from each agency to understand agencies’ monitoring process and application of monitoring requirements for counter-trafficking in persons projects. Because State and DOL officials also identified site visits as a key tool they use to monitor their counter-trafficking in persons projects, we reviewed evidence of site visits conducted during the life time of the projects to report on these efforts. We also interviewed State TIP Office officials to discuss instances in which the agency did not have full documentation of key monitoring activities. To assess the extent to which key agencies have ensured the reliability of the performance information they use to monitor selected projects, we selected for review a nongeneralizable sample of 5 projects—2 State projects, 1 DOL project, and 2 USAID projects—out of the 54 counter- trafficking in persons projects identified by agencies that started before or during October 2015 and were active through fiscal year 2017. We based our selection of these projects primarily on largest total award amounts. For these selected projects, we obtained 2 years of progress reports and other documents to assess the quantitative and qualitative performance information. We developed a standardized template to capture all quarterly or semi-annual indicator performance information reported for each of these projects and assessed whether quarterly or semi-annual totals were consistent with annual and cumulative totals where these were reported. Using this quantitative information, we judgmentally selected indicators for inclusion in agency interviews where it appeared likely that numerical errors had occurred or there appeared to be significant project events, such as large over- or under-performance or the elimination of the indicator. We interviewed agency officials, including managers of these five projects, about the consistency and completeness of monitoring information in these projects for about 60 indicators identified through our analysis. Additionally, we questioned these officials about performance report narrative information describing project activities that, in our judgement, appeared to be incomplete or inconsistent with respect to indicator results. We also used these interviews to determine whether our findings for these selected projects reflected general agency policies and procedures. We assessed the completeness and consistency of project performance data that State, DOL, and USAID use to monitor projects as part of our data reliability assessment. We found State and USAID data to be unreliable in the projects we reviewed. We discuss the implications of these unreliable data for State and USAID’s project management and reporting in our findings and recommendations. We found the performance data that DOL used were consistent and complete for the project we reviewed. While we examined indicator data and narrative information for consistency and completeness, we did not verify the accuracy of performance information. To assess the extent to which key agencies have reviewed the usefulness of the performance indicators they use to monitor selected projects, we used the same nongeneralizable sample of five projects— two State projects, one DOL project, and two USAID projects. We interviewed agency officials, including managers of these five projects, about processes and systems they use to review the usefulness of indicators on an ongoing basis, such as when conditions in the project activity region change or if the agency and implementing partner learn that certain project activities are less effective than expected. We identified examples of indicators that had apparently been discontinued, as well as continued indicators that showed minimal progress, and we asked these officials to explain what had or had not been discontinued. We also used these interviews to determine whether our findings for these selected projects reflected general agency policies and procedures. We conducted this performance audit from October 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Departments of State (State) and Labor (DOL), and U.S. Agency for International Development (USAID) managed 120 projects in counter- trafficking in persons carried out by implementing partners during fiscal year 2017, according to information provided by officials with these agencies. The three agencies used different approaches to identify relevant projects. For example, State reported projects with a primary goal of counter-trafficking in persons, while DOL and USAID included projects that may not have counter-trafficking in persons as a primary goal. Table 4 lists these agencies’ reported project information for projects that were active during fiscal year 2017. The Department of State (State) did not fully document its monitoring activities (monitoring plan; fiscal year 2017 quarterly progress reports; and final progress report, including indicators and targets, for projects that ended as of December 2017) for 16 of the 37 selected projects we reviewed with start dates between fiscal years 2011 to 2016. (See table 5.) For example, State’s Office to Monitor and Combat Trafficking in Persons did not have monitoring plans for nine projects or targets for each indicator in six of seven final progress reports for projects that ended as of December 2017. 1. USAID commented that it does not believe that our draft report reflected the existing controls the USAID mission in Ghana shared with us, and that the mission had furnished us with a file that, according to USAID, contained correct information for all indicators and their results from the time the activity began until our audit. While the mission provided us with a spreadsheet, this document included only annual performance totals for several years without accompanying quarterly totals, or quarterly or annual narrative information. We focused our analysis on the quarterly and annual performance reports to understand the extent to which USAID was ensuring the consistency and completeness of performance information, including associated narratives, underlying its aggregate and higher-level performance reports. We reported on inconsistent or incomplete performance information only after discussing and substantiating the specific errors we identified with USAID officials. Further, we recognize USAID’s efforts to address errors that the agency identified prior to our review and we provide an example of such efforts in the report. 2. We have incorporated USAID’s comment. Our report no longer characterizes USAID’s regular activity monitoring and conversations with implementing partners as “informal.” 3. USAID noted that our report does not discuss how the USAID mission in Ghana uses its third-party monitoring project—Monitoring, Evaluation and Technical Support Services (METSS)—to work with local organizations to improve their collection and analysis of data. We have added a reference to USAID’s third-party monitoring project to the report where we discussed limited capacity of local partners as a cause of data reliability issues. 4. USAID commented that one of the Ghana counter-trafficking in persons indicators we examined in the integrated project (“value of new private sector investments in selected value-chains”), was not related to trafficking in persons and, therefore, was not directly related to the focus of our audit. As discussed in the Objectives, Scope, and Methodology section of our report (see app. I), we selected projects, including the integrated project in Ghana, based on a list of counter- trafficking in persons projects provided by USAID. Because the same operational policy that sets the monitoring and evaluation standards for the agency applied to all indicators within a given project, we examined available quarterly or semi-annual indicator data for all reported indicators in selected projects to determine the completeness and consistency of the data. We then conducted interviews with agency officials to discuss instances in which we identified potentially incomplete and inconsistent performance information, as well as whether our findings about the management of performance information for these selected projects reflected general agency policies and procedures. In addition to the contact named above, Leslie Holen (Assistant Director), Victoria Lin (Analyst-in-Charge), Esther Toledo, and Andrew Kurtzman made key contributions to this report. The team benefited from the expert advice and assistance of Neil Doherty, Justin Fisher, Benjamin Licht, Grace Lui, and Aldo Salerno. Human Trafficking: State Has Made Improvements in Its Annual Report but Does Not Explicitly Explain Certain Tier Rankings or Changes, GAO-17-56 (Washington, D.C.: December 5, 2016). Human Trafficking: Oversight of Contractors’ Use of Foreign Workers in High-Risk Environments Needs to Be Strengthened. GAO-15-102 (Washington, D.C.: November 18, 2014). Human Trafficking: Monitoring and Evaluation of International Projects Are Limited, but Experts Suggest Improvements. GAO-07-1034 (Washington, D.C.: July 26, 2007). Human Trafficking: Better Data, Strategy, and Reporting Needed to Enhance U.S. Antitrafficking Efforts Abroad. GAO-06-825 (Washington, D.C.: July 18, 2006).", "summary": "Human trafficking is a pervasive problem throughout the world. Victims are often held against their will in slave-like conditions. The National Defense Authorization Act for Fiscal Year 2017 includes a provision for GAO to report on the programs conducted by specific agencies, including State, DOL, and USAID, that address trafficking in persons. Among other objectives, this report (1) identifies the recent projects in international counter-trafficking in persons that key U.S. agencies have awarded to implementing partners; and, for selected projects, assesses the extent to which key agencies have (2) documented their monitoring activities and (3) ensured the reliability of project performance information. GAO reviewed State, DOL, and USAID project documents and interviewed agency officials. GAO reviewed monitoring documents for 54 of the 57 projects that were active from the beginning of fiscal year 2016 through the end of fiscal year 2017. Of these 54 projects, GAO selected a nongeneralizable sample of 5 projects, based primarily on largest total award amounts, for review of the reliability of project performance information. The Departments of State (State), Labor (DOL), and the U.S. Agency for International Development (USAID)—through agreements with implementing partners—managed 120 international counter-trafficking in person projects during fiscal year 2017. GAO reviewed a selection of 54 counter-trafficking projects (37 State, 3 DOL, and 14 USAID), and found that DOL and USAID had fully documented their monitoring activities, while State had not. All three agencies used similar tools to monitor the performance of their projects, such as monitoring plans, performance indicators and targets, progress reports, and site visits. GAO found, however, that State did not fully document its monitoring activities for 16 of its 37 projects (43 percent). GAO found that State did not have the monitoring plans or complete progress reports for one-third of its projects and often lacked targets for performance indicators in its final progress reports. State officials said they had not required targets for each performance indicator for the projects GAO reviewed, or had not set targets due to limited resources in prior years. State has taken steps to improve its monitoring efforts, including issuing a November 2017 policy that requires targets to be set for each performance indicator and developing an automated data system that would require targets to be recorded. However, because the pilot data system allows targets to be recorded as “to be determined” and does not have controls to ensure entry of actual targets, it is uncertain whether performance targets will be regularly recorded. Without full documentation of monitoring activities and established performance targets, State has limited ability to assess project performance, including project efficiency or effectiveness. GAO reviewed the reliability of project performance information for 5 of the 54 counter-trafficking projects (2 State, 1 DOL, and 2 USAID) and found that State and USAID used inconsistent and incomplete performance information, while DOL used consistent and complete information. For example, some quarterly indicator results in State and USAID progress reports were inconsistent with annual total results, and narrative explanations for significant deviations from performance targets were sometimes not present in quarterly reports. According to agency officials, performance information from these projects is regularly used not only for direct project oversight but also for internal and external reporting, program decisions, and lessons learned. GAO found that State's and USAID's processes lack sufficient controls to ensure the reliability of project performance information, but did not find inadequate controls in DOL's process. For example, neither State nor USAID consistently used automated checks on indicator results to ensure consistency and completeness of performance indicator result calculations. In contrast, DOL used automated checks as part of its process. Without implementing controls to ensure that performance information is consistent and complete, State and USAID officials cannot fully or accurately understand what projects are, or are not, achieving, and how their efforts might be improved. GAO is making four recommendations to State and one recommendation to USAID, including that both agencies establish additional controls to improve the consistency and completeness of project performance information, and that State maintain monitoring activity documentation and establish targets for each performance indicator. State and USAID concur with GAO's recommendations.", "document_type": "gao"}
{"report": "Export credit agencies such as the Bank are usually government agencies, although some private institutions operate export credit programs on their respective governments’ behalf, according to a Bank report on global export credit competition. These agencies offer financing for domestic companies to make sales to foreign buyers, in the form of products such as loans, guarantees, and insurance for exporters, according to the Organisation for Economic Co-operation and Development, which monitors international export credit activity. The Bank is one of several federal agencies promoting U.S. exports. According to the Bank, as of December 31, 2016, it had identified 96 export credit agencies worldwide. There have been significant changes in the role of export credit agencies since 2007 and the global financial crisis and the European debt crisis, according to the Bank. This is because ready access to credit before the global financial crisis has given way to caution in lending among private-sector banks, and also because other nations have adopted export credit agencies as a tool for national growth. For fiscal year 2014—which the Bank says is the most recent year in which it operated with full authority— the Bank reported authorizing nearly $20.5 billion in financing in support of an estimated $27.5 billion worth of U.S. exports and nearly 165,000 American jobs. For fiscal year 2017, operating under reduced authority, the Bank reported authorizing more than $3.4 billion in financing to support $7.4 billion of exports and an estimated 40,000 jobs. The Bank, which has about 430 employees, was established under the Export-Import Bank Act of 1945. Under the act, the Bank must have a “reasonable assurance” of repayment when providing financing; it must supplement, and not compete with, private capital; and it must provide terms that are competitive with foreign export credit agencies. Also relevant to whether the Bank provides assistance is whether foreign competitors of the U.S. exporter are receiving export credit assistance from their home nations, and thus the American exporter would need assistance to stay competitive. Over time, Congress has directed the Bank to support certain specific types of exports. Such requirements include using at least 25 percent of its authority to finance small-business exports; promoting exports related to renewable energy sources; and promoting financing for sub-Saharan Africa. As described in figure 1, to support U.S. exports, the Bank offers four major types of financing: direct loans, loan guarantees, export-credit insurance, and working capital guarantees. Bank products generally have three maturity periods: Short-term transactions are for less than 1 year; medium-term transactions are from 1 to 7 years long; and long-term transactions are more than 7 years. For fiscal year 2017, the Bank reported it had exposure in 166 countries. Figure 2 shows Bank exposure by product type, geographic region, and economic sector, for fiscal year 2017. Its greatest exposure, by product type, was in loan guarantees. By geographic region, the largest exposure was the Asian market. By economic sector, exposure was biggest in aircraft products. Because the Bank’s mission is to support U.S. jobs through exports, there are foreign-content eligibility criteria and limitations on the level of foreign content that may be included in a Bank financing package. For medium- and long-term transactions, for example, the Bank limits its support to 85 percent of the value of goods and services in a U.S. supply contract, or 100 percent of the U.S. content of an export contract, whichever is less. There are also requirements that certain products supported by the Bank must be shipped only on U.S.-flagged vessels. Defaults occur when transaction participants fail to meet their financial obligations. The Bank must report default rates to Congress quarterly. It calculates the default rate as overdue payments divided by financing provided. If the rate is 2 percent or more for a quarter, the Bank may not exceed the amount of loans, guarantees, and insurance outstanding on the last day of that quarter until the rate falls under 2 percent. As of March 31, 2018, the Bank reported its default rate at 0.438 percent. The Bank is overseen by a Board of Directors (the Board), which has a key role in approving Bank transactions, because directors must approve medium- and long-term transactions of greater than $10 million. Since July 2015, however, the Board has lacked a quorum (at least three members), which has precluded approval of these large transactions. Also due to the lack of a quorum, new transaction activity has shifted away from larger transactions, according to Bank managers. The Bank’s total exposure has recently declined by about a third, from $113.8 billion at the end of fiscal year 2013 to $72.5 billion at the close of fiscal year 2017, according to the Bank. In part during the period when the Board has lacked a quorum and been unable to approve large transactions, the amount of earnings the Bank has transferred to the Department of the Treasury has declined steadily, according to Bank figures. Since 2012, the amount the Bank transferred to the Treasury peaked at $1.1 billion in fiscal year 2013. In successive years, that transfer fell to $674.7 million in fiscal year 2014, $431.6 million in fiscal year 2015, and $283.9 million in fiscal year 2016, before reaching zero in fiscal year 2017. As the Board vacancies have continued, a backlog of Board-level transactions has grown, reaching an estimated $42.2 billion as of December 2017. The Board also has a key role in risk management, with members serving on the Bank’s Risk Management Committee, which oversees portfolio stress testing and risk exposure, according to the Bank. Board members also approve the appointment of the chief risk officer (CRO), the chief ethics officer, and members of advisory committees. During the course of our review, in addition to the Board quorum issue, Bank senior leadership changed. According to the Bank, the following took place: The acting chairman of the Board and president of the Bank resigned. The vice chairman, first vice president, and acting agency head also later resigned. Subsequently, a new executive vice president, chief operating officer, and acting agency head was named. Following that, an acting president and Board chairman was named. Fraud and “fraud risk” are distinct concepts. Fraud—obtaining something of value through willful misrepresentation—is challenging to detect because of its deceptive nature. Fraud risk exists when individuals have an opportunity to engage in fraudulent activity, have an incentive or are under pressure to commit fraud, or are able to rationalize committing fraud. When fraud risks can be identified and mitigated, fraud may be less likely to occur. Although the occurrence of fraud indicates there is a fraud risk, a fraud risk can exist even if actual fraud has not yet been identified or occurred. According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks. Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks. Risk management is a formal and disciplined practice for addressing risk and reducing it to an acceptable level. We issued our Fraud Risk Framework in July 2015. The Fraud Risk Framework provides a comprehensive set of leading practices, arranged in four components, which serve as a guide for agency managers developing efforts to combat fraud in a strategic, risk-based manner. The Fraud Risk Framework is also aligned with Principle 8 (“Assess Fraud Risk”) of the Green Book. The Fraud Risk Framework describes leading practices in four components: commit, assess, design and implement, and evaluate and adapt, as depicted in figure 3. The Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires the Office of Management and Budget (OMB) to establish guidelines for federal agencies to create controls to identify and assess fraud risks, and to design and implement antifraud control activities. The act also requires OMB to incorporate the leading practices of the Fraud Risk Framework in those guidelines. In July 2016, OMB published guidance on enterprise risk management and internal controls in federal executive departments and agencies. Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework. The act also requires federal agencies to submit to Congress a progress report each year, for 3 consecutive years, on implementation of the controls established under the OMB guidelines. The Bank has identified a dedicated entity to lead fraud risk management activities, as called for in the first component of GAO’s Fraud Risk Framework. In addition, employees generally have a positive view of antifraud efforts across the Bank, according to our employee survey. However, we also found that management and staff have differing views on key aspects of the Bank’s antifraud culture. In particular, we identified issues inconsistent with the notion of “an antifraud tone that permeates the organizational culture,” as the Fraud Risk Framework calls for, in which there is agreement across the organization on key fraud issues and practices. These areas of disagreement on aspects of the Bank’s antifraud culture include how active the Bank should be in preventing, detecting, and addressing fraud; and the adequacy of time for underwriting, which the Bank says is its primary safeguard against fraud. Bank managers said that our findings provide an opportunity for additional staff training on fraud issues. The Bank has identified two managers who serve as a dedicated entity for leading fraud risk management activities, managers told us. These are a vice president of the Credit Review and Compliance division (CRC) and an assistant general counsel in the Bank’s Office of the General Counsel (OGC). According to Bank managers, they work together under the direction of the CRO, who was permanently named to the position on a part-time basis in September 2016. GAO’s Fraud Risk Framework provides that the dedicated entity can be an individual or a team, depending on the needs of the agency. Hence, the Bank’s arrangement is consistent with the framework. Before recently identifying the two managers as the dedicated entity, Bank managers told us there was no centralized entity responsible for fraud risk management. Likewise, Bank written procedures, dated February 2015, for preventing, detecting, and prosecuting fraud provided there is no “central figure in charge” of such efforts. The CRO told us that he oversees the two managers in their work as the dedicated entity. We also found that the two managers named to form the dedicated entity are involved in one of the key activities contemplated by the Fraud Risk Framework. Overall, these activities include serving as a repository of knowledge on fraud risks and controls; leading or assisting with trainings and other fraud-awareness activities; and coordinating antifraud initiatives. The two managers have helped develop and provide training, some of which is mandatory and targeted directly at fraud issues, managers told us. The Bank provides semiannual fraud training through OGC for claims-processing staff, Bank managers also said. Other training, while nominally not directed at fraud, can nevertheless involve fraud issues, Bank managers told us. For instance, managers told us recent training on shipping matters included a review of fraudulent shipping documentation, which is one way fraud can be perpetrated. GAO’s Fraud Risk Framework calls for creating an organizational culture to combat fraud, such as by demonstrating senior-level commitment to fighting fraud and involving all levels of the agency in setting an antifraud tone. Bank managers, in interviews, and staff, in our employee survey, generally expressed positive views of the Bank’s antifraud culture. For example, according to Bank managers, the Bank has maintained an antifraud culture, which they attribute to factors including: fraud and ethics training; internal controls; tone set at the top by management; a realization after fraud cases in the 2000s that the Bank cannot be solely reactive to fraud; and the pursuit of fraud cases by the Bank and its OIG. Our survey results indicate that Bank employees also generally have a positive view of antifraud tone across the Bank and attention paid to combating fraud. For example: Eighty percent said Bank management in general has established a clear antifraud tone, to the extent of “a great deal” or “a lot.” Employees said that based on senior management’s actions, preventing, detecting, and addressing fraud is “extremely” or “very” important to the Bank (86 percent). Staff expressed “a great deal” or “a lot” of confidence in senior management (76 percent), managers in their division (85 percent), and their peers (82 percent), to respond to fraud on a timely and appropriate basis. Illustrative Comments from GAO’s Survey of Bank Employees “The Bank has become much more sensitized to the risks of fraud over the last 10 years.” “The progress made on combating fraud is tremendous. When I started, no one really cared, and fraud was common…. Now, blatant attempts at fraud are a rarity.” “There is a high degree of concern at all levels of the Bank regarding potential fraud, which has resulted in good oversight.” We also found indications of disagreement among managers and staff about how active the Bank should be in preventing, detecting, and addressing fraud. Overall, Bank managers told us, the Bank’s current approach has been appropriate for dealing with fraud. In particular, an OGC manager told us that with its underwriting and due diligence standards—the process for assessing and evaluating an application before approval—and established fraud procedures, the Bank has an appropriate strategy to mitigate fraud risks it knows about or envisions occurring. However, about one-third of survey respondents (35 percent) said the Bank should be “much more active” or “somewhat more active” in preventing, detecting, and addressing fraud. Less than half (44 percent) said the current level of activity should remain the same. Asked whether what they see as the Bank’s current approach for overseeing fraud and fraud risk, based on the level of responsibilities of various parties involved, is the most effective way to do so, about 6 in 10 (62 percent) said yes. While Bank managers characterized our survey results as positive, these divergent views indicate room for strengthening antifraud culture, in light of the Fraud Risk Framework’s goal of achieving shared views across the organization. Illustrative Comments from GAO’s Survey of Bank Employees “The Bank should be much more active in preventing, detecting, and addressing fraud, because the Bank handles business transactions that involve taxpayers’ money.” “The Bank needs more funding for technology to help with fraud prevention and additional Bank staff to spot/monitor fraud.” “The first- and second-level managers have not done all they could to ensure fraud prevention. The front-line credit officers are the ones in the best position to detect fraud and management does not always support it.” “A more proactive approach to fraud detection, rather than a reactive approach, would be more prudent. This means trying to sniff out fraud the preapplication and underwriting stages.” Another area where we identified differing views is in the adequacy of time for underwriting. Preapproval underwriting, and the due diligence done as part of that process, is the Bank’s main control against fraud, according to Bank managers and procedures. However, during our review, Bank managers also acknowledged in interviews that their business involves potentially competing objectives: performing sufficient due diligence to prevent and detect fraud prior to approving transactions, while still processing transactions in a timely manner to meet customers’ needs and achieve the Bank’s mission. Some comments we received in our employee survey illustrated the tension between the competing objectives of thorough due diligence and timely processing of transactions. Illustrative Comments from GAO’s Survey of Bank Employees “Detecting fraud is a very high priority, as is appropriate. But overemphasis on managing that risk would lead to a sense of paranoia when approaching any new risk.” “Given all the other obligations we have, even more time spent on fraud detection means less time for other transaction-related work, with only marginal benefit.” “Risk is part of the business, and being overly cautious leads to never taking any risk and consequently not serving the customers.” “Fraud is important to discuss, but it should not become the main force driving the organization. There needs to be more of a risk-based analysis when determining how much to concentrate on fraud.” According to a Bank report on global export credit competition, transaction processing time is an important factor in customers’ decisions to choose the Bank over foreign export-financing agencies. In recent years, the Bank has significantly reduced processing time. Bank statistics show that the percentage of transactions completed in 30 days or fewer grew from 57 percent in fiscal year 2009 to 91 percent in fiscal year 2016. For 100 days or fewer, the rate has increased from 90 percent to 99 percent over the same period. Bank managers told us they seek to strike the right balance between the competing objectives and believe they have done so. For example, according to the CRC division, the Bank chooses to perform some of its fraud-detection and mitigation activities after application approval—such as through reviews of transactions selected on both a random and risk- based basis—in order to not unduly delay processing applications. Under Bank practices, document review can be abbreviated, and, after underwriting approval, lenders may accept certain transaction documentation, such as invoices or shipping documents, at face value unless something appears suspicious, managers told us. In the particular case of processing short- and medium-term transactions, the Bank is alert to “red flag” items—known warning signs, such as use of nonbank financial institutions, or participants that are trading entities rather than original equipment manufacturers, managers told us. But otherwise, the Bank limits the extent of its application investigation, according to the Bank’s OGC. In particular, as the Bank’s OGC told us, the Bank is required by law to make medium-term offerings a “simple product.” There is pressure both legally and commercially to process transactions quickly, because, otherwise, an exporter could lose its business opportunity, the Bank’s OGC told us. In many of these transactions, both the exporter and buyer are small, the OGC also said, so it is more difficult to get information. As a result, according to the OGC, the Bank relies more on self-reporting by transaction parties. For these reasons, the Bank’s OGC told us, for both short- and medium-term products, there are not as many “inherent checks and balances” in the process. We note that based on previous GAO work, self-reporting can present an opportunity for fraud. However, our survey results suggest that significant portions of Bank staff question whether the Bank is striking the right balance in providing sufficient time for preapproval review of transactions. Specifically, Bank staff raised concerns about the amount of time dedicated to the key task of preapproval review of applications. For each of the Bank’s three major product maturity categories, we asked whether the application process provides enough time for Bank staff to conduct thorough due diligence on potential fraud risks. For short-term products—which Bank managers said, as a category in general, have been the most susceptible to fraud recently—less than half (47 percent) said there is “always” or “usually” enough time; and about 20 percent said there is “sometimes,” “seldom,” or “never” enough time. For both medium- and long-term products, about 6 in 10 (56 percent and 61 percent, respectively) said the application process “always” or “usually” provides enough time. As noted, while Bank managers characterized our survey results as positive, these views indicate an opportunity for the Bank to further set an antifraud tone that permeates the organizational culture. Illustrative Comments from GAO’s Survey of Bank Employees “More due diligence should be required in order to qualify for the U.S. government’s support.” “The Bank is more concerned with increasing sales than preventing fraud.” Our survey also identified that while nearly half (48 percent) of respondents rated fraud as a “very significant” or “significant” risk to the Bank, there may be misunderstanding among employees on where responsibility lies for fraud risk management. We asked employees to describe the extent to which each of six offices or groups—OGC, the OIG, the Office of Risk Management, Bank senior management, all bank staff and managers collectively, or others—are responsible for overseeing fraud risk management activities at the Bank. The OIG received the highest response, with 73 percent saying it has “a great deal of responsibility.” Bank managers told us this result is to be expected, because staff associate issues of fraud with the OIG. However, these survey results suggest confusion—lack of a shared view, from the standpoint of antifraud culture—around the OIG’s role, which includes investigating suspected fraud, rather than overseeing the Bank’s fraud risk management activities. The OIG acknowledged to us that its role does not include responsibility for overseeing fraud risk management activities at the Bank. Asked about our findings overall, Bank managers told us they view our survey results as positive because the results indicate employees have a strong awareness of fraud and the risk it presents to the Bank. For example, regarding the results about the role of the OIG, they noted that staff are actively encouraged to report suspected fraud through channels—first to OGC, for subsequent referral to the OIG. Thus, employees would understand the OIG as being responsive to fraud, and Bank managers believe this likely accounts for the survey result. Nevertheless, they said, our survey results provide an opportunity for more detailed training, to better communicate with staff. In particular, the Bank managers told us such training would focus on the Bank’s approach to fraud, plus the Bank’s organizational structure for addressing fraud. The training will also clarify that the OIG has an investigative function as well as an auditing function, they said. Our employee survey results underscore the potential benefit of further fraud training. Among respondents who said they have received fraud or fraud risk-related training provided by the Bank in the last 2 years, three-quarters said it was “extremely” or “very” relevant to their job duties. Nearly two-thirds (63 percent) said it was “extremely” or “very” useful to their duties. Overall, about half (52 percent) of respondents said fraud or fraud risk-related information obtained from management, or any Bank resources, has increased their understanding of fraud “a great deal” or “a lot.” The differences we identified in perceptions of fraud risk and fraud management responsibilities do not, by themselves, implicate the performance of any particular antifraud control, or suggest that any additional control is necessary. However, to the extent views on significant antifraud issues, such as how active the Bank should be in preventing, detecting, and addressing fraud, or adequacy of time devoted to underwriting, differ across the organization, the Bank cannot ensure that it is best setting an antifraud tone that permeates the organizational culture, as provided in the Fraud Risk Framework. In particular, as the framework describes, antifraud tone and culture are important parts of effective fraud risk management. These elements can provide an imperative among peers within an organization to address fraud risks, rather than have the organization rely solely on top-down directives. The Bank has taken some steps to assess fraud risk. However, it has not conducted a fraud risk assessment, tailored to its operations, or created a fraud risk profile, both as provided in the second component of GAO’s Fraud Risk Framework. Further, under the framework, recent changes in the Bank’s operating environment indicate a heightened need to do so. We also found that although the Bank has been compiling a “risk register” intended to catalog risks it faces across the organization, this compilation does not include some known fraud risks, indicating that the Bank’s assessment is incomplete. In addition, we found that while the Bank has adopted a general position on the degree of risk it will tolerate, its current risk tolerance is not specific and measurable, as provided by federal internal control standards. Bank managers told us they will revise their fraud risk management practices to fully adopt the Fraud Risk Framework. A leading practice of the Fraud Risk Framework calls for agencies to conduct fraud risk assessments at regular intervals, as well as when there are changes to the program or operating environment, because assessing fraud risks is an iterative process. Managers should determine where fraud can occur and the types of internal and external fraud the program faces. This includes an assessment of the likelihood and impact of fraud risks inherent to the program; that is, meaning both fraud risks known through fraud that has been experienced, as well as other fraud risk that can be identified, based on the nature of the program. According to a Bank report, FY2016 Enterprise Risk Assessment, the Bank is more susceptible to fraud, due to “the nature of the Bank’s mission, the high volume of transactions it executes, and the need for various groups within the Bank to work together to successfully defend against fraud.” The Bank’s short- and medium-term products are more susceptible to fraud, according to Bank managers. Other indicators of fraud, according to the managers, include domestic geography, transactions that involve truck shipments; international geography, since conducting adequate due diligence can be more difficult in remote locations; and when there are smaller, less well-known parties on both sides of the transaction. In this environment, the Bank has taken some steps to assess known fraud risks. Generally, the Bank’s practice has been to assess particular fraud risks and lessons learned following specific instances of fraud encountered, according to Bank managers. Because it has focused on fraud already encountered, the Bank’s practice has not been of the comprehensive nature provided in the Fraud Risk Framework. As an example of its current approach, according to Bank managers, the Bank experienced “significant fraud” in the early 2000s. This was chiefly in the medium-term program, and to a lesser degree, the short-term program, the managers said. As a result, the Bank made changes that reduced the fraud significantly, they said. Otherwise, according to the CRO, fraud has been addressed within product lines, as appropriate. Under its current approach, the Bank’s risk assessments do not include areas where fraud has not already been detected, according to Bank managers. They acknowledged that approach could expose the Bank to fraud risks for activities not yet discovered. A key difference between the Bank’s current approach, as illustrated above, and leading practices as provided in the Fraud Risk Framework, can be seen in how fraud risks are assessed. As described later, the Bank has been compiling risks it faces across the organization, with fraud risk among them. These efforts have focused on soliciting views of Bank staff. By contrast, the framework envisions a more comprehensive approach. Effective fraud risk assessments identify specific tools, methods, and sources for gathering information about fraud risks, according to the framework. Among other things, this can include data on trends from monitoring and detection activities. Under the framework, programs might develop surveys that specifically address fraud risks and related control activities. It may be possible, the framework suggests, to conduct focus groups, or engage relevant stakeholders, both internal and external, in one-on-one interviews or brainstorming about types of fraud risks. Thus, we found, the Bank’s current process for assessing fraud risk has been generally reactive and episodic, rather than regularly planned and comprehensive. Rather than adopt a more proactive approach, the Bank has instead relied on the normal processing and review of transactions— which build in experience with previous fraud schemes—as the truest test for identifying fraud issues or concerns, according to Bank managers. Recent changes in the Bank’s program and operating environment also heighten the need for comprehensively assessing fraud risks, according to the Fraud Risk Framework. Such changes include the Bank’s inability to approve large transactions due to the absence of a quorum. This has meant transaction activity has shifted to smaller transactions, which carry a greater risk of fraud, according to bank managers. Additionally, Congress recently mandated that the Bank increase its focus on small businesses, whose transactions present a different risk profile than those of the Bank’s large customers, according to Bank managers. Further, the Bank’s transaction backlog could also become an issue in the future. If a Board quorum is restored, there could be pressure to process transactions quickly in order to clear the backlog, which could undermine the quality of the underwriting process, according to documentation from the Office of the CRO. According to our review, the Bank’s current antifraud controls further the goal of protecting Bank resources and providing “reasonable assurance” of repayment. However, without planning and conducting regular fraud risk assessments, as identified in GAO’s Fraud Risk Framework, the Bank is vulnerable to not identifying material risks that can hurt performance or its ability to fulfill its mission. As Bank managers acknowledged to us, the Bank faces acute reputational risk if new instances of large or otherwise significant fraud emerge. The Bank has taken some steps in an effort to identify, manage, and respond to risks, including those related to fraud. It has been developing a “risk register”—a compilation of risks across the organization. It has also recently completed an “enterprise risk assessment” through an outside consultant. However, these efforts do not reach the full extent of the relevant leading practices of the Fraud Risk Framework. Specifically, the framework call for agencies to identify inherent fraud risks of a program, examine the suitability of existing fraud controls, and then to prioritize “residual” fraud risks—that is, risks remaining after antifraud controls are adopted. For the risk register, individual business units contribute items, such as indicating types of risk and likelihood, and methods to mitigate the risk. The register, through the Bank’s Office of Risk Management, notes the risk of fraudulent deals generally, characterizing the likelihood as “somewhat likely,” but having the possibility of “major” financial, operational, legal, and reputational impacts. However, particular methods of fraud known to the Bank through experience—such as applicants submitting fraudulent documentation—are absent thus far. This indicates the register is incomplete, from the standpoint of identifying where fraud can occur and the types of internal and external fraud risks the program faces, as provided in GAO’s Fraud Risk Framework. Other inherent fraud risks, such as those posed by the Bank’s more limited understanding of transactions made when it delegates lending authority to other institutions, are also absent from its risk register. Work continues on developing the risk register, Bank managers told us. However, adoption of the risk register has been delayed, due to a reorganization of Bank management and the vacancies on the Board. Without a more comprehensive assessment of inherent fraud risks, the Bank cannot be assured of the extent to which existing controls effectively mitigate inherent risks. According to the chief risk officer, the Bank’s risk register is part of a more wide-ranging “enterprise risk management” strategy, which includes documenting a range of risks across the organization, including fraud. In March 2017, as part of this strategy, the Bank completed the enterprise risk assessment. Based on assessments by senior Bank managers, it identifies fraud risk—defined as a “significant and high-profile fraud” conducted against the Bank—as one among a range of risks facing the Bank. Consistent with Bank managers’ representations to us, the enterprise risk assessment ranks the likelihood of fraud risk as low against other risks the Bank faces—fourth out of five among “operational” risks, and 24th out of 26 total identified risks. Figure 4 depicts how the Bank evaluates these operational risks, in a schematic pairing likelihood of the event with expected impact if they were to occur. In this context, fraud risk is the least prominent risk among the top operational risks identified. In addition to operational risks, the enterprise risk assessment also details six high risks facing the Bank overall. Among them are new or unfamiliar deal structures, which may present increased repayment risk; and doing business in new and unfamiliar technologies, sectors, and industries where the Bank has limited experience. Although fraud is not explicitly identified as a risk, we note these new activities could provide an opening for those seeking to commit fraud. During our review, Bank managers maintained that the enterprise risk assessment represents a “comprehensive fraud risk assessment” undertaken by the Bank. They also, however, acknowledged that this assessment does not contain all the elements of a fraud risk assessment as described in GAO’s Fraud Risk Framework. For instance, as noted, the Bank has not conducted a comprehensive assessment of inherent fraud risks, tailored to its operations. We note that because, as described above, the Bank has not undertaken a fraud risk assessment as envisioned by the Fraud Risk Framework, its ranking of fraud risk compared to other risks may change after it has completed such an assessment. This is because a comprehensive assessment may identify new fraud risks or produce revised assessments of known fraud risks, both of which could affect relative rankings of other risks. A leading practice of the Fraud Risk Framework calls for agencies to determine fraud risk tolerance. Further, federal internal control standards state that managers should consider defining risk tolerances that are specific and measurable. In addition, under the framework, tolerance cannot be determined until the agency has identified inherent fraud risks and assessed their likelihood or impact. As part of its overall risk management activities, the Bank has adopted a general position on its fraud risk tolerance. Specifically, Bank managers told us that, by its nature, the Bank accepts more risk than the commercial sector; and some level of fraud is to be expected because it is not reasonable to eliminate all fraud in its programs. The instances of fraud encountered by the Bank in recent years have centered on small exposures, according to bank managers. Thus, the current level of fraud the Bank experiences is “defensible,” given the Bank’s mission and number of transactions it undertakes, according to the CRO. Bank managers said that fraud activity has steadily declined over the last decade, based on what they cited as fraud indicators that are reviewed by the Bank’s OGC. Bank managers also pointed to claims as another indication of declining fraud activity. Transaction participants file claims for losses covered under Bank loan guarantee and insurance products, such as if a borrower fails to make required payments. The Bank considers fraud to be a subset of transactions that result in claims, and managers cited declining claims activity over the last decade as an indirect measure of fraud activity. Table 1 shows a history of claims paid for fiscal years 2008 through 2017. Overall, Bank managers told us that in light of the decline in fraud they described, the task facing the Bank is to make sure that staff do not lose their focus on fraud and become too comfortable. We asked the Bank to provide statistics supporting the claimed long-term decline in fraud activity, based on fraud indicators. In response, managers told us the indicators are actually not “precise or numerical measures.” Instead, OGC noted the office is aware of fraud activity through “consultations and general sense of day-to-day business.” As for claims, we note that not all fraud activity may result in claims. Consequently, an analysis of claims alone may not reveal a complete or accurate view of fraud activity. In addition, although Bank statistics we reviewed show a decline in number of claims filed from fiscal year 2014 through nearly the end of fiscal year 2017, the decline is likely attributable to the lapse in the Bank’s authority in fiscal year 2015, according to a Bank report. While the Bank has adopted a general position on its fraud risk tolerance—that the current level of fraud is defensible, given the Bank’s mission—its current risk tolerances are not specific and measurable. Without more specific and measurable risk tolerances, the Bank cannot be assured of the extent to which any fraud risks exceed the Bank’s fraud risk tolerance. For example, a measurable risk tolerance could express willingness to tolerate an estimated amount of potentially fraudulent activity, given resource constraints in eliminating all fraud risks. After initially telling us that the Bank’s fraud risk management practices are working well and do not need modification, Bank managers later told us they will revise their approach. They now plan to conduct periodic fraud risk assessments and assess risks to determine a fraud risk profile, as provided in GAO’s Fraud Risk Framework, they said. Asked what prompted the changes, the CRO attributed them to our inquiries plus the Bank’s own growing experience with enterprise risk management. Bank managers also noted that since 2013, there has been an evolution in Bank antifraud controls, as part of what they refer to as a continuous improvement process. Specifically, the Bank’s new effort will include a range of new fraud management activities, according to the managers, starting with a fraud risk assessment and also including determining a fraud risk profile, on a priority-risk basis. The Bank also plans to identify residual risks and mitigating factors. In addition, according to the managers, this new work in addressing fraud risk is planned to include developing specific fraud risk tolerance or tolerances, with a metric for measuring such tolerance. As for implementation of the planned new approach, Bank managers stated they plan to complete a fraud risk assessment by December 2018 and to determine the Bank’s fraud risk profile by February 2019. However, Bank managers did not provide us with documentation describing in detail how they plan to ensure their fraud risk assessments and fraud risk profile are consistent with GAO’s Fraud Risk Framework. For example, we requested documentation of any specific plans to adopt any of the four components of GAO’s framework. Bank managers told us they plan to work with an outside consultant, and provided an outline of planned activities. However, the information did not describe how the Bank will ensure its risk assessments and profile include a full range of inherent fraud risks, including known fraud risks that are absent from its current risk register. Similarly, the managers did not provide documentation describing how the Bank’s fraud risk assessments and profile will include risk tolerances that are specific and measurable. Our employee survey results highlight the importance of the Bank’s planned new approach. In comments, some respondents noted the changing nature of fraud, underscoring the importance of taking a wider, more proactive approach to fraud, which the Fraud Risk Framework encourages. Illustrative Comments from GAO’s Survey of Bank Employees “There are tricks that financial fraudsters would use that many of our staff are unaware of.” “The biggest risk is that we cease to see fraud controls as an ever-evolving process.” “Types of fraud are constantly changing.” “To assume that thieves don’t evolve is inane, and to assume that you have the best, most evolved mechanisms for combating fraud is presumptuous.” Given the importance, under a more proactive approach, of being able to identify and react to new forms of fraud, we also asked employees how well they believe Bank senior management understands new or changing ways of attempting or committing fraud. About two-thirds (67 percent) said senior Bank management understands “very well” or “for the most part,” with the remaining respondents undecided or believing otherwise. The Bank has instituted a number of antifraud controls but has not developed an antifraud strategy based on a fraud risk profile, or implemented specific control activities to achieve such a strategy. This is because, as discussed earlier, it has not yet completed a fraud risk assessment tailored to its operations. As described in the third component of GAO’s Fraud Risk Framework, agencies should design and implement a strategy with specific control activities to address risks identified in the fraud risk assessment. We also found the Bank has opportunities to improve antifraud controls through greater fraud awareness and use of data analytics. Leading practices for fraud risk management under the third component include fraud awareness and data analytics activities, which can enhance the agency’s ability to prevent and detect fraud. The Bank currently employs a number of antifraud controls, both before and after transaction approval, which Bank managers told us include: Specific antifraud activities within individual business units, as they operate their respective programs. Review of transactions, including checking for fraud activity, following transaction approval. Later-stage review, such as examinations and recommendations by the Bank’s OIG. Preapproval antifraud efforts: Underwriting is the initial step in preventing fraud, and underwriters have a heightened awareness of fraud and irregularities, Bank managers told us. Under the Bank’s antifraud procedures, underwriters in the business units should be aware of fraud risks in their transactions and be alert to indications of fraud. Prior to approval, transactions and their participants go through several evaluations. These can assist underwriters in preventing fraud, according to Bank procedures. Figure 5 describes selected preapproval evaluations. According to the Bank, additional preapproval measures include analyzing lenders, focusing on sufficiency of due diligence or what appear to be a high level of claims; requiring collateral on most medium-term transactions; not allowing online applications to proceed unless applicants provide required information; and using a two-step approval process, in which both the underwriter and the underwriter’s supervisor must approve certain transactions. Postapproval antifraud efforts: Postapproval monitoring is generally not directed specifically at fraud, but plays a key role in fraud detection. Specifically, Bank managers told us that the Bank typically learns of fraud through the claims process—that is, after transactions are approved. Figure 6 describes postapproval monitoring. Later, third parties, such as the Bank’s OIG, review transactions and operations, the chief risk officer told us. The Bank has developed a policy and expectations for employee conduct in matters of possible fraud, imposing a duty to report any “suspicion” of fraud to OGC or the OIG. In particular, OGC is not selective about what information it passes to OIG, a manager told us—anything about Bank transactions is referred, no matter the strength of the evidence. In our employee survey, some respondents expressed concern that there is reliance on postapproval monitoring, versus greater scrutiny at the time of application. Illustrative Comments from GAO’s Survey of Bank Employees  The current division of responsibilities “is not the most effective way for the Bank to oversee fraud and fraud risk, as responsibility needs to be given to the teams on the front end—such as the individual relationship managers and loan officers—not on the back end.”  The current arrangement “seems to be more of an after-the-fact approach to potentially (if reluctantly) detecting fraud than any proactive encouragement to actively prevent fraud.” Although the Bank has instituted these pre- and postapproval antifraud controls, they may not provide the most effective protection available. According to GAO’s Fraud Risk Framework, the leading practice is for agencies to design and implement antifraud controls based on a strategy determined after performing a fraud risk assessment and creating a fraud risk profile. However, as previously discussed, the Bank has not yet completed such an assessment to determine such a profile. Consequently, the Bank cannot develop an antifraud strategy and associated controls that meet the leading practice until it has completed a fraud risk assessment and documented the results in a fraud risk profile. As noted earlier, Bank managers told us they now recognize the need to conduct assessments and develop a fraud risk profile for the Bank, and that they plan to complete this work by February 2019. They further told us that, after conducting a risk assessment and developing a fraud risk profile, they plan to design and implement antifraud controls as may be indicated by the assessment, in keeping with the framework’s third component. Until the Bank creates an antifraud strategy based explicitly on a fraud risk assessment and corresponding fraud risk profile, and has designed and implemented specific control activities to prevent and detect fraud, it is at risk of failing to address fraud vulnerabilities that could hurt its performance, undermine its reputation, or impair its ability to fulfill its mission. As provided in GAO’s Fraud Risk Framework, increasing awareness of potential fraud schemes can serve a preventive purpose, by helping to create a culture of integrity and compliance, as well as to enable staff to better detect potential fraud. The Bank currently takes some steps to share information on fraud risks across the institution, through a variety of mechanisms, but it has opportunities to further improve information sharing to build fraud awareness. Training, cited earlier, is a leading practice of the Fraud Risk Framework, by which an agency can build fraud awareness. In particular, the framework cites requiring that all employees, including managers, attend training when hired and then on an ongoing basis thereafter. As discussed earlier, the Bank now conducts some training, and Bank managers told us they see our survey results as an opportunity to provide additional training. By extending training requirements to all employees, the Bank can seek to build awareness as broadly as possible, and with that, further reinforce antifraud tone and culture. Currently, according to our assessment of information the Bank provided, it does not offer dedicated fraud training across the organization, for all employees and on an ongoing basis. Another way to build fraud awareness is information sharing. For example, a manager in the Bank’s OGC told us he monitors fraud activity and communicates relevant fraud-related information to other units in the Bank, based on considerations such as whether a situation could be repeated in other cases. However, there are limitations in information- sharing. For example, the Bank’s OGC told us it restricts how widely it shares information on parties placed on an internally generated “watch list” of parties that should be scrutinized. The Bank also cannot share information provided by OIG on parties in a confidential law enforcement database as being under investigation, managers said, because those parties may not know they are under investigation. The reasons for such caution, according to managers, include the Privacy Act of 1974 and fear of creating a “de facto debarment list” absent any formal findings of fraud. In addition, CRC division managers told us that when the division discovers fraud-related information, it communicates such information to appropriate Bank staff. Despite concerns, we found there are opportunities for greater compilation and sharing of information, and employees said in our survey that they believe wider sharing of fraud-related information would be beneficial to building fraud awareness and performing their duties. For example, one way of boosting fraud awareness would be if Bank managers comprehensively tracked referrals of suspected fraud matters to the OIG and shared case outcomes with Bank staff, Bank managers told us. However, Bank managers told us they do not currently maintain and share such information on cases of suspected fraud referred to the OIG. Relatedly, GAO’s Fraud Risk Framework notes the opportunity for an agency to collaborate with its OIG when planning or conducting training, and promoting the results of successful OIG investigations internally. Some program managers also told us maintaining a repository of known fraud cases could aid in compliance and transaction approvals, but the Bank does not maintain and share this information with staff. In addition, as Bank managers acknowledge, compiling and maintaining information collected through the Bank’s database checks on transaction participants could serve as a library of useful information. However, Bank managers told us they do not currently maintain and share such information. In our survey, we asked employees whether Bank management provides any information on outcomes of fraud cases involving the Bank or Bank staff. Nearly half of respondents (49 percent) said no. About a third (35 percent) said yes. Among a subset of employees who reported that their job duties include direct responsibility for fraud matters, the “Yes” figure was higher but still less than a majority (41 percent). Some survey respondents noted lack of information-sharing about fraud practices and case outcomes, including that staff processing transactions must rely on personal memory for fraud issues that arose in previous transactions. Illustrative Comments from GAO’s Survey of Bank Employees “In some cases, there is no way to track bad actors or suspected fraudsters unless someone working the new transaction remembers that there was an issue with the actor in a previous transaction.” “Management seems to not want to discuss any fraud with staff. Instead, they should use the opportunity to educate staff about fraud that occurs and show the consequences that result. They need to be more open.” “While the Bank has put a lot of best practices in place, more could be done to more regularly communicate to staff about changing practices in committing and detecting fraud.” “Outcomes are rarely relayed to staff.” Underscoring the value of sharing information, our survey also found that when Bank management does share fraud-related information, Bank staff tend to find it useful in carrying out their duties. For those reporting that management does share fraud information, more than half of respondents (54 percent) said they found such information was “extremely” or “very” helpful in their job duties. Similarly, for those who reported they can readily access fraud-related information on their own from internal Bank resources, nearly two-thirds (63 percent) said the information was “extremely” or “very” helpful. In response to our inquiries, Bank managers said they plan to evaluate the feasibility of maintaining and sharing case outcome and database query information. In addition, they said OGC is exploring how it might share more fraud-related information, but in a protected way. In particular, the Bank wants to be able to share information on “integrity factors,” especially at the underwriting level. One way to do this might be distribution of fraud case studies as a refresher for staff, they said. Until the Bank makes greater efforts to share information on known fraud schemes or bad actors, the Bank forgoes the opportunity, as described in the Fraud Risk Framework, to build staff awareness that could enhance antifraud efforts in these ways. For example, by not sharing the outcomes of suspected fraud matters referred to the OIG, the Bank forgoes the opportunity to build awareness through lessons learned from actual cases, which could give staff especially relevant insight into future attempts at fraud. GAO’s Fraud Risk Framework cites data analytics as a leading practice for preventing and detecting fraud; in particular, to mitigate the likelihood and impact of fraud. We found the Bank makes limited use of data analytics for antifraud purposes. For example, it conducts analyses of claims cases, according to Bank managers, and, as noted earlier, considers fraud to be a subset of transactions that result in claims. Documentation of such activity provided to us by the Bank includes analyses and statistical summaries, such as number and types of claims filed, and tallies of claim decisions (for example, approved, denied). However, the Bank does not perform data analytics, which are additional leading practices described in the Fraud Risk Framework. According to one manager, the Bank does not perform data analytics on its transaction-related data because the Bank OIG does not provide a specific transaction number (or “deal number”) necessary to link fraud cases it successfully pursues to the specific transactions from which the OIG action arises. Without that link, the Bank cannot distinguish transactions proven to be fraudulent from other, nonfraudulent transactions in its data, the Bank manager said. The link would be necessary for data-analytics purposes, the manager said. This inability to tie proven fraud cases to individual transactions, based on inability to obtain the key identifying information from the OIG, is a significant weakness in the Bank’s postapproval transaction monitoring, the manager further said. The Bank and its OIG take different views on this linking information. The Bank has asked the OIG to provide these specific transaction numbers in an effort to link proven fraud cases to its transaction data, according to one Bank manager. OIG officials, meanwhile, told us they always notify the Bank when a conviction is made, and provide as much information as possible and appropriate under the circumstances, including company name and individual name. OIG officials also noted that, even without the specific transaction number the Bank requests, the Bank should nevertheless be able to use OIG-provided case data to search its own transaction files and successfully locate corresponding transactions. In response to our inquiries, Bank managers said they are now considering a move into data analytics, including predictive analytics, to guard against fraud. However, until the Bank has a feasible and cost- effective means of linking OIG cases to specific transactions, its ability to use data-analytics for antifraud purposes will be limited. Without the ability to make use of data-analytics, the Bank forgoes the opportunity to develop a best-practices antifraud tool that could aid in identifying potential fraud retrospectively, on transactions already approved, or prospectively, in advance of approval. The fourth and final component of GAO’s Fraud Risk Framework calls for ongoing monitoring and periodic evaluations of the effectiveness of antifraud controls. This monitoring and evaluation should be from the specific perspective of antifraud controls established based on a comprehensive fraud risk assessment. Such activities can serve as an early warning system to help identify and resolve issues in fraud risk management—whether they involve current controls or prospective changes. Ongoing monitoring and periodic evaluations provide assurances to managers that they are effectively preventing, detecting, and responding to potential fraud. Further, according to the framework, effective monitoring and evaluation focuses on measuring outcomes and progress toward achieving objectives. Because the Bank has not completed a comprehensive fraud risk assessment, or designed antifraud controls based on such an assessment, it is not in a position to fulfill this final component. Even at that, however, we found the Bank does not generally evaluate the effectiveness or efficiency of its current fraud risk management practices. For example, OGC and CRC managers—who form the dedicated entity for managing fraud risks (as described earlier in component one)—both told us they are unaware of any procedure to periodically assess the effectiveness of the Bank’s fraud risk management policies. In addition, the Bank currently has no formal method for tracking fraud activity, according to a Bank manager. Thus, the Bank is not in a position to explicitly judge the effectiveness of antifraud controls. Further, as described earlier, Bank managers told us the fraud indicators they do track are not precise or numerical measures and that, instead, OGC is aware of fraud activity through a general sense of daily business. Following our inquiries, Bank managers told us they plan to revise their approach to monitoring, evaluating, and adapting their fraud risk management practices. They said they now plan to evaluate the effectiveness of those practices, following adoption of the second and third components of GAO’s Fraud Risk Framework, and with the intent to adapt controls as indicated necessary, in accordance with the framework’s fourth component. Timing will depend on implementation of the underlying fraud risk assessment, Bank managers told us. The Bank cannot be assured that its antifraud controls are optimal until it has fulfilled component four of GAO’s Fraud Risk Framework in the comprehensive fashion envisioned, following previous full implementation of components two and three. In particular, it cannot be assured that current practices are adequate, based on inherent program risks. Proactively and strategically managing fraud risks can aid the Bank’s mission of supporting American jobs by facilitating U.S. exports, by reducing not only the risk of financial loss to the government, but also the risk of serious reputational harm to the Bank. The Bank has taken some steps to address fraud that are among leading practices identified in GAO’s Fraud Risk Framework. But overall, the Bank has approached fraud risk management on a fragmented, reactive basis, and its antifraud activities have not been marshalled into the kind of comprehensive, strategic fraud risk management regime envisioned by GAO’s Fraud Risk Framework and its leading practices. Chiefly, this is because the Bank has not anchored its fraud risk management policies in a comprehensive fraud risk assessment and corresponding risk profile, tailored to its operations, and then implemented controls designed to address the specific fraud risks identified in the assessment. Some fraud risk facing the Bank is already known, such as fabricated documentation. But as the Bank acknowledges, in addition to fraud risk inherent in its complex lines of business, it also faces significant risk from new or unfamiliar deal structures it may employ, and in new and unfamiliar technologies and industries it may service, where it has limited experience. Regular, comprehensive fraud risk assessments will address not only known types of fraud, but also seek to identify where fraud can occur and the types of fraud the program faces, including likelihood and impact. Accordingly, until the Bank begins conducting thorough, systematic assessments of its fraud risks, and compiles a risk profile prioritizing such risks, it cannot be assured that it satisfactorily understands its vulnerabilities to fraud and any gaps in its capabilities for addressing them. Following on from that, without developing and implementing an antifraud strategy that builds on the findings of the comprehensive risk assessments and risk profile, the Bank cannot be assured that its antifraud control activities are optimally designed for, and targeted to, the actual fraud risks its faces—meaning that it could be failing to address significant risks or targeting the wrong ones. Finally, without establishing outcome-oriented metrics and then regularly reviewing progress toward meeting these goals, the Bank cannot be assured that its antifraud control activities are working as intended. As we concluded our review, the Bank, encouragingly, said it would adopt the more proactive approach described by GAO’s Fraud Risk Framework. Thus, the Bank now needs to follow through on its stated intent to change its practices, and accomplish the tasks, described to us by Bank managers, as intended and in a timely fashion. This is true not only for current operations, but also prospectively, for the large transaction backlog the Bank faces, which Bank managers will process if or when the Bank’s quorum issue is resolved, and which could stress Bank fraud controls. The Bank’s identification of a dedicated entity to lead fraud risk management activities can be an important step in the right direction if that move now becomes the start of a sustained commitment. By fully adopting the elements of the framework, the Bank can strengthen its antifraud culture, better understand fraud risks facing its products and programs, and reshape how it monitors and evaluates the outcomes of its fraud risk management activities. In doing so, it will be better positioned to protect taxpayers and its multi-billion-dollar portfolio, while still meeting its mission to support American jobs and exports. Even though Bank managers have already told us they plan to implement the framework, they did not provide us documentation describing in detail how they will ensure their fraud risk assessment and fraud risk profile are consistent with leading practices of the framework—such as by ensuring the risk assessment considers all inherent fraud risks and the risk profile reflects risk tolerances that are specific and measurable. Thus, we include the following framework-specific recommendations in order to comprehensively enumerate relevant issues we identified, as well as to present clear benchmarks of accountability for assessing Bank progress. This complete listing is important in light of the Bank’s recent embrace of the framework; changes in the Bank’s executive leadership and vacancies on the Bank Board; and expected congressional consideration of the Bank’s reauthorization in 2019. We are making the following seven recommendations to the Bank: The acting Bank president and Board chairman should ensure that the Bank evaluates and implements methods to further promote and sustain an antifraud tone that permeates the Bank’s organizational culture, as described in GAO’s Fraud Risk Framework. This should include consideration of requiring training on fraud risks relevant to Bank programs, for new employees and all employees on an ongoing basis, with the training to include identifying roles and responsibilities in fraud risk management activities across the Bank. (Recommendation 1) As the agency begins efforts to plan and conduct regular fraud risk assessments and to determine a fraud risk profile, the acting Bank president and Board chairman should ensure that the Bank’s risk assessments and profile address not only known methods of fraud, including those that are absent from its current risk register, but other inherent fraud risks as well. (Recommendation 2) As the agency begins efforts to plan and conduct regular fraud risk assessments and to determine a fraud risk profile, the acting Bank president and Board chairman should ensure that the risk profile includes risk tolerances that are specific and measurable. (Recommendation 3) The acting Bank president and Board chairman should ensure that the Bank develops and implements an antifraud strategy with specific control activities, based upon the results of fraud risk assessments and a corresponding fraud risk profile, as provided in GAO’s Fraud Risk Framework. (Recommendation 4) The acting Bank president and Board chairman should ensure that the Bank identifies, and then implements, the best options for sharing more fraud-related information—including details of fraud case referrals and outcomes—among Bank staff, to help build fraud awareness, as described in GAO’s Fraud Risk Framework. (Recommendation 5) The acting Bank president and Board chairman should lead efforts to collaborate with the Bank’s OIG to identify a feasible, cost-effective means to systematically track outcomes of fraud referrals from the Bank to the OIG, including creating a means to link the OIG’s proven cases of fraud to the specific Bank transactions from which the OIG actions arose. If any such means are found to be feasible and cost-effective, the acting Bank president and Board chairman should direct appropriate staff to implement them, with such information to be used for purposes consistent with GAO’s Fraud Risk Framework, such as data analytics. (Recommendation 6) The acting Bank president and Board chairman should ensure that the Bank monitors and evaluates outcomes of fraud risk management activities, using a risk-based approach and outcome-oriented metrics, and that it subsequently adapts antifraud activities or implements new ones, as determined to be appropriate and consistent with GAO’s Fraud Risk Framework. (Recommendation 7) We provided a draft of this report to the Bank for review and comment. In written comments, summarized below and reproduced in appendix III, the Bank agreed with our recommendations. The bank also provided technical comments, which we incorporated as appropriate. In its written comments, the Bank said it will take several steps to implement our recommendations to improve its fraud risk management activities. For example, the Bank stated it would continue to evaluate and implement methods to promote and sustain an antifraud tone that permeates the Bank’s organizational culture. In assessing fraud risks, the Bank stated it will include not only known risks, but also other inherent risks not yet known to have led to fraud. Following a fraud risk assessment as provided in GAO’s Fraud Risk Framework, the Bank stated that it will develop antifraud controls based on that assessment, subject to cost-benefit analysis. The Bank also stated that it will monitor and evaluate outcomes of its fraud risk management activities, and adapt existing controls or implement new controls as indicated, subject to cost- benefit analysis. The Bank further stated it will identify and implement ways to share more fraud-related information. In its written comments, the Bank also raised four concerns about our work. First, the Bank stated that it keeps substantial reserves for losses, which protect against taxpayer costs. We clarified our report to indicate that Bank officials told us they maintain reserves to protect against taxpayer costs. We did not evaluate the extent to which these reserves protect against taxpayer costs because doing so was outside the scope of our review. Second, the Bank stated our employee survey does not directly support some of the conclusions that we draw from responses received, and that only 24 percent of respondents were in the Export Finance area, which handles underwriting of Bank transactions. We note that the leading practices of the Fraud Risk Framework call for involving all levels of the agency in setting an antifraud tone that permeates the organizational culture. We also note that the Office of the Export Finance is not the only division involved in fraud control activities. For example, during our review, Bank managers told us that employees in the Credit Review and Compliance division, the Office of the General Counsel, and the Office of the Chief Financial Officer, among other offices, are also involved in fraud control activities. Thus, we believe it is appropriate that survey responses from those who work in these and other offices are included in our survey results. As noted in our report, Bank managers, in interviews, and staff, in our employee survey, generally expressed positive views of the Bank’s antifraud culture, but they hold different views on key aspects of that culture. We believe that our survey results support these findings, as well as related conclusions and recommendation (Recommendation 1), with which the Bank agreed. Third, the Bank stated that it has been very effective in preventing, detecting, and prosecuting fraud in Bank transactions. Our review evaluated the extent to which the Bank has adopted leading practices for managing fraud risks, as described in the Fraud Risk Framework. We did not evaluate the operational effectiveness of specific Bank control activities for preventing, detecting, and prosecuting fraud because doing so was beyond the scope of our review. Fourth, the Bank stated that our report and the employee survey did not clearly and consistently distinguish between fraud and fraud risk, which may lead to confusion in both the survey responses and the analysis in the report. However, we define the terms “actual fraud” and “fraud risk” in our employee survey, which appears in appendix II. Further, as described in greater detail in appendix I, we pretested and modified the survey to ensure questions were understood by respondents and that we used correct terminology. This process allowed us to determine whether survey questions and answer choices were clear and appropriate. Thus, we believe the survey results support our findings. Overall, as noted, these findings include positive views of the Bank’s antifraud culture as well as differing views on some aspects of that culture. We are sending copies of this report to the appropriate congressional committees, the acting president and Board chairman of the Bank, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines management by the Export-Import Bank of the United States (the Bank) of fraud risks in its export credit activities, by evaluating the extent to which the Bank has adopted the four components described in GAO’s A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework). Specifically, we evaluate the extent to which the Bank has established an organizational culture and structure conducive to planned regular fraud risk assessments and assessed risks to determine a fraud risk profile; designed and implemented a strategy with specific control activities to mitigate assessed fraud risks; and evaluated outcomes using a risk-based approach and adapted activities to improve fraud risk management. To examine the extent to which the Bank has adopted the components of GAO’s Fraud Risk Framework, we reviewed Bank policy and governance documentation, plus other documentation; reviewed GAO and Bank Office of the Inspector General reports on fraud and fraud risk management topics; reviewed relevant reports of the Congressional Research Service and the Congressional Budget Office; and reviewed other reports and background information. Documentation we reviewed included Bank operating procedures, details of database search procedures, Bank annual reports, reports to Congress, the Bank’s strategic plan, risk assessments, and other materials. We also interviewed a range of Bank managers, at both the senior- management level and those overseeing relevant Bank operating units. These included the Bank’s chief financial officer, its chief risk officer, its acting chief operating officer, those with specific antifraud responsibilities, and others responsible for individual business units. These individual business units included those with responsibilities for monitoring transactions following approval. We then assessed our findings on the Bank’s fraud risk management practices and its antifraud controls against provisions of the Fraud Risk Framework, which also incorporates concepts from GAO’s Standards for Internal Control in the Federal Government. To examine the extent to which the Bank has established an organizational culture and structure conducive to fraud risk management, we conducted a web-based survey of Bank employees. In our survey, we assessed, among other things, perceptions of the Bank’s organizational culture and attitudes toward fraud and fraud risk management, and whether employees viewed senior Bank management as committed to establishing and maintaining an antifraud culture. We surveyed all non- senior-management Bank employees, regardless of their position or length of employment, who are responsible for implementing, but not determining, Bank policy (that is, those below the level of senior vice president). There were 403 employees in our survey population, and we received 296 responses, thus producing a response rate of 73.5 percent. We received sufficient representation across Bank offices and divisions, and, overall, obtained a range of employee views. To develop our survey instrument, we utilized background research, leading practices as identified in GAO’s Fraud Risk Framework, interviews with Bank senior managers, and other sources. We conducted in-person pretests of survey questions with five Bank employees, varying in position, Bank office or division, and seniority, at Bank headquarters in Washington, D.C. We pretested the survey instrument to ensure the questions were understood by respondents, that we used correct terminology, and that the survey was not burdensome to complete. This process allowed us to determine whether the survey question and answer choices were clear and appropriate. We modified our survey instrument as appropriate based on pretest results and suggestions made by an independent survey specialist. The final survey instrument included closed- and open-ended questions on Bank management and tone-at- the-top; fraud-related training and information; antifraud environment; and personal experiences with fraud at the Bank. Throughout the survey instrument, we defined important terms, such as “senior management,” so respondents could interpret key concepts consistently through the survey. We administered the survey, via the World Wide Web, from July 31, 2017, through September 22, 2017. To do so, we obtained from Bank management a file of Bank employees with relevant identifying information. Before we opened the survey, the Bank president, at our suggestion, sent an email to employees notifying them of the forthcoming survey and encouraging them to respond. We also sent Bank employees a notification email describing the forthcoming survey, in advance of sending employees another email providing a unique username and password to access the web-based survey. To improve the response rate, we contacted Bank employees by phone who had not yet completed the survey (nonrespondents), to determine their eligibility, update their contact information, answer any questions or concerns about the survey, and seek their commitment to participate. We also sent multiple follow-up emails to nonrespondents encouraging them to respond, and provided instructions for taking the survey. These follow-up contacts reduced the possibility of nonresponse error. We sent our follow-up reminder emails to the survey population on August 10, 17, and 29, 2017, and September 1 and 14, 2017. Because we surveyed all non-senior-management employees, the survey did not involve sampling error. To minimize nonsampling errors, and to enhance data quality, we employed recognized survey design practices in the development of the survey instrument and in the collection, processing, and analysis of the survey data. We calculated frequencies for closed-ended responses and reviewed open-ended response for themes and illustrative examples. When we analyzed the survey data, an independent analyst checked statistical programs used to collect and process responses. We selected survey excerpts—tallies of answers to selected questions, plus individual comments received from respondents—presented in the main text of this report based on relevance to the respective subject matter. We conducted our performance audit from October 2016 to July 2018, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Results of GAO Survey of Bank Employees: “Anti-Fraud Controls at the Export-Import Bank of the United States” As described in appendix I, GAO conducted a survey of employees of the Export-Import Bank of the United States (the Bank), to obtain their views on the Bank’s organizational culture and attitudes toward fraud and fraud risk management. We surveyed 403 employees and obtained 296 responses, for a response rate of 73.5 percent. Our survey did not rely on a sample, as we distributed it to the entire employee population identified. Although originally presented through the World Wide Web, the questions and answer choices that follow are the same wording as shown to Bank employees. Results are tallied for each question. We omit, however, all individual responses to open-ended questions, in order to protect respondent anonymity. Underlined items indicate terms for which hyperlinked definitions were available in the original survey form. “Fraud” generally means obtaining something of value through willful misrepresentation; and in particular, misconduct involving Bank transactions. We mean it to include actual fraud, as found through the judicial system or an administrative process; as well as “fraud risk” – an opportunity, situation, or vulnerability that could allow for someone to engage in fraudulent activity. For this section and elsewhere, two additional definitions— “Senior management” refers to Bank managers at the senior vice president level and above. “Management in general” refers to a broader management group – first-level supervisors and above. 4. In your view, to what extent has Bank management in general established a clear anti-fraud tone for the Bank? A great deal A lot Some A little Not at all Unsure/don’t know Valid responses: 296 50.3% 29.4% 10.8% 2.7% 1.4% 5.4% 5. Based on the actions of Bank senior management in particular, how important do you think preventing, detecting, and otherwise addressing fraud is to the Bank? Extremely important Very important Not at all important Unsure/don’t know 61.5% 25.0% 7.1% 1.7% 1.0% 3.7% 6. Based on the actions of the managers of your division in particular, how important do you think preventing, detecting, and otherwise addressing fraud is to the Bank? Extremely important Very important Not at all important Unsure/don’t know 60.5% 27.9% 5.1% 1.7% 1.4% 3.4% 7. How clearly has Bank management in general communicated a standard of conduct that applies to all employees, and which includes the Bank’s expectations of behavior concerning fraud? Extremely clearly Very clearly Somewhat clearly Slightly clearly Not at all clear Unsure/don’t know Valid responses: 294 44.6% 33.3% 16.0% 1.7% 1.7% 2.7% 8. Based on your experience, for each entity below, which category best describes the level of responsibility the entity has for overseeing fraud risk management activities at the Bank? for the Bank to oversee fraud and fraud risk? Yes No Unsure/don’t know Valid responses: 295 62.4% 7.1% 30.5% 9(a). Why, or why not, is this the most effective way for the Bank to oversee fraud and fraud risk? 23. In your view, should the Bank be more, or less, active in preventing, detecting, and otherwise addressing fraud or fraud risk? Much more active Somewhat more active Remain the same Much less active Unsure/don’t know 9.8% 25.7% 43.6% 1.7% – 19.3% 23(a). Why do you feel this is the appropriate level of activity for addressing fraud or fraud risk? Excluding “Not applicable to my job or experience”— Always enough time Usually enough time Sometimes enough time Seldom enough time Never enough time Unsure/don’t know 14.9% 32.2% 14.4% 4.6% 1.1% 32.8% 31. If you have additional comments on any of the items above, or on fraud- or fraud risk-related issues at the Bank generally, please feel free to provide them below. 32. Would you be willing to speak with GAO regarding your answers to the survey, the topics raised above, or other fraud-related matters? 32(a). Please provide your name and contact information. In addition to the contact named above, Jonathon Oldmixon (Assistant Director), Marcus Corbin, Carrie Davidson, David Dornisch, Paulissa Earl, Colin Fallon, Dennis Fauber, Kimberly Gianopoulos, Gina Hoover, Farahnaaz Khakoo-Mausel, Heather Latta, Flavio Martinez, Maria McMullen, Carl Ramirez, Christopher H. Schmitt, Sabrina Streagle, and Celia Thomas made key contributions to this report.", "summary": "According to the Bank, it serves as a financier of last resort for U.S. firms seeking to sell to foreign buyers but that cannot obtain private financing for their deals. Its programs support tens of thousands of American jobs and enable billions of dollars in U.S. export sales annually, the Bank says. The Bank is also backed by the full faith and credit of the United States government, meaning that taxpayers could be responsible for Bank losses. The Export-Import Bank Reform Reauthorization Act of 2015 included a provision for GAO to review the Bank's antifraud controls within 4 years, and every 4 years thereafter. This report examines the extent to which the Bank has adopted the four components of GAO's Fraud Risk Framework—commit to combating fraud; regularly assess fraud risks; design a corresponding antifraud strategy with relevant controls; and evaluate outcomes and adapt. GAO reviewed Bank documentation; interviewed a range of Bank managers; and surveyed Bank employees about the extent to which the Bank has established an organizational culture and structure conducive to fraud risk management. In managing its vulnerability to fraud, the Export-Import Bank of the United States (the Bank) has adopted some aspects of GAO's A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework). This framework describes leading practices in four components: organizational culture, assessment of inherent program risks, design of tailored antifraud controls, and evaluation of outcomes. As provided in the framework, for example, the Bank has identified a dedicated entity within the Bank to lead fraud risk management. GAO also found that Bank managers and staff generally hold positive views of the Bank's antifraud culture. However, GAO also found that management and staff hold differing views on key aspects of that culture. These differing views include how active the Bank should be in addressing fraud. For example, Bank managers told GAO the Bank's current approach has been appropriate for dealing with fraud. However, about one-third of Bank staff responding to a GAO employee survey said the Bank should be “much more active” or “somewhat more active” in preventing, detecting, and addressing fraud. These and other divergent views indicate an opportunity to better ensure the Bank sets an antifraud tone that permeates the organizational culture, as provided in the Fraud Risk Framework. GAO found the Bank has taken some steps to assess fraud risk. For example, the Bank's practice has generally been to assess particular fraud risks and lessons learned following specific instances of fraud encountered, according to Bank managers. However, the Bank has not conducted a comprehensive fraud risk assessment, as provided in the framework. The Bank has also been compiling a “register” of risks identified across the organization, including fraud. This register, however, does not include some known methods of fraud, such as submission of fraudulent documentation, thus indicating it is incomplete. Without planning and conducting regular fraud risk assessments as called for in the framework, the Bank is vulnerable to failing to identify fraud risks that can damage its reputation or harm its ability to support U.S. jobs through greater exports. As provided in the framework, managers should determine where fraud can occur and the types of internal and external fraud the program faces, including an assessment of the likelihood and impact of fraud risks inherent to the program. At the conclusion of GAO's review, Bank managers said they will fully adopt the GAO framework. They said they plan to complete a fraud risk assessment by December 2018, and to determine the Bank's fraud risk profile—that is, document key findings and conclusions from the assessment—by February 2019. Work to adopt other framework components will begin afterward, the managers said. However, they did not provide details of how their efforts will be in accord with leading practices of the framework. As a result, GAO makes framework-specific recommendations in order to enumerate relevant issues and to present clear benchmarks for assessing Bank progress. This complete listing of recommendations is important in light of the Bank's recent embrace of the framework; recent changes in Bank leadership; and expected congressional consideration of the Bank's reauthorization in 2019. GAO makes seven recommendations, centering on conducting a fraud risk assessment, tailored to the Bank's operations, to serve as the basis for the design and evaluation of appropriate antifraud controls. The Bank agreed with GAO's recommendations, saying it will take steps to improve its fraud risk management activities.", "document_type": "gao"}
{"report": "Over the last 3 decades employers have shifted away from sponsoring defined benefit (DB) plans and toward DC plans. This shift also transfers certain types of risk—such as investment risk—from employers to employee participants. DB plans generally offer a fixed level of monthly annuitized retirement income based upon a formula specified in the plan, which usually takes into account factors such as a participant’s salary, years of service, and age at retirement, regardless of how the plan’s investments perform. In contrast, benefit levels in DC plans—such as 401(k) plans—depend on the contributions made to the plan and the performance of the investments in individual accounts, which may fluctuate in value. As we have previously reported, some experts have suggested that the portability of DC plans make them better-suited for a mobile workforce, and that such portability may lead to early withdrawals of retirement savings. DOL reported there were 656,241 DC and 46,300 DB plans in the United States in 2016. Tax incentives are in place to encourage employers to sponsor retirement plans and employees to participate in plans. Under the Employee Retirement Income Security Act of 1974 (ERISA), employers may sponsor DC retirement plans, including 401(k) plans—the predominant type of DC plan, in which benefits are based on contributions to and the performance of the investments in participants’ individual accounts. To save in 401(k) plans, participants contribute a portion of their income into an investment account, and in traditional 401(k) plans taxes are deferred on these contributions and associated earnings, which can be withdrawn without penalty after age 59½ (if permitted by plan terms). As plan sponsors, employers may decide the amount of employer contributions (if any) and how long participants must work before having a non-forfeitable (i.e., vested) interest in their plan benefit, within limits established by federal law. Plan sponsors often contract with service providers to administer their plans and provide services such as record keeping (e.g., tracking and reporting individual account contributions); investment management (i.e., selecting and managing the securities included in a mutual fund); and custodial or trustee services for plan assets (e.g., holding the plan assets in a bank). Individuals also receive tax incentives to save for retirement outside of an employer-sponsored plan. For example, traditional IRAs provide certain individuals with a way to save pre-tax money for retirement, with withdrawals made in retirement taxed as income. In addition, Roth IRAs allow certain individuals to save after-tax money for retirement with withdrawals in retirement generally tax-free. IRAs were established under ERISA, in part, to (1) provide a way for individuals not covered by a pension plan to save for retirement; and (2) give retiring workers or individuals changing jobs a way to preserve assets from 401(k) plans by transferring their plan balances into IRAs. The Investment Company Institute (ICI) reported that 34.8 percent of households in the United States owned an IRA in 2017, a percentage that has generally remained stable since 2000. In 2017, IRA assets accounted for almost 33 percent (estimated at $9.2 trillion) of total U.S. retirement assets, followed by DC plans, which accounted for 27 percent ($7.7 trillion). Further, according to ICI, over 94 percent of funds flowing into traditional IRAs from 2000 to 2015 came from rollovers—primarily from 401(k) plans. IRS, within the Department of the Treasury, is responsible for enforcing IRA tax laws, while IRS and DOL share responsibility for overseeing prohibited transactions relating to IRAs. IRS also works with DOL’s Employee Benefits Security Administration (EBSA) to enforce laws governing 401(k) plans. IRS is primarily responsible for interpreting and enforcing provisions of the Internal Revenue Code (IRC) that apply to tax- preferred retirement savings. EBSA enforces ERISA’s reporting and disclosure and fiduciary responsibility provisions, which, among other things, include requirements related to the type and extent of information that a plan sponsor must provide to plan participants. Employers sponsoring employee benefit plans subject to ERISA, such as a 401(k) plans, generally must file detailed information about their plan each year. The Form 5500 serves as the primary source of information collected by the federal government regarding the operation, funding, expenses, and investments of employee benefit plans. The Form 5500 includes information about the financial condition and operation of their plans, among other things. EBSA uses the Form 5500 to monitor and enforce plan administrators and other fiduciaries, and service providers’ responsibilities under Title I of ERISA. IRS uses the form to enforce standards that relate to, among other things, how employees become eligible to participate in benefit plans, and how they become eligible to earn rights to benefits. In certain instances, sponsors of 401(k) plans may allow participants to access their tax-preferred retirement savings prior to retirement. Plan sponsors have flexibility under federal law and regulations to choose whether to allow plan participants access to their retirement savings prior to retirement and what forms of access to allow. Typically, plans allow participants to access their savings in one or more of the following forms: Loans: Plans may allow participants to take loans and limit the number of loans allowed. If the plan provides for loans, the maximum amount that the plan can permit as a loan generally cannot exceed the lesser of (1) the greater of 50 percent of the vested account balance, or $10,000 or (2) $50,000 less the excess of the highest outstanding balance of loans during the 1-year period ending on the day before the day on which a new loan is made over the outstanding balance of loans on the day the new loan is made. Plan loans are generally not treated as early withdrawals unless they are not repaid within the terms specified under the plan. Hardship withdrawals: Plans may allow participants facing a hardship to take a withdrawal on account of an immediate and heavy financial need, and if the withdrawal is necessary to satisfy the financial need. Though plan sponsors can decide whether to offer hardship withdrawals and approve applications for hardship withdrawals, IRS regulations provide “safe harbor” criteria regarding circumstances when a withdrawal is deemed to be on account of an immediate heavy financial need. IRS regulations allow certain expenses to qualify under the safe harbor including: (1) certain medical expenses; (2) costs directly relating to the purchase of a principal residence; (3) tuition and related educational fees and expenses for the participant, and their spouse, children, dependents or beneficiary; (4) payments necessary to prevent eviction from, or foreclosure on, a principal residence; (5) certain burial or funeral expenses; and (6) certain expenses for the repair of damage to the employee’s principal residence. Plans that provide for hardship withdrawals generally specify what information participants must provide to the plan sponsor to demonstrate a hardship meets the definition of an immediate and heavy financial need. Early withdrawals of retirement savings may have short-term and long- term impacts on participants’ ability to accumulate retirement savings. In the short term, IRA owners and participants in 401(k) plans who received a withdrawal before reaching age 59½ generally pay an additional 10 percent tax for early distributions in addition to income taxes on the taxable portion of the distribution amount. The IRC exempts certain distributions from the additional tax, but the exceptions vary among 401(k) plans and IRAs. Early withdrawals of any type can result in the permanent removal of assets from retirement accounts thereby reducing the amounts participants can accumulate before retirement, including the loss of compounded interest or other earnings on the amounts over the participant’s career. According to DOL’s Bureau of Labor Statistics (BLS), U.S. workers are likely to have multiple jobs in their careers as average employee tenure has decreased. In 2017, BLS reported that from 1978 to 2014, workers held an average of 12 jobs between the ages of 18 and 50. BLS also reported in 2016 that the median job tenure for a worker was just over 4 years. Employees who separate from a job bear responsibility for deciding what to do with their accumulated assets in their former employer’s plan. Recent research estimated that 10 million people with a retirement plan change jobs each year, many of whom faced a decision on how to treat their account balance at job separation. Plan administrators must provide a tax notice detailing participants’ options for handling the balance of their accounts. When plan participants separate from their employers, they generally have one of three options: 1. They may leave the balance in the plan, 2. They may ask their employer to roll the money directly into a new qualified employer plan or IRA (known as a direct rollover), or 3. They may request a distribution. Once the participant receives the distribution he or she can (1) within 60 days, roll the distribution into a new qualified employer plan or IRA (in which case the money would remain tax-preferred); or (2) keep the distributed amount, and pay any income taxes or additional taxes associated with the distribution (known as a cashout). Sponsors of 401(k) plans may cash out or transfer separating participant accounts if an account balance falls below a certain threshold. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) amended the IRC to provide certain protections for separating participants with account balances between $1,000 and $5,000 by requiring, in the absence of participant direction, plan sponsors to either keep the account in the plan or to transfer the account balance to an IRA to preserve its tax-preferred status. Plan sponsors may not distribute accounts with balances of more than $5,000 without participant direction, but have discretion to distribute account balances of $1,000 or less. The IRC imposes an additional 10 percent tax (in addition to ordinary income tax) on certain early withdrawals from qualified retirement plans, which includes IRAs and 401(k) plans in an effort to discourage the use of plan funds for purposes other than retirement and ensure the favorable tax treatment for plan funds is used to provide retirement income. Employers are required to withhold 20 percent of the amount cashed out to cover anticipated income taxes unless the participant pursues a direct rollover into another qualified plan or IRA. Research has found that many employees are concerned about their level of savings and ability to manage their retirement accounts, and some employers provide educational services to improve employees’ financial wellness and financial literacy and encourage them to save for retirement. A 2017 survey on employee financial wellness in the workplace found more than one-half of workers experienced financial stress and that insufficient emergency savings was a top concern for employees. Research has also found that limited financial literacy is widespread among Americans over age 50, and those who lack financial knowledge are less likely to successfully plan for retirement. In 2018, the Federal Reserve reported that three-fifths of non-retirees with participant-directed retirement accounts had little to no comfort managing their own investments. As we have previously reported, some employers have developed comprehensive programs aimed at overall improvement in employees’ financial health. These programs, often called financial wellness programs, may help employees with budgeting, emergency savings, and credit management, in addition to the traditional information and assistance provided for retirement and health benefits. In 2013, individuals ages 25 to 55 withdrew at least $68.7 billion early from their retirement accounts. Of this amount, IRA owners in this age group withdrew the largest share (about 57 percent) and 401(k) plan participants in this age group withdrew the rest (about 43 percent) However, a total amount withdrawn from 401(k) plans cannot be determined due to data limitations. IRA withdrawals were the largest source of early withdrawals of retirement savings, accounting for an estimated $39.5 billion of the total $68.7 billion in early withdrawals made by individuals ages 25 to 55 in 2013. According to IRS estimates, 12 percent of IRA owners in this age group withdrew money early that year from their IRAs in 2013. The amount they withdrew early comprised a small percentage of their total IRA assets. Specifically, in 2013, the amount of early withdrawals was equivalent to 3 percent of the cohort’s total IRA assets and, according to IRS estimates, the total amount withdrawn by this cohort exceeded their total contributions to IRAs in that year. At least $29.2 billion left 401(k) plans in 2013 in the form of hardship withdrawals, cashouts at job separation, and unrepaid plan loans, according to our analysis of 2013 SIPP data and data from DOL’s Form 5500. Specifically, we found that: Hardship withdrawals were the largest source of early withdrawals from 401(k) plans with an estimated 4 percent (+/- 0.25) of plan participants ages 25 to 55 withdrawing an aggregate $18.5 billion in 2013. The amount of hardship withdrawals was equivalent to 0.5 percent (+/- 0.06) of the cohort’s total plan assets and 8 percent (+/- 0.9) of the cohort’s plan contributions made in 2013. Cashouts of account balances of $1,000 or more at job separation were the second largest source of early withdrawals from 401(k) plans. In 2013, an estimated 1.1 percent (+/- 0.11) of plan participants ages 25 to 55 withdrew an aggregate $9.8 billion from their plans that they did not roll into another qualified plan or IRA. Additionally, 86 percent (+/- 2.9) of these participants taking a cashout of $1,000 or more did not roll over the amount in 2013. The amounts cashed out and not rolled over were equivalent to 0.3 percent (+/- 0.05) of the cohort’s total plan assets and 4 percent (+/- 0.75) of the cohort’s total contributions made in 2013. Loan defaults accounted for at least $800 million withdrawn from 401(k) plans in 2013; however, the amount of distributions of unpaid plan loans is likely larger as DOL data cannot be used to quantify plan loan offsets that are deducted from participants’ account balances after they leave a plan. As a result, the amount of loan offsets among terminating participants ages 25 to 55 cannot be determined with certainty. Specifically, DOL’s Form 5500 instructions require plan sponsors to report unpaid loan balances in two separate places on the Form 5500, depending on whether the loan holder is an active or a terminated participant. For active participants, plan sponsors report loan defaults as a single line item on the Form 5500 (i.e., the $800 million in 2013 listed above). For terminated participants, plan sponsors report unrepaid plan loan balances as benefits paid directly to participants—a category that also includes rollovers to employer plans and IRAs. According to a DOL official, as a result of this commingling of benefits on this line item, isolating the amount of loan offsets for terminated participants using the Form 5500 data is not possible. Without better data of the amount of unrepaid plan loans, the amount of loan offsets and the characteristics of plan participants who did not repay their plan loans at job separation cannot be determined. IRA owners and plan participants taking early withdrawals paid $6.2 billion as a result of the additional 10 percent tax for early distributions in 2013, according to IRS estimates. Although the taxes are generally treated separately from the amounts withdrawn, IRA owners and plan participants are expected to pay any applicable taxes resulting from the additional 10 percent tax when filing their income taxes for the tax year in which the withdrawal occurred. Individuals with certain demographic and economic characteristics that we analyzed had higher incidence of early withdrawals of retirement savings, according to our analysis of SIPP data. The characteristics described below reflect statistically significant differences between comparison groups (a full listing of all demographic groups can be found in appendix III). Age. The incidence of IRA withdrawals was higher among individuals ages 45 to 54 (8 percent) than individuals ages 25 to 34 and 35 to 44. Education. Individuals with a high school education or less had higher incidence of cashouts (97 percent) and hardship withdrawals (7 percent) than individuals with some college or some graduate school education. Family size. Individuals in families of seven or more (8 percent) or in families of five to six (7 percent) had higher incidence of hardship withdrawals than individuals in smaller family groups we analyzed. Individuals living alone had higher incidence of IRA withdrawals than individuals living in the larger family groups. Marital status. Widowed, divorced, or separated individuals had higher incidence of IRA withdrawals (11 percent) and hardship withdrawals (7 percent) than married or never married individuals. Race. The incidence of hardship withdrawals among African American (10 percent) and Hispanic individuals (6 percent) was higher than among individuals who were White, Asian, or Other. Residence. The incidence of IRA withdrawals and hardship withdrawals was higher among individuals living in nonmetropolitan areas (7 percent and 6 percent, respectively) than among individuals living in metropolitan areas. Similarly, individuals with certain economic characteristics that we analyzed had higher incidence of early withdrawals of retirement savings, according to our analysis of SIPP data. The characteristics described below reflect statistically significant differences between comparison groups (a full listing of all demographic groups can be found in appendix III). Employer size. Individuals working for employers with fewer than 25 employees had higher incidence of IRA withdrawals (9 percent) than individuals working for employers with higher number of employees. Employment. Individuals working fewer than 35 hours per week had higher incidence of IRA withdrawals (7 percent) than employees working 35 hours or more. Household debt. Individuals with household debt of $5,000 up to $20,000 had higher incidence of IRA withdrawals (14 percent) than individuals with other debt amounts. Household income. Individuals with household income of less than $25,000 or $25,000 up to $50,000 had higher incidence of IRA withdrawals (12 percent and 9 percent, respectively) and hardship withdrawals (9 percent and 7 percent, respectively) than individuals with higher income amounts. Personal cash reserves. Individuals with personal cash reserves of less than $1,000 had higher incidence of IRA withdrawals (10 percent) and hardship withdrawals (6 percent) than individuals with larger reserves. Retirement assets. Individuals with combined IRA and 401(k) plan assets valued at less than $5,000 had higher incidence of hardship withdrawals (7 percent) than individuals with higher valued assets. Tenure in retirement plan. Individuals with fewer than 3 years in their retirement plan had higher incidence of hardship withdrawals (6 percent) than individuals with longer tenures. Stakeholders we interviewed said that plan rules related to the disposition of account balances at job separation can lead participants to remove more than they need, up to and including their entire balance. We previously reported U.S. workers are likely to change jobs multiple times in a career. Plan sponsors may cash out balances of $1,000 or less at job separation, although they are not required to do so. As a result, plan participants with such balances, including younger employees and others with short job tenures, risk having their account balances distributed in full each time they change jobs. As shown in table 1, a separating employee must take multiple steps to ensure that an account balance remains tax-preferred. Participants who take a distribution from a plan with the intent of rolling it into another qualified plan or IRA must acquire additional funds to complete the rollover and avoid adverse tax consequences. Plan sponsors are required to withhold 20 percent of the account balance to pay anticipated taxes on the distribution. As a result, the sponsor then sends 80 percent of the account balance to the participant, who must acquire outside funds to compensate for the 20 percent withheld or forgo the preferential tax treatment of that portion of their account balance. For example, a participant seeking to roll over a retirement account with a $10,000 balance would receive an $8,000 distribution after tax withholding, requiring them to locate an additional $2,000 to complete the rollover within the 60-day period to avoid a taxable distribution of the withheld amount. If participants can replace the 20 percent withheld and complete the rollover within the 60-day period, they do not owe taxes on the distribution. Stakeholders said that the complexity of rolling a 401(k) account balance from one employer to another may encourage participants to take the relatively simpler route of rolling their balance into an IRA or cashing out altogether. They noted that separating participants had many questions when evaluating their options and had difficulty understanding the notice provided. For example, participants may not fully understand how the decisions made at job separation can have a significant impact on their current tax situation and eventual retirement security. One plan sponsor, describing concerns about giving investment advice, said she watched participants make what she judged to be poor choices with their account balances and felt helpless to intervene. Stakeholders also noted that the lack of a standardized rollover process sometimes bred mistrust among employers and complicated separating participants’ ability to successfully facilitate a rollover between plans. For example, one stakeholder told us that some plans were hesitant to accept funds from other employer plans fearing that the funds might come from plans that have failed to comply with plan qualification requirements and could create problems for the receiving plan later on. Another stakeholder suggested that the requirement for plan sponsors to provide a notice to separating participants likely caused more participants to take the distribution. Stakeholders described loans as a useful source of funds in times of need and a way to avoid more expensive options, such as high-interest credit cards. They also noted that certain plan loan policies could lead to early withdrawals of retirement savings. (See fig. 1.) Loan repayment at job separation: Stakeholders said loan repayment policies can increase the incidence of defaults on outstanding loans. When participants do not repay their loan after separating from a job, the outstanding balance is treated as a distribution, which may subject it to income tax liability and, possibly, an additional 10 percent tax for early distributions. According to stakeholders, the process of changing jobs can inadvertently lead to a distribution of a participant’s outstanding loan balance, when the participant could have otherwise repaid the loan. Extended loan repayment periods: Some plan sponsors allow participants to take loans to purchase a home. Stakeholders told us that the amounts of these home loans tended to be larger than general purpose loans and had longer repayment periods that these extended from 15 to 30 years. A stakeholder further noted that these loans could make it more likely that participants would have larger balances to repay if they lost or changed jobs. Multiple loans: While some plan sponsors noted that their plans limited the number of loans participants can take from their retirement plan, others do not. Some plan sponsors limited participants to between one and three simultaneous loans, and one plan administrator indicated that 92 percent of their plan-sponsor clients allowed no more than two simultaneous loans. Other plan sponsors placed no limit on the number of participant loans or limited loans to one or two per calendar year, in which case a participant could take out a new loan at the start of a calendar year regardless of whether or not outstanding loans had been repaid. Stakeholders described some participants as “serial” borrowers, who take out multiple loans and have less disposable income as a result of ongoing loan payments. One plan administrator stated that repeat borrowing from 401(k) plans was common, and some participants took out new loans to pay off old loans. Other loan restrictions: Allowing no loans or one total outstanding loan can cause participants facing economic shocks to take a hardship withdrawal, resulting in the permanent removal of their savings and subjecting them to income tax liability and, possibly, an additional 10 percent tax for early distributions and a suspension on contributions. Minimum loan amounts: Minimum loan amounts may result in participants borrowing more than they need to cover planned expenses. For example, a participant may have a $500 expense for which they seek a loan, but may have to borrow $1,000 due to plan loan minimums. Stakeholders said that plan participants take plan loans and hardship withdrawals for pressing financial needs. Many plan sponsors we interviewed said they used the IRS safe harbor exclusively as criteria when reviewing a participant’s application for a hardship withdrawal. Stakeholders said the top two reasons participants took hardship withdrawals were to prevent imminent eviction or foreclosure and to cover out-of-pocket medical costs not covered by health insurance. Participants generally took loans to reduce debt, for emergencies, or to purchase a primary residence. Stakeholders also said that participants who experienced economic shocks stemming from job loss made early withdrawals. They said retirement plans often served as a form of insurance for those between jobs or facing a sudden economic shock and participants accessed their retirement accounts because, for many, they were the only source of savings. They cited personal debt, health care costs, and education as significant factors that affected employees across all income levels. Stakeholders said some participants also used their retirement savings to pay for anticipated expenses. Two plan administrators said education expenses were one of the reasons participants took hardship withdrawals. They said that participants accessed their retirement savings to address the cost of higher education, including paying off their own student loan debt or financing the college costs for family members. For example, plan administrators told us that some participants saved with the expectation of taking a hardship withdrawal to pay for college tuition. Other participants utilized hardship withdrawals to purchase a primary residence. IRA owners generally may take withdrawals at any time and IRS does not analyze the limited information it receives on the reasons for IRA withdrawals. IRA owners can withdraw any amount up to their entire account balance at any time. In addition, IRAs have certain exceptions from the additional 10 percent tax for early distributions. For example, IRA withdrawals taken for qualified higher education expenses, certain health insurance premiums, and qualified “first-time” home purchases (up to $10,000) are excepted from the additional 10 percent tax. IRA owners who make an IRA distribution receive a Form1099-R or similar statement from their provider. On the Form 1099-R, IRA providers generally identify whether the withdrawal, among other things, can be categorized as a normal distribution, an early distribution, or a direct distribution to a qualified plan or IRA. For an early distribution, the IRA provider may identify whether a known exception to the additional 10 percent tax applies. For their part, IRA owners are required to report early withdrawals on their income tax returns, as well as the reason for any exception from the additional 10 percent tax for a limited number of items. In written responses to questions, an IRS official indicated that IRS collected data on the exemption reason codes, but did not use them. Some plan sponsors we interviewed had policies in place that may reduce the long-term impact of early withdrawals of retirement savings taken at job separation. Policies suggested by plan sponsors included: Providing a periodic installment distribution option: Although some plan sponsors may require participants wanting a distribution to take their full account balance at job separation, other plan sponsors provided participants with an option of receiving their account balance in periodic installments. For example, one plan sponsor gives separating participants an option to receive periodic installment distributions at intervals determined by the participants. This plan sponsor said separating participants could select distributions on a monthly, quarterly, semi-annual or annual basis. These participants could also elect to stop distributions at any time, preserving the remaining balance in the employer’s plan. The plan sponsor said the plan adopted this option to help separating participants address any current financial needs, while preserving some of the account balance for retirement. Another plan sponsor adopted a similar policy to address the cyclical nature of the employer’s business, which can result in participants being terminated and rehired within one year. Offering partial distributions: One plan sponsor provided separated participants with the option of receiving a one-time, partial distribution. If a participant opted for partial distribution, the plan sponsor issued the distribution for the requested sum and preserved the remainder of the account balance in the plan. The plan sponsor adopted the partial distribution policy to provide separating participants with choices for preserving account balances, while simultaneously providing access to address any immediate financial needs. Providing plan loan repayment options for separated participants: Some plan sponsors allowed former participants to continue making loan repayments after job separation. Loan repayments after job separation reduce the loan default risk and associated tax implications for participants. Some plan sponsors said that separating participants who have the option to continue repaying an outstanding loan balance generally have three options: (1) to continue repaying the outstanding loan, (2) to repay the entire balance of the loan at separation within a set repayment period, or (3) not to repay the loan. Those participants who continue repaying their loans after separation generally have the option to set up automatic debit payments to facilitate the repayment. Those separated participants who do not set up loan repayment terms within established timeframes, or do not make a payment after the loan repayment plan has been established, default on their loan and face the associated tax consequences, including, possibly, an additional 10 percent tax for early distributions. Some plan sponsors we spoke with placed certain limits on participant loan activity, which may reduce the incidence of loan defaults (see fig. 2). Limiting loan amounts to participant contributions: Some plan sponsors said they limited plan loans to participant contributions and any investment earnings from those contributions to reduce early withdrawals of retirement savings. For example, one plan sponsor’s policy limited the amount a participant could borrow from their plan to 50 percent of participant contributions and earnings, compared to 50 percent of the total account balance. Implementing a waiting period after loan repayment before a participant can access a new loan: Some plan sponsors said they had implemented a waiting period between plan loans, in which a participant, having fully paid off the previous loan, was temporarily ineligible to apply for another. Among plan sponsors who implemented a waiting period, the length varied from 21 days to 30 days. Reducing the number of outstanding loans: Some plan sponsors we spoke with limited the number of outstanding plan loans to either one or two loans. One plan sponsor had previously allowed one new loan each calendar year, but subsequently revised plan policy to allow participants to have a total of two outstanding loans. The plan sponsor said the rationale was to balance limiting participant loan behavior with the ability of participants to access their account balance. Some plan sponsors said they had expanded the definition of immediate and heavy financial need beyond the IRS safe harbor to better align with the economic needs of their participants. For example, one plan sponsor approved a hardship withdrawal to help a participant pay expenses related to a divorce settlement. Another plan sponsor developed an expanded list of qualifying hardships, including past-due car, mortgage, or rent payments; and payday loan obligations. Some plan sponsors implemented loan programs outside their plan, contracting with third-party vendors to provide short-term loans to employees. For example, one plan sponsor instituted a loan program that allowed employees to borrow up to $5,000 from a third-party vendor that would be repaid through payroll deduction. This plan sponsor said the loan program featured an 8 to 12 percent interest rate, and approval was not based on a participant’s credit history. The plan sponsor also observed that they had fewer 401(k) loan applications since the third- party loan program was implemented. A second plan sponsor instituted a similar loan program that allowed employees to borrow up to $500 interest free from a third-party vendor. According to this sponsor, to qualify for a loan, an employee must demonstrate financial hardship and have no outstanding plan loans, and is required to attend a financial counseling course if their loans are approved. Some plan sponsors said they have provided workplace-based financial wellness resources for their participants to improve their financial literacy. Some implemented optional financial wellness programs that covered topics such as investment education, how plan loans work, and the importance of saving for emergencies. These plan sponsors told us they offered on-site financial counseling with representatives of the plan administrator to help provide guidance on financial decision-making; however, other plan sponsors said that—despite their investment in participant-specific financial education—participation in these programs was low. Stakeholders suggested strategies that they believed could help mitigate the long-term effects of early withdrawals of retirement savings on IRA owners and plan participants. They noted that any of these proposed strategies, if implemented, could (1) increase the costs of administering IRAs and plans, (2) require changes to federal law or regulations, and (3) involve tradeoffs between providing access to retirement savings and preserving savings for retirement. Stakeholders suggested several strategies that, if implemented, could help reduce early withdrawals from IRAs. These strategies centered on modifying existing rules to reduce early withdrawals from IRAs (and subsequently the amount paid as a result of the additional 10 percent tax for early distributions). Specifically, stakeholders suggested: Raising the age at which the additional 10 percent tax applies: Some stakeholders noted that raising the age at which the additional 10 percent tax for early distributions applies from 59½ to 62 would align it with the earliest age of eligibility to claim Social Security and may encourage individuals to consider a more comprehensive retirement distribution strategy. However, other stakeholders cautioned that it could have drawbacks for employees in certain situations. For example, individuals who lose a job late in their careers could face additional tax consequences for accessing an IRA before reaching the age 62. In addition, one stakeholder said some individuals may shift to a part-time work schedule later in their careers as they transition to retirement and plan on taking IRA withdrawals to compensate for their lower wages. Allowing individuals to roll existing plan loans into an IRA: Some stakeholders said that allowing individuals to include an existing plan loan as part of a rollover into an IRA, although currently not allowed, would likely reduce plan loan defaults by giving individuals a way to continue repaying the loan balance. One stakeholder suggested that rolling an existing plan loan into an IRA could be administratively challenging for IRA providers, but doing so to repay the loan may ultimately preserve retirement savings. Allowing IRA loans: While currently a prohibited transaction that could lead to the cessation of an IRA, some stakeholders suggested that IRA loans could theoretically reduce the amounts being permanently removed from the retirement system through early IRA withdrawals. One stakeholder said an IRA loan would present a good alternative to an early withdrawal from an IRA account because it would give the account holder access to the balance, defer any tax implications, and improve the likelihood the loaned amount would ultimately be repaid. However, another stakeholder said that allowing IRA loans could increase early withdrawals, given the limited oversight of IRAs, as well as additional administrative costs and challenges for IRA providers. Stakeholders suggested several strategies that, if implemented, could reduce the effect of cashouts at job separation from 401(k) plans. Simplifying the rollover process: Stakeholders proposed two modifications to the current rollover process that they believe could make the process more seamless and reduce the incidence of cashouts. First, stakeholders suggested that a third-party entity tasked with facilitating rollovers between employer plans for a separating participant would likely reduce the incidence of cashouts at job separation. Such an entity could automatically route a participant’s account balance from the former plan to a new one. One stakeholder said having a third-party entity facilitate the rollover would eliminate the need for a plan participant to negotiate the process. Such a service, however, would likely come at cost that may likely be passed onto participants. Stakeholders also suggested direct rollovers of account balances between plans could further reduce the incidence of cashouts. One stakeholder, however, cautioned that direct rollovers could have downsides for some participants. For example, participants who prefer to keep their balance in their former employer’s plan but provide no direction to the plan sponsor may inadvertently find their account balance rolled into a new employer’s plan. Restricting cashouts to participant contributions only: Some stakeholders suggested limiting the assets a participant may access at job separation. For example, some stakeholders said that participants should not be allowed to cash out vested plan sponsor contributions, thus preserving those contributions and their earnings for retirement. However, this strategy could result in participants overseeing and monitoring several retirement accounts. Stakeholders suggested several strategies that, if implemented, could limit the adverse effect of hardship withdrawals on retirement savings. Narrowing the IRS safe harbor: Although some plan sponsors are expanding the reasons for a hardship to align with perceived employee needs, some stakeholders said narrowing the IRS safe harbor would likely reduce the incidence of early withdrawals. For example, some stakeholders suggested narrowing the definition of a hardship to exclude the purchase of a primary residence or for postsecondary education costs. In addition, one stakeholder said alternatives exist to finance home purchases (mortgages) and postsecondary education (student loans). Stakeholders noted that eliminating the purchase of a primary residence and postsecondary education costs from the IRS safe harbor would make hardship withdrawals a tool more strictly used to avoid sudden and unforeseen economic shocks. In combination with the two exclusions, one stakeholder suggested consideration be given to either reducing or eliminating the additional 10 percent tax for early distributions that may apply to hardship withdrawals. Replacing hardship withdrawals with hardship loans: Stakeholders said replacing a hardship withdrawal, which permanently removes money from the retirement system, with a no-interest hardship loan, which would be repaid to the account, would reduce early withdrawals. Under this suggestion, if the loan were not repaid within this predetermined time frame, the remaining loan balance could be considered a deemed distribution and treated as income (similar to the way a hardship withdrawal is treated now). Incorporating emergency savings features into 401(k) plans: Stakeholders said incorporating an emergency savings account into the 401(k) plan structure may help participants absorb economic shocks and better prepare for both short-term financial needs and long-term retirement planning. (See fig. 3.) In addition, stakeholders said participants with emergency savings accounts could be better prepared to avoid high interest rate credit options, such as credit cards or payday loans, in the event of an economic shock. Stakeholders had several ideas for implementing emergency savings accounts. For example, one stakeholder suggested that, were it allowed, plan sponsors could revise automatic account features to include automatic contributions to an emergency savings account. Some stakeholders also said emergency savings accounts could be funded with after-tax participant contributions to eliminate the tax implications when withdrawing money from the account. However, another stakeholder said emergency savings contributions could reduce contributions to a 401(k) plan. In the United States, the amount of aggregate savings in retirement accounts continues to grow, with nearly $17 trillion invested in 401(k) plans and IRAs. Early access to retirement savings in these plans may incentivize plan participation, increase participant contributions, and provide participants with a way to address their financial needs. However, billions of dollars continue to leave the retirement system early. Although these withdrawals represent a small percentage of overall assets in these accounts, they can erode or even deplete an individual’s retirement savings, especially if the retirement account represents their sole source of savings. Employers have implemented plan policies that seek to balance the short- term benefits of providing participants early access to their accounts with the long-term need to build retirement savings. However, the way plan sponsors treat outstanding loans after a participant separates from employment has the potential to adversely affect retirement savings. In the event of unexpected job loss or separation, plan loans can leave participants liable for additional taxes. Currently, the incidence and amount of loan offsets in 401(k) plans cannot be determined due to the way DOL collects data from plan sponsors. Additional information on loan offsets would provide insight into how plan loan features might affect long-term retirement savings. Without clear data on the incidence of these loan offsets, which plan sponsors are generally required to include, (but not itemize) on the Form 5500, the overall extent of unrepaid plan loans in 401(k) plans cannot be known. To better identify the incidence and amount of loan offsets in 401(k) plans nationwide, we recommend that the Secretary of Labor direct the Assistant Secretary for EBSA, in coordination with IRS, to revise the Form 5500 to require plan sponsors to report qualified plan loan offsets as a separate line item distinct from other types of distributions. (Recommendation 1) We provided a draft of this product to the Department of Labor, the Department of the Treasury, and the Internal Revenue Service for review and comment. In its written comments, reproduced in appendixes IV and V, respectively, DOL and IRS generally agreed with our findings, but neither agreed nor disagreed with our recommendation. DOL said it would consider our recommendation as part of its overall evaluation of the Form 5500, and IRS said it would work with DOL as it responds to our recommendation. The Department of Treasury provided no formal written comments. In addition, DOL, IRS, Treasury and two third-party subject matter experts provided technical comments, which we incorporated in the report, as appropriate As agreed with your staff, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Labor, Secretary of the Treasury, Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix VI. The objectives of this study were to determine: (1) what are the incidence and amount of retirement savings being withdrawn early; (2) what is known about the factors that might lead individuals to access their retirement savings early; and (3) what strategies or policies, if any, might reduce the incidence and amount of early withdrawals of retirement savings. To examine the incidence and amount of early withdrawals from individual retirement accounts (IRA) and 401(k) plans, we analyzed the most recent nationally representative data available in three relevant federal data sources, focusing our analysis on individuals in their prime working years (ages 25 to 55), when possible. For consistency, we analyzed data from 2013 from each data source because it was the most recent year that data were available for all types of early withdrawals we examined. We adjusted all dollar-value estimates derived from each data source for inflation and reported them in constant 2017 dollars. We determined that the data from these sources were sufficiently reliable for the purposes of our report. First, to examine recent incidence and amount of early withdrawals from IRAs and the associated tax consequences for individuals ages 25 to 55, we analyzed IRS estimates based on tax returns as filed by taxpayers before enforcement activity published by the Internal Revenue Service’s (IRS) Statistics of Income Division for tax year 2013. Specifically, we analyzed the number of taxpayers reporting early withdrawals from their IRAs in 2013 and the aggregate amount of these withdrawals. To provide additional context on the scope of these early withdrawals, we analyzed the age cohort’s total IRA contributions and the end-of-year fair market value of the IRAs, and compared these amounts to the aggregate amount withdrawn. To examine the incidence and amount of taxes paid as a result of the additional 10 percent tax for early distributions, we analyzed estimates on the additional 10 percent tax paid on qualified retirement plans in 2013. Although IRS did not delineate these data by age, we used these data as proxy because IRS assesses the additional 10 percent tax on distributions to taxpayers who have not reached age 59½. Given the delay between a withdrawal date and the date of the tax filing, it is possible that some of the taxes were paid in the year following the withdrawal. We reviewed technical documentation and developed the 95 percent confidence intervals that correspond to these estimates. Second, to examine the incidence and amount of early withdrawals from 401(k) plans, we analyzed data included in the 2014 panel of the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP)—a nationally representative survey of household income, finances, and use of federal social safety net programs—along with retirement account contribution and withdrawal data included in the SIPP’s Social Security Administration (SSA) Supplement on Retirement, Pensions, and Related Content. Specifically, we developed percentage and dollar-value estimates of the incidence and amount of lump sum payments received and hardship withdrawals taken by participants in 401(k) plans in 2013. Because the SIPP is based upon a complex probability sample, we used Balanced Repeated Replication methods with a Fay adjustment to derive all percentage, dollar-total, and dollar-ratio estimates and their 95 percent confidence intervals. To better understand the characteristics of individuals who received a lump sum and/or took a hardship withdrawal in 2013, we analyzed a range of selected individual and household demographic variables and identified characteristics associated with a higher incidence of withdrawals. We applied domain estimation methods to make estimates for these subpopulations. (For a list of variables used and the results of our analysis, please see appendix III.) We attempted to develop a multiple regression model to estimate the unique association between each characteristic and withdrawals, but determined that the SIPP did not measure key variables in enough detail to develop persuasive causal explanations. The sample size of respondents receiving lump sums was too small to precisely estimate the partial correlations of many demographic variables at once. Even with adequate sample sizes, associations between broad demographic variables, such as age and income, likely reflected underlying causes, such as retirement and financial planning strategies, which SIPP did not measure in detail. Third, to examine the incidence and amount of unrepaid plan loans from 401(k) plans, we analyzed the latest filing of annual plan data that plan sponsors reported on the Form 5500 to the Department of Labor (DOL) for the 2013 plan year. We looked at unrepaid plan loans reported by sponsors of large plans (Schedule H) and small plans (Schedule I). For each schedule, we analyzed two variables related to unrepaid plan loans: (1) deemed distributions of participant loans (which captures the amount of loan defaults by active participants) and (2) benefits distributed directly to participants (which includes plan loan offsets for a variety of reasons, including plan loans that remain unpaid after a participant separates from a plan). Because plan sponsors report data in aggregate and do not differentiate by participant age, we calculated and reported the aggregate of loan defaults identified as deemed distributions in both schedules. We could not determine the amount of plan loan offsets based on the way that plan sponsors are required to report them. Specifically, plan sponsors are required to treat unrepaid loans occurring after a participant separates from a plan as reductions or offsets in plan assets, and are required to report them as part of a larger commingled category of offsets that also includes large-dollar items like rollovers of account balances to another qualified plan or IRA. As a result, we were unable to isolate and report the amount of this category of unrepaid plan loans. To identify what is known about the factors that might lead individuals to access their 401(k) plans and IRAs and what strategies or policies might reduce the early withdrawal of retirement savings, we performed a literature search using multiple databases to locate documents regarding early withdrawals of retirement savings published since 2008 and to identify experts for interviews. The search yielded a wide variety of scholarly articles, published articles from various think tank organizations, congressional testimonies, and news reports. We reviewed these studies and identified factors that lead individuals to withdraw retirement savings early, as well as potential strategies or policies that might reduce this behavior. The search also helped us identify additional potential interviewees. To answer our second and third objectives, we visited four metropolitan areas and conducted 51 interviews with a wide range of stakeholders that we identified in the literature. In some cases, to accommodate stakeholder schedules, we conducted phone interviews or accepted written responses. Specifically, we interviewed human resource professionals from 22 private-sector companies (including 4 written responses), representatives from 8 plan administrators, 13 retirement research experts (including 1 written response), representatives from 4 industry associations, representatives from 2 participant advocacy organizations, and representatives from 2 financial technology companies. We conducted in-person interviews at four sites to collect information from three different groups: (1) human resource officials in private-sector companies, (2) top 20 plan administrators or recordkeepers, and (3) retirement research experts. We selected site visit locations in four metropolitan locations that were home to representatives of each group. To select companies for potential interviews, we reached out to a broad sample of Fortune 500 companies that offered a 401(k) plan to employees and varied by geographic location, industry, and number of employees. We selected plan administrators based on Pensions and Investments rankings for assets under management and number of individual accounts. We selected retirement research experts who had published research on early withdrawals from retirement savings, as well as experts that we had interviewed in our prior work. Based on these criteria, we conducted site visits in Boston, Massachusetts; Chicago, Illinois; the San Francisco Bay Area, California; and Seattle, Washington. We held interviews with parties in each category who responded affirmatively to our request. In each interview, we solicited names of additional stakeholders to interview. We also interviewed representatives of organizations, such as financial technology companies, participant advocacy organizations, industry associations, and plan administrators focused on small businesses, whose work we deemed relevant to our study. We developed a common question set for each stakeholder category that we interviewed. We based our interview questions on our literature review, research objectives, and the kind of information we were soliciting from each stakeholder category. In each interview, we asked follow-up questions based on the specific responses provided by interviewees. In our company interviews, we asked how companies administered retirement benefits for employees; company policies and procedures regarding separating employees and the disposition of their retirement accounts; company policies regarding plan loans, hardship withdrawals, and rollovers from other 401(k) plans; and company strategies to reduce early withdrawals from retirement savings. In our interviews with plan administrators, we asked about factors that led individuals to access their retirement savings early, how plan providers interacted with companies and separating employees, available data on loans and hardship withdrawals from client retirement plans, and potential strategies to reduce the incidence and amount of early withdrawals. In our interviews with retirement research experts, financial technology companies, participant advocacy organizations, and industry associations we asked about factors that led individuals to make early withdrawals from their retirement savings and any potential strategies that may reduce the incidence and amount of early withdrawals. In our interviews with plan administrators and retirement research experts, we also provided a supplementary table outlining 37 potential strategies to reduce early withdrawals from retirement savings. We asked interviewees to comment on the strengths and weaknesses of each strategy in terms of its potential to reduce early withdrawals, and gave them opportunity to provide other potential strategies not listed in the tables. We developed the list of strategies based on the results of our literature review. Some interviewees also provided us with additional data and documents to assist our research. For example, some companies and plan administrators we interviewed provided quantitative data on the number of plan participants, the average cashout or rollover amounts, the percentage of participants who took loans or hardship withdrawals from their retirement accounts, and known reasons for these withdrawals. Some research experts also provided us with documentation, including published articles and white papers that supplemented our interviews and literature review. All data collected through these methods are nongeneralizable and reflect the views and experiences of the respondents and not the entire population of their respective constituent groups. To answer our second and third objectives, we analyzed the content of our stakeholder interview responses and corroborated our analysis with information obtained from our literature review and quantitative information provided by our interviewees. To examine what is known about the factors leading individuals to access retirement savings early, we catalogued common factors that stakeholders identified as contributing to early withdrawals from retirement savings. We also collected information on plan rules governing early participant withdrawals of retirement savings. To identify potential strategies or policies that might reduce the incidence and amount of early withdrawals, we analyzed interview responses and catalogued (1) company practices that employers identified as having an effect in reducing early withdrawals and (2) strategies that stakeholders suggested that could achieve a similar outcome. GAO is not endorsing or recommending any strategy in this report, and has not evaluated these strategies for their behavioral or other effects on retirement savings or on tax revenues. Appendix II: Selected Provisions Related to Early Withdrawals from 401(k) Plans and Individual Retirement Accounts (IRAs) Requirements Provides an exception for distributions for qualified higher education expenses and for qualified “first-time” home purchases made before age 59½ from the additional 10 percent tax for early distributions Defines “qualified first-time homebuyer distribution” and “first-time homebuyer,” and prescribes the lifetime dollar limit on such distributions, among other things. Allows eligible individuals to make tax-deductible contributions to individual retirement accounts, subject to limits based, for example, on income and pension coverage. Provides for the loss of exemption for an IRA if the IRA owner engages in a prohibited transaction, which results in the IRA being treated as distributing all of its assets to the IRA owner at the fair market value on the first day of the year in which the transaction occurred. Defines a prohibited transaction to include the lending of money or other extension of credit between a plan and a disqualified person. Requirements Allows eligible individuals to make contributions to a Roth IRA that are not tax- deductible. Distributions from the account can generally be treated as a qualified distribution if a distribution is made on or after the Roth IRA owner reaches age 59½ and the distributions is made after the 5-taxable year period beginning when the account was initially opened. Defines a prohibited transaction to include the lending of money or other extension of credit between a plan and a disqualified person. Appendix III: Estimated Incidence of Certain Early Withdrawals of Retirement Savings 401(k) plans 401(k) plans ($1000 or more) 401(k) plans 401(k) plans ($1000 or more) 401(k) plans 401(k) plans ($1000 or more) Legend: * Sampling error was too large to report an estimate. In addition to the contact named above, Dave Lehrer (Assistant Director); Jonathan S. McMurray (Analyst-in-Charge); Gustavo O. Fernandez; Sean Miskell; Jeff Tessin; and Adam Wendel made key contributions to this report. James Bennett, Holly Dye, Sara Edmondson, Sarah Gilliland, Sheila R. McCoy, Ed Nannenhorn, Katya Rodriguez, MaryLynn Sergent, Linda Siegel, Rachel Stoiko, Frank Todisco, and Sonya Vartivarian also provided support. The Nation’s Fiscal Health: Action Is Needed to Address the Federal Government’s Future. GAO-18-299SP. Washington, D.C.: June 21, 2018. The Nation’s Retirement System: A Comprehensive Re-evaluation is Needed to Better Promote Future Retirement Security. GAO-18-111SP. Washington, D.C.: October 18, 2017. Retirement Security: Improved Guidance Could Help Account Owners Understand the Risks of Investing in Unconventional Assets. GAO-17-102. Washington, D.C.: December 8, 2016. 401K Plans: Effects of Eligibility and Vesting Policies on Workers’ Retirement Savings. GAO-17-69. Washington, D.C.: October 21, 2016. Retirement Security: Low Defined Contribution Savings May Pose Challenges. GAO-16-408. Washington, D.C.: May 5, 2016. Retirement Security: Shorter Life Expectancy Reduces Projected Lifetime Benefits for Lower Earners. GAO-16-354. Washington, D.C.: March 25, 2016. Social Security’s Future: Answers to Key Questions. GAO-16-75SP. Washington, D.C.: October 27, 2015. Retirement Security: Federal Action Could Help State Efforts to Expand Private Sector Coverage. GAO-15-556. Washington, D.C.: September 10, 2015. Highlights of a Forum: Financial Literacy: The Role of the Workplace. GAO-15-639SP. Washington, D.C.: July 7, 2015. 401(K) Plans: Greater Protections Needed for Forced Transfers and Inactive Accounts. GAO-15-73. Washington, D.C.: November 21, 2014. Older Americans: Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Retirees. GAO-14-866T. Washington, D.C.: September 10, 2014. Financial Literacy: Overview of Federal Activities, Programs, and Challenges. GAO-14-556T. Washington, D.C.: April 30, 2014. Retirement Security: Trends in Marriage and Work Patterns May Increase Economic Vulnerability for Some Retirees. GAO-14-33. Washington, D.C.: January 15, 2014. 401(K) Plans: Labor and IRS Could Improve the Rollover Process for Participants. GAO-13-30. Washington, D.C.: March 7, 2013. Retirement Security: Women Still Face Challenges. GAO-12-699. Washington, D.C.: July 19, 2012. 401(K) Plans: Policy Changes Could Reduce the Long-term Effects of Leakage on Workers’ Retirement Savings. GAO-09-715. Washington, D.C: August 28, 2009.", "summary": "Federal law encourages individuals to save for retirement through tax incentives for 401(k) plans and IRAs—the predominant forms of retirement savings in the United States. In 2017, U.S. plans and IRAs reportedly held investments worth nearly $17 trillion dollars. Federal law also allows individuals to withdraw assets from these accounts under certain circumstances. DOL and IRS oversee 401(k) plans, and collect annual plan data—including financial information—on the Form 5500. For both IRAs and 401(k) plans, GAO was asked to examine: (1) the incidence and amount of early withdrawals; (2) factors that might lead individuals to access retirement savings early; and (3) policies and strategies that might reduce the incidence and amounts of early withdrawals. To answer these questions, GAO analyzed data from IRS, the Census Bureau, and DOL from 2013 (the most recent complete data available); and interviewed a diverse range of stakeholders identified in the literature, including representatives of companies sponsoring 401(k) plans, plan administrators, subject matter experts, industry representatives, and participant advocates. In 2013 individuals in their prime working years (ages 25 to 55) removed at least $69 billion (+/- $3.5 billion) of their retirement savings early, according to GAO's analysis of 2013 Internal Revenue Service (IRS) and Department of Labor (DOL) data. Withdrawals from individual retirement accounts (IRA)—$39.5 billion (+/- $2.1 billion)—accounted for much of the money removed early, were equivalent to 3 percent (+/- 0.15 percent) of the age group's total IRA assets, and exceeded their IRA contributions in 2013. Participants in employer-sponsored plans, like 401(k) plans, withdrew at least $29.2 billion (+/- $2.8 billion) early as hardship withdrawals, lump sum payments made at job separation (known as cashouts), and loan balances that borrowers did not repay. Hardship withdrawals in 2013 were equivalent to about 0.5 percent (+/-0.06 percent) of the age group's total plan assets and about 8 percent (+/- 0.9 percent) of their contributions. However, the incidence and amount of certain unrepaid plan loans cannot be determined because the Form 5500—the federal government's primary source of information on employee benefit plans—does not capture these data. Stakeholders GAO interviewed identified flexibilities in plan rules and individuals' pressing financial needs, such as out-of-pocket medical costs, as factors affecting early withdrawals of retirement savings. Stakeholders said that certain plan rules, such as setting high minimum loan thresholds, may cause individuals to take out more of their savings than they need. Stakeholders also identified several elements of the job separation process affecting early withdrawals, such as difficulties transferring account balances to a new plan and plans requiring the immediate repayment of outstanding loans, as relevant factors. Stakeholders GAO interviewed suggested strategies they believed could balance early access to accounts with the need to build long-term retirement savings. For example, plan sponsors said allowing individuals to continue to repay plan loans after job separation, restricting participant access to plan sponsor contributions, allowing partial distributions at job separation, and building emergency savings features into plan designs, could help preserve retirement savings (see figure). However, they noted, each strategy involves tradeoffs, and the strategies' broader implications require further study. GAO recommends that, as part of revising the Form 5500, DOL and IRS require plan sponsors to report the incidence and amount of all 401(k) plan loans that are not repaid. DOL and IRS neither agreed nor disagreed with our recommendation.", "document_type": "gao"}
{"report": "Generally, the responsibility for reducing lead in drinking water and ensuring safe drinking water overall is shared by EPA, states, and local water systems. EPA is responsible for, among other things, national implementation of the Lead and Copper Rule, setting standards, overseeing states’ implementation of the rule, and conducting some enforcement activities. However, most states have primary responsibility for enforcing the requirements under SDWA as amended. Water systems are generally subject to requirements under SDWA as amended, such as the Lead and Copper Rule, and are responsible for managing and funding the activities and infrastructure needed to meet those requirements. Such infrastructure includes storage facilities and drinking water mains and may include other pipes such as service lines. There are 1 million miles of drinking water mains in the country, according to a 2017 American Society of Civil Engineers study. As figure 1 illustrates, service lines are the smaller pipes that connect the water mains to homes and buildings. According to EPA guidance, service lines also include any smaller pipes used for connecting a service line to the water mains (e.g., gooseneck pipes which are also known as pigtails). Service lines can generally be made of lead, steel, copper, or plastic. Service lines can be fully owned by the water system (publicly owned) or by the homeowner (privately owned), or ownership can be shared. In most communities, lead service lines are partially owned by the water system and partially owned by the homeowner. With shared ownership, the water system typically owns the service line from the water main to the curb stop, and the homeowner owns the service line from the curb stop into the home. In such cases, each party is responsible for maintaining the part of the service line that it owns. In some circumstances, if lead levels are higher than the Lead and Copper Rule allows and other measures do not alleviate the problem, the Lead and Copper Rule requires water systems to replace lead service lines under the systems’ control. The Lead and Copper Rule does not require homeowners to replace the portion of lead service lines they own, but if they choose to do so they are generally responsible for the associated costs. The Lead and Copper Rule allows for a partial replacement by the water system when an owner of a home or building is unable or unwilling to pay for replacement of the portion of the service line not owned by the water system. The total number of lead service lines is unknown and while national, state, and local estimates exist, approaches used to count lead service lines vary. The total number of lead service lines is unknown because, among other things, the Lead and Copper Rule does not require all water systems to collect such information. National, state, and local estimates exist, but the methods used to arrive at these estimates vary, making it challenging to compare estimates. The total number of lead service lines is unknown, in part because the Lead and Copper Rule does not require all water systems to develop and maintain a complete inventory of lead service lines, and there are no national repositories of information about lead service lines. According to EPA headquarters officials we interviewed in 2017, the materials inventory required under the Lead and Copper Rule is not intended to be a census of lead service lines (and other lead pipes such as goosenecks/ pigtails). Instead, it is intended to provide sufficient information to develop a plan for periodically obtaining tap samples. For example, according to 2008 EPA guidance to water systems, if a system contains lead service lines, then, if possible, half of the sample sites should include those served by a lead service line. The Lead and Copper Rule requires water systems to conduct complete inventories only if the water system is required to begin replacing lead service lines. In these instances, water systems are required to expand the materials inventory to a complete inventory that identifies the total number of lead service lines for the purpose of tracking replacements over time. As we reported in 2017, based on the available data, the majority of the 68,000 water systems subject to the Lead and Copper Rule at the time of our review had not been required to replace lead service lines and therefore were not required to conduct complete inventories. Moreover, there are no national repositories for information about lead service lines. In September 2017, we recommended that, as a part of revisions to the Lead and Copper Rule, EPA require states to report data on lead pipes (including lead service lines) and incorporate these data in the agency’s Safe Drinking Water Information System. EPA agreed with the recommendation but has not implemented it. In May 2018, EPA noted that it was in the process of reviewing comments received through consultations with state and local officials and tribes. According to EPA officials, final revisions to the Lead and Copper Rule are expected by February 2020. We continue to believe that EPA should collect data about lead pipes (including lead service lines) from states. By doing so, EPA and congressional decision makers would have important information at the national level on what is known about lead infrastructure in the country, thereby facilitating oversight of the Lead and Copper Rule. The total number of lead service lines is unknown, and while some entities have developed estimates of lead service lines at the national, state, or local water system level, the estimates we reviewed have significant limitations to their reliability. Moreover, the approaches used to arrive at these estimates vary, making it challenging to compare estimates. Nationally, according to EPA’s October 2016 Lead and Copper Rule Revisions White Paper, there are an estimated 6.5 million to 10 million homes served by lead service lines. This range of estimates, based in part on data from a study for the 1991 Lead and Copper Rule, has significant limitations. In appendix I we explain why EPA’s estimate may not accurately reflect the total number of lead service lines, nationwide. An April 2016 American Water Works Association study estimated 6.1 million lead service lines nationwide. The authors of this study extrapolated the number based on survey responses from 978 water systems in 2011 and 2013. While this study is the most recent attempt to provide a national estimate, it has significant limitations. First, the sample was not statistically representative of all 68,000 water systems subject to the Lead and Copper Rule. Rather, the water systems that responded to the American Water Works Association’s survey are not a statistical sample. Second, according to the study’s authors, survey responses were based on water systems’ best guesses of the number of lead service lines in their systems. However, since water systems have not been required to maintain inventories of lead service lines, many of them do not know the exact number. For these reasons, we are not confident that the number accurately reflects the total number of lead service lines nationwide. An American Water Works Association official told us that the organization is not planning to update the study. EPA officials told us that they were not aware of a more recent study than the association’s 2016 study. In addition, EPA officials said in May 2018 that the results in the American Water Works Association study likely represent a lower-bound estimate for the number of lead service lines in the country because the sample was not generalizable, and had other data quality issues. EPA officials in one region we interviewed said that estimates of lead service lines can decrease or increase as a water system replaces lead service lines and as a water system does or does not count lead service lines on private property. The Lead and Copper Rule does not require states to collect statewide information about lead service lines, but at least two states collected data from water systems in their states and published reports with these data: A 2016 report by the Massachusetts Department of Environmental Protection’s Drinking Water Program reported 22,023 lead service lines and 15,809 lead goosenecks and pigtails statewide. The report counted goosenecks and pigtails separately from lead service lines. Officials from the Massachusetts Department of Environmental Protection told us that the state has about 2 million service lines total; therefore, about 1 percent of the total service lines are lead. A 2017 report by the Washington State Department of Health estimated 1,000-2,000 lead service lines statewide and 8,000 goosenecks statewide. According to Washington State officials, they continued to update their estimates in early 2018 with selected water utilities. Generally, the purpose of both studies, as stated in each report, was to identify areas in which water systems would need technical assistance in complying with the Lead and Copper Rule or state requirements. However, for the purposes of estimating the number of lead service lines, complete details were not available about the methodologies and some systems that did respond were only able to provide rough guesses rather than precise counts of lead service lines. EPA headquarters officials told us that Massachusetts and Washington were at the forefront of states’ efforts to gather information about lead service lines. EPA officials also told us that they were not aware of any other states with published reports estimating the number of lead service lines. However, at least two states have also collected information about lead service lines but have not published the information in official reports, at the time of our review. For example, in 2016, officials in Indiana and Maryland sent questionnaires to water systems in their states asking for information about the number of lead service lines. A representative of a water association told us that, generally, water systems were in the beginning stages of conducting complete inventories of lead service lines. However, some local water systems also have estimates. For example, EPA officials told us that water systems in the states of Ohio, Michigan, and Washington had estimates of lead service lines. In May 2018, a representative of the Greater Cincinnati Water Works water system estimated there were approximately 7 percent of publicly owned and approximately 18 percent privately owned lead service lines out of a total of 240,000 service lines in the area served by that water system. In March 2018, representatives of the Greater Cincinnati Water Works water system said that their estimates of lead service lines are best characterized as what is known at any given point in time. These representatives also told us that they collect this information on a continual basis from historical and on-going maintenance records, reports of lead service lines by customers, and the water system’s lead service line replacement program, among other sources. To conduct complete inventories and develop estimates, water systems have used varying approaches, which can hinder comparisons among states and water systems. The publicly available reports that existed as of May 2018 provide some insight into the various approaches water systems have used. For example, to identify lead service lines, water systems have used visual inspection or a combination of visual inspections, existing water system records, and discussions with homeowners. In addition, water systems have used various definitions of lead service lines. For example, water systems have counted: only active service lines delivering water to customers, or both active and inactive (no longer delivering water to customers) service lines; or only the publicly owned lead service lines, or both the publicly and privately owned portions of the lead service lines; or only lead service lines or the lead service lines and goosenecks/pigtails separately. While most states informed EPA that they intend to fulfill the agency’s request to work with water systems to publicize inventories of lead service lines, EPA has identified potential challenges to these efforts. Nonetheless, the agency has not followed up with all states since 2016 to share information about how to address these challenges. Most states that said they intended to fulfill EPA’s request to encourage water systems to publicize materials inventories reported in subsequent letters to or meetings with EPA that they did so; however, as of May 2018, most large waters systems had not made such information public. Our analysis of states’ written responses to EPA’s 2016 request, and information obtained through interviews with EPA officials as of February 2018, found that most (43) of the 50 states indicated an intent to fulfill EPA’s request, 3 states said that they may consider it, and 4 states did not intend to fulfill EPA’s request. Of the approximately 43 states that responded that they would fulfill EPA’s request, almost all (39) reported in subsequent letters to or meetings with EPA that they had encouraged water systems to publicize their materials inventories or other information about lead service lines. In these letters and meetings, states also reported taking other actions to increase their knowledge about lead service lines such as requesting that water systems update the materials inventory required by the Lead and Copper Rule, creating online repositories of maps of lead service lines, posting reports on lead service lines, and issuing requirements for water systems to collect information on lead service lines. For example, in May 2016, the governor of Washington issued a directive requiring the state’s Department of Health to work with certain water systems to identify all lead service lines and lead components within 2 years. Figure 2 shows the number of states that reported fulfilling EPA’s request or taking other related actions. Because EPA asked states to prioritize large water systems (those servicing populations greater than 50,000), we reviewed the websites for the 100 largest water systems. As of January 2018, we found 12 of these water systems had publicized information on the inventory of lead service lines; the rest had not. The information on the websites for the 12 water systems varied. For example, the water system for Tulsa, Oklahoma posted a map that highlighted where lead service lines may be present. Water systems such as Cincinnati, Ohio, Boston, Massachusetts, and Washington, D.C., provided interactive maps that showed locations identified as having lead service lines. See figure 3 for examples of the interactive maps of lead service lines that some selected large water systems have provided to the public. Water systems that serve populations greater than 50,000 but were not among the 100 largest water systems at the time of our review may have also publicized information on the inventory of lead service lines. For example, the water systems for Akron, Ohio, Flint, Michigan, and Providence, Rhode Island each publicized an interactive or other type of map of lead service lines. EPA officials in the regional offices provided a range of reasons why water systems may be challenged in conducting inventories of lead service lines and making any information about lead service lines public, however, it has not followed up with all states about how to address such challenges since 2016. In September 2017, we reported that the six states that would not fulfill EPA’s 2016 request had highlighted challenges in finding historical documentation about lead pipes to create plans for collecting tap water samples or in dedicating staff resources to do so. In January and February 2018, some officials whom we interviewed in EPA’s 10 regional offices agreed that these would be challenges for states and water systems. The officials also mentioned additional potential challenges in conducting complete inventories of lead service lines or publicizing information about lead service lines. Table 1 describes the challenges mentioned by EPA officials in the 10 regional offices. Since the February 2016 letter, EPA followed up in July 2016 with a letter to the Association of State and Territorial Health Officials and Environmental Council of States, which represents all states. In that letter, EPA provided two examples of state practices that increase public transparency: some drinking water systems are providing online searchable databases that provide information on known locations of lead service lines, or are providing videos that show homeowners how to determine whether their home is served by a lead service line. The letter also said that EPA would continue to work with states to ensure that the identification of the locations of lead service lines remains a priority for drinking water systems. However, EPA has conducted limited follow-up since then, mainly, EPA headquarters and regional officials said, because they have focused their efforts on ensuring states appropriately comply with the Lead and Copper Rule. As previously noted in this report, posting materials inventories or other information about the location of lead service lines is not a requirement of the Lead and Copper Rule. In May 2018, EPA headquarters officials we interviewed said that they learned of some states’ and water systems’ efforts toward making information about lead service lines available to the public since 2016, through conferences and discussions with states. These headquarters officials told us that they have shared such efforts with those states who, in 2016, said they did not intend to fulfill EPA’s 2016 request. For example, EPA shared how states that were publicizing information about lead service lines were addressing privacy concerns with states that originally said they would not fulfill EPA’s request. However, as of January 2018, most of the 100 largest water systems had not made their materials inventories or additional maps or updated inventories public. According to EPA’s February 2016 letter, the agency’s objective in encouraging states to work with water systems to post, on a public website, the water system’s original materials inventory along with any additional updated map or inventories of lead service lines was to assure the public that lead risks were being addressed. Under federal standards for internal control, management should externally communicate the necessary quality information, so that external parties can help to achieve the entity’s objectives. By sharing information with all states about the approaches that some states and water systems are using to successfully identify and publicize information about lead service lines, including responses to potential challenges, EPA could encourage states to be more transparent to the public and support the agency’s objectives for safe drinking water. Lead service lines present a significant risk of lead contamination in drinking water. Publicizing drinking water systems’ knowledge about lead service lines, and other lead infrastructure, would facilitate oversight of the Lead and Copper Rule. In September 2017, we recommended that, as a part of revisions to the Lead and Copper Rule expected by February 2020, EPA require states to report data on lead pipes (including lead service lines) and incorporate these data in the agency’s Safe Drinking Water Information System. EPA agreed with the recommendation, and we continue to believe that EPA should require data about lead pipes (including lead service lines) from states. Most states reported that they had encouraged their water systems to publicize information about lead service lines in response to EPA’s February 2016 requests. EPA headquarters officials told us that they had learned of some states’ and water systems’ efforts since 2016 and shared this information with the few states that said that they would not take action in response to EPA’s letter. This information did in fact help at least one state take action, according to information we received from EPA and the state. By sharing information with all states about the approaches that some states and water systems are using to successfully identify and publicize information about lead service lines, including responses to potential challenges, EPA could encourage states to be more transparent to the public and support the agency’s objectives for safe drinking water. The Assistant Administrator for Water of EPA’s Office of Water should share information with all states about the approaches that some states and water systems are using to successfully identify and publicize information on lead service lines, including responses to potential challenges. (Recommendation 1) We provided a draft of this report to EPA for review and comment. In its comments, reproduced in appendix II, EPA agreed with our recommendation. The agency also highlighted a recently developed website that showcases efforts to identify and replace lead service lines and said that it will continue to ensure states and water systems are aware of this resource. We are sending copies of this report to the appropriate congressional committees, the Administrator of EPA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Our objectives were to examine (1) what is known about the number of existing lead service lines nationally, and among states and water systems; and (2) state responses to EPA’s February 2016 request to work with water systems to publicize inventories of lead service lines and any steps EPA has taken to follow up on these responses. To examine what is known about the number of existing lead service lines nationally, and among states and water systems, we relied on interviews and publicly available reports for which we could assess the reliability of the data. We reviewed the requirements under the Lead and Copper Rule for assessing the number of lead service lines. We interviewed officials from EPA’s Office of Water and the following water organizations concerning what these officials knew about the number of lead service lines nationally and among states and water systems: the American Water Works Association, Association of State Drinking Water Administrators, and Regional Community Assistance Partnership. We also interviewed an official with the Environmental Defense Fund regarding the available information about the number of lead service lines nationally and among states and water systems. We selected these organizations because they are all members of the Lead Service Line Replacement Collaborative, a consortium that provides information about voluntary lead service line replacement for states and water systems. On behalf of the Lead Service Line Replacement Collaborative, the organizations we spoke with are collecting examples of states’ and water systems’ experiences in conducting inventories of lead service lines, as the first step in replacing lead service lines. Using information from these interviews, we identified three published studies from the American Water Works Association, the state of Massachusetts, and the state of Washington. We interviewed the authors of the studies to determine the reliability, completeness, and accuracy of the data presented in the studies. For the 2016 American Water Works Association study, we determined that the data were of undetermined reliability because the responses of the water systems surveyed were not generalizable to all water systems and the study authors could not verify the accuracy of the information. Specifically, the sample in the 2016 American Water Works Association study was not based on a statistical sample, and therefore the sampling error was not calculated and information was not available to determine whether responding water systems were similar to nonresponding water systems. For example, the estimate is based on survey responses from 978 of the approximately 23,000 water systems that existed around the time of the surveys, and therefore may not represent all water systems nationwide. In addition, since many water systems do not have complete inventories of their lead service lines, the accuracy of data that water systems submitted in response to the survey is difficult to verify. For example, our interview with the study authors indicates that the information provided by water systems varied in quality, with some systems basing their responses on rough estimates. We based our determination about the data using the criteria of Total Survey Error, which is a framework for assessing the validity and reliability of survey estimates. It includes sampling error (the difference between the population and the sample), nonresponse error, measurement error (the difference between the true response and the response provided by the respondent) and coverage error (the discrepancy between the list of individuals that is used to select a sample and the target population). EPA’s 2016 Lead and Copper Rule Revisions White Paper also identified an estimate of lead service lines. According to EPA officials, this estimate used data from the 2016 American Water Works Association study and a 1988 American Water Works Association study cited in the regulatory impact analysis for the 1991 Lead and Copper Rule. The 1991 estimate also had significant limitations in measurement error and representation error as well as a lack of documentation about key aspects of the methodology. As such, we determined the estimate was not reliable for the purposes of establishing the total number of lead service lines in existence as of 1991. The two state-specific studies represent reasonable efforts to estimate the number of lead service lines in these states. However, they generally could not verify the accuracy of the information provided by these systems because, as we note elsewhere in this report, water systems may not know the number of lead service lines they have. Therefore, for the state-specific studies, we also determined that the data were also of undetermined reliability. Finally, while the Greater Cincinnati Water Works water system did not publish a report about lead service lines, we collected the information through an in-person interview and corroborated the information through a review of the water system’s geographic information system database. The Greater Cincinnati Water Works’ GIS database includes the location and material information for all of the water system’s distribution system. According to the Greater Cincinnati Water Works website, the water system continues to update its map as it obtains more information from its customers. Based on these steps we deemed the data provided by the water system to be sufficiently reliable for the purposes of describing the estimate reported by representatives of the Greater Cincinnati Water Works system. To examine states’ responses to EPA’s February 2016 request to work with water systems to publicize inventories of lead service lines and any steps EPA has taken to follow up on these responses, we relied both on the publicly available letters from each state to EPA and on interviews with EPA regional and headquarters officials. We did not interview state officials in all 50 states, but reviewed some state documents, where available. We used a standard set of open-ended questions to interview officials in EPA’s headquarters and in each of the 10 regional offices. To analyze states’ and EPA officials’ responses, we conducted two analyses. Specifically, we conducted two analyses to summarize updates in state responses to EPA’s February 2016 letter and EPA’s responses to challenges states and water systems may face in conducting and publicizing materials inventories. To confirm each analysis, one analyst independently summarized the information and another analyst verified the accuracy of the information. All initial disagreements were discussed and reconciled. All numbers in our analysis are considered approximate because interpretations of the states’ responses to EPA’s 2016 letter can differ, and states may have taken actions after our interviews with EPA regional officials, or may have taken actions that they did not report to EPA. Figure 4 shows the EPA regions and the states within those regions. We also reviewed EPA documents related to EPA’s request that states take certain actions following the events in Flint, Michigan. In addition, we reviewed federal regulations; EPA guidance to water systems on how to implement the Lead and Copper Rule; and other relevant documents such as an EPA white paper. Because EPA asked states to place an emphasis on working with large water systems to publicize their materials inventories or updated inventories or maps of lead service lines, we reviewed the websites of the 100 largest water systems by population. Our review was conducted in January to February 2018; and since then, additional water systems may have provided information to the public on lead service lines. We identified the largest water systems, based on population served, from data in EPA’s Safe Drinking Water Information System/Fed. EPA has stated on its website that the agency acknowledges challenges related to the data in the Safe Drinking Water Information System/Fed, specifically underreporting of some data by states. GAO has also reported on EPA’s challenges with the Safe Drinking Water Information System/Fed. Even with these challenges, the information on the populations served by water systems in the Safe Drinking Water Information System/Fed is generally reliable. We used a standard set of search terms on each website to ensure the consistency of our searches, as well as information from water organizations and EPA officials, where applicable. We counted a water system as having an inventory if the water system provided a map, interactive map, list of pipes or service lines, or numerical count of lead service lines available to the public. To ensure the completeness of this analysis, one analyst independently conducted the search of websites and another analyst verified the search. All initial disagreements were discussed and reconciled. We compared EPA’s actions to follow up on state responses with federal standards for internal control for information and communication. We conducted this performance audit from October 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Diane Raynes (Assistant Director); Tahra Nichols (Analyst in Charge); David Blanding, Jr.; Mark Braza; Lawrence Crockett, Jr.; Justin Fisher; Richard P. Johnson, and Jeanette Soares made key contributions to this report. In addition, Cynthia Norris and Dan Royer made important contributions. Drinking Water: Additional Data and Statistical Analysis May Enhance EPA’s Oversight of the Lead and Copper Rule. GAO-17-424. Washington, D.C.: September 1, 2017. Water Infrastructure: Information on Selected Midsize and Large Cities with Declining Populations. GAO-16-785. Washington, D.C.: September 15, 2016. Water Infrastructure: EPA and USDA Are Helping Small Water Utilities with Asset Management; Opportunities Exist to Better Track Results. GAO-16-237. Washington, D.C.: January, 27, 2016. Drinking Water: Unreliable State Data Limit EPA’s Ability to Target Enforcement Priorities and Communicate Water Systems’ Performance. GAO-11-381. Washington, D.C.: June 17, 2011. Drinking Water: The District of Columbia and Communities Nationwide Face Serious Challenges in Their Efforts to Safeguard Water Supplies. GAO-08-687T. Washington, D.C.: April 15, 2008. Drinking Water: EPA Should Strengthen Ongoing Efforts to Ensure That Consumers Are Protected from Lead Contamination. GAO-06-148. Washington, D.C.: January 4, 2006. District of Columbia’s Drinking Water: Agencies Have Improved Coordination, but Key Challenges Remain in Protecting the Public from Elevated Lead Levels. GAO-05-344. Washington, D.C.: March 31, 2005. Drinking Water: Safeguarding the District of Columbia’s Supplies and Applying Lessons Learned to Other Systems. GAO-04-974T. Washington, D.C.: July 22, 2004.", "summary": "The crisis in Flint, Michigan, brought increased attention to lead in drinking water infrastructure. Lead in drinking water primarily comes from corrosion of service lines connecting the water main to a house or building. In 1991, EPA issued the Lead and Copper Rule that required water systems to conduct a “materials inventory” of lead service lines. In light of the events in Flint, EPA sent a letter to all states in February 2016 encouraging them to work with water systems to publicly post the materials inventory, along with any additional updated maps or inventories of lead service linesactions the rule does not require. A House Committee report accompanying a bill for the Department of the Interior, Environment and Related Agencies Appropriations Act, 2017, includes a provision for GAO to review lead service lines. This report examines (1) what is known about the number of existing lead service lines among states and water systems and (2) states' responses to EPA's February 2016 request to work with water systems to publicize inventories of lead service lines and any steps EPA has taken to follow up on these responses. GAO reviewed existing studies of lead service lines, reviewed the websites of the 100 largest water systems, and interviewed EPA officials in headquarters and its 10 regional offices. The total number of lead service lines is unknown and while national, state, and local estimates exist, approaches used to count lead service lines vary. A 2016 American Water Works Association study estimated that nationally there were 6.1 million lead service lines, but the study has significant sampling limitations and, as a result, likely does not accurately reflect the total number of lead service lines nationwide. In addition, at least two statesMassachusetts and Washingtonpublished reports with estimates of lead service lines and reported 22,023 and 1,000-2,000 lead service lines as of 2016 and 2017, respectively. Certain water systems also have estimates, such as the approximately 7 percent of publicly owned lead service lines out of the area's total number of service lines cited by a representative for the system serving Cincinnati, Ohio and surrounding areas, as of May 2018. While most states informed the Environmental Protection Agency (EPA) that they intend to fulfill the agency's request to publicize inventories of lead service lines, EPA has identified potential challenges to these efforts. Of the approximately 43 states that responded that they would fulfill EPA's request, almost all (39) reported to EPA that, although they had encouraged water systems to publicize inventories, few systems had completed these actions. GAO found in January 2018 that, of the 100 largest water systems, 12 had publicized information on the inventory of lead service lines. According to EPA, among challenges in conducting inventories of lead service lines and publicizing information about lead service lines were concerns about posting on public websites information about lead service lines on private property; and a lack of records about the locations of lead service lines. EPA told GAO the agency was focused on state compliance with drinking water rules, and not following up with information on how states could address the challenges cited. By sharing information with all states about the approaches that some states and water systems are using to successfully identify and publicize information about lead service lines, including responses to potential challenges, EPA could encourage states to be more transparent to the public and support the agency's objectives for safe drinking water. GAO recommends that EPA share information about the successful approaches states and water systems use to identify and publicize locations of lead service lines with all states. EPA agreed with the recommendation.", "document_type": "gao"}
{"report": "Many consumer products—such as deodorants, shaving products, and hair care products—are differentiated to appeal specifically to men or women through differences in packaging, scent, or other product characteristics (see fig. 1). These differences related to gender can affect manufacturing and marketing costs that may contribute to price differences in products targeted to different genders. However, firms may also charge consumers different prices for the same (or very similar) goods and services even when there are no differences in costs to produce. To maximize profits, firms use a variety of techniques to charge prices close to the highest price different consumers are willing to pay. Firms may attempt to get segments of the consumer market to pay a higher price than another segment by slightly altering or differentiating the product. Based on the differentiated products, consumers self-select into different groups according to their preferences and what they are willing to pay. For example, some consumer goods have different versions of what is essentially the same product—except for differences in packaging or features, such as scent—with one version intended for women and another version intended for men. The two products may be priced differently because the firm expects that one gender will be willing to pay more for the product than the other based on preference for certain product attributes. Firms may also use some group characteristic, such as age or gender, to charge different prices because some groups may have differences in willingness or ability to pay. For example, a firm may offer discounted movie tickets to students or seniors, as they may have less disposable income. For the seller the cost of providing the movie is the same for any customer, but the seller is able to maximize its profits by offering tickets to different groups of customers at different prices. A firm’s ability to differentiate prices depends on multiple factors, such as the firm’s market power (so that competitors cannot put downward pressure on prices to eliminate the price differences), the presence of consumer segments with different demands and willingness to pay, and control over the sale of its product so it cannot be easily resold to exploit price differences. In addition, the extent to which consumers pay different prices for the same or similar goods can depend on other factors, such as consumers’: willingness to purchase an item they believe may be priced higher for ability to compare prices and product characteristics and choose a product based on its characteristics rather than its price, choices about whether to purchase a more expensive version of the product (e.g., a branded item versus a cheaper store brand), choices about where to purchase the item (i.e., when different retailers sell the same item at different prices), and use of coupons or promotions. No federal law expressly prohibits businesses from charging different prices for the same or similar consumer goods and services targeted to men and women. However, consumer protection laws do prohibit sex discrimination in credit and real estate transactions. Specifically, the Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against credit applicants based on sex or certain other characteristics and the Fair Housing Act (FHA) prohibits discrimination in the housing market on the basis of sex or certain other characteristics. ECOA and FHA (collectively known as the fair lending laws) prohibit lenders from, among other things, refusing to extend credit or using different standards in determining to extend credit based on sex. Credit, such as a credit card account or mortgage loan, is generally made available and priced based on a number of risk factors, including credit score, income, and employment history. A borrower with a lower credit score is likely to pay a higher interest rate on a loan, reflecting the greater risk to the lender that the borrower could default on the loan. In addition to the interest rate, borrowing costs for consumers can also include fees and other costs charged by lenders or brokers. However, there may be differences in average outcomes for men and women—such as for availability of credit or interest rates—if there are differences related to gender in the factors that determine creditworthiness, such as income. BCFP, FTC, the federal prudential regulators, and DOJ have the authority to investigate alleged violations of ECOA and are primarily responsible for enforcing the act’s requirements, while HUD and DOJ share responsibility for enforcing the provisions of FHA. Further, BCFP and the prudential regulators oversee regulated entities for compliance with ECOA by, among other things, collecting complaints from the public and through routine inspections of the financial institutions they oversee. HUD and DOJ have the authority to bring enforcement actions for alleged violations of FHA. In 5 out of 10 product categories we analyzed, personal care products targeted to women sold at higher average prices than those targeted to men after controlling for certain observable factors. For 2 of the 10 product categories, men’s versions sold at higher average prices. While the factors we controlled for likely proxy for various costs and consumer preferences, we could not fully observe all underlying differences in costs and demand for products targeted to different genders. As a result, we could not determine the extent to which the gender-based price differences we observed may be attributed to gender bias as opposed to other factors. Women’s versions of personal care products sold at a statistically significant higher average price than men’s versions for 5 of the 10 personal care product categories we analyzed—using two different price measures and after controlling for observable factors that could affect price, such as brands, product size or quantity, promotional expenses (see table 1) and other product-specific attributes (e.g., scent, special claims, form). Because women’s and men’s versions of the same product were frequently sold in different sizes, we compared prices using two price measures: average item price and average price per ounce or count of product. For 2 of the 10 product categories—shaving gel and nondisposable razors—men’s versions sold at a statistically significant higher price using both price measures. For one category (razor blades), women’s versions sold at a statistically significant higher average price per count, but there was no gender price difference using average item prices. Additionally, for two product categories—disposable razors and mass-market perfumes—there were no statistically significant price differences between men’s and women’s products using either price measure. In addition to this analysis of retail price scanner data, we also manually collected advertised online prices for a limited selection of personal care products targeted to women and men from several online retailers. Some price comparisons of advertised online prices for men’s and women’s versions of a product were similar to comparisons of average prices paid based on the Nielsen retail price scanner data. For example, for three pairs of comparable underarm deodorants, the women’s deodorant was listed at a higher price per ounce on average than the men’s deodorant (see app. II). In addition, for one pair of shaving gel products we analyzed, the men’s shaving gel was listed at a higher price per ounce on average. However, for both pairs of nondisposable razors we analyzed, the women’s razors were listed at a higher average price per count than the men’s razors. This contrasted with the Nielsen data showing that men’s nondisposable razors sold at higher prices on average than women’s. An important limitation of our analysis of these advertised prices is that we were unable to determine the extent to which consumers actually paid these prices and in what volume the products were sold, and our results are not generalizable to the broader universe of prices for these products sold at other times or by other online retailers. Though we found that the target gender for a product is a significant factor contributing to price differences we identified, we do not have sufficient information to determine the extent to which these gender- related price differences were due to gender bias as opposed to other factors. Versions differentiated to appeal to men and women can result in different costs for the manufacturer. Our econometric analysis controlled for many observable factors related to costs, such as product size, promotional activity, and packaging type. We also controlled for many product attributes such as forms, scents, and special claims that products make to account for underlying manufacturing cost differences. In addition, we controlled for brands, which can reflect consumer preferences. However, we do not have firm-level data on all cost differences—for example, those related to advertising and packaging. As a result, we could not determine the extent to which the price differences we observed may be explained by remaining cost differences between men’s and women’s products. We also do not have the data to determine the extent to which men and women have different demands and willingness to pay for a product, which would be expected to affect the prices firms charge for differentiated products. For example, some academic experts we spoke with said that women may value some product attributes, such as design and scent, more than men do. If products differentiated to incorporate those attributes do not result in different costs, then differences in prices could be part of a firm’s pricing strategy based on the willingness of one gender to pay more than another. The conditions necessary for firms to be able to implement a strategy of price differentiation likely exist for the personal care products we analyzed. First, our analysis suggests that due to industry concentration, there is limited market competition for the 10 personal care products we analyzed. With more market power, firms can more easily set different prices for different consumer segments. Second, firms have the ability to segment the market for personal care products by tailoring product characteristics related to gender, such as by labeling the product as women’s deodorant or men’s deodorant, or by altering scent or colors. Third, while men and women are able to freely purchase a product targeted to the opposite gender, certain factors may limit the extent to which this occurs. For example, some product differences such as scents may discourage one gender from buying products targeted to another gender. In addition, consumers may find it difficult and time- consuming to compare prices for similar men’s and women’s products because of the ways they are differentiated (such as product size and scents) and because they may be sold in different parts of a store. We reviewed studies that compared prices for men and women in four markets where the product or service is not differentiated by gender: mortgages, small business credit, auto purchases, and auto repairs. First, we reviewed studies on mortgage and small business credit that analyzed interest rates and access to credit to identify any differences for men and women. Second, we reviewed studies that compared prices quoted to men and women in auto purchase and repair markets. However, several of these studies have important limitations, such as using nonrepresentative data samples, and the results are not generalizable. Studies we reviewed found that women as a group pay higher interest rates on average than men in part due to weaker credit characteristics. After controlling for borrower credit characteristics and other factors, three studies did not find statistically significant differences in interest rates between men and women for the same type of mortgage, while one study found that women paid higher mortgage rates for certain subprime loans. In addition, one study found that female borrowers defaulted less frequently on their loans than male borrowers with similar credit characteristics, suggesting that women as a group may pay higher mortgage rates than men relative to their default risk. While these studies attempted to control for factors other than gender or sex that could affect borrowing costs, several lacked important data on certain borrower risk characteristics. For example, several studies we reviewed rely on Home Mortgage Disclosure Act of 1975 (HMDA) data, which did not include data on risk factors such as borrower credit scores that could affect analysis of disparities between men and women. Also, several studies analyzed nonrepresentative samples of loans, such as subprime loans or loans originated more than 10 years ago, which limits the generalizability of the results (see table 2). Three of the studies we reviewed found that while women on average were charged higher interest rates on mortgage loans than men, this difference was not statistically significant after controlling for other factors. For example, one study found that differences in mortgage interest rates between men and women became insignificant after controlling for differences in how men and women shop for mortgage rates. The authors used data from the 2004 Survey of Consumer Finances (SCF) to analyze the effect on interest rates of mortgage features, borrower characteristics such as gender, and market conditions. However, their analysis did not include data on some borrower credit characteristics such as credit score and debt-to-income ratio that could affect borrowing costs. Another study found that women were charged higher interest rates for subprime loans made in 2005, but once the authors controlled for observed risk characteristics there was no evidence of disparity in interest rates by gender of the borrower in the subprime market. However, the authors’ data did not include any fees paid at loan origination, which could affect the overall cost of borrowing. A third study that examined disparities between men and women in subprime loans found no significant evidence that gender affected the cost of borrowing within the subprime market, though it did find that women—particularly African American women—were more likely to have subprime loans. The authors found that, even after controlling for some financial characteristics and loan terms, single African American women were more likely than non-Hispanic white couples to have subprime loans. One study analyzed subprime loans made by one large lender from 2003 through 2005 and found that women paid more for subprime mortgages than men after controlling for some risk factors. This study found that women had higher average borrowing costs—as measured by annual percentage rate—than men, and controlling for credit characteristics such as credit scores and debt-to-income ratios did not fully explain the differences. However, the authors did not control for other factors that could also affect borrowing costs, such as differences in education, shopping behaviors, and geographic location. Additionally, a research paper found that female-only borrowers—that is, where the only borrower is a woman—default less than male-only borrowers with similar loans and credit characteristics. The authors found that female-only borrowers on average pay more for their mortgage loans because they generally have weaker credit characteristics, such as lower income, and also because a higher percentage of these mortgage loans are subprime. However, after controlling for credit characteristics such as credit score, loan term, and loan-to-value ratio, among others, the analysis showed that these weaker credit characteristics do not accurately predict how well women pay their mortgage loans. Since pricing is tied to credit characteristics and not performance, women may pay more relative to their actual risk than do similar men. Studies we reviewed on small business loans generally did not find differences in interest rates, though some found differences in denial rates and other accessibility issues between female- and male-owned firms. Most of the studies we reviewed used data from the 1993, 1998, or 2003 Survey of Small Business Finances (SSBF), which could limit the applicability or relevance of their findings today. A study that analyzed data from the 1993 SSBF did not find evidence that businesses owned by women paid more for credit than firms owned by white men. However, when the authors took into account the market concentration and competition, they found that white female-owned firms experienced increased denial rates in less competitive markets. In addition, the study found that women may avoid applying for credit in those markets because of the fear of being denied. For example, almost half of all small business owners who needed credit reported that they did not apply for credit, and these rates were even higher for businesses owned by women and minorities. Other studies found that women may have less access to small business credit than men, in part because of higher denial rates and because they may not apply for credit out of fear of rejection. For example, one study found that women-owned firms have higher loan denial rates compared with men; however, this is mainly due to differences in business characteristics of female- and male-owned firms. The authors also found that even when denial rates are the same for small businesses with similar characteristics, women’s loan application rates are lower, suggesting that women may be discouraged from applying for credit by the higher overall denial rates for female-owned firms. Another study by one of the same authors examined the reasons why female borrowers may be discouraged from applying for a business loan compared to male business owners and found that it was mainly because they fear that their application will be rejected. A third study by the same author found that women in general did not have less access to credit than men, though newer female-owned firms received significantly lower loan amounts than requested compared to their male-owned counterparts. Similarly, the study also found that women with few years of experience managing or owning a business received significantly lower loan amounts compared with men with similar years of experience. A fourth study looked at six different types of loans, including lines of credit, and found that white women were significantly more likely than white men to avoid applying for a loan because they assume they would be denied. However, once the authors’ model controlled for education differences, all gender disparities in applying for credit disappeared, though white women were still less likely than white men to have loans. Studies we reviewed on auto purchases and repairs found that a seller’s expectation of what customers are willing to pay and how informed they seemed can differ by gender, which can affect the price customers are quoted. However, these studies were published in 1995 and 2001, which may limit the applicability or relevance of their findings today. The 2001 study we reviewed on auto purchases found that though women paid higher prices than men for car purchases on average, these differences declined when cars were purchased online. The authors suggest that this may be because Internet consumers can effectively convey their level of price knowledge and therefore may seem better informed to the sellers. They also suggest it could be because the dealerships have less information about online consumers and their willingness to pay, which may limit the extent of price differentiation. The 1995 study on auto purchases found that the dealers quoted significantly lower prices to white males than to female or African American test buyers using identical, scripted bargaining strategies in part because dealers may have made assumptions about women’s willingness to bargain for lower prices. We also reviewed one study on auto repairs that found that women were quoted higher prices than men if they seemed uninformed about the cost of car repair when requesting a quote, but the price differences disappeared if the study participant mentioned an expected price. The study suggests that a potential explanation for this result could be that auto repair shops expect women to accept a price that is higher than the market average and men to accept a price below it. BCFP and HUD have responsibilities to monitor consumer complaints in the consumer credit and housing markets, respectively. Additionally, FTC monitors complaints about the consumer credit and consumer goods markets. All three agencies play a role in potentially monitoring or addressing issues of gender-related price differences and have online complaint forms for submission of consumer complaints: BCFP collects and reviews consumer complaints about financial products and services and provides complaints and related data in its Consumer Complaint Database. In 2017 BCFP received approximately 320,200 consumer complaints. The products that generated the most complaints in 2017 were “Credit or consumer reporting,” “Debt collection,” and “Mortgage.\" According to BCFP officials, BCFP also analyzes loan and demographics data collected through HMDA and other data sources to monitor and identify market trends. In addition, BCFP and the federal financial regulators examine fair lending practices of the institutions they regulate, and these examinations have uncovered sex discrimination in credit products by FDIC and NCUA. FTC receives complaints and the complaints are stored in the Consumer Sentinel Network, a database of consumer complaints received by FTC, as well as those filed with other federal and state agencies and organizations, such as mass marketing fraud complaints from the Council of Better Business Bureaus. The complaints in the Consumer Sentinel Network focus on consumer fraud, identity theft, and other consumer protection matters, such as debt collection, and can include complaints related to consumer credit markets. HUD receives consumer complaints about potential FHA violations through its website, via its toll-free phone hotline, and in writing. HUD monitors those complaints through its online HUD Enforcement Management System. HUD investigates all complaints for which it has jurisdictional authority. HUD may monitor complaints to identify trends, but HUD officials stated that the agency does not generally monitor consumer credit and housing market data, absent a specific complaint. In cases where HUD has jurisdictional authority under FHA, HUD offers conciliation between the parties. If resolution is not reached, and HUD determines there is reasonable cause to believe a violation has occurred, the parties may elect to have the matter heard in U.S. District Court or at HUD. In their oversight of federal antidiscrimination statutes, BCFP officials said they have not identified significant consumer concerns about price differences based on a consumer’s sex or gender. FTC and HUD officials identified some examples of concerns of this nature. For example, FTC has taken enforcement actions alleging unlawful race- and gender-related price differences. HUD has also identified several cases where pregnant women and their partners applied for a mortgage while the woman was on maternity leave, and the couple’s mortgage loan application was denied. BCFP, FTC, and HUD have received few consumer complaints about price differences related to sex or gender, according to our analysis of a sample of each agency’s 2012–2017 complaint data (see table 3). In separate samples of 100 gender-related complaints at BCFP, HUD, and FTC, we found that 0, 4, and 1 complaint, respectively, were related to price differences based on sex or gender. Three of the complaints from HUD also cited differences in price based on other protected classes (such as race or ethnicity). Half of the academic experts and consumer groups we interviewed told us that in some markets it is difficult for consumers to observe and compare prices paid by other consumers, such as when prices are not posted or can be negotiated (e.g., car sales). In such cases, consumers may not know if other consumers are paying a higher or lower price than the price quoted to them. Most academic experts also told us that when consumers are aware that price differences could exist, they may make different decisions when making purchases. Additionally, officials from BCFP noted that price differences related to gender may be difficult for consumers to identify, or that consumers may not know where to complain. The consumer education resources of BCFP, FTC, and HUD provide general consumer education resources on discrimination (i.e., consumer user guide or a website) and consumer awareness. Officials from BCFP and HUD said they have not identified a need to develop other consumer education resources specific to gender-related price differences. For example, BCFP’s print and online consumer education materials are intended to inform consumers of their rights and protections related to credit discrimination, which includes discrimination based on sex or gender. The three agencies’ consumer education materials also provide advice that could help consumers avoid paying higher prices regardless of their gender—such as home-buying resources and resources on comparison shopping. However, the agencies have not developed additional educational resources focused specifically on potential gender- related price differences in part because few complaints on this topic have been collected in their databases, agency officials told us. FTC officials noted that it tries to focus its education efforts on topics that will have the greatest benefit to consumers, often determined by information it gathers through complaints and investigations. Representatives of five consumer groups and industry associations told us that they have received few complaints about gender-related price differences. However, four consumer groups noted that low concern could be the result of consumers being unaware of price differences related to gender. For example, as indicated above, price differences related to gender may be difficult for consumers to identify when they cannot determine whether they are paying a higher price than others. Representatives of two retailing industry associations similarly stated that they have not heard concerns about price differences related to gender. In response to consumer complaints or concerns about gender disparities in pricing, at least one state (California) and two municipalities (Miami- Dade County and New York City) have passed laws or ordinances to prohibit businesses from charging different prices for the same or similar goods or services solely based on gender (see table 4). In addition, two of these laws included requirements related to promoting price transparency. California enacted the Gender Tax Repeal Act of 1995, which prohibits businesses from charging different prices for the same or similar services based on a consumer’s gender. The law also requires certain businesses to display price information and disclose prices upon request, according to state officials with whom we spoke. Similarly, in 1997, Miami-Dade County passed the Gender Pricing Ordinance, which prohibits businesses from charging different prices based solely on a consumer’s gender (though businesses are permitted to charge different prices if the goods or services involve more time, difficulty, or cost). In the same year, it also passed an ordinance that prohibits dry cleaning businesses from charging different prices for similar services based on gender. This ordinance also requires those businesses to post all prices on a clear and conspicuous sign, according to county officials with whom we spoke. State and local officials we interviewed identified benefits and challenges associated with these laws. For example, California, New York City, and Miami-Dade County officials noted that these laws give them the ability to intervene to address pricing practices that may lead to discrimination based on gender. In addition, California state officials said that the state’s efforts to implement the Gender Tax Repeal Act helped to improve consumer awareness about gender price differences. However, officials from California and Miami-Dade County cited challenges associated with tracking relevant complaints. For example, Miami-Dade County’s online complaint form includes a narrative section but does not ask for the complainant’s gender. Consumers do not always identify their gender in the narrative or state that that was the reason for their treatment. Additionally, officials from California and Miami-Dade County stated that seeking out violations would be very resource-intensive, and they rely on residents to submit complaints about violations. We provided a draft of this report to BCFP, DOJ, FTC, and HUD. BCFP, FTC, and HUD provided technical comments on the report draft, which we incorporated where appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, BCFP, DOJ, FTC, HUD, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI. We used a multivariate regression model to estimate the effect of gender (to which a product is targeted to) on the price of that product while controlling for other factors that may also affect the product’s price. The factors that we controlled for were the product size, promotional and packaging costs, and other product characteristics discussed in detail later. We used scanner data from the Nielsen Company (Nielsen) for calendar year 2016 and analyzed the following 10 product categories: (1) underarm deodorants, (2) body deodorants, (3) shaving cream, (4) shaving gel, (5) disposable razors, (6) nondisposable razors, (7) razor blades, (8) designer perfumes, (9) mass-market perfumes, and (10) mass-market body sprays. We estimated the following regression model for each of our 10 product categories: P=α+β*Male + λ* Size + θ*Owner +η*Promotion+ μ*X + δ*Y + ε The dependent variable P in the above equation represents price. For our analysis, we constructed two measures of price. The first is the item price, estimated as the total dollar sales of an item (each item is depicted by a unique Universal Product Code (UPC) in the Nielsen data), divided by the total units sold of that item. The second measure of price that we use is price per ounce or price per count. This is estimated as the item price divided by the total quantity of product, where quantity or size depicts the number of ounces (as in the case of fragrances) or the count of blades in razor blade packs. The total quantity of the product is the ounces or counts of one item multiplied by the number of items included in a specific product configuration. For example, a 2-pack of deodorant sticks where each deodorant stick is 2.7 ounces would be a total quantity of 5.4 ounces. The variable Male in the above equation is an indicator variable depicting whether the product is designated as a “men’s” product in the Nielsen data. It is represented as a value of “1” for men’s products and a value of “0” for women’s products. The co-efficient for this variable, parameter β, would therefore show the price difference between a men’s and women’s product. A negative value would imply a lower price for products designated as men’s products. The variable Size represents the most appropriate specification of the size of the product. Owner is a set of indicator variables representing all the brand owners selling a particular product. The brand of a product can be expected to have a substantial effect on prices for the kind of products we analyze because brands can be a proxy for quality for some consumers. However, we also found that firms often create gender-specific brands, so holding brands constant rendered most gender-based price comparisons infeasible. To overcome this, we hold owners instead of brands constant for our price comparison analysis. The variable Promotion represents the percentage of dollar sales that were sold on any type of promotion. This variable proxies for promotional costs to some extent based on the assumption that the greater the proportion of sales due to promotional activity, the greater the promotional costs. The variables X represent a set of indicator variables for packaging characteristics such as package delivery method (for example, roll-on or aerosol spray deodorants) or package shape (for example, bottle, tube, or can). We expect these characteristics to proxy for different costs associated with different packaging methods. The variables Y represent a set of indicator variables representing different product characteristics (for example, forms such as gel stick or smooth solid and claims such as “active cooling” or “anti-wetness” for underarm deodorants, and blade types such as “triple edge” and “flexible six” for razors). These product characteristics may proxy for some underlying manufacturing costs or even consumer preferences. Since firms may create gender-specific product attributes—scents like “sweet petals” and “pure sport” or razor head types and colors to differentiate products between genders—we did not always keep every product attribute constant when comparing prices. The idiosyncratic error term is represented by ε. All of our regressions are weighted, with the proportion of units sold for a particular item in that year as the weight. This is because, for personal care products, there are large differences in units sold of various product types and brands, and therefore it not useful to compare simple un- weighted average prices. For example, for one company the highest selling men’s deodorant stick sold almost 12 million units in 2016, and the highest selling women’s deodorant stick sold over 8 million units. The average units sold for underarm deodorants as a whole was just over 300,000 units, and 1,000 products out of a total of almost 3,000 products had less than 100 units sold in 2016. The linear model we used has the usual shortcomings of being subject to specification bias to the extent the relationship between price and each of the independent variables is not linear. The model also does not include complete data on costs, such as advertising and packaging, or consumers’ willingness to pay, both of which have an effect on the price differences. The model may thus also be subject to omitted variable bias. In addition, the model may have some endogeneity issues to the extent the product characteristics themselves are influenced by consumers’ willingness to pay for some of those product features. To reduce the impact of any model misspecifications or heteroscedasticity, we used the robust (or Huber-White sandwich) estimator. We estimated the regression model above for each of the 10 products separately and for each of the two measures of price. We used Nielsen’s in-store, retail price scanner data, which include information on total volume sold and dollar sales for items purchased at 228 retailers including grocery stores, drug stores, mass merchandisers (such as Target), dollar stores, club stores (such as Sam’s Club), and convenience stores. The data capture 82 percent of all U.S. sales. Nielsen also projects sales for the remaining noncooperating retailers, and that information is included in this dataset. We excluded some very small brands that did not have enough units sold from our regression analysis in order to avoid outliers. These brands usually had less than 50,000 units sold over the entire year, and for some products they represented less than 1 percent of all units sold. We found that average retail prices paid were significantly higher for women’s products than for men’s in 5 out of 10 personal care products. In 2 categories, men’s versions sold at a significantly higher price. One category had mixed results based on two price measures analyzed, and two others showed no significant gender price differences. A summary of our regression results is presented in table 5. We manually collected prices for 16 pairs of selected personal care products from the websites of four online retailers that also operated physical store locations. We selected comparable pairs of similar men’s and women’s products that were differentiated by product attributes, such as scent or color, and were sold at most or all of the four retailers. The products were selected based on several comparability factors such as brand, product claims, and number of blades in a razor. For two 1-week time periods in January and March 2018, we collected prices manually between 1:00 p.m. and 7:00 p.m. (ET) over two 7-day time periods. We collected listed prices and did not adjust the prices for any promotions that were available, such as online coupons or buy-one-get-one-free offers. Table 6 presents the results of our online price collection. These results have important limitations: The average prices shown are not generalizable to the broader universe of prices for these products sold at other times or by other online retailers. The data reflect prices advertised to consumers rather than the prices consumers actually paid. The data do not capture the volume of sales for each item for each retailer; in our analysis, we weighted all advertised prices equally across the retailers. As a result, differences we found within these advertised prices may not have translated into comparable differences in prices female and male consumers paid for these products online. The prices do not reflect any promotional discounts, volume discounts, or other discounts that may have been available to some or all consumers. This report examines (1) how prices compared for selected categories of consumer goods that are differentiated for men and women, and potential reasons for any significant price differences; (2) what is known about the extent to which men and women may pay different prices in, or experience different levels of access to, markets for credit and goods and services that are not differentiated based on gender; (3) the extent to which federal agencies have identified and taken steps to address any concerns about gender-related price differences; and (4) state and local government efforts to address concerns about gender-related price differences. To compare prices for selected goods that are differentiated for men and women, we purchased and analyzed Nielsen Company (Nielsen) data on retail prices paid for 10 personal care product categories for calendar year 2016. The product categories included underarm deodorants, body deodorants (typically sold as a spray), disposable razors, nondisposable razors, razor blades, shaving creams, shaving gels, and three categories of fragrances. We selected these categories of personal care products because they are commonly purchased consumer goods that were categorized by gender in the Nielsen data. The women’s and men’s versions of personal care products we selected are generally more similar in terms of the form, size, and packaging in comparison to certain other consumer product categories that are also differentiated by gender, such as clothing. We used regression models to analyze data on retail prices paid for the 10 categories of personal care products differentiated for women and men. To assess the reliability of the Nielsen data, we reviewed relevant documentation and conducted interviews with Nielsen representatives to review steps they took to collect and ensure the reliability of the data. In addition, we electronically tested data fields for missing values, outliers, and obvious errors. We determined that these data were sufficiently reliable for our purposes. For more details on the methodology for, and limitations of, our analysis of these retail price data, see appendix I. We also manually collected listed prices for 16 pairs of selected personal care products from four different retailer websites over two 7-day periods in January and March 2018. For each pair, we selected comparable men’s and women’s products that were differentiated by product attributes, such as scent or color, and were commonly sold across retailers. For more details on our online price data collection and the limitations associated with interpreting the results, see appendix II. To examine what is known about the extent to which men and women may be offered different prices or access for the same goods or services, we reviewed academic literature identified through a literature search covering the last 25 years. To identify existing studies from peer-reviewed journals, we conducted searches using subject and keyword searches of various databases, such as EconLit, Scopus, ProQuest, and Social SciSearch. We also used a snowball search technique—meaning we reviewed relevant academic literature cited in our selected studies—to identify additional studies. We performed these searches and identified articles from December 2016 to April 2018. From these searches, we identified 21 studies that appeared in peer-reviewed journals or research institutions’ publications from 1995 through 2016 and were relevant to gender-related price differences for the same products. We reviewed and assessed each study’s evaluation methodology based on generally accepted social science standards. See the bibliography at the end of this report for a list of the 21 studies. We then summarized the research findings. A GAO economist read and assessed each study, using the same data collection instrument. The assessment focused on information such as the types of disparities examined, the research design and data sources used, and methods of data analysis. The assessment also focused on the quality of the data used in the studies as reported by the researchers and any limitations of data sources for the purposes for which they were used. A second GAO economist reviewed each completed data collection instrument to verify the accuracy of the information included. As a result, the 21 studies that we selected for our review met our criteria for methodological quality. We found the studies we reviewed to be reliable for purposes of determining what is known about price differences for the same products. However, these studies have important limitations, such as using nonrepresentative data samples, and the results are not generalizable. To examine the federal role in overseeing gender-related price differences, we reviewed relevant federal statutes and agency guidance, and interviewed officials from the Federal Trade Commission (FTC), Bureau of Consumer Financial Protection (BCFP), the Department of Housing and Urban Development (HUD), and the Department of Justice (DOJ). To help identify the extent of concerns about gender-related price differences, we interviewed representatives from eight consumer groups, three industry associations, and four academic experts. Additionally, we reviewed a sample of consumer complaints from databases managed by BCFP, FTC, and HUD (Consumer Complaint Database, Consumer Sentinel Network, and Enforcement Management System, respectively). Complaints were submitted by consumers across the United States about various financial products, housing grievances, and other consumer protection concerns. To identify our universe of gender-related consumer complaints in BCFP and FTC databases, we used the following search terms that targeted sex or gender discrimination: discriminat, unfair, treat, decept, abus, female, woman, women, man, men, male, gender, sex, female, woman, women, man, men, male, gender, and sex. HUD’s consumer complaint database is categorized by protected class (e.g., race, sex, national origin), so we did not need to use search terms to identify gender-related complaints. For the years 2012 through 2017, we identified 6,117 BCFP consumer complaint narratives; 10,472 FTC consumer complaints narratives; and 5,421 HUD consumer complaint narratives that were relevant to our scope. We then drew a stratified random probability sample of 100 gender-related consumer complaints from each database. To determine which complaints in our samples were about price differences related to gender or sex, two team members read through each complaint narrative and coded whether or not the complainant’s narrative indicated that they felt that they paid or were charged more because of their gender or sex. A third team member conducted a final review of the results, and made a final determination in cases where there were differences in the first two team member’s assessments. With this probability sample, each member of the study population had a nonzero probability of being included, and that probability could be computed for any member. We followed a probability procedure based on random selections and our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (with a margin of error of 5.9 percent). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. We assessed the reliability of these data by reviewing documentation and interviewing agency officials about the databases used to collect these complaints. We determined that these data were sufficiently reliable for our purposes of identifying complaints of gender- related price differences. To explore state and local efforts to address concerns about gender- related price differences, we conducted a literature search and identified three state or local laws or ordinances that specifically address gender- related price differences: California, Miami-Dade County, Florida, and New York City, New York. We reviewed these laws and ordinances and interviewed officials from these jurisdictions to discuss motivations for, oversight of, and the impact of these laws. We conducted this performance audit from October 2016 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. For each of 10 personal care product categories we analyzed, we compared the overall average prices for women’s products and men’s products using two measures of average price: average item price and average price per ounce or count. While the second price measure adjusts the average price for quantity of product, these comparisons did not take into account the effect on price of differences in product brand, packaging, and other characteristics. As shown in table 7, adjusting the average item price to account for differences in product quantity (ounces or count) significantly affected the size and magnitude of gender price differences for several product categories. This is because men’s products in the dataset were frequently larger in size or count compared with women’s products in the same category. For example, women’s disposable razors sold for 11 percent less than those targeted to men when we compared average item prices. However, when we compared average price per count of razors, women’s disposable razors sold for 19 percent more on average than men’s. This is because women’s disposable razors had on average about one fewer razor per package. In 5 out of 10 product categories, women’s versions of the product on average sold for a higher price per ounce or count than men’s and these differences were statistically significant at the 95 percent confidence level for 4 products and at the 90 percent level for one product. Information about sales and relative sizes of different products targeted to men and women are presented in table 8 below. This appendix provides additional details about the consumer complaint processes at the Bureau of Consumer Financial Protection (BCFP), Federal Trade Commission (FTC), and Department of Housing and Urban Development (HUD). Consumers with a complaint about unfair treatment related to gender could submit a complaint to one of these agencies. BCFP and FTC monitor consumer complaints related to violations under the Equal Credit Opportunity Act, while HUD and the Department of Justice (DOJ) investigate housing discrimination complaints under the Fair Housing Act. These complaints could be about price differences because of gender. Alicia Puente Cackley, (202) 512-8678 or cackleya@gao.gov. In addition to the contact named above, John Fisher (Assistant Director), Jeff Harner (Analyst in Charge), Vida Awumey, Bethany Benitez, Namita Bhatia-Sabharwal, Kelsey Kreider, and Kelsey Sagawa made key contributions to this report. Also contributing to this report were Abigail Brown, Michael Hoffman, Jill Lacey, Oliver Richard, Tovah Rom, and Paul Schmidt. We reviewed literature to identify what is known about the extent to which female and male consumers may face different prices or access in markets for credit and goods and services that are not differentiated based on gender. This bibliography contains citations for the 20 studies and articles that we reviewed that compared prices or access for female and male consumers in markets where the product is not differentiated by gender (mortgages, small business credit, auto purchases, and auto repairs). Asiedu, Elizabeth, James A. Freeman, and Akwasi Nti-Addae. “Access to Credit by Small Businesses: How Relevant Are Race, Ethnicity, and Gender?” The American Economic Review, vol. 102, no. 3 (2012): 532- 537. Ayers, Ian and Peter Siegelman. “Race and Gender Discrimination in Bargaining for a New Car.” The American Economic Review, vol. 85, no. 3. (1995): 304-321. Blanchard, Lloyd, Bo Zhaob, and John Yinger. “Do lenders discriminate against minority and woman entrepreneurs?” Journal of Urban Economics 63 (2008): 467–497. Blanchflower, David G., Phillip B. Levine, and David J. Zimmerman. “Discrimination in the Small-Business Credit Market.” The Review of Economics and Statistics, vol. 85, no. 4 (2003): 930-943. Busse, Meghan R., Ayelet Israeli, and Florian Zettelmeyer. “Repairing the Damage: The Effect of Price Expectations on Auto Repair Price Quotes.” National Bureau of Economic Research, Working Paper 19154 (2013). Cavalluzzo, Ken S., Linda C. Cavalluzzo, and John D. Wolken. “Competition, Small Business Financing, and Discrimination: Evidence from a New Survey.” The Journal of Business, vol. 75, no. 4 (2002): 641- 679. Cheng, Ping, Zhenguo Lin, and Yingchun Liu. “Do Women Pay More for Mortgages?” The Journal of Real Estate Finance and Economics, vol. 43 (2011): 423-440. Cheng, Ping, Zhenguo Lin, and Yingchun Liu. “Racial Discrepancy in Mortgage Interest Rates.” The Journal of Real Estate Finance and Economics, vol. 51 (2015): 101-120. Cole, Rebel, and Tatyana Sokolyk. “Who Needs Credit and Who Gets Credit? Evidence from the Surveys of Small Business Finances”. Journal of Financial Stability, vol. 24 (2016), 40-60. Coleman, Susan. “Access to Debt Capital for Women- and Minority- Owned Small Firms: Does Educational Attainment Have an Impact?” Journal of Developmental Entrepreneurship, vol. 9, no. 2 (2004): 127-143. Duesterhas, Megan, Liz Grauerholz, Rebecca Weichsel, and Nicholas A. Guittar. “The Cost of Doing Femininity: Gendered Disparities in Pricing of Personal Care Products and Services,” Gender Issues, vol. 28, (2011): 175-191. Goodman, Laurie, Jun Zhu, and Bing Bai. “Women Are Better than Men at Paying Their Mortgages.” Urban Institute, Research Report (2016). Haughwout, Andrew, et al. “Subprime Mortgage Pricing: The Impact of Race, Ethnicity, and Gender on the Cost of Borrowing.” Brookings- Wharton Papers on Urban Affairs (2009): 33-63. Mijid, Naranchimeg. “Gender differences in Type 1 credit rationing of small businesses in the US.” Cogent Economics & Finance, vol. 3 (2015). Mijid, Naranchimeg. “Why are female small business owners in the United States less likely to apply for bank loans than their male counterparts?” Journal of Small Business & Entrepreneurship, vol. 27, no. 2 (2015): 229- 249. Mijid, Naranchimeg and Alexandra Bernasek. “Gender and the credit rationing of small businesses.” The Social Science Journal, vol. 50 (2013): 55-65. Morton, Fiona Scott, Florian Zettelmeyer, and Jorge Silva-Risso. “Consumer Information and Price Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?” National Bureau of Economic Research, Working Paper 8668 (2001). O’Connor, Sally. “The Impact of Gender in the Mortgage Credit Market.” University of Wisconsin-Milwaukee Doctoral Dissertation (1996). Van Rensselaer, Kristy N., et al. “Mortgage Pricing and Gender: A Study of New Century Financial Corporation.” Academy of Accounting and Financial Studies Journal, vol. 18, no. 4 (2014): 95-110. Wyly, Elvin and C.S. Ponder. “Gender, age, and race in subprime America.” Housing Policy Debate, vol. 21, no. 4 (2011): 529-564. Zimmerman Treichel, Monica and Jonathan A. Scott. “Women-Owned Businesses and Access to Bank Credit: Evidence from Three Surveys Since 1987.” Venture Capital, vol. 8, no. 1 (2006): 51-67.", "summary": "Gender-related price differences occur when consumers are charged different prices for the same or similar goods and services because of factors related to gender. While variation in costs and consumer demand may give rise to such price differences, some policymakers have raised concerns that gender bias may also be a factor. While the Equal Credit Opportunity Act and Fair Housing Act prohibit discrimination based on sex in credit and housing transactions, no federal law prohibits businesses from charging consumers different prices for the same or similar goods targeted to different genders. GAO was asked to review gender-related price differences for consumer goods and services sold in the United States. This report examines, among other things, (1) how prices compared for selected goods and services marketed to men and women, and potential reasons for any price differences; (2) what is known about price differences for men and women for products not differentiated by gender, such as mortgages; and (3) the extent to which federal agencies have identified and addressed any concerns about gender-related price differences. To examine these issues, GAO analyzed retail price data, reviewed relevant academic studies, analyzed federal consumer complaint data, and interviewed federal agency officials, industry experts, and academics. Firms differentiate many consumer products to appeal separately to men and women by slightly altering product attributes like color or scent. Products differentiated by gender may sell for different prices if men and women have different demands or willingness to pay for these product attributes. Of 10 personal care product categories (e.g., deodorants and shaving products) that GAO analyzed, average retail prices paid were significantly higher for women's products than for men's in 5 categories. In 2 categories—shaving gel and nondisposable razors—men's versions sold at a significantly higher price. One category—razor blades--had mixed results based on two price measures analyzed, and two others—disposable razors and mass-market perfumes—showed no significant gender price differences. GAO found that the target gender for a product is a significant factor contributing to price differences identified, but GAO did not have sufficient information to determine the extent to which these gender-related price differences were due to gender bias as opposed to other factors, such as different advertising costs. Though the analysis controlled for several observable product attributes, such as product size and packaging type, all underlying differences in costs and demand for products targeted to different genders could not be fully observed. Studies GAO reviewed found limited evidence of gender price differences for four products or services not differentiated by gender—mortgages, small business credit, auto purchases, and auto repairs. For example, with regard to mortgages, women as a group paid higher average mortgage rates than men, in part due to weaker credit characteristics, such as lower average income. However, after controlling for borrower credit characteristics and other factors, three studies did not find statistically significant differences in borrowing costs between men and women, while one found women paid higher rates for certain subprime loans. In addition, one study found that female borrowers defaulted less frequently than male borrowers with similar credit characteristics, and the study suggested that women may pay higher mortgage rates than men relative to their default risk. While these studies controlled for factors other than gender that could affect borrowing costs, several lacked important data on certain borrower risk characteristics, such as credit scores, which could affect analysis of gender disparities. Also, several studies analyzed small samples of subprime loans that were originated in 2005 or earlier, which limits the generalizability of the results. In their oversight of federal antidiscrimination statutes, the Bureau of Consumer Financial Protection, Federal Trade Commission, and Department of Housing and Urban Development have identified limited consumer concerns based on gender-related pricing differences. GAO's analysis of complaint data received by the three agencies from 2012–2017 found that they had received limited consumer complaints about gender-related price differences. The agencies provide general consumer education resources on discrimination and consumer awareness. However, given the limited consumer concern, they have not identified a need to incorporate additional materials specific to gender-related price differences into their existing consumer education resources.", "document_type": "gao"}
{"report": "The federal budget process provides the means for the President and Congress to make informed decisions between competing national needs and policies, to allocate resources among federal agencies, and ensure laws are executed according to established priorities. OMB, as part of the Executive Office of the President, is to guide the annual budget process, make decisions on executive agencies’ budgets, aggregate submissions for agencies, and submit the consolidated document for the executive branch as the President’s Budget Request to Congress. In support of the President’s budget request, departments are to submit budget justifications to the congressional appropriations committees, typically to explain the key changes between the current appropriation and the amounts requested for the next fiscal year. During the process, OMB is to ensure that budget requests are consistent with presidential objectives and issue guidance to federal agencies through OMB Circular A-11, which provides instructions for submitting budget data and materials, as well as for developing budget justifications. Various offices within ICE are involved in developing ICE’s annual budget request for immigration detention (see fig. 1). Two ICE entities integral to the budget request formulation are the Office of Budget and Program Performance (OBPP) and Enforcement and Removal Operations (ERO). Within ICE’s Office of the Chief Financial Officer, OBPP is responsible for guiding ICE’s annual budget request process, including analyzing and validating budget projections for all of ICE’s directorates, including ERO. ERO is responsible for estimating the total amount of funding to cover costs of immigration detention. For the upcoming budget year, ERO determines the projected ADP, while OBPP determines the projected bed rate. ERO then utilizes the two variables of bed rate and ADP in its estimate of future detention costs. Other offices within ICE, such as Custody Management, Field Operations, Operations Support, Management and Administration, and the Office of Policy are involved in the formulation of other aspects of ICE’s budget or in supervisory roles. Figure 1 is an organizational chart of ICE offices that are involved in the annual budget request for immigration detention resources. ICE follows budget formulation guidance from DHS, and uses two key variables—the bed rate and ADP—when formulating its budget request. Approximately 20 months before the start of a particular fiscal year, the Secretary of Homeland Security provides its Resource Planning Guidance to all DHS components. This document works to align the department’s planning, programming, and budgeting activities and execution activities over a five-year period, and sets forth the resource planning priorities of the department as they relate to its mission. The department planning priorities are to guide the DHS components as they develop their respective Resource Allocation Plans (RAP). After the Secretary issues the Resource Planning Guidance, DHS’s Office of the Chief Financial Officer provides fiscal guidance to ICE that identifies an estimated allocation amount, which ICE is to budget to in its RAP submission. In developing its RAP, each of ICE’s program offices determines its current budget needs and then submits Program Decision Options (PDO) to ICE leadership for any changes from the prior year’s budget. Every ICE program and activity submits, in the form of a PDO, any changes that are to occur, including all programmatic increases, initiatives, reductions, or eliminations. Once all of the program offices submit their PDOs to ICE leadership, a council of leadership representatives from across ICE convenes to approve and prioritize the selected PDOs moving forward to DHS. ICE submits its RAP to DHS for a final decision with all pertinent information attached, such as the prioritized PDOs based on mission and department needs, fiscal changes to programs, and potential capital investments. During the Resource Allocation Decision (RAD) process, DHS leadership reviews all of the RAP submissions from across the department and approves or rejects the PDOs. Individual program offices work out any changes that may have occurred during the RAD process prior to the completion of the budget request and submission to OMB. DHS then submits a budget proposal on behalf of the entire department, inclusive of ICE, to OMB. OMB is to prepare a budget request for all of the executive departments and agencies, which is submitted to Congress as the President’s budget. Following OMB decisions on agency budget requests, DHS submits a budget justification, inclusive of ICE, with more details to the congressional appropriations committees. Key steps in the overall process are shown in figure 2. When preparing the budget submission, ICE uses two key variables, the bed rate and ADP (see sidebar), to calculate a cost estimate for the resources needed for managing the immigration detention system. In order to determine the amount necessary to operate the detention system for adult detainees, ICE multiplies the projected ADP by the projected bed rate by the number of days in the year (see fig. 3). ICE then includes these costs as part of its Custody Operations account. ICE does not have a documented review process to ensure the accuracy of its budget calculations presented in its yearly congressional budget justifications (CBJ). Based on our review of CBJs from fiscal year 2014 to fiscal year 2018, there are a number of inconsistencies and errors in the numerical calculations pertaining to immigration detention costs. During our review of ICE’s fiscal year 2014 and fiscal year 2015 budget requests, we calculated the total amounts requested for ICE’s immigration detention costs using its formula (see fig. 3) and the ADP and bed rate figures provided in the budget request and compared it with ICE’s requested amount. Based on our calculations, the amounts ICE requested are not consistent (by a difference of $34.7 million for fiscal year 2014 and $129 million for fiscal year 2015) with the figures used to develop their estimate. ICE officials acknowledged the error. Additionally, ICE’s fiscal year 2017 budget request erroneously applied $2 million in costs from detention beds to transportation and removal, resulting in a request for $2 million less for detention beds and $2 million more for transportation and removal, a total of $4 million in errors in the agency’s estimate. In response to the misapplication of $2 million, ICE officials stated that the CBJ still provided for the same net total because the two mistakes offset each other. Officials also stated that the final appropriation ultimately was not based on its budget request numbers and ICE’s detention activities were funded at an amount that was greater than what they requested. The fiscal year 2018 request also contains a multiplication error that resulted in ICE requesting less funds—$4,000— than using the correct calculation. ICE officials told us that there are multiple reviews of the budget documents prior to submission to ensure that the numbers presented are accurate and supportable. However, ICE could not provide us with any documentation that the reviews were conducted. ICE officials stated that reviews were typically completed using hard copies and then approval was verbal and not documented formally. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks. Such activities include review processes to ensure the accuracy of budget calculations prior to official submission and appropriate documentation of the reviews. While the final appropriations that Congress determines for ICE may ultimately be higher or lower than what ICE requested, generating and presenting an accurate picture of ICE’s funding needs is necessary to provide Congress the information needed to make informed decisions. By developing and implementing a documented review process, it is more likely that relevant ICE officials are accountable for ensuring the accuracy of the budget requests and underlying calculations. Without a documented review process, ICE is not positioned to demonstrate the credibility of its budget requests. Furthermore, Congress may not have reliable information to make informed decisions about funding immigration detention needs. Bed Rate ICE’s bed rate is based on four cost categories. Bed/guard costs: The contract costs of beds and guards at U.S. Immigration and Customs Enforcement’s (ICE) various detention facilities. Health care: Medical expenses of the detainee population. Other direct costs: All costs that directly concern detainees, including payments to detainees for work programs, provisions and supplies for detainees, and telecommunications billed to individual facilities. Service-wide or indirect costs: Overhead expenses for ICE’s management of the detention system, including rent, security, office equipment, and liability insurance. Although ICE bases its projected adult bed rate on historical costs, from fiscal year 2014 through fiscal year 2017, ICE underestimated the actual rate. ICE calculates the adult bed rate by tracking obligations and expenditures in four categories—bed/guard costs, health care, other direct costs, and service-wide costs, also known as indirect costs. (See sidebar for more information.) We found that ICE has improved its process for collecting this information from its financial management system since 2014, when we previously reported that limitations in its data system required ICE personnel to manually enter codes to categorize relevant data. In fiscal year 2014, ICE introduced a new financial coding process that allows staff to pull costs—the obligations and expenditures—directly from its financial management system. This system is an improvement over the manual workarounds that ICE previously used and allows staff to pull the necessary data more easily for the purposes of calculating the projected bed rate. To estimate what ICE’s projected adult bed rate will be two years into the future, ICE calculates and averages the year-over-year percentage change in costs since fiscal year 2009 and multiplies the current bed rate by this figure twice, following the formula outlined in figure 4. ICE calculates the year-over-year percentage change for each cost category—bed/guard costs, health care, other direct costs, and service- wide costs—and then applies the average of these changes to the current cost of the category. The final projected bed rate is the sum of the four cost categories. According to ICE, the average of the year-over-year percentage change serves as its inflation rate and more accurately reflects the annual escalation of its detention costs. Given that ICE must determine the projected bed rate almost two years into the future, ICE applies its inflation rate twice to the current costs. Although the formula outlined in figure 4 summarizes ICE’s adult bed rate methodology, ICE’s guidance notes that situations may occur in which it is advisable to adjust national bed rate projections to account for new trends or other changes. For example, in response to concerns from Congress about ICE’s application of indirect costs, and the opportunity to revise the fiscal year 2017 bed rate, ICE officials told us they changed some of the methodology for the projected 2017 and 2018 bed rates. Although ICE’s bed rate model is based on historical costs, from fiscal year 2014 through fiscal year 2017 ICE’s adult bed rate projections underestimated the actual bed rate. Specifically, ICE underestimated the bed rate by $2.16 in fiscal year 2014, by $8.08 in fiscal year 2015, by $5.42 in fiscal year 2016, and by $0.31 in fiscal year 2017 (see fig. 5). For illustrative purposes, underestimating the bed rate by $5 per day, assuming an ADP of 34,000, yields a more than $62 million underestimation in the detention budget request. The bed rate model assumes that operations in the immigration detention system will continue without drastic changes and that past trends will continue since it bases its projections on historical costs. According to ICE officials, the bed rate model cannot anticipate a need to increase the capacity of the entire system, or anticipate a policy decision to close or continue operation of a facility. Either of these situations may cause the bed rate to change. Although certain situations may lead to unanticipated changes in the bed rate, we identified a number of factors in ICE’s current bed rate model that have led to inaccuracies, including using incorrect inflation factors and mixing costs for family and adult facilities. ICE calculates the projected bed rate by using its own inflation rate based on the escalation of detention costs instead of a standard inflation rate provided by OMB or DHS, but did not provide documentation of its rationale. As described previously, ICE’s inflation factor is based on an average of the year-over-year changes in costs since fiscal year 2009. OMB guidance states that it will provide agencies with economic assumptions to be used for budget requests, including inflation rates, and that agencies can consider price changes, such as bed/guard costs, as a factor in developing estimates. ICE officials told us that historical costs more accurately reflect potential increases, but did not provide us with documentation to support that rationale. According to ICE officials, by accepting the inflation factor used in ICE’s budget request, OMB has given tacit, if not direct, approval for its usage. Based on our review of ICE’s adult bed rate projections, historical costs may not be the best method for predicting future costs and assumes that past trends will continue, including negative inflation rates. Because the bed rate model accounts for changes on a per person basis, negative inflation factors could be due to decreasing costs or an increasing detainee population, both of which may change in the following year. For example, ICE’s fiscal year 2018 bed rate model incorporates a negative inflation factor for health care costs even though in its budget justification ICE attributes part of the bed rate increase over the prior year to rising health care costs. Relying on historical costs may lead to inaccuracies if a deflationary trend does not continue as the model assumes. In our examination of the bed rate model, we also found that ICE did not calculate the percentage change correctly. Year-over-year percentage change compares the difference in costs in percentage terms and can be calculated by dividing the difference in costs by the starting costs. Instead of following this formula, ICE’s bed rate model calculated the actual monetary difference between the two years and represented it as a percentage change. For example, from fiscal year 2009 to fiscal year 2010, the bed/guard rate increased from $77.50 to $81.59. Whereas the percentage change in the rate is 5.28 percent, ICE calculated the percentage change by subtracting one rate from the other ($4.09) and adding a percent sign (4.09%), thereby treating the dollar difference as a percentage change. (See table 1.) ICE officials stated that they decided to use the actual monetary difference as a way to account for inflation for the fiscal year 2018 adult bed rate. However, using the actual monetary difference in costs does not provide a percentage of change. It misrepresents a difference in price as a percentage. Further, we found that because ICE did not appropriately calculate the percentage change for each year, the average of year-over- year changes, which ICE uses as its inflation factor, is not correct. For example, ICE’s inflation factor for the bed/guard rate is 2.74 percent, while the appropriate calculation is 3.28 percent. (See table 1.) (See Appendix I for more information and calculations.) In addition, when calculating the fiscal year 2018 projected bed rate, rather than following formulas contained in the bed rate model, ICE manually entered a different inflation factor for two cost categories—other direct costs and service-wide costs—instead of relying on the historical data. ICE added together the inflation factors indicated by the model for other direct costs and service-wide costs and then applied the combined inflation factor to both categories. By combining and manually entering the factors, ICE mistakenly introduced an additional error. Officials did not provide an explanation or documentation of why they manually entered these numbers or combined the two inflation factors except to state that it stemmed from the Congressional request to separate the costs. ICE’s adult bed rate model includes information for family facilities, even though family facilities are budgeted separately and in a different manner from adult facilities. For its adult facilities, ICE contracts with the individual facilities to provide beds and the cost is dependent on the number of adults detained. ICE’s family detention facilities, however, are operated by local governments or private companies and are funded through fixed price contracts that are not dependent on the number of people detained. (See sidebar for more information.) While ICE budgeted $291.4 million for its family facilities in fiscal year 2018, our analysis showed that ICE also included the population in its family facilities in the calculations of the adult bed rate. For example, in fiscal year 2018, ICE divided the obligations and expenditures for health care, other direct costs, and service-wide costs across the entire detainee population of adults and families, resulting in an adult bed rate that was lower than if the costs were divided by the adult population alone. Using this underestimated bed rate has resulted in a lower cost estimate than what ICE may need to sustain its adult population. Additionally, ICE double-counted some costs by budgeting for family facilities in both the adult bed rate and the total cost for family facilities. Specifically, we found that ICE included “other direct costs” associated with its family facilities when calculating its adult bed rate. Given that ICE already budgeted for these family facilities’ costs as a line item within its budget for family facilities, calculating the adult bed rate in this way double-counts the costs for family facilities in the budget. ICE officials did not provide documentation or their rationale for including the family facilities in their adult bed rate model. (See Appendix I for more information and calculations.) Standards for Internal Control in the Federal Government states that management should use quality information to achieve objectives, defining quality information as appropriate, current, complete, accessible, and provided on a timely basis. Quality information is based on relevant data from reliable sources and relatively free from error. According to GAO’s Cost Estimating and Assessment Guide, having a realistic estimate of projected costs facilitates effective resource allocation. Because information requirements should consider the expectations of external users, by basing its detention cost estimates on quality information, ICE would help ensure they are useful to Congress for making resource allocation decisions. Additionally, GAO’s cost estimating guide states that applying correct inflation rates is an important step to ensure accurate cost estimates and that inflation assumptions should be well documented. According to ICE officials, ICE’s most substantial change to the bed rate model since its creation in 2009 was a revision in 2014 to account for the costs of family facilities. In our review, we found that ICE includes information for family facilities in the adult bed rate model. By reviewing its bed rate model and methodology and correcting identified inaccuracies and other potential issues, ICE could improve its adult bed rate projections and better ensure its funding requests are credible and reliable. To calculate its budget needs, ICE reported using ADP figures that are based on policy decisions, but it is unclear if the ADP figures were based on statistical analysis. Further, ICE did not provide documentation on how it calculated the final ADP numbers used in its budget requests. For example, the fiscal year 2018 budget justification includes a projected ADP of 48,879 adults, a 63 percent increase over the fiscal year 2017 projected adult ADP (29,953) and a 49 percent increase over the fiscal year 2016 actual adult ADP (32,770). Although ICE provided a general explanation of various factors that influence ADP, including policy changes such as executive orders regarding immigration enforcement, the agency did not provide documentation quantifying the effect of these factors nor the calculations or methodology used to arrive at the 48,879 figure. In the absence of documentation, we reviewed ICE’s CBJs from fiscal year 2014 through fiscal year 2018 and we could not identify a clear methodology that ICE used across the years for developing the ADP and using it to calculate its detention-related budget needs. For example, in the fiscal year 2018 CBJ, ICE did not independently determine the projected ADP for use as an input into its cost estimate. Rather, officials started with the prior year’s funding level for detention costs, which officials told us they were directed to do by OMB, and calculated the ADP it could house with that amount. In the fiscal year 2017 budget justification, ICE used its projected ADP numbers from the previous year as starting points to calculate changes in its budget request. Additionally, while the appropriations act for fiscal year 2014 included a proviso that ICE’s funding support at least 34,000 detention beds during the fiscal year, ICE included a lower number of detention beds (30,539) in its 2015 budget request. According to ICE officials, the ADP figures used in its budget requests are initially projected by ERO, but may be changed by ICE leadership, DHS leadership, or OMB. Officials said the final ADP figure is based on policy decisions that account for factors that could affect the detainee population—for example, delays in immigration courts or the number of asylum officers on staff. According to officials, ICE prepares the budget request two years in advance of the year of execution with the best knowledge they have available at that time, including ADP projections. Officials stated that ADP is difficult to estimate given the unpredictable nature of events such as natural disasters, gang activity, or political upheaval in another part of the world, which may lead to an unanticipated increase in migration. Additionally, officials told us that various policy developments across the administration, DHS, or other agencies may affect immigration trends or enforcement. ICE officials also stated that because immigration detention facilities may receive detainees from other parts of the immigration system, ADP can be affected by actions taken by other actors involved in immigration enforcement, such as the Executive Office for Immigration Review, U.S. Customs and Border Protection, and U.S. Citizenship and Immigration Services. Such events could include, for example, delays in immigration court cases or an increase in the number of asylum cases, which could increase ADP. When asked to provide documentation for the fiscal year 2018 ADP projection of 51,379, ICE provided us a document containing tables and justification that explained the factors that impact ADP, but did not provide us the calculations or methodology used to arrive at the projected ADP. While the ADP used in its budget requests may be developed based on policy decisions, documenting the calculations and rationale by which the figure was developed would help to demonstrate how the number was determined and that it was based on sound decisions. Although ICE officials stated that ADP is difficult to forecast, the agency has developed a statistical model that may help predict the ADP. ERO’s Law Enforcement Systems and Analysis (LESA) Office has developed a statistical model that uses population data directly pulled from ICE’s Enforcement Information Database to forecast the ADP in upcoming years. (See sidebar for more information.) ERO began using the model in 2014, and according to officials, ICE currently uses it to estimate how much funding the agency will need for detention costs for the remainder of the fiscal year. The model describes historical trends, seasonal fluctuations, and random movement in the ADP, and then uses these historical patterns to make forecasts. Based on our evaluation, we found that this type of model was a reasonable method to forecast ADP, and that LESA’s particular modeling choices were generally consistent with accepted statistical practices and appropriate for the data and application. Using LESA’s model, ICE can produce a range of ADP forecasts under different scenarios, as well as confidence intervals for any particular forecast. Confidence intervals indicate the level of certainty around the model’s forecast, depending on how wide the range is for the ADP forecast. Confidence in the model’s forecasts decreases when the ADP range is smaller and when forecasting for later time periods. Because the model relies on historical data in making ADP forecasts, LESA is able to incorporate separate analysis of external or unexpected events to help inform the effects of similar events on ADP in the future. For example, according to ICE officials, LESA can conduct ad hoc analysis outside of the model of how potential policy decisions, such as a change in the number of field officers, may affect future ADP, if a similar event occurred in the past. Although new policies, processes, or political or economic events may cause the dynamics of ICE’s detainee population to change in ways that historical data would not predict, incorporating this type of model into ICE’s process to project ADP could potentially help provide useful and accurate forecasts in instances where ICE does have relevant historical data. ICE officials stated that ICE has used the LESA model in the past to inform the budget during the year of execution, but has only recently used it to provide confidence intervals for the ADP inputs into the budget projections when revising the projected fiscal year 2017 bed rate. According to GAO’s Cost Estimating and Assessment Guide, having a realistic estimate of projected costs facilitates effective resource allocation. In addition, federal standards for internal control state that management should design control activities to achieve objectives, and as part of those control activities, management should clearly document significant events in a manner that allows the documentation to be readily available for examination. Without documenting the methodology or rationale behind the ADP numbers ICE uses to develop its budget request for immigration detention, Congress and other stakeholders do not have clear visibility into the number upon which ICE is basing its budget request. Additionally, by considering how or whether the LESA model could be incorporated into ICE’s process for projecting ADP, ICE could leverage an existing model and identify potential improvements in the accuracy of its ADP projections based on historical data. ICE’s cost estimate for immigration detention resources does not fully meet best practices outlined in GAO’s Cost Estimating and Assessment Guide. As described earlier, the characteristics of a reliable cost estimate are comprehensive, well documented, accurate, and credible. As noted in table 2, ICE’s cost estimate for fiscal year 2018 substantially met the comprehensive characteristic, partially met the well documented and accurate characteristics, and minimally met the credible characteristic. By not sufficiently meeting the best practices in all of the characteristics, the cost estimate for the immigration detention cannot be considered reliable. Based on our analysis, ICE substantially met the comprehensive characteristic by including all costs, but has double-counted certain costs, as described earlier, and has not clearly documented all ground rules and assumptions. Based on our analysis, ICE’s cost estimate appears to include all government and contractor labor costs as well as material, equipment, facilities, and services to fund immigration detention, accounting for both the salary and expenses categories of the budget. ICE also adheres to DHS’s Common Appropriations Structure, and follows the OMB Object Class structure for planning and tracking costs at a more granular level. Officials stated that they use past execution reports, historical data, and spend plans to help inform the necessary distribution of funding for immigration detention by project and object code. While ICE accounted for all costs, ICE did not directly address how the agency prevents omissions or double-counting in its cost estimate, and double-counted costs by including other direct costs for family facilities when estimating the cost to house adult detainees. Additionally, ICE did not identify ground rules and assumptions influencing the estimate. Officials said that several documents list ground rules and assumptions; however, the ground rules cited are very broad or have not been followed. For example, ICE guidance states that ICE shall fund sufficient detention beds to support current enforcement and removal priorities and mandatory detention requirements, but it does not provide a basis for determining a sufficient number of detention beds. Another important factor in determining the bed/guard rate for adult beds is tier utilization. Tier utilization refers to the use of bed space in detention centers. For example, at a given detention center, ICE may pay a lower rate if it houses more detainees. When determining the bed rate based on tier utilization, ICE did not provide documentation of the ground rules or assumptions behind the tier utilization percentage used to calculate the fiscal year 2018 bed rate. Finally, as noted earlier in this report, ICE has not documented its rationale for not following DHS or OMB guidance for applying inflation rates to the estimate. According to GAO’s guide, given that cost estimates are based on limited information, defining ground rules and assumptions is important because they help identify the risks associated with these assumptions, including how changes in the assumptions could influence cost. Without clear documentation and rationale behind ground rules and assumptions, the estimate will not be able to be reconstructed when the budget staff and information used to develop the estimate are no longer available. Based on our analysis, ICE partially met the well documented characteristic by showing that its cost estimate had been reviewed by management and providing documentation that described its methodology in general. However, ICE did not show the formulas used to develop the cost estimate in sufficient detail to enable an outside party to fully follow its calculations or to re-create the fiscal year 2018 bed rate. Although the agency provided the bed rate model and showed what numbers were used as inputs into the model to project the fiscal year 2018 bed rate, it did not provide documentation that described the formulas used to calculate the projected bed rate. During our review of the bed rate model, we had to reconstruct the calculations step-by-step to identify the formulas and variables used to create the fiscal year 2018 bed rate. Additionally, ICE officials provided conflicting explanations regarding how they applied inflation to develop the projected fiscal year 2018 adult bed rate. In one instance, ICE officials said that they applied a 2.66 percent inflation factor to develop the fiscal year 2017 adult bed rate and then calculated and applied a cost adjustment to add more than 8,800 new beds, to produce the fiscal year 2018 bed rate. In another instance, ICE officials stated that the inflation factor was adjusted to 3.73 percent overall to develop the fiscal year 2017 bed rate and then they applied the cost adjustment to develop the fiscal year 2018 projected bed rate. These two explanations also differ from how the bed rate model applies inflation as described earlier in this report. ICE also did not document how the cost adjustment was calculated or the actual costs that the adjustment is based upon. When asked about documentation, ICE officials stated that the budget justification was not the appropriate document to cite detailed methodologies, but did not provide any additional supporting documentation. Documentation is essential for validating a cost estimate, including demonstrating that it is a reliable estimate of future costs. Consistent with GAO’s guide, without a well documented cost estimate, ICE is not positioned to present the estimate’s validity or answer questions about its basis. According to GAO’s Cost Estimating and Assessment Guide, estimates that lack sufficient documentation are not useful for updates or information sharing and can hinder understanding and proper use. Based on our analysis, ICE partially met the accurate characteristic by basing the cost estimate on historical cost data and tracking the differences between the projected and actual bed rate and ADP. ICE officials stated that they utilized historical cost data for bed/guard contract costs, health care costs, overhead expenses, detainee wages and supplies, and detainee headcount and capacity utilization, among other categories to estimate detention costs. However, ICE did not provide evidence that it analyzes the reasons behind the variances between the cost estimate and actual numbers for each year, and as mentioned previously, we identified issues with the inflation rates used to project the bed rate and the inclusion of family facilities in the adult bed rate. While ICE tracks differences between the projected bed rate used in the cost estimate and the actual numbers for each fiscal year, officials did not provide evidence that they analyze the reasons for these variances nor that they use this information to reassess its assumptions or models and improve them. ICE officials said that variances between the projected and actual bed rates are documented in a quarterly report that is publicly available. While these reports track the bed rate in the execution year, they do not demonstrate that ICE tracks explanations for variances between that bed rate and the original cost estimate figures presented in the budget request. ICE provided a document that showed the bed rate projection and the year-end result for fiscal years 2013 through 2016 and quarter-end results for fiscal year 2017, but the document did not explain most of the changes from the projected and actual numbers. ICE officials also said that they conduct ad hoc analyses to identify and communicate sources of variance, but did not provide any related documentation. Without a comparison and analysis of the reasons behind the differences between the actual figures and the original estimates, ICE is not positioned to assess the quality of its projections and use that information to improve cost estimates. Tracking the forecast rate against the actual rate and tracking budget justification assumptions against actual conditions could offer insight into the quality of the forecasts, according to GAO’s cost estimating guide. Based on our analysis, ICE minimally met the credible characteristic, and in particular did not conduct sensitivity or risk and uncertainty analyses to capture the cumulative effects if variables change. ICE also did not conduct any cross checks on the major cost elements using alternate methods to estimate cost. A sensitivity analysis reveals how a change in a single assumption, or variable, affects the cost estimate. A risk and uncertainty analysis would provide ICE a clear level of confidence about the estimate. ICE did not conduct a risk and uncertainty analysis for either the fiscal year 2018 cost estimate or the fiscal year 2018 bed rate model. Additionally, ICE’s description of the LESA model to project ADP discussed forecast confidence levels, but ICE did not quantify the uncertainty around the ADP projection of 51,379 detainees used in the fiscal year 2018 budget justification. ICE also did not discuss the range of potential costs due to uncertainty in the ADP and bed rate projections. Having a range of costs around a point estimate is useful to decision makers because it conveys the level of confidence in achieving the most likely cost. Additionally, ICE did not provide any documentation showing that major cost elements were cross checked using a different method for calculating the cost estimate to see if results were similar. According to GAO’s cost estimating guide, one way to reinforce the credibility of the cost estimate is to determine whether applying a different method produces similar results. If so, then confidence in the estimate increases, leading to greater credibility. ICE officials stated that internal and external auditors vetted the bed rate model and determined it to be credible, but this does not constitute an estimate cross check and using an alternate cost estimating method to cross check its estimate would provide greater assurance of its credibility. As noted previously, we found ICE’s bed rate model underestimated the actual bed rates over several years. Unless all characteristics are met or substantially met, the cost estimate cannot be considered reliable. Additionally, a poor cost estimate can negatively affect a program by eventually requiring a transfer or reprogramming of funds. In recent years, ICE has consistently transferred and reprogrammed millions of dollars of funds to account for budgeting too little or too much for immigration detention costs. By improving the budget estimation to better reflect cost estimating best practices, ICE could ensure a more reliable budget request. As an agency, ICE operates the immigration detention system on a budget of nearly $3 billion. Although estimating immigration detention costs may be difficult, taking steps to improve ICE’s cost estimating and budget request processes could help provide Congress with a more accurate picture of ICE’s funding needs. Developing and implementing a documented review process for its annual budget request calculations could help ICE better ensure that its budget requests are consistently credible and reliable. Additionally, assessing its bed rate model and addressing the identified inaccuracies in its methodology could help ICE more accurately project the bed rate in upcoming years. As we noted, a difference of just five dollars in the bed rate amounts to a difference of tens of millions of dollars in the final budget calculation. Documenting the methodology or rationale behind the ADP projections would better position ICE to support the basis for its budget requests each year, and incorporating the use of a statistical model may help decision makers by providing more information about the numbers that ICE presents. Furthermore, taking steps to ensure that ICE fully addresses cost estimating best practices could ensure a more reliable overall estimate. We are making the following five recommendations to ICE: The Director of ICE should take steps to document and implement its review process to ensure accuracy in its budget documents. The Director of ICE should take steps to assess ICE’s adult bed rate methodology to determine the most appropriate way to project the adult bed rate, including any inflation rates used. The Director of ICE should take steps to update ICE’s adult bed rate methodology by incorporating necessary changes based on its assessment, and ensure the use of appropriate inflation rates and the removal of family beds from all calculations. The Director of ICE should take steps to determine the most appropriate way to project the ADP for use in the congressional budget justification and document the methodology and rationale behind its ADP projection. As part of that determination, ICE should consider the extent to which a statistical model could be used to accurately forecast ADP. The Director of ICE should take steps to ensure that ICE’s budget estimating process more fully addresses cost estimating best practices. We provided a draft of this report to DHS for the department’s review and comment. DHS provided written comments, which are noted below and reproduced in full in appendix II, and technical comments, which we incorporated as appropriate. DHS concurred with our recommendations and described actions underway or the actions it plans to take in response. To our first recommendation, DHS stated that ICE recently implemented a more stringent process for the fiscal year 2020 budget cycle, and will work to more effectively document its review process and decisions during the budget formulation process. To our second recommendation, DHS stated that ICE has completed multiple third-party assessments of its bed rate methodology. We will evaluate any assessments provided and determine the extent to which those assessments meet the intent of the recommendation. To our third recommendation, DHS stated that ICE will provide GAO with documentation demonstrating updates to the adult bed rate methodology, including the use of an appropriate inflation rate and removal of family beds from calculation. We will evaluate any documentation provided and determine the extent to which ICE’s actions meet the intent of the recommendation. To our fourth recommendation, DHS stated that ICE ERO developed a statistical modeling capability and provided that documentation and methodology to GAO. As previously noted in this report, we found that this type of model was a reasonable method to forecast ADP, and the particular modeling choices were generally consistent with accepted statistical practices and appropriate for the data and application. DHS began leveraging the model for its fiscal year 2019 budget cycle, and it will be important to see how the model is used in future budget justifications. To our fifth recommendation, DHS stated that ICE will implement the best practices for cost estimating to the degree that it is possible, specifically performing sensitivity and cost risk and uncertainty analyses to strengthen the credibility of its estimates. Implementing the best practices should help position ICE to produce a more reliable cost estimate. If implemented effectively, these actions should address the intent of our recommendations. We are sending copies of this report to the appropriate congressional committees and the Secretary of the Department of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or GamblerR@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. U.S. Immigration and Customs Enforcement (ICE) calculated a bed rate for fiscal year 2018 using a bed rate model built in Excel with data from its Federal Financial Management System and Enforcement Information Database. To project the fiscal year 2018 bed rate, ICE officials told us they used a different inflation factor from the ones set forth in guidance from the Office of Management and Budget (OMB) or the Department of Homeland Security (DHS). Specifically, ICE used an inflation factor based on the historical service costs. ICE did not provide a documented rationale for not using the OMB’s inflation rate, written descriptions of the calculations within the bed rate model, or detailed ground rules and assumptions for the bed rate model. In examining the adult bed rate model used by ICE to project the fiscal year 2018 bed rate, we identified a number of inaccuracies and errors in the formulas used. Specifically: Instead of using the average of the percentage change in year-over- year costs, ICE used the average of the actual monetary difference in year-over-year costs and then applied that figure as a percentage; ICE added the inflation factors for two cost categories and then applied the combined rate to each category, which led to additional negative inflation; and ICE included information for family facilities, which were already budgeted as fixed priced contracts, in the calculation of the adult bed rate. ICE calculates a projected bed rate for two years into the future based on actual obligations and expenditures for four cost categories—bed/guard costs, health care, other direct costs, and service-wide or indirect costs. Table 3 shows ICE’s historical costs since fiscal year 2009 for these categories. Table 4 shows ICE’s calculations to determine the projected fiscal year 2018 bed rate. To calculate the projected fiscal year 2018 bed rate, ICE applied its inflation factors twice to the fiscal year 2016 costs and then added a cost adjustment to account for the cost of adding new beds. ICE notes that the initial projected rate is for fiscal year 2017; however, this figure follows the formula that ICE would use to determine the fiscal year 2018 bed rate. With the change in administration during fiscal year 2017, ICE had the opportunity to revise its projected bed rate. ICE officials told us that they applied their inflation factors to fiscal year 2016 costs once to project the bed rate one year into the future and then applied their inflation factors a second time in order to account for an operational adjustment, which they estimated to be approximately 3 percent. ICE officials did not provide us with documentation of their calculations or analysis showing that compounding the inflation factors over two years was equivalent to one year’s inflation plus an operational adjustment. In addition, because the inflation factors used in the bed rate model are based on historical costs, any operational costs should already have been accounted for in the model itself. Using Actual Monetary Difference in Costs Instead of Percentage Change ICE’s bed rate model is designed to use the average of year-over-year percentage change as its inflation rate. However, for the revised fiscal year 2017 and the projected fiscal year 2018 bed rates, ICE did not calculate the inflation rate based on year-over-year percentage changes, but based it on the actual monetary difference in yearly costs. ICE officials told us that in response to Congress’s concerns about service- wide costs, ICE began separating service-wide costs from other direct costs in fiscal year 2017. Previously, the two cost categories had been combined as an “other costs, miscellaneous” cost category. ICE officials told us that when other direct costs were separated from service-wide costs, they discovered that the average of year-over-year percentage changes showed a large decrease (negative 20 percent) for other direct costs which was not reflected in a separate analysis conducted by ICE. Therefore, officials decided to use the average of the actual monetary difference in year-over-year costs instead. ICE officials did not provide documentation of this separate analysis. According to ICE officials, for consistency they decided to use the average of the actual monetary difference in year-over-year costs for all of the cost categories including bed/guard, health care, and service-wide costs. The bed rate model then applied these figures as inflation factors. Table 5 shows the results from ICE’s calculation of yearly cost changes as percentages. In this table, ICE uses the formula of (Year 2 - Year 1)/100 and displays it as a percentage. For example, as noted in table 1, the fiscal year 2010 bed/guard rate was $81.59 and the fiscal year 2009 rate was $77.50. ICE calculated the change in the bed/guard rate for fiscal year 2010 as $81.59 - $77.50 = $4.09, and then replaced the dollar sign with a percent sign, thereby treating the dollar difference as a percentage change. Table 6 shows the results if the year-over-year change were calculated by comparing the actual percentage difference in costs. In this table, we use the formula of (Year 2 - Year 1) / Year 1 and display it as a percentage. For example, for fiscal year 2010, the percentage change in the bed/guard rate is 5.28 percent (or ($81.59 - $77.50) / $77.50), not 4.09 percent as calculated by ICE. Because of how ICE presented the percentage change for each year, the average of year-over-year changes, which ICE uses as its inflation factors, is not correct. For example, ICE’s inflation factor for the bed/guard rate is 2.74 percent (see table 3), while the appropriate calculation is 3.28 percent (see table 4). Applying Combined Inflation Factor Twice In developing its fiscal year 2018 projected adult bed rate, ICE combined the inflation factors for two cost categories—other direct costs and service-wide costs—and applied the combined rate to each category. By using this combined rate, the bed rate model applies an additional -0.54 percent factor to the categories, which it otherwise would not have done if ICE applied the individual inflation factors for the categories. As noted in Table 7, ICE’s year-over-year average change for other direct costs was -1.33 percent when ICE calculated it individually for the category, and was 0.78 percent for service-wide costs. Instead of applying these inflation factors (-1.33 and 0.78 percent) to the fiscal year 2016 costs for these categories, ICE added the two inflation factors for a total of -0.54 percent, based on the following calculation: - 1.3267 + 0.7833 = -0.5433. ICE then applied this combined inflation factor to both categories (see table 2). Officials did not provide us with a rationale or documentation of why they manually entered these numbers, or combined the two rates except that it stemmed from the Congressional request to separate the costs. By applying the combined inflation factor to both categories, ICE mistakenly introduced an additional error for these two cost categories. Counting Families in the Adult Bed Rate ICE’s bed rate model divides the obligations and expenditures for health care, other direct costs, and service-wide costs by the entire detainee population of adults and families, resulting in an adult bed rate that is lower than if the costs were divided by the adult population alone. ICE’s bed rate model is used to calculate a bed rate to estimate detention costs for the adult population. Family facilities operate on firm fixed price contracts and all cost categories for the family facilities—bed/guard costs, health care costs, other direct costs, and service-wide costs—are budgeted for separately from costs for adult detention in ICE’s budget request. By dividing adult bed costs across its entire detainee population, ICE may be underestimating the total detention costs. To calculate the daily per person cost of health care, other direct costs, and service-wide or indirect costs, the bed rate model divides the total obligations and expenditures for each category by the number of mandays. Table 8 shows ICE’s calculations using the formula: Obligations and Expenditures / Mandays for Adults and Families = Daily Per Person Rate By spreading these costs across the entire population, the bed rate model derives a lower daily per person cost than by considering only the adult detainee population. For example, ICE calculated the daily per person cost of health care in fiscal year 2016 as: $148,186,091 / 9,096,014 = $16.29. Table 9 shows what the daily per person cost of health care would be if the family population were removed from the calculation. Specifically, the daily per person health care cost would be $148,186,091 / 8,696,453 = $17.04 The result of a $0.75 underestimate in health care costs is an overall underestimation of approximately $13.4 million for the fiscal year 2018 immigration detention system cost estimate based on the calculation: $0.75 x 48,879 x 365 = $13,380,626. Including Family Facilities in Cost Data In addition to spreading total costs across the entire population, rather than just the adult population, ICE’s bed rate model includes obligations and expenditures for family facilities. In examining ICE’s data for other direct costs, we found that data from the three family facilities (Berks, Karnes, and South Texas) were included in the facility cost data. These three facilities’ other direct costs totaled $222,425. Because these facilities operate on firm fixed price contracts that include other direct costs, and these costs were already budgeted at $5.5 million in the $291.4 million allotted for family facilities, these costs were double- counted in the model and the costs were added to the adult bed rate. It is unclear if cost data for family facilities are also included in the health care and in the service-wide costs used to calculate the adult bed rate. ICE officials did not provide documentation or their rationale for including the family facilities in their adult bed rate model. Table 10 demonstrates the effect of removing information for family facilities from the other direct cost data and then dividing by the adult population alone. This calculation results in a daily per adult rate for other direct costs of $1.75 for fiscal year 2016, which is 3 cents lower than the rate if the other direct costs for family facilities are included (and the costs are divided by the adult population alone). In addition to the contact named above, Kirk Kiester (Assistant Director), Brian Bothwell, Pamela Davidson, Eric Hauswirth, Susan Hsu, Heather Keister, Sasan J. “Jon” Najmi, Leah Q. Nash, Karen Richey, Daniela Rudstein, Jack Sheehan, and Jeff Tessin made significant contributions to this report.", "summary": "In fiscal year 2017, ICE operated on a budget of nearly $3 billion to manage the U.S. immigration detention system, which houses foreign nationals whose immigration cases are pending or who have been ordered removed from the country. In recent years, ICE has consistently had to reprogram and transfer millions of dollars into, out of, and within its account used to fund its detention system. The explanatory statement accompanying the DHS Appropriations Act, 2017, includes a provision for GAO to review ICE's methodologies for determining detention resource requirements. This report examines (1) how ICE formulates its budget request for detention resources, (2) how ICE develops bed rates and determines ADP for use in its budget process, and (3) to what extent ICE's methods for estimating detention costs follow best practices. GAO analyzed ICE's budget documents, including CBJs, for fiscal years 2014 to 2018, examined ICE's models for projecting ADP and bed rates, and evaluated ICE's cost estimating process against best practices. U.S. Immigration and Customs Enforcement (ICE) formulates its budget request for detention resources based on guidance from the Office of Management and Budget and the Department of Homeland Security (DHS). To project its detention costs, ICE primarily relies on two variables—the average dollar amount to house one adult detainee for one day (bed rate) and the average daily population (ADP) of detainees. U.S. Immigration and Customs Enforcement's (ICE) Formula to Calculate Detention Costs GAO found a number of inconsistencies and errors in ICE's calculations for its congressional budget justifications (CBJs). For example, in its fiscal year 2015 budget request, ICE made an error that resulted in an underestimation of $129 million for immigration detention expenses. While ICE officials stated their budget documents undergo multiple reviews to ensure accuracy, ICE was not able to provide documentation of such reviews. Without a documented review process for reviewing the accuracy of its budget request, ICE is not positioned to ensure the credibility of its budget requests. ICE has models to project the adult bed rate and ADP for purposes of determining its budget requests. However, ICE consistently underestimated the actual bed rate due to inaccuracies in the model, and it is unclear if the ADP used in the budget justification is based on statistical analysis. GAO identified factors in ICE's bed rate model—such as how it accounts for inflation and double counts certain costs—that may lead to its inaccurate bed rate projections. For example, in fiscal year 2016, ICE's projections underestimated the actual bed rate by $5.42 per day. For illustrative purposes, underestimating the bed rate by $5 per day, assuming an ADP of 34,000, yields a more than $62 million underestimation in the detention budget request. By assessing its methodology and addressing identified inaccuracies, ICE could ensure a more accurate estimate of its actual bed rate cost. Additionally, ICE reported that the ADP projections in its CBJs are based on policy decisions that account, for example, for anticipated policies that could affect the number of ICE's detainees. While ICE's projected ADP may account for policy decisions, documenting the methodology and rationale by which it determined the projected ADP would help demonstrate how the number was determined and that it was based on sound assumptions. ICE's methods for estimating detention costs do not fully meet the four characteristics of a reliable cost estimate, as outlined in GAO's Cost Estimating and Assessment Guide . For example, while ICE's fiscal year 2018 detention cost estimate substantially met the comprehensive characteristic, it partially met the well-documented and accurate characteristics, and minimally met the credible characteristic. By taking steps to fully reflect cost estimating best practices, ICE could better ensure a more reliable budget request. GAO recommends that the Director of ICE: (1) document and implement its review process to ensure accuracy in its budget documents; (2) assess ICE's adult bed rate methodology; (3) update ICE's adult bed rate methodology; (4) document the methodology and rationale behind the ADP projection used in budget requests; and (5) take steps to ensure that ICE's detention cost estimate more fully addresses best practices. DHS concurred with the recommendations.", "document_type": "gao"}
{"report": "Spinal cord injuries are complex, lifelong injuries that typically result from acute traumatic damage to the spinal cord or nerves within the spinal column. In spinal cord injury patients, certain nervous system functions may be impaired temporarily or permanently lost, depending on the level and severity of the patient’s injury. In addition to lower level nervous system functioning, spinal cord injury patients may develop secondary medical complications that can further decrease functional independence and quality of life, including, but not limited to: Autonomic dysreflexia: a condition that may result in life threatening hypertension—high blood pressure—due to impaired nervous system response, below the level of spinal cord injury. Depression: a medical mood disorder—commonly affecting about one in five spinal cord injury patients—that can cause physical and psychological symptoms (including changes in sleep and appetite, and thoughts of death or suicide). Impaired bowel and bladder functioning: potential inability to move waste through the colon and control, stop or release, urine—which can lead to other life-threatening illnesses (such as autonomic dysreflexia) and/or infections. Pressure ulcers: a common complication affecting up to 80 percent of spinal cord injury patients that results from an area of the skin or underlying tissue that is damaged due to decreased blood flow, which can occur after extended periods of inactive sitting or lying, among other ways. Pressure ulcers—also known as pressure sores or wounds—can occur years after initial injury and may also result in life- threatening infections or amputation. Spasticity: a common condition that affects 65 to 78 percent of spinal cord injury patients and can result in symptoms ranging from mild muscle stiffness to severe, uncontrollable leg movements. Syringomyelia: a rare disorder that occurs when cerebrospinal fluid— normally found outside of the spinal cord and brain—enters the interior of the spinal cord to form a cyst known as a syrinx. This cyst expands and elongates over time, destroying the center of the spinal cord. Symptoms can develop slowly and can include numbness, pain, effects on bowel and bladder function, or paralysis. While this condition can occur as a result of a trauma, such as a spinal cord injury, the majority of cases are associated with a complex brain abnormality. Acquired brain injuries occur after birth and are not hereditary, congenital, degenerative, or a result of birth trauma. Acquired brain injuries result in changes to the brain’s neuronal activity, which can affect the physical integrity, metabolic activity, or functional ability of nerve cells in the brain. Acquired brain injuries can be either non-traumatic or traumatic in nature: non-traumatic brain injuries are caused by an internal force—such as in the case of stroke, tumors, or drowning—and traumatic brain injuries are caused by an external force—such as in the case of car accidents, gunshot wounds, or falls. The severity of brain injury can often result in changes to physical, behavioral, and/or cognitive functioning. For example, according to one source, nearly 50 percent of all people with a traumatic brain injury experience depression within the first year after injury, and nearly two-thirds experience depression within 7 years post- injury. Depression can develop as a result of physical changes in the brain, emotional response to the injury, and other unrelated factors—such as family history. Due to impaired cognitive functioning, traumatic brain injury patients may also experience difficulty communicating, concentrating, and processing and understanding information. Acute care hospitals and LTCHs are paid under different Medicare payment systems by law. Acute care hospitals are paid under the inpatient prospective payment system (IPPS). LTCHs are paid under the LTCH PPS. Under both systems, Medicare classifies patients based on Medicare diagnosis groups, which organize patients based on their conditions and the care they receive. Medicare payments for LTCHs are typically higher than payments for acute care hospitals, to reflect the average resources required to treat Medicare beneficiaries who need long-term care. Traditionally, all LTCH discharges were paid at the LTCH PPS standard federal payment rate. The Pathway for SGR Reform Act of 2013 modified the LTCH PPS by establishing a two-tiered payment system— such that certain LTCH discharges continue to be paid at the standard rate and others are paid at a generally lower, site-neutral rate. In its March 2013 report, MedPAC described concerns regarding growth in the number of LTCHs and the extent to which some of their patients may otherwise be treated appropriately in less costly settings. To continue to be eligible for the standard rate, the discharge must generally have a preceding acute care hospital stay with either an intensive care unit stay of at least 3 days or an assigned diagnosis group based on the receipt of at least 96 hours of mechanical ventilation services in the LTCH, unless an exception applies. Discharges that do not qualify for the standard rate are to receive a blended site-neutral rate—equal to 50 percent of the site-neutral rate and 50 percent of the standard rate—for discharges in cost reporting periods beginning in fiscal years 2016 through 2019, and the full site-neutral rate for discharges in cost reporting periods beginning in fiscal year 2020. Beginning with cost reporting periods in fiscal year 2020, if fewer than half of an LTCH’s discharges meet the statutory requirements to be paid at the standard rate, the LTCH will no longer receive any payments at that rate for discharges in future cost reporting periods until eligibility for receiving payments under that rate is reinstated. Under this scenario, all discharges in succeeding cost reporting periods would be paid at the generally lower rate that an acute care hospital would receive for providing comparable care until eligibility for receiving payments at the standard rate is reinstated. According to officials from HHS, the department intends to establish a process for how hospitals would have their eligibility for receiving payments at the standard rate reinstated as part of the fiscal year 2020 rule-making cycle. Since the two qualifying hospitals are currently only excepted from the statutory two-tiered payment structure for cost reporting periods beginning during fiscal years 2018 and 2019, these two hospitals must also meet the statutory 50 percent threshold in fiscal year 2020 and beyond in order to receive the standard rate for any future discharges until reinstated. See table 1 for more information on Medicare’s LTCH PPS payment policies. Two LTCHs have qualified for the temporary exception to site-neutral payments, according to CMS officials. Craig Hospital is a private, not-for- profit facility that has specialized in medical treatment, research, and rehabilitation for patients with spinal cord and brain injury since 1956. Craig Hospital is classified as an LTCH for the purposes of Medicare payment, and is licensed as a general hospital by the state of Colorado— which does not have separate designations for LTCHs. Craig Hospital has been selected as one of 14 NIDILRR Spinal Cord Injury Model Systems and one of 16 Traumatic Brain Injury Model Systems and is accredited by the Joint Commission. Shepherd Center is a private, not-for-profit facility that specializes in medical treatment, research, and rehabilitation for people with traumatic spinal cord injury and brain injury—as well as neuromuscular disorders, including multiple sclerosis. Shepherd Center is classified as an LTCH for the purposes of Medicare payment, and as a specialty hospital—which includes LTCHs—by the state of Georgia. Shepherd Center is also currently designated as a NIDILRR Spinal Cord Injury Model System and is accredited by the Joint Commission. Shepherd Center also has several CARF International accredited specialty programs. Specifically, it has CARF-accredited inpatient rehabilitation specialty programs in spinal cord injury and brain injury—for adults, children, and adolescents; and interdisciplinary outpatient medical rehabilitation specialty programs in spinal cord injury and brain injury—for adults, children, and adolescents, among others. More than half of the Medicare discharges in fiscal year 2013 at the two qualifying hospitals—43 of 75 at Craig Hospital and 47 of 88 at Shepherd Center—were within the diagnosis groups designated in section 15009(a) of the 21st Century Cures Act. (See table 2 below for more information.) Patients treated for these diagnosis groups may receive treatment for spinal disorders and injuries; medical back problems; degenerative nervous system disorders; skin grafts for skin ulcers; acquired brain injuries, such as traumatic brain injuries; or other significant traumas with major complicating and comorbid (simultaneous) conditions. Both qualifying hospitals have a variety of specialized inpatient and outpatient programs to help treat the complex health care needs of their patients, including those covered by Medicare. For example, both hospitals have wheelchair positioning clinics that can help prevent skin complications, such as pressure ulcers, that can occur in spinal cord patients. Both hospitals also have programs for those patients who need ventilator support such as diaphragmatic pacing—support for patients with respiratory problems whose diaphragm, lungs, and nerves have limited function—and ventilator weaning programs. In addition to clinical programs, both qualifying hospitals also provide transitional support, such as providing counseling and education to families of patients with these injuries. We found that most Medicare beneficiaries at the two qualifying hospitals need specialized services to manage the chronic, long-term effects of a catastrophic spinal cord or brain injury. Most of these patients are younger than 65 and ineligible for Medicare at the time of their initial injury, according to officials from the qualifying hospitals. Instead, according to officials, these patients typically become eligible for Medicare 2 years or more after their initial injury due to disability. Medicare beneficiaries at the two qualifying hospitals typically need care to manage comorbidities or the associated long-term complications of their injury. Officials from Craig Hospital said a significant number of their Medicare beneficiaries have comorbid conditions—such as diabetes or cardiac problems—upon admission, that can be further complicated by their injury. The officials said managing these comorbidities is as much of a medical challenge as managing the spinal or brain injury. Officials from both qualifying hospitals noted their Medicare beneficiaries who have a spinal cord or brain injury also frequently seek care after initial injury to address secondary complications resulting from their injury, including urinary tract infections; respiratory problems; and pressure ulcers. While the qualifying hospitals primarily treated traumatic spinal cord or brain injuries, we found that their Medicare populations differed from each other during the period from fiscal year 2013 to 2016. Specifically, Craig Hospital. Our review of Medicare claims data indicates more than 50 percent of the 246 Medicare discharges during this time were associated with Medicare diagnosis groups for spinal cord conditions. Specifically, during this time, Craig Hospital’s Medicare discharges were commonly assigned to three diagnosis groups covering spinal procedures and spinal disorders and injuries. For example, officials from Craig Hospital told us that about 60 percent of Medicare beneficiaries in fiscal year 2016 required surgical care for a spinal cord injury. According to officials, most of these patients received surgery for syringomyelia—a complication in spinal cord patients that generally develops years after their initial injury. These officials told us that Craig Hospital provided the pre- and post-operative care for those patients in fiscal year 2016; however, currently, Craig Hospital is only responsible for pre-operative assessments. The remaining 40 percent of their Medicare beneficiaries in fiscal year 2016 received care for new spinal cord injuries. Shepherd Center. Our review of Medicare claims data indicates the most common diagnosis group of the 365 Medicare discharges during this time—fiscal year 2013 to fiscal year 2016—related to treatment for skin grafts that can be associated with pressure ulcers, among other things. Shepherd Center officials confirmed that most of their Medicare beneficiaries received treatment for a pressure ulcer that occurred after initial injury which, as previously noted, can be so severe as to result in life-threatening infections. According to officials, most of their post-injury Medicare beneficiaries receive post-operative care and other wound management services following surgery to treat pressure ulcers, to ensure that the site will not tear again and to avoid reoccurrence. Other diagnosis groups for Medicare patients at Shepherd Center included those for spinal disorders and injuries and extensive operating room procedures unrelated to principal diagnosis. According to officials, beneficiaries in these diagnosis groups received treatment for a range of conditions, including traumatic injuries, urinary tract infections, neurogenic bladder and bowel or respiratory complications. Officials told us the hospital also served Medicare beneficiaries recovering from other acquired brain injuries, such as stroke, and paralyzing neuromuscular conditions, such as multiple sclerosis. Stakeholders we interviewed—including providers at other facilities— noted that traumatic spinal cord and brain injury patients—including those covered by Medicare—require significant levels of care due to the complexity of their injuries as well as the immediate and long-term complications that can occur from the injuries. For example, most stakeholders told us these patients often require lifelong care due to the complexity and reoccurrence of comorbidities or secondary complications. Some of these stakeholders noted, for example, spinal cord and brain injury patients often face mental health or psychosocial conditions, such as depression or anxiety. Some stakeholders also emphasized that many spinal cord injury patients risk secondary complications that may not occur until years after injury, such as pneumonia, pressure ulcers, and other infections. A few stakeholders told us spinal cord and brain injury patients are often among the most complex patients they treat. As such, patients with spinal cord or brain injuries often require interdisciplinary care that covers a wide range of specialties—including physiatry (rehabilitation medicine), neurology, cardiology, and pulmonology—as well as specialized equipment or technology, such as eye glance tools to control call systems or the television. Simulations of Medicare payments illustrate the potential effects of Medicare’s site-neutral payment policies, which were required by law, on the qualifying hospitals. Specifically, our simulations calculated what the qualifying hospitals would have been paid for Medicare patient discharges that occurred in two baseline years—fiscal year 2013 (baseline year 1) and fiscal year 2016 (baseline year 2)—if applicable payment policies from future years (2017 through 2021) were applied to those discharges. We selected two baseline years to account for differences in data, such as the number of discharges, between fiscal year 2016—the most recent year of complete data available at the time we began our analysis—and fiscal year 2013. Table 3 below provides a summary of Medicare discharges and payments to the qualifying hospitals during these two baseline years. Variation in utilization and patient mix across the baseline years allows the simulations to cover a range of possible changes in payments for the two hospitals. Our simulations indicated how Medicare’s payment policies could have affected these baseline payments to each qualifying hospital: Fiscal Year 2017 Blended Site-Neutral Rate Policy: Discharges that do not meet criteria to receive the standard rate are to receive a blended site-neutral rate—equal to 50 percent of the site-neutral rate and 50 percent of the standard rate. We found that while some of the baseline discharges would qualify for the standard rate, most discharges would have been paid at the blended site-neutral rate. Specifically, 8 to 20 percent of Craig Hospital’s baseline Medicare discharges would have qualified for the standard rate, resulting in simulated payments of about $3.86 million (baseline year 1) and $3.22 million (baseline year 2) under blended site-neutral rate policy. For Shepherd Center, between 23 percent and 40 percent of baseline Medicare discharges would have qualified for the standard rate, resulting in simulated payments of about $5.16 million (baseline year 1) and $5.31 million (baseline year 2). Each of these simulated payments is an increase compared to actual payments made in the baseline years. Fiscal Years 2018 and 2019 Temporary Exception: The qualifying hospitals are receiving the standard rate for all discharges, due to the temporary exception. As a result, simulated payments under the temporary exception are about $3.74 million (baseline year 1) and $3.18 million (baseline year 2) for Craig Hospital and about $5.64 million (baseline year 1) and $5.75 million (baseline year 2) for Shepherd Center, which is an increase compared to actual payments made in the baseline years. Fiscal Year 2020 Two-Tiered Payment Rate: The temporary exception for the qualifying hospitals no longer applies; therefore, the site- neutral rate will apply to discharges not qualifying for the standard rate. We found that both qualifying hospitals would receive some payments at the standard rate, but that most of their discharges would be paid at the lower, site-neutral rate—assuming similar caseloads (e.g., patient mix). As a result, simulated baseline year payments at Craig Hospital are about $3.47 million (baseline year 1) and $3.03 million (baseline year 2), and simulated baseline payments to Shepherd are about $4.42 million (baseline year 1) and $4.55 million (baseline year 2). The simulated payments therefore decrease compared to those in fiscal year 2019, and also generally decrease compared to actual payments made in the baseline years. Future Years Under 50 Percent Threshold: Under statute, unless 50 percent or more of the hospital’s discharges in cost reporting periods beginning during or after fiscal year 2020 qualify for the standard rate, no subsequent payments will be made to a hospital at that rate in each succeeding cost reporting period. Most of the baseline year discharges did not qualify for the standard rate, and therefore simulated payments are based on the generally lower comparable acute care rate. However, simulated payments stayed about the same between fiscal year 2020 and 2021, in part due to differences in calculations for high-cost outlier payments. A high-cost outlier payment is made to hospitals for those cases that are extraordinarily costly, which can occur because of the severity of the case and/or a particularly long length of stay. Specifically, simulated payments were about $3.49 million (baseline year 1) and $3.02 million (baseline year 2) for Craig Hospital and about $4.24 million (baseline year 1) and $4.16 million (baseline year 2) for Shepherd Center. Without the high-cost outlier payments, the simulated payments would have decreased by at least $2 million. If the mix of patients at Craig Hospital and Shepherd Center changes so that they meet the 50 percent threshold in fiscal year 2020, then simulated payments for fiscal year 2021 could be higher. As of September 2018, Craig Hospital officials told us that they expect to meet the 50 percent threshold with their current patient mix. Shepherd Center officials told us they do not expect to meet the 50 percent threshold. See figures 1 and 2 below for the results of our simulations. Our simulations of payments assume the number and type of Medicare discharges at the two qualifying hospitals remain the same as those in fiscal years 2013 and 2016. However, the full effect of payment policy on future Medicare payments to the qualifying hospitals will depend on three key factors that are subject to change: 1. Severity of patient conditions: Medicare payment is typically higher for more severe injuries, such as a traumatic injury with major comorbidities or complications, relative to less severe injuries. In the two baseline years we used for our simulations—fiscal year 2013 and fiscal year 2016—more than half of the Medicare discharges at the qualifying hospitals were associated with conditions with multiple comorbidities and complications, as indicated by the diagnosis groups, and this level of severity is reflected in the simulation results. Future payments to qualifying hospitals will depend on the extent to which the severity of patient conditions changes over time. 2. Volume of discharges meeting criteria for the standard rate: As previously noted, for a hospital to receive the standard rate for a discharge, the discharge must meet certain criteria, such as having a preceding acute care hospital stay with either an intensive care unit stay of at least 3 days or an assigned diagnosis group based on the receipt of at least 96 hours of mechanical ventilation services in the LTCH. Our simulations reflect that in the two baseline years, about 23 percent of the fiscal year 2013 discharges and about 40 percent of the fiscal year 2016 discharges met the criteria to receive the standard rate for Shepherd Center; and about 8 percent of the fiscal year 2013 discharges and about 20 percent of the fiscal year 2016 discharges met the criteria for Craig Hospital. Changes to these amounts could affect future payments to the qualifying hospitals. In particular, if 50 percent or more of either hospital’s discharges beginning in fiscal year 2020 meet the standard rate criteria, then the hospitals would be eligible for payments at the standard rate in fiscal year 2021, which may result in higher payments compared to our simulations. 3. Payment adjustments: LTCHs may receive a payment adjustment for certain types of discharges, such as short-stay outliers, interrupted stays, or high-cost outliers. In particular, most discharges at Craig Hospital received high-cost outlier payments (additional payments for extraordinarily costly cases) during the two baseline years—76 percent in fiscal year 2013 and 85 percent in fiscal year 2016. At Shepherd Center, at least 40 percent of discharges during the two baseline years received high-cost outlier payments—about 42 percent in fiscal year 2013 and about 58 percent in fiscal year 2016. The amount of future payments to qualifying hospitals will depend on the extent to which they continue to have a high proportion of discharges with high-cost outlier payments. In addition to the effect on payments, officials from both qualifying hospitals and some stakeholders we interviewed noted that the LTCH site-neutral payment policies may result in fewer services provided and fewer patients served by the qualifying hospitals and other LTCHs. For example, officials from Craig Hospital told us they stopped providing post- operative care to patients requiring spinal surgery, such as patients with syringomyelia, in 2016—instead referring them to other facilities—in part because these discharges do not meet the criteria for the standard rate. As of September 2018, they told us they do not plan to provide this care in the future unless the temporary exception is extended. Officials from Shepherd Center told us while they have not yet made changes to services they offer to Medicare patients, they may limit which Medicare beneficiaries they serve in the future. For example, they told us that most of their Medicare beneficiaries were admitted from home or sought care in their outpatient clinic. When the temporary exception expires after fiscal year 2019, hospital officials expected that these patients will not qualify for the standard rate. Shepherd Center officials said they may not be able to serve similar patients in future years. MedPAC officials and some stakeholders—a specialty association and health care providers with experience treating patients with similar conditions at other LTCHs—told us that some LTCHs have changed the services they offer and the patients they treat to increase the proportion of discharges that qualify for the standard rate. For example, MedPAC officials cited reports that indicate how some LTCHs have adjusted to the site-neutral policies. For example, a 2018 MedPAC report indicated that LTCHs in one large for-profit chain were able to make adjustments so that, as of September 30, 2016, close to 100 percent of their Medicare discharges met the criteria to receive the standard rate. A representative from an LTCH association told us that many LTCHs have adjusted their patient mix by increasing the number of discharges that meet criteria for the standard rate and turning away some Medicare beneficiaries to reduce the number of discharges subject to the site-neutral rate. The representative noted that certain LTCHs have already been able to adjust their patient mix because they have existing programs in place that focus on chronic, critically ill patients who would have a preceding acute care hospital stay. The representative told us that some LTCHs specialize in care for patients who do not meet the criteria to receive the standard rate and would generally be paid at the site-neutral rate; therefore, changing their patient mix is not a viable strategy for these LTCHs. According to the stakeholder, as of February 2018, about two-thirds of all LTCHs are above the 50 percent threshold. Providers from another LTCH told us that before the site-neutral payment policy went into effect, only about 40 to 45 percent of its discharges met criteria for the standard rate. However, they worked to ensure most patients referred to the LTCH would qualify for the standard rate. Officials told us patients who do not meet the criteria for that rate typically either stay longer in the acute care hospital or are transferred to a different post-acute care setting, such as a skilled nursing facility. Officials noted that, in both cases, the patient may not receive the specialized services often required for their injuries, including those patients with spinal cord or brain injuries. A provider we interviewed from another LTCH said that, historically, the LTCH has accepted patients who acquire pressure ulcers at home following discharge, but they may choose not to continue this practice because the patients’ discharges would not meet the criteria to receive the standard rate. A few of these stakeholders told us some LTCHs are in markets that do not have alternative providers of care, such as skilled nursing facilities, for patients who do not meet the criteria. These LTCHs may have difficulty adjusting their patient mix to avoid site-neutral payments. For example, a provider from one LTCH said his facility continues to take “site-neutral patients” because those patients often do not have another option to receive the specialized services they need. The provider emphasized concerns about the long-term viability of caring for those patients at the facility, because their care is paid at lower rates. Our review of Medicare claims data, other information, and interviews with stakeholders indicated the two qualifying hospitals treated Medicare beneficiaries with different conditions than most of those treated at other LTCHs. Our analysis of Medicare claims data indicates Craig Hospital and Shepherd Center treat very few patients in the Medicare diagnosis groups that are most common to other LTCHs. Specifically, for several years, MedPAC has reported that LTCH patient discharges are concentrated in a relatively small number of diagnosis groups. For example, in March 2018, MedPAC reported that 20 diagnosis groups accounted for over 61 percent of LTCH discharges at both for-profit and not-for-profit facilities, in fiscal year 2016. However, in fiscal year 2016, these diagnosis groups accounted for approximately 30 percent of Medicare discharges—26 out of 88—at Shepherd Center, and most of these discharges fell within a single diagnosis group which covers a range of conditions. Craig Hospital did not discharge any Medicare beneficiaries assigned to these 20 diagnosis groups, in fiscal year 2016. The seven diagnosis groups that were used in the statutory criteria to except Craig Hospital and Shepherd Center from site-neutral payments were also not among these 20 diagnosis groups. For more information on the 20 diagnosis groups common to LTCHs in fiscal year 2016, see Appendix III, table 5. Our review of Medicare claims data and other information indicates the two qualifying hospitals also treat a relatively small number of Medicare beneficiaries, a key distinguishing factor from most other LTCHs. In March 2018, MedPAC reported that, on average, Medicare beneficiaries account for about two-thirds of LTCH discharges. However, Medicare claims data and other information provided by the two qualifying hospitals indicate Medicare beneficiaries account for a significantly smaller proportion (about 8 percent) of patients discharged from Craig Hospital and Shepherd Center in 2016. Specifically, 40 of the 486 patients discharged from Craig Hospital in fiscal year 2016 and 75 of the 912 patients discharged from Shepherd Center in calendar year 2016, were Medicare beneficiaries. Officials from the qualifying hospitals told us they treat few Medicare patients primarily because of the younger average age of persons with spinal cord injuries and acquired brain injuries. While patients with spinal cord and brain injuries may receive care in other LTCHs, most stakeholders we interviewed also suggested the two qualifying hospitals treat patients that are different from those treated at most other LTCHs, and can offer specialized care. Officials from the two qualifying hospitals told us that, relative to most other facilities—including most traditional LTCHs—they offer a more complete continuum of care to meet the needs of patients at different stages of spinal cord and brain injury treatment, without the need to transfer to different facilities. Officials also stated that, unlike most traditional LTCHs, they are able to offer more specialized care for patients with spinal cord and brain injuries, including more comprehensive rehabilitation services. Stakeholders we interviewed generally agreed that the two qualifying hospitals have developed expertise in treating spinal cord and brain injury patients and offer intensive rehabilitation services that are not provided in most other LTCHs. In addition, officials from the Colorado Department of Health Care Policy & Financing noted that Craig Hospital treats a patient population that is different from most other LTCHs in the state of Colorado. Specifically, according to officials, in comparison to other LTCHs in the state, Craig Hospital treats: (1) a higher percentage of patients with more severe conditions, (2) more patients from outside the state of Colorado, (3) fewer patients requiring ventilator weaning or requiring wound care— conditions typically characteristic of LTCH patients—and (4) patients that are, on average, younger than most other LTCHs in the state of Colorado. In addition, a 2014 study of LTCHs conducted for the Georgia Department of Community Health found Shepherd Center was “distinctly different” from other LTCHs in the state of Georgia, and most LTCHs nationwide. Most stakeholders we interviewed suggested some IRFs provide specialty care to patients with catastrophic spinal cord, acquired brain injuries, or other paralyzing neuromuscular conditions. Most of the stakeholders we interviewed noted that—like the two qualifying hospitals—some IRFs have the expertise to treat patients with catastrophic spinal cord, acquired brain injuries, or other paralyzing neuromuscular conditions patients and thus, may also treat patients with similar conditions. According to CMS officials, IRFs are specifically designed to provide post-acute rehabilitation services to patients with spinal cord injuries, brain injuries, and other neuromuscular conditions. CMS officials noted that patients with these conditions typically respond well to intensive rehabilitation therapy provided in a resource intensive inpatient hospital environment and to the specific interdisciplinary approach to care that is provided in the IRF setting. Stakeholders also noted that patients with spinal cord injuries, brain injuries, and other neuromuscular conditions may receive care in other settings. However, some stakeholders noted that some of these providers—such as skilled nursing facilities—generally do not offer the specialized care these patients generally require. Differences in payment systems and data limitations make it difficult to directly compare the attributes of Medicare beneficiaries discharged from the two qualifying hospitals and IRFs, including the costs of care they receive. Medicare uses separate payment systems to pay LTCHs and IRFs, for care provided to beneficiaries. LTCHs are paid pre-determined fixed amounts for care provided to Medicare beneficiaries, under the LTCH PPS. Medicare beneficiaries treated in LTCHs are assigned to diagnosis groups (MS-LTC-DRGs) for each stay—based on the patient’s primary and secondary diagnoses, age, gender, discharge status, and procedures performed. IRFs are also paid pre-determined fixed amounts for care provided to Medicare beneficiaries, but under a separate system—IRF PPS. Medicare beneficiaries treated in IRFs are assigned to case-mix groups—based on age, and level of motor and cognitive function—and then further assigned to one of four tiers (within these groups) based on the presence of specific comorbidities that may increase their cost of care. According to CMS officials, because the payment groups and assignments to those groups are different, it is difficult to directly compare LTCH patients, classified in diagnosis groups, with IRF patients, classified in case-mix groups. See Appendix II for more information on these payment systems. MedPAC has previously reported the differences in patient assessment tools used by post-acute care providers undermines Medicare’s ability to compare the patients admitted, costs of care, and outcomes beneficiaries achieve in these settings, on a risk-adjusted basis. MedPAC has also reported that while similar beneficiaries can receive care in each setting, payments can differ considerably for comparable conditions, due to differences in payment systems. It has made recommendations to address these issues. The Improving Medicare Post-Acute Care Transformation Act of 2014 also requires the Secretary of HHS to collect and analyze common patient assessment information and, in consultation with MedPAC, submit a report to Congress recommending a post-acute care PPS. Such efforts may make future comparison of beneficiaries, costs of services, and outcomes of care across these settings possible. While data limitations make a direct comparison difficult, based on our review of other data and information, and interviews with stakeholders, we identified similarities and differences between the qualifying hospitals and certain IRFs that provide specialty treatment for catastrophic spinal cord injuries, acquired brain injuries, or other paralyzing neuromuscular conditions. Key similarities and differences include the following: Volume of services. Our review of Medicare claims data, other information, and interviews with stakeholders indicate that—similar to the two qualifying hospitals—some IRFs treat a high volume (at least 100) of patients with complex spinal cord injury, brain injury, and other related conditions. Officials from the two qualifying hospitals, as well as some other stakeholders we interviewed—including officials from the Christopher & Dana Reeve Foundation and the Brain Injury Association of America—emphasized the importance of facilities treating a high volume of patients with these specialized conditions, which can be an indicator of expertise in treating these patients. Our review of Medicare claims data for 1,148 IRFs in fiscal year 2016 identified 21 IRFs that treated at least 100 Medicare beneficiaries with non-traumatic and traumatic spinal cord injuries and 109 IRFs that treated at least 100 Medicare beneficiaries with non-traumatic and traumatic brain injuries. Our review of Medicare claims data indicated that, similar to the two qualifying hospitals—some IRFs also treat a high volume of patients with “catastrophic” injuries—traumatic brain injury, traumatic spinal cord injury, and major multiple traumas with brain or spinal cord injuries. Specifically, we identified 25 IRFs that treated a high volume (at least 100) of Medicare beneficiaries with catastrophic injuries, in fiscal year 2016. In the absence of patient assessment data from the facilities, we did not independently evaluate the level and severity of these patients’ injuries, which can vary due to the presence of other co-morbid conditions. The Medicare case mix indexes we reviewed for these 25 IRFs indicated that, relative to other IRFs, most of these facilities treat patients who are more resource intensive. Specialty accreditation and designation as model systems. Like Shepherd Center, some IRFs receive CARF-accreditation for specialty programs to treat spinal cord and brain injuries. According to most stakeholders, this accreditation indicates expertise in treating these patients, as CARF International has established standards using evidence-based practices, among other factors. Officials from the two qualifying hospitals also noted CARF International has a specific focus on quality and outcomes. However, officials from Shepherd Center noted similarities in care and services offered at CARF-accredited facilities would depend on the specialties for which they are certified. Most of the stakeholders we interviewed also noted that designation as a NIDILRR model system is an indicator of similar expertise in treating patients with spinal cord and brain injuries. According to the Model Systems Knowledge Translation Center, spinal cord injury and brain injury model systems are recognized as national leaders in medical research and patient care and provide the highest level of comprehensive specialty services from the point of injury through eventual re-entry into full community life. While stakeholders we interviewed from NIDILRR model systems indicated the model system designation is focused primarily on research, rather than clinical care, most noted that model systems’ research often complements the facilities’ clinical efforts to address the unique needs of these patients. Officials from HHS’s Administration for Community Living also noted that all model system grantees must provide a continuum of care—emergency care, acute medical care, acute medical rehabilitation, and post-acute care—and that can happen in various provider types. According to officials from the qualifying hospitals and stakeholders from one other NIDILRR model system we interviewed, Craig Hospital and Shepherd Center are the only two LTCHs currently classified as spinal cord injury model systems; 12 of 14 spinal cord injury model systems are IRFs. Specialized programs and services. Similar to the two qualifying hospitals, some IRFs may also offer specialized programs and services for patients with brain and spinal cord injuries, but the availability of these programs and services may vary by facility. Officials from some of the IRFs that responded to our information request—which included both NIDILRR facilities and IRFs with CARF-accredited programs—told us they provide specialized programs and services for patients with similar conditions as those treated at two qualifying hospitals, and sometimes compete with the two qualifying hospitals for the same patients. For example, each IRF reported having interdisciplinary treatment teams; the capacity to provide medical management of medically complex and high acuity patients with spinal cord injury, traumatic brain injury, or other major multiple traumas associated with a brain or spinal cord injury; family education and training; and skin and wound programs or services, among other services. However, the availability of certain services—including but not limited to ventilator-dependent weaning programs, diaphragmatic pacing, and outpatient programs for spinal cord and traumatic brain injury patients—varied by facility. Staff with specialized training and clinical expertise. Similar to the two qualifying hospitals, most facilities that responded to our information request also reported having physicians, nurses, and physical and occupational therapists with specialty training in medical rehabilitation, spinal cord, and/or brain injury. However, the number of staff with these trainings, varied by facility. In comparison to the other facilities that responded to our information request, the number of nurses and physical and occupational therapists with these specialty trainings were generally higher at Craig Hospital and Shepherd Center. According to an American Spinal Injury Association consumer guideline that the Christopher & Dana Reeve Foundation typically provides to spinal cord injury patients and families, programs should regularly admit persons with spinal cord injury each year, to develop and maintain the necessary skills to manage a person with spinal cord injury, and a substantial portion of those admitted should have traumatic injuries. Out-of-state Admissions. Officials from the two qualifying hospitals emphasized they admit a significant number of patients from out-of-state, and our review of information provided by the qualifying hospitals and a select group of IRFs indicated the qualifying hospitals admit a higher percentage of patients from out-of-state. Specifically, information provided by these IRFs indicates that less than a quarter of patients admitted to these facilities, in 2016, were from out-of-state. Information provided by Craig Hospital and Shepherd Center indicate that about half of their patients were admitted from out-of-state in 2016. Officials from the Colorado Department of Health Care Policy & Financing also noted Craig Hospital treats a higher percentage of out-of-state patients, compared to IRFs in the state. Ability to treat medically complex patients. Officials from the two qualifying hospitals told us they treat more medically complex patients and provide a more complete range of medical services to spinal cord and brain injury patients, not provided by most IRFs. Specifically, officials from the two qualifying hospitals both noted they are able to treat patients much sooner in their recovery process than most IRFs, due to their LTCH status. Officials from the Shepherd Center noted that they have a 10-bed intensive care unit which allows them to take patients with certain injures that some IRFs may not be equipped to admit—such as patients requiring advance medical management and advanced level procedural services and monitoring. Information provided by Shepherd Center indicated that, in calendar year 2017, approximately 20 percent of all inpatients were admitted to this unit and 13 percent of all inpatients were internally transferred to this unit after developing medical complications. According to officials, Craig Hospital does not have an intensive care unit, but noted their ability to similarly care for medically complex patients—including telemetry (e.g., specialized heart monitoring) and one-to-one nursing care, if necessary. Most stakeholders we interviewed agreed that both qualifying hospitals’ LTCH status provides certain advantages over IRFs, such as the ability to admit some medically complex patients earlier in the recovery process and longer lengths of stay. Stakeholders from most of the IRFs we interviewed also reported having the flexibility to admit some medically complex patients requiring more advanced level monitoring and resources earlier in the recovery process—such as patients with disorders of consciousness. Officials from the two qualifying hospitals also said they offer a continuum of care that can meet patient’s changing needs, without the need to transfer them to different facilities. Information provided by Craig Hospital indicated that 83 percent of patients treated at its facility, in 2016, were discharged to home, 13 percent were discharged to another post-acute care facility, and 3 percent were discharged to an acute care hospital. In 2016, approximately 91 percent of patients treated at Shepherd Center were discharged to home, 7 percent were discharged to another post- acute care facility, and 2 percent were discharged to an acute care hospital. Information provided by the IRFs that responded to our written request varied by facility, but—similar to the two qualifying hospitals— each facility discharged more than 65 percent of patients to home. IRF payment criteria. CMS and most other stakeholders we interviewed noted that two Medicare payment policies applicable to IRFs, but not LTCHs, may contribute to their different patient populations. Specifically, to be classified for payment under Medicare’s IRF PPS, at least 60 percent of the IRF’s total inpatient population must require intensive rehabilitative treatment for one or more of 13 conditions—which includes both spinal cord and brain injury. To be admitted to an IRF, Medicare beneficiaries must reasonably be expected to actively participate in and benefit from the intensive rehabilitation therapy program, typically provided in IRFs. According to HHS, per industry standard, the intensive rehabilitation therapy program is often demonstrated by providing three hours of rehabilitation services per day for at least five days per week, but this is not the only way such intensity can be demonstrated. Officials from the two qualifying hospitals told us they generally use Medicare’s intensive rehabilitation requirement as a minimum standard for their rehabilitation patients—even though they are not held to this requirement, for the purposes of Medicare payment—but noted that some of their patients may not meet this requirement, due to their medical complexity. Length of stay and site-neutral payment requirements, for LTCHs. As previously noted, LTCHs—including the two qualifying hospitals—must have an average length of stay of greater than 25 days; IRFs are not subject to this requirement. The average length of stay for patients discharged from the Craig Hospital was about 60 days, in fiscal year 2016, and the average length of stay for patients discharged from Shepherd Center was about 53 days, in calendar year 2016. Stakeholders from the IRFs that responded to our information request reported average lengths of stay ranging from 14 to 31 days, for patients discharged in fiscal year 2016; the ranges of lengths of stay were slightly higher for spinal cord injury and traumatic brain injury inpatients for the IRFs, during the same period. LTCHs are also generally subject to site- neutral payment policy that is not applicable to IRFs and may decrease LTCHs payments for certain discharges, under Medicare. Other services provided. In addition to these Medicare specific differences, a few stakeholders we interviewed also noted the two qualifying hospitals receive additional funding from their strong philanthropic donor base that may allow them to provide other services and resources, not covered by Medicare or offered at some IRFs. For example, while a few IRFs that responded to our information request reported offering housing for families of injured patients, the two qualifying hospitals offer up to 30 days of free housing to families of newly injured rehabilitation patients, if both the family and patient live more than 60 miles from the hospital. Officials from Shepherd Center told us their revenues are supplemented by investment income and donor funds. Craig Hospital has also established a foundation that supports the hospital in achieving its goals through philanthropy. We provided a draft of this report to HHS. HHS provided technical comments, which we incorporated as appropriate. We also provided the two qualifying hospitals summaries of information we collected from them, to confirm the accuracy of statements included in our draft report. We incorporated their comments, as appropriate. We are sending copies of this report to the Secretary of Health and Human Services and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at farbj@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix IV. This appendix describes our methodology for conducting simulations of payments for the two qualifying hospitals. We used Medicare claims data to conduct simulations of payments for the two qualifying hospitals. We first identified discharges at each hospital in two baseline years—federal fiscal years 2013 and 2016. We selected fiscal year 2016 because it was the year with the most recent data available at the time of our analysis, and we selected a second baseline year because data for 2016 was different than data for other recent years. For example, the number of discharges for one qualifying hospital declined by nearly half between fiscal years 2013 and 2016. We chose fiscal year 2013 because data from that year was used to help determine which hospitals are subject to the temporary exception. To identify how to appropriately calculate the long-term care hospital (LTCH) payment for each of these discharges in future payment years, we reviewed applicable federal regulation and documents from the Centers for Medicare & Medicaid Services (CMS) and the Medicare Payment Advisory Commission (MedPAC), and interviewed officials from both organizations. See table 4 for the relevant components in the formulas, such as Medicare severity long-term care diagnosis related group (MS-LTC-DRG) weights, identified from final rule tables. When conducting these simulations, we made the following assumptions: For simulated payments for payment policies in effect for fiscal years 2017 and 2018, we used the base rates, relative weights (e.g., the MS-LTC-DRG weights), geometric mean length of stay, wage index, geographic adjustment factor, fixed-loss amounts, and outlier thresholds that were published in the final rule tables for LTCH and inpatient prospective payment system (IPPS) hospitals—also known as acute care hospitals—for each respective year. At the time we began our analysis, this information was not known for fiscal years 2019 through 2021. We chose to use the fiscal year 2018 rates when conducting simulations for payment policies in those years because historical trends showed that annual changes were minimal—about 1 percent. Therefore, to the extent that these values continue to change over time, our findings may understate or overstate the amount that the qualifying hospitals would have been paid in our baseline years based on these future payment policies. The site-neutral payment policy did not apply to discharges from the fiscal year 2013 baseline year. Therefore, we examined Medicare claims data to determine whether each discharge would have met the criteria to receive the LTCH standard rate in that year. Specifically, we determined whether each discharge had an acute care hospital stay that immediately preceded their LTCH stay. We then determined whether the time at the acute care hospital included three or more days in the intensive care unit or whether there was a code on the LTCH claim that indicated at least 96 hours of mechanical ventilation services were provided. Per Medicare’s payment policy, we assumed any discharge that met these two criteria would qualify for full LTCH payment rate, unless the case was a psychiatric or rehabilitation stay, as identified by the following MS-LTC-DRG codes: 876, 880, 881, 882, 883, 884, 885, 886, 887, 894, 895, 896, 897, 945, or 946. Under statute, unless 50 percent or more of the hospital’s discharges beginning during or after 2020 qualify for the standard rate, no subsequent payments will be made to a hospital at that rate. Therefore, when calculating simulated payments for fiscal year 2021, we applied the 50 percent threshold. At the time of our analysis, CMS had not yet finalized this policy through rule-making. As of November 2018, CMS officials told us that it is unlikely that any payment adjustment under this provision would apply until 2022 because the percentage cannot be determined until after an LTCH’s cost reporting period has ended and data have been submitted. Shepherd Center’s fiscal year is different than the federal fiscal year. Therefore, the variables used to determine whether discharges in federal fiscal year 2016 met criteria to receive the standard rate were not available to use for some of the discharges that year. Of those discharges, we assumed that the same percentage of discharges that met the criteria to receive the standard rate in Shepherd’s fiscal year—30 percent—met the criteria in federal fiscal year 2016. When calculating site-neutral payments, we assumed that each discharge would be paid at a rate comparable to that for acute care hospitals—the IPPS comparable amount rate. Site-neutral payments may also be based on the estimated cost-of-care, if it is lower than the IPPS comparable amount rate. However, over 90 percent of discharges at the qualifying hospitals were paid at the IPPS comparable amount rate in fiscal year 2016. Per CMS’s recommendation, we applied the cost-to-charge ratio that was effective October 1, 2017, for each qualifying hospital, regardless of discharge date. For Craig Hospital this value was 0.442 and for Shepherd Center this value was 0.464. According to CMS officials, in general, these values do not change significantly when they are updated during the fiscal year. Therefore, they believe that using the values effective at the start of the fiscal year is a reasonable assumption. We excluded indirect medical education adjustments and disproportionate share hospital payments that are part of the IPPS comparable amount rate because, according to CMS, they were unlikely to have much impact for these hospitals. CMS reviewed each of these assumptions and agreed they were reasonable for purposes of our analysis. CMS also verified that we were correctly applying the formulas for calculating these payments and using the appropriate values from the final rules. Figures 3 and 4 illustrate the methodology for calculating Medicare payments under the long-term care hospital (LTCH) prospective payment system (PPS) and the inpatient rehabilitation facility (IRF) PPS, respectively, as reported by the Medicare Payment Advisory Commission (MedPAC). Appendix III: List of Common Diagnosis Groups for Long-Term Care Hospitals (LTCH) In its March 2018 annual report to the Congress, the Medicare Payment Advisory Commission (MedPAC) reported that 20 diagnosis groups accounted for over 61 percent of LTCH discharges at both for-profit and not-for-profit facilities, in fiscal year 2016. Table 5 provides a list of these 20 diagnosis groups. In addition to the contact named above, Will Simerl, Assistant Director; Kathy King; Amy Leone, Analyst-in-Charge; Todd Anderson; Sam Amrhein; LaKendra Beard; Rich Lipinski; Jennifer Rudisill; and Eric Wedum made key contributions to this report. Also contributing were Leia Dickerson, Diona Martyn, Vikki Porter, and Lisa Rogers.", "summary": "The Centers for Medicare & Medicaid Services pays LTCHs for care provided to Medicare beneficiaries. There were about 400 LTCHs across the nation in 2016. The 21st Century Cures Act included a provision for GAO to examine certain issues pertaining to LTCHs. This report examines (1) the health care needs of Medicare beneficiaries who receive services from the two qualifying hospitals; (2) how Medicare LTCH payment polices could affect the two qualifying hospitals; and (3) how the two qualifying hospitals compare with other LTCHs and other facilities that may treat Medicare patients with similar conditions. GAO analyzed the most recently available Medicare claims and other data for the two qualifying hospitals and other facilities that treat patients with spinal cord injuries. GAO also interviewed HHS officials and stakeholders from the qualifying hospitals, other facilities that treat spinal cord patients, specialty associations, and others. GAO provided a draft of this report to HHS. HHS provided technical comments, which were incorporated as appropriate. We also provided the two qualifying hospitals summaries of information we collected from them, to confirm the accuracy of statements included in our draft report. We incorporated their comments, as appropriate. Spinal cord injuries may result in secondary complications that often lead to decreased functional independence and quality of life. The 21st Century Cures Act changed how Medicare pays certain long-term care hospitals (LTCH) that provide spinal cord specialty treatment. For these hospitals, the act included a temporary exception from how Medicare pays other LTCHs. Two LTCHs—Craig Hospital in Englewood, Colorado and Shepherd Center in Atlanta, Georgia—have qualified for this exception. GAO found that most Medicare beneficiaries treated at these two hospitals typically receive specialized care for multiple chronic conditions and other long-term complications that develop after initial injuries, such as pressure ulcers that can result in life-threatening infection. The two hospitals also provide specialty care for acquired brain injuries, such as traumatic brain injuries. GAO's simulations of Medicare payments to these two hospitals using claims data from two baseline years—fiscal years 2013 and 2016—illustrate potential effects of payment policies. LTCHs are paid under a two-tiered system for care provided to beneficiaries: they receive the LTCH standard federal payment rate—or standard rate—for certain patients discharged from the LTCH, and a generally lower rate—known as a “site-neutral” rate—for all other discharges. Under the temporary exception, Craig Hospital and Shepherd Center receive the standard rate for all discharges during fiscal years 2018 and 2019. Assuming their types of discharges remain the same as in fiscal years 2013 and 2016, GAO's simulations of Medicare payments in the baseline years indicate: Most of the discharges we examined would not qualify for the standard rate, if the exception did not apply. Medicare payments would generally decrease under fiscal year 2020 payment policy, once the exception expires. However, the actual effects of Medicare's payment policies on these two hospitals could vary based on factors, including the severity of patient conditions (e.g., Medicare payment is typically higher for more severe injuries), and whether hospitals' discharges meet criteria for the standard rate. Similarities and differences may exist between the two qualifying hospitals and other facilities that treat Medicare patients with spinal cord and brain injuries. Patients with spinal cord and brain injuries may receive care in other LTCHs, but GAO found that most Medicare beneficiaries at these other LTCHs are treated for conditions other than spinal cord and brain injuries. Certain inpatient rehabilitation facilities (IRF) also provide post-acute rehabilitation services to patients with spinal cord and brain injuries. While data limitations make a direct comparison between these facilities and the two qualifying hospitals difficult, GAO identified some similarities and differences. For example, officials from some IRFs we interviewed reported providing several of the same programs and services as the two qualifying hospitals to medically complex patients, but the availability of services and complexity of patients varied. Among other reasons, the different Medicare payment requirements that apply to LTCHs and IRFs affect the types of services they provide and the patients they treat.", "document_type": "gao"}
{"report": "The Energy Policy and Conservation Act (EPCA) of 1975 authorized the SPR, partly in response to the Arab oil embargo of 1973 to 1974 that caused a shortfall in the international oil market. The SPR is owned by the federal government, managed by DOE’s Office of Petroleum Reserves, and maintained by Fluor Federal Petroleum Operations LLC. The SPR stores oil in underground salt caverns along the Gulf Coast in Louisiana and Texas. DOE established an initial target capacity for the SPR of 500 million barrels based on U.S. import levels and implemented a phased approach to create large underground oil storage sites in salt formations, to reach a physical storage capacity of 750 million barrels. The SPR currently maintains four storage sites with a physical capacity of 713.5 million barrels. Three recent laws required sales of oil from the SPR to fund its modernization and other national priorities. The Bipartisan Budget Act of 2015 provided for the drawdown and sale of 58 million barrels of oil from fiscal years 2018 through 2025 and authorized the sale of up to $2 billion worth of oil through fiscal year 2020 to be used for an SPR modernization program. The Fixing America’s Surface Transportation Act provided for the drawdown and sale of 66 million barrels of oil from fiscal years 2023 through 2025. The 21st Century Cures Act provided for the drawdown and sale of 25 million barrels from fiscal years 2017 through 2019. DOE estimates that, as a result of these sales, the SPR will hold between 506 and 513 million barrels of oil by 2025. For member countries to meet net petroleum import obligations, the IEA counts both public and private oil reserves, although the United States meets its IEA obligation solely through the SPR. As of July 2017, according to IEA data, the SPR held the equivalent of 141 days of import protection and U.S. private oil held the equivalent of an additional 216 days, for a total of about 356 days. Based on EIA projections of net imports, between 506 and 513 million barrels of oil would be equivalent to about 242 and 245 days of net imports in 2025. The United States has two regional refined product reserves—Northeast Home Heating Oil Reserve and Northeast Gasoline Supply Reserve. The Northeast Home Heating Oil Reserve, which is not part of the SPR, holds 1 million barrels of ultra-low sulfur distillate, used for heating oil, for homes and businesses in the northeastern United States, a region heavily dependent upon the use of heating oil, according to DOE’s website. The distillate is stored in leased commercial storage in terminals located in three states: Connecticut, Massachusetts, and New Jersey. In 2000, President Clinton directed the creation of the reserve to hold approximately 10 days of inventory, the time required for ships to carry additional heating oil from the Gulf of Mexico to New York Harbor. The Northeast Gasoline Supply Reserve, a part of the SPR, holds a 1 million barrel supply of gasoline for consumers in the northeastern United States. According to DOE’s website, this region is particularly vulnerable to gasoline disruptions as a result of hurricanes and other natural events. In response to Superstorm Sandy, which caused widespread gasoline shortages in the region in 2012, DOE conducted a test sale of the SPR and used a portion of the proceeds from the sale to create the reserve in 2014. The gasoline is stored in leased commercial storage in terminals located in three states: Maine, Massachusetts, and New Jersey. Under conditions prescribed by EPCA, as amended, the President has discretion to authorize the release of petroleum products from the SPR to minimize significant supply disruptions. In the event of an oil supply disruption, the SPR can supply the market by selling stored oil. Should the President order an emergency sale of SPR oil, DOE conducts a public sale, evaluates and selects offers, and awards contracts to the highest qualified bidders. Purchasers are responsible for making their own arrangements for the transport of the SPR oil to its final destination. The Secretary of Energy also is authorized to release petroleum products from the SPR through an exchange for the purpose of acquiring oil for the SPR. According to DOE officials, this authority is sometimes utilized in oil supply disruptions when a specific volume of SPR oil is provided to a private sector company in an emergency exchange for an equal quantity of oil plus an additional amount as a premium to be returned to the SPR in the future. According to DOE’s website, emergency exchanges are generally requested by a company after an event outside the control of the company, such as a hurricane, disrupts commercial oil supplies. The Secretary of Energy is also authorized to carry out test drawdowns through a sale or exchange of petroleum products to evaluate SPR’s drawdown and sales procedures. When oil is released from the SPR, it flows through commercial pipelines or on waterborne vessels to refineries, where it is converted into gasoline and other petroleum products, and then transported to distribution centers for sale to the public. Petroleum markets have changed substantially in the 40 years since the establishment of the SPR, including increases in global markets, increases in domestic oil production, and declines in net petroleum imports. Increases in global markets. At the time of the Arab oil embargo, price controls in the United States prevented the prices of oil and petroleum products from increasing as much as they otherwise might have, contributing to a physical oil shortage that caused long lines at gasoline stations throughout the United States. Now that the oil market is global, the price of oil is determined in the world market, primarily on the basis of supply and demand. In the absence of price controls, scarcity is generally expressed in the form of higher prices, as purchasers are free to bid as high as they want to secure oil supply. In a global market, an oil supply disruption anywhere in the world raises prices everywhere. Releasing oil reserves during a disruption provides a global benefit by reducing oil prices in the world market. Increases in domestic oil production. Reversing a decades-long decline, U.S. oil production has generally increased in recent years. According to EIA data, U.S. production of oil reached its highest level in 1970 and generally declined through 2008, reaching a level of almost one-half of its peak. During this time, the United States increasingly relied on imported oil to meet growing domestic energy needs. However, recent improvements in technologies have allowed producers to extract oil from shale formations that were previously considered to be inaccessible because traditional techniques did not yield sufficient amounts for economically viable production. In particular, the application of horizontal drilling techniques and hydraulic fracturing—a process that injects a combination of water, sand, and chemical additives under high pressure to create and maintain fractures in underground rock formations that allow oil and natural gas to flow—have increased U.S. oil and natural gas production. Declines in net petroleum imports. One measure of the economy’s vulnerability to oil supply disruptions is to assess net petroleum imports—that is, imports minus exports. Net petroleum imports have declined by over 60 percent from a peak of about 12.5 million barrels per day in 2005 to about 4.8 million barrels per day in 2016. In 2006, net imports were expected to increase in the future, increasing the country’s reliance on foreign oil. However, imports have declined since then and, according to EIA’s most recent forecast, are expected to remain well below 2005 import levels into the future. Canada and Mexico are the nation’s major foreign sources for imported oil. Furthermore, the United States has increased its exports of oil and refined petroleum products. To quantify how DOE has used the SPR to address domestic petroleum supply disruptions, we reviewed DOE and EIA documents. We also reviewed our past work from August 2006 to January 2014. Our preliminary analysis indicates that DOE has primarily used exchanges to private companies in response to domestic supply disruptions such as hurricanes and other events. DOE has released oil 24 times from 1985 through September 2017, including 11 releases in response to domestic supply disruptions. Of these 11 releases, 10 were exchanges, including 6 exchanges in response to hurricanes. One of the 11 releases was an SPR sale in response to Hurricane Katrina, which was part of an IEA coordinated action release. Historic releases from the SPR are shown in figure 1. Our preliminary analysis also indicates that the six exchanges from DOE to U.S. refineries in response to hurricanes totaled about 28 million barrels. Based on our preliminary analysis of DOE documents, most recently, in response to Hurricane Harvey in 2017, DOE exchanged 5 million barrels of oil to Gulf Coast refineries that requested supplies. Refinery operations largely depend on a supply of oil and feedstocks. Hurricane Harvey closed or restricted ports through which 2 million barrels of oil per day were imported, and several refineries had no supply options except for SPR oil. According to DOE officials, exchanges from the SPR have allowed refineries to continue to operate until alternative supply sources became available, ensuring continued production of refined petroleum products for use by consumers. Based on our preliminary analysis of DOE documents, DOE’s most significant response to a hurricane was in 2005 following Hurricane Katrina. As we reported in January 2014, oil platforms were evacuated and damaged, virtually shutting down all oil production in the Gulf region as a result of the hurricane. Based on our preliminary analysis of DOE documents, exchanges from the SPR, totaling 9.8 million barrels of oil, helped refineries offset this short-term physical supply disruption at the beginning of the supply chain, thereby helping to moderate the impact of the production shutdown on U.S. oil supplies. In addition to these exchanges, DOE also participated in an IEA collective action that was called in response to Hurricane Katrina by selling 11 million barrels of oil from the SPR, and IEA member countries delivered and sold much needed gasoline and other products to the United States. In total, DOE sold or exchanged 20.8 million barrels of oil from the SPR. Our preliminary analysis of DOE documents and reports also showed that although almost all of DOE’s releases in response to domestic supply disruptions have been from the SPR, DOE also used the Northeast Home Heating Oil Reserve in response to Superstorm Sandy in 2012. According to DOE’s website, the agency transferred approximately 120,000 barrels of fuel to the Department of Defense to help provide fuel for first responders. Based on our past work and preliminary observations, the SPR is limited in its ability to respond to domestic petroleum supply disruptions for three main reasons. First, as we reported in September 2014, reserves are almost entirely composed of oil and not refined products, which may not be effective in responding to all disruptions that affect the refining sector. Second, as we reported in September 2014, reserves are nearly entirely located in one region, the Gulf Coast, which may limit responsiveness to disruptions in other regions. Third, during the course of our ongoing work, we reviewed DOE and energy task force reports that found that the statutory authorities governing SPR releases may inhibit their use for regional disruptions. Composition: As we reported in September 2014, the SPR is almost entirely composed of oil, which may not be effective in responding to all disruptions that affect the refining sector. In September 2014, we reported that many recent economic risks associated with supply disruptions have originated from the refining and distribution sectors, which provide refined products, such as gasoline, rather than from shortages of oil. Oil reserves are of limited use in such instances. We reported in May 2009 that following Hurricanes Katrina and Rita, nearly 30 percent of U.S. refining capacity was shut down for weeks, disrupting supplies of gasoline and other products. The SPR could not mitigate the effects of disrupted supplies because it holds oil. As of September 2017, over 99 percent of the SPR and its Northeast Gasoline Supply Reserve component (about 674 of 675 million barrels) is held as oil rather than as refined products, such as gasoline and diesel. Moreover, Gulf Coast hurricanes severely impacted refinery operations, such as Hurricane Katrina in 2005, Hurricane Ike and Hurricane Gustav in 2008, and Hurricane Harvey this year. According to DOE officials, oil reserves are not able to mitigate the potential effects of large-scale Gulf Coast refinery outages that may impact refined product deliveries. Location: As we reported in September 2014, the SPR is nearly entirely located in one region, the Gulf Coast, which may limit its ability to respond to disruptions in other regions. In the Gulf Coast, the SPR is located close to a major refining center as well as to distribution points for tankers, barges, and pipelines that can carry oil from it to refineries in other regions of the country. Most of the system of oil pipelines in the United States was constructed in the 1950s, 1960s, and 1970s to accommodate the needs of the refining sector and demand centers at the time. Given the SPR’s current location in the Gulf Coast, transporting oil from the reserve may impact commercial distribution of oil. Based on our ongoing work, according to DOE’s 2016 long-term strategic review of the SPR, the agency reported that the expanding North American oil production and the resulting shifts in how oil is transported around the country have reduced the SPR’s ability to add incremental barrels of oil to the market under certain scenarios in the event of an oil supply crisis. This means that while the SPR remains connected to physical assets that could bring oil to the market, in many cases, forcing SPR oil into the distribution system would result in an offsetting reduction in domestic commercial oil flows. As we reported in September 2014, it may be more difficult to move oil from the SPR to refineries in certain regions of the United States. For example, since no pipelines connect the SPR to the West Coast, supplies of petroleum products and oil must be shipped by pipeline, truck, or barge from other domestic regions or by tanker from foreign countries. Such modes of transport are slower and more costly than via pipelines. For example, it can take about 2 weeks for a vessel to travel from the Gulf Coast to Los Angeles—including transit time through the Panama Canal. Statutory release authorities: In the course of our ongoing work, we reviewed DOE and energy task force reports that found that the statutory authorities governing SPR releases may inhibit their use for regional disruptions. DOE is authorized to release petroleum distillate (fuel) from the Northeast Home Heating Oil Reserve upon a finding by the President of a severe energy supply interruption that includes a dislocation in the heating oil market or other regional supply shortage. On the other hand, because the Northeast Gasoline Supply Reserve is a part of the SPR, DOE can release gasoline from that reserve only after the President makes the statutorily required findings for release from the SPR, which do not explicitly include the existence of a regional supply shortage. According to DOE’s 2016 long-term strategic review of the SPR, a regional product reserve is meant to address regional supply shortages, whereas the SPR of which the Northeast Gasoline Supply Reserve is a part of, is meant to address severe energy supply interruptions that have a national impact. As a result, according to DOE’s 2016 long-term strategic review of the SPR, in practice, this means that the release of the gasoline reserve would have to have a national impact. The Quadrennial Energy Review of 2015 recommended that Congress integrate the authorities of the President to release products from the regional product reserves—the Northeast Home Heating Oil Reserve and Northeast Gasoline Supply Reserve—into a single, unified authority by amending the trigger for the release of fuel from the two refined product reserves so that they are aligned and properly suited to the purpose of a product reserve, as opposed to an oil reserve. As discussed, based on our preliminary observations, DOE has used the SPR in response to domestic supply disruptions, but the effectiveness of these releases is unclear because DOE has not formally assessed all of them. DOE has exchanged about 28 million barrels of oil in response to hurricanes, but we found only two reports assessing DOE’s response to Hurricanes Gustav, Ike, Katrina, and Rita, and it is unclear whether DOE has examined other responses. According to a 2006 DOE Inspector General report, DOE used the SPR and its assets with great effectiveness to address emergency energy needs in the crises surrounding Hurricanes Katrina and Rita, but the concentration of SPR sites along the Gulf Coast meant the United States also had to rely on refined petroleum products from Europe. The report noted that despite being in the path of the hurricanes’ destruction, the SPR promptly fulfilled requests for oil from refineries suffering from storm-related supply shortages. However, the damage caused by Hurricane Katrina demonstrated that the concentration of refineries on the Gulf Coast and resulting damage to pipelines left the United States to rely on imports of refined petroleum products from Europe, as part of an IEA collective response. Consequently, regions experienced a shortage of gasoline, and prices rose. DOE testified in 2009 that despite a response from the SPR and IEA, some markets south of Virginia and north of Florida could not be immediately supplied with refined products due to a lack of infrastructure to receive and distribute imports from the Atlantic coast to inland population centers. Exchanges with multiple refiners totaling 5.4 million barrels of SPR oil were authorized to Hurricanes Gustav and Ike in 2008. DOE assessed this response and submitted a report to Congress in 2009. According to DOE’s 2009 report, the exchanges conducted in September and October 2008 were successful in providing emergency petroleum supplies to refiners experiencing shortages caused by Hurricanes Gustav and Ike. As we reported in May 2009, as originally enacted, EPCA envisioned the possibility that the SPR would include a variety of petroleum products stored at locations across the country. In a 2009 hearing, the then Deputy Assistant Secretary for Petroleum Reserves testified that DOE still considers a large SPR focused on oil storage to be the best way to protect the nation from the negative impacts of a short-term international interruption to U.S. oil imports; however, the hurricanes of 2005 and 2008 showed that the SPR may be limited in its ability to address some short- term interruptions to domestic refined products supply and distribution infrastructure. Based on information reviewed during the course of our ongoing work, to respond to disruptions, 27 of the 29 IEA member countries use one of five reserve structures, also known as stockholding structures, in which these countries hold public reserves, industry reserves, or a combination of these. The five structures are shown in figure 2. Also, most members hold refined petroleum products, with many members holding at least a third of their reserves in refined petroleum products. Some members hold their refined petroleum products in different regions across their country to respond to disruptions. Based on our preliminary analysis of information on the 29 IEA member countries, 18 place a stockholding obligation on industry either exclusively or in part to meet their total emergency reserve needs. Most of these countries distribute the stockholding obligation in proportion to companies’ share of oil imports or of sales in the domestic market. However, several member countries instead impose a higher obligation on refineries because of their high amount of operating oil. According to a 2014 IEA report, most IEA members hold some amount of refined petroleum products, and a European Union (EU) directive generally requires EU members to ensure that at least one-third of their stockholding obligation is held in the form of refined petroleum products. For example, according to the IEA’s website, Germany’s stockholding agency, Erdolbevorratungsverband (EBV), holds 55 percent of its reserve in refined petroleum products such as gasoline, diesel fuel, and light heating oil. In contrast, the United States holds almost all of its reserves in oil rather than refined petroleum products. Some IEA member countries geographically disperse their reserves of refined petroleum products to be able to respond to domestic disruptions. For example, according to the IEA’s website, to maintain a wide geographical distribution of emergency reserves, the French stockholding agency stores refined petroleum products in each of its seven geographic zones. Moreover, according to the IEA’s website, France’s agency stores petroleum product reserves in each zone; reserves in each zone should represent specified amounts based on consumption in order to respond to emergencies. During a labor strike in December 2013, France used its emergency reserves to supply local gas stations when delivery of fuel was impeded for a prolonged period of time, according to a French document. In another example, the IEA reported that Germany holds petroleum product reserves in several regions in the country and that the reserves are to be distributed throughout Germany, so that a minimum reserve equivalent to a 15-day supply is maintained in each of five designated supply areas. The rationale for this is to prevent logistical bottlenecks that could occur if all emergency reserves were stored centrally, according to a 2014 IEA report. Based on our preliminary observations, DOE has taken some steps to evaluate different structures for holding reserves. However, the agency has not formally evaluated other countries’ structures in over 35 years and has not finalized its 2015 studies on regional petroleum product reserves. According to DOE officials, the agency explored the feasibility of adopting the industry structure shortly after creating the SPR and concluded that this and other structures were not feasible in the United States. In 1980, DOE studied the feasibility of adopting the agency structure, which is the most similar to the SPR since the only major difference is how the reserve is funded, according to DOE officials. According to IEA documents, in the agency structure, generally the reserve is funded by a tax or levy on products or industry, which is passed down to the consumer. In contrast, the SPR is funded through congressional appropriations. However, DOE officials we interviewed cautioned that the agency has not reassessed its findings from 35 years ago. As mentioned above, in 2016 DOE reassessed the SPR in light of the changing global oil market, but this assessment did not include a review of other IEA countries’ structures. Our preliminary review indicates that DOE examined the feasibility of additional regional petroleum product reserves in two 2015 studies, but it did not finalize these studies or expand the SPR to include additional reserves. In September 2014, we reported that DOE officials told us they were conducting a regional fuel resiliency study that would provide insights into whether there is a need for additional regional product reserves and, if so, where these reserves should be located. The Quadrennial Energy Review of 2015 recommended that the agency analyze the need for additional or expanded regional product reserves by undertaking updated cost-benefit analyses for all of the regions of the United States that have been identified as vulnerable to fuel supply disruptions. Figure 3 illustrates vulnerabilities that DOE identified in 2014. In response to the 2015 recommendation, DOE contractors studied the feasibility of additional regional petroleum product reserves, as part of the SPR, in the U.S. Southeast and West Coast regions to address supply vulnerabilities from hurricanes and earthquakes, respectively. According to DOE officials, weather events in the Southeast are of higher probability but lower consequence, and events in the West Coast are of lower probability but higher consequence. DOE did not finalize its 2015 studies on regional petroleum product reserves and make them publicly available. According to DOE officials, because consensus could not be reached within the Administration on several issues associated with the refined product reserve studies, these studies were not included as part of DOE’s 2016 long-term strategic review of the SPR. Our ongoing work indicates that DOE’s 2016 long-term strategic review of the SPR did not account for the risks of domestic supply disruptions as a factor in determining the appropriate size, location, and composition of the SPR. Prior to the two 2015 studies, in 2011, DOE carried out a cost-benefit study of the establishment of a refined product reserve in the Southeast and estimated that such a reserve would reduce the average gasoline price rise by 50 percent to 70 percent in the weeks immediately after a hurricane landfall, resulting in consumer cost savings, according to the Quadrennial Energy Review of 2015. In closing, I note that we are continuing our ongoing work examining issues that may help inform future considerations for the SPR. Given the constrained budget environment and the evolving nature of energy markets and their vulnerabilities, it is important that DOE ensures the SPR is an efficient and effective use of federal resources. We look forward to continuing our work to determine whether additional DOE actions may be warranted to promote this objective. Chairman Upton, Ranking Member Rush, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Frank Rusco, Director, Natural Resources and Environment, at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this testimony include Quindi Franco, Assistant Director; Philip Farah, Ellen Fried, Nkenge Gibson, Cindy Gilbert, Gregory Marchand, Patricia Moye, Camille Pease, Oliver Richard, Danny Royer, Rachel Stoiko, Marie Suding, and Kiki Theodoropoulos. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Over 4 decades ago, Congress authorized the SPR—the world's largest government-owned stockpile of emergency oil—to release oil to the market during supply disruptions and protect the U.S. economy from damage. The SPR is managed by DOE. According to DOE's strategic plan, the SPR benefits the nation by providing an insurance policy against actual and potential interruptions in U.S. petroleum supplies caused by international turmoil and hurricanes, among other things. The SPR also helps the United States meet its obligations, including to holding reserves of oil or refined petroleum products equaling 90 days of net petroleum imports, as one of 29 members of the IEA—an international energy forum established to help members respond to major oil supply disruptions. The SPR held almost 674 million barrels of oil at the end of September 2017. This testimony primarily focuses on preliminary observations from ongoing work on (1) DOE's use of the SPR in response to domestic petroleum supply disruptions, (2) the extent to which the SPR is able to respond to domestic petroleum supply disruptions, and (3) how other IEA members structure their strategic reserves and extent to which DOE has examined these structures. GAO reviewed past work from August 2006 through September 2014 and DOE and IEA documentation. GAO also interviewed DOE and IEA officials, as part of GAO's ongoing work. GAO's preliminary analysis of Department of Energy (DOE) documents indicates that DOE has primarily used the Strategic Petroleum Reserve (SPR) to an exchange of oil to companies in response to domestic supply disruptions, such as hurricanes. In the event of a supply disruption, the SPR can supply the market by either exchanging oil for an equal quantity of oil plus an additional amount as a premium to be returned to the SPR in the future or selling stored oil. Since the SPR was authorized in 1975, DOE has released oil 11 times in response to domestic supply disruptions. All but one were in the form of an exchange, including six exchanges in response to hurricanes. For example, Hurricane Harvey in 2017 closed or restricted ports through which 2 million barrels of oil per day were imported. In response, DOE exchanged 5 million barrels of oil to Gulf Coast refineries. According to DOE officials, exchanges from the SPR allowed refineries to operate, ensuring continued production of refined petroleum products for use by consumers. Based on past GAO work and preliminary observations, the SPR is limited in its ability to respond to domestic supply disruptions, including severe weather events, for three main reasons. First, as GAO reported in September 2014 (GAO-14-807), the SPR is almost entirely composed of oil and not refined products like gasoline, which may not be effective in responding to all disruptions. For example, following Hurricanes Katrina and Rita, nearly 30 percent of U.S. refining capacity was shut down for weeks, disrupting supplies of gasoline and other petroleum products. The SPR could not mitigate the effects of disrupted supplies. Second, as GAO also reported in September 2014, the SPR is nearly entirely located in the Gulf Coast, so it may not be responsive to disruptions in other regions, such as the West Coast. Third, GAO's ongoing work reviewed DOE and energy task force reports that found that statutory authorities governing SPR releases may inhibit their use for regional disruptions. GAO's preliminary observations show that other International Energy Agency (IEA) member countries generally have used one of five reserve structures configured in various ways. The structures are defined by whether countries hold either public reserves (e.g., the SPR), industry reserves (e.g., placing reserve holding requirements on industry), or a combination. Most IEA members hold refined petroleum products in reserve, with many members holding at least a third of their reserves in these products. For example, in Germany, 55 percent of reserves are in petroleum products. In addition, some IEA members' reserves are geographically dispersed in their countries to respond to disruptions. For example, France has reserves in each of its seven regions and has used these to address fuel supply disruptions as a result of recent domestic strikes. DOE has taken some steps to evaluate other structures but has not formally evaluated the structures of other countries in over 35 years. In addition, DOE contractors studied the feasibility of regional product reserves in the Southeast and West Coast regions to address supply vulnerabilities from hurricanes and earthquakes, respectively but DOE did not finalize the two 2015 studies. In 2016, DOE released a long- term strategic review of the SPR that Congress had required and GAO recommended. However, DOE did not include the results of the two studies in its 2016 review. GAO is not making recommendations but will consider making them, as appropriate, as it finalizes its work.", "document_type": "gao"}
{"report": "Spectrum is a natural resource used to provide a variety of communication services to businesses and consumers, as well as federal, state, and local governments. Businesses and consumers use spectrum for a variety of wireless services including mobile voice and data, WiFi- and Bluetooth-enabled devices, broadcast television, radio, and satellite services. Federal, state, and local governments’ uses of spectrum include national defense, law enforcement communication, air- traffic control, weather services, military radar, and first responder communications. IoT applications that rely on spectrum are highly diverse and include connected vehicles, devices in the home, and personal mobile devices. IoT devices communicate using wireless networks, including wide area networks that use cellular networks to cover large areas (e.g., cellular transmission), local area networks that cover about 100 meters (e.g., Wi-Fi within a house), and personal networks covering about 10 meters (e.g., Bluetooth inside a room) (see fig. 1). Each of these wireless devices, like other wireless IoT devices, communicates using spectrum, and the number of connected devices is expected to increase. In 2013, the number of devices connected to the internet globally was estimated to be over 9 billion. In 2015, the Organisation for Economic Cooperation and Development (OECD) estimated that a family of four had an average of 10 devices connected to the Internet in their household, and that this average will increase to 50 devices by 2022. As companies bring new IoT technologies and services to market and government users develop new mission needs, the demand for spectrum will increase. The frequencies, or frequency bands, of spectrum have different characteristics that make them more or less suitable for specific purposes, depending on the specific band (see fig. 2). These bands have different levels of ability to penetrate physical obstacles and cover distances, known as “propagation,” and different limits to the amount of information that they can carry, known as data capacity, and are used for different communication purposes. Low frequency bands are characterized by strong propagation, and are used by numerous IoT devices, some of which may only transmit small amounts of information such as temperature, location, or activity status. The strong propagation of low bands means they can transmit over long distances. Mid-band frequencies have higher data capacity than low bands (because, in part, frequency allocations in higher bands are larger, allowing wider channels), as well as, stronger propagation qualities than higher bands. The bands above 30 GHz have high data capacity but relatively poor propagation, to the point that bands at the highest frequencies can be easily obstructed. This spectrum is currently used by a variety of services, including satellite, fixed microwave, and radio astronomy, and is expected to be important for the next generation wireless technology (5G). FCC is the federal agency responsible for allocating spectrum for various consumer and commercial purposes, assigning spectrum licenses, and making spectrum available for use by unlicensed devices. Licensing assigns frequencies of spectrum, in a specific area, to a specific entity, such as a telecommunications company that operates a network using licensed spectrum. We refer to these bands as licensed spectrum. In some frequency bands, FCC authorizes unlicensed use of spectrum bands—generally referred to as unlicensed spectrum—that is, users do not need to obtain a license to use spectrum. Rather, users of unlicensed devices can share frequencies on a non-interference basis, such as with home wireless networks, cordless phones, and garage door openers. In addition, FCC supports federal emergency-communications activities. NTIA is responsible for establishing policy on regulating federal spectrum use, assigning spectrum bands to government agencies, and maintaining spectrum use databases. Additionally, like FCC, NTIA participates in federal emergency communications activities. NTIA also determines what spectrum bands reserved for the federal government can be made available for commercial use. In managing spectrum, one factor that FCC and NTIA consider is the potential for interference. Harmful interference occurs when two communication signals are either at the same frequencies or close to the same frequencies in the same vicinity, a situation that may lead to degradation of a device’s operation or service. Co-channel interference occurs when two communications systems operate on the same frequency assignment in the same vicinity. Adjacent band interference occurs between two communication systems operating on different, but adjacent frequencies in the same geographic area. Another source of interference can be signals on adjacent spectrum bands leaking into another band. FCC and NTIA work to make more efficient use of spectrum that has been assigned. One means of more efficiently using spectrum is to share it, between and among both federal users and commercial users. In 2017, FCC and NTIA continued oversight of the development of a new- spectrum sharing mechanism called the Spectrum Access System (SAS) in the 3.5 GHz band. Among other things, the SAS allows multiple users access to the same band at different times or places. Within this spectrum band the SAS establishes a three-tiered system of access priority, with federal and non-federal incumbent users having first priority, new non- federal users who have paid for licensed access as second priority, and other users as third priority. This system relies on the SAS to assign frequencies by determining if a frequency is in use by a higher priority user before assigning it to a lower priority user. Stakeholders representing IoT network providers, device manufacturers, users, and federal regulators consistently identified two spectrum-related challenges to the continued growth and development of IoT 1) ensuring the availability of sufficient spectrum and 2) managing the harmful interference from the increasing number of IoT devices. While not currently a crisis, the stakeholders we spoke to agreed that ensuring the availability of sufficient amounts and the right kinds of spectrum is a key challenge for supporting the growth of IoT. Specifically, stakeholders cited three dimensions of the spectrum availability challenge: the amount, the balance between licensed and unlicensed, and the variety of spectrum bands available. According to some reports, incorrectly anticipating industry needs in any of these areas could weaken IoT growth and development in the United States. Amount of spectrum: The amount of spectrum needed for IoT devices is expected to increase with their growth. According to a majority of stakeholders we interviewed, FCC will need to continue to make additional spectrum commercially available in order to meet the demand from expected rapid growth in wireless devices, including IoT devices. FCC officials told us the current amount of available spectrum will be sufficient for the growth of IoT unless devices that use a disproportionally large amount of spectrum become more prevalent. Such devices, like those that stream video, could lead to a spectrum shortage that negatively impacts IoT growth. According to several stakeholders spectrum availability will become an issue as use of these devices increases. FCC officials said that cellular providers experienced similar issues when they introduced smart phones, spurring rapid, exponential growth in consumer demand to send and receive wireless data. Despite the potential for a shortage of spectrum for IoT devices, most of the stakeholders agreed that there should not be specific spectrum set aside for IoT devices; rather, some noted spectrum policies should remain flexible, allowing licensees to determine the best use. Licensed and unlicensed spectrum: A majority of stakeholders said that the spectrum availability challenge includes making both licensed and unlicensed spectrum available. According to FCC staff, FCC is responsible for ensuring sufficient spectrum exists for commercial purposes and will continue to identify new spectrum that can be used for a variety of uses, including by IoT and other wireless devices. This identification of new spectrum includes making spectrum available on both a licensed and unlicensed basis to meet the needs of IoT and other wireless devices. For example, some devices may need to send a signal over a long distance and with a high quality of service to ensure a signal will go through, such as a fire alarm, something licensed spectrum can provide. However, for other devices, cost is a more important consideration. Licensed spectrum has costs that can come from purchasing the license or accessing the spectrum. For example, an official from a supply-chain automation company that develops radio- frequency identification tags told us the lack of inexpensive, low power networks that provide broad coverage is a challenge for their business. With such a network, the company’s tags could send out small amounts of data at intervals to help manufacturers track their goods. However, the cost of such a service is important if these tags are to attach to all size packages because paying for GPS or a wireless connections for each would make it unfeasible. According to several stakeholders, the correct balance between licensed and unlicensed spectrum is difficult to know. Spectrum bands: Several stakeholders indicated that the need to make various spectrum bands available for IoT devices contributes to the spectrum management challenge. As previously described, each band of spectrum has different characteristics, such as the ability to carry data long distances and penetrate obstacles. IoT devices have diverse spectrum needs, such as needing to send a signal over a distance or send a constant stream of information. For example, in the package delivery industry there could be IoT devices, sending signals over a distance, that read the location of the vehicle and direct the driver on a different route based on traffic and deliveries. In addition, there are IoT devices that can monitor containers being delivered including their location, temperature within the container, and other characteristics. In both these examples, the devices can send signals over long distances to systems that can monitor the information. Some stakeholders and FCC staff also agreed that managing interference caused by the increasing number of IoT devices will challenge the continued growth of IoT. As previously stated, interference occurs when signals in the same vicinity attempt to access the same spectrum bands or bands close to each other, causing the signals to degrade. This can lead to intermittent access, poor reception, or no reception. As the number of wireless IoT devices grows, the chances of harmful interference increases. The number of IoT devices is predicted to grow so fast the instances of harmful interference could be difficult to track. Furthermore, according to one stakeholder, with devices being made by more manufacturers, not all devices are created of equal quality, potentially further increasing the chance that such devices will cause interference. A recently issued GAO report found that according to FCC staff, the expansion in wireless services and devices, not just IoT, has contributed to interference becoming more of a challenge for FCC. FCC staff agreed that managing interference is becoming more challenging as the number of wireless IoT devices grows. However, according to FCC staff, relatively few complaints pertaining to licensed services involve devices that are compliant with FCC regulations and operating properly. Managing interference may be particularly difficult in homes where many devices rely on unlicensed spectrum. The FCC Technical Advisory Council’s (TAC) report from 2014, expressed concerns that the rapid growth of IoT could exacerbate interference issues in the home. Particularly, the growing reliance on unlicensed spectrum for many consumer IoT devices has contributed to this concern. For example, many IoT devices using unlicensed spectrum, such as digital assistants or wireless speaker systems, use Wi-Fi, Bluetooth or similar technology to transmit a short distance to a smart phone or Wi-Fi router. Not all agree however, that this use is an issue. One spectrum expert we interviewed for a recently-issued report said that interference among consumer devices is less likely to be an issue because they only transmit for short durations and over short distances. If the devices only transmit a short distance then many devices can transmit on the same spectrum. Similarly, if devices only transmit for short durations then they can take turns transmitting over the same spectrum. To plan for spectrum needs, FCC has repurposed spectrum by making additional spectrum available for commercial purposes and, according to FCC officials, the agency is continuing to look for additional opportunities to do so. For example, in 2016, FCC issued a final order that opened up high-band spectrum (above 24 GHz) for use with 5G networks and applications. This particular rulemaking from FCC opened up a total of 10.85 GHz of spectrum, 3.85 GHz for licensed mobile use and 7 GHz for unlicensed use. According to FCC, this order follows a technology neutral approach to planning by allowing spectrum users to develop technologies for the spectrum and not have FCC dictate its specific use. Advances in technology that now allow use of spectrum above 24 GHz for high-speed mobile services led the FCC to initiate the proceeding resulting in this order. Previously, this spectrum was best suited for various satellite or fixed microwave applications. As shown in table 1, in recent years FCC has freed up spectrum for licensed use, unlicensed use, and sharing between the two. In 2016, FCC issued a proposed rule to allow mobile uses in an additional 17.7 GHz of spectrum. In 2017, the FCC issued a Notice of Inquiry seeking input on potential opportunities for additional flexibility, particularly for wireless broadband services, in spectrum bands between 3.7 and 24 GHz. However, according to FCC staff, the process of identifying and freeing up new spectrum can take a significant amount of time as FCC must complete a rulemaking and either relocate existing users or define sharing arrangements between the existing users and new users. FCC has also proposed sharing mechanisms it hopes will allow some bands to be used by existing users as well as additional uses in the future. Other efforts to make additional spectrum commercially available have included examining the potential for sharing the 5.9 GHz band that FCC designated for transportation safety. This band was allocated over 15 years ago and designated exclusively for safety communication between vehicles and between vehicles and infrastructure. In recent years, FCC has worked with the automobile industry and Department of Transportation to assess whether all or a portion of that spectrum could be shared. FCC is also monitoring development of specifications to support 5G—the next generation of wireless networks. According to FCC, the 5G technologies that providers develop are projected to bring wireless networks lower latency, better coverage, faster Internet connections, and allow for more connections than the existing cellular network, all of which may enable more IoT devices to be connected. However, 5G technology is still being developed, and while specifications are not fully defined, according to the plans from the standards-making bodies there will be particular standards designed to support IoT communications. In 2016, NTIA issued a report on the potential roles of the federal government in support of the growth of IoT. It addressed specific questions regarding the spectrum needs and potential interference related to IoT devices and reaffirmed the government’s role in supporting technology growth. Furthermore, the report identified ongoing initiatives that support IoT as well as proposed future steps the Department of Commerce can take to further support IoT development. For example, NTIA’s report proposed that it continue to analyze the usage and growth of IoT devices through its survey used to collect its Digital Nation data. Recent Digital Nation surveys have asked about wearable devices, use of smart televisions, and use of Internet-enabled mobile phones, all uses that include IoT applications. The most recent survey, in 2015, also asked Internet users whether they interact with household equipment or appliances via the Internet. NTIA officials recently told us that they will continue to monitor these connected items to track trends in their use but do not intend to expand the survey to include questions about additional IoT devices. Specifically, in January 2017, NTIA sought out public comment on its November 2017 Digital Nation survey including comment on a proposed questionnaire. NTIA subsequently submitted its proposed questionnaire to Office of Management and Budget for final approval. NTIA also has ongoing spectrum studies through its Institute for Telecommunications Sciences and the findings may apply to IoT’s use of spectrum. As shown in table 2, these studies touch on a number of areas related to IoT including interference issues and spectrum use. NTIA also co-chairs the Wireless Spectrum Research and Development Interagency Working Group that coordinates spectrum-related research and development activities across the federal government, academia, and the private sector. Among other activities, this working group has developed the Wireless Spectrum Research and Development Inventory that, in its 2016 iteration, provides information on completed projects or those scheduled to be completed between January 1, 2015 and December 31, 2018. FCC has a strategic goal of promoting economic growth, and one way FCC pursues that goal is by ensuring that there is sufficient spectrum to support commercial demand. Most stakeholders agree that the growth in mobile IoT devices will eventually require additional spectrum to operate effectively. According to some stakeholders we interviewed and reports we reviewed, rapid, unexpected growth in two areas could lead to congestion and interference that could slow the growth of IoT in the United States: (1) high-bandwidth devices and (2) devices that operate in unlicensed bands. Federal standards for internal control instruct agencies to address risks such as these by estimating the significance of the risk, analyzing the likelihood of it occurring, and assessing its nature. Such assessments can be used to determine how to respond to the potential risks that could prevent agencies from meeting their goals. Rapid growth in high-bandwidth and unlicensed spectrum devices represent risks to FCC achieving its goal of promoting economic growth by ensuring that sufficient spectrum is available. FCC officials said that the agency tracks industry-produced trends and projections related to spectrum demand and use but does not focus on specific devices. Rather, it relies on network providers to manage and track the spectrum related to specific device types. When more spectrum is needed, FCC officials said that FCC identifies additional spectrum and makes it available to the commercial sector. However, this reactive approach may not adequately address the risks caused by high- bandwidth and unlicensed-spectrum devices. High-bandwidth devices: Some stakeholders we interviewed and FCC officials said that rapid increases in high-bandwidth IoT devices could overwhelm current wireless networks. Such IoT devices could include video-streaming devices or unmanned drones, which have much higher data needs and will require a lot of bandwidth. FCC officials said that the supply of spectrum has not always kept pace with demand caused by rapid increases in high-bandwidth devices. For example, the officials said that wireless networks were overwhelmed when providers introduced smart phones. Until then, ringtones represented the bulk of demand for wireless data, but mobile Internet browsing caused the demand for wireless data to increase several fold. In 2014, the FCC TAC warned that new IoT applications could overwhelm networks the same way smartphones and other new technologies have in the past. The TAC recommended that FCC monitor IoT wireless networks with a specific focus on high-bandwidth devices. Unlicensed spectrum use: Some stakeholders also said that unlicensed bands are particularly vulnerable to congestion and potential interference because of expected growth in IoT devices. For example, all the commercial, industrial, and personal devices that connect using WiFi and Bluetooth networks use unlicensed spectrum. In 2014, the TAC indicated that the majority of wireless IoT devices will rely on unlicensed spectrum and recommended FCC make sufficient unlicensed spectrum available for devices operating on local and personal area networks, like WiFi and Bluetooth. However, FCC may not have enough information to determine when the amount of unlicensed spectrum is sufficient. While network providers can manage the number of devices on their own licensed networks, this approach does not work for devices that use unlicensed spectrum, and FCC does not track unlicensed spectrum utilization. It does not track use of unlicensed spectrum because congestion of unlicensed spectrum is geographically and technically challenging to track. Specifically, it is geographically challenging because network congestion and demand can vary over very short distances and technically challenging because there are so many bands of spectrum that would have to be tracked at one time and unlicensed spectrum typically propagates over relatively short distances. However, there may be ways to track unlicensed use that does not require monitoring. For example, NTIA’s Digital Nation survey provides information on select IoT devices using unlicensed spectrum that could help track unlicensed spectrum use. While FCC makes additional spectrum available when needed, it lacks an early warning system for high-risk sectors, like high-bandwidth and unlicensed-spectrum devices. The process of identifying and reallocating spectrum is a lengthy process that can take years, including the need to identify new bands, address the needs of existing users on the bands, establish service rules, and license or assign the spectrum for commercial uses. Without tracking the high-bandwidth and unlicensed-spectrum devices, FCC is not assessing a key risk associated with its goal of promoting economic growth. Rapid, unexpected growth in these IoT sectors could lead to spectrum congestion and interference that could slow or halt the economic growth associated with IoT until FCC can make additional spectrum available. Like the United States, France, Germany, the Netherlands, and South Korea are among the world leaders in the development of IoT. We contacted public and private officials in these countries to identify their approaches to spectrum planning to address the growth of IoT. Those officials described approaches to planning for future spectrum needs that are similar to the United States in one area but different in others (see table 3). Specifically, we found that all four countries practice technology neutral spectrum planning, an approach that was broadly supported by the stakeholders we interviewed, including wireless carriers, a technology manufacturer, academics, and a nonprofit group. Some of these stakeholders indicated that this approach to spectrum planning encourages innovation as it allows developers to choose the most appropriate spectrum bands for new technology without having to take the extra step of getting regulators’ permission for each new device or application. Two of the selected leading countries, Germany and South Korea, have developed national IoT plans focused on developing IoT for industry; however, only South Korea has a plan that specifically addresses spectrum issues. South Korea’s national IoT plan seeks to increase collaboration among IoT stakeholders, promote innovation, and develop services for the global market in order to promote productivity and efficiency in Korean business. South Korea also developed a mid- to long-term spectrum plan to respond to the expected growth in demand for spectrum as IoT expands and 5G cellular networks are deployed. Released in 2016, the plan intends to makes more spectrum available to support new services such as smart homes, smart factories, smart cities, remote medical treatment, and unmanned vehicles. Specifically, the South Korean spectrum plan that includes IoT and establishes the following goals: almost doubling the amount of available spectrum available, expanding from 44 GHz of available spectrum to 84 GHz by 2026, and increasing the efficiency of spectrum use, promoting spectrum sharing, and advancing international coordination in spectrum planning. Officials from France and the Netherlands told us that making more unlicensed spectrum available is a high priority in their spectrum planning. These officials told us that unlicensed spectrum promotes greater innovation by lowering barriers to access, and many IoT devices are expected to be designed to operate on unlicensed bands. German and Dutch officials told us that numerous smart city IoT applications have been developed in their respective countries, most of which operate on unlicensed spectrum. For example, German and Dutch networks use unlicensed spectrum for purposes that include managing street lighting, preventing the theft of property such as bicycles, monitoring parking spaces, and managing agricultural resources. To provide service options for low power IoT devices, private companies in France, the Netherlands, and South Korea developed nationwide low- power wide-area networks (LPWAN) which use unlicensed spectrum to transmit data. These LPWANs use the 800 and 900 MHz bands to transmit data from wireless IoT devices such as sensors and location trackers. Signals in these bands can be transmitted over long distances and can penetrate obstacles. According to one LPWAN provider, the distance served by a LPWAN site is greater than a single cellular network site. However, according to the same LPWAN operator, the bands used for LPWAN networks have limited data capacity compared to those used by cellular networks. According to officials and telecommunications industry stakeholders in these countries, LPWANs offer several potential benefits including low barriers to entry, low costs, and broad coverage. According to a Dutch telecommunications industry stakeholder most devices that use LPWANs transmit only small amounts of data. A telecommunications industry stakeholder in France told us that the long range and strong propagation of these LPWANs make them useful for utility metering data and South Korean official told us that LPWANs are used to transmit location or temperature data. For example, in the Netherlands, LPWANs are used to monitor water depth and quality, manage street lighting, and to track the location of business inventory and personal property. In France, LPWANs are used for similar tracking as well as smoke detectors. Other uses for the LPWANs are currently in development. For example, a representative of a Dutch telecommunications company told us that in the Netherlands, IoT devices operating on the nationwide LPWAN are being tested at an airport for use in logistical processes such as baggage handling. Additionally, a Dutch railway station is experimenting with IoT technology that monitors rail switches using the LPWAN, and depth sounders at the port of Rotterdam have been fitted with devices to connect them to the network. South Korean officials said that the LPWAN in their country also provides specialized location-tracking services. Selected leading countries take many similar approaches to each other and the United States to managing spectrum in order to address related challenges (see table 4). Like the United States, spectrum-planning officials in France, Germany, and the Netherlands told us that it was necessary to coordinate spectrum planning with other countries on their borders. Officials in each of these countries told us that European spectrum planning is complicated by the number of countries that share borders. Germany, for example, borders nine other countries. As each country is responsible for its own spectrum planning, if their plans are not closely coordinated, there is a potential for cross-border interference. This coordination is complicated by the fact that European countries have legacy spectrum allocations, and these must be accommodated in spectrum planning. The United States, by contrast, shares its border with only Mexico and Canada. According to FCC officials, both of these countries generally align their spectrum plans to those of the United States, reducing interference issues. In order to facilitate international coordination of spectrum planning, each of the four selected leading countries, like the United States, belongs to a regional spectrum-planning association that works to harmonize spectrum planning among member states. Officials of regional groups we spoke with told us that harmonizing can reduce interference issues across borders and facilitate interoperability of devices across different countries. Officials from the manufacturing and telecommunications industries told us that this interoperability creates a larger potential market for IoT devices, thereby improving the economies of scale for the manufacture of IoT devices and reducing production costs. Regional planning associations are also taking steps to prepare their member countries for the spectrum needs of IoT. For example, an official of one association, the Inter-American Telecommunication Commission, told us that in 2016 it held a workshop on “machine-to-machine” technologies that brought together spectrum planners and stakeholders from IoT-related industries. Regional-planning associations also represent their member countries at World Radiocommunications Conferences (WRC). An official from one association told us that due to the diverse nature of IoT devices and applications it is unnecessary for IoT to be explicitly addressed as an agenda item at WRCs. However, the official further stated that the spectrum needs of specific IoT applications— including low power sensors, robotics, and connected vehicles—are included on the agenda. For example, the next WRC is scheduled for 2019 and includes an agenda item addressing connected vehicles, which are closely linked to IoT. Spectrum-planning officials in each of the selected leading countries told us they are concerned about the potential for spectrum congestion, due to growth in the number of IoT devices. However, like FCC in the United States, these officials do not currently believe such congestion presents an immediate problem. Representatives of the four countries we spoke with told us that one way that they address the potential challenge of spectrum congestion is through the use of spectrum-sharing arrangements. Representatives from Germany specifically stressed the importance of finding additional sharing arrangements in response to the expected spectrum needs for IoT. In 2016, both France and the Netherlands initiated pilot programs for spectrum sharing in which multiple users’ access the same bands while prioritizing use by the licensee. These pilot programs are similar to the dynamic-sharing model that FCC adopted in 2015, as described previously. However, whereas the model adopted by FCC has three tiers of users, the model used by France and the Netherlands has only two, and lacks the third tier of general access users. Unlike the United States, officials from Germany and France told us that they directly monitor spectrum congestion. For example, German officials told us that there are spectrum-monitoring services at six locations around the country, and that they perform mobile measurements of spectrum congestion. FCC officials told us that their primary means of tracking congestion is to communicate with spectrum licensees. According to officials from the Netherlands, the Dutch spectrum management agency takes a similar approach and has struck an agreement with a group of telecommunications companies to share information concerning IoT’s interference and congestion issues. Officials also told us that it is easier to monitor spectrum congestion in smaller countries, as there is simply less geographical space to monitor. Nevertheless, officials in France, Germany, and the Netherlands told us that monitoring spectrum is a challenging task, as it is difficult to determine how many wireless devices are active at any given time. FCC has a strategic goal to promote economic growth and effective spectrum management represents a key way that FCC can support meeting that goal. To that end, FCC officials said that the agency continuously seeks to make additional spectrum available and broadly tracks spectrum demand. However, stakeholders and FCC’s own technical advisors have identified rapid, unexpected growth in both high- bandwidth devices and unlicensed spectrum as risks to effective spectrum management. By overwhelming existing networks before FCC can make more spectrum available, rapid growth in spectrum demand could slow or halt IoT’s potential to facilitate economic growth. Absent additional efforts to assess the risks to effective spectrum management by focusing on high-bandwidth and unlicensed-spectrum devices, spectrum congestion and interference could slow IoT growth. We are making the following two recommendations to the Chairman of FCC. The Chairman of FCC should track the growth in high bandwidth IoT devices, such as video-streaming devices and optical sensors. (Recommendation 1) The Chairman of FCC should track the growth in IoT devices relying on unlicensed spectrum. (Recommendation 2) We provided a draft of this report to FCC and the Department of Commerce for their review and comment. FCC provided comments in a letter, which is reprinted in appendix IV. FCC and the Department of Commerce provided technical comments that we incorporated as appropriate. In its written comments, FCC did not concur with our recommendation that it track growth in high-bandwidth devices. FCC noted that it continues to believe that the best approach to track growth of devices is by monitoring overall traffic statistics and forecasts and how these devices affect aggregate spectrum requirements for all applications and services. However, FCC noted that it would task the Technological Advisory Council (TAC) to periodically review the state of the IoT ecosystem to ensure that the planned communications infrastructure is sufficient to support the needs of the growing sector and advise on any actions the FCC should take. We continue to believe that tracking the growth of high- bandwidth devices is necessary to avoid the potential spectrum shortage and that the TAC may be able to help FCC accomplish that. FCC did not concur with our recommendation to track IoT devices that rely on unlicensed spectrum. FCC noted that it may not be practical to determine which devices qualify as IoT or quantify their effect on spectrum utilization. As a result, FCC said that the best way to monitor growth in unlicensed IoT devices is to continue to monitor published papers and conferences and work with industry. However, since most of the projected IoT growth is expected to occur in unlicensed bands that are not protected from interference, we continue to believe that FCC should place a greater focus on tracking IoT devices in these bands. For example, the TAC may also be well positioned to help FCC track unlicensed IoT devices. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretaries of Homeland Security and Commerce, the Chairman of FCC, and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or members of your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix IV. We were asked to examine the challenges facing federal spectrum managers and the steps they are taking to address those challenges. In this report we discuss: (1) the spectrum-related challenges stakeholders identified due to the anticipated growth of IoT, (2) steps FCC and NTIA are taking to plan for the anticipated growth in the demand for spectrum as a result of IoT, and (3) efforts that selected leading countries are undertaking to plan for IoT’s spectrum needs and ways that these efforts compare with those of the United States. To identify the spectrum-related challenges stemming from the expected growth of IoT, we reviewed documents from the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA), the two federal agencies that have direct authority over spectrum planning. Further, in order to identify relevant literature for review, we (1) conducted a key word search of data bases; (2) searched IoT and spectrum related websites, such as those of cellular carriers, telecommunications industry groups, and nonprofit organizations; (3) reviewed prior GAO reports on IoT and spectrum issues; and (4) asked FCC and NTIA officials, researchers, and non-profit organizations to identify relevant documents. Through our literature search, we identified a number of documents, including academic reports, government reports, congressional committee hearings, and trade journals addressing the projected growth of IoT to understand the number of devices that would be relying on the spectrum in the coming years. We also reviewed literature concerning the growth of other wireless devices, such as smart phones, and the burden they place on the spectrum, to assess if there are any lessons learned from the demand these devices placed on the spectrum that could be applied to the expected growth of IoT. In addition, we interviewed FCC and NTIA officials, and conducted 24 telephone and in-person interviews with officials from industry associations, industrial and commercial users of IoT, nonprofit groups, subject matter experts, manufacturers, and telecommunications companies to obtain their perspectives on the challenges presented by the expected growth of IoT. The experiences of the stakeholders are not generalizable to those of all IoT stakeholders in the United States; however, we believe that the information we gathered from selected stakeholders provides a balanced and informed perspective on the topics discussed. We identified relevant stakeholders by reviewing comments submitted to NTIA in response to its request for comment on the government’s role in planning for IoT growth, reviewing congressional hearings, and conducting a literature review encompassing academic articles, government reports, and trade journals. We interviewed officials from businesses that manufacture Internet-connected devices or equipment that would be considered part of IoT, including agriculture, telecommunications, and manufacturing. We spoke with these officials to gather information about the spectrum challenges they face as businesses working with and developing IoT devices. We then analyzed the results of these interviews and related documents to identify the main themes and develop summary findings. To characterize the views captured during the interviews, we defined the terms to quantify the views as follows: “most” users represents 18 to 24 users, “a majority of” users represents 11 to 17 users, “several” users represents 6 to 10 users, and “some” users represents 3 to 5 users.” To identify the steps FCC and NTIA are taking to plan for the anticipated growth in the demand for spectrum as a result of IoT, we interviewed FCC and NTIA officials and reviewed agency reports and documents. We interviewed officials to understand any agency plans to address spectrum needs for IoT devices and how these plans aligned with the spectrum planning for other wireless devices. We reviewed agency reports and documents on spectrum planning, IoT planning, and the role of the federal government in planning for IoT. Specifically, we reviewed comments submitted in response to NTIA’s request for comment and the final report developed in response to the comments received on the role of the federal government. To identify other relevant reports and literature from FCC and NTIA, we asked officials at the meetings and conducted a literature search. We also compared those planning efforts against FCC’s and NTIA’s strategic goals and the federal internal control standards related to risk management. Specifically, we compared FCC’s planning against its strategic goal to promote economic growth and national leadership in telecommunications, and NTIA’s efforts against its mission to expand the use of spectrum by all users and to ensure that the Internet remains an engine for continued innovation and economic growth. We also assessed the efforts of both agencies against leading practices that we previously developed for identifying, analyzing, and responding to risks related to achieving agency objectives. To identify the efforts that selected foreign governments are taking to plan for the expected spectrum needs of IoT and ways their efforts compare with those of the United States, we surveyed trade journals, industry publications, and foreign governments’ websites and publications. Through this survey, we identified seven countries of potential interest, all of which have conducted spectrum planning in support of IoT: China, France, Germany, Netherlands, Japan, Singapore, and South Korea. We selected four of these countries—France, Germany, the Netherlands, and South Korea—as being like the United States and leaders in IoT development based on additional criteria including the level of their economic development, the maturity of their telecommunications infrastructures, the comparability of their governments to the United States, and the accessibility of their spectrum-planning information. We categorized a country’s economy as fully developed if the United Nations Statistics Division categorized it in 2016 as existing in a developed economic region. When determining the maturity of a country’s telecommunications infrastructure, we followed the United Nation’s International Telecommunication Union (ITU) in categorizing a country’s telecom infrastructure as mature if it was included in the top quartile of the 175 countries ranked in ITU’s 2016 Information and Communications Technology Development Index. We considered a country to have a government structure comparable to that of the United States if Freedom House’s 2016 Freedom in the World report rated it as “free” and the Polity Project categorized it as a “democracy” in 2015. Finally, we considered the extent to which information could be efficiently procured from each country under consideration. We reviewed documents and conducted telephone and written interviews with officials from the spectrum management agencies in each of these four countries. We also conducted eight telephone and written interviews with officials from foreign telecommunications companies, IoT manufactures, and international spectrum-planning groups to gather information about IoT development, challenges, and responses to these challenges in the leading countries that we contacted. We conducted this performance audit from August 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Barcoding Case IH Deere & Co. O-I Consumer Technology Association CTIA National Association of Manufacturers Telecommunications Industry Association U.S. Chamber of Commerce Wi-Fi Alliance World Shipping Council New America Foundation Public Knowledge Technology and Innovation Foundation Jeffrey Reed, Ph.D. (Virginia Polytechnic Institute and State University) Douglas Sicker, Ph.D. (Carnegie Mellon University) AT&T Sigfox Verizon Agence Nationale des Fréquences (France) Agentschap Telecom (Netherlands) Bundesnetzagentur (Germany) Ministry of Science, ICT, and Future Planning (South Korea) In addition to the individual named above, Keith Cunningham (Assistant Director); Eric Hudson (Analyst-in-Charge); Camilo Flores; Adam Gomez; Josh Ormond; Andrew Stavisky; Hai Tran; and Michelle Weathers made key contributions to this report.", "summary": "IoT generally refers to devices (or “things”), such as vehicles and appliances, that use a network to communicate and share data with each other. The increasing popularity of wireless IoT devices that use spectrum has created questions about spectrum needs. GAO was asked to examine issues related to spectrum and IoT. This report discusses, among other things, (1) spectrum challenges related to IoT, (2) how the federal government plans for IoT’s spectrum needs, and (3) how selected leading countries prepare for IoT’s spectrum needs. GAO reviewed documents and interviewed officials from FCC and the National Telecommunications and Information Administration as well as 24 officials from a variety of sectors, including government, commercial, and manufacturing. Stakeholders were selected based on a literature review, among other factors. GAO interviewed government and commercial representatives from four leading countries regarding IoT planning and development and reviewed associated documents. These countries were selected based on criteria that included level of economic development among other criteria. The stakeholders GAO spoke with identified two primary spectrum-related challenges for the internet of things (IoT)—the availability of spectrum and managing interference. Although not considered an immediate concern, Federal Communications Commission (FCC) staff and some stakeholders noted that rapid increases in IoT devices that use large amounts of spectrum—called high-bandwidth devices—could quickly overwhelm networks, as happened with smart phones. Stakeholders and FCC staff also indicated that managing interference is becoming more challenging as the number of IoT and other wireless devices grows, particularly in bands that do not require a spectrum license. The figure below illustrates the uses of radio frequency spectrum, including unlicensed use. FCC plans for IoT’s spectrum needs by broadly tracking spectrum demand and making additional spectrum available as needed. Ensuring sufficient spectrum to support commercial demand is one way FCC pursues its strategic goal of promoting economic growth. FCC has made additional spectrum publicly available at least four times since 2015 by repurposing over 11 gigahertz of spectrum. However, FCC does not track the growth of IoT devices in two areas that pose the greatest risk to IoT’s growth—high bandwidth and unlicensed-spectrum devices. In 2014, FCC’s Technical Advisory Council (TAC) recommended that FCC monitor high-bandwidth IoT devices and make sufficient unlicensed spectrum available. FCC officials said that FCC monitors spectrum use broadly and makes spectrum available as needed. However, since the process of reallocating spectrum is lengthy, FCC may not have adequate time to take actions to avoid a shortage, possibly hindering IoT’s growth and associated economic growth. Spectrum planners in four leading countries—France, Germany, the Netherlands, and South Korea—have taken steps similar to those taken by the United States in preparation for IoT’s expansion, including taking a technology-neutral approach that stakeholders believe encourages innovation. Unlike the United States, officials from two leading countries said they are concerned about spectrum congestion from the growth of IoT devices, but only one is actively monitoring congestion. In addition, three leading countries have developed nationwide low power wide-area networks that use unlicensed spectrum with potential benefits including low costs and low barriers to entry. FCC should track the growth in (1) high-bandwidth IoT devices and (2) IoT devices that rely on unlicensed spectrum. FCC did not believe these actions are necessary but noted that it would ask its TAC to periodically review and report on IoT’s growth. GAO continues to believe the recommendations are valid.", "document_type": "gao"}
{"report": "This section outlines the legal framework under which agencies and federal labs license patents and general stages of the patent licensing process. Prior to 1980, federal agencies generally retained title to any inventions developed through federally funded research—whether extramural, that is, conducted by universities and contractors, or intramural, conducted by federal agencies in their own facilities. By the late 1970s, there was increasing debate in Congress over ways to allow the private and public sectors better access to federally owned inventions by, among other things, creating a uniform policy for those seeking to license inventions developed in federal labs. In the 1980s, Congress began passing a series of key laws that have provided the foundation for federal technology transfer activities, including patenting and licensing inventions that are developed in federal labs and funded by federal dollars. One of the first technology transfer laws, the Stevenson-Wydler Act, established technology transfer as a federal policy and required federal labs to set up Offices of Research and Technology Applications (which, for our purposes, we refer to as technology transfer offices) and devote budget and personnel resources to promoting the transfer of federal technologies to the private sector. In 1980, another key law, the Bayh-Dole Act allowed not-for-profit corporations, including universities, and small businesses to retain title to their federally funded inventions. In 1984, through amendments made to the Bayh-Dole Act, Commerce became responsible for issuing regulations to implement the act. The Stevenson-Wydler Act was amended by the Federal Technology Transfer Act of 1986, which (1) established the Federal Laboratory Consortium (FLC); (2) required that technology transfer efforts be considered positively in employee performance evaluations; and (3) empowered federal agencies to permit the directors of government- owned, government-operated labs to enter into cooperative research and development agreements (CRADA) and to negotiate license agreements for inventions created in the labs. The FLC began largely as a forum for the education, training, and networking of federal technology transfer officials to promote the integration of technical knowledge that federal departments and agencies developed into the U.S. economy. Over time, the FLC’s role would include serving as a clearinghouse—a central point for collecting and disseminating information—for federal technologies and assisting outside entities in identifying available federal technology. Within Commerce, NIST is the designated host and financial administrator of the FLC. Additional laws were adopted to help further the development of federally owned inventions for commercial use. Among them was the National Competitiveness Technology Transfer Act of 1989, which directed federal agencies to propose, for inclusion in contracts, provisions to establish technology transfer as a mission of government-owned, contractor- operated labs and permitted those labs, under certain circumstances, to enter into CRADAs. In addition, the Technology Transfer Commercialization Act of 2000 required Commerce to provide Congress with summary reports on agencies’ patent licensing and other technology transfer activities. Since 2007, Commerce has delegated to NIST the role of providing to Congress an annual report summarizing technology transfer at federal agencies. NIST’s role as the lead in an interagency collaborative effort in federal technology transfer grew further when Commerce delegated to the agency the additional responsibility of coordinating the Interagency Working Group for Technology Transfer. Commerce also has delegated to NIST its authority to promulgate implementing regulations pertaining to patenting and licensing at federal labs. In 2011, Congress passed the Leahy-Smith America Invents Act (AIA) that further affected technology transfer activities by federal labs through comprehensive changes made to the U.S. patent system. Federal labs are typically managed under either a government-operated or a contractor-operated model. Commerce regulations prescribe the terms, conditions, and procedures that government-operated labs are to use to license their inventions for commercial use or other practical applications. Government-operated labs are usually owned or leased by the federal government and are predominantly staffed by federal employees. Contractor-operated labs, on the other hand, operate facilities and equipment that are owned by the federal government, but the staff is employed by a private or nonprofit contractor that operates the lab under a contract with the federal government. Contractor-operated labs typically license their technologies under the authority of the Bayh-Dole Act, applicable regulations, and their contracts, which generally give contractor-operated labs more flexibility in licensing their technologies. Contractors that manage and operate labs include universities, private companies, nonprofit organizations, or consortia thereof. As discussed below, whether a lab is government-operated or contractor-operated will affect how that lab licenses inventions because each type operates under a different set of licensing regulations and requirements. The pathway of an invention from lab development to commercial product can end at any point, and products may not always reach, or find success in, the marketplace. Figure 2 shows the seven general areas of the patent licensing process at federal labs. The patent licensing process begins with researchers identifying inventions—a process that primarily relies on researchers disclosing their inventions to lab officials, mostly through the lab director or directly to an agency’s technology transfer office. Various laws and regulations establish a uniform policy for determining who holds the rights to government employees’ inventions. Some government-operated labs allow or encourage researchers to publish their research, including research describing inventions, for public dissemination, such as in research journals. Contractor-operated labs are required to disclose inventions to the agency within 2 months after notifying contractor personnel responsible for patent licensing activities. Labs must then decide within 2 years after the disclosure whether to retain title to the invention. The contract then must file its initial patent application on the invention to which it elects to retain title within one year after election of title. If the contractor-operated lab does not disclose the invention or elect to retain title within the times specified in the law and regulations, it will convey title to the invention to the funding agency upon written request. Once an invention has been identified and disclosed, federal agencies and labs keep track of the invention. How they do so varies in degree of automation and centralization. For example, systems that keep track of lab inventions can range from spreadsheets to automated software that tracks all patent licensing and other technology transfer activities. Also, such systems can be centralized, with oversight at the agency level, or decentralized, with independent oversight at the lab level—which is generally the case at contractor-operated labs. Some contractor-operated labs manage their federally funded inventions through the Interagency Edison (iEdison) reporting system, which is owned and managed by NIH. Before applying for patent protection through USPTO, agency and lab officials review the invention—often using evaluation committees and patent attorneys—to consider a number of factors, including whether it is patentable, it furthers the lab’s mission, and patenting the invention is likely to bring it to commercial use or practical application. The agency must file a patent application within 1 year of the first publication, public use, sale, or offer for sale of the invention or lose U.S. patent rights to that invention. Not all patents will be licensed out to companies for a variety of reasons, including national security considerations. The average time from filing to issuing a patent, or when an application is abandoned, is about 2 years, according to USPTO. Patent applications are often rejected, modified, and refiled, and various fees are associated with filing and prosecuting a patent application. However, according to USPTO, patent maintenance fees that allow federal labs to maintain their patents in force are among the most significant fees. Agencies and labs use a variety of methods to attract potential licensees, including those from industry, universities, and nonprofits. For example, agencies may post their inventory of patented inventions online, publish them in academic journals, or highlight them at public events. Agencies and labs actively engage with the private sector by, for example, attending conferences where companies can network with federal researchers and federal technology transfer officials. In addition, technology transfer offices often work with partnership intermediaries— such as local or state entities and nonprofit organizations—to support their efforts, including reaching out to potential licensees. Labs have other mechanisms to help attract potential licensees to further develop their inventions. For example, CRADAs can help facilitate licensing or the transfer of knowledge from a lab to a licensee, and new inventions that arise under a CRADA are typically made available to the partner via an option to license. The technology transfer offices and legal counsel are generally responsible for crafting and negotiating the terms of the patent license, sometimes with input from other lab officials. Negotiations are often an iterative process in which both the lab and the licensee request adjustments to the terms of the license. Laws and regulations specify some terms that government-operated labs must include in their licenses. Among others, a typical license includes terms related to (1) financial compensation (if applicable), (2) the degree of exclusivity of the license, (3) the U.S. manufacturing requirement, (4) retained rights for the government, (5) termination of the license, and (6) enforcement of licenses. Financial terms may include up-front fees; minimum payments; royalties, usually based on sales; and milestone payments, among others. Federal labs typically establish financial terms on a case-by-case basis that are tailored to the specifics of the technology, licensee, and market conditions. License agreements may be nonexclusive, partially exclusive, or fully exclusive, and may be limited to some fields of the invention’s use or to specific geographic areas. Government-operated labs must publicly announce their intent to grant an exclusive license for at least 15 days. After this period, comments and objections are considered. Negotiations then begin with the proposed licensee or, if the licensee has changed, another public announcement of the new licensee may be required. Government-operated labs are required to obtain a commercialization plan from a potential licensee regardless of the degree of exclusivity. Contractor-operated labs, which typically retain title to their inventions under the authority of the Bayh-Dole Act, are not subject to the requirement to obtain a commercialization plan from a prospective licensee before granting a license; however, they are subject to requirements specified in their contracts regarding patent licensing. In addition, they are not subject to the same notification requirements as government-operated labs. The law also contains some other provisions pertaining to patent licenses originating from federal labs. For example, the law generally gives preference to small businesses that are capable of bringing the invention to practical application. There is a general preference for products that incorporate federal inventions to be manufactured substantially in the United States; however, on a case-by-case basis, agencies may waive this requirement. Applicable law also reserves certain rights for the government to protect the public’s interests in federally funded inventions. For example, the government retains a royalty-free license to use inventions that are contractor owned or that are licensed exclusively. In addition, the Bayh-Dole Act provides the government march-in authority when certain statutory conditions have been met. Under this authority, an agency may grant a license to an invention developed with federal funding even if the invention is exclusively licensed to another party if, for example, it determines that such action is needed to alleviate public health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensee. A federal lab can also terminate a license when the licensee is not meeting its commitment to achieve practical application of the invention. The lab can also, through the license, grant permission to a licensee to pursue patent infringement cases. Federal license agreements generally require licensees to report periodically on their commercialization. For instance, labs generally put specific monitoring requirements in the license agreements, including milestones and reporting requirements. Through the agreements, government-operated labs have the right to terminate or modify licenses if certain requirements are not met. Government-operated labs must submit written notices to the licensees and any sublicensees of their intentions to modify or terminate licenses, and allow 30 days for the licensees or sublicensees to remedy any breach of the licenses or show cause why the licenses should not be modified or terminated. Contractor-operated labs also monitor licensee performance in much the same way; however, they are subject to a different set of regulations. Federal labs are responsible for measuring the outcomes of their activities in all areas of the patent licensing process by developing metrics and evaluation methods. Measuring licensing outcomes help labs assess the effectiveness of their patent licensing efforts. Soon after the passage of AIA, President Obama issued a memorandum in October 2011 to the heads of executive departments and agencies calling for, among other things, (1) developing strategies to increase the usefulness and accessibility of information about federal technology transfer opportunities; (2) listing all publicly available, federally owned inventions on a public government database; and (3) improving and expanding its collecting of metrics for Commerce’s annual technology transfer summary report. Federal law states that it is Congress’s policy and objective to use the patent system to promote the commercialization and public availability of inventions, and that technology transfer, including federal patent licensing, is the responsibility of each laboratory science and engineering professional. No single federal agency is responsible for managing technology transfer activities government-wide. Rather, each federal agency involved in technology transfer designs its own program to meet technology transfer objectives, consistent with its other mission responsibilities. Federal agency and lab officials and external stakeholders have identified challenges across the federal patent licensing process, but NIST has not fully reported such challenges. Specifically, DOD, DOE, NASA, and NIH officials at the agency and lab levels, as well as external stakeholders, cited challenges related to all seven areas of the patent licensing process. In addition, officials and stakeholders cited challenges in one area that cuts across the entire process: prioritizing patent licensing as part of agencies’ missions. In its annual reports to Congress on federal labs’ performance in patent licensing activities, NIST has discussed some challenges identified by agency and lab officials and external stakeholders but has not fully reported on the range of challenges they have experienced. DOD, DOE, NASA, and NIH officials at the agency and lab levels, as well as external stakeholders, identified challenges in all seven areas of the patent licensing process, including identifying inventions, keeping track of inventions, and negotiating license agreements. They also cited challenges in prioritizing patent licensing as part of agencies’ missions. Based on our analysis of relevant literature and on interviews with external stakeholders, many of these challenges are occurring government-wide. DOD, DOE, NASA, and NIH have taken some steps to address the challenges in each area of the patent licensing process. DOD, DOE, NASA, and NIH officials at the agency and lab levels, as well as external stakeholders, identified challenges in all seven areas of the patent licensing process, including not identifying inventions, keeping track of inventions in inadequate systems, and difficulty negotiating license agreements. For example, several DOD, DOE, NASA, and NIH officials stated that some researchers do not have adequate training in identifying potentially patentable inventions. When a federal researcher does not disclose to lab officials an invention developed in a federal lab, the opportunity to assess the invention’s potential for commercial use may be lost. Federal officials cited various reasons why researchers do not disclose inventions. Navy officials, for example, stated that researchers are often intimidated by the overall invention disclosure process and tend to focus on their research rather than consider what could be patentable. Officials at one NASA lab noted that they have come across a few contractor employees who do not see the benefit of filing invention disclosures, and sometimes researchers are too busy to engage in the patenting process. Our analysis of relevant literature and interviews with stakeholders also showed that researchers not identifying and disclosing inventions is a government-wide challenge. For example, one stakeholder stated that researchers at federal labs generally have limited understanding of the patenting process, including an understanding of what constitutes patentable subject matter and how to conduct a prior art search on the technology to determine whether it is patentable. DOD, DOE, NASA, and NIH officials stated that they are taking a variety of actions to help address this challenge. For example, some agency and lab officials stated that labs conduct training to educate researchers about the patenting process, inform researchers about requirements to disclose inventions, and incentivize them by acknowledging their efforts through awards and monetary incentives—such as potential royalty distributions— when their inventions reach commercial success. In addition, DOD, DOE, and NIH officials described their agencies’ systems for keeping track of inventions developed in the labs as inadequate or in need of improvement. How agencies and labs keep track of such inventions can range from spreadsheets to sophisticated databases that manage all technology transfer activities, including keeping track of patented inventions and licenses. Currently, DOD has a decentralized approach to keeping track of inventions, which, according to DOD officials, needs improvement given how large the agency is. Several stakeholders we interviewed also noted that the challenge of keeping track of inventions exists government-wide. According to some stakeholders, federal labs not only have inadequate systems to keep track of their own inventions but also limited information on the kinds of inventions being developed in federal labs across the government. The result is that agencies risk being unaware of research across the labs, which can limit their ability to leverage other federal research efforts. For example, one stakeholder stated that there can be research conducted independently at three or four labs under different agencies but little interaction among those labs about the research. DOD, DOE, and NIH officials stated that they have made efforts to improve their current systems for keeping track of inventions. Specifically, DOE officials reported that they have developed a plan to leverage the capabilities of the iEdison reporting system to unify the agency’s data management process. Air Force and NIH officials stated that they have contacted NASA, which has a centralized system for tracking inventions, about leveraging its expertise. NASA officials reported that they have been hosting regular webinars with other agencies to determine whether NASA’s tracking system could help meet other agencies’ needs. Furthermore, agency and lab officials and stakeholders noted that federal labs face challenges in negotiating license agreements because the licensing process is lengthy and uniquely regulated, which can deter companies from licensing federal inventions. Stakeholders stated that the federal licensing process can take anywhere from about 3 months to more than 2 years. Some stakeholders stated that from their point of view taking a year to negotiate a license agreement is too long. One stakeholder said that such lengthy processes are particularly difficult for start-ups, which often need to finalize license agreements in 3 months. DOD, DOE, NASA, and NIH officials said they are taking steps to address companies’ concerns about the time it takes to negotiate a license agreement. For instance, NASA, NIH, and Navy officials told us that they have developed model license agreements to help guide companies through the process, and NASA and NIH have special license agreements for start-ups to shorten the licensing process. For more detail on challenges in the seven areas of the patent licensing process that agency and lab officials and external stakeholders identified, see appendix II. DOD, DOE, NASA, and NIH face challenges in prioritizing patent licensing as part of their agency missions. For example, DOD and DOE officials stated that an agency’s mission affects patent licensing activities. DOD officials stated that the agency’s primary mission is protecting the warfighter and that patent licensing is a secondary benefit to the agency. According to DOE officials, the nuclear security labs do not focus on patenting but instead on developing technologies associated with a weapons program. In addition, several stakeholders we interviewed stated that some agencies and labs do not have a culture that prioritizes patent licensing. In particular, one stakeholder stated that at some federal labs, patent licensing is not reflected in performance evaluation management plans, which can help incentivize lab personnel to engage in patent licensing activities. A few stakeholders stated that at some labs where management does not prioritize patent licensing activities, researchers’ careers can be negatively affected if they engage in patent licensing activities. Some agency and lab officials stated that they have taken steps to overcome such challenges. For example, officials at one Navy lab stated that the lab has management support and nine patent attorneys to assist in the reviews of researchers’ invention disclosures. Also, officials at one NIH lab stated that the lab has strong management support and a good royalty stream from successful inventions that pay for patenting and other reinvestments, which allows the lab to not draw from its appropriations. In its three most recent fiscal year summary reports to Congress, NIST identified some challenges faced by federal labs in areas of patent licensing and has assisted agencies in addressing challenges in their patent licensing activities. However, NIST does not fully report on the range of challenges that agency and lab officials and stakeholders identify. NIST collaborates with agencies to gather patent licensing data for its summary reports to Congress. For example, according to agency officials, NIST engages with agencies to inform them about new requirements in technology transfer and helps them identify their successes in conducting technology transfer activities. NIST also provides administrative support to the FLC, which offers training to federal technology transfer specialists through workshops; publishes a desk reference on federal patent licensing, laws, and regulations; and has commissioned studies on efforts to develop federal inventions for commercial use. Further, NIST developed a survey in 2016 on agency technology transfer processes. NIST officials stated that the survey is aimed in part at improving federal labs’ decisions on whether to spend money on applying for patents, whether patents will facilitate the commercialization of technology, and what data are needed to make those determinations. NIST officials stated that the agency continues to analyze the survey data and currently plans to report its findings in fiscal year 2018. While NIST has identified in its annual summary reports to Congress some challenges that federal labs face in patent licensing and other technology transfer activities, it has not fully reported the range of challenges that agencies and labs face in patent licensing. For example, in its fiscal year 2015 summary report—its most recent report—on federal technology transfer, NIST reported that the federal intramural research budget has been relatively consistent over the years but not that DOD, DOE, NASA, and NIH face challenges in prioritizing patent licensing as an agency mission. The report also mentions that there is no uniform federal system for tracking research that employees in federal labs published but not that DOE, for example, has faced challenges in keeping track of inventions developed in its labs. In addition, we found that although the report mentions that the Department of Veterans Affairs is facing challenges with its labs disclosing inventions, it does not mention similar challenges at DOD. NIST officials stated that they were generally aware of the challenges identified by agency and lab officials and external stakeholders but had not considered including such challenges to a greater degree in the summary reports to Congress. We have previously reported on Congress’s goal to make the federal government more results oriented through reporting of agency performance information to aid decision making by agency executives, Congress, and program partners. Specifically, we have reported how the effective implementation of good governance can help address government challenges in five key areas involving agency performance and management: (1) instituting a more coordinated and crosscutting approach to achieving meaningful results, (2) focusing on addressing weaknesses in major management functions, (3) ensuring that agency performance information is useful and used in decision making, (4) sustaining leadership commitment and accountability for achieving results, and (5) engaging Congress in identifying management and performance issues to address. By fully reporting the range of challenges in federal patent licensing—such as those outlined in this report—and including that information in its annual summary reports to Congress, NIST has the opportunity to further ensure that Congress is more aware of challenges that limit agencies’ efforts in patent licensing and ways for potentially addressing those challenges. To identify these challenges, NIST could, for example, leverage its survey, past FLC studies, and agency reports. Federal agencies and labs have limited information on processes, goals, and comparable licenses to guide establishing the financial terms in patent licenses. DOD, DOE, NASA, and NIH labs generally do not document their processes for establishing the financial terms of patent licenses and instead rely on the expertise of technology transfer staff. Furthermore, existing agency and lab guidance does not consistently link the practice of establishing license financial terms to the statutory goal of promoting commercial use of inventions. In addition, although many federal labs rely on comparable licenses to aid them in setting the terms of new licenses, labs have varying levels of access to information about such licenses. DOD, DOE, NASA, and NIH labs have limited documentation of their processes for establishing the financial terms of patent licenses. Such documentation is limited at both the agency level and the lab level. At the agency level, the four agencies we reviewed had some documentation on patent licensing in general, such as policies, procedures, guides, and handbooks, but had limited information on how to establish financial terms. For example, the Air Force and the Navy had handbooks on technology transfer that include brief passages on financial terms. However, agency officials noted that these handbooks were either outdated or under revision. At DOE, labs collaborated to develop two agency-level documents on patent licensing: one for lab officials on using equity in licenses and a licensing guide for licensees. These documents describe the general structure of various types of financial terms and, in the document on using equity, factors to consider regarding its use in a license, but do not discuss methods for establishing financial terms. NASA and NIH have policies and procedures for patent licensing that mention the types of financial terms that are normally found in licenses but do not cover other aspects, such as methods for establishing financial terms. All four agencies reported that they gave their labs discretion to develop their own processes for establishing financial terms. At the lab level, DOD, DOE, NASA, and NIH generally had not documented their processes for establishing financial terms in patent licenses. Based on documentation provided by NASA, NIH, and DOD, few labs at these agencies had issued additional documentation on the patent licensing process. DOE labs had documented the patent licensing process in general, and 6 out of 17 DOE labs provided documentation that covered aspects of establishing financial terms. For example, one DOE lab document contained a set of licensing principles that help clarify what financial terms a license usually contains, their purpose, and how to structure the financial terms in patent licenses. In addition, agency and lab officials at NASA and DOE reported using tools, such as financial term calculators, at some of their labs, which aid technology transfer staff in valuing technologies. Agency and lab officials reported that they generally rely on the expertise of technology transfer staff to establish and vet appropriate financial terms. Accordingly, agencies and labs reported that they have taken some steps to develop, share, and retain expertise among staff in their technology transfer offices. The agencies we reviewed reported that some technology transfer staff participate in training opportunities provided by professional organizations like the Association of University Technology Managers (AUTM) or the Licensing Executives Society (LES), as well as the FLC and the agencies. In addition, some agencies and labs reported that internal working groups and regular meetings are opportunities to share licensing expertise. At DOD, officials stated that on a case-by-case basis, labs may use the expertise of their partnership intermediary to help establish financial terms. However, according to agency and lab officials and stakeholders, federal labs face challenges in acquiring, developing, and retaining expertise in patent licensing for their technology transfer offices. Specifically, some agency officials, lab officials, and stakeholders cited issues such as losing experienced technology transfer staff to retirement or to the private sector, having difficulties in hiring staff with expertise in part because of limited funding, and facing a limited pool of prospective employees to hire with the expertise to value and license inventions. A few stakeholders said that government training in the business aspects of patent licensing is inadequate and not widespread. In addition, some stakeholders had concerns about consistency in licensing practices both within the labs and across labs. For example, some of these stakeholders said that the outcome of license negotiations can depend on the specific licensing professional handling the license. Varying levels of expertise may lead to inconsistency in licensing practices, including establishing financial terms, as can undocumented processes. Under the federal standards for internal control, management should design control activities by, for example, clearly documenting them in management directives, administrative policies, or operating manuals, to achieve objectives and respond to risks. Furthermore, documentation can act as a means to retain organizational knowledge and provide some assurance that an approach is operational across the lab or agency. Agency and lab officials stated that they had not documented their processes for establishing financial terms for various reasons. For example, lab officials stated that establishing financial terms is often complex and varies based on the specific circumstances applicable to each potential license, which may limit what can be documented. Some agency and lab officials stated that labs need flexibility in negotiating terms to make adjustments based on the circumstances and therefore officials do not want to be prescriptive. A few agency and lab officials also noted that there are benefits to having streamlined processes. Furthermore, a few agency and lab officials described negotiating license terms as a craft or art that requires expertise and said that documenting this will not enhance licensing by itself. However, some agency and lab officials and stakeholders said that it is possible to document some aspects of the process. A few stakeholders we interviewed noted that even if each agreement is unique, it is still possible to develop guidelines or outline a methodology for establishing financial terms. A few agency and lab officials stated that they are investigating opportunities to standardize their processes or would be open to documenting them. For example, one agency official told us that the agency plans to update existing documents with specific information about royalty ranges so labs do not have to constantly “reinvent the wheel.” Some labs also described steps that they take to establish financial terms, such as methods for valuing inventions, without being prescriptive. By documenting processes for establishing the financial terms of licenses while maintaining enough flexibility to tailor the specific terms of each license, the four agencies could have more reasonable assurance of consistency across their labs regardless of the expertise of staff. Agency and lab documentation does not consistently link establishing financial terms in patent licenses to the goal of promoting commercial use of inventions. As noted above, federal law states that it is Congress’s policy and objective to use the patent system to promote the commercialization and public availability of inventions, and that technology transfer, including federal patent licensing, is the responsibility of each laboratory science and engineering professional. Agency-level documentation at NASA contains a provision that clearly links establishing financial terms to the goal of promoting commercial use of inventions—that is, “terms should be negotiated that provide the licensee incentive to commercialize the invention.” NIH’s documentation mentions financial terms in the context of protecting the public from nonuse, which is one aspect of promoting commercial use, and also mentions the goal of obtaining a fair financial return on investment from the licensed invention. DOD and DOE agency-level documents mention the general goal of promoting the commercial use of inventions without specifically linking it to the financial terms. At the lab level, DOD documents generally do not address the goals for financial terms. Of 17 DOE labs, 4 had a statement in their documentation to link financial terms to the goal of promoting commercial use of inventions. DOD, DOE, NASA, and NIH officials we interviewed stated that getting the technology into the marketplace is their primary goal in licensing but also mentioned other goals related to financial terms that support their mission. In addition, some agency and lab officials described using revenues from licenses as a means to provide a reward to inventors for their work or to obtain a fair return on investment for research conducted by federal agencies. Furthermore, lab officials we interviewed mentioned the flexibility of revenues from licenses as helpful in funding activities, such as additional research, training, and patent prosecution. Some agency officials and stakeholders we interviewed expressed concerns about competing goals for establishing financial terms. For example, a few stakeholders stated that licensing professionals may be motivated to negotiate for increased license revenue because it reflects positively on them professionally. Further, some stakeholders expressed concerns about labs taking a short-term view of some licensees, particularly small companies, because they have less ability to pay initially and thus may offer less certain revenues. Our review of relevant economic literature and interviews with stakeholders suggest that license financial terms set with goals other than promoting commercial use in mind, such as short-term revenue maximization, may undermine that longer-term goal. For example, high up-front license fees typically provide more guaranteed short-term revenue to the licensor than other forms of payment but can also reduce the capital available to develop a product successfully. Labs with other goals in mind when establishing financial terms may be at risk of establishing them in ways that run counter to the goal of promoting commercial use. NIST plays an important role in providing regulations and guidance to agencies regarding patent licensing. Commerce has delegated to NIST the authority to promulgate implementing regulations pertaining to patenting and licensing at federal labs—that is, regulations that indicate how agencies are to implement statutory provisions, including the goal of, among other things, promoting commercial use of inventions. NIST has developed regulations, but they do not link the financial terms of federal patent licenses and the statutory goal of promoting commercial use of inventions. As the host of the FLC and a coordinator for the Interagency Working Group for Technology Transfer, NIST also plays a role in supporting the development of interagency guidance on patent licensing that covers, among other topics, establishing financial terms in licenses. However, existing interagency guidance provides limited information regarding the goals for financial terms. For example, the FLC desk reference contains a statement that links royalty rates to the goal of promoting commercial use but does not clarify how the goal applies to other financial terms. Furthermore, the FLC desk reference states that labs are entitled to market-based compensation for their intellectual property. However, licenses are structured differently to accomplish different goals and a primary focus on obtaining market-based compensation may undermine the goal of promoting commercial use. As the lead agency on the government-wide effort to find commercial uses or practical applications for federally funded inventions, NIST has been delegated the responsibility to promulgate regulations pertaining to patenting and licensing at federal labs, including implementing the statutory goal of promoting commercial use. NIST officials stated that a change to the regulations could be made as part of an upcoming rule- making process. However, in doing so, a stakeholder and agency officials noted that any changes to the regulations should avoid prescriptive language that mandates specific practices. NIST officials also stated that they could update relevant guidance on this issue through one of their current efforts. By clarifying the link between establishing federal patent license financial terms and the goal of encouraging commercial use, through the upcoming rule-making process and updating relevant guidance, NIST would have better assurance that financial terms in patent licenses are targeted to that goal. According to agency and lab officials, comparable license information can be used as a point of reference to guide establishing financial and other terms in new patent licenses. Just as real estate agents look at sales of comparable houses when setting the selling price of a house, patent licensing professionals can look at licenses for comparable inventions when determining what financial terms to include in a new license. However, federal labs have varying amounts of information on comparable licenses when establishing financial terms. NASA and NIH each have an agency-wide system that enables each lab to access information from other labs at the agency, including the financial terms in previous licenses. NIH agency officials reported that technology transfer offices have access to thousands of previous licenses and refer to such information frequently to help establish the financial terms of new licenses. Labs at DOE and DOD are generally responsible for tracking their own licenses and do not have access to information on comparable licenses from other labs in their agencies. According to DOE officials, under DOE contracts and relevant law, license information at the agency’s contractor-operated labs is considered business sensitive and a contractor-owned record that resides at the labs, which limits DOE’s ability to share it. Officials at DOE and DOD’s military departments reported that they have investigated and continue to investigate systems that would provide greater access to information on financial terms but have encountered some obstacles, such as network security requirements, that they have not yet overcome. To bolster their access to comparable license information, some federal labs obtain private sector license information. For example, some lab officials we interviewed said that they have occasionally purchased benchmarking guides and access to other private sector license information through organizations such as AUTM and LES. According to some lab officials and stakeholders, private sector license information is useful for understanding acceptable royalty rates in industry and may cover certain technology areas or inventions that are new to the lab. However, access to private sector license information is typically ad hoc and can be limited by its cost, according to agency and lab officials. Some agency and lab officials stated that they would like increased access to private sector information on comparable licenses. For example, according to agency officials at DOE, there is an effort under way to obtain benchmark financial terms from labs and universities with comparable R&D portfolios. Although lab officials and stakeholders said that private licensing information can be helpful for understanding financial terms acceptable to the market, using private license information may not always be appropriate for government licenses. Private licenses are often structured to maximize revenue for the licensor—not necessarily to promote commercial use or practical application, according to stakeholders. Our review of economic literature and interviews with stakeholders and agency officials suggest that licenses are structured differently to accomplish different goals. For example, a few stakeholders and agency officials noted that federal licenses would typically be less exclusive and have different financial terms than those in the private sector, where there is a greater emphasis on generating revenue from R&D investments. Some stakeholders and agency officials also stated that in general the value of a government license may be different from that of a private license for a similar technology because of the rights the government retains on its licenses. In addition, according to agency and lab officials and stakeholders, government inventions tend to be in an earlier stage of development than those in the private sector, potentially making it more difficult to find licenses for comparable inventions in the private sector. Some agency and lab officials and a few stakeholders stated that it would be valuable for federal labs to have greater access to information on financial terms in government licenses to help establish a benchmark for financial terms. Our analysis of approximately 21,000 patents assigned to DOD, DOE, NASA, and NIH and issued since 2000 shows that different agencies may patent inventions in similar technology fields. All four agencies we reviewed had patented inventions in 26 of 35 technology fields covered by the patents, and all had 10 or more patents in 9 of the 35 technology fields. DOD and DOE, including DOE contractor-operated labs, had more patents in a wider range of fields than the other agencies. On the other hand, HHS’s patents are more focused on fields such as biotechnology and medical technology. However, even in the area of biotechnology, there were hundreds of patents issued to the other three agencies. Although other information would be needed to determine whether the agencies’ inventions are truly comparable, their having patents in the same technology fields suggests that some government- wide information on financial terms could be useful to federal labs. Under internal control standards for the federal government, management should externally communicate the necessary quality information to achieve the entity’s objectives; this includes communicating with and obtaining quality information from external parties using established reporting lines. The four agencies we reviewed communicate and share information through several collaborative efforts to improve federal patent licensing, including the FLC and the Interagency Working Group for Technology Transfer. For example, agency officials said they share experiences, ideas, and best practices related to patent licensing informally through these groups. However, there is no formal sharing of information on financial terms in patent licenses among federal labs, according to NIST officials. We have previously reported that federal agencies engaged in interagency collaborative efforts should identify and address needs by leveraging their resources to obtain additional benefits that would not be available if they were working separately. NIST plays a leading role in these interagency collaborative efforts on patent licensing, including gathering and sharing information among the labs. As the administrative host for the FLC, NIST has already supported an effort to share information about available technology. NIST is also responsible for gathering information from technology transfer agencies, including gross license income, and submitting summary reports to Congress annually and sharing them with the public. Furthermore, NIST has initiated a survey of practices at federal technology transfer offices and shared some preliminary information with the agencies. By facilitating the formal sharing of comparable license information, NIST could help provide agencies and labs with benchmarks for evaluating which financial terms are best suited to licensing inventions successfully. NIST officials stated that gathering and sharing comparable license information could be done as part of their existing efforts but that there are obstacles to doing so. Specifically, NIST officials stated that this effort would add to the reporting burdens of agencies, may require additional resources, and would need to take into account data security and proprietary information considerations. Agency officials also stressed that any effort to share license terms would have to ensure that confidential and proprietary information from licensees, including specific financial terms from a particular license, is not divulged. Federal labs under DOD, DOE, NASA, and NIH face challenges at various stages of the patent licensing process, and agencies have taken some steps to address such challenges. For example, ensuring that researchers identify and disclose inventions is a government-wide challenge, according to interviews with external stakeholders and our analysis of relevant literature. However, such challenges in federal patent licensing are not fully reported by NIST, the lead agency delegated by Commerce to provide annual summary reports to Congress on federal technology transfer activities. By fully reporting the range of these challenges that agencies and labs face, NIST can ensure that Congress has greater awareness of these challenges. To help identify these challenges, NIST could, for example, leverage its survey of practices at federal technology transfer offices, past FLC studies, and agency reports. In addition, DOE, DOD, NASA, and NIH documentation does not consistently link establishing financial terms in patent licenses to the statutory goal of promoting commercial use. As the lead agency on the government-wide effort to find commercial uses or practical applications for federally funded inventions, NIST has been delegated the responsibility to promulgate regulations pertaining to patenting and licensing at federal labs, including implementing the statutory goal of promoting commercial use. By clarifying the link between establishing patent license financial terms and the goal of encouraging commercial use, through the upcoming rule-making process and updating relevant guidance, NIST would have better assurance that financial terms in patent licenses are targeted to that goal. Further, federal labs have varying amounts of information on comparable government licenses when establishing financial terms. However, there is no formal sharing of information on financial terms in patent licenses among federal labs, according to NIST officials. NIST plays a leading role in interagency collaborative efforts on patent licensing, including gathering and sharing information among the labs. By facilitating the formal sharing of comparable license information, NIST could help provide agencies and labs with benchmarks for evaluating which financial terms are best suited to successfully licensing inventions. To establish financial terms, DOD, DOE, NASA, and NIH labs rely on the expertise of their technology transfer staff and take a number of steps to build and share expertise, but had limited documentation of their processes for establishing the financial terms of patent licenses. Agency and lab officials explained that there is a need for flexibility, and thus not every aspect of their processes can be documented in detail. By documenting processes for establishing the financial terms of licenses while maintaining enough flexibility to tailor the specific terms of each license, the four agencies could have more reasonable assurance of consistency across their labs regardless of the expertise of staff. We are making seven recommendations, including three to Commerce and one each to DOD, DOE, NASA, and NIH: The Secretary of Commerce should instruct NIST to fully report the range of challenges in federal patent licensing, such as those outlined in this report, by, for example, leveraging its survey of practices at federal technology transfer offices, past FLC studies, and agency reports and including that information in its summary reports to Congress. (Recommendation 1) The Secretary of Commerce should instruct NIST to clarify the link between establishing patent license financial terms and the goal of promoting commercial use, through appropriate means, such as the upcoming rule-making process and updating relevant guidance. (Recommendation 2) The Secretary of Commerce should instruct NIST to facilitate formal information sharing among the agencies to provide federal labs with information on financial terms in comparable patent licenses, as appropriate. (Recommendation 3) The Secretary of Defense should ensure that the agency or its labs document processes for establishing license financial terms, while maintaining flexibility to tailor the specific financial terms of each license. (Recommendation 4) The Secretary of Energy should ensure that the agency or its labs document processes for establishing license financial terms, while maintaining flexibility to tailor the specific financial terms of each license. (Recommendation 5) The Administrator of NASA should ensure that the agency or its labs document processes for establishing license financial terms, while maintaining flexibility to tailor the specific financial terms of each license. (Recommendation 6) The Director of NIH should ensure that the agency or its labs document processes for establishing license financial terms, while maintaining flexibility to tailor the specific financial terms of each license. (Recommendation 7) We provided a draft of this report to Commerce, DOD, DOE, NASA, and NIH for review and comment. All provided written responses, which are reproduced in appendixes IV-VIII. Commerce and NIH also provided technical comments, which we incorporated as appropriate. Commerce agreed with all three of our recommendations to the agency. In general, the agency stated that it will work through interagency groups, such as the Interagency Working Group for Technology Transfer and the FLC, to address our recommendations, including by creating a specific section in its annual reports to Congress with more details on challenges agencies and labs face in patent licensing and by examining and implementing solutions to facilitate the sharing of information among agencies. According to Commerce, such solutions could include identifying licensing officers who have expertise and creating a community of practice in which they can share best practices and approaches for establishing license terms. DOD, DOE, and HHS agreed, and NASA partially agreed, with the recommendation that they or their labs document processes for establishing financial terms in patent licenses. In its written response, DOD said it will direct the military departments and appropriate defense agencies to have their labs establish documentation of their licensing processes as appropriate. In their written comments, DOE, HHS, and NASA noted the complexity and nuances associated with negotiating license agreements, such as understanding the market for the technology and the level of risk involved. Further, DOE and NASA noted challenges that limit their ability to document processes and emphasized the importance of maintaining flexibility in establishing financial terms in patent licenses. We agree that some flexibility in establishing financial terms of patent licenses is important. DOE, HHS, and NASA all identified steps they would take to ensure that at least some processes for establishing financial terms are documented. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Commerce, Defense, and Energy; the Administrator of NASA; and the Director of NIH. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. Figure 3 presents examples of inventions developed in federal laboratories under the Department of Defense, Department of Energy, National Aeronautics and Space Administration, and National Institutes of Health. The following are additional descriptions of challenges in the seven areas of the patent licensing process as well as challenges in prioritizing patent licensing faced by federal laboratories (lab) that were identified by external stakeholders and by agency and lab officials at the Department of Defense (DOD), Department of Energy (DOE), National Aeronautics and Space Administration (NASA), and the National Institutes of Health (NIH)—as well as steps agencies and labs have taken to address those challenges. DOD, DOE, NASA, and NIH officials reported challenges in identifying inventions that lab researchers developed. When a federal researcher does not disclose to lab officials an invention developed in a federal lab, the opportunity to assess the invention’s potential for commercial use may be lost. Federal officials cited various reasons why researchers do not disclose inventions. For instance, several DOD, DOE, NASA, and NIH agency and lab officials stated that some researchers do not have adequate training in identifying potentially patentable inventions. Some agency and lab officials pointed to other reasons why invention disclosures may not be filed, such as researchers not having enough incentive to disclose their inventions. Navy officials stated that researchers are often intimidated by the overall invention disclosure process and tend to focus on their research rather than consider what could be patentable. Officials at one NASA lab noted that they have come across a few contractor employees who do not see the benefit of filing invention disclosures, and sometimes researchers are too busy to engage in the patenting process. According to National Institute of Standards and Technology (NIST) officials, some researchers decide not to disclose an invention because they believe filing a patent application, which includes a filing fee, could take away money from the research itself, and most federal researchers are not motivated by the potential for receiving royalty distributions. Our analysis of relevant literature and interviews with stakeholders also showed that researchers not identifying and disclosing inventions is a government-wide challenge. One stakeholder stated that researchers at federal labs generally have limited understanding of the patenting process, including an understanding of what constitutes patentable subject matter and how to conduct prior research on the technology to determine whether it is patentable. DOD, DOE, NASA, and NIH agency and lab officials stated that they are taking a variety of actions to help address these challenges. For example, some agency and lab officials stated that labs conduct training to educate researchers about the patenting process, inform researchers about statutory requirements to disclose inventions, and incentivize them by acknowledging their efforts through awards and monetary incentives when their inventions reach commercial success. DOD, DOE, and NIH officials described their agencies’ systems for keeping track of inventions developed in the labs as inadequate or in need of improvement. How agencies and labs keep track of such inventions can range from spreadsheets to sophisticated databases that manage all technology transfer activities, including keeping track of patented inventions and licenses. Currently, DOD has a decentralized approach to keeping track of inventions, which, according to DOD officials, needs improvement given how large the agency is. Each military department has its own systems to track and store information on inventions developed in the labs. Officials from DOD and the departments describe the systems as inadequate to keep track of the agency’s inventions. For example, Navy officials described the department’s in-house system to track inventions as “plagued by outages” and thus ineffective. According to officials, the Army funds systems that track inventions, but these systems are different from each other and not connected to headquarters and have been suspended since 2015. We have previously reported on federal agencies’ challenges in monitoring technology transfer activities, including tracking inventions developed in the federal labs. Several stakeholders we interviewed also noted that keeping track of inventions is a government-wide challenge. According to some stakeholders, federal labs not only have inadequate systems to keep track of their own inventions but also limited information on the kinds of inventions being developed in federal labs across the government. The result is that agencies risk being unaware of research across the labs, which can limit their ability to leverage other federal research efforts. One stakeholder specifically noted that the Interagency Edison (iEdison) reporting system—which allows federal grantees and contractors to report federally funded inventions to the agency that issued the funding award, including inventions developed by some contractor- operated labs—is difficult to navigate and needs improvement. Another stakeholder stated that there can be independent research at three or four labs under different agencies but little interaction among those labs about the research. Information on federal lab inventions can also be accessed publically through the Federal Laboratory Consortium (FLC) website; however, NIST officials stated that the website’s information on inventions relies on agencies to submit accurate information, which may be limited by the agencies’ tracking systems. DOD, DOE, and NIH officials stated that they have made efforts to improve their current systems. For example, since our 2015 report on the agency’s challenges with its data management systems that track federally funded inventions, DOE officials reported that they have developed a plan to leverage the capabilities of the iEdison reporting system to unify the agency’s data management process. While DOD officials stated that the agency has been unsuccessful in purchasing software to track inventions across the agency, Air Force officials said they are developing a pilot program and seeking new software to manage the Air Force’s inventions, and they expect the pilot program to increase the number of invention disclosures. Air Force and NIH officials stated that they have contacted NASA, which has a centralized system for tracking inventions, about leveraging the agency’s expertise. NASA officials reported that they have been hosting regular webinars with other agencies to determine whether NASA’s tracking system could help meet other agencies’ needs. DOD, DOE, NASA, and NIH agency and lab officials cited selecting inventions to patent as a challenge because of the expense of patenting fees. According to some agency and lab officials we interviewed, fees paid to the United States Patent and Trademark Office (USPTO) affect their decision on whether to patent an invention. For example, DOE officials stated that budget constraints force them to make decisions about whether they should file a patent or engage in other agency activities. NIH officials stated that the agency maintains fewer patents because of the patent maintenance fees and the agency’s tight budgets. NASA officials reported that one step the agency is taking to deal with the costs of maintaining its issued patents is to identify technologies with low licensing potential and allow the patents to expire if they fail to attract licensees. NASA has created a searchable database that catalogs thousands of expired NASA patents already in the public domain, making them freely available to industry for unrestricted commercial use. Federal labs under DOD, DOE, NASA, and NIH face challenges that limit their ability to attract potential licensees, according to agency and lab officials. Even officials at NASA, described by NIST officials as one of the best agencies in promoting its inventions to industry, said the agency is not selecting among multiple licensees and would like to have more companies license its patents. There are various reasons why federal labs struggle to attract companies interested in licensing their inventions, according to agency and lab officials we interviewed. First, several agency and lab officials cited that the number of entities that want to license inventions is generally not large. Second, some agency and lab officials identified inadequate promotion of federal inventions and licensing opportunities to companies, including start-ups, as a factor. Third, some agency and lab officials also noted that their inventions are often in the early stages of development and thus pose more of a risk for companies to license. Based on our analysis of relevant literature and interviews with stakeholders, difficulty in attracting industry to license inventions developed in federal labs is a government-wide challenge. According to several stakeholders, industry perceives federal labs as not friendly to the private sector when it comes to patent licensing, especially for start-ups. For example, one stakeholder said that it is rare that federal agencies want to license to a start-up, and that more often the labs want a “safer route” by licensing inventions to large companies that already have a steady revenue stream. Another stakeholder said that DOE’s contractor- operated labs in particular tend to not issue exclusive licenses to start-ups and prefer to license to large companies because the agency sees those companies as presenting less of a risk. In addition, stakeholders stated that federal inventions are often not yet commercially viable, which can deter companies from licensing federal inventions. One stakeholder, for example, stated that NASA officials may think that NASA technology is more developed than it is and therefore underestimate how long it will take a company to develop it for practical application, the millions of dollars needed to develop it, and whether it can be manufactured for commercial use. DOD, DOE, NASA, and NIH officials stated that they are taking steps to attract potential licensees by, for example, conducting local outreach to attract companies and working on improving their databases so that companies can learn about federal inventions available for licensing. For instance, NASA officials stated that the agency’s comprehensive database accessible to potential licensees uses a wide variety of search criteria and attracted 6 million unique visitors in 2016. Agency and lab officials and stakeholders noted that federal labs face challenges in negotiating the license agreement because the process is (1) lengthy and (2) uniquely regulated, which can deter companies from licensing federal inventions. Stakeholders stated that the federal licensing process can take anywhere from about 3 months to more than 2 years. Some stakeholders stated that from their point of view taking a year to negotiate a license agreement is too long. One stakeholder said that such lengthy processes are particularly difficult for start-ups, which often need to finalize license agreements in 3 months. Another stakeholder noted that the federal government in general does not understand how urgent it is for companies to complete the licensing process in a timely manner. Although actions on the part of both the labs and companies can cause delays, if the overall process is time-consuming, prospective licensees will tend to move onto something else instead, according to agency and lab officials and stakeholders. Based on our analysis of licensing information provided by the agencies, we found that the amount of time from receipt of an application for a license to signature of the license by the lab varies widely. Specifically, based on this measure of the length of the process, approximately 60 percent of 132 licenses effective in fiscal year 2014 took at most 6 months for DOD, DOE, NASA, and NIH labs to process. Officials at one Navy lab stated that issuing an invention license to a company within 6 months is “highly unusual,” and officials at one NASA lab stated that the fastest they have issued a license was a week because the start-up was prepared and ready to go. For more on our analysis of licensing information from DOD, DOE, NASA, and NIH, see appendix III. Several agency and lab officials also noted that federal regulations associated with patent licensing can deter companies from licensing federal inventions. Such regulations include requirements that are unique to federally funded and federally owned inventions, including that products arising from the invention must be substantially manufactured in the United States and that the government may retain rights to the invention and terminate the license agreement if the licensee does not take steps to commercialize the technology. In particular, NASA officials stated that venture capital firms sometimes oppose the government retaining rights for federal technology used by start-ups that they fund. According to DOD and DOE officials, federal regulations require a level of documentation or explanation that can deter some companies from licensing inventions developed in federal labs. Based on interviews with stakeholders, as well as our analysis of relevant literature, company concerns about federal regulations is a government-wide challenge that federal labs face in licensing their inventions. For example, according to NIST officials, the U.S. manufacturing requirement can influence whether companies consider licensing federal inventions, because manufacturing in the United States can be more expensive than manufacturing in other countries. NIST officials also stated that some prospective licensees initially become concerned when they are told about march-in authority, because it applies to federally funded inventions and contractors. However, once companies are told that it is a legal requirement and that the provision has never been exercised, they generally become more comfortable with it. DOD, DOE, NASA, and NIH agency officials said they are taking steps to address companies’ concerns about the time it takes to negotiate a license agreement and their unfamiliarity with federal licensing requirements. For instance, NASA, NIH, and Navy officials told us they have developed model license agreements to help guide companies through the process, and NASA and NIH have special license agreements for start-ups to shorten the licensing process. Also, DOE created an agency-wide licensing guide to help prospective licensees navigate federal licensing requirements. DOD, DOE, NASA, and NIH agency and lab officials we interviewed identified limited resources and inadequate monitoring systems as factors that make it difficult to monitor licensee performance. NASA and NIH officials reported that the number of license agreements has increased in their labs and that they do not have enough resources to monitor licenses. DOD officials stated that the agency’s technology transfer offices have traditionally been understaffed and that the agency’s monitoring systems are inadequate for tracking the status of issued licenses. Officials at one DOE lab stated that collecting royalties from licensees can be difficult because the lab does not have enough funds to support that activity. In addition, agencies may rely on the same systems they use to keep track of inventions to monitor licensee performance, and as previously discussed, these systems are in need of improvement. Some stakeholders we interviewed noted that monitoring licensee performance is a government-wide challenge. They explained that sometimes licensees do not pay fees if they are not contacted, and a few stakeholders stated that federal labs have limited funding and resources to monitor contracts effectively. One stakeholder recalled one agency that did not communicate with a licensee for 2 years after the license agreement was signed. According to another stakeholder, ineffective monitoring of licensee performance may limit federal labs’ ability to determine whether a company is developing federal inventions for commercial use per the terms and conditions of the license agreement. Some agency and lab officials stated that they have taken steps to regularly monitor licensees. In particular, at NASA and NIH—where monitoring of licensee performance is centralized at the agency level— officials have programed systems to remind staff to check on licensee performance. Federal labs, including those under DOD, DOE, NASA, and NIH, also face challenges in effectively measuring patent licensing outcomes, based on our interviews with stakeholders and analysis of relevant literature. According to one stakeholder, labs need metrics to assess whether a licensee has made progress on developing the invention for commercial use and whether the lab needs to get the license back and give it to another company. However, some stakeholders we interviewed stated that although the 2011 presidential memorandum on technology transfer called for strategies to establish metrics, federal labs are still struggling to implement metrics for measuring technology transfer outcomes, including patent licensing activities. Stakeholders we interviewed and our analysis of relevant literature have indicated that federal labs in general track the numbers of patents, licenses, and revenues instead of using metrics that identify direct economic impacts from patent licensing and other technology transfer activities. In agencies where such metrics do exist, they may be applied inconsistently across labs. For example, officials at one DOE lab stated that DOE metrics are generally not consistent across the agency’s labs. DOD, DOE, NASA, and NIH agency officials stated that they are working to improve their metrics and incorporate metrics beyond tracking numbers of patents, licenses, and revenues. For example, in addition to measuring the numbers of patents and licenses issued, NASA and Air Force officials stated that they are also measuring factors that affect the length of time it takes for their labs to process licenses. Such information, officials said, will help them expedite the licensing process. DOD, DOE, NASA, and NIH face challenges in prioritizing patent licensing as part of their agency missions, which can affect the entire patent licensing process. For example, DOD and DOE agency and lab officials stated that an agency’s mission affects patent licensing activities. DOD officials stated that the agency’s primary mission is protecting the warfighter and that patent licensing is a secondary benefit to the agency. According to DOE officials, the nuclear security labs do not focus on patenting but instead on developing technologies associated with a weapons program. In addition, several stakeholders we interviewed stated that some agencies and labs do not have a culture that prioritizes patent licensing. In particular, one stakeholder stated that at some federal labs, patent licensing is not reflected in performance evaluation management plans, which can help incentivize lab personnel to engage in patent licensing activities. A few stakeholders stated that at some labs where management does not prioritize patent licensing activities, researchers’ careers can be negatively affected if they engage in patent licensing activities. DOD, DOE, NASA, and NIH agency and lab officials cited limited resources to conduct the range of activities related to patent licensing. For example, sometimes there is just one person at a DOD lab overseeing technology transfer activities, according to DOD agency and lab officials. Officials at one NIH lab stated that many labs across the agency do not receive enough royalties to offset their patent licensing costs. In its fiscal year 2015 report—its most recent report—to Congress on federal technology transfer activities, NIST reported that the federal intramural research budget, which include patent licensing activities, has generally not increased in the past 4 fiscal years. Several agency and lab officials stated that budget constraints affect the extent to which they can engage in patent licensing activities—including patent enforcement, which can cost millions of dollars and presents challenges for federal labs, according to DOE officials. Some agency and lab officials stated they have taken steps to overcome such challenges. For example, officials at one Navy lab stated that the lab has management support and nine patent attorneys to assist in the reviews of researchers’ invention disclosures. Also, officials at one NIH lab stated that the lab has strong management support and a good royalty stream from successful inventions that pay for patenting and other reinvestments, which allows the lab to not draw from its appropriations. Tables 1 through 3 and figures 4 through 6 are based on 222 patent licenses that became effective in fiscal year 2014, and associated data, provided by the Department of Defense (specifically the Army, Navy, and Air Force), Department of Energy, National Aeronautics and Space Administration, and National Institutes of Health. They include both data provided by the agencies and information compiled directly from the licenses. The tables and figures are provided for informational purposes and are not generalizable to all patent licenses. In addition to the contact named above, Robert J. Marek (Assistant Director), James D. Ashley, Kevin S. Bray, Virginia A. Chanley, Ellen L. Fried, Sarah C. Gilliland, Cheryl M. Harris, Robert Letzler, Gregory A. Marchand, Christopher P. Murray, Emmy L. Rhine Paule, Dan C. Royer, Ardith A. Spence, Vasiliki Theodoropoulos, and Reed Van Beveren made key contributions to this report. Bozeman, Barry. Technology Transfer Research and Evaluation: Implications for Federal Laboratory Practice, Final Report to VNS Group, Inc. and the U.S. National Institute of Standards, 2013. Accessed on March 14, 2018. https://www.nist.gov/tpo/return-investment-roi-initiative. Bozeman, Barry, Heather Rimes, and Jan Youtie. “The Evolving State-of- the-Art in Technology Transfer Research: Revisiting the Contingent Effectiveness Model.” Research Policy, vol. 44, no. 1 (2014): 34-49. Franza, Richard M. and Kevin P. Grant. “Improving Federal to Private Sector Technology Transfer: A Study Identifies Seven Critical Factors with the Greatest Impact on Whether Transfer Attempt Succeeds or Fails.” Research Technology Management, vol. 49, no. 3 (2006): 36-40. Greiner, Michael A. and Richard M. Franza. “Barriers and Bridges for Successful Environmental Technology Transfer.” Journal of Technology Transfer, vol. 28, no. 2 (2003): 167-177 Howieson, Susannah V., Stephanie Shipp, Gina Walejko, Pamela Rambow, Vanessa Peña, Sherrica S. Holloman, and Phillip N, Miller. Exemplar Practices for Department of Defense Technology Transfer. Alexandria, Va.: Institute of Defense Analyses, January 2013. Hughes, Mary E., Susannah V. Howieson, Gina Walejko, Nayanee Gupta, Seth Jonas, Ashley T. Brenner, Dawn Holmes, Edward Shyu, and Stephanie Shipp. Technology Transfer and Commercialization Landscape in the Federal Laboratories. Alexandria, Va.: Institute of Defense Analyses, June 2011. Jin, D., X. Mo, A. M. Subramanian, K. H. Chai, and C. C. Hang. “Key Management Processes to Technology Transfer Success.” 2016 IEEE International Conference on Management of Innovation and Technology, (2016), 67-71. Linton, Jonathan D., Cesar A. Lombana, and A. D. Romig, Jr. “Accelerating Technology Transfer from Federal Laboratories to the Private Sector—the Business Development Wheel.” Engineering Management Journal, vol. 13, no. 3 (2001): 15-20. Office of Science and Technology Policy and the National Institutes of Health, National Heart, Lung and Blood Institute. Lab-to-Market Inter- agency Summit: Recommendations from the National Expert Panel. Washington, D.C.: National Expert Panel, White House Conference Center, May 2013. Stepp, Matthew, Sean Pool, Nick Loris, and Jack Spencer. Turning the Page: Reimagining the National Labs in the 21st Century Innovation Economy. Washington, D.C.: Information Technology and Innovation Foundation, Center for American Progress, and Heritage Foundation, June 2013. Toregas, Costis, E. Colin Campbell, Sharon S. Dawes, Harold B. Finger, Michael D. Griffin, and Thomas Stackhouse. Technology Transfer: Bringing Innovation to NASA and the Nation. Washington, D.C.: National Academy of Public Administration, November 2004. U.S. Department of Energy, Commission to Review the Effectiveness of the National Energy Laboratories. Securing America’s Future: Realizing Potential of the Department of Energy’s National Laboratories, vol. 1, Executive Report. Washington, D.C.: October 2015. Accessed March 14, 2018. https://www.energy.gov/labcommission/downloads/final-report- commission-review-effectiveness-national-energy-laboratories. Wang, Mark, Shari Pfleeger, David M. Adamson, Gabrielle Bloom, William Butz, Donna Fossum, Mihal Gross, et al. Technology Transfer of Federally Funded R&D: Perspectives from a Forum. Conference Proceedings. Santa Monica, Calif.: RAND Corporation, 2003.", "summary": "The federal government spends approximately $137 billion annually on research and development—mostly at DOD, DOE, NASA, and NIH—to further agencies' missions, including at federal labs. Multiple laws have directed agencies and labs to encourage commercial use of their inventions, in part by licensing patents, to private sector companies and others that aim to further develop and bring the inventions to market. GAO was asked to review agency practices for managing inventions developed at federal labs, with a particular focus on patent licensing. This report examines (1) challenges in licensing patents and steps taken to address and report them and (2) information to guide establishing financial terms in patent licenses at DOD, DOE, NASA, and NIH. GAO reviewed relevant literature, laws, and agency documents, including patent licenses from 2014, to match the most recent NIST summary report when the licenses were requested, and GAO interviewed agency officials and knowledgeable stakeholders, including organizations that assist federal labs in licensing patents. Federal agency and laboratory (lab) officials identified challenges in licensing patents across the federal government, and agencies have taken some steps to address and report them. Patent licensing is a technology transfer activity that allows, for example, federal inventions to be legally transferred to the private sector for commercial use. Specifically, officials at the Departments of Defense (DOD) and Energy (DOE), National Aeronautics and Space Administration (NASA), and National Institutes of Health (NIH), as well as external stakeholders, noted challenges in having researchers identify potentially patentable inventions. DOD, DOE, and NIH officials also cited having inadequate internal systems to keep track of inventions developed in the labs. In addition, several stakeholders stated that licensing patented inventions can be lengthy and bureaucratic, which may deter companies from licensing. The agencies reported taking steps to address these challenges, such as implementing model license agreements across labs to expedite the process. The Department of Commerce has delegated to its National Institute of Standards and Technology (NIST) to annually report agencies' technology transfer activities, including patent licensing. Although NIST has reported some challenges, it has not fully reported the range of challenges identified by agency and lab officials and stakeholders. NIST officials stated that they were generally aware of the challenges but had not considered including them to a greater degree in their annual reports to Congress. By fully reporting the range of challenges in federal patent licensing, NIST has the opportunity to further ensure that Congress is more aware of challenges that limit agencies' efforts and ways for potentially addressing those challenges. Federal agencies and labs have limited information to guide officials when establishing the financial terms of patent licenses. For example, while federal labs can use comparable licenses to help establish financial terms, their access to information on comparable licenses from other labs varies, and such information is not formally shared among the agencies. Based on its established interagency role, NIST is best positioned to assist agencies in sharing information on comparable licenses, in accordance with leading practices for interagency collaboration. By doing so, NIST would provide federal agencies and labs with useful information that can help them better establish financial terms and successfully license inventions. GAO is making seven recommendations, including that Commerce instruct NIST to fully report the range of challenges in federal patent licensing in its annual reports to Congress and facilitate information sharing among agencies. Commerce, DOD, DOE, NASA, and NIH generally agreed with GAO's recommendations and are taking steps to implement them.", "document_type": "gao"}
{"report": "NASA’s mission is to drive advances in science, technology, aeronautics, and space exploration to enhance knowledge, education, innovation, economic vitality, and stewardship of Earth. The NASA Administrator is responsible for leading the agency and is accountable for all aspects of its mission, including establishing and articulating its vision and strategic priorities and ensuring successful implementation of supporting policies, programs, and performance assessments. Within NASA headquarters, the agency has four mission directorates that define its major core mission work: (1) Aeronautics Research conducts cutting-edge research to enable revolutionary advances in future aircraft, as well as in the airspace in which they will fly; (2) Human Exploration and Operations is responsible for NASA space operations, developing new exploration and transportation systems, and performing scientific research; (3) Science carries out the scientific exploration of Earth and space to expand the frontiers of Earth science, planetary science, and astrophysics, and (4) Space Technology develops revolutionary technologies through transparent, collaborative partnerships that expand the boundaries of aerospace. The agency also has a mission support directorate to manage its business needs and administrative functions, such as human capital management. In addition to NASA headquarters in Washington, D.C., the agency is composed of nine field centers managed by NASA employees, and one federally funded research and development center that are responsible for executing programs and projects. NASA centers are located throughout the country and manage projects or programs for multiple mission directorates. For example, the Goddard Space Flight Center supports various IT programs within the Science mission directorate, while the Johnson Space Center supports multiple programs in the Human Exploration and Operations mission directorate. According to NASA documents, the agency planned to spend $1.6 billion of its fiscal year 2018 budget authority on IT. Of this total, $888 million was to be used for business IT and $672.8 million was to be used for mission IT. Business IT includes the infrastructure and systems needed to support internal agency operations, such as commodity IT (e.g., e-mail and communications systems), infrastructure, IT management, administrative services, and support systems, whereas mission IT includes the technology needed to support space programs and research for the agency’s mission programs. The technology that the agency uses to support its mission programs includes highly-specialized IT, defined by NASA as any equipment, system, and/or software that is used to acquire, store, retrieve, manipulate, and/or transmit data or information when the IT is embedded in a mission platform or provides a platform required for simulating, executing, or operating a mission. Historically, NASA and its Inspector General have reported that funding for and oversight of highly-specialized IT has been decentralized among mission directorates and embedded within launch programs and other mission activities instead of being identified as IT to be managed as part of the agency’s IT portfolio. According to the Inspector General, the agency’s decentralized funding for and oversight of IT has minimized agency-wide visibility into and oversight of NASA’s spending on these systems. The agency’s Chief Information Officer (CIO) reports directly to the NASA Administrator and serves as the principal advisor to the NASA Administrator and senior officials on all matters pertaining to IT. The CIO is to provide leadership, planning, policy direction, and oversight for the management of NASA’s information and systems. Toward this end, the CIO’s responsibilities include developing and implementing approaches for executing the goals and outcomes in the NASA strategic plan; ensuring that the agency’s human resources possess the requisite knowledge and skills in IT and information resources management; maximizing the value of NASA IT investments through an investment management process; and leading and implementing the agency’s IT security program. The CIO also is responsible for developing and implementing agency-wide IT policies and processes. NASA’s CIO also is to direct, manage, and provide policy guidance and oversight of the agency’s center CIOs. Each center has a CIO responsible for supporting center leadership and managing IT staff. Similarly, each mission directorate has a representative who coordinates with programs on IT-specific issues and, as needed, obtains support from the Office of the CIO. Both center CIOs and mission directorate IT representatives report to the NASA CIO and to the leadership of their respective centers and mission directorates. The CIO is supported by staff in the Office of the CIO. This office is organized into four divisions responsible for (1) IT security, (2) capital planning and governance, (3) technology and innovation, and (4) enterprise services and integration. Collectively, these divisions support NASA’s approach to IT strategic and workforce planning, governance boards and practices, and cybersecurity. In March 2017, the Office of the CIO submitted plans to establish a fifth division focused on new applications, and also to rename existing divisions to better represent the services they provide. For example, the Office of the CIO proposed that the Capital Planning and Governance Division be renamed the IT Business Management Division. As of March 2018, NASA had not yet approved or implemented the planned reorganization. Figure 1 depicts the organization of the Office of the CIO, including relevant reporting relationships for center CIOs and mission directorate IT representatives, as of March 2018. We and NASA’s Office of Inspector General have reported on longstanding IT management weaknesses within the agency. For example, in October 2009, we reported that NASA had made progress in implementing IT security controls and aspects of its information security program, but that it had not always implemented appropriate controls to sufficiently protect the confidentiality, integrity, and availability of information and systems. We also identified control vulnerabilities and program shortfalls, which, collectively, increased the risk of unauthorized access to NASA’s sensitive information, as well as inadvertent or deliberate disruption of its system operations and services. We recommended that the NASA Administrator take steps to mitigate control vulnerabilities and fully implement a comprehensive information security program. The agency concurred with our eight recommendations and stated that it was taking actions to mitigate the information security weaknesses identified. In addition, NASA’s Office of Inspector General has issued 24 reports over the last 7 years on IT governance and security weaknesses at the agency. For example, in June 2013, the office reported that the decentralized nature of NASA’s operations and its longstanding culture of autonomy had hindered the agency’s ability to implement effective IT governance. Specifically, the report stated that the CIO had limited visibility and control over a majority of IT investments, operated in an organizational structure that marginalized the authority of the position, and could not enforce security measures across NASA’s computer networks. Moreover, the IT governance structure in place at the time was overly complex, did not function effectively, and operated under a decentralized model that relegated decision making about critical IT issues to numerous individuals across NASA, leaving such decisions outside the purview of the CIO. The Office of Inspector General made eight recommendations to the NASA Administrator for improving IT governance, including calling for all governance to be consolidated within the Office of the CIO to ensure adequate visibility, accountability, and integration into all mission-related IT assets and activities. The Administrator concurred with six and partially concurred with two of the recommendations and planned actions sufficient for the Office of Inspector General to close all eight recommendations as implemented. However, the Office of Inspector General later reported that the extent to which NASA had implemented the agreed-upon changes was in doubt based on subsequent audit findings that NASA was still struggling with limited agency CIO authority, decentralized IT operations, and ineffective IT governance. A follow-on report issued in October 2017 described a continued lack of progress in improving IT governance, determined that the CIO’s visibility into investments across the agency continued to be limited, and identified flaws in the process developed to improve governance. Specifically, the Office of Inspector General noted that the Office of the CIO had made changes to its IT governance boards over the past few years, but the boards had not made strategic decisions to substantively impact how NASA IT would be managed. According to the Office of Inspector General, slow implementation of the revised governance structure had left many IT officials operating under the previous inefficient and ineffective framework. The report also noted that, as of August 2017, the Office of the CIO had not finalized the roles and responsibilities for IT management and lingering confusion regarding security roles, coupled with poor IT inventory practices, had negatively impacted NASA’s security posture. Importantly, the report explained that the Office of the CIO continued to have limited influence over IT management within the mission directorates and at centers. The Office of Inspector General made five recommendations to the CIO that were intended to improve, among other things, governance and security. As of October 2017, NASA had concurred with three recommendations, partially concurred with two recommendations, and described corrective actions taken or planned. However, the Office of Inspector General found that NASA’s original proposed action to address the fourth recommendation was insufficient; thus, in December 2017, the agency established additional proposed actions to address that recommendation. We have identified a set of essential and complementary management disciplines that provide a sound foundation for IT management. These include the following: Strategic planning: Strategic planning defines what an organization seeks to accomplish and identifies the strategies it will use to achieve desired results. We have previously reported that a defined strategic planning process allows an agency to clearly articulate its strategic direction and establish linkages among planning practices, such as goals, objectives, and strategies and identified leading practices for agency planning. Workforce planning: We have previously reported that it is important for an agency to have a strong IT workforce to help ensure the timely and effective acquisition of IT. In November 2016, we identified eight key workforce planning activities derived from the Clinger-Cohen Act of 1996 and relevant guidance, including memorandums and guidance from OPM and OMB, and prior GAO reports. These laws and guidance focus on the importance of setting the strategic direction for workforce planning, analyzing the workforce to identify skill gaps, developing strategies to address skill gaps, and monitoring and reporting on progress in addressing skill gaps. IT governance: IT projects can significantly improve an organization’s performance, but they can also become costly, risky, and unproductive. In 1996, Congress passed the Clinger-Cohen Act, which requires executive branch agencies to establish a process for selecting, managing, and evaluating investments in order to maximize the value and assess and manage the risks of IT acquisitions. Agencies can maximize the value of their investments and minimize the risks of their acquisitions by having an effective and efficient governance process, as described in GAO’s guide to effective IT investment management. Cybersecurity: Federal systems and networks are often interconnected with other internal and external systems and networks, including the Internet. When systems are interconnected, the number of avenues of attack increases and the attack surface expands. Effective security for agency systems and data is essential to prevent data tampering, disruptions in critical operations, fraud, and inappropriate disclosure of sensitive information, including personal information entrusted to the government by members of the American public. Taking action to assure that an agency’s contractors and partners are adequately protecting the agency’s information and systems is one way an agency can address cybersecurity risks. NIST has issued a suite of information security standards and guidelines that, collectively, provide comprehensive guidance on managing cybersecurity risk to agencies and any entities performing work on the agencies’ behalf. NIST’s cybersecurity framework was issued in February 2014 in response to Executive Order 13636. The framework outlines a risk-based approach to managing cybersecurity risk and protecting an organization’s critical information assets. Subsequent to the issuance of the cybersecurity framework, a May 2017 executive order required agencies to use the framework to manage cybersecurity risks. The order outlined actions to enhance cybersecurity across federal agencies and critical infrastructure to improve the nation’s cyber posture and capabilities against cybersecurity threats to digital and physical security. NASA has not yet effectively established and implemented leading IT management practices for strategic planning, workforce planning, governance, and cybersecurity. Specifically, The agency’s IT strategic planning process is not yet fully documented and its IT strategic plan lacks key elements called for by leading practices. NASA has not yet established an IT workforce planning process consistent with leading practices. The agency has taken recent action to improve its IT governance structure; however, it has not yet fully established that structure, documented improvements to its investment selection process, fully implemented investment oversight leading practices, or fully defined its policies and procedures for IT portfolio management. NASA has not fully established an effective approach to managing agency-wide cybersecurity risk. While it has designated a risk executive, the agency lacks a dedicated office to provide comprehensive executive oversight of risks. In addition, the agency- wide cybersecurity risk management strategy is currently in development, and the agency’s information security program plan does not address all leading practices and has not been finalized. Further, policies and procedures for protecting NASA’s information systems are in place, but the agency has not ensured that they are always current or integrated. Leading practices of IT strategic planning established in OMB guidance call for an agency to document its IT strategic planning process, including, at a minimum, documenting the responsibilities and accountability for IT resources across the agency. It also calls for documenting the method by which the agency defines its IT needs and develops strategies, systems, and capabilities to meet those needs. NASA’s documented IT strategic planning process describes the responsibilities and accountability for IT resources across the agency. For example, NASA has assigned specific governance bodies with responsibility for developing and overseeing the implementation of the IT strategy. Also, in its IT strategic plan, NASA described key stakeholders across the agency that are responsible for the development of the plan. These stakeholders include the Associate CIOs, representatives from mission directorates, mission support organizations, and the centers. On the other hand, the methods by which the agency defines its IT needs and develops strategies, systems, and capabilities to meet those needs are not documented. For example, according to the IT strategic plan, the Office of the CIO is to perform a gap analysis to inform the development of NASA’s roadmap that translates its IT needs and the strategies identified for meeting those needs into tactical plans. The tactical plans are to define how the strategic plan will be incrementally executed to achieve the longer term goals. However, the Office of the CIO has not documented in its strategic planning policies and procedures how the CIO will perform the gap analysis or the methods for developing these tactical plans and roadmaps. This is particularly important since, according to officials in NASA’s Office of the CIO, the centers vary as to whether they have developed their own IT strategic plans or tactical plans, and the office does not oversee or review any center-level plans to ensure they align with the NASA IT strategic plan. According to officials in the Office of the CIO, NASA used a new model in formulating its IT strategy for fiscal years 2018 to 2021, such as including a broader set of stakeholders in the strategic planning cycle before documenting the strategic planning process. The officials stated that they intend to identify lessons learned from using this new model and formally document a complete and repeatable IT strategic planning process in the future. However, the agency has not established time frames for when the Office of the CIO will fully document its strategic planning process. Without a fully documented strategic planning process, NASA risks not being able to clearly articulate what it seeks to accomplish and identify the IT resources needed to achieve desired results in a way that is consistent and complete. In addition to calling for agencies to fully document the strategic planning process, leading practices from OMB guidance and our prior research and experience at federal agencies have shown that an agency should develop a comprehensive and effective IT strategic plan that (1) is aligned with the agency’s overall strategy; (2) identifies the mission of the agency, results-oriented goals, and performance measures that permit the agency to determine whether implementation of the plan is succeeding; (3) includes strategies, with resources and time frames, that the governing IT organization intends to use to achieve desired results; and (4) provides descriptions of interdependencies within and across projects so that they can be understood and managed. The resulting plan is to serve as an agency’s vision, or road map, and help align information resources with business strategies and investment decisions. NASA has taken steps to improve its IT strategic plan, but the updated plan is not comprehensive in that it does not fully address all four elements of a comprehensive and effective plan outlined above. In this regard, the agency had a prior strategic plan covering the time frame of March 2014 to November 2017. More recently, in December 2017, the CIO and Associate Administrator approved an updated plan for implementation. The updated plan is intended for use from the date it was approved through fiscal year 2021. Regarding the four elements of a comprehensive IT strategic plan, NASA’s prior plan addressed one element, partially addressed two elements, and did not address one element. The updated plan was slightly improved in that it addressed two elements, partially met one element, and did not meet one element of a comprehensive strategic plan. Table 1 provides a summary of the extent to which NASA’s prior IT strategic plan (covering the time frame of March 2014 to November 2017) and recently updated IT strategic plan (covering the time frame of December 2017 to fiscal year 2021) addressed key elements of a comprehensive strategic plan. NASA’s prior IT strategic plan was aligned with the agency’s overall strategic plan and identified the mission of the agency and results- oriented goals. However, these goals were not linked to specific performance measures that were needed to track progress and did not always describe strategies to achieve desired results. Additionally, this plan lacked descriptions of interdependencies within and across projects. NASA’s updated IT strategic plan is aligned with the agency’s overall strategic plan and identifies the mission of the agency and results- oriented goals. For example, the plan describes the agency’s IT vision, mission, principles, and objectives of five strategic goals—excellence, data, cybersecurity, value, and people. To support these goals, the plan defines 14 objectives to be accomplished over 4 years. For example, the plan defines objectives for increasing the effectiveness of NASA’s IT strategy execution through disciplined program and project management. In addition, NASA has improved upon the prior plan by identifying performance measures that allow the agency to determine whether it is succeeding in the implementation of its goals. For example, in order to increase the effectiveness of its IT strategy execution, the Office of the CIO expects 85 percent of projects to be in conformance with approved project plans by the end of fiscal year 2018. As another example, to prepare its employees to achieve NASA’s IT vision, the Office of the CIO plans to, by the end of fiscal year 2020, identify skills gaps and ways to close the gaps based on the workforce strategy. However, similar to the prior plan, the updated plan does not fully describe strategies NASA intends to use to achieve the desired results or descriptions of interdependencies within and across projects. Specifically, the plan discusses how the agency intends to achieve its strategic goals and objectives through various activities. For example, according to the plan, to increase the effectiveness of investment analysis and prioritization, NASA intends to implement a financial management process that integrates Office of the CIO, center, and mission directorate IT spending. The plan states that this process will map IT investments to NASA’s vision and strategy, as well as enable high-quality internal and external investment insight and reporting. However, the updated plan does not further describe the strategies NASA intends to use to accomplish these activities, including a schedule for significant actions and the resources needed to achieve this objective. For instance, the plan states that the Office of the CIO will define clear lines of authority and accountability for IT between the agency and NASA’s centers, but does not describe a strategy, including time frames and resources, for accomplishing this. Additionally, the plan does not describe interdependencies between projects, which is essential to help define the relationships within and across projects and major initiatives. According to NASA’s CIO, the updated strategic plan was kept at a higher level with the expectation that more detailed implementation plans (e.g., tactical plans and roadmaps) would define the necessary projects and interdependencies. However, NASA has not defined guidance for developing the implementation plans to ensure that any plans developed will fully describe strategies and interdependencies, or time frames for when these plans will be completed. Until NASA incorporates the key elements of a comprehensive IT strategic plan, it will lack critical information needed to align information resources with business strategies and investment decisions. Key to an agency’s success in managing its IT investments is sustaining a workforce with the necessary knowledge, skills, and abilities to execute a range of management functions that support the agency’s mission and goals. Achieving such a workforce depends on having effective human capital management consistent with workforce planning activities pursuant to federal laws and guidance. Specifically, OMB requires agencies to develop and maintain a current workforce planning process. In addition, we reported in 2016 on the importance of setting a strategic direction for IT workforce planning, identifying skills gaps and implementing strategies to address them, and monitoring and reporting on progress in addressing the identified skills gaps. We identified eight key IT workforce planning activities that are essential to agency efforts to establish an effective IT workforce: 1. establish and maintain a workforce planning process; 2. develop competency and staffing requirements; 3. assess competency and staffing needs regularly; 4. assess gaps in competencies and staffing; 5. develop strategies and plans to address gaps in competencies and 6. implement activities that address gaps (including IT acquisition cadres, cross-functional training of acquisition and program personnel, career paths for program managers, plans to strengthen program management, and use of special hiring authorities); 7. monitor the agency’s progress in addressing competency and staffing 8. report to agency leadership on progress in addressing competency and staffing gaps. The Office of the CIO has had IT workforce planning efforts underway since 2015 that are intended to address the workforce planning activities listed above; however, the office has not finalized or implemented any of the planned actions. The office recently began working to establish a more comprehensive workforce strategy for fiscal year 2019 to align with the agency’s increased emphasis on improving the overall workforce. Specifically, in the draft NASA Strategic Plan, the agency established a workforce development goal and two strategic objectives that relate to its IT workforce and call for, among other things, workforce training and efforts to increase cybersecurity awareness to reduce cybersecurity risks. Nevertheless, NASA has gaps in its IT workforce planning efforts. Of the eight key IT workforce planning activities that we previously outlined, NASA partially implemented five and did not implement three. Table 2 shows the extent to which NASA has implemented each IT workforce planning activity and provides examples of workforce practices planned or implemented, as well as those not yet undertaken. According to NASA’s CIO, the Office of the CIO put IT workforce planning activities on hold in 2015 pending the outcome of more comprehensive, agency-wide efforts. Specifically, the agency began planning and developing a new phased program—the Mission Support Future Architecture Program—designed to deliver workforce and other mission support services, including a talent management program. Phase 1 of the new phased Mission Support Future Architecture Program began in May 2017. According to the NASA CIO, the Office of the CIO is expected to be part of a future phase and to renew its IT workforce planning as part of that effort. However, the CIO did not have an estimate for when the Office of the CIO would join the program. Until NASA implements all of the key IT workforce planning activities discussed in this report, the agency will have difficulty anticipating and responding to changing staffing needs. Further, NASA will face challenges in controlling human capital risks when developing, implementing, and operating IT systems. Leading practices for governing IT, such as those identified by GAO in its IT investment management framework, call for agencies to establish and follow a systematic and organized approach to investment management to help lay a foundation for successful, predictable, and repeatable decisions. Critical elements of such an approach include instituting an IT investment board (or boards), developing and documenting a governance process for investment selection and for investment oversight, and establishing governance policies and procedures for managing the agency’s overall IT investment portfolio. Instituting an effective IT governance structure involves establishing one or more governance boards, clearly defining the boards’ roles and responsibilities, and ensuring that they operate as intended. Moreover, Section 811(a) of the National Aeronautics and Space Administration Transition Authorization Act of 2017 directs the agency to ensure that the NASA CIO, mission directorates, and centers have appropriate roles in governance processes. The act also calls on the Administrator to provide, among other things, an IT program management framework to increase the efficiency and effectiveness of IT investments, including relying on metrics for identifying and reducing potential duplication, waste, and cost. NASA has established three boards focused specifically on IT governance—an IT Council which is its executive-level IT board, a CIO Leadership Team, and an IT Program Management Board which provides oversight of programs and projects. Meeting minutes for the three IT- specific governance bodies identified above revealed that these groups are meeting as required by their charters. Further, two of NASA’s agency-wide councils (whose governance responsibilities extend beyond IT) also play a role in IT governance. Specifically, the Mission Support Council is the governance body to which the IT Council escalates unresolved decisions, and the Agency Program Management Council is responsible for reviewing and approving highly- specialized IT. In addition, NASA centers have the option to create center-specific IT governance boards to make decisions about center- level IT investments under the authority of center CIOs. Table 3 describes the roles of the IT-specific governance boards, the agency-wide councils with roles in IT governance, and the center-level IT governance boards. The table also includes additional details on how frequently the councils and boards meet, the dollar thresholds NASA has established to determine which investments each council or board reviews, and which officials serve as members of the boards. Although it has established and assigned responsibilities for the aforementioned governance councils and boards, NASA has not yet fully instituted an effective investment board governance structure for several reasons. Planned improvements to the IT governance structure are not yet complete. NASA has established new governance boards in addition to the boards listed above, but has not yet approved charters to guide their operations. Specifically, the Office of the CIO has revised its governance structure to establish six new boards, one for each of its IT programs. Agency officials, including the IT governance lead, reported that the boards had been established; however, as of December 2017, NASA had not yet approved charters defining the new governance bodies’ membership, functions, and interactions with other governance boards. Roles and responsibilities of the IT governance boards and agency-wide governance councils are not clearly defined. NASA continues to operate a federated governance model with decentralized roles and responsibilities for governance of mission and business IT investments. Business IT is selected and approved by the IT-specific governance boards, but mission IT follows a different path for investment selection in that it is not reviewed and approved by the CIO along with other IT investments proposed for selection. Instead, the Agency Program Management Council’s reviews focus on the selection of overall mission programs, and not on selecting IT. As a result, mission IT has historically been reported to the Office of the CIO only if the program has been designated as a major agency IT investment to be reported to OMB. NASA has begun making changes to its decentralized governance approach in response to provisions in legislation commonly referred to as the Federal Information Technology Acquisition Reform Act that are intended to ensure that the CIO has visibility into both mission and business IT investments. However, the agency has not yet developed policies and procedures to clarify how these changes will affect the CIO’s and governance boards’ roles and responsibilities. For example, in January 2017, the IT Council approved an updated definition for highly-specialized IT and established new expectations about the extent to which highly-specialized IT investments would be reviewed by the NASA CIO. However, NASA has not clarified roles and responsibilities for identifying such investments and ensuring they are reported by mission directorate programs to the CIO. In addition, the agency has not yet outlined procedures for how these investments that are overseen by the agency-wide Agency Program Management Council are to be reported to the CIO or IT-specific governance boards. During a January 2017 IT Council meeting, the NASA CIO acknowledged that roles and responsibilities for IT governance were unclear and that it would take 1 to 2 years to clarify them. In July 2017, the Deputy CIO recognized that significant work remained for NASA to achieve a consistent agency-wide governance approach with established roles and responsibilities. While the IT governance boards are meeting regularly, they are not consistently operating as intended. Board charters finalized in 2016 defined the membership for the governance boards and established expectations for the expertise to be made available to support board decisions. However, the boards are not consistently operating with all designated board members in attendance. For example, the Chief Engineer was designated as a member of the IT Council, but the council’s meeting minutes indicated that the Deputy Chief Engineer regularly attends the council meetings instead. In addition, IT Program Management Board meetings are consistently held with fewer voting members than designated by the board’s charter. The board’s meeting minutes indicated that fewer than six voting members regularly attend board meetings instead of the eight voting members outlined in the board charter. For example, the minutes showed that each meeting has been held with only one center and mission support directorate representative—instead of the two required by the charter. NASA officials, including the Associate CIO for Capital Planning and Governance, stated that planned efforts to update the governance structure and develop additional guidance for IT investment management have impacted the agency’s time frames for fully establishing its new boards and defining their roles and responsibilities. Specifically, these officials stated that the Office of the CIO is working to develop a comprehensive IT framework intended to update the governance structure, fully establish the new governance boards, and define governance roles and responsibilities. According to the officials, this framework is expected to be finalized in 2018, but the office did not provide a detailed schedule with milestones for completing the framework. Without a detailed schedule for updating the governance structure and establishing a comprehensive IT framework to help ensure that the revised governance boards are fully established and operating as intended, NASA may not be able to improve IT governance in accordance with the requirements in the National Aeronautics and Space Administration Transition Authorization Act of 2017. According to our IT investment management guide, defining policies and procedures for selecting investments provides investment boards and others with a structured process and a common understanding of how investments will be selected. Selection policies and procedures should, among other things, establish thresholds or criteria (e.g., investment size, technical difficulty, risk, business impact, customer needs, and cost- benefit analysis) for boards to use in identifying, analyzing, prioritizing and selecting new IT proposals. In addition, outlining a process for reselecting ongoing projects is intended to support board decisions about whether to continue to fund projects not meeting established goals or plans. Using the defined selection process promotes consistency and transparency in IT governance decision making. Further, after the guidance has been developed, organizations must actively maintain it, making sure that it always reflects the board’s current structure and the processes that are being used to manage the selection of the organization’s IT investments. NASA’s defined selection process policies and procedures designated the CIO with responsibility to ensure that IT governance, investment management, and program/project management processes are integrated to facilitate the selection of appropriate IT investments. The agency has established multiple policies and procedures outlining certain aspects of how both mission programs and business IT investments are to be planned, such as standardized templates for requesting approval to plan investments and direction for teams to use in planning for investments. In addition, the Office of the CIO has established a Capital Planning and Investment Control Guide for business IT investments and issues annual budget guidance for requesting funding for IT investments. The agency’s selection process also includes specific IT governance processes developed by centers for the investments they review. For example, Goddard Space Flight Center had developed additional center- specific guidance assigning lead responsibility for assessing new and ongoing projects. The center also has established predetermined criteria, such as whether projects conflict, overlap, or are redundant with other projects, and the risk if the investment was not funded. Nevertheless, NASA’s established process does not yet define thresholds or criteria (e.g., qualitative or quantitative data) to be analyzed and compared when governance boards make decisions to select investments. Charters for NASA’s governance boards outline the functions these boards are to perform and direct them to be involved in IT governance. However, the charters do not outline specific thresholds or procedures that the boards are to follow in selecting investments. For example, NASA’s process does not fully define how investment risks are to be evaluated. NASA policy establishes dollar thresholds for IT governance board reviews, but does not define any other parameters for how risk will be evaluated. In addition, NASA has established an expectation that the new capital investment review process is to yield risk- based decisions for all investments and help mitigate IT security risks. However, guidance for capital investment reviews does not address how investment risks are to be evaluated. Moreover, NASA’s selection process policies and procedures have not been updated to reflect efforts to improve governance. Its guidance for selecting investments (and for all aspects of its governance process) is fragmented, and the agency has not updated its policies and procedures to reflect current selection practices. In addition, this guidance does not yet reflect recent efforts to clarify and standardize the definitions of fundamental IT investment terms, such as “information technology” and “major” investments. Further, while NASA has begun changing its selection process to ensure that the CIO and IT governance boards will be provided data about all IT investments, including mission IT investments such as highly-specialized IT, the agency’s selection policies have not been updated to reflect these changes. NASA’s Capital Planning and Investment Control Guide does not require all investments to be included in the selection process (or other IT governance processes) and the NASA Space Flight Program and Project Management procedures for mission program governance do not address whether or how the investments within mission programs are to be reported to the agency’s IT-specific governance boards. In addition, NASA has not yet defined a reselection process for IT investments. Current policies and guidance for selecting investments do not clearly define a consistent approach for how performance is to be considered in reselecting investments. Without a defined reselection process, the agency’s boards lack structure and a common understanding about how to make decisions about whether to continue to fund projects not meeting established goals or plans. NASA officials acknowledged that the current policies and procedures do not establish sufficient content within the business cases and IT plans for proposed investments to support effective governance decision making. The agency has begun working to update its policy for IT program and project management but did not expect to complete the update until April 2018. Further, even when this key IT investment management policy is updated, the agency will still need to update related policies and procedures to reflect changes it has made but not yet documented in the investment selection process. NASA has not yet established plans for when all needed updates to the policies and procedures will be completed. Until NASA updates its IT governance policies and procedures to establish thresholds and procedures to guide its boards in decision making and outline a process for reselecting investments, the agency will be limited in its assurance that the investment selection process will provide a consistent and structured method for selecting investments. Further, until all relevant governance policies and procedures are updated to reflect current investment selection practices and proposed changes intended to provide the CIO with data about mission IT, the CIO will not be positioned to minimize investments that present undue risk to the agency and ensure accountability for both business and mission IT. Organizations that provide effective IT investment oversight have documented policies and procedures that, among other things, ensure that data on actual performance (e.g., cost, schedule, benefit, and risk) are provided to the appropriate IT investment board(s). In addition, such organizations establish procedures for escalating or elevating unresolved or significant issues; ensure that appropriate actions are taken to correct or terminate underperforming IT projects based on defined criteria; and regularly track corrective actions until they are completed. As with investment selection, NASA has established multiple policies and procedures for the oversight of IT investments. In October 2015, the agency added to its oversight processes by establishing a capital investment review process to improve the quality of the information available for investment oversight and established a matrix defining dollar thresholds to delineate oversight among the IT governance boards. The IT Program Management Board is also assigned specific oversight responsibilities for reviewing investment cost, schedule, performance, and risk at key lifecycle decision points for investments submitted for its review. In addition, the IT Program Management Board’s charter requires this board to track, among other things, board decisions about investments and action items. In implementing NASA’s oversight practices, the IT Program Management Board consistently reviewed updates on investment performance (i.e., cost, schedule, and benefits) and progress. In addition, the IT Program Management Board’s oversight decisions about IT investments are documented in meeting minutes, and the board also records any action items identified for investments in the decision memorandums it submits to the CIO. Nevertheless, we identified limitations in NASA’s established oversight policies and procedures. For example, the agency’s policies and procedures require IT investments to report data to the governance boards at key decision points but do not establish specific thresholds or other criteria for the governance boards to use in overseeing the investments’ performance or escalating investments to review by other boards. The oversight guidance also does not specify the conditions under which a project would be terminated. In addition, weaknesses we identified in oversight of specific NASA IT investments highlighted additional limitations of the established oversight process. Specifically, NASA did not have a mechanism for alerting the IT Program Management Board to provide oversight if investments were underperforming or overdue for review. For example, significant schedule overruns did not trigger additional oversight for one investment. In March 2015, NASA approved the proposed design for an investment to implement a security tool in June 2015 at an expected cost of $1.3 million. Although the project fell 13 months behind schedule and encountered unforeseen challenges, the IT Program Management Board did not review the investment again until June 2017—2 years later. Not all IT investments followed the established oversight process. For example, in our review of governance board meeting minutes and documentation, we identified an investment that was close to completion before the IT Program Management Board reviewed its proposed design. Specifically, in February 2016, the board was asked—1 day before the investment was to become operational—to (1) approve the proposed design and (2) grant authority to operate for the investment intended for use by NASA staff and external partners. Although concerns about limited oversight were noted, the investment was approved. Further, NASA lacks procedures to ensure that action items identified are tracked. We identified instances in which the IT Program Management Board did not consistently track action items identified for IT investments. NASA’s investments typically report back to the IT Program Management Board at future decision point reviews about steps taken to address documented action items. However, the board’s meeting minutes and documentation identified multiple examples of investments that were returned to the board at future decision points without reporting on whether identified action items had been addressed. Moreover, NASA’s oversight processes do not encompass highly- specialized or other IT that supports mission programs. After reviewing NASA’s fiscal year 2015 budget request, OMB directed NASA to identify unreported IT investments throughout the agency to ensure that all related spending would be documented. NASA established a team in 2016 to explore how to identify such investments so that they could be reported to the CIO. The team initiated efforts to identify such investments in mission directorates and evaluated various mechanisms that NASA could employ to detect unreported IT. However, the agency has not yet finalized decisions about how to implement the team’s recommendations, including those for fully identifying investments for all mission directorates or determining which mechanisms to employ to identify unreported IT. According to NASA officials, time frames for completing these activities have not yet been established. In July 2017, NASA officials, including the Deputy CIO, acknowledged in governance board meeting minutes describing needed improvements, that the agency had not yet fully identified its IT footprint and needed to establish a comprehensive investment management process to address federal requirements, including those governing processes for selecting, reselecting, and overseeing IT investments. NASA officials explained that important progress had been made in improving oversight practices, but that efforts to implement more thorough capital investment reviews and identify IT investments across the agency had not yet been completed. The officials reported that they anticipated additional improvement to be made by the next annual budget cycle. However, expanding NASA’s oversight of IT will require continued coordination with the mission directorates to work through any needed changes to the longstanding differences in NASA’s management of mission and business IT. The scope and complexity of such efforts are likely to be significant and may take time to plan and implement. Clearly defining how IT across the agency is to be identified and reported to the CIO would likely involve changes to policies and processes within and across NASA’s IT, engineering, and mission program areas and would involve expertise and collaboration from those same groups. Until such practices are fully established, NASA will continue to operate with limitations in its oversight process and projects that fall short of performance expectations. In addition, the agency will face increased risk that its oversight will fail to (1) prevent duplicative investments, (2) identify opportunities to improve efficiency and effectiveness, and (3) ensure that investment progress and performance meet expectations. The IT investment management framework developed by GAO notes that, as investment management processes mature, agencies move from project specific processes to managing investments as a portfolio. The shift from investment management to IT portfolio management enables agencies to evaluate potential investments by how well they support the agency’s missions, strategies, and goals. According to the framework, the investment board enhances the IT investment management process by developing a complete investment portfolio. As part of the process to develop a complete portfolio, an agency is to establish and implement policies and procedures for developing the portfolio criteria, creating the portfolio, and evaluating the portfolio. NASA has not yet fully defined its policies and procedures for developing the portfolio criteria, creating the portfolio, and evaluating the portfolio. In its Annual Capital Investment Review Implementation Plan, dated October 2015, NASA began documenting policies for IT portfolio management and procedures for creating and evaluating the portfolio. For example, the procedures state that NASA is to update its IT portfolio annually in conjunction with the agency’s planning and budgeting process. Additionally, in its IT Capital Planning and Investment Control Process guide, dated October 2006, NASA outlined procedures the agency can use to analyze the portfolio by establishing factors that should be taken into consideration, including the relative benefits, costs, and risks of the investment compared to all other proposals and the strength of the investment’s linkage to NASA’s strategic business plan. However, these documents do not constitute a comprehensive IT portfolio management process in that they do not specifically define the procedures for creating and modifying the IT portfolio selection criteria; analyzing, selecting, and maintaining the investment portfolio; or reviewing, evaluating, and improving the performance of its portfolio. Further, the policies and procedures have not been updated to reflect current NASA practices. Specifically, the current policies and procedures have not been updated to reflect changes the agency made to its capital investment review process that are relevant to portfolio management. According to NASA officials, the reason that the agency has not fully defined its policies and procedures is because they are intended to be part of a new IT portfolio management framework that also requires NASA to make changes to its investment management process. Specifically, the IT portfolio management plan that NASA drafted in January 2017 called for the agency to develop new IT investment criteria, discover currently unreported IT investments, develop an investment review process, and implement an IT investment dashboard and reporting tool, and a communications plan. Although the IT Council has not yet approved the IT portfolio management plan, NASA has begun work to address elements of the draft plan, including building the requirements for an IT dashboard and reporting tool for implementation in 2018. In addition, according to Office of the CIO officials, the capital planning team is continuing to work with stakeholders to develop a comprehensive IT framework and investment review process. However, no firm dates have been established for the approval and implementation of the final plan or the framework. Until NASA fully defines its policies and procedures for developing the portfolio criteria, creating the portfolio, and evaluating the portfolio, the agency will lack assurance it is identifying and selecting the appropriate mix of IT projects that best meet its mission needs. We have previously reported that securing federal government computerized information systems and electronic data is vital to the nation’s security, prosperity, and well-being. Yet, the security over these systems is inconsistent and agencies have faced challenges in establishing cybersecurity approaches. Accordingly, we have recommended that federal agencies address control deficiencies and fully implement organization-wide information security programs. NIST’s cybersecurity framework is intended to support federal agencies as they develop, implement, and continuously improve their cybersecurity risk management programs. In this regard, the framework identifies cybersecurity activities for achieving specific outcomes over the lifecycle of an organization’s management of cybersecurity risk. According to NIST, the first stage of the cybersecurity risk management lifecycle— which the framework refers to as “identify”—is focused on foundational activities for effective risk management that provide agencies with the organizational understanding to manage cybersecurity risk to systems, assets, data, and capabilities. NIST also provides specific guidance for implementing foundational activities and achieving desired outcomes that calls for, among other things, the following: A risk executive in the form of an individual or group that provides agency-wide oversight of risk activities and facilitates collaboration among stakeholders and consistent application of the risk management strategy. A cybersecurity risk management strategy that articulates how an agency intends to assess, respond to, and monitor risk associated with the operation and use of the information systems it relies on to carry out the mission. An information security program plan that describes the security controls that are in place or planned for addressing an agency’s risks and facilitating compliance with applicable federal laws, executive orders, directives, policies, or regulations. Risk-based policies and procedures that act as the primary mechanisms through which current security requirements are communicated to help reduce the agency’s risk of unauthorized access or disruption of services. However, NASA has not yet fully implemented these foundational activities of effective cybersecurity risk management. According to NIST guidance, federal agencies should establish a risk executive in the form of an individual or group that provides organization- wide oversight of risk activities and facilitates collaboration among stakeholders and consistent application of the risk management strategy. This functional role helps to ensure that risk management is institutionalized into the day-to-day operations of organizations as a priority and integral part of carrying out missions. NASA has developed a policy regarding the establishment of a risk executive function in accordance with NIST guidance, but it has not fully implemented the policy. Specifically, the agency’s policy designates the Senior Agency Information Security Officer (SAISO) as the risk executive. According to the policy, the SAISO is charged with ensuring that cybersecurity is considered and managed consistently across the systems that support the agency and its partnerships—academic, commercial, international, and others that leverage NASA resources and extend scientific results. The policy also calls for the SAISO to establish an office with the mission and resources for information security operations, security governance, and cyber-threat analysis. In accordance with its policy, NASA has designated an Acting SAISO. Since April 2017, the Acting SAISO has led the IT Security Division within the Office of the CIO—an office that coordinates information security operations, security governance, security architecture and engineering, and cyber-threat analysis. However, the agency has not yet established a risk executive office with assigned leadership positions and defined roles and responsibilities. According to NASA documentation, the agency had planned for the office to become operational by mid-December 2016. Agency officials, including the Acting Deputy Associate CIO for Information Security, explained that an IT security program office was not established in 2016 because the planned time frame for doing so was not realistic and failed to take into account other risk management efforts competing for available resources. For example, the officials stated that the agency was focused on a priority goal of deploying a centralized tool across its centers that would provide monitoring of implemented security controls to ensure they are functioning adequately. According to the NASA CIO, the agency planned to establish a comprehensive risk executive function by employing a cybersecurity risk manager in April 2018 and forming a program office—called the Enterprise Security Office—by September 2018. NASA’s new cybersecurity risk manager began work on April 2, 2018. The agency’s plan to have the new cybersecurity risk manager establish a comprehensive risk executive function should help ensure that current risk management efforts and decisions are appropriate and consistently carried out across the agency and its external partnerships. NIST guidance states that federal agencies should establish and implement an organizational strategy for managing cybersecurity risk that guides and informs how the agency assesses, responds to, and monitors risk to the information systems being relied on to carry out its mission. The strategy should, among other things, make explicit an agency’s risk tolerance, accepted risk assessment methodologies, a process for consistently evaluating risk across the organization, risk response strategies, approaches for monitoring risk over time, and priorities for investing in risk management. In 2015, NASA recognized the need to establish and implement an agency-wide strategy for managing its cybersecurity risks to address weaknesses it had identified with the decentralized approach it was using. Specifically, because the agency’s centers had independently developed approaches for managing cybersecurity risk, there was little integration regarding risk management and practices across the agency. Further, NASA determined that the decentralized, center-level approach did not provide sufficient transparency regarding risks that could affect mission directorate programs. To overcome the limitations of its decentralized approach, NASA planned to develop and begin implementing a comprehensive cybersecurity strategy by the end of September 2016 that was expected to include the key elements identified in NIST guidance. For example, it was expected to define the agency’s risk tolerance, establish a methodology for identifying and assessing risks, and provide a clear understanding of NASA’s risk posture. However, the strategy was not completed as planned and is currently in development. According to officials in the Office of the CIO, including the Acting Deputy Associate CIO for Information Security, the strategy was not completed as planned due to the complexity and scope of the effort. For example, the officials stated that establishing an effective agency- wide strategy required insight into center-specific practices and significant input from stakeholders at all levels of NASA. In addition, these officials and the NASA CIO explained that the agency’s efforts were redirected in order to respond to a new executive order from the President to develop an action plan for adopting NIST’s cybersecurity framework in phases. According to NASA’s CIO, the agency plans to move forward with drafting an agency-wide cybersecurity strategy that reflects the agency’s approach to using NIST’s framework; however, the agency has not yet established time frames for completing this effort. Until NASA establishes and implements a comprehensive strategy for managing its cybersecurity risks using NIST’s framework, its ability to make operational decisions that adequately address security risks and prioritize IT security investments will be hindered. NIST recommends that federal agencies develop and disseminate an information security program plan that describes the organization-wide security controls that are in place or planned for addressing the agency’s risks and complying with applicable federal laws, executive orders, directives, policies, or regulations. Specifically, the plan should provide a description of the agency’s program management controls and common controls in place or planned for meeting relevant federal, legal, or regulatory requirements; include the identification and assignment of roles, responsibilities, and coordination among organizational entities responsible for different aspects of information security; define the frequency for reviews of the security program plan; and receive approval from a senior official with responsibility and accountability for the risk being incurred. NASA issued a draft information security program plan in November 2017 that addresses many of the components called for in NIST guidance. For example, the plan discusses program management controls that will be established, including the development of an inventory of its information systems, measures to determine information security performance, and an information security workforce development and improvement program; common controls that are to be implemented agency-wide, including configuration management, contingency planning, and personnel security; roles and responsibilities for promoting collaboration and providing consolidated unclassified security operations, and incident response and IT security awareness and training capabilities; and responsibility for ensuring that the information security program plan is maintained, approved by the NASA CIO, and reviewed annually. However, the plan is currently in draft and incomplete. For example, it does not yet describe the majority of the security functions and services that are to be carried out by the agency’s IT Security Division to address the relevant federal statutory and regulatory requirements. Specifically, the plan does not identify the agency-wide privacy controls derived from standards promulgated pursuant to federal law and guidance that, according to the agency, are an integral part of its security program. According to NASA’s Acting Deputy Associate CIO for Information Security, the information security program plan has not been finalized because of an upcoming revision to NIST’s guidance for implementing security controls. Specifically, a fifth revision of NIST SP 800-53 is planned for release in December 2018. NASA’s Acting Deputy Associate CIO for Information Security stated that the agency intends to finalize its draft plan after incorporating the updated NIST guidance. In the absence of an established information security program plan, NASA’s view of the security controls that protect its systems will remain decentralized, and it will lack assurance that it has established oversight over security controls for all of its systems. In addition, the agency will continue to operate its systems without defined and established information security requirements that are essential to agency-wide operations. NIST Special Publication 800-53 recommends that agencies create policies and procedures to facilitate the appropriate application of security controls. If properly implemented, these policies and procedures may be able to effectively reduce the risk that could come from cybersecurity threats such as unauthorized access or disruption of services. Because risk-based policies and procedures are the primary mechanisms through which federal agencies communicate views and requirements for protecting their computing environments, it is important that they are established and kept current. NASA has taken steps to document policies and procedures that address the security controls identified in NIST guidance for protecting information systems. For example, the agency established an overarching security policy that identified roles and responsibilities related to configuration management, contingency planning, and incident response. In addition, the agency issued procedures for implementing each of the NIST controls. However, NASA does not have current and fully integrated policies and procedures. For example, the agency’s overarching policy for implementing security controls expired in May 2017. In addition, approximately one-third of the documents that guide the implementation of these controls remained in effect past their expiration dates instead of being updated before they had expired per NASA policy requirements. Further, in July 2017, NASA determined that cybersecurity roles and responsibilities were not always clear and sufficiently integrated across policies. For example, responsibilities were not consistently well-defined in the policies for governance, IT security, program and project management, and systems engineering. In addition, although NASA’s Policy Directive 2810.1E, NASA Information Security Policy provided the SAISO with responsibility for the agency’s cybersecurity risk, the policy assigned mission directorates control over risk decisions for their missions and programs and the centers were given the authority to implement any technical changes needed to address risk. NASA’s Procedural Requirement 2810.1A, Security of Information Technology states that the agency’s SAISO is responsible for ensuring that information security policies and procedures are reviewed and appropriately updated. However, according to officials in the Office of the CIO, including the specialist for IT security, responsibilities for establishing, reviewing, and updating policies and procedures are being shared by two groups: the IT Security Division, led by the SAISO, and the Capital Planning and Governance Division. Specifically, the IT Security Division controls the content of IT-related policies and procedures but does not have control over the established NASA-wide process for reviewing the policies and procedures to determine if any changes are needed to the content. Instead, the Capital Planning and Governance Division is responsible for ensuring formal review and approval of any IT- related policies and procedures through the standard agency process and schedule. Officials from the Office of the CIO, including the specialist for IT security, also stated that they intend to (1) establish a policy management framework that would provide the SAISO with more control over policies and procedures and include an annual document review, and (2) clarify and update cybersecurity roles and responsibilities in NASA policies. However, the agency has not yet developed a plan and specific time frame for completing these activities. In addition, the Acting Deputy Associate CIO for Information Security stated that, having expired policies and procedures is not significant because they will remain in use until they are rescinded or superseded by updated versions. However, until NASA fully updates its policies and procedures to govern security over the agency’s computing environments, it will have limited assurance that controls over information are appropriately applied to its systems. NASA continues to pursue efforts to improve IT strategic planning, workforce planning, IT governance, and cybersecurity, but consistently lacks the documented processes needed to ensure that policies and leading practices are fully addressed. Specifically, the agency has taken steps to improve the content of its strategic plan and established an agency-wide goal for improving its workforce. In addition, after analyzing its IT management and governance structure, NASA took action to streamline its governance boards and standardize and strengthen its selection and oversight of investments, including initiating a portfolio management process. NASA has also moved toward new strategies and plans to bolster cybersecurity. Nevertheless, while NASA has made progress, the agency has not yet fully addressed many of the leading IT management practices noted in this report or completed efforts to increase the CIO’s authority over, and visibility into, agency-wide IT. Among other things, NASA has not fully documented a process for IT strategic planning or addressed all key elements of a comprehensive plan. In addition, it has not yet fully implemented a workforce planning process and has gaps in efforts to address leading practices. Regarding IT governance, its efforts to institute an effective governance structure and update policies and procedures for selecting IT investments are not yet complete. Moreover, NASA has not yet addressed weaknesses in its oversight practices or fully defined policies and procedures for developing an effective portfolio management process. Similarly, although NASA continues cybersecurity improvement efforts, important elements of an effective cybersecurity approach have not been completed, including establishing a risk management strategy, an information security program plan, and updated policies and procedures. Until NASA leadership fully addresses these leading practices, its ability to overcome its longstanding weaknesses and ensure effective oversight and management of IT across the agency will remain limited. Moreover, NASA may be limited in its ability to strengthen its risk posture, including ensuring effective cybersecurity across partnerships with commercial entities, federal agencies, and other countries. We are making 10 recommendations to the National Aeronautics and Space Administration: The Administrator should direct the Chief Information Officer to develop a fully documented IT strategic planning process, including methods by which the agency defines its IT needs and develops strategies, systems, and capabilities to meet those needs. (Recommendation 1) The Administrator should direct the Chief Information Officer to update the IT strategic plan for 2018 to 2021 and develop associated implementation plans to ensure it fully describes strategies the agency will use to achieve the desired results and descriptions of interdependencies within and across programs. (Recommendation 2) The Administrator should direct the Chief Information Officer to address, in conjunction with the Chief Human Capital Officer, gaps in IT workforce planning by fully implementing the eight key IT workforce planning activities noted in this report. (Recommendation 3) The Administrator should direct the Chief Information Officer to institute an effective IT governance structure by completing planned improvement efforts and finalizing charters to fully establish IT governance boards, clearly defining roles and responsibilities for selecting and overseeing IT investments, and ensuring that the governance boards operate as intended. (Recommendation 4) The Administrator should direct the Chief Information Officer to update policies and procedures for selecting investments to provide a structured process, including thresholds and criteria needed for, among other things, evaluating investment risks as part of governance board decision making, and outline a process for reselecting investments. (Recommendation 5) The Administrator should direct the Chief Information Officer to address weaknesses in oversight practices and ensure routine oversight of all investments by taking action to document criteria for escalating investments among governance boards and establish procedures for tracking corrective actions for underperforming investments. (Recommendation 6) The Administrator should ensure that the Chief Information Officer fully defines policies and procedures for developing the portfolio criteria, creating the portfolio, and evaluating the portfolio. (Recommendation 7) The Administrator should direct the Chief Information Officer to establish an agency-wide approach to managing cybersecurity risk that includes a cybersecurity strategy that, among other things, makes explicit the agency’s risk tolerance, accepted risk assessment methodologies, a process for consistently evaluating risk across the organization, response strategies and approaches for monitoring risk over time, and priorities for risk management investments; (Recommendation 8) an information security program plan that fully reflects the agency’s IT security functions and services and agency-wide privacy controls for protecting information; (Recommendation 9) and policies and procedures with well-defined roles and responsibilities that are integrated and reflect NASA’s current security practices and operating environment. (Recommendation 10) We provided a draft of this product to NASA for comment. In its comments, which are reproduced in appendix II, NASA concurred with seven of the recommendations, partially concurred with two recommendations, and did not concur with one recommendation. NASA partially concurred with our first and second recommendations. Specifically, consistent with the first recommendation, NASA agreed to fully document its strategic planning process, including the methods by which the agency defines IT needs and develops outcomes, strategies, major actions, and performance measures to meet those needs. In addition, our second recommendation called for NASA to update the strategic plan and develop associated implementation plans. With regard to updating the plan, NASA stated that its strategic plan provides the context and parameters to support achievement of the agency's vision and mission through the strategic use of IT. The agency also stated that this plan describes the business outcomes, strategies, major actions, and performance measures to achieve the desired results. With regard to the implementation plans related to our first and second recommendation, NASA agreed to develop the associated implementation plans for accomplishing the IT strategic plan, including descriptions of the interdependencies within and across programs. Nevertheless, in commenting on both recommendations, as well as the first recommendation, NASA stated that it does not believe that implementation plans, including specific IT capability and system changes, should be part of a strategic plan. The agency also maintained that the implementation plans, including descriptions of interdependencies within and across programs, are at a lower level than the IT strategic plan, since detailed IT implementation plans are more dynamic than the four-year NASA IT Strategic Plan. However, our first and second recommendations do not call for NASA to incorporate implementation plans within the strategic plan. Rather, as discussed in the report, it is important that NASA document how it intends to accomplish the activities outlined in the strategic plan. Further, we continue to believe that NASA should address the weaknesses we identified in this report by updating the strategic plan to incorporate strategies on resources and time frames to achieve desired results and descriptions of interdependencies within and across projects so that they can be understood and managed. Thus, we stand by both recommendations (recommendations 1 and 2) that the agency take these actions. NASA did not concur with our third recommendation to implement the IT workforce planning activities noted in our report. In this regard, the agency stated that its workforce improvement efforts were already underway. Specifically, NASA stated that IT workforce planning is part of the agencywide Mission Support Future Architecture Program. It added that, among other things, this program is intended to ensure that mission support resources, including the IT workforce, are optimally structured to support NASA’s mission. In addition, NASA referenced our two additional ongoing audits of the agency’s IT workforce, and noted that its activities related to IT workforce planning would be centered on any recommendations resulting from those audits. In our view, neither of these circumstances should hinder NASA from addressing our recommendation in this report. As of March 2018, the agency’s IT workforce plans were out-of-date and incomplete because activities the agency had been planning since 2015 had not been finalized in an approved plan or implemented. Further, NASA had not yet determined when the Office of the CIO would become an active part of the agencywide Mission Support Future Architecture program or developed plans for when that program’s assessment of the IT workforce would be completed. Thus, instead of limiting NASA’s ability to address our recommendation, implementing the workforce planning activities discussed in this report could complement the agency’s ongoing and future efforts. Specifically, NASA could use the IT workforce leading practices described in this report to strengthen any new workforce plans and assess the implementation of any planned improvements. Until NASA documents an IT workforce planning process and implements all of the key IT workforce planning activities, the agency may not be effectively positioned to anticipate and respond to changing staffing needs. Further, the agency is likely to face challenges in controlling human capital risks when developing, implementing, and operating IT systems. NASA concurred with our four recommendations aimed at addressing deficiencies in its IT governance (recommendations 4 through 7). In this regard, the agency described planned actions intended to address each of these recommendations. For example, among other activities, the agency stated that it intended to publish charters for all IT governance boards; have the IT Council review governance board operations annually; document criteria for escalating investments among governance boards; and update policies and procedures for managing its investments as a portfolio. Similarly, NASA concurred with our three recommendations related to establishing an agency-wide approach to managing cybersecurity risk (recommendations 8, 9, and 10). The agency described actions it had taken or planned to address each of these recommendations. In particular, with regard to establishing a cybersecurity risk management strategy (recommendation 8), NASA asserted that it had already taken actions that met the requirements of our recommendation. Specifically, NASA stated that it had established an approach to developing its cybersecurity risk management strategy by approving a charter for an agency-wide team to address cybersecurity risk management needs and hiring a Chief Cybersecurity Risk Officer to oversee agency-wide risk management initiatives. While these actions constitute steps toward addressing the recommendation, we disagree that establishing a charter for a team and hiring a Chief Cybersecurity Risk Officer fully addresses the recommendation. As previously noted in this report, the agency does not have a cybersecurity risk management strategy that includes elements of NIST guidance. The strategy should, among other things, make explicit the agency’s risk tolerance, accepted risk assessment methodologies, a process for consistently evaluating risk across the organization, risk response strategies, approaches for monitoring risk over time, and priorities for investing in risk management. Ensuring that the established agency-wide team and the Chief Cybersecurity Risk Officer develop a cybersecurity risk management strategy that aligns with the NIST guidance will be essential to fully address our recommendation. NASA also provided technical comments on the draft report, which we incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Administrator of the National Aeronautics and Space Administration, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. Should you or your staffs have any questions on information discussed in this report, please contact Carol Harris at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. The National Aeronautics and Space Administration Transition Authorization Act of 2017 included a provision for us to review the effectiveness of the agency’s approach to overseeing and managing information technology (IT), including its ability to ensure that resources are aligned with agency missions, cost effective, and secure. Our specific objective for this review was to address the extent to which the National Aeronautics and Space Administration (NASA) has established and implemented leading IT management practices in strategic planning, workforce planning, governance, and cybersecurity. To address this objective, we compared NASA’s IT management policies, procedures, and other documentation to criteria established by federal laws and leading practices. This documentation included the agency’s strategic plans, workforce gap assessments, governance board meeting minutes and briefings, charters, policies and procedures, and other documentation of the Chief Information Officer’s (CIO) authority. We also reviewed relevant reports by GAO and the NASA Office of Inspector General. With regard to IT strategic planning, we identified the strategic plans and related planning guidance issued by NASA and the Office of the CIO, including NASA’s Governance and Strategic Management Handbook, dated November 26, 2014; NASA’s Information Resources Management Strategic Plan, dated March 2014; and NASA’s updated Information Technology Strategic Plan for fiscal years 2018 to 2021. We then reviewed the agency’s overall strategic plan, and evaluated its previous and current IT strategic plans against key practices for IT strategic planning that we have previously identified. These practices call for documenting the agency’s IT strategic planning processes and developing an IT strategic plan that aligns with the agency’s overall strategy; identifies the mission of the agency, results-oriented goals, and performance measures that permit the agency to determine whether implementation of the plan is succeeding; includes strategies the governing IT organization will use to achieve desired results; and provides descriptions of interdependencies within and across projects so that they can be understood and managed. To determine the extent to which NASA has established and implemented leading IT workforce planning practices, we conducted a comparative analysis of NASA’s IT workforce planning policies and documents. Specifically, we compared agency documents, such as NASA policy directives, the desk guide, and documentation of efforts to establish IT workforce competencies and staffing requirements and conduct gap assessments, to GAO’s IT workforce framework. GAO’s framework consists of four IT workforce planning steps and eight key activities. The eight key activities were identified in federal law, regulations, and guidance, including the Clinger-Cohen Act of 1996, the legislation referred to as the Federal Information Technology Acquisition Reform Act, Office of Management and Budget (OMB) guidance, the Office of Personnel Management’s Human Capital Framework, and GAO reports. Based on our assessment of the documentation and discussions with agency officials, we assessed the extent to which the agency implemented, partially implemented, or did not implement the activities. We considered an activity to be fully implemented if NASA addressed all of the underlying practices for the activity; partially implemented if it addressed some but not all of the underlying practices for the activity; and not implemented if it did not address any of the underlying practices for the activity. We assessed IT governance practices by comparing NASA documentation to critical processes identified by GAO in the IT investment management framework. To align our work with the provision in Section 811(a) of the National Aeronautics and Space Administration Transition Authorization Act of 2017 calling for NASA to take actions regarding IT governance, we selected critical processes from Stage 2 of the framework: instituting the investment board; selecting and reselecting investments that meet business needs; and providing investment oversight. For each critical process, we compared key practices outlined in the framework to NASA documentation. The documentation we reviewed included NASA’s IT governance policies and procedures, and charters and other guidance. We also reviewed governance board meeting minutes and briefings from each board’s first meeting in 2016 through meetings held in August 2017. In addition, we selected key practices for effective governance from Stage 3 of the IT investment management framework regarding establishing and implementing policies and procedures for developing the portfolio criteria, creating the portfolio, and evaluating the portfolio. We then compared documentation, including NASA’s IT Capital Planning and Investment Control Process guide dated October 2006, and Annual Capital Investment Review Implementation Plan dated October 2015, and draft IT portfolio management plans, against these practices. Using standards and guidance from the National Institute of Standards and Technology (NIST), which identify foundational elements of effective cybersecurity risk management, we evaluated NASA’s cybersecurity risk management approach by analyzing policies and plans for establishing a comprehensive risk evaluating documents and plans for establishing a cybersecurity risk comparing a draft Information Security Program Plan to determine if it was consistent with NIST guidance; and analyzing policies and procedures to determine if they address relevant NIST security controls and are current. In addition to assessing NASA headquarters, we reviewed IT management practices at two of the agency’s nine centers (Marshall Space Flight Center in Huntsville, Alabama; and Johnson Space Center in Houston, Texas) and at one of NASA’s four mission directorates (the Human Exploration and Operations Mission Directorate). The two centers and one mission directorate were selected because they had the largest fiscal year 2017 IT budgets, respectively, as reported on the federal IT dashboard. We also visited the Goddard Space Flight Center in Greenbelt, Maryland, because of the center’s proximity to GAO. The results of our work at the selected NASA centers and mission directorate are not generalizable to other NASA centers and mission directorates. To assess the reliability of these data, we compared them to budgetary data obtained directly from NASA’s Office of the CIO. We found the data to be sufficiently reliable for the purpose of identifying the NASA centers and mission directorate with the largest IT budgets. We also interviewed cognizant officials with responsibilities for IT management at NASA headquarters and for the selected centers and mission directorate. We conducted this performance audit from May 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. In addition to the contact name above, the following staff also made key contributions to this report: Eric Winter (Assistant Director), Donald Baca, Rebecca Eyler, Amanda Gill (Analyst in Charge), Tom Johnson, Kate Nielsen, Teresa Smith, and Niti Tandon.", "summary": "NASA depends heavily upon IT to conduct its work. The agency spends at least $1.5 billion annually on IT investments that support its missions, including ground control systems for the International Space Station and space exploration programs. The National Aeronautics and Space Administration Transition Authorization Act of 2017 included a provision for GAO to review the effectiveness of NASA's approach to overseeing and managing IT, including its ability to ensure that resources are aligned with agency missions and are cost effective and secure. Accordingly, GAO's specific objective for this review was to determine the extent to which NASA has established and implemented leading IT management practices in strategic planning, workforce planning, governance, and cybersecurity. To address this objective, GAO compared NASA IT policies, strategic plans, workforce gap assessments, and governance board documentation to federal law and leading practices. GAO also assessed NASA IT security plans, policies, and procedures against leading cybersecurity risk management practices. The National Aeronautics and Space Administration (NASA) has not yet effectively implemented leading practices for information technology (IT) management. Specifically, GAO identified weaknesses in NASA's IT management practices for strategic planning, workforce planning, governance, and cybersecurity. NASA has not documented its IT strategic planning processes in accordance with leading practices. While NASA's updated IT strategic plan represents improvement over its prior plan, the updated plan is not comprehensive because it does not fully describe strategies for achieving desired results or describe interdependencies within and across programs. Until NASA establishes a comprehensive IT strategic plan, it will lack critical information needed to align resources with business strategies and investment decisions. Of the eight key IT workforce planning activities, the agency partially implemented five and did not implement three. For example, NASA does not assess competency and staffing needs regularly or report progress to agency leadership. Until NASA implements the key IT workforce planning activities, it will have difficulty anticipating and responding to changing staffing needs. NASA's IT governance does not fully address leading practices. While the agency revised its governance boards, updated their charters, and acted to improve governance, it has not fully established the governance structure, documented improvements to its investment selection process, fully implemented investment oversight practices and ensured the Chief Information Officer's visibility into all IT investments, or fully defined policies and procedures for IT portfolio management. Until NASA addresses these weaknesses, it will face increased risk of investing in duplicative investments or may miss opportunities to ensure investments perform as intended. NASA has not fully established an effective approach to managing agency-wide cybersecurity risk. An effective approach includes establishing executive oversight of risk, a cybersecurity risk management strategy, an information security program plan, and related policies and procedures. As NASA continues to collaborate with other agencies and nations and increasingly relies on agreements with private companies to carry out its missions, the agency's cybersecurity weaknesses make its systems more vulnerable to compromise. Until NASA leadership fully addresses these leading practices, its ability to ensure effective management of IT across the agency and manage cybersecurity risks will remain limited. GAO is making 10 recommendations to NASA to address the deficiencies identified in NASA IT strategic planning, workforce planning, governance, and cybersecurity. NASA concurred with seven recommendations, partially concurred with two, and did not concur with one. GAO maintains that all of the recommendations discussed in this report remain valid.", "document_type": "gao"}
{"report": "Unmanned systems provide DOD with capabilities for conducting a range of military operations, including environmental sensing and battlespace awareness; chemical, biological, radiological, and nuclear detection; counter-improvised explosive device capabilities; port security; precision targeting; and precision strike. DOD’s unmanned systems operate in different warfighting “domains” ranging from air, land, and maritime environments. As shown in figure 1, DOD categorizes its unmanned systems into five groups by domain (i.e., aerial and maritime, including surface and underwater) and other attributes of size and capability. Group 1 UASs weigh fewer than 20 pounds and operate below 1,200 feet in altitude, whereas group 5 UASs weigh more than 1,320 pounds and operate above 18,000 feet. Similarly, USVs are categorized in five groups, increasing in size and capability from very small to extra-large, and UUVs are categorized in four groups—small, medium, large, and extra-large. Various offices within the Office of the Secretary of Defense and the Department of the Navy have roles and responsibilities for evaluating the appropriate mix of personnel for the Navy’s and the Marine Corps’ total workforces. According to Section 129a of Title 10 of the U.S. Code, which governs DOD’s general policy for total force management, the Secretary of Defense is required to establish policies and procedures for determining the most appropriate and cost efficient mix of military, federal civilian, and contractor personnel to perform the missions of the department. Section 2463 of Title 10 mandates the Under Secretary of Defense for Personnel and Readiness (USD(P&R)) to devise and implement guidelines and procedures to ensure consideration is given to using DOD civilian employees to perform new functions and functions that are performed by contractors and could be performed by civilian employees. DOD policies also establish roles and responsibilities for the USD(P&R): DOD Directive 1100.4 establishes departmental policy concerning workforce management, including multiple responsibilities for the USD(P&R) (e.g., reviewing the workforce management guidelines and practices of DOD components for compliance with established policies and guidance). DOD Instruction 1100.22 implements policy set forth under DOD Directive 1100.4; assigns responsibilities; and prescribes procedures for determining the appropriate mix of military, federal civilian, and contractor personnel. The instruction assigns to the USD(P&R) the responsibility for overseeing the instruction’s implementation and working with component heads to ensure that they establish policies and procedures consistent with this instruction. DOD Instruction 7041.04 states that DOD’s USD(P&R), the Comptroller, and the Director of Cost Assessment and Program Evaluation are responsible for developing a DOD-wide cost model for estimating and comparing the full costs of DOD workforce and contract support. Section 129a of title 10 of the U.S. Code directs the Secretary of Defense to delegate responsibility for the implementation of policies and procedures established by the Secretary to the Secretaries of the military departments. In accordance with this delegation, the Secretary of the Navy has overall responsibility for requirements determination, planning, programming, and budgeting for policies and procedures for determining the appropriate and cost-effective mix of personnel. DOD policies establish the following roles and responsibilities for the military department Secretaries, including the Secretary of the Navy and heads of other DOD components: DOD Directive 1100.4 requires the component heads to designate an individual with full authority for workforce management, to include responsibility for, among other things, developing annual personnel requests to Congress considering the advantages of converting from one form of support (active or reserve military servicemembers, federal civilians, or private sector contractors) to another for the performance of a specified function, consistent with section 129a of the U.S. Code. DOD Instruction 1100.22 establishes that the component heads should require that their designated workforce authority issue implementing guidance requiring the use of the instruction when determining workforce mix for current, new, or expanded missions. Secretary of the Navy Instruction 5430.7R assigns authority for workforce management in the Department of the Navy, including workforce mix issues, to the Assistant Secretary of the Navy for Manpower and Reserve Affairs. Concurrently with a weapon system’s development through DOD’s acquisition process, the Navy and the Marine Corps determine the numbers and types of personnel and skills required for their unmanned systems. The personnel requirements development process generally begins with the program manager from a Navy systems command (e.g., Naval Air Systems Command for Navy and Marine Corps aircraft and Naval Sea Systems Command for ships and submarines) that is responsible for supervising the management of assigned acquisition programs. The program manager and systems command utilize Navy policies and other inputs to formulate initial requirements. In doing so, the program manager coordinates any Navy personnel requirements with the Office of the Chief of Naval Operations and other entities such as the Navy Personnel Command and commands that will operate and maintain the systems, such as the U.S. Fleet Forces Command and the Commander, Naval Air Forces. For Marine Corps aircraft systems, the program manager from the Naval Air Systems Command coordinates with Marine Corps headquarters entities, such as the Deputy Commandant for Aviation and the Deputy Commandant for Combat Development and Integration. The program manager and systems command calculate the cost of personnel as part of a system’s total life cycle cost. The program manager validates personnel requirements as program changes dictate and at a minimum annually, over a system’s lifecycle. The Navy and the Marine Corps staff the units that will operate and maintain their unmanned systems by filling the required positions to the extent possible based on the number of positions funded and the number of trained and qualified personnel available to fill them. This staffing process is managed by the Navy Personnel Command and in the Marine Corps by the Deputy Commandant for Manpower and Reserve Affairs. The Navy and the Marine Corps are in the process of rapidly growing their portfolios of unmanned systems, but have not evaluated the use of alternative workforces—specifically the use of federal civilian employees and private sector contractors as unmanned system operators. DOD Directive 1100.4 states that authorities should consider all available sources when determining workforce mix, including federal civilians and contractors, and personnel shall be designated as federal civilians except in enumerated circumstances. According to DOD Instruction 1100.22, the initial steps in planning for personnel requirements include determining categories of eligible personnel (e.g., military servicemembers, federal civilian employees, or private sector contractors). These determinations are based on whether activities to be performed are “military essential” (the activity must be performed by a military servicemember), “inherently governmental” (the activity could be performed by a military servicemember or a federal civilian employee), or “commercial” (the activity could be performed by military servicemembers, federal civilians, or private sector contractors). Military servicemembers and federal civilians must be considered before the services may consider using contractors to perform a function. In the absence of workforce alternative analyses, the services have decided to rely solely on military servicemembers as operator workforces for all of their unmanned systems, including the eight systems we reviewed in detail. For all eight case studies, Navy and Marine Corps officials told us that their decisions to rely on servicemembers as operators were based on the pre-existing force structure made up of personnel who were already trained in related mission areas. For seven of the eight selected systems, the officials stated that they did not evaluate the use of federal civilians or contractors in their determinations for using military personnel for their operator workforces. In the case of an eighth system, the MQ-4 Triton UAS, the Navy evaluated using contractor personnel, but did so without first considering the use of federal civilian employees as DOD policy requires. In a 2009 analysis for the Triton, the Navy concluded that comparisons between the cost-effectiveness of using military personnel and federal civilian employees were beyond the expertise of the working group that performed the analysis. Ultimately, the Navy decided to use military personnel as Triton operators. According to senior-level officials from OUSD(P&R), there are concerns within the department about the level of consideration the military services have applied to workforce mix alternatives for unmanned system operators. As a result, OUSD(P&R) and other entities from the Office of the Secretary of Defense commissioned the Institute for Defense Analyses to conduct a study, which was published in June 2016, on alternative staffing strategies to enable DOD to accomplish UAS-related missions more cost-effectively. The study found that staffing alternatives exist for each service and could produce cost savings. According to the Institute for Defense Analyses’ report, the use of enlisted personnel for a portion of the Navy’s and the Air Forces’ UAS operator workforces offers the potential for savings, as could the use of limited duty officers or warrant officers. The Institute for Defense Analyses also reported that federal civilian employees of DOD could generate the most substantial savings of the options studied if they were used in combination with military servicemembers as UAS operators responsible for the launch and recovery of air vehicles. OUSD(P&R) officials stated that this latter approach would free up military servicemembers to fill key positions for supporting military readiness in other areas of operations that are military personnel essential, and better leverage the services’ limited military personnel end strengths. In September 2016, OUSD(P&R) issued a proposal for an additional study of UAS staffing options that stated that the Department of the Navy’s workforce mix determination (i.e., relying on military servicemembers as operators) is “immature and infeasible” and that any recommended approaches should also be applied to unmanned maritime systems. OUSD(P&R) has also commissioned a study to clarify circumstances in which military servicemembers should be considered essential for certain positions, which is expected to be complete by the end of fiscal year 2018. OUSD(P&R) officials stated that they plan to continue their efforts to expand awareness of these studies and of the available workforce mix alternatives for UAS operators with military service officials. On the basis of our discussions with Navy and Marine Corps workforce planners, key reasons for not evaluating workforce alternatives for unmanned system operators were that planners did not believe it was necessary, and they did not believe that federal civilian employees or private sector contractors were viable workforce alternatives to military servicemembers for such roles and functions. For example, officials cited concerns that federal civilians cannot serve aboard Navy ships or provide rapid deployment capability. However, officials from OUSD(P&R) told us that these concerns are inaccurate, noting that federal civilian employees have deployed on Navy ships. Further, we note that DOD’s Expeditionary Civilian Workforce comprises federal civilian employees across DOD components who are available to deploy within 120 days of notice to meet urgent requirements. DOD officials responsible for the Expeditionary Civilian Workforce program stated that such personnel are intended to be predictable, reliable, and effective so that the military services will source them and the combatant commands can depend upon them. Further, service workforce planners stated that relevant service-level guidance is unclear on when and how such personnel can and should be considered for performing in operational roles and in deployable positions. The Navy’s and the Marine Corps’ policies do not provide details about the types of operational roles specific to a service, including those related to unmanned system operators, that could be filled with federal civilians or private sector contractors, nor do the policies provide guidance on the limitations and benefits of using these personnel sources, such as those identified in DOD-commissioned reports and our prior work. For example, military personnel can be the most costly of the three personnel categories and shortages exist in certain functions that have been deemed military essential and are in high demand, such as fighter pilots. On the other hand, federal civilians and private sector contractors can be cost-effective and may augment military servicemembers on a short-term basis if needed (see table 1). Federal internal controls standards emphasize the importance of having clear, updated policies that align with an organization’s mission and goals. Officials from the Office of the Secretary of the Navy for Manpower and Reserve Affairs agreed that the cited service policies do not provide the sort of detail and clarity that could aid planners and decision makers with determining eligible personnel categories for their workforces and weighing the benefits and limitations thereof. Clarifying their respective workforce planning policies could help workforce planners better understand when, where, and how federal civilians or contractors may serve in operational roles (e.g., from shore or from underway naval vessels) and what the benefits and limitations are. The use of military servicemembers, and not federal civilians or private sector contractors, as unmanned system operators may indeed be the most appropriate and cost-effective workforce option for the Navy and the Marine Corps. However, the services will not have certainty about the basis for such decisions without first clarifying workforce planning policies and then applying the revised policies to evaluate the use of all personnel resources available to them for future unmanned systems. The Navy and the Marine Corps have efforts underway to develop requirements for operators, maintainers, and other support personnel needed for selected unmanned systems. According to Navy information, personnel requirements for three systems are sufficient and the sufficiency of requirements for four other systems is yet undetermined. However, the Navy and the Marine Corps have not updated personnel requirements and the related cost estimate for the RQ-21 Blackjack UAS based on deployment data. Furthermore, the Department of the Navy has not fully evaluated and updated policies or clarified goals that may inform future personnel requirements development and updates to requirements. The Navy and the Marine Corps have efforts underway to develop requirements for operators, maintainers, and other support personnel needed for selected unmanned systems, commensurate with each system’s maturity in DOD’s acquisition process. The USVs associated with the littoral combat ships, the Snakehead Large Displacement UUV, and the MQ-25 Stingray UAS are in earlier phases of both acquisition and personnel requirements development and, according to Navy information, the precise number of required personnel will be determined and updated as the systems progress through acquisition. On the other hand, the MK 18 UUVs, MQ-8 Fire Scout UAS, MQ-4 Triton UAS, and RQ-21 Blackjack UAS have matured the furthest through DOD’s acquisition process. The Navy and the Marine Corps have identified personnel requirements, and service officials told us they have reviewed their sufficiency as units have trained and deployed with the systems. Although future modifications to personnel requirements for the MK 18 UUVs, the MQ-8 Fire Scout, and the MQ-4 Triton may be needed as their inventories and the pace of deployments increase, Navy officials told us the numbers of operators are appropriate at this time to meet mission objectives based on available deployment data and feedback from operators. For the RQ-21 Blackjack UAS, however, Navy and Marine Corps headquarters and command entities disagree with unit-level officials about the sufficiency of the personnel requirements. Marine Corps UAS squadrons have identified a requirements shortfall of 13 to 21 personnel per detachment to support each RQ-21 Blackjack UAS. The UAS squadrons have established that a total of 22 personnel are necessary to form a detachment sufficiently sized to support operations with the UAS. Marine Corps unit-level officials told us that this personnel requirement is based on the numbers needed to conduct training and deployments since the first Blackjack system was delivered in 2015, for which 22 to 30 personnel have been needed per detachment to meet mission requirements. In contrast, higher level command and service headquarters entities in the Navy and the Marine Corps have established a requirement of nine Marine Corps personnel per detachment, including three enlisted UAS operators and one UAS officer along with maintenance and support personnel. Squadron officials stated to the Navy and the Marine Corps in their written rebuttal of the 9-person requirement that 13 more personnel are needed to support operations for 10 to 12 hours per day, or up to 24 hours a day for 10-day surges in operations, and to comply with naval aviation maintenance procedures. Marine Corps officials also told us that the squadrons believe these additional personnel are essential for supporting the workload and levels of supervision they believe are necessary to operate and maintain an RQ- 21 Blackjack UAS and avoid mishaps and damage to the aircraft during recovery. DOD policy directs that personnel requirements should be driven by workload and established at the minimum levels necessary to accomplish mission and performance objectives. In addition, according to a Navy instruction, personnel requirements must be validated as program changes dictate and at a minimum annually, over a system’s lifecycle to determine if a personnel update is required. The Navy instruction also identifies guidelines for average weekly working hours and personnel availability for different tasks, which are key elements in the calculation of personnel requirements. The instruction states that routinely exceeding these guidelines to meet workloads should be avoided because it can adversely affect unit morale, retention and safety. With respect to the RQ-21 Blackjack UAS, Marine Corps officials stated that the concept of operations has changed for the service’s vision of employing the system to support Marine Expeditionary Units and that the 9-person detachment requirement was based on the outdated concept of operations. As a result, Marine Corps officials told us that the personnel requirements for the squadrons that operate them are too low to support the workloads associated with the systems and service headquarters- level decision makers have not yet updated them based on the most current and enduring concept of operations for the system. Marine Corps officials stated that efforts are underway to review the differences in personnel requirements deemed necessary by squadrons and headquarters-level entities as training and deployments continue, which is a positive step. However, according to the program office, the personnel requirements were not changing at the time of this report. Until the Navy and the Marine Corps update the personnel requirements for the RQ-21 Blackjack based on the most current and enduring concept of operations and deployment data, the services will lack current information about the number of operators needed for the squadrons that operate the RQ-21 Blackjack. In addition, the Navy and the Marine Corps have not updated the life cycle cost estimate for the RQ-21 Blackjack UAS to include additional personnel that Marine Corps squadrons have needed for current operations and expect to need for future operations and deployments. The program office estimated the total Marine Corps personnel cost for the RQ-21 Blackjack based on detachments of 9 personnel each at approximately $371 million over the program’s expected 19-year life cycle—nearly 20 percent of the Marine Corps’ life cycle cost for the program. However, this estimate may be too low because Marine Corps squadrons have reported that they need up to 21 more personnel per detachment to support the workload associated with the system, as discussed previously. DOD guidance requires that components determine a weapon system program’s life cycle cost by planning for the many factors needed to support the system, including personnel. Decision makers use this information to determine whether a new program is affordable and the program’s projected funding and personnel requirements are achievable. In addition, the Office of Management and Budget’s Capital Programming Guide indicates that to keep the cost analyses for capital assets, such as weapon systems, current, accurate, and valid, cost estimating should be continuously updated based on the latest information available as programs mature. The Navy and the Marine Corps have updated the life cycle cost estimate for the RQ-21 Blackjack to account for changing assumptions, such as the expected usage rate of spare parts for system repairs, but not for additional Marine Corps personnel that squadrons have reportedly needed for deployments. Without updating the cost estimate as appropriate after updating personnel requirements, the Navy and the Marine Corps may not have current information about the Marine Corps’ RQ-21 Blackjack UAS lifecycle cost and affordability. The Department of the Navy has made some positive steps but has not fully evaluated and updated its aviation policies for operation and maintenance of certain UAS to inform the development of future personnel requirements. According to officials from the Navy Manpower Analysis Center, correctly determining personnel workload and the related numbers of personnel required for operation and maintenance is especially critical for UAS units because of the safety risks associated with operating in shared airspaces and over populated areas. These officials also stated that naval aviation policies—which apply to manned aircraft and UAS—affect the workload of operators and maintenance personnel and the numbers required to achieve a squadron’s mission and meet the standards prescribed in the policies. For example, the Naval Air Training and Operating Procedures Standardization manual contains provisions for pilot fatigue and hours they can fly compared with the hours they must rest. Further, the Naval Aviation Maintenance Program instruction prescribes standards for performing and documenting quality assurance steps for maintenance tasks, among other things. Our review of these selected policies found that some naval aviation standards have been modified to account for UAS separately from manned aircraft, and to some extent between UAS of different sizes and capabilities. The Naval Air Training and Operating Procedures Standardization manual was updated in 2016 with a new chapter for UAS policies and operations. The Naval Aviation Maintenance Program instruction has been updated to specify that UAS of groups 3, 4, and 5 will always be governed by the policy similar to manned aircraft, with a few exceptions, such as compass calibration. Notwithstanding these updates, Marine Corps headquarters- and unit- level officials told us that the policies have not been fully reviewed and updated to account for differences in UAS of varying sizes and capabilities, especially group 3 UAS, which are those systems weighing 55 to 1,320 pounds. According to these officials, applying certain procedures and standards from these policies equally across different sizes of UAS is problematic for group 3 UAS in particular, which includes the RQ-21 Blackjack. The officials stated that the application of such standards affects workloads and personnel levels in a way that prevents squadrons from accomplishing their missions as efficiently as possible. Specifically, they stated that upholding current naval aviation standards is one key reason—the other being changes to the concept of operations for the RQ-21 Blackjack—for having staffed up to 21 more personnel per RQ-21 Blackjack detachment than the 9-person requirement discussed earlier in this report. Applying naval aviation operating and maintenance standards equally across different sizes of UAS may not align with the Marine Corps’ concept of operations, which states that all UAS are intended to be recovered by landing or capture even though they may be expendable. Each RQ-21 Blackjack system includes five air vehicles, more than one of which could be unavailable for assigned missions at the same time. For example, Marine Corps officials told us that damage to RQ-21 Blackjack air vehicles can be caused by weather, a deficiency with the air vehicle itself, a crash landing, or a combination of factors, and up to three air vehicles could be unavailable at a time. These officials told us that holding the RQ-21 Blackjack to maintenance standards designed for other non-expendable aircraft may not be efficient because their application has a limited effect on mishap rates relative to the additional personnel needed to uphold the standards. Moreover, in discussion groups we held with Marine Corps UAS operator personnel, operators mentioned that mishap investigations performed to existing standards sideline operators from training pending the investigation’s outcome. Such standards also apply to the Navy’s larger, non-expendable UAS like the MQ-8 Fire Scout and the MQ-4 Triton. According to DOD Directive 1100.4, existing policies, procedures, and structures should be periodically evaluated to ensure efficient and effective use of personnel resources. Further, federal internal controls standards emphasize the importance of having clear, updated policies that align with an organization’s mission and goals. Such goals could include the Department of the Navy’s goal to accelerate the development and fielding of unmanned systems, and the Marine Corps’ emphasis on reducing operator workload and providing effective and efficient support to mission execution and decision making. For example, the Marine Corps’ UAS concept of operations envisions a future in which one UAS operator will perform multiple functions as opposed to the current approach in which multiple Marines are necessary for a single mission. We found that the Navy has taken a preliminary step to further evaluate what policy changes may be needed to support unmanned systems by establishing an advisor position for this purpose within the Naval Innovation Advisory Council. The advisor is responsible for making recommendations to the Secretary of the Navy and other senior leaders to streamline policy and remove roadblocks that hinder innovation, among other things. In addition, the program manager for the RQ-21 Blackjack and the Marine Corps’ Deputy Commandant for Combat Development and Integration are supporting a research effort through the Naval Postgraduate School to improve the efficiency and effectiveness of naval aviation maintenance procedures for group 3 UAS, according to a Marine Corps official who is leading this effort. While these are positive steps, the time frames for making such policy changes have not been identified. In addition, we did not find evidence that the Navy has taken or planned related steps such as determining whether future reductions to personnel requirements could be accomplished, and any associated cost savings, or benefits to UAS operations if policies were further updated to account for UAS of different sizes and capabilities. The Navy has thus far prioritized the evaluation and modification of acquisition-related policies to expedite the delivery of unmanned systems to units, consistent with a 2015 memorandum from the Secretary of the Navy. Unless the Navy and the Marine Corps prioritize updating policies for operating and maintaining UAS of different sizes and capabilities they may miss opportunities to effectively and efficiently use personnel resources as system inventories grow. The Department of the Navy also lacks clear overarching goals for informing future unmanned system personnel requirements and the level of priority that should be assigned to these systems and the units that operate them for the purpose of personnel resourcing decisions. While DOD’s Unmanned Systems Integrated Roadmap, FY2013-2038 stated that the department must strive to reduce the number of personnel required to operate and maintain its unmanned systems, the Department of the Navy has not affirmed this goal or communicated any other personnel goals for its unmanned system development. Department of the Navy documents we reviewed for unmanned systems expressed goals that are less directly related to personnel requirements, to include expanding the range of operations and reducing costs and risks to personnel safety and mission success. As previously mentioned, the Navy has prioritized the evaluation and modification of acquisition-related policies to expedite the delivery of unmanned systems to units, consistent with a 2015 memorandum from the Secretary of the Navy. Navy and Marine Corps officials we spoke with who are responsible for the RQ-21 Blackjack and other case study systems we reviewed told us they did not believe the Department of the Navy has a clear and overarching goal for unmanned system personnel requirements either now or over the long-term. For example, officials stated that they did not know if the Department of the Navy expects that fewer personnel should be needed to operate and support unmanned systems than the numbers of personnel required for other types of systems. Without such clarity about personnel-related goals and priority levels, some officials expressed concern that using the term “unmanned” systems conveys expectations that technological advances can substantially reduce personnel requirements in the near term, and that funding for related personnel resources are a lower priority than those for other system types. For example, a senior Navy personnel official told us that the Navy’s past goals and related efforts to reduce personnel required for its ship crews—an initiative referred to as optimal manning—makes them cautious about whether the same goals and efforts will be adopted for unmanned systems and could produce similar, undesirable effects on readiness. Navy officials at three commands also stated they are concerned that resources for unmanned system personnel over future years may not keep pace with the increasing inventories of the systems if a lower priority is assigned to them in budget decisions in the absence of goals and clarity over priorities. The Navy’s Commander, Submarine Forces, identified a personnel shortfall for supporting increased UUV inventories as its second-highest personnel priority for the Navy’s fiscal year 2019 budget deliberations to help underscore to headquarters entities the importance of personnel resources for such systems. According to Navy officials, the Navy has since authorized the requested addition of 66 personnel to the command to augment the sole unit that will operate the Snakehead Large Displacement UUV along with increasing inventories of other types of UUVs. Federal internal controls standards state that an agency’s management should define goals clearly to enable the identification of risk. By applying this standard to the Department of the Navy’s acquisition and operations of unmanned systems, such goals could include whether or not unmanned systems should require fewer personnel resources than manned counterparts. Until the Secretary of the Navy clarifies overarching goals for unmanned system personnel requirements and resource priority levels and communicates them to requirements planners and budget decision makers, the services will be hampered in developing future personnel requirements and identifying risks as system inventories grow and operations expand. The Navy and the Marine Corps have developed staffing approaches to select, train, and track unmanned systems operators and to retain some UAS operators by offering special and incentive pays. However, both services face challenges in ensuring that there are sufficient UAS operators to meet personnel requirements. Yet neither service has assessed the commercial drone industry to inform its retention approach for UAS operators. Although Marine Corps UAS operators and officers report low morale and career satisfaction, the Marine Corps has not fully explored the use of human capital flexibilities to address these workforce challenges. In the Navy, unmanned system operations are secondary skills for personnel from related communities. For its UASs in groups 4 and 5, for example, the Navy utilizes personnel from manned aviation communities within the same mission areas, such as MH-60 helicopter pilots and aircrew who are selected and then trained to operate the MQ-8 Fire Scout UAS. Likewise, Navy officials stated that personnel from related communities are selected and trained to operate USVs and UUVs. The Navy is taking steps to track these trained operator personnel by using secondary skill identification codes. According to Navy officials, these identification codes will help personnel managers monitor the inventories of personnel with unmanned system operator qualifications and provide a temporary surge in capability if needed. In contrast to the Navy’s approach, the Marine Corps has a primary career field for operating UAS, including enlisted and officer personnel. The Marine Corps replenishes its UAS operator and officer personnel inventories by selecting from eligible applicant groups. To become UAS operators, enlisted marines must achieve minimum test scores comparable to those required for other high-skill occupations, such as intelligence specialists. Eligible groups include new graduates of recruit training and experienced marines who apply for a lateral transfer from another occupational specialty. UAS officers take a separate test battery and must attain the same minimum scores as other officers who are selected for manned naval aviation training. They are selected from three sources: new graduates of officer training; pilot or flight officer trainees who do not complete their manned aircraft qualification; and experienced officers seeking a transfer from another occupational specialty, including pilots of manned aircraft. Following their selection, enlisted personnel and officers must complete 5 months of Army UAS training courses or 6 months of Air Force UAS training courses, respectively. The Marine Corps then assigns a primary occupation identification code to trained personnel, which facilitates tracking their inventory to help meet requirements. To help retain sufficient numbers of personnel to meet requirements, both the Navy and the Marine Corps have offered special and incentive pays to personnel who operate UASs. Navy personnel who serve as air vehicle operators for the MQ-8 Fire Scout and MQ-4 Triton or as MQ-4 Triton tactical coordinators are eligible for two types of aviation pays based on their qualification as pilots or naval flight officers rather than their UAS assignments—monthly “flight pay” of up to $1,000 and aviation career continuation pay bonuses of $75,000 for a new 5-year contract, as of fiscal year 2017. Marine Corps UAS officers are not offered special and incentive pays, but enlisted operators have been eligible for a selective reenlistment or selective retention bonus since 1998, which ranged from $8,250 up to $19,750 in fiscal year 2017 for qualified marines who committed to an additional 4 years of service. Based on our analysis, the Navy faces challenges with meeting personnel requirements for UAS operators although, according to Navy officials, it is too soon to know if personnel shortfalls may arise with unmanned maritime systems because many programs are in early in stages of development. Navy officials told us they have sufficient numbers of personnel to operate the current inventory of UAS, which included 49 MQ-8 Fire Scouts and 2 MQ-4 Tritons as of September 2017. As UAS inventories increase, the Navy has reported growing retention challenges among its pilots and naval flight officers over the past 3 years as the U.S. economy improves and commercial airline hiring increases. Navy aviation and workforce planning officials told us this could affect the ability to fill both its manned aviation and UAS personnel requirements. According to Navy proposals for the Navy’s aviation retention bonus program, future retention shortfalls are expected in the helicopter, maritime patrol and reconnaissance, and E-2 Hawkeye communities, among others. The first two communities are sources of personnel for the MQ-8 Fire Scout and MQ-4 Triton and, according to Navy officials, the latter community is being considered as a personnel source for the MQ- 25 Stingray. In particular, the Navy has reported concerns about the future retention of its maritime patrol and reconnaissance pilots because their experience directly translates to a commercial 737 aircraft. Additionally, the Navy has reported shortages and significant retention issues in meeting requirements for its reserve helicopter and maritime patrol and reconnaissance pilots, communities that the Navy uses to augment its available inventories of active duty pilots who also operate UASs. Based on our analysis, the Marine Corps has experienced past shortfalls of UAS operators through fiscal year 2017. Since the first fiscal year of available data after the inception of the Marine Corps’ career specialty for UAS officers in 2012, personnel inventories have increased but fallen short of requirements (see fig. 2). For fiscal years 2013 through 2017, the Marine Corps was substantially short of captains, majors, and lieutenant colonels (i.e., O3, O4, and O5 pay grades) to serve as UAS officers. Consistent with this trend, the Marine Corps has designated UAS officer inventories as unhealthy since fiscal year 2013. Marine Corps officials told us these shortfalls could be attributable to the annual growth in requirements for this new community. They also stated that they do not currently anticipate retention challenges for UAS officers. However, according to these officials, their predictions about UAS officer retention for future years are based on data from other longer established career fields as proxies until more UAS officer data are available. For fiscal years 2007 through 2017, inventories of enlisted UAS operators increased in all but one year, but fell short of requirements (see fig. 3) in part due to substantial yearly shortfalls of certain junior enlisted personnel. According to a Marine Corps official, the UAS operator inventory will exceed requirements in fiscal year 2018 because the requirement has decreased by about 60 percent from the previous year. However, the Marine Corps has leveraged lateral personnel transfers from other occupations to meet approximately 33 to 89 percent of its yearly retention quotas for first-term UAS operator reenlistments since fiscal year 2010 (see fig. 3 above). A Marine Corps personnel planning official told us that personnel transfers have been helpful and necessary for meeting retention quotas. However, other Marine Corps officials told us that heavily leveraging transfers shows that the UAS community is not retaining its own experienced operators—that is, UAS operators who have attained proficiency and advanced skills and been deployed. For more senior enlisted UAS operators eligible for a second reenlistment or beyond, the Marine Corps has fallen short of its retention quotas for fiscal years 2015 through 2017. Despite the current and future challenges previously discussed, Navy and Marine Corps officials told us that the services have not used information about the commercial drone industry to inform their use of special and incentive pays because they did not believe doing so was needed. Marine Corps officials told us that they have not observed a retention problem for UAS operators and officers and unless they miss retention goals in 3 consecutive years they will not consider changing financial incentives— i.e., increasing bonuses to enlisted UAS operators or offering special and incentive pays to UAS officers. Until such time, pilots who are selected for the UAS career field are informed by the Marine Corps that their flight pay and aviation continuation pay bonus eligibility will be terminated. Another Marine Corps official with knowledge of the UAS community told us that studying the commercial drone industry and the potential effect on retention is timely because the services must program for the necessary resources for financial incentives 2 years in advance of the budget year. They stated that after 3 years of missing retention goals the problem could persist for another 2 years before additional funds were available to increase retention bonuses given the programming and budget cycle. Navy workforce planning officials acknowledged that they are concerned about increasing difficulty in providing sufficient numbers of mid-career pilots to meet the Navy’s aviation requirements over future years, which includes UAS operator requirements. In addition to competition from commercial airlines, Navy officials told us a growing labor market in the commercial drone industry could exacerbate pilot retention challenges for those with secondary qualifications to operate UAS. However, they added that little is known about the demand and available wages in that industry. Likewise, Marine Corps officials told us that past challenges in meeting requirements and retaining experienced operators could persist in future years, and hiring in the commercial drone industry could affect retention. These officials stated that the Air Force could also pose a future retention challenge for the Marine Corps’ UAS operator community. The Air Force offers the potential for higher pay to its UAS operators than the Marine Corps along with larger and more capable types of UAS. The Air Force reported to Congress in July 2017 that its projections of enlisted UAS operator retention indicate that a bonus may be necessary as soon as 2022. During discussion groups we held with Marine Corps UAS operators, enlisted operators cited the potential for higher pay for their skills outside the Marine Corps as a factor that has influenced reenlistment decisions among them or their peers. Operators in one group told us that three of their five RQ-21 Blackjack instructors were former enlisted operators from their squadron who secured employment with the RQ-21 Blackjack’s manufacturer as private sector contractors. DOD’s 2012 Eleventh Quadrennial Review of Military Compensation determined that organizations should assess civilian supply and demand and civilian wages to develop the most cost effective special and incentive pay strategies. We reported in February 2017 that conducting such an assessment is a key principle of effective human capital management by which to evaluate DOD’s special and incentive pay programs. Our report also found that the services do conduct such assessments for aviation, nuclear propulsion, and cybersecurity occupations. Without assessing the commercial drone industry and using such information to inform retention approaches, including the use of special and incentive pays, the Navy and the Marine Corps may not know if their approaches are effectively tailored to ensure a sufficient number of UAS operators are available to meet future requirements. The Marine Corps has experienced workforce challenges with its career field for UAS officers and enlisted operators, including diminished morale and career satisfaction and short periods of time in which operators are trained and available to UAS squadrons before their contract or squadron assignment ends. Results of a 2015 Marine Corps survey of UAS officers showed that about 65 percent of captains and first lieutenants who responded were dissatisfied with their career and about 75 percent of that group cited low job satisfaction as influencing their decision to leave the Marine Corps. UAS officers and enlisted operators in all eight discussion groups we held told us about factors that enhance their morale, including the opportunities to learn and to shape their community and their positive deployment experiences, but they also discussed factors that negatively affect their job satisfaction. UAS operators in all enlisted groups cited the frequency of personnel turnover in the squadron as a source of frustration in developing and retaining expertise with the RQ-21 Blackjack. Officers told us they feel like a lower tier priority in Marine Corps aviation for reasons ranging from the lack of a uniform insignia device akin to those awarded to manned aircraft pilots (i.e., pilot “wings”), to confusion over the strategy and missions for Marine Corps UAS now and in future years. UAS officers also told us they desired assignments to positions outside the UAS squadrons that they believed would enhance their leadership ability, but such positions had not consistently been available to them because they were needed to fill squadron billets. For example, the Marine Corps has limited or restricted UAS officers from applying for in- residence professional military education opportunities in past years because they could not be diverted from billets requiring their qualifications due to inventory shortages. UAS operators and officers spend approximately 2 years or more of their 3-year squadron assignment awaiting and completing training to attain proficiency and advanced skills with the RQ-21 Blackjack UAS. After training and deployment, they may have about 4 months or fewer to impart their knowledge and deployment experience to others in the squadron before they reach the end of their squadron assignment, the end of their service obligation, or both (see fig. 4). According to Marine Corps officials we spoke with, the loss of experienced UAS operators who do not reenlist and are replaced by lateral transfers from other careers results in diminished UAS expertise among mid-career enlisted members in the squadrons. These officials told us that personnel who transfer to the UAS career to replace experienced operators must spend at least 2 years in training for initial qualification and then proficiency on the RQ-21 Blackjack. Moreover, Marine Corps officials told us that a portion of the UAS operators who reenlist past their first contract must fulfill 3-year special duty assignments outside the UAS community. They stated that this exacerbates the diminished squadron expertise and is the reason that some operators leave rather than reenlist in the Marine Corps. Although the Marine Corps has taken steps to address challenges with UAS operator inventories by using special and incentive pays for enlisted operators and limiting opportunities that would divert officers away from squadrons, as previously discussed, it has not fully explored flexibilities for managing its UAS career fields more effectively to help meet requirements. Employing flexibilities to improve job satisfaction could help improve retention of experienced personnel in an already-challenged environment. For example, the Marine Corps has not authorized available aviation special and incentives pays for UAS officers in spite of challenges meeting personnel requirements. As mentioned previously, pilots who are selected for the UAS career field are informed by the Marine Corps that their flight pay and aviation continuation pay bonus eligibility will be terminated. The Marine Corps has incentivized enlisted personnel from certain specialties, such as aircraft maintenance, to both reenlist and to remain in a specified unit as recently as fiscal year 2018, but has not offered this opportunity to UAS operators. By considering longer UAS operator contracts, the Marine Corps could increase the availability of experienced operators to squadrons, where they can pass on their knowledge and skills to junior enlisted personnel. Our prior work has identified that a key principle for effective strategic human capital planning is that organizations should ensure that flexibilities are part of the overall human capital strategy to ensure effective workforce planning. According to Marine Corps officials, they have not taken additional steps to address workforce challenges in part because inventories of UAS operators and officers have grown and squadrons have generally attained readiness goals and accomplished their deployment missions despite personnel shortages. Further, these officials stated that low morale and career satisfaction could be partially caused by the current transition from the RQ-7 Shadow UAS to the RQ- 21 Blackjack, and to the relative newness of the officer career field. Without exploring these or other human capital flexibilities to improve morale and career satisfaction and maximize operators’ availability to squadrons, the Marine Corps may face continued challenges in meeting personnel requirements and the growing demands of expanding operations and increasing UAS inventories. Moreover, as the Marine Corps budgets for additional resources to establish its own school for UAS operator training, flexibilities that could improve retention and maximize operator availability could also help ensure the greatest return on its investment in the UAS operator workforce. For almost 20 years we have identified strategic management of human capital as a high-risk area across government in part because of persistent gaps in mission critical skills. With the Navy’s commitment to accelerate the delivery of unmanned systems to the fleet and its budget of nearly $10 billion to develop and procure those systems in fiscal years 2018 through 2022, having sufficient personnel with the appropriate skills at the right time will be critical. To that end, without additional actions to improve their workforce planning the Navy and the Marine Corps may not be positioned to support their expanding unmanned systems operations. Specifically, lacking clear workforce planning policies, decision makers may not know when they should consider using federal civilian employees and private sector contractors as alternatives in determining the most appropriate and cost-effective workforces for their unmanned system operators. With respect to personnel requirements development, until the Marine Corps’ requirements and related cost estimates for the RQ-21 Blackjack UAS are updated, the services will lack current information about the number of operators needed and their affordability. Further, unless the Navy and the Marine Corps prioritize policy updates for operating and maintaining UAS of different sizes and capabilities they may miss opportunities to effectively and efficiently use personnel resources as system inventories grow. Without assessing the commercial drone industry and using that information to inform retention approaches, the Navy and Marine Corps may not know whether special and incentive pays are effectively tailored to ensure a sufficient number of UAS operators are available to meet future requirements. The Marine Corps, in particular, may continue to face challenges in meeting requirements and growing operational demands until it examines additional flexibilities to improve morale and career satisfaction among its UAS operator workforce and maximize the availability of operators serving in its squadrons. Overall, unmanned systems are key to future Navy and Marine Corps operations, but for these systems to be effective the services need to ensure that they take the necessary actions to provide sufficient personnel. We are making the following ten recommendations to DOD. The Secretary of the Navy ensures that: The Chief of Naval Operations should clarify workforce planning policies to identify circumstances in which federal civilian employees and private sector contractors may serve in operational roles and what the benefits and limitations are of using federal civilians and private sector contractors as alternative workforces. (Recommendation 1) The Chief of Naval Operations should, after clarifying workforce planning policies, apply the revised policies to evaluate the use of alternative workforces (including federal civilian employees and private sector contractors) for future unmanned system operators. (Recommendation 2) The Commandant of the Marine Corps should clarify workforce planning policies to identify circumstances in which federal civilian employees and private sector contractors may serve in operational roles and what the benefits and limitations are of using federal civilians and private sector contractors as alternative workforces. (Recommendation 3) The Commandant of the Marine Corps should, after clarifying workforce planning policies, apply the revised policies to evaluate the use of alternative workforces (including federal civilian employees and private sector contractors) for future unmanned system operators. (Recommendation 4) The Commander, Naval Air Systems Command, in coordination with the Deputy Commandant of the Marine Corps for Combat Development and Integration, should update the Marine Corps personnel requirements associated with the RQ-21 Blackjack UAS based on the most current and enduring concept of operations and utilize the updated requirements in planning for UAS squadron personnel requirements. (Recommendation 5) The Commander, Naval Air Systems Command, should update the life cycle cost estimate for the RQ-21 Blackjack UAS to make adjustments as appropriate after updating the personnel requirements for the system. (Recommendation 6) The Deputy Chief of Naval Operations for Warfare Systems (N9), in coordination with the Deputy Commandant for Aviation, should prioritize continued efforts to fully evaluate policies for operating and maintaining UAS of different sizes and capabilities, such as group 3 UAS—to include establishing completion time frames, determining whether reductions to personnel requirements could be accomplished, and identifying any associated cost savings and the benefits to the UAS squadrons’ ability to complete missions—and update such policies as needed. (Recommendation 7) The Secretary of the Navy should clarify overarching goals for unmanned systems’ personnel requirements, including related priority levels for resourcing purposes, and communicate them to requirements planners and budget decision makers. (Recommendation 8) The Chief of Naval Personnel and the Deputy Commandant for Manpower and Reserve Affairs should assess civilian supply, demand, and wages in the commercial drone industry and use the results to inform retention approaches, including the use of special and incentive pays for UAS operators. (Recommendation 9) The Deputy Commandant for Aviation and the Deputy Commandant for Manpower and Reserve Affairs should examine the use of additional human capital flexibilities that could improve the career satisfaction and retention of experienced UAS operators and maximize their availability to squadrons. Such flexibilities could include authorizing available special and incentive pays; permitting UAS operators to extend their enlistments to serve longer within squadrons; ensuring the availability of career- and promotion- enhancing opportunities for professional military education; considering the use of a potential insignia device for operators; or extending UAS operator contract lengths. (Recommendation 10) We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix III, DOD concurred with eight of our recommendations and partially concurred with two recommendations. DOD also provided technical comments on the draft report, which we incorporated as appropriate. With regard to our recommendation to assess civilian supply, demand, and wages in the commercial drone industry and use the results to inform retention approaches, DOD partially concurred. DOD stated that it will assess competitive markets, both externally and internally, and then analyze the usage of incentive pays for UAS operators when retention rates and inventory levels of personnel display decreasing trends. DOD added that such analysis would be premature if conducted before initial operational capability is attained for each UAS because retention behaviors and air crew dynamics are not yet established. As noted in our report, the Navy and the Marine Corps have each attained initial operational capability with one UAS (i.e., the MQ-8 Fire Scout B-variant and the RQ-21 Blackjack) and quantities of these and other UAS are expected to increase in future years. Additionally, the Marine Corps has designated UAS officer inventories as unhealthy since fiscal year 2013. Accordingly, we continue to believe that conducting such assessments and using the results are timely and important steps to ensure enough personnel to meet future operator requirements. DOD partially concurred with our recommendation to examine the use of additional human capital flexibilities that could improve the career satisfaction and retention of experienced UAS operators. DOD stated that human capital flexibilities are constantly under review. Further, DOD stated that the UAS community is still in its infancy, but as it continues to grow and become healthier, assignment opportunities and flexibilities will become more prevalent and special and incentive pays will be examined as retention rates dictate. Such efforts would meet the intent of our recommendation if the opportunities and flexibilities DOD considers include other examples cited in our recommendation. That is, we continue to believe that DOD should also consider permitting UAS operators to extend their enlistments to serve longer within squadrons; ensuring the availability of career- and promotion-enhancing opportunities for professional military education; considering the use of a potential insignia device for operators; and extending UAS operator contract lengths. We are providing copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of the Navy, and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The Navy’s MQ-8 Fire Scout unmanned aerial system (UAS) (B and C variants) is intended to provide real-time imagery and data in support of intelligence, surveillance, and reconnaissance missions for surface, anti- submarine, and mine warfare. The system is part of the surface warfare and mine countermeasures mission packages of the littoral combat ships. The MQ-8 system comprises one or more air vehicles with sensors, a control station, and ship equipment to aid in vertical launch and recovery. According to the program office, the MQ-8C has 90 percent commonality with the previously developed MQ-8B. The primary differences between the two are structural modifications to accommodate the MQ- 8C’s larger airframe and fuel system. The manufacturer has delivered 49 aircraft to the Navy as of September 2017 (including 30 B variants and 19 C variants), and 11 more aircraft (C variants) are scheduled to be delivered by fiscal year 2019. The Navy attained initial operational capability with the B variant of the Fire Scout in fiscal year 2014, and plans to attain initial operational capability with the C variant in December 2018, depending on the availability of the littoral combat ship from which it deploys. A composite aviation detachment embarked on a littoral combat ship consists of up to 24 personnel, including operator air crews equipped with one MH-60 helicopter and one MQ-8 Fire Scout UAS. An air crew consists of two personnel: one air vehicle operator and one mission payload operator. There is no additive personnel requirement associated with operators of the MQ-8 Fire Scout because these personnel already reside within existing expeditionary MH-60 helicopter squadron detachments. The littoral combat ships’ crew berthing constraints was a key limiting factor in creating the personnel requirements for the number of air crew in a single composite aviation detachment. Navy officials told us that they believe, based on deployment experiences and available data, that the personnel requirements for the MQ-8 Fire Scout are correct, although they stated that the operational tempo has been very limited to date due to problems with the littoral combat ship that have reduced the number of deployments. MH-60 helicopter pilots and enlisted aircrewmen from expeditionary helicopter squadrons attend 8 and 6 weeks, respectively, of MQ-8 Fire Scout UAS training. During deployments, these personnel serve dual roles as air crew of both the MH-60 and the MQ-8 Fire Scout. MQ-8 Fire Scout air vehicle operators hold primary career designators as Navy helicopter pilots, and after their UAS training they are identified with an additional qualification designator of DY8. According to a senior Navy official, private sector contractors trained 126 air vehicle operators prior to February 2015, and since then Navy has trained another 91 air vehicle operators as of May 2017. MQ-8 Fire Scout mission payload operators have an enlisted rating as a helicopter aircrewman, and after their UAS training they are identified with a Navy enlisted classification code of 8367. According to a senior Navy official, private sector contractors trained 148 mission payload operators through March 2017, and the Navy has trained another 68 mission payload operators since February 2017 (as of May 2017). According to Navy officials, they do not expect that the approach for staffing MQ-8 Fire Scout aircrew to negatively affect accessions or retention in the helicopter community, even when operational tempo increases, but they are continuing to monitor feedback from deployments. The Navy’s MQ-4 Triton UAS is intended to provide persistent maritime intelligence, surveillance, and reconnaissance data collection and dissemination capability in an operating area of a 2,000 nautical miles radius. Based on the Air Force’s RQ-4B Global Hawk air vehicle, the MQ- 4 Triton was formerly known as the Broad Area Maritime Surveillance UAS. Triton UAS sensors can provide detection, classification, tracking, and identification of maritime targets. Additionally, the MQ-4 Triton is designed with a communications relay capability that can link dispersed forces in the theater of operation. The system will cue other Navy assets for further situational investigation and/or attack, and will also provide a battle damage assessment of the area of interest. Tactical-level data analysis will occur in real-time at shore-based mission control systems via satellite communications. The MQ-4 Triton is planned to operate from five shore-based sites worldwide as part of the Navy’s family of maritime patrol and reconnaissance systems. From these sites, five MQ-4 Triton air vehicles will be airborne concurrently, 24 hours a day and 7 days a week (see fig.6). As a precursor to the MQ-4 Triton, the Navy’s RQ-4A Broad Area Maritime Surveillance System-Demonstrator has been continuously deployed to the U.S. Central Command area since January 2009. All four of those planned demonstrator systems have been delivered to the Navy. The manufacturer has delivered 2 systems to the Navy as of September 2017 and the Navy expects 10 more systems to be delivered through fiscal year 2021. At the time of this report, no air vehicles had yet been delivered to the Navy’s first unmanned patrol squadron; the 2 systems were being utilized for testing. The Navy has estimated that it will attain initial operational capability with the MQ-4 Triton UAS in 2021. One of the Navy’s two planned unmanned patrol squadrons (referred to as VUPs) will have 30 mission crews, the other squadron will have 20 mission crews, and both squadrons will have additional launch and recovery operators. A MQ-4 Triton mission crew will consist of four personnel: one air vehicle operator, one tactical coordinator, and two mission payload operators. Future upgrades to the MQ-4 Triton will require a fifth mission crew member to fill a signals intelligence capability operator position. The number of required mission crew members was based in part upon a model that Naval Air Systems Command utilizes to project the number of air crew personnel to support a system. According to Navy officials, the additional personnel requirements for the Navy associated with the establishment of Triton squadrons are offset by realignments of the Maritime Patrol and Reconnaissance Force, including the retirement of the P-3 Orion aircraft and reduction of associated personnel requirements. Navy officials told us that they believe, based in part on experience with the Broad Area Maritime Surveillance - Demonstrator, that the personnel requirements for the MQ-4 Triton are adequate, although they stated that they will continue to review and monitor the requirements for sufficiency in future years as the Navy attains steady state operations with the system’s five continuous orbits. The Navy’s approach for staffing operator aircrew for the MQ-4 Triton is to utilize a portion of its naval aviators, naval flight officers, and enlisted aircrew whose qualification is on a maritime patrol and reconnaissance force aircraft (e.g., the P-8A Poseidon) and assign them to an unmanned patrol squadron following a sea tour with their primary aircraft. According to Navy officials, the career path for all its aviators generally includes a number of shore duty options following a first deployment. The unmanned patrol squadron assignments will be an additional option for aviators’ first shore tour. The Navy will provide Triton aircrew members with approximately 3 months of training to qualify on the UAS in connection with their unmanned patrol squadron assignment. Air vehicle operators and tactical coordinators who are trained and qualified on the MQ-4 Triton will be identified with an additional qualification designator of DC5. Trained and qualified mission payload operators will be identified with a Navy enlisted classification of 7828. According to Navy officials, they do not expect the approach for staffing MQ-4 Triton aircrew to affect accessions or retention in the maritime patrol and reconnaissance community at this time, but it is too soon to be certain. In the meantime, the officials stated that they will continue to monitor personnel feedback and reassure personnel about the career value of experience in a MQ-4 Triton squadron. In addition, the Navy plans to leverage members of its reserve component to augment the pool of available personnel who can be assigned to its VUP squadrons. The Navy’s MQ-25 Stingray UAS will be the first UAS to operate from aircraft carriers. According to Navy officials, the MQ-25 Stingray’s primary mission will be to provide a robust refueling capability to extend the range and reach of the carrier air wing and reduce the need for F/A-18E/F Super Hornets to perform refueling missions, freeing them for strike missions, and preserving service life. As a secondary mission, the MQ-25 Stingray will also provide an intelligence, surveillance, and reconnaissance capability. The Navy previously referred to the MQ-25 Stingray as the Carrier Based Aerial Refueling System, a program that followed a restructuring of the former Unmanned Carrier-Launched Airborne Surveillance and Strike program. The Navy’s initial plan is to purchase 72 MQ-25 Stingray air vehicles. No systems have been delivered and a delivery schedule has not been established because the system is still in an early stage of DOD’s acquisition process, with a contract award for system development scheduled for the fourth quarter of fiscal year 2018. The Navy has estimated attaining initial operational capability with the system by the mid-2020s time frame. The Navy has not yet developed a staffing approach for MQ-25 Stingray operators. According to Navy officials involved in establishing plans and requirements for the system, they are considering different options for the systems’ operators, including using enlsited personnel or an approach similar to that used for the MQ-8 Fire Scout operators in which a population of aviation personnel, including pilots, would be identified from a related, existing aircraft community—such as the E-2 Hawkeye aircraft—and provided with UAS qualification training if they were assigned to operate the MQ-25 Stingray in a composite squadron along with their other primary aircraft. According to these officials, at the direction of the Commander of Naval Air Forces, they have considered establishing a new UAS operator career field and surveyed midshipmen at the U.S. Naval Academy to gauge their interest in such a career. The Marine Corps’ RQ-21 Blackjack UAS provides units with a dedicated intelligence, surveillance, and reconnaissance capability for tactical commanders in real time by providing actionable intelligence and communications relay for 12-hour continuous operations per day, with a short surge capability of 24-hours of continuous operations for a 10-day period, during any 30-day cycle. An RQ-21 Blackjack system consists of five air vehicles, two ground control stations, multi-mission payloads, one launcher, one recovery system, data links, and support systems. Standard payloads include electro-optical and infrared cameras, communications relay payload, and automatic identification system. Future upgraded capabilities may include command and control integration, weapons integration, heavy fuel engine, laser designator, frequency agile communications relay, digital common data link, and cyclic refresh of the electro-optical and infrared cameras. The RQ-21 Blackjack can be launched and recovered from land or from air-capable ships, including L-class ships (e.g., amphibious transport docks) (see fig. 7). The manufacturer has delivered 11 systems to the Marine Corps as of September 2017 and the Marine Corps expects the other 21 planned systems to be delivered through 2022. The Marine Corps attained initial operational capability with the RQ-21 Blackjack in 2016. The Marine Corps has three active duty unmanned aerial vehicle squadrons (VMU 1, 2, and 3) and one reserve VMU squadron (VMU 4) that will operate the RQ-21 Blackjack UAS. Each active duty VMU will contain nine detachments and each detachment will comprise 9 personnel—including 1 UAS officer and 3 enlisted UAS operators—and one RQ-21 Blackjack UAS. The Marine Corps Reserve’s VMU 4 will contain three detachments. The Marine Corps’ does not distinguish between requirements for air vehicle operators and mission payload operators for the RQ-21 Blackjack because those functions are performed by the same operator. The Marine Corps has a primary career field for operating UAS, including enlisted UAS operators and UAS officers. The Marine Corps replenishes its UAS operator and officer personnel inventories by selecting from eligible applicant groups. For enlisted UAS operators, eligible groups include new graduates of recruit training and experienced marines who apply for a lateral transfer from another occupational specialty. UAS officers are selected from three sources: new graduates of officer training; pilot or flight officer trainees who do not complete their manned aircraft qualification; and experienced officers seeking a transfer from another occupational specialty, including pilots of manned aircraft. The Marine Corps requires certain minimum test scores before marines can be selected for UAS training. Enlisted marines must achieve minimum test scores comparable to those required for other high-skill occupations, such as intelligence specialists. Officers take a separate test battery and must attain the same minimum scores as other officers who are selected for manned naval aviation training. Following their selection for UAS training, enlisted personnel must complete 5 months of Army UAS training courses to attain their military occupational specialty as a UAS operator. Officers attend 6 months of Air Force training courses to attain their occupational specialty. The Marine Corps then assigns a primary occupation identification code to trained personnel, which is 7314 for enlisted UAS operators or 7315 for UAS officers. The Marine Corps assigns enlisted personnel and officers to one of its UAS squadrons after they attain their occupational specialty, where they continue their UAS training to attain and maintain proficiency and advanced qualifications. As discussed earlier in this report, Marine Corps UAS squadrons believe that an RQ-21 Blackjack detachment requirement of 9 personnel is not sufficient to meet their workloads. Since 2015, squadrons have staffed their deploying detachments with up to 30 personnel each to support the workload and levels of supervision they believe are necessary to operate and maintain an RQ-21 Blackjack UAS and avoid mishaps and damage to the aircraft during recovery to meet operating and maintenance standards, among other reasons. The Navy’s Mine Countermeasures Unmanned Surface Vehicle (USV) and Unmanned Influence Sweep System will be part of the mine countermeasures mission package of the Navy’s littoral combat ships (see fig. 8). The Mine Countermeasures USV will tow a sonar payload for mine hunting. The Unmanned Influence Sweep System will use the same USV platform to tow an acoustic and magnetic influence sweep payload to clear bottom and moored mines. Both systems will be launched and recovered from littoral combat ships. For the Mine Countermeasures USV, the projected inventory is 2 systems per mine countermeasures mission package for a total of 48 systems, in addition to systems needed for training. For the Unmanned Influence Sweep System, the projected inventory is 1 per mine countermeasures mission package for a total of 24 payloads, in addition to payloads for training. As of September 2017, two Mine Countermeasures USVs were under construction, but neither had been delivered to the Navy. The Navy plans to attain initial operational capability with the Mine Countermeasures USVs in fiscal year 2021. As of September 2017, one Unmanned Influence Sweep System had been constructed and the Navy expects it to be delivered for testing by fiscal year 2018. The Navy plans to attain initial operational capability with the Unmanned Influence Sweep System in fiscal year 2019. The Mine Countermeasures USV and Unmanned Influence Sweep System will be operated by littoral combat ship mine countermeasures mission package crews of 20 personnel each. The precise number of operators per system will be determined and updated as the systems progress through acquisition. According to Navy officials, USV operators associated with the littoral combat ships’ mine countermeasures mission package crews will not be directly accessed and recruited to such positions. Instead, these officials stated that enlisted sailors from related primary career ratings will be assigned to the crews and trained on the USVs along with other systems as part of a longer training pipeline. Upon their completion of training, the Navy plans to identify them with a Navy enlisted classification code of 1206, Littoral Combat Ship Mine Warfare Mission Package Specialist. The Navy’s MK 18 Unmanned Underwater Vehicle (UUV) family of systems consists of the MK 18 “Mod 1” Swordfish UUV and the MK 18 “Mod 2” Kingfish UUV. The MK 18 Mod 1 Swordfish is a man-portable system that performs autonomous, low-visibility exploration and reconnaissance missions in support of amphibious landings and mine countermeasures operations, among other things. The MK 18 Mod 2 Kingfish UUV is a larger vehicle with increased endurance and depth, and more advanced sensors to improve mine countermeasures capabilities. The Mod 1 Swordfish and the Mod 2 Kingfish operate in very shallow water and shallow water zones, and will be tactically integrated to enable detection of moored and bottom mines at increased standoff and reduced risk to operators and systems that would otherwise be operating in the minefield. The MK 18 systems can be launched and recovered from shore, from rigid hull inflatable boats or from ships (see fig. 9). 41 (25 Mod 1 Swordfish and 16 Mod 2 Kingfish) The manufacturer has delivered 33 systems (21 Mod 1 Swordfish and 12 Mod 2 Kingfish) to the Navy as of fiscal year 2017. The Navy attained full operational capability with the first increment of the Mod 1 Swordfish in fiscal year 2007 and expects to attain initial operational capability with the first increment of the Mod 2 Kingfish in fiscal year 2019. MK 18 UUVs are operated by platoons within three different Navy units: Explosive Ordinance Disposal Mobile Unit One, Mobile Diving and Salvage Unit Two, and the Naval Oceanography Mine Warfare Center. According to Navy officials, the establishment of such platoons did not generate an additive personnel requirement to those units. The minimal personnel requirement for MK 18 operations includes three UUV operators and a UUV supervisor, along with an officer-in-charge, a boat coxswain, and a boat engineer. According to Navy officials, the Navy does not directly access or recruit personnel to fill its requirements for operators of the MK 18 UUVs. These officials stated that, instead, enlisted sailors from related primary career ratings, including special warfare boat operator and aerographer’s mate ratings, can be assigned to a unit that operates the UUVs either on their first tour or later in their career on a subsequent assignment. Navy officials also stated that Navy Expeditionary Combat Command is coordinating with the Commander, Submarine Forces, to potentially utilize the Navy enlisted classification code of 9550 for its UUV operators. The Navy’s Snakehead Large Displacement UUV will be a long- endurance, off-board system that will conduct reconnaissance and surveillance missions in denied areas and in waters too shallow or otherwise inaccessible for conventional platforms (see fig. 10). The Snakehead Large Displacement UUV will be launched and recovered from submarines and surface ships. No systems have been delivered to the Navy. The Navy is planning for the first 2 systems to be delivered in fiscal year 2020 and for another 2 systems to be delivered in fiscal year 2023. The Navy will attain initial operational capability with the first phase systems when two of them are delivered and tested on a host platform, a life-cycle sustainment plan is in place, and personnel are trained and equipped to operate and maintain the system from a host platform. The Navy plans to field the Snakehead Large Displacement UUVs to UUV Squadron 1. According to Navy officials, the squadron is also testing or operating more than 10 other types of UUVs and expects to receive 2 or more other new types of UUVs through approximately fiscal year 2020, along with the Snakehead. Although Navy officials told us that it is too soon to analyze and determine the numbers of personnel required for the system at the time of this report, they plan to utilize forward-deployed operators to launch and recover the vehicle, an operator to control the vehicle from an operations center on land, and a mission payload operator as needed depending on the mission. The precise number of operators per system will be determined and updated as the systems progress through acquisition. In staffing personnel to meet requirements for UUV Squadron 1, Navy officials stated that they do not directly access or recruit personnel to fill such positions. Instead, these officials told us that enlisted sailors from related career ratings within the submarine community, such as sonar technicians, are assigned to the squadron generally after they have completed at least one previous assignment and have approximately 5 years of experience in the Navy. According to the officials, once personnel are assigned to the squadron, they receive UUV training to qualify on the systems they will operate, and they will be identified with a Navy enlisted classification code of 9550 for UUV operators. This report addresses the extent to which the Navy and the Marine Corps have (1) evaluated workforce alternatives for their unmanned system operators, including the use of federal civilian employees and private sector contractors; (2) developed and updated personnel requirements and related policies and goals that affect requirements for operators, maintainers, and other support personnel for selected unmanned systems; and (3) developed approaches for staffing unmanned system operators to meet personnel requirements and have met those requirements. To address these objectives, we included in the scope of our review the Navy’s and the Marine Corps’ unmanned aerial systems (UAS), unmanned surface vehicles (USV), and unmanned underwater vehicles (UUV) that were programs of record in calendar year 2016. On the basis of Department of the Navy documentation and interviews with knowledgeable officials, we identified 24 such systems. To provide illustrative examples for our first and third objectives and to address the entirety of our second objective, we further narrowed our scope to those systems that had progressed far enough through DOD’s acquisition process to be part of a program of record within the purview of the services’ system commands. Additionally, we narrowed our scope for UASs, in particular, to those categorized as group 3 or above. We omitted smaller group 1 UASs because service officials told us that those systems are fielded in larger numbers as additional capabilities for existing units in accomplishing their missions and entail a small workload for operating and maintaining them relative to UASs of group 3 and above. Group 2 UASs that the Navy and the Marine Corps utilize are contractor-owned and operated, which was outside the scope of our review. From the remaining unmanned systems in our scope, we selected eight case studies to review the services’ evaluations of workforce alternatives, development and updates of personnel requirements and related policies and goals, and staffing approaches: four UASs—the Navy’s MQ-4 Triton, MQ-8 Fire Scout, MQ-25 Stingray, and the Marine Corps’ RQ-21 Blackjack; the two USVs—the Unmanned Influence Sweep System and the Mine Countermeasures USV—associated with the Navy’s littoral combat ships; and two types of the Navy’s UUVs—the MK 18 family of UUV systems and the Snakehead Large Displacement UUV—based on their size and missions. Although the results of the UUV case studies cannot be generalized to all UUVs across the Navy, they illustrate different characteristics of and approaches used for workforce mix, requirements, and staffing for such systems. To address our first objective, we compared any Navy and Marine Corps efforts to evaluate federal civilian employees and private sector contractors as workforce alternatives for operators of all of their unmanned systems, including those from our case study sample, with criteria from (1) DOD Directive 1100.4, Guidance for Manpower Management, which directs, among other things, that authorities consider all available sources when determining workforce mix, and that workforces be designated as federal civilians except in certain circumstances, and (2) DOD Instruction 1100.22, Policy and Procedures for Determining Workforce Mix, which establishes the workforce mix decision process and directs that workforce planning authorities consider all available personnel when determining the workforce mix—that is, the combination of military servicemembers, federal civilians, and private sector contractors. Specifically, we analyzed available documentation for the selected case study systems on any evaluations the services performed of alternative workforces and the related decisions made about eligible personnel categories, and interviewed knowledgeable service officials about factors that informed those evaluations and decisions and any reasons for not evaluating workforce alternatives. We also interviewed officials from the Navy and OUSD(P&R) who are responsible for reviewing workforce and personnel planning documents for Navy and Marine Corps programs to understand any broader DOD or service workforce planning efforts for unmanned systems, and reasons for omitting certain personnel categories from consideration for systems that are in development. We reviewed our prior reports on workforce mix and DOD-commissioned workforce mix studies and interviewed officials from OUSD(P&R) to identify limitations and benefits associated with different categories of personnel, including military servicemembers, federal civilian employees of DOD, and private sector contractors. We reviewed the Navy’s and the Marine Corps’ policies on workforce planning to determine whether those policies provide more detailed guidance or criteria relative to those available in DOD’s policies on circumstances for which alternative personnel sources should be considered or on the limitations and benefits associated with different workforce mix options. We also compared these service-level workforce planning policies with federal internal controls standards that emphasize the importance of having clear, updated policies that align with an organization’s mission and goals. To address our second objective, we reviewed the Navy’s and the Marine Corps’ efforts to develop and update personnel requirements for our selected case study systems, including documentation of steps taken to analyze and determine personnel requirements levels. We interviewed service officials about their views of the sufficiency of those personnel requirements for supporting training and deployment requirements for the selected systems. For any systems that service officials were concerned about the sufficiency of related personnel requirements, we compared documentation of the requirements with DOD Directive 1100.4 and with a Navy instruction. The DOD policy states that personnel requirements should be driven by workload and established at the minimum levels necessary to accomplish mission and performance objectives. Navy Instruction 1000.16L states that personnel requirements must be validated as program changes dictate and at a minimum annually over a system’s lifecycle to determine if a personnel update is required. Further, we reviewed documentation of the life cycle cost estimate for the number of Marine Corps personnel required to operate and maintain the RQ-21 Blackjack, and of UAS squadrons’ position on the sufficiency of those personnel requirements, and compared those documents with DOD guidance requiring that components determine a weapon system program’s life cycle costs by planning for the many factors needed to support the system, including personnel, and with Office of Management and Budget guidance that states that to keep the cost analyses for capital assets, such as weapon systems, current, accurate, and valid, cost estimating should be continuously updated based on the latest information available as programs mature. In addition, we reviewed Navy policies on operating and maintaining UAS and documentation from the Marine Corps about the effect of those policies on UAS squadron personnel workload, and interviewed Navy and Marine Corps headquarters- and unit-level officials about those effects and any efforts underway to review and update policies. We then compared those efforts to review and update policies with DOD Directive 1100.4 stating that existing policies, procedures, and structures should be periodically evaluated to ensure efficient and effective use of personnel resources, and with federal internal controls standards that emphasize the importance of having clear, updated policies that align with an organization’s mission and goals. Finally, we compared goals established in DOD’s Unmanned Systems Integrated Roadmap, FY2013- 2038 and Department of the Navy strategy documents on unmanned systems with federal internal controls standards that state than an agency’s management should define objectives clearly to enable the identification of risk. For our third objective, we reviewed the Navy’s and the Marine Corps’ steps to select, train, and track unmanned system operators to identify any challenges. We reviewed for the selected systems a combination of manpower estimate reports and personnel and training plan documents to identify approaches for staffing operators. We also reviewed personnel and training manuals describing prerequisites for related military qualifications and occupations. We interviewed command- and unit-level officials from the Navy and the Marine Corps to discuss the effectiveness of current staffing approaches for meeting their training and deployment requirements. Focusing on challenges with providing enough personnel to serve as UAS operators in particular, we also reviewed Navy reports on the retention of certain aviation personnel to serve as UAS operators and we reviewed Marine Corps data on its UAS operator inventory and retention levels relative to its requirements and goals. Specifically, we reviewed Navy reports on retention for fiscal years 2015 through 2017 because data from earlier years were less relevant given the lower numbers of UAS inventories. We requested data from the Marine Corps on its inventories of and requirements for enlisted UAS operators for fiscal years 2007 through 2017 and on UAS officers for fiscal years 2013 (the first year of available data) through 2017. We requested retention data—actual numbers of personnel who reenlisted versus annual quotas—on enlisted UAS operators for fiscal years 2010 (the earliest year for which data were available) through 2017. We assessed the reliability of these Marine Corps data by administering questionnaires and interviewing relevant personnel responsible for maintaining and overseeing the systems that supplied the data and manually checking the data for errors or omissions. Through these methods, we obtained information on the systems’ ability to record, track, and report on these data, as well as on the quality control measures in place. We found the inventory and requirements data to be sufficiently reliable for the purposes of describing personnel inventory trends and the sufficiency of operator personnel to meet requirements. We found that the retention data are of undetermined reliability but are reporting them because they are the data of record used by Marine Corps planning officials. We also reviewed Navy and Marine Corps financial incentives for retaining sufficient personnel to serve as UAS operators and compared those approaches with criteria from DOD’s 2012 Eleventh Quadrennial Review of Military Compensation, which established that organizations should assess civilian supply and demand and civilian wages to determine the most cost effective special and incentive pay strategies. Further, we compared the Marine Corps’ efforts to address workforce challenges specific to the Marine Corps’ UAS operator career field with a key principle of strategic human capital planning from our prior work, which states that agencies should ensure that flexibilities are part of their overall human capital strategy. In our prior work, we found that strategic human capital planning is an important component of an agency’s effort to develop long-term strategies for acquiring, developing, and retaining staff needed for an agency to achieve its goals and of an agency’s effort to align human capital activities with the agency’s current and emerging mission. Specifically, we have found that an agency’s efforts to conduct strategic human capital planning should include, among other things, building the capability needed to address administrative, educational, and other requirements important to supporting workforce strategies by ensuring that flexibilities are part of the overall human capital strategy. We focused on workforce challenges in the Marine Corps, in particular, because it has a long-established career field for UAS operators, and the Navy does not yet have a separate career field for any of its unmanned systems operators. We identified workforce challenges within the Marine Corps’ UAS operator career field by reviewing a 2015 Marine Corps-sponsored survey of its pilot and UAS officer workforce. The survey included questions about satisfaction with career and benefits, and intentions to stay in the Marine Corps and the underlying reasons for these. Although officers in ranks of first lieutenant through lieutenant colonel were surveyed, we were unable to include majors and lieutenant colonels in reporting results for UAS officers because the Marine Corps aggregated those officers’ responses with those of majors and lieutenant colonels who operate other types of aircraft. By reviewing the survey methodology and interviewing an official involved in administering the survey and analyzing the results, we determined that the survey results were sufficiently reliable for reporting the perceptions about career satisfaction at a single point in time for UAS operators who answered those questions. In addition, we visited one of three active duty Marine Corps UAS squadrons, which we chose because it had the most deployment experience with the RQ-21 Blackjack UAS. We met with squadron leaders to discuss their views about UAS personnel requirements and staffing approaches. We also conducted eight small group discussions with active duty UAS operators and officers—separately for enlisted personnel and officers—to gain their perspectives on topics such as morale, workload, and career satisfaction. The opinions of Marine Corps UAS operators we obtained during our discussion groups are not generalizable to the population of UAS operators in the Marine Corps. Office of the Deputy Commandant for Aviation Office of the Deputy Commandant for Combat Development and Office of the Deputy Commandant for Manpower and Reserve Affairs Marine Corps Systems Command Marine Unmanned Aerial Vehicle Squadron 2 We conducted this performance audit from September 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, key contributors to this report were Lori Atkinson, (Assistant Director), Melissa Blanco, Tim Carr, Mae Jones, Amie Lesser, Felicia Lopez, Ben Sclafani, Mike Silver, and Paul Sturm. Department of Defense: Actions Needed to Address Five Key Mission Challenges. GAO-17-369. Washington, D.C.: June 13, 2017. Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18, 2017. High Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Military Compensation: Additional Actions Are Needed to Better Manage Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.: February 3, 2017. Unmanned Aerial Systems: Air Force and Army Should Improve Human Capital Planning for Pilot Workforces. GAO-17-53. Washington, D.C.: January 31, 2017. Unmanned Aerial Systems: Further Actions Needed to Fully Address Air Force and Army Pilot Workforce Challenges. GAO-16-527T. Washington, D.C.: March 16, 2016. Military Personnel: Army Needs a Requirement for Capturing Data and Clear Guidance on the Use of Military for Civilian or Contractor Positions. GAO-15-349. Washington, D.C.: June 15, 2015. Unmanned Aerial Systems: Actions Needed to Improve DOD Pilot Training. GAO-15-461. Washington, D.C.: May 14, 2015. Air Force: Actions Needed to Strengthen Management of Unmanned Aerial System Pilots. GAO-14-316. Washington, D.C.: April 10, 2014. Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce. GAO-13-470. Washington, D.C.: May 29, 2013. Unmanned Aircraft Systems: Comprehensive Planning and a Results- Oriented Training Strategy Are Needed to Support Growing Inventories. GAO-10-331. Washington, D.C.: March 26, 2010. Human Capital: Key Principles for Effective Strategic Workforce Planning. GAO-04-39. Washington, D.C.: December 11, 2003.", "summary": "The Department of the Navy has committed to rapidly grow its unmanned systems portfolio. It currently has at least 24 types of systems and has budgeted nearly $10 billion for their development and procurement for fiscal years 2018-2022. Personnel who launch, navigate, and recover the systems are integral to effective operations. Senate Report 114-255 included a provision for GAO to review the Navy's and the Marine Corps' strategies for unmanned system operators. GAO examined, among other things, the extent to which the Navy and the Marine Corps have (1) evaluated workforce alternatives (such as the use of civilians and contractors) for unmanned system operators and (2) developed and updated personnel requirements and related policies and goals for selected unmanned systems. GAO compared documentation on unmanned systems with DOD policies and conducted discussion groups with unmanned system operators. The Navy and the Marine Corps are rapidly growing their portfolios of unmanned aerial systems (UAS) and unmanned maritime systems and have opted to use military personnel as operators without evaluating alternatives, such as federal civilian employees and private sector contractors. Service officials stated that civilians or contractors are not viable alternatives and policies are unclear about when and how to use them. However, a June 2016 Department of Defense-commissioned study found that alternative staffing strategies could meet the UAS mission more cost-effectively. Military personnel may be the most appropriate option for unmanned systems, but without clarifying policies to identify circumstances in which civilians and contractors may serve in operational roles, the services could continue to make workforce decisions that do not consider all available resources. The Navy and the Marine Corps have sufficient personnel requirements or efforts underway to develop personnel requirements for seven unmanned systems that GAO reviewed (see fig.), but requirements for one system (i.e., the RQ-21 Blackjack UAS) have not been updated. That system's requirements have not been updated because service entities disagree about whether they are sufficient. Since 2015, units have deployed with about two to three times the personnel that headquarters and command officials expected they would need. Marine Corps officials stated that the Blackjack's personnel requirements were based on an outdated concept of operations and are insufficient for supporting workloads. Without updating the personnel requirements for the Blackjack UAS, the services will lack current information about the number of personnel needed. The Department of the Navy has taken positive steps but has not fully evaluated and updated aviation policies that affect personnel requirements for certain UAS and lacks clear goals for informing future requirements for all of its UASs. GAO found that the policies do not fully account for differences between UASs of varying sizes and capabilities. These policies require, for example, that the Blackjack UAS be held to the same maintenance standards designed for larger aircraft and UAS, which in turn affects personnel requirements. Until the Department of the Navy evaluates and updates such policies and clarifies related goals, the services will be hampered in developing and updating future requirements as unmanned system inventories grow and operations expand. GAO is making ten recommendations, including that the Navy and the Marine Corps clarify policies to identify circumstances in which civilians and contractors may serve in operational roles and apply the policies to future evaluations; update personnel requirements for one UAS; and evaluate and update policies and goals to inform future personnel requirements. DOD concurred with eight recommendations and partially concurred with two. As discussed in the report, GAO continues to believe that all ten are warranted.", "document_type": "gao"}
{"report": "The DATA Act was enacted May 9, 2014, for purposes that include expanding on previous federal transparency legislation by requiring the disclosure of federal agency expenditures and linking agency spending information to federal program activities, so that both policymakers and the public can more effectively track federal spending. The act also calls for improving the quality of data submitted to USAspending.gov by holding federal agencies accountable for the completeness and accuracy of the data submitted. The Federal Funding Accountability and Transparency Act of 2006 (FFATA), as amended by the DATA Act, identifies OMB and Treasury as the two agencies responsible for leading government-wide implementation. For example, the DATA Act requires OMB and Treasury to establish government-wide financial data standards that shall, to the extent reasonable and practicable, provide consistent, reliable, and searchable spending data for any federal funds made available to or expended by federal agencies. These standards specify the data elements to be reported under the DATA Act and define and describe what is to be included in each data element, with the aim of ensuring that information will be consistent and comparable. The DATA Act also requires OMB and Treasury to ensure that the standards are applied to the data made available on USAspending.gov. USAspending.gov has many sources of data. For example, agencies submit data from their financial management systems, and other data are extracted from government-wide federal financial award reporting systems populated by federal agencies and external award recipients. A key component of the reporting framework is Treasury’s DATA Act broker (broker)—a system that collects and validates agency-submitted data to create linkages between the financial and award data prior to their publication on the USAspending.gov website. According to Treasury guidance documents, agencies are expected to submit three data files with specific details and data elements to the broker from their financial management systems. File A: Appropriations account. This includes summary information such as the fiscal year cumulative federal appropriations account balances and includes data elements such as the agency identifier, main account code, budget authority appropriated amount, gross outlay amount, and unobligated balance. File B: Object class and program activity. This includes summary data such as the names of specific activities or projects as listed in the program and financing schedules of the annual budget of the U.S. government. File C: Award financial. This includes award transaction data such as the obligation amounts for each federal financial award made or modified during the reporting quarter (e.g., January 1, 2017, through March 31, 2017). The broker also extracts spending information from government-wide award reporting systems that supply award data (e.g., federal grants, loans, and contracts) to USAspending.gov. These systems—including the Federal Procurement Data System-Next Generation (FPDS-NG), System for Award Management (SAM), Financial Assistance Broker Submission (FABS), and the FFATA Subaward Reporting System (FSRS)—compile information that agencies and external federal award recipients submit to report, among other things, procurement and financial assistance award information required under FFATA. The four files produced with information extracted by the broker from the four systems are as follows: File D1: Procurement. This includes award and awardee attribute information (extracted from FPDS-NG) on procurement (contract) awards and contains elements such as the total dollars obligated, current total value of award, potential total value of award, period of performance start date, and other information to identify the procurement award. File D2: Financial assistance. This includes award and awardee attribute information (extracted from FABS) on financial assistance awards and contains elements such as the federal award identification number, the total funding amount, the amount of principal to be repaid for the direct loan or loan guarantee, the funding agency name, and other information to identify the financial assistance award. File E: Additional awardee attributes. This includes additional information (extracted from SAM) on the award recipients and contains elements such as the awardee or recipient unique identifier; the awardee or recipient legal entity name; and information on the award recipient’s five most highly compensated officers, managing partners, or other employees in management positions. File F: Subaward attributes. This includes information (extracted from FSRS) on awards made to subrecipients under a prime award and contains elements such as the subaward number, the subcontract award amount, total funding amount, the award description, and other information to facilitate the tracking of subawards. The key components of the broker and how the broker operated when the agencies submitted their data for the second quarter fiscal year 2017 are shown in figure 1. After agencies submit the three files to the DATA Act broker, it runs a series of validations and produces warnings and error reports for agencies to review. After passing validations for these three files, the agencies are to generate Files D1 and D2, the files containing details on procurement and assistance awards. Before the data are displayed on USAspending.gov, agency senior accountable officials are required to certify the data submissions in accordance with OMB guidance. Certification is intended to assure alignment among Files A, B, C, D1, D2, E, and F, and to provide assurance that the data are valid and reliable. According to Treasury officials, once the certification is submitted a sequence of computer program instructions or scripts are issued to transfer and map the data from broker data tables to tables set up in a database used as a source for the information on the website. Certified data are then displayed on USAspending.gov along with certain historical information from other sources, including Monthly Treasury Statements. The DATA Act requires each OIG to issue three reports on its assessment of the quality of the agency’s data submission and compliance with the DATA Act. The first report was due November 8, 2016; however, agencies were not required to submit spending data in compliance with the DATA Act until May 2017. Therefore, the Council of the Inspectors General on Integrity and Efficiency (CIGIE) developed an approach to address what it described as a reporting date anomaly; encouraged interim OIG readiness reviews and related reports on agencies’ implementation efforts; and delayed issuance of the mandated reports to November 2017, with subsequent reports following a 2-year cycle and due November 2019 and 2021. CIGIE established the Federal Audit Executive Council (FAEC) to discuss and coordinate issues affecting the federal audit community, with special emphasis on audit policy and operations of common interest to FAEC members. FAEC formed the FAEC DATA Act Working Group to assist the OIG community in understanding and meeting its DATA Act oversight requirements by (1) serving as a working-level liaison with Treasury, (2) consulting with GAO, (3) developing a common approach and methodology for conducting the readiness reviews and mandated reviews, and (4) coordinating key communications with other stakeholders. To assist the OIG community, the FAEC DATA Act Working Group developed a common methodology and published the Inspectors General Guide to Compliance Under the DATA Act (IG Guide) for use in conducting mandated reviews. The IG Guide includes procedures to test data in agencies’ Files A and B by reconciling these data to the information that agencies report in their quarterly SF 133, Report on Budget Execution and Budgetary Resources. The IG Guide also instructs OIGs to select a statistically valid sample of spending data from the agencies’ available award-level transactions in File C, and among other procedures, to confirm whether these data are also included in the agencies’ Files D1 and D2. The OIGs are also to confirm whether the transactions in the sample were linked to the award and awardee attributes in Files E and F. The data in Files E and F are reported by award recipients in two external government-wide systems, and are outside the direct control of the federal agencies, except for the General Services Administration, which manages these external systems. Based on additional guidance from the FAEC DATA Act Working Group, OIGs are not required to assess the quality of the award recipient-entered data that the broker extracted from the two external government-wide systems used to create Files E and F. According to the IG Guide, the sampled spending data and testing results are to be evaluated using the following definitions for the requirements being assessed: Completeness is measured in two ways: (1) all transactions that should have been recorded are recorded in the proper reporting period, and (2) as the percentage of transactions containing all applicable data elements required by the DATA Act. Timeliness is measured as the percentage of transactions reported within 30 days of the end of the quarter. Accuracy is measured as the percentage of transactions that are complete and agree with the systems of record or other authoritative sources. Quality is defined in OMB guidance as a combination of utility, objectivity, and integrity. Utility refers to the usefulness of the information to the intended users. Objectivity refers to whether the disseminated information is being presented in an accurate, clear, complete, and unbiased manner. Integrity refers to the protection of information from unauthorized access or revision. The IG Guide also states that OIGs should assess agencies’ implementation and use of the data standards, including evaluating each agency’s process for reviewing the 57 required data elements and associated definitions that OMB and Treasury established and documenting any variances. In November 2017, we issued our first report on data quality as required by the DATA Act, which identified issues with the completeness and accuracy of the data that agencies submitted for the second quarter of fiscal year 2017, use of data elements, and presentation of the data on Beta.USAspending.gov. Among other things, we recommended that Treasury disclose known data quality issues and limitations on the new USAspending.gov website. Treasury agreed with that recommendation and stated that it would develop a plan to better disclose known data quality issues. Since the DATA Act’s enactment in 2014, we have issued a series of interim reports on our ongoing monitoring of the implementation of the DATA Act and made recommendations intended to help ensure effective government-wide implementation. However, many of those recommendations still remain open. These reports identified a number of challenges related to OMB’s and Treasury’s efforts to facilitate agency reporting of federal spending, as well as internal control weaknesses and challenges related to agency financial management systems that we and agency auditors reported that present risks to agencies’ ability to submit quality data as required under the act. For example, our prior work has identified issues with agency source systems that could affect the quality of spending data made available to the public. In April 2017, we reported a number of weaknesses and issues previously identified by agencies’ auditors and OIGs that affect agencies’ financial reporting and may affect the quality of the information reported under the DATA Act. We also reported on findings and recommendations from prior reports with issues on the four key award systems—FPDS-NG, SAM, the Award Submission Portal (ASP), and FSRS—which increase the risk that the data submitted to USAspending.gov may not be complete, accurate, and timely. Based on our review of the 53 OIG reports, the scope of all of the OIG reviews covered their agencies’ submission of spending data for the second quarter of fiscal year 2017 (i.e., January through March 2017). However, the files that the OIGs included in their scope to select and review sample transactions and the type of audit standards used—such as attestation examination engagement or performance audit—varied among the OIGs. According to the IG Guide, the OIGs were to select and review a statistically valid sample of transactions, preferably from the agencies’ File C certified data submissions; if File C was unavailable or did not contain data, they were to select their sample test items from Files D1 and D2. Based on their survey responses, we found that most OIGs tested data from File C, File D1, File D2, or some combination of these agency file submissions. We also found that some OIGs tested a statistical sample of transactions in these files, while others tested all the transactions in the files because of the small population size. Further, we found that some OIGs used different files when testing for completeness, timeliness, or accuracy. For example, one OIG used File C when testing for completeness, File D1 when testing for timeliness, and File D2 when testing for accuracy. Overall, as shown in figure 2, the source files that 47 of the 53 OIGs used for testing accuracy were as follows. Twenty-eight OIGs selected items for testing accuracy from File C. Twelve OIGs selected items for testing accuracy from Files D1, D2, or both. Seven OIGs selected items for testing accuracy from a combination of Files C, D1, and D2. The IG Guide also states that OIGs should conduct either attestation examination engagements or performance audits in accordance with generally accepted government auditing standards (GAGAS). Performance audits are audits that provide findings or conclusions based on an evaluation of sufficient, appropriate evidence against criteria. Attestation examination engagements involve obtaining sufficient, appropriate evidence with which to express an opinion stating whether the subject matter is in conformity with the identified criteria. In contrast to these two types of engagements that provide conclusions or opinions, agreed-upon procedures attestation engagements do not result in opinions or conclusions, but instead involve auditors performing specific procedures on the subject matter and issuing a report of findings. All 53 OIGs reported that they performed their engagements in accordance with GAGAS; 47 OIGs reported that they conducted a performance audit, 5 reported that they performed an attestation examination engagement, and 1 reported that it performed an agreed- upon procedures attestation engagement. Twenty-one CFO Act agency OIGs and 26 non-CFO Act agency OIGs conducted performance audits, 3 CFO Act agency OIGs and 2 non-CFO Act agency OIGs conducted attestation examination engagements, and 1 non-CFO Act agency OIG conducted an agreed-upon procedures attestation engagement. According to the OIG reports, about half of the agencies met the OMB and Treasury requirements for implementation and use of data standards. However, almost three-fourths of OIGs determined that their respective agencies’ submissions were not complete, timely, accurate, or of quality. Based on their reports and survey responses, certain OIGs also found data errors related to problems with how Treasury’s DATA Act broker extracted information from external award reporting systems. The FAEC DATA Act Working Group considered these data errors to be a government-wide issue. Other errors that the OIGs identified may have been caused by agency-specific internal control deficiencies. Most of the OIGs made recommendations to agencies to help address the concerns they identified in their reports. Based on our review of the 53 OIG reports, we found that 27 OIGs determined that their agencies met OMB and Treasury requirements for implementation and use of the data standards, whereas 23 OIGs determined that their agencies did not meet these requirements. In addition, 3 CFO Act agency OIGs did not include an assessment of their agencies’ implementation and use of the data standards in their reports. The OIG reports described reasons why the 23 agencies did not meet the implementation and use of data standards requirements, including data submissions that did not include required data elements or included data elements that did not conform with the established data standards. For example, one OIG reported that 74 percent of transactions it tested did not contain program activity names or codes aligned with the President’s Budget, and as a result, 39 percent of total obligations and 57 percent of total expenditures from that agency’s data submission could not be aligned with established programs. Another OIG reported that because of inconsistent application of data standards and definitions across award systems, the agency’s spending data were not complete, timely, or accurate. In their survey responses, certain OIGs identified additional concerns about their agencies’ implementation and use of data standards and related data elements. Specifically, six OIGs identified differences between their agencies’ definitions of the data standards and OMB guidance. For example, two OIGs noted differences between definitions in OMB guidance and their agencies’ definitions of “primary place of performance address.” One of these OIGs noted that its agency submitted the wrong data, providing the address of the legal entity receiving the award instead of the address of the primary place where performance of the award will be accomplished or take place. In our November 2017 report, we also noted that OMB guidance for this data element was unclear and recommended that OMB clarify and align existing guidance regarding the appropriate definitions agencies should use to collect and report on primary place of performance and establish monitoring mechanisms to foster consistent application and compliance. In addition, based on their survey responses, 21 OIGs reported error rates over 50 percent for 25 data elements. This includes 10 data elements that were reported by multiple OIGs and 15 data elements only reported by one OIG, as shown in table 1. There were five other data elements with error rates over 50 percent that the FAEC DATA Act Working Group determined to be government-wide broker-related data reporting issues, as discussed later in this report. The OIGs’ survey responses did not indicate whether the data elements with errors were the result of issues related to the agencies’ implementation or use of required data standards. Based on the OIG reports, we found that 15 of the 53 OIGs determined that their agencies’ data were generally complete, timely, accurate, or of quality, comprising 6 CFO Act agency OIGs and 9 non-CFO Act agency OIGs (see fig. 3). Conversely, 38 of 53 OIGs determined that their agencies’ data were not complete, timely, accurate, or of quality, comprising 18 CFO Act agency OIGs and 20 non-CFO Act agency OIGs. OIG reports did not always include separate assessments for completeness, timeliness, and accuracy, but gave an overall assessment of the quality of the data. As part of our OIG survey, we requested the overall error rates, agency- specific error rates, and broker error rates for each requirement— completeness, timeliness, and accuracy—used to evaluate the quality of data tested to help provide more insights on the nature and extent of errors that the OIGs identified. For the purposes of our survey, based on guidance from the FAEC DATA Act Working Group and in the IG Guide, these error rates were defined as follows: Overall error rate is the percentage of transactions tested that were not in accordance with policy, and includes errors due to the agency, broker, and external award reporting systems. Agency error rate is the percentage of transactions tested that were not in accordance with policy, and includes only errors that were within the agency’s control. Broker error rate is the percentage of transactions tested that were not in accordance with policy, and includes only errors due to the broker and external award reporting systems. With regard to overall error rates and the tests conducted, 40 OIGs reported that they tested a statistical sample of transactions, 9 OIGs reported that they tested all transactions in the populations of data, and 4 OIGs reported that they did not test any transactions or were unable to complete their testing. As shown in figure 4, our survey results show that the 40 OIGs that tested a statistical sample of transactions generally reported higher (projected) overall error rates for the accuracy and completeness of data than for the timeliness of data. We found similar results based on our tests to assess the completeness, timeliness, and accuracy of government-wide spending data that we tested for the same time period, as described in our November 2017 report. More than half of the 40 OIGs reported projected overall error rates of 25 percent or greater for accuracy, including 8 OIGs reporting projected accuracy error rates of over 75 percent. In contrast, more than three-fourths of the OIGs projected overall error rates of less than 25 percent for completeness and timeliness of their agencies’ data. See appendix II for more details on the 53 OIGs’ individual agency testing results, including the actual overall error rates for those OIGs that tested the full population of transactions included in their agencies’ data submissions and the estimated range of projected overall error rates for OIGs that conducted a statistical sample. The OIG survey responses that included agency-specific error rates showed that the agency-specific error rates were similar to the overall error rates, with accuracy of data having higher error rates than those for completeness and timeliness. Fourteen OIGs provided agency-specific error rates for accuracy, 13 OIGs provided agency-specific error rates for completeness, and 12 OIGs provided agency-specific error rates for timeliness of the data sampled. In addition, nine OIGs reported error rates for broker-related errors that, similar to the overall and agency-specific error rates, had higher error rates for accuracy of data than for completeness and timeliness. The FAEC DATA Act Working Group determined that the broker-related errors had a government-wide impact, as discussed further below. In October 2017—1 month before the mandated reports were to be issued—the working group provided guidance to the OIGs suggesting that they determine and report these additional broker error rates separately because they were not within the agencies’ control. Some OIGs may not have reported separate agency-specific and broker error rates as their work was already substantially completed. Of the nine OIGs that reported they tested all transactions in the populations of their agencies’ data, five OIGs reported actual overall error rates and found that overall error rates for accuracy were higher than the error rates for completeness or timeliness. Of the four OIGs that reported agency-specific error rates, only one OIG reported an error rate for accuracy, and it was greater than 75 percent. One OIG reported a broker error rate, and it was higher for accuracy than for completeness or timeliness. In addition to using different testing methodologies (e.g., statistical sampling or testing the full population of transactions) and source files, as previously discussed, the OIGs also used different assumptions and sampling criteria to design and select sample items for testing. As a result, the overall error rates are not comparable and a government-wide error rate cannot be projected. Based on discussions with OIGs, the FAEC DATA Act Working Group identified certain data errors caused by broker-related issues that it determined to be government-wide data reporting issues. Also, because the broker is maintained by Treasury, these issues were beyond the control of the affected agencies. According to the working group, these issues involve inconsistencies in data the broker extracted from government-wide federal financial award reporting systems, as described in table 2. To help provide consistency in reporting these issues, the working group developed standard report language used by OIGs in their reports to describe the errors caused by the broker. The standard reporting language stated that because agencies do not have responsibility for how the broker extracts data, the working group did not expect agency OIGs to evaluate the reasonableness of Treasury’s planned corrective actions. In April 2018, a Treasury official told us that the issues causing these problems have been resolved. To address these issues, the Treasury official stated that, among other things, Treasury implemented the DATA Act Information Model Schema version 1.1, loaded previously missing historical procurement data to USAspending.gov, updated how information from FPDS-NG is mapped to File D1, and replaced ASP with FABS. However, we plan to follow up on these efforts as a part of our ongoing monitoring efforts. In their survey responses and OIG reports, 43 OIGs reported agency- specific control deficiencies that may have contributed to or increased the risk of data errors. Of these 43 OIGs, 37 OIGs identified deficiencies affecting accuracy, 32 OIGs identified deficiencies affecting completeness, and 14 OIGs identified deficiencies affecting timeliness. A few OIGs reported that they leveraged their financial statement audit results, which found deficiencies in certain financial reporting controls, in conducting their DATA Act reviews. We categorized the OIGs’ reported control deficiencies and found that the categories with the most frequently reported deficiencies related to their agencies’ lack of effective procedures or controls, such as conducting reviews and reconciliations of data submissions to source systems, and information technology system deficiencies, as shown in figure 5. In their survey responses, OIGs provided additional information about whether their agencies’ controls over agency source systems and controls over the DATA Act submission processes were properly designed, implemented, and operating effectively to achieve their objectives. For both CFO Act and non-CFO Act agencies, OIGs generally reported that agencies’ internal controls over source systems and the DATA Act submission process were designed effectively but were not implemented or operating effectively as designed. Some examples of agency-specific control deficiencies reported by the OIGs are as follows. Lack of effective procedures or controls. Deficiencies where agency procedures for reviewing and reconciling data and files to different sources were not performed, or were performed ineffectively, or standard operating procedures for data submissions had not been designed and implemented. For example, some of these deficiencies related to agencies’ lack of review or reconciliation of data in Files A and B to data in Files D1 and D2. Further, two OIGs found that their agencies did not perform any sort of quality review of their data until after they were submitted to the broker. Another OIG found that its agency did not ensure that its components developed objectives for accomplishing its data submissions, assessed the risks to achieving those objectives, or established corresponding controls to address them. As a result, the agency’s DATA Act submissions included errors. Information technology system deficiencies. Deficiencies related to the lack of effective automated systems controls necessary to ensure proper system user access or automated quality control procedures and the accuracy and completeness of data, as well as systems that are not compliant with federal financial management system requirements. For example, one OIG noted that its agency experienced issues related to segregation of duties and access controls that affected the agency’s ability to ensure completeness and accuracy of data in its financial, procurement, and grant processing systems. Another OIG found that its agency did not complete necessary system updates to ensure that all data were certified prior to submission. Further, an OIG reported that its agency’s information system was unable to combine transactions with the same unique identifiers, resulting in over 12,000 transactions being removed because of broker warnings. Insufficient documentation. Deficiencies related to agencies’ production and retention of documentary evidence supporting their DATA Act submissions. For example, three OIGs found that their agencies were unable to provide supporting documentation for various portions of their DATA Act submissions. Another OIG reported that one of its agency’s components did not take effective steps to ensure that procurement and grant personnel understood the specific documentation that should be maintained to support data entered in grant and contract files. Further, another OIG found that its agency did not document the process for compiling the agency’s DATA Act submission files. Inappropriate application of data standards and data elements. Deficiencies related to the inappropriate use of data definition standards or the misapplication of data elements. For example, one OIG found that its agency did not identify the prior year funding activity names or codes for all transactions included in its spending data submission. Another OIG found that its agency did not consistently apply standardized object class codes in compliance with OMB guidance, as well as standardized U.S. Standard General Ledger account codes as outlined in Treasury guidance. Similarly, an OIG reported instances where agency users of certain award systems were not knowledgeable about how required DATA Act elements were reported in their procurement system. Data entry errors or incomplete data. Deficiencies related to controls over data entry and errors or incomplete data in agency or government- wide external systems. For example, an OIG found that its agency did not include purchase card transactions greater than $3,500, which represented about 1 percent of the agency’s data submission. Another OIG reported that its agency’s service provider did not enter miscellaneous obligations in the data submission file because it expected the agency to enter such transactions in the federal procurement data system. Timing errors. Deficiencies related to delays in reporting information to external government-wide systems that result in errors in the data submitted. For example, one OIG reported that its agency did not take effective steps to ensure that contracting officers timely report required DATA Act award attribute information in FPDS-NG. Another OIG reported that a bureau in its agency consistently submitted certain payment files 2 months late, resulting in incomplete Files C and D2 in the agency’s data submission. Inaccurate broker uploads. Deficiencies related to agencies uploading data to the broker. For example, one OIG found a lack of effective internal controls over data reporting from its agency’s source systems to the DATA Act broker for ensuring that the data reported are complete, timely, accurate, and of quality. Specifically, certain components were not able to consolidate data from multiple source systems and upload accurate data to the broker for File C. Another OIG reported that the broker could not identify and separate an individual component’s award data from agency- wide award data. Specifically, the broker recognized only agency-wide award data and did not include award data from its agency’s individual components. As a result, the OIG reported that the component did not comply with the DATA Act requirements because its submission did not include all of the agency’s required award data. Reliance on manual processes. Deficiencies that cause agencies to rely on manual processes and work-arounds. For example, one OIG found that in the absence of system patches to map data elements directly from feeder award systems to financial systems, its agency developed an interim solution that relied heavily on manual processes to collect data from multiple owners and systems and increased the risk for data quality to be compromised. Another OIG reported that its agency’s financial management systems are outdated and unable to meet DATA Act requirements without extensive manual efforts, resulting in inefficiencies in preparing data submissions. Other. Other deficiencies including, among other things, instances where an agency’s senior accountable official did not submit a statement of assurance certifying the reliability and validity of the agency account-level and award-level data submitted to the DATA Act broker, an agency did not provide adequate training and cross-training of personnel on the various DATA Act roles, and certain components of one agency were not included in the agency’s DATA Act executive governance structure. To help address control deficiencies and other issues that resulted in data errors, 48 of the 53 OIGs (23 CFO Act agency OIGs and 25 non-CFO Act agency OIGs) included recommendations in their reports. As shown in figure 6, the most common recommendations OIGs made to their agencies related to the need for agencies to develop controls over their data submissions, develop procedures to address errors, and finalize or implement procedures or guidance. Some examples of OIG recommendations made to agencies to improve data quality and controls are as follows. Develop controls over submission process. Recommendations related to controls or processes to resolve issues in submitting agency financial system data to the broker. For example, one OIG recommended that its agency develop and implement a formal process to appropriately address significant items on broker warning reports, which could indicate systemic issues. Develop procedures to address errors. Recommendations related to procedures to address data errors in the agency’s internal systems. For example, one OIG recommended that its agency correct queries to extract the correct information and ensure that all reportable procurements are included in its DATA Act submissions. Finalize or implement procedures or guidance. Recommendations related to establishing and documenting an agency’s DATA Act-related standard operating procedures or agency guidance, including the roles and responsibilities of agency stakeholders. For example, one OIG recommended that its agency update its guidance on what address to use for primary place of performance to be consistent with OMB and Treasury guidance. Maintain documentation. Recommendations related to establishing or maintaining documentation of the agency’s procedures, controls, and related roles and responsibilities for performing them. For example, one OIG recommended that its agency develop a central repository for grant award documentation and maintain documentation to support its DATA Act submissions. Provide training. Recommendations related to developing, implementing, and documenting training for an agency’s DATA Act stakeholders. For example, one OIG recommended that its agency provide mandatory training to all contracting officers and grant program staff to ensure their understanding of DATA Act requirements. Work with Treasury, OMB, and other external stakeholders. Recommendations for the agency to work with Treasury, OMB, or other stakeholders external to the agency to resolve government-wide issues. For example, one OIG recommended that its agency work closely with its federal shared service provider to address timing and coding errors that the service provider caused for future DATA Act submissions. Implement systems controls or modify systems. Recommendations related to developing and implementing automated systems and controls. For example, one OIG recommended that its agency complete the implementation of system interfaces and new procedures that are designed to improve collection of certain data that were not reported timely to FPDS-NG and improve linkages of certain financial transactions and procurement awards using a unique procurement instrument identifier. Increase resources. Recommendations related to increasing the staff, resources, or both necessary to fully implement DATA Act requirements. For example, one OIG recommended that its agency allocate the resources to ensure that reconciliations are performed when consolidating source system data to the DATA Act submission files. Management for 36 agencies stated that they concurred or generally concurred with the recommendations of their OIGs (see fig. 7). Management at many of these agencies stated that they continued to improve their processes and controls for subsequent data submissions. In addition, management for seven agencies stated that they partially concurred with the recommendations that their OIGs made. Management for two agencies did not concur with their OIGs’ recommendations. Management for one agency that did not concur with the recommendations stated that they should not be held responsible for data discrepancies that other agencies caused, and management for the other agency stated that they followed authoritative guidance that OMB and Treasury issued related to warnings and error messages. OMB staff told us that they reviewed the OIG reports—focusing on the 24 CFO Act agencies—to better understand issues that the OIGs identified and to determine whether additional guidance is needed to help agencies improve the completeness, timeliness, accuracy, and quality of their DATA Act submissions. OMB staff explained to us how they have or are planning to address OIG-identified issues. OMB staff told us that in April 2017 the CFO Council’s DATA Act Audit Collaboration working group was formed, which includes officials from OMB, Treasury, and the Chief Financial Officers (CFO) Council to foster collaboration and understanding of the risks that were being identified as agencies prepared and submitted their data. The working group also consults with CIGIE, which is not a member of the working group, but its representatives attend meetings to help the group members better understand issues involving the OIG reviews and the IG guide. According to OMB staff, the working group is the focal point to identify government- wide issues and identify guidance that can be clarified. They also told us that OMB continues to meet with this working group to determine what new guidance is needed to meet the DATA Act requirement to ensure that the standards are applied to the data available on the website. In June 2018, OMB issued new guidance requiring agencies to develop data quality plans intended to achieve the objectives of the DATA Act. According to OMB staff, OMB is committed to ensuring integrity and providing technical assistance to ensure data quality. Treasury officials told us that they reviewed OIG reports that were publicly available on Oversight.gov and are collaborating with OMB and the CFO Council to identify and resolve government-wide issues, including issues related to the broker, so that agencies can focus on resolving their agency-specific issues. In February 2018, the working group documented certain topics identified for improving data quality and value. OMB staff and Treasury officials also told us that OMB and Treasury have taken steps to address issues we previously reported related to their oversight of agencies’ implementation of the DATA Act. For example, we recommended in April 2017 that OMB and Treasury take appropriate actions to establish mechanisms to assess the results of independent audits and reviews of agencies’ compliance with the DATA Act requirements. The DATA Act Audit Collaboration working group is one of the mechanisms OMB and Treasury use to assess and discuss the results of independent audits and to address identified issues. In November 2017, we also recommended, among other things, that Treasury (1) reasonably assure that ongoing monitoring controls to help ensure the completeness and accuracy of agency submissions are designed, implemented, and operating as designed, and (2) disclose known data quality issues and limitations on the new USAspending.gov. Treasury has taken some steps and is continuing to take steps to address these recommendations. For example, under the data quality section of the About page on USAspending.gov, Treasury disclosed the requirement for each agency OIG to report on its agency’s compliance with the DATA Act and noted the availability of the reports at Oversight.gov. We provided a draft of this report to OMB, Treasury, and CIGIE for comment. We received written comments from CIGIE that are reproduced in appendix III and summarized below. In addition, OMB, Treasury, and CIGIE provided technical comments, which we incorporated as appropriate. In its written comments, CIGIE noted that the report provides useful information on OIG efforts to meet oversight and reporting responsibilities under the DATA Act. CIGIE further stated that it believes that the report will contribute to a greater understanding of the oversight work that the OIG community performs and of agency efforts to report and track government-wide spending more effectively. We are sending copies of this report to the Director of the Office of Management and Budget, the Secretary of the Treasury, the Chairperson and Vice Chairperson of the Council of the Inspectors General on Integrity and Efficiency, as well as interested congressional committees and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-9816 or rasconap@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The Digital Accountability and Transparency Act of 2014 (DATA Act) includes provisions requiring us to review the Offices of Inspector Generals’ (OIG) mandated reports and issue our own reports assessing and comparing the completeness, timeliness, accuracy, and quality of the data that federal agencies submit under the act and the federal agencies’ implementation and use of data standards. We issued our first report on data quality in November 2017, as required. This report includes our review of the OIGs’ mandated reports, which were also issued primarily in November 2017. Our reporting objectives were to describe 1. the reported scope of work covered and type of audit standards OIGs used in their reviews of agencies’ DATA Act spending data; 2. any variations in the reported implementation and use of data standards and quality of agencies’ data, and any common issues and recommendations reported by the OIGs; and 3. the actions, if any, that the Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) have reported taking or planning to take to use the results of OIG reviews to help monitor agencies’ implementation of the act. To address our first and second objectives, we obtained and reviewed 53 OIG reports that were issued on or before January 31, 2018, including reports related to 24 Chief Financial Officers Act of 1990 (CFO Act) agencies and 29 non-CFO Act agencies. Of 91 entities for which second quarter fiscal year 2017 spending data were submitted, we did not obtain and review OIG DATA Act reports for 38 entities with obligations totaling at least $1.2 billion (as displayed on USAspending.gov on May 23, 2018) because no reports for those entities were publicly available by our January 31, 2018, cutoff date. Table 3 lists the 53 agencies for which we obtained and reviewed the OIG reports on the quality of data that agencies submitted in accordance with DATA Act requirements. We also developed and conducted a survey of OIGs to provide further details on the design and results of their efforts to conduct statistical samples to select and test agencies’ data submissions and reviews of internal controls. In November 2017, we sent the survey to those OIGs whose agencies originally submitted DATA Act data to Treasury’s DATA Act broker. We received and reviewed responses from the 53 OIGs that we obtained reports from, with 9 OIGs including the completed surveys in their published reports and the others providing us their completed survey responses separately. We analyzed 53 OIG reports and survey responses, following up with OIGs for clarification when necessary. We reviewed each of the 53 OIG reports we obtained and identified the reported scope of work covered (e.g., the quarter of data reviewed) and the type of audit standards OIGs used to conduct their reviews (e.g., performance audit or attestation examination engagement). We also developed and used a data collection instrument to compile and summarize the conclusions and opinions included in the OIG reports on the completeness, timeliness, accuracy, and quality of agencies’ data submissions and their implementation and use of data standards. During this process, GAO analysts worked in teams of three to reach a consensus on how these OIG conclusions and opinions were categorized. For OIG reports that did not specifically state whether the agencies met the DATA Act requirements, we considered the reported results in conjunction with the more detailed information provided in the OIG responses to our survey and made conclusions about the OIGs’ assessments based on our professional judgment. We also reviewed the OIG reports and survey responses and used two data collection instruments to compile, analyze, and categorize common issues or agency-specific control deficiencies the OIGs identified in their reviews and recommendations they made to address them. During this process, GAO analysts worked in teams of three to obtain a consensus in how these issues and deficiencies were categorized. To address our third objective, we interviewed OMB staff and Treasury officials about how they used or planned to use the results of the OIG DATA Act reviews to assist them in their monitoring of agencies’ implementation of the act. We conducted this performance audit from September 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In their survey responses, Offices of Inspector General (OIG) for 45 agencies reported actual overall error rates or estimated error rates and estimated ranges of errors associated with the spending data transactions they tested for accuracy, completeness, or timeliness (see table 4). These results include OIGs that tested a statistical sample of transactions, tested the full population, and conducted an assessment of internal controls without additional substantive testing. OIGs that tested a sample responded that they used different sampling criteria, and the sources of files they used to select their statistical samples varied based on the files that were available. Regardless of whether the OIG tested a sample or the full population, some of the OIGs selected items for testing from File C, File D1, File D2, or some combination thereof. As a result, the overall error rates the OIGs reported are not from the same data submission files and are not fully comparable, but are intended to provide additional information on the individual results of the completeness, timeliness, and accuracy of the data each agency OIG tested. In addition to the contact named above, Michael LaForge (Assistant Director), Diane Morris (Auditor in Charge), Umesh Basnet, Thomas Hackney, and Laura Pacheco made major contributions to this report. Other key contributors include Dave Ballard, Carl Barden, Maria Belaval, Jenny Chanley, Patrick Frey, Ricky Harrison, Jason Kelly, Jason Kirwan, Quang Nguyen, Samuel Portnow, Carl Ramirez, Anne Rhodes-Kline, and Dacia Stewart. DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness and Accuracy of Spending Data and Disclose Limitations. GAO-18-138. Washington, D.C.: November 8, 2017. DATA Act: As Reporting Deadline Nears, Challenges Remain That Will Affect Data Quality. GAO-17-496. Washington, D.C.: April 28, 2017. DATA Act: Office of Inspector General Reports Help Identify Agencies’ Implementation Challenges. GAO-17-460. Washington, D.C.: April 26, 2017. DATA Act: Implementation Progresses but Challenges Remain. GAO-17- 282T. Washington, D.C.: December 8, 2016. DATA Act: OMB and Treasury Have Issued Additional Guidance and Have Improved Pilot Design but Implementation Challenges Remain. GAO-17-156. Washington, D.C.: December 8, 2016. DATA Act: Initial Observations on Technical Implementation. GAO-16- 824R. Washington, D.C.: August 3, 2016. DATA Act: Improvements Needed in Reviewing Agency Implementation Plans and Monitoring Progress. GAO-16-698. Washington, D.C.: July 29, 2016. DATA Act: Progress Made but Significant Challenges Must Be Addressed to Ensure Full and Effective Implementation. GAO-16-556T. Washington, D.C.: April 19, 2016. DATA Act: Data Standards Established, but More Complete and Timely Guidance Is Needed to Ensure Effective Implementation. GAO-16-261. Washington, D.C.: January 29, 2016. DATA Act: Progress Made in Initial Implementation but Challenges Must be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July 29, 2015.", "summary": "The DATA Act was enacted to increase accountability and transparency and, among other things, expanded on the required federal spending information that agencies are to submit to Treasury for posting to a publicly available website. The act also includes provisions requiring a series of oversight reports by agencies' OIGs and GAO. The objectives of this report are to describe (1) the reported scope of work covered and type of audit standards OIGs used in their reviews of agencies' DATA Act spending data; (2) any variations in the reported implementation and use of data standards and quality of agencies' data, and any common issues and recommendations reported by the OIGs; and (3) the actions, if any, OMB and Treasury have reported taking or planning to take to use the results of OIG reviews to help monitor agencies' implementation of the act. To address these objectives, GAO reviewed 53 OIG reports issued on or before January 31, 2018, that assessed agencies' first submissions of spending data for the second quarter of fiscal year 2017 and surveyed the OIGs to obtain additional information. The Digital Accountability and Transparency Act of 2014 (DATA Act) requires agencies' Offices of Inspector General (OIG) to issue reports on their assessments of the quality of the agencies' spending data submissions and compliance with the DATA Act. The scope of all OIG reviews covered their agencies' second quarter fiscal year 2017 submissions. The files the OIGs used to select and review sample transactions varied based on data availability, and OIGs performed different types of reviews under generally accepted government auditing standards. Some OIGs reported testing a statistical sample of transactions that their agencies submitted and other OIGs reported testing the full population of submitted transactions. Because of these variations, the overall error rates reported by the OIGs are not fully comparable and a government-wide error rate cannot be projected. According to the OIG reports, about half of the agencies met Office of Management and Budget (OMB) and Department of the Treasury (Treasury) requirements for the implementation and use of data standards. The OIGs also reported that most agencies' first data submissions were not complete, timely, accurate, or of quality. OIG survey responses show that OIGs generally reported higher (projected) overall error rates for the accuracy of data than for completeness and timeliness. OIGs reported certain errors that involve inconsistencies in how the Treasury broker (system that collects and validates agency-submitted data) extracted data from certain federal award systems that resulted in government-wide issues outside the agencies' control, while other errors may have been caused by agency-specific control deficiencies. For example, OIGs reported deficiencies related to agencies' lack of effective procedures or controls and systems issues. Most OIGs made recommendations to agencies to address identified concerns. OMB staff and Treasury officials told GAO that they reviewed the OIG reports to better understand issues identified by the OIGs. OMB issued new guidance in June 2018 requiring agencies to develop data quality plans intended to achieve the objectives of the DATA Act. Treasury officials told GAO that they are collaborating with OMB and the Chief Financial Officers Council DATA Act Audit Collaboration working group to identify and resolve government-wide issues. GAO is not making recommendations in this report. The Council of the Inspectors General on Integrity and Efficiency (CIGIE) noted that GAO's report provides useful information on OIG efforts to meet oversight and reporting responsibilities under the DATA Act. OMB, Treasury, and CIGIE also provided technical comments that GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "Territorial governments issue debt securities and receive loans for a variety of purposes, including to finance long-term investments, such as infrastructure projects, and to fund government operating costs. For the purposes of this report, total public debt outstanding refers to the sum of bonds and other debt held by and payable to the public, as reported in the territories’ single audit reports. Bonds payable are marketable bonded debt securities issued by the territories’ primary governments or their component units and held by investors outside those governments. The primary government is generally comprised of governmental activities (generally financed with taxes and intergovernmental aid) and business- type activities (generally financed with charges for goods and services). Component units are legally separate entities for which a government is financially accountable. For the purposes of this report, any reference to total government activity and balances includes both the primary government and component units. Other debt payable may include shorter term marketable notes and bills issued by territorial governments and held by investors outside those governments, non-marketable intragovernmental notes, notes held by local banks, federal loans, intragovernmental loans, and loans issued by local banks. Pension liabilities and other post-employment benefits (OPEB) are not included in our definition of total public debt. Marketable debt securities, primarily bonds with long-term maturities, are the main vehicle by which the territories access capital markets. Municipal bonds issued by all five territories have traditionally been attractive to investors because they are triple tax exempt; interest from the bonds is generally not subject to federal, state, and local income taxes regardless of an investor’s state of residence. There are several different types of marketable debt securities: General obligation bonds are bonds issued by territorial governments that are payable from the general funds of the issuer, although the precise source and priority of payment for general obligation bonds may vary considerably from issuer to issuer depending on applicable law. Most general obligation bonds are said to entail the full faith and credit (and in many cases the taxing power) of the issuer, depending on applicable law. In USVI, unlike in the other four territories in which general obligations bonds are backed by the full faith and credit of the government, debt issued by the primary government is either backed by 1) both a general obligation of the government and revenue from USVI’s gross receipts tax, or 2) revenue from the federal excise tax on rum rebated to the territory. Limited obligation bonds are bonds payable from specific taxes that are limited by law in rate or amount, while revenue bonds are payable from specific sources of revenue. Marketable notes differ from bonds in that they are short-term obligations of an issuer to repay a specified principal amount on a certain date, together with interest at a stated rate, usually payable from a defined source of anticipated revenues. Notes usually mature in 1 year or less, although notes of longer maturities are also issued. Bonds and notes may be issued by both the territories’ primary governments and by their component units. Examples of the territories’ component units are USVI’s Water and Power Authority, Guam’s Airport Authority, CNMI’s Ports Authority, and Puerto Rico’s Electric Power Authority. Unlike the states, territories are prohibited from authorizing their component units to seek debt restructuring under Chapter 9 of the federal bankruptcy code, which can be used to extend the timeline for debt repayment, refinance debt, or reduce the principal or interest on existing debt. U.S. law restricts the territories’ authority to impose certain territorial taxes. Three territories—Guam, CNMI, and USVI—are required by U.S. law to have a mirror tax code. In general this means that these territories must use the U.S. Internal Revenue Code (IRC) as their territorial income tax law. In contrast, American Samoa and Puerto Rico, which are not bound by a mirror tax code, have established and promulgated their own income tax regulations. Although Guam and CNMI are mirror-code jurisdictions, they are authorized under the Tax Reform Act of 1986 to delink from the IRC if certain conditions are met. Revenues are amounts that result from governments’ exercise of their sovereign power to tax or otherwise compel payment. Revenues also include income generated by the territories’ component units. While our analysis primarily focuses on trends in general revenues, we also include total revenue—general revenues and program revenues combined—in our analysis. In addition to general revenue levels, another measure of fiscal health is the net position for primary government activities, which represents the difference between the primary government’s assets (including the deferred outflows of resources) and the primary government’s liabilities (including the deferred inflows of resources). In other words, the net position for primary government activities reflects what the primary government would have left after satisfying its liabilities. A negative net position means that the primary government has more liabilities than assets. A decline in net position may indicate a deteriorating financial position. While our analysis primarily focuses on trends in the net position for the primary government, we also include certain information on trends in the total net position—primary government net position and component unit net position combined— for the government. Fiscal risks refer to responsibilities, programs, and activities that may legally commit or create the expectation for future government spending. Fiscal risks may be explicit in that the government is legally required to fund the commitment, or implicit in that an exposure arises not from a legal commitment, but from current policy, past practices, or other factors that may create the expectation for future spending. Civilian pension benefits are typically an example of an explicit fiscal risk because the government has a legal commitment to pay pension benefits earned by current government employees who will receive benefits in the future and to pay retirees who currently receive benefits. Puerto Rico’s total public debt outstanding increased continuously between fiscal years 2005 and 2014. (See figure 2.) Total public debt grew from $39.2 billion in fiscal year 2005 to $67.8 billion at the end of fiscal year 2014 —an average rate of 6.3 percent per year. Bonded debt outstanding —including mainly general obligation and revenue bonds—represented the majority of total public debt outstanding for all years. Bonded debt outstanding averaged 86 percent of total public debt between fiscal years 2005 and 2014, increasing from a total of $35 billion in fiscal year 2005 to $58.5 billion in fiscal year 2014. Puerto Rico’s Consolidated Audited Financial Report for fiscal year 2015 was not available as of June 2017. However, in the March 13, 2017, fiscal plan released by the Government of Puerto Rico, total public debt outstanding was listed as $74.3 billion as of February 2017. As of fiscal year 2014, the primary government’s bonded debt outstanding was mainly comprised of revenue bonds. These accounted for $24.3 billion of the $37.9 billion in total bonded debt. In contrast, between fiscal years 2005 and 2008, general obligation bonds represented the majority of the primary government’s bonded debt. In fiscal year 2009, the amount of revenue bonds outstanding tripled. The risks of general obligation bonds and revenue bonds are different. A revenue bond is secured by a specific revenue stream, identified in the bond contract, whereas a general obligation bond is secured by the full taxing power of the government, but also reliant on the full faith and credit of the issuing government. Puerto Rico also issued notes between fiscal years 2005 and 2014. Puerto Rico’s primary government and the three largest component units—the Puerto Rico Electric Power Authority (PREPA), the Puerto Rico Aqueduct and Sewage Authority (PRASA), and the Puerto Rico Highways and Transportation Authority (PRHTA)—owed the majority of Puerto Rico’s public debt outstanding in fiscal year 2014. (See table 1.) These component units mostly issued debt backed by their own resources, including the revenue generated from their operations. Other component units also held public debt in fiscal year 2014, including the Government Development Bank, State Insurance Fund Corporation and the Puerto Rico Trade and Export Company, among others. The primary government’s share of total public debt outstanding grew relative to debt owed by all of the component units from 44 percent in fiscal year 2005 to 59 percent in fiscal year 2014. Puerto Rico’s total public debt outstanding as a percentage of Gross Domestic Product (GDP) grew from 47 percent in fiscal year 2005 to 66 percent in fiscal year 2014, and its ratio of total public debt outstanding to Gross National Product (GNP) grew from 71 percent of GNP in fiscal year 2005 to 99 percent in fiscal year 2014. (See figure 3.) GDP measures the value of goods and services produced inside a country, or for the purpose of this report, a territory. In contrast, GNP measures the value of goods and services produced by its residents. GNP includes production from residents abroad and excludes production by foreign companies in a country. In Puerto Rico, GDP has consistently been greater than GNP, which means that production by foreign companies in Puerto Rico is larger than production by Puerto Rican residents in the territory and abroad. For this reason, according to the U.S. Department of the Treasury, GNP is generally a more representative measure of Puerto Rico’s economic activity than GDP. A July 2014 report by the Federal Reserve Bank of New York stated that debt to GNP ratios above just 60 percent can inhibit economic growth because they generally lead to higher financing costs and limit access to other sources of financing. Puerto Rico’s share of total public debt outstanding to GNP has remained above 90 percent since 2010. Puerto Rico’s total public debt outstanding per capita has almost doubled since fiscal year 2005, rising from $10,000 per person in fiscal year 2005 to $19,000 per person in fiscal year 2014. (See figure 4.) Puerto Rico’s general revenue fluctuated between fiscal years 2005 and 2014, with lows around $11.6 billion between fiscal years 2008 and 2010 and again in 2013. Puerto Rico’s general revenue in fiscal year 2014 was $13.8 billion, of which 75 percent or $10.3 billion was tax revenue. Most of the tax revenue for the same year was reported as income taxes (52 percent of the total or $5.4 billion) and excise taxes (33 percent of the total or $3.4 billion.) Revenue in fiscal year 2014 increased by over $2 billion from the prior year. The majority of this growth was due to increases in income and excise taxes. Puerto Rico’s total revenue (i.e. general revenue and program revenue combined) also fluctuated but grew slightly by 3 percent on average, per year, from $25.5 billion in fiscal year 2005 to $32.5 billion in fiscal year 2014. (See figure 5.) Despite the growth in revenue in fiscal year 2014, Puerto Rico’s net position for the primary government as of fiscal year end 2014 was a negative $49.7 billion, declining from a negative $46.4 billion as of fiscal year end 2013. Moreover, despite the fluctuations in revenue between fiscal years 2005 and 2014, Puerto Rico’s net position for the primary government declined year over year from a negative $15.2 billion as of fiscal year end 2005 to a negative $49.7 billion as of fiscal year end 2014. Puerto Rico’s declining net position for the primary government reflects its deteriorating financial position. Further, the effect of Puerto Rico implementing Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions —An Amendment of GASB Statement No. 27, is not yet known. GASB Statement No. 68 was in effect for fiscal years beginning after June 15, 2014, and established standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources related to pensions. For each of the other territories that implemented GASB Statement No. 68, implementing the statement resulted in the territory recognizing previously unrecognized net pension liabilities and, therefore, a decline in ending net position in the year of recognition. Puerto Rico’s total net position for the primary government and component units combined also declined year over year between fiscal years 2005 and 2014, from a positive $2.5 billion as of fiscal year end 2005 to a negative $43.6 billion as of fiscal year end 2014. Puerto Rico officials, representatives from ratings agencies that we spoke to, and publically available reports that we reviewed cited various major factors as contributors to Puerto Rico’s high debt levels. The factors cited include the following: Public debt financing government operations: Ratings agency officials told us that Puerto Rico has long used public debt as a means to finance general government operations and indicated that debt has been used for this purpose in Puerto Rico since at least 2000. According to these officials, the sustained use of debt to finance general government operations is unusual when compared to states and was considered a “red flag” in the case of Puerto Rico. As Puerto Rico’s debt grew, the government found it increasingly difficult to meet other responsibilities, including paying tax returns, settling accounts payable, and fulfilling pension obligations. Triple tax exempt status: Debt in Puerto Rico was attractive to investors for its triple tax exempt status. Over time, Puerto Rico’s primary government accumulated debt from investors without addressing its persistent deficits. According to the February 28, 2017, version of the Puerto Rico government’s fiscal plan, Puerto Rico’s capacity to issue debt at favorable rates postponed the implementation of fiscal reforms and controls necessary to balance Puerto Rico’s budget. Financial data limitations: A lack of comprehensive, timely, and accurate financial data from Puerto Rico may have limited the ability of some investors to anticipate or fully understand the economic crisis in the territory. For example, according to the Government of Puerto Rico’s February 28, 2017, version of the fiscal plan, audited financial statements for Puerto Rico were only issued on time three times from 2005 to 2014. Audited financial statements are still currently pending for fiscal years 2015 and 2016. In addition, forecasts routinely overestimated revenue. Recession and outmigration: Recession and outmigration have resulted in reduced tax revenue. A recession in Puerto Rico began in 2006 and continued through the period we reviewed. Outmigration also accelerated most years since 2005 as Puerto Ricans migrated to the U.S. mainland and elsewhere. According to U.S. Census Bureau estimates, Puerto Rico lost 14 percent of its population, more than 550,000 individuals, between July 2009 and July 2016. 936 tax credit phase out: The phase out of the section 936 tax credit is often cited by Puerto Rico officials for its negative effect on Puerto Rico’s economy. Other experts said the effect was not as significant. In addition, in 2006, we reported that the expiration of the benefit did not ultimately lead to a reduction in income and value added. A substantial share of production in Puerto Rico is carried out by U.S. multinational corporations, in part because of federal corporate income tax benefits, once available to firms located in Puerto Rico. Prior to 1994, certain U.S. corporations could claim the possessions tax credit under section 936 of the Internal Revenue Code (IRC). In general, the credit equaled the full amount of federal tax liability related to an eligible corporation’s income from its operations in a possession—including Puerto Rico—effectively making such income tax-free. In 1993, caps were placed on the amount of possessions credits that corporations could earn. In 1996, the credit was repealed, although corporations that were existing credit claimants were eligible to claim credits through 2005. Puerto Rico had missed up to $1.5 billion in debt service payments as of September 2016. Puerto Rico’s government is working with the Financial Management and Oversight Board (Board) to implement plans for long- term financial reform and to adjust debts accrued by both the primary government and public corporations. The Board has the power to approve or certify fiscal plans, budgets, voluntary agreements with bondholders, debt restructuring plans, and critical projects within Puerto Rico. As the first step in a process to adjust debts in Puerto Rico, the Board certified the current Governor’s fiscal plan in March 2017, which outlines strategies for financial reform. The fiscal plan includes estimates for how much each year can be allocated for debt payments, which average 23 percent of total debt payments due for the years 2018 through 2026. (See figure 6.) On May 3, 2017, the Board filed an initial petition for restructuring Puerto Rico’s debt and pension liabilities. Puerto Rico’s ultimate liability for its outstanding debt will be determined based on the outcome of this process in federal court. American Samoa’s total public debt outstanding grew from $27 million in fiscal year 2005 to $69.5 million in fiscal year 2015. Until fiscal year 2015, the portion of American Samoa’s total public debt outstanding that was bonded debt outstanding was limited. (See figure 7.) In fiscal year 2007, the territory paid off a general obligation bond that was issued in fiscal year 2000 to refinance prior debt. Between fiscal years 2008 and 2014, American Samoa had no outstanding bonded public debt. In fiscal year 2015, American Samoa’s primary government issued a general obligation bond for about $55 million, and in January 2016 a second bond was issued for $23 million. Most of American Samoa’s bonded debt outstanding is scheduled to mature by 2035. Between fiscal years 2005 and 2015, American Samoa’s loan balance was significantly greater than bonded debt outstanding for all years except fiscal year 2015. American Samoa’s loan balance consists of both loans from the U.S. government and intragovernmental loans, or loans between the territory’s primary government and component units. Between fiscal years 2005 and 2015, this included 1993 and 1994 Federal Emergency Management Agency community disaster loans totaling $10.2 million and a 1999 Department of the Interior loan in the amount of $18.6 million. In 2006 and 2007, the primary government also entered into two loan agreements with the government retirement fund, in the amounts of $10 million and $20 million, in part to finance infrastructure projects. American Samoa’s total public debt outstanding has remained small relative to its economy between fiscal years 2005 and 2015. During this period, American Samoa’s total public debt outstanding as a percentage of GDP was 5.3 percent in fiscal year 2005, reached a low of 4.4 percent in fiscal year 2014, and grew to 10.9 percent in fiscal year 2015. During this same period, bonded debt outstanding as a share of GDP was 1.3 percent in fiscal year 2005, declined to 0.44 percent in fiscal year 2007 and remained at 0 percent between fiscal years 2008 and 2014. The new bond issuance in fiscal year 2015 increased the share to 8.6 percent. (See figure 8.) Total public debt per capita grew from $414 per person in fiscal year 2005 to $1,212.8 in fiscal year 2015. (See figure 9.) American Samoa’s general revenue fluctuated, but trended upward between fiscal years 2005 and 2015. American Samoa’s general revenue of $116.5 million in fiscal year 2015 represented a 20 percent increase over its revenue of $97.4 million in fiscal year 2005. Approximately 55 percent of the general revenue earned by American Samoa during this period was comprised of tax revenue, and all of the tax revenue was from income and excise taxes. American Samoa’s total revenue (i.e. general revenue and program revenue combined) also fluctuated but trended upward between fiscal years 2005 and 2015. Its total revenue of $436.4 million in fiscal year 2015 represented a 55 percent increase over its total revenue of $281.8 million in fiscal year 2005. According to territory officials, growth in revenue during this period can be attributed in part to revenue generated by stimulus funding the territory received as part of the American Recovery and Reinvestment Act of 2009. (See figure 10.) Along with the growth in revenue, American Samoa’s net position for the primary government was consistently positive and generally improving between fiscal years 2005 and 2014. American Samoa’s net position for the primary government generally improved year over year from a positive $217.7 million as of fiscal year end 2005 to a positive $291.9 as of fiscal year end 2014; it then declined to a positive $245.1 million as of fiscal year end 2015. American Samoa’s net position for the primary government as of fiscal year end 2014 is shown prior to restatement. In fiscal year 2015, American Samoa implemented GASB Statement No. 68 and adjusted its beginning net position by $60.1 million, resulting in a restated net position as of fiscal year end 2014 of a positive $240.8 million. The implementation of GASB Statement No. 68 resulted in the territory recognizing previously unrecognized net pension liabilities and, therefore, a decline in ending net position in the year of recognition. American Samoa’s total net position for the primary government and component units combined was also consistently positive and generally improving between fiscal years 2005 and 2015. It increased from $317.9 million as of fiscal year end 2005 to $450.2 million as of fiscal year end 2015. The territory has previously faced financial management challenges, including failures to meet revenue projections and deficiencies in forecasting expenditures. Territory officials said, however, that they are taking a number of steps to improve forecasting. In early 2015, officials convened a task force in Hawaii to develop a plan to improve the management of American Samoa’s finances. As part of the effort to improve forecasting, the plan requires the treasury and budget departments to meet on a monthly basis to reconcile actual revenues and expenditures and brief the Governor. If revenues are below projections, the Governor may instruct all government departments to reduce spending by an additional 5-10 percent. In addition, officials told us that the territory is planning to procure a contractor in fiscal year 2017 to help further improve its revenue and spending forecasts. According to territory officials, American Samoa has never issued debt to fund government operating costs and does not intend to do so. Territory officials confirmed that the fiscal year 2015 and 2016 general obligation bonds were issued primarily to fund various infrastructure projects, including relocating airport fuel tanks, constructing an inter-island ferry, and establishing a territorial charter bank. While American Samoa’s level of public debt is relatively low compared to other territories, we found that it faces significant economic vulnerabilities that may hamper its ability to repay that debt. According to territory officials and our prior work, American Samoa’s economy relies heavily on the tuna processing and canning industry. In December 2016, we reported that canneries employed about 14 percent of American Samoa’s workforce in 2014. Moreover, we found that the canneries provided a number of indirect benefits to other industries and the economy in American Samoa. For example, other businesses exist because of the canneries, such as the company that manufactures the cans. Maintenance for the canneries and for the vessels that supply the canneries also has brought business and jobs to the island. Cannery workers spend money at local establishments, such as restaurants and retail stores. Additionally, exported cannery products and delivery of materials to the canneries reduced the shipping cost of bringing other goods to American Samoa. We also reported that the tuna canning industry faces a number of challenges; in addition territory officials expressed concerns about federal policies that may hamper American Samoa’s tuna industry, such as scheduled minimum wage increases that increase labor costs for tuna canning in American Samoa relative to other locations, decreased access to fishing grounds in the Pacific due to environmental regulations, and potential erosion of the territory’s preferential trade status. In October 2016, one of the two companies with canning operations in American Samoa announced that it would indefinitely suspend its operations in the territory, and the other temporarily suspended operations twice during the same year. Changes in American Samoa’s tuna industry have been important determinants of changes in its GDP, and additional disruptions in the industry would reduce revenue and hamper GDP growth, which, if severe enough, could impede the repayment of existing debt. In part because of such challenges, Moody’s Investor Services assigned a noninvestment grade rating to the territory’s bonds in early 2016. According to the rating agency, this downgrade reflected concerns associated with the territory’s small and volatile economy, low income levels, weak financial position, and financial management challenges. Territory officials told us that the Puerto Rico debt crisis has affected their access to favorable rates in capital markets, and said that they currently do not have plans to issue any more bonded debt. CNMI’s total public debt outstanding declined from $251.7 million in fiscal year 2005 to $144.7 million in fiscal year 2015. (See figure 11.) During this time, CNMI’s primary government issued one general obligation bond in the amount of about $100.5 million in fiscal year 2007. This general obligation bond refinanced two prior bonds that were issued in fiscal years 2000 and 2003. Most of CNMI’s bonded debt outstanding is scheduled to mature in 2030 or later. Between fiscal years 2005 and 2015, CNMI’s total public debt outstanding as a share of GDP grew from 23 percent in fiscal year 2005 to 26 percent in fiscal year 2007, and then declined to 16 percent in fiscal year 2015. Bonded debt outstanding as a share of GDP was 14 percent in both fiscal years 2005 and 2015, but reached 19 percent in fiscal year 2011. (See figure 12.) CNMI’s total public debt outstanding per capita declined from about $4,199 per person in fiscal year 2007 to about $2,776 per person in fiscal year 2015. (See figure 13.) CNMI’s general revenue fluctuated between fiscal years 2005 and 2015. General revenues declined by about 39 percent between fiscal years 2005 and 2011, largely due to the decline in the territory’s garment industry. (See figure 14.) General revenues have steadily increased since fiscal year 2011, primarily as a result of growth in the tourism sector. Data from the Marianas Visitor Authority show that the downward trend in Japanese visitors from 2013 to 2016 was offset by the growth in visitors from China and South Korea. The tourist industry has also been boosted by the introduction of a new casino. In August 2014, the CNMI government entered into a casino license agreement to construct a development project that will include a hotel with a minimum of 2,004 guest rooms and areas for gaming, food, retail, and entertainment, among other things. CNMI’s total revenue (i.e. general revenue and program revenue combined) also fluctuated between fiscal years 2005 and 2015. Total revenue reached a high of $635.7 million in fiscal year 2014 and then declined to $573.8 million in fiscal year 2015, which represented only a one percent increase over the fiscal year 2005 revenue of $567.9 million. While general revenue fluctuated, dipping then rebounding between fiscal years 2005 and 2015, CNMI’s net position for the primary government has been negative and generally trending downward. Specifically, CNMI’s net position for the primary government declined from a negative $38.1 million as of fiscal year end 2005 to a negative $215.4 million as of fiscal year end 2015. CNMI’s net position for the primary government has been negative by over $200 million for each fiscal year since 2010, but it showed a slight improvement between fiscal years 2011 and 2013 and in fiscal year 2015. CNMI’s total net position for the primary government and component units combined fluctuated but generally remained stagnant, increasing slightly from $281.6 million as of fiscal year end 2005 to $284.8 million as of fiscal year end 2015. CNMI’s Constitution prohibits public indebtedness for operating expenses of the CNMI government or its political subdivisions. In addition, the territory’s legislature must approve any bond issuances and the value of any bonds issued cannot exceed 10 percent of the assessed value of real property within CNMI. In fiscal year 2007, the primary government of CNMI issued one general obligation bond to refinance two bonds originally issued in 2000 and 2003. Both the 2000 and 2003 bonds were issued to finance various infrastructure improvement projects. The 2003 issuance was also used for a onetime payment to settle land claims for the appropriation of private lands for public use. Component units in CNMI also issue debt. In 2007, the Commonwealth Ports Authority, which is responsible for operating, maintaining, and improving all airports and seaports in CNMI, issued a bond for about $7.2 million. The proceeds of the bond were used in part to pay for improvements to seaport facilities at Saipan Harbor. While CNMI’s economic outlook has improved, with GDP increasing 3 years in a row since 2013, we found that the territory faces growing labor shortages that may affect its ability to repay public debt in the future. In May 2017, we reported that CNMI’s economy relies heavily on a foreign workforce and foreign workers comprised a majority of the territory’s workforce in 2015. The Consolidated Natural Resources Act of 2008, among other things, established federal control of CNMI immigration beginning in 2009. The act established a transition period with special provisions for foreign visitors, investors, and workers. Specifically, it required the U.S. Department of Homeland Security (DHS) to establish a temporary work permit program for foreign workers and to reduce annually the number of permits issued, reaching zero by the end of the transition period—now set to occur on December 31, 2019. We analyzed the economic effect of removing all permitted foreign workers from CNMI’s economy using the most recent GDP information available from calendar year 2015. Depending on assumptions made, with no permitted workers CNMI’s GDP in 2015 would have hypothetically declined by 26 to 62 percent. Planned reductions in permitted workers could worsen the effect on GDP going forward and hamper the territory’s ability to repay existing debt. CNMI also has significant pension liabilities, but the exact amount of the net pension liability is not included in the territory’s most recent single audit report because the government has not complied with accounting standards that require it to do so. In 2013, a U.S. district court approved a settlement agreement with the territory’s government pension plan, which applied for bankruptcy in 2012. As part of the settlement, CNMI agreed to make minimum annual payments to the fund to allow members to receive 75 percent of their full benefits. In addition to the settlement plan, CNMI appropriated $25 million of casino license fees to fund the restoration of the 25 percent reduction of the retirees’ and beneficiaries’ pensions, among other purposes. CNMI made one payment of $27 million and another payment of $19.4 million to the fund in fiscal year 2015. Territory officials told us they are planning to market a $45 million general obligation bond in 2017 to provide additional financing for the pension fund. They added, however, that they currently have no plans to issue debt for other purposes, such as infrastructure projects, because of uncertainty in the labor market. In 2012, Moody’s Investor Services confirmed CNMI’s general obligation bond ratings as non-investment grade, which was downgraded in 2009. According to the rating agency, the 2012 rating was due to losses in the territory’s garment industry, consistent operating deficits, and increasing unfunded pension liabilities. Guam’s total public debt outstanding increased from almost $1 billion in fiscal year 2005 to $2.5 billion fiscal year 2015, with the majority of the increase occurring between fiscal years 2008 and 2015 when total outstanding public debt grew 13 percent on average per year. (See figure 15.) In fiscal year 2015, 54 percent of Guam’s total public debt outstanding was issued by component units. Territory officials told us component unit debt is backed solely by the revenue component units generate and cannot be used to service debt issued by the primary government. The majority of Guam’s total public debt is in the form of bonds. Bonded debt outstanding comprised between 93 and 97 percent of total public debt outstanding from fiscal years 2005 through 2015. Most of Guam’s bonded debt outstanding will mature in 2027 or afterwards. The remainder of Guam’s public debt outstanding between fiscal years 2005 and 2015 was primarily comprised of notes and loans, including loans from the federal government. Between fiscal years 2005 and 2015, Guam’s total public debt outstanding as a share of GDP increased from 24 percent to 44 percent, with bonded debt outstanding growing similarly from 22 percent of GDP to 42 percent. (See figure 16.) Both total public debt and bonded public debt outstanding per capita more than doubled between fiscal years 2005 and 2015. Total public debt outstanding per capita rose from about $6,270 per person to $15,323 per person, while bonded public debt outstanding increased from $5,810 per person to $14,759 per person. (See figure 17.) Guam’s general revenue grew by 6 percent on average, per year, between fiscal years 2005 and 2015, from $573.2 million to $862.7 million. General revenue declined sharply in fiscal year 2006, recovered in fiscal year 2007, and then increased steadily through fiscal year 2015. According to territory officials, this increase in revenue can largely be attributed to economic development, with significant growth in tourism and new construction. A 2015 report to Guam’s bondholders noted that there was an increase in visitors to the island each month between 2014 and 2015. The report attributed this increase to several factors, such as the expanded number of airline routes to Guam, the favorable exchange rate for Asian visitors, and the relative improvement of the overall global economy. Guam’s total revenue, or general revenue and program revenue combined, also grew by 5 percent on average, per year, between fiscal years 2005 and 2015, from $1.4 billion to $2.2 billion. (See figure 18.) To project revenues, Guam officials use a model comprised of statistical weights that are calculated and assigned to each revenue source, which is derived from historical collections data from the prior fiscal years. While revenue generally grew, Guam’s net position for the primary government fluctuated significantly between fiscal years 2005 and 2015. Since fiscal year end 2006, Guam’s net position for the primary government has been negative and trending downward. Specifically, Guam’s net position for the primary government declined from a positive $79.8 million as of fiscal year end 2005 to a negative $194.2 million as of fiscal year end 2012. Net position improved significantly and was positive in fiscal years 2013 and 2014, but then declined from a positive $174.4 million as of fiscal year end 2014 to a 10-year low of a negative $670.9 million as of fiscal year end 2015. Guam’s net position for the primary government as of fiscal year end 2014 is shown prior to restatement. In fiscal year 2015, Guam implemented GASB Statement No. 68 and adjusted its beginning net position by $815.6 million, resulting in a restated net position as of fiscal year end 2014 of a negative $641.2 million. The implementation of GASB Statement No. 68 resulted in the territory recognizing previously unrecognized net pension liabilities and, therefore, a decline in ending net position in the year of recognition. Guam’s total net position for the primary government and component units combined also fluctuated significantly. Specifically, Guam’s total net position increased from a positive $788.8 million as of fiscal year end 2012 to a 10-year high of positive $1.2 billion as of fiscal year end 2014. It declined to a 10-year low of positive $47.3 million as of fiscal year end 2015 due to the implementation of GASB Statement No. 68. According to territory officials, Guam’s bonded debt outstanding has primarily been used to comply with federal requirements and court orders. Guam has issued debt in several cases when compelled to meet federal and territorial requirements. For example, since Guam adheres to the mirror tax code, the territory is required to fund the Earned Income Tax Credit (EITC) and is not reimbursed for this by the federal government. In June 2004, the territory agreed to pay $60 million over 9 years in settlement of unpaid EITC refunds from 1996, and in September 2006, the territory reached a new settlement replacing the 2004 agreement in which it agreed to pay up to $90 million. Moreover, in 2006, the Superior Court of Guam held that a territorial statutory provision required the retirement fund for government employees to pay past due annual lump sum Cost of Living (COLA) payments plus interest to eligible retirees and survivors. This resulted in an award of $123.5 million plus interest to those individuals. In response, Guam issued a general obligation bond in 2007 in the amount of $151.9 million to finance these past due tax refunds and outstanding COLA settlement payments, as well as to refinance prior debt and help fund infrastructure projects. In 2009, it issued another general obligation bond in the amount of $271 million for similar purposes. According to a Guam government report, the largest increase in the territory’s indebtedness occurred between fiscal year 2008 and fiscal year 2009, and was due in part to issuing bonds to pay for past due tax refunds and unpaid COLA expenses. In Guam’s 2017 draft debt management policy, the Governor cited the administration’s commitment to ensuring that tax refunds will be paid on time and no later than 6 months after filing. In addition, in February 2004 the U.S. Environmental Protection Agency (EPA) and the Department of Justice filed a consent decree in the U.S. District Court of Guam. The consent decree set forth the settlement terms agreed to by the federal government and Guam settling a lawsuit alleging Guam violated the Clean Water Act. The consent decree included deadlines for opening a new landfill and adopting a dump closure plan. In response to a 2009 District Court order that Guam comply with the terms of the consent order, the territory chose to issue a $202.4 million limited obligation bond to fund closing the Ordot dump and constructing a new landfill to meet the terms of the settlement agreement. Guam also issued revenue bonds between fiscal years 2005 and 2015 to finance infrastructure projects. For example, in 2011 a revenue bond backed by hotel occupancy taxes was issued in the amount of $90.6 million in part to fund the construction of a museum on the island and other projects to benefit Guam’s tourism industry. In addition, in 2013 Guam’s Airport Authority issued $247 million in bonds that were used, in part, to fund airport enhancements. As established under its Organic Act, Guam has the authority to issue bonds, but Guam’s public indebtedness is not authorized or allowed to exceed 10 percent of the aggregate tax valuation of property in the territory; tax valuation of property is currently set at 90 percent of appraised value of property. The limit applies to both general obligation and limited obligation debt. In fiscal year 2007, to increase borrowing capacity to address a $524 million deficit, the government changed the percentage of appraised value which constitutes the assessed value. The debt ceiling still limits the amount of public debt Guam can issue to 10 percent of the aggregate tax valuation of property. However, in September 2007, Guam amended its statutory definition of assessed value from 35 percent of appraised property values to 70 percent. In May 2009, the definition tax valuation of property was again amended to 90 percent of appraised property values. This second increase was imposed so Guam could issue bonds to comply with the requirement to close the Ordot dump and open a new landfill. In fiscal year 2012, the government increased borrowing capacity a third time by amending the definition of assessed value to 100 percent of appraised value in order to fund past due tax refunds. In fiscal year 2016, the statutory definition of assessed value was decreased back down to 90 percent of appraised value. Despite economic growth, we found that Guam faces large fiscal risks related to unfunded pension liabilities and other post-employment benefits (OPEB) that, if unaddressed, may hamper its ability to repay existing debt and increase its need to issue debt. A number of factors may contribute to continued economic growth in Guam. Specifically, according to a government report, visitor arrivals to Guam are projected to continue increasing and higher room rates and occupancy are leading to continued hotel development. Moreover, the Marine Corps has plans to consolidate bases in Okinawa, Japan, and relocate 4,100 Marines to Guam. The Department of Defense (DOD) expects this relocation to Guam to occur between fiscal years 2022 and 2026. Officials from Guam predict that the military buildup will result in significant additional investment in Guam’s economy. In July 2016, DOD agreed to give Guam approximately $55.6 million in grants to fund civilian water and wastewater projects linked to the military buildup; additional investments in the power infrastructure will also be funded by DOD. A 2014 study conducted by the Department of the Navy on the effect of the military buildup on Guam’s economy concluded that it would increase civilian labor force demand, increase civilian labor force income, and increase tax revenues. While it maintained Guam’s debt as investment grade as of 2017, the rating agency Standard and Poor’s expressed concern about Guam’s extremely high debt burden and vulnerability to economic changes in its tourism and military industries. In addition, Guam has large pension and OPEB liabilities that may stress current debt service payment arrangements if anticipated savings from changes to the government pension system are not realized. In fiscal year 2015, pension liabilities were $1.2 billion and OPEB liabilities were $2 billion, 22 and 37 percent of GDP, respectively. Territory officials told us that they have taken a variety of steps to address their unfunded pension and OPEB liabilities. In 1995, the government closed the defined benefit plan to new members with all new employees participating in a defined contribution plan, which resulted in a decrease in accrued liabilities. To address insufficient savings by members in the defined contribution plan, the legislature created two new retirement plans in 2016. The government estimates that the new retirement plans could add an additional $173 million to the pension fund. Territory officials said the government is meeting its actuarial contributions on an annual basis and is on track to pay off the existing unfunded pension liability in approximately 15 years. Between fiscal years 2005 and 2015, USVI’s total public debt outstanding grew by 84 percent, from $1.4 billion to $2.6 billion. (See figure 19.) The sharpest increase was between fiscal years 2008 and 2010. During this period, total public debt outstanding increased by about $800 million, and almost all of USVI’s public debt was in the form of bonds. Bonds issued by USVI’s primary government are either backed by 1) both a general obligation of the government and a gross receipts tax, or 2) an excise tax on rum produced in USVI. Bonds issued by component units are backed by their revenues. Approximately half of USVI’s bonded debt is backed by revenues generated from the excise tax placed on rum imports to the U.S. mainland. Both the primary government and component units issued notes and took out loans during this period. Most of USVI’s bonded debt outstanding is scheduled to mature in 2027 or afterward. USVI’s total public debt outstanding as a percentage of GDP doubled between fiscal years 2005 and 2015, growing from 34 percent to 72 percent. The steepest increases were between 2008 and 2010, when total public debt outstanding as a percentage of GDP increased by 19 percent, and between 2011 and 2014, when it increased by 16 percent. Total public debt outstanding as a share of GDP reached 72 percent in fiscal year 2015. Bonded debt outstanding was 63 percent of GDP in fiscal year 2015. (See figure 20.) Total public debt outstanding per capita also increased during this period. It ranged from about $13,063 per person in fiscal year 2005 to about $25,739 per person in fiscal year 2015. (See figure 21.) USVI’s general revenue showed almost no growth in the 10-year period between fiscal years 2005 and 2015. USVI’s general revenue declined from fiscal years 2008 to 2009 due to the 2008 recession and operating losses at the Hovensa oil refinery, and rebounded in fiscal year 2010 as the economy recovered. General revenue decreased again from fiscal year 2010 to 2011. Between fiscal years 2011 and 2014 revenue increased again. Despite the increase, the fiscal year 2015 general revenue of $919.4 million was only about $43 million greater than that collected 10 years prior. In contrast USVI’s total revenue (i.e. general revenue and program revenue combined) grew slightly by 2 percent on average, per year, between fiscal years 2005 and 2015, from $1.6 billion to $1.9 billion. (See figure 22.) USVI has a statutory requirement that a team, composed of senior executives and legislative officials, meet at least twice a year to establish an official economic forecast of the territorial economy, including estimates of the following year’s revenue. Territory officials acknowledged that in recent years actual revenues have been less than had been estimated, citing both adverse economic conditions and litigation that had blocked the collection of property taxes for several years. These officials said that a new estimation methodology has been devised which uses a weighted average of the prior 5 years of actual revenue. USVI’s net position for the primary government declined year over year from a negative $215.0 million as of fiscal year end 2008 to a negative $1.5 billion as of fiscal year end 2014; continuing to decline to a negative $3.7 billion as of fiscal year end 2015. USVI’s net position for the primary government as of fiscal year end 2014 is shown prior to restatement implementing GASB Statement No. 68. In fiscal year 2015, USVI implemented GASB Statement No. 68 and adjusted its beginning net position by $2.0 billion, resulting in a restated net position as of fiscal year end 2014 of a negative $3.5 billion. The implementation of GASB Statement No. 68 resulted in the territory recognizing previously unrecognized net pension liabilities and, therefore, a decline in ending net position in the year of recognition. USVI’s declining net position for its primary government reflects its deteriorating financial position. USVI’s total net position for the primary government and component units combined increased between fiscal year end 2005 and 2007; it then declined year over year from positive $490.9 million as of fiscal year end 2008 to negative $3.6 billion as of fiscal year end 2015. More than a third of USVI’s current bonded debt outstanding as of fiscal year 2015 was issued to fund government operating costs. Before that time bonded debt outstanding issued on behalf of the primary government was used either to refinance earlier bond issues; fund infrastructure projects such as improvements to schools, public safety facilities, and transportation infrastructure; or to assist privately-owned industrial enterprises, specifically construction at the Cruzan and Diageo rum distilleries and payment of a portion of the costs of sewage and solid waste disposal at the Hovensa oil refinery. In the period following the recession of 2008, revenues declined and there were continuing demands for spending. In response, USVI issued debt for the purpose of financing regular government operating expenses. Between July 2010 and December 2014, USVI issued almost $850 million in bonds for this purpose with maturities ranging between 1 and 20 years. According to territory officials, several factors contributed to USVI’s increasing reliance on debt to fund government operations, including the recession of 2008, the 2012 closure of the Hovensa oil refinery, a decline in USVI’s share of worldwide rum sales, and a decline in visits from cruise ship passengers. According to a senior government official, the closure of the Hovensa refinery was particularly detrimental to the territory’s economy and resulted in the loss of 2,000 jobs on St. Croix and a significant decrease in revenue. As of April 2017, USVI’s unemployment rate was 10.3 percent. USVI officials cited several federal requirements that contributed to USVI’s need to issue debt. Because USVI is part of the mirror tax code, officials noted that USVI is required to pay the EITC to its residents, but is not reimbursed for this by the federal government. In contrast, state governments do not pay EITC because it is a federal benefit administered through the federal tax code. EPA directives for improving landfills and water projects and federal banking regulations that treat branches of U.S. banks placed in USVI as non-U.S. banks—thereby discouraging large banks from having branches in USVI—were also cited as reasons that USVI has issued debt. USVI officials expressed confidence in the territory’s ability to repay public debt, but we found that large fiscal risks and exclusion from capital markets may hamper its ability to do so. USVI’s bonds are backed by the gross receipts tax on some individuals and entities doing business in USVI and by excise tax revenues collected by the federal government and remitted to USVI as required by statute. Officials said that revenues from the gross receipts tax and excise tax rebates—from which debt service payments are made—are monitored on a month-by-month basis. Also, officials cited as a protection against default the “lockbox” provisions that USVI has had contractually for some time and that were written into its statutes in 2016. According to these provisions, gross receipts tax and excise rebate revenue go directly to an escrow account in a New York bank, and the escrow agent makes debt service payments twice a year from the account; a year’s worth of payments is held in reserve at all times. USVI officials expressed confidence that these provisions make it difficult for USVI to default on its debt payments. However, in a recent statement, Moody’s rating service said that these security provisions have not been tested in a stress scenario where the government faces a lack of funds to provide basic services. This observation was part of a statement issued by Moody’s in late January 2017 in which it announced it had downgraded USVI’s matching fund bonds (those backed by excise tax rebates) to noninvestment grade. Other rating agencies expressed similar concerns. For example, Standard & Poor’s cited 1) the government’s fiscal distress, as evidenced by its significant structural imbalance and continued reliance on deficit financing to fund operations; 2) revenue backed bond issues that have exhibited either declining or flat growth absent tax rate increases and are levied on a limited and concentrated base; 3) adequate, but substantially reduced, debt service coverage; and 4) a limited economy, concentrated in rum production, tourism, and government. In late January 2017, USVI cancelled a new bond issuance it was attempting to market to provide additional financing for general government operations. The bond issuance was authorized by the USVI legislature in 2016, but according to a senior bank official involved in underwriting USVI bonds, delays in bringing the issuance to market, and the legislature’s delay in enacting so-called “sin taxes” on items such as beer, cigarettes, and liquor, reduced the chances of successfully marketing the bond issue to investors. By the time USVI made an effort to market the bonds in late 2016 and January 2017, the Puerto Rico debt crisis had increased investors’ concerns about USVI’s debt as well. The rating downgrades of existing USVI debt, while not the decisive factor according to the bank official, did reinforce existing skepticism on the part of potential investors. Ultimately, the early 2017 bond issuance was not adequately subscribed and the offer failed. USVI effectively lost market access to new debt even at high interest rates. In September 2016, the administration released its 5-year financial plan. The two major features of this plan were a reduction in government expenditures by limiting hiring and reducing non-personnel costs, and a proposal for increasing revenue through taxes on beer, rum, wine, brandy, sugar-laden carbonated beverages, and cigarettes, among other revenue generating measures. The legislature passed the tax increase bill, with some modification of the Governor’s proposal, in early March and the Governor signed it into law on March 22, 2017. In the 5-year financial plan, the administration said that adopting austerity and tax measures would eliminate future deficits, which otherwise would amount to more than $130 million for each fiscal year between 2017 and 2021. A senior USVI official expressed a belief that the level of consumption of cigarettes, for example, will remain at pretax levels despite the higher cost. However, due to elasticity of demand, an increase in the price of cigarettes could decrease cigarette consumption and therefore revenues. If the tax increases do not produce the anticipated level of revenue, and if USVI is not able to regain access to capital markets, it will place even more stress on the debt service arrangements currently in effect. Moreover, the recent measures do not address the fiscal risk presented by unfunded pension liabilities and OPEB for government employees. USVI reported an unfunded pension liability of over $3 billion, which was 83 percent of GDP in fiscal year 2015. According to an independent consulting firm’s August 2016 report conducted for the USVI Government Employees Retirement System, the retirement fund will become insolvent in 2023 without adding financial resources and adjusting benefit levels. Territory officials cited several reasons for the large unfunded pension and OPEB benefit liabilities. These include recent legislation that resulted in more retirees eligible for pensions and a decline in the active USVI government workforce that resulted in a narrower ratio of retirees to workers, dropping from 6-to-1 in fiscal year 1982 to almost 1-to-1 in fiscal year 2015. In addition, officials told us that the most significant cause for the current condition of the retirement system is the primary government making contributions to the system below the amounts required by law. Some measures have been taken to address the retirement fund’s impending insolvency, and other steps have been recommended. According to territory officials, USVI law changed in 2005, resulting in increased required pension contributions from all newly hired employees except for judges and legislators. In 2013, a Pension Reform Task Force (Task Force) recommended legislation that would 1) increase government and employee contributions towards pension benefits, 2) raise contribution rates for senators and judges, 3) reduce retiree current benefits by 10 percent, 4) increase the early retirement age from 50 to 55 and the regular retirement age from 60 to 65, 5) limit cost of living increases, and 6) change the formula used to calculate benefits. In October 2015, the Legislature enacted and the Governor signed legislation that raised retirement ages for some employees, changed the basis for determining pension levels to career earnings, and allowed the retirement system to invest funds in lower-rated securities. This did not, however, address most of the Task Force recommendations. Territory officials told us that the administration will put forward additional pension reform proposals in the near future, however it remains unclear what those reforms will entail and when they will take effect. Moreover, territory officials told us that since 2011 the government has paid less than half of actual post-employment benefit costs, leaving an unpaid current obligation of $357 million as of fiscal year 2015. The unfunded liability for post-employment benefits, projecting anticipated future costs, was most recently calculated in October 2013; at that time it was just over $1 billion. USVI’s pension and OPEB obligations are already contributing to the territory’s debt burden, and will likely continue to do so at an increasing rate. If unaddressed, they may place additional stress on the debt service arrangements currently in effect and hamper the territory’s ability to repay debt. We provided a draft of this report for review to the U.S. Departments of the Interior and Treasury. We also provided, to the governments of Puerto Rico, American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), Guam, and the United States Virgin Islands (USVI), portions of the draft that were relevant to them. We received written comments from each of the five territories’ governments, which are reprinted in appendixes II, III, IV, V, and VI, respectively. We also received technical comments from American Samoa, Guam, USVI, and Treasury, which we incorporated as appropriate. We did not receive any comments from the Department of the Interior. In the letter from the Governor of Guam, the territory raised some issues, which we subsequently discussed in depth with territory officials. Following these discussions, we made modifications to the draft to provide additional context by broadening our coverage of revenue for Guam and for other territories, as applicable. We provide additional information about changes that we made or did not make at the end of Appendix V. We will provide copies of this report to the Governor of each territory and the U.S. Secretaries of the Interior and Treasury. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have questions about this report, please contact Susan J. Irving at (202) 512-6806, or David Gootnick at (202) 512-3149. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Our objectives were, for each U.S. territory—Puerto Rico, American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), Guam and the U.S. Virgin Islands (USVI)— to describe: (1) trends in public debt and its composition between fiscal years 2005 and 2015, (2) trends in revenue and its composition between fiscal years 2005 and 2015, (3) the major reported drivers of the territory’s public debt, and (4) what is known about the ability of the territory to repay public debt. For the purposes of this report, total debt held by the public (public debt) refers to the sum of bonds payable and other debt payable as described in the audited financial statements included within the territories’ single audit reporting packages, hereinafter referred to as the single audit reports. Bonds payable are marketable bonded debt securities issued by territorial governments or their component units and held by investors outside those governments. Other debt payable may include marketable notes issued by territorial governments and held by investors outside those governments; non-marketable intragovernmental notes; and notes held by local banks, federal loans, intragovernmental loans, and loans issued by local banks. Pension liabilities and other post-employment benefits (OPEB) are not included in the definition of total public debt but are considered and discussed in the sections of the report that describe the territories’ ability to repay their public debt. To describe trends in public debt and its composition for each territory, we reviewed the territories’ single audit reports. These single audits are conducted each year by independent accounting firms in accordance with government accounting standards. We obtained single audits for American Samoa, CNMI, Guam, and USVI for fiscal years 2005 through 2015. We also obtained and analyzed consolidated audited financial statements for Puerto Rico from the Commonwealth of Puerto Rico’s Treasury Department website for fiscal years 2005 through 2014. For each territory, we reviewed the independent auditor’s report corresponding to each single audit and noted the type of opinion that was expressed on the financial statements and accompanying note disclosures. With the exception of Puerto Rico, each of the territories received modified opinions by auditors on one or more of the single audit reports included in our analysis. We reviewed each of these opinions and determined that despite the modified opinions the data we obtained from each of the single audit reports was reliable for the purpose of describing trends in debt and revenue and their composition for the fiscal years included in our analysis. For each territory, we extracted information on public debt—specifically bonds, loans, and notes for both the primary government and component units—for each fiscal year and recorded the data on spreadsheets, which were then independently verified by other analysts. For American Samoa, CNMI, Guam, and USVI, we calculated debt per capita and debt as a percentage of nominal Gross Domestic Product (GDP) using nominal GDP and population data from the U.S. Department of Commerce’s Bureau of Economic Analysis. For Puerto Rico, we obtained data on Gross National Product (GNP) and nominal GDP from the Commonwealth of Puerto Rico Office of the Governor’s Planning Board and data on population from the U. S. Census Bureau. To identify trends in revenue and its composition for each territory, we obtained and recorded information from the single audit reports on general revenues. All tax revenues, including tax revenues that are dedicated to particular purposes, are reported in general revenues. Tax revenues represent the largest component of general revenues and include both derived tax revenues (resulting from assessments imposed on exchange transactions, such as income taxes and sales taxes) and imposed nonexchange revenues (resulting from assessments imposed on non-exchange transactions, such as property taxes and fines). General revenues also include other forms of revenue, such as unrestricted aid from other governments and investment earnings. Our analysis primarily focused on trends in general revenues because the territories’ public debt is either explicitly or implicitly backed by general revenues. We also included total revenue—general revenues and program revenues combined—in our analysis because it reflects revenue generated by the territories’ component units and could be used to service debt payments. In addition to general revenue levels, another measure of fiscal health is the net position for primary government activities, which represents the difference between the primary government’s assets (including the deferred outflows of resources) and the primary government’s liabilities (including the deferred inflows of resources). In other words, the net position for primary government activities reflects what the primary government would have left after satisfying its liabilities. A negative net position means that the primary government has more liabilities than assets. A decline in net position may be indicative of a deteriorating financial position. While our analysis primarily focuses on trends in the net position for the primary government, we also include certain information on trends in the total net position for the primary government and component units combined. To determine the major reported drivers of public debt and what is known about the territories’ ability to repay this debt, we interviewed officials from the territories’ governments, including officials from the Governors’ offices, departments of finance or treasury, and the agency responsible for issuing and marketing bonded debt. We also spoke to officials in territorial public audit offices. In addition, we interviewed representatives of the three rating agencies that provide credit ratings for the territories’ securities: Fitch, Moody’s, and Standard and Poor’s. In addition, to determine what is known about the territories’ ability to repay public debt we analyzed common factors—identified through prior work, documents, and interviews with the three rating agencies—that indicate territories’ potential vulnerability to debt crises. These factors included 1) the extent to which territories consistently issued debt to fund general government operations, 2) the extent to which territories’ economies were vulnerable to shocks due to a heavy dependence on a single or limited industry, and 3) the extent to which territories faced large fiscal risks such as pension liabilities. We also interviewed officials from the Department of the Interior’s Office of Insular Affairs, which provides grant aid and technical assistance and support to the territories, and the Pacific and Virgin Islands Training Initiatives, which provides training and technical assistance on fiscal management to the Pacific territories and USVI, and directs the preparation of an annual report on the fiscal condition of these territories. In addition, we spoke with subject matter experts on territorial debt, officials from an investment bank involved in underwriting the territories’ bonds, and officials from the three rating agencies that rate the marketability of the territories’ bonds. We obtained and reviewed information on territorial bond issuances from fiscal years 2005 through 2015 from the Electronic Municipal Market Access (EMMA) database of the Municipal Securities Rulemaking Board, the primary regulator of the municipal securities market. We reviewed information from EMMA on bonds issued by the territories from fiscal years 2005 through 2015, including memoranda of offering for individual bond issuances. We conducted this performance audit from September 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained for the purpose of addressing our audit objectives provides a reasonable basis for our findings and conclusions. The following are GAO’s comments on Guam’s letter that supplement the comments in the text. 1. Our responses to Guam’s technical comments are not corrections. After reviewing Guam’s comments, we expanded the information provided on revenue and net position for all 5 territories. For example, for Guam, we included on pages 41 and 42 of this report, additional information on revenue where we combine primary government revenue and component unit revenue. 2. Since our objective was to provide the most comprehensive metric of total public debt, it would have been incorrect for us to exclude public enterprise and revenue bond debt in our measure. 3. We do not compare the relative public debt burdens of the territories in this report. Further, pension liabilities are not included in our definition of public debt. Our definition of total public debt does include component unit debt, which Guam excludes from the calculations presented in its response. 4. On pages 41 and 42 of this report we include both a measure of primary government revenue, and a measure of primary government revenue and component unit revenue combined; an “apples-to- apples” comparison can be made to our total public debt figure, which includes component unit debt. 5. Our calculation of total public debt outstanding for Guam is the total of bonds payable and notes payable, both the current and noncurrent portions, and other debt as defined on page 8 of this report. Guam’s calculation of total public debt outstanding as shown in the table is all noncurrent liabilities except the net pension liability and results in a higher amount for fiscal year 2015 than our calculation. For bonds payable, our calculation includes both the current and noncurrent portions of bonds payable. Guam’s calculation of bonds payable as shown in the table only includes the noncurrent portion and results in a lower amount for fiscal year 2015 than our calculation. As a result of these differences, our calculation of bonded debt outstanding as a percentage of total public debt outstanding for fiscal year 2015 is higher than Guam’s calculation. 6. As noted on page 42 of this report, while revenue generally grew, Guam’s net position for the primary government fluctuated significantly between fiscal years 2005 and 2015. Since fiscal year end 2006, Guam’s net position for the primary government has been negative and trending downward. Guam’s total net position for the primary government and component units also combined fluctuated significantly. On page 41 and 42 of this report, we explicitly note the increase in revenue, however in the long-term significant financial risks may outweigh any given year’s revenue increase. 7. Based on our methodology, which includes component unit debt, Guam’s total public debt outstanding was $2.5 billion for fiscal year 2015. 8. We used total public debt outstanding, not solely tax-supported debt to calculate the debt-to-GDP ratio for all 5 territories. As reported on page 39 of this report, Guam’s debt to GDP ratio is 44 percent for total public debt and 42 percent for bonded debt for fiscal year 2015. We do not rank the U.S. territories in this report. 9. The per capita amounts presented in the report are based on debt amounts from Guam’s fiscal year 2015 audit as reported in the single audit report. However, the debt amounts and population figure shown in the table differ from those used in our calculations. Total public debt and bonded public debt outstanding used in our per capita calculations are calculated as discussed in comment 5 above, which differ by about $7 million from the amounts cited in the table. In addition, the population figure used in our per capita calculations is on a fiscal year basis, which results in 161,500 for fiscal year 2015. 10. Pension liabilities are not included in our definition of public debt. The debt per capita numbers that we present in this report are based on total public debt. For Guam that figure for fiscal year 2015 was $2.5 billion. 11. We disagree with Guam’s comment that the presentation in this report is negative. The final section in the discussion of Guam notes both the elements that may contribute to continued economic growth in Guam and the vulnerabilities and risks to the future: a high total debt burden and vulnerability to economic changes in its tourism and military industries. In addition, we note that Guam has large pension and other post-employment benefits liabilities that may stress current debt service payment arrangements if anticipated savings from changes to the government pension system are not realized. In addition to the contacts named above, Tara Carter, Assistant Director; Emil Friberg, Assistant Director; Divya Bali, Analyst-in-Charge; and Steven Berke, Karen Cassidy, and Eddie Uyekawa made significant contributions to this report. Dawn Simpson, Director; Nicole Burkart, Assistant Director; and J. Mark Yoder provided accounting expertise. Also contributing to this report were Pedro Almoguera, Jeffrey Arkin, Ann Czapiewski, John Hussey, Heather Krause, Donna Miller, Amy Radovich, Justin Snover, and A.J. Stephens.", "summary": "The United States has five territories: Puerto Rico, American Samoa, CNMI, Guam, and USVI. The territories, like U.S. states in some cases, borrow through financial markets. Puerto Rico in particular has amassed large amounts of debt, and defaulted on billions of dollars of debt payments. In response to the fiscal crisis in Puerto Rico, Congress enacted and the President signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) in June of 2016, which established an Oversight Board with broad powers of budgetary and financial control over Puerto Rico and requires GAO to study fiscal issues in all five U.S. territories. In this report, for each territory for fiscal years 2005-2015, GAO examined (1) trends in public debt and its composition, (2) trends in revenue and its composition, (3) the major reported drivers of the territory's public debt, and (4) what is known about the ability of each territory to repay public debt. GAO analyzed the territories' single audit reports; interviewed officials from the territories' governments, ratings agencies, and subject matter experts; and reviewed documents and prior GAO work. Puerto Rico: Between fiscal years 2005 and 2014, the latest figures available, Puerto Rico's total public debt outstanding (public debt) grew from $39.2 billion to $67.8 billion, reaching 66 percent of Gross Domestic Product (GDP). Despite some revenue growth, Puerto Rico's net position was negative and declining during the period, reflecting its deteriorating financial position. Experts pointed to several factors as contributing to Puerto Rico's high debt levels, and in September 2016 Puerto Rico missed up to $1.5 billion in debt payments. The outcome of the ongoing debt restructuring process will determine future debt repayment. American Samoa: American Samoa's public debt more than doubled in fiscal year 2015 to $69.5 million, but remained small relative to its economy, with a debt to GDP ratio of 10.9 percent. American Samoa's debt was primarily used to fund infrastructure projects. Between fiscal years 2005 and 2015, revenues grew and the government's net position was positive and generally improving. GAO previously reported that American Samoa relies heavily on the tuna processing and canning industry. Disruptions in this industry could affect its ability to repay debt. Commonwealth of the Northern Mariana Islands (CNMI): CNMI's public debt declined from $251.7 million to $144.7 million between fiscal years 2005 and 2015, decreasing CNMI's debt to GDP ratio to 16 percent. Most of CNMI's debt was used to refinance prior debt and fund infrastructure projects. Despite revenue growth since fiscal year 2011, CNMI's net position was negative and generally declining during the period. GAO previously reported that labor shortages may affect GDP. This could impede CNMI's ability to repay debt in the future. Guam: Between fiscal years 2005 and 2015, Guam's public debt more than doubled from almost $1 billion to $2.5 billion, with a debt to GDP ratio of 44 percent for fiscal year 2015. Most of Guam's debt was used to comply with federal requirements and court orders. Revenue grew during this period, and net position fluctuated significantly, with a negative balance in fiscal year 2015. Despite recent and expected economic growth, GAO found that large unfunded pension and other post-employment benefit (OPEB) liabilities may present a risk. U.S. Virgin Islands (USVI): Between fiscal years 2005 and 2015, USVI's public debt nearly doubled, reaching $2.6 billion and a debt to GDP ratio of 72 percent. Since 2010, most of USVI's debt was used to fund general government operations. Revenue remained stagnant and net position was negative and declining during the period, reflecting a deteriorating financial position. While USVI holds a year's worth of debt service payments in reserve, GAO found that economic uncertainty and looming government pension fund insolvency by 2023 may hamper repayment. In early 2017, USVI was unable to access capital markets to issue new debt at favorable rates. Although the government adopted a financial plan intended to reduce expenditures and increase revenue, the plan does not address USVI's significant unfunded pension and OPEB liabilities and it is unclear whether the plan will produce the intended level of savings. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "JWST is envisioned to be a large deployable space telescope, optimized for infrared observations, and the scientific successor to the aging Hubble Space Telescope. JWST is being designed for a 5-year mission to find the first stars, study planets in other solar systems to search for the building blocks of life elsewhere in the universe, and trace the evolution of galaxies from their beginning to their current formation. JWST is intended to operate in an orbit approximately 1.5 million kilometers—or 1 million miles—from the Earth. With a 6.5-meter primary mirror, JWST is expected to operate at about 100 times the sensitivity of the Hubble Space Telescope. JWST’s science instruments are designed to observe very faint infrared sources and therefore are required to operate at extremely cold temperatures. To help keep these instruments cold, a multi-layered tennis court-sized sunshield is being developed to protect the mirrors and instruments from the sun’s heat. The JWST project is divided into three major segments: the observatory segment, the ground segment, and the launch segment. When complete, the observatory segment of JWST is to include several elements (Optical Telescope Element (OTE), Integrated Science Instrument Module (ISIM), and spacecraft) and major subsystems (sunshield and cryocooler). The hardware configuration referred to as OTIS was created when the Optical Telescope Element and the Integrated Science Instrument Module were integrated. Additionally, JWST is dependent on software to deploy and control various components of the telescope, and to collect and transmit data back to Earth. The elements, major subsystems, and software are being developed through a mixture of NASA, contractor, and international partner efforts. See figure 1 for the elements and major subsystems of JWST and appendix 1 for more details, including a description of the elements, major subsystems, and JWST’s instruments. For the majority of work remaining, the JWST project is relying on two contractors: Northrop Grumman and the Association of Universities for Research in Astronomy’s Space Telescope Science Institute. Northrop Grumman plays the largest role, developing the sunshield, the Optical Telescope Element, the spacecraft, and the Mid-Infrared Instrument’s cryocooler, in addition to integrating and testing the observatory. Space Telescope Science Institute’s role includes soliciting and evaluating research proposals from the scientific community, and receiving and storing the scientific data collected, both of which are services that it currently provides for the Hubble Space Telescope. Additionally, the Institute is developing the ground system that manages and controls the telescope’s observations and will operate the observatory on behalf of NASA. JWST will be launched on an Ariane 5 rocket, provided by the European Space Agency. JWST depends on 22 deployment events—more than a typical science mission—to prepare the observatory for normal operations on orbit. For example, the sunshield and primary mirror are designed to fold and stow for launch and deploy once in space. Due to its large size, it is nearly impossible to perform deployment tests of the fully assembled observatory, so the verification of deployment elements is accomplished by a combination of lower level component tests in flight-simulated environments; ambient deployment tests for assembly, element, and observatory levels; and detailed analysis and simulations at various levels of assembly. We have previously found that complex development efforts like JWST face numerous risks and unforeseen technical challenges, which can often become apparent during integration and testing. To accommodate unanticipated challenges and manage risk, projects reserve extra time in their schedules, which is referred to as schedule reserve, and extra funds in their budgets, which is referred to as cost reserve. Schedule reserve is allocated to specific activities, elements, and major subsystems in the event of delays or to address unforeseen risks. Each JWST element and major subsystem has been allocated schedule reserve. When an element or major subsystem exhausts schedule reserve, it may begin to affect schedule reserve on other elements or major subsystems whose progress is dependent on prior work being finished for its activities to proceed. Cost reserves are additional funds within the project manager’s budget that can be used to address unanticipated issues for any element or major subsystem, and are used to mitigate issues during the development of a project. For example, cost reserves can be used to buy additional materials to replace a component or, if a project needs to preserve schedule reserve, reserves can be used to accelerate work by adding shifts to expedite manufacturing. NASA’s Goddard Space Flight Center— the NASA center with responsibility for managing JWST—has issued procedures that establish the requirements for cost and schedule reserves. In addition to cost reserves held by the project manager, management reserves are funds held by the contractors that allow them to manage program risks and to address unanticipated cost increases throughout development. We have previously found that management reserves should contain 10 percent or more of the cost to complete a project and are generally used to address various issues tied to the contract’s scope. NASA’s cost-plus-award-fee contract with Northrop Grumman has spanned almost two decades, during which there have been significant variances in contractor performance. Cost-reimbursement contracts are suitable when uncertainties in the scope of work or cost of services prevent the use of contract types in which prices are fixed, known as fixed-price contracts. Award fee contracts provide contractors the opportunity to obtain monetary incentives for performance in designated areas identified in the award fee plan. Award fees may be used when key elements of performance cannot be defined objectively, and, as such, require the project officials’ judgment to assess contractor performance. For JWST’s contract with Northrop Grumman, these areas include cost, schedule, technical, and business management and are established in the contracts’ performance evaluation plans. In December 2013, the JWST program and the contractor agreed to replace a $56 million on-orbit incentive—incentives based on successful performance in space—with award fees. The award fees are to incentivize cost and schedule performance during development. This shift increased the available award fee for the entire contract to almost a quarter of a billion dollars. According to officials, restructuring the incentives gave NASA more flexibility to incentivize the contractor to prioritize the cost and schedule performance over exceeding technical requirements. In December 2014, we found that NASA award fee letters of award fee periods from February 2013 to March 2014 indicated that the contractor had been responsive to interim award fee period criteria provided by NASA and that contractor officials confirmed that they pay close attention to this guidance in prioritizing their work. For example, Northrop Grumman officials reported that they had made specific changes to improve communications in direct response to this guidance, which was validated by award fee letters from NASA. The JWST program has a history of significant schedule delays and increases to project costs, which resulted in replans in 2011 and 2018. Before 2011, early technical and management challenges, contractor performance issues, low levels of cost reserves, and poorly phased funding caused the JWST program to delay work. As a result, the program experienced schedule overruns, including launch delays, and cost growth. The JWST program underwent a replan in September 2011, and a rebaseline in November of that same year, and Congress placed an $8 billion cap on the formulation and development costs for the project. On the basis of the replan, NASA rebaselined JWST with a life- cycle cost estimate of $8.835 billion, which included additional money for operations and a planned launch in October 2018. Congress also required that NASA treat any cost increase above the cap according to procedures established for projects that exceed their development cost estimates by at least 30 percent. This process is known as a rebaseline. Congress must authorize continuation of the JWST program if formulation and development costs increase over the $8 billion cost cap. In June 2018, after a series of launch delay announcements due to technical and workmanship issues identified during spacecraft element integration, NASA notified Congress that it had again revised the JWST program’s cost and schedule estimates. NASA estimated that it now required $828 million in additional resources and 29 more months to complete beyond those estimates agreed to in the 2011 rebaseline. As of November 2018, NASA had funding to continue to execute the program and was waiting to see if Congress would authorize the program’s continuation and appropriate funds for the program in fiscal year 2019. Figure 2 shows the project’s history of changes to its cost or schedule and key findings from two external independent review teams and our prior work. As discussed above, various technical and workmanship errors drove some of the more recent delays. Examples of some of the workmanship issues we found in the past include: In October 2015, the project reported that a piece of flight hardware for the sunshield’s mid-boom assembly was irreparably damaged during vacuum sealing in preparation for shipping. The damaged piece had to be remanufactured, which consumed 3 weeks of schedule reserve. In April 2017, a contractor technician applied too much voltage and irreparably damaged the spacecraft’s pressure transducers, components of the propulsion system that help monitor spacecraft fuel levels. The transducers had to be replaced and reattached in a complicated welding process. At the same time, Northrop Grumman also addressed several challenges with integrating sunshield hardware. These issues combined took up another 1.25 months of schedule reserve. In May 2017, some of the valves in the spacecraft propulsion system’s thruster modules were leaking beyond permissible levels. Northrop Grumman determined that the most likely cause was the use of an improper cleaning solution, and the thruster modules were returned to the vendor for investigation and refurbishment. Reattaching the refurbished modules was expected to be complete by February 2018, but was delayed by one month when a technician applied too much voltage to one of the components in a recently refurbished thruster module. NASA and Northrop Grumman reported that resolving the thruster module issue resulted in a 2-month delay to the project’s overall schedule. In October 2017, when conducting folding and deployment exercises on the sunshield, Northrop Grumman discovered several tears in the sunshield membrane layers. According to program officials, a workmanship error contributed to the tears. The tears resulted in another 2-month delay to the project’s overall schedule. In addition, some first-time efforts took longer than planned. For example, in fall 2017, the project determined that it would need to use up to 3 months of schedule reserve based upon lessons learned from the contractor’s initial sunshield folding operation. This first deployment, or unfolding, took 30 days longer than planned. The sunshield has since undergone another deployment, and will be deployed twice more before launch. The IRB took into account these technical and workmanship errors, as well as other considerations, when it analyzed the project’s organizational and technical issues. The board’s final report, issued in May 2018, included 31 recommendations that addressed a range of factors. For example, the IRB recommended that the project: Conduct an audit to identify potential embedded design flaws— problems that have not been detected through analysis, inspection, or test activities and pose a significant risk to JWST schedule, cost, and mission success; Establish corrective actions to detect and correct human mistakes during integration and test; Establish a coherent, agreed-upon, and factual narrative on project status and communicate that status regularly across to all relevant stakeholders; and Augment integration and test staff to ensure adequate long-term staffing and improve employee morale. In its response to the IRB’s report, NASA stated that it accepted the report’s recommendations and had already begun implementing action in response to many of them. Further, project officials told us that some of the actions were underway before the IRB completed its review. To develop a new schedule for JWST’s 2018 replan, NASA took into account the remaining integration and test work and added time to the schedule to address threats that were not yet mitigated. This includes 5.5 months to address an anomaly that occurred on the sunshield’s cover in 2018. The project also replenished its schedule reserves—which we found in February 2018 had been consumed—so that they now exceed the recommended levels. Both the project and IRB conducted schedule risk assessments that produced similar launch dates. The project relied on the replan schedule to determine its remaining costs because the workforce necessary to complete the observatory represents most of the remaining cost. Following is additional information on the schedule and cost considerations. Schedule: JWST’s revised launch readiness date of March 2021 reflects a consideration of the hardware integration and test challenges the project has experienced, including adding time to: Add snag guards for the membrane tensioning system—which helps deploy the sunshield and maintain its correct shape—to prevent excess cable from snagging, Repair tears of the sunshield membrane, Deploy, fold, and stow the sunshield, and Mitigate contractor schedule threats. In addition, the project added extra time to the schedule to complete repairs to the membrane cover assembly, which did not perform as expected during acoustics testing in April 2018. The membrane cover assembly shown in figure 3 is used to cover the sunshield membrane when in the stowed position to provide thermal protection during launch. After the anomaly occurred, the project halted spacecraft element testing, investigated the anomaly, and found that the fasteners had come loose due to a design change made to prevent the fasteners from damaging the sunshield membrane. The design change caused the nuts to not lock properly. According to project officials, due to the design of the membrane cover assembly, the project was not able to conduct flight-like, stand- alone testing on the cover prior to spacecraft element testing. As a result, the project did not discover the design issue until the hardware came loose while installed on the spacecraft element. The project determined that the repairs would take approximately 5.5 months. The project’s replan also reflected schedule reserves above the level required by Goddard Space Flight Center policy, which would have been approximately 5 months at that time. The new schedule includes a total of 293 days or 9.6 months of schedule reserves leading up to its committed launch readiness date of March 2021. NASA approved a JWST launch date of March 2021, but the project and the contractor are working toward a launch date in November 2020. Figure 4 shows the project’s new schedule following the 2018 replan, including how the project distributed its schedule reserves through different integration and test activities. As part of its May 2018 study, the IRB reviewed the project’s schedule and recommended a launch date of March 2021, which was subsequently reflected in NASA’s new schedule for the program. In reviewing the project’s schedule, the IRB found that the project had robust scheduling practices for ensuring that the schedule represented a complete and dynamic network of tasks that could respond automatically to changes. This schedule also passed a standard health check with minimal errors indicating that it was well constructed. However, the IRB noted that this schedule does not account for certain types of unknown risks to the program such as integration and test errors which can take many months to resolve, or the potential need to remove a science instrument from the observatory, which can have about a 1 year impact. As a result, the program could experience additional delays if a risk of this magnitude is realized. Cost: The project’s new $9.7 billion life-cycle cost estimate is principally driven by the schedule extension, which requires keeping the contractor’s workforce to complete integration and test longer than expected. Specifically, the project determined that almost all of the hardware had been delivered and the remaining cost was predominantly the cost for the workforce necessary to complete and test the observatory. For the past 3 years, we have reported that Northrop Grumman’s ability to decrease its workforce was central to JWST’s capacity to meet its long- term cost commitments. However, Northrop Grumman’s actual workforce continued to exceed its projections. This was because it needed to maintain higher workforce levels due to technical challenges, including problems with spacecraft and sunshield integration and test. It also needed to keep specialized engineers available when needed during final assembly and test activities. In developing the cost estimate supporting the 2018 replan, the project used a Northrop Grumman workforce profile that is higher than previous projections because Northrop Grumman now plans to maintain personnel longer during integration and test. According to project officials, the planned reduction of Northrop Grumman’s workforce is now more gradual and conservative than the prior plan. For example, the Northrop Grumman workforce will not start to significantly decline until the observatory ships to the launch site, which is expected to occur in August 2020. As shown in Figure 5, the JWST workforce assembling the observatory declines and the government and contractor workforce necessary to manage and operate the observatory remains after the internal launch readiness date of November 2020. As seen in the above figure, the Space Telescope Science Institute workforce, the contractor responsible for operating JWST, will remain generally flat between fiscal years 2021 to 2026 when it operates the observatory. The NASA civil service and support contractor will remain relatively flat through November 2020 launch date and then decline. In addition, the new cost estimate also took into account $61 million for implementing the IRB recommendations and mission success enhancements, funding for project cost reserves, and operations costs. In June 2018, the NASA associate administrator—who is the project’s decision authority—approved the project to proceed with its replan with a March 2021 launch date and $9.7 billion in life-cycle costs based on the Agency Program Management Council review and replan documents. The associate administrator did not require the project to conduct an updated Joint Cost and Schedule Confidence Level (JCL) analysis for this replan. A JCL is an integrated analysis of a project’s cost, schedule, risk, and uncertainty whose result indicates the probability of a project’s success of meeting cost and schedule targets. NASA policy states that a JCL should be recalculated and approved as a part of the rebaselining approval process, but it is not required. In its replan decision memo, NASA’s associate administrator explained that he did not require the project to update the JCL because project costs are almost entirely related to the workforce and most of the remaining planned activities will be performed generally in sequence. Therefore, according to NASA’s associate administrator, the total cost would be driven almost entirely by the schedule because the workforce levels will remain the same through delivery of the observatory. Both the project and independent estimators used multiple schedule estimating methods to analyze the schedule for the remaining work, and NASA’s associate administrator said these analyses returned consistent, high confidence launch dates. The project’s ability to execute to its new schedule will be tested as it progresses through the remainder of challenging integration and test work. The project has yet to complete three of five integration and test phases. The remaining phases include integration and test of OTIS, the spacecraft element, and the observatory. Our prior work has shown that integration and testing is the phase in which problems are most likely to be found and schedules tend to slip. For a uniquely complex project such as JWST, this risk is magnified as events start to become more sequential in nature. As a result, it will continue to become more difficult for the project to avoid schedule delays by mitigating issues in parallel. As of November 2018, the project is about a week behind its replanned schedule because repairs on the membrane cover assembly took longer than planned. Completing the membrane cover assembly repairs and returning the spacecraft to vibration testing was a key event for the project to demonstrate that it could execute to its new schedule. When the project developed its 2018 replanned schedule, it had planned to complete the membrane cover assembly repairs and reinstall the assembly onto the sunshield and restart spacecraft element integration and test activities by November 6, 2018. The project allocated 4 weeks of schedule reserves specifically for these repairs. However, the membrane cover repairs proved more difficult than anticipated. For example, the program had to address unanticipated technical challenges on the membrane cover assemblies, including repairing tears and pin holes in the covers discovered after the covers were removed. The project also had to allot time to install bumpers, which are kapton tubes, to the assembly to protect the composite material on a sunshield structure during launch. The project identified the need to add the bumpers during subassembly vibration testing. As a result, as of November 2018, the project had used about 4.5 weeks of schedule reserves to cover delays associated with these activities. The use of reserves beyond what the project had planned for the repairs pushed the restart of spacecraft element integration and test activities out about a week to November 14, 2018. Figure 6 compares the project’s initial membrane cover assembly schedule in June 2018 to the actual schedule in November 2018. While the project repaired the membrane cover assembly, it also used this time to conduct risk mitigation activities on OTIS. For example, the project worked to mitigate a design issue on the frill connections. The frill is composed of a single layer of blankets placed around the outside of the primary mirror used to block stray light (see figure 7). A combination of modeling and inspections revealed that most of the frill sections did not have as much slack as expected at the near-absolute zero cryogenic temperatures of space. This caused shrinkage that put stress on the edges of the outer ring of mirrors, which could affect the stability of the optical mirror and image quality. The project loosened these outer connections by adding a ring to the connecting points. As of November 2018, project officials said they were in the process of verifying the fix through inspections. Examples of technical issues and risks that the project continues to face during the remaining phases of integration and test include: The project is working to mitigate a design issue on the sunshield membrane tensioning system—which helps deploy the sunshield and maintain its correct shape. In our February 2018 report, we found that Northrop Grumman was planning to modify the design of the membrane tensioning system after one of the sunshield’s six membrane tensioning systems experienced a snag when conducting folding and deployment exercises on the sunshield in October 2017. The project and Northrop Grumman determined that a design modification was necessary to fully mitigate the issue, which includes modifying clips used to progressively release the cable tension and adding guards to control the excess cable. The project identified a concern that the depressurization of trapped air in the folded sunshield membrane when the fairing separates to release the JWST observatory may overly stress the membrane material. The project is working with Arianespace—the company responsible for operating JWST’s launch vehicle—and experts at the Kennedy Space Center to resolve this concern. Officials estimated that a design solution would be in place in mid-2019. However, if the project determines that it needs to reinforce the membrane covers to survive excessive residual pressure as it works on this design solution, a multi-month schedule delay could occur. As of November 2018, the project has mitigated 21 of its 47 hardware and software risks to acceptable levels, and reviews these risks monthly for any changes that might affect the continued acceptability of the risk. Five of these 21 risks are related to the project’s more than 300 potential single point failures—several of which are related to the deployment of the sunshield. The project is actively working to mitigate the remaining 26 risks to acceptable levels or closure prior to launching. The project also has several first-time and challenging integration and test activities remaining. For example, the project must integrate OTIS and the completed spacecraft element and test the full observatory in the final integration phase, which includes another set of challenging environmental tests. See figure 8 for an image of OTIS and the spacecraft element prior to being integrated. As previously discussed, the project also has two remaining deployments of the sunshield, and prior deployments have taken longer than planned. To help mitigate the risks associated with the deployments, the project added additional time for deployments in the 2018 replanned schedule based on lessons learned from prior deployments. The two remaining deployments are to occur after spacecraft element integration and test and again after observatory integration and test. The JWST project office is required to evaluate whether the project can complete development within its revised cost and schedule commitments at its next major review—the system integration review—planned for August 2019. This review is to occur after the project has completed two major tasks—OTIS and spacecraft element integration and test. The review is to evaluate whether the project (1) is ready to enter observatory integration and test, and (2) can complete remaining project development with acceptable risk and within its cost and schedule constraints. NASA guidance does not require projects to conduct a JCL at this review. However, project officials said that they plan to conduct another schedule risk analysis in the future. They do not intend to complete a new JCL for the same reasons they did not complete one for the 2018 replan— because costs are almost entirely related to the workforce and can be derived from a schedule that takes into account known risk. While not required, conducting a JCL prior to the system integration review would inform NASA about the probability of meeting both its cost and schedule commitments. If the project proceeds with its plan to conduct only a schedule risk analysis, NASA would be provided only with an updated probability of meeting its schedule commitments. Our cost estimating best practices recommend that cost estimates should be updated to reflect changes to a program or kept current as it moves through milestones and as new risks emerge. In addition, government and industry cost and schedule experts we spoke with noted that integration and testing is a critical time for a project when problems can develop. These experts told us that completing a JCL is a best practice for analyzing major risks at the most uncertain part of project execution. Conducting a JCL at system integration review—a review that occurs during the riskiest phase of development, the integration and test phase— would allow the project to update its assumptions of risk and uncertainty based on its experiences in OTIS and spacecraft element integration and test. The project could then determine how those updated assumptions affect overall cost and schedule for the JWST project. As noted above, the project has many risks to mitigate, technical challenges to overcome, and challenging test events to complete, which could affect the project’s schedule and risk posture. Further, the project has an established history of significant cost growth and schedule delays. In its June 2018 letter notifying an appropriate congressional committee of its updated cost and schedule commitments, NASA acknowledged that recent cost growth for the project will likely impact other science missions. Conducting a JCL at system integration review would provide NASA and Congress with critical information for making informed resource decisions on the JWST project and its affordability within NASA’s portfolio of projects more broadly. NASA has taken steps to augment oversight of the contractor and project following the discovery of the embedded design flaws and workmanship errors that contributed to the project’s most recent schedule delays and cost increases. See table 1 for examples of changes NASA has made to contractor and project oversight—some of which NASA self-identified and others that were in response to IRB recommendations. The IRB made 31 recommendations that ranged from improving employee morale to improving security during transporting JWST to its launch site. NASA has also used award fees to try to incentivize Northrop Grumman to improve its performance. In a July 2018 hearing on the JWST program before the House Science, Space, and Technology Committee, Administrator Bridenstine stated that NASA had reduced the available award fee through commissioning by $28 million out of a total of about $60 million. Northrop Grumman also did not earn its full award fee in the two most recent periods of performance that NASA assessed. For the performance period of April 1, 2017 to September 30, 2017, Northrop Grumman earned approximately 56 percent of the available award fee. Reasons that NASA cited for its evaluation of award fees in this period included workmanship errors on the propulsion system, schedule delays, as well as issues with schedule execution, management, and quality control. For the period of October 1, 2017 to March 31, 2018, Northrop Grumman earned none of the available award fee. Northrop Grumman’s overall score was driven by an “unacceptable” rating in schedule and cost due to delays and in anticipation of exceeding the project’s $8 billion cost cap. Northrop Grumman received an “excellent” rating under the technical category, but the evaluation noted ongoing issues with quality controls, which resulted in delays. For example, the process steps for applying voltage to the spacecraft’s pressure transducers were not clear enough, which resulted in technician error and irreparable damage to the hardware. According to Northrop Grumman officials, the contractor has started to take action to try to improve its quality assurance processes. Officials described actions that ranged from rewriting hardware integration and test procedures to starting efforts to change aspects of the company’s culture that contributed to quality control issues. For example, in July 2018, Northrop Grumman initiated a JWST mission assurance culture change campaign to increase focus on product quality and process compliance. This effort includes having inspectors affirm by signature that they have personally inspected, verified, and confirmed that all aspects of an activity meet quality standards. According to the form instructions, if the inspector is uncertain on compliance or if instructions are unclear, workers are to halt work, investigate and assess the situation, and request help to resolve the situation. Project and Northrop Grumman officials provided an example of these changes working. During a manual deployment of a radiator panel, a Northrop Grumman employee discovered that a flap used as thermal protection for a radiator was installed incorrectly and reported the error. Northrop Grumman technicians found that this flap had been swapped with another flap in the process of moving them to be installed and corrected the problem before work proceeded. Further, NASA and Northrop Grumman are conducting audits to try to minimize the risk of failures during the remaining phases of integration and test. These audits are conducted on items that have not been fully tested, are in workmanship-sensitive areas, or have had a late design change. The first phase of the audit was completed in September 2018 and found no major design issues or hardware rework required. The project plans to audit other areas through at least spring 2019, but will add audits if needed. The JWST oversight structure includes a number of positions that could be responsible for ensuring that the recent augmentations to contractor and project oversight are sustained through launch (see table 2). In response to our review, NASA officials clarified that the project manager has sole responsibility for ensuring that these improvements are sustained through launch. Further, these officials stated that the project office is responsible for monitoring these changes at the project level and at Northrop Grumman. The project manager’s continued focus on these efforts will be important because: The project is implementing a wide span of improvement efforts, ranging from more on-site coverage at the contractor facility to cultural improvements, which will now need to be sustained for an additional 29 months. The project has had recurring issues with effective internal and external communication as well as defining key management and oversight responsibilities, both of which are important to sustaining oversight. For example, the Independent Comprehensive Review Panel identified communication problems—between the JWST project and Science Mission Directorate management as well as between NASA and Northrop Grumman—and that the project’s governance structure lacked clear lines of authority and accountability. In December 2012, we found the JWST project had taken several steps to improve communication—such as instituting meetings that include various levels of NASA, contractor, and subcontractor management— but the IRB’s findings in 2018 indicate that communication and governance issues have resurfaced in some areas. For example, the IRB found that communication with key stakeholders including the science community, Congress, and NASA leadership, has been variable and at times inconsistent. The project may encounter new schedule pressures as it proceeds through integration and test. A senior NASA official with expertise in workmanship issues told us that schedule pressure is a key reason for increased quality problems on projects. For example, this official said that companies tend to give experts leniency to operate without the burden of quality assurance paperwork when schedule pressures arise, which can lead to workmanship errors. While JWST project officials told us they do not view this as applicable to their project, the perspective regarding potential schedule pressures and workmanship is important to keep focus on given the magnitude of technical challenges and delays the project has faced. We will continue to monitor the project’s efforts at maintaining these oversight augmentations in future reviews, given that less than a year has passed since the project began implementing many of them. Moreover, the project may find that some actions will be required of officials outside the project, particularly since the communication problems identified by the IRB may well extend to headquarters’ interaction with stakeholders from the science community, industry, and the Congress. JWST is one of NASA’s most expensive and complex science projects, and NASA has invested considerable time and resources on it. The project first established its cost and schedule baseline in 2009. Since then, the project made progress by completing two of five phases of integration and test, but has also experienced significant cost growth and schedule delays. However, the project did not complete a JCL analysis as part of its second replan. Between now and its system integration review planned for August 2019, the JWST program will have to continue to address technical challenges and mitigate risks. Conducting a JCL would better inform decision makers on the status of the project as they determine whether the project can complete remaining project development with acceptable risk and within its cost and schedule constraints. Given the project is now on its third iteration of cost and schedule commitments, conducting a JCL is a small step that NASA can take to demonstrate it is on track to meet these new commitments. We are making the following recommendation to NASA: The NASA Administrator should direct the JWST project office to conduct a JCL prior to its system integration review. (Recommendation 1) We provided a draft of this report to NASA for comment. In written comments, NASA agreed with our recommendation. NASA expects to complete the JCL by September 2019, prior to the system integration review. The comments are reprinted in appendix II. NASA also provided technical comments, which have been addressed in the report, as appropriate. We are sending copies of this report to the appropriate congressional committees, the NASA Administrator, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In addition to the contact named above, Molly Traci (Assistant Director), Karen Richey (Assistant Director), Jay Tallon (Assistant Director), Brian Bothwell, Daniel Emirkhanian, Laura Greifner, Erin Kennedy, Jose Ramos, Sylvia Schatz, Roxanna Sun, and Alyssa Weir made key contributions to this report.", "summary": "JWST, a large, deployable telescope, is one of NASA's most complex projects and top priorities. The project has delayed its planned launch three times since September 2017 due to problems discovered in testing. In June 2018, NASA approved new cost and schedule estimates for JWST. Since the project established its cost and schedule baselines in 2009, the project's costs have increased by 95 percent and the launch date has been moved back by 81 months. Conference Report No. 112-284, accompanying the Consolidated and Further Continuing Appropriations Act, 2012, included a provision for GAO to assess the project annually and report on its progress. This is the seventh report. This report assesses (1) the considerations NASA took into account when updating the project's cost and schedule commitments and (2) the extent to which NASA has taken steps to improve oversight and performance of JWST, among other issues. GAO reviewed relevant NASA policies, analyzed NASA and contractor data, and interviewed NASA and contractor officials. In June 2018, the National Aeronautics and Space Administration (NASA) revised the cost and schedule commitments for the James Webb Space Telescope (JWST) to reflect known technical challenges, as well as provide additional time to address unanticipated challenges. For example, the revised launch readiness date of March 2021 included 5.5 months to address a design issue for the cover of the sunshield (see image). The purpose of the sunshield is to protect the telescope's mirrors and instruments from the sun's heat. NASA found that hardware on the cover came loose during testing in April 2018. The new cost estimate of $9.7 billion is driven by the schedule extension, which requires keeping the contractor's workforce on board longer than expected. Before the project enters its final phase of integration and test, it must conduct a review to determine if it can launch within its cost and schedule commitments. As part of this review, the project is not required to update its joint cost and schedule confidence level analysis—an analysis that provides the probability the project can meet its cost and schedule commitments—but government and industry cost and schedule experts have found it is a best practice to do so. Such analysis would provide NASA officials with better information to support decisions on allocating resources, especially in light of the project's recent cost and schedule growth. NASA has taken steps to improve oversight and performance of JWST, and identified the JWST project manager as responsible for monitoring the continued implementation of these changes. Examples of recent changes include increasing on-site presence at the contractor facility and conducting comprehensive audits of design processes. Sustaining focus on these changes through launch will be important if schedule pressures arise later and because of past challenges with communications. GAO will follow up on the project's monitoring of these improvements in future reviews. GAO recommends NASA update the project's joint cost and schedule confidence level analysis. NASA concurred with the recommendation made in this report.", "document_type": "gao"}
{"report": "The President issued two executive orders addressing border security and immigration enforcement on January 25, 2017. These orders direct executive branch agencies to implement a series of reporting, policy, and programmatic provisions to carry out the administration’s border security and immigration policies and priorities. Executive Order 13767 lays out key policies of the executive branch with regard to securing the southern border, preventing further unlawful entry into the United States, and repatriating removable foreign nationals. To support these purposes, the order directs DHS to, among other actions, produce a comprehensive study of the security of the southern border; issue new policy guidance regarding the appropriate and consistent use of detention of foreign nationals for violations of immigration law; plan, design, and construct a wall or other physical barriers along the southern border; and hire and on- board, as soon as practicable, 5,000 additional Border Patrol agents. Executive Order 13767 also directs DOJ to assign immigration judges to immigration detention facilities in order to conduct removal and other related proceedings. Executive Order 13768 focuses on immigration enforcement within the United States. Among other things, the order lays out the administration’s immigration enforcement priorities for removable foreign nationals; directs ICE to hire 10,000 additional immigration officers; states that, as permitted by law, it is the policy of the executive branch to empower state and local law enforcement officials to perform the functions of immigration officers; calls for weekly public reports on criminal actions committed by foreign nationals and any jurisdictions that do not honor ICE detainers with respect to such individuals; and terminates the Priority Enforcement Program while reinstituting Secure Communities. The order also directs DHS and DOJ to ensure that jurisdictions that willfully prohibit or otherwise restrict communication with DHS regarding immigration status information are not eligible to receive federal grants, except as determined necessary for law enforcement purposes. On March 6, 2017, the President issued Executive Order 13780. This order directed agencies to take various actions to improve the screening and vetting protocols and procedures associated with the visa-issuance process and the U.S. Refugee Admissions Program. Specifically, the order directed agencies to conduct a worldwide review to identify any additional information needed from each foreign country to adjudicate visas and other immigration benefits to ensure that individuals applying for such benefits are not a security or public-safety threat. The order also instituted visa entry restrictions for nationals from certain listed countries for a 90-day period; directed agencies to develop a uniform baseline for screening and vetting standards and procedures; and suspended the U.S. Refugee Admissions Program for 120 days in order to review refugee application and adjudication procedures. The order further directed DHS to expedite the completion and implementation of a biometric entry-exit tracking system for travelers to the United States. Implementation of Executive Order 13780 entry restrictions for visa travelers and refugees commenced on June 29, 2017, subject to a June 26 ruling of the U.S. Supreme Court prohibiting enforcement of such restrictions against foreign nationals with a credible claim of a bona fide relationship to a person or entity in the United States. The federal budget process provides the means for the President and Congress to make informed decisions between competing national needs and policies, allocate resources among federal agencies, and ensure laws are executed according to established priorities. The President generally submits the budget request for the upcoming fiscal year to Congress no later than the first Monday of February (e.g. the fiscal year 2019 budget request was submitted in February 2018). To ensure there is not a lapse in appropriations for one or more federal departments or agencies, regular appropriations bills must be enacted to fund the government before the expiration of the prior appropriations, which would typically be in effect through September 30 in a regular appropriations cycle. If these regular full-year appropriations bills are not enacted by the deadline, Congress must pass a continuing appropriation (or resolution) to temporarily fund government operations into the next fiscal year. For fiscal year 2017, multiple continuing appropriations were enacted to extend funding until the Consolidated Appropriations Act, 2017, was enacted in May 2017. At the time the President issued the executive orders in January and March of 2017, agencies were operating under a continuing appropriation which did not incorporate any funding explicitly for the administration’s immigration and border security priorities, such as hiring 5,000 additional Border Patrol agents. The administration sought additional funds to implement the executive orders through an out-of-cycle March 2017 budget amendment and supplemental appropriations request for the remainder of fiscal year 2017. In May 2017, Congress provided funding for selected priorities through the Consolidated Appropriations Act, 2017. The administration submitted additional funding requests related to the executive orders through the President’s fiscal year 2018 and 2019 budget requests. A number of continuing appropriations acts were enacted from September 2017 through February 2018, providing fiscal year 2018 funding at fiscal year 2017 levels through March 23, 2018. The Consolidated Appropriations Act, 2018, was signed into law on March 23, 2018, providing funding for government operations for the remainder of fiscal year 2018. Figure 1 below provides a timeline of executive order issuance and key milestones in the budget process from December 2016 through March 2018. DHS, DOJ, and State each play key roles in enforcing U.S. immigration law and securing U.S. borders. Key components and bureaus at the three agencies, and their general roles and responsibilities with regard to border security and immigration enforcement, are described in table 1. DHS, DOJ, and State issued reports, developed or revised policies, and took initial planning and programmatic actions in response to the executive orders. Each agency took a distinct approach to implementing the orders based on its organizational structure and the scope of its responsibilities. Each executive order established near-term reporting requirements for agencies, including updates on the status of their efforts, studies to inform planning and implementation, and reports for the public. According to officials, agencies focused part of their initial implementation efforts on meeting these reporting requirements. In addition, agencies developed and revised policies, initiated planning efforts, and made initial program changes (such as expanding or expediting programs) to reflect the administration’s priorities. DHS: DHS established an Executive Order Task Force (EOTF), which was responsible for coordinating and tracking initial component actions to implement the executive orders. The EOTF assembled an operational planning team with representatives from key DHS components, such as U.S. Customs and Border Protection (CBP) and ICE. The EOTF and the planning team inventoried tasks in the orders, assigned component responsibilities for tasks, and monitored the status of the tasks through an online tracking mechanism and weekly coordination meetings. Additionally, the EOTF coordinated and moved reports required by the orders through DHS. For example, Section 4 of Executive Order 13767 directed DHS to produce a comprehensive study of the security of the southern border. DHS completed and submitted this report to the White House on November 22, 2017, according to EOTF officials. DHS also publicly issued three Declined Detainer Outcome Reports pursuant to Section 9 of Executive Order 13768. Additionally, EOTF officials stated that, in 2017, DHS produced and submitted to the White House 90-day and 180-day reports on the progress of implementing Executive Orders 13767 and 13768. The Secretary of Homeland Security issued two memoranda establishing policy and providing guidance related to Executive Orders 13767 and 13768 in February 2017. One memorandum implemented Executive Order 13767 by outlining new policies designed to stem illegal entry into the United States and to facilitate the detection, apprehension, detention, and removal of foreign nationals seeking to unlawfully enter or remain in the United States. For example, the memorandum directed U.S. Citizenship and Immigration Services (USCIS), CBP, and ICE to ensure that appropriate guidance and training is provided to agency officials to ensure proper exercise of parole in accordance with existing statue. The other memorandum implemented Executive Order 13768 and provided additional guidance with respect to the enforcement of immigration laws. For example, it terminated the Priority Enforcement Program, under which ICE prioritized the apprehension, detention, and removal of foreign nationals who posed threats to national security, public safety, or border security, including convicted felons; and restored the Secure Communities Program, pursuant to which ICE may also target for removal those charged, but not yet convicted, of criminal offenses, among others. Additionally, the memorandum reiterated DHS’s general enforcement priorities. ICE, CBP, and USCIS may allocate resources to prioritize enforcement activities as they deem appropriate, such as by prioritizing enforcement against convicted felons or gang members. DHS components subsequently issued additional guidance further directing efforts to implement the executive orders and apply the guidance from the memoranda. For example, ICE issued guidance to its legal program to review all cases previously administratively closed based on prosecutorial discretion. ICE’s new guidance requested its attorneys to determine whether the basis for closure remains appropriate under DHS’s new enforcement priorities. USCIS also reviewed its guidance for credible and reasonable fear determinations—the initial step for certain removable individuals to demonstrate they are eligible to be considered for particular forms of relief or protection from removal in immigration court. As a result, USCIS made select modifications pursuant to Executive Order 13767, including adding language related to evaluating an applicant’s credibility based on prior statements made to other DHS officials, such as CBP and ICE officers. DHS also initiated a number of planning and programmatic actions to implement the executive orders. In some cases DHS components expanded or enhanced existing regular, ongoing agency activities and programs in response to the orders. For example, in response to Executive Order 13768, ICE officials reported that they expanded the use of the existing Criminal Alien Program. In other instances, DHS components altered their activities consistent with the administration’s immigration priorities. For instance, in response to Executive Order 13768, the Secretary of Homeland Security directed ICE to terminate outreach or advocacy services to potentially removable foreign nationals, and reallocate all resources currently used for such purposes to a new office to assist victims of crimes allegedly perpetrated by removable foreign nationals (the Victims of Immigration Crime Engagement, or VOICE, office, established in April 2017). Additional examples of planning and programmatic actions that DHS took, or officials reported taking, in response to the executive orders are described in table 2. DOJ: Within DOJ, the Office of the Deputy Attorney General coordinated and oversaw DOJ’s initial implementation of key provisions in the executive orders, according to DOJ officials. Specifically, DOJ officials said that the Office of the Deputy Attorney General coordinated and collected information for executive order reporting requirements and participated in an interagency working group related to Executive Order 13780, and interagency meetings related to Executive Order 13767. However, DOJ components were responsible for implementing the provisions and ensuring that they met executive order requirements. In addition, DOJ assisted in the creation and issuance of various reports. For example, officials told us that DOJ provided data to State for a report on foreign assistance to the Mexican government, as required by Section 9 of Executive Order 13767. DOJ also jointly issued three reports with DHS in response to Executive Order 13768 Section 16, which included information regarding the immigration status of foreign-born individuals incarcerated under the supervision of the Federal Bureau of Prisons and in pre-trial detention in U.S. Marshals Service (USMS) custody. The Attorney General issued two memoranda providing policy and guidance related to Executive Orders 13767 and 13768 in April and May of 2017. The April 2017 memorandum contains guidance for federal prosecutors on prioritizing certain immigration-related criminal offenses. For example, the memorandum requires that federal prosecutors consider prosecution of foreign nationals who illegally re-enter the United States after prior removal, and prioritize defendants with criminal histories. The May 2017 memorandum addresses Executive Order 13768’s provision directing DOJ and DHS to ensure that jurisdictions willfully prohibiting immigration status-related communication with the federal government (referred to as “sanctuary jurisdictions”) are not eligible for federal grants. It requires jurisdictions to certify their compliance with 8 U.S.C §1373, under which a federal, state, or local government entity or official may not prohibit, or in any way restrict the exchange of citizenship or immigration status information with DHS. Additionally, DOJ took a number of initial planning and programmatic steps to implement the executive orders. DOJ officials stated that some provisions outlined in the executive orders represent regular, ongoing agency activities and did not require any major changes to be implemented. For example, DOJ detailed Assistant United States Attorneys (AUSAs) and immigration judges to southern border districts and detention centers to assist in prosecutions and to conduct removal proceedings in response to the executive orders. However, while they expanded their efforts, DOJ officials said that detailing immigration judges and AUSAs to the border districts is a regular practice, and not a new function created by the executive orders. Examples of actions that DOJ took, or officials reported taking, in response to the executive orders are described in table 3. State: State’s Bureaus of Population, Refugees, and Migration and Consular Affairs led efforts to implement key provisions in Executive Order 13780. Several legal challenges and resulting federal court injunctions affected State’s implementation of Executive Order 13780 and at times curtailed specific provisions. Initial State actions included conducting reviews and contributing to reports required by the order. For instance, while State generally suspended refugee travel for 120 days, the department, in conjunction with DHS and the Office of the Director of National Intelligence, conducted a review to determine what, if any, additional procedures should be implemented in the U.S. Refugee Admissions Program. According to State officials, the agencies provided a joint memorandum to the President in October 2017 that contained recommendations regarding resumption of the program, specific changes to refugee processing, and further reviews and steps that the interagency group should take. Additionally, State worked with DHS and the Office of the Director of National Intelligence to conduct a worldwide review. This review identified any additional information that the United States may need from each foreign country to adjudicate visas and other immigration benefit applications and ensure that individuals seeking to enter the United States do not pose a threat to public safety or national security. In July 2017, upon completion of this review, DHS, in consultation with State and other interagency partners, issued a report to the President cataloguing information needed from each country and listing countries not providing adequate information. State also issued a number of policies and guidance in response to the executive orders; however, guidance on how to implement certain provisions often changed due to legal challenges. For example, the Bureau of Population, Refugees, and Migration issued 23 iterations of refugee travel restrictions guidance to overseas refugee processing centers in response to federal litigation and budgetary uncertainties. Similarly, the Secretary of State issued a number of cables to visa-issuing foreign posts on implementing travel restrictions for nationals of selected countries following court orders limiting the implementation of such restrictions. Executive Order 13780 contained several time-sensitive provisions directed to the Secretary of State. State focused on first addressing these provisions while working towards longer-term priorities outlined in the order. For instance, Executive Order 13780 Sections 2 and 6 established visa and refugee entry restrictions, which contained near-term timelines. State implemented these provisions, consistent with judicial decisions. Examples of planning and programmatic actions that State took, or officials reported taking, to implement Executive Order 13780 are described in table 4. For more information on specific planning or programmatic actions DHS, DOJ, and State have taken to implement the executive orders, see appendix I. The examples we provided for DHS, DOJ, and State represent initial actions and do not constitute an exhaustive list of actions that agencies have taken, or may take in the future, to fully implement the executive orders. Agency officials anticipate that implementation of the executive orders will be a multi-year endeavor comprising present and future reporting, planning, and other actions. For example, DOJ officials noted that many of the actions that they took to implement the orders will be ongoing and responsive to additional DHS actions. Specifically, DOJ bases the number of immigration judges and AUSAs detailed to the southern border districts on court caseloads driven by ICE. If ICE hires additional officers and attorneys and arrests and files charges of removability against more foreign nationals, then DOJ may need to staff additional judges and AUSAs to meet caseload needs. Existing Fiscal Year 2017 Resources: Many of the initial actions agencies and components took in response to the executive orders fit within their existing fiscal year 2017 budget framework and aligned with their established missions. At the time the executive orders were issued in January and March of 2017, federal agencies were operating under existing continuing appropriations pending enactment of fiscal year 2017 appropriations; therefore the new administration’s border security and immigration priorities and policies had not yet been incorporated into the budget process. As a result, it is not always possible to disaggregate which fiscal year 2017 funds were used for implementation of the executive orders versus other agency activities. For example, while the orders call for a surge in hiring at CBP and ICE, these agencies regularly hire additional personnel to offset attrition or to meet budget hiring targets as part of their normal operations. We asked agencies to identify budgetary resources they used specifically to address the executive orders. In some cases agencies were able to quantify their expenditures; however in other cases they could not. For example, according to DOJ officials, the Executive Office for Immigration Review, which conducts immigration court proceedings, spent close to $2.4 million in existing funds to surge approximately 40 immigration judge positions to detention centers and the southwest border from March through October 2017 in response to Executive Order 13768. DHS’s USCIS reported expending approximately $4.2 million detailing asylum officers to immigration detention facilities along the southern border from February 2017 through February 2018. Additionally, as a result of the 120-day suspension of refugee admissions, State cancelled airline tickets for previously approved refugee applicants, which resulted in a cost of nearly $2.4 million in cancellation and unused ticket fees. State officials noted that, aside from the ticket costs, other budgetary costs associated with implementing the order are difficult to disaggregate from other processing activities. For example, any budgetary costs associated with refugees who were admitted on a case-by-case basis were absorbed into overseas processing budgets. In some cases, agencies also identified cost savings or avoidances. For example, State reported a total cost avoidance of over $160 million in fiscal year 2017, partially as a result of admitting fewer refugees than originally planned under the prior administration. While the costs above were part of agencies’ normal operations, we identified one case where Congress approved a DHS request to reprogram $20 million from existing programs to fund the planning and design of new physical barriers along the border, including prototype design and construction. Specifically, CBP reprogrammed $15 million from funds originally requested for Mobile Video Surveillance System deployments and $5 million from a border fence replacement project in Naco, Arizona. Additionally, we identified another case where DHS shifted funds and notified Congress, but determined Congressional approval for reprogramming was not required. Specifically, in response to Executive Order 13768, the Secretary of Homeland Security directed ICE to reallocate any and all resources used to advocate on behalf of potentially removable foreign nationals (except as necessary to comply with a judicial order) to the new VOICE office. As part of this effort, ICE’s Office of the Principal Legal Advisor determined that the creation of the VOICE office fell within ICE’s authority to carry out routine or small reallocations of personnel or functions. According to officials at DHS, DOJ, and State, there were no additional requests to reprogram or transfer funds to implement the executive orders. DHS budget officials stated that any future requests from DHS components to reprogram or transfer funds would typically be considered at the midway point in the budget cycle. All three agencies indicated that they used existing personnel to implement the executive orders and, in some cases, a substantial amount of time was spent preparing reports, planning to implement provisions, and responding to changes or new developments in the executive orders. For example, USCIS officials noted that the agency devoted a significant number of manpower hours to aligning USCIS priorities to the executive orders. ICE’s Office of Human Capital established a dedicated executive order hiring team to plan for the hiring surge directed by Executive Order 13768. Additionally, officials at State told us that personnel were diverted from normal operations in order to implement executive order policy actions and that there were overtime costs associated with some provisions. In most cases, agencies did not specifically track or quantify the amount of time spent on these efforts; however, ICE’s Office of Human Capital tracked the amount of time spent on planning for the potential surge in ICE hiring in its human resource data system. According to ICE information, ICE personnel charged approximately 14,000 regular hours (the equivalent of 1,750 8-hour days) and 2,400 overtime hours to this effort from January 2017 through January 2018. Fiscal Year 2017 Request for Supplemental Appropriations: In March 2017, the President submitted a budget amendment along with a request for $3 billion in supplemental appropriations for DHS to implement the executive orders and address border protection activities. In May 2017, an additional appropriation of approximately $1.1 billion was provided in response to this request, some of which DHS used to fund actions to implement the orders. For example, CBP received $65.4 million for hiring and, according to CBP officials, used these funds to plan and prepare for the surge in Border Patrol agents directed by Executive Order 13767. As of January 2018, CBP had obligated $18.8 million and expended $14.1 million of the $65.4 million it received. Additionally, ICE received $147.9 million for custody operations. At the end of fiscal year 2017, ICE had obligated and expended nearly all—over 99.9 percent—of the funds it received. Fiscal Years 2018 and 2019 Budget Requests and Fiscal Year 2018 Appropriations: Agency officials anticipate additional costs to further implement the executive orders and expect that certain provisions will require a multi-year effort. According to DHS officials, the agency expects to incorporate executive order implementation into its annual strategic and budgetary planning processes. DHS officials also noted that additional future planning and funds will be needed to fully implement actions in the orders. Agencies plan to continue to use their base budgets as well as request additional funds as needed to carry out their mission. Examples of DHS and DOJ fiscal year 2018 budget requests and appropriations to implement executive order provisions are listed below. CBP requested $1.6 billion and in the Consolidated Appropriations Act, 2018, received approximately $1.3 billion to build new and replace existing sections of physical barriers along the southern border. CBP also projected out-year funding for construction along certain segments of the border through 2024. ICE requested $185.9 million for approximately 1,000 new immigration officers and 606 support staff. ICE’s fiscal year 2018 appropriation included $15.6 million to support the hiring of 65 additional investigative agents, as well as 70 attorneys and support staff. DOJ requested approximately $7.2 million to hire additional attorneys in support of the orders. According to DOJ officials, DOJ received sufficient funds in the fiscal year 2018 budget to meet the hiring goal for attorneys. DHS and DOJ also requested funds for fiscal year 2019 to implement executive order provisions, examples of which are listed below. ICE requested $571 million to hire 2,000 immigration officers (including 1,700 deportation officers and 300 criminal investigators) and 1,312 support staff (including attorneys). DOJ requested $1.1 million for 17 paralegal support positions to support the additional attorneys requested in the fiscal year 2018 request. DOJ also requested approximately $40 million to hire new immigration judges and their supporting staff, citing an over 25 percent increase in new cases brought forward by DHS over the course of fiscal year 2017. DHS and DOJ components that were not directly tasked with responsibilities in the executive orders have also begun to plan for potential effects as agencies implement the orders. For example, as CBP and ICE work to meet the hiring surge in the orders, USMS anticipates a likely increase in the number of individuals who are charged with criminal immigration offenses and detained pending trial, resulting in a corresponding increase in its workload. USMS developed a multi-year impact statement which projected possible effects on USMS prisoner operations, judicial security, and investigative operations. According to DOJ officials, these efforts may inform USMS’s budget requests and future year planning. For example, for fiscal year 2018 USMS requested approximately $9 million to hire 40 USMS deputies to support the executive orders. For fiscal year 2019, USMS projected that the administration’s policies to increase immigration enforcement and immigration-related prosecutions could result in an increase of nearly 19,000 prisoners between fiscal year 2017 and fiscal year 2019 and a corresponding budget increase of approximately $105 million for immigration expenses. In addition, officials at the Federal Law Enforcement Training Centers stated that they coordinated with Border Patrol and ICE to assess future training needs and project future resource requirements based on the hiring assumptions in the executive orders. For example, the Federal Law Enforcement Training Centers requested an increase of $29 million in fiscal year 2018 and $25.7 million in fiscal year 2019 for tuition and training requirements to implement the executive orders, among other funding requested. Appendix I includes additional information on funds DHS, DOJ, and State have obligated, expended, or shifted, to implement provisions of the executive orders. We provided a draft of this report to DHS, DOJ, and State for review and comment. DHS provided written comments, which are reproduced in appendix III; DOJ and State did not provide written comments. In its written comments, DHS discussed resources and legislative authorities the department believes it needs to carry out executive order requirements. All three agencies provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Homeland Security, the Attorney General, and the Secretary of State. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix IV. This appendix contains summaries of initial actions that the Department of Homeland Security (DHS), Department of Justice (DOJ), and Department of State (State) took to implement selected programmatic provisions of the President’s executive orders on border security and immigration. These orders include Executive Order 13767, Border Security and Immigration Enforcement Improvements; Executive Order 13768, Enhancing Public Safety in the Interior of the United States; and Executive Order 13780, Protecting the Nation from Foreign Terrorist Entry into the United States. These summaries also contain overviews of budget information related to implementing the executive orders, including obligations, expenditures, and budget requests where available, among other things. Table 5 lists the summaries and the executive order provisions on which they focus. We reviewed the executive orders and placed each provision directed at DHS, DOJ, and State into one of three categories: (1) analyses and reports, (2) policies, and (3) programs. We defined the analyses and reports category as executive order provisions that direct agencies to review and analyze data, policies, processes, and operational mission areas and produce reports. We defined the policies category as executive order provisions that establish new or modify existing policies, guidance, or processes related to border security or immigration. We defined the programs category as tangible, measurable, and quantifiable executive order provisions that implement policies. We confirmed our categorization with each agency, particularly for the programs category, since it was sometimes ambiguous whether provisions would lead to actions that were tangible, measurable, and quantifiable. Specifically, we reviewed agency documentation, such as a DHS inventory of tasks related to the executive orders, and interviewed agency officials. In some cases, we moved policy provisions to the programs category if agency efforts to implement the policy were underway. We prepared summaries for each executive order provision(s) we categorized as a program. For each program, we identified actions planned, completed, or underway at DHS, DOJ, and State as of March 2018 through reviewing documentation, interviewing agency officials, and submitting data collection instruments. For each program we also collected available budgetary costs—specifically, any funds requested, appropriated, obligated, and expended for executive order implementation from January 2017 through March 2018. We reviewed publicly available budget requests, congressional budget justifications, public laws, and budgetary data from agencies’ internal data systems. While we were able to identify certain funds directly attributed to the executive order provisions from these documents, it was not always possible to extract funds specifically meant for implementing the executive order provisions from more general budget increase requests, appropriations, or expenditures. To specifically identify funds used for the executive order provisions, we reviewed agency documentation, interviewed agency budget and program officials, and submitted written questions as necessary. In instances where we were unable to differentiate executive order provision funds from regular operating funds, we identified the larger account used for executive order funds and noted this distinction. We analyzed agency documentation on the policies, procedures, and processes for maintaining budgetary data and interviewed agency officials about their data collection practices to assess the reliability of these data. We determined that the data were sufficiently reliable for our purposes. Action Overview CBP has taken initial steps to plan, design, and construct new and replacement physical barriers on the southern border. For instance, CBP began the acquisition process for a Border Wall System Program, including developing plans to construct barrier segments and awarding eight task orders with a total value of over $3 million to design and construct barrier prototypes (four made from concrete and four made from non-concrete materials). CBP selected San Diego, California as the first segment and plans to replace an existing 14 miles of primary and secondary barriers. DHS plans to use fiscal year 2017 funding for the replacement of the primary barrier which it plans to rebuild to existing—as opposed to prototype—design standards. In January 2018, DHS leadership also approved cost, schedule, and performance goals for a second segment in the Rio Grande Valley in Texas, which will extend an existing barrier with 60 miles of new fencing. The Consolidated Appropriations Act, 2018, stated that fiscal year 2018 funds for primary pedestrian fencing are only available for “operationally effective designs deployed as of ,” such as steel bollard fencing currently deployed in areas of the border. As of April 2018, CBP and DHS were evaluating what, if any, impact this direction will have on the department’s plans, according to DHS officials. Additionally, DHS waived specific legal restrictions, such as environmental restrictions, in order to begin construction of barriers in the El Centro and San Diego Border Patrol sectors in California; and the Santa Teresa, New Mexico segment of the El Paso Border Patrol Sector. DHS also completed a categorical exclusion for replacement of a segment of existing barriers in El Paso, Texas. Budget Overview To fund the barrier prototypes, Congress approved a DHS request to reprogram $20 million in fiscal year 2017. Specifically: CBP reprogrammed $15 million from funds originally requested for Mobile Video Surveillance System deployments. The funds were originally part of the fiscal year 2015/2017 Border Security Fencing, Infrastructure, and Technology (BSFIT) Development and Deployment funding and were available due to a contract bid protest and delays associated with the Mobile Video Surveillance System Program. CBP also reprogrammed $5 million from funds originally intended for a fence replacement project in Naco, Arizona. The funds were part of fiscal year 2016 BSFIT Operations and Maintenance funding and were available as a result of unanticipated contract savings. The Naco Fence Replacement project will be completed within its original scope, according to CBP documentation. DHS also received an appropriation in fiscal year 2017 to replace existing fencing and to install new gates; and an appropriation in fiscal year 2018 for border barrier planning and design, and to replace existing fencing and build new barriers. As previously discussed, the Consolidated Appropriations Act, 2018, limited the use of funds provided for construction of new and replacement primary pedestrian fencing to previously deployed fencing designs. DHS has requested, but has not received, fiscal year 2019 funds for building new barriers. For more information regarding funding for future barrier construction projects along the southern border, see table 6. According to CBP documentation, the total cost to construct the Border Wall System Program over approximately 10 years is $18 billion. DHS headquarters conducted an independent cost estimate for the San Diego and Rio Grande Valley segments of the program, which CBP adopted as the program’s life cycle cost estimate. Acquisition and operations and maintenance costs for the Rio Grande Valley segment were separately described in other DHS documents and are shown in table 7 below. Provision: Sections 5 and 6 Sections 5 and 6 pertain to detention facilities and detention of foreign nationals for violations of immigration law, pending the outcome of their proceedings or to facilitate removal. The order directs the Department of Homeland Security (DHS) to take immediate actions to construct, operate, or control facilities to detain foreign nationals at or near the southern border, and assign asylum officers to immigration detention facilities, among other things. Additionally, the order directs the Department of Justice (DOJ) to immediately assign immigration judges to immigration detention facilities. DHS: U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), U.S. Citizenship and Immigration Services (USCIS) DOJ: Executive Office for Immigration Review (EOIR) ICE and U.S. Border Patrol officials stated they consider custody determinations on a case by case basis. Additionally, officials from CBP’s Office of Field Operations stated they inspect all applicants for admission in accordance with the Immigration and Nationality Act, as prescribed by the executive order and a February 2017 memorandum the Secretary of Homeland Security issued. ICE, through its Enforcement and Removal Operations directorate, manages the nation’s immigration detention system, which houses foreign nationals detained while their immigration cases are pending or after being ordered removed from the country. DOJ’s EOIR is responsible for conducting immigration court proceedings, appellate reviews, and administrative hearings, pursuant to U.S. immigration law and regulation. ICE initially intended to increase bed capacity at detention facilities in order to accommodate potential surges in apprehensions that could result from implementation of the executive order. According to ICE officials, ICE identified 1,100 additional beds available at detention facilities already in use. However, officials also stated that, as of February 2018, ICE has not needed to use these additional beds due to a decrease in the number of apprehensions. Additionally, ICE officials indicated no acquisition actions were needed because contracts and agreements are in place at existing detention facilities and additional beds are available for excess capacity. CBP and ICE are continuously monitoring bed space requirements based on migration volume. According to ICE officials, as of February 2018, ICE had no additional actions planned to increase bed capacity. DHS’s Office of Strategy, Policy and Plans convened a cross-component meeting to discuss detention standards, which govern the conditions of detainee confinement, according to DHS officials. ICE officials reported that ICE is currently re-writing its national detention standards (the standards applicable at most county jails housing immigration detainees). According to officials, the new standards are intended to make it easier for local jurisdictions to comply with standards without completely re-writing their existing policies to conform to ICE’s requirements. USCIS officials told us they began working with ICE to identify where additional asylum officers were needed based on workload needs and space availability as soon as the executive order was issued in January 2017. From February 2017 through February 2018, USCIS deployed between 30 and 64 asylum officers during any given week along the southern border and continues to do so in response to caseload needs. USCIS continues to monitor and periodically adjust asylum officer staffing requirements, according to USCIS officials. DOJ officials stated that DOJ components coordinated with ICE to identify removal caseloads along the southern border that were large enough to warrant additional immigration judges. According to DOJ officials, from March 2017 through October 2017, EOIR detailed approximately 40 immigration judge positions, both in person and by video teleconference, to 19 DHS detention facilities, including many along the southern border, in response to the executive order. DOJ officials further explained that as caseloads fluctuated, some of the details ended, some in- person details were converted to video teleconference, and some details were converted to permanent immigration judge positions. EOIR often details immigration judges for operational reasons; however officials noted that the scale of this detail mobilization was larger because of the executive order. Fiscal Year 2017: Because Executive Orders 13767 and 13768 were issued during fiscal year 2017, DHS submitted a budget amendment and requested supplemental appropriations to address the needs of the department in support of executive order implementation. The request proposed funding to increase daily immigration detention capacity to 45,700 detention beds by the end of fiscal year 2017. The request stated that the detention capacity was necessary to implement the administration’s immigration enforcement policies for removing foreign nationals illegally entering or residing in the United States. ICE: On May 5, 2017, ICE received a supplemental appropriation of $236.9 million for enforcement and removal operations, including $147.9 million for custody operations, $57.4 million for alternatives to detention, and $31.6 million for transportation and removal operations. According to ICE documentation, almost all of the funds from that additional appropriation were obligated and expended at the conclusion of fiscal year 2017, as shown in table 8. USCIS: USCIS documentation estimated that it expended at least $4.2 million detailing asylum officers to immigration detention facilities along the southern border from February 2017 through February 2018. Fiscal Year 2018: The President’s budget requested an additional $1.5 billion above the 2017 annualized continuing appropriations level, for expanded detention, transportation, and removal of foreign nationals who enter, or remain in, the United States, in violation of U.S. immigration law. As part of the $1.5 billion requested, the ICE congressional budget justification requested $1.2 billion in additional funds to support an average daily population (ADP) of detainees of 51,379—a 49 percent increase over fiscal year 2016 ADP (34,376). The request stated that Executive Order 13768 and subsequent department guidance were expected to drive increases in the ADP due to the increase in ICE law enforcement officers and an expected increase in the average length of stay at detention facilities. ICE also requested funds for transportation and alternatives to detention. In fiscal year 2018, ICE was appropriated $4.1 billion to support enforcement and removal operations. According to DHS officials, the Consolidated Appropriations Act, 2018, provides funds for an ADP of 40,520 total beds, 10,859 lower than requested. Fiscal Year 2019: The President’s budget requested $2.5 billion for detention and removal capacity. As part of the $2.5 billion requested, ICE’s congressional budget justification states $2.3 billion will support an ADP of 47,000. According to the ICE congressional budget justification, the number of beds will sustain the fiscal year 2017 ADP level (38,106) and provide additional detention capacity stemming from the continued implementation of Executive Order 13768. ICE also requested funds for transportation and alternatives to detention. Prior GAO Work: Our prior work on immigration detention examined ICE’s formulation of its budget request and cost estimate for detention resources. In April 2018, we found errors and inconsistencies in ICE’s calculations for its congressional budget justifications and bed rate model. Specifically, we found that ICE made errors in its budget justifications, underestimated the actual bed rate, and its methods for estimating detention costs did not meet the characteristics of a reliable cost estimate. We also found ICE did not document its methodology for its projected ADP. We recommended that ICE assess and update its adult bed rate and ADP methodology and take steps to ensure that its budget estimating process fully addresses cost estimating best practices. DHS concurred with our recommendations and plans to take actions in response to them. Fiscal Year 2017: DOJ documentation showed it expended approximately $2.4 million detailing immigration judge positions to immigration detention facilities from March 2017 through October 2017, either through video teleconferencing, or in-person, to adjudicate removal proceedings. EOIR officials explained the funds used were unobligated balances carried over from a prior fiscal year. Fiscal Year 2018: For fiscal year 2018, DOJ requested an increase of $75 million to hire 75 additional immigration judge teams to enhance public safety and law enforcement. According to DOJ officials, the agency received sufficient funds in the fiscal year 2018 budget to meet this hiring goal. Fiscal Year 2019: The fiscal year 2019 President’s budget also requests an increase of $40 million for 75 new immigration judge teams at EOIR and nearly $40 million for 338 new prosecuting attorneys at ICE to ensure immigration cases are heard expeditiously. According to the President’s budget, these investments are critical to the prompt resolution of newly-brought immigration charges and to reduce the 650,000 backlog of cases currently pending in the immigration courts. EOIR’s fiscal year 2019 congressional budget justification includes a program increase totaling almost $65 million to provide funding for immigration judges and support staff, as well as information technology efforts. This increase supports initiatives that implement Presidential and Attorney General priority areas, among other things. USCIS has discretion to authorize parole for urgent humanitarian reasons or significant public benefit, which it uses to allow an individual, who may be inadmissible or otherwise ineligible for admission to come to the United States for a temporary period. USCIS asylum officers adjudicate asylum applications filed with USCIS, and conduct credible and reasonable fear screenings to determine if certain removable foreign nationals may be eligible to seek particular forms of relief or protection in immigration court. Additional Funds Saved and Expended: According to USCIS officials, USCIS saved approximately $274,000 from not renewing contracts to administer the Central American Minors Parole Program. According to USCIS documentation, USCIS expended approximately $70,300 to deploy FDNS officers along the southern border from March 2017 to February 2018. Action Overview DHS has taken a number of actions to implement the executive order hiring provisions. Specifically, DHS requested and the Office of Personnel Management approved a number of changes to assist DHS and its components with the executive order hiring directives. These changes include granting CBP and ICE direct hire authority and a special salary rate for polygraphers, among others. DHS’s Office of the Chief Human Capital Officer and DHS components’ human capital offices also began additional hiring planning, such as refining component-level hiring plans, coordinating on potential joint hiring events, and targeting specific recruitment efforts, such as military veterans. CBP and ICE have also taken the following additional actions: CBP: In November 2017, CBP awarded a contract not to exceed $297 million to Accenture Federal Service LLC to help with law enforcement hiring for all CBP components. The contract is structured so the contractor receives a set dollar amount for each law enforcement officer hired—80 percent for each final offer letter and 20 percent for each law enforcement officer who enters on duty. The contractor is to assist CBP in hiring 7,500 qualified agents and officers, including 5,000 Border Patrol agents, 2,000 CBP officers, and 500 Air and Marine Interdiction agents over 5 years. CBP expects Accenture to be fully operational and effectively provide surge hiring capacity by June 2018, according to CBP officials. ICE: According to ICE Office of Human Capital (OHC) officials, OHC is ensuring policies and procedures are in place so that ICE is ready to begin hiring additional immigration officers and support staff if funds are appropriated. In January 2018, ICE OHC also issued a contract solicitation for recruitment, market research, data analytics, marketing, hiring, and onboarding activities. ICE OHC sought to procure comprehensive hiring and recruitment services to assist ICE OHC in meeting the demands required to achieve the executive order’s hiring goals and develop efficiencies to current OHC processes. ICE aimed to have a similar pricing structure as CBP’s Accenture contract, according to the solicitation. Specifically, according to the solicitation, the yet to be selected contractor would receive a set dollar amount for each frontline officer hired–80 percent for each preliminary offer letter and 20 percent for each frontline officer who enters on duty. The contractor would assist ICE in hiring 10,000 law enforcement agents, including 8,500 deportation officers and 1,500 criminal investigators. It would also assist in the hiring of approximately 6,500 support personnel positions. In May 2018, the contract solicitation was cancelled; however, the government anticipates re-soliciting the requirement in fiscal year 2019. According to the contract cancellation notice and an ICE OHC official, DHS cancelled the contract due to delays associated with the fiscal year 2018 budget and hiring timelines, as well as the limited number of additional ICE positions funded in the fiscal year 2018 budget. In the interim, ICE is partnering with the Office of Personnel Management to meet the executive order’s hiring goals and develop efficiencies to current OHC processes, according to ICE officials. Because Executive Orders 13767 and 13768 were issued during fiscal year 2017, DHS submitted a budget amendment and requested supplemental appropriations to help address the needs of the department in support of executive order implementation. The request included funding for DHS agencies to begin building the administrative capacity necessary to recruit, hire, train and equip the additional 5,000 Border Patrol agents and 10,000 ICE officers. The Federal Law Enforcement Training Centers (FLETC), which provides training to law enforcement professionals who protect the homeland, including any new ICE and CBP personnel hired as result of the executive orders, also requested funds to support these efforts. On May 5, 2017, CBP received an additional appropriation of $65.4 million to improve hiring processes for Border Patrol agents, CBP officers, and Air and Marine Operations personnel, and for officer relocation enhancements. Of the $65.4 million appropriated in fiscal year 2017, CBP obligated $18.8 million and expended $14.1 million as of January 2018. While ICE also received additional funding for custody operations, alternatives to detention, and transportation and removal, it did not receive supplemental funds in fiscal year 2017 specifically for hiring. DHS also requested funds for CBP, ICE, and FLETC hiring and training in fiscal year 2018 and fiscal year 2019. For additional details, see table 9. According to FLETC officials, the total average cost to provide basic law enforcement training varies by agencies and position, as shown in table 10. FLETC officials noted their partners also provide additional training unique to their missions, which is not included in the costs below. Action Overview ICE officials reported expediting review of pending 287(g) requests and approved 46 additional state and local jurisdictions for the program from February 2017 through March 2018, bringing the total to 76 law enforcement agencies in 20 states. See figure 2 for a map of additional jurisdictions approved. Section 10 and Section 8 of Executive Orders 13767 and 13768, respectively, direct the Department of Homeland Security (DHS) to engage with state and local entities to enter into agreements under Section 287(g) of the Immigration and Nationality Act. DHS: U.S. Immigration and Customs Enforcement (ICE) The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 added Section 287(g) to the Immigration and Nationality Act, which authorizes ICE to enter into agreements with state and local law enforcement agencies, permitting designated state and local officers to perform immigration law enforcement functions. According to ICE officials, ICE also conducted outreach with state and local officials and identified potential law enforcement partners with whom to enter into possible future 287(g) agreements. U.S. Customs and Border Protection (CBP) officials stated that they agreed to support ICE’s program expansion efforts and provided hundreds of viable state and local law enforcement referrals to ICE to assist with this effort. For example, CBP reviewed data and conducted a gap analysis, to include a survey, to identify potential law enforcement partners for future 287(g) memorandums of agreement. CBP officials further noted that they introduced new language into Operation Stonegarden grant guidance that allows the use of grant funding to support CBP-identified, 287(g) law enforcement operational activities. According to CBP and ICE officials, efforts to develop a 287(g) enforcement model that can be used for this purpose are pending. According to ICE officials, the agency is considering developing a program under which designated local law enforcement officers would be trained and authorized to serve and execute administrative warrants for individuals who are in violation of U.S. immigration laws at the time they are released from state criminal custody. ICE officials indicated that program participants would have limited authority under 287(g). For example, they would not interview individuals regarding nationality and removability, lodge detainers, or process individuals for removal. ICE has not yet finalized the program and it may evolve as ICE further develops the program, according to ICE officials. ICE is also leveraging an existing Basic Ordering Agreement, a procurement tool to expedite acquisition of a substantial, but presently unknown, quantity of supplies or services, according to ICE officials. A Basic Ordering Agreement is not a contract, but rather, is a written instrument of understanding, negotiated between ICE and state and local jurisdictions, to house detainees upon ICE’s issuance and their acceptance of an Immigration Detainer and either a Warrant for Arrest of Alien or Warrant of Removal. For any order placed under the agreement, ICE will reimburse the provider, such as a state or local jurisdiction, for up to 48 hours of detention, under applicable regulations. The rate will be fixed at $50.00 for up to 48 hours of detention. No payment will be made for any detention beyond 48 hours. The Secretary of Homeland Security vested authority in CBP to accept state services to carry out certain immigration enforcement functions pursuant to Title 8, United States Code Section 1357(g). According to CBP officials, CBP also joined a 287(g) Program Advisory Board, which reviews and assesses ICE field office recommendations about pending 287(g) applications. Participation in the 287(g) program is expected to expand further in fiscal years 2018 and 2019, according to ICE. Additionally, ICE anticipates further increase in the number of 287(g) memorandums of agreement in fiscal years 2018 and 2019. In fiscal year 2018, ICE requested $24.3 million for ICE 287(g) program funding. According to the explanatory statement accompanying the Consolidated Appropriations Act, 2018, the 287(g) program was fully funded at the requested level. In fiscal year 2019, ICE requested $75.5 million for ICE 287(g) program funding. Section 11 of Executive Order 13768 directs DOJ and the Department of Homeland Security (DHS) to develop and implement a program to ensure that adequate resources are devoted to prosecuting criminal immigration offenses, and to develop cooperative strategies to reduce the reach of transnational criminal organizations and violent crime. border districts developed guidelines for prioritizing misdemeanor cases involving individuals illegally entering the United States for the first time. However, according to these officials, southern border districts developed these guidelines based on an initial high volume of apprehensions, and when apprehensions decreased the guidelines were no longer necessary and never published. DOJ: Executive Office for United States Attorneys (EOUSA) DHS: Immigration and Customs Enforcement (ICE) EOUSA provides executive and administrative support for United States Attorneys and Assistant United States Attorneys (AUSAs). AUSAs conduct trial work, as prosecutors, in which the United States is a party, including prosecution of criminal immigration offenses. Western District of Texas and Arizona, and two AUSAs each to the Southern District of California, the District of New Mexico, and the Southern District of Texas, for a total of 12 details according to DOJ officials. The first round of details lasted for 6 months, and EOUSA extended the details of one AUSA at each southern border district for an additional 6 months. DOJ officials told us that EOUSA will continue to evaluate the need for additional details along the southern border based on the needs of the districts, as determined by the number of DHS apprehensions. According to DOJ officials, implementation of these provisions is ongoing and will depend largely upon DHS executive order actions—for instance, as DHS hires more enforcement personnel, criminal immigration cases may increase which could spur a need for more AUSAs. ICE litigates charges of removability against foreign nationals and conducts criminal investigations, including investigations of immigration fraud. The Secretary of Homeland Security released a memorandum with guidance on the enforcement of immigration laws in the United States on February 20, 2017. In response to this memorandum, ICE’s Office of the Principal Legal Advisor sent guidance to its attorneys directing them to prioritize legal services supporting the timely removal of foreign nationals in accordance with Executive Order 13768. The guidance directed ICE to review all cases previously administratively closed based on prosecutorial discretion to determine whether the basis for closure remains appropriate under DHS’s enforcement priorities. The guidance also directed ICE to coordinate with the Executive Office for Immigration Review to ensure that foreign nationals charged as removable and who meet the enforcement priorities remain on active immigration court dockets and that their cases are completed as expeditiously as possible. In response to the executive orders, ICE Homeland Security Investigations officials stated that the agency began to focus more of its resources on the investigation and criminal prosecution of immigration fraud. ICE Homeland Security Investigations added five new Document and Benefit Fraud Task Forces throughout the nation and directed field offices to increase staffing of task forces. Additionally, ICE is in the process of combining five Benefit Fraud Units into an immigration fraud center—the National Lead Development Center— that will serve as a new centralized entity that will refer cases to the task forces for enforcement action. A summary of DOJ budget increase requests, appropriations, and expenditures related to prosecution priorities in the executive orders that we identified can be found in table 11. The fiscal year 2018 President’s budget request included $19.3 million for 195 attorney positions in ICE’s Office of the Principal Legal Advisor. According to ICE officials, while the Consolidated Appropriations Act, 2018, included funds for 70 positions for the Homeland Security Investigations Law Division, it did not include funds for additional attorney positions for immigration litigation within the Office of the Principal Legal Advisor. The fiscal year 2019 President’s budget request included $39.7 million for additional attorney resources in ICE’s Office of the Principal Legal Advisor. Provision: Sections 5 and 10 Sections 5 and 10 direct the Department of Homeland Security (DHS) to take action related to immigration enforcement. Specifically, Section 5 directs DHS to prioritize the removal of certain categories of removable foreign nationals. Section 10 directs DHS to terminate the Priority Enforcement Program (PEP) and reinstitute Secure Communities, among other things. DHS: U.S. Immigration and Customs Enforcement (ICE), U.S. Customs and Border Protection (CBP) Under PEP (from 2015 to 2017), ICE issued a request for detainer (with probable cause of removability) or information or transfer, for a priority removable individual, such as one posing a threat to national security or public safety, including a foreign national convicted of a felony, among others, under DHS’s former tiered civil enforcement categories. Under Secure Communities, ICE may issue detainers for removable individuals charged, but not yet convicted, of criminal offenses, in addition to individuals subject to a final order of removal whether or not they have a criminal history. Pursuant to Executive Order 13768, the Secretary of Homeland Security terminated PEP and reinstituted the Secure Communities program. As such, DHS is no longer required to utilize a tiered approach to civil immigration enforcement with direction to dedicate resources to those deemed of highest priority. Instead, under Section 5 of the executive order, various categories of removable individuals are general priorities for removal, and DHS personnel may initiate enforcement actions against all removable persons they encounter. Further, the DHS memorandum implementing this executive order allows ICE, CBP, and USCIS to allocate resources to prioritize enforcement activities within these categories, such as by prioritizing enforcement against convicted felons or gang members. As part of this effort, ICE reported it reviewed policies, regulations, and forms relevant to enforcement priorities. ICE subsequently rescinded prior enforcement priority guidance and issued new guidance directing application of the new approach to immigration enforcement prioritization. Additionally, ICE eliminated existing forms and created a new form to place detainers on foreign nationals who have been arrested on local criminal charges and for whom ICE possesses probable cause to believe that they are removable from the United States, so that ICE can take custody of such individuals upon release. According to ICE officials, more than 43,300 convicted criminal aliens have been identified and removed through Secure Communities from January 25, 2017 through the end of fiscal year 2017. Pursuant to Executive Order 13768 and in accordance with the Secretary of Homeland Security’s memorandum entitled, Enforcement of the Immigration Laws to Serve the National Interest, ICE’s Enforcement and Removal Operations (ERO) expanded the use of the Criminal Alien Program (CAP) by increasing the use of Criminal Alien Program Surge Enforcement Team (CAPSET) operations, traditional CAP Surge operations, and the Institutional Hearing Program. Specifically, ICE took the following actions: ICE ERO conducted four CAPSET operations in Louisiana, Georgia, and California in fiscal year 2017, resulting in a total of 386 encounters, 275 detainers, and 261 charging documents issued, according to ICE documentation. ICE ERO field offices conducted CAP Surge operations, which concluded in March 2017. According to ICE documentation, the operations collectively resulted in 2,061 encounters, 668 arrests, 1,307 detainers issued, and 614 charging documents issued. ICE, along with the Department of Justice’s Executive Office for Immigration Review and the Federal Bureau of Prisons, expanded the number of Institutional Hearing Program sites by nine, from 12 to 21. As of January 22, 2018, five of the nine Institutional Hearing Program expansion sites were operational. ICE officials reported that ICE also detailed over 30 percent more officers (79 officers) to support Community Shield efforts, an international law enforcement initiative to combat the growth and proliferation of transnational criminal street gangs, prison gangs, and outlaw motorcycle gangs throughout the United States. According to ICE officials, CAP used existing resources in fiscal year 2017 to support the efforts required by Executive Order 13768. ICE also requested funds in fiscal years 2018 and 2019 for CAP. Specifically, ICE stated in its fiscal year 2018 and 2019 congressional budget justifications that CAP performs its duties in accordance with immigration enforcement priorities defined by Executive Order 13768. In fiscal year 2018, ICE requested $412.1 million for CAP. The Consolidated Appropriations Act, 2018, funded $319.4 million for CAP, $92.6 million less than requested. Section 9 directs the Department of Justice (DOJ) and the Department of Homeland Security (DHS) to ensure that jurisdictions in willful noncompliance with 8 U.S.C. § 1373 (section 1373) are ineligible to receive federal grants. The section also directs DOJ to take appropriate enforcement action against any entity that violates section 1373, or which has in effect a policy, statute, or practice that prevents or hinders the enforcement of federal law. conducted a compliance review of certain jurisdictions relative to 8 U.S.C. § 1373, and issued a report in May 2016 finding that 10 jurisdictions raised compliance concerns. In response, DOJ placed a special condition on certain fiscal year 2016 grant awards, requiring recipients to submit an assessment of their compliance with section 1373. In November 2017, as part of the section 1373 compliance effort predating Executive Order 13768, DOJ sent letters to 29 jurisdictions expressing concern that they may not be in compliance with section 1373, and requesting responses regarding compliance. In January 2018, DOJ sent 23 follow-up demand letters to jurisdictions seeking further documents to determine whether they are unlawfully restricting information sharing by their law enforcement officers with federal immigration authorities, and stating that failure to respond will result in records being subpoenaed. The Attorney General determined that Section 9 will be applied solely to DOJ or DHS federal grants for jurisdictions willfully refusing to comply with section 1373. Under section 1373, a federal, state, or local government entity or official may not prohibit, or in any way restrict the exchange of information regarding citizenship or immigration status with DHS. ICE developed weekly Declined Detainer Outcome Reports detailing jurisdictions with the highest volume of declined detainers and a list of sample crimes suspected or determined to have been committed by released individuals. According to ICE officials, ICE identified data processing errors and incorrect detainer information and is working to correct these issues. ICE officials noted that they temporarily suspended the reports, and have not yet determined a specific time frame for future publications. DHS reviewed all DHS grant programs to determine which programs could be conditioned to require compliance with section 1373 and plans to provide this information to the Office of Management and Budget, according to DHS officials. DOJ has not obligated, expended, or requested any additional funds to implement Executive Order 13768, section 9(a). The fiscal year 2019 President’s budget proposed to amend the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 to condition DHS and DOJ grants and cooperative agreements on state and local governments’ cooperation with immigration enforcement. Section 2 directed multiple agencies, including the Department of State (State) and Department of Homeland Security (DHS), to conduct a worldwide review to identify any additional information needed from each foreign country to adjudicate immigration benefit applications and ensure that individuals applying for a visa or other immigration benefit are not a security or public safety threat. It also directed the agencies to send a report of the findings of the worldwide review to the President. This section further established visa entry restrictions applicable to foreign nationals from Iran, Libya, Somalia, Sudan, Syria, and Yemen for a 90-day period. It also stated that agencies, including State and DHS, could continue to submit additional countries for inclusion in visa entry restrictions. Section 5 required agencies, including State, DHS, and the Department of Justice (DOJ), to develop a uniform baseline for screening and vetting to identify individuals seeking to enter the United States on a fraudulent basis or who support terrorism or otherwise pose a danger to national security or public safety. practices based on the criteria identified above. In July 2017, State directed its posts to inform their respective host governments of the new information-sharing criteria and request that host governments provide the required information or develop a plan to do so. CA directed posts to engage more intensively with countries whose information-sharing and identity-management practices were preliminarily deemed “inadequate” or “at risk” and submit an assessment of mitigating factors or specific interests that should be considered in the deliberations regarding any travel restrictions. According to officials, State and its posts will continue to engage with foreign countries to address information-sharing and identify management deficiencies. State: Bureau of Consular Affairs (CA), DHS, and DOJ CA provides consular services in reviewing and adjudicating visa applications for those seeking to enter the United States. DHS adjudicates visa petitions, and DHS and DOJ also play roles in screening and vetting applicants. DHS and DOJ, along with State, are responsible for implementing the enhanced screening and vetting protocols established under the executive order. June 29, 2017 through September 24, 2017. During the implementation period, if an applicant was found ineligible for a visa on other grounds unrelated to the executive order, such as prior criminal activity or immigration violations, the applicant would be refused the visa on those grounds, according to State officials. If the applicant was found to be otherwise eligible for the visa and did not qualify for an exemption or a waiver under the executive order, he or she would be refused on the basis of the executive order. CA sent several cables to posts with guidance on implementing the 90-day travel restriction, including operational guidance and updated guidance following court decisions. CA also offered trainings to consular posts on implementation of the order. A series of legal challenges ultimately led to the June 26, 2017 Supreme Court decision prohibiting enforcement of entry restrictions against foreign nationals who could credibly claim a bona fide relationship with a person or entity in the United States. On September 24, 2017, pursuant to section 2(e) of Executive Order 13780, the President issued Presidential Proclamation 9645, which established conditional restrictions on U.S. entry for certain categories of nationals from Chad, Iran, Libya, North Korea, Syria, Venezuela, Yemen and Somalia, for an indefinite period. According to State officials, State, DHS, DOJ, and other agencies formed a working group and developed a uniform baseline for screening and vetting standards and procedures to ensure ineligible individuals are not permitted to enter the United States, and are implementing the new requirements. The working group conducted a review of the visa screening and vetting process and established uniform standards for (1) applications, (2) interviews, and (3) system security checks, including biographic and biometric checks. According to State officials, for applications, the group identified data elements against which applicants are to be screened and vetted. For interviews, the working group established a requirement for all applicants to undergo a baseline uniform national security and public safety interview. The working group modeled its interview baseline on elements of the refugee screening interview. As of June 2017, State collected most of the data elements online for immigrant and nonimmigrant visas, according to State officials. The President issued a memorandum on February 6, 2018, directing DHS, in coordination with State, DOJ, and the Office of the Director of National Intelligence to establish a national vetting center to coordinate agency vetting efforts to identify individuals who pose a threat to national security, border security, homeland security, and public safety. The National Vetting Center will be housed in DHS, and will leverage the capabilities of the U.S. intelligence community to identify, and prevent entry of, individuals that may pose a threat to national security. On February 14, 2018, the Secretary of Homeland Security appointed a director for the National Vetting Center. The Secretary also delegated authorities of the National Vetting Center to the Commissioner of U.S. Customs and Border Protection. State officials said that personnel worked overtime to implement Section 2 and the following Presidential Proclamation, but did not identify monetary costs or budget increases associated with implementation. DHS also dedicated several full-time staff positions to developing and implementing enhanced screening and vetting protocols, and DHS employees worked overtime to implement these provisions, according to officials. Section 6 directed the Department of State (State) to suspend travel of refugees seeking to enter the United States, and the Department of Homeland Security (DHS) to suspend adjudications on refugee applications, for 120 days. Section 6 further ordered that during the 120- day period, State, together with DHS, and the Office of the Director of National Intelligence review the refugee application and adjudication process to identify and implement additional procedures to ensure that refugees seeking entry into the United States under the United States Refugee Admissions Program (USRAP) do not pose a threat to U.S. security and welfare. This section also capped annual refugee admission at 50,000 in fiscal year 2017. State generally suspended travel of refugees into the United States from June 29, 2017 through October 24, 2017. State coordinated with DHS, the Office of the Director of National Intelligence, and other security vetting agencies on the 120-day review of the USRAP application and adjudication process to determine what additional procedures should be used to ensure that individuals seeking admission as refugees do not pose a threat to the security and welfare of the United States, according to State officials. Upon completion of the review, the agencies submitted a joint memorandum to the President. The United States admitted 53,716 refugees in fiscal year 2017, according to State officials. Throughout fiscal year 2017, State issued guidance that steered the refugee admissions program to different refugee arrival goals during different periods of time due to court decisions and budget considerations. Prior to the issuance of Executive Order 13769, which, after largely being blocked nationwide by a federal court injunction was revoked and replaced by Executive Order 13780, PRM operated at the rate of 110,000 refugees per year. After the issuance of Executive Orders 13769 and 13780, PRM officials noted that at times, State made no bookings for refugee arrivals, and also made bookings based on 50,000 arrivals, as well as 110,000 arrivals. A series of legal challenges and resulting court injunctions culminated in the June 26, 2017, Supreme Court order limiting State’s implementation of this section to prospective refugees without bona fide ties to the United States. Together with budget uncertainties, State could not enact the refugee travel suspension or 50,000-person admissions cap based on the timeline set in the executive order. Figure 3 below shows key milestones related to this section of the order. The USRAP resettles refugees to the United States in accordance with a refugee admission ceiling set by the President each year. PRM is responsible for coordinating and managing the USRAP. USCIS is responsible for adjudicating refugee applications. According to USCIS officials, USCIS is implementing new requirements and vetting procedures for refugees. For example, these officials stated that USCIS is accessing more detailed biographical information earlier in the vetting process. Additionally, these officials noted that USCIS’s Fraud Detection and National Security unit is conducting additional reviews of applicants, including social media and other information against various databases. USCIS officials further noted that USCIS’s International Operations office sent guidance to the field that established the logistical requirements of the new procedures. As of April 2018, USCIS was finalizing further guidance and training officers for the enhanced review and vetting procedures, according to USCIS officials. State officials said that State and DHS executed four categories of exemptions during the 120-day USRAP suspension: a Congolese woman with a life-threatening illness and her family; 29 unaccompanied refugee minors; 17 Yezidis and other religious minorities in northern Iraq who had been victims of ISIS; and 53 individuals on Nauru and Manus Islands. appointments by 12 months. In October 2017, State approved extending offers for follow-on 60-month Limited Non-Career Appointments to Consular Fellows who complete a successful initial 60-month appointment. State officials noted the first officer to accept a follow-on appointment was sworn in during April 2018. CA and State’s Bureau of Human Resources updated the CA Limited Non-Career Appointments handbook to include an implementation plan for extending such appointments, and according to officials, providing language training outside of the applicant’s area of core linguistic ability. Consular Fellows serve in U.S. embassies and consulates overseas and primarily adjudicate visa applications for foreign nationals. The Visa Interview Waiver Program formerly waived in-person interviews for certain categories of visa applicants. In early 2017, State streamlined the application process for Consular Fellows and realigned resources to expedite their security clearance process, according to CA officials. From February 2017 through February 2018, State hired 134 new Consular Fellows, according to CA officials. Additionally, State officials said that they expect to hire 120 more Consular Fellows for the remainder of fiscal year 2018. In August 2017, the Foreign Service Institute created a 12-week Spanish Language program for Consular Fellows who received certain scores on the Spanish language exam, according to CA officials. Eleven Consular Fellows completed the program in January 2018 and 20 more are expected to complete the program in July 2018, according to CA officials. As of January 2018, five Consular fellows were being trained in a language outside their core linguistic ability, according to CA officials. While these actions were taken to support implementation of the executive order, CA officials also told us that hiring Consular Fellows has been a State priority for some time. CA officials said that the bureau has hired an increasing number of Consular Fellows to meet worldwide visa demand since 2012, and that providing consular services is one of State’s highest priorities, as well as a national security imperative. According to CA officials, because the Consular Fellows program is entirely funded by non-appropriated consular fees, subject to fluctuating demand for passports and visas, the expansion of the program did not have appropriations impacts. However, officials did provide per unit costs associated with aspects of expanding the Consular Fellows program. For example, Consular Fellows salaries range from approximately $48,000 to approximately $98,000 and Foreign Service Institute language courses last from 24 to 36 weeks, at a cost of $1,700 per week, per student. Executive orders 13767 (Border Security and Immigration Enforcement Improvements), 13768 (Enhancing Public Safety in the Interior of the United States), and 13780 (Protecting the Nation from Foreign Terrorist Entry into the United States) include reporting requirements for the Department of Homeland Security (DHS), the Department of State (State), and the Department of Justice (DOJ). Table 13 lists completed reports as of April 2018, according to DHS, State, and DOJ officials. In addition to the contact named above, Taylor Matheson (Assistant Director), Sarah Turpin (Analyst-in-Charge), Isabel Band, and Kelsey Hawley made key contributions to this report, along with David Alexander, Eric Hauswirth, Sasan J. “Jon” Najmi, Kevin Reeves, and Adam Vogt.", "summary": "In January and March 2017, the President issued a series of executive orders related to border security and immigration. The orders direct federal agencies to take a broad range of actions with potential resource implications. For example, Executive Order 13767 instructs DHS to construct a wall or other physical barriers along the U.S. southern border and to hire an additional 5,000 U.S. Border Patrol agents. Executive Order 13768 instructs federal agencies, including DHS and DOJ, to ensure that U.S immigration law is enforced against all removable individuals and directs ICE to hire an additional 10,000 immigration officers. Executive Order 13780 directs agencies to develop a uniform baseline for screening and vetting standards and procedures; and established nationality-based entry restrictions with respect to visa travelers for a 90-day period, and refugees for 120 days. GAO was asked to review agencies' implementation of the executive orders and related spending. This report addresses (1) actions DHS, DOJ, and State have taken, or plan to take, to implement provisions of the executive orders; and (2) resources to implement provisions of the executive orders, particularly funds DHS, DOJ, and State have obligated, expended, or shifted. GAO reviewed agency planning, tracking, and guidance documents related to the orders, as well as budget requests, appropriations acts, and internal budget information. GAO also interviewed agency officials regarding actions and budgetary costs associated with implementing the orders. The Departments of Homeland Security (DHS), Justice (DOJ), and State issued internal and public reports such as studies and progress updates, developed or revised policies, and took initial planning and programmatic actions to implement Executive Orders 13767, 13768, and 13780. For example: DHS's U.S. Customs and Border Protection (CBP) started the acquisition process for a Border Wall System Program and issued task orders to design and construct barrier prototypes. In November 2017, CBP awarded a contract worth up to $297 million to help with hiring 5,000 U.S. Border Patrol agents, 2,000 CBP officers, and 500 Air and Marine Operations agents. DOJ issued memoranda providing guidance for federal prosecutors on prioritizing certain immigration-related criminal offenses. Additionally, from March through October 2017, DOJ detailed approximately 40 immigration judge positions to detention centers and to the southern border to conduct removal and other related proceedings, according to DOJ officials. State participated in an interagency working group to develop uniform standards related to the adjudication of visa applications, interviews, and system security checks. State also implemented visa and refugee entry restrictions in accordance with the Supreme Court's June 26, 2017, ruling. Agency officials anticipate that implementing the executive orders will be a multi-year endeavor comprising additional reporting, planning, and other actions. DHS, DOJ, and State used existing fiscal year 2017 resources to support initial executive order actions that fit within their established mission areas. GAO found that it was not always possible to disaggregate which fiscal year 2017 funds were used for implementation of the orders versus other agency activities. All three agencies indicated that they used existing personnel to implement the orders and, in some cases, these efforts took substantial time. For example, according to ICE data, personnel spent about 14,000 regular hours (the equivalent of 1,750 8-hour days) and 2,400 overtime hours planning for the ICE hiring surge from January 2017 through January 2018. In March 2017, the President submitted a budget amendment along with a request for $3 billion in supplemental appropriations for DHS to implement the orders. In May 2017, DHS received an appropriation of just over $1.1 billion, some of which DHS used to fund actions to implement the orders. For example, CBP received $65 million for hiring and, according to CBP officials, used these funds to plan and prepare for the surge in U.S. Border Patrol agents. As of January 2018, CBP had obligated $18.8 million of the $65 million. Agencies plan to continue to use their base budgets and request additional funds as needed to carry out their missions and implement the orders. For example, for fiscal year 2018, CBP requested approximately $1.6 billion and received (in March 2018) approximately $1.3 billion to build new and replace existing sections of physical barriers along the southern border. For fiscal year 2019, ICE requested $571 million to hire 2,000 immigration officers and DOJ requested approximately $40 million to hire new immigration judges and supporting staff.", "document_type": "gao"}
{"report": "IT systems supporting federal agencies and our nation’s critical infrastructures are inherently at risk. These systems are highly complex and dynamic, technologically diverse, and often geographically dispersed. This complexity increases the difficulty in identifying, managing, and protecting the numerous operating systems, applications, and devices comprising the systems and networks. Compounding the risk, federal systems and networks are also often interconnected with other internal and external systems and networks, including the Internet. This increases the number of avenues of attack and expands their attack surface. As systems become more integrated, cyber threats will pose an increasing risk to national security, economic well-being, and public health and safety. Advancements in technology, such as data analytics software for searching and collecting information, have also made it easier for individuals and organizations to correlate data (including PII) and track it across large and numerous databases. For example, social media has been used as a mass communication tool where PII can be gathered in vast amounts. In addition, ubiquitous Internet and cellular connectivity makes it easier to track individuals by allowing easy access to information pinpointing their locations. These advances—combined with the increasing sophistication of hackers and others with malicious intent, and the extent to which both federal agencies and private companies collect sensitive information about individuals—have increased the risk of PII being exposed and compromised. Cybersecurity incidents continue to impact entities across various critical infrastructure sectors. For example, in its 2018 annual data breach investigations report, Verizon reported that 53,308 security incidents and 2,216 data breaches were identified across 65 countries in the 12 months since its prior report. Further, the report noted that cybercriminals can often compromise a system in just a matter of minutes—or even seconds, but that it can take an organization significantly longer to discover the breach. Specifically, the report stated nearly 90 percent of the reported breaches occurred within minutes, while nearly 70 percent went undiscovered for months. These concerns are further highlighted by the number of information security incidents reported by federal executive branch civilian agencies to DHS’s U.S. Computer Emergency Readiness Team (US-CERT). For fiscal year 2017, 35,277 such incidents were reported by the Office of Management and Budget (OMB) in its 2018 annual report to Congress, as mandated by the Federal Information Security Modernization Act (FISMA). These incidents include, for example, web-based attacks, phishing, and the loss or theft of computing equipment. Different types of incidents merit different response strategies. However, if an agency cannot identify the threat vector (or avenue of attack), it could be difficult for that agency to define more specific handling procedures to respond to the incident and take actions to minimize similar future attacks. In this regard, incidents with a threat vector categorized as “other” (which includes avenues of attacks that are unidentified) made up 31 percent of the various incidents reported to US-CERT. Figure 1 shows the percentage of the different types of incidents reported across each of the nine threat vector categories for fiscal year 2017, as reported by OMB. These incidents and others like them can pose a serious challenge to economic, national, and personal privacy and security. The following examples highlight the impact of such incidents: In March 2018, the Mayor of Atlanta, Georgia reported that the city was victimized by a ransomware cyberattack. As a result, city government officials stated that customers were not able to access multiple applications that are used to pay bills or access court related information. In response to the attack, the officials noted that they were working with numerous private and governmental partners, including DHS, to assess what occurred and determine how best to protect the city from future attacks. In March 2018, the Department of Justice reported that it had indicted nine Iranians for conducting a massive cybersecurity theft campaign on behalf of the Islamic Revolutionary Guard Corps. According to the department, the nine Iranians allegedly stole more than 31 terabytes of documents and data from more than 140 American universities, 30 U.S. companies, and five federal government agencies, among other entities. In March 2018, a joint alert from DHS and the Federal Bureau of Investigation (FBI) stated that, since at least March 2016, Russian government actors had targeted the systems of multiple U.S. government entities and critical infrastructure sectors. Specifically, the alert stated that Russian government actors had affected multiple organizations in the energy, nuclear, water, aviation, construction, and critical manufacturing sectors. In July 2017, a breach at Equifax resulted in the loss of PII for an estimated 148 million U.S. consumers. According to Equifax, the hackers accessed people’s names, Social Security numbers (SSN), birth dates, addresses and, in some instances, driver’s license numbers. In April 2017, the Commissioner of the Internal Revenue Service (IRS) testified that the IRS had disabled its data retrieval tool in early March 2017 after becoming concerned about the misuse of taxpayer data. Specifically, the agency suspected that PII obtained outside the agency’s tax system was used to access the agency’s online federal student aid application in an attempt to secure tax information through the data retrieval tool. In April 2017, the agency began notifying taxpayers who could have been affected by the breach. In June 2015, OPM reported that an intrusion into its systems had affected the personnel records of about 4.2 million current and former federal employees. Then, in July 2015, the agency reported that a separate, but related, incident had compromised its systems and the files related to background investigations for 21.5 million individuals. In total, OPM estimated 22.1 million individuals had some form of PII stolen, with 3.6 million being a victim of both breaches. Safeguarding federal IT systems and the systems that support critical infrastructures has been a long-standing concern of GAO. Due to increasing cyber-based threats and the persistent nature of information security vulnerabilities, we have designated information security as a government-wide high-risk area since 1997. In 2003, we expanded the information security high-risk area to include the protection of critical cyber infrastructure. At that time, we highlighted the need to manage critical infrastructure protection activities that enhance the security of the cyber and physical public and private infrastructures that are essential to national security, national economic security, and/or national public health and safety. We further expanded the information security high-risk area in 2015 to include protecting the privacy of PII. Since then, advances in technology have enhanced the ability of government and private sector entities to collect and process extensive amounts of PII, which has posed challenges to ensuring the privacy of such information. In addition, high- profile PII breaches at commercial entities, such as Equifax, heightened concerns that personal privacy is not being adequately protected. Our experience has shown that the key elements needed to make progress toward being removed from the High-Risk List are top-level attention by the administration and agency leaders grounded in the five criteria for removal, as well as any needed congressional action. The five criteria for removal that we identified in November 2000 are as follows: Leadership Commitment. Demonstrated strong commitment and top leadership support. Capacity. The agency has the capacity (i.e., people and resources) to resolve the risk(s). Action Plan. A corrective action plan exists that defines the root cause, solutions, and provides for substantially completing corrective measures, including steps necessary to implement solutions we recommended. Monitoring. A program has been instituted to monitor and independently validate the effectiveness and sustainability of corrective measures. Demonstrated Progress. Ability to demonstrate progress in implementing corrective measures and in resolving the high-risk area. These five criteria form a road map for efforts to improve and ultimately address high-risk issues. Addressing some of the criteria leads to progress, while satisfying all of the criteria is central to removal from the list. Figure 2 shows the five criteria and illustrative actions taken by agencies to address the criteria. Importantly, the actions listed are not “stand alone” efforts taken in isolation from other actions to address high- risk issues. That is, actions taken under one criterion may be important to meeting other criteria as well. For example, top leadership can demonstrate its commitment by establishing a corrective action plan including long-term priorities and goals to address the high-risk issue and using data to gauge progress—actions which are also vital to monitoring criteria. As we reported in the February 2017 high-risk report, the federal government’s efforts to address information security deficiencies had fully met one of the five criteria for removal from the High-Risk List— leadership commitment—and partially met the other four, as shown in figure 3. We plan to update our assessment of this high-risk area against the five criteria in February 2019. Based on our prior work, we have identified four major cybersecurity challenges: (1) establishing a comprehensive cybersecurity strategy and performing effective oversight, (2) securing federal systems and information, (3) protecting cyber critical infrastructure, and (4) protecting privacy and sensitive data. To address these challenges, we have identified 10 critical actions that the federal government and other entities need to take (see figure 4). The four challenges and the 10 actions needed to address them are summarized following the table. The federal government has been challenged in establishing a comprehensive cybersecurity strategy and in performing effective oversight as called for by federal law and policy. Specifically, we have previously reported that the federal government has faced challenges in establishing a comprehensive strategy to provide a framework for how the United States will engage both domestically and internationally on cybersecurity related matters. We have also reported on challenges in performing oversight, including monitoring the global supply chain, ensuring a highly skilled cyber workforce, and addressing risks associated with emerging technologies. The federal government can take four key actions to improve the nation’s strategic approach to, and oversight of, cybersecurity. Develop and execute a more comprehensive federal strategy for national cybersecurity and global cyberspace. In February 2013 we reported that the government had issued a variety of strategy- related documents that addressed priorities for enhancing cybersecurity within the federal government as well as for encouraging improvements in the cybersecurity of critical infrastructure within the private sector; however, no overarching cybersecurity strategy had been developed that articulated priority actions, assigned responsibilities for performing them, and set timeframes for their completion. Accordingly, we recommended that the White House Cybersecurity Coordinator in the Executive Office of the President develop an overarching federal cybersecurity strategy that included all key elements of the desirable characteristics of a national strategy including, among other things, milestones and performance measures for major activities to address stated priorities; cost and resources needed to accomplish stated priorities; and specific roles and responsibilities of federal organizations related to the strategy’s stated priorities. In response to our recommendation, in October 2015, the Director of OMB and the Federal Chief Information Officer, issued a Cybersecurity Strategy and Implementation Plan for the Federal Civilian Government. The plan directed a series of actions to improve capabilities for identifying and detecting vulnerabilities and threats, enhance protections of government assets and information, and further develop robust response and recovery capabilities to ensure readiness and resilience when incidents inevitably occur. The plan also identified key milestones for major activities, resources needed to accomplish milestones, and specific roles and responsibilities of federal organizations related to the strategy’s milestones. Since that time, the executive branch has made progress toward outlining a federal strategy for confronting cyber threats. Table 1 identifies these recent efforts and a description of their related contents. These efforts provide a good foundation toward establishing a more comprehensive strategy, but more effort is needed to address all of the desirable characteristics of a national strategy that we recommended. The recently issued executive branch strategy documents did not include key elements of desirable characteristics that can enhance the usefulness of a national strategy as guidance for decision makers in allocating resources, defining policies, and helping to ensure accountability. Specifically: Milestones and performance measures to gauge results were generally not included in strategy documents. For example, although the DHS Cybersecurity Strategy stated that its implementation would be assessed on an annual basis, it did not describe the milestones and performance measures for tracking the effectiveness of the activities intended to meet the stated goals (e.g., protecting critical infrastructure and responding effectively to cyber incidents). Without such performance measures, DHS will lack a means to ensure that the goals and objectives discussed in the document are accomplished and that responsible parties are held accountable. According to officials from DHS’s Office of Cybersecurity and Communications, the department is developing a plan for implementing the DHS Cybersecurity Strategy and expects to issue the plan by mid-August 2018. The officials stated that the plan is expected to identify milestones, roles, and responsibilities across DHS to inform the prioritization of future efforts. The strategy documents generally did not include information regarding the resources needed to carry out the goals and objectives. For example, although the DHS Cybersecurity Strategy identified a variety of actions the agency planned to take to perform their cybersecurity mission, it did not articulate the resources needed to carry out these actions and requirements. Without information on the specific resources needed, federal agencies may not be positioned to allocate such resources and investments and, therefore, may be hindered in their ability to meet national priorities. Most of the strategy documents lacked clearly defined roles and responsibilities for key agencies, such as DHS, DOD, and OMB. These agencies contribute substantially to the nation’s cybersecurity programs. For example, although the National Security Strategy discusses multiple priority actions needed to address the nation’s cybersecurity challenges (e.g. building defensible government networks and deterring and disrupting malicious cyber actors), it does not describe the roles, responsibilities, or the expected coordination of any specific federal agencies, including DHS, DOD, or OMB, or other non- federal entities needed to carry out those actions. Without this information, the federal government may not be able to foster effective coordination, particularly where there is overlap in responsibilities, or hold agencies accountable for carrying out planned activities. Ultimately, a more clearly defined, coordinated, and comprehensive approach to planning and executing an overall strategy would likely lead to significant progress in furthering strategic goals and lessening persistent weaknesses. Mitigate global supply chain risks. The global, geographically disperse nature of the producers and suppliers of IT products is a growing concern. We have previously reported on potential issues associated with IT supply chain and risks originating from foreign- manufactured equipment. For example, in July 2017, we reported that the Department of State had relied on certain device manufacturers, software developers, and contractor support which had suppliers that were reported to be headquartered in a cyber-threat nation (e.g., China and Russia). We further pointed out that the reliance on complex, global IT supply chains introduces multiple risks to federal agencies, including insertion of counterfeits, tampering, or installation of malicious software or hardware. Earlier this month, we testified that if such global IT supply chain risks are realized, they could jeopardize the confidentiality, integrity, and availability of federal information systems. Thus, the potential exists for serious adverse impact on an agency’s operations, assets, and employees. These factors highlight the importance and urgency of federal agencies appropriately assessing, managing, and monitoring IT supply chain risk as part of their agencywide information security programs. Address cybersecurity workforce management challenges. The federal government faces challenges in ensuring that the nation’s cybersecurity workforce has the appropriate skills. For example, in June 2018, we reported on federal efforts to implement the requirements of the Federal Cybersecurity Workforce Assessment Act of 2015. We determined that most of the Chief Financial Officers (CFO) Act agencies had not fully implemented all statutory requirements, such as developing procedures for assigning codes to cybersecurity positions. Further, we have previously reported that DHS and DOD had not addressed cybersecurity workforce management requirements set forth in federal laws. In addition, we have reported in the last 2 years that federal agencies (1) had not identified and closed cybersecurity skills gaps, (2) had been challenged with recruiting and retaining qualified staff, and (3) had difficulty navigating the federal hiring process. A recent executive branch report also discussed challenges associated with the cybersecurity workforce. Specifically, in response to Executive Order 13800, the Department of Commerce and DHS led an interagency working group exploring how to support the growth and sustainment of future cybersecurity employees in the public and private sectors. In May 2018, the departments issued a report that identified key findings, including: the U.S. cybersecurity workforce needs immediate and sustained improvements; the pool of cybersecurity candidates needs to be expanded through retraining and by increasing the participation of women, minorities, and veterans; a shortage exists of cybersecurity teachers at the primary and secondary levels, faculty in higher education, and training instructors; and comprehensive and reliable data about cybersecurity workforce position needs and education and training programs are lacking. The report also included recommendations and proposed actions to address the findings, including that private and public sectors should (1) align education and training with employers’ cybersecurity workforce needs by applying the National Initiative for Cybersecurity Education Cybersecurity Workforce Framework; (2) develop cybersecurity career model paths; and (3) establish a clearinghouse of information on cybersecurity workforce development education, training, and workforce development programs and initiatives. In addition, in June 2018, the executive branch issued a government reform plan and reorganization recommendations that included, among other things, proposals for solving the federal cybersecurity workforce shortage. In particular, the plan notes that the administration intends to prioritize and accelerate ongoing efforts to reform the way that the federal government recruits, evaluates, selects, pays, and places cyber talent across the enterprise. The plan further states that, by the end of the first quarter of fiscal year 2019, all CFO Act agencies, in coordination with DHS and OMB, are to develop a critical list of vacancies across their organizations. Subsequently, OMB and DHS are to analyze these lists and work with OPM to develop a government-wide approach to identifying or recruiting new employees or reskilling existing employees. Regarding cybersecurity training, the plan notes that OMB is to consult with DHS to standardize training for cybersecurity employees, and should work to develop an enterprise-wide training process for government cybersecurity employees. Ensure the security of emerging technologies. As the devices used in daily life become increasingly integrated with technology, the risk to sensitive data and PII also grows. Over the last several years, we have reported on weaknesses in addressing vulnerabilities associated with emerging technologies, including: IoT devices, such as fitness trackers, cameras, and thermostats, that continuously collect and process information are potentially vulnerable to cyber-attacks; IoT devices, such as those acquired and used by DOD employees or that DOD itself acquires (e.g., smartphones), may increase the security risks to the department; vehicles that are potentially susceptible to cyber-attack through technology, such as Bluetooth; the unknown impact of artificial intelligence cybersecurity; and advances in cryptocurrencies and blockchain technologies. Executive branch agencies have also highlighted the challenges associated with ensuring the security of emerging technologies. Specifically, in a May 2018 report issued in response to Executive Order 13800, the Department of Commerce and DHS issued a report on the opportunities and challenges in reducing the botnet threat. The opportunities and challenges are centered on six principal themes, including the global nature of automated, distributed attacks; effective tools; and awareness and education. The report also provides recommended actions, including that federal agencies should increase their understanding of what software components have been incorporated into acquired products and establish a public campaign to support awareness of IoT security. In our previously discussed reports related to this cybersecurity challenge, we made a total of 50 recommendations to federal agencies to address the weaknesses identified. As of July 2018, 48 recommendations had not been implemented. These outstanding recommendations include 8 priority recommendations, meaning that we believe that they warrant priority attention from heads of key departments and agencies. These priority recommendations include addressing weaknesses associated with, among other things, agency-specific cybersecurity workforce challenges and agency responsibilities for supporting mitigation of vehicle network attacks. Until our recommendations are fully implemented, federal agencies may be limited in their ability to provide effective oversight of critical government-wide initiatives, address challenges with cybersecurity workforce management, and better ensure the security of emerging technologies. In addition to our prior work related to the federal government’s efforts to establish key strategy documents and implement effective oversight, we also have several ongoing reviews related to this challenge. These include reviews of: the CFO Act agencies’ efforts to submit complete and reliable baseline assessment reports of their cybersecurity workforces; the extent to which DOD has established training standards for cyber mission force personnel, and efforts the department has made to achieve its goal of a trained cyber mission force; selected agencies’ ability to implement cloud service technologies and notable benefits this might have on agencies; and the federal approach and strategy to securing agency information systems, to include federal intrusion detection and prevention capabilities and the intrusion assessment plan. The federal government has been challenged in securing federal systems and information. Specifically, we have reported that federal agencies have experienced challenges in implementing government-wide cybersecurity initiatives, addressing weaknesses in their information systems and responding to cyber incidents on their systems. This is particularly concerning given that the emergence of increasingly sophisticated threats and continuous reporting of cyber incidents underscores the continuing and urgent need for effective information security. As such, it is important that federal agencies take appropriate steps to better ensure they have effectively implemented programs to protect their information and systems. We have identified three actions that the agencies can take. Improve implementation of government-wide cybersecurity initiatives. Specifically, in January 2016, we reported that DHS had not ensured that the National Cybersecurity Protection System (NCPS) had fully satisfied all intended system objectives related to intrusion detection and prevention, information sharing, and analytics. In addition, in February 2017, we reported that the DHS National Cybersecurity and Communications Integration Center’s (NCCIC) functions were not being performed in adherence with the principles set forth in federal laws. We noted that, although NCCIC was sharing information about cyber threats in the way it should, the center did not have metrics to measure that the information was timely, relevant and actionable, as prescribed by law. Address weaknesses in federal information security programs. We have previously identified a number of weaknesses in agencies’ protection of their information and information systems. For example, over the past 2 years, we have reported that: most of the 24 agencies covered by the CFO Act had weaknesses in each of the five major categories of information system controls (i.e., access controls, configuration management controls, segregation of duties, contingency planning, and agency-wide security management); three agencies—the Securities Exchange Commission, the Federal Deposit Insurance Corporation, and the Food and Drug Administration—had not effectively implemented aspects of their information security programs, which resulted in weaknesses in these agencies’ security controls; information security weaknesses in selected high-impact systems at four agencies—the National Aeronautics and Space Administration, the Nuclear Regulatory Commission, OPM, and the Department of Veterans Affairs—were cited as a key reason that the agencies had not effectively implemented elements of their information security programs; DOD’s process for monitoring the implementation of cybersecurity guidance had weaknesses and resulted in the closure of certain tasks (such as completing cyber risk assessments) before they were fully implemented; and agencies had not fully defined the role of their Chief Information Security Officers, as required by FISMA. We also recently testified that, although the government had acted to protect federal information systems, additional work was needed to improve agency security programs and cyber capabilities. In particular, we noted that further efforts were needed by agencies to implement our prior recommendations in order to strengthen their information security programs and technical controls over their computer networks and systems. Enhance the federal response to cyber incidents. We have reported that certain agencies have had weaknesses in responding to cyber incidents. For example, as of August 2017, OPM had not fully implemented controls to address deficiencies identified as a result of its 2015 cyber incidents; DOD had not identified the National Guard’s cyber capabilities (e.g., computer network defense teams) or addressed challenges in its exercises. as of April 2016, DOD had not identified, clarified, or implemented all components of its support of civil authorities during cyber incidents; and as of January 2016, DHS’s NCPS had limited capabilities for detecting and preventing intrusions, conducting analytics, and sharing information. In the public versions of the reports previously discussed for this challenge area, we made a total of 101 recommendations to federal agencies to address the weaknesses identified. As of July 2018, 61 recommendations had not been implemented. These outstanding recommendations include 14 priority recommendations to address weaknesses associated with, among other things, the information security programs at the National Aeronautics and Space Administration, OPM, and the Security Exchange Commission. Until these recommendations are implemented, these federal agencies will be limited in their ability to ensure the effectiveness of their programs for protecting information and systems. In addition to our prior work, we also have several ongoing reviews related to the federal government’s efforts to protect its information and systems. These include reviews of: Federal Risk and Authorization Management Program (FedRAMP) implementation, including an assessment of the implementation of the program’s authorization process for protecting federal data in cloud environments; the Equifax data breach, including an assessment of federal oversight of credit reporting agencies’ collection, use, and protection of consumer PII; the Federal Communication Commission’s Electronic Comment Filing System security, to include a review of the agency’s detection of and response to a May 2017 incident that reportedly impacted the system; DOD’s efforts to improve the cybersecurity of its major weapon DOD’s whistleblower program, including an assessment of the policies, procedures, and controls related to the access and storage of sensitive and classified information needed for the program; IRS’s efforts to (1) implement security controls and the agency’s information security program, (2) authenticate taxpayers, and (3) secure tax information; and federal intrusion detection and prevention capabilities. The federal government has been challenged in working with the private sector to protect critical infrastructure. This infrastructure includes both public and private systems vital to national security and other efforts, such as providing the essential services that underpin American society. As the cybersecurity threat to these systems continues to grow, federal agencies have millions of sensitive records that must be protected. Specifically, this critical infrastructure threat could have national security implications and more efforts should be made to ensure that it is not breached. To help address this issue, NIST developed the cybersecurity framework—a voluntary set of cybersecurity standards and procedures for industry to adopt as a means of taking a risk-based approach to managing cybersecurity. However, additional action is needed to strengthen the federal role in protecting the critical infrastructure. Specifically, we have reported on other critical infrastructure protection issues that need to be addressed. For example: Entities within the 16 critical infrastructure sectors reported encountering four challenges to adopting the cybersecurity framework, such as being limited in their ability to commit necessary resources towards framework adoption and not having the necessary knowledge and skills to effectively implement the framework. Major challenges existed to securing the electricity grid against cyber threats. These challenges included monitoring implementation of cybersecurity standards, ensuring security features are built into smart grid systems, and establishing metrics for cybersecurity. DHS and other agencies needed to enhance cybersecurity in the maritime environment. Specifically, DHS did not include cyber risks in its risk assessments that were already in place nor did it address cyber risks in guidance for port security plans. Sector-specific agencies were not properly addressing progress or metrics to measure their progress in cybersecurity. DOD and the Federal Aviation Administration identified a variety of operations and physical security risks that could adversely affect DOD missions. We made a total of 19 recommendations to federal agencies to address these weaknesses and others. These recommendations include, for example, a total of 9 recommendations to 9 sector-specific agencies to develop methods to determine the level and type of cybersecurity framework adoption across their respective sectors. As of July 2018, all 19 recommendations had not been implemented. Until these recommendations are implemented, the federal government will continue to be challenged in fulfilling its role in protecting the nation’s critical infrastructure. In addition to our prior work related to the federal government’s efforts to protect critical infrastructure, we also have several ongoing reviews focusing on: the physical and cybersecurity risks to pipelines across the country responsible for transmitting oil, natural gas, and other hazardous liquids; the cybersecurity risks to the electric grid; and the privatization of utilities at DOD installations. The federal government has been challenged in protecting privacy and sensitive data. Advances in technology, including powerful search technology and data analytics software, have made it easy to correlate information about individuals across large and numerous databases, which have become very inexpensive to maintain. In addition, ubiquitous Internet connectivity has facilitated sophisticated tracking of individuals and their activities through mobile devices such as smartphones and fitness trackers. Given that access to data is so pervasive, personal privacy hinges on ensuring that databases of PII maintained by government agencies or on their behalf are protected both from inappropriate access (i.e., data breaches) as well as inappropriate use (i.e., for purposes not originally specified when the information was collected). Likewise, the trend in the private sector of collecting extensive and detailed information about individuals needs appropriate limits. The vast number of individuals potentially affected by data breaches at federal agencies and private sector entities in recent years increases concerns that PII is not being properly protected. Federal agencies should take two types of actions to address this challenge area. In addition, we have previously proposed two matters for congressional consideration aimed toward better protecting PII. Improve federal efforts to protect privacy and sensitive data. We have issued several reports noting that agencies had deficiencies in protecting privacy and sensitive data that needed to be addressed. For example: The Department of Health and Human Services’ (HHS) Centers for Medicare and Medicaid Services (CMS) and external entities were at risk of compromising Medicare Beneficiary Data due to a lack of guidance and proper oversight. The Department of Education’s Office of Federal Student Aid had not properly overseen its school partners’ records or information security programs. HHS had not fully addressed key security elements in its guidance for protecting the security and privacy of electronic health information. CMS had not fully protected the privacy of users’ data on state- based marketplaces. Poor planning and ineffective monitoring had resulted in the unsuccessful implementation of government initiatives aimed at eliminating the unnecessary collection, use, and display of SSNs. Appropriately limit the collection and use of personal information and ensure that it is obtained with appropriate knowledge or consent. We have issued a series of reports that highlight a number of the key concerns in this area. For example: The emergence of IoT devices can facilitate the collection of information about individuals without their knowledge or consent; Federal laws for smartphone tracking applications have not generally been well enforced. The FBI has not fully ensured privacy and accuracy related to the use of face recognition technology. We have previously suggested that Congress consider amending laws, such as the Privacy Act of 1974 and the E-Government Act of 2002, because they may not consistently protect PII. Specifically, we found that while these laws and guidance set minimum requirements for agencies, they may not consistently protect PII in all circumstances of its collection and use throughout the federal government and may not fully adhere to key privacy principles. However, revisions to the Privacy Act and the E-Government Act have not yet been enacted. Further, we also suggested that Congress consider strengthening the consumer privacy framework and review issues such as the adequacy of consumers’ ability to access, correct, and control their personal information; and privacy controls related to new technologies such as web tracking and mobile devices. However, these suggested changes have not yet been enacted. We also made a total of 29 recommendations to federal agencies to address the weaknesses identified. As of July 2018, 28 recommendations had not been implemented. These outstanding recommendations include 6 priority recommendations to address weaknesses associated with, among other things, publishing privacy impact assessments and improving the accuracy of the FBI’s face recognition services. Until these recommendations are implemented, federal agencies will be challenged in their ability to protect privacy and sensitive data and ensure that its collection and use is appropriately limited. In addition to our prior work, we have several ongoing reviews related to protecting privacy and sensitive data. These include reviews of: IRS’s taxpayer authentication efforts, including what steps the agency is taking to monitor and improve its authentication methods; the extent to which the Department of Education’s Office of Federal Student Aid’s policies and procedures for overseeing non-school partners’ protection of federal student aid data align with federal requirements and guidance; data security issues related to credit reporting agencies, including a review of the causes and impacts of the August 2017 Equifax data breach; the extent to which Equifax assessed, responded to, and recovered from its August 2017 data breach; federal agencies’ efforts to remove PII from shared cyber threat indicators; and how the federal government has overseen Internet privacy, including the roles of the Federal Communications Commission and the Federal Trade Commission, and strengths and weaknesses of the current oversight authorities. In summary, since 2010, we have made over 3,000 recommendations to agencies aimed at addressing the four cybersecurity challenges. Nevertheless, many agencies continue to be challenged in safeguarding their information systems and information, in part because many of these recommendations have not been implemented. Of the roughly 3,000 recommendations made since 2010, nearly 1,000 had not been implemented as of July 2018. We have also designated 35 as priority recommendations, and as of July 2018, 31 had not been implemented. The federal government and the nation’s critical infrastructure are dependent on IT systems and electronic data, which make them highly vulnerable to a wide and evolving array of cyber-based threats. Securing these systems and data is vital to the nation’s security, prosperity, and well-being. Nevertheless, the security over these systems and data is inconsistent and urgent actions are needed to address ongoing cybersecurity and privacy challenges. Specifically, the federal government needs to implement a more comprehensive cybersecurity strategy and improve its oversight, including maintaining a qualified cybersecurity workforce; address security weaknesses in federal systems and information and enhance cyber incident response efforts; bolster the protection of cyber critical infrastructure; and prioritize efforts to protect individual’s privacy and PII. Until our recommendations are addressed and actions are taken to address the four challenges we identified, the federal government, the national critical infrastructure, and the personal information of U.S. citizens will be increasingly susceptible to the multitude of cyber-related threats that exist. Chairmen Meadows and Hurd, Ranking Members Connolly and Kelly, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. Questions about this testimony can be directed to Nick Marinos, Director, Cybersecurity and Data Protection Issues, at (202) 512-9342 or marinosn@gao.gov; and Gregory C. Wilshusen, Director, Information Security Issues, at (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Jon Ticehurst, Assistant Director; Kush K. Malhotra, Analyst-In-Charge; Chris Businsky; Alan Daigle; Rebecca Eyler; Chaz Hubbard; David Plocher; Bradley Roach; Sukhjoot Singh; Di’Mond Spencer; and Umesh Thakkar. Information Security: Supply Chain Risks Affecting Federal Agencies. GAO-18-667T. Washington, D.C.: July 12, 2018. Information Technology: Continued Implementation of High-Risk Recommendations Is Needed to Better Manage Acquisitions, Operations, and Cybersecurity. GAO-18-566T. Washington, D.C.: May 23, 2018. Electronic Health Information: CMS Oversight of Medicare Beneficiary Data Security Needs Improvement. GAO-18-210. Washington, D.C.: April 5, 2018. Technology Assessment: Artificial Intelligence, Emerging Opportunities, Challenges, and Implications. GAO-18-142SP. Washington, D.C.: March 28, 2018. GAO Strategic Plan 2018-2023: Trends Affecting Government and Society. GAO-18-396SP. Washington, D.C.: February 22, 2018. Critical Infrastructure Protection: Additional Actions are Essential for Assessing Cybersecurity Framework Adoption. GAO-18-211. Washington, D.C.: February 15, 2018. Cybersecurity Workforce: Urgent Need for DHS to Take Actions to Identify Its Position and Critical Skill Requirements. GAO-18-175. Washington, D.C.: February 6, 2018. Homeland Defense: Urgent Need for DOD and FAA to Address Risks and Improve Planning for Technology That Tracks Military Aircraft. GAO-18-177. Washington, D.C.: January 18, 2018. Federal Student Aid: Better Program Management and Oversight of Postsecondary Schools Needed to Protect Student Information. GAO-18-121. Washington, D.C.: December 15, 2017. Defense Civil Support: DOD Needs to Address Cyber Incident Training Requirements. GAO-18-47. Washington, D.C.: November 30, 2017. Federal Information Security: Weaknesses Continue to Indicate Need for Effective Implementation of Policies and Practices. GAO-17-549. Washington, D.C.: September 28, 2017. Information Security: OPM Has Improved Controls, but Further Efforts Are Needed. GAO-17-614. Washington, D.C.: August 3, 2017. Defense Cybersecurity: DOD’s Monitoring of Progress in Implementing Cyber Strategies Can Be Strengthened. GAO-17-512. Washington, D.C.: August 1, 2017. State Department Telecommunications: Information on Vendors and Cyber-Threat Nations. GAO-17-688R. Washington, D.C.: July 27, 2017. Internet of Things: Enhanced Assessments and Guidance Are Needed to Address Security Risks in DOD. GAO-17-668. Washington, D.C.: July 27, 2017. Information Security: SEC Improved Control of Financial Systems but Needs to Take Additional Actions. GAO-17-469. Washington, D.C.: July 27, 2017. Information Security: Control Deficiencies Continue to Limit IRS’s Effectiveness in Protecting Sensitive Financial and Taxpayer Data. GAO-17-395. Washington, D.C.: July 26, 2017. Social Security Numbers: OMB Actions Needed to Strengthen Federal Efforts to Limit Identity Theft Risks by Reducing Collection, Use, and Display. GAO-17-553. Washington, D.C.: July 25, 2017. Information Security: FDIC Needs to Improve Controls over Financial Systems and Information. GAO-17-436. Washington, D.C.: May 31, 2017. Technology Assessment: Internet of Things: Status and Implications of an Increasingly Connected World. GAO-17-75. Washington, D.C.: May 15, 2017. Cybersecurity: DHS’s National Integration Center Generally Performs Required Functions but Needs to Evaluate Its Activities More Completely. GAO-17-163. Washington, D.C.: February 1, 2017. High-Risk Series: An Update. GAO-17-317. Washington, D.C.: February 2017. IT Workforce: Key Practices Help Ensure Strong Integrated Program Teams; Selected Departments Need to Assess Skill Gaps. GAO-17-8. Washington, D.C.: November 30, 2016. Electronic Health Information: HHS Needs to Strengthen Security and Privacy Guidance and Oversight. GAO-16-771. Washington, D.C.: September 26, 2016. Defense Civil Support: DOD Needs to Identify National Guard’s Cyber Capabilities and Address Challenges in Its Exercises. GAO-16-574. Washington, D.C.: September 6, 2016. Information Security: FDA Needs to Rectify Control Weaknesses That Place Industry and Public Health Data at Risk. GAO-16-513. Washington, D.C.: August 30, 2016. Federal Chief Information Security Officers: Opportunities Exist to Improve Roles and Address Challenges to Authority. GAO-16-686. Washington, D.C.: August 26, 2016. Federal Hiring: OPM Needs to Improve Management and Oversight of Hiring Authorities. GAO-16-521. Washington, D.C.: August 2, 2016. Information Security: Agencies Need to Improve Controls over Selected High-Impact Systems. GAO-16-501. Washington, D.C.: May 18, 2016. Face Recognition Technology: FBI Should Better Ensure Privacy and Accuracy. GAO-16-267. Washington, D.C.: May 16, 2016. Smartphone Data: Information and Issues Regarding Surreptitious Tracking Apps That Can Facilitate Stalking. GAO-16-317. Washington, D.C.: May 9, 2016. Vehicle Cybersecurity: DOT and Industry Have Efforts Under Way, but DOT Needs to Define Its Role in Responding to a Real-world Attack. GAO-16-350. Washington, D.C.: April 25, 2016. Civil Support: DOD Needs to Clarify Its Roles and Responsibilities for Defense Support of Civil Authorities during Cyber Incidents. GAO-16-332. Washington, D.C.: April 4, 2016. Healthcare.gov: Actions Needed to Enhance Information Security and Privacy Controls. GAO-16-265. Washington, D.C.: March 23, 2016. Information Security: DHS Needs to Enhance Capabilities, Improve Planning, and Support Greater Adoption of Its National Cybersecurity Protection System. GAO-16-294. Washington, D.C.: January 28, 2016. Critical Infrastructure Protection: Sector-Specific Agencies Need to Better Measure Cybersecurity Progress. GAO-16-79. Washington, D.C.: November 19, 2015. Critical Infrastructure Protection: Cybersecurity of the Nation’s Electricity Grid Requires Continued Attention. GAO-16-174T. Washington, D.C.: October 21, 2015. Maritime Critical Infrastructure Protection: DHS Needs to Enhance Efforts to Address Port Cybersecurity. GAO-16-116T. Washington, D.C.: October 8, 2015. Cybersecurity: National Strategy, Roles, and Responsibilities Need to Be Better Defined and More Effectively Implemented. GAO-13-187. Washington, D.C.: February 14, 2014. Information Resellers: Consumer Privacy Framework Needs to Reflect Changes in Technology and the Marketplace. GAO-13-663. Washington, D.C.: September 25, 2013. Cyberspace: United States Faces Challenges in Addressing Global Cybersecurity and Governance. GAO-10-606. Washington, D.C.: July 2, 2010. Privacy: Alternatives Exist for Enhancing Protection of Personally Identifiable Information. GAO-08-536. Washington, D.C.: May 19, 2008. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Federal agencies and the nation's critical infrastructures—such as energy, transportation systems, communications, and financial services—are dependent on information technology systems to carry out operations. The security of these systems and the data they use is vital to public confidence and national security, prosperity, and well-being. The risks to these systems are increasing as security threats evolve and become more sophisticated. GAO first designated information security as a government-wide high-risk area in 1997. This was expanded to include protecting cyber critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015. GAO was asked to update its information security high-risk area. To do so, GAO identified the actions the federal government and other entities need to take to address cybersecurity challenges. GAO primarily reviewed prior work issued since the start of fiscal year 2016 related to privacy, critical federal functions, and cybersecurity incidents, among other areas. GAO also reviewed recent cybersecurity policy and strategy documents, as well as information security industry reports of recent cyberattacks and security breaches. GAO has identified four major cybersecurity challenges and 10 critical actions that the federal government and other entities need to take to address them. GAO continues to designate information security as a government-wide high-risk area due to increasing cyber-based threats and the persistent nature of security vulnerabilities. GAO has made over 3,000 recommendations to agencies aimed at addressing cybersecurity shortcomings in each of these action areas, including protecting cyber critical infrastructure, managing the cybersecurity workforce, and responding to cybersecurity incidents. Although many recommendations have been addressed, about 1,000 have not yet been implemented. Until these shortcomings are addressed, federal agencies' information and systems will be increasingly susceptible to the multitude of cyber-related threats that exist. GAO has made over 3,000 recommendations to agencies since 2010 aimed at addressing cybersecurity shortcomings. As of July 2018, about 1,000 still needed to be implemented.", "document_type": "gao"}
{"report": "FEMA’s mission is to help people before, during, and after disasters. It provides assistance to those affected by emergencies and disasters by supplying immediate needs (e.g., ice, water, food, and temporary housing) and providing financial assistance grants for damage to personal or public property. FEMA also provides non-disaster assistance grants to improve the nation’s preparedness, readiness, and resilience to all hazards. FEMA accomplishes a large part of its mission through awarding grants to state, local, and tribal governments and nongovernmental entities to help communities prevent, prepare for, protect against, mitigate the effects of, respond to, and recover from disasters and terrorist attacks. As previously mentioned, for fiscal years 2005 through 2014, the agency obligated about $104.5 billion in disaster relief grants. In addition, as of April 2018, the four major disasters in 2017—hurricanes Harvey, Irma, and Maria; and the California wildfires—had resulted in over $22 billion in FEMA grants. The current FEMA grants management environment is highly complex with many stakeholders, IT systems, and users. Specifically, this environment is comprised of 45 active disaster and non-disaster grant programs, which are grouped into 12 distinct grant categories. For example, one program in the Preparedness: Fire category is the Assistance to Firefighters Grants (AFG) program, which provides grants to fire departments, nonaffiliated emergency medical service organizations, and state fire training academies to support firefighting and emergency response needs. As another example, the Housing Assistance grant program is in the Recovery Assistance for Individuals category and provides financial assistance to individuals and households in geographical areas that have been declared an emergency or major disaster by the President. Table 1 lists FEMA’s non-disaster and disaster-based grant categories. According to FEMA, the processes for managing these different types of grants vary because the grant programs were developed independently by at least 18 separate authorizing laws that were enacted over a 62-year period (from 1947 through 2009). The various laws call for different administrative and reporting requirements. For example, the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended, established the statutory authority for 11 of the grant programs, such as the administration of Public Assistance and Individual Assistance grant programs after a presidentially declared disaster. The act also requires the FEMA Administrator to submit an annual report to the President and Congress covering FEMA’s expenditures, contributions, work, and accomplishments, pursuant to the act. As another example, the National Dam Safety Program Act established one of the grant programs aimed at providing financial assistance to improve dam safety. Key stakeholders in modernizing the IT grants management environment include the internal FEMA officials that review, approve, and monitor the grants awarded, such as grant specialists, program analysts, and supervisors. FEMA has estimated that it will need to support about 5,000 simultaneous internal users of its grants management systems. Other users include the grant recipients that apply for, receive, and submit reports on their grant awards; these are considered the external system users. These grant recipients can include individuals, states, local governments, Indian tribes, institutions of higher education, and nonprofit organizations. FEMA has estimated that there are hundreds of thousands of external users of its grants systems. The administration of the many different grant programs is distributed across four divisions within FEMA’s organizational structure. Figure 1 provides an overview of FEMA’s organizational structure and the divisions that are responsible for administering grants. Within three of the four divisions—Resilience, United States Fire Administration, and Office of Response and Recovery—16 different grant program offices are collectively responsible for administering the 45 grant programs. The fourth division consists of 10 regional offices that help administer grants within their designated geographical regions. For example, the Office of Response and Recovery division oversees three different offices that administer 13 grant programs that are largely related to providing assistance in response to presidentially declared disasters. Figure 2 shows the number of grant programs administered by each of the four divisions’ grant program and regional offices. In addition, appendix II lists the names of the 45 grant programs. FEMA’s OCIO is responsible for developing, enhancing, and maintaining the agency’s IT systems, and for increasing efficiencies and cooperation across the entire organization. However, we and the DHS Office of Inspector General (OIG) have previously reported that the grant programs and regional offices develop information systems independent of the OCIO and that this has contributed to the agency’s disparate IT environment. We and the DHS OIG have reported that this disparate IT environment was due, in part, to FEMA’s decentralized IT budget and acquisition practices. For example, from fiscal years 2010 through 2015, the OCIO’s budget represented about one-third of the agency’s IT budget, with the grant program offices accounting for the remaining two-thirds of that budget. In February 2018, the OIG found that FEMA had shown limited progress in improving its IT management and that many of the issues reported in prior audits remained unchanged. As such, the OIG initiated a more comprehensive audit of the agency’s IT management that is ongoing. FEMA has identified 10 primary legacy IT systems that support its grants management activities. According to the agency, most of these systems were developed to support specific grant programs or grant categories. Table 2 summarizes the 10 primary legacy systems. According to FEMA officials, the 10 primary grant systems are all in operation (several have been for decades) and are not interoperable. As a result, individual grant programs and regional offices have independently developed work arounds intended to address existing capability gaps with the primary systems. FEMA officials stated that while these work arounds have helped the agency partially address capability gaps with its primary systems, they are often nonstandardized processes, and introduce the potential for information security risks and errors. This environment has contributed to labor-intensive manual processes and an increased burden for grant recipients. The disparate systems have also led to poor information sharing and reporting capabilities, as well as difficulty reconciling financial data. The DHS OIG and we have previously highlighted challenges with FEMA’s past attempts to modernize its grant management systems. For example, In December 2006, the DHS OIG reported that EMMIE, an effort to modernize its grants management systems and provide a single grants processing solution, was being developed without a clear understanding and definition of the future solution. The report also identified the need to ensure crosscutting participation from headquarters, regions, and states in developing and maintaining a complete, documented set of FEMA business and system requirements. In April 2016, we found weaknesses in FEMA’s development of the EMMIE system. For example, we noted that the system was implemented without sufficient documentation of system requirements, an acquisition strategy, up-to-date cost estimate and schedule, total amount spent to develop the system, or a systems integration plan. In response to our findings and related recommendations, FEMA took action to address these issues. For example, the agency implemented a requirements management process that, among other things, provided guidance to programs on analyzing requirements to ensure that they are complete and verifiable. We reported in November 2017 that EMMIE lacked the ability to collect information on all pre-award activities and, as a result, agency officials said that they and applicants used ad hoc reports and personal tracking documents to manage and monitor the progress of grant applications. FEMA officials added that applicants often struggled to access the system and that the system was not user friendly. Due to EMMIE’s shortfalls, the agency had to develop another system in 2017 to supplement EMMIE with additional grant tracking and case management capabilities. FEMA initiated GMM in 2015, in part, due to EMMIE’s failed attempt to modernize the agency’s grants management environment. The program is intended to modernize and streamline the agency’s grants management environment. To help streamline the agency’s grants management processes, the program established a standard framework intended to represent a common grants management lifecycle. The framework consists of five sequential phases—pre-award, award, post-award, closeout, and post- closeout—along with a sixth phase dedicated to continuous grant program management activities, such as analyzing data and producing reports on grant awards and managing IT systems. FEMA also established 43 distinct business functions associated with these six lifecycle phases. Figure 3 provides the general activities that may occur in each of the grant lifecycle phases, but specific activities would depend on the type of grant being administered (i.e., disaster versus non-disaster). GMM is expected to be implemented within the complex IT environment that currently exists at FEMA. For example, the program is intended to replace the 10 legacy grants management systems, and potentially many additional subsystems, with a single IT system. Each of the 10 legacy systems was developed with its own database(s) and with no standardization of the grants management data and, according to FEMA officials, this legacy data has grown significantly over time. Accordingly, FEMA will need to migrate, analyze, and standardize the grants management data before transitioning it to GMM. The agency awarded a contract in June 2016 to support the data migration efforts for GMM. The agency also implemented a data staging environment in October 2017 to migrate the legacy data and identify opportunities to improve the quality of the data. Further, the GMM system is expected to interface with a total of 38 other systems. These include 19 systems external to DHS (e.g., those provided by commercial entities or other federal government agencies) and 19 systems internal to DHS or FEMA. Some of the internal FEMA systems are undergoing their own modernization efforts and will need to be coordinated with GMM, such as the agency’s financial management systems, national flood insurance systems, and enterprise data warehouses. For example, FEMA’s Financial Systems Modernization Program was originally expected to deliver a new financial system in time to interface with GMM. However, the financial modernization has been delayed until after GMM is to be fully implemented; thus, GMM will instead need to interface with the legacy financial system. As a result, GMM is in the process of removing one of its key performance parameters in the acquisition program baseline related to financial systems interoperability and timeliness of data exchanged. In May 2017, DHS approved the acquisition program baseline for GMM. The baseline estimated the total lifecycle costs to be about $251 million, initial operational capability to be achieved by September 2019, and full operational capability to be achieved by September 2020. FEMA intends to develop and deploy its own software applications for GMM using a combination of commercial-off-the-shelf software, open source software, and custom developed code. The agency plans to rely on an Agile software development approach. According to FEMA planning documentation, the agency plans to fully deliver GMM by September 2020 over eight Agile development increments. Agile development is a type of incremental development, which calls for the rapid delivery of software in small, short increments. Many organizations, especially in the federal government, are accustomed to using a waterfall software development model. This type of model typically consists of long, sequential phases, and differs significantly from the Agile development approach. We have previously reported that DHS has sought to establish Agile software development as the preferred method for acquiring and delivering IT capabilities. However, the department has not yet completed critical actions necessary to update its guidance, policies, and practices for Agile programs, in areas such as, developing lifecycle cost estimates, managing IT requirements, testing and evaluation, oversight at key decision points, and ensuring cybersecurity. (See appendix III for more details on the Agile software development approach.) FEMA’s acquisition approach includes using contract support to assist with the development and deployment efforts. The agency selected a public cloud environment to host the computing infrastructure. In addition, from March through July 2017, the agency used a short-term contract aimed at developing prototypes of GMM functionality for grant tracking and monitoring, case management of disaster survivors, grant reporting, and grant closeout. The agency planned to award a second development contract by December 2017 to complete the GMM system (beyond the prototypes) and to begin this work in September 2018. However, due to delays in awarding the second contract to develop the complete GMM system, in January 2018, the program extended the scope and time frames of the initial short-term prototype contract for an additional year to develop the first increment of the GMM system— referred to as the AFG pilot. On August 31, 2018, FEMA awarded the second development contract, which is intended to deliver the remaining functionality beyond the AFG pilot (i.e., increments 2 through 8). FEMA officials subsequently issued a 90-day planning task order for the Agile development contractor to define the work that needs to be done to deliver GMM and the level of effort needed to accomplish that work. However, the planning task order was paused after a bid protest was filed with GAO in September 2018. According to FEMA officials, they resumed work on the planning task order after the bid protest was withdrawn by the protester on November 20, 2018, and then the work was paused again during the partial government shutdown from December 22, 2018, through January 25, 2019. FEMA began working on the AFG pilot—GMM’s first increment—in January 2018. This increment was intended to pilot GMM’s use of Agile development methods to replace core functionality for the AFG system (i.e., one of the 10 legacy systems).This system supports three preparedness/fire-related grant programs—Assistance to Firefighters Grants Program, Fire Prevention and Safety Grant Program, and Staffing for Adequate Fire and Emergency Response Grant Program. According to FEMA officials, the AFG system was selected as the first system to be replaced because it is costly to maintain and the DHS OIG had identified cybersecurity concerns with the system. Among the 43 GMM business functions discussed earlier in this report, FEMA officials specified 19 functions to be delivered in the AFG pilot. Figure 4 shows the planned time frames for delivering the AFG pilot in increment 1 (which consisted of four 3-month Agile development sub- increments), as of August 2018. As of August 2018, the program was working on sub-increment 1C of the pilot. In September 2018, GMM deployed its first set of functionality to a total of 19 AFG users—which included seven of 169 total internal AFG users, and 12 of more than 153,000 external AFG users. The functionality supported four of the 19 business functions that are related to the closeout of grants (i.e., the process by which all applicable administrative actions and all required work to award a grant have been completed). This functionality included tasks such as evaluation of final financial reports submitted by grant recipients and final reconciliation of finances (e.g., final disbursement to recipients and return of unobligated federal funds). According to FEMA officials, closeout functionality was selected first for deployment because it was the most costly component of the legacy AFG system to maintain, as it is an entirely manual and labor-intensive process. The remaining AFG functionality and remaining AFG users are to be deployed by the end of the AFG pilot. The GMM program is executed by a program management office, which is overseen by a program manager and program executive. This office is responsible for directing the day-to-day operations and ensuring completion of GMM program goals and objectives. The program office resides within the Office of Response and Recovery, which is headed by an Associate Administrator who reports to the FEMA Administrator. In addition, the GMM program executive (who is also the Regional Administrator for FEMA Region IX) reports directly to the FEMA Administrator. GMM is designated as a level 2 major acquisition, which means that it is subject to oversight by the DHS acquisition review board. The board is chaired by the DHS Undersecretary for Management and is made up of executive-level members, such as the DHS Chief Information Officer. The acquisition review board serves as the departmental executive board that decides whether to approve GMM through key acquisition milestones and reviews the program’s progress and its compliance with approved documentation every 6 months. The board approved the acquisition program baseline for GMM in May 2017 (i.e., estimated costs to be about $251 million and full operational capability to be achieved by September 2020). In addition, the program is reviewed on a monthly basis by FEMA’s Grants Management Executive Steering Group. This group is chaired by the Deputy Administrator of FEMA. Further, DHS’s Financial Systems Modernization Executive Steering Committee, chaired by the DHS Chief Financial Officer, meets monthly and is to provide guidance, oversight, and support to GMM. For government organizations, including FEMA, cybersecurity is a key element in maintaining the public trust. Inadequately protected systems may be vulnerable to insider threats. Such systems are also vulnerable to the risk of intrusion by individuals or groups with malicious intent who could unlawfully access the systems to obtain sensitive information, disrupt operations, or launch attacks against other computer systems and networks. Moreover, cyber-based threats to federal information systems are evolving and growing. Accordingly, we designated cybersecurity as a government-wide high risk area 22 years ago, in 1997, and it has since remained on our high-risk list. Federal law and guidance specify requirements for protecting federal information and information systems. The Federal Information Security Modernization Act (FISMA) of 2014 requires executive branch agencies to develop, document, and implement an agency-wide cybersecurity program to provide security for the information and information systems that support operations and assets of the agency. The act also tasks NIST with developing, for systems other than those for national security, standards and guidelines to be used by all agencies to establish minimum cybersecurity requirements for information and information systems based on their level of cybersecurity risk. Accordingly, NIST developed a risk management framework of standards and guidelines for agencies to follow in developing cybersecurity programs. The framework addresses broad cybersecurity and risk management activities, including categorizing the system’s impact level; selecting, implementing, and assessing security controls; authorizing the system to operate (based on progress in remediating control weaknesses and an assessment of residual risk); and monitoring the efficacy of controls on an ongoing basis. Figure 5 provides an overview of this framework. Prior DHS OIG assessments, such as the annual evaluation of DHS’s cybersecurity program, have identified issues with FEMA’s cybersecurity practices. For example, in 2016, the OIG reported that FEMA was operating 111 systems without an authorization to operate. In addition, the agency had not created any corrective action plans for 11 of the systems that were classified as “Secret” or “Top Secret,” thus limiting its ability to ensure that all identified cybersecurity weaknesses were mitigated in a timely manner. The OIG further reported that, for several years, FEMA was consistently below DHS’s 90 percent target for remediating corrective action plans, with scores ranging from 73 to 84 percent. Further, the OIG reported that FEMA had a significant number of open corrective action plans (18,654) and that most of these plans did not contain sufficient information to address identified weaknesses. In 2017, the OIG reported that FEMA had made progress in addressing security weaknesses. For example, it reported that the agency had reduced the number of systems it was operating without an authorization to operate from 111 to 15 systems. According to GAO’s Business Process Reengineering Assessment Guide and the Software Engineering Institute’s Capability Maturity Model Integration® for Development, successful business process reengineering can enable agencies to replace their inefficient and outmoded processes with streamlined processes that can more effectively serve the needs of the public and significantly reduce costs and improve performance. Many times, new IT systems are implemented to support these improved business processes. Thus, effective management of IT requirements is critical for ensuring the successful design, development, and delivery of such new systems. These leading practices state that effective business process reengineering and IT requirements management involve, among other things, (1) ensuring strong executive leadership support for process reengineering; (2) assessing the current and target business environment and business performance goals; (3) establishing plans for implementing new business processes; (4) establishing clear, prioritized, and traceable IT requirements; (5) tracking progress in delivering IT requirements; and (6) incorporating input from end user stakeholders. Among these six selected leading practices for reengineering business processes and managing IT requirements, FEMA fully implemented four and partially implemented two of them for its GMM program. For example, the agency ensured strong senior leadership commitment to changing the way it manages its grants, took steps to assess and document its business environment and performance goals, defined initial IT requirements for GMM, took recent actions to better track progress in delivering planned IT requirements, and incorporated input from end user stakeholders. In addition, FEMA had begun planning for business process reengineering; however, it had not finalized plans for transitioning users to the new business processes. Further, while GMM took steps to establish clearly defined and prioritized IT requirements, key requirements were not always traceable. Table 3 summarizes the extent to which FEMA implemented the selected leading practices. According to GAO’s Business Process Reengineering Assessment Guide, the most critical factor for engaging in a reengineering effort is having strong executive leadership support to establish credibility regarding the seriousness of the effort and to maintain the momentum as the agency faces potentially extensive changes to its organizational structure and values. Without such leadership, even the best process design may fail to be accepted and implemented. Agencies should also ensure that there is ongoing executive support (e.g., executive steering committee meetings headed by the agency leader) to oversee the reengineering effort from start to finish. FEMA senior leadership consistently demonstrated its commitment and support for streamlining the agency’s grants management business processes and provided ongoing executive support. For example, one of the Administrator’s top priorities highlighted in FEMA’s 2014 through 2022 strategic plans was to strengthen grants management through innovative systems and business processes to rapidly and effectively deliver the agency’s mission. In accordance with this strategic priority, FEMA initiated GMM with the intent to streamline and modernize grants management across the agency. In addition, FEMA established the Grants Management Executive Steering Group in September 2015. This group is responsible for transforming the agency’s grants management capabilities through its evaluation, prioritization, and oversight of grants management modernization programs, such as GMM. The group’s membership consists of FEMA senior leaders from across the agency’s program and business support areas, such as FEMA regions, Individual Assistance, Public Assistance, Preparedness, Office of the Chief Financial Officer, Office of Chief Counsel, OCIO, and the Office of Policy and Program Analysis. In this group’s ongoing commitment to reengineering grants management processes, it meets monthly to review GMM’s updates, risks, and action items, as well as the program’s budget, schedule, and acquisition activities. For example, the group reviewed the status of key acquisition activities and program milestones, such as the follow-on award for the pilot contractor and the program’s initial operational capability date. The group also reviewed GMM’s program risks, such as data migration challenges (discussed later in this report) and delays in the Agile development contract award. With this continuous executive involvement, FEMA is better positioned to maintain momentum for reengineering the new grants management business processes that the GMM system is intended to support. GAO’s Business Process Reengineering Assessment Guide states that agencies undergoing business process reengineering should develop a common understanding of the current environment by documenting existing core business processes to show how the processes work and how they are interconnected. The agencies should then develop a deeper understanding of the target environment by modeling the workflow of each target business process in enough detail to provide a common understanding of exactly what will be changed and who will be affected by a future solution. Agencies should also assess the performance of their current major business processes to identify problem areas that need to be changed or eliminated and to set realistically achievable, customer- oriented, and measurable business performance improvement goals. FEMA has taken steps to document the current and target grants management business processes. Specifically, The agency took steps to develop a common understanding of its grants management processes by documenting each of the 12 grant categories. For example, in 2016 and 2017, the agency conducted several nationwide user outreach sessions with representatives from FEMA headquarters, the 10 regional offices, and state and local grant recipients to discuss the grant categories and the current grants management business environment. In addition, FEMA’s Office of Chief Counsel developed a Grants Management Manual in January 2018 that outlined the authorizing laws, regulations, and agency policies for all of its grant programs. According to the Grants Management Executive Steering Group, the manual is intended to promote standardized grants management procedures across the agency. Additionally, the group expects grant program and regional offices to assess the manual against their own practices, make updates as needed, and ensure that their staff are properly informed and trained. FEMA also documented target grants management business process workflows for 18 of the 19 business functions that were notionally planned to be developed and deployed in the AFG pilot by December 2018. However, the program experienced delays in developing the AFG pilot (discussed later in this report) and, thus, deferred defining the remaining business function until the program gets closer to developing that function, which is now planned for August 2019. In addition, FEMA established measurable business performance goals for GMM that are aimed at addressing problem areas and improving grants management processes. Specifically, the agency established 14 business performance goals and associated thresholds in an October 2017 acquisition program baseline addendum, as well as 126 performance metrics for all 43 of the target grants management business functions in its March 2017 test and evaluation master plan. According to FEMA, the 14 business performance goals are intended to represent essential outcomes that will indicate whether GMM has successfully met critical, business-focused mission needs. GMM performance goals include areas such as improvements in the satisfaction level of users with GMM compared to the legacy systems and improvements in the timeliness of grant award processing. For example, one of GMM’s goals is to get at least 40 percent of users surveyed to agree or strongly agree that their grants management business processes are easier to accomplish with GMM, compared to the legacy systems. Program officials stated that they plan to work with the Agile development contractor to refine their performance goals and target thresholds, develop a plan for collecting the data and calculating the metrics, and establish a performance baseline with the legacy systems. Program officials also stated that they plan to complete these steps by September 2019—GMM’s initial operational capability date—which is when they are required to begin reporting these metrics to the DHS acquisition review board. According to GAO’s Business Process Reengineering Assessment Guide, agencies undergoing business process reengineering should (1) establish an overall plan to guide the effort (commonly referred to as an organizational change management plan) and (2) provide a common understanding for stakeholders of what to expect and how to plan for process changes. Agencies should develop the plan at the beginning of the reengineering effort and provide specific details on upcoming process changes, such as critical milestones and deliverables for an orderly transition, roles and responsibilities for change management activities, reengineering goals, skills and resource needs, key barriers to change, communication expectations, training, and any staff redeployments or reductions-in-force. The agency should develop and begin implementing its change management plan ahead of introducing new processes to ensure sufficient support among stakeholders for the reengineered processes. While FEMA has begun planning its business process reengineering activities, it has not finalized its plans or established time frames for their completion. Specifically, as of September 2018, program officials were in the process of drafting an organizational change management plan that is intended to establish an approach for preparing grants management stakeholders for upcoming changes. According to FEMA, this document is intended to help avoid uncertainty and confusion among stakeholders as changes are made to the agency’s grant programs, and ensure successful adoption of new business processes, strategies, and technologies. As discussed previously in this report, the transition to GMM will involve changes to FEMA’s disparate grants management processes that are managed by many different stakeholders across the agency. Program officials acknowledged that change management is the biggest challenge they face in implementing GMM and said they had begun taking several actions intended to support the agency’s change management activities. For example, program officials reported in October 2018 that they had recently created an executive-level working group intended to address FEMA’s policy challenges related to the standardization of grants management processes. Additionally, program officials reported that they planned to: (1) hire additional support staff focused on coordinating grants change management activities; and (2) pursue regional office outreach to encourage broad support among GMM’s decentralized stakeholders, such as state, local, and tribal territories. However, despite these actions, the officials were unable to provide time frames for completing the organizational change management plan or the additional actions. Until the plan and actions are complete, the program lacks assurance that it will have sufficient support among stakeholders for the reengineered processes. In addition, GMM did not establish plans and time frames for the activities that needed to take place prior to, during, and after the transition from the legacy AFG to GMM. Instead, program officials stated that they had worked collaboratively with the legacy AFG program and planned these details informally by discussing them in various communications, such as emails and meetings. However, this informal planning approach is not a repeatable process, which is essential to this program as FEMA plans to transition many sets of functionality to many different users during the lifecycle of this program. Program officials acknowledged that for future transitions they will need more repeatable transition planning and stated that they intend to establish such plans, but did not provide a time frame for when such changes would be made. Until FEMA develops a repeatable process, with established time frames for communicating the transition details to its customers prior to each transition, the agency risks that the transition from the legacy systems to GMM will not occur as intended. It also increases its risk that stakeholders will not support the implementation of reengineered grants management processes. Leading practices for software development efforts state that IT requirements are to be clearly defined and prioritized. This includes, among other things, maintaining bidirectional traceability as the requirements evolve, to ensure there are no inconsistencies among program plans and requirements. In addition, programs using Agile software development are to maintain a product vision, or roadmap, to guide the planning of major program milestones and provide a high-level view of planned requirements. Programs should also maintain a prioritized list (referred to as a backlog) of narrowly defined requirements (referred to as lower-level requirements) that are to be delivered. Programs should maintain this backlog with the product owner to ensure the program is always working on the highest priority requirements that will deliver the most value to the users. The GMM program established clearly defined and prioritized requirements and maintained bidirectional traceability among the various levels of requirements: Grant lifecycle phases: In its Concept of Operations document, the program established six grants management lifecycle phases that represent the highest level of GMM’s requirements, through which it derives lower-level requirements. Business functions: The Concept of Operations document also identifies the next level of GMM requirements—the 43 business functions that describe how FEMA officials, grant recipients, and other stakeholders are to manage grants. According to program officials, the 43 business functions are to be refined, prioritized, and delivered to GMM customers iteratively. Further, for the AFG pilot, the GMM program office prioritized 19 business functions with the product owner and planned the development of these functions in a roadmap. Epics: GMM’s business functions are decomposed into epics, which represent smaller portions of functionality that can be developed over multiple increments. According to program officials, GMM intends to develop, refine, and prioritize the epics iteratively. As of August 2018, the program had developed 67 epics in the program backlog. An example of one of the epics for the AFG pilot is to prepare and submit grant closeout materials. User stories: The epics are decomposed into user stories, which convey the customers’ requirements at the smallest and most discrete unit of work that must be done within a single sprint to create working software. GMM develops, refines, and prioritizes the user stories iteratively. As of August 2018, the program had developed 1,118 user stories in the backlog. An example of a user story is “As an external user, I can log in with a username and password.” Figure 6 provides an example of how GMM’s different levels of requirements are decomposed. Nevertheless, while we found requirements to be traceable at the sprint- level (i.e., epics and user stories), traceability of requirements at the increment-level (i.e., business functions) were inconsistent among different requirements planning documents. Specifically, the capabilities and constraints document shows that five business functions are planned to be developed within sub-increment 1A, whereas the other key planning document—the roadmap for the AFG pilot—showed one of those five functions as being planned for the sub-increment 1B. In addition, the capabilities and constraints document shows that nine business functions are planned to be developed within sub-increment 1B, but the roadmap showed one of those nine functions as being planned for the sub- increment 1C. Program officials stated that they decided to defer these functions to later sub-increments due to unexpected technical difficulties encountered when developing functionality and reprioritizing functions with the product owners. While the officials updated the roadmap to reflect the deferred functionality, they did not update the capabilities and constraints document to maintain traceability between these two important requirements planning documents. Program officials stated that they learned during the AFG pilot that the use of a capabilities and constraints document for increment-level scope planning was not ideal and that they intended to change the process for how they documented planned requirements for future increments. However, program officials did not provide a time frame for when this change would be made. Until the program makes this change and then ensures it maintains traceability of increment-level requirements between requirements planning documents, it will continue to risk confusion among stakeholders about what is to be delivered. In addition, until recently, GMM’s planning documents were missing up- to-date information regarding when most of the legacy systems will be transitioned to GMM. Specifically, while the program’s planning documents (including the GMM roadmap) provided key milestones for the entire lifecycle of the program and high-level capabilities to be delivered in the AFG pilot, these documents lacked up-to-date time frames for when FEMA planned to transition the nine remaining legacy systems. For example, in May 2017, GMM drafted notional time frames for transitioning the legacy systems, including plans for AFG to be the seventh system replaced by GMM. However, in December 2017, the program decided to reprioritize the legacy systems so that AFG would be replaced first—yet this major change was not reflected in the program’s roadmap. Moreover, while AFG program officials were informed of the decision to transition the AFG program first, in June 2018 officials from other grant programs told us that they had not been informed on when their systems were to be replaced. As a result, these programs were uncertain about when they should start planning for their respective transitions. In August 2018, GMM program officials acknowledged that they were delayed in deciding the sequencing order for the legacy system transitions. Program officials stated that the delay was due to their need to factor the Agile development contractor’s perspective into these decisions; yet, at that time, the contract award had been delayed by approximately 8 months. Subsequently, in October 2018, program officials identified tentative time frames for transitioning the remaining legacy systems. Program officials stated that they determined the tentative time frames for transitioning the legacy systems based on key factors, such as mission need, cost, security vulnerabilities, and technical obsolescence, and that they had shared these new time frames with grant program officials. The officials also stated that, once the Agile contractor begins contract performance, they expect to be able to validate the contractor’s capacity and finalize these time frames by obtaining approval from the Grants Management Executive Steering Group. By taking steps to update and communicate these important time frames, FEMA should be better positioned to ensure that each of the grant programs are prepared for transitioning to GMM. According to leading practices, Agile programs should track their progress in delivering planned IT requirements within a sprint (i.e., short iterations that produce working software). Given that sprints are very short cycles of development (e.g., 2 weeks), the efficiency of completing planned work within a sprint relies on a disciplined approach that includes using a fixed pace, referred to as the sprint cadence, that provides a consistent and predictable development routine. A disciplined approach also includes identifying by the start of a sprint which user stories will be developed, developing those stories to completion (e.g., fully tested and demonstrated to, and accepted by, the product owner), and tracking completion progress of those stories. Progress should be communicated to relevant stakeholders and used by the development teams to better understand their capacity to develop stories, continuously improve on their processes, and forecast how long it will take to deliver all remaining capabilities. The GMM program did not effectively track progress in delivering IT requirements during the first nine sprints, which occurred from January to June 2018. These gaps in tracking the progress of requirements, in part, had an impact on the program’s progress in delivering the 19 AFG business functions that were originally planned by December 2018 and are now deferred to August 2019. However, beginning in July 2018, in response to our ongoing review, the program took steps to improve in these areas. Specifically, GMM did not communicate the status of its Agile development progress to program stakeholders, such as the grant programs, the regional offices, and the development teams, during most of the first nine sprints. Program officials acknowledged that they should use metrics to track development progress and, in July 2018, they began reporting metrics to program stakeholders. For example, they began collecting and providing data on the number of stories planned and delivered, estimated capacity for development teams, and the number of days spent working on the sprint, as part of the program’s weekly status reports to program stakeholders, such as product owners. Rather than using a fixed, predictable sprint cadence, GMM allowed a variable development cadence, meaning that sprint durations varied from 1 to 4 weeks throughout the first nine sprints. Program officials noted that they had experimented with the use of a variable cadence to allow more time to complete complex technical work. Program officials stated that they realized that varying the sprints was not effective and, in July 2018 for sprint 10, they reverted back to a fixed, 2 week cadence. GMM added a significant amount of scope during its first nine sprints, after the development work had already begun. For example, the program committed to 28 user stories at the beginning of sprint eight, and then nearly doubled the work by adding 25 additional stories in the middle of the sprint. Program officials cited multiple reasons for adding more stories, including that an insufficient number of stories had been defined in the backlog when the sprint began, the realization that planned stories were too large and needed to be decomposed into smaller stories, and the realization that other work would be needed in addition to what was originally planned. Program officials recognized that, by the start of a sprint, the requirements should be sufficiently defined, such that they are ready for development without requiring major changes during the sprint. The program made recent improvements in sprints 11 and 12, which had only five stories added after the start of a sprint. By taking these steps to establish consistency among sprints, the program has better positioned itself to more effectively monitor and manage the remaining IT development work. In addition, this improvement in consistency should help the program avoid future deferments of functionality. Leading practices state that programs should regularly collaborate with, and collect input from, relevant stakeholders; monitor the status of stakeholder involvement; incorporate stakeholder input; and measure how well stakeholders’ needs are being met. For Agile programs, it is especially important to track user satisfaction to determine how well the program has met stakeholders’ needs. Consistent stakeholder participation ensures that the program meets its stakeholders’ needs. FEMA implemented its responsibilities in this area through several means, such as stakeholder outreach activities; development of a strategic communications plan; and continuous monitoring, solicitation, and recording of stakeholder involvement and feedback. For example, the agency conducted nationwide outreach sessions from January 2016 through August 2017 and began conducting additional outreach sessions in April 2018. These outreach sessions involved hundreds of representatives from FEMA headquarters, the 10 regional offices, and state and local grant recipients to collect information on the current grants management environment and opportunities for streamlining grants management processes. FEMA also held oversight and stakeholder outreach activities and actively solicited and recorded feedback from its stakeholders on a regular basis. For example, GMM regularly verified with users that the new functionality met their IT requirements, as part of the Agile development cycle. Additionally, we observed several GMM biweekly requirements validation sessions where the program’s stakeholders were involved and provided feedback as part of the requirements development and refinement process. In addition, FEMA identified GMM stakeholders and tracked its engagement with these stakeholders using a stakeholder register. The agency also defined processes for how the GMM program is to collaborate with its stakeholders in a stakeholder communication plan and Agile development team agreement. Also, while several officials from the selected grant program and regional offices that we interviewed indicated that the program could improve in communicating its plans for GMM and incorporating stakeholder input, most of the representatives from these offices stated that GMM is doing well at interacting with its stakeholders. Finally, in October 2018, program officials reported that they had recently begun measuring user satisfaction by conducting surveys and interviews with users that have utilized the new functionality within GMM. The program’s outreach activities, collection of stakeholder input, and measurement of user satisfaction demonstrate that the program is taking the appropriate steps to incorporate stakeholder input. Reliable cost estimates are critical for successfully delivering IT programs. Such estimates provide the basis for informed decision making, realistic budget formulation, meaningful progress measurement, and accountability for results. GAO’s Cost Estimating and Assessment Guide defines leading practices related to the following four characteristics of a high-quality, reliable estimate. Comprehensive. The estimate accounts for all possible costs associated with a program, is structured in sufficient detail to ensure that costs are neither omitted nor double counted, and documents all cost-influencing assumptions. Well-documented. Supporting documentation explains the process, sources, and methods used to create the estimate; contains the underlying data used to develop the estimate; and is adequately reviewed and approved by management. Accurate. The estimate is not overly conservative or optimistic, is based on an assessment of the costs most likely to be incurred, and is regularly updated so that it always reflects the program’s current status. Credible. Discusses any limitations of the analysis because of uncertainty or sensitivity surrounding data or assumptions, the estimate’s results are cross-checked, and an independent cost estimate is conducted by a group outside the acquiring organization to determine whether other estimating methods produce similar results. In May 2017, DHS approved GMM’s lifecycle cost estimate of about $251 million for fiscal years 2015 through 2030. We found this initial estimate to be reliable because it fully or substantially addressed all the characteristics associated with a reliable cost estimate. For example, the estimate comprehensively included government and contractor costs, all elements of the program’s work breakdown structure, and all phases of the system lifecycle; and was aligned with the program’s technical documentation at the time the estimate was developed. GMM also fully documented the key assumptions, data sources, estimating methodology, and calculations for the estimate. Further, the program conducted a risk assessment and sensitivity analysis, and DHS conducted an independent assessment of the cost estimate to validate the accuracy and credibility of the cost estimate. However, key assumptions that FEMA made about the program changed soon after DHS approved the cost estimate in May 2017. Thus, the initial cost estimate no longer reflects the current approach for the program. For example, key assumptions about the program that changed include: Change in the technical approach: The initial cost estimate assumed that GMM would implement a software-as-a-service model, meaning that FEMA would rely on a service provider to deliver software applications and the underlying infrastructure to run them. However, in December 2017, the program instead decided to implement an infrastructure-as-a-service model, meaning that FEMA would develop and deploy its own software application and rely on a service provider to deliver and manage the computing infrastructure (e.g., servers, software, storage, and network equipment). According to program officials, this decision was made after learning from the Agile prototypes that the infrastructure-as-a-service model would allow GMM to develop the system in a more flexible environment. Increase in the number of system development personnel: A key factor with Agile development is the number of development teams (each consisting of experts in software development, testing, and cybersecurity) that are operating concurrently and producing separate portions of software functionality. Program officials initially assumed that they would need three to four concurrent Agile development teams, but subsequently realized that they would instead need to expend more resources to achieve GMM’s original completion date. Specifically, program officials now expect they will need to at least double, and potentially triple, the number of concurrent development teams to meet GMM’s original target dates. Significant delays and complexities with data migration: In 2016 and 2017, GMM experienced various technical challenges in its effort to transfer legacy system data to a data staging platform. This data transfer effort needed to be done to standardize the data before eventually migrating the data to GMM. These challenges resulted in significant delays and cost increases. Program officials reported that, by February 2018—at least 9 months later than planned—all legacy data had been transferred to a data staging platform so that FEMA officials could begin analyzing and standardizing the data prior to migrating it into GMM. FEMA officials reported that they anticipated the cost estimate to increase, and for this increase to be high enough to breach the $251 million threshold set in GMM’s May 2017 acquisition program baseline. Thus, consistent with DHS’s acquisition guidance, the program informed the DHS acquisition review board of this anticipated breach. The board declared that the program was in a cost breach status, as of September 12, 2018. As of October 2018, program officials stated that they were in the process of revising the cost estimate to reflect the changes in the program and to incorporate actual costs. In addition, the officials stated that the program was applying a new cost estimating methodology tailored for Agile programs that DHS’s Cost Analysis Division had been developing. In December 2018, program officials stated that they had completed the revised cost estimate but it was still undergoing departmental approval. Establishing an updated cost estimate should help FEMA better understand the expected costs to deliver GMM under the program’s current approach and time frames. The success of an IT program depends, in part, on having an integrated and reliable master schedule that defines when the program’s set of work activities and milestone events are to occur, how long they will take, and how they are related to one another. Among other things, a reliable schedule provides a roadmap for systematic execution of an IT program and the means by which to gauge progress, identify and address potential problems, and promote accountability. GAO’s Schedule Assessment Guide defines leading practices related to the following four characteristics that are vital to having a reliable integrated master schedule. Comprehensive. A comprehensive schedule reflects all activities for both the government and its contractors that are necessary to accomplish a program’s objectives, as defined in the program’s work breakdown structure. The schedule also includes the labor, materials, and overhead needed to do the work and depicts when those resources are needed and when they will be available. It realistically reflects how long each activity will take and allows for discrete progress measurement. Well-constructed. A schedule is well-constructed if all of its activities are logically sequenced with the most straightforward logic possible. Unusual or complicated logic techniques are used judiciously and justified in the schedule documentation. The schedule’s critical path represents a true model of the activities that drive the program’s earliest completion date and total float accurately depicts schedule flexibility. Credible. A schedule that is credible is horizontally traceable—that is, it reflects the order of events necessary to achieve aggregated products or outcomes. It is also vertically traceable—that is, activities in varying levels of the schedule map to one another and key dates presented to management in periodic briefings are consistent with the schedule. Data about risks are used to predict a level of confidence in meeting the program’s completion date. The level of necessary schedule contingency and high-priority risks are identified by conducting a robust schedule risk analysis. Controlled. A schedule is controlled if it is updated regularly by trained schedulers using actual progress and logic to realistically forecast dates for program activities. It is compared to a designated baseline schedule to measure, monitor, and report the program’s progress. The baseline schedule is accompanied by a baseline document that explains the overall approach to the program, defines ground rules and assumptions, and describes the unique features of the schedule. The baseline schedule and current schedule are subject to a configuration management control process. GMM’s schedule was unreliable because it minimally addressed three characteristics—comprehensive, credible, and controlled—and did not address the fourth characteristic of a reliable estimate—well-constructed. One of the most significant issues was that the program’s fast approaching, final delivery date of September 2020 was not informed by a realistic assessment of GMM development activities, and rather was determined by imposing an unsubstantiated delivery date. Table 4 summarizes our assessment of GMM’s schedule. In discussing the reasons for the shortfalls in these practices, program officials stated that they had been uncertain about the level of rigor that should be applied to the GMM schedule, given their use of Agile development. However, leading practices state that program schedules should meet all the scheduling practices, regardless of whether a program is using Agile development. As discussed earlier in this report, GMM has already experienced significant schedule delays. For example, the legacy data migration effort, the AFG pilot, and the Agile development contract have been delayed. Program officials also stated that the delay in awarding and starting the Agile contract has delayed other important activities, such as establishing time frames for transitioning legacy systems. A more robust schedule could have helped FEMA predict the impact of delays on remaining activities and identify which activities appeared most critical so that the program could ensure that any risks in delaying those activities were properly mitigated. In response to our review and findings, program officials recognized the need to continually enhance their schedule practices to improve the management and communication of program activities. As a result, in August 2018, the officials stated that they planned to add a master scheduler to the team to improve the program’s schedule practices and ensure that all of the areas of concern we identified are adequately addressed. In October 2018, the officials reported that they had recently added two master schedulers to GMM. According to the statement of objectives, the Agile contractor is expected to develop an integrated master schedule soon after it begins performance. However, program officials stated that GMM is schedule-driven—due to the Executive Steering Group’s expectation that the solution will be delivered by September 2020. The officials added that, if GMM encounters challenges in meeting this time frame, the program plans to seek additional resources to allow it to meet the 2020 target. GMM’s schedule-driven approach has already led to an increase in estimated costs and resources. For example, as previously mentioned, the program has determined that, to meet its original target dates, GMM needs to at least double, and possibly triple, the number of concurrent Agile development teams. In addition, we have previously reported that schedule pressure on federal IT programs can lead to omissions and skipping of key activities, especially system testing. In August 2018, program officials acknowledged that September 2020 may not be feasible and that the overall completion time frames established in the acquisition program baseline may eventually need to be rebaselined. Without a robust schedule to forecast whether FEMA’s aggressive delivery goal for GMM is realistic to achieve, leadership will be limited in its ability to make informed decisions on what additional increases in cost or reductions in scope might be needed to fully deliver the system. NIST’s risk management framework establishes standards and guidelines for agencies to follow in developing cybersecurity programs. Agencies are expected to use this framework to achieve more secure information and information systems through the implementation of appropriate risk mitigation strategies and by performing activities that ensure that necessary security controls are integrated into agencies’ processes. The framework addresses broad cybersecurity and risk management activities, which include the following: Categorize the system: Programs are to categorize systems by identifying the types of information used, selecting a potential impact level (e.g., low, moderate, or high), and assigning a category based on the highest level of impact to the system’s confidentiality, integrity, and availability, if the system was compromised. Programs are also to document a description of the information system and its boundaries and should register the system with appropriate program management offices. System categorization is documented in a system security plan. Select and implement security controls: Programs are to determine protective measures, or security controls, to be implemented based on the system categorization results. These security controls are documented in a system security plan. For example, control areas include access controls, incident response, security assessment and authorization, identification and authentication, and configuration management. Once controls are identified, programs are to determine planned implementation actions for each of the designated controls. These implementation actions are also specified in the system security plan. Assess security controls: Programs are to develop, review, and approve a security assessment plan. The purpose of the security assessment plan approval is to establish the appropriate expectations for the security control assessment. Programs are to also perform a security control assessment by evaluating the security controls in accordance with the procedures defined in the security assessment plan, in order to determine the extent to which the controls were implemented correctly. The output of this process is intended to produce a security assessment report to document the issues, findings, and recommendations. Programs are to conduct initial remediation actions on security controls and reassess those security controls, as appropriate. Obtain an authorization to operate the system: Programs are to obtain security authorization approval in order to operate a system. Resolving weaknesses and vulnerabilities identified during testing is an important step leading up to achieving an authorization to operate. Programs are to establish corrective action plans to address any deficiencies in cybersecurity policies, procedures, and practices. DHS guidance also states that corrective action plans must be developed for every weakness identified during a security control assessment and within a security assessment report. Monitor security controls on an ongoing basis: Programs are to monitor their security controls on an ongoing basis after deployment, including determining the security impact of proposed or actual changes to the information system and assessing the security controls in accordance with a monitoring strategy that determines the frequency of monitoring the controls. For the GMM program’s engineering and test environment, which went live in February 2018, FEMA fully addressed three of the five key cybersecurity practices in NIST’s risk management framework and partially addressed two of the practices. Specifically, FEMA categorized GMM’s environment based on security risk, implemented select security controls, and monitored security controls on an ongoing basis. However, the agency partially addressed the areas of assessing security controls and obtaining an authorization to operate the system. Table 5 provides a summary of the extent to which FEMA addressed NIST’s key cybersecurity practices for GMM’s engineering and test environment. Consistent with NIST’s framework, GMM categorized the security risk of its engineering and test environment and identified it as a moderate- impact environment. A moderate-impact environment is one where the loss of confidentiality, integrity, or availability could be expected to have a serious or adverse effect on organizational operations, organizational assets, or individuals. GMM completed the following steps leading to this categorization: The program documented in its System Security Plan the various types of data and information that the environment will collect, process, and store, such as conducting technology research, building or enhancing technology, and maintaining IT networks. The program established three information types and assigned security levels of low, moderate, or high impact in the areas of confidentiality, availability, and integrity. A low-impact security level was assigned to two information types: (1) conducting technology research and (2) building or enhancing technology; and a moderate- impact security level was assigned to the third information type: maintaining IT networks. The engineering and test environment was categorized as an overall moderate-impact system, based on the highest security impact level assignment. GMM documented a description of the environment, including a diagram depicting the system’s boundaries, which illustrates, among other things, databases and firewalls. GMM properly registered its engineering and test environment with FEMA’s Chief Information Officer, Chief Financial Officer, and acting Chief Information Security Officer. By conducting the security categorization process, GMM has taken steps that should ensure that the appropriate security controls are selected for the program’s engineering and test environment. Consistent with NIST’s framework and the system categorization results, GMM appropriately determined which security controls to implement and planned actions for implementing those controls in its System Security Plan for the engineering and test environment. For example, the program utilized NIST guidance to select standard controls for a system categorized with a moderate-impact security level. These control areas include, for example, access controls, risk assessment, incident response, identification and authentication, and configuration management. Further, the program documented its planned actions to implement each control in its System Security Plan. For example, GMM documented that the program plans to implement its Incident Response Testing control by participating in an agency-wide exercise and unannounced vulnerability scans. As another example, GMM documented that the program plans to implement its Contingency Plan Testing control by testing the contingency plan annually, reviewing the test results, and preparing after action reports. By selecting and planning for the implementation of security controls, GMM has taken steps to mitigate its security risks and protect the confidentiality, integrity, and availability of the information system. Consistent with NIST’s framework, in January 2018, GMM program officials developed a security assessment plan for the engineering and test environment. According to GMM program officials, this plan was reviewed by the security assessment team. However, the security assessment plan lacked essential details. Specifically, while the plan included the general process for evaluating the environment’s security controls, the planned assessment procedures for all 964 security controls were not sufficiently defined. Specifically, GMM program officials copied example assessment procedures from NIST guidance and inserted them into its security assessment documentation for all of its 964 controls, without making further adjustments to explain the steps that should be taken specific to GMM. Table 6 shows an example of a security assessment procedure copied from the NIST guidance that should have been further adjusted for GMM. In addition, the actual assessment procedures that the GMM assessors used to evaluate the security controls were not documented. Instead, the program only documented whether each control passed or failed each test. GMM program officials stated that the planned assessment procedures are based on an agency template that was exported from a DHS compliance tool, and that FEMA security officials have been instructed by the DHS OCIO not to tailor or make any adjustments to the template language. However, the assessment procedures outlined in NIST’s guidance are to serve as a starting point for organizations preparing their program specific assessments. According to NIST, organizations are expected to select and tailor their assessment procedures for each security control from NIST’s list of suggested assessment options (e.g., review, analyze, or inspect policies, procedures, and related documentation options). DHS OCIO officials stated that, consistent with NIST’s guidance, they expect that components will ensure they are in compliance with the minimum standards and will also add details and additional rigor, as appropriate, to tailor the planned security assessment procedures to fit their unique missions or needs. In November 2018, in response to our audit, DHS OCIO officials stated that they were meeting with FEMA OCIO officials to understand why they did not document the planned and actual assessment procedures performed by the assessors for GMM. Until FEMA ensures that detailed planned evaluation methods and actual evaluation procedures specific to GMM are defined, the program risks assessing security controls incorrectly, having controls that do not work as intended, and producing undesirable outcomes with respect to meeting the security requirements. In addition, the security assessment plan was not approved by FEMA’s OCIO before proceeding with the security assessment. Program officials stated that approval was not required for the security assessment plan prior to the development of the security assessment report. However, NIST guidance states that the purpose of the security assessment plan approval is to establish the appropriate expectations for the security control assessment. By not getting the security assessment plan approved by FEMA’s OCIO before security assessment reviews were conducted, GMM risks inconsistencies with the plan and security objectives of the organization. Finally, consistent with NIST guidance, GMM performed a security assessment in December 2017 of the engineering and test environment’s controls, which identified 36 vulnerabilities (23 critical- and high-impact vulnerabilities and 13 medium- and low-impact vulnerabilities). The program also documented these vulnerabilities and associated findings and recommendations in a security assessment report. GMM conducted initial remediation actions (i.e., remediation of vulnerabilities that should be corrected immediately) for 12 of the critical- and high-impact vulnerabilities and a reassessment of those security controls confirmed that they were resolved by January 2018. Remediation of the remaining 11 critical- and high-impact vulnerabilities and 13 medium- and low- impact vulnerabilities were to be addressed by corrective action plans as part of the authorization to operate process, which is discussed in the next section. The authorization to operate GMM’s engineering and test environment was granted on February 5, 2018. Among other things, this decision was based on the important stipulation that the remaining 11 critical- and high- impact vulnerabilities associated with multifactor authentication would be addressed within 45 days, or by March 22, 2018. However, the program did not meet this deadline and, instead, approximately 2 months after this deadline passed, obtained a waiver to remediate these vulnerabilities by May 9, 2019. These vulnerabilities are related to a multifactor authentication capability. Program officials stated that they worked with FEMA OCIO officials to attempt to address these vulnerabilities by the initial deadline, but they were unsuccessful in finding a viable solution. Therefore, GMM program officials developed a waiver at the recommendation of the OCIO to provide additional time to develop a viable solution. However, a multifactor authentication capability is essential to ensuring that users are who they say they are, prior to granting users access to the GMM engineering and test environment, in order to reduce the risk of harmful actors accessing the system. In addition, as of September 2018, the program had not established corrective action plans for the 13 medium- and low-impact vulnerabilities. Program officials stated that they do not typically address low-impact vulnerabilities; however, this is in conflict with DHS guidance that specifies that corrective action plans must be developed for every weakness identified during a security control assessment and within a security assessment report. In response to our audit, in October 2018, GMM program officials developed these remaining corrective action plans. The plans indicated that these vulnerabilities were to be fully addressed by January 2019 and April 2019. While the program eventually took corrective actions in response to our audit by developing the missing plans, the GMM program initially failed to follow DHS’s guidance on preparing corrective actions plans for all security vulnerabilities. Until GMM consistently follows DHS’s guidance, it will be difficult for FEMA to determine the extent to which GMM’s security weaknesses identified during its security control assessments are remediated. Additionally, as we have reported at other agencies, vulnerabilities can be indicators of more significant underlying issues and, thus, without appropriate management attention or prompt remediation, GMM is at risk of unnecessarily exposing the program to potential exploits. Moreover, GMM was required to assess all untested controls by March 7, 2018, or no later than 30 days after the approval of the authorization to operate; however, it did not meet this deadline. Specifically, we found that, by October 2018, FEMA had not fully tested 190 security controls in the GMM engineering and test environment. These controls were related to areas such as security incident handling and allocation of resources required to protect an information system. In response to our findings, in October 2018, GMM program officials reported that they had since fully tested 27 controls and partially tested the remaining 163 controls. Program officials stated that testing of the 163 controls is a shared responsibility between GMM and other parties (e.g., the cloud service provider). They added that GMM had completed its portion of the testing but was in the process of verifying the completion of testing by other parties. Program officials stated that the untested controls were not addressed sooner, in part, because of errors resulting from configuration changes in the program’s compliance tool during a system upgrade, which have now been resolved. Until GMM ensures that all security controls have been tested, it remains at an increased risk of exposing programs to potential exploits. Consistent with the NIST framework, GMM established methods for assessing and monitoring security controls to be conducted after an authorization to operate has been approved. GMM has tailored its cybersecurity policies and practices for monitoring its controls to take into account the frequent and iterative pace with which system functionality is continuously being introduced into the GMM environment. Specifically, the GMM program established a process for assessing security impact changes to the system and conducting reauthorizations to operate within the rapid Agile delivery environment. As part of this process, GMM embedded cybersecurity experts on each Agile development team so that they are involved early and can impact security considerations from the beginning of requirements development through testing and deployment of system functionality. In addition, the process involves important steps for ensuring that the system moves from development to completion, while producing a secure and reliable system. For example, it includes procedures for creating, reviewing, and testing new system functionality. As the new system functionality is integrated with existing system functionality, it is to undergo automated testing and security scans in order to ensure that the integrity of the security of the system has not been compromised. Further, an automated process is to deploy the code if it passes all security scans, code tests, and code quality checks. GMM’s process for conducting a reauthorization to operate within the rapid delivery Agile development environment is to follow FEMA guidance that states that all high-level changes made to a FEMA IT system must receive approval from both a change advisory board and the FEMA Chief Information Officer. The board and FEMA Chief Information Officer are to focus their review and approval on scheduled releases and epics (i.e., collections of user stories). Additionally, the Information System Security Officer is to review each planned user story and, if it is determined that the proposed changes may impact the integrity of the authorization, the Information System Security Officer is to work with the development team to begin the process of updating the system authorization. Finally, GMM uses automated tools to track the frequency in which security controls are assessed and to ensure that required scanning data are received by FEMA for reporting purposes. Program officials stated that, in the absence of department-level and agency-level guidance, they have coordinated with DHS and FEMA OCIO officials to ensure that these officials are in agreement with GMM’s approach to continuous monitoring. By having monitoring control policies and procedures in place, FEMA management is positioned to more effectively prioritize and plan its risk response to current threats and vulnerabilities for the GMM program. Given FEMA’s highly complex grants management environment, with its many stakeholders, IT systems, and internal and external users, implementing leading practices for business process reengineering and IT requirements management is critical for success. FEMA has taken many positive steps, including ensuring executive leadership support for business process reengineering, documenting the agency’s grants management processes and performance improvement goals, defining initial IT requirements for the program, incorporating input from end user stakeholders into the development and implementation process, and taking recent actions to improve its delivery of planned IT requirements. Nevertheless, until the GMM program finalizes plans and time frames for implementing its organizational change management actions, plans and communicates system transition activities, and maintains clear traceability of IT requirements, FEMA will be limited in its ability to provide streamlined grants management processes and effectively deliver a modernized IT system to meet the needs of its large range of users. While GMM’s initial cost estimate was reliable, key assumptions about the program since the initial estimate had changed and, therefore, it no longer reflected the current approach for the program. The forthcoming updated cost schedule is expected to better reflect the current approach. However, the program’s unreliable schedule to fully deliver GMM by September 2020 is aggressive and unrealistic. The delays the program has experienced to date further compound GMM’s schedule issues. Without a robust schedule that has been informed by a realistic assessment of GMM’s development activities, leadership will be limited in its ability to make informed decisions on what additional increases in cost or reductions in scope might be needed to achieve their goals. Further, FEMA’s implementation of cybersecurity practices for GMM in the areas of system categorization, selection and implementation, and monitoring will help the program. However, GMM lacked essential details for evaluating security controls, did not approve the security assessment plan before proceeding with the security assessment, did not follow DHS’s guidance to develop corrective action plans for all security vulnerabilities, and did not fully test all security controls. As a result, the GMM engineering and test environment remains at an increased risk of exploitations. We are making eight recommendations to FEMA: The FEMA Administrator should ensure that the GMM program management office finalizes the organizational change management plan and time frames for implementing change management actions. (Recommendation 1) The FEMA Administrator should ensure that the GMM program management office plans and communicates its detailed transition activities to its affected customers before they transition to GMM and undergo significant changes to their processes. (Recommendation 2) The FEMA Administrator should ensure that the GMM program management office implements its planned changes to its processes for documenting requirements for future increments and ensures it maintains traceability among key IT requirements documents. (Recommendation 3) The FEMA Administrator should ensure that the GMM program management office updates the program schedule to address the leading practices for a reliable schedule identified in this report. (Recommendation 4) The FEMA Administrator should ensure that the FEMA OCIO defines sufficiently detailed planned evaluation methods and actual evaluation methods for assessing security controls. (Recommendation 5) The FEMA Administrator should ensure that the FEMA OCIO approves a security assessment plan before security assessment reviews are conducted. (Recommendation 6) The FEMA Administrator should ensure that the GMM program management office follows DHS guidance on preparing corrective action plans for all security vulnerabilities. (Recommendation 7) The FEMA Administrator should ensure that the GMM program management office fully tests all of its security controls for the system. (Recommendation 8) DHS provided written comments on a draft of this report, which are reprinted in appendix IV. In its comments, the department concurred with all eight of our recommendations and provided estimated completion dates for implementing each of them. For example, with regard to recommendation 4, the department stated that FEMA plans to update the GMM program schedule to address the leading practices for a reliable schedule by April 30, 2019. In addition, for recommendation 7, the department stated that FEMA plans to ensure that corrective action plans are prepared by July 31, 2019, to address all identified security vulnerabilities for GMM. If implemented effectively, the actions that FEMA plans to take in response to the recommendations should address the weaknesses we identified. We also received technical comments from DHS and FEMA officials, which we incorporated, as appropriate. We are sending copies of this report to the Secretary of Homeland Security and interested congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Our objectives were to (1) determine the extent to which the Federal Emergency Management Agency (FEMA) is implementing leading practices for reengineering its grants management business processes and incorporating business needs into Grants Management Modernization (GMM) information technology (IT) requirements; (2) assess the reliability of the program’s estimated costs and schedule; and (3) determine the extent to which FEMA is addressing key cybersecurity practices for GMM. To address the first objective, we reviewed GAO’s Business Process Reengineering Assessment Guide and Software Engineering Institute’s Capability Maturity Model for Integration for Development to identify practices associated with business process reengineering and IT requirements management. We then selected six areas that, in our professional judgment, represented foundational practices that were of particular importance to the successful implementation of an IT modernization effort that is using Agile development processes. We also selected the practices that were most relevant based on where GMM was in the system development lifecycle and we discussed the practice areas with FEMA officials. The practices are: Ensuring executive leadership support for process reengineering Assessing the current and target business environment and business Establishing plans for implementing new business processes Establishing clear, prioritized, and traceable IT requirements Tracking progress in delivering IT requirements Incorporating input from end user stakeholders We also reviewed selected chapters of GAO’s draft Agile Assessment Guide (Version 6A), which is intended to establish a consistent framework based on best practices that can be used across the federal government for developing, implementing, managing, and evaluating agencies’ IT investments that rely on Agile methods. To develop this guide, GAO worked closely with Agile experts in the public and private sector; some chapters of the guide are considered more mature because they have been reviewed by the expert panel. We reviewed these chapters to ensure that our expectations for how FEMA should apply the six practices for business process reengineering and IT requirements management are appropriate for an Agile program and are consistent with the draft guidance that is under development. Additionally, since Agile development programs may use different terminology to describe their software development processes, the Agile terms used in this report (e.g., increment, sprint, epic, etc.) are specific to the GMM program. We obtained and analyzed FEMA grants management modernization documentation, such as current and target grants management business processes, acquisition program baseline, operational requirements document, concept of operations, requirements analyses workbooks, Grants Management Executive Steering Group artifacts, stakeholder outreach artifacts, Agile increment- and sprint-level planning and development artifacts, and the requirements backlog. We assessed the program documentation against the selected practices to determine the extent to which the agency had implemented them. We then assessed each practice area as: fully implemented—FEMA provided complete evidence that showed it fully implemented the practice area; partially implemented—FEMA provided evidence that showed it partially implemented the practice area; not implemented—FEMA did not provide evidence that showed it implemented any of the practice area. Additionally, we observed Agile increment and sprint development activities at GMM facilities in Washington, D.C. We also observed a demonstration of how the program manages its lower level requirements (i.e., user stories and epics) and maintains traceability of the requirements using an automated tool at GMM facilities in Washington, D.C. We also interviewed FEMA officials, including the GMM Program Executive, GMM Program Manager, GMM Business Transformation Team Lead, and Product Owner regarding their efforts to streamline grants management business processes, collect and incorporate stakeholder input, and manage GMM’s requirements. In addition, we interviewed FEMA officials from four out of 16 grant program offices and two out of 10 regional offices to obtain contextual information and illustrative examples of FEMA’s efforts to reengineer grants management business processes and collect business requirements for GMM. Specifically, We selected the four grant program offices based on a range of grant programs managed, legacy systems used, and the amount of grant funding awarded. We also sought to select a cross section of different characteristics, such as selecting larger grant program offices, as well as smaller offices. In addition, we ensured that our selection included the Assistance to Firefighters Grants (AFG) program office because officials in this office represent the first GMM users and, therefore, are more actively involved with the program’s Agile development practices. Based on these factors, we selected: Public Assistance Division, Individual Assistance Division, AFG, and National Fire Academy. Additionally, the four selected grant program offices are responsible for 16 of the total 45 grant programs and are users of five of the nine primary legacy IT systems. The four selected grant program offices also represent about 68 percent of the total grant funding awarded by FEMA from fiscal years 2005 through 2016. We selected two regional offices based on (1) the largest amount of total FEMA grant funding for fiscal years 2005 through 2016—Region 6 located in Denton, Texas; and (2) the highest percentage of AFG funding compared to the office’s total grant funding awarded from fiscal years 2005 through 2016—Region 5 located in Chicago, Illinois. To assess the reliability of data from the program’s automated IT requirements management tool, we interviewed knowledgeable officials about the quality control procedures used by the program to assure accuracy and completeness of the data. We also compared the data to other relevant program documentation on GMM requirements. We determined that the data used were sufficiently reliable for the purpose of evaluating GMM’s practices for managing IT requirements. For our second objective, to assess the reliability of GMM’s estimated costs and schedule, we reviewed documentation on GMM’s May 2017 lifecycle cost estimate and on the program’s schedule, dated May 2018. To assess the reliability of the May 2017 lifecycle cost estimate, we evaluated documentation supporting the estimate, such as the cost estimating model, the report on GMM’s Cost Estimating Baseline Document and Life Cycle Cost Estimate, and briefings provided to the Department of Homeland Security (DHS) and FEMA management regarding the cost estimate. We assessed the cost estimating methodologies, assumptions, and results against leading practices for developing a comprehensive, accurate, well-documented, and credible cost estimate, identified in GAO’s Cost Estimating and Assessment Guide. We also interviewed program officials responsible for developing and reviewing the cost estimate to understand their methodology, data, and approach for developing the estimate. We found that the cost data were sufficiently reliable. To assess the reliability of the May 2018 GMM program schedule, we evaluated documentation supporting the schedule, such as the integrated master schedule, acquisition program baseline, and Agile artifacts. We assessed the schedule documentation against leading practices for developing a comprehensive, well-constructed, credible, and controlled schedule, identified in GAO’s Schedule Assessment Guide. We also interviewed GMM program officials responsible for developing and managing the program schedule to understand their practices for creating and maintaining the schedule. We noted in our report the instances where the quality of the schedule data impacted the reliability of the program’s schedule. For both the cost estimate and program schedule, we assessed each leading practice as: fully addressed—FEMA provided complete evidence that showed it implemented the entire practice area; substantially addressed—FEMA provided evidence that showed it implemented more than half of the practice area; partially addressed—FEMA provided evidence that showed it implemented about half of the practice area; minimally addressed—FEMA provided evidence that showed it implemented less than half of the practice area; not addressed—FEMA did not provide evidence that showed it implemented any of the practice area. Finally, we provided FEMA with draft versions of our detailed analyses of the GMM cost estimate and schedule. This was done to verify that the information on which we based our findings was complete, accurate, and up-to-date. Regarding our third objective, to determine the extent to which FEMA is addressing key cybersecurity practices for GMM, we reviewed documentation regarding DHS and FEMA cybersecurity policies and guidance, and FEMA’s authorization to operate for the program’s engineering and test environment. We evaluated the documentation against all six cybersecurity practices identified in the National Institute of Standards and Technology’s (NIST) Risk Management Framework. While NIST’s Risk Management Framework identifies six total practices, for reporting purposes, we combined two interrelated practices—selection of security controls and implementation of security controls—into a single practice. The resulting five practices were: categorizing the system based on security risk, selecting and implementing security controls, assessing security controls, obtaining an authorization to operate the system, and monitoring security controls on an ongoing basis. We obtained and analyzed key artifacts supporting the program’s efforts to address these risk management practices, including the program’s System Security Plan, the Security Assessment Plan and Report, Authorization to Operate documentation, and the program’s continuous monitoring documentation. We also interviewed officials from the GMM program office and FEMA’s Office of the Chief Information Officer, such as the GMM Security Engineering Lead, GMM Information System Security Officer, and FEMA’s Acting Chief Information Security Officer, regarding their efforts to assess, document, and review security controls for GMM. We assessed the evidence against the five practices to determine the extent to which the agency had addressed them. We then assessed each practice area as: fully addressed—FEMA provided complete evidence that showed it fully implemented the practice area; partially addressed—FEMA provided evidence that showed it partially implemented the practice area; not addressed—FEMA did not provide evidence that showed it implemented any of the practice area. To assess the reliability of data from the program’s automated security controls management tool, we interviewed knowledgeable officials about the quality control procedures used by the program to assure accuracy and completeness of the data. We also compared the data to other relevant program documentation on GMM security controls for the engineering and test environment. We found that some of the security controls data we examined were sufficiently reliable for the purpose of evaluating FEMA’s cybersecurity practices for GMM, and we noted in our report the instances where the accuracy of the data impacted the program’s ability to address key cybersecurity practices. We conducted this performance audit from December 2017 to April 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Federal Emergency Management Agency (FEMA) awards many different types of grants to state, local, and tribal governments and nongovernmental entities. These grants are to help communities prevent, prepare for, protect against, mitigate the effects of, respond to, and recover from disasters and terrorist attacks. Agile software development is a type of incremental development that calls for the rapid delivery of software in small, short increments. The use of an incremental approach is consistent with the Office of Management and Budget’s guidance as specified in its information technology (IT) Reform Plan, as well as the legislation commonly referred to as the Federal Information Technology Acquisition Reform Act. Many organizations, especially in the federal government, are accustomed to using a waterfall software development model, which typically consists of long, sequential phases, and differs significantly from the Agile development approach. Agile practices integrate planning, design, development, and testing into an iterative lifecycle to deliver software early and often. Figure 7 provides a depiction of software development using the Agile approach, as compared to a waterfall approach. The frequent iterations of Agile development are intended to effectively measure progress, reduce technical and programmatic risk, and respond to feedback from stakeholders in changes to IT requirements more quickly than traditional methods. Despite these intended benefits, organizations adopting Agile must overcome challenges in making significant changes to how they are accustomed to developing software. The significant differences between Agile and waterfall development impact how IT programs are planned, implemented, and monitored in terms of cost, schedule, and scope. For example, in waterfall development, significant effort is devoted upfront to document detailed plans and all IT requirements for the entire scope of work at the beginning of the program, and cost and schedule can be varied to complete that work. However, for Agile programs the precise details are unknown upfront, so initial planning of cost, scope, and timing would be conducted at a high level, and then supplemented with more specific plans for each iteration. While cost and schedule are set for each iteration, requirements for each iteration (or increment) can be variable as they are learned over time and revised to reflect experiences from completed iterations and to accommodate changing priorities of the end users. The differences in these two software development approaches are shown in figure 8. Looking at figure 8, the benefit provided from using traditional program management practices such as establishing a cost estimate or a robust schedule, is not obvious. However, unlike a theoretical environment, many government programs may not have the autonomy to manage completely flexible scope, as they must deliver certain minimal specifications with the cost and schedule provided. In those cases, it is vital for the team to understand and differentiate the IT requirements that are “must haves” from the “nice to haves” early in the planning effort. This would help facilitate delivery of the “must-haves” requirements first, thereby providing users with the greatest benefits as soon as possible. In addition to the contact named above, the following staff made key contributions to this report: Shannin G. O’Neill (Assistant Director), Jeanne Sung (Analyst in Charge), Andrew Beggs, Rebecca Eyler, Kendrick Johnson, Thomas J. Johnson, Jason Lee, Jennifer Leotta, and Melissa Melvin.", "summary": "FEMA, a component of DHS, annually awards billions of dollars in grants to help communities prepare for, mitigate the effects of, and recover from major disasters. However, FEMA's complex IT environment supporting grants management consists of many disparate systems. In 2008, the agency attempted to modernize these systems but experienced significant challenges. In 2015, FEMA initiated a new endeavor (the GMM program) aimed at streamlining and modernizing the grants management IT environment. GAO was asked to review the GMM program. GAO's objectives were to (1) determine the extent to which FEMA is implementing leading practices for reengineering its grants management processes and incorporating needs into IT requirements; (2) assess the reliability of the program's estimated costs and schedule; and (3) determine the extent to which FEMA is addressing key cybersecurity practices. GAO compared program documentation to leading practices for process reengineering and requirements management, cost and schedule estimation, and cybersecurity risk management, as established by the Software Engineering Institute, National Institute of Standards and Technology, and GAO. Of six important leading practices for effective business process reengineering and information technology (IT) requirements management, the Federal Emergency Management Agency (FEMA) fully implemented four and partially implemented two for the Grants Management Modernization (GMM) program (see table). Specifically, FEMA ensured senior leadership commitment, took steps to assess its business environment and performance goals, took recent actions to track progress in delivering IT requirements, and incorporated input from end user stakeholders. However, FEMA has not yet fully established plans for implementing new business processes or established complete traceability of IT requirements. Until FEMA fully implements the remaining two practices, it risks delivering an IT solution that does not fully modernize FEMA's grants management systems. While GMM's initial May 2017 cost estimate of about $251 million was generally consistent with leading practices for a reliable, high-quality estimate, it no longer reflects current assumptions about the program. FEMA officials stated in December 2018 that they had completed a revised cost estimate, but it was undergoing departmental approval. GMM's program schedule was inconsistent with leading practices; of particular concern was that the program's final delivery date of September 2020 was not informed by a realistic assessment of GMM development activities, and rather was determined by imposing an unsubstantiated delivery date. Developing sound cost and schedule estimates is necessary to ensure that FEMA has a clear understanding of program risks. Of five key cybersecurity practices, FEMA fully addressed three and partially addressed two for GMM. Specifically, it categorized GMM's system based on security risk, selected and implemented security controls, and monitored security controls on an ongoing basis. However, the program had not initially established corrective action plans for 13 medium- and low-risk vulnerabilities. This conflicts with the Department of Homeland Security's (DHS) guidance that specifies that corrective action plans must be developed for every weakness identified. Until FEMA, among other things, ensures that the program consistently follows the department's guidance on preparing corrective action plans for all security vulnerabilities, GMM's system will remain at increased risk of exploits. GAO is making eight recommendations to FEMA to implement leading practices related to reengineering processes, managing requirements, scheduling, and implementing cybersecurity. DHS concurred with all recommendations and provided estimated dates for implementing each of them.", "document_type": "gao"}
{"report": "OPA amended the Clean Water Act and established provisions expanding and consolidating the federal government’s authority to prevent and respond to oil spills. This includes providing the federal government with the authority to perform cleanup immediately after a spill using federal resources, monitor the response efforts of the spiller, or direct the spiller’s cleanup activities. OPA also established a “polluter pays” system, placing the primary burden of liability and costs of oil spills on the responsible party for the vessel or facility from which oil is discharged. Under this system, the responsible party assumes, up to a specified limit, the burden of paying for spill costs, including both removal costs (for cleaning up the spill) and damage claims (for restoring the environment and paying compensation to parties economically harmed by the spill). OPA authorized the use of the Oil Spill Liability Trust Fund to fund up to $1 billion per spill incident for pollution removal costs and damages resulting from oil spills and mitigation of a substantial threat of an oil spill in navigable U.S. waters when a responsible party cannot or does not pay for the cleanup. After the Deepwater Horizon oil spill, the Resources and Ecosystems Sustainability, Tourist Opportunities, and Revived Economies of the Gulf Coast States Act of 2012 (RESTORE Act) established a new trust fund for programs, projects, and activities that restore and protect the environment and economy of the Gulf Coast region as well as the RESTORE Council, which is to summarize its activities for each calendar year’s activities in an annual report to Congress. In addition, NOAA finalized regulations in 1996 for assessing natural resource damages resulting from a discharge or substantial threat of a discharge of oil. The NRDA regulations recognize that OPA provides for designating federal, state, and tribal officials as natural resource trustees and authorizes them to make claims against the parties responsible for the injuries23, 24 Under NRDA regulations, a trustee council’s work usually occurs in three steps: (1) a pre-assessment phase, (2) the restoration planning phase, and (3) the restoration implementation phase. During the pre-assessment phase the trustees are to determine whether they have jurisdiction to pursue restoration. In the restoration planning phase the trustees are to evaluate information on potential injuries and use that information to determine the need for, type of, and scale of restoration. Finally, the restoration implementation phase describes the process for implementing restoration. The NRDA regulations define injury as an observable or measurable adverse change in a natural resource or impairment of a natural resource service. 15 C.F.R. 990.11. federal and state trustees entered into legal settlements with responsible parties to resolve certain claims. The Exxon Valdez Trustee Council is in the restoration implementation phase, while the Deepwater Horizon Trustee Council is in both the restoration planning and implementation phases. The National Oil and Hazardous Substances Pollution Contingency Plan, commonly known as the National Contingency Plan, contains the federal government’s framework and operative requirements for preparing and responding to discharges of oil and releases of hazardous substances, pollutants, and contaminants. It establishes that federal oil spill response authority is determined by the location of the spill: the Coast Guard has response authority in the U.S. coastal zone, and EPA covers the inland zone. In addition, NOAA is to provide scientific analysis and consultation during oil spill response activities in the coastal zones. The Exxon Valdez oil spill in Alaska’s Prince William Sound in 1989 contaminated portions of national wildlife refuges, national and state parks, a national forest, and a state game sanctuary—killing or injuring thousands of sea birds, marine mammals, and fish and disrupting the ecosystem in its path. In October 1991, the U.S. District Court for the District of Alaska approved a civil settlement and criminal plea agreement among Exxon, the federal government, and the state of Alaska for recovery of natural resource damages resulting from the oil spill. Exxon agreed to pay $900 million in civil claims in 11 annual payments and $125 million to resolve various criminal charges. In August 1991, the federal government and the state of Alaska signed a memorandum of agreement and consent decree to act as co-trustees in collecting and using natural resource damage payments from the spill. The 1991 memorandum states that all decisions related to injury assessment, restoration activities, or other use of the natural resource damage payments are to be made by unanimous agreement of the trustees. According to the memorandum, the trustees are to use the natural resource damage payments to restore, replace, rehabilitate, enhance, or acquire the equivalent of the natural resources injured as a result of the oil spill and the reduced or lost services provided by such resources. The memorandum also recognized that EPA was designated to coordinate restoration activities on behalf of the federal government. In 1992, the trustees established the Exxon Valdez Trustee Council to ensure coordination and cooperation in restoring the natural resources injured, lost, or destroyed by the spill. In 1994, the Exxon Valdez Trustee Council prepared a restoration plan for use of the funds, which consisted of five categories: (1) general restoration; (2) habitat protection and acquisition; (3) monitoring and research; (4) restoration reserve; and (5) public information, science management, and administration. The restoration plan noted that in addition to restoring natural resources, funds may be used to restore reduced or lost services (including human uses) from injured natural resources, which includes subsistence, commercial fishing, recreation, and tourism services. The Exxon Valdez Trustee Council is advised by members of the public and a panel of scientists, and its Executive Director manages the day-to-day administrative functions. The Exxon Valdez Trustee Council has published documents that are on the council’s public website, such as the Injured Resources and Services list (current as of 2014), lingering oil updates (current as of 2016), annual reports (current as of 2018), and annual project work plans (current as of 2018). The Deepwater Horizon oil spill in the Gulf of Mexico in 2010 resulted in the tragic loss of 11 lives and a devastating environmental impact and affected the livelihoods of thousands of Gulf Coast citizens and businesses. In April 2016, BP, the federal government, and the five Gulf Coast states agreed to a settlement resolving multiple claims for federal civil penalties and natural resource damages related to the spill totaling up to $14.9 billion. Under the terms of the consent decree for the settlement, BP must pay up to $8.8 billion in natural resource damages under OPA, which includes $1 billion BP previously committed to pay for early restoration projects, and up to $700 million to address injuries that were unknown to the trustees as of July 2, 2015, including for any associated Natural Resource Damage assessment and planning activities, or to adapt, enhance, supplement, or replace restoration projects or approaches that the trustees initially selected. BP is to make these payments into the Deepwater Horizon Oil Spill Natural Resource Damages Fund managed by the Department of the Interior (Interior), to be used jointly by the federal and state trustees of the Deepwater Horizon Trustee Council for restoration of injured or lost natural resources. Two additional, separate restoration funds are to receive money from the BP civil and criminal penalties: (1) the Gulf Coast Restoration Trust Fund established under the RESTORE Act is to receive 80 percent of the $5.5 billion Clean Water Act civil penalty paid by BP to support environmental restoration and economic recovery projects in the Gulf Coast region and (2) the Gulf Environmental Benefit Fund managed by the nonprofit National Fish and Wildlife Foundation is to receive $2.394 billion in criminal penalties. For more information on the amount and distribution of the BP civil and criminal payments, see figure 1. Prior to reaching the settlement in 2016, BP signed an agreement in April 2011 to provide $1 billion toward early restoration projects in the Gulf of Mexico to address injuries to natural resources caused by the spill. Early restoration projects may be developed prior to the completion of the injury assessment, which can take months or years to complete. Payments by BP for early restoration projects are counted towards its liability for the $8.8 billion in natural resource damages resulting from the spill. The designated trustees are to administer these payments for natural resources, according to OPA. The designated trustees include federal officials from Interior, NOAA, the U.S. Department of Agriculture, and EPA, as well as state officials from the five Gulf States that were affected by the spill—Alabama, Florida, Louisiana, Mississippi, and Texas. In February 2016, the Deepwater Horizon Trustee Council finalized the Programmatic Damage Assessment and Restoration Plan (programmatic restoration plan) that provided the council’s injury assessment and proposed a framework for identifying and developing project-specific restoration plans. The five goals of the programmatic restoration plan are to (1) restore and conserve habitat; (2) restore water quality; (3) replenish and protect living coastal and marine resources; (4) provide and enhance recreational opportunities; and (5) provide for monitoring, adaptive management, and administrative oversight to support restoration implementation. According to the 2016 programmatic restoration plan, the Deepwater Horizon Trustee Council is to coordinate with other Deepwater Horizon restoration programs, such as those funded by the RESTORE Act, the National Fish and Wildlife Foundation, and other entities. The 2016 programmatic restoration plan established Trustee Implementation Groups for each of the seven designated restoration areas—one for each of the five Gulf States, the Region-Wide implementation group, and the Open Ocean implementation group. Each trustee implementation group is to plan, decide on, and implement restoration activities, including monitoring and adaptive management, for the funding that the consent decree allocated to its restoration area. Federal trustees serve in all the trustee implementation groups, and state trustees serve on the Region-Wide implementation group and the trustee implementation groups for their states; decisions are to be made by consensus. The Deepwater Horizon Trustee Council is to coordinate the work of the trustee implementation groups by establishing standard procedures and practices to ensure consistency in developing and implementing restoration activities. OPA created the interagency committee to provide a comprehensive, coordinated federal oil pollution research program and promote cooperation with industry, universities, research institutions, state governments, and other nations through information sharing, coordinated planning, and joint funding of projects. It also designated member agencies and authorized the President to designate other federal agencies as members of the interagency committee. As of November 2018, the interagency committee consisted of 15 federal members representing independent agencies, departments, and department components. OPA directs that a representative from the Coast Guard serve as the chair, and the interagency committee charter designates that a representative from NOAA, EPA, or the Bureau of Safety and Environmental Enforcement (BSEE) serve as the vice-chair and that the committee’s Executive Director provide staff support. The interagency committee’s charter notes that it shall meet at least semi-annually or at the decision of the chair. According to OPA, the chair’s duties include reporting biennially to Congress on the interagency committee’s activities related to oil pollution research, development, and demonstration programs. OPA also required the interagency committee to prepare and submit a research and technology plan, which has been updated periodically. In September 2015, the interagency committee released the research and technology plan for fiscal years 2015 through 2021. This research and technology plan updates the interagency committee’s 1992 plan, revised in 1997, and provides a new baseline of the nation’s oil pollution research needs. The plan is primarily directed at federal agencies with responsibilities for conducting or funding such research, but it can also serve as a research planning guide for nonfederal stakeholders such as, industry, academia, state governments, research institutions, and other nations, according to interagency committee documents. The 2015 research and technology plan established a common language and planning framework to enable researchers and interested parties to identify and track research in four classes or categories that represent general groupings of oil spill research: Prevention: Research that supports developing practices and technologies designed to predict, reduce, or eliminate the likelihood of discharges or minimize the volume of oil discharges into the environment. Preparedness: Research that supports the activities, programs, and systems developed prior to an oil spill to improve the planning, decision-making, and management processes needed for responding to and recovering from oil spills. Response: Research that supports techniques and technologies that address the immediate and short-term effects of an oil spill and encompasses all activities involved in containing, cleaning up, treating, and disposing of oil to (1) maintain the safety of human life, (2) stabilize a situation to preclude further damage, and (3) minimize adverse environmental and socioeconomic effects. Injury assessment and restoration: Research that involves collecting and analyzing information to (1) evaluate the nature and extent of environmental, human health, and socioeconomic injuries resulting from an incident; (2) determine the actions needed to restore natural resources and their services to pre-spill conditions; and (3) make the environment and public whole after interim losses. In response to the Exxon Valdez and Deepwater Horizon oil spills and by forming trustee councils, federal and state trustees have used the restoration trust funds to authorize money for activities in accordance with approved restoration plans. The Exxon Valdez Trustee Council has largely completed restoration work and authorized approximately $985 million, roughly 86 percent of the restoration trust fund, primarily on habitat protection and general restoration, research, and monitoring activities. As a result of these restoration activities and natural recovery, the majority of the injured natural resources and human services in the spill area has recovered or is recovering, according to the council’s assessment. However, the Exxon Valdez Trustee Council continues to monitor the lack of recovery of Pacific herring and the presence of lingering oil in the spill area. The Deepwater Horizon Trustee Council is completing early restoration work and initial post-settlement restoration planning. It has authorized approximately $1.1 billion for restoration activities, roughly 13 percent of the restoration trust fund, and spent $368 million, roughly 5 percent of the restoration trust fund, primarily on habitat protection and enhancing recreation, such as building boat ramps and other recreational facilities. Exxon’s payments to the restoration trust fund totaled approximately $900 million, and the interest earnings, as of January 2016, totaled $247 million. From 1992 to 2018, the Exxon Valdez Trustee Council authorized the expenditure of approximately $985 million or 86 percent of the roughly $1.15 billion in principal funds plus interest from the restoration trust fund, primarily on habitat protection ($445 million) and general restoration, research, and monitoring of injured natural resources ($234 million). The remaining unspent restoration trust fund balance as of January 2018 was $210 million, split evenly between the habitat investment subaccount for future habitat protection activities and the research investment subaccount for future general restoration activities (see fig. 2). According to the Exxon Valdez Trustee Council, as of January 2018, it had spent approximately $445 million to protect and enhance habitat, including acquiring 628,000 acres of lands and interest in lands. As outlined in the trustee council’s 1994 restoration plan, the habitat program is intended to minimize further injury to resources and services and allow recovery to continue with the least interference by authorizing funds for federal and state resource agencies to acquire title or conservation easements on ecologically valuable lands. For example, in 2017 the Exxon Valdez Trustee Council authorized about $5.5 million to acquire a conservation easement on 1,060 acres at the northeastern end of Kodiak Island in the Gulf of Alaska, known as Termination Point. The trustee council authorized funds for this acquisition to (1) protect the property from timber logging and development and (2) provide habitat and feeding areas for marine birds injured by the spill, such as marbled murrelets and pigeon guillemots. According to the Exxon Valdez Trustee Council, habitat acquisitions prevent additional injury to species during recovery, promote restoration of spill-affected resources and services, and are the primary tool for acquiring equivalent resources harmed by the spill. The habitat program also supports habitat enhancement projects, which, according to the Exxon Valdez Trustee Council, aim to repair human- caused harm to natural resources, their habitats, and the services they provide to humans. For example, the trustee council authorized $2.2 million to the Alaska Department of Natural Resources to stabilize stream bank vegetation and install elevated steel walkways to provide less- damaging access to the Kenai River, a popular fishing destination. The Exxon Valdez Trustee Council has spent roughly $234 million from October 1992 to January 2018 on hundreds of general restoration, monitoring, and research activities. As outlined in the 1994 restoration plan, general restoration includes activities that manipulate the environment, manage human use, and reduce marine pollution. Research and monitoring activities also provide information on the status and condition of resources and services, including (1) whether they are recovering, (2) whether restoration activities are successful, and (3) factors that may be constraining recovery, according to the 1994 plan. For example, since 2012, the trustee council has authorized money for a program called Gulf Watch Alaska that provides long-term monitoring data on the status of environmental conditions—such as waters temperature and salinity—and the marine and nearshore ecosystems. Gulf Watch Alaska provides data to federal, state, and tribal agencies, as well as the public, that informs resource conservation programs and aid in the management of species injured by the spill. According to the trustee council, its expenditures for research projects have resulted in hundreds of peer-reviewed scientific studies and increased knowledge about the marine environment that benefits the injured resources. The Exxon Valdez Trustee Council has spent roughly $89 million from October 1992 to January 2018 on administration, science management, and public information. According to the 1994 restoration plan, expenditures under this category cover the cost to (1) prepare work plans, (2) negotiate habitat purchases, (3) provide independent scientific review, (4) involve the public, and (5) operate the restoration program. Although the Exxon Valdez Trustee Council set a target of 5 percent administrative costs in the 1994 restoration plan, according to a written statement that the trustee council provided, administrative costs averaged around 6 percent from 1994 through 2001. The trustees and council staff we interviewed told us that in hindsight the 5 percent target was unrealistic as it did not reflect the actual administrative costs at that time, although such costs were included in project budgets or were absorbed by federal and state agencies. Therefore, in 2012, the Exxon Valdez Trustee Council changed the way it accounted for administrative costs and has included these costs in the administrative budget. According to the trustee council, under the new accounting policy, administrative costs were recalculated and estimated at around 19 percent for the period 2002 through 2018. The remaining $210 million Exxon Valdez restoration trust fund balance is held by the Alaska Department of Revenue in two interest-bearing subaccounts. As of January 2018, the research subaccount and the habitat subaccount each held approximately $105 million. In the 1994 restoration plan, the Exxon Valdez Trustee Council established the need for a restoration reserve to ensure that restoration activities could continue to be supported after the final annual payments from the Exxon Corporation were received in September 2001. According to the 1994 restoration plan, the trustee council planned to set aside $12 million per year for a period of 9 years into the restoration reserve, totaling $108 million plus interest. In 1999, the Exxon Valdez Trustee Council resolved to transfer the estimated remaining balance of $170 million to the restoration reserve and split the money into two subaccounts. Since 2002, the trustee council is to make allocations for its annual work plans and ongoing habitat acquisition using these accounts. In 2010, the trustee council established a 20-year strategic plan to spend the remaining trust funds using four 5-year incremental work plans. In November 2010, the trustee council issued a call for project proposals for the first 5-year work plan, for fiscal years 2012 through 2016. Although the Exxon Valdez Trustee Council solicited invitations on a 5-year cycle, it has authorized money for each project annually. In a written statement, the trustee council also stated that it continues to pursue and acquire from willing sellers remaining parcels of land that prior studies have identified as high-priority habitat. According to the Exxon Valdez Trustee Council’s long-term spending scenario, both of the subaccounts are expected to be depleted by 2032 or earlier as determined by the market’s performance. According to the Exxon Valdez Trustee Council’s 2014 restoration plan update—its most recent assessment of injured resources and services— all but 5 of the 32 natural resources and human services identified as injured by the spill have recovered, are recovering, or are very likely recovered. In the 1994 restoration plan, the trustee council established a list of resources and services that suffered injuries from the spill, and developed specific, measurable recovery objectives for each injured resource and service. The Exxon Valdez Trustee Council has periodically assessed the status of those resources, most recently in 2014. As of the 2014 assessment, the following 4 resources were listed as not recovering: (1) marbled murrelets, (2) Pacific herring, (3) pigeon guillemots, and (4) one group of killer whales. In addition, the recovery of Kittlitz’s murrelets was listed as unknown. According to the Exxon Valdez Trustee Council, the status of these resources in 2018 is largely similar to their status in 2014 except that one population of pigeon guillemots has likely increased as a result of a predator-control project that the council supported. However, the overall status of this species has not been determined. In a written statement, the trustees stated that the trustee council plans to initiate its next assessment of injured resources in late 2018. The Exxon Valdez Trustee Council remains particularly concerned about the health of the Pacific herring population and the presence of lingering oil. According to the trustee council’s 2014 restoration plan update, Pacific herring are considered an ecologically and commercially important species that in addition to being fished for human consumption is a source of food for various marine species. The assessment noted a combination of factors, including disease, predation, and poor recruitment of additional fish to the stock through growth or migration, appear to have contributed to the continued suppression of herring populations. As a result, the herring fishery has been closed for 23 of the 29 years since the oil spill and has not met the trustee council’s recovery objective. To address concerns regarding the Pacific herring, the trustee council plans to authorize additional money for ongoing Pacific herring research and monitoring through the anticipated end date for the fund in fiscal year 2032, for an estimated total cost of roughly $23 million over 20 years. The Exxon Valdez Trustee Council also has concerns regarding the presence of lingering oil in the spill area. According to a March 2016 report for the trustee council, approximately 27,000 gallons of lightly weathered oil from the Exxon Valdez spill remains, located along almost 22 miles of shoreline at a small number of subsurface sites, where oxygen and nutrients are at levels too low to support microbial degradation. In May 2018, we accompanied researchers working with the trustee council to the spill area and observed the excavation of three pits that revealed lingering oil roughly 6 inches below the surface of the beach, as captured in figure 3. According to the researchers, oil previously recovered from this location was identified as belonging to the Exxon Valdez oil spill. Evidence of exposure to lingering oil was observed as recently as 2009 in a variety of marine species, including sea otters and harlequin ducks, according to the 2016 lingering oil report. The report also noted that the most recent studies show that the sea otter and harlequin duck populations have recovered and that lingering oil is no longer causing ecological damage. Further, studies demonstrated that minimally intrusive remediation of the oil would only be effective at a small number of sites, according to the 2016 report. Therefore, although the trustee council has decided not to pursue remediation of the oil, it stated that it has authorized money for projects to study the effects of oil and lingering oil totaling over $16 million and will continue to monitor the oil to document its physical and chemical changes over time. The Exxon Valdez Trustee Council expects that lingering oil will persist for decades; however, its representatives said that the evidence indicates that there are no current biological effects of the oil. The Exxon Valdez Trustee Council’s priorities for future spending are outlined in the 2014 restoration plan update, and in addition to long-term herring research and lingering oil, the priorities include long-term monitoring of marine conditions and injured resources, shorter-term harbor restoration projects, and habitat protection. Since the federal and state governments reached a final settlement with BP in 2016 and the Deepwater Horizon Trustee Council finalized a programmatic restoration plan, four trustee implementation groups have issued initial independent restoration plans. Specifically, the Alabama, Louisiana, Mississippi, and Texas trustee implementation groups have issued initial restoration plans. According to the Deepwater Horizon Trustee Council, the trustee implementation groups covering Florida, Open Ocean, and Region-Wide restoration are in the midst of a multiyear planning effort and anticipate issuing initial restoration plans in 2019 or later. The trustee implementation groups are responsible for developing and approving restoration plans and resolutions, which, when approved, authorize money to be spent on restoration projects. This process includes soliciting project ideas, submitting proposed plans for public comment, and ensuring compliance with applicable laws and regulations, such as the National Environmental Policy Act. According to the trustee council, there is no specific timetable for approving future restoration plans, as plans are approved on an ongoing basis—typically for several projects at a time. The four completed restoration plans, together with early restoration spending and other activities, including planning and administrative efforts, account for all authorizations made by the Deepwater Horizon Trustee Council as of December 31, 2017, according to NOAA—the agency that manages the system the trustee councils uses for financial reporting. As shown in figure 4, these authorizations include approximately $1.1 billion, or 13 percent, of the $8.1 billion restoration trust fund on five goals. The Deepwater Horizon Trustee Council has authorized roughly $460 million for habitat protection—about 10 percent of the almost $4.7 billion ordered for this use by the settlement. According to the 2016 programmatic restoration plan, habitat protection includes both conservation acquisition and habitat enhancement, such as creating, restoring, or enhancing coastal wetlands. For example, during the first phase of early restoration in 2012, the trustee council authorized $14.4 million to the Louisiana Coastal Protection and Restoration Authority to create 104 acres of new brackish marsh at Lake Hermitage in Barataria Bay, Louisiana. The project involved dredging sediment and planting native marsh vegetation to restore marsh habitat damaged by the spill. The project is currently in the monitoring phase. As of the end of 2017, the Deepwater Horizon Trustee Council had approved 34 habitat protection projects, many of which were still in progress as of December 2017. The initial results of these projects include the restoration of over 4,000 acres of habitat and the creation of over 40 artificial reefs, according to a written statement by the federal trustees. The trustee council has authorized roughly $349 million to enhance recreational use—about 83 percent of the almost $420 million ordered for this use by the settlement. According to the 2016 programmatic restoration plan, enhancing recreational use includes acquiring land along the coast, building improved or new infrastructure, and improving navigation for on-water recreation. For example, during the first phase of early restoration in 2012, the Deepwater Horizon Trustee Council authorized approximately $5.3 million to the Florida Department of Environmental Protection to repair and construct boat ramps in Pensacola Bay and Perdido Bay, Florida. Construction was completed in 2016, and the project is currently in the monitoring and operations and maintenance phase. As of the end of 2017, the Deepwater Horizon Trustee Council had approved 43 projects to enhance recreational use, many of which were still in progress as of December 2017. These projects have provided new or enhanced facilities, such as pavilions, picnic areas, and boat ramps, according to a written statement by the federal trustees. The Deepwater Horizon Trustee Council has authorized roughly $218 million to restore coastal and marine wildlife—about 12 percent of the almost $1.8 billion ordered for this use by the settlement, primarily for birds ($108 million), sea turtles ($50 million), oysters ($38 million), and fish ($20 million). According to the 2016 programmatic restoration plan, restoring coastal and marine wildlife includes activities that restore the resources, such as fish, sea turtles, and deep coral communities, which contribute to a productive, biologically diverse, and resilient ecosystem. For example, during the first phase of early restoration in 2012, the trustee council authorized $11 million to the Mississippi Department of Environmental Quality to deploy a mixture of oyster shells, limestone, and concrete on 1,430 acres in waters off Hancock and Harrison Counties in Mississippi. This material, when placed in oyster spawning areas, provides a surface for free swimming oyster larvae to attach and grow into oysters. The project is currently in the monitoring and operations and maintenance phase. As of the end of 2017, the Deepwater Horizon Trustee Council had approved 32 projects to restore coastal and marine wildlife. Although the trustee council authorized millions of dollars to restore coastal and marine wildlife, it authorized 1 percent or less of funds ordered by the settlement for sturgeon, marine mammals, submerged aquatic vegetation, and other seafloor species—such as corals. According to the 2016 consent decree, the Open Ocean implementation group is responsible for authorizing the majority of the restoration funds for these types of wildlife, but that trustee implementation group has not yet completed its initial restoration plan. According to NOAA, the complexity of restoring several of these resources necessitated additional preplanning and restoration technique development prior to considering specific restoration projects for several of these types of wildlife. The trustee implementation group is developing two restoration plans that will include projects for birds and sturgeon, as well as for sea turtles, fish, marine mammals, and corals, according to a Deepwater Horizon Trustee Council press release. The trustee council released the first draft plan for public comment in October 2018, and plans to release the second plan in early 2019. In August 2017, the Deepwater Horizon Trustee Council announced that the Louisiana implementation group was soliciting project ideas to fund the restoration of submerged aquatic vegetation, among other types, to include in a future restoration plan but has not yet submitted such a plan for public review. Roughly $27 million has been authorized for administrative oversight and monitoring activities, or about 3 percent of the almost $810 million that the settlement ordered for this use. The majority of the funding ($25 million) was for administrative oversight activities, and the balance was for monitoring. According to the 2016 programmatic restoration plan, administrative oversight includes the costs for trustees to guide project selection, implementation, and adaptive management. For the state trustees, all administrative costs are covered by their respective trustee implementation groups, and for federal trustees, all administrative costs are covered by the Open Ocean implementation group. For example, during the postsettlement phase, the trustee council authorized approximately $6.6 million to Interior for (1) participation on the trustee council; (2) restoration planning, plan development, and coordination with other trustees; (3) environmental compliance reviews; (4) technical assistance; and (5) financial management, among other uses. As of the end of 2017, the Deepwater Horizon Trustee Council had approved nine administrative oversight and monitoring projects, which remained ongoing as of December 31, 2017. The results of the trustee council’s activities in this area so far include the completion of a monitoring and adaptive management manual and its standard operating procedures. The Deepwater Horizon Trustee Council has authorized $4 million to restore water quality—about 1 percent of the $410 million that the settlement ordered for this use. According to the 2016 programmatic restoration plan, restoring water quality includes both reducing nonpoint nutrient pollution to coastal watersheds and improving water quality in Florida through efforts such as stormwater control and erosion control. As of the end of 2017, the Deepwater Horizon Trustee Council approved two nonpoint nutrient reduction projects to address excessive nutrient loads in Gulf waters but no water quality projects in Florida. For example, in 2017, the Deepwater Horizon Trustee Council authorized approximately $224,000 to conduct restoration planning to develop, draft, and finalize a restoration plan addressing nonpoint nutrient reduction, among other goals. The trustee council has authorized few funds to date for this restoration goal because, in part, the Florida implementation group has not yet completed its first postsettlement restoration plan. In September 2017, the trustee council announced that the Florida implementation group was reviewing water quality project ideas for its initial restoration plan, and it released a draft of the plan for public comment in September 2018. According to the Deepwater Horizon Trustee Council, the final plan will be released in January 2019. Nine of the interagency committee member agencies funded over 100 oil spill research projects per year from fiscal years 2011 through 2017, for a total cost of about $200 million; however, we found that the interagency committee did not coordinate its research with some key entities. More specifically, approximately half of the interagency committee members said internal coordination on such research improved during this time, but the committee may not have included all relevant agencies, and we found that the committee did not coordinate with relevant trustee councils. During fiscal years 2011 through 2017, 9 of the 15 interagency committee member agencies funded oil spill research projects, spending about $200 million on this research, based on our review of agency data from the member agencies. These nine agencies were the Bureau of Ocean Energy Management, BSEE, the Coast Guard, the Department of Energy, EPA, NASA, NOAA, the Pipeline and Hazardous Materials Safety Administration, and the U.S. Arctic Research Commission. One of these agencies—BSEE—spent about $84 million, or about 40 percent of the total amount spent by all nine agencies (see table 1). In March 2011 we reported that during fiscal years 2000 through 2010, seven interagency committee member agencies spent about $163 million on oil pollution research, according to officials from those agencies. Since we last reported on the interagency committee, three additional agencies told us that they also fund oil spill research—the Department of Energy, BSEE, and the U.S. Arctic Research Commission—while the U.S. Navy told us that it no longer funds oil spill research projects. According to agency officials, the nine interagency committee member agencies funded from 100 to 200 research projects annually from fiscal years 2011 through 2017. These nine agencies reported funding research projects in one or more of the interagency committee’s four oil spill research categories: prevention, preparedness, response, and injury assessment and restoration (see table 2). We reported in March 2011 that federal agencies conducted oil pollution research but that the interagency committee had taken limited actions to foster the communication and coordination of this research among member agencies and nonfederal stakeholders. More specifically, we noted that member agencies were not consistently represented on the interagency committee and interested nonfederal stakeholders reported limited contact with the interagency committee. We recommended, among other things, that the Commandant of the Coast Guard direct the chair of the interagency committee, in coordination with member agencies, establish a more systematic process to identify and consult with key nonfederal stakeholders. Officials from 8 of the 15 member agencies said they believe that the interagency committee’s coordination efforts have improved since the Deepwater Horizon oil spill in 2010. In response to our recommendation on coordination with nonfederal stakeholders, we found that members consistently attend major oil spill conferences and workshops. In addition, we observed that the interagency committee invites outside speakers and researchers to its meetings to update the membership on ongoing research activities in academia, industry, and the government. The committee charter calls for meetings at least semiannually, but since fiscal year 2011 the interagency committee has held quarterly meetings with member agencies as well as meetings with outside groups of knowledgeable stakeholders. At the meetings, member agencies have the opportunity to present information on oil spill research they are conducting, share information about upcoming research conferences, and listen to presentations by outside groups. According to member agency officials, some of the benefits of the interagency committee’s improved coordination efforts include a reduction in research redundancies, increased understanding of the broader oil spill research community, the facilitation of relationships, the identification of research gaps, and the ability to leverage resources. U.S. Navy officials said that the interagency committee facilitated communication between member agencies that use the Navy’s equipment for research purposes. As a result of discussions that took place at an interagency meeting, the Navy offered the use of a hydraulic power unit to the Coast Guard for hydraulic testing in Arctic conditions in Alaska. Officials from a few of the member agencies, including the Coast Guard, BSEE, EPA, and NOAA, told us that they collaborate on oil spill- related research efforts with other member agencies of the interagency committee. In addition, the release of the 2015-2021 research and technology plan provides a new baseline for research, including 150 priority oil pollution research needs within 25 research areas. According to the research and technology plan, future updates will reflect advancements in oil pollution technology and changing research needs by capitalizing on the unique roles and responsibilities of each member agency. According to officials from one member agency, the revised research and technology plan has helped member agencies coordinate with other member agencies to leverage funding and expertise. Member agencies also cooperate with nonfederal research entities on research needs and activities. The interagency committee has demonstrated key practices that strengthen coordination, such as agreeing on common terminology and priorities for oil spill research in its revised research and technology plan. However, the committee could enhance coordination by ensuring that relevant participants have been included—another key practice. Under OPA, certain federal agencies are members of the interagency committee, but member agencies may choose which office or official represents them at meetings and coordinates with other members on committee-related work. Officials from 6 of the 15 member agencies told us that their particular research efforts are not the focus of ICCOPR meetings, and therefore ICCOPR’s ability to coordinate their research efforts are less valuable. For example, NASA officials said the office representing their agency at meetings is not involved in oil spill research, but other offices within their agency fund or conduct relevant research. In addition, 7 of the 15 officials we interviewed from member agencies suggested that other federal agencies could be relevant to the committee’s research efforts. For example, officials we interviewed from several member agencies suggested including the U.S. Geological Survey (USGS) as a full member because of its relevant research and mapping expertise. According to committee documents, the interagency committee considered adding USGS in 2015 but has not made a decision on USGS’s membership. The Commandant of the Coast Guard, under his or her capacity as chair of the interagency committee, has been delegated authority to appoint additional agencies to the committee as appropriate. A leading practice for collaboration calls for interagency groups to ensure that all relevant participants have been included in collaborative efforts. According to this leading practice, participants should have the appropriate knowledge, skills, and abilities to contribute to the outcomes of the collaborative effort. However, interagency committee member agency officials said the committee has not systematically reviewed its membership to determine which offices within current member agencies are the most relevant to its mission and whether adding other federal agencies as members would be beneficial. By systematically reviewing its membership to determine whether any additional agencies should be involved in coordinating oil spill research and that the most appropriate offices within member agencies are represented, the interagency committee could improve its ability to coordinate research among federal agencies. In addition, agency officials knowledgeable about the work of the NRDA trustee councils are not the same officials representing their agency as members on the interagency committee. The research and technology plan notes that the interagency committee’s injury assessment and restoration research is intended to support the NRDA process. However, the NRDA trustees who manage the restoration funds for the Exxon Valdez and Deepwater Horizon oil spills told us that they have not coordinated or communicated on oil spill research or restoration efforts with the interagency committee; therefore, they would not have been involved with developing the research and technology plan. In addition, some trustee council members told us that they were not even aware that the interagency committee existed. Under OPA, one of the interagency committee’s responsibilities is to coordinate with federal agencies and external entities on an oil pollution research program that includes methods to restore and rehabilitate natural resources damaged by oil spills. As previously discussed, the NRDA trustee councils are charged with assessing natural resource damages for the natural resources under their trusteeship and developing and implementing plans for restoration efforts. The research that the interagency committee members fund includes research on restoration that could be pertinent to the work of the NRDA trustee councils. For example, following the oil spill in 2010, the Deepwater Horizon Trustee Council evaluated baseline conditions for several different representative species, such as sea turtles and Gulf sturgeon, to quantify the extent of injury as part of the restoration planning process that OPA regulations required. Some interagency committee member agencies, such as NOAA and BOEM, fund research on baseline data that could inform the NRDA trustee councils’ injury assessment work. In turn, the NRDA trustee councils’ work could also inform the interagency committee’s coordination of future oil spill research by, for example, identifying gaps in research as identified and prioritized in updates to the research and technology plan. By coordinating with the NRDA trustee councils, the interagency committee could ensure that its research informs and supports the councils’ damage assessment and restoration efforts and better leverages members’ resources. According to the literature we reviewed, environmental differences between the Gulf of Mexico and Arctic regions, as well as factors such as the type of oil, influence the potential effectiveness of various oil spill response techniques. In each region, environmental conditions, such as water and air temperature, water movement, and salinity, influence how effective oil spill response techniques can be. Further, according to the literature we reviewed, these conditions determine which response techniques are appropriate. Environmental conditions, such as ocean water and air temperature, can influence the effectiveness of natural oil removal through evaporation or biodegradation. These processes may occur more quickly in warmer climates, such as in the Gulf of Mexico. In the event of an oil spill, communities of microbes can bloom to respond to the new supply of oil. According to a 2011 report from the American Academy of Microbiology, these microbes can biodegrade up to 90 percent of some light crude oil, but the largest and most complex molecules––such as the ones that make up road asphalt––are not significantly biodegradable. A 2016 study found that higher temperatures lead to increased biodegradation, and increased salinity had a small positive impact on crude oil removal. However, the American Academy of Microbiology report also states that while microbes can biodegrade oil over time, the process may not be fast enough to prevent ecological damage. Therefore, immediate containment or physical removal of the oil is an important first response. The effectiveness of oil removal is also influenced by conditions of the water, determined by wind, waves, and currents. According to literature we reviewed, winds and currents can make it more difficult to remove the oil, increasing the likelihood of the oil spill affecting larger areas and additional plant and animal populations. Further, high seas and rough waters can make some response techniques less effective. According to a 2017 study that estimates the effect of environmental conditions on deploying oil spill response techniques in the Arctic Ocean, most response techniques are not suitable during Arctic winters, between November and June. Literature we reviewed also shows that other factors influence the effectiveness of response techniques, including oil type, oil thickness, and the location and depth of oil spill events. Light crude oil typically evaporates and biodegrades more quickly than heavy crude oil, which is more viscous. However, if the oil slick is too thin, it becomes difficult to contain and limits response options. Oil spilled in a remote location, such as the place where the Exxon Valdez oil spill occurred, may complicate response efforts because equipment and personnel are far away and may not be able to respond within the window of opportunity before the oil spreads. According to Coast Guard officials, during an oil spill response, various response techniques are used to minimize the negative effects on the water surface, water column, and shorelines, each with different applications, advantages, disadvantages, and risks. The response techniques we reviewed are: Mechanical recovery in the marine environment uses a variety of containment booms, barriers, and skimmers, as well as natural and synthetic absorbent materials to capture and store the spilled oil until it can be disposed of properly. In-situ burning, meaning in-place burning, is the process of igniting and burning oil slicks in a controlled environment. Dispersants are chemicals that can mitigate the immediate damage caused by oil at the surface and help accelerate the natural removal of the spilled oil. Dispersants work similarly to dish soap, breaking up the oil into small droplets that can more easily spread through the water. The advantage of mechanical recovery is that it physically removes the oil from the water, minimizing the negative effects of the oil. Mechanical recovery can be used to safely remove oil where other methods might cause health risks or environmental damage, according to a 2013 report published by the National Academies Press. However, mechanical recovery has limitations in some conditions. If the oil slick is thin, it is difficult to achieve a significant rate of recovery and requires a lot of equipment to concentrate the slick so it is thick enough to be collected. According to literature we reviewed, mechanical recovery is less effective during inclement weather or high seas because the oil spreads and can emulsify in these conditions and is difficult to contain. Low temperatures and the presence of ice also make it challenging to achieve high recovery rates, and mechanical recovery becomes increasingly ineffective as wave heights increase, according to literature we reviewed. Furthermore, the process of recovering the oil is labor- and cost-intensive, and recovery can be delayed if the equipment is not readily available. Mechanical recovery is especially challenging to implement quickly when spills occur in remote areas, such as with Exxon Valdez, or where the oil is traveling quickly and broadly, such as with Deepwater Horizon. For example, according to a 1999 EPA report, skimmers were not readily available during the first 24 hours following the Exxon Valdez oil spill, repairs to damaged skimmers were time-consuming, and continued inclement weather slowed down the recovery efforts. In addition, a disadvantage of mechanical recovery is that temporary storage for large amounts of oil is frequently needed and recovered oil is generally brought back to the shore for disposal, according to Interior officials. Because of the resources required to physically remove the oil, it is difficult to recover a large percentage of the spilled oil through mechanical recovery in large oil spills. According to two studies and an agency document we reviewed, in-situ burning can be a highly effective technique for eliminating spilled oil from the sea surface. In response to the Deepwater Horizon oil spill, roughly 5 to 6 percent of all of the spilled oil was burned, about double the amount of oil removed with skimmers, according to a 2013 National Academies Press report. The primary advantage of in-situ burning is its efficiency. In ideal conditions, this method can quickly eliminate spilled oil. According to several reports we reviewed, in optimal conditions, in-situ burning can eliminate up to 90 percent of the spilled oil contained for burning with a relatively minimal investment of equipment or manpower. Literature we reviewed suggests that it is especially suited for response in Arctic conditions, particularly in ice-covered water where logistics and environmental conditions may preclude other options and where the ice can act as a natural barrier to help keep the oil slick thick enough to burn. However, in-situ burning also has its disadvantages. Burning has a narrow window of opportunity, and if the approval process takes longer than it takes to prepare for the burn, the opportunity for using in-situ burning may be lost, according to a NOAA document. Similar to mechanical recovery, burning can only be used if the oil slick is a certain thickness and when waves, wind, and currents are not too strong. In-situ burning becomes increasingly difficult in strong winds or with waves over 3 feet tall. A second disadvantage is that the burn residue caused by in- situ burning may have negative effects on ocean life, though studies we reviewed differed on this matter. According to a 2014 National Academies Press report about oil spills in the U.S. Arctic environment, a series of studies in the 1990s found that burn residues have little to no impact on oceanic organisms. However, a 2015 review on burn residues from in- situ burning in Arctic waters concluded that not enough research has been done on the side effects of burn residue from in-situ burning. According to NOAA officials, another disadvantage of in-situ burning is that the soot from inefficient combustion can result in unsightly and unhealthy particulates that may affect any downwind populations before the smoke dissipates. According to Coast Guard officials, chemical dispersants are typically used in conjunction with mechanical means and are considered when offshore mechanical methods are recognized as inadequate because of the spill volume, the geographical extent of the slicks, or specific on- scene environmental conditions. According to the literature we reviewed, an advantage of dispersants is their versatility. Dispersants are not as limited by environmental conditions as other response techniques, and they can be applied on surface or underwater environments. Further, dispersants can be applied through a variety of mechanisms. For example, they can be applied on oil slicks at the water’s surface by boats, planes, or helicopters. Dispersants can also be used below the surface, through subsea injection at the site of the spill, as was applied in response to the Deepwater Horizon oil spill. However, the literature suggests that the effectiveness of dispersants depends on many factors, such as the type of oil, type of dispersant used, and sea and weather conditions. According to Coast Guard officials, the decision to use dispersants is made after careful consideration of the location of the spill, type of oil spilled, seasonal resources at risk, and the environmental conditions at the time, as these factors influence the effectiveness and practicality of using dispersants, as well as the advisability of the tactic in the face of other options and risks. These officials also noted that dispersants are rarely used in the United States, but in certain situations, where mechanical means such as booming and skimming may not be effective, dispersants may be considered. In addition to the uncertainty of their effectiveness, the potential environmental risks associated with dispersants are also uncertain. One 2014 study states that while dispersants were thought to undergo rapid degradation in the water column, there was evidence that the dispersants remained on Gulf of Mexico beaches almost 4 years after the Deepwater Horizon oil spill. During the Deepwater Horizon oil spill, responders applied over 1.8 million gallons of chemical dispersants to the spilled oil— an unprecedented volume in the United States. It was the first major oil spill to use dispersants on such a large scale, and approximately 42 percent of these dispersants were applied sub-sea in the first operational sub-sea application of this technique. According to Coast Guard officials, the toxicity and long-term effects of large-scale application of dispersants on the ecology of marine life are unknown. According to literature we reviewed, there is evidence that chemically dispersed oil and some dispersant compounds may be toxic to some marine life, especially those in early life stages. Coast Guard officials also said that continued monitoring and further review of scientific research should improve the understanding of the impact of dispersants on mitigating the effects of oil spills as well as their overall environmental impact. Following initial response and cleanup efforts, restoration activities related to a significant offshore oil spill, such as those from Exxon Valdez or Deepwater Horizon, can endure for decades. Federal agencies of the interagency committee conduct and fund research projects related to preventing, preparing for, responding to, and restoring the environment after oil spills. The interagency committee has improved the coordination of federal oil spill research efforts since the Deepwater Horizon oil spill in 2010. However, the interagency committee has not systematically reviewed its membership to determine which offices within current member agencies are the most relevant to its mission and whether adding other federal agencies as members would be beneficial. By systematically reviewing its membership to determine whether any additional agencies should be involved in coordinating oil spill research and that the most appropriate offices within member agencies are represented, the interagency committee could improve its ability to coordinate research among federal agencies. In addition, the interagency committee does not coordinate with the NRDA trustee councils that manage the large restoration funds and monitor the restoration of damaged resources after a specific spill, such as the Exxon Valdez and Deepwater Horizon oil spills. Coordinating with the NRDA trustee councils could help ensure that the interagency committee’s oil spill research program is effectively supporting the damage assessment and restoration efforts of the councils, and better knowledge sharing between groups and leveraging its members’ oil spill research resources. We are making the following two recommendations to the Commandant of the U.S. Coast Guard at the Department of Homeland Security: The Commandant of the U.S. Coast Guard should direct the chair of the Interagency Coordinating Committee on Oil Pollution Research, in coordination with member agencies, to systematically review its membership to determine whether any additional agencies should be involved in coordinating oil spill research and that the most appropriate offices within member agencies are represented. (Recommendation 1) The Commandant of the U.S. Coast Guard should direct the chair of the Interagency Coordinating Committee on Oil Pollution Research, in coordination with member agencies, to coordinate with the relevant Natural Resource Damage Assessment trustee councils to help ensure that the interagency committee’s research informs and supports the councils’ damage assessment and restoration efforts. (Recommendation 2) We provided our draft report to the Department of Agriculture, Department of Commerce, Department of Defense, Department of Energy, Department of Homeland Security, Department of the Interior, Department of Transportation, Environmental Protection Agency, National Aeronautics and Space Administration, and U.S. Arctic Research Commission for review and comment. In comments reprinted in appendix II, the Department of Homeland Security concurred with our recommendations. In addition, the departments of Commerce, Homeland Security, Interior, and EPA provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of the report to the appropriate congressional committees; the Secretaries of Agriculture, Commerce, Defense, Energy, Homeland Security, the Interior, and Transportation; the Administrators of EPA and NASA; the Executive Director of the U.S. Arctic Research Commission; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) how the Natural Resource Damage Assessment (NRDA) trustee councils have used the restoration trust funds for the Exxon Valdez and Deepwater Horizon oil spills and the status of the restoration efforts; (2) the status of the Interagency Coordinating Committee on Oil Pollution Research’s (interagency committee) oil spill research efforts and how coordination of such efforts has changed since we last reported on it in March 2011; and (3) what literature suggests about the effectiveness of various oil spill response techniques in the Arctic and the Gulf of Mexico. To examine how the NRDA trustee councils used the restoration funds from the Exxon Valdez oil spill (from October 1992 to January 2018) and the Deepwater Horizon oil spill (from April 2012 to December 2017) for restoration and the status of the restoration efforts, we obtained data from each trustee council on the amount of funds (1) ordered by the settlement for each restoration type; (2) authorized by the trustees for, but not yet spent on, restoration activities (authorizations); (3) spent on restoration activities (expenditures); and (4) not yet authorized for restoration activities (remaining balance) through calendar year 2017 for Deepwater Horizon and through January 31, 2018, for Exxon Valdez. To assess the reliability of the financial data, we reviewed related budget documentation; interviewed knowledgeable council staff about how fund balances are recorded and reported; reviewed the totals for obvious errors and inconsistencies; and reviewed internal control documents, such as a database manual and standard operating procedures. We determined that the data were sufficiently reliable for the purposes of our report. We examined the approved restoration plans (1994 restoration plan and 2014 restoration plan update for the Exxon Valdez oil spill, and the 2016 programmatic damage assessment and restoration plan for the Deepwater Horizon oil spill) and, when available, annual reports on restoration activities (1994 through 2018 annual reports for the Exxon Valdez Oil Spill Trustee Council (Exxon Valdez Trustee Council) and 2016 and 2017 annual financial reports for the Deepwater Horizon Natural Resource Damage Assessment Trustee Council (Deepwater Horizon Trustee Council)). We also reviewed project reports and scientific studies that the trustee councils funded to gain a better understanding of the status of restoration of injured natural resources, restoration priorities, activities, and progress made by the trustee councils. We reviewed laws and regulations that provide the legal authority for federal agencies to intervene and respond after an oil spill, such as the Oil Pollution Act of 1990 (OPA), the Clean Water Act, and NRDA regulations. We met with officials from the Exxon Valdez Trustee Council to discuss the distribution of settlement money for restoration purposes after the Exxon Valdez oil spill, and with officials from the Deepwater Horizon Trustee Council, Gulf Coast Ecosystem Restoration Council (RESTORE Council), and the National Fish and Wildlife Foundation to discuss the distribution of settlement money for restoration purposes after the Deepwater Horizon oil spill. Additionally, in May 2018, we traveled to multiple locations in the former spill area in Alaska to observe the extent of restoration efforts and ongoing issues. Along with researchers sent by the Exxon Valdez Trustee Council, we excavated three pits that revealed lingering oil about 6 inches below the surface of the beach on Eleanor Island in Prince William Sound. These researchers told us that oil previously uncovered at this location had been linked to the Exxon Valdez oil spill. In addition to fieldwork in Alaska, in November 2017 and February 2018, we attended public meetings in Alabama and Louisiana to learn about restoration plans for the Gulf States. To examine the status of the interagency committee’s federal oil spill research efforts and how coordination of such efforts has changed since we last reported on it in March 2011, we requested funding data and project information on oil spill research from all 15 member agencies of the interagency committee. We received data from the 9 member agencies that reported funding oil spill research projects from fiscal years 2011 through 2017. These 9 agencies provided data on agency expenditures on oil spill research and the research category of any projects funded. We assessed the reliability of the data by reviewing related documentation, interviewing knowledgeable agency officials, and reviewing agency internal controls for each of the 9 member agencies that provided us data about the steps they take to maintain this information. We determined that in most cases the data were sufficiently reliable for the purposes of our report. However, we chose not to provide the National Oceanic and Atmospheric Administration’s (NOAA) agency expenditures for oil spill research because NOAA officials were unable to provide reliable data on the actual amount the agency spent on such research during the time period we requested. In addition, some agency officials we interviewed raised the concern that their agencies do not track oil spill research funding and therefore the information they provided on expenditures for such research may not include all relevant efforts that could inform oil spill prevention, preparedness, response, and restoration. We also interviewed officials from the 15 member agencies to learn about each agency’s oil spill research efforts and participation in and coordination through the interagency committee, and compared their coordination practices to one of our federal leading practices for collaboration for interagency groups to evaluate the interagency committee’s efforts to coordinate such research. We chose to focus on the collaboration practice pertaining to participants because it appeared to be the most challenging for the interagency committee based on the findings of our previous March 2011 report, the actions taken by the interagency committee to address our recommendations from that report, and our own findings from our research for this report. In addition, we reviewed the 2013 interagency committee charter, the committee’s most recent biennial reports to Congress covering fiscal years 2008 through 2017, and the committee’s third multiyear research and technology plan for fiscal years 2015 through 2021; attended two committee meetings; and reviewed minutes of eight past meetings. We also reviewed OPA’s provisions that established and govern the interagency committee’s coordination efforts and membership, as well as various related executive documents. To examine what literature suggests about the effectiveness of various oil spill response techniques in the Arctic and the Gulf of Mexico, we conducted a literature search for studies and articles that analyzed and summarized the effectiveness of various oil spill response techniques in those regions. We identified existing literature from 1989 (the year of the Exxon Valdez oil spill) to March 2018 by searching various databases, such as Scopus and ProQuest. We chose to focus on three primary response techniques—mechanical recovery, in-situ burning, and the use of dispersants—used to clean up after offshore oil spills according to knowledgeable stakeholders and the literature we reviewed. The database search produced over 800 results. Our subject matter expert helped the team narrow this list to 50 results, of which we relied on 16 studies and articles that we determined were most relevant to our research objective of determining the effectiveness of various oil spill response techniques in the Arctic and the Gulf of Mexico. Some literature was not included if it was too specific for the scope of our review. Literature published recently, generally within the past 10 years, was considered more relevant. We supplemented the list of studies from these databases with literature from the Congressional Research Service, the National Academies Press, the Environmental Protection Agency (EPA), NOAA, the American Academy of Microbiology, the Arctic Oil Spill Response Joint Industry Programme, and our previous report on oil dispersants. In total, we relied upon 22 literature results to inform the findings of our objective. For a complete list of the literature, see the bibliography. We shared our summary of the literature search findings with agency officials representing some of the interagency committee member agencies. The following agencies responded with comments and we included their perspectives where relevant: the Department of the Interior, EPA, NOAA, and the U.S. Coast Guard. We did not independently evaluate the effectiveness of these response techniques. We conducted this performance audit from July 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Christine Kehr (Assistant Director), Amy Ward-Meier (Analyst-in-Charge), Colleen Candrl, Nirmal Chaudhary, Juan Garay, Cindy Gilbert, Matt Hunter, Jessica Lewis, Joe Maher, Greg Marchand, Kimberly (Kim) McGatlin, Cynthia Norris, Travis Schwartz, Sheryl Stein, Sara Sullivan, Vasiliki (Kiki) Theodoropoulos, Matthew Valenta, Sarah Veale, and Dan Will made key contributions to this report. We reviewed literature to examine what it suggests about the effectiveness of various oil spill response techniques in the Arctic and the Gulf of Mexico. This bibliography contains citations for the studies and articles that contributed to these findings. American Academy of Microbiology, Microbes and Oil Spills FAQ (Washington, D.C.: 2011). Arctic Oil Spill Response Technology Joint Industry Programme, Synthesis Report, D. Dickens-DF Dickens Associates, LLC (May 3, 2017). Belore, Randy C., Ken Trudel, Joseph V. Mullin, and Alan Guarino. “Large-scale Cold Water Dispersant Effectiveness Experiments with Alaskan Crude Oils and Corexit 9500 and 9527 Dispersants.” Marine Pollution Bulletin, vol. 58 (2009): 118-128. Boufadel, Michel C., Xiaolong Geng, and Jeff Short. “Bioremediation of the Exxon Valdez Oil in Prince William Sound Beaches.” Marine Pollution Bulletin, vol. 113 (2016): 156-164. Brakstad, Odd G., Trond Nordtug, and Mimmi Throne-Holst. “Biodegradation of Dispersed Macondo Oil in Seawater at Low Temperature and Different Oil Droplet Sizes.” Marine Pollution Bulletin, vol. 93 (2015): 144-152. Committee on Responding to Oil Spills in the U.S. Arctic Marine Environment; Ocean Studies Board; Polar Research Board; Division on Earth and Life Studies; Marine Board; Transportation Research Board; National Research Council, Responding to Oil Spills in U.S. Arctic Marine Environment. National Academies Press (US) (Washington, D.C.: 2014). Committee on the Effects of the Deepwater Horizon Mississippi Canyon- 252 Oil Spill on Ecosystem Services in the Gulf of Mexico, Ocean Studies Board, Division on Earth and Life Studies, National Research Council, An Ecosystem Services Approach to Assessing the Impacts of the Deepwater Horizon Oil Spill in the Gulf of Mexico. National Academies Press (US) (Washington, D.C.: December 20, 2013). Corn, Lynne M., Claudia Copeland, The Deepwater Horizon Oil Spill: Coastal Wetland and Wildlife Impacts and Response. Congressional Research Service (July 7, 2010). Environmental Protection Agency, Office of Emergency and Remedial Response, Understanding Oil Spills and Oil Spill Response, EPA 540-K- 99-007 (Dec 1999). Fletcher, Sierra, Tim Robertson, Bretwood Higman, and Elise DeCola. Estimating Impact of Environmental Conditions on Deployment of Marine Oil Spill Response Tactics in the U.S. Arctic Ocean, proceedings of the Fortieth AMOP Technical Seminar. Ottawa: Environment and Climate Change Canada, 2017, 246-264. Fritt-Rasmussen, Janne, Susse Wegeberg, d Kim Gustavson, “Review on Burn Residues from In Situ Burning of Oil Spills in Relation to Arctic Waters.” Water Air Soil Pollution, vol. 226 (2015). GAO, Oil Dispersants: Additional Research Needed, Particularly on Subsurface and Arctic Applications, GAO-12-585 (Washington, D.C.: May 30, 2012). Naseri, M., and J. Barabady, Safety and Reliability: Methodology and Applications—Performance of Skimmers in the Arctic Offshore Oil Spills. London: Taylor & Francis Group, 2015, 607-614. National Oceanic and Atmospheric Administration, Oil Spill - Behavior, Response and Planning: Open-water Response Strategies: In-situ Burning, (August 1997). Nedwed, Tim, Tom Coolbaugh, and Amy Tidwell. Subsea Dispersant Use during the Deepwater Horizon Incident, proceedings of the Thirty-Fifth AMOP Technical Seminar on Environmental Contamination and Response. Vancouver, BC; Canada, ExxonMobil Upstream Research Company, 2012, 506-518. Nyankson, Emmanuel, Dylan Rodene, and Ram B. Gupta. “Advancements in Crude Oil Spill Remediation Research After the Deepwater Horizon Oil Spill.” Water Air Soil Pollution (2016). Rahsepar, Shokouh, Martijn P.J. Smit, Albertinka J. Murk, Huub H.M. Rijnaarts, and Alette A.M. Langenhoff. “Chemical Dispersants: Oil Biodegradation Friend or Foe?” Marine Pollution Bulletin, vol. 108 (2016): 113-119. Ramseur, Jonathan L., Oil Spills: Background and Governance. Congressional Research Service (Sept 15, 2017). Sharma, Priyamvada, and Silke Schiewer. “Assessment of Crude Oil Biodegradation in Arctic Seashore Sediments: Effects of Temperature, Salinity, and Crude Oil Concentration.” Environmental Science and Pollution Research (2016): 14881-14888. Shi, X., P.W. Bellino, A. Simeoni, and A.S. Rangwala. “Experimental Study of Burning Behavior of Large-scale Crude Oil Fires in Ice Cavities.” Fire Safety Journal, vol. 79 (2016): 91-99. United States Coast Guard, On Scene Coordinator Report Deepwater Horizon Oil Spill, (September 2011). White, Helen K., Shelby L. Lyons, Sarah J. Harrison, David M. Findley, Yina Liu, and Elizabeth B. Kujawinski. “Long-Term Persistence of Dispersants Following the Deepwater Horizon Oil Spill.” Environmental Science & Technology Letters (2014): 295-299.", "summary": "The Exxon Valdez and Deepwater Horizon oil spills are two of the largest offshore oil spills in U.S. history, causing long-lasting damage to marine and coastal resources. OPA includes provisions to prevent and respond to such oil spills by authorizing (1) federal-state trustee councils that manage billions of dollars from legal settlements and (2) an interagency committee to coordinate oil pollution research, among other things. GAO was asked to review the federal government's response, restoration, and research efforts after the Exxon Valdez and Deepwater Horizon oil spills. This report examines, among other things, (1) how the trustee councils have used the restoration trust funds and the status of restoration and (2) the interagency committee's coordination of oil spill research efforts. GAO reviewed the councils' plans for the funds and how they were used, federal funding of oil spill research by member agencies, and key laws. Also, GAO evaluated the coordination of such efforts against a leading collaboration practice. GAO interviewed members of the trustee councils and the interagency committee. The trustee councils, composed of federal and state members, have used portions of the restoration trust funds from the Exxon Valdez and Deepwater Horizon oil spill settlements to restore natural resources. From October 1992 to January 2018, the Exxon Valdez Oil Spill Trustee Council used about 86 percent of the fund's roughly $1 billion, primarily on habitat protection and restoration of damaged natural resources. According to the council, all but 5 of the 32 natural resources and human services identified as damaged by the spill have recovered or are recovering. The health of Pacific herring is one example of a resource that has not yet recovered. Further, the presence of lingering oil remains a concern almost 30 years after the spill. In May 2018, GAO accompanied trustee council researchers to the spill area and observed the excavation of three pits that revealed lingering oil roughly 6 inches below the surface of the beach, as captured in the photo below. The Deepwater Horizon Natural Resource Damage Assessment Trustee Council finalized a programmatic restoration plan in 2016; four trustee implementation groups have since issued initial restoration plans for designated restoration areas, and three anticipate issuing restoration plans in 2019 or later. From April 2012 to December 2017, the council used 13 percent of the at least $8.1 billion restoration trust fund, mostly on habitat protection, enhancing recreation, and marine wildlife and fishery restoration. The Oil Pollution Act of 1990 (OPA), which was enacted after the Exxon Valdez spill in 1989, established the Interagency Coordinating Committee on Oil Pollution Research (interagency committee) to coordinate oil pollution research among federal agencies and with relevant external entities, among other things. However according to the trustee council members that manage the restoration trust funds, the committee does not coordinate with the trustee councils and some were not aware that the interagency committee existed. The research of the member agencies could be relevant to the trustee councils' work on restoration. By coordinating directly with the trustee councils, the interagency committee could ensure better knowledge sharing between groups and leverage its member agencies' resources to inform and support the work of the councils. GAO recommends, among other things, that the interagency committee coordinate with the trustee councils to support their work and research needs. The agency agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "In providing health care services to veterans, clinicians at VAMCs use RME, such as endoscopes and surgical instruments, which must be reprocessed between uses. Reprocessing covers a wide range of instruments and has become increasingly complex. VHA has developed policies that VAMCs are required to follow to help ensure that RME is reprocessed correctly. In addition, VHA policy requires that VHA and VISNs oversee VAMCs’ reprocessing of RME and that VAMCs report incidents involving improperly reprocessed RME. According to reports from RME professional associations, the complexity of RME reprocessing has increased as the complexity of medical instruments has increased. While at one time reprocessing surgical and dental instruments such as scalpels and retractors might have been the bulk of a SPS program’s tasks, now SPS programs are responsible for reprocessing complex instruments such as endoscopes. Reprocessing these instruments is a detailed and time-consuming process, and their increasing complexity requires a corresponding increase in the skills and time required to safely reprocess them. (See figure 1 for an example of steps that can be required for endoscope reprocessing.) Within VHA, the National Program Office for Sterile Processing under the VHA Deputy Under Secretary of Health for Operations and Management is responsible for developing RME reprocessing policies. It is also responsible for ensuring that VISNs and their respective VAMCs are adhering to its policies. Each of the 18 VISNs are responsible for ensuring adherence with VHA’s RME policies at the VAMCs within its region. In turn, each of the 170 VAMCs are responsible for implementing VHA’s policies related to RME. Within each VAMC, the SPS department is primarily responsible for reprocessing RME, which is used by clinicians in the operating room and other clinical service lines such as the dental and gastroenterology service. (See fig. 2.) Additionally, the SPS department collaborates with other VAMC departments such as the Environmental Management and Engineering Services on variables that affect RME reprocessing, such as the climate where RME is reprocessed. In March 2016 VHA issued Directive 1116(2)—a comprehensive policy outlining requirements for SPS programs and for overseeing RME reprocessing efforts. SPS program operation requirements. To help ensure that VAMCs are reprocessing RME correctly, VHA policy establishes various requirements for the SPS programs in VAMCs to follow, such as a requirement that SPS staff monitor sterilizers to ensure that they are functioning properly, use personal protective equipment when performing reprocessing activities, separate dirty and clean RME, and maintain environmental controls. For example, VAMCs are required to maintain certain temperature, humidity, and air flow standards in areas where RME is reprocessed and stored. Additionally, in order to ensure that RME is reprocessed in accordance with manufacturers’ guidelines, VAMCs are required to assess staff on their competence in following the related reprocessing steps. Oversight requirements. To help ensure that VAMCs are adhering to VHA’s RME policies, VHA requires inspections, reports on incidents of improperly reprocessed RME, and corrective action plans for both non- adherent inspection results and incidents of improperly reprocessed RME. Inspections. VISNs are required to conduct annual inspections at each VAMC within their VISN and to report their inspection results to the VHA National Program Office for Sterile Processing. The VISN inspections are a key oversight tool for regularly assessing adherence to RME policies in the SPS, gastroenterology, and dental areas within VAMCs and use a standardized inspection checklist known as the SPS Inspection Tool. According to VHA officials, VHA developed the SPS Inspection Tool and generally updates it annually. The most recent fiscal year 2017 SPS Inspection Tool contained 148 requirements. Examples of requirements include those regarding proper storage of RME and following manufacturers’ instructions when reprocessing RME. Although VAMCs are also required to conduct annual self-inspections using the SPS Inspection Tool and report the results to VHA, the VISN annual inspections are a separate and important level of oversight. Finally, according to VHA officials, while not a formal policy, VHA’s National Program Office for Sterile Processing also inspects each VAMC at least once every 3 years. VHA requires VISNs and VAMCs to conduct their own inspections even in years when VHA also conducts inspections. Incident Reports. VHA collects incident reports or “issue briefs” generated by VAMCs on incidents involving RME to help determine the extent to which VAMCs are adhering to RME policies, among other things. VHA requires VAMCs to report significant clinical incidents or outcomes involving RME that negatively affect groups or a cohort of veterans in an issue brief. According to a VHA official, when VAMC staff report incidents involving RME to their facility leadership, these officials should follow VHA guidance to determine which incidents, if any, should be reported in an issue brief to the VAMC’s VISN. Similarly, VISN officials, in turn, are responsible for determining whether an incident should be reported in an issue brief to VHA. Corrective Action Plans. Corrective action plans—which detail an approach for addressing any areas of policy non-adherence identified in inspections or incidents identified in issue briefs—are required at both the VISN and VAMC levels. Specifically, both VISNs and VAMCs are required to develop corrective action plans for any deficiencies identified through their inspections, and VAMCs are required to develop corrective action plans for incidents identified in issue briefs. According to a VHA official, VISNs and VAMCs are not required to send corrective action plans from inspections to VHA; however, VAMCs must send their correction action plans to the VISN and also any related to issue briefs to VHA. Further, according to a VHA official, although neither the VAMC nor VISN corrective action plans from inspections are monitored by VHA, VHA does expect VISN officials to inform it of any critical issues that VISNs believe warrant VHA attention. For example, VHA officials would expect VISNs to report instances when RME issues result in the cancellation of procedures for multiple patients or when the VISN discovers a VAMC is lacking documentation of RME reprocessing competency assessments for a large number of their SPS staff. A number of recent reports have identified several RME-related issues at VAMCs, including non-adherence to RME policies. The issues have ranged from improperly reprocessed RME being used on patients to the cancellation of medical procedures due to lack of available RME. For example: In March 2018, the VA Office of Inspector General released a report describing problems identified at the Washington, D.C. VAMC, some of which were RME-related. For example, the office determined that ineffective sterile processing contributed to procedure delays due to unavailable RME. The report included specific recommendations, such as ensuring there are clearly defined and effective procedures for replacing missing or broken instruments and implementing a quality assurance program to verify the cleanliness, functionality, and completeness of instrument sets before they are used in clinical areas. The VAMC Director agreed with those recommendations. In fiscal year 2017, the VA Office of Inspector General reviewed 29 VAMCs and issued reports for each in response to several RME- related complaints received through its reporting hotline. The office identified issues such as staff failure to perform quality control testing on endoscopes or document their competency assessments of SPS staff in employee files. Many of the reports included specific recommendations, such as performing quality control testing on all endoscopes and ensuring SPS staff are assessed for competency at orientation and annually for the types of RME they reprocess. The VAMC Directors agreed with those recommendations. In 2016, the VA Office of the Medical Inspector released a report that substantiated allegations that SPS practices led to the delivery of RME with bioburden, debris, or both to the operating room. The report included specific recommendations, such as reeducating SPS staff on proper SPS standards and ensuring that all training and assessments of RME reprocessing competency of SPS staff are completed as required. The VAMC Director agreed with those recommendations. In 2011, we released a report on VA RME that found issues with RME reprocessing. We found, for example, that VHA did not provide specific guidance on the types of RME that require device-specific training and that the guidance VHA did provide on RME reprocessing training was conflicting. We issued several recommendations for improvement, which VA has implemented. VHA has not ensured that it has complete information from the annual inspections VISNs conduct—a key oversight tool providing the most current VA-wide information on adherence to RME policies—and therefore does not have reasonable assurance that VAMCs are following RME policies intended to ensure veterans are receiving safe care. For fiscal year 2017, we determined that VHA should have had records of 144 VISN SPS inspection reports to have assurance that all required VISN SPS inspections had been conducted. However, our review shows that as of February 2018, VHA had 105 VISN SPS inspection reports and was missing 39, or more than one quarter of the required inspection reports. We also determined that there were two VISNs from which VHA did not have any fiscal year 2017 reports. For the missing SPS inspection reports, VISN officials suggested several reasons why the inspections were either not conducted or conducted but the reports were not submitted to VHA. For example, officials from one of the VISNs from which VHA had no SPS inspection reports told us that VISN management staffing vacancies prevented it from conducting all of its inspections. An official from the other VISN from which VHA had no SPS inspection reports provided evidence that it had conducted all but one of the inspections, but the official told us the VISN did not submit reports because it has yet to receive information from VHA regarding VISN inspection outcomes, common findings, or best practices and therefore sees no value in submitting them. VISNs provided us with evidence showing that they conducted 27 of 39 inspections that were missing from VHA’s data. We analyzed these 27 reports to identify the information about non-adherence to RME policy requirements that VHA does not have from these missing VISN inspections. We determined the 10 requirements for which these VAMCs had the most non-adherence were related to quality, training, and environmental issues, among other things, with the extent of non- adherence ranging from 19 to 38 percent. For example, there were 19 and 26 percent non-adherence rates to the requirements that instrument and equipment levels be sufficient to meet workloads and having a process in place to ensure staff receive make-up/repeat training, respectively. (See Appendix I.) We also found that variation in SPS Inspection Tools and related guidance from VHA resulted in incomplete inspection results for the gastroenterology and dental areas. VHA provided VISNs with three different SPS Inspection Tools throughout the course of fiscal year 2017. Although VHA guidance stated otherwise, only the third SPS Inspection Tool—which was used during the second half of the fiscal year—contained requirements specific to the gastroenterology and dental areas. A VHA Central Office official told us the office hadn’t been aware that it did not have all of the VISN inspection reports until it took steps to respond to our data request. The official told us VHA granted VISNs a 3- month extension for fiscal year 2017—meaning that VISNs had until the end of December 2017 to submit their inspection results—and had granted similar extensions for at least the past 4 fiscal years as well. For all of those years, the VHA official told us that the office didn’t have all VISN inspection reports, even after granting extensions. As a result, VHA did not have assurance that all of the inspections had been conducted. When asked why VHA hadn’t been aware that it didn’t have all VISN SPS inspection reports, a VHA official said that the office has largely relied on the VISNs to ensure complete inspection result reporting because it hasn’t had the resources to dedicate to monitoring inspections. The official told us that VHA has asked for and just recently received approval to hire a data analyst who could potentially be responsible for monitoring the VISN inspection reports. VHA’s lack of complete information from inspection results is inconsistent with standards for internal control in the federal government regarding monitoring and information that state management should establish and operate monitoring activities and use quality information to achieve the entity’s objectives. Without such controls, VHA lacks reasonable assurance that VAMCs are following RME policies designed to ensure that veterans are receiving safe care. We also found that VHA does not consistently share information, particularly inspection results, with VISNs and VAMCs, and that VISNs and VAMCs would like more of this information. Specifically, about two- thirds of VISN and VAMC officials told us that sharing information on the common issues identified in the inspections of other VAMCs as well as potential solutions developed to address these issues would allow VAMCs to be proactive in strengthening their adherence to RME policies and ensuring patient safety. For example, a VAMC official told us that there were problems with equipment designed to sterilize heat- and moisture sensitive devices, and seeing how other VAMCs addressed the problem was helpful for their VAMC. Further, officials from some VISNs said VHA cited their VAMCs for issues that had been found at other facilities and, had the VAMCs been aware of the issue beforehand, they could have corrected or improved their processes earlier. When asked about sharing inspection results and other information, VHA Central Office officials told us the office doesn’t analyze or share information from VISN inspections because of a lack of resources. A VHA official told us that the office does create an internal report of common issues identified through the third of VAMCs it inspects each year, but the office doesn’t share this report with VISNs and VAMCs because the office lacks the resources needed to prepare reports that are detailed enough to be understood correctly by recipients. According to this official, VHA has occasionally shared information it has identified on common inspection issues through newsletters, national calls, and trainings; however, VHA officials at close to half of the VISNs and VAMCs we spoke to said that they rarely or never get this information. For example, officials from one VISN told us they recall only one or two instances where VHA sent a summary of the top five RME-related issues found during inspections. Insufficient sharing of information is inconsistent with standards for internal control in the federal government regarding communication, which state that management should internally communicate the necessary quality information to achieve the entity’s objectives. Until this sharing becomes a regular practice, VHA is missing an opportunity to help ensure adherence to its RME policies, which are intended to ensure that veterans receive safe care. According to interviews with officials from all of the VISNs and selected VAMCs, the top five challenges VAMCs face in operating their SPS programs are related to meeting certain RME policies and challenges addressing SPS workforce needs. In particular, officials told us that VAMCs have challenges (1) meeting two RME policy requirements related to climate control monitoring and a reprocessing transportation deadline, and (2) addressing SPS workforce needs related to lengthy hiring timeframes, the need for consistent overtime, and limited pay and professional growth. (See Table 1.) Regarding the challenges VAMCs face in meeting RME policy requirements, the majority of VISN and selected VAMC officials interviewed reported experiencing challenges adhering to two requirements from 2016 VHA issued Directive 1116(2). Climate control monitoring requirement. Officials reported that meeting the climate control monitoring requirement related to airflow and humidity is challenging for their VAMCs. Under the requirement VAMCs must monitor the humidity and airflow in facility areas where RME is reprocessed and stored in order to ensure that humidity levels do not exceed a certain threshold and thereby allow the growth of microorganisms. According to almost all VISN officials, meeting the requirement is a challenge for some, if not all, of their VAMCs and in particular for older VAMCs that lack proper ventilation systems. We also found some instances of non-adherence on this issue in the group of VISN inspection reports we reviewed. In a September 2017 memorandum, VHA relaxed the requirement (e.g., adjusted the thresholds). Additionally, according to a VHA official, VHA wants to renovate all outdated VAMC heating, ventilation, and air conditioning systems to help VAMCs meet the requirement. Further, according to VHA officials, VHA also allows VAMCs to apply for a waiver exempting them from having to meet this requirement if they have an action plan in place that shows they are working toward meeting the requirement. Reprocessing transportation deadline requirement. Officials reported that meeting the reprocessing transportation deadline was also challenging for their VAMCs. Under the requirement, used RME must be transported to the location where it will be reprocessed within 4 hours of use to prevent bioburden or debris from drying on the instrument and causing challenges with reprocessing. Officials reported this requirement as particularly challenging for VAMCs that must transport their RME to another facility for cleaning, such as community based outpatient clinics in rural areas that must transport their RME to their VAMC’s SPS department. We also found some instances of non-adherence on this issue in the group of VISN inspection reports we reviewed. In June 2016, VHA issued a memorandum allowing the use of a pre-cleaning spray solution that, if used, allows offsite facilities such as community based outpatient clinics to transport that RME within 12 hours instead of the required 4 hours. VHA has made some adjustments to these requirements, although some officials told us the requirements remain difficult to meet. Specifically, over half of the VISN officials reported that the climate control monitoring requirement continues to be a challenge for their VAMCs. Further, some of the officials told us that meeting the 12-hour reprocessing transportation requirement using the pre-cleaning spray was still challenging, due to the distance between clinics and their VAMC’s SPS department; as a result, some facilities have decided to use disposable medical equipment that does not require reprocessing to avoid this requirement completely. When we shared this information with a VHA official, the official stated that providing general information on how all facilities can meet the climate control monitoring requirement is impossible due to the uniqueness of each facility and that VHA has no further plans to adjust the reprocessing transportation deadline requirement. However, these challenges remain and some officials have expressed frustration with the limited support they’ve received from VHA. In September 2017 we recommended that VHA establish a mechanism by which program offices systematically obtain feedback from VISNs and VAMCs on national policy after implementation and take the appropriate actions. Our findings provide further evidence of the need for VA to address this recommendation. Regarding the challenges VAMCs face in meeting SPS workforce needs, almost all of the 18 VISN officials and officials from the three selected VAMCs reported experiencing challenges related to lengthy hiring timeframes, need for consistent overtime, and limited pay and professional growth. According to officials, these challenges result in SPS programs having difficulty maintaining sufficient staffing levels. Lengthy hiring timeframes. Officials reported that the lengthy hiring process for SPS staff creates challenges in maintaining sufficient SPS workforce. For example, officials from one VISN estimated that on average it can take 3 to 4 months for a person to be hired. Officials from a few other VISNs noted that not only does the lengthy hiring process create challenges in recruiting qualified candidates (because they accept other positions where they can be more quickly employed), but that it also results in long periods of time when SPS programs are short-staffed. Need for overtime. Officials reported that needing their SPS staff to work overtime is a challenge. Specifically, 16 of the 18 VISN officials stated that there is a need for staff at their VAMCs to work overtime either “all, most, or some of the time.” Further, officials from one VISN told us their VAMCs have used overtime to meet the increased workload required to implement VHA’s RME policies; one official noted that the overtime has led to dissatisfaction and retention issues among SPS staff. Limited pay and professional growth. Officials identified limited pay and professional growth associated with the current pay grade as the biggest SPS workforce challenge. Almost all officials stated that the current pay grade limits the pay and potential for professional growth for the two main SPS positions—medical supply technicians, who are responsible for reprocessing RME, and SPS Chiefs, who have supervisory responsibility. Specifically, the relatively low maximum allowable pay discourages staff from accepting or staying in positions and the current pay grade does not create a career path for SPS medical supply technicians to grow within the SPS department. Officials from one VISN told us that all VAMCs in their VISN have lost SPS staff due to the low pay grade for both positions. VHA officials said a proposed increase in the pay grade for SPS staff has been drafted; however, they do not know when or if it will be made effective. Further, according to officials with knowledge of the proposed changes, the changes could still be insufficient to recruit and retain SPS staff with the necessary skills and experience. Some VISN and VAMC officials told us that difficulties maintaining sufficient SPS staff levels have in some instances adversely affected patients’ access to care and increased the potential for reprocessing errors that could affect patient safety. According to these officials, staffing challenges can affect access to care when facilities have to limit or delay care—such as surgeries—because there aren’t enough staff available to process all the necessary RME. An official at one VAMC told us that their SPS staff must review available RME daily to determine whether scheduled surgeries or other procedures can proceed. Further, among the 18 operating room nurse managers who responded to our inquiries, 15 indicated they have experienced operating room delays because of RME issues. In addition, some VISN and VAMC officials told us staffing challenges can potentially have an impact on patient safety, because when SPS staffing is not sufficient, mistakes are more likely to occur. For example, officials told us that if SPS staffing levels are low, particularly if they are low for an extended period of time, there is an increased chance RME will be improperly reprocessed and, if used on a patient, put that patient’s safety at risk. A 2018 VA Office of Inspector General report on the Washington D.C. VAMC found that consistent SPS understaffing was a factor in SPS staff not being available to meet providers’ need for reprocessed RME; according to the report, “veterans were put at risk because important supplies and instruments were not consistently available in patient care areas.” While VHA is aware of these workforce challenges cited by VISN and VAMC officials, it has not studied SPS staffing at VAMCs. As a result, it does not know whether or to what extent the workforce challenges VISNs and VAMCs report adversely affect VAMCs’ ability to effectively operate their SPS programs and ensure safe care for veterans. A National Program Office of Sterile Processing official indicated that while the office might have access to some of the necessary data from VAMC SPS departments, it does not have all the necessary data or staff needed to assess SPS staffing levels. Furthermore, the official added, conducting such a study would not be the responsibility of her office. Officials from the Workforce Management and Consulting Office said VHA is considering a study of SPS staffing, given the results of the VA Office of Inspector General 2018 review that identified high vacancy rates as a contributing factor to the challenges with the SPS program at the Washington D.C. VAMC. However, VHA does not have definitive plans to complete this type of study or a timeframe for when the decision will be made. Until the study is conducted and actions are taken based on the study, as appropriate, VHA will not have addressed a potential risk to its SPS programs. This is inconsistent with standards for internal control in the federal government for risk assessment, which state that management should identify, analyze, and respond to risks related to achieving defined objectives. Without examining SPS workforce needs, and taking action based on this assessment, as appropriate, VHA lacks reasonable assurance that its approach to SPS staffing helps ensure veterans’ access to care and safety. The proper reprocessing of surgical instruments and other RME used in medical procedures is critical for ensuring veterans’ access to safe care. We have previously found that VA had not provided enough guidance to ensure SPS staff were reprocessing RME correctly; in 2016, VA issued Directive 1116(2)—with requirements for the SPS program. While this is a good step, our current review shows that VHA needs to strengthen its oversight of VAMCs’ adherence to these requirements. VHA has not ensured that it has complete information from inspections of VAMCs, nor does VHA consistently share inspection results and other information that could help VAMCs meet the requirements. Without analysis of complete information from inspections and consistent sharing of this information, VHA does not have reasonable assurance that VAMCs are following all RME policies, and VHA is missing an opportunity to strengthen VAMCs’ adherence to RME requirements. Furthermore, officials from some VISNs and selected VAMCs report challenges meeting two RME policy requirements—the climate control and the reprocessing transportation deadline requirements. If VHA implements a recommendation we made in 2017 for the agency to obtain feedback from VISNs and VAMCs on their efforts to implement VHA policies and take the appropriate actions, it could help with these challenges. Additionally, while nearly all of the officials from the 18 VISNs and selected VAMCs interviewed reported challenges maintaining a sufficient SPS workforce, VHA does not know whether the current SPS workforce addresses VAMCs’ SPS workforce needs. VHA officials say that VHA is considering studying its SPS workforce; however, it has not done so or announced a timeframe for doing so. Until it conducts such a study, VHA will not know whether or to what extent reported SPS workforce challenges adversely affect the ability of VAMCs to effectively operate their SPS programs and ensure access to safe care for veterans. We are making the following three recommendations to VHA: The Under Secretary of Health should ensure all RME inspections are being conducted and reported as required and that the inspection results VHA has are complete. (Recommendation 1) The Under Secretary of Health should consistently analyze and share top common RME inspection findings and possible solutions with VISNs and VAMCs. (Recommendation 2) The Under Secretary of Health should examine the SPS workforce needs and take action based on this assessment, as appropriate. (Recommendation 3) We provided a draft of this report to VA for comment. In its written comments, which are provided in appendix III, VA concurred with our recommendations. In its comments, VA acknowledged the need for complete RME inspection information, stating that VHA will establish an oversight process for reviewing and monitoring findings from site inspections and for reporting this information to VHA leadership. Further, VA noted that VHA will analyze data from RME inspections and share findings and possible solutions with VISNs and VAMCs via a written briefing that will be published on VHA’s website and discussed during educational sessions and national calls. VA also noted that VHA has an interdisciplinary work group that has identified actions it can take to address SPS workforce needs, including implementing an enhanced market-based approach for determining pay levels and developing a staffing model so VAMCs can determine what staffing levels they need to more effectively operate their SPS programs. VA expects VHA to complete all of these actions by July 2019 or earlier. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of Veterans Affairs. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Sharon M. Silas at (202) 512-7114 or silass@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Our review of the 27 fiscal year 2017 inspections of VAMCs conducted by Veterans Integrated Service Networks (VISN) for which VHA did not have inspection reports identified a number of common reusable medical equipment (RME) issues among the select VAMCs. The top 10 are listed in table 2 below. Our review of the Veterans Health Administration (VHA) summary of issue briefs for fiscal years 2015 through 2017 identified three major categories of issues related to reusable medical equipment (RME). See table 3 below for the percentage of all issue briefs that fell into each of these three categories. In addition to the contact named above, Karin Wallestad (Assistant Director), Teresa Tam (Analyst-in-Charge), Kenisha Cantrell, Michael Zose, and Krister Friday made major contributions to this report. Also contributing were Kaitlin Farquharson, Diona Martyn, and Muriel Brown.", "summary": "VHA operates one of the largest health care delivery systems in the nation, serving over 9 million enrolled veterans. In providing health care services to veterans, VAMCs use RME which must be reprocessed—that is, cleaned, disinfected, or sterilized—between uses. Improper reprocessing of RME can negatively affect patient care. To help ensure the safety of veterans, VHA policy establishes requirements VAMCs must follow when reprocessing RME and requires a number of related oversight efforts. GAO was asked to review VHA's reprocessing of RME. This report examines (1) VHA's oversight of VAMCs' adherence to RME policies and (2) challenges VAMCs face in operating their Sterile Processing Services programs, and any efforts by VHA to address these challenges. GAO reviewed relevant VHA documents including RME policies and VISN inspection results for fiscal year 2017. GAO interviewed officials from VHA, all 18 VISNs, and four VAMCs, selected based on geographic variation, VAMC complexity, and data on operating room delays. GAO examined VHA's oversight in the context of federal internal control standards on communication, monitoring, and information. GAO found that the Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) does not have reasonable assurance that VA Medical Centers (VAMC) are following policies related to reprocessing reusable medical equipment (RME). Reprocessing involves cleaning, sterilizing, and storing surgical instruments and other RME, such as endoscopes. VHA has not ensured that all VAMCs' RME inspections have been conducted because it has incomplete information from the annual inspections by Veterans Integrated Service Networks (VISN), which oversee VAMCs. For fiscal year 2017, VHA did not have 39 of the 144 VISN reports from the VISNs' inspections of their VAMCs' Sterile Processing Services departments. VISNs were able to provide GAO with evidence that they had conducted 27 of the 39 missing inspections; top areas of non-adherence in these inspections were related to quality and training, among other things. Although VHA has ultimate oversight responsibility, a VHA official told GAO that VHA had not been aware it lacked complete inspection results because it has largely relied on the VISNs to ensure complete inspection result reporting. Without analyzing and sharing complete information from inspections, VHA does not have assurance that its VAMCs are following RME policies designed to ensure that veterans receive safe care. GAO also found that VAMCs face challenges operating their Sterile Processing Services programs—notably, addressing workforce needs. Almost all of the officials from all 18 VISNs and selected VAMCs GAO interviewed reported Sterile Processing Services workforce challenges, such as lengthy hiring timeframes and limited pay and professional growth potential. According to officials, these challenges result in programs having difficulty maintaining sufficient staffing. VHA officials told GAO that the office is considering studying Sterile Processing Services staffing at VAMCs, although VHA does not have definitive plans to do so. VHA's Sterile Processing Services workforce challenges pose a potential risk to VAMCs' ability to ensure access to sterilized medical equipment, and VHA's failure to address this risk is inconsistent with standards for internal control in the federal government. Until VHA examines these workforce needs, VHA won't know whether or to what extent the reported challenges adversely affect VAMCs' ability to effectively operate their Sterile Processing Services programs and ensure access to safe care for veterans. GAO is making three recommendations to VHA, including that it ensure all RME inspections are being conducted and complete results reported, and that it examine Sterile Processing Services workforce needs and make adjustments, as appropriate. VA concurred with these recommendations.", "document_type": "gao"}
{"report": "Federal agencies and our nation’s critical infrastructures—such as energy, transportation systems, communications networks, and financial services—are dependent on computerized (cyber) information systems and electronic data to process, maintain, and report essential information, and to operate and control physical processes. Virtually all federal operations are supported by computer systems and electronic data, and agencies would find it difficult, if not impossible, to carry out their missions and account for their resources without these information assets. Hence, the security of these systems and data is vital to public confidence and the nation’s safety, prosperity, and well-being. Ineffective security controls to protect these systems and data could have a significant impact on a broad array of government operations and assets. Yet, computer networks and systems used by federal agencies are often riddled with security vulnerabilities—both known and unknown. These systems are often interconnected with other internal and external systems and networks, including the Internet, thereby increasing the number of avenues of attack and expanding their attack surface. Furthermore, safeguarding federal computer systems has been a long- standing concern. This year marks the 21st anniversary of when GAO first designated information security as a government-wide high-risk area in 1997. We expanded this high-risk area to include safeguarding the systems supporting our nation’s critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015. Over the last several years, we have made about 2,500 recommendations to agencies aimed at improving the security of federal systems and information. These recommendations identified actions for agencies to take to strengthen their information security programs and technical controls over their computer networks and systems. Nevertheless, many agencies continue to be challenged in safeguarding their information systems and information, in part because they have not implemented many of these recommendations. As of March 2018, about 885 of our prior information security-related recommendations had not been implemented. DHS has broad authorities to improve and promote cybersecurity of federal and private-sector networks. The federal laws and policies that underpin these authorities include the following: The Federal Information Security Modernization Act (FISMA) of 2014 clarified and expanded DHS’s responsibilities for assisting with the implementation of, and overseeing, information security at federal agencies. These responsibilities include requirements to: develop, issue, and oversee agencies’ implementation of binding operational directives to agencies, including directives for incident reporting, contents of annual agency reports, and other operational requirements; monitor agencies’ implementation of information security policies provide operational and technical assistance to agencies, including by operating the federal information security incident center, deploying technology to continuously diagnose and mitigate threats, and conducting threat and vulnerability assessments of systems. Act of 2014, among other things, requires DHS to assess its cybersecurity workforce. In this regard, the Secretary of Homeland Security is to identify all positions in DHS that perform cybersecurity functions and to identify cybersecurity work categories and specialty areas of critical need. The National Cybersecurity Protection Act of 2014 codified the role of the National Cybersecurity and Communications Integration Center (NCCIC)—a center established by DHS in 2009—as the federal civilian interface for sharing information concerning cybersecurity risks, incidents, analysis, and warnings to federal and non-federal entities, including owners and operators of information systems supporting critical infrastructure. The Cybersecurity Act of 2015, among other things, sets forth authority for enhancing the sharing of cybersecurity-related information among federal and non-federal entities. The act gives DHS’s NCCIC responsibility for implementing this information sharing authority. The act also requires DHS to: Jointly develop with other specified agencies and submit to Congress, procedures for sharing federal cybersecurity threat information and defensive measures with federal and non-federal entities. Deploy, operate, and maintain capabilities to prevent and detect cybersecurity risks in network traffic traveling to or from an agency’s information system. DHS is to make these capabilities available for use by any agency. In addition, the act requires DHS to improve intrusion detection and prevention capabilities, as appropriate, by regularly deploying new technologies and modifying existing technologies. Long-standing federal policy as promulgated by a presidential policy directive, executive orders, and the National Infrastructure Protection Plan have designated DHS as a lead federal agency for coordinating, assisting, and sharing information with the private-sector to protect critical infrastructure from cyber threats. We have reviewed several federal programs and activities implemented by DHS that are intended to mitigate cybersecurity risk for the computer systems and networks supporting federal operations and our nation’s critical infrastructure. These programs and activities include deploying the National Cybersecurity Protection System, providing continuous diagnostic and mitigation services, issuing binding operational directives, sharing information through the National Cybersecurity and Communications Integration Center, promoting adoption of a cybersecurity framework, and assisting private-sector partners with cyber risk mitigation activities. We also examined DHS’s efforts to assess its cybersecurity workforce. DHS has made important progress in implementing these programs and activities. However, the department needs to take additional actions to ensure that it successfully mitigates cybersecurity risks on federal and private-sector computer systems and networks. DHS is responsible for operating its National Cybersecurity Protection System (NCPS), operationally known as EINSTEIN. NCPS is intended to provide intrusion detection and prevention capabilities to entities across the federal government. It also is intended to provide DHS with capabilities to detect malicious traffic traversing federal agencies’ computer networks, prevent intrusions, and support data analytics and information sharing. In January 2016, we reported that the NCPS was partially, but not fully, meeting most of its stated four system objectives: Intrusion detection: We noted that NCPS provided DHS with a limited ability to detect potentially malicious activity entering and exiting computer networks at federal agencies. Specifically, NCPS compared network traffic to known patterns of malicious data, or “signatures,” but did not detect deviations from predefined baselines of normal network behavior. In addition, the system did not monitor several types of network traffic and its “signatures” did not address threats that exploited many common security vulnerabilities and, thus was not effective in detecting certain types of malicious traffic. Intrusion prevention: The capability of NCPS to prevent intrusions (e.g., blocking an e-mail determined to be malicious) was limited to the types of network traffic that it monitored. For example, the intrusion prevention function monitored and blocked e-mail. However, it did not address malicious content from other types of network traffic. Analytics: NCPS supports a variety of data analytical tools, including a centralized platform for aggregating data and a capability for analyzing the characteristics of malicious code. In addition, DHS had further enhancements to this capability planned through 2018. Information sharing: DHS had not developed most of the planned functionality for NCPS’s information-sharing capability, and requirements had only recently been approved. Moreover, we noted that agencies and DHS did not always agree about whether notifications of potentially malicious activity had been sent or received, and agencies had mixed views about the usefulness of these notifications. Further, DHS did not always solicit—and agencies did not always provide—feedback on the notifications. We recommended that DHS take nine actions to enhance NCPS’s capabilities for meeting its objectives, better define requirements for future capabilities, and develop network routing guidance. The department agreed with our recommendations; however, as of April 2018, it had not fully implemented 8 of the 9 recommendations. As part of a review mandated by the Federal Cybersecurity Enhancement Act of 2015, we are currently examining DHS’s efforts to improve its intrusion detection and prevention capabilities. The Continuous Diagnostics and Mitigation (CDM) program was established to provide federal agencies with tools and services that have the intended capability to automate network monitoring, correlate and analyze security-related information, and enhance risk-based decision making at agency and government-wide levels. These tools include sensors that perform automated scans or searches for known cyber vulnerabilities, the results of which can feed into a dashboard that alerts network managers and enables the agency to allocate resources based on the risk. DHS, in partnership with, and through the General Services Administration, established a government-wide acquisition vehicle for acquiring CDM capabilities and tools. The CDM blanket purchase agreement is available to federal, state, local, and tribal government entities for acquiring these capabilities. There are three phases of CDM implementation and the dates for implementing Phase 2 and Phase 3 appear to be slipping: Phase 1: This phase involves deploying products to automate hardware and software asset management, configuration settings, and common vulnerability management capabilities. According to the Cybersecurity Strategy and Implementation Plan, DHS purchased Phase 1 tools and integration services for all participating agencies in fiscal year 2015. Phase 2: This phase intends to address privilege management and infrastructure integrity by allowing agencies to monitor users on their networks and to detect whether users are engaging in unauthorized activity. According to the Cybersecurity Strategy and Implementation Plan, DHS was to provide agencies with additional Phase 2 capabilities throughout fiscal year 2016, with the full suite of CDM phase 2 capabilities delivered by the end of that fiscal year. However, according to the Office of Management and Budget’s (OMB) FISMA Annual Report to Congress for Fiscal Year 2017, the CDM program began deploying Phase 2 tools and sensors during fiscal year 2017. Phase 3: According to DHS, this phase is intended to address boundary protection and event management throughout the security life cycle. It focuses on detecting unusual activity inside agency networks and alerting security personnel. The agency had planned to provide 97 percent of federal agencies the services they need for CDM Phase 3 in fiscal year 2017. However, according to OMB’s FISMA report for fiscal year 2017, the CDM program will continue to incorporate additional capabilities, including Phase 3, in fiscal year 2018. In May 2016, we reported that most of the 18 agencies covered by the CFO Act that had high-impact systems were in the early stages of implementing CDM. All 17 of the civilian agencies that we surveyed indicated they had developed their own strategy for information security continuous monitoring. Additionally, according to the survey responses, 14 of the 17 civilian agencies had deployed products to automate hardware and software asset configuration settings and common vulnerability management. Further, more than half of these agencies noted that they had leveraged products/tools provided through the General Services Administration’s acquisition vehicle. However, only 2 of the 17 agencies reported that they had completed installation of agency and bureau/component-level dashboards and monitored attributes of authorized users operating in their agency’s computing environment. Agencies noted that expediting the implementation of the CDM phases could be of benefit to them in further protecting their high-impact systems. Subsequently, in March 2017, we reported that the effective implementation of the CDM tools and capabilities can assist agencies in overcoming the challenges of securing their information systems and information. We noted that our audits often identify insecure configurations, unpatched or unsupported software, and other vulnerabilities in agency systems. Thus, the tools and capabilities available under the CDM program, when effectively used by agencies, can help them to diagnose and mitigate vulnerabilities to their systems. We reported that, by continuing to make these tools and capabilities available to federal agencies, DHS can also have additional assurance that agencies are better positioned to protect their information systems and information. Beyond the NCPS and CDM programs, DHS also provides a number of services that could help agencies protect their information systems. Such services include, but are not limited to: US-CERT monthly operational bulletins, which are intended to provide senior federal government information security officials and staff with actionable information to improve their organization’s cybersecurity posture based on incidents observed, reported, or acted on by DHS and US-CERT. CyberStat reviews, which are in-depth sessions attended by National Security Staff, as well as officials from OMB, DHS, and an agency to discuss that agency’s cybersecurity posture and opportunities for collaboration. According to OMB, these interviews are face-to-face, evidence-based meetings intended to ensure agencies are accountable for their cybersecurity posture. The sessions are intended to assist the agencies in developing focused strategies for improving their information security posture in areas where there are challenges. DHS Red and Blue Team exercises that are intended to provide services to agencies for testing their systems with regard to potential attacks. A Red Team emulates a potential adversary’s attack or exploitation capabilities against an agency’s cybersecurity posture. The Blue Team defends an agency’s information systems when the Red Team attacks, typically as part of an operational exercise conducted according to rules established and monitored by a neutral group. In May 2016, we reported that, although participation in these services varied among the 18 agencies we surveyed, most of those that chose to participate reported that they generally found these services to be useful in aiding the cybersecurity protection of their high-impact systems. Specifically, 15 of 18 agencies reported that they participated in US-CERT monthly operational bulletins, and most said they found the service very or somewhat useful. All 18 agencies reported that they participated in the CyberStat reviews, and most said they found the service very or somewhat useful. 9 of 18 agencies reported that they participated in DHS’ Red/Blue team exercises, and most said they found the exercises to be very or somewhat useful. Half of the 18 agencies in our survey reported that they wanted an expansion of federal initiatives and services to help protect their high- impact systems. For example, these agencies noted that expediting the implementation of CDM phases, sharing threat intelligence information, and sharing attack vectors, could be of benefit to them in further protecting their high-impact systems. We believe that by continuing to make these services available to agencies, DHS will be better able to assist agencies in strengthening the security of their information systems. FISMA authorizes DHS to develop and issue binding operational directives to federal agencies and oversee their implementation by agencies. The directives are compulsory and require agencies to take specific actions that are intended to safeguard federal information and information systems from a known threat, vulnerability, or risk. In September 2017, we reported that DHS had developed and issued four binding operational directives as of July 2017, instructing agencies to: mitigate critical vulnerabilities discovered by DHS’s NCCIC through its scanning of agencies’ Internet-accessible systems; participate in risk and vulnerability assessments as well as DHS security architecture assessments conducted on agencies’ high-value assets; address several urgent vulnerabilities in network infrastructure devices identified in a NCCIC analysis report within 45 days of the directive’s issuance; and report cyber incidents and comply with annual FISMA reporting requirements. Since July 2017, DHS has issued two additional binding operational directives instructing agencies to: identify and remove the presence of any information security products developed by AO Kaspersky Lab on their information systems and discontinue the use of such products; and enhance e-mail by, among other things, removing certain insecure protocols, and ensure public facing web sites provide services through a secure connection. We plan to initiate work later this year to identify and assess DHS’s process for developing and overseeing agencies’ implementation of binding operational directives. In February 2017, we reported that NCCIC had taken steps to perform each of its 11 statutorily required cybersecurity functions, such as being a federal civilian interface for sharing cybersecurity-related information with federal and nonfederal entities. NCCIC managed several programs that provided data used in developing 43 products and services that the center made available to its customers in the private-sector; federal, state, local, tribal and territorial government entities; and other partner organizations. For example, NCCIC issued indicator bulletins, which could contain information related to cyber threat indicators, defensive measures, and cybersecurity risks and incidents, and helped to fulfill its function to coordinate the sharing of such information across the government. Respondents to a survey that we administered to NCCIC’s customers varied in their reported use of NCCIC’s products but had generally favorable views of the center’s activities. The National Cybersecurity Protection Act also required NCCIC to carry out its functions in accordance with nine implementing principles, to the extent practicable. However, as we reported, the extent to which NCCIC adhered to the 9 principles when performing the functions was unclear because the center had not yet determined the applicability of the principles to all 11 functions. It also had not established metrics and methods by which to evaluate its performance against the principles. We also identified several impediments to NCCIC performing its cybersecurity functions more efficiently. For example, the center did not have a centralized system for tracking security incidents and, as a result, could not produce a report on the status of all incidents reported to the center. In addition, the center did not keep current and reliable customer information and was unable to demonstrate that it had contact information for all owners and operators of the most critical cyber-dependent infrastructure assets. We made nine recommendations to DHS for enhancing the effectiveness and efficiency of NCCIC. Among other activities, these recommendations called for the department to determine the applicability of the implementing principles and establish metrics and methods for evaluating performance; and address identified impediments. DHS agreed with the recommendations; however, as of April 2018, all nine recommendations remained unimplemented. An executive order issued by the President in February 2013 (E.O. 13636) states that sector-specific agencies (SSA), which include DHS, are to review the National Institute of Standards and Technology Framework for Improving Critical Infrastructure Cybersecurity (cybersecurity framework) and, if necessary, develop implementation guidance or supplemental materials to address sector-specific risks and operating environments. In February 2014, DHS launched the Critical Infrastructure Cyber Community Voluntary Program to assist the enhancement of critical infrastructure cybersecurity and to encourage adoption of the framework across the critical infrastructure sectors. In addition, DHS, as the SSA and co-SSA for 10 critical infrastructure sectors, had developed framework implementation guidance for some of the sectors it leads. Nevertheless, we reported weaknesses in DHS’s efforts to promote the use of the framework across the sectors and within the sectors it leads. Specifically, in December 2015, we reported that DHS did not measure the effectiveness of cyber community voluntary program to encourage use of the Cybersecurity Framework. In addition, DHS and GSA, which are the co-SSAs for the government facilities sector, had yet to determine if sector implementation guidance should be developed for the government facilities sector. Further, in February 2018, we reported that none of the SSAs, to include DHS, had measured the cybersecurity framework’s implementation by entities within their respective sectors, in accordance with the nation’s plan for national critical infrastructure protection efforts. We made two recommendations to DHS to better facilitate adoption of the Cybersecurity Framework across the critical infrastructure sectors and within the government facilities sector. We also recommended that DHS develop methods for determining the level and type of framework adoption by entities across their respective sectors. DHS concurred with the three recommendations. As of April 2018, only the recommendation related to the government facilities sector has been implemented. Presidential Policy Directive-21 issued by the President in February 2013, states that SSAs are to collaborate with critical infrastructure owners and operators to strengthen the security and resiliency of the nation’s critical infrastructure. In November 2015, we reported that the SSAs, including DHS, generally used multiple public-private mechanisms to facilitate the sharing of cybersecurity related information. For example, DHS used coordinating councils and working groups of federal and nonfederal stakeholders to facilitate coordination with each other. In addition, the department’s NCCIC received and disseminated cyber-related information for public and private-sector partners. Nevertheless, we identified deficiencies in critical infrastructure partners’ efforts to collaborate to monitor progress towards improving cybersecurity within the sectors. Specifically, the SSAs for 12 sectors, including DHS for 8 sectors, had not developed metrics to measure and report on the effectiveness of their cyber risk mitigation activities or their sectors’ cybersecurity posture. This was because, among other reasons, the SSAs rely on their private-sector partners to voluntarily share information needed to measure efforts. We made two recommendations to DHS—one recommendation based on its role as the SSA for 8 sectors and one recommendation based on its role as the co-SSA for 1 sector—to collaborate with sector partners to develop performance metrics and determine how to overcome challenges to reporting the results of their cyber risk mitigation activities. DHS concurred with the two recommendations. As of April 2018, DHS has not demonstrated that it has implemented these recommendations. In February 2018, we reported that DHS had taken actions to identify, categorize, and assign employment codes to its cybersecurity positions, as required by the Homeland Security Cybersecurity Workforce Assessment Act of 2014. However, its actions had not been timely and complete. For example, DHS had not met statutorily defined deadlines for completing actions to identify and assign codes to cybersecurity positions or ensured that its procedures to identify, categorize, and code its cybersecurity positions addressed vacant positions, as required by the act. The department also had not (1) identified the individual within each DHS component agency who was responsible for leading and overseeing the identification and coding of the component’s cybersecurity positions or (2) reviewed the components’ procedures for consistency with departmental guidance. In addition, DHS had not yet completed its efforts to identify all of the department’s cybersecurity positions and accurately assign codes to all filled and vacant cybersecurity positions. In August 2017, DHS reported to the Congress that it had coded 95 percent of the department’s identified cybersecurity positions. However, we determined that the department had, at that time, coded approximately 79 percent of the positions. DHS overstated the percentage of coded positions primarily because it excluded vacant positions, even though the act required the department to report such positions. Further, although DHS had taken steps to identify its workforce capability gaps, it had not identified or reported to the Congress on its department- wide cybersecurity critical needs that align with specialty areas. The department also had not annually reported its cybersecurity critical needs to the Office of Personnel Management (OPM), as required; and it had not developed plans with clearly defined time frames for doing so. We recommended that DHS take six actions, including ensuring that its cybersecurity workforce procedures identify position vacancies and responsibilities; reported workforce data are complete and accurate; and plans for reporting on critical needs are developed. DHS concurred with the six recommendations and stated that it plans to take actions to address them by June 2018. In conclusion, DHS is unique among federal civilian agencies in that it is responsible for improving and promoting the cybersecurity of not only its own internal computer systems and networks but also those of other federal agencies and the private-sector owners and operators of critical infrastructure. Consistent with its statutory authorities and responsibilities under federal policy, the department has acted to assist federal agencies and private-sector partners in bolstering their cybersecurity capabilities. However, the effectiveness of DHS’s activities has been limited or not clearly understood because of shortcomings with its programs and a lack of useful performance measures. DHS needs to enhance its capabilities; expedite delivery of services; continue to provide guidance and assistance to federal agencies and private-sector partners; and establish useful performance metrics to assess the effectiveness of its cybersecurity-related activities. In addition, developing and maintaining a qualified cybersecurity workforce needs to be a priority for the department. Until it fully and effectively performs its cybersecurity authorities and responsibilities, DHS’s ability to improve and promote the cybersecurity of federal and private-sector networks will be limited. Chairman Johnson, Ranking Member McCaskill, and Members of the Committee, this concludes my statement. I would be pleased to respond to your questions. If you or your staffs have any questions about this testimony, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Nabajyoti Barkakati, Chris Currie, Larry Crosland, Tammi Kalugdan, David Plocher, Di’Mond Spencer, and Priscilla Smith. GAO, Critical Infrastructure Protection: Additional Actions Are Essential for Assessing Cybersecurity Framework Adoption, GAO-18-211 (Washington, D.C.: Feb. 15, 2018). GAO, Cybersecurity Workforce: Urgent Need for DHS to Take Actions to Identify Its Position and Critical Skill Requirements, GAO-18-175 (Washington, D.C.: Feb. 6, 2018). GAO, Federal Information Security: Weaknesses Continue to Indicate Need for Effective Implementation of Policies and Practices, GAO-17-549 (Washington, D.C.: Sept. 28, 2017). GAO, Cybersecurity: Federal Efforts Are Under Way That May Address Workforce Challenges, GAO-17-533T (Washington, D.C.: Apr. 4, 2017). GAO, Information Security: DHS Needs to Continue to Advance Initiatives to Protect Federal Systems, GAO-17-518T (Washington, D.C.: Mar. 28, 2017). GAO, High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.: Feb. 15, 2017). GAO, Cybersecurity: Actions Needed to Strengthen U.S. Capabilities, GAO-17-440T (Washington, D.C.: Feb. 14, 2017). GAO, Cybersecurity: DHS’s National Integration Center Generally Performs Required Functions but Needs to Evaluate Its Activities More Completely, GAO-17-163 (Washington, D.C.: Feb. 1, 2017). GAO, Information Security: DHS Needs to Enhance Capabilities, Improve Planning, and Support Greater Adoption of Its National Cybersecurity Protection System, GAO-16-294 (Washington, D.C.: Jan. 28, 2016). GAO, Critical Infrastructure Protection: Measures Needed to Assess Agencies’ Promotion of the Cybersecurity Framework, GAO-16-152 (Washington, D.C.: Dec. 17, 2015). GAO, Critical Infrastructure Protection: Sector-Specific Agencies Need to Better Measure Cybersecurity Progress, GAO-16-79 (Washington, D.C.: Nov. 19, 2015). This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The emergence of increasingly sophisticated threats and continuous reporting of cyber incidents underscores the continuing and urgent need for effective information security. GAO first designated information security as a government-wide high- risk area in 1997. GAO expanded the high-risk area to include the protection of cyber critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015. Federal law and policy provide DHS with broad authorities to improve and promote cybersecurity. DHS plays a key role in strengthening the cybersecurity posture of the federal government and promoting cybersecurity of systems supporting the nation's critical infrastructures. This statement highlights GAO's work related to federal programs implemented by DHS that are intended to improve federal cybersecurity and cybersecurity over systems supporting critical infrastructure. In preparing this statement, GAO relied on a body of work issued since fiscal year 2016 that highlighted, among other programs, DHS's NCPS, national integration center activities, and cybersecurity workforce assessment efforts. In recent years, the Department of Homeland Security (DHS) has acted to improve and promote the cybersecurity of federal and private-sector computer systems and networks, but further improvements are needed. Specifically, consistent with its statutory authorities, DHS has made important progress in implementing programs and activities that are intended to mitigate cybersecurity risks on the computer systems and networks supporting federal operations and our nation's critical infrastructure. For example, the department has: issued cybersecurity related binding operational directives to federal agencies; served as the federal-civilian interface for sharing cybersecurity related information with federal and nonfederal entities; Framework for Improving Critical Infrastructure Cybersecurity ; and Nevertheless, the department has not taken sufficient actions to ensure that it successfully mitigates cybersecurity risks on federal and private-sector computer systems and networks. For example, GAO reported in 2016 that DHS's National Cybersecurity Protection System (NCPS) had only partially met its stated system objectives of detecting and preventing intrusions, analyzing malicious content, and sharing information. GAO recommended that DHS enhance capabilities, improve planning, and support greater adoption of NCPS. In addition, although the department's National Cybersecurity and Communications Integration Center generally performed required functions such as collecting and sharing cybersecurity related information with federal and non-federal entities, GAO reported in 2017 that the center needed to evaluate its activities more completely. For example, the extent to which the center had performed its required functions in accordance with statutorily defined implementing principles was unclear, in part, because the center had not established metrics and methods by which to evaluate its performance against the principles. Further, in its role as the lead federal agency for collaborating with eight critical infrastructure sectors including the communications and dams sectors, DHS had not developed metrics to measure and report on the effectiveness of its cyber risk mitigation activities or on the cybersecurity posture of the eight sectors. GAO reported in 2018 that DHS had taken steps to assess its cybersecurity workforce; however, it had not identified all of its cybersecurity positions and critical skill requirements. Until DHS fully and effectively implements its cybersecurity authorities and responsibilities, the department's ability to improve and promote the cybersecurity of federal and private-sector networks will be limited. Since fiscal year 2016, GAO has made 29 recommendations to DHS to enhance the capabilities of NCPS, establish metrics and methods for evaluating performance, and fully assess its cybersecurity workforce, among other things. As of April 2018, DHS had not demonstrated that it had fully implemented most of the recommendations.", "document_type": "gao"}
{"report": "GAO’s Standards for Internal Control in the Federal Government state that federal agencies—such as DOD—must demonstrate a commitment to training, mentoring, retaining, and selecting competent individuals, which would include program managers. These standards explain that federal agencies like DOD should provide training that enables individuals to develop competencies appropriate for key roles, reinforces standards of conduct, and can be tailored based on the needs of the role; mentor individuals by providing guidance on their performance based on standards of conduct and expectations of competence; retain individuals by providing incentives to motivate and reinforce expected levels of performance and desired conduct; and select individuals for key roles by conducting procedures to determine whether a particular candidate fits the organization’s needs and has the competence for the proposed role. The Project Management Institute, as well as four companies that we included in this review, have also identified these activities as critical for developing program managers. Program managers for DOD’s 78 major defense acquisition programs, along with program executive officers, their respective deputies, and program managers for certain non-major programs, occupy what DOD refers to as program management key leadership positions. There were 446 program management key leadership positions at the end of fiscal year 2016. They are in turn part of a broader program management career field, which numbers approximately 17,000 civilian and military personnel. The Air Force typically brings its future program managers for major defense acquisition programs into the career field early in their careers, and then provides training and experiences to prepare them for the role. In contrast, the Army and Navy typically bring their future program managers into the career field later in their careers and from other fields, such as engineering. As shown in table 1, at the end of fiscal year 2016, most program manager positions for major defense acquisition programs were held by military personnel. According to military service officials, when a military officer fills a program manager position, a civilian usually fills the deputy program manager position for that program and vice versa. Overarching guidance, training, and oversight for the defense acquisition workforce is provided centrally by DOD in the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, which includes Human Capital Initiatives and the Defense Acquisition University. Other officials and organizations that play key roles include the Defense Acquisition Functional leader for program management, who is responsible for establishing a competency model that reflects the knowledge and skills required to be successful in the career field, as well as position descriptions, requirements for key leadership positions, certification standards, and continuous learning activities; the Directors for Acquisition Career Management in each of the military services, who serve as key advisors for policy, coordination, implementation, and oversight of acquisition workforce programs within their services; and acquisition commands and program executive offices within each military service, which work together to manage acquisition programs and initiatives to improve the workforce. Over the last decade, Congress has passed several laws aimed at bolstering the acquisition workforce and specifically the program management career field. Provisions have included requiring DOD to develop a comprehensive strategy for enhancing the role of program managers, provide advancement opportunities for military personnel, and establish training programs for the acquisition workforce. Congress also established the Defense Acquisition Workforce Development Fund (DAWDF) in 2008 to provide funds for the recruitment, training, and retention of DOD acquisition personnel. Since the establishment of DAWDF, DOD has obligated more than $3.5 billion in DAWDF funds for these purposes. Of the more than $440 million in DAWDF funds obligated in fiscal year 2016, almost $12 million was obligated for the program management career field: $0.4 million was obligated for recruitment, $10.5 million was obligated for training, and $0.9 million was obligated for retention and recognition. Additional funds supported the salaries of 33 people hired into the career field during fiscal year 2016. To bolster the number of civilian personnel that could be selected for a program manager position, the National Defense Authorization Act for Fiscal Year 2018 requires DOD to implement a civilian program manager development program. The act states that the plan for such a program shall include consideration of qualifications, training, assignments and rotations, and retention benefits, among other things. We identified 10 practices, across four distinct areas, used by leading organizations to develop program manager talent based on our extensive review of Project Management Institute documents and discussions with AstraZeneca, Boeing, DXC Technology, and Rio Tinto. These four areas correspond to the internal control standards discussed previously. Program managers at these companies share similar basic responsibilities with DOD program managers, including overseeing the development and production of goods and services in a timely and cost- effective manner. As shown in figure 1 below, leading organizations provide a mix of formal and informal training opportunities focused on sharing knowledge and providing experiences that prepare people for program management, offer mentoring opportunities to guide people along career paths use a mix of financial and nonfinancial incentives to retain high select program managers based on identification of high-potential talent and then assign program managers based on program needs. Boeing representatives noted that by using a combination of these practices, over the past 15 years, their program managers have primarily left positions due to promotion or retirement. Rio Tinto representatives noted that in a challenging environment for finding suitable external talent, they have been able to use these practices to successfully develop most of the talent they need internally. DXC Technology representatives noted that these practices enabled their program managers to receive better feedback and address skill gaps. An AstraZeneca representative noted that these practices have made it easier for people to get the range of experiences they need to move into leadership positions. The Project Management Institute identifies training as the most common component of development. Leading organizations we spoke with use venues like training classes to share knowledge and experiences. These organizations also expand people’s knowledge and experience by encouraging rotation of talent across organizational boundaries. Leading organizations also provide access to on-the-job learning opportunities and repositories of best practices and lessons learned. Examples of practices used by commercial companies we spoke with are described below. Practice #1—Training classes that allow program managers to share experiences: Boeing representatives told us that the company sends employees aspiring to be program managers to a 5-day, in-residence program manager workshop. Attendees simulate challenging program management scenarios and get exposure to senior executives who discuss best practices and share experiences. They are expected to make decisions quickly, and play different roles throughout the simulation so they can gain a better understanding of the consequences of their decisions. Similarly, DXC Technology holds multiday workshops for program managers where they participate in role-playing scenarios in which they have to react to a given situation that a program manager could face. One of the key benefits of the workshop noted by DXC Technology representatives is that they receive individual feedback on areas for improvement. Practice #2—Rotational assignments: According to Boeing representatives, the company selects high-performing midcareer employees interested in program management for a 2-year rotation program in which they take leadership roles and solve difficult challenges facing a part of the business. These could be internal assignments within an individual’s current business unit, or external assignments that cross organizational boundaries, for example, between Boeing’s commercial, defense, and services businesses. Boeing representatives noted this as a valuable leadership opportunity for the people involved, which helps drive change in the organizations to which they are assigned. In order to expand people’s capabilities and give them a broader perspective on the business, AstraZeneca regularly notifies its workforce—via a monthly newsletter and an online portal—of rotational opportunities lasting 6 months to a year. These rotations could be within an individual’s business unit, or in a different location or part of the business. Practice #3—On-the-job learning and information repositories: Rio Tinto representatives told us that the company has managers from one project participate in reviews and events for other projects in order to transfer knowledge. For example, a manager from a mining operation based in one country might visit a mining operation in another country to share ideas. Rio Tinto also retains the formal reviews that take place at the end of each project, as well as the lessons learned by the team itself, in an accessible document management system. Similarly, AstraZeneca uses online collaboration software to house project information that might help others. It has also established a community of practice and networking groups to share knowledge, and provides people moving into management positions a checklist of tasks and meetings to complete within their first 6 months. Boeing representatives told us that one way the company provides on-the-job training and support to program managers is by temporarily bringing in experts with prior experience to participate in a wide variety of activities across all types of programs. These activities include verifying designs and proactively identifying and resolving challenges such as manufacturing problems. The Project Management Institute identifies mentoring as a way of encouraging and supporting people. Leading organizations we spoke with have programs in place to facilitate mentor and mentee relationships. They expect senior people to serve as mentors. The organizations we spoke with also mentor employees by laying out the career paths they might need to follow to achieve the highest levels of program management within the organization. Examples of practices used by commercial companies we spoke with are described below. Practice #4—Mentoring programs with senior leader involvement: According to Boeing representatives, the company offers voluntary mentoring programs—both formal and informal—at different points throughout an employee’s career cycle, including the early stages. Depending on the career goals of an individual, Boeing offers both mentors and sponsors, who are senior leaders that nominate people— especially high performers—for specific opportunities. At Boeing, there is an expectation that senior leaders will be involved in mentoring. For example, midcareer program managers can be matched with executives based on the preferences of the two parties. Relationships are reevaluated annually. Through these relationships, mentees get exposure to critical decisions, as well as other parts of the business. Rio Tinto representatives told us that the company has a formal mentoring program targeted at high-potential talent that partners people with senior leaders, including those from different departments. Senior leaders at Rio Tinto are expected to participate in long-term career development discussions for people two levels below them. The company also provides senior executives and other lower-level managers access to external coaches who focus more on leadership than technical company matters. Practice #5—Career paths that describe skills needed to advance: According to DXC Technology representatives, the company has documented a program management career path that details the skills needed to be a program manager. The company annually identifies the developmental needs of employees, who can then take steps such as moving to another program to gain the required experience to address any gaps. This helps management make decisions that benefit both the individual and the company. Boeing representatives told us that the company has developed a general career path for many of its career fields, including program management, and encourages people to develop the skills they need by gaining experience in different career fields and business units. Boeing program managers we met with described the range of experiences they had within the company that equipped them for their roles, such as working on different kinds of aircraft and in technical and business functions. Leading practices identified by us and the Project Management Institute suggest that a combination of financial and nonfinancial incentives can be used to retain high performers. For example, leading organizations we spoke with offer student loan repayments and financing of higher education in compensation packages as financial incentives. They also provide monetary awards to recognize excellence in job performance and contributions to organizational goals. Nonfinancial incentives could include senior leadership recognizing strong performance in program management and emphasizing the idea that program management is prestigious, challenging, and key to business success. Examples of practices used by commercial companies we spoke with are described below. Practice #6—Financial rewards for good performance: Rio Tinto representatives told us that the company offers incentives that are based on performance. The company includes pay raises linked to annual performance ratings, which are determined by the extent to which a program manager meets objectives including cost and schedule goals. According to Boeing representatives, the company annually assesses program managers based on technical and financial performance measures and employee feedback. These assessments help determine annual salary increases and bonuses. Practice #7—Education subsidies: Boeing offers tuition assistance to all people after they have been at the company for at least 1 year. This can support degree programs, professional certificates, and individual courses in fields of study at over 270 colleges and universities. Boeing representatives noted that this has helped foster a high degree of loyalty from people. Practice #8—Recognition: Boeing representatives told us that program managers for major programs hold a high level of responsibility and accountability. When program managers are successful at running effective programs, they are often moved to larger and more complex programs with much greater responsibility. AstraZeneca announces recognition for program achievements such as meeting delivery targets via e-mail and at town hall meetings, and significant achievements can also be recognized through nomination for annual company-wide awards. The Project Management Institute emphasizes the importance of identifying top talent and future high performers for key roles. Leading practices for selecting program managers are rooted in the identification of high-potential talent and the alignment of that talent with program needs. Leading organizations we spoke with engage senior management in identifying high performing people and monitoring their job assignments, performance, and career progression. They also select program managers with the blend of skills, experience, knowledge, and expertise required to be effective within a particular program environment. Examples of practices used by commercial companies we spoke with are described below. Practice #9—Identification of high-potential talent by senior leaders: Rio Tinto representatives told us that senior leaders at the company annually assess the potential and performance of its people and then classify them in one of nine categories that include those who need additional experiences and developmental opportunities, those in the right role and at the right level that need to be kept engaged, and those considered high potential who need challenging opportunities. AstraZeneca identifies and keeps track of high-potential people through annual talent assessments addressing each person’s strengths and gaps, as well as potential roles, development actions, and associated time frames. The assessments also include an individual’s professional aspirations. According to Boeing representatives, the company uses its succession planning process to identify a pool of qualified people able to step into executive and program manager positions, including those who are ready to step into a role immediately, and those who need some additional development. Practice #10—Assignment based on skills, experiences, and program needs: According to DXC Technology representatives, the company assigns program managers to roles based on a review of their demonstrated management and subject matter competencies. For example, an individual is evaluated on experience such as managing programs of a certain size or level of complexity, as well as the outcomes they achieved on those programs in terms of cost, schedule, and client feedback. An individual is also evaluated on whether he or she has the specific skills needed to manage a particular program, such as those related to data migration or software application design. Boeing representatives told us that the company takes into account a wide variety of factors when assigning a program manager to a program. Factors could include the size, dollar value, and complexity of a program, as well as the developmental needs of a program manager. Our analysis of the practices used by the military services to train, mentor, retain, and select program managers for major defense acquisition programs shows a mix in the level of alignment with the leading practices. We based our analysis on a review of DOD, military service, and relevant sub-component documentation on training, mentoring, retaining, and selecting program managers, including policies, guidance, strategic plans, curricula, online portals, and acquisition workforce data. Table 2 provides our assessment of the alignment of military service practices with the 10 leading practices. Practices used by each of the military services align extensively with 4 of the 10 leading practices. For 5 of the 10, practices used by at least one of the military services do not align extensively with leading practices, and for the remaining practice related to financial rewards for good performance, none of the services’ practices align extensively. We discussed these assessments with each military service Director for Acquisition Career Management, and they generally agreed with our assessments. Military service practices align extensively with four of the leading practices, as shown in table 3 below. For the first practice, alignment is largely the result of steps taken by DOD to comply with the Defense Acquisition Workforce Improvement Act, enacted as part of the National Defense Authorization Act for Fiscal Year 1991. This legislation set forth education, training, and experience requirements that program managers must meet prior to being assigned to a major defense acquisition program or significant non-major defense acquisition program. All four practices that have extensive alignment reflect a combination of DOD-wide initiatives and approaches unique to the military services. The following summarizes our assessment of these practices. Practice #1—Training classes that allow program managers to share experiences: DOD provides centralized training that brings together current and prospective program managers to strengthen their skill sets and share their experiences. The Defense Acquisition University has developed a training curriculum of courses that people must complete—in conjunction with experience and education standards—to be certified as ready to take on increasingly challenging assignments. The highest level courses required for program managers incorporate simulations, case studies, senior agency and industry speakers, and team projects to strengthen participants’ analytical, critical thinking, and decision-making skills. According to a Defense Acquisition University official, each year approximately 350 people attend these courses. According to the military services’ Directors for Acquisition Career Management, all current major defense acquisition program managers met their certification requirements. The military services have also developed their own training for program managers that brings peers together and addresses service-specific issues. For example, the Navy has established program management colleges at its largest systems commands. These colleges teach curricula specific to Navy processes. The Navy also provides approximately 200 program managers each year with training courses focused on understanding commercial industry and managing relationships with contractors. These classes, offered through business schools, are taught by academic faculty, senior naval officials, and private sector executives and focus on factors program managers need to be aware of to understand industry behavior and decision-making. According to DOD’s acquisition workforce strategic plan for fiscal years 2016 through 2021, the department intends to improve the type of training it provides program managers, the timing of when courses are provided, and the delivery method. The plan also noted DOD’s intent to strengthen qualification requirements for program management positions by further developing the list of proficiencies associated with certifications, including leadership skills for all levels and technical skills needed by those in the “beginner” and “intermediate” level program management positions. In September 2016, the defense acquisition functional leader for program management finalized and issued this list. Practice #3—On-the-job learning and information repositories: Each of the services provides its own unique on-the-job training or repositories to share lessons learned from acquisition programs. The Air Force provides people in the program management career field with detailed task lists that support on-the-job learning along their career paths. For example, people are encouraged to demonstrate competence in areas such as schedule management. The Army has developed an online portal that houses lessons learned from acquisition programs that were documented around program milestones or upon termination. Users can view and search lessons submitted by others, participate in discussion forums, and reference acquisition case histories. The portal contains over 800 lessons learned, with over 400 relating specifically to program management. The Navy has created a series of physical “war rooms” that display materials on the evolution and organization of the Navy, the service’s acquisition history, how to manage a major program, the unique challenges of ship building, and case studies. The Navy hosts a 5-day training program for program managers in these rooms in order to transfer lessons learned from previous acquisition programs. The Defense Acquisition University has also established an online program management community of practice that houses a range of tools and documents that communicate lessons learned. Practice #8—Recognition: DOD leadership acknowledges the challenges and importance of program management by designating the most senior positions in the career field—including program managers— as key leadership positions. These positions require a significant level of authority commensurate with the responsibility and accountability for acquisition program success. Based on our analysis of DOD acquisition workforce data, while the program management career field represents just over 10 percent of the overall acquisition workforce, it accounts for almost 40 percent of key leadership positions. Senior leadership in each of the services also provides their own types of recognition for good performance in program management. For example, each service has an annual award recognizing high-performing program managers. In addition, program management is an award category for the DOD-wide Defense Acquisition Workforce Individual Achievement Award, which includes recognition for winners at an awards ceremony held at the Pentagon. Practice #10—Assignment based on skills, experiences, and program needs: All of the services evaluate the skills and experiences of candidates for program manager roles, and ensure they have the required qualifications. As part of their processes for filling these roles, the services take note of specific needs associated with a program. In the Army, civilian and military personnel apply each year and are competitively selected by a board of senior Army acquisition leaders who use instructions from the Secretary of the Army to select the best qualified individuals. Once selected by the board, the Army uses another process to match the skills and experience of the individual to those required by the program manager position based on factors such as functional, technical, and educational experience. In the Navy, civilian and military personnel apply and compete for specific programs. As part of the documentation of candidate selection, the Navy requires a description of how the candidate’s skills align with the current status of the program. The Air Force designates whether a program will have a military or civilian program manager in advance. The senior official who approves program manager selections considers program needs along with individual qualifications and functional requirements. In addition, the military services consult with the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics on the selection of program managers for those programs where that office is the decision authority. For five of the leading practices, at least one of the military services’ practices do not align extensively, as shown in table 4 below. The following summarizes our assessment of instances in which one or two military services may be using a leading practice, but not all three services. We also identify examples of military service actions that could serve as a model for meeting those leading practices. Practice #2—Rotational assignments: Each of the services provides civilian and military program management personnel with opportunities to rotate internally among other units or functions. However, while the military services have identified external rotations with industry as a way to gain valuable experience and improve people’s business acumen, practices in this area vary. For example, The Air Force has an external industry rotation program that is open to both civilian and military personnel. In total, about seven military and civilian program management personnel participate in this program each year, according to the Air Force Director for Acquisition Career Management. The Army’s external industry rotation program is open only to military personnel, and approximately 11 program management personnel participate each year, according to the Army Director for Acquisition Career Management. The Director also noted that some local Army organizations send civilian personnel on industry rotations, but was not aware of participation by civilian personnel in the program management career field. The Navy uses the Secretary of Defense Executive Fellows program to provide experience with commercial industry. This program is open to participants from all the military services. Until 2017, participation in the program was restricted to only military personnel. Over the past 5 years, between two and five Navy military acquisition personnel per year participated in the program, according to the Navy Director for Acquisition Career Management. The Directors for Acquisition Career Management noted that two of the inherent difficulties with sending civilians on potentially year-long industry rotations are that their organizational unit would need to fund the participant’s travel costs, and would also need to find people to perform the participant’s duties in their absence. The Air Force’s industry rotation program avoids the travel cost problem by finding civilians opportunities with local companies. In addition, the program is targeted at more junior personnel than the programs used by either the Army or Navy, reducing the difficulty of filling their position while they are on a rotation. As a result of the focus on military personnel participating in industry rotations, civilian personnel in the Army and Navy miss an opportunity to improve their business acumen and gain valuable experience that would better prepare them for program manager roles. They could benefit from consideration of the approaches taken by the Air Force. Practice #4—Mentoring programs with senior leader involvement: Each of the services offers some kind of voluntary mentoring program. However, only the Air Force and Army have a documented expectation that senior civilian and military personnel serve as mentors. The Navy provides a range of mentoring resources, but only has a documented expectation that senior military personnel serve as mentors. The Navy Director for Acquisition Career Management agrees that this expectation is not documented for civilians, but believes that senior civilian leaders in program management are aware that mentoring is a responsibility. However, because it is not documented, some senior civilian leaders might not be aware of this expectation. Practice #5—Career paths that describe skills needed to advance: Each of the services has outlined the steps people need to take to become program managers and provided opportunities for both civilians and military to advance to these and even higher level positions. However, the descriptions of the skills people should obtain to advance along the various career paths are inconsistent among the services. The Air Force includes the skills and competencies people need to achieve specific career goals in the competency-based task lists previously discussed as a tool to support on-the-job learning. The task lists are the same for civilian and military personnel. The Army describes the skills and competencies civilians need to advance via a one-page roadmap. While there is a one-page roadmap for military personnel, it does not discuss or link to skills and competencies. The online version of the civilian roadmap includes direct links to an existing DOD tool that people can use to identify and address gaps in their experience and capture demonstrated experience in a wide range of program management competencies, such as stakeholder management. People and their supervisors are encouraged to use this tool to develop individual career development plans. The tool also provides a common set of standards that organizations can use to mitigate skill gaps through hiring or using developmental opportunities. The Navy’s systems command responsible for delivering and supporting aircraft provides a career roadmap for the program management career field, as well as detailed descriptions of the different levels of skills and competencies needed to advance. However, the systems command responsible for delivering and supporting ships does not have a formal career roadmap. Both Army and Navy Directors for Acquisition Career Management are aware of these inconsistencies, and are working to put approaches in place in fiscal year 2018 to address them and ensure that key groups in the program management career field are not missing important information about skills they should develop. Practice #7—Education subsidies: All the services offer tuition assistance to military and civilian personnel to further their education, which has helped increase the percentage of program management personnel with a graduate degree from 46 percent in fiscal year 2008 to 57 percent in fiscal year 2016. The services also offer student loan repayments, but use them for different purposes. The Army and Navy use DAWDF-funded student loan repayments—and the requirement that recipients sign an agreement to serve for 3 years—as a retention tool for program management personnel. However, the Air Force only uses these repayments as a recruiting tool, despite the fact that they can be used for both recruitment and retention. This decision stems from the results of a 2016 study the Air Force commissioned from the RAND Corporation that found limited utility in offering retention bonuses as a tool to retain talent. The Director for Acquisition Career Management told us that the Air Force is scaling back its use of all financial retention incentives and prefers to use student loan repayments as a recruiting tool. The service agreement therefore only covers the early part of someone’s career with the Air Force, instead of being a way to drive retention of more senior personnel. Prior GAO work has found that financial retention incentives are among the most effective flexibilities that agencies have for managing their workforce, and that insufficient use of existing flexibilities can significantly hinder the ability of agencies to retain and manage personnel. Practice #9—Identification of high-potential talent by senior leaders: The Army regularly and systematically involves senior management in identifying high-potential program management talent among civilian and military personnel. It requires senior managers to annually evaluate the leadership potential of all civilian acquisition personnel at midcareer or above, and the Army’s annual evaluation for all military officers assesses their potential for positions of greater responsibility. The Air Force has a similar process for military personnel, but not civilians. The onus is on civilian personnel to nominate themselves for development programs and resources, rather than being identified and guided toward those opportunities by senior leaders. The Navy only identifies high-potential military and civilian talent on an informal basis, which varies across the service. The Air Force and Navy risk overlooking high-potential talent as a result of their approaches. The Directors for Acquisition Career Management for both services acknowledge the ad hoc nature of their practices, and are looking into steps they could take in fiscal year 2018 to more systematically identify high-potential talent. None of the military services’ practices align extensively with leading practices for providing financial rewards for good performance, as shown in table 5 below. Commercial companies have more flexibility than DOD to financially reward good performance. They are not subject to the legal restrictions on compensation that federal agencies must consider, and can offer types of compensation, such as stock options, that federal agencies cannot. Despite this, DOD has mechanisms to financially reward high- performing people. However, these incentives are either unavailable to all program management personnel because of the various pay systems used by DOD, or are underutilized by the military services. For example, military and civilian personnel are compensated under different systems. Military pay and allowances are delineated in Title 37 of the U.S. Code, and while there are provisions for retention bonuses that would cover acquisition officers, there are none that reward high performance. Most DOD civilian personnel, on the other hand, are covered by the General Schedule classification, a pay system that is used in many agencies across the federal government. For the most part, people in this pay system receive set pay increases as long as their performance is at an acceptable level. The military services also have the option to convert civilian personnel to the Civilian Acquisition Workforce Personnel Demonstration Project, known as AcqDemo, where people including those in the program management career field have the opportunity to earn varying levels of pay increases or bonuses based on their performance. The military services’ use of AcqDemo varies. According to AcqDemo data collected by DOD’s Human Capital Initiatives office, as of the end of fiscal year 2016, approximately 64 percent of the Army’s civilian program management workforce is covered by the system. Army officials told us that the level of coverage has increased since then, and that organizations containing the remaining eligible workforce are considering participation in fiscal year 2018. Furthermore, officials told us that all Army program managers are covered by AcqDemo. However, only 38 percent of the Navy’s civilian program management workforce is covered by the system, and 29 percent of the Air Force’s. According to the AcqDemo program manager and the Air Force and Navy Directors for Acquisition Career Management, organizations are hesitant to extend coverage because they are apprehensive about whether what is currently a demonstration program will become permanent, and the time it takes management to reach formal agreement with local bargaining units. The greater coverage of AcqDemo across the Army’s civilian program management workforce compared to the Air Force and Navy suggests that these two services may have opportunities to learn lessons from the Army’s experience. Congress recently took actions that could address some of the concerns about AcqDemo. The National Defense Authorization Act for Fiscal Year 2018, for example, extends the authorized timeline for AcqDemo use from December 31, 2020 to December 31, 2023, and increases the total number of people who may participate in the program at any one time from 120,000 to 130,000. As of February 2017, a total of approximately 36,000 people across DOD were participating in AcqDemo. The military services can also use DAWDF funding to recognize high- performing civilian personnel, but have only made limited use of this funding for program management personnel. The Directors for Acquisition Career Management reported the following awards between fiscal years 2008 and 2017: The Air Force awarded $5,000 to one recipient in fiscal year 2017. The Army awarded a total of $70,000 to 351 recipients on one team in fiscal year 2015. The Navy awarded a total of $10,000 to seven recipients between fiscal years 2008 and 2017. Requests for DAWDF funds are left to the discretion of acquisition commands. According to the military services’ Directors for Acquisition Career Management, local commanders are not frequently requesting DAWDF funds for program management recognition awards. One director stated that this was because they want to avoid the perception of treating civilian personnel differently from military personnel. As a result, the military services are missing an opportunity to financially reward good performance and potentially losing talented civilians by not using all available retention tools. The Army Director stated that Army organizations have also used other financial performance incentives, such as spot awards for civilian program management personnel that are not funded by DAWDF. This director also noted that government-wide budgetary limitations for individual monetary awards have reduced the flexibility to offer rewards for performance. The National Defense Authorization Act for Fiscal Year 2018 requires DOD to commission a review of military and civilian program manager incentives, including a financial incentive structure to reward program managers for delivering capabilities on budget and on time. This represents an opportunity for DOD to identify and begin to address concerns about the equitable treatment of civilian and military program management personnel. The military services recognize that they need skilled program managers to develop acquisition programs and have taken steps to develop that top-notch talent. Of note, DOD has developed a solid training regimen and established minimum training, experience, and education requirements for people to manage acquisitions of various dollar thresholds. The services have also established repositories that share lessons learned and provide on-the-job learning opportunities to supplement the formal training. Yet, when compared to leading practices, we found that several practices used by the military services for training, mentoring, retaining, and selecting people for program manager positions could be improved. For instance, the Air Force has practices that extensively align with all leading practices for training and mentoring, but we identified some practices for retaining and selecting program managers that do not. We assessed the Army as having practices that extensively align with all leading practices for selecting program managers, but identified some practices for training, mentoring, and retaining program managers that do not. We assessed the Navy as having practices that do not extensively align with leading practices in each of the areas of training, mentoring, retaining, and selecting program managers. In nearly all cases, the military services could improve their practices by learning from ideas and initiatives being used by another military service or by commercial companies and ensuring that civilian and military personnel have similar opportunities to develop. While commercial companies have more flexibility in providing financial incentives to their program managers, the military services could make greater use of financial mechanisms provided by Congress—such as DAWDF and AcqDemo—to reward high performing civilian personnel. DOD also has an opportunity to identify for Congress any concerns about the equitable treatment of civilian and military program management personnel when it comes to rewarding good performance. Taking these actions could encourage high-potential talent to remain in the program management career field and strengthen the next generation of program managers. We are making a total of eight recommendations, including three to the Air Force, two to the Army, and three to the Navy. Specifically: The Secretary of the Air Force should take steps to address areas of civilian and military program manager retention and selection that do not align extensively with leading practices. This could include using approaches already used by the other military services or commercial companies. (Recommendation 1) The Secretary of the Air Force should make greater use of existing financial mechanisms such as DAWDF to recognize high performers. (Recommendation 2) The Secretary of the Air Force should identify lessons learned by the Army related to the Army’s experience to extend coverage of AcqDemo across the civilian program management workforce. (Recommendation 3) The Secretary of the Army should take steps to address areas of civilian and military program manager training, mentoring, and retention that do not align extensively with leading practices. This could include using approaches already used by the other military services or commercial companies. (Recommendation 4) The Secretary of the Army should make greater use of existing financial mechanisms such as DAWDF to recognize high performers. (Recommendation 5) The Secretary of the Navy should take steps to address areas of civilian and military program manager training, mentoring, retention, and selection that do not align extensively with leading practices. This could include using approaches already used by the other military services or commercial companies. (Recommendation 6) The Secretary of the Navy should make greater use of existing financial mechanisms such as DAWDF to recognize high performers. (Recommendation 7) The Secretary of the Navy should identify lessons learned by the Army related to the Army’s experience to extend coverage of AcqDemo across the civilian program management workforce. (Recommendation 8) We provided a draft of this report to DOD for review and comment. In its written comments, reproduced in appendix II, DOD concurred with our eight recommendations and in some cases identified ongoing efforts among the military services to address the recommendations and increase alignment with leading practices. In addition, DOD noted the importance of addressing restrictions on how it can reward and retain military personnel, and requested that this issue be included in an ongoing study of DOD workforce incentives. DOD also stated that some of its recent accomplishments and improvements were not mentioned in the report. For example, DOD noted that representatives from the program management community meet regularly to discuss and share lessons learned and best practices. Recent accomplishments include updated competencies, career tracking and development tools, and improvements to classroom and online training. Our report recognizes the progress made by DOD in these areas and highlights some specific examples. We also agree that there is a broader range of efforts underway to enhance the development of program managers. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; and the Secretaries of the Air Force, Army, and Navy. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or sullivanm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report addresses (1) how leading organizations train, mentor, retain, and select program managers and (2) the extent to which military service practices for training, mentoring, retaining, and selecting program managers align with those of leading organizations. To identify how leading organizations train, mentor, retain, and select program managers, we first reviewed GAO’s Standards for Internal Control in the Federal Government to identify criteria regarding the controls that federal agencies such as the Department of Defense (DOD) should have in place to manage talent. To identify leading practices for implementing these internal control standards, we first reviewed key documentation, including relevant legislation and prior GAO reports related to program management. We also reviewed prior GAO reports on managing the federal workforce, and in particular those reports that addressed retention mechanisms. We obtained and reviewed documentation from the Project Management Institute, a not-for-profit association that provides global standards for project and program management, related to program management and managing talent. We also worked with the Project Management Institute to identify suitable companies for us to approach to learn about leading practices, based on their membership in the Project Management Institute’s Global Executive Council, and insights from Project Management Institute representatives regarding these companies’ practices for training, mentoring, retaining, or selecting program managers. We spoke with or visited these companies, and where possible, companies provided relevant documentation to support their examples. The selected companies were the following: AstraZeneca is a biopharmaceutical company that focuses on the discovery, development, and commercialization of prescription medicines. AstraZeneca reported total revenues of $23 billion in 2016. Boeing Company is a global aerospace company and manufacturer of commercial airplanes and defense, space, and security platforms and systems. Boeing reported total revenues of $94.6 billion in 2016. DXC Technology is an end-to-end information technology services company. Created by the merger of CSC and the Enterprise Services business of Hewlett Packard Enterprise, DXC Technology serves nearly 6,000 private and public sector clients across 70 countries, delivering next-generation information technology services and solutions. Rio Tinto is a metal and minerals mining company that finds, mines, processes, and markets mineral resources including iron ore, aluminum, copper, diamonds, and energy. Rio Tinto reported total revenues of $33.8 billion in 2016. Based on our review of Project Management Institute documentation and prior GAO reports, as well as our discussions with commercial companies, we identified a set of leading practices for training, mentoring, retaining, and selecting program managers. We shared this set of leading practices with Project Management Institute representatives and made adjustments based on their feedback. To identify the extent to which military service practices align with those of leading organizations, we analyzed DOD, military service, and relevant sub-component documentation on training, mentoring, retaining, and selecting program managers for DOD’s current portfolio of 78 major defense acquisition programs as defined in our most recent assessment of the portfolio. We also interviewed the following DOD and military service organizations during our review: Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, Office of Human Capital Initiatives. Office of the Under Secretary of Defense for Personnel and Readiness, Office of the Defense Civilian Personnel Advisory Service. Office of the Assistant Secretary of Defense for Acquisition Defense Acquisition University. Department of the Air Force Director for Acquisition Career Management. Department of the Army Director for Acquisition Career Management. Department of the Navy Director for Acquisition Career Management. 4th Estate Director for Acquisition Career Management. Naval Air Systems Command. Naval Sea Systems Command. We also interviewed a former Assistant Secretary of the Army and Deputy Assistant Secretary of the Air Force with expertise in defense acquisition. We used pertinent documentation and information from interviews with officials to assess the extent to which each of the services’ practices aligned with leading practices. Specifically, we assigned ratings for three levels of alignment. Extensive alignment means that the service’s practice contains all of the elements of the leading practice and is not limited to a subset of the population. Partial alignment means that the service’s practice contains some, but not all, elements of the leading practice, or is limited to a subset of the population, such as military or civilian personnel only, or a particular organization within the service. Little to no alignment means that the service’s practice contains minimal or no elements of the leading practice. The following is a list of elements for each practice: 1. Training classes that allow program managers to share experiences: Training classes that involve current or prospective program managers and that allow for knowledge and experience sharing. 2. Rotational assignments: Internal and external—that is, industry— rotational assignments available to military and civilian personnel. 3. On-the-job learning and information repositories: Resources that provide access to guidance on how to perform program management activities and learn from past program management experiences. 4. Mentoring programs with senior leader involvement: Existence of programs that facilitate mentor-mentee relationships and expectation that senior personnel serve as mentors. 5. Career paths that describe skills needed to advance: Documentation for military and civilian personnel of skills needed at different stages of career path(s) to becoming a program manager. 6. Financial rewards for good performance: Consistent use of DAWDF to fund recognition awards for 1 percent or more of civilian program management personnel and AcqDemo coverage of a majority of the civilian program management workforce. 7. Education subsidies: Tuition assistance for further education and use of DAWDF-funded student loan repayments as a retention—versus recruitment—tool. 8. Recognition: Senior-level recognition of prestige and challenging nature of program manager role and of good performance in the role. 9. Identification of high-potential talent by senior leaders: Processes for senior leaders to assess military and civilian program management personnel and identify those considered high potential. 10. Assignment based on skills, experiences, and program needs: Program manager selection processes that assess candidate skills and experiences and specific needs of a program. One analyst performed the initial assessment for each service, and the supporting evidence was then reviewed by the Assistant Director, with any disagreement discussed and resolved as a team. These discussions also informed requests for more information and documentation from each of the services. Assessments were updated based on what was provided by the services. We also reviewed the military services’ practices for approaches that one or more services had adopted that aligned with leading practices, and that could potentially be adopted by the other services to improve their alignment. We shared our assessments with the military service Directors for Acquisition Career Management to give them the opportunity to note additional approaches or initiatives that might inform our assessments, and incorporated their input as appropriate. We reviewed data from DataMart, DOD’s acquisition workforce database, on the composition of the acquisition workforce and the program management career field as of the end of fiscal year 2016, including the extent of coverage of the Civilian Acquisition Workforce Personnel Development (AcqDemo) project. To assess the reliability of DOD’s DataMart data, we (1) reviewed existing information about the data and the system that produced them, (2) interviewed knowledgeable agency officials, and (3) reviewed written answers to questions about the system’s data reliability, including data collection and entry, underlying data sources, and use of internal controls. We determined that the data were sufficiently reliable for the purposes of our reporting objectives. We conducted this performance audit from August 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Michael J. Sullivan, (202) 512-4841 or sullivanm@gao.gov. In addition to the contact named above, Cheryl Andrew (Assistant Director), Emily Bond, Robert Bullock, Lorraine Ettaro, Kurt Gurka, Ruben Gzirian, Ashley Rawson, Lucas Scarasso, and Robin Wilson made key contributions to this report.", "summary": "The Department of Defense's (DOD) major acquisition programs continue to experience cost and schedule overruns. GAO previously found that selecting skilled program managers is a key factor to achieving successful program outcomes. DOD relies on military and civilian program managers to deliver its most expensive new weapon systems, meaning its approach to training, mentoring, retaining, and selecting program managers is critical. House Report 114-537 included a provision for GAO to review the career paths, development, and incentives for program managers. This report addresses how leading organizations train, mentor, retain, and ultimately select program managers; and the extent to which military service practices align with those leading practices. To conduct this work, GAO identified leading practices documented in prior work and by the Project Management Institute, and interviewed commercial companies identified by the Institute as leaders in this field. GAO also analyzed military service practices for developing program managers and compared those to leading practices. Leading organizations use 10 key practices to train, mentor, retain, and ultimately select skilled program managers. GAO found that military service practices for developing program managers align extensively with four of the leading practices, as shown in the table below. At least one military service's practices do not align extensively with five of the leading practices, as shown in the table below. For the remaining leading practice, none of the military services' practices align extensively, as shown in the table below. Military service officials generally agreed with the assessments. More consistent alignment with leading practices—adapted for military and civilian personnel as appropriate and including greater use of existing financial rewards—would enhance the services' ability to manage acquisition programs. GAO is making eight recommendations, including that the military services improve practices that do not align extensively with leading practices and make greater use of existing financial rewards for good performance. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "Federal law enforcement agencies and state coordinators in our survey— as well as officials we interviewed from federal, state, and local law enforcement agencies—reported various uses of DOD excess controlled property for law enforcement activities. The reported uses included enhancing counterdrug, counterterrorism, and border-security activities. Also, law enforcement agencies reported using DOD’s excess controlled property for other law enforcement activities, such as search and rescue, natural disaster response, surveillance, reaching barricaded suspects, police training, and the serving of warrants. Federal, state, and local agencies cited a number of ways in which they had benefited from LESO program, with several reporting that the transfers of controlled property allowed them to save money. For example, a local law enforcement official in Texas reported that 96 percent of the department budget goes to salaries and that the LESO program helped the department acquire items that it would otherwise not be able to afford, saving the department an estimated $2 million to $3 million. Additionally, agencies provided examples of how property they received through the LESO program have been used. For example, the Bureau of Indian Affairs officials reported they have used vehicles to support their Office of Justice Services’ drug unit during marijuana eradication and border operations by providing transport to agents over inhospitable terrain in mountainous and desert environments. In another example, Texas law enforcement officials reported that the San Marcos and Hays County police departments used their issued Mine Resistant Ambush Protected (MRAP) vehicles to rescue more than 600 stranded people from floodwaters in October 2015. Moreover, the Los Angeles County Sheriff’s Department reported that it used a robot to remove a rifle from an attempted murder suspect who had barricaded himself. DLA has taken some steps to address previously identified weaknesses in its processes for transferring and monitoring its excess controlled property through revisions to its policy and procedures on the management, oversight, and accountability of the LESO program. Such revisions were made, in part, because of recommendations made by the DOD and DLA Offices of Inspector General. The DOD and DLA Offices of Inspector General conducted four audits of the LESO program between 2003 and 2013 that identified more than a dozen recommendations, such as developing and implementing written standard operating procedures for the approval and disapproval of law enforcement agency property requests and issuance, transfer, turn-in and disposal of LESO property. In our July 2017 report, we found the department had taken the following actions to enhance its transfer process through revisions to policy and procedures: transitioned full management responsibility of the LESO Program to DLA Disposition Services in 2009; developed LESO Program Standard Operating Procedures in 2012 and updated them in 2013; transitioned to a new data system in 2013 after identifying that the old system was not capable of post-issue tracking;revised the DLA instruction that provides policy, responsibility, and procedures for DLA’s management responsibilities of the LESO program in 2014 and 2016; and revised LESO program processes in 2016 to incorporate recommendations made by the Federal Interagency Law Enforcement Equipment Working Group, such as defining executive order controlled property or prohibiting schools K-12 from participating in the program. In addition, DLA is in the process of developing additional training on LESO program policies and procedures, and is establishing memorandums of understanding with federal law enforcement agencies on the general terms and conditions of participating in the program, including the restrictions on the transfer and sale of controlled property. We found weaknesses in three areas: (1) verifying and approving applications, (2) transferring property, and (3) the assessment of risk. First, our independent testing of the LESO program’s internal controls identified deficiencies in the processes for verification and approval of federal law enforcement agency applications. Specifically, our investigators posing as authorized federal law enforcement officials of a fictitious agency applied and were granted access to the LESO program in early 2017. In late 2016, we emailed our completed application to the LESO program office. Our application contained fictitious information including agency name, number of employees, point of contact, and physical location. In early 2017, after revising our application at the direction of LESO officials we were notified that our fictitious law enforcement agency was approved to participate in the LESO program. LESO officials also emailed us to request confirmation of our agency’s authorizing statute; in response, our investigators submitted fictitious authorizing provisions as provisions in the U.S. Code. At no point during the application process did LESO officials verbally contact officials at the agency we created—either the main point of contact listed on the application or the designated point of contact at a headquarters’ level—to verify the legitimacy of our application or to discuss establishing a memorandum of understanding with our agency. DLA’s internal controls for verifying and approving federal agency applications and enrollment in the LESO program were not adequate to prevent the approval of a fraudulent application to obtain excess controlled property. Specifically, LESO’s reliance on electronic communications without actual verification does not allow it to properly vet for potentially fraudulent activity. For example, DLA did not require supervisory approval for all federal agency applications, or require confirmation of the application with designated points of contact at the headquarters of participating federal agencies. Additionally, at the time we submitted our application, DLA officials did not visit the location of the applying federal law enforcement agency to help verify the legitimacy of the application. After our briefing of DLA officials in March 2017 on the results of our investigative work, DLA officials stated they took immediate action, and in April 2017 visited 13 participating federal law enforcement agencies. However, at this time DLA has not reviewed and revised the policy or procedures for verifying and approving federal agency applications and enrollment in the LESO program. Second, our independent testing also identified deficiencies in the transfer of controlled property, such as DLA personnel not routinely requesting and verifying identification of individuals picking up controlled property or verifying the quantity of approved items prior to transfer. Our investigators, after being approved to participate in the LESO program, obtained access to the department’s online systems to view and request controlled property. We subsequently submitted requests to obtain controlled property, including non-lethal items and potentially-lethal items if modified with commercially available items. In less than a week after submitting the requests, our fictitious agency was approved for the transfer of over 100 controlled property items with a total estimated value of about $1.2 million. The estimated value of each item ranged from $277 to over $600,000, including items such as night-vision goggles, reflex (also known as reflector) sights, infrared illuminators, simulated pipe bombs, and simulated rifles. Our investigator scheduled appointments and obtained the controlled property items, such as those shown in the photos below. Using fictitious identification and law enforcement credentials, along with the LESO-approved documentation, our investigator was able to pass security checks and enter the DLA Disposition Service warehouse sites. Personnel at two of the three sites did not request or check for valid identification of our investigator picking up the property. According to DLA guidance, direct pickup of allocated property may be made by an individual with valid identification and the appropriate DOD authorization form that is signed by the authorized individual listed in the letter. DLA has not taken steps to reasonably ensure that onsite officials routinely request and verify valid identification of the individual(s) authorized to pick up allocated property from the LESO program, as required by the guidance. DLA officials acknowledged they could take additional steps to ensure compliance with the requirements in the handbook. Furthermore, although we were approved to receive over 100 items and the transfer documentation reflects this amount, we were provided more items than we were approved to receive. The discrepancy involved one type of item—infrared illuminators. We requested 48 infrared illuminators but onsite officials at one Disposition Services site provided us with 51 infrared illuminators in 52 pouches, of which one pouch was empty. Additionally, we found that one DLA Disposition Services site had a checklist as a part of their transfer documentation for their personnel to complete. The checklist required manual completion of several items, including quantity, date, and who fulfilled the order. The other two DLA Disposition Services sites, including the site that transferred the wrong quantity, did not include this checklist with the transfer documentation we received. DLA guidance states that accountability records be maintained in auditable condition to allow property to be traced from receipt to final disposition. We concluded that without guidance that specifically requires DLA Disposition Services’ on-site officials to verify the type and quantity of approved items against the actual items being transferred prior to removal from the sites, DLA will lack reasonable assurance that the approved items transferred are appropriately reflected in their inventory records. Third, while DLA has taken some steps, mostly in early 2017, to address identified deficiencies in the LESO program, DLA lacks a comprehensive framework for instituting fraud prevention and mitigation measures. During the course of our review, DLA revised the LESO program applications by requiring applicants to sign an attestation that the agency that they represent is a legitimate law enforcement agency. Further, DLA officials stated they are more carefully reviewing the legitimacy of some information on the application such as email addresses and physically visiting federal agencies that enter into memorandums of understanding with the LESO program. However, as previously discussed, we identified internal controls weakness in the policy and procedures for verifying and approving federal agency applications and enrollment as well as weakness throughout the process from approval to the actual transfer of the items to the agencies, which indicates that DLA has not examined potential risks for all stages of the process. According to GAO’s Fraud Risk Framework, effective fraud risk managers collect and analyze data on identified fraud schemes, use these lessons learned to improve fraud risk management activities, and plan and conduct fraud risk assessments that are tailored to their programs. The framework states there is no universally accepted approach for conducting fraud risk assessments since circumstances among programs vary. However, per leading practices, assessing fraud risks generally involves five actions: (1) identifying inherent fraud risks affecting the program, (2) assessing the likelihood and effect of those fraud risks, (3) determining fraud risk tolerance, (4) examining the suitability of existing fraud controls and prioritizing residual fraud risks, and (5) documenting the program’s fraud risk profile. DLA has begun to examine some fraud risks associated with the LESO program. However, DLA officials acknowledged during our March 2017 meeting that they have not conducted a fraud risk assessment on the LESO program to include the application process, and as such, has not designed or implemented a strategy with specific control activities to mitigate risks to the program. We concluded that conducting such an assessment could have program-wide improvements, including strengthening the controls to verify the legitimacy of applicants. Overall, we concluded in our July 2017 report that DLA’s internal controls did not provide reasonable assurance in preventing fraud. Therefore, we made four recommendations for DLA to: review and revise policy or procedures for verifying and approving federal agency applications and enrollment; ensure compliance that DLA Disposition Services on-site officials transferring controlled property verify that persons picking up items have valid identification and are authorized to pick up allocated property from the LESO program; issue guidance that requires DLA Disposition Services on-site officials to verify the type and quantity of approved items against the actual items being transferred prior to removal from the sites; and conduct a fraud risk assessment to design and implement a strategy with specific internal control activities to mitigate assessed fraud risks. DOD concurred with all of our recommendations and highlighted actions to address each one. Chairman Wilson, Ranking Member Bordallo, and Members of the Subcommittee, this concludes our prepared statement. My colleague, Mr. McElrath, and I would be pleased to respond to any questions that you may have at this time. For questions about this statement, please contact Zina D. Merritt at (202) 512-5257 or merrittz@gao.gov or Wayne A. McElrath at (202) 512-2905 or mcelrathw@gao.gov. In addition, individuals making significant contributions to this statement include: Marilyn Wasleski, Assistant Director; Laura Czohara, Martin de Alteriis, Barbara Lewis, Felicia Lopez, Maria McMullen, George Ogilvie, Richard Powelson, and Samuel Woo. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's July 2017 report, entitled DOD Excess Property: Enhanced Controls Needed for Access to Excess Controlled Property ( GAO-17-532 ). merrittz@gao.gov or Wayne A. McElrath at (202) 512-2905 or mcelrathw@gao.gov . The Defense Logistics Agency (DLA) has taken some actions and is planning additional actions to address identified weaknesses in its excess controlled property program. However, internal control deficiencies exist for, among other things, ensuring that only eligible applicants are approved to participate in the Law Enforcement Support Office (LESO) program and receive transfers of excess controlled property. DLA is establishing memorandums of understanding with participating federal agencies intended to, among other things, establish general terms and conditions for participation, revise its program application to require additional prospective participant information, and plans to provide additional online training for participating agencies that is expected to begin in late 2017. However, GAO created a fictitious federal agency to conduct independent testing of the LESO program's internal controls and DLA's transfer of controlled property to law enforcement agencies. Through the testing, GAO gained access to the LESO program and obtained over 100 controlled items with an estimated value of $1.2 million, including night-vision goggles, simulated rifles, and simulated pipe bombs, which could be potentially lethal items if modified with commercially available items . GAO's testing identified that DLA has deficiencies in the processes for verification and approval of federal law enforcement agency applications and in the transfer of controlled property, such as DLA personnel not routinely requesting and verifying identification of individuals picking up controlled property or verifying the quantity of approved items prior to transfer. Further, GAO found that DLA has not conducted a fraud risk assessment on the LESO program, including the application process. Without strengthening DLA and LESO program internal controls over the approval and transfer of controlled property to law enforcement agencies, such as reviewing and revising policy or procedures for verifying and approving federal agency applications and enrollment, DLA lacks reasonable assurance that it has the ability to prevent, detect, and respond to potential fraud and minimize associated security risks. Examples of Controlled Property Items Obtained DLA maintains a public Internet site to address statutory requirements to provide information on all property transfers to law enforcement agencies. DLA's public Internet site shows all transferred property, and, as of April 2017, in response to GAO's findings, has included a definition of controlled property to distinguish for the general public what items are considered controlled.", "document_type": "gao"}
{"report": "FHA’s single-family mortgage insurance programs insure private lenders against losses from borrower defaults on mortgages that meet FHA criteria for properties with one to four housing units. FHA insures a variety of mortgage types, including loans for initial home purchases, construction and rehabilitation, and refinancing. In fiscal year 2016, FHA insured roughly 1.3 million single-family mortgages with total initial balances of approximately $260 billion. Partly because of its low 3.5 percent minimum down-payment requirement, FHA has played a particularly large role among groups with lower average levels of accumulated wealth, including minority, lower-income, and first-time home buyers. For example, in fiscal year 2016, roughly 82 percent of FHA-insured home purchase loans went to first-time home buyers and more than 33 percent went to minority home buyers. FHA also generally is thought to promote stability in the housing market by helping to ensure the availability of mortgage credit in areas that may be underserved by the private sector or that are experiencing economic downturns. Consistent with this view, the volume of FHA-insured forward mortgages peaked in fiscal year 2009, toward the end of the 2007–2009 recession and in the midst of the 2007–2011 housing crisis. In terms of loan originations, the share of the single-family home purchase mortgage market insured by FHA reached nearly 30 percent in fiscal year 2009, while in more recent years it has been about 20 percent. The MMI Fund includes almost all of FHA’s single-family mortgage insurance programs, the largest of which is the 203(b) program. The Housing and Economic Recovery Act of 2008 (HERA) moved a number of other programs that were previously under the General and Special Risk Insurance Fund to the MMI Fund. These included programs for insuring mortgages on condominium units, mortgages that simultaneously finance home purchase and rehabilitation costs, and reverse mortgages. A reverse mortgage is a type of loan against the borrower’s home equity. With a reverse mortgage, borrowers do not need to repay the loan as long as they meet certain conditions. These conditions, among others, require the borrower to live in the home, pay property taxes and homeowners’ insurance, maintain the property, and retain the title in his or her name. Unlike forward mortgages, where the borrower makes monthly payments to the lender, increasing equity and decreasing the loan balance over time, reverse mortgages typically are “rising debt, falling equity” loans. For reverse mortgages, the loan balance increases and the home equity decreases over time. As the borrower receives payments from the lender, the lender adds the principal and interest to the loan balance, reducing the homeowner’s equity. FHA insures reverse mortgages under its Home Equity Conversion Mortgage (HECM) program, which serves eligible borrowers aged 62 or older. Congress established the HECM program in 1988 as a way to alleviate economic hardship caused by the increasing costs of health care, housing, and subsistence needs at a time in life when income is reduced, while protecting reverse mortgage lenders and borrowers from financial losses. The MMI Fund is supported by insurance premiums paid by borrowers. For forward mortgages, FHA has the authority to establish and collect a single up-front premium (in an amount not to exceed 3.0 percent of the amount of the original insured principal of the mortgage) and annual premiums of up to 1.5 percent of the remaining insured principal balance, or 1.55 percent for borrowers with down payments of less than 5.0 percent. As of September 2017, FHA charged a 1.75 percent up-front premium and either a 0.80 percent or 0.85 percent annual premium, depending on the size of the down payment. As of the same date, FHA charged HECM borrowers an initial premium of either 0.50 percent or 2.5 percent, depending on how they draw down available funds, and an annual premium equal to 1.25 percent of the outstanding HECM balance. Each year, the MMI Fund is subject to three different financial assessments: Independent actuarial review. The National Housing Act requires an annual independent actuarial review of the MMI Fund’s financial position. FHA uses the results of the actuarial review to determine whether the MMI Fund is meeting the act’s requirement that it maintain a capital ratio of at least 2 percent. Each year, an independent actuarial contractor conducts two separate actuarial reviews—one for forward mortgages and one for HECMs—to estimate the economic value of the two portfolios. In a separate annual report to Congress, FHA combines the findings of the forward mortgage and HECM actuarial reviews to determine the capital ratio for the MMI Fund as a whole. As previously noted, the capital ratio is the fund’s economic value divided by the insurance-in-force. Budgetary review. FHA estimates and reestimates the net lifetime costs—known as credit subsidy costs—of the mortgages it insures as part of the MMI Fund’s annual budgetary review. Under the Federal Credit Reform Act of 1990 (FCRA), FHA and other federal agencies must estimate the credit subsidy costs of their direct loan or loan guarantee programs in their annual budgets. Credit subsidy costs represent the present value of estimated cash flows to the government minus the present value of estimated cash flows from the government over the life of the loan, excluding administrative costs. For a mortgage insurance program, cash inflows consist primarily of insurance premiums charged to borrowers and proceeds from sales of foreclosed properties, and cash outflows consist mostly of insurance claim payments to lenders. Annually, agencies estimate credit subsidy costs for new loan cohorts—the loans agencies commit to guarantee in a given fiscal year. When estimated cash inflows exceed expected cash outflows, a cohort is said to have a negative credit subsidy cost, meaning that the cohort is estimated to generate income. When the opposite is true, the cohort is said to have a positive credit subsidy cost. Generally, agencies also are required to produce annual updates of their subsidy estimates—known as reestimates—for each loan cohort on the basis of information on actual performance and estimated changes in future loan performance. Each additional year provides more historical data on loan performance that may influence estimates of the amount and timing of future claims. Additionally, economic assumptions (such as house prices and interest rates) also can change from year to year, which would affect estimates of future loan performance. In recognition of the difficulty in making credit subsidy estimates that mirror actual loan performance, FCRA provides permanent and indefinite budget authority for reestimates that reflect increased credit subsidy costs (upward reestimates). While FHA has had a number of upward reestimates, the only year in which the MMI Fund has needed to draw on permanent and indefinite budget authority was fiscal year 2013, when it received $1.69 billion. All other upward reestimates were covered by funds held in the MMI Fund’s capital reserve account. Financial accounting review. The preparation of FHA’s financial statements also provides a review of the MMI Fund. FHA is required to prepare financial statements in accordance with generally accepted accounting principles for the federal government (federal GAAP). The financial statements provide information on the overall financial position of the MMI Fund, including its assets, liabilities, and actual cash flows during the year. In addition, federal GAAP requires FHA to calculate a liability for loan guarantees, which represents the estimated net present value of expected future cash flows for outstanding insurance. In general, capital exists to absorb unexpected losses and allow a financial institution to continue operations during economic downturns. The MMI Fund plays a key role during such periods by helping to maintain the flow of mortgage credit to areas that may be underserved by the private sector. As previously noted, the MMI Fund is statutorily required to maintain at least a 2 percent capital ratio. It also is the only federal credit program with a capital requirement. Because the MMI Fund can draw on permanent and indefinite budget authority, if necessary, it has greater ability to weather adverse economic conditions than a private entity. However, the capital requirement is intended to help ensure that the fund remains self-sufficient by creating a reserve for unexpected losses. The size of the MMI Fund’s capital reserve can be expected to fluctuate depending on economic conditions and other factors. For example, the reserve may tend to grow when the economy is strong (limiting borrower defaults and FHA insurance losses), and may tend to shrink when the economy is weak (increasing borrower defaults and FHA insurance losses). Stress tests are a risk management tool used by banks and other financial institutions. The International Actuarial Association defines stress testing as a projection of the financial condition of an institution under a specific set of adverse conditions. While there is no requirement that FHA stress test the MMI Fund, actuarial reviews of the MMI Fund have included analyses of the MMI Fund’s economic value and insurance-in-force under alternative scenarios, including adverse scenarios. As discussed later in this report, the alternative scenarios include selected economic paths used in estimating the economic value of the MMI Fund’s forward mortgage and HECM portfolios, as well as baseline and economic slump paths produced by Moody’s Analytics. FHA considers these analyses to be a form of stress testing. FHA assessments performed as part of the MMI Fund’s annual budgetary review—specifically, the credit subsidy estimates and reestimates discussed previously—determine the fund’s financing account and capital reserve account balances. The financing account is designed to hold sufficient funds to cover anticipated net future costs on outstanding insurance. The capital reserve account holds additional funds that could be used to cover unexpected losses (for example, due to higher-than- anticipated mortgage defaults). If the capital reserve account had insufficient funds to cover an upward credit subsidy reestimate (that is, an increase in expected lifetime costs), FHA would draw on permanent and indefinite budget authority. As previously noted, this has occurred one time (fiscal year 2013) since the implementation of FCRA. Drawing on permanent and indefinite budget authority means that the MMI Fund is not self-sufficient under FCRA requirements. However, it does not indicate that the fund is unable to pay insurance claims in the near-term without supplemental funding, because the fund’s financing account holds balances to cover the anticipated net future costs on claims expected in the near-term and over the long-term for the existing insurance portfolio. In contrast, the actuarial reviews do not directly determine the need for additional budget authority; rather, they are used to assess whether the MMI Fund is in compliance with the requirement to maintain at least a 2 percent capital ratio. Additionally, the reviews are statutorily required to be conducted by an independent actuary rather than by FHA. As previously noted, the actuarial reviews estimate the economic value of the forward mortgage and HECM portfolios separately, and FHA combines these estimates to calculate the capital ratio (that is, the economic value divided by the insurance-in-force) for the MMI Fund as a whole. The economic value of each portfolio consists of existing net capital resources (assets less liabilities) plus the net present value of anticipated future cash inflows and outflows on outstanding insurance. To determine existing net capital resources, FHA’s actuarial contractor uses information on the assets and liabilities of the financing and capital reserve accounts previously discussed. Beginning with the fiscal year 2012 actuarial review and continuing through the fiscal year 2016 review (the most recently completed one), FHA’s actuarial contractor has estimated the net present value of cash flows using Monte Carlo simulation—a methodology that involves running simulations of multiple economic paths. Specifically, for the forward mortgage and HECM portfolios separately, the contractor generated 100 economic paths, centered around Moody’s Analytics’ baseline economic scenario, and computed a net present value of future cash flows for each of these paths. The contractor added the average of these 100 numbers to the existing net capital resources to produce the economic value used to assess compliance with the MMI Fund’s 2 percent capital requirement. Table 1 shows the fiscal year 2016 economic value, insurance-in-force, and capital ratio for the forward mortgage and HECM portfolios, as well as for the MMI Fund as a whole. Under the independent actuarial reviews, an economic value of zero— and therefore a capital ratio of zero—for the MMI Fund as a whole indicates that estimated resources are enough to cover anticipated net future costs and no more. Specifically, if the capital ratio is zero, the MMI Fund’s existing net capital resources (for example, cash and Treasury investments) and the net present value of future cash inflows (for example, premium revenue and proceeds from sales of foreclosed homes) are estimated to be equal to the net present value of future cash outflows (for example, insurance claim payments and costs to maintain foreclosed properties). Therefore, in concept, a positive economic value is similar to a positive balance in the capital reserve account under the budget process—that is, it projects the availability of funds above what is needed to cover expected net future costs on outstanding insurance. However, the independent actuarial reviews have used different estimation models and economic assumptions from those used in FHA’s budgetary assessment to estimate the present value of future cash flows; therefore, the actuarial and budgetary reviews have not produced identical capital estimates. (See app. II for more information on the related components of the budgetary and actuarial reviews.) A capital ratio below 2 percent, or even below zero, does not directly determine the need for permanent and indefinite budget authority. However, it indicates that according to the models and assumptions of the actuarial reviews, the MMI Fund’s ability to absorb unexpected losses may be limited and that premium and policy changes designed to bolster the fund’s capital position may be needed. In addition to the capital assessment, the actuarial reviews also have projected the MMI Fund’s performance under alternative economic scenarios, including stress scenarios. For example, the fiscal year 2016 actuarial reviews estimated the economic value and insurance-in-force of the MMI Fund under eight alternative scenarios, including both strong economic conditions and economic downturns. Specifically, the fiscal year 2016 reviews estimated the 10th best and worst, 25th best and worst, and worst economic values produced by the Monte Carlo simulation, along with the economic values resulting from Moody’s Analytics’ baseline and protracted slump scenarios. In addition, the fiscal year 2016 reviews included a low-interest-rate scenario, which assumes that low interest rates persist for 2 years, before resuming on the path of the Moody’s Analytics’ baseline scenario. The reviews also include information on the house price index values, interest rates, and unemployment rates from the economic paths that produced these alternative economic values. The actuarial reviews have analyzed the economic value under alternative scenarios separately for the forward mortgage and HECM portfolios. The estimated economic values for the forward mortgage and HECM portfolios can be combined to arrive at fund-wide capital ratios for the average of the 100 economic values produced by the simulation— Monte Carlo average—and all of the Moody’s Analytics’ scenarios (see table 2). However, the 10th best and worst, 25th best and worst, and worst economic values produced by the Monte Carlo simulations cannot be combined. This limitation is due to the fact that the economic scenario that led to the 10th best forward mortgage economic value, for example, may be different from the scenario that led to the 10th best HECM economic value. In contrast, the budgetary reviews do not include analysis of future loan performance under alternative economic scenarios. The budgetary reviews are required to use the President’s economic assumptions, which the Office of Management and Budget provides to agencies for budget formulation. In addition to the actuarial reviews prepared by FHA’s contractor, FHA compiles statutorily required annual reports for Congress based on the results of the actuarial analysis. These reports include the calculation of the MMI Fund’s overall capital ratio and some additional analyses of the MMI Fund’s financial condition. Statutory requirements for the content of the reports to Congress are broad, and each year, FHA determines the types of information it believes will be most useful to Congress. FHA officials said they consider what they reported in the previous year, events from the past year, and feedback from readers to determine what would be most useful to include. For example, in its fiscal year 2015 report to Congress, FHA discussed the amount of additional capital that would have been needed for the forward mortgage portfolio to achieve a 2 percent capital ratio and withstand losses in the event of an economic downturn similar to the last economic crisis. FHA’s financial statements present the MMI Fund from a financial accounting perspective and are prepared according to federal GAAP. The financial statements are composed of year-end balance sheets, the related statements of net cost and changes in net position, and the combined statements of budgetary resources. As with the budgetary and actuarial reviews, FHA’s annual management reports, which include the financial statements, also include information on the MMI Fund’s capital resources and a net present value calculation of cash flows from outstanding insurance. Information used in preparing the financial statements—specifically, the MMI Fund’s assets and liabilities (excluding the liability for loan guarantees)—is used in the budgetary review to inform the amount needed in the financing account and is used by the actuarial review to determine the existing capital resources component of the economic value calculation. Like the budgetary reviews, the financial statement reviews do not include analysis of future loan performance under alternative economic scenarios. Another source of information on the MMI Fund’s financial status is quarterly reports FHA issues to Congress, as required by HERA. The quarterly reports can help provide early insight into whether there are potential deviations from the prior year’s projections before the next annual budgetary and actuarial reviews are completed. Among other topics, the reports must include information on any significant changes between actual and projected claim and prepayment activity, and projected versus actual loss rates. However, while the quarterly reports update certain measures of the MMI Fund’s performance and financial condition, they are not intended to provide a full actuarial or budgetary analysis. The MMI Fund’s capital requirement and stress tests are consistent with some principles and practices promulgated or used by financial institutions and regulators, but are not consistent with others. To assess the MMI Fund’s consistency with these principles and practices, we developed a framework of important considerations in designing capital requirements and another for designing stress tests. Our frameworks include underlying principles or key features of the requirements and practices of institutions we reviewed—such as transparency and accountability—that could also be applied to the MMI Fund. See appendix I for further details on our methodology. The MMI Fund’s capital requirement is consistent with our framework element on transparency and partially consistent with two other elements—that the requirement include both risk-based and fixed components and that the requirement be designed to cover unexpected losses and be based on specified risk thresholds. However, the MMI Fund’s capital requirement is not consistent with the element on including accountability mechanisms. We were unable to determine whether the requirement is consistent with the element on balancing financial soundness with the entity’s role and mission because such an assessment would require more information about the severity of the economic conditions the capital requirement was designed to withstand without supplemental funding. Table 3 summarizes our assessments. The MMI Fund’s capital requirement is consistent with the framework element of being transparent so that external parties can understand the financial risks facing the entity. FHA’s actuarial reports and accompanying report to Congress provide specific information about the MMI Fund’s capital requirement and capital assessment results. For example, the actuarial reports describe how the capital ratio is calculated, the models and data sources used to calculate the net present value of future cash flows, key economic assumptions used in calculating the MMI Fund’s economic value, and estimated economic values of the forward mortgage and HECM portfolios. Additionally, FHA’s reports to Congress include calculations of the Fund-wide capital ratio based on these values, as well as analyses of factors affecting the past performance of the forward mortgage and HECM portfolios and factors that could affect their future performance. The actuarial reviews and reports to Congress are publicly available on HUD’s website. The MMI Fund’s capital requirement is partially consistent with the framework element of having both a risk-based and a fixed component. For capital requirements with this feature, whichever component requires the greater level of capital is the binding minimum requirement. Among other things, a risk-based component helps to ensure that the entity holds more capital as the asset quality of its portfolio (credit quality, specifically, in the case of a mortgage portfolio) decreases. A fixed component is insensitive to asset quality; it therefore is not subject to the potential for estimation errors of risk-based assessments and serves as a backstop to the risk-based component. While the MMI Fund’s capital requirement is statutorily set at 2 percent, it is risk-based because the calculation of the capital ratio’s numerator (economic value) accounts for loan and borrower quality. As loan and borrower characteristics, such as loan-to-value ratios and borrower credit scores, get riskier, the models used to estimate the MMI Fund’s economic value predict higher insurance claims and higher net losses on claims (due to increased foreclosures and decreased returns on sales of foreclosed properties). This, in turn, reduces the MMI Fund’s estimated economic value and makes it more difficult for the fund to meet the 2 percent capital requirement. The MMI Fund’s capital requirement also has attributes similar to a fixed component in that the fund’s economic value must be at least 2 percent of the insurance-in-force, regardless of the credit quality of the insurance portfolio. However, the requirement does not have a separate fixed component that backstops the risk-based component (that is, becomes binding when it is the more stringent of the two). Developing and implementing a separate fixed component to the MMI Fund’s capital requirement would pose challenges. For example, a requirement that was insensitive to portfolio credit quality would not align with the FCRA requirements and accounting principles that FHA must follow. These requirements and principles emphasize the consideration of risk factors in estimating potential financial losses. Additionally, substantial additional analysis would be required to determine the structure of a separate fixed component, the level at which it should be set, under what conditions it might become binding, and how it might affect FHA’s ability to fulfill its mission. As a result, it is unclear whether developing a separate fixed component to the MMI Fund’s capital requirement would be beneficial. The MMI Fund’s capital requirement is partially consistent with the framework element of being able to cover unexpected losses and being based on a specified risk threshold, such as an adverse economic scenario that the entity would be expected to withstand. The MMI Fund’s capital requirement is designed to cover some unexpected losses. As previously noted, the MMI Fund’s capital ratio is calculated by dividing the economic value of the fund by the amortized insurance-in-force. The economic value is determined by adding existing capital resources to the net present value of future cash flows on outstanding insurance. An economic value of zero (and therefore a capital ratio of zero) indicates that based on the actuarial calculations, the sum of the MMI Fund’s existing capital resources and the present value of expected cash inflows (for example, premium income) is exactly the amount needed to cover the present value of expected cash outflows (for example, claim payments). Therefore, a 2 percent capital requirement serves the purpose of covering some losses above expected amounts. However, the requirement was not designed to absorb losses associated with a specified economic scenario, so the extent of loss protection it provides is unclear. In a February 2001 report, we concluded that neither the statute that created the 2 percent capital requirement nor FHA had established criteria to determine how severe of a stress the MMI Fund should be able to withstand. Accordingly, we recommended that Congress or FHA specify the economic conditions that the MMI Fund would be expected to withstand. In March 2002, a legislative proposal was introduced in the House of Representatives that would have required a capital ratio sufficient to withstand a broad range of adverse economic circumstances, but it was not enacted. Neither Congress nor FHA has subsequently specified the economic conditions the MMI Fund should be able to withstand or corresponding minimum capital ratios. FHA officials said they did not consider it their role to define those economic conditions and would comply with any requirement Congress established. Because the MMI Fund’s capital requirement is not based on a specified risk threshold, it may not provide an adequate financial cushion under economic scenarios in which Congress may anticipate that the fund would be self- sufficient. The MMI Fund’s capital requirement is not consistent with the framework element of having accountability mechanisms such as additional reporting requirements, remediation plans, and operational restrictions that are triggered if capital requirements are not met. Failure to comply with the MMI Fund’s capital requirement does not trigger a defined process or set of steps to be taken by FHA. In a September 2010 report, we stated that Congress should consider establishing a minimum time frame for restoring the capital ratio to 2 percent should the ratio fall below that level. A legislative proposal was introduced in Congress in December 2011 that, among other things, would have required FHA to return the MMI Fund’s capital ratio to the statutorily required level within 2 years, but it was not enacted. In addition, in a September 2013 report, we stated that Congress should consider requiring FHA to submit a capital restoration plan and regular updates on plan implementation whenever the capital ratio falls below 2 percent. Congress has not yet acted on this suggestion, but doing so could help ensure prompt action by FHA and focus Congress’s monitoring efforts should this situation arise in the future. We could not assess the consistency of the MMI Fund’s capital requirement with the framework element of balancing financial soundness with the entity’s role and mission. Such an assessment would require more information about the severity of the economic conditions the capital requirement was designed to withstand without supplemental funding. As previously discussed, the statute that created the requirement did not specify those conditions. As a result, it is unclear whether FHA’s difficulties in maintaining the financial soundness of the MMI Fund while carrying out its public mission during and after the 2007–2011 housing crisis indicate that the 2 percent capital requirement is insufficient. Any reconsideration of the capital requirement would involve policy decisions that would need to be made through congressional deliberations. These decisions center on the relative weight FHA should place on its financial and mission goals and requirements. On the one hand, FHA has a statutory operational goal to minimize mortgage default risk to the MMI Fund and a statutory requirement to maintain a capital ratio of at least 2 percent. A minimum capital requirement that is too low may result in FHA taking on too much risk and having an insufficient capital buffer to withstand an economic downturn without requiring supplemental funding. On the other hand, FHA also has a statutory operational goal to provide mortgage insurance to traditionally underserved borrowers—such as low-income, minority, and first-time home buyers—and historically has played a role in stabilizing housing markets during economic downturns. Setting a minimum capital requirement that is too high may limit FHA’s ability to serve the borrowers for which it was intended or play its market-stabilizing role, because it might require FHA to charge insurance premiums that many borrowers cannot afford or impose underwriting standards they cannot meet. The tension between the financial and mission aspects of FHA’s goals and requirements poses trade-offs that must be weighed by policymakers in setting the MMI Fund’s capital requirement. Stress testing practices for the MMI Fund are consistent with two of the five elements in our stress testing framework—that stress testing methods and results be transparent and stress testing scenarios capture relevant risks. The stress testing practices are inconsistent with two other elements—that the scope of testing includes entity-wide assessments and that the specific objectives of the tests be defined. We were unable to determine the consistency of MMI Fund stress testing practices with the framework element that methods and scenarios be consistent with the objectives of the tests because FHA has not defined specific objectives. Table 4 summarizes our assessments. Stress tests of the MMI Fund are consistent with the framework element of transparency. Specifically, stress testing methods, scenarios, and results should be specific and available for review. Actuarial reports on the MMI Fund provide detailed information on the methodology and results of fund stress tests. For example, the actuarial reports describe the stress testing method of estimating economic values for the forward mortgage and HECM portfolios using hypothetical scenarios based on projected unemployment, house price appreciation, and interest rates. The reports also describe sources for these projections, including scenarios developed by Moody’s Analytics and generated by the actuarial contractor through Monte Carlo simulation. In addition, for each variable, the reports present graphics showing their projected paths under each scenario over the stress period. Furthermore, for each scenario, the reports provide quantitative results and an accompanying narrative discussion highlighting key drivers of the results. The reports are publicly available on HUD’s website. Stress tests of the MMI Fund are consistent with the framework element of capturing risks that are relevant to the entity. The stress scenarios used in the actuarial reviews have incorporated risks the MMI Fund faces by considering changes in economic conditions that would negatively affect the fund’s cash flows and, by extension, the fund’s economic value. More specifically, they include declines in house prices and rises in unemployment, which can be expected to increase borrower defaults on FHA-insured mortgages and increase the number and severity of insurance claims FHA pays to lenders. In addition, the scenarios include declines in interest rates, which can be expected to increase the number of FHA-insured mortgages that are paid off before maturity—for example, as borrowers refinance out of their FHA-insured mortgages into conventional mortgages (those without government insurance or guarantees)—thus reducing the amount of insurance premiums FHA collects. To examine these risks, the stress scenarios in recent FHA actuarial reviews have included substantial declines in a Federal Housing Finance Agency national house price index, increases in unemployment rates, and decreases in interest rates for 30-year home mortgages. To provide additional perspective on the severity, duration, and timing of scenarios used to stress test the MMI Fund, appendix III compares selected MMI Fund stress scenarios to the severely adverse scenario used by the Federal Reserve in conducting annual supervisory stress tests of large banking organizations. Stress tests of the MMI Fund are not consistent with the framework element of including entity-wide assessments to provide a complete picture of risk. Since fiscal year 2009, when the HECM portfolio was first included in the MMI Fund, stress tests of the MMI Fund have analyzed the forward mortgage and HECM portfolios separately, but not on a fund- wide basis. This practice partly reflects the way in which capital assessments of the MMI Fund are performed—through separate assessments of the forward mortgage and HECM portfolios. Additionally, an FHA official said the agency has been reluctant to report combined ratios for stress scenarios because the results could be misinterpreted (for example, result in too much or too little confidence in the fund’s ability to withstand stress) if the scenarios are not viewed in the proper historical context. However, without the combined analysis, it is unclear what the capital position of the MMI Fund as a whole would be under stressful conditions. As a result, FHA and Congress may lack information that could be useful in assessing risks to the MMI Fund, including circumstances that could cause the fund’s capital ratio to fall below the statutory minimum. Stress testing of the MMI Fund is not consistent with the framework element of defining the specific objectives of the tests. According to guidance from federal banking regulators, large banking organizations should indicate the specific purpose and focus of stress tests within a framework that allows for consistent, repeatable exercises. Additionally, this guidance and stress testing principles and practices from two international financial organizations provide examples of stress testing objectives such as informing assessment of vulnerabilities, contingency planning, identifying and monitoring risk concentrations, and determining the level of risk the entity is willing to accept (risk appetite). The MMI Fund actuarial reviews have included the broad statement that the stress tests performed as part of the reviews provide insights into the sensitivity of the MMI Fund’s economic value under different economic conditions. In addition, FHA has included some information from the stress tests in recent annual reports to Congress to highlight different points. However, FHA has not articulated specific objectives for the stress tests, in part because a key use of the actuarial reviews is to help determine the MMI Fund’s compliance with the capital requirement under a baseline economic scenario (which, in recent actuarial reviews, has been the Monte Carlo average). Accordingly, the types of information FHA has reported to Congress have varied from year to year. For example, in recent years, FHA’s reporting on stress test results has ranged from no information (fiscal year 2016), to how much additional capital the forward mortgage portfolio would need to withstand losses comparable to the last economic crisis (fiscal year 2015), to the probability that the economic value of the HECM portfolio would fall below zero under deteriorating economic conditions (fiscal year 2013). Without specific objectives for its stress testing, FHA has limited assurance that its stress tests are targeted to risk-management needs and that its reporting to Congress provides consistent information on the MMI Fund’s ability to withstand adverse conditions. Because FHA has not defined specific objectives for MMI Fund stress tests, we could not assess whether existing tests were consistent with the framework element of using stress testing methods and scenarios that are consistent with stated objectives. Entities should use stress testing methods—such as conventional stress testing (which looks at the effect of specified hypothetical or historical stress scenarios) or reverse stress testing (which assumes a negative outcome and identifies scenarios that would lead to that outcome)—that yield information responsive to the objectives of the stress tests. Actuarial reviews of the MMI Fund have used conventional stress testing and a range of stress scenarios developed by Moody’s Analytics and generated by Monte Carlo simulation. But, depending on how FHA defines the specific objectives of the MMI Fund’s stress tests, other stress testing methods or scenarios might provide useful information for risk management. For example, if the objective of the stress testing was to identify the conditions that might cause the MMI Fund’s capital ratio to fall below 2 percent or require supplemental funding, reverse stress testing would be an appropriate method. If the objective was to assess the MMI Fund’s ability to withstand conditions similar to those of the Great Depression or the 2007–2011 housing crisis, developing historical stress scenarios would be appropriate. Additionally, if the objective was to assess the effect of changes to a particular variable or input (as opposed to a broader economic scenario), sensitivity stress tests would be appropriate. Beginning with the 2009 loan cohort, HERA placed new HECMs (FHA- insured reverse mortgages) in the MMI Fund, while previous HECMs remained in the General and Special Risk Insurance Fund. When the post-2008 HECM portfolio became part of the MMI Fund, it also was included in the MMI Fund’s capital ratio assessment and became subject to annual actuarial review requirements. These changes have had some advantages. First, subjecting HECMs to the annual actuarial review requirements has improved the transparency of the program’s financial condition. For example, the actuarial reviews have included estimates of the HECM portfolio’s economic value and performance under alternative economic conditions, which were not available prior to 2009. Second, jointly considering the forward mortgage and HECM portfolios in the MMI Fund’s capital assessment mitigates the potential difficulty of independently holding the HECM portfolio to a specified capital ratio. The economic value of the HECM portfolio is more sensitive to changes in economic conditions and inputs to the models than the forward mortgage portfolio. As a result, the capital ratio for the HECM portfolio is more volatile, and requiring HECMs to independently meet a capital ratio would be difficult. Specifically, it could be difficult to manage HECM insurance premiums, loan limits, and other program requirements to ensure that a capital requirement is consistently met. Estimates of HECM capital ratios under alternative economic scenarios from the fiscal year 2016 actuarial review illustrate the sensitivity of this portfolio’s economic value—and therefore its capital ratio—to changes in economic conditions (see fig.1). While the capital ratio for forward mortgages ranged from negative 3.3 percent to positive 4.17 percent under all of the economic scenarios, the corresponding range for HECMs was negative 38.74 percent to positive 3.07 percent. Under the current approach of jointly considering the HECM and forward mortgage portfolios in the capital assessment, both portfolios in combination are subject to the capital requirement, but the volatility of the HECM portfolio’s economic value is mitigated by the relative stability of the forward mortgage portfolio. More specifically, because the forward mortgage portfolio is substantially larger than the HECM portfolio (with the HECM portfolio accounting for roughly 10 percent of the MMI Fund’s insurance-in-force in fiscal year 2016), the combined capital ratio more closely follows the generally less volatile capital ratio for forward mortgages (see fig. 2). As a result, the combined capital ratio is less uncertain than the HECM capital ratio, and managing the HECM portfolio within that combined framework is more feasible than managing it to a separate capital requirement. Finally, another possible advantage of the joint assessment is some degree of risk diversification. The cash inflows and outflows of the forward mortgage and HECM portfolios do not necessarily rise and fall in tandem in response to changes in macroeconomic conditions. For example, all other things being equal, rising mortgage interest rates tend to increase the economic value of the forward mortgage portfolio but tend to decrease the economic value of the HECM portfolio. Because the cash flows of the two portfolios are not fully correlated, the amount of capital needed for the two portfolios in combination may be less than the sum of the amount of capital needed for each portfolio separately. Joint assessment of the forward mortgage and HECM portfolios in determining compliance with the capital requirement also has some disadvantages. First, including HECMs in the MMI Fund can result in more uncertainty about the Fund’s expected performance. As previously discussed, the economic value of HECMs is more volatile and sensitive to economic conditions than the economic value of forward mortgages. As a result, estimates of the MMI Fund’s economic value and capital ratio and its potential performance under alternative economic scenarios are less predictable and more difficult to interpret with the inclusion of HECMs. Although the combined capital ratio generally tracks with the forward mortgage capital ratio, the inclusion of HECMs in the assessment can affect the combined capital ratio. For example, in fiscal year 2015, a high HECM capital ratio (6.44 percent) pulled the combined capital ratio above 2 percent (2.07 percent), even though the forward mortgage capital ratio was below 2 percent (1.63 percent). In this case, the inclusion of the HECM portfolio in the capital ratio resulted in the MMI Fund meeting the 2 percent capital requirement for the first time in 6 years. In its fiscal year 2014 report to Congress, FHA concluded that the HECM portfolio was over 10 times more volatile than the forward mortgage portfolio, noting that small changes to the HECM program can affect the overall value of the MMI Fund. Further, in its fiscal year 2015 report to Congress, FHA noted that because the HECM portfolio is projected to continue growing at a faster rate than the forward portfolio, year-to-year HECM volatility is likely to contribute more uncertainty to future actuarial valuations of the MMI Fund. In recent years, HECMs have accounted for an increasing percentage of the MMI Fund’s insurance-in-force, rising from 4.01 percent in fiscal year 2009 to 9.42 percent in fiscal year 2016. Second, relying on a combined capital ratio to assess the MMI Fund’s compliance with the capital requirement could mask the financial condition of the individual portfolios. Information on the performance of each portfolio is available in separate actuarial reports, but differences between the financial health of the two portfolios may be overlooked because compliance with the 2 percent capital requirement is determined by the combined capital ratio. For example, in fiscal year 2013, the combined capital ratio was below 2 percent (negative 0.11 percent), while the HECM capital ratio was 7.50 percent. In contrast, in fiscal year 2016, the combined ratio was above 2 percent (2.32 percent), while the HECM capital ratio was below 2 percent (negative 6.90 percent). In those years, the substantial difference between the financial condition of the HECM portfolio and the overall MMI Fund would not have been evident from the combined capital ratio. Even in years when the capital ratios of both the forward mortgage and HECM portfolios are above or below the 2 percent level, the combined capital ratio may still hide important differences between the two. For example, in fiscal year 2014, the capital ratios for both the forward mortgage and HECM portfolios were below 2 percent. However, the forward mortgage capital ratio was positive (0.56 percent), while the HECM capital ratio was negative (-1.20 percent). This difference may be important to policymakers because a positive capital ratio indicates that the portfolio has some capital cushion to absorb unexpected losses, even if it is small. In contrast, a negative ratio suggests the portfolio may not have sufficient capital to independently cover all expected net losses on outstanding insurance, and may essentially be financially supported by the other portfolio in the MMI Fund. Finally, in certain circumstances, the joint capital assessment could create pressure to raise insurance premiums or tighten underwriting standards in one program to compensate for the weaker financial performance of another program. For example, if the forward mortgage capital ratio were above 2 percent, but the HECM capital ratio pulled the combined ratio below 2 percent, raising insurance premium rates for forward mortgages could be the quickest way to regain a 2 percent capital ratio. In this example, a portion of the premiums paid by the forward mortgage borrower would essentially support the HECM program. While this situation would benefit HECM borrowers (because their insurance premiums would not increase), it would potentially create a burden for forward mortgage borrowers and could reduce the number of prospective borrowers who are able to afford FHA mortgage insurance. However, as of September 2017, FHA officials said that the agency had not increased forward mortgage premiums to support the HECM program or vice versa. Alternatives to the MMI Fund’s joint capital assessment could address some of the disadvantages of this approach but would also involve potential trade-offs between mission, financial soundness, and transparency goals. Policy decisions about these trade-offs could have significant implications for the management of FHA’s programs and for potential FHA borrowers. If Congress wishes to place additional emphasis on the financial self- sufficiency of the HECM program, it may be appropriate to hold the HECM portfolio to a capital requirement separate from that of forward mortgages. Under this option, future HECMs could either remain in the MMI Fund or be placed under a different insurance fund. The capital requirement could be set at the same congressionally defined level as the one for forward mortgages, or it could be tailored to the risks and volatility of the HECM portfolio. A separate HECM capital requirement would help ensure that the forward mortgage portfolio is not supporting the HECM portfolio, or vice versa. Decisions about premiums and other program requirements could be based solely on each portfolio’s financial condition and would not be influenced by a need to keep a combined capital ratio sufficiently high. In addition, a separate HECM capital requirement would help ensure that for future loan cohorts, the financial conditions of the individual portfolios are not masked by a combined capital ratio. However, if the HECM portfolio was required to independently meet a minimum capital ratio, the volatility of the portfolio’s economic value could make it difficult for FHA to consistently meet the requirement without targeting a capital level substantially above the minimum requirement. Doing so may require FHA to raise insurance premiums or place greater restrictions on the amount seniors can borrow, which would limit the program’s ability to serve its goal of alleviating economic hardship. In comparison, if Congress wishes to place greater emphasis on maximizing the benefits of the HECM program for seniors, another option may be to exempt the HECM portfolio from a capital requirement. Under this option, future HECMs would not be part of the MMI Fund and would not be subject to the MMI Fund’s capital requirement. As with a separate HECM capital requirement, this option would help ensure that the financial condition of future loan cohorts in the forward mortgage portfolio is not masked by a combined capital ratio. But, the financial condition of the HECM portfolio would not be as transparent, unless FHA continued to conduct HECM actuarial assessments. In addition, FHA could set premiums and program limits without consideration for building a capital buffer, which might decrease the likelihood that the HECM program would operate on at least a break-even basis over the long run. Some industry participants we spoke with did not think that HECMs should be exempted from a capital requirement, noting that the increased transparency and accountability of HECMs were important. However, even without a capital requirement, FHA could choose to continue conducting actuarial assessments of the HECM program for continued transparency. The programs FHA administers under its MMI Fund play an important role in the mortgage market by expanding homeownership opportunities and helping stabilize housing markets during economic downturns. However, the MMI Fund’s financial challenges in the wake of the 2007–2011 housing crisis illustrate the fund’s vulnerability to severely adverse economic conditions and underscore the importance of capital requirements and stress testing practices for this $1.2 trillion mortgage insurance portfolio. Opportunities exist to strengthen these requirements and practices by making them more consistent with those used by financial institutions and regulators, as reflected in our two evaluative frameworks. As we concluded in our September 2013 report, and consistent with the capital requirements framework in this report, including accountability mechanisms in FHA’s capital requirement could enhance management and oversight of the MMI Fund. Therefore, as we suggested in our 2013 report, we maintain that Congress should consider requiring FHA to submit a capital restoration plan and regular updates on plan implementation whenever the fund’s capital ratio falls below the required level. In our current review, we identified three additional areas where the capital requirement and stress testing practices for the MMI Fund could be strengthened in accordance with our frameworks. Specifically, the statutory 2 percent capital requirement does not specify the economic conditions the fund would be expected to withstand. As a result, it may not provide an adequate financial cushion under scenarios in which Congress may anticipate that the fund would be self-sufficient. In addition, FHA has not analyzed or reported stress test results on a fund-wide basis, making it unclear what the capital position of the fund as a whole would be under stressful conditions. Finally, FHA has not defined the specific objectives of the fund’s stress tests and therefore has limited assurance that its stress testing methods and scenarios are targeted to risk-management needs. Congress should consider amending the National Housing Act to specify the economic conditions the MMI Fund would be expected to withstand without substantial risk of drawing on permanent and indefinite budget authority, and require FHA to specify and comply with a capital ratio consistent with these conditions. In specifying the economic conditions, Congress should take into account FHA’s statutory operational goals and role in supporting the mortgage market during periods of economic stress. (Matter for Consideration 1) We are making the following two recommendations to FHA: The Commissioner of FHA should combine stress test results for the forward mortgage and HECM portfolios, where possible, and report estimated MMI Fund-wide capital ratios for the stress scenarios examined. (Recommendation 1) The Commissioner of FHA should develop specific objectives for stress tests of the MMI Fund and apply stress testing methods and scenarios consistent with those objectives. (Recommendation 2) We provided a draft of this report to HUD, the Federal Reserve, and FHFA for their review and comment. The Federal Reserve and FHFA had no comments. In its comments, reproduced in appendix IV, HUD agreed with our recommendations. HUD said that FHA’s forthcoming annual actuarial reports and report to Congress on the MMI Fund would include stress test results for forward mortgages and HECMs, but HUD did not state whether the reports would address our recommendations. By analyzing and reporting stress test results on a fund-wide basis and defining the specific objectives of its stress tests, FHA would better understand the capital position of the MMI Fund as a whole under stressful conditions and have greater assurance that its stress testing methods and scenarios are targeted to risk-management needs. HUD also said it was important to recognize the trade-offs between FHA’s mission and insurance policy holders when considering financial soundness. HUD said it appreciated our report’s statement that minimum capital requirements that are too high may limit FHA’s ability to serve its mission and market role and recommended that we make this statement more prominent. While our report does contain that statement, it also states that a minimum capital requirement that is too low may result in FHA taking on too much risk and having an insufficient capital buffer to withstand an economic downturn without requiring supplemental funding. Accordingly, we added language to the introduction of the report noting the challenge FHA and Congress face in balancing the fund’s financial self-sufficiency with FHA’s role in facilitating mortgage credit to underserved borrowers and stabilizing the housing market during economic downturns. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Housing and Urban Development, the Chair of the Board of Governors of the Federal Reserve System, the Director of the Federal Housing Finance Agency, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Our objectives were to examine (1) the types of information actuarial reviews and other assessments provide about the Mutual Mortgage Insurance Fund’s (MMI Fund) financial condition, including its ability to remain self-sufficient; (2) the extent to which the capital requirement and stress testing practices for the MMI Fund are consistent with principles and practices underlying those of other financial institutions; and (3) key advantages and disadvantages of including both forward and Home Equity Conversion Mortgages (HECM) in the MMI Fund’s capital assessment. To examine the types of information actuarial reviews and other assessments provide about the MMI Fund’s financial condition, including its ability to remain self-sufficient, we reviewed actuarial reports of the fund prepared by a Federal Housing Administration (FHA) contractor and related FHA reports to Congress. We focused on reports for fiscal year 2009 (the first year HECMs were part of the MMI Fund) through fiscal year 2016 (the most recently completed report). Additionally, we reviewed FHA budget and financial documents containing assessments of the fund. Specifically, we reviewed the Department of Housing and Urban Development (HUD) appendix from the President’s budgets for fiscal year 2011 through fiscal year 2018 (the most recent available) and FHA’s audited financial statements for fiscal year 2011 through fiscal year 2016 (the most recent available). We also reviewed FHA documents and prior GAO reports describing the mechanisms used to provide supplemental resources to the fund, if necessary. We determined the extent to which the actuarial, budgetary, and financial accounting reviews contained information pertinent to assessing the MMI Fund’s financial condition, such as the amount of funds needed and available to cover expected net future costs on outstanding insurance, the amount of funds available to cover unexpected losses, and the projected performance of the MMI Fund under alternative economic scenarios. We compared the types of information available in the actuarial reviews with the types of information in the budgetary and financial accounting reviews of the fund, as well as in FHA’s quarterly reports to Congress, focusing on information that could help inform whether the MMI Fund is likely to remain self-sufficient. Additionally, we interviewed FHA headquarters officials about the content and interpretation of the various reviews of the fund. To illustrate the similarities and differences between the MMI Fund’s actuarial and budgetary reviews, we summarized information about the two reviews, including their purposes and the sources of their requirements (see app. II). In addition, we reviewed recent actuarial reports and HUD budget appendixes and spoke with FHA officials to understand their similarities and differences. We developed a hypothetical illustration of how certain components of the budgetary review are used in the actuarial review. To assess the extent to which the MMI Fund’s capital requirement and FHA’s stress testing approach are consistent with principles underlying such requirements for other financial institutions, we developed two evaluative frameworks and assessed requirements and practices for the MMI Fund against them. For the capital requirements framework, we reviewed publicly available documents on requirements and capital assessment practices from financial regulators and institutions, including the Bank for International Settlements, Fannie Mae and Freddie Mac (specifically, their capital requirements for private mortgage insurers), the Federal Deposit Insurance Corporation, and the Federal Housing Finance Agency (FHFA). For the stress testing framework, we reviewed articles on principles and practices from financial regulators and institutions, including the Bank for International Settlements, the Board of Governors of the Federal Reserve System (Federal Reserve), and the International Monetary Fund. We included in our frameworks key common elements in designing capital requirements and stress tests that could apply to the MMI Fund, assuming the fund would continue to operate under federal accounting standards and budgeting requirements. In addition to FHA, we shared the draft frameworks with FHFA, the National Association of Insurance Commissioners, and the American Academy of Actuaries and interviewed officials from these organizations to obtain their input on the frameworks. We chose these organizations based on their expertise in financial assessments of housing finance and mortgage insurance institutions. We then reviewed publicly available reports and documents, including relevant statutory provisions and FHA’s annual actuarial reviews and reports to Congress, to assess whether the requirements and practices of the MMI Fund were consistent with our framework elements. To provide additional perspective on stress tests of the MMI Fund, we compared variables in selected economic scenarios from the fiscal year 2016 actuarial review of FHA’s forward mortgage portfolio with corresponding variables in one of the scenarios used by the Federal Reserve in its 2016 supervisory stress tests of large banking organizations (see app. III). Specifically, we graphed the projected paths of the house price index, 30-year fixed mortgage rate, and unemployment rate for the two most stressful MMI Fund scenarios—the Monte Carlo simulation path producing the lowest economic value for forward mortgages and the Moody’s Analytics’ protracted slump scenario—and the Federal Reserve’s severely adverse scenario. We chose to highlight the worst simulation path and the Moody’s Analytics protracted slump scenarios because they are generally the two most severe scenarios used in stress tests of the MMI Fund. The Federal Reserve’s severely adverse scenario was the most analogous to the two MMI Fund scenarios and has been referenced in Fannie Mae’s and Freddie Mac’s financial requirements for private mortgage insurers. We analyzed the similarities and differences in the severity, duration, and timing of the three variables discussed above. To assess the reliability of FHA’s data on its stress scenarios, we compared the data we received from the agency with published information in FHA’s actuarial reviews. We determined the data were sufficiently reliable for the purposes of illustrating similarities and differences with the Federal Reserve’s severely adverse scenario. To identify key advantages and disadvantages of including both forward mortgages and HECMs in the MMI Fund’s capital assessment, we reviewed actuarial results for both portfolios from fiscal year 2009 through fiscal year 2016. Using information from the actuarial reviews, we calculated and compared the separate and combined capital ratios for forward mortgages and HECMs to determine the effect of including the reverse mortgage portfolio in the MMI Fund capital calculation, as well as the potential effects of holding the HECM portfolio to a separate capital requirement. We also reviewed discussions in FHA’s annual reports to Congress describing the effect of including the forward mortgage and HECM portfolios in the same fund. In addition, we interviewed FHA officials and other industry participants and stakeholders, including the National Reverse Mortgage Lenders Association, Mortgage Bankers Association, U.S. Mortgage Insurers, American Bankers Association, and the American Association of Retired Persons, about the advantages and disadvantages of jointly considering both portfolios in assessing the MMI Fund’s capital ratio as well as of alternative approaches. We conducted this performance audit from August 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The budgetary and actuarial reviews of the Mutual Mortgage Insurance Fund (MMI Fund) serve different purposes, stem from different requirements, and are conducted by different entities. See table 5 for a summary of these two reviews of the fund. However, the two reviews share some concepts and numbers. For example, the actuarial analysis of the MMI Fund’s economic value includes an existing capital resources component, which can be calculated from information on assets and liabilities presented in the budgetary review. In addition, both reviews include a calculation of the present value of future cash flows on outstanding insurance, though the two reviews use different models and economic assumptions to perform these calculations. Both reviews also provide estimates of the amount of resources the MMI Fund has, in excess of what is needed to cover estimated credit subsidy costs (that is, the net present value of expected future cash flows on outstanding insurance). Figure 3 provides a simplified, hypothetical illustration of the relationship between the MMI Fund’s budgetary and actuarial reviews. We compared selected economic scenarios used in stress tests of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund) with the severely adverse scenario developed by the Board of Governors of the Federal Reserve System (Federal Reserve) for its supervisory stress tests of large banking institutions. (Under the direction of the Federal Housing Finance Agency, the housing enterprises Fannie Mae and Freddie Mac incorporated the Federal Reserve scenario into financial criteria that private mortgage insurance companies must meet to be an approved insurer of mortgages acquired by the housing enterprises.) Our analysis focused on scenarios used in the fiscal year 2016 actuarial review of the MMI Fund’s forward mortgage portfolio (the most recently completed review) and the Federal Reserve’s 2016 supervisory stress tests, because these scenarios all used projections of economic variables beginning in calendar year 2016. We examined similarities and differences in the severity, duration, and timing of these scenarios’ projections of three variables most pertinent to the MMI Fund’s economic value: single-family home prices, 30-year fixed mortgage interest rates, and unemployment rates. These comparisons should be treated as illustrative because the MMI Fund and Federal Reserve stress tests have different intended uses and time horizons. For example, the Federal Reserve stress scenarios last 3 years and one quarter, whereas the MMI Fund scenarios last nearly 12 years. In addition, because both the MMI Fund and Federal Reserve stress scenarios change from year to year, the similarities and differences we discuss are not representative of those that might be observed for other time periods. The following analysis compares the projected quarterly paths of the three variables under two economic scenarios used in stress tests of FHA’s forward mortgage portfolio—the Monte Carlo simulation path producing the lowest economic value for forward mortgages (MMI Fund worst simulation path) and the modified Moody’s Analytics protracted slump scenario (MMI Fund protracted slump)—with the projected paths of the variables under the Federal Reserve’s severely adverse scenario. We chose to highlight these MMI Fund stress scenarios because they generally have been the two most adverse scenarios considered in the actuarial reviews and are therefore the most analogous to the Federal Reserve’s severely adverse scenario. The projections for the MMI Fund scenarios and the Federal Reserve scenario start 6 months apart (third quarter and first quarter of calendar year 2016, respectively). We treated the starting quarter of each scenario as the first quarter of the comparative analysis. As shown in figure 4, the MMI Fund and Federal Reserve scenarios differ in terms of the severity, duration, and timing of projected changes in house prices (as measured by house price indexes). All other things being equal, falling house prices negatively affect the MMI Fund because they increase the number of mortgage foreclosures and the severity of insurance losses on those foreclosures. The MMI Fund protracted slump and Federal Reserve severely adverse scenarios assume similar sharp declines in house prices during the first 2 years—about negative 20 percent and negative 23 percent, respectively. However, under the MMI Fund protracted slump scenario, house prices begin to recover in the third year and rise steadily thereafter, ending 15 percent higher than they were at the start of the scenario. In contrast, under the Federal Reserve scenario, house prices decline about an additional 2 percentage points, then recover slightly before the scenario ends in the fourth year. The MMI Fund worst simulation path features a substantially different house price path than the other two scenarios. It shows a small initial increase in house prices over the first 2 years, before projecting an extended 6-year decline, resulting in a peak-to-trough drop of about 18 percent. Thereafter, house prices recover somewhat, but end up about 10 percent below their level at the start of the scenario. The projected path of 30-year fixed mortgage interest rates also differs among the three stress scenarios. Changes in mortgage interest rates can have varying effects on the MMI Fund. On the one hand, lower interest rates can negatively affect the fund by incentivizing borrowers to prepay their mortgages (for example, through refinancing), which reduces the fund’s income from insurance premiums. On the other hand, if coupled with conditions that increase foreclosure risk (such as low house price growth), higher interest rates can negatively affect the fund by reducing prepayments, resulting in more mortgages remaining in the fund that could lead to foreclosures and insurance claims. As shown in figure 5, the three scenarios exhibit differences in the severity and timing of interest rate changes and the overall volatility of the interest rate path. The mortgage interest rate under the Federal Reserve’s severely adverse scenario increases by about 1 percentage point over the first year, then essentially levels off through the end of the scenario in the fourth year. In contrast, the MMI Fund protracted slump scenario projects an initial 1.5 percentage point decline in the interest rate over about the first 2 years, followed by an extended increase that leaves the interest rate almost 2 percentage points higher at the end of the 12- year scenario than it was at the start. The MMI Fund worst simulation path features the most dramatic interest rate changes of the three scenarios. It begins with a sharp increase of more than 3.5 percentage points over about the first 2 years, then assumes several up and down spikes over about the next 10 years, before ending with an interest rate about 3 percentage points higher than it was at the start of the scenario. As shown in figure 6, all three scenarios feature a steep increase and subsequent decline in the unemployment rate, but the timing and duration of the changes differ. All other things being equal, increases in the unemployment rate adversely affect the MMI Fund because of the negative effect that job loss has on a borrower’s ability to make monthly mortgage payments and avoid foreclosure. The unemployment rate under the Federal Reserve severely adverse scenario and the MMI Fund protracted slump scenario follows similar paths. Both start with nearly identical increases of about 4 percentage points within the first 2 years, followed by declines of roughly 1 percentage point over the subsequent six quarters, at which juncture the Federal Reserve scenario ends. In the longer MMI Fund protracted slump scenario, the unemployment rate continues to fall gradually through the 12th year, ending about 1 percentage point lower than it was at the beginning of the scenario. In contrast, the MMI Fund worst simulation path features a more gradual and less even increase in the unemployment rate—about a 3.25 percentage point rise over about the first 5 years. The unemployment rate then slides below the starting level by year 10, before rebounding past the starting level by the end of the scenario. In addition to the contact named above, Steven Westley (Assistant Director), Winnie Tsen (Analyst in Charge), Stephen Brown, Marcia Carlsen, William Chatlos, Robert Dacey, Emei Li, John McGrail, Angela Pun, Jennifer Schwartz, Jena Sinkfield, and Frank Todisco made key contributions to this report.", "summary": "FHA insures private lenders against losses from defaults on single-family mortgages. According to independent actuarial reviews, in fiscal years 2009–2014, FHA's MMI Fund (which insures $1.2 trillion in single-family traditional and reverse mortgages) did not meet its statutory 2 percent capital requirement. Also, a budgetary review determined that the fund required $1.69 billion in supplemental funds in fiscal year 2013. GAO was asked to examine issues concerning the MMI Fund's capital requirement and actuarial reviews. This report examines the types of information provided by assessments of the fund's financial condition, FHA's capital requirement and stress testing practices, and trade-offs associated with including reverse mortgages in the fund's capital assessment. GAO analyzed actuarial and budgetary assessments of the MMI Fund. GAO reviewed financial institution and regulatory capital and stress testing principles to develop an evaluative framework and applied it to FHA. GAO also interviewed federal and mortgage industry officials. The Federal Housing Administration's (FHA) budgetary reviews of the Mutual Mortgage Insurance Fund (MMI Fund) assess whether it needs more budget authority to cover expected future costs, and independent actuarial reviews provide complementary information on the fund's finances. FHA uses the actuarial reviews to assess whether the MMI Fund's capital ratio (economic value divided by insurance obligations) meets the 2 percent requirement and how fund components would perform under alternative economic scenarios. While the actuarial assessment does not directly determine the need for additional budget authority, it evaluates the fund's ability to absorb unexpected losses and may prompt changes in FHA policies and insurance premiums. Capital requirements and stress testing practices—tools for managing financial risks—for the MMI Fund are not consistent with all elements of a framework GAO developed to help assess these tools in the context of FHA's single-family mortgage insurance programs. In accordance with the framework, FHA's capital assessments and stress tests are transparent and incorporate a number of relevant risk factors. However, areas of inconsistency include the following: Scenario-based requirement . The statutory capital requirement is intended to help ensure the fund can absorb unexpected losses but is not based on a specified risk threshold, such as an adverse economic scenario the fund would be expected to withstand without requiring supplemental funds. Accountability mechanisms . The capital requirement also does not include accountability mechanisms, such as a set of steps FHA would have to take if the capital ratio again fell below the 2 percent minimum. Fund-wide stress tests . FHA has conducted separate stress tests—projections of financial condition under adverse scenarios—of its forward (traditional) and reverse mortgage (loans against home equity available to seniors) portfolios, but has not performed tests on a fund-wide basis. Stress test objectives . FHA has not defined specific objectives for its stress tests such as determining the amount of additional capital, if any, that would be needed to withstand conditions similar to the last housing crisis. Strengthening FHA's capital requirement and stress testing practices could help ensure that the MMI Fund is able to withstand economic downturns and that stress test results are as relevant and useful as possible for risk management. Including reverse mortgages in the fund's capital assessment has advantages and disadvantages. Unlike for stress tests, FHA jointly assesses forward and reverse mortgages to calculate a combined capital ratio. Subjecting the reverse mortgage portfolio to capital assessment has made its financial condition more transparent. But, the portfolio's sensitivity to changes in economic assumptions makes the combined ratio more unpredictable. Alternative approaches also pose trade-offs. For example, a separate reverse mortgage capital requirement may help ensure the financial transparency of both portfolios, but requiring FHA to hold more capital to account for the volatility of the reverse mortgage portfolio could compel FHA to raise insurance premiums or lower borrowing limits. Congress should consider specifying the economic conditions the MMI Fund would be expected to withstand without supplemental funds, and FHA should conduct stress tests on a fund-wide basis and specify the objectives of its stress tests. GAO also continues to maintain that Congress should incorporate accountability mechanisms into FHA's capital requirement (as stated in GAO-13-722 ). FHA agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Roughly two-thirds of domestic energy supplies are transported through over 2.6 million miles of pipelines throughout the United States. These pipelines carry hazardous liquids and natural gas from producing wells to end users (residences and businesses). Natural gas, which is combustible, accounts for 99.8 percent of all gas distributed in the United States. Other combustible gases transported by pipeline include hydrogen, landfill gas, synthetic gas, and propane. Within this nationwide system, three main types of pipelines serve different purposes and users (see fig. 1): Gathering pipelines. The estimated 11,500 miles of onshore gas gathering pipelines subject to PHMSA regulation collect natural gas from wells in production areas. These pipelines then typically transport the gas to processing facilities, which in turn refine it and send the gas to transmission pipelines. Gathering pipelines range in diameter from about 2 to 12 inches and operate at pressures that range from about 5 to 1,400 pounds per square inch (psi). These pipelines tend to be located in rural areas but can also be located in urban areas. PHMSA estimates that another 230,000 miles of gas gathering pipelines are not subject to federal regulation based on their generally rural location and low operating pressures. Transmission pipelines. The estimated 298,000 miles of onshore transmission pipelines carry natural gas, sometimes over hundreds of miles, to communities and large-volume users (e.g., factories). Transmission pipelines tend to have the largest diameters and pressures of any type of pipeline, generally ranging from 12 inches to 42 inches in diameter and operating at higher pressures ranging from 400 to 1,440 psi. Distribution pipelines. The estimated 2,170,000 miles of natural gas distribution and service pipelines transport natural gas from transmission pipelines to residential, commercial, and industrial customers. These pipelines tend to be smaller, sometimes less than 1 inch in diameter, and operate at lower pressures, from 0.25 to 100 psi. A specific pipeline only carries one type of gas. These gases may be colorless and odorless, which is why odorizing them may be necessary to safely alert people of a leak. All odorants used in the United States contain sulfur. According to PHMSA officials, there are nine primary sulfur-based odorants used domestically for transporting combustible gas, all but one contain mercaptan—a type of chemical with a distinctive sulfur smell—which is blended with other chemicals for stability. Pipeline operators select the odorant blend that works best for their pipeline network. Distribution pipeline operators add the odorant to their gas, usually at the “city gate”, or the place where transmission pipelines connect to a distribution pipeline network. The odorant is transported and stored in a concentrated liquid form that has a strong smell, is flammable, and is toxic. The odorant is injected into the gas stream at the “city gate” odorization station and vaporizes into the gas. In its diluted form, the odorants are nontoxic. PHMSA, within the Department of Transportation (DOT), administers DOT’s national regulatory program to ensure the safe transportation of natural gas by pipeline. PHMSA oversees and enforces pipeline operators’ compliance with federal odorization requirements for interstate pipelines, which are primarily transmission pipelines. Most states have agreements with PHMSA to oversee and enforce pipeline operators’ compliance with federal requirements—including odorization requirements—for intrastate pipelines, which are primarily distribution pipelines. These states may also impose safety requirements that are more stringent than federal requirements. Under the current regulatory system, most gathering pipelines are not subject to federal safety requirements, based on their location. Only gathering pipelines close to populated areas or waterways are currently subject to federal requirements. In March 2012, we reported that land use changes have resulted in development encroaching on existing gathering pipelines and the increased extraction of oil and natural gas from shale deposits has resulted in the development of new gathering pipelines, some of which are larger in diameter and operate at higher pressure than older pipelines. Therefore, we recommended that PHMSA collect data on gathering pipelines to help determine whether to expand regulation of these pipelines. In April, 2016, PHMSA issued the Gas Transmission and Gathering Notice of Proposed Rulemaking that would: 1) require all gas gathering pipeline operators to submit operating and accident data to PHMSA, 2) more clearly define “gathering pipeline” to better identify pipelines subject to PHMSA’s requirements, and 3) increase the number of gathering pipeline miles under PHMSA’s jurisdiction. PHMSA estimates that the new rule would increase the number of gathering pipeline miles with reporting requirements by 344,000 and the number of gathering pipeline miles subject to additional safety measures by almost 70,000. The overall framework for federal gas pipeline regulations—including odorization requirements—is designed to mitigate risk. All pipelines regulated by PHMSA are required to meet uniform, minimum safety standards. Regarding odorization, these minimum standards prescribe that a combustible gas must be odorized so that at a concentration in air of one-fifth of the lower explosive limit, the gas is readily detectable by a person with a normal sense of smell. The proximity of pipelines to populated areas, where leaks present the greatest risk, determines whether or not the gas needs to be odorized. Since 1970, PHMSA has categorized pipelines into four classes based on their proximity to populated areas to determine the odorization requirements for gas transported by distribution and transmission pipeline. Class 1 locations are in rural areas and Class 4 locations are in densely populated areas (see table 1.). All combustible gases transported by distribution pipelines are required to be odorized because these pipelines are primarily in populated areas. Some transmission pipelines in highly populated—Class 3 and 4—areas are also required to be odorized. In addition, PHMSA has a supplemental risk-based regulatory program termed “integrity management” for pipelines in “high-consequence areas” where an incident would have greater consequences for public safety or the environment. Integrity management has been a part of PHMSA’s risk- based regulatory approach for natural gas transmission pipelines since 2004, and for natural gas distribution pipelines since 2011. The risk- based integrity management programs for natural gas transmission pipelines require operators to systematically identify and mitigate risks to pipeline segments located in high-consequence areas. For example, in these areas operators must monitor their pipelines for signs of corrosion and repair corroded lines within a specified period of time. High- consequence areas for natural gas pipelines include highly populated or frequently used areas, such as parks. These areas may overlap with Class 3 or Class 4 locations. The integrity management program for distribution pipelines applies to all distribution pipelines due to their proximity to populated areas. Almost all officials and stakeholders we interviewed and the state pipeline safety officials we surveyed told us that the advantage of using sulfur- based odorants to odorize combustible gas transported by pipeline is public safety. Sulfur-based odorants have a low-odor threshold, so are easily detected at low concentrations. With a smell similar to that of rotten eggs, this odor is particularly advantageous when used in distribution pipelines that are located in areas where people congregate (e.g., homes, businesses and hospitals). If individuals smell an odorant, they can call emergency services and alert those nearby of a potential gas leak, possibly helping to prevent an explosion that could result in the loss of life and property. According to federal regulations, all local distribution companies must conduct outreach to educate the public and others on what to do when they smell a gas leak. To this end, the 2017 American Gas Association Odorization Manual (manual) states that some local distribution companies have gone beyond placing the traditional scratch-and-sniff insert in customers’ billing statements—to inform them about gas leaks and odor—to implementing “Smell Gas Act Fast!” campaigns. According to the manual, these campaigns are designed to better educate the public on the smell and nature of natural gas, along with the need to quickly take action if the odor is detected. Responding immediately to the smell of natural gas can help to prevent possible accidents. For example, when authorities were reportedly called to a Rockville, Maryland home in November 2017 to investigate an odor from a natural gas leak, authorities evacuated several nearby homes as a safety precaution in the event of an explosion, until the source of the leak could be identified and addressed. While nearly all stakeholders we interviewed said that public safety was the key advantage associated with odorizing combustible gases (in particular, combustible gases transported by distribution pipeline), some experts expressed differing opinions on the use of handheld electronic combustible gas detection devices as an alternative to detect gas leaks. According to one expert, these devices are better suited to detect gas at levels much lower than an individual’s sense of smell would allow. This expert also noted that odor does not wake a sleeping individual so a gas leak could go undetected for hours. However, a second expert noted that during his experience with pipeline accident investigations over the past 40 years, he was aware of about 10 cases in which deceased individuals were found after a gas leak accident holding a portable combustible gas detector because (1) the device may not have indicated the presence of gas in one location while a nearby location may have been explosive due to a gas leak; or (2) the user may not have been properly trained on the instrument’s limitations to identify a safe area. Accordingly, that expert stated that odorization is the most effective safety method for alerting the public of a possible gas leak. Additionally, a third expert noted that (1) electronic detectors can be difficult to place in certain areas and (2) odorants allow the public to quickly detect gas leaks without acquiring or maintaining external equipment. The most common disadvantage of sulfur-based odorants cited by officials and stakeholders we contacted is the need to remove the odorant for some industrial processes. Officials from both federal safety regulatory agencies we interviewed (PHMSA and NTSB); approximately half of state pipeline safety officials surveyed; and about half of the stakeholders interviewed reported that sulfur-based odorants used in transmission pipelines can cause an adverse chemical reaction during processing for some industries. For example, sulfur in natural gas can be detrimental in the production of electricity, fertilizer, and glass because it interferes with the catalyst used during production. PHMSA and NTSB officials and about half of the stakeholders said that before these items are produced, operators must remove any added (or naturally occurring) sulfur from their combustible gas, adding another step to production. One expert and three stakeholders told us that removing the odorant also resulted in added cost for some operators. However, because most transmission pipelines are in less populated areas and not odorized, many manufacturers currently receive unodorized gas from transmission pipelines and do not need to remove odorant, according to the industry associations we interviewed. In addition, some stakeholders warned that accidental spills of concentrated odorant, using more odorant than needed, or releasing excessive amounts of odorant during operators’ maintenance activities can lead to false alarm calls. One pipeline operator told us that an employee spilled odorant on a glove and the public made several false alarm calls due to the odorant’s potent smell as the employee drove through town with the glove on the back of a truck. Officials from PHMSA, an official from a pipeline safety organization and representatives from two pipeline industry associations told us that the public could get accustomed to these types of odorant leaks and begin to ignore them or have a false sense of security when a real gas leak does occur. For example, the official from the pipeline safety organization told us that he has heard of at least one location where odorant leaks frequently occurred, and the public began to ignore the smell. Additionally, under certain conditions, sulfur-based odorants can be hazardous to human health and the environment. A few stakeholders told us that odorants released in excessive amounts may cause health concerns. For example, during a presentation before the Pipeline Safety Trust, a Los Angeles County public health official stated that it appears a sulfur-based odorant was related to public health complaints made in 2015 after a 4-month long natural gas leak from a natural gas storage facility in California’s Aliso Canyon. Many of the reported symptoms matched those made after a 2008 natural gas storage tank leak in Alabama, which included respiratory problems; eye, nose, and throat irritation; headache; nausea; and dizziness. While at least one study has been conducted and another is planned on the long-term effects of sulfur- based odorants on human health, no direct cause and effect relationships have been established. Finally, a few stakeholders noted potential environmental hazards regarding the use of odorants. For example, one stakeholder told us that odorants can become a hazardous waste depending on the quantity used and the amount of time the chemical remains in one location prior to use; one expert and another stakeholder noted that sulfur-based odorants when spilled may contaminate waterways; and four experts and two stakeholders warned that when combusted, sulfur-based odorants can produce acid rain. Also, according to PHMSA officials, these odorants are both toxic and flammable in their concentrated state. However, none of the stakeholders provided specific examples of when an odorant caused environmental damage. General consensus exists among those we spoke with (including federal regulatory and safety officials, experts identified by the National Academies, and industry stakeholders) that federal requirements to odorize all gases in distribution pipelines are sufficient as written and do not need to be modified. PHMSA and NTSB officials we interviewed and many commenting stakeholders articulated this view. In addition, state pipeline officials we surveyed generally did not indicate a need to change federal regulations for odorizing distribution pipelines. Due to the proximity of distribution pipelines to areas where people live and work, officials, experts, and stakeholders we interviewed emphasized the importance of odorizing gas in distribution pipelines to reduce the safety risk to the public. As we have previously reported, the operating characteristics of distribution pipelines make odorant a key factor in reducing safety risk. In 2012 we reported that distribution pipelines operate at lower pressures, so pipeline failures are more likely to involve slow leaks rather than explosive ruptures. Leaking gas can accumulate in confined spaces, or migrate away from the pipeline until it finds an ignition source and potentially causes injury, death, and/or property damage. These slow leaks are difficult to see or hear, so odorants provide a critical warning to call emergency services and inform those nearby of a potential gas leak before it ignites. Of those we interviewed or surveyed, about half of stakeholders and a third of state pipeline safety officials did not indicate a need to modify existing regulations for odorizing gas in gathering pipelines. Further, a few commenting experts said odorizing those pipelines would be technically challenging. According to the experts, technological challenges stem from the fact that gas contains natural sulfur at many of the wells where gathering pipelines collect the raw gas. The natural sulfur in the raw gas could counteract the added chemical sulfur odorant, masking the smell of each and lowering the effectiveness of the odorant. Further, one stakeholder said that odorizing gathering pipelines would be logistically difficult and expensive given the number of wells that would each need an odorization station. For example, according to this stakeholder, there are roughly 500,000 gas wells nationwide and each odorizer would cost $2,000 as a capital investment. In addition, this stakeholder said that any safety benefit of adding odorant would be limited because most gas wellheads and gathering pipelines are located in sparsely populated rural areas. While the majority of stakeholders and state survey respondents did not see a need to odorize gas in gathering pipelines, a third of the state safety officials and three other stakeholders said all gathering pipelines should be odorized for additional safety regardless of any technical challenge. However, requiring all gathering pipelines to be odorized at the federal level would have to be consistent with federal pipeline safety regulations. According to the safety regulations, a risk assessment, including an assessment of the benefits and costs of proposed regulatory standards, is required to be considered in any decision on whether to impose a new safety standard. According to PHMSA officials, they do not have the data to report on any incidents on gathering pipelines where odorant may have made a difference. Moreover, PHMSA officials stated that they do not have the data to formulate an educated opinion or viewpoint as to the need to odorize gathering pipelines. To address this lack of data, the Pipeline Safety -Safety of Gas Gathering Pipelines rulemaking, if approved, will provide PHMSA with more data on gas gathering pipeline infrastructure and incident data. According to PHMSA officials, the data collected will inform PHMSA on the best path forward regarding further regulation of gas gathering pipelines, including the need for odorization. Officials anticipate publishing the final rule in summer 2019. Officials, stakeholders and survey respondents generally disagreed about the need to odorize all transmission pipelines. Officials from NTSB as well as about half of the stakeholders we contacted said the current regulations for odorizing gas in certain transmission pipelines in populated areas were sufficient. Additionally, NTSB officials said they were not aware of incidents where odorants in a transmission pipeline would have alerted the public in time to prevent the incident. These officials and stakeholders generally said that odorizing gas in transmission pipelines is not an effective means of reducing the risk of an incident. For example, one stakeholder said that at the typically high pressure at which most transmission pipelines operate, even a relatively small hole in the pipeline would cause a rupture that would excavate the earth around it so people would hear and see the evidence of the leak. Some experts also said that odorizing gas in all transmission pipelines could have increased costs and other challenges for pipeline operators or gas end users. For example, one expert said that odorizing all gas transported in the transmission pipeline system would require tens of thousands of odorization facilities. This expert also said that if gas is odorized in transmission pipelines, some industries currently receiving unodorized gas will be affected negatively because they either must incur the additional processing and cost of removing the odorant or find new ways to receive gas that is not odorized. Further, PHMSA officials and representatives from the Interstate Natural Gas Association of America said that the integrity management program for transmission pipelines provides more preventative, risk-based safety management than odorants, which rely on reducing risk through early detection of a leak that has already occurred. The integrity management program requires operators to assess the integrity of their pipelines within high consequence areas—which, by definition, encompass Class 3 and 4 locations—on a regular basis using any of three approved methods: (1) running an in-line inspection tool, or “smart pig”, through the pipeline to detect anomalies, such as corrosion, that can cause leaks (2) conducting a direct assessment using data and direct examination of the pipeline from aboveground to identify problem areas, or (3) hydrostatically testing a portion of the pipeline by removing the gas product, replacing it with water, and increasing the pressure of the water above the maximum allowable operating pressure of the pipeline to test its integrity. These inspection methods are designed to detect issues that could cause a gas leak before the leak occurs. Following the assessments, pipeline operators are required to prioritize and repair anomalies found during assessments. While odorants could be added in addition to integrity management requirements, PHMSA officials said that integrity management more effectively helps assure an acceptable level of safety for transmission pipelines than an odorant could because the risk assessments focus on the potential causes of leaks and ruptures for these types of pipelines and, therefore, are more preventative than odorizing. In a September 2006 report, we found that PHMSA’s gas pipeline integrity management program benefits public safety by incorporating risk-based management principles into pipeline safety oversight, and in June 2013, we reported that transmission pipeline operators were conducting periodic assessments and making repairs to pipelines in high consequence areas. Transmission pipeline operators are also required through the integrity management program to proactively take measures to reduce the risk or potential impact of an accident. Based on inspections of interstate transmission operators’ integrity management programs, PHMSA officials noted that—while transmission pipeline operators could opt to odorize gas in a transmission pipeline—they are not aware of any operator to date that has concluded that odorizing transmission pipelines was necessary to reduce risk. Instead, operators use tools such as electronic leak detection and remotely-controlled valves to detect potential leaks and shut down the pipeline if needed. While the preventative safety practices required under the gas transmission pipeline integrity management program are designed to mitigate risk without requiring the use of odorant, officials from two states and one stakeholder questioned the sufficiency of integrity management practices. However, as part of the ongoing two rulemakings: the Pipeline Safety: Safety of Gas Transmission Pipelines, MAOP Reconfirmation, Expansion of Assessment Requirements and Other Related Amendments and the Pipeline Safety - Safety of Gas Transmission Pipelines, Repair Criteria, Integrity Management Improvements, Cathodic Protection, Management of Change, and Other Related Amendments Rulemaking, PHMSA also plans to strengthen and expand requirements for the gas integrity management program for transmission pipelines. For example, PHMSA plans to expand the requirements for periodic assessments and subsequent repairs to additional pipeline mileage beyond that located in high consequence areas. PHMSA plans to publish these rulemaking in March and June, 2019, respectively. The 2016 PIPES Act includes a mandate for GAO to review PHMSA’s gas integrity management program as soon as PHMSA publishes the final rule. In contrast to the opinions expressed above that transmission pipeline odorization requirements are sufficient, 31 of 49 state pipeline safety officials surveyed responded that these requirements are not stringent enough for safety. Of these respondents, several said that exemptions that currently apply to some operators with transmission pipelines in Class 3 and Class 4 locations should not be allowed. There are several exemptions, determined by the overall class location of the pipeline or end use of the gas. For example, one class location exemption is that when at least 50 percent of the length of the pipeline downstream from the more populated Class 3 or Class 4 location is in a less populated Class 1 or Class 2 location, the gas does not need to be odorized (see fig. 2). Eliminating the current regulatory exemptions for certain transmission pipelines and requiring operators to odorize all gas transported by transmission pipeline through Class 3 or Class 4 locations may not be cost-beneficial under federal regulatory risk assessment principles, which direct the agency to assess the benefits and costs of changes in regulatory standards. For example, while four states cited increased public safety as the reason to remove the existing exemption, PHMSA and NTSB officials could not identify any incidents where odorants in a transmission pipeline would have prevented damage. In addition, as described above, some experts told us that removing the exemptions could have increased costs and other challenges for pipeline operators or gas end users. PHMSA officials also said that the definition of a high- consequence area under the gas integrity management program encompasses all Class 3 and Class 4 locations, so the risk-based preventative measures required under that program apply to the areas exempt from odorization requirements. We provided a draft of this product to DOT for review and comment. DOT provided technical comments that were incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Transportation, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or FlemingS@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. While our report focuses on sulfur-based odorants, which are used in the United States, we also asked experts and stakeholders about the advantages and disadvantages of non-sulfur based odorants. According to a German-based manufacturer of non-sulfur odorants, these odorants are used in some European countries, including Germany and Austria. This manufacturer also told us that the German energy industry has embraced using non-sulfur based odorants, in part, to meet German emissions regulations, as these odorants do not produce sulfur dioxide and contribute to acid rain when burned. Most of the experts and stakeholders that we interviewed were generally unfamiliar with non-sulfur based odorants. Those with some familiarity offered the following advantages and disadvantages. Three experts and stakeholders reported that non-sulfur based odorants: have less adverse impact on the environment; for example, no acid may cost less for some operators because less product may be needed than sulfur-based odorants; and do not adversely impact some operators’ processes. Four experts noted that non-sulfur based odorants: have a smell that the American public does not associate with a gas leak. Two experts commented that non-sulfur based odorants: may be chemically unstable; and can react with other compounds. Two experts noted that non-sulfur based odorants: may have a higher level of toxicity. Susan Fleming, (202) 512-2834 or FlemingS@gao.gov. In addition to the individual named above, other key contributors to this report were Sara Vermillion, Assistant Director; Sarah Jones, Analyst in Charge; Jennifer W. Clayborne; Timothy J. Guinane; David K. Hooper; Delwen A. Jones; Josh Ormond; Rebecca R. Parkhurst; and Kelly L. Rubin.", "summary": "The nation's gas pipeline network moves about 74 billion cubic feet of combustible gas to homes and businesses daily. To alert the public of a gas leak before an explosion occurs, PHMSA has different requirements for odorizing gas. All gas transported by distribution pipelines throughout communities must be odorized. Gas transported across many miles by transmission pipelines is required to be odorized only in certain populated areas. There are no requirements to odorize gas in gathering pipelines. Congress included a provision in statute for GAO to review odor requirements for all pipelines. This report presents the views of federal and state pipeline safety officials and industry and safety stakeholders on: (1) the advantages and disadvantages of odorizing combustible gases in pipelines; and (2) whether and how federal requirements for odorizing pipelines should be modified. GAO reviewed relevant regulations and reports; surveyed officials in 48 states and the District of Columbia; and interviewed PHMSA and NTSB officials. GAO also interviewed 34 stakeholders, including 14 experts identified by the National Academies, and 20 other industry and safety stakeholders. Pipeline and Hazardous Materials Safety Administration (PHMSA) and National Transportation Safety Board (NTSB) officials, state officials, and stakeholders GAO contacted cited safety as the main advantage to odorizing combustible gases in pipelines, primarily for distribution pipelines in densely populated areas (see figure). Specifically, adding a chemical with a distinctive odor to gas allows the public to generally detect leaks before an explosion can occur. The most frequently cited disadvantage was that commonly used sulfur-based odorants must be removed—primarily from gas in transmission pipelines—before the gas can be used in certain processes, such as producing fertilizer. While federal odorization requirements follow a risk-based approach by focusing on pipelines in populated areas, the officials and stakeholders GAO contacted disagreed on the need to modify these requirements for some pipelines. Specifically, because distribution pipelines run through populated areas, everyone GAO contacted generally agreed that these pipelines should be odorized for safety, as currently required. For gathering pipelines, the majority of officials and stakeholders did not see a need to modify regulations because these pipelines would be technically challenging to odorize and are primarily located in rural areas. However, about two-thirds of state officials and about half of stakeholders said that additional transmission pipelines should be odorized for public safety. Conversely, officials from PHMSA and NTSB and about half of the stakeholders contacted noted that, because transmission pipelines operate at high pressure and generally rupture rather than leak, it is unlikely that odorant could mitigate risk. Instead, other required safety practices—such as internal pipeline inspections—can provide more preventative, risk-based safety management, according to PHMSA officials. In this regard, PHMSA officials said that they plan to strengthen risk-based safety requirements for transmission and gathering pipelines as part of on-going rulemakings. PHMSA anticipates issuing these rules in 2019.", "document_type": "gao"}
{"report": "Indian tribes and nations are recognized as “distinct, independent political communities” that are part of the unique political structure of layered sovereigns and internal governments that comprise the U.S. system of government. Tribal powers of self-government are recognized by the Constitution, legislation, treaties, judicial decision, and administrative practice. Tribal governments have many of the same responsibilities as state and local governments. However, tribes are generally unable to establish a strong tax base structured around the property taxes and income taxes typically available to state and local governments, according to a 2016 joint report from the Native Nations Institute and the Harvard Project on American Indian Economic Development and a 2003 report from the U.S. Commission on Civil Rights. For example, the reports found that tribes are unable to levy property taxes on some of their lands because of the legal status of the land. In addition, most tribes have a limited land base. Tribes generally do not levy income taxes because many tribal communities have disproportionately high levels of unemployment and a lack of employment opportunities. To the degree that they are able, some tribes use sales and excise taxes, but these do not generally generate enough revenue to fully support tribal governments. Therefore, some tribes rely on a combination of federal funds and economic development initiatives as fundamental sources of financial support for the government programs and services provided to their communities. According to Cohen’s Handbook of Federal Indian Law, “federal services to Indians were never mere gratuities. Instead, they were provided in exchange for cessions of land and rights, and to achieve distinctly federal purposes.” Generally, the programs that provide basic tribal services are supported through tribal priority allocation (TPA) funds that Congress appropriates. TPA funds are used to provide a wide variety of services to tribal communities—either through BIA-administered programs or self- determination contracts and self-governance compacts—and all federally recognized tribes are eligible to receive those funds. BIA, through its 12 regional offices and more than 80 agency offices, administers programs that provide services and funding to tribes. For example, BIA programs include social services, natural resources management, economic development, law enforcement and detention services, tribal court administration, implementation of land and water claim settlements, repair and maintenance of roads and bridges, repair of structural deficiencies on high hazard dams, land consolidation activities, and electric utilities. In some cases, a BIA agency office may serve one tribe, and in other cases, a BIA agency office may administer programs on behalf of more than one tribe. For example, BIA’s Central California Agency administers programs to 56 tribes, the largest multi-tribal field office in the contiguous 48 states. These programs may also be administered by tribal governments under a self-determination contract or self-governance compact. BIA is responsible for administering self-determination contracts, including negotiating and approving each contract and its associated annual funding agreement and disbursing funds to the tribes. For instance, under its procedures, BIA is to provide tribes that are interested in pursuing a self-determination contract with key information about the program and available funding. ISDEAA transfers control over programs to tribes, but as stated in Cohen’s Handbook of Federal Indian Law, “financial responsibility remains with the federal government.” ISDEAA provides that tribes who decide to administer federal programs are to receive the same funds that would have been provided had the federal government operated the programs. BIA identifies the amount of funds available to a tribe under a self- determination contract or self-governance compact for the administration of a federal program. In general, the most basic process for calculating the program amount is as follows: The program amount equals the total amount of funds Interior used to operate a program minus residual funds. Residual funds are the funds necessary for the federal government to carry out residual functions. Residual functions are inherently federal functions that only federal employees’ may perform if all tribes were to assume responsibilities for all programs that ISDEAA permits. Inherently federal functions are not defined in Title I or Title IV of the ISDEAA, and a 1994 Solicitor of the Interior memo reports that inherently federal functions are to be determined on a case-by-case basis when they fall outside certain defined categories. BIA officials told us the basic calculation is most likely to be used when a tribe is served by an agency office that only serves one tribe and the tribe took over administration of a program from that agency office. In cases where the total amount of funds BIA used to operate a program serves more than one tribe, additional data and factors may be included in the methodology to calculate the amount of funds available to administer the program. This is needed to ensure BIA can continue to provide services to the tribes that did not take over administration of the program. A BIA official told us that some regions and agency offices may divide the total amount by the number of tribes served, as shown in the following example: The program amount equals the total amount of funds Interior used to operate a program minus residual funds divided by the number of tribes served by the program. In other cases, regions and agency offices may include additional data to weight the calculation, such as tribal population or tribal land acres. When a tribe elects to pursue a self-determination contract, BIA is to meet with tribal officials to discuss and negotiate the terms of the contract, including what functions will be retained by BIA, the annual funding amount, and terms for the frequency of disbursing funds—that is, disbursed in a single lump sum or other intervals, such as quarterly payments. According to Interior budget officials responsible for BIA’s budget, after Interior receives its appropriations, departmental budget officials determine how to distribute any changes between the Administration’s budget and the final budget among BIA offices that deliver direct services to tribes and to tribes that contract the services through self-determination contracts. According to Interior budget officials, they calculate changes in the budget amounts for each contract after consulting BIA program officials and based on statutory requirements, historical percentages, or other distribution factors. After the budget calculations are completed, Interior officials transfer funds to BIA regional offices to distribute to BIA agency offices and tribes. An awarding official in the regional or agency office then provides contracting tribes an updated annual funding agreement that identifies the amount of funds for that fiscal year. ISDEAA authorizes federally-recognized tribes to assume administration of certain federal programs and functions that were previously managed by the federal government. It is Interior policy to facilitate tribal administration of programs through self-determination contracts and remove obstacles that hinder tribal autonomy and flexibility to administer such programs. Under Title I of ISDEAA, an interested tribe may request by tribal resolution to enter into a self-determination contract with BIA. ISDEAA requires the parties to such contracts to negotiate annual funding agreements and determine the frequency and timing of payments under the contract. Payments may occur throughout the fiscal year in accordance with terms identified in the annual funding agreements as Interior’s Indian Affairs Office of Budget and Performance Management makes appropriated funds available. Under Title IV of ISDEAA, an interested tribe may request to enter into a self-governance compact. Under the law, to be eligible for participation in self-governance compacting, a tribe must, among other things, demonstrate financial stability and management capability, which can be evidenced by participating in a self-determination contract for at least 3 years with no material audit exceptions. Interior’s Office of Self- Governance (OSG) is responsible for administering self-governance compacts and funding agreements for Interior programs. OSG assists tribes that want to enter into self-governance compacts by providing training, determining eligibility, participating in negotiations with the tribes and Interior agencies to identify the amount of funds that will be included in the self-governance compacts, and approving tribes to participate in self-governance. In addition, tribes with self-governance compacts negotiate annual funding agreements with OSG rather than BIA. OSG is also responsible for transferring funds from Interior to tribes with a self- governance compact, ensuring audit compliance, and processing waivers of BIA regulations. Further, OSG is responsible for preparing an annual report to Congress on the costs and benefits of self-governance. As of fiscal year 2016, OSG has entered into self-governance compacts that cover 47 percent of federally recognized tribes (267 tribes). For additional information on the differences between self-determination contracts and self-governance compacts, see table 1. Several factors, including federal agencies’ processes and actions can affect tribes’ use of mechanisms that further tribal self-government such as self-determination contracts, self-governance compacts, or leasing authority under the HEARTH Act that further tribal self-government. Some of these factors, such as federal training and resources, can help tribes develop the tribal capacity needed to take over administration of federal programs and thereby facilitate tribes’ use of these mechanisms. In contrast, other factors, specifically federal processes and actions, can hinder or delay tribes’ use of these mechanisms. Some of these processes include: (1) BIA’s approach for sharing information with tribes, (2) Interior’s process to disburse funds, and (3) Interior’s process to review proposed tribal leasing regulations submitted under the HEARTH Act. In addition, the adequacy of federal resources needed to administer a program is a factor that can affect tribes’ use of self-determination contracts and self-governance compacts, according to several tribal stakeholders and federal officials we spoke with, government reports, our prior reports, and other articles we reviewed. The capacity of a tribal government to administer a federal program or manage its resources is a key factor that can affect a tribe’s decision to enter into a self-determination contract or self-governance compact, or to use the authority available under the HEARTH Act, according to some reports we reviewed. For example, the Harvard Project on American Indian Economic Development found that successful tribal assertions of sovereignty and self-government are backed by capable institutions of governance that contribute to tribal capacity. According to federal officials and agency training documents we reviewed, Interior has contributed to the capacity of tribal governments by increasing tribes’ knowledge about self-governance compacting and the HEARTH Act. For example, Interior’s OSG provides opportunities for tribes to learn about self-governance compacting and build capacity by partnering with a non-profit organization to conduct training events, including an annual week-long training program. In addition, BIA offered several training sessions in 2014 and 2015 on the HEARTH Act to educate tribes on the benefits of developing tribal leasing regulations. Furthermore, Interior’s Office of Indian Energy and Economic Development administers a grant program, Tribal Energy Development Capacity, intended to help tribes build the capacity to enter into a tribal energy resource agreement (TERA) or develop leasing regulations under the HEARTH Act. Some tribal stakeholders identified the EPA’s Indian Environmental General Assistance Program (GAP) as a model for a federal program that helped their tribes build the capacity needed to administer environmental programs from EPA. These tribal stakeholders also told us this capacity benefitted the tribes as they sought to take over similar programs from Interior. Some tribal stakeholders told us the GAP program is effective in assisting tribal governments build capacity because it is designed to provide consistent funding over multiple years. According to reports we reviewed that discuss building tribal capacity, effective capacity building efforts should both provide for sustained, consistent funding over time, since developing capacity can be an ongoing effort that may take longer than 1 year to achieve and facilitate a tribe’s ability to develop a program that is responsive to each tribe’s unique conditions and priorities. We found that several factors can hinder tribes’ ability to use self- determination contracts, self-governance compacts, or leasing authorities under the HEARTH Act, including: (1) BIA’s approach for sharing key information with tribes seeking to develop a program using a self- determination contract, (2) Interior’s process to disburse funds to tribes associated with self-determination contracts and self-governance compacts, (3) Interior’s review of tribal leasing regulations submitted under the HEARTH Act, and (4) BIA’s management and maintenance of federal programs that tribes may pursue to take over under a self- determination contract. According to several tribal stakeholders, BIA’s approach for sharing key information with tribes does not always ensure that tribes have the information they need to design programs under self-determination contracts prior to negotiations. As a result, this has been a factor that has hindered or delayed tribes’ use of self-determination contracts for administering programs. Interior guidance and policy call for BIA to provide tribes information that includes, among other things, calculations BIA uses to identify the amount of funds available to a tribe if it takes over administration of a program. In accordance with Interior’s policy, BIA should provide tribes with the information necessary to design programs those tribes would like to administer under a self-determination contract to meet the needs of their communities consistent with their diverse demographic, geographic, economic, cultural, health, social, religious, and institutional needs. Also in accordance with Interior guidance, when a tribe requests to enter into a self-determination contract with Interior, BIA should disclose information to the tribe that identifies the amount of program funding available, the methodology used to identify available amounts, the process used to arrive at available amounts, an identification of the amount of funding retained by BIA, and any other information useful to understand how contract amounts were calculated. Moreover, Interior regulations call for BIA to provide to tribes, for the negotiation of annual funding agreements for self-governance compacts, a brief justification as to why specific functions have been determined inherently federal. However, according to several tribal stakeholders, they do not receive this information, including calculations BIA uses to identify the amount of funds available to tribes, prior to negotiating their self-determination contracts. Some BIA regional and agency office officials we interviewed told us they do not generally provide information to tribes prior to negotiating the terms of a self-determination contract because the determinations of inherently federal functions and the amount of funding the bureau would retain to perform such functions generally occurs during meetings with BIA and the tribe. A tribal stakeholder told us that without documentation on funding calculations and methodologies, tribes are at a disadvantage and have little basis to negotiate during these meetings. A tribal stakeholder told us that, in practice, the negotiation generally consists of BIA informing the tribe of the amount of funds to request in its proposal and what federal functions BIA will retain without any documentation to support its determination of inherently federal functions or the resources to be made available to the tribe to administer a program using a self- determination contract. BIA’s approach is not consistent with Interior’s policy of sharing information so tribes can develop programs. By developing a process that results in BIA’s regional and agency offices providing tribes with documentation on calculations and methodologies to identify resources available to administer a program using a self-determination contract, BIA would be adhering to Interior’s policy and have greater assurance that tribes have the information they need to design the programs that they would like to pursue under a self-determination contract. In addition, BIA guidance states the bureau will ensure functional consistency in the determination of inherently federal functions when the Central Office and all regional offices are compiling that information for negotiating annual funding agreements with tribes. We found examples that suggest that BIA has not consistently determined whether programs and functions are inherently federal, which can affect some tribes’ use of self-determination contracts. For example, a BIA official in one regional office told us that the region had previously decided all functions associated with the Land Titles and Records Offices were inherently federal and told tribes that BIA would not approve a self-determination contract for those functions. However, other BIA regional offices did not consider the functions of the Land Titles and Records Offices as inherently federal, and some tribes in those regions had taken over administration of those functions. BIA does not have a process that results in consistent determinations of inherently federal functions and does not provide tribes with information on its prior determinations. A BIA official told us that determinations of inherently federal functions are made on a case-by-case basis because each tribe and its circumstances are unique. However, this approach does not provide BIA leadership with reasonable assurance of functional consistency throughout the bureau in the determination of inherently federal functions—consistent with bureau guidance. By developing a process that results in consistent determinations of inherently federal functions, BIA could have greater assurance that these decisions are being made appropriately across the agency. BIA could also increase transparency in the process by providing tribes with documentation on activities and functions previously determined to be inherently federal and the basis for making these determinations. According to tribal stakeholders we spoke with, Interior’s process to disburse funds associated with the tribes’ self-determination contracts and self-governance compacts is a factor that hinders expansion of self- determination contracts or self-governance compacts. Several tribal stakeholders and federal officials we interviewed said that the process does not ensure that tribes receive funds within the time frame specified in ISDEAA’s Model Agreement for self-determination contracts or as agreed to by Interior and the tribes in their annual funding agreements. Two tribal stakeholders stated that in prior years, funds were disbursed several weeks or months after Interior received its apportionment from the Office of Management and Budget. We were unable to determine the extent to which Interior disburses funds for self-determination contracts within the time frame agreed to in a self- determination contract because Interior does not systematically track the disbursement of funds from the date it received its appropriations through the date that it made funds available to tribes and does not compare its actual performance to expected performance. Not tracking this information and comparing actual performance to expected performance is contrary to federal internal control standards, which state that agency management should design control activities to achieve objectives and respond to risks, such as by comparing actual performance to planned or expected results and analyzing significant differences. This is not a new issue for Interior. Specifically, in 2015, an Interior contractor reported on an evaluation of Interior’s process for disbursing funds and identified opportunities for improvement. Consistent with our findings, the report also found that, among other things, the process used by Interior to disburse funds is a manual process that does not include a real-time tracking mechanism. Without such a mechanism, the report found that officials must spend time trying to determine the status of documents and finding misplaced or lost documents. For example, the report found that in fiscal year 2014, Interior had more than 6,000 scanned documents that required up to 6 signatures each, for a total of up to 36,000 signatures, to disburse funds including funds to tribes for self-determination contracts or self-governance compacts. To finalize these documents, the report estimates that 600 hours of staff time were spent scanning, uploading, and printing the documents. Several Interior officials told us they conduct monitoring activities within a specific BIA region or BIA agency office, such as tracking disbursement information through an Excel spreadsheet, but these activities were not part of a systematic process. An Interior official told us there are no plans to develop a real-time tracking mechanism. Interior officials we interviewed cited several reasons why some funds associated with self-determination contracts and self-governance compacts were not disbursed in accordance with time frames outlined in its Model Agreement or negotiated in funding agreements. The reasons include the following: Interior’s financial data management system. Interior officials told us that the agency’s financial data management system is used for all of Interior and is not equipped for the unique aspects of self- determination contracts and self-governance compacts—making it difficult to properly track and monitor key actions. Prior use of an inefficient process. An Interior official told us that prior to fiscal year 2017, BIA used several spreadsheets to coordinate TPA information for distributions. The official stated that these spreadsheets were over 15 years old, and they made the process inefficient and time-consuming. To distribute funds, officials would use one spreadsheet to gather information and another to summarize the amounts by functional area and region. The official stated that BIA updated the process in fiscal year 2018 and does not expect it to delay funding in the future. Staff shortages in key positions. BIA officials in several regions told us they are experiencing staff shortages in key positions that are responsible for the transfer of funds from BIA to tribal governments, such as awarding officials. Interior officials said the Office of Self Governance also needs additional awarding officials with only one awarding official for self-governance compacts. Interior officials stated that the challenges from staff shortages are compounded by Congress’ use of continuing resolutions that result in BIA repeating its fund distribution process multiple times in a single year. Delays in receiving tribal signatures. Interior officials we interviewed told us that they have experienced delays disbursing funds to a tribe because they must wait for tribal officials to sign documents before funds may be disbursed. When funds are not disbursed in a timely manner, a tribal stakeholder told us that tribes may have to use funds from their general revenue accounts to cover expenses for federal programs or seek other sources, such as loans, to cover program expenses. According to several tribal stakeholders, when a tribe has to use its own funds for the administration of programs—even temporarily—it can adversely affect the tribe in various ways, including lost opportunities to use tribal funds for improving the tribes’ economic conditions, reducing other services provided to tribal communities, and furloughing tribal government employees. In addition, several tribal stakeholders told us that the timeliness of disbursements for self-determination contracts is a factor they consider when deciding whether to take over additional programs under a self-determination contract. The tribal stakeholders said that the tribe must consider if it is able to use tribal funds or willing to obtain a loan to fund a program when the federal government is late disbursing funds. Without establishing a process for tracking and monitoring the disbursement of funds associated with self-determination contracts and self-governance compacts, Interior will not have reasonable assurance it disburses funds in a systematic way or in accordance with agreed upon time frames. Interior has not clearly documented its process for reviewing proposed tribal leasing regulations with timeframes associated with each step of the process. The process can often be lengthy and time consuming; according to tribal stakeholders, this can be a factor that hinders the tribes’ ability to make decisions about the use of tribal resources. Under the HEARTH Act, tribes are to submit proposed leasing regulations for Interior’s review and approval before a tribe can approve leases for the use of tribal lands, and Interior’s review is to be completed within 120 days after the dates on which the tribal regulations are submitted to the agency. Interior officials told us they interpret the statutory review time frame requirements of the HEARTH Act as applying only to the agency’s review to ensure tribes incorporated all changes identified in prior reviews. Specifically, Interior officials told us the agency does not consider the statutory time frame to begin until it has received a final version of the proposed tribal leasing regulations. These officials described the final version of proposed tribal leasing regulations as regulations that have already undergone review by BIA and Interior’s Solicitor’s office, have been revised by the tribe, and have been resubmitted for additional review by BIA and the Solicitor’s office. This process can be repeated multiple times before Interior considers the tribe’s proposed leasing regulations to be final. In contrast, a tribal stakeholder told us that Interior’s interpretation of how to measure the time frame is inconsistent with the tribe’s interpretation of the statutory time frame. The tribal stakeholder told us that a tribe considers its leasing regulations initially submitted to Interior as final, although the tribe understands that BIA and the Solicitor’s office may request revisions. Some tribal stakeholders told us that because Interior is not considering the 120 days as a time frame from first submission until approval, tribes do not know when to expect a final decision on draft tribal regulations. We found that some of this confusion could be attributed to the fact that Interior has not clearly documented its review process to include established time frames associated with each step of the process. Under federal standards for internal control, management should design control activities, such as clearly documenting internal control in management directives, administrative policies, or operating manuals. The HEARTH Act seeks to expand tribal self-government and promote economic development by shifting the authority for leasing from the Secretary to the tribes. By developing a clearly documented review process that includes established time frames for each step in the process for reviewing proposed tribal leasing regulations submitted under the HEARTH Act, Interior can better ensure that it is eliminating uncertainty and better communicating the process for approval to the tribes. We also found that the approval process can be lengthy in some cases. Our review of 42 tribal leasing regulations submitted to Interior for review from 2012 through 2017 for which BIA provided us with data on the date the tribe submitted the regulations to Interior and the date of Interior’s approval found that 4 of the 42 leasing regulations were approved within 120 days. For the other 38 proposed regulations, the time from when the tribe submitted the regulations to Interior to when the agency approved the regulations ranged from 134 days to 980 days. Half of the 42 proposed regulations were under review by Interior for a year or longer, with 5 of the 21 under review for more than 2 years. Interior’s review was generally not continuous during the entire period; instead, these time periods included review by BIA and the Solicitor’s office and the time spent by the tribe revising its leasing regulations in response to Interior’s review. Tribal stakeholders also shared with us several examples that illustrate Interior’s lengthy review process for tribal governments’ use of the HEARTH Act. For example, in one case, Interior received a tribe’s leasing regulations for review and approval in May 2015. Interior approved the tribe’s leasing regulations and published the decision in the Federal Register in April 2018—more than 2 years later. Officials representing this tribe told us they considered the leasing regulations initially submitted on May 18, 2015, as final, though they understood that Interior could request revisions. These officials explained that the tribe has its own extensive process and procedures for lawmaking and developed its leasing regulations consistent with its Constitution, Legislative Procedures Act, and Administrative Rulemaking Procedure, which take into account comments from tribal members and tribal agencies and includes a judicial review, legislative analysis, fiscal impact review, and adoption by the tribe’s elected business committee. Tribal stakeholders told us that after each communication with BIA about the leasing regulations, they believed the regulations were satisfactory for approval. For example, the tribe received preliminary approval from BIA in October 2016. Then, tribal stakeholders said in August 2017—nearly 10 months later—the tribe received correspondence from BIA stating that the tribe needed to add several additional provisions, including language regarding Indian irrigation projects and districts even though the tribe does not have any irrigation projects or districts within its boundaries. Additional correspondence took place between the tribe and Interior, resulting in final approval in January 2018. Tribal stakeholders told us that the lengthy review delayed the tribe’s ability to implement leasing regulations and delayed the tribe’s ability to make decisions about the use of tribal resources. In another case, Interior received tribal leasing regulations for review and approval on January 17, 2014. The tribe stated in documentation submitted to Interior that it was seeking increased decision-making authority under the HEARTH Act because it had finalized various construction agreements and needed to approve surface leases for an economic development project. During the time that the tribe’s leasing regulations were under review at Interior, BIA asked the tribe to submit multiple versions of its leasing regulations. According to BIA documents, the bureau took approximately 2 months to transfer the tribe’s regulations from BIA headquarters to a regional office for its review. Once the regional office received the tribal leasing regulations, the office conducted its review over a 3-month period and provided comments to BIA’s headquarters. BIA’s data show that headquarters sent the tribe’s leasing regulations to the Solicitor’s office nearly 5 months after it received the tribal leasing regulations. Over the next couple of years, Interior requested the tribe make changes to its leasing regulations three more times and resubmit revised versions for review. On March 3, 2016—more than 2 years after receiving the tribe’s leasing regulations—Interior documented that it had “one small change” it would like the tribe to make to the regulations. The tribe made the requested change and resubmitted the leasing regulations to Interior via certified mail, which showed receipt at Interior on July 1, 2016. Interior approved the tribal leasing regulations on October 7, 2016—more than 3 months after the tribe submitted regulations with the “small change.” Interior approved the tribe’s leasing regulations and published the decision in the Federal Register in October 2016—more than 2 years after Interior first received the tribe’s leasing regulations. Interior officials told us there was not a single reason for the lengthy review times. In some cases, Interior officials said the review times were long because the BIA official responsible for managing Interior’s review had left the bureau. In other cases, Interior officials told us they were short-staffed in the Office of the Solicitor and the legal review took longer than anticipated. However, they acknowledged that the uncertainty associated with how long Interior’s review will take can make it difficult for tribes to plan and execute economic development projects. For example, a BIA official told us that a tribe was unable to pursue an economic development opportunity because of the time it took for Interior to complete the process to review the tribe’s regulations. In contrast, a timely review of a tribe’s proposed leasing regulations can positively affect tribal control and decision making. For example, a tribal stakeholder said after several months waiting for BIA to approve a surface lease needed for a tribe to develop a wind farm, the tribe decided to pursue authority under the HEARTH Act so that it could review and approve the lease without waiting for BIA’s review of the surface lease. Interior reviewed and approved the tribe’s leasing regulations submitted under the HEARTH Act authority in 31 days. According to the tribal stakeholder, the timely review and approval of the tribe’s leasing regulations allowed the tribe to review and approve the surface lease needed for construction of the wind farm to commence before the expiration of tax credits—a key component that made the project feasible. Past mismanagement of federal programs under the administration of BIA is a factor that can affect tribes’ decisions whether to take over federal programs through self-determination contracts, according to several tribal stakeholders and BIA officials. As documented in a 2003 report by the U.S. Commission on Civil Rights, decades of general mismanagement of infrastructure and programs under BIA’s administration can hinder a tribes’ use of self-determination contracts. In 1999, BIA reported to Congress that funds provided under self-determination must be used not only for current operations but also “to repair 150 years of general neglect” of Indian programs. In these cases, taking over programs with long-standing neglect is a liability that some tribes are not willing to assume. For example, a tribal stakeholder told us that its BIA agency office neglected tribal land records for many years. As a result, the tribe is reluctant to assume the liability associated with administering a real estate program without accurate property records. In another example, BIA operates an irrigation project that provides electric utility service to two tribes. Both tribes have taken over certain functions associated with the utility service provided to their communities through self-determination contracts, and both tribes have expressed interest in expanding the functions they administer. However, BIA and tribal officials said that concerns over infrastructure that needs to be repaired or replaced and the liability associated with rights-of-way have deterred both tribes from taking over the remaining functions of the utility. For example, many utility poles on the project’s transmission lines are more than 50 years old and are in need of replacement, and the project has over 1,500 miles of transmission lines and 2,000 miles of distribution lines. According to a BIA document, these lines might have been extended without receiving a formal right-of-way. The report states that “many of ’s rights-of-way are unperfected and there are no supporting documents evidencing a legal right-of-way.” According to tribal stakeholders these kinds of uncertainties are significant factors they must consider in their decisions related to self- governance of BIA programs. The adequacy of resources is a long-standing concern that has been a factor affecting tribal participation in self-determination contracts and self- governance compacts, according to several tribal stakeholders and federal officials we interviewed, government reports, our prior reports, and articles we reviewed. Specifically, a lack of adequate resources has been a long-standing concern that can limit the number of programs tribes take over using self-determination contracts and self-governance compacts. For example, the U.S. Commission on Civil Rights 2003 report noted that the authority tribes have to take over the administration of federal programs is useful to the extent that adequate funds are made available to the tribes to operate the program. According to Interior officials, Interior does not have an estimate on the extent to which it can provide adequate resources to tribes that want to administer federal programs. For one program, BIA estimated in a report to Congress that the dollars BIA expended in fiscal year 2013 for BIA and tribes to operate detention and corrections centers fund about forty percent of the estimated operating needs. Faced with funding shortfalls from the BIA budget to administer federal programs under federal self-determination contracts or self-governance compacts, many tribal stakeholders told us that they supplement federal funding. Officials from one tribe told us that the tribe has supplemented all the programs it has taken over from BIA. For example, the tribe reported that the Land Titles and Records Program has a shortfall of about $300,000 annually; the Law Enforcement program with about $564,000 annually; and the Probate Program with about $129,000 annually. Officials from the tribe told us that tribes may rely on revenues generated from economic development or tax revenue to supplement federal dollars for programs they have taken over from the federal government. However, tribal stakeholders we interviewed told us that not all tribes are in a position to supplement additional federal programs because of limited economic development opportunities and tax revenue; therefore, those tribes may not have the option to take over additional federal programs. According to a tribal stakeholder, dual-taxation—when both a tribe and state tax the same non-tribal members and businesses on tribal land— can significantly limit a tribe’s tax revenue because tribes must reduce or eliminate their taxes to stay competitive and attract business and enterprise to their lands. Furthermore, the funds tribes may use to supplement federal programs are needed to fund other governmental services and activities, which place tribal leaders in the position of deciding whether to use funds to provide governmental services not funded by the federal government or to increase self-governance by administering additional federal programs. As we have previously reported, when tribes supplement the federal program they take over, it diverts funds away from other economic development opportunities and other government functions and services they provide to their communities and citizens. Lastly, several tribal stakeholders told us that not receiving adequate resources from the federal government to administer federal programs makes them reluctant to administer additional federal programs because they believe BIA has a better chance than the tribe to obtain additional resources that can be used to supplement program shortfalls. This is, in part, because they believe that BIA agency offices and regional offices have access to funding sources that are not available to tribes and because BIA does not always make tribes aware of funds that are available. For example, the Department of the Interior’s Self-Governance Advisory Committee reported in 2015 that the distribution of year-end funds is entirely within the discretion of the local awarding official and that not all tribes are notified that these funds are available. Interior has taken steps to assist tribes pursuing tribal self-government by providing training opportunities focused on self-governance compacts and the use of the HEARTH Act to help increase tribal capacity. However, several factors have continued to hinder tribes’ use of these mechanisms to further tribal self-government. First, BIA’s approach for sharing key information with tribes when tribes seek to administer a program using a self-determination contract does not provide the tribes with the information they need to understand how the self-determination contract amounts were calculated. As a result, tribal leaders are at a disadvantage in making sound decisions regarding the feasibility of taking over the administration of federal programs. Second, BIA does not have a process that results in consistent determinations of inherently federal functions and does not provide tribes with information on its prior determinations. By developing a process that results in consistent determinations of inherently federal functions, BIA could have greater assurance that such determinations are being made appropriately across the agency and BIA could increase the transparency of the process by providing tribes with documentation on activities and functions previously determined to be inherently federal and the basis for the determinations. Third, Interior does not have an effective process for tracking and monitoring the disbursement of funds associated with tribes’ self- determination contracts and self-governance compacts or as agreed to with the tribes. Without establishing an effective tracking and monitoring process, Interior does not have reasonable assurance that it is disbursing funds in accordance with ISDEAA or time frames agreed to with the tribes. Lastly, Interior has not documented its process to include established time frames associated with each step of the process to review proposed tribal leasing regulations submitted under the authority provided by the HEARTH Act. This has resulted in lengthy review times—in some cases, multiple years. By developing a clearly documented review process that includes established time frames for each step in the process for reviewing proposed tribal leasing regulations submitted under the HEARTH Act, Interior can better ensure that it is eliminating uncertainty in the process to approve tribal leasing regulations. We are making the following four recommendations to Interior: The Assistant Secretary of Indian Affairs should develop a process so that all regional and agency offices consistently provide tribes with documentation on calculations and methodologies to identify resources available to administer a program using a self- determination contract. (Recommendation 1) The Assistant Secretary of Indian Affairs should develop a process that results in consistent determinations for inherently federal functions and to provide documentation to tribes on specific activities and functions determined to be inherently federal. (Recommendation 2) The Assistant Secretary of Indian Affairs should establish a process to track and monitor the disbursement of funds associated with self- determination contracts and self-governance compacts. (Recommendation 3) The Assistant Secretary of Indian Affairs should coordinate with the Office of Solicitor and BIA to develop a clearly documented process with established time frames for each step in the process for reviewing proposed tribal leasing regulations submitted under the HEARTH Act. (Recommendation 4) We provided a draft of this report to Interior for comment. In its comments reproduced in appendix II, Interior generally concurred with our recommendations. Interior also provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 28 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, the Assistant Secretary of Indian Affairs, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. For this report, we reviewed a range of reports, articles, conference proceedings, congressional testimony, and other publications from federal and tribal governments, academics, and nonprofit organizations. These publications included general background information related to tribal self- government and tribes’ use of self-determination contracts, self- governance compacts, and the HEARTH Act, as well as historical perspectives, successes and challenges, and identified some factors that can affect a tribe’s decision to use one of these mechanisms. We identified these articles and publications by searching various Web-based databases, such as ProQuest, Scopus, DIALOG, Academic OneFile, JSTOR, and Lexis to identify existing studies from articles, peer-reviewed and other journals, including law review journals, and government and academic publications. We searched terms such as tribal sovereignty, self-governance, self-determination, and capacity, as well as relevant acts or program names. We also asked tribal stakeholders that we interviewed to recommend additional reports, congressional testimony, and other articles on the topic. We did not set specific time frames for the search, and identified more than 50 articles from 1982 to 2017. We examined summary-level information about the literature identified in our search and identified a few of the articles as directly related to our report. These five publications are identified throughout this report. Other articles provided beneficial context and historical information but did not contribute to us identifying factors to include in this report. We reviewed relevant laws and regulations including the Indian Self- Determination and Education Assistance Act of 1975 (ISDEAA), as amended and Helping Expedite and Advance Responsible Tribal Home Ownership Act of 2012 (HEARTH Act). We also reviewed Interior’s policy manual, Interior’s procedures handbook for contracting under Title I of ISDEAA, the Interior Solicitor’s opinions on inherently federal functions, and other guidance documents. We reviewed Interior reports and audits related to self-determination contracts, self-governance compacts, and the Hearth Act, including Interior budget justification reports and evaluations of tribes’ performance with trust programs administered under a self-governance compact. ISDEAA also allows tribal governments to take over administration of certain programs from the Department of Health and Human Service’s Indian Health Service. For this review, we focused on tribes’ use of self-determination contracts and self- governance compacts to administer Bureau of Indian Affairs (BIA) programs. To determine tribes’ use of self-determination contracts, we obtained data from Indian Affairs’ Office of Chief Financial Officer for all current contracts as of November 2017. The data provided included the contract number, the tribe or tribal organization with the contract, and the program included in the contract. To assess the reliability of the data, we consulted with knowledgeable federal officials and found examples in one of our prior reports that generally supported the data we obtained from the Office of Chief Financial Officer. To determine tribes’ use of self- governance compacts, we reviewed data that Interior provides to Congress in annual reports that cover tribal use of self-governance compacts. To assess the reliability of the data, we consulted with Interior’s Office of Self Governance officials and tribal stakeholders and compared information provided to us from Interior with information obtained from the Tribal Self-Governance Communication and Education Consortium. We determined that the data were sufficiently reliable for the purpose of our report. To obtain a better understanding of the information found in self- determination contracts, we requested BIA provide information from self- determination contract files. We requested contract files that would represent a range of BIA regions and programs. We also sought to use this information to identify examples from the contract file where BIA documented the amount of program funding available to the tribe and retained by BIA, and the methodology BIA used to identify available amounts. Through our review of several contract files, we were able to corroborate information from BIA officials and tribal stakeholders, who told us that BIA does not systematically document the amount of program funding available to the tribe and retained by BIA and the methodology BIA used to identify available amounts. The findings from the contract reviews are not generalizable to those we did not request and obtain. We also collected information from 9 BIA regions on the number of retrocessions (tribes that voluntarily turned back administration of a program to BIA), reassumptions (programs where BIA took back administration from a tribe because of noncompliance with contract requirements), and declinations (programs that tribes requested to take over administration but BIA declined) from 2012 through 2017. BIA does not have a centralized data system to collect this information and through consultations with knowledgeable federal officials, we determined that each of BIA’s regions was in the best position to provide us with this information. To determine tribal participation with the HEARTH Act and the extent to which Interior’s review is consistent with the Act, we collected data from BIA on the number of tribes that have submitted leasing regulations for BIA’s review, and the number of tribal leasing regulations BIA approved under the HEARTH Act. In most cases, Interior provided an internal checklist that included, among other things, the dates tribes submitted information and dates of Interior responses. We used this information to identify the amount of time associated with BIA’s review of tribal leasing regulations. In some cases, we also gathered information from tribes. We determined that the data were sufficiently reliable for the purposes of this report. We interviewed federal officials from Interior’s Office of Solicitor, Indian Affair’s Office of Self Governance, Office of the Chief Financial Officer, and Office of Budget and Performance Management. Within BIA, we met with officials from Office of Trust Services, the Office of Indian Services and interviewed or received written responses from regional officials in all 12 BIA regions. Through these interactions we asked officials to identify processes associated with tribes entering into, negotiating, and administering federal programs under a self-determination contract or self-governance compact. We also discussed processes associated with Interior’s disbursement of funds agreed upon in contracts and compacts. In addition, we discussed processes for tribes to submit leasing regulations to BIA and for BIA’s review of tribal leasing regulations. We compared the information collected through discussions with federal officials and federal documents with Interior guidance documents and Standards for Internal Control in the Federal Government. We also discussed the use of self-determination contracts and self-governance compacts with Interior’s Bureau of Land Management and Bureau of Reclamation, and interviewed officials from the Environmental Protection Agency to discuss tribes’ use of existing authorities to administer environmental programs and the agency’s efforts to build tribal capacity. To identify factors that can affect a tribe’s decision to use self- determination contracts, self-governance compacts, and the HEARTH Act—as well as tribes’ experience with these mechanisms—we interviewed leaders and officials from 29 federally recognized Indian tribes and nations, the Department of the Interior Self-Governance Advisory Committee, and non-profits representing tribal interests, such as the National Congress of American Indians (NCAI) and the Native Governance Center. The key factors we included in this report are those that were most frequently mentioned and that are specifically related to federal government policies and processes. During the review, we identified factors that tribes may consider but that are not related to the federal government; because these factors were outside of the scope of this review, we did not include them in our report. We selected Indian tribes and nations to ensure a representation of tribes with a range of experience using self-determination contracts and self-governance compacts, tribal size, and geographic location. We also selected tribes to ensure we had representation from tribes that developed leasing regulations under the HEARTH Act and those that have elected to not yet develop or submit leasing regulations under the HEARTH Act. We also met with representatives from tribal consortia, such as the Coalition of Large Tribes; the Great Plains Tribal Chairman’s Association; the Department of the Interior Tribal Self-Governance Advisory Committee; the United South and Eastern Tribes; and the United Indian Nations of Oklahoma, Kansas, and Texas to gather additional perspectives on factors that can affect tribal participation. To encourage increased participation and perspectives from tribal leaders and officials, we provided opportunities for tribes to contact us for individual discussions by requesting that tribal consortia, as well as NCAI, include information about our review in their newsletters or other correspondence with tribal stakeholders. As a result of these efforts, several additional tribes contacted us to share information about their experiences. For the purposes of this review, we refer to tribal leaders, tribal government officials, and representatives from tribal consortia as tribal stakeholders. Throughout the report, we use the following categories to quantify statements made by stakeholders: “some” is defined as two to five entities and “several” is defined as six to 10 entities. Because each of the federally recognized tribes and nations are unique, the information obtained in our discussions with tribal stakeholders is not generalizable, but provides examples of tribes’ experiences with self-determination contracts, self-governance compacts, and the HEARTH Act. It is possible we did not identify all of the factors that can affect a tribe’s decision to use self-determination contracts, self-governance compacts, or the HEARTH Act and there may be other factors we did not present. We conducted this performance audit from February 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Christine Kehr (Assistant Director); Jay Spaan (Analyst in Charge); John Delicath, William Gerard, Cindy Gilbert, Greg Marchand, Dan Purdy, Vasiliki Theodoropoulos, and Leigh White made key contributions to this report.", "summary": "For more than 4 decades, federal Indian policy has promoted tribal self-government—the practical exercise of Indian tribes and nations' inherent sovereign authority. Under ISDEAA, federally recognized tribes may request to enter into self-determination contracts and self-governance compacts with Interior, transferring the administration of federal programs to the tribe. Under the HEARTH Act, tribes may issue certain leases on their lands without Interior approval if such leases are executed under approved tribal regulations. GAO was asked to evaluate issues related to tribal self-government. This report examines factors affecting tribes' use of self-determination contracts, self-governance compacts, and tribal leasing authority under the HEARTH Act. GAO reviewed key legislation and regulations, relevant literature, federal and tribal documents; analyzed agency data; and interviewed federal officials at 12 BIA regional offices, 29 tribes that used at least one of these mechanisms, and 7 tribal organizations. GAO found that various factors can affect tribes' use of self-determination contracts and self-governance compacts under the Indian Self-Determination and Education Assistance Act of 1975 (ISDEAA), as amended, and tribal leasing under the Helping Expedite and Advance Responsible Tribal Home Ownership Act of 2012 (HEARTH Act). A key factor that helps tribes use these self-governance mechanisms is tribal government capacity to administer a federal program or manage these resources. Federal efforts that have helped build this capacity have included training, such as that offered by the Bureau of Indian Affairs (BIA) in 2014 and 2015 to educate tribes on the benefits of developing tribal leasing regulations under the HEARTH Act. In contrast, GAO found that other factors can hinder tribes' use of these mechanisms including: Inadequate Information Sharing. The Department of the Interior's (Interior) policy and guidance states that tribes should be provided necessary information to design programs they would like to self-administer, such as the amount of funding available to the tribes for the programs and the amount retained by Interior for inherently federal functions. However, according to several tribal stakeholders and some BIA regional officials GAO spoke to, some of this information is not made available to the tribes prior to self-determination contract negotiations, such as information on funding calculations and determinations of inherently federal functions. Without this information, according to a tribal stakeholder, tribes may be at a disadvantage when negotiating with BIA and designing programs for self-determination contracts. Delays in Disbursing Funds. According to tribal stakeholders, Interior's process does not ensure that funds associated with their self-determination contracts and self-governance compacts are disbursed in a timely manner. These funding delays can therefore be a factor that hinders their use of self-government mechanisms. Some tribal stakeholders said that disbursement delays have ranged from weeks to months. GAO was unable to determine the extent to which Interior disburses funds in accordance with ISDEAA or within agreed-upon time frames with the tribes, because Interior does not systematically track and monitor the disbursement of these funds. Lengthy Review of Proposed Tribal Leasing Regulations. Interior does not have a clearly documented process for reviewing proposed tribal leasing regulations submitted under the HEARTH Act with identified time frames associated with each step of the process. As a result, tribal stakeholders told GAO that they are uncertain about how long the process will take and how it aligns with the 120 day requirement in the Act. According to tribal stakeholders and GAO's analysis of proposed regulations submitted from 2012 through 2017, Interior's review process has resulted in lengthy review times—in some cases, multiple years. Some tribal officials told GAO that Interior's lengthy review process had delayed the tribe's ability to make decisions about the use of their resources. By developing a clearly documented process that includes established time frames for each step in the review, Interior can help eliminate uncertainty and improve the transparency of the review process for the tribes. GAO is making four recommendations, including that Interior develop processes to share how it makes funding and inherently federal function determinations with tribes, to track and monitor the disbursement of funds within agreed upon time frames, and for the review of proposed tribal leasing regulations including review time frames. Interior concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "The goal of federal government industrial security is to ensure that contractors’ security programs detect, deter, and counter the threat posed by adversaries seeking classified information. The National Industrial Security Program was established by executive order in 1993 to replace industrial security programs operated separately by various federal agencies and ensure that contractors, among others, were adequately protecting classified information. For the purposes of this report, we will use “contractor” to refer to any party that the program applies to, including contractors, grantees, licensees, certificate holders, and their respective employees. DSS is responsible for administering the National Industrial Security Program on behalf of the Department of Defense and, by mutual agreement, 32 other federal departments and agencies. Headquartered in Quantico, Virginia, and with staff in 26 field offices across four regions, DSS provides oversight, advice, and assistance to more than 12,000 U.S. facilities that are cleared for access to classified information under the program. Facilities can range in size and be located anywhere in the United States, and include manufacturing plants, laboratories, and universities. In addition, they can also include contractor personnel who travel to U.S. government sites to access classified information but do not store any classified information at their facility. There are multiple reasons why a contractor may need access to classified government information. For example, a factory may produce parts for a major weapons system using a production process that is classified, or a contractor may have employees who deliver their technical expertise in a classified environment at a military installation. As part of the facility clearance process, DSS is responsible for ensuring that cleared contractors safeguard classified information under the program by meeting requirements, which are outlined in the National Industrial Security Program Operating Manual. The Secretary of Defense, in consultation with all affected agencies and with the concurrence of the Secretary of Energy, the Nuclear Regulatory Commission, the Director of National Intelligence, and the Secretary of Homeland Security, issues and maintains the operating manual. The operating manual addresses the contractors’ key responsibilities such as reporting incidents of suspected loss of classified information. The Information Security Oversight Office of the National Archives and Records Administration, an agency separate from the Department of Defense, monitors the National Industrial Security Program and issues implementing directives for agencies. The Information Security Oversight Office also chairs the program’s policy advisory council, which is comprised of government and industry representatives who recommend changes to industrial security policy. The Department of Defense, including DSS, has periodically issued information for contractors in the program, such as industrial security letters, to clarify the operating manual. The operating manual states that a contractor or prospective contractor is eligible for a facility clearance if it has a need for access to classified information in connection with a legitimate U.S. government contracting requirement. A facility clearance is an administrative determination that, from a national security standpoint, a contractor or prospective contractor is eligible to access classified information at a specified level. A contractor’s employees cannot begin accessing classified information until the facility clearance has been granted, even if that results in delayed performance of a contract. According to the operating manual, in order for a contractor or prospective contractor to enter the program, it may be sponsored by an already cleared contractor or the government contracting activity. DSS requires information about the contract, subcontract, or solicitation that necessitates a clearance, such as level of safeguarding required and a brief description of the procurement. Within the government contracting activity, the information may be provided by the contracting office, program office, or security office. DSS begins its facility clearance process once it receives the information and assigns the case to an industrial security representative at a local DSS field office. The industrial security representative serves as the primary point of contact for the sponsored facility during the clearance process and once the contractor is eligible to access classified information. Across DSS field offices and headquarters, multiple people are involved in the facility clearance process, including those who specialize in information systems or others who have experience with analyzing contractors for indicators of foreign influence. See figure 1 for more details about how DSS processes a facility clearance. As shown in the figure above, DSS also reviews the contractor’s ownership and business structure to assess whether foreign interests indicate a contractor is under foreign influence, which could lead to disclosure of classified information to foreign nationals. Contractors are required to answer questions about whether there is foreign involvement in their ownership, board composition, debt, source of revenues, and any other situations where foreign nationals might be in a position to influence their operations. If DSS determines that there is a risk for foreign influence, the contractor is ineligible for a facility clearance unless, and until, security measures are put in place, such as negotiating a mitigation agreement with DSS. As of June 2017, approximately 630 of the over 12,000 cleared facilities in the program have mitigation agreements in place to address foreign influence. As part of the facility clearance process, certain personnel, such as the facility security officer, must receive personnel clearances to the level of the facility clearance. In the personnel clearance process, specialists at DSS headquarters grant interim clearances to U.S. citizens based on national security standards and information from background investigations conducted by the Office of Personnel Management, if there is no adverse information of material significance. Before the facility clearance can be granted, a DSS industrial security representative verifies that the key management personnel have received their permanent clearance. After DSS completes the facility clearance process and determines that a contractor is eligible to access classified information and grants the facility security clearance, the cleared contractor officially enters the National Industrial Security Program. Once in the program, contractors establish a security program at cleared facilities or implement security measures required by the Department of Defense security agreement, as well as any elements required by DSS. Depending on the facility, security measures may address a variety of industrial security issues. For example, a contractor may be required to start using visitor logs or badges to track every person with physical access to a facility or establish separate computer systems for the sole purpose of storing classified information. In addition, contractors are required to implement insider threat programs, which are meant to prevent persons with approved access to classified information, such as contractor employees, from causing harm to national security through unauthorized disclosures. The insider threat programs may include activities such as training programs about reporting requirements or monitoring classified information systems. DSS monitors cleared contractor facilities to determine their compliance with the program’s requirements for protecting classified information by conducting periodic security reviews. DSS determines the frequency of these reviews, although they generally cannot take place more than once in a 12-month period, according to the operating manual. The duration of security reviews and the size of the team conducting them vary by facility. For example, a single industrial security representative can perform a review of a small facility with no classified information stored on site in one day. By comparison, a large facility may require a lengthier review that involves additional DSS officials, such as information system security professionals who review a facility’s information systems if they are needed to store or process classified information. Moreover, counterintelligence officials may also participate and provide threat information about the facility. Security reviews are generally led by staff located in DSS’s 26 field offices across the country. A contractor’s facility clearance may be subject to invalidation or revocation if DSS identifies certain vulnerabilities, among other things. See figure 2 for more information about DSS’s process for monitoring contractor facilities in the program. In addition to administering the facility clearance process and conducting security reviews at cleared facilities, DSS also collects information from cleared contractors about suspicious contacts, which may involve efforts by an individual to obtain illegal or unauthorized access to classified information, among other things. DSS aggregates this information to identify counterintelligence trends among cleared contractors and refers cases to the relevant agency for further investigation or action. We last issued reports about the National Industrial Security Program in 2004 and 2005. In 2004, we made eight recommendations for DSS to improve its processes for conducting security reviews, such as taking steps to quickly notify government contracting activities when classified information has been lost or compromised. The Department of Defense agreed with our recommendations. In 2005, we made eight recommendations about DSS’s oversight of contractors under foreign influence. For example, we recommended that DSS collect and analyze data about foreign business transactions in order to improve its oversight of contractors under foreign influence. The Department of Defense partially agreed with our recommendations and subsequently took action to address them. As of April 2018, 13 of 16 of the recommendations have been implemented. For more detail on our prior recommendations, please see appendix II. Since 2005, when we last reviewed how DSS administered the National Industrial Security Program, it has streamlined its facility clearance process in order to make it more efficient. DSS has also strengthened the process to analyze contractors for foreign influence and the Department of Defense issued a rule to clarify policies and procedures for mitigating foreign influence concerns. Despite upgrading its capabilities, DSS continues to face challenges in monitoring cleared contractors with access to classified information. In 2004 and 2005, we reported that DSS did not collect and analyze data on contractors operating in the National Industrial Security Program. For example, DSS was not able to analyze data to make informed resource decisions or track key changes that affect contractors operating under foreign influence. In our 2005 report, we recommended that DSS collect and analyze data about foreign business transactions, among other things. As a result, DSS streamlined its facility clearance process by developing two electronic systems for tracking the facility clearance requests and maintaining information on cleared facilities. 1. The Electronic Facility Clearance System is a web-based system that contractors or prospective contractors use to submit their required information, such as key management personnel and other staff who need to be cleared for access as well as business-related items like articles of incorporation, bylaws, and other supporting documentation. 2. The Industrial Security Facilities Database is another web-based system that serves as a repository for information about cleared facilities. DSS field office and contractor officials we spoke with noted that the web- based systems help them do their job more efficiently. For example, DSS’s industrial security representatives stated that these systems make the facility clearance and monitoring process more efficient because it is easier to track the status of documentation received. Industrial security representatives also track conditions that may require changes to their monitoring process through this database, such as a change in ownership or key management personnel. Industrial security representatives noted that being able to track this information electronically is helpful because the facility clearance and monitoring processes involve numerous officials within DSS, as well as other parties, such as the government contracting activity and the contractor. For example, a government contracting activity can use the database to check whether a facility has been cleared to store classified information onsite before sending materials to them. In 2017, DSS started the process of modernizing these systems by developing two new systems. DSS officials stated that these two new systems will provide additional automation that can be used in the facility clearance and monitoring processes. The new systems are: National Industrial Security Program Contracts Classification System. This system collects detailed information about classified contract(s) a facility will support during the initial clearance process as well as throughout the duration of the facility’s clearance, to include the facility’s assets (e.g. technology produced or expertise provided), and enables the government contracting activity to gain visibility into the subcontractors performing work for each classified contract. National Industrial Security System. This system will be the official repository for data on cleared facilities. DSS officials noted that the system will help identify foreign influence concerns, such as changes in a contractor’s ownership, because they will be more centrally tracked. Further, in 2017, DSS also issued a manual to reflect an updated process for assessing and authorizing cleared contractors’ information systems that process classified information. DSS changed its process to align with the intelligence community, the Department of Defense, and other federal government agencies’ standards. DSS previously reviewed systems on regular cycles and is shifting to reflect practices in the intelligence community that are based on assessed threats and target the information systems that pose the most significant risk of losing information. DSS information security system professionals told us that this new authorization process is helping them clarify and communicate the nature of security risks to the contractor. The updated process is intended to include the identification of cybersecurity concerns earlier than the prior approach and enables DSS’s information system security professionals to adjust their monitoring to meet emerging cyber threats. In response to recommendations we made in 2005, DSS has centralized its support related to identifying and mitigating foreign influence and strengthened its process, including issuing a rule to make the process of mitigation of foreign influence clearer to contractors. Since our last review of the program in 2005, DSS has centralized staff expertise in headquarters to improve the identification and mitigation of foreign influence concerns. Whereas DSS used to rely primarily on field staff to negotiate and oversee individual facilities in their respective regions, it now has staff in headquarters, including specialists in law and other areas, who have an agency-wide view of threats and who understand the portfolio of contractors that may be at risk of foreign influence. DSS officials said that this is important because a contractor may have multiple cleared facilities across several regions. They noted that an agency-wide view helps DSS identify trends across facilities that may be tied to a single contractor. The headquarters staff: negotiate and put in place mitigation agreements that require contractors under foreign influence to acknowledge and mitigate foreign influence risks, including the development of protective measures to reduce the risk of foreign interests gaining access to classified information; identify foreign influence within cleared contractors and provide written analysis to DSS field offices when foreign influence concerns are identified, such as when a foreign contractor acquires a majority or substantial minority position in a U.S. contractor with a cleared facility; and provide subject matter expertise in the areas of business, acquisition, intelligence, and international law to develop a comprehensive understanding of companies, their industries and technologies, as well as the regulatory environments in foreign countries. DSS officials acknowledged that the establishment of a headquarters division in 2008 focused on analyzing foreign influence and issuing related publications was in response to recommendations we made in 2005. DSS’s field office industrial security representatives said that the written products and specialized foreign influence analysis prepared and disseminated by DSS headquarters has resulted in more timely identification and mitigation of these issues. Examples include: NISP in the News, an internal weekly publication that provides a summary of business transactions that may result in the need for a mitigation agreement to address foreign influence. Industrial security representatives we spoke with said this publication helps them identify and proactively address issues with their contractors. DSS officials told us the publication is helpful because it can result in more timely identification and initiate the process for negotiating a mitigation agreement, particularly in cases where a foreign company acquires a facility previously owned by a U.S. contractor. Copies of NISP in the News that we reviewed also included information that may affect contractors that are not under a mitigation agreement for foreign influence, such as changes in key management personnel. We previously reported that DSS had challenges identifying these transactions or facility security officers would neglect to report them, which led to delays in putting protective measures in place to prevent unauthorized access to classified information. Assessments of new contractors that have been sponsored for clearances, which are used to identify and mitigate foreign influence. DSS industrial security representatives stated that this analysis used to be performed in the field but now they can use time previously spent preparing analysis of foreign influence to work with contractors to implement security measures. Further, the assessments help them work more effectively with contractors because they draw upon expertise across different disciplines. For example, 7 of the 13 facility case files we reviewed contained a summary of analysis conducted by specialists in DSS headquarters. The summaries also noted that the specialists reviewed classified and unclassified information on the contractor, including counterintelligence information and other U.S. government information, as applicable. In April 2014, the Department of Defense issued a rule about policies and procedures for mitigating foreign ownership, control, or influence. This rule was issued in order to ensure maximum uniformity and effectiveness in the Department of Defense implementation of the National Industrial Security Program. The rule detailed specific mitigation approaches for addressing concerns about foreign ownership, control, or influence, which we cover in detail in appendix I. The rule clarified the role of DSS, the government contracting activity, and the contractor during the process when DSS determines that the contractor needs to mitigate potential foreign ownership, control, or influence. The rule also documented policies and procedures regarding how decisions will be made on the appropriate method to mitigate foreign ownership, control, or influence. These include the timing of agency and contractor actions involved in mitigation of foreign ownership, control, or influence and how to proceed in cases where the contractor had not worked out a mitigation agreement with DSS before changed conditions (e.g. indebtedness, ownership, or foreign intelligence threat) occurred, among other things. The rule further stated that DSS, in consultation with the government contracting activity, has discretion to modify or reject the contractor’s outlined action plan to mitigate foreign ownership, control, or influence. Despite upgrading its capabilities, DSS officials indicated that they face resource constraints, such as an inability to manage workloads and complete training necessary to stay informed on current threats and technologies. DSS’s current resource challenges include: Managing staff workloads. DSS field officials acknowledged that they have historically faced workload challenges. DSS officials said that their limited staff carry heavy workloads and, according to DSS’s most recent biennial report to Congress, were unable to conduct security reviews at about 60 percent of cleared facilities in fiscal year 2016. In addition to their official security reviews, industrial security representatives also conduct informal “advise and assist” efforts when facility officials inquire about a range of security issues, from preparing employees for overseas travel to providing training on reporting suspicious contacts. In fiscal year 2016, industrial security representatives conducted about 22,000 “advise and assist” efforts. DSS officials attribute the heavy workload to the current staffing levels of their field offices and frequent turnover among the industrial security representatives. DSS officials noted that both hiring and retention are difficult and that these challenges are exacerbated by the fact that it is a relatively small agency with field offices with limited staff. For example, an average field office oversees about 470 facilities and has about 8 industrial security representatives on staff. As a result, if a person leaves, it adds strain to the remaining staff. Most of the contractors’ facility security officers we spoke with noted that DSS field officials have heavy workloads that could affect their ability to respond to threats at cleared facilities. Further, DSS indicated that it has limited resources to analyze, process, and distribute counterintelligence to the cleared facilities. For example, DSS received more than 46,000 reports from cleared contractors about suspicious contacts in fiscal year 2016, which was an almost 18 percent increase over the prior year. In comparison, during the same time period, DSS’s counterintelligence directorate, which analyzes suspicious contact reports, grew by 7 percent. In addition, DSS’s ability to distribute counterintelligence is limited by the geographic distribution of over 12,000 cleared facilities and each facility’s capability to receive or store classified communication. Developing foreign influence mitigation agreements. Multiple DSS industrial security representatives and contractors’ facility security officers stated that mitigation agreements to address the risk of foreign influence, including supplemental plans, have become more detailed and the process to develop and implement them has required additional time and resources. For example, DSS may require a contractor to develop an electronic communications plan, which must include details about which networks will be protected from access by a foreign parent contractor, including monitoring, maintaining, and establishing separate email servers, as appropriate. DSS reported in its 2015 biennial report to Congress that the average amount of time to approve and implement a foreign influence mitigation plan was 93 days. The length of time to approve and implement a foreign influence mitigation plan more than doubled to 204 days, according to the 2017 biennial report. DSS officials stated that this increase is due, in part, to increased complexity of the agreements and the amount of coordination required between the government contracting activity, DSS, and the contractor. A DSS official also noted that over time, the agency has incorporated more information in its analysis and sometimes needs more time to review all the information that may be relevant. Attending relevant trainings. DSS officials in three of four regions noted that staffing challenges affect their ability to take training, even though industrial security matters continue to become more sophisticated. Information system security professionals said they face challenges in learning technology that continues to evolve. For example, they cited the multiple software products such as operating systems and configurations of information networks that are used in a facility’s daily operations. In addition, they need to understand other technologies that can pose risks to industrial security, such as devices that are capable of transmitting data, like cellular phones, and therefore might need to be prohibited from areas where classified information is discussed. As a result, the lack of expertise in multiple technologies hampers their ability to identify vulnerabilities that might leave a facility at risk for loss of classified information. We have previously reported that training staff in new skills, such as cybersecurity, remains an ongoing challenge for the federal government. For example, in 2016, we found that chief information officers throughout the government identified difficulties related to recruiting, hiring, and retaining qualified personnel, as well as ensuring they have the appropriate skills and expertise. In 2017, DSS announced its plans to transition to a new approach to monitoring cleared facilities in order to address emerging threats to classified information. DSS faces challenges as it pilots its new approach—DSS in Transition. DSS has taken steps to begin addressing challenges, including scheduling training for its staff, but has not documented how it will collaborate with its stakeholders or identified the resources needed to monitor cleared facilities. In 2017, DSS announced that it would begin transitioning to an asset-and- threat-based monitoring approach. DSS has reported that the United States is facing the most significant foreign intelligence threat it has ever encountered and adversaries are attacking cleared facilities at unprecedented rates. In fact, adversaries are varying their methods and adjusting their priorities based on the targeted information they need. The new approach is expected to involve DSS working collaboratively with contractors and government contracting activities to design a customized security plan for each facility based on threats specific to its assets rather than using a standardized worksheet to perform security reviews. DSS officials said that customized security plans will be developed based on assets at the specific facilities. For example, a contractor providing information technology services may need the latest software to thwart cyberattacks while a contractor that engineers weapons systems may need additional secure storage facilities and work areas to ensure an adversary cannot physically extract classified information or technology. As a result, according to agency officials, these customized security plans represent a departure from a “one size fits all” or schedule-driven approach to overseeing contractors’ protection of classified information. According to DSS officials, this new approach, DSS in Transition will use the Department of Defense’s list of critical technologies and programs, along with counterintelligence, to prioritize facilities for security reviews based on their assets and the severity of the threats to them. See table 1 for more information about the monitoring approaches. After announcing DSS in Transition in 2017, DSS began taking steps to develop its methodology for the new approach, including prioritization of facilities and developing procedures for executing customized security plans. In a January 2018 letter to industry, DSS stated that it plans to pilot the new approach by working with one facility in each of its four regions to develop a customized security plan and use the lessons learned to refine the process. While it is piloting the approach at four facilities, DSS notified contractors not participating in the pilot that DSS would partner with selected facilities to identify and document their critical assets. Industry, including contractors and prospective contractors that are interested in U.S. government contract awards in the future, are awaiting more details on how DSS plans to implement DSS in Transition, including who would be responsible for the costs of additional security requirements, according to a March 2018 statement from the industry spokesperson of the National Industrial Security Program Policy Advisory Committee. Although DSS began piloting DSS in Transition in January 2018, it has not determined how it will collaborate with government contracting activities, the intelligence community, other federal agencies, and contractors. In particular, DSS has not identified its stakeholders’ roles and responsibilities in terms of who needs to communicate and coordinate with whom and when, which is necessary to successfully implement the new approach. For example, DSS needs to establish agreed-upon criteria for what information a government contracting activity would need to provide to DSS in order to develop a customized security plan for a facility. GAO’s Federal Internal Control Standards establish the need to coordinate with stakeholders and clearly define roles and responsibilities, among other things. In addition, our leading practices for interagency collaboration state that successful collaborative working relationships require organizations to agree on roles and responsibilities and identify the resources necessary to accomplish objectives. For example, GAO found it is unclear how DSS will determine what resources it needs as it has not identified the necessary roles and responsibilities. DSS has taken steps to begin addressing these challenges by establishing an office dedicated to documenting processes and procedures for how DSS in Transition will be implemented, providing a concept of operations, and scheduling training for its staff. However, to monitor cleared facilities, DSS needs information from the various National Industrial Security Program stakeholders, including: Government contracting activity. DSS officials stated that, under the new approach to monitoring cleared facilities, they will need to better communicate and coordinate with the government contracting activity. For example, in some circumstances, DSS officials will have to collaborate with government contracting activities to determine when a security plan is no longer sufficient as threats and mitigation methods evolve. DSS officials stated that communication and coordination with government contracting activities has been a challenge because industrial security is often considered an added duty on top of their contract management responsibilities. Further, DSS officials indicated that staff turnover at government contracting activities and the lack of clear roles and responsibilities have led to delays in resolving a facility’s vulnerabilities. According to DSS officials, it is difficult to determine whether they have the correct point of contact at the government contracting activity to discuss vulnerabilities at a facility, which, if left unaddressed, can leave classified information at risk for loss. There are no formal agreements about how a case should be elevated and resolved if DSS identifies vulnerabilities and is unable to elicit a response from the government contracting activity about further action, according to DSS officials. In addition, DSS officials stated that they will need to work with the government contracting activity to assess the risk of security vulnerabilities that involve subcontractors working on contracts containing classified information. In the past, a government contracting activity might not know the identities of subcontractors if they were sponsored by a cleared contractor. Given the adversaries’ ability to vary its methods to target information it needs, the government needs to know who—regardless of subcontracting tier—is accessing classified information. Government intelligence community. We found DSS has not established how it will collaborate with the intelligence community, including formalizing roles and responsibilities for its new approach. A DSS counterintelligence official told us that DSS currently relies on a combination of its own counterintelligence staff and informal coordination with other agencies, such as the Federal Bureau of Investigation. Another DSS official stated that they have worked with the Federal Bureau of Investigation to deliver counterintelligence when a facility does not have the capacity to receive classified information electronically. According to DSS field officials, the current process is handled on a case-by-case basis, depending on the availability of resources. Although DSS’s Counterintelligence Directorate recently became part of the intelligence community and will potentially have greater access to counterintelligence data, it will need to determine how to regularly communicate with the intelligence community to fully understand their products and share current threats and vulnerabilities with certain contractors under DSS in Transition. Other government agencies. DSS relies on collaborating with other cognizant security agencies to develop a complete picture of the threats to contractors. In addition to the Department of Defense, there are four other federal agencies that have authority to inspect and monitor facilities to ensure the protection of classified information. DSS may only conduct security reviews for facilities performing contracts awarded by these agencies if the Department of Defense is the cognizant security agency for that facility. Contracts where another agency is the cognizant security agency may involve information coveted by adversaries, but DSS industrial security representatives have acknowledged that they may not know why the information is coveted or that it exists. Given the new approach to develop a complete picture of threats to a facility, DSS will need additional information from other cognizant security agencies that it may not have sought in the past. As a result, DSS needs to establish how best to collaborate with other agencies, such as identifying appropriate points of contacts and specific time frames to conduct outreach, to effectively implement DSS’s new approach to monitor contractors. Cleared contractors. DSS officials said that DSS in Transition will require contractors to identify assets in a greater level of detail than what was previously expected of them. In order to develop a security plan unique to the facility, the contractor’s facility security officers will need to understand these assets and why adversaries would want to target them in order to develop and implement specific security measures. Since DSS officials cannot be onsite every day, they have to rely on the contractor’s facility security officer or other key management personnel at cleared facilities to identify and report potential problems. However, DSS officials noted that convincing facility staff to spend more time on security-related matters may be difficult at facilities where one employee may serve as the contractor’s facility security officer in addition to having other responsibilities. In addition, DSS officials stated that contractors’ security costs are typically not profit-generators and realize that DSS in Transition may require the contractor to expend more time, money, and energy to address vulnerabilities or enact policies to safeguard against adversaries. DSS recognizes the need to keep industry informed and its implementation plans for DSS in Transition need to address what level of communication and coordination is required. For example, DSS currently uses a rating system to indicate how well a contractor is meeting the requirements of the operating manual as a metric for how it is protecting classified information. As DSS moves toward developing customized security plans that are unique to each facility’s threats and assets, it needs to formalize new approaches to communicate with contractors how well they are protecting classified information. In addition to piloting DSS in Transition, DSS is reassuming responsibility for conducting background and security investigations for the Department of Defense, which could potentially magnify its workload challenges. DSS previously held these responsibilities but they were transitioned to the Office of Personnel Management in 2005. The National Defense Authorization Act of Fiscal Year 2018 required DSS to reassume this background and security investigations mission by implementing a phased transition by October 1, 2020. This phased transition will overlap with DSS’s piloting of DSS in Transition and may create disruptions as an agency of over 700 employees assumes responsibility for a background and security investigations mission that currently has more than 7,000 employees and contractors. In January 2018, we added personnel security clearances to our high-risk list, a list of federal areas in need of either broad-based transformation or specific reforms to prevent waste, fraud, and abuse. This issue is on the list because we identified: (1) a significant backlog of background investigations; (2) a lack of long-term goals for increasing federal and contractor-provided investigator capacity to address the backlog; and (3) delays in the timely processing of security clearances among other factors. DSS officials have identified potential benefits and challenges with reassuming the background investigations mission, and, in August 2017, the Department of Defense submitted a plan for a 3-year phased transition to assume the background and security investigations mission. In March 2018, we reported that this transition could potentially affect the timely processing of personnel security clearances, the backlog, and other reform initiatives but the effect is unknown at this time. Given the changing nature of threats to classified information, DSS needs to ensure that classified information is protected from unauthorized access. While DSS has upgraded its capabilities for identifying foreign influence, DSS officials acknowledged that adversaries continue to evolve, and classified information and technologies remain vulnerable to exploitation. In response, in 2017, DSS launched a new approach (DSS in Transition) to change how it oversees contractors with access to classified information. As DSS pilots the new approach, it will need to work with government contracting activities, the intelligence community, other agencies, and cleared contractors to determine their roles and responsibilities in protecting classified information at every facility in the program. Without the necessary information—that is gained through communicating and coordinating with stakeholders—to assess the threats to the nation’s most critical technologies and programs, DSS will be unable to provide appropriate oversight that addresses the most significant threats to industrial security. Also, DSS has not identified the resources necessary, including the number of personnel needed to implement its new approach, which will add pressure to an agency accepting a background and security investigations mission that has significant backlog and timeliness challenges. Until DSS identifies roles and responsibilities and determines how it will collaborate with stakeholders for the pilot, it will be difficult to assess whether the new approach is effective in protecting classified information. We are making one recommendation to the Director of the Defense Security Service: Determine how it will collaborate with stakeholders as it pilots a new approach to overseeing contractors with cleared facilities (DSS in Transition), including identifying roles and responsibilities and the related resources needed. (Recommendation 1) We provided a draft of this report for review and comment to DSS. DSS provided written comments, which are reproduced in appendix III. In its comments, DSS concurred with the recommendation and summarized actions it is taking to pilot its new approach (DSS in Transition). DSS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, Director of DSS, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Since our July 2005 report, the Defense Security Service (DSS) has taken additional steps to address oversight of contractors with foreign influence. In April 2014, the Department of Defense issued a rule that clarified policies for oversight of contractors under foreign ownership, control, or influence. The rule detailed specific mitigation approaches for addressing foreign ownership, control, or influence concerns. The rule provided detail regarding the terms of each of these types of foreign ownership, control, or influence mitigation agreements and the circumstances under which each may be appropriate. The types of mitigation specified in the rule are: Board Resolution. The board resolution may be used when a foreign entity does not own voting interests sufficient to elect a representative to the company’s governing board. Security Control Agreement. The security control agreement is a tailored foreign ownership, control, or influence mitigation agreement, often used when a foreign interest does not effectively own or control a company or corporate family but the foreign interest is entitled to representation on the company’s board. Special Security Agreement. The special security agreement may be used when a company is effectively owned or controlled by a foreign interest. Access to certain proscribed classified information by a company cleared under this agreement may require that the government contracting activity complete a National Interest Determination to determine that the release of proscribed information to the company is consistent with the national security interests of the United States. Voting Trust Agreement and Proxy Agreement. These foreign ownership, control, or influence mitigation agreements may be used when a foreign interest effectively owns or controls a company or corporate family. Under these agreements, the foreign owner relinquishes most rights associated with ownership of the company to cleared United States citizens approved by the U.S. government. DSS has clarified the types of supplemental plans that companies must submit to document specific steps that it will take to mitigate foreign influence. Table 2 describes the types of plans and provides examples of how they mitigate foreign influence. In 2004 and 2005, GAO issued reports about the National Industrial Security Program and made 16 recommendations. Prior to the start of our review, the Department of Defense, through the Defense Security Service (DSS), implemented two of the recommendations. Below is our assessment of whether DSS addressed the remaining 14 recommendations that had been previously recorded as “closed – not implemented”. Table 3 provides a summary of those recommendations and the actions that DSS has taken in response to the recommendations. A number of the recommendations we made were aimed at clarifying policies related to contractors under foreign influence that were part of the National Industrial Security Program. The primary evidence to support our conclusions is cited in the last column. In GAO-04-332, we made eight recommendations that were recorded as closed not implemented prior to the start of this review. Based on information obtained during this review, seven of the recommendations will be closed as implemented. The recommendation that remains closed as not implemented was outside of the scope of the current review. In GAO-05-681, we made eight recommendations and two of the recommendations were closed as implemented prior to this review. Based on information obtained during this review, four of the remaining six recommendations will be closed as implemented. We were unable to close two of the six recommendations as implemented based on the information provided during this review. Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition to the contact named above, Penny Berrier (Assistant Director), Lorraine Ettaro, Gina Flacco, Stephanie Gustafson, John Rastler, Sylvia Schatz, Roxanna Sun, Alyssa Weir, and Jocelyn Yin made key contributions to this report.", "summary": "Industrial security addresses the information systems, personnel, and physical security of facilities and their cleared employees who have access to or handle classified information. The National Industrial Security Program was established in 1993 to safeguard federal government classified information that may be or has been released to contractors, among others. GAO last reported on this program in 2005 and the Department of Defense has since implemented 13 of the 16 related recommendations. GAO was asked to examine how DSS administers the program. This report assesses to what extent DSS: 1) changed how it administers the program since GAO's last report; and 2) addressed challenges as it pilots a new approach to monitoring contractors with access to classified information. GAO reviewed guidance and regulations since 2005, including the program's operating manual. GAO analyzed data from DSS's electronic databases and also selected a non-generalizable sample of contractor facilities based on clearance level, geographic location, and type of agreement to address foreign influence. We also reviewed documents and interviewed relevant government and contractor officials. The Defense Security Service (DSS) has upgraded its capabilities but also faces challenges in administering the National Industrial Security Program, which applies to all executive branch departments and agencies, and was established to safeguard federal government classified information that current or prospective contractors may access. Since we last reported on this program in 2005, DSS has: streamlined facility clearance and monitoring processes, and strengthened the process for identifying contractors with potential foreign influence. However, under its current approach, DSS officials indicated that they face resource constraints, such as an inability to manage workloads and complete training necessary to stay informed on current threats and technologies. In its most recent report to Congress, DSS stated that it was unable to conduct security reviews at about 60 percent of cleared facilities in fiscal year 2016. Further, DSS recently declared that the United States is facing the most significant foreign intelligence threat it has ever encountered. As a result, in 2017, DSS announced plans to transition to a new monitoring approach to address emerging threats at facilities in the program. For a comparison of the current and new approaches, see below. DSS has not addressed immediate challenges that are critical to piloting this new approach. For example, GAO found it is unclear how DSS will determine what resources it needs as it has not identified roles and responsibilities. Moreover, DSS has not established how it will collaborate with stakeholders—government contracting activities, the government intelligence community, other government agencies, and contractors—under the new approach. Federal Internal Control Standards establish the importance of coordinating with stakeholders, including clearly defining roles and responsibilities. In addition, GAO's leading practices for interagency collaboration state that it is important for organizations to identify the resources necessary to accomplish objectives. Until DSS identifies roles and responsibilities and determines how it will collaborate with stakeholders for the piloting effort, it will be difficult to assess whether the new approach is effective in protecting classified information. GAO recommends DSS determine how it will collaborate with stakeholders, including identifying roles and responsibilities and related resources, as it pilots a new approach. DSS concurred with the recommendation.", "document_type": "gao"}
{"report": "DOD has two types of public water systems that provide drinking water to people that live and work on military installations. The first type provides drinking water that has been treated by DOD. The second type provides water treated by a private company or a local utility, which we refer to as “non-DOD-treated” drinking water. Drinking water systems vary by size and other factors, but they most typically include a supply source, treatment facility, and distribution system. A water system’s supply source may be a reservoir, aquifer, well, or a combination of these sources. The treatment process for surface water generally uses sedimentation, filtration, and other processes to remove impurities and harmful agents, and disinfection processes such as chlorination to eliminate biological contaminants. Distribution systems are comprised of water towers, piping grids, pumps, and other components to deliver treated water from treatment systems to consumers. EPA regulates drinking water contaminants under the Safe Drinking Water Act by issuing legally enforceable standards, known as National Primary Drinking Water Regulations, which generally limit the levels of these contaminants in public water systems. EPA has issued such regulations for approximately 90 drinking water contaminants. In accordance with the Safe Drinking Water Act, EPA may authorize a state to have primary enforcement responsibility for drinking water regulations, as long as the state has, among other things, drinking water regulations that are no less stringent than the National Primary Drinking Water Regulations. The Safe Drinking Water Act also authorizes EPA to take emergency actions necessary to protect public health when informed that a contaminant is present in or is likely to enter a public water system or an underground source of drinking water that may present an imminent and substantial endangerment. For example, EPA may issue administrative orders, which generally include actions to be taken, such as remediating contaminated sources of drinking water or requiring the provision of alternative water supplies. State regulators may also issue orders to public water systems to address contaminated drinking water. Public water systems, including the DOD public water systems that provide drinking water to about 3 million people living and working on military installations, are required to comply with EPA and state drinking water regulations. EPA divides violations of drinking water regulations into two types: (1) health-based violations and (2) other types of violations that include violations of monitoring, reporting, and public notification requirements. Under the Safe Drinking Water Act, EPA also is required to identify unregulated contaminants that present the greatest health concern, establish a program to monitor drinking water for unregulated contaminants, and decide whether or not to regulate at least five such contaminants every 5 years. EPA has not regulated any new contaminants using this process since 1996. DOD’s environmental compliance policy states that ASD (EI&E) is responsible for providing guidance, oversight, advocacy, and representation for environmental compliance programs—to include overseeing the military departments’ compliance with health-based drinking water regulations at DOD public water systems. The policy directs the military departments to annually report to ASD (EI&E) the total population receiving water from both “regulated” and “other” DOD public water systems—referred to in this report as DOD public water systems that provide DOD- and non-DOD-treated drinking water, respectively— that did and did not attain all Safe Drinking Water Act health-based drinking water standards. The policy also requires the military departments to report information regarding each instance health-based drinking water standards were not attained during the reporting period, to include the name and location of the military installation; the nature of the issue (e.g., the contaminant type); the DOD population affected; the duration of the issue; the corrective actions taken or planned (e.g., flushing the system, resampling the water, or implementing system upgrades); and the estimated date for achieving the standard. In addition to issuing drinking water regulations, EPA may also publish drinking water health advisories. In contrast to drinking water regulations, health advisories are nonenforceable. Drinking water health advisories provide technical guidance on health effects, analytical methodologies, and treatment technologies. These advisories recommend the amount of these contaminants that can be present in drinking water—”health advisory levels”—at which adverse health effects are not anticipated to occur over specific exposure durations, to include 1 day, 10 days, several years, or over a lifetime. EPA issues provisional health advisories to provide information in response to an urgent or rapidly developing situation. DOD’s list of emerging contaminants includes 11 contaminants, including PFOS, PFOA, and perchlorate, for which EPA has issued a drinking water health advisory. Specifically, PFOS. PFOS is part of a larger group of fluorinated organic chemicals that have been incorporated into an array of consumer products (i.e., to make some more resistant to stains, grease, and water) and also in firefighting foam used by DOD and civilian airports. According to EPA, the major manufacturer of PFOS in the United States voluntarily agreed to phase out production of the chemical in 2002. According to EPA’s health advisory, exposure to PFOS may remain possible due to legacy uses, existing and legacy use in imported goods, and the chemical’s “extremely high persistence” in the environment. According to the EPA, exposure to PFOS may result in adverse health effects, such as fetal developmental effects during pregnancy or to breastfed infants, cancer, liver damage, immune effects, thyroid effects, and other effects. See table 1 for details of the EPA provisional health advisory that was issued in 2009 and the lifetime health advisory that was issued in 2016, which superseded the provisional health advisory. PFOA. PFOA is a fluorinated organic chemical that has been used in generally the same products as PFOS, including firefighting foam used by DOD and civilian airports. According to EPA, PFOA was voluntarily phased out by eight major companies in the manufacturing of their products at the end of 2015. According to the EPA, adverse health effects from exposure to PFOA are similar to those for PFOS. See table 1 for details of the EPA provisional health advisory that was issued in 2009 and the lifetime health advisory that was issued in 2016, which superseded the provisional health advisory. Perchlorate. Perchlorate is commonly used in solid propellants, fireworks, matches, signal flares, and some fertilizers, and has been used by DOD for rocket fuel and ammunition. EPA published an interim health advisory for perchlorate in 2008; the interim health advisory level was set at 15 parts per billion. According to the health advisory, perchlorate can disrupt the functions of the thyroid gland. In 2009, DOD issued a policy on the identification, assessment, and risk management of emerging contaminants that have the potential to impact DOD. According to that policy, chemicals and materials used or planned for use by DOD that meet the definition of an emerging contaminant should be identified as early as possible. The policy further states that DOD is to assess and, when appropriate, take action to reduce risks posed by its emerging contaminants to people; the environment; and DOD missions, programs, and resources. Where necessary, DOD is to perform sampling, conduct site-specific risk assessments, and take response actions for emerging contaminants released from DOD facilities, in accordance with relevant statutes. According to the DOD policy on emerging contaminants, ASD (EI&E) is to develop and maintain a list of emerging contaminants with potential or probable high risk to the department’s personnel and functions. As of April 2017, DOD’s list of emerging contaminants comprised 49 chemicals or substances. According to our analysis of EPA documents, DOD’s list includes 21 contaminants that can be found in drinking water. Of these 21 contaminants, 10 contaminants have been regulated by EPA under the Safe Drinking Water Act, and 11 contaminants are currently unregulated but have an EPA-issued drinking water health advisory. The other 28 DOD-identified emerging contaminants do not have EPA drinking water regulations or health advisories. Appendix II provides more information on the drinking water regulatory status of DOD-identified emerging contaminants. For the years we reviewed—fiscal years 2013 through 2015—the military departments annually reported information internally to ASD (EI&E) on compliance with EPA and state health-based drinking water regulations, which indicate that drinking water quality at DOD public water systems was similar to other systems in the United States. However, not all violations of health-based regulations were reported to ASD (EI&E) during this time frame, as is required by DOD policy. The military departments reported that a total of 77 military installations had at least one violation at some point from fiscal year 2013 through fiscal year 2015, but we found that at least 16 additional installations had violations that were reported to EPA but were not internally reported to ASD (EI&E). DOD also has not used available compliance data to identify why DOD public water systems that provide DOD-treated drinking water appear to have more violations of health-based regulations than DOD systems that provide non-DOD- treated drinking water. For the years we reviewed—fiscal years 2013 through 2015—the military departments annually reported information to ASD (EI&E) on compliance with and violations of EPA and state health-based drinking water regulations at the DOD public water systems that provide drinking water to military installations. The military departments’ data for fiscal years 2013 through 2015 indicate that about 92 percent of people who received drinking water from DOD public water systems were served by a system that complied with EPA and state health-based regulations. This is similar to the percentage of people in the United States—also about 92 percent, according to EPA—who received drinking water during that time frame from a community public water system with no health-based violations. The data for that time period also indicate that about 8 percent of people were provided drinking water from a DOD public water system that had at least one violation of a health-based regulation. Health-based violations can be for any length of time during a fiscal year—for example, a violation lasting 1 day is counted the same as a violation lasting for 1 month. Across the 3 fiscal years, the military departments reported that a total of 77 military installations had at least one violation at some point during that time period: 35 in fiscal year 2013, 25 in fiscal year 2014, and 17 in fiscal year 2015. The most common types of contaminants for which the military departments reported violations were coliform and two disinfection byproducts—trihalomethanes and haloacetic acids—which, according to EPA, are among the most common types of contaminants for which health-based drinking water violations occur across the United States. However, we found that the military departments have not always reported all violations to ASD (EI&E), as required by DOD policy. Based on our review of data in EPA’s Safe Drinking Water Information System for fiscal years 2013 through 2015, we found that the military departments did not report violations to ASD (EI&E) for at least 16 installations—9 Air Force installations, 5 Navy installations, and 2 Army installations. According to EPA’s database, the total population served by DOD public water systems at these installations is approximately 180,000 people, and most of the violations that went unreported involved coliform and disinfection byproduct contaminants. However, the actual population number affected by these violations and the contaminants involved— along with other information such as the duration of the contamination and the corrective actions planned or taken—were not included in the military departments’ annual reports to ASD (EI&E). These violations were recorded in EPA’s system, which indicates that the installations reported the violations to the appropriate state regulatory agencies, who then reported them to EPA’s database. However, the violations were not reported to ASD (EI&E), as required by DOD policy. According to military department officials, violations of health-based drinking water regulations went unreported to ASD (EI&E) due to a lack of clarity in DOD’s reporting requirements and misunderstandings of the requirements on the part of installations and the military departments. We found that violations were either not reported by the military installations where the violations occurred or that they were not reported by the installations’ chains of command. Navy officials cited turnover of installation personnel as the reason some violations went unreported, as well as misinterpretations by installation personnel of DOD’s reporting requirements. Air Force officials also told us that most of their unreported violations were not reported to ASD (EI&E) because the Air Force did not interpret them as health-based violations, although DOD policy requires these types of violations to be reported. Army officials told us that, based on their interpretation of DOD’s policy, the policy did not require them to report violations at installations where formal, written notification was not received from the state regulatory agency. However, ASD (EI&E) officials stated that all violations of health-based regulations should be reported, whether or not the state provides formal, written notification of the violation. Navy officials also told us that they have not reported violations at some of the Navy’s smaller systems that purchase drinking water from non-DOD public water systems, due in part to misinterpretation of DOD’s internal reporting requirements. However, Navy officials told us that ASD (EI&E) had instructed them to begin reporting these types of violations in fiscal year 2016, and the Navy is working with ASD (EI&E) and the other military departments to determine whether these types of systems should regularly report health-based violations. Currently, ASD (EI&E) does not have complete data in accordance with DOD’s policy, limiting its ability to conduct oversight and analyze how many people at military installations receive drinking water with health- based violations, what contaminants were involved, the duration of the contamination, or what corrective actions the military departments have planned or taken to address the violation. Standards for Internal Control in the Federal Government states that quality information is needed to achieve an organization’s objectives. Those standards also indicate that actions such as improved communication to and additional training for personnel are helpful for an organization to meet its objectives. According to DOD officials, a committee comprised of ASD (EI&E) and military department officials began a review in 2016 of DOD’s internal reporting requirements for drinking water compliance data. While such a committee could be in a position to make recommendations on clarifying the annual reporting requirements, no documentation on the committee’s efforts was yet available at the time of our review as the committee’s work was still in progress. In addition, at present, there are no firm dates for when its work will be completed or when any potential changes would be implemented. Absent actions by ASD (EI&E) to identify and implement any necessary changes to clarify annual reporting requirements in its environmental compliance policy, and absent actions by the military departments to increase understanding at their installations and commands about the requirements, adherence to DOD’s environmental compliance policy will remain limited and DOD will lack complete data to conduct oversight of regulatory compliance at its public water systems. DOD has not used available data to assess why DOD public water systems providing DOD-treated drinking water appear to have more violations of health-based drinking water regulations than systems providing non-DOD-treated drinking water. Although we found that not all violations were reported by the military departments to ASD (EI&E), the data that were reported during fiscal years 2013 through 2015 indicated that about 99 percent of the people who received non-DOD-treated drinking water were served by systems with no violations, while about 89 percent of the people who received DOD-treated drinking water were served by systems with no violations. When we asked ASD (EI&E) and military department officials why these differences may exist, they were unable to provide an explanation because they had not used the reported water quality data to identify the reasons why DOD public water systems providing DOD-treated water appear to have more violations than systems providing non-DOD-treated water. Although some officials offered ideas on the reasons for differences in compliance—including the relative expertise of utilities and private companies, versus DOD, in providing drinking water—DOD officials acknowledged that the agency has not evaluated the data to identify specific reasons for why the differences may exist. All public water systems, including DOD public water systems, are required to comply with applicable EPA and state drinking water regulations. According to Standards for Internal Control in the Federal Government, management should establish and operate activities to monitor the internal control system and evaluate the results. Such monitoring should assess the quality of performance over time and promptly resolve any findings. Without reviewing the data reported by the military departments to identify why there appear to be differences in violations between DOD’s two types of public water systems and without identifying and implementing any actions to address any differences, ASD (EI&E) and the military departments may not be able to improve overall compliance with health-based drinking water regulations. DOD is taking steps to address health and environmental concerns with its use of firefighting foam that contains PFCs—including PFOS and PFOA—to include restricting the use of foam at its installations and funding research into the development of a PFC-free foam that can meet DOD performance requirements. DOD also has responded to EPA and state orders and initiated additional actions to address elevated levels of PFOS, PFOA, and perchlorate. DOD is taking steps to address PFOS- and PFOA-related health and environmental concerns with its use of firefighting foam that contains PFCs. Firefighting foam is used by DOD to put fires out quickly while also ensuring that they do not reignite. This is critical if, for example, there is a fire from a fighter jet on the deck of an aircraft carrier. DOD has outlined performance requirements in its military specification for firefighting foam, which was authored by the Navy’s Naval Sea Systems Command but is approved for use in all of DOD. For example, the military specification states how long it should take for firefighting foam to extinguish a fire—based on the size of the fire and the amount of foam used—and how long the foam should prevent the extinguished fire from reigniting. DOD’s military specification also requires that firefighting foam purchased and used by the department must contain PFCs. DOD’s steps to address concerns with the use of firefighting foam include restricting the use of existing foams that contain PFCs; testing its current foams to identify the amount of PFCs they contain; and funding research into the future development of PFC-free foam that can meet DOD’s performance and compatibility requirements (see table 2). Some of these steps, such as limiting the use of firefighting foam containing PFCs, are in place. Others, such as determining the specific amount of PFCs in existing firefighting foams or researching potential PFC-free firefighting foams, are in progress with targets, in some cases, but no firm completion dates. Navy officials stated that they are planning to revise the military specification after they have completed their testing—to be completed in late 2017 or 2018—on the amounts of PFOS, PFOA, and other PFCs found in the firefighting foam currently used by DOD. That revision, according to Navy officials, is intended to set limits for the amount of PFCs that are allowed in firefighting foam. According to DOD, at present there is no PFC-free firefighting foam that meets DOD’s performance and compatibility requirements. As a result, the Navy has no plans to remove the requirement for firefighting foam to contain PFCs at this time. However, if a PFC-free foam is developed in the future that can meet DOD performance and compatibility requirements, Navy officials said that any necessary revisions to the military specification would be made at that time—a process that could take months to complete. DOD has taken steps to respond to four administrative orders directing the department to address PFOS and PFOA levels that exceeded EPA’s health advisory levels for drinking water. One order was issued by the Ohio Environmental Protection Agency at Wright-Patterson Air Force Base in Ohio, and three orders were issued by the EPA directed at: the former Pease Air Force Base in New Hampshire; Horsham Air Guard Station in Pennsylvania; and the former Naval Air Warfare Center Warminster in Pennsylvania. Under Section 1431 of the Safe Drinking Water Act, EPA may issue orders necessary to protect human health where a contaminant in a public water system presents an imminent and substantial endangerment. EPA may do so if appropriate state and local authorities have not acted to protect human health. These orders may require, among other things, carrying out cleanup studies, providing alternate water supplies, notifying the public of the emergency, and halting disposal of the contaminants threatening human health. The Ohio Environmental Protection Agency has similar authority. According to information provided by officials from the Ohio Environmental Protection Agency, EPA, and DOD, DOD has taken steps to respond to the administrative orders. Table 3 provides further details on each order and examples of actions by DOD to address the orders. In addition to actions specific to these four installations, DOD has initiated other actions to test for, investigate, and mitigate elevated levels of PFOS and PFOA at or near installations across the military departments. Following the release of EPA’s lifetime health advisory for PFOS and PFOA in May 2016, each of the military departments issued guidance directing installations to, among other things, test for PFOS and PFOA in their drinking water and take steps to address drinking water that contained amounts of PFOS and PFOA above the EPA’s lifetime health advisory level. The military departments also directed their installations to identify locations with a known or suspected prior release of PFOS and PFOA and to address any releases that pose a risk to human health— which can include people living outside DOD installations. As a result of these efforts, DOD has initiated actions to address PFOS and PFOA in drinking water both on military installations and outside military installations. As of March 2017, DOD data indicated that the department was taking steps to address levels of PFOS and PFOA above the EPA’s lifetime health advisory level in drinking water on 11 military installations in the United States, 2 of which we visited during the course of this review (see fig. 1). According to DOD data, these installations took various corrective actions to mitigate the presence of PFOS and PFOA in the drinking water, including shutting down drinking water wells, providing alternative drinking water, and installing treatment systems. For example, at Eielson Air Force Base in Alaska, the Air Force reported shutting down three of the installation’s six drinking water wells and installing a treatment system to remove PFOS and PFOA from the drinking water. At Marine Corps Base Camp Pendleton in California, the Navy reported that a well contaminated with PFOS and PFOA was taken out of service and that the affected reservoir was drained and replaced with water from another source; follow-on testing showed that the presence of PFOS and PFOA were returned to below the EPA’s lifetime health advisory level. At Fort Leavenworth in Kansas, the Army reported that the private company that operates the installation’s drinking water system had shut down two wells contaminated with PFOS and PFOA and plans to install a treatment system before returning those wells to service. Additionally, according to DOD data as of December 2016 the military departments had identified 391 active and closed installations with known or suspected releases of PFOS and PFOA, and had reported spending almost $200 million on environmental investigations and mitigation actions at or near 263 (or about 67 percent) of those installations. In particular, DOD had initiated mitigation actions, which include installing treatment systems or supplying bottled water, to address PFOS and PFOA in drinking water for people living outside 19 installations—5 of which we visited during the course of this review (see fig. 2). The following cost data provided by DOD were current as of December 2016, and are supplemented by additional information we obtained during our installation visits. The Air Force identified 203 installations with known or suspected releases of PFOS and PFOA, spent about $120 million on environmental investigations at those installations, and spent about $33 million on mitigation actions at or near 14 of the 203 installations. For example, the Air Force reported spending over $5 million on environmental investigations and mitigation actions at Peterson Air Force Base in Colorado. During our visit to that installation, officials showed us the sites they are investigating—to include the current (see fig. 3 below) and former fire training areas—to determine the extent to which their prior use of firefighting foam may have contributed to the discovery of PFOS and PFOA in the drinking water of three nearby communities. Additionally, the Air Force has awarded a contract for, among other things, installing treatment systems in those communities. In another example, the Air Force reported spending about $800,000 on environmental investigations at Joint Base Langley-Eustis in Virginia, but nothing yet on mitigation actions. During our visit to this installation, officials told us that they had not taken any mitigation actions because they do not use the installation’s groundwater as a drinking water source; the utility that serves the installation, as well as the nearby city of Newport News, obtains its drinking water primarily from a surface water source, which officials said was approximately 20 miles from the installation. The Navy identified 127 installations with known or suspected releases of PFOS and PFOA, spent about $20.5 million on environmental investigations at 47 of those installations, and spent about $24 million on mitigation actions at or near 5 of those installations. For example, the Navy reported spending about $15 million on environmental investigations and mitigation actions at the former Naval Air Station Joint Reserve Base Willow Grove in Pennsylvania. During our visit to this installation, officials told us that the Navy is investigating the extent to which PFOS and PFOA on the installation may have contaminated a nearby town’s drinking water. The Navy has agreed to fund installation of treatment systems and connections of private well owners to the town’s drinking water system, among other things. In another example, the Navy reported spending nearly $3 million on environmental investigations and mitigation actions at Naval Auxiliary Landing Field Fentress in Virginia. During our visit to this installation, officials told us that the Navy is providing bottled water to the approximately 20 to 30 personnel who work there and plans to install a treatment system to treat for PFOS and PFOA. The Army identified 61 installations with known or suspected releases of PFOS and PFOA, spent about $1.6 million on environmental investigations at 13 of those installations, and has not yet begun any mitigation actions at or near the identified installations. For example, the Army reported spending about $26,000 on environmental investigations at Fort Carson in Colorado, but nothing yet on mitigation actions. During our visit to this installation, officials told us that they had found PFOS and PFOA in groundwater near their previous fire training area but that the installation does not use that groundwater as a drinking water source, and state officials told us that it is unlikely that PFOS and PFOA from Fort Carson had affected any nearby drinking water sources. According to DOD, it may take several years for the department to determine how much it will cost to cleanup PFOS and PFOA contamination at or near its military installations. In January 2017, we reported that DOD had not notified Congress that the costs for environmental cleanup at closed installations will significantly increase due to the high cost of remediating emerging contaminants—including PFOS and PFOA. We also reported that DOD officials had not determined the total costs for cleaning up emerging contaminants at closed installations. We recommended that DOD include in future annual reports to Congress best estimates of the environmental cleanup costs for emerging contaminants as additional information becomes available, and DOD concurred with the recommendation and stated its commitment to do so. DOD previously directed installations to test for perchlorate in drinking water. Following the EPA’s issuance of an interim drinking water health advisory for perchlorate in 2008, DOD issued policy in April 2009—which superseded similar policy that was issued in January 2006—directing DOD-owned drinking water systems that were testing for inorganic substances to also test for perchlorate. Installations that found perchlorate in their drinking water were to consult with their leadership on appropriate actions to take and to continue testing on a quarterly basis until they determined that perchlorate levels were likely to remain below EPA’s health advisory level, or any applicable federal or state regulation. Citing congressional and regulatory agency concerns related to perchlorate, DOD developed a database for storing the results of perchlorate testing. According to ASD (EI&E), the database was last updated in 2009 and is no longer being used by the department. ASD (EI&E) officials stated that they are no longer regularly testing drinking water for perchlorate unless there is a state requirement to do so; previous testing indicated that DOD was not a primary source of perchlorate in drinking water and that known releases of perchlorate did not currently pose a threat to drinking water. According to EPA, the agency expects to issue a final drinking water regulation for perchlorate by the end of 2019. ASD (EI&E) officials told us that, once EPA has issued a final regulation, DOD is committed to complying with it. During the period we reviewed, DOD data indicate that DOD public water systems complied with EPA and state health-based drinking water regulations at a level comparable with other systems in the United States. However, we found that the military departments did not report all violations of these regulations to ASD (EI&E) during that period, which illustrates that DOD’s internal reporting requirements for drinking water data are either not clear in DOD regulations or are not clearly understood by those implementing them. Unless ASD (EI&E) and the military departments act to make any necessary clarifications to and increase understanding of DOD’s annual reporting requirements, ASD (EI&E) may not have complete data to effectively oversee the military departments’ compliance with drinking water regulations. Further, the data indicated that systems providing DOD-treated drinking water had more reported health-based violations than DOD systems providing non-DOD-treated drinking water. However, DOD has not used these data to identify the reasons that these differences may exist. Without using available data to identify why differences in violations appear to exist between DOD’s two types of public water systems, DOD will likely be hampered in its ability to identify what actions, if any, could be taken to address any differences and improve overall compliance with health-based drinking water regulations. We are making a total of five recommendations to DOD. The Assistant Secretary of Defense for Energy, Installations, and Environment, in consultation with the Secretaries of the military departments, should identify and implement any necessary changes to DOD’s environmental compliance policy to clarify DOD’s reporting requirements for violations of health-based drinking water regulations. (Recommendation 1) The Secretary of the Army should identify and implement actions to increase understanding at Army installations and commands about DOD’s reporting requirements for violations of health-based drinking water regulations. These actions may include improved communication to or additional training for personnel. (Recommendation 2) The Secretary of the Navy should identify and implement actions to increase understanding at Navy installations and commands about DOD’s reporting requirements for violations of health-based drinking water regulations. These actions may include improved communication to or additional training for personnel. (Recommendation 3) The Secretary of the Air Force should identify and implement actions to increase understanding at Air Force installations and commands about DOD’s reporting requirements for violations of health-based drinking water regulations. These actions may include improved communication to or additional training for personnel. (Recommendation 4) The Assistant Secretary of Defense for Energy, Installations, and Environment, in consultation with the Secretaries of the military departments, should (a) review reported compliance data to identify the reasons for any differences in the number of violations of health-based drinking water regulations between DOD’s two types of public water systems and (b) identify and implement any actions needed to address the causes of any differences in the number of violations between DOD’s two types of public water systems. (Recommendation 5) We provided a draft of this report to DOD and EPA for review and comment. In its written comments, reproduced in appendix III, DOD concurred with our recommendations. DOD and EPA also provided technical comments, which we incorporated as appropriate. Based on technical comments from DOD, we revised the title of the report to more clearly specify the actions DOD should take to address the findings in our report. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Assistant Secretary of Defense for Energy, Installations, and Environment; the Secretaries of the Army, the Navy, and the Air Force; and the Administrator of EPA. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact us at J. Alfredo Gómez, (202) 512-3841 or gomezj@gao.gov, or Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Senate Report 114-255 accompanying a bill for the national defense authorization for fiscal year 2017 included a provision for us to review the Department of Defense’s (DOD) efforts to manage contaminants in drinking water. This report examines the extent to which DOD has (1) internally reported data on compliance with health-based drinking water regulations at military installations and used those data to assess compliance at its two types of public water systems and (2) taken actions to address concerns with its firefighting foam containing perfluorinated chemicals (PFCs) and to address elevated levels of perfluorooctanesulfonic acid (PFOS), perfluorooctanoic acid (PFOA), and perchlorate in drinking water at or near military installations. For objective one, we reviewed DOD’s policy on environmental compliance in the United States, which directs the military departments to annually report data to the Assistant Secretary of Defense for Energy, Installations, and Environment (ASD (EI&E)) on compliance with and violations of Environmental Protection Agency (EPA) and state health- based drinking water regulations at military installations. We analyzed data reported by the military departments to ASD (EI&E) on compliance with and violations of health-based drinking water regulations at DOD public water systems located at military installations in the United States for fiscal years 2013 through 2015, the most recent data available at the time of our review. We analyzed the data to identify (1) the number of people served by DOD public water systems that complied with applicable EPA and state health-based drinking water regulations during the fiscal year and (2) the number of people served by DOD public water systems that violated at least one of these regulations sometime during the fiscal year. We performed this analysis for both types of DOD public water systems—those that provide DOD-treated drinking water, and those that provide non-DOD-treated drinking water. We also used the data to identify the military installations where the reported violations occurred; the nature of the violation (including the contaminant involved); and the number of people affected. Next, we collected data from EPA’s Safe Drinking Water Information System for all public water systems in the United States. We used DOD-provided public water system identification numbers to identify in the EPA system any violations for health-based drinking water regulations at those DOD systems for fiscal years 2013 through 2015. We then compared the violations found in EPA’s data to the data reported by the military departments to ASD (EI&E) to determine the extent to which the military departments were reporting all violations of health-based drinking water regulations to ASD (EI&E). We also analyzed DOD’s data to identify any differences in violations between DOD- and non-DOD-treated drinking water. We evaluated the military departments’ reported data and DOD’s use of these data to determine compliance with DOD’s reporting requirements in the department’s environmental compliance instruction and Standards for Internal Control in the Federal Government. According to these standards, quality information is needed to achieve an organization’s objectives, management is to monitor performance over time and promptly resolve any findings, and actions such as improved communication to and additional training for personnel are helpful for an organization to meet its objectives. We also discussed our analysis with ASD (EI&E) and military department officials, and discussed possible reasons for why any violations went unreported to ASD (EI&E) and why there may be differences in violations between DOD- and non-DOD- treated drinking water. We assessed the reliability of the DOD and EPA data on violations of health-based drinking water regulations by reviewing relevant documentation, testing the data for obvious errors, and interviewing knowledgeable officials. As we have previously found, EPA’s data system may not contain all public water violations as states have under-reported the violations. During this review, we found that some public water system identification numbers for DOD installations could not be matched with EPA’s system and, therefore, were excluded from our analysis. As a result, some DOD installation violations may be missing from the data, and we may not have comprehensive violations data for health-based drinking water regulations at DOD installations. Nonetheless, we determined that DOD and EPA data were sufficiently reliable for the purpose of identifying whether any drinking water violations were recorded in EPA’s system but not internally reported within DOD, and to indicate possible differences in drinking water violations, as reported by the military departments, between DOD’s two types of public water systems. For objective two, we reviewed policies issued by the military departments on the use of firefighting foam that contains PFCs. We also reviewed DOD documents related to research into PFC-free firefighting foams that can meet the department’s performance and compatibility requirements, as well as DOD’s military specification document that outlines those requirements. We met with officials from ASD (EI&E) and the military departments to discuss their policies on the use of firefighting foam and actions taken to address concerns with the use of firefighting foam containing PFCs, including the future use of firefighting foam. Additionally, we met with Navy officials responsible for testing existing firefighting foam products and setting the military specifications for firefighting foam use in DOD. Additionally, we obtained and reviewed four regulatory administrative orders—three from EPA and one from the Ohio Environmental Protection Agency—directing DOD to address elevated levels of PFOS and PFOA contamination in drinking water at or near four active and closed military installations, and reviewed documentation related to DOD’s efforts to address these administrative orders. We also met with officials from Ohio and the EPA regions that issued the orders—EPA Regions 1 and 3—as well as DOD officials who responded to the orders, to discuss DOD’s response to the orders. We reviewed drinking water guidance issued by ASD (EI&E) and the military departments on testing installation drinking water for PFOS and PFOA and responding to known or suspected releases of PFOS and PFOA. We analyzed DOD-provided data on the installations where DOD-conducted testing showed the presence of PFOS and PFOA in drinking water above the EPA’s health advisory level for those contaminants (as of March 2017) and on the costs and actions taken to investigate and mitigate PFOS and PFOA at or near military installations (as of December 2016). We assessed the reliability of the data by examining the data for obvious errors and inconsistencies, comparing the data, where applicable, with other information collected, and by interviewing knowledgeable officials; we found the data to be sufficiently reliable for our purposes of describing what DOD has reported on its actions and costs for responding to PFOS and PFOA. Additionally, we reviewed DOD policy and our prior work on testing for and responding to perchlorate at military installations. We met with ASD (EI&E) and military department officials to discuss DOD actions to address PFOS, PFOA, and perchlorate. To obtain additional information on DOD actions to address emerging contaminants in drinking water, we conducted site visits to a nongeneralizable sample of seven current and former military installations—at least two installations per military department—that were selected because they were investigating or responding to unregulated DOD-identified emerging contaminants in drinking water; these installations are listed below. We also met with EPA and state regulatory officials to better understand how DOD was responding to administrative orders and addressing PFOS, PFOA, and perchlorate at or near DOD installations. Specifically, we met with officials from selected EPA regions and state regulatory offices that had issued an administrative order for PFOS and PFOA or whose region or state included the installations we visited; those EPA regions and states are listed below. We also compared DOD’s list of emerging contaminants with EPA documentation to determine how many DOD-identified emerging contaminants (1) have been regulated by EPA under the Safe Drinking Water Act or (2) are currently unregulated but have an EPA-issued drinking water health advisory. We visited or contacted the following offices and locations during our review. Unless otherwise specified, these organizations are located in or near Washington, D.C. Office of the Secretary of Defense Office of the Assistant Secretary of Defense for Energy, Installations, Office of the Deputy Assistant Secretary of Defense for Environment, Safety, and Occupational Health Office of the Assistant Chief of Staff of the Army for Installation U.S. Army Installations Management Command, Fort Sam Houston, U.S. Army Environmental Command, Fort Sam Houston, Texas Fort Carson, Colorado Fort Jackson, South Carolina Office of the Assistant Secretary of the Navy for Energy, Installations, Office of the Chief of Naval Operations, Energy and Environmental Commander, Navy Installations Command Marine Corps Installations Command Naval Facilities Engineering Command Naval Sea Systems Command Former Naval Air Station Joint Reserve Base Willow Grove, Naval Auxiliary Landing Field Fentress, Virginia Department of the Air Force Office of the Assistant Secretary of the Air Force for Installations, Air Force Civil Engineer Center, Joint Base San Antonio, Texas Former Pease Air Force Base, New Hampshire Joint Base Langley-Eustis, Virginia Peterson Air Force Base, Colorado Wright-Patterson Air Force Base, Ohio Office of Research and Development Office of Land and Emergency Management Office of Enforcement and Compliance Assurance EPA Region 1, Boston, Massachusetts EPA Region 3, Philadelphia, Pennsylvania EPA Region 4, Atlanta, Georgia EPA Region 5, Chicago, Illinois EPA Region 8, Denver, Colorado EPA Region 9, San Francisco, California Colorado Department of Public Health and Environment Ohio Environmental Protection Agency Pennsylvania Department of Environmental Protection South Carolina Department of Health and Environmental Control We conducted this performance audit from June 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Department of Defense’s (DOD) list of emerging contaminants includes 21 contaminants that can be found in drinking water: 10 that have been regulated by the Environmental Protection Agency (EPA) under the Safe Drinking Water Act and 11 that are currently unregulated but have an EPA-issued drinking water health advisory. Table 4 shows the regulatory status for each of the 21 contaminants. In addition to the contacts named above, Maria Storts (Assistant Director), Diane B. Raynes (Assistant Director), Kazue Chinen, Michele Fejfar, Jennifer Gould, Karen Howard, Richard P. Johnson, Mae Jones, Daniel Kuhn, Summer Lingard-Smith, Daniel Longo, Felicia Lopez, Geoffrey Peck, Ophelia Robinson, Jerry Sandau, and Sara Sullivan made key contributions to this report.", "summary": "According to DOD, about 3 million people in the United States receive drinking water from DOD public water systems, which are to comply with EPA and state health-based regulations. EPA and DOD have detected elevated levels of two unregulated, DOD-identified emerging contaminants found in firefighting foam—PFOS and PFOA—in drinking water at or near installations. Perchlorate, an unregulated chemical used by DOD in rocket fuel, can also be found in drinking water. The Senate Report accompanying a bill for national defense authorization for fiscal year 2017 included a provision for GAO to review DOD management of drinking water contaminants. This report examines the extent to which DOD has (1) internally reported data on compliance with health-based drinking water regulations at military installations and used those data to assess compliance at its two types of public water systems, and (2) taken actions to address concerns with its firefighting foam and elevated levels of PFOS, PFOA, and perchlorate in drinking water at or near military installations. GAO reviewed DOD guidance and EPA drinking water regulations, advisories, and orders; analyzed DOD and EPA drinking water data; and visited seven installations from among those addressing emerging contaminants in drinking water. The Department of Defense (DOD) has not internally reported all data on compliance with health-based drinking water regulations or used available data to assess compliance. DOD data for fiscal years 2013-2015 indicate that DOD public water systems complied with Environmental Protection Agency (EPA) and state health-based drinking water regulations at levels comparable with other systems in the United States. However, the military departments did not report all violations to DOD, i.e., while 77 installations reported violations to DOD, GAO found that at least 16 additional installations did not. Until DOD takes steps to increase the clarity and understanding of its internal reporting requirements, it may not have the data it needs to fully oversee compliance. DOD also has not used its data to determine why its two types of systems—one that provides DOD-treated water and another that provides non-DOD-treated water—have different compliance rates. Specifically, DOD's data indicate that about 99 percent of the people who received non-DOD-treated drinking water were served by systems with no violations, while about 89 percent of the people who received DOD-treated drinking water were served by systems with no violations. Absent further analysis of its data, DOD may not be able to improve overall compliance. DOD has initiated actions to address concerns with both its firefighting foam and also with elevated levels in drinking water of perfluorooctane sulfonate (PFOS), perfluorooctanoic acid (PFOA), and perchlorate, which are DOD-identified emerging contaminants. PFOS and PFOA can be found in DOD's firefighting foam. DOD has restricted its use of this foam and is funding efforts to develop a new foam that meets DOD performance requirements. Additionally, at 11 military installations (see fig.), DOD has shut down wells, provided alternate water sources, or installed water treatment systems to respond to elevated levels of PFOS and PFOA, at times in response to EPA and state orders. GAO is making five recommendations to improve DOD's reporting and use of data on compliance with health-based drinking water regulations. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "For the purpose of this report, an economic analysis is defined as an analysis that is intended to inform decision-makers and stakeholders about the economic effects of an action. Economic effects (hereafter also called “effects”) commonly include costs, benefits, and/or economic transfers (for example, transfer payments). Action is defined to include a government law, rule, regulation, project, policy, or program. An action may be examined in the context of legislation, regulation, advocacy, agency operations, or in response to certain events (such as a natural disaster, for example). An economic analysis may be prospective, examining an action that could be taken, or retrospective, examining the outcome of an action that has already been taken. Examples of economic analyses include: 1. An economic analysis of the costs of a government program, project, 2. An economic analysis of the benefits and costs of a government rule 3. An economic analysis of the impact of a proposed or existing regulation on regulated entities and consumers. 4. An economic analysis of an action in response to an event (for example, an analysis of a federal response to a natural disaster); 5. A benefit-cost analysis or cost-effectiveness analysis. GAO reviewed handbooks and guidance on economic analysis that have been issued by various government agencies and institutions and consulted with experts. (Appendix 1 details GAO’s objective, scope, and methodology.) In this Section, GAO synthetizes economic elements and concepts embodied in this literature for use by GAO in its assessment methodology for the review of an economic analysis. GAO identifies five key methodological elements to the baseline structure of an economic analysis. These key elements are: 1. Objective and scope— the objective and scope of the analysis. 2. Methodology— the methodology used to examine the economic effects. 3. Analysis of effects — the analysis of economic effects. 4. Transparency— the transparency of the analysis of economic effects. 5. Documentation— the documentation included in the analysis. These key elements are standard to the structure of analyses, generally speaking. That is, an analysis is performed to address an objective; the analysis is scoped to address that objective; the analysis adopts a methodology, which is used to analyze the economic effects of interest; and the analysis is transparent and properly documented. The emphasis on transparency is consistent with the final implementation guidelines of the Office of Management and Budget (OMB). “The primary benefit of public transparency is not necessarily that errors in analytic results will be detected, although error correction is clearly valuable. The more important benefit of transparency is that the public will be able to assess how much of an agency’s analytic result hinges on the specific analytic choices made by the agency.” Having identified key elements to the structure of an economic analysis we synthetized for each key element, economic concepts embodied in the literature that we reviewed. For example, what might we be assessing under the key element: Objective and Scope? We considered economic concepts commonly identified across the documents we reviewed, and incorporated feedback from the experts and agencies with whom we consulted. The documents that we reviewed included, among others, Circulars A-94 and A-4 released by OMB, handbooks for economic analysis from federal and international agencies, such as the U.S. Environmental Protection Agency, the U.S. Department of Defense, the U.S. Department of Transportation, the Organization for Economic Co- operation and Development (OECD), and the United Kingdom’s HM Treasury. These documents generally outline a methodical structure to an economic analysis. This methodical structure takes the form of a set of issues or sequence of steps to address while conducting the analysis. These issues or steps, in turn, embody economic concepts. For the purpose of developing our assessment methodology, we synthetized and categorized these economic concepts with the key elements that we identified—as listed below. The concepts for each listed key element are not intended to be exhaustive and do not supplant or alter existing requirements for economic analysis. Depending on the context in which an action is examined, GAO’s assessment of a key element could exclude some concepts, or extend beyond the concepts listed for that element. In such cases, GAO’s written assessment of the relevant key element will specify the concepts that were actually considered in the review process. The five key elements and economic concepts in GAO’s assessment methodology for an economic analysis are: 1. Key Element: Objective and Scope—the objective and scope of the analysis. The economic analysis explains the action examined and includes a rationale and justification for the action. The analysis states its objective. The scope of the analysis is designed to address this objective. Unless otherwise justified, the analysis focuses on economic effects that accrue to citizens and residents of the United States, and its time horizon is long enough to encompass the important economic effects of the action. 2. Key Element: Methodology—the methodology used to examine the economic effects. The economic analysis examines the effects of the action by comparing alternatives, using one of them as the baseline. Unless otherwise justified, it considers alternatives that represent all relevant alternatives, including that of no action. The analysis defines an appropriate baseline. The analysis justifies that the world specified under each alternative considered (including the baseline) represents the best assessment of what the world would be like under that alternative. The analysis identifies the important economic effects for each alternative considered, their timing, and whether they are direct or ancillary effects. 3. Key Element: Analysis of Effects—the analysis of economic effects. Where feasible, the economic analysis quantifies the important economic effects and monetizes them using the concept of opportunity cost. The analysis applies the criterion of net present value, or related outcome measures, to compare these effects across alternatives. It controls for inflation and uses economically justified discount rates. Where important economic effects cannot be quantified, the analysis explains how they affect the comparison of alternatives. Where the equity and distributional impacts are important, the full range of these impacts is separately detailed and quantified, where feasible. 4. Key Element: Transparency—the transparency of the analysis of economic effects. The economic analysis describes and justifies the analytical choices, assumptions, and data used. The analysis assesses how plausible adjustments to each important analytical choice and assumption affect the estimates of the economic effects and the results of the comparison of alternatives. The analysis explains the implications of the key limitations in the data used. Where feasible, the analysis adequately quantifies how the statistical variability of the key data elements underlying the estimates of the economic analysis impacts these estimates, and the results of the comparison of alternatives. 5. Key Element: Documentation—the documentation included in the analysis. The economic analysis is clearly written, with a plain language summary, clearly labeled tables that describe the data used and results, and a conclusion that is consistent with these results. The analysis cites all sources used and documents that it is based on the best available economic information. The analysis documents that it complies with a robust quality assurance process and, where applicable, the Information Quality Act. The analysis discloses the use and contributions of contractors and outside consultants. In summary, GAO identifies five key elements, with associated economic concepts, to the structure of an economic analysis. GAO’s assessment methodology then examines the extent to which an economic analysis properly dealt with these key elements. GAO’s assessment methodology has two steps: (1) an assessment of each individual key element and (2) an overall assessment based on the assessment of the individual key elements. Below, these two types of assessment are discussed. While GAO’s assessment methodology typically considers all five key elements, there may be cases, for example depending on the scope of an engagement, where it may consider only certain key elements. In those cases, GAO may not be able to make an overall assessment. The first step in the review process is an assessment of the extent to which the economic analysis has considered and properly dealt with each key element. For each element, the outcome of the review is a written assessment and an assessment score. The written assessment details the extent to which the analysis considered and properly dealt with the element. To the extent that important limitations are identified in the review, the written assessment describes these limitations. This written assessment informs the assessment score, which is one of three mutually exclusive scores: 1. fully met—that is, the economic analysis has considered and properly dealt with the element; 2. partly met—that is, the economic analysis has only partly considered and properly dealt with the element; 3. not met—that is, the economic analysis has not considered or not properly dealt with the element. If the outcome is “partly met” or “not met,” the written assessment should describe the limitations of the analysis. Assessments are made from expertise in economics and with professional judgment. The guiding principles of a review are objectivity, integrity, and compliance with generally accepted government auditing standards (GAGAS). An assessment is contextual—that is, it is conditional on the evidence underlying the action examined, and the context in which it takes place. The assessment is also conditional on the reasonably obtainable information available at the time of the economic analysis that is being reviewed. A caveat may be added to the assessment if new information that would affect it, has become available and is reasonably obtainable since the analysis was made. Should the review of a key element exclude certain concepts, or extend beyond the concepts listed for that key element, GAO’s written assessment of the key element will specify the concepts that were actually considered in the assessment process. Once each element has been individually reviewed, an overall assessment is made of the extent to which the economic analysis accordingly informs decision-makers and stakeholders about the economic effects of the action examined. Four outcomes are possible: 1. The analysis informs decision-makers and stakeholders about the economic effects of the action examined. 2. The analysis informs, with caveats, decision-makers and stakeholders about the economic effects of the action examined. (If this is the outcome, the review should describe the caveats in writing.) 3. The analysis needs additional work to inform decision-makers and stakeholders about the economic effects of the action examined. (If this is the outcome, the review should describe in writing the important limitations of the economic analysis.) 4. The analysis does not inform decision-makers and stakeholders about the economic effects of the action examined. (If this is the outcome, the review should describe in writing the deficiencies of the analysis.) An economic analysis that has fully met all the key elements should be identified as informing decision-makers and stakeholders about the economic effects of the action examined (this is outcome 1). This determination is neither an endorsement of the specific findings and conclusions of the analysis, nor is it a determination that these are correct. For example, a prospective analysis is predictive of a potential result, but cannot definitively determine the result. It is a determination that the analysis is adequately and properly designed, and accordingly, it can inform the public discourse about the economic effects of the action examined. The written statements added to outcomes 2–4 should refer to the review of the individual elements. The difference between outcomes 2 and 3 is a matter of degree and professional judgment. Generally speaking, the caveats under outcome 2 will be relatively minor or few, whereas the important limitations under outcome 3 are likely to be more consequential. Should the economic analysis suffer from major deficiencies in meeting the key elements, then outcome 4 may be appropriate. Our objective was to identify, for the purpose of developing GAO’s assessment methodology for the review of economic analysis, key methodological elements to the structure of an economic analysis that is intended to inform decision-makers and stakeholders about the economic effects of a public action. To address this objective, we reviewed existing Circulars issued by the Office of Management and Budget (OMB), handbooks for economic analysis issued by federal agencies, international government agencies and institutions, and established textbooks on economic theory and benefit-cost analysis. We also solicited feedback from economics experts (in academia and public policy) and international audit agencies. We identified in our document review, five key elements to the structure of an economic analysis. These key elements are: (1) objective and scope; (2) methodology; (3) analysis of effects; (4) transparency; (5) documentation. These key elements are standard to the structure of analyses, generally speaking. That is, an analysis is performed to address an objective; the analysis is scoped to address that objective; the analysis adopts a methodology, which is used to analyze the economic effects of interest; and the analysis is transparent and properly documented. Having identified key elements to the structure of an economic analysis, we synthetized for each key element economic concepts embodied in the literature we reviewed. For example, what might we be assessing under the key element objective and scope? To do so, we looked for economic concepts commonly identified across the documents we reviewed and incorporated feedback from the experts and agencies that we consulted with. We then categorized these economic concepts across the key elements that we identified. Among the documents we reviewed in our process were the following: OMB Circular A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, Revised (Oct. 29, 1992). Circular A-94 provides a checklist of whether an agency has considered and properly dealt with all the elements for sound benefit-cost and cost- effectiveness analyses. OMB Circular A-4, Regulatory Analysis, (Sept. 17, 2003). Circular A-4, released in collaboration with the Council of Economic Advisors, identifies key elements to the structure of economic analyses in regulatory proceedings. Office of Management and Budget, Office of Information and Regulatory Affairs, Regulatory Impact Analysis: A Primer (Washington, D.C.: The White House). The purpose of the primer is to offer a summary of OMB Circular A-4. Agency-issued handbooks for economic analysis, such as, for example, those issued by the U.S. Environmental Protection Agency, the U.S. Department of Defense, the U.S. Department of Transportation, and the Organization for Economic Co-operation and Development (OECD). We also reviewed The Green Book: appraisal and evaluation in central government, issued by HM Treasury, Government of the United Kingdom, (London; July, 2011). HM Treasury describes The Green Book as a best practice guide for all central departments and executive agencies, and covers projects of all types and size. The guide applies to appraisals—defined as any analysis used to support a government decision to adopt a new policy, or to initiate, renew, expand or re-orientate programs or projects that would result in measurable benefits and/or costs to the public—and evaluations—defined as retrospective analysis of a policy, program or project at its completion, conclusion or revision. The National Academies of Sciences, Engineering, and Medicine, Guidelines for the review of Reports of the National Academies of Sciences, Engineering, and Medicine. While these guidelines are specific to the review of reports issued by the National Academies and outline review criteria that apply across a broad range of disciplines, not just economics, they provide review criteria for scientific analysis. We conducted our work from June 2017 to April 2018 in accordance with all sections of GAO’s Quality Assurance Framework that are relevant to our objectives. The framework requires that we plan and perform the engagement to obtain sufficient and appropriate evidence to meet our stated objectives and to discuss any limitations in our work. We believe that the information and data obtained, and the analysis conducted, provide a reasonable basis for any findings and conclusions in this product. We provided a draft of this product for third-party outside review to experts at various U.S. and international government agencies and specialists. Reviewers provided technical comments which we incorporated as appropriate. In addition to the contact named above, Carol Bray, Timothy Carr, Tim Guinane, Kathleen Scholl, Paola Tena and Elaine Vaurio made key contributions to this report.", "summary": "We prepared this report to answer the question: What are key methodological elements of an economic analysis that is intended to inform decision-makers and stakeholders? GAO identifies five key methodological elements to the baseline structure of an economic analysis: Objective and scope, Methodology, Analysis of effects, Transparency and Documentation. GAO's assessment methodology evaluates each key element and provides an overall assessment based on the assessment of the individual key elements.", "document_type": "gao"}
{"report": "The Patriot weapon system is a mobile Army surface-to-air missile system designed to counter tactical ballistic missiles; cruise missiles; and other threats such as airplanes, helicopters, and unmanned aerial vehicles. The Patriot system was first deployed in the early 1980s; since that time, it has received a number of substantial updates to keep pace with growing threats. Patriot units are deployed worldwide—in Germany and South Korea, for example—in defense of the United States’ and its allies’ key national interests, ground forces, and critical assets. The Army currently has 15 Patriot battalions, all in its active component. Each battalion is organized into groups known as fire units, along with a headquarters and headquarters battery. Each battalion is controlled by its own command and control station and can manage up to six fire units, although a battalion is typically deployed with four. A fire unit is made up of four basic components: (1) a ground-based radar to detect and track targets; (2) launchers; (3) interceptor missiles; and (4) a command, control, and communication station. Overall, a fire unit’s equipment includes eleven unique major end items, including the radar, the launchers, and an electric power plant, among other items. Figure 1 provides a listing of the major end items in a Patriot fire unit (top) along with the notional employment of some of these items (bottom). Two of the primary processes the Army utilizes to maintain the Patriot system are reset and recapitalization, summarized in Table 1. The Army’s reset program seeks to bring Patriot equipment returning from the U.S. Central Command area of responsibility back to Army standards. The reset process seeks to return Patriot equipment to a pre-deployment condition in order to prevent Patriot units from having to spend home station training funds to keep their equipment functional after returning from operations in austere environments for extended periods. The Army also relies heavily on recapitalization to restore Patriot equipment. A longer and more intensive process than reset, recapitalization seeks to restore equipment to what the Army considers a “like-new” condition, and according to Army guidance is a “near zero time or zero mile” maintenance process. The recapitalization process seeks to add life to the system, and it provides an opportunity for the Army to make incremental modernization upgrades, such as the insertion of new software, technology insertions, or replacing obsolete parts. For example, the Army is upgrading the Patriot system to prepare for its integration into the Integrated Air and Missile Defense Battle Command System. As the Army fields this modernized command and control system, the Patriot equipment undergoing recapitalization will also change, but the Army plans to continue recapitalization to support the Patriot system’s mission through 2048. Specifically, the Army expects that the transition to the Integrated Air and Missile Defense Battle Command System will allow it to replace current command and control elements. However, remaining end items, such as launchers, would continue to require recapitalization through the full life of the system to 2048. If the Integrated Air and Missile Defense Battle Command System, which is currently planned for initial fielding in 2022, is delayed, program and depot officials expect that they can continue to recapitalize current Patriot equipment as long as needed to support the Army’s long-term goal. However, Army officials noted that delays could require mitigation actions, such as the need to continue repairing parts that the Army would otherwise have replaced. Aside from the degree of work performed, the recapitalization and reset processes differ in several other key ways. For instance, the Army generally provides units undergoing recapitalization with another set of Patriot equipment in a one-for-one exchange. In contrast, units undergoing reset receive the same set of equipment back after work is completed and are not provided other equipment while the unit’s equipment undergoes reset at the depot. Additionally, the target length for each process differs; the Army aims to recapitalize one battalion’s worth of equipment each year, while reset work is expected to be completed in 180 days to meet the timelines of the Army’s process to prepare units for potential deployment. Letterkenny Army Depot primarily conducts the maintenance work for both of these efforts under the management of Army Materiel Command and via coordination with the Patriot program office. Patriot units are in high demand. As we found in October 2017, the Army believes its Patriot force is operating at capacity given a consistently high pace of operations, and Army studies have found that any additional operational demands and potential wartime demands would exceed current capacity. We also found that the Army was planning to increase the capacity of its Patriot force in two ways: first, by fielding five small detachments in fiscal year 2018 that would provide the ability to deploy a Patriot battery without a full battalion-level command and control element, and second, by increasing the size of an existing test detachment in order to relieve the Patriot battalion currently assigned to conduct testing for Patriot modernization efforts of that mission. The Army intends for the test detachment to begin supporting Patriot modernization test events starting in the second quarter of fiscal year 2019. From fiscal years 2014 through 2017, Patriot equipment across the force was reported to be fully mission capable at least 90 percent of the time on average, in accordance with the Army’s goal, as established in Army regulation. These fully mission capable rates continue an overall trend since 2009, which a 2014 Army assessment of Patriot readiness attributed to the recapitalization program. Specifically, this assessment noted that the worldwide average for Patriot unit fully mission capable levels was above 90 percent, and that units that underwent recapitalization consistently experienced positive spikes in readiness. Further, this assessment highlighted the importance of the Army’s reset program, noting that it must be sustained because deployed Patriot units are subjected to the highest pace of operations in the Patriot force. During the period we reviewed, the Army often did not return reset equipment to units in accordance with the timelines established in Army regulation, which affected unit training. Although the Army has identified several factors that caused delays in returning equipment to units and monitors these factors, it has not assessed their relative importance. From fiscal years 2014 through 2017, the Army often did not return reset equipment to units in accordance with the timelines established in the Army’s keystone regulation governing its process to build ready forces. This regulation establishes phases through which a unit passes as it prepares for a potential deployment. The first of these, the reset phase, begins when a majority of the unit’s personnel have returned from deployment and must last a minimum of 180 days. At the conclusion of the 180 days, the unit enters the train/ready phase, at which point it may be deployed again, and needs to have its equipment back in order to do so. Because of this standard, the Army must return a unit’s equipment from reset within 180 days from the start of the unit’s reset phase. From fiscal years 2014 through 2017, the Army reset seven battalions and for six of these battalions the Army did not return all of the units’ equipment within 180 days. Two of these battalions—the 2-43 Air Defense Artillery and 4-3 Air Defense Artillery—experienced delays that were deliberately planned. Specifically, Army officials told us that the installation of system upgrades for these battalions extended the overall reset timeline by 60 days. One official stated that this was requested and approved, and explained that if the upgrades had been installed separately after equipment had been reset, it would have taken 4 months to conduct the work. However, as shown in figure 2, of the remaining five Patriot units that completed reset during the period we reviewed, only one received all of its returned equipment within 180 days. Patriot battalion officials we interviewed told us that delays in the receipt of reset equipment forced them to modify their scheduling and execution of required collective training. For example, one battalion commander we spoke with said that without equipment his battalion could not effectively train for some collective tasks, such as exercises that require moving the system. Additionally, leadership from two battalions we spoke with told us that the late return of reset equipment compressed the training time available for them to conduct field exercises. This can create unnecessary challenges in meeting Army training requirements as units progress through the Army’s process for building ready units. Specifically, according to the Army’s force generation guidance, a unit is expected to be ready to redeploy on day 181 after returning from its last deployment to its home station. As one battalion commander described, the collective-level training that units conduct during these shortened windows is “sufficient, but not optimal.” Patriot units have utilized a series of actions to mitigate the impact of delays in equipment receipt after maintenance, but such mitigation actions are sometimes not feasible or optimal. For example, Patriot unit officials told us that the Army shares equipment between battalions that are collocated on the same installation, but at different points in the readiness building timeline. Specifically, when one battalion turns in equipment for reset, certain pieces of equipment from another battalion on the same installation, if available, might be borrowed to conduct training. Battalion officials noted, however, that this measure may not always be feasible. Leadership from two Patriot battalions, for example, cited instances where their units were unable to train during their reset periods and could not borrow equipment from other battalions located on the same installation because those battalions were deployed. In addition, units use simulators to conduct individual-level training to give personnel experience with new system upgrades, though Patriot brigade officials noted this is a stopgap measure while units are without equipment and does not allow for collective training. Lastly, Patriot units can—once delayed equipment arrives or via borrowing equipment—conduct some collective training for extended hours (i.e. during evenings) each day while at their home station, but a battalion official noted that doing so is also not optimal for unit morale. Battalion commanders we spoke with told us that their units were sufficiently trained and ready to deploy, despite the delays in the return of the equipment to the units. However, a memorandum from a brigade commander noted that given the high pace of operations, it is important that units receive their equipment in a timely manner to enable them to complete training for their next deployment, as delays can create a notable impact on crew and collective training. The late return of reset equipment could therefore have a detrimental impact on units’ ability to conduct training to meet assigned missions. The Army has identified several factors affecting the timeliness of Patriot maintenance as shown in table 2. Some of the factors affecting timeliness, as identified by Army officials, are directly within the control of Letterkenny, where reset is conducted, and some are not. Specifically, Army officials stated that U.S. Transportation Command and the Defense Logistics Agency also have responsibilities related to some of the factors that can affect timeliness, such as the transport of equipment and availability of parts, respectively. These factors are discussed in more detail below. Preventive maintenance. According to Army officials and Army documentation, the unit leadership of some deployed Patriot battalions do not emphasize preventive maintenance. As a result, equipment may not be properly maintained to Army standards and can create additional work tasks for depot personnel when they receive it, such as conducting additional or more detailed inspections. Unexpected damage. Army officials cited some instances where equipment sent to the depot arrives in worse than expected condition, either due to damage incurred during transport or because unit personnel did not accurately report the condition of the equipment prior to turning it in. For example, in December 2017 Letterkenny officials documented that a battalion’s missile launcher was returned to the depot with unexpected severe corrosion on power cables, and certain equipment items, such as generators, were completely inoperable. Officials cited another instance where a radar was pressure-washed prior to its return to the depot, causing extensive damage. These kinds of unexpected conditions result in greater repair work than anticipated for depot employees. Supply chain challenges. Officials at Letterkenny told us that their forecasts for parts orders have not been consistently met via Army and Department of Defense supply chain processes, but that the depot was taking steps to improve its own forecasting. An official also noted that problems can arise if sole-source suppliers for critical parts go out of business, or if they have to order parts that are no longer regularly produced by vendors due to obsolescence. Patriot program office officials provided an example of a radio that is part of the Patriot system and is no longer in production, and noted that the program office was working with Army headquarters officials to identify a solution. The Army uses a series of measures to mitigate parts availability issues, such as having the depot utilize its own equipment to fabricate some items on short notice (see fig. 3) and, according to Army officials, by taking parts from incoming equipment and using them for equipment nearing completion of maintenance. Additionally, in July 2017, the depot received permission to purchase critical “long-lead” parts for specific Patriot items in advance of anticipated need, although, according to officials, as a general rule and practice, the depot is not allowed to purchase items without funding in place. Letterkenny officials told us that in cases where they are unable to acquire critical parts, or lack the funds to do so, delays can occur. Depot quality controls. Time spent remedying maintenance errors and quality defects—such as incorrect assemblies, defective parts, or improper painting during depot operations—may contribute to the depot’s timeliness challenges. Army officials stressed that the Patriot system is complex, and certain maintenance tasks can be challenging because it can be difficult to isolate equipment faults. For example, the Patriot radar system is composed of thousands of elements (see fig. 4), which, according to officials, requires extensive testing to ensure that each element is operational. Depot officials told us that their processes are designed to ensure that finished products meet operational standards, and that doing so sometimes takes longer than expected. Letterkenny uses a series of metrics and reporting methods, such as internal tracking of defects and surveys and reports from customers, to monitor, document, and correct quality defects during the Patriot maintenance process to ensure that any maintenance errors or defects are identified before the equipment is returned to units. However, quality defects that may affect timeliness can still arise. Each fiscal year Letterkenny establishes a target for hours spent at the depot correcting quality defects that arise during maintenance, which are then tracked and used as indicators of the overall quality of the maintenance process. As tracked by the depot, the monthly time spent correcting quality defects varied, when averaged across each year. Specifically, the average in fiscal year 2015 was below the depot’s set target, but the averages in fiscal years 2014, 2016, and 2017 exceeded the targets. For example, the time spent correcting quality defects ranged from 846 hours a month in fiscal year 2016 to 1,242 hours a month in fiscal year 2017, above those years’ monthly target of 800 hours. Equipment transportation. Transportation time is included in the 180- day policy for returning equipment from reset to Patriot units, and it often takes a significant amount of time before equipment is transported to the depot from theater. As such, according to Army documentation, the depot can be left with only 120 days to complete reset work before it has to return equipment back to units if it is to meet the 180-day policy. According to Army documentation, to mitigate this issue the Army airlifts a number of critical Patriot equipment items, such as radars, from theater to the depot so that reset work can begin earlier on these items. Additionally, unit officials and a program official involved in planning for the Army’s reset process noted that equipment items are sent back from the depot as soon as reset work is completed; the depot does not wait until the entire unit equipment set is complete. However, as shown previously in figure 2, these kinds of mitigation actions with respect to transportation have not been sufficient in ensuring that units receive all of their equipment back within the 180 days allowed by policy. Although the Army monitors the factors that have affected maintenance timeliness, it has not conducted an analysis to identify their relative importance. According to Army documents and officials we interviewed, the Army monitors and uses a number of processes to identify, discuss, and select mitigation actions for factors affecting maintenance timeliness, such as: Quarterly working group meetings of Patriot stakeholders. The Army monitors maintenance timeliness via a quarterly working group, which includes representatives from key Army Patriot stakeholder organizations such as Training and Doctrine Command, Aviation and Missile Command, Letterkenny, and Patriot unit higher command headquarters. Any timeliness issues discussed at such meetings, such as potential training impacts and transportation delays, are conveyed to units afterwards. Letterkenny weekly production meetings. Letterkenny command staff hold weekly production meetings to discuss various issues affecting maintenance production, identify potential factors that could delay depot work, and select mitigation measures against such factors. Army Materiel Command oversight of Letterkenny production. Army Materiel Command monitors and tracks Letterkenny’s actual and projected maintenance performance against the scheduled completion dates for Patriot maintenance projects, and depot officials internally review the depot’s performance for each Patriot equipment item each week before submitting the results to Army commands monthly. Although Army officials are aware of challenges in returning reset equipment to Patriot units within the 180-day policy and have taken some steps to minimize these impacts, they could not quantify how much each of the factors affecting timeliness contributes to delays in completing maintenance and returning equipment to units. Moreover, based on our discussions with different stakeholders associated with the sustainment of the Patriot system, there are different perceptions as to the degree to which the various factors contributed to delays in completing maintenance and returning reset equipment to units. For example, during our meetings, depot officials indicated that supply chain issues were the primary timeliness challenge. In contrast, a senior program office official and unit officials emphasized the importance of transportation of equipment and its effects on timeliness. In addition, Letterkenny and Army stakeholders told us that while they work to identify and correct issues as they arise through the processes described above, their efforts to remedy these issues are conducted in isolation from one another and not compiled and compared to enable the Army to identify their relative importance in terms of each factor’s effect on timeliness. Although aware of the challenges of returning equipment to units in a timely manner, the Army has not comprehensively analyzed the relative importance of the various factors identified above that affect Patriot maintenance timeliness. Army Regulation 702-11 states that fact-based decision-making and the use of performance information to foster continuous improvement are essential activities of quality management and assurance. Specifically, activities supporting logistics missions should engage in continued review, evaluation, and improvement. This regulation further states that Army Material Command, as the manager of the Army’s quality program, should conduct performance reviews and assist other applicable organizations in developing corrective action plans, such as establishing protocols to mitigate risks and prevent recurrence of issues when nonconforming performance is identified. Although not required by Army regulation, one means of doing this is through conducting comprehensive analysis, such as comparing the relative importance of factors affecting performance in order to target improvement efforts. A comprehensive analysis to identify the relative importance of factors could better position the Army to fully understand current and historic issues affecting its ability to complete Patriot equipment maintenance in a timely manner. Such an understanding would better inform corrective actions than isolated efforts and would position the Army to determine where best to target its efforts in order to ensure units receive equipment back in a timely manner to conduct training. The Army has decided to recapitalize each battalion set of Patriot equipment once every 15 years, while recognizing that this approach introduces some challenges to upgrading and supporting the system’s readiness to meet its assigned missions through 2048. While the Army would prefer to recapitalize Patriot equipment every 10 years, the Army has reviewed two options for recapitalizing Patriot equipment more frequently and determined that these options are not feasible. According to Army documentation, the Army plans to continue sustaining and upgrading Patriot equipment to meet its long-term goal—which is to keep the system viable through 2048—by, for example, improving system reliability and enhancing its warfighting capabilities. The Army considers recapitalization a key program to achieve this goal. Specifically, in its 2014 readiness assessment of the Patriot force, the Army concluded that recapitalization is the single most important program with respect to keeping Patriot equipment viable and sustainable. Officials from multiple Army organizations also told us that the age of the Patriot system makes replacement of expendable and aged components and insertion of new technology during recapitalization important to Patriot sustainment, readiness, and its ability to meet emerging threats. While the Army has emphasized the importance of recapitalization in achieving its long-term goals for the Patriot system, the Army is not planning to adjust its recapitalization pace in the near term, as of March 2018. According to Army documentation, recapitalizing equipment every 10 years would maintain the equipment at the Army’s desired condition. However, the Army’s near-term schedule for recapitalization in fiscal years 2018 through 2022 and its long-term notional schedule for recapitalization of Patriot equipment through fiscal year 2031 both outline cycling one battalion per year through recapitalization. With 15 Patriot battalions, the pace of one battalion per year does not restore the equipment to its desired condition every 10 years. According to Army Patriot officials, there are two main options for the Army to increase the pace of recapitalization, but each of these options poses challenges. These two options are: Reduce the amount of equipment available for ongoing commitments and recapitalize it at the depot. Officials told us that one way the Army could increase the pace of recapitalization would be to reduce the amount of equipment available for ongoing commitments, but that this is not feasible given the current high pace of operations. Further, the Army does not anticipate that operational requirements will lessen under the projected security environment. The near-term schedule assumes that ongoing operational commitments will not change and is designed to synchronize recapitalization with currently scheduled operational deployments and training. Army officials responsible for coordinating the near-term schedule told us that the near-term schedule has little flexibility given the Army’s limited force structure of 15 battalions, and program and depot officials stated that if the Army were to recapitalize more than one battalion per year, the pool of battalions available to meet these current commitments would decrease. Procure additional equipment to provide to units turning in equipment for recapitalization. Army officials said that the Army could buy extra equipment to provide to additional units turning in their equipment for recapitalization if the Army wanted to accelerate the recapitalization pace. At the current pace of recapitalization, the Army has sufficient quantities of major equipment items to ensure that as a Patriot battalion turns in equipment for recapitalization it receives recently recapitalized equipment back on a one-to-one basis and thus is generally not without equipment. This process prevents removing Patriot battalions from operational rotations during the recapitalization period. However, officials stated that if the Army were to adjust the pace to recapitalize more than the current one battalion per year, it would require buying more equipment to ensure that any additional units undergoing recapitalization would not be left without equipment. Army documents indicate that the Army has assessed whether to acquire additional equipment to enable an accelerated pace of recapitalization. However, an official with responsibility for the Patriot capability and senior Army headquarters officials with responsibility for Patriot resourcing and planning told us that the Army instead has prioritized developing a replacement for the Patriot radar. This replacement radar is expected to address capability needs related to radar reliability and range to better defend against advanced threats. Army documentation indicates that this replacement radar is expected to reach initial operational capability in fiscal year 2025. If the Army decided to reduce the amount of equipment available for ongoing commitments or buy more equipment, then the Army would also need to make additional investments in depot resources to support accelerating the pace of recapitalization. According to Army documents and officials we interviewed, these include personnel, facilities, and equipment. However, there are a number of challenges related to putting these resources in place. Personnel. Army documentation shows and depot officials stated that they would likely hire contractors to meet workload demands and the depot could add shifts if the Army decided to adjust the pace of recapitalization to what it considers an optimal pace. Depot officials also told us they would try to hire contractors with some Patriot experience and place them alongside more experienced personnel in order to preserve work quality, as they have done in response to previous surges in reset work. However, the Army recognizes that Letterkenny faces challenges in expanding its workforce due to a limited pool of available workers in the area around the depot. Developing skilled Patriot maintenance personnel is also difficult. An Army study of the organic industrial base found that 11 of the 15 most critical personnel positions at Letterkenny are directly associated with Patriot maintenance and officials noted that, due to the complexity of the system, it can take up to 5 years for Patriot maintenance personnel to become proficient. Facilities and equipment. Depot officials stated that if the Army decided to adjust the pace of recapitalization to what it considers optimal, they would likely need to review, among other things, the tools, equipment, and facilities needed to support such an adjustment, as well as supply availability. They also told us that Letterkenny already has proposed expanding its facilities to meet projected future work, and the depot has planned for the plant equipment it will need to continue maintaining the Patriot system as upgrades are incorporated. However, they noted that it takes a full year to recapitalize the Patriot radar, including 3 months of testing, and that Letterkenny has one of only two radar test sites. Given the time required and the single test site, if the Army wanted to recapitalize more than one battalion a year, program officials stated that current conditions probably would not support doing so. Continuing the current pace of recapitalization could introduce other challenges in meeting the Army’s long-term goals for the Patriot system, and Army officials stated they are aware of these challenges. Specifically, Army documentation shows, and Army officials told us, that the current pace is not optimal and that it could introduce the possibility of equipment failure as specific items remain in use past the Army’s desired timeframe for recapitalizing equipment every 10 years. Additionally, depot officials told us that their biggest concern with continuing recapitalization at its current pace is that there may be increased costs to conduct recapitalization due to the system’s increasing age. As an example, they stated that there may be increased corrosion issues, adding that they have already seen a significant deterioration in the condition of some trailers. Also, the Army’s decision to continue recapitalizing equipment every 15 years instead of every 10 years provides fewer opportunities to conduct modernization, which is often done in conjunction with recapitalization. Program officials stated that modernizing the system is important because upgrades reduce the number of items that can fail, thereby making field maintenance easier. Moreover, officials from one Patriot brigade stated that their main concern with respect to Patriot is that additional operational commitments could potentially slow modernization progress and affect the Army’s capability to meet threats, particularly since the capabilities and sophistication of enemy threats continue to increase. The Army has reviewed its options and the associated challenges related to increasing the pace of recapitalization and has decided the best path forward based on its review is to continue recapitalizing Patriot battalion equipment sets once every 15 years. However, this pace of recapitalization includes some risk—as identified by Army officials—and will likely create challenges in meeting the Army’s long-term goals for the system. Maintaining good equipment condition is particularly important given the current high pace of operations for Patriot units, as well as the potential for a further increase in operational requirements. However, the Army’s reset process has often delivered equipment to units late, affecting units’ ability to schedule and execute training as they prepare for their next mission. The Army is aware of the challenges in completing maintenance and returning reset equipment to units, and has identified several factors that contribute to delays, but has not analyzed how much each of the factors contribute to delays. Unless the Army conducts a comprehensive analysis of the relative importance of the factors affecting Patriot reset timeliness and develops and implements appropriate corrective actions to address the results of the analysis, it will not be positioned to target its efforts most effectively to take corrective actions. We recommend that the Secretary of the Army ensure that Army Materiel Command, in coordination with its subordinate and other Army organizations as appropriate, conducts a comprehensive analysis of the primary factors affecting timeliness to identify their relative importance in the Army’s Patriot reset program and develops and implements appropriate corrective actions. (Recommendation 1) In written comments on a draft of this report, the Department of the Army concurred with our recommendation. The department stated that it is taking steps to address the recommendation, noting that it will continue analysis between Army Materiel Command, Headquarters Department of the Army, and the Patriot program office to identify and address factors that may affect reset timeliness. The Department of the Army’s comments are reprinted in their entirety in appendix II. The department also provided technical comments, which we incorporated into the report as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Secretary of the Army. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. To evaluate the extent to which the Army’s reset process supports the timely delivery of Patriot equipment back to units, we analyzed Army documents concerning recapitalization and reset activities. This included analysis of, among other things, documents describing the processes for Patriot battalion equipment transfers to and from Letterkenny Army Depot (Letterkenny), depot activities to recapitalize and reset equipment, and testing to ensure the equipment’s proper operation. We also reviewed, among other documents, Army guidance on Patriot equipment status reporting, reset, materiel maintenance, and on ensuring the quality of Army programs; as well as planning schedules and documents on backorders and critical items. We evaluated the Army’s processes to identify and correct factors causing any reset delays against Army guidance on program performance improvement. Additionally, we analyzed data provided by the Army on Patriot equipment fully mission capable rates and the timeliness of Army Patriot reset activities from fiscal years 2014 through 2017—the most recent data available—to identify any trends. Specifically, we analyzed Patriot unit fully mission capable data as recorded by Army Aviation and Missile Command G-3 (Readiness) based on data submitted by Patriot operational units. We analyzed it to corroborate statements regarding equipment readiness and the quality of maintenance work made by program and operational unit officials and to compare against the Army’s goal for fully mission capable rates. To determine depot timeliness, we analyzed aggregate monthly data provided by the Army on Letterkenny’s timeliness in completing Patriot maintenance activities against performance schedules. We also analyzed Patriot battalion-specific Army data on reset timeliness in order to determine the frequency with which Letterkenny met the reset timeliness policy. Finally, we reviewed Army data on the time spent re-working and re-inspecting equipment with quality deficiencies found during internal inspections at Letterkenny in order to inform our assessment of the potential effects of addressing quality deficiencies on depot timeliness. We assessed the reliability of these data by reviewing available system documentation, such as user manuals and data dictionaries for each of the automated information systems from which the respective data were drawn. We manually checked the data for obvious errors and missing or outlier values. We administered data reliability questionnaires to officials familiar with the data systems and assessed their responses and answers to follow-up questions, and we interviewed cognizant officials about their data management practices and use of the data. Based on these steps, we found these data to be sufficiently reliable for our purposes, to include providing fiscal years 2014 through 2017 Patriot equipment fully mission capable rates, battalion-specific reset timeliness, and the time spent by the depot on correcting quality defects identified during internal inspections. To describe the Army’s plans for supporting the long-term viability of the Patriot system through recapitalization and any challenges associated with its plans, we analyzed Army regulations, guidance, and planning documents, as well as Army studies. These included, among others, the Army’s recapitalization management policy; Army documents proposing and approving a recapitalization program for Patriot; Army studies of its depot workforce, worldwide Patriot equipment readiness, and Patriot operational demands in relation to available assets; and Army guidance on materiel maintenance and useful equipment life. We also analyzed, among other documents, the Army’s near-term schedule synchronizing Patriot recapitalization, reset, incremental modernization, training, and deployment schedules for fiscal years 2018 through 2022 and a long-term notional schedule for the recapitalization of Patriot equipment, by battalion set, through 2031. We also reviewed depot equipment and personnel planning documents and the Patriot life-cycle management plan, among other planning documents. For both objectives, we interviewed cognizant Army personnel involved in the planning and conduct of Patriot recapitalization and reset. We visited Letterkenny to speak with officials and observe the facilities and the conduct of Patriot maintenance activities. In addition, we interviewed officials with responsibility for Patriot funding; for monitoring Patriot unit readiness; as well as officials from two Patriot battalions that recently underwent reset and their brigade headquarters; and one Patriot battalion that recently underwent recapitalization and its brigade headquarters to identify challenges, if any, with respect to these maintenance processes, such as any training or equipment transfer delays or maintenance deficiencies. The list of the organizations and offices we interviewed during the course of our review is below. Assistant Secretary of the Army for Acquisition, Logistics, and Acquisition Policy and Logistics Group Program Executive Office, Missiles and Space, Redstone Arsenal, Huntsville, Alabama Lower Tier Project Office, Redstone Arsenal, Huntsville, Headquarters, Department of the Army G-3, Readiness Directorate G-4, Logistics Maintenance Directorate: G-44 (M) Maintenance G-4, 3/5/7, Current Operations and Strategic Readiness Division G-8, Programs and Priorities, Fires Division Army Aviation and Missile Life Cycle Management Command, Redstone Arsenal, Huntsville, Alabama Army Aviation and Missile Command Logistics Center, Redstone Arsenal, Huntsville, Alabama Letterkenny Army Depot, Chambersburg, Pennsylvania 32nd Army Air and Missile Defense Command, Fort Bliss, Texas 11th Air Defense Artillery Brigade, Fort Bliss, Texas 3-43 Air Defense Artillery Battalion, 11th Air Defense Artillery Brigade, Fort Bliss, Texas 31st Air Defense Artillery Brigade, Fort Sill, Oklahoma 3-2 Air Defense Artillery Battalion, 31st Air Defense Artillery Brigade, Fort Sill, Oklahoma 4-3 Air Defense Artillery Battalion, 31st Air Defense Artillery Brigade, Fort Sill, Oklahoma U.S. Army Training and Doctrine Command Fires Center of Excellence, Fort Sill, Oklahoma Training and Doctrine Command Capability Manager – Army Air and Missile Defense Command, Fort Sill, Oklahoma We conducted this performance audit from June 2017 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix III: GAO Contact and Staff Acknowledgments Error! No text of specified style in document. In addition to the contact named above, individuals who made key contributions to this report include Kevin O’Neill, Assistant Director; Jason Blake, Vincent Buquicchio, Clarice Ransom, Michael Silver, Erik Wilkins- McKee, and Matthew Young.", "summary": "Patriot is a mobile Army surface-to-air missile system deployed worldwide to defend critical assets and forces. The Army plans to extend the life of Patriot equipment until at least 2048 through maintaining and modernizing the system. To achieve this, the Army performs two maintenance processes, restoring equipment returning from combat back to pre-deployment conditions (“reset”) and comprehensively overhauling (\"recapitalizing\") a portion of its equipment annually. The conference report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017 included a provision that GAO assess the Army's Patriot maintenance and recapitalization plans to ensure that operational needs are met. This report (1) evaluates the extent to which the Army's reset process supports the timely delivery of Patriot equipment back to units; and (2) describes the Army's plans for supporting the long-term viability of the Patriot system through recapitalization and any challenges associated with its plans. GAO analyzed Army guidance and equipment and maintenance data; interviewed Army officials; and assessed the Army's recapitalization plans. The Army uses reset and recapitalization to extend the life of its Patriot surface-to-air missile system. The reset process—which is intended to repair recently-deployed equipment—has often returned equipment to Patriot units late, which has affected unit training. GAO found that of the seven Patriot battalions that underwent reset from fiscal years 2014 through 2017, only one received its equipment within 180 days, in accordance with Army policy (see figure). Patriot unit officials told GAO that such delays reduced the time available for unit training, creating challenges in meeting training requirements as units prepare for their next mission. The Army has identified and analyzed several factors affecting reset timeliness, ranging from supply chain issues to transportation. However, the Army has not comprehensively analyzed the relative importance of these factors. Such an analysis would better position the Army to target its efforts effectively to ensure units receive equipment back in a timely manner. Patriot Equipment Reset Timeliness for Units, Fiscal Years 2014-2017 With respect to recapitalization, the Army has decided to recapitalize each battalion set of Patriot equipment once every 15 years to support the system's long-term viability through 2048, while recognizing that this approach introduces some challenges. The Army would prefer to recapitalize Patriot equipment every 10 years, but Army officials stated this is not feasible for the following reasons: Reducing the amount of equipment for ongoing operational commitments to increase the pace of recapitalization is not feasible given current commitments and the projected security environment. Buying extra equipment to provide to additional units undergoing recapitalization is not feasible because the Army has prioritized replacing the Patriot radar to improve its capability to defend against advanced threats. Army officials told GAO that the current pace of recapitalization is not optimal and could introduce challenges, such as the possibility of equipment failure and increased maintenance costs. However, the Army has concluded that the current pace is the best path forward. GAO recommends that the Army conduct an analysis of the primary factors affecting the Patriot program's reset timeliness to identify their relative importance and develop and implement appropriate corrective actions. The Department of the Army concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "The Office of Compliance Inspections and Examinations (OCIE) administers SEC’s nationwide examination and inspection program for registered SROs, broker-dealers, transfer agents, clearing agencies, investment companies, and investment advisers. OCIE conducts examinations and inspections to improve compliance, prevent fraud, monitor risk, and inform policy. Individual groups in OCIE have oversight responsibility for the various registered entities. The FINRA and Securities Industry Oversight (FSIO) program within OCIE performs examinations of FINRA and the Municipal Securities Rulemaking Board, an SRO that regulates the municipal bond market. As part of its FINRA oversight activities, FSIO conducts four types of reviews that may involve Section 964 areas. Program inspections are reviews of FINRA operations and program areas (for example, FINRA’s review of applications by broker-dealers seeking to become members). Oversight examinations are single, stand-alone examinations of specific examinations that FINRA conducts of its member firms. FSIO initiates an oversight examination when its examinations of a broker- dealer find deficiencies FSIO believes should have been identified by FINRA in its own examination of the broker-dealer. Thematic oversight examinations are a series of oversight examinations that evaluate FINRA’s review of a particular regulatory area across a number of its member firms. Tips, complaints, and referrals are allegations or statements of concern about possible violations of securities laws or risky conduct received by SEC. FSIO reviews FINRA-related tips, complaints, and referrals by evaluating facts and circumstances and conducting background research. The reviews may result in FINRA-related inspections or examinations or may be used for inspection planning purposes. To help identify the FINRA programs and topics that it will review, FSIO uses a risk-based approach that includes an annual assessment of high- risk areas and consideration of the areas specified in Section 964. According to SEC staff, FSIO also conducts ongoing monitoring of FINRA’s activities through reviews of information provided by FINRA and meetings with FINRA officials. Generally accepted government auditing standards define performance audits as those that provide findings or conclusions based on an evaluation of sufficient, appropriate evidence against criteria. Performance audit objectives can include assessments of program effectiveness, economy, and efficiency; internal control; compliance; and prospective analyses. SEC’s examinations of SROs share many of the attributes of performance audits, including their objectives. For example, examinations (including inspections) of FINRA enable FSIO staff to evaluate compliance with applicable laws and regulations; FINRA rules, regulations, or by-laws; or both. Although SEC is not required to follow the auditing standards when examining SROs, these standards and guidance provide a framework for conducting high-quality reviews that can serve as useful criteria in evaluating a regulatory agency’s examination or inspection programs. Areas of generally accepted government auditing standards relevant to SRO examinations include independence, competence, quality control and assurance, planning, supervision, evidence, documentation, and reporting: Independence refers to the audit organization and individual auditor’s need to be independent and include documentation proving independence. Competence refers to the extent to which audit staff collectively should possess adequate professional competence and technical knowledge, skills, and expertise. Quality control and assurance refers to a system of quality control that an organization should establish that is designed to provide the organization with reasonable assurance that its personnel comply with professional standards and legal requirements. Planning includes creating a written audit plan for each audit. Supervision requirements include sufficient guidance and direction to the staff assigned to the audit to address the audit objectives and follow applicable requirements, while staying informed about significant problems encountered, reviewing the work performed, and providing effective on-the-job training. Evidence refers to sufficient, appropriate evidence to provide a reasonable basis for the auditor’s findings and conclusions. Audit documentation requirements state that auditors must prepare documentation related to planning, conducting, and reporting for each audit. Finally, communication of the results entails auditors issuing audit reports. Since fiscal year 2015, SEC examinations related to FINRA included reviews of all areas identified in Section 964. We determined that FSIO completed at least one examination covering each of the Section 964 areas since fiscal year 2015 (see table 1). In total, FSIO began or completed 61 examinations (program inspections, oversight examinations, and thematic oversight examinations) related to FINRA programs and operations in that period. Some examinations evaluated other aspects of FINRA’s programs and operations (those not specifically identified in Section 964), such as market surveillance and restitution for harmed investors. FSIO examinations either focused on a single Section 964 area or considered multiple areas. Some examinations focused specifically on a single Section 964 area. For example, in 2017 FSIO reviewed FINRA’s arbitration program, which provides retail investors a venue for resolving disputes with their brokers. Other examinations considered one or more of the areas as part of a broader scope. For instance, a program inspection completed in 2016 touched on FINRA’s arbitration services, cooperation with state securities regulators, transparency, and other topics. Another program inspection involved governance, policies on former employees, and other topics. FSIO examinations most frequently covered FINRA examinations (41 of 61). Nearly all of the oversight examinations reviewed at least some aspect of FINRA examinations. In two cases, the oversight examinations also covered another area—review of advertising by FINRA members. We found that OCIE policies and procedures used for examining FINRA since fiscal year 2015 generally were consistent with the requirements of generally accepted government auditing standards. SEC uses an examination manual to conduct its SRO examinations. We previously found that OCIE policies and procedures (including the prior version of the manual) generally were consistent with the requirements of the auditing standards that we determined were most relevant to assessing examination policies and procedures: independence, competence, quality control and assurance, planning, supervision, evidence, documentation, and reporting. We compared the current and prior versions of the examination manual. More specifically, we selected requirements for planning, prefieldwork scoping, and communicating findings from the current manual and compared those with similar sections in the prior version of the manual. We found that the new version includes the same material as the prior version while also incorporating additional guidance in certain areas. The planning section of the current version includes two additional requirements on the inclusion of non-National Examination Program staff. The communicating findings section of the current version included two additional requirements related to extensions of time to respond to disposition letters. Two of the four additional requirements were generally consistent with government auditing standards, and the remaining two additional requirements were minor adjustments that did not materially change the requirements. Therefore, we deemed the selected sections of the current version of the manual to also be consistent with the auditing standards. OCIE (and from 2016, FSIO) program inspections of FINRA governance in fiscal years 2015–2017 were consistent with internal examination guidance. OCIE identified five inspections in that period that related to FINRA governance. Each of the inspections focused on one of the following areas: (1) code of conduct, (2) executive and employee compensation practices, (3) investment portfolio, (4) compliance resource provider program, and (5) the funding mechanism for its regulatory services agreement. FINRA’s code of conduct imposes restrictions on employees’ investments and requires financial disclosures that are uniquely related to its role as a securities regulator. The code also outlines FINRA’s ethical commitments and expectations and provides guidance on what employees must do to meet them. FINRA’s executive and employee compensation practices consist of salary and incentive compensation determined by FINRA’s Management Compensation Committee using operational, strategic, and financial factors, in addition to individual performance. FINRA’s investment portfolio is governed by a policy based on the degree of risk appropriate for FINRA assets, as applied by its board to its investment objectives. In the compliance resource provider program, FINRA worked with organizations to offer firms compliance-related products and services at a discounted price or with additional features. According to FINRA staff, this program was discontinued in May 2017 and replaced with FINRA’s Compliance Vendor Directory. FINRA’s regulatory service agreements are designed to provide market surveillance, financial surveillance, examinations, investigations, and disciplinary services to other entities, including the New York Stock Exchange LLC and the Chicago Board Options Exchange. For our review, we judgmentally selected the most relevant requirements from the section of the examination manual related to planning inspections and the most relevant requirements from the section of the manual related to communicating inspection findings to determine if OCIE conducted the inspections in accordance with its guidance. The planning section covers planning examinations and prefieldwork scoping and requires the examination team to discuss the results of background research and determine an appropriate scope for the examination as early as possible. The communicating findings section requires entities to be provided with timely and concise communications on the results. It also discusses how examination staff should take further actions for those findings that could involve notifications to other regulators. We reviewed relevant inspection-related documentation (including scope memorandums, disposition letters, emails, and information extracted from an examination database) and compared them against the selected requirements to determine if the guidance was followed. We tallied our results with a scorecard methodology (see fig. 1). We found that all five inspections we reviewed met all requirements applicable to that particular inspection. For example, across all the inspections, OCIE examiners held prefieldwork meetings and documented and received approval for the scope of the examinations. Additionally, all five inspections met the required 180-day completion deadline and closed the inspection with a disposition letter. In cases in which requirements were not applicable, the reasons generally were that a triggering event had not occurred and no further action was needed. For instance, the scope was not modified in any of the inspections, so the requirement for approval of such modifications did not apply. Furthermore, none of the inspections included non-National Examination Program staff (such as personnel from SEC’s Enforcement Division), and so requirements surrounding participation by those groups did not apply. We provided a draft of this report to SEC for their review and comment. In its comment letter, which is reprinted in appendix II, SEC concurred with our findings and appreciated our attention to the issues discussed in the report. SEC also provided technical comments on the draft report, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, Inc., and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or clementsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report (1) determines if the Securities and Exchange Commission’s (SEC) oversight of the Financial Industry Regulatory Authority, Inc.’s (FINRA) operations and programs since fiscal year 2015 included the 10 areas specified in Section 964 of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), (2) evaluates the extent to which selected SEC internal guidance on conducting examinations of FINRA follows generally accepted government auditing standards, and (3) evaluates the extent to which examinations of FINRA’s governance practices followed SEC’s internal guidance. To assess whether oversight of FINRA by SEC’s Office of Compliance Inspections and Examinations (OCIE) included the Section 964 areas, we requested and reviewed documentation for all examinations since fiscal year 2015 (from October 2014 through April 2018) that OCIE staff identified as relating to Section 964 areas. We use the term “examination” to include program inspections, two types of oversight examinations, and oversight activities stemming from tips and referrals. The documentation included scope memorandums, deficiency letters, and closing letters to the file for OCIE examinations. We evaluated whether the documentation indicated that an examination’s scope and findings covered one or more Section 964 areas or included other areas related to FINRA oversight that were not specified in Section 964. To determine the extent to which OCIE’s internal guidance on conducting examinations of FINRA followed generally accepted government auditing standards, we compared SEC’s examination manual against generally accepted auditing standards. We reviewed selected sections of the current version of the manual and the earlier version. We judgmentally selected the two sections that most directly related to our focus on self- regulatory organization (SRO) inspections, which focused on preparing for examinations and communicating examination findings. Other areas of the examination manual that were not relevant focused on administration and organizational issues. We relied on our work that found that the earlier version of the manual followed the auditing standards and also interviewed pertinent staff within OCIE to discuss the guidance and why it did or did not include certain elements. We analyzed any differences between the versions to determine whether changes or additions in the current version of the manual also followed auditing standards. In addition, we interviewed FINRA staff to gain a general understanding of how OCIE staff work with them to conduct examinations. To determine the extent to which OCIE’s program inspections of FINRA’s governance in fiscal years 2015–2017 followed OCIE’s internal guidance, we used a scorecard methodology to compare inspections of FINRA’s governance with the examination manual and draft updates. We only reviewed the extent to which examinations followed specified guidelines and did not evaluate the analysis, findings, or disposition of the examinations. We created a checklist of relevant elements from the examination manual by judgmentally selecting 6 requirements from the planning inspections section of the manual and 11 requirements from the communicating findings section of the manual that were most applicable to our focus on the actual SRO inspection process. Other requirements that we deemed less relevant include examinations of exempt reporting advisers and the process for approving examination documents. The planning section of the manual covers planning examinations and prefieldwork scoping and requires the examination team to discuss the results of background research and determine an appropriate scope for the examination as early as possible. The communication of examination findings section requires entities to be provided with timely and concise communications on the results. It also discusses how examination staff should take further actions for those findings that could involve notifications to other regulators. We then reviewed different types of inspection-related documentation to determine whether the guidance was followed. For instance, we assessed certain inspection requirements, such as compliance with changing the scope of the inspection, based on formal written documentation such as scope memorandums and disposition letters. We assessed other requirements (such as whether prefieldwork team meetings were held) based on informal documentation, such as email appointments. We also relied on other internal documentation, which included the examination tracking database, which is used to certify compliance with a requirement to complete an inspection within 180 days from the completion of audit work. Two analysts then independently compared the elements against documentation for the five OCIE inspections to determine the extent to which the inspections documented the requirements outlined in the examination manual. Analysts assigned a rating of “yes” if the element was found in the inspection materials we reviewed, “no” if there was no mention of the element in the inspection materials we reviewed, “partially” if the element was not fully addressed in the inspection materials we reviewed, and “n/a” if the element was not applicable to the inspection. We also interviewed pertinent staff within OCIE to discuss the guidance and why it did or did not include certain elements. We conducted this performance audit from November 2017 to July 2018 in accordance with generally accepted government auditing standards. These standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Karen Tremba (Assistant Director), Jon D. Menaster (Analyst in Charge), Kevin Averyt, Farrah Graham, Marc Molino, Akiko Ohnuma, Barbara Roesmann, and Jessica Sandler made key contributions to this report.", "summary": "The securities industry is generally regulated by a combination of federal and industry oversight. FINRA, a self-regulatory organization, is responsible for regulating securities firms doing business with the public in the United States. SEC oversees FINRA's operations and programs. Section 964 of the Dodd-Frank Act includes a provision for GAO, following an initial report, to triennially review and report on aspects of SEC's oversight of FINRA. GAO issued its first report in May 2012 ( GAO-12-625 ) and its second report in April 2015 ( GAO-15-376 ). This report (1) determines if SEC's oversight of FINRA included the 10 areas specified in Section 964 of the Dodd-Frank Act and (2) evaluates the extent to which selected SEC internal guidance for examinations of FINRA follows generally accepted government auditing standards and the extent to which SEC's examinations of FINRA's governance practices followed SEC internal guidance. GAO reviewed all SEC examinations relating to a Section 964 area completed since fiscal year 2015 (including five that were governance-related), reviewed certain SEC procedures used to examine self-regulatory organizations against Government Auditing Standards , and compared completed inspections against SEC guidance. GAO also interviewed SEC and FINRA staff. Since fiscal year 2015, Securities and Exchange Commission (SEC) examinations of the Financial Industry Regulatory Authority, Inc. (FINRA) covered each of the 10 areas specified in Section 964 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), such as governance, funding, and transparency. The most commonly covered area was FINRA examinations of its members. Selected SEC guidance used to examine FINRA, including requirements for planning, prefieldwork scoping, and communicating findings, was consistent with generally accepted government auditing standards, and SEC inspections of FINRA were consistent with SEC's guidance. The five governance-related inspections of FINRA that GAO reviewed were consistent with SEC guidance for planning examinations and communicating findings (see fig.). Not all the requirements were applicable (because in certain instances completion of one requirement eliminated the need to satisfy others). GAO is not making any recommendations. SEC agreed with GAO's findings.", "document_type": "gao"}
{"report": "The term “STEM education” includes educational activities across all grade levels—from preschool to graduate school. STEM education programs have a variety of primary objectives, which include preparing students for STEM coursework, providing postsecondary students with grants or fellowships in STEM fields, and improving STEM teacher training (see appendix I for our definition of STEM education programs). Federal STEM education programs have been created in two ways— either by law or by federal agencies under their statutory authorities. We previously reported that most federal STEM education programs overlapped to some degree with at least one other program, in that they offered similar services to similar groups in similar STEM fields to achieve similar objectives (see sidebar for definition of overlap). Duplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries. Overlap occurs when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve their goals, or aim to serve similar beneficiaries. Fragmentation refers to those circumstances in which more than one federal agency (or more than one organization within an agency) is involved in the same broad area of national need and opportunities exist to improve service delivery. Although those programs may not be duplicative, we reported that they were similar enough that they needed to be well coordinated and guided by a robust strategic plan. And, through its strategic planning and other coordination efforts, the Office of Science and Technology Policy and the National Science and Technology Council implemented our recommendations to work with agencies to better align their activities with a government-wide strategy; develop a plan for sustained coordination; identify programs for potential consolidation or elimination; and assist agencies in determining how to better evaluate their programs. Enacted in 2007, the America COMPETES Act authorized several programs to promote STEM education. The America COMPETES Reauthorization Act of 2010 (COMPETES Act) reauthorized the America COMPETES Act and addresses coordination and oversight issues, including those associated with the coordination and potential duplication of federal STEM education efforts. The COMPETES Act required the Director of the Office of Science and Technology Policy to establish, under the National Science and Technology Council, the Committee on STEM Education to serve as the interagency coordination body for STEM education in the federal government (see fig. 1). In May 2013, the Committee on STEM Education issued a 5-year Strategic Plan for federal STEM education efforts, as required by the COMPETES Act. To improve collaboration across the portfolio, the Strategic Plan identified five priority investment areas and two coordination objectives, specifying national goals for each (see fig. 2). The COMPETES Act also requires that the Committee create, and periodically update, an inventory of federal STEM education programs that includes documentation of program assessments and the participation rates of women, underrepresented minorities, and persons in rural areas. In addition, the COMPETES Act requires that the Office of Science and Technology Policy publish annual reports on coordinating federal STEM education efforts. The law mandates that these reports include specific information, such as: a description of each federal agency’s STEM education programs funded in the previous and current fiscal years, as well as those proposed under the President’s budget request; the levels of funding for each participating federal agency’s programs described above; an evaluation of the levels of duplication and fragmentation of the programs described above; and a description of the progress made implementing the Strategic Plan, including a description of the outcome of any program assessments completed in the previous year, and any changes made to the Strategic Plan since the previous annual report. In January 2017, the President signed into law the American Innovation and Competitiveness Act, which, among other things, amended certain provisions of the COMPETES Act. The Act added some requirements for both the Office of Science and Technology Policy and the Committee on STEM Education. For example, it created new mandates for the Committee to: review the measures federal agencies use to evaluate their STEM education programs, and make recommendations for reforming, terminating, or consolidating the federal STEM portfolio. Any such recommendations for an upcoming fiscal year are to be included in the Office of Science and Technology Policy’s annual report. In 2014, the Office of Management and Budget, in consultation with the federal agencies that administer STEM education programs, established STEM education as a cross-agency priority goal. The Office of Science and Technology Policy and the National Science Foundation led the oversight and management of this goal, and as part of this work, goal leaders from these agencies identified milestones that aligned with the Strategic Plan’s priority investment areas and coordination objectives (see fig. 2). For example, goal leaders reported progress toward meeting key milestones associated with improving STEM instruction. In 2017, to ensure alignment with the current administration’s priorities, the Office of Management and Budget removed the priority status of all cross-agency priority goals, including STEM education; this ended the required public issuance of quarterly priority goal reports. The STEM Education goal’s final quarterly progress report was issued at the end of fiscal year 2016. Other government-wide efforts are underway to improve the transparency around federal programs in general. These efforts are not directed at the STEM education programs specifically, but may assist in managing the STEM education portfolio. The GPRA Modernization Act of 2010 requires the Office of Management and Budget to present a coherent inventory of all federal programs by making information about each federal program available on a website. However, we previously reported that, because agencies used different approaches to define their programs, comparability of programs within and across agencies on this inventory was limited. We recently identified a potential framework for the development of a useful federal program inventory. The Office of Management and Budget decided to postpone further development of the inventory in order to coordinate with the implementation of related requirements of the Digital Accountability and Transparency Act of 2014. Once fully implemented, this act is expected to expand the types and transparency of public information on federal spending to make it easier to track it to specific federal programs. The act requires government-wide reporting on a greater variety of data related to federal spending, such as budget and financial information, as well as tracking of these data at multiple points in the federal spending lifecycle. Program officials from the 13 federal agencies that administer STEM education programs reported a total of 163 STEM education programs in fiscal year 2016, compared to 209 programs in fiscal year 2010. Three agencies—the Department of Energy, the Department of Health and Human Services, and the National Science Foundation—administered more than half of all STEM education programs in fiscal years 2010 and 2016. Despite collectively reporting fewer STEM education programs, program officials responding to our questionnaire reported spending about the same amount in fiscal year 2016 as they did in fiscal year 2010. In fiscal year 2016, program officials reported spending about $2.9 billion on the 163 programs. Spending by individual programs ranged from about $14,000 annually to hundreds of millions of dollars. The National Science Foundation and the Department of Health and Human Services programs account for about 60 percent of this spending. Figure 3 provides an agency-level summary of the number of programs and their reported spending. Appendix II contains a complete list of the 163 STEM education programs and their reported spending for fiscal year 2016. While agencies reported many of the same STEM education programs in fiscal years 2010 and 2016, the federal portfolio evolved in various ways. About half of the 209 programs previously reported for fiscal year 2010 were reported again for fiscal year 2016—accounting for about two-thirds (109 programs) of the fiscal year 2016 portfolio. The remaining third (54 programs) were newly reported for fiscal year 2016. (See appendix I for more information on changes to the STEM portfolio between fiscal years 2010 and 2016.) The portfolio underwent various changes from fiscal years 2010 to 2016, including program consolidations, creations, and terminations. According to leadership of the Committee on STEM Education, these changes were due to many factors. One key factor is the STEM Education Strategic Plan, which, among other things, calls for greater efficiency and cohesion across federal STEM education programs. Other factors include agencies’ individual priorities, including their mission and budget, and congressional interest in specific programs. For example, agencies reported: Consolidations. Starting in 2014, for greater efficiency and cohesion, the National Science Foundation consolidated a number of related undergraduate STEM education programs, including STEM Talent Expansion Programs, Transforming Undergrad Education in STEM, and Nanotechnology Undergraduate Education in Engineering. Creations. Department of Health and Human Services officials reported administering 28 new STEM education programs. These programs are housed in the Department’s National Institutes of Health, which generally bases its funding decisions on scientific opportunities and its own peer review process. One new program is the Building Infrastructure Leading to Diversity Initiative. This program supports undergraduate institutions in implementing and studying approaches to engaging and retaining students from diverse backgrounds in biomedical research. Terminations. Department of Education officials reported that four STEM education programs funded in fiscal year 2010 were terminated before fiscal year 2016. One such program was the Women’s Educational Equity program. Congress last funded this program in fiscal year 2010. Based on our analysis of questionnaire responses, nearly all STEM education programs in fiscal year 2016 overlapped with at least one other STEM education program, in that they offered at least one similar service to at least one similar group in at least one similar STEM field to achieve at least one similar objective (see text box). Similar levels of overlap occurred among programs funded in fiscal year 2010. Similarities Among Overlapping Federal Science, Technology, Engineering, and Mathematics (STEM) Education Programs Similar Services Many of the 163 STEM education programs provided similar services. To support students, most programs (143) provided research opportunities, internships, mentorships, or career guidance. In addition, 110 programs supported short-term experiential learning activities, and 99 programs supported long-term experiential learning activities. Short-term experiential learning activities include field trips, guest speakers, workshops, and summer camps. Long-term experiential learning activities last throughout a semester in length or longer. To support teachers, 77 programs provided curriculum development and 45 programs supported teacher in-service training, professional development, or retention activities. Similar Groups Intended to be Served Many programs also provided services to similar groups, such as K-12 students, postsecondary students, K-12 teachers, and college faculty. A majority of STEM programs reported primarily benefiting postsecondary students; specifically, 103 programs intended to serve 4-year undergraduate students, 76 intended to serve Master’s degree students, and 83 intended to serve doctoral students. Most programs also intended to serve multiple groups; 137 of the 163 programs served two or more groups. Similar STEM Fields More than 75 percent of programs focused on specific STEM academic fields of study. The most common fields were biology (85 programs), technology (75 programs), engineering (72 programs), and computer science (71 programs). Of those programs that focused on specific STEM fields of study, about 55 percent (68 programs) focused on 5 or more different fields. Similar Objectives Many STEM education programs had similar objectives. An objective of a majority of programs (115) was to provide training opportunities for undergraduate or graduate students in STEM fields. Most programs (139) also reported having multiple primary STEM objectives. Despite these similarities, overlapping programs may differ in meaningful ways, such as their specific field of focus and those programs’ stated goals. For example, a primary objective of the Department of Health and Human Services’ Cancer Education Grants program and the National Aeronautics and Space Administration’s National Space Grant College and Fellowship Project is to provide training opportunities for undergraduate or graduate students in biological sciences, among other fields. However, these programs have different program goals: The Cancer Education Grants program aims to develop innovative cancer education programs and cancer research dissemination projects. The National Space Grant College and Fellowship Project encourages interdisciplinary education, research, and public service programs related to aerospace. Although many STEM education programs are designed to provide similar services to similar groups, some programs serve distinct populations within those broader groups, such as minority, disadvantaged, or underrepresented groups. Within the broad group— middle and high school students, an individual program may focus on serving only minority, disadvantaged, or underrepresented students. For example, the Department of Transportation’s Garrett A. Morgan Technology and Transportation Education program focuses services on students who are girls and minorities, whereas the Department of Education’s Upward Bound Math-Science program aims to serve students who are economically disadvantaged. The Committee on STEM Education and the Office of Science and Technology Policy reported managing overlap in the portfolio by coordinating with other agencies through a: Cross-agency priority goal. Project management and oversight of this goal provided an additional mechanism to facilitate coordination. Goal leaders published quarterly progress reports describing their efforts to achieve each of the five priority investment areas and two coordination objectives. Federal coordination subcommittee. Creating a federal coordination subcommittee and various interagency working groups helped to advance goals identified in the Strategic Plan. Committee leadership structured working groups to connect agencies with similar programs (see fig. 4). The Committee on STEM Education and Office of Science and Technology Policy have not fully met their responsibilities to assess the STEM education portfolio. Specifically, the Committee on STEM Education has not reviewed performance assessments of STEM education programs to ensure effectiveness—a primary function of its authorizing charter. Committee leadership acknowledged that they have not conducted such reviews. Overall, the Committee made limited progress advancing its strategic goal of increasing the use of evidence- based approaches because, according to Committee leadership, they focused on achieving other strategic goals. By reviewing programs’ performance assessments, the Committee could leverage existing performance information to identify and share promising practices that agencies could use in designing or revising their programs. Moreover, in doing so, the Committee could further its strategic goal of increasing the use of evidence-based approaches across the portfolio of STEM education programs. We previously have reported that managers can use performance information to identify and increase the use of program approaches that are working well. Additionally, such a review could help the Committee meet its new responsibilities under the 2017 American Innovation and Competitiveness Act, including reviewing the measures federal agencies use to evaluate their STEM education programs and making recommendations for terminating, consolidating, and reforming programs in the federal STEM education portfolio. Further, the Committee on STEM Education has not met the COMPETES Act requirement to document the performance assessments of STEM education programs in its federal STEM inventory (see sidebar). In 2011, the Committee on STEM Education reported summary information on programs’ performance assessments, including the total number of programs funded in fiscal year 2010 that had been evaluated since 2005. However, the information provided was not program- specific; therefore, it is unclear which programs were assessed for effectiveness. Further, that information is outdated, as the STEM education portfolio has changed considerably since 2010, as we have discussed in this report. Committee leadership said they do not have plans to update the summary information provided in 2011, noting that agency budget justifications include program performance assessments. However, we reviewed the budget justifications for 10 STEM education programs that program officials reported had been recently evaluated and found that 8 had no information on performance assessments. By periodically documenting in its federal STEM education inventory whether programs have been assessed for effectiveness, the Committee can enhance communication of performance information among agency officials and stakeholders. This could facilitate the use of performance information by agency managers and lead to greater public awareness regarding the effectiveness of many of the nation’s STEM education programs. The Office of Science and Technology Policy has not done everything required of it either. It has not described the outcomes of programs’ performance assessments completed in the previous year in its annual reports, as required by the COMPETES Act (see sidebar). Office of Science and Technology Policy officials said that they have not reported on recent program assessments, and added that many STEM education programs were not mature enough to provide sufficient data for a definitive assessment. However, many of the 2016 programs that we identified were at least 7 years old and had been assessed. Specifically, 67 percent (109) of the programs reported by program officials for fiscal year 2016 had also been reported for fiscal year 2010. Of the programs in existence since 2010, 49 percent (53) have been assessed, according to program officials’ questionnaire responses. By reporting information on the outcomes of performance assessments completed in the previous year, the Office of Science and Technology Policy could enhance awareness of promising practices in federal STEM education programs. The Committee on STEM Education has not reported STEM education programs’ participation rates of groups historically underrepresented in STEM fields, although broadening participation of those groups is one of the Committee’s strategic goals. Moreover, the COMPETES Act requires that the Committee report the participation rates of women, underrepresented minorities, and persons in rural areas in its inventory of federal programs (see sidebar). Committee leadership acknowledged they have not reported these data, and added that such participation data are not fully available across all STEM education programs. However, we found that such participation data were generally available. an inventory of federal STEM education programs that includes documentation of participation rates of women, underrepresented minorities, and persons in rural areas. In response to our questionnaire, nearly three-quarters of STEM education programs (120 of 163) reported tracking participants in fiscal year 2016. Of those programs, many also tracked specific participant characteristics. For example, 61 percent (73) of programs that tracked participants also captured whether their participants were women and 54 percent (65) documented those who were African American. Programs primarily intended to serve minority, disadvantaged, or underrepresented groups tracked participant characteristics at higher rates than programs that intended to serve broader groups of beneficiaries (see fig. 5). In addition, 7 of the 13 administering agencies, such as the Department of Health and Human Services, reported that they tracked participation in fiscal year 2016 for at least two-thirds of their STEM education programs. Officials from the Department of Health and Human Services said that the department maintains data for many of its STEM education programs in a database that captures individual participants’ demographic data, including race and gender, and aggregates such information for internal reporting. Officials also said they use this information to evaluate whether individual programs are meeting their goals of serving particular groups. Although we found that many agencies reported collecting data on participants in their STEM education programs, the Committee on STEM Education has not reported such information in its inventory, as required. Reporting information on the participation rates of women, underrepresented minorities, and persons in rural areas could help the Committee assess whether STEM education programs have broadened participation to groups historically underrepresented in STEM fields—a key goal of the Strategic Plan. Committee leadership said they measured progress toward this goal with general performance indicators, such as the number of women who earned STEM degrees, regardless of participation in federal programs, because such data were readily available. However, those performance indicators are influenced by various factors, including some external to federal STEM education efforts. For example, the number of women earning STEM degrees could be affected by broader economic factors or college enrollment trends, rather than the activities of the agencies. The federal government continues to invest billions of dollars annually in STEM education programs to enhance the nation’s economic and educational competitiveness. Since 2010, the federal portfolio of STEM education programs has evolved considerably. The Committee on STEM Education reported that, through its leadership and strategic planning efforts, it fostered coordination among agencies administering STEM education programs, which helped them implement the STEM Education Strategic Plan. Such efforts to encourage interagency coordination can help ensure efficient use of resources, particularly given the overlap of programs in the STEM education portfolio. The Committee on STEM Education and the Office of Science and Technology Policy have not fulfilled their responsibilities to review, document, and report performance information on STEM education programs. Reviewing performance assessments of the many programs in the federal STEM education portfolio is a vital management responsibility that could, for example, improve the Committee’s ability to disseminate information on promising practices or make recommendations that agencies can use to make well-informed decisions about designing or revising their programs. Further, documenting programs’ performance assessments in the Committee’s federal STEM education inventory and reporting the outcomes of recent assessments in the Office of Science and Technology Policy’s annual reports could enhance the availability of performance information. In addition, the Committee falls short in reporting required information on programs’ participation rates of women, underrepresented minorities, and persons from rural areas. Without such information, it is unclear whether the federal investment in STEM education is ultimately supporting its strategic goal of broadening participation to groups historically underrepresented in STEM fields. Moreover, as the Committee on STEM Education begins to implement its new responsibilities prescribed by the American Innovation and Competitiveness Act, its efforts to review programs’ performance assessments could improve its capacity to make well-informed recommendations to further enhance the portfolio of STEM education programs. We are making a total of four recommendations, including three to the Committee on STEM Education and one to the Office of Science and Technology Policy. Specifically: The leadership of the Committee on STEM Education should review performance assessments of federal STEM education programs and then take appropriate steps to enhance effectiveness of the portfolio, such as by sharing promising practices that agencies could use in designing or revising their programs. (Recommendation 1) The leadership of the Committee on STEM Education should improve public awareness of information on programs’ performance assessments by documenting program-level information on performance assessments in its federal STEM education inventory. (Recommendation 2) The leadership of the Committee on STEM Education should report required information on the participation rates of women, underrepresented minorities, and persons from rural areas in federal STEM education programs that collect this information. (Recommendation 3) The Director of the Office of Science and Technology Policy should report the outcomes of programs’ performance assessments completed in the previous year in its annual report. (Recommendation 4) We provided a draft of this report to the National Science and Technology Council’s Committee on STEM Education and the Office of Science and Technology Policy for review and comment. These entities jointly provided written comments, which are reproduced in appendix IV, and technical comments, which we incorporated, as appropriate. They agreed with all four of our recommendations and noted initial strategies for how they would implement three of them. Regarding implementation of the fourth recommendation to report on participation rates of underrepresented groups in federal STEM education programs, they noted plans to examine confounding factors inhibiting the reporting of the information required under the COMPETES Act. Gaining insight on the challenges agencies face collecting this information is an important first step. However, to comply with the requirement of the COMPETES Act and help ensure programs reach populations historically underrepresented in STEM fields, we continue to believe that the Committee should report the participation rates of women, underrepresented minorities, and persons from rural areas in federal STEM education programs that collect this information. To do so, the Committee may also need to develop strategies to help agencies overcome some of these confounding factors. We are sending copies of this report to leadership of the Committee on STEM Education, and the Assistant Director of STEM Education at the Office of Science and Technology Policy, and the appropriate congressional committees. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff should have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. To identify the programs that should receive our questionnaire, we sought input from the 13 agencies that administer federal science, technology, engineering, and mathematics (STEM) education programs. We provided each of the agencies with our definition of a STEM education program and asked agency officials to identify programs funded in fiscal year 2016 that met this definition (see text box). We also asked agency officials to provide information on the status of the 209 STEM education programs we included in our previous report on STEM education programs. Specifically, we asked whether the programs were funded in fiscal year 2016 and, if not, whether they were consolidated or terminated. Definition of Science, Technology, Engineering, and Mathematics (STEM) Education Program GAO defined “STEM education program” as a program funded by allocation or congressional appropriation. An organized set of activities was considered a single program even when its funds were also allocated to other programs. A STEM education program that met the definition had one or more of the following as a primary objective: attract or prepare students to pursue classes or coursework in STEM areas through formal or informal education activities (informal education programs provide support for activities that offer students learning opportunities outside of formal schooling through contests, science fairs, summer programs, and other means; outreach programs aimed at the general public were not included); attract students to pursue degrees (2-year, 4-year, graduate, or doctoral degrees) in STEM fields through formal or informal education activities; provide training opportunities for undergraduate or graduate students in STEM fields (this can include grants, fellowships, internships, and traineeships that are intended for students; general research grants that involve hiring a student for lab work were not considered a STEM education program); attract graduates to pursue careers in STEM fields; improve teacher (preservice or in-service) education in STEM fields; improve or expand the capacity of K-12 schools or postsecondary institutions to promote or foster education in STEM fields; and conduct research to enhance the quality of STEM education programs provided to students. Programs designed to retain current employees in STEM fields were not included. Programs that fund retraining of workers to pursue a degree in a STEM field were included because these programs help increase the number of students and professionals in STEM fields by helping retrain non-STEM workers to work in STEM fields. Also included were health care programs that train students for careers that are primarily in scientific research, but not those that train students for careers that are primarily in patient care (e.g. those that trained nurses, doctors, dentists, psychologists, or veterinarians). Lastly, GAO considered STEM fields to include any of the following broad disciplines: agricultural sciences; astronomy; biological sciences; chemistry; computer science; earth, atmospheric, and ocean sciences; engineering; material science; mathematical sciences; physics; social sciences (e.g., psychology, sociology, anthropology, cognitive science, economics, behavioral sciences); and technology. GAO used this same definition of STEM education program in its 2012 report. However, in the current report, GAO explicitly specified astronomy and material science as STEM fields and also revised “mathematics” to be “mathematical sciences” based on feedback from agency officials. We reviewed the information agencies submitted and took steps to corroborate it, such as by reviewing program descriptions and budget documents. Based on our analysis of this information, we sent a web- based questionnaire to 198 programs (see table 1). To develop the questionnaire and collect the data, we used recognized survey design practices to enhance data quality. For instance, we ordered the questionnaire appropriately and ensured the questions were clearly stated and easy to understand. The questionnaire solicited information on federal STEM education programs, including programs’ objectives, intended groups served, services provided, STEM fields, and obligations. We did not conduct pretests because most of the questions were included in our prior questionnaire and had already been pretested. On May 8, 2017, we sent an email announcing the online questionnaire to the officials responsible for programs identified as STEM education and also notifying them that the questionnaire would be activated that week. On May 10, 2017, we sent a second message to officials informing them that the questionnaire was activated and providing them with unique usernames and passwords. As necessary, we followed-up with program officials by telephone and email. We collected responses through August 31, 2017. Based on our analysis of the questionnaire responses and other information we received from program officials, we excluded 35 programs from our inventory. (See table 2 for a summary of those 35 programs and the reasons we excluded them.) Nine of the 35 excluded programs had been reported by agency officials as STEM education programs in our previous report. In most cases (8 of 9), we excluded these programs in this report because the programs did not include STEM education as a primary objective in fiscal year 2016. In the remaining case, we excluded the program because it was a component of another fiscal year 2016 STEM education program, and thus would be duplicative. We confirmed this information and the programs’ exclusion with the administering agencies. After we completed our analysis, we identified 163 programs as STEM education for fiscal year 2016. Programs officials responsible for all 163 of these programs completed our questionnaire. We used standard descriptive statistics to analyze responses to these completed questionnaires. We also used recognized survey design practices to process and analyze data collected via the questionnaire. For instance, we performed automated checks to review the data and identify inappropriate answers. We also reviewed the data for missing or ambiguous responses and followed up with program officials when necessary to clarify their responses. We did not verify all responses since we had applied recognized survey design practices and follow-up procedures, and had determined that the data used in this report were of sufficient quality for the purposes of our reporting objectives. In addition to the contact named above, Bill J. Keller (Assistant Director), Kathryn O’Dea Lamas (Analyst-in-Charge), Morgan Jones, and Karissa Robie made significant contributions. Also contributing to this report were James Bennett, Deborah Bland, Charles Culverwell, Jill Lacey, Sheila McCoy, James Rebbe, Kathleen van Gelder, and Sarah Veale.", "summary": "Education programs in STEM fields are intended to enhance the nation's global competitiveness. GAO reported in 2012 that there were more than 200 federal STEM education programs in fiscal year 2010. Since then, this portfolio of programs has changed. GAO was asked to review the landscape of federal STEM education programs. This report examines (1) how the federal investment in STEM education programs changed from 2010 to 2016, and (2) the extent to which the STEM education portfolio has been assessed.To answer these questions, GAO administered a web-based questionnaire to all federal STEM education programs funded in fiscal year 2016 and analyzed the results. GAO also reviewed relevant federal laws and agency documents, examined the implementation of relevant assessment requirements, and interviewed officials from relevant federal agencies. The federal investment in science, technology, engineering, and mathematics (STEM) education programs remained relatively stable from fiscal years 2010 to 2016, although the number of programs declined from 209 to 163 (see figure). While agencies reported that many of the same STEM education programs existed during this time period, the portfolio underwent various changes, including program consolidations, creations, and terminations. Nearly all STEM education programs in fiscal year 2016 overlapped to some degree with at least one other program in that they offered similar services to similar groups in similar STEM fields to achieve similar objectives. The Committee on STEM Education, an interagency body responsible for implementing the federal STEM education strategic plan, reported it managed this overlap through coordination with agencies administering these programs. The Committee on STEM Education has not fully met its responsibilities to assess the federal STEM education portfolio. Specifically, the Committee has not reviewed programs' performance assessments, as required by its authorizing charter, nor has it documented those assessments in its inventory, as required by law. Such efforts could encourage the use of evidenced-based practices across the portfolio—a key national goal of the STEM education strategic plan. These efforts could also enhance public awareness of the administering agencies' efforts to assess programs' performance. In addition, the Committee has not reported the participation rates of underrepresented groups in federal STEM education programs, as required by law. By reporting this information, the Committee could better assess whether programs are broadening access to groups historically underrepresented in STEM fields—another key goal of the strategic plan. GAO is making four recommendations, including three to the Committee on STEM Education to review performance assessments of STEM education programs, document those assessments, and report programs' participation rates of underrepresented groups. The Committee on STEM Education agreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Under the Brady Handgun Violence Prevention Act of 1993 (referred to hereafter as the “Brady Act”) and implementing regulations, the FBI and designated state and local criminal justice agencies use NICS to conduct background checks on individuals seeking to purchase firearms from an FFL or obtain permits to possess, acquire, or carry firearms. The mission of the FBI’s NICS Section is to enhance national security and public safety by providing the timely and accurate determination of a person’s eligibility to possess firearms in accordance with federal law. Figure 1 shows the states where the FBI performs background checks for all transactions, as well as POC and partial POC states. ATF—one of several Department of Justice law enforcement components—is responsible for investigating criminals and criminal organizations that use firearms, arson, or explosives in violent criminal activity, among other things. ATF is also responsible for investigating criminal and regulatory violations of federal firearms, explosives, arson, and alcohol and tobacco-smuggling laws subject to the direction of the Attorney General, as well as any other function related to the investigation of violent crime or domestic terrorism that is delegated to ATF by the Attorney General. U.S. Attorneys prosecute criminal cases brought forward by the federal government, prosecute and defend civil cases in which the United States is a party, and collect debts owed to the federal government that are administratively uncollectible. U.S. Attorneys investigate and prosecute a wide range of criminal activities—including, but not limited to, international and domestic terrorism, corporate fraud, public corruption, violent crime, and drug trafficking. Each U.S. Attorney exercises wide discretion in the use of his or her resources to further the priorities of the local jurisdictions and needs of their communities. The Executive Office for United States Attorneys (EOUSA) represents the 93 U.S. Attorneys that prosecute federal cases. Among other things, EOUSA provides guidance, management direction, and oversight to USAOs. During a NICS check, the FBI and POC states use descriptive data provided by an individual—such as name and date of birth—to search various databases containing criminal history and other relevant records. These databases include the Interstate Identification Index, the National Crime Information Center, and the NICS Indices. The Interstate Identification Index includes, among other things, information on persons who are indicted for, or have been convicted of, a crime punishable by imprisonment for a term exceeding 1 year or have been convicted of a misdemeanor crime of domestic violence. The National Crime Information Center includes criminal justice- related records pertaining to wanted persons (fugitives) and persons subject to protection orders, among other things. The NICS Indices were created for use in connection with NICS background checks and contain information on persons determined to be prohibited from possessing or receiving a firearm. NICS checks determine whether or not an individual is disqualified by federal or state law from possessing firearms. As shown in figure 2: Federal NICS transactions increased from about 6.5 million in fiscal year 2011 to about 8.6 million in fiscal year 2017. Federal NICS denials increased from about 77,000 in fiscal year 2011 to about 112,000 in fiscal year 2017. POC state transactions—which include both full and partial POC states—increased from about 9.3 million in fiscal year 2011 to about 17 million in fiscal year 2017. POC state denials increased from about 45,000 in fiscal year 2011 to about 69,000 in fiscal year 2017. If the FBI or state agency completes a background check within 3 business days and determines that a person should be denied, such denials are referred to as “standard denials” and do not involve the potential transfer of a firearm. If the FBI or state agency cannot complete a background check within 3 business days, the FFL may transfer the firearm pursuant to federal law, unless state law provides otherwise. When the FBI makes a denial determination after 3 business days— called a “delayed denial”—the FBI determines if the FFL transferred the firearm to the individual, and if so, refers these cases to ATF for retrieval of the firearm if the individual is confirmed to be prohibited from possessing a firearm. States may establish requirements regarding background check processing times, including waiting periods, beyond the federal requirement. States also may include state databases in addition to NICS indices when conducting background checks. In POC states, FFLs initiate a NICS check by contacting one or more state organizations, such as a state or local law enforcement agency, to query NICS databases and related state files. If necessary, the state organization then conducts any required follow-up research. States may use different methods to conduct background checks. Examples of these varying methods include the following: Instant Check: Requires an FFL to transmit a buyer’s application to a checking agency by telephone or computer. The agency is required to respond immediately or as soon as possible. Purchase Permit: Requires a buyer to obtain, after a background check, a government-issued document (such as a permit, license, or identification card) that must be presented to an FFL before the buyer can receive a firearm. Exempt Carry Permit: State concealed weapons permits, issued after a background check, exempt the holder from a new check at the time of purchase under an ATF ruling or state law. Other: Requires an FFL to transmit an application to a checking agency, which delays transfer until a waiting period expires or the agency completes a check. After a federal NICS denial, ATF can take enforcement actions through criminal investigation and referral for prosecution to a USAO, as making false written statements on the ATF Form 4473 is a crime punishable as a felony under federal law by up to 10 years in prison and up to a $250,000 fine. Any fines that result from a firearm denial are criminal fines assessed through prosecution as part of a plea agreement or sentencing. ATF does not have the statutory authority to issue fines or take any civil action against individuals whose firearm applications are denied and are suspected of providing false information during the attempted purchase. For federal denied transactions, the FBI’s NICS Section sends information about each denial to ATF’s DENI Branch. The DENI Branch is responsible for researching each transaction to determine whether the case should be referred to one of ATF’s 25 field divisions for possible investigation. The DENI Branch is to refer all delayed denial cases— which may require recovery of a firearm—and standard denial cases that meet USAO investigative referral criteria for each corresponding judicial district. An ATF NICS coordinator in each field division is to distribute the referred denial cases to the appropriate field office within each field division. In addition to recovery of a firearm for delayed denial cases, all firearms denial investigations may involve verifying the purchaser’s prohibited status, gathering relevant supporting documentation such as mental health or court files, and communicating with prosecutors regarding the prosecutorial merit of the case, according to ATF officials. Figure 3 shows the general NICS background check process when purchasing a firearm from an FFL in either a NICS or POC state. Among the denials that ATF investigates (delayed and standard), each field office also determines which cases should be referred to a USAO for possible prosecution. If the ATF field office determines that the subject is a prohibited person and local prosecutorial guidelines are met, the field office may refer the case for prosecution. ATF agents may discuss potential referrals with prosecutors to try to obtain USAO acceptance before ATF formally refers a case for possible prosecution. A case that is not deemed appropriate for federal prosecution may be referred to a state prosecutor. If the U.S. Attorney decides to prosecute, an arrest is made or a warrant is issued. Figure 4 shows the general process for the investigation and prosecution of standard firearms denials. POC states vary in their procedures and standards for investigating and prosecuting persons denied firearms transactions. For example, these states may or may not investigate and prosecute prohibited persons who violate state gun control laws. In some states, the agency conducting background checks notifies the state or local police, depending on which has jurisdiction, where the transaction occurred. The local agency is then responsible for investigating and assisting in the prosecution of the case by state or local prosecutors. Other states have units with statewide jurisdiction that screen cases before deciding whether a referral should be made to a state police trooper or local law enforcement agency for investigation. A POC state may also refer denials for further investigation to the nearest ATF field office. In POC states, a firearm retrieval associated with a delayed denial may be handled by local law enforcement, a statewide firearms unit, or ATF. State and local prosecutors, whether the district attorney, county or city prosecutor, or the state Attorney General’s office, represent the state for cases arising under state law. Occasionally, federal and state law may prohibit similar types of criminal conduct, allowing both federal and state prosecutors to pursue the case. In fiscal year 2017, ATF referred about 13,000 firearms denials to its field divisions for investigation, of which USAOs had prosecuted 12 cases as of June 2018. In March 2018, the Attorney General issued a memo that directed all United States Attorneys to enhance prosecution of cases involving individuals who make false statements on the ATF Form 4473. Officials from 10 of our 13 selected POC states said that they do not investigate or prosecute NICS denials. At the federal level, the FBI’s NICS Section referred 112,090 denied transactions to ATF’s DENI Branch in fiscal year 2017, of which ATF referred 12,710 (about 11 percent) to its field divisions for further investigation. The 12,710 referred cases consisted of 3,993 delayed denials and 8,717 standard denials. According to ATF headquarters officials, the DENI Branch refers all delayed denials to ATF field divisions for additional investigation because these cases could potentially require the recovery of a firearm that was transferred to a prohibited person. The DENI Branch uses investigative guidelines established by USAOs that cover 94 judicial districts to determine if standard denials should be referred to the respective ATF field division for investigation. USAO criteria may include individuals who are violent felons, have an active protection order, or have made multiple attempts to purchase a firearm in the past after being denied, among other offenses. Based on our analysis of ATF data, the number of firearms denials the DENI Branch referred to ATF field divisions for investigation increased from 5,208 in fiscal year 2011 to 12,710 in fiscal year 2017—an increase of 141 percent. We discuss the reported impact of this increase in referrals on ATF staff later in the report. Of the 12,710 referrals ATF sent to its field divisions in fiscal year 2017 for investigation, USAOs considered 50 cases for prosecution, and prosecuted a total of 12 cases (9 delayed denial and 3 standard denial) as of June 2018, according to ATF data (see table 1). An additional 10 cases were pending or awaiting prosecution as of June 2018. Overall, USAOs filed about 54,000 criminal cases in fiscal year 2016, of which about 9,200 involved firearm-related matters. According to Department of Justice officials, in fiscal year 2017, USAOs also filed about 54,000 criminal cases, of which about 10,400 involved firearm-related matters. We also asked state officials from states within our six selected ATF field divisions whether they investigated and prosecuted these denials. Officials from four of these six states said that ATF has not been referring firearms denials to them, so investigation and prosecution of firearms denials was not being done in their state. State officials from two of the six states said that they either occasionally receive referrals from ATF, which are investigated and submitted for local prosecution or they are not aware whether they receive referrals from ATF because they do have a dedicated team to investigate these cases. Officials from all 6 states said they have laws that prohibit persons from purchasing and/or possessing firearms based on prohibitions, such as a prior felony or misdemeanor convictions, but do not have laws that prohibit persons from falsifying information on ATF’s form 4473 during the NICS background check. These states also cited some limitations for investigating these referrals such as lack of statutory authority within their state agency and resource constraints. On March 12, 2018, the Attorney General issued a memo that directed all United States Attorneys to enhance prosecution of cases involving false statements on the ATF Form 4473, which the memo refers to as “lie-and- try” cases. The memo specifically stated that every United States Attorney must coordinate with the ATF Special Agent-in-Charge in the local district to review and revise, as necessary, local prosecution and referral guidelines to ensure vigorous and appropriate prosecution of these cases. The memo also stated that these guidelines should place particular emphasis on cases against violent persons, including—but not limited to—denials involving individuals convicted of violent felonies, misdemeanor crimes of domestic violence, or subject to protective orders, and denials involving fugitives where the underlying offense is a violent felony or misdemeanor crime of domestic violence. Further, the memo stated that the review and any resulting revisions should ensure that district-specific prosecution and referral guidelines reflect the Department of Justice’s renewed commitment to reducing violent crime. The memo required that all United States Attorneys certify that the review has been completed and all necessary adjustments made within 45 days. According to EOUSA officials, as of early May 2018, about 90 percent of USAOs had coordinated with their respective ATF field divisions to discuss revisions in USAO referral guidelines for standard denial cases. The officials added that in response to the Attorney General’s memo, some USAOs narrowed criteria to focus resources on particular denials, such as those involving an attempted purchaser with a history of violent crime, or prioritized denials with recent prohibitions, such as a domestic violence conviction in the past year. In other cases, ATF officials said that USAOs broadened criteria, which may result in more potential cases from which to select for investigation and referral for prosecution. ATF officials also said that some USAOs added investigation referral criteria (for individuals prohibited from possessing firearms) to include elements outside the list of federal prohibitors, such as denied individuals with ties to gang activity or terrorism. These attributes outside of NICS prohibiting categories would require further investigation at the local level by ATF, according to officials. While ATF officials have the expectation that the revised criteria would increase the overall workload on ATF field divisions, ATF officials said that it is too early to discern how these changes will impact ATF and the number of denial cases prosecuted by USAOs. EOUSA officials suggested that firearm-related prosecutions may well increase in the future, but added that any increase that results does not necessarily mean that firearms denial prosecutions would increase. Officials from 10 of our 13 selected POC states said that they do not investigate or prosecute any NICS denials, sometimes citing resource availability or the lack of state statutes as the reason. Officials from these 10 states said that while their state does not investigate or prosecute firearms denials, their state may take other actions following a denial. These possible actions may include informing local jurisdictions of the denial for possible investigation, and possible arrest if the denied individual has an active warrant. Other actions cited include revoking a state firearms owner identification card and possibly seizing any firearms; informing ATF of a delayed denial so ATF can retrieve the firearm; and providing the information on each denial to the FBI for input into FBI databases used to perform NICS checks. Officials and data from the remaining three POC states—Oregon, Pennsylvania, and Virginia—indicate that these states investigate a high proportion of firearms denials. These states have statutes that prohibit providing falsified information on a state or federal firearms form as well as statutes that penalize the attempt to purchase firearms by individuals prohibited from such purchases. Oregon: Prior to 2014, the state generally did not investigate firearms denials, according to state officials. In 2014, the state changed its policy based on concerns about firearm-related crimes. Specifically, beginning in late 2014, Oregon began investigating all firearms denials, which resulted in more than 2,500 firearms denial investigations in both 2016 and 2017. According to state data, there were between 2,000 and 2,400 firearms denials annually from 2011 to 2013. According to the two Oregon county prosecutors we interviewed, from late 2014 through 2017, their offices accepted about 141 of the more than 700 firearms denial investigations referred to their offices, with most prosecuted successfully. Pennsylvania: Prior to 2014, the state investigated a relatively small percentage of firearms denials per year using risk-based criteria, according to state police officials. In 2014, the state changed its policy to investigate all firearms denials. According to state police reports, in 2016, approximately 6,500 denial cases were referred for investigation, of which about 1,600 were referred for prosecution and 356 resulted in convictions. For 2017, the state reported that approximately 5,500 denial cases were referred for investigations, of which 1,907 investigations were referred for prosecution, resulting in 472 convictions. Virginia: Virginia has investigated firearms denials since 1989, according to state officials. Virginia does not refer all firearms denials for investigation, but instead uses risk-based criteria to refer a subset of prohibited categories for investigation, according to these officials. The number of referrals for investigation in Virginia has increased from about 770 in 2011 to around 1,700 in 2016 and 2017. Virginia prosecutors we interviewed in three jurisdictions from localities where a high volume of firearms denial referrals occur said they tend to work with Virginia state troopers who specialize in denial investigations and reported high prosecution rates for the cases they accept. The prosecutors noted that most convictions do not go to trial and are reduced to less severe violations and most of the penalties imposed tend to be probation, but there is the occasional jail term. For example, one Virginia prosecutor said that jail sentences are rare, but for a felon with a record of violence, sentences of 7 to more than 24 months in jail have been imposed. Unlike federal denial investigation referrals where about 30 percent of the total is for delayed denials, the vast majority of investigations and prosecutions within these three states are related to standard denials. Officials within these states explained that background checks that result in delayed denials are fairly uncommon. According to Pennsylvania officials, in Pennsylvania this is because of state background check policies that provide additional time, 15 days, to complete background checks if a denial is possible, but not clear initially. If the 15-day period expires without an approved transfer, the transaction is not denied, but the firearm is not transferred. According to officials in all three states, FFLs generally will not transfer a firearm until the background checks are completed. ATF officials from our six selected field divisions said that investigating firearms denials can be challenging because of the high volume and require use of their limited resources. ATF has not assessed field divisions’ use of warning notices in lieu of prosecution, which could provide greater awareness of their deterrence value. EOUSA officials said that denial cases are difficult to prosecute and offer less value for public safety than other prosecutions. State officials said that denial investigations compete with other investigations and can be difficult to successfully prosecute. ATF officials from our six selected field divisions—which combined received approximately 60 percent of the total standard denials that ATF referred to field divisions from fiscal years 2011 through 2017—said that investigating firearms denials can be challenging for various reasons. ATF field divisions have taken some steps to help mitigate these challenges, but ATF headquarters could benefit from enhancing its oversight of some aspects of the investigations process. According to officials from our six selected field divisions, one challenge to investigating and prosecuting firearms denials is the high volume of firearms denial referrals for investigation that ATF sends to field divisions. According to ATF headquarters officials, the DENI Branch has agreed to send these referrals to field divisions based on criteria each ATF field division has established with USAOs within their division. In fiscal year 2017, ATF’s DENI Branch referred 1,889 delayed denial cases to our six selected field divisions—which field divisions are required to investigate— and 5,435 standard denials cases, which they are to consider for further investigation. In the six field divisions, the number of standard denial referrals more than tripled from fiscal years 2011 to 2017, and in two field divisions, the number of standard referrals in 2017 was more than five times the number in 2011. For example, in one field division, the number of standard referrals was 166 in 2011 and increased to 1,064 in 2017. ATF officials did not know why the number of standard and delayed denials had increased during this period. Officials from all six of our selected ATF field divisions also said that investigating denial cases can be time-intensive and require use of their limited resources. The officials said that delayed denials can be particularly time-intensive because they are required to be investigated and the investigation involves a defined set of actions, including the possible retrieval of the firearm. For example, these investigations typically involve steps to verify the prohibition of the individual, including obtaining court records; contacting the individual and FFL that sold the firearm; and arranging to retrieve the firearm for those individuals found to be prohibited. A fiscal year 2016 ATF funding request through the annual congressional budget justification submission noted the drain on investigative resources because of the requirement for ATF to follow-up on delayed denials. While the investigation of standard denials also can take time, officials from our six selected field divisions said they have greater discretion over whether or not to investigate these denials. For example, each field division has discretion to screen all or some of the standard denials, which can include confirming the person was correctly denied and contacting the denied individual and the firearms dealer. Officials from all of the six selected field divisions said that, in light of the high volume and time-intensiveness of denial cases, they have taken various steps to prioritize the types of cases to investigate. For example, per ATF policy, field divisions prioritize delayed denials over standard denials because a prohibited person may be in possession of a firearm. Officials from three of the six field divisions said that after verifying that the applicant is prohibited by reviewing the criminal history attached to the case file, they generally close standard denials without further investigation. The officials added that while these cases may meet USAO criteria and be referred to a field division for investigation, they ultimately do not have prosecutive merit based on coordination with prosecutors who have experience in prosecuting these cases. Officials from one field division said that they typically do not devote resources to verifying the prohibited status, and instead triage standard denials based on certain criteria, such as a recent violent felony or domestic violence conviction. Accordingly, officials in that field division only refer to a criminal investigator for further review what they consider the greatest threats to public safety. EOUSA officials said that USAOs generally do not accept and prosecute denial cases that do not involve aggravating circumstances, as these cases can require significant effort for prosecutors relative to the short length of punishment and may offer little value to public safety because the offender does not obtain the firearm, compared to other cases involving gun violence. The officials added that USAOs filed about 9,200 firearm-related cases in fiscal year 2016 and about 10,400 in fiscal year 2017, but that cases involving falsifying information when attempting to purchase a firearm generally are only a small fraction of USAO efforts. Instead, USAOs primarily focus on cases where persons obtain firearms and are prohibited persons or use the firearms in connection with a criminal offense. According to ATF DENI Branch data, the majority of the 25 cases that USAOs prosecuted in fiscal years 2016 and 2017 that involved firearms denials (standard and delayed) resulted in reaching plea agreements with the defendants. Federal law provides that it is unlawful “for any person in connection with the acquisition or attempted acquisition of any firearm or ammunition from a licensed importer, licensed manufacturer, licensed dealer, or licensed collector, knowingly to make any false or fictitious oral or written statement or to furnish or exhibit any false, fictitious, or misrepresented identification, intended or likely to deceive such importer, manufacturer, dealer, or collector with respect to any fact material to the lawfulness of the sale or other disposition of such firearm or ammunition ….” Generally, to convict someone for making a false statement on the ATF Form 4473, the prosecutor must establish beyond a reasonable doubt that the seller was a FFL; the defendant made a false statement or used a false identification while acquiring or attempting to acquire a firearm; the defendant knew the statement or identification was false; and the false statement or identification was intended to, or likely to, deceive a FFL about the lawfulness of the firearm sale. EOUSA officials said that prosecutions for falsifying information are very challenging because of the requirement to prove intent, and can become further complicated because the purchaser may not know that he or she is prohibited and was not intentionally trying to deceive an FFL. The officials added that these cases are not appealing to judges and juries from a public safety standpoint. They also said that they find juries questioning why the case is being prosecuted in instances when the individual did not get the gun, resulting in juries refusing to convict these individuals or jury nullification. EOUSA officials said that the number of prosecutions of firearms denials can be low, particularly in standard denial cases where the system worked and the subject did not obtain a firearm, and because of the priority often given to other cases involving gun violence. EOUSA officials said that delayed denial cases can require less effort to prosecute than standard denials, since USAOs do not need to prove an individual’s intent in making a false statement in purchasing the firearm, only that the prohibited individual is intentionally in possession of a firearm. For instance, generally, to obtain a conviction for a felon in possession of a firearm, the prosecution must establish beyond a reasonable doubt that the defendant had previously been convicted of a crime punishable by imprisonment for a term of more than 1 year; the defendant knowingly possessed a firearm; and the firearm previously passed in interstate commerce. However, officials from our six selected field divisions said that as long as a firearm is recovered from the prohibited person and the person is cooperative, ATF is unlikely to refer delayed denial investigations to USAOs for prosecution. While officials from all six selected ATF field divisions said that investigating the increasing number of denial cases can be time-intensive and require use of their limited resources, ATF headquarters has not assessed the extent to which field divisions’ use warning notices in lieu of prosecutions or whether any policy changes could enhance their use as a deterrence tool. Standard denial cases ATF referred to field divisions for investigation grew by more than 200 percent ATF-wide from fiscal years 2011 through 2017, and by more than 300 percent within our six selected field divisions. Moreover, delayed denial referrals grew by about 70 percent ATF-wide and by 70 percent within our six selected field divisions during this period. Figure 5 shows the increase in standard and delayed denial cases ATF referred to its field divisions for investigation from fiscal years 2011 through 2017. At the same time, ATF data show that special agent staffing across our six selected field divisions collectively only increased by one special agent from fiscal years 2011 through 2017. Officials from five of our six selected field divisions said that the increasing number of NICS denial cases received from ATF headquarters for investigation has posed a burden on staff resources. Field divisions are required to investigate all delayed denial referrals, but have discretion as to how thoroughly they investigate standard denial referrals. Officials from all six selected field divisions said that, to date, one of the ways they have been able to adjust to the increasing volume of standard denial referrals has been by closing them with limited investigation or sending warning notices to the prohibited individuals. However, based on trends over the last 7 years, the number of standard and delayed denial referrals for investigation could continue to increase. In addition, the Attorney General’s March 2018 memo to USAOs directing that the prosecution of false statements on the ATF Form 4473 be enhanced may impact how, and how many, denial investigations ATF performs. For all delayed denials, ATF policy requires field divisions to contact prohibited persons within three days of being assigned the case to advise the person of their prohibition. According to ATF headquarters officials, warning notices are intended to inform the individual that he or she is prohibited from purchasing a firearm, should not attempt to purchase a firearm again, and may be subject to prosecution. For delayed denials, ATF policy also requires field divisions to send a written warning notice in all instances where the special agent is unable to make contact with the prohibited person within 3 business days, or when other circumstances exist, such as extraordinary distance or inclement weather. Officials from our six selected field divisions said that while warning notices for delayed denials are not always delivered in writing, all individuals involved in delayed denials receive a warning in some form—e.g., written, oral, or via text message—from the ATF special agent investigating the denial. Officials from one field division said that they send text messages to denied purchasers in lieu of warning letters because they are less intimidating to prohibited persons, the texts save time and money, and are more effective in helping retrieve firearms. For standard denials, warning notifications are not required. Specifically, ATF policy provides that field divisions may send warning notices to denied persons “where appropriate and in lieu of prosecution.” However, in instances where aggravating circumstances exist, such as if the prohibited person committed a violent felony or made multiple attempts to purchase firearms, ATF policy provides that consideration should be given to hand-deliver the notice to the prohibited person. The 6 selected field divisions varied in the extent to which they sent warning notices related to standard denials. Specifically, three of the six divisions had established a practice to send notices to all prohibited persons. Officials from these three divisions said that such letters are intended to (1) educate the denied person that he or she is prohibited from purchasing firearms, (2) deter the individual from attempting future purchases, and (3) serve as evidence during any subsequent investigation or prosecution that the individual knew that he or she was prohibited from purchasing a firearm. Officials from one of these field divisions also said that the practice of addressing standard denials by sending warning notices is a good use of limited resources while addressing a public safety concern. Of the three field divisions that routinely send warning notices for all standard denials, two send them via certified mail, while the other sends letters via standard mail due to limited resources. According to officials from these three field divisions, the costs associated with mailing warning notices also includes staff time to locate recipient information and mail the letters, in addition to supervisory review, as is done in at least one field division. A group supervisor in one of these field division’s sub-offices said that while their field division primarily uses certified mail, the sub- office hand delivers these notices for all standard and delayed denials. Officials from one of these three field divisions said that they confirm the prohibited status of individuals before sending the warning notices, while officials at another field division said they do not confirm the prohibited status prior to mailing but that the notice includes information on how to appeal the denial. These three divisions received an average of about 800 standard denials in fiscal year 2017. Officials from the three divisions that do not routinely send warning notices for standard denials said that notices are only sent for standard denials in rare cases. Such cases can include when there are aggravating circumstances. Criminal activity or not cooperating with the ATF—after the attempted purchase are examples of aggravating circumstances. Officials from one field division stated that warning notices were used for standard denials by individual agents in the past, but there was no field division policy to do so routinely. Officials from another field division said that due to limited resources, the decision was made to not send these notices, though they said the notices could be an effective deterrent for prohibited individuals from trying to possess a firearm or attempting to purchase from an FFL. ATF headquarters officials said that under ATF policy, the decision whether to send warning notices for all standard denials is made by individual field divisions. Therefore, they did not know the extent to which each of the 25 divisions used this practice. Standards for Internal Control in the Federal Government call on federal managers to design control activities to achieve an agency’s objectives. These controls can include using quality information to make informed decisions, such as how best to achieve ATF’s objectives given limited resources; evaluating ATF’s performance in achieving key objectives; and addressing risks, including its limited resources to investigate or prosecute denial cases. While ATF policy provides that individual field divisions determine their use of warning notices, ATF headquarters is uniquely positioned to assess use of the notices across all field divisions. Assessing the extent to which ATF field divisions use warning notices for standard denials would provide ATF headquarters with greater awareness regarding agency-wide efforts to use the notices as a deterrence tool in lieu of prosecution. As assessment could also better inform ATF as to whether the application of certain practices to all field divisions could be a feasible and effective use of limited investigative resources, given the small number of standard denial cases prosecuted each year, and revise related policies if appropriate. State police supervisors in all three states (Oregon, Pennsylvania, and Virginia) that investigate denials said investigators are generally assigned to denial investigations as their time permits. Supervisors also said these investigations are generally considered time consuming and can sometimes impact other duties. State police supervisors said that these investigations can be disruptive to operations by taking troopers away from their core duties, such as traffic enforcement and response, except where troopers are dedicated to conducting these investigations. State troopers echoed this point, adding that denial investigations are difficult to conduct given the amount of documentation needed for prosecution when they have other duties. Local law enforcement officials in Oregon and Pennsylvania also said that denial investigations are disruptive, as they are usually forwarded to officers when they are on patrol, sometimes many weeks or months after the firearms background check was initiated. Investigators in all three states also said they face challenges assisting with prosecutions of denied persons, including gathering the necessary documentation to prove the individual knew they were prohibited. For example, Virginia troopers said that obtaining records on out-of-state convictions and mental health prohibitions, and locating documentation on older convictions, can be especially difficult. Troopers in Oregon and Virginia commented that in their experience, there can be some degree of inaccuracy in the criminal records in their state. For example, they said that arrests and prosecution results may not be accurately reflected in the criminal history of the denied person. When the trooper checks the actual record, it is sometimes discovered that the person is not prohibited. A Virginia trooper said this is especially common for juvenile convictions. Oregon and Virginia officials said they have been able to mitigate these challenges by utilizing specialized troopers to conduct denial investigations. These troopers are taken off line and generally perform denial investigations almost exclusively. In both states, these specialized troopers conduct a large portion of the denial investigations in these states or in designated locations within the state. Virginia State Police officials told us that some areas within police divisions that receive a high volume of denials for investigation use specialized troopers that spend all or most of their time investigating firearms denials. These Virginia troopers reported that they have become more efficient than troopers that do not specialize because the repetition of performing multiple investigations improves the learning curve and the quality of their investigations. Virginia State Police officials said that while any area may assign troopers to work exclusively on denial investigations, most areas either cannot afford to remove a trooper from road coverage or do not investigate enough cases involving persons denied firearms to make it an effective use of resources. According to Oregon officials, five specialized troopers in the state investigated more than 1,100 of the almost 2,600 firearms denials referred for investigation in 2016. These troopers covered the denials for several metropolitan areas in Oregon and cited efficiencies in conducting and referring investigations for prosecution. State prosecutors we interviewed in the three states that conducted denial investigations said the primary challenge in prosecuting denial cases is in gathering the evidence needed to prove that the individuals knew they were prohibited. They added that the difficulty in gathering evidence for certain prohibited categories also make those prosecutions more difficult. For example, obtaining records related to old convictions, out of state convictions, and mental health prohibitions are common challenges. There are also challenges due to record retention policies for specific prohibitions. For example, a Virginia prosecutor said that prosecuting denials for misdemeanor crimes of domestic violence convictions in Virginia that are more than 10 years old is difficult because these records may be destroyed under state law after 10 years. Oregon state investigators we interviewed said that, under state statutes, successfully prosecuting someone for falsifying information on firearms purchase forms requires proving that the person “knowingly and willingly” falsified information on the form, which can be difficult to prove. One Pennsylvania investigator also said that denied individuals may not understand the questions on the forms and genuinely believe they are not prohibited. Prosecutors we interviewed who worked with specialized investigators reported that they have worked closely with these troopers to facilitate successful prosecutions. For example, an Oregon prosecutor we spoke to utilizes a case reporting process where the trooper advises the prosecutor of the strong cases to be considered for prosecution. This allows prosecutors to focus their attention on the cases more likely to be successfully prosecuted. In one Virginia county, the prosecutor’s office provides troopers a checklist of important points the trooper should address to make a strong case for prosecution. Virginia prosecutors in jurisdictions served by a specialized trooper said that they confer with the troopers regularly and are able to successfully prosecute a high percentage of the denial investigations these troopers conduct. While individuals are denied firearms purchases because they are prohibited from possessing firearms under federal or state law, federal denial investigations and prosecutions are generally based on additional aggravating circumstances. The three states that investigate denial cases have established priorities for investigating and prosecuting such cases. The types of standard and delayed denial cases investigated by ATF field divisions and referred to USAOs for prosecution are determined by multiple factors, including the prohibiting category (e.g., felony conviction), criminal history of the denied individual, USAO investigative referral criteria, and the nature of the ATF investigation itself. Of the almost 21,000 delayed denials the ATF DENI Branch referred to ATF field divisions for investigation from fiscal years 2011 through 2017, 32 percent were denied for being convicted felons, 23 percent for a qualifying misdemeanor crime of domestic violence, and 19 percent for being an unlawful user of, or addicted to, a controlled substance. As discussed earlier, all delayed denials are referred to the appropriate field division for investigation. Of the almost 36,000 standard denials the ATF DENI Branch referred to field divisions for investigation during this time period, 36 percent were denied for being convicted felons, 30 percent for a qualifying protective order, and 16 percent for a conviction for a qualifying misdemeanor crime of domestic violence. For standard denials, USAO investigative referral criteria, not the prohibiting category itself, determines which cases are referred for investigation. From fiscal years 2015 through 2017, the number of delayed denials referred to ATF field divisions for investigation increased by 46 percent (from 2,742 to 3,993). This increase was driven by cases in which the prohibiting category was drug-related, which increased by about 300 referrals (60 percent increase); involved misdemeanor crimes of domestic violence, which increased by about 250 referrals (34 percent increase); and involved felony convictions, which increased by about 280 referrals (34 percent increase). Also during this period, the number of standard denials referred to ATF field divisions for investigation increased by 30 percent (from 6,715 to 8,717). This increase was driven by misdemeanor crimes of domestic violence, which increased by about 626 referrals (62 percent increase), and felony convictions, which increased by about 659 referrals (25 percent increase). Cases in which the prohibiting category was related to mental health or protection orders also increased by 42 percent (about 200 referrals) and 21 percent (about 300 referrals), respectively. Figure 6 shows the breakdown of investigation referrals by prohibiting category from fiscal years 2011 through 2017. The types of denial cases that ATF’s DENI Branch refers to field divisions for investigation are determined by the USAO referral criteria established in the district in which the purchase took place. Based on our analysis of the standard denial referral criteria for the 34 USAO districts that cover the six selected ATF field divisions as of February 2017, there are similarities in the criteria used across these USAO districts. For example, most of the 34 districts direct ATF to refer standard denials for investigation if the cases involved recent convictions for violent crimes or convictions for misdemeanor crimes of domestic violence. Also, about two-thirds of the 34 USAO districts direct ATF to refer cases in which prohibited persons have made two or more attempts to buy firearms while prohibited. In addition to the 10 prohibitions listed under federal law, other referral criteria used by USAO districts include prohibited individuals who are also suspected terrorists or associates of suspected terrorists; known gang members or members of criminal organizations; or suspected of gun trafficking. Aggravating Circumstances Resulting in a Prosecuted Firearms Denial Case An individual attempted to purchase a firearm while under indictment for first degree robbery, in which the subject used a woman to set up an exchange of sex for marijuana. During the exchange, the subject robbed and shot the victim. The subject was charged with two felonies—falsifying information on the background check form and illegal possession of a firearm while under indictment. The subject pled guilty to both charges and was sentenced to 24 months in prison and 3 years supervisory release. The denial cases ATF field divisions refer to USAOs for prosecution generally include aggravating circumstances in addition to the factors discussed above related to an individual’s criminal history. According to ATF officials in one field division, these aggravating circumstances could include violent felonies or multiple serious offenses in a short period of time, especially if these occurred in close proximity to the timing of the attempted firearms purchase. For example, a prohibited person with multiple armed robberies or actively involved in gang activity could be considered to have aggravating circumstances. The officials described a recent incident where an individual was found in possession of PCP three times in a span of a couple months, then bought a firearm and fired it at an occupied dwelling. This was considered a clear example, and the individual was prosecuted for making a false statement as well as illegal possession of a firearm stemming from the delayed denial. Additional examples provided by ATF officials from our 6 selected field divisions of recent cases ATF referred for prosecution include: An individual purchased a firearm from an FFL and sold that firearm to a prohibited person. The original purchaser was later denied (delayed denial) due to a prior drug conviction. The purchaser was charged with illegally possessing a firearm, making a false statement in the purchase of a firearm, and making a “straw purchase,” which is when an individual illegally purchases a firearm on behalf of another person. According to ATF, this individual was sentenced to 1 year in federal custody and 3 years of supervisory release. An individual was charged with making false statements in the attempted purchase of a firearm. The individual did not receive the firearm as a result of a standard denial. During the investigation, the subject was not cooperative, and had an extensive criminal history in multiple states dating back 35 years, including several contacts with law enforcement on domestic violence and protective orders. The subject was charged with falsifying a background check form, to which he pled guilty and was sentenced to 12 months in prison. An individual under indictment for armed criminal action committed first-degree robbery in which he used a woman to set up an exchange of sex for marijuana. During the exchange, the subject robbed and shot the victim. The subject later attempted to purchase a firearm and was able to obtain the firearm as a result of a delayed denial. Later, a completed NICS check revealed that he was a prohibited person for being under indictment, and was subsequently arrested later that week. The subject was perceived as a threat to the community and charged with two felonies, falsifying the background check form, and illegal possession of a firearm while under indictment. He pled guilty to both charges and was sentenced to 24 months in prison and 3 years supervisory release. Of the 12 examples from our six selected field divisions provided, 9 involved delayed denials and 3 involved standard denials. Eleven of the 12 cases have been completed as of May 2018. Of the 9 cases charged in federal court, 1 case was declined by prosecutors, and the other 8 resulted in guilty pleas. These guilty pleas resulted in penalties ranging from time served to 33 months in prison, along with additional punishments such as probation, fines, and mandated treatment programs. Of the 3 cases charged in state court, 2 resulted in guilty pleas and 1 had not been resolved as of May 2018. Of the 10 cases pursued by federal and state prosecutors that resulted in guilty pleas, 7 cases involved a subject with a history of drug crimes, 6 involved violent crimes, and 4 involved domestic violence. Additional information on these case examples can be found in appendix VI. According to officials from our six selected ATF field divisions, standard denial referrals may meet USAOs criteria and be referred to a field division for investigation, but almost always do not have prosecutive merit based on coordination with prosecutors. The officials noted that USAOs generally do not accept standard denials that only involve a violation related to falsified information. The officials also said that minor crimes, such as burglary, from decades ago would likely not be a high enough threat for prosecution. For delayed denial cases, officials from the 6 field divisions said that if a firearm is retrieved or otherwise recovered from the prohibited person—and the person is cooperative—ATF is unlikely to refer these investigations to USAOs for prosecution unless there are aggravating circumstances. The types of denial cases that are referred for investigation in Oregon, Pennsylvania, and Virginia are determined in part by the priorities the states have set for such referrals. For Oregon and Pennsylvania, which investigate all firearms denials, these priorities include cases involving stolen guns, purchasers with active warrants, active protection orders, and prior felony convictions. In these states, convictions of a crime punishable by more than one year (i.e. felony convictions) are the most common reasons for denial. Virginia investigates a subset of all denials based on risk, and has a policy to prioritize denials that is similar to Oregon and Pennsylvania—active warrants, active protection orders, as well as mental health issues. According to Virginia state police officials, denials can be referred for investigation if they involve one or more of a set of prohibiting categories. In 2017, these amounted to about 50 percent of the almost 3,600 denials recorded. Virginia state police officials said that investigations tend to be handled in the order they arrive, regardless of prohibited category. Two troopers said that Virginia residents with exclusive Virginia criminal histories jump to the top of their lists because the records for these individuals will be easiest to obtain. The investigators in these Virginia jurisdictions said they tend to refer most of their investigations for prosecution, regardless of the prohibited category, if there is evidence to support the falsified information charge. Pennsylvania investigators and supervisors generally said that no priority is given to the denial investigation referrals they receive. They said investigations tend to be handled on a first in first out basis, regardless of the prohibiting category of the denied person. One supervisory trooper said that since these investigations are usually sent to the field 2 to 3 months after the transaction has occurred, they are generally considered low priority when compared to assaults, robberies, and other crimes a trooper investigates. Oregon state police management and troopers told us they prioritize cases involving stolen guns, purchasers with active warrants, active protection orders, and prior felony convictions. Local law enforcement agencies that investigate denial cases in Oregon told us they do not prioritize any cases—except for active warrants—handling them in order as they are received. Investigators in all three states said that the criminal histories of those investigated tend to be minor. For example, outside of the prohibiting offenses that led to persons being denied, most of these individuals’ criminal histories tend to consist of old prohibiting offenses like non- violent felonies, or drug possession, with few gun violations noted. Investigators in these three states said that this may be because individuals with the most severe criminal histories do not attempt to purchase firearms through FFLs. However, one investigator said that individuals who were denied based on misdemeanor crimes of domestic violence tend to have multiple charges in their background. State investigators said prosecutors’ interest or willingness to prosecute is a key determinant for whether a case is referred for prosecution. One investigator also said he may check with prosecutors early in an investigation to determine the likelihood of prosecution. According to Oregon troopers, denial investigations that are recommended for prosecution often involve convictions for felonies, misdemeanor crimes of domestic violence, and restraining orders. The troopers said that the strength of the case—including the adequacy and availability of proof the individual knew he or she was prohibited and falsified information— determines which cases are referred to prosecutors. Prosecutors from all three states said that they generally pursue cases against individuals who have indications of violence, including protection orders, domestic violence, and felony convictions. Individual prosecutors also identified specific prohibiting categories, based on public safety concerns, as their priorities for prosecution. An Oregon prosecutor said there is a good public safety argument for prosecuting denials based on domestic violence, mental health, and felony prohibitions when there is probable cause. However, for other prohibiting categories, such as being on probation or being a drug user, the officials said that prosecuting these denial cases is not very useful based on the amount of effort required to prosecute. A Virginia prosecutor cited domestic violence and protection orders as being prosecuted most often. A Pennsylvania prosecutor said that his county prosecutes most of the referrals it receives, with denials for multiple instances of driving under the influence, mental health, and domestic violence being the most common. State prosecutors we interviewed also said the cases they accept for prosecution may be influenced by the fact that certain types of cases are harder to prove. For example, they said that denials involving mental health, drug users, and misdemeanor crimes of domestic violence are often harder to prove, due in part to the difficulty in obtaining related records. The officials added that cases involving out-of-state and older convictions are also not prosecuted as often as other cases due to the difficulty in obtaining records. State prosecutors also said that there are certain circumstances where prosecutors are reluctant to pursue prosecution—such as cases where prohibitions occurred as a juvenile— where a firearms denial conviction would establish an adult criminal record where no criminal record had previously existed. According to the prosecutors we contacted, the criminal histories of denied individuals generally involved minor violations other than the prohibiting offense. Prosecutors said the criminal history of the individual can play a role in whether felony charges are filed, as opposed to misdemeanor charges, and for sentencing. For example, one Virginia prosecutor said that he will file felony charges for a denial case only for cases in which an individual was denied based on an active protection order or serious felony in his county. Another Virginia prosecutor said that there is consideration of both criminal history—convictions for violent felonies or misdemeanors, especially—as well as multiple arrests where no conviction resulted, when deciding whether to charge the denied person with a felony or misdemeanor. The prosecutor noted, however, that denial cases tend not to be violent felons or hardened criminals. According to a Pennsylvania prosecutor, almost all cases are ultimately charged with misdemeanors. The prosecutor noted, however, that the state recently brought multiple felony charges against a person who was denied a firearms purchase based on a murder conviction in 1973. These prosecutors also stated that they often try to plead denial cases whenever possible, as these cases often do not result in convictions when they go to trial. For example, a prosecutor in Pennsylvania told us about one denial case that went to trial where the jury found the denied person not guilty. The defendant was prohibited from purchasing a firearm based on convictions for repeatedly driving while under the influence, a misdemeanor with a potential prison term of 5 years in that state. The attorney said the jury believed that it was a pointless prosecution for a firearm’s denial offense. In Virginia, one prosecutor also described a case where a person was denied because of a mental health prohibition, and the person was found not guilty of the charges of falsifying information when attempting to purchase the firearm. He attributed this to a sympathetic defendant and jury reluctance to impose a criminal conviction on an individual without a criminal record. Further, state officials said that the penalties handed down when denied individuals are convicted tended to be minor. The Oregon prosecutors said that common penalties are fines (usually in the hundreds of dollars) and probation ranging up to 1 year depending on the criminal background of the denied person. According to a Pennsylvania state police official, in some instances the charges are pled down to a lesser violation, such as disorderly conduct, which result in an approximately $300 fine. The two Pennsylvania prosecutors we interviewed said that most denial prosecutions in their jurisdictions are pled down to misdemeanors, eliminating the need for a trial. According to the prosecutors, common penalties for misdemeanor convictions include probation and the requirement to pay court costs (upwards of $1,000 in one county). The prosecutors added that there is an occasional jail sentence for denied felons with substantial criminal records that can result in about 1 to almost 2 years in jail. Prosecutors across the states said that they try to plead cases—thus avoiding trial—whenever possible. One Pennsylvania prosecutor said that cases without strong evidence that cannot be pled are sometimes dropped because conviction would be difficult. Another Pennsylvania prosecutor said jury apathy in one strong case led to fewer denial cases. Virginia prosecutors said that most convictions are for misdemeanor charges and result in probation, fines, and court costs. They did say, however, that jail time has resulted for denied individuals with violent felony convictions. At the federal level, the number of firearms denial cases ATF has referred to its field divisions for investigation has increased substantially over recent years, which has placed a burden on field division resources. At the same time, field division resources have not increased, and the number of USAO prosecutions remains low—totaling 12 in fiscal year 2017. Assessing the extent to which ATF field divisions use warning notices for standard denials in lieu of prosecution would provide ATF headquarters greater awareness of agency-wide deterrence efforts, and better inform the agency as to whether any policy changes are needed. We recommend that the Deputy Director, Head of the Bureau of Alcohol, Tobacco, Firearms and Explosives assess the extent to which ATF field divisions use warning notices for standard denials in lieu of prosecution and determine whether any policy changes are needed. (Recommendation 1) We provided a draft of this report to DOJ for review and comment. DOJ concurred with our recommendation to ATF and provided technical comments, which we incorporated in this report where appropriate. We are sending copies of this report to the appropriate congressional committees, the Attorney General, the Deputy Director, Head of the Bureau of Alcohol, Tobacco, Firearms and Explosives, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512- 8777 or goodwing@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions are listed in appendix VII. Our objectives in this report were to (1) describe the extent to which federal and selected state law enforcement agencies investigate and prosecute firearms denial cases; (2) examine the challenges, if any, that federal and selected federal and selected state law enforcement agencies face in investigating and prosecuting firearms denial cases; and (3) describe the circumstances that lead to the investigation and prosecution of persons denied firearms. To describe the extent that federal and selected state law enforcement agencies investigate and prosecute firearms denials, we reviewed published reports regarding federal and state law enforcement efforts to investigate and prosecute firearms denials. For federal efforts, we requested data from the Federal Bureau of Investigation’s (FBI) National Instant Criminal Background Check System (NICS) regarding firearms denials provided to the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) by state and prohibiting category for fiscal years 2011 through 2017. We reviewed the internal controls in place for these data and determined that the data were reliable for our purposes. We requested and received data from the ATF Automated National Instant Criminal Background Check System Referral Application and the NForce Case Management System that showed how many of these denials, both standard and delayed, were forwarded from ATF’s Denial Enforcement NICS Intelligence (DENI) Branch to ATF field divisions, broken out by the prohibiting category of the denials. This provided us the total count of denials that ATF may investigate nationwide. To assess the reliability of these data we reviewed internal controls and the data quality assurance program of ATF. We determined that these data were reliable for the purpose of our reporting objectives. To examine federal prosecutions of denied persons, we requested information from ATF’s case management system that identified the NICS cases that were prosecuted, including those instances where a conviction was recorded. For state investigations and prosecutions, we selected the 13 states that perform their own background checks for all firearms transactions and searched their state police and state agency websites to identify the state’s background check units, or staff associated with this function and inquired about their policy regarding the investigation of persons denied firearms purchase. From these contacts we determined that 10 of these selected states did not perform investigations, while 3 point-of-contact (POC) states did investigate these denials. We analyzed data from the state police in Oregon, Pennsylvania and Virginia that identified the number of firearms denials recorded, the prohibiting category of the denials, and the number of these denials referred to state or local law enforcement for investigation. To assess the reliability of these data we interviewed knowledgeable individuals about the procedures for creating these data, and reviewed the internal controls in place within these systems. We determined that this data was reliable for the purpose of our reporting objectives. We spoke to state and local investigators and prosecutors in these states to discuss the investigative processes followed and the frequency of prosecution. Though these prosecutors tended to lack hard data on the number of these cases prosecuted and the outcome of these prosecutions, they were able to share their experiences prosecuting these cases, and to estimate the approximate quantity of these cases that have been addressed by their offices. We believe their experiences provide an understanding of the demands these prosecutions place on prosecutors’ offices and the value these prosecutions have for the jurisdiction in question. To describe the challenges, if any, federal and selected state law enforcement agencies face in investigating and prosecuting firearms denials, for federal denial investigations, we used the denial referral data provided by ATF to identify the field divisions that received the most denial referrals for investigation. We found that 6 field divisions received about 60 percent of the total ATF standard denial referrals over the 2011 through 2017 fiscal year period. These six field divisions also received more than half of the delayed denial referrals distributed to the 25 ATF field divisions over that time period. To assess the reliability of the referral data and the case data, we discussed the internal controls in place with knowledgeable officials and received a copy of the ATF quality assurance plan for review. We determined that the data was reliable for the purposes of our reporting objectives. We contacted officials in these six field divisions and discussed the investigative process for standard and delayed denial investigations as well as the challenges these investigations posed to the ATF staff in these field divisions. We also evaluated ATF’s investigative procedures and internal controls in place against the Standards for Internal Control in the Federal Government. We also discussed the types of cases that each field division referred to the appropriate USAO for prosecution, and were provided detailed examples from ATF headquarters of these denial cases for each of the six field divisions. We spoke to EOUSA officials to discuss the circumstances that would lead a USAO to prosecute a firearms denial and the challenges faced in these prosecutions. For state denial investigation challenges we spoke to state troopers and local law enforcement to learn about the procedures for conducting these investigations, the challenges that investigators face, and how and when these firearms denial investigations are referred to prosecutors. We also spoke with multiple prosecutors from each of these states and discussed their offices’ policies for accepting these denial cases, how often these cases were prosecuted in these localities and the general outcome of the cases. Though we did not speak to a representative sample of prosecutors across our selected states, we believe their views provide insights into the types of challenges faced by prosecutors in those states. To identify the circumstances that lead to investigations and prosecutions of firearms denials, we reviewed federal denial investigations by visiting the ATF DENI Branch, the office that uses USAO criteria to screen federal NICS denials for referral to ATF field divisions. There, we observed how denials are screened and discussed internal controls. We also requested USAO referral criteria from the 34 USAO districts that comprise the six ATF field divisions that received the most denial referrals from 2011 to 2017. We also analyzed standard and delayed denial referral data that captured the prohibited categories of the referrals to those field divisions. Further, we analyzed standard and delayed denial case data for the investigations that were referred for prosecution for fiscal years 2015 through 2017, and those that were ultimately prosecuted. To assess the reliability of the data we discussed the internal controls in place for entering the data and the quality assurance plan in place after data was entered. We determined that the data was reliable for the purposes of our reporting objectives. Officials from our 6 selected ATF field divisions also provided examples of denial cases investigated and referred for prosecution. These case examples included the specific circumstances that convinced the field division to investigate and refer the case for prosecution. For these federal denial prosecutions, we identified firearms denial cases in PACER and LEXIS for the years 2015, 2016 and 2017 to identify the specific circumstances of the cases prosecuted, the statutes used to charge the defendants, and the outcome of the cases. We also spoke to EOUSA officials and discussed the reasons that certain denial cases were prosecuted while thousands of others are not. For state denial investigation circumstances, we spoke with state and local investigators from the three selected states that investigate and prosecute denials and discussed the circumstances—to include state priorities, the prohibiting category and criminal history of those investigated—that resulted in state firearms denial to be referred for prosecution. We also spoke with multiple prosecutors from the same states and asked them to describe the characteristics of cases they are more likely to prosecute, as well as those they are less likely to prosecute. While we did not speak to a representative sample of investigators and prosecutors from these states, we believe their experiences and viewpoints provide insights into how these investigations and prosecutions are conducted and prioritized in these states. We conducted this performance audit from March 2017 through September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix includes information on the investigation and prosecution of individuals denied firearms purchases in the state of Oregon. In the state of Oregon, the Oregon State Police (OSP) Firearms Unit serves as the point of contact responsible for conducting background checks for firearms transactions. OSP’s Firearms Instant Check System (FICS) unit conducts criminal background checks to determine the eligibility of individuals attempting to transfer or purchase a firearm. Oregon law requires that gun dealers request that the OSP conduct a criminal history record check on the purchaser before a firearm is delivered to a purchaser. Dealers may submit these requests either by telephone or online. The FICS unit determines from criminal records and other available information whether the purchaser is disqualified under state or federal law from completing the transfer or is otherwise prohibited by state or federal law from possessing a firearm. Generally, for gun shows, Oregon law prohibits a transferor who is not a gun dealer from transferring a firearm unless the transferor requests a criminal background check prior to completing the transfer, receives a unique approval number from OSP indicating that the recipient is qualified to complete the transfer, and has the recipient complete the form for transfer of a firearm at a gun show, or completes the transfer through a gun dealer. Generally, for private firearms sales, Oregon law requires a transferor to complete the transfer of a firearm to a transferee through a gun dealer. Prior to the transfer of the firearm, both the transferor and the transferee must appear in person before a gun dealer, with certain exceptions, with the firearm and request that the gun dealer perform a criminal background check on the transferee. Process for Conducting a Background Check When a FICS background check is requested, Oregon law requires the seller to provide information about the firearm—so OSP can ensure it has not been reported stolen—and the purchaser in order to conduct a criminal history check. If the purchaser is qualified, a unique approval number is provided to complete the transaction. The dealer then enters this number on the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) background check form (Form 4473), and a thumbprint form, which is attached to the Form 4473 and retained for 5 years. By statute, if OSP is unable to determine if the purchaser is approved or denied within 30 minutes, OSP is required to notify the dealer and provide an estimate of when the check will be completed. These checks are placed in a pended/delayed status until sufficient record information can be obtained to complete the request. Federal law provides that if the FBI or state agency cannot complete a background check within 3 business days and make a final determination (i.e., proceed or denied), the Federal Firearms Licensee (FFL) may transfer the firearm pursuant to federal law, unless state law provides otherwise. Regardless of the FFL’s decision to transfer or not transfer the firearm, OSP will continue to research missing information in order to complete the background check request and provide either an approval number or notice that the person is denied for the FFL’s records. Typically, a case is placed in “pend” status because the record is missing information necessary to make a final determination. For example, domestic violence charges may not include details about the relationship needed to make a determination; state, local, or federal agencies may not have the resources to respond in a timely manner to requests for missing information; or it may be unclear whether prior charges were a felony or misdemeanor. When a transaction is denied, it is either labeled a Priority FICS Call, and is dispatched to the first available trooper or local law enforcement officer, or it is labeled a Cold FICS Call, and dispatched to the appropriate OSP office and next available trooper or local law enforcement officer. Priority calls are those that involve a convicted felon, a serviceable warrant, a stolen gun, or a restraining/stalking order. Oregon Executive Order 16-12 requires notification of certain officials after a transaction is denied if the prohibited person is on probation, on parole or post-prison supervision, subject to a court-issued release agreement or protective order, or subject to supervision by a Psychiatric Security Review Board. Figure 7 shows the process for purchasing a firearm from a dealer in Oregon. According to OSP officials, 95 to 97 percent of background checks are approved and less than 1 percent are denied within minutes of initiation, while roughly 3 to 5 percent are placed in pend/delay status. According to FICS officials, about 95 percent of pend/delay transactions are ultimately approved. A challenge phone line is available for individuals who have been denied or pended and wish to find out the reason, or to challenge a denial determination. The gun dealer may be asked to fax the ATF form 4473 and thumbprint form to the FICS Unit to assist in the challenge process. The purchaser is provided a reference number upon request to be used to appeal the determination through the Federal Bureau of Investigation’s (FBI) National Instant Criminal Background Check System (NICS) program. Oregon law prohibits individuals that have been convicted of certain offenses from possessing firearms. For example, Oregon prohibits the possession of a firearm by any person found to have mental illness and subject to a court order for treatment or commitment that prohibits them from purchasing or possessing a firearm as a result of mental illness. Finally, an individual is prohibited if while a minor, was found to be within the jurisdiction of the juvenile court for having committed an act which, if committed by an adult, would constitute a felony or misdemeanor involving violence and was discharged from the jurisdiction of the juvenile court within the last 4 years. Table 2 shows Oregon firearms denials by prohibiting categories. From 2011 through 2017, prohibited persons convicted of a felony was the most common category among firearm denials, followed by individuals on probation, individuals convicted of a violent misdemeanor in the previous 4 years, and wanted persons. The two largest prohibiting categories, convicted felons and individuals on probation, made up 32 percent and 24 percent, respectively, of all denials in 2016. In 2017, convicted felons fell to 29 percent and individuals on probation increased to 28 percent. Wanted persons, the fourth largest group in 2016, made up 10 percent of all denials that year, but fell to less than 5 percent of all denials in 2017. Total firearms denials fluctuated during that span from more than 2,400 denials in 2012, to 1,050 in 2017. From 2015 to 2017, denials declined each year. Total firearm transactions fluctuated as well, but generally increased during that span, increasing from less than 200,000 in 2011 to over 287,000 in 2017. From 2015 to 2017, denials fell by 45 percent while total transactions increased by 9 percent. Oregon has had the policy of investigating all persons denied a firearms purchase since 2014. Prior to 2014, OSP only investigated a small percentage of persons denied firearms purchases, with a priority placed on denied persons with an active warrant. According to OSP, the FICS unit provides the initial source of information in a denial investigation packet, which generally includes but is not limited to: FICS Transaction Report, which includes information regarding the denied transfer, the subject firearm, the point of sale location, the denied transferee, and the specific reason for denial; Oregon Criminal History data; Interstate Identification Index information; FBI’s NICS information; and Court records, police reports, or other records specific to the individual transferee and the denial in question. Before an investigation is started, OSP must determine whether the investigation should be conducted by OSP or local law enforcement. If the jurisdiction where the transaction took place has an agreement with OSP to receive training on firearms investigations, then the local law enforcement agency will conduct the investigation. Otherwise, OSP will conduct the investigation. In 2016, 26 percent of denial investigations were conducted by local law enforcement, up from 22 percent in 2015. The percentage covered by local law enforcement rose to 28 percent in 2017. In September 2017, three large local jurisdictions agreed to receive firearms denial referrals from OSP. For the last three months of 2017 the proportion of denials referred to local law enforcement was about 33 percent. OSP has five troopers dedicated full-time to FICS denial investigations in specific locations across the state. These troopers have essentially been pulled off of regular patrol duties and dedicated full-time to firearms denial investigations, according to OSP officials. These troopers cover the denials for most of the major metropolitan areas in Oregon. Except for the highest priority cases, the denial cases are tasked to the dedicated FICS troopers if the case falls within their geographical area of responsibility. According to Oregon officials, the five specialized troopers in the state investigated more than 1,100 of the almost 2,600 firearms denials referred for investigation in 2016. OSP troopers are required through OSP executive leadership directives to investigate each FICS case and submit the case, with all available facts and evidence, to the appropriate District Attorney’s Office for review, regardless of findings. With this information, the prosecutor makes an independent charging decision. When there is a recommendation included with the investigator’s report, it is most often to not file charges, either because the evidence indicates no crime was committed, or because there are specific mitigating circumstances involved in the case. Finally, OSP generates a report tracking denial investigations and the dispositions of any new criminal cases initiated after the investigation is completed. There is no current mechanism for reporting actions taken following an investigation and therefore OSP has no data regarding the total number of prosecutions accepted and convictions obtained. According to OSP officials, potential state level criminal conduct associated with denied firearm transfers are established in Oregon Revised Statutes Chapters 162 and 166. These crimes include but are not limited to: Or. Rev. Stat. § 162.075 False swearing. Or. Rev. Stat. § 166.250 Unlawful possession of firearms. Or. Rev. Stat. § 166.270 Possession of weapons by certain felons. Or. Rev. Stat. § 166.416 Providing false information in connection with a firearm transfer. Or. Rev. Stat. § 166.418 Improperly transferring a firearm. Or. Rev. Stat. § 166.425 Unlawfully purchasing a firearm. Or. Rev. Stat. § 166.435 Firearm transfers by unlicensed persons; requirements; exceptions; penalties. Or. Rev. Stat. § 166.470 Limitations and conditions for sales of firearms. Generally, Oregon’s Constitution requires the election by districts of a sufficient number of prosecuting attorneys (District Attorneys), who are the law officers of the state, and of the counties within their respective districts, and are to perform duties pertaining to the administration of law. District Attorney responsibilities may include, but are not limited to, representing the district in felony prosecutions, misdemeanor prosecutions, grand jury proceedings, mental commitment hearings, family abuse prevention hearings, and juvenile delinquency hearings. After a trooper completes an investigation, they submit a report to the District Attorney’s office. A prosecuting attorney then reviews the case and decides whether to charge an individual or individuals with a crime. When a case is not prosecuted, a rejection memo is provided to the trooper that submitted the report. According to two Oregon county prosecutors we interviewed, from late 2014 through 2017, their offices accepted about 140 of the more than 700 firearms denial investigations referred to their offices, with most prosecuted successfully. According to OSP officials, the most common types of cases resulting in convictions are related to misdemeanor domestic violence convictions, followed closely by prior felony convictions. The officials said that a new working group was created in 2016 to review gun relinquishment protocols in domestic violence cases, review outcomes and make recommendations to improve the safety of domestic violence survivors. With regard to sentencing, these prosecutors said common penalties in firearms denial cases include fines (usually in the hundreds of dollars), and probation ranging up to 1 year, depending on the criminal background of the denied individual. According to OSP, data is not collected on what prosecutions and convictions result from investigations by prohibited category. However, anecdotally, investigators and prosecutors said the prohibiting category of convicted felons is the most common among persons prosecuted for FICS denials. Prosecution outcomes are not automatically reported back to OSP; each county’s District Attorney must be contacted to obtain their agency’s respective case outcome data. Reporting disposition of firearms denial cases back to FICS is voluntary and can be done via an online form. The participating local agencies are requested to report back to OSP on the findings of their investigations; however, this reporting is voluntary and according to FICS officials, many agencies do not consistently submit this information. This appendix includes information on the investigation and prosecution of individuals denied firearms purchases in the state of Pennsylvania. Since 1998, Pennsylvania has served as a Point-of-Contact (POC) state for the National Instant Criminal Background Check System (NICS) operated by the Federal Bureau of Investigation (FBI). The Pennsylvania State Police (PSP) acts as the state point of contact for NICS for determining an individual’s eligibility to acquire, possess, transfer, and carry firearms. PSP conducts instant records checks using the Pennsylvania Instant Check System (PICS). PICS uses a voice response component and a web-based application that allows users to initiate firearm and license to carry (also known as concealed carry) background check requests. In Pennsylvania, a licensed importer, manufacturer or dealer is required to request by means of a telephone call that the PSP conduct a criminal history, juvenile delinquency history and a mental health check prior to selling or delivering any firearm to another unlicensed person. In addition, the firearm may not be transferred until the licensed importer, manufacturer or dealer has received a unique approval number for that inquiry from the PSP and recorded the date and number on the application or record of sale form. Generally, for any person that is not a licensed importer, manufacturer or dealer who wants to sell or transfer a firearm to an unlicensed person, the person must do so at the place of business of a licensed importer, manufacturer, dealer or county sheriff’s office and follow the procedures related to the transfer of a firearm for a licensed importer, manufacturer or dealer. Process for Conducting a Background Check At the point of purchase, once the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Form 4473 background check form is submitted, a PICS automated firearms check is initiated. The licensed firearms dealer contacts the PICS unit to determine if the applicant is eligible to purchase a firearm. The initial PICS check, which takes about 10 to15 minutes, searches the state’s repositories and NICS to identify any criminal history records or prohibitions. State databases searched as part of the check includes but are not limited to: Pennsylvania criminal history records; Juvenile records, contained within the criminal history record file; Mental Health File, containing involuntary commitment information and adjudication of incompetence; Pennsylvania Protection From Abuse File; Pennsylvania Wanted/Missing Persons File; and Bureau of Motor Vehicle records. If there is no record in the system for the applicant, the transaction can be approved automatically without any manual evaluation. The gun dealer is provided a unique approval number, which is required to authorize the transfer of the firearm. Any firearm purchase check that hits on a record is transferred to a PICS operator. According to PSP officials, if a PICS operator cannot immediately approve or deny a firearm purchase on the phone, the firearm purchase application is put in “research” status, and the PICS unit has 15 days to determine if the firearm purchase can proceed. During this period, the PICS staff attempts to obtain clarifying information from the state’s repositories. In many of these instances, the PICS staff needs to obtain the final disposition to an arrest, according to PICS officials. If after 15 days, PICS staff cannot make a determination, the applicant’s status becomes “undetermined” and the applicant is not allowed to purchase the firearm. If the automated check comes back with a red flag, the applicant is denied the purchase, and the information is sent to the PICS Challenge Unit, according to PSP officials. Generally, any person who is denied the right to receive, sell, transfer, possess or carry a firearm as a result of the procedures may challenge the accuracy of that person’s criminal history, juvenile delinquency history or mental health record pursuant to a denial by the instant records check by submitting a challenge to PSP within 30 days from the date of the denial. If challenged, PSP is required to conduct a review of the accuracy of the information forming the basis for the denial and has the burden of proving the accuracy of the record. Within 20 days after receiving the challenge, PSP is required to notify the challenger of the basis for the denial and provide the challenger an opportunity to provide additional information for the purposes of the review. PSP is to communicate its final decision to the challenger within 60 days of the receipt of the challenge with the decision containing all of the information which formed a basis for the decision. If after the challenge period the denial is upheld, the PICS Section sends the denied firearm application to the local police department or state police field station to investigate for falsification of the background check form and potentially refer the case for prosecution, according to PSP officials. In addition to handling firearms denial appeals, the Challenge Unit prepares case files for appeals through the Office of the Attorney General, testifies at appeal hearings when required, and attends and testifies at relief hearings for restoration of firearms rights, which are conducted in the various county courts of common pleas throughout the state. Finally, the Challenge Unit handles enforcement investigations involving individuals who knowingly and intentionally provide false information in the attempt to acquire a firearm in violation of Pennsylvania law. Figure 8 shows the process for purchasing a firearm from a dealer in Pennsylvania. According to PSP officials, in 2017, the PICS conducted about 1.1 million background checks for licensed firearm dealers, sheriffs and law enforcement throughout the state. Of these requests, 56 percent were approved within minutes by the system, while an additional 41 percent were approved during the initial check with operator assistance. The remaining 3 percent were placed in research status to obtain additional information. The Challenge Unit reversed 32 percent of all state background check denial challenges, which include licenses to carry, in 2017. According to Pennsylvania officials, the state of Pennsylvania does not have delayed denials, in which a firearm is transferred to an individual before determining whether the individual is prohibited from purchasing or possessing a firearm under state or federal law, and the purchase is subsequently denied. Generally, under Pennsylvania law, a licensed importer, manufacturer or dealer may not sell or deliver any firearm to an unlicensed person until having received a unique approval number from PSP. Pennsylvania law prohibits individuals that have been convicted of certain offenses from possessing firearms. For example, under Pennsylvania law, an individual who has been convicted of driving under the influence of alcohol or controlled substance on three or more separate occasions within a 5-year period is prohibited from possessing a firearm. One prosecutor told us that most of the denials in his county stemmed from second and third offense DUI convictions. Table 3 shows Pennsylvania firearms denials by prohibiting category. According to PSP officials, from 2014—when Pennsylvania began investigating denials—through 2017, the most common category was “persons convicted of a crime punishable by more than one year or a misdemeanor punishable by more than two years,” which comprised 42 percent of all denials. The second most common prohibiting category was mental health-related denials, at 16 percent. During this span, the number of denials increased from 2014 to 2016, only to decline in 2017. Since 2014, PICS policy has been to investigate all firearm denials, according to PSP officials. Prior to 2013, Pennsylvania used risk-based criteria to investigate a much smaller percentage of denials. Criteria used included violent felonies, drug trafficking, domestic violence, involuntary mental health commitment, active warrants, and straw purchases, among others. After PSP began investigating all firearms denials in 2014, according to PSP officials, the number of denials remained largely the same, but the number of investigations rose from 620 to 4,154. PSP officials told us they believe that the policy to investigate all denials acts as a deterrent, and that as prohibited individuals learn that investigations follow a denial these individuals will not attempt to purchase a firearm. According to PSP officials, as PICS refers all confirmed firearms denials for investigation, PICS does not use screening criteria to make determinations about whether firearms denials should be referred for investigation, or which denials are more likely to be accepted for prosecution. However, PICS does prioritize and determine which denials involve more serious criminal violations. According to PSP’s Firearms Unit staff, many referrals are not pursued based on the investigator’s assessment of the case or a prosecutor’s declination of the case when the referral was received. The PSP partners with local law enforcement to investigate firearms denials. Investigations are split up between the PSP and municipal police departments based on the jurisdiction of where the applicant submitted the firearms purchase. In 2016, 68 percent of cases referred for investigation were referred to state police, while 32 percent were referred to local law enforcement. In 2017, cases referred to local law enforcement increased to 62 percent, while 38 percent were referred to state police. If the subject is federally prohibited, a case may be referred to ATF for investigation, though based on our analysis this is relatively uncommon. In 2015 and 2016, 16 and 5 cases, respectively, were referred to ATF for investigation, while in 2017 one case was referred to ATF. Firearms denials are automatically funneled into a state investigative database where an investigation file is created according to PSP officials. When a denial is referred to a PSP troop for investigation, it is assigned to a state investigator if the state police has jurisdiction. If local law enforcement has jurisdiction, the PSP troop or PSP investigation staff will pass the referral to local law enforcement, according to PSP officials. Though some PSP units have investigators that specialize in firearm denials cases, generally denial investigations are assigned to the next available investigator, according to PSP officials. After an investigation is assigned, the investigator will review all provided documentation and verify that the subject is actually prohibited, according to PSP officials. The investigator will then pull an incident number and take steps to obtain necessary documentation. The investigator will then respond to the location of the violation, review the ATF Form 4473, and attempt to interview the employee who handled the attempted transaction. Finally, the investigator will locate and interview the subject of the denial. Cases are not prioritized for investigation because all firearms denials are investigated and are immediately assigned to an investigator upon receipt from PICS, according to PSP officials. While no denial categories are designated as priority, protective orders may be investigated more vigorously when there is an indication of violence, according to PSP officials. PSP does not track the length of time or resources required for conducting investigations of firearms purchase denials, according to PSP officials. Some jurisdictions may send the subject a letter to notify them that they are prohibited and under investigation, according to PSP officials. Other jurisdictions may send a letter only when prosecutors decide not to press charges, explaining to the recipient why they were denied, that they are not eligible to purchase a firearm, and that they could have been prosecuted for that reason. If the case is considered for prosecution, the investigator may meet with the District Attorney’s office and review the case for prosecutorial merit, according to PSP officials. If prosecution is sought, the investigator will type up the charges, process the subject, and arraign. If prosecution is approved, the investigator will notify the Firearms Unit and attend all court proceedings. The investigating unit is to inform PSP’s Firearms Unit of the outcome of the prosecution. According to prosecutors and PSP officials, denials are primarily referred for prosecution on the basis of the violations under: 18 Pa. Cons. Stat. § 4904 - Unsworn falsification to authorities 18 Pa. Cons. Stat. § 6111(g)(4) - Sale or transfer of firearms. 18 Pa. Cons. Stat. § 6105 - Persons not to possess, use, manufacture, control, sell or transfer firearms. According to PSP officials, in Pennsylvania, the District Attorney is the chief law enforcement officer for each county, and in most instances, cases are accepted for prosecution based on their discretion. As such, discretionary decisions vary by county, and there are no internal criteria. District Attorneys may also refer cases for prosecution to the State Attorney General due to lack of resources or a conflict of interest. Trials for firearms denials are extremely rare in Pennsylvania, according to prosecutors that we spoke with. Only a small percentage of referred denials are ultimately prosecuted, mostly due to the difficulty proving the suspect “knowingly and willingly” provided false information on the background check application, according to PSP officials. According to PSP officials, the conviction rate for firearms denial cases is about 10 percent of all denials referred for investigation. Based on our discussions with Pennsylvania prosecutors and PSP Firearms Division staff, most cases that are prosecuted result in misdemeanor pleas, rather than felony convictions, and common penalties are probation and fines. One county prosecutor told us that most convictions reduced to a misdemeanor are for “statement under penalty,” a third degree misdemeanor. Other cases might be pled down to misdemeanor disorderly conduct, which carries a $300 fine, according to PSP officials. According to county prosecutors that we spoke with, there is an occasional prison sentence for denied felons which can result in about 12 months in prison, and have resulted in sentences of almost 2 years in prison. One prosecutor told us the most frequent firearms prohibitor among convictions is a crime punishable by greater than 1 year in prison, such as a second or subsequent DUI conviction within 10 years, as many of those are graded as misdemeanors of the first degree, punishable by up to 5 years in prison. Typically, when asked, these individuals are unaware of the maximum penalty. Another state prosecutor we spoke with stated that the most prosecuted prohibiting categories also involved felony DUIs, as well as matters related to mental health and domestic violence. He added that, typically, more recent crimes are treated with more severity. One county prosecutor told us they prioritize prosecution of persons with a history of violent behavior. According to state police officials, upon conclusion of a prosecuted case, the investigator will document the disposition of the court. The entire investigative process is documented in a PSP incident report, which includes all interviews, queries made, investigative steps taken, and consultation with the District Attorney. The result of the investigation is then forwarded to the PSP investigation staff. Finally, an email summarizing the entire investigative process is sent to the Troop Crime Commander, Troop Administrative Manager, and the PSP Firearms Unit. Table 4 shows the disposition of firearms denial cases in Pennsylvania. While no annual statistics are recorded at the unit level, according to PSP officials, the state of Pennsylvania does track prosecutions resulting from firearms denials. In 2016, there were convictions in about half of the approximately 730 arrests made and about 6,500 denials referred for investigation. This represents a 39 percent increase in referrals over 2015, but a 67 percent decline in convictions and 68 percent decline in arrests. In 2017, the number of cases referred for investigation declined by 16 percent to about 5,500. Numbers for 2016 and 2017, including arrests, convictions, and prosecutions returned to numbers more representative of a typical year, according to PSP officials. Neither PSP nor the municipal departments track enforcement actions associated with investigations, or the specific sentencing results of investigations referred for prosecution beyond whether the investigation resulted in a conviction or declination. This appendix includes information on the investigation and prosecution of individuals denied firearms purchases in the state of Virginia. The Virginia Firearms Transaction Center (FTC), established in 1989, performs background checks at the point of sale by accessing state and federal databases. The FTC is the federally designated point of contact for the National Instant Criminal Background Check System (NICS), and is responsible for any investigations of firearms denials. The Virginia State Police (VSP) is responsible for conducting background checks using VCheck, Virginia’s Internet-based instant background check program, and for enforcing state and federal laws related to firearms purchases in Virginia. Under Virginia law, generally, a licensed dealer is required to obtain written consent and other identifying information— including but not limited to the name, date of birth, gender, race, citizenship, and Social Security number of a potential unlicensed purchaser—and provide the Department of State Police with this information and request criminal history record information by a telephone call to or other communication authorized by the State Police prior to selling, renting, trading, or transferring any firearm from the dealer’s inventory. The FTC provides personnel to conduct transactions onsite at anticipated high volume gun shows. Pursuant to Virginia law, the Department of State Police are to be available at every firearms show held in Virginia to make determinations, in accordance with the procedures set out for background checks required for the transfer of certain firearms, of whether a prospective purchaser or transferee is prohibited under state or federal law from possessing a firearm. One prosecutor we spoke with estimated that 25 percent of his illegal possession cases are from private sales at gun shows. At a gun show, when an individual attempts to purchase a firearm from a licensed dealer, the individual has to complete the state background check form (SP-65B) and the federal form (ATF 4473) and the FTC will conduct a full NICS check. Should the transaction be denied, the trooper may arrest the applicant depending on the reason for the denial. A Virginia prosecutor explained that in his jurisdiction when two private parties, neither of whom is a FFL, initiate a sale outside of the state transaction system, troopers may approach the purchaser and ask questions related to his or her eligibility to purchase a firearm. If the purchaser appears to be prohibited based on their testimony they may be subject to arrest as well. Process for Conducting a Background Check For transactions conducted through an FFL, the gun dealer submits a background check request to VSP via a toll free number or through an online application. Upon receipt of the request, VSP reviews the applicant’s criminal record information to determine if the applicant is prohibited from possessing or transporting a firearm by state or federal law. This check includes a review of an applicant’s entire criminal history, with no exclusion based on when the prohibiting offense occurred, according to FTC officials. For example, a recent prohibiting felony conviction is treated the same as the same conviction from decades ago. The applicant’s information is submitted to the FTC, where it is checked against databases at the federal and state level. Information is screened through NICS, National Crime Information Center, and the Virginia Criminal Information Network. The FTC provides an instant response to approve the transaction or place it in delayed, research status. Databases maintained by VSP and accessible by the Virginia Criminal Information Network include: Virginia’s wanted and missing persons files and protective orders; Virginia’s criminal history record files; and Virginia’s database of adjudications of legal incompetence and incapacity, and involuntary commitments to mental institutions. If the instant VCheck search indicates that the purchaser is approved, a unique computer-generated approval number that is required to transfer the firearm is provided to the dealer to complete the transaction. If a possible identification is made in the state or federal databases, the instant check produces a “delayed” status and a review is conducted to determine identification and eligibility of the purchaser. If a background check enters delayed status, the dealer will be requested to provide additional information about the purchaser. The dealer is to be notified immediately upon a final determination of eligibility. Pursuant to federal law, if the dealer has not been notified of a final determination by the end of the third business day, the dealer may complete the sale and transfer of the firearm. If a firearm is transferred prior to a final determination of eligibility, the dealer is requested to notify VSP immediately. When a delayed transaction is ultimately approved or denied, the FTC updates the dealer on the status of the transaction by telephone or online depending on how it was entered. When research efforts have been exhausted, if no clear reason to deny is identified, the transaction is approved. More than 99 percent of delayed applications are resolved before 30 days, according to FTC officials. All transactions that are not immediately approved and enter delayed status are assigned a priority level, based on the possible prohibiting category. Virginia investigates a subset of all denials based on risk, but prioritizes denials with active warrants, active protection orders, mental health issues, and certain felony convictions. According to VSP officials, a “priority 1” transaction is a possible hit for mental health reasons, a protective order, or a possible wanted subject. A “priority 2” transaction is any possible hit in NICS, such as convicted felons and out-of-state mental health cases. A “priority 3” transaction is any hit in the Interstate Identification Index, or Virginia’s Computerized Criminal History. According to VSP officials, convicted felons are normally a priority 3 unless they appear in the NICS database. A “priority 4” transaction is a hit from U.S. Immigration and Customs Enforcement, namely an alien or immigrant attempting to purchase a firearm, or a possible request for information, such as a Be On The Lookout or Alert notice, from a police agency or the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). According to VSP officials, while a transaction may be given an initial priority level, VSP moves some priority 3 and 4 hits to the front of the list, such as those involving recent felony indictments or a misdemeanor crime of domestic violence. Denial decisions undergo supervisory review to verify that the denial is correct and accurate, including a review of the police report to document findings, and to ensure that the prohibited person’s rights have not been restored, according to VSP officials. According to a VSP official, in practice, there are rarely any transactions in Virginia in which a firearm is transferred before the purchaser is determined to be ineligible, known as a delayed denial. According to an FTC official, there were no delayed denials in the previous 2 years. After 3 business days of conducting a background check, at which time firearms dealers may transfer a firearm, firearms dealers typically contact the FTC to notify them of the possible transfer, and ask whether to hold the gun for a few more days, according to VSP officials. If the FTC believes the purchaser will ultimately be denied, they will suggest the firearm be held, but it is up to the dealer to decide whether to do so. The FTC will also ask to speak with the purchaser to explain that if they accept the firearm and are later denied, VSP would have to send an officer to retrieve the firearm and charges may be filed against the purchaser for illegal possession of the firearm. VSP will then advise that if unsure of his or her prohibited status, the applicant should wait until the background check is complete. According to a VSP official, there are advantages to being a point-of- contact state, such as the ability to provide better service to citizens and to build relationships with FFLs that would not be possible as a NICS state. For example, VSP conducts training sessions and regular outreach to firearms dealers. VSP officials estimate that in 80 percent of cases involving firearms purchases on behalf of a prohibited person, sometimes referred to as “straw purchases,” leads come from dealers notifying VSP of something suspicious. According to VSP officials, straw purchases are treated very seriously, and can result in prison sentences of 5 to 10 years. Figure 9 shows the process for purchasing a firearm from a dealer in Virginia. Individuals denied the right to purchase a firearm may exercise a right of access, review, and correction of criminal history record information or institute a civil action within 30 days of the denial. Typically, after a denial, individuals are provided a Virginia Firearms Transaction Program brochure or referred to the VSP website for appeal procedures if they believe that they are not prohibited by state or federal law from purchasing or possessing a firearm. These individuals may contact the FTC via phone or e-mail to discuss the determination and provide additional information, provide fingerprinting to facilitate future transactions, request a correction of record, or institute a civil action. Denied persons may also challenge the accuracy of the record in writing to the FBI. Generally, individuals prohibited from either purchasing or possessing a firearm under Virginia law include, but are not limited to: any person who has been convicted of a felony, or adjudicated delinquent as a juvenile 14 years of age or older at the time of certain offenses (including murder, kidnapping, robbery by threat or presentation of firearms, or rape), or under the age of 29 who was adjudicated delinquent as a juvenile14 years of age or older at the time of the offense of a delinquent act which would be a felony if committed by an adult; any person who has been acquitted by reason of insanity and committed to the custody of the Commissioner of Behavioral Health and Developmental Services on a charge of treason, any felony or certain offenses punishable as a misdemeanor or certain ordinances of any county, city, or town similar to other outlined offenses; any person who is subject to certain protective orders; or any person who, within a 36 consecutive month period, has been convicted under Virginia law of two misdemeanor offenses for possession of controlled substance or marijuana without a valid prescription or order of a practitioner while acting in the course of his professional practice within 5 years from the date of the second conviction. The top prohibiting categories for individuals denied firearms purchases are felony convictions, which comprise 21 percent of all denials from 2011 through 2017, followed by drug-related prohibitions (19 percent), and mental health-related prohibitions (13 percent). One prosecutor we spoke with said that denials tend to not involve violent career criminals, and typically involve non-violent felonies, such as grand larceny, or involve drugs, and most occurred 20 years ago or more. From 2011 to 2017, the total number of denials increased from about 2,000 to about 3,600, an increase of almost 80 percent, while the total number of transactions increased from about 320,000 to about 500,000, an increase of more than 50 percent. Table 5 shows Virginia firearms denials by prohibiting category. Virginia has investigated firearms denials since its instant check system was introduced in 1989. Virginia does not refer all firearms denials for investigation, instead using risk-based criteria to refer a sub-set of prohibited categories for investigation. The following conditions trigger an automatic investigation for a firearms denial: felony conviction, including juvenile felony conviction, or felony indictment; misdemeanor crime of domestic violence; involuntary mental health treatment; nonimmigrant or illegal alien; and dishonorable discharge from the military. All Virginia denial investigations are handled by VSP with the exception of some fugitive and warrant-related, protective order, and mental health cases, as well as purchases at gun shows, which may involve municipal or local police, according to VSP officials. When FTC’s background check unit refers a case for investigation involving mental health or protective orders (both which are priority 1), the package is sent to both the VSP division and the local police department. According to VSP officials, to initiate a denial investigation, FTC sends requests for investigation to the VSP division headquarters, where it is referred to the appropriate section where the gun transaction took place, then to a state trooper to conduct the investigation. A file with a copy of both the federal background form, ATF Form 4473, and the state background check form, SP-65, is sent to the investigating trooper. The trooper then collects necessary information, such as information about the denial from VCheck, the criminal history of the purchaser, and court records. As necessary, the investigator verifies the information in the FTC file at the FFL, and interviews the subject. Part of the investigation involves trying to prove the purchaser “willingly and knowingly” answered falsely on the state and federal forms. Some VSP sections, typically those in more densely populated areas, have troopers dedicated exclusively to firearms denial investigations due to the higher volume of denials in those areas. According to VSP officials, every area may assign troopers to work exclusively on firearms denial investigations. However, most areas either cannot afford to remove a trooper from road coverage availability, or don’t investigate enough firearms denial cases to make it an effective use of resources. These sections assign denial investigations to troopers on a case by case basis. Prosecutors are often consulted as to whether a case will be prosecuted, where the prosecutor comments on the strength of the case based on the evidence available, according to investigators and prosecutors we spoke with. Investigators told us that prosecutors are generally more agreeable to taking on firearms denial cases involving recent felony convictions. They also said that if the case is accepted for prosecution, the trooper will obtain warrants to make an arrest. If the Commonwealth Attorney finds that the case does not have prosecutorial merit, the case is closed and the name of the Commonwealth Attorney consulted is put in the case management system report, according to a VSP official. Table 6 shows Virginia denial investigations from fiscal years 2011 through 2017. According to VSP officials, the time spent on denial investigations depends on the type of denial, location, and the information needed to bring charges or close the case. However, on average a case may involve about 4 hours of investigation. Officials in another division stated that in-state convictions can range from 4 to 6 hours of investigative work, while out-of-state convictions can take significantly more time, from 4 to 15 hours. Obtaining records from out of state can be difficult, and can take weeks or months. For example, one state requires a fee per conviction copy, which requires a check to be mailed, processed, and then for the files to be mailed back to the investigator. VSP officials told us that cases involving straw purchases can take 50 hours or more, however, these cases can result in longer prison sentences of 5 to 10 years. They added that additional time may be spent on search warrants, examining video from firearms stores, reviewing phone records, and conducting interviews. Further, denial investigations involving dishonorable discharges and mental health denials from out of state typically take the longest to investigate, in part because some states won’t release these records for the purpose of prosecution. Locating old felony documentation is also a challenge for investigators, according to VSP officials. According to investigators and prosecutors, the most common state statutes used for attempted firearm purchases include: Va. Code Ann. § 18.2-308.2:2(K) Willfully and intentionally making a materially false statement on the consent form; Va. Code Ann. § 18.2-308.1:3 (Usually prosecuted as an attempt) Prohibition against purchase or possession of a firearm by someone involuntarily admitted or ordered to outpatient mental health treatment; and Va. Code Ann. § 18.2-308.1:4 (Usually prosecuted as an attempt) Prohibition against purchase or transport of a firearm by someone subject to a protective order. Virginia’s chief prosecutors, the Commonwealth’s Attorneys, are elected at-large for a 4-year term. They are responsible for prosecuting all felonies and some misdemeanors, in addition to handling certain civil matters. According to a prosecutor we spoke with, Commonwealth’s Attorneys offices receive referrals for prosecution directly from state troopers. We interviewed Virginia investigators and prosecutors from four counties, including from localities where a high volume of firearms denial referrals occur. These prosecutors said they tend to work with Virginia troopers who specialize in denial investigations and report high prosecution rates for the cases they accept. One investigator with a high referral rate to prosecutors told us he benefits from operating in a high-volume, relatively compact jurisdiction, while in other parts of the state, investigators may have to cross several counties to gather the paperwork needed to establish a denial case, interview the purchaser, and make an arrest. According to a county prosecutor, a key component of successful prosecutions is a willing Commonwealth Attorney because charging decisions are at their discretion. An investigator and prosecutor that work together stated that in some jurisdictions, attorneys may not welcome firearms denial cases, while in other jurisdictions specialized investigators working with an attorney willing to prosecute these cases for public safety and deterrence value can yield a high prosecution rate. Two county prosecutors we spoke with said approximately 90 percent of firearms denial convictions are pled down to misdemeanors, and the penalties imposed tend to include probation or community service, but there is an occasional prison sentence. According to investigators and prosecutors we spoke with, some prosecutors prefer to avoid the use of fines while others may use them occasionally. Of the few cases that go to trial, according to prosecutors, most go before a judge rather than a jury, and typically involve a felon in possession of a firearm, resulting in a felony conviction and likely probation. Judges have discretion to reduce sentences, while juries are constrained to issuing more severe sentences if they find the defendant guilty, and typically hand down more prison time, according to prosecutors we spoke with. The severity of penalties handed down for firearms denials depends on the prohibited category, according to one county prosecutor. Another prosecutor said protective order violations tend to be easier to prosecute because the records are available and indicate a clear violation. Other cases where accurate records are difficult to obtain, such as juvenile denials, mental health denials, and out of state cases, prosecutions are difficult to prosecute, according to investigators and prosecutors. One prosecutor told us that a subject’s criminal history also makes a big difference as to whether they might receive a harsher or more lenient sentence. Several prosecutors we spoke with said that while prison sentences are rare, for a felon with a history of violence, sentences of 7 months to more than 24 months in prison have been imposed. One prosecutor told us they typically agree to no prison time on a felony conviction unless there are indicators of violence on the record, such as destruction of property or assault and battery. If a person has no record, the prosecutor would be far more willing to forego a felony and sometimes even a misdemeanor, and propose community service instead. One prosecutor questioned whether it makes sense to make a person a felon over a firearms denial; however, if a person has a consistent misdemeanor history of getting into trouble then they would be less convinced that this particular offense is out of character and may not make any non-felony offers. Prosecutors also may reduce the charges to disorderly conduct or providing false information to police during a plea in these cases to try to get a conviction, according to one prosecutor. Data on prosecutions, dismissals, and convictions resulting from investigations, are not collected at the state level, and are only accessible at the VSP divisions that conduct investigations and the courts where they are prosecuted, according to Virginia officials. Table 7 shows examples of firearms denial cases that our six selected ATF field divisions referred to U.S. Attorney’s Offices for prosecution during fiscal years 2014 through 2017, including the types of circumstances that could lead to referral for prosecution, the range of charges filed, and the severity of sentences that resulted. All the cases involved 18 U.S.C. § 922(a)(6), falsifying a background check form. While all were not ultimately charged under that statute, they were selected for investigation by ATF for that reason. Occasionally, federal and state law may prohibit similar types of criminal conduct, allowing both federal and state prosecutors to pursue the case. U.S. Attorney’s Offices may also refer a case to a state prosecutor that is not deemed appropriate for federal prosecution. In addition to the contact named above Eric Erdman (Assistant Director) and Anthony DeFrank (Analyst-in-Charge) managed this assignment. Daniel Kuhn, James Lawson, Billy Commons, Susan Hsu, Michele C. Fejfar, and Eric D. Hauswirth made significant contributions to the work.", "summary": "In 2017, approximately 25.6 million firearm-related background checks were processed through NICS, and about 181,000 of the attempted purchases at the federal and state levels combined were denied because the individual was prohibited from possessing a firearm under federal or state law. Individuals who certify that they are not prohibited from purchasing or receiving a firearm and are subsequently determined to be prohibited could be subject to investigation, and if prosecuted, a fine, imprisonment, or both. GAO was asked to examine firearms denials. This report (1) describes the extent to which federal and selected state law enforcement agencies investigate and prosecute firearms denial cases; (2) examines related challenges faced by these agencies; and (3) describes the circumstances that lead to investigations and prosecutions. GAO reviewed laws and regulations; analyzed federal and state data from 2011 through 2017; and interviewed officials from ATF headquarters, 6 of 25 ATF field divisions (the 6 that investigated the most cases), and the 13 states that process all NICS checks within their state. Results from state interviews are not generalizable but provide insights on state practices. Investigations and prosecutions. Federal and selected state law enforcement agencies that process firearm-related background checks through the National Instant Criminal Background Check System (NICS) collectively investigate and prosecute a small percentage of individuals who falsify information on a firearms form (e.g., do not disclose a felony conviction) and are denied a purchase. Federal NICS checks resulted in about 112,000 denied transactions in fiscal year 2017, of which the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) referred about 12,700 to its field divisions for further investigation. U.S. Attorney's Offices (USAO) had prosecuted 12 of these cases as of June 2018. At the state level, officials from 10 of 13 selected states said they did not investigate or prosecute firearm denials, some citing competing resource demands and the lack of statutes with which states prosecute as reasons. The remaining 3 states investigated a high proportion of firearms denials. One of the 3 states reported about 1,900 referrals for prosecution in 2017 and about 470 convictions. Challenges. ATF and selected states reported challenges in investigating and prosecuting firearms denials. Officials from six selected ATF field divisions said that investigating the increasing number of denial cases referred to field divisions—which increased from about 5,200 in fiscal year 2011 to about 12,700 in fiscal year 2017—has been time intensive and required use of their limited resources. ATF policy provides that field divisions may send “warning notices” to denied persons in lieu of prosecution, but ATF has not assessed field divisions' use of these notices, which could provide greater awareness of their deterrence value and inform whether any policy changes are needed. Officials from the Executive Office for United States Attorneys said that prosecuting denial cases can require significant effort and may offer little value to public safety compared to other cases involving gun violence. Selected state officials said that denial investigations can take law enforcement officials away from their core duties. State prosecutors said gathering evidence to prove individuals knew they were prohibited was a challenge. Types of cases. ATF field divisions investigate denial cases based on USAO criteria and generally only refer cases to USAOs for prosecution when aggravating circumstances exist, such as violent felonies or multiple serious offenses over a short period of time. Officials from two of three selected states refer all denial cases for investigation, while one state uses risk-based criteria for selecting cases that include conditions such as felony convictions and misdemeanor crimes of domestic violence. Prosecutors from these three states said they generally pursue cases that involve indications of violence, though individual prosecutors had differing priorities based on public safety concerns. GAO recommends that ATF assess the extent to which ATF field divisions use warning notifications as an enforcement tool, which would inform whether changes to policy are needed. DOJ concurred with GAO's recommendation.", "document_type": "gao"}
{"report": "To participate in federal student aid programs, postsecondary schools must be 1) certified by Education as eligible to participate in federal student aid programs, 2) accredited by a recognized accrediting agency— generally nongovernmental, nonprofit entities—and 3) authorized by the state in which the school is physically located. (See table 1.) FSA is responsible for ensuring that schools with access to federal student aid are eligible and capable of properly administering federal student aid funds, according to standards established by Education and authorized by the Higher Education Act. These standards include requirements for schools related to communication, personnel, policies, procedures and reporting, and adequate checks and balances in a system of internal controls, among others. FSA is also responsible for conducting ongoing financial oversight of schools that receive federal student aid. This includes reviewing annual financial statement audits to assess a school’s financial responsibility and providing additional oversight to schools that do not meet financial responsibility standards outlined in the Higher Education Act. Schools that participate in federal student aid programs generally are required to submit annual compliance audits. The compliance audit provides information that FSA can use to assess the school’s administration of federal student aid programs and to identify schools that require additional oversight because they do not fully comply with federal student aid administrative requirements. The OIG is required to assess the quality of school compliance audits and selects a sample to review each year. The OIG reviews the audit documentation to ensure that it supports the auditor’s opinions and that the audit results are reliable. According to agency guidance, FSA staff should refer compliance audits to the OIG for a quality review if they have any concerns about the quality of the audits. Both FSA and OIG officials stated that the OIG has primary responsibility for issues related to audit quality. When a school first applies to be certified to administer federal student aid, FSA will either approve the school for provisional certification— generally for 1 year—or deny certification (see fig. 1). Once a school is approved for initial certification and applies for recertification, FSA will provisionally or fully recertify the school, or deny certification. According to FSA procedures, FSA uses provisional certification for initial, or first time, applicants, as well as schools that are applying for recertification. Provisional certification is the only approval status available to new schools. In addition, FSA may decide to recertify a school provisionally if it determines that a school has not fully complied with federal student aid requirements. FSA prohibits provisionally certified schools from opening new campus locations or offering new programs without approval from FSA, and provisionally certified schools that are denied recertification have a less substantive appeals process than fully certified schools. Further, recertified schools in provisional status are subject to more FSA oversight than schools that are fully certified. FSA procedures allow for some discretion in determining for how long to certify a school. Provisional recertification generally lasts 1 to 3 years, while full recertification generally lasts 4 to 6 years. Education’s FSA regional staff draw information from a variety of sources during the certification process to assess a school’s capability to administer federal student aid. According to FSA documents, regional staff are to review information collected from schools and third parties, such as annual compliance audits conducted by independent auditors, among other information sources. FSA staff responsible for different functional areas, such as financial and compliance audits, accreditation status, and student loan default rates, compile and review information on schools, according to FSA procedures. FSA officials told us that these staff meet to discuss any potential program eligibility issues and to ensure that all information relevant to a school is considered before making a certification decision. FSA’s certification procedures outline some of the key information that regional staff should assess, some of which is relevant to both initial and recertification decisions, and some of which is specific to each type of certification process (see fig. 2). Documents and policies provided by schools: FSA regional staff are directed to review documents submitted by schools, including school catalogs, and certain school policies—such as admissions and student refund policies—that are relevant to assessing administrative capability. Proof of accreditation: School accreditors are responsible for applying and enforcing standards to help ensure that the education offered by schools is of sufficient quality to achieve program objectives. Accreditation of schools, which generally includes a site visit, takes place on a cycle that may range from every few years to as many as 10 years. Proof of state authorization: States are responsible for authorizing schools to offer postsecondary education and respond to student complaints. The process for approving schools varies from state to state and may include on-site visits. Audited financial statements: FSA regional staff are directed to review information in audited financial statements to assess schools’ financial health. Schools are required to have annual audited financial statements issued by an independent certified public accountant or a government auditor. Self-reported school data: FSA regional staff are instructed to review data on continual student enrollment in eligible academic programs and student withdrawal rates. Pre-certification review and school outreach: FSA staff are responsible for contacting school personnel to verify the school’s application information and discuss relevant policies, procedures, and other materials relevant to administering federal student aid. FSA visits to newly certified schools: After schools first apply and are provisionally certified, Education requires FSA regional staff to contact them within 3 months and schedule an on-site school visit. Schools cannot administer federal student aid until they are certified, so FSA has limited information on how newly certified schools are administering federal student aid programs. School visits provide FSA with an opportunity to collect additional information about a provisionally certified school’s ability to administer federal student aid. Some FSA regional staff we interviewed told us that on-site visits to newly certified schools provide valuable first-hand information about whether these schools are administering federal student aid in accordance with program requirements. If FSA regional staff find that a school is having difficulties administering federal student aid, FSA procedures direct regional staff to assist schools by providing clarification and guidance on federal student aid policies, recommending additional training for school officials, and helping schools develop a plan to track and report on their corrective actions, among other things. Compliance audits: FSA staff are directed to review information in compliance audits to determine if schools are complying with specific federal student aid requirements. Generally, compliance audits are required to be conducted annually by an independent auditor, and submitted with the school’s audited financial statements. Program reviews: FSA regional staff are also responsible for conducting program reviews, usually on site, which evaluate school compliance with federal requirements and can provide more in-depth information on schools than compliance audits, according to some FSA staff we interviewed. Generally, FSA selects schools for program reviews that it considers to be at risk for noncompliance, according to Education documents. FSA conducts approximately 250 to 300 program reviews per year, according to FSA documentation. FSA staff from all four of our selected regional offices told us they consider results from any recent program review in decisions about recertification and noted that such information, when available, is valuable for assessing schools’ administrative capability. Education data: FSA regional office staff are also directed to review data on student loan default rates. From calendar years 2006 through 2017, FSA approved most schools applying for certification to receive federal student aid, according to Education data. From 2006 through 2017, FSA approved 89 percent of schools new to administering federal student aid for provisional certification and denied 11 percent of schools overall (see fig. 3). Denial rates for initial certification were 11 percent for public and for-profit schools and 14 percent for nonprofit schools. For more information on 2006-2017 school certification outcomes by year, see appendix I. FSA regional staff responsible for reviewing school applications told us that schools are denied initial certification for issues such as a lack of accreditation, not offering eligible programs for federal student aid, or not meeting other statutory eligibility requirements. For example, FSA staff said that for-profit and vocational schools that apply for initial certification are required to provide an eligible program continuously for 2 years prior to their initial application. FSA staff may also advise schools that do not meet basic eligibility requirements not to apply, which could result in fewer initial certification denials overall. In addition, FSA staff said they often work with schools to address compliance problems, for example, by providing guidance on revising school policies that do not meet requirements, so that the schools are able to meet FSA’s certification requirements. From 2006 through 2017, 76 percent of schools applying for recertification were fully recertified, 21 percent were provisionally recertified, and 3 percent were denied recertification. Sixty-six percent of for-profit schools were fully recertified, 28 percent were provisionally recertified, and 6 percent were denied. In comparison, 86 percent of public schools were fully recertified, 14 percent were provisionally recertified, and fewer than 1 percent were denied. Nonprofit schools had rates similar to public schools, with 80 percent fully recertified, 18 percent provisionally recertified, and 2 percent denied (see fig 4). FSA staff from all four of our selected regional offices told us that they typically deny recertification when a school no longer meets eligibility requirements, such as losing accreditation, or when there is significant evidence of serious issues or massive wrongdoing, such as fraud. For example, managers in one regional office told us they denied recertification for a school because they had evidence that the school was accepting students without valid high school diplomas and referring them to diploma mills to boost enrollment. Staff in two FSA regional offices told us that they can also choose to fully recertify a school for shorter periods of time if they uncover issues related to administrative capability. For example, one regional staff member told us that when they found a school’s default rate for one federal student loan program had been high for the prior 3 years, the regional office decided to shorten the school’s full recertification period from 6 to 4 years, to allow FSA staff to review the school again sooner. FSA staff from all four of our selected regional offices told us that they provisionally certify schools for a variety of reasons, including when a school submits a late compliance audit or when a recent compliance audit indicates that a school could potentially have significant problems. Generally, schools in provisional certification status are subject to additional monitoring by FSA compared to schools that have been fully certified. For example, Education officials said that if they have concerns about a provisionally certified school’s student withdrawal rate, they can add provisional conditions requiring the school to submit monthly enrollment rosters for review. Staff in two FSA regional offices told us that in other cases, if they have concerns about how a school is administering federal student aid or suspected fraud, they can put a school on provisional status and conduct a program review to collect more detailed information on compliance with federal requirements. Education data also show that most schools remain in provisional status the first time they are recertified—62 percent from 2006 to 2017. In contrast, FSA staff fully recertified over three-quarters of schools that applied for recertification a second time during the same time period (see table 2). For more information on first and second recertification outcomes by school sector, see appendix II. We found that FSA generally relies on compliance audits as the only annual on-site review to determine how schools applying for recertification administer federal student aid. The audits provide direct information collected by independent auditors from school visits and file reviews examining how schools administer federal student aid and comply with program requirements. For example, OIG audit guidance directs auditors to check whether schools are distributing federal student aid to eligible students and accurately calculating student loan amounts. FSA officials and staff from all four of our selected regional offices said that compliance audits are a key source of information they use to assess a school’s administrative capability. Officials from Education’s OIG said that the quality of information in compliance audits varies substantially and depends on the auditor. The OIG has found quality problems in some of the compliance audits it selects—based on auditor and school risk factors—for its annual quality control reviews. Because the OIG selects higher risk audits to review, its reviews are more likely to detect problems, and OIG officials said they cannot make any conclusions about the overall prevalence of quality problems in compliance audits. However, our analysis of OIG quality review data found that of the 739 compliance audits reviewed by the OIG from fiscal years 2006 through 2017, the OIG passed 23 percent (173) and failed 59 percent (436). An additional 18 percent (130) passed with deficiencies. For example, across the 41 compliance audits it reviewed in fiscal year 2016, the OIG identified 264 quality deficiencies with the auditor’s work, according to our analysis of quality reviews provided by the OIG. The most frequently cited issues in these 41 audits were: reporting (24 audits), such as lack of evidence that the auditor tested whether the school correctly reported student enrollment status; student eligibility (20 audits), such as lack of evidence that the auditor verified student school attendance; and administrative capability (19 audits), such as lack of evidence that the auditor determined whether the accreditor had been notified about a change in school ownership within 10 days. FSA officials also identified quality issues with the compliance audits of some schools. FSA headquarters officials and staff we interviewed in several regional offices said they have seen schools with significant program review findings that had not been identified in annual compliance audits. FSA staff said they have referred some compliance audits to the OIG for quality reviews when they have had questions about the thoroughness of an audit. We also found a couple of examples in our review of school certification documents in which the findings identified in a school’s compliance audit were different from the findings identified by FSA in a program review of the same school covering the same time period. In one case, FSA staff said they probably would have fully recertified the school if they had relied solely on the compliance audit. Instead, they used the program review to determine that the school should be provisionally recertified. Compliance audits and program review findings are based on a sample of student records, and FSA staff said some differences in findings might be explained by differences in the records reviewed. FSA and OIG officials cited several issues that can affect the quality of compliance audits. FSA and OIG officials we interviewed said that some auditors conducting compliance audits have insufficient training in federal student aid, which contributes to audit quality problems. OIG staff also said that even if an auditor meets the general training hour requirements for auditors, the training content may not be relevant for federal student aid audits. In addition, FSA and OIG officials said some schools— particularly smaller schools—tend to hire less experienced auditors in order to save money, often resulting in poor quality audits. FSA officials in most selected regional offices said that additional training on federal student aid for auditors who are new to or unfamiliar with federal student aid could help improve audit quality. FSA and the OIG recently have taken steps to address audit quality and the information available to FSA staff when making certification decisions. These efforts include: Training for auditors: The OIG has taken steps to enhance training offered to auditors of schools’ administration of federal student aid and is exploring opportunities to provide additional training. In December 2017, the OIG and the American Institute of Certified Public Accountants cosponsored training for auditors on the OIG’s 2016 revised guide for audits of for-profit schools, and other topics related to auditing federal student aid. The training included discussion of common audit quality issues and areas of highest risk. According to an OIG official, about 200 auditors attended, and after the event, the American Institute of Certified Public Accountants and the OIG posted a recording of the training to their websites to make it available to additional auditors. In addition, OIG officials said they maintain an email account—listed on the OIG website—through which auditors can ask questions and receive responses. In March 2018, the OIG posted frequently asked questions and answers to the website. Timeliness of OIG quality reviews: Both FSA and OIG officials said that the OIG has recently renewed efforts to issue compliance audit quality reviews more quickly, after several years in which staffing shortages and other issues led to some delayed quality reviews. Guidance to schools on selecting an auditor: OIG officials said that at the 2017 FSA training conference for school financial aid staff, they presented to more than 400 participants about factors schools should consider when hiring an auditor. For example, they suggested that schools verify the licenses of certified public accountants, ask about the types of engagements an auditing firm has conducted, request and check references, check for any actions that may have been taken against a firm, and ask whether the auditor has been subject to a previous review by the OIG or another agency. FSA officials said they expected to invite the OIG to present at future FSA conferences, and OIG officials said they were seeking additional opportunities to share information on auditor selection with schools, including a planned presentation to an association of postsecondary schools. FSA working group: FSA recently established a working group to update its guidance to FSA staff on how to coordinate with the OIG to address compliance audits with quality problems. Among other topics, the working group has consulted with the OIG about how schools are made aware of the OIG’s findings regarding the quality of their audits. FSA officials said that OIG officials have provided input and feedback on FSA’s proposed changes to the guidance. Audit guide revisions: In addition, OIG and FSA staff told us they expected the OIG’s 2016 revisions to the for-profit school audit guide to improve the quality of compliance audits for those schools. They said that because the revised guide clarified some issues that were confusing to auditors in the previous guide issued in 2000, auditors might be better able to implement the guidance. The audit guide revisions include more testing and reporting requirements, clarified procedures, and guidance on issues such as fraud reporting and coordinating financial and compliance audits. The 2016 revisions first applied to audits for fiscal years beginning after June 30, 2016, and FSA began receiving those audits at the end of 2017. In addition, although the OIG’s 2016 revisions only apply to audits of for-profit schools, FSA officials said they planned to establish a working group to consider improvements to audit guidance for public and nonprofit schools. FSA and OIG efforts to address audit quality could help ensure that compliance audits provide accurate and reliable information on school administrative capability for Education’s recertification decisions. We provided a draft of this report to Education for review and comment. Education’s Office of Inspector General provided technical comments, which we considered and incorporated as appropriate. Education did not provide other comments on the report. We are sending copies of this report to the appropriate congressional committees; the Secretary of Education; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In addition to the contact named above, Michelle St. Pierre (Assistant Director), Kristy Kennedy (Analyst-in-Charge), Edward Bodine, Marissa Jones, and Mark Ward made significant contributions. Also contributing to this report were Susan Aschoff, Deborah Bland, Nagla’a El-Hodiri, Monika Gomez, Sheila R. McCoy, Jessica Orr, Mimi Nguyen, John Mingus, Rhiannon Patterson, Monica Savoy, Benjamin Sinoff, and Rosemary Torres Lerma.", "summary": "Education provided over $122 billion in grants, loans and work study funds to help students pay for college at about 6,000 schools in fiscal year 2017. Education is responsible for certifying that these schools are eligible for and capable of properly administering federal student aid funds. Schools are required to submit an annual compliance audit that provides information on schools' administrative capability, which Education considers in its school certification decisions. GAO was asked to review Education's process for certifying schools to receive federal student aid. This report examines (1) how Education certifies schools to administer federal student aid and how frequently schools are approved and denied certification; and (2) the role of compliance audits in the certification process and what, if any, steps Education has taken to address the quality of the audit information. GAO analyzed data on school certification outcomes for calendar years 2006-2017 (when GAO determined data were most reliable); reviewed data and reports summarizing Education's reviews of compliance audit quality for fiscal years 2006-2017; reviewed a non-generalizable sample of 21 school certification decisions from fiscal years 2015 and 2016, selected for a mix of decisions, school characteristics, and geographic regions; examined relevant federal laws, regulations, policy manuals and guidance; and interviewed Education officials. The Department of Education (Education) is responsible for evaluating a variety of information to determine whether a postsecondary school should be certified to administer federal student aid programs, and agency data show that it approves most schools that apply. Education procedures instruct regional office staff to review school policies, financial statements, and compliance audits prepared by independent auditors, among other things. Education can certify schools to participate in federal student aid programs for up to 6 years, or it can provisionally certify them for less time if it determines that increased oversight is needed—for example, when a school applies for certification for the first time or when it has met some but not all requirements to be fully certified. In calendar years 2006 through 2017, Education fully or provisionally approved most schools applying for initial or recertification to receive federal student aid (see figure). Note: Schools applying for certification for the first time and approved are placed in provisional certification. In deciding whether to certify schools, Education particularly relies on compliance audits for direct information about how well schools are administering federal student aid, and Education's offices of Federal Student Aid and Inspector General have taken steps to address audit quality. The Inspector General annually selects a sample of compliance audits for quality reviews based on risk factors, such as auditors previously cited for errors. In fiscal years 2006 through 2017, 59 percent of the 739 selected audits received failing scores. Audits that fail must be corrected; if not, the school generally must repay federal student aid covered by the audit. Because higher risk audits are selected for review, Inspector General officials said they cannot assess the overall prevalence of quality problems in compliance audits. These two Education offices have taken steps to improve audit quality. For example, the Inspector General offered additional training to auditors on its revised 2016 audit guide and provided guidance to schools on hiring an auditor, while Federal Student Aid created a working group to strengthen its procedures for addressing poor quality compliance audits. Education's efforts to address audit quality could help ensure that these audits provide reliable information for school certification decisions. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "In April 2017, we issued our latest report on NNSA’s 25-year plans to modernize the nation’s nuclear weapons stockpile and its supporting infrastructure. In that report, we identified two areas of misalignment between NNSA’s modernization plans and the estimated budgetary resources needed to carry out those plans, which could result in challenges to NNSA in affording its planned portfolio of modernization programs. First, we found that NNSA’s estimates of funding needed for its modernization plans sometimes exceeded the budgetary projections included in the President’s planned near- and long-term modernization budgets. In the near-term (fiscal years 2018 through 2021), we found that NNSA may have to defer certain modernization work beyond that time period to execute its program within the planned budget, which could increase modernization costs and schedule risks. This is a pattern we have previously identified as a “bow wave”—an increase in future years’ estimated budget needs that occurs when agencies are undertaking more programs than their resources can support. In the long-term (fiscal years 2022 through 2026), we found that NNSA’s modernization program budget estimates sometimes exceeded the projected budgetary resources planned for inclusion in the President’s budget, raising additional questions about whether NNSA will be able to afford the scope of its modernization program. Second, the costs of some major modernization programs—such as for nuclear weapon refurbishments— may also increase and further strain future modernization budgets. We are currently reviewing NNSA’s Fiscal Year 2018 Stockpile Stewardship and Management Plan. As we reported in April 2017, NNSA estimates of funding needed for its modernization plans sometimes exceeded the budgetary projections included in the President’s planned near- and long-term modernization budgets. We found that NNSA may have to defer certain modernization work planned for fiscal years 2018 through 2021 beyond its current 5-year planning period, called the Future-Years Nuclear Security Program (FYNSP). As we reported in April 2017, this is caused by a misalignment between NNSA’s budget estimates for certain nuclear modernization programs and the President’s budgets for that period. We concluded that this deferral could exacerbate a significant bow wave of modernization funding needs that NNSA projects for the out-years beyond the FYNSP and could potentially increase modernization costs and schedule risks. As we have previously reported, such bow waves occur when agencies defer costs of their programs to the future, beyond their programming periods, and they often occur when agencies are undertaking more programs than their resources can support. As NNSA’s fiscal year 2017 budget materials show, its modernization budget estimates for fiscal years 2022 through 2026—the first 5 years beyond the FYNSP—may require significant funding increases. For example, in fiscal year 2022, NNSA’s estimates of its modernization budget needs are projected to rise about 7 percent compared with the budget estimates for fiscal year 2021, the last year of the FYNSP, as shown in figure 1. The analysis in our April 2017 report showed that NNSA has shifted this modernization bow wave to the period beyond the FYNSP time frame in each of the past four versions of the annual Stockpile Stewardship and Management Plan. For example, in the Fiscal Year 2014 Stockpile Stewardship and Management Plan, NNSA’s budget estimates for its modernization programs increased from a total of about $9.3 billion in fiscal year 2018, the last year of the FYNSP, to about $10.5 billion in fiscal year 2019, the first year after the FYNSP—an increase of about 13 percent. Similar patterns showing a jump in funding needs immediately after the last year of the FYNSP are repeated in the funding profiles contained in the fiscal year 2015, 2016, and 2017 plans. As we have previously reported, deferring more work to future years can increase cost and schedule risks and can put programs in the position of potentially facing a backlog of deferred work that grows beyond what can be accommodated in future years. The Fiscal Year 2017 Stockpile Stewardship and Management Plan shows that NNSA’s overall modernization budget estimates for fiscal years 2022 through 2026—the out-years beyond the FYNSP—may exceed the projected funding levels in the President’s budgets for that period, raising further questions about the affordability of NNSA’s nuclear modernization plans. According to NNSA’s data, the agency’s estimated budget needed to support modernization totals about $58.4 billion for fiscal years 2022 through 2026, and the out-year funding projections contained in the President’s fiscal year 2017 budget for the same period total about $55.5 billion. The President’s out-year funding projections, therefore, are approximately $2.9 billion, or about 5.2 percent, less than NNSA estimates it will need over the same period. Despite this potential shortfall, NNSA’s Fiscal Year 2017 Stockpile Stewardship and Management Plan concludes that the modernization program is generally affordable in the years beyond the FYNSP for two reasons. First, the President’s out-year funding projections are sufficient to support NNSA’s low-range cost estimates for its modernization programs for fiscal years 2022 through 2026. Based on NNSA data, the low-range cost estimates for fiscal years 2022 through 2026 total approximately $54.4 billion and the President’s out-year funding projections total about $55.5 billion. Figure 2 illustrates data from the 2017 plan showing NNSA’s budget estimates in nominal dollars, including high- and low-range cost estimates for its modernization program, along with the out-year funding projections from the President’s fiscal year 2017 budget, for fiscal years 2022 to 2026. Second, NNSA concludes that its modernization programs are generally affordable beyond the FYNSP because the agency’s estimated modernization budget needs will begin to decrease in fiscal year 2027. In our April 2017 report, we noted that NNSA’s conclusion—that its modernization program is affordable because the President’s out-year funding projections fall within NNSA’s modernization cost ranges—is overly optimistic. This is because the conclusion is predicated on optimistic assumptions regarding the cost of the modernization program beyond the FYNSP, particularly for fiscal years 2022 through 2026. For the program to be affordable, NNSA’s modernization programs would need to be collectively executed at the low end of their estimated cost ranges. The plan does not discuss any options NNSA would pursue to support or modify its modernization program if costs exceeded its low- range cost estimates. In addition, the Fiscal Year 2017 Stockpile Stewardship and Management Plan states that the nominal cost of NNSA’s modernization program is expected to decrease by approximately $1 billion in fiscal year 2027. In that year, according to the 2017 plan, it is anticipated that NNSA’s estimated budgets for its modernization program will begin to fall in line with projections of future presidential budgets. However, as we noted in our April 2017 report, the decrease that NNSA anticipates in its modernization funding needs beginning in fiscal year 2027 may not be achievable if the projected mismatch between NNSA’s estimates of its modernization budget needs and the projections of the President’s modernization budget for fiscal years 2022 through 2026 is not resolved. This mismatch creates concerns that NNSA will not be able to afford planned modernization costs during fiscal years 2022 through 2026 and will be forced to defer them to fiscal year 2027 and beyond, continuing the bow wave patterns discussed above. Our April 2017 report identified misalignment between NNSA’s estimate of its budget needs and NNSA’s internal cost range estimates for several of its major modernization programs. Further, we found that the costs of some major life extension programs (LEP) may increase in the future, which may further strain NNSA’s planned modernization budgets. With respect to the alignment of NNSA’s estimate of its budget needs and NNSA’s internal cost range estimates, in April 2017 we found that NNSA’s budget estimates were generally consistent with NNSA’s high- and low-range cost estimates. However, for some years, NNSA’s low- range cost estimates exceeded the budget estimates for some of the programs, suggesting the potential for a funding shortfall for those programs in those years. Specifically, we found that the low-range cost estimates for the W88 Alteration 370 program and all LEPs discussed in our April 2017 report exceeded their budget estimates for some fiscal years within the 10-year time period from fiscal year 2017 to 2026. As we reported in 2013 and 2016, this misalignment indicates that NNSA’s estimated budgets may not be sufficient to fully execute program plans and that NNSA may need to increase funding for these programs in the future. Additionally, in April 2017 we found that the costs of two ongoing nuclear weapon LEPs and the W88 Alteration 370 program may increase in the future, based on NNSA information that was produced after the release of the fiscal year 2017 budget materials. These potential cost increases could further challenge the extent to which NNSA’s budget estimates support the scope of modernization efforts. The LEPs facing potential cost increases include: B61-12 LEP. An independent cost estimate for the program completed in October 2016 exceeded the program’s self-conducted cost estimate from June 2016 by $2.6 billion. W80-4 LEP. Officials from NNSA’s Office of Cost Policy and Analysis told us that this program may be underfunded by at least $1 billion to meet the program’s existing schedule. W88 Alteration 370. According to officials from NNSA’s Office of Cost Policy and Analysis, this program’s expanded scope of work may result in about $1 billion in additional costs. To help NNSA put forth more credible modernization plans, we recommended in our April 2017 report that the NNSA Administrator include an assessment of the affordability of NNSA’s portfolio of modernization programs in future versions of the Stockpile Stewardship and Management Plan, such as by presenting options (e.g., potentially deferring the start of or canceling specific modernization programs) that NNSA could consider taking to bring its estimates of modernization funding needs into alignment with potential future budgets. In commenting on our report, NNSA neither agreed nor disagreed with our recommendation. DOE also faces challenges with addressing its environmental liabilities and its cleanup mission. In February 2017, we added the federal government’s environmental liabilities to our High-Risk List. Specifically, we found that the federal government’s environmental liability has been growing for the past 20 years—and is likely to continue to increase—and that DOE is responsible for over 80 percent ($372 billion) of the nearly $450 billion reported environmental liability. Notably, this estimate does not reflect all of the future cleanup responsibilities that DOE may face. In addition, DOE has not consistently taken a risk-informed approach to decision-making for environmental cleanup, and DOE may therefore be missing opportunities to reduce costs while also reducing environmental risks more quickly. Our recent work in this area has also identified opportunities where DOE may be able to save tens of billions of dollars. As we have previously reported, DOE’s total reported environmental liability has generally increased over time. Since 1989, EM has spent over $164 billion to retrieve, treat, and dispose of nuclear and hazardous waste and, as of 2017, it had completed cleanup at 91 of 107 sites across the country (the 91 sites were generally viewed by DOE as the smallest and least contaminated sites to address). Despite billions spent on environmental cleanup, DOE’s environmental liability has roughly doubled from $176 billion in fiscal year 1997 to the fiscal year 2016 estimate of $372 billion. Between 2011 and 2016, EM spent $35 billion, primarily to treat and dispose of nuclear and hazardous waste and construct capital asset projects to treat the waste (see fig. 3 for EM’s annual spending and growing environmental liability). According to documents related to DOE’s fiscal year 2016 financial statements, half of DOE’s environmental liability resides at two cleanup sites: the Hanford Site in Washington State and the Savannah River Site in South Carolina. In its fiscal year 2016 financial statement, DOE attributed recent environmental liability increases to (1) inflation adjustments for the current year; (2) improved and updated estimates for the same scope of work, including changes resulting from deferral or acceleration of work; (3) revisions in technical approach or scope for cleanup activities; and (4) regulatory and legal changes. Notably, in recent annual financial reports, DOE has cited other significant causes for increases in its liability. Other causes have included the lack of a disposal path for high-level radioactive waste—because of the termination of the Yucca Mountain repository program—and delays and scope changes for major construction projects at the Hanford and Savannah River sites. We also reported in February 2017 that DOE’s estimated liability does not include billions in expected costs. According to federal accounting standards, environmental liability estimates should include costs that are probable and reasonably estimable, meaning that costs that cannot yet be reasonably estimated should not be included in total environmental liability. Examples of costs that DOE cannot yet estimate include the following: DOE has not yet developed a cleanup plan or cost estimate for the Nevada National Security Site and, as a result, the cost of future cleanup of this site was not included in DOE’s fiscal year 2015 reported environmental liability. The nearly 1,400-square-mile site has been used for hundreds of nuclear weapons tests since 1951. These activities have resulted in more than 45 million cubic feet of radioactive waste at the site. According to DOE’s financial statement, since DOE is not yet required to establish a plan to clean up the site, the costs for this work are excluded from DOE’s annually reported environmental liability. DOE’s reported environmental liability includes an estimate for the cost of a permanent nuclear waste repository, but these estimates are highly uncertain and likely to increase. In March 2015, in response to the termination of the Yucca Mountain repository program, DOE proposed separate repositories for defense high-level and commercial waste. In January 2017, we reported that the cost estimate for DOE’s new approach excluded the costs and time frames for site selection and site characterization. As a result, the full cost of these activities is likely billions of dollars more than what is reflected in DOE’s environmental liability. In our annual report on Fragmentation, Overlap, and Duplication in the federal government that we issued in May 2017, we reported that DOE may be able to save billions of dollars by reassessing the rationale for its March 2015 proposal. In June 2017, a bill that could result in renewed efforts to open the Yucca Mountain repository was introduced in the House of Representatives. In addition, according to the DOE Inspector General, DOE may have insufficient controls in place to accurately account for its environmental liabilities. In November 2016, the DOE Inspector General reported a significant deficiency in internal controls related to the reconciliation of environmental liabilities. Moreover, DOE does not consistently take a risk-informed decision- making approach to its environmental cleanup mission to more efficiently use resources. As our reports and those by other organizations issued over the last 2 decades have found, DOE’s environmental cleanup decisions have not been risk-based, and there have been inconsistencies in the regulatory approaches followed at different sites. We and others have pointed out that DOE needs to take a nation-wide, risk-based approach to cleaning up these sites, which could reduce costs while also reducing environmental risks more quickly. In 2006, the National Research Council reported that the nation’s approach to cleaning up nuclear waste—primarily carried out by DOE—was complex, inconsistent, and not systematically risk- based. For example, the National Research Council noted that the current regulatory structure for low-activity waste is based primarily on the waste’s origins rather than on its actual radiological risks. The National Research Council concluded that by working with regulators, public authorities, and local citizens to implement risk-informed practices, waste cleanup efforts can be done more cost-effectively. The report also suggested that statutory changes were likely needed. In 2015, a review organized by the Consortium for Risk Evaluation with Stakeholder Participation reported that DOE was not optimally using available resources to reduce risk. According to the report, factors such as inconsistent regulatory approaches and certain requirements in federal facility agreements caused disproportionate resources to be directed at lower-priority risks. The report called for a more systematic effort to assess and rank risks within and among sites, including through headquarters guidance to sites, and to allocate federal taxpayer monies to remedy the highest priority risks through the most efficient means. In May 2017, we reported on DOE’s efforts to treat a significant portion of the waste in underground tanks at the Hanford Site. We found that DOE chose different approaches to treat the less radioactive portion of its tank waste—which DOE refers to as “low- activity waste” (LAW)—at the Hanford and Savannah River Sites. At the Savannah River Site, DOE has grouted about 4 million gallons of LAW since 2007. DOE plans to treat a portion of the Hanford Site’s LAW with vitrification, but it has not yet treated any of Hanford’s LAW and faces significant unresolved technical challenges in doing so. In addition, we found that the best available information indicates that DOE’s estimated costs to grout LAW at the Savannah River Site are substantially lower than its estimated costs to vitrify LAW at Hanford, and DOE may be able to save tens of billions of dollars by reconsidering its waste treatment approach for a portion of the LAW at Hanford. Moreover, according to experts that attended a meeting we convened with the National Academies of Sciences, Engineering, and Medicine, both vitrification and grout could effectively treat Hanford’s LAW. Experts at our meeting also stated that developing updated information on the effectiveness of treating a portion of Hanford’s waste, called supplemental LAW, with other methods, such as grout, may enable DOE to consider waste treatment approaches that would accelerate DOE’s tank waste treatment mission, thereby potentially reducing certain risks and lifecycle treatment costs. We recommended that DOE (1) develop updated information on the performance of treating supplemental LAW with alternate methods, such as grout, before it selects an approach for treating supplemental LAW; and (2) have an independent entity develop updated information on the lifecycle costs of treating Hanford’s supplemental LAW with alternate methods. DOE agreed with both recommendations. Since 1994, we have made at least 28 recommendations related to addressing the federal government’s environmental liability to DOE and others and 4 suggestions to Congress to consider changes to the laws governing cleanup activities. Of these, 13 recommendations remain unimplemented. If implemented, these steps would improve the completeness and reliability of the estimated costs of future federal cleanup responsibilities and lead to more risk-based management of the cleanup work. We believe these recommendations are as relevant, if not more so, today. The Secretary of Energy has taken several important steps that demonstrate DOE’s commitment to improving management of contracts and projects. However, our recent work indicates that, even with these efforts, NNSA and EM continue to face long-standing challenges in several areas. As we noted in our 2017 high-risk report, DOE has made progress in its contract and project management. DOE continued to meet the criterion for demonstrating a strong commitment and top leadership support for improving project management. The Secretary of Energy issued two memorandums, in December 2014 and June 2015, that lay out a series of changes to policies and procedures to improve project management. These changes were included in DOE’s revised project management order, DOE Order 413.3B, issued in May 2016. As noted in the memorandums, some of these changes are in response to recommendations we made in prior years, such as requiring that projects develop cost estimates and analyses of alternatives according to our best practices. DOE also made significant efforts to improve its performance in monitoring and independently validating the effectiveness and sustainability of corrective measures and now partially meets our monitoring criterion for removing agencies and program areas from our High-Risk List. For example, the Secretary improved the department’s senior-level monitoring capability. The Secretary strengthened the Energy Systems Acquisition Advisory Board by changing it from an ad hoc body to an institutionalized board responsible for reviewing all capital asset projects with a total project cost of $100 million or more. The Secretary also created the Project Management Risk Committee, which includes senior DOE officials and is chaired by a new departmental position—the Chief Risk Officer. The committee is chartered to assess the risks of projects across DOE and advise DOE senior leaders on cost, schedule, and technical issues for projects. DOE’s recent efforts do not address several areas where it continues to have challenges including (1) acquisition planning for its major contracts, (2) the quality of enterprise-wide cost information available to DOE managers and key stakeholders, (3) program and project management, and (4) major legacy projects. As we have previously reported, during the acquisition-planning phase for contracts, DOE makes critical decisions that have significant implications for the cost and overall success of an acquisition. The size and duration of DOE’s management and operating (M&O) contracts—22 M&O contracts with an average potential duration of 17 years, representing almost three-quarters of DOE’s spending in fiscal year 2015—underscore the importance of planning for every M&O acquisition. In August 2016, we examined DOE’s use of M&O contracts. According to DOE officials we interviewed at that time, one of the primary reasons DOE uses M&O contracts is because they are easier to manage with fewer DOE personnel because they are less frequently competed and have broadly written scopes of work, among other attributes. We found that DOE did not consider acquisition alternatives beyond continuing its long-standing M&O contract approach for 16 of its 22 M&O contracts. We concluded that without considering broader alternatives in the acquisition planning phase, DOE cannot ensure that it is selecting the most effective scope and form of contract, raising risks for both contract cost and performance. We recommended in our August 2016 report that DOE establish a process to analyze and apply its experience with contracting alternatives. DOE generally concurred with our recommendation, and, in November 2016, issued updated guidance requiring acquisition planning documents to contain a thorough discussion of alternatives beyond simply extending or competing M&O contracts. We have previously reported that the effectiveness of DOE’s monitoring of its contracts, projects, and programs depends upon the availability of reliable enterprise-wide cost information on which to base oversight activities. For example, reliable enterprise-wide cost information is needed to identify the cost of activities, ensure the validity of cost estimates, and provide information to Congress to make budgetary decisions. However, we have found that meaningful cost analyses across programs, contractors, and sites are not usually possible because NNSA’s contractors use different methods of accounting for and tracking costs. NNSA developed a plan to improve and integrate its cost reporting structures; however, we found in January 2017 that this plan did not provide a useful road map for guiding NNSA’s effort. For example, we found that NNSA did not define strategies and identify resources needed to achieve its goals, which is a leading practice for strategic planning. NNSA’s plan contained few details on the elements it must include, such as its feasibility assessment, estimated costs, expected results, and an implementation timeline. We concluded that, until a plan is in place that incorporates leading strategic planning practices, NNSA cannot be assured that its efforts will result in a cost collection tool that produces reliable enterprise-wide cost information that satisfies the information needs of Congress and program managers. We recommended that NNSA develop a plan for producing cost information that fully incorporates leading planning practices. NNSA agreed with our recommendation. In addition, as we have previously noted, quality data are needed for DOE to manage its risk of fraud. The Fraud Reduction and Data Analytics Act of 2015 establishes requirements aimed at improving federal agencies’ controls and procedures for assessing and mitigating fraud risks through the use of data analytics. In a March 2017 report, however, we found that because DOE does not require its contractors to maintain sufficiently detailed transaction-level cost data that are reconcilable with amounts charged to DOE, it is not well positioned to employ data analytics as a fraud detection tool. We found that the data were not suitable either because they were not for a complete universe of transactions that was reconcilable with amounts billed to DOE or because they were not sufficiently detailed to determine the nature of costs charged to DOE. We concluded that, without requiring contractors to maintain such data, DOE will not be well positioned to meet the requirements of the Fraud Reduction and Data Analytics Act of 2015 and manage its risk of fraud and other improper payments. We recommended that DOE require contractors to maintain sufficiently detailed transaction-level cost data that are reconcilable with amounts charged to the government. DOE did not concur with our recommendation. This is because, according to DOE, the recommendation establishes agency-specific requirements for DOE contractors that are more prescriptive than current federal requirements and that its M&O contractors, not DOE, are responsible for performing data analytics and determining what data are needed to do so. DOE’s response to our recommendation is concerning because it demonstrates that DOE does not fully appreciate its responsibility for overseeing contractor costs. We believe that the use of data-analytic techniques by DOE employees could help mitigate some of the challenges that limit the effectiveness of DOE’s approach for overseeing M&O contractor costs. However, effectively applying data-analytics depends on the availability of complete and sufficiently detailed contractor data. Therefore, by implementing our recommendation DOE could take the important steps necessary to require contractors maintain sufficiently detailed transaction-level cost data that are reconcilable with amounts charged to the government. Although, as mentioned previously, DOE has taken some steps to improve program and project management, our recent work has shown that DOE continues to face several challenges in these areas. Specifically on program management: In November 2017, we found that NNSA had established program management requirements, such as developing cost and schedule estimates for its uranium, plutonium, tritium, and lithium programs and had established managers’ roles and responsibilities for these programs. However, officials told us that the programs had not fully met these requirements primarily because of staff shortages. We recommended that NNSA determine the critical staff skills it will need for these programs and use that information to address staffing shortages. NNSA agreed with our recommendation. In a September 2017 report on the NNSA’s uranium program, we found that NNSA had not developed a complete scope of work, a life- cycle cost estimate, or an integrated master schedule for the overall uranium program—all of which are considered leading practices—and it had no time frame for doing so. We reported that NNSA plans to do so for the specific Uranium Processing Facility project, as required by DOE’s project management order. However, NNSA had not developed a complete scope of work for key program requirements, including important and potentially costly repairs and upgrades to existing buildings in which NNSA intends to house some uranium processing capabilities. We concluded that because NNSA had not developed a complete scope of work for the overall uranium program, it did not have the basis to develop a life-cycle cost estimate or an integrated master schedule for the entire uranium program, which runs counter to best practices identified in GAO’s cost estimating and scheduling guides. We recommended that NNSA set a time frame for completing the scope of work, life-cycle cost estimate, and integrated master schedule for the overall uranium program. NNSA generally agreed with this recommendation and has ongoing efforts to complete these actions. In September 2017, we found that DOE’s program to re-establish the production of a plutonium isotope used to provide electrical power for the National Aeronautics and Space Administration missions had made progress but that it faced a number of technical and organizational challenges to meeting production goals. Specifically, we found that NNSA had not developed an implementation plan that identifies milestones and interim steps that can be used to demonstrate progress in meeting production goals. Our prior work has shown that plans that include milestones and interim steps help an agency to set priorities, use resources efficiently, and monitor progress in achieving agency goals. In our September 2017 report, we made three recommendations, including that DOE develop such a plan for its plutonium isotope production approach and that DOE assess the long-term effects of known production challenges and communicate these effects to the National Aeronautics and Space Administration. DOE concurred with our recommendations. Our prior work also demonstrates that DOE continues to face project management challenges in terms of having reliable performance data or conducting reliable analyses of alternatives. Specifically, In a January 2018 report, we found management challenges associated with NNSA’s life extension programs (LEP). For example, we found that NNSA had begun implementing requirements for using earned value management (EVM) —a tool used across industry and government for conducting cost and schedule performance analysis—in three LEPs, but it had not adopted a key best practice that could help the agency better manage risk for LEPs. Specifically, we found that NNSA does not require an independent team to validate the EVM systems used by NNSA’s contractors for LEPs against the national EVM standard. We concluded that without requiring validation of EVM systems, NNSA may not have assurance that its LEPs are obtaining reliable EVM data for managing their programs and reporting their status. We recommended that NNSA require an independent team to validate contractor EVM systems used for LEPs. NNSA agreed with our recommendation but stated that it already relies on a DOE project management office to independently validate contractor EVM systems. However, as we reported, DOE has not independently validated contractor EVM systems at six of the seven contractor sites that are responsible for conducting LEP activities. In May 2015, we reported that DOE initiated a new project, the Low Activity Waste Pretreatment System project, to accelerate waste treatment at Hanford. We found that this project was selected on the basis of similar past proposals without consideration of other potentially viable alternatives, contrary to requirements in DOE’s project management order. We also reported that DOE’s cost and schedule estimates for completion of the project were not conducted according to best practices and were therefore not reliable. We recommended that DOE re-evaluate alternatives and that it revise the cost and schedule estimates in line with best practices. DOE generally agreed with our recommendations but not some of the conclusions. In September 2017, amid concerns about project cost growth and schedule delays, DOE directed the contractor to conduct a new analysis of alternatives to identify options that will allow the project to be completed within current cost and schedule estimates. The department has suspended work on the project pending a decision on its design. We will continue to monitor EM’s management and oversight of its operations activities and DOE’s risk-informed cleanup decisions to address environmental liabilities, as part of our ongoing work for this subcommittee. As previously mentioned, in response to a 2015 memorandum on project management policies from the Secretary of Energy, DOE instituted project management reforms that—if fully implemented—will help ensure that future projects are not affected by the challenges that have persisted for DOE’s major legacy projects. Although DOE has taken action on certain major projects, we found that it has not consistently applied these reforms, and in particular, DOE has not applied such reforms to its largest legacy cleanup project at its Hanford Site in Washington state. As we found in a May 2015 report, DOE continues to allow construction of certain Waste Treatment and Immobilization Plant (WTP) facilities at DOE’s Hanford Site before designs are 90 percent complete. This contrasts with DOE’s revised project management order that now requires a facility’s design to be at least 90 percent complete before establishing cost and schedule baselines and cost and schedule estimates that meet industry best practices. The WTP is DOE’s largest project, and it has faced numerous technical and management challenges that have added decades to its schedule and billions of dollars to its cost. We recommended in May 2015 that DOE (1) consider whether to limit construction on the WTP until risk mitigation strategies are developed to address known technical challenges, and (2) determine the extent to which the quality problems exist, in accordance with its quality assurance policy, for the facilities’ systems that have not been reviewed to determine if additional vulnerabilities exist. However, as of September 2016, DOE had not yet implemented our recommendations. In December 2016, DOE announced that the cost estimate for one portion of the WTP—the part needed to treat a fraction of the low-activity waste—had increased to nearly $17 billion. We are currently in the process of completing a report on DOE’s WTP quality assurance program. Our previous work has found that NNSA also faces challenges implementing its nonproliferation programs under its Office of Defense Nuclear Nonproliferation (DNN), which implements nuclear nonproliferation programs worldwide. In recently completed reviews of DNN programs, we have identified several challenges NNSA faces in how it measures performance and conducts program management of these efforts. Specifically, In September 2017, we found that four DNN programs did not have schedule and cost estimates covering their planned life cycles and did not measure performance against schedule and cost baselines as is recommended by program management leading practices. NNSA officials explained that in general this is due in part to high levels of uncertainty in planning the selected programs’ work scope or schedules, particularly in working with partner countries; however, we noted that uncertainty should not prevent these programs from establishing more complete or longer-term estimates to account for the time and resources they need to achieve their goals and track their performance. In addition, we observed that DOE’s cost estimating guide, which applies to NNSA programs, describes approaches for programs to incorporate risk and uncertainty in estimates. But we found that DNN’s program management policy, which was updated in February 2017, did not outline requirements for programs to establish life-cycle estimates or measure performance against schedule and cost baselines. We recommended that DNN revise its program management policy to require DNN programs to follow life-cycle program management, such as requiring life-cycle estimates and measuring against baselines. Updating the DNN policy to include requirements and guidance on cost estimating and tracking performance against schedule and cost baselines could help ensure that NNSA managers and Congress have better information on (1) how much DNN programs may cost, (2) the time they may need to achieve their goals, and (3) how effectively they are being executed compared to plans. Although NNSA neither agreed nor disagreed with the recommendation, it indicated that it plans to take action to revise its policy to address the recommendation. In February 2017, we found that NNSA was unable to demonstrate the full results of its research and development technology for preventing nuclear proliferation. Specifically, we reported that DNN’s Research and Development program did not consistently track and document projects that result in technologies being transitioned or deployed. Furthermore, we found that DNN’s Research and Development project performance was difficult to interpret because the program’s performance measures did not define criteria or provide context justifying how the program determined that it met its targets. We concluded that this, in turn, could hinder users’ ability to determine the program’s progress. NNSA officials said that final project reports did not document their assessment of performance against baseline targets and that there was no common template for final project reports. We noted that documenting assessments that compare final project performance results against baseline targets for scope of work and completion date could enhance NNSA’s ability to manage its programs in accordance with these standards. We also concluded that more consistently tracking and documenting the transitioned and deployed technologies that result from DNN’s projects could also facilitate knowledge sharing within DNN. This would also provide a means by which to present valuable information to Congress and other decision makers about the programs’ results and overall value. We recommended that NNSA consistently track and document results of DNN Research and Development projects and document assessments of final project results against baseline performance targets. NNSA agreed to take actions in response to both recommendations. In June 2016, we found that the Nuclear Smuggling Detection and Deterrence (NSDD) program had developed a program plan but that the plan did not include measurable goals and performance measures aligned to the goals. As a result, we concluded that the NSDD program may not be able to determine when it has fully accomplished its mission and risked continuing to deploy equipment past the point of diminishing returns. We recommended that NSDD develop a more detailed pr ogram plan that articulates when and how it will achieve its goals, including completing key activities, such as the deployment of radiation detection equipment to partner countries. NNSA agreed with this recommendation. Chairman Upton, Ranking Member Rush, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions you may have at this time. If you or your staff members have any questions about this testimony, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Nico Sloss, Assistant Director; Nathan Anderson; Allison Bawden; Natalie Block; Mark Braza; Antoinette Capaccio; Jenny Chow; Ricki Gaber; Jonathan Gill; William Hoehn; Cristian Ion; Amanda Kolling; and Diane LoFaro. The following is a selection of GAO’s recent work assessing the Department of Energy’s management efforts, including at the National Nuclear Security Administration and at the Office of Environmental Management: Nuclear Weapons: NNSA Should Adopt Additional Best Practices to Better Manage Risk for Life Extension Programs. GAO-18-129. Washington, D.C.: January 30, 2018. Nuclear Weapons: NNSA Needs to Determine Critical Skills and Competencies for Its Strategic Materials Programs. GAO-18-99. Washington, D.C.: November 14, 2017. Nuclear Nonproliferation: NNSA Needs to Improve Its Program Management Policy and Practices. GAO-17-773. Washington, D.C.: September 28, 2017. Modernizing the Nuclear Security Enterprise: A Complete Scope of Work Is Needed to Develop Timely Cost and Schedule Information for the Uranium Program. GAO-17-577. Washington, D.C.: September 8, 2017. Space Exploration: DOE Could Improve Planning and Communication Related to Plutonium-238 and Radioisotope Power Systems Production Challenges. GAO-17-673. Washington, D.C.: September 8, 2017. Nuclear Waste: Opportunities Exist to Reduce Risks and Costs by Evaluating Different Waste Treatment Approaches at Hanford. GAO-17-306. Washington, D.C.: May 3, 2017. 2017 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-17-491SP. Washington, D.C.: April 26, 2017. National Nuclear Security Administration: Action Needed to Address Affordability of Nuclear Modernization Programs. GAO-17-341. Washington, D.C.: April 26, 2017. Department of Energy: Use of Leading Practices Could Help Manage the Risk of Fraud and Other Improper Payments. GAO-17-235. Washington, D.C.: March 30, 2017. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. Nuclear Nonproliferation: Better Information Needed on Results of National Nuclear Security Administration’s Research and Technology Development Projects. GAO-17-210. Washington, D.C.: February 3, 2017. Nuclear Waste: Benefits and Costs Should Be Better Understood Before DOE Commits to a Separate Repository for Defense Waste. GAO-17-174.Washington, D.C.: January 31, 2017. National Nuclear Security Administration: A Plan Incorporating Leading Practices Is Needed to Guide Cost Reporting Improvement Effort. GAO-17-141. Washington, D.C.: January 19, 2017. Program Management: DOE Needs to Develop a Comprehensive Policy and Training Program. GAO-17-51. Washington, D.C.: November 21, 2016. Department of Energy: Actions Needed to Strengthen Acquisition Planning for Management and Operating Contracts. GAO-16-529. Washington, D.C.: August 9, 2016. DOE Project Management: NNSA Needs to Clarify Requirements for Its Plutonium Analysis Project at Los Alamos. GAO-16-585. Washington, D.C.: August 9, 2016. Orion Multi-Purpose Crew Vehicle: Action Needed to Improve Visibility into Cost, Schedule, and Capacity to Resolve Technical Challenges. GAO-16-620. Washington, D.C.: July 27, 2016. Department of Energy: Whistleblower Protections Need Strengthening. GAO-16-618. Washington, D.C.: July 11, 2016. Combating Nuclear Smuggling: NNSA’s Detection and Deterrence Program Is Addressing Challenges but Should Improve Its Program Plan. GAO-16-460. Washington, D.C.: June 17, 2016. Modernizing the Nuclear Security Enterprise: NNSA’s Budget Estimates Increased but May Not Align with All Anticipated Costs. GAO-16-290. Washington, D.C.: March 4, 2016. Weapons System Acquisitions: Opportunities Exist to Improve the Department of Defense’s Portfolio Management. GAO-15-466. Washington, D.C.: August 27, 2015. Hanford Waste Treatment: DOE Needs to Evaluate Alternatives to Recently Proposed Projects and Address Technical and Management Challenges. GAO-15-354. Washington, D.C.: May 7, 2015. DOE and NNSA Project Management: Analysis of Alternatives Could Be Improved by Incorporating Best Practices. GAO-15-37. Washington, D.C.: December 11, 2014. Modernizing the Nuclear Security Enterprise: NNSA’s Budget Estimates Do Not Fully Align with Plans. GAO-14-45. Washington, D.C.: December 11, 2013. Commercial Nuclear Waste: Effects of a Termination of the Yucca Mountain Repository Program and Lessons Learned. GAO-11-229. Washington, D.C.: April 8, 2011. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "DOE's NNSA is responsible for managing the nuclear weapons stockpile and supporting nuclear nonproliferation efforts. DOE's Office of Environmental Management's mission includes decontaminating and decommissioning facilities that are contaminated from decades of nuclear weapons production. Over the last few years, GAO has reported on a wide range of challenges facing DOE and NNSA. These challenges contribute to GAO's continuing inclusion of DOE's and NNSA's management of major contracts and projects on the list of agencies and program areas that are at high risk of fraud, waste, abuse, and mismanagement, or are in need of transformation. GAO also recently added the U.S. government's environmental liabilities to this list. This statement is based on 25 GAO reports issued from April 2011 through January 2018 and discusses (1) challenges related to the affordability of NNSA's nuclear modernization plans; (2) challenges related to DOE's environmental liability; (3) the status of DOE's efforts to improve its management of contracts, projects, and programs; and (4) challenges facing NNSA's nonproliferation programs. The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) faces challenges related to the affordability of its nuclear modernization programs. In April 2017, GAO found a misalignment between NNSA's modernization plans and the estimated budgetary resources needed to carry out those plans. Specifically, GAO found that NNSA's estimates of funding needed for its modernization plans sometimes exceeded the budgetary projections included in the President's planned near-term and long-term modernization budgets by billions of dollars. GAO also found that the costs of some major modernization programs—such as for nuclear weapon refurbishments—may also increase and further strain future modernization budgets. GAO recommended in April 2017 that NNSA include an assessment of the affordability of its modernization programs in future versions of its annual plan on stockpile stewardship; NNSA neither agreed nor disagreed with that recommendation. DOE also faces challenges with addressing its environmental liabilities—the total cost of its cleanup responsibilities. In February 2017, GAO found that DOE was responsible for over 80 percent ($372 billion) of the U.S. government's estimated $450 billion environmental liability. However, this estimate does not reflect all of DOE's cleanup responsibilities. Notably, this estimate does not reflect all of the future cleanup responsibilities that DOE may face. For example, in January 2017, GAO found that the cost estimate for DOE's proposal for separate defense and commercial nuclear waste repositories excluded the costs and time frames for site selection and site characterization, and therefore full costs are likely to be billions of dollars more than DOE's reported environmental liabilities. To effectively address cleanup, GAO has made at least 28 recommendations to DOE and other federal agencies, which could reduce long-term costs as well as environmental risks more quickly. Of these, 13 remain not implemented. DOE has taken several important steps that demonstrate its commitment to improving contract and project management, but challenges persist. Specifically, DOE's revised project management order, issued in May 2016, made several changes in response to recommendations GAO made in prior years, such as requiring that projects develop cost estimates and analyses of alternatives according to our best practices. However, DOE's recent efforts do not address several areas, such as acquisition planning for major contracts and aspects of program and project management, where the department continues to struggle. GAO has made several recommendations related to these areas, and DOE has generally agreed with and begun to take action on most of them. Finally, NNSA faces challenges in implementing its nonproliferation programs. For example, in September 2017, GAO found that selected programs in NNSA's Office of Defense Nuclear Nonproliferation (DNN) did not measure performance against schedule and cost baselines, as recommended by program management leading practices because DNN's program management policy did not require programs to measure performance in this way. GAO recommended that DNN revise its policy to require programs to measure performance against cost and schedule baselines. NNSA indicated it plans to take action to revise its policy. GAO has previously suggested that Congress consider changes to the laws governing environmental cleanup activities. In addition to these suggestions, GAO has made numerous recommendations to DOE to address its management challenges.", "document_type": "gao"}
{"report": "The marketplace for primary and secondary ticketing services consists of several types of participants, including primary market ticketing companies, professional ticket brokers, secondary market ticket exchanges, and ticket aggregators (see table 1). Other parties that play a role in event ticketing, as discussed later in this report, include artists and their managers, booking agents, sports teams, producers, promoters, and operators of event venues (such as clubs, theaters, arenas, or stadiums). The private research firm IBISWorld estimated that online ticketing services (including ticketing for concerts, sporting events, live theater, fairs, and festivals) represented a $9 billion market in 2017, which included both the primary and secondary markets. Another private research firm, Statista, estimated that U.S. online ticketing revenues for sports and music events totaled about $7.1 billion in 2017. Estimates of the total number of professional ticket sellers vary. IBISWorld estimated that the U.S. market for online event ticket sales included 2,571 businesses in 2017. The Census Bureau lists more than 1,500 ticket services companies as of 2015 based on the business classification code for ticket services. However, this does not provide a reliable count of companies in the event ticketing industry because it includes companies selling tickets for services such as bus, airline, and cruise ship travel, among other services. However, a small number of companies conducts the majority of event ticket sales. In the primary ticket market—where tickets originate and are available at initial sale—Ticketmaster is the largest ticketing company. DOJ estimated that Ticketmaster (whose parent company is now Live Nation Entertainment) held more than 80 percent of market share in 2008, and it was still the market leader as of 2017. Less than a dozen other companies control most of the rest of the primary market, by our estimates. In the secondary market—where resale occurs—more companies are active, but StubHub estimated it held roughly 50 percent of market share as of 2017. According to Moody’s Investors Service, Ticketmaster, which in addition to its primary market ticketing has a U.S. resale subsidiary, held the second-largest market share as of 2016. The majority of ticket sales occur online, through a website or mobile application. Ticketmaster’s parent company reported that 93 percent of its primary tickets were sold online in 2017. The industry research group LiveAnalytics reported that in 2014, 68 percent, 50 percent, and 49 percent of people attending concerts, sporting events, and live theater or arts events, respectively, had recently purchased a ticket online. The event ticketing industry is not federally regulated. However, the Federal Trade Commission Act prohibits unfair or deceptive acts or practices in or affecting commerce, and FTC can enforce the act for issues related to event ticketing and ticketing companies. One federal statute specifically addresses ticketing issues—the BOTS Act, which prohibits, among other things, circumventing security measures or other systems intended to enforce ticket purchasing limits or order rules. The act also makes it illegal to sell or offer to sell any event ticket obtained through these illegal methods and granted enforcement authority to FTC and state attorneys general. The Department of Justice’s Antitrust Division plays a role in monitoring competition in the event ticketing industry. In 2010, Live Nation and Ticketmaster—respectively, the largest concert promoter and primary ticket seller in the United States—merged to form Live Nation Entertainment, Inc. DOJ approved the merger after requiring Ticketmaster to license its primary ticketing software to a competitor, sell off one ticketing unit, and agree to be barred from certain forms of retaliation against venue owners who use a competing ticket service. DOJ may also inspect Live Nation’s records and interview its employees to determine or secure compliance with the terms of the final judgment clearing the merger. State government agencies generally invoke state laws on unfair and deceptive acts and practices to address ticketing violations, according to representatives of two state attorney general offices. In addition, several states have laws that directly apply to event ticketing. For example, some states restrict the use of bots, several other states impose price caps (or upper limits) on ticket resale prices, and states including Connecticut, New York, and Virginia restrict the use of nontransferable tickets (tickets with terms that do not allow resale). Several states require brokers to be licensed and adhere to certain professional standards, such as maintaining a physical place of business and a toll-free telephone number, and offering a standard refund policy. The concert, sports, and theater industries vary in how they price and distribute tickets. Many tickets are resold on the secondary market, typically at a higher price. Among a nongeneralizable sample of events we reviewed, we observed that primary and secondary market ticketing companies charged total fees averaging 27 percent and 31 percent, respectively, of the ticket’s price. Ticketing practices for major concerts include presales and pricing that varies based on factors like location and the popularity of the performer. Tickets to popular concerts are often first sold through presales, which allow certain customers to purchase tickets before the general on-sale. Common presales include those for holders of certain credit cards or members of the artist’s fan club, although promoters, venues, or other groups also may offer presales. Credit card companies might provide free marketing for events or other compensation in exchange for exclusive early access to tickets for their cardholders. In addition, the artist usually has the option to sell a portion of tickets to its fan club. The venue’s ticketing company might want to limit the number of tickets allocated to fan clubs because the artist and manager can sell them through a separate ticketing platform, according to three event organizers we interviewed. There are no comprehensive data on the proportion of tickets sold through presales because this information is usually confidential. Industry representatives told us that 10 percent to 30 percent of tickets for major concerts typically are offered through presales, although it can be as many as about 65 percent of tickets for major artists performing at large venues. In addition, fan club presales usually represent 8 percent of tickets, although it may be more if the fan club presale uses the venue’s ticketing company, according to two event organizers. A large ticketing company told us that 10 percent of tickets may be available for fan club presales. A 2016 study by the New York State Office of the Attorney General found that an average of 38 percent of tickets were allotted to presales for the 74 highest-grossing concerts at selected New York State venues in 2012–2015. Additionally, venues, promoters, agents, and artists commonly hold back a small portion of tickets from public sale. “Holds” may be given or sold to media outlets, high-profile guests, or friends and family of the artist. They also may be used to provide flexibility when the seating configuration is not yet final. Promoters typically will release unused holds before the event, offering the tickets to the public at face value. As with presales, little comprehensive data exist on the proportion of tickets reserved for holds. Industry representatives told us holds typically represent a relatively small number of tickets—a few hundred for major events or perhaps a thousand for a stadium concert. The New York Attorney General report’s review of a sample of high-grossing New York State concerts found that approximately 16 percent of tickets, on average, were allocated for holds. Of those holds, many went to venue operators— for example, one arena with around 21,000 seats usually received more than 900 holds per concert held there. The average face-value ticket price in 2017 among the top 100 grossing concert tours in North America was $78.93, according to Pollstar. Concert ticket prices vary by city or day of the week, based on anticipated demand. The main parties involved in price setting are the artist and her or his management team, promoter, and booking agent. Venues sometimes provide input based on their knowledge of prevailing prices in the local market. Ticketing companies sometimes offer tools or support to help event organizers price tickets based on their analysis of sales trends. Concert ticket prices are generally set to maximize profits, according to event organizers. In terms of production costs, the artist’s guarantee—the amount the artist is paid for each performance—is usually the largest expense. The most popular artists can command the highest guarantees and their concerts also tend to have the highest production costs. However, for some high-demand events, tickets might be “underpriced”— that is, knowingly set below the market clearing price that would provide the greatest revenue. Artists may underprice their tickets for a variety of reasons, according to industry stakeholders and our literature review: Reputation risk. Artists may avoid very high prices because they do not want to be perceived as gouging fans. Similarly, event organizers told us some artists have a certain brand or image—such as working- class appeal—that could be harmed by charging very high ticket prices. Affordability. Some event organizers told us that artists want to price tickets below market to provide access to fans at all income levels. Sold-out show. Event organizers may price tickets lower to ensure a sold-out show, which can improve the artist and event organizers’ reputations and might help future sales. Audience mix. Some artists prefer to have the most enthusiastic fans at their shows, rather than just those able to pay the most, especially in the front rows, where tickets are generally the most expensive. Ancillary revenue. Better attendance through lower ticket prices can increase merchandise and concession sales, which can be a substantial source of revenue. In addition, event organizers may unintentionally underprice concert tickets because of imperfect information about what consumers are willing to pay. Tickets are also priced based on the prices and sales of the artist’s (or similar artists’) past tours, but demand can be hard to predict. Three event organizers told us that they have started using data from the ticket resale market to help set prices because that is a good gauge of the true market price. For major league professional sports, most decisions about ticket pricing and ticket distribution are made by the individual teams rather than by the league. According to the three major sports leagues we interviewed, their teams generally sell most of their tickets through season packages, with the remainder sold for individual games. Teams favor packages because they guarantee a certain level of revenue for the season. Representatives of two major sports leagues told us that their teams sold an average of 85 percent and 55 percent, respectively, of their tickets through season packages. One league told us that some of its teams increasingly offer not only full-season packages, but also partial-season packages. Another league said that in some cases, its teams might need to reserve a certain number of single game-day tickets—for example, as part of an agreement when public funds helped build a new stadium. Representatives of the three sports leagues we interviewed told us that their teams do not use presales and holds to the same extent as the concert industry. Although teams do not sell a significant number of tickets through presales, they might offer first choice of seats to season ticket holders or individuals who purchased tickets in the past. In terms of holds, one league told us it requires its teams to hold a small number of tickets for the visiting team and teams might also hold a few tickets for sponsors and performers. Another league told us it does not have league- wide requirements on holds, but its teams sometimes hold a small number of seats for media. Sports teams generally set their ticket prices to maximize revenue, based on supply and anticipated demand, according to the leagues we interviewed. Ticket prices typically vary year-to-year, based on factors such as the team’s performance the previous season and playing in a new stadium. Teams in many leagues use “dynamic pricing” for individual game tickets. They adjust prices as the game approaches based on changing demand factors, such as team performance and the weather forecast. The sports leagues with whom we spoke said teams’ pricing considerations are based in part on a desire to have affordable tickets for fans of different income levels. In addition, one league told us its teams rely heavily on revenues other than ticket sales, such as from television deals and sponsorships. Tickets for Broadway and national touring shows are distributed through direct online sales as well as several additional channels, including day- of-show discount booths, group packages, and call centers. Industry representatives told us that these shows use presales and holds, but not as extensively as the concert industry. At our request, a company provided us with data for five Broadway shows from June 2016 to September 2017. Approximately 13 percent of tickets in this sample were sold through presales, almost all of which were group sales (offered to particular groups prior to the general on-sale). Less than 1 percent of tickets in this sample were sold through presales offered to specific credit cardholders. Two shows in high demand held back an average of about 6 percent of tickets, while the other three shows held back about 1 percent. Producers and venue operators generally set prices, which are influenced by factors like venue capacity and the length of run needed to recoup expenses, according to industry representatives. According to the Broadway League, from May 22, 2017, to February 11, 2018, the average face-value price of a Broadway show was $123—an average of $127 for musicals and $81 for plays. Industry representatives told us they sell about 10 percent of tickets through day-of-show discount booths. Even the most popular shows typically offer steep discounts for a small number of tickets through lotteries or other means. Tickets for some of the most popular Broadway shows have sometimes been underpriced, according to Broadway theater representatives, who told us they feel obligated to maintain relatively reasonable prices and to allow consumers of varying financial resources to attend their shows. Additionally, some shows are underpriced because their popularity was not anticipated. At the same time, in recent years, producers have started charging much higher prices (sometimes exceeding $500) for premium seats or for shows in very high demand, which allows productions to capture proceeds that would otherwise be lost to the secondary market. Sometimes event organizers work directly with brokers to distribute tickets on the secondary market. For high-demand events, event organizers may seek to capture a share of higher secondary market prices without the reputation risk of raising an event’s ticket prices directly. For lower-demand events, selling tickets directly to brokers can guarantee a certain level of revenue and increase exposure (by using multiple resale platforms rather than a single ticketing site). In major league sports, teams sell up to 30 percent of seats directly to brokers, according to a large primary ticket seller. For Broadway theater, one company told us it regularly distributes about 8 percent to 10 percent of its tickets to a few authorized secondary market brokers. In the concert industry, it is unclear how often artists and event organizers sell tickets directly through the secondary market. Any formal agreements would be in business-confidential contracts, according to industry representatives, and artists may be concerned about disclosing them for fear of appearing to profit from high resale prices. All the artists’ representatives with whom we spoke denied that their clients sold tickets directly to secondary market companies. However, a Vice President of the National Consumers League has cited evidence of cases in which ticket holds reserved for an artist were listed on the secondary market. A representative of one secondary market company told us of two cases in which representatives of popular artists approached his company about selling blocks of tickets for upcoming tours. Ticket resale prices can be significantly higher than primary market prices and brokers account for most sales on major ticket exchanges. When tickets on the primary market are priced below market value—that is, priced less than what consumers are willing to pay—it creates greater opportunities for profit on the secondary market. Resale transactions typically occur on secondary ticket exchanges—websites where multiple sellers can list their tickets for resale and connect with potential buyers. Primary ticketing companies have also entered the resale market. For example, Ticketmaster allows buyers to resell tickets through its TM+ program, which lists resale inventory next to primary market inventory, and it owns the secondary ticket exchange TicketsNow.com. Generally speaking, the secondary market serves two types of sellers: (1) those who buy or otherwise obtain tickets with the intent of reselling them at a profit (typically, professional brokers), and (2) individuals trying to recoup their money for an event they cannot attend (or sports season ticket holders who do not want to attend all games or use resale to finance part of their season package). Representatives from the four secondary ticket exchanges with whom we spoke each said that professional brokers represent either the majority or overwhelming majority of ticket sales on their sites. Sellers set their own prices on secondary ticket exchanges, but some exchanges offer pricing recommendations. The exchanges allow adjustment of prices over time, and sellers can lower prices if tickets are not selling, or raise prices if demand warrants. Software tools exist that assist sellers in setting prices and in automatically adjusting prices for multiple ticket listings. However, resale prices are not always higher than the original price, and thus brokers assume some risk. In some cases, the market price declines below the ticket’s face value—for example, for a poorly performing sports team. The leading ticket exchange network has publicly stated that it estimates that 50 percent of tickets resold on its site sell for less than face value. However, we were unable to obtain data that corroborated this statement. Relatively few studies have looked at the ticket resale market for major concert, sporting, or theatrical events. Our review of relevant economic literature identified six studies that looked at ticket resale prices, one of which also looked at the extent of resale (see table 2). In general, the studies found a wide range of resale prices, perhaps reflecting the different methodologies and samples used or the limited amount of information on ticket resale. Additionally, the data reported are several years old and will not fully reflect the current market. For illustrative purposes, we reviewed secondary market ticket availability and prices for a nongeneralizable sample of 22 events. Among our selected events, the proportion of seats that were listed for resale ranged from 3 percent to 38 percent. In general, among the 22 events we reviewed, listed resale prices tended to be higher than primary market prices. For example, tickets for one sold-out rock concert had been about $50 to $100 on the primary market but ranged from about $90 to $790 in secondary market listings. For 7 of the 22 events, we observed instances in which tickets were listed on the resale market even when tickets were still available from primary sellers at a lower face-value price. For example, one theater event had secondary market tickets listed at prices ranging from $248 to $1,080 (average of $763), while a substantial number of tickets for comparable seats were still available on the primary market at $198 to $398. We did not have data to determine whether the resale tickets actually sold at their listed price. However, as discussed later, it is possible that some consumers buy on the secondary market, at a higher price, because they are not aware that they are purchasing from a resale site rather than the primary seller. Ticket fees vary in amount and type among the primary and secondary markets, and among different ticketing companies and events. Companies that provide ticketing services on the primary market typically charge fees to the buyer that are added to the ticket’s list price and can vary considerably. A single ticket can have multiple fees, commonly including a “service fee,” a per-order “processing fee,” and a “facility fee” charged by the venue. Most primary ticketing companies offer free delivery options, such as print-at-home or mobile tickets, but charge additional fees for delivery of physical tickets. Venues usually have an exclusive contract with a single ticketing company and typically negotiate fees for all events at the venue, though in some cases they do so by category of event. Ticketing companies and venues usually share fee revenue and in some cases, the venue receives the majority of the fee revenue, according to primary ticketing companies. In addition, event organizers told us that promoters occasionally negotiate with the venue to add ticket fees or receive fee revenue. Ticketing companies told us that they do not have a set fee schedule and amounts and types of fees vary among venues. Fees can be set as a fixed amount, a fixed amount that varies with the ticket’s face value (for example, $5 for tickets below $50 and $10 for tickets above $50), a percentage of face value, or other variations. While ticketing fees vary considerably, the 2016 New York Attorney General report found average ticket fees of 21 percent based on its review of ticket information for more than 800 tickets at 150 New York State venues. (In other words, a ticketing company would add $21 in fees to a $100 ticket, for a total price to the buyer of $121.) The 21 percent figure encompassed all additional fees, including service fees and flat fees, like delivery or order processing fees. We conducted our own review of ticketing fees for a nongeneralizable sample of a total of 31 concert, theater, and sporting events across five primary ticket sellers’ websites: In total, the combined fees averaged 27 percent of the ticket’s face value, and we observed values ranging from 13 percent to 58 percent. Service fees were, on average, 22 percent of the ticket’s face value, and we observed values ranging from 8 percent to 37 percent. Fourteen of the events we reviewed had an additional order processing fee, ranging from $1.00 to $8.20. Five of the events we reviewed had an additional facility fee, ranging from $2.00 to $5.10. Table 3 shows the ticketing fees observed for events sold through three of the largest ticket companies we reviewed. A sixth ticketing company that focuses on theater uses a different fee structure. It simply charges two flat service fees across all of its events ($7 for tickets below $50 and $11 for tickets above $50), plus a base per- order handling charge of $3. Additionally, we noted that the 6 sporting events we observed tended to have lower fees than the 16 concerts and 9 theater events we observed. Specifically, sporting events had total fees averaging roughly 20 percent, compared to about 30 percent for concerts and theater. Fees charged by secondary ticket exchanges we reviewed were higher than those charged by primary market ticket companies. Secondary ticket exchanges often charge service and delivery fees to ticket buyers on top of the ticket’s listed price. For 7 of the 11 secondary ticket exchanges we reviewed, the service fee was a set percentage of the ticket’s list price. Three of the remaining exchanges charged fees that varied across events, and the fourth did not charge service fees. Among the 10 exchanges that charged fees: In total, the combined fees averaged 31 percent of the ticket’s listed price, and we observed values ranging from 20 percent to 56 percent. Service fees, on average, were 22 percent of the ticket’s listed price, and we observed values ranging from 15 percent to 29 percent. In addition to the service fee, 8 of the 10 exchanges charged a delivery fee for mobile or print-at-home tickets, ranging from $2.50 to $7.95. Eight of the exchanges also charged a fee to the seller (in addition to the buyer), which was typically 10 percent of the ticket’s sale price. (For example, if a ticket sells for $100, the seller would receive $90 and the exchange $10.) Table 4 provides additional information about the fees charged by three of the largest ticket resale exchanges. The technology and other resources of professional brokers give them a competitive advantage over individual consumers in purchasing tickets at their face-value price. Views vary on the extent to which the use of holds and presales also affect consumers. Many ticketing websites we reviewed did not clearly display their fees up front, and a subset of websites— referred to as white-label—used marketing practices that might confuse consumers. Other consumer protection concerns that have been raised involve the amount charged for ticketing fees, speculative and fraudulent tickets, and designated resale exchanges (resale platforms linked to the primary ticket seller). Tickets to popular events often are not available to consumers at their face-value price, frequently because seats sell out in the primary market almost as soon as the venue puts them on sale. Brokers whose business is to purchase and resell tickets have a competitive advantage over individual consumers because they have the technology and resources to purchase large numbers of tickets as soon as they go on sale. Some consumer advocates, state officials, and event organizers believe that brokers unfairly use this advantage to obtain tickets from the primary market, which restricts ordinary consumers from buying tickets at face value. As a result, consumers may pay higher prices than they would if tickets were available on the primary market. In addition, some event organizers and primary ticket sellers have expressed frustration that the profits from the higher resale price accrue to brokers who have not played a role in creating or producing the event. Some professional brokers use software programs known as bots to purchase large numbers of tickets very quickly. When tickets first go on sale, bots can complete multiple simultaneous searches of the primary ticket seller’s website and reserve or purchase hundreds of tickets, according to the 2016 report by the New York State Office of the Attorney General. Seats reserved by a bot—even if ultimately not purchased— appear online to a consumer as unavailable. This, in turn, can make inventory appear artificially low during the first minutes of the sale and lead consumers to the secondary market to seek available seats, according to event organizers we interviewed. Bots can also automate the ticket-buying process, as well as identify when additional tickets are released and available for purchase. During its investigation of the ticketing industry, the New York State Office of the Attorney General identified an instance in which a bot bought more than 1,000 tickets to a single event in 1 minute. In addition, bots can be used to bypass security measures that are designed to enforce ticket purchase limits. For example, bots can use advanced character recognition to “read” the characters in a test designed to ensure that the buyer is human. Although the BOTS Act of 2016 restricts the use of bots, as discussed later, it is not yet clear the extent to which the act has reduced their use. Brokers have other advantages over consumers in the ticket buying process, according to the New York State Attorney General’s report and industry stakeholders we interviewed. For example, some brokers employ multiple staff, who purchase tickets as soon as an event goes on sale. In addition, brokers can bypass sellers’ limits on the number of tickets allowed to be purchased by using multiple names, addresses, credit card numbers, or IP (Internet protocol) addresses. Finally, to access tickets during a presale, some brokers join artists’ fan clubs or hold multiple credit cards from the company sponsoring the presale. Holds and presales may limit the number of tickets available to consumers at face value, according to some consumer groups, secondary market companies, and other parties. For example, the National Consumers League testified that events with many holds and presales sell out more quickly during the general on-sale because fewer seats are available. Consumers may not be aware that many seats are no longer available by the time of the general on-sale. In addition, the National Consumers League and New York State Office of the Attorney General said they believe the use of holds and presales raise concerns about equity and fairness. They noted that most holds go to industry insiders who have a connection to the promoter or venue, while credit card presales are available only to cardholders, who typically are higher- income. The New York State Attorney General’s office and seven event organizers with whom we spoke expressed concerns that presales benefit brokers, who take special measures to access tickets during presales. However, other industry representatives told us that holds and presales do not adversely affect consumers. They noted that for most events, the number of tickets sold through presales is not very high and few tickets are held back. Additionally, two event organizers and representatives from a primary ticketing company noted that most presales are accessible to a broad range of consumers—such as tens of millions of cardholders. As a result, the distinction between what constitutes a presale and a general on-sale can be slim. Furthermore, some fan clubs may try to limit brokers’ use of presales. For example, one manager said his artist’s fan club gives priority for presales to long-time fan club members. In addition, some industry representatives noted that holds and presales serve important functions that can benefit consumers. For example, credit card presales can reduce event prices by funding certain marketing costs, and fan club presales can offer better access to tickets to artists’ most enthusiastic fans, according to event organizers with whom we spoke. And as noted earlier, holds serve various functions, such as providing flexibility for seating configuration. Among the largest primary and several secondary market ticketing companies, we identified instances in which fee information was not fully transparent. We reviewed the ticket purchasing process for a selection of primary and secondary ticketing companies’ websites, including a subset of secondary market websites known as “white-label” websites. We reviewed the extent to which the companies’ websites clearly and conspicuously presented their fees and other relevant information and also recorded the point at which fees were disclosed in the purchase process. While FTC staff guidance states that there is no set formula for a clear and conspicuous disclosure, it states that among several key factors are whether the disclosure is legible, in clear wording, and proximate to the relevant information. In recent reports, the National Economic Council (which advises the President on economic policy) and FTC staff have expressed concern about businesses that use “drip pricing,” the practice of advertising only part of a product’s price up front and revealing additional charges later as consumers go through the buying process. For the 23 events we reviewed, the largest ticketing company—believed to have the majority of the U.S. market share—frequently did not display its fees prominently or early in the purchase process. For 14 of 23 events we reviewed, fees could be learned only by (1) selecting a seat; (2) clicking through one or two additional screens; (3) creating a user name and password (or logging in); and (4) clicking an icon labeled “Order Details,” which displayed the face-value price and the fees. For 5 of the 23 events, the customer did not have to log in to see the fees, but the fees were visible only by clicking the “Order Details” icon. For 4 of the 23 events, fees were displayed before log-in and without the need to take additional steps. Additionally, for 21 of the 23 events, ticket fees were displayed in a significantly smaller font size than the ticket price. For the five other primary market ticketing companies whose ticketing process we reviewed, fees were displayed earlier in the purchase process and more conspicuously. All five companies displayed fees before asking users to log in, including one that displayed fees during the initial seat selection process. Four of the five companies displayed fees in a font size similar to that of other price information and in locations on the page that were generally proximate to relevant information. However, for all companies we reviewed, fees and total ticket prices were not displayed during the process of browsing for different events. We found that two primary ticket sellers that sometimes offer nontransferable tickets (that is, tickets whose terms and conditions prohibit transfer) had prominently and clearly disclosed the special terms of those tickets—for example, that the buyer’s credit card had to be presented at the venue and the entire party had to enter at the same time. One company’s website displayed these conditions on a separate screen for 10 seconds before allowing the buyer to proceed. The other company’s website similarly displayed information about the tickets’ nontransferability on a separate page in clear language in a font size similar to the pricing information. We also reviewed disclosure of fees and other relevant information on the websites of 11 secondary ticket exchanges and resale aggregators. Two of the 11 websites displayed their fees conspicuously and early in the purchase process, and a third site did not charge ticketing fees. However, we found that ticket resale exchanges sometimes lacked transparency about their fees: Fees often were revealed only near the end. Seven of the 11 websites disclosed ticket fees only near the end of the purchase process, after the consumer entered an e-mail or logged in. Three of those seven websites displayed fee information only after the credit card number or other payment information was submitted. Fees sometimes were not conspicuously located. On 2 of the 11 websites, some fees were not displayed alongside the ticket price, but instead were only visible by clicking a specific button. Font sizes were small in two cases. On 2 of the 11 websites, fees were displayed in a font size significantly smaller than other text. In contrast to primary market sellers, secondary market sellers’ websites sometimes did not clearly disclose when a ticket was nontransferable. Disclosures on secondary market ticket exchanges varied, in part because individual sellers are permitted to enter their own descriptions about ticket characteristics. In some cases, the seller identified nontransferable tickets only by labeling them “gc,” indicating that a gift card would be mailed to the buyer to present for entry to the venue. To further review nontransferable ticket listings, we contacted the customer service representatives of three large secondary ticket exchanges to ask about a nontransferable ticket listing. We asked if we would have difficulty using the ticket because the venue’s or ticket seller’s website stated that only the original buyer could use the ticket, with one website noting that picture identification might be required for entry. Customer service representatives of all three exchanges told us that despite the purported restrictions, we would be able to use the ticket to gain entry to the venue. To confirm these statements, we contacted officials of these venues, who acknowledged that picture identification had not been required for entry at these events. Consumers may not always be aware they are purchasing tickets from a secondary market site at a marked-up price. In a 2010 enforcement action, FTC settled a complaint against Ticketmaster after alleging, among other things, that the company steered consumers to its resale site, TicketsNow, without clear disclosures that the consumer was being directed to a resale website. The settlement requires Ticketmaster, TicketsNow, and any other Ticketmaster resale websites to clearly and conspicuously disclose when a consumer is on a resale site and that prices may exceed face value, and to include “reseller price” or “resale price” with ticket listings. In addition, in January 2018, the National Advertising Division, a self-regulatory organization, asked FTC to investigate the fee disclosure practices of StubHub, a large secondary ticket exchange, alleging the company did not clearly and conspicuously disclose its service fees when it provides ticket prices. A subset of ticket resale websites, known as “white label,” used marketing practices that might confuse consumers. A company providing white-label support allows affiliates to connect its software to their own, uniquely branded website. This is sometimes also described as a “private label” service in the industry. For event ticketing, a ticket exchange offering white-label support provides the affiliate company with access to its ticket inventory and services, such as order processing and customer service. However, the affiliate uses its own URL (website address), sets the ticket prices and fees, and conducts its own marketing and advertising. Two secondary ticket exchanges operate white-label affiliate programs, under which affiliates create unique white-label websites for ticket resale. While we did not identify data on the number of white-label websites for event ticketing, they commonly appear in the search results for all types of venues, including smaller venues like clubs and theaters. White-label websites often market themselves through paid advertising on Internet search engines, appearing at the top of search results for venues. Thus, they are often the first search results consumers see when searching for event tickets. Figure 1 provides a hypothetical example of a white-label advertisement on a search engine, as well as the typical appearance of a white-label website. In 2014, FTC and the State of Connecticut announced settlements with TicketNetwork—one of the exchanges operating a white-label program— and two of its affiliates after charges of deceptively marketing resale tickets. The complaint alleged that these companies’ advertisements and websites misled consumers into thinking they were buying tickets from the original venue at face value when they were actually purchasing resale tickets at prices often above face value. According to the complaint, the affiliate websites frequently used URLs that included the venue’s name and displayed the venue’s name prominently on their websites in ways that could lead consumers to believe they were on the venue’s website. The settlements prohibited the company and its affiliates from misrepresenting that they are a venue website or that they are offering face-value tickets, and from using the word “official” on the websites, advertisements, and URLs unless the word is part of the event, performer, or venue name. They also required that the websites disclose that they are resale marketplaces, that ticket prices may exceed the ticket’s face value, and that the website is not owned by the venue or other event organizers. FTC staff with whom we spoke told us that they were aware that similar practices have continued among other white-label companies. Staff told us they have continued to monitor white-label websites and related consumer complaints. Additionally, a wide range of stakeholders with whom we spoke—including government officials, event organizers, and other secondary ticket sellers—expressed concerns about these websites. In particular, they were concerned that consumers confused white-label websites for the venue’s website. We reviewed 17 websites belonging to eight companies that were affiliates of the two secondary ticket exchanges offering white-label programs. We identified the sites by conducting online searches for nine venues (including stadiums, clubs, and theaters) on two of the largest search engines. All nine of the venues had at least one white-label site appear in the paid advertising above the search results. We observed the following: Sites could be confused with that of the official venue. Fourteen of the 17 white-label websites we reviewed used the venue’s name in the search engine’s display URL, in a manner that could lead a consumer to believe it was the venue’s official website. In addition, 5 of the 17 webpages used photographs of the venue and 11 provided descriptions of the venue (such as its history) that could imply an association with the venue. Fees were higher than on other resale sites. Total ticketing fees (such as “service charges”) for the white-label sites ranged from 32 percent to 46 percent of the ticket’s list price, with an average of 38 percent. These fees were generally higher than those of other ticket resellers—for example, the secondary ticket exchanges that we reviewed charged average fees of 31 percent. Fees were revealed only near the end. All 17 of the white-label sites we reviewed disclosed their fees late in the purchase process. Ticketing fees and total prices were provided only after the consumer had entered either an e-mail address or credit card information. Other key disclosures were present but varied in their conspicuousness. All 17 of the white label webpages we reviewed disclosed on their landing page and check-out page that they were not associated with the venue and were resale sites whose prices may be above face value. However, this information was presented in a small font or in an inconspicuous location (not near the top of the page) for the landing page of 7 of these webpages, as well as for the check-out page of 12 of the 17 webpages. Ticket prices were higher than other resale sites. The ticket price charged for the events we reviewed on the white-label sites had an average markup of about 180 percent over the primary market price. By comparison, other ticket resale websites we reviewed had an average markup of 74 percent. In some cases, we observed white-label websites selling event tickets when comparable tickets were still available from the primary seller at a lower price. For example, two white-label sites were offering tickets to an event for $90 and $111, respectively, whereas the venue’s official ticketing website was offering comparable seats for $34. (All figures include applicable fees). Given the significantly higher cost for the same product, some consumers may be purchasing tickets from a white-label site only because they mistakenly believe it to be the official venue’s site. As we discuss in greater detail later in this report, in February 2018, Google implemented requirements for resellers using its AdWords service that are intended, among other things, to prevent consumer confusion related to white-label sites. Ticket fees, the use of speculative tickets, ticket fraud, and designated resale exchanges have raised consumer protection concerns among government agencies, industry stakeholders, and consumer advocates. Consumer protection advocates, event organizers, and some government entities have expressed concerns about high ticket fees. For example, the New York State Attorney General’s report expressed concern about what it deemed high ticketing fees charged for unclear purposes. The report found that among online platforms, vendors of event tickets appeared to charge fees to consumers higher than most other online vendors. Concerns about high ticket fees also were frequently cited in 2009 congressional hearings on the proposed merger of Live Nation and Ticketmaster. In addition, some managers and agents we interviewed said their clients were dissatisfied with high ticket fees. Data we received from FTC’s Consumer Sentinel Network indicated 67 complaints related specifically to event ticket fees from 2014 through 2016. A 2010 analysis by the Department of Justice said that the dominance of one company, Ticketmaster, in the primary ticketing market allowed the company to maintain high ticket fees. The report noted high barriers to entry for competitors, among which were high startup costs, Ticketmaster’s reputation for providing quality service to venues, and long-term exclusive contracts that large venues typically sign with one ticketing company. In addition, with the merger, Live Nation Entertainment owns both the largest primary ticket seller (Ticketmaster) and largest promoter (Live Nation), and owns many large venues and an artist management company. When the ticketing company is owned by a major promoter, the combined firm’s ability to bundle ticketing services and access to artists would require competitors to offer similar services in order to compete effectively, according to the Department of Justice analysis. In an attempt to mitigate these potential effects, the Department of Justice final judgment on the merger prohibited certain forms of retaliation against venues that contract with other ticketing companies. In the United Kingdom, where the venue and promoter typically contract with multiple ticket sellers, ticket fees are lower than in the United States— around 10 percent to 15 percent of the ticket’s face value, according to a recent study. Industry experts generally consider the secondary market for event ticketing to be more competitive than the primary market because of the large number of brokers participating in the industry. According to a report by the National Economic Council, fees in this market may be higher than expected because of the lack of transparency described earlier—consumers may be more willing to accept high fees and less likely to comparison shop when fees are disclosed at the end of a multistep purchase process. An FTC staff report made a similar point regarding hotel resort fees, noting that fees disclosed only at the end of the shopping process could harm consumers by making it more difficult to comparison shop for hotels. In addition, consumers who are led to believe that white-label ticketing sites are the official venue site may accept high fees because they think they are buying tickets from the primary ticketing provider, according to two industry representatives with whom we spoke. The level of fees in the secondary market might also be affected by partnerships between the primary and secondary ticket seller. Primary ticketing companies sometimes offer resale options or use of designated resale exchanges (discussed below). The American Antitrust Institute has expressed the view that these relationships can reduce inventory for rival secondary sellers and in turn, can result in higher fees, as the primary ticket seller essentially has a monopoly over both markets. A speculative ticket refers to a ticket put up for sale by a broker when the broker does not yet have the ticket in hand, perhaps because the event has not yet gone on sale. Brokers may sell speculative tickets because they anticipate they will be able to secure the tickets (whether on the primary or secondary market) and sell them for a profit. The terms of use of most secondary sites we reviewed did not allow speculative ticket listings. However, while we were unable to identify comprehensive data on the extent of speculative tickets, numerous industry representatives told us that these sites commonly do not enforce this prohibition and listing of speculative tickets was widespread. One common form of speculative ticketing occurs when brokers offer tickets after a popular artist has announced a concert schedule but not yet begun ticket sales, according to industry representatives. Several concerns exist around the use of speculative ticketing: The buyer may never get the ticket. Speculative ticket listings can result in canceled orders if the broker cannot obtain the ticket, or cannot obtain it at a price that would result in a profit. For example, it was reported that many fans who thought they purchased tickets to the 2015 Super Bowl actually purchased speculative tickets that were subsequently canceled when the supply of tickets was less than expected. According to industry stakeholders, consumers can typically obtain a refund on a canceled order from the broker or secondary ticket exchange, but may still face disappointment, inconvenience, or costs associated with nonrefundable travel to the planned event. The seat location is not guaranteed. Brokers selling speculative tickets typically do not specify the seat number but rather promise a certain section of the venue, according to two event organizers we interviewed. However, because the broker does not have the ticket in hand, consumers can receive seats that are worse or different than advertised. Speculative ticketing can cause consumer confusion. One large ticket resale exchange told us it only allows trusted brokers to sell speculative tickets under certain circumstances and requires sellers to use a special label for these listings. However, we observed other exchanges that are less transparent and do not make clear to the buyer that the ticket is speculative. Consumers may not be aware that tickets have not officially gone on sale yet and eventually may be available on the primary market at a lower price. In its 2010 enforcement action against Ticketmaster and its resale exchange, TicketsNow.com, FTC alleged that the companies failed to tell buyers that many of the resale tickets advertised were being sold speculatively. The settlement required Ticketmaster and its affiliates to disclose if a ticket was being sold speculatively and to otherwise refrain from misrepresenting the status of tickets. FTC staff also sent warning letters to other resale companies that may have been at risk of violating the FTC Act with regard to their speculative ticketing practices. More recently, in 2015 a request by the New York State Attorney General resulted in three major ticket exchanges removing speculative ticket listings for an upcoming tour. Representatives from one of the secondary ticket exchanges told us that while it is difficult to determine if a listing is truly speculative, they have removed listings when they have information from event organizers to indicate that no one could have obtained the tickets. Posing as a consumer, a GAO investigator made 11 inquiries to customer service representatives of two of the largest secondary ticket exchanges about two events listing tickets that appeared to be speculative. The customer service representatives generally acknowledged that the sellers did not yet have the tickets in hand but assured the investigator that the tickets would be provided. Event tickets are sometimes fraudulent—for example, a fraudster may create and sell a counterfeit ticket or multiple copies of the same print-at- home ticket, according to industry representatives. We did not identify comprehensive data on the extent of ticket fraud. Event organizers with whom we spoke said that they typically only see a handful of fraudulent tickets at popular events, and do not consider fraudulent ticketing to be a widespread problem. A limited search of FTC’s Consumer Sentinel Network data identified relatively few complaints—an estimated 19 related to fraudulent tickets from 2014 through 2016. Industry representatives told us fraudulent tickets are most common for the most popular events and were often purchased on the street outside the venue or through an online classified advertisement. According to industry representatives, fraudulent ticketing is rare on secondary market exchanges, in part because the exchanges can take action against sellers of fraudulent tickets, such as fining them or banning them from future sales. The National Association of Ticket Brokers requires its members to have a policy to reimburse consumers for fraudulent tickets. Two secondary market participants told us the most common fraudulent activity they must address is credit card fraud by buyers rather than invalid tickets posted by sellers. Designated resale exchanges are resale platforms that are linked to the primary ticket seller. They are most commonly used in major league sports. The four major sports leagues have agreements with one of two ticketing companies that allow consumers to buy and sell tickets through an official “fan-to-fan” resale marketplace. In addition, some individual teams and venues have an agreement with a third company to use its resale platform, which uses paperless tickets and can facilitate ticket transfers from one consumer to another or restrict transfers altogether (such as with nontransferable tickets). On these exchanges, when a consumer lists a ticket for resale, the exchange electronically confirms the seller’s identity, then cancels the original ticket information (such as a barcode) and reissues the ticket with the new buyer’s name. According to the three sports leagues we interviewed, designated resale exchanges are generally optional—for example, the sports leagues allow brokers and consumers to use other secondary market exchanges as well. A representative of one of the major sports leagues told us the exchanges provide added revenue to teams because the teams receive some of the fee revenues from sales on the exchanges. The exchanges provide data on event attendees, which is valuable for marketing and security purposes, according to another sports league and a primary ticket seller. In addition, the exchanges can reduce resale fraud because the primary seller verifies the legitimacy of the ticket being resold, according to representatives of the three leagues we interviewed. However, some academics and secondary market participants we interviewed have argued that designated resale exchanges work to the detriment of consumers. For example, one academic study stated that a primary ticket seller’s dominance in the secondary market can substantially reduce inventory for rival secondary sellers, thus impeding competition in the resale market. The study stated that reduced secondary market competition, in turn, can result in higher fees. In 2015, a U.S. district court dismissed StubHub’s antitrust complaint against the Golden State Warriors basketball team and Ticketmaster, LLC. StubHub claimed that the Warriors’ and Ticketmaster’s exclusive resale agreement restricted secondary market competition for professional basketball tickets in the Bay Area, but the court disagreed. Some designated resale exchanges use price floors, below which consumers may not sell their tickets. One sports league’s exchange has a price floor of $6, while the exchanges of two other sports leagues do not have league-wide price floors, according to league representatives. In addition, we identified instances of individual teams using price floors on their designated resale exchanges. One purpose of price floors is to protect brand reputation, according to league representatives, because too low a ticket price can lessen an event’s perceived value. Price floors also can prevent the secondary market from undercutting a team’s own (primary market) price. However, some consumer organizations and secondary ticket sellers said price floors were unfriendly to consumers. Season ticket holders might be unable to sell tickets for low-demand games for which market prices were lower than the floors. In addition, the New York State Attorney General’s office noted that consumers might not always be aware that price floors were in effect and thus pay more than they would on another exchange. Policymakers, consumer organizations, and industry participants have proposed or implemented a number of ticket resale restrictions and disclosure requirements, each of which have or would have advantages and disadvantages for consumers or industry participants (see table 5). Event ticketing is not federally regulated and some industry participants are using or exploring technology and other market-based approaches to address concerns related to secondary market activity. Some event organizers make tickets to their events nontransferable—that is, the terms and conditions of the ticket prohibit its transfer from one person (in whose name the ticket is issued) to another. The prohibition can be enforced by requiring consumers to bring to the venue the credit or debit card used for purchase and matching photo identification. The consumer then receives a seat locator slip—akin to a consumer swiping a credit card at the airport to retrieve a boarding pass. At least three states—Connecticut, New York, and Virginia—have laws that restrict ticket issuers’ ability to sell nontransferable tickets. Similar legislation has been introduced in several other states in recent years. The use of nontransferable tickets, even in states where they are legal, is relatively uncommon. For example, an artist advocacy group told us that some events that use them make only the first several rows of seats nontransferable. One large primary ticketing company told us it estimated that less than 5 percent of its events used nontransferable tickets, while another told us nontransferable tickets represented less than 1 percent of its tickets in total. Almost all nontransferable tickets are for concerts; the practice is rare for sporting events and theater, according to industry stakeholders with whom we spoke. Advantages to consumers of nontransferable tickets stem from the goal of preventing ticket resale—allowing consumers to pay face value rather than a higher price on the secondary market. As described earlier, markups on the secondary market can be substantial. Proponents of nontransferable tickets, which include a large primary ticket seller and some event organizers and well-known artists, have argued they are an important tool that makes it harder for brokers to resell tickets for profit. We identified one empirical study on the effects of nontransferable tickets on resale activity. A 2013 study in the Journal of Competition Law and Economics compared two events using nontransferable tickets to comparable events using transferable tickets at the same venues. It found that nontransferable tickets significantly reduced resale and that prices were significantly higher for the relatively small portion of nontransferable tickets that were resold. In addition, there is anecdotal evidence that nontransferable tickets reduce the rate of resale and allow more consumers to access tickets at face-value prices. Many stakeholders told us that making tickets nontransferable reduces secondary market activity, with some stakeholders citing specific examples. For instance, the manager of a large concert venue that primarily uses nontransferable tickets told us that resale is much less common for the venue’s events than for comparable events at similar venues. Similarly, the manager of a major musical artist told us that using nontransferable tickets for a subset of seats on a recent arena tour resulted in minimal listings for those seats on the secondary market. The New York State Attorney General’s report stated that nontransferable paperless tickets “appear to be one of the few measures to have any clear effect in reducing the excessive prices charged on the secondary markets and increasing the odds of fans buying tickets at face value.” But, while we identified evidence that nontransferable tickets limit resale, they may not eliminate resale because sellers may not follow the restriction. However, other parties—including primary and secondary market participants, consumer advocacy groups, academics, and government agencies—have noted that nontransferable tickets can have the following disadvantages to consumers and adverse effects on markets: Financial loss. With nontransferable tickets, ticket buyers who cannot attend an event can lose the ability to recoup their money through resale. Inconvenience. Nontransferable tickets can be inconvenient because the buyer may need to present identification, a debit or credit card, or both, to gain entry to the venue, which can create delays. Nontransferable tickets also can create challenges for consumers buying tickets for others (including as a gift) because the ticket terms may require the buyer and original purchase card be present to gain entry. However, a primary ticket seller and a promoter told us these obstacles can be overcome—for example, through mechanisms allowing buyers to transfer tickets upon request, and by using processes to speed venue entry (such as automated kiosks). Economic inefficiency. When nontransferable tickets are priced below the prevailing market price in the primary market, this creates excess demand, and tickets are sold without regard to consumers’ willingness to pay. Traditional economics maintains that an efficient market would result in tickets going to those willing to pay the highest price, which nontransferability inhibits by restricting a secondary market. In addition, some academics have noted that consumers may be less willing to buy nontransferable tickets because they do not offer the “insurance” that comes with the ability to resell them. Potential impingement on property rights. Some consumer groups and secondary market participants have argued that nontransferable ticket policies impinge on consumers’ property rights. These parties argue that once consumers buy a ticket, they should be able to do whatever they like with it. Effect on competition. The New York State Attorney General’s office and some economics literature have cautioned that use of nontransferable tickets by primary ticketing companies can impede competition in the secondary market by making these companies’ own resale exchanges the only way to transfer tickets. Several states have caps on the price at which tickets can be resold, while others have repealed caps and some studies have questioned their enforceability. For example, Kentucky generally prohibits the resale of event tickets for more than either face value or the amount charged by the venue, and Massachusetts prohibits resale by brokers of most tickets for more than $2 above face value, with the exception of relevant service charges. New Jersey allows a maximum markup of 20 percent or $3 (whichever is greater) for nonbrokers and a maximum markup of 50 percent for registered brokers, but does not limit resale prices for nonbrokers for sales over the Internet. A number of other states— including Minnesota, Missouri, New York, and Connecticut—repealed their price cap laws in the 2000s. However, the New York State Attorney General’s 2016 report recommended bringing back a price cap, through a “reasonable limit” on resale markups. Price caps are generally intended to protect consumers from high markups and increase the fairness of ticket distribution so that the wealthiest consumers do not have disproportionate access to tickets. In theory, price caps offer consumers the advantages of nontransferable tickets without the disadvantages: they limit high secondary-market prices but still allow consumers to transfer tickets to others or resell tickets they cannot use. However, three government studies we reviewed stated that price caps are difficult to enforce and are rarely complied with. A 1999 report by the New York Attorney General noted that ticket resellers “almost universally disregarded” a cap in place at the time. Representatives from the office told us enforcement of such a cap might be easier now because the secondary market is largely on the Internet, which offers greater price transparency. A 2016 study of the United Kingdom’s ticket market noted that enforcement of a price cap was complicated by the fact that ticket resellers were not a well-defined group and sales could occur on various platforms and across jurisdictions. Similarly, the New York State Department of State noted in 2010 that enforcement of price caps can be challenging. In addition, critics of price caps have said that caps might force resale activity underground, which would reduce transparency and protections (such as refund guarantees) that legitimate secondary market exchanges provide. Both the largest ticket exchange and the largest primary market ticket company have opposed price caps, with the ticket exchange arguing that they would result in street-corner transactions, where the risk of counterfeit and fraud would be significant. On formal exchanges, transactions can be monitored and regulated. As with nontransferable tickets, price caps also can create economic inefficiencies because tickets are not necessarily allocated to those willing to pay the highest price. A 2010 study by the New York State Department of State compared publicly available secondary market listings for high-demand concerts in New York to the same artists’ concerts in nearby states with price caps. It found no definitive evidence that price caps resulted in greater or lesser availability on the secondary market or in lower resale prices. The study noted that online resale prices routinely exceeded the price caps. However, the authors of the study acknowledged that their findings were limited by their inability to obtain data on ticket sales and availability from secondary sellers. Legislative or regulatory actions to improve disclosure and transparency of ticket fees, resale markups, and ticket availability have advantages and disadvantages. Some government stakeholders have suggested improving fee transparency through a legal requirement to disclose ticket fees earlier in the purchase process. As discussed earlier, ticketing companies in the primary and secondary markets vary on when and how they disclose their fees, and some disclose fees only upon checkout. No federal law expressly addresses fee disclosure in event ticketing. However, at least one state requires disclosure of fees at the beginning of the purchase process. On the primary market, up-front fee disclosure helps decision making by informing consumers of the total ticket price early in the process. It also helps consumers decide whether to buy from the ticketer’s website or at the box office, where there typically are no fees. On the secondary market, up-front fee disclosure aids comparison shopping by helping consumers identify the resale exchange with the best total price. Sellers that do not provide enough or full information on prices through hidden fees could have competitive advantage because they would be perceived as offering lower prices over their competitors who do provide full information showing the price. For products and services in general, FTC staff guidance advocates that fees be disclosed up front, particularly before the point at which the consumer has decided to make a purchase. Figure 2 provides examples of different approaches to displaying prices and fees. Currently, FTC relies on the Federal Trade Commission Act—which prohibits unfair or deceptive acts or practices—to address problems related to fee disclosures. But FTC staff said it is challenging and resource-intensive to use the act to address inadequate fee disclosures industry-wide because it requires proving violations on a case-by-case basis. FTC staff told us that, depending on the circumstances, a legislative disclosure requirement that specified requirements for fees could facilitate enforcement activity and create a more level playing field for consumers and sellers. Eleven industry stakeholders and three consumer advocacy groups with whom we spoke similarly expressed support for a requirement that ticketing fees be disclosed up front. Many noted that fees should be fully transparent to consumers. However, a primary ticket seller, two venue managers, and a secondary ticket seller we interviewed questioned the need for an up-front fee disclosure requirement. For example, a primary ticket seller stated that knowing fees up front would not affect a consumer’s decision of whether or not to buy a ticket. The two venue managers believed that the timing of the fee disclosure was not important, as long as fees are disclosed before consumers complete the purchase. Representatives of one secondary ticket exchange said that up-front disclosure of fees could be challenging because a ticket’s fee is not stable—for example, the fee can change based on price fluctuations, different delivery methods, and the use of promotion codes. The National Economic Council has stated that “all-in pricing,” a form of up-front pricing, may be preferable to other methods of fee disclosure. All-in pricing incorporates the ticket’s face value and all mandatory fees and taxes, as illustrated in figure 2 above. According to the National Economic Council, all-in pricing eases comparison across vendors. The FTC staff report analyzing hotel resort fees supported all-in pricing for that industry because it said that breaking out fees, instead of providing a single total price, hindered consumer decision making and often resulted in consumers underestimating the total price. Officials from two state attorney general offices told us that all-in pricing could be advantageous, noting that fee disclosures represent their most significant enforcement issue related to the ticketing industry. Three secondary ticket sellers told us they might support a requirement to provide all-in pricing, but only if it was required of all ticket sellers. In 2014, the largest secondary market ticketing company began using all-in pricing, with its listings displaying a single total price that incorporated fees. However, the company soon discontinued all-in pricing as the default because, it told us, it put the company at a competitive disadvantage with other secondary market providers whose fees were not included in the initial ticket price displayed to consumers. A requirement that all ticket sellers provide up-front fee disclosure would mitigate or resolve that issue. One argument against a requirement for all-in pricing is that such regulation would restrict ticket companies’ flexibility in choosing how to disclose fees. In addition, a manager, a promoter, and two artist advocacy groups said all-in pricing could give fans the incorrect impression that the artist was charging the full ticket price and receiving its revenues, because the portion of the price going toward ticketing fees would not be transparent. Some federal and state policymakers have proposed requirements for resellers to disclose a ticket’s face value on secondary ticket websites. Georgia and New York State have enacted similar requirements, with statutes requiring resellers to disclose both the face value of tickets and their list price. Requiring that ticket resellers disclose the ticket’s face value can have several advantages. First, it makes the reseller’s markup transparent. Second, it can help consumers assess the quality of the seat location and compare similar seats across resale listings. Third, it might reduce the possibility that consumers mistake a reseller’s website for a venue website, as described earlier. This, in turn, could encourage consumers to recognize they are viewing a secondary market exchange and comparison shop for a better price elsewhere. However, a requirement that resellers disclose a ticket’s face value can present challenges because the definition of “face value” may not always be clear, according to three ticket resellers and FTC Bureau of Consumer Protection staff. If the face value does not incorporate fees and taxes charged on the primary market, it would not reflect the full amount paid by the original buyer. Similarly, some tickets are sold through VIP packages that do not itemize the price of the ticket and other components, such as backstage access or parking. In addition, with dynamic pricing, a ticket’s face value can change frequently. Furthermore, season tickets may display a higher face value than the season ticket holder paid because teams usually sell the packages at a discount. A requirement to disclose a ticket’s face value also could create compliance costs for secondary ticket exchanges, and could be difficult to enforce, according to some stakeholders. Three secondary ticket exchanges told us they do not currently collect information on a ticket’s face value and would have difficulty verifying the value provided by the listing broker—in part because of the challenges in defining face value, as described above. The New York State Office of the Attorney General stated in its 2016 report that most resellers cannot comply with the state’s disclosure requirement because most secondary ticket exchanges do not offer the option to show the ticket’s face value alongside its list price, despite having the capability to add such functionality. In addition, an official from Georgia’s Athletic and Entertainment Commission told us that resellers largely disregarded the state’s requirement to disclose face value. Another proposal, advocated by secondary market stakeholders, among others, would require primary ticket sellers to disclose how many tickets are available when an event first goes on sale to the general public. For instance, a venue or ticket seller might be required to provide the venue capacity and number of tickets available for sale after accounting for presales and holds. A 2017 law in Ontario, Canada, requires primary ticket sellers to provide certain information about venue capacity and presales, according to testimony by the Ontario Attorney General. Such a disclosure would provide consumers a clearer picture of ticket availability and help them manage expectations and make informed decisions, according to three consumer advocacy groups and two academics with whom we spoke. In addition, the National Association of Ticket Brokers and a secondary ticket exchange stated that disclosing ticket availability would shed light on what some consider excessive holds and presales by the primary market. They said that brokers often are blamed when events quickly sell out on the primary market, whereas there may have been relatively few tickets available for sale in the first place. The New York State Office of the Attorney General stated that the lack of transparency about the manner in which tickets are distributed creates a level of mistrust among consumers. However, many primary market stakeholders with whom we spoke— including promoters, managers, venue operators, and primary ticket sellers—said such a disclosure would have little-to-no benefit. First, some of them noted that ticket inventory can change as event production details evolve and holds are released, making it difficult to provide an accurate number of tickets available at any one time. Second, some said this disclosure would be confusing or meaningless for consumers, with one promoter noting that for high-demand events, a consumer’s odds of getting a ticket are low regardless of whether he or she knows the number of available tickets. Another promoter noted that the seat maps used to select seats when purchasing tickets already provide information on ticket availability. Many stakeholders also told us such a disclosure would only help brokers by giving them information useful in buying tickets and setting resale prices. In addition, a venue manager noted that information on ticket sales is considered proprietary and artists and event organizers should not be required to disclose confidential business information. Federal agencies face constraints in addressing ticketing issues. Some industry players are implementing technological and market-based approaches that seek to address concerns about secondary market activity. As noted earlier, the event ticketing industry is not federally regulated. In contrast, in the airline industry, the Department of Transportation can issue regulations regarding the disclosure of airline fees. Staff from FTC’s Bureau of Consumer Protection told us that—in addition to the enforcement activity noted earlier—they monitor consumer complaints related to the event ticket industry. However, they said they have resource and other constraints that make it difficult to conduct industry- wide investigations related to ticketing practices. Issues around the level and transparency of fees are not unique to the event ticketing industry. For example, as noted earlier, FTC staff have raised concerns about mandatory “resort fees” charged by many hotels but not immediately disclosed (such as in online price search results). In addition, according to the National Economic Council, sellers of other goods and services—such as car dealers and telecommunications companies—sometimes offer low prices up front that rise substantially with the addition of mandatory fees revealed later in the purchase process. As such, options for regulating the transparency of fees can have applicability broader than that of event ticketing. As noted earlier, the BOTS Act, which prohibits circumventing security measures or other systems intended to enforce ticket purchasing limits or order rules, went into effect in December 2016. However, a variety of industry, consumer, academic, and government stakeholders have expressed doubt that the BOTS Act would have much of an effect on prohibited bot use. Several of these stakeholders told us that bot users can easily evade detection and that enforcement of the act would be extremely difficult, in part because a lot of bot use occurs—or could shift—outside the United States. As of February 2018, FTC had not taken any enforcement action related to the act, but FTC staff told us they were monitoring the situation. The degree to which legislation combatting bots is effective may depend in part on the extent to which state attorneys general pursue enforcement actions. As of February 2018, we identified two states that had taken enforcement actions related to bot use. In May 2017, the New York State Office of the Attorney General announced settlements totaling $4.11 million with five ticket brokers which, among other offenses, violated New York State law by using bots to purchase and resell tickets. In April 2016, the office announced settlements totaling $2.7 million with six ticket brokers for similar violations. In February 2018, the Washington State Office of the Attorney General announced settlements totaling $60,000 with two ticket companies that used bots in violation of the state’s ticketing law. Industry players, including ticket companies and event organizers, are using or exploring technology and market-based approaches that seek to address concerns about secondary market activity. Examples of these approaches and their potential effects include the following: Delivery delays. Ticket sellers sometimes use delivery delays, meaning they do not provide the ticket immediately upon purchase. Instead, buyers receive their tickets (in paper or print-at-home form) closer to the day of the event. Delivery delays can inhibit resale activity because they give brokers less time to buy and resell tickets, and allow primary ticket sellers to review whether brokers and bots made bulk purchases, according to some promoters and primary ticket sellers. However, secondary market sellers we interviewed generally argued against delivery delays, with two sellers saying it can be inconvenient and stressful for consumers to receive a ticket just a few days before an event. Dynamic pricing. The use of dynamic pricing—which adjusts prices over time based on demand—can reduce secondary market activity by pricing tickets closer to their market clearing price. Raising primary market ticket prices, such as through dynamic pricing, does not necessarily benefit consumers but can help ensure that more ticket revenue accrues to the artist or team rather than ticket resellers. Verified fan program. At least one major ticket company has a program to sell tickets to pre-approved “verified fans,” to help ensure that more consumers and fewer brokers can access tickets on the primary market. New technology. Two stakeholders noted the potential for distributed ledger technology in ticketing. The technology associates a unique identification code with the ticket and its owner, which can help restrict transfer of the ticket and ensure its authenticity. Adding concerts. Artists can seek to make their ticket prices accessible by increasing the supply of seats—for example, one major artist has added concert dates with the express purpose of matching ticket supply to demand to prevent higher resale prices. Face-value resale exchanges. Resale exchanges used by some artists only allow resale at face value (plus a limited amount to account for primary market fees). This allows consumers to recoup their ticket costs if their plans change, while preventing resale markups. Market-based approaches also may augment regulatory and enforcement action with regard to problems discussed earlier around transparency. In February 2018, Google’s AdWords service—which offers paid advertising alongside search results—implemented new certification requirements for businesses that resell event tickets. First, resellers using AdWords must clearly disclose on their website or mobile application that they are a secondary market company and not the primary provider of the tickets. They cannot imply they are the primary provider by using words such as “official” or by including the artist or venue name in their website’s URL— practices we noted earlier that were being used by some white-label websites. Second, resellers must prominently disclose when their ticket prices are higher than face value and disclose a price breakdown, including any fees, before the customer provides payment information. Google said in a statement that these measures were intended to protect customers from scams and prevent potential confusion. However, due to the recency of this change, it is too early to determine how it will affect the marketplace. In addition, the advertising industry’s self-regulatory organization has taken steps to address potentially misleading pricing practices in the ticket industry. The Advertising Self-Regulatory Council sets standards for truth and accuracy for national advertisers, monitors the marketplace, and holds advertisers responsible for their claims. As noted earlier, the organization recently referred a major ticket company to FTC for not following its recommendations to conspicuously disclose its fees. Although the council can play a role in monitoring deceptive advertising related to ticketing, it also faces constraints—for example, it addresses practices case-by-case and its recommendations depend on voluntary compliance by the advertiser. No matter what efforts are made to address concerns about the ticket marketplace, some of the consumer dissatisfaction with event ticketing stems from an intractable issue: demand for tickets to highly popular events exceeds supply. As such, no activity, outside of expanding the supply, is likely to effectively address one key source of consumer dissatisfaction: that tickets are not available to popular sold-out events. We provided a draft of this report to DOJ and FTC for review and comment. We received technical comments from FTC, which we incorporated as appropriate. We also provided relevant excerpts of the draft for technical review to selected private parties cited in our report, and included their technical comments as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to DOJ, FTC, the appropriate congressional committees and members, and others. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8678 or clementsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. The objectives of this report were to examine (1) what is known about primary and secondary online ticket sales, (2) the consumer protection concerns that exist related to online ticket sales, and (3) potential advantages and disadvantages of selected approaches to address these concerns. The scope of our work generally focused on ticketing for large concert, theater, and sporting events for which there is a resale market. To develop background information on the U.S. ticketing industry, we analyzed business classification codes from the North American Industry Classification System, which assigns a 6-digit code to each industry based on its primary activity that generates the most revenue. The code we selected, “All Other Travel Arrangement and Reservation Services,” includes theatrical and sports ticket agencies, as well as automobile club road and travel services and ticket offices for airline, bus, and cruise ship travel. Because the Census data do not distinguish event ticketing from other services in particular, we determined the data do not provide a reliable count of companies in the event ticketing industry. In addition, we obtained publicly available data from private research firms and reviewed the largest publicly held ticketing companies’ annual public filings with the Securities and Exchange Commission (Form 10-K). We also collected information from firms that collect data related to the ticketing industry, such as IBISWorld and LiveAnalytics. To examine what is known about primary and secondary online ticket sales, we reviewed data related to ticket prices and sales published by Pollstar, a concert industry trade publication, and the Broadway League, a trade organization representing commercial theater. In addition, we obtained and analyzed data on ticket volume and resale prices for a nongeneralizable sample of 22 events. These events were selected because they (1) occurred in relatively large venues (more than 500 seats) that typically experience ticket resale activity; (2) represented a mix of event types (13 concerts, 3 commercial theater productions, and 6 sporting events); and (3) represented a mix of popularity, including 17 events that would be expected to be in high demand. We defined high- demand events as those that were likely to sell out, which we assessed by reviewing past attendance at other events for the same artist or theatrical event. For sports, we assessed demand by reviewing team performance and rankings. We collected data from October 16 through December 20, 2017. For each event, we analyzed: resale prices and volume, through data obtained from publicly available listings on the websites of two secondary ticket exchanges; primary market prices and availability, through data obtained from the websites of primary market ticket sellers; and event capacity, through data obtained from Billboard or Pollstar (trade publications) for concerts, the Broadway League for theater, and ESPN.com (a media company) for sporting events. To examine consumer protection concerns, we reviewed the websites of 6 primary market ticket sellers, 11 secondary ticket exchanges, and 8 “white-label” ticket websites. We collected data from June 19, 2017, through January 16, 2018. For the primary market ticket seller that represents the majority of market share, we observed the online ticket purchase process for 23 events. Three events were selected using the process described below and the remaining 20 were chosen to reflect 2 events at each of 10 venues, selected because they were among the 200 top-selling arenas or 200 top-selling theaters in the United States in 2017, according to Pollstar. For each of the 5 other primary market ticket sellers and the 11 secondary ticket exchanges, we observed the online ticket purchase process for 1–5 events. For each primary ticket seller, we selected one event per category (concert, theater, and sports). For consistency and comparability across companies, we also limited events to the same state (which did not extensively limit ticket resale) and time period. We also selected 2 events in another state because they used nontransferable tickets. For the secondary ticket exchanges, we used 3–5 events from our review of primary ticket sellers’ websites. If the event was no longer available, we selected an alternative event at the same venue. For each of the 8 white-label ticket sellers, we reviewed 1–4 events from the events described above. In some cases, the same event was not available so we selected an alternative event at the same venue. For these events—31 events in total—we documented (1) the ticket fees charged, (2) at what point in the purchase process the fees were disclosed, and (3) any restrictions to the ticket. In addition, we assessed the clarity, placement, and font size of the fees, restriction information, and—for white-label websites—disclaimers that the website was a ticket resale website. We worked with a GAO investigator to review the websites that required users to provide an e-mail address or credit card information before viewing fees. Analysts followed a protocol to help ensure consistency of observations and completed a data collection instrument for each website. A second analyst independently reviewed each website to verify the accuracy of information collected by the first analyst. Any discrepancies between the two analysts were identified, discussed, and resolved by referring to the source websites. A GAO investigator acting in an undercover capacity contacted the customer service departments of three large secondary ticket exchanges to inquire about two events for which tickets were nontransferable (not allowed to be resold) and two events for which listed tickets were speculative (not yet in-hand by the seller). The nontransferable tickets were identified through press releases and articles about popular touring artists and the speculative tickets were identified by searching for events that had been announced but were not yet for sale on the primary market. The investigator contacted customer service through 16 e-mails to one company and 8 online “live chats” with another company. For the third company, the investigator sent 8 e-mails about nontransferable tickets and did not inquire about speculative tickets because this company labeled such tickets. We also contacted the venues hosting these events to help assess the accuracy of the information provided by the ticket companies’ customer service departments. In addition, we reviewed enforcement activity by federal and state agencies related to ticketing and ticket companies. We also collected information on the number of consumer complaints by requesting the Federal Trade Commission (FTC) conduct a search of its Consumer Sentinel Network database, which includes complaints submitted to FTC, the Consumer Financial Protection Bureau, the Better Business Bureaus, and other sources. The search results covered calendar years 2014– 2016 and used the term “ticket” with terms related to events (e.g., “concert,” “sport,” “theater”), sold-out events (e.g., “sold-out”); fees; fraudulent tickets (e.g., “fake”); delayed delivery (e.g., “late,”); or nontransferable tickets (e.g. “paperless”). We selected our initial search terms by reviewing terms used in similar complaints on the Better Business Bureau website. We made modifications to our search string based on suggestions from FTC staff who reviewed the results of a preliminary search. To help ensure that results were related to event ticket sellers, we limited the search to complaints against the 6 primary ticket sellers and 11 secondary ticket exchanges in our scope. We assessed the reliability of the complaint data by interviewing agency officials. In addition, we have assessed the reliability of Consumer Sentinel Network data as part of previous studies related to consumer protection and found the data to be reliable for the purposes of gauging the extent of consumer complaints about event ticketing. However, in general, consumer complaint data have limitations as an indicator of the extent of problems. For example, not all consumers who experience problems may file a complaint, and not all complaints are necessarily legitimate or categorized appropriately. In addition, a consumer could submit a complaint more than once, or to more than one entity, potentially resulting in duplicate complaints. To examine the potential advantages and disadvantages of selected approaches to address consumer protection concerns, we reviewed federal and selected state laws related to event ticket sales. At the federal level, these included the Better Online Ticket Sales Act of 2016 and relevant provisions of the Federal Trade Commission Act. To determine which states had laws related to ticket resale or disclosure, we reviewed compilations of state ticketing laws from the National Association of Ticket Brokers, a secondary ticket seller’s website, and a law firm publication, and we conducted independent research and verification. We reviewed ticketing-related legislation—selected for its relevance to the approaches covered in our review—in Connecticut, New York, and Georgia. We reviewed state government reports and interviewed state officials to get information on the states’ experiences with these laws. We also consulted foreign government reports to obtain information on relevant laws or regulations in Canada and the United Kingdom, which have reported similar consumer protection issues as we reviewed in our report. To address all of our objectives, we conducted searches of various databases, such as ProQuest, Academic OneFile, Nexis, Scopus, and the National Bureau of Economic Research, to identify sources such as peer- reviewed academic studies; law review articles; news and trade journal articles; government reports; and hearings and transcripts related to ticketing issues. We examined summary-level information about each piece of literature, and from this review, identified articles that were germane to our report. We generally focused on articles from 2009 and later. We identified additional articles and reports through citations in literature we reviewed and from expert recommendations. For the articles we used to cite empirical findings or to support arguments on advantages and disadvantages of selected resale restrictions or disclosure requirements, we conducted a methodology and soundness review. We eliminated one study on pricing and one study on price caps because we believed the methods were not sufficiently rigorous. In addition, we identified and reviewed relevant congressional testimony on proposed ticketing legislation. We reviewed the Department of Justice’s competitive impact statement and testimonies with regard to the 2010 merger of Ticketmaster and Live Nation. We interviewed staff from the FTC’s Bureau of Consumer Protection and Bureau of Economics, the Department of Justice’s Antitrust Division, and the New York State Office of the Attorney General, and we conducted a group interview, coordinated by the National Association of Attorneys General, with staff from the offices of the attorney general of Pennsylvania and Texas. We also interviewed representatives of three consumer organizations: Consumer Action, the National Association of Consumer Advocates, and the National Consumers League; four trade associations: the Broadway League, Future of Music Coalition, National Association of Ticket Brokers, and the Recording Academy; as well as four primary ticket sellers, five secondary ticket exchanges and aggregators, one broker, five venue operators, three event promoters (who also operate venues), five artists’ managers and booking agents, three major sports leagues, and three academics who have studied the ticket marketplace. These organizations and individuals were selected based on their experience and prominence in the marketplace and to provide a range of perspectives. We conducted this performance audit from November 2016 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Our investigative staff agent conducted all related investigative work in accordance with investigative standards prescribed by the Council of the Inspectors General on Integrity and Efficiency. In addition to the contact named above, Jason Bromberg (Assistant Director), Lisa Reynolds (Analyst in Charge), and Miranda Berry made key contributions to this report. Also contributing were Enyinnaya David Aja, Maurice Belding, JoAnna Berry, Farrah Graham, John Karikari, Barbara Roesmann, Jena Sinkfield, and Tyler Spunaugle.", "summary": "Tickets for concerts, theater, and sporting events can be purchased—typically online—from the original seller (primary market) or a reseller (secondary market). Some state and federal officials and others have raised issues about ticketing fees, the effect of the secondary market on ticket prices, and the transparency and business practices of some industry participants. Event ticketing is not federally regulated. However, federal legislation enacted in 2016 restricts bots (ticket-buying software). Also, the Federal Trade Commission (FTC) has taken two enforcement actions related to deceptive marketing by ticket sellers under its broad FTC Act authority. GAO was asked to review issues around online ticket sales. This report examines (1) what is known about online ticket sales, (2) consumer protection issues related to such sales, and (3) potential advantages and disadvantages of selected approaches to address these issues. GAO focused on concert, theater, and major league sporting events for which there is a resale market. GAO analyzed data on fees, ticket volume, and resale prices from a variety of sources; reviewed the largest ticket sellers' websites and purchase processes; and reviewed federal and state laws and relevant academic literature. GAO also interviewed and reviewed documentation from government agencies; consumer organizations; ticket sellers; venue operators; promoters and managers; sports leagues; and academics (selected for their experience and to provide a range of perspectives). Ticket pricing, resale activity, and fees for events vary. Tickets to popular events sold on the primary market sometimes are priced below the market price, partly because performers want to make tickets affordable and maintain fans' goodwill, according to industry representatives. Tickets are often resold on the secondary market at prices above face value. In a nongeneralizable sample of events GAO reviewed, primary and secondary market ticketing companies charged total fees averaging 27 percent and 31 percent, respectively, of the ticket's price. Consumer protection issues include difficulty buying tickets at face value and the fees and marketing practices of some market participants. Professional resellers, or brokers, have a competitive advantage over consumers in buying tickets as soon as they are released. Brokers can use numerous staff and software (“bots”) to rapidly buy many tickets. As a result, many consumers can buy tickets only on the resale market at a substantial markup. Some ticket websites GAO reviewed did not clearly display fees or disclosed them only after users entered payment information. “White-label” resale sites, which often appear as paid results of Internet searches for venues and events, often charged higher fees than other ticket websites—sometimes in excess of 40 percent of the ticket price—and used marketing that might mislead users to think they were buying tickets from the venue. Selected approaches GAO reviewed, such as ticket resale restrictions and disclosure requirements, would have varying effects on consumers and businesses. Nontransferable tickets. At least three states restrict nontransferable tickets—that is, tickets whose terms do not allow resale. Nontransferable tickets allow more consumers to access tickets at a face-value price. However, they also limit consumers' ability to sell tickets they cannot use, can create inconvenience by requiring identification at the venue, and according to economists, prevent efficient allocation of tickets. Price caps. Several states cap the price at which tickets can be resold. But according to some state government studies, the caps generally are not effective because they are difficult to enforce. Disclosure requirements. Stakeholders and government research GAO consulted generally supported measures to ensure clearer and earlier disclosure of ticket fees, although views varied on the best approach (for example, to include fees in an “all-in” price or disclose them separately). Some market-based approaches are being used or explored that seek to address concerns about secondary market activity. These approaches include technological tools and ticket-buyer verification to better combat bots. In addition, a major search engine recently required enhanced disclosures from ticket resellers using its advertising platform. The disclosures are intended to protect consumers from scams and prevent potential confusion about who is selling the tickets.", "document_type": "gao"}
{"report": "In 1961, the Navy commissioned the first and only Enterprise-class aircraft carrier, CVN 65, which was the world’s first nuclear-powered aircraft carrier. CVN 65 served the Navy’s needs for 51 years, deploying 25 times and sailing more than 1 million miles during that time. The carrier, which was powered by eight nuclear reactors, was the predecessor of the two-reactor Nimitz-class aircraft carriers that followed it into service. The Navy plans to begin retiring the Nimitz-class carriers in the next decade. Following the retirement of CVN 65 in 2012, the Navy began preparing the ship for dismantlement and disposal in a process called inactivation. These inactivation activities—which Navy officials stated cost $863 million to complete—included removing the nuclear fuel from the ship’s reactors and taking off equipment and other materials in preparation for dismantlement of the ship. The Navy’s next steps include planning efforts to meet the environmental requirements associated with dismantling and disposing of a nuclear-powered ship, such as handling of radioactive and other hazardous materials. The final step for CVN 65 will be dismantlement, including the recycling of non-nuclear portions of the ship and safe disposal of nuclear and other hazardous materials. Figure 1 provides a timeline of CVN 65 events. CVN 65 is the largest nuclear-powered ship that has been retired by the Navy. Figure 2 compares the size of CVN 65 to previous and future Navy vessels requiring dismantlement and disposal, as well as other relatable structures. In 1990, the Navy authorized a program to recycle decommissioned submarines at Puget Sound Naval Shipyard in Bremerton, Washington. According to Navy officials, the Department of Energy’s low-level waste site in Hanford, Washington, was the only practical site at the time for disposal of the defueled submarine reactor compartments, which included low-level radioactive waste. Puget Sound Naval Shipyard is the largest shipyard on the U.S. West Coast, and while it is equipped and staffed to work on all classes of Navy vessels, it primarily conducts maintenance on nuclear-powered aircraft carriers and submarines, which the Navy considers a priority. This shipyard has the only dry dock on the West Coast capable of servicing an aircraft carrier and is the Navy’s only site for dismantlement and disposal of nuclear-powered ships. Since 1990, the Navy has inactivated over 130 nuclear-powered vessels. Inactivation is the process used to prepare a ship for disposing of the compartments that house the reactors and recycling the hull or for safe storage pending dismantlement and disposal at a later date. Inactivation includes draining hydraulic systems and tanks, and removing hazardous and expendable materials, tools, spare parts, and furnishings from the ship. The removal of the spent fuel from a ship’s nuclear reactor(s), referred to as defueling, usually happens as part of inactivation. Historically, when a ship is dismantled at Puget Sound Naval Shipyard, the reactor compartments are removed and packaged for transport to the Hanford low-level radioactive waste disposal site. Figure 3 shows the typical path followed for dismantlement and disposal at the shipyard. The Navy often uses commercial industry to dismantle and recycle its non-nuclear ships, including aircraft carriers, such as ex-USS Constellation and ex-USS Ranger completed in 2017. Navy officials noted that the cost to the government in recycling recent ships has been minimal—ranging from 1¢ to $6 million—because of the resale value of their scrap metal. Commercial companies have decommissioned 32 civilian nuclear reactor plants—work that the Navy has noted is comparable to nuclear-powered ship dismantlement and disposal. Commercial industry uses a component-based process for commercial nuclear plant decommissioning. This process breaks the reactor down into smaller components for transport and disposal, and separates nuclear waste from non-nuclear waste as much as possible to reduce disposal costs. Several laws and an executive order have established the regulatory authority and requirements underlying the dismantlement and disposal of nuclear-powered Navy vessels. The Atomic Energy Commission exercised control of nuclear technology primarily for military purposes until 1954, when the Atomic Energy Act was amended. These amendments allowed for the possibility of a privatized nuclear energy industry. Twenty years later, the Atomic Energy Commission was abolished and split into the Nuclear Regulatory Commission (NRC) and the Energy Research and Development Administration—which was later absorbed into the Department of Energy. Under this structure, NRC is responsible for overseeing commercial nuclear reactor safety, licensing reactors, and establishing regulations and guidelines for radioactive waste disposal for the commercial nuclear industry. The National Nuclear Security Administration, a separately organized agency within the Department of Energy, is responsible for the management and security of the nation’s nuclear weapons, as well as nonproliferation programs. The Naval Nuclear Propulsion Program—also known as Naval Reactors—is a joint program of the Department of Energy and DOD that has cradle-to-grave responsibility for all naval nuclear propulsion matters. Figure 4 provides a brief description of laws and orders related to nuclear materials. In addition to the nuclear-specific requirements guiding the dismantlement and disposal process, the Navy must comply with the National Environmental Policy Act. Specifically, this act requires federal agencies to evaluate the likely environmental effects of projects they are proposing, generally by preparing either an environmental assessment or a more detailed environmental impact statement. An environmental impact statement must, among other things, (1) describe the environment that will be affected, (2) identify alternatives to the proposed action and identify the agency’s preferred alternative, (3) present the environmental impacts of the proposed action and alternatives, and (4) identify any adverse environmental impacts that cannot be avoided should the proposed action be implemented. The Act’s requirements are invoked for major federal actions, such as the construction of buildings or highways, or the dismantlement and disposal of reactor compartments from nuclear- powered vessels. Since 1996, nuclear-related dismantlement and disposal activities performed by Puget Sound Naval Shipyard have been based on the same environmental impact statement—which addresses the effects of disposing of submarine and cruiser reactor compartments. In 2012, the Navy produced an environmental assessment analyzing the effects of removing and preparing the reactor compartments of CVN 65 for disposal at Puget Sound Naval Shipyard and transporting the compartment packages to the Hanford site for disposal. It found that these activities would have no significant impact on the environment beyond existing activity. Naval Reactors subsequently decided, however, that a new environmental impact statement is required for CVN 65 because the alternatives identified for dismantling and disposing of the ship could potentially have significant impacts on the environment that are not captured by the existing environmental assessment. As part of the new statement for CVN 65, Navy officials said environmental factors that account for the naval shipyard and full commercial options will be reviewed, as well as indefinite waterborne storage of the ship pending dismantlement and disposal at a later date. The Navy is weighing a number of considerations before making a decision for CVN 65 dismantlement and disposal. The naval shipyard option offers well-established processes for dismantlement and disposal of the ship’s nuclear material and better understood cost and schedule estimates than the full commercial option. Our analysis of available data, however, found that the naval shipyard option would contribute to existing workload backlogs and exacerbate facility challenges at the shipyard that could affect its work maintaining the active fleet—a Navy priority. While the Navy has not defined its requirements for the full commercial option, industry does not expect to face workload or facility challenges. Navy officials also believe that the full commercial option potentially could shorten the timeline for completing the work and reduce the total cost. Although CVN 65 is the first nuclear-powered aircraft carrier requiring dismantlement and disposal, the Navy has well-established processes for dismantling and disposing of nuclear-powered submarines and cruisers. Navy officials explained that the shipyard’s extensive dismantlement and disposal experience with these vessels has resulted in a strong understanding of how to accomplish the work. Further, the Navy has been working on plans to address the ship-specific needs of CVN 65 for many years. If the Navy chooses the naval shipyard option for CVN 65, it expects to adapt and use these well-established processes to dismantle the 28,000-ton nuclear propulsion space section at Puget Sound Naval Shipyard. This section would contain the 8 defueled reactors and all other nuclear-related material that remains on the ship. To separate the propulsion space from the ship, a commercial company would perform “ship-shaping” to create a dedicated ship section for all of the nuclear- related work. This activity would minimize the portion of the ship transported to the naval shipyard for dismantlement and disposal. The remaining ship sections would be commercially recycled. The shipyard is evaluating two designs for reactor compartment packages that could be used for transport and disposal of the ship’s nuclear material. One design—based on a package previously used for cruiser reactors—would involve the shipyard preparing 8 single reactor packages. The other includes a new design that would enclose 2 reactors in dual reactor packages. Figure 5 shows how the Navy anticipates the ship would be divided into sections through this process. In contrast, the Navy formally began considering the potential for a full commercial option for CVN 65 within the past 4 years. According to Navy officials, although information received through previous requests for information and hosting discussions with commercial industry helped shape their understanding of the potential for a commercial ship dismantlement, they ultimately have had relatively limited interaction with commercial companies to determine their potential plans and processes for CVN 65 dismantlement and disposal. Naval Reactors officials stated they are waiting for the environmental impact statement process to officially begin before further engaging with prospective commercial companies and the public. Many of the details for a full commercial option will depend upon Navy requirements, such as standards, technology, or specific procedures required to do the work; data and analysis in the environmental impact statement; and preferred work practices and facilities of prospective companies. Officials we interviewed from companies with potential interest in the work stated that because the Navy has not communicated its CVN 65 requirements for a full commercial option, any commercial approach described for the work would be hypothetical at this point, relying on their extensive prior experience with nuclear materials handling, packaging, shipping, and disposal—including nuclear ship maintenance and decommissioning of commercial reactors—or ship recycling. Commercial company officials noted that despite the lack of definitive information available, they would anticipate employing typical practices used for commercial nuclear reactor decommissioning, ship dismantlement, and control of nuclear materials to complete CVN 65 work. In terms of locations for the work, Naval Reactors officials noted that many coastal sites in the United States could potentially accommodate CVN 65 dismantlement activities, and the location of the work site would affect the proposed disposal site or sites. Table 1 provides characteristics of the two options that the Navy is considering for CVN 65 dismantlement and disposal. Cost and schedule estimates for both CVN 65 options have yet to be formally established by the Navy. Puget Sound Naval Shipyard has been refining CVN 65 plans and estimates over many years. However, its most recent estimates for cost and schedule still may not fully account for uncertainties in completing the work because it represents a first-of-its- kind project with an unprecedented scale. The Navy’s notional estimates for the commercial option are a first step in establishing expectations and will evolve as requirements for the work are better understood. The Navy awarded a contract in July 2018 to the Center for Naval Analyses—a federally funded research and development center serving the Navy and other defense agencies—to complete a cost analysis for the full commercial option. This effort is expected to provide the Navy with a cost estimate for CVN 65 in October 2018, followed by a model through which the Navy can develop cost estimates for future Nimitz-class dismantlement and disposal efforts. The findings from the CVN 65 environmental impact statement may contribute to the final cost and schedule estimates for either option. Better Fidelity in Existing Naval Shipyard Option Estimates Puget Sound Naval Shipyard officials explained that as their planning has progressed, they have refined their cost and schedule estimates for CVN 65 dismantlement and disposal. Overall, the Navy’s cost estimates have increased significantly from initial estimates but have been relatively stable since 2016. The schedule went through similar fluctuations but has steadied. Table 2 outlines changes in the shipyard’s plans and how they affected cost and schedule. The schedule for starting the work at the naval shipyard also changed. Navy officials stated that as a result of the Navy’s decision in early 2017 to reassess its options for CVN 65, it delayed the expected start date for the naval shipyard option from 2019 to 2034 based on analysis of the workload at the naval shipyard, which we discuss below. Although Puget Sound Naval Shipyard officials noted their cost estimate includes some margin to account for CVN 65 being the first project of its kind, it may not adequately account for the extent of unknown facts or circumstances that could affect cost. For example, unrecognized hazardous materials may exist in inaccessible areas of the CVN 65 propulsion space section that will only be discovered once the work is underway, which could affect cost and schedule. Execution of the work in support of a new dual reactor compartment package design also could lead to unanticipated challenges that cause deviations from estimates. No Formal Estimates for Full Commercial Option The Navy has notionally estimated cost and schedule for a full commercial option to be $750 million to $1.4 billion and about 5 years to complete. These estimates suggest that the commercial option could cost less and take less time to complete than the naval shipyard option. Navy officials stated that the notional cost estimate is derived from data reported by nuclear power plant operators, with differences in size and scope for the nuclear reactors incorporated. They also said that the notional estimate will be updated once it receives additional information from industry during the planning process. Navy officials told us they expect the cost per reactor for CVN 65 would be significantly less than the NRC decommissioning average for a commercial facility because CVN 65 reactor compartments are smaller, the reactors are more compact, and they have already been through the costly defueling activity. A 2016 international study on the cost of decommissioning nuclear power plants identified several high-level categories and their contribution to total costs for reactors decommissioned in the United States, such as project management, site restoration, and waste packaging, transportation, and disposal. According to this study, about 25 percent of decommissioning costs can be attributed to reactor decontamination and dismantling. Using this percentage and the average cost to decommission a commercial nuclear reactor, we estimate the cost to dismantle the eight CVN 65 defueled reactors to range from $1.2 billion to 1.3 billion, which is at the higher end of the Navy’s notional estimated range for the full commercial option. In addition to the potential cost, the Navy initially projected about a 5-year period of performance for the full commercial option based on limited industry input. Navy officials told us the full commercial option start date, beginning no earlier than 2024, is contingent on the finalization of the environmental impact statement and a record of decision that chooses this option as the Navy’s path forward. The Navy’s intent would be to award a contract shortly after the environmental impact statement is completed if the Navy decides to pursue the full commercial option. Commercial officials told us they do not anticipate a need for significant lead time before starting work, though the need will be better understood once the Navy outlines requirements for the work. Finally, the cost for a full commercial option could be influenced by the contract type selected by the Navy. Contract type selection is a key factor in determining how cost risk is shared between the Navy and the contractor. Firm-fixed-price contracts are suitable for situations where the risk involved is minimal or can be predicted with an acceptable degree of certainty. Conversely, cost-type contracts are used when either requirements are not sufficiently defined or uncertainties with contract performance do not permit costs to be sufficiently estimated to use a fixed-price contract. Although no decision has been made, Navy officials told us they are interested in using a firm-fixed-price contract—a contract type that has been used for commercial reactor decommissioning. Under a firm-fixed-price contract, the contractor agrees to perform the work for a price that is not subject to change based on the contractor’s cost experience in performing the contract, placing full responsibility for all costs and resulting profit on the contractor. Navy officials stated that because CVN 65 is the first nuclear-powered aircraft carrier to be disposed of, the scope of the effort will need to be better defined before they could reliably conclude that firm-fixed-price contracting would be appropriate. Specifically, insufficiently understood risks may make potential contractors unwilling to accept the risks associated with a firm- fixed-price contract. The Navy has stated its priority for Puget Sound Naval Shipyard is the work associated with maintaining nuclear-powered aircraft carriers and submarines currently in the fleet. However, as we reported in 2017, Puget Sound Naval Shipyard has had significant fleet maintenance delays since fiscal year 2000. These delays resulted in 4,720 lost operational days for nuclear-powered aircraft carriers and submarines. The addition of CVN 65 would contribute to challenges in the naval shipyard’s ability to meet workload demands and further constrain its available facilities. In comparison, despite the lack of detail about the Navy’s requirements, commercial company officials we interviewed stated they currently do not anticipate any major workload challenges or conflicts with other ongoing or future work in completing the work on CVN 65 based on their existing workforce and potential facilities for performing the work. Puget Sound Naval Shipyard Workload and Facility Challenges Based on our analysis of workload and resources data from Puget Sound Naval Shipyard, we found that the shipyard consistently operates at its maximum annual workload level and this likely will continue regardless of the Navy’s decision for CVN 65. A Naval Reactors analysis of the shipyard’s workload data also shows the workload meeting or exceeding capacity for the foreseeable future. The shipyard’s workload projections that we reviewed show it will be working at or near capacity through fiscal year 2025—the last year for which data were available. Adding the work associated with dismantlement and disposal of CVN 65 would put the shipyard over current workload capacity. Shipyard officials explained that historically, the workload projection for a given year matures as that year approaches, and the dips that sometimes are depicted in future-year workload projections generally vanish. Workload maturity or growth can be attributed to changes in the Navy’s maintenance plans, deferred maintenance, growth from the previous year, and overall shipyard productivity. The condition of a ship when it arrives for maintenance can also contribute to growth if inspections of systems or components reveal a need for unplanned repairs. To account for historical variability and improve projections of overall workload, in 2015 shipyard officials began including 10 percent in unallocated workload to projections. In reviewing the shipyard workload and resources data, we also found that the shipyard regularly underestimates workload for future years— especially 5 years or more out—with workload growth for future years consistently exceeding 15 percent. Even without the CVN 65 work at the naval shipyard, projections show its workload with average notional growth will meet or exceed the workforce available to complete the work, as shown in figure 6. According to the Navy, it is typical for naval shipyards to continually shift resources across projects to align worker-specific trade skills to the type of work executed on any hull in the shipyard, at any particular time. To achieve a level and sustainable workforce across the fiscal years, the number of full-time employees required to support planned work is sized as part of the total workforce. The shipyard mitigates peaks in workload (above the available workforce) through the use of additional overtime, loans from other naval shipyards, and contracting. When that cannot occur, the shipyard will defer workload until it can be executed. The CVN 65 dismantlement and disposal work could affect the shipyard’s ability to complete active fleet maintenance. We found that the addition of the CVN 65 dismantlement and disposal would add almost a year’s worth of work across the estimated 10-year dismantlement and disposal period to an already busy shipyard that has demonstrated difficulties in accurately projecting its future work. The Navy prioritizes maintenance of the active fleet, but the scale of the CVN 65 work would reduce the shipyard’s ability to delay or reprioritize dismantlement and disposal. Shipyard officials noted that the Navy often defers planned dismantlement and disposal to address higher-priority active fleet maintenance. For example, smaller submarines prepared for dismantlement can instead be stored at the shipyard until workforce and space are available to complete the work. However, an aircraft carrier—even when reduced to a propulsion space section as proposed for CVN 65—would not offer the same level of flexibility to defer work. CVN 65 would involve a more extensive resource commitment because of its increased size relative to past ship dismantlement projects and would occupy limited facilities at the shipyard. Specifically, current plans require 3 years pier side to prepare the propulsion space section for dismantlement and reactor compartment disposal and about 5 years in a dry dock for the actual dismantlement. Further, the shipyard expects a significant increase in its submarine inactivation and reactor compartment disposal and hull recycling workload due to the end of service for an additional class of submarines— specifically, the Ohio-class submarines starting in 2027. The estimated increase in inactivation and reactor recycling workload would overlap with the planned start for CVN 65 dismantlement and disposal in 2034, if the Navy elects to pursue this option. In addition, the shipyard already has a backlog of 10 submarines and the ex-USS Long Beach cruiser in storage awaiting disposal and recycling at its long-term storage facility for defueled, decommissioned, and inactivated nuclear-powered ships. Another 3 submarines are pier-side at Puget Sound Naval Shipyard. This backlog is not expected to subside as submarines continue to be retired, and each vessel represents thousands of workdays that the shipyard has to commit to its dismantlement and disposal. Navy and Industry Expect Full Commercial Option to Face Fewer Challenges While the Navy has not established specific requirements for the full commercial option, Navy officials maintain that it does not present the same workload and facility challenges that exist for the naval shipyard option. Commercial companies have flexibility in selecting a location for CVN 65 dismantlement activities based on facility and workforce availability considerations. Some company officials we spoke with also noted they have existing worksites—which are audited and approved by Naval Reactors—where they process, package, and transport low-level radioactive waste or operate low-level radioactive waste disposal sites licensed by NRC. These include facilities for radioactive waste processing and decontamination of materials for recycling. Additionally, company officials said they anticipate that a substantial amount of the work could be performed with the ship in the water—similar to the traditional approach used to dismantle non-nuclear vessels for recycling—and existing contractor facilities likely would not require major upgrades or improvements other than to provide for the radiological-based waste handling and packaging considerations. Commercial company officials told us that they would not expect significant additional hiring needs based on their limited understanding of the potential CVN 65 work and their existing workforce capacity. They added that the nuclear dismantlement and disposal industry has an available, qualified workforce that could easily be employed if additional workforce were needed. Given the early stage of the Navy’s planning for CVN 65 and the Navy’s lack of formal engagement with commercial companies at the time of our review, we did not assess the current or future commercial workforce capacity. Any details on potential CVN 65 facility and workforce plans from commercial companies will be hypothetical until the Navy formally begins efforts to seek input from commercial companies and communicate requirements. The Navy’s approach typically used to budget for and report on ship dismantlement and disposal does not provide sufficient information to support decision makers’ oversight of CVN 65—a multi-year project that may require more than $1 billion to complete. We found the Navy is not required to provide detailed budget information or report dismantlement and disposal cost, schedule, and programmatic information to decision makers. Providing additional information through budget requests and reporting would help ensure that decision makers have sufficient information to oversee CVN 65 dismantlement and disposal activities and to support future decisions. The Navy uses budget exhibits to provide congressional decision makers information about dismantlement and disposal efforts. If no changes are made to the information provided within the Operation and Maintenance, Navy (OMN) budget exhibits, the CVN 65 dismantlement and disposal budget request will include limited details for planned work, funding needs, and total estimated costs. The bulk of the Navy’s past dismantlement and disposal work is comprised of comparatively low-cost projects—particularly submarines—with limited resource demands compared to a nuclear-powered aircraft carrier like CVN 65, a multi-year project with a cost that will potentially exceed $1 billion. For example, nuclear-powered submarines have an average dismantlement and disposal cost of about $26 million and average about 50,000 workdays. Federal internal control standards recommend that agency management communicate with external stakeholders the necessary quality information—such as complete cost and schedule information for CVN 65 dismantlement and disposal—to achieve objectives. Budget exhibits are a primary source of information about all programs and other activities during budget planning and congressional appropriation decisions. Well- prepared budget exhibits help provide a rationale for the amount and timing of funding requests. Given that this multi-year, large-scale project is the first of its kind, more detailed information would facilitate greater transparency and oversight of cost, schedule, and performance. Limited Budget Information Provided for Dismantlement and Disposal The Navy uses the OMN appropriation account to fund dismantlement and disposal activities. The Navy’s Financial Management Policy Manual provides overall summary guidance on OMN budget formulation, but it does not provide specific guidance on reporting criteria for dismantlement and disposal of Navy ships. Budget exhibits are prepared to justify appropriation requests and are key documents that can be used to support congressional oversight. DOD acquisition training materials state that well prepared budget exhibits make programs more defensible. However, in assessing the OMN budget exhibits associated with dismantlement activities for fiscal years 2007-2018, we found they provide little ship-specific detail that could be used to monitor a significant project such as the planned effort for CVN 65 dismantlement and disposal, which may begin requesting funding as soon as fiscal year 2023. Specifically, we reviewed the dismantlement and disposal funding requests from the past several years, which reside within the Navy’s OMN budget exhibits under the Ship Activations/Inactivations sub-activity group of the Mobilization budget activity. In doing so, we found these exhibits generally contain high-level information with a summary of funding changes for the current fiscal year and the requested funding estimate for the budget year. We could not definitively identify or track dismantlement and disposal of specific ships because key work activities are not described by ship, cost and schedule for individual ships are not presented, and prior year costs and cost to complete a specific ship’s dismantlement and disposal are not provided. In reviewing programmatic documentation other than the budget requests, such as Puget Sound Naval Shipyard dismantlement planning documents and the Navy’s long-range shipbuilding plans, we found instances of submarine inactivation costs significantly exceeding estimates and notable delays to the start dates for work activities. We found that, although not required, this information was not reflected in the budget exhibit documents we reviewed. As another example we previously noted, Navy officials stated that CVN 65 inactivation—already completed in December 2017—cost $863 million. We could not track this cost from the budget exhibits because of their limited detail. As a consequence of the general lack of detail in the budget exhibits, decision makers cannot readily identify if cost growth occurred or if a specific ship was dismantled when planned, hindering oversight of dismantlement and disposal projects. The Navy’s OMN annual appropriations fund work activities on a year-by- year basis, which does not necessarily allow for tracking of the full resource commitment of a project over time or enable monitoring of cost growth to determine if additional funds are needed. Navy officials stated that they fully fund dismantlement and disposal efforts that span multiple fiscal years. They added that for CVN 65, the Navy may divide the work into multiple discrete phases that are separately funded due to the lengthy projected schedule. This approach could require the Navy to seek OMN appropriations in several non-consecutive years. Such an approach could make tracking CVN 65 dismantlement and disposal funding challenging, as the total cost and any changes would be obscured among the multiple funded activities that collectively compose the total dismantlement and disposal effort. Navy officials acknowledged that they could provide further information, such as total project cost and an overall schedule for CVN 65, in the OMN budget exhibits. However, without direction from DOD leadership or Congress, Navy officials stated that they have no plans to deviate from providing the traditional OMN budget exhibit information. Providing additional information in the CVN 65 budget exhibit could enable decision makers to track total cost, any cost changes, schedule progress, and general performance for the CVN 65 dismantlement and disposal. Navy Could Provide More Budget Details for CVN 65 While the Navy funds ship dismantlement and disposal from the OMN account, budget exhibits for other accounts—such as the Shipbuilding and Conversion, Navy (SCN) account typically used for major investment items—offer examples of how to provide decision makers with more detailed information. Budget exhibits for SCN appropriations are structured to identify major elements of cost and track those costs over time, consistent with DOD Financial Management Regulations. For example, the SCN budget exhibits typically contain specific information for each ship being procured with a distinct funding line for major cost categories such as basic construction, propulsion, and electronics. Additionally, these budget exhibits describe the program with specific plans for the upcoming budget year and estimate across 5 fiscal years (known as DOD’s Future Years Defense Program), including the total cost to complete the program. While some of the SCN budget exhibit elements are not applicable to dismantlement and disposal, others could be adapted and used in an OMN budget exhibit for CVN 65 to provide information that would enable better oversight, such as work activities planned and performed by fiscal year; prior years’ funding data; future years’ funding plans; cost to complete dismantlement; schedule of key events; and information on the contractor(s), contract type, and contract award and completion dates. Navy officials said they typically would not provide the level of detail found in SCN budget exhibits or the exhibits for other DOD acquisition programs because OMN exhibits are not designed to support the same level of oversight. Unlike DOD acquisition programs, DOD projects completed with operation and maintenance funds typically are not investment programs and generally do not require the same level of oversight. However, as we previously indicated, Navy officials noted that if DOD leadership or Congress provided clear direction on what additional details related to CVN 65 dismantlement and disposal should be included in OMN budget exhibits, it could provide that additional information to support oversight. Navy officials stated that given the considerable funding needs and congressional interest with CVN 65, they were assessing options for providing specific detail in the OMN budget exhibit for its dismantlement and disposal activities. They added that no specific decisions had been made on what additional information, if any, would be included for CVN 65. Despite being a part of the final phase in the program’s life cycle, we found no specific reporting requirement related to the cost, schedule, risk management, and general performance of dismantlement and disposal activities in DOD or Navy policy that would support oversight by DOD or Congress. Officials from Naval Reactors and the Naval Sea Systems Command confirmed that there is no reporting requirement for performance of dismantlement and disposal of Navy ships. Navy officials noted that dismantlement and disposal activities are included in their annual briefings to Congress that support the Navy’s budget requests, but acknowledged that the typical comparatively low-cost ship dismantlement and disposal activities are generally of less interest when combined with a briefing on shipbuilding and other high-dollar acquisition investments. This approach may be appropriate for submarine dismantlement and disposal activities that have lower costs, shorter periods of performance, and a well-established history. However, the magnitude of CVN 65’s anticipated cost of dismantlement and disposal is comparable to that of large DOD acquisition programs. Such programs generally are expected to provide more information to decision makers within DOD and Congress through formal reporting on plans, activities, and performance to support accountability than what has traditionally been provided with respect to Navy dismantlement and disposal activities. The precedent-setting nature of the CVN 65 dismantlement and disposal adds a level of risk and heightens the importance of having sufficient accountability measures to facilitate oversight. There is greater potential for unexpected challenges to arise because a nuclear-powered aircraft carrier has not been dismantled and disposed of before. Additionally, CVN 65 provides an opportunity to establish a foundation for management and oversight of future aircraft carrier dismantlement and disposal efforts, with the first of 10 Nimitz-class carriers expected to reach the end of its service life in the next decade. Standards for internal control in federal government state that in order to identify and mitigate risk, program objectives such as a baseline for cost and schedule, should be clearly defined in measurable terms so performance in attempting to achieve those objectives can be assessed. Doing so would also provide the Navy with the ability to collect important historical cost data that could be used to inform cost estimates for future aircraft carrier dismantlement and disposal efforts. DOD acquisition programs could serve as a model to identify appropriate cost and schedule objectives for the CVN 65 dismantlement and disposal, even though it is not an acquisition program and not subject to these requirements. DOD acquisition programs with significant resource commitments comparable to that expected of CVN 65 are generally subject to structured oversight and have reporting requirements to support performance transparency and accountability. As discussed earlier, preliminary cost estimates for CVN 65 dismantlement and disposal may exceed $1 billion, regardless of the option the Navy ultimately selects. While many requirements for DOD acquisition programs are not relevant to dismantlement and disposal, even when costs may reach similar levels, we found elements of the reporting requirements associated with larger DOD acquisition category (ACAT) programs that the Navy could leverage to facilitate oversight of CVN 65 dismantlement and disposal. For example, ACAT II programs—which have estimated costs comparable to CVN 65 dismantlement and disposal cost expectations—are required by DOD policy to establish a program cost and schedule baseline prior to program start and report any significant deviations from the established baseline. They also are required by statute to provide information on risk management. Table 3 highlights some DOD acquisition program reporting elements that could support oversight of CVN 65 dismantlement and disposal. For example, once a cost baseline is established, comparison to an independent cost estimate or assessment could provide greater assurance that the risks associated with performing CVN 65’s large-scale, first-of-a-kind dismantlement activities were adequately considered and appropriately estimated. GAO’s Cost Estimating and Assessment Guide states an independent review of a program’s cost estimate is crucial to establishing confidence in the estimate. It provides an unbiased test of whether the program cost estimate is reasonable and can be used to identify risks related to budget shortfalls or excesses. The Naval Center for Cost Analysis is responsible for developing independent cost assessments for ACAT II Navy programs, while the Office of the Secretary of Defense’s Office of Cost Assessment and Program Evaluation develops independent cost estimates for major defense programs. As noted earlier, the Navy continues to refine its cost estimate of the naval shipyard option and expects to receive an estimate for the full commercial option from the Center for Naval Analyses in October 2018. The Navy stated it considers the anticipated cost estimate and model from the Center for Naval Analyses to be the independent cost estimate for the full commercial option. We view this estimate as a valuable step in establishing cost expectations for the full commercial option, but believe it is inadequate because it will determine the Navy’s cost expectations as opposed to validating an existing estimate—the intent of having an independent assessment. For the naval shipyard option, the Navy suggested no plans for an independent cost estimate as it continues to refine the current cost estimate prior to a decision for CVN 65. Completing an independent cost estimate for both CVN 65 options prior to a Navy decision on its dismantlement and disposal approach would provide additional information to inform a decision that could have repercussions for carrier dismantlement and disposal activities for years to come. Adapting certain acquisition program requirements to the CVN 65 effort, as described above, would help the Navy establish baselines that can be tracked by decision makers to assess cost and schedule, and help identify deviations, if any. These types of reporting requirements would provide decision makers with greater information to support their oversight and hold the Navy accountable for meeting CVN 65 dismantlement and disposal expectations. The regulatory authority determines the rules, procedures, and oversight that will guide the dismantlement and disposal process for CVN 65. The Navy is considering three regulatory authority scenarios related to the naval shipyard or full commercial options, as discussed in table 4. If the Navy chooses the naval shipyard option, it can rely on Naval Reactors’ extensive experience serving as the regulatory authority for dismantlement activities conducted at Puget Sound Naval Shipyard. Naval Reactors has overseen the dismantlement and disposal of roughly 130 reactors from submarines and cruisers by the naval shipyard. Many shipyard oversight organizations and activities, as well as on-site Naval Reactors personnel, help control environmental and human health exposures. For example, the Radiological Controls Office is responsible for monitoring radiation exposure to the workforce and ensuring radioactivity is confined to controlled work areas. The Nuclear Quality Division employs nuclear auditors who review performance, processes, and instructions for all nuclear work at the shipyard. Although the scale and design of CVN 65 creates some unique dismantlement and disposal considerations as compared to the submarine and cruiser activities, Navy officials stated they plan to use the same organizations located at the shipyard and practices to oversee performance if they decide to complete the CVN 65 work at the shipyard. The environmental impact statement planned for CVN 65 is expected to outline the different needs that the aircraft carrier presents for the dismantlement process and disposal path, such as changes related to the transportation of CVN 65 reactor packages required if the Navy chooses to use four larger dual reactor compartment disposal packages instead of eight single packages to dispose of the carrier’s reactors. While the Navy can rely on familiar regulatory practices to support the naval shipyard option, as discussed earlier, this option includes potential workload and schedule disadvantages. Agreement State Program The Atomic Energy Act gives the Nuclear Regulatory Commission (NRC) authority over domestic industrial, medical, and research uses of radioactive materials. The act also authorizes NRC to enter into agreements with states (called agreement states) so they assume, and NRC relinquishes, regulatory authority over specified radioactive materials. Specifically, NRC is authorized to enter into agreements to allow states to assume regulatory authority over source, byproduct, and special nuclear materials in quantities insufficient to form a critical mass. NRC must find a state program adequate to protect public health and safety and compatible with NRC’s program for regulating such materials before entering into these agreements. The mechanism for the transfer of NRC's authority to a state is an agreement signed by the governor of the state and the chair of the Commission. Naval Reactors’ position is that a commercial company could dismantle and dispose of CVN 65 under the regulatory authority of NRC or an agreement state. According to Naval Reactors officials, the full commercial option would represent a continuation of Naval Reactors’ long history of nuclear-related activities with vendors licensed and regulated by NRC or agreement states. For example, Naval Reactors officials noted they commonly have used facilities licensed by NRC or agreement states for a range of manufacturing, processing, and disposal activities available for naval nuclear materials. Naval Reactor officials specifically assert that, as CVN 65 has already been defueled, such a facility should be able to process the byproduct material on the ship. However, NRC stated its disagreement that it or an agreement state is able to serve as the regulatory authority for CVN 65, emphasizing that regulatory responsibility for the safe processing and disposal of Navy ships falls to Naval Reactors under its Department of Energy authority. NRC officials also noted that Naval Reactors has been regulating nuclear-powered ship dismantlement and disposal activities exclusively at Puget Sound Navy Shipyard for decades. Coordination between Naval Reactors and NRC to identify the applicable regulatory authority and establish a regulatory plan for the CVN 65 full commercial option would help ensure accountability for safe dismantlement and disposal of CVN 65 under the full commercial option. It would also enable the Navy and commercial companies to effectively estimate costs. Without a resolution, the Navy could face challenges in estimating the cost and completing a comprehensive business case analysis of costs, benefits, and risks for the full commercial option if it is unsure of which regulatory authority will be responsible for enforcement. Furthermore, companies with potential interest in the CVN 65 work may not be able to effectively estimate the workload and associated cost without a clearly identified regulatory authority. Resolution of this disagreement also has relevance for other future ship dismantlement and disposal activities, such as with the Surface Ship Support Barge in the near term and the Nimitz-class aircraft carriers in the long term. Navy Surface Ship Support Barge The Surface Ship Support Barge is a dockside refueling facility constructed from a converted Navy tanker vessel used to disassemble spent nuclear fuel for shipment within a water pool. Naval Reactors noted this facility is now obsolete, with no further use planned, and the Navy is interested in dismantling and disposing of it commercially. According to Naval Reactors officials, the barge contains very low radioactivity in the water pool and fluid systems, which requires appropriate dismantlement and disposal measures. The Navy halted its pursuit of a contract award to dismantle and dispose of the barge in early 2017 based on NRC formally stating it has no regulatory authority over the dismantlement and disposal of naval vessels. A Naval Reactors official stated a request for information may be issued in 2018 to solicit input from commercial companies for dismantlement and disposal of this barge, but plans remain unsettled. Naval Reactors could use its own authority to regulate a full commercial dismantlement of CVN 65. Naval Reactors officials stated, however, that NRC or agreement states—which regulate industrial, medical, and research uses of radioactive materials—also have authority to regulate commercial dismantlement and disposal of CVN 65, and the Navy would benefit from leveraging their regulatory experience and structure. In particular, Naval Reactors officials stated that for the full commercial option, their responsibility to provide for processing and disposal of the byproduct material—which Naval Reactors indicated is what remains on CVN 65—can be best met by contracting with commercial companies licensed by NRC or an agreement state. According to Naval Reactors officials, even if NRC maintains that it cannot regulate material from CVN 65, some states may do so under their own authority. Specifically, Naval Reactors’ position is that states that had agreements with the old Atomic Energy Commission prior to its abolishment and the creation of NRC in 1974 were granted—and continue to maintain—authority to process naval nuclear propulsion waste. Accordingly, Naval Reactors officials stated that these states could serve as the sole regulatory authority over commercially-performed CVN 65 dismantlement and disposal. Naval Reactors officials also asserted specific potential advantages of having NRC or an agreement state regulate commercial dismantlement and disposal of CVN 65. First, they said the regulatory structure that NRC and agreement states apply to commercial nuclear-related activities includes an enforcement process to impose fines for violations, which Naval Reactors does not have. Additionally, Naval Reactors officials noted the Navy’s contract strategy options could be improved if NRC or an agreement state serves as the regulatory authority for CVN 65. Specifically, they stated that a reason for the Navy’s interest in using NRC or agreement state authority is the possibility of emulating the firm-fixed-price contract currently being used to decommission a commercial nuclear power plant. In this example, the operating license was transferred from the utility that owns the plant and site to a dismantlement contractor to more quickly complete the decommissioning. This effectively gave a dismantlement and disposal company the power plant owner’s responsibility for the safe dismantlement and disposal of the power plant, with NRC continuing to act as the regulatory authority. According to Naval Reactors, the firm- fixed-price contract used in this case was viable because the dismantlement contractor had total responsibility independent of the plant owner to perform the work in accordance with the regulations and requirements of NRC. Naval Reactors officials stated that the firm-fixed- price contract created an incentive for the company to thoroughly understand what the work entailed and perform the work efficiently to maximize its profit. Naval Reactors officials stated that a total separation of the owner from regulatory decisions and interpretations, like the one currently being used for the commercial nuclear power plant, is the Navy’s best means to facilitate the potential use of a firm-fixed-price dismantlement contract for CVN 65. They further stated that an approach wherein Naval Reactors retained regulatory authority could undercut the prospect of a firm-fixed- price contract by eliminating the clear division between regulator and owner. In taking this position, Naval Reactors officials suggest that a conflict of interest exists in being both the owner who wants to establish a fixed price for the work as well as the regulator with the potential to affect costs. Naval Reactors officials also noted that if Naval Reactors were the regulator, with no experience in regulating this type of work, commercial companies could have difficulty pricing such regulatory risk. In contrast, they stated that in NRC-regulated commercial plant dismantlement, as well as agreement state-regulated, large-scale radioactive waste processing work, commercial companies have demonstrated that they are willing to accept this regulatory risk, agreeing to contracts on a fixed-price basis. Nuclear Regulatory Commission’s Position In February 2017, NRC formally stated its position in a letter responding to a congressional inquiry that it has no regulatory authority for Navy ships, such as CVN 65. NRC said that under the Atomic Energy Act it is the responsibility of the Department of Energy, and accordingly Naval Reactors, to provide for processing and disposal of naval nuclear propulsion waste. NRC stated that agreement states also lack jurisdiction because their authority derives from NRC’s authority. NRC officials we interviewed also disputed Naval Reactors’ position that states have independent authority to process naval nuclear propulsion waste for two reasons. First, they stated that regulation of reactor dismantlement is not an activity that can be relinquished to the states. Second, they pointed out that the authorities that can be relinquished to the states under the Atomic Energy Act are licensing activities conducted under specific provisions of the act, and that the responsibility to safely process and dispose of naval nuclear propulsion waste is conducted under a different set of provisions which are not subject to licensing. NRC officials acknowledged that naval nuclear propulsion waste has been processed at facilities licensed by NRC or an agreement state, but distinguished such examples from CVN 65. Specifically, they noted that no additional regulatory oversight was required to process incidental amounts of such waste at facilities licensed to process commercial waste, but CVN 65 is not licensed by NRC or an agreement state and would involve only naval nuclear propulsion waste. NRC officials emphasized that the additional work that would be required to regulate the dismantlement of CVN 65—an unlicensed facility—puts it beyond NRC’s jurisdiction. Additionally, NRC stated that while such work could be carried out by a contractor, including a contractor with an NRC or agreement state license, the work would not be covered by that license, as NRC and agreement states do not have authority to regulate such activity. Essentially, NRC’s position is that while Naval Reactors can contract to have the dismantlement and disposal performed by a commercial entity, Naval Reactors would retain its own regulatory responsibility for enforcing that contract. NRC stated that if Naval Reactors desired technical support in regulating a commercial dismantlement, NRC or an agreement state could provide such services through a contract. This approach, according to NRC officials, would offer Naval Reactors a regulatory consultant familiar with commercial dismantlement while maintaining Naval Reactors as the regulatory enforcement authority. In such an arrangement, NRC or an agreement state could identify regulatory concerns, but Naval Reactors would be responsible for determining what corrective action is taken to address those concerns. Naval Reactors officials stated they are in ongoing discussions with NRC about this potential approach. They also asserted that this potential approach is not optimal because, as previously discussed, it could create regulatory uncertainty for commercial companies by preventing a clear separation of the regulator and owner. Since Naval Reactors has its own authority as part of the Department of Energy, it could choose to regulate a CVN 65 commercial dismantlement. However, with Puget Sound Naval Shipyard having performed the dismantlement and disposal work for previous nuclear-powered vessels, Naval Reactors lacks experience to draw upon for a full commercial option. It also cannot rely on the organizational structure and practices in place at Puget Sound Naval Shipyard to support a commercial CVN 65 dismantlement that will be conducted at an offsite facility. If Naval Reactors serves as the regulatory authority for a full commercial dismantlement, it will have to determine what mechanisms are needed to provide sufficient monitoring of the work and how they will fulfill the roles and responsibilities typically filled by the naval shipyard’s support. These mechanisms may include elements similar to those used by the naval shipyard as well as new ones unique to the dismantlement practices used by commercial companies. A significant consideration for Naval Reactors when working to establish an approach to monitor commercial dismantlement and disposal is the component-based dismantlement process that companies may use. This process, which is commonly used to dismantle commercial nuclear power reactors, involves segmenting reactor components (i.e., cutting to reduce in size) so the pieces can be put in standardized containers for transport and disposal. This process is a contrast to the traditional dismantlement approach that Nuclear Reactors uses at Puget Sound Naval Shipyard— an approach that would leave CVN 65’s reactors largely intact by encasing them in packages for disposal. As noted by Naval Reactors officials, commercial dismantlement practices potentially could require the Navy to decide whether to adjust its standard radiological work practices to better align with different dismantlement and disposal activities or use the same practices it uses for work performed at Puget Sound Naval Shipyard. Using the same practices could affect cost expectations for the Navy and commercial companies by changing the way the work is performed. As an example, applying the Navy’s standard practices for total containment of radionuclides to a dismantlement process that involves increased cutting could require additional measures to control the work environment. Over 50 years ago, CVN 65 set a precedent as the Navy’s first nuclear- powered aircraft carrier. The Navy’s plans and decisions for this aircraft carrier’s dismantlement and disposal represent an opportunity to create a standard that the Navy may use for decades to come as the Nimitz-class carriers enter retirement. As the Navy considers how to proceed, it will be critical to ensure that there is sufficient oversight and accountability for what likely will be an effort greater than $1 billion that lasts the better part of a decade. Since budget exhibits are a primary tool to aid Congress in making well-informed funding decisions, without additional details, transparency and the ability to assess CVN 65 progress could be limited. In particular, a more robust budget exhibit for CVN 65 that includes cost and schedule information across the Future Years Defense Program, as well as the status of activities—including any contract awards and a tracking of high level changes in cost and schedule—could help increase transparency for oversight. Reporting requirements for DOD acquisition programs, which are not required or currently planned for CVN 65 dismantlement and disposal, provide examples of the types of information that decision makers can use to ensure that resource-intensive programs are meeting expectations or make changes as necessary. Without establishing a cost and schedule baseline that has been validated by an independent cost estimate or assessment, it will be difficult for decision makers to track cost and schedule performance or have confidence in CVN 65 costs. The Navy has indicated it is receptive to providing additional information to support oversight that is commensurate with other Navy programs of a similar funding level. However, the Navy also stated that it requires clear direction from DOD leadership or Congress on what additional accountability measures are desired before it would make any changes to current budget exhibits and reporting. Naval Reactors is charged with cradle-to-grave responsibility for our nation’s naval nuclear propulsion material. The disagreement between Naval Reactors and NRC about the regulatory authority for commercial dismantlement and disposal of Navy nuclear ships persists. Coordination between the two agencies to identify the applicable regulatory authority for a full commercial dismantlement and disposal of CVN 65 and to develop a regulatory plan would help establish which practices and standards will apply to uphold nuclear safety and security. It would also help ensure the Navy’s selection of a dismantlement and disposal plan for CVN 65 is informed by well understood regulatory expectations and cost and schedule estimates that reflect those expectations. We are making one matter for congressional consideration. Congress should consider requiring Naval Reactors to coordinate with the Nuclear Regulatory Commission for any CVN 65 dismantlement and disposal performed commercially to identify the applicable regulatory authority. In the event that an entity other than Naval Reactors will serve as the regulatory authority, Naval Reactors should submit to Congress a plan that identifies the regulatory authority for CVN 65 activities, and includes acknowledgement from that regulatory entity of its agreement with Naval Reactors and the legal basis for its authority. If the regulatory entity is an agreement state, such acknowledgment should be coordinated with the Nuclear Regulatory Commission. (Matter 1) We are making the following four recommendations to DOD. The Secretary of Defense should ensure that the Navy provides additional information in the annual President’s budget exhibits associated with CVN 65 dismantlement and disposal to facilitate improved transparency and accountability. Additions should, at a minimum, include the CVN 65 funding estimate across the Future Years Defense Program, activities planned or performed for applicable fiscal years, tracking of total cost and high level changes in cost and schedule from the prior year with explanations for changes, and if applicable, contract type, awardee, award value, and award and completion date estimates. (Recommendation 1) The Secretary of Defense should require the Navy to obtain an independent cost estimate, performed by DOD’s Office of Cost Analysis and Program Evaluation or the Naval Center for Cost Analysis, for both the naval shipyard and full commercial options before choosing a dismantlement and disposal approach for CVN 65. (Recommendation 2) The Secretary of Defense should require the Navy to complete a risk management plan prior to beginning the CVN 65 dismantlement and disposal. (Recommendation 3) The Secretary of Defense should require the Navy to approve a cost and schedule baseline prior to beginning the CVN 65 dismantlement and disposal. (Recommendation 4) We provided a draft of this report to DOD and NRC for comment. Both DOD and NRC agreed with the draft report and its findings, and DOD concurred with the four recommendations we directed to the department. DOD and NRC provided written comments, which have been reproduced in appendix II and appendix III, respectively. DOD and NRC also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense, the Secretary of the Navy, the Nuclear Regulatory Commission, and other interested parties. This report will also be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact me at (202) 512-4841 or oakleys@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix IV. This report (1) describes the differences between the dismantlement and disposal options under consideration, including cost and schedule as well as workload and facilities; (2) evaluates the Navy’s funding and reporting practices for dismantlement and disposal activities; and (3) assesses the effect that nuclear regulatory authority considerations have on dismantlement and disposal options for CVN 65. To identify the differences between the potential CVN 65 dismantlement and disposal options, we reviewed Navy documentation on prior, ongoing, and future dismantlement and disposal activities, as well as information related to the different options the Navy has considered or is considering for CVN 65. We interviewed Navy officials and reviewed documentation from the Naval Sea Systems Command, which includes Naval Reactors, and Puget Sound Naval Shipyard and Intermediate Maintenance Facility (hereafter referred to as Puget Sound Naval Shipyard). To obtain an understanding of the full commercial dismantlement and disposal approach, including work practices and potential work sites, we interviewed officials and reviewed documentation from commercial companies that the Navy identified as having involvement in shipbreaking or nuclear-related industries and potential interest in CVN 65. These companies include Atkins Global; EnergySolutions; Huntington Ingalls Industries (HII – Nuclear); International Shipbreaking Limited; NorthStar Group Services; and Waste Control Specialists. For CVN 65 cost and schedule estimates, the Navy considers all estimates to still be preliminary because the Navy has yet to formally begin the environmental impact statement process and remains years away from a decision on its dismantlement and disposal approach. As a result, we did not formally evaluate the reasonableness of any cost or schedule estimates. However, we did review the initial estimates to gain insight on historical and current cost expectations. To assess the Navy’s preliminary cost estimates for the naval shipyard option, we reviewed Navy data on the basis for the cost estimates, particularly estimates since 2011. This included reviewing the cost factors that contributed to each estimate to understand how the shipyard’s increasing knowledge of CVN 65’s ship characteristics and changes to the planned dismantlement approach fed into the different estimates. For the Navy’s notional cost estimate of the CVN 65 full commercial option, we reviewed the data and approach used by the Navy to develop initial cost information. This included commercial decommissioning data, which the Navy used to establish a rough order of magnitude cost estimate based on the limited information available that is comparable to CVN 65 dismantlement and disposal. We used the same data to generate our own notional estimated cost range based on a Nuclear Regulatory Commission (NRC) cost formula, as well as published data from the Organisation for Economic Co- operation and Development’s Nuclear Energy Agency. This included analysis of costs reported by operating power reactor licensees in NRC’s 2015 decommissioning funding status report to comply with decommissioning financial assurance reporting requirements. Our review of historical data from the Nuclear Energy Agency and a 2011 report on nuclear decommissioning by an independent panel established by the California Public Utilities Commission helped us identify cost drivers and categories of costs attributed to specific activities that occur when decommissioning commercial power plants. To assess workload and facility considerations related to CVN 65, we analyzed Puget Sound Naval Shipyard workload and resource requirements data for fiscal years 2006 through 2025, and facility data for fiscal years 2018 through 2035. To assess the reliability of these data, we interviewed knowledgeable officials and reviewed documentation to verify the controls and measures used to validate and maintain the data. We determined these data to be reliable for our purposes of discussing the existing and planned workload at Puget Sound Naval Shipyard. We compared projections to actual workload when available to identify differences and compared the average amount of annual projected workload to the average amount of annual projected workforce available. We also reviewed a 2018 report on the Navy’s strategic plan for addressing the infrastructure deficiencies at the public naval shipyards as well as the Navy’s long-range shipbuilding plans for fiscal years 2011, 2016, and 2019. Additionally, we reviewed past GAO reports that addressed operation and maintenance activities at naval shipyards, and the related workload demands and facilities’ requirements. To identify the Navy’s funding and reporting practices for dismantlement and disposal activities, we reviewed Navy documentation on prior, ongoing, and future ship dismantlement and disposal activities, as well as Navy procurement and operation and maintenance budget exhibits— fiscal years 2016 and 2017 for procurement exhibits and fiscal years 2007 through 2017 for operation and maintenance budget exhibits. We also reviewed Federal Acquisition Regulations, Office of Management and Budget guidance on budget information, and the Department of Defense and Navy acquisition regulations. We interviewed officials from Naval Reactors and the Program Executive Office for Aircraft Carriers. Based on these efforts, we evaluated the Navy’s historical approach for funding, conducting oversight, and reporting on dismantlement and disposal activities. We assessed the Navy’s approach against federal standards for internal control. Additionally, we assessed how funding and typical reporting requirements for Department of Defense acquisition programs align with the potential need to facilitate oversight for CVN 65 dismantlement and disposal. To determine the effect that nuclear regulatory authority considerations have on dismantlement and disposal for CVN 65, we examined applicable laws, regulations, executive orders, policies, and guidance documents related to nuclear-powered ships. We also reviewed past GAO reports related to environmental and nuclear requirements. We reviewed Navy documentation on prior, ongoing, and future ship dismantlement and disposal activities. We also interviewed officials and reviewed documentation from Naval Reactors; the Assistant Secretary of the Navy for Energy, Installations, and Environment; the Chief of Naval Operations Environmental Readiness Division; the Program Executive Office for Aircraft Carriers; Puget Sound Naval Shipyard; and the Nuclear Regulatory Commission. Additionally, we interviewed officials from the Washington State Departments of Health and Ecology, the Texas Commission on Environmental Quality, and the Texas Department of State Health Services—two states in which ship dismantlement activities have recently occurred and that have nuclear waste disposal sites. We conducted this performance audit from August 2017 to August 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Shelby S. Oakley, (202) 512-4841 or oakleys@gao.gov. In addition to the contact named above, key contributors to this report were Diana Moldafsky, Assistant Director; Antoinette Capaccio; Kurt Gurka; Stephanie Gustafson; Kristine Hassinger; Jean Lee; Sean Merrill; LeAnna Parkey; Karen Richey; and Roxanna Sun.", "summary": "The Navy is planning to dismantle and dispose of CVN 65 after 51 years of service. In 2013, the estimated cost to complete the CVN 65 work as originally planned increased to well over $1 billion, leading the Navy to consider different dismantlement and disposal options. The Senate Report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to review the Navy's plans for CVN 65. This report addresses (1) dismantlement and disposal options under consideration; (2) nuclear regulatory authority considerations; and (3) funding and reporting practices. GAO reviewed budget, cost, and schedule documentation, as well as applicable laws, regulations, executive orders, policies, and guidance. GAO interviewed officials from the Navy and commercial companies about the dismantlement and disposal options, and NRC and state agencies about regulatory considerations. The Navy is assessing two options to dismantle and dispose of its first nuclear-powered aircraft carrier—ex-USS Enterprise (also known as CVN 65). CVN 65 dismantlement and disposal will set precedents for processes and oversight that may inform future aircraft carrier dismantlement decisions. Characteristics of the Navy's Potential CVN 65 Dismantlement and Disposal Options Source: GAO analysis of Navy and Nuclear Regulatory Commission information. | GAO-18-523 The Navy could rely on its extensive regulatory experience for the naval shipyard option. However, the Navy's ability to effectively evaluate the full commercial option is hampered by a disagreement with the Nuclear Regulatory Commission (NRC), which oversees the commercial nuclear industry. Naval Reactors officials assert that NRC's regulatory authority should apply to the full commercial option. NRC disagrees with this position. Coordination between the two agencies to identify the applicable regulatory authority and craft a regulatory plan would help ensure accountability, solidify cost estimates, and facilitate a CVN 65 decision. The budget documentation and reporting that the Navy typically uses for ship dismantlement and disposal projects will not enable adequate oversight of CVN 65—a multi-year project with a cost that may exceed $1 billion. The documents that support Navy budget requests for dismantlement and disposal funding do not provide data that decision makers can readily use to track dismantlement costs against an established baseline or to evaluate funding plans for future years. Further, the Navy has no reporting requirements to support accountability for CVN 65 activities. Large defense acquisition programs generally are required to submit more detailed budget information and report on cost, schedule, and performance. These practices could be adapted for CVN 65 to provide information that will facilitate oversight commensurate with the scale of the effort. Congress should consider requiring Naval Reactors to coordinate with NRC to identify the applicable regulatory authority for a CVN 65 commercial dismantlement and disposal. GAO is also making four recommendations, including that the Navy take action to provide additional budget information and reporting to facilitate improved transparency and accountability for the CVN 65 cost, schedule, and risks. The Department of Defense agreed with all four recommendations.", "document_type": "gao"}
{"report": "After the terrorist attacks of September 11, 2001, Congress passed and the President signed the Aviation and Transportation Security Act into law on November 19, 2001, with the primary goal of strengthening the security of the nation’s civil aviation system. The act established TSA as the agency with responsibility for securing all modes of transportation, including civil aviation. As part of this responsibility, TSA performs or oversees security operations at the nation’s nearly 440 commercial airports, including managing passenger and checked baggage screening operations. TSOs inspect individuals and property to deter and prevent passengers from bringing prohibited items on board an aircraft or into the airport sterile area—in general, an area of an airport to which access is controlled through the screening of persons and property. While working at an airport checkpoint as shown in figure 1, TSOs perform a variety of tasks, which include: Travel document verification: a TSO checks passengers’ identification against the boarding pass and the individual presenting the identification. Divestiture: a TSO assists passengers by informing them what items need to be placed on the x-ray conveyor belt. X-ray interpretation: TSOs screen passengers’ carry-on baggage and personal property by interpreting x-ray images to identify any prohibited items. Advanced imaging technology operations: Passengers are screened via advanced imaging technology (often referred to as body scanners), which identifies areas where they may be concealing prohibited items. Walk-through metal detector operation: a TSO operates the walk- through metal detector. Physical searches: Passengers can opt to be screened through a physical search, or TSOs may perform a physical search to resolve an alarm triggered by the AIT system or the walk-through metal detector, among other reasons. Explosive trace detection and manual searches of property: TSOs use an explosives trace detection system by swabbing carry-on baggage and testing the sample for explosive residue or vapors. This test is usually performed in conjunction with a manual search of the carry-on baggage. Exit lane monitoring: a TSO watches the lane through which passengers exit the sterile area to ensure that no one enters the sterile area through that passage. Within TSA, two offices work together to manage TSOs and ensure their training is current and relevant. OSO is responsible for allocating TSO staff to airports, scheduling TSO work hours and training availability, and developing SOPs that govern how TSOs screen passengers and baggage. OTD is responsible for developing initial and ongoing training curricula for TSOs based in part on SOPs. Within OTD, a dedicated team is located at the Academy to manage updates at TSO Basic Training. In accordance with the Aviation and Transportation Security Act, screeners must complete a minimum of 40 hours of classroom instruction, 60 hours of on-the-job training, and successfully complete an on-the-job training examination. Until 2016, new TSOs completed these training requirements at or near their home airports through the New Hire Training Program (NHTP). Since TSA centralized the TSO Basic Training program in January 2016, TSOs fulfill these training requirements through classroom training at the Academy as well as training at their home airports prior to the Academy and on-the-job training after completion of TSO Basic Training. During the 2 weeks spent at the Academy, TSOs receive 80 hours of training on standard operating procedures, threat detection, and the use of screening equipment. Prior to attending TSO Basic Training, new TSOs complete computer-based prerequisite training and may shadow experienced TSOs at a checkpoint. TSO Basic Training allows for participants to be trained at a dedicated facility with more hands-on training than was possible for NHTP (see Appendix I for a comparison of the two programs). As shown in table 1, of the $53 million obligated from January 2016 through March 2018, TSA obligated $18.2 million for procurement and development of the modular buildings on the FLETC campus used for TSA training, as well as associated hardware and set-up obligations such as audio/video equipment and fully operational simulated checkpoints. TSA obligated an additional $12 million in fiscal year 2016 and $13.7 million in fiscal year 2017 for the delivery of TSO Basic Training, including associated student travel and related equipment. TSA officials told us that due to continuing budget resolutions that funded the government between October 2017 and March 2018, TSA was not able to fully fund the interagency contract between TSA and FLETC to support the TSO Basic Training course in fiscal year 2018 at the beginning of the year. For this reason, TSA does not yet have 2018 training obligations available for reporting through its accounting system. However, based on the average cost per student in fiscal year 2017 of about $2,300 to attend TSO Basic Training, TSA estimates total training obligations of approximately $9.1 million in the first half of fiscal year 2018. According to the business case for TSO Basic Training and TSA officials, implementation of the TSO Basic Training program at the Academy was anticipated to provide a number of potential benefits. The anticipated benefits identified generally align under two distinct categories: (1) efficiencies and improvements obtained through the centralized delivery of training, and (2) enhanced professionalism and “esprit de corps” obtained through bringing newly hired screeners together for centralized training. Collectively, these benefits were also envisioned by TSA headquarters officials to have a positive impact on screening effectiveness and public perception of the TSA workforce. Based on several analyses of training delivery options that TSA has conducted since 2008, TSA determined that a centralized training academy would have a number of potential benefits relative to the decentralized training previously administered at field airports through NHTP. Among the potential efficiencies and improvements cited by TSA are: Increased consistency and standardization. According to TSA documents and OTD headquarters officials, centralized training provides a standardized curriculum that serves as a foundation for the skills, knowledge, and equipment used across an array of different airport environments. The TSA business case and other supporting analyses note that such an approach offers greater consistency of training delivery and a better mechanism for developing, delivering, and evaluating course content. Equipment availability and expanded course content. TSO Basic Training includes a full suite of dedicated checkpoint equipment and x-ray image simulators for students to practice learned skills, eliminating the challenge of finding available equipment and training times in a busy airport environment (see figure 2). Officials told us that being more familiar with the screening equipment increases TSOs’ readiness for on-the-job training when they return to their home airports. Initial test results also indicate that participants trained at the Academy receive higher pass rates on end-of course assessments of x-ray image interpretation skills than those who received their initial training at their home airports. Specifically, according to TSA data, of the 5,877 test-takers who received training at TSO Basic Training in 2016, 91.5 percent passed the Image Interpretation Test on their first attempt. In contrast, 83.2 percent of the 1,458 test-takers who received training at local airports in 2016 passed the test on their first attempt. In addition, the Academy curriculum incorporates new learning opportunities, including a live demonstration of improvised explosive devices and an active shooter drill, both of which would be difficult to reproduce within the airport environment, according to TSA officials. Dedicated faculty and instructor development. TSO Basic Training offers a dedicated faculty and support staff focused exclusively on training TSOs. According to TSA officials, before TSO Basic Training, training at individual airports was often conducted by TSOs for whom instruction was a collateral duty, whereas instructors at the Academy have full-time training responsibilities and enhanced opportunities to learn from each other, increase their professional training skills, and provide feedback on the delivery of course curriculum. Centralized facility and shared logistics. By locating the TSA Academy at FLETC, TSA is able to take advantage of the services and logistical support that FLETC provides. Specifically, FLETC services and logistics include accommodations, meals, and transportation, thereby reducing the administrative demands on TSA personnel and allowing students a focused and efficient training experience. Additional efficiencies cited by TSA officials include lower overall costs for office space, janitorial services, and other operational costs because such costs are shared by the 96 agencies that use FLETC. According to TSA officials, conducting training at FLETC can also help TSA accommodate hiring surges and better augment future training, if needed. For example, TSA officials reported that the facility has surge capacity from its current capacity of 240 students up to 300 new students if sufficient instructors are available. According to TSA documents and training officials, another key benefit of centralized training is the opportunity to enhance professionalism and help foster camaraderie and esprit de corps. TSA anticipates that centralized, standardized training will not only provide trainees with an increased focus on the TSA mission and operational environment, but can serve to instill a common culture and sense of belonging among the broader community of TSOs nationwide. In its business case, TSA notes that centralized training of new recruits is a common model employed by the armed forces and other federal law enforcement agencies within DHS, such as U.S. Customs and Border Protection and the U.S. Coast Guard. According to the business case, by bringing together newly hired TSOs from around the country, TSA also hopes to inspire in its trainees a singular identity and unity of purpose, which previous analyses generally found lacking as part of the decentralized training approach. The business case also associates such increases in professionalism and esprit de corps with greater employee satisfaction and the potential for reduced attrition. Analysis conducted by TSA in 2017 provides some initial support for positive trends in these areas. For example, results of a 2017 TSA employee engagement survey indicated that respondents who attended TSO Basic Training reported higher scores in categories including Organizational Commitment, Job Satisfaction, and Overall Morale versus respondents who did not attend. TSA also reported a 19 percent reduction in the attrition rate during the first 180 days of being hired for those attending TSO Basic Training at the Academy in 2016 versus those who received their initial training at field airports through the New Hire Training Program. OTD updates and modifies the TSO Basic Training curriculum based, in part, on regular communications from OSO, the office responsible for developing SOPs for screening operations and managing TSO performance. Officials from both offices told us that OSO provides information to OTD on changes to SOPs as soon as changes are made so they can update the TSO Basic Training curriculum. For instance, in 2017, when OSO began planning major changes to the SOPs, the office gave OTD information about the planned SOP revisions, as well as the airports where the new SOPs would be piloted. In response, OTD modified its curriculum and was able to provide revised training for new TSOs based at airports that were piloting the program, while providing TSOs at all other airports the prior version of training. OTD officials noted that in some cases TSA must quickly update SOPs to reflect imminent threats. According to officials, a plan is in place to make changes to TSO Basic Training curriculum in response to emerging or imminent threats, although such threats have not been experienced since the establishment of TSO Basic Training in 2016. In addition to changes in SOPs, OSO officials indicated they may also change the timing of when TSOs employed by TSA attend TSO Basic Training. Specifically, officials told us that OSO plans to implement a new model for TSO Basic Training in which TSOs will attend TSO Basic Training 2 to 6 months after they are hired rather than as soon as is practical. According to TSA, the agency is pursuing this change to, among other things, implement a transparent career path for TSOs employed by TSA and to encourage and reward skill development. During the 2 to 6 months prior to attending TSO Basic Training, TSOs will perform checkpoint tasks that require training that can be delivered at the airport as soon as they are hired, such as checking passengers’ travel documents and helping passengers move through the checkpoint. Once TSOs are able to perform these initial tasks, they will attend TSO Basic Training at the Academy, Officials told us they are preparing for the change by modifying the TSO Basic Training curriculum to eliminate subjects that will be covered at the airports and to emphasize skills that more experienced TSOs will need, such as performing physical searches of passengers. TSA plans to implement the revised model beginning in August 2018. Finally, OTD receives information on TSO performance and uses that information to inform TSO Basic Training curriculum. For example, two TSA offices—OSO and the Office of Inspections—perform regular effectiveness testing of airport checkpoints through covert testing and share the results with OTD. After each covert testing event, each office conducts interviews with TSOs to determine the factors that contributed to their effectiveness at identifying prohibited items. Officials told us that OSO and OTD hold regular meetings to discuss the analyses of covert testing failures and ways in which training curriculum can be modified to address the reasons for the failures, which are then incorporated into the TSO Basic Training curriculum. Office of Inspections officials noted that they participated in the development of the TSO Basic Training curriculum and provide regular reports to OTD on covert testing results. OTD gathers input from TSO Basic Training participants, instructors, and contractors on ways to update the curriculum. For instance, TSO Basic Training instructors told us they submit “white paper proposals” to TSO Basic Training course managers detailing their suggested changes to the course. They can also provide feedback and suggestions during “train the trainer” sessions, in which all instructors participate when TSO Basic Training is updated. Instructors told us that all sessions include an opportunity for instructors to provide feedback after reviewing the new curriculum. Officials told us that they take instructors’ feedback into account when implementing new curriculum. For instance, officials told us that at the suggestion of instructors, they added time for discussion at the end of each checkpoint lab to help capture and share lessons learned. OTD also collects feedback from TSOs who have participated in the course, both at the end of their two weeks at the Academy and several months after their completion of the course. At the end of TSO Basic Training, OTD collects feedback from participants through a survey with both multiple choice and open-ended questions. The survey includes questions on the course curriculum and instructor performance. Officials told us that they regularly review the results of the survey and consider whether it is appropriate to address the feedback by modifying TSO Basic Training. For instance, the most often provided feedback for altering the curriculum was to increase the time in hands-on training using screening equipment in the Academy’s simulated checkpoints. In response, OTD officials told us they added nearly 5 hours of hands-on training to the 80- hour program in addition to the 6 hours that had previously been a part of the curriculum. In addition to collecting feedback from TSO Basic Training participants and instructors, TSA officials told us that TSA regularly uses a contractor to support the design and development of training courses and to assess existing courses, including TSO Basic Training. In 2016, the contractor conducted an evaluation of the instructional integrity of the TSO Basic Training curriculum. The resulting report made a number of recommendations to improve the curriculum and structure of TSO Basic Training, many of which OTD has implemented. For instance, the contractor recommended that TSO Basic Training include more opportunities for review of the material to reinforce TSOs’ understanding. In response, OTD implemented a review session at the end of the first week of training so TSOs have an opportunity to clarify information presented over the first week. TSA has implemented three of the four levels of the Kirkpatrick Model, a training evaluation model that, in part, helps TSA collect feedback from course participants and evaluate the impact on individual development. However, the agency has not developed goals for the program or related performance metrics to demonstrate progress toward goals. To evaluate the TSO Basic Training program, TSA uses the Kirkpatrick Model, which is a commonly accepted training evaluation model endorsed by the Office of Personnel Management and used throughout the federal government. The Kirkpatrick Model consists of a four-level approach for soliciting feedback from training course participants and evaluating the impact the training had on individual development, among other things. To date, TSA has implemented the first three levels of the model by administering (1) course surveys to participants at the end of the training program; (2) an end-of-course written exam and an x-ray image interpretation test to assess achievement of learning objectives; and (3) course surveys to participants and their supervisors several months after completing training to collect information regarding how the training affected behavior or performance on the job. OTD officials told us that they have not yet implemented Level 4 of the model because they do not believe they have enough data. Table 2 provides a description of what each level within the Kirkpatrick model is to accomplish and TSA’s progress in implementing the levels. While TSA reported potential benefits of TSO Basic Training in its business case and implemented the Kirkpatrick Model to assess training, it has not yet identified specific goals that the TSO Basic Training program is expected to achieve, nor has it developed performance measures to evaluate progress toward goals. The business case and the Kirkpatrick Model are positive steps and document certain benefits of TSO Basic Training, but without a set of specific training goals and associated performance measures for the program, TSA is not able to fully evaluate the program’s effectiveness and ensure accountability toward results. Such goals are important to help ensure alignment with course objectives and the end-of course examinations administered as part of Level 2 of the Kirkpatrick Model. In addition, without the development of specific goals, it is not possible to determine what types of performance measures should be used to help show progress toward such goals. For example, in its business case, TSA identified improved employee morale as one of the anticipated benefits of TSO Basic Training. However, there are no goals or metrics specifically related to this benefit. If TSA believes improved morale should be something for which TSO Basic Training aims, goals and measures could help them demonstrate the extent to which this benefit is being realized by the training program. Leading management practices related to training evaluation guidance identifies the importance of agencies developing and using performance measures regularly to ensure accountability and assess progress toward achieving results that are aligned with the agency’s mission and goals. In addition, these practices highlight the importance of agencies having clear goals about what the training or development program is expected to achieve as a precursor to developing such measures. When designed effectively, performance measures help decision makers (1) determine the contributions that training makes to improve results, (2) identify potential gaps in performance, and (3) determine where to focus resources to improve results. In particular, incorporating valid measures of effectiveness into training programs can enable an organization to better ensure that desired changes occur in trainees’ skills, knowledge, and abilities. According to OTD officials, the TSO Basic Training program was established on an accelerated schedule in late 2015 as one of multiple efforts to improve training delivery and help enhance screener effectiveness. Officials stated that the program is still relatively new and they plan to collect several additional years of data on system-wide screening performance before conducting efforts to further evaluate the impact of the training. They reported that the lack of performance measures is also due to the inherent difficulty of tying specific training initiatives to broader organizational results. Officials told us that once TSOs return to their home airports after TSO Basic Training, they are exposed to additional on-the-job training and differing airport cultures, which make it difficult to isolate the effects of TSO Basic Training. However, senior training officials agreed that establishing applicable goals and performance measures for the TSO Basic Training program would be helpful to support ongoing efforts and better measure program progress. We recognize that developing metrics to assess the performance of training programs on broad organizational results can be challenging. However, there are additional opportunities to develop program goals and performance measures as part of the training evaluation efforts at the Academy to help ensure that participants can demonstrate proficiency in performing core technical skills before returning to their home airports. We believe that developing goals for a training program does not need to wait for years of data. Goals reflect desired results, connected to an agency’s mission, which a program plans to achieve. In the over 2 years of using TSO Basic Training, TSA has not stated what results the training program is to achieve. TSOs provide a crucial function to help ensure passenger safety, and it is important to have goals aligned with this mission, as well as associated measures of effectiveness of the training they receive at TSO Basic Training to determine the extent to which they are able to fulfill their important role. As noted by leading management practices for training evaluation, agencies need credible information to demonstrate a training program is contributing to a goal and they can develop such data through a mix of quantitative and qualitative indicators. We found that options for assessing the effectiveness of TSO Basic Training could include measuring TSO performance by leveraging data from end of course examinations, such as the x-ray image interpretation test, and introducing similar additional tests or mechanisms to further evaluate trainees’ knowledge and skills in effective screening procedures. Additional options could include measuring employee morale as indicated by TSOs on their Kirkpatrick Level 1 surveys at the completion of the training program, and comparing these results against applicable program goals for employee morale that TSA could establish related to TSO Basic Training. By identifying annual goals and measures for TSO Basic Training, TSA will also be better positioned to move forward with Level 4 of the Kirkpatrick Model to evaluate the impact of training on broader organizational results. Given that over $50 million has been obligated to set up and operate the TSO Basic Training program to date, it is important that TSA incorporate annual goals and measures into the training program to be better informed when making training decisions and to help hold itself accountable for training results on a regular basis. TSOs perform a critical role in securing our nation’s commercial aviation system and often represent the most visible face of TSA to the public. For this reason, new hire training is an integral function to ensure that TSOs are obtaining the foundational skills and knowledge to help prepare them to perform their jobs effectively. In 2016, TSA initiated a major change to its training approach for new hires to help ensure a consistent and standardized training experience and promote enhanced camaraderie and esprit de corps. Although TSA has implemented a framework to assess participant reactions to the training and their knowledge of course content, it has not yet established goals for the TSO Basic Training program or measures to gauge effectiveness of the training TSOs receive to determine the extent to which they can fulfill their crucial role in ensuring passenger safety. By taking these steps, TSA will be better positioned to determine if the program is improving trainees’ skills, knowledge, and abilities and whether additional skill development, or other training modifications, may be needed. We are making one recommendation to the Administrator of TSA. Specifically, the Administrator of TSA should establish specific goals for the TSO Basic Training program and develop performance measures that can be used to assess if the program is achieving desired outcomes and help ensure accountability for training results on a regular basis. (Recommendation 1) We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are reprinted in appendix II, and technical comments, which we incorporated as appropriate. DHS agreed with our recommendation that TSA establish specific goals for the TSO Basic Training program and develop performance measures that can be used to assess if the program is achieving desired outcomes. In addition, in its written comments DHS outlined steps to address this recommendation. With regard to performance goals, TSA plans to establish broad goals that include successful screening and improved morale, among others. The stated goals are an appropriate response to our recommendation that TSA develop goals specifically for TSO Basic Training. These actions, if implemented effectively, should address the intent of our recommendation. With regard to developing performance measures that can be used to assess program outcomes, TSA intends to leverage existing mechanisms through its Kirkpatrick Model evaluations to measure program success. As we noted in the report, implementing the first three levels of the Kirkpatrick Model are positive steps that document certain benefits of TSO Basic Training, but they do not address specific goals or performance measures. Kirkpatrick Model Level 2 evaluations include proficiency exams administered prior to TSOs’ departure from the Academy. Data from these evaluations, in conjunction with specific goals, may provide quantifiable metrics that could inform further refinement of the TSO Basic Training curriculum. However, the surveys being used by TSA for Level 3 of the Kirkpatrick Model do not include metrics that would allow TSA to measure the program’s effectiveness and ensure accountability toward results. Specifically, the surveys do not demonstrate whether TSO Basic Training is reaching goals related to successful screening or improved morale because survey results are influenced by factors outside of the training program. We will continue to monitor TSA’s efforts in this area. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (206) 287-4804 or AndersonN@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. In 2016, the Transportation Security Administration (TSA) established the TSO Basic Training program at the TSA Academy, located at the Federal Law Enforcement Training Centers in Glynco, Georgia. TSO Basic Training allows new TSOs to be trained at a dedicated facility with simulated checkpoints. Previously, TSOs’ initial training was delivered through the New Hire Training Program at or near their home airports, at which they were able to practice using checkpoint equipment only when the equipment was not being used, such as after hours. For further comparison of the two programs, see Table 3. In addition to the contact named above, Dawn Locke, Assistant Director; Miriam Hill, Analyst in Charge; and Ryan Lambert made key contributions to this report. Also contributing to the report were Elizabeth Dretsch, Eric Hauswirth, Susan Hsu, Heidi Nielson, and Adam Vogt.", "summary": "TSA is responsible for ensuring that all airline passengers and their property are screened for items that could pose a threat to airplanes and passengers at 440 airports across the United States. Since 2016, TSO Basic Training—initial training for newly hired TSOs, including both TSA-employed and private screeners—has consisted of an intensive two-week course at the TSA Academy located at FLETC. TSA has obligated about $53 million for the program from its inception through March 2018. In 2015 and 2017, the Department of Homeland Security Inspector General raised questions about the effectiveness of checkpoint screening, which prompted concerns about training. GAO was asked to review TSA's training of new TSOs. This report (1) describes the reasons why TSA established the TSO Basic Training program; (2) discusses factors OTD considers when updating TSO Basic Training curriculum; and (3) assesses the extent to which TSA evaluates its TSO Basic Training program. GAO reviewed documents on the development and modification of TSO Basic Training curriculum; visited FLETC; interviewed TSA officials; and compared TSA's program evaluation to leading practices. The Transportation Security Administration (TSA) established the Transportation Security Officer (TSO) Basic Training program at the TSA Academy at the Federal Law Enforcement Training Centers (FLETC) in Glynco, Georgia to obtain benefits from centralized training. Prior to the Basic Training program, TSO training was conducted at individual airports, often by TSOs for whom instruction was a collateral duty. According to a business case developed by TSA for Congress in 2017 and TSA officials, TSA expected implementation of the TSO Basic Training program to provide efficiencies to the delivery of new-hire training for TSOs and to enhance the professionalism and morale of newly hired screeners. For example, GAO observed that TSO Basic Training facilities have airport checkpoint equipment and x-ray image simulators for students to practice skills, eliminating the challenge of finding available equipment and training times in a busy airport environment. According to program officials, centralized training also provides trainees with an increased focus on the TSA mission and instills a common culture among TSOs. TSA's Office of Training and Development (OTD) updates and modifies the TSO Basic Training curriculum in response to evolving security threats and evaluations of effectiveness, among other factors. For example, OTD holds regular meetings with TSA's Office of Security Operations—the office responsible for managing TSO performance—to discuss issues such as imminent threats. The offices also discuss analyses of TSO effectiveness identified through covert tests, in which role players attempt to pass threat objects—such as knives, guns, or simulated improvised explosive devices—through the screening checkpoints. The two offices identify ways to address issues identified in covert testing, which are then incorporated into TSO Basic Training. OTD also gathers input from TSO Basic Training instructors and from participants to adjust training curriculum. TSA has implemented a training evaluation model but has not yet established specific program goals and performance measures to assess TSO Basic Training. The Kirkpatrick model used by TSA is a commonly-accepted training evaluation model endorsed by the Office of Personnel Management and used throughout the federal government. While TSA reported expected benefits of TSO Basic Training in its business case and implemented the Kirkpatrick model to begin assessing training, it has not yet identified specific goals that the program is expected to achieve, nor has it developed applicable performance measures to evaluate progress toward goals, as called for by leading management practices for training evaluation. TSA officials told GAO that TSO Basic Training is a relatively new program and they planned to collect more data on TSO screening performance before further evaluating the potential impacts of the training program. However, TSO Basic Training serves as the foundation for TSOs to learn core skills and procedures, and it is important to establish goals and measures to better assess the effectiveness of the training they receive. This will help TSA determine the extent to which TSOs are able to fulfill their important role in ensuring passenger safety while also showing results for the funds spent on such training each year. GAO recommends that TSA establish specific goals and performance measures for the TSO Basic Training program. TSA concurred with the recommendation.", "document_type": "gao"}
{"report": "FEHBP was established primarily to help the government compete with private-sector employers in attracting and retaining talented and qualified workers. As indicated by the legislative history of the original FEHBP statute, lawmakers wanted enrollees to exercise choice among various plan types and, by using their own judgment, select health plans that best meet their specific needs. While participation in FEHBP is voluntary, in 2015, 85 percent of federal workers and 90 percent of federal retirees were enrolled in the program. Each FEHBP carrier offers one or more plans, and these plans can have up to three options, or levels of benefits, depending on which type of plan is being offered. Although they may differ in the specific benefits they provide, all FEHBP plans cover basic hospital, surgical, physician, emergency, and mental health care, as well as childhood immunizations and certain prescription drugs. However, FEHBP plans offer different levels of benefits, with many plans offering a choice between a more expensive plan option, which offers a higher level of coverage, and a less expensive plan option, which offers a lower level of coverage. FEHBP enrollees can purchase individual or family coverage. Beginning in 2016, enrollees could also purchase coverage for themselves and one eligible family member, referred to as “self plus one” coverage. FEHBP enrollees can change health care plans during an annual open enrollment period or at other times if they experience a qualifying life event, such as a change in family status. OPM data indicates that between 2005 and 2015, the annual percentage of FEHBP enrollees who changed their plan enrollment by choice—rather than because of mergers or plan terminations—ranged from 5 to 7 percent. The FEHBP statute limits the program to four specific plan types: (1) one service benefit plan—a government-wide plan with two levels of benefits; (2) one government-wide indemnity benefit plan; (3) employee organization plans; and (4) and comprehensive medical plans—also known as HMO plans. OPM generally refers to these plan types as either FFS plans (the service benefit plan and the employee organization plans), or HMO plans (comprehensive medical plans). Within the categories of FFS and HMO plans, there can be significant variation in the plan designs and enrollee cost sharing. Most FFS plans have PPO arrangements, which usually have lower out-of-pocket expenses (i.e., a smaller copayment and/or a reduced or waived deductible) when enrollees use providers within the plan’s preferred network. Compared with HMOs, PPOs typically offer their enrollees a greater choice of providers and have less plan management of the care that enrollees receive. HMOs provide or arrange for comprehensive health care services on a prepaid basis through designated plan physicians, hospitals, and other providers in particular locations. Each HMO sets a geographic area for which health care services will be available. Some HMOs offer a point of service product that offers FEHBP enrollees the choice of using a designated network of providers or using non-network providers at an additional cost. Additionally, in 2003 and 2005 respectively, FEHBP also began offering consumer-driven health plan (CDHP) and high-deductible health plan (HDHP) designs that are coupled with a tax-advantaged account to help enrollees pay for qualified medical expenses. Any of the FEHBP plan types may be offered with a CDHP or HDHP design, and therefore CDHPs and HDHPs can be either FFS or HMO plans. Enrollees in typical CDHPs have responsibility for certain up-front medical costs, an employer-funded account that enrollees may use to pay these up-front costs, and catastrophic coverage with a high deductible. CDHP enrollees receive full coverage of in-network preventive care. HDHPs offer low premiums but higher deductibles and annual out-of-pockets limits combined with a tax-advantaged account. HDHPs can have first dollar coverage (no deductible) for preventive care and higher out-of-pocket copayments and coinsurance for services received from non-network providers. OPM is responsible for negotiating health benefits and premiums with FFS and HMO plans. Each year, OPM sends a letter to all approved and participating FFS and HMO plans—its annual “call letter”—to solicit proposed benefit and premium changes for the next calendar year, which are due by the end of May. The descriptions of both covered and excluded benefits are incorporated into the final contracts. Each plan subsequently prints brochures describing the benefits and costs according to a standard format, as specified by OPM. The brochures are binding statements of benefits and exclusions that plans must follow as parties to FEHBP contracts. Those plans meeting the minimum requirements specified in the statute and regulations may participate in the program and their contracts may be automatically renewed each year. The federal government and FEHBP enrollees generally each bear a portion of the cost of FEHBP plan premiums. By statute, the government generally pays 72 percent of the weighted average premium of all health benefit plans participating in FEHBP, but no more than 75 percent of any particular plan’s premium, while enrollees pay the balance. Premium prices vary across plans and within plans and depend on whether an enrollee is enrolled in self-only, family, or self plus one coverage. The premiums are intended to cover enrollees’ health care costs, plans’ expenses, reserves, and OPM’s administrative costs. Although there has been some minor fluctuation in the number of FEHBP enrollees over time, total program enrollment has remained around 8 million enrollees since 2000. As the Congressional Research Service has reported previously, FEHBP enrollment is concentrated among a small number of carriers and BCBSA has the largest share of total program enrollment by far. See figure 1 for the total FEHBP enrollment and enrollment market share of the top five carriers in the program from 2000 through 2015. The number of plan offerings available to FEHBP enrollees generally increased from 2007 through 2015. In 99 percent of counties nationwide, enrollees had more plan offerings in 2015 than they had in 2007. The median number of plan offerings available in a county increased from 19 in 2007 to 24 in 2015. Most of these offerings were the nationwide FFS plans that are available in all counties. There were 17 such plan offerings in 2007 and 19 in 2015. The remaining plan offerings were HMOs that were available in more limited areas. While the total number of HMO plans that participated in FEHBP decreased from 2007 through 2015, the median number of HMO plan offerings in a county increased. This suggests that those HMO plans in FEHBP in 2015 generally participated in more counties than was the case in 2007. (See table 1 for a comparison of plan offerings in 2007 and 2015.) Despite increases in the availability of the median number of HMO plan offerings in a county, there was wide variation in the number of HMO offerings available to enrollees in a given county. For example, while FFS plan offerings were available nationwide, in some counties enrollees had no HMO plan offerings. Since 2007, however, the number of counties without any HMO plan offerings available declined from 18 percent to less than 2 percent in 2015. Most counties had a couple of HMO plan offerings, and some counties had at least 10 HMO offerings. For example, in 2015, enrollees in one county in New York had 15 HMO plan offerings, giving enrollees a total of 34 offerings from which to select coverage. (See fig. 2 for the range of available HMO plan offerings among counties across all years.) Regarding reasons for the variation in available FFS and HMO plan offerings, OPM officials told us that plans participating in FEHBP enter and withdraw based on internal business decisions and often in response to changing economic conditions. For example, according to OPM officials, some plans may enter the program with the expectation of gaining a target market share. OPM officials also noted that decreases in plan participation in the past may have been a response to premium increases that impacted plans’ ability to effectively compete. In addition, a 2012 OPM report noted that many prominent HMO plan carriers have reduced the number of states in which they participated since 1985. FEHBP enrollment within counties generally became more concentrated from 2000 through 2015, although most of that growth occurred prior to 2007. The share of the market held by the largest carrier increased from a county median of 58 percent in 2000 to 70 percent in 2007, to 72 percent in 2015. Similarly, the combined median county market share of the three largest carriers increased from 86 to 90 percent over the same time period. However, we observed that the median market share held by the second and third largest carrier generally decreased over time. This suggests that the increases in combined market share held by the three largest carriers were generally due to increases observed in the single largest carrier. Although there was little change in the median county market share of the top five carriers, these carriers accounted for nearly all enrollments in a county in each of the years we examined. (See fig. 3 for a comparison of the market share held by the three largest carriers over time.) We found that these increases in concentration were widespread. Overall, from 2000 through 2015, almost 90 percent of counties experienced an increase in the market share held by the largest carrier. Over this period, the percentage of counties in which the largest carrier held at least half of the market also increased—from 70 percent in 2000 to 93 percent in 2015. Additionally, the proportion of counties where at least 80 percent of the market share was held by the top three carriers increased from about 76 percent of counties in 2000 to 94 percent of counties in 2015. (See fig. 4 for maps showing the market share of the largest carrier in each county in 2000 and 2015.) Similar to the combined median county market share of the top five carriers, nationwide FFS plans’ combined median county market share accounted for almost all FEHBP enrollment and showed a slight increase from 97 percent in 2000 to 99 percent in 2015, although variation existed in some counties. Comparatively, the combined median county market share held by HMO plans decreased from 6 percent to 2 percent. In addition, in each year since 2000, 16 to 30 percent of counties had all of their FEHBP enrollment in FFS plans, and, in years for which we had HMO plan availability data, almost all of these counties offered at least one HMO plan offering. At the same time, we observed a small number of counties each year where HMO plans’ combined market share was at least 50 percent. BCBSA was the largest carrier in almost all counties nationwide and the share of these markets held by its two nationwide FFS plan options increased from 2000 through 2015. While BCBSA was already the largest carrier in 93 percent of counties in 2000, by 2015 it was the largest in 98 percent of counties. Over this same time period, the median county market share held by BCBSA also increased—from 58 percent in 2000 to 72 percent in 2015. Most of BCBSA’s 14 percent market share increase occurred between 2000 and 2008. Other carriers had significantly smaller median county market shares, but they had the highest share in a certain limited number of counties. The Government Employees Health Association, Inc. (GEHA), another carrier offering nationwide FFS plans, had the second highest program-wide market share in 2015, and an 8 percent median county market share. GEHA held the second or third largest market share in 77 percent of counties in 2015, reaching as high as 65 percent of the county market share, for example, in a county in Texas, but was the largest carrier in less than 1 percent of counties. Kaiser Permanente—which offers HMO plans—was the third largest carrier program-wide in 2015 and held the largest market share among HMOs (6 percent), though its market share decreased slightly over time. In counties where a Kaiser Permanente plan was available in 2015 (fewer than 200 out of more than 3,000 counties nationwide), those plans had a median county market share of 8 percent; however, in some counties Kaiser Permanente plans held a larger market share, for example, reaching as high as 64 percent in one county in California. In counties where Kaiser Permanente plans were available in 2015, it was the largest carrier 8 percent of the time and the second or third largest carrier in a majority of cases. (See table 2 for a description of market share and position for the three carriers with the largest program-wide market share within FEHBP.) BCBSA’s increased FEHBP market share may be due to a number of factors. For example, officials from several FEHBP carriers told us that BCBSA’s market share performance was tied to several factors, including brand recognition, comparably favorable plan premiums, and enrollee population characteristics. According to an OPM report, another factor contributing to BCBSA’s increased market share was the introduction of the Basic option to the Service Benefit Plan in 2002. Compared to its Standard option, this nationwide FFS plan option restricts enrollees to a more narrowly defined provider network (with some limited exceptions) and offers lower premiums, thereby broadening BCBSA’s ability to compete with other lower cost plans. As shown in table 3, while program-wide enrollments in BCBSA’s nationwide FFS plan options have increased by 32 percent following the introduction of the Basic option, enrollments in the Standard option decreased, suggesting that enrollees are shifting to the Basic option or plans offered by other carriers. In addition, a study published in 2012 noted that BCBSA market concentration was the possible outcome of the carrier’s established provider network and lower relative administrative costs. For examples of BCBSA’s and other carriers’ premiums, plan offerings, and market shares in 2015, in select counties, see appendix I. The combined market share for the three largest FEHBP carriers in a state was generally similar to the large group market and higher than Medicare Advantage. As shown in figure 5, in 2014, the median state market share for FEHBP was 89 percent compared to 90 percent in the large group market and 74 percent for Medicare Advantage. And, the range of state market shares held by the three largest carriers in Medicare Advantage and the large group market (69 and 62 percentage points, respectively) was wider than in FEHBP (23 percentage points). However, programmatic differences between the three selected markets, such as varying enrollee demographics, market sizes, and program designs, make it difficult to draw conclusions about these contrasting market trends. For each market and each year, the 50 states and the District of Columbia were ranked from highest to lowest market share for the combined three largest carriers in each state and then divided into four groups based on those rankings. FEHBP enrollment data could not be separated from the overall large group market data used to calculate state-level market share in prior GAO reports. In 2014, we estimated that FEHBP plans accounted for about 20 percent of the 44 million total enrollments in the large group market nationally. Compared to Medicare Advantage and the large group market, the state market shares held by the largest carrier in FEHBP generally held a larger share of the market. For example, in 2014, the median market share held by the largest carrier in a state was higher in FEHBP (75 percent) than both Medicare Advantage (35 percent) and the large group market (59 percent). Seven of the 10 stakeholders we interviewed, and who commented on OPM’s contracting authority, generally supported expanding OPM’s contracting authority to allow it to contract with a greater variety of health plan types than are currently offered in FEHBP. Stakeholders we interviewed that offer HMO plans generally supported this expansion. However, the 2 stakeholders that offer nationwide FFS plans and 1 stakeholder that represents federal employees opposed it. Most of the concerns expressed by these 3 stakeholders were related specifically to the potential effects of OPM adding regional PPO plans to FEHBP. Five of the seven stakeholders we interviewed who supported expanding OPM’s contracting authority said that adding additional plan types could result in both positive and negative effects. In terms of positive effects, one stakeholder said the authority could potentially allow OPM to offer different types of plans—such as value-based plan designs and accountable care organizations—that could lead to improved benefit options and health outcomes for enrollees. One stakeholder also told us that OPM’s expanded authority would enable the agency to improve transparency by allowing plans to contract with OPM as the type of plan they actually are, rather than fitting into outdated statutorily established categories, which the stakeholder characterized as an “antiquated labeling system.” Another stakeholder said that participation by new plans in FEHBP would foster competition and help keep health plan costs down. One stakeholder also noted that if plan expansion would only be undertaken when it is in the best interests of FEHBP and its enrollees— as OPM has indicated would be the case—there was little or no downside to such expanded authority. Additionally, in April 2013, three FEHBP carriers that offer HMO plans sent a letter to Congress in favor of expanding OPM’s authority, citing that it would “ensure OPM has the tools it needs to lower costs and provide federal workers access to innovation, choice, and value” and would allow more competition in the program. Some stakeholders we interviewed, however, suggested that any positive effects of expanding OPM’s authority and adding new plan types could be limited due to other aspects of FEHBP that affect competition and discourage participation by carriers. In particular, these stakeholders cited concerns related to costs associated with FEHBP enrollees who are Medicare-eligible but who do not enroll in Medicare, and the formula that determines the government’s contributions to enrollee premiums. According to these stakeholders, this creates unfair competitive advantages for the nationwide plans and BCBSA in particular. They also cited FEHBP’s system for assessing the performance of participating carriers, which they said discourages competition and participation by carriers in FEHBP, particularly for certain HMO plans. OPM reported that it was open to considering some program changes related to these concerns; however, some proposed changes could require changes to the FEHBP statute. For more information about stakeholder comments regarding these other aspects of FEHBP, see appendix II. Some of the 10 stakeholders we interviewed and who commented on OPM’s contracting authority also identified other potential negative effects that could occur with expanding OPM’s contracting authority. For example, 1 stakeholder said that an increase in plan types offered could lead to a subsequent increase in OPM’s administrative costs. In addition, several of these stakeholders said that adding more plans to FEHBP would exacerbate an existing problem of choice overload for enrollees. One of the stakeholders said that FEHBP enrollees are already confused by the number of available plan offerings, and that the current information provided to enrollees does not allow for easy comparison of their choices. They noted that additional expansion of offerings will only complicate enrollees’ plan analysis. Consistent with these concerns, studies that we reviewed related to consumer choice and decision-making processes in health insurance markets suggest that adding additional plans may not always yield positive effects or improve competition. For example, a 2016 report by the RAND Corporation found that health insurance consumers are unlikely to change plans, even as better choices become available. Additionally, a 2009 study examining the Swiss health insurance market similarly found that as the number of choices offered to individuals grows their willingness to switch plans declines. The study found persistently low rates of plan switching despite high variation in premiums between plans, and found that more choice inhibited plan switching. It concluded that having a large number of plans to choose from likely reduces the effectiveness of consumer decision making, and that simplifying health plan decision making by reducing the number of choices might result in more price competition among insurers, and benefit consumers. Additionally, 6 of the 10 stakeholders we interviewed and who commented on OPM’s contracting authority said that there would potentially be negative effects if OPM were to use the expanded authority to add regional PPO plans to FEHBP. For example, 5 of these 6 stakeholders said there could be instability and higher premiums in FEHBP if new regional PPO plans were able to “cherry pick” low cost areas in which to participate. This was of particular concern to 1 of the 2 stakeholders we spoke to who offer nationwide plans. Because they offer the same premiums nationally, they said the lower-cost areas of the country help subsidize the premiums of the higher-cost areas. If these nationwide plans lost customers in lower-cost areas to regional PPO plans, then their premiums would likely rise. These 2 stakeholders and a third said, therefore, that adding regional PPO plans could result in nationwide carriers discontinuing their coverage due to their inability to compete with regional plans. According to 1 stakeholder that offers a nationwide FFS plan, if the nationwide carriers dropped out of the program, plan offerings would be significantly reduced in certain areas of the country and some areas could potentially be left with no offerings at all. Additionally, in 2014 and 2015, six nationwide FEHBP carriers, including the two we interviewed, sent letters to Congress expressing their opposition to legislation that would add new plan types in FEHBP. In the letters, they cited negative effects such as program destabilization, increased premiums, and fewer consumer choices—all of which were specifically tied to the proposal to add regional PPO plans to FEHBP. Two of the 10 stakeholders we interviewed and who commented on OPM’s contracting authority, however, said that adding regional PPO plans to FEHBP would have positive effects. For example, 1 of these stakeholders that offers HMO plans and referred to FEHBP’s plan type labels as antiquated noted that this would enable them to promote their existing FEHBP products—currently categorized as HMO plans—more appropriately as regional PPO plans. This stakeholder said the current categorization causes enrollees to erroneously believe their plans are more restrictive than the plans listed as nationwide FFS plans. When we shared these stakeholder concerns about expanding OPM’s contracting authority with OPM officials, they told us that the agency has existing strategies and is working towards implementing additional ones, which officials said should allow it to address many of these concerns. For example, OPM officials said in January 2017 that the agency was in the process of building models that would allow it to simulate the impact that adding new plan types would have on FEHBP, but that the agency is still years away from being able to make such assessments. The officials said that the agency would only seek to introduce new plan types that it determines to be in the best interests of FEHBP enrollees and the federal government. With regards to enrollee confusion over the number of plan choices, the OPM officials said that the agency is improving the tools enrollees can use to learn about the available plans. For open season in 2016, the agency released what it considers to be a new and improved Plan Comparison Tool on its website that enables enrollees to gain more knowledge about their health plan options before making a selection. According to the officials, some of the improved functions of the tool include more details about the plan benefits and services, clearer definitions of the health insurance terms, and easier ability to compare the plans. Officials also told us that they expect to make more improvements to the tool in future years based on feedback from the FEHBP enrollees who use it. OPM officials said the agency would continue existing plan negotiation strategies that, among other things, would prevent plans from “cherry picking”—that is, offering products in only the most profitable service areas—by ensuring that new carriers provide services in contiguous regions that include both low- and high-cost areas. Additionally, related to the concern that nationwide plans might withdraw from the program if regional PPO plans were introduced, OPM officials noted that if, for example, BCBSA were to cancel its nationwide plan options, another carrier might step up to gain the service benefit plan designation and provide nationwide service. We identified three significantly differing estimates of the financial effects on the federal budget that expanding OPM’s FEHBP contracting authority would have. However, these estimates are based on different assumptions about a variety of factors such as premium changes, administrative costs, and enrollment, and only limited information was available about the methodologies used for each set of estimates. It is also important to note that the assumptions used in developing these estimates are subject to professional judgment and have inherent uncertainty regarding whether the assumed scenarios will be realized. The three estimates include: The President’s Budget for fiscal year 2017 estimated that expanding FEHBP to a greater variety of plan types would save $88 million from 2017 through 2026. According to information provided by OPM, the estimate considered the effect of a broad expansion of OPM’s authority to add new plan types, and OPM did not indicate whether the agency specifically considered the effect of adding regional PPOs to FEHBP when developing this estimate. OPM officials told us that these savings were based on a number of assumptions, including an estimate of the number of enrollees that will migrate to new plan types based on previous FEHBP experience and projecting a medical loss ratio of 90 percent for the new plan types added to FEHBP. However, in follow-up with the agency, OPM officials were not able to provide us with more detailed information about how these savings were calculated. The Congressional Budget Office, in its analysis of the budget proposal, estimated a range from $50 million in savings to $50 million in costs over the 10-year period. A 2014 study from the Center for Health and Economy that examined the effects of introducing regional PPOs to FEHBP across three scenarios estimated cost savings ranging from $1.2 to $2.1 billion over 7 years (2015 to 2021). The study provided limited information about the data, assumptions, and methodology the center used to develop its estimates. The study did explain that the center modeled the projected impact on enrollment, average premiums, and the federal budget of adding regional PPOs to FEHBP using three different sets of assumptions about how expensive the newly introduced regional PPO plans would be. Under each scenario, the center estimated shifts over time in enrollment from existing FEHBP plan designs (FFS, HMO, CDHP, and HDHP) to the new PPO plans— and assumed that these new plans would achieve 10 percent of the market share throughout the analysis period. The study also projected decreases in average FEHBP premiums and a corresponding reduction in total government contributions in each scenario. A December 2013 study conducted by Avalere Health at BCBSA’s request specifically examined the effect of adding regional PPOs into FEHBP and estimated an increase in spending of $7.8 billion over 10 years (2014 to 2023). In developing its estimates, the study noted that it assumed that the BCBSA national plans dissolve and would break into regional plans in response to new regional plan competition. The study stated that the $7.8 billion in increased costs was based on an assumption that both regional PPOs and BCBSA regional plans would have higher administrative costs as compared to BCBSA’s national plans. The study estimated that these costs would be offset slightly by an initial anticipated decrease in premiums resulting from new plans introducing competition into these regions. We provided a draft of this product to OPM for comment. The agency did not provide any comments. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to OPM and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In table 4, we present information about a selection of counties that reflect a range of FEHBP attributes, but which are not intended to be a representative sample of all counties. We chose counties with a range of total enrollments, market shares held by different plan offerings (with different enrollee premiums), and number of health maintenance organization (HMO) plan offerings. Some of the stakeholders we interviewed suggested that any positive effects of expanding the Office of Personnel Management’s (OPM) contracting authority and adding additional plan types to the Federal Employees Health Benefits Program (FEHBP) could be limited because of other aspects of the program that affect competition and discourage carrier participation. In particular, stakeholders cited concerns related to: Medicare-eligible enrollees, the government contribution formula for FEHBP premiums, and FEHBP’s plan performance assessment system. Medicare-eligible enrollees. Six of the 11 stakeholders we interviewed suggested that problems associated with Medicare-eligible enrollees negatively affect FEHBP premiums, and 5 of the 6 noted these problems create an unfair competitive advantage for the nationwide FEHBP plans. These stakeholders suggested that because certain older, Medicare- eligible FEHBP enrollees tend to incur higher health care costs, they drive up premiums. Some stakeholders noted that plans—in particular, health maintenance organizations (HMOs) that offer service in areas with higher concentrations of older enrollees—experience challenges keeping premium rates competitive with the nationwide plans like those offered by the Blue Cross Blue Shield Association (BCBSA). Additionally, 3 stakeholders we interviewed that offer HMO plans pointed specifically to costly retirees who opt not to enroll in in Medicare coverage of outpatient services, known as Part B, making it difficult for them to compete. FEHBP retirees eligible to enroll in Medicare are not required to do so, and some maintain only their FEHBP coverage instead. While there is no penalty for choosing not to enroll in Medicare, retirees who later decide to enroll in Part B must pay a penalty. For retirees in FEHBP who choose not to enroll in Medicare, their FEHBP plan remains the primary payer and they continue to receive the same level of coverage through that plan as they did prior to becoming eligible for Medicare. Two stakeholders said that charging the same rates to the retiree population without Part B and the active employee population—a scenario that occurs in FEHBP—is not typical of the private, commercial insurance market. In a recent publication, one of the stakeholders we interviewed reported that these types of issues have been a problem for FEHBP since its inception, and that it is therefore in the interest of every enrollee to join plans with the lowest proportion of high-cost retirees. The stakeholder noted that this distorts plan selection and alters results, noting that while the Kaiser plans on the West Coast do an outstanding job of keeping costs low for enrollees, they have a disproportionate number of retirees who correctly understand that they do not need to enroll in Medicare. According to the stakeholder, this puts Kaiser at a disadvantage since it has to cover the age-related costs of these enrollees. Stakeholders we interviewed offered a number of potential solutions for OPM to address these challenges. For example, two stakeholders suggested that OPM could introduce some form of risk adjustment into FEHBP to assist plans that have a disproportionate number of Medicare- eligible enrollees. Risk adjustment provides a way to correct for imbalances that occur when some carriers attract a larger share of enrollees at low risk for expensive claims and other carriers attract a larger share of enrollees at high risk for expensive claims. One of the two stakeholders suggested that FEHBP could introduce a budget-neutral risk adjustment program that adjusts the amount of a plan’s premium that is paid by the government based on a plan’s ratio of age-65 retirees with Medicare (Parts A, B, or both) to those without. The stakeholder said that this would greatly improve plan competition over time. OPM officials agreed with stakeholders that providing nationwide service is an advantage for carriers like BCBSA in high cost areas, but noted that it is a disadvantage in low cost areas, and said that, similarly, a lack of risk adjustment in the program works both in favor of and against BCBSA and HMOs. OPM officials said, for example, that the BCBSA Standard option would likely benefit from risk adjustment, while the BCBSA Basic option would likely be negatively impacted. OPM officials also said that risk adjustment could be a way for the agency to compensate plans that have enrollees with higher than average risk and to improve competition by discouraging plans from avoiding those higher risk enrollees. However, officials noted that risk adjustment would require the agency to have reliable claims-level data from each of the plans, which the agency does not have. In January 2017, OPM officials said that the agency is in the process of collecting claims data from FEHBP carriers and expects to have a sufficiently reliable data set by July 2018. OPM officials also noted that before implementing any form of risk adjustment in FEHBP they would have to use that data to determine the effects on the program, and they would also need to determine whether doing so would require any legislative changes. Some stakeholders we interviewed also suggested retirees could be incentivized to enroll in Medicare Part B (for example, by waiving the Medicare Part B late enrollment fee for FEHBP retirees, or by having FEHBP plans subsidize Part B premiums), and two stakeholders went as far as suggesting that Medicare enrollment should be required for those eligible. OPM officials said that they already encourage enrollment in Medicare Part B; in particular, they noted that in their annual call letters they have encouraged carriers to offer benefits in their plans that incentivize Medicare enrollment for eligible FEHBP enrollees. However, OPM officials said that they are open to pursuing additional approaches that would encourage FEHBP retirees to fully participate in Medicare coverage. The government contribution formula for FEHBP premiums. Five of the 11 stakeholders we interviewed suggested that the government contribution formula for FEHBP premiums negatively impacts program competition. The FEHBP statute establishes the amount the government contributes towards the costs of FEHBP plan premiums. By statute, the government pays an amount equal to 72 percent of the weighted average premium across all FEHBP plans, but no more than 75 percent of any particular plan’s premium. Enrollees generally pay the remaining premium. As such, enrollee contributions will generally be 25 percent for lower-premium plans and can be higher than 28 percent if their plan’s premiums are significantly higher than the weighted average FEHBP plan. Some stakeholders we interviewed noted that BCBSA has an advantage under the contribution formula, and that the existing formula does not incentivize enrollees to choose low cost plans. Two stakeholders noted that BCBSA’s large program market share—66 percent of total program enrollment in 2015—allows it significant influence over the government contribution amount. Therefore, several stakeholders suggested that BCBSA’s enrollees end up paying closer to the minimum of 25 to 28 percent of their premium’s costs. Conversely, other plans—particularly HMOs operating in high cost areas—may have premiums that are higher than BCBSA’s and the weighted program average, resulting in their enrollees having to pay considerably more than 28 percent of their total premium’s costs. Two stakeholders said that, as a result, carriers may exit the program once their premiums exceed the weighted program average. Additionally, two stakeholders we interviewed suggested that the formula does not incentivize enrollees to choose lower cost plans because the maximum government contribution amount is 75 percent— regardless of whether the plan’s premiums are less than the weighted FEHBP average. See table 5 for examples of how the government contribution formula affects the share of premiums that enrollees pay. Some stakeholders we interviewed proposed solutions to the concerns they identified with the government contribution formula. For example, two stakeholders suggested that the formula be changed so that plans that cost less than 72 percent of the weighted average would be covered either in full or to a greater extent by the government. They noted that this would incentivize enrollees to choose lower cost plan options and would strengthen the competitiveness of lower-cost plans—particularly as compared to the BCBSA options. One stakeholder also suggested that the government contribution formula could be varied by metropolitan regions (i.e., vary government and enrollee premium contributions based on regional health care costs), which they suggested would lead to more carriers introducing more plan offerings overall. While the government contribution formula is set in statute, OPM officials said that they are open to pursuing changes that would encourage FEHBP enrollees to select the health plans that meet their current and expected health care needs at affordable costs. FEHBP plan performance assessment system. Five of the 11 stakeholders we interviewed cited concerns with OPM’s system for assessing FEHBP plan performance, with 2 noting that it discourages competition and participation in FEHBP. OPM announced a new methodology for assessing plan performance in a letter to carriers in 2015, noting that the agency would use a discrete set of quantifiable measures to examine aspects of contract performance and link this performance assessment to the profit plans receive. OPM reported in the letter that it implemented performance assessment to move away from paying for procedures or services and towards paying for value and prevention of disease. It also noted that the system was intended to create a more objective performance standard and provide more transparency for enrollees. Stakeholders we interviewed, however, were particularly critical of the way in which community-rated plans are assessed in this new system, noting that plans are penalized rather than rewarded. Regulations specify a process by which OPM may withhold a portion of payments to a community-rated carrier based on plan performance thereby reducing the carrier’s profits. Two of these stakeholders said that the only way for a plan to not receive a financial penalty is to get a perfect score on the assessment and said that it is impossible to receive such a score. Therefore, one stakeholder noted that the system is extremely discouraging to carriers, particularly to new carriers considering joining FEHBP. Additionally, two stakeholders said that the measures used in the assessment—Healthcare Effectiveness Data and Information Set (HEDIS) and Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures—favor certain types of HMOs. For example, one stakeholder noted that some carriers can have problems meeting the HEDIS measure for breast cancer screening rates, because they have to get patients to go to a separate mammography center while carriers that are part of more integrated health systems can offer mammograms in-house. With regard to how the plan performance assessment system could be improved, stakeholders we interviewed suggested that OPM should switch to a reward or incentive-based system for community-rated carriers. Several stakeholders suggested that OPM could implement a system similar to the Medicare Advantage star ratings system. In December 2016, OPM officials told us that they were listening to community-rated plans’ concerns regarding the performance assessment penalty and would consider adjustments to address these concerns. Then in March 2017, in response to some of these concerns, OPM issued a letter to FEHBP carriers proposing an update to the assessment of community-rated plans that would allow carriers with high-performing plans to avoid any financial penalties. Regarding the concern about the use of HEDIS and CAHPS measures, OPM officials said that these measures are well-established and commonly required by other commercial and government payers, such as Medicare Advantage. Nonetheless, OPM officials said that the plan performance system will continuously be improved through the introduction of new measures and the retirement of measures on which all FEHBP plans have achieved satisfactory performance. In addition to the contact named above, William Hadley (Assistant Director), Kristi Peterson (Assistant Director), Christina Ritchie (Analyst in Charge), Leonard Brown, William Garrard, Daniel Ries, and Said Sariolghalam made key contributions to this report. Also contributing were Sandra George, Emei Li, Yesook Merrill, Laurie Pachter, Vikki Porter, Jennifer Rudisill, Frank Todisco, and Merrile Sing. Private Health Insurance: In Most States and New Exchanges, Enrollees Continued to be Concentrated among Few Insurers in 2014. GAO-16-724. Washington, D.C.: September 6, 2016. Private Health Insurance: The Range of Premiums and Plan Availability for Individuals in 2014 and 2015. GAO-15-687. Washington, D.C.: August 10, 2015. Private Health Insurance: Concentration of Enrollees among Individual, Small Group, and Large Group Insurers from 2010 through 2013. GAO-15-101R. Washington, D.C.: December 1, 2014. Federal Employees Health Benefits Program: Oversight of Carriers’ Fraud and Abuse Programs. GAO-14-39. Washington, D.C.: November 14, 2013. U.S. Postal Service: Proposed Health Plan Could Improve Financial Condition, but Impact on Medicare and Other Issues Should Be Weighed before Approval. GAO-13-658. Washington, D.C.: July 18, 2013. Federal Employees Health Benefits Program: Premium Growth Has Recently Slowed, and Varies among Participating Plans. GAO-07-141. Washington, D.C.: December 22, 2006. Federal Employees Health Benefits Program: First-Year Experience with High-Deductible Health Plans and Health Savings Accounts. GAO-06-271. Washington, D.C.: January 31, 2006. Federal Employees Health Benefits Program: Early Experience with a Consumer-Directed Health Plan. GAO-06-143. Washington, D.C.: November 21, 2005. Federal Employees Health Benefits Program: Competition and Other Factors Linked to Wide Variation in Health Care Prices. GAO-05-856. Washington, D.C.: August 15, 2005. Federal Employees’ Health Plans: Premium Growth and OPM’s Role in Negotiating Benefits. GAO-03-236. Washington, D.C.: December 31, 2002. Federal Employees’ Health Program: Reasons Why HMOs Withdrew in 1999 and 2000. GAO/GGD-00-100. Washington, D.C.: May 2, 2000.", "summary": "FEHBP provides health care coverage to about 8 million federal employees, retirees, and their dependents through carriers that contract with OPM. The Federal Employees Health Benefits Act of 1959 limited the types of plans OPM could offer. OPM has reported that the program needs more competition between plans and more diverse health plan choices and has proposed that its contracting authority be expanded to allow a greater variety of types of health plans to participate in FEHBP than are currently allowed. GAO was asked to examine FEHBP plan participation and the potential impact of OPM adding new plan types to the program. This report describes, among other things: (1) how the number of plans and market shares of carriers participating in FEHBP changed in recent years, and (2) what is known about the potential effects of allowing OPM to contract with a greater variety of types of health plans than are currently offered. GAO requested OPM plan availability and enrollment data by county for 2000 through 2015, but county-level availability data were only available for 2007 and 2009 through 2015. Therefore, plan availability and market share analysis timeframes differ. GAO also interviewed OPM officials, 11 FEHBP stakeholders, such as carriers and federal employee and retiree organizations, and reviewed relevant documentation and research, such as cost estimates of the potential effects of expanding OPM's authority. GAO provided a draft of this product to OPM for comment. The agency did not provide any comments. Federal Employees Health Benefits Program (FEHBP) enrollees can choose from a number of health plan offerings depending on where they live. From 2007 to 2015, the median number of plan offerings available in a county increased from 19 to 24. Of the 24 plan offerings in 2015, 19 were available nationwide and 5 were health maintenance organization plans offered in specific geographic areas. Yet despite more available plan offerings in recent years, enrollment has become more concentrated within the largest health insurance carrier in a county. Specifically, the median share of enrollment held by the largest carrier in a county increased from 58 percent in 2000 to 72 percent in 2015. Further, one carrier—the Blue Cross Blue Shield Association—was the largest carrier in 93 percent of counties in 2000 and 98 percent of counties in 2015. The stakeholders GAO interviewed and the cost estimates GAO reviewed about the potential effects of expanding the Office of Personnel Management's (OPM) authority to contract with more plan types than currently offered in FEHBP did not offer clear consensus about the effects. Most stakeholders supported expanding OPM's authority; those opposed were primarily concerned about OPM adding regional preferred provider organization plans, saying this could cause program instability and higher premiums. Estimates by OPM and others differed significantly on whether the expansion would increase or decrease costs. This is because they used differing assumptions about premiums, enrollment, and other factors, and it is unclear whether the assumptions used in these estimates will be realized.", "document_type": "gao"}
{"report": "In February 2011, Boeing won the competition to develop the Air Force’s next generation aerial refueling tanker aircraft, the KC-46. The KC-46 will allow for two types of refueling to be employed in the same mission—a refueling boom that is integrated with a computer assisted control system and a permanent hose and drogue refueling system. The boom is a rigid, telescoping tube that an operator on the tanker aircraft extends and inserts into a receptacle on the aircraft being refueled. See figure 1 for an example of boom refueling. The hose and drogue system is comprised of a long, flexible refueling hose and a parachute-like metal basket that provides stability. Drogue refueling is available via the centerline drogue system in the middle of the aircraft, or via wing aerial refueling pods located on each wing. The pods are used for simultaneous refueling of two aircraft. To develop a KC-46 tanker, Boeing modified a commercial 767 aircraft in two phases. In the first phase, Boeing modified the design of the 767 with a cargo door and an advanced flight deck display borrowed from its 787 aircraft and is calling this modified version the 767-2C. The 767-2C is built on Boeing’s existing production line. In the second phase, the 767-2C was militarized and brought to a KC-46 configuration in a separate Boeing facility. See figure 2 for a depiction of the conversion of the 767 aircraft into the KC-46 tanker with the boom deployed and the flight certifications needed at each stage. The Federal Aviation Administration has previously certified the airworthiness of Boeing’s 767 commercial passenger airplane (referred to as a type certificate) and in December 2017, awarded the amended type certificate for the 767-2C aircraft to Boeing. It is also responsible for certifying the design of the KC-46 with a supplemental type certificate. The Air Force is then responsible for certifying the airworthiness of the KC-46 with a military certification, as well as certifying the KC-46 and various receiver aircraft, such as F-16 fighters and C-17 cargo planes, for refueling operations. Boeing must complete developmental testing to support these certifications as well as to demonstrate that contract specifications have been met. After the first 4 KC-46 aircraft are delivered, the Air Force will complete operational testing to determine the KC-46’s operational effectiveness and operational suitability for combat. Boeing was awarded a fixed-price-incentive (firm target) contract for KC- 46 development, which includes the design, manufacture, and delivery of four test aircraft. Barring any changes, the contract specifies a ceiling price of $4.9 billion for Boeing to develop the first 4 aircraft, at which point Boeing must assume responsibility for all additional costs. The contract includes options to manufacture the remaining 175 aircraft with firm-fixed- price contract options for the first 2 production lots, and options with not- to-exceed fixed prices for production lots 3 through 13. For purposes of this report, a production lot refers to a set number of aircraft that must be built and delivered in a given time frame and procured with a specific year of funding. For example, the first production lot includes 7 aircraft procured with fiscal year 2015 funding that are to be built and then delivered to the Air Force starting in 2018. The original contract also required Boeing to deliver 18 fully capable aircraft by August 2017. The Under Secretary for Acquisition, Technology and Logistics approved the KC-46 program to enter low-rate initial production in August 2016. Since then, the Air Force has exercised options for the first 3 production lots for 34 aircraft totaling about $4.9 billion. Previously we reported that in January 2017, Boeing and the program office updated the schedule to reflect a 14-month delivery delay due to problems Boeing experienced wiring the aircraft, design issues discovered with fuel system components, a fuel contamination event, and test delays (see figure 3). As we reported, instead of meeting the original August 2017 date, the updated schedule shows Boeing would deliver the first 18 aircraft with booms and centerline drogue systems between September 2017 and February 2018. Then, the 9 wing aerial refueling pod sets would be delivered separately by October 2018, at which point Boeing will have delivered 18 fully capable aircraft. The KC-46 program’s total acquisition cost estimate remained stable over the past year at $44.4 billion, which is about $7.3 billion less than the original estimate. In addition, the aircraft is projected to meet all performance capabilities. However, Boeing is currently trying to resolve a critical deficiency it discovered in testing, which could affect performance. Similar to last year, the Air Force estimates that the total program acquisition cost for the KC-46, which includes development, procurement, and military construction costs will be $44.4 billion. This is about $7.3 billion, or about 14 percent, less than the original estimate of $51.7 billion. Average program acquisition unit costs have decreased by the same percent because quantities have remained the same. Table 1 provides a comparison of the initial and current quantity and cost estimates. The Air Force decreased its cost estimate primarily because it has not added or changed requirements and therefore there were fewer engineering changes than expected. Program officials said the initial cost estimate included a large amount of funding for possible requirements changes, based on the Air Force’s experience with prior major acquisition programs. Military construction cost estimates also decreased as the Air Force has decided, for example, to reuse existing facilities at its operating bases rather than build new ones. The program expects to meet all of its 21 performance goals. For example, the aircraft is expected to be ready for operational use when required at least 89 percent of the time and, once it is deployed for an aerial refueling mission, be able to complete that mission 92 percent of the time. In addition, the aircraft is now using less than 1,557 gallons of fuel per flight hour, its fuel usage rate target. The program also closely tracks the actual weight of the aircraft because weight has a direct effect on the amount of fuel that can be carried. As of January 2018, program officials told us that there are approximately 176 pounds of margin to the operational empty weight target of 204,000 pounds. When we met with them in December 2017, Boeing officials told us they do not expect the aircraft to exceed the target weight. Appendix I provides a description of each of the performance capabilities. In some cases, the program will be tracking progress towards achieving performance capabilities while the aircraft is in operation. For example, the program set a reliability growth goal of 2.83 flight hours between unscheduled maintenance events due to equipment failure by the time the aircraft reaches 50,000 flight hours. As of November 2017, the program had completed about 2,159 flight hours, achieving 1.8 hours at that time. Program officials believe that the reliability will improve as additional flight hours are completed and as unreliable parts are identified and replaced. The 2017 Annual Report by the Office of the Director of Operational Test and Evaluation included a recommendation that the Air Force re-test the KC-46 in an operationally representative condition to demonstrate that aerial refueling systems could perform their required missions following an electromagnetic pulse event. This type of testing is related to the aircraft’s survivability performance goal, meaning the aircraft should be capable of operating in a hostile environment, including after a nuclear incident that delivers an electromagnetic pulse. The report stated that the program powered down or removed critical mission systems during this testing and that therefore, the KC-46’s capability to deliver fuel during or immediately following an electromagnetic pulse was not fully tested. Program officials stated that this testing was adequate to meet the initial contract specifications. They also stated that the program is assessing whether additional tests are needed to meet the new, more stringent standards that were issued by the Department of Defense after the fixed- price contract was signed. Boeing is currently working to resolve a high-priority deficiency related to the performance of the aerial refueling boom that it discovered during testing. According to the 2017 Annual Report by the Director of Operational Test and Evaluation, analysis of boom aerial refueling testing to date showed a significant number of instances where the boom nozzle contacted the receiver aircraft outside the refueling receptacle. In many of those instances, the aerial refueling operators were unaware that those contacts had occurred. Boom nozzle contact outside the receptacle can damage antennae or other nearby structures. It is especially problematic for low-observable receiver aircraft, such as the F-22 fighter, because it can damage radar-absorbing coatings. Program officials said that Boeing is currently developing a software fix for the remote vision system that would provide aerial refueling operators better visibility for refueling operations to help avoid unintended boom contacts with receiver aircraft. The officials also said that Boeing is responsible for the costs to develop and retrofit the fix onto existing aircraft. Although Boeing schedule documents indicate that the company remains committed to delivering 18 fully capable aircraft by October 2018, a program office risk assessment, as well as our own analysis, project that Boeing will not deliver the aircraft until around May 2019, if risks are not mitigated. The company is taking steps to address several risks associated with developmental testing, but challenges remain. Boeing, not the government, is responsible for the cost of development delays based on the terms of the fixed-price contract. A program office schedule risk assessment from June 2017 projects that Boeing will not deliver the first 18 fully capable aircraft until May 2019, 7 months after the updated schedule and about 21 months later than the original plan, if Boeing does not mitigate existing program risks. Boeing has already missed delivery milestones in the updated schedule shown earlier in figure 3, because it had not yet completed developmental testing. Boeing still plans to deliver 18 fully capable aircraft by October 2018, but in a compressed time period. A comparison of the original, updated, and schedule risk assessment delivery schedules are shown in figure 4. Boeing has efforts underway to mitigate several risks that threaten its ability to deliver the first 18 fully capable aircraft by October 2018. These key risks and efforts to address them are discussed below. Test aircraft configuration: Boeing needs to update test aircraft to the correct configuration before it can complete different types of testing that remain. For example, according to program officials, Boeing needs to ensure that test aircraft have up-to-date and approved wiring, software versions, and aircraft parts prior to Federal Aviation Administration testing for the supplemental type certificate and Air Force testing for the required military certificate. At a more basic level, Boeing also needs to finalize the design of the wing aerial refueling pods to start developmental testing on that subsystem. According to Boeing officials, the company and its wing aerial refueling pod supplier had underestimated the level of design drawing details the Federal Aviation Administration needed to review to certify that the parts conformed to the approved design. Over the past 4 years, this supplier has been negotiating with several key sub-tier suppliers for the necessary documentation and has obtained most of it. Boeing has co-located some of its employees with the supplier to provide technical support to complete the remaining documentation for certification. Boeing and the program office disagree on how long it will take to reach that certification milestone. Boeing projects it will have conformed wing aerial refueling pods to test in March 2018 and program officials said there is risk to that time frame. Flight test pace: Boeing plans to complete about 6,550 remaining developmental flight test points by the end of June 2018 at a pace that is nearly double its current average. For example, some test points involve a KC-46 and receiver aircraft maintaining a specific airspeed and altitude during refueling. On average, from February 2016 through January 2018, Boeing has completed about 689 test points per month. It would need to almost double this pace to about 1,310 test points and sustain that pace for a 5-month period to complete testing by June. Based on the average number of tests points that Boeing has completed per month, as shown in figure 5, we project Boeing would finish the remaining test points about 5 months later than expected in early November 2018. We also project that delivery of 18 fully capable aircraft would occur around May 2019, assuming the same 5.5 month delivery time frame included in the updated schedule. Boeing recognizes that achieving its planned flight test pace is one of the most significant program risks and has taken several actions to address this risk. For example, last year, Boeing moved from a “test once” approach—where testing would begin once a series of tests was approved by the Federal Aviation Administration and Department of Defense—towards a more incremental testing approach where a smaller set of tests could be conducted as soon as they are approved by a single entity. Program officials pointed out that, where possible, Boeing is still using a single test point to satisfy more than one requirement from both regulators. As of January 2018, Boeing also identified about 440 test points that could be eliminated because, according to program officials, data collected in other tests may provide sufficient knowledge to cover the eliminated test points. Boeing has also consolidated a large percentage of qualification testing resources at a single location to improve efficiency. Test planning: According to program officials, Boeing’s test plans do not fully account for the time needed to complete receiver aircraft certification testing. Program officials, government test officials, and Boeing officials said that tests for certifying F-16 fighters, C-17 cargo planes, and other aircraft to receive fuel from a KC-46 will take between 3 and 5 weeks to complete for each aircraft. This is longer than the 1 week for each aircraft that is currently included in Boeing’s test plan, according to company officials. Boeing officials said the company intends to update the test schedule in Spring 2018 to reflect more time to complete receiver aircraft certifications. Boeing has not yet quantified how much time will be added to the test schedule for these certifications or determined whether it will affect the overall delivery schedule. According to program officials, Boeing is required to have 8 receiver aircraft certified by the first KC-46 delivery. These officials stated that to avoid the risk of further delivery delays, the Air Force is discussing the possibility of reducing the number of receiver aircraft certifications needed if some, but not all, receiver aircraft are certified prior to first KC-46 delivery. This would allow the warfighter to start using KC-46 aircraft sooner rather than wait for all 8 receiver aircraft to be certified. Air Force officials still maintain, however, that 8 receiver certifications are required prior to operational testing, which is slated to begin in October 2018 and last for about 7 months. Retrofitting already produced aircraft: Based on the updated schedule, Boeing will be producing 49 aircraft, or about 27 percent of the total aircraft the Air Force plans to buy, before developmental testing is complete. Originally, the Air Force planned to buy 19 aircraft or about 11 percent of the total number concurrent with developmental testing. In general, DOD tries to limit the amount of concurrency because testing can reveal design or performance problems that need to be fixed, which could lead to costly retrofits or schedule delays. For example, Boeing already needs to retrofit 18 aircraft it has produced with an updated wiring design and 6 aircraft with new flooring and tires. The Under Secretary for Acquisition, Technology and Logistics allowed 27 percent concurrency on this program to avoid a break in production. Cost risk to the government is low because the KC-46 development contract specifies that Boeing must correct any deficiencies and bring development and production aircraft to the final configuration at no additional cost to the government. However, there could be schedule delays if continued testing reveals problems that need to be corrected on aircraft already built. As of January 2018, Boeing estimates KC-46 development will cost about $5.9 billion or about $1 billion over the contract ceiling price. KC-46 development problems have resulted in delivery delays and kept the Air Force from achieving a higher level of refueling capacity it expected to achieve by this time. These problems have not resulted in additional costs to the government. However, if delivery delays continue past October 2018, the Air Force will need to maintain legacy aircraft such as the KC-135 longer than planned. The Air Force expected to have 470 tankers in January 2018—a combination of KC-46, KC-135, and KC-10 aircraft—for refueling missions, but only had 455 of these aircraft at that time. Since no KC-46 aircraft have been delivered, the Air Force has had to use KC-135 and KC-10 aircraft at a higher rate than expected. Air Force officials negotiated non-monetary considerations from Boeing to offset the lost military tanker capacity associated with the delay, such as obtaining additional training at no cost to the government for KC-46 pilots and maintenance personnel and support for the aircrew training system. According to program officials, Boeing has already provided almost all of these considerations even though the contract modification that includes them has not yet been signed by Boeing. According to Air Mobility Command officials, if there are delivery delays past October 2018, the Air Force would need to keep some KC-135 aircraft operational longer than planned. The cost of maintaining those KC-135 aircraft is estimated to be about $10.3 million per year per aircraft. Additionally, about $12 million per aircraft may also be needed, according to Command officials, for depot maintenance activities that are scheduled every 5 years. Command officials stated that the number of depot events that are needed will depend on how quickly Boeing can deliver expected KC-46 aircraft. We are not making any recommendations in this report, but believe the Under Secretary of Defense for Acquisition, Technology and Logistics should implement a prior recommendation to closely monitor the cost, schedule, and performance outcomes of the KC-46 program to identify positive or negative lessons learned. As one of only a few major acquisition programs to award a fixed-price incentive (firm target) development contract in recent years, evaluating performance and identifying lessons learned will be illustrative, important for informing decision makers, and help guide and improve future defense acquisition programs. We provided a draft of this report to DOD for comment. DOD did not provide any written comments, but the KC-46 program office provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; and the Secretary of the Air Force. The report is also available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or sullivanm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. The program office has 21 performance goals that are critical to the KC- 46 aircraft’s military capability and track progress in meeting contract specifications. These performance goals include nine key performance parameters, five key system attributes, and seven technical performance measures. Table 2 provides a description of each key performance parameter and key system attribute and table 3 provides a description and status of each technical performance measure. In addition to the contact named above, Cheryl Andrew, Assistant Director; Matt Crosby; Kurt Gurka; Stephanie Gustafson; Katheryn Hubbell; Zachary Sivo; Nate Vaught; and Robin Wilson made key contributions to this report. KC-46 Tanker Modernization: Delivery of First Fully Capable Aircraft Has Been Delayed Over One Year and Additional Delays are Possible. GAO-17-370. Washington, D.C.: March 24, 2017. KC-46 Tanker Aircraft: Challenging Testing and Delivery Schedules Lie Ahead. GAO-16-346. Washington, D.C.: April 8, 2016. KC-46 Tanker Aircraft: Key Aerial Refueling Capabilities Should Be Demonstrated Prior to the Production Decision. GAO-15-308. Washington, D.C.: April 9, 2015. KC-46 Tanker Aircraft: Program Generally on Track, but Upcoming Schedule Remains Challenging. GAO-14-190. Washington, D.C.: April 10, 2014. KC-46 Tanker Aircraft: Program Generally Stable but Improvements in Managing Schedule Are Needed. GAO-13-258. Washington, D.C.: February 27, 2013. KC-46 Tanker Aircraft: Acquisition Plans Have Good Features but Contain Schedule Risk. GAO-12-366. Washington, D.C.: March 26, 2012.", "summary": "The KC-46 tanker modernization program, valued at about $44 billion, is among the Air Force's highest acquisition priorities. Aerial refueling—the transfer of fuel from airborne tankers to combat and airlift forces—is critical to the U.S. military's ability to effectively operate globally. The Air Force initiated the KC-46 program to replace about a third of its aging KC-135 aerial refueling fleet. Boeing was awarded a fixed-price-incentive contract to develop the aircraft. Among other things, Boeing was contractually required to deliver 18 fully capable aircraft (KC-46 aircraft with 9 sets of wing aerial refueling pods that allow for simultaneous refueling of 2 aircraft) by August 2017. The program plans to eventually field 179 aircraft in total. GAO was asked to monitor the KC-46 program because of problems Boeing is experiencing developing the aircraft. This is GAO's 7th report on the KC-46 program. This report assesses program progress and challenges toward achieving its cost goals and delivery schedule. GAO analyzed cost, schedule, development, and test information contained in program documents; and discussed results with officials from the KC-46 program office, other defense offices, the Federal Aviation Administration (responsible for certifying the design of the KC-46), and Boeing. The total acquisition cost estimate for the KC-46 refueling tanker aircraft remained stable over the last year at $44.4 billion. As shown in the table below, the estimate has decreased about $7.3 billion, or 14 percent, since the initial estimate. This decrease is due in part to stable requirements. The program updated its delivery schedule in 2017 to allow Boeing to delay delivery of the first 18 fully capable aircraft from August 2017 to October 2018— 14 months. A schedule risk assessment, as well as GAO's analysis, however projects that deliveries could slip to May 2019, 21 months from the original schedule, if risks are not mitigated. See figure. Boeing faces the following risks and challenges and is trying to address them: updating test aircraft to the correct configuration to complete remaining tests; completing flight tests at a pace that is almost double its monthly average; updating test plans to reflect a more realistic schedule for certifying aircraft, such as F-16 fighters and C-17 cargo planes, to be refueled by a KC-46; retrofitting production aircraft to their final configuration for delivery; and fixing a critical deficiency to keep the boom from contacting receiver aircraft outside the refueling receptacle. Because of the terms of the contract, Boeing, not the government, is responsible for nearly $1 billion in additional development costs already incurred. Boeing is also providing additional training for KC-46 pilots, among other things, to compensate the Air Force for delivery delays. Meanwhile, the Air Force is continuing to use KC-135 and KC-10 tankers for refueling missions. GAO believes the Department of Defense should implement a prior recommendation to document lessons learned given the program's challenges.", "document_type": "gao"}
{"report": "NIST carries out its measurement services and documentary-standards development activities across several agency laboratories. NIST’s standards activities include participation in private-sector standards development organizations that conduct most standards development in the United States, and federal law and guidance provide direction to agencies when they participate in this process. NIST’s work underlies much of our nation’s business and public infrastructure, from helping to ensure the quality of air and water to helping to ensure the security of online financial transactions. This work includes providing measurement services, such as calibrations of equipment and reference materials used to ensure the accuracy and reliability of a wide range of scientific and industrial devices, and support for the development of documentary standards by the private sector. As of July 2017, NIST employed approximately 3,500 federal personnel and hosted 4,000 associates, who include guest researchers and collaborators, student interns, facility users, and contractors at its locations in Gaithersburg, MD and Boulder, CO. Under its Associate Director for Laboratory Programs, NIST’s activities span seven laboratory programs that cover a wide range of subject matter, such as bioscience and health, energy, manufacturing, and public safety and security (see figure 1). The seven laboratories are divided into divisions and groups of scientists and engineers who perform research in a certain field or discipline, and may also provide measurement services or participate in standards activities. In addition, NIST has three offices that primarily deal with measurement services: (1) the Office of Reference Materials within the Material Measurement Laboratory; (2) Calibrations Services within the Physical Measurement Laboratory; and (3) the Office of Weights and Measures also within the Physical Measurement Laboratory. Further, the Standards Coordination Office, which is also under the Associate Director for Laboratory Programs, conducts standards-related activities and provides guidance to NIST staff on participation in documentary standards activities. In 2010, NIST reorganized its laboratory structure, in part to improve the agency’s provision of measurement services. Under the new structure, the Physical Measurement Laboratory includes staff that handles most of the agency’s measurement standards and calibrations. The Material Measurement Laboratory includes staff supporting materials science and produces most of the agency’s standard reference materials. According to the NIST Director at the time of the reorganization, managing related research and measurement services together would allow the agency to improve its services. NIST’s measurement services encompass calibrations, standard reference materials, and standard reference data, among others. NIST provides calibration services for about 700 different types of devices and has over 1,200 different types of reference materials available (see figure 2). For example, NIST performs calibrations on many different types of thermometers for both scientific and industrial uses. For customers that have unique calibration needs, NIST can perform special tests tailored to their specific circumstances. NIST also performs detailed analysis of certain materials to precisely characterize their properties and makeup and provides these reference materials for use by others. For example, NIST produces a number of food-related reference materials that allow companies to accurately determine the nutritional content of their products. NIST has established a formal quality-control system covering the calibrations, special tests, and standard reference materials provided by the agency. The NIST quality system is intended to provide customers with confidence in the quality of NIST’s measurement services and create an environment of continual improvement for NIST management and staff. The quality system is described in policies and procedures governing the agency’s measurement services. Specifically, the NIST Quality Manual for Measurement Services, NIST-QM-I, contains NIST- wide policies and procedures and additional sub-level quality documentation contains policies and procedures established and maintained by each Division or Office to meet its technical needs. The system is overseen by the NIST Quality Manager, a position within the Standards Coordination Office, and the NIST Measurement Services Council, comprised of the Quality Manager and other agency officials, who report to the Associate Director for Laboratory Programs. Private sector calibration and testing companies may use NIST’s measurement services to provide NIST-traceable services, meaning that the accuracy and precision of the private company’s service has been documented and compared to NIST’s capabilities. This process allows these companies to provide services to consumers who do not need the high level of certainty provided by NIST while still providing assurance that their measurements are sufficient for their needs. As shown in figure 3, NIST performed calibrations on about 13,000 individual devices per year and provided about 30,000 reference materials per year or more from fiscal year 2006 to fiscal year 2016. NIST also provides standard reference data—such as detailed technical data on various elements, materials, and chemicals—and keeps time with its atomic clock in Boulder, CO, and broadcasts it. NIST also accredits public and private- sector laboratories to perform calibrations and other tests through the National Voluntary Laboratory Accreditation Program. Such accreditation shows, among other things, that the measurement services provided by these labs comports with certain federal and international requirements for calibration and testing. NIST’s standards activities support the development and use of standards to enhance the economic and technological competitiveness of the United States. There are various types of standards including measurement standards that define specific units, such as the kilogram, and documentary standards that describe the performance or design of a particular product, process, or test. NIST develops and refines numerous measurement standards and collaborates with other national metrology institutes across the world through the General Conference on Weights and Measures, the Bureau International des Poids et Mesures, and other organizations. This work includes supporting the International System of Units, which includes the kilogram, meter, second, and other units of measurement that form the basis for NIST’s calibration services. Measurement standards ensure that these units are consistently used and applied around the world. Documentary standards, in comparison, can specify how a product is designed or made, or they may establish performance standards that define the product by function rather than material. For example, documentary standards define Wi-Fi radios, certain aspects of building codes, and safe design for children’s toys, among other things. Both of these standards help define the properties and functions of today’s products and provide businesses and consumers with confidence that products will work as expected before purchase. In the United States, documentary standards are generally developed by the private sector through an open, consensus-based process overseen by various SDOs. Private sector companies in the United States choose when it is in their interest to participate in standards development. Many SDOs follow similar processes in the development of standards, and generally adhere to certain principles, including openness, balance of interests, and consensus. Specifically, once an SDO agrees to develop a new or revised standard, a committee is formed of representatives with subject-matter expertise from companies, nonprofit organizations, and government agencies. The representatives serve on a voluntary basis, and the committee drafts the standard. SDOs may have certain requirements for participants, such as payment of membership dues, to fully participate. In the process of creating or revising documentary standards, certain committee members will take on leadership roles, such as chairing committee meetings or leading writing of draft standards or other documents. Generally, a committee will use a consensus-based process to vote on whether to approve the draft standard. For example, to approve a draft standard, some SDOs require a supermajority, at least two-thirds, of the members who cast ballots as well as resolution of any negative comments. Documentary standards define the technical aspects or capabilities of materials, devices, machines, and other products to ensure their performance and interoperability. For example, in 1990, the IEEE Standards Association began work to develop a documentary standard for allowing devices to connect wirelessly to the internet. The IEEE wireless networking working group, designated as 802.11, approved its first standard in 1997 and has since approved a series of amendments and improvements to the standard. In 1999, a group of companies formed the Wi-Fi Alliance to help drive usage of the 802.11 standard and provide consumers with information on products that implement the standard. The Wi-Fi Alliance coined the brand Wi-Fi and developed certification procedures to show that devices using the 802.11 standard from different vendors are interoperable and provide a consistent user experience. Devices that comply with the standard are able to wirelessly transfer data within a local area. Within 2 years of the standard’s initial approval, the first devices using the standard were available to consumers and 21 years later wireless networks have become commonplace in libraries, coffee shops, and homes around the world. Originally intended for linking home or office computers, the standard has been implemented in a growing array of devices including lightbulbs and other household items. Hundreds of companies now incorporate Wi-Fi into their products, leveraging the ubiquity of the standard to improve the value of their products and give consumers options for meeting their networking needs. Several, large private sector organizations help create documentary standards in the United States. The American National Standards Institute (ANSI) is a membership organization that accredits numerous U.S. SDOs that oversee the creation, promulgation, and use of over 10,000 American National Standards. Other U.S.-based organizations that develop standards for domestic and international use include ASTM International, IEEE, and the National Fire Protection Association. ANSI also serves as the U.S. representative to two Geneva-based international organizations that support the creation of global standards, the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC). When followed, international standards may reduce technical barriers to trade by reducing conflict among domestic standards in various nations and allowing companies to produce a single product for multiple markets. For example, ISO encompasses 163 national standards organizations and is a major source of international standards. In 2000, NIST and ANSI signed a memorandum of understanding to, among other things, improve communication and coordination among the private and public sector on voluntary standards issues. Staff across many of NIST’s laboratories participate in documentary- standards development activities. NIST policy encourages staff participation in domestic- and international-standards activities whenever such participation is in the public interest and is compatible with NIST’s mission, policies, positions, priorities, and available resources. In 2016, NIST reported that staff participated in 114 SDOs. In limited policy areas, where a national priority has been identified in statute, regulation, or administration policy, active engagement or a convening role by the federal government may be needed to accelerate standards development and implementation. Federal agencies may use or help develop documentary standards for several reasons, including (1) to procure goods or services, (2) to incorporate standards into agency regulations, or (3) to improve agency operations or further agency policy goals. For example, the General Services Administration uses standards to specify packaging, marking, and labeling of products purchased for government use and for descriptions of the products themselves; the Consumer Product Safety Commission has incorporated various consensus standards into its regulations of consumer products; and the Department of Energy uses a number of consensus standards to help operate its contractor-run laboratories, among other uses. As a result, a number of federal agencies participate in a range of standards development activities that span many different areas of national need. Federal law and guidance provide that where possible, agencies are to use voluntary, private sector standards instead of creating their own unique standards and are to establish certain responsibilities in overseeing and coordinating these efforts. The National Technology Transfer and Advancement Act of 1995 (NTTAA) states that federal agencies are generally to use technical standards developed or adopted by voluntary-consensus standards bodies, and in doing so are to consult with voluntary, private-sector consensus standards bodies and participate with such bodies in the development of technical standards when such participation meets certain conditions. NTTAA, as amended, also provides that it is a function of NIST to coordinate the use of private sector standards by federal agencies emphasizing where possible the use of standards developed by private-sector, consensus organizations. Furthermore, the Trade Agreements Act of 1979 (1979 act) directs the Secretary of Commerce to keep adequately informed regarding international standards-related activities and identify those that may substantially affect the commerce of the United States. The Secretary is also to monitor the adequacy of U.S. representation in private international standards activities. The 1979 act says that the representation of U.S. interests before any private international standards organizations is to be carried out by a private person recognized as an organization member. Further, the 1979 act establishes a process for the Secretary to follow if the Secretary has reason to believe that such participation will not result in the adequate representation of U.S. interests or if there is no current organization member. These tasks have been delegated to NIST. NIST’s memorandum of understanding with ANSI also describes NIST’s role under the NTTAA, OMB Circular A-119, and the 1979 act to, among other things, ensure adequate representation of U.S. interests in all relevant international standards organizations and to coordinate federal activities in voluntary standards. In addition, Office of Management and Budget (OMB) Circular A-119, as revised in 2016, sets forth the policy for federal participation in the development and use of voluntary consensus standards. Federal representatives are encouraged to participate actively in standards development activities and to be fully involved in discussions and technical debates, register opinions, and serve in leadership positions if selected, among other things. A-119 directs the Secretary of Commerce, who has delegated this responsibility to NIST, to foster implementation of the Circular. Further, A-119 provides for a NIST-chaired interagency group called the Interagency Committee on Standards Policy (ICSP). The ICSP is composed of agency standards executives—senior-level officials who are broadly engaged in the agencies’ standards activities. A-119 directs standards executives to coordinate their agencies’ views when they participate in the same standards activities so as to present, whenever feasible, a unified position and, when not feasible, mutual recognition of differences. A-119 directs the ICSP to coordinate with certain entities with a view to encouraging more strategic and coordinated federal participation in the development and use of standards in regard to regulatory policy. According to the ICSP charter, the ICSP has the objective to promote effective and consistent standards policies in furtherance of U.S. domestic and foreign goals and, to this end, to foster cooperative participation by the federal government and U.S. industry and other private organizations in standards activities, and its purpose is to ensure effective federal participation in domestic- and international- standards activities. Further, in 2012 the Executive Office of the President (EOP) issued a memo for federal agencies to clarify principles guiding federal government engagement in standards activities that can help address national priorities. According to the memo and A-119, federal engagement in standards activities should be guided by the following strategic objectives: Produce timely, effective standards and efficient conformity assessment schemes that are essential to addressing an identified need. Achieve cost-efficient, timely, and effective solutions to legitimate regulatory, procurement, and policy objectives. Promote standards and standardization systems that promote and sustain innovation and foster competition. Enhance U.S. growth and competitiveness and ensure non- discrimination, consistent with international obligations. Facilitate international trade and avoid the creation of unnecessary obstacles to trade. To address these strategic objectives, the memo notes that the federal government works with the private sector to address common standards- related needs, while taking on a more active role where necessary to ensure a rapid, coherent response to national challenges. The memo also identifies responsibilities for agencies, such as periodically reviewing their standards activities to identify gaps in representation for mission-critical areas as part of their long-range planning and ensuring effective intra- and inter-agency coordination of engagement in standards development activities. We identified three areas where NIST faces challenges in providing measurement services and supporting documentary-standards development, based on our literature review, NIST stakeholder focus groups, and interviews with stakeholders and agency officials. First, the breadth of U.S. industry and the number of SDOs, among other factors, make identifying and prioritizing measurement service and standards needs and communicating with stakeholders about NIST’s services challenging. Second, ensuring adequate U.S. representation in international standards activities can be challenging due to the number of activities and other factors. Third, the involvement of multiple agencies and interdisciplinary issues makes coordinating among federal agencies on documentary standards challenging. The breadth of U.S. industries and commercial sectors with measurement-service and documentary-standards needs, and other factors, make it challenging to identify and prioritize among these needs, and make it challenging for NIST to ensure stakeholders are aware of the agency’s services. Identifying measurement-service and documentary-standards needs: Identifying measurement-service and documentary-standards support needs can be challenging, according to participants in all five of our focus groups and other NIST stakeholders we interviewed. Participants and stakeholders identified several factors that contribute to these challenges, including difficulty identifying needs across the breadth of U.S. industries and standards development activities, and difficulties presented by emerging, crosscutting, or interdisciplinary technology areas. The breadth of U.S. industries and standards development activities can make it difficult to identify their measurement service needs. NIST’s potential customer base covers the entirety of the U.S. manufacturing sector and many service sectors, including small- and medium-sized enterprises, as well as federal agencies and state and local governments. Identifying needs across the full range of this customer base can be a challenge, according to participants in all five of our focus groups and other stakeholders. Further, NIST officials noted that even within an industry sector, stakeholders may have differing views on the industry’s measurement service needs, which can make it harder to determine whether or how NIST should take action to meet those needs. Similarly, the diversity of documentary standards activities across many SDOs may make it difficult to identify when industry needs NIST staff participation in documentary standards efforts. There are no restrictions on which organizations may develop standards, and therefore, the total number of SDOs is not precisely known. However, ANSI estimates that there are hundreds of such bodies in the United States, and NIST has reported participating in 114 separate SDOs. Participants in four of our focus groups and two agency standards executives said that it can be difficult to keep track of SDOs or standards development activities, and NIST standards officials noted that the breadth of active SDOs and volume of their activities was an ongoing challenge. Similarly, three agency standards executives we interviewed said that identifying standards activities of interest to their agencies is challenging due to the large number of activities. Furthermore, emerging, crosscutting, or interdisciplinary technology areas can be a challenge, according to participants in all five of our focus groups. For example, participants in three focus groups discussed the difficulties faced by organizations that work in areas that combine multiple areas of technical expertise. A participant in one focus group cited electronic health records as an example of an interdisciplinary technology, as it includes biomedical research, public health research, and information technology. Another participant cited increasingly high- tech development in biological devices that involve physics, engineering, and mathematics. Participants said that organizations need to coordinate across disciplines and break down communication barriers to address these challenges. Additionally, representatives from one SDO we interviewed as well as an agency standards executive we spoke with highlighted the difficulty associated with predicting the trajectory of future change in emerging technologies. NIST officials noted that taking action to support the measurement service and standards needs of emerging technologies may be more challenging where there is a lack of industry consensus on how a technology will develop. Prioritizing among needs: Prioritizing among different measurement services can also be challenging. Participants in all of our five focus groups said that NIST must prioritize among measurement service needs because it does not have the resources to provide services for all industry needs. Participants in three of our five focus groups described challenges balancing between continuing older measurement services that serve current needs and creating new services. Further, a 2017 review of the activities of NIST’s Material Measurement Laboratory by the National Academies found that stakeholders have high demands for the laboratory and that it faces challenges balancing between maintaining ongoing efforts and initiating new efforts. A participant in one focus group also said that it can be difficult to prioritize between services that have broad use and those that are vital to narrower customer bases. For example, NIST performs calibrations for thermometers across a wide range of temperatures for use in many different sectors. On the other hand, NIST’s million-pound deadweight machine provides calibrations for very large force gauges used by aerospace manufacturers and the U.S. military. Focus group participants and NIST officials said that the volume of services provided may not reflect the value of the service to the industry, because a single calibration can support many millions of dollars of economic activity. When prioritizing staff participation in documentary standards activities, NIST faces a similar challenge. Specifically, the abundance of ongoing standards development activities means NIST staff may have to choose among several standards development activities in their areas of expertise. While some staff may have expertise that is closely linked to a small number of SDOs and activities, others may have expertise in foundational technologies that have relevance to numerous activities. Further, a participant in one focus group and two agency standards executives we interviewed stated that standards need to be revised from time to time, for example, to incorporate new technologies, and these revisions may compete for time and attention against new standards efforts in related areas. While individual SDOs can plan for and prioritize among their new standards efforts and revisions, NIST staff who participate in standards development efforts across a number of SDOs may still have to choose among contemporaneous efforts. Communicating with stakeholders: Communicating with stakeholders about NIST’s measurement services can be challenging, according to participants in all five of our focus groups and other stakeholders. Specifically, the breadth of potential users of NIST’s measurement services makes it more difficult for NIST to communicate with industry about its needs and NIST’s services. Participants in four of the five focus groups said that it can be difficult for potential users to be aware of and understand the services NIST provides relevant to their needs. For example, participants in one focus group described concerns regarding how well they, and industry stakeholders generally, understand the extent of NIST’s capabilities within their areas of expertise. Participants in this focus group cited benefits of having NIST and industry staff perform site visits to elucidate each other’s needs and capabilities. One NIST calibrations official we interviewed said that some commercial sectors, such as the automotive industry, may be underserved by NIST’s services due to a limited understanding of how NIST could help companies remain innovative and competitive. However, participants in one focus group said that NIST’s engagement with the industrial community is generally quite strong. Other stakeholders suggested that NIST faces an increasingly difficult task educating potential customers about its services because those customers may have less technical expertise today than they did in the past. Participants in one focus group, officials from the Department of Energy, and a NIST reference material official said that the portion of the nation’s workforce trained in measurement and standards issues is shrinking and that industry representatives now have less experience in these matters than they used to. Accordingly, NIST now communicates with stakeholders who have less expertise about its measurement services. According to NIST standards officials, focus group participants, other stakeholders, and a NIST report on U.S. representation in international documentary-standards activities, ensuring adequate U.S. representation in these activities can be challenging. Several factors, such as the large number of international standards activities occurring across numerous industry sectors, underlie this challenge and make it difficult for NIST to ensure adequate U.S. representation. First, the breadth of the global economy and the volume of international documentary-standards development activities make ensuring adequate U.S. representation challenging, according to NIST standards officials, stakeholders, participants in two focus groups, and literature we reviewed. For example, NIST standards officials, two agency standards executives, participants in one focus group, and literature we reviewed said that the large number of SDOs and volume of international standards activities presents a challenge to NIST. A participant in a different focus group also said that in some cases, industry is reliant on NIST to provide them with information on international standards activities relevant to them. As the number of activities increase, it can be difficult to maintain a comprehensive understanding of what is happening in various industry sectors and standards areas. Further adding to this challenge, several sources of information we collected identified a significant increase in the number of international standards activities or the relative participation of other countries in these activities, for example: NIST officials and participants in one focus group said that international SDOs, such as the ISO, are expanding their efforts to create global standards. Participants said that ISO’s efforts could conflict with existing standards that U.S. industry uses. Two stakeholders we interviewed said that U.S. industry also faces increasing competition from other countries, such as China, which, in some cases, is overwhelming the ability of U.S. industry to participate. Further, according to a 2012 testimony to Congress by the director of NIST’s Standards Coordination Office, other countries have made significant investments in their standards efforts and have attempted to increase their participation in international standards activities. According to the testimony, other countries increasingly view standards as a tool to increase their international competitiveness and are developing strategies and tactics to play a greater role in standardization, such as increasing their participation and leadership in international standards bodies. A 2014 NIST report on U.S. representation in international SDOs showed that the United States fell from first in 2005 to second in 2012 in the number of experts participating in one international SDO, the IEC, which produces standards for electric and electronic products, systems, and services. Specifically, the number of technical experts from the top ten countries that participate in the IEC was 5,528 in 2005 and 9,199 in 2012—an increase of 66 percent. However, participants from outside the United States were responsible for 85 percent of the increase. Additionally, the report showed that the United States fell from third in 1999 to fourth in 2012 in the number of IEC standards proposals submitted. The report showed that the number of new IEC standards proposed by all countries was 70 proposals in 1999 and 124 proposals in 2012—an increase of 77 percent. However, the percentage of U.S. country proposals out of all country proposals fell from 19 percent in 1999 to 14 percent in 2012. NIST standards officials said that there could be additional factors driving changes in U.S. stakeholder participation in international SDO activities. For example, NIST officials said that while U.S. stakeholder participation in ISO and IEC may have declined in some cases, some U.S. stakeholders have increased participation in other international SDOs whose standards are better suited for their industry. Second, what constitutes adequate representation is currently unclear, according to NIST’s 2014 report on U.S. representation in ISO and IEC activities and NIST standards officials we interviewed. According to NIST’s 2014 report, there are no guidelines or definitions given for what is deemed to be adequate representation of U.S. interests in international standards activities. Further, NIST standards officials said that it was not clear what circumstances would lead NIST to use the process established under the 1979 act if U.S. representation in an international SDO may be potentially inadequate. NIST officials also said that defining what would constitute adequate U.S. representation at international SDOs and collecting the information to help assess the adequacy of U.S. representation would be difficult and the definition and metrics could vary by industrial sector. Third, according to participants in two focus groups, the large number of companies and other stakeholders that could be involved in or have an interest in various international SDO activities under the U.S. system of private-sector-led standards development can make ensuring adequate U.S. representation a challenge. For example, participants in two focus groups said that NIST would need to consult with numerous industry stakeholders or SDOs to facilitate representation in situations where U.S. representation was inadequate. Further, as we mentioned above, documentary standards needs in emerging, crosscutting, or interdisciplinary technology areas can be a challenge. Literature we reviewed highlighted the need for NIST or other agencies to help bring together industries or other stakeholders that may not have a history of collaborating to resolve standards issues. Fulfilling NIST’s role to work with other agencies to coordinate use of and participation in standards activities under the NTTAA, as chair of the ICSP, and in implementing OMB Circular A-119 is challenging due to (1) the involvement of multiple federal agencies in documentary standards activities, and (2) increasingly interdisciplinary technology areas. Multiple agency involvement: Multiple federal agencies are involved in documentary standards activities, a situation that can make coordinating agencies’ activities challenging, according to participants in all five of our focus groups, and some stakeholders and agency standards executives we interviewed. Because multiple agencies are involved in documentary standards, agency efforts can be fragmented. Fragmentation refers to those circumstances in which more than one federal agency (or more than one organization within an agency) is involved in the same broad area of national need and opportunities exist to improve service delivery. We have previously reported that fragmentation of federal efforts occurs in a number of areas and can lead to challenges to effective coordination. As we mentioned earlier, federal agencies may use or help develop documentary standards for several reasons, including (1) to procure goods or services, (2) to incorporate standards into agency regulations, or (3) to improve agency operations or further agency policy goals. As a result, a number of federal agencies participate in a range of standards development activities that span many different areas of national need. Further, while some documentary standards issues may only affect the mission or activities of a limited number of agencies, other issues may affect many agencies. Participation by multiple federal agencies in documentary standards activities can be beneficial, according to some focus group participants, stakeholders, and agency standards executives. Some focus group participants, stakeholders, and agency standards executives identified examples of federal participation in which agencies could leverage their different strengths and expertise. For example, participants in four focus groups and some stakeholders we interviewed noted NIST’s unique role as a non-regulatory and neutral agency in facilitating the development of standards. These participants and stakeholders said that, in combination with NIST’s technical capability, this role allowed NIST to gain trust and cooperation from industry in advancing standards development, whereas industry may view regulatory agencies as less neutral. Participants in one focus group said that this role was also helpful to regulatory agencies because these agencies, such as the Food and Drug Administration, would not be able to work as closely with industry in regard to solving technical standards problems or assisting industry because of their regulatory role. Further, two agency standards executives said that some standards activities benefit from the expertise of multiple agencies. For example, one agency standards executive said that evaluating whether standards or product specifications in other countries constituted a barrier to trade required the expertise and participation of different agencies. Two stakeholders we spoke to also said that participation by all relevant federal agencies in standards activities is beneficial because the agencies can provide technical expertise and are important stakeholders for standards efforts because agencies regulate industry, develop policy, and procure goods from the private sector. At the same time, participants in all five of our focus groups, some stakeholders, agency standards executives, and NIST officials we interviewed cited challenges in coordinating documentary standards among multiple federal agencies, for example: Some stakeholders, agency standards executives, and another federal standards official we interviewed said that communication between federal agencies on their standards activities can be a challenge. For instance, three agency standards executives and one stakeholder said that it can be difficult to identify when other agencies are working on the same standards areas, and two of the standards executives said it can be difficult to know who to contact in other agencies to coordinate efforts. Three agency standards executives said that it can be difficult for standards executives to be fully aware of all standards activities in their department or agency. One standards executive also said that some standards executives have split responsibilities and are not full time, a situation that may make it difficult for these executives to devote sufficient time to understanding their agencies’ standards activities, particularly in large agencies. Further, NIST officials said that there is an uneven level of interest and focus on standards as a policy issue among federal agencies, generally. Participants in three focus groups cited differing priorities and interests among federal agencies as a challenge to coordinating on standards activities. For example, participants in one focus group said that different interests and priorities among financial regulatory agencies posed a challenge to coordination on cybersecurity standards. As we reported in December 2015, NIST undertook a collaborative process that involved federal agencies as well as nonfederal stakeholders in developing a cybersecurity framework in response to executive order and legislative requirements. Participants in one focus group noted NIST’s efforts to work with a variety of public and private-sector stakeholders but also said that financial regulatory agencies have their own cybersecurity regulations that may not align with NIST’s framework. In a February 2018 report on implementation of the cybersecurity framework, we noted the complex regulatory and cybersecurity environment of the financial sector and noted that sector representatives said that agencies’ differing cybersecurity requirements led to competition among various cybersecurity frameworks. NIST officials also said that it can be challenging for federal agencies to harmonize their views on standards because they each have individual missions and priorities that may lead to varying views. Similarly, a 2011 National Science and Technology Council report cited a lack of coordination among agencies with interests in standards activities as having a negative impact on government effectiveness. The report noted that agency objectives may not always be aligned and that they may be providing redundant support or competing with one another. An additional complexity to coordination of federal agencies’ documentary standards activities is that some standards issues may have multiple venues for interagency coordination. NIST officials said that agencies participated in the U.S. private-sector-led standards system and that there were a number of different organizations and groups through which federal agencies shared information, depending on the standards activity. There are at least four groups including the ICSP that provide interagency coordination on standards issues generally. According to NIST officials, interagency coordination also occurs through the National Science and Technology Council’s committees and subcommittees. Further, individual documentary standards areas may have additional interagency coordination venues. For instance, interagency coordination on cybersecurity standards also occurs through the Interagency International Cybersecurity Standardization Working Group, according to a NIST 2018 draft report. This group was established by the National Security Council’s Cyber Interagency Policy Committee to coordinate on major issues in international cybersecurity standardization and enhance U.S. federal agencies’ participation in these efforts. Furthermore, agencies may coordinate amongst themselves informally on specific standards interests, according to two standards executives. Interdisciplinary technology areas: Documentary standards development issues have become increasingly interdisciplinary— potentially creating challenges to coordinating agencies’ standards activities, according to our prior work, literature we reviewed, focus groups we conducted, and stakeholders we interviewed. As described above, technology areas, including emerging areas of technology such as electronic health records, can cut across disciplines. According to literature we reviewed, our prior work, and stakeholders we interviewed, interdisciplinary standards can be more difficult to develop or implement because they can be complex and involve a broader range of industry and government stakeholders with potentially different interests and needs. Standards areas are also becoming increasingly interdisciplinary, according to literature we reviewed, one stakeholder, and participants in one focus group. In addition, participants in all five focus groups and some stakeholders we interviewed said that it can be challenging to facilitate interagency coordination on interdisciplinary standards areas. For example, some participants and some stakeholders said that these standards areas can involve the need for collaboration among multiple agencies that can have different roles and responsibilities, priorities, or levels of expertise. Further, two stakeholders said that it could be a challenge for federal agencies to identify these areas. Our prior work, participants in two of our focus groups, and an agency standards executive identified several examples of interdisciplinary standards areas that present challenges to interagency coordination: In February 2018, we reported that protecting the nation against complex and growing cybersecurity threats required coordination between 10 different agencies, 9 of which had responsibility for coordinating implementation of NIST’s cybersecurity framework across 16 different critical infrastructure sectors. In November 2016, we reported that improved interagency coordination could help to address challenges SDOs face in using forward-looking climate information—an interdisciplinary standards area that requires expertise from multiple agencies—and we made a related recommendation. One focus group participant identified open source software and a participant in a different focus group identified machine learning and artificial intelligence as interdisciplinary standards areas needing increased coordination among federal agencies. One agency standards executive also said that federal coordination could be beneficial for developing standards for “Big Data” because multiple federal agencies have expertise in Big Data that is not being leveraged to create standards that could facilitate appropriate use of Big Data-related technology and techniques. Establishing a private-public partnership to coordinate standards development with different stakeholders. Implementing a testing framework. According to NIST officials, developing documentary standards for interdisciplinary technologies can be more resource intensive because of the need to pull together expertise from different disciplines and potential competition among SDOs in developing a standard. However, NIST officials also noted that standards development for interdisciplinary technologies may not always be more challenging than other types of standards development efforts, when an SDO has willing participants with the necessary expertise. For example, according to a 2010 VCAT report, NIST established a public-private Smart Grid Interoperability Panel to identify, prioritize, and address new and emerging requirements for this interdisciplinary standards area involving many stakeholders and agencies. According to VCAT, the panel allowed for a wide range of participating stakeholders and served as an effective way to determine and incorporate the different needs and interests of participants in a framework that enabled further development of smart grid standards. NIST works to address the challenges it faces in providing measurement services and supporting documentary-standards development in a variety of ways, but opportunities exist to improve some efforts. First, NIST’s efforts help address challenges to identifying and prioritizing measurement-service and documentary-standards needs, but some efforts do not fully align with federal guidance or NIST policy. Second, NIST’s efforts help support U.S. representation in international standards organizations but may not fully implement its role and address the challenge it faces. Third, NIST’s efforts support federal agency coordination on standards issues but do not fully align with selected leading collaboration practices. NIST takes a variety of steps to identify agency stakeholders’ measurement-service and documentary-standards needs, has procedures to support the prioritization of measurement services and standards activities in the agency, and has developed mechanisms for communicating with stakeholders. While these steps help NIST address challenges to identifying and prioritizing needs and communicating with stakeholders, some aspects of these efforts do not fully align with federal guidance or NIST policy. Identifying measurement-service and documentary-standards needs: NIST identifies stakeholders’ measurement-service or documentary-standards needs in various ways, including discussions with industry by NIST technical staff, attendance at trade shows and scientific professional society meetings, workshops hosted by NIST on technology areas of interest, and participation in planning activities of SDOs, among other ways. However, NIST does not regularly perform a comprehensive assessment of its measurement services and standards activities to identify and address any gaps between the agency’s efforts and industry needs. Genome in a Bottle The Genome in a Bottle consortium is one of several ongoing collaborations among the National Institute of Standards and Technology (NIST), Stanford University, and various industry and government partners that focus on measurements and standards supporting the newest developments in biology. Genome sequencing involves determining the chemical building blocks of deoxyribonucleic acid (DNA) or ribonucleic acid (RNA) and can give insights into the genes carried by an individual and how and when they are activated. Since the completion of the Human Genome Project in 2003 which first sequenced the whole genome of a human, scientists have worked to make whole human genome sequencing faster and less expensive. Genome in a Bottle aims to develop the tools needed to allow clinical use of whole human genome sequencing. These tools include reference materials that allow laboratories to ensure the reliability and accuracy of their sequencing equipment, increasing laboratories’ capability to perform genetic testing, medical diagnoses, and customize drug therapies. NIST’s primary method for assessing stakeholders’ needs is through outreach by individual technical staff and their expertise in relevant disciplines and related industries. Measurement services officials said that NIST’s staff work closely with their respective industry stakeholders and others to understand their measurement service needs. They stated that NIST staff engage with industry through direct contact at conferences and trade shows, company and NIST laboratory visits, training, NIST-led workshops, through their ongoing research activities, and other activities. NIST also collaborates with other metrology organizations to identify measurement service needs and advance measurement science. For example, measurement services officials described NIST’s participation in international organizations that develop strategic plans for calibrations and measurement standards, such as the Bureau International des Poids et Mesures and Inter-American Metrology System. These organizations allow national metrology institutes, like NIST, to collaborate with their peers and other stakeholders to improve the world’s measurement standards and services. NIST also collaborates with government, industry, and research institutions on emerging issues through various collaboration mechanisms. For example, NIST formed the Genome in a Bottle Consortium in 2011. It provides an open forum for discussion and planning for reference materials and other measurement infrastructure needed to use human genomic sequencing in clinical settings. Similarly, NIST’s Advanced Materials Center of Excellence allows the agency to work with universities, a government lab, and others to address research and development needs related to designing novel materials for manufacturing. Furthermore, since 1905 NIST has participated in activities of the National Conference on Weights and Measures. Recent activities of this group include developing measurement practices and measurement standards to ensure that ride-sharing companies accurately measure time and distance charges. The National Institute of Standards and Technology (NIST) began an active mercury reduction campaign in 2007 and stopped calibrating mercury thermometers entirely on March 1, 2011. NIST's Temperature and Humidity Group is actively participating in several U.S. and international phasing out efforts to identify alternative thermometers for a broad range of measurement applications, and to coordinate efforts to replace mercury- based instruments. For example, the Minamata Convention on Mercury is a global treaty to protect human health and the environment from the adverse effects of mercury and includes a phase out of the use of mercury in products and processes. According to NIST officials, NIST worked closely with one standards development organization, ASTM International, to develop a new standard for the manufacture and selection of digital thermometers. This standard describes three different types of digital-thermometer sensors and defines different classes of devices based on accuracy and, according to NIST, allowed ASTM to revise over 750 additional standards to replace required mercury thermometers with digital thermometers. NIST provides calibrations for all three types of sensors to the worldwide measurement standard, the International Temperature Scale. Furthermore, NIST examines trends in the measurement services it provides to better understand industry needs. In particular, NIST conducts individualized testing for companies known as special tests that can give the agency insight into industry’s needs. Special tests comprise calibrations and related measurements that are unique to the customer and are not part of NIST’s regular catalogue. A company may request a special test, for example, to evaluate a prototype product or measurement technology. According to NIST officials, NIST uses special tests as a way to meet industry needs and also understand what kinds of measurement services industry may need more of in the future. Similarly, NIST standards officials also described staff expertise as important for identifying stakeholders’ needs for support in the development of documentary standards. In particular, standards officials described staff participation in roadmapping activities—used to identify and plan for future standards activities in certain fields—sponsored by NIST or SDOs as important opportunities for staff to assess the standards landscape and identify needs. For example, NIST officials noted the importance of NIST participation in ANSI’s standards panels and collaboratives, some of which are co-led by NIST staff, for identifying standards needs. NIST also participates in SDO administrative groups, such as the ANSI Government Members Forum, that can alert NIST to important international and domestic standards activities. Through participation in SDOs, NIST standards officials said that NIST may obtain information on international standards activities in which U.S. industry representation is needed. NIST officials said that developing new documentary standards can take from a year and a half up to a decade to complete, and accordingly, NIST considers what the standards industry is likely to need in the next 1 to 5 years. Various thermometers at NIST’s temperature calibration lab. In addition, NIST gathers information on how its efforts align with stakeholders’ needs through feedback from industry customers and external reviews by the National Academies, VCAT, and others. For example, NIST asks the users of its calibration services and standard reference materials to respond to customer satisfaction surveys. NIST measurement services officials said that while a small percentage of customers respond to the surveys, the information gathered provides useful input on what new services customers need. By 2018, NIST implemented new information systems to track its measurement services’ sales and customers, and is evaluating if the agency’s outreach to these customers can be improved using the new systems. According to NIST officials, NIST also receives feedback when stakeholders contact the agency through phone, email, or the NIST website. Further, the National Academies evaluated NIST’s Material Measurement Laboratory in 2017 and has reviewed every NIST laboratory since the 2010 reorganization. In a 2017 report, the National Academies recommended that NIST’s Material Measurement Laboratory develop a strategy to balance between existing product support and the research, production, and certification of new standard reference materials. Recent VCAT reports have also considered how well NIST identifies measurement-service and documentary-standards needs of its customers and assessed the agency’s services: In a 2009 report, VCAT examined NIST’s participation in standards development in three specific areas and found that NIST’s technical expertise, its reputation as an unbiased and neutral party, and its extensive participation in standards activities strongly position NIST to address the standards-related challenges of the 21st century. In a 2010 report, the VCAT found that NIST’s analysis and planning practices for its measurement services tended to be driven by bottom- up initiatives more than high level strategy and in 2010 and 2011 reports the VCAT recommended, among other things, that NIST perform additional assessments of its measurement services. In 2012 and 2013 reports, the VCAT found that NIST’s participation in standards activities has helped the agency identify industry needs related to advanced manufacturing. Additionally, in 2015, NIST received a peer review of its measurement services by experts from other national metrology institutes. According to the peer review summary, most of the eight individuals from other national metrology institutes who reviewed NIST’s measurement services found that the agency covered major needs, and the reviewers gave NIST additional feedback on areas for expansion the agency should consider. Participants in three of our five focus groups said that when NIST focuses on a specific area, its efforts to understand industry needs can be very effective. For example, participants in one group said that NIST creates an open environment for discussions with industry and companies feel comfortable approaching the agency with their needs. Participants in another group said NIST’s regular contact with and surveys of state metrology labs help the agency understand their needs. However, participants in all five of the focus groups said that NIST’s capacity for outreach is limited. For example, participants in one focus group said that NIST’s outreach efforts can be driven by the personal relationships NIST staff develop with stakeholders and therefore do not scale to the large size of U.S. industry. NIST officials said that its measurement services and documentary-standards support activities serve different populations of stakeholders and that identifying the needs of NIST’s measurement services’ stakeholders is more manageable than with documentary standards. Specifically, by working with measurement equipment manufacturers, NIST officials said that understanding the needs of its measurement services’ stakeholders was manageable. However, NIST officials said it is more difficult to know the measurement-service needs of industry stakeholders that work with equipment manufacturers rather than with NIST directly. NIST’s efforts to identify industry needs are supported by agency policy, and NIST has controls in place to evaluate the efficacy of the measurement services it provides. NIST policy directs staff to consider stakeholders’ measurement service needs and assign responsibility for assessing measurement services to agency management. Specifically, the NIST Quality Manual, which contains the agency’s policies and procedures governing its measurement services, describes meeting and anticipating the needs of measurement services’ users as a goal for the agency. The manual encourages staff to identify improvements to measurement services and assigns ultimate responsibility for providing services that meet industry, academia, and other government agency needs to the Associate Director for Laboratory Programs. Further, the Quality Manual requires multiple levels of review of the agency’s measurement services, including internal audits at the division level, quarterly management review by measurement services officials, and peer-review by a team of experts from other NIST divisions. The assessments are to provide NIST with assurance that its measurement services, and especially the calibration and measurement capabilities, continue to be in compliance with its quality management system. Further, NIST officials told us that the agency was considering measurement services as part of its strategic-planning efforts, but those efforts were preliminary at the time of our review. For documentary standards, NIST’s policies for staff participation in standards development encourages staff participation in domestic- and international-standards development activities whenever such participation is in the public interest and is compatible with NIST’s mission, policies, positions, priorities, and available resources. NIST’s standards participation policy also provides that the Associate Director for Laboratory Programs conduct periodic reviews of the effectiveness of NIST’s participation in documentary standards activities, with support from the Standards Coordination Office. Additionally, the policy directs NIST managers to annually review records of SDO participation by staff in their divisions and calls for laboratory and division managers to periodically review activities to identify gaps in representation for mission- critical areas. Further, NIST officials said that across both measurement services and documentary-standards support activities, the efforts of its staff to meet stakeholders’ needs are assessed via employee performance reviews, among other means. NIST’s multi-level assessments of its measurement services and documentary standard development activities help ensure their quality and help to identify stakeholders’ needs; however, these assessments do not comprehensively identify and assess gaps in NIST’s services or how well they align with stakeholder needs. For example, NIST’s efforts to identify measurement service needs for individual technology areas or industries, or to evaluate the services provided by its labs—both areas of strength for NIST—may not identify gaps in service needs for technology areas not evaluated or that cut across NIST’s labs. Officials working on calibration services and reference materials told us that NIST has not performed a comprehensive assessment of how well its services address industry needs since a 2006 assessment of the U.S. measurement system. NIST measurement services officials raised concerns about the value of this type of review, describing the agency’s 2006 assessment as time consuming and ultimately of limited use in identifying unmet measurement needs. However, members of the 2015 peer review of measurement services said that NIST would benefit from strategic assessments to identify and assess gaps in programs and a calibration official told us that it is difficult for NIST to recognize if it is not effectively reaching stakeholders. Similarly, NIST officials told us that the Associate Director for Laboratory Programs does not perform a periodic review of the effectiveness of NIST’s standards participation, despite the agency’s standards participation policy calling for such a review. One standards official said NIST generally does not comprehensively assess standards needs because of the number and diverse nature of standards activities. Federal standards for internal control direct management to use quality information to determine if the agency is meeting its objectives and to identify, analyze, and respond to significant changes that could present risks to achieving its objectives. In addition, the 2012 EOP memo on standards activities in areas of national priority states that agencies should periodically review their standards activities to identify gaps in representation for mission-critical areas as part of their long-range planning. Revising NIST’s policies to provide for periodic comprehensive management reviews of NIST’s measurement services would augment NIST’s ongoing efforts to assess how well its services align with stakeholder needs and identify any gaps. Conducting comprehensive reviews of NIST’s measurement services and documentary standards activities would provide NIST with greater confidence that its activities align with stakeholders’ needs, consistent with internal control standards. Conducting such reviews would also help NIST address the recommendations made by its recent external reviews and could be used to support NIST’s efforts to develop the strategic plan called for by the American Innovation and Competitiveness Act. Prioritizing among needs: NIST has a process for deciding when new measurement services are warranted; however, decision-making about documentary-standards development activities is decentralized, and NIST management and staff may not have clear guidelines or sufficient information to support decision-making about new standards activities. NIST has processes to guide decision-making about measurement services; this guidance helps address the challenges focus group participants identified given that NIST cannot address all needs. Before choosing to develop a new measurement service, such as a new standard reference material or calibration service, NIST’s Office of Reference Materials and Calibration Services office, respectively, consider the need for and priority of the service. One NIST official said that because NIST cannot cover all measurement services that may be needed by the private sector, the measurement services program focuses on the areas where NIST may have the most impact. NIST has procedures in place to evaluate proposals for new services. For example, before NIST develops a new reference material, Office of Reference Materials and relevant laboratory staff annually review proposals for new materials by evaluating factors such as the potential user base for the material, related legislative or regulatory requirements, and whether the material could be produced by other organizations, such as private companies. The Office of Reference Materials also considers these factors when considering extending reference materials it already provides. Further, because developing a new reference material can be time consuming, NIST is currently evaluating the creation of a suite of reference materials called “research-grade materials” that could address high priority areas with a lower level of precision than NIST’s standard reference materials. According to NIST officials, research-grade materials are one way of providing this type of measurement service faster to meet the needs of U.S. industry. Similarly, new calibration proposals are reviewed by Calibration Services management on a quarterly basis and are evaluated on factors such as stakeholder need and potential impact. In addition, NIST extends its reach through its work with private sector test and calibration companies that also serve the needs of U.S. industry. For example, the National Voluntary Laboratory Accreditation Program allows NIST staff to directly interact with test and calibration laboratories and provides opportunities to share NIST’s expertise and improve services offered by these laboratories. Further, a focus group participant and government laboratory officials described industry association meetings as important opportunities to find out about cutting-edge capabilities and potential future measurement capabilities offered by NIST and others. NIST does not have a similar formalized process to support consistent decision-making across NIST laboratories and divisions about participation in new documentary standards activities. As described previously, NIST’s policy for staff participation in standards development encourages staff participation in domestic- and international-standards development activities. Additionally, NIST guidance directs staff to participate in SDO activities based on their unit’s mission and goals, and the technical competence required, among other factors, and advises that staff may choose to accept leadership positions in these activities, such as the secretary or chair of a standards committee. OMB Circular A-119 and the 2012 EOP memo on standards also encourage agencies to play a variety of roles in the standards process, such as serving as chairpersons or other official capacities. Focus group participants had mixed opinions on when NIST staff should take on leadership roles. Participants in four of our focus groups said that NIST staff are particularly suited to leadership roles, and some attributed this conclusion to the technical expertise of NIST staff or their ability to act neutrally among competing companies. However, participants in two focus groups said that NIST is better suited to a technical advisor role. However, NIST policy and guidance do not describe when it is appropriate for staff to take leadership roles in standards development activities. Individual staff in consultation with their supervisors determine what standards activities, if any, they should participate in and their appropriate role in the standards development activity. According to NIST officials, other levels of management may be involved in the decision- making process to varying degrees depending upon whether participation in an SDO activity aligns with a NIST priority or where involvement entails international travel, among other factors. A guidance document for staff encourages them to attend additional training provided by the Standards Coordination Office, and standards officials we interviewed told us that the training and informal guidance provided by the office could help staff in leadership positions; however, such roles may entail additional time commitments. Although some stakeholders have expressed interest in increasing NIST’s participation and leadership in standards activities, doing so could entail tradeoffs between these activities and other NIST priorities. Without clear agency guidance on staff participation in standards development activities, such as the factors staff could consider when deciding to take on leadership or other more active roles, NIST cannot be assured that decisions on the time staff commit to standards activities are being made consistently across the agency and in accordance with agency priorities. Further, NIST’s ability to ensure participation is appropriately prioritized across the many documentary-standards development activities in which its staff could be involved is limited by incomplete information. Staff are directed in NIST policy to record their participation in standards activities in a centralized database, including a description of the SDO, specific activity, and role of the NIST participant. According to a NIST standards official, the database may be used by laboratory managers to assess the standards activities of their staff. However, NIST’s database does not contain information regarding NIST staffs’ time commitment, information that could be used by management to assess the resources required for participation in these activities. NIST guidelines also direct staff to document their goals and time commitments for standards activities in their individual performance plans, but the data are not included in the standards participation database. According to NIST officials, determining the time spent on documentary standards can be difficult. Specifically, staff participate in standards development within their areas of expertise and often this work is closely related to their research activities at NIST. Because of this confluence, the amount of time staff spend on a particular standards activity may be unclear. The time spent at meetings or directly drafting or responding to standards documents will also depend on the amount of consensus on the standards committee, consensus that may not be known ahead of time. NIST standards officials told us that the self-reported data currently in the database are sufficient for laboratory management to identify what activities staff are participating in, and that management can then ask individual staff for additional information. However, NIST does not have data at an aggregate level on the time staff commit to or expect to commit to these activities. Standards for internal control require agencies to use quality information to achieve the entity’s objectives, such as by using relevant data from reliable internal and external sources in a timely manner based on the identified information requirements. While staff document their roles in documentary standards activities, without information on the estimated amount of time staff commit to these activities, NIST management may not have the information needed to comprehensively assess how staff distribute their limited time and attention. Although it may not be feasible to determine the exact amount of time spent on documentary standards activities, information on estimated amount of time could help inform staff decision-making on when to accept leadership roles in standards development activities and could inform management on trends in time commitments to these activities across the agency’s laboratories and divisions. Communicating with stakeholders: NIST takes a number of steps to address the challenges it faces communicating with its diverse stakeholders about its measurement services and documentary standards activities. NIST measurement services officials described the primary goal of their stakeholder outreach efforts as informing potential customers of the services NIST provides. The officials described multiple avenues for reaching potential customers of NIST’s measurement services, including: attendance at workshops, trade shows, and professional societies; NIST’s measurement services websites; email and newsletter correspondence with current customers; direct contacts between individual staff and stakeholders; and research papers and other scholarly activities. For example, NIST distributes a newsletter to customers that includes information on upcoming changes to the agency’s standard reference materials. NIST has also taken steps to better target its stakeholder communication. For example, NIST measurement services officials described an effort to evaluate customer interest in NIST’s standard reference materials, as expressed through contact with NIST staff at trade shows. As a result of this analysis, NIST reduced the number of trade shows at which it advertised these materials—focusing on those trade shows that were identified as having the greatest number of interested attendees. More broadly, by 2018 NIST implemented new information systems supporting its measurement services sales, inventory, and customer relationship management. Measurement services officials described efforts currently underway to take advantage of these systems to better target customers by, for example, providing email notifications to customers of new materials or improved measurements of current materials. NIST’s efforts help support U.S. representation in international standards organizations but may not fully implement its role and address the challenges it faces. NIST works to support U.S. industry’s efforts to ensure that its interests are adequately represented in international standards activities. For example, NIST officials said that NIST staff participate broadly in international standards activities that are aligned with NIST’s priorities and share their technical expertise in various committees. Through its participation in SDOs, NIST may obtain information on international standards activities in which U.S. industry representation is needed. NIST also shares information on international standards activities with U.S. industry. NIST hosts the World Trade Organization Inquiry Point, a U.S. government website that serves as a communications hub for information on international standards and related issues. Through the website, U.S. industry and other stakeholders receive notifications of standards-related regulations and procedures, as well as the basis and objective for proposed measures, among other information provided. The website also provides a mechanism to circulate comments on proposed measures. Further, we noted above that NIST participates in ANSI standards panels and collaboratives and the ANSI Government Members Forum. NIST’s participation in these bodies can alert NIST to important international standards activities. NIST officials said that when NIST has become aware of concerns about U.S. representation at an international standards activity within a federal government area of responsibility, it has led efforts to ensure adequate representation in those activities. For example, according to NIST officials, NIST: Worked with the U.S. Patent and Trademark Office to help identify another organization to represent U.S. interests in a standards activity that affected U.S. intellectual property after the original organization decided not to continue participating. Established and administered the U.S. technical advisory group for a new ISO technical committee on biotechnology after industry and many federal agencies chose not to participate. Took on a leadership role to represent U.S. interests in a standards activity at the International Telecommunication Union when no U.S. telecommunications companies took on responsibility for representing U.S. industry in the activity. NIST has also issued three reports on U.S. representation in international SDOs. In June 2014 NIST issued its most recent report on U.S. representation in two international SDOs, the ISO and IEC—its two prior reports were published in 2000 and 1988. The 2014 report describes U.S. representation in ISO and IEC activities from 1966 through 2012. As noted previously, the report also describes U.S. memberships and roles in ISO and IEC standards development committees, and includes data comparing U.S. representation on these committees with representation from other countries. While NIST has helped support U.S. representation in international documentary standards activities, NIST has not developed a mechanism to implement the role delegated to it under the 1979 act to address circumstances when U.S. representation at international standards organizations may be inadequate. As noted previously, the 1979 act directs the Secretary of Commerce to coordinate with the U.S. Trade Representative (USTR) and keep adequately informed regarding international standards-related activities and identify those that may substantially affect the commerce of the United States. The Secretary is also to monitor the adequacy of U.S. representation in private international standards activities. Further, the 1979 act establishes a process for the Secretary to follow to address circumstances in which U.S. representation may be inadequate, specifically: If the Secretary, after an inquiry, has reason to believe that the participation by an organization member in the proceedings of a private international standards organization will not result in the adequate representation of United States interests that are, or may be, affected by the activities of such organization (particularly with regard to the potential impact of such activity on the international trade of the United States) the Secretary shall immediately notify the organization member concerned. The organization member has a 90-day period following the Secretary’s notification to demonstrate its willingness and ability to represent adequately U.S. interests. If the organization member demonstrates willingness and ability, the Secretary should take no further action. If the organization member either does not respond or does not demonstrate the requisite willingness or ability to represent U.S. interests or there is no organization member of the private international standards organization—the Secretary is to make arrangements to provide for the adequate representation of U.S. interests. Although NIST has reported on the extent to which the U.S. participates in some Geneva-based international standards development activities, these reports do not assess the adequacy of this participation. NIST officials we interviewed said that the agency does not assess whether U.S. interests are adequately represented and does not have definitions of or guidelines for what constitutes adequate representation. NIST officials also told us that the agency has not evaluated the circumstances under which it would follow the procedures under the act for addressing inadequate representation. Federal standards for internal control indicate that management should identify, analyze, and respond to risks related to achieving an agency’s objectives. As noted previously, the large number of international standards activities occurring across numerous industry sectors, among other factors, present challenges to ensuring adequate U.S. representation in international standards activities. In commenting on a draft of this report, Commerce stated that a determination to follow the statutory process in the 1979 act would carry significant risk of being perceived by the national and international standards community as a U.S. government change of policy relating to the nation’s private-sector-led standards system. However, the memorandum of understanding between NIST and ANSI states that NIST’s role, under the NTTAA, OMB A-119, and the 1979 act is “to ensure adequate representation of U.S. interests in all relevant international standards organizations.” Further, NIST has previously taken action in some cases in international standards activities within a federal government area of responsibility, as described above. Additionally, the ongoing contacts between NIST and SDOs and staff participation in standards activities can help NIST keep adequately informed on international-standards-related activities. Without a mechanism to identify and respond to circumstances when U.S. representation at international SDOs may be inadequate, such as guidelines for what constitutes adequate representation and when and how to follow the process under the 1979 act, NIST may miss opportunities to take action in furtherance of its mission to support U.S. competitiveness by helping to ensure adequate U.S. representation in international standards activities. Alternatively, given Commerce’s concerns about the statutory process in the 1979 act, NIST could develop a legislative proposal that allows NIST to ensure adequate U.S. participation in international standards activities while addressing those concerns. NIST supports coordination among federal agencies on documentary standards issues as chair of the ICSP, as well as additional coordination efforts outside of the ICSP. However, aspects of the ICSP’s efforts do not fully align with selected leading practices for enhancing and sustaining interagency collaboration. These practices can help agencies manage fragmentation and other coordination challenges. NIST has taken several steps to address the challenge of interagency coordination on documentary standards issues through its efforts as chair of the ICSP: NIST and member agencies have a charter that outlines the purpose, functions, and membership of the ICSP, among other information. According to the charter, the ICSP was established to advise the Secretary of Commerce and the heads of other federal agencies in matters relating to standards policy. The ICSP’s purpose under the charter is to ensure effective participation by the federal government in domestic- and international-standards activities, among other things. NIST officials we interviewed said that the ICSP meets three to four times per year and that the purpose of the ICSP is to promote effective participation by federal agencies in the standards process— when it is within an agency’s mission and in the public interest—but not to force their participation. According to NIST officials, NIST tries to demonstrate the benefits of participation and encourages other agencies to participate actively in relevant standards activities. NIST chairs and supports ICSP activities, including providing administrative services, organizing meetings, and developing agendas and reports. We previously reported in 2012 that designating a lead agency can assist in driving accountability and providing for continuity of leadership for a collaborative effort. According to NIST officials we interviewed, ICSP meetings are open to agencies outside of the member agencies. Further, NIST officials said they routinely invite staff from non-member agencies when the committee plans to discuss items of particular interest to them. NIST officials said that the ICSP network allows NIST to provide a knowledge base for other federal agencies, and to help federal staff understand standards policy and participation in SDOs, among other things. According to ICSP members and NIST officials, NIST facilitates the sharing of best practices on broad standards topics affecting multiple agencies through the ICSP. As of June 2018, 30 federal agencies have identified participants to the ICSP, while 5 agencies have vacant positions on the committee. NIST officials provided several examples of its information-sharing activities: NIST led ICSP efforts to facilitate discussion on, and manage revisions to, key guidance regarding federal agencies’ standards efforts in OMB Circular A-119. NIST led ICSP efforts to promote awareness on and share information related to the development of corporate social responsibility standards in ISO. NIST created an ICSP working group on conformity assessment to help address issues that were frequently being raised during ICSP meetings. NIST invites speakers to share information with ICSP members on various standards-related issues. For example, NIST invited officials from ANSI to present information on standards areas of agency interest and also invited the members of the SDO leading efforts on smart grid standards to brief agencies on the SDO’s efforts. According to six agency standards executives we interviewed, the ICSP helps members to share information, including best practices and to have a general awareness of pertinent documentary standards topics. Three agency standards executives said that the ICSP helps standards executives to know each other on a personal basis so that they know whom to contact to coordinate on standards activities. Bringing agency standards executives together through the ICSP can also spur coordination among agencies if a topic of mutual interest is identified. For example, two agency standards executives said that questions and suggestions raised by agencies at the ICSP led to coordination with other agencies on a standards area of mutual interest. NIST also coordinates with individual agencies on documentary standards activities outside of the ICSP. For example, according to participants in four focus groups, relevant NIST and VCAT reports, and congressional testimonies we reviewed, NIST is particularly strong in bringing relevant federal agencies and other stakeholders together to develop standards and frameworks for individual interdisciplinary technology areas. Such coordination can occur through a variety of methods or groups, such as workshops, that address standards-related issues. Additionally, four agencies’ standards executives said that they coordinated extensively with NIST on specific standards activities. Two of the agency standards executives described how collaboration with NIST on research helped inform their agencies’ standards activities. NIST also offers training, such as NIST’s standards boot camp, according to federal standards executives. Five agency standards executives said staff from their agencies attended the training and four standards executives said the training had improved their staff’s competence in standards. While coordination between NIST and other federal agencies on documentary standards issues occurs in a variety of ways, the ICSP is the primary body established to facilitate interagency coordination on standards policy, according to NIST standards officials. However, some of the ICSP’s efforts to support coordination among federal agencies on standards issues do not fully align with selected leading practices for interagency collaboration we identified in our previous work. Specifically, the ICSP charter has not been updated; ICSP member agencies’ roles and responsibilities have not been fully clarified; and the ICSP may not include relevant members to carry out its functions. Additionally, we reported in 2015 that while collaborative mechanisms differ in complexity and scope, following leading practices can help manage fragmentation and other coordination challenges. ICSP charter: The ICSP charter has not been updated since it was signed in October 2000. According to the charter, the need for and mission of the ICSP was to be reexamined 3 years after the charter was created. However, NIST officials said that the ICSP charter has not been reexamined. We reported in 2012 that agencies that articulate their agreements in formal documents can strengthen their commitment to working collaboratively. We also reported that written agreements are most effective when they are regularly updated and monitored. Further, updating written agreements, such as the ICSP charter, can be an opportunity for members to define common goals and purpose. In addition, focus group participants, stakeholders we interviewed, and literature we reviewed described broad changes in documentary standards that have led to new challenges. For example, we previously noted the challenges related to emerging interdisciplinary standards issues and the increase in the number of international standards activities, and both of these areas can benefit from federal coordination. Further, the ICSP charter has not been updated to reflect the 2016 revisions to OMB Circular A-119 or the guidelines provided to agencies in the 2012 EOP memo on engagement in standards activities to address national priorities. For example, the revised A-119 notes several executive orders relating to review and coordination that were not in existence at the time of the charter’s creation. Additionally, the EOP memo that outlines agency responsibilities for standards areas of national priority was also not in existence at the time of the ICSP charter’s creation. The EOP memo calls on agencies to ensure effective intra and interagency coordination of engagement in standards development activities. Without reexamining and updating the ICSP charter, as necessary, NIST and other ICSP member agencies cannot be assured that their collaborative efforts are best structured to address current standards challenges. ICSP member roles and responsibilities: ICSP member agencies’ roles and responsibilities have not been fully clarified to an extent that would help the ICSP fulfil its purpose, objectives, and functions to gather information and make recommendations to the Secretary of Commerce to strengthen standards policy and coordination. The ICSP charter outlines two basic functions for the committee: (1) gathering, analyzing, and maintaining current information about standards and other specified related information and (2) on the basis of such information, and when appropriate, making recommendations to the Secretary of Commerce to achieve various standards-related objectives, such as strengthening coordination of standards-related policies and activities among federal agencies. The charter also specifies that the ICSP may create task groups as appropriate. However, we found several areas in which the ICSP charter could more fully clarify member agencies’ roles and responsibilities in regard to implementing its functions, purpose, and objectives, for example: The ICSP charter does not fully clarify the ICSP role and member agencies’ responsibilities for identifying and coordinating on interdisciplinary standards issues that cross agency boundaries. Five agency standards executives we interviewed as well as NIST standards officials described the ICSP as primarily an information- sharing or networking body, with little role in establishing federal positions on standards activities or policy, or making joint policy decisions with respect to specific standards issues. While information sharing is an important component of interagency coordination, OMB Circular A-119 gives agency standards executives responsibility for consulting with other relevant agencies on standards issues to avoid, to the extent practicable, expressing inconsistent views on standards issues. Furthermore, the 2012 EOP memo specifies that agencies should periodically review their standards activities to identify gaps in representation for mission-critical areas and should ensure effective coordination of engagement in standards development activities. NIST officials and one standards executive said that the ICSP could identify emerging or interdisciplinary standards issues that may require more active federal roles and coordination; however, the charter does not specify the ICSP’s role and member responsibilities regarding interdisciplinary standards areas that may cut across agencies. The ICSP charter does not fully identify member agencies’ responsibilities for coordinating on international standards issues. OMB Circular A-119 and the ICSP charter specify that the ICSP has a role in coordinating federal agencies’ international standards activities. However, the ICSP charter does not fully identify member agencies’ responsibilities toward fulfilling this role. NIST standards officials and one agency standards executive said that the ICSP does not typically address international standards issues, or policy, or coordinate federal positions on international standards. While NIST officials said other USTR-led efforts could help coordinate agencies’ international standards activities, a USTR official told us that USTR does not have the technical expertise needed to effectively coordinate multiple agencies’ views on standards. Further, the USTR official, one NIST standards official, and representatives from ANSI said that different agencies’ positions are taken into account as part of the standards development process at SDOs that have an open process, such as ANSI. However, as mentioned previously, A-119 specifies that the ICSP is to coordinate with other interagency entities with a view to encouraging more strategic and coordinated federal participation in the development and use of standards. Further, the ICSP charter also specifies that the ICSP is to ensure effective federal participation in international standards activities. The ICSP charter does not fully identify member agencies’ responsibilities for developing joint recommendations to the Secretary of Commerce. The charter describes eight areas in which the ICSP shall make recommendations when appropriate, including to strengthen agency coordination and to improve the efficiency of standardization efforts within the federal government. Further, the charter specifies an administrative process for voting on ICSP recommendations. However, according to NIST officials, the ICSP has never made a recommendation to the Secretary of Commerce to address a standards-related issue. Further, NIST officials said that the ICSP agencies have not shown interest in acting jointly. NIST officials said that there may be circumstances in which making such a recommendation would be appropriate, for example, to strengthen interagency coordination on interdisciplinary standards issues, although the officials said that the ICSP would try to address issues at a lower level before elevating them to the Secretary of Commerce. Further clarifying agencies’ responsibilities may help ensure that the ICSP is able to meet this function of its charter. The ICSP charter does not fully identify member agencies’ roles and responsibilities for creating and participating in ICSP’s task groups. We have previously reported that task groups can be an effective mechanism for agencies to collaborate on joint challenges. NIST standards officials said that one task group has been created and that task groups may be appropriate either (1) when a standards issue may require more focused and sustained monitoring to understand possible effects on U.S. government activities and missions or (2) when an ICSP member suggests the need for a task group and there is a consensus among membership. However, these reasons are not specified in the charter or other documents available on the ICSP website. Further, while NIST officials said that no member has requested the creation of a task group, two standards executives identified standards coordination issues that they thought may benefit from the creation of an ICSP task group. The charter specifies an administrative process for voting to create an ICSP task group but does not specify what the role of task groups are, why they would be created, or ICSP member agencies’ responsibilities in determining the need for and participating in task groups. We have previously reported that to achieve a common outcome, participating agencies should consider clarifying roles and responsibilities. By agreeing on and clearly defining the roles and responsibilities of the members as well as documenting those decisions, collaborating agencies can clarify which agency will do what, organize their joint and individual efforts, and facilitate decision-making. Without ensuring that member agencies’ roles and responsibilities have been fully clarified, NIST and the ICSP may miss opportunities to strengthen agencies’ coordination on standards issues, and better ensure effective coordination related to standards activities. Further, without fully clarifying federal agencies’ roles and responsibilities, the ICSP may also miss opportunities to address standards challenges noted above, which limit its ability to support U.S. competitiveness. ICSP membership: The ICSP may not include all relevant agencies as members or invited observers. The ICSP is comprised of certain specified agencies that are represented by their standards executives as described in OMB Circular A-119. A-119 provides that federal standards executives should be broadly engaged in the agency’s standards-related activities so as to ensure intra-agency coordination and have sufficient authority to ensure compliance with Circular A-119. In addition, the ICSP charter allows the Secretary of Commerce to invite additional members— a role which has been delegated to NIST as chair of the ICSP. Consistent with leading collaboration practices, it is important to ensure that all relevant agencies are included in a collaborative effort. In addition, participants should also have full knowledge of relevant resources in their agency, and the skills and abilities to commit relevant resources and contribute to the outcomes of the collaborative effort, among other attributes. While the chair of the ICSP said that agency standards executives are engaged in understanding their standards activities and that participation in the ICSP is strong, as we noted above, it can be difficult for standards executives to be fully aware of all standards activities in their department or agency, particularly in large agencies. In addition, an agency standards executive, a NIST stakeholder, and NIST standards officials raised concerns about whether standards executives have sufficient time to understand all their agencies’ activities and needs, given their other duties, or whether standards executives have the authority to fully coordinate on standards activities. In some cases, agency officials other than the standards executive may have greater knowledge and expertise about specific standards issues. For example, sub-component offices and agencies may have numerous standards-related activities, such as the Food and Drug Administration within Health and Human Services. According to interviews with two agency standards executives, some sub- component agencies may also have more knowledge and expertise in significant standards areas, and some of these areas can affect multiple agencies. According to one NIST standards official, NIST invites additional agencies when it learns that an agency could potentially add value but has not conducted a comprehensive assessment of ICSP membership within the last 5 years. By assessing whether relevant agencies and offices have been invited to participate as members or observers, the ICSP would have greater assurance of its ability to ensure effective participation by the federal government in domestic- and international-standards activities. Further, having relevant parties involved at the ICSP could enhance the ICSP’s efforts by ensuring the viewpoints of all relevant agencies are considered. In NIST’s role as the nation’s measurement science laboratory, NIST works to improve how we design, build, and test the technologies around us. Further, NIST’s measurement services and support of documentary standards development can directly affect innovation and the nation’s economy by helping companies produce better products and compete in the global economy. However, factors such as the breadth of industry needs, number of domestic- and international-standards development activities, and the fragmented nature of federal agencies’ involvement in documentary standards development create challenges to NIST’s ability to fulfill its mission of promoting U.S. innovation and industrial competitiveness. NIST has taken steps to address these challenges. For example, NIST’s expert scientists and engineers maintain close contact with industry through a variety of mechanisms, and use their expertise to help identify industry needs and to communicate about NIST’s services. NIST has also established procedures to help the agency prioritize and evaluate the effectiveness of its measurement services and ensure that supervisors and laboratory management oversee agency staff participation in documentary standards activities. However, NIST has not comprehensively evaluated the extent to which its efforts align with stakeholder needs. Conducting comprehensive reviews of its activities would provide NIST with greater confidence that its activities align with stakeholder needs and may help identify areas not currently served by NIST. Similarly, NIST could gain confidence in the effectiveness of its participation in documentary-standards development activities: by completing the comprehensive review called for in NIST policy, by improving its guidance to staff, and by taking steps to enhance agency management’s understanding of the time devoted to NIST’s current efforts. NIST staff’s expertise and lack of bias make them valuable contributors in documentary-standards development activities, but these individuals have limited time for such activities. Without additional guidance regarding the factors staff could consider when deciding to take more active roles in standards development activities, NIST cannot be assured that decisions on when to participate in such activities are made consistently. Further, while determining the exact amount of time spent on any one standards activity may not be possible due to overlap with other employee duties, examining to the extent possible the aggregate amount of time NIST staff expect to commit to standards development activities could help NIST management assess the agency’s participation in these activities. Further, NIST has a role, delegated by the Secretary of Commerce, to ensure U.S. interests are adequately represented at private international standards organizations but does not currently have a mechanism to use the process under the Trade Agreements Act of 1979 to identify or respond to circumstances when U.S. representation in international standards activities may be inadequate. Developing a mechanism could help ensure that NIST does not miss opportunities to ensure that the United States is adequately represented in international standards activities. Alternatively, NIST could develop a legislative proposal that allows NIST to ensure adequate U.S. participation in international standards activities while addressing any concerns. Finally, as chair of the ICSP, NIST provides leadership to enhance interagency coordination on documentary standards issues. However, some of the ICSP’s efforts do not fully align with selected leading practices for enhancing and sustaining interagency collaboration, as identified in our previous work. Specifically, the ICSP charter has not been updated since 2000 and certain roles and responsibilities for the ICSP and its members are unclear. Further, the ICSP membership may not include relevant members or observers to ensure effective participation by the federal government in domestic- and international- standards activities. Updating the ICSP charter to affirm its mission and to delineate appropriate roles and responsibilities of participating agencies could strengthen interagency coordination through the ICSP on standards development issues and help the ICSP fulfill its role as envisioned under OMB guidance. Moreover, assessing whether relevant agencies or sub- component offices are invited to participate in the ICSP could provide the ICSP with better assurance of its ability to effectively coordinate agencies’ standards activities. We are making a total of seven recommendations to NIST, specifically: The NIST Associate Director for Laboratory Programs should: update NIST policy to include periodic comprehensive management review of the agency’s measurement services to assess gaps and ensure alignment with stakeholders’ needs, and take steps to ensure that the Associate Director completes the review of NIST’s standards development activities (Recommendation 1). The NIST Standards Coordination Office Director should: update NIST policy for staff participation in standards development activities to provide additional guidance, such as the factors staff could consider when deciding to take more active roles, including leading efforts to develop standards (Recommendation 2); and assess the feasibility of collecting aggregate data on the estimated amount of time staff spend on documentary standards activities (Recommendation 3). The Director of NIST should establish a mechanism—such as guidelines for what constitutes adequate U.S. representation—to assess whether U.S. representation in international SDOs is adequate, and when to follow the statutory process for addressing inadequate U.S. representation. If NIST determines that it is unable to implement the process described in the 1979 act without conflicting with current standards policy, the Director of NIST should develop a legislative proposal to address those concerns (Recommendation 4). The NIST Standards Coordination Office Director, working with other ICSP member agencies, should: review and, as necessary, update the ICSP charter (Recommendation 5); clearly define ICSP roles and member agencies’ responsibilities, such as for identifying and coordinating on interdisciplinary documentary- standards issues and for making recommendations, as appropriate, to the Secretary of Commerce (Recommendation 6); and, assess whether additional agencies or sub-component offices should be invited to participate as ICSP members or observers (Recommendation 7). We provided a draft of this report to the Departments of Commerce, Defense, Energy, and Homeland Security, and Health and Human Services, as well as the Consumer Product Safety Commission, Environmental Protection Agency, General Services Administration, and USTR for their reviews and comments. Commerce provided written comments, which are reproduced in appendix III, in which it generally concurred with six recommendations and disagreed with one. USTR provided technical comments, which we incorporated as appropriate. The remaining seven agencies informed us that they had no comments. Commerce agreed with our recommendation regarding comprehensive reviews of the agency’s measurement services and standards participation, and stated that it will include requiring management review of its measurement services in a future agency order and will have the Standards Coordination Office support the Associate Director’s review of staff participation in standards activities. Commerce also agreed with our recommendations regarding guidance on staff participation in standards activities and assessing the feasibility of collecting data on the time spent on documentary standards activities. Specifically, Commerce said that it will consider updates to guidance to staff and will report on the feasibility of collecting data on the time spent on standards activities. Commerce also agreed with recommendations on improving interagency coordination in the ICSP. It stated that the chair of the ICSP will review the charter and recommend any updates to the committee and will work with existing ICSP members, alternates, and observers to identify other agencies or sub-component offices that may be invited to participate. While Commerce agreed with our recommendation on roles and responsibilities of the ICSP and its members, it stated that the roles and responsibilities of standards executives are effectively stated in OMB A- 119. A-119 describes the roles and responsibilities of standards executives in general, such as their responsibilities to promote effective use of agency resources and participation in standards bodies. However, A-119 does not address specific roles and responsibilities with respect to the activities of the ICSP, such as defining the role of the ICSP in establishing federal positions on standards issues. In our 2012 report on interagency collaborative mechanisms, we state that agencies working together to define and agree on their respective roles and responsibilities can help clarify who will do what and identify how to organize individual and joint efforts. We believe that additional efforts by ICSP members to clarify their roles and responsibilities within the framework of the ICSP will improve the effectiveness of the ICSP as a coordinating body. Commerce disagreed with the recommendation on ensuring adequate U.S. representation in international SDOs, stating that any determination to follow statutory process would itself carry significant risk of being perceived by the national and international standards community as a U.S. government change of policy relating to our private-sector-led standards system. However, we do not perceive a conflict between the private sector leading U.S. standards development, and NIST developing a mechanism to respond to any instances where U.S. representation in international standards efforts are inadequate. NIST has already taken steps, in some cases, to identify or encourage private sector participation in international standards efforts that lacked U.S. participation. Further, the 1979 act does not define what constitutes adequate representation; NIST can develop criteria to allow the agency to take action when appropriate. In carrying out the 1979 act, the agency could continue to encourage private-sector stakeholders to address any areas determined to be inadequate, allowing NIST to step in only as necessary when the relevant private-sector entities are not adequately representing, and are not willing and able to adequately represent, U.S. interests. We continue to believe that a mechanism to identify and respond to circumstances when U.S. representation at international SDOs may be inadequate would allow NIST to consistently take action in furtherance of its mission to support U.S. competitiveness. However, in consideration of the concerns raised by Commerce, we have clarified our recommendation that NIST either develop a mechanism to carry out the process described by the 1979 act, or develop a legislative proposal to address any concerns arising from the implementation of the act. We are sending copies of this report to the appropriate congressional committees, the Secretary of Commerce, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) the challenges the National Institute of Standards and Technology (NIST) faces in providing measurement services and supporting documentary-standards development and (2) the extent to which NIST has taken steps to address any challenges and how those steps align with relevant federal guidance and policy. To identify any challenges NIST may face in providing measurement services and supporting documentary-standards development, we began by performing a literature review, including reports on NIST from the National Academies of Sciences, Engineering, and Medicine, NIST’s Visiting Committee on Advanced Technology (VCAT), congressional committee hearings on NIST’s measurement services, and other sources. We reviewed these sources to identify statements regarding any challenges to NIST’s current measurement services and documentary standards activities or statements recommending improvements to these services or activities. For purposes of our analysis, we included NIST’s efforts to support measurement standards as a component of NIST’s measurement services. We supplemented our literature review by holding focus groups with NIST stakeholders including: (1) researchers and (2) representatives working with industry, including commercial entities and states’ metrology laboratories. To ensure our focus groups contained a diverse group of stakeholders and viewpoints on NIST’s measurement services and documentary standards activities, we included participants from a variety of backgrounds. We selected researchers to participate in our focus groups from university scientists in engineering and the physical and biological sciences. We selected industry participants for the focus groups to reflect a range of industrial sectors, including (1) sectors that comprise greater than 1 percent of U.S. gross domestic product, according to Bureau of Economic Analysis data and (2) sectors that the Department of Commerce’s International Trade Agency has identified as U.S. export opportunities. Across these sectors we selected industry participants from the following categories: broadcasting and telecommunications; chemical products and pharmaceuticals; computer and electronic products and related services; building products and construction; finance and insurance; food and beverage and tobacco products; health care and social assistance; transportation; utilities and energy; defense products; and other manufacturing. We also included representatives from the National Conference on Weights and Measures, an organization of commercial entities and state metrology laboratories, among others, that addresses measurement of commercial products. After developing our focus group structure and determining our participant categories, we obtained feedback on our approach during discussions with NIST officials and with representatives from standards development organizations (SDO) selected from those that NIST most often collaborates with—the American National Standards Institute, ASTM International, and IEEE. We then used a snowball approach to identify and invite individuals from across our participant categories. Starting with individuals from several SDOs and the VCAT, we asked for suggestions of individuals knowledgeable in measurement services and standards needs of our participant categories. As we received responses and contacted those individuals, we asked them to recommend additional participants. Through this process, we identified and invited nearly 100 individuals to participate in our focus groups, and 58 individuals agreed to participate. To organize our focus groups we asked the individuals who agreed to participate to describe their expertise regarding measurement services and standards development and familiarity with the industrial sectors we identified. We then selected individuals for each focus group based on availability and to include a mix of expertise. We conducted 3 focus groups for representatives from industry and 2 focus groups for researchers. Each focus group included from 5 to 8 individuals. In total, our focus groups included 31 stakeholders. We reviewed transcripts of the focus groups to identify the challenges NIST faces in providing measurement services and supporting documentary-standards development. We also collected information on the challenges that NIST faces during 36 interviews, including 17 interviews with current and former NIST officials, 10 interviews with officials from other federal agencies, and 9 interviews with representatives from SDOs and other stakeholders. The 10 interviews we conducted with other federal agency officials included 8 agency standards executives—senior level officials with knowledge of, and experience in, standards-related issues at their agencies and who are responsible for coordinating their agency’s participation in SDOs, among other responsibilities—or their alternates on the ICSP. The agencies whose standards executives or other officials we interviewed included the Departments of Defense, Energy, and Homeland Security, and Health and Human Services, as well as the Consumer Product Safety Commission, Environmental Protection Agency, General Services Administration, and Office of the U.S. Trade Representative. GAO reviewed our interview notes to identify challenges and NIST’s efforts to address these challenges. To evaluate the steps NIST has taken to address challenges in providing measurement services and supporting documentary-standards development, we drew upon our focus groups, interviews with NIST staff, and reviews of NIST documentation that described the agency’s measurement services and standards activities, such as agency policies, orders, and publications. We also conducted a review of existing literature, relevant laws, NIST policy, and other guidance documents to identify federal requirements and guidance. For example, we reviewed the National Technology Transfer and Advancement Act of 1995, Office of Management and Budget’s Circular A-119, and Executive Office of the President’s Memo on Principles for Federal Engagement in Standards Activities to Address National Priorities, among other sources. We compared the steps NIST has taken to address the challenges it faces in providing measurement services and supporting standards development to these policies and guidance. To evaluate NIST’s current steps, we also considered our prior work on federal standards for internal control and on interagency collaboration. Internal control is a process created by an agency’s management and other personnel that provides reasonable assurance that the objectives of the agency will be achieved and comprises the plans, methods, policies, and procedures used to fulfill the mission and objectives of the agency. Standards for Internal Control in the Federal Government (known as the Green Book), provide the overall framework for establishing and maintaining an effective internal control system and require that agencies perform and document certain actions to establish an effective internal control system. These requirements include: that management should identify, analyze, and respond to risks related to achieving the defined objectives; that management should use quality information to achieve the entity’s objectives; and that management documents the results of evaluations to identify internal control issues. Our work on interagency collaboration describes leading practices agencies can engage in to enhance and sustain collaborative efforts and describes seven key features to consider to implement these practices. We selected the following five features relevant to NIST’s leadership of the Interagency Committee on Standards Policy (ICSP) for review: Outcomes and Accountability: Have short-term and long-term outcomes been clearly defined? Is there a way to track and monitor their progress? Leadership: How will leadership be sustained over the long-term? If leadership is shared, have roles and responsibilities been clearly identified and agreed upon? Clarity of Roles and Responsibilities: Have participating agencies clarified roles and responsibilities? Participants: Have all relevant participants been included? Do they have the ability to commit resources for their agency? Written Guidance and Agreements: If appropriate, have participating agencies documented their agreement regarding how they will be collaborating? Have they developed ways to continually update and monitor these agreements? We did not review ICSP collaboration with respect to key features regarding resources or bridging organizational culture because we did not fully examine the activities of all agencies participating in the ICSP. We conducted this performance audit from July 2016 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following individuals participated in GAO’s five focus groups: Allen Adler, Former Vice President of Enterprise Technology Strategy, Boeing Kathleen Almand, Vice President for Research, Data, and Analytics, National Fire Protection Association Karin Athanas, Government and Regulatory Affairs Manager, American Association for Laboratory Accreditation (A2LA) Robert Austin, Professor of Physics, Princeton University Karl Bly, Quality Assurance Director, Vermont Thread Gage Jerry Buendel, Weights and Measures Program Manager, Washington State Department of Agriculture Rita Colwell, Professor, University of Maryland, and Johns Hopkins University School of Public Health Ross Corotis, Professor of Engineering, University of Colorado Boulder Denyette DePierro, Vice President and Senior Counsel, Center for Payments and Cybersecurity, American Bankers Association Don Detmer, Professor of Public Health Sciences, University of Virginia Gail Folena-Wasserman, Senior Vice President, Biopharmaceutical Development, MedImmune Ruben G. Carbonell, Professor of Chemical Engineering, North Carolina State University and Chief Technology Officer, National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) Christopher Guay, Regulatory Fellow, Procter and Gamble Kelvin H. Lee, Professor of Chemical and Biomolecular Engineering, University of Delaware and Director, National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) Hani Haider, Director of Orthopaedics Biomechanics & Advanced Surgical Technologies Laboratory, University of Nebraska Jennie Hwang, CEO and Principal, H-Technologies Group Walter Jager, Principal, Environmentally Conscious Design (ECD) Compliance Karen Kafadar, Professor and Chair of Department of Statistics, University of Virginia Dave Kreitlow, Operations Manager, MTS Systems Corporation Zhiyong Ma, Vice President and Director of Technology and Manufacturing Labs, Intel Kristin Macey, Director of Division of Measurement Standards, California Department of Food and Agriculture Josh Magri, Vice President and Counsel for Regulation and Developing Technologies, Financial Services Roundtable Dave Maisch, Director of Engineering and Industrial Affairs, PMC Lone Star Tod Sizer, Vice President of Mobile Radio Research Laboratory, Nokia Bell Labs Clifford Spiegelman, Distinguished Professor of Statistics, Texas A&M University Lonnie Spires, President and CEO, American Association for Laboratory Accreditation (A2LA) In addition to the contact named above, Chris Murray (Assistant Director), Tind Shepper Ryen (Analyst-in-Charge), John Delicath, Justin Fisher, Eli Harpst, Tricia Moye, Danny Royer, Andrew Stavisky, and Sarah Veale made key contributions to this report.", "summary": "The U.S. Department of Commerce's NIST provides measurement services and supports standards that promote U.S. competitiveness. For example, NIST provides calibrations for manufacturing equipment and reference materials used in testing. NIST also supports private sector organizations in developing standards to help ensure product performance, among other things, such as Wi-Fi. In recent years, NIST has sought to improve the delivery of its services and documentary standards activities. GAO was asked to review NIST measurement services and standards-support activities. This report examines (1) the challenges NIST faces in providing measurement services and supporting documentary standards development, and (2) the extent to which NIST has taken steps to address these challenges and how those steps align with federal guidance and policy. GAO analyzed testimony, reports, laws, and policies; conducted focus groups with academics and industry representatives; and interviewed various stakeholders. The National Institute of Standards and Technology (NIST) faces challenges in providing measurement services and supporting private sector development of specifications for products' designs or performance—referred to as “documentary standards.” Based on reviews of relevant testimony, reports, and other documents; interviews with stakeholders; and focus groups with academics and industry representatives, GAO identified challenges including: Identifying and prioritizing what measurement services, such as calibrating large force-measurement tools used by aerospace manufacturers, or what documentary standards activities, such as serving as a technical advisor on fire safety standards, are most needed by U.S. industry, and Coordinating with other federal agencies on standards development issues. NIST has taken steps to address these challenges, including industry outreach and reviews of measurement services and standards activities. However, some efforts do not fully align with federal guidance or NIST policy. For example, NIST's measurement-services and standards-activity reviews have not included a comprehensive examination of how these services and standards activities align with stakeholder needs. Federal internal control standards call for managers to use quality information to determine if the agency is meeting its objectives. Comprehensively reviewing NIST's measurement services and documentary-standards activities would provide NIST with greater confidence that its services and activities align with stakeholders' needs. GAO also found that NIST coordinates with other agencies on standards development and related activities, but that some efforts do not fully align with specific leading practices GAO has previously identified for enhancing and sustaining interagency collaboration. For example, NIST and other agencies coordinate on standards activities through a NIST-chaired interagency committee. However, GAO found that the committee has not updated its charter since 2000—contrary to leading practices to update and monitor collaborative agreements. GAO also found that NIST has not worked with other committee members to fully clarify agencies' roles and responsibilities. Without ensuring that member agencies' roles and responsibilities are current and fully clarified, NIST and other agencies may miss opportunities to strengthen coordination. GAO is making seven recommendations, including that NIST comprehensively review measurement services and documentary-standards activities, and work with other agencies to take steps to strengthen interagency coordination. The Department of Commerce agreed with six recommendations and disagreed with one, citing risks to the private-sector-led U.S. standards system. GAO clarified its recommendation and continues to believe this action is needed, as discussed in the report.", "document_type": "gao"}
{"report": "DHS leads the federal government’s efforts to secure our nation’s public and private critical infrastructure information systems against cyber threats. As part of these efforts, cybersecurity professionals can help to prevent or mitigate the vulnerabilities that could allow malicious individuals and groups access to federal information technology (IT) systems. The ability to secure federal systems depends on the knowledge, skills, and abilities of the federal and contractor workforce that designs, develops, implements, secures, maintains, and uses these systems. The Office of Management and Budget has noted that the federal government and private industry face a persistent shortage of cybersecurity and IT talent to implement and oversee information security protections. This shortage may leave federal IT systems vulnerable to malicious attacks. Experienced and qualified cybersecurity professionals are essential in performing DHS’s work to mitigate vulnerabilities in its own and other agencies’ computer systems and to defend against cyber threats. Since 1997, we have identified the protection of federal information systems as a governmentwide high-risk area. In addition, in 2001, we introduced strategic governmentwide human capital management as another area of high risk. We have also identified a number of challenges federal agencies are facing to ensure that they have a sufficient cybersecurity workforce with the skills necessary to protect their information and networks from cyber threats. These challenges pertain to identifying and closing skill gaps as part of a comprehensive workforce planning process, recruiting and retaining qualified staff, and navigating the federal hiring process. In recent years, the federal government has taken various steps aimed at improving the cybersecurity workforce. These include establishing a national initiative to promote cybersecurity training and skills and developing guidance to address cybersecurity workforce challenges. Founded in 2010, the National Initiative for Cybersecurity Education (NICE) is a partnership among government, academia, and the private sector, and is coordinated by the National Institute of Standards and Technology (NIST). The NICE mission promotes cybersecurity education, training, and workforce development in coordination with its partners. The initiative’s goal is to increase the number of skilled cybersecurity professionals in order to boost national IT security. In 2013, NICE published the National Cybersecurity Workforce Framework to provide a consistent way to define and describe cybersecurity work at any public or private organization, including federal agencies. In 2014, OPM developed guidance for assigning 2-digit employment codes for each cybersecurity work category and specialty area identified in the 2013 NICE framework. Federal agencies can use the codes to identify cybersecurity positions in personnel and payroll systems, such the system of the National Finance Center. To further enhance efforts to strengthen the cybersecurity workforce, NICE subsequently revised the framework in 2017 to include 33 cybersecurity-related specialty areas organized into 7 categories— securely provision, operate and maintain, protect and defend, investigate, collect and operate, analyze, and oversee and govern. The revision defined work roles in specialty areas and cybersecurity tasks for each work role, as well as the knowledge, skills, and abilities that a person should have in order to perform each work role. Also, in 2017, OPM issued guidance creating a unique 3-digit employment code for each cybersecurity work role. In October 2017, NIST issued guidance that reflected the finalized 2017 NICE framework and included a crosswalk of OPM’s 2-digit employment codes to the 3-digit codes. DHS is the third largest department in the federal government, employing approximately 240,000 people, and operating with an annual budget of about $60 billion, of which about $6.4 billion was reportedly spent on IT in fiscal year 2017. In leading the federal government’s efforts to secure our nation’s public and private critical infrastructure information systems, the department, among other things, collects and shares information related to cyber threats and cybersecurity risks and incidents with other federal partners to enable real-time actions to address these risks and incidents. The department is made up of 15 operational and support components that perform its critical mission functions. Table 1 describes the 6 components that we included in our review. The Homeland Security Cybersecurity Workforce Assessment Act of 2014 required DHS to perform workforce assessment-related activities to identify and assign employment codes to its cybersecurity positions. Specifically, the act called for DHS to: 1. Establish procedures for identifying and categorizing cybersecurity positions and assigning codes to positions (within 90 days of law’s enactment). 2. Identify all filled and vacant positions with cybersecurity functions and determine the work category and specialty area of each. 3. Assign OPM 2-digit employment codes to all filled and vacant cybersecurity positions based on the position’s primary cybersecurity work category and specialty areas, as set forth in OPM’s Guide to Data Standards. In addition, after completing the aforementioned activities, the act called for the department to take steps to identify and report its cybersecurity workforce areas of critical need. Specifically, DHS was to: 4. Identify the cybersecurity work categories and specialty areas of critical need in the department’s cybersecurity workforce and report to Congress. 5. Submit to OPM an annual report through 2021 that describes work categories and specialty areas of critical need and substantiates the critical need designations. The act required DHS to complete the majority of these activities by specific due dates between March 2015 and September 2016. Within DHS, OCHCO is responsible for carrying out these provisions, including the coordination of the department’s overall efforts to identify, categorize, code, and report its cybersecurity workforce assessment progress to OPM and Congress. The act required DHS to establish procedures to identify and assign the appropriate employment code, in accordance with OPM’s Guide to Data Standards, to all filled and vacant positions with cybersecurity functions by March 2015. In addition, DHS’s April 2016 Cybersecurity Workforce Coding guidance states that components should ensure procedures are in place to monitor and to update the employment codes as positions change over time. Further, the Standards for Internal Control in the Federal Government recommends that management assign responsibility and delegate authority to key roles and that each component develop individual procedures to implement objectives. The standards also recommend that management periodically review such procedures to see that they are developed, relevant, and effective. DHS OCHCO developed departmental procedures in May 2014 and recommended implementation steps for coding positions with cybersecurity functions for the department’s components. However, OCHCO did not update its procedures to include information on identifying positions and assigning codes until April 2016—13 months after the due date specified by the act. In addition, the procedures were not complete because they did not include information related to identifying and coding vacant positions, as the act required. Moreover, the departmental procedures did not identify the individual within each DHS component who was responsible for leading and overseeing the identification and coding of the component’s cybersecurity positions. Further, although components were able to supplement the departmental procedures by developing their own component-specific procedures for identifying and coding their cybersecurity positions, OCHCO did not review those procedures for consistency with departmental guidance. The department could not provide documentation that OCHCO had verified or reviewed component-developed procedures. In addition, OCHCO officials acknowledged that they had not reviewed the components’ procedures and had not developed a process for conducting such reviews. OCHCO officials stated that several factors had limited their ability to develop the procedures and to review component-developed procedures in a timely and complete manner. These factors were (1) a delayed departmental decision until April 2016 as to whether certain positions should be considered cybersecurity positions; (2) a belief that each component had the best understanding of their human capital systems, so procedure development was best left up to each component; (3) a condition where each of the six selected DHS components recorded and tracked vacant positions differently; and (4) cybersecurity specialty areas for vacant positions were not known until a position description was developed or verified and a hiring action was imminent. Without assurance that procedures are timely, complete, and reviewed, DHS cannot be certain that its components have the procedures to identify and code all positions with cybersecurity functions, as required by the act. Accordingly, our February 2018 report included recommendations that DHS 1) develop procedures on how to identify and code vacant cybersecurity positions, 2) identify the individual in each component who is responsible for leading that component’s efforts in identifying and coding cybersecurity positions, and 3) establish and implement a process to periodically review each component’s procedures for identifying component cybersecurity positions and maintaining accurate coding. DHS concurred with the recommendations and stated that it would implement them by April 30, 2018. The act required DHS to identify all of its cybersecurity positions, including vacant positions, by September 2015. Further, the act called for the department to use OPM’s Guide to Data Standards to categorize the identified positions and determine the work category or specialty area of each position. As of December 2016, the department reported that it had identified 10,725 cybersecurity positions, including 6,734 federal civilian positions, 584 military positions, and 3,407 contractor positions. Nevertheless, as of November 2017, the department had not completed identifying all of its cybersecurity positions and it had not determined the work categories or specialty areas of the positions. In explaining why the department had not identified all its positions, OCHCO officials stated that components varied in reporting their identified vacant positions because the department did not have a system to track vacancies. Of the 7 work categories and 33 specialty areas in the NICE framework, DHS reported that its 3 most common work categories were “protect and defend”, “securely provision,” and “oversight and development;” and its 2 most common specialty areas were “security program management” and “vulnerability assessment and management.” However, DHS could not provide data to show the actual numbers of positions in each of these categories and specialty areas. According to OCHCO officials, the department was still in the process of identifying positions for the 2-digit codes and would continue this effort until the 3-digit codes were available in the National Finance Center personnel and payroll system in December 2017. At that time, OCHCO officials stated that the department intends to start developing procedures for identifying and coding positions using the 3-digit codes. The act also required DHS to assign 2-digit employment codes to all of its identified cybersecurity positions. This action was to be completed by September 2015. However, as of August 2017—23 months after the due date—the department had not completed the coding assignment process. Although, in August 2017, OPM provided a progress report to Congress containing DHS data which stated that 95 percent of DHS-identified cybersecurity positions had been coded, our analysis determined that the department had assigned cybersecurity position codes to approximately 79 percent of its identified federal civilian cybersecurity positions. The primary reason for this discrepancy was that DHS did not include the coding of vacant positions, as required by the act. Further, OCHCO officials stated they did not verify the accuracy of the components’ cybersecurity workforce data. Without coding cybersecurity positions in a complete and accurate manner, DHS will not be able to effectively examine its cybersecurity workforce; identify skill gaps; and improve workforce planning. Thus, in our recently issued report, we recommended that OCHCO collect complete and accurate data on all filled and vacant cybersecurity positions when it conducts its cybersecurity identification and coding efforts. DHS concurred with the recommendation and stated that, by June 29, 2018, it intends to issue memorandums to its components that provide instructions for the components to periodically review compliance and cybersecurity workforce data concerns to ensure data accuracy. According to the act, DHS was to identify its cybersecurity work categories and specialty areas of critical need in alignment with the NICE framework and to report this information to the appropriate congressional committees by June 2016. In addition, a DHS directive required the DHS Chief Human Capital Officer to provide guidance to the department’s components on human resources procedures, including identifying workforce needs. As of February 2018, the department had not fulfilled its requirements to identify and report its critical needs. Although DHS identified workforce skills gaps in a report that it submitted to congressional committees in March 2017, the department did not align the skills gaps to the NICE framework’s defined work categories and specialty areas of critical need. In September 2017, OCHCO developed a draft document that attempted to crosswalk identified department-wide cybersecurity skills gaps to one or more specialty areas in the NICE framework. However, the document did not adequately help components identify their critical needs by aligning their gaps with the NICE framework because it did not provide clear guidance to help components determine a critical need in cases in which a skills gap is mapped to multiple work categories. According to OCHCO officials, DHS had not identified department-wide cybersecurity critical needs that aligned with the framework partly because OPM did not provide DHS with guidance for identifying cybersecurity critical needs. In addition, OCHCO officials stated that the components did not generally view critical skills gaps in terms of the categories or specialty areas as defined in the NICE framework, but instead, described their skills gaps using position titles that are familiar to them. In the absence of relevant guidance to help components identify their critical needs, DHS and the components are hindered from effectively identifying and prioritizing workforce efforts to recruit, hire, train, develop, and retain cybersecurity personnel. DHS also did not report cybersecurity critical needs to OPM in September 2016 or September 2017, as required. Instead, the department first reported its cybersecurity coding progress and skills gaps in a March 2017 report that it sent to OPM and Congress to address several of the act’s requirements. However, the report did not describe or substantiate critical need designations because DHS has not yet identified them. Additionally, DHS had not developed plans or time frames to complete priority actions—developing a DHS cybersecurity workforce strategy and completing its initial cybersecurity workforce research— that OCHCO officials said must be completed before it can report its cybersecurity critical needs to OPM. According to OCHCO officials, the report that the department submitted to Congress in March 2017 had contained plans and schedules. However, we found that the March 2017 report did not capture and sequence all of the activities that DHS officials said must be completed in order to report critical needs. Until DHS develops plans and schedules with time frames for reporting its cybersecurity critical needs, DHS may not have insight into its needs for ensuring that it has the workforce necessary to carry out its critical role of helping to secure the nation’s cyberspace. In our report, we recommended that DHS 1) develop guidance to assist DHS components in identifying their cybersecurity work categories and specialty areas of critical need that align to the NICE framework and 2) develop plans with time frames to identify priority actions to report on specialty areas of critical need. DHS concurred with the recommendations and stated that it plans to implement them by June 2018. In summary, DHS needs to act now to completely and accurately identify, categorize, and assign codes to all of its cybersecurity positions, and to identify and report on its cybersecurity workforce areas of critical need. Implementing the six recommendations we made in our February 2018 report should better position the department to meet the requirements of the 2014 act. Further, doing so will help DHS understand its needs for recruiting, hiring, developing, and retaining a cybersecurity workforce with the skills necessary to accomplish the department’s varied and essential cybersecurity mission. Until DHS implements our recommendations, it will not be able to ensure that it has the necessary cybersecurity personnel to help protect the department’s and federal networks and the nation’s critical infrastructure from cyber threats. Chairmen Ratcliffe and Perry, Ranking Members Richmond and Correa, and Members of the Subcommittees, this concludes my statement. I would be pleased to respond to your questions. If you or your staffs have any questions about this testimony, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov, or Chris P. Currie at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Alexander Anderegg, Ben Atwater, David Blanding, Jr., Chris Businsky, Wayne Emilien, Jr., Nancy Glover, David Hong, Tammi Kalugdan, David Plocher, Luis E. Rodriguez, and Priscilla Smith. GAO, Cybersecurity: Federal Efforts Are Under Way That May Address Workforce Challenges, GAO-17-533T (Washington, D.C.: Apr. 4, 2017). GAO, Information Security: DHS Needs to Continue to Advance Initiatives to Protect Federal Systems, GAO-17-518T (Washington, D.C.: Mar. 28, 2017). GAO, High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.: Feb. 15, 2017). GAO, Cybersecurity: Actions Needed to Strengthen U.S. Capabilities, GAO-17-440T (Washington, D.C.: Feb. 14, 2017). GAO IT Workforce: Key Practices Help Ensure Strong Integrated Program Teams; Selected Departments Need to Assess Skill Gaps, GAO-17-8 (Washington, D.C.: Nov. 30, 2016). GAO, Federal Chief Information Security Officers: Opportunities Exist to Improve Roles and Address Challenges to Authority, GAO-16-686 (Washington, D.C.: Aug. 26, 2016). GAO, Federal Hiring: OPM Needs to Improve Management and Oversight of Hiring Authorities, GAO-16-521 (Washington, D.C.: Aug. 2, 2016). GAO, Information Security: DHS Needs to Enhance Capabilities, Improve Planning, and Support Greater Adoption of Its National Cybersecurity Protection System, GAO-16-294 (Washington, D.C.: Jan. 28, 2016). GAO, Federal Workforce: OPM and Agencies Need to Strengthen Efforts to Identify and Close Mission-Critical Skills Gaps, GAO-15-223 (Washington, D.C.: Jan. 30, 2015). GAO, Cybersecurity Human Capital: Initiatives Need Better Planning and Coordination, GAO-12-8 (Washington, D.C.: Nov. 29, 2011). This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "DHS is the lead agency tasked with protecting the nation's critical infrastructure from cyber threats. The Homeland Security Cybersecurity Workforce Assessment Act of 2014 required DHS to identify, categorize, and assign employment codes to all of the department's cybersecurity workforce positions. These codes define work roles and tasks for cybersecurity specialty areas such as program management and system administration. Further, the act required DHS to identify and report its cybersecurity workforce critical needs. GAO was asked to testify on the extent to which DHS has (1) identified, categorized, and assigned employment codes to its cybersecurity positions and (2) identified its cybersecurity workforce areas of critical need. To do so, GAO summarized the findings discussed in its February 2018 report on DHS's cybersecurity workforce ( GAO-18-175 ). The Department of Homeland Security (DHS) has taken actions to identify, categorize, and assign employment codes to its cybersecurity positions, as required by the Homeland Security Cybersecurity Workforce Assessment Act of 2014 ; however, its actions have not been timely and complete. For example, DHS did not establish timely and complete procedures to identify, categorize, and code its cybersecurity position vacancies and responsibilities. Further, DHS did not complete efforts to identify all of the department's cybersecurity positions and accurately assign codes to all filled and vacant cybersecurity positions. In August 2017, DHS reported to Congress that it had coded 95 percent of the department's identified cybersecurity positions. However, the department had, at that time, coded approximately 79 percent of the positions. DHS's 95 percent estimate was overstated primarily because it excluded vacant positions, even though the act required DHS to report these positions. In addition, although DHS has taken steps to identify its workforce capability gaps, it has not identified or reported to Congress on its departmentwide cybersecurity critical needs that align with specialty areas. The department also has not reported annually its cybersecurity critical needs to the Office of Personnel Management (OPM), as required, and has not developed plans with clearly defined time frames for doing so. (See table). Without ensuring that its procedures are complete and that its progress in identifying and assigning codes to its cybersecurity positions is accurately reported, DHS will not be positioned to effectively examine its cybersecurity workforce, identify critical skill gaps, or improve its workforce planning. Further, until DHS establishes plans and time frames for reporting on its critical needs, the department may not be able to ensure that it has the necessary cybersecurity personnel to help protect the department's and the nation's federal networks and critical infrastructure from cyber threats. The commitment of DHS's leadership to addressing these matters is essential to helping the department fulfill the act's requirements. In its February 2018 report, GAO recommended that DHS take six actions, including ensuring that its cybersecurity workforce procedures identify position vacancies and responsibilities; reported workforce data are complete and accurate; and plans for reporting on critical needs are developed. DHS concurred with the six recommendations and described actions the department plans to take to address them.", "document_type": "gao"}
{"report": "SEC’s mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. As part of SEC’s strategic plan, SEC strives to promote a securities market that is worthy of the public’s trust and is characterized by, among other things, transparent disclosure to investors of the risks of particular investments. SEC is headed by a five-member Commission composed of the Chair and four Commissioners. SEC’s responsibilities are divided among five divisions and 24 offices, including the following offices that are responsible for filing review or investor outreach: Corporation Finance is responsible for reviewing documents that publicly-held companies are required to file with SEC, which may include climate-related disclosures. Corporation Finance reviews disclosure documents that companies are required to file, including annual reports. Corporation Finance performs its filing review responsibilities through accounting and legal staff in 11 offices, organized by industry. The division’s staff also provides companies with assistance interpreting the Commission’s rules and assists the Commission with rule making. The Investor Advisory Committee was established under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act) to advise the Commission on regulatory priorities, the effectiveness of disclosure, and initiatives to protect investor interests and to promote investor confidence, among other things. The committee has the authority to submit findings and recommendations for review and consideration by the Commission. The Office of the Investor Advocate was established in 2014 pursuant to the Dodd-Frank Act to provide a voice for investors, assist retail investors, study investor behavior, and support the Investor Advisory Committee. The Investor Advocate is required to submit reports directly to Congress, without any prior review or comment from the Commissioners or SEC staff. SEC rules generally require public companies to disclose, among other things, known trends, events, and uncertainties that are reasonably likely to have a material effect on the company’s financial condition or operating performance through annual and other periodic filings. Information is material if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision. Regulation S-K, promulgated by SEC, contains disclosure requirements that are applicable to the nonfinancial statement portion of annual filings and other periodic reports filed with SEC. The Commission occasionally provides guidance on topics of general interest to the business and investment communities by issuing interpretive releases, which publish the Commission’s views and interpret federal securities laws and SEC regulations. The 2010 Guidance was published by the Commission to provide guidance to companies on how existing disclosure requirements apply for climate-related matters. The 2010 Guidance identifies four items in Regulation S-K that may be most likely to require climate-related disclosure in companies’ annual filings. The four items are as follows: Description of business. This section of a company’s annual filing requires a description of the company’s business, including its main products and services, and what markets it operates in. This item expressly requires disclosure of certain material effects of complying with environmental laws. Legal proceedings. This section requires a company to include information about certain material pending legal proceedings, including, in certain circumstances, those arising under any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment. Risk factors. This section discusses the most significant factors that make investment in the company speculative or risky. Disclosure under this section should clearly state risks and specify how each risk affects the particular company and should not present risks that could apply to any company. Management’s discussion and analysis. This section presents management’s perspective on material past and anticipated future business results. The information provided in this section is intended to give the investor an opportunity to look at the company through the eyes of management by providing both a short- and long-term analysis of the company’s financial condition. Additionally, in this section companies must identify and disclose known trends, events, demands, commitments, and uncertainties that are reasonably likely to have a material effect on their financial condition or operating performance. The 2010 Guidance also identifies four different topics under which climate-related risks can be categorized (see table 1). Regardless of whether a company’s identified risk falls under one of these categories, companies need to disclose the information required by the federal securities laws and regulations, and any additional material information necessary to make the required statements, in light of the circumstances under which they are made, not misleading. Additionally, SEC staff may issue guidance that includes a summary or explanation of rules adopted or amended by the Commission. For example, SEC staff issued a Staff Accounting Bulletin on materiality that provides guidance in applying quantitative materiality thresholds to the preparation of financial statements filed with SEC. According to SEC, staff guidance is not a substitute for any rule, and only the rule itself can provide complete and definitive information on its requirements. The Commission can adopt new rules through the rule-making process. According to SEC, rule making can involve several steps: concept release, rule proposal, and rule adoption. Concept release. The Commission at times issues a concept release to seek public input to help identify the appropriate regulatory approach, if any, prior to issuing a rule proposal. In a concept release, SEC describes the area of interest and the Commission’s concerns; identifies different approaches to address the problem; and includes a series of questions that seek the views of the public on the issue. Rule proposal. The Commission publishes a detailed formal rule proposal for public comment. A rule proposal advances specific objectives and methods for achieving them. The Commission typically provides between 30 and 90 days for public review and comment. Public comment is considered vital to the formulation of a final rule. Rule adoption. The Commissioners consider what they have learned from public input on the rule proposal and seek to agree on the specifics of a final rule. If a final rule is adopted by the Commission, it becomes part of the official rules that govern the securities industry. According to SEC senior staff, SEC reviewers examine climate-related disclosures as part of their review of all disclosures included in the companies’ annual filings. Corporation Finance selects annual filings for review and determines the extent to which annual filings are reviewed based on the requirements of the Sarbanes-Oxley Act of 2002 and review goals established by senior leadership (see fig. 1). The Sarbanes-Oxley Act requires SEC to review the financial statements of each reporting company at least once every 3 years. According to SEC senior staff, SEC staff review the financial statements of a significant number of companies more frequently. SEC staff may also review companies’ nonfinancial disclosures, which may be reviewed as (a) a part of a full cover-to-cover review or (b) a targeted issue review. SEC reviewed the disclosures of approximately 4,400 companies each in fiscal years 2015 and 2016 and approximately 4,200 companies in fiscal year 2017. Of the reviews in fiscal years 2016 and 2017, over 1,400 and 1,250 resulted in comment letters, respectively. Corporation Finance generally conducts two levels of review at key steps in the filing review process. Once selected for review, a filing enters the review cycle, which generally includes evaluating the disclosure for material compliance with securities laws, preparation and review of comments, review of company responses to comments, and public posting of filing review correspondence on the SEC website. For most filings, a second-level review is required during each of these phases. According to some SEC staff, as part of SEC’s filing reviews, SEC staff focus on the company’s filing for the current year and can supplement the review with information from the company’s prior years’ filings, filings of other companies in the same industry, SEC’s prior filing review reports, and other external data outside of the filings, including companies’ sustainability and earning reports and financial analyst reports. Companies may voluntarily disclose climate-related risks through channels outside of SEC filings, including nongovernmental organizations, company websites, and in response to reporting requirements in foreign countries. As part of the review process, SEC staff may issue “comment letters” to companies to obtain additional information, clarification on the companies’ disclosures, or elicit better compliance with applicable requirements. In a review of Corporation Finance’s comment letter process, SEC’s OIG reported in September 2017 that Corporation Finance has established policies, procedures, and internal controls that provide overall guidance for how staff should conduct disclosure reviews and for how information, including comments, should be documented, tracked, and disseminated to companies and the public. However, the report also found, among other things, that SEC reviewers (1) did not always properly document comments before issuing comment letters to companies and (2) inconsistently documented oral comments to companies. The report recommended that Corporation Finance establish mechanisms or controls and provide detailed guidance to staff to improve documentation in the comment letter process. SEC management agreed with these recommendations. Furthermore, if SEC reviewers find a material inadequacy in a company’s disclosures, the reviewers may refer the potential violations to the Division of Enforcement for investigation. If the Division of Enforcement finds sufficient evidence of a potential violation, SEC may file an action in federal district court or institute an administrative proceeding. Corporation Finance maintains four distinct electronic databases to track, document, and report on different aspects of its filing review program. One of these is Electronic Data Gathering, Analysis, and Retrieval (EDGAR), which is Corporation Finance’s primary record-keeping system of documents related to filing reviews, including companies’ filings, SEC’s comment letters to companies and their responses to the letters, and SEC staff’s filing review reports. In April 2016, SEC published a Concept Release to seek public comment on modernizing certain business and financial disclosure requirements in Regulation S-K. The 2016 Concept Release specifically requested comments about “Disclosure of Information Relating to Public Policy and Sustainability Matters.” Sustainability disclosures—including topics on climate change, resource scarcity, corporate social responsibility, and good corporate citizenship—are often characterized broadly as environmental, social, or governance concerns. The public comment period for the Concept Release ended on July 21, 2016. According to SEC staff, the agency received approximately 370 unique comment letters on the Concept Release. Since 2010, several voluntary reporting frameworks are available for companies to use to report climate-related information, including the following: In June 2017, the FSB Task Force issued final recommendations for four areas of voluntary climate-related disclosures that companies can choose to adopt, which are applicable to organizations across sectors and jurisdictions. In October 2016, the Sustainability Accounting Standards Board (SASB) developed a Climate Risk Framework that enables, among other things, the identification of climate-related risks and the development of metrics that help companies disclose material sustainability information to investors. In May 2013, the Global Reporting Initiative and CDP (formerly known as the Carbon Disclosure Project) signed a Memorandum of Understanding for the two organizations to work together to align areas of their reporting frameworks. This will provide more consistency in companies’ voluntary climate-related disclosures and improve comparability of data for investors. SEC issued the 2010 Guidance, and comment letters to specific companies, to clarify their existing disclosure requirements as they apply to climate-related matters. SEC staff said the issuance of the 2010 Guidance was the primary form of communication it used to clarify to companies their climate-related disclosure requirements. However, SEC staff also noted that companies should consider the 2010 Guidance along with all other guidance and securities laws and regulations applicable to their filings. In addition to publishing the 2010 Guidance, SEC staff discussed it immediately following its release in webinars and other public events. For example, an SEC staff member presented information on the 2010 Guidance at a panel discussion for an October 2010 webinar hosted by the National Asian Pacific American Bar Association. Representatives from the industry associations with whom we spoke, which represent the five industries we selected, all agreed that the 2010 Guidance helped clarify climate-related disclosure requirements and stated that they consider the disclosure requirements for climate-related risks to be clear and have no need for additional guidance. In addition, since the release of the 2010 Guidance, SEC staff has issued individual comment letters to specific companies on their climate-related disclosures. For example, on September 26, 2016, SEC staff issued a comment letter to an oil company requesting that the company expand on its disclosures in the risk factor section of the filing to provide a more in- depth description of its climate-related compliance obligations. SEC publishes comment letters in EDGAR, and other interested companies can view these letters to understand SEC’s assessment of a particular company’s disclosures. Ceres, a nonprofit organization that advocates for climate-related disclosure, analyzed SEC’s comment letters from February 2, 2010—the release date of the 2010 Guidance—to December 31, 2013, to determine how many were related to climate-related disclosures. Ceres reported that SEC staff sent 25 letters relating to climate-related disclosures to 23 companies (2 companies received two letters as a result of back-and-forth correspondence) out of the more than 45,000 comment letters sent during this period. Using the same specific keyword search terms—such as “climate change” and “climate mitigation”—that were identified in the Ceres report, we found 14 comment letters to 14 companies that SEC staff issued relating to climate-related disclosures out of the over 41,000 comment letters issued from January 1, 2014, through August 11, 2017. These comment letters were found during our search but may not represent all climate-related comment letters SEC staff has issued during that time frame. After the issuance of the 2010 Guidance, the Senate Committee on Appropriations directed SEC to conduct two reviews of climate-related disclosures in 2012 and 2014. In response, SEC staff examined climate- related disclosures of a total of 60 companies in six industries each year in 2012 and 2014. In both reports, SEC staff focused on the business description, risk factors, and management’s discussion and analysis sections of companies’ filings and found that most of the filings included some level of climate-related disclosure in one or more of these areas. SEC staff also found that the disclosures they reviewed varied in the level of details provided. Additionally, in the 2012 report, SEC staff reported that they did not find any notable year-to-year changes in the disclosures reviewed from the year before the 2010 Guidance to the year after. According to SEC senior staff, in addition to its regular evaluation of climate-related disclosures in individual filing reviews, SEC staff continues to periodically assess climate-related disclosures within these industries. SEC senior staff said they did not expect changes in companies’ climate- related disclosures as a result of the 2010 Guidance since SEC did not adopt any new disclosure requirements. As previously mentioned, SEC published the 2010 Guidance to provide guidance to companies on how existing disclosure requirements apply for climate-related matters. At the time the 2010 Guidance was issued, “cap and trade” legislation was pending in Congress; the Environmental Protection Agency was taking steps to regulate greenhouse gas emissions; and there were efforts to launch an international “cap and trade” system. The 2010 Guidance in part provided clarification on how such changes—if they took place— could be incorporated into companies’ filings. However, some of these changes did not occur. Through the April 2016 Concept Release related to business and financial disclosures in Regulation S-K, SEC sought input from investors, companies, and other interested parties on the effectiveness of its disclosure requirements, including a request for comment on climate- related disclosures in SEC’s filings. In the April 2016 Concept Release, SEC discussed comments previously received that both noted a growing interest in environmental, social, or governance disclosure among investors and recommended increased sustainability disclosure requirements. According to SEC staff, some comments criticized the primarily voluntary nature of current corporate sustainability reporting outside of companies’ SEC filings. As of December 2017, SEC senior staff said they are considering recommendations for the Commission’s consideration based on comments received on the Concept Release. As SEC reviews climate-related and other disclosures in companies’ filings, SEC relies primarily on information that companies determine is material. SEC may not have details of the information companies used to support their determination of material climate-related risks. Also, this climate-related information varies in format and specificity among companies. SEC has tools, mechanisms, and resources to help ensure that its staff conducts reviews consistently across filings. Stakeholders, including investor and industry groups, have mixed views on the need for more climate-related disclosures with additional specificity and a consistent format for these disclosures to allow for comparison across filings. Additional disclosure requirements or increased scrutiny of companies’ climate-related information—which, if necessary, SEC and Congress can consider—could have mission and resource implications for SEC’s Division of Corporation Finance. SEC reviewers may not have access to the detailed information that companies use to arrive at their determination of whether risks, including climate-related risks, must be disclosed in their SEC filings. SEC’s scope of review of companies’ disclosures under federal securities laws differs from the scope of review that may be possible through the investigative authority of the state attorneys general under state laws. SEC senior staff further noted that Corporation Finance staff assess companies’ filings for compliance with the disclosure requirements under federal securities laws but do not have the authority to subpoena companies’ information. As previously noted, if SEC reviewers find a material inadequacy in a company’s disclosures, the reviewers can refer potential violations to the Division of Enforcement for investigation. SEC senior staff stated that the Division of Enforcement can subpoena company information only after obtaining a formal order of investigation. In an investigation of Peabody Energy under a New York State law, the Attorney General of New York State subpoenaed the company’s internal documents and found that although the company’s disclosures denied it had the ability to reasonably predict the impact of future climate change laws and regulations on its business, Peabody had made internal market projections showing severe negative impacts from certain potential laws and regulations and failed to disclose those projections to the public. As a result of this investigation, Peabody agreed to disclose, among other things, concerns that the environmental impacts of coal combustion are resulting in increased regulation, which could affect demand for Peabody’s products or services. SEC staff explained that when they become aware of an investigation of a company, they look for and assess disclosures related to any pending legal proceedings and the potential impacts. SEC senior staff told us SEC staff reviewed Peabody Energy’s filings and other publicly available information, including its climate- related disclosures, and did not issue climate-related comments in its review of Peabody Energy’s filings; SEC has not taken any public actions against Peabody Energy following the New York Attorney General’s investigation. Also, SEC staff noted that the additional disclosures Peabody Energy is asked to provide by the New York Attorney General may not be applicable for other companies, but these disclosures may be required if the information is material and necessary to make the disclosures not misleading under the current federal disclosure rules. If SEC reviewers are aware of publicly-available information outside of the filings that is contradictory to companies’ disclosures, they can request additional information or clarification from companies on their climate- related and other disclosures through comment letters. However, a company possesses information necessary to determine whether environmental regulations will have a material effect on the company’s financial condition or results of operations and may claim that the effect of environmental regulations raised by SEC is not material and hence does not need further disclosure. For example, in a 2016 comment letter, SEC staff requested that an oil company expand and clarify its discussion of climate-related compliance with a California environmental law. The company responded that the current costs and impact of compliance with the state law have not been material to the company and it would seek to more clearly disclose such information in its annual filing for the coming year. SEC staff did not issue any further comment on this issue. SEC senior staff told us that they determine whether further comments are needed based on whether the company’s response is consistent with other information the companies reported in other publicly available documents, such as financial analyst reports or the company’s sustainability report. Climate-related disclosures vary in format because companies may report similar climate-related disclosures in different sections of the annual filings. We reviewed and identified illustrative examples of climate-related disclosures in the annual filings of 116 S&P 500 Index companies, filed with SEC in 2016, in the five industries in our review (see app. II for additional information). We found, for example, one beverage company reported its goal to reduce greenhouse gas emissions in the business description section of its filing while another beverage company reported a similar goal on carbon footprint reduction in the risk factors section of its filing. As previously noted, SEC reviewers may compare a company’s disclosures to other companies’ disclosures in the same industry to identify potential missing disclosures if other companies in the same industry have made similar disclosures. When companies report climate- related disclosures in varying format, SEC reviewers and investors may find it difficult to navigate through the filings to identify, compare, and analyze the climate-related disclosures across filings, especially given the size of each individual filing. In addition, companies’ filings may include only a few mentions of climate-related disclosures. For instance, the annual filings we reviewed for an insurance company, an oil company, and a food company, respectively, were 389 pages, 117 pages, and 136 pages long. Within these filings, the corresponding number of mentions of climate-related disclosures was 9, 13, and 6, respectively, based on our analysis using Ceres’ SEC Sustainability Disclosure Search Tool. Given that SEC reviewers primarily rely on information companies disclose in filings, it may be difficult to determine whether a low level of disclosure indicates that the company does not face any climate-related risks or does not consider the risks to be material. Also, climate-related disclosures in some companies’ filings use boilerplate language, which is not specific to the company, and the information is unquantified. Our review of the annual filings of 116 S&P 500 Index companies found that some companies’ climate-related disclosures provided some quantitative information, while some other companies’ disclosures listed existing environmental regulations without specifying the associated impacts on the companies. For example, one oil and gas company stated in its annual filing that the imposition and enforcement of stringent greenhouse gas emissions reduction targets could severely and adversely impact the oil and gas industry and significantly reduce the value of the company’s business. However, the company did not provide any quantitative information on such impacts on its business. Additionally, SASB reported in October 2016 that its analysis of almost 1,500 disclosures in annual filings of 637 companies in 72 industries found that almost 30 percent of the disclosures SASB reviewed did not include any climate-related information, some contained boilerplate language or company-tailored narratives, and less than 20 percent of these disclosures included quantitative metrics. Although SEC relies primarily on information companies provide in their filings when reviewing climate-related and other disclosures, it has mechanisms, tools, and resources to help its staff consistently review filing disclosures, according to SEC documents and SEC staff we interviewed. Internal supervisory control testing. As we reported in 2016, Corporation Finance’s Disclosure Standards Office (DSO) helps improve consistency in oversight of filing reviews by conducting testing of internal supervisory controls throughout the year. DSO is responsible for managing Corporation Finance’s internal supervisory control and contributes to Corporation Finance’s quality and process improvement efforts. DSO senior staff told us that the office examined filing reviews conducted by SEC staff on a random sample of filings in each year from 2014 through 2016. In DSO’s reviews, DSO examined the documents that are part of the filing reviews conducted by SEC staff, including the underlying filings, filing review reports prepared by SEC staff, comment letters issued, and the associated responses, among other things. Also, DSO staff assessed whether SEC staff had followed the relevant Corporation Finance policies and procedures. For example, DSO checked whether staff followed procedures for second-level reviews and issuing comment letters. However, DSO senior staff said they have not conducted any review specific to climate-related disclosures. Corporation Finance senior staff said DSO submits the results of its testing to its managing executive for use in the division’s management assurance statements. We also reported in 2016 that DSO helped strengthen components of Corporation Finance’s internal control. Two-level review process. As discussed earlier, SEC generally conducts two levels of review at key steps in the filing review process. The two-level review process helps ensure that staff consistently review disclosures across filings, according to SEC staff we interviewed. For example, the second-level reviewers review the comment letters prepared by the first-level reviewers before sending the letters to companies, according to SEC’s internal policies and procedures. Also, assistant directors and senior assistant chief accountants of the 11 Corporation Finance offices generally meet monthly to discuss recent trends and issues identified in filing reviews in general, which helps ensure that staff assess materiality consistently across industries, according to some SEC staff. Regulations and guidance. SEC staff can consult regulations and formal and informal SEC guidance for their filing reviews (see table 2 for examples), according to SEC documents and staff we interviewed. SEC posts relevant guidance and other information on its intranet site. Nearly all SEC staff we interviewed said current guidance was sufficient to guide their filing reviews, including the reviews of climate-related disclosures. Internal and external data. According to SEC’s internal review guidance, SEC staff are expected to consider internal and external data as part of the filing review. As previously noted, some SEC staff told us they consider information from prior filings, internal filing review reports, other filings of companies in the same industry, and external data outside of the filings to supplement their filing reviews. For example, SEC staff can generally use internal and external databases to search prior years’ filings and filing-review-related comments and correspondence with companies. Some SEC reviewers told us that they also compare disclosures with external information, such as companies’ voluntary sustainability reports and financial analyst reports on companies’ earnings and operations, to look for inconsistencies in the companies’ reporting. Although SEC Corporation Finance staff can review external information such as the company’s sustainability report, they do not have the underlying information the company used to determine whether a potential disclosure was material or prepare the sustainability report and cannot perform an independent assessment of the disclosure based on the materiality of the underlying information. For example, SEC staff noted in a 2016 comment letter to an oil company that SEC has compared and identified potential inconsistency between the company’s disclosures on uncertainty about a new climate-related regulation and physical risks and information in the company’s sustainability report. The company stated the climate-related regulatory risks were not material and climate-related risks in their filing were consistent with information in its sustainability report. SEC did not issue any further comments. Staff training. SEC staff have had some training on assessing materiality and industry-specific issues but fewer training that discussed climate- related disclosures, according to SEC staff. Training on materiality. Most SEC staff we interviewed said training on materiality assessment was part of staff training or their ongoing on-the-job learning in their day-to-day work. Our review of some SEC training materials showed that training discussions covered federal securities laws and disclosure requirements, disclosure review, and materiality but did not focus specifically on climate-related issues. Also, some SEC staff said they consider materiality based on a given company’s specific facts and circumstances as they review filings in their day-to-day work. For example, two SEC staff we interviewed explained that second-level reviewers help first-level reviewers understand how to apply specific facts and circumstances as they consider materiality when they review filings. Training on industry-specific issues. All SEC staff we interviewed noted that industry-specific training is provided by individual assistant director offices. For example, some staff mentioned training on disclosures for the oil and gas industry. Other staff noted that they also share information on industry-specific issues as part of their communication or meetings with supervisory staff. However, SEC staff we interviewed did not recall any industry-specific training on climate-related disclosures offered by individual assistant director offices. Training on climate-related disclosures. Some SEC staff we interviewed identified training on the 2010 Guidance when the guidance was issued or a brownbag discussion on climate-related disclosure issues including the Peabody Energy investigation in 2016. According to SEC senior staff, the 2016 brownbag included a discussion of the 2010 Guidance and was offered to all Corporation Finance staff. In addition, our review of some meeting agendas showed that these meetings sometimes included discussion items on issues related to climate-related disclosures, such as the Peabody Energy investigation and a proposed environmental regulation. Furthermore, new SEC staff receive training on how to conduct filing reviews in general but not specifically on climate-related disclosures, according to some SEC staff. Most of the SEC staff we interviewed told us they consider the training they have received to be sufficient for conducting filing reviews. Additionally, an SEC OIG survey of SEC staff published in September 2017 asked both first- and second-level reviewers if they felt they had received adequate training and guidance from SEC on how to conduct a disclosure review. Of the 159 who answered as first-level reviewers, 82 percent said that they felt they received adequate training and guidance to conduct disclosure reviews; and of the 130 who answered as second- level reviewers, 83 percent said that they felt they received adequate training and guidance to conduct disclosure reviews. Other staff we interviewed also noted that they receive training through their day-to-day work on an ongoing basis or when new regulations are issued or the need arises. Staff experience. All eight supervisory staff we interviewed indicated that, as of August 2017, they had at least 10 years of experience at SEC as filing reviewers, while the 12 nonsupervisory staff we interviewed noted that they had from 2 to 18 years of such experience. Also, most of the SEC staff we interviewed indicated that they had some prior accounting or legal experience related to annual filing preparation or review, but they did not have any direct prior experience on climate- related disclosures. However, most SEC staff we interviewed said they generally do not need technical expertise to understand climate-related disclosures. Some staff said they can consult mining or petroleum engineers within Corporation Finance if the disclosures relate to other subjects, such as oil and gas reserves. Stakeholders, including investor and industry groups, have different views on whether additional climate-related disclosures, including the amount and specificity, are needed. Some asset management firms and investor groups have highlighted the need for companies to disclose more climate- related information to help investors make more informed investment decisions. Three large asset management firms stated that they are committed to engaging with and encouraging companies to provide additional climate-related disclosures. For example, in 2017, one firm supported shareholder proposals for two companies to report the impacts of climate change on their operations. The proposals passed with majority shareholder support. The Council of Institutional Investors and Ceres stated in their letters commenting on SEC’s April 2016 Concept Release and also told us that the information on environmental risks, including climate risks, has become more significant for investors and companies. The two investor associations also noted that companies’ climate-related disclosures in the risk factors and management’s discussion and analysis sections of the filings generally do not provide investors with sufficient details. They further stated in their letters commenting on SEC’s April 2016 Concept Release that current climate- related disclosures are generally not comparable across companies’ filings. Additionally, SASB reported that climate-related disclosures using quantitative metrics may not be comparable because they lack standardization. In contrast, representatives from the five industry associations with whom we spoke all noted that they consider the current requirements for climate-related disclosures adequate. They also do not believe additional climate-related disclosures are needed in SEC filings as the filings should include only climate-related information if it is material. Additionally, some companies are providing climate-related information through channels outside of SEC filings. Three of these industry associations also stated in their letters commenting on SEC’s April 2016 Concept Release that they would like to keep the existing requirements for climate-related disclosures. While some investor organizations we spoke with generally believe more climate-related disclosures are needed, investors have not reached agreement on the priority of advocating for climate-related disclosures or the framework for companies to use to report these disclosures. For example, some members of a subcommittee of SEC’s Investor Advisory Committee have identified climate-related disclosures as a priority issue, but the subcommittee as a whole did not reach agreement that climate- related disclosures should be among its highest priorities. In addition, as previously described, existing reporting frameworks include those developed by CDP, Global Reporting Initiative, SASB, and the June 2017 FSB Task Force final recommendations. Given that these are voluntary frameworks, companies can report climate-related information using any of the frameworks or not use a framework at all. Further, stakeholders advocating for climate-related disclosures have not agreed on whether to adopt one of the existing reporting frameworks or develop a new framework for companies to use in reporting climate-related disclosures. For example, companies have not determined which of the existing reporting frameworks to use or are uncertain on which framework is preferred by investors for reporting climate-related disclosures, according to one investor association, representatives of SEC’s Investor Advisory Committee, and an SEC senior staff of the Office of Investor Advocate. The SEC senior staff further stated that SEC may be hesitant to recommend a particular framework for companies to use given the uncertainties. Another organization focusing on climate-related disclosures in its letter commenting on SEC’s April 2016 Concept Release suggested that SEC review and consider elements of existing reporting frameworks. Furthermore, SEC’s Investor Advisory Committee, in its letter commenting on the Concept Release, recommended SEC develop an analytical framework on climate-related disclosures, among other things. Most recently in June 2017, the FSB Task Force reported that its recommendations aim to provide a framework to help companies more consistently disclose climate-related information and align their reporting frameworks over time. In particular, the Task Force recommends that companies include material climate-related disclosures in their public filings and encourages standard-setting bodies to support adoption of the recommendations. According to SEC senior staff, while the Task Force recommendations may be helpful if the Commission were to consider new rules on climate-related disclosures in the future, SEC staff is not aware of any specific SEC actions or plans based on the recommendations. Also, additional disclosure requirements or increased scrutiny of companies’ climate-related information—which, if necessary, SEC and Congress can consider—could have mission and resource implications for SEC’s Division of Corporation Finance. We provided a draft of this report to SEC for review and comment. In oral comments provided on January 10, 2018, senior staff in SEC’s Division of Corporation Finance generally agreed with our findings and provided technical comments, which we incorporated into the report, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, the Chair of SEC, and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Michael Clements at (202) 512-8678 or clementsm@gao.gov, or J. Alfredo Gómez at (202) 512-3841 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines: (1) steps the Securities and Exchange Commission (SEC) has taken to help companies understand disclosure requirements for climate-related risks, (2) steps SEC has taken to examine changes in climate-related disclosures since the release of its 2010 Commission Guidance Regarding Disclosure Related to Climate Change (hereafter referred to as the 2010 Guidance), and (3) constraints SEC faces when reviewing climate-related disclosures and stakeholders’ views of those disclosures. To address all objectives, we reviewed SEC documents, including the 2010 Guidance and internal filing review guidance, related to SEC’s review of climate-related and other disclosures in companies’ annual filings. We also reviewed SEC’s 2012 and 2014 congressional reports, titled Staff Report to the Senate Committee on Appropriations Regarding Climate Change Disclosure, and additional information on SEC staff’s ongoing reviews of climate-related disclosures. In addition, we reviewed prior GAO and SEC Office of Inspector General reports related to the 2010 Guidance, climate-related risks, and SEC’s filing review process and reports from stakeholders, including the report on recommendations from the Financial Stability Board Task Force on Climate-related Financial Disclosures (FSB Task Force). We selected five industries to focus on for this report: oil and gas, mining, insurance, electric and gas utilities, and food and beverage. We selected the first four industries because they were identified by SEC staff, in its 2012 and 2014 congressional reports, as more likely than other industries to be affected by climate change-related matters due to the nature of their operations. We also selected the food and beverage industry because we identified companies in this industry that have submitted climate-related disclosures and can provide perspectives on these disclosures, and SEC had not selected companies in this industry for review in its 2012 and 2014 congressional reports or ongoing periodic reviews of climate-related disclosures. For all five industries, we searched companies’ annual filings to determine whether the industries include companies that have submitted climate-related disclosures in SEC filings or are represented by associations that have submitted comments on SEC’s April 2016 Concept Release related to business and financial disclosures in Regulation S-K. Because we did not search companies’ filings of all industries, industries we focused on in this report may not be a comprehensive list of industries that are affected by climate-related risks and views on the selected industries are not generalizable to other industries we did not include in our review. To address the first objective, we reviewed SEC’s 2010 Guidance and Division of Corporation Finance (Corporation Finance) policies and procedures on review of disclosures. We determined the number of comment letters SEC issued to individual companies on climate-related disclosures from February 2010 to August 2017. Specifically, we reviewed a 2014 report by Ceres, a nonprofit organization that works with investors, companies, and public interest groups on sustainable business practices, that analyzed and determined the number of SEC comment letters to companies from February 2, 2010 (the date the 2010 Guidance was released) to December 31, 2013. Additionally, using the same keyword search terms—such as “climate change” and “climate mitigation”—that were used in the Ceres report, we determined the number of SEC comment letters issued to individual companies on issues related to climate-related disclosures from January 1, 2014, through August 11, 2017. Specifically, we searched for SEC’s comment letters in its EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system— which is SEC’s record-keeping system for comment letters to companies, among other things—using the keyword search functionality. The search terms we used were not intended to represent a comprehensive list of keywords that may relate to climate-related issues. Therefore, the nongeneralizable sample of comment letters we identified is not intended to be a comprehensive list or representative sample of comment letters on climate-related information in SEC filings. We reviewed the comment letters identified through our search to understand the climate-related disclosure issues SEC staff has identified. To understand SEC’s efforts to clarify climate-related disclosure requirements for companies and industry groups’ views on SEC’s efforts, we interviewed SEC staff from Corporation Finance and representatives from a nongeneralizable sample of industry groups representing companies in the five industries we selected. Specifically, we interviewed representatives from the following industry groups: American Insurance Association, American Petroleum Institute, Edison Electric Institute, Grocery Manufacturers Association, and National Mining Association. We selected these groups because they represent companies in the five industries in our review and they or their members submitted letters commenting on SEC’s April 2016 Concept Release or their members submitted climate-related disclosures to SEC in 2016. Additionally, we reviewed the letters these groups submitted commenting on the Concept Release to understand their views on climate-related disclosures. Views from the industry representatives with whom we spoke cannot be generalized to those we did not include in our review. To address the second objective, we reviewed SEC’s 2012 and 2014 congressional reports and additional information on ongoing periodic reviews of climate-related disclosures. We also reviewed SEC’s April 2016 Concept Release, particularly the section that focuses on climate- related disclosures in SEC’s filings. Further, we interviewed Corporation Finance staff to understand steps SEC has taken to assess the effect of the 2010 Guidance and planned actions related to comments on climate- related disclosures for the Concept Release. To address the third objective, we reviewed SEC documents on the review of climate-related and other disclosures in companies’ filings, including the 2010 Guidance, filing review guidance, and examples of staff training materials. We also reviewed information related to the New York State Attorney General’s investigation of and agreement with Peabody Energy on the company’s climate-related disclosures in SEC filings. To understand the specificity of companies’ climate-related disclosures in annual filings, we reviewed the Sustainability Accounting Standards Board’s (SASB) October 2016 report that analyzed and categorized selected companies’ climate-related disclosures according to their level of specificity. To identify illustrative examples of climate- related disclosures, we used Ceres’ SEC Sustainability Disclosure Search Tool to search annual filings of S&P 500 Index companies, filed with SEC in 2016, in the five industries we selected. We used Ceres’ SEC Sustainability Disclosure Search Tool because it searches companies’ SEC annual filings by industry, identifies relevant climate-related disclosures and their locations within the filings, and reproduces the excerpts of these disclosures in a single report. In a search of Ceres’ database on September 20, 2017, we identified 116 S&P 500 Index companies that included climate-related disclosures in their annual filings filed in 2016. See appendix II for examples of disclosures with varying levels of specificity. To obtain information on SEC staff’s review of climate-related disclosures—including information on the review process, tools and guidance used in the review, and staff training and experience—we interviewed 20 Corporation Finance staff. Specifically, we interviewed 8 senior supervisory staff from the four Corporation Finance offices that cover reviews of filings of companies in the five industries we selected. We also randomly selected 12 nonsupervisory staff from these same four offices, with a mix of accountants and attorneys and years of experience at SEC. In addition, we interviewed senior staff from Corporation Finance’s Disclosure Standards Office to obtain information on the office’s examinations of the filing review process conducted in 2014 through 2016. Furthermore, we interviewed Corporation Finance senior staff to obtain an understanding of SEC’s enforcement authority in its filing review program and how that differs from the investigation power of state attorney generals. To understand stakeholders’ views on climate-related disclosures, we reviewed SEC’s April 2016 Concept Release and individual letters commenting on the Concept Release from organizations that represent investors, companies in the five industries we selected, or organizations that focus on climate-related issues. We also reviewed the websites and documents of three investment management firms—BlackRock Advisors LLC, State Street Global Advisors Limited, and Vanguard Group, Inc.—on their efforts to seek additional climate-related disclosures from companies. We reviewed reports by stakeholders, including SASB and the FSB Task Force, to provide perspectives on investors’ views on the current state of climate-related disclosures. We identified these stakeholders because they represent major investor interests or have submitted letters commenting on SEC’s April 2016 Concept Release. Furthermore, we interviewed representatives from the five industry groups we selected and other nonprofit organizations representing investors or focusing on climate-related issues. Specifically, we interviewed representatives from the following organizations representing investors or focusing on climate-related issues: Center for Climate and Energy Solutions (C2ES)—an independent, nonpartisan, nonprofit organization that works to address climate and energy challenges; Ceres; and the Council of Institutional Investors—a nonprofit, nonpartisan association that represents corporate, public, and union employee benefit funds and endowments. We selected these organizations because they represent investors or focus on climate-related issues and have submitted letters commenting on SEC’s April 2016 Concept Release. Views from the representatives of investor groups with whom we spoke cannot be generalized to those we did not include in our review. Additionally, we interviewed SEC senior staff from the Investor Advisory Committee and the Office of Investor Advocate and an industry representative who is a member of the Investor Advisory Committee to obtain information on investors’ views on climate-related disclosures. We also interviewed Corporation Finance senior staff to understand SEC’s planned efforts, if any, on climate-related disclosures. Throughout this report, we use certain qualifiers when describing results from interview participants, such as “few,” “some,” and “most.” We define few as two or three; some as four or more but less than most; and most as more than half or nearly all relative to the total number possible. The views of interviewees we selected cannot be generalized to all SEC staff or stakeholders on issues related to climate-related disclosures. We conducted this performance audit from November 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides illustrative examples of climate-related disclosures by two companies in the oil and gas industry. The first example contains boilerplate and unquantified information. The second example contains some quantitative information and metrics. Filings we identified are not intended to be a comprehensive list or representative sample of companies that disclose climate-related information in SEC filings. See appendix I for additional information on the analysis. Other Items The amount of insurance covering physical damage to our property and liability related to negative environmental effects resulting from a sudden and accidental pollution event, excluding Atlantic Named Windstorm coverage for which we are self insured, varies by asset, based on the asset’s estimated replacement value or the estimated maximum loss. Risk Factors Climate change initiatives may result in significant operational changes and expenditures, reduced demand for our products and adversely affect our business. We recognize that climate change is a global environmental concern. Continuing political and social attention to the issue of climate change has resulted in both existing and pending international agreements and national, regional or local legislation and regulatory measures to limit greenhouse gas emissions. These agreements and measures may require significant equipment modifications, operational changes, taxes, or purchase of emission credits to reduce emission of greenhouse gases from our operations, which may result in substantial capital expenditures and compliance, operating, maintenance and remediation costs. In addition, our production is used to produce petroleum fuels, which through normal customer use may result in the emission of greenhouse gases. Regulatory initiatives to reduce the use of these fuels may reduce demand for crude oil and other hydrocarbons and have an adverse effect on our sales volumes, revenues and margins. The imposition and enforcement of stringent greenhouse gas emissions reduction targets could severely and adversely impact the oil and gas industry and significantly reduce the value of our business. Management’s Discussion and Analysis of Financial Condition and Results of Operations We recognize that climate change is a global environmental concern. We assess, monitor and take measures to reduce our carbon footprint at existing and planned operations. We are committed to complying with all Greenhouse Gas (GHG) emissions mandates and the responsible management of GHG emissions at our facilities. Risk Factors We expect to continue to incur substantial capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations. Likewise, future environmental laws and regulations, such as limitations on greenhouse gas emissions, may impact or limit our current business plans and reduce demand for our products. Our businesses are subject to numerous laws and regulations relating to the protection of the environment. These laws and regulations continue to increase in both number and complexity and affect our operations with respect to, among other things: The discharge of pollutants into the environment. Emissions into the atmosphere, such as nitrogen oxides, sulfur dioxide, mercury and greenhouse gas emissions. Carbon taxes. The handling, use, storage, transportation, disposal and cleanup of hazardous materials and hazardous and nonhazardous wastes. The dismantlement, abandonment and restoration of our properties and facilities at the end of their useful lives. Exploration and production activities in certain areas, such as offshore environments, arctic fields, oil sands reservoirs and tight oil plays. We have incurred and will continue to incur substantial capital, operating and maintenance, and remediation expenditures as a result of these laws and regulations. To the extent these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, our business, financial condition, results of operations and cash flows in future periods could be materially adversely affected. Although our business operations are designed and operated to accommodate expected climatic conditions, to the extent there are significant changes in the Earth’s climate, such as more severe or frequent weather conditions in the markets we serve or the areas where our assets reside, we could incur increased expenses, our operations could be materially impacted, and demand for our products could fall. Demand for our products may also be adversely affected by conservation plans and efforts undertaken in response to global climate change, including plans developed in connection with the recent Paris climate conference in December 2015. Many governments also provide, or may in the future provide, tax advantages and other subsidies to support the use and development of alternative energy technologies. Management’s Discussion and Analysis of Financial Condition and Results of Operations Climate Change There has been a broad range of proposed or promulgated state, national and international laws focusing on greenhouse gas (GHG) reduction. These proposed or promulgated laws apply or could apply in countries where we have interests or may have interests in the future. Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a material impact on our results of operations and financial condition. Examples of legislation or precursors for possible regulation that do or could affect our operations include: European Emissions Trading Scheme (ETS), the program through which many of the European Union (EU) member states are implementing the Kyoto Protocol. Our cost of compliance with the EU ETS in 2015 was approximately $0.4 million (net share pre-tax). In Canada during 2015, the Alberta government amended the regulations of the Climate Change and Emissions Act. The regulations now require any existing facility with emissions equal to or greater than 100,000 metric tonnes of carbon dioxide or equivalent per year to reduce its net emissions intensity from its baseline. The reduction is increasing from the current 12 percent in 2015, to 15 percent in 2016 and to 20 percent in 2017. We also incur a carbon tax for emissions from fossil fuel combustion in our British Columbia operations. The total cost of compliance with these regulations in 2015 was approximately $4.7 million. The U.S. Supreme Court decision in Massachusetts v. EPA, 549 U.S. 497, 127 S.Ct. 1438 (2007), confirming that the EPA has the authority to regulate carbon dioxide as an “air pollutant” under the Federal Clean Air Act. The U.S. EPA’s announcement on March 29, 2010 (published as “Interpretation of Regulations that Determine Pollutants Covered by Clean Air Act Permitting Programs,” 75 Fed. Reg. 17004 (April 2, 2010)), and the EPA’s and U.S. Department of Transportation’s joint promulgation of a Final Rule on April 1, 2010, that triggers regulation of GHGs under the Clean Air Act, may trigger more climate based claims for damages, and may result in longer agency review time for development projects. The U.S. EPA’s announcement on January 14, 2015, outlining a series of steps it plans to take to address methane and smog-forming volatile organic compound emissions from the oil and gas industry. The current U.S. administration has established a goal of reducing the 2012 levels in methane emissions from the oil and gas industry by 40 to 45 percent by 2025. Carbon taxes in certain jurisdictions. Our cost of compliance with Norwegian carbon tax legislation in 2015 was approximately $31 million (net share pre-tax). The agreement reached in Paris in December 2015 at the 21st Conference of the Parties to the United Nations Framework on Climate Change, setting out a new process for achieving global emission reductions. In the United States, some additional form of regulation may be forthcoming in the future at the federal and state levels with respect to GHG emissions. Such regulation could take any of several forms that may result in the creation of additional costs in the form of taxes, the restriction of output, investments of capital to maintain compliance with laws and regulations, or required acquisition or trading of emission allowances. We are working to continuously improve operational and energy efficiency through resource and energy conservation throughout our operations. Compliance with changes in laws and regulations that create a GHG emission trading scheme or GHG reduction policies could significantly increase our costs, reduce demand for fossil energy derived products, impact the cost and availability of capital and increase our exposure to litigation. Such laws and regulations could also increase demand for less carbon intensive energy sources, including natural gas. The ultimate impact on our financial performance, either positive or negative, will depend on a number of factors, including but not limited to: Whether and to what extent legislation or regulation is enacted. The timing of the introduction of such legislation or regulation. The nature of the legislation (such as a cap and trade system or a tax on emissions) or regulation. The price placed on GHG emissions (either by the market or through a tax). The GHG reductions required. The price and availability of offsets. The amount and allocation of allowances. Technological and scientific developments leading to new products or services. Any potential significant physical effects of climate change (such as increased severe weather events, changes in sea levels and changes in temperature). Whether, and the extent to which, increased compliance costs are ultimately reflected in the prices of our products and services. The company has responded by putting in place a corporate Climate Change Action Plan, together with individual business unit climate change management plans in order to undertake actions in four major areas: Equipping the company for a low emission world, for example by integrating GHG forecasting and reporting into company procedures; utilizing GHG pricing in planning economics; developing systems to handle GHG market transactions. Reducing GHG emissions—In 2014, the company reduced or avoided GHG emissions by approximately 900,000 metric tonnes by carrying out a range of programs across a number of business units. Evaluating business opportunities such as the creation of offsets and allowances; carbon capture and storage; the use of low carbon energy and the development of low carbon technologies. Engaging externally—The company is a sponsor of MIT’s Joint Program on the Science and Policy of Global Change; constructively engages in the development of climate change legislation and regulation; and discloses our progress and performance through the Carbon Disclosure Project and the Dow Jones Sustainability Index. The company uses an estimated market cost of GHG emissions in the range of $8 to $35 per tonne depending on the timing and country or region to evaluate future opportunities. In addition to the contacts named above, Barbara L. Patterson (Assistant Director), Giselle Cubillos-Moraga (Analyst in Charge), Anna Chung, Cindy Gilbert, Jesse Lamarre-Vincent, Marc Molino, Tovah Rom, Grant Simmons, and Tyler Spunaugle made key contributions to this report.", "summary": "Impacts from a changing climate can pose serious risks to the global economy and affect many economic sectors, according to reports. Public companies are generally required to disclose certain risks in their SEC filings. In 2010, SEC issued guidance to clarify how existing disclosure requirements apply for climate-related matters. GAO was asked to review (1) steps SEC has taken to clarify to companies their disclosure requirements for climate-related risks, (2) steps SEC has taken to examine changes companies may have made to their climate-related disclosures since the release of its 2010 Guidance, and (3) constraints SEC faces when reviewing climate-related disclosures and stakeholders' views of those disclosures. GAO reviewed SEC's disclosure requirements, guidance, and reports on changes in climate-related disclosures; queried SEC's filings system to identify comment letters with issues on climate-related disclosures; identified examples of climate-related disclosures in companies' filings; and interviewed SEC staff and representatives of stakeholder groups, such as industry associations from five industry groups, and nonprofit organizations that work with investors. We selected these stakeholders because they either were from industries likely to be affected by climate change-related matters due to the nature of their operations, or have a key interest in climate-related issues. Senior staff from SEC's Division of Corporation Finance generally agreed with GAO's findings. To help clarify to companies their disclosure requirements for climate-related matters, the Securities and Exchange Commission (SEC) issued the Commission Guidance Regarding Disclosure Related to Climate Change in 2010 (2010 Guidance). The 2010 Guidance was SEC's primary form of communication to clarify companies' climate-related disclosure requirements. In addition, SEC issued individual comment letters to specific companies on their climate-related disclosures. These letters are publicly available and companies can view these letters to understand SEC's assessment of a particular company's disclosures. Representatives from industry associations with whom GAO spoke stated that they consider the disclosure requirements for climate-related risks to be clear and have no need for additional guidance. SEC issued two reports to Congress in 2012 and 2014 that examined changes in climate-related disclosures in select industries. SEC found that most of these filings included some level of climate-related disclosures and reported that there were no notable year-to-year changes. SEC staff also continue to periodically assess climate-related disclosures in addition to its regular disclosure review process. Additionally, in April 2016, SEC requested public input on modernizing certain business and financial disclosure requirements, including potential changes on reporting climate-related risks in SEC's filings. As of December 2017, SEC staff said they are considering recommendations for the Commission's consideration based on comments received. SEC faces constraints in reviewing climate-related and other disclosures because it primarily relies on information that companies provide. SEC senior staff explained that SEC's Division of Corporation Finance staff assess companies' filings for compliance with federal securities laws—which require companies to disclose material risks—but do not have the authority to subpoena additional information from companies. Additionally, companies may report similar climate-related disclosures in different sections of the filings, and climate-related disclosures in some filings contain disclosures using generic language, not tailored to the company, and do not include quantitative metrics. When companies report climate-related disclosures in varying formats and specificity, SEC reviewers and investors may find it difficult to compare and analyze related disclosures across companies' filings. SEC has tools, mechanisms, and resources—including internal supervisory controls, regulations and guidance, a two-level filing review process, internal and external data, and staff training and experience—that help SEC staff consistently review filing disclosures, according to SEC documents and staff. Representatives of industry associations told GAO that they consider the current climate-related disclosure requirements adequate and no additional climate-related disclosures are needed. However, some investor groups and asset management firms have highlighted the need for companies to disclose more climate-related information. But, members of SEC's Investor Advisory Committee told GAO that investors have not agreed on the priority of climate-related disclosures. Also, additional disclosure requirements or increased scrutiny of companies' climate-related information—which, if necessary, SEC and Congress can consider—could have mission and resource implications for SEC's Division of Corporation Finance.", "document_type": "gao"}
{"report": "CAPTA, originally enacted in 1974, provides formula grants to states to improve child protective service systems. ACF administers the CAPTA state grant program and provides guidance and oversight to states. In fiscal year 2017, Congress provided about $25 million for the program. As part of the CAPTA state grant program, states are required to submit to the Secretary of HHS plans outlining how they intend to use CAPTA funds to improve their child protective service systems, among other things. State plans remain in effect for the duration of states’ participation in the grant program; if modifications are needed, these must be submitted. In addition to state plans, states are required to submit to HHS an annual data report providing information on agency decisions made in response to referrals of child abuse and neglect, as well as preventive services provided to families, among other things. CAPTA requires state governors to provide a series of assurances in their state plans. Since 2003, governors have had to provide an assurance that states have in effect and are enforcing a state law or program that includes policies and procedures to address the needs of infants affected by prenatal substance abuse or displaying withdrawal symptoms at birth. Under states’ policies and procedures, health care providers are required to notify CPS of such infants. Governors must also assure that a plan of safe care is developed for these infants. Although CAPTA does not define “plans of safe care,” for the purposes of this report we define them as plans to ensure the safety and well-being of infants who are born substance-affected. The Comprehensive Addiction and Recovery Act of 2016 (CARA) amended certain provisions of CAPTA that relate to substance-affected infants (see table 1). In addition to provisions related to substance-affected infants, CAPTA also requires governors to provide an assurance to the Secretary of HHS that they have provisions or procedures for certain individuals to report known and suspected instances of child abuse and neglect, which are generally referred to as mandated reporter laws. All states have statutes identifying persons who are required to report suspected child maltreatment to an appropriate agency, such as child protective services, a law enforcement agency, or a state’s toll-free child abuse reporting hotline, according to a 2016 HHS report. Mandatory reporters often include social workers; teachers, principals, and other school personnel; physicians, nurses, and other health care workers; and counselors, therapists, and other mental health professionals. The circumstances under which a mandatory reporter must make a report vary from state to state, according to HHS. Typically, a report must be made when the reporter, in his or her official capacity, suspects or has reason to believe that a child has been abused or neglected. State laws require mandatory reporters to report the facts and circumstances that led them to suspect that a child has been abused or neglected; they do not have the burden of providing proof that abuse or neglect has occurred. CPS, a division within state and local social services, is generally the agency that conducts an initial assessment or investigation of reports of child abuse and neglect. It also offers services to families and children where maltreatment has occurred or is likely to occur. Typically, when CPS agencies receive a notification about suspected child abuse, including a substance-affected infant, social workers review the referral to determine if it should be accepted for investigation. During an investigation, social workers determine, among other things, the nature, extent, and cause of abuse or neglect, and identify the person responsible for the maltreatment. An investigation may include the following: a visit to the hospital and/or infant’s home; observation of the infant; risk and safety assessments; evaluation of the home environment; background checks, including criminal record checks of adults that reside with the family; as well as mental health evaluations. If social workers determine that there is enough evidence to suggest that an infant is at risk for harm or neglect, or that abuse or neglect occurred, the case is substantiated. Once a case is substantiated, CPS develops a case plan with the family outlining objectives and tasks for the family. Among other things, CPS may refer the family to services in the community, such as early intervention services, parenting classes, and substance abuse treatment. Generally, CPS attempts to strengthen the family and alleviate the problems which led to maltreatment. If the case is not substantiated, but there is genuine concern about the child’s situation and the family may benefit from services in the community, the case may be closed and/or the family may be referred for voluntary services (see figure 1). Prenatal maternal opioid use has increased considerably in recent years. This increase has contributed to a significant rise in the rate of NAS. According to a recent study, the rate of NAS has increased from 1.2 per 1,000 hospital births in 2000 to 5.8 per 1,000 hospital births in 2012, reaching a total of 21,732 infants diagnosed with NAS. NAS occurs with considerable variability. According to a recent HHS report, various studies indicate that anywhere from 55 to 94 percent of infants exposed to opioids in-utero exhibit some degree of symptoms. Typically, infants with NAS develop symptoms within 72 hours of birth, but may develop symptoms within the first 2 weeks of life, including after hospital discharge. For the purpose of this report, infants exposed to opioids ingested by mothers in utero are considered substance-exposed, and those born negatively affected by exposure or experiencing withdrawal symptoms are considered substance-affected. According to experts, NAS is considered an expected and treatable result of women’s prenatal opioid use. Opioid exposure during pregnancy may occur for the following reasons: Women receiving pain medication with a prescription under the care of a physician. Medications can include fentanyl and oxycodone. Women under the care of a physician and undergoing treatment for an opioid use disorder with medications, such as methadone or buprenorphine. This type of treatment is generally referred to as medication-assisted treatment (MAT). Women misusing opioid pain medications with or without a prescription (such as using without a prescription, using a different dosage than prescribed, or continuing to use a drug when no longer needed for pain). Women using or abusing illicit opioid, such as heroin. In response to our survey, 42 states reported that state policies and procedures require health care providers to notify CPS about substance- affected infants. Some states reported that they explicitly require health care providers to notify CPS of substance-affected infants. For example, Wisconsin reported that under its state law if tests indicate that infants have controlled substances or controlled substance analogs in their bodily fluids, the health care provider shall report the occurrence of that condition to CPS. Others reported that the requirement is met by their states’ mandated reporter law—whereby people in certain positions, including health care providers, are required to notify CPS about substance-affected infants, similar to the manner in which other mandatory reporters, like school teachers, day care personnel, and social workers are required to report other instances of child abuse and neglect. For example, Kentucky statute requires that “any person who knows or has reasonable cause to believe that a child is dependent, neglected, or abused shall immediately” make a report to the police or CPS. The statutory definition for an abused or neglected child in Kentucky includes situations where a child’s health or welfare is harmed or threatened with harm because of parental incapacity due to alcohol and other drug abuse. Of the 42 states that require health care providers to notify CPS of substance-affected infants, 21 reported that notification is required for infants affected by both illegal and legal use of opioids. For example, in Massachusetts health care providers are required to notify CPS orally and, in writing within 48 hours, about substance-affected infants physically dependent on drugs, even if the drugs were legally obtained and the mother is under the care of a prescribing medical professional. Sixteen of the 42 states reported that health care providers are required to notify CPS of infants affected only by the illegal use of opioids, and five of the 42 states reported that they did not know if health care providers were required to notify CPS of infants affected by the illegal and legal use of opioids. The other eight states reported that although they did not have policies and procedures that require health care providers to notify CPS about substance-affected infants, they have laws or policies that encourage notification. Specifically, in written responses to our survey: Two states reported that under their state mandated reporter laws health care providers are encouraged, but not required, to notify CPS about substance-affected infants. Four states reported that they are working to amend their states’ policies and procedures to require that health care providers refer substance-affected infants to CPS. Another state reported that it encourages the notification from health care providers, but has not sought legislation to require health care providers to report substance-affected infants to CPS because of concerns that any laws that criminalize prenatal substance use would further deter substance-using pregnant women from seeking prenatal care. The state’s law requires all hospital personnel who suspect abuse and neglect or observe conditions that are likely to result in abuse or neglect to notify CPS. One state reported that all persons, including health care providers, are required to report child abuse and neglect, but reporting depends on whether a hospital’s policy indicates substance abuse is child abuse or neglect. Further, the state CPS director reported collaboration with the health care community on reporting substance exposed infants to its child abuse hotline. Although one state reported in our survey that it does not require or encourage health care providers to notify CPS about substance-affected infants, in an interview, state officials explained that its policy requires that health care providers notify CPS if, through an assessment, they conclude that infants are at risk for abuse and neglect. Under the state’s law, health care providers in each county are required to assess the needs of mothers and substance-affected infants using a protocol established by county health departments, CPS agencies, and hospitals. State officials told us that under the state’s law, the birth of a substance- affected infant is not in and of itself a sufficient basis for reporting child abuse or neglect. In addition to having policies and procedures regarding the reporting of substance-affected infants, in written responses to our survey some states reported providing training and guidance to support the efforts of health care providers to notify CPS about these infants. Three states reported that they offer mandatory reporter training to inform health care providers that they are obligated to notify CPS about substance-affected infants. Another state reported that its Department of Human Services developed a guide for mandated reporters that discusses what needs to be reported and where to make reports. Also, one state reported that it sent a formal letter to its state hospital association about how to report substance-affected infants to CPS. This state also sent a memo to its CPS county directors instructing them to contact their local health care providers on the importance of reporting substance-affected infants to CPS and the process for doing so. In addition, during our Massachusetts site visit, officials shared with us a memo that was sent to mandated reporters, community partners, and other stakeholders that offered guidance on when to file a report about substance-exposed infants. Further, local CPS staff at one Massachusetts field office told us that upon request they provide mandated reporter training to health care providers. Despite these policies, procedures, and guidance, in written responses to our survey, a few states reported concerns about requiring health care providers to notify CPS about substance-affected infants and the definition of substance-affected. All of the hospitals that we visited have policies consistent with their state’s law that require that health care providers, primarily hospital social workers, to notify CPS about substance-affected infants. However, one state reported that some medical personnel have been reluctant to report some infants that are positive for illegal and legal substances due to fears of mothers being arrested. Another state reported that stakeholders are concerned that having to notify CPS about substance-affected infants will have a chilling effect on the willingness of pregnant women who use substances to be honest with providers and seek the help and support they need and deserve. According to one state, there is often an inherent resistance to contacting CPS in these cases as health care providers tend to view child welfare involvement as punitive rather than a potential resource for the family. In addition, three states reported in written responses to our survey challenges understanding how to define terms, such as substance- affected, under CAPTA. For example, the Pennsylvania CPS director expressed concerns during our site visit, suggesting that CAPTA raises many unanswered questions, such as (1) if “affected by substances” means at-risk of being or physically affected by substances, (2) what policies relating to substance-affected infants should look like and include, and (3) whether “affected by substances” should include women who are under the care of health care or treatment providers and taking their medications as prescribed. A Kentucky public health official told us that a drug test, or whether the infant is affected by legal or illegal substances, should not be the sole factor in determining CPS’ involvement with a family. Rather, a holistic view of the family, whether the substance prohibits the mother’s ability to care for her child, and any risk factors present that places the infant at risk should also be considered. According to officials, an infant that is exposed to substances, but has not been affected by the substance, can still be at risk for child abuse and neglect. In response to our survey, 46 states reported that they have policies and procedures for deciding which notifications about substance-affected infants are accepted for investigation. Seventeen of those states reported that all notifications of substance-affected infants are accepted for investigation, regardless of the circumstances. The remaining 29 states reported that they apply specific criteria to determine if children who present as substance-affected are accepted for investigation by CPS. Several states reported in written responses to our survey that they base their criteria for accepting notifications on the infant’s safety. For these states, drug exposure does not by itself indicate that an infant’s safety is at risk. For example, one state explained that in determining a child’s safety risk, staff evaluate a number of factors including the history of the family; the family’s presentation at the birthing hospital (appearance of chaotic behavior, suspected intoxication of adults, lack of appropriate concern or bonding with the infant); the presentation of the infant’s physical condition; the results of any testing of parent or child (blood, urine, etc.); discrepancies identified in the parent’s representation of their substance use or substance use treatment; and any other concerns noted by the reporting source. Other states reported that their criteria for accepting notifications for investigation are based on the degree or type of drug exposure in question. For example, one state reported that its policy directs CPS agencies to accept notifications for investigation when a parent has used illegal substances or non-medical use of prescribed medication during the last trimester of pregnancy. Another state reported that it will accept notifications for investigation if the infant is born with a positive toxicology or is experiencing drug withdrawal, or if the mother tests positive for substances. A few states reported using both risk to the safety of infants as well as degree or type of drug as their criteria for accepting notifications. For example, one state reported that it considers factors, such as the type of drug, the parent’s ability to care for the child, addiction history, and the parent’s readiness and preparation to care for the infant. In follow-up correspondences with states that reported that they do not have policies and procedures to decide whether to accept for investigation notices about substance-affected infants, one state reported that decisions are made on a case-by-case basis. A few states reported that after receiving notifications about substance- affected infants, CPS agencies may decide to opt out of investigating some families, referred to as “screening out” families. For example, in Massachusetts, CPS can “screen out” referrals of mothers if the only substance affecting the infants was used by the mothers as prescribed by their physician. In these instances, when CPS in Massachusetts is notified by the hospital about an infant, the screener gathers information from the caller and consults with a supervisor to determine whether the referral should be accepted for investigation or screened out. If the mother is on methadone, for example, but is involved with services and is in a treatment plan, CPS verifies with medical or other qualified providers that the mother used the drug as part of substance abuse or medical treatment as authorized. Additionally, CPS confirms that there are no other concerns of child abuse and/or neglect. If CPS officials in Massachusetts are unable to collect all the information that they need to screen out families, for example when a mother does not sign a release allowing CPS officials to speak with her health care providers, notifications about substance-affected infants are accepted for investigation. In response to our survey, 49 states reported that their CPS agency has policies to develop a plan to ensure the safety and well-being of substance-affected infants who meet the state’s criteria for investigation. Two states reported that CPS staff are not required to develop such a plan, even if a notification is accepted for an investigation or an assessment. For purposes of this report, we are defining a plan of safe care as a plan to ensure the safety and well-being of the infant. States’ approaches to identifying children and families who will receive a plan of safe care generally fall into two categories: 38 states reported that CPS is required to develop a plan of safe care for all notifications of substance-affected infants that are accepted for investigation, including those that are not substantiated. 11 states reported that CPS staff are required to develop a plan of safe care only in those instances where an investigation substantiates the notification or uncovers an unmet need or present or emerging danger. For example, local Pennsylvania CPS officials told us that they only develop plans when there is a safety threat or other concern about the infant. Most states reported that after a notification of a substance-affected infant is accepted for investigation, CPS always conducts a needs assessment for the infant and caregivers. For example, one local CPS office that we visited told us that social workers assess risk to and safety of infants, their function (development, age appropriate behavior, etc.), and environment. In addition, workers assess the caregiver’s ability to parent and employment status, as well as housing. The assessments conducted as part of the investigation inform the development of plans of safe care, as well as decisions about the removal of infants from the home. Among the 49 states that reported that plans of safe care are developed for all or some substance-affected infants, 47 reported that these plans either always or sometimes address infants’ safety needs. Plans also address other needs, such as infants’ immediate medical and longer-term developmental needs, as well as caregiver’s substance use treatment needs. See figure 2 for the number of states whose plans of safe care address various issues facing the infant and parent. In written responses to our survey and during our site visits, officials reported that plans of safe care and referrals for services included in the plans are individualized based on the infant and family’s needs. For example, Massachusetts state CPS officials told us that plans of safe care are developed for each family based on the information that staff collect from the safety, risk, and family assessments, as well as information collected from individuals who may have knowledge that would inform the family assessments, such as medical and treatment providers, and family members. Kentucky state CPS officials told us that the local organizations and service providers that they collaborate with to develop the plan of safe care also vary based on the family’s needs. For example, Kentucky will only collaborate with substance use treatment providers to develop the plan of safe care when families have substance use disorders. Similarly, during our site visits, officials from two states told us that the decision to place an infant in foster care is based on the individualized needs of the infant and caregiver. For example, Massachusetts state officials told us that their decision to remove a baby from the home depends on a myriad of factors and is determined on a case-by-case basis. Officials explained that if a mother is discharged from the hospital and begins using drugs again and does not have adequate supports in place to care for her baby, CPS may decide to place the infant in foster care. However, if a mother has existing support systems in place to mitigate safety risks, CPS may decide to keep the baby in the home. In our survey, all 51 states reported that their agencies either always or sometimes refer parents or caregivers to substance use treatment programs, and most states reported that they always or sometimes refer parents or caregivers to parenting classes or programs (49), and other supportive services (49). CPS officials in each of the three states that we visited told us that their plans of safe care include referrals to address not only the immediate needs of the infants, but also the needs of the parent or caregiver. For example, officials from a local Kentucky CPS agency told us that staff refer mothers of substance-exposed infants to a program called Sobriety Treatment and Recovery Team (START). START is comprised of a social worker and a peer support mentor who has at least 3 years of sobriety, previous involvement with CPS, and was successfully able to regain or keep custody of her own children. According to officials, the START program has been able to provide participants with quick access to substance use disorder treatment. Officials from a Massachusetts local CPS agency told us that one of the services that they provide to parents of substance-affected infants is a parent aide who can help monitor how the parent is caring for the infant, such as administering the infant’s medications appropriately and ensuring the parent is not abusing the infant’s drugs. In addition, a parent aide can provide emotional support and help parents adjust after the infant is discharged from the hospital. Kentucky officials noted the effect that a healthy caregiver has on the outcome of the infant and emphasized that a baby cannot be healthy if the mother is not. Kentucky CPS officials said that they have found that the earlier caregivers enter treatment, the better the outcomes are for mothers and babies. According to Kentucky officials, parents who participate in the START program are less likely to have their child placed in foster care. Officials from the states that we visited told us that developing and monitoring plans of safe care under CAPTA’s new requirements for infants affected by their mother’s legal use of prescribed medications, as well as plans for these infants’ caregivers, present challenges. Specifically, officials reported concerns about increased caseloads, particularly if they are required to provide plans and services for infants at low risk of abuse or neglect, the content of plans, and confidentiality restrictions. Thirty-one of 50 states reported on our survey that staffing or resource limitations was very or extremely challenging, and CPS officials across the 3 states we visited said that the opioid epidemic has directly contributed to increased caseloads. According to a local Kentucky CPS office, the number of babies that met criteria for being accepted for investigation has increased about 55 percent from 2011 to 2016, while the number of staff has remained the same. Similarly, hospitals reported being impacted by this challenge. For example, staff at four hospitals we visited told us that they have delayed discharging infants from the hospital because CPS social workers did not identify caregivers to whom infants may be released or make plans for infants in a timely manner. In addition, staff from three hospitals told us that some CPS workers are difficult to contact and not especially responsive to their questions. One hospital social worker told us that she is concerned that the changes to CAPTA that require notifying CPS of all substance-affected newborns will inundate the agencies with cases. Officials from two of the three states we visited anticipated that providing services to infants affected by the legal use of prescribed medications, but not likely to be at risk for child abuse and neglect, will result in an increase in the number of families referred to CPS. This, in turn, will require a plan of safe care and further strain limited resources. Twenty- five states reported in our survey that the plan they develop for substance-affected infants is the same as for other children in CPS care, suggesting that states devote the same level of resources to these infants as other cases. The states we visited interpret CAPTA to require that plans of safe care be developed for all substance-affected infants who are referred to CPS, including those who may not meet usual criteria to be accepted for an investigation. Some state officials we interviewed questioned whether the new CAPTA requirements would allow for the best use of limited resources. For example, one senior state CPS official questioned whether it would be a good use of resources to develop plans of safe care for mothers in substance use disorder treatment or mothers using opioid medications due to chronic pain. A local CPS official we interviewed stated that drug exposure, in and of itself, is not necessarily a safety risk, and CPS should not intervene with families who are not at risk for child abuse or neglect. Instead, hospitals or treatment providers should intervene and refer families who do not meet criteria for CPS involvement, but could benefit from additional supports, to voluntary services. Kentucky public health officials told us that the period after a woman gives birth is a critical time for families as mothers may be stressed, sleep-deprived, exhausted, and may have other children in the home. This period may be especially challenging for mothers with substance use disorders, if adequate supports are not in place. According to officials women are typically covered for substance use treatment during pregnancy; however, this coverage ends roughly 60 days after the baby is born. In written responses to our survey, some states reported that they would rely on other agencies to develop plans of safe care. Similarly, in order to manage limited CPS resources, officials from two of the three states that we visited said they are considering having hospitals or other agencies assume responsibility for developing plans of safe care when there is no evidence of abuse or neglect and there appears to be minimal risk to the safety and well-being of the infant. Kentucky officials told us that they envision that CPS will be responsible for developing a plan of safe care for notifications that are accepted for investigation, while hospitals, or another agency, will be responsible for developing plans of safe care for referrals that are screened out by CPS. According to CPS state officials, the plan of safe care for the infant and the family can be part of the discharge plan prior to the family leaving the hospital. However, officials reported that obtaining cooperation from other agencies may be difficult. Some state officials reported being concerned that other agencies may not feel obligated to develop these plans, in part, because CAPTA provides funding to child welfare, and other agencies may therefore believe that child welfare should be responsible for developing the plan of safe care. CPS officials we interviewed in two of our site visit states, as well as one state we followed up with, told us that they were unsure of whether their current plans will meet new CAPTA requirements because CAPTA does not define a plan of safe care. For example, Massachusetts officials said that their plans include everything that a family might need to ensure the safety of the child, including resources to ensure stabilization and reunification of a family, but they are not sure whether the plans meet new CAPTA requirements, in part because they are not familiar with the term “plan of safe care.” An official in another state was also unsure about whether his state’s “safety plans” would meet CAPTA requirements. According to the official, safety plans may include a treatment plan for mothers, and referral services, such as early intervention for the child. In practice, plans of safe care generally address gaps that place an infant at risk for harm or neglect. However, state officials we interviewed reported being unsure about what a plan of safe care should look like for families where these gaps do not exist. Also, in a written response to our survey, one state expressed uncertainty about CPS’ role if required to work with infants who do not typically receive CPS services. For example, a Pennsylvania official said that it is unclear what types of interventions child welfare should conduct with families of infants exposed to legal substances, such as medications prescribed by doctors, when the caregivers are taking their medications correctly. Similarly, officials also questioned whether a plan would be necessary, and what the plan would entail, for caregivers who are already addressing their substance use disorder and taking steps to ensure their infant’s safety. Officials from a local Kentucky CPS office described a case in which a mother was participating in medication-assisted treatment, had attended counseling three times per week throughout her pregnancy, and was continuing treatment in the postpartum period. Through CPS’ investigation, the agency found that the case was not substantiated, in part, because there were no additional services that CPS could connect her with that she was not already receiving. Officials across the three states we visited also said that state and federal drug and alcohol confidentiality restrictions may challenge their ability to monitor plans of safe care. To monitor plans of safe care, CPS staff may need access to confidential information in order to know how caregivers are progressing in treatment, particularly now that these plans must address the substance use disorder needs of the caregiver. However, federal law restricts the disclosure and use of alcohol and drug patient records maintained in connection with the performance of any federal- assisted alcohol and drug abuse program. Generally, confidential information may be disclosed in accordance with the prior written consent of the patient. State and local CPS staff we interviewed said that strict confidentiality requirements make it challenging for drug and alcohol treatment providers to share information about mothers and infants. A CPS state director from Pennsylvania said that treatment providers are often reluctant to provide CPS case workers with information or updates on a mother’s treatment, which prevents child welfare workers from fully understanding how mothers are progressing with their treatment and the extent to which those in treatment are adhering to prescribed directions as outlined by treatment providers. In addition, one official from a state we visited said state statutes regarding sharing of drug and alcohol treatment information may be more restrictive than the federal statute. Some states have developed ways to obtain confidential information about mothers in substance use disorder treatment. For example, officials from one local CPS office told us that in instances when they have to develop a long-term plan of safe care for families, they have mothers sign a release of information form in order to obtain updates about her treatment adherence from the medication- assisted treatment provider. Similarly, a local Massachusetts CPS office told us that typically staff obtain releases from mothers so that they can verify whether mothers are actively participating in their treatment and that there are no records of relapse. In HHS’ role to assist states in the delivery of child welfare services, two agencies—ACF and the Substance Abuse and Mental Health Services Administration (SAMHSA)—provided technical assistance to states through the National Center on Substance Abuse and Child Welfare (NCSACW). In addition, in ACF’s role to administer and monitor states’ implementation of CAPTA, the agency has provided some guidance to states on the provisions pertaining to substance-affected infants and has begun its monitoring responsibilities. ACF and SAMHSA, which leads public health efforts to reduce the impact of substance abuse and mental illness, established the NCSACW in 2002. The NCSACW provides technical assistance to states, and has issued publications and hosted forums to help states develop policies and procedures around issues affecting substance-affected infants. The technical assistance has focused on a broad range of issues, including collaboration among service providers, and plans of safe care. With respect to collaboration, NCSACW has issued several studies that identify opportunities for strengthening interagency efforts to prevent, intervene, identify, and treat prenatal substance exposure. The NCSACW collaboration guides encourage states to involve CPS agencies with medical providers in an interagency collaborative setting, thereby facilitating the process for CPS agencies to be notified of substance- affected infants. Regarding plans of safe care, NCSACW has provided technical assistance and best practices to states around development of these plans. For example, in one state it has facilitated discussion groups to help the state develop a model plan. From calendar year 2011 to 2016, NCSACW processed approximately 600 requests from state CPS agencies for short-term technical assistance related to improving care for substance-affected infants and their families. This short-term technical assistance included activities such as responding to telephone inquiries, mailing information, identifying needed resources, and making referrals. The NCSACW has also provided in- depth assistance to 16 states to strengthen collaboration and linkages across child welfare, addiction treatment, medical communities, early care and education systems, and family courts to improve outcomes for substance-affected infants and their families. Through this in-depth assistance, NCSACW identified areas for improvement in states, including a lack of clarity regarding compliance with CAPTA requirements (such as identification, notification, and developing plans of safe care) and the need for state models to comply with CAPTA requirements to develop plans of safe care. In one state, the project overview report indicated that a next step for the in-depth technical assistance is to continue development of the plan of safe care model and ensure practices and protocols are in place across systems to meet CAPTA requirements. The report indicated that this will include ongoing work with hospitals to ensure consistent identification of infants with prenatal exposure and notifications to CPS. Although18 states reported in our survey that technical assistance from the NCSACW was very or extremely helpful, 11 reported that it was moderately helpful, 7 reported that it was slightly helpful, and 1 reported that it was not at all helpful. Eleven states reported that they were not familiar with this assistance. Since July 2016, when the most recent amendments to CAPTA were enacted, ACF has issued one information memorandum and two program instructions to states about provisions relating to substance-affected infants. According to an ACF official, information memoranda share information with states, while program instructions provide interpretations of the law and inform states of actions they must take. ACF issued an August 2016 information memorandum informing states of the 2016 amendments to CAPTA. The August 2016 information memorandum also provided states with best practices, drawing on an NCSACW guide on collaboration for developing multi-systemic approaches to assist child welfare, medical, substance use disorder treatment, and other systems to support families affected by opioid use disorders. In January 2017, ACF issued a program instruction which provided guidance to states on implementing the 2016 amendments to CAPTA made by CARA and informed states of the flexibilities that they have under the law. Particularly, the guidance noted that: “CAPTA does not define ‘substance abuse’ or ‘withdrawal symptoms resulting from prenatal drug exposure.’ We recognize that by deleting the term ‘illegal’ as applied to substance abuse affecting infants, the amendment potentially expands the population of infants and families subject to the provision [that states have policies and procedures in place to address their needs]. States have flexibility to define the phrase, ‘infants born and identified as being affected by substance abuse or withdrawal symptoms resulting from prenatal drug exposure,’ so long as the state’s policies and procedures address the needs of infants born affected by both legal (e.g., prescribed drugs) and illegal substance abuse.” “While CAPTA does not specifically define a ‘plan of safe care,’ CARA amended the CAPTA state plan requirement . . . to require that a plan of safe care address the health and substance use disorder treatment needs of the infant and affected family or caregiver.” “CAPTA does not specify which agency or entity must develop the plan of safe care; therefore the state may determine which agency will develop the plans. We understand that in most instances the state already has identified the responsible agency in its procedures. When the state reviews and modifies its policies and procedures to incorporate the new safe care plan requirements in CARA, the state may wish to revisit its procedures regarding which agency develops the plan of safe care, including any role for agencies collaborating with CPS in caring for the infant and family.” In addition, in April 2017, ACF issued a program instruction on reporting requirements, including changes in those requirements brought about by the 2016 amendments to CAPTA. ACF conducted limited monitoring of states prior to the amendments passed in 2016. According to ACF officials, if presented with evidence of potential deficiencies, the agency would attempt to learn more about the state’s activities. In one instance, ACF reviewed South Carolina’s policies and found them to not be in compliance with the notification and safe care plan requirements of CAPTA. It directed the state to develop a program improvement plan to bring it into full compliance, which South Carolina submitted in April 2016. In a recent progress report (February–April 2017), South Carolina reported that it was focused on updating statutes, developing policies and procedures, training child protective service workers, and building relations with health care providers. In response to the 2016 amendments to CAPTA that added the requirement for HHS to monitor state policies and procedures to address the needs of substance-affected infants, ACF officials told us that staff in regional offices will review states’ annual reports, submitted in June 2017. In its program instruction describing the reporting requirements, ACF asked each state to submit a new Governor’s Assurance, as well as a narrative explaining what they have done in response to the amendments. Specifically, ACF asked states to provide information on any changes that were made in state laws, policies, or procedures related to identifying and referring infants affected by substance abuse to CPS as a result of prenatal drug exposure. It also requested updates on states’ policies and procedures regarding the development of plans of safe care; a description of how states have developed systems to monitor plans of safe care; and a description of any outreach or coordination efforts the states have taken to implement the amendments, among other things. According to ACF officials, as of October 1, 2017, some states have provided information and a Governor’s Assurance demonstrating compliance with the amended provisions and some states have been placed on Program Improvement Plans, but the agency does not yet have information on the status of all states. An ACF official explained that, in their annual reports, some states either acknowledged that they are trying to get legislation enacted to bring them into compliance with the law and it has failed, or that they are not in compliance, for example, because they were limiting their policies to those infants affected only by illegal substances. In addition, in May 2017, ACF issued a technical bulletin informing states of the new data collection requirements that resulted from the 2016 amendments to CAPTA. ACF stated that it intends to collect data required by the amendments to CAPTA through the National Child Abuse and Neglect Data System, beginning with states’ submission of fiscal year 2018 data. This system is maintained by ACF and contains data from states about children who have been abused or neglected. ACF issued a Federal Register notice about the proposed data elements and requested comments on the accuracy and quality of the proposed data collection, among other things; the comment period closed in July 2017. In the Federal Register notice, ACF notes that the 2016 amendments to CAPTA require it to collect information from state CPS agencies on the number of notifications from health care providers that are accepted for investigation or screened out. Further, of those infants screened in, ACF is required to collect data on the number of safe care plans developed for substance- affected infants as well as the number of infants for whom a referral was made for appropriate services, including services for the affected family or caregiver. In the Federal Register notice, ACF proposed to collect this information using a combination of existing and new data from states. Thirty-two states reported in our survey that they already collect data on the incidence of substance-affected and/or substance-exposed infants; 15 of those 32 states also collect data on the incidence of NAS. Further, 18 states reported that they collect data on the number of notifications health care providers make to CPS. Of those states, 8 reported that they collect specific data on notifications related to infants diagnosed with NAS. Most states reported in our survey that additional guidance and assistance would be extremely or very helpful (see figure 3). For example, 38 states reported that additional guidance on requirements for health care providers to notify CPS of substance-affected infants would be extremely or very helpful. Similarly, 37 states reported that additional guidance on developing, implementing, and monitoring plans to ensure the safety and well-being of substance-affected infants would be extremely or very helpful. In written responses to our survey, states suggested ideas for additional guidance, training, and technical assistance to help them address the needs of substance-affected infants. States’ suggestions ranged from assisting in the development of substance abuse training curriculum for staff to video conferences with other states to share information about implementing CAPTA. A few states suggested that the guidance ACF has provided to date is not clear and reported grappling with the meaning of terms such as “affected” and “legal vs. illegal” substances, and two states requested “concrete guidance” and “specificity.” A few other states suggested that it would be helpful to obtain additional information about meeting the requirements of plans of safe care within the constraints of state and federal confidentiality laws, technical assistance on what plans of safe care look like, and a format for a plan of safe care. ACF officials told us that states have flexibility with implementing the law and the agency does not anticipate issuing additional written guidance on the amendments to CAPTA made by CARA. ACF officials explained, in October 2017, that they were finalizing their review of the plans that states were required to submit. These plans are expected to include details on how the states are addressing the CAPTA requirements. While ACF could not provide the number, officials reported that some of the state plans submitted to date did not meet the requirements and those states have been asked to develop program improvement plans. They expect states to work with the ACF regional offices, which will provide or facilitate technical assistance to states on their implementation of the provisions, as needed. In addition to the review of state plans, ACF officials explained that regional officials may learn about states’ needs for technical assistance through meetings or informational exchanges. Finally, the NCSACW is expected to review and prepare a summary of CAPTA state plans, current state statutes and policies and procedures relating to amended CAPTA requirements. In addition, according to ACF, NCSACW will continue to offer technical assistance on the development and implementation of plans of safe care to states. Technical assistance may include responding to requests for information, disseminating written materials and resources, and conducting webinars/conference calls. Further, ACF reported that some states will receive more in-depth technical assistance, albeit in some instances on a time-limited basis. Undertaking these actions can enhance states’ understanding of CAPTA requirements and better address known challenges such as the ones described in this report. However, more specific guidance from HHS on the issues which states have expressed confusion can assist them in better understanding CAPTA requirements and providing more effective protections and services for the children and families most in need. The opioid epidemic has generated a significant increase in the number of substance-affected infants born and diagnosed with NAS. These vulnerable infants may be at risk for child abuse and neglect if adequate supports and services are not available to ensure their safety. CAPTA requires states to have policies and procedures to address the needs of these infants and their families, including mothers with a substance use disorder. However, states have experienced challenges implementing new CAPTA requirements. Many states reported in our survey that they are not completely adhering to the law. This is reflected in ACF’s review of state plans, some of which are resulting in program improvement plans. States cite challenges that stem, in part, from ACF’s lack of specificity in providing guidance on implementing CAPTA requirements. Specifically, states report that ACF has not provided clear guidance about which substance-affected infants health care providers are required to notify CPS about, as well what a plan of safe care is and for whom it should be developed. Given the challenges that states reported facing in implementing the provisions, a majority reported wanting more help from ACF, such as trainings and teleconferences with other states, to help overcome their challenges. Additional guidance and assistance from HHS would help states better understand what they need to do to develop policies and procedures that meet the needs of children and families affected by substance use. The Secretary of HHS should direct ACF to provide additional guidance and technical assistance to states to address known challenges and enhance their understanding of CAPTA requirements, including the requirements for health care providers to notify CPS of substance- affected infants and the development of a plan of safe care for these infants. We provided a draft of this report to HHS for review and comment. HHS’s comments are reproduced in appendix I. HHS also provided technical comments, which we incorporated into our report where appropriate. HHS did not concur with our recommendation. HHS stated that: in January 2017, ACF clarified in guidance several of the issues raised in the report, including the population of infants and families covered by the provision and the state flexibility inherent in determining which infants are “affected by” substance abuse, and the terminology used in the federal law of what a “plan of safe care” is; ACF believes it is necessary to allow states the flexibility to meet the requirements in the context of their state CPS program; several of the challenges that the GAO notes are not specific to CAPTA compliance with the safe care plan and notification requirements; and it does see the value in continuing to provide technical assistance to states to address known challenges and to enhance their understanding of CAPTA requirements. With respect to HHS’ January 2017 guidance, state officials reported in our survey and during site visits that they found some terms unclear and were uncertain about what is required of them. In written responses to our survey, states reported challenges understanding how to define substance-affected under CAPTA. In addition, as we note in our report, the guidance about plans of safe care described the following: “While CAPTA does not specifically define a ‘plan of safe care,’ CARA amended the CAPTA state plan requirement . . . to require that a plan of safe care address the health and substance use disorder treatment needs of the infant and affected family or caregiver.” States reported in our survey and in follow-up discussions that this lack of specificity remained an ongoing challenge for them. For example, as we discuss in our report, one state that we followed up with in August 2017 was still unsure about whether its safety plans would meet CAPTA requirements for plans of safe care. In addition, as of October 2017, HHS confirmed that some state plans did not meet CAPTA requirements and that the states were asked to develop program improvement plans. Accordingly, a key ongoing challenge was not addressed by the January guidance. Regarding allowing states flexibility to meet CAPTA requirements, we acknowledge in our report that HHS said that states have flexibility. However, in our survey and site visits, states indicated that they would find it helpful for HHS to provide them with greater specificity around terms, including the degree of flexibility they are allowed. States added that this would include parameters within which they can develop policies and procedures that meet CAPTA requirements. We continue to believe that additional guidance addressing these concerns would benefit states and could be provided without imposing additional mandates. Concerning HHS’ third point that some of the issues raised in the report are not specific to CAPTA, the states we visited interpret CAPTA to require that plans of safe care be developed for all substance-affected infants who are referred to CPS. During our discussions with states and in responses to our survey, state officials did not delineate which federal requirement impacted their approach to serving children and families. As stated in our conclusion, vulnerable infants may be at risk for child abuse and neglect if adequate supports and services are not available to ensure their safety. Lastly, HHS indicated that it will continue to provide technical assistance to states and fund demonstration sites to establish or enhance collaboration across community agencies and courts. Although continuing to provide technical assistance to states should be beneficial, our findings demonstrate that additional guidance is also needed. For example, 38 states reported that additional guidance on requirements for health care providers to notify CPS of substance-affected infants would be extremely or very helpful. Similarly, 37 states reported that additional guidance on developing, implementing, and monitoring plans to ensure the safety and well-being of substance-affected infants would be extremely or very helpful. Overall, given the results of our review, we continue to believe our recommendation is warranted. Effective implementation of our recommendation should help states better implement protections for children. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees and the Secretary of Health and Human Services. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Kathryn A. Larin, (202) 512-7215 or larink@gao.gov. In addition to the contact above, Sara Schibanoff Kelly (Assistant Director), Ramona L. Burton (Analyst-in-Charge), Kay E. Brown, Hannah Dodd, Ada Nwadugbo, and Srinidhi Vijaykumar made key contributions to this report. Also contributing to this report were Sandra L. Baxter, James Bennett, Gina Hoover, Jessica Orr, Rhiannon Patterson, Jean McSween, and James Rebbe.", "summary": "Under CAPTA, states perform a range of prevention activities, including addressing the needs of infants born with prenatal drug exposure. The number of children under the age of 1 entering foster care increased by about 15 percent from fiscal years 2012 through 2015. Child welfare professionals attribute the increase to the opioid epidemic. GAO was asked to examine the steps states are taking to implement CAPTA requirements on substance-affected infants and related amendments enacted in 2016. This report examines (1) the extent to which states have adopted policies and procedures to notify CPS of substance-affected infants; (2) state efforts to develop plans of safe care, and associated challenges; and (3) steps HHS has taken to help states implement the provisions. To obtain this information, GAO surveyed state CPS directors in all 50 states and the District of Columbia and reached a 100 percent response rate. GAO also visited 3 states (Kentucky, Massachusetts, and Pennsylvania); reviewed relevant documents such as federal laws and regulations, and HHS guidance; and interviewed HHS officials. GAO did not assess states' compliance with CAPTA requirements. All states reported adopting, to varying degrees, policies and procedures regarding health care providers notifying child protective services (CPS) about infants affected by opioids or other substances. Under the Child Abuse Prevention and Treatment Act (CAPTA), as amended, governors are required to provide assurances that the states have laws or programs that include policies and procedures to address the needs of infants affected by prenatal substance use. This is to include health care providers notifying CPS of substance-affected infants. In response to GAO's survey, 42 states reported having policies and procedures that require health care providers to notify CPS about substance-affected infants and 8 states reported having policies that encourage notification. The remaining 1 state has a policy requiring health care providers to assess the needs of mothers and infants and if they conclude that infants are at risk for abuse or neglect, CPS is notified. In response to GAO's survey, 49 states reported that their CPS agency has policies to develop a plan of safe care; 2 reported not having such a requirement. Under CAPTA, states are required to develop a plan of safe care for substance-affected infants. Although not defined in law, a plan of safe care generally entails an assessment of the family's situation and a plan for connecting families to appropriate services to stabilize the family and ensure the child's safety and well-being. States reported that plans typically address the infant's safety needs, immediate medical needs, and the caregiver's substance use treatment needs. However, officials in the 3 states GAO visited noted challenges, including uncertainty about what to include in plans and the level of intervention needed for infants at low risk of abuse or neglect. The Department of Health and Human Services (HHS) has provided technical assistance and guidance to states to implement these CAPTA requirements. Most states reported in GAO's survey that additional guidance and assistance would be very or extremely helpful for addressing their challenges. Nevertheless, HHS officials told GAO that the agency does not anticipate issuing additional written guidance, but that states can access technical assistance through their regional offices and the National Center on Substance Abuse and Child Welfare—a resource center funded by HHS. However, of the 37 states that reported on the helpfulness of the assistance they have received, 19 said it was only moderately helpful to not helpful. States offered suggestions for improving the assistance, such as developing substance abuse training materials for staff and holding video conferences with other states to share information. In October 2017, HHS officials explained that some states have submitted plans that include details on how they are addressing the CAPTA requirements. HHS officials reported that some of the plans submitted to date indicated that states are not meeting the requirements and those states have been asked to develop program improvement plans. Without more specific guidance and assistance to enhance states' understanding of CAPTA requirements and better address known challenges such as the ones described in this report, states may miss an opportunity to provide more effective protections and services for the children and families most in need. GAO recommends that HHS provide additional guidance and technical assistance to states to address known challenges and enhance their understanding of requirements. HHS did not concur with the recommendation. As discussed in the report, GAO continues to believe that added guidance would benefit states.", "document_type": "gao"}
{"report": "Since 1990, generally every 2 years at the start of a new Congress, we call attention to agencies and program areas that are high risk due to their vulnerability to mismanagement or that are most in need of transformation. Our high-risk program is intended to help inform the congressional oversight agenda and to improve government performance. Since 1990, a total of 61 different areas have appeared on the High-Risk List. Of these, 24 areas have been removed, and 2 areas have been consolidated. On average, the high-risk areas that were removed from the list had been on it for 9 years. Our experience with the High-Risk List over the past 25 years has shown that the key elements needed to make progress in high-risk areas are top-level attention by the administration and agency leaders grounded in the five criteria for removing high-risk designations, which we reported on in November 2000. When legislative and agency actions, including those in response to our recommendations, result in significant progress toward resolving a high-risk problem, we will remove the high-risk designation. However, implementing our recommendations alone will not result in the removal of the designation, because the condition that led to the recommendations is symptomatic of systemic management weaknesses. In cases in which we remove the high-risk designation, we continue to closely monitor the areas. If significant problems again arise, we will consider reapplying the high-risk designation. The five criteria for removing high-risk designations are: Leadership commitment. Demonstrated strong commitment and top leadership support to address the risks. Capacity. Agency has the capacity (i.e., people and other resources) to resolve the risk(s). Action plan. A corrective action plan that defines the root causes, identifies effective solutions, and provides for substantially completing corrective measures in the near term, including steps necessary to implement solutions we recommended. Monitoring. A program has been instituted to monitor and independently validate the effectiveness and sustainability of corrective measures. Demonstrated progress. Ability to demonstrate progress in implementing corrective measures and in resolving the high-risk area. These five criteria form a road map for efforts to improve and ultimately address high-risk issues. Addressing some of the criteria leads to progress, and satisfying all of the criteria is central to removal from the list. Figure 1 shows the five criteria for removal for a designated high-risk area and examples of agency actions leading to progress toward removal. Importantly, the actions listed are not “stand alone” efforts taken in isolation of other actions to address high-risk issues. That is, actions taken under one criterion may be important to meeting other criteria as well. For example, top leadership can demonstrate its commitment by establishing a corrective action plan, including long-term priorities and goals to address the high-risk issue and by using data to gauge progress—actions that are also vital to addressing the action plan and monitoring criteria. When an agency meets all five of these criteria, we can remove the agency from the High Risk List. We rate agency progress on the criteria using the following definitions: Met. Actions have been taken that meet the criterion. There are no significant actions that need to be taken to further address this criterion. Partially Met. Some, but not all, actions necessary to meet the criterion have been taken. Not Met. Few, if any, actions toward meeting the criterion have been taken. Officials from Indian Affairs, BIE, BIA, and IHS expressed their commitment to addressing the issues that led to the high-risk designation for federal management of programs that serve tribes and their members. Since we last testified before this committee on September 13, 2017, we met with agency leaders and worked with each agency to identify actions the agencies took or plan to take to address the concerns that contributed to the designation. We determined that Indian Affairs, BIE, BIA, and IHS demonstrated varying levels of progress to partially meet most or all of the criteria for removing a high-risk designation. However, additional progress is needed for the agencies to fully address the criteria and related management weaknesses, particularly in the areas of leadership commitment and capacity. To meet the leadership commitment criterion for removal of a high-risk designation, an agency needs to have demonstrated strong commitment and top leadership support to address management weaknesses. The following examples show actions Indian Affairs, BIE, BIA, and IHS took to partially meet the leadership commitment criterion. Education. Indian Affairs’ leaders have demonstrated commitment to addressing key weaknesses in the management of BIE schools in several ways. For example, the BIE Director formed an internal working group, convened meetings with other senior leaders within Indian Affairs, and publicly stated that his agency is committed to ensuring implementation of our recommendations on Indian education. In addition, the BIE Director and other Indian Affairs leaders and senior managers have met with us frequently to discuss outstanding recommendations, actions they have taken to address these recommendations, and additional actions they could take. In particular, the BIE Director met with us on nine occasions over the past year to discuss our recommendations and instructed his staff to provide us draft policies and procedures related to our recommendations. However, it is important that Indian Affairs leaders be able to sustain this level of commitment to solving problems in Indian education. Since 2012, there have been six Assistant- Secretaries of Indian Affairs and five BIE Directors. There has also been leadership turnover in other key offices responsible for implementing our recommendations on Indian education. We have previously reported that leadership turnover hampered Indian Affairs’ efforts to make improvements to Indian education. We believe that ensuring stable leadership and a sustained focus on needed changes is vital to the successful management of BIE schools. Energy. BIA officials demonstrated leadership commitment by, for example, issuing a memorandum requiring all regions and their agency offices to use a centralized data management system to track requests for land title status reports. Using this type of centralized approach for tracking such requests may improve BIA’s ability to provide needed oversight of federal actions associated with energy development and ensure documents needed for the development of energy resources are provided in a timely manner. In addition, BIA officials frequently met with us over the last 9 months to discuss the bureau’s progress in addressing recommendations related to Indian energy. However, Indian Affairs does not have a permanent Assistant Secretary. BIA does not have a permanent Director, and BIA’s Office of Trust Services—which has significant responsibility over Indian energy activities—does not have a permanent Director or Deputy Director. We have seen turnover in these leadership positions as officials have been brought in to temporarily fill these roles. As officials are brought in temporarily, previously identified plans and time frames for completing some activities have changed, and BIA has found itself starting over to identify or implement corrective actions. Health Care. IHS officials demonstrated leadership commitment by regularly meeting with us to discuss the agency’s progress in addressing our recommendations. IHS has continued to implement its Quality Framework by acquiring a software system to centralize the credentialing of clinical providers, developing a patient experience of care survey, and developing standards for limiting patient wait time. However, IHS still does not have permanent leadership—including a Director of IHS—which is necessary for the agency to demonstrate its commitment to improvement. Since 2012, there have been five IHS Acting Directors, and there has been leadership turnover in other key positions, such as area directors. For example, in January 2017 we reported that officials from four of the nine area offices in our review reported that they had at least three area directors over the prior 5 years. We also reported that inconsistent area office and health care facility leadership is detrimental to the oversight of facility operations and the supervision of personnel. To fully meet the leadership commitment criterion, all agencies will need, among other things, stable, permanent leadership that has assigned the tasks needed to address weaknesses and that holds those assigned accountable for progress. For a timeline of senior leadership turnover in Indian Affairs, BIE, BIA, and IHS from 2012 through 2018, see Figure 2. To meet the capacity criterion, an agency needs to demonstrate that it has the capacity (i.e., people and other resources) to resolve its management weaknesses. Indian Affairs, BIE, BIA, and IHS each made some progress in identifying capacity and resources to implement some of our recommendations, but BIA officials reported to us that the agency does not have the people and resources needed to fully implement other recommendations. The following examples show actions Indian Affairs, BIE, BIA, and IHS took to partially meet the capacity criterion. Education. BIE and other Indian Affairs offices that support BIE schools have made some progress in demonstrating capacity to address risks to Indian education. For example, BIE hired a full-time program analyst to coordinate its working group and help oversee the implementation of our recommendations on Indian education. This official has played a key role in coordinating the agency’s implementation efforts and has provided us with regular updates on the status of these efforts. BIE has also conducted hiring in various offices in recent years as part of a 2014 Secretarial Order to reorganize the bureau. For example, it has hired school safety officers and personnel in offices supporting the oversight of school spending. However, about 50 percent of all BIE positions have not been filled, including new positions that have been added as a result of the agency’s restructuring, according to a BIE official. Moreover, agency officials told us that vacancies remain in several key positions, including the Chief Academic Officer and the Associate Deputy Director for Bureau Operated Schools. Furthermore, BIE and other Indian Affairs offices that support BIE schools have not developed a workforce plan to address staffing and training gaps with key staff, which we previously recommended. Such a plan is important to allow BIE and other Indian Affairs offices to better understand workforce needs and leverage resources to meet them. BIE officials told us they have held workforce planning sessions and anticipate completing work on our recommendation to develop a workforce plan at the end of 2018. Energy. In November 2016, we recommended that BIA establish a documented process for assessing the workforce at its agency offices. BIA has taken a number of actions, such as conducting an internal survey to identify general workforce needs related to oil and gas development. This survey information supported staffing decisions for the recently created Indian Energy Service Center. However, BIA officials told us the bureau does not have the staff or resources to implement a comprehensive workforce planning system that would be needed to ensure it has staff in place to meet its organizational needs. Health Care. IHS has made some progress in demonstrating it has the capacity and resources necessary to address the program risks we identified in our reports. For example, IHS officials stated that the agency is expanding the role of internal audit staff within its enterprise risk management program to augment internal audits and complement audits by the HHS Inspector General and GAO. However, according to IHS, there are still vacancies in several key positions, including the Director of the Office of Resource Access and Partnerships, and the Office of Finance and Accounting. To fully meet the capacity criterion, all of the agencies need to assess tradeoffs between these and other administration priorities in terms of people and resources, and the agencies should provide to decision makers with key information on resources needed to address management weaknesses. To meet the action plan criterion, an agency needs to have a corrective action plan that defines the root causes, identifies effective solutions, and provides for substantially completing corrective measures in the near term, including steps necessary to implement the solutions we recommended. Indian Affairs, BIE, BIA, and IHS have shown progress in identifying actions to address many of our recommendations—leading us to believe they can partially meet the action plan criterion before our next update of the High Risk List. For example: Education. BIE has taken several steps to develop action plans to address management weaknesses. For example, BIE implemented a new policy for overseeing BIE school spending, including developing written procedures and risk criteria for monitoring school expenditures. BIE also developed a strategic plan, which we recommended in September 2013. The plan provides the agency with goals and strategies for improving its management and oversight of Indian education, and establishes detailed actions and milestones for the implementation. BIE notified us that it has completed the plan and expects to publish it on June 11, 2018, and will begin implementation starting in July 2018. We will review the strategic plan once it has been published. In addition, Indian Affairs’ Office of Facilities, Property & Safety Management has developed and implemented revised comprehensive guidelines that addressed several of our findings on weaknesses with BIE school safety identified in our March 2016 report. However, Indian Affairs has not provided us with evidence that it has developed and put in place action plans on other important issues, such as a comprehensive, long-term capital asset plan to inform its allocation of school construction funds, which we recommended in May 2017. Energy. BIA officials met with us several times over the past few months to discuss planned actions for addressing management weaknesses related to Indian energy resources, and they identified actions they have taken to help implement some of our recommendations. For instance, BIA officials told us they have proposed several modifications to the bureau’s land records data management system that will enable increased tracking and monitoring of key documents that BIA must review prior to the development of Indian energy resources. BIA officials we met with have demonstrated an understanding that addressing long-standing management weaknesses is not accomplished through a single action but through comprehensive planning and continued movement toward a goal. However, the agency does not have a comprehensive plan to address the root causes of all identified management shortcomings. Health Care. Senior leaders in IHS have prioritized addressing our recommendations by implementing four recommendations we highlighted in our February 2017 update to the High Risk List. IHS incorporated our recommendations into its risk management work plan starting in 2017, and according to IHS officials, they will annually review the effectiveness of the agency’s internal controls, and where controls are deemed insufficient, take actions to strengthen them. IHS officials we met with have demonstrated an understanding that addressing long-standing management weaknesses requires that they develop a corrective action plan that defines root causes, identifies solutions, and provides for substantially completing corrective measures. However, agency officials have not yet developed a corrective action plan. To fully meet the action plan criterion, a comprehensive plan that identifies actions to address the root causes of its management shortcomings would have to come from top leadership with a commitment to provide sufficient capacity and resources to take the necessary actions to address management shortcomings and risks. To meet the monitoring criterion, an agency needs to demonstrate that a program has been instituted to monitor and independently validate the effectiveness and sustainability of corrective measures. For example, agencies can demonstrate that they have a systematic way to track performance measures and progress against goals identified in their action plans. We have been working with the agencies to help clarify the need to establish a framework for monitoring progress that includes goals and performance measures to track their efforts and ultimately verify the effectiveness of their efforts. BIA and IHS made progress in holding frequent review meetings to assess the status of implementing our recommendations but have not yet taken needed steps to monitor their progress in addressing the root causes of their management weaknesses. In addition, Indian Affairs has made some progress in meeting the monitoring criterion on Indian education. For example, the agency has implemented a plan to monitor the effectiveness of corrective measures to address school safety program weaknesses. However, the agency has not yet demonstrated that it is monitoring other areas, such as showing that it is using safety program outcomes to evaluate and manage the performance of regional safety inspectors. To fully meet the monitoring criterion, the agencies need to set up goals and performance measures as they develop action plans and take further actions to monitor the effectiveness of actions to address root causes of identified management shortcomings. To meet the demonstrated progress criterion, an agency needs to demonstrate progress in implementing corrective measures and in resolving the high-risk area. We made 52 recommendations to improve management weaknesses at Indian Affairs, BIE, BIA, and IHS, of which 34 are still open. Since our testimony in September 2017, we found that Indian Affairs has made significant progress in implementing corrective actions in education as demonstrated by our closure of nearly a third of our recommendations directed to Indian Affairs related to education programs. We found that BIA and IHS also made some progress in implementing corrective actions related to the management of energy resources and healthcare programs. Specifically, since our testimony in September 2017, BIA took actions resulting in the implementation of 2 of 14 recommendations, and IHS took actions that resulted in the implementation of four recommendations. The following examples show actions Indian Affairs, BIA, and IHS took to partially meet the demonstrated progress criterion. Education. As of early June 2018, Indian Affairs had fully addressed 8 of the 23 outstanding education recommendations we identified in our September 2017 testimony, and we have closed them. BIE implemented half of the closed recommendations, including 2 on oversight of BIE school spending identified as high priority in a March 2018 letter from the Comptroller General to the Secretary of the Interior. The rest of the recommendations we closed were implemented by personnel in Indian Affairs’ Office of Facilities, Property & Safety Management and related to oversight of school safety and construction. Overall, Indian Affairs’ efforts since we issued our High Risk List update in February 2017 represent a significant increase in activity implementing our recommendations. Substantial work, however, remains to address our outstanding recommendations in several key areas, such as in accountability for BIE school safety and school construction projects. For example, BIA has reported taking some actions to address recommendations in our May 2017 report on improving accountability of its safety employees who inspect BIE schools. However, it has not provided us with documentation of these actions. Energy. In June 2015, we recommended that BIA take steps to improve its geographic information system (GIS) capabilities to ensure it can verify ownership in a timely manner. Since our last update in September 2017, BIA has made significant progress in enhancing its GIS capabilities by integrating map-viewing technology and capabilities into its land management data system. In addition, we recommended that BIA take steps to identify cadastral survey needs. BIA’s enhanced map-viewing technology also allows the bureau to identify land boundary discrepancies, which can then be researched and corrected. Further, BIA identified unmet survey needs that were contained within the defunct cadastral request system and developed a new mechanism for its regions and agency offices to make survey requests. We believe these actions show significant progress in addressing management weaknesses associated with data limitations and outdated technology. Health Care. In April 2013, we recommended that IHS monitor patient access to physician and other nonhospital care to assess how capped payment rates may benefit or impede the availability of care. In response to our recommendation, IHS developed an online tracking tool that enables the agency to document providers that refuse to contract for lower rates. In October 2017, IHS officials met in person with us and provided a demonstration of the tracking tool. To fully meet the demonstrating progress criterion, agencies need to continue taking actions to ensure sustained progress and show that management shortcomings are being effectively managed and root causes are being addressed. In conclusion, we see some progress in all of the criteria, including leadership commitment, at all agencies, especially related to education programs. However, permanent leadership that provides continuing oversight and accountability is needed. We also see varying levels of progress at all of the agencies in understanding what they need to do to be removed from the High Risk List by identifying steps that can be incorporated into corrective action plans to address most recommendations. We look forward to working with the agencies to track their progress in implementing a framework for monitoring and validating the effectiveness of planned corrective actions. In addition, all the agencies have made progress in implementing some key recommendations. Perhaps the biggest challenge for the agencies will be achieving the capacity and identifying the resources required to address the deficiencies in their programs and activities. This challenge cannot be overcome by the agencies without a commitment from the administration to prioritize fixing management weaknesses in programs and activities that serve tribes and their members. Chairman Hoeven, Vice Chairman Udall, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have. If you or your staff have any questions about education issues in this testimony or the related reports, please contact Melissa Emrey-Arras at (617) 788-0534 or emreyarrasm@gao.gov. For questions about energy resource development, please contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov. For questions about health care, please contact Jessica Farb at (202) 512-7114 or farbj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this statement include Christine Kehr (Assistant Director), Jay Spaan (Analyst-in-Charge), Edward Bodine, Kelly DeMots, William Gerard, Greg Marchand, Elizabeth Sirois, and Kiki Theodoropoulos. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "GAO's High Risk List identifies federal program areas that are high risk due to their vulnerability to mismanagement, among other things. GAO added the federal management of programs that serve Indian tribes and their members to its February 2017 biennial update of high-risk areas in response to management weaknesses at Interior and HHS. This testimony provides examples of actions taken and progress made by these agencies to address the five criteria GAO uses for determining whether to remove a high-risk designation (leadership commitment, capacity, action plan, monitoring, and demonstrated progress). To conduct this work, GAO drew on findings from GAO reports issued from September 2011 through September 2017 and updated that work by reviewing agency documentation and interviewing agency officials. GAO designated the federal management of programs that serve tribes and their members as high risk, and officials from the Department of the Interior's Office of the Assistant Secretary-Indian Affairs (Indian Affairs), the Bureau of Indian Education (BIE), the Bureau of Indian Affairs (BIA), and the Department of Health and Human Services' (HHS) Indian Health Service (IHS) expressed their commitment to addressing the issues that led to the designation. Since GAO last testified before this committee on September 13, 2017, Indian Affairs, BIE, BIA, and IHS have demonstrated varying levels of progress to partially meet most or all of the criteria for removing a high-risk designation. However, additional progress is needed to fully address management weaknesses, particularly in the areas of leadership commitment and capacity. Leadership commitment . To meet the leadership commitment criterion for removal of a high-risk designation, the agency needs to have demonstrated strong commitment and top leadership support to address management weaknesses. Indian Affairs, BIE, BIA, and IHS each took some actions to partially meet the leadership criterion. For example, the BIE Director formed an internal working group, convened meetings with other senior leaders within Indian Affairs, and publicly stated that his agency is committed to ensuring the implementation of prior GAO recommendations on Indian education. In addition, BIA officials demonstrated leadership commitment by, for example, issuing a memorandum requiring the use of a centralized data management system to track requests for land ownership records. To fully meet the leadership commitment criterion, all the agencies need, among other things, stable, permanent leadership that has assigned the tasks needed to address weaknesses and that holds those assigned accountable for progress. Capacity . To meet the capacity criterion, an agency needs to demonstrate that it has the capacity (i.e., people and other resources) to resolve its management weaknesses. Indian Affairs, BIE, BIA, and IHS each made progress identifying capacity and resources to partially meet the capacity criterion. For example, BIE hired school safety officers and personnel in offices supporting the oversight of school spending. BIA conducted a survey to identify workforce needs related to energy development to support staffing decisions for the recently created Indian Energy Service Center. IHS officials told us that the agency is expanding the role of internal audit staff within its enterprise risk management program to augment internal audits and complement audits by the HHS Inspector General and GAO. However, all the agencies have vacancies in key offices. For example, BIA officials said the agency does not have the staff or resources to implement a comprehensive workforce planning system to ensure it has staff in place at its agency offices to meet its organizational needs concerning numerous activities, including energy resources. To fully meet the capacity criterion, all the agencies need to assess tradeoffs between these and other administration priorities in terms of people and resources, and should provide key information to decision makers on resources needed to address the criteria and related management weaknesses. GAO has made 52 recommendations to improve management weaknesses at some Interior and HHS agencies, of which 34 are still open. Some of these weaknesses led to the agencies' placement on the High Risk List. GAO sees varying levels of progress at the agencies in understanding what they need to do to be removed from the list and will continue to closely monitor their progress.", "document_type": "gao"}
{"report": "SSA has in recent years relied on advocates for individuals with certain diseases and disorders to bring potential CAL conditions to its attention. However, SSA has not clearly communicated this or provided guidance on how to make suggestions through its CAL webpage, which communicates information to the public. Without more explicit instructions, we noted that advocates may not present information that is relevant for SSA’s decision-making or that most strongly makes the case for these conditions to be included on the CAL list. One representative from an advocacy organization, for example, described meeting with agency officials and being surprised by SSA’s focus on cancer grades— an indicator of how quickly cancer is likely to grow and spread—as she was not accustomed to discussing the condition she represents in these terms. Federal internal control standards state that agencies should use quality information to achieve their objectives. We concluded that absent clear guidance to advocates on how to make suggestions through its CAL webpage, SSA is missing an opportunity to gather quality information to inform its selection of CAL conditions. In addition, we found that relying on advocates to bring conditions to SSA’s attention also introduces potential bias toward certain conditions and the possibility of missing others. Some conditions that are potentially deserving of CAL consideration may not have advocacy organizations affiliated with them, and some advocates may be unaware of CAL. As a result, some conditions may have a better chance of being considered than other, equally deserving ones that are not proposed, and individuals with those conditions may have to wait longer to receive approval for disability benefits. Federal internal control standards state that agencies should collect complete and unbiased information and consider the reliability of their information sources. According to some external researchers who work with SSA, an approach leveraging SSA’s administrative data may help address the bias that is introduced by only using advocates. SSA has contracted with the National Institutes of Health and the National Academies of Sciences, Engineering, and Medicine for research using SSA administrative data, which has led to the identification of potential CAL conditions. However, we noted that to date, the research SSA has contracted has not been sufficiently targeted to generate more than a small number of additions to the CAL list. In our August 2017 report, we recommended that SSA develop a formal and systematic approach to gathering information to identify potential conditions for the CAL list, including sharing information through SSA’s website on how to propose conditions for the list and using research that is directly applicable to identifying CAL conditions. SSA agreed with this recommendation and has begun to make revisions to its website. We also found that SSA has also not consistently communicated with advocates who have suggested conditions to add to the CAL list about the status of their recommendations, leading to uncertainty for some. SSA officials told us that they provide a written or oral response to advocacy organizations that have suggested a condition for inclusion on the CAL list to inform them whether the condition is approved. However, some of the advocates we spoke to had not received such a response from SSA and found it challenging to connect with SSA officials to obtain information about the status of their suggestions. For example, one representative from an advocacy organization told us that she was unable to reach SSA officials to obtain any information on the status of her suggestion despite repeated attempts. In the absence of a response from SSA, she had resubmitted her condition and supporting documents to SSA every six months for three years since her initial submission in 2014. Federal internal control standards state that agencies should communicate quality information externally so that external parties can help the agency achieve its objectives. We concluded that without two- way communication between SSA and advocates, advocates are unclear on the status of their proposed CAL conditions and SSA may be missing an opportunity to improve the quality of the information it obtains from advocates. In our August 2017 report, we recommended that SSA develop formal procedures for consistently notifying those who propose conditions for the CAL list of the status of their proposals. SSA agreed with this recommendation. Our review also found that SSA has not developed or communicated clear, consistent criteria for deciding which potential conditions will be included on the CAL list. Officials told us that they have informally considered criteria such as allowance rates—the percentage of claimants asserting a certain condition who are approved for benefits—when identifying potential CAL conditions. However, we reviewed 31 assessments of potential CAL conditions prepared by SSA medical consultants and found that they did not cite consistent criteria. There was no standard format used for these reports, and SSA does not have a template, checklist, or guidance—other than the medical listings—that its staff consult when preparing them. Further, SSA officials have cited different reasons for not designating conditions as CAL in communications with those who proposed conditions, which led to confusion regarding CAL condition criteria for staff from some advocacy organizations we interviewed. Federal internal control standards state that agencies should define objectives in specific and measurable terms so that they are understood at all levels of the agency and performance toward achieving these objectives can be assessed. To help achieve these objectives, the standards state that agencies should also communicate key information to their internal and external stakeholders. We concluded that absent clear criteria for designating CAL conditions, advocates and other stakeholders may be confused as to why some conditions are not included on the CAL list and SSA may miss conditions that could qualify for CAL. In our August 2017 report, we recommended that SSA develop and communicate internally and externally criteria for selecting conditions for the CAL list. SSA agreed with this recommendation. To identify disability claims for expedited CAL processing, SSA primarily relies on software that searches for key words in claims. However, because text provided by claimants may be ambiguous, incomplete, inaccurate, or misspelled, the software is hindered in its ability to flag all claimants with CAL conditions and may also flag claimants for CAL processing that should not be flagged. For example, officials we interviewed at 5 of the 6 selected DDS offices said that they have seen claims inaccurately flagged for CAL when the claim text included words like “family history of ” though the CAL condition was not asserted by the claimant. In addition, in our claim file review, we found a claimant asserting a leiomyosarcoma, a soft tissue cancerous tumor that may be found in organs including the liver, lungs, and uterus, who misspelled the term as “leiomysarcoma” on the disability claim, which resulted in the software not flagging the claim as CAL, although liver and lung cancers are CAL conditions. SSA officials told us that they have not established a feedback loop to capture observations from DDS officials on weaknesses in the software. However, DDS officials we spoke with have observed weaknesses in the software that, if shared, could assist SSA in improving its accuracy in identifying CAL claims. For example, an official at one DDS office noted that the software appears to identify CAL conditions using words from the claim text out of order or without regard to specific phrases. Specifically, the official stated that some claims with “pancreatitis” or “pancreatic pain” have been incorrectly flagged for the CAL condition “pancreatic cancer.” According to federal internal control standards, quality information about the agency’s operational processes should flow up the reporting lines from personnel to management to help management achieve the agency’s objectives. We concluded that absent a mechanism to gather feedback from DDS offices nationwide, the agency may be missing an opportunity to obtain important information that could help improve the software. In our August 2017 report, we recommended that SSA take steps to obtain information that can help refine the selection software for CAL claims, for example by using management data, research, or DDS office feedback. SSA agreed with this recommendation. We also found that DDS offices play an important role in helping to ensure that claims are accurately flagged for CAL by manually correcting flagging errors made by the software, but SSA’s guidance on how to make such corrections does not address when they should occur. For example, instructions on the mechanical process for removing the flag based on the DDS examiner’s review of the medical evidence in the claimant’s file does not indicate how quickly this should be done after CAL status is clarified. Based on our discussions with officials in the 6 selected DDS offices, we found that some examiners did not understand the importance of making timely changes to a CAL flag designation to ensure faster claim processing and accurate tracking of CAL claims. For example, examiners at one DDS office said that they do not always add or remove a CAL flag when they determine a claim is erroneously designated because it adds another step to claim processing and the step seems unnecessary. Ensuring claims are correctly flagged for or not flagged for CAL is important because the CAL flag reduces DDS processing time by about 10 weeks on average compared to the processing time for all claims, according to SSA data. According to federal internal control standards, agencies should record transactions in an accurate and timely fashion, and communicate quality information throughout the agency. We concluded that without clear guidance on when to make manual changes, DDS examiners may continue to take actions that are not timely and may hinder expedited processing and accurate tracking of CAL claims. In our August 2017 report, we recommended that SSA clarify written policies and procedures regarding when manual addition and removal of CAL flags should occur on individual claims. SSA agreed with this recommendation. In addition, our analysis of SSA’s data shows that DDS offices varied in their use of manual actions to add the CAL flag to claims that were not initially flagged for CAL by the software. Specifically, we found that over half of DDS offices nationwide that processed disability claims in fiscal year 2016 had one or zero claims with a manually added CAL designation in that year. In comparison, 5 DDS offices together accounted for over 50 percent of all claims with a manual addition. Such variance could result in some claimants who assert a CAL condition not receiving expedited processing because their claims were not flagged for CAL by the selection software or DDS examiners. We found that because SSA had not undertaken a study of its manual action procedures on such claims, it was unclear why this variance existed among DDS offices. Federal internal control standards state that agencies should establish and operate monitoring activities to monitor operations and evaluate results. In our August 2017 report, we recommended that SSA assess the reasons why the uses of manual actions vary across DDS offices. SSA agreed with this recommendation. In our August 2017 report, we found that SSA has taken some steps to ensure the accuracy and consistency of decisions on CAL claims, including developing detailed descriptions of CAL conditions, known as impairment summaries, but has not regularly updated the summaries. These summaries suggest specific medical evidence for the DDS examiner to obtain to verify the claimant’s asserted CAL condition and help examiners make decisions about whether to allow or deny a claim. However, we found that because SSA has not regularly updated the impairment summaries, nearly one-third are 5 or more years old. Several advocates (4 of 6) and medical experts (2 of 3) we interviewed suggested that the impairment summaries should be updated every 1 to 3 years because medical research and advancements may have implications for disability determinations. In addition, federal internal control standards state that as changes in the agency’s environment occur, management should make necessary changes to the information requirements to address the modified risks. We concluded that given the pace of medical research for certain CAL conditions, in the absence of a systematic and regular mechanism to update CAL impairment summaries, SSA potentially faces the risk of making inaccurate and inconsistent disability determinations based on outdated information. In our August 2017 report, we recommended that SSA develop a schedule and a plan for updates to the CAL impairment summaries to ensure that information is medically up to date. SSA agreed with this recommendation. We also found that SSA does not leverage data it collects to identify potential challenges to accurate and consistent decision-making on CAL claims. SSA and DDS officials review some data to monitor CAL claims processing, such as the total number of CAL claims and claims flagged for CAL by the selection software, but these efforts do not address the accuracy and consistency of decisions on CAL claims. In contrast, our analysis of SSA’s data on outcomes for claims with asserted CAL conditions suggested that a review of data on allowance and denial rates for these claims may help identify conditions that are challenging to accurately and consistently adjudicate. For example, while the vast majority of claims asserting CAL conditions are allowed—about 92 percent were approved in fiscal year 2016—data we reviewed showed that there was a lower percentage of claims allowed for certain asserted CAL conditions. Specifically, SSA denied more than 30 percent of claims asserting 37 CAL conditions, and 17 of these conditions had denial rates that were greater than 50 percent. Advocates we spoke to who represent some of these conditions explained why challenges adjudicating these claims may exist. For example, officials from one of these advocacy groups told us that the CAL condition they represent is frequently confused with a much more common and non-life threatening condition that is less likely to be allowed. According to federal internal control standards, management should obtain relevant data based on identified information requirements, process these data into quality information that can be used to make informed decisions, and evaluate the agency’s performance in achieving key objectives and addressing risks. We concluded that without regular analyses of available data, SSA is missing an opportunity to ensure the accuracy and consistency of CAL decision-making. In our August 2017 report, we recommended that SSA develop a plan to regularly review and use available data to assess the accuracy and consistency of CAL decision-making. SSA agreed with this recommendation. Chairman Johnson, Ranking Member Larson, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. For questions about this statement, please contact Kathryn A. Larin at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony include Rachel Frisk, Assistant Director; Kristen Jones, Analyst-in- Charge; and Michelle Loutoo Wilson. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "SSA in October 2008 implemented CAL to fast track individuals with certain conditions through the disability determination process by prioritizing their disability benefit claims. Since then, SSA has expanded its list of CAL conditions from 50 to 225. This testimony summarizes the information contained in GAO's August 2017 report entitled SSA's Compassionate Allowance Initiative: Improvements Needed to Make Expedited Processing of Disability Claims More Consistent and Accurate , GAO-17-625 . It examines the extent to which SSA has procedures for (1) identifying conditions for the CAL list; (2) identifying claims for CAL processing; and (3) ensuring the accuracy and consistency of CAL decisions. For its August 2017 report, GAO reviewed relevant federal laws, regulations, and guidance; analyzed SSA data on disability decisions for CAL claims from fiscal years 2009 through 2016 and on CAL claims with manual actions in fiscal year 2016; reviewed a nongeneralizable sample of 74 claim files with fiscal year 2016 initial determinations; and interviewed medical experts, representatives from patient advocacy groups, and SSA officials in headquarters and six DDS offices selected for geographic dispersion and varied CAL caseloads. The Social Security Administration (SSA) does not have a formal or systematic approach for designating certain medical conditions for the Compassionate Allowance initiative (CAL). CAL was established in 2008 to fast-track through the disability determination process claimants who are likely to be approved because they have certain eligible medical conditions. SSA has in recent years relied on advocates for individuals with certain diseases and disorders to bring conditions to its attention for potential inclusion in CAL. However, by relying on advocates, SSA may overlook disabling conditions that have no advocates, potentially resulting in individuals with these conditions not receiving expedited processing. Further, SSA does not have clear, consistent criteria for designating conditions for potential CAL inclusion, which is inconsistent with federal internal control standards. As a result, external stakeholders lack key information about how to recommend conditions for inclusion on the CAL list. To identify disability claims for expedited CAL processing, SSA primarily relies on software that searches for key words in claims. However, if claimants include incorrect or misspelled information in their claims the software is hindered in its ability to flag all claimants with CAL conditions or may flag claimants for CAL processing that should not be flagged. SSA has guidance for disability determination services (DDS) staff on how to manually correct errors made by the software, but the guidance does not address when such corrections should occur. Without clear guidance on when to make manual changes, DDS examiners may not take timely actions and may hinder expedited processing for appropriate claims. SSA has taken some steps to ensure the accuracy and consistency of decisions on CAL claims, including developing detailed descriptions of CAL conditions, known as impairment summaries. These summaries help examiners make decisions about whether to allow or deny a claim. However, nearly one-third of the summaries are 5 or more years old. Experts and advocates that GAO spoke to suggested that summaries should be updated every 1 to 3 years to reduce the risk of SSA making disability determinations using medically outdated information. In addition, GAO found that SSA does not leverage data it collects to identify potential challenges to accurate and consistent decision-making on CAL claims. Without regular analyses of available data, SSA is missing an opportunity to ensure the accuracy and consistency of CAL decision-making. In its August 2017 report, GAO made eight recommendations, including that SSA develop a process to systematically gather information on potential CAL conditions, communicate criteria for designating CAL conditions, clarify guidance for manual corrections on CAL claims, update CAL impairment summaries, and use available data to ensure accurate, consistent decision-making. SSA agreed with all of GAO's recommendations.", "document_type": "gao"}
{"report": "VA comprises a Veterans Affairs Central Office (VACO) and over 1,000 facilities and offices throughout the nation, as well as the U.S. territories and the Philippines. As shown in figure 1, VA’s three major administrations are the Veterans Health Administration (VHA), Veterans Benefits Administration (VBA), and National Cemetery Administration (NCA). The largest of the administrations, in terms of workforce, is VHA and its associated Veterans Integrated Service Networks (VISN). VHA is estimated to employ about 316,800 employees in 2017, followed by the VBA and NCA with about 22,700 and 1,850 employees, respectively. The remaining 15,000 employees are in various staff offices. VA’s budget request for fiscal year 2018 of $186.4 billion includes $82.1 billion in discretionary resources and $104.3 billion in mandatory funding. The following offices are involved in addressing misconduct at VA. Office of Human Resource Management (OHRM): OHRM develops policies with regard to performance management and assesses the effectiveness of department-wide human-resource programs and policies. Office of Accountability Review (OAR): OAR was established in 2014 within VA’s Office of General Counsel and was intended to ensure leadership accountability for improprieties related to patient scheduling and access to care, whistle-blower retaliation, and related disciplinary matters that affect public trust in VA. Office of Inspector General (OIG): The VA OIG provides oversight through independent audits, inspections, and investigations to prevent and detect criminal activity, waste, abuse, and mismanagement in VA programs and operations. Office of Accountability and Whistleblower Protection (OAWP): As required by the Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017, OAWP will take on the responsibility of, among other things, receiving whistle-blower complaints. Corporate Senior Executive Management Office (CSEMO): CSEMO supports the entire life-cycle management of VA’s senior executives by developing policy and providing corporate-level personnel services, such as training and coaching to VA’s senior executive workforce. Client Services Response Team (CSRT): CSRT serves to centralize and streamline internal processes to improve VHA’s overall responsiveness to concerns of veterans, employees, and other internal and external stakeholders. This office works closely with VA and VHA program offices and facilities to review, research, and respond to inquiries sent to the Office of the Under Secretary for Health, Office of the Secretary, and other concerns received via program offices within VACO, which lack a formalized response process. National Cemetery Administration (NCA): NCA honors veterans and their families with final resting places in national shrines that commemorate their service. NCA’s Office of Management oversees and administers all human-resource management, including activities associated with labor and employee relations. Office of the Medical Inspector (OMI): OMI is responsible for assessing the quality of VA health care through investigations of VA facilities nationwide, which include employee whistle-blower allegations referred to VA by the OSC; veteran complaints referred by the OIG, Congress, or other stakeholders; and site-specific internal reviews directed by the Office of the Under Secretary for Health. Office of Research Oversight (ORO): ORO promotes the responsible conduct of research, serves as the primary VHA office in advising the Office of the Under Secretary for Health on matters of research compliance, and is to provide oversight of compliance with VA and other federal requirements related to research misconduct. Office of Resolution Management (ORM): ORM provides Equal Employment Opportunity (EEO) discrimination complaint processing services to VA employees, applicants for employment, and former employees, which include counseling, investigation, and final agency procedural decisions. Office of Security and Law Enforcement (OS&LE): OS&LE develops policies, procedures, and standards that govern VA’s infrastructure law- enforcement program. The Law Enforcement Oversight and Criminal Investigations Division is responsible for conducting investigations of serious incidents of misconduct. Veterans Benefits Administration (VBA): VBA provides benefits and services to veterans, their families and survivors. VBA’s Office of Management directs and oversees nationwide human-resources activities and supports ORM in processing EEO complaints filed by employees and applicants who allege employment discrimination. The process for addressing employee misconduct involves various components within VA that are responsible for investigating and adjudicating allegations, as shown in figure 2. Receipt of Allegation: The OIG receives allegations of criminal activity and employee misconduct from VA employees, the OSC, members of Congress, the public, or other stakeholders. The allegations received by the OIG are initially routed to the OIG Hotline Division. The OIG also receives other types of allegations outside the scope of this review, such as issues pertaining to VA employee benefits and contracts. In addition to reporting allegations of employee misconduct to the OIG, VA employees may also report allegations of misconduct directly to their supervisors. Review and Referral of Allegation: Due to the substantial number of allegations received through the OIG Hotline Division, the OIG exercises a “right of first refusal” on misconduct cases, which allows it to take no further action, refer the case to program offices within VA for review and response, or open an investigation. For example, the OIG can either decide to (1) take no further action on matters not within the OIG’s jurisdiction or too vague to warrant further review; (2) refer allegations that warrant some action to the OMI, OAR, or VA facilities or program offices within each administration to conduct an independent review of the allegations; or (3) open cases for further review for serious allegations of criminal activity, fraud, waste, abuse, and mismanagement. Cases opened by the OIG typically involve misconduct by senior officials, or matters relating to the quality of care provided by licensed professionals. In contrast, the OIG typically refers allegations to VA facility or program offices for matters where the OIG does not have sufficient resources to open an internal case. The OIG generally does not review matters that are addressed in other legal or administrative forums, such as allegations of discrimination or whistle-blower retaliation. Notice to Employee Once Allegations Are Substantiated: The type of appointment an employee holds determines whether an employee is to be provided advance notice of planned disciplinary action once misconduct is substantiated at the conclusion of an investigation. Employees holding a permanent appointment are entitled to receive a notice of proposed action that states the specific charges for which the proposed disciplinary action is based and informs the employee of his or her right to review the material that is relied upon to support the reasons for the action. Employees in the competitive service serving in a permanent appointment (who have completed their probationary period) are treated differently than those who are still in their probationary period or serving under temporary appointments. An employee serving a probationary period or under a temporary appointment does not receive a notice of proposed action and may be immediately terminated because his or her work performance or conduct fails to demonstrate fitness or qualifications for continued employment. Temporary employees are terminated by notifying employees in writing as to why they are being separated and the effective date of the action. Disciplinary Action: VA Handbook 5021, Employee/Management Relations, governs policy for disciplinary and grievance procedures for all employees. Supervisory staff or appropriate higher-level officials use the results from investigations to help determine whether any disciplinary actions are warranted and, if so, the type and severity of each action. Other VA staff, such as human-resources and general-counsel staff may also provide guidance to management in determining appropriate disciplinary actions. After determining the facts in a case, VA may employ either disciplinary or adverse action. Adverse action involves a more- severe type of discipline (e.g., removal, suspension more than 14 days, or reduction in grade) as described in table 1. As a federal agency, VA is required to report department-wide information on certain disciplinary personnel actions to the Office of Personnel Management (OPM). OPM’s Enterprise Human Resources Integration (EHRI) system currently collects, integrates, and publishes data for executive-branch employees on a biweekly basis. This system provides federal workforce data to other government systems and the public. To adhere to this reporting requirement, VA provides information on certain disciplinary actions such as terminations and removals to OPM. The Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017 also requires the Secretary to provide a report on the disciplinary procedures and actions of the department to Congress. To understand the depth and breadth of misconduct and related issues in a large entity, such as VA, comprehensive and reliable information is needed. Standards for Internal Control in the Federal Government states that an information system represents the life cycle of information used for the entity’s operational processes that enables the entity to obtain, store, and process quality information. Therefore, management should design the entity’s information system to obtain and process information to meet each operational process’s information requirements and to respond to the entity’s objectives and risks, such as the ability to systematically analyze misconduct department-wide to identify trends and make management decisions regarding misconduct. A deficiency exists when (1) a control necessary to meet an objective is missing or (2) an existing control is not properly designed, so that even if the control operates as designed, the objective would not be met. We identified 12 fragmented information systems that VA has used, or continues to use, to collect employee misconduct and disciplinary actions. Although VA has made efforts to develop repositories to collect information pertaining to misconduct and disciplinary action, none of the 12 information systems contain complete information. Six of these systems collect partial misconduct and disciplinary action information and contain fields that could potentially be shared with other systems to obtain additional information, while the other six systems are intended for internal office use only, each containing their own unique fields and values tailored to the needs of that particular office, which are not shared. Therefore, the number of eligible fields for each information system was also limited to those not specifically designated for internal use. On the basis of our review, the 12 information systems are not currently able to communicate, or interoperate, with one another to provide a complete picture of misconduct and disciplinary actions across VA. Table 2 provides an overview of VA’s six information systems and associated data files that collect partial misconduct and disciplinary-action data that could potentially be shared with other systems. According to OHRM officials, VA’s information system for recording adverse disciplinary actions—the Personnel and Accounting Integrated Data (PAID) system—was not designed to track all misconduct cases. In addition, OHRM stated that the 53-year-old PAID system was developed primarily to track payroll actions for all employees and is the system of record that holds department-wide personnel information that is reported to OPM’s EHRI system. It contains information about adverse disciplinary actions that affect employee leave or salary, or result in a Notification of Personnel Action Form (Standard Form 50). However, PAID does not track comprehensive information on instances of misconduct such as the offense, or the date of occurrence, and it does not include instances of other types of disciplinary actions, such as admonishments or reprimands that would not affect leave or salary, or result in a Standard Form 50. OHRM officials stated VA implemented a system called HR Smart in June 2016 that is intended to replace PAID, but the agency does not plan to upgrade the functionality of the new system to enable reliable collection of misconduct information. According to OHRM, HR Smart includes the same personnel-processing functions as PAID but will allow for tracking data changes and transaction history over time. However, as with the PAID system, adverse disciplinary actions involving leave and salary will be tracked, but other actions, such as reprimands and admonishments, will not. It also will not track information related to the offense that prompted the disciplinary action. While the HR Smart system has the capability to include modules to enhance performance features, such as the ability to track misconduct, according to OHRM officials VA does not currently have plans to implement these modules. As a result, the HR Smart system will not have the capability to track all employee misconduct department-wide and will not improve VA management’s visibility over the depth and breadth of misconduct so that it can systematically understand misconduct department-wide. VA has five additional information systems for tracking complaints or allegations of misconduct and disciplinary actions, but, similar to the agency’s PAID information system, each of these information systems contains a subset of the information that would be needed to understand all misconduct department-wide. According to Standards for Internal Control in the Federal Government, systems should include relevant data from reliable internal sources that are reasonably free from error and faithfully represent what they purport to represent. Additionally, management is advised to process data into quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis. Management should also evaluate processed information, make revisions when necessary so that the information is quality information, and use the information to make informed decisions. Additionally, according to Standards for Internal Control in the Federal Government, management should design the entity’s information system and related control activities to achieve objectives and respond to risks. The standards add that the information system design should consider defined information requirements for each of the entity’s operational processes. Defined information requirements allow management to obtain relevant data from reliable internal and external sources. In order to achieve complete and accurate data, internal controls are needed, among other things, to ensure that fields are not left blank, data elements are clearly defined and standardized, and common data elements are included across data systems to allow for interoperability and aggregation. Our analysis of VA’s 14 data files identified the following three categories that reduced the reliability of the data: lack of data standardization, and lack of identifiers. We found that 7 data files we reviewed contained a majority of data within fields, but 5 data files were missing a significant amount of data within certain fields. We were unable to analyze the remaining two files due to a number of data-quality issues. Among the fields that were missing data were several that would be useful for analyzing misconduct, including complainant name, proposed action, and person of interest, as shown in table 4. For example, we found that in the OAR Legacy Referral Tracking List, 97 percent of the entries for the Proposed Action field (1,210 of 1,245) and 96 percent for the Disciplinary Action field (1,190 of 1,245) were blank. If available, comparison of the proposed and disciplinary action-taken fields would allow VA to assess whether actions are consistently implemented department-wide. However, the high percentages of blank values in multiple fields impair VA’s ability to conduct a comprehensive analysis of misconduct to identify and address trends. See appendix II for a further listing of the five data files and the corresponding fields that were missing data. In addition, we found that several data files had options such as “not applicable” or “no” for certain fields so that the field would not be left blank, but these options were not consistently used. For example, the Complainant Name field within the Legacy Referral Tracking List was blank for some entries and not applicable (N/A) for others. Accordingly, we did not know whether data were intentionally omitted or not entered by mistake. In addition, the Offense Sustained field found within the VA-Wide Adverse Employment Action and Performance Improvement Plan Database was blank for some entries and either a yes or no for others. Eight of the 14 data files we reviewed did not have key data elements that were defined within and across information systems. In other words, the data files contained entries that described similar information in different ways. For example: The Complaints Automated Tracking System (CATS) Employment data were not mutually exclusive, or independent of one another. For example, this field includes two distinct categories of information: employment status, such as full time or part time; or hiring authority, such as Title 5 or Title 38. This method of storing information resulted in undercounting each of the separate values due to the system’s inability to account for expected overlap. For instance, an employee could be both a full-time and Title 5 employee and the field only tracks one or the other. ORM officials stated that this field has since been modified to capture more options to account for the overlap. The NCA data file’s Action Proposed/Decided/Taken data were tracked in a single field and updated with the most-recent action, rather than capturing proposed actions, decided actions, and actions taken in separate fields. We also identified standardization issues with the newly updated VA- Wide Adverse Employment Action and Performance Improvement Plan Database. For example, we found 15 different variations of Registered Nurse, such as “Registered Nurse,” “Staff RN,” and “RN” position names. In addition, we found 28 alternate values that identified Diagnostic Radiologic Technologists (e.g., Diagnostic Radiologic Technologist, Diagnostic Radiological Technologist, and Radiologic Technologist). See appendix III for a description of the fields that did not have standardization within the eight data files. We determined that 5 out of the 14 data files did not have identifiers that would allow comparisons of information across systems. Identifiers are important because they reference one unique individual or case, which makes it possible to analyze historical data pertaining to all records with the same identifier and analyze trends in employee misconduct over time. For example: The OAR VA-Wide Adverse Employment Action Database and the VBA data files had a combined total of 4,487 closed cases of misconduct that received adverse corrective action during the combined period of November 2013 through December 2016. We found that these two data files did not contain unique identifiers for complainants or accused individuals for a given case. OAR officials stated that this system does not contain Personal Identifying Information since its purpose is to track proposed and taken adverse actions. If more-specific information is needed, OAR staff coordinate with the human-resource point of contact. Although OAR may obtain additional information, this information is not entered into the OAR VA-Wide Adverse Employment Action Database, which would assist with conducting analysis. VAPS tracks misconduct in two separate subsystems, one of which tracks traffic violations and other administrative offenses, and one of which also tracks more-egregious offenses such as criminal violations. These subsystems also do not have unique identifiers that would allow data matching between the two subsystems, which could impede the analysis of this information. Even with both files, there is no ready way to capture the complete number of individuals with misconduct in both files due to the lack of a shared identifier. The newly updated VA-Wide Adverse Employment Action and Performance Improvement Plan Database does not contain unique identifiers, such as employee identification number, name of the complainant or accused, or other linking variables, to allow for the analysis of historical trends or comparison of information among other information systems. The data-quality issues described above are due in part to most of VA information systems not having data dictionaries, field definitions, or other documented guidance and procedures on data entry and automated edit checks to control for erroneous entries and blank fields. Absent guidance and procedures, VA lacks assurance that employees will enter complete and accurate information in the various data systems. Further, the lack of unique identifiers such as employee identification number, case number, or other linking variables for each of the records does not allow for analysis of historical trends or comparison of information among different information systems. Consequently, this precludes VA from determining the frequency and nature of allegations by specified category, or identifying trends, thus impeding senior officials’ ability to analyze misconduct department-wide and develop corrective actions. VA Directive 5021, Employee/Management Relations, governs policy for disciplinary procedures for all employees and outlines the provisions for the adjudication of each disciplinary action and associated file documentation requirements. Specifically, files must be established before a notice of proposed adverse action is issued to the employee to document that the adjudication procedures were followed. The file must contain all available evidence upon which the notice of proposed action is based and that supports the reasons in that notice. In addition, each file should contain specific documentation related to the adjudication of employee misconduct. VA Handbook 5021 states that disciplinary actions and associated adjudication procedures for all VA employees appointed under Title 5 are governed by three basic principles: (1) an employee shall be informed in writing honestly and specifically why the action is being brought against him or her; (2) an employee shall be given a reasonable opportunity to present his or her side of the case; and (3) the employee and representative shall have assurance of freedom from restraint, interference, coercion, discrimination, or reprisal in discussing, preparing, and presenting a defense. Our review of a generalizable sample of 544 misconduct case files (from a universe of 23,622 files) associated with disciplinary actions that affect pay from October 2009 through May 2015 revealed that VA officials did not consistently adhere to VA’s policy for retaining files containing evidence of misconduct. Specifically, VA was unable to provide the files for 10 percent (55 of 544) of the files we requested. We determined that administrations and program offices within VA have various record- retention schedules. Offices that have not established a record-retention schedule refer to the general records schedule developed by the National Archives and Records Administration (NARA). However, we found that some offices are misinterpreting OPM and NARA guidance and specify the record retention period for adverse action files as a range between 4 to 7 years rather than selecting a specific number of years in their record- retention schedules. All of the files were within VA’s record-retention range specified during the time of our review. The files that were unaccounted for were dispersed throughout most of the VISNs, but one VISN was not able to account for 19 of the missing files in our sample. On the basis of our weighted analysis of the generalizable sample, we estimate that VA would not be able to account for approximately 1,800 files in the full population that were within the record-retention period specified. In addition, VA officials did not consistently adhere to VA’s policy for documenting that procedures were followed in the adjudication of misconduct cases. We identified 22 out of 36 file requirements where VA was not able to consistently demonstrate compliance with VA policy due to the lack of documentation contained in files, based on our generalizable sample. Specific to both Title 5 and Title 38 permanent- employee misconduct case files, table 5 shows the estimated number and percentage that deviated from file documentation requirements. A list of the 22 identified requirements and the percentage of files not in compliance can be found in appendix IV. As table 5 indicates, Title 5 and Title 38 permanent employee files did not always contain documentation that employees were informed of the reason the action was brought against them. For example, on the basis of our generalizable sample, we estimate that the advance notice of proposed action, which includes a statement of the specific alleged misconduct upon which the proposed action is based, was not included in 16 percent of the files department-wide. A final decision letter, which contains a statement of the decision official’s determination regarding which charges, if any, in the advance notice were sustained, was not included for an estimated 15 percent of all files. Further, an estimated 35 percent of all files did not include a written acknowledgement from the employees that they received the final decision letter in person, and an estimated 23 percent of all files did not include the required return receipt for certified mail indicating that the decision letter was mailed to the employee. In addition, Title 5 and Title 38 permanent employee files did not always contain documentation that employees were provided a reasonable opportunity to present their side of the case. Our review found that permanent-employee disciplinary files did not adhere to basic principles outlined in VA Handbook 5021 and lacked evidence to demonstrate that employees were adequately informed regarding their rights during the adjudication procedure. Specifically, our generalizable sample found that an estimated 21 percent of all files did not include statements regarding the employee’s rights to due process, such as his or her entitlement to be represented by an attorney or other representative. In addition, an estimated 8 percent of all files did not mention that more information regarding appeal rights could be obtained by consulting Human Resources Management offices. For files where the employee provided an oral reply in response to proposed disciplinary action, an estimated 29 percent of files did not include the required written summary, which is to be signed by the official hearing the oral reply. Where a written reply was submitted, an estimated 11 percent of files did not include a copy of the employee’s written reply. Further, VA officials did not consistently adhere to VA’s best practices specific to Title 5 permanent employees only. We found that in a majority of these files (an estimated 72 percent) the proposal letters did not include a statement that assured the employee he or she had freedom from restraint, discrimination, or reprisal in discussing, preparing, and presenting a defense. VA Handbook 5021, Employee/Management Relations, also states that Title 5 employees should provide their written responses through supervisory channels to the decision official. We estimate that a total of 6,819 files (47 percent) of Title 5 permanent employee files did not provide their written reply through supervisory channels to the decision official. Although OHRM is responsible for assessing the effectiveness of department-wide human resource programs and policies of VA Handbook 5021, according to OHRM officials, each facility is responsible for oversight of implementing policies and guidelines pertaining to how disciplinary actions are processed. We found no evidence that OHRM has assessed whether documentation exists that demonstrates adherence to policy governing cases involving disciplinary actions or provided oversight of VA’s implementation of record-retention requirements, or that human- resource personnel adhere to basic principles outlined in policy to ensure employees are informed of their rights during the adjudication process. The resulting lack of oversight to HR policies increases the risk that employees will not be adequately informed of their rights during the adjudication process. Accordingly, employees may not (1) be provided with information on why an action is being brought against them, (2) be provided with a reasonable opportunity to present their case, and (3) be adequately protected from potential reprisal in preparing their defense. Regarding retention of records, according to NARA, disciplinary and adverse action case files should be destroyed no sooner than 4 years but no later than 7 years after the case is closed. According to OPM, to implement this authority, each agency must select one fixed retention period between 4 and 7 years and publish the retention in the agency’s records disposition manual. We determined that some offices are misinterpreting OPM and NARA guidance by not selecting a specific number of years in their record- retention schedules. For example, three of the six policy record-retention schedules we reviewed did not establish a specific number of years for record retention. Specifically, record-retention policies for the Office of Information and Technology, VACO staff offices, and VBA specified the record-retention period for adverse action files as a range between 4 to 7 years rather than selecting a fixed retention period. For example, we found that the Records Control Schedule pertinent to VACO was dated June 30, 1967, without references to new or revised items since 1969. Our results are consistent with an October 2016 inspection conducted by NARA. The inspection report contained 16 findings and 19 recommendations for improvement of the records-management program at VA. Among the findings and recommendations were the following. Finding: The VA records management program has not ensured that the VACO maintains a current Records Management Handbook and a current Records Control Schedule, which together establish program objectives, responsibilities, and authorities for the creation, maintenance, and disposition of agency records. Recommendation: The Department Records Office must update and maintain the VACO handbook and the Records Control Schedule for Central Office Staff Offices and the Offices of the Assistant Secretaries to include specific Records Management roles and responsibilities for all VACO staff and to include mandates for implementation of records management policies and procedures in accordance with Federal statutes and regulations. Finding: The VA Departmental Records Management program does not conduct regular records management evaluations within VACO and the Offices of the Secretary and Assistant Secretaries or monitor the oversight activities of the Administrations. Recommendation: The VA Departmental Records Management program, working with the Administrations, VACO, and Enterprise Risk Management, must establish effective Records Management evaluation programs to monitor VA compliance with Federal regulations. Recommendation: The VA Departmental Records Management program, working with the Senior Agency Official for Records Management, must establish effective Records Management evaluation programs to monitor the records management practices within the Office of the Secretary and Assistant Secretaries to ensure compliance with Federal regulations. Finding: VACO Staff Offices and the Offices of the Assistant Secretaries are not routinely conducting records inventories. Recommendation: VACO Staff Offices and the Offices of the Assistant Secretaries, with support from the Department Records Management program, must conduct inventories of existing electronic and non-electronic records to identify scheduled, unscheduled, and vital records. In response to NARA findings, VA is to submit a plan of corrective action that specifies how the agency will address each inspection report recommendation, including a timeline for completion and proposed progress reporting dates. VA does not have a method in place to evaluate the implementation of records-management practices outside of those being conducted by VHA and VBA. Accordingly, VA has not been conducting records-management oversight with any uniformity department-wide. Further, VA’s use of multiple retention periods for adverse action files, and in some cases the lack of adherence to OPM and NARA guidance in defining a specific retention period for these files, results in inconsistent retention of these files across VA. The OIG receives allegations of employee misconduct from VA employees, the OSC, members of Congress, the public, and other stakeholders. When the OIG receives allegations it can either take no further action, open an investigation, or refer the case to facility or program offices within VA for review and response. For cases referred to facility or program offices, the OIG has developed a policy for VA facilities and program offices to use when investigating allegations of misconduct. This policy includes six elements that VA facility and program officials are to incorporate in their investigations, as shown in table 6. According to OIG officials, if the reviewing employees have concerns about the adequacy of the response provided, the OIG can either ask for additional information to supplement the response or open an internal case. Departmental heads (Under Secretaries for Health, Benefits, and Memorial Affairs, Assistant Secretaries, and other key officials) are responsible for ensuring that referrals are properly reviewed, documented, and answered within specified time frames. Our review of the 23 OIG cases of alleged misconduct between calendar years 2011 and 2014 involving senior officials found that VA facility and program offices did not consistently follow policies and procedures established by the OIG for investigating such allegations. In several instances, VA facility and program offices did not include one or more of the six elements required in their investigative response to allegations of misconduct. In addition, our review of the 23 cases found instances in which VA facility and program offices did not include sufficient documentation for their findings, or provide a timely response to the OIG. The OIG was not able to produce the documentation provided by the facility or program office that was used to close 2 of the 23 cases in our review. All of the requested files were within the OIG’s 7-year record- retention period during the time of our review. As shown in table 7, we identified four cases that did not contain evidence of an independent review by an official separate from and at a higher pay grade than the accused. In three of the four cases that were not reviewed by an independent official at a higher grade, the review was performed by the medical center director, who was one of the accused named in the allegation. For example, in one case involving alleged time-and-attendance abuse by a physician, the medical center director, who was also named in the allegation as having received a similar complaint against the physician 2 years earlier, reviewed the allegations made against the physician and himself. The documentation provided showed that the medical center director conducted the investigation of allegations and found the allegations were not substantiated and no corrective actions were implemented. In all four cases, both the independence and higher-grade criteria were not followed when the accused senior officials investigated allegations against themselves. As shown in table 8, we generally found that VA facility and program offices reviewed each allegation contained in the original referrals, although in one case the reviewer did not respond directly to all allegations. As shown in table 9, VA facility and program offices clearly indicated their findings for each allegation in 14 of the 21 cases of misconduct involving senior officials for which files could be located, as well as their assessment of whether the allegations were substantiated or unsubstantiated. However, we identified seven cases in which VA discussed its findings but did not provide a clear indication of whether all allegations were substantiated or unsubstantiated. Responses lacking a clear statement of substantiation may be more difficult for subsequent reviewers, including OIG and OAR investigators, to track and perform follow-up where necessary. For example, in one case involving 11 allegations, no statement of substantiation was provided, but VA’s response included seven recommendations, three of which involved disciplinary action. We did not find evidence in the case file that follow-up was performed by the OIG personnel to clarify this discrepancy, and the case was closed. As shown in table 10, most allegations involving senior officials (16 of 21 cases for which files could be found) were not formally substantiated and did not require a recommendation for corrective action based on OIG case-referral criteria. Specifically, the criteria require a description of corrective actions taken or proposed as a result of substantiated allegations, but make no mention of allegations that were not substantiated as part of VA’s response. For one substantiated allegation, however, we found no evidence of a recommendation for corrective action. Table 11 shows that 17 cases from VA facility and program offices did not provide the supporting documentation they used to reach their conclusions about the OIG case referrals. In 17 cases, including one case reviewed by an AIB panel, VA referenced documents reviewed but did not attach any of the supporting evidence. OIG case-referral criteria state that VA facility or program offices must provide supporting documentation used in their review, such as copies of pertinent documents. However, the criteria do not specify whether copies of all documentation reviewed must be included in the file. Supporting documentation, which must be provided according to OIG policy, will vary depending on the circumstances of the case, but those used to support the findings and recommendations should be included. For example, we reviewed one case where pertinent documents were referenced to support the allegation, but documents supporting the findings and recommendation were not included. The case contained allegations involving false patient wait-time documentation and abuse of authority. Specifically, a medical center director instructed staff to review patient wait times between follow-up appointments in order to meet VA’s 14-day timeliness metric. The investigation revealed that VA staff had changed several hundred veteran appointment wait times. The investigation concluded that the false documentation allegation was substantiated, but attributed the cause to the staff not understanding how to enter a follow-up appointment date into the system. However, there was no documentation in the files to support (1) that the medical center director had not abused his authority by instructing staff to review wait times greater than 14 days to determine how they could be reduced, and (2) findings for the conclusion that the original wait times were entered in error. Absent supporting documentation, it is difficult for the OIG to determine whether enough evidence was gathered before closing alleged cases of misconduct that were found to be unsubstantiated or closing substantiated cases of misconduct that required further action. VA Directive 0701 states that copies of voluminous transcripts of interviews, the entire claims folder, and medical charts are not necessary. However, VA Directive 0701 further states that such materials should be available if the OIG subsequently requests them within the record-retention period. Case examples of allegations reviewed, and subsequently closed, by the VA OIG based on its evaluation of evidence provided by facility and program offices in response to allegations of misconduct can be found in appendix V. As shown in table 12, VA facilities’ or program offices’ response letters, which were sent to the OIG, included a point of contact for further questions in 15 of the 21 OIG case referrals involving senior officials, including the individual’s name and a means of contact (phone or e-mail). In 2 of the 15 cases where a point of contact was provided, the contact was also one of the accused in the allegation. Although that is not technically a violation of OIG criteria, it likely presents a conflict of interest in regard to independent reviewers obtaining objective case information. In six other cases, no contact was listed, although the letter was signed by the reviewer. If a specific point of contact is not identified, including position title, it may be assumed erroneously by employees involved in the case, or following up on the case, that the default contact is the reviewer, who may not be the appropriate point of contact, and may or may not be able to provide objective case information. OIG guidelines state that VA facilities and program offices assigned Hotline case referrals are responsible for reporting written findings to the Hotline Division within 60 days, unless an extension is requested. Our review of the 21 cases found instances in which VA facility or program offices did not always provide a timely response to the OIG. Table 13 shows five instances in which VA facility or program offices submitted a response after the deadline requested by the OIG. One response was not reported timely after an extension was provided by the OIG. In one of the five cases involving allegations of abuse of authority by a VA medical center director, the reviewer requested an extension, which is permitted by OIG policy, but still missed the revised deadline. The five case files did not contain any information regarding any follow-up actions taken in response to delays. According to OIG officials, when a case has been referred to a program office for investigation, the OIG reviews the program office’s response for completeness and sufficiency before closing the case. However, there is no requirement for the OIG to ensure that the responses contain the six elements listed in VA Directive 0701 and confirm that case referral allegations have been addressed. Consequently, the lack of verification could have contributed to insufficient evidence that does not meet the requirements outlined by the OIG. Additionally, VA facility and program offices have not consistently adhered to VA Directive 0701 policy and do not always provide supporting documentation for their findings and recommendations, or always provide a timely response when reporting findings to the OIG’s Hotline division. Inconsistent adherence to the reporting standards provided by the OIG to VA facilities and program offices for investigating and resolving misconduct case referrals from the OIG Hotline impedes VA’s ability to ensure that misconduct cases are being handled appropriately. According to OIG officials, the OIG has taken steps to enhance the review of case responses. Specifically, OIG officials stated that in April 2018 the OIG implemented a new Enterprise Management System to reduce reliance on certain manual processes. According to OIG officials, Hotline analysts will now have more time to review their work and perform other quality-assurance activities. In implementing this new system, it will be important for the OIG to consider how the system can assist in ensuring requirements are met and responses are received timely. Our review of VA’s information systems that track misconduct involving senior officials department-wide indicates that they may not always be held accountable for misconduct. Specifically, (1) misconduct was sometimes substantiated, but the proposed disciplinary action was not taken; (2) misconduct was sometimes substantiated, but no disciplinary action was recommended; (3) previous penalties did not have the corrective effect for officials found to have engaged in repeated acts of misconduct and who have remained in VA management positions; and (4) senior officials violated separation-of-duty policy when taking disciplinary action. VA Handbook 5021 allows the deciding official to determine the appropriate disciplinary action if one or more allegations are substantiated. However, the disciplinary action may not be more severe than what had been proposed. In several cases, misconduct was substantiated, but the proposed action was not always taken. Our review of the OAR Legacy Referral Tracking List identified 17 officials between calendar year 2011 through May 2015 with substantiated misconduct where action was proposed. However, in some of these cases, the officials were given a lesser penalty than the one proposed, while in other cases there is no evidence that action was taken. As shown in figure 3, we found that for 12 of the 17 officials with substantiated misconduct, an adverse disciplinary action (removal) was proposed. Of those 12 officials, 3 were removed, 2 received a suspension, 4 received a reprimand or admonishment, 2 were allowed to resign or retire before receiving disciplinary action, and we found no evidence of disciplinary action for the remaining individual. For the other 5 officials, actions such as counseling, admonishment, suspension, or reprimand were proposed. Of the 5 officials, 2 received the actions that were proposed, 1 received a lesser penalty than what had been proposed, 1 was allowed to retire before receiving action, and we found no evidence of the proposed action for the remaining individual. For the two officials for whom there was no evidence that disciplinary action was taken, we found no evidence within the PAID information system or personnel files that these officials received the action proposed in the OAR Legacy Referral Tracking List. Counseling was proposed for one official, and removal from the position for the other official. OAR did not provide us with evidence that the officials had received the action proposed. We also reviewed an additional 15 cases that involved a fact-finding or an AIB. Our review of these cases found that 11 out of 23 officials were associated with instances of substantiated misconduct and proposed action was recommended. For 4 of the 23 officials where the proposed action field was populated, the information within the OAR Legacy Referral Tracking List reflected the action recommended. The applicable data fields for the remaining 19 officials within the OAR Legacy Referral Tracking List were not in agreement with the action recommended, or blank. This review also identified two officials with substantiated misconduct where OAR did not provide evidence that the disciplinary action proposed was taken: Two officials were involved in a case concerning alleged whistle- blower retaliation at the Phoenix VA Health Care System. The investigative report documented that allegations were sustained. The retaliation included allegations of involuntary reassigning the whistle- blower to another position, placement of the whistle-blower on administrative leave, and lowered performance pay ratings following disclosures regarding poor patient care and nursing triage errors. Appropriate administrative action for persons identified as having engaged in retaliation was recommended. We did not find any evidence in the PAID system that these two officials involved in retaliation received disciplinary action. OAR provided documentation to show that no action was taken against one official, and was unable to provide documentation to show that the disciplinary action had been taken for the other. The official who received no action received approximately $11,500 in performance pay during a 2-year period following the allegations. OAR’s quality-review process for investigative reports does not ensure that reports with findings of substantiated misconduct include recommendations for action. Our review of OAR’s Legacy Referral Tracking List identified 70 out of 1,245 closed cases involving officials where misconduct was either substantiated, or partially substantiated, but no disciplinary action was recommended. One case involved three allegations of poor dental care provided to patients by three different senior officials. One physician cut underneath a patient’s tongue with the bur of a hand-piece drill (substantiated), another administered medication the patient was allergic to (partially substantiated), and the final senior official extracted the wrong tooth (substantiated). We did not find any evidence in the PAID system that these senior officials received disciplinary action. Further, OAR did not provide documentation to show that any disciplinary action had been proposed or taken. The physician that cut underneath a patient’s tongue received performance pay totaling $15,000 approximately 6 days after the investigation had concluded that misconduct was substantiated. As of March 2018, two of these senior officials received performance pay, and appear to still be employed at VA. While an investigation was conducted that substantiated (or partially substantiated) the allegations, there is an increased risk that some substantiated misconduct will go unaddressed if there is no recommendation for corrective action. Our review of OAR’s Legacy Referral Tracking List indicated that some officials who had been disciplined for misconduct remained in positions where they were responsible for proposing or deciding disciplinary action for other employees. We identified 15 officials in the OAR VA-Wide Adverse Employment Action Database who received disciplinary action between 14 days to 1 year prior to proposing disciplinary action for another employee. Most of the 15 officials (12 officials) had received a suspension. We also found that five officials in the OAR Legacy Referral Tracking List had received prior disciplinary actions for offenses unrelated to the new OAR allegations. A prior history of disciplinary actions indicates that some officials may be repeat offenders for whom the previous penalties did not have the desired corrective effect. For example, 4 out of 5 officials were suspended for a different offense prior to being the subject of a new allegation. One of the four officials was suspended less than 2 months prior to being the subject of a new allegation, while another received a suspension before, and again approximately 7 months following, the OAR allegation. According to VA Handbook 5021, the deciding official must use the “Douglas” factors, which include the employee’s past disciplinary record, to determine a reasonable penalty. One of the five VA officials was eventually removed approximately 6 months after the new OAR allegation. In analyzing cases involving senior management, we noted that the OAR Legacy Referral Tracking List often did not accurately reflect the disciplinary action that was decided based on the results of the investigation. In numerous instances for the OAR Legacy Referral Tracking List, the applicable data fields indicating the proposed and final disciplinary action were blank. In these cases where the disciplinary fields were populated, the data usually did not agree. Specifically, for 32 out of the 40 records we reviewed where misconduct was substantiated, the final disciplinary action taken did not reflect the information within the OAR Legacy Referral Tracking List. When disciplinary actions are taken in response to findings of misconduct but are not entered within an appropriate information system, or are inaccurately recorded, it is more difficult to (1) monitor whether disciplinary actions have been implemented, and (2) ensure information relevant to management for making decisions is available. Further, without a prior record of misconduct or disciplinary action, senior officials who are repeat offenders may not receive the appropriate penalty required. Pursuant to the Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017, OAWP will now be responsible for receiving, reviewing, and investigating allegations of misconduct, retaliation, or poor performance involving senior officials. According to OAWP officials, their office investigates allegations of misconduct at the senior level only. OAWP officials also stated that misconduct issues that occur below the senior level will be referred to each of the three major VA administrations for investigation and resolution. In addition to the VA- Wide Adverse Employment Action and Performance Improvement Plan Database, OAWP officials stated that it has implemented two additional information systems that are used concurrently to capture case information. OAWP officials stated that they are currently working with VA Information Technology to assess options for other case-management systems that could consolidate these three information systems into one comprehensive system. VA Handbook 5021, Employee/Management Relations, states that the decision on a proposed major adverse action will be made by an official who is in a higher position than the official who proposed the action, unless the action is proposed by the Secretary. Standards for Internal Control in the Federal Government states that management should divide or segregate duties among different people. Our review of the OAR VA-Wide Adverse Employment Action Database, OAWP VA-Wide Adverse Employment Action and Performance Improvement Plan Database, and VBA data file identified examples where VA officials did not follow separation-of-duty requirements. As shown in table 14, 73 (out of an estimated 7,886) VA officials acted as both the proposing and deciding official in cases involving removals for employees found to have engaged in misconduct. Fourteen VA officials acted as both the proposing and deciding official in two or more cases. One of these 14 officials acted as both the proposing and deciding official for seven different removal cases. Further, our review of 29 VA officials found that none received disciplinary action for violating separation-of-duty policy. The systemic lack of adherence to VA’s separation-of-duty policy is reflective of a lack of controls that would allow such activity to occur. Focusing on ensuring such controls are implemented would help ensure that VA decreases the risk of abuse when officials act as both proposing and deciding officials. VA has procedures in place to ensure that allegations of misconduct are investigated, but these procedures allow VA program offices or facilities where a whistle-blower has reported misconduct to conduct the investigation. According to VA officials, investigations that are deemed necessary are occasionally ordered directly from the head of the facility or VA leadership, which takes the lead on an investigation into the allegation. Alternatively, an OIG official stated if allegations of misconduct are received by the OIG, the OIG has the option of investigating the allegation or exercising a “right of first refusal” whereby it refers allegations of misconduct to VA facilities or program offices where the allegation originated to complete an independent review and provide a response to the OIG. As shown in figure 4, the majority of contacts the OIG received (127,265 out of 133,435) from calendar years 2010 through 2014 were not investigated due to several reasons, such as insufficient evidence or lack of jurisdiction. Of those contacts that were investigated, the majority (4,208 of 6,170 investigated contacts) were not investigated by the OIG but rather were referred to facility or program offices for investigation. Whistle-blowers also have the option of reporting alleged misconduct outside VA by filing a disclosure with the OSC, and may do so if they believe there has not been a resolution to their complaint internally. If the OSC determines that there is substantial likelihood of wrongdoing, it may refer the disclosure back to the Secretary of Veterans Affairs for further investigation. According to OSC officials, as a general policy, the OSC will not refer a disclosure to the Secretary if the OIG is already conducting an investigation of that particular complaint and defers to the OIG to finalize the investigation. According to OIG officials, the OIG may, in turn, exercise its “right of first refusal” when cases are referred from the OSC. Consequently, this process can result in a disclosure that was originally made to the OSC being referred back to the facility or program office where the allegation originated. As shown in figure 4, the OSC referred 172 of 942 disclosures (18 percent) filed by VA employees back to the Secretary of Veterans Affairs for further investigation from calendar years 2010 through 2014. Of the 172 disclosures referred, VA referred 53 back to the facility or program offices where the complaint originated and 119 to the OIG. The independence of officials conducting or reviewing the results is paramount to the integrity of the process both in deed and appearance. According to VA Directive 0700, the decision whether to conduct an investigation should not be made by an official who may be a subject of the investigation, or who appears to have a personal stake or bias in the matter to be investigated. Moreover, according to OIG policy, investigations referred to VA offices must be reviewed by an official independent of and at least one level above the individual involved in the allegation. VA does not have oversight measures to ensure that all referred allegations of misconduct are investigated by an entity outside the control of the facility or program office involved in the misconduct, to ensure independence. VA OIG officials acknowledged that there have been concerns about referring cases back to the chain of command because the OIG is unsure where cases go once they are referred. The investigation of allegations of misconduct by the program office or facility where the complaint originated may present the appearance of a conflict of interest in which managers and staff at facilities may investigate themselves or other allegations where they may have a personal stake or bias in the matter to be investigated. Consequently, there may be an increased risk that the results of the investigation are minimized, not handled adequately, or questioned by the OSC or the individual who made the original allegation. According to VA Directive 0700, significant incidents occurring, and issues arising, within VA facilities or offices shall be reported and investigated as necessary to meet the informational and decision-making needs of VA. Primary responsibility in this regard rests with the chief executives of the facility or staff office involved, and with their supervisors in VA and its administrations. According to an OIG official, VA (the Secretary or a delegate) sends disclosures received from the OSC to the OIG, which may then refer to VA facility or program offices for further review and investigation. According to OSC officials, for cases that are referred to a program office, the OSC requires that the Secretary or delegate provide a report that outlines its conclusions and findings. This reporting is not required for disclosures where an ongoing OIG investigation is already under way. According to OSC officials, for each disclosure, the OSC is to review the report for statutory sufficiency and determine whether the findings of the agency head appear reasonable. The OSC is to send its final determination, report, and any comments made by the whistle-blower to the President and responsible congressional oversight committees. The OSC has raised concerns in its reports to the President about investigations conducted by VA program offices and facilities. Of the 172 whistle-blower disclosures referred by the OSC between calendar years 2010 through 2014, the Secretary of Veterans Affairs referred 53 to facility and program offices. Our review of these 53 OSC reports found that the OSC had concerns about the conclusions VA reached in 21 (40 percent) of the 53 disclosure cases. For example, the OSC found that the conclusions in some VA reports were unreasonable because VA reached its conclusion without interviewing the witness, provided shifting explanations that strained credibility and did not provide evidence of an unbiased investigation, ignored whistle-blower concerns by refusing to investigate allegations, and refused to acknowledge the impact on the health and safety of veterans seeking care after confirming problems in these areas. For disclosure cases that were referred from the OIG to facility and program offices during the 2010–2014 time frame of our review, the OIG acknowledged that these concerns arose because of a lack of communication between the department and the OIG regarding the scope of the review. At the time of our review, VA did not have a procedure in place to ensure the conclusions reached for investigations involving OSC disclosure cases are reasonable and meet the informational and decision- making needs of VA whereby all allegations are addressed. More recently, the OIG has started to communicate the scope of its reviews that involve matters referred by the OSC to the Office of the Secretary. In implementing this new process, it will be important for the Office of the Secretary to ensure that any allegations outside the purview of the OIG’s investigation are fully addressed by a departmental entity in accordance with OSC requirements. As shown in figure 4, of the 172 disclosure cases referred to VA by the OSC, a total of 119 cases were referred to the OIG. The OIG had conducted, or was already conducting, an investigation of the particular allegations for all 119 disclosures. Since these 119 disclosure cases were already under investigation by the OIG, the OSC deferred to the OIG’s investigation for these cases. A total of 37 of these 119 disclosure cases that were referred to the VA OIG were submitted to the OSC anonymously. Therefore, we were unable to conduct a review of these investigations because there was no information available to identify the individuals involved. According to Standards for Internal Control in the Federal Government, management’s ability to make informed decisions is affected by the quality of information. Accordingly, the information should be appropriate, timely, current, accurate, and accessible. The oversight body oversees management’s design, implementation, and operation of the entity’s organizational structure so that the processes necessary to enable the oversight body to fulfill its responsibilities exist and are operating effectively. Our review of the remaining 82 disclosure cases determined that the OIG does not have procedures in place to track cases that were referred from the OSC for further investigation. According to OIG officials, the OIG’s information system did not have a method in place to ensure that OSC case numbers are linked to the OIG investigative case number and final report. Consequently, the OIG was unable to produce the investigative documentation for these 82 disclosures. According to OIG officials, OSC case numbers and associated Hotline numbers are currently tracked in a spreadsheet until the implementation of a new system. The inability to locate investigative documentation prevents a third party from verifying whether the OIG examined the disclosures, whether any recommendations were addressed, or whether appropriate disciplinary action was taken for these cases. In addition, because the OSC defers to the OIG’s investigation for allegations that were already conducted, or being conducted, the OSC and individuals that made the allegations do not have documentation to demonstrate that the allegations were addressed. This information, or lack of it, has direct influence on management’s ability to make sound decisions relating to investigative matters. Pursuant to the Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017, OAWP will be responsible for recording, tracking, reviewing, and confirming implementation of recommendations from audits and investigations involving whistle-blower disclosures, including the imposition of disciplinary actions and other corrective actions contained in such recommendations. According to OAWP officials, the whistle-blower disclosure process will be similar to the current process when cases are referred to facility and program offices for investigation. OAWP will follow up on any open points with the level of leadership that is most appropriate in each case, such as the medical center or VISN director. Case details will be tracked through the three active databases that are being used concurrently. OAWP is currently working to develop an internal process that will bring the investigative communities together. For instance, OAWP would like to monitor cases that are referred to VA facility and program offices, but it does not currently have documented criteria to guide the process. According to OAWP officials, OAWP is finalizing new policies in the form of a policy manual and handbook. However, these officials were unable to provide a time frame for completion of the published guidance. Our analysis of VA data shows that individuals who filed a disclosure of misconduct with the OSC received disciplinary action, and left the agency, at a higher rate than the peer average for the rest of VA. We identified 135 disclosure cases that were received by the OSC between calendar years 2010 and 2014 and were alleging misconduct. Of the 135 disclosures, a total of 129 employees made a total of 130 disclosures nonanonymously. We compared the 129 employees who made nonanonymous disclosures to the PAID information system using the complainants’ information. As shown in table 15, on average approximately 1 percent of all employees in the VA roster received an adverse action in any given fiscal year. For the 129 nonanonymous whistle-blowers, we found that approximately 2 percent received an adverse action in the fiscal year prior to their disclosure, while 10 percent had received an adverse action in the fiscal year of their disclosure, and 8 percent received an adverse action in the year subsequent to this disclosure. While the fact that nonanonymous whistle-blowers faced higher rates of adverse action subsequent to their disclosure than the VA population as a whole is consistent with a pattern of retaliation for nonanonymous whistle-blowers, it is only an indication that retaliation could be occurring. Our analysis also showed that among employees who could be matched to the PAID end-of-year roster, attrition rates were higher for those individuals who filed a nonanonymous disclosure with the OSC. On average, approximately 9 percent of all VA employees on the end-of-year roster in one fiscal year were not on the subsequent year’s roster. In contrast, 66 percent of the 129 nonanonymous whistle-blowers did not appear in the subsequent year’s roster. Attrition rates were higher among employees who had filed a disclosure than among their peers who had not filed disclosures, for all fiscal years in our review (see table 16). Our analysis did not confirm the reasons for disciplinary action or attrition involving any of the 129 employees who made nonanonymous disclosures to the OSC. According to VA officials, employees who have a history of poor performance or conduct may be more likely to file a disclosure with the OSC or allege misconduct, which could explain some of the disparities between whistle-blowers and other employees. However, we also could not rule out instances where retaliation by senior officials may have occurred after misconduct was disclosed. The Civil Service Reform Act of 1978, as amended, states, among other things, that federal personnel management should be free from prohibited personnel practices (PPP). The law also authorizes the OSC to investigate allegations involving PPP that include reprisals against employees for the lawful disclosure of certain information pertaining to individuals who engage in such conduct or other wrongdoing. According to Standards for Internal Control in the Federal Government, laws and regulations may require entities to establish separate lines of communication, such as whistle-blower and ethics hotlines, for communicating confidential information. Management informs employees of these separate reporting lines, how they operate, and how they are used, and how the information will remain confidential. Reporting lines are defined at all levels of the organization and provide methods of communication that can flow down, across, up, and around the structure. Our interviews with six VA whistle-blowers who claim to have been retaliated against provided anecdotal evidence that retaliation may be occurring. Whistle-blowers we spoke to alleged that managers in their chain of command took a number of actions that were not traceable to retaliate against the whistle-blowers after they reported misconduct. These alleged actions included being reassigned to other duty locations or denied access to computer equipment necessary to complete assignments, and socially isolating these individuals from their peers, among other things. Whistle-blowers we spoke to also expressed concerns regarding the lack of guidance available to employees about how to file a disclosure through VA and the OSC. Whistle-blowers stated that employees are not provided adequate information on how to document or file a claim of misconduct or retaliation. Employees can file disclosures regarding misconduct and complaints of retaliation through multiple reporting lines. As mentioned previously, however, the OSC will generally not refer to the Secretary under its statutory process a disclosure if the OIG has conducted or is already conducting an investigation of that particular complaint. Thus, whistle-blowers may limit their chance of having an independent, non-VA entity oversee their complaint if they file a complaint with the OIG first. The Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017 requires the Secretary, in coordination with the Whistleblower Protection Ombudsman, to provide training regarding whistle-blower disclosures to each employee of VA. This information shall include, among other items, an explanation of each method established by law in which an employee may file a whistle-blower disclosure, an explanation that the employee may not be prosecuted or reprisal taken against him or her for disclosing information, and language that is required to be included in all nondisclosure policies, forms, and agreements. The Secretary shall also publish a website and display the rights of an employee making a whistle-blower disclosure. In August 2017, VA began providing additional information on its website for potential whistle-blowers who wish to report criminal or other activity to the OIG. The information provided focuses on reporting misconduct to the OIG and provides other lines of reporting established by law in which an employee may file a whistle-blower disclosure, such as directly to an immediate supervisor or the OSC. In addition, the information provided explains the process after misconduct is reported through the OIG Hotline, but does not clarify the process for referred disclosure cases received from the OSC. As mentioned previously, OIG officials stated that a disclosure made to the OSC or the OIG can be referred back to the facility or program office where the allegation originated, which may compromise confidentiality. Consequently, employees may not be aware that their information may be shared among the OSC, the OIG, OAWP, or VA facility and program offices when a disclosure is made to the OSC. Adequately communicating the investigative process to employees may alter their decision to report wrongdoing. Without a clear understanding of the lines for reporting misconduct and how they operate, whistle-blowers may be uncertain as to their options for reporting misconduct, which increases the risk that they may not report workplace misconduct. According to OSC, it has learned through its cases that OAWP has a practice of allowing VA employees, who are the subject of the allegations brought forward by whistle-blowers to review or participate in investigations, or both, which could make the whistle-blower feel uncomfortable or intimidated. This practice has led to confusion regarding the role and responsibilities of OAWP personnel. OAWP’s use of VA employees that are employed at the facility under investigation in the review of allegations creates the possibility of a conflict of interest or an appearance of a conflict of interest. For example, in a case OSC described in its comments on a draft of our report, an OAWP representative who was also associated with the human-resource office at the VISN that oversees the whistle-blower’s facility, placed the whistle- blower under oath and questioned her about issues unrelated to the referred allegations. OSC has since sought clarification of OAWP’s role and the OAWP employee’s possible connection to the VISN. While VA collects data on some types of disciplinary actions, it is limited in its ability to use those data because it does not collect all misconduct and associated disciplinary-action data through a single information system, or multiple interoperable systems. Absent a process to collect such data department-wide, VA does not have the ability to analyze and report data systematically. In addition, the data currently collected are not always reliable or useful. The inclusion of appropriate documented guidance and standardized field definitions would help to ensure VA collects reliable misconduct and associated disciplinary-action data. With high-quality information that is accurate and comprehensive, VA management would be better positioned to make knowledgeable decisions regarding the extent of misconduct occurring and how it was addressed, department-wide. VA has not ensured that program and facility human-resources personnel adhere to policy governing documentation contained within evidence files to support conclusions reached. In addition, VA often had no record of the evidence involved with the adjudication of these actions and could not verify whether these individuals received reasonable and fair due process. The absence of documentation in some files also raises the possibility that VA may not always be in compliance with its procedures for governing the adjudication of alleged employee misconduct. Additionally, ensuring that human-resources personnel adequately inform employees of their rights during the adjudication process would provide them with a reasonable opportunity to present their case when preparing their defense. VA also does not consistently adhere to OPM and NARA guidance in defining a specific retention period for adverse action files. This results in an inconsistent retention of these files across VA which complicates department-wide analysis. VA’s inconsistent adherence to the standards provided by the OIG to facilities and program offices for investigating and resolving misconduct cases increases the risk that misconduct case are not being handled appropriately. Additionally, the lack of verification of responses received to ensure documentation supports findings and recommendations has contributed to evidence that does not always meet the requirements outlined by the OIG. Finally, timely responses are not consistently provided when facility and program offices report findings to the OIG’s Hotline Division. OAR did not monitor whether substantiated instances of misconduct involving senior officials received disciplinary action. OAR’s Legacy Referral Tracking List also did not accurately reflect the disciplinary action that was decided based on the results of the investigation. When disciplinary actions are taken, in response to findings of misconduct, but are not entered within an appropriate information system, or are inaccurately recorded, it is more difficult to monitor whether disciplinary actions have been implemented in substantiated instances of misconduct involving senior officials. As demonstrated, this may result in no action being taken for substantiated misconduct or the previous penalties not having the corrective effect for repeat offenders. There is also an increased risk that substantiated misconduct will go unaddressed if there is no recommendation for corrective action. Further, VA also does not have internal controls to ensure adherence to proper separation-of-duty standards involving the removal of an employee. Such controls would minimize the risk of abuse when officials act as both proposing and deciding officials. In addition, VA does not have oversight measures to ensure that all allegations of misconduct referred by the OIG to facility and program offices are investigated by an entity outside the control of the facility or program office involved in the misconduct. The investigation of allegations of misconduct by the program office or facility where the complaint originated may present the appearance of a conflict of interest in which managers and staff at facilities may investigate themselves or other allegations where they may have a personal stake or bias in the matter to be investigated. Therefore, the risk that the results of the investigation are minimized, or not handled adequately, is increased. VA’s newly developed process to communicate the scope of its reviews that involve matters referred by the OSC to the Office of the Secretary will be important to ensure any allegations outside the purview of the OIG’s investigation are fully addressed by a departmental entity in accordance with OSC requirements. Further, the OIG’s inability to locate investigative documentation prevents a third party from verifying whether the OIG examined the disclosures, whether any recommendations were addressed, or whether appropriate disciplinary action was taken for these cases. This lack of information has direct influence on management’s ability to make sound decisions relating to investigative matters. According to OIG officials, a spreadsheet is being used for tracking case numbers associated with disclosures, but plans to implement a process within the new system. Nonanonymous whistle-blowers faced higher rates of adverse action subsequent to their disclosure than the VA population as a whole. In addition, these individuals also had attrition rates higher than their peers who had not filed a disclosure. The disparities between whistle-blowers and other employees may be an indication that retaliation by senior officials may have occurred after misconduct was disclosed. Although VA has started to provide additional information for potential whistle-blowers who wish to report criminal or other activity to the OIG, VA does not have a process to inform employees of how their information may be shared between organizations when misconduct is reported. Without a clear understanding of how the lines for reporting misconduct operate, whistle- blowers may be uncertain as to their options for reporting misconduct, increasing the risk that they may not report workplace misconduct. We are making the following 16 recommendations to VA. The Secretary of Veterans Affairs should develop and implement guidance to collect complete and reliable misconduct and associated disciplinary-action data department-wide, whether through a single information system, or multiple interoperable systems. Such guidance should include direction and procedures on addressing blank data fields, lack of personnel identifiers, and standardization among fields, and on accessibility. (Recommendation 1) The Secretary of Veterans Affairs should direct applicable facility and program offices to adhere to VA’s policies regarding employee misconduct adjudication documentation. (Recommendation 2) The Secretary of Veterans Affairs should direct the Office of Human Resource Management (OHRM) to routinely assess the extent to which misconduct-related files and documents are retained consistently with VA’s applicable documentation requirements. (Recommendation 3) The Secretary of Veterans Affairs should direct OHRM to assess whether human-resources personnel adhere to basic principles outlined in VA Handbook 5021 when informing employees of their rights during the adjudication process for alleged misconduct. (Recommendation 4) The Secretary of Veterans Affairs should adhere to OPM and NARA guidance and establish a specific record-retention period for adverse action files. In doing so, the Secretary should direct applicable administration, facility, and program offices that have developed their own record-retention schedules to then adhere to the newly established record-retention period. (Recommendation 5) The Department of Veterans Affairs (VA) Inspector General should revise its policy to include a requirement to verify whether evidence produced in senior-official case referrals demonstrates that the six elements required in VA Directive 0701 have been addressed. (Recommendation 6) The Secretary of Veterans Affairs should direct the Office of Accountability and Whistleblower Protection (OAWP) to review responses submitted by facility or program offices to ensure evidence produced in senior-official case referrals demonstrates that the six elements required in VA Directive 0701 have been addressed. (Recommendation 7) The Secretary of Veterans Affairs should direct OAWP to issue written guidance on how OAWP will verify whether appropriate disciplinary action has been implemented for all substantiated misconduct by senior officials. (Recommendation 8) The Secretary of Veterans Affairs should direct OAWP to develop a process to ensure disciplinary actions proposed in response to findings of misconduct are recorded within appropriate information systems to maintain their relevance and value to management for making decisions and take steps to monitor whether the disciplinary actions are implemented. (Recommendation 9) The Secretary of Veterans Affairs should direct OAWP to issue written guidance on how OAWP will review the disposition of accountability actions for all substantiated misconduct cases involving senior officials resulting from investigations. (Recommendation 10) The Secretary of Veterans Affairs should implement internal controls to ensure that proper adherence to separation-of-duty standards involving the removal of an employee are consistent with policy. (Recommendation 11) The Secretary of Veterans Affairs should develop oversight measures to ensure all investigations referred to facility and program offices are consistent with policy and reviewed by an official independent of and at least one level above the individual involved in the allegation. To ensure independence, referred allegations of misconduct should be investigated by an entity outside the control of the facility or program office involved in the misconduct. (Recommendation 12) The VA Inspector General, in consultation with the Assistant Secretary of OAWP, should develop a process to ensure that OSC case numbers are linked to the investigative case number and final report. (Recommendation 13) The Secretary of Veterans Affairs should direct OAWP to develop a time frame for the completion of published guidance that would develop an internal process to monitor cases referred to facility and program offices. (Recommendation 14) The Secretary of Veterans Affairs should ensure that employees who report wrongdoing are treated fairly and protected against retaliation. (Recommendation 15) The Secretary of Veterans Affairs should direct OAWP to develop a process to inform employees of how reporting lines operate, how they are used, and how the information may be shared between the OSC, the OIG, OAWP, or VA facility and program offices when misconduct is reported. (Recommendation 16) We provided a draft of this report to the Department of Veterans Affairs (VA), VA Office of Inspector General (OIG), and the Office of Special Counsel (OSC) for review and comment. In its comments, VA concurred with nine of our recommendations and partially concurred with five (see app. VI for a copy of VA’s letter). Regarding our recommendations to the Inspector General, the OIG concurred with one recommendation and partially concurred with the other. The OIG also provided comments on our findings (see app. VII for a copy of the OIG’s letter). We received technical comments by e-mail from OSC’s Principal Deputy Special Counsel, which we incorporated in the report as appropriate. Regarding VA’s comments, in its response to our first recommendation that the Secretary develop and implement guidance to collect complete and reliable misconduct and associated disciplinary-action data department-wide, VA concurred and outlined steps it plans to take to address our recommendations. These steps include the creation of new policies to address blank data fields, lack of personnel identifiers, lack of standardization among fields, and accessibility issues related to misconduct and associated disciplinary-action data department-wide. The target date for system implementation, dependent on approved funding and acquisition-related requirements, is January 1, 2020. On our second recommendation, that the Secretary direct applicable facility and program offices to adhere to VA’s policies regarding employee-misconduct adjudication documentation, VA concurred. It stated that a memorandum will be distributed to reiterate facility and program-office requirements to adhere to VA Handbook 5021, Employee/Management Relations, no later than October 1, 2018. VA also concurred with our third recommendation, that the Secretary direct the Office of Human Resource Management (OHRM) to routinely assess the extent to which misconduct-related files and documents are retained. According to VA, OHRM will assess, during periodic Oversight and Effectiveness Service reviews, the extent to which misconduct- related files and documents are retained. The first assessment is to be incorporated into the fiscal year 2019 Oversight and Effectiveness Service schedule no later than November 1, 2018. VA concurred with our fourth recommendation, that the Secretary direct OHRM to assess whether human-resources personnel adhere to basic principles outlined in VA Handbook 5021. VA stated that OHRM will assess, during periodic Oversight and Effectiveness Service reviews, whether human-resources and administration personnel adhere to basic principles outlined in VA Handbook 5021. The first assessment is to be incorporated into the fiscal year 2019 Oversight and Effectiveness schedule no later than November 1, 2018. In its response to our fifth recommendation, that the Secretary adhere to Office of Personnel Management (OPM) and National Archives and Records Administration (NARA) guidance and establish a specific record- retention period for adverse-action files, VA concurred and indicated that the Human Resources and Administration Assistant Secretary will establish VA guidance regarding the retention period for adverse-action files. In addition, the Human Resources and Administration Assistant Secretary is to advise applicable administration, facility, and program offices that have developed their own record-retention schedules to adhere to the newly established directive. According to VA, the directive will be established no later than November 1, 2018. VA partially concurred with our seventh recommendation, that the Secretary direct departmental heads to review responses submitted by facility or program offices to ensure evidence produced in senior-official case referrals demonstrates that the six elements required in VA Directive 0701 have been addressed. VA stated that the process described in our report pertaining to OIG findings or results will be changed to require all such reports to be submitted to OAWP. VA also indicated that it expects to publish new guidance by October 1, 2018, that will require the Office of Accountability and Whistleblower Protection (OAWP) to review responses and recommendations from facilities or program offices. Given VA’s comments, we have revised our draft recommendation to have the Secretary direct OAWP, not the department heads, to ensure evidence demonstrates that the six elements have been addressed. VA also partially concurred with our eighth recommendation, that the Assistant Secretary of OAWP review all substantiated misconduct by senior officials to verify whether disciplinary action has been implemented. VA stated that all substantiated misconduct by senior leaders in VA is handled by OAWP from intake, through investigation, working with the proposing and deciding officials. VA also stated that it expects to publish written guidance by October 1, 2018, that will clarify how OAWP will work with the appropriate servicing personnel office to ensure that the recommended disciplinary actions decided are implemented for substantiated misconduct involving senior officials. Given VA’s comments, we have revised our draft recommendation to have the Secretary of Veterans Affairs direct OAWP to issue written guidance on how OAWP will verify that appropriate disciplinary action has been implemented for all substantiated misconduct by senior officials. VA partially concurred with our ninth recommendation, that the Assistant Secretary of OAWP develop a process to ensure disciplinary actions proposed are recorded within appropriate information systems. VA stated that the VA-wide discipline tracking system currently used by OAWP will eventually be phased out. It added that once the Human Resources Information System (HRSmart) is capable of capturing and recording similar data, it will be used for this purpose. Accordingly, we have not revised our draft recommendation. VA partially concurred with our 10th recommendation, that the Assistant Secretary of OAWP assess all misconduct cases involving senior officials to ensure investigative reports with findings of substantiated misconduct include recommendations for action. According to VA, OAWP has instituted several processes since our review. VA plans to issue written guidance that outlines the process for the review and disposition of appropriate accountability actions for allegations of misconduct by senior officials by October 1, 2018. Given VA’s comments, we have revised our draft recommendation to have the Secretary of Veterans Affairs direct OAWP to issue written guidance on how OAWP will review the disposition of accountability actions for all substantiated misconduct cases involving senior officials resulting from investigations. In its response to our 11th recommendation, that the Secretary implement internal controls to ensure that separation-of-duty standards involving the removal of an employee are consistent with policy, VA concurred. It stated that it will also establish and distribute internal controls to ensure that separation-of-duty standards involving the removal of an employee are consistent with policy no later than November 1, 2018. VA partially concurred with our 12th recommendation, that the Secretary take steps to ensure independence of referred allegations of misconduct by requiring that investigations be conducted outside the control of the facility or program office involved in the misconduct. VA stated that OAWP is responsible for recording, tracking, reviewing, and confirming the implementation of recommendations from audits and investigations. However, VA did not address how it will ensure the independence of the entity responsible for conducting an investigation. As we discuss in our report, during the review OAWP officials stated that the process of referring cases of misconduct back to facilities and program offices where the misconduct occurred will continue. Accordingly, we have not revised our draft recommendation and believe implementation of it will help ensure independence. VA concurred with our 14th recommendation, that the Assistant Secretary of OAWP develop a time frame for the completion of published guidance for the development of an internal process to monitor cases referred to facility and program offices. VA provided an expected date of October 1, 2018, for publishing the internal VA guidance, with the subsequent Directive and Handbook to be published as rapidly as staff coordination permits. In its response to our 15th recommendation, that the Secretary ensure that employees who report wrongdoing are treated fairly and protected against retaliation, VA concurred. It stated that OAWP and OSC have developed a functional process to ensure whistle-blower protections are implemented, but did not indicate what the process entails. The VA Secretary has also delegated authority to the Executive Director, OAWP, to put individual personnel actions on hold if the actions appear motivated by whistle-blower retaliation. VA added that OAWP has also hired two whistle-blower program specialists specifically to increase awareness of whistle-blower protections and work with individuals that disclose employee wrongdoing to ensure individuals are treated fairly and protected from retaliation for their disclosures. VA concurred with our 16th recommendation, that the Assistant Secretary of OAWP develop a process to inform employees of how reporting lines operate. VA stated that it will provide whistle-blower training to all employees on a biennial basis, which will include the reporting lines for disclosures of wrongdoing, the manner in which disclosures flow once they are made, how information is shared among the whistle-blower entities, and what protections exists for those who disclose wrongdoing. Regarding our recommendations to the Inspector General, the OIG partially concurred with our sixth recommendation, to revise its policy to include a requirement to verify whether evidence produced in senior- official case referrals demonstrates that the six elements required in VA Directive 0701 have been addressed. The OIG indicated that VA Directive 0701 is currently being updated to require a written or electronic signature from the person preparing the responses as an attestation that the specific requirements of the directive were met. The OIG also indicated in its letter that the OIG’s Hotline staff carefully review the case response but Hotline staff are not required to request an updated response from VA to address matters not necessary to the resolution to the referral. The OIG asserted that requesting an update would detract from the resources for other important VA activities. On page 4 of the OIG’s letter, the OIG states that Hotline analysts are allowed to exercise some discretion in accepting responses that may include minor departures from the six elements. We continue to believe that, in order to have a complete response to a referral, all six elements required by the directive should be addressed. In addition, Directive 0701 does not allow for the use of professional judgement to decide which elements to include or not to include in a response. While we agree that requiring a written or electronic signature from the person preparing the responses as an attestation will help ensure that the specific requirements of the directive were met, we maintain that not requiring Hotline analysts to review responses to ensure that all elements of the directive are addressed is inconsistent with the intent of the directive. In its response to our 13th recommendation, that the OIG develop a process to ensure that an OSC case number is linked to the investigative case number and the final report, the OIG concurred. It stated that it will engage with the Executive Director of OAWP to develop a process to ensure that OSC case numbers are linked to OIG and OAWP investigative case numbers, as appropriate, and linked to any final report of investigation. In addition to its response to recommendations, the VA OIG also raised a number of concerns with our findings. Page 1 of its letter summarizes some of these concerns and then provides more detail on each concern raised, starting on page 2. Our responses to each of these detailed concerns are provided below. The OIG stated that our report does not focus on the most important cases, but focuses primarily on case referrals regarding senior officials that were not handled by the OIG because the allegations were lower risk or because of resource constraints. In addition, the OIG stated that GAO risks presenting a skewed picture of the OIG’s oversight work. We disagree with this characterization of our findings. We requested that the OIG provide us with data from the OIG’s Master Case Index (MCI) information system that would allow us to select a sample of cases, in accordance with the scope of our review. The OIG was unable to provide the requested information due to several reasons. Instead, the OIG provided data from the OIG Hotline and Office of Investigations case- management systems (subsystems within MCI) that contained a limited number of fields for analysis and 23 cases pertaining to SES misconduct that were referred to VA for investigation during GAO’s period of review. Therefore, as we discuss in the report, we were only able to review the 23 senior-official misconduct cases included in our report because the OIG was only able to provide related documentation for these cases. The OIG stated that we only reviewed a sample of just 23 case referrals from fiscal years 2011 through 2014. As described, we reviewed all 23 senior-official misconduct cases that were referred to VA for investigation that the OIG was able to provide us, not a sample. The OIG stated that our report inaccurately states that the extracts received from the MCI information system contained missing information. We disagree with this characterization of our findings. Our review included a comprehensive assessment of the reliability of the OIG’s data. To conduct this assessment, we requested an explanation of each data field to clarify when fields are normally populated and how they are used. Our findings are consistent with the information provided in response to this request. For example, the OIG’s response to our data-reliability assessment stated that the data field used to identify the type of allegations being investigated should never be blank. However, we found that field to be blank in some cases in the data that were provided to us, though the OIG asserted that the MCI information system is a relational database where each case may be associated with multiple allegations and codes. In response to the OIG’s comments on our report, we requested supporting documentation to demonstrate that the fields analyzed during our period of review did not contain missing data. The OIG provided the MCI information system user’s manual that contains detailed procedures for accessing and entering data into the MCI information system, and a compilation of various internal documents. However, the documentation did not provide evidence of the completeness of data entered into the MCI information system as part of quality-assurance reviews performed by the OIG or other designated entity. Absent evidence of data-quality reviews aimed at assessing the accuracy and completeness of data contained in the MCI information system, we did not change the conclusions based on our previous analysis. The OIG stated that our report provides incomplete information regarding sampled cases and mischaracterized one of the OIG’s case referrals in the body of the report. We disagree with this characterization of our findings. Specifically, the OIG said that we inaccurately stated that a medical center director conducted the investigation into his own alleged misconduct and found no allegations were substantiated. The synopsis included in our report clearly articulates that the medical center director was named in the allegation for having received a similar complaint involving time and attendance abuse by a physician. The medical center director, who provided the response to the OIG, was implicated in the allegation as having not addressed a similar time and attendance complaint regarding the same physician 2 years earlier. The OIG did not provide any supporting documentation to demonstrate that the alleged time and attendance abuse allegations against the physician were not substantiated. The OIG stated that our report inaccurately stated that the medical center director conducted his own investigation of himself and found no allegations were substantiated. We disagree. In response to the OIG’s comments on our report, we requested that the OIG provide additional support used to determine that the medical center director did not investigate the allegation in which he was named. The additional case documentation provided by the OIG further reaffirmed our assessment that the medical center director performed his own investigation and found no allegations were substantiated. Additional documentation provided by the OIG indicated that the OIG referred the case to the Veterans Integrated Service Network (VISN) for a response. However, documentation we examined during the course of our audit, and the documentation provided in response to our draft report, indicates that the medical center director performed the investigation of the allegations and then the results were routed through the VISN back to the OIG. The OIG stated that routing the response through the VISN should address our concerns of independence. This process does not address our concerns regarding independence because VA Directive 0701 states that all responses to Hotline case referrals must contain evidence of an independent review by an official separate from and at a higher grade than the subject / alleged wrongdoer. In this case, the name of the medical center director who signed the facility response provided to the OIG was the same individual named in the allegations. The OIG stated that the report does not provide a balanced presentation of the rigor with which the OIG reviews all incoming Hotline contacts and case responses. We disagree with this characterization of our findings. As described above, the OIG was unable to provide comprehensive data to select a sample of OIG audits, evaluations, and inspections for review due to the limitations cited. We focused on misconduct involving senior officials consistently with the scope of our review and thoroughly reviewed all 23 senior-official misconduct cases that were referred to VA for investigation, which were the only cases that the OIG was able to provide. The OIG stated that the description for one of the cases included in appendix V of the draft report was incomplete because we misunderstood the OIG’s process. We disagree with this characterization. In response to the OIG’s comments on our report, we requested additional supporting documentation. The documentation provided reaffirmed our assessment that another medical center director performed his own investigation and found no allegations were substantiated. Similar to the case described above, the medical center director completed his own investigation and then routed the response through the VISN back to the OIG. In contrast to the previous case, however, the Hotline Workgroup reviewed the response to the OIG and found it to be insufficient. Specifically, the OIG noted that the medical center director who provided the response was the subject of the complaint, despite the response being directed to the VISN, and requested clarification. The VISN informed the OIG that it is not its policy for the complainant to have any involvement in the review and data submission on a case in which the complainant is involved. The VISN stated that while this did obviously occur in this instance, it has taken steps to ensure it does not occur in the future. The supporting evidence provided for the case included in appendix V also contradicts the OIG’s previous assertion that the routing of a response through the entity with oversight (VISN) over the medical center director should have addressed GAO’s concerns of independence. The OIG stated our report provides a misrepresentation of the OIG’s failure to follow internal policies for department responses. We disagree. According to OIG statements on page 4 of the OIG’s letter, Hotline analysts are allowed to exercise some discretion in accepting responses that may include minor departures from the six elements required in VA Directive 0701. We continue to believe that in order to have a complete response to a referral, all six elements required by the directive should be addressed. On the basis of our review, the OIG does not have an effective method to ensure that cases referred to VA are reviewed in accordance with VA Directive 0701. Out of the 23 cases we reviewed, only 4 included sufficient documentation needed to support VA’s findings, and we could not identify a case that contained all six elements required in VA Directive 0701. This suggests that the current OIG review process is not adequately resolving case referrals, as asserted by the OIG’s response. In addition, VA Directive 0701 does not currently include a provision that would allow Hotline analysts to deviate from the six required elements. As stated in our report, the OSC also raised concerns regarding 40 percent of disclosure cases that were referred to VA facility and program offices. The OIG stated that much of the information in the draft report is dated and ignores system updates, specifically several key Hotline-related process improvements since 2014. Although our review began in 2015, we disagree with this characterization of our findings. In our report, we included relevant improvements to demonstrate where the OIG was able to provide support for those improvements. For example, our report discusses: (1) a new process for communicating the scope of reviews that involve matters referred by the OSC to the Office of the Secretary, (2) a description on the VA website of the process for employees who wish to report criminal or other activity to the OIG, (3) a new Enterprise Management System, and (4) a new process for receiving whistle-blower disclosures by the Secretary. In response to the OIG’s comments on our report, we requested additional documentation for any systems, practices, or personnel changes that have been implemented since 2011, including improvements to Hotline-related processes since 2014 that were not included in our report. In response, the OIG provided a copy of the OIG’s organizational chart (current as of Apr. 23, 2018), described the oversight responsibilities of each OIG component, and summarized the pertinent staff positions within each component. On the basis of this documentation, we identified a new office (the Office of Special Reviews), a promotion, staff reassignments, and numerous vacancies during our review period. However, the OIG did not provide evidence of any measures to improve the MCI information system, case-referral processes, or relevant staff roles that were not already included in our report. As described above, the OIG was unable to provide comprehensive data to select a sample of OIG audits, evaluations, and inspections for our initial review due to the limitations cited. In response to the OIG’s comments on our report, we requested documentation related to any significant changes that have been made to the MCI information system that allows the OIG to identify all allegations of misconduct for export and analysis. The OIG provided additional information regarding overall departmental achievements that are highlighted in the OIG’s Semiannual Report to Congress, and other products from its website published between fiscal years 2011 through 2018. We recognize the OIG’s broader administrative and oversight work described in the published reports. However, this information does not address changes specifically made to the MCI information system that would enable the OIG to analyze cases pertaining to alleged misconduct by senior officials that we requested. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-5045 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Our objectives were to determine the extent to which the Department of Veterans Affairs (VA) (1) collects reliable information associated with employee misconduct and disciplinary actions that is accessible and could be used to analyze misconduct department-wide; (2) retains documentation that demonstrates VA adheres to its policies when adjudicating cases of employee misconduct; (3) ensures allegations of misconduct involving senior officials are reviewed in accordance with VA investigative standards, and these officials are held accountable; (4) has procedures to investigate whistle-blower allegations of misconduct; and the extent to which (5) data and whistle-blower testimony indicate whether retaliation for disclosing misconduct occurs at VA. For the first objective, we obtained VA employee misconduct data from 12 information systems operated by various VA components covering October 2009 through July 2017, where available. To determine the reliability of VA’s misconduct data, we analyzed the contents of the 12 information systems operated by various offices across VA. These data encompass each of the three major administrations that constitute VA— the National Cemetery Administration (NCA), Veterans Benefits Administration (VBA), and Veterans Health Administration (VHA). We selected the information systems based on our discussions with VA officials and staff that oversee the data and, hence, identified databases capable of collecting information pertaining to either employee misconduct or disciplinary actions. Data fields were selected based on whether they would provide beneficial information to better understand the disciplinary process. VA’s Personnel and Accounting Integrated Data (PAID) system, which was developed to track payroll actions, contains information about adverse disciplinary actions that affect employee salary department-wide. We obtained an extract of all adverse disciplinary actions from the PAID system. We assessed the reliability of each system for the purposes of identifying and tracking misconduct cases. To do this, we performed electronic tests on 12 information systems to determine the completeness and accuracy of the fields contained in the data files. We also submitted to the overseeing offices for all 12 information systems general data-quality questions regarding the purpose of the data, their structure, definitions and values for certain fields, automated and manual data-quality checks to ensure the accuracy of the data, and limitations. As discussed further, the data were generally not reliable for a department-wide assessment of all misconduct and disciplinary actions due to the lack of completeness and compatibility of the data across all information systems. VA staff could not confirm whether some of the missing data we identified were artifacts of the database extraction process VA used to assemble the data files we used in our review. Despite challenges with aspects of the data, we found the data sufficiently reliable for conducting analysis where fields were populated and field definition concurrence was obtained by program offices. For the second objective, we selected a generalizable stratified random sample of 544 misconduct cases from October 2009 through May 2015. Where available, we reviewed the employees’ disciplinary-action files and Electronic Official Personnel Folders to determine the extent to which VA’s actions were consistent with disciplinary policy outlined in VA Handbook 5021, Employee/Management Relations. These data encompass each of the three major administrations that constitute VA— NCA, VBA, and VHA. We determined the data to be sufficiently reliable for analysis of disciplinary actions affecting salary that resulted from misconduct that was not reported to supervisors directly from employees. Accordingly, our sample only includes misconduct cases that resulted in a change in salary or were reported to departmental organizations within the 12 information systems selected. We developed a data-collection instrument to document the results of our case reviews. We revised our data-collection instrument to address issues found during the course of our analysis, and developed a companion document that outlined the decision rules for reviewing cases. We also designated two primary reviewers to ensure the decision rules were consistently applied across all cases. Our review of laws and regulations revealed that disciplinary rules sometimes vary depending on whether employees fall under Title 5, Title 38, or hybrid Title 5 and Title 38 hiring authority. To minimize confusion associated with these differences, we incorporated criteria into our data- collection instrument. In addition, we were unable to obtain complete case information for 25 percent of the cases. For these cases, we obtained direct access to the Office of Personnel Management’s (OPM) Electronic Official Personnel Folders system to attempt to recover some of the missing information. Ultimately, we were unable to complete our review for 10 percent of cases in our sample because of missing files. In addition to reporting missing case information, we used our generalizable analysis results to project VA-wide figures for several data elements that were not in compliance with VA policy. Unless otherwise noted, estimates in this report have a margin of error of +/-7.4 percentage points or less for a 95 percent confidence interval. For the third objective, we analyzed data from the Office of Accountability Review (OAR) Legacy Referral Tracking List and VA Office of Inspector General (OIG) case-referral and investigative case-management systems, and we selected cases for in-depth review. We selected these two systems based on discussions with VA officials who were knowledgeable with databases that have the capacity to track misconduct information pertaining to senior officials. The OAR Legacy Referral Tracking List comprises referrals from January 2011 through May 2015. The OIG provided 23 case-referral files involving senior officials from calendar years 2011 through 2014. As part of our review of the OIG case files, we evaluated specific data elements contained in VA’s response documents using VA policy for referring and reviewing misconduct cases. We assessed the reliability of the OAR Legacy Referral Tracking List and OIG case-management systems for the purposes of identifying and tracking misconduct cases. To do this, we performed electronic tests on each database to determine the completeness and accuracy of the fields contained in the data files, including senior-official indicators. Where feasible, we opted to match individual datasets to PAID to determine whether disciplinary actions were administered as prescribed. We also submitted to OAR and the OIG general data-quality questions regarding the purpose of the data, their structure, definitions and values for certain fields, automated and manual data-quality checks to ensure the accuracy of the data, and limitations. On the basis of this information, we found the OAR data to be sufficiently reliable for conducting analysis where fields were sufficiently populated. For the OAR data, we matched the persons of interest to adverse-action files from PAID to determine whether adverse disciplinary actions were administered as prescribed during the available time frame (January 2011 through May 2015). We also obtained VA’s response documents for the 23 case-referral files provided by the OIG to evaluate whether VA was adhering to its own policy for referring and reviewing misconduct cases. Through our OAR Legacy Referral Tracking List analysis, we identified illustrative case examples of misconduct involving senior officials. Further, based on our evaluation of the 23 OIG case referrals using VA’s referral policy, we developed several illustrative case examples. For the fourth objective, we interviewed senior officials from VA and the OSC responsible for investigating whistle-blower complaints. We obtained the OSC’s procedures for referring disclosure complaints and VA’s policy for investigating these complaints once received at the agency. In addition, we obtained whistle-blower disclosure data from the Office of Special Counsel (OSC) covering calendar years 2010 through 2014. To determine the reliability of the data, we conducted electronic testing and traced data elements to source documentation. We determined the data to be sufficiently reliable to identify the total number of cases that were investigated by the OIG, or referred to facility and program offices. We also observed a course to assess VA’s training provided to VA employees conducting investigations. We identified 135 OSC disclosure cases for analysis based on two criteria: (1) they contained at least partial complainant information (i.e., the allegations were not anonymously reported or could be identified with supplemental information) and (2) they contained an indicator that the case had been closed by the OSC pending an ongoing investigation by VA or the OIG. These cases represent the universe of VA disclosures accepted by the OSC. Of the 135 disclosure cases referred to VA, 53 cases were referred to VA facility and program offices for further investigation. The remaining 82 disclosure cases indicated that they were investigated by the OIG. We reviewed the results of OSC’s assessment of investigative documentation developed by VA for these whistle-blower disclosure cases. For the fifth objective, we analyzed the 135 whistle-blower disclosure cases obtained from the OSC. These cases represent the universe of VA disclosures accepted by the OSC from calendar years 2010 through 2014, which were investigated by VA. We obtained an extract of year-end rosters from the PAID system as of September for fiscal years 2010 through 2014, with a final extract through May 30, 2015. Finally, we interviewed representatives from whistle-blower advocacy groups, as well as established whistle-blowers who disclosed wrongdoing or retaliation at VA and who were referred to us by one advocacy group. Of the 135 disclosures received by the OSC, a total of 129 employees made a total of 130 disclosures nonanonymously. For these 130 disclosure cases, we reviewed OSC and OIG investigative reports, as well as PAID roster files, to gather additional information to perform analysis of potential retaliation. We also interviewed six individual whistle- blowers with formal disclosure cases accepted by the OSC, indicating that the OSC had previously reviewed the case and determined that it contained sufficient evidence and merit to warrant further investigation. Our analysis of potential retaliation comprised two parts. First, we compared the 129 employees associated with the selected OSC cases to the PAID rosters using the complainants’ information to determine whether employees associated with the selected OSC cases were more likely to leave the agency. We identified the overall count and proportion (across years) of roster-matched employees who made a disclosure between fiscal years 2010 through 2014 but were not employed at VA the following fiscal year. Second, to determine whether employees associated with the selected OSC cases were more likely to receive disciplinary action, we also calculated the yearly totals and proportion of roster-matched employees identified above for whom a record existed in the PAID disciplinary action information system. We did this by comparing the proportion of employees who received one or more disciplinary actions in the year prior to the appearance in the roster, in the same fiscal year as the roster, and in the subsequent fiscal year. We also completed this analysis utilizing the PAID roster file to determine the yearly proportion of all VA employees who left the agency. On the basis of the results of our analysis, we reported by fiscal year the percentage of whistle-blowers that received disciplinary action or left VA at a higher rate than the overall VA population following a disclosure. To address all objectives, we interviewed senior officials from VA’s major components responsible for investigating and adjudicating cases of employee misconduct. We also reviewed standard operating procedures, policy statements, and guidance for staff charged with investigating and adjudicating allegations of employee misconduct. We conducted this performance audit from January 2015 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This data file is designed to track referrals made to OAR, including allegations of misconduct related to senior officials. Through our analysis of this spreadsheet, we identified 11 fields out of 92 that were missing information that could be used to analyze misconduct. Complainant #1 (First Name) (20 percent of 1,245 blank)— According to OAR, this field is populated when there is a known complainant for a matter. Some matters referred to OAR may be anonymously disclosed and not contain complainant information. This file also contains a case-origin field that specifies whether a case was anonymous. Our review of both the complainant and case-origin field indicated that only 11 percent of the complaints were generated from an anonymous source, and the remaining records should have included a complainant name. Disciplinary Action (96 percent of 1,245 blank)—This field should be populated to indicate whether a disciplinary action was taken after the completion of an investigation. Grade (97 percent of 1,245 blank)—According to OAR, this field should be populated with the grade of the Person of Interest (POI), if known. Our review of this field indicated that 97 percent were blank, therefore we were unable to analyze the variation in grade level for officials who were the subject of complaints. OAR Action (77 percent of 1,245 blank)—According to OAR, this field should be populated as an internal reference to describe what stage in the administrative process the matter was in when received. The lack of information did not allow for analysis of the types of actions taken for each case. Person of Interest (POI) (47 percent of 1,245 blank)—This field specifies the first and last name of the Department of Veterans Affairs (VA) employee who is the subject of an allegation. POI (Person of Interest) Last Name 1–5 (51 to 99 percent of 1,245 blank)—This field specifies the last name of VA employee who is the subject of an allegation. There are a total of five person-of-interest (POI) fields for each matter. According to OAR, blank POI fields occur when the case has fewer than five POIs or the POI was not specified in the matter referred. Our review of the five POI fields indicated that more than half of the records did not contain at least one POI because no individual was specified. The lack of information did not allow for further investigation of senior-level officials involved in misconduct. Proposed Action (97 percent of 1,245 blank)—According to OAR, this field should be populated to notify OAR staff if any disciplinary action was proposed. Our review of this field indicated that 97 percent were blank, suggesting that very few high-level officials received corrective action, or the field was not consistently completed for each record. Due to the large share of blank values, the data posed limitations when analyzing how many senior officials received corrective action as a result of a complaint. This data file is designed to track misconduct and disciplinary actions taken against VA employees. Through our analysis of this spreadsheet, we identified 9 fields out of 21 that were missing information that could be used to analyze misconduct. Action Taken (3 percent of 9,851 blank)—According to OAR, this field should be populated with the action that the deciding official takes, with the exception of pending actions. If there is a pending action, this field will remain blank. Our review of the action-taken field found three records that were annotated as a “pending decision” within this field, which indicates that there is an option for entering information into this field when there is an action pending and the field should never be blank. Admin Leave (30 percent of 9,851 blank)—According to OAR, this field should be populated if an employee is placed on administrative leave while an adverse action is pending. If an employee is not placed on administrative leave, the field may be left blank. Our review of the admin-leave field found that about 66 percent of the records were annotated as “no” within this field, which indicates that there is an option for entering information into this field when an employee was not placed on administrative leave. Date Proposed (11 percent of 9,851 blank)—According to OAR, this field is used when an adverse action is proposed for an employee. There are some actions that are not proposed, such as probationary terminations or admonishments that may be taken without being proposed, and therefore result in this field being blank. Our analysis found that about 95 percent of these records containing blank proposed date fields also had an entry in the proposed adverse-action field, which contained such entries as removals, suspensions, and demotions that require a proposed date. Deciding Official (14 percent of 9,851 blank)—According to OAR, this field should be populated with the name of the official who issued the action taken. Effective Date (5 percent of 9,851 blank)—According to OAR, this field should be populated with the date of the action taken. Some entries will not have an effective date if an entry is pending decision. Also, if no action is taken, the decision was counseling, or the proposed action was rescinded, this field may not have an effective date. Our review found that about 14 percent of the cases that included adverse actions, such as a suspension, removal, reassignment, or demotion, and that should have included a date of action, were blank. Offense 2 and 3 (79 and 95 percent of 9,851 blank)—According to OAR, this field tracks the second- and third-most-significant charge against the employee when applicable. Proposing Official (16 percent of 9,851 blank)—According to OAR, this field should be populated with the name of the official who makes the proposed adverse action. Instances where a proposing official has left the agency at the time of entry and could not be found in the lookup feature that relies on the e-mail global address list may produce blank fields. Also, disciplinary actions that were taken without proposal would not have a proposing official. In these instances, the human-resources specialists who enter the actions are instructed to include the name in the other-comments box. Our review of these records indicated that a majority of records lacking an entry in the proposing official field also lacked an annotation in the other- comments field to accurately identify the proposing official. Settlement (14 percent of 9,851 blank)—According to OAR, this field tracks whether a settlement agreement occurred. This data file is designed to collect allegations of criminal activity, waste, abuse, and mismanagement received by the OIG Hotline Division. Through our analysis of this information system, we identified one field out of seven that was missing information that could be used to analyze misconduct. Nature of Complaint (54 percent of 896 blank)—According to the OIG, this field should contain a brief description of the issue that most closely matches the allegation. Each case can have more than one nature of complaint and corresponding administrative action, if any. OIG officials stated that this field identifies the type of allegations being investigated and should never be blank. Our review of these cases found that over half of the cases involving the OIG contained entries for administrative action taken, but the nature-of-complaint fields corresponding to these actions were blank. This data file is designed to track misconduct and disciplinary action taken against VBA employees. Through our analysis of this spreadsheet, we identified 3 fields out of 20 that were missing information that could be used to analyze misconduct. Alleged Offense 2 and 3 (92 and 99 percent of 1,375 blank)— According to VBA officials, this field should be populated if an individual is charged with multiple offenses, or has additional offenses in the same reporting period. In most instances, there is typically only one offense at the time of reporting. Sustained (52 percent of 1,375 blank)—According to VBA, this field should be populated if an offense is sustained at the time of reporting. This data file is designed to track all allegations of misconduct and associated disciplinary actions taken against VA employees. Through our analysis of this spreadsheet, we identified 8 fields out of 34 that were missing information that could be used to analyze misconduct. Deciding Official (3 percent of 5,571 blank)—According to OAWP, this field should be populated with the name of the official who makes the decision for adverse action. Detail Position (89 percent of 5,571 blank)—According to OAWP, this field should be populated with the position an employee was detailed to if removed from official position. Offense 2 and 3 (69 and 91 percent of 5,571 blank)—According to OAWP, this field tracks the most-significant charges against the employee. If there are fewer than three charges, these fields are left blank. Offense 1 Sustained (14 percent of 5,571 blank)—According to OAWP, this field should be populated if an individual’s first offense has been sustained. Offense 2 and 3 Sustained (73 and 91 percent of 5,571 blank)— According to OAWP, these fields should be populated if an individual’s second and third offenses have been sustained. The majority of cases only involve one offense. Proposing Official (9 percent of 5,571 blank)—According to OAWP, this field should be populated with the name of the official who makes the proposed adverse action. This data file tracks Equal Employment Opportunity (EEO) discrimination complaints. Through our analysis of this information system, we identified 1 field out of 66 that did not have standardization that could be useful to analyze misconduct. Employment—We found that the values for this field were not mutually exclusive, or independent of one another. For example, this field includes two distinct categories of information: employment status, such as full time or part time; and hiring authority, such as Title 5 or Title 38. This method of storing information resulted in undercounting each of the separate values due to the system’s failure to account for expected overlap. For instance, an employee could be both a full-time and Title 5 employee and the field only tracks one or the other. ORM officials stated that this field has since been modified to capture more options to account for the overlap. This data file is designed to track misconduct and disciplinary actions taken against Department of Veterans Affairs (VA) employees. Through our analysis of this spreadsheet, we identified 1 field out of 21 that did not have standardization that could be useful to analyze misconduct. Position—We found the VA-Wide Adverse Employment Action Database contained variations within this field, such as multiple values for the “Cemetery Caretaker” position name. According to OAR, this field is a free-text field, and the office conducts manual searches to review and analyze position titles when needed. Our review found that the different variations in position titles made it difficult to successfully determine the frequency and nature of allegations by position. This is an information system designed to collect allegations of criminal activity, waste, abuse, and mismanagement received by the OIG Hotline Division. Through our analysis of this data file, we identified 1 field out of 7 that did not have standardization that could be useful to analyze misconduct. Nature of Complaint—Our review of the Master Case Index file found variations of similar values in this field. For example, this field contained 21 different claim types pertaining to similar types of fraud, which made it difficult to assess the frequency and nature of claims entered into the system. OIG officials stated that they do not attempt to account for these variations or assess the frequency of use because they are assigned based on a “best match” to the allegations of the case. This data file is designed to track misconduct and disciplinary action taken against VBA employees. Through our analysis of this spreadsheet, we identified 1 field out of 20 that did not have standardization that could be useful to analyze misconduct. Position—Our review found some duplication and overlapping values among this field. For example, the position title for “service representative” contained 21 similar categories with numerous variations in spelling (i.e., Veteran Service Representative vs. Veterans Service Representative, and Rating Veteran Service Representative vs. Rating Veterans Service Representative). We were unable to verify the number of distinct positions due to the lack of standardization within this field. This data file is a tracking spreadsheet for monitoring misconduct and disciplinary action workload. Through our analysis of this spreadsheet, we identified 5 fields out of 12 that did not have standardization that could be useful to analyze misconduct. Action Proposed/Decided/Taken—We were unable to analyze this data field because the action taken was tracked in one single field and updated with the most-recent action, rather than each distinct action being entered in a separate field. Consequently, we were not able to distinguish those cases where corrective action may have been taken, to verify whether the corrective action had been implemented. Current Status—We were unable to analyze this data field because it was not a standardized field. For example, we were unable to determine the total number of cases that were closed, open, or pending due to the variations in the data field (e.g., Open, open, open – pending, open-pending). Full Name of Employee, Grievant, Appellant, Complainant, Non- Employee—We were unable to distinguish whether the individual filing a complaint was an employee, grievant, appellant, complainant, or nonemployee because the information entered into this single field only provided the employee’s full name and did not provide a distinction as to which category the record was assigned, as indicated by the field name. NCA Facility—We were unable to analyze this data field because it was not a standardized field. For example, we were unable to run demographic information on the different facilities involved because this field contained erroneous information. Examples of erroneous information included the name of the Memorial Service Network in one case, and the region, rather than the facility name, in another. Supervisor Name—We were unable to analyze this data field because it was not a standardized field. For example, we were unable to determine the total number of supervisors that were associated with each case due to the variations in the names entered within this field, which included misspelled first or last names, addition/omission of middle initials, or no first name. This data file is a tracking spreadsheet for all allegations received by the VA Secretary regarding misconduct, patient care, or other wrongdoing. Through our analysis of this spreadsheet, we identified 1 field out of 9 that did not have standardization that could be useful to analyze misconduct. Subject—Our review of this tracking spreadsheet found over 380 different possible categories that could be assigned to one record. These categories contained a significant number of variations. For example, we found 38 different categories that contained possible EEO-related issues such as “EEO/Whistleblower,” “Potential EEO,” and “EEO Violations.” We were unable to distinguish the different subject categories for this field due to the lack of standardization. CSRT officials stated that ExecVA reports contain only data corresponding to specific search criteria. This is an information system for tracking allegations of misconduct at all VA facilities that include violation of law and misdemeanors. Through our analysis of this data file, we identified 3 fields out of 29 that did not have standardization that could be useful to analyze misconduct. Classification—We found that this field contained at least three different variations of assault categories (i.e., assault, assault-other, and assault-aggravated). VAPS officials stated that this field is determined and entered by the user. Crime Type—We found this field contained at least five different variations of alcohol-consumption categories, such as “entering premises under the influence” and “alcohol – under the influence.” VAPS officials stated that this field is determined and entered by the user. Final Disposition—We found this field contained at least two different variations of charge type (i.e., charged, charged – Issued Ticket), six different variations of open type (for example, open/referred to Court, open/cvb), and two different variations of closed type (i.e., closed, case closed). VAPS officials stated that this field is determined and entered by the user. This data file is designed to track all allegations of misconduct and associated disciplinary actions taken against VA employees. Through our analysis of this spreadsheet, we identified 1 field out of 34 that did not have standardization that could be useful to analyze misconduct. Position Title—We found this field contained at least 15 different variations of Registered Nurse, such as “Registered Nurse,” “Staff RN,” and “RN.” Allegations surrounding inadequate staffing, patient care, and safety at a Department of Veterans Affairs (VA) emergency room were investigated by the medical center director of the facility. The medical center director found that the inadequate patient care and safety issue was unsubstantiated based on a review of patient safety incidents for the last 6 months. The medical center director did not provide a copy of her report review to support this conclusion. She also indicated that an external consultant was hired to assess staffing issues, and found generally that improvements could be made for staffing to address surge capacity. The director stated the medical center was in the process of implementing the recommendations made by the consultant, but her response did not discuss the specific improvements planned or include the external consultant’s report. A fact-finding was performed by a panel comprised of VA Connecticut Healthcare System officials in response to alleged violations of law, gross mismanagement, and waste of funds that included the improper billing of services for a Las Vegas conference and paying contracts through a VA nonprofit corporation to handle such expenditures. The allegations specifically requested a cost-benefit analysis for the conference location. The response received from the program office stated that an outside accounting firm performs an annual financial audit of the VA nonprofit corporation and found no material issues. Neither a copy of the annual financial audit nor a cost-benefit analysis was provided in the response as support. Additionally, the response did not address allegations regarding the status of several essential positions vacated over the prior 3 years. Allegations involved time-and-attendance abuse by a physician who was accused of not responding to calls from peers or coming into the clinic, in favor of his private practice. According to the complainant, physician assistants (PA) examine the physician’s patients at the clinic for him. The medical center director, who was also named in the allegation as having received a similar complaint against the physician 2 years earlier, reviewed the case against the physician and himself. The medical center director’s response claimed that the location indicated in the allegation was not a private practice, but rather a location where the physician reviews medical records and sometimes serves as an expert witness. He did not provide evidence to support his claim. The medical center director also stated that he had not received any reports against the physician for missed calls or clinics and that PAs are expected to participate in these activities. However, he did not provide the physician’s work log, or the PA position descriptions showing that they are allowed to perform these functions autonomously. Finally, the medical center director claimed he did not recall the allegation made against the physician 2 years prior and neither formally substantiated nor disproved the current allegations against the physician. No recommendations were made. The medical center director was accused of hiring an unqualified individual to a Quality Manager position due to their romantic relationship. The response received from the human-resources consultant noted that it was unusual to find a Nurse II manager with only an associate’s degree, but was not illegal, and the employee was qualified based on prior experience. Concerns were also raised concerning the medical center director’s use of over $400 in government funds to “soundproof” the Quality Manager’s office, including having panels attached to one wall and the hollow office door replaced with a solid door. The Chief of Engineering Services was interviewed regarding the request and stated it was an odd request, and the first time he was asked to soundproof an administrative employee’s office. The response provided by the program office did not address why the director used government funds to soundproof the Quality Manager’s office. The response provided also did not address whether recommendations that the Quality Manager’s retention allowance be reviewed for compliance and that she be counseled for appropriate office dress code were implemented. The medical center director was alleged to have misrepresented a plan to track and provide mental-health services to veterans in non-VA hospitals and created a hostile work environment against African-American veterans and employees. The medical center director investigated the allegations against himself and provided a response that was eventually submitted late to the OIG. His response indicated that a review was completed and all allegations were unsubstantiated. Several documents provided with his response showed that only 12 contacts were made to veterans with mental-health care needs during the requested 24-month period, the percentage of patients experiencing wait times greater than 14 days before receiving mental-health services averaged 18 percent, and two veteran suicides occurred. The medical center director did not address allegations of creating a hostile work environment for African American veterans and employees. The medical center director improperly reannounced a vacancy in order to hire an individual with whom he allegedly had a close personal relationship to an Assistant Director position. He also requested the master key to the facility be issued to her against regulations. The allegation involving the master key was substantiated, but the Deputy Under Secretary who conducted the investigation stated that while there was no record of the key being returned, the key was returned and the general engineer brought the facility into compliance with VA regulations. Nonetheless, the Deputy Under Secretary found that a master key was issued in violation of policy, but no recommendations were made to the medical center director for corrective action. Allegations involved false patient wait-time documentation and abuse of authority. Specifically, a medical center director instructed staff to falsify patient wait times between follow-up appointments in order to meet VA’s 14-day timeliness metric. The investigation concluded that the false documentation allegation was substantiated, but attributed the cause to staff not understanding how to enter a follow-up appointment date into the system. It was also concluded that the correction of several hundred dates in the system improved the performance of the department for the national wait-time metric. However, no documentation was provided to (1) prove the medical center director had not abused his authority by instructing staff to review wait times greater than 14 days to determine how they could be reduced, and (2) support the conclusion that the original wait times were entered in error. In addition to the contact above, Dave Bruno (Assistant Director), Erica Varner (Analyst in Charge), Hiwotte Amare, Chris Cronin, Carrie Davidson, Ranya Elias, Colin Fallon, Mitch Karpman, Grant Mallie, Anna Maria Ortiz, Sabrina Streagle, Reed Van Beveren, and April Van Cleef made key contributions to this report.", "summary": "VA provides services and benefits to veterans through hospitals and other facilities nationwide. Misconduct by VA employees can have serious consequences for some veterans, including poor quality of care. GAO was asked to review employee misconduct across VA. This report reviews the extent to which VA (1) collects reliable information associated with employee misconduct and disciplinary actions, (2) adheres to documentation-retention procedures when adjudicating cases of employee misconduct, (3) ensures allegations of misconduct involving senior officials are reviewed according to VA investigative standards and these officials are held accountable, and (4) has procedures to investigate whistle-blower allegations of misconduct; and the extent to which (5) data and whistle-blower testimony indicate whether retaliation for disclosing misconduct occurs at VA. GAO analyzed 12 information systems across VA to assess the reliability of misconduct data, examined a stratified random sample of 544 misconduct cases from 2009 through 2015, analyzed data and reviewed cases pertaining to senior officials involved in misconduct, reviewed procedures pertaining to whistle-blower investigations, and examined a nongeneralizable sample of whistle-blower disclosures from 2010 to 2014. The Department of Veterans Affairs (VA) collects data related to employee misconduct and disciplinary actions, but fragmentation and data-reliability issues impede department-wide analysis of those data. VA maintains six information systems that include partial data related to employee misconduct. For example, VA's Personnel and Accounting Integrated Data system collects information on disciplinary actions that affect employee leave and pay, but the system does not collect information on other types of disciplinary actions. The system also does not collect information such as the offense or date of occurrence. GAO also identified six other information systems that various VA administrations and program offices use to collect specific information regarding their respective employees' misconduct and disciplinary actions. GAO's analysis of all 12 information systems found data-reliability issues—such as missing data, lack of identifiers, and lack of standardization among fields. Without collecting reliable misconduct and disciplinary action data on all cases department-wide, VA's reporting and decision making on misconduct are impaired. VA inconsistently adhered to its guidance for documentation retention when adjudicating misconduct allegations, based on GAO's review of a generalizable sample of 544 out of 23,622 misconduct case files associated with employee disciplinary actions affecting employee pay. GAO estimates that VA would not be able to account for approximately 1,800 case files. Further, GAO estimates that approximately 3,600 of the files did not contain required documentation that employees were adequately informed of their rights during adjudication procedures—such as their entitlement to be represented by an attorney. The absence of files and associated documentation suggests that individuals may not have always received fair and reasonable due process as allegations of misconduct were adjudicated. Nevertheless, VA's Office of Human Resource Management does not regularly assess the extent to which files and documentation are retained consistently with applicable requirements. VA did not consistently ensure that allegations of misconduct involving senior officials were reviewed according to investigative standards and these officials were held accountable. For example, based on a review of 23 cases of alleged misconduct by senior officials that the VA Office of Inspector General (OIG) referred to VA facility and program offices for additional investigation, GAO found VA frequently did not include sufficient documentation for its findings, or provide a timely response to the OIG. In addition, VA was unable to produce any documentation used to close 2 cases. Further, OIG policy does not require the OIG to verify the completeness of investigations, which would help ensure that facility and program offices had met the requirements for investigating allegations of misconduct. Regarding senior officials, VA did not always take necessary measures to ensure they were held accountable for substantiated misconduct. As the figure below shows, GAO found that the disciplinary action proposed was not taken for 5 of 17 senior officials with substantiated misconduct. As a result of June 2017 legislation, a new office within VA—the Office of Accountability and Whistleblower Protection—will be responsible for receiving and investigating allegations of misconduct involving senior officials. VA has procedures for investigating whistle-blower complaints, but the procedures allow the program office or facility where a whistle-blower has reported misconduct to conduct the investigation. According to the OIG, it has the option of investigating allegations of misconduct, or exercising a “right of first refusal” whereby it refers allegations of misconduct to the VA facility or program office where the allegation originated. VA does not have oversight measures to ensure that all referred allegations of misconduct are investigated by an entity outside the control of the facility or program office involved in the misconduct, to ensure independence. As a result, GAO found instances where managers investigated themselves for misconduct, presenting a conflict of interest. Data and whistle-blower testimony indicate that retaliation may have occurred at VA. As the table below shows, individuals who filed a disclosure of misconduct with the Office of Special Counsel (OSC) received disciplinary action at a much higher rate than the peer average for the rest of VA in fiscal years 2010–2014. Additionally, GAO's interviews with six VA whistle-blowers who claim to have been retaliated against provided anecdotal evidence that retaliation may be occurring. These whistle-blowers alleged that managers in their chain of command took several untraceable actions to retaliate against the whistle-blowers, such as being denied access to computer equipment necessary to complete assignments. GAO makes numerous recommendations to VA to help enhance its ability to address misconduct issues (several of the recommendations are detailed on the following page). GAO recommends, among other things, that the Secretary of Veterans Affairs develop and implement guidance to collect complete and reliable misconduct and disciplinary-action data department-wide; such guidance should include direction and procedures on addressing blank fields, lack of personnel identifiers, and standardization among fields; direct applicable facility and program offices to adhere to VA's policies regarding misconduct adjudication documentation; direct the Office of Human Resource Management to routinely assess the extent to which misconduct-related files and documents are retained consistently with applicable requirements; direct the Office of Accountability and Whistleblower Protection (OAWP) to review responses submitted by facility or program offices to ensure evidence produced in senior-official case referrals demonstrates that the required elements have been addressed; direct OAWP to issue written guidance on how OAWP will verify whether appropriate disciplinary action has been implemented; and develop procedures to ensure (1) whistle-blower investigations are reviewed by an official independent of and at least one level above the individual involved in the allegation, and (2) VA employees who report wrongdoing are treated fairly and protected against retaliation. GAO also recommends, among other things, that the VA OIG revise its policy and require verification of evidence produced in senior-official case referrals. VA concurred with nine recommendations and partially concurred with five. In response, GAO modified three of the recommendations. The VA OIG concurred with one recommendation and partially concurred with the other. GAO continues to believe that both are warranted.", "document_type": "gao"}
{"report": "Individuals who have a limited ability to care for themselves due to physical, cognitive, or mental disabilities or conditions may require a range of LTSS that include hands-on assistance with, or supervision of, daily tasks. Individuals with LTSS needs range from young children to older adults, and they have varying degrees of difficulty performing without assistance (1) activities of daily living (ADL), such as bathing, dressing, toileting, and eating, or (2) instrumental activities of daily living (IADL), such as preparing meals, housekeeping, using the telephone, and managing money; they may require full or partial assistance to complete some—or all—of the ADLs and IADLs. LTSS are generally provided in two settings: (1) institutional settings, such as nursing facilities and intermediate care facilities for individuals with intellectual disabilities; and (2) home and community settings, such as homes or assisted living facilities. LTSS provided in home- and community-based settings comprise a wide range of services and supports to help individuals remain in or return to their homes or communities. HCBS include personal care services to provide assistance with ADLs or IADLs, adult day care services, certain home modifications that allow beneficiaries to remain in their home, non-medical transportation, respite care for caregivers, and case management services to coordinate services and supports. Direct care workers— personal care aides, homemakers, companions, and others—provide the majority of the paid care for individuals with LTSS needs. Medicaid provides states with a number of options for providing HCBS, including through state plan benefits and through waivers and demonstrations. Since 1975, states have had the option to offer personal care services under their state Medicaid plan, which covers assistance with ADLs and IADLs, either at home or in another location. States also have the option to cover HCBS for Medicaid beneficiaries through waivers and demonstrations, under which states may, for example, provide services not otherwise covered by Medicaid to designated populations who may or may not otherwise be eligible for Medicaid services. States have the option to seek approval for waivers and demonstrations that allow them to target HCBS to specific populations or conditions, limit the availability of those services geographically, and limit the number of individuals served through the use of enrollment caps—actions that are generally not otherwise allowed under Medicaid, but may enable states to control costs. Table 1 below summarizes key characteristics of selected state plan and waiver authorities that states can use to provide HCBS. The 1915(c) waiver, named for the statutory provision authorizing it in the Social Security Act, is the primary means through which states provide HCBS coverage for Medicaid beneficiaries. Added as an option in 1981, these waivers account for the majority of Medicaid HCBS expenditures. Under 1915(c) waivers, states may cover a broad range of services for participants, as long as these services are required to prevent institutionalization. Therefore, to be eligible, individuals must demonstrate the need for an institutional level of care by meeting state eligibility requirements for services in an institutional setting, such as a nursing facility. Prior to 2014, states were required to have multiple 1915(c) waivers if they chose to target different populations—using, for example, one waiver for individuals with developmental disabilities and another for individuals with physical disabilities. However, beginning in March 2014, CMS permitted states to combine target groups within a single 1915(c) waiver as long as the services offered were the same for all groups. States’ 1915(c) waivers are required by federal law to be cost neutral; that is, states must show that the average Medicaid expenditures for the services provided under the waiver are equal to or less than what average expenditures would be if that same population were to be served in an institutional setting. States may apply cost neutrality in the aggregate across all waiver participants—meaning that some individuals can be more costly to serve in home- and community-based settings than in an institution—or individually, meaning that spending for each waiver participant can be no more than what it would cost to serve the individual in an institution. States also have the option to limit the number of beneficiaries served under a 1915(c) waiver by establishing a predefined enrollment cap. States with enrollment caps may establish a waiting list, and a nationwide survey of state Medicaid officials estimated that there were over 600,000 individuals on waiting lists for 1915(c) waiver services in 2015. The newest Medicaid option for covering HCBS—the Community First Choice state plan option under section 1915(k) of the Social Security Act—was established by the Patient Protection and Affordable Care Act in 2010. Under this option, states must provide personal care services to assist beneficiaries with ADLs and IADLs and services to support the acquisition of skills necessary for beneficiaries to accomplish these daily activities, among other things. The Community First Choice option also allows for the coverage of other services, such as the costs associated with moving a beneficiary from an institution to a home- or community- based setting. Like the 1915(c) waiver, this option is limited to individuals who meet the state’s institutional level-of-care criteria, but unlike the 1915(c) waiver, enrollment in a 1915(k) Community First Choice program cannot be capped. States that offer this benefit receive a 6 percentage point increase in their federal medical assistance percentage for services provided under this option. Medicaid spending on LTSS is significant, representing about 30 percent of total Medicaid program spending in fiscal year 2016, and the percentage of LTSS spending used for HCBS has grown over time. CMS’s annual reports on LTSS expenditures have shown that national spending for HCBS as a percentage of LTSS spending surpassed the percentage spent on institutional care in fiscal year 2013 and has continued to grow, climbing to 53 percent in fiscal year 2014, 54 percent in 2015, and 57 percent in 2016. At the state level, 29 states spent more on HCBS than institutional care in fiscal year 2016, but the percentage of HCBS spending varied widely across states. (See fig. 1.) As states’ options for providing HCBS within Medicaid and spending on HCBS have grown, Congress has also authorized temporary programs aimed at increasing the provision of HCBS. Money Follows the Person was established by the Deficit Reduction Act of 2005 as a demonstration grant program to support states’ transition of eligible individuals who want to move from institutional settings back to the community. As of September 2016, CMS had awarded a total of about $3.7 billion in grant funding to 44 states. According to CMS, as of December 2016, funding from the program had been used to support the transition of more than 75,000 individuals back into the community. Authorization for the Money Follows the Person program expired at the end of fiscal year 2016, but states have through fiscal year 2018 to transition new beneficiaries and through fiscal year 2020 to spend any remaining grant funds. The Balancing Incentive Program was created by the Patient Protection and Affordable Care Act to help states rebalance their provision of LTSS toward greater use of HCBS. Under the program, states that spent under 25 percent of their LTSS expenditures on HCBS in fiscal year 2009 qualified for a 5 percentage point increase in their federal medical assistance percentage for state HCBS expenditures. States that spent between 25 and 50 percent were eligible for a 2 percentage point increase. In return, states agreed to increase the percentage of LTSS spending for HCBS to achieve a specific benchmark. Under the program, CMS provided $2.4 billion in enhanced federal matching payments over 4 years (October 2011 – September 2015) to 21 states. According to CMS, 15 of the 21 states met their balancing benchmark by September 2015, when the program ended. States can choose among delivery systems, such as fee-for-service and MLTSS (i.e., managed care), to provide HCBS. Under fee-for-service, states pay providers directly and on a retrospective basis for each covered service they deliver. In contrast, in MLTSS, states contract with MCOs to provide a specific set of covered services to beneficiaries in return for one fixed periodic payment per beneficiary, typically per member per month. These payments are referred to as capitation payments. The use of MLTSS has increased over time; MLTSS spending rose from $10 billion in fiscal year 2012 to about $39 billion in 2016. According to a 2018 CMS report, 24 states had implemented 41 MLTSS programs as of August 2017, and there were about 1.8 million Medicaid beneficiaries enrolled in MLTSS programs. The structure of the 26 HCBS programs we reviewed in selected states reflected decisions about which populations states wanted to cover, whether to limit eligibility for or enrollment in HCBS programs, and whether the state wanted to provide HCBS through managed care (i.e., MLTSS). In two states, settlements resulting from litigation also affected the structure of HCBS programs. Four of our five selected states—Florida, Mississippi, Montana, and Oregon—had multiple HCBS programs (21 in total) that targeted specific populations. The fifth state, Arizona, used one program to provide HCBS to individuals who are aged or disabled and those with intellectual or developmental disabilities. The remaining four programs were not targeted to specific populations. (See appendix I for a list of the HCBS programs and populations served in each of the selected states.) All four of Florida’s HCBS waiver programs targeted specific populations, such as individuals with intellectual or developmental disabilities and individuals with familial dysautonomia. Florida’s HCBS program for intellectually and developmentally disabled individuals included an individual budgeting model through which the beneficiaries and their guardians could choose which services they received and which providers would deliver the services. Such individual budgeting also allowed beneficiaries the flexibility to make adjustments in services and providers as their needs changed. All of Mississippi’s six HCBS programs provided services to targeted populations, including the aged or disabled and individuals with severe orthopedic and neurological impairment. Two of the programs were targeted to individuals with intellectual or developmental disabilities, including a state plan benefit that provided services that help beneficiaries develop daily living and social skills, as well as opportunities to participate in community activities, and promote an individual’s ability to obtain and maintain employment. Four of Montana’s six HCBS programs targeted specific populations, including those with severe disabling mental illness and children with autism. Officials from Montana told us that one of the reasons for implementing the program for children with autism was to provide early intensive treatment to lessen the degree of services needed later in life. In addition to its programs for specific populations, Montana also operated two programs that provided personal care services to a broader Medicaid population requiring assistance with ADLs and IADLs—the personal care state plan benefit and the Community First Choice program. Montana officials told us that one of the factors the state considered when implementing the Community First Choice program was the 6 percent enhanced federal match for this program; before implementing the program, Montana projected that the increase in federal funds would allow the state to serve an additional 150 beneficiaries per year. Oregon had nine different HCBS programs, seven of which targeted specific populations, including children with LTSS needs and different populations of individuals with intellectual or developmental disabilities. Like Montana, Oregon also had two personal care services programs that served all eligible Medicaid beneficiaries—a state plan benefit and a Community First Choice program. Oregon officials explained that they were also attracted to the Community First Choice option due to the enhanced federal match, as well as the opportunity to expand the array of services available. For example, in addition to providing personal care services, Oregon’s Community First Choice program also covers costs associated with transitioning beneficiaries from institutions to home- or community-based settings, such as the first month’s rent, utility deposits, bedding, and basic kitchen supplies. All five of the selected states had at least 1 HCBS program that limited eligibility to individuals who require an institutional level of care. Specifically, 22 of the 26 HCBS programs we reviewed limited eligibility to this population. The remaining 4 programs—in Mississippi, Montana, and Oregon—were state plan HCBS or personal care services programs, which were operated under authorities that do not permit limiting enrollment to individuals with an institutional level-of-care need. Four of the selected states—Florida, Mississippi, Montana, and Oregon— had enrollment caps for 1 or more of their HCBS programs, namely all of the 19 HCBS programs operated under 1915(c) waivers. Some of the state officials we spoke with told us that they used historical data on utilization, cost-of-care per person, and the annual number of requests for enrollment, as well as information on available funding, when determining their enrollment caps. However, states can also obtain CMS approval to change their enrollment caps over time to respond to increased demand or to include additional populations. Oregon officials told us that the state has generally been able to increase the enrollment cap for the aged or disabled program as needed in order to meet demand. Montana officials told us that the enrollment cap for their HCBS program for individuals with intellectual or developmental disabilities—originally limited to children— was increased when the state decided to expand the program to serve adults. The four selected states maintained waiting lists for 12 of the 19 HCBS programs that limited enrollment through enrollment caps. However, because states differed on whether they determined eligibility before adding individuals to the waiting list, information on the number of individuals on these waiting lists is not comparable across states. For example, Florida did not screen for eligibility prior to placing individuals on the waiting list of its aged or disabled waiver, which totaled over 48,000 individuals as of December 2017. By contrast, individuals on Montana’s much smaller aged or disabled waiting list were pre-screened for eligibility. In addition, states varied on whether and how they set priorities for enrollment in the waiver for individuals on the waiting list. For example, the Montana aged or disabled waiver set priorities for an individual’s enrollment according to various state criteria, including risk of institutionalization, and an assessment of informal supports. By contrast, in Mississippi, individuals on the intellectual or developmental disabilities waiting list generally gained enrollment into the waiver in order of their date of eligibility. Two of the selected states we reviewed—Arizona and Florida—used MLTSS for one HCBS program. Officials from these states told us the ability to use managed care contracts to (1) set incentives aimed at transitioning individuals from institutions to home- and community-based settings and (2) increase oversight of providers were important factors in choosing MLTSS to provide HCBS. Setting incentives for transitions. State officials told us that they used contract incentives to shift services from nursing facilities to community-based care in their MLTSS programs. Specifically, Arizona and Florida used blended capitation rates, meaning that the rate or amount the states pay MCOs to cover expected costs for each LTSS beneficiary is the same for all beneficiaries regardless of whether they are in a nursing home or in a home- and community- based setting. Because HCBS is generally less expensive than LTSS delivered in institutional settings, blended rates can create a financial advantage for the MCO to serve as many beneficiaries as possible in home- and community-based settings. Three of the MCOs we spoke with provided examples of how they have responded to these incentives to provide HCBS. For example, an official from one MCO told us that the MCO had created new positions for “transition clinicians,” registered nurses who use their medical knowledge to systematically evaluate beneficiaries in an institution to determine if they may be a candidate for transition to a community-based setting. The official explained that after the transition clinician identifies a potential candidate, the clinician will evaluate other factors, including the candidate’s current housing options and level of familial support, in order to ensure that necessary resources are in place when the beneficiary leaves the institution. In addition, the official said they facilitated transitions by providing beneficiaries leaving nursing facilities with a one-time $2,500 transition allowance that can be used for expenses such as security or utility deposits, furniture, or new resident fees at an assisted living facility. Oversight of MCOs. According to officials from Arizona and Florida, the states chose to use MLTSS because it afforded better oversight of providers and had the potential to improve patient outcomes. Specifically, officials said that managing a limited number of MCOs, who in turn have contracts with HCBS providers, allows for better oversight and outcomes, and has led to service delivery improvements, compared to paying providers on a fee-for-service basis. For example, Florida officials explained that they recently consolidated three smaller fee-for-service programs into their MLTSS program. Prior to that consolidation, the three fee-for-service programs provided HCBS to approximately 7,500 individuals with AIDS, traumatic brain injury/spinal cord injury, and individuals with cystic fibrosis. Officials said that they did not believe providers in these smaller fee-for-service programs were providing good care, based on service utilization analyses that showed some beneficiaries were not accessing any services beyond one case management service per month. Furthermore, the officials also told us that it was harder to assess quality of care in the fee-for-service programs compared to MLTSS. Officials said that now that these beneficiaries receive care under the MLTSS waiver, there is more accountability and improved quality of care. Representatives from aging and developmental disability professional groups we interviewed said that states may also choose to implement MLTSS programs to achieve greater budget predictability and control costs. CMS’s recent report on the growth of MLTSS also notes states’ desire for improvements in quality of care and outcomes; increased access to HCBS providers; and better care coordination, among other factors. We have previously reported that although MLTSS can provide states with the opportunity to enhance and encourage the provision of HCBS, oversight at the state and federal levels is critical to ensure that individuals with LTSS needs are able to obtain needed care in a timely fashion. In addition, our prior work on MLTSS payment rates found that five states—including Arizona and Florida—set clear financial incentives in their MCO payment rates for greater use of community-based care, while one state’s rate structure included higher payments for beneficiaries receiving institutional care. This state’s rate structure could have created an incentive for MCOs to move higher-cost beneficiaries from the community to an institution. Additionally, we found that most of the states reviewed for that prior work were not specifically linking payments with MLTSS program goals such as beneficiary outcomes and that federal oversight of states’ MLTSS payment structures was limited. We made several recommendations to improve CMS’s oversight of states’ payment structures for MLTSS. CMS agreed with our recommendations and reported actions it planned to take to address them. Officials from the three selected states that do not use MLTSS cited various reasons for this, such as stakeholder opposition and state law restrictions on enrolling individuals receiving LTSS in managed care. For example, officials in Oregon explained that stakeholders objected to the profit motive they assumed an MCO would have, which the stakeholders believed would compromise quality of care and reduce beneficiaries’ choice of providers. Officials in Montana said that because the state was rural and had relatively few Medicaid beneficiaries, MLTSS would not be cost effective. Officials from two of the selected states—Oregon and Mississippi—told us that settlements resulting from litigation have shaped the structure of their HCBS programs for certain populations. Oregon officials explained that a legal settlement in 2001 resulted in the creation of an additional HCBS program for individuals with intellectual or developmental disabilities and the elimination of an HCBS waiting list for this population. In Mississippi, officials explained that as a result of a legal settlement in 2005, the state increased enrollment in certain HCBS programs. As a result of the settlement, officials said that state case managers contacted all 1,900 individuals who resided in institutions at the time to determine their interest in living in a home- and community-based setting. Those who expressed interest were evaluated to determine if they could live outside an institution and whether adequate familial or other support was available. Based on this information, and as a result of additional funding from the state legislature as a result of the lawsuit, the state was able to add new beneficiaries to several of its HCBS programs. Officials from the five selected states and MCOs we interviewed described challenges with providing HCBS, including workforce issues, such as recruiting and retaining direct care workers; serving beneficiaries with complex medical and behavioral health needs; and other challenges. The officials also reported taking steps to respond to these challenges. Officials from all five selected states and three of the four MCOs we interviewed described workforce challenges, such as recruiting and retaining direct care workers and ensuring the availability of HCBS providers in rural and remote areas. For example, officials from Montana and Oregon noted that the low wages paid to direct care workers, who provide hands-on care and assistance with ADLs and IADLs, contribute to workforce shortages. According to the officials, direct care workers can typically earn more by working at a fast food restaurant. Officials from Montana and Mississippi and officials from three of the MCOs said the workforce shortages are often worse in rural or remote areas, where travel across long distances is common. For example, the state officials said that it can be hard to find a provider willing to drive a long distance each way to work for only a few hours. To respond to these workforce issues, officials from Montana and Mississippi and two MCOs reported offering higher payment rates to providers. In 2017, the Montana legislature approved special funding to raise the hourly wage for direct care workers providing care in certain Medicaid HCBS programs in state fiscal year 2019. Officials from Mississippi said that based on a study of provider reimbursement rates in one of their HCBS waiver programs, the state raised payment rates for agencies that employ direct care workers and other providers in 2017. Officials said they hoped the increase would create an incentive to recruit and develop providers in more rural areas. Officials from Arizona and Montana and one MCO also mentioned that Medicaid’s participant- directed options—which allow beneficiaries to draw paid caregivers from among their family members, friends, and neighbors—had helped to address HCBS workforce shortages. Arizona officials said that roughly half of beneficiaries in its HCBS program who were receiving personal care services got their care from family members, including spouses and parents of adult children living in the home. Officials from four of the five selected states and all four MCOs we spoke with said they faced challenges providing HCBS for beneficiaries with complex medical or behavioral health needs. Officials we interviewed said that complex medical conditions can be hard to accommodate in home- and community-based settings. For example, officials from Mississippi and one MCO mentioned difficulties finding appropriate placements for individuals requiring ventilator services. State and MCO officials also reported that complex conditions that affect beneficiaries’ behavior, such as co-occurring developmental disabilities and behavioral health conditions, dementia, and traumatic brain injury can also create challenges for providing HCBS, particularly when beneficiaries display aggressive or other challenging behaviors. Officials from one MCO explained that these beneficiaries’ challenging behaviors can cause friction between beneficiaries and their providers and make it harder for beneficiaries to sustain good relationships with providers. Officials from the selected states and MCOs we interviewed said that they have responded to the challenge of serving HCBS beneficiaries with complex medical or behavioral health needs by (1) supporting the development of locations in the community to serve individuals with specific complex needs, (2) training providers, and (3) increasing care coordination. Officials from one MCO said that they worked with nurses in the community to support the development of adult foster homes as an alternative to institutional care for beneficiaries who require ventilator services. Similarly, Montana officials said they had reached out to community partners, such as assisted living facility owners, to educate them on what Medicaid can and cannot pay for in order to aid them in developing multiple funding streams for specialized programs for individuals with traumatic brain injury. Montana officials and officials from an MCO said they had offered behavioral health training for providers; Montana offered a mental health first aid class for providers, and MCO officials reported sending behavioral health specialists into assisted living facilities to help train staff on handling challenging behaviors in an effort to avoid beneficiaries being moved out of the assisted living facility and into an institutional setting. Regarding care coordination, Arizona officials reported that the state is planning to offer beneficiaries with intellectual or developmental disabilities the choice of a model of care that integrates medical care, behavioral health care, and certain LTSS, under a single, comprehensive managed care contract beginning in October 2019. Officials from one MCO said this model of care will help better identify needs and coordinate care, for example, for children with autism and a co-occurring behavioral health condition. Officials from four selected states and officials from one of the MCOs in the fifth state told us that limits on funding for HCBS programs were a challenge, particularly in the context of the growing number of individuals with LTSS needs. Officials from Mississippi said that lack of funding from the state legislature had affected the enrollment of beneficiaries in certain HCBS waivers. Specifically, officials said that the state was unable to enroll as many beneficiaries in certain waivers as were approved by CMS, and that only a limited number of beneficiaries had been added to these programs for the past 2 or 3 years. Officials from one MCO in Arizona said that state budget constraints had led to past reductions in the amount of certain HCBS, such as respite care. Oregon officials said that the state experienced budgetary pressures as a result of implementing its 1915(k) Community First Choice state plan program, namely, that the increase in federal funding the state received did not fully cover the increased cost of serving all eligible beneficiaries as required under this option. Florida officials said that the state has experienced rapid growth in the population with LTSS needs and that this growth, combined with medical advances that prolong life and reduce attrition from waiver programs, had contributed to a growing waiting list for HCBS. Officials who cited HCBS funding as a challenge said that they responded to these challenges by, among other things, providing information to their legislatures on the projected need for HCBS to inform future funding decisions. For example, Florida officials said that they educate the legislature about funding needs by conducting estimating conferences that produce information that is provided to the Governor and both legislative houses to use when deciding funding amounts. The information provided includes the growth in the population of frail elders, the projected demand for Medicaid, the cost of providing HCBS, and the cost avoidance achieved by keeping people out of nursing homes. State officials have also leveraged alternative funding sources—including federal grants—to help respond to funding limits for HCBS. Officials from Montana and Mississippi said that CMS’s Money Follows the Person grant program—which provided state Medicaid programs with funding for beneficiaries to transition out of institutions—had helped them to serve more individuals in home- and community-based settings. Montana officials noted that Money Follows the Person provided the state with extra help to transition beneficiaries who were the most difficult to serve and often had multiple co-occurring conditions from institutions to community-based settings. Mississippi’s Money Follows the Person program—Bridge to Independence—resulted in a total of 540 beneficiaries moving from institutions to home- and community-based settings, according to state officials. Mississippi officials also noted that they maximize HCBS waiver funding by leveraging other potential funding sources, such as charitable organizations, that could pay for items such as a wheelchair ramp for a beneficiary before waiver funds were expended. State and MCO officials also mentioned other challenges providing HCBS: Affordable housing. Officials from Mississippi and Montana and one MCO cited the lack of affordable housing as a barrier for beneficiaries wishing to transition out of an institution. The MCO officials we spoke with said their transitions team, which assists beneficiaries who are moving out of an institution into the community, includes a housing coordinator whose job it is to track available housing and help beneficiaries find housing they can afford. Limits on HCBS spending per beneficiary. Officials from one MCO said that the state’s limit on HCBS waiver spending per beneficiary— requiring that spending for HCBS does not exceed the cost of institutional care—was a challenge, particularly for beneficiaries with high needs. The officials indicated that the MCO tracks HCBS spending for each beneficiary and reviews plans of care when a beneficiary reached 80 percent and 95 percent of the spending limit. Beneficiaries whose spending exceeds 100 percent for more than a 6- month period can choose to move to an institutional setting, or to continue to receive more limited HCBS that do not exceed the cost of care in an institution. In cases where the MCO believed the beneficiary could not be safely served in the community at that level of spending, officials said that beneficiaries and their families were required to sign a form acknowledging the safety risks. HHS provided technical comments on a draft of this report, which we incorporated as appropriate. As discussed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days after its issuance date. At that time, we will send copies of this report to the Secretary of Health and Human Services and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions, please contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix II. Developmental Disabilities Individual Budgeting Waiver 1915(c) 1915(c) and 1915(j) Familial Dysautonomia Waiver 1915(c) Individuals diagnosed with familial dysautonomia 1915(c) Children under 21 years of age with degenerative spinocerebellar disease 1915(c) 1915(c) 1915(c) Intellectual Disabilities/ Developmental Disabilities Waiver 1915(c) Traumatic Brain Injury/Spinal Cord Injury Waiver 1915(c) Individuals with traumatic brain injury or spinal cord injury 1915(i) Individuals with intellectual or developmental disabilities 1915(c) Home and Community-Based Waiver for Individuals with Developmental Disabilities 1915(c) Children’s Autism Waiver 1915(c) Behavioral Health Severe and Disabling Mental Illness HCBS Waiver 1915(c) State Plan Personal Care Services 1905(a)(24) N/A 1915(k) 1915(c) Authorizing statute 1915(c) Medically Involved Children’s Waiver 1915(c) Behavioral Intermediate Care Facility for Individuals with Intellectual Disabilities Model Waiver 1915(c) Intermediate Care Facility for Individuals with Intellectual Disabilities (ICF/IID) Comprehensive Waiver 1915(c) Intermediate Care Facility for Individuals with Intellectual Disabilities (ICF/IID) Support Services Waiver 1915(c) Individuals 18 years of age or older with intellectual or developmental disabilities 1915(i) State Plan Personal Care Services 1905(a)(24) N/A 1915(k) In addition to the contact named above, Michelle Rosenberg, Assistant Director; Hannah Locke, Analyst-in-Charge; Romonda McKinney Bumpus; Krister Friday; Vikki Porter; and Jennifer Whitworth made key contributions to this report. Medicaid Assisted Living Services: Improved Federal Oversight of Beneficiary Health and Welfare Is Needed. GAO-18-179. Washington, D.C.: January 5, 2018. Medicaid: CMS Should Take Additional Steps to Improve Assessments of Individuals’ Needs for Home- and Community-Based Services. GAO-18-103. Washington, D.C.: December 14, 2017. Medicaid Managed Care: CMS Should Improve Oversight of Access and Quality in States’ Long-Term Services and Supports Programs. GAO-17-632. Washington, D.C.: August 14, 2017. Medicaid: CMS Needs Better Data to Monitor the Provision of and Spending on Personal Care Services. GAO-17-169. Washington, D.C.: January 12, 2017. Medicaid Managed Care: Improved Oversight Needed of Payment Rates for Long-Term Services and Supports. GAO-17-145. Washington, D.C.: January 9, 2017. Medicaid Personal Care Services: CMS Could Do More to Harmonize Requirements across Programs. GAO-17-28. Washington, D.C.: November 23, 2016. Long-Term Care Workforce: Better Information Needed on Nursing Assistants, Home Health Aides, and Other Direct Care Workers. GAO-16-718. Washington, D.C.: August 16, 2016. Older Adults: Federal Strategy Needed to Help Ensure Efficient and Effective Delivery of Home- and Community-Based Services and Supports. GAO-15-190. Washington, D.C.: May 20, 2015. Medicaid: States’ Plans to Pursue New and Revised Options for Home- and Community-Based Services. GAO-12-649. Washington, D.C.: June 13, 2012.", "summary": "The need for LTSS to assist individuals with limited abilities for self-care is expected to increase, in part due to the aging of the population. Medicaid is the nation's primary payer of LTSS, with spending estimated at $167 billion in 2016. State Medicaid programs are generally required to cover LTSS provided in institutions, such as nursing homes, but coverage of the same services outside of institutions—that is, HCBS—is generally optional. In recent years there have been efforts to shift the balance of LTSS away from institutions through the expanded use of HCBS. National spending for HCBS has increased and now exceeds that for services in an institution. However, the extent to which Medicaid programs cover HCBS varies by state, as does the structure of states' HCBS programs. GAO was asked to review the approaches states use to provide coverage for HCBS in the Medicaid program. For selected states, this report describes (1) decisions that influenced the structure of Medicaid HCBS programs, and (2) challenges providing HCBS to Medicaid beneficiaries and efforts to respond to these challenges. GAO reviewed information and conducted interviews with officials from a nongeneralizable sample of five states, which GAO selected to obtain variation in the percentage of total Medicaid LTSS expenditures used for HCBS, geography, and other factors. GAO also reviewed information and interviewed officials from four MCOs—two in each of the two selected states that used managed care to provide HCBS. The MCOs varied in enrollment size and population served. All state Medicaid programs finance coverage of long-term services and supports (LTSS), which help beneficiaries with physical, cognitive, or other limitations perform routine daily activities, such as eating, dressing, and making meals. When these services are provided in beneficiaries' homes or other community settings instead of nursing homes, the services are known as home- and community-based services (HCBS). The structure of the 26 HCBS programs we reviewed in five states—Arizona, Florida, Mississippi, Montana, and Oregon—reflected decisions about which populations to cover, whether to limit eligibility or enrollment, and whether to use managed care. Populations: Four of the five states had multiple HCBS programs that targeted specific populations. For example, Mississippi had separate HCBS programs for aged or physically disabled individuals and individuals with intellectual or developmental disabilities. The fifth state, Arizona, had one program that targeted two specific populations. Eligibility: All five states had at least one HCBS program that limited eligibility to beneficiaries whose needs would otherwise require care in a nursing home or other institutional setting. Enrollment: Four of the five states limited enrollment in one or more of their HCBS programs; 19 of the 26 programs had enrollment caps, and 12 of these programs maintained a waiting list. Managed care: Two of the five states used managed care to provide HCBS, paying managed care organizations (MCO) a fixed fee for each beneficiary rather than paying providers for each service delivered. State and MCO officials identified several challenges providing HCBS and described their efforts to respond to them: HCBS workforce: Officials cited challenges recruiting and retaining HCBS providers, particularly given the low wages these providers typically receive. To respond to this, officials from Mississippi, Montana, and two of the MCOs reported offering providers higher payment rates. Complex needs: Officials described challenges serving beneficiaries with complex medical and behavioral health needs, including individuals who display aggressive or other challenging behaviors. Officials from Montana and one MCO reported responding to this challenge by providing behavioral health training for providers. HCBS funding: State officials reported that limitations on overall HCBS funding levels posed a challenge, which they responded to by providing their state legislatures with information on the projected need for HCBS to inform future funding decisions, and leveraging other available resources, such as federal grants. The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.", "document_type": "gao"}
{"report": "Oversight of nursing homes is a shared federal-state responsibility, with CMS central and regional offices overseeing activities completed by state survey agencies. Specifically, CMS central office (1) oversees the federal quality standards nursing homes must meet to participate in the Medicare and Medicaid programs and (2) establishes the responsibilities of CMS’s regional offices and state survey agencies to ensure federal quality standards for nursing homes are met. CMS regional offices oversee state activities and report results back to CMS central office. Specifically, regional offices are required to conduct annual federal monitoring surveys to assess the adequacy of surveys conducted by state survey agencies. CMS regional offices also evaluate state surveyors’ performance on factors such as the frequency and quality of state surveys. Finally, in each state, under agreement with CMS, a state survey agency assesses whether nursing homes meet CMS’s standards by conducting regular surveys and investigations of complaints regarding resident care or safety, as needed. CMS collects data on nursing home quality through annual standard surveys and complaint investigations, as well as other sources, such as staffing data and clinical quality measures. Standard surveys. By law, every nursing home receiving Medicare or Medicaid payment must undergo a standard survey during which teams of state surveyors conduct a comprehensive on-site evaluation of compliance with federal quality standards. Nursing homes with consistently poor performance can be selected for the Special Focus Facility (SFF) program, which requires more intensive oversight, including more frequent surveys. Complaint investigations. Nursing homes also are surveyed on an as-needed basis with investigations of consumer complaints. These complaints can be filed with state survey agencies by residents, families, ombudsmen, or others acting on a resident’s behalf. During an investigation, state surveyors evaluate the nursing home’s compliance with a specific federal quality standard. Staffing data. Nurse staffing levels are considered a key component of nursing home quality and are often measured in total nurse hours per resident day. Higher nurse staffing levels are typically linked with higher quality nursing home care. Clinical quality measures. Nursing homes are required to provide data on certain clinical quality measures—such as the incidence of pressure ulcers—for all residents to CMS. CMS currently tracks data for 18 clinical quality measures. CMS publicly reports a summary of each nursing home’s quality data on its Nursing Home Compare website using a five-star quality rating. The Five-Star Quality Rating System assigns each nursing home an overall rating and three component ratings—surveys (standard and complaint), staffing, and quality measures—based on the extent to which the nursing home meets CMS’s quality standards and other measures. In a 2016 report, we found that CMS did not have a systematic process for prioritizing recommended changes to improve its Nursing Home Compare website and that several factors limited the ability of CMS’s Five-Star Quality Rating System to help consumers understand nursing home quality and choose a home. We recommended that CMS establish a process to evaluate and prioritize website improvements and add explanatory information about the Five-Star System to Nursing Home Compare. HHS agreed and in 2018 completed actions on these recommendations, but has not yet acted on the other recommendations, including providing national comparison information that we maintain are important to help enable consumers to understand nursing home quality and make distinctions between nursing homes. In our October 2015 report examining trend data that give insight into nursing home quality, we found that four key data sets showed mixed results, and data issues complicated the ability to assess quality trends. Nationally, one of the four data sets—consumer complaints—suggested consumers’ concerns over nursing home quality increased from 2005 to 2014. However, the other three data sets—deficiencies, staffing levels, and clinical quality measures—indicated potential improvement in nursing home quality (see Table 1). Specifically, we found consumer complaints—which can originate from residents, families, ombudsmen, or others acting on a resident’s behalf—had a 21 percent increase from 2005 to 2014. In contrast, nurse staffing levels increased 9 percent from 2009 to 2014 and selected quality measure scores showed decreases in the number of reported quality problems, such as falls resulting in major injury from 2011 to 2014. In addition, we identified 416 homes in 36 states that had consistently poor performance across the four data sets we examined. Of the 416 homes, 71 (17 percent) were included in the Special Focus Facility (SFF) program at some point between 2005 and 2014. In our October 2015 report, we found CMS’s ability to use available data to assess nursing home quality trends was complicated by various issues with these data, which made it difficult to determine whether observed trends reflect actual changes in quality, data issues, or both. CMS has taken some actions to address these data complications, however, more work is needed. Consumer complaints: The average number of consumer complaints reported per nursing home increased in the 10 years of data we examined, although it is unclear to what extent this can be attributed to a change in quality or to state variation in the recording of complaints. Some state survey agency officials explained that changes in how they recorded complaints into CMS’s complaint tracking system could in part account for the jump in reported complaints. In addition, officials at one state survey agency explained the increase in complaints could also reflect state-level efforts to provide consumers with more user-friendly options for filing complaints. Similarly, in April 2011, we found differences in how states record and track complaints. Deficiencies cited on standard surveys: The decline in the number of serious deficiencies—deficiencies that at a minimum caused a harm to the resident—in the data we examined may have indicated an improvement in quality, although it may also be attributed to inconsistencies in measurement. For example, the use of multiple survey types, such as both traditional paper-based surveys and electronic surveys, to conduct the standard survey that every nursing home receiving Medicare or Medicaid payment must undergo complicates the ability to compare the results of these surveys nationally. In our October 2015 report, we recommended CMS implement the same survey methodology across all states; HHS agreed with this recommendation and in November 2017 completed its national implementation of this electronic survey methodology. Nurse staffing: CMS data showed the average total nurse hours per resident day increased from 2009 through 2014, although CMS did not have assurance these data were accurate. Many of the regional office and state survey agency officials we spoke with expressed concern over the self-reported nature of these data, noting that it may be easy to misrepresent nurse staff hours. At the time of our 2015 report, CMS was in the process of implementing a system to collect staffing information based on payroll and other verifiable data and has now completed that implementation, as required by law. We recommended in 2015 that CMS establish and implement a clear plan for ongoing auditing of its staffing data and other quality data. HHS agreed with this recommendation and in July 2018 CMS provided us with documentation that it was conducting regular audits of this new nurse staffing data. According to CMS, facilities experienced challenges submitting complete and accurate data in the early stages, however, as of April 2018 the agency has begun relying on the payroll data to calculate the staffing measures that it posts in Nursing Home Compare and uses in the Five-Star Quality Rating System. Selected quality measures: Nursing homes generally improved their performance on the eight selected quality measures we reviewed, although it is unclear to what extent this can be attributed to a change in quality or possible inaccuracies in self-reported data. Like the nurse staffing data used by CMS, data on nursing homes’ performance on these measures were self-reported, and until 2014 CMS conducted little to no auditing of these data to ensure their accuracy. In our 2015 report, we found CMS had begun taking steps to help mitigate the problem with self- reported data by starting to audit the data in 2015; however, the agency did not have clear plans to continue the audits beyond 2016. As such, in our recommendation we indicated the need for ongoing auditing of data used to calculate clinical quality measures. As of August 2018, CMS has not provided us a plan for ongoing auditing of its clinical quality measures and we continue to believe that CMS should establish and carry out such a plan. Collectively, these data issues have broader implications related to nursing home quality trends, including potential effects on the quality benchmarks CMS sets and consumers’ decisions about which nursing home to select. Furthermore, data used by CMS to assess quality measures are also used when determining Medicare payments to nursing homes, so data issues—and CMS’s internal controls related to the data— could affect the accuracy of payments. Moreover, the use of quality data for payment purposes will expand in fiscal year 2019 when a nursing home value-based purchasing program will be implemented, which will increase or reduce Medicare payments to nursing homes based on certain quality measures. Our 2015 report found that CMS had made numerous modifications to its nursing home oversight activities in recent years, but had not monitored the potential effect of these modifications on nursing home quality oversight. Some of these modifications expanded or added new oversight activities—for example, CMS expanded the number of tools available to state surveyors when investigating medication-related adverse events, increased the amount of nursing home quality data available to the public, and created new trainings for surveyors on unnecessary medication usage. However, other modifications reduced existing oversight activities. In 2015, we highlighted modifications that reduced two existing oversight activities—the federal monitoring survey program and the SFF program. Federal monitoring surveys: CMS reduced the scope of the federal monitoring surveys regional offices use to evaluate state surveyors’ skills in assessing nursing home quality. CMS requires regional offices to complete federal monitoring surveys in at least 5 percent of nursing homes surveyed by the state each year. Starting in 2013, CMS required fewer federal monitoring surveys to be standard surveys and allowed more monitoring surveys to be the narrower scoped and less-resource intensive revisits and complaint investigations. Special Focus Facilities: CMS reduced the number of nursing homes participating in the SFF program. In 2013, CMS began to reduce the number of homes in the program by instructing states to terminate homes that had been in the program for 18 months without improvement from participating in Medicare and Medicaid. As we have previously reported, between 2013 and 2014, the number of nursing homes in the SFF program dropped by more than half—from 152 to 62. In 2014, CMS began the process of re-building the number of facilities in the SFF program; however, according to CMS officials, the process would be slow, and as of August 2018 there were 85 SFFs. In 2015, CMS said some of the reductions to oversight activities were in response to an increase in oversight responsibilities and limited number of staff and financial resources. Specifically, CMS officials said increasing oversight responsibilities and a limited number of staff and financial resources at the central, regional, and state levels required the agency to evaluate its activities and reduce the scope of some activities. In the October 2015 report, we recommended CMS monitor oversight modifications to better assess their effects; HHS agreed with the recommendation and told us they are beginning to take steps to address this issue. We maintain the importance of monitoring to help CMS better understand how its oversight modifications affect nursing home quality and to improve its oversight given limited resources. Chairman Harper, Ranking Member DeGette, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. For further information about this statement, please contact John E. Dicken at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. In addition to the contact named above, key contributors to this statement were Karin Wallestad (Assistant Director), Sam Amrhein, Summar Corley, Pam Dooley, Will Simerl, and Jennifer Whitworth. Nursing Homes: Consumers Could Benefit from Improvements to the Nursing Home Compare Website and Five-Star Quality Rating System. GAO-17-61. Washington, D.C.: November 18, 2016. Skilled Nursing Facilities: CMS Should Improve Accessibility and Reliability of Expenditure Data. GAO-16-700. Washington, D.C.: September 7, 2016. Nursing Home Quality: CMS Should Continue to Improve Data and Oversight. GAO-16-33. Washington, D.C.: October 30, 2015. Health Care Transparency: Actions Needed to Improve Cost and Quality Information for Consumers. GAO-15-11. Washington, D.C.: October 20, 2014. Nursing Homes: More Reliable Data and Consistent Guidance Would Improve CMS Oversight of State Complaint Investigations. GAO-11-280. Washington, D.C.: April 7, 2011. Nursing Homes: Complexity of Private Investment Purchases Demonstrates Need for CMS to Improve the Usability and Completeness of Ownership Data. GAO-10-710. Washington, D.C.: September 30, 2010. Poorly Performing Nursing Homes: Special Focus Facilities Are Often Improving, but CMS’s Program Could Be Strengthened. GAO-10-197. Washington, D.C.: March 19, 2010. Nursing Homes: Addressing the Factors Underlying Understatement of Serious Care Problems Requires Sustained CMS and State Commitment. GAO-10-70. Washington, D.C.: November 24, 2009. Nursing Homes: Opportunities Exist to Facilitate the Use of the Temporary Management Sanction. GAO-10-37R. Washington, D.C.: November 20, 2009. Nursing Homes: CMS’s Special Focus Facility Methodology Should Better Target the Most Poorly Performing Homes, Which Tended to Be Chain Affiliated and For-Profit. GAO-09-689. Washington, D.C.: August 28, 2009. Medicare and Medicaid Participating Facilities: CMS Needs to Reexamine Its Approach for Funding State Oversight of Health Care Facilities. GAO-09-64. Washington, D.C.: February 13, 2009. Nursing Homes: Federal Monitoring Surveys Demonstrate Continued Understatement of Serious Care Problems and CMS Oversight Weaknesses. GAO-08-517. Washington, D.C.: May 9, 2008. Nursing Homes: Efforts to Strengthen Federal Enforcement Have Not Deterred Some Homes from Repeatedly Harming Residents. GAO-07-241. Washington, D.C.: March 26, 2007. Nursing Homes: Complaint Investigation Processes Often Inadequate to Protect Residents. GAO/HEHS-99-80. Washington, D.C.: March 22, 1999. California Nursing Homes: Care Problems Persist Despite Federal and State Oversight. GAO/HEHS-98-202. Washington, D.C.: July 27, 1998. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Approximately 15,600 nursing homes participating in the Medicare and Medicaid programs provide care to 1.4 million residents—a population of elderly and disabled individuals. To help ensure nursing home residents receive quality care, CMS defines quality standards that homes must meet to participate in the Medicare and Medicaid programs. To monitor compliance with these standards, CMS enters into agreements with state survey agencies to conduct on-site surveys of the state's homes and also collects other data on nursing home quality. Although CMS and others have reported some potential improvements in nursing home quality, questions have been raised about nursing home quality and weaknesses in CMS oversight. This statement summarizes GAO's October 2015 report, GAO-16-33 . Specifically, it describes (1) trends in nursing home quality through 2014, and (2) changes CMS had made to its oversight activities as of October 2015. It also includes the status of GAO's recommendations associated with these findings. GAO recently obtained information from CMS officials about steps they have taken to implement the 2015 GAO recommendations. GAO's October 2015 report found mixed results in nursing home quality based on its analysis of trends reflected in key sources of quality data that the Centers for Medicare & Medicaid Services (CMS) collects. An increase in reported consumer complaints suggested that consumers' concerns about nursing home quality increased. In contrast, trends in care deficiencies, nurse staffing levels, and clinical quality measures indicated potential improvement in nursing home quality. GAO also found that data issues complicated CMS's ability to assess nursing home quality trends. For example: CMS allowed states to use different survey methodologies to measure deficiencies in nursing home care, which complicates the ability to make comparisons nationwide. GAO recommended that CMS implement a standardized survey methodology across states, and in November 2017 CMS completed national implementation. CMS did not regularly audit selected quality data including nurse staffing and clinical data (for example, on residents with pressure ulcers) to ensure their accuracy. GAO recommended CMS implement a plan for ongoing auditing of quality data. The agency concurred with this recommendation and has been conducting regular audits of nurse staffing data but does not have a plan to audit other quality data on a continuing basis. GAO continues to believe that regular audits are needed to ensure the accuracy and comparability of nursing home quality data. GAO's October 2015 report found that CMS had made numerous modifications to its nursing home oversight activities. However, CMS had not monitored how the modifications might affect its ability to assess nursing home quality. GAO found that some modifications expanded or added new activities—such as creating new training for state surveyors on unnecessary medication usage—while others reduced existing activities. For example, CMS reduced the number of nursing homes participating in the Special Focus Facility program—which provides additional oversight of certain homes with a history of poor performance—by over half from 2013 to 2014. CMS officials told GAO that some of the reductions to oversight activities were in response to an increase in oversight responsibilities and a limited number of staff and financial resources. To help ensure modifications do not adversely affect CMS's ability to assess nursing home quality, GAO recommended that CMS monitor modifications of essential oversight activities to better understand the effects on nursing home quality oversight. CMS concurred with this recommendation and told us it has begun to take steps to address it. Such monitoring is important for CMS to better understand how its oversight modifications affect nursing home quality and to improve its oversight given limited resources.", "document_type": "gao"}
{"report": "FWS provides grants to a variety of recipients, including state agencies, tribal governments, and nongovernmental organizations. In fiscal year 2016, FWS awarded $1.5 billion in grants, which was about 50 percent of the agency’s total $2.9 billion budget authority. Within FWS, WSFR is responsible for awarding most of the grant funding available from FWS, and in fiscal year 2016, WSFR awarded $1.2 billion in grants. As we have previously reported, most federal grant-making agencies generally follow a grants management process that includes awarding grant funds and monitoring grant projects. The award process generally involves announcing the grant opportunities, reviewing applications, and making award decisions. During the monitoring process, the agency oversees the implementation of the grant project and periodically reviews financial and performance reports from grant recipients. In our past reports, we have found that it is important for federal agencies to employ a fair and transparent process to make award selections for competitive grant programs and to monitor federal grant funds to ensure that they are used properly and effectively to achieve program goals. In general, WSFR awards two types of grants: formula and competitive grants. Formula grants: WSFR awards these grants to recipients in amounts based on required formulas. The two largest formula grant programs WSFR manages are the Wildlife Restoration Program and Sport Fish Restoration Program, which provided $699 million and $356 million, respectively, in grants to states in fiscal year 2016. According to WSFR documents and officials, these grants are often used by states to help their fish and wildlife agencies restore, enhance, and manage wildlife and sport fish resources and provide public access to those resources. Each state’s use of certain funds and each state’s wildlife and sport fish activities are to be audited every 5 years, and these audits have generally been conducted by Interior’s Office of Inspector General (OIG). According to Interior OIG officials, these audits have been conducted since 2002, and each state has been audited three times over the past 15 years. Competitive grants: WSFR awards these grants to eligible applicants for specific projects based on a competitive process in which grant applications are scored against certain criteria. Competitive grants comprise a much smaller portion of the grant funding that WSFR awards; in fiscal year 2016, WSFR awarded about $54 million in competitive grants. Competitive grants, unlike the formula grants, are not required under their program-specific statutes to be regularly audited. According to the Interior OIG and WSFR officials, the OIG has conducted few audits of these programs. Funding for most of WSFR’s grant programs comes from two sources: the Wildlife Restoration Account and the Sport Fish Restoration and Boating Trust Fund. These accounts are generally funded by industries paying excise taxes and import duties on certain equipment and gear manufactured for purchase by hunters, anglers, boaters, archers, and recreational shooters, including pistols, bows and arrows, and fishing rods and reels, among other items. Federal taxes on fuel for motorboats and small engines are also a source of funding. In administering grant programs, WSFR adheres to federal laws and regulations, as well as agency policies and guidance. Federal laws: The 1937 Pittman-Robertson Wildlife Restoration Act and the 1950 Dingell-Johnson Sport Fish Restoration Act established the Wildlife Restoration Program and the Sport Fish Restoration Program, respectively. The Pittman-Robertson and Dingell-Johnson Acts have been amended to, among other things, establish additional grant programs, many of which are competitive programs. For example, the Clean Vessel Act of 1992 amended the Dingell-Johnson Act and created the Clean Vessel Act Grant Program. In addition, in 1998, the Sportfishing and Boating Safety Act amended the Dingell- Johnson Act and established the Boating Infrastructure Grant Program. Federal government-wide grant regulations: The Uniform Guidance, issued by OMB and adopted by federal grant-making agencies, includes requirements for several aspects of the federal grants management process, including the award and monitoring processes. For example, sections 327 and 328 lay out general requirements for financial and performance reporting by grant recipients. Agency regulations: Some of the WSFR grant programs have specific regulations that, among other things, define eligible activities, application procedures, and the conditions for using grant funding. For example, the Boating Infrastructure Grant Program, the Clean Vessel Act Grant Program, and the National Coastal Wetlands Conservation Grant Program have program-specific regulations that govern aspects of the grant process, such as the eligible uses of grant funding. Agency policies and guidance: WSFR also has agency guidance found in the FWS Service Manual, along with other guidance on grants. The manual describes the structure and functions of FWS’s organization and contains policies and procedures that govern administrative activities and program operations. For example, the FWS Service Manual contains a chapter focused on the Multistate Conservation Grant Program that reiterates or clarifies requirements, including program-specific statutory requirements as well as those found in the Uniform Guidance. In addition to the FWS Service Manual, the FWS, and WSFR within it, is subject to grant management guidance issued by the Department of the Interior. For example, in December 2014, Interior’s Office of Acquisition and Property Management issued a memorandum that required (1) maximum competition in grant awards through a fair and impartial competitive process, and (2) a comprehensive, impartial, and objective grant application review process based on criteria contained in the grant award announcement. WSFR awards and monitors five competitive grant programs, according to agency documents and officials we interviewed. These five grant programs are (1) the Boating Infrastructure Tier 2 Grant Program, (2) the Clean Vessel Act Grant Program, (3) the Competitive State Wildlife Grant Program, (4) the Multistate Conservation Grant Program, and (5) the National Coastal Wetlands Conservation Grant Program. While these grant programs support different types of projects, they generally are funded from the Sport Fish Restoration and Boating Trust Fund, and most require non-federal matching funds from the grant recipient based on statute. The exceptions to this are the Multistate Conservation Grant Program, which also receives funds from the Wildlife Restoration Account and does not require matching funds, and the Competitive State Wildlife Grant Program, which receives funding from annual appropriations. Table 1 provides summary information on these five competitive grant programs. Across the five competitive grant programs, the number of grants and the funding awarded varied by program. In fiscal years 2012 through 2016, the largest amount of federal grant funding was awarded through the National Coastal Wetlands Conservation Grant Program—about $94 million total—while the least amount of grant funding was awarded through the Competitive State Wildlife Grant Program—about $24 million total, as shown in table 2. Based on our review of competitive grant award documentation for fiscal years 2012 through 2016, the percentage of projects selected from the applications received ranged from 63 percent for the Competitive State Wildlife Grant Program to 100 percent for the Clean Vessel Act Grant Program. While all Clean Vessel Act grant applicants received funding, they did not all receive the total amount of funding requested; rather, the amount of funding was based on the total amount of funding available and the score the application received. The same applies for other grant programs, as the agency sometimes provides less funding to a recipient than was requested depending on various factors, such as the total amount of funding available. For more information on the number of applications received and awards for each grant program, see appendixes II through VI. In fiscal year 2016, the five WSFR competitive grant programs funded a variety of projects according to our review of the list of awarded projects. Boating Infrastructure Tier 2 Grant Program. Grants were awarded to states for projects focused on improving facilities for recreational boaters. These projects included installing docks, installing boat slips, and constructing restroom and shower facilities for boaters. For more information on this grant program, see appendix II. Clean Vessel Act Grant Program. Grants were awarded to states for projects focused on constructing and maintaining facilities to accept sewage from recreational boats, including sewage pumpout stations and floating restrooms. In addition, some of the grants were to be used for public education materials on the importance of properly disposing sewage from boats. For more information on this grant program, see appendix III. Competitive State Wildlife Grant Program. Grants were awarded to states and a nongovernmental organization for projects focused on state-identified species of greatest conservation need, which may include endangered or threatened species. These projects included conducting research on these species along with creating and enhancing habitat for these species. For more information on this grant program, see appendix IV. Multistate Conservation Grant Program. Grants were awarded to nongovernmental organizations and federal agencies for a variety of projects that were national or regional in scope, such as providing training to state fish and wildlife officials. Over half of the grants awarded (11 of 18) were awarded to the Association of Fish and Wildlife Agencies (AFWA), but most of the funding went towards the administration of the National Survey of Fishing, Hunting and Wildlife- Associated Recreation ($6.4 million of the $7.7 million). According to AFWA and WSFR officials, the reason many grants are awarded to AFWA is because this organization is in a unique position to carry out projects that benefit multiple states as required by law. For more information on this grant program, see appendix V. National Coastal Wetlands Conservation Grant Program. Grants were awarded to states for projects focused on acquiring and restoring wetlands. Many of these projects focused on acquiring wetlands that benefit wildlife. For more information on this grant program, see appendix VI. Under these five grant programs, state agencies often partner with subgrantees to carry out grant projects. According to WSFR officials, subgrants are common in the Boating Infrastructure Tier 2, Clean Vessel Act, and Competitive State Wildlife grant programs. For example, states are the recipients of Boating Infrastructure Tier 2 grants, but they can subgrant the money to marina operators to oversee the construction of dock facilities. The award process WSFR uses for the five competitive grant programs generally involves announcing the grant opportunity and reviewing applications to make award decisions, and in some cases federal agencies or third parties are involved in these activities. The award process used for the five competitive WSFR grant programs is generally consistent with federal grant regulations in the Uniform Guidance. The award process WSFR uses for the five competitive grant programs we reviewed involves announcing the grant opportunity and reviewing applications to make award decisions, and third parties are involved in these activities for some grant programs. Based on our review of agency guidance and interviews with WSFR officials, announcing a grant opportunity begins with developing a Notice of Funding Opportunity (NOFO). The NOFO contains information for applicants to consider when deciding whether to apply, including the amount of funding available, the types of applicants that are eligible, the process to apply, and the criteria that will be used to score applications. NOFOs are available publicly at www.grants.gov. Interested parties then submit grant applications, which WSFR reviews for eligibility by examining the project’s goals, budget, and environmental impact, among other things. A review panel comprised of WSFR staff, and in some cases other FWS staff or a third party organization, reviews and scores the applications based on criteria in the NOFO and develops a list of recommended projects and funding amounts for these projects. This list is forwarded to the Director of FWS for review and approval and if approved, FWS then awards the grant. For all of the grant programs except for the Competitive State Wildlife Grant Program, other federal agencies or third party organizations are involved in some aspects of the award process (as shown in table 3). In general, these entities are more involved in reviewing grant applications than in developing the NOFOs for the grant programs. AFWA, a third party, has the largest involvement in the award process for the Multistate Conservation Grant Program, and implements most aspects of the award process. Specifically, the Wildlife and Sport Fish Restoration Programs Improvement Act of 2000, which established this grant program, requires that FWS only fund grant projects that are on a priority list established by AFWA. To develop this list, AFWA has developed a process to review and score applications, and the highest-scoring applications are put on a priority list. This list is presented to all AFWA members at their annual meeting and if approved by the membership, AFWA forwards the priority project list to the Director of the U.S. Fish and Wildlife Service for review and approval. The Multistate Conservation program leader at WSFR said he also reviews grant applications to determine whether the project’s budget is reasonable and whether the project is eligible for funding. Other federal agencies and third party organizations are also involved in the award process for other WSFR competitive grants programs as follows: Boating Infrastructure Tier 2 Grant Program: The Sport Fishing and Boating Partnership Council reviews and scores each grant application and provides these scores to WSFR. The scores from the Council are averaged with WSFR’s scores to develop a final ranked list of grant projects. Officials from the Council said that they provide expertise to the review process since Council members are often engineers or members of boating organizations. Clean Vessel Act Grant Program: Program regulations state that WSFR will convene a review panel to include representatives from WSFR, the U.S. Environmental Protection Agency (EPA), the U.S. Coast Guard, and the National Oceanic and Atmospheric Administration (NOAA). WSFR provides the grant applications and WSFR’s proposed list of recommended projects to these agencies for review. According to WSFR officials, they have received limited input from these agencies, due in part to staff turnover at these agencies in recent years. For example, in fiscal year 2016, EPA indicated in an email to WSFR that it agreed with the proposed funding decisions for the program, and NOAA sent a letter to WSFR indicating that it had not reviewed all of the applications but it supported the program and did not object to the agency’s scoring of the applications. National Coastal Wetlands Conservation Grant Program: Staff from FWS’ Coastal Program partner with WSFR in developing the NOFO, reviewing applications, and scoring applications. For example, the review panel for fiscal year 2016 included seven staff from the Coastal Program and four staff from WSFR. The five competitive WSFR grant programs we reviewed follow an award process that is generally consistent with federal grant regulations found in the Uniform Guidance. Specifically, the Uniform Guidance requires that grant funding opportunities be publicly announced and that the NOFO contains certain information, including the criteria and process used to evaluate applications. In reviewing the five NOFOs used for the fiscal year 2016 grant cycle for the five competitive grant programs, we found that all five NOFOs were made publicly available on the website www.grants.gov, and the NOFOs contained the information required by the Uniform Guidance. These NOFOs contained criteria for scoring applications that matched the criteria in program-specific regulations for the grant programs that have them. For example, the regulations for the National Coastal Wetlands Conservation Grant Program contain 13 different scoring criteria, which were listed in the NOFO for that program. The Uniform Guidance also contains provisions regarding a review process for grant applications. Specifically, the Uniform Guidance requires that, unless prohibited by federal statute, the agencies must design and execute a merit review process for competitive grant applications, and that this process must be described in the NOFO. In accordance with the Uniform Guidance, Interior issued guidance on implementing a merit review process in December 2014. This guidance requires that the “competitive process be fair and impartial” and that all applicants be evaluated based on the criteria in the funding announcement. In reviewing the five competitive grant programs, we found that there was a merit review process and that this process was described in the five NOFOs for fiscal year 2016 that we reviewed. As part of the merit review process, four of the competitive grant programs convened review panels attended by those that scored applications for the fiscal year 2016 grant cycle, and these panels developed a recommended list of projects, according to our review of award documents. The exception was the Clean Vessel Act Grant Program, where an in-person review panel meeting was not held but rather projects were scored separately within each region, and regional officials submitted their scores to WSFR headquarters. These two sets of scores were combined and the WSFR program leader developed a recommended list of projects, according to WSFR officials. The Uniform Guidance also requires that federal agencies must establish conflict of interest policies for federal awards. As a result, in December 2014, Interior established a policy requiring agency officials who evaluate grant applications as part of a review panel to sign a conflict of interest certificate. In our review of the award documents for the fiscal year 2016 grant cycle, we generally found signed copies of these certificates for members of the review panels, except for the Multistate Conservation Grant Program. This program did not have certificates for the fiscal year 2016 grant cycle because AFWA, which oversees the scoring of applications, did not require these forms until the fiscal year 2017 grant cycle. We reviewed these forms for the fiscal year 2017 grant cycle and found that each member of the AFWA review panel had submitted a form. AFWA officials said that the organization had previously required a general conflict of interest form to be signed by its members, and they started requiring a specific form for review panel members in fiscal year 2017 to align with Interior’s policy. WSFR monitors its competitive grants primarily by reviewing annual financial and performance reports submitted by grant recipients, which is consistent with federal regulations. We found in our review of these reports for a sample of grant projects awarded funds in fiscal year 2015 that grant recipients generally submitted them on time, but that some performance reports were missing required information. According to WSFR officials, their primary method for monitoring projects funded by competitive grants is to review financial and performance reports submitted by grant recipients. Grant recipients submit these reports to WSFR staff in FWS regional offices. According to regional WSFR officials, regional staff who specialize in financial matters review the financial reports to ensure they are filled out correctly. Staff do this by comparing financial information on the amount of federal funding reported by recipients with amounts found in Interior’s Financial and Business Management System, which is used to track grants. In addition, WSFR grant specialists review the performance reports to ensure they contain required information, such as an update on the progress of meeting the specified goals of a grant project. If WSFR staff identify discrepancies in the financial reports or deficiencies in the performance reports, WSFR regional staff work with the grant recipients to resolve them. WSFR regional staff occasionally perform site visits to grant projects to verify grant activities described in the performance reports. WSFR regional staff said they perform site visits as funding and time allow and that recently they have had to limit site visits due to budget and staffing constraints. The Uniform Guidance contains requirements for financial and performance reports for monitoring federal grants. Specifically, the Uniform Guidance requires federal agencies to collect financial information from grant recipients at least annually. The Uniform Guidance also requires grant recipients to submit performance reports at least annually, and these reports are to include certain information, such as a comparison of the actual accomplishments of a grant with its goals and the reasons why goals were not met, if appropriate. To further guide FWS staff in implementing these requirements, the FWS Service Manual provides additional information on the agency’s expectations for these reports, including the required content. For example, the Service Manual states that recipients should submit financial information, including the amount of federal and matching funds spent and remaining on a grant. The Service Manual also identifies the standard federal form that should be used for this report. For performance reports, the FWS Service Manual states that FWS must require certain information from grant recipients, including a comparison of actual accomplishments to the goals of the grant projects, and if the goals were not met, the reasons why. In our review of the agency’s monitoring process for selected grants awarded in fiscal year 2015, we found that WSFR required both financial and performance reports at least annually, as required by the Uniform Guidance. In addition, the number and due dates of these reports were specified in the letters provided to grant recipients when they were awarded the grant. These award letters also specified the amount of federal funding for the grant along with any required non-federal matching funds. We reviewed 53 financial reports and 51 performance reports for a sample of 32 grants awarded in fiscal year 2015 and found that most reports were submitted by their due date or within 2 weeks of this date, as table 4 shows. In addition, the majority of the reports we reviewed met the content requirements found in the Uniform Guidance and the FWS Service Manual. Specifically, all 53 financial reports were submitted on the standard form prescribed by the Service Manual. In addition, the financial information on the amount of the grant and non-federal matching funds aligned with the amounts specified in the award letter for nearly all the financial reports we reviewed. In our review of performance reports, we found that most contained information required by the Uniform Guidance on the grant project’s goals, progress toward those goals, and an explanation for why the goals had not been met, if applicable. However, in our sample, nine performance reports submitted for six awarded grants were missing some of this information. For example, one performance report stated that “no activities had occurred” under the grant, but it did not specify what the goals of the grant were or why no progress had been made, as required by the Uniform Guidance. Additionally, two annual performance reports for another grant described the goals of the grant and said they had not been met, but did not provide information as to why. Officials from one state fish and wildlife agency said that there was not a template to follow when preparing performance reports. Officials from another state agency said that while the requirements for performance reporting were laid out clearly in most NOFOs, they could be interpreted differently by different state officials, and these officials needed to ask for clarification from WSFR officials. The format and content of the performance reports is generally left for grant recipients to choose, according to WSFR officials, because neither the Uniform Guidance nor internal FWS guidance recommends a specific template for the performance reports. However, the program leader for the Multistate Conservation Grant Program provides grant recipients with a suggested template to follow when preparing performance reports. The template contains areas in which to describe the goals and objectives of the grant along with progress made towards these. The seven performance reports we reviewed for the Multistate Conservation Grant Program followed this template and, as a result, all contained the information required by the Uniform Guidance. We also found that Region 8 developed a suggested template for performance reports, but the template did not explicitly ask for grant recipients to explain why the goals of a grant had not been met. The lack of a clear performance report template may have contributed to 2 of the 10 performance reports from region 8 we reviewed not including clear explanations of why the goals of the grant had not been met, as required by the Uniform Guidance. According to WSFR officials, the agency is planning to develop a more standardized reporting process for performance reports but the timeline for completion of this has not been formally established and remains uncertain. According to Standards for Internal Control in the Federal Government, management should design control activities to achieve objectives and respond to risks. This includes designing mechanisms to help monitor performance to ensure the objectives of the program are being achieved. As noted previously, the Uniform Guidance specifies that grant performance reports contain a comparison of actual accomplishments to the goals of the project, and the reasons why the goals were not met, as appropriate. The absence of a clear format for these reports may have contributed to some reports not containing all the information needed to comply with federal grant requirements. Without a template or some other standardized method for performance reporting across competitive grant programs, WSFR grant recipients may continue to submit performance reports to WSFR that do not meet all of the content requirements of the Uniform Guidance and do not convey all the information needed for FWS to oversee its competitive grant programs. WSFR awards and monitors five competitive grant programs and, in general, WSFR’s process for awarding and monitoring these grants is consistent with regulations for federal grants established in OMB’s Uniform Guidance. However, there were instances in which the performance reports submitted by grant recipients did not include a comparison of actual accomplishments to the goals of the project, as required by the Uniform Guidance. WSFR does not have a template for performance reporting for four of the five competitive grant programs we reviewed, and the template used by one region does not clearly ask for all required information. Without a template or standardized method that facilitates the collection of performance information, WSFR grant recipients may continue to submit performance reports to WSFR that do not contain the information required by the Uniform Guidance and do not convey all the needed information for FWS to oversee its competitive grant programs. The Director of the U.S. Fish and Wildlife Service should direct WSFR to develop a template or other standardized method to facilitate collection of all required information for grant performance reports. (Recommendation 1) We provided a draft of this report to the Department of the Interior for review and comment. In its written comments, reproduced in appendix VII, the Department of the Interior agreed with our recommendation and described actions it plans to take. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VIII. Our objectives were to (1) identify and describe the competitive grant programs that the Wildlife and Sport Fish Restoration (WSFR) program awards and monitors; (2) examine how WSFR awards grants under these programs and the extent to which this is consistent with relevant federal regulations; and (3) examine how WSFR monitors grants under these programs and the extent to which this is consistent with relevant federal regulations. To identify the competitive grant programs that WSFR both awards and monitors, we reviewed federal laws and regulations related to WSFR grant programs. In particular, we reviewed the 1937 Pittman-Robertson Wildlife Restoration Act and the 1950 Dingell-Johnson Sportfish Restoration Act and amendments to these laws, along with associated regulations for these laws. We also reviewed OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) for federal grant awards. In addition, we reviewed agency guidance and information on grant programs; agency budget documents; and grant program descriptions in the Catalog of Federal Domestic Assistance, a compilation of federal assistance programs that includes grants. Based on our review of these materials, we developed an initial list of grant programs that WSFR had a role in managing, and we spoke with WSFR officials to gather information on which competitive grant programs met the criteria of WSFR being responsible for both awarding and monitoring grants. We corroborated this list of grant programs with WSFR officials. We analyzed data on the competitive grant programs we identified from Interior’s Financial and Business Management System for fiscal years 2012 through 2016, the most recent five-year period for when the award process had been completed. To determine the reliability of these data, we interviewed agency officials and conducted electronic testing of the data, and we determined the data were sufficiently reliable for our purposes. To examine the process WSFR uses to award competitive grants and the extent to which this is consistent with relevant federal regulations, we reviewed relevant agency regulations and guidance along with relevant sections of the Uniform Guidance. To assess the extent to which the award process is consistent with relevant regulations, we compared the process WSFR uses to award grants with OMB’s Uniform Guidance. In addition, we reviewed award documents for grants awarded in fiscal year 2016 for the competitive grant programs we identified. We selected fiscal year 2016 because it was the most recently completed award cycle. These documents included the Notice of Funding Opportunity, which described the funding opportunity to applicants; documentation of the scoring of applications; and memos that documented the results of the scoring process. We also reviewed the entire grant files for eight grants awarded in fiscal year 2016 to determine what documents were contained in these files. In selecting this non-probability sample of files, we selected at least one file for each of the grant programs we examined and at least one file from each of the FWS regional offices that had a grant awarded in fiscal year 2016. However, one of these files was misclassified under an incorrect grant program, so we excluded it from our review. As a result, we did not examine an entire file from the FWS Region 8 office. We reviewed the award documents and files using a standard document review tool to examine specific parts of these documents, such as the descriptions of the process used to review and score applications. To ensure that this review tool was filled out correctly, two GAO staff members reviewed the documents: one filled out the data collection instrument and the other verified this work. In addition to looking at award documents for fiscal year 2016, we also examined memos that documented the results of the grant scoring process for fiscal years 2012 through 2015 for the grant programs we identified. We reviewed the grant scoring memos from fiscal years 2012 through 2016 grants cycles because they comprise the most recent five-year period for when the award process had been completed. To examine the process WSFR uses to monitor competitive grants and the extent to which those processes are consistent with relevant federal regulations, we reviewed relevant agency regulations and guidance along with relevant sections of the Uniform Guidance. To assess the extent to which the monitoring process is consistent with relevant regulations, we compared the process WSFR uses to monitor grants with OMB’s Uniform Guidance. We used a standard document review tool to review financial and performance reports for 32 of 129 grants that were awarded in fiscal year 2015 to determine the extent to which these reports contained information required by the Uniform Guidance. We selected fiscal year 2015 to ensure that enough time had elapsed under these grants for financial and performance reports to have been required and submitted. In selecting this non-probability sample of files, we ensured that we had at least one file for each of the grant programs and at least one file from each of the eight FWS regional offices. For financial reports, we determined whether reported financial information on the grant award and matching funds aligned with the dollar amounts in their award letters, whether the reports were submitted by their due dates, and whether they were submitted on the correct form. For performance reports, we determined whether they were submitted by their due dates and whether they contained information on the grant project’s goals, progress toward those goals, and an explanation why the goals had not been met, if applicable. The Uniform Guidance requires this information to be in performance reports. The results from our analysis of these documents are not generalizable to all monitoring documents for grants awarded in fiscal year 2015, but allowed us to examine how WSFR monitored selected grants. For all three objectives, we interviewed WSFR staff responsible for managing WSFR grant programs. These included WSFR program leaders at headquarters and WSFR staff in each of the eight FWS regional offices that are responsible for the five competitive grant programs we reviewed. We asked these officials about the role they played in awarding and monitoring competitive grants. In addition, we interviewed other FWS officials that were involved with managing grants and officials from select third party organizations that played a role in awarding grants, including the Association of Fish and Wildlife Agencies and the Sport Fishing and Boating Partnership Council. We also interviewed grant applicants, including state fish and wildlife agency officials and nongovernmental organizations to learn about their experiences during the award and monitoring process for WSFR grants. We selected applicants that had various experiences with the grant programs in fiscal year 2016, including those that applied and did not receive funding and those that applied and received funding. The results of the interviews with grant applicants cannot be generalized to other applicants, but were used to obtain perspectives on the grant award and monitoring processes. We conducted this performance audit from March 2017 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Below is summary information on the Boating Infrastructure Tier 2 Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials. Establishment and goals of the program: The program was established by the Sportfishing and Boating Safety Act of 1998, which amended the Dingell-Johnson Sport Fish Restoration Act. The program provides grants to be used for constructing, renovating, or maintaining docking or mooring facilities for transient, nontrailerable recreational vessels that are 26 feet or greater in length. These facilities generally must allow public access, and examples of facilities that can be built with these funds include boat slips, piers, buoys, fuel stations, restrooms, bulkheads, dredging, or laundry facilities. Grants can also be awarded to produce information and education materials specific to the program or projects funded by the program. Governor-designated agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this grant program. The designated agency is often a state natural resource or fish and wildlife agency. Subgrants to other entities are allowed. According to Wildlife and Sport Fish Restoration (WSFR) officials, subgrants under this program are common. About 2 percent of the Sport Fish Restoration and Boating Trust Fund is devoted to the grant program. In fiscal year 2016, there was $8.6 million in federal funds available for the Tier 2 program. The maximum grant award is $1.5 million per project, and recipients generally must provide matching funds worth at least 25 percent of the total cost of projects. Funds not obligated within three fiscal years shall be transferred to the Coast Guard and expended for state recreational boating safety programs. Highlights from the award process used in fiscal year 2016: The Notice of Funding Opportunity for fiscal year 2016 was posted on www.grants.gov on June 22, 2015, and applications were due by September 18, 2015. Thirteen states submitted a total of 22 applications for projects. Regional staff for the Wildlife and Sport Fish Restoration Program and members from the Sport Fishing and Boating Partnership Council scored the applications and recommended that 10 projects be fully funded and one be partially funded. The Deputy Director of the U.S. Fish and Wildlife Service approved the list of recommended projects on March 11, 2016. The U.S. Fish and Wildlife Service announced the selected projects on March 17, 2016. Information on past applications and selected projects: Table 5 shows the number of applications received and selected projects under the Boating Infrastructure Tier 2 Grant Program in fiscal years 2012 through 2016. Below is summary information on the Clean Vessel Act Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials. Establishment and goals of the program: The program was established by the Clean Vessel Act of 1992, which amended the Dingell-Johnson Sport Fish Restoration Act. This program funds grants to coastal states for certain activities, such as constructing and renovating pumpout stations and waste reception facilities and conducting a program to educate recreational boaters about the problem of human body waste discharges from vessels and inform them of the locations of pumpout stations and waste reception facilities. The program also funds grants to inland states meeting certain criteria. Under program regulations, facilities need to be open to the public in order to be eligible for a grant. Since the program was established, over 6,000 dump or pumpout facilities have been built and over 3,700 of these facilities have been operated or maintained using grant funds. Governor-designated agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this grant program. The designated agency is often a state natural resource or fish and wildlife agency. Subgrants to other entities are allowed. According to Wildlife and Sport Fish Restoration (WSFR) officials, subgrants under this program are common. About 2 percent of the Sport Fish Restoration and Boating Trust Fund is devoted to the grant program. In fiscal year 2016, there was $13.7 million in federal funds available for the program. The maximum award amount is generally $1.5 million, and recipients generally must provide matching funds worth at least 25 percent of the total cost of projects. Funds not obligated within three fiscal years shall be transferred to the U.S. Coast Guard and expended for state recreational boating safety programs. Highlights from the award process used in fiscal year 2016: The Notice of Funding Opportunity (NOFO) for fiscal year 2016 was posted on www.grants.gov on August 12, 2015, and applications were due by December 2, 2015. A total of 21 states and the District of Columbia submitted 33 applications. WSFR staff from the U.S. Fish and Wildlife Service regions scored applications in their regions; then, these scores were averaged with scores from the WSFR program leader for the Clean Vessel Act grant program, who scored all of the applications. WSFR provided copies of grant applications to the U.S. Environmental Protection Agency (EPA), U.S. Coast Guard, and National Oceanic and Atmospheric Administration (NOAA) for them to review and score the applications. WSFR also provided its scores on the applications to these agencies. EPA informed WSFR in an email that it agreed with the proposed funding decisions for the program. According to WSFR, the Coast Guard did not provide comments on the proposed scores. NOAA sent a letter to WSFR indicating that it had not reviewed all of the applications but it supported the program and did not object to the agency’s scoring of the applications. The Deputy Director of the U.S. Fish and Wildlife Service approved the list of recommended projects on April 28, 2016. The U.S. Fish and Wildlife Service announced the winning grant awards on May 11, 2016. According to the fiscal year 2016 NOFO, this program attempts to provide support to as many eligible projects as possible. In practice, all eligible applications have been awarded funds from fiscal year 2012 through fiscal year 2016. If funding requests exceed available funds, WSFR applies a formula to allocate funding based on the score the application receives. Information on past applications and selected projects: Table 6 shows the number of applications received and selected projects under the Clean Vessel Act Grant Program in fiscal years 2012 through 2016. Below is summary information on the Competitive State Wildlife Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials. Establishment and goals of the program: The State Wildlife Grant Program provides grants for the development and implementation of programs for the benefit of wildlife and their habitats, including species that are not hunted or fished. Eligible activities include planning and conservation implementation. The competitive portion of the State Wildlife Grant Program was established by the Consolidated Appropriations Act, 2008. Fish and wildlife agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands and at the discretion of affected states, the regional Association of Fish and Wildlife Agencies are eligible for this grant program. According to the Notice of Funding Opportunity (NOFO) for this program, for each of the 48 contiguous United States and the District of Columbia, at least two states must be active participants in proposed conservation actions. Applicants are also encouraged to engage with other partners on projects. Potential partners include tribes, federal agencies, other state agencies, local governments, nongovernmental organizations, academic institutions, private landowners, industry groups, and international partners. The program is governed and funded through annual appropriations acts. In fiscal year 2016, there was about $5.6 million available for the program. For most applicants proposing a multi-state project, the maximum award is $500,000 and the minimum award is $50,000. Applicants must provide matching funds worth at least 25 percent of the total cost of projects. Past appropriations for these grants have been appropriated to remain available until expended. The appropriations acts governing the program have generally provided that any amount apportioned in one fiscal year that remains unobligated by the end of the next fiscal year are to be reapportioned in the following fiscal year. Highlights from the award process used in fiscal year 2016: The NOFO for fiscal year 2016 was posted on www.grants.gov on November 20, 2015, and applications were due by February 19, 2016. The Wildlife and Sport Fish Restoration Program (WSFR) received 21 eligible applications. Applications were reviewed by a panel consisting of WSFR staff from each region of the U.S. Fish and Wildlife Service (FWS). The panel recommended fully funding 14 projects and partially funding 1 project, for a total of $5.6 million, with $2.9 million in non- federal matching funds. The Deputy Director of the U.S. Fish and Wildlife Service approved the list of recommended projects on May 19, 2016. FWS announced the selected projects on May 20, 2016. Information on past applications and selected projects: Table 7 shows the number of applications received and selected projects under the Competitive State Wildlife Grant Program in fiscal years 2012 through 2016. Below is summary information on the Multistate Conservation Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials. Establishment and goals of the program: The program was established by the Wildlife and Sport Fish Restoration Programs Improvement Act of 2000, which amended the Pittman-Roberts Wildlife Restoration Act and the Dingell-Johnson Sport Fish Restoration Act. The program focuses on funding multistate conservation projects that benefit a certain number of states or a regional association of state fish and game departments. Fish and wildlife agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this grant program. The U.S. Fish and Wildlife Service (FWS) is also an eligible applicant for the purpose of carrying out the National Survey of Fishing, Hunting, and Wildlife-Associated Recreation, which is conducted every five years. Nongovernmental organizations are also eligible, provided that they submit a certification that they will not use the grant funds to fund, in whole or in part, any activity of the organization that promotes or encourages opposition to the regulated hunting or trapping of wildlife or the regulated taking of fish. Grant projects shall not be eligible unless they will benefit at least 26 states, a majority of states in a FWS region, or a regional association of state fish and wildlife agencies. By statute, FWS may only make grants for projects identified on a priority list prepared by the Association of Fish and Wildlife Agencies (AFWA), a nongovernmental organization that represents state fish and wildlife agencies on conservation and land management issues, after following certain procedures. Up to $6 million annually is authorized to fund grants, with no more than $3 million from the Wildlife Restoration Account and $3 million from the Sport Fish Restoration Trust Fund. In practice, some of the grant funds are carried over to future years to fund certain multi-year projects, such as the National Survey of Fishing, Hunting, and Wildlife-Associated Recreation. This program does not have a matching funds requirement. Funds not obligated within two fiscal years revert back to the Wildlife Restoration and Sport Fish Restoration programs for apportionment to the states. Highlights from the award process used in fiscal year 2016: The Notice of Funding Opportunity for fiscal year 2016 was posted on www.grants.gov on April 13, 2015, and the deadline for submitting letters of intent to AFWA was May 11, 2015. These letters of intent provide a summary of the grant project, and they were scored by AFWA’s national grants committee. The highest-scoring applicants were invited to submit a full grant application to AFWA by August 14, 2015. The national grants committee scored these applications and presented these scores to AFWA members at its annual meeting in September 2015. Members voted to approve the priority list at this meeting. AFWA provided the priority list containing 18 projects to FWS. The Deputy Director of Program Management and Policy of the U.S. Fish and Wildlife Service approved the list of recommended projects on December 7, 2015. During the award process, Wildlife and Sport Fish Restoration staff also reviewed the grant applications. FWS announced the selected projects on February 11, 2016. Information on past applications and selected projects: Table 8 shows the number of applications received and selected projects under the Multistate Conservation Grant Program in fiscal years 2012 through 2016. Below is summary information on the National Coastal Wetlands Conservation Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials. Establishment and goals of the program: The program was established by the Coastal Wetlands Planning, Protection and Restoration Act. This program’s primary goal is the long-term conservation of coastal wetlands’ ecosystems. It accomplishes this by helping states protect, restore, and enhance their coastal habitats through a competitive grants program. Since 1992, the U.S. Fish and Wildlife Service (FWS) has awarded over $377 million through these grants. Governor-designated agencies of an eligible coastal state are eligible for this grant program. The designated agency is often a state natural resource or fish and wildlife agency. Subgrants are allowed, are relatively common, and can be awarded to local governments and nonprofit organizations. About 3 percent of the Sport Fish Restoration and Boating Trust Fund is devoted to the grant program. In fiscal year 2016, there was about $20.3 million in federal funds available for the program. The maximum award amount is $1 million, and states generally must provide 50 percent of the total cost of the project. However, states that have established and are using a state fund for the purpose of acquiring coastal wetlands must provide a minimum of 25 percent of the total cost of projects. Projects are generally funded through annual proposals. Funds must be obligated by December 31st of the year after funds were allocated, meaning that, for example, fiscal year 2015 funds must be obligated by December 31, 2016. Funds not obligated during the specified time frame return to the FWS program account. Highlights from the award process used in fiscal year 2016: The Notice of Funding Opportunity for fiscal year 2016 was posted on www.grants.gov on February 5, 2015, and applications were due by June 24, 2015. The FWS Wildlife Sport Fish Restoration Program (WSFR) received 32 applications. A panel of WSFR and FWS Coastal Program regional officials scored and ranked the applications, and recommended 28 projects for funding. The Deputy Director of the U.S. Fish and Wildlife Service approved the list of recommended projects on January 13, 2016. WSFR awarded $20 million in grant funding, which was supplemented by $20.5 million in non-federal matching funds. FWS announced the selected projects on February 2, 2016. Information on past applications and selected projects: Table 9 shows the number of applications received and selected projects under the National Coastal Wetlands Conservation Grant Program in fiscal years 2012 through 2016. In addition to the individual named above Elizabeth Erdmann (Assistant Director), Steven Bagley, and Scott Heacock made key contributions to this report. Additional contributions were made by Thomas M. James, Ying Long, Kim McGatlin, Patricia Moye, Anne Rhodes-Kline, and Sheryl Stein.", "summary": "FWS awarded $1.5 billion in grants in fiscal year 2016, which represented about half of the agency's budget. In general, FWS awards two types of grants: (1) formula grants, which are distributed to recipients based on a required formula, and (2) competitive grants, where potential recipients submit an application for funding that is reviewed and scored against criteria. Within FWS, WSFR manages several grant programs. GAO was asked to review WSFR's management of its competitive grant programs. This report (1) identifies and describes competitive grant programs that WSFR awards and monitors; (2) examines how WSFR awards grants under these programs and the extent to which this is consistent with relevant regulations; and (3) examines how WSFR monitors grants under these programs and the extent to which this is consistent with relevant regulations. GAO reviewed relevant federal laws, regulations, and FWS guidance; analyzed agency data for fiscal years 2012-2016; reviewed award documents for fiscal year 2016 and a sample of monitoring documents for grants awarded in fiscal year 2015 (selected to ensure sufficient time for required reports to be submitted) and compared these with requirements from relevant regulations; interviewed WSFR headquarters and regional officials and grant recipients. The U.S. Fish and Wildlife Service's (FWS) Wildlife and Sport Fish Restoration (WSFR) program, within the Department of the Interior, awards and monitors five competitive grant programs. These grant programs fund different types of projects ranging from building docks to acquiring wetlands. GAO found that the number of grants and funding awarded varied by grant program from fiscal years 2012 through 2016. Dollars in thousands The award process WSFR uses for the five competitive grant programs generally involves publicly announcing the grant opportunity through a Notice of Funding Opportunity, which contains information applicants need to consider when applying, such as available funding and criteria that will be used to score applications. A panel comprised of WSFR staff, and in some cases other FWS staff or a third party organization, reviews and scores the applications based on the criteria in the Notice of Funding Opportunity and develops a list of recommended projects and funding amounts. The list is forwarded to the Director of FWS for review and approval. GAO found that WSFR's grant award process is consistent with federal regulations for awarding federal grants. WSFR monitors its competitive grants by reviewing financial and performance reports submitted by grant recipients. In general, this process is consistent with relevant regulations, but some of the performance reports were missing required information. Specifically, for fiscal year 2015 grants GAO reviewed, financial and performance reports were generally submitted on time by grant recipients, but several performance reports (9 of 51) did not include a comparison of actual accomplishments to the goals of the grant, as required by regulations. WSFR does not have a template for grant recipients to follow in preparing these reports for most of the grant programs, and the template used by one region does not clearly ask for all required information. WSFR officials have said the agency plans to develop a more standardized reporting process but no timeline has been established. According to Standards for Internal Control in the Federal Government , management should design control activities to achieve objectives and respond to risks, including designing mechanisms to help monitor performance. Without a template or standardized method that facilitates the collection of performance information, WSFR grant recipients may continue to submit performance reports that are missing information needed by FWS to monitor its competitive grant programs. GAO recommends that FWS develop a template or other standardized method to facilitate collection of all required information for grant performance reports. The Department of the Interior concurred with this recommendation.", "document_type": "gao"}
{"report": "A reliable schedule is critically important for a successful 2020 Census. In February 2017, we added the 2020 Census to our High-Risk List because operational and other issues including scheduling are threatening the Bureau’s ability to deliver a cost-effective enumeration. We reported on concerns about the quality of the Bureau’s schedule and cost assessment, the Bureau’s capacity to implement innovative census-taking methods, and uncertainties surrounding critical information technology systems. Underlying these issues are challenges in such essential management functions as the Bureau’s ability to collect and use real-time indicators of schedule, cost, and performance; follow leading practices for scheduling, cost estimation, risk management, and IT acquisition, development, testing, and security; and cost effectively deal with contingencies including, for example, fiscal constraints, potential changes in design, and natural disasters that could affect the enumeration. Reliable scheduling practices are essential for managing tradeoffs between cost, schedule, and scope. Among other things, scheduling allows program managers to decide between possible sequences of activities, determine the flexibility of the schedule according to available resources, predict the consequences of managerial action or inaction in events, and allocate contingency plans to mitigate risk. Following changes in a program, the schedule is used to forecast the effects of delayed, deleted, and added effort, as well as possible avenues for time and cost recovery. Scheduling is important because the cost of counting the nation’s population has been escalating with each decade. The 2010 Census was the most expensive in U.S. history at about $12.3 billion, and was about 31 percent more costly than the $9.4 billion 2000 Census (in 2020 constant dollars). According to the Bureau, the total cost of the 2020 Census is now estimated to be approximately $15.6 billion dollars, more than $3 billion higher than previously estimated by the Bureau. Moreover, as shown in figure 1, the average cost for counting a housing unit increased from about $16 in 1970 to around $92 in 2010 (in 2020 constant dollars). At the same time, the return of census questionnaires by mail (the primary mode of data collection) declined over this period from 78 percent in 1970 to 63 percent in 2010. Declining mail response rates have led to higher costs because the Bureau needs to send temporary workers to each nonresponding household to obtain census data. The schedules we reviewed for this report—2020 Census Geographic Programs, 2018 End-to-End Test Address Canvassing, and 2018 End-to- End Census Test Nonresponse Follow-up—relate to the key activities of developing an accurate address list and following up with households that did not mail back their census forms. The Bureau relies on a complete and accurate address list to maximize the more cost-efficient self- response rate. The three projects we selected contribute to two of the Census Bureau’s largest field operations. The Bureau’s Geographic Programs Operation maintains the Bureau’s master address file and mapping data used to conduct the 2020 Census. The Bureau’s Geographic Programs Operation provides the most current address list to the Bureau’s Address Canvassing Operation, where Bureau staff make updates to the address list via in-office and in-field procedures. These updates are processed on an ongoing basis throughout the decade. The Bureau conducts its Nonresponse Follow-up Operation after Census Day by having enumerators go door-to-door to determine the housing unit status for addresses that do not self-respond to the 2020 Census, and enumerate households that are determined to be occupied. We have previously reported in our Schedule Assessment Guide that a reliable schedule can provide a road map for systematic execution of a program, and the means by which to gauge progress, identify and address potential problems, and promote accountability. The guide identifies four characteristics of a reliable schedule: Comprehensive: The schedule should identify all activities and resources necessary to accomplish the project. The schedule should cover the scope of work to be performed so that the full picture is available to managers. Well-constructed: Activities should be logically sequenced and critical activities that would affect the timelines of the schedule should be identified. Credible: All schedules should be linked to a complete master schedule for managers to reference and analyzed for how risk impacts the outcome of the schedule. Controlled: There should be a documented process for changes to the schedule so that the integrity of the schedule is assured. For a schedule to be reliable, it must substantially or fully meet all criteria for these four characteristics. These characteristics, their related leading practices, and their criteria are described in more detail in appendix II. In 2013, we assessed the Bureau’s 2020 Research and Testing and Geographic Support System Initiative schedules using these criteria. While the results exhibited some of the characteristics of a reliable schedule, important weaknesses remained. Both schedules substantially met one of the four characteristics (controlled) and minimally or partially met the other three characteristics (comprehensive, well-constructed, and credible). For this review, we assessed the 2018 End-to-End Census Test Address Canvassing, 2018 End-to-End Census Test Nonresponse Follow-up, and 2020 Census Geographic Programs projects’ schedules. We found that overall the selected schedules better reflected two of the four characteristics of a reliable schedule compared to our 2013 assessment (see figure 2). Examples of the extent to which these characteristics were met are provided below. For a more detailed explanation of our assessment results, see appendix III. As with our 2013 schedule assessment, our 2018 analysis found that the Bureau is partially meeting the characteristics of a comprehensive schedule. For example, the projects we assessed reflect the work to be accomplished for the project schedules, and each project schedule includes estimates of the duration of each activity. Additionally, the 2018 End-to-End Census Test Address Canvassing and the 2018 End-to-End Census Test Nonresponse Follow-up project schedules contain clear start and finish milestones, and map to the census program work breakdown structure—a detailed definition of the work necessary to accomplish a program’s objectives. This leading practice of capturing all activities was substantially met, not fully met (see appendix III for a more detailed explanation), because while for each project all activities and milestones are mapped to their work breakdown structures by codes, there are no corresponding dictionaries to define the work. The absence of such a dictionary could potentially lead to confusion among staff in different census offices about the scope of the work they are responsible for performing. Our schedule guide states that a work breakdown structure dictionary is a valuable communication tool between systems engineers, program management, and other stakeholders because it provides a clear picture of what efforts have to be accomplished. Bureau officials stated that although their 2020 Schedule Management Plan requires each project to have a schedule work breakdown structure dictionary, as project schedules are updated, they have not created these required dictionaries. As an alternative, they noted that the 2020 Census Operational Plan includes details and definitions of the projects. Additionally, none of the three schedules we assessed include information about what levels of resources, such as labor and equipment, are required to complete the planned work—including this information is called resource loading. The Bureau’s 2020 Schedule Management Plan states that it is the responsibility of a representative from a project team and the schedule staff to assign resources to an individual project schedule, and that defining and assigning resources should be done following the testing phase of the 2020 Census Lifecycle. The Bureau is now in its implementation phase (see figure 3 below), so according to its management plan, resource loading should have begun. But it has not. For example, the 2018 End-to-End Census Test Address Canvassing project schedule did not include any resource information on the recruiting and hiring goals for the address canvassing field work. Instead, Bureau officials stated that they are estimating the cost of activities using a software tool separate from the current schedule management tool. They further stated that this Bureau-wide solution includes all 2020 Decennial Census staff as Decennial funded resources. However, the information in this separate tool has no effect on the durations or forecasted start and finish dates of detailed activities within individual projects. Furthermore, the separate tool does not always track all activities at the lowest level in the schedule, so that Bureau managers do not have reliable visibility with it on the efforts of the lowest level of detailed activities. Resource loading is important for any agency, but is particularly important for the Census Bureau, given its statutorily mandated deadlines. Missed deadlines or schedule slippage can easily jeopardize the quality of the 2020 Census, and there is little room for error given that census data are used to apportion the seats of the House of Representatives, redraw congressional districts, and allocate billions of dollars each year in federal financial assistance. In our schedule guide, we reported that including resources such as labor, materials, and overhead costs can make a schedule a more useful management tool. A resource-loaded schedule can help management with things such as computing labor and equipment hours, calculating total project and per- period cost, resolving resource allocation conflicts, determining whether all required resources will be available when they are needed, and establishing the reasonableness of the plan. For example, information on the resource needs of field operations in the 2018 End-to-End Census Test would assist management in determining if the appropriate resource allocations have been made for any given test activity. It would also aide in forecasting the likelihood that those resources will be available to complete the 2018 End-to-End Census Test Address Canvassing and Nonresponse Follow-up activities as scheduled. If the schedule does not allow insight into the current or projected allocation of resources for these test activities, the Bureau’s risk of key end-to-end test milestones slipping increases significantly. In 2009, we reviewed the Bureau’s schedule and recommended that the Bureau include estimates of the resources in the 2020 integrated schedule for each activity as the schedule was built. The Department of Commerce did not respond to the recommendation at that time. In our 2013 assessment of the Bureau’s schedule, Bureau officials stated that they hoped to begin identifying the resources needed for each activity in their schedules by early 2014. However, as of May 2018, the Bureau has not yet implemented this recommendation. Senior Bureau officials have now stated that the Bureau would require additional staffing in the Schedule Management Branch in the Decennial Census Management Division in order to plan for and implement resource loading. When the Bureau has resource loaded its schedule, it will be able to use the schedule more effectively as a management tool. Our 2013 assessment of the Bureau’s schedule reported that the Bureau only minimally met the characteristics of a well-constructed schedule. Our 2018 assessment found that two of the selected project schedules now substantially met this characteristic and one partially met it. In this assessment, Bureau officials linked many of the activities clearly and in a straightforward sequence in the schedule, which was not always the case in prior assessments. This improvement is important because it helps staff identify next steps as they progress through such things as acquiring and mobilizing the staff needed to conduct the address canvassing and nonresponse follow-up test field work, and helps managers identify the impact of changes in one activity on subsequent activities. For example, the schedule lays out the sequence of activities needed, such as developing training materials, recruiting field staff, training staff and equipping them with the tools needed to complete the test. Our assessment also concluded that two of the three project schedules we assessed have valid critical paths, which is the sequence of activities in the schedule that, according to their current status, lead to the program’s earliest completion date. A valid critical path allows management to focus on activities that will lead to the project’s success. The 2020 Census Geographic Programs project schedule partially met the well-constructed characteristic due to problems existing within the schedule’s sequencing logic. In particular, we found a large number of unjustified date constraints and lags. In part because of these sequencing issues, total float calculations—that is, the amount of time a predecessor activity can slip before its delay affects the program’s estimated finish date—appear unreasonably high. Additionally, this project schedule has activities on the critical path with long durations. For example, the project schedule for Geographic Programs included several long-duration activities on its critical path that relate to the Bureau’s collection of community boundary data—information essential to delineating geographic boundaries used in the tabulation of census data. These critical long-duration activities make it difficult to measure time- critical progress on such activities in the near term. These issues with how the schedule is constructed can also cause schedule users to lack confidence in the forecasted dates. Bureau officials acknowledged that the 2020 Census Geographic Programs project schedule had logic issues at the time because it was in the middle of a revision. Bureau officials stated that the standard process is to update the project schedule in an offline version and then assess the quality and impacts of changes before acceptance. According to Bureau officials, the Geographic Programs project schedule did not follow this process and was instead updated in the live version of the schedule because of time constraints. Our 2013 assessment of the Bureau’s schedule found that the Bureau minimally met the characteristics of a credible schedule. Our 2018 assessment of the Bureau’s schedule found that the Bureau’s scheduling practices for a credible schedule have improved. We found that there is now a clear relationship between lower-level activities and higher-level activities and milestones, and there is generally better consistency of dates between the project schedule and higher-level management documents. However, the Bureau has not carried out a systematic quantitative risk analysis on its schedule. A schedule risk analysis is a statistical simulation of the possible effects of threats, opportunities, and general uncertainty to a program’s schedule that results in a quantifiable level of confidence in meeting the program’s key milestone dates. While the Bureau has identified and continues to track risks to its 2018 End-to-End Test address canvasing and nonresponse follow-up efforts in risk registers, a quantitative risk analysis would illustrate the impact of risks on the project schedule, and how those risks would affect the Bureau’s ability to meet milestones on time. Such an analysis would also provide a measure of how much time contingency should be built in the schedule to help manage prioritized risks, and, implicitly, provide indications of where additional resources might be needed to stay on schedule. In response to our 2013 schedule assessment, Bureau officials said they were waiting for decisions about scheduling software before making decisions about a schedule risk analysis. As of May 2018, the Bureau has conducted three risk analyses to prove the software’s capability. However, the Bureau still had not conducted a schedule risk assessment on the current integrated master schedule used to manage the 2020 Census program. Without a schedule risk analysis, the Bureau cannot determine the likelihood of each project’s completion date; how much schedule risk contingency is needed to provide an acceptable level of certainty for completion by a specific date; which risks are most likely to affect the schedule; how much contingency time each risk requires; and the sequence of activities that are most likely to delay the project. Senior Bureau officials stated that a schedule risk assessment plan and process was approved by Bureau management in late May 2018 and that they hope to implement this plan in summer 2018. They intend to conduct an internal review over the next couple months to determine how to best use the information this risk assessment would yield. Follow through on their plans is critical to ensuring our recommendation is implemented. As with our 2013 schedule assessment, our 2018 analysis reported that the Bureau’s scheduling practices are substantially meeting the characteristics of a controlled schedule. Our analysis determined that there are no date anomalies in the project schedules, such as planned dates in the past or actual dates in the future. We found the schedule was current as of the date delivered to us, and according to Bureau documents, the schedule is updated weekly following an established schedule process. Additionally, the Bureau reported that it has a schedule management process in place and a method for logging changes to the schedule in accordance with leading practices. Bureau officials reported that they monitor schedule trends, including bi-weekly schedule reliability checks using the Defense Contract Management Agency 14-Point assessment, a commonly used set of schedule integrity and reliability measures. Bureau officials also provided the May 2014 Program Change Management Process Strategy which defines the process for initiating changes to the integrated performance measurement baseline configuration; analyzing the impact of changes to project cost, schedule and scope; approving or disapproving changes; and updating project or product specifications and baselines. However, our assessment found that the Bureau did not fully meet this characteristic for a controlled schedule. The Bureau lacked sound documentation of the schedule in the form of a schedule basis document, and changes to the current schedules in the form of a schedule narrative. The current schedule should be documented in a schedule narrative with each update, including changes made to the schedule during status updates and changes that are justified along with their likely effect on future activities. The Bureau had not prepared such narratives. Additionally, none of the three schedules were supported by a schedule baseline document—a single document that defines the organization of a schedule, describes the logic of the network, describes the basic approach to managing resources, and provides a basis for all parameters used to calculate dates. Sound documentation helps with analyzing changes in the program schedule and identifying the reasons why actual schedule results vary from their estimates, thereby contributing to the collection of data that can be useful to evaluations of schedule efforts, and that can be used to support future estimates. While the Bureau has made improvements to implement the recommendations regarding the comprehensiveness and construction characteristics of the Bureau’s scheduling practices, the Bureau’s lack of resource loading and a risk assessment of the schedule continue to affect the reliability of the Bureau’s schedule. The schedule would be a more useful management tool if the Bureau increased the schedule’s reliability by addressing these weaknesses. To address these remaining weaknesses, we continue to believe that these recommendations are valid in order to ensure the 2020 schedule can support key management decisions. We provided a draft of this report to the Department of Commerce. In its written comments, reproduced in appendix IV the Department of Commerce agreed with our findings. We are sending copies of this report to the Secretary of Commerce, the Under Secretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and interested congressional committees. The report also is available at no charge on GAO’s website at http://www.gao.gov. If you have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made major contributions to this report are listed in appendix V. This report assesses the extent to which the Bureau is using leading practices for scheduling key projects. We did this by focusing on three 2020 projects. We selected the three projects from the December 17, 2017, version of the 2020 Census integrated master schedule. That schedule consists of 255 total projects, of which 134 were remaining to be completed. We made our selections based on the cost of the projects, their significance to the 2020 Census, and the fact that they were in progress. The 3 projects selected for review are 2018 End-to-End Census Test Address Canvassing, 2018 End-to-End Census Test Nonresponse Follow-up, and 2020 Census Geographic Programs. We reviewed the project schedules and underlying sub-schedules to assess them against the 10 scheduling leading practices by: Checking for specific problems that could hinder the schedule’s ability to respond to changes. For example, we: Examined if there are any open-ended activities (i.e., activities with no predecessor and/or successors), Searched for activities with poor logic: For example, Start to Start successor only or Finish to Finish predecessor only which represent dangling logic, or Logic on summary tasks rather than attached to detailed tasks (summary tasks are for organizing the schedule and should not drive the logic). Looked for activities with constraints which keep the schedule rigid (e.g., start no earlier than, finish no later than, etc.), Identified any lags or leads which should only be used to show how two tasks interact and not to represent work, Determined if activities were resource loaded—which helps to cost out the schedule—and examine whether resources are over allocated or not available when needed, Examined the length of activity durations and compared them to the program management review cycle, Checked for horizontal and vertical integration within the schedule, Examined the schedule critical path to determine whether or not it was reliable and logical, Examined schedule float and determine if it was reasonable, and Examined whether the schedule was baselined, its status cycle, and what deviations there were from the original plan. We also determined if there were any actual start or finish dates recorded in the future and whether there was any broken logic between planned tasks. We also interviewed Bureau officials responsible for the 2020 schedule. We scored each scheduling leading practice on a five-point scale ranging from “not met” to “met.” We determined the characteristic assessment rating by assigning each best practice rating a number and taking the average. The numerical ratings and ranges of the resulting averages are as follows. We then compared these results with our prior assessments of the Bureau’s schedule, particularly those where recommendations were made, and we updated the status of those recommendations. Assessing only three key projects limits possible statements about the Bureau’s entire schedule. For example, if the Bureau is not following best practices in creating and maintaining the three project schedules, we can conclude that the larger integrated schedule is unreliable. This is because an integrated master schedule consolidates lower-level project schedules; errors and reliability issues in lower levels will be transferred to higher- level schedules. However, if the selected lower-level projects are deemed reliable, we cannot definitively determine the reliability of the integrated master schedule because the other projects that were not assessed may be unreliable. Description A schedule should reflect all activities defined in the project’s work breakdown structure and include all activities to be performed by the government and contractor. The schedule should realistically reflect the resources (i.e., labor, material, and overhead) needed to do the work, whether all required resources will be available when needed, and whether any funding or time constraints exist. The schedule should reflect how long each activity will take to execute. The schedule should be planned so that all activities are logically sequenced in the order they are to be carried out. The schedule should identify the critical path, or those activities that, if delayed, will negatively impact the overall project completion date. The critical path enables analysis of the effect delays may have on the overall schedule. The schedule should identify float—the amount of time an activity can slip in the schedule before it affects other activities—so that flexibility in the schedule can be determined. As a general rule, activities along the critical path have the least amount of float. The detailed schedule should be horizontally traceable, meaning that it should link products and outcomes associated with other sequenced activities. The integrated master schedule should also be vertically traceable—that is, varying levels of activities and supporting subactivities can be traced. Such mapping or alignment of levels enables different groups to work to the same master schedule. The schedule should include a schedule risk analysis that uses statistical techniques to predict the probability of meeting a completion date. A schedule risk analysis can help management identify high priority risks and opportunities. Progress updates and logic provide a realistic forecast of start and completion dates for program activities. Maintaining the integrity of the schedule logic at regular intervals is necessary to reflect the true status of the program. To ensure that the schedule is properly updated, people responsible for updating should be trained in critical path method scheduling. A baseline schedule represents the original configuration of the program plan and is the basis for managing the project scope, the time period for accomplishing it, and the required resources. Comparing the current status of the schedule to the baseline can help managers target areas for mitigation. Other key contributors to this report include Ty Mitchell, Assistant Director; Juaná Collymore; Rob Gebhart; Yvette Gutierrez; Jason Lee; Kayla Robinson; Cynthia Saunders; and Timothy Wexler.", "summary": "The Bureau is required by law to count the population as of April 1, 2020; deliver state apportionment counts to the President by December 31, 2020; and provide redistricting data to the states within 1 year of Census Day, April 1, 2021. To meet these statutory deadlines, the Bureau carries out hundreds of projects, which it manages with an integrated master schedule. Because census operations need to proceed in concert with one another, significant delays could propagate to other activities resulting in increased costs, reduced operational quality, or changes to the design of the census in order to compensate for lost time. This report determines the extent to which the Bureau is using leading practices for scheduling key projects. GAO selected three projects for review based on their cost and in-progress status. GAO analyzed schedules and their supporting documents against GAO's Schedule Assessment Guide. GAO also spoke with relevant Bureau officials regarding the three selected projects. GAO provided a draft of this report to the Department of Commerce, which agreed with the findings. The three census project schedules GAO reviewed better reflect characteristics of a reliable schedule compared to a GAO schedule assessment performed in 2013, but weaknesses remain. GAO reviewed three projects that contribute to two of the Census Bureau's (Bureau) largest field operations—address canvassing and nonresponse follow-up. The schedules for all three projects are better constructed and more credible than previously reviewed project schedules. For example, the Bureau has improved the logic of the relationship between activities, and better ensured that all schedules are linked together in a master schedule so that their interactions can be better managed. However, the three selected schedules have some of the same weaknesses GAO identified in other Bureau schedules in 2009 and 2013. For example, none of the selected schedules contain information on resource needs and availability. GAO has reported that such information assists program offices in forecasting the likelihood that activities will be completed as scheduled. It can also help management compute total labor and equipment hours, calculate total project and per-period cost, resolve resource conflicts, and establish the reasonableness of the plan. If the schedule does not allow insight into current or projected allocation of resources, then the likelihood is significantly increased that the program may slip or need additional resources to complete on time. In GAO's 2009 review of the Bureau's schedule, GAO recommended that the Bureau include in the 2020 master schedule estimates of the resources, such as labor, materials, and overhead costs for each activity as the 2020 schedule was built. The Department of Commerce did not respond to the recommendation at that time. Then, regarding GAO's 2013 assessment of the Bureau's schedule, Bureau officials stated that they hoped to begin identifying the resources needed for each activity in their schedules by early 2014. However, as of May 2018, the Bureau had not taken these steps. Senior Bureau officials have now stated that it would require additional staffing in order to plan for and implement this recommendation. Additionally, the Bureau has not conducted risk assessments for the project schedules GAO assessed. Schedule risk analysis—the systematic analysis of “what if” scenarios—is an established leading practice. Risk assessments are needed to determine the likelihood of the project's completion date; how much schedule risk contingency is needed to provide an acceptable level of certainty for completion by a specific date; risks most likely to delay the project; how much contingency reserve each risk requires; and the paths or activities that are most likely to delay the project. In 2013, GAO recommended the Bureau conduct risk assessments for its schedules. The Bureau said it had no disagreement with this recommendation. However, while Senior Bureau officials stated that a schedule risk assessment plan and process were approved by Bureau management in late May 2018, it has not yet implemented this recommendation. GAO believes that these prior recommendations still apply and can help the Bureau improve the reliability of its 2020 schedule.", "document_type": "gao"}
{"report": "As of January 2018, there were 22 TCS programs authorized across 18 states (see fig. 1). All TCS programs are state programs; there are no federal TCS programs. Decisions about whether to develop and operate a TCS program (and how to structure the program) are completely at the discretion of each state; there is no federal role in establishing these programs. Most TCS programs began within the last 10 years; the first TCS program awarded scholarships in Arizona in 1998 and Florida created the newest program in 2018, according to state program documents and officials. Scholarships are funded through donations from private individuals and businesses, and the financial impact to states from TCS programs primarily occurs through forgone revenue resulting from the associated tax credits. In all 22 programs, state agencies and nonprofit organizations both play a role in administering the programs, with the specific responsibilities varying by program: State departments or agencies responsible for tax administration, education, or both, generally administer these programs. For example, they may approve schools or nonprofit scholarship granting organizations or disseminate program information or guidance to potential donors, scholarship students, or the public. Nonprofit scholarship granting organizations (SGO) are generally responsible for managing some aspects of the donation process— such as collecting donations—as well as awarding scholarships to students. States’ TCS programs often determine student eligibility for scholarships based on household income and use a range of factors to determine scholarship award amounts. Income requirements: Seventeen of the 22 TCS programs have income limits (i.e., the maximum amount of household income a student can have and still be eligible for a scholarship). As shown in figure 2, income limits varied widely among programs, ranging from just under $32,000 to about $136,500 per year for students from a four-person household in SY 2017-2018. For context, we compared these income limits to the 2012- 2016 5-year ACS estimates of state median household income for four- person households. Six of the 17 programs had household income limits in SY 2017-2018 above their state’s median income. This included two programs each in Arizona and Pennsylvania which collectively accounted for about one-third of all TCS scholarships awarded to students in SY 2016-2017, according to state-reported data. Of the 17 programs that have household income limits, 6 also require SGOs to further consider income when selecting scholarship recipients among eligible students. Such requirements include giving preference to scholarship applicants from lower-income households or ensuring that a certain percentage of scholarship recipients come from lower-income households. Of the remaining five TCS programs that do not use income to determine eligibility, three use one or more other types of eligibility criteria, such as whether the student has a disability, and two—Montana’s TCS program and Arizona’s Original Individual Income Tax Credit program—are open to all school-aged residents. TCS programs collected limited information on the household incomes of scholarship recipients. The 11 programs that had income information on recipient families collected and reported it in different ways. For example, the Alabama program requires SGOs to report the total number and amount of scholarships awarded to students qualifying for the federal free and reduced-price lunch program and makes the information publicly available. Arizona makes an annual report publicly available on the state’s four TCS programs, including breakdowns of the number of students receiving scholarships from various income levels. Other eligibility requirements: Some TCS programs’ eligibility criteria for student scholarship recipients include other factors, such as students’ disability status or previous schooling. Specifically, 7 of 22 programs are limited to students with disabilities or allow students with disabilities to qualify for a scholarship even if they do not meet some requirements for students without disabilities. For example, to be eligible for Virginia’s program, all students must have a household income below a certain amount, but that amount is higher for students with disabilities. South Carolina’s program is limited to students with disabilities. In addition, some programs may require students to have previously attended a public school (9 of 22) or live in the attendance area of a public school with performance challenges (5 of 22). See appendix II for more information on the eligibility criteria of TCS programs. TCS programs have different requirements for how students can use their scholarships and different methods for calculating scholarship amounts. More than half of the programs (13 of 22) allow students to use their scholarship money for costs like transportation and books in addition to tuition, whereas the remaining programs (9 of 22) require scholarships funds to be used for tuition only. Four programs allow donors to recommend that their donations fund scholarships for specific students. Average scholarship awards in SY 2016-2017 ranged from $500 to $5,468 per student among the 16 programs that published such information or provided it to us. (See appendix II for more information). Most programs require SGOs to consider one or more factors related to student or school characteristics when determining scholarship award amounts. As shown in table 1, these factors may include the cost of private school tuition or the state funding amounts for public school students, among other factors. See appendix II for more information on program requirements related to scholarship amounts. The extent to which TCS program donations affect the amount that donors owe in state and federal taxes depends on program characteristics—such as the percentage of the donation that the rules of the program allow donors to claim as a state tax credit (referred to in this report as “tax credit percentages”) and limits on donation amounts—along with donors’ financial circumstances. Almost all of the TCS programs (20 of 22) offer tax credits to businesses for income or other types of taxes, while more than half offer tax credits to individuals for their income taxes (13 of 22). More than half of programs (13 of 22) offer tax credits for cash donations only, while the remaining 9 programs also allow for at least one type of “in kind” donation, such as a property donation. Eleven of the 22 programs allow eligible donors (either individuals, businesses, or both) to claim 100 percent of their donations as state tax credits, meaning that, for each dollar donated, the amount of state taxes owed (i.e., the donor’s tax liability) is reduced by a dollar, up to any maximum donation limits set by the program. The other 11 programs offer tax credits of 50 percent to 85 percent of donations (see table 2). For example, Indiana and Oklahoma offer tax credits of 50 percent of the donation value, meaning that donors can reduce their state tax liability by 50 cents for every dollar donated. All but one of the programs prohibit donors from receiving a tax credit greater than their tax liability in a given year, although two thirds of the programs allow donors to carry forward portions of the credits to use in future years. Sixteen of the 22 programs limit the amount of tax credits each donor may claim per year and programs vary in how they structure these limits. The programs that set annual limits for donors generally do so in one or both of the following ways: Dollar amount limits: Thirteen programs limit the dollar amount of TCS program tax credits that donors can claim in a given year. These limits ranged from a maximum tax credit of $150 for either individuals or businesses in Montana’s program, to a maximum tax credit of $1 million for either individuals or businesses in Illinois’ program in CY 2018. Limits based on percentage of tax liability: Four programs limit the amount of the TCS program tax credits a donor can claim to a percentage of the donor’s total income tax liability. These limits ranged from 50 to 90 percent of a donor’s income tax liability in CY 2018. For example, in South Carolina donors could receive a tax credit up to 60 percent of their total income tax liability for the year of the donation. All but three programs specify a maximum total amount, or cap, of TCS program tax credits that may be claimed each year for the program as a whole (see table 3). Programs’ procedures vary if the cap is reached in a given year. For example, in Rhode Island, potential donors may apply for credits on a “first come, first served” basis once the application period starts until all credits are taken. In 2018, all of the credits were claimed on the first day of the application period and a drawing was held to determine who would receive credits among those who applied on that first day. Georgia’s TCS program offers a maximum tax credit percentage of 100 percent when total donations do not exceed the donation cap. However, if total donations exceed the program cap, the allowable tax credit percentage is prorated among donors who apply on the day the program- wide cap on tax credits is reached. Twenty programs published or provided us with information on donation amounts, such as total donations and average donations. Among these programs, total program-wide donation amounts in CY 2016 ranged from $43,865 to $553 million. (See appendix III for more information about donation amounts.) In addition to reducing their state tax liabilities, some individuals who make TCS program donations may also be able to reduce their federal income tax liabilities through the federal tax deduction for charitable contributions. In August 2018, IRS and Treasury published proposed regulations that, if finalized without modification, would change the extent to which individuals who make TCS program donations can reduce their federal tax liability. However, the proposed regulations were not final at the time this report was published and are therefore subject to change. As a result, the information we present below does not address the proposed regulations. Currently, the extent to which individuals may reduce their federal income tax liabilities as a result of their TCS donation depends on their specific circumstances, such as whether they itemize their deductions (versus taking the standard deduction), the federal rates at which their income is taxed, and the amount of federal deductions they take for state and local taxes. More specifically, the effect of a TCS donation on an individual donor’s federal tax liability depends on the following: Itemizing federal deductions and taking the deduction for charitable contributions: Taxpayers benefit from itemizing deductions—such as those for state and local taxes, mortgage interest, and charitable contributions—if they exceed the standard deduction. Taxpayers, including TCS donors, may only claim a federal deduction for charitable contributions if they itemize. Federal tax rate: The reduction in federal taxes owed as a result of the federal deduction for charitable contributions depends on the donor’s applicable federal tax rate. Given the same deduction amount, taxpayers subject to higher tax rates will generally reduce their tax liabilities by larger amounts than taxpayers subject to lower tax rates. Deduction for state and local taxes: When filing federal taxes, taxpayers who itemize may take a deduction for state and local taxes they have paid during the tax year. Beginning in tax year 2018, individual taxpayers may deduct no more than $10,000 in state and local taxes on their federal tax returns. Taxpayers who claim state tax credits for TCS program donations reduce their state tax liability, which may in turn reduce the amount they may deduct on their federal tax return for state and local taxes paid. Interaction between the federal deduction for charitable contributions and the federal deduction for state and local taxes: Generally, if a donor pays $10,000 or less in state and local taxes, the amount of the deduction for charitable contributions may be fully or partially offset (i.e., canceled out) by a decrease in the deduction for state and local taxes paid as a result of the TCS program tax credit. Conversely, taxpayers who pay more than $10,000 in state and local taxes cannot deduct the full amount of state and local taxes they paid. Therefore, the reduced state and local taxes paid as a result of the tax credit generally may not offset the amount of the deduction for charitable contributions for these taxpayers. See figure 3 for a description of how individuals’ TCS program donations could affect their federal tax liabilities. TCS program donations can lead to a range of possible changes to an individual’s state and federal income tax liabilities, including some scenarios where donors could reduce their combined state and federal tax liability by an amount that is greater than the amount of their donation (see for example, Donor A in figure 4). Figure 4 shows four examples of how state and federal income taxes may be reduced for hypothetical individual donors in states with 100 percent and 50 percent tax credit scholarship programs. We provided a draft of this report to Education and IRS for review and comment. While the draft was under review at these agencies, IRS and Treasury issued proposed regulations related to state tax credits and the federal deduction for charitable contributions. We updated the report to include information about these proposed regulations but did not alter our analysis to reflect the proposed regulations because they were not final at the time this report was published and are therefore subject to change. We provided a revised draft to IRS as the revisions directly relate to IRS’s areas of responsibility, and informed Education about our approach to addressing the proposed regulations. IRS did not provide formal comments on the draft report. Education’s comments are reproduced in appendix I. Education also provided technical comments, which we incorporated as appropriate. In its comments, Education noted that it has no role in developing, operating, or overseeing TCS programs, and provided a variety of comments and observations on the draft report. For example, Education suggested that we add additional details about certain TCS program requirements, such as more information about state tax rules and permissible uses of scholarship funds. We incorporated these comments as appropriate. Education also suggested that we delay publication of this report until the IRS regulations are finalized, as Education thought that the report could be more helpful at that time. GAO policy is to communicate audit and evaluation results in a timely manner to decision makers and others who either requested the work or may need the information to bring about needed changes. Therefore, we are issuing the report as planned. We are sending copies of this report to the appropriate congressional committees, the Secretary of Education, and the Commissioner of Internal Revenue. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Program name Programs available for both individual and business donors Alabama Educational Scholarship Program $50,000 or 50% of tax liability, whichever is lower (individual) 50% of business tax liability $1,000 (individual) 75% of business tax liability $1 million (individual and business) $350,000 (Individual and business) $150 (Individual and business) $1,000 (individual) $100,000 (business) 60% of tax liability (Individual and business) Virginia Education Improvement Scholarships Tax Credits Program Programs available for individual donors only Arizona Original Individual Income Tax Credit Program $81,250 (individual) No limit for business donors $555 (individual) $552 (individual) Maximum donation amounts vary from 50% to 100% of tax liability $510,000 or no more than 10% of program credits 2 percent of wages paid no In Oklahoma, Pennsylvania, and Rhode Island, the percentage of donations that can be claimed as a tax credit increases if donors commit to donating for 2 years. In Oklahoma, that percentage increases from 50 percent to 75 percent. In the two Pennsylvania programs and the Rhode Island program, the percentage increases from 75 percent to 90 percent. Total donations in CY 2016 (rounded) In addition to the individual named above, Nagla’a El-Hodiri (Assistant Director), Barbara Steel-Lowney (Analyst-in-Charge), Jeff Arkin, and Jessica L. Yutzy made key contributions to this report. Also contributing to this report were Deborah Bland, Lilia Chaidez, Sarah Cornetto, Caitlin Cusati, Paulissa Earl, Alison Grantham, Kirsten Lauber, Sheila R. McCoy, Mimi Nguyen, Jessica Orr, Michelle Philpott, Paul Schearf, and Andrew J. Stephens.", "summary": "TCS programs offer state tax credits to individuals or businesses that donate to scholarship funds for students to attend private elementary and secondary schools. Through these credits, donors may reduce the amount they owe in state taxes by the full or a partial amount of their donation, depending on each program's rules. Designing a TCS program requires that many decisions be made, such as which students will be eligible to receive scholarships and the effect donations will have on donors' state taxes. GAO was asked to review key characteristics of TCS programs. This report examines (1) state TCS programs' policies regarding student eligibility and scholarship awards, and (2) how donating to a TCS program could affect the amount of state and federal taxes owed by donors. For both objectives, GAO reviewed publicly-available documents about student eligibility and tax provisions for all 22 programs authorized as of January 2018 and verified the accuracy of the information with state program officials. GAO did not conduct an independent legal review of state laws and regulations. GAO also interviewed federal officials and reviewed relevant federal guidance and policy documents. In 2018, there were 22 tax credit scholarship (TCS) programs authorized across 18 states, which provide state tax credits for individual and business donations that fund scholarships for students to attend elementary and secondary private schools (see figure). To determine the eligibility of students for these scholarships, most TCS programs use household income and have various approaches to determine scholarship award amounts. Income limits vary widely among programs, ranging from approximately $32,000 to $136,500 per year for students from a four-person household in school year 2017-2018. Programs have different requirements for how students can use their scholarships and different methods for calculating scholarship amounts. More than half of the programs (13 of 22) allow students to use their scholarship money for costs like transportation and books in addition to tuition, whereas the remaining programs (9 of 22) require scholarships funds to be used for tuition only. Average scholarship awards in school year 2016-2017 ranged from $500 to $5,468 per student among the 16 programs that published or provided GAO with such information. The effect of TCS donations on donors' tax liability depends on program characteristics and donors' financial circumstances. Specifically, half of the 22 programs allow eligible donors to claim 100 percent of their donations as state tax credits, meaning that for each dollar donated, state taxes owed are reduced by a dollar, up to any maximum set by the state. The remaining 11 programs allow donors to claim from 50 to 85 percent of their donations as state tax credits. Programs often specify a maximum tax credit that may be claimed each year by a donor, by all donors combined, or both. Individual donors may also reduce their federal tax liabilities through the federal deduction for charitable contributions, depending on their financial circumstances and applicable tax provisions.", "document_type": "gao"}
{"report": "Patients may request copies of their medical records, or request that copies of their records be sent to a designated person or entity of their choice. In a patient request, a patient or former patient requests access to or copies of some or all of her medical records, in either paper or electronic format. For example, a patient might want to keep copies for her own personal use or to bring with her when moving or changing providers. In a patient-directed request, a patient or former patient requests that a provider or other covered entity send a copy of the patient’s medical records directly to another person or entity, such as another provider. For example, a patient might request that her medical records be forwarded to another provider because the patient is moving or wants to seek a second opinion. In a third-party request, a third party, such as an attorney, obtains permission from a patient (via a HIPAA authorization form that is signed by the patient) to access the patient’s medical records. For example, with permission from the patient, a lawyer might request copies of a patient’s medical records to pursue a malpractice case. HIPAA’s Privacy Rule—the regulations that implement HIPAA’s privacy protections—requires that upon request, HIPAA-covered entities, such as health care providers and health plans, provide individuals with access to their medical records. Under HIPAA’s implementing regulations, providers and other covered entities must respond to a patient or patient- directed request for medical records within 30 days. The Privacy Rule also establishes an individual’s right to inspect or obtain a copy of his or her medical records which, as amended in 2013, includes the right to direct a covered entity to transmit a copy of the medical records to a designated person or entity of the individual’s choice. Individuals have the right to access their medical records for as long as the information is maintained by a covered entity or by a business associate on behalf of a covered entity, regardless of when the information was created; whether the information is maintained in paper or electronic systems onsite, remotely, or is archived; or where the information originated. Finally, the HIPAA Privacy Rule also describes the circumstances under which protected health information in medical records may be released to patients and third parties. In February 2016, OCR issued guidance to explain its 2013 regulations. Among other things, this guidance states that as part of a patient’s right of access, patients have the right to obtain copies of their medical records and the right to have their records forwarded to a person or entity of their choice; in these circumstances, patients are only to be charged a “reasonable, cost-based fee.” The guidance further notes that state laws that provide individuals with greater rights of access to their medical records are not preempted by HIPAA and still apply. With respect to fees, patients may not be charged more than allowed under the Privacy Rule, even if state law provides for higher or different fees. To respond to medical record requests, providers either use staff within their organization or may contract with ROI vendors to conduct this work. In general, both providers’ staff and ROI vendors follow the same process when fulfilling requests for medical records for both individual patients and third parties. (See fig. 1.) Available information suggests that the allowable fees for accessing medical records vary by type of request—that is, whether a patient or third party is making the request—and by state. Federal laws establish limits on the fees that may be charged for two of the three types of requests for medical records: (1) patient requests, when patients request access to their medical records, and (2) patient-directed requests, when patients request that their records be sent to another person or entity, such as another provider. HIPAA does not establish limits on fees for third-party requests. For patient and patient-directed requests, providers may charge a “reasonable, cost-based fee” under HIPAA’s implementing regulations. OCR’s 2016 guidance gives examples of options providers (or a ROI vendor responding to requests for medical records on behalf of a provider) may use in determining a “reasonable cost-based fee.” (See table 1.) In addition to the HIPAA requirements, some states have established their own fee schedules, formulas, or limits on the allowable fees for patient and patient-directed requests. State laws that allow for higher fees than permitted under HIPAA are preempted by the federal law, but those providing for lower fees are not preempted. Representatives from ROI vendors, provider representatives, and other stakeholders we interviewed told us that not all states have established their own requirements governing the fees for medical record requests and, among the states that have, the laws can vary. For example, states can vary as to whether they set a maximum fee that may be charged or whether they establish a fee schedule that is applicable to paper records, electronic records, or both. While states may establish per-page amounts that can be charged for a copy of a patient’s medical records, these per-page amounts can vary. In contrast with patient and patient-directed requests, the fees for third- party requests are not limited by HIPAA’s reasonable, cost-based standard for access requests and are instead governed by state laws, regulations, or other requirements. For third-party requests, providers and vendors working on their behalf may charge whatever is allowed under these state requirements. According to ROI vendors and other stakeholders we interviewed, such fees are typically higher than the reasonable, cost-based fees permitted under HIPAA for patient and patient-directed requests and may be established by formulas that vary by state. For example, states can vary as to whether they establish per- page copy fees, allow providers to charge a flat fee, or charge different fees based on the type of media requested (e.g., electronic copies, X- rays, microfilm, paper, etc.). Additionally, state laws of general applicability (for example, the commercial code) may govern the permissible fees applicable to ROI release of records. Representatives of ROI vendors we interviewed stated that there is significant variation in the state laws that govern the fees for third-party requests, and companies employ staff to track the different frameworks. Across the four selected states, we found examples of the kinds of variation stakeholders have described in the allowable fees for patient and third-party requests for medical records. (See table 2.) Three of the states— Ohio, Rhode Island, and Wisconsin—have established per-page fee amounts. The amounts charged are based on the number of pages requested and vary across the three states. These three states have also established specific fee rates for requesting media such as X-ray or magnetic resonance imaging scan images. One state—Ohio—has established a different per-page fee amount for third-party requests. The other three states have not established different fees for different types of requests (i.e., between patient and third-party requests). One state—Rhode Island—specifies a maximum allowable fee if the provider uses an electronic health records (EHR) system for patient and patient-directed requests. One state—Kentucky—entitles individuals to one free copy of their medical record under state law. The statute allows a charge of up to $1 per page for additional copies of a patient’s medical records. In some cases, questions have been raised about the fee structure that should be applied to certain types of requests. Representatives from ROI vendors we interviewed told us that they have seen an increase in third parties (primarily law firms) submitting requests for medical records and indicating that the requests are patient-directed and therefore subject to HIPAA’s reasonable, cost-based fee standard. According to these representatives, it is sometimes difficult for them to determine whether it is an attorney making a third-party request or an attorney submitting a patient-directed request because, for example, patient-directed requests are submitted by a patient’s attorney and appear similar to traditional third-party requests (e.g., they appear on legal letterhead). As a result, the representatives said that they are often unsure about which fee structure to apply to the request: a reasonable, cost-based fee or a fee for a third-party request, which ROI vendors told us is typically higher. When asked about the reported distinction between fees for patient- directed and third-party requests, OCR officials told us that they are in the process of considering whether any clarification is needed to their 2016 guidance. This guidance describes the requirements of HIPAA and the Health Information Technology for Economic and Clinical Health (HITECH) Act, as well as their implementing regulations. HIPAA provides patients with a legally enforceable right of access to their medical records. OCR officials explained that the HITECH Act amended HIPAA and specifies that a patient’s right of access includes the right to direct a provider to transmit the records directly to an entity or individual designated by the individual. According to OCR officials, the same requirements for providing a medical record to an individual, such as the limits on allowable fees and the format and timeliness requirements, apply to patient-directed requests. OCR officials told us that they are considering whether—and if so, how—they could clarify the 2016 guidance within the constraints of HIPAA and the HITECH Act. Patient advocates and others we interviewed described challenges patients face accessing medical records, such as high fees. Provider representatives described challenges providers face, including allocating staff time and other resources to respond to requests for medical records. Multiple stakeholders we interviewed—patient advocates, a provider representative, experts, and a representative from an ROI vendor—told us that some patients have incurred high fees when requesting access to their medical records. Stakeholders noted that in some cases the fees reported by patients appear to exceed the reasonable, cost-based standard established under HIPAA. One patient advocacy organization, which collects information on patients’ access to their medical records, described the following examples reported to them by patients: Two patients described being charged fees exceeding $500 for a single medical record request. One patient was charged $148 for a PDF version of her medical record. Two patients were directed to pay an annual subscription fee in order to access their medical records. One patient was charged a retrieval fee by a hospital’s ROI vendor for a copy of her medical records. Retrieval fees are prohibited under HIPAA. In addition, according to patient advocates we interviewed, high fees can adversely affect patients’ access to their medical records. For example, one patient advocate told us that some patients simply cancel their requests after learning about the potential costs associated with their request. Another patient advocate told us that patients are often unable to afford the fees charged for accessing their medical records, even in cases when the fees are allowed under HIPAA or applicable state law. This advocate explained that per-page fees, even if legally authorized, can pose challenges for patients; in particular, patients who have been seriously ill can accumulate medical records that number in the thousands of pages and can, as a result, face fees in excess of $1,000 for a single copy of their records. Stakeholders we interviewed told us that in many cases, providers may also be unaware of patients’ right to access their medical records and the laws governing the fees for doing so. Two patient advocates and an expert said that patients are sometimes denied access to their medical records. Patient advocates and experts told us that some providers are not aware of the 2016 OCR guidance, which describes patients’ rights to access their medical records, as well as the permitted fees for such access. One patient advocate and a provider representative also noted that providers may be confused about caregivers’ and family members’ access to medical records. For example, providers sometimes incorrectly deny family members’ access to a patient’s health information, which HIPAA allows under certain circumstances. Provider representatives, patient advocates, and an expert agreed that providers could benefit from more training on medical record access issues, including training on the options patients have for accessing their medical records. Stakeholders we interviewed also noted that patients themselves are not always aware of their right to access their medical records, do not always know that they can submit a formal complaint to HHS’s OCR when denied access, and could benefit from specific educational efforts that raise awareness of these issues. For example, patient advocates said that the “notice of privacy practices” form that patients receive and are asked to sign when they first seek care from a provider could be improved to raise awareness of the rights associated with accessing medical records. This form is used to explain a provider’s privacy policies and obligations, and what patients have to do to obtain access to their medical records. However, a provider association and an expert told us that these forms are not always easy for patients to understand, and patients might not always read them. OCR has developed a standard privacy notice that providers may adopt if they choose. However, a patient advocate told us that most providers are still using their own versions of the notice. Multiple stakeholders we interviewed told us that responding to patient requests for medical records can be challenging because it requires the allocation of staff and other resources and as a result, responding to such requests can be costly. Furthermore, a provider representative, three representatives from ROI vendors, and a patient advocate confirmed that providers and their staff may lack the expertise needed for responding to requests for medical records in a manner that complies with HIPAA and applicable state laws. Providers can receive training on HIPAA related issues; however, a patient advocate told us that this training, which may be provided by private companies, often focuses on security issues (i.e., maintaining secure medical record systems) and not on the rights of patients. In addition, stakeholders we interviewed commonly stated that the increased use of electronically stored health information in EHRs has resulted in a more complex and challenging environment when responding to requests for patients’ medical records. For example, these stakeholders noted the following: Extracting medical records from EHRs is not a simple “push of a button” and often requires providers or their ROI vendors to go through multiple systems to compile the requested information. Stakeholders noted that printing a complete record from an EHR system can result in a document that is hundreds of pages long due to the amount of data stored in EHR systems. Representatives from three ROI vendors told us that as providers have transitioned from using paper records to using EHR systems, information has been scanned into electronic medical records. This has, in some cases, resulted in records being incorrectly merged (e.g., the records of two patients merged into a single record). As a result, when responding to a medical record request, providers or their vendors must carefully go through each page of the record to ensure only the correct patient’s medical records are being released. A provider representative, representatives from four ROI vendors, and two experts noted that providers often have multiple active EHR systems, or have legacy EHR systems in which some medical records are stored. This requires providers and their vendors to go through multiple EHR systems to extract information in response to a medical record request. Some providers still have a mix of paper and electronic records, which ROI vendors and provider representatives told us makes responding to medical record requests more difficult and time consuming. A provider representative and other stakeholders said that while patients can request copies of their records in an electronic format, providers may have security concerns about sending information via unsecured email or providing electronic information via a patient’s USB stick, which increases the risk of a provider’s system becoming infected with malware. While health information technology has created some challenges for providers, numerous stakeholders we interviewed told us that the technologies have made accessing medical records and other information easier and less costly for patients. For example, multiple stakeholders we interviewed told us that an increase in the use of patient portals has reduced the number of patient requests for access to their medical records because patients are able to directly access some health information through the portals. As we have previously reported, patient portals have facilitated patient access to medical records and patients have noted the benefits from having such electronic access, even though portals do not always contain all the information patients need. The use of patient portals has not eliminated patient requests for access to their medical records; a provider representative we interviewed said that many patients still prefer to obtain paper copies of their records. To enforce patients’ right of access under HIPAA’s Privacy Rule, the HHS OCR undertakes four types of efforts. OCR (1) investigates complaints it receives from patients and others regarding access to patient medical records, (2) audits a sample of providers to determine the extent to which their policies and procedures are compliant with HIPAA, (3) reports to Congress on compliance with HIPAA, and (4) educates patients and providers about patients’ rights to access their medical records. OCR has established a process for investigating patients’ complaints over access to their medical records. Via an online portal on its website, OCR receives complaints submitted by patients. Staff in OCR’s headquarters office conduct an initial review of the information provided by the complainant. According to OCR officials, complaints that cannot be immediately resolved are generally assigned to a regional office investigator, who is responsible for reviewing the complaint and obtaining additional information from the complainant and provider, if needed. After the investigator completes the investigation, OCR issues a letter to both the provider and patient explaining what OCR has found. Depending on the nature of the findings, OCR may, for example, issue technical assistance to the provider; close the complaint without identifying a violation; require the provider to implement a corrective action plan; conduct a more detailed investigation; and, if warranted, levy a civil monetary penalty. According to OCR officials, the use of civil monetary penalties is rare and reserved for situations where providers’ behavior is particularly egregious. Examples of patient access complaints provided to us by OCR included complaints about the following: providers not responding even after the patient made multiple requests, or providers taking longer than 30 days to respond to a request for medical records or other information ; providers charging excessive fees for copies of patients’ medical providers not responding to requests from personal representatives or providers denying medical records requests from a parent or parents of children. Our analysis of OCR data also shows that the amount of time OCR takes to investigate and close a patient access complaint varies. OCR received a total of 583 patient access complaints between February 2016 and June 2017, closing 437 of these complaints during that same time period. These 437 complaints took anywhere from 11 to 497 days to close. (See fig. 2.) The majority of these 437 complaints (63 percent) were closed in 200 or fewer days. OCR officials stated that while there is no required time frame for closing a complaint involving patients’ access to their medical records, they aim to close cases in fewer than 365 days. According to OCR officials, while there is no required time frame for closing a patient access case, investigators aim to get patients access to their medical records as soon as possible, which typically occurs before the case is formally closed (i.e., a formal letter is issued to provider and patient). OCR officials noted a number of reasons why complaints can take a significant amount of time to close. In some cases, the patient receives her records early in the investigation, but the complaint is kept open by OCR to ensure that agreed-upon or recommended corrective actions are taken by the provider—for example, training staff on patient access rights or demonstrating that the provider’s policies pertaining to patient access have been changed. In other complaints, time is needed for OCR to obtain consent from the patient who filed the complaint. OCR officials noted that in some instances, patients ultimately decide they do not want to give OCR consent to investigate their complaint, due to concerns that the provider will learn their identity. OCR officials also noted that complaints that are moving towards more serious enforcement actions, such as civil monetary penalties, may also take a long time to close. Finally, OCR officials noted that their own staffing limitations in regional offices can sometimes result in complaints taking additional time to close. The HITECH Act requires OCR to conduct periodic audits of selected covered entities in order to review the policies and procedures the covered entities have established to meet HIPAA requirements and standards. The right of patients to access their medical records is included in these requirements. As part of its most recent audit, OCR officials stated that they reviewed 103 covered entities regarding their policies related to patient access to health information, including the entities’ notice of privacy practices. In addition, OCR reviewed any access requests the covered entities received from patients, including both requests that were granted and requests that were denied. OCR examined these access requests to determine whether access was provided in a manner that was consistent with the covered entities’ policies and procedures and whether the entities fulfilled the requests they received within the 30-day time frame established under the Privacy Rule. OCR also examined any fees that were charged for access and whether those fees met HIPAA’s reasonable, cost-based standard. OCR officials said that after completing each audit, OCR submitted a draft report for the audited entity for review. The entity had 10 days to review and submit any feedback to OCR, which OCR reviewed and incorporated into the entity’s final audit report. According to OCR officials, OCR has completed this phase of the audit program and will release a final report in 2018. The HITECH Act directs HHS to submit an annual report to Congress on compliance with HIPAA that includes details about complaints of alleged violations of the Privacy Rule and the resolution of these complaints. The patient right of access is part of the HIPAA and Privacy Rule requirements. The report, which is issued by OCR, includes information on the patient access complaints OCR has received, the number of investigations it has conducted, and the fines OCR has levied. OCR issued its most recent report in 2016. The report summarized complaints and enforcement actions for the 2013 through 2014 calendar years. OCR officials stated that they are in the process of reviewing a draft report that will be released in mid-2018 and contain information and data from calendar years 2015 and 2016. As part of its responsibilities to enforce HIPAA’s Privacy Rule, OCR also provides a variety of educational materials that aim to educate both patients and providers about patients’ right to access their medical records. These materials include the following: In September 2017, OCR published a pamphlet that aims to educate consumers, particularly caregivers, about patients’ rights to access their medical records, including how to file a complaint if denied access. OCR has worked with ONC to produce three videos (“Your Health Information, Your Rights!”) and an infographic aimed at educating patients and others about patients’ rights to access their medical records. OCR has developed provider education videos that aim to educate providers on the rights of patients to access their medical records and how such access can enable patients to be more involved in their own care. Providers can receive continuing education credits for watching these videos. To assist providers, OCR has worked with ONC to develop a model notice of privacy practices to help providers adequately communicate access rights to patients in a standardized, easy-to-understand way. We provided a draft of this report to HHS for review. HHS provided us with technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or at yocomc@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix I. In addition to the contact named above, Tom Conahan, Assistant Director; Andrea E. Richardson, Analyst-in-Charge; Krister Friday; and Monica Perez-Nelson made key contributions to this report.", "summary": "HIPAA and its implementing regulations, as amended by the Health Information Technology for Economic and Clinical Health Act, require health care providers to give patients, upon request, access to their medical records, which contain protected health information (i.e., diagnoses, billing information, medications, and test results). This right of access allows patients to obtain their records or have them forwarded to a person or entity of their choice—such as another provider—in a timely manner while being charged a reasonable, cost-based fee. Third parties, such as a lawyer or someone processing disability claims, may also request copies of a patient's medical records with permission from the patient. The 21st Century Cures Act included a provision for GAO to study patient access to medical records. Among other things, this report describes (1) what is known about the fees for accessing patients' medical records and (2) challenges identified by patients and providers when patients request access to their medical records. GAO reviewed selected HIPAA requirements and implementing regulations and guidance, and relevant laws in four states selected in part because they established a range of fees associated with obtaining copies of medical records. GAO also interviewed four provider associations, seven vendors that work for providers, six patient advocates, state officials, and Department of Health and Human Services' (HHS) officials. The information GAO obtained and its analysis of laws in the selected states are not generalizable. HHS provided technical comments on this report. Available information suggests that the fees charged for accessing medical records can vary depending on the type of request and the state in which the request is made. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its implementing regulations, providers are authorized to charge a reasonable, cost-based fee when patients request copies of their medical records or request that their records be forwarded to another provider or entity. In the case of third-party requests, when a patient gives permission for another entity—for example, an attorney—to request copies of the patient's medical records, the fees are not subject to the reasonable cost-based standard and are generally governed by state law. According to stakeholders GAO interviewed, the fees for third-party requests are generally higher than the fees charged to patients and can vary significantly across states. The four states GAO reviewed have state laws that vary in terms of the fees allowed for patient and third-party requests for medical records. For example, three of the states have per-page fee amounts for patient and third-party records requests. The amounts charged are based on the number of pages requested and vary across the three states. One of the three states has established a different per-page fee amount for third-party requests. The other two do not authorize a different fee for patient and third-party requests. One of the three states also specifies a maximum allowable fee if the provider uses an electronic health records system. The other two do not differentiate costs for electronic or paper records. In the fourth state, state law entitles individuals to one free copy of their medical record. The statute allows a charge of up to $1 per page for additional copies. Patient advocates, provider associations, and other stakeholders GAO interviewed identified challenges that patients and providers face when patients request access to their medical records. Patients' challenges include incurring what they believe to be high fees when requesting medical records—for example, when facing severe medical issues that have generated a high number of medical records. Additionally, not all patients are aware that they have a right to challenge providers who deny them access to their medical records. Providers' challenges include the costs of responding to patient requests for records due to the allocation of staff time and other resources. In addition, according to provider associations and others GAO interviewed, fulfilling requests for medical records has become more complex and challenging for providers, in part because providers may store this information in multiple electronic record systems or in a mix of paper and electronic records.", "document_type": "gao"}
{"report": "The Great Lakes-Seaway system’s commercial shipping has traditionally been dominated by vessels carrying bulk commodities such as grain, coal, and iron ore, although there are differences between the shipping on the Great Lakes versus the St. Lawrence Seaway portions of the system. On the Great Lakes side, U.S.-flag (meaning registered in the United States) vessels are primarily “lakers”—meaning they stay on the Great Lakes and generally do not enter the St. Lawrence Seaway. This domestic Great Lakes traffic primarily consists of iron ore, limestone, and coal that are transported to serve the U.S. steelmaking industry. For example, U.S. lakers transport iron ore, mined in northern Minnesota, from Duluth to steel manufacturers at ports such as Burns Harbor, Indiana, and Toledo, Ohio, in the lower Great Lakes. U.S. law requires that maritime transport of cargo between U.S. ports be carried by U.S.- flag vessels. In contrast to the Great Lakes, the St. Lawrence Seaway is used primarily by Canadian- or foreign-flag vessels that carry cargo between and among U.S., Canadian, and overseas ports. For example, in 2015, 40 percent of St. Lawrence Seaway traffic, as measured by tonnage moved, consisted of cargos shipped between Canadian ports. Another 34 percent of 2015 Seaway traffic consisted of cross-border trade between U.S. and Canadian ports. Only 10 percent of Seaway traffic in 2015 was between overseas and U.S. ports. This trade is generally characterized as “steel in/ grain out”—with imported iron and steel products entering the system destined for U.S. ports and U.S. grain leaving the system destined for overseas ports. For example, foreign vessels transport fabricated steel through the Seaway to manufacturing facilities in the Great Lakes region and then carry grain from the region back through the Seaway to overseas destinations such as Europe. The Great Lakes and St. Lawrence Seaway portions of the system also differ in how they are managed. On the St. Lawrence Seaway, which opened in 1959, the U.S. Seaway Corporation manages the Snell and Eisenhower locks, which are located in Massena, New York. Like all locks on the St. Lawrence Seaway, the Snell and Eisenhower are single locks without parallel locks for redundancy and are the same dimensions— about 766 feet long and 80 feet wide. On the Great Lakes, the Army Corps manages the Soo locks, which consist of two parallel locks: the larger Poe lock, completed in 1968 (1,200 feet long and 110 feet wide) and the smaller MacArthur lock, completed in 1943 (800 feet long and 80 feet wide). Many U.S.-flag laker vessels are restricted to using the Poe lock, as they are too large to fit in the MacArthur lock. The construction of a second Poe-sized lock at the Soo locks is currently under consideration. In 1986, Congress authorized the construction of a second Poe-sized lock, but funds sufficient to begin construction were never appropriated. In 2005, the Army Corps calculated a benefit-cost ratio of 0.73 associated with the construction of a second Poe-sized lock, which was not high enough to request funding. In January 2016, the Army Corps initiated an economic reevaluation of the project’s benefit- cost ratio to update assumptions of the 2005 study. In July 2018, the Army Corps released its reevaluation study, which estimated the cost of constructing a new Poe-sized lock to be approximately $922 million with an updated benefit-cost ratio of 2.42. According to the Army Corps, the project will compete with other construction projects throughout the country through the agency’s budgeting process. The decision to fund the new lock also involves review by the Office of Management and Budget for inclusion in the President’s budget, and Congress will need to appropriate funds. The U.S. Seaway Corporation and Army Corps also differ in their size and role, for example: The U.S. Seaway Corporation. In addition to managing the two U.S.- operated locks on the St. Lawrence Seaway, the U.S. Seaway Corporation has a role in enhancing utilization of the entire Great Lakes- Seaway system. Its stated mission is to improve the operation and maintenance of a safe, reliable, and efficient waterway and to perform economic and trade development activities with the aim of enhancing utilization. In doing so, the Corporation works closely with its Canadian counterpart (the Canadian Seaway Corporation) to manage the binational St. Lawrence Seaway and provide information on the system to potential users. The U.S. Seaway Corporation is located within the U.S. Department of Transportation and has approximately 140 employees. The Army Corps. The Army Corps, located within the Department of Defense, maintains a wide range of water resources projects across the country—including the Soo locks—under its Civil Works Program. These projects include over 200 inland waterway locks, such as those along the Mississippi river and its tributaries. The Army Corps’ Civil Works Program is supported by approximately 22,000 civilian employees and is organized into three tiers: a national headquarters in Washington, D.C., eight regional divisions, and 38 local district offices. The Detroit District, which is responsible for the day-to-day maintenance and operation of the Soo locks, falls under the Great Lakes and Ohio River Division. Following the 2007 joint U.S.-Canadian study, the Army Corps and the U.S. Seaway Corporation developed asset renewal plans, which were originally intended to cover approximately 10 years and which focused on replacing or rehabilitating existing lock components to avoid unexpected lock closures. Both agencies complete routine maintenance and capital improvements on the locks during the 2–3 winter months the locks are closed to navigation every year due to weather conditions. Congress appropriates funding for both Army Corps’ and U.S. Seaway Corporation’s lock operations and maintenance from the Harbor Maintenance Trust Fund (trust fund). The trust fund is supported through collections of the Harbor Maintenance Tax (also sometimes called a fee), which is charged to vessels carrying U.S. domestic or imported cargo or passengers, primarily at coastal and Great Lakes ports. Congress also appropriates funds from the trust fund for other Great Lakes-Seaway purposes, including dredging (underwater debris removal) to maintain the depth of ports and channels for navigation. In the U.S. portions of the Great Lakes-Seaway, including ports and channels, dredging is primarily conducted by the Army Corps and to a lesser extent the U.S. Seaway Corporation. As of July 2013, the trust fund built up a balance of $8.5 billion. In 2014, Congress authorized targets to annually increase appropriations from the fund to reduce the balance, and required the Army Corps to allocate annually a minimum amount of funds for the Great Lakes-Seaway system. Two federal agencies within the Department of Homeland Security also have roles in the Great Lakes-Seaway. The U.S. Coast Guard ensures safety in various ways, including by ensuring a sufficient supply of certified U.S. pilots who board foreign vessels to ensure safe navigation. Specifically, the Coast Guard is responsible for annually setting the rates U.S. pilots on the Great Lakes-Seaway charge carriers (referred to as pilotage rates for the remainder of this report). In addition, the Coast Guard is also required by law to maintain heavy icebreaking capability on the Great Lakes to assist in keeping channels and ports open to navigation. Meanwhile U.S. Customs and Border Protection is responsible for screening cargo and passengers entering the United States at ports of entry, including Great Lakes ports. The amount of cargo transported annually on the Great Lakes-Seaway— specifically for U.S. Great Lakes domestic and Seaway cargo—has generally declined since 1980 (see fig. 3). The Great Lakes U.S. domestic “laker” cargo traffic declined from about 115 million tons in 1980 to about 78 million tons in 2016—a decline of 32 percent—according to data from the Army Corps’ Waterborne Commerce Statistics Center. As noted in figure 3, the trend includes many noticeable year-to-year changes over this time period, which may be in response to broader economic factors, as discussed below. Meanwhile, cargo traffic on the St. Lawrence Seaway, which as described earlier is primarily transported by Canadian and foreign vessels, declined by 48 percent over the same time period, from about 74 million tons in 1980 to about 39 million tons in 2016, according to Seaway Traffic Data. Between 2001 and 2016, domestic Great Lakes cargo traffic levels were driven primarily by iron ore, limestone, and coal—three commodities that are closely tied to the steel industry (see fig. 4). Specifically, these three commodities accounted for 90 percent of the total of about 78 million tons in domestic Great Lakes traffic in 2016—iron ore alone comprised 50 percent. Great Lakes domestic tonnage declined by about 22 million tons overall from 2001 to 2016, with declines in iron ore, limestone, and coal totaling about 21 million tons. Army Corps officials noted that other commodities such as wheat also have a presence on the Great Lakes, with over 5 million tons of wheat traveling on the Great Lakes in 2017 according to these officials. In contrast to the domestic Great Lakes cargo traffic, the top five commodities on the St. Lawrence Seaway, which comprised 70 percent of total cargo traffic in 2016, show a more varied picture of the types of commodities and trends from 2001 to 2016 (see fig. 5). Grain, the top commodity transported on the St. Lawrence Seaway, comprised nearly a third of total Seaway traffic in 2016. Like the domestic Great Lakes traffic, iron ore and coal have a significant presence on the St. Lawrence Seaway, together comprising 24 percent of cargo traffic in 2016. In contrast to domestic Great Lakes traffic, iron and steel constitute key commodities on the St. Lawrence Seaway, declining from about 3.2 million tons in 2001 to about 2.4 million tons in 2016. Nearly all such iron and steel transports are imports destined for U.S. or Canadian ports. For example, some specialty steel used to package food in cans is manufactured in Europe and imported for use in the United States. Several stakeholders we interviewed told us that a balance between inbound iron and steel shipments and outbound grain exports are important in providing shipping capacity in both directions. Stakeholders identified various economic factors that have affected Great Lakes-Seaway cargo traffic levels since the 1980s: Global economic factors. Many stakeholders noted that year-to-year trends in global prices for commodities such as grain, iron ore, and steel affect Great Lakes-Seaway cargo traffic levels. For example, two stakeholders told us that U.S. iron ore is exported through the St. Lawrence Seaway when global iron ore prices are high, allowing producers to cover the costs of shipping while also being price competitive internationally. Further, some stakeholders reported that the increase in globalization since 1980 has resulted in greater foreign competition to U.S. and Canadian commodities exported via the Great Lakes-Seaway. For example, one stakeholder noted that countries that were grain importers in the 1980s, such as Russia, have since become grain exporters, competing with U.S. and Canadian grain internationally. Grain traffic on the St. Lawrence Seaway fell by over 60 percent from about 32 million tons in 1980 to about 12 million tons in 2016, with nearly the entire decline occurring prior to 2001. Domestic economic factors. Several stakeholders told us that Great Lakes-Seaway cargo traffic rises and falls in conjunction with general economic conditions and trends, such as a sharp decline during the recession in 2009 (see fig. 3 above). For example, one stakeholder reported that a trend in the U.S. economy toward a more service- based rather than manufacturing-based economy has affected Great Lakes-Seaway traffic, reducing demand for manufacturing inputs such as iron ore. As we reported in 2013, manufacturing has accounted for a decreasing share of U.S. employment and economic output over the last several decades. Industry-specific changes. Changes in industries that have relied on the Great Lakes-Seaway for the transportation of input materials have affected cargo trends, according to several stakeholders. For example, demand for iron ore has been affected by the U.S. steel industry’s move towards smaller manufacturing plants, which are located away from the Great Lakes and which use recycled metal and do not require iron ore. Between 2001 and 2016, domestic Great Lakes tonnage of iron ore declined by 14 percent, from about 45 million to about 39 million tons (see fig. 4 above). Several stakeholders also told us that changes in the power generation industry have reduced shipments of coal. For example, environmental concerns and competitive natural gas prices have led some utilities in Canada and the United States to close coal-fired facilities. St. Lawrence Seaway coal tonnage from 2001 to 2016 declined by 53 percent, from about 5.3 million to about 2.5 million tons (see fig. 5 above). Greater competition among modes. Several stakeholders said that certain other transportation modes have become more competitive with the Great Lakes-Seaway. For example, several told us that the use of shipping containers—which enable easy intermodal transfer between waterways, highway, and rail—has grown dramatically worldwide in the past several decades with implications for modal competition and the Great Lakes-Seaway. As we previously reported, the largest container vessels in 2016 could carry nearly 18,000 standard 20-foot shipping containers, roughly twice as many as in 2005. However, most modern containerships are too large to use the Great Lakes-Seaway locks and container service on the system is limited. Three stakeholders that sometimes use the Great Lakes- Seaway to import cargo reported that they can also import cargo to the Midwest via coastal ports, where containers can be transferred from container ship to truck or rail for inland delivery. While traffic on the Great Lakes-Seaway has generally declined since 1980, according to data published by the U.S. Bureau of Transportation Statistics, U.S. railroad freight nearly doubled from 1980 to 2015, from 932,000 to 1.7 million ton-miles. Stakeholders reported a recent increase in the diversity in the use of the Great Lakes-Seaway, although bulk commodities continue to constitute the majority of the 78 million and 39 million tons of domestic Great Lakes and St. Lawrence Seaway cargo traffic in 2016, respectively. The reported increase in the diversity of uses includes: Project cargo. Some stakeholders told us shipments of project cargo—specialty items that may be difficult to move by rail or truck due to width or weight limits, such as windmill blades, beer fermentation tanks, and mining equipment—have increased in recent years. The tonnage of St. Lawrence Seaway traffic comprised of machinery and other manufactured products, which encompass project cargo, grew from about 657,000 tons in 2001 to about 1.1 million tons in 2016. Project cargos are typically chartered on an as- needed basis. One stakeholder said that carriers would need to offer more ships capable of carrying project cargo as a prerequisite for any large future increases in project cargo. Containers. Although containers continue to represent a small fraction of total cargos on the St. Lawrence Seaway, container traffic on the Seaway more than tripled from 18,156 tons in 2001 to 64,984 tons in 2016. The only regular container service on the system began in 2014 and operates between ports in Cleveland and Antwerp, Belgium. The service is offered through a partnership between the Port of Cleveland, where officials told us they view the service as a way to attract traffic, and a Dutch carrier, whose representatives view it as a way to educate U.S. manufacturers on the advantages of maritime transportation. Representatives from the carrier said that the service offers 44 sailings annually. Cruises. Several stakeholders said that there is recent growth of small passenger cruises on the Great Lakes-Seaway with the potential for further growth. Some of those stakeholders said that the region affords advantages including a variety of scenic destinations. A typical cruise may begin and end in Chicago and Toronto, both of which have air connections for arriving and departing passengers. An official from the U.S. Seaway Corporation said that the number of cruise ships operating on the system grew from 5 to 8 and the number of voyages offered grew from 54 to 92 between 2014 and 2018. The official said that additional ships and voyages are expected in the future. Stakeholders we met with identified a range of challenges to using the Great Lakes-Seaway and noted that these challenges pose risks to the future use of the system. Although many of the challenges that stakeholders identified—such as the annual winter closure—affect all users of the system, some challenges may impact the system’s various users differently. Specifically, some challenges directly affect the “traditional use” of the system—including the transport of bulk cargos such as iron ore, grain, and steel—while other challenges primarily affect “emerging use” of the system, such as the cruise industry and container market, as discussed below. The cumulative effect of all the challenges represents costs and system reliability risks to shippers that can erode the advantages that the system has traditionally offered over other transportation modes. For example, a representative from one shipping company told us the company frequently compares the cost of using the Great Lakes-Seaway to other modes and noted that the margin favoring the Great Lakes-Seaway is becoming narrower due to the system’s various challenges. Stakeholders identified several challenges that affect traditional uses of the Great Lakes-Seaway, including transport of dry bulk commodities and imported steel. Recent Increase of Pilotage Rates: The majority of stakeholders we interviewed reported that recent rate increases in the costs of securing pilots, who are intended to ensure safe navigation, have significantly increased costs for foreign ocean going vessels operating in the Great Lakes-Seaway. Federal law requires that certified pilots board foreign vessels while in the Great Lakes-Seaway. A pilot may be on board for multiple days on a single voyage, given the size of the system. As part of its responsibility to set rates that pilots charge carriers for the Great Lakes-Seaway, the U.S. Coast Guard revised the methodology used to calculate the rates in 2016. Coast Guard officials told us the methodology had not changed since the mid- 1990s and changes were needed to bring rates up to a sufficient level to attract and retain pilots. Specifically, according to the Coast Guard the number of pilots in the region decreased from 44 in 2007 to 36 in 2014, resulting in pilot shortages and traffic delays. In response, the Coast Guard raised rates. For example, in the St. Lawrence River portion of the system, pilotage rates increased 23 percent between 2014 and 2016. According to one carrier association we interviewed, pilotage is one of the single largest cost items for foreign vessels entering the system. Similarly, representatives from a carrier association told us pilotage rates are a primary challenge affecting the cost competitiveness of the system compared to truck and rail. The methodology used to calculate rates was revised further in 2017 and 2018 and Coast Guard officials report that the recent updates have accounted for factors, such as eliminating a weighting factor based on the size of the vessel. According to Coast Guard officials, these changes corrected factors that were not properly accounted for in previous years and effectively lowered rates compared with 2016. The Coast Guard also authorized an increase in the number of registered pilots, from 36 in 2014 to 45 in 2017. Condition of the Poe-lock Infrastructure: Several stakeholders that operate on the Great Lakes told us that they are concerned about the condition of the Poe lock (see fig. 6). One Great Lakes shipper representative told us that they believe the Poe lock is at critical risk of lock failure that could result in an unplanned outage and disrupt the U.S. steel industry, which has limited alternatives (rail or truck) to move large amounts of iron ore from Minnesota and Michigan’s Upper Peninsula to steel manufacturing plants in the lower Great Lakes. As mentioned previously, many U.S. laker vessels can only fit in the larger Poe lock at the Soo locks due to vessel size. For example, the Army Corps estimated that 85 percent of the tons of cargo travelling through the Soo locks in 2017 were restricted to using the Poe lock. A representative from a Great Lakes carrier told us that a closure of the Poe lock for repairs during the shipping season could pose further challenges to using the system, since there is currently no redundant Poe-sized lock to which traffic could be diverted. As discussed below, Army Corps officials note they currently lack the means to replace the Poe lock’s upper miter gate—which was identified as critical in 2007—without disrupting navigation. The Army Corps’ asset renewal efforts to improve lock condition, including the Poe lock, are discussed in greater detail below. Regulatory Complexity Related to Ballast Water: Several agencies are involved in regulating ballast water in the Great Lakes-Seaway, and several stakeholders reported that the complexity of the regulatory environment poses a challenge to using the system. Ballast water is taken up or discharged in a vessel’s tanks to improve stability during voyages and when cargo is loaded or unloaded. Ballast water regulations are aimed at preventing the introduction of invasive species collected in foreign waters from transoceanic vessels and discharging them into the Great Lakes. These regulations involve joint U.S.-Canadian Seaway regulations as well as requirements from the U.S. Coast Guard, U.S. Environmental Protection Agency (EPA), and some states. Specifically, under the current framework, all oceanic vessels bound for the Great Lakes-Seaway are tested to meet the ballast water discharge standards established by the U.S. Coast Guard and the EPA. Most lakers, which are confined to the Great Lakes and unlikely to introduce new aquatic invasive species from outside the Lakes, are not subject to the Coast Guard and EPA requirements. In addition, states are authorized to establish their own vessel discharge control measures, and according to an industry association, several Great Lakes states have their own ballast water requirements. One carrier association representative told us that the various ballast water regulations can cause confusion over how the regulations apply across the system. U.S. Seaway Corporation officials said they are aware of these issues and since 2007, the U.S. and Canadian Seaway Corporations have been operating under harmonized, joint ballast water regulations intended to eliminate confusion among users of the system. In addition, both Corporations participate in the Great Lakes Seaway Ballast Water Working Group, which is comprised of representatives from the U.S. Coast Guard and others. The group’s mission is to coordinate regulatory, compliance, and research efforts to reduce the introduction of aquatic invasive species via ballast water. The working group reported in 2018 that such coordination will help minimize the creation of a patchwork of inconsistent regulations. Effect of insufficient dredging: Several stakeholders we met with said that insufficient dredging—removal of sediment and debris from the bottom of ports to maintain water levels for maximum vessel load— can pose a challenge to using the Great Lakes-Seaway. In particular, a stakeholder noted the Army Corps, which is responsible for dredging the major U.S. ports on the Great Lakes, has limited capacity to keep up with all ports’ dredging needs, and that this situation can lead to vessels having to engage in “light loading”— filling to a lower capacity to reduce vessel weight—to access affected ports. The Army Corps reported in 2018 that its dredging backlog has decreased to 13.5 million cubic yards from a high of 18 million in 2013. One stakeholder that uses the Great-Lakes Seaway to ship iron ore told us that light loading causes steel mills to operate at lower capacity when they do not receive the required amount of iron ore. Army Corps officials told us that high water levels in recent years have allowed vessels to carry more tons of cargo. However, because water levels fluctuate over time, those conditions could change and affect load efficiency. Stakeholders also identified challenges that particularly affect emerging uses of the Great Lakes-Seaway, such as the cruise industry and container market. Winter closure: The majority of stakeholders we interviewed told us the annual winter closure hurts the system’s competitiveness because shippers must either stockpile their cargo or find alternative modes of transport during the winter months. While winter closure has been a long-standing feature of the system, it poses a particular challenge for the emerging container market since, as a stakeholder from a carrier association noted, containerized cargo is often time-sensitive and cannot be stockpiled. Securing an alternative transportation mode during the winter closure may be challenging because railroads, for example, prefer to sign year-round contracts for shipping rather than shorter-term winter arrangements. Additionally, some stakeholders told us lack of icebreaking during the start and end of the season, particularly during severe winters, has caused vessel delays. The U.S. Coast Guard’s icebreaking fleet consists of nine vessels on the Great Lakes. In 2016, a U.S. Coast Guard report identified some ice breaking issues that led to 3- and 6-week delays in 2010. The report detailed actions the U.S. Coast Guard took to mitigate future delays, including moving an icebreaking vessel’s home port to a Great Lakes port, but also noted that procuring an additional heavy icebreaker is not cost-effective. An example of potential delays caused by ice was demonstrated in January 2018 when a vessel became frozen in the U.S. Seaway Corporation’s Snell lock during extreme weather conditions, delaying five vessels and necessitating the system’s closure for 11 days. Efforts to free the vessel included ice melting equipment and tug boats. Limited U.S. Customs and Border Protection resources for clearing passengers and container cargo: Several stakeholders we interviewed told us that the limited capacity of U.S. Customs and Border Protection’s processing of container cargo and passengers poses a challenge for emerging system uses. U.S. Customs and Border Protection is responsible for inspecting travelers and imported cargo that enters the U.S., including at the ports of entry in the Great Lakes regions. U.S. Customs and Border Protection officials told us that their procedures for processing containers and passengers are more involved than traditional bulk cargos and that processes differ by port. For example at the Port of Detroit, cruise passengers are transported by bus to facilities a few miles away for processing. According to a representative from a cruise industry association, this processing creates delays and poses a challenge to the developing cruise industry. Officials from U.S. Customs Border and Protection offices in the Great Lakes region told us that their resources for processing passengers and cargos are located at main ports of entry (such as airports) and that at the Great Lakes ports are lacking appropriate facilities, tools, technology, equipment, and personnel. These same officials said that if the Great Lakes ports were to handle increasing numbers of passengers and containers, U.S. Customs and Border Protection would need sufficient time and budget to add inspection equipment, but that port operators would need to bear the costs of upgrading their facilities. Inadequate portside infrastructure: Some stakeholders told us that many of the ports along the Great Lakes-Seaway were developed to support bulk commodities—such as iron ore, coal, and grain—and are not equipped to easily handle containers. Bulk commodities do not require portside equipment at destination ports since they are transported by self-unloading vessels and are often delivered straight to private docks, such as iron ore delivered to a steel manufacturing facility. As such, Great Lakes ports generally lack multimodal connections that enable transfer of containers from vessel to truck and rail routes. A representative from a company that ships containers on the Great Lakes-Seaway told us that the port nearest its location does not have cranes to handle containers. Instead, the company uses a different port that is further away because it has the infrastructure necessary to ship containers. Port representatives told us that financing options exist to make upgrades to port infrastructure but consistent and sustainable traffic levels are needed in order to justify investments. For example, an official from the Port of Cleveland told us they have access to their own financing and have added infrastructure to create their container business, including cranes, storage warehouses, and right-of-way for rail connections using revenue bonds issued by the board that oversees the port. An official from the Port of Indiana told us that the port lacks infrastructure to handle containers, but it would find the financing to make investments in container equipment if there were a consistent stream of business. Although U.S Seaway Corporation officials told us they are aware of system challenges cited by stakeholders, the Corporation has not fully assessed the extent to which the challenges pose risks to the use of the Great Lakes-Seaway. As previously noted, the U.S. Seaway Corporation’s stated mission is to improve the operation and maintenance of a safe, reliable, and efficient waterway and to improve regional economic and trade development by enhancing utilization of the entire Great Lakes Seaway system. To achieve this mission, the U.S. Seaway Corporation’s strategic plan includes several goals, such as increasing the volume and value of commercial trade through the Great Lakes Seaway System, while promoting cost-effective competition for all users. To achieve these goals, the plan lists several actions, including developing initiatives to improve capacity of the system, and working with carriers, ports, pilots, and other stakeholders to contain costs and foster increased trade in the region. For example, the U.S. Seaway Corporation has taken steps to improve the condition of lock infrastructure—as discussed in greater detail below—and in 2015, hired a full-time employee, stationed in Cleveland, Ohio, who is responsible for advancing the Corporation’s trade and economic development activities in the Great Lakes region. However, the Corporation has not taken steps to identify, analyze and monitor challenges that affect use of the system, such as those identified by the stakeholders we interviewed. The Standards for Internal Control in the Federal Government states that assessing risks and monitoring changes are key to achieving objectives. Specifically, management should analyze identified risks to estimate their significance, which provides a basis for responding to the risks, and design responses to the analyzed risks so that risks are within the defined risk tolerance for the defined objective. The standards also note that monitoring is key to ensuring that the process used by management to help achieve its objectives remains aligned with changing environments, laws, and resources. The importance of understanding risks to system use in the Great Lakes Seaway was also emphasized by the Conference of Great Lakes and St. Lawrence Governors and Premiers. This conference, made up of Governors and Premiers of the eight states and two Canadian provinces along the Great Lakes-Seaway, developed a 2016 strategy that delineated system challenges and called for an analysis of the total costs of moving cargo through the system and how this compares to other modes. U.S. Seaway Corporation officials told us they are supportive of the Conference’s strategy but are not working to implement this analysis or other elements of the strategy. Although some actions have been taken to address challenges, officials from the U.S. Seaway Corporation told us that the Corporation has not fully assessed risks to Great Lakes-Seaway use, in part because the Corporation does not have a formal or standing process to monitor risks over time. The U.S. Seaway Corporation has worked closely with other federal agencies over the years, including the Army Corps and Coast Guard, to address challenges. For example, in 2007, it played a role in the joint U.S.-Canadian study that focused attention on the system’s infrastructure, and the Corporation has worked with the Coast Guard and others in the Great Lakes Seaway Ballast Water Working Group. In addition, although U.S. Seaway Corporation officials told us that they have a limited role in addressing challenges involving other agencies, the U.S. Seaway Corporation has some experience assessing system risks that could be useful in better understanding and addressing challenges facing system users. For example, in 2012, the U.S. Seaway Corporation was involved in a study led by the Canadian Seaway Corporation that examined the cost-competitiveness of the Great Lakes-Seaway and included a discussion of risks. These efforts could be useful in developing a process to track risks and monitor how they evolve over time and in relation to current shipping trends so that further actions could be taken to address challenges faced by traditional and emerging users of the system. Establishing a process to assess and monitor system risks would provide the U.S. Seaway Corporation with greater assurance that the actions taken by the Corporation, including those listed in its strategic plan, and by other stakeholders are working to improve future utilization and ensure efficient use of the system. Without a formal assessment of risks, the U.S. Seaway Corporation lacks information on the cumulative effect of the challenges faced by users of the system, limiting its ability to inform its future actions to help address those challenges. The Army Corps and the U.S. Seaway Corporation developed asset renewal plans, in fiscal year 2007 and 2009 respectively, which were originally intended to cover approximately 10 years and focused on modernizing, rehabilitating, or replacing existing lock components to avoid unexpected lock closures. Within a lock there are a number of structural, mechanical, and electrical components that must work together (see fig. 7). Key lock components included in the agencies’ asset renewal plans include: Approach walls—Help guide the vessel as it approaches the lock chamber and provides a place for the vessel to tie up to wait to enter the lock chamber. Lock chamber—Concrete structure with rock or concrete floors that contain the vessel while water flows to empty or fill the chamber. The lock structure houses the culvert valves, which fill and empty the lock. Miter gates—Steel structures that first function as a dam to prevent free flow of water through a lock, then open and close to allow vessels to transit through the lock. The end of the gates are mitered (angled) and use the difference in water levels to provide the force necessary to achieve a nearly water-tight seal. Embedded anchorages—The connection point between the miter gates and lock walls, which transfers the load from the gate to the lock wall during the opening and closing of the gates. Over the past decade since beginning these efforts, the Army Corps and U.S. Seaway Corporation have made progress on asset renewal efforts. The Army Corps’ asset renewal efforts have a total estimated cost of about $310 million for work through 2035. Meanwhile the U.S. Seaway Corporation’s asset renewal efforts have a total estimated cost of $189 million for work through 2023 (see fig. 8). (See appendix II for a complete list of both agencies’ asset renewal projects.) According to the Army Corps’ most recent asset renewal plan from 2016 and updates provided by Army Corps officials in May 2018, to date, the Army Corps has spent about $53 million on 18 completed projects out of the about $86 million it has received since 2008 (see below for more information on funding received per year for both agencies). The U.S. Seaway Corporation estimates it has spent $45 million on 16 completed projects of the about $137 million it has received since 2009. According to the Army Corps’ estimates, it has about $257 million in remaining and ongoing work through 2035. Meanwhile, the U.S. Seaway Corporation estimates it has almost $144 million in remaining and ongoing work through 2023. Officials from both agencies stated that asset renewal plans will transition to ongoing capital investment programs that will continue into the foreseeable future. Army Corps Detroit District Officials also emphasized that the list of asset renewal projects frequently changes to account for new information such as results of facility inspections. These officials also noted that a project’s inclusion in the asset renewal plan does not obligate future funds on behalf of the Army Corps, since all projects must compete for funding as part of the annual budget process. Furthermore, these Army Corps officials noted that the total cost estimate could decrease if a second Poe-sized lock is constructed, since traffic could be diverted to the new lock, allowing the current lock to be taken out of service for repairs. Both agencies have also made progress addressing critical projects identified in the 2007 study, but the Army Corps faces obstacles in finishing key projects without disrupting traffic through the Poe Lock. In the 2007 study, the U.S. Seaway Corporation and the Army Corps identified several critical projects to improve the condition of their respective locks (see table 1). The U.S. Seaway Corporation has completed its rehabilitation of the downstream miter gates on both locks and started work on a long-term project to rehabilitate concrete on the Eisenhower lock. Of the three key Army Corps projects identified in the 2007 study, one is complete, one is ongoing, and the other is remaining. Specifically, the Army Corps has not started work to replace the Poe lock’s upper miter gate because Army Corps officials say they lack the means to replace the gate without disrupting navigation. In the short term, Army Corps officials say they now plan to repair the gate and have requested $2 million in appropriated funds in fiscal year 2019 for the first phase of this work. Army Corps officials also noted they have ongoing work to reinforce the West Center Pier, which has eroded over time and which forms the approach channel for both the Poe and MacArthur locks. However, these officials reported that the cost to complete the work differs greatly ($82.6 million versus $7.5 million) depending on whether a second Poe-sized lock is constructed, since more expensive construction methods are currently needed to avoid disrupting traffic. In addition to addressing key projects from the 2007 report, over the past decade the Army Corps and U.S. Seaway Corporation have undertaken projects to address emergent issues and make operational improvements to lock infrastructure. For example, in late July 2015, the Army Corps identified the MacArthur lock’s embedded gate anchorages as a critical issue requiring immediate attention. It closed the MacArthur lock for 19 days during the navigation season in August 2015 in order to address the issue at a project cost of $5.8 million. Meanwhile, the U.S. Seaway Corporation is working to install “hands-free mooring” at both of its locks, which is intended to improve the efficiency of lock operations. Hands-free mooring was developed by the Canadian Seaway Corporation, is being deployed on all Seaway locks, and eliminates the need for conventional lines to secure a vessel during the lockage process—instead, arms along the side of the locks extend and secure the vessel using vacuum pads. Once fully implemented, the system is expected to produce benefits such as improved workplace safety and reducing the time to transit a Seaway lock by approximately 7–10 minutes each direction. The U.S. Seaway Corporation expects to have the system completed by the end of the 2019 shipping season, at a total cost of about $18 million, about $7 million of which had been spent through 2016. The Army Corps and the U.S. Seaway Corporation differ in the level of funding they have received for asset renewal efforts in the past decade, which may have influenced the agencies’ pace of asset renewal efforts. Through fiscal year 2017, the Army Corps received about $86 million (starting in fiscal year 2008) and the U.S. Seaway Corporation received about $137 million (starting in fiscal year 2009) (see fig. 9). Army Corps officials noted they received an increase in funds in 2009 due to the American Recovery and Reinvestment Act of 2009 as well as more stable recent funding due to the Water Resources and Development Act of 2014 which, as mentioned earlier, required the Army Corps to allocate annually a minimum amount of funds for the Great Lakes- Seaway. However, individual Soo Lock asset renewal projects must compete for funding with other Army Corps projects across the country at the district, division, and headquarters level, based in part on a project’s risk rating. In contrast, the U.S. Seaway Corporation is a much smaller organization and directly allocates its funding to projects based on its own condition assessments. The U.S. Seaway Corporation has a lock performance goal and measure that officials use to monitor its asset renewal efforts, in accordance with government internal control standards, but the Army Corps does not have such a goal specific to the Soo locks. Standards for Internal Control in the Federal Government states that agencies should define objectives clearly and in measurable terms so that performance toward achieving those objectives can be assessed. Similarly, Leading Practices in Capital Decision-Making states that organizational goals should be integrated into the capital decision-making process and that agencies should use performance measures to evaluate results of capital projects to determine if goals have been met. As part of the Department of Transportation’s annual performance reports, the U.S. Seaway Corporation reports its annual progress toward its goal of maintaining 99 percent system availability of the U.S. portion of the Seaway during the navigation season. This measure includes times the system is unavailable for three key reasons: vessel incidents, weather, and lock outages. Of these reasons, the U.S. Seaway Corporation has the most direct control over lock outages. U.S. Seaway Corporation officials told us they use this information, particularly on lock outages, to assess the effect of its asset renewal efforts on lock performance, as part of its agency goal to reduce the risk of delays due to lock equipment failure. The Army Corps has not established specific operational goals or metrics for the Soo locks that can be used to evaluate the outcomes of its asset renewal efforts. In its annual financial report, the Army Corps Civil Works program has a nationwide strategic goal to facilitate the transportation of commerce goods on the nation’s coastal channels and inland waterways and a corresponding goal and measure for the number of instances where mechanically-driven failure at locks resulted in delays of more than a day or week. This national measure aggregates Army Corps locks across the country, including over 200 in the inland waterways such as the Mississippi River. However, this national goal and measure does not provide information on the operational performance of individual locks, including the Soo locks. Detroit District Army Corps officials told us that they have not established operational goals or measures specific to the Soo Locks because the Army Corps’ project approval process involves prioritization based on risk rather than operational performance. Specifically, these officials noted that asset renewal efforts are measured by improved risk scores, which indicate higher reliability and less likelihood of unscheduled outages. While this process allows the Army Corps to prioritize individual investment decisions according to risk, it does not define a specific measurable goal for the operational performance of the Soo Locks. As a result, the Army Corps lacks a key tool to assess whether the investments made in the locks have resulted in improved lock performance, such as reductions in outages and delays to its users. Furthermore, the Detroit District has access to information that could be used to develop measure performances for the Soo Locks—specifically the Lock Performance Monitoring System, which contains lock operations data such as scheduled and unscheduled outages. According to Detroit District officials, these data are used for the Army Corps’ nationwide lock performance measure. The Army Corps has previously noted the need for local lock performance goals and measures to improve asset management. In December 2006, the Great Lakes and Ohio River Division, which has the Soo locks in its jurisdiction, recommended in a 5-year plan the development of specific goals for the Great Lakes navigation system for use in prioritizing investments, but the plan has not been updated since then. Furthermore, a 2013 Army Corps commissioned report on best practices in asset management recommended the development of key performance indicator target values to monitor the effectiveness of asset management. Likewise a senior official in the Army Corps’ Asset Management Program Office—which shares leading asset management practices across the Corps— stated that local and regional offices have the ability to develop local lock performance goals and measures to assess the local results. This official also noted the goals and measures to evaluate the progress of asset renewal efforts and lock performance would allow for greater transparency to stakeholders. Without goals and associated measures for the Soo locks, the Army Corps cannot link its asset renewal efforts to improved lock performance and cannot demonstrate the effect of these efforts to stakeholders. The Great Lakes-Seaway serves as an essential transportation route linking U.S. manufacturing, agricultural, and other industries in the nation’s interior to the global economy. Yet, this system faces various challenges that, according to stakeholders, pose risks to traditional and emerging uses that could limit the system’s ability to enhance the region’s economy. The U.S. Seaway Corporation’s mission to improve the system’s utilization and reliability provides it with a unique vantage point for assessing the cumulative risks that these challenges pose on the system’s current and future utilization. Establishing a process for identifying, analyzing, and monitoring the system’s risks would better enable the U.S. Seaway Corporation to design future actions that it, and other stakeholders, could take to address those risks. Similarly, the Army Corps’ efforts to rehabilitate the Soo locks are critical to U.S. manufacturing and trade in the Great Lakes region. Regardless of the outcome of the decision on whether to build another Soo lock, the importance of the Poe lock remains, as indicated by the concerns raised by stakeholders regarding its condition. Given the criticality of the Poe lock and the more stable funding for asset renewal since 2014, it is important that the Army Corps assess these funds’ potential effect on the Soo locks’ performance. Without establishing goals and measures for the Soo locks, the Army Corps is not able to demonstrate whether the substantial investments made so far and planned in the future will improve the Soo locks’ performance and by extension, the reliability of the Great Lakes navigation infrastructure. We are making the following two recommendations: The Administrator of the U.S. Seaway Corporation should establish a process to identify, analyze, and monitor risks to the system’s use to inform future actions to address those risks. (Recommendation 1) The Army Corps Director of Civil Works should, in coordination with the Commanders of the Great Lakes and Ohio River Division and the Detroit District, develop and adopt goals and measures to assess the performance of the Soo Locks and assess outcomes of asset renewal efforts. (Recommendation 2) We provided a draft of this product to the Departments of Defense, Transportation, and Homeland Security for comment. In comments, reproduced in appendixes III and IV, the Departments of Transportation and Defense concurred with our recommendations. All three departments also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Transportation, the Secretary of Defense, the Secretary of Homeland Security, and other interested parties. In addition, this report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report examines (1) how Great Lakes-St. Lawrence Seaway (Great Lakes-Seaway) shipping trends have changed since 1980 and what factors have shaped recent trends, (2) selected stakeholders’ perspectives on challenges to using the Great Lakes-Seaway, and (3) to what extent the U.S. Army Corps of Engineers (Army Corps) and the Saint Lawrence Seaway Development Corporation (U.S. Seaway Corporation) have made progress on lock infrastructure renewal efforts and how the agencies measure performance of these efforts. To understand shipping trends, we analyzed cargo traffic by tonnage for both the St. Lawrence Seaway (published jointly by Canada’s St. Lawrence Seaway Management Corporation and the U.S. Seaway Corporation) and for domestic Great Lakes cargo traffic (from the Army Corps’ Waterborne Commerce Statistics Center) from 1980 to 2016. Although the Seaway data represents all cargo traffic that travels on the St. Lawrence Seaway, we analyzed the Army Corps’ domestic data, which accounts exclusively for traffic between U.S. ports on the Great Lakes system. As a result, some cargos that travel on the Great Lakes— such as between U.S. and Canadian ports or between Canadian ports— are not included, although such movements would be captured in the Seaway data to the extent they enter the Seaway. Although the Army Corps’ data include information on Canadian and foreign cargo, we did not analyze or report this information because (1) of the limitation, which we confirmed with Army Corps officials, that the data exclude Great Lakes cargo movements between Canadian ports and (2) including this information would potentially double-count trips that also entered the St. Lawrence Seaway. We selected the 1980 to 2016 timeframe because it provides a sufficient timeframe to describe long-term trends using consistently collected data from both sources and 2016 is the most recent year for which both sources have published data. We also analyzed cargo trends for the top five commodities by tonnage from 2001 to 2016 for domestic Great Lakes and St. Lawrence Seaway traffic. We selected the years 2001 to 2016 to capture trends over the past approximately 15 years. The selected commodities represent the majority of cargo traffic for both sources. Specifically, the top five domestic Great Lakes commodities made up 96 percent of total cargo tonnage from 2001 to 2016, while the five commodities for the St. Lawrence Seaway represented 71 percent of total St. Lawrence Seaway cargo tonnage for the same time period. We assessed the reliability of the data by reviewing documentation and interviewing Army Corps and U.S. and Canadian Seaway Corporation officials and determined these data were sufficiently reliable for our purpose of describing trends. To describe factors that have shaped recent trends, we reviewed available government and industry reports, such as the 2007 Great Lakes-Seaway study, the 2013 U.S. Department of Transportation Maritime Administration’s Status of the U.S.-Flag Great Lakes Water Transportation Industry, and the 2016 Conference of Great Lakes and St. Lawrence Governors and Premiers’ Strategy for the Great Lakes-St. Lawrence River Maritime Transportation System. To understand factors affecting recent trends and challenges to using the system, we interviewed 24 stakeholders representing a range of traditional and emerging system users and experts. We interviewed representatives from three carriers that transport goods on the system and three associations that represent current U.S., Canadian, and foreign vessel traffic: Interlake Steamship Company, FedNav, Spliethoff, Lake Carriers Association, Chamber of Marine Commerce, and the Shipping Federation of Canada. We interviewed four Great Lake ports stakeholders, including three ports that represent a range of cargo levels and mix of cargos—Port of Duluth, Port of Cleveland, and Port of Indiana, Burns Harbor—and their association, the American Great Lake Ports Association. We interviewed six stakeholders that represent traditional or emerging shipping uses (e.g., cruises and containers) on the system: Cleveland-Cliffs Inc.; Tata Steel; CHS Inc.; General Motors; American Iron and Steel Institute; and the Great Lakes Cruising Coalition. We interviewed two maritime experts and a freight forwarder which helps arrange shipping logistics: Dr. Walter Kemmsies, Martin Associates, and Midwest Transatlantic Lines. Lastly, we interviewed representatives from five Great-Lakes Seaway region and maritime stakeholder groups: Conference of Great Lakes and St. Lawrence Governors and Premiers, Great Lakes Commission, Council of the Great Lakes Region, Committee on the Marine Transportation System, and the American Pilots’ Association. We grouped the challenges identified by stakeholders based on whether challenges affect traditional use of the system or emerging use of the system. Although the results are non-generalizable, stakeholders were selected to represent a range of known perspectives. To better understand the context of these challenges, we interviewed officials from the Army Corps, U.S. Seaway Corporation, U.S. Coast Guard, and Customs and Border Protection. To understand the agencies’ progress on asset renewal efforts and how they measure performance of these efforts, we analyzed available information on projects, status, and estimated cost from both agencies. To assess the agencies’ asset renewal progress we reviewed the Army Corps’ most recent asset renewal plan from 2016 with updates provided by the Army Corps in May 2018. Likewise, we analyzed information provided by U.S. Seaway Corporation officials in March 2018 on project- by-project expenditures from 2009 to 2016 and cost estimates from 2017 to 2023. Although we describe the agencies’ cost estimates for their asset renewal efforts, it was beyond the scope of this engagement to check these cost estimates for accuracy and completeness. Likewise, although we describe the agencies’ processes for selecting projects for funding, we did not verify these processes by, for example, selecting projects and ensuring the selection met the agencies’ established procedures for selection. We reviewed U.S. Seaway Corporation and Army Corps relevant reports, available asset renewal plans, and documentation related to program goals and performance measures, such as annual financial and performance reports, from 2007 through 2018. We also visited the Soo locks at Sault Ste. Marie, Michigan, and the Seaway locks at Massena, New York, in summer 2017 and interviewed officials from both agencies. For example, within the Army Corps we interviewed officials from the Detroit District, headquarters’ navigation and Asset Management Program offices, the Inland Navigation Design Center, and the Institute for Water Resources. We compared agencies’ efforts to GAO’s Standards for Internal Control in the Federal Government and to Leading Practices in Capital Decision-Making. Although the Great Lakes- Seaway system is binational, we are not evaluating the Canadian agencies, although we did interview officials from the Canadian St. Lawrence Seaway Management Corporation to understand their process for asset renewal. The Army Corps information below is based on the most recent asset renewal plan report from 2016 for the Soo locks, with updates provided by the Army Corps in May 2018. The U.S. Seaway Corporation information includes project-by-project expenditures for fiscal years 2009 through 2016 and cost estimates for work from fiscal years 2017 through 2023 provided by U.S. Seaway Corporation officials in March 2018. To align projects between the two agencies, we removed from the U.S. Seaway Corporation list: a dredging project (since the Army Corps information does not include dredging), one Seaway International Bridge project that lacked an associated cost estimate, and discontinued projects. It was beyond the scope of this review to check these cost estimates for accuracy and completeness. Replace lock utility lines and steam system, used for de-icing Fabrication of second set of stoplogs to allow for full dewatering of the lock Poe Replacement of quoin and miter blocks that help transfer load from the gate to the lock wall Replace gate latches to protect the miter gates Replace bevel gears that help move the miter gates Replace protective relays for power plant Replace switchgear assembly B, to assist with de-watering Replace sluice gate valves for Poe and Davis pump well which are used to dewater the locks Repair west center pier, which forms the north wall of the approach channel (outer portion of the wall) Modernize steamplant, which supports de-icing Repair west center pier, which forms the north wall of the approach channel (inner portion of wall closest to lock chamber) Rehabilitation of Davis pump well which is used to dewater locks for winter maintenance Rehabilitate ship arrestor booms that are designed to protect miter gates from vessel impact Gate 1 coating/ weld repairs (upstream end of lock) New miter gate replacement (spare) for upstream end Rehabilitation of Poe pump well used to dewater Poe lock for winter maintenance Fabrication of replacement stoplogs (replacement for originals from initial Poe Lock construction) Rehabilitate ship arrestor booms that are designed to protect miter gates Rehabilitate lock fill/ empty valve machinery Rehabilitate gate skin plate and replace gate coating Repair southwest pier, which serves as south upstream approach wall Reinforce piers mooring bollards along approach wall (Southwest Pier) In addition to the contact named above, Matt Barranca (Assistant Director), Emily Larson (Analyst in Charge), Amy Abramowitz, Melissa Bodeau, Michelle Everett, Aaron Gluck, David Hooper, Alyssa Hundrup, SaraAnn Moessbauer, Joshua Ormond, and Shane Spencer made key contributions to this report.", "summary": "The Great Lakes-Seaway system extends 2,300 miles and serves more than 100 ports in the United States and Canada. Four of the 17 locks that enable navigation are managed by the Army Corps (within the Department of Defense) and U.S. Seaway Corporation (within the Department of Transportation). The rest are managed by Canada. A 2007 U.S.-Canada study noted the system could absorb additional traffic and led to U.S. asset renewal plans to improve lock infrastructure condition. GAO was asked to review efforts to modernize the Great Lakes-Seaway. This report examines (1) shipping trends since 1980 and factors affecting recent trends, (2) stakeholder views on challenges to use, and (3) the extent to which the Army Corps and the U.S. Seaway Corporation have made progress on and measure performance of lock renewal efforts. GAO analyzed Seaway and Army Corps shipping data from 1980 through 2016, the agencies' asset renewal plans, and interviewed 24 stakeholders, including port and shipper representatives, selected to represent a range of perspectives. The tons of cargo moved by domestic Great Lakes and St. Lawrence Seaway traffic have declined since 1980—by 32 and 48 percent, respectively, according to U.S. Army Corps of Engineers (Army Corps) and Saint Lawrence Seaway Development Corporation (U.S. Seaway Corporation) data. Stakeholders identified various factors for this decrease such as the U.S. economy's shift away from manufacturing. Traffic on the Great Lakes-St. Lawrence Seaway (Great Lakes-Seaway) is traditionally dominated by bulk commodities like iron ore, although stakeholders noted emerging uses like containerized cargo and cruises. Stakeholders identified a range of challenges to using the Great Lakes- Seaway—such as inadequate portside infrastructure for intermodal transfers of shipping containers—that together pose risks for both traditional bulk cargos and emerging uses. Although the U.S. Seaway Corporation's mission is to improve the system's utilization and reliability, the Corporation has not fully assessed the risks that challenges pose to the system's users. Establishing a process to assess and monitor risks, in accordance with federal internal control standards, would help inform future actions to address identified and emerging challenges. The U.S. Seaway Corporation and the Army Corps have made progress on lock asset renewal efforts, but the Army Corps lacks goals and measures to assess performance and outcomes of these efforts. According to estimates provided by the Army Corps, it has completed 18 projects totaling about $53 million to date, and has about $257 million in remaining and ongoing work through 2035. Meanwhile, the U.S. Seaway Corporation has completed 16 projects totaling $45 million and has almost $144 million in remaining and ongoing work through 2023. The Army Corps has not developed goals and measures to assess its asset renewal results, as the U.S. Seaway Corporation has done. As a result, the Army Corps lacks tools to assess the outcomes of these efforts and demonstrate the extent to which its asset renewal efforts have improved operational performance of the Soo Locks. GAO recommends that (1) the U.S. Seaway Corporation establish a process to identify, analyze, and monitor risks to the system's use to inform future actions, and (2) the Army Corps develop and adopt goals and measures to assess the performance of the Soo Locks and assess of asset renewal outcomes. The Departments of Transportation and Defense concurred with our recommendations and provided technical comments which we incorporated as appropriate.", "document_type": "gao"}
{"report": "Decisions about end-of-life care are based on an individual’s personal beliefs and values. Advance care planning documents, including advance directives and POLST forms, allow individuals to express their wishes for end-of-life care. These documents serve different purposes depending on an individual’s stage of life or health condition. (See fig. 1.) According to a report by the Institutes of Medicine, advance care planning documents are most effective when used as part of broader advance care planning efforts, which may involve multiple, in-depth discussions with family members and health care providers. The report also stated that multiple discussions at various stages of life are needed, with greater specificity as an individual’s health deteriorates, because an individual’s medical conditions and treatment preferences may change over time. Therefore, a comprehensive approach to end-of-life care, rather than any one document, helps to ensure that medical treatment given at the end of life is consistent with an individual’s preferences. An advance directive is a written instruction recognized under state law and relating to the provision of health care when an individual is incapacitated. For example, an advance directive may be used to record an individual’s wish to receive all available medical treatment, to withdraw or withhold certain life-sustaining treatments, or to identify an agent to make medical decisions on the individual’s behalf if necessary. The most common advance directive documents are living wills and health care power of attorney. Life-Sustaining Treatment Life-sustaining treatment means the use of available medical machinery and techniques, such as heart-lung machines, ventilators, and other medical equipment and techniques, that may sustain and possibly extend life, but which may not by themselves cure the condition. Living will. A living will is a written expression of how an individual wants to be treated in certain medical circumstances. Depending on state law, a living will may permit an individual to express whether they wish to be given life-sustaining treatment in the event they are terminally ill or injured, to decide in advance whether they wish to be provided food and water via intravenous devices (known as tube feeding), and to give other medical directions that affect their health care, including at the end of life. A living will applies to situations in which the decision to use life-sustaining treatments may prolong an individual’s life for a limited period of time and not obtaining such treatment would result in death. Having a living will does not mean that medical providers would deny medications and other treatments that would relieve pain or otherwise help an individual be more comfortable. Health care power of attorney. A health care power of attorney is a document that identifies a health care agent—also called a health care proxy—as the decision maker for the patient. Under state law, the health care power of attorney typically becomes operative when an individual is medically determined as unable to make decisions. Most commonly, this situation occurs either because the individual is unconscious or because the individual’s mental state is such that they do not have the legal capacity to make decisions. As with living wills, the process for validly executing a health care power of attorney depends on the state of residence. The health care power of attorney may be designated by using a model form in state statute or it may be drafted specifically for an individual by a lawyer. Similar to the living will, medical providers will make the initial determination as to whether an individual has the capacity to make their own medical treatment decisions. Most adults in the United States do not have an advance directive. According to a 2017 study, about 37 percent of adults had an advance directive. However, the proportion of individuals with an advance directive can vary by demographic group. See appendix I for more information related to the prevalence of advance directives. POLST forms differ from advance directives in that they are medical orders used to communicate an individual’s treatment wishes, and are appropriate for individuals with a serious illness or advanced frailty near the end-of-life. For these individuals, their current health status indicates the need for medical orders. In the event of a medical emergency, the POLST form serves as an immediately available and recognizable medical order in a standardized format to aid emergency personnel. Following the POLST form orders, emergency personnel can honor the individual’s treatment wishes as communicated to and documented by the individual’s health care provider. See appendix II for information on the types of information included on a POLST form. Both government and non-government organizations, such as state agencies or the National POLST Paradigm, provide individuals and providers information on how to access or download blank advance care planning documents through their websites and education campaigns. For Medicare and Medicaid providers, the Patient Self Determination Act requires certain providers participating in these programs—such as hospitals and nursing homes—to maintain written policies and procedures to inform individuals about advance directives, and document information about individuals’ advance directives in their medical records. Once the advance care planning documents are completed, individuals and providers can access them through various systems. For example, an individual may have their advance directive or POLST form in their electronic health record (EHR), which can be accessed by their provider or other medical personnel in the event that the individual has a medical emergency. In addition, advance directives can be stored in a lawyer’s office or in an individual’s home; these documents would have to be found and transported to the medical setting if needed. Some states have registries (either electronic or paper-based) for advance directives or POLST forms, whereby individuals and providers can access the registry and obtain the necessary documents. We found websites related to advance care planning for every state; however, the amount of information on these websites varied. In addition, about a quarter of states had registries to provide access to completed advance directives, POLST forms, or both. For all states, either government or non-government websites provided information, which could include blank documents, on advance care planning for individuals and providers within the state. However, the amount of available information about advance care planning varied by state. The information available online varied from having an advance care planning document available to download, to extensive information on advance care planning. For example, in Mississippi, the State Board of Medical Licensure provided a POLST document that could be downloaded from its webpage with no additional information. In contrast, California—through its state attorney general’s website—offered a blank advance directive document that could be downloaded, as well as additional information on advance directives, including who should fill out particular types of advance care planning documents, and the importance of filling out these documents; and other resources, including brochures or information packets detailing advance care planning and other relevant documents. To give providers, individuals, or both access to completed advance care planning documents, about one-quarter of states (14) had active registries (either electronic or paper-based) of completed advance directives, POLST forms, or both, as of November 2018. (See fig. 2.) Specifically, 3 states had active registries for both completed advance directives 8 states had active registries solely for completed advance directives; 2 states had active registries solely for completed POLST forms, 1 state had an active registry for completed advance directives and was piloting registries for completed POLST forms, and 37 states did not have active registries for either advance directives or POLST forms. The 14 states with active registries varied in how they administered them. Some states’ registries were administered through state agencies or by contracting with an outside organization. For example, in Oregon, the state contracted with a large health system in the state to operate the technical aspects of the state’s POLST registry, while in Vermont, the Department of Health administered the state’s registry with technical support from a private national document registry company. For other states—such as New York, Virginia, and West Virginia—the state registries were administered through non-government organizations in collaboration with state agencies. Based on our interviews with officials from national stakeholder organizations, state agencies and stakeholder organizations in selected states, and articles we reviewed, we identified two broad challenges to advance care planning: (1) a lack of understanding about advance care planning, including how to initiate conversations about advance care planning and how to complete and follow advance care planning documents; and (2) ensuring access to completed documents. In addition to these two broad challenges, the officials we interviewed identified challenges related to resources and the portability of advance care planning documents. Individuals and providers may struggle with how and when to initiate advance care planning conversations. We previously reported that providers identified informing individuals about advance care planning as a challenge due to reluctance to talk about end-of-life issues. In addition, officials from both national and state stakeholder organizations identified challenges to providers properly counseling their patients about advance care planning, either to avoid discussing death and dying with their patients, or because of their own uncertainties regarding the timing of when to hold such discussions. In addition to challenges related to having advance care planning conversations, individuals and providers may not understand that filling out the document is voluntary or how to complete and follow the advance care planning document, according to officials from national stakeholder organizations and officials in the four selected states. Officials from national stakeholder organizations and articles we reviewed noted that challenges with voluntarily completing advance care planning documents can arise when there are language or cultural barriers to understanding these documents. When individuals or providers do not understand the information being requested in advance care planning documents, it can affect whether an individual’s wishes for care are accurately represented. A state agency official in one state identified challenges in ensuring EMS providers understand the appropriate actions to take when they encounter a document that is different from a traditional POLST form. For example, the state official noted that EMS providers might assume that individuals who have a wallet card on their person do not want CPR when the card actually indicates that the individual has completed an advance directive or POLST form to express their care wishes. This could result in treatment that does not match the individual’s expressed wishes. Once advance care planning documents are completed, additional challenges exist to ensuring that providers have access to these documents when needed, such as in an emergency situation. Officials from the national stakeholder organizations, state agencies, and state stakeholder organizations we interviewed identified challenges related to accessing advance directives and POLST forms stored in EHRs. Specifically, stakeholders identified challenges related to EHR interoperability, such as where a provider in one health system cannot access advance care planning documents recorded in an EHR at a different health care system. While interoperability is not limited to advance care planning documents, the challenges associated with accessing advance care planning documents in EHRs can affect providers’ abilities to honor an individual’s wishes in an emergency if they do not have ready access to the documents. For example, when emergency providers cannot readily access advance care planning documents in another health system’s EHR, the providers might not be aware of and provide treatment inconsistent with the wishes of someone they are treating in the emergency room. National stakeholder officials also noted challenges due to a lack of standardization in EHR systems. For example, one national stakeholder official noted that EHR systems in health care facilities do not always have standardized processes for storing advance care planning documents—that is, one health care facility might enter advance directive information into a physician’s notes section of the EHR, while another might have a specific tab in the EHR for advance directives. Due to the lack of standardization, providers might not be able to find an individual’s advance care planning document, and consequently provide treatment inconsistent with the individual’s expressed wishes. In addition to challenges related to understanding and accessing advance care planning documents, officials from the national stakeholder organizations, state agencies, and state stakeholder organizations we interviewed identified other challenges related to resources and portability of advance care planning documents. State agency officials told us that the lack of dedicated resources for advance care planning efforts, such as maintaining a registry, can be challenging. For example, an Idaho official stated that, due to resource constraints within the Secretary of State’s Office—which administers its Health Care Directive registry—the office does not have the personnel to maintain the registry at current document submission rates. National stakeholder officials discussed challenges with states’ legal structures for accepting advance care planning documents—that is, the portability of documents across state lines. For example, an individual might fill out an advance directive or POLST form in one state, but become ill in another state where these documents may not be valid. In our four selected states—California, Idaho, Oregon, and West Virginia—state agencies and state stakeholder organizations pursued various strategies to improve individuals’ and providers’ understanding of advance care planning documents, as well as to improve their access to completed advance care planning documents. Officials from state agencies and stakeholder organizations in our selected states described efforts to educate individuals about the importance of advance care planning and train providers on the use of advance care planning documents. To address individuals’ lack of understanding of advance care planning, state agency officials and stakeholders in our selected states used strategies to inform them about the purpose of the documents and how to fill them out. The following are some examples of these efforts. Oregon. The Oregon POLST Coalition used its relationship with stakeholder groups in the state—a large health system, and the state health authority—to educate individuals about POLST forms. These efforts included online videos and brochures intended to improve individuals’ voluntary and informed completion of the documents. West Virginia. The West Virginia Center for End-of-Life Care—which administers the state’s advance care planning registry—collaborated with the West Virginia Network of Ethics Committees and a national organization to conduct public education presentations and webinars. For three of our selected states, educational efforts also included making information about advance care planning available in other languages. For example, in California, Idaho, and Oregon, POLST forms and other information on advance care planning are available in Spanish. Articles we reviewed stated that providing culturally sensitive documents that communicate how to fill out the documents could help improve voluntary and informed completion of advance care planning documents. Officials from state agencies and state stakeholder organizations in all four selected states reported conducting provider training, which included working with EMS and hospital providers to train them on advance care planning documents, such as how to use advance directives and POLST forms and when to conduct end-of-life care conversations. The following are examples of these efforts. California. A state stakeholder organization in California conducted train-the-trainer sessions to educate providers about POLST forms, so the providers could subsequently conduct community training events. The organization also published decision aids for providers and individuals to help facilitate advance care planning conversations. The organization, which focused on POLST education and training, noted that it holds periodic conference calls with previous session participants to provide ongoing support and continue discussions about advance care planning. Idaho. The state—through collaborations with stakeholder organizations in Idaho—focused on improving advance care planning through education efforts. Specifically, the state collaborated with stakeholder organizations to conduct trainings on locating and understanding advance care planning documents. In addition, the organizations created EMS protocols related to accessing individuals’ wishes during emergencies. An Idaho official noted that successful advance care planning education and outreach within the state has led to a large increase in the number of advance care planning documents submitted to the state’s registry. Oregon. State stakeholder organizations conducted provider training on advance directives and POLST forms. For example, an organization that focused on improving advance care planning education in the state developed an initiative, which included educational materials and training programs, to improve patient understanding of filling out and updating advance directives through health care organizations and provider training. Further, according to an official from the state health authority, POLST information is included in the curriculum for all medical education in the state ranging from emergency medical technicians to physicians. West Virginia. The West Virginia Center for End-of-Life Care created training manuals, led EMS training webinars, and provided other online education materials to improve provider education about using POLST forms and related protocols in the field. National stakeholder organizations we interviewed and articles we reviewed also noted that increasing the quality of the advance care planning conversations between providers and their patients is an important aspect of successful advance care planning efforts. One strategy to improve the advance care planning conversations is to conduct the conversations over multiple visits, according to national stakeholders and articles. Officials from state agencies and stakeholder organizations in our selected states utilized strategies to improve access to current advance care planning documents, including better interoperability between EHRs and a state registry, and access to completed documents stored in registries. Officials from state agencies and stakeholder organizations identified strategies to improve providers’ access to advance care planning documents stored in an EHR and to ensure the EHR has the most current copy of the document. One strategy used in Oregon enabled information sharing between EHR systems and the state’s electronic registry of completed POLST forms, allowing providers access to the most current POLST forms, according to state officials. Certain EHR systems— including those in three large health systems in the state—are interoperable with the state’s electronic POLST registry using bidirectional technology, meaning that the systems are coded in a way that they can seamlessly exchange information with each other. This allows providers to receive updated POLST forms from the registry upon the individual’s admission to the hospital. It also updates the POLST forms in the registry when changes are made in the EHR by the provider in the hospital. The Oregon officials described another strategy taken within a large health system in the state, which allows providers to quickly know whether a patient has an advance directive in an EHR by using a tab in the medical record indicating that the documents are in the EHR. Stakeholder organizations identified other strategies for increasing access to completed advance care planning documents, such as standardizing information. For example, one national stakeholder organization noted that advance care planning documents could be in a standardized location within an EHR to help providers find these documents more easily. Another strategy used in our selected states is the use of a health information exchange to facilitate access to advance care planning documents. According to a West Virginia stakeholder organization, using the state’s health information exchange allowed West Virginia to easily provide authorized individuals with direct access to completed advance care planning documents—both advance directives and POLST forms—in its registry. Officials from state agencies and stakeholder organizations also developed strategies to improve access to completed advance care planning documents in their state registries. All four selected states used registries to facilitate access to completed advance care planning documents: two states (Idaho and West Virginia) had registries for both advance directives and POLST forms, one state (California) had an advance directive registry and was piloting an electronic POLST registry in two communities, and the remaining state (Oregon) had a POLST registry. Officials in these states reported strategies to facilitate access through their registries. Below are examples of these strategies. California. To test whether partnering with a health information exchange organization would provide benefits to the state’s POLST eRegistry uptake and expansion, one of the two California communities chosen to pilot the POLST eRegistry was led by a health information exchange. The other community selected for the pilot was led by a for-profit commercial service. According to a California EMS official, using the health information exchange allowed advance care planning documents to be exchanged quickly between ambulances and hospitals. West Virginia. West Virginia’s registry used the state-wide EMS structure, enabling EMS providers to access the information in an individual’s POLST form while en route to an emergency call. The medical director at the EMS state office noted that EMS providers could call one of its five medical command centers, which could access the registry online to “pre-screen” individuals, to determine if there was a valid advance care planning document on file. EMS providers then received the individual’s information from the medical command center. According to an official involved with the state registry, authorized individuals—i.e., individuals with a registry-issued username and password—could also directly view registry documents. Oregon. State officials reported using an opt-out strategy for the submission of POLST forms to the state’s registry to help ensure that the information in the registry was current. That is, the state has a legislative mandate for providers to submit all POLST forms to the state’s POLST registry unless the patient elected to opt out of the submission. According to Oregon stakeholders, Oregon attributes the widespread use and adoption of the registry to this strategy. One article noted that, in Oregon, successful access to POLST forms through the registry by EMS providers influenced the treatment of individuals. Oregon officials and stakeholders told us that they have not experienced many challenges related to administering its POLST registry and providing access to completed POLST forms, because they leveraged their existing centralized EMS system and created a state administered registry that is interoperable and available to all health systems within the state. Oregon officials stated that the state’s registry success is largely attributable to the fact that it was designed to meet the access and workflow needs of both EMS providers in the field and acute care providers. At the federal level, to support state registry efforts, in February 2016, CMS published a State Medicaid Director letter alerting states to the availability of federal Medicaid funding for the development of and connection to public health systems, such as registries. A July 2018 report by the Office of the National Coordinator for Health Information Technology noted that end-of-life care advocacy groups should consider working with State Medicaid Directors to apply for CMS funding to pilot POLST registries. According to CMS, as of October 2018, one state, Louisiana, received approval to fund an electronic registry for advance directives. Officials from state agencies and stakeholder organizations in our selected states discussed the importance of having adequate funding and staff resources to administer their registries. For example, according to an Oregon stakeholder organization, dedicated state funding for the state’s registry allows multiple benefits, such as continuous availability of the registry for individuals and providers. Oregon POLST officials stated that in order to ensure access to individuals’ POLST forms between health systems within a state, they believe POLST registries should be state funded and administered. According to the Office of the National Coordinator for Health Information Technology report and a West Virginia registry official, the state’s registry, which received state-funding from 2009 until 2017, functioned as a central source of information on individuals’ wishes, which were recorded in documents such as advance directives and POLST forms and alleviated multiple access issues. However, officials involved in receiving and providing registry services reported challenges when the registry did not receive state funding in 2018. As a result, online access to advance directives and POLST forms through the registry was discontinued. In California, officials involved with the POLST eRegistry pilot stated that one goal of the pilot project was to identify potential plans for sustainable funding of a registry. Regarding acceptance of out-of-state advance care planning documents—that is, the portability of documents across state lines—we found that all four selected states have statutes that address the validity of advance care planning documents executed in another state. To ensure individuals’ wishes are honored, according to an American Bar Association official, states need to engage in efforts to develop processes and protocols that will allow advance care planning documents to be accepted between states. While the states’ language varies, all selected states allow use of out-of-state documents. Under Idaho’s statute, out-of- state documents that substantially comply with Idaho’s requirements are deemed to be compliant with Idaho’s statute. California’s, Oregon’s, and West Virginia’s statutes note that out-of-state documents executed in compliance with that state’s laws are valid within their states. For more information on the states’ statues related to advance care planning, see appendix IV. We provided a draft of this report to the Department of Health and Human Services. HHS provided technical comments, which we incorporated as appropriate. We also provided relevant information from the draft report to state officials and stakeholders in each of the four selected states in our review (California, Idaho, Oregon, and West Virginia), and to one national stakeholder organization (the National POLST Paradigm), and incorporated their technical comments, as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, the Administrator of the Centers for Medicare & Medicaid Services, the National Coordinator for Health Information Technology, the National Institute on Aging, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Officials from the National Institutes of Health’s National Institute on Aging, the Centers for Disease Control and Prevention’s National Center for Health Statistics, and representatives of national stakeholder organizations identified specific surveys and a comprehensive national study of the prevalence of individuals who have completed advance directives. Table 1 provides information from selected research on the prevalence of advance directives. Table 2, below, shows the percentage of individuals age 65 and older responding to the Health and Retirement Survey who reported having a living will or power of attorney in 2012, 2014, and 2016. Physician orders for life-sustaining treatment (POLST) forms are different in each state, and the order of the sections or the options within a section may differ. However, according to the National POLST Paradigm, POLST forms cover the same information. Information about the forms, including sections on cardiopulmonary resuscitation (CPR), medical interventions, artificially administered nutrition, and signatures, is provided below. This section only applies when the individual is unresponsive, has no pulse, and is not breathing. This is similar to a do-not-resuscitate order, but the individual only has a do-not-resuscitate order when they do not want CPR. The POLST form allows individuals to clearly show they do want CPR. If this is left blank, the standard protocol is for emergency personnel to provide CPR if medically indicated. (See fig. 3.) This section gives medical orders when CPR is not required, but the individual still has a medical emergency and cannot communicate. There are three options and a space for a health care professional to write in orders specific for the individual. Care is always provided to individuals. This section is for letting emergency personnel know what treatments the individual wants to have. (See fig. 4.) 1. Full treatment. The goal of this option is to provide all treatments necessary (and medically appropriate) to keep the individual alive. In a medical emergency, individuals want to go to the hospital and, if necessary, be put in the intensive care unit and on a breathing machine. 2. Limited treatment / select treatment. The goal of this option is to provide basic medical treatments. These individuals want to go to the hospital, but do not want to be put in the intensive care unit or on a breathing machine. They are okay with antibiotics and intravenous fluids. 3. Comfort measures only. The goal of this option is to focus on making the individual as comfortable as possible where they are. These individuals do not want to go to the hospital. If the individual’s comfort cannot be taken care of where they are, transfer to the hospital may be necessary. According to the National POLST Paradigm, in many states, if an individual chooses CPR—or leaves Section A blank—the individual is required to choose “Full Treatment” in Section B. This is because CPR usually requires intubation and a breathing machine, which are only options under “Full Treatment.” If an individual has a medical emergency, but does not want CPR, this is the section emergency personnel will look at to see whether the individual wants to go to the hospital or not (for Full Treatment and Limited Interventions: yes; for Comfort Measures Only: no). If the individual only has a do-not-resuscitate order, emergency personnel would take them to the hospital. This section is where orders are given about artificially administered nutrition (and in some states artificially administered hydration) for when the individual cannot eat. All POLST forms note that individuals should always be offered food by mouth, if possible. (See fig. 5.) Health care professional. Since this document is a medical order, a health care professional is required to sign it in order for it to be valid. Which health care professionals can sign (e.g., physician, nurse practitioner) varies by state. The document has a statement saying that, by signing the form, the health care professional agrees that the orders on the document match what treatments the individual said they wanted during a medical emergency based on their current medical condition. Patient or surrogate. According to the National POLST Paradigm, most states require the patient or the surrogate to sign this form. This helps to show the patient or surrogate was part of the conversation and agrees with the orders listed on the form. The backside of the POLST form has directions and information, usually for health care professionals. Other information it may have includes information on how to void a POLST form; contact information for surrogates; and information on who completed the POLST form. This appendix provides information about incentive programs provided by the Centers for Medicare & Medicaid Services (CMS) to encourage providers to use electronic health records related to advance care planning documents. CMS provided incentive payments to eligible providers who reported certain measures through its Medicare electronic health records (EHR) Incentive Program (meaningful use program), which started in 2011. At certain points in the program, measures related to advance care planning were optional measures. In 2017, eligible professionals (physicians) began reporting “promoting interoperability” measures through the Merit-based Incentive Payment System (MIPS). The American Recovery and Reinvestment Act of 2009 established the Medicare and Medicaid EHR Incentive Program. This program provided incentive payments for certain eligible providers—certain hospitals and physicians—that successfully demonstrated meaningful use of certified EHR technology and met other program requirements established by CMS. The program was implemented in three stages—measures were established at each stage to promote the use of EHRs in the delivery of health care and to ensure that providers capture information in their EHRs consistently. For example, one measure assessed whether providers have the technical capability in their EHRs to notify the provider of potential interactions among the patients’ medications and with patients’ allergies. In all three stages of meaningful use, providers had to report certain mandatory or core measures, as well as on a set of optional or menu measures. The recording of advance directives was not included as a mandatory measure for eligible providers during any stage of meaningful use. For stages 1 and 2 of meaningful use (2011 through 2015) the recording of advance directives was an optional measure, meaning hospitals could choose to report it or could choose to report a different measure. This optional measure for eligible hospitals was a yes/no measure of whether users could record whether a patient has an advance directive. In October 2015, CMS released the stage 3 final rule that also modified elements of stage 2 reporting; this modification eased reporting requirements and aligned them with other quality reporting programs, according to agency officials. For both modified stage 2 and stage 3 (2015 through 2017), the original advance directive measures were no longer included. CMS noted that a goal for stage 3 measures was to include more advanced EHR functions, and one stage 3 measure addressed capturing and incorporating a broad range of data into the EHR, including advance directives. One national stakeholder organization recommended a measure to ensure that if there are any advance care planning documents in the medical record, that the documents be accessible to all health care providers. CMS noted that advance care planning directives can be included in the notes and is addressed by certification requirements applicable to EHRs. Participants in these CMS programs must use certified EHR technology, which is technology that has been determined to conform to certification criteria developed by the Department of Health and Human Services’ Office of the National Coordinator for Health Information Technology. The 2015 certified EHR technology criteria—the most recent edition—includes a criterion that relates to advance care planning documents. The Medicare Access and CHIP Reauthorization Act of 2015 established the Quality Payment Program, which consolidated components of three previously used payment incentive programs, including the Medicare EHR Incentive Program, into MIPS. Under the MIPS program, which affects clinician payments beginning in 2019, participating clinicians will generally be assessed in four areas, one of which is the “promoting interoperability” performance category that aims to achieve the same objectives as the original meaningful use program. MIPS-eligible clinicians report measures and activities to earn a score in the performance categories. Under the “improvement activities” performance category, one optional activity—advance care planning—covers items such as implementation of practices or processes to develop advance care planning that includes documenting the advance care plan or living will, and educating clinicians about advance care planning. Clinicians who meet the criteria for this activity can report this advance care planning activity to earn credit for the “improvement activities” performance category. Further, the advance care planning activity could earn bonus points in the “promoting interoperability” category, if the activity was conducted using certified EHR technology in 2017 and 2018. Our four selected states—California, Idaho, Oregon, and West Virginia— had statutes with similar provisions that affected access to advance care planning documents; however, the statutes differed in the specificity of these provisions. This appendix provides information on provisions related to (1) document execution requirements, such as signature and witness requirements; (2) the validity of other advance care planning documents; (3) provider objections to advance care planning directions; and (4) provider liability protections. Statutes in the four selected states required advance care planning documents to contain specific elements for the documents to be valid. The document requirements included the following: Signature requirements. All four selected states required individuals or designated representatives to sign the advance care planning document for the document to be legally valid. In addition, California allows individuals to sign the documents with a digital signature. Witness requirements. Three of the states (California, Oregon, and West Virginia) have statutes that require at least one witness to be present during the completion of advance care planning documents for that document to be legally valid. These states varied regarding the relationship the witness could have with the individual and number of required witnesses. For example, for advance care planning documents that were signed by witnesses, California required that at least one of the witnesses not be related to the individual by blood, marriage, or adoption, nor be entitled to any portion of the individual’s estate upon the individual’s death under an existing will. In contrast, according to state officials in Idaho, the state removed witness requirements from its advance care planning documents in 2012 to make the documents easier to complete. All four selected states’ statutes contained model forms that could be used as a valid advance care planning document. All of the states contained provisions regarding the acceptance of documents other than the forms set out in statute. A document other than the model form is valid if it includes required statutory elements (e.g., signature requirements). For example, in Idaho, the document must be substantially like the model form or contain the elements laid out in the statute. In Oregon, the advance directive statute states that, except as otherwise provided, Oregon residents’ advance directives must be the same as the statutory model form to be valid. All four selected states’ advance care planning statutes had provisions related to provider objections—the statutes address situations in which the provider is unable or unwilling to comply with advance care planning directions. However, the statutes varied on the grounds for provider objection, the required steps to be taken, and the extent to which providers were responsible for taking those steps. For example, California’s and Idaho’s statutes allow providers to object on ethical and professional grounds; and California’s, Idaho’s, and West Virginia’s statutes allow providers to object on reasons of conscience. In addition, the four states’ statutes specified the steps that providers or health systems must take after an objection is made. For example, all four selected states require that specified steps be taken with regard to transferring the individual to a provider that will honor their wishes. Further, California and Oregon explicitly require patient or health care representative notification as soon as provider objections are made. All four states also had statutes that addressed the circumstances under which providers would not be subject to civil or criminal liability, or professional disciplinary action with regard to administering advance care planning documents and directions. The states’ statutes varied with regard to the actions that were covered under these liability provisions. For example, California’s statute addresses situations in which a provider or institution either complied with or objected to the directions provided in advance care planning documents, while Idaho’s, Oregon’s, and West Virginia’s statutes only addressed situations in which providers and other parties complied in good faith with the directions. In addition to the contact named above, Kim Yamane (Assistant Director), Shirin Hormozi (Analyst-in-Charge), Leia Dickerson, Drew Long, Ian P. Moloney, Monica Perez-Nelson, and Vikki Porter made key contributions to this report.", "summary": "Many individuals receive medical care for a serious or life-limiting condition during the last months of life, which may involve making difficult decisions about life-sustaining treatment. Advance care planning helps ensure that physicians, families, and friends have documentation outlining individuals' wishes under these circumstances. GAO was asked to identify issues related to completing and accessing advance care planning documents. This report describes, among other things, (1) the challenges individuals and providers face completing and accessing the documents, and (2) selected states' strategies for improving individuals' and providers' understanding of and access to advance care planning documents. GAO reviewed documents and interviewed officials from national stakeholder organizations involved in advance care planning or aging issues, and conducted a literature review of relevant articles published from January 2012 to April 2018 in peer-reviewed and other publications. In addition, GAO interviewed officials from state agencies and stakeholder organizations in California, Idaho, Oregon, and West Virginia. GAO selected those four states because they were active in encouraging advance care planning and had registries for completed documents that were in different stages of development. The Department of Health and Human Services, states, and stakeholders provided technical comments on a draft of this report, which GAO incorporated as appropriate. Advance care planning documents—including advance directives and physician orders for life sustaining treatment (POLST)—allow individuals to express their wishes for end-of-life care. Advance directives, which include living wills and health care power of attorney, provide direction regarding care when an individual becomes incapacitated. POLST documents are appropriate for seriously ill individuals whose health status indicates the need for medical orders to be documented in their medical records. Stakeholders from national organizations and officials in the four states GAO selected to review cited several challenges—affecting both individuals and health care providers—related to the use of advance care planning documents. In particular, they noted a lack of understanding about how to complete the documents and how to initiate conversations about advance care planning. They also cited challenges related to the difficulty of ensuring access to completed documents when needed, such as in an emergency situation. Officials from state agencies and stakeholder organizations in the four selected states reported pursuing various strategies to improve understanding of advance care planning documents by conducting education efforts for individuals and providers. In addition, the states utilized strategies to improve access to completed documents, such as improving the electronic exchange of information between health records and a state registry, which is a central repository intended to improve access to the documents. Further, stakeholder officials reported strategies related to the acceptance of out-of-state advance care planning documents; all four selected states had statutory provisions that address the validity of documents executed in another state.", "document_type": "gao"}
{"report": "Cybersecurity incidents continue to impact federal entities and the information they maintain. According to OMB’s 2018 annual FISMA report to Congress, agencies reported 35,277 information security incidents to DHS’s U.S. Computer Emergency Readiness Team (US-CERT) in fiscal year 2017. As shown in figure 1, these incidents involved threat vectors, such as web-based attacks, phishing attacks, and the loss or theft of computer equipment, among others. These incidents and others like them can pose a serious challenge to economic, national, and personal privacy and security. The following examples highlight the impact of such incidents: In March 2018, the Department of Justice reported that it had indicted nine Iranians for conducting a massive cybersecurity theft campaign on behalf of the Islamic Revolutionary Guard Corps. According to the department, the Iranians allegedly stole more than 31 terabytes of documents and data from more than 140 American universities, 30 U.S. companies, and 5 federal government agencies, among other entities. In March 2018, a joint alert from DHS and the Federal Bureau of Investigation stated that, since at least March 2016, Russian government actors had targeted U.S. government entities and critical infrastructure sectors, including the energy, nuclear, water, aviation, and critical manufacturing sectors. In June 2015, the Office of Personnel Management reported that an intrusion into its systems had affected the personnel records of about 4.2 million current and former federal employees. Then, in July 2015, the agency reported that a separate but related incident had compromised its systems and the files related to background investigations for at least 21.5 million individuals. The federal approach and strategy for securing information systems is prescribed by federal law and policy. FISMA sets requirements for effectively securing federal systems and information. In addition, the Federal Cybersecurity Enhancement Act of 2015 requires protecting federal networks through the use of federal intrusion prevention and detection capabilities. Further, Executive Order 13800, Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure, directs agencies to manage cybersecurity risks to the federal enterprise by, among other things, using the NIST Framework for Improving Critical Infrastructure Cybersecurity (cybersecurity framework). FISMA was enacted to improve federal cybersecurity and clarify government-wide responsibilities. The law is intended to provide for improved oversight of federal agencies’ information security programs. Specifically, the law provides a comprehensive framework for ensuring the effectiveness of information security controls over information resources that support federal operations and assets. The law is also intended to ensure the effective oversight of information security risks, including those throughout civilian, national security, and law enforcement agencies. FISMA assigns OMB and DHS oversight roles in ensuring federal agencies’ compliance with the law. Among other things, FISMA requires OMB to develop and oversee the implementation of policies, principles, standards, and guidelines on information security in federal agencies, except with regard to national security systems. The law also assigns OMB the responsibility of requiring agencies to identify and provide information security protections commensurate with assessments of risk to their information and information systems. The law further requires DHS to administer the implementation of agency information security policies and practices for non-national security information systems, in consultation with OMB, by developing, issuing, and overseeing implementation of binding operational directives; monitoring agency implementation of information security policies and practices; and convening meetings with senior agency officials to help ensure their effective implementation of information security policies and practices, among other things. FISMA assigned to NIST the responsibility for developing standards and guidelines that include minimum information security requirements. To this end, NIST has issued several publications to provide guidance for agencies in implementing an information security program. For example, NIST Special Publication (SP) 800-53 provides guidance to agencies on the selection and implementation of information security and privacy controls for systems. FISMA also assigns to the head of each executive branch agency, responsibility for providing information security protections commensurate with the risk and magnitude of harm resulting from unauthorized access, use, disclosure, disruption, modification, or destruction of information systems used or operated by an agency or by a contractor of an agency or other organization on behalf of an agency. The law also delegates to the agency chief information officer (CIO), or comparable official, the authority to ensure compliance with FISMA requirements. The CIO is responsible for designating a senior agency information security officer whose primary duty is information security. In addition, the law requires agencies to develop, document, and implement an agency-wide information security program to secure federal information systems. Specifically, these information security programs are to provide risk-based protections for the information and information systems that support the operations and assets of the agency. Further, FISMA requires agencies to comply with DHS binding operational directives, OMB policies and procedures, and NIST federal information processing standards. FISMA also has reporting requirements for OMB and federal agencies. Specifically, OMB is to report annually, in consultation with DHS, on the effectiveness of agency information security policies and practices, including a summary of major agency information security incidents and an assessment of agency compliance with NIST standards. Further, the law requires agencies to report annually to OMB, DHS, certain congressional committees, and the Comptroller General of the United States on the adequacy and effectiveness of their information security policies, procedures, and practices, as well as their compliance with FISMA. The Federal Cybersecurity Enhancement Act of 2015, among other things, sets forth authority for enhancing federal intrusion prevention and detection capabilities among federal entities. The act contains several provisions for DHS and OMB. Specifically, the act requires that DHS deploy, operate, and maintain capabilities to prevent and detect cybersecurity risks in network traffic traveling to or from an agency’s information system. DHS is to make these capabilities available for use by any agency. In addition, the act requires DHS to improve intrusion detection and prevention capabilities, as appropriate, by regularly deploying new technologies and modifying existing technologies. The act also requires OMB and DHS, in consultation with appropriate agencies, to review and update government-wide policies and programs to ensure appropriate prioritization and use of network security monitoring tools within agency networks, and to brief appropriate congressional committees. In May 2017, the President signed Executive Order 13800, which sets policy for managing cybersecurity risk as an executive branch enterprise. Specifically, it outlines actions to enhance cybersecurity across federal agencies and critical infrastructure to improve the nation’s cyber posture and capabilities against cybersecurity threats. To this end, the order states that the President will hold executive agency heads accountable for managing agency-wide cybersecurity risk and directs each executive agency to use the NIST cybersecurity framework to manage those risks. The cybersecurity framework, which provides guidance for cybersecurity activities, is based on five core security functions: Identify: Develop an organizational understanding to manage cybersecurity risk to systems, people, assets, data, and capabilities. Protect: Develop and implement appropriate safeguards to ensure delivery of critical services. Detect: Develop and implement appropriate activities to identify the occurrence of a cybersecurity event. Respond: Develop and implement appropriate activities to take action regarding a detected cybersecurity incident. Recover: Develop and implement appropriate activities to maintain plans for resilience and to restore capabilities or services that were impaired due to a cybersecurity incident. According to NIST, these five functions should be performed concurrently and continuously to address cybersecurity risk. In addition, when considered together, they provide a high-level, strategic view of the life cycle of an organization’s management of cybersecurity risk. Within the five functions are 23 categories and 108 subcategories that include controls for achieving the intent of each function. Appendix II provides a description of the cybersecurity framework categories and subcategories of controls. In February 2013, we reported that the government had issued a variety of strategy-related documents that addressed priorities for enhancing cybersecurity within the federal government, as well as for encouraging improvements in the cybersecurity of critical infrastructure within the private sector. However, we noted that no overarching cybersecurity strategy had been developed that articulated priority actions, assigned responsibilities for performing them, and set time frames for their completion. Accordingly, we recommended that the White House Cybersecurity Coordinator in the Executive Office of the President develop an overarching federal cybersecurity strategy that included all key elements of the desirable characteristics of a national strategy. These characteristics would include, among other things, milestones and performance measures for major activities to address stated priorities; cost and resources needed to accomplish stated priorities; and specific roles and responsibilities of federal organizations related to the strategy’s stated priorities. Since that time, the executive branch has made progress toward outlining a federal strategy for confronting cyber threats. For example, in September 2018, we reported that recent executive branch initiatives that identify cybersecurity priorities for the federal government provide a good foundation toward establishing a more comprehensive strategy. Nevertheless, we pointed out that additional efforts were needed to address all of the desirable characteristics of a national strategy that we recommended. Specifically, recently issued executive branch strategy documents did not include key elements of desirable characteristics that can enhance the usefulness of a national strategy as guidance for decision makers in allocating resources, defining policies, and helping to ensure accountability. For example, these strategy documents did not generally include: milestones and performance measures to gauge results; resources needed to carry out the goals and objectives; and clearly defined roles and responsibilities for key agencies, such as DHS, the Department of Defense, and OMB. Ultimately, we determined that a more clearly defined, coordinated, and comprehensive approach to planning and executing an overall strategy would likely lead to significant progress in furthering strategic goals and lessening persistent weaknesses. Subsequent to our September 2018 report, the President issued the National Cyber Strategy on September 20, 2018. The strategy builds upon Executive Order 13800 and describes actions that federal agencies and the administration are to take to, among other things, secure federal information systems. For example, the strategy states that the administration is expected to further enable DHS to secure federal department and agency networks, to include ensuring that DHS has appropriate access to agency information systems for cybersecurity purposes and can take and direct action to safeguard systems. In addition, the strategy states that the administration plans to continue with its existing efforts underway to transition agencies to shared services and infrastructure and that DHS is to have appropriate visibility into those services and infrastructure to improve cybersecurity posture. DHS’s Network Security Deployment (NSD) division manages cybersecurity programs that are intended to improve the cybersecurity posture of the federal government. Among these programs, NCPS provides a capability to detect and prevent potentially malicious network traffic from entering agencies’ networks. In addition, the Continuous Diagnostics and Mitigation (CDM) program provides tools to agencies intended to identify and resolve cyber vulnerabilities on an ongoing basis. Operated by DHS’s US-CERT, NCPS is intended to detect and prevent cyber intrusions into agency networks, analyze network data for trends and anomalous data, and share information with agencies on cyber threats and incidents. Deployed in stages, this system, operationally known as EINSTEIN, has provided increasing capabilities to detect and prevent potential cyberattacks involving the network traffic entering or exiting the networks of participating federal agencies. Table 1 provides an overview of the EINSTEIN deployment stages to date. In January 2016, we reported the projected total life-cycle cost of the program was approximately $5.7 billion through fiscal year 2018. In addition, according to the Federal CIO, Congress appropriated $468 million in fiscal year 2017 and $402 million in fiscal year 2018 for NCPS. In that report, we also noted that NCPS was partially, but not fully, meeting most of its stated system objectives. Although the system’s intrusion detection capabilities provided the ability to detect known patterns of malicious activity on agency networks, it was limited in its capabilities to identify potential threats using anomaly-based detection. We also reported that although DHS had developed metrics for measuring the performance of NCPS, the metrics did not gauge the quality, accuracy, or effectiveness of the system’s intrusion detection and prevention capabilities. The department had also identified needs for future capabilities, but had not defined requirements for the capability to detect threats entering and exiting cloud service providers. Further, DHS had not considered specific vulnerability information for agency information systems in making risk- based decisions about future intrusion prevention capabilities. Accordingly, we made nine recommendations to DHS to, among other things, enhance the NCPS capabilities for meeting its objectives and better define requirements for future capabilities. DHS agreed with each of our nine recommendations and indicated that it would take steps to address them. DHS’s CDM program provides federal agencies with tools and services that have the intended capability to automate network monitoring, correlate and analyze security-related information, and enhance risk- based decision making at agency and government-wide levels. These tools include sensors that perform automated scans or searches for known cyber vulnerabilities, the results of which can feed into a dashboard that, at an agency level, is intended to alert network managers and enable the agency to allocate resources based on the risk. Summary data from each participating agency’s dashboard is expected to be transmitted to the Federal Dashboard where the data can be used to inform decisions about cybersecurity risks across the federal government. There are four phases of CDM implementation: Phase 1—involves deploying products to automate hardware and software asset management, configuration settings, and common vulnerability management capabilities. According to the Cybersecurity Strategy and Implementation Plan, DHS purchased phase 1 tools and integration services for all participating agencies in fiscal year 2015. DHS plans to have all phase 1 tools deployed at participating agencies by the end of the second quarter of fiscal year 2019. Phase 2—intends to address privilege management and infrastructure integrity by allowing agencies to monitor users on their networks and to detect whether users are engaging in unauthorized activity. According to the Cybersecurity Strategy and Implementation Plan, DHS was to provide agencies with additional phase 2 capabilities throughout fiscal year 2016, with the full suite of CDM phase 2 capabilities delivered by the end of that fiscal year. However, according to the OMB FISMA Annual Report to Congress for Fiscal Year 2017, the CDM program began deploying Phase 2 tools and sensors during fiscal year 2017. DHS plans to have all phase 2 tools deployed at participating agencies by the end of fiscal year 2019. Phase 3—includes detection capabilities that are intended to assess agency network activity and identify any anomalies that may indicate a cybersecurity compromise. Full operating capability for phases 1, 2, and 3 is planned to be achieved by the end of fiscal year 2022. Phase 4—intends to provide tools to (1) protect data at rest, in transit, and in use; (2) prevent loss of data; and (3) manage and mitigate data breaches. According to CDM program officials, phase 4 has not been approved and no tools have been selected. An approach for protecting systems against cybersecurity compromise is for federal agencies to build successive layers of defense mechanisms at strategic points in their information technology infrastructures. This approach, commonly referred to as defense in depth, entails implementing a series of protective mechanisms so that if one mechanism fails to detect and prevent an attack, another will provide a backup defense. By utilizing defense in depth, federal agencies can reduce the risk of a successful cyberattack by implementing intrusion detection and prevention capabilities. NIST has developed guidelines for protecting agency information systems using intrusion detection and prevention capabilities. For example, NIST SP 800-53 recommends that agencies strategically deploy capabilities and perform monitoring of their systems to include observation of events occurring on their network and at the external boundary of their network. In addition, NIST SP 800-94 provides agencies with guidance in designing, implementing, configuring, securing, monitoring, and maintaining such capabilities. As part of their defense-in-depth approach and, as recommended by the NIST guidelines, agencies can deploy the following list of capabilities, among others, on their networks to detect and prevent an attack: Protecting email from intrusions: According to OMB, email, by way of phishing attacks, remains one of the most common threat vectors across the government. Methods for protecting email include encryption, false email alerts, and anti-spear-phishing training. Monitoring cloud services: Cloud vendors provide services to agencies, including Software as a Service, Platform as a Service, and Infrastructure as a Service. As agencies increasingly rely on cloud services, monitoring traffic to and from their cloud service providers helps to ensure that agencies detect malicious traffic. Using host-based intrusion prevention: Host-based intrusion prevention systems provide defense at an individual system or device level by protecting against malicious activities. Host-based capabilities include memory-based protection and application whitelisting. Monitoring external and internal traffic: Agencies can monitor external and internal traffic, including: encrypted traffic, traffic between workstations and servers on the network, and direct connections to outside entities such as universities. Monitoring traffic helps to ensure that agencies detect malicious activity. Using security information and event management: A security information and event management capability produces real-time alerts and notifications of significant security events. Security alerts and notifications can provide the agency with better situational awareness regarding possible intrusion activity. According to inspectors general, agency CIOs, and OMB reports on federal information security practices, many agencies were not effectively implementing the federal government’s approach and strategy to securing information systems as of fiscal year 2017. Agencies’ inspectors general determined that most of the 23 civilian CFO Act agencies did not have effective agency-wide information security programs. They also reported that agencies did not have effective information security controls in place, leading to deficiencies in internal control over financial reporting. In addition, the CIOs demonstrated that, during fiscal years 2016 and 2017, most agencies had not met all targets for the cybersecurity CAP goal for improving cybersecurity performance. Further, based on FISMA metrics reported for fiscal year 2017, OMB determined that 13 of the 23 agencies were managing risks to their enterprise, while the other 10 agencies were at risk of ineffectively identifying, protecting, detecting, responding to, and if necessary, recovering from cyber intrusions. Figure 2 summarizes agencies’ efforts to implement the government’s approach and strategy for securing information systems as of fiscal year 2017. Appendix III includes a table that provides an additional overview of the effectiveness of each agency’s implementation of the government’s approach and strategy to securing information systems. Inspectors general determined that more than half of the 23 civilian CFO Act agencies did not have effective agency-wide information security programs as of fiscal year 2017. Further, in agency financial statement audit reports for fiscal year 2017, inspectors general reported that, despite improvements being made in information security practices, most of the civilian CFO Act agencies continued to exhibit deficiencies in information security controls. As a result of these deficiencies, inspectors general reported material weaknesses or significant deficiencies in internal control over financial reporting. FISMA requires inspectors general to determine the effectiveness of their respective agencies’ information security programs. To do so, FISMA reporting instructions direct inspectors general to provide a maturity rating for agency information security policies, procedures, and practices related to the five core security functions established in the NIST cybersecurity framework, as well as for the agency-wide information security program. The ratings used to evaluate the effectiveness of agencies’ information security programs are based on a five-level maturity model, as described in table 2. According to this maturity model, Level 4 (managed and measurable) represents an effective level of security. Therefore, if an inspector general rates the agency’s information security program at Level 4 or Level 5, then that agency is considered to have an effective information security program. For fiscal year 2017, the inspectors general for 6 of the 23 civilian CFO Act agencies reported that their agencies had an effective agency-wide information security program. More specifically, for the 5 core security functions, most inspectors general reported that their agency was at Level 3 (consistently implemented) for the identify, protect, and recover functions, and at Level 2 (defined) for the detect and respond functions, as shown in figure 3. Inspectors general report on the effectiveness of agencies’ information security controls as part of the annual audits of the agencies’ financial statements. The reports resulting from these audits include a description of information security control deficiencies related to the five major control categories defined by the Federal Information System Controls Audit Manual (FISCAM)—access controls, configuration management, segregation of duties, contingency planning, and security management. The reports also identify the inspectors general’s designation of information security as a significant deficiency or material weakness in internal control over financial reporting systems. For fiscal year 2017, inspectors general continued to identify information security control deficiencies in each of the five major control categories across the 23 civilian CFO Act agencies. The number of agencies with deficiencies in the access control and contingency planning information security control categories decreased between fiscal years 2016 and 2017, according to the inspectors general. Nevertheless, the inspectors general reported that agencies continued to exhibit deficiencies in these two control categories. In addition, the number of agencies with deficiencies in the security management and segregation of duties control categories increased from the prior year. The number of agencies reported as having deficiencies in the configuration management control category remained the same. Figure 4 shows the number of agencies that reported deficiencies in each of the information security control categories for fiscal years 2016 and 2017. Overall, inspectors general for the 23 civilian CFO Act agencies reported progress in agencies’ information security practices for fiscal year 2017. Specifically, during that time, 17 inspectors general designated information security as either a significant deficiency (11) or material weakness (6) in internal control over financial reporting systems for their agencies. This is a decrease from the previous fiscal year when 19 inspectors general designated information security as a significant deficiency (12) or material weakness (7). Reporting instructions contained in the fiscal year 2017 FISMA metrics directed CIOs to assess their agencies’ progress toward achieving outcomes that strengthen federal cybersecurity. To do this, CIOs evaluated their agencies’ performance in reaching targets for specific FISMA reporting metrics. According to the reporting instructions, certain metrics were selected to represent the administration’s cybersecurity CAP goal. These selected metrics allowed CIOs to evaluate their agencies progress in meeting targets for that goal. The cybersecurity CAP goal for fiscal years 2015 through 2017 was to improve cybersecurity performance by having an ongoing awareness of information security, vulnerabilities, and threats impacting the operating information environment; ensuring that only authorized users have access to resources and information; and implementing technologies and processes that reduce the risk of malware. The cybersecurity CAP goal consisted of three priority areas with a total of nine performance indicators. Each of the nine performance indicators had an expected level of performance, or target, for implementation. Table 3 shows the three priority areas and related performance indicators and targets of the cybersecurity CAP goal for fiscal years 2015 through 2017. According to agency CIO assessments for fiscal year 2017, 6 of the 23 agencies met all 9 targets for the cybersecurity CAP goal. More specifically, 8 agencies met all four targets for the information security continuous 16 agencies met the two targets for the identity, credential, and access management priority area; and 17 agencies met all three targets for the anti-phishing and malware defense priority area. In addition, CIOs reported that agencies were making progress in meeting the targets for the nine performance indicators for fiscal years 2016 and 2017, with increases in the number of agencies meeting the targets within each of the three priority areas. However, although the number of agencies that met the targets in individual priority areas showed a net increase, not all agencies maintained their status. For example, the CIO for one agency reported meeting all three targets for the anti-phishing and malware defense priority area in fiscal year 2016, but reported that the agency only met two of the three targets in fiscal year 2017. Figure 5 shows the number of agencies that reported meeting each of the targets within the individual cybersecurity CAP goal priority areas for fiscal years 2016 and 2017. Although the CIOs for only six agencies reported meeting each of the targets associated with all nine performance indicators for the three cybersecurity CAP goal priority areas, the CIOs at an additional eight agencies reported meeting each target for two of the three priority areas. Specifically, one CIO reported that its agency met each of the targets for the (1) information security continuous monitoring and (2) identity, credential, and access management priority areas; another CIO reported that its agency met each of the targets for the (1) information security continuous monitoring and (2) anti-phishing and malware defense priority areas; and the CIOs at six other agencies met each of the targets for the (1) identity, credential, and access management and (2) anti-phishing and malware defense priority areas. In fiscal year 2018, the President’s Management Agenda replaced the three cybersecurity-focused CAP goal priority areas with updated performance indicators, most of which are to be met by 2020: 1. the manage asset security priority area is similar to the information security continuous monitoring priority area from the previous CAP goal and has a focus on understanding the assets and users on agency networks. In addition to hardware asset and software asset management, this priority area includes performance indicators for authorization and mobile device management. 2. the limit personnel access priority area focuses on issues of access management. This area includes performance indicators for using automated access management and managing access for privileged network and high-impact system users. The privileged network access management performance indicator is a continuation of the identity, credential, and access management priority area of the previous cybersecurity CAP goal. Therefore, agencies are expected to complete this metric by the end of the fiscal year 2018 FISMA reporting year. 3. the protect networks and data priority area, which is similar to the anti-phishing and malware defense priority area from the previous cybersecurity CAP goal, has three new performance indicators: intrusion detection and prevention, exfiltration and enhanced defenses, and data protection. Appendix IV describes the updated cybersecurity-focused CAP priority areas and performance indicators in more detail. In Executive Order 13800, the President directed OMB, in coordination with DHS, to assess and report to the executive branch on the sufficiency and appropriateness of federal agencies’ processes for managing cybersecurity risks. For these risk management assessments, OMB leveraged the FISMA metrics reported by agency CIOs and inspectors general for fiscal year 2017. The metrics addressed domains that correspond with the five core security functions identified in the cybersecurity framework. Table 4 lists these domains and their relationship to the core functions. Based on OMB’s evaluation of these domains, agency risk management processes related to the five core security functions and overall agency enterprise fell into one of the following three rating categories: managing risk: required cybersecurity policies, procedures, and tools are in use and the agency actively manages cybersecurity risks; at risk: some essential policies, processes, and tools are in place to mitigate overall cybersecurity risk, but significant gaps remain; and high risk: key fundamental cybersecurity policies, processes, and tools are either not in place or not deployed sufficiently. For fiscal year 2017, OMB reported that not all agencies were managing risk. When considering each of the five core security functions, OMB reported that most of the 23 agencies were at risk or at high risk with regard to the identify and protect core security functions. Less than half of the 23 agencies were at risk with regard to the detect, respond, and recover core security functions. Overall, OMB determined that 13 agencies were managing risk and that the remaining 10 agencies were at risk of not effectively identifying, protecting, detecting, responding to, and if necessary, recovering from cyber intrusions. Figure 6 shows OMB’s risk management assessment ratings by core security function across the 23 agencies for fiscal year 2017. DHS and OMB, as required by law and policy, have taken various actions to facilitate the agencies’ use of intrusion detection and prevention capabilities to secure federal systems. For example, DHS has developed an intrusion assessment plan, deployed NCPS to offer intrusion detection and prevention capabilities to agencies, and is providing tools and services to agencies to monitor their networks through its CDM program. However, NCPS still had limitations in detecting certain types of traffic and agencies were not sending all appropriate traffic through the system. Further, CDM was behind at meeting planned implementation dates, and agencies have requested additional training and guidance for these services. OMB has taken steps to improve upon agencies’ capabilities, but has not completed a policy and strategy to do so, or fully reported on its assessment of agencies’ capabilities. The Federal Cybersecurity Enhancement Act of 2015 requires DHS, in coordination with OMB, to develop and implement an intrusion assessment plan to proactively detect, identify, and remove intruders in agency information systems on a routine basis. The act also requires that the plan be updated, as necessary. In December 2016, DHS documented its Intrusion Assessment Plan. In the plan, DHS outlined tools, platforms, resources, and ongoing work that the department provides, and that are intended to help agencies detect, identify, and remove intruders on their networks and systems. The intrusion assessment plan also outlines a defense-in-depth strategy, which utilizes multiple layers of cybersecurity and deploys multiple capabilities in combination, to secure agencies’ networks and information systems. For example, the plan calls for DHS to implement NCPS to provide a perimeter defense for the networks of federal civilian executive branch agencies, while the agencies are to deploy their own intrusion detection and prevention capabilities inside their networks. DHS submitted its intrusion assessment plan to OMB in January 2017. The Federal Cybersecurity Enhancement Act of 2015 also requires DHS to deploy, operate, and maintain a capability to detect cybersecurity risks and prevent network traffic associated with such risks from transiting to or from an agency information system. In addition, the act requires that DHS make regular improvements to intrusion detection and prevention capabilities by deploying new technologies and modifying existing technologies. Further, the act requires agencies to use this capability on all information traveling between their information systems and any information system other than an agency information system. DHS developed NCPS, operationally known as EINSTEIN, to provide the capabilities to detect and prevent potentially malicious network traffic from entering agency networks. Consistent with recommendations we made to DHS in January 2016, DHS has taken actions to improve these capabilities and has other actions underway. For example, the department determined that enhancing NCPS’s current intrusion detection approach to include functionality that would detect deviations from normal network behavior baselines would be feasible. In addition, according to DHS officials, the department was operationalizing functionality intended to identify malicious activity in network traffic otherwise missed by signature-based methods. determined that developing enhancements to current intrusion detection capabilities to facilitate the scanning of Internet Protocol Version 6 (IPv6) traffic would be feasible. According to DHS officials, the department has developed plans to fully support IPv6 for several of its NCPS intrusion detection capabilities. Further, the department has developed implementation schedules and begun roll-out of the enhancements. updated the tool it uses to manage and deploy intrusion detection signatures to include a mechanism to clearly link signatures to publicly available, open-source information. developed clearly defined requirements for detecting threats on agency internal networks and at cloud service providers to help better ensure effective support of information security activities. According to DHS officials, the department was also continuing pilot activities with cloud service providers to enhance protections of agency assets. developed processes and procedures for using vulnerability information, such as data from the CDM program as it becomes available, to help ensure the department is using a risk-based approach for the selection/development of future NCPS intrusion prevention capabilities. Nevertheless, NCPS continues to have known limitations in its ability to identify potential threats. For example: NCPS does not have the ability to effectively detect intrusions across multiple types of traffic. Specifically, DHS determined that developing enhancements to current intrusion detection capabilities to facilitate the scanning of traffic related to supervisory control and data acquisition (SCADA) control systems would not be feasible. However, according to DHS officials, the department is exploring capabilities that are intended to provide critical, cross-sector, real-time visibility into critical infrastructure companies that utilize SCADA systems. In addition, DHS determined that the scanning of encrypted traffic would not be feasible. Nevertheless, according to its officials, the department performed research on potential architectural, technical, and policy mitigation strategies that could provide both the protection and situational awareness for encrypted traffic. The department has actions under way to continue its research in this area. DHS does not always explicitly ask agencies for feedback or confirmation of receipt of NCPS-related notification. While the department had drafted a standard operating procedure related to its incident notification process, the policy did not instruct DHS analysts specifically to include a solicitation of feedback from agencies within the notification. Further, US-CERT could not provide any information regarding the timetable for when these procedures would take effect. Metrics for NCPS, as provided by DHS, do not provide information about how well the system is enhancing government information security or the quality, efficiency and accuracy of supporting actions. Without the deployment of comprehensive measures, DHS cannot appropriately articulate the value provided by NCPS. While the department had taken actions to develop new measures, these measures did not provide a qualitative or quantitative assessment of the system’s ability to fulfill the system’s objectives. NSD did not provide guidance to agencies on how to securely route their information to their Internet service providers. Without providing network routing guidance, NSD has no assurance that the traffic it sees constitutes all or only a subset of the traffic the customer agencies intend to send. As shown in table 5, as of October 2018, the department had implemented five of the nine recommendations and was in the process of implementing the remainder. However, until DHS completes implementation of the remaining recommendations, the effectiveness of NCPS’s intrusion detection and prevention capabilities may be hindered. In addition, the 23 civilian CFO Act agencies had implemented NCPS capabilities to varying degrees. In a March 2018 report, OMB reported that 21 (about 91 percent) of the 23 agencies had implemented the first two iterations of the NCPS capabilities. In addition, 15 (about 65 percent) of the 23 agencies had implemented all three NCPS capabilities, as shown in table 6 below. However, agencies did not route all network traffic for all information traveling between their information systems and any information system other than an agency information system through NCPS sensors. For example, officials at 13 of 23 agencies stated that not all of their agency external network traffic flowed through NCPS. To illustrate, officials at one agency estimated that 20 percent of their external network traffic did not flow through the system. In addition, 4 of the agencies in our review previously cited several challenges in routing all of their traffic through NCPS intrusion detection sensors, including capacity limitations of the sensors, agreements with external business partners that use direct network connections, interagency network connections that do not route through Internet gateways, use of encrypted communications mechanisms, and backup network circuits that are not used regularly. NSD officials stated that agencies are responsible for routing their traffic to the intrusion detection sensors, and DHS does not have a role in that aspect of NCPS implementation. As a result, potential cyberattacks may not be detected or prevented for a portion of the external traffic at federal agencies. As noted above, we previously recommended that DHS work with agencies to better ensure the complete routing of information to NCPS sensors. The Federal Cybersecurity Enhancement Act of 2015 requires DHS to include, in the efforts of the department to continuously diagnose and mitigate cybersecurity risks, advanced network security tools to improve the visibility of network activity and to detect and mitigate intrusions and anomalous activity. According to DHS officials, the department is addressing the requirement to improve the visibility of network activity by including advanced network security tools as a part of CDM phase 3. In April 2018, we testified that DHS had previously planned to provide 97 percent of federal agencies with the services they needed for CDM phase 3 in fiscal year 2017. In addition, according to OMB’s annual FISMA report for fiscal year 2017, the CDM program was to continue to incorporate additional capabilities, including phase 3, in fiscal year 2018. However, DHS now expects initial operational capabilities to be in place for phase 3 in fiscal year 2019. The department has awarded contracts of approximately $3.26 billion to support its Dynamic and Evolving Federal Enterprise Network Defense (also known as DEFEND) aspect of the CDM program, which is to include phase 3. DEFEND also is to provide coverage for existing agency deployments. According to DHS documentation, the task orders associated with DEFEND are to be issued between the second quarter of fiscal year 2018 and the second quarter of fiscal year 2024. FISMA requires that DHS provide operational and technical assistance to agencies in implementing policies, principles, standards, and guidelines on information security. Toward this end, DHS has available training and guidance related to the implementation of the capabilities of NCPS (i.e., EINSTEIN) and CDM. Specifically: According the DHS officials, the department offers training and guidance to agencies on EINSTEIN 1 implementation. For example, DHS established a program in which the Software Engineering Institute will provide training and mentoring to agencies looking to enhance their understanding of, and proficiency with, the EINSTEIN 1 capability (e.g., network traffic information). NCPS program officials stated that agencies can use this service, which is available at no charge to them, on an unlimited basis as long as the requests relate to EINSTEIN 1. According to the officials, training and guidance related to EINSTEIN 2 and EINSTEIN 3 Accelerated is limited because DHS intentionally restricts the amount of data provided to agencies. According to DHS officials, the department also offers training and guidance to assist agencies with the implementation and use of resources associated with the CDM program, including webinars, guides, and computer-based training. The DEFEND contracts that the department awarded also include a mechanism for agencies to procure specialized tailored training, such as on the use of CDM tools. The department also offers customer advisory forums every other month that agencies are invited to attend. According to CDM program officials, the program’s governance, among other topics, is commonly discussed during these forums. Further, the department provides agencies with guidance, such as various governance documents, best practices, and frequently asked questions, through a web portal that is made available by OMB. In addition, US-CERT offers the CDM training program, which is to provide CDM implementation resources. Nevertheless, most agencies told us that they wanted DHS to provide more training and guidance as it relates to their implementation of the capabilities made available by NCPS and CDM. Specifically, Officials from 16 of 23 agencies reported that they wanted to receive additional training on NCPS capabilities. For example, officials at 5 agencies stated that they would like to receive training related to using network traffic information, understanding alerts, or implementing capabilities for cloud services. The officials also stated that they wanted training specific to agency security personnel. Officials from 19 of 23 agencies stated that they wanted to receive additional guidance related to NCPS’s capabilities, but not all of the 19 provided specific details. For example, officials from at least 3 agencies stated that they wanted additional guidance such as, “how to” documents, descriptions of architecture details, or guidance documents that explain NCPS’s capabilities so that agencies can gauge the gap between the security that the system provides and the security being provided by their own agency’s capabilities. Officials from 21 of 23 agencies reported that they wanted to receive additional training on implementing CDM at their agencies. For example, officials from 7 agencies suggested that additional training on the use of the tools would be beneficial. Officials from 22 of 23 agencies stated that they wanted additional guidance as it relates to CDM implementation. For example, officials from one agency stated that they would like examples of best practices and successful deployments. These requests for additional training and guidance demonstrate that agencies are either unaware of the available training and guidance, or that the training may not meet their needs. Until DHS coordinates with agencies to determine if additional training and guidance are needed, agencies may not be able to fully realize the benefits of the capabilities provided by the NCPS and CDM programs. Although OMB took steps to report on agencies’ implementation of intrusion detection and prevention capabilities, it did not report on all required actions. For example, the office did not submit DHS’s intrusion plan to Congress as required by the Federal Cybersecurity Enhancement Act of 2015. In addition, OMB provided various reports to Congress that described agencies’ intrusion detection and prevention capabilities, but the reports did not always include all information required by the act. Further, OMB developed a draft policy and strategy that were intended to improve agency capabilities, but it had not finalized these documents. The Federal Cybersecurity Enhancement Act of 2015 requires OMB to submit the intrusion assessment plan developed by DHS to the appropriate congressional committees no later than 6 months after the date of enactment of the act. The act also required OMB to submit to Congress a description of the implementation of the intrusion assessment plan and the findings of the intrusion assessments conducted pursuant to the intrusion assessment plan no later than 1 year after the date of enactment of the act, and annually thereafter. Although DHS developed and documented an intrusion assessment plan, which described a defense-in-depth approach to security, OMB did not submit the plan to Congress, as called for in the act. Even though DHS submitted the plan to OMB in January 2017, OMB had not submitted it to Congress as of October 2018 (21 months after DHS submitted the plan and 28 months past the due date). On the other hand, OMB did submit its own reports to Congress which generally described elements of the implementation of DHS’s intrusion assessment plan and intrusion assessment findings. In September 2017, OMB issued its analysis of agencies’ implementation of intrusion detection and prevention capabilities, or more specifically, agencies’ implementation of the various versions of NCPS. In addition, the office’s annual FISMA report, issued most recently in March 2018, generally covered elements of the intrusion assessment plan. OMB personnel within the Office of the Federal CIO believed that these two reports, along with a process the office had initiated to validate incidents across the government, addressed the requirement for OMB to submit to Congress a description of the implementation of the intrusion assessment plan and the findings of the intrusion assessments conducted pursuant to the plan. However, the September 2017 and March 2018 reports did not address other elements described in DHS’s intrusion assessment plan. For example, OMB did not describe agency roles associated with segmenting their networks, identifying key servers based on threat and impact, ensuring all applications are appropriately tracked and configured, and categorizing and tagging data based on threat and impact. While OMB has provided important information to congressional stakeholders through its own reports, until it submits the plan and addresses all elements described in DHS’s intrusion assessment plan, it will continue to be remiss in providing timely and sufficiently detailed information regarding the intrusion assessment plan to congressional stakeholders to support their oversight responsibilities. The Federal Cybersecurity Enhancement Act of 2015 also required that OMB submit an analysis of agencies’ application of the intrusion detection and prevention capabilities to Congress no later than 18 months after the date of enactment of the act, and annually thereafter. OMB was to include a list of federal agencies and the degree to which each agency had applied the intrusion detection and prevention capabilities in this analysis. As discussed previously in this report, OMB issued its analysis of agencies’ implementation of intrusion detection and prevention capabilities in September 2017. However, the analysis did not include the degree to which agencies had applied the intrusion detection and prevention capabilities. For example, the analysis did not reflect that not all agencies were using this capability on all information traveling between their systems and any system other than an agency system, as required by the act. Until OMB includes the degree to which agencies have applied intrusion detection and prevention capabilities in its analysis, it cannot provide congressional stakeholders with an accurate portrayal of the extent to which the capabilities are detecting and preventing potential intrusions. The Federal Cybersecurity Enhancement Act of 2015 further required that the Federal Chief Information Officer, within OMB, submit a report to Congress no earlier than 18 months after the date of enactment, but no later than 2 years after that date, assessing the intrusion detection and intrusion prevention capabilities that DHS made available to agencies. The act required that the report address (1) the effectiveness of DHS’s system used for detecting, disrupting, and preventing cyber-threat actors, including advanced persistent threats, from accessing agency information and agency information systems; (2) whether the intrusion detection and prevention capabilities, continuous diagnostics and mitigation, and other systems deployed are effective in securing federal information systems; (3) the costs and benefits of the intrusion detection and prevention capabilities, including as compared to commercial technologies and tools, and including the value of classified cyber threat indicators; and (4) the capability of agencies to protect sensitive cyber threat indicators and defensive measures if they were shared through unclassified mechanisms for use in commercial technologies and tools. In a report issued in September 2018 (about 8 months past the required due date), the Federal Chief Information Officer provided Congress an assessment of intrusion detection and intrusion prevention capabilities across the federal enterprise. The report pointed out, among other things, that agencies did not possess or properly deploy capabilities to detect or prevent intrusions or minimize the impact of intrusions when they occur. In addition, the report acknowledged the need to improve the effectiveness of intrusion detection and intrusion prevention capabilities and stated that OMB would track performance through the CAP goal and annual FISMA reports. However, the report did not address all of the requirements specified in the act. For example, the report did not address whether DHS’s system (i.e., NCPS) was effective in detecting advanced persistent threats. In addition, the report did not include a comparison of the costs and benefits of the intrusion detection and prevention capabilities versus commercial technologies and tools, or the value of classified cyber threat indicators. Further, the report did not address the capability of agencies to protect sensitive cyber threat indicators and defensive measures. Until OMB updates the Federal CIO report to address all of the requirements specified in the act, it will continue to be remiss in providing timely and sufficiently detailed information, such as that related to costs and benefits, among other elements in the act, to congressional stakeholders to support their oversight responsibilities. In addition to OMB’s responsibilities in the Federal Cybersecurity Enhancement Act of 2015, OMB has initiated plans for further improving agencies’ intrusion detection and prevention capabilities. In response to a tasking in Executive Order 13800, the Director of the American Technology Council coordinated the development of a report to the President from the Secretary of DHS, the Director of OMB, and the Administrator of the General Services Administration, regarding the modernization of federal information technology (IT). The report, Report to the President on Federal IT Modernization, identified actions that OMB should take for (1) prioritizing the modernization of high-risk, high-value assets and (2) modernizing the Trusted Internet Connection (TIC) program and NCPS to improve protections, remove barriers, and enable commercial cloud migration. For example, OMB was to take the following actions subsequent to the December 13, 2017 report issuance date: Within 60 days: Update a TIC policy to address challenges with agencies’ perimeter-based architectures, such as the modernization of NCPS. In addition, introduce a “90 day sprint” during which approved projects would pilot proposed changes in TIC requirements. Within 90 days: Update the annual FISMA and CAP goal metrics to focus on those critical capabilities that were most commonly lacking among agencies and focus oversight assessments on high-value assets. Within 120 days: In conjunction with DHS, develop a strategy for optimally realigning resources across agencies to reduce the risk to high-value assets and respond to cybersecurity incidents for those assets. OMB has taken steps toward implementing several, but not all, of these actions. For example, it introduced a “90 day sprint” and, according to knowledgeable OMB staff, the outcomes of this action are directly informing changes in TIC requirements. In addition, OMB updated the annual FISMA and CAP goal metrics by including several metrics that focus on high-value assets. The updated FISMA and CAP goal metrics went into effect in April 2018. However, while OMB had taken steps toward updating the TIC policy and developing a strategy for optimally realigning resources, the policy and strategy were in draft and had not yet been finalized as of October 2018. The agency did not specify a time frame for finalizing the policy and strategy. Until OMB finalizes the TIC policy and the strategy for optimally realigning resources, the enhancements offered through the policy and strategy are unlikely to be realized. FISMA requires agencies to provide information security protections to prevent unauthorized access to their systems and information. Officials from the 23 selected agencies reported to us that they generally took steps to meet this requirement by augmenting the tools and services provided by DHS with their own intrusion detection and prevention capabilities. However, agencies did not consistently implement five key capabilities specified by DHS and NIST guidance. In addition, most of the agencies did not fully implement any of the phases of DHS’s CDM program that is intended to improve their capabilities to detect and prevent intrusions. Binding Operational Directive (BOD) 18-01 instructs agencies to enhance email security. These enhancements include enabling encrypted email transmission, ensuring that receiving mail servers know what actions the agency would like taken when an email falsely claims to have originated from the agency, and removing certain insecure protocols, among others. The final deadline for implementing all BOD 18-01 requirements was October 16, 2018. Additionally, NIST SP 800-53 Revision 4 recommends that security awareness training include training on how to recognize and prevent spear-phishing attempts. As of September 2018, only 2 of the 23 agencies reported implementing all of the email requirements. For the remaining 21 agencies: 9 agencies stated that their agency had plans to implement all enhancements by the October 2018 deadline, 1 agency was uncertain whether it would meet the deadline, and 11 stated they would not be able to meet the deadline. By contrast, the majority of agencies (22 of 23) reported that they had trained staff on spear-phishing exercises, as recommended by NIST SP 800-53 Revision 4. Officials at the remaining agency told us that the agency planned to have spear-phishing exercises in fiscal year 2019. Such training should help ensure that phishing will be a less effective attack vector against the majority of agencies. While agencies benefit from secure protocols and spear-phishing training, implementing the remaining BOD 18-01 email requirements would provide additional protection to agency information systems. NIST recommends that federal agencies deploy intrusion detection and prevention capabilities. These capabilities include monitoring cloud services, using host-based intrusion prevention systems, monitoring external and internal network traffic, and using a security information and event management (SIEM) system. However, in our semi-structured interviews of the 23 agencies, officials told us that they often had not implemented many of these capabilities. Such inconsistent implementation exposes federal systems and the information they contain to additional risk. As part of their continuing oversight efforts, OMB and DHS can use the information below to work with agencies to identify obstacles and impediments affecting the agencies’ abilities to implement these capabilities. NIST SP 800-53 Revision 4 states that agencies should monitor and control communications at the external boundary of the network. However, as of June 2018, fewer than half of the agencies that used cloud computing services were monitoring cloud traffic. Specifically: 10 of 22 agencies that used Infrastructure as a Service were monitoring inbound and outbound Infrastructure as a Service traffic, 7 of 21 agencies that used Platform as a Service were monitoring inbound and outbound Platform as a Service traffic, and 10 of 23 agencies that used Software as a Service were monitoring inbound and outbound Software as a Service traffic. Without monitoring traffic to and from cloud service providers, agencies risk a greater chance of malicious cloud activity detrimentally affecting agency information security. NIST SP 800-53 Revision 4 states that agency internal monitoring may be achieved by utilizing intrusion prevention capabilities. These capabilities include using host-based intrusion prevention systems to provide defense at an individual system or device level by protecting against malicious activities. Host-based capabilities include memory-based protection and application whitelisting. As of June 2018, officials at the 23 agencies reported the following to us: 16 agencies used host-based intrusion prevention capabilities, 15 agencies used memory-based protection, and 8 agencies used host-based application whitelisting. Until host-based intrusion protections are fully deployed, agencies will be at greater risk of malicious activity adversely affecting agency operations. NIST SP 800-53 Revision 4 also states that agencies should monitor and control communications at the external boundary of the network and at key internal boundaries (e.g., network traffic). NIST guidance also stated that an agency should deploy monitoring devices strategically within the network to detect essential information. However, the agencies in our review did not always monitor external and internal traffic. For example, of the 23 agencies: 5 reported that they were not monitoring inbound or outbound direct connections to outside entities. 11 reported that they were not persistently monitoring inbound encrypted traffic. 8 reported that they were not persistently monitoring outbound encrypted traffic. In addition, 13 agencies reported they were not using a network-based session capture solution. Of the 10 agencies that reported using this solution, officials from 2 agencies stated that they were not capturing workstation-to-workstation connections. Without thorough monitoring of external and internal traffic, agencies will have less assurance that they are aware of compromised or potentially compromised traffic within their network. NIST SP 800-53 Revision 4 states that agencies should establish enhanced monitoring capabilities. Such capabilities should include automated mechanisms that collect and analyze incident data for increased threat and situational awareness. According to NIST, a security information and event management (SIEM) system analyzes data from different sources and identifies and prioritizes significant events. Sources of data used by SIEM systems include logs from database systems, network devices, security systems, web applications, and workstation operating systems. Of the 23 agencies that we reviewed, 21 reported using a SIEM capability. Over half of the agencies employing a SIEM used one or more of their logs to match against known vulnerabilities and advanced persistent threats, as well as to create real-time alerts. For example, of the 21 agencies: 14 agencies reported collecting database logs, but only 7 agencies reported using the logs to match against known vulnerabilities and persistent threats and to create real-time alerts; 20 agencies reported collecting network logs, but only 13 agencies reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts; 21 agencies reported collecting security logs, but only 13 reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts; 15 agencies reported collecting web application logs, but only 9 agencies reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts; and 13 agencies reported collecting workstation logs, but only 8 agencies reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts. Only 5 agencies collected all 5 types of logs and used them to match against known vulnerabilities and persistent threats and to create real- time alerts. By not fully using SIEM capabilities, agencies will have less assurance that relevant personnel will be aware of possible weaknesses or intrusions. To further enhance their intrusion detection and prevention capabilities, the 23 civilian CFO Act agencies were in the process of implementing DHS’s CDM program. As previously discussed, Phase 1 of the program involves deploying products to automate hardware and software asset management, configuration settings, and common vulnerability management capabilities. Phase 2 intends to address privilege management and infrastructure integrity by allowing agencies to monitor users on their networks and to detect whether users are engaging in unauthorized activity. Phase 3 is intended to assess agency network activity and identify any anomalies that may indicate a cybersecurity compromise. As of June 2018, most agencies had not fully implemented any of the three phases. As shown in Figure 7, 15 agencies had partially implemented phase 1, 21 had partially or not yet begun to implement phase 2, and none of the agencies had fully implemented phase 3. Agencies’ implementation status has been affected, at least in part, due to delays in DHS’s deployment of the program phases. As a result, federal systems will remain at risk until the program is fully deployed. Many agencies have not effectively implemented the federal approach and strategy for securing information systems. For example, the inspectors general for 17 of the 23 selected agencies reported that their agencies had not effectively implemented their information security programs and had significant information security deficiencies associated with internal control over financial reporting. In addition, CIOs for 17 agencies reported not meeting all nine targets for the cybersecurity cross- agency priority goal. Further, OMB determined that that only 13 of the 23 agencies were managing risks to their overall enterprise, while the other 10 agencies were at risk. Until agencies more effectively implement the government’s approach and strategy, federal systems will remain at risk. DHS and OMB have initiatives underway that are intended to further improve agencies’ security posture. However, although DHS had provided training and guidance for NCPS and CDM, agencies expressed the need for more. In addition, OMB had also not finalized its policy and strategy aimed at addressing challenges with perimeter security and protecting high value assets, respectively. OMB had also not provided useful information to Congress, such as a description of agencies’ implementation of DHS’s intrusion assessment plan, the degree to which agencies are using NCPS, a complete analysis of agencies’ implementation of DHS’s intrusion assessment plan, or the costs and benefits of using commercial tools. Although agencies’ officials reported various efforts underway to enhance their agency’s intrusion detection and prevention capabilities, implementation efforts across the federal government were not consistent. OMB and DHS can use the information provided in this report to work with agencies to identify obstacles and impediments affecting the agencies’ abilities to implement these capabilities. We are making a total of nine recommendations, including two to DHS and seven to OMB. Specifically: The Secretary of DHS should direct the Network Security Deployment division to coordinate further with federal agencies to identify training and guidance needs for implementing NCPS and CDM. (Recommendation 1) The Secretary of DHS should direct the appropriate staff to work with OMB to follow up with agencies to identify obstacles and impediments affecting their abilities to implement intrusion detection and prevention capabilities. (Recommendation 2) The Director of OMB should submit the intrusion assessment plan to the appropriate congressional committees. (Recommendation 3) The Director of OMB should report on implementation of the defense- in-depth strategy described in the intrusion assessment plan, including all elements described in the plan. (Recommendation 4) The Director of OMB should update the analysis of agencies’ intrusion detection and prevention capabilities to include the degree to which agencies are using NCPS. (Recommendation 5) The Director of OMB should direct the Federal CIO to update her report to Congress to include required information, such as detecting advanced persistent threats, a comparison of the costs and benefits of the capabilities versus commercial technologies and tools, and the capability of agencies to protect sensitive cyber threat indicators and defense measures. (Recommendation 6) The Director of OMB should establish a time frame for finalizing the Trusted Internet Connections policy intended to address challenges with agencies’ perimeter-based architectures and issue it when finalized. (Recommendation 7) The Director of OMB should establish a time frame for finalizing the strategy for realigning resources across agencies to protect high- value assets and issue it when finalized. (Recommendation 8) The Director of OMB should direct the Federal CIO to work with DHS to follow-up with agencies to identify obstacles and impediments affecting their abilities to implement intrusion detection and prevention capabilities. (Recommendation 9) We provided a draft of this report to OMB and the 23 civilian CFO Act agencies, including DHS, covered by our review. In response, OMB provided comments via email, and DHS and three other agencies (the Department of Commerce, Social Security Administration, and U.S. Agency for International Development) provided written comments, which are reprinted in appendices V through VIII, respectively. The 19 remaining agencies (the Departments of Agriculture, Education, Energy, Health and Human Services, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs; as well as the Environmental Protection Agency, General Services Administration, National Aeronautics and Space Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management, and Small Business Administration) stated via email that they had no comments. In its comments, which the OMB liaison provided to GAO via email on December 7, 2018, OMB did not state whether it agreed or disagreed with the seven recommendations that we made to it. Rather, according to the liaison, OMB agreed with the facts in our draft report, but found that the report did not reflect the agency’s rationale for not submitting the DHS intrusion assessment plan to Congress and a report on the implementation of the plan, as required by the Federal Cybersecurity Enhancement Act of 2015. The liaison stated that OMB is working closely with DHS to provide strategic direction in assessing gaps in, and modernizing, the manner in which intrusion detection and prevention capabilities are delivered to the federal government. Further, in a subsequent email on December 10, 2018, OMB said it believes the Federal CIO’s September 2018 report to Congress, along with data provided in OMB’s fiscal year 2017 FISMA report to Congress, achieves the outcomes sought by the Federal Cybersecurity Enhancement Act of 2015 and demonstrates OMB's continuous engagement with DHS across the evolution of the intrusion detection and prevention program. As stated in our report, we acknowledge that OMB has provided important information to congressional stakeholders through its reports. However, OMB’s reports did not cover all outcomes described in the act. For example, as we pointed out, these reports did not fully address implementation of the defense-in-depth strategy described in DHS’s intrusion assessment plan. In addition, although OMB reported on several elements required by the Federal Cybersecurity Enhancement Act of 2015, it did not report on all of the required elements. For example, the reports did not address whether DHS’s NCPS was effective in detecting advanced persistent threats. The reports also did not include a comparison of the costs and benefits of the intrusion detection and prevention capabilities versus commercial technologies and tools, or the value of classified cyber threat indicators. Further, the reports did not address the capability of agencies to protect sensitive cyber threat indicators and defensive measures. Accordingly, we maintain that our recommendations for OMB to report on required elements in the Federal Cybersecurity Enhancement Act of 2015 are warranted. In addition, OMB suggested that we revise our recommendations to the agency to include a shared responsibility with DHS to help drive desired outcomes. However, six of the seven recommendations we are making to OMB are related to specific OMB responsibilities cited in either the Federal Cybersecurity Enhancement Act of 2015 or the Report to the President on Federal IT Modernization. As such, we believe the recommendations are appropriately addressed to OMB. Furthermore, our recommendations do not prevent OMB from working with DHS to implement them. Our seventh recommendation to OMB—to work with DHS to follow up with agencies to identify obstacles and impediments affecting their abilities to implement intrusion detection and prevention capabilities—includes a shared responsibility with DHS. OMB also provided technical comments, which we incorporated into the report, as appropriate. Subsequent to providing initial comments on our draft report, OMB issued a memorandum intended to provide a strategy for realigning resources across agencies to protect high-value assets. This action addresses our recommendation 8, which called for the Director of OMB to establish a time frame for finalizing the strategy for realigning resources across agencies to protect high-value assets, and to issue the strategy when finalized. In its comments, DHS stated that it concurred with the two recommendations we made to the department. DHS stated that it expects to implement the recommendations in 2019. The Department of Commerce commented that the report was reasonable and that the department agreed with the findings and recommendations. In its comments, the Social Security Administration stated that protecting its networks and information is a critical priority. According to the agency, it continued to make improvements in fiscal year 2018, such as improvements and progress in securing applications, leveraging the cloud, managing its assets and vulnerabilities, strengthening its network and incident response capabilities, improving its security training, and enhancing the overall effectiveness of its cybersecurity program. Finally, the U.S. Agency for International Development commented that its inspector general had improved the agency’s capability maturity ratings for core security functions in fiscal year 2018. The agency also pointed out that it was the only selected agency in which fiscal year 2017 indicators of effectiveness in implementing the federal approach and strategy for securing information systems were all positive (as noted in Appendix III). We are sending copies of this report to appropriate congressional committees, the Director of OMB, the heads of the 23 civilian CFO Act agencies and their inspectors general, and other interested congressional parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. The Federal Cybersecurity Enhancement Act of 2015, which was enacted December 18, 2015, included a provision for GAO to report on the effectiveness of the federal government’s approach and strategy for securing agency information systems, including intrusion detection and prevention capabilities. The objectives of our review were to assess: (1) the reported effectiveness of selected agencies’ implementation of the federal government’s approach and strategy to securing agency information systems; (2) the extent to which the Office of Management and Budget (OMB) and the Department of Homeland Security (DHS) have facilitated the use of intrusion detection and prevention capabilities to secure federal agency information systems; and (3) the extent to which selected agencies reported implementing intrusion detection and prevention capabilities. Selected agencies for our review were the 23 civilian agencies covered by the Chief Financial Officers Act of 1990 (CFO Act). We did not include the Department of Defense because the Federal Cybersecurity Enhancement Act of 2015 only pertains to civilian agencies. Because we focused our work on the 23 civilian agencies, results from these reviews are not generalizable to the entire federal government. To assess the reported effectiveness of agencies’ implementation of the federal government’s approach and strategy to securing agency information systems, we described the federal government’s approach and strategy by summarizing the Federal Information Security Modernization Act of 2014 (FISMA), Executive Order 13800, Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure, and the National Institute of Standards and Technology’s (NIST) Framework for Improving Critical Infrastructure Cybersecurity (cybersecurity framework). assessed the reported effectiveness of agencies’ implementation of the approach and strategy by reviewing annual reports from OMB and the inspectors general (IG) of the 23 civilian CFO Act agencies regarding the reported implementation of FISMA for fiscal year 2017. We described the IG reported maturity levels, including the Office of Inspectors General FISMA Reporting Metrics definition of “effectiveness.” These maturity levels are based on security domains aligned with the five core functions in NIST’s cybersecurity framework. We also summarized IG reported conclusions on the effectiveness of agencies’ information security programs for fiscal year 2017. reviewed the fiscal year 2016 and 2017 financial statement audit reports for each of the 23 civilian CFO Act agencies to identify the extent to which any significant deficiencies or material weaknesses related to information security over financial systems had been reported and to identify information security control weaknesses reported by the IGs. identified whether agencies had met the targets for the cybersecurity- focused cross-agency priority goal for fiscal years 2016 and 2017 by examining agency-reported performance metrics for fiscal years 2016 and 2017. evaluated OMB’s agency risk management assessment ratings to make a determination on how agencies were managing risk to their enterprise. These conclusions were based on FISMA metrics, and are aligned with the five core security functions defined in the cybersecurity framework. interviewed knowledgeable OMB officials and staff to obtain their views on the reported effectiveness of the federal government’s approach and strategy to securing agency information systems. To assess the extent to which OMB and DHS have facilitated the use of intrusion detection and prevention capabilities to secure federal agency information systems, we determined the extent OMB and DHS fulfilled their requirements described in the Federal Cybersecurity Enhancement Act of 2015 by collecting and reviewing artifacts from OMB and DHS and comparing them to the provisions outlined in the act. We also interviewed knowledgeable officials from OMB and DHS regarding their efforts to fulfill their requirements described in the act. determined the effectiveness of corrective actions taken by DHS to address nine previously reported recommendations we made in our report related to NCPS. Specifically, we collected appropriate artifacts and assessed the artifacts against the criteria used in that report, and determined the extent to which the actions taken by DHS met the intent of the recommendations, and we met with DHS staff responsible for the remediation activities and obtained their views of the status of actions taken to address the recommendations. held semi-structured interviews with knowledgeable officials from the 23 civilian CFO Act agencies. During these interviews, we obtained the agency’s views on whether they need more training and guidance from DHS for NCPS and CDM. We also interviewed knowledgeable officials and staff at DHS to obtain their views on how DHS had improved the intrusion detection and prevention capabilities it provides to federal agencies. We also interviewed DHS officials to obtain their views on the training and guidance that the department makes available to agencies. To assess the extent to which selected agencies reported implementing intrusion detection and prevention capabilities, we described the reported intrusion detection and prevention capabilities implemented by the 23 civilian CFO Act civilian agencies by summarizing implemented intrusion detection and prevention capability information obtained from the semi-structured interviews at the 23 civilian CFO Act agencies described above; identifying the extent to which the 23 civilian CFO Act agencies were in compliance with DHS’s binding operating directive (BOD) pertaining to enhanced email and web security (BOD 18-01) by collecting and summarizing Cyber Hygiene Trustworthy Email reports from the 23 agencies and determining the extent to which the agencies had taken required actions to implement the BOD. During the semi-structured interviews, we also obtained the agency’s views and experiences with other programs and services provided by DHS, including the extent to which agencies had implemented the tools offered by the department’s Continuous Diagnostics and Mitigation (CDM) program. To determine the reliability of submitted data and obtain clarification about agencies’ processes to ensure the accuracy and completeness of data used in their respective FISMA reports, we analyzed documents and conducted interviews with officials from 6 of the 23 civilian CFO Act agencies. To select these six agencies, we sorted agency fiscal year 2017 information technology budget data from highest to lowest amount and then divided the data into three tiers: high spending, medium spending, and low spending. We then randomly selected two agencies from each of the three tiers. The selected agencies were the Departments of Agriculture, Commerce, Housing and Urban Development, Transportation, and Veterans Affairs, and the U.S. Agency for International Development. While not generalizable to all agencies, the information we collected and analyzed about the six selected agencies provided insights into various processes in place to produce FISMA reports. Based on this assessment, we determined that the data were sufficiently reliable for the purposes of our reporting objectives. We conducted this performance audit from December 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The National Institute of Standards and Technology established the cybersecurity framework to provide guidance for cybersecurity activities within the private sector and government agencies at all levels. The cybersecurity framework consists of five core functions: identify, protect, detect, respond, and recover. Within the five functions are 23 categories and 108 subcategories that define discrete outcomes for each function, as described in table 7. The federal approach and strategy for securing information systems is prescribed by federal law and policy, including the Federal Information Security Modernization Act of 2014 and the presidential executive order on Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure. Accordingly, federal reports describing agency implementation of this law and policy, and reports of related agency information security activities, indicated the effectiveness of agencies’ efforts to implement the federal approach and strategy. Table 8 summarizes the reported effectiveness of the 23 civilian Chief Financial Officers Act of 1990 agencies to implement the government’s approach and strategy to securing information systems. The President’s Management Agenda identifies cross-agency priority (CAP) goals to target areas where multiple agencies must collaborate to effect change. The agenda issued in fiscal year 2018 established an information technology modernization goal that includes a cybersecurity objective with specific priority areas and performance indicators. This cybersecurity-focused goal is intended to drive progress in the government’s efforts to modernize information technology to increase productivity and security. Figure 8 describes the 3 updated cybersecurity- focused cross-agency priority areas and 10 performance indicators. Each federal agency is expected to meet one of the 10 new performance indicators by the end of fiscal year 2018 and the remainder by 2020. In addition to the individual named above, Jeffrey Knott (assistant director), Daniel Swartz (analyst-in-charge), David Blanding, Chris Businsky, Kristi Dorsey, Di’Mond Spencer, Priscilla Smith, and Edward Varty made key contributions to this report. West Coile, Franklin Jackson, and Chris Warweg also provided assistance.", "summary": "Federal agencies are dependent on information systems to carry out operations. The risks to these systems are increasing as security threats evolve and become more sophisticated. To reduce the risk of a successful cyberattack, agencies can deploy intrusion detection and prevention capabilities on their networks and systems. GAO first designated federal information security as a government-wide high-risk area in 1997. In 2015, GAO expanded this area to include protecting the privacy of personally identifiable information. Most recently, in September 2018, GAO updated the area to identify 10 critical actions that the federal government and other entities need to take to address major cybersecurity challenges. The federal approach and strategy for securing information systems is grounded in the provisions of the Federal Information Security Modernization Act of 2014 and Executive Order 13800. The act requires agencies to develop, document, and implement an agency-wide program to secure their information systems. The Executive Order, issued in May 2017, directs agencies to use the National Institute of Standards and Technology's cybersecurity framework to manage cybersecurity risks. The Federal Cybersecurity Enhancement Act of 2015 contained a provision for GAO to report on the effectiveness of the government's approach and strategy for securing its systems. GAO determined (1) the reported effectiveness of agencies' implementation of the government's approach and strategy; (2) the extent to which DHS and OMB have taken steps to facilitate the use of intrusion detection and prevention capabilities to secure federal systems; and (3) the extent to which agencies reported implementing capabilities to detect and prevent intrusions. To address these objectives, GAO analyzed OMB reports related to agencies' information security practices including OMB's annual report to Congress for fiscal year 2017. GAO also analyzed and summarized agency-reported security performance metrics and IG-reported information for the 23 civilian CFO Act agencies. In addition, GAO evaluated plans, reports, and other documents related to DHS intrusion detection and prevention programs, and interviewed OMB, DHS, and agency officials. The 23 civilian agencies covered by the Chief Financial Officers Act of 1990 (CFO Act) have often not effectively implemented the federal government's approach and strategy for securing information systems (see figure below). Until agencies more effectively implement the government's approach and strategy, federal systems will remain at risk. To illustrate: As required by Office of Management and Budget (OMB), inspectors general (IGs) evaluated the maturity of their agencies' information security programs using performance measures associated with the five core security functions—identify, protect, detect, respond, and recover. The IGs at 17 of the 23 agencies reported that their agencies' programs were not effectively implemented. IGs also evaluated information security controls as part of the annual audit of their agencies' financial statements, identifying material weaknesses or significant deficiencies in internal controls for financial reporting at 17 of the 23 civilian CFO Act agencies. Chief information officers (CIOs) for 17 of the 23 agencies reported not meeting all elements of the government's cybersecurity cross-agency priority goal. The goal was intended to improve cybersecurity performance through, among other things, maintaining ongoing awareness of information security, vulnerabilities, and threats; and implementing technologies and processes that reduce malware risk. Executive Order 13800 directed OMB, in coordination with the Department of Homeland Security (DHS), to assess and report on the sufficiency and appropriateness of federal agencies' processes for managing cybersecurity risks. Using performance measures for each of the five core security functions, OMB determined that 13 of the 23 agencies were managing overall enterprise risks, while the other 10 agencies were at risk. In assessing agency risk by core security function, OMB identified a few agencies to be at high risk (see figure at the top of next page). DHS and OMB facilitated the use of intrusion detection and prevention capabilities to secure federal agency systems, but further efforts remain. For example, in response to prior GAO recommendations, DHS had improved the capabilities of the National Cybersecurity Protection System (NCPS), which is intended to detect and prevent malicious traffic from entering agencies' computer networks. However, the system still had limitations, such as not having the capability to scan encrypted traffic. The department was also in the process of enhancing the capabilities of federal agencies to automate network monitoring for malicious activity through its Continuous Diagnostics and Mitigation (CDM) program. However, the program was running behind schedule and officials at most agencies indicated the need for additional training and guidance. Further, the Federal CIO issued a mandated report assessing agencies' intrusion detection and prevention capabilities, but the report did not address required information, such as the capability of NCPS to detect advanced persistent threats, and a cost/benefit comparison of capabilities to commercial technologies and tools. Selected agencies had not consistently implemented capabilities to detect and prevent intrusions into their computer networks. Specifically, the agencies told GAO that they had not fully implemented required actions for protecting email, cloud services, host-based systems, and network traffic from malicious activity. For example, 21 of 23 agencies had not, as of September 2018, sufficiently enhanced email protection through implementation of DHS' directive on enhanced email security. In addition, less than half of the agencies that use cloud services reported monitoring these services. Further, most of the selected 23 agencies had not fully implemented the tools and services available through the first two phases of DHS's CDM program. Until agencies more thoroughly implement capabilities to detect and prevent intrusions, federal systems and the information they process will be vulnerable to malicious threats. GAO is making two recommendations to DHS, to among other things, coordinate with agencies to identify additional needs for training and guidance. GAO is also making seven recommendations to OMB to, among other things, direct the Federal CIO to update the mandated report with required information, such as detecting advanced persistent threats. DHS concurred with GAO's recommendations. OMB did not indicate whether it concurred with the recommendations or not.", "document_type": "gao"}
{"report": "VA pays monthly disability compensation to veterans with service- connected disabilities (i.e., injuries or diseases incurred or aggravated while on active military duty) according to the severity of the disability. VBA’s Compensation Service sets policy and oversees the delivery of disability compensation. VBA’s Office of Performance Analysis and Integrity analyzes performance information related to claims. VBA’s Office of Field Operations provides operational oversight to district and regional offices. The 57 regional offices are grouped into five district offices, which manage the regional offices in their areas. VBA staff in the Veterans Service Centers of the regional offices process disability compensation claims. These claims processors include Veterans Service Representatives who gather evidence needed to determine entitlement and review the amount of the award and authorize payment, if any, and Rating Veterans Service Representatives who decide entitlement and the rating percentage. Veterans may claim more than one medical condition, and VBA assigns a rating percentage for each claimed medical condition, as well as for the claim overall. As shown in figure 1, after a veteran submits a claim to VBA, a Veterans Service Representative reviews the claim and helps the veteran gather the relevant evidence needed to evaluate the claim. Such evidence includes the veteran’s military service records, medical examinations, and treatment records from Veterans Health Administration medical facilities and private medical service providers. Also, if necessary to provide support to substantiate the claim, VA will provide a medical examination for the veteran. Once VBA has gathered the supporting evidence, a Rating Veterans Service Representative—who typically has more experience at VBA than a Veterans Service Representative—evaluates the claim and determines whether the veteran is eligible for benefits and, if so, assigns a percentage rating. A Veterans Service Representative then determines the amount of the award, if any, and drafts a decision notice. A senior Veterans Service Representative then authorizes the award and releases the decision notice to the veteran following a review of both for accuracy. In May 2016, VBA completed implementation of the National Work Queue—an electronic workload management initiative that prioritizes and distributes claims across regional offices. Previously, a veteran’s claim was generally processed from start to finish (i.e., awarding of benefits or notification of denial) by the veteran’s local regional office of jurisdiction, and the regional office’s workload generally depended on how many claims were filed by veterans within its area of jurisdiction. Now, a claim can be processed by multiple regional offices, and claims are distributed based on regional office capacity (see fig. 2). VBA establishes national targets and tracks performance for disability compensation claims processing. Since fiscal year 2014, national claims processing timeliness has improved substantially, and accuracy scores have decreased slightly, as shown in table 1. VBA’s 12-month issue- based accuracy target for fiscal year 2017 was 96 percent and its target for fiscal year 2018 was the same. From fiscal year 2014 to 2017, VBA’s national accuracy estimate decreased from about 96 percent to about 94 percent. In addition, VBA’s target for backlog claims—defined by VBA as those pending for more than 125 days—for fiscal year 2017 was no more than 15 percent of claims inventory and its target for fiscal year 2018 was no more than 21 percent of claims. In fiscal year 2017, VBA’s reported percentage of backlog claims was 23 percent, with a reduction from 240,443 to 70,965 total reported backlog claims from fiscal years 2014 to 2017. VBA’s Office of Performance Analysis and Integrity collects a variety of data on timeliness and accuracy, including on VBA’s claims backlog, so that VBA can monitor regional office performance. To improve timeliness and accuracy, and reduce the claims backlog, VBA sets performance standards for the directors of regional offices. In fiscal year 2018, regional office performance was assessed using two primary metrics—timeliness (Time-in-Queue) and accuracy (12-month issue-based accuracy). Since 1999, VBA has assessed the accuracy of disability compensation claims decisions at the national and regional office level using its Systematic Technical Accuracy Review (STAR). With this tool, VBA reviews a stratified random sample of completed claims, and certified reviewers use a checklist to assess specific aspects of each claim. According to VA, as of October 2017, 31 congressionally chartered VSOs were recognized by VA under federal statute to help veterans navigate the claims process. VSOs commonly are private nonprofit groups that advocate without fees on behalf of veterans. VSOs employ individuals, called veterans service officers, whose offices often are located at a VBA regional office. Through a power of attorney, VSOs can represent veterans before VA, and assist them and their families with disability compensation claims, among other things. VSO staff are trained to help veterans understand and apply for any VA benefits to which they may be entitled, including disability compensation. In addition to helping veterans submit claims to VBA, VSOs are allowed to communicate with VBA on behalf of the veteran throughout the life of the claim, and are given up to 48 hours to review the claim decision before it is finalized (after the Rating phase in figure 1 above). VSOs can have access to VBA’s electronic claims management system to view claims status and submit claims documents. According to a Congressional Research Service report, as of March 2016, 919 congressional caseworkers were working for constituents on a variety of issue areas, including veterans’ disability compensation claims. Also according to the report, congressional caseworkers cannot legally represent veterans, but with a privacy release form from the veteran, VBA may respond to a congressional inquiry. According to VA officials, congressional caseworkers can then obtain certain claim-related information from VA, such as the status of the veteran’s claim. VA’s guidance on “special controlled correspondence” governs VBA’s communication with congressional caseworkers, including required time frames for responding to congressional inquiries. Congressional caseworkers generally work out of Congressional Members’ state and district offices. The National Work Queue, which VBA uses to distribute disability compensation claims, was designed to even out the differences in claims workload across regional offices by having multiple offices complete parts of a claim and allocating claims based on each office’s capacity. For example, as shown in figure 3, in fiscal year 2017, about 88 percent of all disability compensation claims were processed by more than one office, and over 75 percent were processed by three or more offices. This distribution method is intended to keep all offices working at their capacity, regardless of the volume of claims filed by veterans in each region. While VBA officials stated that they had initially planned to continue to have a majority of claims processed at veterans’ local regional offices, after implementation of the National Work Queue they determined that the system operates more effectively if veteran location is a lower priority factor for claims distribution. Thus, very few claims are processed entirely at a veteran’s local regional office, unless the veteran has a documented hardship that may necessitate expediting the claim or face- to-face interaction. VBA officials added that the National Work Queue formula distributes claims based on VBA priorities. For example, VBA prioritizes claims for veterans with documented hardships (e.g., terminal illness, financial hardship). In addition, the National Work Queue formula takes into account the length of time since the claim was received and prioritizes backlog claims—defined by VBA as claims that have been open for more than 125 days. Once the National Work Queue allocates claims to a regional office, the office has some discretion in managing the distribution of claims to its staff and managing the claims review process. For example, while VBA determines how the claims workload is allocated across offices, regional office managers decide which claims within the office’s queue to work first, how to program the office’s queue for distributing claims to individual claims processors’ electronic work queues, and whether any changes to this distribution are needed throughout the day. Regional office managers at each of the four offices we visited reported using VBA’s timeliness goals and daily data on claims processing timeliness to prioritize claims. Managers at the offices we visited also described additional strategies to manage their work queue, including: At two of the four offices we visited, managers said that they provide a list of claims to claims processors to prioritize, such as those that are older or have been in the office’s work queue for multiple days. Managers at one office said that they manually alter individual claims processors’ electronic work queues so that older claims are processed first. Managers at one office stated that because they instruct claims processors to focus on meeting timeliness targets for the office, all claims are worked within a few days; thus, they encourage their staff to focus on meeting the office timeliness goals rather than requiring them to work the claims in their queue in a specified order. VBA officials acknowledged that regional office managers may have different strategies for managing workload, but noted that all offices are expected to respond to VA national priorities—such as decreasing the claims backlog—while also meeting their individual office performance goals. While VBA officials noted that having discretion in workload management can be beneficial, such discretion can also lead to inconsistent handling of the claims workload. In particular, we found gaps in guidance for managing deferrals—actions taken by claims processors in VBA’s electronic claims management system when they identify claims errors that occurred earlier in the claims process. The deferral process began with the National Work Queue since claims were, for the first time, routinely being processed by multiple regional offices. Through deferrals, when claims processors identify errors in a claim, they can use the National Work Queue to return the claim for correction to the office that made the error. According to VBA data, in fiscal year 2017, VBA claims processors deferred claims in 450,305 instances, which represented almost 4 percent of the total disability claims processing work completed. While VBA officials said that claims processors who find errors are generally expected to defer a claim, managers and claims processors at the regional offices we visited had different perspectives regarding when Veterans Service Representatives should do this. At all four of the regional offices we visited, managers and claims processors said that they generally would not defer a claim if the error could be corrected and the claim moved forward. At one regional office, managers and claims processors said that they would log a deferral in the electronic claims management system, so the error would be tracked and the previous claims processor could be notified and trained, but that they would also correct the error themselves to move the claim forward. VBA provides some guidance to Rating Veterans Service Representatives regarding the circumstances in which they should defer claims, but does not have corresponding guidance for Veterans Service Representatives. However, according to our analysis of VBA data from fiscal year 2017, more than 75 percent of deferrals are logged during the Initial Development, Supplemental Development, Award, or Authorization phases—when Veterans Service Representatives are typically processing claims. Existing guidance for Veterans Service Representatives on deferrals in the National Work Queue Playbook and other documents focuses on the process for deferring a claim in the electronic claims management system, rather than on situations that merit a deferral. Specifically, VBA does not provide guidance on when Veterans Service Representatives should defer a claim or consider other options, such as correcting the error and moving the claim forward, with or without a deferral. VBA officials stated that the policy regarding when to defer claims is not prescriptive—and they do not plan to provide additional guidance—because they want to allow regional offices the discretion to decide what action is best for the veteran. However, federal internal control standards state that agencies should design control activities to achieve objectives and respond to risks. For example, a control activity that is performed routinely and consistently generally is more precise than one performed sporadically. As such, deferrals may not serve as an effective control without being used consistently across VBA’s regional offices. VBA’s lack of guidance on when to defer claims may lead to delays for veterans and missed opportunities to train individuals who make errors. In some cases, differences in regional office practices for when to defer claims may lead to situations in which claims that could move forward are instead sent back to the previous office, causing unnecessary delays for veterans. In addition, we heard from managers or claims processors at three offices we visited that claims may not always be deferred for legitimate reasons and that the ability to defer claims may create incentives for employees to defer a claim based on an insignificant error if they want to avoid working on a complex claim. In other cases, more significant errors may end up being fixed at a regional office without providing feedback to the office that made the mistake. While the practice of fixing the error rather than deferring the claim may keep the claim moving for the veteran, it also means that claims processors who make errors may repeat the same mistakes in the future. VBA sets regional office goals and individual claims processor expectations that align with national efforts to increase timeliness and accuracy of claims decisions. VBA holds regional offices accountable for meeting performance goals through the Director’s Performance Plan. For disability compensation claims in fiscal year 2018, VBA assessed regional office performance using the Time-in-Queue and 12-month issue-based accuracy measures. VBA has developed processes and tools for communicating performance information to regional offices and for identifying common errors. For example, VBA sets timeliness goals for regional offices and generates daily claims processing timeliness data for each office. At the regional offices we visited, we observed that VBA displays these data on monitors so that managers and employees can see how their office is performing on a daily basis. In addition, VBA has created performance reporting tools that allow regional office managers, claims processors, and various VBA workgroups to download regional office performance information and analyze office performance issues at their discretion. At the regional offices we visited, quality review teams analyze claims processing errors made by their employees, such as those identified in STAR reviews and through the deferral process. Based on common mistakes they identify, quality review staff at all four offices we visited said that they incorporate topics related to the errors into training sessions, or provide direct coaching to individual employees. VBA also conducted an In-Process Review pilot from November 2017 through May 2018 at selected regional offices. The pilot involved a quality review for two phases of the claims process. The purpose of the pilot was for employees to learn from and correct mistakes in a non-punitive setting while the claim was being processed. VBA officials reported that VBA discontinued the pilot in May 2018—prior to its scheduled completion date—because the pilot was not demonstrating the anticipated benefit of reducing the number of errors at pilot offices that resulted in deferrals. VBA also develops practices at the national level for managing individual employee performance and, in some cases, provides regional office managers with discretion for implementing those practices. In support of the regional office performance standards, VBA sets individual employee performance standards in the following five areas: (1) quality of work; (2) timeliness of corrective actions and responsiveness to workload assignments; (3) production (i.e., the number of transactions, or tasks, completed within the assessment period); (4) completion of training; and (5) organizational support. The production standards include a goal for the number of credits, or points, that employees are expected to earn during each pay period for their work activities. According to VBA officials, regional office managers are held accountable for providing feedback to employees on a regular basis and addressing performance deficiencies appropriately and in a timely manner. In addition, according to VBA officials, VA’s policy allows regional office managers “broad discretion” in determining when a performance deficiency exists. Employee performance incentive programs, which provide monetary awards to top performers in each regional office, are also managed at the national level. However, within regional offices, some managers told us that they also occasionally provide small incentives or celebrations to show appreciation for staffs’ contributions. VBA uses Time-in-Queue—the average number of business days that claims have been pending at a regional office—to measure overall regional office timeliness for processing disability compensation claims. Time-in-Queue is measured separately for each phase of the claims process—Initial Development, Supplemental Development, Rating, Award, and Authorization—and VBA has established timeliness goals for each of these phases. VBA holds regional offices accountable for meeting timeliness goals through the Director’s Performance Plan, which rates offices as successful if they meet Time-in-Queue standards for each phase of the claims process in 10 out of 12 months. For this purpose, the measure is a snapshot on the last day of each month that shows how long, on average, claims have been pending at each office; however, it does not capture regional office performance over a period of time. Consequently, Time-in-Queue can provide a skewed picture for a period of time, depending on the work that is assigned to the office toward the end of the month and the speed with which claims are processed during that limited time period. Moreover, according to VBA officials, the agency used Time-in-Queue scores and additional factors—such as space considerations and training capacity—to determine the amount of new resources to allocate to its regional offices in May 2017, and the agency will continue to consider such performance information when allocating resources in the future. However, federal internal control standards state that agencies should use quality information to achieve objectives. For example, an agency should obtain data from reliable sources in a timely manner and based on identified requirements, and reliable sources are those that provide data that are reasonably free from error and bias and faithfully represent what they purport to represent. In addition, our prior work has shown that practices for improving the usefulness of performance data include using new methods of measurement to address data limitations, such as Time- in-Queue only capturing performance as a snapshot on 1 day. VBA officials acknowledged that the Time-in-Queue performance measure does not reflect the complete timeliness of a regional office. These officials said that the agency is exploring adding a Time-to-Exit- Queue measure that could capture regional office timeliness over a period of time. For example, Time-to-Exit-Queue could measure the timeliness of all claims processing work completed throughout the month instead of work pending on the last day of the month. However, VBA has not yet completed the development of the Time-to-Exit-Queue performance measure. VBA has also not determined whether or when it will replace or supplement Time-in-Queue with a new primary metric— Time-to-Exit-Queue or something else—to measure regional office timeliness. Until VBA implements a new measure to more fully assess regional offices’ timeliness, the agency will not have a complete picture of regional office performance over time, which could impair decision- making related to regional office performance, such as decisions about targeting resources to high- or low-performing offices. VBA uses the STAR 12-month issue-based accuracy score to measure regional office accuracy in processing disability compensation claims, but this score could provide a misleading picture of an office’s performance. VBA’s accuracy measure attributes the accuracy of sampled claims to the regional office that finishes the claim even though, under the National Work Queue, that office may not have done all of the work on the claim. In fiscal year 2017, about 88 percent of all disability compensation claims were processed by more than one office, and about 43 percent were processed by five or more offices, as shown earlier in figure 3. As a result, the scores attributed to each office may not reflect the true accuracy of the office’s work. In addition, any errors made by other offices earlier in the claims process would not be reflected in those offices’ accuracy scores. Therefore, the current regional office accuracy measure does not reflect the accuracy of each office’s work and may skew the score negatively or positively. According to VBA officials, the agency uses issue-based accuracy scores, among other things, to determine how to allocate resources to regional offices. However, federal internal control standards state that agencies should use quality information to achieve objectives. For example, an agency obtains data from reliable sources in a timely manner based on identified requirements, and reliable sources provide data that are reasonably free from error and bias and faithfully represent what they purport to represent. In addition, our prior work has shown that practices for improving the usefulness of performance data include using new methods of measurement to address data limitations. VBA officials said that they recognize the limitations of the agency’s regional office accuracy measure, but VBA officials also said it is reasonable to hold the office that completes the claim accountable because Veterans Service Representatives are responsible for checking for errors in the claims process before completing the claim during the Authorization phase. However, according to VBA officials, some areas on VBA’s accuracy checklist—such as whether the claimed conditions were correctly granted or denied, and whether the correct percentage evaluation was assigned—are beyond the scope of the Veterans Service Representatives’ review or qualifications. These tasks are completed by Rating Veterans Service Representatives. In fiscal year 2017, these two areas—whether the claimed conditions were correctly granted or denied, and whether the correct percentage was assigned—accounted for an estimated 28 percent of all errors nationwide. In addition, these two areas ranged from an estimated low of about 13 percent (5 of 40) of all errors attributed to one regional office to an estimated high of about 55 percent (16 of 29) of all errors attributed to another regional office. In addition, while VBA officials said that it is reasonable to hold the office that completes the claim accountable for errors, officials also said that when STAR errors are identified, only the regional offices that actually made the errors are told about them in order to improve staff performance. This suggests that VBA does not view the Veterans Service Representative who completes the claim as fully responsible for all errors in the claims process. According to VBA officials, the agency has been exploring the development of a new accuracy measure that would enable it to assign error scores to the offices that actually made the errors. For example, VBA is considering using the STAR reviews to produce a claims phase- based score that would attribute the accuracy of individual phases of the claims process to the offices completing those phases. However, according to VBA officials, sampling by each phase of the claims process would be more complicated than the current system of sampling by regional office and would require additional staff. In addition, the agency is also exploring leveraging its existing Individual Quality Reviews— currently used to assess the accuracy of individual staff’s work—to create individual regional office accuracy scores. VBA officials added, however, that there are challenges with converting these individual accuracy scores to office scores, such as calculating scores by claims phase instead of by employee position since an employee may conduct work in various phases. VBA has not determined which alternate measure, if any, to use, and does not have a timeline for addressing the challenges it has identified with the alternate measures being considered, or for implementing a new accuracy measure. Until VBA implements a new measure to assess regional offices’ accuracy, it will not have an accurate picture of individual regional offices’ performance, which could impair decision-making, such as targeting resources to high- or low-performing offices. Despite being generally satisfied with regional office communication, VSOs we spoke with also expressed some frustrations. VSOs we spoke with at all four offices reported generally being able to contact someone to answer their questions. Moreover, VBA staff we spoke with reported being flexible in communicating with VSOs in the manner in which they preferred. In addition, Compensation Service and Benefits Assistance Service site visit reports found that VSOs are generally satisfied with regional office communication. However, VSOs at all four offices we visited expressed some frustrations with communication, but they varied some by offices. Examples of communication issues included: Diminished contact. VSOs noted that the National Work Queue reduced personal relationships and collaboration between VSOs and regional office staff since claims are no longer fully processed at the local regional office, and therefore VSOs can no longer simply walk across the office to discuss a claim. Delayed responses. VSOs said there sometimes are delays in receiving responses from regional offices, with staff taking different lengths of time to respond to an inquiry, or not responding at all. Sometimes, once VSOs receive a response, the claim is no longer being processed at the regional office they contacted, so the response is no longer useful. Decreased notice of activity. VSOs said that with the advent of electronic claims processing, they no longer receive paper copies of disability ratings and other documents that VBA sends to the veteran. VSOs have access to such information in VBA’s electronic claims management system, but the system does not notify them when VBA has sent documents to the veteran, such as requests for information and evidence. VSOs said it is time-consuming for them to proactively monitor a large number of veterans’ electronic claims files for new documents. VSOs may communicate with a regional office throughout the life of a claim for various purposes and, according to VBA officials, regional offices generally have discretion in establishing local policies for handling VSO questions or inquiries. One exception to this local discretion is during the 48-hour review period when VSOs can review a completed disability rating before it is finalized. A November 2016 VBA policy states that during the 48-hour review period, VSOs may contact a regional office’s Change Management Agent. The policy also states that VSOs should not contact the Change Management Agent for claim status updates, evidence submission, or any other type of inquiry unrelated to a rating decision discrepancy. According to VBA officials, the policy to contact the Change Management Agent during the 48-hour review period was intended to streamline the inquiry process for VSOs, provide consistent responses to them, and minimize disruptions for claims processors. The previous policy required VSOs to first contact the Rating Veterans Service Representative before the Change Management Agent during the 48-hour review period. VSOs at three offices we visited reported contacting the Change Management Agent for inquiries during the 48-hour review period, but also reported contacting the Change Management Agent at other points during the claims process. VSOs at all four offices we visited also reported contacting other staff, such as claims processors or their supervisors at their local regional offices, during the 48-hour review period, unrelated to the Change Management Agent’s availability or a particular type of claim, which VBA officials stated were reasons for which VSOs might contact an alternate VBA official. Federal standards for internal control state that an agency should externally communicate the necessary quality information to achieve an entity’s objectives, for example, communicating with external parties using established reporting lines, and periodically evaluating its communication methods. VBA officials told us that the November 2016 policy was intended to address communication during the 48-hour review period, and that regional office discretion for communication with VSOs outside of this period was still in place, including contacting Change Management Agents if regional offices determined this was best. However, regional offices and VSOs do not consistently implement this policy. Moreover, the policy states that VSOs are not to contact Change Management Agents for claim status updates, evidence submission, or any other question unrelated to a rating decision discrepancy. These types of inquiries generally occur outside of the 48-hour review period, so this portion of the policy conflicts with VBA officials’ description of regional office discretion for communication with VSOs throughout the life of a claim. Although VSO communication with Change Management Agents did not always appear to match VBA’s policy for communication during or outside of the 48-hour review period, VSOs we spoke with seemed to value regional offices’ flexibility in communicating with them. However, it is possible that the policy’s lack of clarity or inconsistent application could contribute to communication frustrations for VSOs, and that changes to either the policy or its enforcement could better serve VSOs and regional office staff. Evaluating its regional office communication policy with VSOs and ensuring that the policy is clear, that it aligns with regional offices’ practices, and that it effectively meets VSOs’ communication needs, could help VBA ensure that it is providing timely and consistent responses to VSOs on behalf of the veterans they represent, while minimizing disruptions to regional office staff. Such alignment could be achieved either by adjusting the communication policy or better enforcing the existing policy. Congressional caseworkers we spoke with at all four offices we visited were satisfied with regional office communication regarding disability compensation claims, though some regional office responses were not timely or accurate, according to VA Inspector General reports. VBA has congressional liaisons at each of its regional offices to answer inquiries from congressional caseworkers. Caseworkers generally contact the VBA liaison at their local regional office when they inquire about claims— whether the claims are being processed at the local regional office or another regional office. Caseworkers may also contact the VBA liaison at the office where the claim is being processed once they find out from VBA where that is. According to regional office officials at the four offices we visited, most congressional inquiries received at the regional offices are by email or phone, although some are by regular mail; the congressional inquiries are most often regarding the status of a veteran’s claim. While caseworkers we spoke with were satisfied with their communication with regional offices, VA’s Office of Inspector General found that in some instances, VBA regional offices had not provided timely or accurate responses to special controlled correspondence, which includes congressional inquiries. According to VBA guidance on special controlled correspondence in fiscal year 2017, VBA liaisons are to respond to caseworkers’ inquiries within 5 business days with a full or interim response, for example. During its inspections of regional offices during fiscal year 2017, the Office of Inspector General found that some offices had not provided interim responses within 5 business days and, in a few cases, had provided inaccurate responses. At some offices, the Office of Inspector General made recommendations for improving regional offices’ responses to inquiries and, according to its reports, regional offices planned and implemented changes, such as providing additional training to staff and improving oversight of correspondence. Caseworkers we spoke with at three offices we visited identified ways that regional offices could improve communication with them or ways that VBA could provide them with additional information or support. For example, while caseworkers generally contact their local regional office with inquiries, caseworkers at two offices said that a regularly updated contact list of VBA liaisons at all VBA regional offices could be helpful so that they can immediately contact another regional office if they learn that a claim is being processed there, or if their local VBA liaison is unable to provide sufficient specifics on a claim. Some of these caseworkers suggested that the list could either be posted to a non-public website or sent to VBA regional offices to distribute to local caseworkers. According to VBA officials, the agency does maintain a list of regional office VBA liaisons, and updates it quarterly. The list is provided upon request, both electronically and in hard copy, and caseworkers frequently request the list, according to VBA officials. However, the caseworkers we spoke with at all four offices we visited were not aware of this list. In September 2017, VBA developed an online toolkit for congressional caseworkers to better assist them in serving their veteran constituencies. The toolkit webpage provides a central location for caseworkers to quickly locate information regarding available VA benefits and services. For example, the toolkit provides a link to a description of the disability compensation program and how to apply for benefits. VBA officials reported that in September 2017, they provided information on the toolkit to VA’s Office of Congressional and Legislative Affairs for distribution to congressional staff. However, caseworkers and VBA liaisons at all four offices we visited were not aware of this online toolkit, and caseworkers we spoke with at two offices we visited said that it could have been useful to them if they had been aware of it or if it had additional elements, such as regional office expectations for caseworker inquiries. According to VBA officials, they have not received any feedback on the toolkit beyond that initially provided by another VA office. This could be, in part, because VBA does not have an outreach mechanism to actively obtain perspectives from congressional caseworkers on their communication with regional offices or their information or support needs, or to determine whether the findings from the Office of Inspector General are typical across regional offices. The Office of Inspector General stopped performing its reviews of regional offices—including evaluations of communication with congressional caseworkers—in fiscal year 2017 to focus its efforts on VBA-wide audits, so this information is no longer available to VBA. Federal standards for internal control state that an agency should externally communicate the necessary quality information to achieve an entity’s objectives, for example, selecting the appropriate methods to communicate externally, and periodically evaluating its methods of communication so that the agency has the appropriate tools to communicate quality information outside the agency. VBA officials reported an open-door policy in which caseworkers can share concerns and requests as needed, and said that a formal outreach mechanism is not necessary. Although caseworkers can approach regional office staff with ideas for improvement, this informal mechanism is not a consistent process and does not facilitate candid feedback, nor does it include documentation of potential improvements and actions taken. By creating an outreach mechanism to solicit periodic feedback from congressional caseworkers, VBA could streamline the inquiry process and enable them to provide more accurate and timely information to veterans. VBA’s National Work Queue has been in place for more than 2 years and provides opportunities for a higher level of service to veterans. However, with claims moving among regional offices, the individual performance of regional offices remains critical to VBA’s success. For example, regional offices’ inconsistent use of deferrals when claims processors identify errors could unnecessarily delay the decision on a veteran’s claim or prevent staff from receiving needed training. In addition, VBA has developed several practices to assess performance at regional offices, but some of this information could be of limited use if the agency continues using its existing measures. Specifically, VBA’s two primary performance measures for regional offices do not allow the agency to adequately measure claims timeliness and accuracy. Finally, communication with VSOs and congressional caseworkers could be improved by clarifying the VSO communication policy and aligning it with practice and VSO needs, and conducting caseworker outreach in order to provide more consistent and timely information to VSOs and caseworkers. Without these improvements, VSOs and caseworkers may not be able to serve veterans in as timely a manner as possible. We are making the following five recommendations to VBA: The Under Secretary for Benefits should clarify how Veterans Service Representatives should handle claims when they identify an error, including when to defer a claim and when to correct the error on their own. (Recommendation 1) The Under Secretary for Benefits should develop and implement a new regional office performance measure that allows it to better assess each regional office’s timeliness over a period of time. (Recommendation 2) The Under Secretary for Benefits should develop and implement a new regional office performance measure that allows it to better measure the accuracy of each regional office’s work. (Recommendation 3) The Under Secretary for Benefits should evaluate its policy for regional office communication with VSOs to ensure that it is clear, that it aligns with practice, and that it meets the communication needs of VSOs. (Recommendation 4) The Under Secretary for Benefits should develop and implement a mechanism to obtain periodic feedback from congressional caseworkers on their communication with regional offices regarding claims and needed information or support. (Recommendation 5) We provided a draft of this report to the Department of Veterans Affairs for review and comment. VA provided written comments, which are reproduced in appendix I. VA concurred with all of our recommendations and described VBA’s plans for taking action to address them. Regarding Recommendation 1, VA stated that VBA is working to clarify guidance to regional offices for handling claims when errors are identified. Regarding Recommendations 2 and 3, VA stated that VBA is working to develop and implement new performance measures for regional office timeliness and accuracy. Regarding Recommendation 4, VA stated that VBA will review and enhance its policy for communication with VSOs. Regarding Recommendation 5, VA stated that VBA will review existing practices on support for congressional caseworkers, and develop and implement mechanisms to strengthen this support. VA also reported that regional office managers have been directed to meet at least quarterly with congressional caseworkers to gather feedback and resolve issues. If VBA can demonstrate that it is consistently using such feedback mechanisms across regional offices to identify and address caseworker concerns, this will meet the intent of our recommendation. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Nyree Ryder Tee (Assistant Director), Rebecca Kuhlmann Taylor (Analyst-in-Charge), Justin Gordinas, and Martin E. Scire made significant contributions to the report. Also contributing to the report were James E. Bennett, Alex Galuten, Benjamin T. Licht, Liam O’Laughlin, David Perkins, Almeta Spencer, Walter K. Vance, and Kathleen van Gelder.", "summary": "Each year, VBA processes more than 1 million disability compensation claims and provides about $65 billion in benefits to veterans. The Jeff Miller and Richard Blumenthal Veterans Health Care and Benefits Improvement Act of 2016 includes a provision for GAO to review VBA's regional offices to help VBA achieve more consistent performance in processing disability compensation claims. This report examines (1) how VBA manages workload and performance for the disability compensation claims process, (2) how well VBA's timeliness and accuracy measures capture its regional offices' performance in processing these claims, and (3) how well selected regional offices communicate with VSOs and congressional caseworkers about these claims. GAO reviewed VBA policies and procedures; visited four regional offices selected to represent a range of performance scores and claims processing volume in fiscal year 2017; and interviewed VBA headquarters officials and management and staff from the selected regional offices. GAO also interviewed VSOs and congressional caseworkers—selected for House, Senate, and bipartisan representation—to learn more about their communication with VBA. In 2016, the Veterans Benefits Administration (VBA) centralized distribution of the disability compensation claims workload through the National Work Queue, which prioritizes and distributes claims to regional offices based on their capacity; however, there are gaps in VBA's guidance for processing claims with errors. Under the National Work Queue, multiple regional offices can work on a single claim instead of the claim remaining at one office for the duration of processing (see figure). GAO found gaps in guidance about whether a claims processor should fix an error made by another regional office, or return the claim to that office to be corrected. The former could result in missed opportunities to train staff who made the error, while the latter could result in processing delays. VBA primarily uses timeliness and accuracy measures to assess its regional offices' performance in processing disability compensation claims, but these measures do not adequately capture performance. The timeliness measure can be skewed because it is a snapshot of how long claims have been pending at an office on the last day of the month, and does not capture performance over a period of time. The accuracy measure is attributed to the office that finishes the claim, even though 88 percent of claims completed in fiscal year 2017 were processed at more than one office. VBA officials acknowledged that these measures are limited and said the agency is exploring alternatives, but VBA has no specific plan or time frame for determining and implementing new measures. Without measures to more accurately assess regional office performance, VBA may be limited in its ability to make efficient and effective decisions. Veterans service organizations (VSO) and staff working for Members of Congress (congressional caseworkers) interviewed by GAO were generally satisfied with regional office communication regarding disability compensation claims. However, VBA's policy on whom VSOs should contact during different points in the process did not always align with what occurs at the offices we visited or with VSO needs. This could result in VSOs not receiving consistent and timely responses from VBA. Evaluating this policy could help VBA assist VSOs in better serving veterans. In addition, congressional caseworkers GAO interviewed identified ways that communication could be improved or that additional support could be provided, such as a list of contacts at all regional offices for claim inquiries. VBA officials GAO interviewed described an open-door policy through which they may receive feedback from caseworkers, but the agency does not formally solicit periodic feedback from them. Without such feedback, the agency may miss opportunities to identify and address caseworker communication needs that could help them better serve veterans. GAO is making five recommendations to VBA to clarify guidance for correcting errors, develop and implement measures to better assess timeliness and accuracy at regional offices, and evaluate communication with VSOs and caseworkers. The Department of Veterans Affairs concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "An estimated 481,000 workers were employed in the animal slaughtering and processing industry in 2016, according to the Current Population Survey, which is jointly sponsored by DOL’s Bureau of Labor Statistics and the U.S. Census Bureau. There were 5,282 meat and poultry plants in the United States, of which 4,133 conducted processing only, 14 conducted slaughter only, and 1,135 conducted both slaughter and processing, as of February 2017, according to FSIS (see fig. 1). More than 30 million beef cattle, 117 million hogs, 243 million turkeys, and 8 billion chickens were slaughtered in the United States in 2016, according to USDA’s National Agricultural Statistics Service data. As of June 2017, almost 7,500 FSIS inspectors worked in meat and poultry plants, according to FSIS. These inspectors are generally exposed to the same types of hazards as plant employees. Meat and poultry plants are generally designed for an orderly flow from point of entry of the living animal to the finished food product (see fig. 2). Typically, the animal is brought to the meat or poultry plant and taken to the kill floor area, where the animal is rendered unconscious and slaughter occurs. Workers and machines behead and eviscerate the animal, among other things, after which it is chilled for several hours. FSIS inspectors ensure that the carcass meets federal food safety standards. Workers and machines then process the carcass and may break it into small portions that can be transported directly to supermarkets. Slaughter and processing of meat and poultry require workers to perform a high number of repetitive motions. Although plants have increased automation, much of the work is still done by hand using saws, knives, and other tools. OSHA helps ensure safe and healthful working conditions for workers in the meat and poultry industry and other industries, in part by setting and enforcing workplace safety and health standards. To carry out its responsibilities under the Occupational Safety and Health Act of 1970, as amended (OSH Act), OSHA establishes workplace safety and health standards; conducts inspections; investigates complaints from workers and reports of fatalities and severe injuries at worksites; and offers cooperative programs, training, and outreach, among other efforts. OSHA is responsible for enforcing private sector employers’ compliance with these standards in about half the states, while the remaining states have assumed that responsibility under a state plan approved by OSHA. These “state-plan states” adopt and enforce their own standards (which must be “at least as effective” in providing safe and healthful employment conditions as the federal standards). With respect to federal employers, federal agencies are generally required to establish and maintain a comprehensive and effective occupational safety and health program that is consistent with OSHA’s standards. OSHA is generally responsible for inspecting federal employers in all states, including state-plan states. As part of its enforcement, OSHA conducts on-site inspections of federal and non-federal employers, collecting evidence through methods such as observation, document review, and interviews. Steps in an inspection may include an opening conference, a walkaround by inspectors, worker interviews, and a closing conference. Based on evidence developed during the inspection, OSHA evaluates whether the employer has violated any safety or health standards. The inspection may result in issuance of a citation if appropriate, and possible appeals by the employer (see fig. 3). Although OSHA does not fine federal agencies, it does monitor these agencies and conducts federal workplace inspections in response to workers’ reports of hazards. Since workers at meat and poultry plants include both plant employees and FSIS employees, OSHA officials may inspect FSIS, the plant employer, or both when it receives a complaint or referral about hazards at the plant. OSHA conducts both programmed and unprogrammed inspections. Programmed inspections are planned based on injury incidence rates, previous citation history, or random selection. For example, OSHA’s emphasis programs focus inspections on a particular safety or health hazard or a specific industry. Unprogrammed inspections are conducted in response to imminent danger, fatalities, worker complaints, referrals, and catastrophic events (such as hospitalizations). FSIS inspects each meat and poultry carcass at the majority of meat and poultry plants throughout the United States. The Federal Meat Inspection Act and the Poultry Products Inspection Act give FSIS responsibility for ensuring the safety and wholesomeness of meat and poultry that enter interstate commerce. As a federal employer, FSIS is also required to establish and maintain a comprehensive and effective occupational safety and health program for its employees that is consistent with OSHA’s standards. However, OSHA (or a state agency in a state-plan state) is responsible for overseeing the safety and health of non-federal plant workers. FSIS’s Environmental, Safety, and Health Group administers FSIS’s occupational safety and health program and investigates safety concerns of FSIS inspectors. Within the Department of Health and Human Services, NIOSH conducts occupational safety and health research and workplace evaluations, and makes recommendations to prevent worker injuries and illnesses. In 2016, we reviewed NIOSH evaluations on hazards in the meat and poultry industry such as those associated with musculoskeletal disorders (MSD), chemical exposure, and pathogens and animals, and recommended in our report that NIOSH conduct a study of the injuries and illnesses experienced by meat and poultry sanitation workers. In 1994, after a workplace fire in 1991 that killed 25 poultry workers in North Carolina, OSHA and FSIS signed an MOU on how the two agencies could work together on worker safety and health at meat and poultry plants. The MOU outlines the policies and procedures the agencies agreed to use, including a process for FSIS to refer serious hazards to OSHA, plans for OSHA and FSIS to develop and implement training on hazard recognition for FSIS staff, an agreement to coordinate on the development of standards and share information on common concerns, and plans for evaluating implementation of the MOU. Meat and poultry plants use chemicals such as antimicrobials to reduce potential contamination on food and machinery during processing. Antimicrobials may be sprayed directly on meat or poultry, or may be used to clean machinery. FSIS officials and worker advocates have raised worker safety concerns about peracetic acid, an antimicrobial chemical that is being used by the meat and poultry industry for both of these purposes. Peracetic acid has recently become the antimicrobial of choice, according to an FSIS official and a representative from an advocacy group. An FSIS official told us that this was because it is cheap and effective at reducing potential contamination on food. In addition, it is safe to use on food because it generally degrades before consumption, according to FDA officials. FDA, FSIS, EPA, and OSHA all play a role in regulating the use of chemicals at meat and poultry plants. Under the Federal Food, Drug, and Cosmetic Act (FFDCA), as amended, FDA approves food additives, which include antimicrobial food additives, to ensure the food to which they are applied is safe for human consumption. Antimicrobial food additives such as peracetic acid are applied to meat or poultry to reduce the incidence of human illness from food-borne pathogens, such as Salmonella and Campylobacter. FSIS reviews new ingredients and new technology, including new substances or new applications of substances, to determine whether they are safe and suitable for use in meat and poultry products. FSIS’s review includes an assessment of whether the substance could affect food safety, FSIS regulations, inspection procedures, or the safety or health of FSIS inspection personnel. FSIS coordinates its reviews of new ingredients with FDA’s reviews, in accordance with an MOU between FSIS and FDA, most recently amended in January 2000. EPA is responsible for regulating chemicals that meet the definition of a pesticide under the FFDCA and the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), as amended. Peracetic acid meets the definition of an “antimicrobial pesticide” regulated by EPA when it is used to disinfect, sanitize, or inhibit the growth of microorganisms on surfaces and machinery used in meat and poultry plants. OSHA may regulate the use of chemicals as part of its responsibility for overseeing workplace safety and health. For example, the hazard communication standard requires chemical manufacturers and importers to develop Safety Data Sheets that describe the chemicals’ hazards and include information on safe handling, among other things. The standard also requires employers to ensure their employees have access to these sheets and to provide training on handling these chemicals appropriately. Each agency has a different review or oversight responsibility. The same chemical may undergo different types of review, depending on its intended use in meat or poultry plants. For example, as part of EPA’s pesticide registration process, EPA conducts risk assessments to estimate the nature and probability of harmful effects on the environment and human health, which may include people who may be exposed to the pesticides through their work. FDA’s review of antimicrobial food additives, as mentioned above, focuses on safety to consumers, and does not include a worker safety component. OSHA’s inspections of the meat and poultry slaughter and processing industry increased from 177 in 2005 to 244 in 2016, due primarily to an increase in poultry inspections (see fig. 4). Officials explained that the increase in meat inspections from 2009 to 2010 and poultry inspections from 2008 to 2012 were associated with increases in complaints during those time periods. OSHA officials said that all inspections decreased in 2013 partly due to the federal government shutdown that year. They added that poultry inspections increased from 2013 to 2016, which officials attributed to the introduction of new severe injury reporting requirements, as well as several emphasis programs focusing inspections on the poultry industry. OSHA consistently conducted more meat than poultry inspections, due to the greater number of meat plants than poultry, according to OSHA officials. In states with state OSH plans, inspection numbers increased from 183 inspections in 2005 to 212 in 2016, due primarily to an increase in meat inspections (see fig. 5). State-plan states conducted almost three times as many total meat inspections as poultry from 2005 through 2016. The number of state poultry inspections has remained steady over the time period, in contrast with the increase seen in federal OSHA poultry inspections. OSHA officials said they did not believe there is an overarching explanation for the trend in state-plan state inspections, because each state plan is independently run, and added that publicly available data show the increase in meat inspections from 2008 to 2010 could have been driven by a large increase in programmed inspections conducted by state-plan states during that time, along with increases in several types of unprogrammed inspections in 2010. in the meat and poultry industry. These programs instruct inspectors to investigate potential hazards such as chemical exposure, noise, and ergonomic hazards. Two of the four programs also focus on issues such as bathroom access, temperature of the plant, and employer recording of injuries and illnesses, to check for recordkeeping violations. OSHA inspections incorporated three of these emphasis programs in 2016; the remaining program did not have inspections that year. OSHA’s most frequently used national and regional emphasis programs in meat and poultry plants in 2016 are shown below (see fig. 6). failing to inspect and test equipment failing to investigate an ammonia leak, and to investigate ammonia vapor releases from pipes and valves within 48 hours without input from at least one employee having experience and knowledge specific to the process being evaluated, and failing to ensure the findings of the process hazard analysis were resolved in a timely manner and actions documented failing to provide workers with an appropriate respirator for chlorine and sodium hydroxide releases failing to provide workers adequate training and information regarding the hazards of ammonia lack of control procedures to protect workers from electrical hazards and being struck or caught by machine parts exposing employees to trip hazards and potential electrical hazards by obstructing passageways failing to conduct fire, chemical release, and extreme weather evacuation drills. OSHA initiates unprogrammed inspections in response to required employer reporting of fatalities or severe injuries and complaints or referrals from sources such as employees, union representatives, media reports, or others. Unprogrammed inspections may include issues covered by a relevant emphasis program as well. OSHA’s unprogrammed inspections of the meat and poultry industry recently increased sharply— from 95 in 2014 to 210 in 2015—mainly due to the new severe injury reporting requirements (see fig. 7). According to agency officials, OSHA decreased the number of planned programmed inspections in order to reallocate resources as the number of unprogrammed inspections increased. If OSHA determines that a meat or poultry plant has violated a workplace safety or health standard, it may cite the plant, specifying which standard or standards were violated (see fig. 8). The most frequently cited standard for employers in the meat and poultry industry, the control of hazardous energy (lockout/tagout), relates to safely shutting down a machine, and ensuring it remains shut off, while the machine is being serviced. OSHA inspects safety controls related to this standard as part of its emphasis program for amputations. In cases where an applicable standard does not exist, OSHA may use the general duty clause of the OSH Act to cite a plant for exposing its employees to a hazard. For example, OSHA does not have a specific standard related to ergonomic hazards, which may cause MSDs. Workers we interviewed in all five states said they frequently experience pain related to postures or movements, and medical experts we interviewed said that meat and poultry workers experience high rates of MSDs. Citing the general duty clause can be challenging and resource intensive due to the high burden of proof necessary to establish each element of the violation, such as the difficulty in showing that work hazards caused an injury, according to OSHA officials. In 2016, OSHA proposed initial meat and poultry plant penalties with a median of $7,000 and assessed final penalties with a median of $4,900 for inspections where violations were found (see fig. 9). Proposed penalties may be reduced after employers contest them before an administrative law judge, or as a result of negotiating penalty amounts with OSHA through an informal settlement process. A representative of one worker advocacy group we interviewed said lowering penalties weakens OSHA’s deterrence capabilities. OSHA officials and one worker advocate said that allowing companies to negotiate lower penalties can benefit workers because it may result in companies agreeing to create safety programs or finding other solutions that improve worker safety. One OSHA official said that citations may affect a company’s workers’ compensation insurance rate, magnifying the financial impact of the violation. According to OSHA officials, initial and final penalties increased in 2010 due to administrative adjustments that had the effect of raising penalties on average. We previously reported that, according to an OSHA official, OSHA increased penalties in 2010 after it determined that penalties were too low to deter employer violations. In addition, officials said that a few large penalties raised average penalties in 2010-2013. OSHA compliance assistance efforts during the years 2005-2016 included worker outreach through local foreign consulates, support for training meat and poultry workers, administering employer recognition programs, and supporting state consultation programs that provide technical assistance to small and medium-sized businesses. OSHA has not comprehensively tracked its compliance assistance activities in the past, but officials told us the agency launched a database module that started tracking these activities in fiscal year 2017. Recent examples of OSHA’s compliance assistance efforts related to meat and poultry plants include the following: OSHA officials stated that in fiscal years 2011-2015, states provided 558 on-site consultation visits, largely funded by OSHA, to small and medium-sized meat and poultry plants. The visits provide confidential safety and occupational health advice to small and medium-sized businesses in all states across the country, according to OSHA, with priority given to high-hazard worksites. These on-site consultation programs, at no cost to employers, work with employers to develop or maintain injury and illness prevention programs, which included assisting employers on identifying potential hazards to prevent injuries, according to OSHA officials. OSHA officials stated that, as of July 2016, six meat and poultry plants were participating in the Safety and Health Achievement Recognition Program, which recognizes small and medium-sized businesses that have used OSHA's on-site consultation program services and operate an exemplary injury and illness prevention program, according to OSHA officials. OSHA officials stated that, as of July 2016, eleven meat and poultry plants participated in OSHA’s Voluntary Protection Programs (VPP), which aim to recognize employers that implement effective safety and health management systems and maintain worker injury and illness rates below average for their industry. OSHA has published guidance and other resources related to safety and health in the meat and poultry industry, such as a 2013 publication on preventing musculoskeletal injuries in poultry processing, and a poultry processing safety and health topics web page. OSHA provided grants for worker safety and health education to nonprofit organizations through the Susan Harwood Training Grant Program. These grants target underserved or low-literacy workers and workers in high-hazard industries. For example, in fiscal year 2016, OSHA awarded a grant to the Western North Carolina Workers Center to train poultry workers on topics including personal protective equipment, hazard mapping, ergonomics, and sanitation worker safety. OSHA officials stated that the agency conducted outreach with poultry industry representatives to discuss common hazards, such as MSDs and infectious pathogens, among others. For example, according to OSHA officials, in support of a Regional Emphasis Program on poultry processing, OSHA’s Dallas Regional Office conducted workshops in the southwestern United States in December 2015 to share safety and health information with employers in the poultry processing industry. OSHA worked with groups such as unions, trade or professional organizations, and educational institutions through its Alliance program to develop compliance assistance tools and share information with employers and workers to help prevent injuries, illnesses, and fatalities in the workplace. For example, OSHA officials said that the agency has formed alliances with foreign consulates to reach workers with limited English proficiency. Also, OSHA’s Omaha Area Office has an alliance with local organizations to help protect workers in the meat packing industry. OSHA faces challenges identifying and addressing meat and poultry worker safety and health concerns because workers may be reluctant to speak with inspectors, according to workers we interviewed in four states, as well as worker advocates. Workers we interviewed in four states said they fear dismissal or other punishment if they complain to OSHA or their state OSH agency about their workplace concerns, such as sustaining injuries or being discouraged from using the bathroom. We reported in 2016 that meat and poultry worker vulnerability may hinder reporting of work-related illnesses and injuries, according to federal officials and worker advocacy groups. In particular, these officials and advocates said that some meat and poultry workers may be less likely to report or seek treatment for injuries and illnesses because of their vulnerable status as undocumented or foreign-born workers and because of their economic vulnerability. Meat and poultry workers may also be reluctant to share information with OSHA at their workplace, as on-site interviews often do not allow workers to remain anonymous, even when conducted in private, according to workers in one state, as well as worker advocates we interviewed. According to OSHA officials, OSHA generally conducts worker interviews on-site during inspections. Officials added that, when OSHA conducts on- site interviews, inspectors tell plant supervisors which workers they wish to speak with, so the supervisors can find replacements for these workers on the production line. Therefore, the supervisor knows the identities of interviewed workers, even if the interview itself is private. Officials added that if workers cannot be pulled from the line, they are sometimes interviewed in front of other workers as they continue working. The OSH Act prohibits employers from retaliating against employees for filing complaints with OSHA. However, OSHA officials, workers from two states, and worker advocates we spoke with noted that workers may feel more comfortable sharing concerns about hazards if they are interviewed off-site. The OSHA Field Operations Manual, which sets forth OSHA’s enforcement policies and procedures, allows inspectors to interview workers in locations other than the workplace, and states that, “a free and open exchange of information between OSHA inspectors and employees is essential to effective inspections.” OSHA’s performance goals in DOL’s Strategic Plan include preventing discrimination against workers who report hazards. According to OSHA officials, they will try to schedule an interview off-site if an employee expresses discomfort or if a union arranges it. Officials stated that they do not automatically offer off- site interviews to each employee; rather, inspectors should consult with their Area Directors before offering to conduct an interview off-site. However, OSHA officials told us that inspectors interview meat and poultry workers off-site infrequently, since off-site interviews can be challenging and take additional time, as workers may be difficult to contact or may have ceased working with the company. OSHA also may be challenged to find an acceptable venue when the employee is available. They added that conducting interviews off-site is more feasible in cases when unions or worker advocacy groups have facilitated these meetings, and that interviewing workers on the production line may be advantageous in some cases, as it allows workers to clarify some uncertainties by showing the inspector how their work is done. According to federal internal control standards, agencies should use quality information to achieve their objectives. Although OSHA officials stated that OSHA has taken steps to enable the collection of quality information from workers, such as conducting a representative number of interviews and refraining from reporting information from specific interviews to employers, officials acknowledged that some workers may feel more comfortable sharing concerns about hazards if they are interviewed off- site. Taking additional steps to encourage workers to disclose sensitive concerns, such as by considering off-site interviews or exploring other options to obtain the information anonymously, would help OSHA learn details about hazards, injuries, and illnesses during an inspection and provide additional information to help improve the agency’s efforts to identify or address conditions that endanger worker safety and health. In particular, OSHA may not be aware of the scope of bathroom access issues, which meat and poultry workers we interviewed in all five states said was a concern, because the agency’s reliance on interviewing workers on-site may cause it to miss concerns of workers who are afraid to speak up. In addition, OSHA inspectors do not always ask specifically about bathroom access, and workers who experience bathroom access problems may not volunteer this information. OSHA’s sanitation standard provides that “toilet facilities, in toilet rooms separate for each sex, shall be provided in all places of employment,” based on the number of employees of each sex. According to OSHA guidance, this standard requires employers to make toilet facilities available so that employees can use them when they need to, and may not impose unreasonable restrictions on employee use of the facilities. OSHA guidance also states that denial or delay of bathroom access can result in various serious health effects, such as urinary tract infections, constipation, abdominal pain, and hemorrhoids. Meat and poultry workers may be denied timely bathroom breaks because they work in an assembly line environment, which generally requires workers to be replaced if they leave their station. Workers we interviewed in all five states said their requests to use the bathroom are often delayed or denied, and workers in two states said they fear punishment if they ask to use the bathroom too frequently or complain about lack of bathroom access to their supervisors or to OSHA. Worker advocates we spoke with reported hearing similar concerns on a frequent basis and four worker advocacy groups in different regions of the country reported concerns related to the timeliness of workers’ access to bathrooms based on non-generalizable interviews of poultry workers. For example, workers we interviewed in three states said they had suffered negative health effects, such as kidney problems, from delayed or denied bathroom breaks. One worker said she refrained from eating or drinking until she had completed her shift, to avoid needing a bathroom break. Also, workers we interviewed in all five states said that long lines at the bathroom further limited bathroom access. Meat and poultry industry representatives we interviewed said that bathroom access is not a problem because companies provide bathroom access when needed. They said companies take different approaches to ensuring bathroom access, such as having a supervisor fill in for a worker who leaves the line, establishing scheduled breaks, or allowing workers to leave the line as needed, even without a replacement. However, according to worker advocates, supervisors may vary in implementing plant policy and may feel pressure to fulfill production quotas. One industry representative told us they believe some supervisors in meat and poultry plants deny bathroom access in order to maximize production output. OSHA officials said they did not believe lack of bathroom access was a widespread problem in the meat and poultry industry. However, OSHA officials said they have not compared bathroom access practices in the meat and poultry industry with other industries involving moving production lines because they vary by establishment even within a single industry. OSHA issued a citation in March 2016 to a meat plant related to bathroom access, although that citation is currently being contested by the employer, and is pending as of September 15, 2017, according to officials. From 2005 through 2016, OSHA issued three additional citations to meat and poultry plants related to bathroom access; however, these citations were withdrawn after the employers reached formal or informal settlements with OSHA. OSHA guidance for inspecting poultry plants allows inspectors to ask specifically about bathroom access when there are complaints about it or prior problems, or in the context of specific regional emphasis programs, such as the poultry emphasis program in the southeast United States. In addition, OSHA’s poultry processing regional emphasis programs in regions IV and VI require the inspector to assess the adequacy of toilet and sanitary facilities, and of worker access to them. If there are no prior complaints or relevant emphasis programs, OSHA officials said inspectors ask workers about any other concerns, but do not always specifically ask about bathroom access. Officials said that requiring inspectors to investigate bathroom access would divert inspectors’ limited resources from higher-priority hazards and could result in companies’ claiming that the line of questioning is unsubstantiated. OSHA requires inspectors at poultry plants to consistently investigate other specific hazards, such as ergonomics hazards. According to OSHA officials, the agency selected these hazards based on prior inspection and illness and injury data showing the hazards to be widespread in the industry. Officials contrasted these with the small number of citations issued related to bathroom access. However, given that workers whom we asked about bathroom access during off-site interviews in all five states said that bathroom access is a problem, and worker advocates we interviewed stated it was as well, it is possible that OSHA is missing instances of this hazard, resulting in incomplete data to guide its inspections. According to federal internal control standards, managers should use quality information to achieve the agency’s objectives. While officials stated they believe that inspectors’ open-ended questions will prompt workers to share any concerns they have with bathroom access, workers may not volunteer this information unless specifically asked. For example, workers may not be aware that they have the right to access bathrooms and so may not realize that such information would be of interest to OSHA, according to one worker advocate we interviewed. Gathering additional information about whether meat and poultry workers experience delayed or denied access to bathrooms could help OSHA determine the extent of the problem and be better positioned to protect worker safety and health. OSHA officials told us that addressing medical mismanagement at meat and poultry plants is challenging because of the complex issues involved and OSHA’s limited oversight of plants’ health unit staff. Specifically, they said that ensuring proper certification for medical providers is the responsibility of state authorities. In hazard alert letters to four meat and poultry plants, OSHA noted its concern that plant health unit staff were or may have been inappropriately supervised and working beyond the scope of their medical license. Officials said OSHA contacted state authorities who oversee health unit staff in one state about licensing concerns, and they planned to contact additional states. OSHA officials we interviewed expressed concern about meat and poultry workers’ access to plant first aid stations or health units and the quality of medical treatment workers receive. OSHA issued one general duty clause citation and four hazard alert letters to five meat and poultry plants in 2015-2016 related to medical mismanagement issues, which describe OSHA’s findings or concerns about inappropriate medical treatment, lack of worker access to health care, underqualified practitioners, and challenges to reporting (see sidebar). In the citation, OSHA found that the plant delayed care for injured workers, stating these actions could result in risk of further injury or exacerbated pain, among other conditions. In a 2015 hazard alert letter to a poultry plant, OSHA noted that it appeared the plant used its first aid station to prevent injuries from appearing on the plant’s OSHA log, such as by failing to refer workers to a physician for evaluation or treatment when appropriate. In addition, OSHA noted that a number of workers were fired after suffering MSDs, sometimes on the same day of the MSD occurrence, and further noted workers’ fears of being fired for visiting the first aid station. OSHA recommended voluntary improvements to the plant’s medical management practices. In a 2014 hazard alert letter to another poultry plant, OSHA identified practices that it determined were contrary to good medical practice for managing work-related MSDs, including prolonged treatment by nursing station staff without referral to a physician. The letter included one example in which a worker made over 90 visits to the nursing station before referral to a physician. Meat and poultry workers we interviewed in all five states reported problems with on-site medical care; for example, workers said their supervisor or plant nurse may not take appropriate steps when a worker is injured or ill, such as not referring the worker to a doctor or failing to move the worker to a different work station on the line. Worker advocates we spoke with reported hearing similar concerns. One worker we interviewed said that she experienced severe pain in her wrist and visited the on-site medical unit over the course of 3 months before they referred her to a doctor affiliated with the plant, during which time she continued to work. When the doctor did not find any problems on her X-ray, she went to a doctor unaffiliated with the plant, who found a bone fracture. Meat and poultry workers in three states also said that fear of being reprimanded or losing their jobs sometimes compels them to refrain from accessing care at a plant health unit, or from complaining about inadequate medical care. Workers in one state said they are penalized every time they visit their plant health unit. Amputation Leads to OSHA Detection of Medical Mismanagement and Other Hazards Following the amputation of a worker’s finger at a poultry plant in 2016, the Occupational Safety and Health Administration (OSHA) conducted inspections and cited the plant for violations related to: deficiencies with the procedures meant to stressors as they performed tasks requiring repetitive, forceful motion for extended periods of time, often in awkward positions failure to comply with generally accepted good engineering practices with respect to exhaust systems, ammonia sensors, and alarms, exposing workers to the hazards posed by a potential ammonia release failure to provide free personal protective equipment to workers failure to repair or replace damaged electrical equipment, exposing workers to the risk of electrical shock. According to one industry representative, plants do not have enough guidance on how to ensure their health units are properly staffed and operated. OSHA issued guidance in 1999 about occupational health professionals’ qualifications and scope of practice, as well as a 2006 best practices guide on the fundamentals of a workplace first aid program. However, OSHA officials told us these guidance documents do not address many of the medical management issues they are currently observing in plant health units, which include lack of supervision of medical personnel, personnel working outside their scope of practice, out- of-date health unit protocols, inappropriate response to injuries and illness, lack of quality assurance, poor worker access to health units, and inadequate recordkeeping. OSHA officials told us that the agency has recently begun updating its guidance related to health units to help clarify employers’ responsibilities with regard to the personnel in these units and the services they provide. However, these updates have not been completed, according to officials. Federal internal control standards call for agencies to externally communicate the information needed to achieve their objectives. By updating and issuing its guidance, OSHA could help plant health units be better positioned to provide appropriate care to injured and ill workers. OSHA also issued hazard alert letters recommending the plant take steps to address the following hazards: medical management practices that prevent appropriate standards of care, increase the likelihood of workers developing serious musculoskeletal disorders, restrict referrals to physicians, and discourage employees from reporting symptoms and injuries. In some cases, plant management may deny entry to OSHA inspectors attempting to conduct an inspection, and resolving these issues can create delays. Although the OSH Act authorizes OSHA inspectors to enter plants “without delay” at reasonable times to conduct inspections, employers have the right to refuse entry, in which case OSHA may seek an inspection warrant. If the employer denies entry after OSHA obtains a warrant, OSHA determines its response on a case-by-case basis. Denials of OSHA inspector entry to meat and poultry plants increased in 2016. All 15 denials in that year occurred in region IV, which includes the Southeast United States. In contrast, from 2005-2015, there were 16 denials of entry in the meat and poultry industry. The denials in 2016 took place in Georgia (6), Alabama (5), Florida (2) and Mississippi (2). According to OSHA officials, the agency experienced denials in all 15 cases when it inspected a plant in response to a complaint or referral and moved to expand the inspection to incorporate its regional emphasis program for the poultry industry. OSHA has not been able to expand its inspections in any of these cases, according to OSHA officials. These denials of entry have the potential to limit OSHA’s understanding of worker safety and health in plants during the days or months prior to gaining entry, and addressing denials is resource-intensive, according to OSHA officials. There is currently ongoing litigation in a case in which OSHA was inspecting a plant after an employee was burned by an electrical fire. OSHA attempted to expand the inspection under a relevant emphasis program, and the plant contested the expansion in court. OSHA officials said that the case is pending as of September 15, 2017, and they will consider the outcome of the case when determining their response to any similar denials of entry in the future. OSHA and FSIS’s main vehicle for collaboration on worker safety and health is their 1994 MOU, but efforts to implement and evaluate this agreement have been limited. The MOU outlines the policies and procedures the agencies agreed to use, including (1) a process for FSIS to refer serious hazards facing plant workers or FSIS inspectors to OSHA, (2) plans for OSHA and FSIS to develop and implement training for FSIS staff in hazard recognition, and (3) an agreement to coordinate standards development and exchange information on matters of common concern. In 2005, we found that agency efforts to implement this MOU had lapsed, and we recommended that OSHA and FSIS revisit and update certain aspects of their MOU, as discussed below. OSHA and FSIS have taken some steps to implement the policies and procedures outlined in the MOU. However, we found issues with the MOU’s implementation in these three areas, hampering achievement of the MOU’s goals. Further, OSHA and FSIS have not evaluated the implementation of the MOU. The 1994 MOU calls for FSIS inspectors—who may observe hazards to both plant workers and inspectors—to refer serious workplace hazards to OSHA, via FSIS headquarters. Serious hazards are defined in the MOU as those for which there is a substantial probability that death or serious physical harm could result. The two agencies have established a process for these referrals, but according to FSIS officials its inspectors are reluctant to make them, as discussed below. Until 2014, FSIS inspectors were to refer these hazards to OSHA by sending a referral to OSHA via FSIS headquarters, but, according to FSIS officials, inspectors rarely made referrals under the former system. In 2014, FSIS established a procedure for its inspectors to notify OSHA directly of serious workplace hazards that may affect both FSIS inspectors and plant workers and issued a notice that provides instructions for inspectors to use OSHA’s nationwide public toll-free number to report such hazards. Because the agencies are not able to track all of these referrals, as callers can remain anonymous, it is not possible to assess the extent to which FSIS inspectors are making them, according to OSHA officials. OSHA data show that since 2012, OSHA had received 14 complaints and 2 referrals about FSIS, of which 5 phone calls were from FSIS current or former employees, but these data are likely incomplete. According to FSIS officials, its inspectors may be reluctant to make these referrals because they fear it could trigger an OSHA inspection of FSIS. As a federal employer, FSIS is responsible for ensuring its own employees are protected from plant hazards, and is subject to OSHA inspection and notification of safety and health hazards faced by its employees. OSHA data show that from 2005 to 2016, OSHA inspected FSIS in meat and poultry plants 105 times, of which 14 were in response to complaints and referrals. FSIS occupational safety and health specialists said these inspections can be a drain on their resources because they are time-consuming and there are very few FSIS safety and health specialists to respond to them. FSIS employs three occupational safety and health specialists, along with one team lead, resulting in a ratio of one specialist for every 3,100 employees, according to FSIS officials. FSIS inspectors we contacted did not report communicating with OSHA, and stated that they share any worker safety concerns they might have with their management or with plant contacts. FSIS occupational safety and health specialists told us that FSIS requests technical assistance from OSHA to address hazards that may affect both plant workers and FSIS inspectors. However, they said that OSHA may inspect FSIS instead of providing assistance, even though OSHA has other ways of offering technical assistance to federal agencies. For example, FSIS occupational safety and health specialists told us that when they reached out to OSHA for assistance with hazards posed by peracetic acid, OSHA instead inspected FSIS for what FSIS considered to be unrelated hazards. According to OSHA officials, their enforcement team is obligated to respond to complaints and referrals, including calls to their toll-free number, and may inspect FSIS if there is a report of a hazard at a meat or poultry plant to which FSIS employees are exposed. OSHA officials noted that FSIS employees should not be reluctant to report hazards because OSHA inspections can protect FSIS workers. OSHA officials told us that they are able to provide assistance with hazards if FSIS contacts OSHA’s area offices, but if in the process, OSHA learns about a potential hazard that is FSIS’s responsibility, then OSHA may investigate the agency. FSIS officials told us they did not believe this process would ensure a quick enough response by OSHA to provide FSIS assistance with urgent hazards that could be harming FSIS inspectors and plant workers. OSHA and FSIS agreed under the 1994 MOU to provide training to FSIS inspectors so that they could recognize serious workplace hazards faced by plant workers and FSIS inspectors. OSHA officials told us they developed such training for FSIS in the mid to late 1990s, but according to FSIS officials the course was too excessive and burdensome for FSIS inspectors, whose main responsibility is food safety. In 2005, we recommended that OSHA and FSIS revisit and update their MOU to ensure that FSIS inspectors receive training in recognizing and referring workplace hazards to OSHA. The two agencies did not update their MOU, but FSIS officials told us the agency strengthened its training of FSIS inspectors and OSHA officials told us that the agency planned to cooperate with FSIS to encourage revitalization of FSIS’s inspector training. According to FSIS officials, in 2013, FSIS began requiring its inspectors whose duties were not limited to being on the line to take AgLearn 8500, an FSIS course on identifying and reporting hazards that was reviewed by OSHA. This course—which is now available only on CD—is required for inspectors who do not work on the line and is optional for those who do. In 2014, OSHA provided three training sessions on identifying workplace hazards to FSIS managers, according to OSHA officials. However, FSIS was not able to provide information on whether or how the managers who received the training had shared what they learned with FSIS inspectors because it did not track this information. Line Speed Meat and poultry slaughter and processing generally occurs along a “disassembly line,” on which workers and machines produce various cuts of meat. These lines can include live hang in poultry plants, evisceration lines, and “cone” lines where deboning occurs. The Food Safety and Inspection Service (FSIS) sets maximum evisceration line speed in order to ensure its inspectors can effectively perform their inspection procedures. According to FSIS officials, FSIS does not regulate the speed of other lines, which may run slower than evisceration lines due to complex worker tasks. The Occupational Safety and Health Administration (OSHA)— which is responsible for overseeing worker safety and health—does not play a role in regulating line speed, according to FSIS and OSHA officials. GAO reported in 2016 on concerns that high line speeds may exacerbate existing hazards that can cause musculoskeletal disorders (MSD). OSHA and National Institute for Occupational Safety and Health (NIOSH) officials told us that line speed—in conjunction with forceful exertions, awkward postures, and other factors—affects the risk of MSDs. When plants increase line speed, they may address worker safety by increasing staffing or creating new lines. speed may affect worker safety (see sidebar). FSIS officials told us that OSHA provided comments after the proposed poultry modernization rule was published in the Federal Register. According to the fall 2016 unified regulatory agenda, FSIS is working on a proposed rule to amend the federal meat inspection regulations to establish a new inspection system for hog slaughter establishments. FSIS officials told us they consulted with OSHA officials about the possible worker safety implications of the proposed rule on hog slaughter prior to the rule being sent to OMB. However, they also stated that—contrary to the OSHA officials cited above—they believed the OMB review process was sufficient for addressing any worker safety implications in rules proposed by FSIS. FSIS and OSHA agreed to jointly evaluate the effectiveness and impact of the actions taken under the MOU—in part by tracking the number of FSIS referrals to OSHA, inspections made in response to these referrals, and the number and types of hazards cited in these inspections—and to make adjustments to the MOU as appropriate. According to FSIS and OSHA officials we spoke with, this has not been done. Neither OSHA nor FSIS was able to tell us why these evaluations did not take place. For example, the MOU states that when training has been completed, OSHA and FSIS will analyze field-level evaluations to assess whether the training has raised FSIS inspectors’ awareness and reporting of serious workplace hazards. OSHA officials said they do not know if FSIS used the training materials they provided to FSIS to train FSIS field inspectors. FSIS officials said the training OSHA provided was too time-consuming, so they did not use it. Further, FSIS officials told us the agency does not formally survey staff who complete AgLearn 8500 because it is available only on CD. Our prior work has noted that developing mechanisms to monitor, evaluate, and report results can help enhance and sustain collaboration. Evaluating the implementation of the MOU and making any needed changes, including setting specific timeframes for periodic evaluations of actions taken under the MOU, would help ensure the goals of collaboration are fully met. Federal reviews of certain antimicrobial chemicals before they are used in meat and poultry plants leave gaps with respect to worker safety and health. FSIS inspectors and workers in meat and poultry plants are exposed to antimicrobial chemicals every day, as they are commonly used during all work shifts, both on animal and bird carcasses and on work surfaces and machinery. In general, the potential for chemical exposure is greater for plant workers than for FSIS inspectors. According to officials we spoke with at various plants, plant workers handle these chemicals by receiving shipments, opening containers, and filling machines with the chemical, among other ways, while FSIS inspectors are generally not present at various times that workers are using the chemical, most notably, when the plant is being cleaned between shifts. Depending on a chemical’s intended use, it may or may not undergo a federal review of the risks it poses to worker safety and health before it is used in the plant. The regulation of chemicals used in meat and poultry plants is complex, as several federal agencies have their own specific areas of jurisdiction with regard to their oversight. OSHA does not conduct reviews of chemicals before they are used in the workplace, according to OSHA officials. OSHA officials stated that the agency is limited from taking such an approach, because doing so would overwhelm the agency’s resources. In addition, OSHA is charged with oversight of workers in multiple industries—not just the meat and poultry industry—which would make it difficult for them to utilize a review process that examines all chemicals before they are used in the workplace. Antimicrobial chemicals intended for use as sanitizers in plants to clean machines and surfaces are generally subject to EPA’s pesticide registration process, which considers user or worker safety (see fig. 10). This review does not generally include antimicrobial chemicals applied directly to meat and poultry in plants. When antimicrobials are proposed for use directly on meat or poultry to combat foodborne pathogens, FDA and FSIS both conduct reviews before they are used in the plant, but neither review specifically focuses on plant worker safety or health. FDA’s review of antimicrobial food additives is focused on ensuring they are safe for consumers to eat. FSIS’s review is focused on ensuring that the antimicrobials do not affect the safety of meat and poultry products or interfere with inspections and that they comply with other FSIS regulations; it also includes an assessment of any adverse effects on FSIS inspector safety and health as they perform their duties. Since these federal reviews do not generally take into consideration the occupational risk of chemicals to plant workers, who make up the majority of personnel in a plant, these chemicals could be used in plants directly on meat or poultry to combat foodborne pathogens without a federal assessment of their potential effects on plant worker safety and health or how these effects may be prevented or addressed. As a result, plant workers may be put at risk of chemical hazards. During its review of antimicrobial chemicals proposed for use directly on meat or poultry, FSIS receives information from chemical manufacturers that could be relevant to chemical safety for both FSIS plant-level officials and meat and poultry workers. FSIS occupational safety and health officials told us that the information they request goes beyond what is included in the chemicals’ Safety Data Sheets, and may include directions for use or safety information that is specific for dilution levels and conditions of use at plants. However, this information is not shared with OSHA, NIOSH, at the local level with FSIS in-plant inspectors, or with plant management because FSIS does not have a process for doing so. OSHA and FSIS occupational safety and health officials and an industry representative we interviewed told us that this information would be useful to them when it is available. OSHA officials told us that information on chemical hazards, employee exposure, and safety controls and practices would enable it to strengthen its response to protecting all workers from these chemical hazards and develop outreach and technical assistance for the meat and poultry industry. An FSIS safety and health official told us that this information would have been useful at one plant, because neither plant management nor FSIS inspectors at the plant had received information to adequately protect FSIS employees from the effects of peracetic acid, and there had been complaints from inspectors about the chemical. In addition, NIOSH conducts occupational safety and health research, among other things, and could benefit from such information. Federal internal control standards call for agencies to internally and externally communicate the necessary quality information to achieve the entity’s objectives. By FSIS establishing a process to regularly share the worker safety information it collects during reviews of new chemicals—internally with FSIS inspectors and externally with plant management, OSHA, and NIOSH—the federal government will be better positioned to use existing resources to support the safety and health of plant workers and FSIS inspectors. As discussed above, FSIS conducts reviews of new ingredients and technologies, including antimicrobial chemicals, proposed for use on meat and poultry products8. However, there may be information gaps in FSIS’s examination of the potential risks these new chemicals may pose to inspector safety and health. As part of this review, FSIS requests information from chemical manufacturers or plants describing how the new chemicals will not adversely affect the safety and health of FSIS inspectors. As FSIS’s Environmental, Safety, and Health Group reviews this information, other program areas within FSIS also review the submission to determine whether the chemical is otherwise safe and suitable under the conditions of its intended use—i.e., that it will not adversely affect product safety, violate FSIS regulations, or interfere with inspection procedures. If FSIS determines that the chemical will not have these effects, the agency will issue a letter of “no objection” for the use of the new chemical. It is unclear whether FSIS consistently reviews these chemicals to ensure they will not adversely affect inspector safety and health because the agency does not have a robust process for tracking and sharing information needed to make this determination among the various program areas within the agency participating in the review. Officials in FSIS’s Environmental, Safety, and Health Group told us that they often initially receive inadequate information to make this determination, despite new guidance developed in 2015 on the type of information that chemical manufacturers and plants may submit to enable FSIS to evaluate potential adverse effects to inspector safety. In cases where they do not receive sufficient information, the Environmental, Safety, and Health Group will ask the FSIS program area that is leading the review to request additional information from the manufacturer or plant. However, FSIS does not have a process that seamlessly tracks the worker safety information it receives as part of its review process, and FSIS occupational safety and health officials told us it is not clear whether submissions contain complete inspector safety information before a “no objection” letter is issued. In response, other FSIS officials told us that they would not approve a new chemical until they have adequate information that shows it will not adversely affect the safety and health of FSIS inspectors, among other things. Improving communication within FSIS about this review process is one goal of FSIS’s 2017 Annual Plan. To help implement this goal, FSIS formed a working group in April 2017 that is developing a draft directive to facilitate improved coordination among the program areas involved in the review process, including the Environmental, Safety, and Health Group. More specifically, the draft directive provides procedures and protocols and describes an electronic system for tracking information submitted. According to FSIS officials coordinating reviews, the electronic system will replace the current manual system and will be accessible to all program areas involved in the review process. Further, the draft of a “no objection” letter will be distributed to the program areas involved in the review to ensure that all remaining outstanding questions or issues related to the notification have been addressed prior to issuing the letter to the submitter. According to an FSIS official, the agency plans to finalize and issue the draft directive by the end of calendar year 2017 and anticipates converting to the electronic tracking system in fiscal year 2018. OSHA and FSIS officials told us that they have faced challenges responding to complaints about air quality in meat and poultry plants, because it is hard to measure airborne peracetic acid. According to OSHA, FSIS, and NIOSH officials, there is no sufficiently reliable method to measure peracetic acid in plants, in part because peracetic acid is not stable and breaks down quickly. As a result, it is harder to assess the extent of worker exposure to this chemical and plan for an appropriate response. Some plants currently use monitors to sample for the components of commercial peracetic acid (acetic acid and hydrogen peroxide); however, the effects of peracetic acid exposure on workers can be different than those caused by either of these individual chemicals or by mixtures of peracetic acid with other chemicals. In 2013, OSHA’s Salt Lake Technical Center began working to develop a validated sampling and analytical method that would permit measurement of airborne peracetic acid with a high degree of confidence. Work on the method continues, according to OSHA officials. NIOSH has begun evaluating a range of commercially available peracetic acid monitors and is planning to evaluate an air sampling method for peracetic acid. The lack of a reliable way to measure peracetic acid could also affect any efforts by OSHA to develop a permissible exposure limit (PEL), a type of workplace safety and health standard that officials said would enable the agency to more easily cite employers for exposing their workers to peracetic acid hazards, compared to using the general duty clause. According to OSHA officials, the process for developing PELs is arduous, and peracetic acid is one of many chemicals without such a limit or with one that is outdated. In response to our 2012 report, which found OSHA’s standard-setting process to be challenging and lengthy, OSHA and NIOSH developed an MOU to support their research on developing potential standards. In March 2017, NIOSH announced its intent to initiate a study of workplace uses of and occupational exposure to peracetic acid, but this study will not examine the safety and health hazards this chemical may pose if it is combined with other chemicals, as can happen in slaughter plants. The NIOSH study aims to develop an immediately dangerous to life or health (IDLH) value and an effective workplace measurement method, among other things. While the focus of this research is the characterization of workplace exposure to peracetic acid, the study is not intended to address the extent and consequences of mixing peracetic acid with other substances, which can occur in several ways in meat and poultry plants. As carcasses move from one stage of processing to another, peracetic acid can come into contact with other substances, such as when there are spills or in drainage systems. FSIS officials, a worker advocate, and plant workers we interviewed expressed concern that the mixing of chemicals can create new safety and health risks for workers. For example, an FSIS official said that an inspector at a poultry plant complained about effects from airborne chemicals that appeared to be related to the location of her work station, directly over a drain in which multiple substances were pooling. In 2011, 152 workers at an Arkansas poultry plant reported being hospitalized from effects of chlorine gas created after a supervisor added sodium hypochlorite (bleach) into a container holding a residual acidic antimicrobial solution, creating a chemical reaction. NIOSH officials told us they are aware that chemicals can be used in plants alongside peracetic acid and result in a mixed exposure, and that this may be a serious problem. Although the focus of the current peracetic acid study is primarily on the health effects of and exposures to peracetic acid alone, NIOSH officials said that NIOSH has the capability to assist in characterizing worker exposures of concern, and could consider such research in a follow-on study, depending on available resources. In addition, NIOSH officials told us that the agency will consider whether potential health hazards exist from other chemicals in the environment, particularly if they interfere with measuring peracetic acid exposures and assessing health effects in workers. Moreover, officials told us that their current study could provide the basis of follow-on research into other workplace chemical hazards, including mixtures. In 2004, NIOSH recognized mixed exposures as a priority area for the occupational safety and health research community and identified significant gaps and research needs. According to the report, workers from agriculture, construction, mining, and other industries are commonly exposed to combinations of chemical substances, biological or physical agents, and other stressors, and knowledge is limited regarding the potential health effects of mixed exposures. Identifying these effects can help characterize worker exposure and develop hazard controls that take into account the components of the mixtures. According to NIOSH officials, mixed exposures continue to be important to study because they may represent a health hazard to workers, and employers should prevent or control workplace exposures to such mixtures. By considering the addition to the agency’s research agenda of a proposal to examine peracetic acid’s use in combination with other chemicals, NIOSH will be better able to characterize worker exposure to such scenarios and develop controls to reduce this hazard for workers. While OSHA’s enforcement efforts in the meat and poultry industry have increased since we reported in 2005, worker safety and health problems persist and improvements are needed in identifying worker concerns, strengthening federal collaboration, and protecting workers from certain chemicals. Workers we spoke with reported they are reluctant to report injuries, illnesses, and hazards because they fear losing their jobs. There is a mismatch between concerns we heard from workers and the problems reported by OSHA, particularly in the area of bathroom access. Taking additional steps to encourage workers to disclose sensitive concerns and gathering additional information to determine the scope of bathroom access issues could enable OSHA to better identify worker safety and health concerns. OSHA’s efforts to address medical mismanagement at plants—which has resulted in poor medical care for workers—could be improved by issuing updated guidance for employers on how to manage their health units. Collaboration between OSHA and FSIS is limited and has improved little since we recommended in 2005 that the two agencies strengthen their 1994 MOU on worker safety. Since FSIS is already present in many plants, the federal government is missing out on a cost-effective opportunity to further protect the safety and health of both plant workers and FSIS inspectors by leveraging resources in this fiscally constrained environment. Evaluating the implementation of the MOU and making any needed changes would help ensure the agencies improve their collaboration. With regard to chemicals, there are gaps in information sharing and research that have heightened the risk of chemical hazards for plant workers and FSIS inspectors. In particular, FSIS collects information on how to protect its inspectors from new chemicals, but it does not have a process to share this information with its own inspectors, plant management, OSHA, or NIOSH. By FSIS establishing a process to regularly share the worker safety information it collects during reviews of new chemicals, the federal government will be better positioned to use existing resources to support the safety and health of plant workers and FSIS inspectors. Finally, NIOSH’s plan to conduct a study on peracetic acid will likely yield useful information for meat and poultry worker safety, but it is not intended to address the potential consequences of mixing peracetic acid with other substances, which can occur in several ways in meat and poultry plants. By considering the addition to the agency’s research agenda of a proposal to examine peracetic acid’s use in combination with other chemicals in meat and poultry plants, NIOSH will be better able to characterize worker exposure to such scenarios and develop controls to reduce this hazard for workers. We are making seven recommendations, including four to OSHA, two to FSIS, and one to NIOSH. Specifically: The Assistant Secretary of Labor for Occupational Safety and Health should take additional steps to encourage workers to disclose sensitive concerns during OSHA inspections of meat and poultry plants; for example, by considering additional off-site interviews or exploring other options to obtain information anonymously. (Recommendation 1) The Assistant Secretary of Labor for Occupational Safety and Health should gather more information, such as by asking workers during meat and poultry plant inspections, to determine the extent to which bathroom access is a problem and how to address any identified issues. (Recommendation 2) The Assistant Secretary of Labor for Occupational Safety and Health should update its guidance for employers on how to manage their health units to address the challenges of managing these units. (Recommendation 3) The Assistant Secretary of Labor for Occupational Safety and Health should work with FSIS to assess the implementation of the MOU and make any needed changes to ensure improved collaboration; and set specific timeframes for periodic evaluations of the MOU. (Recommendation 4) The FSIS Administrator should work with OSHA to assess the implementation of the MOU and make any needed changes to ensure improved collaboration; and set specific timeframes for periodic evaluations of the MOU. (Recommendation 5) The FSIS Administrator should develop a process to regularly share the worker safety information it collects during its review of new chemicals with FSIS inspectors, plant management, OSHA, and NIOSH. (Recommendation 6) The Director of NIOSH should consider including in the agency’s research agenda a proposal for examining the extent of peracetic acid’s use in combination with other chemicals in meat and poultry plants, and any safety and health hazards these combinations may pose to workers. (Recommendation 7) We provided a draft of this report to the U.S. Department of Labor (DOL), the U.S. Department of Agriculture (USDA), the U.S. Department of Health and Human Services (HHS), and the Environmental Protection Agency (EPA) for their review. DOL’s Occupational Safety and Health Administration (OSHA), USDA’s Food Safety and Inspection Service (FSIS), and HHS provided written comments that are reprinted in appendixes II, III, and IV, respectively. In an e-mail dated October 5, 2017, an EPA audit liaison indicated that EPA had no comments. OSHA did not state whether it concurred or not with the four recommendations made to it. USDA expressed concern with the draft report’s characterization of FSIS’s collaborative efforts and also described planned actions to address the two recommendations we made to it. HHS agreed with the one recommendation we made to it. DOL and HHS provided technical comments, which we incorporated as appropriate. With respect to our first recommendation that OSHA take additional steps to encourage workers to share information during meat and poultry inspections, OSHA stated that it fully supports the idea of continuous improvement of its processes that would expand its ability to identify and address hazards before an injury, illness, or fatality occurs. However, OSHA noted that it would be challenging to conduct offsite interviews in terms of witness cooperation, resources, and inspector safety. We continue to believe that OSHA should take steps to enhance reporting by meat and poultry workers. Our report describes meat and poultry workers’ reluctance to report injuries, illnesses, and hazards to OSHA because of their fear of employer retaliation. OSHA’s Field Operations Manual highlights the importance of a free and open exchange of information between OSHA inspectors and employees for conducting effective inspections. Conducting additional offsite interviews is one way to encourage employee reporting. However, there may be alternative additional steps OSHA could take to better position it to encourage workers to disclose sensitive concerns, consistent with our recommendation. With respect to our second recommendation that OSHA gather additional information to determine the extent to which bathroom access is a problem in meat and poultry plants, OSHA stated it could not commit to routinely asking about bathroom access at each meat and poultry inspection. OSHA stated that each inspection requires a flexible approach to address unique worksite hazards. It further stated that OSHA does not routinely ask questions about any potential hazards that go beyond the scope of a complaint inspection, unless those hazards are in plain sight. However, as noted in the report, OSHA does require inspectors at poultry plants to consistently investigate other specific hazards, such as ergonomics hazards. Our report highlights the challenges meat and poultry workers may face gaining timely access to bathrooms. However, workers might not volunteer access information to OSHA. Our work identified a mismatch between the concerns we heard from workers and the problems reported by OSHA. Better understanding the scope of bathroom access problems would better position OSHA to respond appropriately. Further, OSHA may choose to address this issue without routinely asking workers about bathroom access, such as by selectively querying workers based on criteria determined by the agency. With respect to our third recommendation to update its guidance for employers on management of plant health units, OSHA stated that it intends to revisit its guidance. With respect to our fourth and fifth recommendations for OSHA and FSIS to work together to assess the MOU’s implementation, make changes to improve collaboration, and set timeframes for periodic evaluations of the MOU, neither agency stated whether it agreed or not. OSHA stated that meat and poultry plants provide an opportunity for the two agencies to work collaboratively to identify employee hazards and promote safety and health, but OSHA did not comment specifically on the recommendation. FSIS stated that it already has directives in place to recognize and report hazards affecting FSIS employees, and acknowledged that the MOU was designed to additionally have FSIS employees report hazards affecting plant employees due to the regular presence of its inspectors in plants. FSIS noted that in collaborating with OSHA, FSIS will need to ensure its primary mission is not compromised by undertaking activities that take time and resources away from its food safety inspection responsibilities. We continue to believe that strengthening the MOU and developing a mechanism to regularly evaluate it would help ensure that the goals of the MOU are met, and that leveraging FSIS’s presence in plants provides the federal government with a cost-effective opportunity to protect worker safety and health. With respect to our sixth recommendation that FSIS regularly share the worker safety information it collects during its review of new chemicals with FSIS inspectors, plant managers, OSHA, and National Institute for Occupational Safety and Health (NIOSH), FSIS stated that the agency already has a process for sharing chemical safety information with its inspectors. However, FSIS has not provided us with evidence that it has shared the worker safety information it collects related to new chemicals, such as safety information that is specific for dilution levels and conditions of use at plants, as noted in the report. FSIS also stated that it would take certain steps to share information about approval of chemicals with other agencies such as OSHA and NIOSH, but the steps identified did not include sharing worker safety information. Incorporating worker safety information would further help enhance this information sharing. FSIS further stated that some of the information collected during its review of new chemicals may be proprietary. In addition, FSIS also expressed concern with how we characterized its collaboration with OSHA and NIOSH on worker safety. Specifically, in reference to the report’s discussion of the development of the poultry inspection modernization rule, FSIS stated that it consulted with and included OSHA and NIOSH during the appropriate step of the rulemaking process, and that the agency followed the Administrative Procedure Act in proposing the rule. We do not intend to suggest any deficiencies with FSIS’s rulemaking procedures. Rather, our report points out possible opportunities for earlier and enhanced collaboration with OSHA on standards development. FSIS also requested that GAO include information in the report about the directive FSIS issued to implement the annual attestation on work-related conditions required by the poultry modernization final rule, and that the agency is sharing the information it receives as part of this process with OSHA. We have incorporated this information into the report. In its written comments, HHS agreed with our seventh recommendation that it consider including in NIOSH’s research agenda a proposal for examining the extent of peracetic acid’s use in combination with other chemicals in meat and poultry plants, and any safety and health hazards these combinations may pose to workers. As agreed with your office, unless you publicly announce the comments of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees; the secretaries of Labor, Agriculture, and Health and Human Services; and the Administrator of EPA. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report (1) describes the efforts the Occupational Safety and Health Administration (OSHA) in the U.S. Department of Labor (DOL) has made to help ensure meat and poultry workers’ safety and health, and assesses what, if any, challenges OSHA faces in carrying out these efforts; (2) examines how OSHA and the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) have collaborated to help ensure meat and poultry worker safety and health; and (3) assesses any factors that may affect OSHA and FSIS efforts to protect meat and poultry workers from chemical hazards. The estimated total employment for the animal slaughtering and processing industry in this report is an annual average calculated from household data collected by the Current Population Survey (CPS) in 2016. The CPS is a probability sample and estimates derived from its data have sampling errors associated with them. We followed the DOL Bureau of Labor Statistics (BLS) technical guidance for estimating the standard error of annual average totals from CPS data. We express our confidence in the precision of our estimate as a 95 percent confidence interval. This is the interval that would contain the actual population value for 95 percent of the CPS samples that the U.S. Census Bureau could have drawn. To describe injury and illness rates in the meat and poultry industry, we analyzed and reported survey data from the BLS Survey of Occupational Injuries and Illnesses (SOII) for calendar years 2004 through 2015 (the most recent year for which data were available). The SOII provides estimates of the number and frequency (incidence rates) of workplace injuries and illnesses by industry and also by detailed case circumstances, such as injury type and event, and worker characteristics for cases that result in days away from work, based on data from logs kept by employers (survey respondents)—private industry and state and local governments. Survey respondents provide counts for all recordable injuries and illnesses under OSHA recordkeeping regulations. To report SOII data from the meat and poultry industry (using North American Industry Classification System (NAICS) code 31161 for the animal slaughtering and processing industry), BLS provided estimates of each industry’s injury and illness incidence rates and their associated relative standard errors. All estimates produced from the analysis of the SOII data are subject to sampling errors. We express our confidence in the precision of the results as a 95 percent confidence interval. This is the interval that would contain the actual population value for 95 percent of the samples the respective agency could have drawn. For estimates derived from BLS’s SOII data, we used the agency-provided relative standard errors to estimate the associated confidence intervals. All estimates we report have the associated 95 percent confidence interval provided. To assess the reliability of BLS SOII data, we reviewed documents related to the data sources, such as BLS’s Handbook of Methods, and we interviewed agency officials knowledgeable about these data. We found that SOII data were sufficiently reliable for our purposes in generally reporting estimated incidence rates of injuries and illnesses in the meat and poultry industry. To address all three objectives, we reviewed relevant federal laws and regulations and interviewed officials from OSHA and FSIS. We also visited four states—Arkansas, Georgia, Minnesota, and Texas—selected based on factors such as high production of meat or poultry; regional emphasis programs focusing on meat or poultry; presence of an OSHA regional or area office; presence of industry and worker advocate contacts; and access to meat or poultry plants participating in the Voluntary Protection Program or the Safety and Health Achievement Recognition Program. We used USDA statistics on the numbers of cattle, hogs, chicken, and turkeys slaughtered annually in the United States as a proxy for meat and poultry production for each state. As appropriate for each site visit, we met with either local OSHA or state Occupational Safety and Health (OSH) agency officials, as well as FSIS officials (including inspectors, supervisors, and an occupational safety and health official), industry representatives, experts in issues related to worker safety, and representatives of worker advocacy groups; and we visited four meat and poultry plants. At each plant, we met with plant management, FSIS management and inspectors, and plant safety and health staff, as available. The information gathered from these interviews is not generalizable to all plants or meat or poultry workers. We also interviewed and reviewed information from additional stakeholders, including experts in issues related to worker safety, as well as representatives of worker advocacy groups. We identified and interviewed these stakeholders based on previous work and on referrals from other stakeholders. We also attended worker safety conferences hosted by the meat industry, the poultry industry, and worker advocates. We also conducted group and individual interviews with meat and poultry workers in six locations in five states: Arkansas, Delaware, Nebraska, North Carolina, and Virginia. We interviewed between six and approximately 30 workers per state, totaling approximately 72 workers across all 5 interviews. We selected sites based on a variety of factors, such as states with a relatively high level of meat or poultry slaughter, according to USDA data; type of plant (meat or poultry); and geographic diversity. We also considered resource availability and the ability of supporting organizations to coordinate worker interviews. We coordinated with worker advocacy groups or worker centers to identify meat and poultry workers who were available and willing to meet with us. Interviews were conducted in English or Spanish. The information gathered from these interviews is not generalizable to all meat or poultry workers. To describe the efforts OSHA has made to help ensure meat and poultry workers’ safety and health and assess any challenges, we reviewed relevant documentation, such as agency guidance and information about enforcement and compliance assistance activities. We interviewed officials from OSHA and FSIS, as well as representatives of the meat and poultry industry. We also analyzed enforcement data from calendar years 2005-2016 from two OSHA databases: the OSHA Information System and OSHA Legacy Data. We examined data starting in 2005 because our previous report on OSHA inspections in the meat and poultry industry examined inspections data through 2004. We analyzed enforcement data on federal and state inspections of meat and poultry plants, including data on the type of inspection, violations found, standards cited, penalties assessed, and whether inspectors were denied entry into the plant. To analyze the number of inspections and the results of OSHA inspections of meat and poultry plants, we analyzed inspections of plants with NAICS codes 311611, 311612, and 311613 for meat plants, and NAICS code 311615 for poultry plants. To assess the reliability of the data, we reviewed relevant agency documentation, conducted electronic data testing, and interviewed agency officials knowledgeable about these data. Based on these reviews, we determined that the data were sufficiently reliable for our purposes. To assess OSHA’s efforts, we compared information we learned to internal controls from Standards for Internal Control in the Federal Government that call for agencies to use quality information and to internally and externally communicate the necessary quality information to achieve the entity’s objectives. To examine how OSHA and FSIS have collaborated to help ensure meat and poultry worker safety and health, we reviewed relevant documentation, such as information about OSHA’s and FSIS’s collaborative activities, and we interviewed officials from OSHA and FSIS. To analyze information on OSHA inspections of FSIS in meat and poultry plants, we used the most recent data available for calendar years 2005- 2016 from the OSHA Information System and OSHA Legacy Data. We also requested FSIS confirm which establishments pertained to the meat and poultry industry. In assessing agency efforts, we reviewed the 1994 memorandum of understanding (MOU) agreed to by OSHA and FSIS, and prior GAO reports that highlight interagency collaboration. We also compared information we learned from officials to internal controls from Standards for Internal Control in the Federal Government that call for agencies to internally and externally communicate the necessary quality information to achieve the entity’s objectives. To assess any factors that may affect OSHA and FSIS efforts to protect meat and poultry workers from chemical hazards, we reviewed relevant documentation, such as Environmental Protection Agency (EPA), Food and Drug Administration (FDA), and FSIS processes for reviewing new workplace chemicals, including FSIS’s Compliance Guideline Procedures for New Technology Notifications and Protocols. We interviewed officials from OSHA, EPA, FDA, and FSIS to understand how these reviews are carried out and the extent to which agencies coordinate and share information. We also interviewed representatives of the meat and poultry industry. We compared information we learned from our review of documents and interviews with officials to internal controls from Standards for Internal Control in the Federal Government that call for agencies to internally and externally communicate the necessary quality information to achieve the entity’s objectives. To understand efforts underway to develop tools to measure the presence of chemicals used in plants, we reviewed scientific information on chemicals, such as peracetic acid, and interviewed officials from OSHA’s Salt Lake Technical Center regarding validated sampling and analytical methods. Focus shifted to peracetic acid during the course of our review because it was identified by FSIS officials and worker advocates as a chemical commonly used in plants for which OSHA had no permissible exposure limit, and FSIS officials told us there were complaints the new chemical was causing illnesses. We reviewed National Institute for Occupational Safety and Health (NIOSH) health hazard evaluations to understand the extent of concerns related to chemicals, including peracetic acid. To identify any gaps in peracetic acid research, we reviewed documents, including NIOSH’s 2017 Request for Information on peracetic acid, as well as NIOSH’s research agenda and goals for studying the mixture of chemicals, including its 2004 Mixed Exposures Research Agenda. We also interviewed officials from NIOSH’s Education and Information Division. We conducted this performance audit from May 2016 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Blake Ainsworth, (Assistant Director), Mary Denigan-Macauley, Eve Weisberg (Analyst-in-Charge), Rosemary Torres Lerma, Monika Gomez, Linda Collins, Erik Kjeldgaard, Cathy Roark, Susan Aschoff, James Bennett, Almeta Spencer, Sarah Cornetto, Monica Savoy, and Hiwotte Amare made significant contributions to this report. Also contributing to this report were Ivelisse Aviles, Carl Barden, Tim Bober, Kevin Bray, Marcia Crosse, John Mingus, Steve Morris, Ardith Spence, and Mark Ward. Workplace Safety and Health: Additional Data Needed to Address Continued Hazards in the Meat and Poultry Industry. GAO-16-337. Washington, D.C.: April 25, 2016. Regulatory Guidance Processes: Selected Departments Could Strengthen Internal Control and Dissemination Practices. GAO-15-368. Washington, D.C.: April 16, 2015. Chemical Assessments: Agencies Coordinate Activities, But Additional Action Could Enhance Efforts. GAO-14-763. Washington, D.C.: September 29, 2014. Food Safety: USDA Needs to Strengthen Its Approach to Protecting Human Health from Pathogens in Poultry Products. GAO-14-744. Washington, D.C.: September 30, 2014. Food Safety: More Disclosure and Data Needed to Clarify Impact of Changes to Poultry and Hog Inspections. GAO-13-775. Washington, D.C.: August 22, 2013. Workplace Safety and Health: OSHA Can Better Respond to State-Run Programs Facing Challenges. GAO-13-320. Washington, D.C.: April 16, 2013. Workplace Safety and Health: Further Steps by OSHA Would Enhance Monitoring of Enforcement and Effectiveness. GAO-13-61. Washington, D.C.: January 24, 2013. Managing for Results: Key Considerations for Implementing Interagency Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September 27, 2012. Workplace Safety and Health: Multiple Challenges Lengthen OSHA’s Standard Setting. GAO-12-330. Washington, D.C.: April 2, 2012. Workplace Safety and Health: Better OSHA Guidance Needed on Safety Incentive Programs. GAO-12-329. Washington, D.C.: April 9, 2012. Workplace Safety and Health: Enhancing OSHA’s Records Audit Process Could Improve the Accuracy of Worker Injury and Illness Data. GAO-10-10. Washington, D.C.: October 15, 2009. OSHA’s Voluntary Protection Programs: Improved Oversight and Controls Would Better Ensure Program Quality. GAO-09-395. Washington, D.C.: May 20, 2009. Whistleblower Protection Program: Better Data and Improved Oversight Would Help Ensure Program Quality and Consistency. GAO-09-106. Washington, D.C.: January 27, 2009. Workplace Safety and Health: OSHA Could Improve Federal Agencies’ Safety Programs with a More Strategic Approach to Its Oversight. GAO-06-379. Washington, D.C.: April 21, 2006. Results-Oriented Government: Practices That Can Help Enhance and Sustain Collaboration among Federal Agencies. GAO-06-15. Washington, D.C.: October 21, 2005. Workplace Safety and Health: Safety in the Meat and Poultry Industry, While Improving, Could Be Further Strengthened. GAO-05-96. Washington, D.C.: January 12, 2005. Workplace Safety and Health: OSHA’s Voluntary Compliance Strategies Show Promising Results, But Should Be Fully Evaluated before They Are Expanded, GAO-04-378. Washington, D.C.: March 19, 2004. Workplace Safety and Health: OSHA Can Strengthen Enforcement through Improved Program Management. GAO-03-45. Washington, D.C.: November 22, 2002. Workplace Safety and Health: OSHA Should Strengthen the Management of Its Consultation Program. GAO-02-60. Washington, D.C.: October 12, 2001. Food Safety: Weaknesses in Meat and Poultry Inspection Pilot Should Be Addressed Before Implementation. GAO-02-59. Washington, D.C.: December 17, 2001. Worker Protection: Better Coordination Can Improve Safety at Hazardous Material Facilities. GAO-01-62. Washington, D.C.: October 26, 2000. Community Development: Changes in Nebraska’s and Iowa’s Counties with Large Meatpacking Plant Workforces. GAO/RCED-98-62. Washington, D.C.: February 27, 1998.", "summary": "Meat and poultry slaughter and processing is one of the most hazardous industries in the United States. GAO was asked to review federal efforts to help ensure meat and poultry worker safety and health. This report (1) describes the efforts OSHA has made to help ensure worker safety and assesses any challenges to these efforts, (2) examines how OSHA and FSIS have collaborated to ensure worker safety, and (3) assesses factors that may affect OSHA and FSIS efforts to protect workers from chemical hazards. GAO analyzed OSHA inspection data from 2005—when GAO last reported on this issue—through 2016. GAO also interviewed OSHA staff in headquarters and six field offices; officials at four other federal agencies; worker advocates; and industry representatives. GAO visited four plants and interviewed workers at six sites in five states selected based on factors such as meat or poultry production. The Department of Labor's Occupational Safety and Health Administration (OSHA) increased its annual inspections of the meat and poultry industry from 177 in 2005 to 244 in 2016. OSHA officials told GAO that this increase was related to several new enforcement programs focusing on the poultry industry, as well as new reporting requirements that prompt additional inspections. However, OSHA faces challenges identifying and addressing worker safety concerns because workers may be reluctant to contact OSHA for fear of employer retaliation, although employers are prohibited from doing so by federal law. If workers are afraid to share concerns, OSHA may not be able to identify or address conditions that endanger them. In particular, OSHA may not be aware of the scope of problems workers could face gaining timely access to bathrooms. When asked by GAO, workers in five selected states cited bathroom access as a concern and said they fear speaking up at work, where OSHA inspectors typically interview them. Taking additional steps to encourage workers to disclose sensitive concerns and gathering additional information to determine the scope of bathroom access issues could enable OSHA to better identify worker safety and health concerns. OSHA's and the Department of Agriculture's Food Safety and Inspection Service's (FSIS) main vehicle for collaboration on worker safety is their 1994 memorandum of understanding (MOU), but efforts to implement and evaluate the MOU have been limited. The MOU outlines plans for collaboration, such as referrals of plant hazards to OSHA by FSIS inspectors, training of FSIS staff, and information sharing. OSHA and FSIS have taken some steps to implement the policies and procedures outlined in the MOU. However, GAO found issues with the MOU's implementation in these three areas, hampering achievement of the MOU's goals. For example, according to FSIS officials, FSIS inspectors may be reluctant to make referrals to OSHA about hazards in plants because they fear it could trigger an OSHA inspection of FSIS. Further, the agencies have not evaluated the implementation of the MOU. Evaluating the implementation of the MOU and making any needed changes would help ensure the goals of the MOU are met and further protect the safety and health of both plant workers and FSIS inspectors. Gaps in federal efforts create challenges to protecting workers from certain chemical hazards. For example, depending on a chemical's intended use, it may not undergo a federal review of the risks it poses to worker safety and health before it is used in a plant. FSIS collects information on how to protect its inspectors from new chemicals, but it does not have a process to share this information with OSHA or plants, among others, so that plant workers can be similarly protected. By FSIS establishing a process to regularly share the worker safety information it collects, the federal government will be better positioned to use existing resources to support the safety and health of plant workers and FSIS inspectors. GAO is making seven recommendations, including that OSHA encourage workers to disclose sensitive concerns and gather bathroom access information; OSHA and FSIS strengthen their MOU; and FSIS share worker safety information. OSHA had concerns about two of these recommendations and did not address one. FSIS expressed concerns but described planned actions to address the recommendations. GAO believes the recommendations should be fully implemented.", "document_type": "gao"}
{"report": "Energy markets across the United States, Canada, and Mexico are extensively integrated. For example, Canada and Mexico—respectively, the largest and fourth largest foreign suppliers of crude oil to the United States—together supply almost half of total U.S. petroleum imports, according to DOE data. The United States is by far Canada’s most significant crude-oil customer. In addition, Canada and Mexico are major buyers of petroleum products refined in the United States. A growing trade in natural gas produced in the United States is also increasingly important to the energy relationship among the three countries, according to a government report. Moreover, trade in the other energy commodities, such as electricity, natural gas liquids, and coal, is comparatively small yet important to some U.S. regions. In 2017, the value of the energy trade between the United States and its North American neighbors exceeded $125 billion, with almost $83 billion in U.S. energy imports and almost $43 billion in exports, according to U.S. Census data (see fig. 1). Extensive cross-border infrastructure is used to transport oil, refined petroleum products, and natural gas between the United States and both Canada and Mexico. Pipelines are the primary means of transporting crude oil from Canada to the United States; at present, six pipeline systems link the petroleum-producing regions in western Canada to U.S. markets. Marine vessels are the primary means used to convey Mexican crude oil imported by the United States. Marine vessels are also used to transport more than 75 percent of refined petroleum products exported by the United States to Canada and Mexico, and pipelines, rail, or trucks are used to transport the remainder. Pipelines are also used to transport all U.S. exports of natural gas to Canada and Mexico as well as Canadian gas exports to the United States, with 24 pipelines crossing the U.S.– Canadian border and 16 pipelines crossing the U.S.–Mexican border. Cross-border electrical infrastructure is significant between the United States and Canada but is limited between the United States and Mexico. There are 30 major U.S.–Canadian transmission connections, while synchronized U.S.–Mexican connections exist only at the border between Mexico and the state of California. According to the U.S. Department of Energy (DOE), energy integration is in the interest of all North American countries because it expands the size of energy markets, creates economies of scale to attract private investment, lowers capital costs, and can reduce energy costs for consumers. Expanding energy systems may also allow for the development of a more diverse mix of energy resources, processing facilities, and end uses, all of which increase energy security. The International Energy Agency defines energy security as the uninterrupted availability of energy sources at an affordable price. According to agency documents, long-term energy security primarily involves timely investments to supply energy to meet economic development and environmental needs. Short-term energy security focuses on the ability of the energy system to react promptly to sudden changes in the supply-demand balance. Energy reforms in Mexico’s oil and gas sector, which received limited capital investment for decades, could contribute to North American energy and security as well as cross-border energy trade, according to government reports. Until 2013, Mexico’s constitution prohibited foreign involvement in most activities in the oil and power sectors, according to a think-tank report. According to the report, the Mexican congress enacted a sweeping energy reform in 2013 that ended the state-owned oil company PEMEX’s monopoly over oil exploration and production and the state-owned electric company Federal Electricity Commission’s control over electricity generation. As a result, Mexico’s energy sector opened to foreign investment in ways not possible since the sector was nationalized in 1938, providing new opportunities for U.S. investors, according to the think-tank report and the Congressional Research Service. According to Mexican government officials, since that time Mexico has established or revamped a number of agencies to govern and operate its energy sector and has awarded leases and contracts to expand exploration, production, and distribution of energy supplies. Since Mexico’s reform was enacted, U.S. companies have participated in winning bids for each of Mexico’s oil and gas tenders, with $6.5 billion pledged in upstream investment, according to the think-tank report. The current administration has made the renegotiation of the North American Free Trade Agreement (NAFTA) a priority; as of April 2018, negotiations to renew NAFTA had been ongoing since August 2017. According to a January 2017 Congressional Research Service report, since NAFTA entered into force on January 1, 1994, its market-opening provisions have gradually eliminated nearly all tariff and most nontariff barriers on goods produced and traded within North America, including energy commodities. In addition, according to energy industry representatives, despite previous limited investment opportunities in Mexico, NAFTA has enhanced North American energy integration, facilitating a greater flow of oil, natural gas, and petroleum-derived products among all three North American countries. A number of U.S. agencies oversee activities related to energy collaboration efforts with Mexico and Canada. We identified the following eight agencies as having a role in energy cooperation efforts that may support North American energy integration. Department of Energy (DOE). DOE is responsible for advancing the energy, environmental, and nuclear security of the United States. DOE also plays a lead role in North American energy integration activities. DOE has established partnerships with its primary government partners in Canada and Mexico—the Department of Natural Resources of Canada (Natural Resources Canada) and Mexico’s Secretariat of Energy—through various memorandums of understanding (MOU). While multiple DOE offices engage in energy integration activities, the Office of International Affairs has primary responsibility for international energy cooperation and leads key cooperation initiatives. The Office of International Affairs is responsible for coordinating the framework for bilateral collaboration between DOE and Natural Resources Canada. According to DOE, areas of U.S.–Canadian cooperation include responsible development of unconventional oil and gas, safe and modern infrastructure, responsible use of energy and energy efficiency, and carbon capture and storage. DOE issues presidential permits for cross-border electric transmission lines and associated facilities, authorizes electricity export and is responsible for authorizing natural gas exports from the United States. Authorization for natural gas exports is granted without modification or delay for U.S. partner countries in free trade agreements that provide for national treatment for trade in natural gas, which, according to Congressional Research Service, presently includes Canada and Mexico. Department of the Interior (Interior). Interior plays an important role in domestic energy production, managing energy produced on America’s federally managed lands and the U.S. outer continental shelf, including oil, gas, coal, wind, solar, and hydropower. Interior also has important cooperative relationships with counterpart agencies in Canada and Mexico, according to Interior officials. As subject matter experts, various Interior offices, such as the Bureau of Ocean Energy Management, and the Bureau of Safety and Environmental Enforcement collaborate with their counterparts in Canada and Mexico to share information, experience, and best practices and provide advice and technical assistance. Interior’s Office of International Affairs is responsible for providing coordination and support as needed on cross-cutting international issues that relate to more than one bureau, including energy cooperation. Department of Commerce (Commerce). Commerce’s International Trade Administration works to remove barriers to U.S. energy development and trade, notably U.S. exports of energy resources and products to Mexico and Canada. The International Trade Administration also works to open markets for energy products in Mexico and Canada, and organizes trade missions. Department of State (State). As the lead agency for foreign policy related to energy, State may play a part in most bilateral and trilateral efforts. State’s role related to North American energy integration includes that of a convening or facilitating authority. State’s Bureau of Energy Resources typically leads these activities but also works closely with State’s Bureau of Western Hemisphere Affairs. In addition, as subject matter experts, State energy and economic officers at embassies in Canada and Mexico report on energy policy and market developments and play a role in communicating, and helping to facilitate interactions, with other U.S. federal agencies and their foreign counterparts. Further, the Secretary of State plays a key role in energy infrastructure because of his or her responsibility in issuing or denying presidential permits for liquid petroleum pipelines that cross U.S. international borders. Department of Transportation (DOT). DOT plays a role in regulating and enforcing safety standards for the transportation of energy products, including crude oil and gas, ethanol, and natural gas. According to DOT, its Pipeline and Hazardous Materials Safety Administration is responsible for regulating and ensuring the safe and secure movement of energy and other hazardous materials to industry and consumers by all modes of transportation, including pipelines. DOT officials work closely with their counterparts in Canada and Mexico when developing draft regulations related to various energy transportation issues, notably those that could affect cross-border trade and safety. Federal Energy Regulatory Commission (FERC). As an independent regulatory agency, FERC has authority to regulate the transmission of electricity, natural gas, and oil between U.S. states and plays a role in facilitating cross-border natural gas pipelines. FERC has responsibility for issuing or denying presidential permit applications for natural gas pipelines that cross the U.S. border with Mexico or Canada. United States Agency for International Development (USAID). As part of its mission and in support of U.S. foreign policy, USAID leads the U.S. government's international development through partnerships and investments. According to USAID officials, USAID has played a role in integrating the electricity markets of the United States and Mexico by supporting the synchronization of regulations, enhancing investment opportunities, and creating easier transmission interconnections between the two countries. As part of those efforts, USAID facilitated technical exchanges between Mexican officials and U.S. grid operators, universities, and other stakeholders. Department of the Treasury (Treasury). The role of Treasury’s newly reorganized Office of Investment, Energy, and Infrastructure includes developing a multipart approach that seeks to promote U.S. exports of energy and energy infrastructure; attract investments in the areas of energy and infrastructure; and catalyze private capital for the financing of exports and investment projects. As part of that approach, the office is in the process of formulating and negotiating energy frameworks with foreign partners, including Mexico, according to officials. Generally speaking, the United States cooperates on energy integration with Canada and Mexico strategically at the presidential and ministry levels and technically at the agency level, although progress on some strategic efforts has been limited. At the presidential level, trilateral cooperation has occurred mainly through the North American Leaders’ Summit, where the leaders of the three countries discuss economic issues, including energy, according to U.S. government officials. The last summit was in 2016, and as of April 2018 a future summit had not been scheduled. At the ministry level, DOE and State have recently conducted meetings with their Canadian and Mexican counterparts. However, efforts to develop a North American Energy Strategy were placed on hold in late 2017 because of disagreement about its scope, although discussions resumed in 2018, according DOE officials. At the agency level, U.S. officials and their counterparts in Mexico and Canada cooperate technically to address specific issues related to North American energy integration. Figure 2 illustrates the three levels of cooperation on energy integration between the U.S., Canadian, and Mexican governments. U.S. cooperation with Canada and Mexico at the presidential level has occurred primarily through the North American Leaders’ Summit, according to U.S. government officials. During the summits, the leaders of the three countries meet to discuss economic, social, and political issues—including energy—on which the three countries can cooperate. The summits have taken place every 1 or 2 years since 2005; the last summit was held in June 2016, in Ottawa. State officials said that if past patterns were followed, the next summit would be scheduled in 2018 and hosted by the United States. However, a future summit had not been scheduled as of April 2018. State officials told us that it is the responsibility of the White House to decide whether a North American Leaders’ Summit will take place and that they therefore would not comment on whether a summit will be scheduled in 2018. The 2016 summit, which focused on energy, formalized the North American Climate, Clean Energy, and Environment Partnership Action Plan (Action Plan), which included pledges to cut greenhouse gas emissions from the oil and gas sectors, boost the development of clean power, and support the development of cross-border transmission lines. However, according to State officials, implementation by each country is voluntary, because the commitments in the Action Plan are not binding. According to State officials, the National Security Council (NSC)—the agency responsible for implementing the Action Plan—has indicated that specific aspects of the plan are being reviewed to ensure alignment with the current administration’s policy priorities. Officials from State, Interior, and Energy—which are among the agencies responsible for developing or implementing certain Action Plan commitments—said that, although they have continued to work with Mexico and Canada on energy-related issues, efforts to implement the plan had not been conducted since January 2017. The United States has also engaged at the presidential level bilaterally with Mexico and Canada to address issues that include energy integration. In a February 2017 meeting—their first during the current administration—the U.S. President and the Canadian Prime Minister identified a number of areas in which the two countries agreed to cooperate, including improving energy security. As of April 2018, the current administration had not held a presidential meeting with Mexico. The previous administration held bilateral presidential meetings with both Mexico and Canada that resulted in the initiation of efforts to improve energy integration. For example, meetings in 2010 and 2011 led to the establishment of, respectively, the U.S.–Mexico High-Level Regulatory Cooperation Council and the U.S.–Canada Regulatory Cooperation Council to help align the countries’ regulatory principles. The U.S. Secretaries of Energy and State cooperate with their Canadian and Mexican counterparts (i.e., ministers) through meetings focused to varying extents on energy, according to DOE and State officials. DOE cooperates with Natural Resources Canada and Mexico’s Secretariat of Energy through various bilateral and trilateral meetings that focus on energy collaboration and integration. State holds bilateral and trilateral ministry-level meetings with its Canadian and Mexican counterparts, where discussions may include energy cooperation. For example, in February 2018, State attended the North American Foreign Ministers’ Meeting in Mexico, where energy and the renegotiation of NAFTA were topics of discussion. State also co-chairs, with Commerce and the United States Trade Representative, the High Level Economic Dialogue with Mexico. However, according to Commerce officials, High Level Economic Dialogue meetings have not been held since 2016. According to DOE officials, ministry-level meetings result in important exchanges of information and collaborative efforts. DOE officials indicated that ministry-level cooperation on energy integration with Mexico and Canada has been consistent. For example, soon after his confirmation in March 2017, the U.S. Secretary of Energy visited Mexico to initiate talks on cooperation, where he made statements recognizing Mexico’s importance both as an economic partner and, along with Canada, in promoting regional energy security. During this visit, the Secretary announced a proposal to pursue a North American energy strategy that would promote comprehensive energy and economic security for the three countries. Characterizing its development as a top priority, the Secretary stated that the North American energy strategy was meant to establish a robust trilateral work plan to guide trilateral cooperation on shared energy interests, such as developing North America’s untapped energy resources, diversifying energy supplies, and supporting the growth of each country’s energy industries. Canadian and Mexican energy officials whom we interviewed expressed agreement with the proposal to develop a North American energy strategy and indicated that a regional energy strategy would further facilitate energy integration efforts. DOE officials stated that DOE, Natural Resources Canada, and Mexico’s Secretariat of Energy held a ministry-level meeting in November 2017— the North American Energy Ministerial—in part to discuss the proposed trilateral energy strategy. However, efforts to formalize the strategy were subsequently suspended because of a lack of agreement on its scope, according to U.S., Canadian, and Mexican officials. Instead, the three ministries released a joint summary outlining their discussions on efforts to address regional energy security. According to DOE officials, the ministries resumed discussions of the strategy in 2018 and are continuing to work on developing either a joint energy strategy or a separate document that would accomplish the objective of such a strategy. However, Canadian officials told us that any expected document on cooperation may not be comprehensive enough to be labeled a strategy. Officials of DOE, Natural Resources Canada, and Mexican Secretariat of Energy said that, despite not having a formal North American energy strategy, the three countries maintain a cooperative ministry-level relationship. U.S. agency staff and their counterparts in Mexico and Canada cooperate to address specific, technical issues related to North American energy integration, according to U.S., Canadian, and Mexican officials. According to DOE officials, cooperation may be trilateral or bilateral and may be led by various U.S. agencies with the required technical expertise. For example, according to DOE staff, they are working on a technical project with Canada and Mexico to improve energy import and export data that all three countries can use. According to DOE officials, involvement in agency-level technical cooperation can occur apart from higher-level strategic or political cooperation and often addresses ongoing issues essential to the industry’s functioning, such as transborder industry inspections and information sharing. According to Interior officials, involvement in agency-level technical cooperation almost always occurs apart from higher-level strategic or political cooperation. Some U.S. agencies’ technical cooperation with their Mexican counterparts is more recent than their cooperation with their Canadian counterparts, according to U.S. agency officials. Officials from Interior, one of the agencies involved in providing technical assistance to Mexico, explained that since 2013, when Mexico’s energy reform began allowing private investment in its oil, gas, and electricity sectors, Mexico has sought to establish regulatory frameworks and oversight mechanisms comparable to those in the United States and Canada. For example, according to Mexican officials, Interior assisted Mexico’s regulatory agencies in developing oversight regulations for their oil and gas sectors, while USAID helped Mexico’s Secretariat of Energy to plan future electricity infrastructure development and meet its clean energy goals. In contrast, U.S. agencies’ technical cooperation with Canadian agencies was already well established, according to some U.S. agency officials. The eight federal agencies that we identified as having a role in North American energy integration—DOE, Interior, Commerce, State, DOT, FERC, USAID, and Treasury—reported involvement in 81 activities related to facilitating energy integration from 2014 through 2017. While some of these activities had multiple purposes or goals, the activities generally comprised five types: technical discussions and assistance, regulatory cooperation, international agreements and other instruments, trade promotion, and research and development. In addition, agencies reported having undertaken other activities, such as internal policy reviews. Table 1 shows the types and numbers of activities that each agency reported. (See app. III for a full listing of these agencies and descriptions of their activities). Several of the U.S. agencies we surveyed reported having participated in technical discussions that provided a forum for exchanging information and best practices with their Canadian and Mexican counterparts. Four agencies—DOE, Interior, State, and USAID—identified a total of 33 technical forums and assistance activities, such as consultative mechanisms, technical committees, and assistance programs. For example: DOE. Since 2015, DOE has participated with Natural Resources Canada and Mexico’s Secretariat of Energy in a trilateral working group focused on carbon capture, utilization, and storage (CCUS) initiatives. According to DOE officials, the group meets twice per year to exchange information about each country’s CCUS programs. DOE officials reported that the group’s primary focus has included carbon- capture technologies, with an emphasis on industrial CCUS, CCUS on power systems and carbon dioxide utilization in enhanced oil recovery, and consistent and harmonized messaging regarding CCUS. DOE also engages in bilateral nuclear security cooperation with Mexico, supporting two to three workshops with Mexico annually on topics such as nuclear security culture and cybersecurity for nuclear facilities. Interior. Since Mexico’s energy reforms, Interior has held discussions with Mexican agencies about environmental and other matters related to offshore oil and gas extraction. Interior also participates in a number of international multilateral forums, including the International Regulators Forum, the International Offshore Petroleum Environmental Regulators and the International Upstream Forum, which bring together government regulators from multiple countries, including Mexico and Canada. State. State has provided technical assistance to Mexico through the Power Sector Program, which supplies guidance and training on a number of regulatory frameworks, market processes, and software tools to support Mexico’s transition to a competitive power market. For example, the program has supported the development of a competitive wholesale power market through technical support to Mexico’s Energy Regulatory Commission, the National Center for Energy Control, and Mexico’s Secretariat of Energy. USAID. According to USAID officials, the agency’s Mexico mission energy program has provided technical assistance to Mexico's Secretariat of Energy, its National Energy Control Center, its Energy Regulatory Commission, and the Federal Electricity Commission. USAID officials reported that this assistance focused on a wide range of energy-integration activities, including the design and implementation of four energy auctions, as well as the development of a public–private contract mechanism to tap private sector resources for energy-transmission construction. As part of this program, USAID also designed, and is currently managing, an activity to reduce social impacts associated with energy-infrastructure projects. USAID also provided technical assistance on grid integration and the planning and development of infrastructure, according to officials. U.S. agencies engage in regulatory cooperation to support coordination in the various energy sectors and to try to identify gaps, best practices, and inconsistencies among U.S., Canadian, and Mexican regulations. Four of the agencies we surveyed—DOE, DOT, FERC, and USAID—reported 13 regulatory cooperation efforts, including discussions between regulators and trilateral and bilateral working groups focused on the various energy sectors and the development of reliability standards. For example: DOE. In 2011, the U.S. President and Canadian Prime Minister created the Canada–United States Regulatory Cooperation Council to facilitate closer cooperation between the countries to develop more effective approaches to regulation. As part of that effort, DOE and Natural Resources Canada have cooperated on two joint energy initiatives, according to DOE officials. First, DOE and Natural Resources Canada have cooperated on energy efficiency standards, with the goal of aligning new and updated standards and test methods for energy-using equipment through enhanced information sharing. Second, DOE and Natural Resources Canada have cooperated on developing natural gas–transportation standards. According to DOE officials, DOE and Natural Resources Canada will continue to build on previous work, facilitate the development of common codes and standards by industry organizations, and explore opportunities for alignment among stakeholders. DOT. DOT officials reported having worked with Canadian and Mexican agencies to collaborate on regulations and standards related to various modes of transportation. For example, DOT has engaged in the North American Pipeline Safety Regulator Initiative. According to DOT’s survey response, the goal of this initiative is to share perspectives, experience, and information on regulatory activities as well as effective strategies for improving pipeline safety for each participating agency and for cross-border energy pipelines. According to officials, DOT also collaborates with Transport Canada on certain facility investigations. FERC. FERC officials reported that FERC has represented the U.S. government at meetings of the Trilateral Electric Reliability Working Group, where U.S., Canadian, and Mexican regulators coordinate on electric grid reliability issues. USAID. According to USAID officials, under a mechanism financed and managed by USAID, the National Association of Regulatory Utility Commissioners provided technical assistance to the Mexican Energy Regulatory Commission on energy-integration topics, such as auctions, reducing barriers to investment and competitive market restructuring. According to agency officials the U.S. government and individual U.S. agencies have entered into various formal agreements to engage Canada and Mexico on energy integration. Three of the agencies we surveyed— DOE, Interior, and State—identified 11 international agreements and other instruments related to North American energy integration, including several MOUs with Canadian and Mexican counterpart agencies. According to officials, such agreements often include a framework under which bilateral and trilateral cooperation can proceed and can serve to highlight areas of priority or focus for the countries. According to one official, the MOUs are based on need and create a mechanism for technical experts to collaborate on specific topics or action items. Other officials noted that periodic renewals of MOUs can provide opportunities to decide whether agreed-on activities have been completed, are obsolete and should be discontinued, or should be continued. The following are examples of the agencies’ reported activities: DOE. In 2014, DOE, Natural Resources Canada, and the Mexican Secretariat of Energy signed an MOU to further collaboration on data and information sharing and to create a trilateral framework for sharing publicly available information. The MOU outlined several areas of cooperation, including systematic comparison of energy export and import flow data; sharing of publicly available geospatial information related to utility infrastructure; exchange of views and projections of cross-border flows of natural gas, electricity, crude oil, and refined products; and development of a cross-reference for the three countries’ energy sector terminology. According to DOE officials, as a result of this MOU, an integrated trilateral energy information website was launched in November 2017. The website consolidates energy-related data, integrated maps, analyses, and references from the three countries in English, French, and Spanish. Interior. Interior officials reported that since 2014, Interior has signed several binding and nonbinding instruments, including two MOUs, to facilitate cooperation with Mexico on energy and environmental matters. In 2016, Interior signed two MOUs with its counterparts in Mexico to facilitate bilateral cooperation on energy and environmental cooperation. Moreover, Interior helped to negotiate the Agreement between the United States and Mexico Concerning Transboundary Hydrocarbon Reservoirs in the Gulf of Mexico, which entered into force in 2014. According to Interior officials, the department, in coordination with State, implements the agreement, which addresses the development of oil and gas reservoirs that span the international maritime boundary between the two countries in the Gulf of Mexico. State. State has played a role in finalizing a United States–Mexico agreement on peaceful nuclear cooperation, according to State officials. The officials said that the U.S. and Mexican governments have agreed on the final text of the agreement, which is awaiting approval by the countries’ legislatures. Commerce leads U.S. trade promotion efforts related to energy integration. In response to our survey, Commerce officials reported having engaged in at least 10 trade promotion activities and Treasury officials reported one additional effort. Commerce. Commerce activities include trade missions to Canada and Mexico, seminar and event presentations, and buyers’ programs. For example, Commerce officials have organized export promotion activities targeting the Canadian and Mexican markets and led delegations of Canadian and Mexican executives to attend major U.S. trade shows in the energy sector to facilitate business partnerships with U.S. firms through its International Buyers Program. According to Commerce officials, Canadian delegations typically consist of 15 to 20 executives and Mexican delegations typically consist of 25 to 100 executives. In addition, Commerce officials reported that the department’s Foreign Commercial Service in Canada has organized and staged annual country briefings and interactions with trade associations from multiple countries at two lead events—the Global Petroleum Show and the Atlantic Petroleum Show. Further, according to Commerce officials, the International Trade Administration conducted two energy-related trade missions to Mexico in 2017—a civil nuclear trade mission and a renewable energy trade mission. Treasury. Treasury’s Office of Investment, Infrastructure, and Energy has formulated and negotiated a framework for energy activities with Mexico’s Secretariat of Energy and the National Center for Energy Control. This energy framework is designed to achieve a high degree of energy integration, growth, and security through initiatives in the energy and infrastructure areas, to be jointly pursued by the United States and the host country partner, according to a Treasury official. The effort will involve Treasury’s Office of Technical Assistance and is envisioned to include activities such as assisting the Mexican government to realize more value and impact with various procurement projects related to the energy value chains. U.S. agency officials and their foreign counterparts cited research and development activities as an important aspect of cooperation to facilitate North American energy integration. Three of the agencies we surveyed— DOE, Interior, and DOT—reported having engaged in seven scientific research and development activities. Examples include the following: DOE. DOE officials reported that the department plans to explore areas of mutual interest for trilateral cooperation in the area of civil nuclear research and development with Natural Resources Canada and Mexico’s Secretariat of Energy. In addition, DOE is engaged bilaterally with Canada in research and development on topics such as nuclear reactor technologies, including small modular reactors. Interior. In 2014, Interior’s U.S. Geological Survey issued a report on the assessment of unconventional oil and gas resources in northeast Mexico. In addition, Interior officials reported that the U.S. Geological Survey has collaborated with Canada on scientific research to better understand the geological framework from eastern Arctic Alaska to the Canadian Arctic Islands. DOT. DOT has engaged with its Canadian counterpart in research and development activities focused on alternative fuels. For example, DOT officials reported that its Federal Aviation Administration Center of Excellence for Alternative Jet Fuels and Environment and Canada’s Transport Canada are undertaking cooperative research and development that primarily focuses on the development of sustainable alternative jet fuels and technical research on aviation noise and emissions mitigation. Three agencies—DOE, Commerce, and State—reported engaging in a total of six other efforts related to North American energy integration. For example: DOE. A Joint U.S.–Canada Electric Grid Security and Resilience Strategy was released in December 2016. DOE and Natural Resources Canada developed this strategy and its accompanying plans to improve the grid security of the countries’ shared electric system. The three goals of the strategy are to protect today’s electric grid and enhance preparedness, to manage contingencies and enhance response and recovery efforts, and to build a more secure and resilient future electric grid. According to DOE officials, DOE is working to implement numerous items from an accompanying action plan over multiple years. Commerce and DOE. Commerce and DOE lead the United States– Mexico Energy Business Council with their Mexican counterparts. According to Commerce officials, the council is a unique effort to gather consensus recommendations from the council’s private sector representatives on ways to strengthen the economic and commercial ties between energy industries in the two countries. The council has met twice a year since its creation in 2016 and has developed a set of recommendations for consideration by U.S. and Mexican government officials. According to DOE officials, these recommendations were discussed at the Council meeting on June 15, 2018. State. State officials reported that the department is engaged in an ongoing effort to streamline its review process for presidential permit applications for cross-border energy infrastructure. Agency officials reported coordinating their energy integration–related activities through a number of coordination efforts and mechanisms. First, an interagency working group at NSC represents a high-level interagency coordination effort. In addition, staff preparations for high-profile bilateral and trilateral summits present further opportunities for high-level interagency coordination. Moreover, agency staff engage in working-level efforts such as serving on formal coordinating bodies that bring together stakeholders in the energy sector; soliciting input from, or providing input to, other agencies; and participating in direct coordination activities at the program level. According to participating agency officials, NSC created a working group in May 2017 to facilitate formal interagency coordination on North American energy integration. Officials reported that the working group comprises representatives of NSC, DOE, Interior, Commerce, and State and has met five times since it was formed, most recently in November 2017. According to officials from participating agencies, the group’s primary purpose is to bring together the key agencies that have a stake in North American energy integration and to receive guidance and input from NSC and other agencies on related activities. Consequently, the group also serves advisory, information-sharing, and coordination purposes. We spoke with agency officials who participate in the working group, asking in particular about their experiences in several aspects that we have previously identified as key to interagency collaboration—identifying outcomes, establishing leadership, involving relevant participants and clarifying their roles and responsibilities, and obtaining necessary resources. Some officials noted the value of the group’s meetings. The following summarizes the officials’ comments. Outcomes. Officials of agencies participating in the NSC-led working group reported that it served primarily as a mechanism to promote coordination and to bring awareness of agencies’ bilateral and trilateral engagement with Canada and Mexico to the NSC and to the other agencies participating in the group. Agency officials identified this high-level, in-person coordination as valuable and as one of the group’s primary outcomes. For example, according to the officials, agencies contributed to, and developed, a matrix of cross-border energy activities with Mexico and Canada, which helps to make the administration and other agencies aware of each other’s efforts and to see the bigger picture of those efforts. Agencies also developed a coordinated set of talking points on energy integration. One official noted that, because staff from the various participating agencies often work with the same Canadian and Mexican counterparts, coordinating the talking points is useful for ensuring that messages are presented in a consistent and substantive way. Leadership. Participating agency officials indicated that NSC has a clear leadership role in the interagency group and is responsible for calling the meetings, setting the agenda, and assigning tasks to participants. Officials noted that NSC appropriately assigned tasks based on agencies’ particular expertise and capabilities. Officials also reported being generally satisfied with NSC’s leadership and noted that this group has created a needed space for high-level interagency coordination. Roles and responsibilities. Agency officials did not report any confusion about their roles and responsibilities in the NSC-led working group. According to agency officials, the agencies generally served in a primarily informational and advisory role, sharing information with each other about their respective agencies and providing input both during and outside the group’s meetings. Participating agency officials are responsible for providing updates on relevant energy-related activities at each meeting. Other assigned tasks include drafting and clearing coordination documents, talking points, and policy papers. Participants. According to participating agency officials, the agencies invited to participate in the NSC-led working group—DOE, Interior, Commerce, and State—were those with the most relevant roles related to North American energy integration. Officials noted that they communicated with each other regularly to follow up on issues raised at a meeting or as a part of normal agency coordination. Resources. Participating agency officials generally reported that, because the NSC working group’s meetings aligned with their regular and ongoing responsibilities, additional resources were not required. Bilateral and trilateral summits can be important methods of collaboration with Mexico and Canada and also serve as episodic or event-related mechanisms for U.S. interagency coordination on energy integration– related activities. According to U.S. agency officials we interviewed, multiple agencies have provided input and advice in preparation for summits and meetings such as the North American Leaders’ Summit, the North American Energy Ministerial, the North American Foreign Ministers’ Meeting, and the U.S.–Mexico High Level Economic Dialogue. According to officials, broadly focused ministerial meetings such as these have included participation from multiple agencies. For example, the U.S.– Mexico High Level Economic Dialogue—a whole-of-government effort that included energy as one its priorities—led to the development of the U.S.–Mexico Energy Business Council, which is cochaired by DOE, Commerce, Mexico’s Secretariat of Energy, and Mexico’s Secretariat of Economy. Agency officials we interviewed stated that they also coordinate on follow-up efforts after these meetings. For example, DOE and Commerce officials said that they conduct ongoing coordination on council business, holding weekly calls with each other and their Mexican counterparts to coordinate the council’s implementation. In addition, Commerce officials told us that they report on the council’s progress to other agencies at the NSC working group. Officials of multiple agencies we surveyed reported other interagency coordination efforts related to North American energy integration. These efforts included participating in formal coordinating bodies, soliciting and providing input, collaborating directly with other agencies’ staff, and collaborating at U.S. embassies. Participating in formal coordinating bodies. Multiple U.S. agencies (e.g., DOT, FERC, and the Department of Homeland Security) participate in the Electricity Sub-Sector Coordinating Council, the Energy Sector Government Coordinating Council, and the Oil and Natural Gas Sector Coordinating Council, according to DOE officials. The Electricity Sub-Sector Coordinating Council’s charter states that the council’s purpose includes coordinating activities and initiatives designed to improve the reliability and resilience of the electricity subsector and serving as the principal liaison between the council’s membership and the Energy Sector Government Coordinating Council. The Energy Sector Government Coordinating Council—the government counterpart of the Electricity Sub-Sector Coordinating Council and the Oil and Natural Gas Sector Coordinating Council — enables interagency and cross-jurisdictional coordination on planning, implementing, and executing resilience programs for the nation’s critical energy infrastructure. Agency officials reported that the Oil and Natural Gas Sector Coordinating Council serves as the principal liaison between the U.S government and representatives for oil and natural gas companies and major trade associations on matters related to oil and natural gas physical and cyber security. Soliciting and providing input. Multiple agencies reported soliciting or providing input regarding certain energy integration efforts. For example, multiple agencies contributed to the development of the U.S. Quadrennial Energy Review, which explicitly discusses North American energy integration and how to better assess and promote opportunities for better coordination between U.S., Canadian, and Mexican energy systems. In addition, DOE, State, and FERC officials reported coordinating with each other and with the Department of Defense to obtain required concurrence on presidential permit applications. For example, when State was reviewing the presidential permit for the Keystone XL pipeline, State asked seven other agencies to provide their insights and opinions, according to State officials. Collaborating directly with other agencies’ staff. Multiple agency officials reported working with other agencies as needed. For example, Treasury officials reported working with staff from State, Interior, and DOE to formulate and negotiate a framework of energy- and infrastructure-related initiatives with Mexico. Agency officials also reported that agency staff responsible for various energy integration activities have engaged in a number of informal activities—including periodic meetings, telephone calls, and e-mails—to directly coordinate these efforts with related federal and industry efforts. Collaboration at U.S. embassies. Agency officials we interviewed at the U.S. embassies in Canada and Mexico stated that they have routinely collaborated and coordinated on energy integration–related activities with staff of other relevant U.S. agencies who were also stationed at the embassies or who visited the embassies from the United States. U.S. agencies reportedly obtain feedback and input from private sector and civil society stakeholders through a variety of formal and informal mechanisms. To gather this input, agencies use formalized mechanisms such as requests for public comment through the Federal Register, public hearings, public-private bodies, and joint stakeholder events. Civil society and private industries also employ informal methods to communicate their positions to agencies and individual agency staff. U.S. agencies solicit and consider private sector and civil society input related to North American energy integration through formal mechanisms that include provisions for public comments in response to Federal Register notices; open hearings, where public comment is allowed; and public–private input entities. The Administrative Procedure Act of 1946 generally requires agencies to publish a notice of proposed rulemaking and to provide an opportunity for public comment through the Federal Register. The private sector and civil society use this process to formally issue public statements on various topics related to energy integration. For example, with regard to the renegotiation of NAFTA, private sector entities and environmental groups have sent letters to the U.S. Trade Representative expressing their respective concerns about negotiations related to the energy sector. Agencies can also hold public hearings where stakeholders can make statements and submit data. According to the Office of the Federal Register, some agencies operate under laws that require rulemaking hearings, while others may hold public meetings to obtain public input or to help affected groups better understand the proposed rule. Moreover, Office of the Federal Register documents state that many agencies are beginning to use webcasts and interactive Internet sessions to broaden the audience attending public meetings. Further, under the National Environmental Policy Act, a process exists through which stakeholders can provide input during the consideration of environmental effects of proposed projects for which the agency has prepared an environmental impact statement. Additionally, agencies may use formal public–private bodies and collaborations that gather private sector and civil society input on energy integration issues. For example, the private sector members of the U.S.– Mexico Energy Business Council are able to provide recommendations to U.S. and Mexican agencies. The council’s stated objectives are to (1) bring together representatives of the respective energy industries of the United States and Mexico to discuss issues of mutual interest, particularly ways to strengthen the economic and commercial ties between energy industries in the two countries, and (2) communicate actionable, nonbinding recommendations to the U.S. and Mexican governments. According to officials, the council comprises 20 private sector representatives—10 from the United States and 10 from Mexico—and is co-chaired by DOE, Commerce, and the Mexican ministries of economy and energy. Officials reported that the council is to meet twice each year to provide consensus recommendations to both governments on ways to improve the safety and efficiency of energy-related activities, improve the commercial environment and investment climate, and enhance collective energy security. Civil society representatives also participate in some formal advisory and information-gathering collaborations. For example, in 2015, the United States and Mexico held an energy education roundtable that brought together key stakeholders to explore possible areas for cooperation, including sharing best practices in energy education, developing vocational and polytechnic-level energy skills training programs, examining joint industry certifications, and promoting greater communication among key players in both countries. In another example, the 2016 North American Leaders’ Summit announced the first annual Stakeholder Dialogue on North American Competitiveness, with a goal of providing private sector, local government, labor, and civil society representatives an opportunity to contribute ideas on increasing North American competitiveness. In response, the Wilson Center, a think tank, in coordination with the three North American governments, assembled a group of more than 40 representatives of entities engaged in North American issues. The results of this dialogue included recommendations on energy integration–related issues, such as energy infrastructure and the U.S. presidential permitting process. Civil society stakeholders also provide expertise by participating in activities such as the U.S.–Canada Northern Oil and Gas Research Forum. According to agency officials, this forum has typically been held every 2 years at locations in the United States and Canada since its founding in 2008 by Interior’s Bureau of Ocean Energy Management and Canada’s Indigenous and Northern Affairs Canada. The forum provides an opportunity for decision-makers, regulators, industry members, nongovernmental organizations, and scientists to discuss current scientific research and future directions for northern oil and gas activities, according to Interior officials. Agencies receive input on North American energy integration from the private sector and civil society through informal mechanisms such as letters, emails, phone calls, interactions at various related events, personal connections, and reports. According to private sector and civil society representatives we interviewed, open letters (e.g., letters to the editor) and letters sent to agencies allow such groups to describe their perspectives on policy choices and advocate for preferred solutions. One civil society stakeholder noted that think tanks and trade association reports and forums also play an important role in allowing civil society and industry to communicate their perspectives and positions to Congress and federal agencies. Another civil society stakeholder reported having directly contacted State officials responsible for issuing presidential permits for the Keystone XL pipeline. Industry association representatives noted that they also have opportunities for informal meetings with agency officials at various events or through phone calls. During our discussions with civil society and private sector organizations, we heard that informal feedback or input mechanisms between stakeholders and agencies were available and functional. Some of the officials we interviewed from all three countries suggested several new or additional steps that the U.S. government could take, in cooperation with Canada and Mexico, to address factors that might impede energy integration and to facilitate a more integrated and secure energy market in North America. Suggestions mentioned by officials in all three countries included aligning energy-related regulations, streamlining the U.S. presidential permitting process, facilitating cross-border transportation of equipment and workers, and involving states and provinces in energy integration efforts. However, U.S., Canadian, and Mexican officials we interviewed expressed general satisfaction with bilateral and trilateral strategic and technical cooperation regarding efforts to facilitate North American energy integration. Some U.S., Canadian, and Mexican officials we interviewed suggested several new or additional steps that the U.S. government, in cooperation with Canada and Mexico, could take to address several factors that may impede energy integration and to facilitate a more integrated and secure energy market in North America. According to some officials, factors that may impede energy integration include duplicative or inconsistent energy regulations, inconsistent cross-border permitting processes, difficulties in cross-border movement of equipment and workers, and the need to involve states and provinces in transborder issues. The text box shows steps suggested by at least one official in all three countries to address these factors. Steps Suggested by U.S., Canadian, and Mexican Officials to Further North American Energy Integration Align energy-related regulations. To reduce the burden on energy companies conducting transborder activities, align regulations, codes, and standards in appropriate sectors in all three countries, to the extent possible. Streamline the U.S. presidential permitting process. To assure that requirements are consistently implemented, by having a set process for obtaining presidential permits for transborder energy infrastructure projects. Facilitate cross-border movement of equipment and workers. To avoid delays in business and trade transactions, implement processes to facilitate movement of energy company personnel and equipment across borders. Involve states and provinces in energy integration efforts. Given states’ and provinces’ control over local regulations, resources, and markets, increase their involvement in efforts to advance North American energy integration. U.S., Canadian, and Mexican officials suggested that the three countries should continue working together to eliminate unnecessary differences in energy sector regulations. Some officials indicated that harmonizing, when appropriate, or establishing comparable regulations, codes, and standards in all three countries could reduce the burden on energy companies conducting transborder activities and enhance regulatory cooperation. According to some government officials and private sector representatives we interviewed, the need to align U.S., Canadian, and Mexican energy-related regulations is generally recognized by industry stakeholders as a factor that could be addressed to further facilitate regional energy integration. Several government initiatives have been undertaken to increase alignment or reduce differences among the countries’ regulatory frameworks, such as the creation of the U.S.–Canada Regulatory Cooperation Council and the U.S.–Mexico High-Level Regulatory Cooperation Council. Nevertheless, officials in the three countries identified a need to expand efforts in certain areas. For example, according to one Canadian official, because of the large number of energy regulations, much remains to be done to align them. According to an industry association representative in Mexico, eliminating duplicative regulations is very challenging and efforts to align them have sometimes not been sufficient. For example, he explained that one company—a member of his association—embarking on a transborder project reported having to conduct extensive work to meet Mexican regulations, despite an earlier effort by Mexico’s Agency for Safety, Energy, and Environment and Interior’s Bureau of Safety and Environmental Enforcement to develop similar regulations for safety and environmental management systems. Some U.S., Canadian, and Mexican government officials suggested that the U.S. government should streamline its presidential permitting process to ensure that requirements for obtaining permits for transborder energy infrastructure projects are consistently implemented. U.S. presidential permits are required for the construction, connection, operation, and maintenance of certain facilities that cross the United States’ borders with Canada and Mexico. Issuance or denial of permits is delegated to the U.S. Secretary of State for pipelines that transport liquids such as petroleum and petroleum products, to FERC for natural gas pipelines, and to DOE for electricity transmission lines. Some officials in Canada and Mexico explained that industry sector representatives have expressed concerns about the process for obtaining the permits. Members of a Canadian energy association expressed concern that requirements for the presidential permits have not been implemented consistently or in a timely manner. According to a representative from the association, in some cases presidential permits have been granted in a relatively short period of time, while in other cases the process has taken over 2 years. For example, members of the Canadian energy association said that the company developing the Keystone XL pipeline spent a significant amount of money and time trying to navigate the permit process before receiving permits in March 2017. A representative from a Mexican energy association told us that, whereas Mexico’s energy reforms were aimed at increasing efficiency to attract investment, the processing time for U.S. presidential permits—up to 2 years, according to the representative—can both interfere with the Mexican government’s efforts and hinder more integration between the two countries. Some U.S. government officials acknowledged a need for streamlining the presidential permitting process. State and DOE officials informed us that they had initiated internal reviews to streamline the process but that as of April 2018, these reviews were ongoing and a completion date had not been set. U.S., Canadian, and Mexican government officials suggested implementing processes to facilitate the movement of energy company personnel and equipment across borders to reduce delays in business and trade transactions. In a discussion among stakeholders after the 2016 North American Leaders’ Summit, participants agreed that there is a significant need to increase the efficiency with which cargo and individuals cross North America’s land borders and that border efficiency and the competitiveness of North America as a region are strongly linked. In addition, a U.S. official working with small and midsize U.S. energy companies with operations in the United States and Canada told us that moving equipment and personnel across the border can be challenging. The official explained that equipment has sometimes crossed the border with minimal delays but at other times has been detained for hours or days. Energy associations from the United States, Canada, and Mexico have advocated jointly for NAFTA negotiations to include provisions that would facilitate the movement of equipment, such as drilling rigs and vessels, and personnel—including for emergency response—across the U.S.– Canadian and U.S.–Mexican borders. These associations have also advocated for a NAFTA visa program to provide access for skilled energy professionals. U.S., Canadian, and Mexican government officials suggested increasing the involvement of states and provinces in energy integration efforts, given their control over local regulations, resources, and markets. The roles played by states and provinces in the countries’ energy sectors vary by country. Canada’s system, where provinces have control over natural resources and specific related procedures such as approval process for local permits, is less centralized than the United States’ system, according to a Canadian government official. In contrast, Mexico’s system is more centralized than the United States’, with Mexican states’ having less control over natural resources, according to a Mexican government official. In addition, the official stated that, while discussion of North American energy integration often focuses on the role of national governments, the inclusion of U.S. and Mexican states and Canadian provinces—especially those on the border—in discussions of regional energy integration is essential. Moreover, the electricity sector is particularly influenced by the participation of states and provinces because of the sector’s dependence on regional markets and interconnected infrastructure, according to an electricity sector representative. For example, the representative stated that the design of Canada’s electrical transmission system sometimes facilitates the transport of electricity more easily from north to south, to the United States, than from east to west, across Canadian provinces. As a result, U.S. markets are an important outlet for Canadian generators in eastern Canada and the Pacific Northwest. Currently, little cross-border electricity trade takes place between the United States and Mexico, other than the importation of electricity from a few power plants in Baja California, Mexico, to supply demand in the San Diego area. A Mexican government official stated that the limited level of electricity integration between the United States and Mexico is due in part to the role of the U.S. states in regulating the electricity industry, since their regulations and plans for working with Mexico may differ. According to the official, it is therefore essential to include the states in any discussions about promoting integration of the U.S. and Mexican electricity sectors. According to USAID officials, a public–private contractual mechanism developed by USAID to tap private sector resources for constructing electricity transmission will be used for the first time to build a project to connect the Mexican state of Baja California with the rest of the Mexican grid, which had previously been isolated from Baja California and the market in the U.S. state of California. According to these officials, the transmission line could also connect the Mexican state of Sonora with the U.S. state of Arizona. U.S., Canadian, and Mexican energy officials we interviewed indicated that they were generally satisfied with bilateral and trilateral strategic and technical cooperation to facilitate North American energy integration. According to U.S. officials, energy is an area in which the interests of the United States, Canada, and Mexico align and cooperation has been well established. U.S. officials also stated that trilateral cooperation works well at both the strategic and technical levels and that regional cooperation enhances energy security for all three countries. Canadian officials stated that cooperation with the United States at the strategic level has often served as a springboard for purposeful action to address shared priorities. Mexican officials stated that there has been extensive communication with the United States on energy issues, in particular at the ministerial and agency levels, which has led to activities to improve integration. Some officials also identified changes in the overall foreign policy context that could affect cooperation in the future. Some Canadian and Mexican government officials we interviewed expressed concern that the renegotiation of NAFTA and the administration’s decision to withdraw from the Paris Agreement could create uncertainty among investors in the energy sector. U.S., Canadian, and Mexican officials , as well as private sector representatives we interviewed, stated that they viewed NAFTA renegotiation as an opportunity to improve the agreement and that any changes to NAFTA should “do no harm” to free-trade arrangements in energy commodities. However, a Canadian official told us industry representatives had expressed concern that the issue of energy could be used as a pawn in NAFTA renegotiations, resulting in harm to the sector. Furthermore, some Mexican officials stated that they were particularly concerned that any change in Mexico’s status as a U.S. free-trade partner could complicate flows of natural gas from the United States, which has assumed a more important role as an energy source for Mexico. Some Canadian and Mexican officials we interviewed expressed concern that the June 2017 announcement of the United States’ intention to withdrawal from the Paris Agreement could create a perception of an uneven playing field and uncertainty among energy sector investors, given Canada’s and Mexico’s continued participation in the accord. However, the officials noted that the commitment of some U.S. states, cities, and private sector companies to adhere to the accord’s tenets may minimize any negative impacts of the U.S. government’s withdrawal on their countries’ energy sectors. State and DOE officials we interviewed said they did not expect the U.S. renegotiation of NAFTA and withdrawal from the Paris Agreement to have a significant impact and stated that the energy sector in North America is already well integrated and well positioned to address these changes. U.S. government officials we interviewed noted that the United States’ energy sector is already extensively integrated with both Canada’s and Mexico’s. The officials stated that most easily accomplished actions to promote integration have already been taken and that they are primarily looking for ways to enhance a system that is working well. They also stated that it is important not to disrupt the advances that have already been made. Further, they stated that, to enhance integration, it is necessary to focus on practical steps that result in concrete changes to further facilitate cross-border production and trade. We provided a draft of this report to DOE, Interior, Commerce, State, DOT, FERC, USAID, Treasury, the Environmental Protection Agency, and the Department of Homeland Security for review and comment. We received comments from USAID, which are reproduced in appendix IV. In its comments, USAID provided additional information about the agency’s contributions to North American energy integration, which we incorporated in the report as appropriate. DOE, Interior, Commerce, DOT, FERC and Treasury provided technical comments, which we also incorporated as appropriate. State, the Environmental Protection Agency, and the Department of Homeland Security informed us that they had no comments. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Energy, the Interior, Commerce, State, Transportation, the Treasury, and Homeland Security; the Executive Director of FERC; the Administrators of USAID and the Environmental Protection Agency; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report examines (1) ways in which the U.S., Canadian, and Mexican governments cooperate on North American energy integration; (2) U.S. agencies’ activities to facilitate North American energy integration; (3) U.S. agencies’ efforts to coordinate among themselves on North American energy integration; (4) ways in which U.S. agencies obtain feedback and input from U.S. industry and civil society regarding North American energy integration; and (5) steps that U.S., Canadian, and Mexican officials suggested to further facilitate North American energy integration. To address these objectives, we reviewed documents and information provided by cognizant U.S., Canadian, and Mexican government officials; U.S., Canadian, and Mexican energy sector associations; and U.S. civil society groups such as think tanks and environmental nongovernmental organizations. We conducted field work in Mexico City, Mexico, and in Ottawa, Canada, where we met with government and energy sector association representatives. We also collected information on activities related to North American energy integration from U.S. agencies implementing such activities. In addition, we obtained and analyzed data from the U.S. Census Bureau regarding the extent of the United States’ energy trade with Canada and Mexico. To examine the ways in which the U.S., Canadian, and Mexican governments cooperate on North American energy integration, we interviewed officials in each country who were responsible for energy- related cooperation, asking about the processes they follow to cooperate on energy integration at the strategic and technical levels. In the United States, we spoke with officials from the Departments of Energy (DOE), State (State), Interior (Interior), Commerce (Commerce), the Treasury (Treasury), Transportation (DOT), and Homeland Security (DHS); the U.S. Agency for International Development (USAID); and the Federal Energy Regulatory Commission (FERC). We also corresponded with officials from the Environmental Protection Agency. In addition, we spoke with officials of the North American Electric Reliability Corporation. Further, we met with Canadian and Mexican embassy officials in Washington, D.C. In Canada, we met with officials from Natural Resources Canada and Global Affairs Canada and spoke with officials from the Alberta provincial government. In Mexico, we met with officials from Mexico’s Secretariat of Energy; National Hydrocarbons Commission; Energy Regulatory Commission; National Gas Control Center; National Center for Energy Control; and Agency for Safety, Energy and Environment. We also reviewed documents developed to formalize bilateral and trilateral cooperation, such as the 2016 North American Climate, Clean Energy, and Environment Partnership Action Plan; documents related to the U.S.–Mexico High Level Economic Dialogue; and the “2017 North American Energy Ministerial Joint Summary.” To examine U.S. agencies’ energy integration activities implemented since 2014, we reviewed agency documents; interviewed DOE, Interior, Commerce, State, DOT, FERC, USAID, and DHS officials; and corresponded with officials from the Environmental Protection Agency. Also, in May 2018, we contacted Treasury officials after learning about recent Treasury activities related to North American energy integration. In addition, we sent a survey to DOE, Interior, Commerce, State, DOT, FERC, USAID, and DHS, asking them to, among other things, identify their energy integration activities implemented from 2014 through 2017; describe each activity, including its purpose; identify the type of activity (e.g., joint research and development, trade mission, forum for technical discussion, regulatory cooperation, technical assistance, other); and identify other agencies participating in the activity. The survey also asked whether the identified activities were bilateral with Canada or Mexico, trilateral, multilateral, or unilateral. We followed up with the agencies to ask for clarifications. We did not independently determine whether the agencies had identified all relevant activities. In addition, we reviewed agencies’ responses to identify any overlap and duplication among federal energy integration efforts. We focused on the goals and outcomes of energy integration activities as described in the agency-provided descriptions and in background material, as needed. We also focused on the activities’ target populations, or intended beneficiaries, since a bilateral U.S.–Canadian activity would have a different target population than a bilateral U.S.–Mexican activity. We compared activities within categories to look for evidence of duplication or overlap based on the description provided by the agency or other background material (i.e., agency website and documents). We determined, in accordance with GAO’s definitions of duplication and overlap, that no two of the agency activities were duplicative or overlapping because the activities did not have the same or similar goals or the same or similar beneficiaries. To examine U.S. agencies’ efforts to coordinate with each other on North American energy integration, we conducted interviews with DOE, Interior, Commerce, and State officials, asking them to identify and discuss any mechanisms, such as interagency groups, offices, activities, or initiatives, used for collaboration for the purposes of energy integration. To conduct a more detailed analysis of interagency coordination on North American integration, we interviewed participants in a National Security Council (NSC)–led interagency working group using a standard set of questions about interagency coordination and collaboration. We selected the NSC working group because it provides an example of very high-level interagency collaboration, could address multiple aspects of energy integration, and had a specific focus and effect on energy-integration efforts. Although we had intended to interview NSC officials, as of April 2018, NSC had not responded to our requests for documents and an interview. As a result, we were unable to include NSC views about the interagency collaboration considerations discussed. However, we were able to mitigate this limitation by interviewing and comparing the testimonial evidence of officials from the four participating agencies. We provided agency officials a structured set of questions about interagency coordination and collaboration that were based on key considerations for implementing interagency collaboration identified in a prior GAO report. To examine the ways in which U.S. agencies obtain feedback and input from U.S. industry and civil society, we conducted several informational interviews with industry associations and civil society organizations, such as think tanks and other environmental groups. To identify these organizations, we reviewed witness lists at relevant congressional and agency hearings, panel lists at energy-related conferences, and recommendations from agency officials. In addition, as we interviewed representatives of these organizations, we asked them to identify other groups that might provide further information. Using this approach, we interviewed representatives from seven civil society groups and 10 industry associations, including organizations based in Mexico and Canada. However, our sample was judgmentally selected and their opinions are not generalizable to all private industry and civil society stakeholders. To report on steps suggested by U.S., Canadian, and Mexican officials to further facilitate North American energy integration, we interviewed officials in each country who were responsible for energy-related cooperation and asked them to suggest additional steps or options that the United States, in collaboration with Canada and Mexico, could take to facilitate building a more integrated and secure energy market in North America. In the United States, we spoke with officials from DOE, Interior, Commerce, State, DOT, FERC, USAID, Treasury, and DHS. We also spoke with Canadian and Mexican embassy officials in Washington, D.C. Additionally, in Canada, we spoke with officials from Natural Resources Canada, Global Affairs Canada, and the Alberta provincial government. In Mexico, we spoke with officials from Mexico’s Secretariat of Energy, National Hydrocarbons Commission, Energy Regulatory Commission, National Gas Control Center, National Center for Energy Control, and Agency Energy and Environment Safety. We analyzed responses provided by officials in the three countries and identified four steps suggested by one or more officials in each of the countries: (1) aligning energy regulatory cooperation, (2) streamlining the presidential permitting process, (3) facilitating cross-border movement of equipment and workers, and (4) involving states and provinces in energy integration efforts. After identifying these four steps, we elaborated on each one by reviewing related documents and reports and discussing them with private sector representatives and researchers in nongovernmental organizations. We did not elaborate on steps suggested by U.S., Canadian, or Mexican officials that were not suggested by at least one official in all three countries. We conducted this performance audit from April 2017 to July 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The North American Electric Reliability Corporation (NERC) is a not-for- profit international corporation that plays a role in regulating and establishing reliability standards for cross-border North American electricity markets. NERC’s mission is to assure the effective and efficient reduction of risks to the reliability and security of the bulk power system in the United States, Canada, and part of Mexico. While not a federal agency, in July 2006, NERC was certified by the Federal Energy Regulatory Commission (FERC) as the electric reliability organization for the United States. Subsequently, compliance with NERC reliability standards became a legal requirement for certain bulk power system owners, operators, and users. NERC is subject to oversight by FERC and governmental authorities in Canada. NERC has a trilateral focus, which enables it to more easily forge partnerships in Canada and Mexico, according to NERC officials. The officials stated that NERC’s work has primarily focused on electrical grid reliability in Canada and the United States, as Mexico’s electricity market was restricted until its recent reforms. NERC identified several activities related to North American energy integration. For example: NERC leads GridEX, a biennial electrical grid security exercise involving industry and government from the United States, Canada, and Mexico. The exercise attempts to execute the electricity sector’s emergency response to simulated cyber and physical security threats and incidents, strengthen utilities’ crisis response functions, and provide input for lessons learned. NERC engages in regulatory cooperation with government entities in Canada and Mexico to improve the reliability of the electric grid. As the electric reliability organization certified by FERC, NERC convenes stakeholders from across the interconnected North American bulk power system to develop continent-wide reliability standards. NERC has entered into a number of memorandums of understanding (MOU) with Canada and Mexico. In September 2006, NERC signed an MOU with Canada’s National Energy Board that committed the parties to work together to promote a reliable bulk electric system in North America through a cooperative relationship. Moreover, NERC officials stated that because electricity is the domain of Canadian provinces, NERC signed an MOU with the responsible organization in a number of provinces. Further, the Mexican government recently began to engage with NERC to bring certain areas into compliance with NERC standards, and officials reported that in March 2017, NERC and Mexico’s Energy Regulatory Commission and National Center for Energy Control signed an MOU as a framework for, and to facilitate, cooperation. According to NERC officials, the MOU with these Mexico energy agencies defines roles and responsibilities, states Mexico’s general commitment for Mexico to use NERC standards as a basis for Mexico’s electric reliability system, and identifies some technical areas in which NERC will provide capacity-building assistance. Table 2 describes activities related to North American energy integration in 2014 through 2017 reported by eight U.S. agencies—the Departments of Energy, Interior, Commerce, State, Transportation, and the Treasury; the U.S. Agency for International Development; and the Federal Energy Regulatory Commission. Kimberly Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov. In addition to the contact named above, Kim Frankena (Assistant Director), Francisco M. Enriquez (Analyst-in-Charge), Brian Tremblay, Martin De Alteriis, Philip Farah, Christopher Keblitis, Reid Lowe, Grace Lui, Franklin Rusco, and Sarah Veale made key contributions to this report.", "summary": "According to a U.S. government study, increased U.S. energy trade with Canada and Mexico—two of the United States' top energy trade partners—is viewed as a major contributor to U.S. economic prosperity and energy security. In recent years, North American energy production has experienced changes. For example, the United States has become the world's top oil producer, Canada has substantially increased its oil outputs, and Mexico has implemented energy reforms. To address energy production and trade issues, the public sector and private sector stakeholders have advocated for further integration of the three North American countries' energy sectors. GAO was asked to review the role of U.S. agencies in supporting energy integration in North America. This report examines (1) ways in which the U.S., Canadian, and Mexican governments cooperate on North American energy integration; (2) U.S. agencies' activities to facilitate North American energy integration; (3) U.S. agencies' efforts to coordinate among themselves on North American energy integration; (4) ways in which U.S. agencies receive feedback from U.S. industry and civil society regarding North American energy integration; and (5) steps that U.S., Canadian, and Mexican officials suggested to further facilitate North American energy integration. GAO reviewed bilateral and trilateral cooperation activities and mechanisms; surveyed U.S. agencies involved in energy integration; and interviewed U.S., Canadian, and Mexican energy officials. GAO is not making any recommendations in this report. Cooperation. The United States cooperates with Canada and Mexico on integrating North American energy markets and infrastructure (energy integration). Cooperation occurs at the presidential and ministerial levels (e.g., the countries' secretaries or ministers of energy) for strategic issues and at the agency level for technical issues. However, progress on some strategic issues has been limited. For example, development of a North American energy strategy, which the U.S. Department of Energy (DOE) proposed in March 2017, was suspended later that year because of disagreement about its scope. Discussions of the strategy resumed in 2018, according to DOE officials. Agency activities. Eight U.S. agencies have engaged in multiple efforts to facilitate North American energy integration. DOE generally serves as the lead agency on energy integration issues, while the Department of State—the lead agency on foreign policy—also leads some bilateral and trilateral efforts. Other agencies play roles in areas such as regulatory compliance or efforts to open energy markets. Agency officials GAO surveyed and interviewed identified 81 energy integration–related activities conducted in 2014 through 2017, including international agreements and other instruments, research and development, technical forums and assistance, regulatory cooperation, and trade promotion. Interagency coordination. U.S. agency officials reported coordinating on energy integration through high-level U.S. interagency meetings, summits, and other means. For example, agencies participating in a National Security Council–led working group share information, provide advice, and coordinate on activities. Agency officials also reported using mechanisms such as stakeholder forums and staff discussions to coordinate on energy integration issues. Stakeholder feedback. U.S. agencies receive feedback on energy integration issues from the private sector and civil society through formal mechanisms such as comments in the Federal Register and public–private advisory entities. For example, the U.S.–Mexico Energy Business Council is designed to capture private sector feedback. Informal feedback comes through activities such as emails, phone calls, and letters. Steps suggested by U.S., Canadian, and Mexican officials . Officials in the three countries expressed general satisfaction with intergovernmental cooperation on energy integration and said cooperative activities had helped foster integration. They also suggested further work in areas such as aligning energy regulations. Source: GAO analysis of information provided by U.S, Canadian, and Mexican officials. | GAO-18-575", "document_type": "gao"}
{"report": "Although less visible than other transportation modes and not as vast as they are, inland waterways allow shippers to transport goods, particularly bulk commodities, in a relatively cost-effective and environmentally friendly method between ports all along the waterways, and to coastal ports for transportation to international markets. For example, in a report prepared for the National Waterways Foundation, the Texas A&M Transportation Institute found that, for every gallon of fuel burned, 647 tons of cargo can be carried 1 mile by barge, but only 477 tons by train or 145 tons by truck. Additionally, if cargo transported on inland waterways each year were to be moved by truck, it would take an additional tens of millions of truck trips to carry that cargo—more than doubling the number of trucks per day, per lane on a typical rural interstate. Most of the goods moved on the inland and intracoastal waterways are bulk commodities, including coal; petroleum products; chemicals; aggregate construction materials such as sand, gravel and stone; as well as grain, soybeans, and other agricultural products. Approximately 12,000 miles of inland and intracoastal waterways and channels in the United States are commercially navigable and approximately 11,000 miles make up the fuel-taxed portion of the system, shown in figure 1. The remaining approximately 1,000 miles of inland and intracoastal waterways and channels are not part of the taxable waterways and contain very few significant lock and dam structures. Some commercial waterways users, especially those on the Upper Mississippi and Ohio Rivers, may never leave the taxable portion of the system, but other vessel operators may navigate through taxable and non-taxable waterways, including connecting deep draft waterways. Navigation on inland waterways is made possible by locks and dams, navigation structures and aids (such as buoys), as well as channel maintenance and dredging where necessary to maintain a minimum channel depth of 9 feet to support commercial barge traffic. Dams form the foundation of the inland waterways system and create “pools” for navigation during periods of low and medium river flow. Locks at dam sites allow river traffic to move up or down from one pool to another much like a stairway of water. See figure 2 below. As part of its Civil Works Program, the Corps operates and maintains the fuel-taxed inland waterways for the purpose of facilitating navigation. The Corps is responsible for balancing its navigation mission with other civil works missions, including hydropower generation, flood risk management, emergency response, environmental stewardship, and recreation (see fig. 3). For example, the Corps may consider the migration of fish when designing locks and dams that facilitate navigation. Congress appropriates funding for the Corps’ Civil Works Program. For inland waterways, the Corps uses funding for two main purposes: (1) inland waterways operations and maintenance and (2) inland waterways construction. From fiscal years 2006–2017 (the years for which data were available), the Corps obligated an average of $690 million annually for operations and maintenance of the fuel-taxed inland waterways. Funding for operations and maintenance is appropriated entirely from general revenues. Figure 4 shows annual obligations for inland waterways operations and maintenance for fiscal years 2006 through 2017. For construction projects, Congress appropriates funding from the Inland Waterways Trust Fund (Trust Fund) in addition to funds from general revenues. Since the Inland Waterways Revenue Act of 1978 (1978 Act), commercial waterway users have paid taxes on fuel used by commercial towboats and other vessels that typically move barges, revenues from which are deposited in the Trust Fund. The Water Resources Development Act of 1986 (1986 Act) increased the initial fuel-tax rate per gallon and established a cost-sharing process for inland waterways expenditures. Together, the 1978 Act and the 1986 Act established a means for the inland waterways industry to provide economic support for infrastructure development. These users currently pay a $0.29 per gallon tax on diesel fuel used on the fuel-taxed portion of the inland waterways, revenue from which is then deposited into the Trust Fund. Traditionally, 50 percent of a project’s funding is appropriated from general revenues and 50 percent is appropriated from the Trust Fund, though Congress reduced the Trust Fund’s cost share for the ongoing new construction of the Olmsted Locks and Dam project to 25 percent for fiscal year 2014 and to 15 percent for subsequent fiscal years. In fiscal year 2018, commercial waterway users contributed about 35 percent of the $399 million allocated to various construction projects (see fig. 5). On average, from fiscal years 1997 through 2018, the Corps has allocated about $240 million annually for construction to repair or improve existing inland- waterways navigation infrastructure. In its 2017 annual financial report, the Corps notes that the number of instances of lock closures on inland waterways (including the fuel taxed inland waterways) due to preventable mechanical breakdowns and failures lasting longer than one day and lasting longer than one week have decreased since fiscal year 2010, but that the lock closures that do occur can result in substantial delays to shippers, carriers, and users, and are a factor in the cost of shipping commodities on waterways. According to the Inland Waterways Users Board (Board)—an advisory committee made up of industry stakeholders—U.S. inland waterways infrastructure is in need of modernization. The Corps currently manages construction projects aimed at replacing, expanding, and modernizing existing locks and dams. For fiscal year 2018, the Corps has allocated about $399 million from money Congress appropriated for civil works construction for a total of five inland waterways construction projects: four ongoing projects and one new project (see fig. 6). According to the Board, as of December 2017, 14 new lock and dam construction projects have been authorized by Congress but have not yet received construction funding. In addition to the Corps and the Board, several entities have roles related to the inland waterways: The Assistant Secretary of the Army for Civil Works (ASA-CW): the ASA-CW establishes policy direction and provides supervision of the Department of the Army functions relating to all aspects of the Corps’ Civil Works program. Maritime Administration: within the Department of Transportation, the Maritime Administration promotes the use of waterborne transportation and its integration with other segments of the transportation system. It is also charged with maintaining the health of the merchant marine, since commercial mariners, vessels, and intermodal facilities are vital for supporting national security. The U.S. Coast Guard (Coast Guard): within the Department of Homeland Security, the Coast Guard is responsible for, among other things, facilitating the safe and efficient flow of commerce on the navigable waterways of the United States. For example, the Coast Guard regulates and enforces safety standards for inland waterways vessels and operator licensing, conducts icebreaking to facilitate the flow of commerce and relieve flooding from ice dams, and installs and monitors aids to navigation that mark the navigable channel (such as buoys, beacons, and lights) to facilitate the safe movement of vessels. The Coast Guard coordinates with the Corps to ensure aids-to- navigation are properly installed and makes adjustments as channel conditions may dictate. Office of Management and Budget (OMB): Within the Executive Office of the President, OMB oversees the implementation of the President’s policy, budget, management, and regulatory objectives. Related to inland waterways, OMB works with the Corps and the ASA-CW to formulate the annual President’s budget request and issues policies related to the budget’s implementation, project study, and prioritization. As part of its management of the inland waterways, the Corps budgets for the costs of operations and maintenance (which are funded from one appropriation account) and construction (funded from a separate appropriation account) and develops an annual budget request to submit to OMB. The Corps develops this budget request for all its civil works activities, including locks and dams on the fuel-taxed inland waterways system; this request is reviewed and finalized by the ASA-CW and OMB before being submitted to Congress as part of the annual President’s budget request. To prepare its annual budget request, the Corps identifies potential operations activities and maintenance projects and submits estimates of the costs to complete those activities, but not all identified maintenance projects are included in the budget request. According to Corps officials, as part of the budget request development process, the Corps provides OMB and the ASA-CW with a variety of funding proposals that would enable different levels of service for all of its civil works assets, including inland waterways. However, according to Corps officials, the President’s budget request for civil works—including funding for inland-waterways maintenance projects—is based on broader administration priorities and does not request funding to complete all identified maintenance projects. The Corps then receives annual appropriations for its Civil Works Program, from which it allocates funding to each of its missions, including inland waterways navigation. Figure 7 illustrates the Corps’ budget formulation and execution process. In 2008, the Corps began implementing an asset management process to guide its management of the Civil Works Program, including inland waterways. Under this process, the Corps determines the hours of operation for each lock, which maintenance activities to perform, and which construction projects to prioritize based on the economic value these activities will provide. The Corps ranks maintenance projects identified during the budget formulation process based on the value or level of service the project is expected to provide as well as how critical they are and funds as many of the priority projects as possible given available funding and the rest are deferred. The Corps assesses the value of inland waterways assets (such as waterways, locks, and dams) based primarily on the economic benefits derived from improved commercial navigation—that is, the benefits achieved by allowing shippers to transport commodities to both domestic and foreign markets more cost effectively than they would using other modes of transportation (such as truck and rail). Economic benefits are generally determined using measures of commercial use, and assets are categorized as high, moderate, and low commercial use. The Corps’ approach to operations and maintenance is as follows: Operations: The Corps allocates funding for operations based on service priorities. The Corps operates locks at varying levels of service (i.e., hours of operation) based primarily on past commercial traffic volume, but also considering the volume of recreational traffic and available resources. The Corps operates high-use locks continuously (24/7), while operating those with less commercial traffic and fewer economic benefits less frequently, sometimes by appointment only. Maintenance: The Corps allocates funding for maintenance projects based on the risk of not performing maintenance; this risk is determined by considering both the condition of an asset as well as the economic impact of a reduction in service should the asset fail (that is, the traffic that would be affected if a lock or dam were to become unusable). According to Corps and ASA-CW officials, the Corps does not know how much deferred maintenance exists for inland waterways, because there is no agreed upon definition for deferred maintenance. Corps and ASA- CW officials identified several challenges related to developing a useful definition with which to measure deferred maintenance: Using the total cost to conduct all maintenance identified during the budget formulation process may not be useful as a budget tool because the Corps would not have the capacity to conduct all identified maintenance in one fiscal year. A single measure may not be useful to gauge the condition of the system, because not all deferred maintenance projects have the same effect on system reliability, for example: Some identified maintenance, such as preventive maintenance conducted less frequently than preferred (like painting lock components to prevent future corrosion), may not affect reliability or function in the short term. Deferring the replacement or rehabilitation of broken or malfunctioning components—such as a lock gate arm—on low use waterways may result in closures on those waterways or delays related to the condition of the lock, but would affect a relatively small amount of cargo and vessels and have a smaller economic impact than closures on high-use waterways. Deferring the replacement or rehabilitation of broken or malfunctioning components on high-use waterways may result in closures that prevent traffic to large sections of the inland waterways system and affect a large portion of cargo transported via waterways. Some deferred maintenance projects may never be undertaken, while others are planned for the near future. Corps officials told us that, depending on the risk associated with not completing a particular maintenance project, the Corps may choose to never complete the project, such as mowing the grass at a low-use lock and dam facility. Conversely, some incomplete projects represent later phases of projects that are already under way and are planned for completion in the near term. The lack of a definition and measure of deferred maintenance for inland waterways projects is inconsistent with federal internal-control standards, which call for agencies to identify information requirements needed to achieve objectives and address identified risks (such as reliability of the waterways) and to process relevant data to develop that information. Further, internal control standards call for agencies to communicate information externally—such as to Congress and OMB—to achieve agencies’ objectives. Corps and ASA-CW officials acknowledged that there is a lack of information on deferred maintenance provided to Congress. One Corps official suggested that the Corps may need more than one measure of deferred maintenance to capture differences in the type and consequences of various projects. Additionally, ASA-CW officials noted that once a meaningful definition or metric for deferred maintenance is identified, the Corps lacks a way to track this information. Without a measure—or measures—of deferred maintenance for inland waterways (1) that the Corps can use to budget for and manage the inland waterways, (2) that reflects its priorities, and (3) that accurately conveys a consistent and well-defined measure of deferred maintenance that can be communicated to outside stakeholders, the Corps is limited in its ability to identify preventive maintenance that could forestall more costly maintenance or rehabilitation in the future and communicate its estimated maintenance costs to OMB and the Congress. In turn, the lack of a measure could limit the ability of Congress to make informed funding decisions pertaining to the Corps. Both the stakeholders we interviewed and the Corps have identified effects on the reliability of the inland waterways related to current funding levels for operations and maintenance. For instance, many stakeholders we spoke to said the funding the Corps receives for operations and maintenance on inland waterways has not been sufficient to maintain the stakeholders’ desired level of reliability. Some stated that the Corps is currently operating using a “fix as fails” approach: that is, requesting enough funding to be able to respond to crises but not to conduct preventive maintenance. Further, many stakeholders said there is potential for some waterway users to switch to other modes of transportation based on unreliability. For instance, two stakeholders stated that businesses may be “chased away” because the inland waterways system continues to be unreliable due to unscheduled closures for maintenance. For example, during the course of our review, one lock on the Ohio River experienced repeated unscheduled closures. One such closure lasted from September 6, 2017, through September 14, 2017, during which time no vessels were able to travel through the lock. According to a June 2017 Corps report on the causes of mechanical breakdowns leading to unscheduled lock closures, routine maintenance occurs less frequently than in the past due to a lack of funding, and that delayed maintenance increases the risk of operational or catastrophic failure that results in lock closures. Figure 8 illustrates the condition of both deteriorating and recently rehabilitated inland waterways’ navigation facilities. Identifying and communicating about deferred maintenance could help Congress and OMB understand the extent of any problems with reliability that could affect the inland waterways system. The Corps manages inland-waterways construction projects—the modernization and rehabilitation of existing locks and dams (called major rehabilitation), or the construction of new structures—to ensure the facilities continue to function and meet future requirements, and prioritizes these projects based on expected costs and benefits. As shown in figure 9, construction projects are developed in response to an identified problem. Congress then authorizes inland-waterways construction projects for study and construction and provides funding through the annual appropriations process, although some authorized projects may not receive funding. Since 1996, Congress has appropriated construction funding that the Corps has allocated toward 20 projects, of which 15 have been completed. The Corps assesses the net economic benefits of inland-waterways construction-project alternatives by comparing estimated direct costs (e.g., construction costs to build a new lock chamber) to estimated reductions in the waterway transportation costs (e.g., reduced travel costs related to a reduction in the time it might take for a barge to pass through a larger lock chamber). For the Corps to recommend construction, the project must have a benefit-cost ratio—that is, the ratio of estimated benefits to estimated costs—greater than 1 to 1 using a statutorily defined discount rate that varies from year to year. The project must then be authorized for construction by Congress through legislation to be eligible for funding, which typically occurs in a Water Resources Development Act. The Corps—with advice from the Inland Waterways Users Board (Board)—prioritizes authorized inland-waterways construction projects according to estimated net economic benefits and an assessment of the economic and safety consequences of not doing the project. In collaboration with Corps headquarters, division, and district offices, the ASA-CW determines which civil works construction projects will be prioritized to include in the budget request to OMB. OMB considers the recommendations of the ASA-CW and the Corps in deciding which projects to include in the President’s budget request. While Corps projects with a benefit-cost ratio of at least 1 to 1 at the statutorily defined discount rate are eligible to seek funding, OMB assesses projects against a different threshold in determining which projects are included in the President’s budget request. In line with OMB practice since the mid- 2000s (and, according to OMB officials, consistent with their evaluation of most federal programs per their guidance set in 1992), generally only inland-waterways construction projects with a benefit-cost ratio of at least 2.5 to 1 using a 7 percent discount rate are included in the annual President’s budget request. In recent years, only one of the Corps’ ongoing construction projects—the Olmsted Locks and Dam project—has met this threshold. Congress appropriates funds to the Corps’ Civil Works construction account, and the Corps allocates some of that funding to inland- waterways construction projects. In recent years, Congress has appropriated funds for projects included in the President’s budget request and has directed the Corps to allocate appropriated amounts that exceed the amount requested in the President’s budget request to other projects as depicted in step 8 in figure 9. For example, in fiscal year 2018, the Administration requested $175 million for the Olmsted Locks and Dam project, but five projects were funded that year. In the Joint Explanatory Statement accompanying the appropriations, Congress directed the Corps to allocate funds to inland-waterways construction projects prioritized by economic effect in such a way that the Corps uses all estimated Trust Fund revenues. In accordance with this direction, the Corps allocated $399 million to inland-waterways construction projects, with more than half—$224 million— going toward the other three ongoing inland-waterways projects and a new major rehabilitation project (see fig. 10). Stakeholders we spoke to stated that the process for determining which construction projects receive funding can be challenging. Some stated that the use of different discount rates and benefit-cost ratio thresholds for authorization and budgeting purposes can create confusion as to whether projects will be funded. Also, some stakeholders stated that because the 7 percent discount rate used by OMB to calculate the benefit-cost ratio is higher than the statutory rate used in recent years, use of the OMB discount rate can result in projects being excluded from the President’s budget request, an exclusion that can reduce the likelihood of the project receiving funding. According to the Board, as of December 2017, 14 construction projects have been authorized for construction but have not been allocated construction funding, and an additional 7 major rehabilitation projects are also candidates for construction over the next 20 years. However, Corps officials stated that, once the Olmsted Locks and Dam project is completed, none of the currently authorized projects will meet OMB’s threshold for inclusion in the President’s budget request. Further, some stakeholders told us that the Corps’ policy—developed to provide additional information to OMB during budget development—to recalculate a project’s benefit-cost ratio every few years, including while the project is under construction, can create challenges. For one, ongoing projects included in the President’s budget request have subsequently been excluded in later years due to a lower updated benefit-cost ratio, which might reduce the likelihood of the project’s being allocated funding. For example, the Lower Monongahela Locks and Dams project had a benefit-cost ratio of 6.7 to 1 at a 7.75 percent discount rate when construction funds were first expended in fiscal year 1995 (based on benefits and costs as estimated when the project was authorized in fiscal year 1992) and has been allocated funding every year since. However, this project was not included in either the fiscal year 2017 or 2018 President’s budget requests due in part to its updated benefit-cost ratio having fallen below the 2.5 to 1 threshold because of increased costs and changes to the expected benefits. Although it was not included in the President’s budget request, the Corps ultimately allocated funding for the project in fiscal years 2017 and 2018 based on congressional direction. Since at least 1995, all inland-waterways construction projects have been funded incrementally, meaning that annual appropriations have covered a portion of the project’s estimated costs. There are several reasons that the Administration may request and Congress may appropriate funding for inland-waterways construction projects incrementally—as they both have done in recent years—in lieu of full upfront funding. Available annual funding is generally less than the amount required to cover the full cost of one new construction project. In addition, the Corps (like other federal agencies) cannot enter a contract that exceeds available funding unless authorized by law. For example, based on average annual Trust Fund revenues since 2015 of about $107 million, a 50-50 cost share would provide about $214 million in construction funding annually, whereas the four ongoing construction projects were each originally estimated to cost more than that amount. Further, of the 10 new construction projects prioritized to be completed next in the Corps’ capital investment strategy, as of 2016, 7 of them are estimated to cost at least $350 million. Additionally, these projects—even once begun—must compete annually with other funding priorities across the federal government. We have previously reported that full upfront funding of capital assets can be challenging to obtain in an era of resource constraints; incremental funding can make it easier for agencies to meet mission capital demands within the constraints of their appropriation. Further, while the Corps could carry over appropriations until they accrue sufficient funds to fully fund a project upfront (because their construction appropriations historically have not expired), Corps officials we spoke to had concerns about this practice. They stated that carryover funds may be seen as available and reprogrammed to other civil works efforts (such as rebuilding infrastructure in the wake of a natural disaster) and that Congress and the Board both expect the Corps to obligate appropriated funds. In addition, some stakeholders had concerns that delaying the start of construction until full upfront funding was appropriated could result in further deterioration or increased maintenance costs for those facilities. Finally, according to some stakeholders we spoke to, the current incremental funding approach has allowed construction projects on multiple waterways to occur at once—a way of spreading benefits across the system and providing some indication to local users and beneficiaries that their local facility will be repaired or replaced. Nonetheless, incremental funding for inland waterways projects—among other factors such as engineering design changes—has contributed to increased costs and schedule delays because it results in inefficient contracting practices. Corps reports and academic studies have found that incremental funding has resulted in inefficient contracting for construction projects, in part because funding is not guaranteed beyond the current year and contractors must stop working once funds are exhausted. Because the Corps receives annual appropriations for a portion of the total estimated cost of a project, the Corps awards contracts for separable elements that can be constructed and left for a period of time with minimal damage and safety risks if further funding is unavailable (such as a contract to build part of a lock wall). According to Corps district officials, this practice has resulted in the Corps entering into many more contracts for each project than they would if they had full upfront funding. For example, Corps officials told us that due to incremental funding, the Lower Monongahela Locks and Dams project is currently on its 14th construction contract even though it was originally planned to be completed using only two contracts. Corps officials told us that this contracting practice is inefficient and can lead to cost overruns due to, for example: contractor mobilization and demobilization, such as moving heavy equipment on and off the construction site, at the beginning and end of each contract; prolonged construction due to multiple contractors unable to work at the same worksite during the same time; extra administrative expenses associated with letting multiple increased cost of fuel and construction materials (e.g., steel and cement) from year to year; higher costs of buying construction materials in smaller quantities; inflation due to prolonged construction. Further, according to Corps officials and stakeholders, additional challenges related to the timing and amount of funding allocated in a given fiscal year can exacerbate inefficiency related to incremental funding. For example, while under a continuing resolution, the Corps does not allocate funding to projects that were not included in the President’s budget, per OMB policy, which can delay funding for projects until Congress provides appropriations for the remainder of the fiscal year. Thus, in fiscal year 2018, funding was delayed for the three ongoing projects that were not included in the President’s budget request. Although project work can continue if the Corps has some carryover funds, Corps officials told us that, if they exhaust their funds, a continuing resolution could mean they won’t be able to exercise the next option on a construction contract. As a result, the contractor would have to stop work and shut down the construction site, and the Corps would need to close the existing contract, repackage the remaining work, and re- advertise the contract—all tasks that can increase the full cost of a project. Additionally, according to Corps officials, when projects receive smaller portions of funding than estimated for the upcoming fiscal year, the amount may not be enough to allow a contractor to continue on the most efficient construction schedule for that contract or contract option which can have the effect of increasing costs. Moreover, according to Corps district officials, the benefit-cost ratios for some ongoing projects have decreased in recent years in part because the projects have experienced increased costs (relative to expected benefits) due to a number of factors, including inefficient contracting stemming from incremental funding, which may affect the project’s priority status and inclusion in the President’s budget request. All four of the Corps’ ongoing construction projects have experienced cost overruns and, as shown in figure 11, schedule delays. According to Corps officials, some of these cost increases and delays were due to inefficient contracting stemming from incremental funding. For example, Corps officials currently expect that the Kentucky Lock Addition project will require at least $229 million more (about 19 percent above the original estimated cost) as a direct result of inefficient contracting and be completed 17 years later than planned. Similarly, the Corps estimates that the Chickamauga Lock project will need at least $170 million more (about 24 percent above the original estimated cost) due to inefficient contracting and be completed at least 13 years later than planned. The amount of estimated cost overruns for just these two projects could potentially fund an entire additional project. In the absence of full funding, our funding simulation demonstrates that contracting efficiency for inland-waterways construction projects could be increased by funding fewer projects at a time. We developed a simulation for a set of four hypothetical new construction projects under different funding approaches to explore the effects of different funding patterns and timing on total project costs and timeframes. We assumed that all four hypothetical projects could be completed for $2 billion ($500 million each, with expected funding of $100 million per year) within 5 years of construction. For our simulation, we assumed that $200 million would be available to allocate each year across the four projects—an amount roughly similar to recent funding levels for actual inland waterways projects. We developed five funding approaches that varied in the pattern and timing of funding allocated toward each project. Given these patterns of funding, we also incorporated cost effects that we hypothesized would occur. For example, for each year that a project did not receive full funding—that is, the entire remaining costs of the project were not provided—we assumed the remaining funding required to complete the project would increase to account for contracting inefficiencies that were likely to occur due to incremental funding, such as increased contractor mobilization and demobilization. Also, for any year that a project received funding in smaller amounts than expected, we assumed that funding required to complete the project would rise due to exacerbated contract inefficiencies due to such factors as having to buy materials in smaller quantities or break work into smaller separable elements. In addition, we incorporated inflation into projects’ remaining costs when funding for those projects was delayed. See appendix III for more detailed information regarding our methodology for this simulation. While fully funding projects up front would help to avoid cost increases or delays due to inefficient contracting, we found that, even with incremental funding, varying the timing and amount of funding can reduce inefficiency (see fig. 12). For example, we found that compared to other approaches, an incremental funding approach that concentrates all available funding to one of the four projects at a time—as in Approach A, shown in figure 12— results in lower cost overruns and faster construction than an approach that funds more projects simultaneously with smaller amounts of funding, as in Approach B (see app. III for results for all five approaches). In addition, concentrating funding toward one project could lead to greater years of benefits—as measured by the Corps as the number of years a facility has been constructed and available for use by vessels. However, according to Corps officials and stakeholders we spoke to, there may be risks associated with concentrating funding on one project at a time due to concerns with delaying the start of other high priority projects. For example, during the time in which a project is waiting for funding, the infrastructure may experience further deterioration, and vessels using the facility may experience increased delays. Corps officials we spoke to about this simulation generally agreed that the Corps’ current funding approach most closely resembles Approach B, with most funding going to the Olmsted Locks and Dam project while the remaining three ongoing projects receive smaller amounts (see also fig. 6). OMB and GAO have advocated for full upfront funding of capital projects as a way to recognize full budgetary commitments, but, as discussed, fiscal pressures on both the Corps and Congress may make it difficult to request and appropriate full funding. OMB’s Capital Programming Guide states that full funding can help ensure that all costs and benefits are taken into account at the time decisions are made to provide resources, increase the opportunity to use more competitive contracts, and allow for more efficient work planning. Further, we have previously reported that full funding is an important tool for maintaining government-wide fiscal control, because failure to recognize the full costs of proposed commitments during budget decisions could lead to distortions in the allocation of resources. We have also reported that incremental funding of capital projects can reduce available funding for future projects and erodes future program flexibility because funding is dedicated to projects begun in previous years. Though providing full upfront funding would likely reduce the overall costs of inland waterways construction over the long term, it may require a significant increase in annual appropriations in the short term, which Corps officials consider to be highly unlikely. Both OMB and GAO have acknowledged the challenges associated with “spikes” in appropriations that would be required for full funding and have suggested that innovative funding mechanisms could be used to mitigate this challenge. In 2010, we recommended that the Corps work with Congress to develop a more stable project-funding approach for Civil Works projects that provides more efficient use of funds, but the Department of Defense only partially concurred with the recommendation, stating that it will support budget decisions made by the administration. However, without some change in the way inland-waterways construction projects are funded to either provide full funding or reduce the effects of incremental funding by concentrating on fewer projects at one time, current cost increases and schedule delays resulting from inefficient contracting are likely to continue. For example, according to the Corps’ 2016 capital investment strategy, under a scenario in which construction funding is limited only by available Trust Fund revenues, in the next 20 years the Corps could complete 16 of the 22 major rehabilitation and new construction projects identified as priority projects for approximately $7 billion; however, because these estimates do not account for cost overruns due to the current incremental funding approach, the Corps is unlikely to meet this goal. In addition to adjusting the timing and distribution of funding, according to some of the stakeholders we interviewed, increasing available funding for construction would provide more upfront funding to enable more efficient contracting. Stakeholders said that with additional funding, the Corps may be able to complete ongoing inland waterways projects more quickly and begin other construction projects. We asked stakeholders representing 55 national and regional entities and researchers about options to increase available funding for inland waterways construction that have been proposed by policymakers and in relevant literature including: altering the cost share between the Trust Fund and federal requiring other users and beneficiaries of the waterways to contribute to the Trust Fund, increasing or adding fees for commercial users, expanding opportunities for local sponsors to contribute to funding pursuing alternative financing arrangements. While each option has potential benefits, stakeholders we interviewed identified limitations or trade-offs that could affect the feasibility of each option. Altering the Trust Fund cost share. Altering the percentage of the Trust Fund cost share for construction projects could increase available funding to complete construction projects. For example, in 2014 the Trust Fund’s cost share for the Olmsted Locks and Dam project was reduced by statute from 50 to 25 percent for fiscal year 2014, and to 15 percent for subsequent fiscal years—thereby increasing the federal share to 85 percent—to speed the pace of other inland-waterways construction projects (by increasing the overall funding available for those projects) and to reduce the costs to commercial users. The Inland Waterways Users Board (Board), in its April 2018 annual letter to Congress, proposed making such a change for all future projects. Specifically, the Board proposed increasing the federal government’s share of construction costs from 50 percent to 75 percent. According to the Board and some stakeholders, this could increase the available funding for Corps construction projects on the inland waterways system. Because each Trust Fund dollar would be matched by three dollars from general revenues as opposed to one dollar under a 50/50 split, overall funding may be increased. The Board stated that this approach may also enable the Corps to start and complete projects more quickly. For example, as shown in figure 12, with more upfront funding available for each project, the Corps may be able to contract for projects more efficiently than if it received smaller amounts of funding each year. However, some stakeholders said additional appropriations for inland waterways construction from general revenues would be required to achieve the benefits of this option, an approach that could, in turn, reduce funding available for other congressional priorities or increase the federal deficit. Absent additional appropriations, however, the amount of funding for construction could be reduced. For example, if appropriations from general revenues were $100 million per year under both scenarios, total funding for inland waterways under a 75/25 split would be only about $133 million, instead of $200 million under the traditional 50/50 split. To provide the same $200 million for construction, but reduce the costs to commercial users under a 75/25 split, appropriations from general revenues would need to increase to $150 million. Require other users and beneficiaries of the waterways to contribute to the Trust Fund. Some stakeholders we spoke to proposed requiring that other users of the waterways contribute to the Trust Fund. Recreational boaters, municipal water utilities, and hydropower utilities already pay fees associated with their use of inland waterways, but this revenue is not directed toward the Trust Fund, for example: recreational users, such as recreational boaters and fishermen, on all waterways pay fees of about $628 million annually on fishing equipment and taxes on fuel used in motorboats that are currently deposited into the U.S. Fish and Wildlife Sport Fish Restoration and Boating Trust Fund, which is used to sustain sport-fishing populations; municipal water utilities that have Corps’ water storage contracts on the inland waterways pay fees that are currently deposited into the general fund of the Treasury; and power generated by federally owned hydroelectric dams (including those owned by the Corps on the inland waterways) is sold at rates intended to cover the government’s costs of operating and maintaining the dams, among other things. Other infrastructure trust funds are supported in part through user fees paid by both commercial and non-commercial users. For example, excise taxes, primarily on motor fuels and commercial trucks and tires, are deposited into the Highway Trust Fund, which is used to provide grants to state highway or transportation agencies. Some stakeholders said that all users who benefit from the pools created by navigation dams should bear some portion of the costs of the infrastructure, and revenue collected from these users could potentially be redirected to the Trust Fund. However, some other stakeholders said that these users as well as U.S. taxpayers that do not use the waterways already contribute to inland waterways construction, operations, and maintenance costs through their federal tax contributions to general revenues. We have previously found that in theory, the extent to which a program is funded by user fees should generally be guided by who primarily benefits from the program; however, the extent to which a program benefits users or the general public is not usually clear cut. In addition, redirecting revenue from fees currently paid by other users of the waterways to inland waterways would reduce funding available for other congressional priorities, as these funds are currently being directed towards other uses. Increasing or adding fees for commercial users. Past administrations as well as entities such as the Congressional Budget Office have proposed increasing revenue for inland waterways construction by increasing existing fees or imposing additional fees, such as lockage fees, for commercial users of the inland waterways—the only group that is currently paying the fuel tax—as they are the primary beneficiaries. For instance, in a legislative proposal accompanying the fiscal year 2019 President’s budget request, the current administration proposed increasing the number of waterways subject to the fuel tax, which could have the effect of increasing the amount some users pay or increasing the number of commercial users subject to the tax. However, some stakeholders pointed out that increasing or adding fees for these users would raise the costs of transportation on the waterways, which could lead shippers to switch to other modes of transportation (such as trucks and rail, which are less efficient) and ultimately reduce both waterways traffic and Trust Fund revenue. Specific proposals for increasing or adding to existing fees are described in more detail below. Index fuel tax to inflation: Two stakeholders said that indexing the fuel tax to inflation could help the Trust Fund retain its purchasing capability over time. In fiscal year 1994, the fuel tax was set at $0.20 per gallon, and it was not raised again until 2015, when Congress increased the tax to $0.29 per gallon with the support of commercial users–close to the inflation adjusted-level of the 1994 rate. However, the rate was not set to automatically rise with future inflation, which reduces the purchasing power of the fuel tax over time. For example, according to our analysis of fuel tax revenue for 1994–2014, if the fuel tax had been indexed to inflation as of 1994, about $400 million in additional revenues would have been raised over the 20-year period between 1994 and 2014. If the additional $400 million were matched by general revenues dollar for dollar, a total of $800 million more would have been available to the Corps for construction projects. Annual vessel fee: Citing the insufficiency of existing revenue to pay the users’ share of capital investment costs, the current administration has proposed a new annual per vessel fee for commercial users to help finance future construction projects and cover a portion of the cost of operating and maintaining them (operations and maintenance has historically been a federal responsibility). The current administration expects this fee would raise approximately $1.78 billion in new revenue from fiscal years 2019–2028 ($178 million annually) to supplement revenue from the existing fuel tax. In its annual letter to Congress, the Board said this proposal is similar to what the prior administration proposed and that Congress has repeatedly rejected because it would more than double the amount collected from commercial users of the inland waterways system each year, with associated consequences for shipping costs and traffic diverted to other modes. Lockage fees: Various groups have proposed collecting lockage fees from commercial users to tie fees more closely to use of the infrastructure and increase available funding. For example, prior administrations’ budget proposals have recommended replacing or supplementing the fuel tax with lockage fees. According to the Transportation Research Board, lockage fees could increase available funding for construction, are moderately easy to administer, and could be implemented on a system-wide basis, with lock operators keeping track of lock use. However, some stakeholders stated that the relative unknowns of how a lockage fee would be implemented make it less appealing than the current, familiar fuel tax, which they are able to incorporate into their operating budgets. Additionally, some stakeholders told us adding lockage fees—just like increasing the fuel tax or adding other fees—would increase shipping costs, and could reduce traffic on the inland waterways. Further, some stakeholders raised concerns about the equity of lockage fees, as all users benefit from the system as a whole, but not all users frequently pass through locks. For example, as one stakeholder pointed out: the Mississippi River has zero locks and dams from St. Louis to New Orleans, so users that operate chiefly on that part of the system may not need to pay lockage fees. As such, lockage fees would affect some commercial users more than others: if the fuel tax were replaced with lockage fees, some users (those that do not routinely pass through locks, but benefit from the pools created) may ultimately pay much less than they currently do, while others (those operating on areas of the system with a high number of locks) would pay much more. Expanding the use of contributed funds. Expanding the Corps’ authority to allow local sponsors—generally state and local governments or interstate agencies—to contribute to the costs of project construction, as is the case for other types of water resource projects, could increase available funding. The Water Resources Reform and Development Act of 2014 established a pilot project that enabled the Corps to accept contributed funds from nonfederal interests to pay for the costs of operating inland waterways facilities but does not allow such contributions for maintenance or construction. Some stakeholders said expanding the current use of contributed funds for operations expenses by enabling local sponsors to contribute funds for construction could potentially benefit some communities and increase available funding. However, the costs for construction and maintenance of facilities on high-use waterways would likely be too high for local sponsors to offset. Moreover, we have reported that state and local governments face long-term fiscal pressures, which may limit their ability to contribute to costs for navigation locks in their jurisdictions. Pursuing alternative-financing arrangements. The current administration and others have proposed alternative-financing options that could enable the Corps to leverage either private capital or other available funds in order to provide full upfront funding for inland waterways construction projects. Numerous proposals call for the Corps to leverage private capital, such as public-private partnerships or debt financing, to access full funding at the beginning of inland-waterways construction projects. The Water Resources Redevelopment Act of 2014 authorized the Corps to implement pilot programs to explore the use of debt financing, such as low interest loans provided under the Water Infrastructure Finance and Innovation Act of 2014, and public-private partnerships for civil works water resources projects. Similarly, the current administration’s 2018 Legislative Outline for Rebuilding Infrastructure in America proposes authorizing the Secretary of the Army to execute agreements with non-federal public or private entities for civil works water resources construction projects. While some stakeholders stated that alternative-financing arrangements could increase available funding for inland-waterways construction projects, they were unsure of whether these agreements would work in practice. According to some stakeholders, public-private partnerships and debt-financing would provide upfront funding with an expectation of either a profitable return to a private equity partner or repayment of debt; however, according to some stakeholders, there is limited interest in entering into these financing arrangements among private sector investors because there is no clear and viable revenue stream to provide such returns. For instance, some stakeholders told us that increasing fees for commercial users to provide a revenue stream could have the effect of reducing traffic on waterways, which would reduce the revenue potential of fees. Alternative-financing arrangements would also require congressional action to implement. Specifically, depending on the structure of these financing agreements, alternative financing would require legislative changes, which could include granting the Corps authority to: (1) enter into public-private partnerships, (2) use debt financing, (3) use contract authority to obligate funding beyond what is appropriated in a given year, or (4) collect and retain revenue such as lockage fees. While the Water Resources Reform and Development Act of 2014 authorized the pilot programs to explore the use of public private partnerships and debt financing, Corps officials told us that they cannot enter into agreements of this type without specific appropriations, which they have not yet received. Corps officials stated that they are currently developing a high level policy to provide general direction about the use of alternative financing but according to them, the lack of a clear revenue source may make it more difficult to execute alternative-financing strategies that include private partners for inland waterways infrastructure. In contrast, the President recently proposed establishment of a Federal Capital Revolving Fund, which could enable federal agencies to access full upfront funding for certain construction projects without leveraging private capital. According to the proposal, the revolving fund would transfer funding to agencies to finance large-dollar real-property capital projects designated in appropriations acts if the project receives an appropriation for the first of a maximum of 15 required annual repayments. If those conditions are met, the revolving fund would transfer funds to agencies to cover the full cost to acquire the capital asset—in the case of inland waterways, the full cost to construct the project. Purchasing agencies would repay the fund using annual appropriations— for inland waterways, this approach likely would mean that repayments could be made using appropriations from either the Trust Fund or general revenues. While Corps inland-waterways construction projects would not be eligible for funding under this proposal, this type of approach to alternative financing could potentially be used to enable the Corps to contract for inland waterways construction more efficiently. However, only projects included in the President’s budget request would be eligible to receive this funding. At present, only one inland waterway project— Olmsted Locks and Dam—meets that requirement, and the Corps does not anticipate other authorized projects meeting the current benefit-cost ratio threshold for inclusion. Congressional action would be required to implement the proposed Federal Capital Revolving Fund, as well as authorize eligibility of inland-waterways construction projects, or a separate fund that would include Corps infrastructure projects. The inland waterways are a critical component of the nation’s freight transportation system, and the Corps must manage the system within the context of competing priorities and limited resources. To effectively manage those resources, the Corps must accurately identify, assess, and communicate its priorities for operations, maintenance, and construction funding. The Corps cannot quantify deferred maintenance for inland waterways because it lacks a definition and measure (or measures) of deferred maintenance that reflects priorities and how deferral will affect system reliability. As such, the Corps is unable to clearly communicate its funding needs related to operating and maintaining the inland waterways. As with many federal programs, the Corps manages inland-waterways- construction and major-rehabilitation projects within some fundamental constraints, including available Trust Fund revenue, which is less than the amount that would be needed to fully fund the estimated costs of any of the four ongoing new construction projects. Accordingly, Congress and the President have instead incrementally funded multiple construction projects at a time. However, this incremental-funding approach can lead to construction delays and increasing costs. As a result, other priority projects cannot be started, construction backlogs grow, and delays and closures continue to affect vessels at locks and dams that continue to deteriorate while waiting for replacement or rehabilitation. The Corps’ capital investment strategy identifies an approach to funding priority projects given estimated Trust Fund revenue, but given the constrained fiscal environment and the unpredictable nature of the annual appropriations process, cost increases and schedule delays are likely to continue. Should Congress decide that additional funding is warranted to reduce this inefficiency, our report includes several options stakeholders have identified for doing so, such as increasing the federal share of construction costs for these projects. In the absence of increased funding, however, stakeholders we spoke to identified actions the Corps could take in coordination with Congress to increase the efficiency of contracting for inland waterways projects. The Corps could explore changes—such as sequencing project construction or legislative changes to enable more upfront funding prior to starting construction, among other options discussed in this report—that would enable the Corps to contract for inland waterways construction in a more efficient way. However, all of the options we discuss have important policy trade-offs and other challenges that the Corps and Congress would need to carefully consider. We are making the following two recommendations to the Corps: The Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers should define and measure deferred maintenance for inland waterways in a way that enables the Corps to clearly communicate estimated costs for maintenance needs. (Recommendation 1) The Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers should pursue ways to increase the Corps’ ability to use available funding for inland waterways construction more efficiently and, should changes to the Corps’ authority be necessary, develop a legislative proposal to request such authority. (Recommendation 2) We provided a draft of this report to the Secretaries of Defense, Transportation, and Homeland Security and the Director of the Office of Management and Budget for review and comment. The Department of Defense provided written comments that are reprinted in appendix V; the department concurred with our recommendations. The Department of Homeland Security and Office of Management and Budget provided technical comments, which we incorporated as appropriate. The Department of Transportation had no comments on the draft report. We are sending copies of this report to appropriate congressional committees; the Secretaries of Defense, Transportation, and Homeland Security; and the Director of the Office of Management and Budget. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or VonAhA@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this report are listed in appendix VI. 1. Alabama-Coosa Rivers: From junction with the Tombigbee River at river mile (hereinafter referred to as RM) 0 to junction with Coosa River at RM 314. 2. Allegheny River: From confluence with the Monongahela River to form the Ohio River at RM 0 to the head of the existing project at East Brady, Pennsylvania, RM 72. 3. Apalachicola-Chattahoochee and Flint Rivers (ACF): Apalachicola River from mouth at Apalachicola Bay (intersection with the Gulf Intracoastal Waterway) RM 0 to junction with Chattahoochee and Flint Rivers at RM 107.8. Chattahoochee River from junction with Apalachicola and Flint Rivers at RM 0 to Columbus, Georgia at RM155 and Flint River, from junction with Apalachicola and Chattahoochee Rivers at RM 0 to Bainbridge, Georgia, at RM 28. 4. Arkansas River (McClellan-Kerr Arkansas River Navigation System): From junction with Mississippi River at RM 0 to Port of Catoosa, Oklahoma, at RM 448.2. 5. Atchafalaya River: From RM 0 at its intersection with the Gulf Intracoastal Waterway at Morgan City, Louisiana, upstream to junction with Red River at RM 116.8. 6. Atlantic Intracoastal Waterway: Two inland waterway routes approximately paralleling the Atlantic coast between Norfolk, Virginia, and Miami, Florida, for 1,192 miles via both the Albermarle and Chesapeake Canal and Great Dismal Swamp Canal routes. 7. Black Warrior-Tombigbee-Mobile Rivers: Black Warrior River System from RM 2.9, Mobile River (at Chickasaw Creek) to confluence with Tombigbee River at RM 45. Tombigbee River (to Demopolis at RM 215.4) to port of Birmingham, RM’s 374-411 and upstream to head of navigation on Mulberry Fork (RM 429.6), Locust Fork (RM 407.8), and Sipsey Fork (RM 430.4). 8. Columbia River (Columbia-Snake Rivers Inland Waterways): From the Dalles at RM 191.5 to Pasco, Washington (McNary Pool), at RM 330, Snake River from RM 0 at the mouth to RM 231.5 at Johnson Bar Landing, Idaho. 9. Cumberland River: Junction with Ohio River at RM 0 to head of navigation, upstream to Carthage, Tennessee, at RM 313.5. 10. Green and Barren Rivers: Green River from junction with the Ohio River at RM 0 to head of navigation at RM 149.1. 11. Gulf Intracoastal Waterway: From St. Mark’s River, Florida, to Brownsville, Texas, 1,134.5 miles. 12. Illinois Waterway (Calumet-Sag Channel): From the junction of the Illinois River with the Mississippi River RM 0 to Chicago Harbor at Lake Michigan, approximately RM 350. 13. Kanawha River: From junction with Ohio River at RM 0 to RM 90.6 at Deepwater, West Virginia. 14. Kaskaskia River: From junction with Mississippi River at RM 0 to RM 36.2 at Fayetteville, Illinois. 15. Kentucky River: From junction with Ohio River at RM 0 to confluence of Middle and North Forks at RM 258.6. 16. Lower Mississippi River: From Baton Rouge, Louisiana, RM 233.9 to Cairo, Illinois, RM 953.8. 17. Upper Mississippi River: From Cairo, Illinois, RM 953.8 to Minneapolis, Minnesota, RM 1,811.4 18. Missouri River: From junction with Mississippi River at RM 0 to Sioux City, Iowa, at RM 734.8. 19. Monongahela River: From junction with Allegheny River to form the Ohio River at RM 0 to junction of the Tygart and West Fork Rivers, Fairmont, West Virginia, at RM 128.7. 20. Ohio River: From junction with the Mississippi River at RM 0 to junction of the Allegheny and Monongahela Rivers at Pittsburgh, Pennsylvania, at RM 981. 21. Ouachita-Black Rivers: From the mouth of the Black River at its junction with the Red River at RM 0 to RM 351 at Camden, Arkansas. 22. Pearl River: From junction of West Pearl River with the Rigolets at RM 0 to Bogalusa, Louisiana, RM 58. 23. Red River: From RM 0 to the mouth of Cypress Bayou at RM 236. 24. Tennessee River: From junction with Ohio River at RM 0 to confluence with Holstein and French Rivers at RM 652. 25. White River: From RM 9.8 to RM 255 at Newport, Arkansas. 26. Willamette River: From RM 21 upstream of Portland, Oregon, to Harrisburg, Oregon, at RM 194. 27. Tennessee-Tombigbee Waterway: From its confluence with the Tennessee River to the Warrior River at Demopolis, Alabama. Appendix II: Inland Waterways Stakeholders GAO Interviewed Entity American Association of State Highway and Transportation Officials American Society of Civil Engineers Big River Coalition (New Orleans) Gulf Intracoastal Canal Association (New Orleans) Illinois Corn Growers Association (Rock Island) National Grain and Feed Association Pacific Northwest Waterways Association (Walla Walla) River Industry Action Committee (Rock Island) Warrior-Tombigbee Waterway Association (Mobile) Waterways Association of Pittsburgh (Pittsburgh) Waterways Council, Inc. Archer Daniels Midland Company (Rock Island) Campbell Transportation Company, Inc. (Pittsburgh) Canal Barge Company, Inc. (New Orleans) Channel Shipyard Companies (New Orleans) Cooper Marine & Timberlands Corp (Mobile) J. Craig Stepan, formerly of U.S. Steel (Mobile) Parker Towing Company (Mobile) Shaver Transportation (Walla Walla) Tidewater Barge Lines (Walla Walla) Turn Services (New Orleans) Arkansas Waterways Commission (Little Rock) Little Rock Port Authority (Little Rock) The Port of New Orleans (New Orleans) The Port of Pittsburgh Commission (Pittsburgh) Washington Grain Commission (Walla Walla) Alabama Scenic River Trail (Mobile) Allegheny River Development Corporation (Pittsburgh) Entity Boat Owners Association of the United States (BoatUS) Little Rock Yacht Club (Little Rock) Upper Monongahela River Association (Pittsburgh) Allegheny County Sanitary Authority (Pittsburgh) Clarksville Light & Water Company (Little Rock) Southwestern Power Resources Association (Little Rock) C. James Kruse, Texas A&M University Chris Hendrickson, Ph.D., Carnegie Mellon University Craig Philip, Ph.D., Vanderbilt University Dennis Lambert, COWI Marine North America Edward Dickey, Ph.D., Dawson & Associates Gary Loew, Dawson & Associates Jill Jamieson, Jones Lang LaSalle Leonard Shabman, Ph.D., Resources for the Future Paul Bingham, Economic Development Research Group, Inc. B. Starr McMullen, Ph.D., Oregon State University Stephen Fitzroy, Ph.D., Economic Development Research Group, Inc. To illustrate the effects associated with the current-funding approach, which was consistently discussed as a challenge in interviews with agency officials and stakeholders, we developed a funding simulation for hypothetical projects using assumptions that were anchored in findings from a 2008 Corps study on factors contributing to cost increases for inland-waterways construction projects. This funding simulation was intended to demonstrate the effects of the pattern and timing of funding on total project costs and construction schedules. To inform our assumptions, we analyzed the results of the Corps study, which examined three inland-waterways construction projects and identified the many factors that contributed to cost increases and schedule delays for each project. One of the factors the report identified that led to higher funding requirements (that is, cost overruns) was inefficient contracting driven by the amount and timing of funding provided to each project. We developed five hypothetical scenarios that represent different funding approaches of a set of four identical construction projects (including a control scenario in which full upfront funding for all projects is available) based on the following information: each project requires $500 million in funding; each project takes 5 years to construct if it is fully funded with $500 absent full upfront funding, projects were structured to expect funding of $100 million per year for the project; once started, funding is not interrupted over the period of our total amount of available funding to fund these projects is $200 million per year; and; the number of years the projects provide benefits—that is, the number of years a facility has been constructed and is available for use by vessels—varies within the period of time selected for the simulation (2020 through 2034). To illustrate the effects of the different funding approaches on total project costs and time frames, we made assumptions about the effect of various funding structures on total funding requirements. These assumptions were informed by our review of the findings of the Corps’ study related to the effects of incremental funding and discussions of these issues with Corps officials. These assumptions include: Remaining required project funding was assumed to increase by 2 percent each year due to inefficient contracting that results from less than full upfront funding—that is, if the full $500 million of estimated project funding is not provided in year 1. Remaining required project funding was also assumed to increase by 0.5 percent each year if projects received less funding than is expected in a given year (less than $100 million) due to exacerbated project-contracting inefficiencies. An increase of 2 percent per year of remaining required project funding was applied if the project’s start was delayed beyond its intended starting year due to inflation. We applied increases to funding requirements where appropriate under the five different funding approaches: Approach A: Fund One Project at a Time—Funding only one project at a time with all available funding ($200 million). Once the first project has been fully funded, all available funding is provided to the second project, and so on. Approach B: Fund Multiple Projects at Different Amounts—Funding one project at a time at the expected level—that is, at $100 million each year until it is finished—then dividing remaining available funding equally to the remaining three projects. After the first project is complete, the second project receives $100 million each year until completion and the remaining funding is divided evenly, and so on. Approach C: Fund Two Projects at a Time—Available funding is divided among two projects; two projects receive funding at the expected level ($100 million) and the start of funding for the remaining projects is delayed until the first 2 are completed. Approach D: Delay Construction to Fully Fund One Project at a Time—Full upfront funding for one project at a time: allocation of funds is delayed until the entire remaining funding required ($500 million plus increases due to inflation) is available. Approach E: Fund Multiple Projects Equally—Equally funding all four projects at once: since the overall budget is $200 million, each project is funded at $50 million per year. We found that the timing and amount of incremental funding resulted in varying degrees of cost overruns (see fig. 13). In addition, the different funding approaches led to varying years of benefits—as measured by the Corps as the number of years a facility has been constructed and available for use by vessels—counted over a 15-year span of our simulation. This variation is shown in figure 13, but these projects would provide many years of benefits beyond this timeframe. For example, we found that—compared to other approaches—an incremental funding approach that concentrates all available funding to one of the four projects at a time, as in Approach A, below, can reduce inefficiency. To validate our findings, we solicited feedback from Corps officials from the Pittsburgh District, Pennsylvania and Rock Island District, Illinois— based on their past and current experience with inland-waterways construction projects—from the Corps’ Cost Estimating Center of Expertise in Walla Walla, Washington; and representatives from the Waterways Council, Inc. to understand the perspectives of industry stakeholders. They all generally agreed that our assumptions, approaches, and results were reasonable. In this report, we (1) assess how the Corps allocates funds for operations and maintenance projects for the inland waterways system; (2) describe how the Corps prioritizes and funds construction projects, and assess the effect of the current-funding approach on projects’ costs and schedules; and (3) present stakeholder opinions on proposed options to alter the funding and management of inland waterways and any associated limitations or trade-offs. The scope of our review includes Corps activities related to managing commercial navigation—including operations, maintenance, and construction—on the 27 inland waterways subject to the inland waterways diesel fuel tax. The fuel-taxed inland waterways system is made up of the navigable waterways of the Mississippi River and its tributaries, the Ohio River basin, the Gulf and Atlantic Intracoastal Waterways, and the Columbia-Snake Rivers, among others (see app. I for a list of fuel-taxed inland waterways). Commercial navigation activities are those that facilitate the movement of traffic along the waterways for commercial purposes, such as the transportation of goods for sale. For contextual information on operations, maintenance, and construction spending, we analyzed Corps financial data on obligations for operations and maintenance for inland-waterways navigation projects for fiscal years 2006 through 2017 (the only years for which data were available) and allocations for construction and major rehabilitation of locks and dams for fiscal years 1997 through 2018 from the Corps of Engineers Financial Management System. To determine the reliability of this data for the purposes of this report, we reviewed the data to identify obvious errors and missing data and interviewed appropriate Corps officials about related internal controls and procedures and the limitations of the data. We found these data to be sufficiently reliable for the purpose of providing contextual information about funding for inland waterways operations and maintenance and construction over time. With regard to all of our reporting objectives, we interviewed a range of Corps officials at the headquarters, division, and district levels, as well as national and regional stakeholders. We interviewed district officials from a non-generalizable sample of 6 of the 24 Corps districts that manage fuel-taxed waterways within their district boundaries; we selected the districts to include a variety of geographic regions, waterway characteristics, primary commodities shipped, and history of construction projects funded through the Trust Fund. Based on these criteria, we selected the Corps districts in Little Rock, Arkansas; Mobile, Alabama; New Orleans, Louisiana; Pittsburgh, Pennsylvania; Rock Island, Illinois; and Walla Walla, Washington. In addition, we interviewed officials from the Corps’ Northwestern Division office, which oversees the Walla Walla District, to understand the division-level role in coordinating districts’ inland-waterways infrastructure projects. We also conducted a total of 42 semi-structured interviews with waterways stakeholders representing 43 different regional and national entities including commercial, recreational, and other waterway users and 12 researchers (academics, economists, and engineers) for a total of 55 stakeholders. National stakeholders were identified by reviewing related literature and our prior reports and recommendations from the Transportation Research Board and the Waterways Council, Inc. (an industry organization representing a range of waterway users including shippers, ports, energy providers, waterways operators, and other advocacy groups). Regional stakeholders in the six selected districts were identified through recommendations from agencies and national waterways stakeholder organizations to represent a mix of commercial users (such as barge companies and shippers with commercial interests in the U.S. inland waterways system); recreational users; and industrial water users (such as municipal water authorities and hydropower entities). From those stakeholders identified, we selected entities to interview to achieve diversity of waterway users’ perspectives and conducted interviews with both individual entities as well as associations representing a variety of users and companies. In addition to waterways’ users, we also interviewed stakeholders who have conducted research regarding the management of and allocation of funding for fuel-taxed waterways, selected based on their contributions to the relevant literature on options for funding and managing inland waterways, including academics, economists, and engineers who were knowledgeable about a range of topics including commodities transportation (agricultural, energy products, and other materials), engineering, and water resources. See appendix II for a list of entities represented among the stakeholders we interviewed. We asked agency officials and stakeholders open-ended questions and did not conduct a survey in which a response was provided irrespective of whether a certain issue was relevant to the interviewee, so not every topic was brought up or discussed by every interviewee. We analyzed the responses to identify common themes and the range of opinions that arose in interviews, which we have reported on. To identify these themes and summarize the opinions of agency officials and stakeholders, potential themes were identified via review of a sample of interviews. Two analysts then conducted a content analysis to identify the themes discussed in each interview and categorize the opinions of the interviewees. For each interview, one analyst independently reviewed the record of interview, and the other analyst later verified that coding. If there was disagreement, the analysis discussed their assessment and came to a final determination on the categorization. Because we selected a non- generalizable sample of stakeholders, their responses should not be used to make inferences about a population. To characterize stakeholders’ views throughout this report, we defined modifiers (e.g., “some”) to quantify stakeholders as follows: “some” stakeholders represents stakeholders in 3 to 14 of the 42 interviews “many” stakeholders represents stakeholders in 15 or more of the 42 interviews. To examine how the Corps allocates funds for operations and maintenance projects for the inland waterways system, we examined the President’s budget request for civil works and appropriations for fiscal years 1997 through 2018 as well as the Corps’ budget request development guidance to understand how the Corps develops its budget request and prioritizes operations and maintenance projects. We conducted site visits to Mobile, Alabama; New Orleans, Louisiana; and Pittsburgh, Pennsylvania, to interview Corps officials and various regional stakeholder groups in person, and to observe the condition of waterway infrastructure. We also interviewed officials from the Office of the Assistant Secretary of the Army for Civil Works (ASA-CW), the Office of Management and Budget (OMB), the Department of Transportation’s Maritime Administration, and the Department of Homeland Security’s U.S. Coast Guard to understand how the Corps coordinates with other agencies to fulfill its inland-waterways navigation mission. To assess the Corps’ efforts related to deferred maintenance we interviewed Corps officials about how the Corps measures and defines deferred maintenance and compared these practices with federal internal-control standards related to control activities and quality information. To describe how the Corps prioritizes and funds inland-waterways construction projects and to examine the effect of the current funding approach on projects’ costs and schedules, we reviewed relevant statutes, agency policies and guidance, the Corps’ capital-investment strategy documents prepared in conjunction with the Inland Waterways Users Board, as well as the Corps’ Civil Works budget justification documents in support of President’s budget requests, congressional appropriations, and accompanying conference reports. We also reviewed relevant Corps documents, such as reports on ongoing construction projects and studies on construction cost increases; prior GAO reports; OMB capital funding guidance; and other academic studies to gather information on capital project funding approaches, including for inland waterways projects. We analyzed data from the Corps of Engineers Financial Management System to identify sources of funding for inland- waterways construction projects from fiscal years 1996 through 2018. As discussed above, we found these data sufficiently reliable for the purposes of providing contextual information about the Corps’ funding sources. In addition to interviewing Corps officials and stakeholders, as described above, we also interviewed officials from the office of the ASA- CW and OMB for their views regarding the prioritization and funding processes for inland waterways-infrastructure projects, and the roles their organizations play in those processes. We compared the established method of funding inland-waterways construction projects with federal internal-control standards, OMB guidance, and prior GAO work related to funding capital projects. To illustrate the effects of the current funding approach on costs and schedules for inland-waterways construction projects, we developed a simulation of the effects of various funding approaches on the total funding requirements for a set of hypothetical construction projects. The simulation incorporates assumptions regarding the amount of total funding a project would require (including any cost overruns) due to the pattern and timing of funding made available. Our assumptions were anchored in findings from a 2008 Corps study on factors contributing to cost increases for three inland-waterways construction projects, and Corps officials and other industry stakeholders generally agreed that our assumptions and results were reasonable. Additional information on our methodology for developing this simulation and the full results are included in appendix III. Finally, to identify proposed options to alter the funding and management of inland waterways, we conducted a literature search—including scholarly/peer-reviewed journals, government reports, congressional hearings’ transcripts, and associations’ and think tanks’ publications—to identify relevant studies and proposals about inland waterways’ financing in the United States, published between 2007 and 2017. Through our literature search, we reviewed the abstracts for 103 potentially relevant studies and identified 24 for further review. For each of these 24 studies, we reviewed the entire study and determined 13 studies were relevant. We then reviewed these 13 studies to identify the options most commonly discussed or proposed. For the purposes of this report, we have divided those options into broad categories: altering the cost sharing between the Trust Fund and federal requiring other users and beneficiaries of the waterways to contribute to the Trust Fund, increasing or adding fees for commercial users, expanding opportunities for local sponsors to contribute to funding pursuing alternative-financing arrangements. In addition, we reviewed proposals by recent administrations, including the fiscal year 2018 President’s budget request, and interviewed Corps officials and other entities including the Transportation Research Board and district and agency stakeholders selected as described above to ensure we had identified the most relevant options. During interviews with stakeholders (as discussed above) we asked about their general views on the potential benefits limitations, and trade-offs of those options. See appendix II for a list of the stakeholders we interviewed. We conducted this performance audit from June 2017 through November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Andrew Von Ah, (202) 512-2834 or Vonaha@gao.gov. In addition to the contact named above, the following individuals made important contributions to this report: Susan Zimmerman, Assistant Director; Katie Hamer, Analyst-In-Charge; Amy Abramowitz; Faisal Amin; Krister Friday; Carol Henn; Hannah Laufe; Sara Ann Moessbauer; Josh Ormond; Cheryl Peterson; Amy Rosewarne; Alexandra Rouse; Lisa Shibata; and Pamela Snedden.", "summary": "The Corps is primarily responsible for operating and maintaining the nation's inland waterways, including maintaining locks and dams as well as rehabilitating, modernizing, or constructing new infrastructure as needed. Persistent schedule delays and cost overruns for inland-waterways construction projects have prompted some in Congress to explore funding and management alternatives. GAO was asked to review options to change the management of inland waterways. Among other things, this report assesses how the Corps allocates funds for operations and maintenance for the inland waterways, describes how the Corps funds construction projects, and assesses the effect of the current funding approach on projects' costs and schedules. GAO reviewed Corps documents and data; interviewed officials from Corps headquarters, six districts, and representatives of regional and national stakeholder groups—including commercial and recreational interests as well as contributors to relevant literature—selected to achieve a variety of viewpoints; and developed a simulation of the effect of various funding approaches on the total funding requirements and timelines for a set of hypothetical construction projects. The U.S. Army Corps of Engineers (Corps) allocates its appropriated funding for operations and maintenance projects for the inland waterways based on risk and economic benefits. However, the Corps does not know how much deferred maintenance exists for inland waterways because there is no agreed upon definition for deferred maintenance. Corps and ASA-CW officials identified several challenges related to developing a useful definition with which to measure deferred maintenance. For example, a single measure may not be useful to gauge the condition of the waterways because the effect of deferred maintenance projects on the reliability of the waterways will vary. However, without a measure or measures of deferred maintenance for inland waterways that (1) the Corps finds useful, (2) reflects its priorities, and (3) accurately conveys a consistent and well-defined measure of deferred maintenance, the Corps is limited in its ability to manage its maintenance efforts and accurately communicate its estimated maintenance costs to OMB and the Congress. With regard to inland-waterways construction projects, the Corps prioritizes them based on expected costs and benefits. The Corps assesses the net economic benefits of inland-waterways construction projects' alternatives by comparing estimated direct costs (e.g., construction costs to build a new lock chamber) to estimated reductions in the waterway transportation costs (e.g., reduced travel costs related to a reduction in the time it might take for a barge to pass through a larger lock chamber). According to Corps officials and stakeholders, the current incremental-funding approach for prioritized projects, among other things, has resulted in schedule delays (as shown below) and cost increases. Although full upfront funding for capital projects is an important tool for effective management, inland-waterways construction projects have been funded incrementally, meaning the Corps requests—and Congress appropriates—annual funding that covers a portion of a project's estimated costs. Corps reports and academic studies have found that this approach results in increased project costs because the Corps must contract for construction in separable pieces. This approach is less efficient than contracting for the entire project at once. For example, Corps officials currently expect that the Kentucky Lock Addition project will cost at least $229 million more than the originally estimated cost as a direct result of this contracting approach. Without some change in the way inland-waterways construction projects are funded to either provide full funding or reduce the effects of incremental funding by concentrating funding on fewer projects at one time, current cost increases and schedule delays resulting from inefficient contracting are likely to continue. GAO is making two recommendations: that the Corps define and measure deferred maintenance for inland waterways and that it pursue changes to increase its ability to more efficiently use available funding for construction. The Department of Defense concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "Over the past decade, the federal government has expanded financial assistance to public and private stakeholders for preparedness activities through various grant programs administered by DHS through its component agency, FEMA. Through these grant programs, DHS has sought to enhance the capacity of states, localities, and other entities, such as ports or transit agencies, to prevent, respond to, and recover from a natural or manmade disaster, including terrorist incidents. Two of the largest preparedness grant programs are the State Homeland Security Program and the Urban Areas Security Initiative. The State Homeland Security Program provides funding to support states’ implementation of homeland security strategies to address the identified planning, organization, equipment, training, and exercise needs at the state and local levels to prevent, protect against, respond to, and recover from acts of terrorism and other catastrophic events. FEMA allocated $402 million for the program in fiscal year 2017. The Urban Areas Security Initiative provides federal assistance to address the unique needs of high-threat, high-density urban areas, and assists the areas in building an enhanced and sustainable capacity to prevent, protect, respond to, and recover from acts of terrorism. FEMA allocated $580 million for the program in fiscal year 2017. The State Homeland Security Program (SHSP), awarded to the nation’s 56 states and territories, and the Urban Areas Security Initiative (UASI), awarded to urban areas based on DHS’s risk assessment methodology, are the largest of the preparedness grant programs, accounting for about 60 percent of Fiscal Year 2017 grant funding. See figure 1 for a history of funding levels for these programs. Eligible candidates for the FY 2017 UASI program are determined through an assessment of relative risk of terrorism faced by the 100 most populous metropolitan statistical areas in the United States, in accordance with the Homeland Security Act of 2002, as amended. In February 2016, we reported that FEMA has taken some steps, but has not fully addressed longstanding preparedness grant management coordination challenges between its headquarters and regional offices. We found that for several preparedness grant programs, FEMA headquarters staff in GPD and regional staff share management and monitoring responsibilities. For example, we found that assessments by GPD and others since 2009 had recommended that regional offices, rather than headquarters offices, be responsible for managing and monitoring preparedness grants to avoid confusion and duplication, and to strengthen coordination with state and local grantees. Further, in July 2011, we found that GPD had efforts underway to regionalize grant management responsibilities and improve coordination of preparedness grants, and that these efforts were consistent with internal control standards. However, GPD officials reported that in 2012 it changed course and decided to continue sharing grant management roles between headquarters and regions, referred to as a hybrid grant management structure. GPD officials told us that they changed course because, among other things, estimates that the costs of regionalization would be greater than the annual savings FEMA identified in an earlier study and concerns that inconsistent program implementation would occur across the regions, and outweighed the potential benefits. GPD officials at that time said they had taken steps to address coordination challenges associated with this hybrid grant management structure. However, we found in February 2016 that these challenges continue. For example, states and FEMA regional officials told us that GPD staffs in headquarters and regions did not always coordinate their monitoring visits, which can be disruptive to the state emergency management agency’s day-to-day operations. FEMA regional officials also reported that GPD staffs in headquarters and regions sometimes provided inconsistent guidance to grantees. Further, while GPD officials identified some steps they plan to take to address the challenges, we found that GPD lacked a plan with time frames and goals for addressing them. We recommended that FEMA develop a plan with time frames, goals, metrics, and milestones detailing how GPD intends to resolve longstanding challenges associated with its existing hybrid grants management model, which divides responsibilities between regional and headquarters staff. FEMA, however, did not concur with our recommendation, stating that it disagreed with our characterization of longstanding challenges in managing preparedness grants. As we stated in the report, multiple assessments dating back to 2009 have reported challenges with the hybrid model. As also noted in our report, officials from four FEMA regional offices and officials from three states within those regions provided various examples of a lack of coordination between headquarters and regional staff in managing preparedness grants, including instances that took place in 2014 and as recently as September 2015. In October 2017, FEMA developed a plan—the Milestone Action Plan—to track efforts aimed at improving coordination issues associated with its hybrid grants management model, as we recommended in February 2016. The plan divides responsibilities for the management of preparedness grants between regional and headquarters staff and describes completed, ongoing, and planned efforts taken by FEMA to improve grants management coordination along with steps taken, goals, and time frames, among other things. For example, the plan shows that FEMA developed and finalized the Monitoring Actions Tracker in August 2016, a tool shared by GPD in FEMA headquarters and staff in regional offices. Through the tracker, GPD headquarters and regional staffs are able to view planned and completed monitoring activities related to grants management, as well as the status of any open corrective actions. In addition to developing the Milestone Action Plan, FEMA officials described other efforts taken to improve coordination issues. For example, FEMA officials told us they increased the use of an online collaboration tool, which allows for instant information sharing between GPD and the regions. By taking these steps, FEMA should be better positioned to track and evaluate efforts to improve regional coordination, as we recommended in 2016. FEMA has been delayed in addressing the need for improved coordination among grant programs identified in our prior work. Specifically, we found in February 2012 that multiple factors contribute to the risk of duplication among four FEMA preparedness grant programs— the State Homeland Security Program, Urban Areas Security Initiative, Port Security Grant Program, and Transit Security Grant Program—as these programs share similar goals, fund similar projects, and provide funds in the same geographic regions. Further, we found that DHS’s ability to track grant funding, specific funding recipients, and funding purposes varies among the programs, giving FEMA less visibility over some grant programs. Also, DHS’s award process for some programs based allocation decisions on high-level, rather than specific, project information, which could further contribute to the risk of duplication. Although our February 2012 analysis identified no cases of duplication among a sample of grant projects, the above factors collectively put FEMA at risk of funding duplicative projects. As a result, in 2012, we included these challenges in our annual report on duplication, overlap, and fragmentation in federal programs, agencies, offices, and initiatives. FEMA has not yet taken action to fully address our concerns. We recommended in February 2012 that as FEMA developed its new grants management information system (the Non-Disaster Grants Management System, or ND Grants at that time), that the agency collect project information with the level of detail needed to better position the agency to identify any potential unnecessary duplication within and across the four grant programs. In December 2012, FEMA officials reported that the agency intended to start collecting and analyzing project-level data from grantees in fiscal year 2014. Further, in December 2017, FEMA took actions to identify potential unnecessary duplication across four preparedness grant programs, as we recommended in February 2012. Although the development of FEMA’s grants management information system is ongoing, FEMA issued guidance and adopted interim processes to help identify potential duplication across these preparedness grant programs until the system’s capabilities are upgraded over the next several years. For example, in fiscal year 2014, FEMA modified a legacy grants data system to capture more robust project-level data—such as project budget data—for the Homeland Security Grant Program, which includes the State Homeland Security Grant Program and the Urban Areas Security Initiative. In addition, in fiscal year 2017, FEMA procured a software visualization tool and developed a set of standard operating procedures to assist staff in identifying potentially duplicative projects. Specifically, the visualization tool will use grants award data from the Port Security Grant Program, the Transit Security Grant Program, and compare the grant programs named above to highlight ZIP codes that contain multiple projects. These projects will then be analyzed by FEMA officials. According to the standard operating procedure, if duplication is suspected within a particular geographic area, further collaborative reviews should be conducted in coordination with the Office of Chief Counsel to determine appropriate remedies. Using an interim approach to collect more specific project-level data during the grant application process and utilizing the new software visualization tool should help FEMA strengthen the administration and oversight of its grant programs until FEMA implements its long-term solution for the agency’s grants management information system. In the area of performance assessment, we reported in June 2013 on limitations in FEMA’s ability to validate the performance data it collects. Specifically, we found that two of FEMA’s preparedness grant programs—Emergency Management Performance Grants (EMPG) and Assistance to Firefighters Grants (AFG) programs—collect performance information through a variety of reporting mechanisms but face challenges in identifying verifiable program outcomes. These reporting mechanisms collect performance data used by FEMA regional offices and headquarters for different purposes. For example, headquarters focuses on the development of future program priorities and on reporting progress toward the National Preparedness Goal, while regions use program information to monitor primary grant recipients for compliance. DHS developed agency priority goals that reflect agency-wide, near-term priorities. According to FEMA officials, the EMPG and AFG programs have an indirect link to a DHS agency priority goal, as well as the National Preparedness Goal, because they support states’ level of preparedness for disasters. According to FEMA officials, neither program has a standardized tool with which to validate the performance data that are self-reported by recipients; additionally, the regions are inconsistent in their approaches to verifying program performance data. We concluded that the absence of a formal established validation and verification procedure, as directed by the Office of Management and Budget’s Circular No. A-11, could lead to the collection of erroneous performance data. In our June 2013 report, we recommended that FEMA ensure that there are consistent procedures in place at the headquarters’ office and regional level to ensure verification and validation of grant performance data that allow the agency to attest to the reliability of EMPG and AFG grant data used for reporting progress toward goals. DHS concurred with our recommendation and stated that FEMA would explore effective and affordable ways to verify and validate EMPG and AFG grant performance data. In April 2015, FEMA officials reported that FEMA was in the process of developing the data verification and validation checks of EMPG grantee performance reporting. For example, according to FEMA officials, they have revised reporting templates and uniform table definitions to make it easier for grantees to submit accurate, complete, and consistent information on programmatic activities such as the completion of training and exercise requirements. However, these processes have not yet been fully implemented, and FEMA officials have not yet provided similar tools and checklists for the AFG program. In March 2017, FEMA grants management staff provided us with documentation on the process FEMA uses to verify and validate grantee data from the EMPG and AFG grant programs, as we recommended. As a result of having a consistent approach to verifying data, FEMA’s efforts should reduce the collection of erroneous performance data. In addition, as part of our September 2016 review of FEMA Fire Assistance Grant program, we reported that FEMA officials said they planned to develop and implement a consolidated grant management system to integrate data used to manage fire grant programs with the data gathered for FEMA’s other preparedness grants, and ultimately better measure the impact of fire grants on national preparedness efforts. Specifically, as we reported in May 2016, FEMA plans to develop and implement a new Grants Management Modernization system to provide agency-wide management for all of FEMA’s disaster and preparedness grants. Further, we are currently performing an on-going review of FEMA’s consolidated grant management system and plan to report on this effort later this year. We also reported in March 2011 that FEMA needed to improve its oversight of preparedness grants by establishing a framework with measurable performance objectives for assessing urban area, state, territory, and tribal capabilities to identify gaps and prioritize investments. Specifically, we recommended that FEMA complete a national preparedness assessment of capability gaps at each level based on tiered, capability-specific performance objectives to enable prioritization of grant funding. With such an assessment, FEMA could identify the potential costs for establishing and maintaining capabilities at each level and determine what capabilities federal agencies should provide. We reported in March 2013 that FEMA has made some progress in assessing its preparedness capabilities, but continued to face challenges developing a national preparedness system that could assist FEMA in prioritizing preparedness grant funding. For example, in March 2012, FEMA issued the first National Preparedness Report, which describes progress made to build, sustain, and deliver capabilities. In April 2012, FEMA issued guidance on developing Threat and Hazard Identification and Risk Assessments (THIRA) to facilitate the self-assessments of regional, state, and local capabilities. FEMA requires state, territory, tribal, and urban area governments receiving homeland security funding to annually complete THIRAs and use the results to determine the resources required to achieve the capability targets they set for their jurisdiction. However, we found in March 2013 that FEMA faced challenges that may reduce the usefulness of these efforts. For example, the National Preparedness Report noted that while many programs exist to build and sustain preparedness capabilities, challenges remain in measuring their progress over time. According to the report, in many cases, measures do not yet exist to gauge the performance of these programs, either quantitatively or qualitatively. FEMA has taken some steps to address our recommendation. Specifically, FEMA reported in February 2018 that the agency has developed capability-specific performance objectives that will enable a national preparedness assessment of capability gaps, but no such report has been issued at this time. FEMA reported that it plans on implementing new methodology for some core capabilities in December 2018 and for all core capabilities by December 2019, and will be able to provide complete results in 2020. In addition, FEMA reported that they are developing a new Threat and Hazard Identification and Risk Assessment (THIRA) methodology that will assist in measuring the effectiveness of state and urban areas’ grant projects in reducing risk. According to FEMA, the new methodology will measure changes in state and urban area preparedness through the use of standardized capability targets and key indicators that will show how FEMA preparedness grants are being used to address gaps in capability targets. This should also lead to a better understanding of the Nation’s overall preparedness. Regardless, as of February 2018, FEMA had taken steps to assess preparedness capabilities, but had not yet completed a national preparedness assessment with clear, objective, and quantifiable capability requirements against which to assess preparedness, as we recommended. Developing such an assessment would help FEMA to identify what capability gaps exist at the federal level and what level of resources are needed to close such gaps. Chairman Donovan, Ranking Member Payne, and Members of the Subcommittee, this concludes my prepared statement. I would be happy to respond to any questions you may have. For questions about this statement, please contact Chris Currie at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Aditi Archer (Assistant Director), John Vocino (Analyst-In- Charge), Dorian Dunbar, Alexandra Gebhard, Eric Hauswirth, Chuck Bausell, Heidi Nielson, and Adam Vogt. Federal Emergency Management Agency: Progress and Continuing Challenges in National Preparedness Efforts GAO-16-560T: Washington, D.C.: Apr 12, 2016. Fire Grants: FEMA Could Enhance Program Administration and Performance Assessment GAO-16-744: Washington, D.C.: Sep 15, 2016. Federal Emergency Management Agency: Strengthening Regional Coordination Could Enhance Preparedness Efforts. GAO-16-38, .Washington, D.C.: February 4, 2016. Emergency Management: FEMA Has Made Progress since Hurricanes Katrina and Sandy, but Challenges Remain. GAO-16-90T. Washington, D.C.: October 22, 2015. Emergency Management: FEMA Collaborates Effectively with Logistics Partners but Could Strengthen Implementation of Its Capabilities Assessment Tool. GAO-15-781. Washington, D.C.: September 10, 2015. Emergency Preparedness: Opportunities Exist to Strengthen Interagency Assessments and Accountability for Closing Capability Gaps. GAO-15-20. . Washington, D.C.: December 4, 2014. Federal Emergency Management Agency: Opportunities to Achieve Efficiencies and Strengthen Operations. GAO-14-687T. Washington, D.C.: July 24, 2014. National Preparedness: Actions Taken by FEMA to Implement Select Provisions of the Post-Katrina Emergency Management Reform Act of 2006. GAO-14-99R. Washington, D.C.: November 26, 2013. National Preparedness: FEMA Has Made Progress, but Additional Steps Are Needed to Improve Grant Management and Assess Capabilities. GAO-13-637T. Washington, D.C.: June 25, 2013. Grants Performance: Justice and FEMA Collect Performance Data for Selected Grants, but Action Needed to Validate FEMA Performance Data. GAO-13-552. Washington, D.C.: June 24, 2013. Managing Preparedness Grants and Assessing National Capabilities: Continuing Challenges Impede FEMA’s Progress. GAO-12-526T. Washington, D.C.: March 20, 2012. Homeland Security: DHS Needs Better Project Information and Coordination among Four Overlapping Grant Programs. GAO-12-303. Washington, D.C.: February 28, 2012. 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12- 342SP. Washington, D.C.: February 28, 2012. Port Security Grant Program: Risk Model, Grant Management, and Effectiveness Measures Could Be Strengthened. GAO-12-47. Washington, D.C.: November 17, 2011. FEMA Has Made Progress in Managing Regionalization of Preparedness Grants. GAO-11-732R. Washington, D.C.: July 29, 2011. Measuring Disaster Preparedness: FEMA Has Made Limited Progress in Assessing National Capabilities. GAO-11-260T. Washington, D.C.: March 17, 2011. Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington, D.C.: March 1, 2011. FEMA Has Made Limited Progress in Efforts to Develop and Implement a System to Assess National Preparedness Capabilities. GAO-11-51R. Washington, D.C.: October 29, 2010. Urban Area Security Initiative: FEMA Lacks Measures to Assess How Regional Collaboration Efforts Build Preparedness Capabilities. GAO-09-651. Washington, D.C.: July 2, 2009. Transit Security Grant Program: DHS Allocates Grants Based on Risk, but Its Risk Methodology, Management Controls, and Grant Oversight Can Be Strengthened. GAO-09-491. Washington, D.C.: June 8, 2009. National Preparedness: FEMA Has Made Progress, but Needs to Complete and Integrate Planning, Exercise, and Assessment Efforts. GAO-09-369. Washington, D.C.: April 30, 2009. Homeland Security: DHS Improved its Risk-Based Grant Programs’ Allocation and Management Methods, But Measuring Programs’ Impact on National Capabilities Remains a Challenge. GAO-08-488T. Washington, D.C.: March 11, 2008. Homeland Security: DHS’ Efforts to Enhance First Responders’ All- Hazards Capabilities Continue to Evolve. GAO-05-652. Washington, D.C.: July 11, 2005. Homeland Security: Management of First Responder Grant Programs Has Improved, but Challenges Remain. GAO-05-121. Washington, D.C.: February 2, 2005. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "The Department of Homeland Security (DHS), through FEMA, provides preparedness grants to state, local, tribal, and territorial governments to improve the nation's readiness in preventing, protecting against, responding to, recovering from and mitigating terrorist attacks, major disasters and other emergencies. According to DHS, the department has awarded over $49 billion to a variety of DHS preparedness grant programs from fiscal years 2002 through 2017, to enhance the capabilities of grant recipients. For example, the State Homeland Security Program which awards grants to the nation's 56 states and territories, and the Urban Areas Security Initiative which awards grants to urban areas based on DHS's risk methodology, are the largest of the preparedness grant programs (see figure). This statement addresses progress and challenges in FEMA's efforts to manage preparedness grants and GAO's prior recommendations to strengthen these programs. This statement is based on prior GAO reports issued from March 2011 through February 2016 and selected updates conducted in December 2017 through April 2018. To conduct the prior work and updates, GAO analyzed relevant FEMA data and documentation and interviewed relevant officials. In February 2012, GAO identified coordination challenges among Federal Emergency Management Agency (FEMA) grant programs that share similar goals and fund similar projects, which contribute to the risk of duplication among the programs. GAO recommended that FEMA take steps, as it develops its new grant management system, to collect project information with sufficient detail to identify potential duplication among the grant programs. FEMA has since addressed these recommendations. Specifically, in 2014, FEMA modified a legacy grants data system to capture more robust grant project-level data, and in fiscal year 2017, procured a software tool and developed a set of standard operating procedures to assist its staff in identifying potentially duplicative projects. These actions should help FEMA strengthen the administration and oversight of its grant programs. Furthermore, FEMA is also developing a new grants management modernization system to consolidate and better manage its grants. GAO is currently reviewing the system for this Committee and will report out next year. GAO reported in March 2011 on the need for FEMA to improve its oversight of preparedness grants by establishing a framework with measurable performance objectives for assessing urban area, state, territory, and tribal capabilities to identify gaps and prioritize investments. Specifically, GAO recommended that FEMA complete a national preparedness assessment of capability gaps at each level based on tiered, capability-specific performance objectives to enable prioritization of grant funding. FEMA has taken some steps to address GAO's prior recommendation. Specifically, in February 2018, FEMA reported developing capability-specific performance objectives that will enable a national preparedness assessment of capability gaps. However, FEMA plans to finalize these efforts in 2020 and it is too early to tell how this will impact grant allocations. Until these efforts are completed, GAO will not be able to determine the extent that they address past challenges and recommendations. GAO has made prior recommendations designed to address the challenges discussed in this statement. FEMA has taken actions to address some but not all of these recommendations.", "document_type": "gao"}
{"report": "The Select Agent Program does not fully meet key elements of effective oversight. In particular, the program has oversight shortcomings related to each of our five key elements: independence, performing reviews, technical expertise, transparency, and enforcement. In addition, the program does not have joint strategic planning documents to guide its oversight efforts, such as a joint strategic plan and workforce plan. It did, however, begin taking steps to develop a joint strategic plan during the summer of 2017. First, regarding independence, the Select Agent Program is not structurally distinct and separate from all of the laboratories it oversees because the two components of the Select Agent Program are located in CDC and APHIS, both of which also have high-containment laboratories registered with the program. Many experts at our meeting raised concerns that the Select Agent Program cannot be entirely independent in its oversight of CDC and APHIS laboratories because the Select Agent Program is composed of divisions of those agencies. To help reduce conflicts of interest, the program has taken steps such as having APHIS lead inspections of CDC laboratories. However, it has generally done so in response to concerns raised by others. The program itself has not formally assessed all potential risks posed by its current structure and the effectiveness of its mechanisms to address those risks. The Office of Management and Budget’s Circular A-123 requires federal agencies to integrate risk management activities into their program management to help ensure they are effectively managing risks that could affect the achievement of agency objectives. In addition, federal internal control standards state that management should identify, analyze, and respond to risks related to achieving defined objectives. Without (1) regularly assessing the potential risks posed by the program’s current structure and the effectiveness of its mechanisms to address them and (2) taking actions as necessary to ensure any identified risks are addressed, the program may not be aware of or effectively mitigate impairments to its independence that could affect its ability to achieve its objectives. Second, regarding the ability to perform reviews, we found that the Select Agent Program performs several types of reviews to ensure compliance with regulatory and program requirements. However, the program may not target the highest-risk activities in its inspections, in part because it has not formally assessed which activities pose the highest risk to biological safety and security. For example, many experts at our meeting and laboratory representatives we interviewed raised concerns about the amount of time inspectors spend assessing compliance with inventory controls (e.g., by counting and examining vials containing select agents) and reviewing inventory records during the inspection process, which takes time away from inspecting other aspects of biological safety and security. Experts at our meeting said that these activities do little to reduce the risk of theft of select agents (a security concern) because samples could be clandestinely removed from vials and replicated without being detected by the inventory controls currently in place. Further, other laboratory representatives told us that activities to assess compliance with certain program requirements, such as time-consuming reviews of records, did little to reduce risk and were unnecessarily burdensome to both researchers and inspectors. These inspection activities are generally intended to address biological security concerns; however, recent high- profile incidents at registered laboratories have concerned biological safety rather than security. To improve the inspection process and identify trends and associations between inspection findings and risk, a 2015 internal review of the CDC component of the Select Agent Program recommended that the CDC and APHIS components of the program work together to analyze inspection and investigation data. According to program officials, they have not yet addressed the recommendation because they do not currently have adequate tools to do so, but the program is transitioning to a new database that will enhance their ability to identify trends and associations and thereby guide improvements to the inspection process. However, the program did not provide a plan for when or how the program will carry out these analyses to improve the inspection process. Federal internal control standards state that management should identify, analyze, and respond to risks related to achieving defined objectives. Without developing and implementing a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities, the Select Agent Program will not have assurance that it is effectively balancing the potential safety and security gains from its oversight efforts against the use of program resources and the effect on laboratories’ research. We also found that the Select Agent Program did not fully meet the other three key elements of effective oversight: technical expertise, transparency, and enforcement. For example, although the program has taken steps to hire additional staff and enhance the technical expertise of its staff, workforce and training gaps remain. In addition, although the program has increased transparency about registered laboratories and violations of the select agent regulations to the public and registered laboratories since 2016, the information it shares is limited and there is no consensus about what additional information could be shared, given security concerns. Lastly, although the program has authority to enforce compliance with program requirements, it is still working to address past concerns about the need for greater consistency and clarity in actions it takes in exercising this authority. In addition to not fully meeting the five key elements of effective oversight, we found that the Select Agent Program does not have joint strategic planning documents to guide its shared oversight efforts across CDC and APHIS. For example, the program does not have a joint mission statement to collectively define what the program seeks to accomplish through its oversight. It also does not yet have a strategic plan. Agencies can use strategic plans to set goals and identify performance measures for gauging progress towards those goals. Strategic plans can also outline how agencies plan to collaborate with each other to help achieve goals and objectives. The program began taking steps to develop a joint strategic plan during the course of our review and, in August 2017, began soliciting bids from contractors for the plan’s development. The statement of work for the contract stipulates that the contractor shall develop guiding principles for the Select Agent Program along with a mission statement and strategic goals and objectives, among other requirements. However, it does not have any requirements related to development of a joint workforce plan. We have found in the past that agencies’ strategic workforce planning should be clearly linked to the agency’s mission and long-term goals developed during the strategic planning process. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program to better manage fragmentation by improving how it leverages resources to ensure all workforce and training needs are met. Leveraging resources is especially important given fiscal constraints. In our report, we recommended that CDC and APHIS take several steps to address these findings. First, we made five recommendations to improve independence, including that CDC and APHIS regularly assess the potential risks posed by the program’s structure and the effectiveness of its mechanisms to address those risks, and take actions as necessary to ensure any identified risks are addressed so that impairments to independence do not affect its ability to achieve its objectives. Second, to improve the ability to perform reviews, we recommended that the directors of the Select Agent Program work together to develop and implement a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities. We also made several other recommendations, including recommending that the directors of the Select Agent Program develop a joint workforce plan that assesses workforce and training needs for the program as a whole. Selected countries and regulatory sectors employ approaches to promote effective oversight that sometimes differ from those of the Select Agent Program by, for example, having regulatory bodies that are structurally independent from the entities they oversee or taking a risk-based approach to performing reviews. To illustrate, with regard to independence, Great Britain’s Health and Safety Executive, whose mission is to protect worker and public health and safety and which oversees laboratories that work with pathogens, is an independent government agency. According to officials from the Health and Safety Executive and laboratory representatives, one strength of this approach is that it avoids potential organizational conflicts of interest because none of the laboratories it oversees are part of the same agency. Some other regulatory sectors in the United States, including the Nuclear Regulatory Commission (NRC), are also structurally independent from regulated facilities as a mechanism to ensure independence. Prior to the creation of NRC in 1974, the U.S. Atomic Energy Commission was responsible for both promotion and oversight of the nuclear industry. The Energy Reorganization Act of 1974 established NRC as a separate, independent entity. According to a Senate committee report, this was a response to growing criticism that there was a basic conflict between the U.S. Atomic Energy Commission’s regulation of the nuclear power industry and its development and promotion of new technology for the industry. Related to the ability to perform reviews, regulators in Great Britain and Canada apply a risk-based approach by targeting laboratories with a documented history of performance issues or those conducting higher- risk activities. In both Great Britain and Canada, the organizations that oversee laboratories generally focus their oversight on (1) biological safety, and (2) regulation of all potentially hazardous pathogens in laboratories. In contrast, the Select Agent Program originated from security-related concerns and regulates only those pathogens identified on the U.S. select agent list and no other pathogens that may be handled in high-containment but are not select agents, such as West Nile virus. Other differences we found in approaches include relying on scientists and other laboratory personnel to have requisite technical expertise on the pathogens and activities in their laboratories, sharing incident information on their public websites, and having prosecutorial authority when incidents occur. In conclusion, CDC and APHIS share a critical role in ensuring that important research on select agents can be conducted in high- containment laboratories in a safe and secure manner. The Select Agent Program has made a number of improvements over the past few years, such as hiring additional staff and improving training to enhance expertise. Nevertheless, the program does not fully meet all key elements of effective oversight and more is needed to develop joint strategic plans to collectively guide its shared oversight efforts. In our prior work, we have found that existing federal oversight of high-containment laboratories is fragmented and largely self-policing, among other things. Our October 2017 report, in combination with these past findings, continues to raise questions about whether the current government framework and oversight are adequate. Vice Chairman Griffith, Ranking Member DeGette, and Members of the Subcommittee, this concludes our prepared statement. We would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this statement, please contact Mary Denigan-Macauley, Ph.D., Acting Director, Health Care, at (202) 512-7114 or deniganmacauleym@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this statement include Sushil Sharma, Ph.D., Dr.PH (Assistant Director); Amy Bowser; Caitlin Dardenne, Ph.D.; John Neumann; Cynthia Norris; Timothy M. Persons, Ph.D.; and Lesley Rinner. Staff who made key contributions to the report(s) cited in the statement are identified in the source products. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Safety lapses have occurred at laboratories in the United States that conduct research on select agents—such as Ebola virus or anthrax bacteria—that may cause serious or lethal infection in humans, animals, or plants, raising concerns about whether oversight is effective. This statement summarizes information contained in GAO's October 2017 report, titled High-Containment Laboratories: Coordinated Actions Needed to Enhance the Select Agent Program's Oversight of Hazardous Pathogens ( GAO-18-145 ). The Federal Select Agent Program—jointly managed by the Departments of Health and Human Services (HHS) and Agriculture (USDA)—oversees laboratories' handling of certain hazardous pathogens known as select agents. However, the program does not fully meet all key elements of effective oversight. For example, the program is not structurally independent from all laboratories it oversees and has not assessed risks posed by its current structure or the effectiveness of mechanisms it has to reduce organizational conflicts of interest. Without conducting such assessments and taking actions as needed to address risks, the program may not effectively mitigate impairments to its independence. In addition, some experts and laboratory representatives GAO interviewed raised concerns that the program's reviews may not target the highest-risk activities, in part because it has not formally assessed which activities pose the highest risk. Without assessing the risk of activities it oversees and targeting its resources appropriately, the program cannot ensure it is balancing its resources against their impact. Moreover, the program does not have strategic planning documents, such as a joint strategic plan and workforce plan, to guide its oversight. Although it began taking steps to develop a joint strategic plan, the program is not developing workforce plans as part of this effort. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program leverage resources to ensure all workforce and training needs are met. Selected countries and regulatory sectors GAO reviewed employ other approaches to promote effective oversight. For example, in Great Britain, an independent government agency focused on health and safety oversees laboratories that work with pathogens. In addition, in both Great Britain and Canada, regulators (1) focus their oversight on biological safety, because safety incidents provided the impetus for laboratory oversight in these countries and (2) regulate all potentially hazardous pathogens and activities in laboratories. GAO's recommendations in GAO-18-145 included that the Federal Select Agent Program (1) assess risks posed by its current structure and address risks as needed; (2) assess the risk of activities it oversees and target reviews to the highest-risk activities; and (3) develop a joint workforce plan. HHS and USDA agreed with GAO's recommendations and outlined actions they are taking, or plan to take, to address them, which GAO will continue to monitor.", "document_type": "gao"}
{"report": "FCC has not evaluated Lifeline’s performance in meeting program goals but, as we found in May 2017, has taken recent steps toward evaluation. According to GAO’s Cost Estimating and Assessment Guide, to use public funds effectively the government must meet the demands of today’s changing world by employing effective management practices and processes, including the measurement of government program performance. In the past, FCC has called for program evaluations to review the administration of universal service generally, including Lifeline, but has not completed such evaluations. For example, FCC specified that it would review USAC 1 year after USAC was appointed as the permanent administrator to determine whether the universal service programs were being administered effectively. This review, which was planned to have been completed by 1999, was never done. In 2005, FCC awarded a contract to the National Academy of Public Administration to study the administration of the USF programs generally, examine the tradeoffs of continuing with the current structure, and identify ways to improve the oversight and operation of universal service programs. However, we reported in May 2017 that FCC officials stated FCC subsequently terminated the contract and the study was not conducted. In March 2015, we found that FCC had not evaluated Lifeline’s effectiveness in achieving its performance goals of ensuring the availability of voice service for low-income Americans, while minimizing the burden on those who contribute to the USF. We recommended, and FCC agreed, to conduct a program evaluation to determine the extent to which Lifeline is efficiently and effectively reaching its performance goals. Our May 2017 report raised additional questions about Lifeline’s effectiveness in meeting its program goals. For example, we reported that: FCC did not know how many of the 12.3 million households receiving Lifeline as of December 2016 also have non-Lifeline phone service (for which they pay out of pocket) along with their Lifeline benefit. Without knowing whether participants are using Lifeline as a primary or secondary phone service, we concluded that it is difficult for FCC to determine whether it is achieving the program’s goal of increasing telephone subscribership among low-income consumers while minimizing the USF contribution burden. FCC revamped Lifeline in March 2016 to focus on broadband adoption and generally phase out phone service, in part because FCC recognized that most eligible consumers have phones without Lifeline and to also close the “digital divide” of broadband adoption between low-income households and the rest of the country. However, broadband adoption rates have steadily increased for the low-income population absent a Lifeline subsidy for broadband. We found that at least two companies operating in a total of at least 21 states had begun offering in-home non-Lifeline broadband wireline support for less than $10 per month to individuals that participate in public- assistance programs, such as SNAP or public housing. The offered rate of these providers’ own low-income broadband service of $10 per month was less expensive than FCC’s broadband reasonable- comparability cost benchmark of approximately $55 per month, which Lifeline subscribers would be paying for a similar level of service. Our May 2017 report also found that FCC has recently taken some steps toward evaluating Lifeline’s performance in meeting program goals. Specifically, in the 2016 Lifeline Modernization Order, FCC instructed USAC to hire an outside, independent, third-party evaluator to complete a program evaluation of Lifeline’s design, function, and administration. The order stipulated the outside evaluator must complete the evaluation and USAC must submit the findings to FCC by December 2020. As FCC expects Lifeline enrollment to increase as the program is expanded to include broadband service, this expansion could carry with it increased risks for fraud, waste, and abuse, as was the case with past expansions of the program. Completing the program evaluation as planned, and as we recommended in 2015, would help FCC determine whether Lifeline is meeting its stated goals of increasing telephone and broadband subscribership among low-income consumers, while minimizing the burden on those who contribute to the USF. In our May 2017 report we found that FCC and USAC have established financial controls for Lifeline, including obtaining and reviewing information about billing, collecting, and disbursing funds. They have also developed plans to establish other controls, such as establishing a national eligibility verifier (National Verifier) for Lifeline providers to determine the eligibility of applicants seeking Lifeline service. However, as discussed in our May 2017 report, we found that weaknesses remain, including the lack of requirements to effectively control program expenditures above approved levels, concerns about the transparency of fees on customers’ telephone bills, and a lack of FCC guidance that could result in Lifeline and other providers paying inconsistent USF contributions. To address these concerns, we recommended the Chairman of FCC (1) require Commissioners to review and approve, as appropriate, spending above the budget in a timely manner; (2) require a review of customer bills as part of the contribution audit to include an assessment of whether the charges, including USF fees, meet FCC Truth-in-billing rules with regard to labeling, so customer bills are transparent, and appropriately labeled and described, to help consumers detect and prevent unauthorized changes; and (3) respond to USAC requests for guidance and address pending requests concerning USF contribution requirements to ensure the contribution factor is based on complete information and that USF pass-through charges are equitable. FCC generally agreed with those recommendations. In addition, we found that USAC’s banking practices for the USF result in oversight and accountability risks that FCC has plans to mitigate. Specifically, FCC maintains USF funds—whose net assets as of September 2016 exceeded $9 billion—outside of the U.S. Treasury pursuant to Office of Management and Budget (OMB) advice provided in April 2000. OMB had concluded that the USF does not constitute public money subject to the Miscellaneous Receipts Statute, 31 U.S.C. § 3302, a statute that requires that money received for the use of the United States be deposited in the Treasury unless otherwise authorized by law. As such, USF balances are held in a private bank account. However, subsequent to this OMB advice, in February 2005 we reported that FCC should reconsider this determination in light of the status of universal service monies as federal funds. As discussed in our May report, according to correspondence we received from the FCC Chairman’s Senior Legal Counsel, as of March 2017, FCC had decided to move the funds to the Treasury. FCC identified potential benefits of moving the funds to the Treasury. For example, FCC explained that having the funds in the Treasury would provide USAC with better tools for fiscal management of the funds, including access to real- time data and more accurate and transparent data. According to FCC, until the USF is moved into the Treasury, there are also some oversight risks associated with holding the fund in a private account. For example, the contract governing the account does not provide FCC with authority to direct bank activities with respect to the funds in the event USAC ceases to be the administrator of the USF. After we raised this matter with FCC officials during the course of our review, beginning in November 2016, FCC sought to amend the contract between USAC and the bank to enable the bank to act on FCC instructions independently of USAC in the event USAC ceases to be the administrator. However, as of May 2017, the amended contract had not yet been signed. While FCC has put in place a preliminary plan to move the USF funds to the Treasury, as well as plans to amend the existing contract with the bank as an interim measure, several years have passed since this issue was brought to FCC’s attention without corrective actions being implemented. Further, under FCC’s preliminary plan, it would not be until next year, at the earliest, that the funds would be moved to the Treasury. In May 2017, while reviewing a draft of this report, a senior FCC official informed us that FCC experienced some challenges associated with moving the funds to the Treasury, such as coordinating across the various entities involved, which raised some questions as to when and perhaps whether the funds would be moved. Until FCC finalizes and implements its plan and moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized. As a result, in our May 2017 report, we recommended that the Chairman of FCC take action to ensure that the preliminary plans to transfer the USF funds from the private bank to the Treasury are finalized and implemented as expeditiously as possible. FCC agreed with this recommendation. FCC and USAC have implemented controls to improve subscriber eligibility verification, such as implementing the NLAD database in 2014, which helps carriers identify and resolve duplicate claims for Lifeline- supported services. However, as discussed in our May 2017 report, our analysis of data from 2014, as well as our undercover attempts to obtain Lifeline service, revealed significant weaknesses in subscriber eligibility verification. Lifeline providers are generally responsible for verifying the eligibility of potential subscribers, but we found that their ability to do so is hindered by a lack of access to, or awareness of, state eligibility databases that can be used to confirm eligibility prior to enrollment. For example, not all states have databases that Lifeline providers can use to confirm eligibility and some providers with whom we spoke were unaware of databases that were potentially available to them. These challenges might be overcome if FCC establishes a National Verifier, as it plans to do nationwide by the end of 2019, to remove responsibility for verifying eligibility from the providers. Additionally, since USAC was not maintaining and providing information to providers about these databases, we recommended they maintain and disseminate an updated list of state eligibility databases available to Lifeline providers that includes the qualifying programs those databases access to confirm eligibility, to help ensure Lifeline providers are aware of state eligibility databases and USAC audits of Lifeline providers can verify that available state databases are being utilized to verify subscriber eligibility. FCC agreed with the recommendation. For our May 2017 report, to identify Lifeline subscribers who were potentially ineligible to participate in the program, we tested the eligibility of subscribers who claimed participation in Medicaid, SNAP, and Supplemental Security Income (SSI) using NLAD data as of November 2014. We focused our analysis on these three programs because FCC reported in 2012 that these were the three qualifying programs through which most subscribers qualify for Lifeline. We compared approximately 3.4 million subscribers who, according to information entered in NLAD, were eligible for Lifeline due to enrollment in one of these three programs to eligibility data for these programs. On the basis of our analysis of NLAD and public-assistance data, we could not confirm that a substantial portion of selected Lifeline beneficiaries were enrolled in the Medicaid, SNAP, and SSI programs, even though, according to the data, they qualified for Lifeline by stating on their applications that they participated in one of these programs. In total, we were unable to confirm whether 1,234,929 subscribers out of the 3,474,672 who we reviewed, or about 36 percent, participated in the qualifying benefit programs they stated on their Lifeline enrollment applications or were recorded as such by Lifeline providers. If providers claimed and received reimbursement for each of the 1.2 million subscribers, then the subsidy amount associated with these individuals equals $11.4 million per month, or $137 million annually, at the current subsidy rate of $9.25 per subscriber. Because Lifeline disbursements are based on providers’ reimbursement claims, not the number of subscribers a provider has in NLAD, our analysis of NLAD data could not confirm actual disbursements associated with these individuals. Given that our review was limited to those enrolled in SNAP or Medicaid in selected case-study states, and SSI in states that participated in NLAD at the time of our analysis, our data results are likely understated compared to the entire population of Lifeline subscribers. These results indicate that potential improper payments have occurred and have gone undetected. We plan to refer potentially ineligible subscribers identified through our analysis for appropriate action as warranted. Our undercover testing, as discussed in our May 2017 report, also found that Lifeline may be vulnerable to ineligible subscribers obtaining service and the testing found examples of Lifeline providers being nonresponsive, or providing inaccurate information. To conduct our 21 tests, we contacted 19 separate providers to apply for Lifeline service. We applied using documentation fictitiously stating that we were enrolled in an eligible public-assistance program or met the Lifeline income requirements. We were approved to receive Lifeline services by 12 of the 19 Lifeline providers using fictitious eligibility documentation. We also experienced instances during our undercover tests where our calls to providers were disconnected, and where Lifeline provider representatives transmitted erroneous information, or were unable to provide assistance on questions about the status of our application. For example, one Lifeline provider told us that our application was not accepted by the company because our signature had eraser marks; however our application had been submitted via an electronic form on the provider’s website and was not physically signed. While our tests are illustrative and not representative of all Lifeline providers or applications submitted, these results suggest that Lifeline providers do not always properly verify eligibility and that applicants may potentially encounter similar difficulties when applying for Lifeline benefits. As described above, these challenges might be overcome if FCC establishes a National Verifier, as it plans to do nationwide by the end of 2019, to remove responsibility for verifying eligibility from the providers. FCC and USAC have implemented some mechanisms to enhance oversight of Lifeline providers, as discussed in our May 2017 report, but we found that remaining gaps could allow noncompliance with program rules. For example, in July 2014, FCC took additional measures to combat fraud, waste, and abuse by creating a strike force to investigate violations of USF program rules and laws. According to FCC, the creation of the strike force is part of the agency’s commitment to stopping fraud, waste, and abuse and policing the integrity of USF programs and funds. Similarly, in June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules. However, we found FCC and USAC have limited oversight of Lifeline provider operations and the internal controls used to manage those operations. The current structure of the program relied throughout 2015 and 2016 on over 2,000 Eligible Telecommunication Carriers (ETC) to provide Lifeline service to eligible beneficiaries. These companies are relied on to not only provide telephone service, but also to create Lifeline applications, train employees and subcontractors, and make eligibility determinations for millions of applicants. USAC’s reliance on Lifeline providers to determine eligibility and subsequently submit accurate and factual invoices is a significant risk for allowing potentially improper payments to occur, and under current reporting guidelines these occurrences would likely go undetected and unreported. Federal internal control standards state that management retains responsibility for the performance and processes assigned to service organizations performing operational functions. Consistent with internal control standards, FCC and USAC would need to understand the extent to which a sample of these internal controls are designed and implemented effectively to ensure these controls are sufficient to address program risks and achieve the program’s objectives. We identified key Lifeline functions for which FCC and USAC had limited visibility. For example, we found instances of Lifeline providers utilizing domestic or foreign-operated call centers for Lifeline enrollment. When we asked FCC officials about Lifeline providers that outsource program functions to call centers, including those overseas, they told us that such information is not tracked by FCC or USAC. With no visibility over these call centers, FCC and USAC do not have a way to verify whether such call centers comply with Lifeline rules. FCC and USAC have limited knowledge about potentially adverse incentives that providers might offer employees to enroll subscribers. For example, some Lifeline providers pay commissions to third-party agents to enroll subscribers, creating a financial incentive to enroll as many subscribers as possible. Companies responsible for distributing Lifeline phones and service that use incentives for employees to enroll subscribers for monetary benefit increase the possibility of fictitious or ineligible individuals being enrolled into Lifeline. Highlighting the extent of the potential risk for companies, in April 2016 FCC announced approximately $51 million in proposed fines against one Lifeline provider, due to, among other things, its sales agents purposely enrolling tens of thousands of ineligible and duplicate subscribers in Lifeline using shared or improper eligibility documentation. To test internal controls over employees associated with Lifeline for our May 2017 report, we sought employment with a company that enrolls individuals to Lifeline. We were hired by a company and were allowed to enroll individuals in Lifeline without ever meeting any company representatives, conducting an employment interview, or completing a background check. After we were hired, we completed two fictitious Lifeline applications as an employee of the company, successfully enrolled both of these fictitious subscribers into Lifeline using fabricated eligibility documentation, and received compensation for these enrollments. The results of these tests are illustrative and cannot be generalized to any other Lifeline provider. We plan to refer this company for appropriate action as warranted. As stated above, these challenges might be overcome if FCC establishes a National Verifier, as it plans to do nationwide by the end of 2019, to remove responsibility for verifying eligibility from the providers. In addition, in May 2017, we made two recommendations to help address control weaknesses and related program-integrity risks. Specifically, we recommended that FCC establish time frames to evaluate compliance plans and develop instructions with criteria for FCC reviewers how to evaluate these plans to meet Lifeline’s program goals. We also recommended that FCC develop an enforcement strategy that details what violations lead to penalties and apply this as consistently as possible to all Lifeline providers to ensure consistent enforcement of program violations. FCC generally agreed with these recommendations. In conclusion, Lifeline’s large and diffuse administrative structure creates a complex internal control environment susceptible to significant risk of fraud, waste, and abuse. FCC’s and USAC’s limited oversight of important aspects of program operations further complicates the control environment—heightening program risk. We are encouraged by FCC’s recent steps to address weaknesses we identified, such as the 2016 order establishing a National Verifier, which, if implemented as planned, could further help to address weaknesses in the eligibility-determination process. We also plan to monitor the implementation status of the recommendations we made in May 2017. Chairman Thune, Ranking Member Nelson, and members of the Committee, this concludes my prepared remarks. I would be happy to answer any questions that you may have at this time. For further information regarding this testimony, please contact Seto J. Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony are Dave Bruno (Assistant Director), Scott Clayton (Analyst-in-Charge), and Daniel Silva. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Created in the mid-1980s, FCC's Lifeline program provides discounts to eligible low-income households for home or wireless telephone and, as of December 2016, broadband service. Lifeline reimburses telephone companies that offer discounts through the USF, which in turn is generally supported by consumers by means of a fee charged on their telephone bills. This testimony is based on GAO's May 2017 report and discusses steps FCC has taken to measure Lifeline's performance in meeting goals; steps FCC and USAC have taken to enhance controls over finances, subscribers, and providers; and any weaknesses that might remain. For the May 2017 report, GAO analyzed documents and interviewed officials from FCC and USAC. GAO also analyzed subscriber data from 2014 and performed undercover tests to identify potential improper payment vulnerabilities. The results of this analysis and testing are illustrative, not generalizable. In its May 2017 report, GAO found the Federal Communications Commission (FCC) has not evaluated the Lifeline program's (Lifeline) performance in meeting its goals of increasing telephone and broadband subscribership among low-income households by providing financial support, but it has recently taken steps to begin to do so. FCC does not know how many of the 12.3 million households receiving Lifeline as of December 2016 also have non-Lifeline phone service, or whether participants are using Lifeline as a secondary phone service. FCC revamped Lifeline in March 2016 to focus on broadband adoption; however, broadband adoption rates have steadily increased for the low-income population absent a Lifeline subsidy for broadband. Without an evaluation, which GAO recommended in March 2015, FCC is limited in its ability to demonstrate whether Lifeline is efficiently and effectively meeting its program goals. In a March 2016 Order, FCC announced plans for an independent third party to evaluate Lifeline design, function, and administration by December 2020. FCC and the Universal Service Administrative Company (USAC)—the not-for-profit organization that administers the Lifeline program—have taken some steps to enhance controls over finances and subscriber enrollment. For example, FCC and USAC established some financial and management controls regarding billing, collection, and disbursement of funds for Lifeline. To enhance the program's ability to detect and prevent ineligible subscribers from enrolling, FCC oversaw completion in 2014 of an enrollment database and, in June 2015, FCC adopted a rule requiring Lifeline providers to retain eligibility documentation used to qualify consumers for Lifeline support to improve the auditability and enforcement of FCC rules. Nevertheless, in its May 2017 report, GAO found weaknesses in several areas. For example, Lifeline's structure relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility. This complex internal control environment is susceptible to risk of fraud, waste, and abuse as companies may have financial incentives to enroll as many customers as possible. On the basis of its matching of subscriber to benefit data, GAO was unable to confirm whether about 1.2 million individuals of the 3.5 million it reviewed, or 36 percent, participated in a qualifying benefit program, such as Medicaid, as stated on their Lifeline enrollment application. FCC's 2016 Order calls for the creation of a third-party national eligibility verifier by the end of 2019 to determine subscriber eligibility. Further, FCC maintains the Universal Service Fund (USF)—with net assets of $9 billion, as of September 2016—outside the Department of the Treasury in a private bank account. In 2005, GAO recommended that FCC reconsider this arrangement given that the USF consists of federal funds. In addition to addressing any risks associated with having the funds outside the Treasury, FCC identified potential benefits of moving the funds. For example, by having the funds in the Treasury, USAC would have better tools for fiscal management of the funds. In March 2017, FCC developed a preliminary plan to move the USF to the Treasury. Until FCC finalizes and implements its plan and actually moves the USF funds, the risks that FCC identified will persist and the benefits of having the funds in the Treasury will not be realized. In its May 2017 report, GAO made seven recommendations, including that FCC ensure plans to transfer the USF from the private bank to the Treasury are finalized and implemented expeditiously. FCC generally agreed with all the recommendations.", "document_type": "gao"}
{"report": "In October 2014, VA modified its existing contracts with two TPAs that were administering another VA community care program to add certain administrative responsibilities associated with the Choice Program. For the Choice Program, each of the two TPAs—Health Net and TriWest—is responsible for delivering care in a specific multi-state region (See figure 1.). Specifically, the TPAs are responsible for establishing networks of community providers, scheduling appointments with community providers for eligible veterans, and paying community providers for their services. As stated in VA’s December 2015 guidance, the Choice Program allows eligible veterans to opt to obtain health care services from the TPAs’ network providers rather than from VHA medical facilities when the veterans are enrolled in the VA health care system and meet any of the following criteria: the next available medical appointment with a VHA clinician is more than 30 days from the veteran’s preferred date or the date the veteran’s physician determines he or she should be seen; the veteran lives more than 40 miles driving distance from the nearest VHA facility with a full-time primary care physician; the veteran needs to travel by air, boat, or ferry to the VHA facility that is closest to his or her home; the veteran faces an unusual or excessive burden in traveling to a VHA facility based on geographic challenges, environmental factors, or a medical condition; the veteran’s specific health care needs, including the nature and frequency of care needed, warrants participation in the program; or the veteran lives in a state or territory without a full-service VHA medical facility. Over the life of the Choice Program, VA has taken various approaches to care for veterans for whom services are not available at a particular VHA medical facility. In May and October of 2015, VHA issued policy memoranda to its VAMCs that required them to offer veterans referrals to the Choice Program before they authorized care through one of VA’s other community care programs, which existed prior to the creation of the Choice Program. Before May 2015, VA provided VAMCs the flexibility to decide on a case-by-case basis whether to refer veterans to the Choice Program or one of VA’s other community care programs when services were not available. In June 2017, VHA issued another policy memorandum that rescinded the referral hierarchy that required VAMCs to refer to the Choice Program first. It directed VAMCs to refer veterans to the Choice Program only if they met the Choice Act’s wait-time, distance, and geographic eligibility criteria, and to instead use other VHA medical facilities, facilities with which VA has sharing agreements, and other VA community care programs to deliver care to veterans when services were not available at a VHA medical facility and veterans did not qualify under the Choice Act’s eligibility criteria. In August 2017, after Congress provided an additional $2.1 billion for the Choice Program, VHA again changed its guidance on referral patterns for the Choice Program and VA’s other community care programs. Specifically, VA issued a fact sheet saying that the new funding will allow VAMCs to refer veterans to the Choice Program to the maximum extent possible. This allowed VAMCs to again offer veterans Choice Program referrals when services are unavailable at VHA medical facilities (until available funds have been exhausted), and also permitted VAMCs to refer veterans to other VA community care programs when services are unavailable. Through policies and standard operating procedures for VAMCs and contracts with the TPAs, VA and VHA have established two separate processes for Choice Program routine and urgent appointment scheduling: one process for time-eligible veterans and another for distance-eligible veterans. Table 1 provides an overview of the appointment scheduling process that applies when a veteran is referred to the Choice Program because the veteran is time-eligible. (Appendix II contains additional detail about the Choice Program appointment scheduling process for time-eligible veterans—including differences between the routine and urgent care appointment scheduling process.) When veterans reside more than 40 miles from a VHA medical facility or meet other travel-related criteria, VHA uses the appointment scheduling process it developed for distance-eligible veterans. The process for distance-eligible veterans differs from that for time-eligible veterans in that VAMCs do not prepare a referral and send it to the TPA. Instead, distance-eligible veterans contact the TPA directly to request Choice Program care. See table 2 for an overview of the Choice Program appointment scheduling process that applies for distance-eligible veterans. (See appendix III for additional detail about the Choice Program appointment scheduling process for distance-eligible veterans—including differences between the routine and urgent care appointment scheduling process.) Data we obtained from the TPAs indicate that VHA and the TPAs used the time-eligible appointment scheduling process about 90 percent of the time from fiscal year 2015 through fiscal year 2016 (the first 2 years of the Choice Program’s implementation). More than half of the veterans who were referred to the Choice Program and for whom the TPAs scheduled appointments were referred because the services they needed were not available at a VHA medical facility. The second-most-common reason for referral was that the wait time for an appointment at a VHA medical facility exceeded 30 days. (See figure 2.) The distance-eligible appointment scheduling process was used for about 10 percent of the veterans who used the Choice Program between fiscal year 2015 through fiscal year 2016. In coordinating the furnishing of care to eligible veterans under the Choice Program, VA is required to ensure that veterans receive appointments for Choice Program care within the wait-time goals of VHA for the furnishing of hospital care and medical services. Although the Choice Act defined VHA’s wait-time goals as not more than 30 days from the date a veteran requests an appointment from the Department, the Choice Act gave VA the authority to change this definition if it did not reflect VHA’s actual wait- time goals. If VA wanted to exercise this authority, it was required to notify Congress of VHA’s actual wait-time goals within 60 days of the law’s enactment (i.e., by October 6, 2014). VA did so in an October 3, 2014, report to Congress. To “ensure that care provided through the Veterans Choice Program is delivered within clinically appropriate timeframes,” VA notified Congress that VHA’s wait-time goals were “not more than 30 days from either the date that an appointment is deemed clinically appropriate by a VA health care provider, or if no such clinical determination has been made, the date a Veteran prefers to be seen for hospital care or medical services.” By incorporating VHA’s reported wait- time goal, the Choice Act required VA to ensure the furnishing of care to eligible veterans within 30 days of the clinically indicated date or, if none existed, within 30 days of the veteran’s preferred date. VA has purchased health care services from community providers through various programs since as early as 1945. Currently, there are six community care programs other than the Choice Program through which VA purchases hospital care and medical services for veterans. These six community care programs offer different types of services and have varying eligibility criteria for veterans and community providers. VA’s six non-Choice community care programs include: Individually authorized VA community care. The primary means by which VHA has traditionally purchased community care is through individual authorizations, where local VAMC staff determine veteran eligibility, create authorizations, and assist veterans in arranging care with community providers that are willing to accept VA payment. Traditionally, VAMCs have approved the use of individually authorized community care when a veteran cannot access a particular specialty care service from a VHA medical facility because the service is not offered or the veteran would have to travel a long distance to obtain it from a VHA medical facility. (See appendix IV for an illustration of how appointment scheduling and care coordination processes for the Choice Program compare to those for individually authorized VA community care.) Two emergency care programs. When VA community care is not preauthorized, VA may reimburse community providers for emergency care under two different community care programs: 1) emergency care for a condition related to a veteran’s service-connected disability and 2) emergency care for a condition not related to a veteran’s service-connected disability, commonly referred to as Millennium Act emergency care. For emergency care to be covered through these two programs, a number of criteria must be met, including (1) community providers must file claims in a timely manner (within 2 years of the date services were rendered for service-connected emergency care and within 90 days for Millennium Act emergency care); (2) the veteran’s condition must meet the prudent layperson standard of an emergency; and (3) a VA or other federal medical facility must not have been feasibly available to provide the needed care, and an attempt to use either would not have been considered reasonable by a prudent layperson. Patient-Centered Community Care (PC3). In September 2013, VA awarded contracts to Health Net and TriWest to develop regional networks of community providers to deliver specialty care, mental health care, limited emergency care, and maternity and limited newborn care when such care is not feasibly available from a VHA medical facility. VA and the TPAs began implementing the PC3 program in October 2013, and it was fully implemented nationwide as of April 2014—prior to the creation of the Choice Program. In August 2014, VA expanded the PC3 program to allow community providers of primary care to join the PC3 networks. PC3 is a program VA created under existing statutory authorities, not a program specifically designed by law. To be eligible to obtain care from PC3 providers, veterans must meet the same criteria that are required for individually authorized VA care in the community services. Agreements with federal partners and academic affiliates. When services are not available at VHA medical facilities, VA may also obtain specialty, inpatient, and outpatient health care services for veterans through two types of sharing agreements—those with other federal facilities (such as those operated by the Department of Defense and the Indian Health Service), and those with university- affiliated hospitals, medical schools, and practice groups (known as academic affiliates). Dialysis contracts. In June 2013, VA awarded contracts to numerous community providers nationwide to deliver dialysis—a life-saving medical procedure for patients with end-stage renal disease (permanent kidney failure). When dialysis services are not feasibly available at VHA medical facilities, veterans may be referred to one of VA’s contracted dialysis providers, and veterans may receive dialysis at local clinics on an outpatient basis, or at home (if the contractors offer home-based dialysis services). The VA Budget and Choice Improvement Act, which was enacted on July 31, 2015, required VA to develop a plan for consolidating all of its community care programs into a new, single program to be known as the “Veterans Choice Program.” VHA submitted this plan, including proposed legislative changes, to Congress on October 30, 2015. VA has moved forward with some aspects of the planned community care program consolidation that it believes can be accomplished without statutory changes. In December 2016, VA issued a request for proposals (RFP) for contractors to help administer the consolidated community care program, through “community care network” contracts. The consolidated community care program VA described in the October 2015 plan it submitted to Congress and the December 2016 RFP, as amended, would be similar to the current Choice Program in certain respects. For example, VA is planning to award community care network contracts to TPAs, which would establish regional networks of community providers and process payments to those providers. In contrast, other aspects of the consolidated community care program VA has planned may differ from the existing Choice Program. For example, VA’s RFP for the community care network contracts, as amended, requires VAMCs—rather than TPAs—to carry out appointment scheduling, unless they exercise a contract option for the TPAs to provide such services. In fiscal year 2015, the first year of the Choice Program’s implementation, total obligations for Choice Program health care services accounted for about 4.7 percent of the $8.7 billion VA obligated for all community care services that year. However, as more care was provided through the Choice Program in fiscal years 2016 and 2017, obligations for Choice Program care grew steadily, while obligations for care delivered through other VA community care programs decreased. In fiscal year 2017, total obligations for Choice Program health care services accounted for about 39 percent of the $11.16 billion VA obligated for all community care services that year. See table 3. As shown in Table 4, below, of the $10.37 billion in Choice Program funds that were obligated between fiscal year 2015 and fiscal year 2017, $6.28 billion (or about 61 percent) of the funds were obligated for Choice Program health care services. About $1.76 billion (or 17 percent) of total Choice Program funds obligated between fiscal year 2015 and fiscal year 2017 were obligated for administrative costs. The remaining $2.33 billion (about 22 percent) were obligated for medical services other than those authorized under the Choice Program. As we previously reported, VHA experienced a projected funding gap in its medical services appropriation account in fiscal year 2015, largely due to lower-than-expected obligations for the Choice Program, higher-than-expected obligations for other VA community care programs, and unanticipated obligations for hepatitis C drugs. To address the projected funding gap, on July 31, 2015, VA obtained temporary authority to use Choice Program funds between July 31, 2015 and September 30, 2015 for amounts obligated on or after May 1, 2015 to furnish medical services other than those that it authorized under the Choice Program. Later, in fiscal year 2016 and fiscal year 2017, VA de-obligated about $420 million of the Choice Program funds it had obligated for other VA community care programs and hepatitis C drugs in fiscal year 2015 because they were never expended. Our analysis of VA’s scheduling process indicates that veterans who are referred to the Choice Program for routine care because they are time- eligible could potentially wait up to 70 calendar days to obtain care, if VAMCs and TPAs take the maximum amount of time allowed by VA’s process. About 90 percent of Choice Program referrals in fiscal years 2015 and 2016 were scheduled under the time-eligibility process, which means that the majority of veterans referred to the program would have been subject to this potential wait time for an appointment for routine care. This 70-day potential wait time is in contrast to the Choice Act’s required time frame, which is that eligible veterans receive Choice Program care no more than 30 days from the date an appointment is deemed clinically appropriate by a VHA clinician (referred to as the clinically indicated date), or if no such determination has been made, 30 days from the date the veteran prefers to receive care. According to VHA policy, a VHA clinician’s clinically indicated date determination must be based upon the needs of the patient, and it should be the earliest date that it would be clinically appropriate for the veteran to receive care. Therefore, if there is no clinical reason that care should be delayed, a veteran’s clinically indicated date could be the same date that the VHA clinician determined the veteran needed care. The potential wait time of about 70 calendar days for time-eligible veterans to receive routine care through the Choice Program encompasses 18 or more calendar days for VAMCs to prepare veterans’ Choice Program referrals and potentially another 52 calendar days for appointments to occur through the TPAs’ scheduling process, as follows: VAMCs’ process for preparing routine Choice Program referrals. According to VHA policies and guidance, VAMC staff have at least 18 calendar days to confirm that veterans want to be referred to the Choice Program and to send veterans’ referrals to the TPAs: They have 2 business days (or up to 4 calendar days) after a VHA clinician has determined the veteran needs care to begin contacting an eligible veteran by telephone to offer them a referral to the Choice Program. They have up to 14 calendar days after initiating contact to reach the veteran by telephone or letter and confirm that the veteran wants to be referred to the Choice Program. After confirming that a veteran wants to be referred to the Choice Program, however, VA has not set a limit on the number of days VAMCs should take to compile relevant clinical information and send referrals to the TPAs. TPAs’ process for scheduling routine Choice Program appointments. Through its contracts with the TPAs, VA has established a process under which a veteran could potentially wait another 52 calendar days from the date the TPA receives the VAMC’s Choice Program referral for a routine care appointment to take place. This includes up to 16 business days (or 22 calendar days) after receiving a referral to confirm the veteran’s decision to opt in to the Choice Program and create an authorization. The contracts further state that, for time-eligible veterans, an appointment shall take place within 30 calendar days of the clinically indicated date, the authorization creation date, or the veteran’s preferred date, whichever occurs later: The TPA has 2 business days to review the VAMC’s referral and accept it if it contains sufficient information to proceed with appointment scheduling. The TPA has 4 business days to contact the veteran by telephone and confirm they want to opt in to the Choice Program (which means that the veteran wants to receive care through the Choice Program and have the TPA proceed with appointment scheduling). If the veteran is not reached by telephone, the TPA has 10 business days for the veteran to respond to a letter confirming that they want to opt in, at which point the TPA creates the Choice Program authorization. If the authorization is created after the veteran’s preferred date or after the clinically indicated date on the VAMC’s referral has already passed, the TPA has 30 calendar days from the authorization creation date for an appointment for routine care to take place. The TPA can use up to 15 business days of this 30- calendar-day time frame to contact providers and successfully schedule the veteran’s Choice Program appointment. See figure 3 for an illustration of the potential wait time of approximately 70 calendar days for time-eligible veterans to receive routine care through the Choice Program. The process VA established for time-eligible veterans to receive routine care through the Choice Program—which could potentially take 70 days to complete—is not consistent with the requirement that veterans receive care within 30 days of their clinically indicated dates (where available) as applicable under the Choice Act. Furthermore, according to the federal internal control standard for control activities, agencies should design control activities—such as through policies and procedures—that will help ensure federal programs meet their objectives and respond to any risks to meeting those objectives. A key reason that veterans’ overall wait times for Choice Program care could potentially exceed the Choice Act’s 30-day wait-time requirement is that the process VA and VHA designed did not include a limit on the number of days VAMCs have to complete a key step of the process— compiling relevant clinical information and sending referrals to the TPAs after veterans have agreed to be referred to the Choice Program. While the process sets forth time frames for the other steps VAMCs and TPAs must complete to process referrals and schedule appointments, VA and VHA have not specified how many days VAMCs have to send veterans’ Choice Program referrals to the TPAs. VHA has no comprehensive policy directive for the Choice Program, and neither its consult management directive nor its outpatient appointment scheduling directive specifies an amount of time within which VAMCs should prepare Choice Program referrals. Another reason that veterans’ overall wait times for Choice Program care could potentially exceed the Choice Act’s 30-day wait-time requirement is that after VA and VHA implemented their policies, they did not review and address risks that were identified through their actual experience in operating the program. In response to a letter we sent in March 2017, VA’s Deputy General Counsel for Legal Policy said that, based on VA’s and VHA’s experiences with actual operation of the Choice Program since November 2014, “the practical reality” has been that the 30-day wait-time goal VA established just prior to the program’s implementation cannot always be met. VA has not disclosed what timeliness goals it would apply under a future consolidated community care program. We note, however, that VA currently has no timeliness goals for its existing individually authorized community care program and cannot determine the amount of time veterans wait, on average, to receive care through that program, which has accounted for a significant portion of veterans’ community care utilization. We recommended in May 2013 that VA analyze the amount of time veterans wait to see providers in its individually authorized community care program and apply the same wait-time goals to that care that it uses to monitor wait times at VHA medical facilities. VA concurred with the recommendation to conduct an analysis and reported that it was in the process of building wait-time indicators to measure wait-time performance for individually authorized VA community care. VHA has since updated its wait-time goal for care delivered within VHA medical facilities—which is that care must be delivered within 30 days of veterans’ clinically indicated dates (where available). However, VA has not applied that same goal to its individually authorized VA community care program nor begun measuring wait-time performance for that program. Timeliness of appointments is an essential component of quality health care; delays in care have been shown to negatively affect patients’ morbidity, mortality, and quality of life. Without specifying wait-time goals that are achievable, and without designing appointment scheduling processes that are consistent with those goals, VA lacks assurance that veterans are receiving care from community providers in a timely manner. It also lacks a means for comparing the timeliness of veterans’ community care with that of care delivered within VHA medical facilities. To examine selected veterans’ actual wait times to receive routine care and urgent care through the Choice Program, we conducted a manual review of a random, non-generalizable sample of 196 Choice Program authorizations. The TPAs created these authorizations between January 2016 and April 2016 in response to referrals sent by six selected VAMCs. Our manual review of veterans’ VA electronic health records and the TPAs’ records for our non-generalizable sample of 55 routine care authorizations and 53 urgent care authorizations for which the TPAs succeeded in scheduling appointments identified the following review times: For the 55 routine care authorizations in our sample, it took VAMC staff an average of 24 calendar days after the veterans’ need for routine care was identified to contact the veterans and confirm that they wanted to be referred to the Choice Program, compile relevant clinical information, and send veterans’ referrals to the TPAs. It took an average of 27 calendar days for the VAMCs to complete these actions for the 53 urgent care authorizations in our sample. For these routine care authorizations, it took the TPAs an average of 14 calendar days to accept referrals and reach veterans by telephone or letter for the veterans to opt in to the Choice Program. It took the TPAs an average of 18 calendar days to complete these actions for the urgent care authorizations in our sample. After the TPAs succeeded in scheduling veterans’ appointments for routine care, an average of 26 calendar days elapsed before veterans in our sample completed their initial appointments with Choice Program providers. For urgent care authorizations in our sample, it took an average of 18 days for the veterans to complete their initial appointments after the TPAs scheduled them. See the following text box for specific examples of the overall wait times experienced by some veterans in the samples of routine and urgent Choice Program authorizations we reviewed. Examples of Delays Experienced by Veterans for Whom the Choice Program Third Party Administrators (TPA) Scheduled Appointments One veteran was referred to the Choice Program for magnetic resonance imaging (MRI) of the neck and lower back because these services were unavailable at a Veterans Health Administration (VHA) medical facility. It took almost 3 weeks for Department of Veterans Affairs (VA) medical center (VAMC) staff to prepare his Choice Program referral for routine care and send it to the TPA, and then it took an additional 2 months after the VAMC sent the referral for the veteran to receive care. Notes in the veteran’s VA electronic health record indicated that his follow- up appointment with a VHA neurosurgeon was at risk of being rescheduled because the VAMC had not received the results of the MRI after the appointment with the Choice Program provider occurred. Ultimately, the veteran’s appointment with the VHA neurosurgeon—where the imaging results and treatment options were discussed—did not occur until almost 6 months after the VHA clinician originally identified the need for the MRI. One veteran was referred to the Choice Program because she needed maternity care, which is generally not available at VHA medical facilities. Almost a month and a half elapsed from the time VAMC staff confirmed her pregnancy (when she was 6 weeks pregnant) to when the VAMC sent the Choice Program referral for urgent care to the TPA. It then took 2 additional weeks for the TPA to make an unsuccessful attempt to contact the veteran to schedule a prenatal appointment; by that point, she was almost 15 weeks pregnant. The veteran called the TPA back, but when the TPA had yet to schedule an appointment by the time she was 18 weeks pregnant, the veteran finally scheduled her initial prenatal appointment herself, almost 3 months after her pregnancy was confirmed by VAMC staff. One veteran was referred to the Choice Program for thoracic surgery to address a growth on his lung because there was a wait for care at a VHA medical facility. TPA documentation we reviewed indicated that VAMC staff contacted the TPA four times to inquire about the status of the veteran’s appointment, and the TPA contacted five Choice Program providers in its unsuccessful attempts to schedule the urgent appointment for the veteran. Ultimately, the veteran scheduled his own initial appointment with a thoracic surgeon in the community and informed the TPA that he had done so. The veteran’s initial appointment occurred 3 weeks after the VAMC sent his referral to the TPA. We also found that veterans in our sample experienced lengthy overall wait times to receive care when the TPAs returned their authorizations to the VAMC without scheduling appointments. When veterans’ Choice Program authorizations are returned, VAMCs must attempt to arrange care through other means—such as through another VA community care program, a new Choice Program referral, or at another VHA medical facility. Among the 88 returned authorizations in our sample, we determined that 53 veterans eventually received care through other means after their authorizations were returned. These 53 veterans ended up waiting an average of 111 days after the VHA clinician originally determined they needed care until their first appointment with a VHA clinician or with a community provider occurred. See the text box below for some examples of delays experienced by veterans in the sample of 88 returned Choice Program authorizations we reviewed. Examples of Delays Experienced by Veterans Whose Authorizations Were Returned to Department of Veterans Affairs Medical Centers (VAMC) by the Choice Program Third Party Administrators (TPA) The VAMC took almost 3 ½ months to refer one veteran to a physical therapist to address her pelvic floor prolapse. When the preferred provider listed in the VAMC’s referral was outside the TPA’s network, the TPA sent a message to the VAMC via its web-based portal to ask if it should try scheduling the appointment with a different provider. By the time VAMC staff responded to the message in the TPA’s portal, the TPA had already returned the authorization—almost 2 weeks after accepting it. Two months later, the VAMC realized that the veteran still needed this care and sent a new Choice Program referral to the TPA. It then took the veteran another 2 ½ months to attend her first appointment. Overall, this veteran waited more than 8 months to receive physical therapy. One veteran who was eligible for the Choice Program because he resided more than 40 miles from a VHA medical facility contacted the TPA to request an appointment with a urologist. More than a month later, the TPA contacted the VAMC via its web-based portal to request a referral for the veteran. VAMC staff responded to the TPA two days later and stated (correctly) that because the veteran was distance-eligible, no referral was required. Four days after receiving the VAMC’s response, the TPA succeeded in scheduling an appointment. However, the veteran declined it because the TPA had scheduled the appointment with a neurologist (a specialist who treats conditions affecting the brain, spinal cord, and nerves) rather than a urologist (a specialist who treats conditions affecting the urinary tract and male reproductive organs). Ultimately, the veteran ended up seeing a urologist at a VAMC nearly 5 months after he originally contacted the TPA to request care. It took about 2 ½ weeks for the VAMC to send one veteran’s referral for pain management to the TPA after a VHA clinician originally determined he needed these services. However, information the TPA needed for scheduling the Choice Program appointment was missing from the VAMC’s referral. The TPA requested the information from the VAMC twice using its web-based portal, but VAMC staff did not reply, and the TPA returned the authorization 2 weeks after receiving it. It then took another month before the veteran ended up receiving pain management services at a VAMC. Overall, this veteran waited almost 2 ½ months for pain management services. After we shared the results of our preliminary analysis with VHA officials in December 2016, VHA required its medical facilities to manually review a sample of about 5,000 Choice Program authorizations that were created in July, August, and September of 2016 for four types of Choice Program care—mammography, gastroenterology, cardiology, and neurology. The purpose of this review was to analyze (1) the timeliness with which VAMCs sent referrals to the TPAs, and (2) veterans’ overall wait times for Choice Program care. VHA calculated the average wait times across these four types of care for each of its 18 Veterans Integrated Service Networks (VISN). VHA’s analysis of data collected by VAMCs identified the following average review times when veterans were referred to the Choice Program because there was a greater-than-30-day wait time for an appointment at a VHA medical facility. Referral wait times. VISN-level averages ranged from 6 to 53 days for VAMC staff to contact veterans and confirm that they wanted to be referred to the Choice Program, compile relevant clinical information, and send veterans’ referrals to the TPAs. The national average was 19 days. Overall wait times. From the time veterans’ need for care was identified until they attended initial Choice Program appointments, average overall wait times ranged from 34 to 91 days across VHA’s 18 VISNs. The national average was 51 days. When veterans were referred to the Choice Program because services were unavailable at a VHA medical facility, VHA’s analysis of VAMCs’ self-reported data identified the following average review times: Referral wait times. VISN-level averages ranged from 6 to 21 days for VAMC staff to contact veterans and confirm that they wanted to be referred to the Choice Program, compile relevant clinical information, and send veterans’ referrals to the TPAs. The national average was 15 days. Overall wait times. From the time veterans’ need for care was identified until they attended initial Choice Program appointments, average overall wait times ranged from 39 to 56 days across VHA’s 18 VISNs. The national average was 47 days. Our analysis indicates that VHA’s ability to monitor Choice Program access is limited because the data VHA uses are not always accurate and reliable, and VHA lacks certain data that are needed to effectively monitor the program. As discussed below, multiple factors contribute to these data limitations. According to federal internal control standards for information and communication and for monitoring, agencies should use quality information to achieve the entity’s objectives, internally and externally communicate quality information, and establish activities to monitor the quality of performance over time and evaluate the results. Without complete, reliable Choice Program data, VHA cannot determine whether the Choice Program has achieved the goals of (1) alleviating the wait times veterans have experienced when seeking care at VHA medical facilities, and (2) easing geographic burdens veterans may face to access care at VHA medical facilities. The data VHA currently uses to monitor the timeliness of Choice Program appointment scheduling and completion do not capture the days it takes for VAMCs to prepare veterans’ referrals and send them to the TPAs. This is because VHA has not standardized the manner in which VHA clinicians and VAMC staff categorize consults that lead to Choice Program referrals. We observed inconsistency in the titles of consults that were associated with the non-generalizable sample of Choice Program authorizations we reviewed. For example, consult titles sometimes included the word “Choice,” but in other cases they included the words “non-VA care.” Some of the consult titles indicated the criterion under which the veteran was eligible for the Choice Program and the type of care the veteran needed (for example, “Choice-First Physical Therapy”), while other consult titles only indicated the type of care the veteran needed (for example, “pain management”). We observed this variability among consult titles both within single VAMCs and across all six of the VAMCs we selected for review. According to documentation VHA officials provided to us in December 2016, they planned on implementing a process for standardizing the consult titles associated with Choice Program referrals over the course of calendar year 2017. Originally, they planned on piloting the process at four VAMCs beginning in February 2017 and expected to gradually roll out standardized consult titles across all other VAMCs over the remainder of calendar year 2017. However, in late June and early July 2017, we followed up with the six VAMCs in our sample, and at that time, managers from only one of the VAMCs said that they had implemented the new process for standardizing consult titles associated with Choice Program referrals. When we interviewed VHA officials again in September 2017, they acknowledged that they had been delayed in implementing standardized consult titles, and they provided documentation indicating that they were just beginning to roll out the new process nationwide. In the absence of standardized consult titles for the Choice Program, VHA has no automated way to electronically extract data from VA’s electronic health record and calculate the average number of days it takes for VAMC staff to prepare veterans’ Choice Program referrals after veterans have agreed to be referred to the program. Further, without standardized consult titles, VHA cannot monitor veterans’ overall wait times—from the time VHA clinicians determine veterans need care until the veterans attend their first appointments with Choice Program providers. The lack of standardized consult titles also prevents VHA from tracking average overall wait times and monitoring the timeliness of care for veterans whose Choice Program authorizations are returned by the TPAs without scheduled appointments. The data VHA currently uses to monitor the timeliness of Choice Program appointments capture only a portion of the process that the TPAs carry out to schedule veterans’ appointments after they receive referrals from VAMCs. Specifically, VHA’s data reflect the timeliness of appointment scheduling and completion after the TPAs create authorizations in their appointment scheduling systems, which (according to VA’s contracts, as of June 1, 2016) the TPAs must do only after they have received all necessary information from VA and the veteran has opted in to the Choice Program. Therefore, VHA’s timeliness data do not capture the time TPAs spend (1) reviewing and accepting VAMCs’ referrals, and (2) contacting veterans to confirm that they want to opt in to the Choice Program. Data related to the timeliness of Choice Program appointment scheduling. When we asked how they monitor the timeliness of Choice Program appointment scheduling, VHA officials provided us the following types of data, all of which reflect the time that elapses only after veterans have opted in to the Choice Program and the TPAs have created authorizations: the average number of business days the TPAs take after creating authorizations to schedule appointments for routine and urgent care, the percentage of appointments for routine care that the TPAs schedule within 5 business days after they create authorizations, and the percentage of appointments for urgent care that the TPAs schedule within 2 business days after they create authorizations. Data related to the timeliness with which initial Choice Program appointments occur. VHA officials provided us data on the timeliness with which initial Choice Program appointments have occurred; however, as shown below, almost all of these data reflect the timeliness with which appointments occur only after veterans have opted in to the Choice Program and the TPAs have either created authorizations or successfully scheduled veterans’ appointments: the average number of business days after the TPAs create authorizations in which appointments for routine and urgent care occur; the percentage of appointments for routine care that are completed within 30, 60, 90, and 120 business days or more after the TPAs create an authorization; the percentage of appointments for routine care that are completed within 30 calendar days of either (1) the TPA’s scheduling of the appointment, (2) the clinically indicated date on the VAMC’s referral, or (3) the veteran’s preferred date; and the percentage of appointments for urgent care that are completed within 2 calendar days of the TPAs creating the authorizations. See figure 4 for an illustration of how VHA’s data capture only a portion of the Choice Program process to obtain care. In September 2017, VHA officials told us that they recently began implementing an interim solution that would allow them to track veterans’ overall wait times for Choice Program and other VA community care— from the time VHA clinicians determine veterans need the care until the veterans attend their first appointments with community providers. Specifically, this interim solution requires VAMC staff to enter unique identification numbers on VHA clinicians’ requests for care and on the Choice Program referrals they send to the TPAs. This unique identification number is then carried over to the Choice Program authorizations that are created in the TPAs’ systems. According to VHA officials, the unique identification number creates a link between VHA’s data and the TPAs’ data, so that VHA can monitor the timeliness of each step of the Choice Program referral and appointment scheduling process. However, the success of VHA’s interim solution relies on VAMC staff consistently and accurately entering the unique identification numbers on both the VHA clinicians’ requests for care and on Choice Program referrals, a process that is prone to error. VHA officials said it is their long- term goal to automate the process by which VHA’s data are linked with TPAs’ data in the consolidated community care program they are planning to implement. Because, as previously explained, VHA lacks data on the average timeliness with which VAMCs prepare Choice Program referrals, and VHA also lacks data on the average amount of time that elapses between when the TPAs receive VAMCs’ referrals and when veterans opt in with the TPAs, VHA cannot track veterans’ overall wait times for Choice Program care—from the time VHA clinicians determine that veterans need care until the veterans attend their first appointments with Choice Program providers. In addition, the lack of data on the timeliness with which the TPAs have (1) accepted VAMCs’ referrals and (2) determined that veterans wish to opt in to the program also prevents VHA from assessing whether the TPAs’ average timeliness in completing these actions has improved over time. Our analysis of a sample of 196 Choice Program authorizations shows that another way in which VHA’s monitoring of veterans’ access to care is limited by available data is that the clinically indicated dates included on referrals that VAMCs send to the TPAs may not be accurate. We found that the clinically indicated dates on VAMCs’ referrals were not always identical to the clinically indicated dates that were originally entered into VA’s electronic health record by the VHA clinicians who treated the veterans. VHA’s policy directive on consult management and its Choice Program standard operating procedure for VAMCs state that the clinically indicated date is to be determined by the VHA clinician who is treating the veteran. However, in reviewing VA’s electronic health records for our sample of 196 Choice Program authorizations, we identified 60 cases where the clinically indicated dates VAMC staff entered on Choice Program referrals they sent to the TPAs differed from the clinically indicated dates that were originally entered by VHA clinicians. In 46 of these 60 cases, VAMC staff entered clinically indicated dates on the Choice Program referrals that were later than the dates originally determined by the VHA clinicians, which would make the veterans’ wait times appear to be shorter than they actually were. VHA could not explain why the dates differed. Clinically indicated dates are manually entered on VAMCs’ electronic referrals to the TPAs, a practice that is subject to error or manipulation. It is unclear if VAMC staff mistakenly entered incorrect dates, or if they inappropriately entered later dates when the VAMC was delayed in contacting the veteran, compiling relevant clinical information, and sending the referral to the TPA. If VAMCs’ Choice Program referrals have clinically indicated dates that are different from the ones VHA clinicians originally entered without additional supporting documentation, there is a risk that VHA’s data will not accurately reflect veterans’ actual wait times. Specifically, VHA will not be able to determine how often veterans receive Choice Program care within the Choice Act’s required 30-day time frame. Another limitation of VHA’s monitoring of veterans’ access to Choice Program care is that VAMCs and TPAs do not always categorize referrals in accordance with the contractual definition for urgent care when they are processing referrals and scheduling appointments for veterans. According to VA’s contracts with the TPAs, Choice Program referrals are to be marked as “urgent” when a VHA clinician has determined that the veteran needs care that (1) is considered essential to evaluate and stabilize conditions and (2) if not provided would likely result in unacceptable morbidity or pain when there is a significant delay in evaluation or treatment. It is VA’s goal that the TPAs schedule appointments for urgent care and ensure that they take place within 2 business days of accepting the referrals from VA. Among the sample of 53 Choice Program authorizations for urgent care we reviewed, VHA and TPA documentation showed that in 35 cases (about 66 percent), VHA clinicians originally determined that veterans needed routine care, but VAMC or TPA staff later re-categorized the referrals or authorizations as urgent. In 4 of these 35 cases, we found documentation showing that VHA clinicians had reviewed the pending referrals and determined that the veterans’ clinical conditions or diagnoses warranted re-categorizing the veterans’ routine care referrals or authorizations as urgent. In 31 other cases we reviewed, however, we found no documentation indicating that a VHA clinician had identified a clinical reason for the veteran to receive care faster. In at least 15 of these 31 cases, it appeared that the VAMC or TPA staff changed the status of the referral or authorization in an effort to administratively expedite appointment scheduling when they were delayed in sending referrals and scheduling veterans’ Choice Program appointments. According to the VA contracting officer who is responsible for the Choice Program contracts, VA’s contracts with the TPAs do not include provisions for separating clinically urgent Choice Program referrals and authorizations from those that the VAMC or the TPA has decided to expedite for administrative reasons (such as when the veteran or VAMC staff has expressed frustration with a delay in the referral or appointment scheduling process). If Choice Program referrals for routine care are inappropriately categorized as urgent care referrals under the Choice Program, VHA’s data on the timeliness of urgent appointment scheduling and completion will not accurately reflect the extent to which veterans who have a clinical need for urgent care are receiving it within the time frames required by the TPAs’ contracts. The authorization creation date is the primary starting point from which VHA monitors the TPAs’ timeliness in appointment scheduling and the extent to which veterans’ initial Choice Program appointments occur in a timely manner. However, when initially implementing the Choice Program—beginning in November 2014—the two TPAs had differing interpretations of contractual requirements relating to when they should create authorizations in their appointment scheduling systems. According to VA contracting officials and VHA community care officials we interviewed, at the start of the program, one of the TPAs was creating authorizations as soon as it accepted referrals from VAMCs, but the other was waiting until after veterans opted in to the Choice Program to create authorizations. It was not until May 2016 (about 18 months into the Choice Program’s implementation) that VA modified its contracts to clarify that the TPAs are to create Choice Program authorizations only after they have contacted the veterans and confirmed that they want to opt in to the program. Due to these differing interpretations, VA lacked comparable performance data for the two TPAs for the first 18 months of the Choice Program’s expected three-year implementation. Therefore, it could not compare the timeliness of access nationwide. In addition, since VA modified the TPAs’ contracts midway through the Choice Program’s implementation, officials can only comparatively examine whether the timeliness of both TPAs’ appointment scheduling and completion has improved since June 2016, which is when the relevant contract modification took effect. VHA collects data and monitors various reasons the TPAs return Choice Program authorizations to VAMCs without making appointments. Each month, VA monitors how each TPA performs on Choice Program performance measures related to the timeliness of appointment scheduling. Authorizations that are returned for reasons that are attributable to the TPA—such as a lack of network providers in close proximity to the veteran’s residence—negatively impact the TPAs’ monthly performance measures. In our sample, we found that VHA’s data on the TPAs’ reasons for returning Choice Program authorizations are not reliable. Specifically, we questioned the validity of the TPAs’ return of 20 out of the 88 authorizations in our sample, for the following reasons: In 11 of the 20 cases, we found VHA or TPA documentation that substantiated the return, but the TPAs selected the incorrect return reasons when they sent the authorizations back to VA. For example, in one case, the TPA was unable to schedule an appointment with a primary care provider—even after contacting 11 different network providers—but the TPA staff returned the authorization to the VAMC indicating that the veteran had declined care. TPA officials who reviewed this authorization with us agreed that it was inappropriate to mark this authorization as having been returned because the veteran declined care and that their staff instead should have indicated that they had been unable to schedule an appointment with a network provider. In the remaining 9 of the 20 cases, we could find no VHA or TPA documentation to substantiate the reasons the TPAs selected when they returned the authorizations to VA, nor any other reasons for return. For example, the TPAs incorrectly selected “missing VA data” as the reason they returned 5 of these 9 authorizations. Based on VHA and TPA documentation we reviewed, the VAMCs’ referrals were complete and not missing any of the information the TPAs needed to proceed with appointment scheduling. TPA officials could not explain why their staff selected incorrect return reasons or inappropriately returned authorizations for which they should have kept attempting to schedule appointments. However, TPA staff must manually select return reasons when they send authorizations back to VAMCs, a process that is subject to error or manipulation. There is a process by which VA’s contracting officer’s representatives validate the monthly data submitted by the TPAs, but it cannot identify the data reliability issues we found when manually reviewing VHA and TPA documentation associated with a sample of returned Choice Program authorizations. VHA officials told us that VA’s contracting officer’s representatives do not have access to veterans’ electronic health records, which means that they cannot check whether VHA documentation substantiates the return reasons selected by the TPAs. Without reliable data on reasons that veterans have been unable to obtain appointments through the Choice Program, VHA cannot properly target its efforts to address challenges—such as network inadequacy— that may be causing the TPAs to return authorizations without making appointments. In addition, the lack of reliable data makes it difficult for VA to monitor whether the TPAs are meeting their contractual obligations, such as establishing adequate networks of community providers. Another way in which VHA’s monitoring of veterans’ access is limited is that VA lacks contract performance measures that would provide VA and VHA with data related to veterans’ driving times to access care from the TPAs’ Choice Program network providers. Such performance measures would help VA monitor the TPAs’ network adequacy. In contrast, for PC3, VA does collect data from the TPAs to monitor urban, rural, and highly rural veterans’ maximum commute times to specialty care providers, providers of higher level care, primary care providers, and mammography and maternity care providers. When we asked why VA had not established driving time performance measures for the Choice Program, a VHA official responsible for monitoring the Choice Program contracts told us he thought that these performance measures had simply been overlooked in the haste to implement the Choice Program. VA concurred with a recommendation we made in our December 2016 report about VA health care for women veterans, in which (among other things) we stated that the department should monitor women veterans’ driving times to access sex-specific care through the Choice Program and VA’s future community care contracts. However, VA stated in its June and October 2017 written updates on actions it has taken to address this recommendation that it does not intend to modify the current Choice Program contracts to address our recommendation because the contracts will be ending soon and it would be too costly to do so. Without driving time performance measures for the Choice Program, VHA lacks assurance that the TPAs’ networks include a sufficient number of community providers in close proximity to where veterans live, and it cannot monitor the extent to which veterans’ geographic access to care has improved or diminished. Officials we interviewed from VA’s contracting office, VHA’s Office of Community Care, and both of the TPAs, along with leadership officials, managers, and staff from the six selected VAMCs told us about various factors that have directly or indirectly affected veterans’ access to care throughout the Choice Program’s implementation. Chief among these are (1) administrative burden associated with the Choice Program’s complex referral and appointment scheduling processes; (2) inadequate VAMC staffing and poor communication between VHA and the VAMCs; and (3) the TPAs’ slow development of a robust provider network. We also identified actions VA and VHA have taken to address these factors. (See appendix VI for additional information about actions that VA and VHA took to address these three access-related issues for the Choice Program.) To the extent that these factors persist under the consolidated community care program that VA plans to establish, they will continue to adversely affect veterans’ access to care. VHA and TPA officials, as well as managers and staff from the six selected VAMCs, told us they encountered administrative burden associated with the complexities of the Choice Program’s referral and appointment scheduling processes. Further, they lacked care coordination tools throughout the time they were operating the Choice Program, which affected their ability to provide timely care to veterans. Among the main issues cited were the following: Manual referral processes and lack of TPA access to veterans’ records. To prepare veterans’ Choice Program referrals, VAMC staff had to follow a manual, time-consuming process to retrieve and collate key contact and clinical information from veterans’ VA electronic health records. This was because—throughout most of the Choice Program’s implementation—VA had no system for automatically generating referral packages that contained all of this information; nor did TPA staff have access to veterans’ VA electronic health records. If VAMC staff made mistakes (such as mistyping or inadvertently omitting veterans’ telephone numbers or addresses) or if the referrals were missing clinical information that the TPAs needed for appointment scheduling purposes, the TPAs had to either contact the VAMC to correct or obtain the missing information or return the referrals to VA without attempting to schedule appointments. These manual processes impeded the VAMCs’ progress in preparing referrals and the TPAs’ progress in scheduling veterans’ Choice Program appointments. Limited availability of care coordination tools and dependence on telephone-based customer service for appointment scheduling. A lack of care coordination tools and near-constant telephone calls also delayed VAMC and TPA staff from efficiently processing veterans’ referrals for appointments. For example, the Choice Program had no web-based portal through which VAMC staff and veterans could view the TPAs’ step-by-step progress in scheduling appointments. While both of the TPAs had portals that allowed VAMC staff (but not veterans) to obtain certain information— such as whether the TPA had already scheduled an appointment—the portals did not show if, or when, veterans’ referrals had been accepted, the dates and times of the TPAs’ attempts to contact veterans, or the number of community providers the TPA had contacted in its attempts to schedule an appointment. VAMC staff we interviewed said that while they could submit written messages to the TPAs through the portals, TPA staff did not always answer these messages in a timely manner. This, in turn, made telephone calls between veterans, the VAMCs, and the TPAs the most effective form of follow-up regarding veterans’ Choice Program referrals, according to VAMC managers and staff. Officials from one selected VAMC estimated that their community care staff (which included about 30 employees) was answering approximately 10,000 calls per month, and another VAMC had hired a full-time staff person just to answer telephone calls. Workload associated with re-authorizing veterans’ care. VAMC and TPA staff also told us they faced a lengthy administrative process to re-authorize care if veterans’ Choice Program authorizations expired before veterans received care or if veterans needed services that were outside the scope of their original authorizations. The TPAs referred to these as “secondary authorization requests” or “requests for additional services.” Without these re-authorizations, veterans’ care from community providers could be delayed or interrupted. VAMC and TPA staff had to process a high volume of these requests for two main reasons. First, the Choice Program originally had a 60- day limit on episodes of care, which meant that all appointments within the episode of care had to be completed within 60 days of the initial date of service. Even if the veteran needed care that could routinely be expected to outlast this 60-day time frame (such as maternity care or cancer treatment), community providers and the TPAs would still have to request additional referrals from the VAMCs to authorize the remaining care. Second, TPAs would have to request additional referrals if an episode of Choice Program care was already in progress and the veteran needed services that were not specifically authorized in the VAMC’s original referral. According to some VAMC managers and staff, this generated significant workload for the VAMCs. Officials from one of the selected VAMCs said it had to hire a full-time nurse just to process secondary authorization requests. Manual post-appointment follow-up processes. According to VAMC managers and staff we interviewed, the manual processes used for post-appointment follow-up also added to delays for veterans seeking care through the Choice Program. After an episode of care is complete—whether services are delivered at a VHA medical facility or in the community—VHA’s policy requires VAMC staff to document that care was provided and make the results of encounters available to VHA clinicians by entering medical records or other clinical information into the veteran’s VA electronic health record. When medical records from the community provider became available, VAMC staff had to retrieve copies from the TPAs’ portals and scan them into veterans’ VA electronic health records. (See appendix V for an illustration of this process.) VAMC staff described this as a very time-consuming process because it could take months for claims or medical records from Choice Program appointments to appear in the TPAs’ portals. At the time of our interviews in the summer of 2016, managers from two of the VAMCs in our sample said they each had backlogs of more than 6,000 Choice Program and other community care consults to complete. These backlogs adversely affected veterans’ access to Choice Program care because the time VAMC staff spent attempting to complete some veterans’ consults could not be spent on preparing other veterans’ Choice Program referrals. Over the course of the Choice Program’s implementation, VA and VHA took multiple actions to address administrative burden, including the following. Opportunities exist to improve or build on these actions as VA moves forward with the consolidated community care program it plans to implement. Implementation of a web-based tool to automate Choice Program referral preparation. In early 2016, to improve the process of gathering information from veterans’ VA electronic health records to prepare Choice Program referrals, staff from two VAMCs developed a web-based tool—called the “referral documentation” (REFDOC) tool. According to VHA documentation, the REFDOC tool automates the process of gathering necessary information and assembling it in a standardized format for veterans’ Choice Program referrals. VHA’s initial analyses of the REFDOC tool’s effectiveness found that it sped up the process of preparing Choice Program referrals by about 20 minutes per referral, which helped reduce the administrative burden associated with preparing referrals. However, VHA’s nationwide dissemination of the tool to all of the VAMCs was slowed by limitations of VA’s information technology systems. As of November 2016 (about 9 months after the tool was created), it had only been implemented at 18 of VHA’s 170 VAMCs. VHA gradually made the tool available at the remaining VAMCs between November 2016 and May 2017. Standardized episodes of care. In April 2017, VHA approved standardized episodes of care—or “bundles” of clinically necessary medical services and procedures—that are to be authorized whenever veterans are referred to community providers for specified types of care. This was intended to help address administrative burden associated with clinical review processes and improve veterans’ access to care. To start, VHA approved standardized episodes of care for 15 different types of care, including physical therapy, maternity care, and optometry. VA and VHA documentation indicate that they intend to roll out additional standardized episodes of care over time and continue using them once VA transitions to the consolidated community care program it is planning to implement. Acquisition of a secure e-mail system and a mechanism for TPAs and community providers to remotely access veterans’ VA electronic health records. VA recently established two different care coordination tools that were intended to make the process of providing veterans’ medical records to Choice Program and other VA community care providers more efficient. Secure e-mail system. In the spring of 2017, VA acquired software that allows VAMC managers and staff to e-mail encrypted files containing veterans’ medical records to the TPAs and community providers. Only the intended recipient can decrypt and respond to messages containing the files. According to VHA documentation, this secure e-mail system was intended to improve the efficiency of coordinating veterans’ Choice Program care and address potential security risks associated with printing paper copies of veterans’ medical records and sending them to the TPAs or community providers via fax or U.S. mail. Remote access to veterans’ VA electronic health records. In May 2017, VHA began offering a secure, web-based application called the Community Viewer as a tool for community providers nationwide to have access to assigned veterans’ VA electronic health records. Like the secure e-mail system, this tool is intended to improve the efficiency of coordinating veterans’ Choice Program care. However, VHA’s ability to seamlessly coordinate care with community providers remains limited—even with the secure e-mail system and the Community Viewer—because these tools only facilitate a one-way transfer of the information needed to coordinate the care veterans receive at VHA medical facilities and in the community. For the purposes of care coordination, it is important that information sharing among all participants concerned with a veteran’s Choice Program or other VA community care—including VHA clinicians, the TPAs, community providers, and the veteran—is as seamless as possible. According to the federal internal control standard for information and communication, agencies should internally and externally communicate the necessary information to achieve their objectives. While the secure e-mail system and Community Viewer tool provide an interim solution for VAMCs to transfer information from veterans’ VA electronic health records to the TPAs and community providers, they do not provide a means by which VAMCs or veterans can (1) view step-by-step progress in scheduling appointments, or (2) electronically receive the clinical results of Choice Program or other VA community care encounters. Building such a capability into the future consolidated community care program that VA plans to implement would allow VHA to improve the care coordination processes that exist in the Choice Program. Pilot programs for VAMC staff to schedule Choice Program appointments. In July 2016 and October 2016, VHA began implementing pilot projects, whereby staff at two VAMCs took over from the TPAs the responsibility of scheduling veterans’ Choice Program appointments. Specifically, VA modified its contracts with TriWest and Health Net to implement the two VAMC scheduling pilots at the Alaska VA Health Care System and the Fargo VA Health Care System, respectively. In these two locations, VAMC staff schedule veterans’ appointments and send relevant clinical documentation to the Choice Program providers. According to VHA officials, this had the potential to improve veterans’ access to care by improving the efficiency of the Choice Program appointment scheduling process. The results of these two VAMC scheduling pilots are particularly relevant, given that VA’s RFP, as amended, for its planned consolidated community care program indicates that VAMCs—rather than TPAs—will carry out community care appointment scheduling, unless VA exercises a contract option for the TPAs to provide such services for VAMCs that request them. However, while VHA officials told us that while they have taken some steps to begin evaluating the effectiveness of the pilots in improving appointment scheduling, these efforts have not been completed. The lack of an evaluation of the two VAMC scheduling pilots is inconsistent with the federal internal control standard for risk assessment, which stipulates that an agency should identify, analyze, and respond to risks related to achieving defined objectives. In addition, the federal internal control standard for monitoring calls for ongoing monitoring to assess the effectiveness of management strategies, make needed corrections if shortcomings are identified, and determine if corrective actions are achieving desired outcomes. Without evaluating the results of the scheduling pilots at the Alaska and Fargo VA Health Care Systems, VA lacks assurance that VAMC staff have the potential to schedule veterans’ community care appointments in a more timely manner than TPA staff otherwise would schedule them. Furthermore, VA is missing an opportunity to inform its planning and decisions for scheduling under its planned consolidated community care program. TPA officials and managers and staff from the six selected VAMCs frequently discussed staffing- and communication-related factors that adversely affected the timeliness of veterans’ Choice Program care. During the course of our review, they cited the following factors that delayed VAMCs’ processing of veterans’ referrals and TPAs’ scheduling of appointments: Staff vacancies and turnover. TPA officials and managers and staff at selected VAMCs said that VAMCs and TPAs were initially understaffed as Choice Program implementation began. VAMCs. Managers at the six selected VAMCs told us that after implementing the Choice Program, they hired additional community care staff, with one of them increasing its community care staffing level almost five-fold by July 2016. Some VAMC managers told us in 2016 and again in 2017 that they still struggled with staff retention and vacancies—among both managers and staff. Five of the VAMCs said they relied on overtime for their existing staff to keep up with the Choice Program workload. According to community care managers from four of the selected VAMCs, it takes about 6 months to recruit, hire, and train new community care staff, and this process could take more time if the VAMC’s human resources office is also understaffed, which was the case for at least one of the six VAMCs. That VAMC had not had a permanent community care manager for more than 2 years as of July 2017—which covered the majority of the Choice Program’s original 3-year implementation. TPAs. Officials from both TPAs also told us that they initially underestimated the workload associated with scheduling Choice Program appointments, and they brought on additional staff, including sub-contractors, to better manage their workloads as utilization of the program increased. One TPA opened eight operations centers in addition to the two it already had when the Choice Program was initially implemented. Ineffective mechanisms for VAMCs to resolve problems. VAMC managers and staff we interviewed also said they lacked useful mechanisms and points-of-contact when they needed to resolve issues and problems they were having with referral and appointment scheduling processes. VHA established a web-based Choice Program “issue tracker” system for VAMCs to report problems to VHA’s Office of Community Care. However, staff at four of the selected VAMCs told us they rarely used the tracker and some had stopped using the tracker altogether because it took too long for VHA’s Office of Community Care or the TPAs to respond and resolve the issues (if they responded at all), and they did not see the value in taking the time to report them via this mechanism. Managers at one of the VAMCs also told us about a phone line that their TPA had established to escalate and resolve urgent issues, but the TPA told the VAMC only to use it for emergencies. VHA’s untimely communication of Choice Program policy and process changes. According to managers and staff at the six selected VAMCs, VA and VHA have issued numerous contract modifications and policy changes with little advanced notice throughout the Choice Program’s implementation. According to these VAMC managers and staff, the untimely communication of changes created confusion at the VAMC level that affected veterans’ access to Choice Program care. We reviewed documentation showing that from October 2014 (when it modified the TPAs’ contracts to add responsibilities related to Choice Program administration) until July 2017, VA modified each TPA’s contract about 40 times. Many of these contract modifications—along with other legislative and regulatory changes that VA implemented during this period—changed VAMC or TPA processes related to Choice Program referrals and appointment scheduling. Many of the VAMC managers and staff we interviewed said they struggled to keep up with the contract modifications and policy changes, that VHA’s Office of Community Care did not always leave adequate time to prepare for them, and they felt they were never really able to become proficient at new processes before additional changes occurred. This meant that training sometimes happened after the contract modifications or VHA policy changes had already gone into effect. For example, managers and staff at three of the selected VAMCs told us that they were not informed in advance about a June 2016 contract modification that required the TPAs to return Choice Program authorizations to VAMCs if they failed to schedule appointments within required time frames. This contract modification had the potential to significantly increase VAMCs’ workloads, because they would have to arrange veterans’ care through other means once the authorizations were returned. According to individuals at two of these three VAMCs, they first heard about this change from TPA staff, rather than from VHA. VHA took the following two actions intended to help address staffing- related factors that adversely affected the timeliness of veterans’ Choice Program care. Staffing tool for VAMCs to estimate needs. In the spring of 2017, VHA developed a tool that is intended to help VAMCs project their staffing needs for the consolidated community care program VA plans to implement. VHA used workload data and site visit observations to develop the tool. Among the six selected VAMC managers we interviewed, impressions about the reasonableness of the staffing estimates generated by the community care staffing tool were mixed. For example, managers at two of the VAMCs said that the tool likely underestimated the number of staff they would need to handle referrals and appointment scheduling once VA transitions to the consolidated community care program. In contrast, managers from two other VAMCs thought that the tool’s staffing estimates seemed about right. Co-locating TPA staff at selected VAMCs to assist with resolution of problems. To help facilitate problem resolution between VAMCs and the TPAs as they work to schedule veterans’ Choice Program appointments, VA modified the TPAs’ contracts in November 2015 to allow for TPA staff to be co-located at selected VAMCs. VHA officials expected that one potential benefit of co- locating TPA staff would be that fewer veterans’ Choice Program referrals would be returned to VAMCs because of missing clinical information because TPA staff could help resolve such problems locally before the TPA returned referrals. As of May 2017, TPA staff were working at 70 of VHA’s 170 VAMCs—or about 40 percent of all VAMCs. Similar care coordination arrangements may exist under the consolidated community care program VA is planning to implement, if VA exercises a contract option for the TPAs to provide such services at VAMCs that request them. However, the communication-related factors that VHA and TPA officials identified as affecting the timeliness of veterans’ Choice Program care remain. VHA relied on ad hoc communications such as memoranda, fact sheets, e-mails, national conference calls, and occasional web-based trainings to communicate policy and process changes to VAMCs throughout the Choice Program’s implementation. Our interviews with VAMC managers and staff suggest that these were not the most effective methods of communication because messages about key changes sometimes lacked sufficient detail or failed to reach the VAMC staff responsible for implementing them in a timely manner. According to the federal internal control standard for control activities, agencies should implement control activities through their policies and procedures, which document the responsibilities of managers and staff who are responsible for implementing a program. Among other things, this may include management reviewing and updating policies and day-to-day procedures in a timely manner after a significant change in the program has occurred. VHA has no comprehensive policy directive or operations manual for the Choice Program, and its broader policy directive for VA community care programs has not been updated since January 2013. As a result, VAMC staff have operated in an environment that is frequently changing with no definitive reference source or sources of up-to-date policy and processes to consult, such as a comprehensive policy directive or operations manual. Instead, VAMC staff have had to keep track of the Choice Program’s policy and process changes through VHA’s various ad hoc communications. This poses a risk to VHA, as it increases the likelihood that VAMCs will implement new policies and processes inconsistently. In addition, there is risk that VAMC managers and staff will not always be aware of the most current policies and processes. Unless a comprehensive policy directive or operations manual is created, those risks could remain for the consolidated community care program VA is planning to establish. According to VAMC managers and TPA officials we interviewed, the TPAs’ inadequate networks of community providers affected both the timeliness with which veterans received Choice Program care and the extent to which veterans were able to access community providers located close to their homes. In September 2015, about 11 months after the Choice Program was implemented, VA contracting officials sent corrective action letters to both TPAs, citing network adequacy (i.e., the number, mix and geographic distribution of network providers) as a concern. TPA officials we interviewed acknowledged that their networks initially were not adequate to meet demand for Choice Program care. From the TPAs’ perspective, the brief transition period before the Choice Program began operations in November 2014 was not enough time to strengthen the community provider networks they had previously established under PC3, another VHA community care program. Furthermore, the TPAs told us that VA had not provided them with sufficient data on the expected demand for Choice Program care—by clinical specialty and zip code—prior to or after the Choice Program’s implementation. The overall number of community providers participating in the TPAs’ Choice Program networks nationwide grew dramatically over the following year—from almost 39,000 providers in September 2015 to more than 161,000 providers as of September 2016. However, at the time of our review, managers at five of the six selected VAMCs told us that they still observed TPA network inadequacies that impeded veterans’ access to Choice Program care. Similarly, managers at three VAMCs in our sample said that key community providers—including large academic medical centers—have refused to join the TPAs’ networks or dropped out of the networks after joining them, often because the TPAs had not paid them in a timely manner for the services they provided. Establishing adequate networks of Choice Program providers in rural areas has been particularly difficult. Officials at two of the three of the rural VAMCs in our sample pointed to general health care workforce shortages in rural areas as one cause for the TPAs’ network inadequacy—a challenge that is not limited to the Choice Program or VA’s health care system. According to a December 2015 analysis by VHA researchers, the majority of network providers in two of the three VISNs examined were located within 40 miles of VAMCs, leaving large geographic areas of these VISNs (particularly rural areas) outside the 40- mile radius with few network providers. For example, only 3.8 percent of primary care providers and 3.2 percent of behavioral health providers in VISN 20 (which covers Alaska, Idaho, Oregon, and Washington) were located more than 40 miles from VAMCs within that VISN. While the areas lacking network providers generally have fewer veterans relative to other areas within these VISNs, the analysis by VHA researchers suggests that veterans living in these areas are likely to have difficulty accessing Choice Program network providers that are located closer to their homes than the nearest VAMC, which is over 40 miles away. VA and VHA have tried to address network inadequacy that existed under the Choice Program and either have taken or plan to take additional actions to address this issue for the community care program VA plans to implement, including the following. Establishment of Choice Program provider agreement process. To help address inadequacies in the TPAs’ provider networks and improve veterans’ access to care under the Choice Program, VHA established the Choice Program provider agreement process in February 2016. This process allowed VAMCs to establish agreements with community providers, schedule veterans’ appointments, and reimburse the providers directly (using Choice Program funds) when the TPAs failed to schedule veterans’ appointments for reasons relating to network inadequacy, among others. Originally, the VAMCs were required to send veterans’ referrals to the TPAs and wait for them to be returned before they could proceed with arranging care through a Choice Program provider agreement. While this process had the potential to increase the availability of providers for the Choice Program, it did not immediately improve the timeliness of veterans’ Choice Program care because veterans still had to wait for as long as it took the VAMCs to send their referrals to the TPAs and for TPAs to return them before the VAMCs could proceed with arranging care through Choice Program provider agreements. According to the policies and contractual requirements that were in effect at the time, it could have taken up to 40 calendar days after a VHA clinician first identified the veteran’s need for care until the TPA returned the referral and the VAMC could proceed with arranging care through a Choice Program provider agreement. However, in March 2017, VHA updated the Choice Program provider agreement process so that—if the TPAs were returning a high volume of a VAMC’s referrals for one or more types of care—the VAMC could seek approval from its VISN and VHA’s Office of Community Care to bypass the TPA and proceed directly to arranging that type of care through Choice Program provider agreements. This had the potential to improve the timeliness of veterans’ access to Choice Program care because it eliminated the steps of sending referrals to the TPAs and waiting for them to be returned. Improving quality of information given to future TPAs. To help inform the recruitment of network providers for the consolidated community care program VA plans to establish, VA plans to provide future TPAs more robust data than they provided the current TPAs at the start of the Choice Program. In particular, VA’s RFP for the consolidated community care program, as amended, indicates that VA will provide (1) zip-code-level data on the number of authorizations that were issued in fiscal year 2015 for specific types of care (e.g., chemotherapy and obstetrics) and (2) VAMC-level data on the clinical specialties with the greatest wait times for appointments at VAMCs. These local-level data could help TPAs estimate the number of network providers of various specialties they will need to recruit in specific localities if awarded a contract for the consolidated community care program that VA is planning to implement. Performing market assessments. In preparation for the consolidated community care program VA plans to establish, VA and VHA officials are planning to conduct market assessments in 96 markets nationwide. Through these market assessments, officials told us, VA will (1) examine the clinical capacity that currently exists within VHA medical facilities and among community providers, (2) assess veterans’ current and future demand for health care services, and (3) develop long-term plans for ensuring that veterans will have access to high-quality health care services—whether they receive care from VHA clinicians or from community providers. According to VHA officials, the market assessments will help inform network provider recruitment efforts for the consolidated community care program VA is planning to implement. In addition, VHA officials told us that the market assessments will help VISN- and VAMC-level leaders make more informed, strategic decisions about whether it is more efficient to maintain or build capacity for delivering particular types of care within VHA medical facilities, or if they should routinely purchase certain types of care in the community. In November 2017, VHA officials told us that they expect to begin conducting the market assessments early in calendar year 2018, and the officials estimate that it will take about 18 months to complete assessments for all 96 markets. The Choice Program is approaching the end of its life, and with plans to consolidate it with VA’s other community care programs, opportunities to improve the program are diminishing. Congress created the Choice Program in 2014 in response to longstanding challenges in veterans’ access to care delivered within VHA medical facilities. However, we found numerous operational and oversight weaknesses with VHA’s management of scheduling veterans’ medical appointments through the Choice Program. While it may not be feasible for VA and VHA to implement corrective actions to address all of our findings before the Choice Program ends, it is imperative that VA incorporate lessons learned from the Choice Program when it implements the consolidated community care program it has planned. First, we found VHA’s process for scheduling appointments for veterans through the Choice Program was not consistent with statutory requirements. The Choice Act requires veterans to receive care no more than 30 days from the date an appointment is deemed clinically appropriate or from the date the veteran prefers to receive care; however, we found that veterans could potentially wait up to 70 calendar days to receive routine care through the Choice Program. In effect, we found that in 2016, some veterans’ actual wait times far exceeded 30 days. Although VA has made some relevant contract modifications and issued guidance to address Choice Program wait times, VHA has not adjusted the Choice Program’s appointment scheduling process or established timeliness standards for all steps of the process. In addition, VHA’s monitoring of access to Choice Program care has been limited by incomplete and unreliable data. In particular, the data VHA uses preclude it from accurately identifying the number of days that occur within each phase of the process, from initial referral to the actual appointment. Furthermore, a lack of controls has allowed for inappropriate changes to be made in veterans’ clinically indicated dates and routine versus urgent care categorizations, affecting VA’s ability to monitor whether veterans are receiving Choice Program care in a timely manner. The lack of reliable data and performance measures also hinders VHA’s ability to oversee the program and identify problems and corrective actions. Further, we found that VHA is missing out on opportunities to enhance its design of the planned consolidated community care program. For example, VHA has not fully evaluated its pilot programs for scheduling appointments nor developed tools such as a mechanism that would allow the seamless sharing of information between VHA and the TPAs. Lastly, we found that VHA often relied on inefficient, ad hoc methods of sharing information (such as memoranda, fact sheets and emails), which often failed to reach the VAMC managers and staff responsible for implementing the program. After the Choice Program ends, VA anticipates that veterans will continue to receive care from non-VHA providers under the consolidated community care program that it is planning to implement. VA’s and VHA’s design of the future program can benefit from the lessons learned under the Choice Program. Ignoring these lessons learned and the challenges that have arisen under the Choice Program as VA and VHA design the future consolidated program would only increase VA’s risk for not being able to ensure that all veterans will receive timely access to care in the community. To ensure that VA and VHA incorporate lessons learned from the Choice Program as they develop and implement a consolidated VA community care program, we are making the following 10 recommendations: The Under Secretary for Health should establish an achievable wait- time goal for the consolidated community care program that VA plans to implement that will permit VHA to monitor whether veterans are receiving VA community care within time frames that are comparable to the amount of time they would otherwise wait to receive care at VHA medical facilities. (Recommendation 1) The Under Secretary for Health should design an appointment scheduling process for the consolidated community care program that VA plans to implement that sets forth time frames within which (1) veterans’ referrals must be processed, (2) veterans’ appointments must be scheduled, and (3) veterans’ appointments must occur, which are consistent with the wait-time goal VHA has established for the program. (Recommendation 2) The Under Secretary for Health should establish a mechanism that will allow VHA to systematically monitor the average number of days it takes for VAMCs to prepare referrals, for VAMCs or TPAs to schedule veterans’ appointments, and for veterans’ appointments to occur, under the consolidated community care program that VA plans to implement. (Recommendation 3) The Under Secretary for Health should implement a mechanism to prevent veterans’ clinically indicated dates from being modified by individuals other than VHA clinicians when veterans are referred to the consolidated community care program that VA plans to implement. (Recommendation 4) The Under Secretary for Health should implement a mechanism to separate clinically urgent referrals and authorizations from those for which the VAMC or the TPA has decided to expedite appointment scheduling for administrative reasons. (Recommendation 5) The Under Secretary for Health should (1) establish oversight mechanisms to ensure that VHA is collecting reliable data on the reasons that VAMC or TPA staff are unsuccessful in scheduling veterans’ appointments through the consolidated community care program VA plans to implement, and (2) demonstrate that it has corrected any identified deficiencies. (Recommendation 6) The Secretary of Veterans Affairs should ensure that the contracts for the consolidated community care program VA plans to implement include performance metrics that will allow VHA to monitor average driving times between veterans’ homes and the practice locations of community providers that participate in the TPAs’ networks. (Recommendation 7) The Secretary of Veterans Affairs should establish a system for the consolidated community care program VA plans to implement to help facilitate seamless, efficient information sharing among VAMCs, VHA clinicians, TPAs, community providers, and veterans. Specifically, this system should allow all of these entities to electronically exchange information for the purposes of care coordination. (Recommendation 8) The Under Secretary for Health should conduct a comprehensive evaluation of the outcomes of the two appointment scheduling pilots it established at the Alaska and Fargo VA Health Care Systems (where VAMC staff, rather than TPA staff, are responsible for scheduling veterans’ Choice Program appointments), which should include a comparison of the timeliness with which VAMC staff and TPA staff completed each step of the Choice Program appointment scheduling process, as well as the overall timeliness with which veterans received appointments. (Recommendation 9) The Under Secretary for Health should issue a comprehensive policy directive and operations manual for the consolidated community care program VA plans to implement and ensure that these documents are reviewed and updated in a timely manner after any significant changes to the program occur. (Recommendation 10) VA provided written comments on a draft of this report, which are reprinted in Appendix VII. In its comments, VA concurred with 8 of our 10 recommendations and described its plans for implementing them. VA stated that VHA’s Office of Community Care will work collaboratively with other VA and VHA offices to evaluate modifications to the current wait- time goals and measurement processes so that wait times for VA community care can be compared to wait times for care delivered at VHA medical facilities. VA did not concur with our recommendation to implement a mechanism to separate clinically urgent referrals and authorizations from those that are designated as urgent for administrative reasons. VA stated that because VAMC staff (rather than TPA staff) will be responsible for scheduling veterans’ appointments under the consolidated community care program it plans to implement, there would no longer be a need to separate clinically urgent referrals from those that need to be administratively expedited. However, we maintain that our recommendation is warranted. In particular, we found that VA’s data did not always accurately reflect the timeliness of urgent care because both VAMC and TPA staff inappropriately re-categorized some routine care referrals and authorizations as urgent ones for reasons unrelated to the veterans’ health conditions. Regardless of whether VAMC staff or TPA staff are responsible for appointment scheduling, VA will need to ensure that it uses reliable data to monitor the extent to which veterans receive urgent care within required time frames. Without a means of separating clinically urgent referrals and authorizations from ones for which the scheduling process must be administratively expedited, VA’s data on the timeliness of urgent care will continue to be unreliable. VA agreed in principle with our recommendation to issue a comprehensive policy directive and operations manual, but stated in its comments that it would wait to determine whether a comprehensive policy directive is needed until after the consolidated community care program has been fully implemented and any interim implementation challenges have been resolved. However, when implementing a new program, it is important that agencies establish the program’s structure, responsibilities, and authorities at the beginning to help ensure that the new program’s objectives are met. Relying on outdated policies and unreliable communication methods increases VA’s risk of encountering foreseeable challenges. Without issuing a comprehensive policy directive and operations manual before the start of the new program, VA risks experiencing untimely communication issues similar to those that affected veterans’ access to care throughout the Choice Program’s implementation. A comprehensive policy directive and operations manual that could be updated as changes occur would give VAMCs a definitive source of real-time, up-to-date information and reduce the likelihood that VAMCs will implement new policies and processes inconsistently under the future program. We are sending copies of this report to the Secretary of Veterans Affairs, the Under Secretary for Health, appropriate congressional committees, and other interested parties. This report is also available at no charge on the GAO Web site at http://www.gao.gov. If you or your staffs have any questions about this report, please contact Sharon M. Silas at (202) 512-7114 or silass@gao.gov or A. Nicole Clowers at (202) 512-7114 or clowersa@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VIII. To examine selected veterans’ actual wait times to receive routine care and urgent care through the Choice Program and the information VHA uses to monitor access to care under the program, we took five key steps. We (1) analyzed Choice Program appointment wait times for selected veterans using a sample of 196 Choice Program authorizations for routine and urgent care; (2) reviewed VHA’s analysis of Choice Program appointment wait times for a sample of about 5,000 Choice Program authorizations; (3) reviewed data VHA uses to monitor the timeliness of Choice Program care and reasons that the TPAs have returned Choice Program referrals without making appointments; (4) interviewed VA, VHA, and TPA officials; and (5) reviewed federal internal control standards, as follows. 1. Our analysis of Choice Program wait times for a sample of 196 authorizations. To analyze the timeliness of Choice Program appointment scheduling and completion for a sample of veterans, we selected six VAMCs and a random, non-generalizable sample of 196 authorizations for veterans who were referred to the Choice Program by those six VAMCs between January 2016 and April 2016. We judgmentally selected the six VAMCs to include variation in geographic location, with three VAMCs that serve rural veteran populations and three VAMCs that serve urban veteran populations. In addition, three of the VAMCs were served by Health Net, and three were served by TriWest. (See table 5.) To select our random, non-generalizable sample of 196 Choice Program authorizations, we obtained VA data on all authorizations created by the TPAs between January and April 2016 for veterans who were referred to the program by the six VAMCs we selected—a universe of about 55,000 authorizations. From these 55,000 authorizations, we randomly selected: 55 routine care authorizations (about 10 authorizations per VAMC) for which the TPAs scheduled appointments for veterans, 53 urgent care authorizations (about 10 authorizations per VAMC) for which the TPAs scheduled appointments for veterans, and 88 routine and urgent care authorizations (about 15 authorizations per VAMC) that the TPAs returned to VA without scheduling appointments for any one of the following three reasons—(1) VA requested the authorization be returned, (2) VA data were missing from the referral, and (3) the veteran declined or did not want Choice Program care. For all 196 Choice Program authorizations in our sample, we manually reviewed VHA documentation (specifically, the veterans’ VA electronic health records) and TPA documentation to track the number of calendar days that elapsed at each step of the Choice Program appointment scheduling process. For the authorizations that the TPAs returned to the VAMCs without making appointments, we examined VHA and TPA documentation to determine whether the veterans eventually obtained care through other means—such as through another VA community care program, a different Choice Program referral, or at a VHA medical facility—and how long it took to receive that care. Determining whether veterans in our sample experienced clinical harm or adverse clinical outcomes because of delays in the VAMCs’ or TPAs’ processing of their referrals and authorizations was outside the scope of our review. We selected our sample of 55 routine care and 53 urgent care authorizations for which the TPAs succeeded in scheduling appointments to include only authorizations for which the TPAs did not meet VA’s appointment scheduling goals at one phase of the appointment scheduling process: when the TPAs attempt to schedule appointments after the veterans have opted in to the program. This was to ensure that our sample included only authorizations for which scheduling was delayed, so that we could examine the potential causes of appointment scheduling delays and whether delays also occurred at other phases of the process (such as when VAMCs were preparing the veterans’ referrals or when the TPAs were attempting to reach the veterans for them to opt in to the program). We omitted this phase of the appointment scheduling process when calculating the timeliness of appointment completion for the 55 routine care authorizations and 53 urgent care authorizations in our sample. Rather than reporting veterans’ overall wait times for these authorizations, we report the average number of calendar days that elapsed (1) while VAMCs were preparing veterans’ Choice Program referrals, (2) while the TPAs were attempting to reach veterans for them to opt in to the program, and (3) while veterans waited to attend their appointments after the TPAs succeeded in scheduling them. To assess the reliability of the authorization data we used, we interviewed knowledgeable agency officials, manually reviewed the content of the data, and electronically tested it for missing values. We concluded that these data were sufficiently reliable for the purposes of our reporting objectives. The findings from our review of Choice Program authorizations cannot be generalized beyond the VAMCs and the veterans’ Choice Program authorizations we reviewed. 2. VHA’s analysis of Choice Program wait times for a sample of about 5,000 authorizations. We obtained from VHA’s Office of Community Care the results of a nationwide analysis of Choice Program appointment timeliness it conducted in February 2017. Specifically, VHA directed its VAMCs to manually review veterans’ health records and TPA documentation and report observations for a non-generalizable sample of about 5,000 randomly selected Choice Program authorizations that were created between July and September of 2016. The sample was limited to authorizations for Choice Program appointments that had been scheduled for time- eligible veterans who needed four types of specialty care— mammography, gastroenterology, cardiology, and neurology. According to VHA officials, they limited their analysis to these four types of care because delayed treatment for any of these specialties could cause adverse health outcomes for patients. To assess the reliability of VHA’s data, we manually reviewed the results of its analysis and interviewed knowledgeable agency officials about potential outliers. We concluded that VHA’s data were sufficiently reliable for the purposes of our reporting objective. The results of VHA’s analysis cannot be generalized beyond the sample of Choice Program authorizations that it reviewed. 3. VHA data on timeliness of Choice Program appointments and the reasons TPAs return referrals without making appointments. To evaluate the information VHA uses to monitor access to care under the Choice Program, we reviewed data that VHA collects to monitor the timeliness with which the TPAs schedule appointments and the timeliness with which appointments occur after the TPAs have scheduled them. We also reviewed and tested the reliability of VHA data on the reasons the TPAs have returned Choice Program referrals to VAMCs without scheduling appointments, which may offer insights about access to care (e.g., the percentage of referrals that are returned due to a lack of providers in the TPAs’ networks). 4. Interviews with officials. We interviewed VA, VHA, and TPA officials responsible for administering the Choice Program contracts and overseeing implementation of the program. We interviewed these officials to gain an understanding of the processes they followed and the information they used to monitor veterans’ access to Choice Program care. 5. Federal internal control standards. We examined the results of our and VHA’s analyses and the information VHA uses to monitor veterans’ access to care under the program in the context of federal standards for internal control for (1) information and communication and (2) monitoring. The internal control standard for information and communication relates to management’s ability to use quality information to achieve the entity’s objectives. The internal control standard for monitoring relates to establishing activities to monitor the quality of performance over time and evaluating the results. Appendix II: Process for Veterans to Obtain Department of Veterans Affairs (VA) Choice Program Care if They Are Time-Eligiblea If the veteran does not respond to the letter within 14 calendar days, a notification is sent to the veteran’s VA clinician so that they can determine if additional action should be taken. Appendix IV: Comparison of Processes for Arranging Choice Program and Individually Authorized Community Care The Veterans Health Administration (VHA) uses the time-eligible appointment scheduling process when the services needed are not available at a VHA medical facility or are not available within allowable wait times. We found 21 actions that the Department of Veterans Affairs (VA) and the Veterans Health Administration (VHA) took after the Choice Program’s November 2014 implementation that were intended to help address issues related to veterans’ access to care. Table 6, below, provides a chronological summary of the actions VA and VHA had taken as of August 2017 and the issues they were intended to address. In addition to the contact named above, Marcia A. Mann (Assistant Director), Alexis C. MacDonald (Analyst-in-Charge), Daniel Powers, and Michael Zose made major contributions to this report. Also contributing were Muriel Brown, Christine Davis, Helen Desaulniers, Krister Friday, Sandra George, Jacquelyn Hamilton, and Vikki Porter. Veterans’ Health Care: Preliminary Observations on Veterans’ Access to Choice Program Care, GAO-17-397T (Washington, D.C.: March 7, 2017). VA Health Care: Improved Monitoring Needed for Effective Oversight of Care for Women Veterans, GAO-17-52 (Washington, D.C.: December 2, 2016). VA’S Health Care Budget: In Response to a Projected Funding Gap in Fiscal Year 2015, VA Has Made Efforts to Better Manage Future Budgets, GAO-16-584 (Washington, D.C.: June 3, 2016). Veterans’ Health Care: Proper Plan Needed to Modernize System for Paying Community Providers, GAO-16-353 (Washington, D.C.: May 11, 2016). VA Health Care: Actions Needed to Improve Monitoring and Oversight of Non-VA and Contract Care. GAO-15-654T (Washington, D.C.: June 1, 2015). VA Health Care: Further Action Needed to Address Weaknesses in Management and Oversight of Non-VA Medical Care, GAO-14-696T (Washington, D.C.: June 18, 2014). VA Health Care: Actions Needed to Improve Administration and Oversight of VA’s Millennium Act Emergency Care Benefit, GAO-14-175 (Washington, D.C.: March 6, 2014). VA Health Care: Management and Oversight of Fee Basis Care Need Improvement, GAO-13-441 (Washington, D.C.: May 31, 2013).", "summary": "Congress created the Choice Program in 2014 to address longstanding challenges with veterans' access to care at VHA medical facilities. The Joint Explanatory Statement for the Consolidated Appropriations Act, 2016 included provisions for GAO to review veterans' access to care through the Choice Program. This report examines for Choice Program care (1) VA's appointment scheduling process, (2) the timeliness of appointments and the information VHA uses to monitor veterans' access; and (3) the factors that have adversely affected veterans' access and the steps VA and VHA have taken to address them for VA's future community care program. GAO reviewed applicable laws and regulations, VA's TPA contracts, and relevant VHA policies and guidance. Absent reliable national data, GAO also selected 6 of 170 VAMCs (selected for variation in geographic location and the TPAs that served them) and manually reviewed a random, non-generalizable sample of 196 Choice Program authorizations. The authorizations were created for veterans who were referred to the program between January and April of 2016, the most recent period for which data were available when GAO began its review. The sample of authorizations included 55 for routine care, 53 for urgent care, and 88 that the TPAs returned without scheduling appointments. GAO also obtained the results of VHA's non-generalizable analysis of wait times for a nationwide sample of about 5,000 Choice Program authorizations that were created for selected services between July and September of 2016. Through the Veterans Choice Program (Choice Program), eligible veterans may receive care from community providers when it is not readily accessible at Veterans' Health Administration (VHA) medical facilities. The Department of Veterans Affairs (VA) uses two contractors—or third party administrators (TPA)—to schedule most veterans' Choice Program appointments after receiving referrals from VA medical centers (VAMC). GAO found that veterans who are referred to the Choice Program for routine care because services are not available at VA in a timely manner could potentially wait up to 70 calendar days for care if VAMCs and the TPAs take the maximum amount of time VA allows to complete its appointment scheduling process. This is not consistent with the statutory requirement that veterans receive Choice Program care within 30 days of their clinically indicated date (when available), which is the soonest date that it would be appropriate for the veteran to receive care, according to a VHA clinician. Without designing appointment scheduling processes that are consistent with this requirement, VA lacks assurance that veterans will receive Choice Program care in a timely manner. GAO and VHA found that selected veterans experienced lengthy actual wait times for appointments in 2016, after manually reviewing separate samples of Choice Program authorizations. For example, when GAO analyzed 55 routine care authorizations that were created between January and April of 2016, it found that the process took at least 64 calendar days, on average. When VHA analyzed about 5,000 authorizations created between July and September of 2016, it took an average of 51 calendar days for veterans to receive care. a GAO excluded from its analysis the amount of time the TPA took to schedule the appointment and the overall wait time because its sample selection methodology differed from VHA's in a way that would have skewed these two averages but not the averages for the other segments of the process. GAO also found that VHA cannot systematically monitor the timeliness of veterans’ access to Choice Program care because it lacks complete, reliable data to do so. The data limitations GAO identified include: A lack of data on the timeliness of referring and opting veterans in to the program. GAO found that the data VHA uses to monitor the timeliness of Choice Program appointments do not capture the time it takes VAMCs to prepare veterans’ referrals and send them to the TPAs, nor do they capture the time spent by the TPAs in accepting VAMCs’ referrals and opting veterans in to the Choice Program. VHA has implemented an interim solution to monitor overall wait times that relies on VAMC staff consistently and accurately entering unique identification numbers on VHA clinicians’ requests for care and on Choice Program referrals, a process that is prone to error. Inaccuracy of clinically indicated dates. GAO found that clinically indicated dates (which are used to measure the timeliness of care) are sometimes changed by VAMC staff before they send Choice Program referrals to the TPAs, which could mask veterans’ true wait times. GAO found that VAMC staff entered later clinically indicated dates on referrals for about 23 percent of the 196 authorizations it reviewed. It is unclear if VAMC staff mistakenly entered incorrect dates manually, or if they inappropriately entered later dates when the VAMC was delayed in contacting the veteran, compiling relevant clinical information, and sending the referral to the TPA. Unreliable data on the timeliness of urgent care. GAO found that VAMCs and TPAs do not always categorize Choice Program referrals and authorizations in accordance with the contractual definition for urgent care. According to the contracts, a referral is to be marked as “urgent,” and an appointment is to take place within 2 days of the TPA accepting it, when a VHA clinician has determined that the needed care is (1) essential to evaluate and stabilize the veteran’s condition, and (2) if delayed would likely result in unacceptable morbidity or pain. GAO reviewed a sample of 53 urgent care authorizations and determined that about 28 percent of the authorizations were originally marked as routine care authorizations but were changed to urgent by VAMC or TPA staff, in an effort to administratively expedite appointment scheduling. Without complete, reliable data, VHA cannot determine whether the Choice Program has helped to achieve the goal of alleviating veterans’ wait times for care. GAO found that numerous factors adversely affected veterans’ access to care through the Choice Program. These factors include: (1) administrative burden caused by complexities of referral and appointment scheduling processes, (2) poor communication between VHA and its VAMCs, and (3) inadequacies in the networks of community providers established by the TPAs, including an insufficient number, mix, or geographic distribution of community providers. VA and VHA have taken numerous actions throughout the Choice Program’s operation that were intended to help address these factors, though not all access factors have been fully resolved. For example, to help address administrative burden and improve the process of coordinating veterans’ Choice Program care, VA established a secure e-mail system and a mechanism for TPAs and community providers to remotely access veterans’ VA electronic health records. However, these mechanisms only facilitate a one-way transfer of necessary information. They do not provide a means by which VAMCs or veterans can view the TPAs’ step-by-step progress in scheduling appointments or electronically receive medical documentation associated with Choice Program appointments. While the Choice Program will soon end, VA anticipates that veterans will continue to receive community care under a similar program that VA plans to implement, which will consolidate the Choice Program and other VA community care programs. Incorporating lessons learned from the Choice Program into the implementation and administration of the new program could help VHA avoid similar challenges. For VA's future consolidated community care program, GAO is making 10 recommendations, which include: establishing an achieveable wait-time goal for the community care program that will permit VHA to monitor whether veterans are receiving care within time frames that are comparable to the amout of time they would otherwise wait for care at VHA medical facilities; designing an appointment scheduling process that (1) is consistent with the wait-time goal and (2) sets forth time frames within which veterans' referrals must be processed, appointments must be scheduled, and appointments must occur; allow VHA to systematically monitor the amount of time taken to prepare referrals, schedule appointments, and complete appointments; prevent veterans' clinically indicated dates from being modified by individuals other than VHA clinicians; and separate clinically urgent referrals and authorizations from those for which the VAMC or the TPA has decided to expedite appointment scheduling for administrative reasons; and establishing a system that will help facilitate seamless, efficient care coordination and exchanges of information among VAMCs, VHA clinicians, TPAs, community providers, and veterans. VA generally agreed with all but one of GAO's recommendations, which was to separate clinically urgent referrals from those that are administratively expedited. GAO maintains that implementing this recommendation will help improve future monitoring of urgent care timeliness for reasons explained in the report.", "document_type": "gao"}
{"report": "The defense lab enterprise consists of 63 labs, warfare centers, and engineering centers across the Departments of the Army, Navy, and Air Force, as shown in Figure 1 below. About 50,000 federally employed scientists and engineers work at these defense labs to support warfighter needs and develop transformative capabilities. Defense labs are managed and operated within the military service chain of command. DOD budgets for technology and product development activities under its research, development, test, and evaluation budget, which DOD groups into seven budget activity categories for its annual budget estimates. Air Force and Army labs rely on appropriated funding provided from the service—often referred to as mission funding—or from customers (or some combination thereof). Customers, such as program offices, provide funding to defense labs for technology development activities and related research. The Air Force and Army funding structure is in contrast to Navy research and development activities, which operate under the Navy Working Capital Fund—a revolving fund that finances Department of the Navy activities on a reimbursable basis. Under this funding model, the Navy employs a Capital Investment Program to obtain capital assets, including minor military construction projects for labs. The program provides the framework for planning, coordinating, and controlling Navy working capital funds and expenditures to obtain capital assets. Figure 2 illustrates the varying funding models used by the military service labs. In addition to its labs, DOD sponsors other entities to provide for its technology development needs. Specifically, these include: FFRDCs are operated by universities, other not-for-profit or nonprofit organizations, or private firms under long-term contracts and provide special research and development services that generally cannot be readily satisfied by government personnel or private contractors. For example, the Massachusetts Institute of Technology Lincoln Laboratory develops key radar and electronic warfare technologies for integrated air and missile defense systems. In addition, the Software Engineering Institute operated by Carnegie Mellon University provides cybersecurity solutions for defense entities. While DOD sponsors 10 FFRDCs in total, it designates 3 FFRDCs as research and development labs, which maintain long-term competencies in key technology areas. In addition to these, DOD sponsors 2 systems engineering and integration FFRDCs and 5 studies and analysis FFRDCs. UARCs provide specialized research and development services similar to FFRDCs and also operate under long-term contracts. However, unlike FFRDCs, DOD requires that UARCs be affiliated with a university. Generally, UARCs may not compete against industry in response to a competitive Request for Proposals for development or production that involves engineering expertise. DOD currently sponsors 13 UARCs. Key DOD offices provide oversight to the defense labs: The Under Secretary of Defense for Research and Engineering (USD(R&E))—the principal advisor to the Secretary of Defense for research, engineering, and technology development activities and programs—serves as DOD’s chief technology officer. The powers and duties of this office include establishing policies and providing oversight for DOD’s research, engineering, and technology development activities. The Defense Laboratories Office—within the Office of the USD(R&E)—supports DOD’s research and engineering mission by helping to ensure comprehensive department-level insight into the activities and capabilities of the defense labs. This office carries out a range of core functions related to the defense labs, including analysis of capabilities, alignment of activities, and advocacy. Congress has granted authorities that address hiring, infrastructure, and technology transition challenges to defense labs since 1995. These authorities provide defense lab directors with certain flexibilities within the established legal framework to manage their operations. While Congress has provided a number of authorities, in this report we focus on four authorities that our prior work on best practices in science and technology management and expedited lab hiring has shown are, or have the potential to be, the most crucial for supporting innovation within DOD labs. Laboratory Initiated Research Authority. This authority provides lab directors with the means to fund some of the research projects that the lab will pursue. The authority provided in Section 219 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, as implemented, provides lab directors with a means to fund projects they consider to be a priority in four allowable categories: (1) basic and applied research, (2) technology transition, (3) workforce development, and (4) revitalization, recapitalization, or repair or minor construction of lab infrastructure. These projects include those not specifically tied to defined requirements, outside of the normal 2-year budget planning process. The authority directs the Secretary of Defense to establish mechanisms under which lab directors may use an amount of funds equal to not less than 2 percent and not more than 4 percent of all funds available to the defense lab for projects under the four allowable categories. Further, lab directors are permitted to obtain additional funding by charging customers a fixed percentage fee that may not exceed 4 percent of costs. Direct Hire Authorities. These authorities provide lab directors with a streamlined and accelerated hiring process. Congress has enacted four types of direct hire authorities since 2008, which help labs compete with private industry and academia for high-quality scientific, engineering, and technical talent. Specific types of direct hire authorities include hiring: (1) candidates with advanced degrees; (2) candidates with bachelor’s degrees; (3) veterans; and (4) students currently enrolled in graduate or undergraduate science, technology, engineering, and mathematics (STEM) programs., Laboratory Enhancement Pilot Program. This authority provides methods for effective lab management operations. Section 233 of the National Defense Authorization Act for Fiscal Year 2017 established a pilot program for lab directors to propose alternative and innovative methods that might lead to more effectively managing labs, and authorized lab directors to waive any regulation, restriction, requirement, guidance, policy, procedure, or departmental instruction that would affect implementation of these methods, unless such implementation would be prohibited by a provision of an existing statute or common law. Micro-purchase Authority. This authority facilitates the purchasing process for labs. The FAR states a preference for government agencies to purchase and pay for micro-purchases of supplies or services using the government-wide commercial purchase card up to and at the micro-purchase threshold, but micro-purchases may be conducted using any of the simplified acquisition methods. This facilitates the ability of lab officials to quickly and easily acquire needed items for their activities and reduce the administrative costs associated with such small purchases. While the FAR micro-purchase was generally $3,500 during our review, Congress increased it to $10,000 for activities of the science and technology reinvention labs in Section 217 of the National Defense Authorization Act for Fiscal Year 2017. As we found in June 2018, the federal government spends approximately $137 billion annually government-wide on research and development (R&D) to help further agencies’ missions, including at federal labs. From fiscal years 2015 to 2017, DOD, Energy, and NASA represented three of the top four federal agencies with the highest annual federal R&D spending, accounting for about 66 percent of total federal R&D spending on average, as shown in Figure 3. While the labs primarily support the agencies that directly fund them, DOD, Energy, and NASA research entities also collaborate extensively to support activities of shared interest. For example, DOD and NASA research centers have collaborated to develop hypersonic vehicle capabilities. Further, Energy’s national labs help provide critical national security capabilities for DOD and support NASA’s deep space mission radioisotope requirements. In 2017, Energy reported performing about $2.6 billion of work per year from fiscal years 2011 through 2015 for other federal agencies and other customers, including DOD. Most defense labs have used the selected authorities since 2008, but their use has sometimes been limited for a variety of reasons. According to lab directors, this is because of DOD legal and policy restrictions and stakeholder concerns. For example: Use of the laboratory initiated research authority was limited by DOD’s military construction funding and financial management policies. Use of the direct hire authority was limited, in part, by personnel- related delays, security clearance challenges, and military hiring restrictions. Use of the laboratory enhancement pilot program was limited by stakeholder uncertainty about how to use this authority effectively. Use of the increased micro-purchase authority was limited by stakeholder concerns about the authority’s potential effect on small businesses. We found that most defense labs have used the laboratory initiated research authority. Twenty-three of 31 of respondents to our survey— about 74 percent—reported obligating funds under this authority. However, we found that most labs are not using the full 4 percent of all funds available to each lab, or charging customers the full fixed percentage fee of 4 percent of costs, as allowed by law. Specifically, we found that, as of September 2018: Navy labs reported charging customers a percentage fee of about 2 percent of costs as of fiscal year 2018. Prior to this, Navy labs only charged a 1 percent fixed fee on these costs. Because Navy labs are working capital funded organizations, they can use payments from customers for goods delivered or services performed. Army labs reported using between 2 and 3 percent of all funds available to the lab for projects under the four allowable categories and charging customers a fixed fee of between zero and 3 percent of costs to fund such activities. Only the Air Force Research Laboratory reported using the full 4 percent of all funds available to the lab. According to agency officials, the lab is using 3 percent of all funds available to the lab and is allowing individual technology directorates the option to use the additional 1 percent of funds available. In fiscal year 2018, three of the lab’s nine technology directorates chose to use this additional 1 percent. However, the lab has not charged customers a fixed percentage fee on their costs at all. As figure 4 shows, in fiscal year 2017, the aggregate fixed percentage fee charged by labs in each of the military departments totaled under the full 4 percent allowed by law for each funding source. Decisions to charge lower percentages are decisions to forego additional potential funding, although agencies have various reasons why this can happen, as we will discuss later. In total, DOD reported that this authority provided almost $300 million to labs in fiscal year 2017 and funded more than 1,750 projects across the four allowable categories, as Figure 5 illustrates. We previously found, in June 2017, that the laboratory initiated research authority provides defense lab directors with limited flexibility to initiate science and technology projects. These projects include those that are not road mapped or tied to defined requirements outside of the normal 2- year budget planning process, and are focused on both near- and long- term needs. For this review, defense lab officials we interviewed stated that the laboratory initiated research authority enables their scientists and researchers to pursue projects not necessarily tied to requirements and provides necessary funds for workforce development and lab infrastructure projects. Further, as shown in Figure 6, lab directors we surveyed generally view the authority as both fostering innovation and increasing efficiency across the four allowable categories on which funds can be used. In accordance with the one of the statutory purposes for the use of the funds, lab directors have developed new, innovative technologies using this authority. For example, DOD reported that: In fiscal year 2017, the Naval Surface Warfare Center, Crane Division, developed and fielded a solution to an urgent requirement for defeating small unmanned aerial vehicles that attack Navy assets or surveil naval activities. The center delivered this technology to the warfighter in May 2017 just 7 weeks after the Navy submitted the requirement. The Army Research Laboratory used the authority to fund a project that eventually developed a material that could increase the speed and lower the power needs of future generations of computer chips, thereby supporting Army networks. The Navy invested more than $700 thousand in laboratory initiated research authority funds to commission a Ballast Water Research Lab at Naval Surface Warfare Center, Carderock Division. Through the use of this new facility, engineers will be able to study ways to treat ballast water to prevent introduction of non- native aquatic species into a new environment that can be disastrous for the marine life that already inhabit that environment, and ensure that the Navy is able to meet various port regulations around the world for its ships. The Air Force Research Laboratory invested funds in fiscal year 2017 to renovate an existing facility to provide high performance computing capability to aid the rapid development of “game-changing” technologies and weapon systems. Officials at the Army’s Space and Missile Defense Command Technical Center noted they used the laboratory initiated research authority for the first time in fiscal year 2018 because the current executive director, who assumed the position in 2017, prioritized implementing this authority. Most of the Center’s planned investments are focused on workforce development and laboratory infrastructure projects; officials cited a high energy laser technology lab as one of the projects being supported by the revitalization, recapitalization, or minor military construction portion of this authority. Although the majority of defense labs reported using the laboratory initiated research authority, interviews we conducted throughout our review, along with other DOD reports, identified certain obstacles that have, at times, impeded wider usage. DOD-wide military construction funding restrictions. DOD restrictions limit the amount of laboratory initiated research authority funds that labs can spend on lab infrastructure. DOD’s limit is $6 million for the revitalization and recapitalization projects that can be funded under the laboratory initiated research authority. Lab officials stated that this amount is often insufficient to construct advanced lab facilities. Air Force Research Laboratory officials indicated that it is nearly impossible to construct lab facilities for less than $6 million. Officials at the Army’s Aviation and Missile Research, Development and Engineering Center echoed this sentiment and noted that they have primarily used funds to renovate existing buildings rather than fund new lab facility construction. In January 2017, the Defense Science Board identified lab infrastructure challenges, including that the average age of research and development facilities was nearly 50 years. Further, the Board reported that the labs are usually not successful in competing against broader service needs for military construction funds. Air Force does not charge customers a fixed percentage fee of costs. The Air Force Research Laboratory reported that it is not charging customers the allowable fixed percentage fee of costs to fund science and technology activities because it does not have a mechanism in place to do so. Air Force Research Laboratory officials estimated the lab would collect approximately $3 million a year if the lab charged customer activities the maximum allowable fee (4 percent). Air Force financial management officials stated that the service’s accounting system does not currently have an automated capability to transfer the allowable percentage fee of costs to a central account at the Air Force Research Laboratory. This lack of capability, officials noted, creates a significant administrative burden for charging these fees. The officials stated that they have not yet estimated the cost to add an automated capability. Although it is possible for the Air Force Research Laboratory to charge customer work orders manually—outside of the Air Force’s accounting system—officials with the Office of the Assistant Secretary of the Air Force for Financial Management and Comptroller perceive that the resources (time and people) required to manage such a process would be cost prohibitive. However, according to these officials, the Air Force has not assessed the costs required to improve the accounting system to do so, nor has it identified the potential benefits any improvements would provide. Federal internal control standards state that changes in condition affecting an entity and its environment often require changes to the entity’s internal control system, as existing controls may not be effective for meeting objectives (or addressing risks) under changed conditions. Further, these standards state that any internal control deficiencies require further evaluation and remediation by management. By not assessing the potential costs and benefits related to the options for collecting these allowable fees, the Air Force could be missing out on a potential source of funding to support its needs. DOD lacks clear guidance on how the Navy should use the initiated research authority for some infrastructure investments within the Capital Investment Program. In our review of DOD documentation, we found that, among the military departments, Navy labs funded recapitalization and revitalization projects using the laboratory initiated research authority the least. As recently as early 2017, a DOD-commissioned study found that defense labs face substantial infrastructure deficiencies that it has not yet identified funding to address. In fiscal year 2017, Navy labs invested $7.3 million in lab recapitalization projects, compared to $32.9 million and $53.7 million at the Air Force and Army, respectively. Navy lab officials told us that their ability to fund lab recapitalization and revitalization projects using funds available under the laboratory initiated research authority is limited because they have not been provided with clear guidance as to whether and how to use the laboratory initiated research authority within the Capital Investment Program of the Navy Working Capital Fund. Some Navy lab officials stated that they have found ways to use the initiated research authority for certain infrastructure investments. These officials stated that they used authority outside of the Capital Investment Program of the Navy Working Capital Fund, for instance, for projects below applicable thresholds because using the authority within the Program creates a bureaucratic and financial burden for them. For example, officials at two separate warfare centers—Naval Surface Warfare Center, Crane Division, and the Naval Air Warfare Center, Aircraft Division, noted that they did not expend funds in either fiscal year 2016 or fiscal year 2017 for recapitalization and revitalization projects. Both cited the Capital Investment Program as a significant barrier to their desired use of the laboratory initiated research authority. Officials from the Office of Budget, within the Office of the Assistant Secretary of the Navy for Financial Management and Comptroller agreed that, to date, clarifying guidance on the use of the laboratory initiated research authority within the Capital Investment Program has not been issued, effectively limiting the extent to which the labs can use it for infrastructure needs. According to these officials, the Office of the Secretary of Defense (OSD) Comptroller—in coordination with the Office of Financial Policy and Systems within the Office of the Assistant Secretary of the Navy for Financial Management and Comptroller—is responsible for developing the clarifying guidance their office has sought. This persistent lack of guidance on whether or how Navy labs should use the laboratory initiated research authority within the context of the Capital Investment Program presents an opportunity cost. Namely, the Navy’s labs have missed out on, and continue to miss, opportunities to invest in needed improvements to its aging lab infrastructure. The Army requires its laboratories to apply similar percentages to what is refers to as “Army direct appropriations” and “customer funds.” The Army requires that the percentage fee applied to direct appropriations not vary from the percentage fee applied to customer funds by more than 1 percent. The Army implemented this policy to maximize the laboratory initiated research authority’s effect on its 17 laboratories. However, the Office of the USD(R&E) reported in March 2018 that the policy was having a significant limiting effect on the breadth and scope of activities executed under this authority. Similarly, we found that the policy may, in practice, create a disincentive for Army lab directors to use the authority. In their responses to our survey, Army lab directors, representing key capability areas, acknowledged their concern about the percentage fee they assessed on customer funds affecting their ability to increase or maintain their customer bases. Further, some Army lab directors reported assessing a lower percentage fee on customer funds than allowed, which could help retain customers that might otherwise be driven away with higher assessed fees to carry out activities. As a result, these labs generally are setting a lower percentage fee on their directly appropriated funds, thereby lowering the overall laboratory initiated research funding available to them. Nonetheless, the Army has not assessed its policy to determine whether changes are needed to eliminate these disincentives. Continuing to operate without such an assessment could result in Army labs using the laboratory initiated research authority to fund fewer self-initiated projects—with the downstream effect that fewer new technologies for warfighters are available. The Navy applies a consistent fixed percentage fee of costs across its labs. Within the Navy, senior leadership has set the fixed percentage fee of costs the labs charge on customer funds at 2 percent. A senior Navy science and technology official stated that Navy leadership set a uniform fixed percentage fee to charge to customer activities across the Navy lab enterprise, in part, to ensure the labs were not inadvertently competing against one another for customer funds. For example, without a uniform rate, a Navy warfare center could offer a lower fee to entice a customer to use it rather than another center. The use of a fixed percentage fee facilitates program offices selecting warfare centers on the basis of best available match in capabilities. On the other hand, the Navy’s fixed 2 percentage fee of costs does limit—by half, as compared to the maximum 4 percent allowable—the amount of fees that Navy labs can collect. Consequently, several Navy lab directors told us that they would like to have the ability to increase the fixed percentage fee of costs above the Navy’s 2 percent to provide their labs with additional resources they said they need for innovation-related investments. Among the lab directors that responded to our survey, 30 of 31 replied that their lab had used at least one of the four types of direct hire authorities previously discussed since fiscal year 2014. Officials view direct hire authority as allowing the labs to compete with private industry for qualified applicants. Lab directors reported they generally believe that each type of direct hire is extremely or very useful for fostering innovation and increasing efficiency, as shown in Figure 7. Selected Officials’ Testimony on the Value of Direct Hire Authority: The U.S. Army Engineer Research and Development Center “was able to meet this important goal [of annually hiring more than 160 new researchers] in large part because of its direct hiring authorities, which save time, effort, and costs, and allow the organization to more effectively hire the best and brightest minds available.” – Dr. Jeffrey P. Holland, Past Director, U.S. Army Engineer Research and Development Center, in testimony before the Senate Committee on Armed Services (Emerging Threats and Capabilities Subcommittee), May 3, 2017. “The Air Force’s ability to recruit, retain, and develop the STEM workforce is vital toward building the future Air Force; Congress has been greatly supportive of these efforts…the addition of direct hire for candidates has been extremely useful in hiring qualified scientists and engineers in less than half the time of traditional hiring methods.” – Jeffrey Stanley, Air Force Deputy Assistant Secretary— Science, Technology and Engineering in testimony before the House Committee on Armed Services (Emerging Threats and Capabilities Subcommittee), March 14, 2018. Although participation in the laboratory enhancement pilot program is open to the DOD labs—and 19 of the 31 lab directors, or 61 percent, that responded to our survey reported they were participating—to date, only the Navy has formally established a pilot program for its labs. The Army and Air Force have not yet used this relatively new authority. A senior Navy science and technology official told us the Navy took important steps to facilitate the implementation of that service’s pilot program. According to the Navy official: The Office of the Deputy Assistant Secretary of the Navy for Research, Development, Test and Evaluation led the effort across the Navy labs, compiling—from each lab’s submission—a single list of proposals to forward to Navy leadership that would apply to all participating Navy labs. The Navy pursued a three-phased approach with its pilot program, with Phase 1 primarily focused on contracting and acquisition policy- related matters. Senior Navy research and development officials perceived these matters as being the easiest from which to obtain buy-in from Navy policy officials and attorneys, as well as Navy leadership. Phase 2 will include proposals related to Information Technology systems for research and development networks, while Phase 3 will most likely address personnel issues. Navy research and development officials deferred proposals— including information technology network enhancements—that might require extensive discussions with policy officials and attorneys stakeholders across the Navy. These proposals were pushed back to allow time for those stakeholders to see how the pilot program was being implemented and executed by the labs. None of the Army and Air Force labs has yet established a laboratory enhancement pilot program. Consistent with Army policy, the Medical Research and Materiel Command and the Space and Missile Defense Command Technical Center submitted proposals; however, they have yet to establish a pilot program. The Army’s Research, Development and Engineering Command, with input from its subordinate labs and engineering centers, developed a list of lab enhancement proposals but, as of September 2018, had yet to formally submit these final proposals to Army leadership for approval. These include initiatives in business operations, contracting, finance, information technology, and personnel management. A senior Army science and technology acknowledged that organizations across the military department have concerns about providing the labs with too much autonomy to use this new authority. Air Force Research Laboratory officials said they previously submitted a list of approximately 30 proposals to the Defense Laboratories Office in September 2017, but ultimately pulled back those requests because of stakeholder concerns within the Air Force. Specifically, officials with the Office of the Deputy Assistant Secretary of the Air Force for Science, Technology, and Engineering stated that the Air Force Materiel Command, to which the lab is a subordinate organization, had not seen the proposals before they were submitted. In addition, these officials identified concerns about how various stakeholders throughout the Air Force—such as those from financial management and personnel—would react to these proposals. These proposals could potentially sidestep the stakeholders’ oversight function of related lab activities. A senior Air Force Research Laboratory official stated that the lab re-submitted its proposals to the Air Force Materiel Command and that Air Force leadership was still reviewing them at the time of this report. Twenty-six of 31 labs directors—84 percent—reported having used the $10,000 micro-purchase threshold authority granted by Congress in 2016. However, we found that contracting and small business management officials’ concerns with this authority have created implementation challenges at some defense labs. For instance, a senior Navy official indicated that multiple stakeholders from across the Navy—including its Office of Small Business Programs—raised concerns about the authority’s potential impact on small businesses as micro-purchasing allows defense labs to bypass small business set asides. Several labs reported similar stakeholder concerns that prevented implementation of the micro-purchase threshold increase. At the same time, however, lab officials we interviewed expressed the view that the increased threshold will be beneficial, consistent with their opinions about the laboratory enhancement pilot program. For example, officials at the Naval Research Laboratory stated that increasing the threshold to $10,000 allows their scientists and engineers to directly purchase necessary equipment and materials through simplified procedures. They identified examples of projects that had been delayed by as much as several months because scientists and engineers used other than simplified acquisition procedures to purchase a relatively inexpensive piece of equipment, such as a specialized microscope, because the cost was above the previous threshold of $3,500. Similarly, the Army’s Armament Research, Development and Engineering Center reported that the micro-purchase threshold increase enables the lab to use simplified acquisition procedures for more items. As a result, they noted that the new authority increases efficiency by reducing contracting time and cost for those additional items. The Navy’s Space and Naval Warfare Systems Center Atlantic similarly reported that requirements, which were previously procured using other than simplified acquisition procedures, took up to 60 to 90 days to procure, while it took as little as 3 to 4 days under this new authority, which enabled its scientists and engineers to purchase materials needed for critical, time sensitive projects. However, lab officials acknowledged that the $10,000 micro-purchase threshold authority—like the laboratory enhancement pilot program—is too new to fully understand how it will increase efficiency and foster innovation over the long term. DOD sponsors several research centers, which are governed through noncompetitive agreements, including contracts. These centers provide the department with access to scientific experts employed by universities and other non-profit organizations. Scientists employed by these external to DOD research centers—specifically, three lab FFRDCs and 13 UARCs—execute DOD-funded science and technology development projects in emerging technical areas. DOD staff oversee these centers using routine oversight of funded research tasks and comprehensive reviews, which help DOD determine whether the centers’ funding should continue. DOD and research center officials told us that their ability to authorize work at the FFRDCs that DOD sponsors is limited by legislative restrictions on the staffing levels at these centers, as well as by infrastructure modernization challenges they face. DOD sponsors three research and development FFRDC labs that were established under noncompetitive procedures. Two of the three lab FFRDCs are operated by universities and one is operated by a nonprofit company. DOD also has contracts with 13 UARCs that fulfill a similar scientific role as the lab FFRDCs, while also differing from them in other respects. These differences are described in more detail in table 1. DOD’s contractor-operated research centers received about $1.3 billion annually in DOD funding in fiscal year 2016 and fiscal year 2017, according to DOD data. The two largest research and development FFRDCs, the Lincoln Laboratory and the Software Engineering Institute, received about 67 percent of total research center funding from DOD in 2017. UARCs received an average of $27 million in DOD funding, which was a 15 percent decrease from 2016. Research centers may also receive work and funding from other federal departments and private companies after obtaining DOD sponsor approval. Appendix II provides an overview of DOD FFRDC and UARC funding in fiscal years 2016 and 2017. DOD Sponsorship and Contract Awards: We reported in 2014 that FFRDCs in the federal government are defined through the sponsoring agreement between the agency and the contractor retained to operate the FFRDC. A written agreement of sponsorship between the government and the FFRDC must be prepared when the FFRDC is established, which may be included in a contract between the government and the FFRDC, or in another legal instrument under which an FFRDC accomplishes effort, or it may be in a separate written agreement. Historically, DOD sponsors retain contractors for many years or decades as FFRDC operators. We found that research centers undertake DOD-sponsored projects and, in some limited instances, scientific projects initiated by centers that are overseen by DOD staff. Individual sponsors enter into noncompetitive contracts with FFRDCs and UARCs. DOD uses noncompetitive contracts to establish or maintain an essential engineering, research, or development capability to be provided by an educational or other nonprofit institution or a federally funded research and development center. Scientific Project Funding: We found that project sponsors provide funding to existing contracts. For example, the government issues orders for requirements under Lincoln Laboratory’s indefinite delivery indefinite quantity base contract as funding sponsors approve new projects. Individual project sponsors, along with the primary sponsor, oversee how project funds are spent by the centers. Project sponsors decide whether they will continue to work with these entities based on perceived performance success. This effectively provides an incentive for FFRDCs and UARCS to perform successfully. This work and review cycle is described in Figure 9 below. FFRDCs and UARCs also partner with DOD government-operated labs to plan and execute technology development projects. For example, according to Navy officials, Naval Surface Warfare Center, Carderock Division collaborated with Navy-sponsored UARCs, such as Penn State’s Applied Research Laboratory, to help develop Navy submarine propeller and propulsion designs. Self-initiated Projects: Research center officials said that DOD provides some research centers with limited funds to self-initiate innovative projects. This funding helps the centers ensure that development projects are not limited to just satisfying near-term DOD requirements. Instead, future generations of DOD technologies can be funded. For example, officials at Johns Hopkins University Applied Physics Laboratory proactively conducted work on advanced naval defense technologies in response to similar technology development in adversary countries. Although Navy sponsors did not fund this initial work, they subsequently provided funding in this area after Hopkins’ research identified a risk reduction strategy for the Navy, according to the Johns Hopkins officials. This allowed the UARC to move relatively quickly on a new science and technology project idea. DOD uses 13 UARCs and three lab FFRDCs to obtain direct access to scientific expertise in emerging technical areas, supplementing research conducted at DOD’s government-owned and operated labs. These research centers provide DOD with additional scientific capabilities and the ability to expand quickly into new technical fields. Hiring Scientific Personnel: Although FFRDCs are largely federally funded, they are generally operated, managed, and administered by either a university or consortium of universities, other not-for-profit or nonprofit organization, or an industrial firm, as an autonomous organization or as an identifiable separate operating unit of a parent organization. The contractor operating the FFRDC exercises primary control over its FFRDC’s business concerns, such as personnel policies and compensation. DOD-funded research centers have flexibility in hiring scientists that leverage a parent institution’s expertise in emerging scientific fields. For example, leadership officials at the Army Institute for Soldier Nanotechnologies UARC at MIT and the Software Engineering Institute FFRDC at Carnegie-Melon University noted that projects they have conducted for DOD have benefitted from university experts in fields such as dark matter physics and artificial intelligence. Personnel Compensation: Research center officials we spoke with noted that their workforce policies permit them to flexibly hire, fire, and compensate staff as needed. Although employee salaries are established separately from the government schedule, they are approved by the government. Further, officials noted that university centers typically offer salaries in line with the labor market, but do not attempt to compete on a salary basis with relatively high, unaffordable private sector company salaries. Instead, they compete on the basis of other factors, such as offering scientists the opportunity to work for a prestigious university conducting science and technology research. Research Center Infrastructure: As with personnel matters, research centers have discretion to manage infrastructure in accordance with the policies and procedures of their parent institutions. While one center, Lincoln Laboratory, is located on government property, others primarily reside on property owned or leased by their parent institutions. According to agency officials, DOD contributes funding for the use and repair of these facilities through their contracts with research centers. Officials noted that Lincoln Laboratory uses military construction funding to pay for new buildings as it is located on government property. Trusted Advisor Role: FFRDCs and UARCs function as trusted advisors for the government and operate in the public interest with objectivity and independence. FFRDCs are independent, private-sector, non-profit organization units required to be free from personal or organizational conflicts of interest, as the FFRDCs answer to the government customer. As a result, DOD’s lab FFRDCs perform tasks that are closely associated with the performance of inherently governmental functions and have access to sensitive and proprietary data. Research center officials noted challenges limiting their work providing scientific expertise to DOD. FFRDCs are also limited in executing infrastructure investments. Limitation on Available Work Hours: DOD FFRDCs are limited by an annual ceiling set by Congress on the amount of staff years of technical effort (STE) that may be funded for defense FFRDCs. We previously found in October 2008 these limits were imposed in response to concerns that DOD was inefficiently using its FFRDCs. We found that the STE workload limitation aimed to ensure that FFRDC work was appropriate and limited resources were being used for DOD’s highest priorities. As a result, Software Engineering Institute officials said they decline many DOD programs’ requests for assistance due to the annual work hour limitation. Further, officials at the Office of the Secretary of Defense’s Studies and FFRDC Management Office reported that this limit significantly constrains the use of DOD’s FFRDCs and that DOD customer demand for their services is significantly greater than the annual STE limit. OSD officials indicated that FFRDC related work must be deferred to later years when these limits are reached, since there are no other legally compliant alternatives capable of fulfilling these requirements. Infrastructure: FFRDC officials we interviewed identified infrastructure challenges—including aging facilities and equipment—as hindering their research and development efforts. For example, many buildings at the Massachusetts Institute of Technology (MIT) Lincoln Laboratory are over 60 years old; MIT considers over half of them to be in substandard condition. According to an MIT official, these facilities, located on government property, were not structurally designed for modern research and have relatively poor vibration isolation, resulting in inefficient workarounds or work that could not be performed. Officials from the Defense Laboratories Office noted that the MIT Lincoln Laboratory is unique among DOD’s FFRDCs in that it is operated on government- owned property. A 2013 study, conducted on behalf of the White House Office of Science and Technology Policy, found that lab infrastructure project funding proposals must compete with hospitals, barracks, runways, and roads and, therefore, tend to be lower on the priority list for military construction funding. A 2017 Defense Science Board report and DOD officials we spoke with indicated this continues to be true. While contract research centers have significant flexibility to execute infrastructure work, they are still affected by limited availability of military construction funding. Officials at another center noted that in some instances, DOD sponsors have been unable or slow to provide required secure facilities and equipment within needed time frames. Delays of this nature can affect the research centers’ ability to deliver the technologies or related services needed by DOD. The Department of Energy (Energy) primarily relies on contractor- operated FFRDCs to operate its labs, while the majority of NASA labs and centers are government-operated. Energy’s national labs form the core of the agency’s scientific work and mission. This is in contrast to DOD-funded labs, which constitute a relatively small aspect of DOD’s overall mission. We have previously found that Energy’s labs can use funding for minor infrastructure improvements. NASA centers can also approve and fund certain facility projects, in accordance with NASA policies, and they have encountered significant challenges with aging infrastructure. Also, in some cases, energy and space research centers have significant challenges with hiring replacement staff and competing with private sector employers for staff. Energy’s labs can hire scientific personnel with the flexibility of private companies, while NASA centers were previously provided hiring flexibilities by Congress in 2004 to facilitate staff hiring. While Energy and NASA’s research entities follow their specific governance models, there are broad characteristics common across these agencies as well as DOD. Table 2 illustrates that while research centers are largely government-owned, the government is not always the operator. As we have reported, Department of Energy national labs are primarily operated by for-profit, non-profit and university FFRDC contractors using management and operating contracts, which are competed on a limited basis. Energy’s funding sponsors and headquarters officials are required to reevaluate FFRDC performance in increments not to exceed 5 years by federal acquisition regulations, which inform future decisions to renew the agreement. In 1990, we designated Energy’s contract management—including both contract administration and project management—a high-risk area because of Energy’s inadequate management and oversight of contractors, leaving the department vulnerable to fraud, waste, abuse, and mismanagement. In 2009, we subsequently narrowed the focus of Energy’s high-risk designation to the National Nuclear Security Administration and Office of Environmental Management, which together oversee four national labs. Further, in our 2017 High Risk report, we found that these two agencies had made progress in addressing our contract management concerns, but we identified continued problems with the agencies having sufficient capacity to mitigate contract and project management risks. Also, we found that they had demonstrated little progress in addressing contract management challenges, particularly in the area of financial management. The Department of Energy uses performance-based management and operating contracts, which have been subject to limited competition, with universities, non-profit companies and for-profit companies to operate the national labs on government-owned property. These contractor-operated FFRDCs provide the vast majority of Energy’s science and technology capacity, rather than supplementing the work of government-operated labs like DOD’s FFRDCs. Energy has depended on the expertise of private organizations to execute its science and technology work since the Manhattan Project produced the first atomic bomb during World War II. The Spallation Neutron Source is an experimental research facility at Oak Ridge National Laboratory—a government-owned contractor-operated laboratory. The Spallation Neutron Source includes the world’s most powerful pulsed-neutron sources and provides information about the structure and properties of materials that cannot be obtained by other means. The Spallation Neutron Source is a user facility whereby researchers from universities, national laboratories, and industry submit proposals, which are peer- reviewed and must compete for time at the user facility. The primary focus of each lab varies based on its expertise and facilities. Energy largely oversees its lab contractors through its headquarters program offices, which include the National Nuclear Security Administration, Office of Science, the Office of Fossil Energy, as well as co-located government field offices. Office of Science-sponsored labs primarily support scientific research for energy and physical sciences, while the National Nuclear Security Administration-sponsored (NNSA) labs primarily focus on nuclear weapons and related science and technologies. Energy also oversees its lab contractors’ activities through on-site Energy oversight offices that work alongside lab management at each FFRDC. Some labs specialize in earlier-phase science, while other labs work on later-phase nuclear weapons technologies in addition to earlier-phase science. As Figure 10 shows, these labs are spread across the United States. Energy has only one government-operated and government-owned lab, the National Energy Technology Laboratory. Key differences between Energy’s contractor-operated and government-operated governance models are described in table 3. Energy’s FFRDCs use their own personnel systems, which Energy officials stated provide more flexibility for hiring and retaining qualified staff. Management within these FFRDCs can move staff in or out of scientific areas more quickly than government labs can, thereby providing greater agility to meet Energy’s needs in emerging science areas. For example, Energy’s lab oversight staff at Oak Ridge National Laboratory told us that use of lab contractors’ human resources management systems allows for workforce flexibilities to meet Energy’s needs. While these contractors have leeway in managing their human resources systems, Energy’s headquarters maintains oversight—through its contracting officers—over employee compensation. Energy’s FFRDC contractors manage and operate nearly all of the department’s government-owned national lab facilities—including day-to- day management of government-controlled facilities and real property. Lab operators used funding to complete minor construction projects, which cost $10 million or less. This funding comes from a percentage of science and technology projects’ funding, requires local Energy oversight office approval, and has streamlined project management requirements. In contrast, major infrastructure upgrades are funded through relatively long and complex line-item funding processes, and projects over $50 million are subject to more rigorous project management requirements. Energy’s labs use a small portion of their funding to initiate discretionary projects for science and technologies that will benefit sponsors in the long-term by maintaining the scientific and technical vitality of the laboratories. To maintain and enhance lab expertise, the National Defense Authorization Act for Fiscal Year 1991 authorized Energy’s contractor-operated labs receiving funding for national security programs to use a percentage of lab funds to perform lab-directed R&D of a creative and innovative nature. The actual percentages allowed to be used for lab-directed R&D are subject to Energy’s approval. Energy’s entities sponsor most national lab projects based on their needs and lab expertise. Typically, earlier foundational science projects are funded through a process whereby funding sponsors issue calls for proposals to Energy’s national labs. Interested scientific teams at labs provide proposals to conduct these projects for sponsor consideration. Sponsors then assess proposals for scientific merit and decide which teams receive funding to execute their projects. NNSA provides funding for later-phase nuclear technology development projects to its labs after agreement is made regarding objectives and deliverables for specific projects, according to Lawrence Livermore National Laboratory officials. Despite their flexibilities with regard to hiring and infrastructure decisions compared to government operated labs, Energy’s lab leadership and government oversight officials noted human resource and facilities related challenges, such as: Sufficiently compensating staff located in high-cost of living areas. For example, the labor market of the San Francisco area, where several Department of Energy national labs are located, is highly competitive for employers. Commercial firms offer salaries and compensation that typically exceed those of government-funded, contractor-operated labs, although Energy’s contractors have more pay flexibility than is allowed for Energy’s government employees. Obtaining government clearances in a timely manner. Energy’s NNSA oversight officials and lab management staff, in particular, cited this challenge, which they stated has led to a backlog of people needing clearances. Government hiring freeze constraining overall hiring. Officials at Energy’s government-operated National Energy Technology Laboratory reported that as a result of a government hiring freeze, the lab has increasingly hired private contractor staff to the point that more than half of the total lab staff is now comprised of contractor employees. Major infrastructure challenges at Energy labs. Energy reported in July 2018 that over half of all national lab buildings are in either substandard or inadequate condition. The Energy Inspector General also identified infrastructure modernization as one of Energy’s top management challenges. This finding followed a mandated commission’s report in 2015 that facilities and infrastructure across Energy’s national lab network were hampered by high levels of deferred maintenance and excess facilities. The majority of NASA’s science and technology facilities are operated within the governance framework of government-operated research centers, similarly to most DOD labs. While government-operated, they have been granted additional legislative flexibilities for hiring employees beyond those normally available to government entities. NASA locates its science and technology staff at four government- operated research centers, one contractor-operated FFRDC, and at five NASA centers assisting space and space flight development. These centers and the Jet Propulsion Laboratory—NASA’s sole sponsored FFRDC—execute NASA’s research missions including technology development in exploration and aeronautics. The differences between these two governance approaches are described in Table 4. NASA also works with Johns Hopkins University Applied Physics Lab, a UARC, to develop major space flight missions. The NASA Glenn Research Center—a government- operated laboratory—is currently developing solar electric propulsion technologies intended to allow manned and unmanned spacecraft to be propelled far beyond earth orbit using solar power. This project is developing large, flexible, radiation-resistant solar arrays that can be unfurled to capture solar energy powering fuel-efficient electrostatic thrusters. Scientists expect a system-level flight test within the next decade to demonstrate key technologies supporting NASA’s Lunar Orbital Platform-Gateway project, a platform to mature necessary short- and long-duration deep space exploration capabilities. Headquarters, including funding sponsors providing oversight for their individual projects. Title 51, Chapters 201 and 203 of U.S. Code and technology efforts with DOD and other organizations, including use of NASA lab and test facilities. Operated by university contractor having sole source contract. Not permitted to compete against industry, except for operation of an FFRDC. property (originally part of DOD). 5-year contract renewable to 10 years total. Headquarters, including funding sponsors providing oversight for their individual projects. Title 51, Chapters 201 and 203 of U.S. Code; 10 U.S.C. § 2304 (c) (3)(B) ; Federal Acquisition Regulation § 35.017 based NASA oversight staff. sponsors seeking FFRDC assistance with NASA approval. “Lab” as used in this context refers to science and technology organizations equivalent to NASA Research Centers, DOD UARCs and FFRDCs. Mission leadership officials at NASA Headquarters—including the Associate Administrators for Aeronautics Research, Human Exploration, Science and Space Technology—oversee NASA’s research centers as well as the Jet Propulsion Laboratory. These officials are responsible for technology programs providing funds to research centers and the Jet Propulsion Laboratory to support their specific mission areas. NASA’s science and technology project portfolios are based on the requirements and priorities established by NASA’s leaders in collaboration with key stakeholders in academia and industry among others. In planning their science and technology work, NASA’s Glenn Research Center officials noted that NASA research center directors consider the capabilities and resources—including staff and facilities—of other research centers to minimize redundant work. NASA depends on a highly skilled civil servant and contractor workforce to plan and execute its missions. Congress provided NASA with additional human resource authorities beyond those otherwise allowed for federal government personnel through the NASA Flexibility Act of 2004. We found in September 2008 that NASA sought this flexibility to ensure that it could hire and retain the workforce it desired. This law consisted of multiple provisions to address a range of human capital challenges and to strengthen all levels of the workforce. The provisions included incentives—including compensation—to allow NASA to compete successfully in the labor market with the private sector and reshape its workforce more effectively to support the Agency’s mission. NASA also employs a significant contractor workforce across its different centers. Glenn Research Center officials we interviewed stated their portfolio of science and technology projects—and funding—mostly aligns with NASA’s top requirements and priorities. They, along with NASA sponsors, create technology roadmaps and investment plans to determine their future projects. NASA policy requires that NASA’s scientific teams offer proposals for potential research and science and technology projects. This is similar in some ways to how many DOD and Energy centers must find sponsors willing to fund specific technology development projects, rather than receiving technology development funding for a given year. These proposals are reviewed by peer review teams, who identify for selecting officials those proposals they believe have the most scientific merit. Ames Research Center officials said they believe this process can foster innovation, encourage employees to keep skills honed, and mitigate complacency. Glenn Research Center officials said that while most of the work they conduct is for sponsored applied research or advanced technology development, about 2 percent of their science and technology budget is spent on early-stage scientific innovation. Recommended projects of this nature proposed by the research center are typically approved by headquarters officials, according to these Glenn officials. NASA provides technical grants for basic research and applied science to university scientists nationwide on a competitive basis, and also funds similar research done internally at research centers. As with DOD and Energy’s research centers, NASA officials have identified some key operating challenges, including: Aging infrastructure and facilities. The NASA Inspector General listed infrastructure area as one of the top five management and performance challenges facing NASA. Further, the Inspector General identified deficiencies with facilities planning and reported that about 80 percent of facilities at three of four NASA research centers are over 50 years old, while about half of the facilities at the Jet Propulsion Laboratory and the fourth research center are that old. Infrastructure projects and upgrades of $1 million or less are undertaken by research center management instead of at the NASA headquarters level. Construction above this threshold has significantly more requirements and is approved by NASA headquarters. Glenn Research Center officials indicated it is difficult to obtain funding for projects that exceed the minor infrastructure threshold, in part, due competition with major construction of facilities proposals from across the agency for limited funds. As a result, they put most of their efforts into sustaining existing infrastructure. Workforce shortages in key technical areas. As we found in May 2018, NASA has experienced workforce challenges on several major projects such as the Mars 2020 and Europa Clipper projects. Also, over 40 percent of NASA’s workforce is either eligible to retire now or will be eligible in the next 5 years. NASA headquarters officials noted that NASA’s workforce is aging because NASA has a low attrition rate—about 4 percent annually—and high numbers of staff stay several years beyond retirement. Further, in 2017, the NASA Inspector General found gaps in NASA’s workforce planning for specific capability areas and how workforce plans would meet future needs, and recommended that NASA establish standardized guidance defining the data and analyses for these planning efforts. NASA concurred with and identified its plan to implement this recommendation. However, NASA has not implemented this recommendation, according to the NASA Inspector General’s latest semiannual report to Congress. Congress provided DOD lab directors with key authorities to foster targeted, timely investments in the most pressing technology areas. Lab directors have used these authorities—such as laboratory initiated research and direct hire authorities—to varying degrees, but more needs to be done to facilitate innovation and efficiency. Specifically, service specific obstacles in the Air Force, Navy, and Army impede lab directors from capitalizing on laboratory initiated research authority to a greater extent. Service leadership can take actions to better understand and potentially remove barriers to more fully use laboratory initiated research tools. We are making the following three recommendations to DOD: The Secretary of the Air Force should assess the potential costs and benefits of implementing accounting system improvements that would allow the Air Force Research Laboratory to charge customers a fixed percentage fee on provided science and technology activities to the extent allowed under the laboratory initiated research authority. (Recommendation 1) The Secretary of the Navy should clarify whether and how to use the laboratory initiated research authority within the Capital Investment Program. (Recommendation 2) The Secretary of the Army should assess existing Army policy for laboratory initiated research authority and determine whether to implement changes to eliminate disincentives for lab usage of the authority. (Recommendation 3) We provided a draft of this report to DOD, Energy, and NASA for review and comment. Energy and NASA did not provide any comments on the draft report. In DOD’s written comments, reproduced in appendix III, DOD concurred with our three recommendations. Further, in its response to our third recommendation, DOD stated that the Army plans to initiate a study by January 2, 2019, regarding its use of the laboratory initiated research authority. According to DOD, the Army’s study will identify potential opportunities for policy improvements. We are sending copies of this report to the appropriate congressional committees and offices; the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; the Secretary of Energy; and the NASA Administrator. In addition, the report will be made available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff members making key contributions to the report are listed in appendix IV. This report examines (1) how the Department of Defense (DOD) labs have used selected legislative authorities to foster innovation and efficiency and identify what barriers impede their use; (2) identifies and describes governance models used by selected DOD-sponsored federally funded research centers and university affiliated research centers; and (3) identifies and describes governance models used non-defense labs, specifically at the Department of Energy (Energy) and National Aeronautics and Space Administration (NASA). To address the first objective, we selected four specific authorities for our review based on previous work identifying science and technology best practices and expedited lab hiring: Laboratory Initiated Research Authority. The authority provided in Section 219 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, as implemented, provides lab directors with flexibility to fund projects in four allowable categories: basic and applied research; technology transition; workforce development; and revitalization, recapitalization, or repair or minor military construction of lab infrastructure. Laboratory Enhancement Pilot Program. Section 233 of the National Defense Authorization Act for Fiscal Year 2017 established a pilot program for lab directors to propose alternative and innovative methods that might lead to more effectively managing and operating labs and authorized lab directors to waive any regulation, restriction, requirement, guidance, policy, procedure, or departmental instruction that would affect implementation of these methods unless such implementation would be prohibited by a provision of an existing statute or common law. Direct Hire Authority. Four types of direct hire authorities authorized by Congress since 2008 are intended to provide a streamlined and accelerated hiring process to allow the labs to successfully compete with private industry and academia for high-quality scientific, engineering, and technician talent. Micro-purchase Authority. The Federal Acquisition Regulation states a preference for government agencies, to purchase and pay for micro-purchases of supplies or services using the government-wide commercial purchase card up to and at the micro-purchase threshold, but micro-purchases may be conducted using any of the simplified acquisition methods. While the FAR micro-purchase threshold was generally $3,500 at the time of our review, Congress increased this threshold to $10,000 for activities of DOD science and technology reinvention laboratories in Section 217 the National Defense Authorization Act for Fiscal Year 2017. Although Congress has provided additional legislative authorities to defense lab directors to address hiring, infrastructure, and technology transition challenges, the authorities that we covered in our review are the ones that our prior and current work have shown are currently, or have the potential to be, the most critical for supporting science and technology reinvention laboratories’ innovation mission within DOD labs. DOD lab leaders use these authorities to flexibly fund projects intended to facilitate research and development; propose alternative and innovative methods that might lead to more effective lab management; directly hire personnel at DOD labs including students currently enrolled in science, technology, engineering, and mathematics (STEM) programs; and expand critical science and technology purchases using simplified acquisition methods. To identify the extent to which DOD laboratories have used these authorities as well as to identify what potential barriers existed to using these authorities, we administered a survey to 44 STRL directors (or their equivalent) to collect information on the use of these specific authorities, their perceptions about the effectiveness of those authorities, and their perceptions about any barriers to using these authorities. The members of the population surveyed were the 44 defense laboratories defined as science and technology reinvention laboratories. For the purposes of our review, we defined laboratories as inclusive of Air Force technical directorates (10), Army warfare centers (17), and Navy warfare centers (17). We emailed questionnaires to the laboratories beginning in late March 2018, and survey data collection ended in early May 2018, with 31 labs returning completed questionnaires, for an overall response rate of 71 percent at the laboratory level. We took steps to minimize the potential errors that the practical difficulties of conducting any survey may introduce. Nonresponse error can result when a survey fails to capture information from all population members selected into a survey sample. Of the 13 questionnaires not returned, 4 were Army warfare centers, and 9 were Air Force research directorates. Throughout the data collection period, we made multiple follow-up attempts by email and phone to those labs not yet responding. The Air Force Research Laboratory (AFRL) provided a single survey response for the entire laboratory enterprise. Not all returned questionnaires may have answers to every question applicable to a respondent. However, this question-level nonresponse did not exceed one for any of the questions applicable to all 31 labs. Because we selected the entire population of laboratories for our survey, our estimates are not subject to sampling error. We developed our list of the 44 labs in our population in consultation with DOD, and are confident that none were left out, so our or survey has no known sources of coverage error. We conducted pretests of the draft questionnaire with 3 laboratories in the population and made revisions to reduce the possibility of measurement error from differences in how questions were interpreted and the sources of information available to respondents. After reviewing the answers received, we also followed up as necessary with respondents to clarify apparent inconsistencies or other possible misreports, and made changes to responses where corrections were needed. A second, independent analyst checked the accuracy of all computer analyses to minimize the likelihood of errors in data processing. To obtain additional information on this objective, we reviewed relevant legislation which established or amended these authorities and reviewed applicable DOD and service policy documentation. Further, we collected military service related information on the usage of two authorities, such as: Spending data on the use of the laboratory initiated research authority. We gathered this information from DOD-mandated reports to Congress on the use of this authority and military service officials. We determined these data to be reliable based on reviews of agency documentation collected and interviews with agency officials. Data on the usage of direct hire authorities by the service laboratories. We collected direct hire data from each of the military services including the number of direct hire authority candidates hired as well as the number of direct hire positions the laboratories were authorized to hire. We determined these data to be reliable based on reviews of agency documentation collected and interviews with agency officials. We also used select findings from our May 2018 report where we evaluated DOD’s use of hiring authorities, including direct hire authority. More information about the scope and methodology of our prior work can be found in that report. In addition, we also collected information on military service proposals to utilize the laboratory enhancement pilot program authority. To obtain further information on department- and service-level involvement in and perspectives of defense laboratory authorities and challenges, we interviewed officials responsible for the management, execution, and oversight of DOD’s science and technology enterprise, including military service labs. At the Office of the Secretary of Defense and military department headquarters level, those responsible for the management and oversight of science and technology activities, we met with officials from the: Office of the Assistant Secretary of Defense for Research and DOD Defense Laboratories Office; Office of the Deputy Assistant Secretary of the Army for Research and Office of the Deputy Assistant Secretary of the Air Force for Science, Technology, and Engineering; Office of the Assistant Secretary of the Air Force for Financial Office of the Deputy Assistant Secretary of the Navy for Research, Development, Test, and Evaluation; and Office of the Budget, within the Office of the Assistant Secretary of the Navy for Financial Management and Comptroller We also met with military department lab officials responsible for the management and execution of science and technology activities from the: Army Research, Development and Engineering Command; Army Research Laboratory; Army Aviation and Missile Research, Development, and Engineering Air Force Research Laboratory; Naval Research Laboratory; Naval Surface Warfare Center, Headquarters; and Naval Surface Warfare Center, Carderock Division To identify and describe governance models used by selected DOD- sponsored federally funded research centers (FFRDCs) and university affiliated research centers (UARCs), we focused our review on the 3 FFRDCs designated as research and development labs as well as all 13 UARCS sponsored by DOD entities. We reviewed appropriate sections of the FAR language related to FFRDCs and UARCs, DOD guidance for working with FFRDCs and UARCs, relevant contracts, and performance assessments. Further, we met with officials from the office of the Deputy Director, OSD Studies and Federally Funded Research & Development Centers Management and Office to discuss overall FFRDC and UARC management, policies, and challenges facing FFRDCs and UARCs. We interviewed officials at selected research and development FFRDCs and UARCS to discuss their experience conducting DOD research and interactions with their customers, such as defense program executive offices. We met with officials at the two major research and development lab FFRDCs—The Lincoln Laboratory at the Massachusetts Institute of Technology (MIT) and the Software Engineering Institute at Carnegie Mellon University. We also selected a university affiliated research center sponsored by the Army and Navy: The Applied Physics Laboratory at Johns Hopkins University and the Institute for Soldier Nanotechnologies also at the MIT. To identify and describe governance models by non-defense labs, we selected Energy and NASA to focus our efforts. We identified 17 Energy national labs and 4 NASA research centers conducting basic and applied research similar to DOD labs. These agencies, along with DOD, represent 3 of the top 4 agencies in terms of average federal research and development spending from fiscal years 2015 to 2017. In our August 2016 GAO Technology Readiness Assessment Guide, we drew heavily from DOD, NASA, and Energy for best practices, terminology, and examples. This contributed to our decision to focus on Energy and NASA’s research entities in this laboratory governance review. We did not include the fourth agency—the National Institutes of Health—in our review because it is not as similar to DOD. We also reviewed relevant Energy and NASA guidance as well as relevant FAR sections. At Energy, we met with officials from the National Nuclear Security Administration which is semi-autonomous entity within Energy responsible for managing the nation’s nuclear weapons and nuclear security. We also met with Officials from the Office of Science, a program office responsible for supporting energy related fundamental science and research. To gain further insights on operating structures, funding arrangements, and their overall experience we met with lab leadership at selected Energy labs which were chosen based on initial discussions with agency officials and our review of past GAO work: Oak Ridge National Laboratory, Lawrence Berkeley National Laboratory, Lawrence Livermore National Laboratory, and National Energy Technology Laboratory (the sole Energy government owned and operated laboratory) We also met with leadership from Battelle Memorial Institute, which is the sole or joint contract manager for five Energy national labs including Oak Ridge National Laboratory. In addition, Battelle is an integrated subcontractor at Lawrence Livermore National Laboratory. At NASA, we met with officials with NASA’s Science Mission Directorate and Mission Support Directorate to discuss overall research center management and operations. We also leveraged ongoing and recently completed work at GAO to gain additional insight on NASA’s operations such as human capital management. Almost all of NASA’s research, space, and space flight centers conduct research and development activities. However, we focused our review on four research centers where NASA primarily conducts its aeronautics research, which has substantial overlap with DOD activities. To gain additional insight into the experience of lab leaders at NASA research centers, we met with officials at NASA’s Glenn Research Center and Ames Research Center. In addition, we also met with officials at the NASA Jet Propulsion Center, which is the only NASA-sponsored FFRDC. We conducted this performance audit from July 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Office of the Secretary of Defense (OSD) In addition to the contact named above, Christopher R. Durbin (Assistant Director); Charlie Shivers, III (Analyst-in-Charge); Emily Bond; Lorraine Ettaro; Carl Ramirez; Sylvia Schatz; Sean Seales; Brian Smith; and Robin Wilson made significant contributions to this report.", "summary": "Congress created several authorities that provide DOD research labs with ways to increase efficiency and foster innovation. Senate report 114-255 contained a provision for GAO to study governance models used by federal labs. This report evaluates DOD labs' use of authorities to foster innovation and efficiency. GAO selected four authorities that recent work on best practices for science and technology management and expedited defense lab hiring have shown to be the most crucial for supporting innovation; administered a survey to 44 lab directors to gain insight into their use of the authorities; interviewed key lab officials and contractors; and reviewed relevant policies and guidance. Congress has provided the Department of Defense's (DOD) research labs with several authorities to enhance management and operations. Four authorities that GAO examined provide lab directors with greater ability to make their own decisions regarding the funding of projects, hiring, lab management, and purchasing of equipment or services. 1. Laboratory initiated research authority. This authority, as implemented, provides labs with a means to fund new science and technology projects that they consider a priority. Labs may use a percentage of all funds available to the lab and are permitted to charge customers of the lab a percentage fee of the costs for activities performed by the lab for the customer. 2. Direct hire authority. This authority enables labs to compete with private industry for high-quality talent. For example, it provides for streamlined hiring of applicants with relevant advanced degrees, or students enrolled in science, technology, engineering, and mathematics programs. 3. Laboratory enhancement pilot program authority. This authority generally allows lab directors to propose alternative methods that might lead to more effective lab management, and waive certain policies or procedures that might affect implementation of these methods. 4. Micro-purchase authority. This authority raises the threshold for small purchases for DOD research lab activities from $3,500 to $10,000 to facilitate acquisitions. While labs have used these authorities, their use has sometimes been limited, particularly with the laboratory initiated research authority. DOD lab directors at Air Force, Navy, and Army cited several obstacles that impede wider use of that authority, specifically: Air Force: Financial management officials at the Air Force stated that the service's accounting system does not currently have an automated capability to transfer the allowable percentage fee of costs to a central account at the Air Force Research Laboratory. This lack of capability, officials noted, creates a significant administrative burden related to charging these fees. Navy: In fiscal year 2017, Navy labs invested $7.3 million in lab infrastructure projects, compared to $32.9 million and $53.7 million at the Air Force and Army, respectively. Navy lab officials told us that they were restricted in their use of infrastructure funds available under the laboratory initiated research authority due to a lack of clear guidance as to whether and how to use this authority within the Capital Investment Program of the Navy Working Capital Fund. Army: The Army requires its labs to use a similar percentage of funds from two sources: (1) what it refers to as directly appropriated funds and (2) funds labs charge for customer activities. Some Army lab directors reported assessing a lower rate on customer funds than allowed so as not to drive customers away. The labs then generally charge a lower than desired rate on their directly appropriated funds, which further constrains the total funding available to them. GAO is making three recommendations to enhance DOD's use of laboratory initiated research authority, including that the Air Force assess potential accounting system improvements, the Navy clarify how labs can use the authority for infrastructure improvements, and the Army assess its policy to determine whether changes are needed to remove disincentives for labs to use the authority. DOD concurred with the recommendations.", "document_type": "gao"}
{"report": "VA’s process for deciding veterans’ eligibility for disability compensation begins when a veteran submits a claim to VA. Staff in one of VBA’s 56 regional offices assist the veteran by gathering additional evidence, such as military and medical records, that is needed to evaluate the claim. Based on this evidence, VBA decides whether the veteran is entitled to compensation and, if so, how much. A veteran dissatisfied with the initial claim decision can generally appeal within 1 year from the date of the notification letter sent by VBA. Under the current appeals process (now referred to by VA as the legacy process), an appeal begins with the veteran filing a Notice of Disagreement. VBA then re-examines the case and generally issues a Statement of the Case that represents its decision. A veteran dissatisfied with VBA’s decision can file an appeal with the Board. In filing that appeal, the veteran can indicate whether a Board hearing is desired. Before the Board reviews the appeal, VBA prepares the file and certifies it as ready for Board review. If the veteran requests a hearing to present new evidence or arguments, the Board will hold a hearing by videoconference or at a local VBA regional office. The Board reviews the evidence and either issues a decision to grant or deny the veteran’s appeal or refers (or remands) the appeal back to VBA for further work. The Act made changes to VA’s appeals process that will generally take effect no earlier than February 2019, which is approximately 18 months after enactment. According to its appeals plan, VA intends to implement the Act by February 2019, by replacing the current appeals process with a process offering veterans who are dissatisfied with VBA’s decision on their claim five options: two of those options afford the veteran an opportunity for an additional review of VBA’s decision within VBA, and the other three options afford them the opportunity to bypass additional VBA review and appeal directly to the Board. Under the new appeals process, the two VBA options will be: 1. Request higher-level review: The veteran asks VBA to review its initial decision based on the same evidence but with a higher-level official reviewing and issuing a new decision. 2. File supplemental claim: The veteran provides additional evidence and files a supplemental claim with VBA for a new decision on the claim. The veteran could also request a VBA hearing. The three Board options will be: 3. Request Board review of existing record: The veteran appeals to the Board and asks it to review only the existing record without a hearing. 4. Request Board review of additional evidence, without a hearing. 5. Request Board review of additional evidence, with a hearing. In November 2017, VA initiated a pilot test of the new VBA higher-level review and supplemental claim options. According to VA’s appeals plan, a purpose of this pilot—the Rapid Appeals Modernization Program (RAMP)—is to reduce legacy appeals by providing veterans with a chance for early resolution of their claims within VBA’s new process. Participation in RAMP is voluntary, but veterans must withdraw their pending legacy appeal to participate, according to VA’s appeals plan. In our March 2018 report, we found that VA could help ensure successful implementation of appeals reform by addressing gaps in its planning. We recommended four actions that VA should take: (1) address all legally required elements required by the Act; (2) articulate how it will monitor and assess the performance of the new appeals process compared to the legacy process, (3) augment its master schedule to manage the project, and (4) address risk more fully. VA has taken steps in response to all four, but has not fully addressed our recommendations. In our March 2018 report, we found that VA’s November 2017 plan for implementing a new disability appeals process while attending to appeals under way in the current (legacy) process, addressed most, but not all, elements required by the Veterans Appeals Improvement and Modernization Act of 2017. Specifically, we found that VA’s appeals plan addressed 17 of 22 elements required by the Act. For the five remaining elements, it partially addressed 4 elements related to monitoring implementation, projecting productivity, and workforce planning, and did not address 1 element related to identifying total resources. This element called for delineating the resources needed by VBA and the Board to implement the new appeals process and address legacy appeals. We recommended in March 2018 that the Secretary of Veterans Affairs address all 22 required elements in the Act in VA’s appeals plan to Congress. This included delineating resources required for all VBA and Board appeals options using sensitivity analyses and results from the RAMP test where appropriate and needed. Since our 2018 report, VA has taken some action on the five elements that were not fully addressed. For example, VA’s updated plan added details related to projecting staff productivity, identifying total resources, as well as about personnel requirements and projections for processing legacy appeals. For identifying total resources, VA added FTE information for other offices that help implement the appeals process and prepared a model to project resource needs. VA’s updated plan, however, continues to only partially address 3 elements related to monitoring implementation and workforce planning, and now addresses the 1 element related to projecting productivity and partially addresses the 1 element related to delineating the total resources. For total resources, VA’s updated plan does not delineate the total resources required by VBA and the Board. Until VA’s appeals plan provides complete information on all required elements, Congress may not have the information needed to conduct oversight of the agency’s efforts to implement and administer the new process while addressing legacy appeals. In our 2018 report, we found that VA could improve its planning practices related to monitoring and assessing performance on a range of key dimensions of success. Specifically, the plan had not (1) established timeliness goals for two of the three Board options (i.e., Board review of additional evidence without a hearing and Board review of additional evidence with a hearing); (2) articulated additional aspects of performance important for managing appeals, such as accuracy of decisions, veteran satisfaction with the process, or cost; (3) provided important details about what aspects of the new appeals’ performance would be compared to what aspects of the legacy process’ performance; or (4) explained how the agency would monitor whether resources are being appropriately devoted to both the new and legacy appeals processes and how it will track both sets of workloads. To address these gaps, we recommended that the Secretary of Veterans Affairs clearly articulate in VA’s appeals plan how VA will monitor and assess the new appeals process compared to the legacy process. These include specifying a balanced set of goals and measures with related baseline data, such as timeliness goals for all VBA appeals options and Board dockets, and measures of accuracy, veteran satisfaction, and cost. In its May 2018 updated plan, VA addressed some but not all aspects of this recommendation. Specifically: Timeliness goals and balanced measures. VA’s updated plan states that the agency is collecting data to inform its development of a complete and balanced set of measures for all new appeals options (e.g., timely and accurate processing of appeals while ensuring veteran satisfaction). VA’s original plan had outlined timeliness goals for the two VBA options and for the Board option that does not include new evidence or a hearing. However, VA does not intend to establish timeliness goals or balanced measures for all options until after fully implementing the new appeals process. Further, VA officials told us they are working to produce metrics required under the Act, but have yet to fully articulate a plan for monitoring. For example, there is not a specific plan to monitor the accuracy of decisions under or veteran satisfaction with the new process. Until VA identifies a complete set of timeliness goals and balanced measures, the agency will not have a way to determine how well the new process is performing. Comparison of new and legacy processes. VA’s updated plan states that VA is working toward capturing the metrics listed in section 5 of the Act, which could help VA measure relative performance of the new and legacy processes. However, VA’s updated plan does not state how VA will assess whether the new process addresses problems in the legacy process. For example, according to VA’s updated plan and agency officials we interviewed, VA believes it cannot measure the timeliness of legacy appeals processing from when an appeal is filed to its resolution. According to VA, developing this measure is not feasible because the legacy process has no defined endpoint. Submission of additional evidence by veterans can, at any point, cause additional cycles of re- adjudication. However, VA has not articulated other options for comparing the timeliness of the new and legacy processes in its May 2018 update to its plan. Without this assessment, VA cannot determine the extent to which the new process, which also allows for multiple appeal opportunities, will achieve final resolution of veterans’ appeals sooner, on average, than the legacy process. Moreover, VA’s updated plan does not fully explain how the agency will use the Act’s metrics to assess relative performance of the new and legacy appeals processes on issues like accuracy, veteran satisfaction, or cost. Monitoring processing of legacy versus new appeals. VA’s updated plan articulates VA’s intention to use sensitivity and other analyses to monitor and address workload changes in its legacy and new appeals processes. These analyses could better position VA to manage the two parallel processes. Nevertheless, VA has not established complete and balanced goals and measures or developed a plan for comparing the new and legacy processes. In recent communications on the status of implementing our recommendations, VA officials indicated they plan to address some of these monitoring and performance issues in the next update. Until VA does so, the agency risks not fully understanding whether the new process is an improvement, or whether veterans with appeals in the legacy process are experiencing poor results. Our March 2018 report also identified elements of a high-quality and reliable implementation schedule that were missing from VA’s master schedule for appeals reform. Specifically, we reported that VA’s master schedule—which the agency included with its November 2017 plan—did not (1) include all key activities; (2) show which activities must finish prior to the start of other activities, or the amount of time an activity could be delayed before the delay affects VA’s estimated implementation date; (3) reflect interim goals and milestones for monitoring implementation; or (4) assign resources for activities. We recommended that the Secretary of Veterans Affairs augment the master schedule for VA’s appeals plan to reflect all activities—such as modifications to IT systems—as well as assigned responsibilities, interdependencies, start and end dates for key activities for each workgroup, and resources. These steps establish accountability and reduce overall risk of implementation failures. In its updated plans, VA took steps to develop interim goals and milestones for monitoring implementation, among other positive actions, but the master schedule still included gaps in sound practices for project management. Specifically: Key activities and their duration. The updated master schedule VA provided in its May 2018 plan added activities, but VA continues to exclude some major activities—including those beyond the planned February 2019 implementation date—and their duration. For example: The updated master schedule does not include a small-scale pilot of the new Board options, even though this pilot is occurring at the same time VA is preparing for full implementation. In response to our questions about this issue, as of July 2018, VA officials said they are adding related pilot test activities to the master schedule. Many activities in the master schedule have the same label or description, such as “communications,” “change management,” “implementation,” “training,” and “hosting,” that do not clearly identify their associated end product without the need to review high-level summary or predecessor activity names. The updated master schedule lacks details and transparency regarding Caseflow, the new information technology system for VA’s appeals process. While VA identified the overall functionality and general timing needed for Caseflow, the steps to accomplish them lack specificity. Further, VA’s updated plan indicates Caseflow will be “minimally ready” by the end of calendar year 2018. At a June 2018 meeting with VA, we asked officials to define the term “minimally ready” and what additional activities or functionality, if any, they planned after reaching this milestone. In response, VA officials pointed us to another source that they said outlined the remaining functionality to complete Caseflow. However, when we consulted this source, we could not determine what functionality listed was to be implemented before or after October 2018. The updated master schedule also lacks start and finish dates as well as status information (e.g., not started, in planning, in progress, complete, etc.) for many of the activities. Sequencing and linkages among activities. VA’s updated plan provided new details about some sub-activities related to processing legacy appeals, monitoring implementation, drafting Board policies, and training. Moreover, the May 2018 updated master schedule was reorganized to improve its flow and alignment, according to VA officials. However, the overall updated master schedule generally does not indicate logical relationships regarding the sequence in which activities should occur, and whether any delays in one activity will dynamically affect other activities linked to it. This type of logic is necessary to define both when an activity may start and finish and when an activity must start and finish for meeting a specified program completion date. These are known as early and late dates, respectively. For example, the plan does not indicate the latest date regulations can fall behind schedule before the planned February 2019 implementation date is impacted, or related activities such as training. This sound planning practice is especially important because VA officials said the agency is concurrently executing many of the activities. Without logical relationships, the master schedule is less effective for modeling the impact of delayed or accelerated activities on related activities, and ultimately for estimating the final implementation date. Interim goals and milestones for monitoring implementation. VA has taken steps to address this aspect of the recommendation. In addition to reiterating the use of an agency-wide governance structure to coordinate implementation of its new appeals process, VA in its updated May 2018 plan added indicators to monitor and assess its readiness for full implementation. Indicators include monitoring the status of implementing regulations and information technology as well as considering any lessons learned through its piloting of the new process. These “readiness indicators” could help VA better identify potential issues related to implementation of the new appeals process. However, the master schedule does not show sequencing and linkages for these indicators. Establishing resources. VA’s updated plan states the agency will use existing resources to implement the new appeals process. Moreover, the master schedule identifies the “owners” or parts of the organization that are playing a role in appeals reform, such as the Veterans Health Administration (VHA). However, other than identifying the “owners” for the activities, resources needed are not identified for the groups of related activities identified in the master schedule or for processing legacy and new appeals processes once implemented in February 2019. By not estimating these resources, VA’s plan does not illuminate resource constraints and indicate whether other parts of the organization or workgroups are dedicated full-time to the tasks or activities for which they are responsible, or whether other constraints exist on funding or time. In general, neither the plan nor the master schedule refers to underlying budget or cost documents or information. In recent discussions on the status of implementing our recommendations, VA officials indicated they plan to address some of these issues in the August 2018 update. Until all necessary activities are accounted for, VA cannot be certain whether key activities are scheduled in the correct order, resources are properly allocated, and key risks have been identified, among other sound practices for guiding implementation and accountability. Furthermore, to the extent that the master schedule is used for internal coordination, the absence of necessary elements could hinder coordination, increasing the likelihood of disruption or delay. In our 2018 report, we found that VA’s November 2017 appeals plan could more fully assess key risks related to implementing the new appeals process. In particular, we found that VA’s plan did not include testing of new Board options or clearly define how it would assess the RAMP pilot test of the VBA-only options before implementing the process more broadly. Further, we reported that VA’s plan had not comprehensively reflected key risks because the agency had not established a complete and balanced set of goals and measures, which are a necessary pre-condition to effectively assessing risk. We recommended the Secretary of Veterans Affairs ensure that the appeals plan more fully addresses risk associated with appeals reform by, for example, assessing risks against a balanced set of goals and measures, articulating an assessment plan for RAMP, and testing or conducting sensitivity analyses of all appeals options—prior to fully implementing the new appeals process. In its updated May 2018 plan, VA took many steps to address our recommendation, although opportunities exist to better assess risks associated with implementing appeals reform and managing appeals workloads in the legacy process. Specifically: Testing all aspects of the new appeals process. Since our March 2018 report, VA has taken steps to pilot test the three new Board appeals options. In its May 2018 updated plan, VA describes a small-scale test program—the Board’s Early Applicability of Appeals Modernization (BEAAM)—to collect information about what options veterans choose and their experiences using the new appeals options. For BEAAM, the Board is partnering with veterans service organizations to identify 50 veterans who are dissatisfied with a recent claim decision, and allowing these veterans to appeal directly to the Board. Participating veterans have begun opting in, and VA plans to collect information on adjudication of these appeals. In addition, for veterans dissatisfied with their RAMP decisions, as of October 2018 the Board will begin adjudicating their appeals to further test new Board processes and technology. VA officials also reported progress with developing new sensitivity analyses that will allow the agency to change assumptions related to key variables—both individually and in conjunction with one another. VA anticipates these analyses will allow the agency to project potential budget needs and staffing requirements and more accurately predict resolution of legacy appeals given certain assumptions. Further, VA anticipates using the analyses to determine distribution of resources, and quickly react to changes in its pending legacy and new appeals processes, and other trends. By taking these steps, VA may be better positioned to estimate future disability appeals inventories, timeliness, and resource needs as well as assess risks associated with implementing a new appeals process. Defining success criteria and articulating how to assess RAMP and BEAAM. In its updated plan, VA broadly defines what it hopes to achieve with the RAMP and BEAAM pilots, such as providing information on veterans’ choices in the new process, testing new technology and procedures, and estimating workloads. It also states that VA will use the results to inform the assumptions in its sensitivity analyses. In addition, the updated plan states that VBA is refining the methods to evaluate RAMP. The applicability of BEAAM results to a fully implemented appeals process may be limited. For example, the BEAAM pilot and the Board’s implementation of RAMP provide limited time in which to conduct and assess the results. Moreover, because VA’s test is very small in scale (up to 50 veterans), it will be important for VA to consider, for example, whether these appeals reflect the complexity of cases and the range of circumstances expected in a fully implemented new appeals process. In a mid-May 2018 meeting with VA officials, we raised these and similar concerns. VA officials said they would consider these concerns. Finally, although VA’s updated plan includes a timeline for testing and assessing the new processes, VA’s updated schedule indicates that VA is planning to assess RAMP results between February 15, 2019 and May 10, 2019. These dates occur after VA intends to fully implement its new process. Our recommendation specifies that testing and assessment of pilot results should occur prior to full implementation. Comprehensively assess risks. Within VA’s updated plan, VA has added to its “risk register,” which describes risks associated with many elements of its plan and related mitigation strategies. However, VA’s updated plan has not established a complete and balanced set of goals and measures as discussed above, which are a necessary pre-condition to effectively assessing risk. Having a complete set of goals and measures would allow VA to better identify and target risks associated with reaching these goals while concurrently managing two processes. Thus, VA may not have comprehensively reflected key risks in its updated plan. In conclusion, although VA intends to fully implement the new disability appeals process in about 6 months (February 2019), VA still has an opportunity to create a stronger foundation of sound planning practices. To its credit, VA has taken a number of positive steps toward implementing our prior recommendations to improve its planning for disability appeals reform while it attends to legacy appeals. Efforts such as testing Board appeals options and resuming sensitivity analysis will provide useful information to guide VA through the uncertainty often associated with process change. However, VA needs to fully address our four recommendations to reasonably assure smooth implementation of appeals reform. As we noted in our prior work, VA is undertaking a complex endeavor that involves updating and creating new processes while on-boarding hundreds of new staff and implementing new technology—an endeavor that will affect the lives of hundreds of thousands of veterans with disabilities. Such an undertaking requires an appropriate level of planning to improve VA’s chance of success. VA’s continued efforts to address our recommendations will better position the agency in its implementation of new appeals processes. Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions you may have at this time. For further information about this testimony, please contact Elizabeth H. Curda at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Other key contributors to this testimony include James Whitcomb (Assistant Director), Daniel Concepcion (Analyst in Charge), and Michele Grgich. In addition, key support was provided by Susan Aschoff, Mark Bird, Grace Cho, Alex Galuten, Joel Green, Sheila R. McCoy, Karen Richey, Almeta Spencer, and Walter Vance. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "VA's disability compensation program pays cash benefits to veterans with disabilities connected to their military service. In recent years, the time needed to complete appeals of VA's decisions on claims has increased. For appeals resolved in fiscal year 2017, veterans waited an average of 3 years. The subset of appeals resolved by the Board of Veterans Appeals—a separate VA agency that provides a higher level of appeals review—took on average 7 years to resolve. The Veterans Appeals Improvement and Modernization Act of 2017 makes changes to VA's current (legacy) process, giving veterans options to have their claims further reviewed by VA or appeal directly to the Board. The Act requires VA to submit a plan to Congress and GAO for implementing a new appeals process (which VA submitted in November 2017) and periodic updates (which VA submitted in February and May 2018). The Act also includes a provision for GAO to assess VA's original plan. In March 2018, GAO found that VA could help ensure successful implementation of appeals reform by addressing gaps in planning and made four recommendations, with which VA agreed. This testimony focuses on the steps VA has taken to address GAO's recommendations and what aspects remain unaddressed. For this statement, GAO reviewed VA's May 2018 updated plan, and interviewed VA officials and reviewed information they provided about steps taken to implement GAO's recommendations. In a March 2018 report, GAO assessed the Department of Veterans Affairs' (VA) November 2017 plan for changing how veterans appeal disability claim decisions and found that VA could do more to successfully implement these reforms. The March 2018 report made four recommendations to address planning gaps. Since then, VA has updated its plan and taken some steps to address aspects of these recommendations, but further steps are needed: Address all legally required elements . GAO reported that VA's plan did not address one and partially addressed four of 22 elements required by the Veterans Appeals Improvement and Modernization Act of 2017 (Act), and recommended VA fully address them all. In a May 2018 update to its plan, VA took steps to address the five elements, such as developing productivity projections and a model to forecast resource needs for processing appeals. These steps address one element related to projecting productivity, and partially address the four remaining elements. Articulate performance measurement . GAO also recommended VA clearly articulate how it will monitor and assess the new appeals process relative to the legacy process. This recommendation includes specifying timeliness goals for five new appeals options to be made available to veterans, and additional goals or measures of performance, such as accuracy in processing appeals. VA's updated plan states that the agency will develop goals and measures for all appeals options after fully implementing appeals reform. Contrary to sound planning practices, it does not articulate these performance goals and measures now, which would provide a vision for what successful implementation would look like. Lacking this vision, VA does not have an “end state” to guide its implementation and help establish accountability. Augment project plan . GAO recommended VA augment its master schedule for implementing appeals reform to include all key activities and reflect other sound practices for guiding implementation and establishing accountability. Although VA's May 2018 updated master schedule added activities, it omitted a pilot test of the new Board of Veterans' Appeals (Board) options. More generally, the plan does not reflect interdependencies among activities. Until all key activities are accounted for and the master schedule reflects sound practices, VA cannot provide reasonable assurance that it has the essential information needed to manage its appeals reform implementation. Address risk fully . GAO recommended that VA's appeals plan more fully address risks in implementing a new process by, for example, testing all appeals options prior to full implementation. In its updated plan, VA stated it will pilot all five new appeals options. By taking these steps, VA should be better positioned to assess implementation risks. However, the updated plan does not have well-defined, measurable criteria for assessing lessons learned from these pilots and does not articulate how well these lessons translate to a broader context. Taking these steps would improve VA's ability to assess and mitigate risks as it implements its reforms.", "document_type": "gao"}
{"report": "In accordance with the Improper Payments Information Act of 2002 (IPIA), as amended, and OMB guidance, CMS developed the PERM to estimate the national Medicaid improper payment rate. CMS has other mechanisms to review and assess program integrity risks in state Medicaid managed care programs, and it uses information from the PERM to target its program integrity activities and oversight of states’ Medicaid programs. IPIA requires federal executive branch agencies to, among other things, (1) identify programs and activities that may be susceptible to significant improper payments; and (2), on an annual basis, estimate the amount of improper payments for susceptible programs and activities. Agency heads must produce a statistically valid estimate or an estimate that is otherwise appropriate, using an OMB-approved alternate methodology. Those agencies with programs identified by OMB as being high priority for additional oversight and review are required to submit annual reports to their Inspectors General detailing the actions the agency plans to take to recover improper payments and prevent future improper payments. The Inspector General of each agency submitting such a report is required to review the quality of the improper payment estimates and methodology, among other things. OMB designated Medicaid as a high priority program. In addition, the Improper Payments Elimination and Recovery Act of 2010 requires the Inspector General of each agency to conduct a compliance review to report on the agency’s compliance with several criteria, one of which is that an agency has reported an improper payment rate of less than 10 percent for each program and activity. IPIA also directed OMB to issue guidance for agencies in implementing the IPIA improper payments requirements. Among other things, the OMB guidance requires that agencies review payments made at the point that federal funds are transferred to nonfederal entities and report on the root causes of identified improper payments. To calculate the Medicaid improper payment rate through the PERM, CMS computes an annual rolling average of improper payment rates across all states based on a 17-state, 3-year rotation cycle. In accordance with IPIA, as amended, OMB approved CMS’s PERM methodology, and the HHS-OIG conducts annual compliance reviews. Beginning with its annual improper payment compliance review for fiscal year 2014, the HHS-OIG established a rotating approach to reviewing the estimation methodology for high-priority programs, including Medicaid, that OMB deemed susceptible to improper payments. Due to the number and complexity of the programs, the HHS-OIG methodology reviews are scheduled to be performed over a 4-year period; the PERM estimation methodology will be reviewed as a part of its fiscal year 2017 compliance review. Each of the three components of the Medicaid PERM—FFS, managed care, and eligibility—is estimated differently: The FFS component of the PERM measures errors in a sample of FFS claims, which are records of services provided and the amount the Medicaid program paid for these services. For the majority of sampled FFS claims, the PERM review contractor performs a medical review, which includes a review of the medical documentation to determine errors that do not meet federal and state policies, such as medically unnecessary services, diagnosis coding errors, and policy violations. Any FFS claims that were paid for services that should have been covered under a managed care plan’s capitated payment are also considered errors. The managed care component of the PERM measures errors that occur in the capitated payments that state Medicaid agencies make to managed care organizations (MCO) on behalf of enrollees. Capitated payments are periodic payments approved by CMS that state Medicaid agencies make to contracted MCOs to cover the provision of medical services to enrollees, as well as the MCOs’ administrative expenses and their profits or earnings. The PERM assesses whether any payments made to the MCOs were in amounts different than those the state agency is contractually required to pay, which are approved by CMS. In contrast to the FFS component, the managed care component of the PERM neither includes a medical review of services delivered to enrollees, nor reviews of MCO records or data. The eligibility component of the PERM measures errors in state determinations of whether enrollees meet categorical and financial criteria for receipt of benefits under the Medicaid program. The eligibility component assesses determinations for both FFS and managed care enrollees. This component has not been calculated since 2014; instead, CMS piloted different approaches to update the methodologies used to assess enrollee eligibility, as the Patient Protection and Affordable Care Act changed income eligibility requirements for nonelderly, nonpregnant individuals who qualify for Medicaid. Beginning in the 2019 reporting year, eligibility reviews under the PERM will resume and will be conducted by a federal contractor. Medicaid program integrity consists of efforts to ensure that federal and state expenditures are used to deliver quality, necessary care to eligible enrollees, and efforts to prevent fraud, waste, and abuse. We have found in prior work that CMS’s and states’ program integrity efforts focused primarily on payments and services delivered under FFS and did not closely examine program integrity in Medicaid managed care. For Medicaid managed care, CMS has largely delegated program integrity oversight of MCOs to the states. States, in turn, generally oversee MCOs and the providers under contract to MCOs through their contracts with the MCOs and reporting requirements. Some program integrity risks for managed care are similar to those in FFS, including payments made for nonenrolled, ineligible, or deceased individuals; payments to ineligible, excluded, or deceased providers; and payments to providers for improper or false claims, such as payments for services that are not medically necessary. Other program integrity risks are more unique to managed care. For example, capitated payments generally reflect the average cost to provide covered services to enrollees, rather than a specific service. Federal law requires capitation rates to be actuarially sound, meaning that, among other things, they must be reasonably calculated for the populations expected to be covered and for the services expected to be furnished under contract. In order to receive federal funds for its managed care program, a state is required to submit the rates it pays MCOs and the methodology it uses to set those rates to CMS for review and approval. Additionally, federal and state oversight of Medicaid managed care can include ensuring that MCOs fulfill contractual provisions within their managed care contracts. In some cases, these provisions relate directly to program integrity activities, including plans and procedures for identifying, recovering, and reporting on overpayments made to providers. The managed care component of the PERM measures the accuracy of the capitated payments state Medicaid agencies make to MCOs. Specifically, a CMS contractor examines whether the state agency made capitated payments only for eligible enrollees, made capitated payments for the correct amount based on the contract and coverage requirements (time period and geographic location), made capitated payments based on the correct rate for enrollees, and did not make any duplicate payments for enrollees. CMS officials noted that the agency established capitated payments as the level of review, because the capitation rate is the transaction used to determine the federal match in managed care. In general, the federal government matches most state expenditures for Medicaid services on the basis of a statutory formula. In FFS, the federal match is provided for the amount the state pays a health care provider for delivering services to enrollees. With managed care, the federal match is provided for the amount of the capitation rate the state pays the MCO. Capitated payments do not directly relate to the provision of a specific service, but reflect the average cost to provide covered services to enrollees. As a result, CMS officials maintain that the capitated payment is the lowest transaction level at which the agency can clearly identify federal funds without making significant assumptions. Because the managed care component of the PERM review is limited to measuring capitated payments, it does not account for other program integrity risks—such as overpayments to providers and unallowable MCO costs. In addition to errors in capitated payments included in PERM reviews, CMS regulations state that overpayments in managed care include any payment made to an MCO or provider under contract to an MCO to which the MCO or provider is not entitled under Medicaid. Such overpayments included payments for services that were not provided or medically necessary; or to ineligible, excluded, or deceased providers, which are not measured by the PERM. Unallowable MCO costs refers to operating costs that MCOs cannot claim under their managed care contracts, such as certain marketing costs, or that the MCO reported incorrectly. Among the 27 audits and investigations of Medicaid managed care programs we reviewed, 10 identified about $68 million in MCO overpayments to providers and unallowable MCO costs that were not accounted for in PERM estimates. In addition, one investigation of an MCO operating in nine states resulted in a $137.5 million settlement to resolve allegations of false claims. (See app. I for a complete list of the audits and investigations we identified.) However, the full extent of these overpayments and unallowable costs is unknown, because these audits and investigations were conducted over more than 5 years and involved a small fraction of the more than 270 MCOs operating nationwide as of September 2017. Specifically, 24 of the audits and investigations represented reviews in 10 states and, in many cases, focused on individual providers or MCOs; there were about 90 MCOs operating in the 10 states as of September 2017, according to the Kaiser Family Foundation. Some examples of the audits and investigations that identified overpayments and unallowable costs include the following: The Washington State Auditor’s Office found that two MCOs made $17.5 million in overpayments to providers in 2010, which may have increased the state’s 2013 capitation rates. The New York State Comptroller found that two MCOs paid over $6.6 million to excluded and deceased providers from 2011 through 2014. The Massachusetts State Auditor found that one MCO paid $420,000 for health care services and unauthorized prescriptions from excluded providers in 2013 and 2014. The Department of Justice alleged that an MCO operating in several states submitted inflated expenditure information to the state Medicaid agencies, falsified encounter data, and manipulated claims costs and service provision costs in nine states. The MCO agreed to pay over $137.5 million to resolve these claims. The Texas State Auditor’s Office found that an MCO reported $3.8 million in unallowable costs for advertising, company events, gifts, and stock options, along with $34 million in other questionable costs in 2015. The New York State Comptroller also found that an MCO claimed over $260,000 in unallowable administrative expenses, which contributed to an increase in capitation rates across the state. To the extent that the state does not identify or know of MCO overpayments to providers or unallowable MCO costs, the overpayments and unallowable costs could inflate future capitation rates, as the Washington State Auditor and New York State Comptroller noted in their findings. The PERM assesses the accuracy of capitated payments that states make to MCOs. States set capitation rates based on cost data— historical utilization and spending—that MCOs submit to the state Medicaid agencies, but the PERM does not consider these data. Unless removed from these cost data, unidentified overpayments and unallowable costs would likely inflate the MCO cost data that states use to set capitation rates. (See fig. 1.) As a result, future capitation rates would also be inflated, resulting in higher state and federal spending. In fiscal year 2017, the Medicaid managed care improper payment rate was 0.3 percent, while the FFS improper payment rate was 12.9 percent, leading to an assumption that the estimated risks in managed care are less significant than those estimated in FFS. However, the managed care component of the PERM does not determine whether MCO payments to providers were for services that were medically necessary, actually provided, accurately billed and delivered by eligible providers, or whether the MCO costs were allowable and appropriate. As a result, the PERM improper payment estimate potentially understates the extent of program integrity risks in Medicaid managed care. Moreover, this potential understatement in the PERM’s improper payment rate estimate may curtail investigations into the appropriateness of MCO spending. We previously reported that CMS and state program integrity efforts did not closely examine program integrity in Medicaid managed care, focusing primarily on payments and services delivered under FFS. Our current review of the 27 audits we identified encompassed a 5-year period, suggesting that reviews of managed care continue to be limited. An official from a state auditor’s office we spoke with suggested that some states may not audit services delivered under managed care, because of a low improper payment rate. In addition, he noted that his state Medicaid agency used the relatively low payment error rate in managed care as an indicator of few program integrity problems. As noted, CMS has increased its focus on and worked with states to improve oversight of Medicaid managed care; however, these efforts and the oversight efforts of states do not ensure the identification and reporting of overpayments and unallowable costs. In recent years, the agency has sought to strengthen oversight of managed care programs through updated regulations; reviews of states’ managed care programs (Focused Program Integrity Reviews) and collaborative audits, which are conducted jointly by federal program integrity contractors and states; and state monitoring of overpayments. Regulations. In May 2016, CMS updated its regulations for managed care programs in order to strengthen oversight. The updated regulations require a number of additional program integrity activities, such as those listed below. If fully implemented, these updated regulations may help with the identification and removal of overpayments and unallowable costs from data used to set future capitation rates. Under these regulations States must arrange for an independent audit of the accuracy, truthfulness, and completeness of the encounter and financial data submitted by MCOs, at least once every 3 years. Through contracts with MCOs, states must require MCOs to have a mechanism through which providers report and return overpayments to the MCOs. States must also require MCOs to promptly report any identified or recovered overpayments—specifying those that are potentially fraudulent—and submit an annual report on recovered overpayments to their state. States must use this information when setting actuarially sound capitation rates. Through contracts with MCOs, states must also require MCOs to report specific data, information, and documentation. In addition, the MCO’s chief executive officer or authorized representative must certify the accuracy and completeness of the reported data, information, and documentation. States must enroll MCO providers that are not otherwise enrolled with the state to provide services to enrollees in Medicaid FFS, and revalidate the enrollment at least once every 5 years. Initially this requirement was to start for MCO contracts beginning on July 1, 2018. Subsequently enacted legislation codified this requirement in statute and moved the implementation to January 1, 2018. It is too early to know if these regulations will assure better oversight of MCO payments to providers and the data used to set future capitation rates. The above program integrity requirements only went into effect recently—for contracts starting on or after July 1, 2017, and January 1, 2018. In addition, CMS issued a notice in June 2017 stating that the agency will use its enforcement discretion to assist states that are unable to implement new requirements by the required compliance date. Also, CMS has delayed issuance of implementing guidance for certain provisions until the agency completes its review, a step that may further delay states’ implementation. The agency has designated Medicaid managed care for “deregulatory action” and plans to propose a new rule, but has not indicated which of these provisions, if any, would be revised. Focused Program Integrity Reviews. In fiscal year 2014, CMS implemented its Focused Program Integrity Reviews in order to target high-risk program integrity areas in each state, including managed care. As we previously reported, these focused reviews are narrower in scope than the prior reviews conducted by CMS, but they still involve on-site visits to states. In its focused reviews of managed care, CMS found that several states had incomplete oversight of MCO payments to providers, even though the agency relies on states to verify reported MCO overpayments and to ensure the overpayments are excluded from the data used to set capitation rates. In the 27 focused reviews of managed care from 2014 to 2017, CMS found that MCOs in 17 states reported fewer overpayments to their state Medicaid agencies than CMS would expect. For example, MCOs in at least 5 states reported that overpayments were less than 0.1 percent of their total managed care expenditures; while CMS noted in 1 focused review that overpayments typically equal 1 to 10 percent of total expenditures in managed care. CMS also found that 5 of the 27 states did not verify that MCOs excluded overpayments from these data, and 1 state did not exclude overpayments from the capitation rate setting. This is consistent with our March 2017 report in which we noted that CMS commonly found that MCOs reported low amounts of recovered overpayments and conducted few reviews to identify overpayments. Also, officials from three of the five states we interviewed for that report said the focused reviews gave them leverage in dealing with MCOs or led MCOs to focus more on program integrity. We also reported that CMS officials recommended states take steps to improve their oversight of MCOs, based on the focused review findings. The findings from CMS’s focused reviews of managed care also highlight the need for greater federal oversight of states. Without these reviews, it is unclear if states would independently identify MCOs’ reporting of overpayments or work to strengthen MCO reporting. Yet, CMS has not yet published the focused reviews of managed care in 13 states, and it may only conduct a focused review in a state once every three or more years. Given CMS’s timeline for the focused reviews, it may take years to determine if corrective actions result in improved program integrity in services delivered through managed care. Collaborative audits. CMS has expanded the federal-state collaborative audits beyond FFS, and has begun to engage states to participate in collaborative audits of MCOs and providers under contract to MCOs. As a part of the collaborative audit process, the state volunteers to jointly develop the audit processes the federal contractors follow. CMS officials told us that federal contractors have completed 14 collaborative audits of providers under contract to MCOs in three states—Arizona, the District of Columbia, and Tennessee. Only the audit of Trusted Healthcare, an MCO in the District of Columbia, has been published. That audit identified $129,000 in overpayments in a sample of MCO payments to providers, which, if generalized to all of the MCO’s payments over 6 months, would equate to over $4 million in overpayments. According to CMS, three additional states—Louisiana, Nebraska, and New Hampshire—have shown interest in collaborative audits of their MCOs, although such audits require states to prepare data files for the federal contractor and commit staff time. In our March 2017 report, we found that states’ participation in FFS collaborative audits varied and some states reported barriers to their participation. Expanding collaborative audits in managed care will require commitment from and coordination with states. State monitoring of overpayments in managed care. States are required to report overpayments they have identified and recouped along with state expenditures on a quarterly basis. However, based on the responses of the program integrity officials in 13 of the 16 states we contacted, most officials were unable to define the magnitude of overpayments in their managed care programs, which may signify a need for greater federal oversight or coordination. Specifically, officials in 7 of the 13 states could not or did not identify the share of total reported Medicaid overpayments that occurred in managed care. In 11 of the 13 states, officials responded that they did not directly monitor MCO payments to providers. Of those 11 states, officials in 4 said they depend on MCOs to report overpayments and exclude the overpayments from the data used to set capitation rates. As long as states are not taking action to identify overpayments in managed care, they cannot be assured that they are accurately paying MCOs for medically necessary services provided to enrollees. Federal internal control standards call for agency management to identify, analyze, and respond to risks. CMS has taken some steps to identify, analyze, and respond to risks through its regulations, Focused Program Integrity Reviews, and collaborative audits. However, key CMS and state oversight efforts fall short of mitigating the limitations of the PERM estimates of improper payments for managed care, because they do not ensure the identification and reporting of overpayments to providers and unallowable MCO costs. Without addressing these key risks, CMS and states cannot ensure the integrity of Medicaid managed care programs. The 0.3 percent improper payment rate for Medicaid managed care, as measured by the PERM, is significantly lower than the improper payment rate of 12.9 percent for Medicaid FFS. However, this difference does not signal better oversight; rather, it represents differences in the review criteria between FFS and managed care, which result in a less complete accounting for the program integrity risks in managed care. The PERM does not account for key program integrity risks in Medicaid managed care: specifically, unidentified overpayments and unallowable costs. One federal investigation of an MCO operating in nine states resulted in a settlement of $137.5 million to resolve allegations of false claims that were not captured in the national Medicaid improper payment rate estimate. Further, CMS found that MCOs and states do not provide sufficient oversight in Medicaid managed care to address the risks that are not accounted for in the PERM, findings that are reinforced by our reports on Medicaid managed care program integrity. CMS has taken steps to improve its oversight of Medicaid managed care, yet these efforts fall short of ensuring that the agency and states will be able to identify and address overpayments to providers and unallowable MCO costs. Without better measurement of program risks—particularly as expenditures for Medicaid managed care continue to grow—CMS cannot be certain that the low improper payment rate for managed care, as measured by the PERM, accurately reflects lower risks in managed care. The Administrator of CMS should consider and take steps to mitigate the program risks that are not measured in the PERM, such as overpayments and unallowable costs; such an effort could include actions such as revising the PERM methodology or focusing additional audit resources on managed care. (Recommendation 1) We provided a draft of this report to the Department of Health and Human Services (HHS) for comment. In its written comments, HHS concurred with our recommendation, and indicated that it will review regulatory authority and audit resources to determine the best way to account for Medicaid program risks that are not accounted for in the PERM. However, HHS stated that the PERM is not intended to measure all Medicaid program integrity risks, and utilizing the PERM measurement in that way would be a misunderstanding and misuse of the reported rate. HHS also commented that a review of payments from MCOs to providers is outside the scope of IPIA. In addition, HHS asserted that including such a review would diminish the value of PERM reporting—because it would require significant assumptions about the amount of federal share in MCO payments to providers. Further, HHS maintained that such a review also would result in a measurement that was not comparable to other programs or agencies, which would diminish the value of government- wide improper payment rate reporting. We acknowledge that the current PERM methodology has been approved by OMB. However, we maintain that the PERM likely underestimates program integrity risks in Medicaid managed care. To ensure the appropriate targeting of program integrity activities, CMS needs better information about these risks. Given the size of the Medicaid program, its vulnerability to improper payments, and the growth in managed care, it is critical to have a full accounting of program integrity risks in managed care in order to best ensure the integrity of the whole Medicaid program. In its written comments, HHS also summarized several activities it uses to oversee and support states’ Medicaid program integrity efforts, including state program integrity reviews; collaborative audits conducted by federal contractors; Medicaid Integrity Institute training for state employees; and the Medicaid Provider Enrollment Compendium. HHS also provided technical comments, which we incorporated as appropriate. HHS’s comments are reprinted in appendix II. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of CMS, appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or at yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix III. We reviewed 16 federal and state audits and 11 notices of investigations of Medicaid managed care organizations (MCO) and providers issued from January 2012 to September 2017. As the findings below show, the audits and investigations represent a limited number of reviews that, in many cases, focused on individual states and individual providers or MCOs within that state. Given the limited scope and number of states reviewed, the amount of the overpayments and unallowable costs occurring nationwide is unknown. These audits and investigations show cases of MCO overpayments to providers or unallowable costs, which are not accounted for by the Centers for Medicare & Medicaid Services’ Payment Error Rate Measurement (PERM) ; errors in capitated payments (e.g., capitated payments made for deceased individuals), which are accounted for in the PERM; and gaps in managed care oversight. When reporting overpayments and unallowable costs identified in the audits and investigations, we only include amounts specifically attributed to MCOs in our total. This total does not include the following: overpayments and unallowable costs identified in those audits and investigations that did not distinguish between the amounts attributable to MCOs, Medicaid fee-for-service, or Medicare; overpayments and unallowable costs identified in criminal proceedings that are not yet resolved; and errors in capitated payments, as those payments would be reviewed by the PERM. As a result, the total amount of overpayments and unallowable costs and capitated payment errors in this appendix exceed what we report. In addition to the contact named above, Leslie V. Gordon (Assistant Director), Pauline Adams (Analyst-in-Charge), Erika Huber, and Drew Long made key contributions to this report. Also contributing were Muriel Brown and Jennifer Whitworth.", "summary": "The improper payment rate is a sentinel measure of program integrity risks for the Medicaid program. CMS and the states oversee Medicaid, whose size, structure, and diversity make it vulnerable to improper payments. CMS estimates the Medicaid improper payment rate annually through its PERM, which includes an estimate for Medicaid managed care, in which states contract with MCOs to provide services to Medicaid enrollees. GAO was asked to study the PERM methodology for managed care. In this report, GAO examined the extent to which the PERM accounts for program integrity risks in Medicaid managed care, including CMS's and states' oversight. GAO identified program integrity risks reported in 27 federal and state audits and investigations issued between January 2012 and September 2017; reviewed federal regulations and guidance on the PERM and CMS's Focused Program Integrity Reviews; and contacted program integrity officials in the 16 states with a majority of 2016 Medicaid spending for managed care, as well as CMS officials and program integrity experts. The Centers for Medicare & Medicaid Services' (CMS) estimate of improper payments for Medicaid managed care has limitations that are not mitigated by the agency's and states' current oversight efforts. One component of the Payment Error Rate Measurement (PERM) measures the accuracy of capitated payments, which are periodic payments that state Medicaid agencies make to managed care organizations (MCO) to provide services to enrollees and to cover other allowable costs, such as administrative expenses. However, the managed care component of the PERM neither includes a medical review of services delivered to enrollees, nor reviews of MCO records or data. Further, GAO's review of the 27 federal and state audits and investigations identified key program risks. Ten of the 27 federal and state audits and investigations identified about $68 million in overpayments and unallowable MCO costs that were not accounted for by PERM estimates; another of these investigations resulted in a $137.5 million settlement. These audits and investigations were conducted over more than 5 years and involved a small fraction of the more than 270 MCOs operating nationwide as of September 2017. To the extent that overpayments and unallowable costs are unidentified and not removed from the cost data used to set capitation rates, they may allow inflated MCO payments and minimize the appearance of program risks in Medicaid managed care. CMS and states have taken steps to improve oversight of Medicaid managed care through updated regulations, focused reviews of states' managed care programs, and federal program integrity contractors' audits of managed care services. However, some of these efforts went into effect only recently, and others are unlikely to address the risks in managed care across all states. Furthermore, these efforts do not ensure the identification and reporting of overpayments to providers and unallowable costs by MCOs. Federal internal control standards call for agency management to identify and respond to risks. Without addressing key risks, such as the extent of overpayments and unallowable costs, CMS cannot be certain that its estimated improper payment rate for managed care (0.3 percent compared with 12.9 percent in Medicaid fee-for-service) accurately reflects program risks. The Administrator of CMS should consider and take steps to mitigate the program risks that are not measured in the PERM, such as overpayments and unallowable costs; such an effort could include actions such as revising the PERM methodology or focusing additional audit resources on managed care. HHS concurred with this recommendation. HHS also provided technical comments, which were incorporated as appropriate.", "document_type": "gao"}
{"report": "Patient record matching is the process of comparing patient information in different health records to determine if the records refer to the same patient. This matching generally relies on the use of demographic information such as a patient’s name, date of birth (DOB), sex, Social Security number (SSN), or address, among other information. Many types of stakeholders can be involved in patient record matching. Examples of stakeholders include the following: Health care providers, such as physicians, hospitals, and their staffs may receive records from another provider that need to be matched to existing patient records. When treating a new patient, for example, a provider might obtain records from other providers that previously cared for the patient. Similarly, a provider caring for a patient with multiple chronic conditions (e.g., heart disease, diabetes) might obtain information from other providers that are also caring for the patient. The providers must ensure that the records they obtain from other providers are matched to the correct patient and therefore properly linked with the patient’s existing records. HIE organizations match patient records as part of their role in facilitating the electronic exchange of health information among hospitals, physicians, and other organizations. They can offer a range of services, such as allowing providers to access the medical records for a patient who has received care from other providers in the HIE organization’s network. They may also obtain information from hospitals when a patient is admitted or discharged, and they then notify the patient’s other providers when those events occur. In these cases, HIE organizations must accurately match records from multiple organizations to the correct patient. HIE organizations generally serve a specific state or region and match records among a network of local or state-wide providers and other entities; some, however, operate nationally. Health IT vendors also play a role in matching patient records. Some IT vendors, for example, provide record matching tools as part of their EHR systems; these tools allow providers to electronically search for patient records that are available from other providers that use the same IT vendor. Other IT vendors offer tools that allow providers or HIE organizations to leverage third-party data, such as credit-bureau data, when matching patients’ medical records. ONC and others have reported that the ability to accurately match patient medical records across different providers is a critical part of effective health information exchange, which can benefit patient care. For example, accurate record matching can help ensure that providers have current information about patients’ laboratory or other diagnostic test results; their medications; their diagnosed medical conditions, such as allergies; and their family medical histories. In contrast, when a patient’s records are not accurately matched, it can adversely affect the patient’s care. There are two ways in which records can fail to be accurately matched. Records for different patients are mistakenly matched. When medical records for different patients are mistakenly matched (known as a “false positive”), it can present safety and privacy concerns for patients. For example, a provider may inadvertently use information about the wrong patient, such as diagnoses or medication lists, to make clinical decisions. In addition, if the wrong patient’s medical information is added to a patient’s record, it could result in disclosure of that information to a provider or patient who is not authorized to view it. Records for the same patient are not matched. When medical records for the same patient are not matched (known as a “false negative”), it can affect patient care. For example, providers may not have access to a relevant part of the patient’s medical history—such as current allergies or prior diagnostic test results—which could help them avoid adverse events and also provide more efficient care, such as by not repeating laboratory tests already conducted. ONC leads federal efforts to promote interoperability, including setting requirements for the information that EHRs and other health IT systems should collect. ONC developed certification criteria for EHRs and other health IT systems that include the ability for health IT systems to capture and exchange various types of information, including clinical data such as information on patients’ allergies, as well as the patient’s name, sex, and date of birth. ONC also compiles an Interoperability Standards Advisory, which suggests certain standards that developers should incorporate into their products. All seven provider representatives we interviewed described manual matching as one of the ways that they match patient records when exchanging health information with other providers. With manual matching, an individual reviews a medical record in order to match it to the correct patient. For example, an outpatient practice representative said that to match records that the practice receives by fax, a staff member must manually review information such as name and DOB to identify the correct patient and add the new information to the correct patient’s electronic record. All of the provider representatives we interviewed told us that they receive health records from other providers by fax. Six provider representatives told us they also use health IT tools to help automatically identify and match patients’ records stored in other data systems. These tools generally use algorithms that compare demographic data in a patient’s separate electronic records. For example, representatives from four of the six providers told us they used a module offered by their EHR system vendor to match records and exchange information with other providers that use the same vendor’s EHR systems. The module includes an algorithm that compares patients’ demographic information and, if the information in two or more records is identical or very similar, can automatically link the records. Automated matching can also involve some degree of manual review, as algorithms can identify potential matches by providing information about the likelihood that two records with similar information refer to the same individual. Afterwards, provider staff manually review the demographic information in the records and assess whether these potentially matching records should be linked as belonging to the same patient. Representatives from the five HIE organizations we spoke with said they use a range of automated and manual approaches to match patients’ records when exchanging information. Representatives from all five of the HIE organizations said that they use software with algorithms to locate and match records using demographic information provided by the providers in their networks. Though these HIE organizations’ algorithms vary, they all use name, sex, DOB, and address to match patients’ records. Representatives said that when the patients’ records contain similar but not identical demographic information, the HIE organizations rely on staff or additional software to review potential matches and determine whether the records belong to the same patient. For example, one HIE organization representative said that his organization leverages third-party data, such as credit databases that store past names or addresses, to update demographic information for records that cannot be matched automatically. When describing their approaches to patient record matching when exchanging information, six of the seven provider representatives said that they sometimes used HIE organizations to exchange and match records. However, none of them relied on HIE organizations as their primary way to match records and exchange health information. Five of the provider representatives we spoke with, including one provider that does not participate in an HIE organization, noted that they only exchange health information with a few providers. They explained that they were able to connect to these providers in ways other than through an HIE organization. According to stakeholders we interviewed, it is difficult to determine the accuracy of the health IT tools used to match patients’ medical records automatically. While the algorithms typically match records belonging to a patient and identify potential matches that need to be manually reviewed, users of these algorithms do not know how many matches the algorithm may have failed to make. These stakeholders expressed concern that it is not possible to assess the accuracy of algorithms without independent testing to identify matches that the algorithm may have missed. HHS stated that the proprietary nature of many patient matching algorithms makes it difficult to assess their effectiveness. Representatives from providers, HIE organizations, and the other stakeholders we interviewed emphasized the importance of using quality patient demographic data when matching patients’ medical records. These stakeholders noted that inaccurate, incomplete, or inconsistently formatted demographic information in patients’ medical records can make it challenging to identify and match all the records belonging to a single patient. Figure 1 illustrates how the demographic information for a hypothetical patient can be recorded inaccurately, incompletely, and inconsistently across the patient’s providers. Stakeholders described the ways in which providers or their staff can collect inaccurate demographic information from patients. According to stakeholders, provider staff sometimes make transcription errors when entering information into electronic records, patients do not always provide correct information (e.g., they register with a nickname rather than a legal name), and patient demographic information can change, such as when a patient moves to a new address or changes her last name, but this information is not consistently updated in all of the patient’s medical records. Provider representatives identified several reasons that patients’ demographic information can be incomplete or contain different data elements across the medical records maintained by multiple providers. In particular, provider representatives explained that providers collect different information from their patients, and health IT systems can collect demographic data differently. Examples include the following: Two provider representatives said that their organizations do not collect patients’ SSN because many patients choose not to provide that information or the information is not available. However, other provider representatives said they do collect SSNs. A health IT vendor said that the algorithms in its software do not rely on SSN as a key factor for matching records because SSN is not consistently available. One provider representative explained that the IT system used by the provider’s laboratory does not contain fields for the same demographic information that the provider’s EHR system contains. As a result, laboratory results often contain too little information to reliably match records, even if the tests were ordered using complete information. One provider representative explained that they do not collect patients’ mothers’ maiden names, though other organizations collect and use this information for patient matching. According to stakeholders, the inconsistencies in formatting across medical records can reflect differences in health IT systems or the policies of the health care organization creating the records: A 2014 ONC report noted that one health IT system may list addresses in a single field, while another may separate street names from the city and state. A 2018 report noted that providers use different standards for recording names with spaces, hyphens, or apostrophes, and that some health IT systems include special characters in phone numbers (i.e., (123) 456-7890), whereas others only allow for numbers (i.e., 1234567890). Representatives from one HIE organization explained that providers handle missing data for fields differently; for example, one provider may enter all 9s into an SSN field when it is not available for a patient and another will enter all 0s. Provider representatives and other stakeholders identified some patient populations for which matching is particularly challenging, due in part to data issues. Three provider representatives said that medical records for newborns often contain temporary names that are not updated with the child’s legal name after it is determined, which makes it difficult to locate these records. Further, provider representatives and other stakeholders said that multiple births (e.g., twins) result in record matching challenges, as these children can have the same DOB and address, and may be named similarly. A few provider representatives said that records can be inaccurate across providers for patients from certain nationalities. For example, according to stakeholders, some east-Asian cultures use the “family name” as the first name, and some Hispanic cultures use multiple last names. Another provider representative said that a few times a month, a transgender patient’s photo ID lists the wrong gender, yet the organizational policy is to record the gender exactly as it appears on a state-issued photo ID. Officials from ONC, selected provider representatives, and other stakeholders we interviewed described a variety of efforts they have undertaken or are currently undertaking to improve the ability to match patients’ medical records accurately. In general, these efforts focus on improving demographic data and improving the methods used for matching. These efforts are discussed in more detail below. ONC has reported that quality demographic data is important for effectively matching patients’ medical records, and in 2017 the agency published the Patient Demographic Data Quality Framework. The Framework is a tool to help providers and other organizations assess their processes for managing data quality and improve the quality of the demographic data they use in matching. It includes, for example, questions that providers can use to identify any gaps in how they manage their demographic data. In 2016, before ONC published the Framework, the agency began a pilot study to assess how the Framework could work in a clinical setting. As part of this pilot study, ONC provided training on demographic data quality to staff from two community health centers, during which it shared best practices for collecting these data. After the training, researchers who collaborated on the pilot with ONC found that there were improvements at the community health centers in indicators of how they managed data quality. According to ONC officials, this pilot highlighted the effect that data quality and training have on effective patient record matching. In addition, officials said it underscored difficulties in implementing data quality improvement efforts when health care organizations have limited resources and high staff turnover. ONC officials plan to issue a final report on the pilot study; however, they said ONC is not currently planning to assess the impact of the Framework or to conduct future studies on how it works in clinical settings. Several stakeholders told us they have worked to improve the consistency with which they record and format demographic data in their EHRs. According to ONC officials and hospital representatives, as well as other stakeholders with whom we spoke, implementing common standards for how certain demographic data should be formatted—such as names and addresses—could improve the consistency of data across providers and thus make it easier to match records. Representatives from four hospitals told us that they collaborated with other providers in their regions to implement common standards for recording patients’ demographic data. They told us the following: In 2017, 23 providers in Texas reached agreement on, and then implemented, standards for how staff should record patients’ names, addresses, and other data in order to improve record matching and facilitate health information exchange. We spoke with representatives from three hospitals that were part of this effort, who all told us that the effort resulted in an increased ability to accurately match patients’ medical records automatically without the need to manually review the records. (See text box.) For example, representatives from one hospital said that when patient records are not matched automatically or when there are questions about the accuracy of record matching, staff must then conduct a manual review to resolve the issue. They said that they have seen a significant decrease in the need for those manual reviews since implementing the data standards. Representatives from all three hospitals estimated that the amount of manual review to resolve matching issues and match incoming records to the right patient had decreased by about 90 percent. Representatives from one hospital added that they are now better able to prevent records from being matched to the wrong patient. One children’s hospital in California worked with other local hospitals in recent years to implement a standard for how staff should record a temporary name for newborns who do not have their own name at birth. According to representatives from this hospital, after implementing this standard, clinical staff are able to more easily match patients’ records and therefore have access to real-time information on the care newborns received in other hospitals. Lessons Learned from One Regional Effort to Standardize Patient Demographic Data across Multiple Providers In 2017, 23 providers in Texas implemented agreed-upon standards for capturing patient name, address, and other data. Representatives from three participating hospitals shared with us lessons for others interested in standardizing data, such as: Allow sufficient time to get buy-in from staff and test for any downstream effects on Communicate the benefits of standardizing data to clinical and administrative staff; and Train staff on how to enter data, and then assess compliance to identify any opportunities for improvement. In a related 2017 effort, Pew Charitable Trusts sponsored a study to measure how standardizing specific types of patient demographic data could improve patient record matching. As part of this study, researchers used four data sets to test the effect that standardizing patient names, addresses, DOBs, telephone numbers, and SSNs had on record matching accuracy. As of September 2018, the full findings from this study had not been published; however, according to Pew, the findings indicated that standardizing some demographic data, such as address, shows promise for increasing the likelihood that patients’ records will be matched. Two stakeholders we spoke with have examined ways to boost patients’ ability to electronically share data with their providers using smartphone applications or other tools. According to these stakeholders, these types of tools could improve the accuracy of the demographic data providers receive from patients, reduce manual data entry errors by providers’ staff, and allow patients to update their information as changes occur, such as if they move. In 2015, the Workgroup for Electronic Data Interchange (WEDI) initiated a “Virtual Clipboard” project to explore the development of a mobile tool to automate the transmission of demographic, insurance, and clinical information to providers. WEDI representatives told us that they had engaged with stakeholders such as providers, vendors, patient advocates, and health plans about the potential benefits of such a tool, but had not yet identified organizations prepared to move forward with developing specific applications. In 2017, Pew Charitable Trusts funded a RAND study on “patient- empowered” patient record matching approaches—specifically, to identify ways that patients could play an additional role in patient record matching and to select a promising solution for further development. In its August 2018 report, RAND proposed a solution in which patients could verify their mobile phone number and other identifying information with providers and then use a smartphone application to share this information with providers. Representatives from both WEDI and Pew told us that, when developing these types of tools, it is important to consider the practical implications for the providers that would need to be able to accept data in this way. For example, Pew representatives said that it would be important to understand whether these tools present any workflow challenges in provider settings, such as with any IT tools that providers would need to access the data stored via smartphone applications, or with the steps needed to incorporate that data into their EHR systems. Representatives from both organizations also noted that not all patients would be willing or able to use these types of tools to share data with providers. In addition, RAND reported on a range of security considerations for these types of tools. For example, RAND noted that a smartphone app that gathers health data—like its proposed patient matching solution—would introduce risk because it would contain private demographic and health information and would therefore be a target for individuals looking to steal data. Officials from ONC and other stakeholders described various efforts to assess and improve the effectiveness of the methods used in matching patients’ medical records. These efforts include hosting competitions, conducting studies, and issuing guidance. For example, ONC officials described the following two efforts to improve patient record matching methods: In 2017, ONC held a Patient Matching Algorithm Challenge in which participants competed to develop an algorithm that most accurately matched patient records in a test data set. According to ONC officials, the goals of the exercise were to bring about greater transparency on the performance of existing patient record matching algorithms, spur the adoption of performance metrics for algorithm developers, and improve other aspects of patient record matching, such as resolving duplicate patient records. Over 140 teams used varying methods to match patient records using an ONC-provided test data set, and ONC selected six winning submissions based on various measures of matching accuracy. As of July 2018, ONC was analyzing data from the challenge to learn more about algorithm performance. Officials told us that the challenge highlighted limitations of commonly used matching algorithms and demonstrated that extensive manual review is often needed to accurately match patients’ medical records. ONC officials told also us they plan to publish a report on their analysis of the challenge data. In 2017, ONC also conducted a patient record matching Gold Standard and Algorithm Testing pilot study. According to ONC officials, there is no widely used standard for assessing the accuracy of patient record matching algorithms, so the pilot was intended to create a data set with known duplicate records (that is, multiple records for the same individual) and then use it to evaluate how well a commonly-used algorithm matched those records. ONC officials told us that the pilot demonstrated how much effort is needed to evaluate the matching algorithms providers and others use, as well as the importance of using standard metrics to assess matching accuracy. ONC expects to issue a final report on the results of the study. Among the examples other stakeholders described were the following efforts to improve patient record matching methods: In 2018, the Sequoia Project published A Framework for Cross- Organizational Patient Identity Management to provide guidance to help providers and other types of health care entities improve patient record matching across organizations. The report, for example, suggests ways organizations can improve their matching algorithms, and it identifies practices that organizations can use to improve how they use patient demographic data and other information when matching records. Representatives from the Sequoia Project told us they plan to speak with organizations that have voluntarily adopted this guidance to learn how doing so affects record matching. These representatives also said they are looking into how ONC’s Patient Demographic Data Quality Framework relates to their own framework, as it may be beneficial if there were a way to link these two efforts. HHS’s Agency for Healthcare Research and Quality funded a study that began in 2017 to evaluate patient record matching approaches, with the goal of identifying different approaches to improving the accuracy of patient record matching algorithms. As part of this ongoing study, researchers are measuring how different changes to matching methods—including changes that have and have not been recommended or evaluated previously—improve matching accuracy. The study is expected to run through 2022. According to researchers, their initial work tested the use of different combinations of demographic data elements, among other things. They identified a modest improvement in the accuracy of matching algorithms, and determined that further research was needed. In 2016, CHIME sponsored a National Patient ID Challenge that offered a monetary award for the development of a tool that matched patients’ medical records with 100 percent accuracy. Although the challenge was not specific to matching patient records across providers, several CHIME members who were involved with the challenge told us that they hoped to identify a patient record matching approach that could be widely adopted and easily integrated into existing EHR and HIE platforms without significant cost. They noted the challenge also was an opportunity to encourage organizations to develop effective matching methods, and to identify a matching method that did not rely solely on demographic patient information. CHIME assessed submissions from a range of organizations, but suspended the challenge in November 2017, reporting that the effort did not achieve the results it had sought. CHIME members said that the challenge nonetheless helped draw attention to patient record matching issues. In addition, several stakeholders have worked to improve the matching of medical records specifically for newborns and multiple-birth siblings such as twins, for whom matching can be particularly challenging: Representatives we spoke with from one children’s hospital told us they have implemented indicators in their EHR to highlight when a child has a twin or other multiple-birth sibling, so that staff know that another child has similar demographic information. Representatives said that this helps prevent medical records from one child being incorrectly matched with the medical records of a sibling. In 2017, this hospital began working with its health IT vendor to explore the broader use of a multiple birth indicator to improve the probability of accurate matching for the multiple birth population between different vendors’ EHRs. The representatives said that while there is a standard indicator that can be used for multiple births, many organizations are not aware of it. In addition, one researcher we spoke with is studying how using information such as physicians’ names and parents’ demographic data could help address record matching challenges for newborns. As noted earlier, one children’s hospital worked with other local hospitals to implement a standard for how staff record a temporary name for newborns. Stakeholders we spoke with said more could be done to improve the ability to accurately match patients’ medical records. The stakeholders identified several efforts that could improve matching, and had varying views on the roles ONC and others should play in these efforts. Among the examples of efforts stakeholders identified that could improve matching were implementing common standards for demographic data; developing a data set to test the accuracy of matching methods; sharing best practices and other resources; implementing a national unique patient identifier; and developing a public-private collaboration effort to improve patient record matching. Multiple stakeholders noted that no single effort would be sufficient to improve matching, given the factors that contribute to matching challenges. These potential additional efforts are described below. Several stakeholders told us that implementing common standards for recording patients’ demographic data in health IT systems could improve the ability of providers to match patients’ medical records. Stakeholders said that if providers implemented such standards, it could increase the extent to which they collect the same types of demographic data or use the same format for names and addresses as other providers, for example. However, stakeholders had differing views on how to reach agreement on and implement common standards among providers, as well as how feasible it would be to do so. Some said it would be helpful if ONC established requirements regarding demographic data—such as the types of data collected, and how it is formatted—potentially through the EHR certification process. In contrast, other stakeholders saw an opportunity for industry organizations to voluntarily agree to implement standards for demographic data. Some stakeholders advocated for EHR vendors to take steps to standardize the data their products allow providers to collect. A representative with one hospital said that having demographic data standards built into EHRs could minimize the amount of time needed to train staff on how to format the data they collect—and then to monitor whether they format the data correctly. A number of stakeholders said that ONC could play a role in getting industry groups to agree on and implement common data standards. ONC officials noted that as part of their role in coordinating health IT efforts, they have worked with industry groups in a number of ways and expect to continue their coordination efforts. Some stakeholders we spoke with told us that efforts to implement common demographic standards could face challenges, such as the following: Several said it could be difficult to reach consensus across various industry organizations on what standards to adopt and implement. Multiple stakeholders noted that patient preferences could affect the effectiveness of efforts to standardize data. Patients might not always be willing to provide some types of data even if providers wanted to collect it. For example, one provider noted that patients may want to use their middle name instead of their legal name. Some stakeholders said it could be time-intensive for providers to train their staff on how to collect data in accordance with standards, or that staff might not always follow the standards. For example, a representative from one hospital that implemented demographic standards told us that they continuously train staff and perform audits to ensure that staff follow those standards. Some said that EHR systems differ in how they allow staff to record demographic data, which can affect providers’ ability to implement standards. Some stakeholders said it can be costly for providers to update or upgrade their EHRs. Stakeholders cited other potential limitations of data standardization efforts. Several, for example, said that standardizing data would not prevent inaccurate or outdated data. In addition, some stakeholders did not think that data standardization would yield significant improvements. Several stakeholders told us that developing a standard data set that organizations could use to evaluate matching methods would be helpful. Stakeholders noted that such a data set would allow health IT vendors, providers, or others to assess matching methods independently (instead of relying on vendors’ reported accuracy rates, for example) and in a standardized way (by using the same data source). While stakeholders did not always specify who should develop such a data set, an official from one stakeholder involved with patient record matching and data sharing efforts said that the most useful thing ONC could do to address patient record matching would be to develop a master data set to allow testing in a uniform way. This official added that without a way to accurately and uniformly test patient record matching methods, efforts to improve patient record matching are hindered. A number of stakeholders did not specifically mention the utility of a data set, but nonetheless highlighted the importance of testing how well matching methods work. For its part, ONC officials said that the lack of a data set for evaluating matching methods is a challenge to efforts to improve matching, and that developing such a data set would be difficult. They noted that the agency’s 2017 Patient Matching Algorithm Challenge had highlighted the difficulties of creating a test data set that closely mimics real world patient data and that could be used to assess the accuracy of matching algorithms. ONC officials cited a number of challenges to developing one test data set for assessing a range of patient matching algorithms. For example, they said the data set would need to be very large; would require an extensive and expensive effort to develop; could be difficult to implement from a practical perspective; and that, because data varies widely across patient populations and organizations, might have limited application for assessing algorithms that are designed to match specific data sets. HHS also stated that the development of a data set would need to include a “key” of known duplicate patient records—that is, an indicator of which records in the data set should be matched to the same individual. According to a number of stakeholders we spoke with, more could be done to encourage the sharing of best practices and other patient record matching resources. For example, representatives from some HIEs said it would be beneficial to bring organizations together to share lessons learned and collaborate on best practices for using patient data to match records. Representatives from one industry association noted that disseminating information on patient matching errors could help organizations better understand the extent of matching errors and what causes them; for example, if information were shared about whether certain data elements are more likely to cause matching errors or problems, then organizations could work to prevent the errors or problems related to those data elements. A few stakeholders said that efforts to identify and share effective matching algorithms could expand resources to a broader range of providers. While stakeholders did not always specify who they thought should identify and share matching resources, several stakeholders saw the potential for ONC to play a role in these types of efforts. For example, representatives from one industry association said that ONC could provide information about the types of identifiers that could be used to facilitate matching, such as cell phone numbers or driver’s license numbers. These representatives also said that ONC could provide information on how to address matching patient records for children and other individuals who might not have those types of identifiers. ONC officials noted that they have shared information and resources about patient matching in a number of ways, such as through the agency’s Patient Demographic Data Quality Framework. They added that other organizations, such as the Sequoia Project and Pew Charitable Trusts, have worked to communicate best practices in this area. A number of stakeholders noted that implementing a new national, unique patient identifier specifically for use in health care settings could improve the ability to match patients’ medical records. For example, having a new unique number assigned to an individual would reduce the reliance on demographic data for record matching, according to several stakeholders. However, stakeholders had differing views on the potential benefits and feasibility of implementing a new unique patient identifier for health care: Some stakeholders said that it is unlikely that any new identifier could be implemented nationwide; they cited reasons such as the prohibition on federal funds being used to develop a national unique health care identifier, as well as potential privacy concerns. Multiple stakeholders cited potential limitations to using a national patient identifier, noting for example that—as with SSNs—patients may not be willing to share their identifier, and identifiers could still be subject to manual data entry errors, data breaches, or fraud. Some stakeholders said that a unique identifier would be the most effective way to improve matching. However, others said they did not believe a new identifier was needed, or did not think a new identifier would significantly improve matching, given the potential limitations. HHS stated that health care systems currently rely on a number of identifiers to match patient records and that a new government- generated identifier would improve matching only if other technical and non-technical challenges were solved before it was implemented. The creation, transmission, and capture of a single national patient identifier across many systems could take decades and would encounter implementation difficulties, according to HHS. In addition, a few stakeholders said that patients might be willing to voluntarily obtain a unique identifier to use across health care settings if one were available. A representative from one provider association, for example, said that people with chronic conditions who obtain care from multiple providers might opt to obtain a unique identifier, if available, to help match their records. In its 2018 report on patient-empowered approaches to matching, RAND described various considerations for implementing a voluntary unique identifier issued by a non-federal entity. The report cited, for example, one organization’s work to develop a tool to allow health care providers to offer patients a unique identifier. RAND stated that although this solution would greatly improve matching if adopted, there is uncertainty that providers or patients would adopt it. Representatives from the organization that developed this tool told us that they had tested it in one location, but that it had not yet been adopted by providers. Multiple stakeholders we spoke with saw a need for a collaborative public-private effort to help identify and implement efforts to improve patient record matching. For example, several stakeholders saw a specific need for a national strategy or approach for addressing patient record matching issues. Representatives from the Pew Charitable Trusts, for example, stated that a national strategy—led by the private sector, with the federal government providing support—could help reach consensus on ways to improve matching. In addition, one researcher said that ONC should help facilitate a strategy for addressing patient record matching at the provider, vendor, and national levels—and that it would be beneficial for ONC to foster collaboration among private sector organizations to address matching issues. More generally, representatives from several provider associations stated that ONC could play an important role by convening stakeholders to identify ways to improve patient record matching. As noted earlier, some stakeholders said that ONC could help industry groups agree on common data standards for EHRs. While some stakeholders we spoke with said that ONC should collaborate by supporting private-sector efforts to improve matching instead of directing those efforts, others said that ONC could potentially play more of a leadership role. Representatives from one HIE, for example, said that ONC could lead an overall effort to improve patient record matching and that private-sector organizations could lead specific actions within that larger effort. For their part, ONC officials said that public and private stakeholders should play a role in efforts to improve patient record matching. According to ONC officials, while the agency does not have sufficient resources to support broad implementation of efforts to improve patient record matching, ONC has collaborated with other stakeholders on various patient record matching issues. ONC’s August 2018 Interoperability Forum included a “patient matching track” where industry stakeholders, such as providers, health IT vendors, and researchers, discussed matching challenges and potential solutions. According to ONC officials, this track covered topics such as patient-empowered solutions to matching, including smartphone applications; issues when matching patient medical records across organizations; the development of consensus on patient matching definitions and metrics; and issues when matching records for pediatric patients. The outcomes of this track, according to ONC officials, were increased awareness of a range of patient matching issues; information sharing among speakers and participants; and an opportunity to network and potentially collaborate with individuals on patient matching issues. ONC officials told us that a takeaway for them was that while various approaches to patient matching—including technical approaches such as biometrics and referential matching; efforts regarding unique identifiers; and non- technical approaches such as data quality improvement efforts—may enhance the capacity for matching, additional research is needed. ONC participated in the Sequoia Project’s development of that organization’s Framework for Cross-Organizational Patient Identity Management. During the 2018 Interoperability Forum, ONC officials and Sequoia Project representatives presented together about developing consensus on patient record matching definitions and metrics. They discussed definitions outlined in the Framework and encouraged participants to work toward consensus and transparency when measuring and reporting matching metrics, such as by forming local and national workgroups, ONC officials said. Looking forward, ONC and some stakeholders said that the agency’s current effort to establish a national framework for exchanging health information electronically is an opportunity for the agency to address patient record matching challenges. As required by the 21st Century Cures Act, ONC is taking steps to develop or support a framework for ensuring the full exchange of health information among health information networks. ONC has referred to this effort as establishing a “network of networks,” and it includes the development of a common agreement among health information networks nationally, which providers and others can use to facilitate the exchange of electronic health information, including patients’ health records. As part of this effort, in January 2018, ONC issued a draft Trusted Exchange Framework that included principles for the trusted exchange of information, as well as minimum required terms and conditions for the Common Agreement. ONC plans to provide funding for an industry entity to incorporate these terms and conditions into a single Common Agreement that participating Qualified Health Information Networks (QHIN) and their participants voluntarily agree to adopt. While it is too soon to tell how this ONC effort will be implemented, several stakeholders said that it could potentially improve patient record matching if, for example, it results in new guidance or standards about demographic data elements. One HIE organization, for example, said that it would be beneficial if this effort leverages non-governmental work on matching and synthesizes this work into guidance for the industry. According to ONC officials, the framework is expected to affect patient record matching by requiring participating QHINs to use ONC’s Patient Demographic Data Quality Framework to evaluate their data practices. The agency plans to release a second draft Trusted Exchange Framework and then release a draft Common Agreement and an updated Trusted Exchange Framework for public comment. We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or farbj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Jessica Farb, (202) 512-7114 or farbj@gao.gov. In addition to the contact named above, individuals making key contributions to this report include Thomas Conahan (Assistant Director), Robin Burke (Analyst-in-Charge), A. Elizabeth Dobrenz, Krister Friday, Monica Perez-Nelson, Vikki Porter, and Andrea Richardson.", "summary": "Health care providers are increasingly sharing patients' health records electronically. When a patient's records are shared with another provider, it is important to accurately match them to the correct patient. GAO and others have reported that accurately matching patient health records is a barrier to health information exchange and that inaccurately matched records can adversely affect patient safety or privacy. At the federal level, ONC is charged with coordinating nationwide efforts to implement and use health IT. The 21st Century Cures Act included a provision for GAO to study patient record matching. In this report, GAO describes (1) stakeholders' patient record matching approaches and related challenges; and (2) efforts to improve patient record matching identified by stakeholders. To do its work, GAO reviewed reports by ONC and others about patient record matching. GAO also interviewed various stakeholders that play a role in exchanging health records, including representatives from physician practices, hospitals, health systems, health information exchange organizations, and health IT vendors. GAO also interviewed other stakeholders, such as ONC officials, provider and industry associations, and researchers. GAO selected stakeholders based on background research and input from other stakeholders, and interviewed 37 stakeholders in total. The information from stakeholders is not generalizable. HHS provided technical comments on a draft of this report, which GAO incorporated as appropriate. Stakeholders GAO interviewed, including representatives from physician practices and hospitals, described their approaches for matching patients' records—that is, comparing patient information in different health records to determine if the records refer to the same patient. Stakeholders explained that when exchanging health information with other providers, they match patients' medical records using demographic information, such as the patient's name, date of birth, or sex. This record matching can be done manually or automatically. For example, several provider representatives said that they rely on software that automatically matches records based on the records' demographic information when receiving medical records electronically. Stakeholders said that software can also identify potential matches, which staff then manually review to determine whether the records correspond to the same patient. Stakeholders also said that inaccurate, incomplete, or inconsistently formatted demographic information in patients' records can pose challenges to accurate matching. They noted, for example, that records don't always contain correct information (e.g., a patient may provide a nickname rather than a legal name) and that health information technology (IT) systems and providers use different formats for key information such as names that contain hyphens. Stakeholders GAO interviewed identified recent or ongoing efforts to improve the data and methods used in patient record matching, such as the following: Several stakeholders told GAO they worked to improve the consistency with which they format demographic data in their electronic health records (EHR). In 2017, 23 providers in Texas implemented standards for how staff record patients' names, addresses, and other data. Representatives from three hospitals said this increased their ability to match patients' medical records automatically. For example, one hospital's representatives said they had seen a significant decrease in the need to manually review records that do not match automatically. Stakeholders also described efforts to assess and improve the effectiveness of methods used to match patient records. For example, in 2017 the Office of the National Coordinator for Health Information Technology (ONC) hosted a competition for participants to create an algorithm that most accurately matched patient records. ONC selected six winning submissions and plans to report on their analysis of the competition's data. Stakeholders said more could be done to improve patient record matching, and identified several efforts that could improve matching. For example, some said that implementing common standards for recording demographic data; sharing best practices and other resources; and developing a public-private collaboration effort could each improve matching. Stakeholders' views varied on the roles ONC and others should play in these efforts and the extent to which the efforts would improve matching. For example, some said that ONC could require demographic data standards as part of its responsibility for certifying EHR systems, while other stakeholders said that ONC could facilitate the voluntary adoption of such standards. Multiple stakeholders emphasized that no single effort would solve the challenge of patient record matching.", "document_type": "gao"}
{"report": "The national pipeline system consists of more than 2.7 million miles of networked pipelines transporting oil, natural gas, and other hazardous liquids. Hazardous liquid and natural gas pipelines—primarily buried underground in the continental United States—run under remote and open terrain, as well as densely populated areas. These pipelines are of three main types: Hazardous liquid: About 216,000 miles of hazardous liquid pipeline transport crude oil, diesel fuel, gasoline, jet fuel, anhydrous ammonia, and carbon dioxide. Natural gas transmission and storage: About 319,000 miles of pipeline—mostly interstate—transport natural gas from sources to communities. Natural gas distribution: About 2.2 million miles of pipeline—mostly intrastate—transport natural gas from transmission sites to consumers. Figure 1 depicts the network of hazardous liquid and natural gas transmission pipelines in the United States. More than 3,000 pipeline companies operate the nation’s pipeline systems, which can traverse multiple states and the U.S. borders with Canada and Mexico. Many pipeline systems are comprised of the pipelines themselves, as well as a variety of facilities, such as storage tanks, compressor stations, and control centers. Most pipeline systems are monitored and moderated through automated ICS or Supervisory Control and Data Acquisition (SCADA) systems using remote sensors, signals, and preprogramed parameters to activate and deactivate valves and pumps to maintain flows within tolerances. Federal agencies and pipeline operators determine the criticality of pipeline systems and their facilities based on their importance to the nation’s energy infrastructure; service to installations critical to national defense; or, if attacked, have the potential to cause mass casualties and significant impact on public drinking water affecting major population centers. Accordingly, those determined to be critical merit increased attention to security. However, as we previously reported, the inherent design and operation of U.S. pipeline systems may reduce some potential impacts of lost service. The pipeline sector is generally considered to be resilient and versatile. Historically, pipeline operators have been able to quickly respond to the adverse consequences of an incident—whether it is damage from a major hurricane or a backhoe—and quickly restore pipeline service. Pipeline infrastructure also includes redundancies such as parallel pipelines or interconnections that enable operators to reroute material through the network. Figure 2 depicts the U.S. pipeline system, its basic components, examples of vulnerabilities, and the entities to which it supplies energy and raw materials. These entities include utility companies, airports, military sites, and industrial and manufacturing facilities. According to TSA, pipelines are vulnerable to physical attacks—including the use of firearms or explosives—largely due to their stationary nature, the volatility of transported products, and the dispersed nature of pipeline networks spanning urban and outlying areas. The nature of the transported commodity and the potential effect of an attack on national security, commerce, and public health make some pipelines and their assets more attractive targets for attack. Oil and gas pipelines have been and continue to be targeted by terrorists and other malicious groups globally. Terrorists have also targeted U.S. pipelines, but have not succeeded in attacking them. Further, environmental activists and lone actors seeking to halt the construction of new pipelines through sabotage have recently emerged as a new threat to pipelines. For example, in March 2017, activists used blowtorches to cut holes in empty portions of the Dakota Access Pipeline in two states. In February 2017, local law enforcement officers fatally shot a man who used an assault rifle to damage the Sabal Trail Pipeline, a natural gas pipeline under construction in Florida. The sophisticated computer systems that pipeline operations rely on are also vulnerable to various cyber threats. According to DOE, the frequency, scale, and sophistication of cyber threats have increased, and attacks have become easier to launch. NCCIC reported that the energy sector, which includes pipelines, experienced more cyber incidents than any sector from 2013 to 2015, accounting for 35 percent of the 796 incidents reported by all critical infrastructure sectors. In 2016, NCCIC reported that the energy sector was the third most frequently attacked sector. Further, according to DOE, the cost of preventing and responding to cyber incidents in the energy sector is straining the ability of companies to adequately protect their critical cyber systems. For example, a 2015 study by the Ponemon Institute estimated the annualized cost of cyber crime for an average energy company to be about $28 million. Ineffective protection of cyber assets from these threats can increase the likelihood of security incidents and cyber attacks that disrupt critical operations; lead to inappropriate access to and disclosure, modification, or destruction of sensitive information; and threaten national security, economic well-being, and public health and safety. Unintentional or nonadversarial threat sources may include failures in equipment or software due to aging, resource depletion, and errors made by end users. They also include natural disasters and failures of critical infrastructure on which the organization depends, but that are outside of the control of the organization. Intentional or adversarial threats may include corrupt employees, criminal groups, terrorists, and nations that seek to leverage the organization’s dependence on cyber resources (i.e., information in electronic form, information and communications technologies, and the communications and information-handling capabilities provided by those technologies). These threat adversaries vary in terms of their capabilities, their willingness to act, and their motives, which can include seeking monetary gain or seeking an economic, political, or military advantage. Cyber threat adversaries make use of various techniques, tactics, practices, and exploits to adversely affect an organization’s computers, software, or networks, or to intercept or steal valuable or sensitive information. For example, an attacker could infiltrate a pipeline’s operational systems via the internet or other communication pathways to potentially disrupt its service and cause spills, releases, explosions, or fires. Moreover, ICS, which were once largely isolated from the Internet and the company’s information technology systems, are increasingly connected in modern energy systems, allowing cyber attacks to originate in business systems and migrate to operational systems. For example, malicious nation-state actors used spear-phishing and other similar approaches in 2018 against energy sector organizations to gain access to their business systems, conduct reconnaissance, and collect information about their ICS. Similarly, in April 2012, the Industrial Control Systems Cyber Emergency Response Team reported that an unidentified cyber attacker had conducted a series of cyber intrusions into U.S. natural gas pipeline systems beginning in December 2011. Federal policy and public-private plans establish roles and responsibilities for the protection of critical infrastructure, including pipelines. These include Presidential Policy Directive 21 (PPD-21), the NIPP, and Executive Order 13636. PPD-21, issued in February 2013, reflects an all- hazards approach to protecting critical infrastructure, including natural disasters, terrorism, and cyber incidents. The directive also identifies the 16 critical infrastructure sectors and assigns roles and responsibilities for each critical infrastructure sector among nine designated federal sector-specific agencies. While PPD-21 identified the critical infrastructure sectors and assigned responsibility for each sector’s sector-specific agency, the NIPP outlines critical infrastructure stakeholder roles and responsibilities regarding critical security and resilience. It describes a voluntary partnership model as the primary means of coordinating government and private sector efforts to protect critical infrastructure. As part of the partnership structure, the designated sector-specific agencies serve as the lead coordinators for security programs of their respective sector. As sector-specific agencies, federal departments or agencies lead, facilitate, or support the security and resilience programs and associated activities of their designated critical infrastructure sector. For example, DHS and DOT are both designated as sector-specific agencies for the transportation systems sector, which includes pipelines. Each sector also has a government coordinating council, consisting of representatives from various levels of government, and many have a sector coordinating council (SCC) consisting of owner-operators of these critical assets or members of their respective trade associations. For example, the Transportation Government Coordinating Council has been established, and the Pipeline Modal SCC has been established to represent pipeline operators. The NIPP also outlines a risk management framework for critical infrastructure protection. As shown in Figure 3, the NIPP uses a risk management framework as a planning methodology intended to inform how decision makers take actions to manage risk. The risk management framework calls for public and private critical infrastructure partners to conduct risk assessments to understand the most likely and severe incidents that could affect their operations and communities, and use this information to support planning and resource allocation. According to DHS, the risk management framework is influenced by the nature and magnitude of a threat, the vulnerabilities to that threat, and the consequences that could result, as shown in Figure 4. Federal policy has encouraged voluntary information-sharing mechanisms between the federal government and critical infrastructure owners and operators. For example, Information Sharing and Analysis Centers (ISAC) are formed by critical infrastructure owners and operators to gather, analyze, appropriately sanitize, and disseminate intelligence and information related to critical infrastructure. They typically collect, analyze and disseminate actionable threat information to their members and provide members with tools to mitigate risks and enhance resiliency. ISACs in which pipeline operators may participate have been formed including the Oil and Natural Gas ISAC, Downstream Natural Gas ISAC, and Electricity ISAC. Finally, in February 2013, the president issued Executive Order 13636, Improving Critical Infrastructure Cybersecurity, which cited repeated cyber intrusions into critical infrastructure as demonstrating the need for improved cybersecurity. Executive Order 13636 outlined actions for improving critical infrastructure cybersecurity, including direction for the National Institute of Standards and Technology (NIST) to lead the development of a voluntary risk-based cybersecurity framework that would comprise a set of industry standards and best practices to help organizations manage cybersecurity risks. NIST issued the framework in 2014 and updated it in April 2018. The order also addressed the need to improve cybersecurity information sharing and collaboratively develop risk-based standards and stated that U.S. policy was to increase the volume, timeliness, and quality of cyber threat information shared with private sector entities so that these entities may better protect and defend themselves against cyber threats. Protecting the nation’s pipeline systems is a responsibility shared by both the federal government and private industry. As a result, several federal departments, agencies, and the private sector have significant roles in pipeline physical and cyber-related security. These entities include the following: Transportation Security Administration (TSA). TSA, within DHS, has primary oversight responsibility for the physical security and cybersecurity of transmission and distribution pipeline systems. Within TSA, the Security Policy and Industry Engagement’s Pipeline Security Branch is charged with overseeing its pipeline security program. Pursuant to its authority, TSA’s Pipeline Security Branch first issued its voluntary Pipeline Security Guidelines in 2011, and released revised guidelines in March 2018. In accordance with the 9/11 Commission Act, TSA’s Pipeline Security Branch identifies the top 100 critical pipeline systems in the nation. To do so, it uses system annual throughput, which is based on the amount of hazardous liquid or natural gas product transported through a pipeline in 1 year (i.e., annual throughput). TSA also ranks the relative risk among the top 100 critical pipeline systems, discussed later in the report. Additionally, TSA’s Pipeline Security Branch is responsible for conducting voluntary Corporate Security Reviews (CSR) and Critical Facility Security Reviews (CFSR), which assess the extent to which the 100 most critical pipeline systems are following the intent of TSA’s Pipeline Security Guidelines. See figure 5 below for an overview of the CSR and CFSR processes. In addition, TSA Intelligence and Analysis is responsible for collecting and analyzing threat information related to the transportation network, and sharing relevant threat information to pipeline stakeholders. National Cybersecurity and Communications Integration Center (NCCIC). Within DHS, NCCIC assists critical infrastructure owners in addressing cyber incidents and attacks, including those targeting industrial control systems. The NCCIC’s mission is to reduce the likelihood and severity of incidents that may significantly compromise the security and resilience of the nation’s critical information technology and communications networks. NCCIC’s role is to serve as the federal civilian interface for sharing information related to cybersecurity risks, incidents, analysis, and warnings with federal and nonfederal entities, and to provide shared situational awareness to enable real-time actions to address cybersecurity risks and incidents to federal and nonfederal entities. Pipeline and Hazardous Materials Safety Administration (PHMSA). PHMSA, within DOT, is responsible for regulating the safety of hazardous materials transportation and the safety of pipeline systems, some aspects of which can be related to pipeline security. In 2004, PHMSA and TSA entered into a memorandum of understanding regarding their respective roles in all modes of transportation. In 2006, they signed an annex to the memorandum of understanding that further delineates lines of authority and responsibility between TSA and PHMSA on pipeline and hazardous materials transportation security. The annex identifies TSA as the lead federal entity for transportation security, including hazardous materials and pipeline security, and PHMSA as responsible for administering a national program of safety in natural gas and hazardous liquid pipeline transportation, including identifying pipeline safety concerns and developing uniform safety standards. Department of Energy (DOE). DOE is responsible for protecting electric power, oil, and natural gas delivery infrastructure and, in December 2015, was identified in statute as the sector-specific agency for cybersecurity for the energy sector. The Office of Cybersecurity, Energy Security, and Emergency Response is the lead for DOE’s cybersecurity efforts. In addition, DOE operates the National SCADA Test Bed Program, a partnership with Idaho National Laboratory, Sandia National Laboratories, and other national laboratories which addresses control system security challenges in the energy sector. Among its key functions, the program performs control systems testing, research, and development; control systems requirements development; and industry outreach. Federal Energy Regulatory Commission (FERC). FERC regulates the U.S. bulk electric power system, which is increasingly powered by natural gas pipeline systems. FERC has regulatory authority over interstate natural gas pipelines under the Natural Gas Act. However, its role is limited to natural gas pipeline siting and rate regulation. The North American Electric Reliability Corporation is the federally designated U.S. Electric Reliability Organization, and is overseen by FERC. The North American Electric Reliability Corporation, with approval from FERC, has developed mandatory critical infrastructure protection standards for protecting electric utility–critical and cyber-critical assets. Private sector. Although TSA has primary federal responsibility for overseeing interstate pipeline security, private sector pipeline operators are responsible for implementing asset-specific protective security measures. As we previously reported, operators have increased their attention on security by incorporating security practices and programs into their overall business operations. Pipeline operators’ interests and concerns are primarily represented by five major trade associations with ties to the pipeline industry—the Interstate Natural Gas Association of America (INGAA), American Gas Association (AGA), American Public Gas Association, American Petroleum Institute (API), and Association of Oil Pipe Lines. According to TSA officials, pipeline operators, and association representatives, these associations have worked closely with the federal government on a variety of pipeline security-related issues, including collaborating on TSA’s voluntary standards and information sharing. All of the pipeline operators and pipeline association representatives we interviewed reported receiving security information from federal and nonfederal entities. Pipeline operators also reported providing security- related information to federal agencies, including TSA, as incidents occur. Multiple federal entities exchange alerts of physical and cybersecurity incidents and other risk-related information with critical infrastructure partners, including pipeline operators. For example, DHS components including TSA’s Intelligence and Analysis and NCCIC share security- related information on physical and cyber threats and incidents with sector stakeholders. Specifically, Intelligence and Analysis provides quarterly intelligence briefings to pipeline operators. NCCIC also issues indicator bulletins, which can contain information related to cyber threat indicators, defensive measures, and cybersecurity risks and incidents. In addition, TSA and other federal entities have coordinated to address specific pipeline-related security incidents. For example, TSA officials coordinated with DOT, DOE, the Department of Justice, and FERC through the Oil and Natural Gas subsector SCC to address ongoing incidents of vandalism and sabotage of critical pipeline assets by environmental activists in 2016. In July 2017, according to DOT officials, PHMSA and TSA collaborated on a web-based portal to facilitate sharing sensitive but unclassified incident information among federal agencies with pipeline-related responsibilities. See table 1 for the key federal information sharing entities and programs that exchange security-related or incident information with critical infrastructure stakeholders, including the pipeline sector. Pipeline operators also share security-related information with TSA and the NCCIC. In its Pipeline Security Guidelines, TSA requests that pipeline operators report by telephone or email to its Transportation Security Operations Center (TSOC) any physical security incidents that are indicative of a deliberate attempt to disrupt pipeline operations or activities that could be considered precursors to such an attempt. TSA’s Pipeline Security Guidelines also request that operators report any actual or suspected cyber attacks that could impact pipeline industrial control systems or other information technology-based systems to the NCCIC. According to the TSOC’s operating procedures, if a reported incident meets certain criteria, such as the incident was intended to or resulted in damage or requires a general evacuation of a facility, the TSOC watch officer is then to contact Office of Security and Industry Engagement officials. According to TSA officials, the TSOC does not conduct investigations of the specific security incidents that pipeline operators report. However, TSOC staff do analyze the incident information they receive for national trends and common threats. TSA officials stated that they share their observations with pipeline operators and other critical infrastructure asset owners during monthly and quarterly conference calls that TSA holds with pipeline operators. All the pipeline operators and association representatives we interviewed identified other nonfederal information sharing entities, including ISACs, fusion centers, industry associations, and SCCs, which provide forums for exchanging information about physical and cyber incidents throughout the pipeline sector. See table 2 for nonfederal information sharing entities identified as available to pipeline operators. Operators and TSA officials reported that the current backlog in granting security clearances for some key pipeline operator employees was a significant factor affecting information sharing between TSA and pipeline operators. TSA officials acknowledged that some pipeline operators have had difficulty obtaining security clearances for key employees due to ongoing backlogs in processing requests by the Office of Personnel Management National Background Investigation Bureau, and that TSA’s ability to share timely information with operators whose staff do not have a clearance may be hindered. Three of the 10 pipeline operators we interviewed identified receiving timely classified security information as a specific challenge due, in part, to difficulties staff have had obtaining security clearances. Further, 7 of the 10 pipeline operators that we interviewed reported experiencing delays in obtaining a security clearance or were aware of others who had experienced this issue. However, according to three operators we interviewed, TSA was helpful in facilitating approval of security clearances for the operators’ personnel to access classified information when necessary. This security clearance challenge is not faced by pipeline operators alone. In January 2018, we designated the backlog of investigations for the clearance process and the government-wide personnel security clearance process as a high-risk area. We will continue to monitor agencies’ progress in reducing the backlog and improving the security clearance process. Pipeline operators that we interviewed reported using a range of guidelines and standards to address their physical and cybersecurity risks, and all of them reported implementing TSA’s voluntary Pipeline Security Guidelines that were applicable to their operations. TSA revised and issued its Pipeline Security Guidelines in March 2018, but the revised guidelines lack a defined process to consider updates to supporting guidance such as to the NIST Framework for Improving Critical Infrastructure Cybersecurity (Cybersecurity Framework). Furthermore, TSA has not clearly defined the terms within the criteria that pipeline operators are to use to determine the criticality of their facilities. Pipeline operators that we interviewed reported using a range of guidelines and standards to address their physical and cybersecurity risks. For example, all 10 of the pipeline operators we interviewed stated they had implemented the voluntary 2011 TSA Pipeline Security Guidelines the operators determined to be applicable to their operations. The guidelines provide TSA’s recommendations for pipeline industry security practices such as establishing a corporate security program and identifying critical facilities among others (see sidebar). Five of the 10 pipeline operators we interviewed characterized the guidelines as generally or somewhat effective in helping to secure their operations, 1 was neutral on their effectiveness, and 4 did not provide an assessment of the guidelines’ effectiveness. However, one operator pointed out that they had not adopted the guidelines’ recommended interval of 36 months or less for conducting security vulnerability assessments due to staffing limitations. Also, another pipeline operator noted that they were working to implement the guidelines in the operations of a newly acquired asset that they determined was not using the guidelines in the same manner as their company. All of the pipeline operators we interviewed reported using other guidelines or standards to address pipeline systems’ security risks. For example, pipeline operators reported using and industry association representatives reported that their members use INGAA’s Control Systems Cyber Security Guidelines for the Natural Gas Pipeline Industry, API’s Pipeline SCADA Security standard, and the NIST Cybersecurity Framework as sources of cybersecurity standards, guidelines, and practices that may be scaled and applied to address a pipeline operator’s cybersecurity risks. Further, pipeline operators are required to adhere to regulations related to pipeline safety and, depending upon their assets, operations, and location, may be required to adhere to regulations for electrical utilities, chemical storage facilities, and locations near waterways. For example, all pipeline operators must adhere to DOT’s PHMSA safety regulations. In addition, pipeline operators whose systems include chemical facilities may be required to comply with DHS’s Chemical Facility Anti-Terrorism Standards (CFATS). Pipeline operators whose systems include a terminal located on a U.S. port may be required to comply with Maritime Transportation Security Act regulations. For a listing of federal and industry guidelines identified as applicable to security by the pipeline operators, see appendix I. TSA’s Pipeline Security Branch issued its revised Pipeline Security Guidelines in March 2018, but TSA has not established a documented process to ensure that revisions occur and fully capture updates to supporting standards and guidance. The guidelines were revised to, among other things, reflect the dynamic threat environment and to incorporate cybersecurity principles and practices from the NIST Cybersecurity Framework, which were initially issued in February 2014. To revise the guidelines and incorporate feedback, according to Pipeline Security Branch officials, they incorporated outcomes from pipeline modal threat assessments and best practices from security reviews, and collaborated with pipeline sector stakeholders—including industry associations and other federal agencies with a role in pipeline security. Officials from the industry associations we interviewed confirmed that they provided input to the revised pipeline guidelines, including meeting with and consolidating comments from member pipeline operators. See figure 6 for a timeline of events pertinent to federal pipeline security guidelines. TSA’s Pipeline Security Smart Practice Observations for pipeline operators states that security plans should have a documented process to include security plan reviews and updates on a periodic and an as- needed basis. Standards for Internal Control in the Federal Government states that periodic review of policies, procedures, and related control activities should occur to determine their continued relevance and effectiveness in achieving identified objectives or addressing related risks. The NIPP and NIST also emphasize the need to provide updates on incident response guidance and security procedures, respectively. Moreover, other pipeline industry guidance cited by TSA’s guidelines also has a prescribed interval for review and revision. For example, API reviews its standards at least every 5 years. However, TSA has not instituted a documented process to consider the need to update the Pipeline Security Guidelines on a regular basis. Pipeline Security Branch officials acknowledged the value of having a defined process for reviewing and, if necessary, revising TSA’s Pipeline Security Guidelines at regular defined intervals to ensure it includes, among other things, newly identified best practices and updated industry guidance that are relevant to pipeline operators, such as the elements of the latest version of NIST’s Cybersecurity Framework. For example, TSA’s revisions to its guidelines incorporated some, but not all of the elements of the NIST Cybersecurity Framework version 1. Specifically, to improve incident response, the NIST framework recommends implementing an incident response analysis and feedback function to a security program. However, TSA’s Pipeline Security Guidelines do not include similar steps for pipelines operators to include in their pipeline security programs. Further, because NIST released version 1.1 of the Cybersecurity Framework in April 2018, the guidelines that TSA released in March 2018 do not incorporate cybersecurity elements that NIST added to the latest Cybersecurity Framework such as the Supply Chain Risk Management category. Pipeline Security Branch officials said that they have not instituted a review process on a regular basis because they intended to review and revise TSA’s guidelines on an as-needed basis in response to updated supporting guidance, but could provide no timeline for doing so. Without a documented process defining how frequently Pipeline Security Branch staff are to review and revise its guidelines, TSA cannot ensure that its guidelines reflect the latest known standards and best practices for physical and cybersecurity, or address the persistent and dynamic security threat environment currently facing the nation’s pipeline system. Under TSA’s Pipeline Security Guidelines, pipeline operators are to self- identify the critical facilities within their system and report their critical facilities to TSA. TSA’s Pipeline Security Branch conducts CFSRs at the critical facilities that pipeline operators have identified. However, our analysis of TSA’s data found that at least 34 of the top 100 critical pipeline systems deemed highest risk indicated that they had no critical facilities. Accordingly, TSA would not conduct a CFSR at any of these systems’ facilities because their operators identified none of them as critical. The fact that pipeline operators of about one third of the highest risk systems identified no critical facilities may be due, in part, to the Pipeline Security Branch not clearly defining the criteria outlined in the Pipeline Security Guidelines that pipeline operators are to use to determine the criticality of their facilities. Three of the 10 operators we interviewed stated that some companies reported to TSA that they had no critical facilities, and may possibly be taking advantage of the guidelines’ lack of clarity. Accordingly, operators that report no critical facilities would avoid TSA’s reviews of their facilities. service or deliverability resulting in a state or local government's inability to provide essential public services and emergency response for an extended period of time; Significantly damage or destroy national intended use of major rivers, lakes, or waterways (e.g., public drinking water for large populations or disruption of major commerce or public transportation routes); service or deliverability to a significant number of customers or individuals for an extended period of time; operations for an extended period of time (i.e., business critical facilities). Our review of the eight criteria included in TSA’s Pipeline Security Guidelines (see sidebar) found that no additional examples or clarification are provided to help operators determine criticality. Although we previously noted that 5 of the 10 operators we interviewed generally found TSA’s Guidelines as a whole helpful in addressing pipeline security, more than half of the operators we interviewed identified TSA’s criticality criteria as a specific area for improvement. Specifically, 3 of the 10 pipeline operators that we interviewed stated that TSA had not clearly defined certain terms within the criteria, and 3 additional operators of the 10 reported that additional consultation with TSA was necessary to appropriately apply the criteria and determine their facilities’ criticality. For example, 2 operators told us that individual operators may interpret TSA’s criterion, “cause mass casualties or significant health effect,” differently. One of these operators that we interviewed stated that this criterion could be interpreted either as a specific number of people affected or a sufficient volume to overwhelm a local health department, which could vary depending on the locality. Another operator reported that because TSA’s criteria were not clear, they created their own criteria which helped the operator identify two additional critical facilities. Pipeline Security Branch officials acknowledged there are companies that report having no critical facilities in their pipeline systems. According to Pipeline Security Branch officials, pipeline operators are in the best position to determine which of their facilities are critical, and the companies that have determined that their pipeline systems have no critical facilities also have reported sufficient redundancies to make none of their facilities critical to the continuity of their operations. According to these officials, they have had extensive discussions with pipeline company officials to assess the validity of their criticality determinations, and have closely questioned companies to ensure they have properly applied TSA’s criteria. However, according to TSA’s Pipeline Security Guidelines, operators should use a consistent set of criteria for determining the criticality of their facilities. In addition, Standards for Internal Control in the Federal Government states that management should define objectives clearly to enable the identification of risks. To achieve this, management generally defines objectives in specific and measurable terms and ensures the terms are fully and clearly set forth so they can be easily understood. Pipeline Security Branch officials acknowledged that the criticality definitions in the Pipeline Security Guidelines could be clarified to be more specific. Additionally, an industry association representative reported that the association, in consultation with TSA, has been developing supplementary guidance for its members to clarify certain terms in TSA’s critical facility criteria. As of October 2018 this guidance is still under review at the association and has not been made available to the association’s members. Pipeline Security Branch officials confirmed they worked with the industry association on its supplementary guidance, but also acknowledged that the supplementary guidance may only be distributed to the association’s membership. Without clearly defined criteria for determining pipeline facilities’ criticality, TSA cannot ensure that pipeline operators are applying its guidance uniformly. Further, because TSA selects the pipeline facilities on which to conduct CFSRs based on operators’ determinations, TSA cannot fully ensure that all of the critical facilities across the pipeline sector have been identified using the same criteria, or that their vulnerabilities have been identified and addressed. TSA’s Intelligence and Analysis identifies security risks to pipeline systems through various assessments. Additionally, TSA’s Pipeline Security Branch conducts security reviews to assess pipeline operators’ implementation of TSA’s Pipeline Security Guidelines, but gaps in staffing and lack of a workforce plan may affect its ability to carry out effective reviews. The Pipeline Security Branch also developed a pipeline risk assessment to rank relative risk of the top 100 critical pipeline systems and to prioritize its security reviews of pipeline companies, but shortfalls in its calculations of threat, vulnerability, and consequence may limit its ability to accurately identify pipeline systems with the highest risk. Finally, the pipeline risk assessment has not been peer reviewed to validate the assessment’s data and methodology, which we previously reported as a best practice in risk management. TSA’s Intelligence and Analysis produces assessments related to pipeline security risks, including Pipeline Modal and Cyber Modal Threat Assessments and the Transportation Sector Security Risk Assessment. The Pipeline and Cyber Modal Threat Assessments are issued on a semiannual basis; TSA Intelligence and Analysis may also issue additional situation-based products on emerging threats. The Pipeline Modal and Cyber Modal Threat Assessments evaluate, respectively, physical and cyber threats to pipelines. The pipeline modal threat assessment evaluates terrorist threats to hazardous liquid and natural gas pipelines, and the cyber modal threat assessment evaluates cyber threats to transportation, including pipelines. Both assessments specifically analyze the primary threat actors, their capabilities, and activities—including attacks occurring internationally—as well as other characteristics of threat. The Transportation Sector Security Risk Assessment assesses threat, vulnerability, and consequence for various attack scenarios across the five transportation modes for which TSA is responsible. The scenarios define a type of threat actor—including homegrown violent extremists and transnational extremists, such as al Qaeda and its affiliates—a target, and an attack mode. For example, a scenario might assess the risk of attacks using varying sizes of improvised explosive devices on pipeline system assets. As part of the assessment process, TSA engages with subject matter experts from TSA and industry stakeholder representatives to compile vulnerabilities for each mode, and TSA analyzes both direct and indirect consequences of the various attack scenarios. According to Pipeline Security Branch officials, the assessments produced by TSA’s Intelligence and Analysis provide key information to inform the pipeline security program’s efforts. According to TSA officials, TSA conducts pipeline security reviews— Corporate Security Reviews (CSRs) and Critical Facility Security Reviews (CFSRs)—to assess pipeline vulnerabilities and industry implementation of TSA’s Pipeline Security Guidelines. However, as shown by Figure 7 below, the number of CSRs and CFSRs completed by TSA has varied during the last five fiscal years, ranging from zero CSRs conducted in fiscal year 2014 to 23 CSRs conducted in fiscal year 2018, as of July 31, 2018. TSA officials reported that staffing limitations have prevented TSA from conducting more reviews. As shown in table 3, TSA Pipeline Security Branch staffing levels (excluding contractor support) have varied significantly over the past 9 years ranging from 14 full-time equivalents (FTEs) in fiscal years 2012 and 2013 to one FTE in fiscal year 2014. They stated that, while contractor support has assisted with conducting CFSRs, there were no contractor personnel providing CSR support from fiscal years 2010 through 2017, but that has now increased to two personnel in fiscal year 2018. TSA prioritizes reviewing and collecting information on the nation’s top 100 critical pipeline systems. According to TSA officials, they would need to conduct 46 CSRs in order to review the top 100 critical pipeline systems. In July 2018, TSA officials stated that TSA’s current target was to assess each pipeline company every 2 to 3 years; this would equate to about 15 to 23 CSRs per year. TSA officials stated that they expect to complete 20 CSRs and 60 CFSRs per fiscal year with Pipeline Security Branch employees and contract support, and have completed 23 CSRs through July 2018 for fiscal year 2018. Given the ever-increasing cybersecurity risks to pipeline systems, ensuring that the Pipeline Security Branch has the required cybersecurity skills to effectively evaluate pipeline systems’ cybersecurity is essential. Pipeline operators we interviewed emphasized the importance of cybersecurity skills among TSA staff. Specifically, 6 of the 10 pipeline operators and 3 of the 5 industry representatives we interviewed reported that the level of cybersecurity expertise among TSA staff and contractors may challenge the Pipeline Security Branch’s ability to fully assess the cybersecurity portions of its security reviews. TSA officials stated that Security Policy and Industry Engagement staff are working with DHS’s National Protection and Programs Directorate to help address cyber- related needs, including identifying specific cybersecurity skills and competencies required for the pipeline security program. The officials were uncertain, however, whether TSA would use contractor support or support from the National Protection and Programs Directorate to provide identified skills and competencies. TSA officials also stated that Security Policy and Industry Engagement staff work with TSA’s human resource professionals to identify critical skills and competencies needed for Pipeline Security Branch personnel, and helps its workforce maintain professional expertise by providing training and education for any identified skill or competency gaps. Our previous work has identified principles that a strategic workforce planning process should follow including developing strategies tailored to address gaps in number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies. Workforce planning efforts, linked to an agency’s strategic goals and objectives, can enable it to remain aware of and be prepared for its needs, including the size of its workforce, its deployment across the organization, and the knowledge, skills, and abilities needed for it to pursue its mission. Agencies should consider how hiring, training, staff development, performance management, and other human capital strategies can be aligned to eliminate gaps and improve the long-term contribution of skills and competencies identified as important for mission success. TSA has not established a workforce plan for its Security Policy and Industry Engagement or its Pipeline Security Branch that identifies staffing needs and skill sets such as the required level of cybersecurity expertise among TSA staff and contractors. When asked for TSA strategic workforce planning documents used to inform staffing allocations related to the pipeline security program, TSA officials acknowledged they do not have a strategic workforce plan. Rather, according to these officials, TSA determines agency-level staffing allocations through the Planning, Programming, Budgeting and Execution process, which is used to decide policy, strategy, and the development of personnel and capabilities to accomplish anticipated missions. According to TSA officials, when they use this process they look at existing resources and then set priorities based on the TSA Administrator’s needs. However, a strategic workforce plan allows an agency to identify and prepare for its needs, such as the size of its workforce, its deployment across the organization, and the knowledge, skills, and abilities needed to pursue its mission. TSA officials stated that the agency has a detailed allocation plan for strategically aligning resources to screen passengers at TSA-regulated airports, but not for the entire agency. By establishing a strategic workforce plan, TSA can help ensure it has identified the knowledge, skills, and abilities that the future workforce of TSA’s Pipeline Security Branch may need in order to meet its mission of reducing pipeline systems’ vulnerabilities to physical and cybersecurity risks, especially in a dynamic and evolving threat environment. Further, as greater emphasis is placed on cybersecurity, determining the long- term staffing needs of the Pipeline Security Branch will be essential. Furthermore, a workforce plan could enable TSA to determine the number of personnel it needs to meet its stated goals for conducting CSRs and CFSRs. After TSA identifies the top 100 critical pipeline systems based on throughput, the Pipeline Security Branch uses the Pipeline Relative Risk Ranking Tool (risk assessment), which it developed in 2007, to assess various security risks of those systems. We previously reported, in 2010, that the Pipeline Security Branch was the first of TSA’s surface transportation modes to develop a risk assessment model that combined all three components of risk—threat, vulnerability, and consequence—to generate a risk score. The risk assessment generates a risk score for each of the 100 most critical pipeline systems and ranks them according to risk. The risk assessment calculates threat, vulnerability, and consequence for each pipeline system on variables such as the amount of throughput in the pipeline system and the number critical facilities. The risk assessment combines data collected from pipeline operators, as well as other federal agencies, such as the Departments of Transportation and Defense, to generate the risk score. However, the last time the Pipeline Security Branch calculated relative risk among the top 100 critical pipeline systems using the risk assessment was in 2014. Pipeline Security Branch officials told us that they use the pipeline risk assessment to rank relative risk of the top 100 critical pipeline systems, and the standard operating procedures for conducting CSRs state the results of the risk ranking are the primary factor considered when prioritizing corporate security reviews of pipeline companies. According to Pipeline Security Branch officials, the risk assessment has not changed since 2014 because the Pipeline Security Branch is still conducting CSRs based on the 2014 ranking of pipeline systems. As outlined in table 4 below, we identified several factors that likely limit the usefulness of the current risk assessment in calculating threat, vulnerability, and consequence to allow the Pipeline Security Branch to effectively prioritize reviews of pipeline systems. For example, because the risk assessment has not changed since 2014, information on threat may be outdated. Additionally, sources of data and underlying assumption and judgments regarding certain threat and vulnerability inputs to the assessment are not fully documented. For example, threats to cybersecurity are not specifically accounted for in the description of the risk assessment methodology, making it unclear if cybersecurity is part of the assessment’s threat factor. Further, the risk assessment does not include information that is consistent with the NIPP and other DHS priorities for critical infrastructure risk mitigation, such as information on natural hazards and the ability to measure risk reduction (feedback data). According to Pipeline Security Branch officials, the risk ranking assessment is not intended to be a fully developed risk model detailing all pipeline factors influencing risk. Rather, officials said they are primarily interested in assessing risk data that impacts security. However, because TSA’s Pipeline Security Program is designed to enhance the security preparedness of the pipeline systems, incorporating additional factors that enhance security into their risk calculation would better align their efforts with PPD-21. For example, PPD-21 calls for agencies to integrate and analyze information to prioritize assets and manage risks to critical infrastructure, as well as anticipate interdependencies and cascading impacts. For a more detailed discussion of the shortfalls we identified, refer to appendix II. In addition to the shortfalls identified above, the risk assessment has not been peer reviewed since its conception in 2007. In our past work, we reported that independent, external peer reviews are a best practice in risk management and that independent expert review panels can provide objective reviews of complex issues. According to the National Research Council of the National Academies, external peer reviews should, among other things, address the structure of the assessment, the types and certainty of the data, and how the assessment is intended to be used. The National Research Council has also recommended that DHS improve its risk analyses for infrastructure protection by validating the assessments and submitting them to independent, external peer review. Other DHS components have implemented our prior recommendations to conduct peer reviews of their risk assessments. For example, in April 2013, we reported on DHS’s management of its Chemical Facility Anti- Terrorism Standards (CFATS) program and found that the approach used to assess risk did not consider all of the elements of consequence, threat, and vulnerability associated with a terrorist attack involving certain chemicals. The Infrastructure Security Compliance Division, which manages the CFATS program conducted a multiyear effort to improve their risk assessment methodology and included commissioning a peer review by the Homeland Security Studies and Analysis Institute, which resulted in multiple recommendations. As part of the implementation of some of the peer review’s recommendations, DHS conducted peer reviews and technical reviews with government organizations and facility owners and operators, and worked with Sandia National Laboratories to verify and validate the CFATS program’s revised risk assessment methodology, which was completed in January 2017. According to Pipeline Security Branch officials, they are considering updates to the risk assessment methodology including changes to the vulnerability and consequence factors. These officials said the risk assessment was previously reviewed within the past 18 months by industry experts and they consider input from several federal partners including DHS, DOT, and the Department of Defense. Officials also said they will consider input from industry experts and federal partners while working on updating the risk assessment. However, most of the proposed changes to the risk assessment methodology officials described are ones that have been deliberated since our last review in 2010. Therefore, an independent, external peer review would provide the opportunity for integration and analysis of additional outside expertise across the critical infrastructure community. While independent, external peer reviews cannot ensure the success of a risk assessment approach, they can increase the probability of success by improving the technical quality of projects and the credibility of the decision-making process. According to the National Research Council of the National Academies, independent, external peer reviews should include validation and verification to ensure that the structure of the risk assessment is both accurate and reliable. Thus, an independent, external peer review would provide better assurance that the Pipeline Security Branch can rank relative risk among pipeline systems using the most comprehensive and accurate threat, vulnerability, and consequence information. TSA has established performance measures, as well as databases to monitor pipeline security reviews and analyze their results. However, weaknesses in its performance measures and its efforts to record pipeline security review recommendations limit its ability to determine the extent that its pipeline security program has reduced pipeline sector risks. Furthermore, we identified data reliability issues in the information that TSA collects to track the status of pipeline security review recommendations, such as missing data, inconsistent data entry formats, and data entry errors. TSA has three sets of performance measures for its pipeline efforts: the Pipeline Security Plan in the 2018 Biennial National Strategy for Transportation Security (NSTS), a management measure in the DHS fiscal year 2019 congressional budget justification, and summary figures in their CSR and CFSR databases. As a result of our 2010 work, TSA established performance measures and linked them to Pipeline Security Plan goals within the Surface Security Plan of the 2018 NSTS. See table 5 below for the 2018 NSTS Pipeline Security Plan performance measures. As shown in table 6 below, DHS also included a management measure in its fiscal year 2019 congressional budget justification to track the annual number of completed pipeline security reviews. Finally, TSA Pipeline Security Branch officials said they use summary figures in the CFSR status database and the CSR goals and priorities database as performance measures. For example, these include the percentage of CFSR recommendations implemented and the average percentage compliance with the guidelines by fiscal year. We previously found that results-oriented organizations set performance goals to clearly define desired program outcomes and develop performance measures that are clearly linked to the performance goals. Performance measures should focus on whether a program has achieved measurable standards toward achieving program goals, and allow agencies to monitor and report program accomplishments on an ongoing basis. Our previous work on performance metrics identified 10 attributes of effective performance. Table 7 identifies each key attribute of effective performance measures along with its definition. We evaluated the current performance measures included in the 2018 NSTS, the DHS fiscal year 2019 congressional budget justification, the CSR goals and priorities database, and the CFSR status database related to TSA’s Pipeline Security Branch. We primarily focused on key attributes which could be applied to individual measures. These include clarity, linkage, measurable targets, objectivity, reliability, and baseline and trend data. Our prior work on performance measurement found that all performance measure attributes are not equal and failure to have a particular attribute does not necessarily indicate that there is a weakness in that area or that the measure is not useful; rather, it may indicate an opportunity for further refinement. Based on our evaluation, the TSA-identified measures do not possess attributes that we have identified as being key to successful performance measures. As a result, TSA cannot fully determine the extent to which the Pipeline Security Branch has achieved desired outcomes, including the effectiveness of its efforts to reduce risks to pipelines. Specifically, many of TSA’s measures cover agency goals and mission, but they generally lack clarity and measurable targets, provide significantly overlapping information, and do not include baseline and trend data. Clarity. The pipeline-related measures in the 2018 NSTS are not clear because they do not describe the methodology used to calculate them, and the names and definitions are not clearly described. For example, NSTS goal 1 includes an objective to conduct training of employees responding to terrorist attacks. The desired outcome is to improve the capability of industry employees to respond and recover from terrorist attacks. However, the performance measure is the percentage of critical pipeline systems implementing the TSA Pipeline Security Guidelines. It is not clear if this measure is specific to the sections of the guidelines related to employee training or overall implementation of the guidelines. The CFSR status database measures include the percentage of recommendations implemented by topic, such as “Site Specific Security Measures,” “Signage,” or “Miscellaneous.” However, the database does not specifically define these topics or explain the methodology for calculating the measures. Unclear measures could be confusing and misleading to users. Core program activities. The pipeline-related measures in the 2018 NSTS cover some of the agency’s core program activities, such as conducting security exercises with the pipeline industry and providing intelligence and information products to the industry. However, the NSTS Pipeline Security Plan measures do not specifically include some core program activities, such as updating the TSA Pipeline Security Guidelines or the results of conducting CSRs and CFSRs in order to collect the information necessary for the existing performance measures. The CSR goals and priorities database and the CFSR status database include measures intended to track some of the results of pipeline security reviews, such as the average percentage compliance with the guidelines by fiscal year and the percentage of CFSR recommendations implemented. If core program activities are not covered, there may not be enough information available in those areas to managers and stakeholders. Limited overlap. The pipeline-related measures in the 2018 NSTS do not have limited overlap. As discussed previously, four of the five NSTS measures are based on the percentage of critical pipeline systems implementing TSA’s Pipeline Security Guidelines. The management measure is based on the number of complete pipeline security reviews. The CFSR status database measures are based on the percentage of recommendations implemented overall and by groups. Finally, the CSR goals and priorities database measures are based on the average compliance percentage of companies that had CSRs conducted in fiscal years 2016 and 2017. This is similar to four of the five NSTS measures. Significantly overlapping measures may lead to redundant, costly information that does not add value for TSA management. Linkage. The pipeline-related measures in the 2018 NSTS generally exhibited this key attribute. For example, all of the NSTS measures were arranged by agency strategic goals and risk-based priorities. However, the management measure in DHS’s fiscal year 2019 congressional budget justification and the CFSR status database measures did not specify the TSA goals and priorities to which they were aligned. If measures are not aligned with division and agency- wide goals and mission, the behaviors and incentives created by these measures do not support achieving those goals or mission. Measurable target. TSA’s measures generally did not include measurable targets in the form of a numerical goal and none of the NSTS measures had measurable targets. For example, the NSTS measure under the Security Planning priority, which tracks the percentage of critical pipeline systems implementing TSA’s Pipeline Security Guidelines, does not state what specific percentages would be considered an improvement in industry security plans. However, the management measure did include target numbers of pipeline security reviews by fiscal year. Both the CFSR status database measures and CSR goals and priorities database measures did not include measurable targets. Without measurable targets, TSA cannot tell if performance is meeting expectations. Objectivity. Because the pipeline-related measures in the 2018 NSTS, the CFSR status database, and the CSR goals and priorities database generally lack clarity and measurable targets, TSA cannot ensure its measures are free from bias or manipulation, and therefore, are not objective. If measures are not objective, the results of performance assessments may be systematically overstated or understated. Reliability. Because the pipeline-related measures in the 2018 NSTS, the CFSR status database, and the CSR goals and priorities database generally lack clarity, measurable targets, and baseline and trend data, it is not clear if TSA’s measures produce the same result under similar conditions; therefore, the pipeline-related measures are unreliable. If measures are not reliable, reported performance data may be inconsistent and add uncertainty. Baseline and trend data. TSA’s measures generally did not include baseline and trend data. For example, none of the NSTS measures included past results and compared them to measurable targets. TSA officials were unable to identify measures or goals to assess the extent to which pipeline operators have fully implemented the guidelines or increased pipeline security, but did say developing a feedback mechanism to measure progress in closing vulnerability gaps was important. However, the management measure did include the number of completed pipeline security reviews for each fiscal year from 2014 through 2017, as well as numerical goals. The CFSR status database includes information on CFSRs conducted from May 22, 2012, through June 29, 2017, but the measures are calculated for the entire time period rather than year-by-year. The CSR goals and priorities database measures include percentage compliance with the guidelines for CSRs conducted in fiscal years 2016 and 2017, as well as a combined measure. However, baseline and trend data are not tracked or reported in either database. Collecting, tracking, developing, and reporting baseline and trend data allows agencies to better evaluate progress being made and whether or not goals are being achieved. Pipeline Security Branch officials explained that in addition to the measures reported in the 2018 NSTS Pipeline Security Plan, they primarily rely on measures assessing CSR and CFSR implementation for assessing the value of its pipeline security program. TSA officials reported that they collect and analyze data and information collected from CSRs and CFSRs to, among other things, determine strengths and weaknesses at critical pipeline facilities, areas to target for risk reduction strategies, and pipeline industry implementation of the voluntary Pipeline Security Guidelines. For example, TSA officials reported that they analyzed information from approximately 734 CFSR recommendations that were made during fiscal years 2012 through 2016. They found that pipeline operators had made the strongest improvements in security training, public awareness outreach and law enforcement coordination, and site specific security measures. The most common areas in need of improvement were 24x7 monitoring, frequency of security vulnerability assessments, and proper signage. However, as described above, we found those measures also did not comport with key attributes for successful measures and we report below on reliability concerns for underlying data supporting those measures. In addition, while the Pipeline Security Branch may not rely on the measures included in the 2018 NSTS Pipeline Security Plan and the fiscal year 2019 congressional budget justification, they are important for reporting the status of pipeline security efforts to TSA as a whole and to external stakeholders such as Congress. Taking steps to ensure that the pipeline security program performance measures exhibit key attributes of successful performance measures could allow TSA to better assess the program’s effectiveness at reducing pipeline physical and cybersecurity risks. This could include steps such as modifying its suite of measures so they are clear, have measurable targets, and add baseline and trend data. Further examples include the following: Adding measurable targets consisting of numerical goals could allow TSA to better determine if the pipeline security program is meeting expectations. For example, measurable targets could be added to TSA’s existing measures by developing annual goals for the percentage of recommendations implemented to the CFSR status database and then reporting annual results. To make measures clearer, TSA could verify that each measure has a clearly stated name, definition, and methodology for how the measure is calculated. For example, the NSTS objective for security training mentioned above could have more specific language explaining how the measure is calculated and whether it applies to pipeline operators’ implementation of the training-related portions of the TSA Pipeline Security Guidelines or overall implementation. Finally, adding baseline and trend data could allow TSA to identify, monitor, and report changes in performance and help ensure that performance is viewed in context. For example, the NSTS measures, CFSR status database measures, and CSR goals and priorities database measures could have annual results from prior years. This could help TSA and external stakeholders evaluate the effectiveness of the pipeline security program and whether it is making progress toward its goals. According to TSA officials, the primary means for assessing the effectiveness of the agency’s efforts to reduce pipeline security risks is through conducting pipeline security reviews— Corporate Security Reviews (CSRs) and Critical Facility Security Reviews (CFSRs). However, TSA has not tracked the status of CSR recommendations for over 5 years and related security review data are not sufficiently reliable. When conducting CSRs and CFSRs, TSA staff makes recommendations to operators, if appropriate. For example, a CSR recommendation might include a suggestion to conduct annual security-related drills and exercises, and a CFSR recommendation might include a suggestion to install barbed wire on the main gate of a pipeline facility. In response to recommendations that we made in our 2010 report, TSA developed three databases to track CSR and CFSR recommendations and their implementation status by pipeline facility, system, operator, and product type. In addition, the agency recently developed a fourth database to collect and analyze information gathered from pipeline operators’ responses to CSR questions. TSA officials reported that they use this database to assess the extent that TSA’s pipeline security program has met NSTS goals and Pipeline Security Branch priorities. TSA officials stated that they use the CSR goals and priorities database for follow-up on recommendations, indications of improvement in pipeline security, and as an input into TSA performance goals and measures, including the performance measures for the 2018 NSTS Pipeline Security Plan. We found several problems with the databases that indicate that the pipeline security program data are not sufficiently reliable and do not provide quality information that is current, complete, and accurate. First, the CSR recommendations database only included information for reviews conducted from November 2010 through February 2013. TSA officials stated that the agency stopped capturing CSR recommendations and status information in 2014. A TSA official stated that one factor was that the pipeline staffing level was one FTE in fiscal year 2014. However, the Pipeline Security Branch did not resume entering CSR recommendation-related information when staffing levels rose to 6 FTEs in the following year and beyond. As a result, TSA is missing over 5 years of data for the recommendations it made to pipeline operators when conducting CSRs. The agency collected some information from CSRs conducted in fiscal years 2016 and 2017 in the separate CSR goals and priorities database. However, this database does not include all of the information that TSA collects when conducting CSRs. Specifically, the CSR goals and priorities database does not state which companies were reviewed, what specific recommendations were made, or the current status of those recommendations, and only records operators’ responses to 79 of the 222 CSR questions. Second, our review identified instances of missing data, inconsistent data entry formats, and data entry errors in the four databases. For example: The CSR recommendations database had missing data in all 13 of the included fields and a data entry error shifted 50 observations into the wrong fields, impacting both the Status Date and Completion Code fields. The CSR goals and priorities database had seven entries with inconsistent data formatting and five of those entries were not taken into account when calculating summary figures. The CFSR recommendations database had missing data in 3 of 9 fields. There was also inconsistent data entry formats in 3 fields. The CFSR status database had missing data in 7 of 29 fields and inconsistent data entry formats in 4 fields. Finally, TSA has not documented its data entry and verification procedures, such as in a data dictionary or user manual, and does not have electronic safeguards for out-of-range or inconsistent entries for any of the databases it uses to track the status of CSR or CFSR recommendations and analyze operator responses to the CSR. TSA Pipeline Security Branch officials told us that they had not documented data entry and verification procedures and did not have electronic safeguards. This was for two reasons. First, the officials stated that the databases are small and maintained in a commercial spreadsheet program that does not allow for electronic safeguards. However, based on our review of the databases, the spreadsheet program does allow for a variety of electronic safeguards. For example, entries can be restricted to only allow selections from a drop-down list or only allow dates to be entered. Second, only a small number of TSA employees enter information into these databases. TSA officials explained that typically one TSA employee is responsible for entering information from pipeline security reviews, and another individual, usually whoever conducted the review, is tasked to verify the accuracy of the data entered. As a result, according to the officials, any errors would be self-evident and caught during these TSA employees’ reviews. Our work has emphasized the importance of quality information for management to make informed decisions and evaluate agencies’ performance in achieving key objectives and addressing risks. The Standards for Internal Control in the Federal Government states that management should use quality information to achieve agency objectives, where “quality” means, among other characteristics, current, complete, and accurate. In addition, DHS’s Information Quality Guidelines state that all DHS component agencies should treat information quality as integral to every step of the development of information, including creation, collection, maintenance, and dissemination. The guidelines also state that agencies should substantiate the quality of the information disseminated through documentation or other appropriate means. Without current, complete, and accurate information, it is difficult for TSA to evaluate the performance of the pipeline security program. Until TSA monitors and records the status of these reviews’ recommendations, it will be hindered in its efforts to determine whether its recommendations are leading to significant reduction in risk. By entering information on CSR recommendations and monitoring and recording their status, developing written documentation of its data entry and verification procedures and electronic safeguards, and improving the quality of its pipeline security program data, TSA could better ensure it has the information necessary to effectively monitor pipeline operators’ progress in improving their security posture, and evaluate its pipeline security program’s effectiveness in reducing security risks to pipelines. A successful pipeline attack could have dire consequences on public health and safety, as well as the U.S. economy. Recent coordinated campaigns by environmental activists to disrupt pipeline operations, and the successful attempts by nation-state actors to infiltrate and obtain sensitive information from pipeline operators’ business and operating systems, demonstrate the dynamic and continuous threat to the security of our nation’s pipeline network. To help ensure the safety of our pipelines throughout the nation, it is important for TSA to address weaknesses in the management of its pipeline security program. TSA’s Pipeline Security Branch revised its security guidelines in March 2018 to, among other things, reflect the dynamic threat environment and incorporate NIST’s Cybersecurity Framework cybersecurity principles and practices. However, without a documented process defining how frequently TSA is to review and, if deemed necessary, revise its guidelines, TSA cannot ensure that its guidelines reflect the latest known standards and best practices for physical and cybersecurity, or address the persistent and dynamic security threat environment currently facing the nation’s pipeline system. Further, without clearly defined criteria for determining pipeline facilities’ criticality, TSA cannot ensure that pipeline operators are applying guidance uniformly and that all of the critical facilities across the pipeline sector have been identified; or that their vulnerabilities have been identified and addressed. TSA could improve its ability to conduct pipeline security reviews and the means that it uses to prioritize which pipeline systems to review based on their relative risk ranking. Establishing a strategic workforce plan could help TSA ensure that it has identified the necessary skills, competencies, and staffing allocations that the Pipeline Security Branch needs to carry out its responsibilities, including conducting security reviews of critical pipeline companies and facilities, as well as their cybersecurity posture. Better considering threat, vulnerability, and consequence elements in its risk assessment and incorporating an independent, external peer review in its process would provide more assurance that the Pipeline Security Branch ranks relative risk among pipeline systems using comprehensive and accurate data and methods. We are making 10 recommendations to TSA: The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to implement a documented process for reviewing, and if deemed necessary, for revising TSA’s Pipeline Security Guidelines at regular defined intervals. (Recommendation 1) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to clarify TSA’s Pipeline Security Guidelines by defining key terms within its criteria for determining critical facilities. (Recommendation 2) The TSA Administrator should develop a strategic workforce plan for its Security Policy and Industry Engagement’s Surface Division, which could include determining the number of personnel necessary to meet the goals set for its Pipeline Security Branch, as well as the knowledge, skills, and abilities, including cybersecurity, that are needed to effectively conduct CSRs and CFSRs. (Recommendation 3) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to update the Pipeline Relative Risk Ranking Tool to include up-to-date data to ensure it reflects industry conditions, including throughput and threat data. (Recommendation 4) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to fully document the data sources, underlying assumptions and judgments that form the basis of the Pipeline Relative Risk Ranking Tool, including sources of uncertainty and any implications for interpreting the results from the assessment. (Recommendation 5) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to identify or develop other data sources relevant to threat, vulnerability, and consequence consistent with the NIPP and DHS critical infrastructure risk mitigation priorities and incorporate that data into the Pipeline Relative Risk Ranking Tool to assess relative risk of critical pipeline systems, which could include data on prior attacks, natural hazards, feedback data on pipeline system performance, physical pipeline condition, and cross-sector interdependencies. (Recommendation 6) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to take steps to coordinate an independent, external peer review of its Pipeline Relative Risk Ranking Tool, after the Pipeline Security Branch completes enhancements to its risk assessment approach. (Recommendation 7) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to ensure that it has a suite of performance measures which exhibit key attributes of successful performance measures, including measurable targets, clarity, and baseline and trend data. (Recommendation 8) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to take steps to enter information on CSR recommendations and monitor and record their status. (Recommendation 9) The TSA Administrator should direct the Security Policy and Industry Engagement’s Surface Division to improve the quality of its pipeline security program data by developing written documentation of its data entry and verification procedures, implementing standardized data entry formats, and correcting existing data entry errors. (Recommendation 10) We provided a draft of this report to DHS, DOE, DOT, and FERC. DHS provided written comments which are reproduced in appendix III. In its comments, DHS concurred with our recommendations and described actions planned to address them. DHS, DOE, DOT, FERC, also provided technical comments, which we incorporated as appropriate. We also provided draft excerpts of this product to the American Petroleum Institute (API), the Association of Oil Pipe Lines, the American Gas Association (AGA), the Interstate Natural Gas Association of America (INGAA), the American Public Gas Association, and the selected pipeline operators that we interviewed. For those who provided technical comments, we incorporated them as appropriate. With regard to our first recommendation, that TSA implement a documented process for reviewing, and if deemed necessary, for revising its Pipeline Security Guidelines at regular defined intervals, DHS stated that TSA will implement a documented process for reviewing and revising its Pipeline Security Guidelines at regular defined intervals, as appropriate. DHS estimated that this effort would be completed by March 31, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our second recommendation, that TSA clarify its Pipeline Security Guidelines by defining key terms within its criteria for determining critical facilities, DHS stated that TSA will clarify its Pipeline Security Guidelines by defining key terms within its criteria for determining critical facilities. DHS estimated that this effort would be completed by May 31, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our third recommendation, that TSA develop a strategic workforce plan for its Security Policy and Industry Engagement's Surface Division, DHS stated that TSA will develop a strategic workforce plan for the division, which includes determining the number of personnel necessary to meet the goals set for the Pipeline Security Branch, as well as the knowledge, skills, and abilities, including cybersecurity, that are needed to effectively conduct CSRs and CFSRs. DHS estimated that this effort would be completed by June 30, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our fourth recommendation, that TSA update the Pipeline Relative Risk Ranking Tool to include up-to-date data in order to ensure it reflects industry conditions, including throughput and threat data, DHS stated that TSA will update the Pipeline Relative Risk Ranking Tool to include up-to-date data in order to ensure it reflects industry conditions, including throughput and threat data. DHS estimated that this effort would be completed by February 28, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our fifth recommendation, that TSA fully document the data sources, underlying assumptions, and judgements that form the basis of the Pipeline Relative Risk Ranking Tool, including sources of uncertainty and any implications for interpreting the results from the assessment, DHS stated that TSA will fully document the data sources, underlying assumptions, and judgements that form the basis of the Pipeline Relative Risk Ranking Tool. According to DHS, this will include sources of uncertainty and any implications for interpreting the results from the assessment. DHS estimated that this effort would be completed by February 28, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our sixth recommendation, that TSA identify or develop other data sources relevant to threat, vulnerability, and consequence consistent with the NIPP and DHS critical infrastructure risk mitigation priorities and incorporate that data into the Pipeline Relative Risk Ranking Tool to assess relative risk of critical pipeline systems, DHS stated that TSA will identify and/or develop other sources relevant to threat, vulnerability, and consequence consistent with the NIPP and DHS critical infrastructure risk mitigation priorities. DHS also stated that TSA will incorporate that data into the Pipeline Risk Ranking Tool to assess relative risk of critical pipeline systems, which could include data on prior attacks, natural hazards, feedback data on pipeline system performance, physical pipeline condition, and cross-sector interdependencies. DHS estimated that this effort would be completed by June 30, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our seventh recommendation, that TSA take steps to coordinate an independent, external peer review of its Pipeline Relative Risk Ranking Tool, after the Pipeline Security Branch completes enhancements to its risk assessment approach, DHS stated that, after completing enhancements to its risk assessment approach, TSA will take steps to coordinate an independent, external peer review of its Pipeline Relative Risk Ranking Tool. DHS estimated that this effort would be completed by November 30, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our eighth recommendation, that TSA ensure that the Security Policy and Industry Engagement's Surface Division has a suite of performance measures which exhibit key attributes of successful performance measures, including measurable targets, clarity, baseline, and trend data, DHS stated that TSA’s Surface Division’s Pipeline Section will develop both physical and cyber security performance measures, in consultation with pipeline stakeholders, to ensure that it has a suite of performance measures which exhibit key attributes of successful performance measures, including measurable targets, clarity, baseline, and trend data. DHS estimated that this effort would be completed by November 30, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our ninth recommendation, that TSA take steps to enter information on CSR recommendations and monitor and record their status, DHS stated that TSA will enter information on CSR recommendations and monitor and record their status. DHS estimated that this effort would be completed by October 31, 2019. This action, if fully implemented, should address the intent of the recommendation. With regard to our tenth recommendation, that TSA take steps to improve the quality of its pipeline security program data by developing written documentation of its data entry and verification procedures, implementing standardized data entry formats, and correcting existing data entry errors, DHS stated that TSA will develop written documentation of its data entry and verification procedures, implementing standardized data entry formats, and correcting existing data entry errors. DHS estimated that this effort would be completed by July 31, 2019. This action, if fully implemented, should address the intent of the recommendation. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until one day from the report date. At that time, we will send copies to the appropriate congressional committees; the Secretaries of Energy, Homeland Security, and Transportation; the Executive Director of the Federal Energy Regulatory Committee; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Chris Currie at (404) 679-1875 or curriec@gao.gov, and Nick Marinos at (202) 512-9342 or marinosn@gao.gov. Key contributors to this report are listed in appendix IV. This appendix lists security guidance and guidance-related tools that the pipeline operators and industry association officials we interviewed identified as adopted or available in order to secure their physical and cyber operations. This list should not be considered to include all physical and cybersecurity guidance that may be available or used by all pipeline operators nor do all operators use all guidance listed. The Transportation Security Administration’s (TSA) Pipeline Security Branch developed the Pipeline Relative Risk Ranking Tool (risk assessment) in 2007. The risk assessment calculates threat, vulnerability, and consequence on variables such as the amount of throughput in the pipeline system (consequence input). Pipeline Security Branch officials told us that they use the pipeline risk assessment to rank relative risk of the top 100 critical pipeline systems, and the standard operating procedures for conducting Corporate Security Reviews (CSR) state the results of the risk ranking are the primary factor considered when prioritizing CSRs of pipeline companies. However, we identified several factors that likely limit the usefulness of the current assessment in calculating threat, vulnerability, and consequence to allow the Pipeline Security Branch to effectively prioritize reviews of pipeline systems. For example, because the risk assessment has not changed since 2014, information on threat may be outdated. Additionally, sources of data and underlying assumption and judgments regarding certain threat and vulnerability inputs to the assessment are not fully documented. For example, threats to cybersecurity are not specifically accounted for in the description of the risk assessment methodology, making it unclear if cybersecurity is part of the assessment’s threat factor. Further, the risk assessment does not include information that is consistent with the National Infrastructure Protection Plan (NIPP) and other Department of Homeland Security (DHS) priorities for critical infrastructure risk mitigation, such as information on natural hazards and the ability to measure risk reduction (feedback data). According to Pipeline Security Branch officials, the risk ranking assessment is not intended to be a fully developed risk model detailing all pipeline factors influencing risk. Rather, officials said they are primarily interested in assessing risk data that impacts security. However, because TSA’s Pipeline Security Program is designed to enhance the security preparedness of the pipeline systems, incorporating additional factors that enhance security into their risk calculation of the most critical pipeline systems would better align their efforts with Presidential Policy Directive 21 (PPD-21). For example, PPD-21 calls for agencies to integrate and analyze information to prioritize assets and manage risks to critical infrastructure, as well as anticipate interdependencies and cascading impacts. Below we present the various shortfalls in the risk assessment—outdated data, limited description of sources and methodology, and opportunities to better align with the NIPP and other DHS priorities for critical infrastructure risk mitigation—in the context of the components that comprise a risk assessment: threat, vulnerability, and consequence. Whereas in 2010 we made recommendations to improve the consequence component in the pipeline relative risk ranking tool, we have currently identified shortfalls that cut across all risk components: threat, vulnerability, and consequence. We identified several shortfalls in the pipeline risk assessment’s calculation of threat. First, while the risk assessment assesses consequence and vulnerability by pipeline system through use of multiple variables, it currently ranks threat for pipeline systems equally. Second, the evolving nature of threats to pipelines may not be reflected, since the risk assessment was last updated in 2014. Third, the threat calculation does not take into account natural hazards. Pipeline Security Branch officials said they currently rank threat equally across pipeline systems because they do not have granular enough threat information to distinguish threat by pipeline. However, ranking threat equally effectively has no effect on the risk calculation for pipeline systems. Further, this judgment is not documented in the risk assessment’s methodology. According to the NIPP, a risk assessment’s methodology must clearly document what information is used and how it is synthesized to generate a risk estimate, including any assumptions and judgments. Additionally, our analysis of the pipeline risk assessment found that it includes at least one field that TSA could use to differentiate threat by pipeline. Specifically, the risk assessment includes a field that accounts for whether a pipeline experienced a previous security threat (including failed attacks), and information provided by Pipeline Security Branch suggests some pipeline systems have experienced such threats. However, the Pipeline Security Branch did not capture these events in the risk assessment’s calculation, which Pipeline Security Branch officials said should be part of the threat calculation, but could not account for why they were not calculated for the systems in the risk assessment. These officials also clarified that incidents such as suspicious photography or vandalism do not constitute an attack to be accounted for in the threat calculation. Documenting such assumptions, judgments, or decisions to exclude information could provide increased transparency to those expected to interpret or use the results. Pipeline Security Branch officials also said that they ranked threat equally because TSA Intelligence and Analysis data show that threats to the oil and natural gas sector have been historically low, and Intelligence and Analysis does not conduct specific threat analysis against individual pipeline systems. However, the Pipeline Security Branch has not updated the risk assessment since June 2014; therefore, the threat information it used to determine threat calculations—and decide to rank threat equally—may be outdated and not reflect the threats to the industry that have emerged in recent years. In fact, pipeline operators we interviewed indicated that the types of threats that concern pipeline operators have evolved. For example, 5 of the 10 operators we interviewed indicated that environmental activists were an increased threat to the pipeline industry because they use sabotage techniques, such as valve turning and cutting in service pipelines with blow torches, against pipelines. Additionally, 6 of 10 pipeline operators we interviewed said cyber attacks from nation-state actors were a primary threat to their industry. Further, when TSA issued its revised Pipeline Security Guidelines in March 2018, it stated that its revisions to the guidelines were made to reflect the ever-changing threat environment in both the physical and cybersecurity realms. However, threats to cybersecurity are not specifically accounted for in the description of the risk assessment methodology. Recent Pipeline Modal and Cyber Modal Threat Assessments include cyber threats to the pipeline industry, but the description of the pipeline risk assessment’s methodology does not specify what types of threat assessments (sources) are used to calculate its threat score. To better align with the guidance in the NIPP for documenting sources of information when conducting risk assessments, the Pipeline Security Branch should document the information used. Keeping the risk assessment updated with current information, as well as documenting those data sources, could help the Pipeline Security Branch ensure it is using its limited resources to review the pipeline systems with greater risk. Natural Hazard Threats to Pipelines The Transportation Systems Sector, of which pipelines are a part, is critical to the Pacific Northwest, but also at risk from natural hazards, like earthquakes. For example, according to the Department of Homeland Security, an earthquake in the Puget Sound region—which relies on the transportation of crude oil from Alaska—could cripple the ports of Seattle and Tacoma, as well as the Olympic and Williams Pipelines greatly impacting the Pacific Northwest Economic Region. Hurricanes are the most frequent disruptive natural hazard for the oil and natural gas subsector and can cause the shutdown of facilities in an area, even when the facilities themselves are not directly affected by the storms. For example, according to the U.S. Energy Information Administration, the flow of petroleum into the New York area via pipeline from the Gulf Coast relies on the ability to move it through major terminals. In August 2017, Hurricane Harvey caused major disruptions to crude oil and petroleum product supply chains, including those to New York Harbor from Houston, Texas via the Colonial Pipeline. Due to the hurricane, decreased supplies of petroleum products available for the pipeline in Houston forced Colonial Pipeline to limit operations temporarily. Finally, another shortfall in the current pipeline risk assessment methodology is that it does not account for natural hazards in its threat calculation, even though DHS’s definition of threat includes natural hazards, and security and resilience of critical infrastructure are often presented in the context of natural hazards. According to the NIPP, threat is a natural or manmade occurrence, individual, entity, or action that has or indicates the potential to harm life, information, operations, the environment, and/or property. As such, along with terrorism, criminal activity and cybersecurity, natural disasters are a key element of DHS’s critical infrastructure security and resilience mission. According to Pipeline Security Branch officials, there is not sufficient historical data available that would indicate a significant impact from natural disasters on specific pipeline systems. However, we identified possible sources of data for the Pipeline Security Branch to consider. For example, a 2016 RAND Corporation study examined national infrastructure systems’ exposure to natural hazards, including pipelines. Additionally, the Federal Emergency Management Agency (FEMA) has collaborated with stakeholders to develop the National Risk Index to, among other things, establish a baseline of natural hazards risk for the United States While there may not be historical data of natural hazard impact for every pipeline system, consulting other sources or experts could provide regional data or analysis to build a more comprehensive threat picture to help distinguish threats by pipeline system. According to the NIPP, hazard assessments should rely not only on historical information, but also future predictions about natural hazards to assess the likelihood or frequency of various hazards. We also identified multiple shortfalls in the vulnerability factors used in the risk assessment methodology, such as the potential uncertainty of the number of critical facilities and incorporating a feedback mechanism to calculate overall risk reduction. Other considerations for vulnerability calculations include physical condition of the pipeline system, cybersecurity activities, and interdependencies among sectors. The number of critical facilities a pipeline system has identified is used as an input for its vulnerability calculation in the Pipeline Security Branch’s risk assessment methodology. As discussed earlier, we identified deficiencies in TSA’s criteria for identifying critical facilities, and found that well-defined criteria and consistent application of the criteria for identifying critical facilities could improve the results of the Pipeline Security Branch’s risk assessment. Nevertheless, communicating in the risk assessment the uncertainty that may be inherent in this self-reported information would better align the risk assessment with the NIPP. Measuring Effectiveness in a Voluntary Environment According to the National Infrastructure Protection Plan, the use of performance metrics is an important step in the critical infrastructure risk management process to enable assessment of improvements in critical infrastructure security and resilience. The metrics provide a basis for the critical infrastructure community to establish accountability, document actual performance, promote effective management, and provide a feedback mechanism to inform decision making. By using metrics to evaluate the effectiveness of voluntary partnership efforts to achieve national and sector priorities, critical infrastructure partners can adjust and adapt their security and resilience approaches to account for progress achieved, as well as changes in the threat and other relevant environments. Metrics are used to focus attention on areas of security and resilience that warrant additional resources or other changes through an analysis of challenges and priorities at the national, sector, and owner/operator levels. Metrics also serve as a feedback mechanism for other aspects of the critical infrastructure risk management approach. Another shortfall in the risk assessment is its inability to reliably measure the progress a pipeline system made in addressing vulnerability gaps between security reviews. The current risk assessment includes a CSR score as part of its vulnerability calculation, which was developed in part in response to our 2010 recommendation to use more reliable data to measure a pipeline system’s vulnerability gap. However, during our review, Pipeline Security Branch officials said they plan to remove pipeline companies’ CSR scores from the risk assessment calculations, because they and industry partners do not have confidence that the score appropriately measures a pipeline system’s vulnerability. For example, Pipeline Security Branch officials explained that pipeline companies consider security factors differently, which can lead to variation in implementing risk reduction activities and by extension lead to different CSR scores. However, removing the CSR score eliminates the only feedback mechanism in the risk assessment from a pipeline company’s actual security review conducted by the Pipeline Security Branch. The NIPP and DHS’s Risk Management fundamentals emphasize the important role that such feedback mechanisms play in risk management. Officials from the Pipeline Security Branch agree on the importance of a feedback mechanism tying results of reviews to a revised vulnerability metric, but said they need a better measure than the current CSR score which is unreliable for comparative and analytic purposes. Developing a feedback mechanism based on implementation of TSA’s Pipeline Security Guidelines could be an important input to the risk assessment’s vulnerability calculation. This information would also inform the amount of risk pipeline companies are reducing by implementing the guidelines and could be used to inform overall risk reduction. The physical and cyber environments in which the pipeline sector operates also present vulnerabilities not accounted for in the pipeline risk assessment. In recent years, DHS has listed the potential for catastrophic losses to dramatically increase the overall risk associated with failing infrastructure and highlighted risks due to climate change and natural hazards to pipelines. For example, DHS reported extreme temperatures—such as higher and lower temperatures over prolonged periods of time—increase vulnerability to the critical infrastructure by causing elements to break and cease to function. Pipelines that freeze and then rupture can affect the energy and transportation systems sectors. As noted above, according to the NIPP, a natural or man-made occurrence or action with the potential to harm life is considered a threat, whereas vulnerability is defined as a physical feature or operational attribute that renders an entity open to exploitation or susceptible to a given threat or hazard. While pipeline physical condition is typically thought of in context of safety, pipeline condition or location (such as above or below ground) could touch upon pipeline security as it relates to system vulnerability. For example, a pipeline system or segment of a system with a compromised physical condition due to corrosion or age could affect the system’s vulnerability to threats and affect its ability to recover from such threats by potentially increasing the time a system is offline. According to the Transportation Systems Sector-Specific Plan, vulnerabilities to damage in aging transportation infrastructure—of which pipelines are a part—are projected to increase with the continued effects of climate change. Further, according to TSA’s Pipeline Security and Incident Recovery Protocol Plan, pipeline integrity efforts—including the design, construction, operation, and maintenance of pipelines—are important to pipeline security because well-maintained, safe pipelines are more likely to tolerate a physical attack. The Pipeline Security Branch already collects information from the Pipeline and Hazardous Materials Safety Administration (PHMSA) for its risk assessment, specifically information on High Consequence Area and High Threat Urban Area mileage. By considering additional information PHMSA collects on pipeline integrity, the Pipeline Security Branch could also use the information to help pipeline operators identify security measures to help reduce the consequences related to the comparatively higher vulnerability of an aging or compromised system. This would align with the Pipeline Security Branch’s efforts to improve security preparedness of pipeline systems and could better inform its vulnerability calculations for relative risk ranking of pipeline systems. Capturing cybersecurity in the risk assessment is also an area for improvement. Pipeline Security Branch officials told us they consulted with the National Cybersecurity and Communications Integration Center to revise TSA’s Pipeline Security Guidelines to align with the National Institute of Standards and Technology (NIST) Cybersecurity Framework and that absent data specific to pipelines on their cybersecurity vulnerabilities, they are unable to include a pipelines’ vulnerability to cyber attack in the risk assessment. However, the Pipeline Security Branch recently updated the security review questions asked of pipeline operators during corporate and critical facility reviews based on the recently updated Pipeline Security Guidelines. Using these updated questions related to companies’ cybersecurity posture, the Pipeline Security Branch could collect additional information on cybersecurity vulnerabilities which could inform the risk assessment. This could be an element of the feedback mechanism described above and emphasized in the NIPP. Additionally, NIST identified several supply chain vulnerabilities associated with cybersecurity, which are not currently accounted for in TSA’s Pipeline Security Guidelines. As pipeline operators implement increasing levels of network technologies to control their systems, the Pipeline Security Branch may not be fully accounting for pipeline systems’ cybersecurity posture by not including the cybersecurity-related vulnerabilities in its risk assessment inputs. Finally, we identified shortfalls in cross-sector interdependencies, which could affect vulnerability calculations. According to the NIPP, understanding and addressing risks from cross-sector dependencies and interdependencies is essential to enhancing critical infrastructure security and resilience. The Pipeline Security Branch’s pipeline risk assessment currently considers the effects of a pipeline system’s ability to service assets such as major airports, the electric grid, and military bases. However, consequence is calculated on the loss or disruption of the pipeline system to these other assets and does not capture the dependency of the pipeline system on other energy sources, such as electricity. Weather events such as Gulf of Mexico hurricanes and Superstorm Sandy highlighted the interdependencies between the pipeline and electrical sectors. Specifically, according to a 2015 DHS annual report on critical infrastructure, power failures during Superstorm Sandy in 2012 closed major pipelines for 4 days, reducing regional oil supplies by 35 to 40 percent. The report goes on to say that the interconnected nature of infrastructure systems can lead to cascading impacts and are increasing in frequency. Pipeline Security Branch officials are considering cross-sector interdependencies and said they discuss these factors with operators as they relate to system resiliency. Considering interdependencies of sectors in both directions—such as calculating the likelihood that an input like electricity could fail and cause disruptions to critical pipelines—could improve the calculations in the pipeline risk assessment. As previously discussed, the Pipeline Security Branch last calculated relative risk among the top 100 pipeline systems in 2014. When doing so, it used pipeline systems’ throughput data from 2010 to assess relative risk. According to Pipeline Security Branch officials, the amount of throughput in pipeline systems does not change substantially year to year. However, Standards for Internal Control in the Federal Government calls for management to use quality information to achieve the entity’s objectives, including using relevant data from reliable sources obtained in a timely manner. The Pipeline Security Branch uses throughput data as a consequence factor in the risk assessment to determine a pipeline system’s relative risk score. Throughput changes could affect relative risk ranking and the Pipeline Security Branch’s ability to accurately prioritize reviews based on relative risk. Chris P. Currie at (404) 679-1875 or curriec@gao.gov Nick Marinos at (202) 512-9342 or marinosn@gao.gov. In addition to the contacts named above, Ben Atwater, Assistant Director; Michael W. Gilmore, Assistant Director; and Michael C. Lenington, Analyst-in-Charge, managed this assignment. Chuck Bausell, David Blanding, Dominick Dale, Eric Hauswirth, Kenneth A. Johnson, Steve Komadina, Susanna Kuebler, Thomas Lombardi, David Plocher, and Janay Sam made significant contributions to this report.", "summary": "More than 2.7 million miles of pipeline transport and distribute oil, natural gas, and other hazardous products throughout the United States. Interstate pipelines run through remote areas and highly populated urban areas, and are vulnerable to accidents, operating errors, and malicious physical and cyber-based attack or intrusion. The energy sector accounted for 35 percent of the 796 critical infrastructure cyber incidents reported to DHS from 2013 to 2015. Several federal and private entities have roles in pipeline security. TSA is primarily responsible for the oversight of pipeline physical security and cybersecurity. GAO was asked to review TSA's efforts to assess and enhance pipeline security and cybersecurity. This report examines, among other objectives: (1) the guidance pipeline operators reported using to address security risks and the extent that TSA ensures its guidelines reflect the current threat environment; (2) the extent that TSA has assessed pipeline systems' security risks; and (3) the extent TSA has assessed its effectiveness in reducing pipeline security risks. GAO analyzed TSA documents, such as its Pipeline Security Guidelines ; evaluated TSA pipeline risk assessment efforts; and interviewed TSA officials, 10 U.S. pipeline operators—selected based on volume, geography, and material transported—and representatives from five industry associations. Pipeline operators reported using a range of guidelines and standards to address physical and cybersecurity risks, including the Department of Homeland Security's (DHS) Transportation Security Administration's (TSA) Pipeline Security Guidelines , initially issued in 2011. TSA issued revised guidelines in March 2018 to reflect changes in the threat environment and incorporate most of the principles and practices from the National Institute of Standards and Technology's Framework for Improving Critical Infrastructure Cybersecurity . However, TSA's revisions do not include all elements of the current framework and TSA does not have a documented process for reviewing and revising its guidelines on a regular basis. Without such a documented process, TSA cannot ensure that its guidelines reflect the latest known standards and best practices for physical security and cybersecurity, or address the dynamic security threat environment that pipelines face. Further, GAO found that the guidelines lack clear definitions to ensure that pipeline operators identify their critical facilities. GAO's analysis showed that operators of at least 34 of the nation's top 100 critical pipeline systems (determined by volume of product transported) deemed highest risk had identified no critical facilities. This may be due, in part, to the guidelines not clearly defining the criteria to determine facilities' criticality. To assess pipeline security risks, TSA conducts pipeline security reviews—Corporate Security Reviews and Critical Facility Security Reviews—to assess pipeline systems' vulnerabilities. However, GAO found that the number of TSA security reviews has varied considerably over the last several years, as shown in the table on the following page. TSA officials stated that staffing limitations have prevented TSA from conducting more reviews. Staffing levels for TSA's Pipeline Security Branch have varied significantly since fiscal year 2010 with the number of staff ranging from 14 full-time equivalents in fiscal years 2012 and 2013 to 1 in 2014. Further, TSA does not have a strategic workforce plan to help ensure it identifies the skills and competencies—such as the required level of cybersecurity expertise—necessary to carry out its pipeline security responsibilities. By establishing a strategic workforce plan, TSA can help ensure that it has identified the necessary skills, competencies, and staffing. GAO also identified factors that likely limit the usefulness of TSA's risk assessment methodology for prioritizing pipeline system reviews. Specifically, TSA has not updated its risk assessment methodology since 2014 to reflect current threats to the pipeline industry. Further, its sources of data and underlying assumptions and judgments regarding certain threat and vulnerability inputs are not fully documented. In addition, the risk assessment has not been peer reviewed since its inception in 2007. Taking steps to strengthen its risk assessment, and initiating an independent, external peer review would provide greater assurance that TSA ranks relative risk among pipeline systems using comprehensive and accurate data and methods. TSA has established performance measures to monitor pipeline security review recommendations, analyze their results, and assess effectiveness in reducing risks. However, these measures do not possess key attributes—such as clarity, and having measurable targets—that GAO has found are key to successful performance measures. By taking steps to ensure that its pipeline security program performance measures exhibit these key attributes, TSA could better assess its effectiveness at reducing pipeline systems' security risks. Pipeline Security Branch officials also reported conducting security reviews as the primary means for assessing the effectiveness of TSA's efforts to reduce pipeline security risks. However, TSA has not tracked the status of Corporate Security Review recommendations for the past 5 years. Until TSA monitors and records the status of these reviews' recommendations, it will be hindered in its efforts to determine whether its recommendations are leading to significant reduction in risk. GAO makes 10 recommendations to TSA to improve its pipeline security program management (many are listed on the next page), and DHS concurred. GAO recommends, among other things, that the TSA Administrator take the following actions: implement a documented process for reviewing, and if deemed necessary, for revising TSA's Pipeline Security Guidelines at defined intervals; clarify TSA's Pipeline Security Guidelines by defining key terms within its criteria for determining critical facilities; develop a strategic workforce plan for TSA's Security Policy and Industry Engagement‘s Surface Division; update TSA's pipeline risk assessment methodology to include current data to ensure it reflects industry conditions and threats; fully document the data sources, underlying assumptions and judgments that form the basis of TSA's pipeline risk assessment methodology; take steps to coordinate an independent, external peer review of TSA's pipeline risk assessment methodology; ensure the Security Policy and Industry Engagement‘s Surface Division has a suite of performance measures which exhibit key attributes of successful performance measures; and enter information on Corporate Security Review recommendations and monitor and record their status.", "document_type": "gao"}
{"report": "Senior Army leadership has acknowledged that the service must change how it develops requirements and acquires weapon systems in order to be successful in future wars. However, the Army’s history of failed, costly weapon system procurements to replace aging weaponry is due, in part, to requirements that could not be met and the immaturity of key technologies. Many of these programs failed to provide any capability to the warfighter despite the time and funding expended. Some examples of these cancelled programs are listed in table 1 below. In the fall of 2017, the Army began a new modernization effort to rapidly develop and field new capabilities. As a part of this effort, the Army’s then-Acting Secretary and the Chief of Staff in an October 3, 2017 memorandum identified six priorities to guide Army modernization: next generation combat vehicle, air and missile defense, and soldier lethality. Given that modernization is an ongoing process, and with Army expectations that some capabilities will be delivered sooner than others, we have divided Army modernization into two timeframes for the purposes of this report: Near-term modernization: from fiscal years 2019 to 2023, including buying existing systems and technologies to fill the Army’s urgent needs. Long-term modernization: fiscal year 2024 and beyond, including the development of new systems and technologies to meet anticipated needs and maintain superiority over major adversaries. In September 2018, we addressed the Army’s efforts for near-term modernization. We found that the Army had set decisively defeating near-peer adversaries as an overarching objective, but had not established processes for evaluating its modernization efforts against this objective. We also found that the Army had not yet completed a cost analysis of its near-term modernization efforts. To address these issues, we recommended that the Army develop a plan to finalize processes for evaluating the contributions of its near-term investments to the ability to decisively defeat a near-peer adversary; and finalize and report to Congress its cost analysis of near-term investments. DOD concurred with both of these recommendations. As we have previously reported, the Army’s long-term modernization efforts as well as those of the other DOD military services will depend upon adequate and effective investments in science and technology. These are investments that focus on increasing fundamental knowledge of new capabilities, applying that knowledge, and demonstrating the technological feasibility of capabilities. As with all the military services in DOD, the Army’s acquisition process generally includes a number of phases including: (1) the materiel solution analysis phase, (2) the technology maturation and risk reduction phase, (3) the engineering and manufacturing development phase, and (4) the production and deployment phase. In this report we refer to these phases more simply as materiel solution analysis, technology development, system development, and production. Before these phases begin, the Army must establish requirements to guide the acquisition process. Requirements describe the capability desired to be achieved through the use of operational performance attributes—the testable and measurable characteristics—necessary to the design of a proposed system and for establishing a program’s cost, schedule, and performance baselines. These requirements include the key performance parameters and system attributes that guide a program’s development, demonstration, and testing. The Army approval authority for all Army warfighting capability requirements is the Army Chief of Staff. At the end of the initial three phases, the Army holds a milestone review, as shown in figure 1 below, to assess an acquisition program’s readiness to proceed to the next phase, consistent with relevant DOD policies and federal statutes. The Assistant Secretary of the Army for Acquisition, Logistics, and Technology is generally the Army’s milestone decision authority. The process is also subject to intermediate reviews by senior Army staff. We have issued several reports related to the Army’s modernization efforts that assess areas regarding requirements and technology development, effective cross-functional teams, and mergers and organizational transformations: Requirements and Technology Development. In our extensive work issued over two decades on requirements and technology development, we have emphasized the importance of promoting leading practices such as communication between end-users and requirements developers; prototyping capabilities as part of technology and product development; and maturing technology to a certain threshold before approving product development. Cross-Functional Teams. In February 2018, we identified eight leading practices that effective cross-functional teams should have: effective communication mechanisms; well-defined goals common to the team, team leader, and an inclusive team environment where all team members have collective responsibility and individual accountability for the team’s work; a well-defined team structure with project-specific rules and autonomy to make decisions rapidly; senior managers who view their teams as a priority; commitment to the team’s goals; and leaders empowered to make decisions and provide feedback and developmental opportunities. Mergers and Organizational Transformations. In July 2003, we found that the key to successful mergers and organizational transformations is to recognize the “people” element and implement strategies to help individuals maximize their full potential while simultaneously managing the risk of reduced productivity and effectiveness that often occurs as a result of changes. We identified nine leading practices new organizations should follow including ensuring top leadership drives the transformation and establishing a communication strategy, among others. The Army’s cross-functional team pilots and early efforts by the Army Futures Command have prioritized closing near-term capability gaps, and have begun planning the transition to long-term capabilities. The cross- functional teams were pilot programs to improve the quality and timeliness of requirements and technology development. These cross- functional teams are transitioning from independent organizations to organizations within the Army Futures Command, which will also subsume other existing Army organizations tasked with modernization. Army Futures Command is in the process of establishing its policies, processes, and functions as well as its relationships with other Army organizations. It plans to reach full capability by July 2019. The Army has already identified near-term priorities and realigned over $1 billion in science and technology funding for long-term modernization. Army Futures Command will be responsible for continuing this prioritization. In an attempt to increase the efficiency of its requirements and technology development efforts, the Army established cross-functional team pilots for modernization. A directive from the then-acting Secretary of the Army on October 6, 2017, established eight multi-disciplinary cross-functional teams on a pilot basis. The eight cross-functional team pilots were assigned to address the six priority areas, as outlined in table 2. These cross-functional team pilots were intended to: take steps toward achieving the six modernization priorities; leverage expertise from industry and academia; identify ways to use experimentation, prototyping, and demonstrations; and identify opportunities to improve the efficiency of requirements development and the overall defense systems acquisition process. Cross-functional team pilots were structured to help achieve these goals. Each cross-functional team pilot consisted of core staff and subject matter experts from across the Army. To facilitate the rapid approval of requirements, each cross-functional team pilot was led by a general officer or a senior civilian official who could communicate directly with the highest levels of the Army. The goal of staffing these teams was to ensure that each team had individuals who specialized in acquisition, requirements, science and technology, test and evaluation, resourcing, contracting, cost analysis, sustainment, and military operations. The goal of bringing different experts together was to facilitate collaboration and immediate opportunities for stakeholders to provide input as opposed to the more traditional requirements development process, in which input has typically been provided separately. Officials told us that, while all of these subject matter experts may have provided input on the requirements development process in the past, placing them on a single team offered the promise of streamlining those efforts and could eliminate the need for multiple reviews. Figure 2 below compares the requirements development process under cross-functional teams to how the Army has traditionally developed requirements. The cross-functional team locations chosen by senior Army leadership coincide with the locations of related Army organizations or industry hubs, which could help to facilitate this exchange of ideas among technical experts, and inform prototyping and experimentation. For example, the cross-functional team pilot for the Future Vertical Lift was stationed at Redstone Arsenal where the Army’s existing research, development, and engineering center for aviation is located. In congressional testimony, the Commander of Army Futures Command stated that in order to achieve their near- and long-term modernization objectives, they will have to reduce their requirements development timelines from 3 to 5 years to less than 1 year. According to cross- functional team members we spoke with, the cross-functional team pilots were able to demonstrate progress toward achieving the goals set out for them. Specifically, cross-functional team pilots completed requirements documentation for one of the Mounted Assured Positioning, Navigation and Timing System’s capabilities in less than a year; replaced small airborne radio with completion of directed requirement for the Integrated Tactical Network in less than 60 days; and completed requirements documentation for a soldier lethality capability in 15 days as opposed to the expected 4 months. The Army has taken initial steps to consolidate all its modernization efforts under one authority, in addition to its initiation of the cross- functional team pilots. In particular, the Secretary of the Army established the Army Futures Command through the issuance of a general order on June 4, 2018. According to Army documentation, the intent of the new command is to provide unity of command, accountability, and modernization at the speed and scale required to prevail in future conflicts. This organization is led by a four-star general like its organizational peers: Army Materiel Command, Training and Doctrine Command, and Forces Command. Establishing Army Futures Command is the most significant institutional change to the Army since it reorganized in 1973 in the wake of the Vietnam War. The Army is in the process of establishing the new command, but has just begun to define its organizational structures. According to the 2018 Army general order, Army Futures Command reached initial operating capability in July 2018. According to Army Futures Command officials and documentation, the new organization is charged with integrating several existing requirements and technology development organizations—such as Army Capabilities Integration Center in Fort Eustis, Virginia and Research, Development, and Engineering Command headquartered in Aberdeen, Maryland—as well as the cross-functional team pilots. The cross-functional team pilots are in the process of being integrated into the new command and, according to Army officials, will continue to be responsible for managing the Army’s six modernization priorities. In addition, Army Futures Command will be supported by a number of operational and administrative offices to assist the components with executing their missions. According to Army officials and documentation, the new command will be organized around three major components: Futures and Concepts: responsible for identifying and prioritizing capability and development needs and opportunities. This organization subsumed the Army Capabilities Integration Center on December 7, 2018—formerly part of Army Training and Doctrine Command, which focuses primarily on the education and training of soldiers. Combat Development: responsible for conceptualizing and developing solutions for identified needs and opportunities. This organization will subsume Research, Development and Engineering Command—currently a part of Army Materiel Command, which focuses primarily on sustainment. Combat Systems: responsible for refining, engineering, and producing new capabilities. The acquisition program offices will communicate with the new command through this organization to ensure integration of acquisition functions. However, the program offices will continue to report to the Assistant Secretary of the Army for Acquisition, Logistics and Technology. Army Futures Command will be headquartered in Austin, Texas, and existing organizations are not expected to change their locations. According to Army officials and documentation, the Army chose Austin because of its proximity to science, technology, engineering, and mathematics talent, as well as private sector innovators that officials believe will assist the command in achieving its modernization goals. According to senior Army leadership we spoke with, the new command headquarters will have around 300 staff in place by July 2019, a workforce that may grow to 500 employees—100 military and 400 civilians. Our analysis of Army’s plans for initial staffing at the Army Futures Command headquarters, based on data from July 1, 2018, found that about one-third of headquarters staff would be involved directly in modernization efforts, such as engineers and operations specialists, and the remainder would consist of support staff, including legal counsel and contracting professionals. Figure 3 shows the locations of the known major Army Futures Command components, the 8 cross-functional teams being integrated under Army Futures Command, and its new headquarters. Although initial steps have been taken to establish the new command, key steps have not yet been completed. The Army stated in the executive order establishing the command that it will consider Army Futures Command fully operational once it is sufficiently staffed with operational facilities, secure funding, and the ability to execute its assigned mission, roles, and responsibilities. At full operating capability, officials told us Army Futures Command will also have finalized the organizational structure and the reporting responsibilities of its various components. However, Army Futures Command has not yet established policies and procedures detailing how it will execute its assigned mission, roles, and responsibilities. For example, we found that it is not yet clear how Army Futures Command will coordinate its responsibilities with existing acquisition organizations within the Army that do not directly report to it. One such organization is the Office of the Assistant Secretary of the Army for Acquisition, Logistics and Technology—the civilian authority responsible for the overall supervision of acquisition matters for the Army—and the acquisition offices it oversees. To mitigate concerns about coordination, in August 2018, the Army issued a directive signed by the Secretary of the Army designating the military deputy of this office as an advisor to Army Futures Command, a designation aimed at establishing a means of coordination. Army Futures Command officials have also stated that the Assistant Secretary of the Army for Acquisition, Logistics and Technology will retain full acquisition authorities as required by law. Army documentation shows that further policies and procedures are expected to be issued in 2019. The Army recognizes the need to balance near-term and long-term modernization over time. To do so, the Army has balanced its modernization efforts by funding the closure of near-term capability gaps, and identifying long-term needs to be funded. Since announcing the modernization efforts in 2017, the Army has directed more funding toward closing near-term capability gaps. For example, as part of the planning for the fiscal year 2019 budget process, the Army identified 67 high-priority programs, such as the M-1 Abrams tank and the AH-64 Apache helicopter, with capability gaps in need of further investment. To support these priorities, the Army identified a need for $16 billion in increased funding in fiscal years 2019 through 2023. The 2018 Army Modernization Strategy report identified the need for additional resources for near-term efforts, including plans to spend billions of dollars for acquisition of maneuverable short range air defense capabilities in fiscal years 2020 through 2024. The same report described plans to spend hundreds of millions of dollars over the same period for prototyping technologies for the Next-Generation Combat Vehicle, a longer-term capability. The Army has also begun to plan research and development efforts for its long-term modernization needs. The Army identified long-term capabilities for all of the modernization priorities, as well as dates that science and technology efforts should transition to programs of record. Army officials stated that, ultimately, multiple programs of record may be considered for each capability area. For example, the Army identified science and technology efforts to develop an advanced powertrain for the Next Generation Combat Vehicle and identified planned transition dates to the program in fiscal years 2020 and 2023. The 2018 Army Modernization Strategy report provides additional details on long-term modernization efforts for three of its six priorities: Future Vertical Lift, Soldier Lethality, and Next-Generation Combat Vehicle. Figure 4 below presents a timeline for some of the proposed capabilities within each of the six priorities. The Army has realigned some resources to support its long-term modernization priorities. In identifying long-term capabilities, we found that the Army has evaluated its science and technology portfolio to determine alignment with the six modernization priorities. For example, as part of an October 2017 review for the office of the Deputy Under Secretary of the Army, the eight cross-functional team pilots examined science and technology investments to identify which efforts contributed to the priorities and which efforts did not contribute to them. According to this review and Army officials, the Army realigned over $1 billion in funding toward the priorities for fiscal years 2019 through 2023, for a total of $7.5 billion directed at these priorities. The review preserved $2.3 billion in funding for basic research for the same time period. According to Army officials, similar science and technology reviews will be conducted annually to help cross-functional teams manage their respective programs’ progress and identify further opportunities for investment. To fund future modernization efforts, both the science and technology review and the review for the fiscal year 2020 budget process also identified opportunities to reduce funding for, or eliminate, some existing programs. For example, plans for the air and missile defense portfolio include an option to divest from legacy short range air defense programs in fiscal year 2029 if its Indirect Fires Protection Capability program becomes fully operational. This aligns with statements from Army officials that program decisions will be driven not by specific schedules but by the maturity of replacement capabilities. The Army has generally applied leading practices for technology development and establishing effective cross-functional teams, and has begun to apply leading practices for mergers and organizational transformations for the Army Futures Command. During the Army’s pilot phase for its eight cross-functional teams, the teams took actions consistent with leading practices for technology development, such as bringing together requirements developers and warfighters, planning prototype demonstrations, and maturing technology prior to beginning an acquisition program. The Army’s pilot teams also applied eight leading practices we have identified for establishing effective cross-functional teams to varying degrees. In addition, senior Army leadership has been clear in its support for the new command and has clearly outlined a timeframe for its establishment, actions that are in line with the leading practices for mergers and organizational transformations we have identified in prior work. Whether further application of these leading practices will continue under the new command is unclear as the role of the cross-functional teams has not yet been formalized and Army Futures Command has not yet taken all the steps needed to reach full operational capability. We found that the Army’s eight cross-functional team pilots generally applied leading practices identified in our prior work when it came to their requirements and technology development efforts. As we found in April 2018, positive outcomes result from taking a knowledge-based approach to product development that demonstrates high levels of knowledge before making significant resource commitments. Our review of the Army’s cross-functional team pilots found that they have generally applied leading practices to the following two areas: Promoted communication between end-users and requirements developers. The Army directive that established the cross-functional team pilots as well as these teams’ charters state that teams will follow a methodology of collaboration between warfighters and developers to prepare capability documents. An official from the Synthetic Training Environment cross-functional team told us that involving industry representatives and warfighters helps the cross- functional team get “closer to what ‘right’ looks like” early in the requirements development process. By promoting communication between industry representatives and warfighters, the cross-functional teams helped ensure that developer resources better matched end- user needs. Planned to prototype capabilities as part of technology and product development. The Army directive establishing the cross- functional team pilots states that cross-functional teams should incorporate iterative experimentation and technical demonstrations to inform capability requirements. As an illustration of this practice, officials from the Future Vertical Lift cross-functional team told us that they will hold a “fly off” between two competitive prototypes of the Future Attack Reconnaissance Aircraft in fiscal year 2023 before choosing a design for follow-on testing and integration in fiscal year 2024. However, we are concerned that the Army has plans to mature technology to a level lower than the threshold recommended by leading practices before beginning system development. Specifically, we found that the Army’s October 2017 science and technology review identified a goal of demonstrating new technologies in a relevant environment, such as a highly realistic laboratory setting, before transitioning them to specific platforms or programs. As an example, the Soldier Lethality cross- functional team began maturing technology for the next generation squad automatic rifle to this level of maturity to prepare it for the transition to product development, scheduled for the end of fiscal year 2019. Under leading practices that we identified, prototypes should be demonstrated in an operational or realistic environment—not simply in a relevant environment—prior to starting system development to ensure that they work as intended for the end-user. The Army’s choice to start a formal acquisition program at lower levels of technology maturity raises concerns that are consistent with those we have raised in the past. Our past work indicates that by demonstrating technologies only in a relevant rather than an operational environment, the Army increases the risk that new capabilities will not perform as intended and require further technological maturation while in system development. This could raise costs and extend timelines for delivery of equipment to the warfighter. For example, almost two decades ago in a 1999 report, we recommended demonstrating technologies in an operational environment prior to system development and DOD concurred with that recommendation. We have also reported the importance of achieving this level of maturity on an annual basis since 2003, most recently in 2018, in our assessment of DOD’s major weapon system acquisition programs. In addition, we again reiterated this leading practice in 2016 in our technology readiness assessment guide. While DOD has a policy, based in statute, that generally requires major defense acquisition programs to, at a minimum, demonstrate technologies in a relevant environment before system development, that policy does not preclude the cross-functional teams from pursuing a higher level of maturity. Such an approach would be consistent with leading practices that recommend maturing technologies to a higher level. By applying these leading practices, the cross-functional teams could better ensure that prototypes are demonstrated in an operational or realistic environment prior to starting system development to ensure that they work as intended for the end-user. Our prior work has identified eight leading practices that organizations should use for establishing effective cross-functional teams. In reviewing the Army’s eight cross-functional team pilots, we found that they have applied these practices to varying degrees. Table 3 describes these leading practices. All eight Army cross-functional team pilots fully applied four of these leading practices. Well-defined team goals. We found that each cross-functional team pilot charter clearly defined its team’s goals. For example, the Long- Range Precision Fires cross-functional team charter states that it will rapidly integrate and synchronize the requirements development process to deliver cutting edge capabilities to the operating force as the best possible return on investment for warfighters. In addition, senior Army leadership approved the charters containing each team’s goals, ensuring that the goals defined for the teams were linked to the Army’s larger goal of modernization. Open and regular communication. Members of all eight cross- functional team pilots shared information with each other, sought feedback, and communicated with team leaders and senior Army leadership. For example, officials from the Next Generation Combat Vehicle cross-functional team told us that ongoing dialogue with senior Army leadership resulted in numerous rounds of refined guidance. The cross-functional team took that guidance, reconvened, assessed options, and then presented another round of updates to Army senior leadership. Moreover, the directive establishing the cross-functional team pilots requires that they develop capability documents, informed by experimentation and technical demonstrations, to ensure that planned capabilities are technologically feasible, affordable, and therefore can eventually be provided to soldiers. According to Army officials, developing such documents requires open and regular communication between team members who have expertise in diverse fields such as contracting, cost analysis, and testing. Autonomy. The eight cross-functional team pilots’ charters show, and interviews with members confirm, that teams are granted substantial autonomy by senior Army leadership. The cross-functional team charters give teams the authority to solve internal problems through market research, prototyping, technical demonstrations, and user assessments. For example, the Synthetic Training Environment cross- functional team and senior Army leadership stressed to us the importance of experimentation as an opportunity to “fail early and fail cheap.” According to cross-functional team members, this allows cross-functional teams to move on and avoid expensive and time- consuming failures later in the acquisition process, as has happened with Army in the past. Furthermore, cross-functional teams can reach out to subject matter experts needed to develop requirements without having to obtain permission from senior Army leadership. Committed team members. All eight cross-functional team pilots include members with expertise in diverse fields who are committed to achieving team goals. For example, the Network cross-functional team charter states that the team should consist of experienced and committed subject matter experts executing disciplined initiatives and willing to take prudent risks. In addition, the directive establishing the cross-functional teams states that they should leverage industry and academia where appropriate to increase knowledge and expertise. Staffing information provided by multiple cross-functional teams demonstrates the diversity of expertise the Army has applied to these efforts. Cross-functional team members also provided us with multiple examples of how their teams have leveraged outreach with industry and academia to improve their understanding of requirements and technology. Additionally, we found that the eight cross-functional team pilots have at least partially applied the following four leading practices. Senior management support. Senior Army leaders, including the Secretary and the Chief of Staff, have championed the cross- functional team pilots in public statements. Although an Army official told us that he was aware of a member of a cross-functional team (who left the team) receiving a civilian achievement award, we did not find any documentary evidence of senior Army leaders providing incentives or recognition to members of the eight cross-functional team pilots. Because many members of cross-functional teams, including some leaders of these teams, work in a number of different roles, they do not have a consistent chain of command that can provide incentives or recognition across all of their activities. The “dual-hatted” nature of team members—in which they work for their parent organization as well as the cross-functional team pilot—may further complicate full application of this leading practice. Empowered team leaders. The team leaders of all eight cross- functional team pilots are empowered to make decisions and regularly interact with senior Army leaders. While an Army official stated that team leaders and Army leadership provide guidance to cross- functional team members, we did not find any documentary evidence of these leaders providing feedback to members of those teams. However, many members of the cross-functional teams, including directors, are only temporarily assigned to cross-functional team pilots because they work in other functions simultaneously. Well-defined team structure. While most cross-functional team pilots have established operating procedures and organizational structures, we found that some have not provided training to their members on the operations of cross-functional teams and how they relate to other organizations. Our previous work identified appropriate training as a key characteristic of a well-defined team structure. Most cross- functional team charters do not address the issue of training. Through our discussions with the cross-functional teams, we found the following with respect to training: An official from the Soldier Lethality cross-functional team told us that team members received training and planned to attend further training to enhance creative and “outside-the-box” thinking. The director of the Network cross-functional team told us that, even though he did not receive training, he was able to leverage his previous experience leading matrixed organizations. The Long-Range Precision Fires cross-functional team told us that members started their work without any training and this posed a challenge as they were unfamiliar with each other’s roles and work. Inclusive team environment. The founding documents for the cross- functional team pilots themselves generally did not address attributes of this leading practice, such as having team members that support and trust one another. However, discussions with team members indicate some teams have invested in creating such an environment. The Soldier Lethality cross-functional team members stated that working in a cross-functional team as opposed to working as separate individuals in disparate offices, allowed them write requirements faster. It also created an atmosphere in which members got to know each other’s experiences and trust each other’s views. Officials from the Synthetic Training Environment cross-functional team told us they spent their first week gaining an understanding of each team member’s role on the team to foster such inclusivity. As previously described, the cross-functional team pilots were an effort to achieve several goals including to identify ways the Army could increase efficiency in requirements and technology development. According to Army officials, the teams have shown initial progress in doing so, delivering requirements—and in some cases developing capabilities for delivery in the next two years—to the warfighter in shorter than anticipated timeframes. However, the Army has not yet definitively established the cross-functional teams’ roles, responsibilities, and how they will operate within Army Futures Command. As a result, it is unclear if the Army will benefit from the experience and expertise of these teams applying leading practices as they transition into Army Futures Command. Until the Army takes formal steps to institutionalize the beneficial practices used by the cross-functional teams during the pilot phase such as autonomy, proactive decision making, and access to senior leadership it will be missing a valuable opportunity to integrate these practices into the new command. The Army directive that established the cross-functional teams directed each team pilot to capture best practices and lessons learned and report them to the Army office that oversaw their efforts. Officials from the cross-functional teams described to us lessons they learned and planned to pass on to their oversight office for the benefit of Army Futures Command. For example, officials from the Air and Missile Defense cross- functional team stated that having direct access to the Under Secretary and the Vice Chief of Staff of the Army is important for obtaining quick decisions, which save time and money in getting capabilities to the warfighter. While officials from Army Futures Command told us that they intend to collect lessons learned from the cross-functional team pilots, they do not yet have a formal plan to identify and incorporate lessons learned. Since the cross-functional team pilots were established to experiment with new approaches, it is important that they take steps to capture the lessons they have learned—positive and negative—so they can be shared as these teams are integrated into Army Futures Command. If the Army fails to institutionalize these lessons learned in the new command, it risks losing the benefits from the experiences of these pilots thereby either repeating past mistakes or failing to benefit from past practices that worked well. If it can capture the lessons learned, it has an opportunity to accelerate the progress these teams made during their pilot phase and spread the benefits across all the cross-functional teams and across a wider range of specific military capabilities they are pursuing. In our discussions with Army Futures Command officials they agreed that formalizing and implementing a plan to collect and incorporate lessons learned would be beneficial. Army officials told us that the establishment of Army Futures Command represents a dramatic organizational transformation in how the Army will develop weapon systems and platforms. In our previous work on mergers and organizational transformations in federal agencies, we have identified several leading practices, as shown in table 4 below, that can help agencies undertaking such transformational efforts. As the Army is standing up Army Futures Command, it has begun to apply some of the leading practices for mergers and organizational transformations. For example, senior Army officials have provided a clear and consistent rationale for establishing the new command in official directives and in public appearances. They have also clearly described the mission of the Army Futures Command and established a timeline for its implementation. However, the command has not yet formalized and institutionalized its authorities, responsibilities, policies and procedures nor taken steps to apply these or other leading practices. While we observed a strong organizational unity of purpose and collaboration from the current senior leadership in the Army for the Army Futures Command, this could change as the Army’s leadership changes. For example, according to law, the tenure of the Chief of Staff of the Army is generally limited to 4 years and the current Chief of Staff has already served 3 years. Furthermore, the Secretary of the Army is appointed by the President, subject to the advice and consent of the Senate, and therefore may change with new presidential administrations and during administrations. For example, the past 6 people, prior to the current secretary, confirmed as the Secretary of the Army served an average of 959 days—about 2 and one-half years. The current secretary has already served about 1 year. Further, senior Army officials told us that they expect changes at both top and mid-tier leadership within the new command will periodically occur as a result of the Army’s normal system of rotations for officers. For example, a senior military official in Army Futures Command told us that they expect commanders of components will rotate every 4 years. Therefore, because this modernization effort is expected to span a decade or longer, continued support from current and future senior Army officials, such as the Chief of Staff and the Secretary of the Army, will be essential to ensure the success of the new command into the future. We have previously reported in our work on internal controls that it is important to establish the organizational structure necessary to enable an entity to plan, execute, control, and assess the organization in achieving its objectives as well as respond to potential changes in, among other things, personnel. By fully applying key principles of major mergers and organizational transformations as the Army completes the process of establishing the Army Futures Command, the Army can better ensure the new command realizes its goals for modernization through development of well-defined requirements, incorporation of mature technologies, and development of systems that provide the warfighter with the capabilities needed for future conflicts. The Army has made substantial changes to how it intends to coordinate and oversee modernization efforts, due at least in part to the lost years and billions of dollars from past efforts to modernize. The Army has taken positive steps to improve its current modernization efforts and has already seen some initial successes. The creation of the new command, the integration of the cross-functional teams to better refine requirements and cultivate technologies, the realignment of several existing organizations, and the shifting of personnel gives the Army a unique opportunity to take advantage of leading practices and its own lessons learned. The Army, however, faces some key challenges. In particular, the Army’s intent to transition technologies to weapon systems before technologies are matured is inconsistent with leading practices, risks delays in equipping the warfighter, and can potentially lead to cost overruns. In addition, the cross-functional team pilots have demonstrated some initial successes in shortening the requirements development process—and, more generally, in collaborating across the Army—but it is not clear what steps the Army Futures Command plans to take to incorporate the experience and expertise of these teams in applying leading practices and thereby sustain these benefits. Further, the Army lacks a formal plan to identify and incorporate lessons learned from the cross-functional teams as Army Futures Command becomes fully operational and could thereby miss an opportunity to leverage the experience of these teams on past practices that worked well and those that did not. Finally, as the Army finalizes the roles, authorities, and responsibilities for the Army Futures Command it can benefit from applying leading practices related to mergers and organizational transformations. This can help ensure that Army Futures Command realizes its goals for modernization including unity of command, accountability, and modernization at the speed and scale required to prevail in future conflicts. We are making four recommendations to the Secretary of the Army: The Secretary of the Army should ensure that the Commanding General of Army Futures Command applies leading practices as they relate to technology development, particularly that of demonstrating technology in an operational environment prior to starting system development. (Recommendation 1) The Secretary of the Army should ensure that the Commanding General of Army Futures Command takes steps to incorporate the experiences of the cross-functional teams in applying leading practices for effective cross-functional teams. (Recommendation 2) The Secretary of the Army should ensure that the Commanding General of Army Futures Command executes a process for identifying and incorporating lessons learned from cross-functional team pilots into the new command. (Recommendation 3) The Secretary of the Army should ensure that the Commanding General of Army Futures Command fully applies leading practices for mergers and organizational transformations as roles, responsibilities, policies and procedures are finalized for the new command. (Recommendation 4) We provided a draft of this report to the Department of Defense for review and comment. In its written comments, reproduced in appendix II, the Department concurred with all four of our recommendations and made certain technical comments which we incorporated as appropriate. In concurring with our recommendation on demonstrating technology in an operational environment, the Department of Defense requested that we reword the recommendation to reflect that technology maturity be considered with other factors, such as risk assessment and troop availability. We understand the Department’s desire for flexibility, but continue to believe that reaching higher levels of technological maturity, through demonstrating technologies in an operational environment prior to beginning system development adds significant value by reducing risk; something that could help the Army deliver capabilities it believes are urgently needed. As such, we made no change to the recommendation. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of the Army, the Commander of Army Futures Command, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or ludwigsonj@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made significant contributions to this report are listed in appendix III. Section 1061 of the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to report on the Army’s modernization strategy. This report assesses (1) the status of the Army’s efforts to establish new acquisition organizations while balancing near- and long- term modernization; and (2) the extent to which the Army has applied leading practices to do so. To assess the status of the Army’s efforts to establish new acquisition organizations we reviewed the Army general orders and directives that established these organizations. This review included documentation such as: Army General Order 2018-10 that established the Army Futures Command, as well as reassigned existing organizations, such as the Army Capabilities Integration Center from the Training and Doctrine Command and the eight cross-functional team pilots to the new command. Army Directive 2017-24 that established the cross-functional team pilots and provided guidance on how they should operate to improve the quality and speed of materiel development activities. Army Directive 2017-22 that provided guidance for implementation of acquisition reform policy/initiatives to reflect modernization such as directive 2017-29 to improve the integration of science and technology into concept, capability, and materiel development. Army Regulation 73-1 (Test and Evaluation Policy) Army Regulation 70-1 (Army Acquisition Policy) Army Regulation 71-9 (Warfighting Capabilities Determination) Training and Doctrine Command Regulation 71-20 (Concept Development, Capabilities Determination, and Capabilities Integration) Headquarters, Department of the Army Executive Order 176-18 (Establishment of Army Futures Command) We also interviewed the Under Secretary of the Army, officials from Army Futures Command and related organizations like the Office of Process Innovation and Integration, members of the eight cross-functional teams, the Army Capabilities Integration Center, and the Army Research, Development, and Engineering Command. To assess the balance of modernization priorities between near-term and long-term, we reviewed documentation related to those lines of effort including: the 2018 Army Modernization Strategy report—which describes the rationale behind modernization and the efforts for each priority, the Strategic Portfolio Analysis Review for Fiscal Year 2020—which is a part of the budget process to determine priorities, align science and technology efforts to capabilities, and plan milestones, the Deputy Under Secretary of the Army and Research and Development Command Science and Technology Review of October 2017—which describes the science and technology priorities for each cross-functional team and realigns funding through identifying opportunities to divest, and Strategic Capability Roadmaps—which provide a timeline for the development and fielding of the capabilities being developed by some of the cross-functional teams. To review these documents, we created a data collection instrument to capture the efforts as they related to each of the eight cross-functional teams and consolidate the different sources of information. We first collected information about the capabilities in which cross-functional team officials indicated their involvement. For these capabilities, we recorded planned milestones and the date that the capability would first be operational. We also recorded whether or not the capability was new or an incremental upgrade, the science and technology efforts to develop that capability, and whether or not those efforts contributed to other capabilities. We then collected data related to the general efforts of the cross-functional teams. These efforts included divestment opportunities, and the amounts of funding aligned to the associated modernization priority. We also interviewed officials from the cross-functional teams, the office of Army G-8, and other Army offices. To address the extent to which the Army’s cross-functional team pilots applied leading practices for technology development, we Reviewed cross-functional team charters, the 2018 Army Modernization Strategy report, Fiscal Years 2019 and 2020 Strategic Portfolio Analysis, the Army’s Fiscal Year 2019 President’s Budget, and the Army’s October 2017 Science and Technology Review to identify actions related to the development of near- and long-term capabilities for the Army’s six modernization priorities that align with the eight cross-functional teams. Interviewed cross-functional team officials to learn about technology development activities they conducted or planned to conduct regarding these priorities. Selected leading practices from our body of work on weapons systems acquisitions based on which ones are most relevant to where the cross-functional teams’ activities fit within the broader weapons systems acquisition process. Consolidated relevant data from Army documentation and statements from Army officials regarding their technology development efforts in a record of analysis containing a description of leading practices for technology development identified in our prior work. Compared Army documentation and cross-functional team officials’ statements against leading practices for technology development identified in our prior work, specifically promoting communication between requirement developers’ and end-users, prototyping technologies, and maturing technology to a specific threshold. To address the extent to which cross-functional team pilots applied leading practices for establishing effective cross-functional teams, we Reviewed Army Directive 2017-24, which established the cross- functional teams, as well as each team’s charter. Interviewed officials from each cross-functional team and other Army offices regarding the collaborative, communicative, and technology development efforts of these teams. Consolidated and analyzed data from Army documentation and statements from Army officials related to leading practices for establishing effective cross-functional teams, identified in our prior work. Compared the content of the Army documents and statements from cross-functional team officials against leading practices identified in our prior work to determine whether cross-functional teams had demonstrated actions consistent with these practices. We then had a second analyst check the same documents and statements to verify our initial result. To address the extent to which Army Futures Command applied leading practices for mergers and organizational transformations and incorporated lessons learned from the cross-functional team pilots, we Reviewed Headquarters Department of the Army Executive Order 176-18, which established the Army Futures Command, and Army Directive 2017-33, which established the Modernization Task Force. Interviewed senior Army officials involved in the establishment of the new command and cross-functional team officials. We selected leading practices identified by GAO for mergers and organizational transformations in our prior work because the establishment of Army Futures Command represents the largest organizational transformation the Army has undertaken since 1973 and includes merging existing Army organizations into a new command. Although Army Futures Command is not yet fully operational, we analyzed Army documentation and officials’ statements regarding the new command against leading practices identified in our prior work and the lessons learned from the cross-functional teams to assess whether it had applied these leading practices. In addition to the contact named above, J. Kristopher Keener (Assistant Director), Joe E. Hunter (Analyst-in-Charge), Jenna Blair, Emily Bond, Matthew T. Crosby, Cale Jones, Kevin O’Neill, John Pendleton, John Rastler, A. Maurice Robinson, and Roxanna Sun made significant contributions to this review.", "summary": "In order for the Army to maintain its technological edge over potential adversaries, it plans to invest in near- and long-term modernization efforts. However, the Army has struggled with modernization initiatives in the past. For example, the Future Combat System was canceled after a cost of $21 billion and delivery of few new capabilities. The National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to report on the Army's modernization strategy. This report assesses (1) the status of the Army's near- and long-term modernization efforts; and (2) the extent to which the Army has applied leading practices to these efforts. GAO reviewed Army directives, procedures, and policies; and compared the Army's efforts with leading practices for requirements and technology development, effective cross-functional teams, and mergers and organizational transformations. Since 2017, when the Army announced its initiative to update its forces and equipment with improved capabilities—known as modernization—it has established and assigned eight cross-functional teams to pilot how to address these needs; established the Army Futures Command as the focal point for modernization efforts, with a four-star general to oversee it; and realigned over $1 billion in science and technology funding to support modernization efforts within the $7.5 billion expected to be spent over the next 5 years. To date, the Army has generally applied leading practices identified by GAO to its modernization efforts. For example, the cross-functional team pilots generally applied leading practices for determining requirements and technology development and for establishing effective teams. Similarly, as the Army began the process of establishing the Army Futures Command, it has started to apply the leading practices for mergers and organizational transformations by establishing a clearly defined mission and providing a clear consistent rationale for the command. However, GAO identified other areas where the Army has not fully applied leading practices to its modernization efforts including the following: Under the modernization effort, the Army plans to begin weapon systems development at a lower level of maturity than what is recommended by leading practices. GAO has raised concerns about this type of practice for almost two decades for other Army acquisitions, because proceeding into weapon systems development at earlier stages of technology maturity raises the risk that the resulting systems could experience cost increases, delivery delays, or failure to deliver desired capabilities. Taking this approach for acquisitions under the modernization effort raises similar concerns for the Army's six prioritized capability needs. The Army has not developed a plan for capturing the lessons learned from the cross-functional team pilots, and therefore may miss an opportunity to leverage the experience of these teams in applying leading practices. GAO is making four recommendations, including that the Army follow leading practices for maturing technologies to a higher level than currently planned and develop a plan to capture lessons learned from the cross-functional teams. DOD concurred with all the recommendations.", "document_type": "gao"}
{"report": "Forty-five states and the District of Columbia levy sales taxes on the sale of goods and services. Of these, thirty-seven states also have local sales taxes at the county or municipal level. Five states do not have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Tax policy specialists have cited figures as high as 12,000 and as low as 10,000 for the number of tax jurisdictions in the United States—each with potentially different tax rates, different rules governing tax-exempt goods and services, different product category definitions, and different standards for determining whether an out-of-state seller has a substantial presence (referred to as nexus) in a state. On average, states receive about one-third of their total tax collections from general sales taxes. However, reliance on sales taxes varies considerably across states. Five states that do not have a broad-based individual income tax—Florida, Nevada, South Dakota, Tennessee, and Texas—collect more than half their tax revenue from general sales taxes. As of January 1, 2017, most state sales tax rates were about 6 percent, although analysis prepared by the Tax Foundation shows that five states—Alabama, Arkansas, Louisiana, Tennessee, and Washington—had average combined state and local tax rates close to or above 9 percent. Generally, businesses are required to collect sales taxes on goods and services sold to in-state consumers at the time of the purchase, and remit those taxes to the state, and sometimes local government, revenue office. The growth of e-commerce has greatly increased the likelihood of businesses selling to out-of-state customers. In 1992, the U.S. Supreme Court ruled in Quill v. North Dakota that a state can only require a business to collect and remit sales tax if the business has substantial presence, referred to as nexus, in that state. However, the decision stated that Congress could pass legislation to overrule the Quill decision. Legislation has been proposed to expand states’ tax collection authority to all remote sales, but no bill has received enough support to pass both the Senate and the House of Representatives. Some of the legislation has included provisions for small seller exemptions, free software, liability protection, and transition periods. In general, under present law in states with sales taxes, if the seller does not have nexus in a state, and is therefore not required to collect tax, then the consumer is required to pay a use tax in the same amount. Although functionally similar to a sales tax, the use tax is a tax levied on the consumer for the privilege of use, ownership, or possession of taxable goods and services. However, consumer compliance rates for use tax remittance are estimated to be very low. With the growth in e-commerce, states have increased their enforcement activities to collect sales tax from residents who make purchases from out-of-state businesses. A few states have passed laws or changed regulations that directly challenge or test the limits of the 1992 Quill v. North Dakota decision—most notably, Alabama, Colorado, and South Dakota—to increase tax collections on remote sales. In reviewing testimony and tax industry publications, we found that states have also sought additional revenue through more indirect approaches, such as asserting jurisdiction on the basis of nexus to include “affiliate nexus” and “click-through nexus.” Colorado for instance enacted a law requiring retailers who do not collect taxes on sales to Colorado customers to notify those customers of their use tax obligations and send an annual report on customers’ purchases to the state revenue agency. The revenue agency could then use this information to identify which purchasers have a use tax obligation. South Dakota took a different approach aimed at overturning the Quill decision. In 2016, the legislature passed a law requiring out-of-state businesses meeting certain criteria to collect and remit sales tax on purchases made by South Dakota residents. The state supreme court ruled on September 13, 2017, that the law violated Quill. On October 2, 2017, South Dakota filed a petition for a writ of certiorari with the U.S. Supreme Court. Alabama promulgated a regulation in September 2015 requiring out-of- state retailers who made $250,000 or more in sales to Alabama residents annually, or who conducted one or more statutorily defined activities, to collect and remit sales tax. A suit was filed with the Alabama Tax Tribunal, but no decision has been made. New York took a different route passing a “click-through” nexus law in 2008. Some out-of-state retailers enter into agreements with local online retailers to advertise the local retailer’s merchandise on the out-of-state retailer’s website. Because the agreement was with an in-state vendor, the law defined that to be a sufficient nexus to impose sales tax on the out-of-state-vendor. Several companies unsuccessfully challenged the statute. A few state governments have taken action to increase tax collection from e-marketplace sellers. As of October 2017, two states (Minnesota and Washington) had passed laws imposing new requirements on e-marketplace companies to collect sales taxes on behalf of the sellers using their e-marketplace platforms. Some states have asserted that the warehousing of goods and fulfillment of orders from within a state is enough to create nexus, and therefore a requirement to collect taxes on sales to customers in that state. To enforce compliance, we found that at least three state revenue agencies have been seeking sales, shipping or location data about goods sold through e-marketplaces. We estimate that state and local governments can, under current law, require remote sellers to collect about 75 to 80 percent of the taxes that would be owed if all remote sellers were required to collect tax on all remote sales at current rates. We found that the extent to which state and local governments can, under current law, require businesses to collect taxes on remote sales varies with the type of remote seller (as shown in table 1). For business-to-consumer (B2C) remote sales, we found that the percentage of taxes already being collected by sellers (which we call the “seller collection rate”) was generally higher for Internet retailers than for other types of remote sellers like catalog retailers or e-marketplaces. Based on our analysis of nearly 1,000 Internet retail companies, we estimate that about 80 percent of the potential revenue from requiring all Internet retailers to collect is already collectible. Many of the largest Internet sellers are established retail chains or consumer brands with a physical presence, such as retail stores, in all, or nearly all, of the 45 states (plus the District of Columbia) that have a statewide sales tax. As noted earlier, under current law, if a remote seller has a substantial presence (referred to as nexus) in a state, the seller is required to collect taxes on remote sales into that state. In addition, even without being required to, some large Internet retailers have entered into agreements with states to collect applicable taxes on all their Internet sales, regardless of physical presence. The rise of e-marketplaces, such as eBay, Etsy, and Amazon Marketplace, has complicated nexus determinations. At these marketplaces, sellers can access large customer bases and utilize the marketing and distribution services of the marketplace platform, often for a fee. Certain states can rely on inventory stored within their borders as sufficient nexus to impose taxes. This has included sellers using a large marketplace’s fulfillment services. As a result, to properly collect and remit taxes, sellers using marketplace fulfillment services need information on where their inventory is stored. While we estimated the seller collection rate to be relatively high for the category of Internet retailers (about 80 percent), we found it to be lower for other types of B2C remote sellers. For example, we estimate that e-marketplace sellers are currently collecting 14 percent of the taxes on their sales, in our highest potential revenue gain estimate, to up to 33 percent, in our lowest potential revenue gain estimate. For other types of remote retailers, such as mail-order companies, we estimate that they are currently collecting tax on 58 percent of their sales in our highest potential revenue gain estimate and up to 64 percent of their sales in our lowest potential revenue gain estimate (as shown in table 1). Although business-to-business (B2B) sales account for a larger share of total e-commerce than B2C sales, potential state and local government revenue gains from taxing all of these sales is less because fewer B2B sales are taxable, and seller collection rates are higher (as shown in table 1). We estimate that about half of all wholesale e-commerce purchases involve businesses purchasing raw materials or other intermediate goods that are then manufactured or incorporated into a final product. These purchases of intermediate goods are generally exempt from state and local government taxes because only the final sale to the end consumer would be taxable. For the remaining taxable B2B purchases, we estimate that the seller collection rates are between 85 percent for those sales in our highest potential revenue gain estimate and 94 percent in our lowest potential revenue gain estimate. Based on the seller collection rates we estimated using high and low scenarios to illustrate the effect of underlying uncertainties, we determined that state and local governments could potentially gain about $8 billion based on our low scenario to about $13 billion, based on our high scenario, in 2017 if they were given expanded authority to require sales tax collection from all remote sellers. Table 2 presents our range of estimates. Appendix II presents our range of estimates for each of the 45 states plus the District of Columbia that have a statewide sales tax. Our estimates range from more than $1 billion for more populated states like California and Texas to about $20 million for less populated states like Vermont and Wyoming. The average gain is about $200 million. In aggregate, our national estimate of about $8 billion (low scenario) to about $13 billion (high scenario) represents about 2 to 4 percent of total state and local government general sales tax revenues. According to data from the U.S. Census Bureau, state and local governments in 2016 collected about $377 billion in general sales and gross receipts taxes. We found that the extent to which state and local governments can require remote sellers to collect taxes varies by state. Based on analyses of remote sellers’ nexus locations, we estimate that some of the largest states (in terms of population) can currently require sellers to collect about 80 to 90 percent of the taxes these states could collect with expanded authority on all remote sales. In contrast, we estimate that some smaller states can only require sellers to collect and remit about 60 to 70 percent of the taxes they could collect on all remote sales. The difference is based on the greater likelihood of Internet retailers having a physical presence in larger states. We researched store locations and sales tax policies for the largest 100 Internet retailers identified by researchers at Internet Retailer. We found that about 85 percent of these Internet retailers had store locations in, or stated on their websites that they were collecting sales taxes for, California and New York. By contrast, about 55 percent of these large Internet retailers had stores or were collecting in less populated states like North Dakota and Wyoming. For smaller Internet retailers with only one location, we also found that a disproportionate share of them were located in larger states. Based on our analysis of more than 400 Internet retailers with only one location, we found that 19 percent were located in California and 12 percent in New York. With Internet retailers and other remote sellers less likely to have a physical presence in less populated states, smaller states are at a disadvantage compared to larger states in their ability to require remote sellers to collect taxes on all sales into their states. We estimate that nearly half of potential revenue gains to state and local governments would result from collecting sales taxes on all e-marketplace sales. To date, e-marketplaces have not been obligated to collect state sales taxes on behalf of sellers. Instead, like with all remote sellers, individual sellers who have title to the goods being sold through an e-marketplace are required to collect tax on sales to states in which they have nexus. However, we identified two states that have recently taken action to attribute a collection obligation to the e-marketplace. Through our review of tax industry publications and interviews with tax practitioners, we learned that some individual sellers have difficulty obtaining information from the e-marketplace companies on where their goods might be stored. While the three large e-marketplaces that we interviewed offer their sellers additional services that help sellers calculate and collect sales taxes, not all sellers take advantage of this service. None of the e-marketplaces that we interviewed could provide us data on the extent to which their sellers currently collect sales tax. Given the lack of available data, we made a conservative estimate of potential revenue gains to states if given the authority to require all e-marketplace sellers to taxes on all their sales. If e-marketplace sellers are currently collecting less tax than we assume in our model, the actual potential revenue gain to states would be higher than the estimate we provide in this report. Because state and local governments currently do not have the authority to require businesses to collect tax on all remote sales, states generally require taxpayers who were not charged a tax on their purchases from out-of-state vendors to pay a use tax on those purchases. However, with the exception of purchases that are required to be registered with the state, such as vehicles, voluntary compliance is generally thought to be extremely low. For those states that permit taxpayers to report use taxes on their income tax returns, it is estimated that only about 1 to 2 percent of returns include use tax payments. Unlike estimates for individual compliance with use tax, estimates for business compliance are high, ranging from 70 to 90 percent. Some tax practitioners we interviewed told us that businesses routinely retain records of their taxable and tax- exempt purchases, including remote purchases, and are more likely to be compliant with any use taxes. We identified at least four states that have begun implementing new laws intended to increase consumer use tax compliance. Under these “notice and reporting” laws, remote sellers not collecting taxes on out-of-state sales are required to notify customers that they may be liable for use taxes to their home state. The states are also requiring remote sellers to send their out-of-state customers an annual summary of all purchases for which sales tax was not collected. Data from these annual summaries are shared with state revenue agencies that can use this information for enforcement purposes. Data were not yet available to estimate the revenue effects of these new programs. As we have previously reported, tax compliance is generally much higher when there is third-party reporting of information to the revenue agency. We expect that state collection of third-party information will achieve similar results. We identified various costs associated with typical steps involved in multistate sales tax collection. We group these costs into three broad categories: software related costs, audit and assessment compliance costs, and costs associated with research and liability. We found that businesses with limited experience in multistate tax collection and those that lack software systems designed to facilitate multistate tax collection would incur the highest costs under such a scenario. Representatives from a large national chain and a trade group representing retailers told us that, generally speaking, larger retailers and those that primarily engage in brick-and-mortar retailing believe that expanded state authority would end the unfair advantage that remote retailers gain by not collecting sales tax on their out-of-state sales. Those familiar with multistate collection explained that because the software used for multistate collection is easily scaled up, retailers already using such systems, would incur few challenges to adapt to this expanded authority. Further, larger retailers that already collect in many states would already have the systems in place for collection under expanded authority. We also identified state and national efforts for simplifying tax collection for businesses. These efforts show potential for mitigating the expected costs, but much depends on the specifics of any legal changes. Our research found that a number of commercial software offerings are available to assist businesses with collecting sales taxes in multiple states. Two people familiar with the use of tax software told us that although many standard business software products generally include some sales tax functionality, these systems do not always fully support businesses selling in multiple tax jurisdictions. As a result, sellers with more widespread collection obligations typically use specialized multistate sales tax software. A representative from a Certified Public Accounting (CPA) firm explained that costs are incurred both when businesses collect sales tax from customers, and when they remit the tax to the appropriate state revenue department. In some instances, there are also start-up costs that businesses incur prior to tax collection, as well as audit or assessment costs that occur after tax collection. Figure 1 summarizes these steps and can help inform the discussion of the specific costs. The cost of both collecting and remitting sales tax rises with increased exposure to tax jurisdictions. As the number of jurisdictions for which a business collects taxes increases, the amount of administrative work also increases. Businesses will have to prepare and file a greater number of returns, license more functionality from the collection software they use, and collect tax on a greater number of sales. All of these actions add additional costs to a business’s operations. While all sellers would incur these additional costs, costs will be highest for those that do not already use software for multistate tax collection. This is especially true for those selling goods treated differently by different states and those that do not use easily-integrated software. Costs for collection software include, start-up costs, licensing fees, administrative costs, and options for premium services, such as preparing or automatically filing sales tax returns. Start-up costs are the costs associated with setting up the software for first use. Tax practitioners told us that software is necessary for multistate collection because of the complexity created by unstandardized requirements across jurisdictions. As we note above, tax policy specialists have cited figures as high as 12,000 and as low as 10,000 for the number of tax jurisdictions in the United States. In addition to differences that exist among the tax codes of the 45 states and the District of Columbia with statewide sales taxes, many local bodies have the power to impose additional sales taxes on purchases within their jurisdictions. Some tax practitioners that we interviewed said that mapping and system integration related to the necessary software for multistate collection are the most costly of the start-up activities. Mapping requires coding all of a business’s product offerings to the taxation categories used by the software. One software provider told us that generally, these software products do not require businesses to research the legal categorization in each state’s laws; however, it does require businesses to categorize products with sufficient precision for the software to assign its tax status based on state laws. For example, apparel is treated differently across states. Pennsylvania exempts clothing, except for formal apparel; items made of real, imitation, or synthetic fur; and athletic apparel. Across the border, New York State exempts clothing sold for less than $110; however, some jurisdictions do not apply these exemptions and charge a local sales tax on these items. The initial product mapping required before using multistate tax software can be labor intensive. As such, we expect that businesses setting up software for the first time, and selling goods which states treat differently will have more labor-intensive product-mapping work. Some software providers offer consulting services to assist businesses with mapping their offerings. Software providers, however, treat these services as a premium option so businesses will generally incur extra costs for using these services. Several people familiar with the use of sales tax software said that errors in mapping products can expose businesses to liability in the form of uncollected taxes. Recognizing the wide variations in sales tax laws, a group of states launched the Streamlined Sales Tax Initiative in 1999. The initiative was designed to standardize these variations and provide software assistance to make it easier for businesses to comply with state and local sales and use tax laws. This initiative sought to shield businesses from liability by directing software providers participating in the effort to complete mapping for businesses and assume liability for errors. However, more recent changes allow software providers to negotiate these issues directly with their business clients. According to a representative of the Streamlined Sales Tax Governing Board, 24 states have passed legislation to conform to the Streamlined Sales and Use Tax Agreement. These states account for a third of the United States population, but many of the largest states (in terms of population) are not fully participating. Software integration, or establishing a connection between existing business software and the new multistate tax software, will be required for businesses that begin to use multistate tax software. Two software providers we spoke with said that they have already created integration modules for the most common business software packages in use today. One explained that integration with these common business systems is generally the least expensive and may come at no cost to the business. However, businesses using customized software or software that is not in common use may see higher costs to integrate these systems. Some businesses may need to integrate several systems with the collection software. This integration may be required for transactions such as processing sales through different retail channels or ensuring that merchandise returns are removed from existing collections. Businesses will also face additional costs to license the necessary software functionality from the provider. A public accounting firm told us that these on-going licensing fees are generally lower in the first year, than the one-time costs associated with mapping and integration. Licensing costs generally are a function of the volume of information requests sent to the tax database maintained by the software provider. In estimating costs to license multistate collection software, online businesses must consider both the number of completed transactions they anticipate as well as the browsing behavior of those using their websites. A CPA firm we interviewed explained how these software packages work. Whenever a business website calculates a sales tax amount, it does so by sending an information request to a rate and address database maintained by the software provider. Importantly, this process is often an automated function of the “shopping cart” system, which may calculate a sales tax amount whenever a customer changes the goods in the shopping cart, even in the absence of a completed sale. As such, businesses must account for both completed transactions as well as how often customers change the bundle of goods in the online shopping cart. For example, customers may use shopping carts while comparison shopping on different websites. Our market research found licensing costs as low as $12 per month for up to 30 information requests each month, and as high as $200,000 per year for unlimited information requests. Businesses and others familiar with sales tax software told us that licensing fees are only one of multiple costs required to collect sales taxes in multiple states. As such, simplification proposals that include provisions for states to pay these licensing fees may not mitigate significant costs to businesses transitioning to software assisted multistate collection. Businesses will still incur start-up costs and additional administrative costs, even when states pay the licensing fees on the use of the software. Even under such proposals when software comes with no licensing fees, mapping can be labor intensive for businesses selling products that state tax laws treat differently, and integration can create costs for businesses using custom software or software that is not widely used. Further, for software to reduce administrative costs, it must be integrated with more than just a business’s shopping cart system. However, simplification proposals that only cover software licensing costs and integration with the shopping cart system may leave businesses with the costs of a more extensive integration. Businesses would either have to incur additional costs to better integrate sales tax software with existing business information systems (such as a general ledger accounting system), or regularly reconcile receipts and records manually to prepare sales tax returns for all states where it makes sales. Additional costs for software include administrative costs associated with use of the software. These costs are incurred because even automated software requires some administrative work by staff. The use of optional premium services offered by software providers may further reduce these administrative costs, but increase software costs in the process. Administrative costs tend to be highest, as a proportion of taxes collected, for the smallest sellers. Some businesses told us that collecting sales tax in all jurisdictions where they have customers would increase staffing costs, even when collection is facilitated by software. Premium services commonly offered by software providers assist businesses with preparing and filing tax returns. While electing to use these services may save businesses labor costs, they incur additional fees to use these premium services. We interviewed several businesses based in states that do not collect a sales tax. They told us that they are already researching software options should the need to collect sales tax on all remote sales arise. These businesses told us that they have little experience with collecting sales tax. As reported above, in the first year, start-up costs for the software are much higher than the on-going licensing fees. Businesses that do not need to collect sales tax in their own state may be less likely to already have multistate tax collection software or in-house expertise. If states are allowed to require businesses to collect tax on all remote sales, businesses we spoke with expect audit and assessment related costs to rise because of increased exposure to more tax jurisdictions. Attorneys told us that state revenue departments also employ other low- cost enforcement tools that create compliance costs. Officials from three state revenue departments that we spoke with said that they primarily focus their audits on large businesses because audits are resource intensive. Officials from one agency acknowledged that other enforcement tools, such as a letter audit, require fewer resources to use. Some businesses told us that they already expend significant resources responding to audits on sales tax collection and remittance. These costs include making staff available, developing justification for tax claims, and complying with document or information requests. A representative from the tax department of one company with nexus in most states said that auditors return every few years to audit the company and that they are currently contending with 8 to 10 audits from different tax authorities. They expect audit related costs to grow with exposure to more jurisdictions and that will require hiring additional staff. Another business we spoke with said they had just dealt with an expensive audit that lasted 3 years. They reported that they do not have the resources to comply with similar audits from other jurisdictions. We interviewed 11 businesses, attorneys, or representatives from the business community who said that fear of increased audits, should states gain expanded authority to tax remote sales, is a legitimate concern for businesses. Attorneys we spoke with offered several reasons that small- and medium-sized businesses will be audited should states gain the authority to tax remote sales. One explained that sales tax audits of small businesses often identify non-compliance and produce revenue. Another said that assessments prepared by revenue offices generally carry a presumption of accuracy. In practice, this places the burden of proof on the retailer to rebut claims made by revenue offices. However, some state revenue departments we spoke with said that they do not expect their audit resources to increase and therefore would be spread more thinly if states are allowed to require businesses to collect tax on remote sales. Two state revenue offices explained that this change would mean they have a much larger universe of businesses from which to select. As such, it is unknown how frequently businesses might have to contend with concurrent audits in different states. Travel to, and securing counsel in, remote jurisdictions would create additional costs for audited businesses that would not occur in the current environment. A business representative explained that the CPAs and attorneys they employ, or have on retainer, may not be able to represent the business in an out-of-state venue. As such, businesses would need to retain counsel qualified to practice in the assessing jurisdiction. Two business representatives also told us that businesses may be less successful at challenging tax assessments in out-of-state courts. This may prompt them to settle claims in an out-of-state court that they might litigate in their home state. Further, the federal Tax Injunction Act restricts businesses’ ability to seek relief in federal court for matters related to state taxes. In addition to audits, state revenue departments have many low-cost enforcement tools at their disposal. One example is the letter audit. An attorney we spoke with explained that in this process, a revenue office sends a letter to a business stating that the office suspects they owe sales taxes. The business incurs costs to prove the state wrong to avoid the assessment. In some cases, states bypass the assessment process and sue the business—arguing that the business has nexus in the state and owes tax. In conducting interviews, we found that states also send information requests and questionnaires to businesses designed to uncover whether they have nexus obligations. One representative from a trade group we spoke with said that a business will normally be responsive in order to remain in compliance with the law, despite potential uncertainty about the state’s authority to collect. Businesses we spoke with in states that do not collect a sales tax generally were not collecting sales taxes for other states, so they had little experience with a sales tax audit. Further, some businesses in these states were not tracking the legal requirements on businesses imposed by out-of-state jurisdictions. Businesses located in states without a sales tax also may incur costs to alter business practices after initial exposure to sales tax audits. This might happen because the procedures they currently use may not withstand the taxing states’ scrutiny. If states gain the authority to require businesses to collect tax on remote sales, businesses will have to incur costs to understand their new compliance obligations, which can differ by state or tax jurisdiction. The related liability cost increases along with an increase in exposure to more tax jurisdictions. These costs will likely increase the most for businesses that do not have established legal teams, software systems, or outside counsel to assist with compliance related questions. We identified three areas, based on interviews with businesses, where these costs are most likely to occur. First, businesses expressed concern that changes in legal precedent could expose businesses to liability for past sales. Second, some businesses reported paying assessments based on contestable laws. Third, some businesses reported instances where businesses’ actions created nexus that led to an unforeseen liability. The U.S. Supreme Court’s 1992 decision in Quill Corp. v. North Dakota constrained states’ ability to tax sales originating from outside the state. We identified four states that recently changed their laws in an attempt to re-litigate this decision. A representative from the business community told us that the effect of the U.S. Supreme Court potentially overturning the Quill decision may allow laws that are on the books in many states to be enforced. For example, Alabama’s Department of Revenue told us that they have asserted jurisdiction over remote sellers under a previously unenforced law to further litigation challenging the Quill decision. They acknowledged that this action has the potential to allow retroactive enforcement, should the challenge succeed. However, they said the state was most interested in prospective compliance. Some businesses worry that, if legal arguments like these prevail, states will not confine themselves to prospective enforcement efforts. They fear that states could decide that businesses owe taxes from years when enforcement of the law did not impose collection obligations on out-of-state businesses. State revenue departments mail assessments, questionnaires, and other correspondence to out-of-state businesses. These may direct businesses to provide information, pay taxes, or register to collect sales taxes. In some cases, the Quill decision protects businesses from obligations to comply with these directives. Nevertheless, some businesses have complied. One representative from a trade organization representing remote businesses said that the natural tendency for a business is toward compliance. This may lead them to pay or comply without thoroughly examining the strength of their legal position. He cited a state that mailed around two hundred demand notices to out-of-state businesses for unremitted sales tax. Even though he said that these businesses did not have nexus in the state, more than half of businesses remitted payment. Another business told us that they registered to collect in a state that was attempting to challenge the Quill decision because they judged that the cost of challenging the state’s new law was likely to exceed any increased compliance costs. This business said that collecting the tax, but waiting to remit it pending the results of a legal challenge, would expose the business to penalties and interest. Because state tax laws are complex and subject to change, businesses may not always be aware of their obligations under state law. Our research revealed cases where businesses incurred collection obligations unknowingly. One lawyer, whose practice represents several businesses in sales tax related issues, described a business that was contacted by a nearby state’s revenue office and asked to provide information on its use of fulfillment services from a popular marketplace provider. The business downloaded a report from the marketplace provider and sent it to the revenue office. The business said that the marketplace provider had formatted the information in a way that made it uninterpretable without knowledge of the location codes it contained. The state revenue office was able to use the report to show that the marketplace’s fulfillment services stored the business’s property in the state. Stored property suffices to create a nexus obligation and the business received an assessment for back taxes, interest, and penalties dating back to when the property was first stored in the state. The lawyer we spoke with has seen six similar cases since that one and said that the addition of interest and penalties often doubles the amount of taxes owed. Active monitoring of sales tax laws across the country can help businesses ensure they are compliant with all of their legal obligations. Businesses we spoke with differed in the way they conducted this research. Some undertook the research in-house. Others used software that provides updates when laws change. Some said that they require outside legal counsel to resolve difficult questions. In all cases, this research imposed additional costs on businesses. Four businesses in states without sales taxes told us that they have incomplete research or a lack of familiarity with recent changes to state laws that impose obligations on out-of-state businesses. Businesses like these may encounter additional costs in the form of unforeseen liabilities or costs to conduct research. In the course of our research, we identified strategies with the potential to mitigate the concerns laid out above. However, much would depend on the specifics of any legal changes. These strategies include: simplification rules for collection and remittance in multiple states, small business exemptions for businesses under a certain size, transition periods for businesses to come into compliance, and limitations on lookback periods. Simplification Rules May Help Businesses Understand Collection Obligations Simplification rules for remote sellers could provide businesses with a single compliance requirement instead of varied requirements from the jurisdictions with the authority to assess sales tax. These rules could lower research and compliance costs, and leave businesses less exposed to hidden liabilities. One multistate effort has created a set of simplified rules for collection and remittance. However, one attorney we spoke with said that the rationale for including and excluding certain items in the classification is unclear, and this leaves room for states to interpret the taxability in different ways. Further, some of the simplifications proposals we analyzed do not apply to state definitions of nexus. As such, it is possible that businesses might be aware of and compliant with the simplification rules, but unclear on how to structure their operations to avoid the less simple rules that come from acquiring nexus. These cases might require additional research costs and legal services to resolve and may expose a business to unforeseen liability. Small Business Exemptions May Help Small Businesses Avoid Additional Costs Small business exemptions would ensure that businesses with sales below a specified threshold would not be liable for taxes to remote jurisdictions. This could reduce research and liability costs for small businesses because these businesses would only have to verify that their sales were below the threshold that requires collection. However, some business representatives we spoke with said that the thresholds contained in many proposals were too low. The Small Business Administration defines a small business as one with $32.5 million in annual sales for electronic shopping retailers, and $38.5 million for mail-order houses. Federal legislation allowing states to tax remote sales have included a variety of small business exemptions. For example, one proposal would initially exempt small business with annual sales below $10 million, but that exemption would decline and eventually expire after 3 years. Another proposal would set a permanent exemption of $1 million in annual sales. New state laws and administrative regulations require out-of-state sellers to collect taxes. We identified small seller exemptions in some of these laws and regulations as low as $10,000 and as high as $500,000 in annual sales into the state. However, one business owner said that $25 million in annual sales is still a small business. The owner explained that such businesses can quickly go bankrupt and have little capital to survive downturns in the business cycle. Business representatives said that business models which emphasize low margins and high sales volume are common in remote sales. These businesses may have limited resources for additional compliance obligations. Transition Periods Can Help Businesses Prepare for Collection Obligations Transition periods may give businesses time to examine their legal obligations and secure tools, such as software or legal counsel, to facilitate compliance but can prompt increased demand for assistance and services. Our work has shown that sometimes tax system transition deadlines are likely to prompt a large volume of requests from taxpayers for compliance assistance from taxing authorities. Because businesses reported that additional software or legal services would be required to transition to new collection obligations, we expect demand for such services to increase before transition deadlines. Limits to Lookback Periods May Protect Newly Registered Businesses Limited lookback periods restrict how far back a state revenue agency can examine a business’s records after that business registers to collect taxes. Attorneys that we interviewed said that registering to collect with a state can trigger an examination of that business’s records with an eye to discovering if the business owes taxes for sales prior to the registration. They explained that if businesses are not protected by limitations to lookback periods upon registration, this may inhibit registering to collect in new states. One business owner told us that the risks of additional scrutiny and unforeseen liability have prevented him from registering to collect in a nearby state where he would like to do more business. Limitations to lookback periods would give businesses more confidence in registering to collect because they would be less likely to incur additional scrutiny or an unforeseen liability as a result of the registration. Actions by state and local governments to increase tax collections on remote sales could require additional government resources to administer sales taxes. State revenue agency officials, as well as representatives from the Federation of Tax Administrators and other state government organizations we interviewed, did not identify any major increases in administrative costs or significant administrative challenges if states were given the authority to require businesses to collect taxes on all remote sales. In the absence of congressional action to grant states expanded tax collection authority on all remote sales, state legislatures have recently considered, and in some cases enacted, new laws designed to increase tax collections on remote sales. As these proposals were being considered, we identified five revenue agencies or legislative budget offices that had estimated the costs to implement and administer these new programs. For example, one state’s analysis concluded that current state revenue agency resources were sufficient to implement and administer the new program, and another state’s analysis determined that the program would have only a moderate effect on the state revenue agency. Other state analyses that estimated additional annual costs varied widely, from a few hundred dollars to up to $4 million. While these estimates varied widely, we found that this information helped to illustrate potential challenges and costs state and local governments could face in trying to collect taxes from all remote sellers. Interviews with three state revenue agency officials who had already implemented, or were beginning to implement, new programs also provided us further information on potential administrative costs and challenges. Sales Tax Administration Activities Registration of vendors. States need to process registration forms from new vendors, including out-of-state vendors. States also need information to help identify unregistered vendors. Returns processing. States require resources to process sales tax returns, including returns from out-of-state vendors. States typically capture data in information systems, and identify and process over- or underpayments. Enforcement efforts. Audit resources are needed to verify vendors’ total taxable sales. When auditing out-of-state vendors, state revenue departments may face higher travel costs. Collections. States send delinquency notices to vendors for late, miscalculated, or underpaid collections. Taxpayer services. States provide education efforts and taxpayer assistance to improve voluntary compliance. We previously reported that the following state functions are typically associated with administering sales taxes: identifying and registering vendors; returns processing; enforcement; collections; and taxpayer services (see sidebar titled “Sales Tax Administration Activities”). If remote sellers were required to collect state taxes regardless of nexus, states may need to process an influx of new registration forms from out- of-state vendors. State revenue agency officials as well as representatives from the Federation of Tax Administrators told us, however, that they did not anticipate that registering new out-of-state vendors and processing additional returns would pose major challenges to state agencies. They explained that state revenue agencies already process a large volume of registration changes annually as new businesses are created or existing businesses fail. As a result, they expected that new registrations from out-of-state sellers would not represent a significant strain on current resources. Potential increases in new out-of-state vendor registrations could be lessened by states’ small seller exemptions. Some state proposals for increasing tax collections on remote sales have exempted smaller out-of- state sellers with annual sales less than a certain dollar amount, or annual transactions less than a certain number, into a state. Recent small seller exemptions have set annual sales exemption thresholds ranging from $10,000 in Washington State to $500,000 in Massachusetts. One revenue agency official from Alabama, which began enforcing a new remote-seller regulation in 2016 that has a $250,000 small seller exemption, told us that the approximately 100 newly registered out-of- state sellers is an extremely small share of the state’s total 40,000 registered sellers. States may need additional resources to process new tax returns from out-of-state vendors and to verify out-of-state vendors’ total taxable remote sales into a state. However, as tax administrators noted above with regard to new vendor registrations, any increase in out-of-state returns processing may be minimal when compared to the volume of routine in-state returns. When processing new out-of-state returns, states may need to decide whether to capture the same amount of data from out-of-state filers as they currently do for in-state filers in order to limit errors and required resources for follow-up. Depending on whether and how some states choose to centralize registration and reporting for out-of-state vendors, some administrative costs and burdens associated with these functions might be reduced or mitigated. For example, a revenue agency official from Alabama told us that implementation of its new administrative rule (requiring out-of-state vendors to collect taxes on sales to Alabama customers) has been facilitated by having its state revenue department serve as a centralized collection point on behalf of local tax authorities. Thirty-seven states, like Alabama, have local sales taxes in addition to statewide sales taxes. Some of these local taxes are already centrally collected by a state revenue agency, but in some states, local authorities collect them. States that are members of the Streamlined Sales and Use Tax Agreement have agreed to allow centralized state registration and reporting for out-of-state vendors. Louisiana, another state with many local sales tax jurisdictions, recently enacted a new law creating a sales tax board for promoting “uniformity and efficiency” of local sales and use tax administration. The law also created an independent agency within the state’s Department of Revenue for administering and collecting state and local taxes related to remote sales. When allocating enforcement and collections resources, state administrators may need to weigh trade-offs between pursuing incidences of noncompliance (typically higher among small filers) against potential revenue effects (greatest among large filers). Representatives from the Federation of Tax Administrators did not anticipate significant increases in enforcement costs because they said most sales tax noncompliance is detected not through intensive audits but through less costly automated matching of electronic data such as credit card sales receipts with business-reported sales. They also said that most noncompliance issues are resolved via automatically-generated correspondence with taxpayers. That is, most taxpayers resolve additional amounts owed or other noncompliance matters after receiving notification letters from state revenue agencies. One state revenue agency official told us that his agency may experience higher travel costs associated with audits of out-of-state vendors. The same official believed, however, that this might merely require re- allocating current travel expenses from in-state audits to out-of-state audits rather than requiring an increase in travel budgets. The Oklahoma legislature recently authorized the state revenue agency to create an out- of-state sales tax enforcement division. While the final bill provided the state agency with flexibility to staff this division using existing resources, the original proposal would have mandated opening a new office outside the state and staffing it with a minimum of five employees at an estimated annual cost of $450,000. Finally, state revenue agency officials and representatives from the Federation of Tax Administrators told us that they anticipated some additional resources may be needed for taxpayer assistance such as providing increased telephone assistance or publishing guidance for new out-of-state vendors. Demand for taxpayer assistance is likely to be higher from smaller out-of-state vendors with less experience in collecting and remitting taxes to other states. The complexity of a state’s sales tax laws, such as rules for when to exempt a certain type of product based on how it is used, are also likely to affect levels of taxpayer service requested by new out-of-state vendors. We identified at least four states that have enacted new “notice and reporting” laws in attempts to increase tax collections from remote sales. Under these laws, if an out-of-state seller chooses not to collect taxes on sales into a state, then the seller is required to notify its customers of state use tax obligations, send customers annual summaries of their purchases, and share that information with state revenue agencies. One state’s fiscal analysis of its new notice and reporting law estimated that out-of-state retailers will decide to collect the tax rather than comply with notice and reporting requirements. The handful of new notice and reporting laws that we identified have only recently become effective, so it is unclear to what extent this has or will occur. We found two recent estimates of costs to implement and administer these new notice and reporting laws. The Louisiana Legislative Fiscal Office estimated that the state revenue agency would incur costs of $90,000 annually to administer a new notice and reporting law. By contrast, the Washington Department of Revenue estimated that it would cost about $4 million annually to administer the state’s new notice and reporting law. Washington revenue officials told us that most of these costs come from hiring new staff. They explained that increased costs are common when they must enforce new provisions of the tax code because it is not easy to reassign tax staff. State revenue agencies implementing new notice and reporting laws may experience difficulty matching sales information from out-of-state retailers with taxpayer data. Revenue officials from Colorado told us that the annual sales reports remote sellers are required to send to their customers and share with state revenue agencies, will not contain unique taxpayer identification data like Social Security numbers. Without these data, these officials explained that revenue agencies will need to use customers’ names and addresses to match with taxpayer returns. If buyers with similar names make use of the same delivery address, this may complicate efforts to identify a taxpayer’s use tax obligation. Colorado and Washington officials also told us that once their revenue agencies begin sending letters to taxpayers with estimated use tax obligations, they anticipate significant increases in phone calls and other requests for taxpayer assistance. In order to manage expected increases in call volumes and control costs, Colorado officials said they plan to be selective about sending notices in the first years. Officials from Washington’s Department of Revenue told us that one part of their new notice and reporting law applied to e-marketplaces rather than sellers. Officials told us that it is easier for states to enforce compliance against one large entity (the e-marketplace company) instead of the thousands of smaller sellers that sell through the e-marketplace’s platform. Washington’s notice and reporting law requires e-marketplace companies to comply with the notice and reporting requirements if the e-marketplaces choose not to collect and remit taxes on behalf of their individual sellers. In August 2017, the Multistate Tax Commission began offering a general sales tax amnesty program for e-marketplace sellers. During the amnesty period, the commission would accept applications from qualifying remote sellers. The sellers would affirm in their applications that their only connection with the participating state or states is through inventory housed in an e-marketplace’s warehouse or fulfillment center. In exchange, one group of participating states would agree to waive back tax liabilities for sales and use taxes, as well as for income and franchise taxes, including penalties and interest, without regard to any lookback period. At the time of our report, 24 states and the District of Columbia were participating. The program was set to end in November 2017. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate Senate and House committees. We will also send copies of the report to the Secretary of the Treasury and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix III. To address our objective on estimating how much revenue state and local governments could gain by being able to collect taxes on sales made by all remote sellers, we updated a model we used to prepare similar estimates in 2000. The sidebar titled “Steps Involved in Estimating Potential Revenue Gains” summarizes the steps in our methodology. Compared to when we did similar analysis in 2000, there are some areas where we have better data, but a single point estimate is still not possible because of uncertainty surrounding estimates of several key inputs to our model. In our 2000 report, there were few reliable data sources on which to base our calculations and adjustments. We noted then that projections of sales were particularly difficult to make given the rapidly changing e-commerce environment. Today, there are more data sources available on current and future e-commerce sales. In addition to the past uncertainty regarding the magnitude of remote sales, we reported in 2000 that there was considerable uncertainty about the amount of tax that state and local governments were already collecting from these remote sales. Today, data are more easily available on where e-commerce companies have a substantial presence (referred to as nexus) in states. Some research companies track this information, and more companies are explicitly stating on their websites in which states they collect sales tax. Still, we had to make several broad assumptions about the volume of e-marketplace sales, including the extent to which e-marketplace sellers were already collecting sales taxes. As states continue to research tax losses associated with e-marketplace sales and pursue increased enforcement actions, we believe that more data could help improve the accuracy of our estimates. Additional data from e-marketplace companies about the extent to which their sellers are collecting sales taxes through the e-marketplace optional tax services would also help improve further analysis in this area. To obtain sales estimates, we reviewed academic, government, and private-sector studies. We also contacted these authors and other specialists in this field to identify other potential sources of sales estimates. Some state revenue agencies and other researchers who have estimated tax revenue losses from remote sales have used data from the U.S. Census Bureau to derive their base estimates of total Internet and other remote sales. While we did use some Census data in our analyses, we primarily relied upon data from Forrester Research (a research company whose data we had used in our 2000 report) to arrive at low and high scenario estimates for total sales volumes for different types of remote sales as shown in table 3. We chose not to provide a single point estimate, because the low and high scenarios illustrate how the numbers can vary—sometimes non-trivially—depending on reasonable assumptions about the underlying uncertainties. Forrester Research’s estimates of business-to-consumer (B2C) e-commerce sales for the years 2016 to 2021 presented data on 31 different product categories to which we could then apply specific state sales tax rates and exemptions. By contrast, similar Census data were more limited in that: the data contained fewer categories (13 merchandise lines plus non-merchandise receipts); the most recent data were for the year 2015; and the data did not include e-marketplace sales. Forrester Research’s total online retail forecast for 2016 was about $400 billion and nearly $450 billion for 2017. We reduced this total by about $20 billion by removing sales for two product categories (movie tickets and event tickets) that were more akin to services industry (rather than retail) activities. Unlike Census data, Forrester Research included sales from e-marketplaces in its e-commerce forecasts. Sales tax losses associated with e-marketplace sales have become an increasing area of focus for state revenue agencies, and so it was important to include in our analysis. To separate e-marketplace sales from the sales of other Internet retailers, we analyzed data from the annual reports of three leading e-marketplace companies and data we obtained from Internet Retailer. We estimated the value of merchandise being sold on these three leading e-marketplaces to be about $110 billion in 2016. However, some of these are sales by other Internet retailers using the e-marketplaces to sell their goods. That is, some retailers operate stores and their own websites but also sell their goods through “storefronts” on the e-marketplaces. We adjusted our total e-marketplace sales estimate to avoid double-counting retailers’ Internet sales in our analysis. In the end, we estimated that e-marketplace sales (excluding the sales of Internet retailers using e-marketplaces) accounted for 20-25 percent of total 2017 online retail sales ($85 billion to $106 billion). Data sources on other remote sales like mail-order catalogs or television shopping channels are more limited, compared to available data on e-commerce sales. A representative of catalog companies we interviewed told us that it is becoming increasingly difficult to attribute retail sales to particular sales channels. For example, many catalog retailers also have websites or sell their goods in retail stores or via e-marketplaces. We decided the best available estimates could be derived by separating out aggregate Census data on Electronic Shopping and Mail-Order Houses into separate e-commerce and mail-order components. We first estimated that the mail-order portion of the top-line Census category to be about $150 billion in 2016, but then removed about $95 billion in estimated mail-order prescription drug sales because nearly all states exempt prescription drugs from sales taxes. Using data on historical growth rates for the mail-order catalog industry, we then estimated the range of other remote sales for 2017 to be from $58 billion to $61 billion. Forrester Research’s estimates of business-to-business (B2B) e-commerce wholesale trade for the years 2016 to 2021 presented data on 11 different product categories to which we could then apply specific state sales tax rates and exemptions. While similar Census data included 19 different product categories, the most recent Census data was only for year 2015. Forrester’s estimates exclude sales via electronic data interchange networks which accounts for some of the difference with Census’ larger e-commerce estimate. Forrester Research’s total B2B forecast was about $825 billion for 2016 and about $885 billion for 2017. We removed about $125 billion in petroleum and petroleum products sales because these sales would generally be subject to excise (not sales) taxes and, furthermore, these sales would be taxed on volume (not dollar value) and we lacked volume data, such as gallons sold. We also lowered the value of the motor vehicles and parts category by 40 to 60 percent under the assumption that most vehicles are taxed when registered with state motor vehicle agencies and sales and use tax compliance is considered generally high. To estimate the amount of tax due on remote sales, we apportioned a share of total e-commerce and other remote sales to each state (and the District of Columbia) and then applied each state’s tax exemptions and rates to those sales. We allocated sales across states by assuming that each state’s share of sales to individual consumers is proportionate to the state’s share of U.S. disposable personal income, and that each state’s share of sales to businesses is proportionate to the state’s share of U.S. gross domestic product. We made this allocation for each of the B2C and B2B product categories. We then determined which categories of products and services are taxed by state and local governments and at what rates. Our main sources for state and local rates and exemptions were CCH’s State Tax Guides and Multistate Quick Answer Charts, Federation of Tax Administrators’ summary tables, and the Tax Foundation’s 2017 State Business Tax Climate Index. Eight states plus the District of Columbia do not have additional local sales tax rates levied by cities, counties, or other special taxing districts. For the other 37 states with both statewide and local tax rates, we used weighted average local rates as estimated by the Tax Foundation after first comparing and testing these rates with similar data published by the Washington State Department of Revenue. For B2B e-commerce wholesales, we made additional adjustments to reflect the fact that many B2B sales are exempt from tax based on the type of purchaser or the type of use. These purchaser and use exemptions are important for estimating the proportion of B2B sales that are exempted as raw materials or as inputs incorporated into a final product. Our sources of sales estimates did not disaggregate them by type of purchaser or types of use. In order to estimate the percentage of business-to-business sales that would be exempt, we used input-output account tables prepared by the Department of Commerce’s Bureau of Economic Affairs. These tables show the inter-industry transactions of the U.S. economy for 2015 and provide detailed information on the composition of inputs and the distribution of outputs of all major U.S. industries. On the basis of our analysis of the input-output data, we excluded a range from 50 to 60 percent of all B2B e-commerce wholesales from our model (see row titled “less exempt intermediate goods” in table 3). Seller collection rates represent the share of taxes on remote sales that state and local governments can currently require remote sellers to collect due to remote sellers’ substantial presence (referred to as nexus) in a state. To estimate seller collection rates for selected categories of e- commerce and other remote sales, we followed an approach similar to that in our 2000 study. We made separate estimates for Internet retailers, e-marketplaces, other remote retailers, and merchant wholesale e- commerce sales because a different population of firms dominates in each group. Again, we chose not to use a single point estimate, because the low and high alternatives illustrate how assumptions made about collection rates can vary our model output—sometimes non-trivially. The ranges of our estimates are shown in table 4. To make our estimate for Internet retailers, we analyzed data from Internet Retailer’s 2017 list of the leading 1,000 U.S. companies to determine the states in which they collect sales taxes. We first used data from company financial reports to adjust Internet Retailer’s 2016 global sales figures for the top 100 companies to reflect only U.S. Internet sales. We also used company annual reports and a smaller list of leading Internet retailers from eMarketer to test the accuracy and reliability of Internet Retailer’s data, which we found to be sufficiently reliable for our purposes. We then verified Internet Retailer’s data on the states where each of the top 100 companies were collecting sales taxes by comparing it to sales tax collection policies published on companies’ websites or lists of companies’ physical locations (such as retail stores, warehouses, or company headquarters). We performed our research on companies’ collection policies and nexus from May to June 2017. During this period some companies’ collection policies or nexus changed from the date when Internet Retailer published its Top 1000 list in April. For example, the largest Internet retailer completed agreements with the remaining few states where it was not previously collecting sales tax. As of September 2017, the company stated on its website that it collects taxes on sales of all its products sold to customers in the 45 states (plus the District of Columbia) with statewide sales taxes. For 27 of the top 100 companies, Internet Retailer did not report any data on states where the companies were collecting sales taxes, so we used the results of our own nexus research. For the remaining states where we could do comparisons, we found Internet Retailer’s data on companies’ nexus to be sufficiently reliable for our purposes. On the basis of our nexus research, we found that about 40 percent of the top 100 companies were collecting in all 45 states (plus the District of Columbia) with statewide sales taxes, and three-quarters were collecting in at least half the states. Only 2 of the top 100 companies were only collecting in, or only had nexus, in one state. To estimate the percent of sales on which Internet retailers were currently collecting taxes, we first allocated each company’s total sales to states based on each state’s share of national disposable personal income. We then multiplied each state’s share of sales by the combined state and local government weighted average tax rate to estimate the total tax dollars that could be collected on all sales regardless of nexus. We then used our nexus data for each company to estimate the tax dollars companies were already collecting. The ratio of these two estimates (total taxes collectible under current law, divided by total taxes that could be collected if states had expanded authority) is our estimated “seller collection rate.” For the top 100 companies on Internet Retailer’s list, we estimated this seller collection rate to be from 87 to 96 percent. We then extended our research of companies’ nexus to the remaining 900 companies on Internet Retailer’s top 1000 list. These remaining 900 companies accounted for about 20 percent of the total dollar sales volume for all 1,000 companies on Internet Retailer’s list (after we had adjusted global sales to U.S.-only sales for the top 100). For about one- third of these 900 companies, Internet Retailer did not report any nexus data so we did our own research. For the other two-thirds, we relied on Internet Retailer’s nexus data because we found it sufficiently reliable based on our analysis of first 100 companies listed. Compared to the top 100 companies, these remaining 900 companies were far less likely to have nexus (or said they were collecting) in all or most states. About half the remaining 900 companies only had nexus (or said they were collecting) in one state. In terms of tax dollars, we estimated that these 900 Internet retailers were already collecting from 44 to 49 percent of the potential taxes that states and local governments could require to be collected if given expanded authority on all remote sales. For all 1000 Internet retailers, we adjusted our estimates of dollars currently being collected by plus (+) and minus (-) 5 percent, which gave us a range of overall estimated collection rates from 78 to 86 percent for the category. The wider range of our estimates on seller collection rates for e-marketplace sales is because less data were available on the extent to which these types of sellers already collect sales taxes. We could not find sufficiently reliable data on the physical locations of sellers who use e-marketplaces. The three major e-marketplaces (that we analyzed to estimate total e-marketplace sales) offer their sellers additional services that help sellers calculate and collect sales taxes, but not all sellers take advantage of this service. None of the e-marketplaces that we interviewed were able to provide us data on the extent to which their sellers currently collect sales tax. We found limited data on the extent to which e-marketplace sales include sales taxes. Two studies estimated that sales taxes were more likely to be collected by larger sellers like other retailers using e-marketplaces to sell some of their products. As we noted above when describing our methods for estimating total e- marketplace sales, we estimated that about 40 percent of Internet retailers sell their products not only via their own stores and websites, but also offer their products for sale on e-marketplace sites. In our calculations, we assumed that from 10 to 30 percent of e-marketplace sales were made by large sellers that collected taxes in most states (either due to nexus or collection agreements with states). After allocating those sales to states based on share of disposable personal income, we assumed that these large sellers collected taxes at the same rates we had estimated for the top 100 Internet retail companies. We assumed that the remaining e-marketplace sales (from 70 to 90 percent) were made by smaller sellers with only one nexus, and that these small sellers were geographically located similar to other Internet retailers with only one nexus. After allocating those sales to states, we assumed that these small sellers collected taxes only in their home state. Our resulting seller collection rates for all e-marketplace sellers ranged from 14 to 33 percent. Due to a lack of sufficiently reliable data, we did not consider what percentage of e-marketplace sales are used items. According to one e-marketplace company, about 20 percent of items listed on their site are used. According to information from one tax software company, the taxability of used items for sale varies by state. We could not find data that listed the leading mail-order catalog companies, and in which states they have nexus and are collecting taxes. However, 116 of the companies in Internet Retailer’s 2017 Top 1000 list were classified by Internet Retailer as “Catalog/Call Center” companies. These companies had from $5 million to $5 billion in 2016 Internet sales to U.S. customers and were distributed similarly to the full population of all 1000 companies. Since we had already estimated their collection rates as part of our analysis on Internet retailers, we re-calculated an aggregate collection rate for these 116 companies. We adjusted our estimates of dollars currently being collected by plus (+) and minus (-) 5 percent, which gave us a range of overall estimated collection rates from 58 to 64 percent. We followed a similar approach for estimating seller collection rates for business-to-business e-commerce wholesalers. We identified 106 companies on the Internet Retailer’s 2017 Top 1000 list with significant B2B sales. Some of the companies appeared to sell exclusively to businesses whereas others had both significant consumer and business sales. These companies had 2016 Internet sales to U.S. customers ranging from $5 million to $10 billion, and the subpopulation was distributed similar to the overall Top 1000 population. The 106 companies were more likely to come from Internet Retailer’s categories of: automobile parts, computers/electronics, hardware/home improvement, and office supplies. Comparatively fewer were in Internet Retailer’s categories of apparel/accessories, food/drug, health/beauty, or housewares/home furnishings. Because we had already estimated their collection rates as part of our analysis on Internet retailers, we re-calculated an aggregate collection rate for these 106 companies. We adjusted our estimates of dollars currently being collected by plus (+) and minus (-) 5 percent, which gave us a range of overall estimated collection rates from 85 to 94 percent. According to data we found, consumer and business use tax compliance rates have not changed significantly since we did similar analyses in 2000. As we reported then, consumer use tax rates are estimated to be very low whereas business use tax compliance rates are estimated to be very high. The most widely-cited study we found on consumer use tax compliance was prepared by the Minnesota legislature in 2015. The study reported that for those states that allowed taxpayers to report use taxes on their state income tax returns, the percentage of returns including use taxes ranged from a low of 0.2 percent in Rhode Island to a high of 10.2 percent in Maine. We used the various rates from the study in our calculations. For those states not listed in the Minnesota legislature study, we used a default median rate of 1.2 percent. We had more to up- to-date data for California, Mississippi, and Vermont, which we used in our calculations. We then adjusted the total dollar amount of use taxes paid by consumers from 0 to 10 percent to provide us a range of inputs for our model. Making these adjustments had little to no effect on the final results. For business use tax compliance rates, we found data from five states that estimated business use tax compliance to be from 70 percent to 90 percent. In our model, we applied both these figures to give us a range of estimated use tax dollars paid by businesses. Table 5 shows the potential revenue gains for 2017 that we calculated using various combinations of low and high estimates for sales and sellers collections rates described above. Here too, we chose to not provide a single point estimate because the low and high scenarios for potential revenue gains illustrate how the many underlying uncertainties affect potential revenue gains. By adjusting various model inputs we produced some lower estimates resulting from the following assumptions and adjustments: (1) decreasing our estimated e-marketplace and other remote retailer sales; (2) increasing our estimated seller collection rate for all types of remote sellers; (3) increasing our estimated consumer and business use tax compliance; and (4) increasing our estimates of tax-exempt business inputs (intermediate goods). The higher estimate results from: (1) increasing our estimated e-marketplace and other remote retailer sales; (2) decreasing our estimated seller collection rates for all types of remote sellers; (3) decreasing our estimated consumer and business use tax compliance rates; and (4) decreasing our estimates of tax-exempt business purchases (intermediate goods). We lacked sufficient data on four additional factors that, if we had included in our model, would likely reduce our estimates of state and local government revenue gains. We lacked sufficient data on the extent to which requiring all remote sellers to collect sales taxes on all sales (regardless of a sellers’ nexus) would raise final prices to consumers and thus lower demand for goods sold remotely. Facing higher final prices, some online or other remote shoppers might shop instead at traditional brick and mortar retailers, or place orders with non-U.S. remote sellers. A representative from one major Internet retailer we interviewed believed that its customers placed higher value on the convenience of shopping online and were less likely to change their shopping behavior if previously untaxed sales now included sales taxes. Some economists have concluded that consumers alter buying decisions when remote retailers begin to collect sales taxes. However, one of the tax policy specialists who reviewed our report noted a lack of consensus on this topic. We lacked sufficient data on what portion of e-commerce sales included in our model might be tax exempt digital downloads of software, music, books, and games. Some states consider digital downloads to be a service (not a physical good) and therefore exempt from sales taxes. The variations in state laws governing the taxability of digital downloads were too numerous for us to reliably include in our model. Assuming that states do not change their laws to make these purchases taxable, it is likely that our estimates of potential revenue gains would be lower. We were unable to factor in the extent to which some small remote sellers might be exempt from sales tax collection requirements even if states had expanded authority over all remote sales. Recent state laws and regulations regarding taxes on remote sales have included small seller provisions that exempt sellers who make less than a specified dollar amount of sales or a number of transactions annually into a state. Proposed federal legislation granting states expanded taxing authority on all remote sales also includes different nationwide dollar amount exemptions for small sellers. We could not find sufficiently reliable data to estimate how many businesses or what dollar volume of sales might be exempt either at the state or federal level. As a result, our final estimates most likely overstate the total potential revenue gains for some, or all, states depending on what types of small seller exemptions might be enacted at either the state or federal level, or both. Sales to Tax Exempt Entities We lacked sufficient data on what share of remote sales are made to tax exempt entities. In our 2000 report, we were also unable to identify any estimates of sales by taxable versus tax-exempt purchaser. Officials from one state revenue agency we interviewed estimated that the percent of purchases made by tax-exempt entities or persons to be extremely low. Our final estimates of potential tax gains would be lower for states if we had included an estimate in our model. James R. McTigue, Jr. (202) 512-9110 or mctiguej@gao.gov. In addition to the contact named above, Tara Carter (Assistant Director), Mark Kehoe (Analyst in Charge), Brett Caloia, and Christine N. Dickason made key contributions to this report. Anne Stevens, A.J. Stephens, Cynthia Saunders, JoAnna Berry, Stewart W. Small, Donna Miller, Andrew Emmons and Andrew Howard also provided key assistance.", "summary": "Over the past two decades, e-commerce sales have grown rapidly, greatly expanding a category of sales known as remote sales. Under current law, states cannot require all businesses to collect taxes on remote sales. Congress has been considering proposals to change this. Little current, nationwide information exists to inform the debate. In this report, GAO (1) estimated revenue states and localities could gain by being able to require businesses to collect taxes on all remote sales, and (2) described what is known about the related compliance costs and challenges to businesses, and administrative costs and challenges to states. GAO estimated 2017 revenue gains to state and local governments based on actual and estimated sales data for remote sellers, excluding certain sales that were exempt from taxation or already collected by remote sellers with a substantial presence in a state. Ranges for GAO's estimates were based on a number of key assumptions that were varied based on available data. To describe related costs and challenges to businesses and states, GAO interviewed officials from state revenue agencies, subject matter specialists, and a wide variety of retailers with remote sales and the organizations that represent them. GAO provided a draft of this report to subject matter specialists who agreed with the general approach that GAO followed in making its estimates. Forty-five states and the District of Columbia levy taxes on the sale of goods and certain services, including those sold remotely, such as over the Internet. In 1992, the Supreme Court ruled in Quill v. North Dakota that a state can only require a business to collect and remit sales tax if the business has substantial presence, referred to as nexus, in that state. However, the decision stated that Congress could pass legislation to overrule this limitation. In general, under present law, if a seller does not have nexus in a state, and therefore does not collect tax, then a purchaser is required to pay a use tax in the same amount to his or her state government. GAO estimated that state and local governments can, under current law, require remote sellers to collect about 75 to 80 percent of the taxes that would be owed if all sellers were required to collect tax on all remote sales at current rates. GAO found that the extent to which state and local governments can require businesses to collect taxes varies with the type of remote seller and by state. GAO estimated that state and local governments could gain from about $8 billion to about $13 billion in 2017 if states were given authority to require sales tax collection from all remote sellers. This is about 2 to 4 percent of total 2016 state and local government general sales and gross receipts tax revenues. Some businesses would likely see increases in several types of costs if required to collect taxes on all remote sales. These costs would be higher for businesses not currently experienced in multistate tax collection. Officials from state revenue departments told us that they generally do not anticipate major administrative costs or challenges if given the authority to require businesses to collect tax on all remote sales. GAO is not making recommendations in this report.", "document_type": "gao"}
{"report": "OPM administers two defined-benefit retirement plans that provide retirement, disability, and survivor benefits to federal employees. The Civil Service Retirement System (CSRS) provides retirement benefits for most federal employees hired before 1984. The Federal Employees Retirement System (FERS) covers most employees hired in or after 1984, and provides benefits that include Social Security and a defined contribution system. If a federal employee becomes disabled while employed in a position subject to the retirement system, and the employee meets the disability eligibility requirements, the employee may apply for a disability retirement. Agencies’ human resources offices, payroll offices, and OPM are responsible for compiling and processing federal employees’ retirement applications. The process begins when an employee submits a paper retirement application to his or her agency’s human resources office. OPM’s guidance states that both agencies and payroll offices must certify that specific portions of the application are accurate. OPM employees then ensure that the package includes all the necessary information. An OPM adjudicator processes the retirement package, which contains the application documents from human resources and payroll. For example, the package includes the separation form, which finalizes the date that the employee will retire. The adjudicator determines if the eligibility requirements are met for an annuity as well as health and life insurance into retirement, and calculates the annuity. The process is completed when the individual begins receiving regular monthly benefit payments, as illustrated in figure 1. According to OPM officials, OPM then stores the paper retirement file until (1) all benefits have been applied for and paid to all eligible heirs, and (2) a specified amount of time has passed. Over several decades, OPM has attempted to modernize the retirement application process by automating paper-based functions and replacing antiquated information systems. However, as we have highlighted in our past work, the agency has experienced numerous challenges and has a history of undertaking modernization projects that did not yield the intended outcomes. Specifically, we found that OPM’s efforts over 2 decades to modernize its processing of federal employee retirement applications were fraught with (information technology) IT management weaknesses. In 2005, we made recommendations to address weaknesses in project, risk, and organizational change management. In 2008, as OPM was on the verge of deploying an automated retirement processing system, we reported deficiencies in, and made recommendations to address, additional weaknesses in system testing, cost estimating, and progress reporting. In 2009, we reported that OPM continued to have deficiencies and made recommendations to address these and other weaknesses in the planning and oversight of the agency’s modernization effort. OPM began to address these recommendations; however, in February 2011, it terminated the modernization effort. As figure 2 shows, 31.6 percent of federal employees who were on board as of September 30, 2017, will be eligible to retire in the next 5 years. Some agencies have particularly high levels of employees eligible to retire in the next 5 years. OPM’s reporting on its application processing timeliness also shows longer processing times or occasional improved processing times that were not sustained from fiscal year 2006 to 2017. We found it difficult to compare OPM’s performance across years because the performance measures have changed over time. For example, in 2009 through 2011, OPM’s performance measure was the average number of days to process applications. During this time period, OPM met its target except for 1 year when OPM reported 108 days and the target was 45 days. In contrast, in 2014 through 2017, OPM’s performance measure was the percentage of applications processed in 60 days. During this time period, OPM did not meets its target of processing 90 percent of applications in 60 days as the percentage ranged from 57 to 79 percent each fiscal year. Paper-based applications. Despite past attempts to modernize its retirement applications processing operation, OPM currently requires federal employees to submit their retirement application on paper. According to OPM officials, OPM has automated some front-end processing steps, despite various challenges, such as OPM’s and agencies’ legacy systems lacking functionality or integration, inaccurate data due to manual data-entry errors, and lack of real-time data because data are stored in inconsistent formats at multiple locations. OPM officials reported that payroll providers can electronically send OPM 59 data elements, which allows OPM to authorize interim annuity payments to 50 percent of new applicants, as well as initiates other processing functions. However, as shown in figure 3, subsequent processing steps still require manual intervention, including assembling paper documents into folders, ensuring documents are in proper order, and addressing missing or incomplete information. Staffing capacity. OPM attributed delays to not having enough staff to address its peak workload season, called the surge period. According to OPM, it hired additional staff in 2017 and 2018 to process applications throughout the year, but overtime pay was needed to increase staffing capacity during surge periods. Also, officials reported that hiring freezes, continuing resolutions, and other budget constraints affected hiring numbers and created hiring delays over the past 5 fiscal years. During the surge, OPM officials said they receive the bulk of applications starting in mid-January continuing through February (6 weeks). However, the effect of the surge workload lasts until mid-April because OPM takes about 60 days on average to process an application. Figure 4 illustrates the flow of applications OPM received and processed in fiscal years 2016 to 2018. During the months of January and February in this time period, OPM received an average of about 13,200 applications per month, a considerable increase over its average of about 7,200 per month at other times of the year. Despite the increase in applications, OPM’s application processing numbers remained essentially the same in January and February (8,200 per month) compared to other months of the year (8,100 per month), thus increasing OPM’s inventory of unprocessed applications, which ranged from approximately 11,400 to 24,200 for the time period shown. The increase in inventory was partly mitigated in March of each year, when OPM processed an average of about 11,000 applications. OPM officials reported that they processed more applications in March because they used overtime pay and flexible staffing across work units, such as temporarily shifting staff to a different unit to expedite workflow; screened for complete applications; and received fewer applications as surge periods ended. We discuss these and other actions OPM has taken to increase staffing capacity during surge periods later in the report. Incomplete applications. According to OPM officials, in up to 40 percent of applications, OPM is missing information needed to finalize processing, which increases processing time. Incomplete applications generally fall into two categories: Missing information. OPM estimates about 10 percent of applications are missing information, such as a form or signature. For example, OPM officials said that documentation for the applicant’s preceding 5 years of health insurance coverage, which is necessary to continue health insurance into retirement, was often missing. Waiting for applicant decisions. OPM estimates about 30 percent of applications are delayed while waiting for applicant decisions. For example, OPM stated that it must wait 30 days for the applicant to select an annuity option if deposits or redeposits are made. In addition to these three root causes, OPM officials reported that other factors, such as legislative changes, can also cause processing delays. For example, changes in the law may require OPM to revise its processes and train its staff, taking away time from core processing activities. Subsequent to terminating its retirement modernization effort in February 2011, OPM refocused its retirement modernization efforts and in 2013 developed a new strategic vision for modernizing retirement applications processing. OPM’s 2013 strategic vision for modernizing retirement applications processing envisioned a paperless system that would timely authorize accurate retirement benefit payments, answer customers’ questions, and promote self-service account maintenance. According to OPM officials, the strategic vision consists of five key initiatives which are in varying stages of development and implementation, as shown in table 1. Partly in response to cancelling its third attempt to automate the processing of federal retirement applications in February 2011, OPM is now taking an incremental approach towards modernizing its retirement IT systems. According to OPM officials, they also recognize the need to improve OPM’s enterprise architecture before implementing significant modernization efforts. As we have previously reported, these steps can help agencies successfully modernize and maintain IT environments. OPM’s current approach provides a framework to help the agency achieve its overall IT modernization strategic vision. However, OPM officials provided no further explanation about how retirement IT modernization activities would proceed, such as describing proposed time frames and estimated cost ranges, even for initial project phases. Likewise, OPM’s Inspector General recently reported that the agency’s fiscal year 2018 IT modernization expenditure plan did not account for total costs nor identify the full scope of OPM’s modernization effort for the agency. Industry best practices and IT project management principles stress the importance of sound planning for system modernization projects. These plans should identify key aspects of a project, such as scope, responsible organizations, costs, schedules, and risks. Additionally, planning should begin early in the project’s life cycle and be updated as the project progresses. Further, according to federal internal control standards, management should define objectives in specific and measurable terms, such as defining what is to be achieved, who is to achieve it, how it will be achieved, and time frames for achievement. OPM officials said that additional IT modernization work is dependent on sufficient funding, support from the Office of the Chief Information Officer, and development of a technical enterprise architecture roadmap. These components are important. However, they do not preclude OPM from establishing a basic project management plan that includes objectives, estimated cost ranges, and proposed time frames for its initial project phases. Without a plan that is consistent with IT project management principles, OPM is less able to articulate a path forward in measurable terms and assess performance towards achieving its objectives. Similarly, without an electronic application system, OPM is less able to automatically verify information upfront when the application is submitted and notify applicants of any discrepancies prior to accepting the application. The administration’s proposal to move the retirement application processing operation to the General Services Administration (to be renamed as the Government Services Agency) has created additional uncertainty for OPM. Potential changes in organizational affiliation, policy, budget, and staff may make it difficult for OPM to plan for large- scale changes in its operations. Nevertheless, continuing to develop plans to modernize retirement IT systems seems prudent, given that the details of the reorganization are still unknown and that the move to the General Services Administration may not occur in the near term, or at all. Further, IT modernization is a key theme in the March 2018 President’s Management Agenda and will likely be a key driver in changing agency operations for years to come. We have previously reported that to successfully implement reforms and improve their operations and results, agencies need to robustly manage their performance. This involves not only measuring progress toward goals, but also using performance information (i.e., data collected to measure progress towards agency goals) to identify and correct problems, improve program implementation, and make other important management and resource allocation decisions. However, we found that OPM does not use performance information on processing timeliness to manage for results. In addition, we found that OPM conducted limited assessments of its processing data and did not assess the effectiveness of its staffing actions. OPM’s fiscal year 2019 processing timeliness goal is to process all retirement applications in an average of 60 days or less. The related performance measure is the average number of days to process retirement applications. However, we found that OPM did not use its timeliness performance measure to manage for results or provide external stakeholders and applicants a clearer picture of processing time. Performance measures not used to manage. Based on our 2017 survey of federal managers, we found that OPM managers agency-wide reported a statistically significant decrease in using performance information to develop program strategy, allocate resources, and take corrective actions since 2013. Similarly, for this review, we found that OPM could enhance its use of performance information to manage for results in retirement applications processing. OPM has not established additional performance measures for the various parts of the application review and processing operation that would contribute towards achieving its overall processing timeliness goal. For example, OPM does not measure timeliness or have related performance goals for its various work units that process applications. OPM officials do not use such performance goals and measures to manage for results in part because they do not perceive the information to be relevant to reducing processing delays. For example, OPM officials said that the new timeliness performance goal facilitates planning but does not improve processing time or otherwise provide better service to retirees. According to these officials, OPM does not have a requirement for completing its various processing steps within a certain amount of time because each application is different, and they do not want staff to rush and potentially make mistakes, thereby causing rework. In comparison, agencies and payroll centers that submit these applications to OPM are required to do so within a certain time frame. Similarly, OPM has not established a timeliness performance goal or measure for completing its review of applicants’ eligibility for disability retirement. OPM officials said that OPM does not have a performance goal or measure for the review for disability retirement eligibility because it has not reached a steady processing level for these applications. However, OPM did not provide a time frame for when it expects to reach a steady processing level, nor did officials explain why OPM has not established performance goals and measures based on past performance or other benchmarks. In comparison, the Social Security Administration, through partnerships with state agencies, also reviews applications for disability benefits eligibility and has established performance goals for both the accuracy and processing time for this review process. As of November 2018, OPM officials reported that they are collecting data to develop a separate performance goal for measuring the timeliness of reviewing disability retirement eligibility and expect to establish a performance baseline within the next 3 to 6 months. The lack of management practices to encourage and enhance the use of performance measures at the operational level can make it challenging for OPM to use performance information to manage operations, such as identifying problem areas that cause delays and implementing corrective actions, and to make decisions, such as better targeting limited resources based on risk or other priorities. Unclear performance measures. OPM officials reported that the new processing timeliness goal also provides agencies and applicants a clearer, more realistic expectation of processing time. However, none of the four agencies we interviewed considered the new goal to be clearer or more helpful than past goals. The Departments of Defense and Health and Human Services, and the U.S. Postal Service were unaware that any such goal was ever established, prior to our discussions. We found that this performance goal was unclear because it lacked explanatory information that would make it more meaningful for applicants and external stakeholders, such as agency benefit officers and congressional oversight committees. Specifically, the new performance goal and related measure are expressed as an average, which allows for potentially wide variation in processing times while still meeting OPM’s goal. In past work, we have reported that including explanatory information on goals and measures helps improve the usefulness of performance information. Without explanatory information, reporting an average can obscure aspects of OPM’s processing timeliness, such as the number and types of applications OPM processes faster or slower than 60 days and the range of processing times. Also, OPM’s processing timeliness goal and measure do not include all phases of the application review process, specifically the time OPM takes to determine eligibility for disability retirements, which can be lengthy. We have previously reported that performance information could be more useful if it identified significant data limitations and their implications for assessing performance. OPM officials reported that the processing timeliness goal and measure exclude data on disability retirement applications pending approval because OPM does not consider reviewing disability retirement eligibility as part of processing. OPM includes disability applications in its processing timeliness goal after these applications have been approved. Not providing explanatory information about what the processing goal includes or excludes can lead to agencies’ and applicants’ false expectations and confusion about the amount of time OPM is taking to review applications. OPM has implemented various strategies for improving processing timeliness, as discussed below. However, we found multiple examples where OPM did not assess whether the strategies were effective. Assessment of processing applications. According to OPM officials, senior and frontline managers review processing data, such as age of pending applications, weekly to identify potential concerns, and adjust staffing and workload if necessary. However, we found that OPM’s performance information may be of limited use for assessing processing delays because the data lacked elements that would provide a more complete measure of performance. For example, we found that OPM did not review about half of applications government-wide for errors in fiscal years 2014 to 2016 combined, including all disability retirement applications. Likewise, OPM officials said that the number of unprocessed applications in inventory does not include disability retirement applications still pending approval. As a result, OPM’s performance information for both application errors and inventory does not reflect the full extent of processing delays because various applications have been excluded. OPM officials were unable to explain to us why or how they decided to exclude certain applications. Also, OPM generally does not assess the accuracy of the data it collects on application errors. OPM most recently reviewed the accuracy of the error data in 2014, despite additional feedback from agencies that some errors charged to them were incorrect. We also found outliers in the data that OPM officials were unable to explain. Assessment of staffing actions. OPM has taken actions to increase staffing capacity in retirement operations throughout the year, as well as during surge periods, as shown in table 2. However, we also found that OPM does not assess the effectiveness of its staffing actions, even though OPM officials reported that they are consistently looking for opportunities to improve OPM’s current processes. For example, OPM officials said that staffing actions improved efficiency but were unable to provide supporting data or documentation of their assessments, such as how often cross-functionally trained staff worked in other units and resulting improvements in output or quality. Likewise, OPM has not assessed the results of using overtime pay. As shown in table 3, any increased use of overtime pay during fiscal years 2013 to 2017 did not increase the number of applications processed. OPM officials said that overtime pay does not necessarily translate into increased output because some actions performed during overtime, such as quality review, do not contribute towards finalizing additional applications. They added that other factors can decrease production, such as reduced staff. Reduced staffing from fiscal years 2013 and 2016 may have contributed to decreased output, even with the use of overtime. However, OPM officials were unable to provide the number or types of positions that were reduced. Likewise, OPM does not measure how and to what extent the various factors affect output. OPM officials also said that they use overtime pay during surge periods to move applications through processing during its busiest time of the year, thereby decreasing an otherwise longer waiting time for applicants. However, OPM does not measure overtime productivity, or productivity in general, nor are they able to correlate overtime data with applications processing data or outcomes. OPM officials explained that they expect staff to be equally productive during overtime as they are during regular work time. Although OPM officials may set these productivity expectations, they do not collect productivity data to measure whether and to what extent staff meet these expectations. Further, OPM officials could not provide basic staffing data, such as the number of staff who have processed retirement applications for the past 5 years or number of processing staff paid overtime. Such information is valuable because it provides the basis for assessing whether OPM’s staffing actions are improving performance and meeting their intended purpose. We have previously reported that to be useful, performance information must meet users’ needs for completeness, accuracy, consistency, timeliness, validity, and ease of use. Other attributes that affect the usefulness of information include, but are not limited to, relevance, credibility, and accessibility. Further, federal internal control standards state that management should use quality information and design control activities to achieve the agency’s objectives. Examples of control activities include top-level reviews of performance compared to plans, goals, and objectives; management reviews at the functional or activity level; comparing and assessing related data sets so that relationships can be analyzed and appropriate actions taken; and clearly documenting control activities, transactions, and other significant events so that the documentation is readily available for examination. Federal internal control standards also state that management should implement control activities through policies. OPM officials reported that OPM’s systems were not robust enough to produce better performance information beyond basic processing data. OPM officials added that they have limited resources to assess data on strategies intended to improve processing timeliness. As such, OPM could consider a risk-based approach to collecting data and conducting assessments. For example, OPM could prioritize assessments of more resource-intensive activities over less resource-intensive activities. OPM could also focus its assessments on situations that could potentially introduce processing errors or data inconsistencies, such as when regulatory or process changes are implemented, or when staff are newly employed or are taking on new responsibilities. OPM officials also said that processing time is one of multiple factors they use to determine the effectiveness of staffing actions. However, as noted earlier, processing times have not consistently improved, further underscoring the need for better data and assessments of strategies intended to improve processing timeliness. Lack of useful performance information and policies and procedures to conduct assessments can hinder managers from identifying causes and corrective actions to problems in existing programs, as well as developing and prioritizing strategies and related resources for future programs. To obtain agencies’ perspectives on the retirement application process and better understand their coordination and collaboration with OPM, we interviewed four selected agencies using a standardized set of questions in a semi-structured interview format. After we met with the agencies, we discussed the agencies’ perspectives on OPM’s assistance with OPM officials and incorporated their comments, as appropriate. OPM provides four main types of assistance to agencies: written guidance, training, communication through assigned liaisons and email, and monthly error reports. Guidance. OPM provides written guidance to agencies on submitting retirement applications through the Civil Service Retirement System and Federal Employees Retirement System Handbook for Personnel and Payroll Offices and Benefit Administration Letters. The letters provide guidance to agencies on various topics, such as on retirement policy and process issues. The most recent version of the handbook posted on OPM’s website is from 1998. OPM officials reported that the handbook is updated on an ongoing basis and as resources permit. Of the 47 chapters on OPM’s website, five had been updated between 2013 and 2017. NASA reported that OPM’s handbook is out of date and found it unreliable because some of the information is no longer accurate. All of the four selected agencies reported that the Benefit Administration Letters were very important. The Department of Defense (DOD), the Department of Health and Human Services (HHS), and the U.S. Postal Service (USPS) reported that the Benefit Administration Letters were issued at about the right frequency. In addition, DOD, the National Aeronautics and Space Administration (NASA), and USPS also stated that the Benefit Administration Letters were helpful or very helpful. Training. OPM officials reported that OPM provides training opportunities to agencies which include semi-annual multi agency conferences, training for benefit officers, webcasts, self-paced online training, and onsite training if requested. DOD and HHS reported that they were satisfied with the training, and NASA and USPS reported that they were dissatisfied. For example, NASA reported that OPM’s training would be improved with more virtual trainings that are shorter. NASA also reported that cost constraints prohibited sending all retirement staff to in-person training while virtual training is accessible to more staff. Liaisons and emails. OPM officials stated that it communicates with agencies by assigning all agencies a liaison to contact for technical assistance and communicating directly via email. For example, HHS reported that its previous liaison had helped locate missing records, such as a federal employee’s federal service history. All of the four selected agencies reported that the interaction with the liaisons was very important, and DOD, NASA, and USPS reported that the interactions were very helpful and about the right frequency. OPM also stated that it communicates with benefit officers and other interested parties through emails. USPS reported that the emails from OPM included Benefit Administration Letters and announcements about meetings and upcoming trainings. DOD, NASA, and USPS reported that emails were the most helpful form of communication with OPM. Error reports. OPM provides agencies with a monthly error report after it analyzes each agency’s batch of applications. This report includes information on the type of error found and the volume of applications with the same error, according to OPM. The error report includes retirement applications for those who retired while working for the federal government, which, for example, does not include disability retirement applications, according to OPM officials. OPM officials reported that the intent of the error reports is to educate the agencies. DOD and USPS reported that the error reports were helpful for identifying application errors. However, all four selected agencies reported that aspects of the error reports were not user-friendly. For example, the error reports are in a format that cannot be manipulated, thereby requiring agencies to manually enter data to track the type of errors found, and analyze the data and share the information internally. Such manual entry increases the risk of data entry errors that could compromise the accuracy of the original data. The four selected agencies also reported that the error reports lack some types of information, such as clear descriptions of errors, data on trends, and information on disability retirement applications. OPM officials reported they review two of the four types of assistance (guidance and training) and also conducted a review of error reports in 2014. They also stated that they had taken some actions in response to agency feedback. However, OPM did not provide documentation of their assessments of guidance or training. Guidance. OPM officials reported that they continue to evaluate their guidance and had taken some actions in response to agency feedback. For example, in response to agencies’ feedback that they experienced difficulty obtaining paper documentation of 5 years of health insurance, OPM officials reported that they developed a new form that agencies could use to certify that employees had the required coverage, which has resulted in decreased errors. However, OPM could not provide us with documentation of its reviews of its guidance. In addition, OPM had no schedule for updating guidance to agencies, according to OPM officials. Training. OPM officials reported that they receive agency feedback on training in multiple ways and had taken some actions in response. For example, OPM officials said that agencies provide feedback on trainings informally during conversations with liaisons and at in-person trainings. OPM officials also said they read training evaluation forms, which include multiple choice questions on the value of the different aspects of the training and an area to write any comments or suggestions. In addition, OPM periodically surveys benefit officers on their training, including open-ended questions about how and on what topics the respondent would prefer to receive training. However, the benefit officer survey does not include broader questions about how the training or other types of assistance could better meet the needs of agencies. In addition, OPM officials reported that in response to agency feedback, they made improvements to the class offerings, such as enhancing training on military discharges. OPM officials also reported that one of the actions they take in response to the most common errors that agencies make in retirement applications is to provide training on these topics. For example, OPM officials reported that they identified common errors on federal health benefits and military service documentation and subsequently provided training on both topics. OPM officials did not provide us with documentation of their reviews of agency feedback on training. Error reports. In 2014, OPM conducted a review of the errors that 12 agencies disputed in the agencies’ error reports. OPM officials reported that the review concluded that less than 1 percent of OPM’s incorrectly identified errors would have affected the annuitant. According to OPM officials, the cost of reviewing and adjusting the error rate for accuracy outweighs the benefits. In addition, the four selected agencies reported that they had shared information with OPM on errors that the agencies thought were erroneously identified as errors. The four selected agencies reported that OPM had not changed the error rates in response. In addition, HHS and USPS reported that OPM did not share the information on disputed errors with its staff who audit the applications for errors. USPS officials also stated that OPM had not used this information to train its staff. OPM’s fiscal year 2018 budget justification cited partnering with agencies to help them submit complete and accurate retirement packages for quicker processing. While OPM officials reported that they have reviewed certain types of assistance, they have limited or no documentation on the analysis or the results of these reviews. Federal internal control standards state that management should compare actual performance to expected results and evaluate and document monitoring results. The standards also state that management should complete and document corrective actions to remediate control deficiencies in a timely manner. In relation to training, which is one of the types of assistance OPM provides to agencies, we have also reported that a leading training investment practice is to evaluate the benefits achieved through training, such as having a formal process for evaluating improvement in performance and tracking the impact of training on the agency’s performance goals. Another leading practice is to compare the merits of different delivery mechanisms (such as classroom or computer-based training) and determine what mix of mechanisms to use to ensure efficient and cost-effective delivery. OPM officials reported that effectiveness of their assistance to agencies is a contributing factor to decreased errors in retirement applications. For example, according to OPM, the percentage of complete applications submitted government-wide improved from 77 percent in fiscal year 2010 to about 92 percent in fiscal year 2017. OPM officials also noted that they assessed the effectiveness of their guidance and trainings and any modifications by observing if particular types of errors decrease overall. OPM officials provided us a list of the most common errors for fiscal year 2017, such as a missing marriage certificate. Although OPM officials have stated that they review two of the four types of assistance (guidance and training), OPM lacks a robust process for assessing and documenting its analysis and findings regarding all forms of the assistance it provides to agencies. This makes it more difficult for OPM to clearly demonstrate the effectiveness of its assistance. Thus, for example, there is limited understanding as to whether OPM’s training is being delivered through the most efficient and cost-effective mix of mechanisms. OPM may be missing opportunities to better partner with agencies by tailoring its assistance to help agencies improve their own processes and training. Assessments that result in enhancing OPM’s assistance to agencies could improve the completeness of applications submitted, which could in turn improve OPM’s application processing time. With respect to the agency error report, federal internal control standards state that management should communicate quality information externally so that external parties can help the entity achieve its objectives, and periodically evaluate its methods of communication so that it communicates quality information. OPM officials reported that the current structure of the agency error reports was designed to capture the large overarching error-based issues many agencies face, such as applicants electing more life insurance coverage than permitted. OPM officials reported that they have not solicited input from agencies about the usefulness of the monthly error reports, but agencies regularly provide feedback to their OPM liaisons. OPM officials reported that they are evaluating the trends in the feedback. However, revising the structure of the current error reports would not be cost-effective, according to OPM officials. They also reported that they are considering including disability applications in future error reports. The current format of the agency error report may limit its usefulness to agencies in improving their retirement applications and educating staff on how to address or minimize errors. Without user-friendly error reports, such as one that could be manipulated in Excel, agencies could find it more challenging to efficiently share the data among agency divisions and for the divisions to further sort the data. This challenge may be particularly burdensome at agencies comprised of numerous sub- agencies that share responsibility for preparing higher volumes of retirement applications. We found that the four selected agencies we interviewed used three strategies to compile accurate retirement applications, as shown in figure 5 below. Some agencies also had additional strategies, such as tracking identified issues in applicant’s retirement applications. Preparing employees for retirement. The four selected agencies provide retirement counseling and had an agenda or a checklist to guide the discussion. Some of the topics included designating beneficiaries and eligibility to continue health insurance into retirement. DOD, HHS, USPS, and NASA also reported providing additional assistance to prepare employees for retirement. DOD’s website had calculators that could be used for estimating a Thrift Savings Plan annuity and survivor benefits. HHS stated that its employees have access to online pre-retirement seminars and financial planning resources. In addition, USPS has an employee retirement kit for that includes health insurance information, general retirement information, and retirement forms, such as for documenting life insurance and retirement effective date. NASA also prepares employees for retirement in two additional ways. First, NASA reviews new employees’ electronic Official Personnel Folders, which contain their federal employment history, and makes corrections as needed. NASA officials stated it tries to resolve any issues in an employee’s electronic Official Personnel Folder rather than waiting until an employee retires. Samples of these files are then audited. Second, NASA stated that it encourages employees to ask for an annuity estimate every year for the 7 years prior to planned retirement. NASA reported that each annuity estimate generated includes a review of an employee’s files, and enables the agency to identify and address any errors. Educating and training staff that compile retirement applications. The four selected agencies hold periodic staff meetings that include discussions of retirement applications. For example, NASA’s meeting includes a discussion of common errors to avoid, unique or complex retirement cases, process improvements, and lessons learned. The four selected agencies also conduct retirement application training. For example, DOD provided a multiday training that included topics such as creditable service, annuity computation, and retirement eligibility. HHS also stated that it partnered with its payroll provider to present the payroll side of retirement processing, including retirement application processing and disability retirement processing. DOD, HHS, NASA, and USPS also reported that new staff is mentored by experienced staff. Procedures for compiling applications. The four selected agencies have procedures for compiling applications. For example, the four selected agencies have checklists to help staff compile the required documents. DOD’s checklist includes a list of more than 30 documents in sequential order with instructions on which documents to include for each of the two retirement plans. In addition, the four selected agencies reported having a system to track the process of compiling applications. DOD’s, NASA’s, and USPS’ respective systems also include tracking identified issues. For example, USPS’ system monitors the overall progress of each application, as well as tracks the status of each identified issue, such as missing documents, and whether the issue had been resolved. The four selected agencies also conduct audits on some or all of the applications before submitting applications to OPM. The agencies reported that the audits are used to increase accuracy of submitted applications and provide feedback to staff on any identified errors. For example, DOD has an audit checklist with more than 30 items to review, such as whether a marriage certificate is included if applicable and if the application is signed. Delays in processing retirement applications for federal employees have been a longstanding problem. According to OPM, it has identified root causes for the delays and has developed and implemented strategies to improve its processing operation. For example, the agency has developed a strategic vision for modernizing the current paper-based application, and employed strategies to address staffing capacity and minimize the number of incomplete applications. However, without improving its data collection and assessments of its strategies, OPM cannot know whether its strategies are effective at reducing the delays, or could be modified to yield better results. Furthermore, OPM’s plan for modernizing its information technology (IT) retirement processing lacks cost estimates and timelines, which means there are no measurable results with which to evaluate resource needs or interim progress. In addition, although OPM has established a performance goal on processing timeliness, its related performance measure does not include explanatory information that could make it more meaningful. OPM also has not set performance measures for various parts of the application review and processing operation that could provide clearer insights into where improvements may be needed. Lack of quality performance information hinders applicants and external stakeholders from understanding OPM’s timeliness in processing applications, and limits OPM from better managing and monitoring program performance. Furthermore, OPM lacks a robust process for assessing its assistance to agencies, which makes it difficult for OPM to demonstrate the effectiveness of its assistance. Potential organizational changes and other external factors have created additional uncertainty for OPM. These challenges notwithstanding, approximately 100,000 federal employees depend on OPM each year to process retirement benefits, such as life and health insurance, in a timely manner. As such, OPM should endeavor to reduce processing delays, monitor and report on its progress through better performance information, and effectively partner across the federal government to improve processing timeliness. We are making the following six recommendations to OPM: The Associate Director of OPM’s Retirement Services, working in coordination with the Chief Information Officer, should develop, document, and implement a Retirement Services IT modernization plan for initial project phases that is consistent with key aspects of IT project management, such as determining objectives, costs, and time frames for each initial phase. (Recommendation 1) The Associate Director of OPM’s Retirement Services should adopt management practices to enhance the use of performance information on processing timeliness to inform how OPM manages operations, identifies problem areas, and allocates resources. For example, OPM could enhance use of performance measures at the operational level or establish a timeliness performance goal for reviewing disability retirement eligibility. (Recommendation 2) The Associate Director of OPM’s Retirement Services should provide explanatory information, such as the range of processing times and the exclusion of disability retirement eligibility determinations, as part of the performance measure on processing timeliness. (Recommendation 3) The Associate Director of OPM’s Retirement Services should develop and implement policies and procedures for assessing strategies intended to improve processing times, including collecting and improving data needed to support those strategies, such as collecting better productivity data or staffing data and linking them to processing outcomes. (Recommendation 4) The Associate Director of OPM’s Retirement Services should examine its process for assessing its assistance to agencies on retirement applications. For example, OPM could incorporate into its assessment process more agency feedback or documentation of assessment results, which could improve its partnership with agencies to strengthen the assistance provided. (Recommendation 5) The Associate Director of OPM’s Retirement Services should work with agencies to determine if there are cost-effective ways to make the retirement application error report that it sends to agencies more user- friendly. For example, explore whether there are cost-effective ways to provide the error report in a format that could be manipulated (e.g., Excel spreadsheet), or to include additional information, such as incorporating disability retirement applications or providing clearer descriptions of errors or trend data, some of which OPM already collects. (Recommendation 6) We provided a draft of the report to OPM, DOD, HHS, NASA, and USPS for review and comment. In its comments, reproduced in appendix I, OPM concurred with 1 recommendation and partially concurred with the remaining 5 recommendations. HHS and NASA provided technical comments, which we incorporated as appropriate. DOD and USPS had no comments on the draft. OPM partially concurred with our first recommendation to develop, document, and implement a Retirement Services IT modernization plan that includes costs and time frames for initial project phases. OPM stated that it has established initial high-level funding estimates for each of its five key IT initiatives, but OPM did not provide any documentation or further details. OPM cited that its ability to implement the modernization plan depends on the availability of funding and coordination with the agency’s top leadership. We agree these are important elements, which further underscore our recommendation. An IT modernization plan with objectives, cost estimates, and time frames could help support funding requests, as well as measure progress in implementing the initiatives. OPM partially concurred with our second recommendation to enhance the use of performance information on processing timeliness to make more informed management decisions. OPM responded that it measures overtime spending, reviews daily work level in each work unit, and assesses employee productivity in these units. Collecting and reviewing such operational-level data contributes to monitoring efforts; however our recommendation emphasizes the importance of using performance information to better manage operations to align with organizational goals. OPM partially concurred with our third recommendation to provide explanatory information as part of its reporting of processing timeliness. OPM agreed to add an explanation about disability retirement eligibility determinations to its public reports. OPM disagreed that reporting data on the range of processing times would be beneficial because, according to OPM, it provides processing information through other means, such as through applicants’ online accounts and agency benefit officers. While providing this information is beneficial, publically reporting data on the range of processing times helps improve the usefulness of performance information for applicants and external stakeholders, such as congressional oversight committees. Further, OPM acknowledged that it already collects and shares such data, which confirms it has the information and ability to implement this recommendation by adding appropriate summary notes to its public reporting. This action coupled with adding an explanation about disability retirement eligibility determinations should address the recommendation. OPM partially concurred with our fourth recommendation to develop and implement policies and procedures for assessing strategies intended to improve processing times, including collecting data needed to support those strategies. OPM stated that a new case management system could provide better productivity and staffing data with which to assess effectiveness, but is dependent on funding and IT support. However, developing policies and procedures to manage and monitor its assessment process—such as determining when, how, and how often to conduct assessments and what data to collect—is not dependent on having a new case management system. In fact, establishing such policies and procedures could help inform system requirements in terms of data and reporting needs. OPM concurred with our fifth recommendation to examine its process for assessing its assistance to agencies on retirement applications, and stated that it will incorporate more agency feedback into its assessment results on non-disability immediate retirement applications. OPM partially concurred with our sixth recommendation to work with agencies to determine if there are cost-effective ways to make the error report more user-friendly. OPM stated that it will explore using MS Excel spreadsheets and incorporating clearer descriptions of errors and data trends. OPM asserted that our report incorrectly states that the data sent to agencies cannot be manipulated as agencies receive the data in MSWord documents from which they can create MS Excel spreadsheets. However, as OPM acknowledges, agencies have to create their own spreadsheets. Doing so requires agencies to manually enter the data to track and analyze errors, which increases the risk of data entry mistakes that could compromise the accuracy of original data, as we reported. OPM also stated that collecting disability application error information is not an inexpensive or simple process change. While we recognize OPM’s audit efforts may need to be modified to capture this type of error information, it would provide agencies with more comprehensive error data that could be used to improve the agencies’ application processes. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Acting Director of OPM, the Secretary of DOD, the Secretary of HHS, the Administrator of NASA, and the Postmaster General and Chief Executive Officer of USPS. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or Jonesy@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact name above, Leah Querimit Nash (Assistant Director), Maya Chakko (Analyst in Charge), Mark Bird, Jackie Chapin, Jeff DeMarco, Elizabeth Fan, Gina Hoover, Ted Hu, Ben Licht, Meredith Moles, Robert Robinson, and Kayla Robinson made key contributions to this report.", "summary": "According to OPM, it receives more than 100,000 retirement applications each fiscal year. Between 2014 to 2017, OPM did not meet its goal of processing most retirement applications within 60 days. GAO was asked to review potential improvements in federal retirement processing at OPM. This report (1) describes the root causes of retirement application processing delays, as determined by OPM; and (2) examines what strategies, if any, OPM has taken to address those root causes, and how OPM has evaluated the effectiveness of the strategies. GAO reviewed OPM data and documents, and interviewed OPM officials. GAO also interviewed officials from DOD, HHS, NASA, and USPS about their experiences with processing retirement applications. GAO selected these agencies because they represent a variety of application error rates and relatively high application volume. The Office of Personnel Management (OPM), which administers the federal retirement program, identified three root causes for retirement processing delays: 1. the continuing reliance on paper-based applications and manual processing; 2. insufficient staffing capacity, particularly during peak workload season; and 3. incomplete applications. OPM has taken various actions to address these root causes and thereby reduce delays. Vision for modernizing retirement processing. OPM's strategic vision consists of five key initiatives for modernizing the application process, including developing an electronic application form and an electronic system to store retirement information. However, OPM was unable to provide estimated time frames or costs for the initiatives. OPM officials said that additional information technology (IT) modernization work is dependent on sufficient funding, among other factors. These factors are important but do not preclude OPM from establishing estimated cost ranges and time frames—practices consistent with industry best practices and IT project management principles. Actions to increase staffing capacity. OPM's actions have included using overtime pay and hiring additional staff. However, OPM generally does not assess the effectiveness of these actions or whether they reduce delays. For example, OPM does not measure overtime productivity or correlate overtime data with application processing data. Federal internal control standards state that management should review its performance compared to its goals. OPM officials stated that they have limited resources for assessments. However, without assessments, OPM is less able to make informed decisions on how to best use staffing practices to improve processing times. Actions to reduce missing information in applications. OPM provides assistance to agencies through guidance, training, communication through liaisons and email, and error reports. OPM's monthly error reports to agencies include information on the type of error found and the volume of applications with the same error, according to OPM. The four agencies GAO interviewed—Department of Defense (DOD), Department of Health and Human Services (HHS), National Aeronautics and Space Administration (NASA), and U.S. Postal Service (USPS)—reported that aspects of the error reports were not user-friendly. OPM stated that its assistance is intended to help agencies submit complete and accurate retirement packages for quicker processing. Federal internal control standards state that management should communicate quality information externally and periodically reevaluate its communication methods. OPM officials stated that the error report is intended to capture the overarching errors many agencies face and that revising the error report would not be cost-effective. However, the current format of the error report may limit its usefulness to agencies in improving their retirement applications. GAO is making 6 recommendations. These recommendations include that OPM should develop a retirement services IT modernization plan for initial project phases; develop and implement policies for assessing staffing strategies intended to improve processing times; and determine if there are cost-effective ways to make the retirement application error report more user-friendly. OPM concurred with 1 recommendation and partially concurred with 5 recommendations. GAO continues to believe all aspects of the recommendations are valid, as discussed in the report. GAO also incorporated technical comments.", "document_type": "gao"}
{"report": "NASA’s Commercial Crew Program is a multi-phased effort that began in 2010. Across the five phases, NASA has engaged several companies using both agreements and contract vehicles to develop and demonstrate crew transportation capabilities. As the program has passed through these phases, NASA has generally narrowed down the number of participants. The early phases of the program were under Space Act agreements, which is NASA’s other transaction authority. These types of agreements are generally not subject to the Federal Acquisition Regulation (FAR) and allow the government and its contractors greater flexibility in many areas. Under these Space Act agreements, NASA relied on the commercial companies to propose specifics related to their crew transportation systems, including their design, the capabilities they would provide, and the level of private investment. In these phases, NASA provided technical support and determined if the contractors met certain technical milestones. In most cases, NASA also provided funding. For the final two phases of the program, NASA awarded FAR-based contracts. By using FAR-based contracts, NASA gained the ability to levy specific requirements on the contractors and procure missions to the ISS, while continuing to provide technical expertise and funding to the contractors. Under these contracts, NASA will also evaluate whether contractors have met its requirements and certify their final systems for use. In September 2014, NASA awarded firm-fixed-price contracts to Boeing and SpaceX, valued at up to $4.2 billion and $2.6 billion, respectively, for the Commercial Crew Transportation Capability phase. Under a firm- fixed-price contract, the contractor must perform a specified amount of work for the price negotiated by the contractor and government. This is in contrast to a cost-reimbursement contract, in which the government agrees to pay the contractor’s reasonable costs regardless of whether work is completed. Thus, under the fixed-price contracts, the contractors must generally bear the risk of cost overruns or schedule delays. During this phase, the contractors will complete development of crew transportation systems that meet NASA requirements, provide NASA with the evidence it needs to certify that those systems meet its requirements, and fly initial crewed missions to the ISS. Under the contracts, NASA and the companies originally planned to complete the certification review for each system by 2017. Figure 1 shows the spacecraft and launch vehicles for Boeing and SpaceX’s crew transportation systems. The Commercial Crew Transportation Capability phase contracts include three types of services: Contract Line Item 001 encompasses the firm-fixed-price design, development, test, and evaluation work needed to support NASA’s final certification of the contractor’s spacecraft, launch vehicle, and ground support systems. Contract Line Item 002 covers any service missions that NASA orders to transport astronauts to and from the ISS. Under this indefinite-delivery, indefinite-quantity line item, NASA has ordered six missions from each contractor. Each service mission is its own firm- fixed-price task order. NASA must certify the contractors’ systems before they can fly these missions. Contract Line Item 003 is an indefinite-delivery, indefinite-quantity line item for any special studies, tests, and analyses that NASA may request. These tasks do not include any work necessary to accomplish the requirements under contract line item 001 and 002. As of July 2017, NASA had issued four orders under this contract line item to Boeing, worth approximately $1.8 million, including an approximately $180,000 study of the spacecraft’s seat incline. NASA has issued one order under this contract line item to SpaceX, which did not affect the value of this line item. The maximum value of this contract line item is $150 million. NASA divided the certification work under contract line item 001 into two acceptance events: the design certification review and the certification review. An acceptance event occurs when NASA approves a contractor’s designs and acknowledges that the contractor’s work is complete and meets the requirements of the contract. The design certification review verifies the contractor’s crew transportation system’s capability to safely approach, dock, mate, and depart from the ISS, among other requirements. After the contractor has successfully completed all of its flight tests, as well as various other activities, the certification review determines whether the crew transportation system meets the Commercial Crew Program’s requirements. The contractors must complete both acceptance events to receive NASA certification. NASA and the contractors also identified discrete performance-based events, called interim milestones, which occur as the contractors progress toward the two acceptance events. Each interim milestone has pre- determined entrance and exit criteria that establish the work that must be completed in order for the contractor to receive payment. The interim milestones serve several functions, allowing the government to finance work from development to completion, review the contractors’ progress, and provide approval to proceed with key demonstrations and tests. The program also uses these milestones to inform its annual budget request. Since the contracts were awarded, the Commercial Crew Program and the contractors have agreed to split several of the interim milestones. The contractors have also added new milestones, in part to capture changes in their development plans. NASA has also made changes to the contracts that have increased their value. While the contracts are fixed-price, their values can increase if NASA adds to the scope of the work or otherwise changes requirements. As of July 2017, NASA had increased the value of contract line item 001 for Boeing by approximately $48 million for hardware and software requirement changes, and contract line item 001 for SpaceX by approximately $91 million for a hardware requirement change and the addition of cargo during an ISS test flight. In our February 2017 report, we found the following: Both of the Commercial Crew Program’s contractors have made progress developing their crew transportation systems, but both also have aggressive development schedules that are increasingly under pressure. Both Boeing and SpaceX had determined that they would not be able to meet their original 2017 certification dates, and both expected certification to be delayed until 2018. We found that the schedule pressures were amplified by NASA’s need to provide a viable crew transportation option to the ISS before its current contract with Russia’s space agency runs out in 2019. If NASA needs to purchase additional seats from Russia, the contracting process typically takes 3 years. Without a viable contingency option for ensuring uninterrupted access to the ISS in the event of further Commercial Crew delays, we found that NASA was at risk of not being able to maximize the return on its multibillion dollar investment in the space station. The Commercial Crew Program was using mechanisms laid out in its contracts to gain a high level of visibility into the contractors’ crew transportation systems, but maintaining the current level of visibility through certification could add schedule pressures. For example, due to NASA’s acquisition strategy for this program, its personnel are less involved in the testing, launching, and operation of the crew transportation system. And while the program has developed productive working relationships with both contractors, the level of visibility that the program had required thus far had also taken more time than the program or contractors anticipated. Ultimately, the program has the responsibility for ensuring the safety of U.S. astronauts, and its contracts give it deference to determine the level of visibility required to do so. Moving forward though, we found that the program office could face difficult choices about how to maintain the level of visibility it feels it needs without adding to the program’s schedule pressures. In order to ensure that the United States had continued access to the ISS if the Commercial Crew Program’s contractors experienced additional schedule delays, we recommended that the NASA Administrator develop a contingency plan for maintaining a presence on the ISS beyond 2018, including options to purchase additional Russian Soyuz seats, and report to Congress on the results. NASA concurred with this recommendation, and in February 2017, NASA executed a contract modification to procure an option for three crewmember seats from Boeing on the Russian Soyuz vehicle. Our analysis found that these seats represented a contingency plan for U.S. access to the ISS through 2019. In April 2017, NASA informed the Congress of this action. Both Boeing and SpaceX have continued to make progress finalizing their designs and building hardware as they work toward final certification of their crew transportation systems, since we last reported in February 2017. Each contractor’s system includes a spacecraft and a launch vehicle with supporting ground systems. The contractors are also manufacturing test articles and flight spacecraft to support the uncrewed and crewed flight tests. The contractors plan to use the test articles to demonstrate system performance and the flight spacecraft to demonstrate their ability to meet contract requirements. As table 1 shows, these test articles and flight spacecraft are currently in varying stages of completion—some are completed and in testing while others are still early in the manufacturing phase. Should any issues arise during integration and test or the flight tests planned for 2018, the contractors may have to complete rework on the spacecraft already under construction. The contractors have notified NASA that final certification dates have slipped to the first quarter of calendar year 2019 and, through our ongoing work, we have identified three key risk areas that could further delay certification of each contractor’s crew transportation system. These areas are (1) the contractors’ aggressive schedules, (2) programmatic and safety risks, and (3) Commercial Crew Program’s workload. These are consistent with the challenges we found facing the contractors and program in our February 2017 report. Aggressive schedules. Since the award of the current Commercial Crew contracts in September 2014, the program, Boeing, and SpaceX have all identified the contractors’ delivery schedules as aggressive. Program officials told us that, from the outset, they knew delays were likely due to the developmental nature of the program. Multiple independent review bodies—including the program’s standing review board, the Aerospace Safety Advisory Panel, and the NASA Advisory Council-Human Exploration and Operations committee—also noted the aggressiveness of the contractors’ schedules as they move toward certification. In February 2017, we found that both contractors had notified NASA that they would not be able to meet the 2017 final certification dates originally established in their contracts and expected final certification to be delayed until 2018. Based on our ongoing work, we found that the contractors have notified NASA that these dates have slipped further to the first quarter of calendar year 2019. Figure 2 shows the original Boeing and SpaceX contract schedule and the current proposed schedule for each contractor. However, the extent to which these schedules represent an accurate estimate of each contractor’s final certification date is unclear for the following two reasons: 1. Each contractor provides schedule updates to the Commercial Crew Program at quarterly status reviews, and the dates frequently change. The program has held 12 quarterly reviews since each contract was awarded. Boeing has reported a delay six times and SpaceX has reported a delay nine times that included at least one key event identified in the timeline above at these quarterly reviews. 2. The Commercial Crew Program is tracking risks that both contractors could experience additional schedule delays and, based on our ongoing work, we found that the program’s own analysis indicates that certification is likely to slip into December 2019 for SpaceX and February 2020 for Boeing. Each month, the program updates its schedule risk analysis, based on the contractors’ internal schedules as well as the program’s perspectives and insight into specific technical risks. The Commercial Crew Program manager stated that differences between the contractors’ proposed schedules and the program’s schedule risk analysis include the following: The contractors are aggressive and use their schedule dates to motivate their teams, while NASA adds additional schedule margin for testing. Both contractors assume an efficiency factor in getting to the crewed flight test that NASA does not factor into its analysis. The program manager explained further that the program meets with each contractor monthly to discuss schedules and everyone agrees to the relationships between events in the schedule even if they disagree on the length of time required to complete events. The program manager added, however, that she relies on her prior experience for a better sense of schedule timeframes as opposed to relying on the contractors’ schedules. While NASA has a fixed-price contract with both SpaceX and Boeing, there are consequences to the delays to date and the lack of certainty surrounding the final certification date. The United States has spent tens of billions of dollars to develop, assemble, and operate the ISS over the past two decades, and NASA relies on uninterrupted crew access to help maintain and operate the station itself and conduct the research required to enable human exploration in deep space and eventually Mars, among other science and research goals. To ensure uninterrupted access to the ISS through 2019, which includes launch and return of the astronauts, NASA purchased five seats on the Soyuz spacecraft through Boeing for an undisclosed value. Boeing obtained these seats though a legal settlement with the Russian firm, RSC Energia, which manufactures the Soyuz. The NASA Office of Inspector General found in its annual report on NASA’s top management and performance challenges that if the Commercial Crew Program experiences additional delays, NASA may need to buy additional seats from Russia to ensure a continued U.S. presence on the ISS. Further, the ISS is planned to be operational through 2024. Unless there is a decision to extend the ISS’s operational life, additional delays by Boeing and SpaceX may lessen NASA’s return on investment with the contractors. We will continue to monitor this as part of our ongoing work. Programmatic and safety risks. In addition to challenges facing Boeing and SpaceX’s aggressive schedules, both contractors face other risks that will need to be addressed to support their certification. This includes the contractors’ ability to meet the agency’s requirements related to the safety of their systems. These risks are not unusual; there are inherent technical, design, and integration risks in all NASA’s major acquisitions, as these projects are highly complex and specialized and often push the state of the art in space technology. The Commercial Crew Program monitors risks through two lenses—programmatic risks potentially affect the program’s cost and schedule or the performance of the crew transportation system, and safety risks could elevate the potential for the loss of crew. Similar to our findings in February 2017, our ongoing work indicates that the Commercial Crew Program’s top programmatic and safety risks for SpaceX, are in part, related to ongoing launch vehicle design and development efforts. SpaceX must close several of the program’s top risks related to its upgraded launch vehicle design, the Falcon 9 Block 5, before it can be certified for human spaceflight. Included in this Block 5 design is SpaceX’s redesign of the composite overwrap pressure vessel. SpaceX officials stated the new design aims to eliminate risks identified in the older design, which was involved in an anomaly that caused a mishap in September 2016. Separately, SpaceX officials told us that the Block 5 design also includes design changes to address cracks in the turbine of its engine identified during development testing. NASA program officials told us that they had informed SpaceX that the cracks were an unacceptable risk for human spaceflight. SpaceX officials told us that they have made design changes, captured in this Block 5 upgrade, that did not result in any cracking during initial life testing. However, this risk will not be closed until SpaceX successfully completes qualification testing in accordance with NASA’s standards without any cracks. SpaceX officials stated they expect this testing to be completed in first quarter calendar year 2018. Finally, both the program and a NASA advisory group consider SpaceX’s plan to fuel the launch vehicle after the astronauts are on board the spacecraft to be a potential safety risk. SpaceX’s perspective is that this operation may be a lower risk to the crew. To better understand the propellant loading procedures, the program and SpaceX agreed to demonstrate the loading process five times from the launch site in the final crew configuration prior to the crewed flight test. Our ongoing work indicates that Boeing is mitigating several risks in order to certify its crew transportation system, including challenges related to its abort system performance, parachutes, and its launch vehicle. Boeing is addressing a risk that its abort system, which it needs for human spaceflight certification, may not meet the program’s requirement to have sufficient control of the vehicle through an abort. In some abort scenarios, Boeing has found that the spacecraft may tumble and that could pose a threat to the crew’s safety. To validate the effectiveness of its abort system, Boeing has conducted extensive wind tunnel testing and plans to complete a pad abort test in April 2018. Boeing is also addressing a risk that during re-entry to the Earth’s atmosphere, a portion of the spacecraft’s forward heat shield may reconnect and damage the parachute system. NASA’s independent analysis indicates that this may occur if both parachutes that pull the forward heat shield away from the spacecraft deploy as expected. Boeing’s analysis indicates the risk exists only if one of two parachutes does not deploy as expected. If the program determines this risk is unacceptable, Boeing would need to redesign the parachute system, which the program estimates could result in at least a 6-month delay. Finally, one of the program’s top programmatic and safety concerns is that it may not have enough information from Boeing’s launch vehicle provider, United Launch Alliance, to assess if the launch vehicle prevents or controls cracking that could lead to catastrophic failures. The program and Boeing are in the process of negotiating next steps. The Commercial Crew Program has identified the ability of it and its contractors to meet a crew safety requirement as one of its top risks. NASA established the “loss of crew” metric as a way to measure the safety of a crew transportation system. The metric captures the probability of death or permanent disability to one or more crew members. Under each contract, the current loss of crew requirement is 1 in 270, meaning that the contractors’ systems must carry no more than a 1 in 270 probability of incurring loss of crew. Near the end of the Space Shuttle program, the probability of loss of crew was approximately 1 in 90. As part of our ongoing work, we continue to work with NASA to understand how the loss of crew requirement was established for the Commercial Crew Program. Program officials told us that Commercial Crew is the first NASA program that the agency will evaluate against a probabilistic loss of crew requirement. They said that if the contractors cannot meet the loss of crew requirement at 1 in 270, NASA could still certify their systems by employing operational mitigations. They said this would entail a potentially increased level of risk or uncertainty related to the level of risk for the crew. Program officials told us their main focus is to work with the contractors to ensure that the spacecraft designs are robust from a safety perspective. The loss of crew metric and the associated models used to measure it are tools that help achieve that goal. For example, Boeing told us that in early 2016, it needed to identify ways to reduce the mass of its spacecraft. As Boeing found opportunities to reduce the spacecraft mass, the program stated that it had to consider how implementing those design changes would affect its loss of crew analysis in addition to compliance with other performance and safety requirements. According to the program, it is working with both contractors to address the factors that drive loss of crew risk through design changes or additional testing to gain more information on the performance and reliability of systems. As part of our ongoing work, we will continue to assess the extent to which the contractors are meeting this requirement and what tools the program and NASA will use to determine if the contractors meet the requirement. Program office workload. In February 2017, we found that the Commercial Crew Program was using contractually defined mechanisms to gain a high level of visibility into the contractors’ crew transportation systems, but also found that the Commercial Crew Program’s workload was an emerging schedule risk. At that time, program officials told us that one of their greatest upcoming challenges will be to keep pace with the contractors’ schedules so that the program does not delay certification. Specifically, they told us they are concerned about an upcoming “bow wave” of work because the program must complete two oversight activities—phased safety reviews and verification closure notices—concurrently in order to support the contractors’ design certification reviews, uncrewed and crewed flight test missions, and final certification. The Commercial Crew Program is working to complete its three-phased safety review, which will ensure that the contractors have identified all safety-critical hazards and implemented associated controls, but it is behind schedule. Both the contractors and the program have contributed to these delays. In phase one, Boeing and SpaceX identified risks in their designs and developed reports on potential hazards, the controls they put in place to mitigate them, and explanations for how the controls will mitigate the hazards. In phase two, which is ongoing, the program reviews and approves the contractors’ hazard reports, and develops strategies to verify and validate that the controls are effective. In phase three, the contractors plan to conduct the verification activities and incrementally close the reports. The Commercial Crew Program’s review and approval of the contractors’ hazard reports have taken longer than planned. The program originally planned to complete phase two in early 2016, but through our ongoing work, we have found that as of October 2017, neither contractor had completed this phase. At that time, Boeing had completed 90 percent and SpaceX had completed 70 percent of the Phase 2 reports. The Commercial Crew Program’s verification closure notice process, which is used to verify that the contractors have met all requirements, is one of the other key oversight activities and potential workload challenges for the program. The program is completing that process concurrently with the phased safety reviews. The verification closure process is initiated by the contractor when it provides the program with data and evidence to substantiate that it has met each requirement, and is completed when the program has reviewed and approved the contractor’s evidence to verify that each requirement has been met. The Commercial Crew Program must also approve a subset of verification closure notices before key tests or milestones can occur. For example, the ISS requirements and a portion of the Commercial Crew Program requirements must be met before Boeing and SpaceX’s uncrewed flights to the ISS, which are currently planned for the third quarter of 2018. The program’s ability to smooth its workload is limited because the contractors generally control their development schedules. In February 2017, we found, however, that proposed changes to the Boeing and SpaceX schedules could help alleviate some of the concurrency between the program’s phased safety reviews and verification closure process. We will continue to monitor the efforts as part of our ongoing work. In conclusion, Boeing and SpaceX continue to make progress developing crew transportation systems to help the United States re-establish its domestic ability to provide crew access to the ISS. But, when the current phase of the Commercial Crew Program began, there was widespread acknowledgment that the contractors’ development and certification schedules were aggressive and the anticipated schedule risks have now materialized. Further, programmatic and safety risks remain with schedules that frequently change making a final certification date uncertain. Delays and uncertain final certification dates raise questions about whether the United States will have uninterrupted access to the International Space Station beyond 2019, and may lessen NASA’s return on investment with the contractors. We look forward to continuing to work with NASA and this subcommittee as we assess the contractors’ and program’s progress to final certification. Chairman Babin, Ranking Member Bera, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Cristina T. Chaplain, Director, Acquisition and Sourcing Management at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Molly Traci, Assistant Director; Susan Ditto; Lisa Fisher; Laura Greifner; Juli Steinhouse; Roxanna Sun; and Kristin Van Wychen. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Since the Space Shuttle was retired in 2011, the United States has been relying on Russia to carry astronauts to and from the space station. NASA's Commercial Crew Program is facilitating private development of a domestic system to meet that need safely, reliably, and cost-effectively before the seats it has contracted for on a Russian spacecraft run out in 2019. In 2014, NASA awarded two firm-fixed-price contracts to Boeing and SpaceX worth a combined total of up to $6.8 billion to develop crew transportation systems and conduct initial missions to the space station. In February 2017, GAO found that both contractors had made progress, but their schedules were under mounting pressure. This statement provides preliminary observations on the extent to which the contractors and the program are making progress toward meeting NASA's standards for human spaceflight, a process called certification. This statement is based on ongoing work and information contained in GAO's February 2017 report on this program ( GAO-17-137 ). To do this work, GAO analyzed contracts, schedules, and other documentation. Both Boeing and Space Exploration Technologies (SpaceX) are making progress toward their goal of being able to transport American astronauts to and from the International Space Station (ISS). However, both continue to experience schedule delays. Such delays could jeopardize the ability of the National Aeronautics and Space Administration's (NASA) Commercial Crew Program to certify either company's option—that is, to ensure that either option meets NASA standards for human spaceflight—before the seats the agency has contracted for on Russia's Soyuz spacecraft run out in 2019. (See figure.) GAO's ongoing work has identified three key risks, which are consistent with challenges reported in February 2017 that could further delay certification of each contractor's crew transportation system: Aggressive schedules —NASA, Boeing, SpaceX, and independent review bodies have all noted that the contractors' schedule plans are aggressive. The anticipated schedule risks have since materialized. Programmatic and safety risks —SpaceX and Boeing are addressing technical risks, which is not uncommon for NASA projects as they often push the state of the art in space technology. In addition, the contractors' systems must meet a standard for crew safety. Additional work remains to determine whether the contractors will meet this requirement. Program office workload —Program officials told GAO that one of their greatest upcoming challenges will be to complete two oversight activities—conducting phased safety reviews and verifying that contractors meet requirements—concurrently. The program's ability to smooth its workload is limited, as the contractors generally control their development schedules. In February 2017, GAO found that proposed schedule changes could alleviate some overlap. Delays and uncertain final certification dates raise questions about whether the United States will have uninterrupted access to the ISS after 2019, and may lessen NASA's return on investment with the contractors. GAO will continue to assess the contractors' and program's progress. GAO is not making any new recommendations. In February 2017, GAO recommended that NASA develop a contingency plan to maintain access to the ISS beyond 2018, when its contract with Russia for seats on the Soyuz was scheduled to end. NASA agreed with this recommendation and purchased Soyuz seats through 2019.", "document_type": "gao"}
{"report": "EEOC data we obtained and analyzed showed that financial services firms employed more than 3.2 million people in 2015. EEOC requires employers to use the North American Industry Classification System (NAICS) to classify their industry. Under this system, the financial services industry includes the following five sectors: credit intermediation and related activities (banks and other credit institutions), which include depository credit institutions— commercial banks, thrifts (savings and loan associations and savings banks), and credit unions; and nondepository credit institutions, which extend credit in the form of loans and include federally sponsored credit agencies, personal credit institutions, and mortgage bankers and brokers; funds, trusts, and other financial vehicles (funds and trusts), which include investment trusts, investment companies, and holding companies; securities, commodity contracts, and other financial investments and related activities (securities and other activities), which is composed of a variety of firms and organizations that bring together buyers and sellers of securities and commodities, manage investments, and offer financial advice; insurance carriers and related activities (insurance), which include carriers and insurance agents that provide protection against financial risks to policyholders in exchange for the payment of premiums; and monetary authorities, which include central banks. EEOC requires private employers subject to Title VII of the Civil Rights Act of 1964 with 100 or more employees and all federal contractors who have 50 or more employees and meet certain other requirements to annually submit data on the racial/ethnic and gender characteristics of employees by various occupations for a broad range of industries, including financial services. Employers are required to submit these data to EEOC by submitting an EEO-1 report. In addition to providing EEOC with data on the demographic characteristics of employees as of a specific point in time, employers must also report the number of employees working at headquarters and any additional offices, the primary industry type of the organization, and the numbers of employees in two different categories of management positions. Beginning in 2007, EEOC changed its requirements on the reporting of data on managers. More specifically, employers were required to report data for senior-level management positions rather than combining data on senior-level managers with data for first- and mid-level management positions as had been the practice prior to 2007. Since 2007, employers are to review EEOC guidance describing the two management positions and determine how their firm’s job positions fit into these classifications. Senior-level managers include, for example, chief executive officers, chief financial officers, and managing partners. The first- and mid-level management category includes (1) middle managers that report to senior managers and typically lead major business units and (2) managers who report to middle managers and oversee day-to-day operations, such as team or branch managers. Additionally, EEOC changed its practices for collecting certain racial/ethnicity information. The EEO-1 form was changed in 2007 to divide “Asian or Pacific Islander” into two separate categories, “Asian” and “Native Hawaiian or other Pacific Islander.” Also, EEOC adopted a two-question format for collecting ethnicity data. Under this format, employers should first ask employees their Hispanic or Latino status, and then ask those employees who do not identify as Hispanic or Latino for their race. EEOC proposed revisions to the EEO-1 form in 2016, which would have required employers with 100 or more employees to report summary pay data in their EEO-1 report. The Office of Management and Budget (OMB) approved the revision in September 2016. In August 2017, OMB issued a memorandum suspending the pay-related data collection aspects of the EEO-1 form. According to the memorandum, since approving the revised EEO-1 form, the relevant circumstances related to the data collection had changed and the burden estimates provided by EEOC in the original filing were materially in error. As a result, the previously approved EEO-1 form without the pay-related data requirements will remain in effect. We previously reported on the challenges faced by the financial services industry in promoting and retaining a diverse workforce. In 2010, we reported that diversity in management in the financial services industry did not change substantially from 1993 through 2008 and that diversity in senior positions was limited. We also found that without a sustained commitment among financial services firms to overcoming challenges to recruiting and retaining minority candidates, limited progress would be possible in fostering a more diverse workplace. Subsequently, in 2013, we found that following the 2007–2009 financial crisis, diversity in management in the financial services industry did not change substantially from 2007 through 2011 and that diversity in senior positions remained limited. We also found that women generally represented 45 percent of management-level positions each year, from 2007 through 2011. Additionally, our 2013 report noted that practices that can support diversity include sponsorships (where an executive acts as a guide to help an employee navigate the organization) and efforts to address unconscious bias in promotions. In a January 2005 report, we defined diversity management as a process intended to create and maintain a positive work environment that values individuals’ similarities and differences, so that all can reach their potential and maximize their contributions to an organization’s strategic goals and objectives. We also identified a set of nine leading diversity management practices that should be considered when an organization is developing and implementing diversity management. They are (1) commitment to diversity as demonstrated and communicated by an organization’s top leadership; (2) the inclusion of diversity management in an organization’s strategic plan; (3) diversity linked to performance, making the case that a more diverse and inclusive work environment could help improve productivity and individual and organizational performance; (4) measurement of the impact of various aspects of a diversity program; (5) management accountability for the progress of diversity initiatives; (6) succession planning; (7) recruitment; (8) employee involvement in an organization’s diversity management; and (9) training for management and staff about diversity management. In 2013, we reported that industry representatives confirmed that these nine practices are still relevant. Since our 2005 report, researchers and the federal government have recognized that a focus on inclusion in the workplace is an important component of creating and sustaining a diverse workforce. For example, the Office of Personnel Management notes that optimal performance is based on both diversity and inclusion, which it defines as a set of behaviors (culture) that encourages employees to feel valued for their unique qualities and experience a sense of belonging. Research discusses a number of reasons why workforce diversity may be beneficial to businesses. For example, two studies summarized other research that found that diversity can bring new voices and perspectives into conversations about business strategies, such as developing opportunities in unserved markets. Also, a diverse workforce can help managers understand and address the needs of a demographically diverse customer base. That is, employees who are demographically similar to customers are likely to have an easier time understanding customer preferences and how they change over time. Additionally, a diverse workforce can stimulate a wider range of creative decisions. Researchers have noted that minority opinions stimulate creativity and divergent thought, and that creativity and innovation are enhanced when a diverse workforce is employed. Research on the effects of workforce diversity on financial performance has been mixed. For example, a 2003 report summarized the results and conclusions reached in four separate studies of the relationships between race and gender diversity and financial performance. The report concluded that race and gender diversity had no direct positive or negative influence on financial performance. A 2011 report that summarized this and other research found that researchers continue to put forth conflicting results regarding the business benefits of workforce diversity. In the authors’ opinion, the goals of workforce diversity programs should be broad, and not just focused on the organization’s financial performance. Representation of minorities at the overall management level increased by 3.7 percentage points from 2007 through 2015 and their representation among senior-level managers increased by 1.7 percentage points during this time. Women’s representation at the overall management level has remained at about 45 percent from 2007 through 2015. Among the various sectors of the financial services industry, the insurance sector has consistently had the highest proportion of women in management positions while the banks and other credit institutions sector has consistently had the highest proportion of racial/ethnic minorities in management. As the size of financial services firms increase (by number of employees), the representation of minorities in overall management increased and the representation of women in overall management was generally the same. Additionally, management-level diversity in the financial services sector has similarities and differences compared to other sectors. At the overall management level, minority representation increased in the financial services sector, though representation varied by individual minority groups. More specifically, the representation of minorities in management increased by 3.7 percentage points from 2007 through 2015 according to EEOC data, (see fig. 1). This increase shows a continued upward trend from our 2006 report—the first of a series of reports we have issued on trends in the financial services industry—in which data showed that management-level representation by minorities increased from 11.1 percent to 15.5 percent from 1993 through 2004. Since 2007, Asians had the largest gains, increasing their representation among managers from 5.4 percent to 7.7 percent. Hispanics made smaller gains. In contrast, the proportion of African-Americans in management positions decreased from 6.5 percent to 6.3 percent. From 2007 through 2015, minorities’ representation among first- and mid- level managers increased by 3.7 percentage points (see fig. 2). Minorities’ representation among senior-level managers increased by 1.7 percentage points during this time. As previously noted, EEOC splits management into two categories: (1) first- and mid-level officials and managers and (2) executive and senior-level officials and managers. First- and mid-level management positions may serve as an internal pipeline in an organization through which minority candidates could move into senior-level management positions. In 2015, representation of minorities in first- and mid-level management positions was 22.4 percent compared to 12.3 percent of minorities in senior-level management positions. Among first- and mid-level managers, the representation of Asians increased by 2.6 percentage points from 2007 through 2015, while representation changed by less than 1 percentage point each for Hispanics and African-Americans (see fig. 3). Among senior-level managers, the representation of each racial/ethnic group changed by less than 1 percentage point during this time. As previously mentioned, racial and ethnic groups’ workforce participation is projected to grow at varying rates. For example, from 2014 through 2024 labor force participation is expected to increase by 10.1 percent for African-Americans, 23.2 percent for Asians and 28 percent for Hispanics, according to the Bureau of Labor Statistics. In contrast, labor force participation among white persons is expected to increase by 2 percent. Representation of women and men at the overall management level in the financial services industry has remained unchanged from 2007 through 2015, with women representing about 45 percent of managers and men representing about 55 percent over time. In 2006, we similarly reported that from 1993 through 2004, women represented from about 43 percent to 46 percent of managers. The proportion of minority women in overall management increased by 1.5 percentage points from 2007 through 2015 while decreasing by 1.5 percentage points among white women (see fig. 4). During the same time period, representation of minority men in overall management increased by 2.2 percentage points while decreasing by 2.3 percentage points for white men. However, representation of white men remained significantly higher at 44.5 percent in 2015 compared to white women at 34.4 percent, minority women at 10.7 percent, and minority men at 10.3 percent. Representation of specific racial/ethnic groups in the financial services sector from 2007 through 2015 varied by gender (see fig. 5). For example, among minority women, African-American women consistently had the highest representation in management, representing from 4.1 percent to 4.0 percent of managers. Hispanic and Asian women had similar representation in management positions over time. More specifically, Hispanic women represented from 2.5 percent to 2.9 percent of managers and Asian women represented from 2.3 percent to 3.1 percent of managers. In contrast, among minority men, Asian men consistently had the highest representation in management, representing from 3.1 percent to 4.6 percent of all managers from 2007 through 2015. African-American and Hispanic men had similar representation in management positions during this time period. More specifically, African- American men represented from 2.3 percent to 2.4 percent of managers and Hispanic men represented from 2.3 percent to 2.6 percent of managers. Representation of women among first- and mid-level managers and senior-level managers was around 48 percent and about 29 percent, respectively, from 2007 through 2015. Among first- and mid-level management positions, the representation of white women decreased by 2 percentage points from 2007 through 2015 (see fig. 6). Also during this time, the representation of white women in senior-level management positions decreased by 0.9 percentage points. For minority women, representation in first- and mid-level management positions increased by 1.6 percentage points and representation in senior-level management positions increased by 0.3 percentage points from 2007 through 2015. For men, the largest changes over time were in the first- and mid-level management positions. More specifically, from 2007 through 2015, representation of white men in first- and mid-level management decreased by 1.8 percentage points and representation of minority men in first- and mid-level management increased by 2.2 percentage points. Among senior-level managers, representation of white men decreased by 0.9 percentage points and increased by 1.5 percentage points among minority men from 2007 through 2015. For additional information on the representation of minority women and men in each management position by race/ethnicity, see appendix II. The representation of minorities in overall management positions varied by sector (see fig. 7). EEO-1 data for the financial services industry include the following four sectors: banks and other credit institutions, funds and trusts, securities and other activities, and insurance. For example, the representation of minorities in overall management positions was consistently the greatest in the banks and other credit institutions sector and lowest in the insurance sector. Minorities’ representation in overall management increased in four sectors of the financial services industry from 2007 through 2015. For example, the representation of minorities in the banks and other credit institutions sector increased by 3.1 percentage points and the representation of minorities in the insurance sector increased by 4.2 percentage points. The representation of women in overall management also varied by sector. As shown in figure 8, the insurance sector consistently had the highest proportion of women in management positions, followed by banks and other credit institutions, funds and trusts, and securities and other activities. From 2007 through 2015, the proportion of women in management positions decreased in each sector except for the insurance sector where it increased by 1.9 percentage points. The proportions of Hispanics, Asians, and Other in overall management increased from 2007 through 2015 in each of the four financial sectors we reviewed, and decreased for African-Americans in all but the insurance sector (see fig. 9). Among racial/ethnic groups, Asians generally experienced the greatest increases in management-level representation. For example, from 2007 through 2015, management-level representation of Asians in the securities and other activities sector increased by 3.5 percentage points while it increased by 0.8 percentage points for Hispanics, increased by 0.6 percentage points for Other, and decreased by 0.8 percentage points for African-Americans. However, in the insurance sector, African-Americans had the highest percentage representation compared to other minority groups and increased from 6.7 percent in 2007 to 7.2 percent in 2015. The representation of minorities in overall management increased as firm size (by number of employees) increased (see fig. 10). In 2007, the representation of minorities in management was nearly 5 percentage points greater in firms with 5,000 or more employees compared to firms with 100–249 employees. In 2015, by comparison, the representation of minorities in overall management was about 6 percentage points greater in the largest category of firms (5,000 or more employees) compared to the smallest (100–249 employees). Research suggests that larger organizations may have greater capacity to address workforce diversity. Researchers also note that large organizations tend to make greater efforts to prevent workplace discrimination against women and racial/ethnic minorities because they have direct legal obligations. Additional information on representation of specific racial/ethnic groups in management positions across firm size can be found in appendix II. As shown in figure 11, the representation of women in management positions was generally the same across firm size in 2007 and 2015. For example, in 2007 women represented from nearly 45 percent to nearly 46 percent of the managers in financial services firms of varying sizes. Similarly, in 2015 women represented from nearly 44 percent to almost 47 percent of the managers in financial services firms of varying sizes. Representation of minorities increased from 2007 through 2015 in the financial services sector, the professional services sector, and the overall private sector at both the senior-level and the first- and mid-level of management, as shown in figure 12. The professional services sector includes jobs in legal services, accounting, consulting, and advertising, among other services. Among first- and mid-level managers, however, the representation of minorities increased at a higher rate for the professional services sector. More specifically, from 2007 through 2015, minorities’ representation among first- and mid-level managers increased by 7.5 percentage points in the professional services sector. In comparison, minorities’ representation among first- and mid-level managers in the financial services sector and the overall private sector increased by 3.7 and 3.8 percentage points, respectively, during this time. Among senior-level managers, representation of minorities fluctuated from 2007 through 2015 in all three sectors. However, minorities’ representation increased the most—by 2.5 percentage points—in the professional services sector, compared to the financial services and overall private sector, which increased by 1.7 and 1.4 percentage points, respectively. The financial services sector has generally had a greater proportion of women in various management positions compared to the overall private sector (excluding the financial services sector) and the professional services sector. As shown in figure 13, from 2007 through 2015 women represented about 48 percent of the first- and mid-level management positions in the financial services sector. In comparison, women’s representation among first- and mid-level managers in other sectors was smaller. For example, women represented 36.7 percent of the first- and mid-level managers in the professional services sector in 2015. Among senior-level managers, the representation of women in financial services was slightly higher than their representation in the overall private sector from 2007–2010, after which time their representation in each sector was generally within 1 percentage point. From 2007 through 2015, women’s representation among senior-level managers in financial services was generally greater than their representation among senior-level managers in the professional services sector. Potential employees for the financial services industry who could be an external pool for becoming managers can come from a wide range of academic and professional backgrounds. Undergraduate or graduate degrees are an important consideration for employment according to staff we spoke with at financial services firms. Representatives from three financial services firms told us that while graduates with Master of Business Administration (MBA) degrees are still an important external talent pool, firms have broadened their recruitment efforts and seek students with a variety of degrees. About one-third of the external pool of potential talent for financial services, that is, those obtaining undergraduate or graduate degrees, were racial/ethnic minorities from 2011 through 2015 (see fig.14). Rates of bachelor’s degree attainment by racial/ethnic minorities increased from 29.4 percent in 2011 to 33.9 percent in 2015. During the same time period, rates of master’s degree attainment increased by similar amounts, from 28.8 percent to 33 percent, and MBA attainment increased from 35.6 percent to 39.2 percent. As previously noted, the proportion of managers in the financial services industry who were racial or ethnic minorities increased from 17.3 percent in 2007 to 21 percent in 2015, which is lower than the rates of bachelor’s, master’s, and MBA degree attainment for these groups across all years. Among the potential external talent pool of minority women and minority men, educational attainment has consistently increased over time, and women have generally obtained a higher percentage of undergraduate or graduate degrees compared to men. For example, from 2011 through 2015, rates of bachelor’s degree attainment increased by at least 2 percentage points each for minority women and minority men, and minority women consistently earned a greater proportion of bachelors’ degrees (see fig. 15). Similarly, the proportions of masters and MBA degrees earned from 2011 through 2015 increased for minority women and minority men. During this time frame, minority women consistently earned a greater proportion of master’s and MBA degrees compared to minority men. Additional information about educational attainment among the potential external talent pool of women and men can be found in appendix IV. A majority of the external pool of potential talent for the financial services industry, that is, those obtaining undergraduate or graduate degrees, have been women in recent years (see fig. 16). From 2011 through 2015, women consistently earned about 58 percent of bachelors’ degrees, just over 60 percent of masters’ degrees, and about 45 percent of the MBA degrees. As we previously discussed, women have generally represented about 45 percent of overall management in the financial services industry. Two of the nonmanagement job categories in the financial services sector—professional and sales positions—are considered to be the industry’s potential “internal pipeline,” which comprise staff that could potentially move into management positions. Professional positions can include credit and financial analysts, personal financial advisors, financial examiners, and loan officers; sales positions can include those in securities, commodities, financial services, and insurance sales agents. EEOC data are derived from annual reports that show firms’ workforce composition in a single point of time and therefore do not allow for analysis of the extent to which firms promote staff internally. However, the data do provide some insights into the potential internal pipeline. Representation of racial/ethnic minorities in professional and sales positions has changed over time, but has generally been greater than their representation in overall management positions (see fig. 17). More specifically, EEOC data show that racial/ethnic minorities generally comprised about 25 percent of the professional positions from 2007 through 2011, and then increased to nearly 28 percent in 2015. In contrast, the representation of racial/ethnic minorities in sales positions decreased during the 2007–2009 financial crisis, and then increased from nearly 23 percent in 2011 to nearly 26 percent in 2015. As previously noted, minorities have represented from 17 percent to 21 percent of overall management in the financial services industry from 2007 through 2015. See appendix IV for additional information on the potential internal pool for management positions in the financial services industry. Representation of women in professional positions in the financial services industry has generally been greater than women’s representation in overall management (see fig. 18). For example, from 2007 through 2015, the proportion of women in professional positions has generally been just over 50 percent. As previously noted, during this time frame women consistently represented about 45 percent of overall management. The percentage of women in sales positions within the financial services industry has generally been lower, at about 40 percent. Representatives from financial services firms and other stakeholders described many of the same challenges in recruiting and retaining women and racial/ethnic minorities as we have previously reported, including negative perceptions of the financial services industry that might discourage potential candidates. Practices that financial services firms use to address these challenges include broadening recruitment efforts, establishing relationships with student groups and professional organizations, and providing training on unconscious bias. Representatives from all of the financial services firms we met with agreed on the importance of analyzing data on the demographic characteristics of their employees. Some firm representatives noted that by assessing employee data they can identify trends that may need to be addressed. However, representatives and other stakeholders differed on the benefits of making firm-level information on employee diversity publicly available. Representatives from financial services firms and organizations that advocate for women or racial/ethnic minorities described a variety of challenges to recruiting a diverse workforce for the financial services sector, many of which we have described in previous reports on the topic. For example, representatives from several financial services firms stated that negative perceptions of the industry could limit potential candidates’ interest in the field. Additionally, representatives of an organization that advocates for workforce diversity stated that women and minorities may not seek employment in the financial sector due to concerns about the industry’s reputation or a lack of awareness of career paths in the industry. Representatives from some financial services firms told us that it is challenging to get firm leadership on board with recruiting at a broad group of schools, rather than a small number of elite universities. Representatives from three organizations that advocate for women or minorities similarly observed that some financial services firms focus on elite universities. Also, some financial services firm representatives told us that there is a great deal of competition for diverse talent and that financial services firms are increasingly competing with technology firms for talent. Representatives from two firms also stated that it is challenging to recruit diverse staff to work in some geographic locations. Reports on workforce diversity echo some of the recruiting challenges that we heard from financial firm representatives. For example, a 2012 consulting firm report on women in senior management notes that at the entry-level businesses viewed as male-dominated tend to attract fewer women. This report also states that sometimes companies have a view that positions requiring long hours will not suit women. A 2012 study on women’s job choices found that in financial services, women are significantly less likely than men to apply for financial advisory and trading jobs and more likely to apply for jobs in general management—most notably internal finance and marketing. A 2014 consulting firm report on diversity in the leadership of companies in the United Kingdom, Canada, Latin America, and the United States found a number of barriers to the recruitment of all diversity groups (including women as well as racial/ethnic groups). These barriers include the lack of visible support from leadership and inadequate collection and use of data on the advantages of more diverse organizations. Additionally, a 2016 consulting firm report on women in financial services in 32 countries noted that a majority of asset managers who were interviewed held the view that certain jobs in financial services, such as asset management, may deter qualified women from applying, as may a lack of knowledge about the industry among graduate students. Financial firm representatives and other stakeholders we spoke with, and research we reviewed described a variety of practices that they believe or have found to be effective for recruiting women and racial/ethnic minorities. These practices include the following. Engaging in broad-based recruiting. Representatives from three firms stated that they are increasingly hiring and interested in recruiting students from a variety of academic disciplines, such as liberal arts or science and technology. For example, representatives from one firm explained that they are interested in candidates with critical thinking skills, and that technical skills can be taught to new employees. Additionally, representatives from several firms noted the importance of recruiting at a broad group of schools, not just a small number of elite universities. Establishing relationships with student and professional organizations. Most financial firm representatives told us that an effective strategy for recruiting diverse students is to establish relationships with student organizations representing diverse groups. Representatives from one firm explained that working with student groups helps expose diverse students to careers in financial services. Additionally, to help recruit women and minorities who may already have graduated from college or graduate school, representatives of most financial firms and two trade groups described establishing relationships with professional organizations that represent women and minorities. Intentionally recruiting diverse candidates. Representatives from two financial services firms and two organizations that advocate for the financial services industry noted that firms should intentionally seek out diverse candidates. For example, representatives from one firm discussed the importance of including diversity in a firm’s recruiting strategy and establishing relationships with schools and organizations that can increase women’s and minorities’ exposure to financial services. Offering programs to increase awareness of financial services. Several financial firm representatives told us that they establish relationships with high school students to expose diverse students to the financial services field. For example, representatives from one firm described a program that pairs high school students with a mentor from the firm. Two organizations that advocate for the financial services industry also noted that it is helpful for financial services firms to establish relationships with high schools to educate young students about the field. A 2016 consulting firm report on women in financial services organizations in 32 countries found that a majority of asset managers who were interviewed thought it was important for financial services firms to educate students about careers available in financial services. The report noted that more on-campus education and public relations work could help attract women to the field. Reports on workforce diversity, representatives from financial services firms, and other stakeholders discussed several challenges to retaining women and racial/ethnic minorities, several of which we have previously reported. Representatives of three financial services firms and two organizations that advocate for the financial services industry told us that it is challenging to retain women and minorities at organizations that lack women and minorities in management positions. Additionally, two former employees of large financial services firms, both racial/ethnic minorities, told us that there are fewer mentors or role models for women and racial/ethnic minorities in firms that have fewer women and minorities in leadership positions. A 2012 consulting firm report on women in senior management reported that women can lack a network or sponsor to help them advance. Some financial firm representatives noted that employee resistance, particularly from middle-managers, poses a challenge to diversity and inclusion efforts. Additionally, some organizations that advocate for women and minorities noted that unconscious bias is an issue that can negatively affect women and minorities. As an example, managers may give hiring or promotion preferences to persons who have hobbies or educational backgrounds similar to theirs. Also, the authors of a 2014 report on women in senior management at financial and nonfinancial organizations across 40 countries suggested that unconscious bias against women can result in a reluctance to promote women in the expectation that they will eventually put family first. The report stated that this bias can trigger a self-fulfilling prophecy, as lack of promotion is one of the top reasons cited by women for leaving their jobs. Reports on diversity, representatives from financial services firms, and other stakeholders described a variety of practices that may be helpful in retaining women and racial/ethnic minorities. These practices include the following. Establishing affinity groups. Representatives from four financial services firms stated that having affinity groups helps promote both diversity and inclusion. Affinity groups—sometimes referred to as employee resource groups or networking programs—provide forums for employees to gather socially and share ideas outside of their particular work unit. Representatives from two firms emphasized that it is important for affinity groups to have meetings with firm leadership. A 2007 study reported that networking programs have stronger effects on some demographic groups than others. Training managers and employees on inclusion and unconscious bias. Several financial firm representatives emphasized the importance of offering training to foster an inclusive work environment. As previously noted, an inclusive work environment is one that encourages employees to feel valued for their unique qualities and experience a sense of belonging. Training on inclusiveness, emotional intelligence, and unconscious bias were specifically noted by two financial firm representatives as being helpful for both managers and staff. Establishing management-level accountability. Representatives from three financial firms told us that firm management should be held accountable for the firm’s workforce diversity goals. Managers’ performance in maintaining a diverse workforce can be evaluated a variety of ways. For example, two firm representatives discussed the use of “diversity scorecards.” A diversity scorecard is a set of objectives and measures derived from an organization’s overall business strategy and linked to its diversity strategy. Additionally, one firm representative noted that tying senior managers’ compensation to diversity goals has been an effective practice for retaining women and minorities. Researchers have noted that efforts to establish organizational responsibility for diversity lead to the broadest increases in managerial diversity. Offering staff mentors and sponsors. Representatives from three financial firms and two organizations that advocate for the financial services industry told us that providing staff with mentors or sponsors helps retain and promote women and racial/ethnic minorities. In general, a mentor provides advice and guidance to more junior staff (protégés) and a sponsor nominates or supports a protégé’s promotion. Research and reports discuss the benefits of mentors and sponsors. Implementing family-friendly policies. Some of the financial services firm representatives and three of the four individuals with whom we met (members of racial minority groups who had worked in large financial services firms) noted the importance of work-life balance to help retain women. A 2011 paper on the Canadian financial sector described selected banks’ family-friendly policies, such as flexible work schedules, that facilitate work-life balance. As previously noted, in 2005 we identified a set of nine leading diversity management practices that should be considered when an organization is developing and implementing diversity management. These practices include measuring the impact of diversity programs and providing training for management and staff on diversity. Financial firm representatives and other stakeholders with whom we met agreed that these practices are still relevant. However, researchers have found that practices related to diversity may not benefit all genders and racial/ethnic groups evenly. For example, a 2015 consulting firm report found that the approach of many companies to cover all groups (racial/ethnic, gender, and sexual orientation) using a single diversity program is insufficient. The report found that diversity- related practices should be tailored to specific groups. Earlier empirical research similarly found that the effects of various diversity-related initiatives varied across gender and race/ethnicity groups. Representatives of financial services firms told us that it is useful for financial services firms to analyze demographic data to assess diversity of their workforce and identify trends that may need to be addressed. All of the financial services firms with whom we met agreed on the importance of analyzing employee data. Some firm representatives noted that by assessing employee data they can analyze the gender and racial/ethnic diversity of new hires, employees leaving the organization, and newly promoted staff and managers. Representatives from several firms stated that it is important for organizations to be self-aware of how they are doing with workforce diversity. Also, representatives from an investment bank told us that they analyze employee data over time to determine whether certain demographic groups tend to leave the firm after a certain number of years. With this information, the representatives told us, the organization can proactively take steps to help retain these staff, such as providing staff with mentors. Additionally, representatives from a large bank explained that by analyzing demographic data of employees, the organization can identify “leaks” in their internal pipeline. That is, they can determine when and potentially why women and racial/ethnic minorities leave before progressing into management positions. Several financial firm representatives told us that when they identify data trends that indicate problems, such as retention issues, they then take steps to address them. Several financial firm representatives stated it is important to know the demographic make-up of employees, because firms should look like their customers. As an example, a representative of an investment banking institution told us that over half of the firm’s customers were women; therefore it was a priority for the organization to know how to serve them as well as other diverse groups. Also, a firm representative told us that some potential clients call inquiring about racial and gender diversity before doing business. The representative added that clients are interested in receiving advice and information from advisors to whom they can relate. Additionally, representatives from a large financial services firm stated workforce diversity helps the firm better understand its diverse customers. Representatives of three financial services firms with whom we met also described the importance of obtaining employees’ views about the organization, including employees’ feelings about diversity and inclusion. For example, a financial services firm representative told us that in order to be successful at fostering workforce diversity firms must obtain employees’ views on work/life balance, opportunities for advancement, and inclusiveness. He noted that while quantitative data on employees’ demographic characteristics may indicate that the workforce has become more diverse, employees may not feel like the workplace has become more diverse. Three of the organizations with whom we met (two that advocate for the financial services industry and one that advocates for diversity) agreed on the importance of surveying employees about diversity and inclusion. For example, representatives from a financial services industry trade group told us that employee surveys can be used to detect issues that minority employees face. Research points out that having diversity management practices alone is insufficient for improving workplace performance. This research finds that productive workplaces exist when inclusion is promoted and employees are encouraged to express their opinions and their input is sought before making important organizational decisions. Representatives of financial services firms and organizations that advocate for diversity varied in their views on whether data on the demographic characteristics of employees at specific financial services firms should be shared publicly, for example through diversity indexes or on the company’s website. Representatives from two financial firms told us that publicly disclosing firm-level employee characteristics would not benefit the company. More specifically, representatives from two financial services firms indicated that diversity indexes are of limited value because they do not indicate whether a firm has made progress on diversity. One representative noted the reputation of firms that are not diverse could be damaged, which could make improvement of workforce diversity more difficult. As discussed earlier, potential candidates’ negative perceptions of the financial services industry’s reputation can make it difficult for firms to recruit diverse employees. In contrast, representatives from one of the financial services firms and two organizations that advocate for diversity told us that making data on the diversity of firms’ workforce publicly available was beneficial because it highlighted firms’ diversity efforts. As an example, representatives from a large financial services firm told us that the firm regularly participates in a number of surveys on diversity, which third-parties use to create various diversity indexes. The indexes highlight this firm’s progress on employee diversity. Additionally, several of the firms with whom we met post data on their websites indicating demographic information about their employees, such as the proportion of women in management and employees’ country of origin. Representatives of organizations that advocate for diversity in the workplace cited the benefits of diversity indexes and the publication of workforce diversity information on specific financial services companies. For example, one representative stated that requiring businesses to be transparent about their workforce diversity data creates incentives to improve the diversity of their workforce. A representative from an organization that advocates for women noted that diversity indexes or other public information can be helpful for investors, who want to know about the workforce composition of the businesses that they may invest in. This representative stated that institutional investors have been leading the charge for more transparency and diversity among companies. We have previously reported on large investors’ interest in having more public disclosure about the diversity of corporate board directors. We provided a draft of this report to EEOC. We received technical comments, which we addressed as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of this report until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees and the Acting Chair of the Equal Employment Opportunity Commission. We will make copies available to others upon request. The report will also be available at no charge on our website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are listed on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. The objectives of this report were to examine (1) trends in management- level diversity in the financial services industry, (2) trends in diversity among potential talent pools, and (3) challenges financial services firms identified in trying to increase workforce diversity and practices firms used to increase workforce diversity. To describe management-level diversity in the financial services industry, we obtained 2007–2015 workforce data from the Equal Employment Opportunity Commission’s (EEOC) Employer Information Report (EEO- 1). EEO-1 data are annually submitted to EEOC by most private-sector firms with more than 100 employees. Most federal contractors with 50 or more employees are also required to submit to EEOC annual reports showing the composition of their workforce; however, consistent with our 2006 and 2013 reports, we did not include these contractors in our analysis. Accordingly, the EEO-1 data presented in this report do not exactly match the EEO-1 data on EEOC’s website. We found that these differences were small and did not materially change the trends in the representation of various demographic groups. We obtained EEO-1 data in February 2017 for the finance and insurance industry categorized under the North American Industry Classification System (NAICS) code 52 from 2007 through 2015, the most recent year of data available. EEO-1 data were specifically obtained for each job category by gender, race/ethnicity, firm size, and industry sectors. We used the race/ethnicity categories used by EEOC: African-American, Asian, Hispanic, and Other. The “Other” category, which represents less than 3 percent of the financial services workforce, includes Native Hawaiian or Pacific Islander, Native American or Alaska Native, and “two or more races.” Job categories include: senior-level managers, first- and mid-level managers, professionals, technicians, sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers. We defined “overall management” as senior-level managers and first- and mid-level managers. We compared 2007 through 2015 EEO-1 data on the financial services industry to comparable information we previously published using EEO-1 data on diversity trends in the financial services industry from 1993–2006. Because the EEOC data do not come from a sample, but are collected from all businesses, we did not calculate standard errors or confidence intervals on our estimates. To compare diversity trends in the financial services industry with the overall private sector and the “professional and technical services sector,” we downloaded 2007 through 2015 EEO-1 data on the overall private sector and the professional and technical services sector from the EEOC website. We excluded data for the financial services industry from the data representing the “overall private sector.” The professional and technical services sector is categorized under the NAICS code 54, and includes establishments that specialize in performing professional, scientific, and technical activities for others, such as accounting, bookkeeping, payroll services, and consulting services. For the financial services industry, we used the data provided to us by EEOC, which, as discussed earlier, does not include federal contractors with fewer than 100 employees and therefore does not precisely match data on EEOC’s website. We chose not to rely on data from the EEOC website for this comparison so that data on the financial services sector would be from a consistent source throughout the report. We compared the representation of racial/ethnic minorities and women in management positions across all three sectors from 2007 through 2015. To determine the reliability of the EEO-1 data from EEOC that we used throughout this report, we interviewed knowledgeable EEOC officials and reviewed relevant documents provided by agency officials and obtained on its website. We also conducted electronic testing of the data. We determined that the EEO-1 data were sufficiently reliable for describing workforce diversity trends. To describe recent trends in diversity among potential external talent pools (potential source of future managers outside the firms) for positions in the financial services sector, we interviewed representatives from three financial services firms about the preferred educational requirements needed to enter the field. We then used educational attainment data available from the Department of Education’s Integrated Postsecondary Education Data System (IPEDS) to analyze the race/ethnicity and gender characteristics of individuals receiving undergraduate degrees, master’s degrees (of all subjects), and Master of Business Administration (MBA) degrees for the school years ending 2011 through 2015. At the time of our review, data for the school year ending in 2015 were the most recent data available. Through a review of documentation and electronic testing, we found the IPEDS data to be sufficiently reliable for describing trends in educational attainment. To describe recent trends in diversity among potential internal talent pools for management positions, we first identified the nonmanagement positions that were most likely to feed into management by reviewing an EEOC report on diversity in financial services and analyzing job descriptions and education requirements for nonmanagement positions in the financial services sector. Based on this information, we determined that the professional and sales job categories best represent the primary internal talent pool for management positions in the financial services industry. We then analyzed EEO-1 data for NAICS code 52 to identify trends in the representation of women and racial/ethnic minorities in professional and sales positions from 2007 through 2015. We compared these trends to trends in the representation of women and racial/ethnic minorities in overall management positions in the financial services industry. To identify challenges financial services firms face in trying to increase workforce diversity as well as practices financial services firms use to improve workforce diversity, we conducted a literature review. We used research databases such as ProQuest and SCOPUS to search for scholarly or peer-reviewed material, government reports, conference papers, trade and industry articles, and association or nonprofit publications published from 2006 through 2016. Also, we used Internet search techniques and keyword search terms to identify publicly available information about workforce diversity in the financial services sector as of August 2017. In cases where the studies or articles referenced older materials that focused on workforce diversity practices, we reviewed those as well. In addition, we interviewed: representatives from 13 financial services firms that were actively involved in workforce diversity efforts, representatives of 11 organizations that advocate for the financial services industry, women or racial/ethnic minorities, or both. We also interviewed a selection of two male and two female members of racial minorities who formerly worked for large financial services firms. We interviewed representatives from 9 of the 13 financial services firms in a group setting. Based on the group-discussion format, we did not collect precise counts of the participants who agreed or disagreed with specific practices or challenges. Financial services firms were selected based on their participation at a conference on improving diversity in the financial services industry, their participation in our previous work, and suggestions from organizations that represent the financial services industry. Former employees were selected based on their participation in a conference on diversity in financial services or their experience in the financial services industry. We also attended a conference on diversity in the financial services sector. To determine how financial services firms assess their diversity policies and practices, we interviewed representatives of financial services firms as well financial services industry trade groups. The views expressed by firms, trade organizations, and former employees may not be representative of all entities involved in workforce diversity efforts. We used certain qualifiers when collectively describing responses from financial services firms and trade groups, such as “some,” “several,” and “most.” We define some as four, several as at least five but less than most, and most as more than half relative to the total number possible. We also reviewed academic and other research studies on the effect of specific workforce diversity policies. We conducted this performance audit from August 2016 through November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This appendix provides additional detailed analysis of EEOC data on the financial services industry from 2007 through 2015. The representation of minority women in first- and mid-level management increased by 1.6 percentage points from 2007 through 2015 while their representation in senior-level management increased by 0.3 percentage points during this time (see fig. 19). Women’s representation among specific racial/ethnic groups did not change by more than 1 percentage point for any specific group at either management level from 2007 through 2015. The representation of minority men in first- and mid-level management increased by 2.2 percentage points from 2007 through 2015 and their representation in senior-level management increased by 1.5 percentage points (see fig. 20). Men’s representation among specific racial/ethnic groups did not change by more than 1 percentage point at the senior management level. In contrast, at the first- and mid-level management position, Asian men experienced an increase in their management representation of 1.7 percentage points. Men of other races/ethnicities did not experience changes in their representation at the first- and mid-level management position of more than 1 percentage point. Representation of minorities in overall management increased from 2007 through 2015 in firms of all sizes, with the greatest increases occurring in firms with over 1,000 employees (see fig. 21). Representation of Asians, Hispanics, and Other in management positions increased over time in firms of all sizes while representation of African-Americans in management decreased by less than 1 percentage point or stayed the same from 2007 through 2015 in firms of all sizes. In 2015, Asians and African-Americans had the largest percentage of minority representation, 8.7 percent and 7.1 percent respectively, in firms with over 5,000 employees. This appendix provides information on management representation in the financial services industry by state in 2015. This appendix provides additional information about the potential external and internal talent pools for the financial services sector. Table 2 includes information on the demographic characteristics of persons obtaining undergraduate-level and graduate-level degrees for the school years ending from 2011 through 2015. Tables 3 through 7 show the representation of various demographic groups working in the Professional and Sales job categories of the financial services sector from 2007 through 2015. In addition to the individual named above, Kay Kuhlman, Assistant Director; Lisa Moore, Analyst in Charge; Rachel Batkins; Ben Bolitzer; Mitch Karpman; Jill Lacey; May Lee; John Mingus; Tovah Rom; Kelsey Sagawa; Jena Sinkfield; and Tyler Spunaugle made major contributions to this report.", "summary": "The U.S. workforce force has become increasingly diverse and is projected to become even more diverse in the coming decades. As a result, many private sector organizations have recognized the importance of recruiting and retaining minorities and women for key positions to improve their business or organizational performance and help them better meet the needs of a diverse customer base. The financial services industry is a major source of employment in the United States and affects the economic well-being of its customers. However, questions remain about diversity in the financial services industry, which provides services that help families build wealth and are essential to economic growth. GAO was asked to analyze diversity trends in the financial services industry, particularly in management positions. This report examines (1) trends in management-level diversity in the financial services industry from 2007 through 2015, (2) trends in diversity among potential talent pools, and (3) challenges financial services firms identified in trying to increase workforce diversity and practices firms used to address them. GAO analyzed data from the Equal Employment Opportunity Commission (EEOC) and the Department of Education. The most recent available data were from 2015. GAO also reviewed studies on workforce diversity and interviewed representatives from financial services firms and organizations that advocate for the financial services industry, women, or minorities. EEOC provided technical comments on a draft of this report that GAO incorporated as appropriate. Overall representation of minorities in first-, mid-, and senior-level management positions in the financial services industry increased from about 17 percent to 21 percent from 2007 through 2015. However, as shown in the figure below representation varied by race/ethnicity group and management level. Specifically, representation of African-Americans at various management levels decreased while representation of other minorities increased during this period. Overall representation of women was generally unchanged during this period. Representation of women among first- and mid-level managers remained around 48 percent and senior-level managers remained about 29 percent from 2007 through 2015. Potential employees for the financial services industry, including those that could become managers, come from external and internal pools. For example, the external pool includes those with undergraduate or graduate degrees, such as a Master of Business Administration. In 2015, about 33 percent of the external pool included minorities and around 60 percent were women. The internal talent pool for potential managers in financial services includes those already in professional positions. In 2015, nearly 28 percent of professional positions in financial services were held by minorities and just over 51 percent were held by women. Research, financial services firm representatives, and financial industry stakeholders described challenges to recruiting and retaining members of racial/ethnic minority groups and women and practices that could help address these challenges, including recruiting from a wider variety of schools. Firm representatives said that it is important for firms to assess firm-level data on diversity and inclusiveness. However, firm representatives and other stakeholders differed in their views on whether firm-level diversity data should be made public. For example, one stakeholder stated that sharing diversity data publicly would create incentives for improvement. However, a firm representative said that for firms that are not diverse, making employee diversity data public could make improvement of workforce diversity more difficult for them.", "document_type": "gao"}
{"report": "Prior to the President’s March 2017 executive order for comprehensive government reorganization, in January 2017, the President ordered a federal hiring freeze—providing exemptions for federal employees with national security or public safety responsibilities. The January 2017 presidential memo also directed OMB, in consultation with the Office of Personnel Management (OPM), to recommend a long-term plan to reduce the size of the federal workforce through attrition. OMB’s April 2017 guidance to agencies on their reform plans lifted the federal hiring freeze. Below is a timeline for proposed reform development and implementation as shown in figure 1. According to OMB’s April 2017 guidance, the agency reform plans were intended to accomplish several objectives, including creating a lean, accountable, more efficient government, focusing on efficiency and effectiveness and delivering programs of highest needs to citizens, and aligning the federal workforce to meet the needs of today and the future, among other things. Each agency’s proposed reform plan was to include proposals to improve efficiency, effectiveness, and accountability in four categories: (1) eliminate activities; (2) restructure and merge activities; (3) improve organizational efficiency and effectiveness; and (4) workforce management. To support these proposed reforms, OMB asked agencies to conduct an analysis, among other things, to consider if there was a unique federal role or whether some or all services, activities, or functions could be better performed by another entity, such as a state, local or tribal government or the private sector. Additionally, according to OMB’s April 2017 guidance, the draft agency proposed reform plan should be aligned with the agency strategic plan. Agency strategic plans were to be released with the President’s fiscal year 2019 budget. The final reforms included in the fiscal year 2019 budget also were to be reflected in the agencies’ human capital operating plans and information technology strategic plans, based on OMB guidance we reviewed. In March 2018, OMB released the President’s Management Agenda (PMA), which provided updated information on the status of government reorganization efforts and is connected with these reform efforts. The PMA also identified a set of cross-agency priority (CAP) goals, required under the GPRA Modernization Act of 2010 (GPRAMA), to target those areas where multiple agencies must collaborate to effect change and report progress in a manner the public can easily track. In addition to the agency reform proposals, OMB was also required by the March 2017 executive order to develop a comprehensive government- wide reform plan, including both legislative proposals and administrative actions based on agency reform plans, OMB-coordinated crosscutting proposals, and public input. According to a document provided by OMB staff, OMB solicited public comments beginning in April 2017 through June 2017 to inform the development of the government-wide reform plan. OMB staff told us they provided these comments to the appropriate agencies. The March 2018 PMA stated that, in the months ahead, the administration plans to share additional reorganization proposals designed to refocus programs around current and future needs. According to OMB guidance, once the government-wide reform proposals are finalized, it will, in coordination with the President’s Management Council, establish a way to track the progress of the reforms. To track progress of the reforms, OMB’s guidance stated that it will leverage the federal performance planning and reporting framework originally put into place by the Government Performance Results Act of 1993 (GPRA) and significantly enhanced by GPRAMA, through the use of CAP goals, agency priority goals, and Performance.gov. Given the potential benefits and challenges developing and implementing agency reform efforts, Congress and the executive branch need the tools and information to help evaluate agencies’ reform proposals and ensure they are effectively implemented. Congress’s role in reviewing agency proposed reforms will be critical to the success of making significant changes in how the government operates. To assist Congress in its oversight role, we organized our prior work and leading practices into the following four broad categories that can help the Congress assess proposed reforms. Figure 2 describes the four broad categories, relevant sub-categories of questions, and selected key questions in more detail below. Lessons learned from prior federal reform and reorganization efforts suggest that reforming government is an immensely complex activity that requires agreement on both the goals to be achieved and the means for achieving them. Because many current federal programs and policies were designed decades ago to respond to trends and challenges that existed at the time of their creation, it makes sense to periodically conduct fundamental reviews of major programs and policy areas to ensure they continue to meet current goals and emerging trends. It is also important to determine the appropriate level of government, or the roles of the non- profit or private sectors, in achieving these goals. Our prior work shows that establishing a mission-driven strategy and identifying specific desired outcomes to guide that strategy are critical to achieving intended results. In other words, what is the agency trying to achieve with its reforms? It is important for agencies to reexamine the role of the federal government in carrying out specific missions and programs, policies, and activities by reviewing their continued relevance and determining whether the federal government is best suited to provide that service or if it can be provided by some other level of government or sector more efficiently or effectively. Another key aspect of shifting federal activities to other levels of government is how well the federal government fully considered the potential effects reforms might have on state and local governments, especially from a budgetary and fiscal standpoint. For example, how should the federal government act directly, or in partnership with another level of government or a non-profit organization, to achieve the identified outcomes? Defining the appropriate federal role also involves examining the federal government’s relationships with key state, local, non-profit, and private sector partners. For example, agencies should assess whether there are alternatives for managing their programs effectively across intergovernmental and organizational boundaries, as well as which level of government has the capacity to deliver on the nation’s needs and priorities today and in the future. How well have the proposed reforms indicated the likely result of the elimination, merging, or restructuring of activities with other levels of government or sectors? To what extent have the proposed reforms included consideration for other levels’ of government or sectors’ ability or likelihood to invest their own resources to address the underlying challenges? To what extent have the proposed reforms included goals to transfer a particular responsibility to another level of government—such as state or local government—or sector, and has the agency made the case that such a transfer could improve the overall accomplishment of public purpose? To what extent have the proposed reforms considered if a new mechanism is needed to integrate and coordinate programs between levels of government? If so, what statutory or regulatory changes would be needed to support such a transfer in responsibilities and to address concerns such as cost-sharing or funding? To what extent has the agency identified any risks of using contractors to perform agency activities, and if so, has it developed appropriate risk mitigating strategies? When considering government reforms, our prior work has identified useful principles, such as designing proposed reforms to achieve specific, identifiable goals that encourage decision makers to reach a shared understanding of the purpose of the reforms. Agreement on specific goals can help decision makers determine what problems genuinely need to be fixed, how to balance differing objectives, and what steps need to be taken to create, not just short-term advantages but long-term gains. Part of determining if agencies have successfully identified the goals of their proposed reforms is to determine whether the agency has built a business case analysis that presents facts and supporting details among competing alternatives. To what extent has the agency established clear outcome-oriented goals and performance measures for the proposed reforms? To what extent has the agency shown that the proposed reforms align with the agency’s mission and strategic plan? To what extent has the agency considered and resolved any agency crosscutting or government-wide issues in developing their proposed reforms? For example, what are the implications of proposed reforms on other agencies? To what extent has the agency considered the likely costs and benefits of the proposed reforms? If so, what are they? To what extent has the agency considered how the upfront costs of the proposed reforms would be funded? To what extent has the agency included both short-term and long- term efficiency initiatives in the proposed reforms? Successful reforms require an integrated approach that involves employees and key stakeholders and is built on the use of data and evidence. Reforms should also address agency management challenges, such as those we have identified as fragmented, duplicative, or overlapping, or in our high-risk program, or by agency Inspectors General. Our prior work has shown that it is important for agencies to directly and continuously involve their employees, the Congress, other key stakeholders—such as other federal partners, state and local governments, and members of the public—in the development of any major reforms. Involving employees, customers, and other stakeholders helps facilitate the development of reform goals and objectives, as well as incorporating insights from a frontline perspective and increases customer acceptance of any changes. We have also identified leading practices for open innovation strategies, defined as the use of activities and technologies to harness ideas, expertise, and resources of those outside an organization to address an issue or achieve specific goals. How and to what extent has the agency consulted with the Congress, and other key stakeholders, to develop its proposed reforms? How and to what extent has the agency engaged employees and employee unions in developing the reforms (e.g., through surveys, focus groups) to gain their ownership for the proposed changes? How and to what extent has the agency involved other stakeholders, as well as its customers and other agencies serving similar customers or supporting similar goals, in the development of the proposed reforms to ensure the reflection of their views? How and to what extent has the agency considered the views of state and local governments that would be affected by the proposed reforms? How and to what extent have agencies gathered the views of the public and incorporate these views in the proposed reforms? Is there a two-way continuing communications strategy that listens and responds to concerns of employees regarding the effects of potential reforms? How will the agency publicize its reform goals and timeline, and report on its related progress? We have reported that agencies are better equipped to address management and performance challenges when managers effectively use data and evidence, such as from program evaluations and performance data that provide information on how well a program or agency is achieving its goals. When reforming a given program, the use of data and evidence is critical from setting program priorities and allocating resources to taking corrective action to solve performance problems and ultimately improve results. We have also stated that full and effective implementation of GPRAMA could facilitate efforts to reform the federal government and make it more efficient, effective, and accountable. GPRAMA also provides important tools that can help decision makers address challenges facing the federal government. What data and evidence has the agency used to develop and justify its proposed reforms? How has the agency determined that the evidence contained sufficiently reliable data to support a business case or cost-benefit analysis of the reforms? How, if at all, were the results of the agency’s strategic review process used to help guide the proposed reforms? How, if at all, were the results of the agency’s enterprise risk management process used to help guide the proposed reforms? In our prior work, we have identified areas where agencies may be able to achieve greater efficiency or effectiveness by reducing or better managing programmatic fragmentation, overlap, and duplication. For additional details on assessing areas of fragmentation, overlap, and duplication, see our evaluation and management guide. To what extent has the agency addressed areas of fragmentation, overlap, and duplication—including the ones we identified—in developing its reform proposals? To what extent have the agency reform proposals helped to reduce or better manage the identified areas of fragmentation, overlap, or duplication? To what extent has the agency identified cost savings or efficiencies that could result from reducing or better managing areas of fragmentation, overlap, and duplication? Reforms improving the effectiveness and responsiveness of the federal government often require addressing longstanding weaknesses in how some federal programs and agencies operate. For example, agency reforms provide an opportunity to address the high-risk areas and government-wide challenges we have called attention to that are vulnerable to fraud, waste, abuse, and mismanagement, or are in need of transformation. What management challenges and weaknesses are the reform efforts designed to address? How specifically has the agency considered high-risk issues, agency Inspector General’s major management challenges, and other external and internal reviews in developing its reform efforts? Have the agency’s efforts to address those challenges been consistent with the proven approach GAO has found to resolve high risk issues? Agencies can show progress by addressing GAO’s five criteria for removal from the High-Risk List: leadership commitment, capacity, action plan, monitoring, and demonstrated progress. The five criteria form a road map for efforts to improve and ultimately address high-risk issues. How has the agency identified and addressed critical management challenges in areas such as information technology, cybersecurity, acquisition management, and financial management that can assist in the reform process? How does the agency plan to monitor the effects proposed reforms will have on high risk areas? Has the agency addressed ways to decrease the risk of fraud, waste, and abuse of programs as part of its proposed reforms? In addition, agencies should also draw upon our past recommendations, including GAO priority open recommendations and those from their own Inspectors General, to address management challenges. How have findings and open recommendations from GAO and the agency Inspectors General been addressed in the proposed reforms? How has the agency addressed GAO’s priority open recommendations, which are those that warrant priority attention from heads of key departments and agencies? Our prior work on organizational transformations show that incorporating change management practices improves the likelihood of successful reforms. Moreover, it is also important to recognize agency cultural factors that can either help or inhibit reform efforts and how change management strategies may address these potential issues. We have also reported that organizational transformations, such as reforms, should be led by a dedicated team of high-performing leaders within the agency. Finally, our prior work also shows that fully implementing major transformations can span several years and must be carefully and closely managed. Has the agency designated a leader or leaders to be responsible for the implementation of the proposed reforms? Has agency leadership defined and articulated a succinct and compelling reason for the reforms (i.e., a case for change)? How will the agency hold the leader or leaders accountable for successful implementation of the reforms? Has the agency established a dedicated implementation team that has the capacity, including staffing, resources, and change management, to manage the reform process? How has the agency ensured their continued delivery of services during reform implementation? What implementation goals and a timeline have been set to build momentum and show progress for the reforms? In other words, has the agency developed an implementation plan with key milestones and deliverables to track implementation progress? Has the agency ensured transparency over the progress of its reform efforts through web-based reporting on key milestones? Has the agency put processes in place to collect the needed data and evidence that will effectively measure the reforms’ outcome-oriented goals? How is the agency planning to measure customer satisfaction with the changes resulting from its reforms? As part of its reform effort, OMB also required agencies to develop a long- term workforce reduction plan and a plan to maximize employee performance as part of the April 2017 reform guidance. Specifically, OMB required agencies to develop proposals intended to improve performance, increase accountability, and reduce the size and costs of the federal workforce. Our prior work has found that at the heart of any serious change management initiative are the people—because people define the organization’s culture, drive its performance, and embody its knowledge base. Experience shows that failure to adequately address—or often even consider—a wide variety of people and cultural issues can lead to unsuccessful change. Research on both private- and public-sector organizations has found that increased levels of engagement—generally defined as the sense of purpose and commitment employees feel toward their employer and its mission—can lead to better organizational performance. Additionally, we found that agencies can sustain or increase their levels of employee engagement and morale, even as employees weather difficult external circumstances. In a previous review of trends in federal employee engagement, as seen in figure 2 below, we identified six key drivers of engagement based on our analysis of selected questions in the Federal Employee Viewpoint Survey (FEVS). What do FEVS results show for the agency’s current employee engagement status both overall and disaggregated to lower organizational levels? How does the agency plan to sustain and strengthen employee engagement during and after the reforms? How specifically is the agency planning to manage diversity and ensure an inclusive work environment in its reforms, or as it considers workforce reductions? Strategic workforce planning should precede any staff realignments or downsizing, so that changed staff levels do not inadvertently produce skills gaps or other adverse effects that could result in increased use of overtime and contracting. To what extent has the agency conducted strategic workforce planning to determine whether it will have the needed resources and capacity, including the skills and competencies, in place for the proposed reforms or reorganization? How has the agency assessed the effects of the proposed agency reforms on the current and future workforce and what does that assessment show? To what extent does the agency track the number and cost of contractors supporting its agency mission and the functions those contractors are performing? How has the agency ensured that actions planned to maintain productivity and service levels do not cost more than the savings generated by reducing the workforce? What succession planning has the agency developed and implemented for leadership and other key positions in areas critical to reforms and mission accomplishment? To what extent have the reforms included important practices for effective recruitment and hiring such as customized strategies to recruit highly specialized and hard-to-fill positions? What employment- and mission-related data has the agency identified to monitor progress of reform efforts and to ensure no adverse impact on agency mission, and how is it using that data? Before implementing workforce reduction strategies, it is critical that agencies carefully consider how to strategically downsize the workforce and maintain the staff resources to carry out its mission. Agencies should consider long-term staffing plans and associated personnel costs, organizational design and position structures and the appropriateness of backfilling positions as they become vacant. To what extent has the agency considered skills gaps, mission shortfalls, increased contracting and spending, and challenges in aligning workforce with agency needs prior to implementing workforce reduction strategies? In situations when “early outs” and “buyouts” are proposed, to what extent has the agency linked proposed early outs and buyouts to specific organizational objectives, including the agency’s future operational, restructuring, downsizing, or other reform goals? Performance management systems are used to plan work and set individual employee performance expectations, monitor performance, develop capacities to perform, and rate and incentivize individual performance. In addition, performance management systems can help the organization manage employees on a daily basis and help to ensure that individual employees understand the “line of sight” between their performance and organizational results. Effective performance management systems provide supervisors and employees with the tools they need to improve performance. To what extent has the agency aligned its employee performance management system with its planned reform goals? How has the agency included accountability for proposed change implementation in the performance expectations and assessments of leadership and staff at all levels? As part of the proposed reform development process, to what extent has the agency assessed its performance management to ensure it creates incentives for and rewards top performers, while ensuring it deals with poor performers? To what extent has the agency taken action to address employees with unacceptable performance and increase the use of alternative dispute resolution to address workplace disputes that involve disciplinary or adverse actions? We provided a draft of this report to the Director of the Office of Management and Budget for review and comment. OMB staff provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Director of the Office of Management and Budget, and other interested parties. This report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact J. Christopher Mihm at (202) 512-6806 or mihmj@gao.gov or Robert Goldenkoff at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix III. Organizational Transformation and Streamlining Government GAO, Managing for Results: Key Considerations for Implementing Interagency Collaborative Mechanisms, GAO-12-1022 (Washington, D.C.: Sep. 27, 2012). GAO, Streamlining Government: Questions to Consider When Evaluating Proposals to Consolidate Physical Infrastructure and Management Functions, GAO-12-542 (Washington, D.C.: May 23, 2012). GAO, Government Efficiency and Effectiveness: Opportunities for Improvement and Considerations for Restructuring, GAO-12-454T (Washington, D.C.: Mar. 21, 2012). GAO, Streamlining Government: Key Practices from Select Efficiency Initiatives Should Be Shared Governmentwide, GAO-11-908 (Washington, D.C.: Sep 30, 2011). GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and Organizational Transformations, GAO-03-669 (Washington, D.C.: Jul. 2, 2003). GAO, A Call For Stewardship: Enhancing the Federal Government's Ability to Address Key Fiscal and Other 21st Century Challenges, GAO-08-93SP (Washington, D.C.: Dec. 17, 2007). GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, GAO-05-325SP (Washington, D.C.: Feb. 1, 2005). GAO, Regulatory Programs: Balancing Federal and State Responsibilities for Standard Setting and Implementation, GAO-02-495 (Washington, D.C.: Mar. 20, 2002). Fragmentation, Duplication, and Overlap GAO, 2018 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits, GAO-18-371SP (Washington, D.C.: Apr. 26, 2018). GAO, Fragmentation, Overlap, and Duplication: An Evaluation and Management Guide, GAO-15-49SP (Washington, D.C.: Apr. 14, 2015). High-Risk and Major Management Challenges GAO, High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.: Feb. 15, 2017). GAO, Managing for Results: Selected Agencies’ Experiences in Implementing Strategic Reviews, GAO-17-740R (Washington, D.C.: Sep. 7, 2017). GAO, Enterprise Risk Management: Selected Agencies' Experiences Illustrate Good Practices in Managing Risk, GAO-17-63 (Washington, D.C.: Dec. 1, 2016). GAO, Managing for Results: Practices for Effective Agency Strategic Reviews, GAO-15-602 (Washington, D.C.: Jul. 29, 2015). Contracting and National Security Acquisitions GAO, Federal Procurement: Smarter Buying Initiatives Can Achieve Additional Savings, but Improved Oversight and Accountability Needed, GAO-17-164 (Washington, D.C.: Oct. 26, 2016). GAO, Framework for Assessing the Acquisition Function At Federal Agencies, GAO-05-218 (Washington, D.C.: Sep. 1, 2005). GAO, Improper Payments: Strategy and Additional Actions Needed to Help Ensure Agencies Use the Do Not Pay Working System as Intended, GAO-17-15 (Washington, D.C.: Oct. 14, 2016). GAO, Financial Management Systems: Experience with Prior Migration and Modernization Efforts Provides Lessons Learned for New Approach, GAO-10-808 (Washington, D.C.: Sep. 8, 2010) GAO, Financial Management Systems: Additional Efforts Needed to Address Key Causes of Modernization Failures, GAO-06-184 (Washington, D.C.: Mar.15, 2006). GAO, Executive Guide: Creating Value Through World-class Financial Management (Supersedes AIMD-99-45), AIMD-00-134 (Washington, D.C.: Apr.1, 2000). GAO, Information Technology: Further Implementation of FITARA Related Recommendations Is Needed to Better Manage Acquisitions and Operations, GAO-18-234T (Washington, D.C.: Nov. 15, 2017). GAO, Information Technology: Opportunities for Improving Acquisitions and Operations, Highlights of a Forum Convened by the Comptroller General of the United States, GAO-17-251SP (Washington, D.C.: Apr. 11, 2017). GAO, Cybersecurity: Federal Efforts Are Under Way That May Address Workforce Challenges, GAO-17-533T (Washington, D.C.: Apr. 4, 2017). GAO, IT Workforce: Key Practices Help Ensure Strong Integrated Program Teams; Selected Departments Need to Assess Skill Gaps, GAO-17-8 (Washington, D.C.: Nov. 30, 2016). GAO, Federal Chief Information Security Officers: Opportunities Exist to Improve Roles and Address Challenges to Authority, GAO-16-686 (Washington, D.C.: Aug. 26, 2016). GAO, Digital Service Programs: Assessing Results and Coordinating with Chief Information Officers Can Improve Delivery of Federal Projects, GAO-16-602 (Washington, D.C.: Aug. 15, 2016). GAO, Information Technology Reform: Billions of Dollars in Savings Have Been Realized, but Agencies Need to Complete Reinvestment Plans, GAO-15-617 (Washington, D.C.: Sept. 15, 2015). Strategically Managing the Federal Workforce GAO, Federal Workforce: Additional Analysis and Sharing of Promising Practices Could Improve Employee Engagement and Performance, GAO-15-585 (Washington, D.C.: Jul. 14, 2015). GAO, Federal Workforce: OPM and Agencies Need to Strengthen Efforts to Identify and Close Mission-Critical Skills Gaps, GAO-15-223 (Washington, D.C.: Jan. 30, 2015). GAO, Federal Workforce: Improved Supervision and Better Use of Probationary Periods Are Needed to Address Substandard Employee Performance, GAO-15-191 (Washington, D.C.: Feb. 6, 2015). GAO, Results-Oriented Management: OPM Needs to Do More to Ensure Meaningful Distinctions Are Made in SES Ratings and Performance Awards, GAO-15-189 (Washington, D.C.: Jan. 22, 2015) GAO, Human Capital: Strategies to Help Agencies Meet Their Missions in an Era of Highly Constrained Resources, GAO-14-168 (Washington, D.C.: May 7, 2014). GAO, Human Capital: Agencies Are Using Buyouts and Early Outs with Increasing Frequency to Help Reshape Their Workforces, GAO-06-324 (Washington, D.C.: Mar. 31, 2006). GAO, Issues Related to Poor Performers in the Federal Workplace, GAO-05-812R (Washington, D.C.: June 29, 2005). GAO, Human Capital: A Guide for Assessing Strategic Training and Development Efforts in the Federal Government (Supersedes GAO-03-893G), GAO-04-546G (Washington, D.C.: Mar. 1, 2004). GAO, Human Capital: Key Principles for Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C.: Dec. 11, 2003). GAO, Results-Oriented Culture: Creating a Clear Linkage between Individual Performance and Organizational Success, GAO-03-488 (Washington, D.C.: Mar. 14, 2003). GAO, Federal Downsizing: Effective Buyout Practices and Their Use in FY 1997, GGD-97-124 (Washington, D.C.: Jun. 30, 1997). GAO, Performance Management: How Well Is the Government Dealing With Poor Performers?, GGD-91-7(Washington, D.C.: Oct. 2, 1990). GAO, Recent Government-Wide Hiring Freezes Prove Ineffective in Managing Federal Employment, FPCD-82-21 (Washington, D.C: Mar. 10, 1982). GAO, Key Issues: Ensuring the Security of Federal Information Systems and Cyber Critical Infrastructure and Protecting the Privacy of Personally Identifiable Information - High Risk Issue, accessed April 24, 2018, https://www.gao.gov/key_issues/ensuring_security_federal_information_s ystems/issue_summay GAO, Key Issues, Duplication and Cost Savings, Action Tracker, https://www.gao.gov/duplication/overview#t=1, accessed April 24, 2018,an online tool for monitoring the progress federal agencies and Congress have made in addressing the actions identified in GAO's annual Duplication and Cost Savings reports. In addition to the above contact, Sarah E. Veale, Assistant Director, Thomas Gilbert, Assistant Director, and Carole J. Cimitile, Analyst-in- Charge, supervised the development of this report. Layla Y. Moughari, Steven Putansu, and Robert Robinson made significant contributions to this report. Kayla Robinson provided legal counsel.", "summary": "On March 13, 2017, the President issued an executive order requiring a comprehensive reorganization of executive branch agencies. In April 2017, the Office of Management and Budget (OMB) provided guidance to federal agencies for developing their reform and workforce reduction proposals. Past proposals to reform and reorganize government have not always come to fruition and can take years to implement fully. GAO's prior work has shown that successful reforms or transformations depend upon following change management practices, such as agreement on reform goals, and the involvement of the Congress, federal employees, and other key stakeholders. This report identifies the key questions that Congress, OMB, and agencies can use to assess the development and implementation of agency reforms. To meet this objective, GAO reviewed its prior work and leading practices on organizational transformations; collaboration; government streamlining and efficiency; fragmentation, overlap, and duplication; high-risk; and on other agency longstanding management challenges. GAO also identified subject matter specialists knowledgeable about issues related to government reform and strategic human capital management who reviewed and commented on GAO's draft questions. GAO is not making recommendations to OMB in this report. OMB staff provided technical comments, which we incorporated as appropriate.", "document_type": "gao"}
{"report": "The appropriation and execution of DOD’s base and OCO amounts is part of the broader federal budget process. In this process, Congress, the President, and federal agencies take a number of steps to formulate a budget, enact appropriation acts, and execute the federal budget for each fiscal year. A summary of the budget process is depicted in figure 1 below. In DOD’s budget process, the military services and defense agencies submit a budget request—known as the Budget Estimate Submission— that addresses their estimated annual funding requirements for both base and OCO activities. In building their OCO budget requests, the military services and defense agencies use criteria that OMB developed in collaboration with DOD, for deciding whether items belong in the base budget or in OCO funding requests. The services also use guidance issued within their own organizations, as well as utilize OCO-specific budget guidance included in DOD’s Financial Management Regulation. Congress then takes action on the budget request and appropriates funding for both base and OCO activities into the same appropriation accounts, such as service-specific O&M accounts. Explanatory statements or conference committee reports accompanying annual appropriations acts provide congressional direction on how OCO and base funding amounts should be obligated. However, the congressional direction for funding is generally not legally binding. Congress also has the discretion to make available amounts for base activities or enduring costs through OCO appropriations, even if DOD considers such costs to be part of the base budget. The Budget Control Act of 2011, amending the Balanced Budget and Emergency Deficit Control Act of 1985, imposes government-wide discretionary spending limits for fiscal years 2012 through 2021 to reduce projected spending by about $1 trillion. All amounts appropriated to DOD are subject to limitations on discretionary spending. Appropriated amounts designated by Congress for OCO that would otherwise exceed the annual limits established for discretionary spending will instead result in an adjustment to the overall spending limit established for a particular fiscal year, and will not trigger a sequestration, which is an automatic cancellation of budgetary resources provided by discretionary appropriations or direct spending laws. Upon enactment of an appropriation, the Secretary of the Treasury issues a warrant to federal agencies, which is an official document that establishes the amount of moneys authorized to be withdrawn from the central accounts that the Department of Treasury maintains. The Treasury does not employ a process to separate OCO funding from base funding in its role in warranting funds to federal agencies, including DOD. After receiving budget authority, agencies make allotments, delegating budget authority to various agency officials allowing them to incur obligations. Agencies then disburse amounts by cash or cash equivalents to liquidate obligations. The DOD components in our review use coding and other internal control activities to separately account for OCO and base amounts in their O&M accounts during budget execution. To record and track OCO and base amounts separately, the DOD components use coding in their financial systems during the allotment, obligation, and disbursement of funds. For example, during the allotment phase, the Army and the Defense Security Cooperation Agency use codes in their financial systems to divide, distribute, and track their appropriated funds into separate categories— including one for OCO and one for base. Army and Defense Security Cooperation Agency officials stated that the separate categories are maintained through the obligation phase. The Air Force, the Marine Corps, and the Navy use specific codes to track OCO transactions within multiple systems they use to allot and obligate OCO and base amounts. For example, the Air Force uses an Emergency and Special Program code to track and record allotments and obligations of OCO amounts within its budgeting and accounting systems. The Marine Corps uses three-digit, alphanumeric codes called Special Interest Codes to track and record costs associated with high-interest activities, such as OCO, during obligation. Figure 2 describes the steps that DOD takes to separate OCO and base amounts. We identified some internal control activities that the DOD components in our review have put into place to ensure separate accounting of OCO and base amounts, such as controls over information processing. A variety of control activities can be used in information processing, including controls incorporated directly into computer applications to ensure accuracy, as well as policies and procedures that apply to information systems. For example, Army and Defense Security Cooperation Agency officials stated that the financial systems they use incorporate system controls that automatically maintain the categories of funding designated during allotment through subsequent actions, including obligation, which ensures an amount in the OCO category maintains its OCO-specific coding throughout the budget execution process. Also, the Army restricts the number of personnel who are able to reassign the coding of funding from one category to another. Navy officials explained that two of three financial accounting systems used by the Navy receive OCO allotments automatically from the Navy’s budgeting information system, which eliminates the need for manual entry of allotment amounts. Also, Marine Corps guidance requires entry of an identifying OCO code in the Marine Corps’ financial system when recording an OCO-related transaction, which can prevent data reporting errors. In addition to controls over information processing, each DOD component in our review incorporates reviews of their OCO execution as one of their internal control activities. Internal control activities also include reviews, such as reviews of data or expected results, by management throughout an organization. The financial management offices of these components periodically review the OCO-related allotments they make within their components to confirm the amounts are properly recorded. For example, the Air Force, the Army, the Marine Corps, the Navy, the Defense Security Cooperation Agency, and U.S. Special Operations Command review OCO-related execution amounts at least monthly to determine if amounts are within their established spending plans and that OCO coding is recorded correctly, among other things. In addition, officials from each service and the Defense Security Cooperation Agency stated that officials review OCO-related obligations and verify they are legitimate OCO expenses. The DOD Inspector General and the services’ audit agencies have found weaknesses in the services’ processes of accounting for OCO costs or in other related internal control activities. For example, in March 2018, the US Army Audit Agency found that while the Army had a strategy and processes to capture and report its financial data for Operation Inherent Resolve for fiscal year 2016, processes to account for some obligation data needed improvement. Moreover, an official from the Office of the Secretary of Defense (Comptroller) stated that, while the DOD components included in our review have processes to separate OCO and base amounts, other DOD components may not have similar processes, and not all components have auditable financial systems. We identified at least four alternatives to the processes Congress and DOD use to separate funding for DOD’s OCO and base activities. Each alternative would require action at different phases of DOD’s budget process and entail tradeoffs. Appendix II provides additional information on requirements and costs to implement the alternatives reported by respondents that we summarize, as well as other alternatives to provide funding to DOD that respondents independently identified. In addition, appendix II provides summary information on the positive and negative aspects of Congress’ current process for providing funding for OCO and base activities, as described by respondents. The first alternative to the current process would be for DOD to request all funding for enduring costs through its base budget rather than its OCO budget. DOD is considering a plan to move enduring costs associated with OCO activities from its OCO budget request into its base budget request for fiscal year 2020. In its budget justification materials for fiscal year 2019, DOD estimated that it would shift between $45.8 billion and $53.0 billion from its OCO request to its base budget request from fiscal years 2020 through 2023. However, moving DOD’s enduring costs to its base budget request may require increased base O&M appropriations provided in annual DOD appropriations acts. Appropriations that are not designated as OCO, such as base O&M amounts, and that exceed annual discretionary spending limits established by the Budget Control Act of 2011, as amended, would trigger a sequestration. Respondents to our questionnaire identified several positive and negative aspects of this alternative, which we summarize in table 1. The second alternative would be for Congress to specify in annual DOD appropriations acts the purposes—programs, projects and activities—for which OCO amounts may be obligated. As we noted above, DOD currently determines what constitutes OCO activities based on criteria developed in 2010 in coordination with OMB and DOD 7000.14-R, Financial Management Regulation. Explanatory statements and conference committee reports accompanying annual appropriations acts include direction on how OCO amounts should be allocated for specific activities; however, explanatory statements and committee reports are not legally binding unless incorporated by reference into the appropriations act. Either specific purpose language or language incorporating explanatory statement or committee report language could be included in DOD’s annual appropriations. Respondents to our questionnaire identified several positive and negative aspects of this alternative, which we summarize in table 2. The third alternative entails Congress creating separate appropriation accounts for OCO and base funding. Under the current approach, both OCO and base amounts are appropriated into and executed out of the same appropriation accounts. By contrast, under this alternative, Congress would create separate Treasury-level appropriation accounts for funding for OCO and base activities. For example, there could be an O&M appropriation account for the Army’s base activities and an O&M appropriation account for the Army’s OCO activities. Funding for OCO and base activities would no longer be comingled, but could be transferred between accounts with statutory authority. Respondents to our questionnaire identified several positive and negative aspects of this alternative, which we summarize in table 3. Under the fourth alternative, Congress would appropriate funds into a non-expiring transfer account for contingency operations. These funds would be available for DOD’s use during multiple fiscal years. DOD would use its base appropriations to initially fund OCO activities and later use funds from the transfer account, as needed, to reimburse its base appropriation accounts. One example is the Overseas Contingency Operations Transfer Fund, which was originally established by Congress in fiscal year 1997 to meet small-scale, recurring operational demands of the department by transferring amounts to the military services and agencies based on execution needs as the year progresses. Respondents to our questionnaire identified several positive and negative aspects of this alternative, which we summarize in table 4. The four alternatives we identified would require Congress and DOD to take action at different phases within DOD’s budget process. In the first alternative, DOD would move enduring costs to the base budget request during the budget formulation phase. In the second alternative, Congress would specify the activities to be funded by OCO amounts in the annual appropriations acts during the congressional appropriation phase. Similarly, in the third alternative, Congress would create separate appropriation accounts for OCO and base activities during the congressional appropriation phase. In the fourth alternative, using transfer accounts would require actions during two phases—the congressional appropriations phase and the budget execution phase. Congress would appropriate funds into a transfer account during the congressional appropriation phase, and DOD would later use funds from the transfer account, as needed, to reimburse its base appropriation accounts during budget execution. In figure 3, we depict the phase of the budget process in which these alternatives would take place. Each alternative includes tradeoffs that Congress and DOD would have to consider to strike the desired balance between agency flexibility and congressional control. For example, adding specific purpose language would better align obligation of OCO amounts with congressional intent; however, doing so could also reduce DOD’s financial flexibility and responsiveness to changes in operations. Understanding the implications of each alternative is important to avoid unintended consequences. Our summary of the positive and negative aspects of the alternatives reported by respondents could be a reference for Congress and DOD as they consider potential changes to processes for separating the funding of amounts for OCO and base activities. We requested comments from DOD, the Department of the Treasury, and provided an informational copy of the draft report to OMB. DOD provided technical comments on the draft report, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretary of the Treasury, the Director of OMB; the Under Secretary of Defense for the Comptroller; the Secretaries of the Air Force, the Army, and the Navy; the Commandant of the Marine Corps; the Commanding General of U.S. Special Operations Command, and the Director of the Defense Security Cooperation Agency. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or fielde1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix IV. To describe selected Department of Defense (DOD) components’ use of internal controls to separately account for overseas contingency operations (OCO) and base amounts, we reviewed documentation of the internal controls that DOD organizations in our review have designed to separate these amounts in their operation and maintenance (O&M) account. We focused on the O&M account because Congress provides most of the OCO amounts for DOD in O&M. In addition, we focused on the military services that receive service-specific OCO appropriations, and the two non-service DOD components (U.S. Special Operations Command and the Defense Security Cooperation Agency) that are allotted the most OCO funding appropriated to the O&M Defense-wide account. We collected information for this objective through interviews and written requests for information from financial management officials in the Office of the Secretary of Defense (Comptroller), the offices of the military services, U.S. Special Operations Command, the Defense Security Cooperation Agency, and the Defense Finance and Accounting Service. Our review focused on the design of the internal control systems and did not assess the effectiveness of these internal controls. To identify alternatives to separate funding for DOD’s OCO and base activities, we searched for relevant literature from 2001 through July 2018. Specifically, we searched for alternative processes that (1) DOD could use to separately account for OCO funding or (2) Congress could use to provide separate OCO funding to DOD because both DOD and Congress could be involved in implementing alternatives to separate funding for OCO and base activities. We started with 2001, because this was the first year that funds were appropriated for the Global War on Terror (GWOT), now known as OCO. We conducted searches of various databases and websites, such as ProQuest and the National Academy of Sciences website. Our literature search identified 235 sources, which primarily consisted of journal articles, reports, and news articles. Two analysts independently reviewed the full text of the literature sources to determine which were relevant. When they disagreed, a third analyst independently reviewed the full text of a source to make the final determination. We determined that 22 sources were relevant. We did not identify any sources that described alternative processes for DOD to separately account for OCO funding; therefore, we do not address this in our report. We did identify three alternatives related to how Congress provides OCO funding to DOD and how DOD requests OCO funding from Congress. We summarized these alternatives and obtained feedback from our internal subject matter experts familiar with Congress’ process for providing funding for OCO and DOD’s process for separating OCO and base funds. We revised the wording of the alternatives based on their feedback to ensure that we described them accurately. Our internal subject matter experts suggested a fourth congressional alternative. We summarized all four alternatives in our report. In collaboration with a survey specialist, we developed a questionnaire to solicit opinions from knowledgeable individuals (“respondents”) regarding Congress’ and DOD’s current processes and the four alternatives. Our internal subject matter experts also provided feedback on the draft questionnaire. We included the summaries of all processes and asked respondents to identify the positive and negative aspects, as well as the costs and requirements, associated with each. We also asked respondents to describe any additional alternatives apart from the four we described in the questionnaire. We identified questionnaire respondents within and outside DOD who were sufficiently knowledgeable about Congress’ and DOD’s current processes in several ways. We identified respondents within DOD by emailing the engagement points of contact, who were budget and financial management officials in the headquarters for the military services and other DOD components included in our review. To identify respondents outside of DOD, we contacted individuals identified by an internal subject matter expert and contacted additional individuals identified in our literature review. We provided respondents with a brief summary of the questionnaire and asked them if they would be able and willing to respond to questions on these topics. We also asked respondents to recommend additional knowledgeable individuals at the end of the questionnaire. Respondents identified were current officials in DOD financial management offices, former DOD officials, and defense budget analysts from think tanks. In addition, we contacted officials from the Congressional Research Service and the Congressional Budget Office, whom we identified as assigned to analyze defense budget issues related to OCO. We included questions at the start of the questionnaire to determine if respondents were sufficiently knowledgeable about either the current congressional process, the current DOD process—or both—to offer perspectives on the alternatives presented. We sent the questionnaire as a Microsoft Word form via email to 23 respondents, including 10 within DOD and 13 outside DOD. We began sending the questionnaires on August 1, 2018, and continued as we identified more respondents. We sent up to two reminder emails with a copy of the questionnaire to anyone who had not yet responded. We received the last questionnaire on September 10, 2018. We received a total of 19 questionnaires back from respondents. We excluded two completed questionnaires from our analysis based on our screening criteria for determining if respondents were sufficiently knowledgeable about Congress’ and DOD’s current processes. Therefore, we included 17 questionnaires in our analysis—10 from DOD officials and 7 from respondents outside DOD—for a response rate of 81 percent. We calculated the response rate using a total possible number of 21 questionnaires instead of 23 to account for the two questionnaires we excluded from the analysis. Fifteen of the 17 respondents to our questionnaire were current or former DOD officials. Results of this questionnaire are not generalizable beyond our respondents. To enable us to provide the information to Congress within the time frames required by the mandate, we did not pretest the questionnaire. However, we believe that the questionnaire was a sufficiently valid data collection tool for reporting positive and negative aspects identified by respondents. We developed the questionnaire with assistance from a survey specialist, and we revised the questionnaire content based on feedback from our internal subject matter experts. Most respondents provided answers that indicated they correctly interpreted the questions as stated in the questionnaire. In addition, we took steps to provide clarification to the few respondents who misunderstood questions and excluded responses we could not reasonably assure were understood. Four of the 23 original recipients of the questionnaire requested clarification or misunderstood two questions in our questionnaire. We provided clarification to those respondents via email and requested that they update their questionnaire responses based on this new information. Two did so. The other two respondents did not reply to our clarification email, and we excluded their responses to the misunderstood questions. Not all respondents provided answers to all questions in our questionnaire. We extracted the data from the Word questionnaires and imported them into Excel for qualitative analyses. We inspected the Excel files to ensure that data were not missing or were not imported incorrectly and made iterative corrections to the process to ensure accurate data were analyzed. Because we did not pretest the questionnaire, we do not report the number of respondents who provided any answers but rather we present qualitative positive and negative aspects based on the responses. We conducted a content analysis in which two analysts independently categorized each response from each questionnaire to identify similarities. For our purposes, similarities existed when two or more respondents gave the same or very similar answers to a particular question. The summaries of the responses we developed were based on comments from two to nine respondents. The analysts discussed any discrepancies in their categorizations until they reached agreement. Subsequently, an internal subject matter expert provided feedback on the summary. Using that feedback, the analysts consolidated summaries that were related and clarified the wording of all the summarized responses. We identified positive and negative aspects for questions regarding the current processes and the four alternatives presented in the questionnaire. We did not summarize positive and negative aspects for questions regarding the additional alternatives described by respondents. We did not include this information because although two respondents described similar alternatives, they did not identify similar positive and negative aspects about this alternative. In addition, none of the remaining questionnaires included similar responses. We list any additional alternatives identified by respondents in appendix II. The verbatim wording from key sections of the questionnaire we administered is presented in appendix III. In addition, section 1523 of the National Defense Authorization Act for Fiscal Year 2018 contained additional provisions for us to review other processes related to the execution of OCO funds. In particular, section 1523 contained a provision for us to review the processes the Department of the Treasury employs to separate expenditures of amounts appropriated for OCO from expenditures of all other amounts appropriated for DOD. We assessed the steps that the Department of the Treasury takes in the execution of the federal budget after funds have been appropriated and determined that the Department of the Treasury does not employ a process to separate OCO funding from base funding in its role in making appropriations available to DOD. In addition, section 1523 of the act included another provision for us to compare the processes DOD and the Department of Treasury use to separate expenditures of OCO amounts to the generally accepted accounting principles. The Federal Accounting Standards Advisory Board issues federal financial accounting standards and provides guidance on federal generally accepted accounting principles. The Federal Accounting Standards Advisory Board’s Handbook of Federal Accounting Standards and Other Pronouncements, as Amended (Current Handbook) is the most up-to-date, authoritative source of generally accepted accounting principles developed for federal entities. However, the Current Handbook does not address the separation of OCO from non-OCO appropriations, obligations, and disbursements. Therefore, it is not possible to compare the processes DOD and the Department of the Treasury use to the generally accepted accounting principles based on existing standards and guidance. We conducted this performance audit from March 2018 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Additional information from our questionnaire is provided below, including information about (1) the positive and negative aspects of Congress’ current process for providing funding for the Department of Defense’s (DOD) overseas contingency operation (OCO) and base activities, (2) the requirements and costs to implement the four alternatives we discussed earlier, and (3) other alternatives for providing funding to DOD. We asked respondents to report on the positive and negative aspects of Congress’ current process for providing funding for DOD’s OCO and base activities. We summarize those aspects in table 5. Respondents reported on the requirements and costs to implement the four alternatives in our questionnaire. The requirements respondents identified to implement the four alternatives are summarized in table 6. Regarding the costs, respondents reported that two alternatives would require minimal or no additional costs, while the other two alternatives would involve higher costs to DOD. The costs respondents identified to implement the four alternatives are summarized in table 7. We also asked respondents to describe any other alternatives for separating funding for DOD’s OCO and base activities, apart from the four alternatives described above. Respondents identified several alternatives for providing funding to DOD, including alternatives that would not provide separation of OCO and base funding. The other alternatives that respondents described are shown in table 8. Below we show the verbatim wording of the descriptions of the alternatives to separate amounts for DOD’s OCO and base activities as summarized in the questionnaire. Each description was presented separately in the questionnaire followed by a standard set of questions that are all presented below these descriptions. We also show the verbatim wording of any clarification text sent via email to respondents who misunderstood the description of the alternative. DOD could move requests for funding of enduring activities from its OCO budget to its base budget request. Enduring activities are those that began in response to contingency operations but have continued after these operations ended. An example of an enduring cost would be maintaining residual headquarters staff at U.S. Central Command in Qatar to train, advise, and assist as missions have evolved from contingency to ongoing activities. We understand that in the in FY 2020, the Department plans to move funding for enduring activities from its OCO budget to its base budget request. DOD’s OCO funding request would then reflect only the incremental costs of existing contingency operations. The Congress could specify activities for which DOD should use OCO amounts within the annual appropriations acts. Currently, DOD determines what activities constitute OCO activities based on criteria developed in 2010 in coordination with OMB. Under this alternative, explicit purpose language designating specific funds for specific activities would be added directly into the appropriations acts or the explanatory statement, then incorporated into the appropriations act by reference. “Under the current approach, funds are designated for specific sub-activities in the explanatory statement. However, these designations are generally not legally binding unless incorporated by reference into the appropriations act itself. Under this alternative approach , specific purpose language or language of incorporation would be included in the appropriations act. The distinction between the current approach and the alternative presented here is that legally binding language concerning specific amounts for specific OCO activities would appear in the appropriation act.” The Congress could create separate appropriation accounts for amounts designated for OCO and amounts designated for base activities. “In the current approach, amounts are designated for OCO and base activities within a single appropriation account. In the alternative proposed in Question 5, the Congress would create two separate appropriation accounts for OCO and base activities amounts. For example, there would be one appropriation account for OCO amounts for O&M, and another appropriation account for base activity amounts for O&M.” DOD could use a transfer account (such as the Overseas Contingency Operations Transfer Fund, or OCOTF) through which the Department could meet operational demands by transferring funds to the military services and agencies based on execution needs as the year progresses. The Congress would appropriate funds into a transfer account. These funds would not expire and be available for DOD’s use during multiple fiscal years. DOD would use its base activities appropriations to fund OCO activities and later draw from the transfer account as needed to reimburse its base appropriation accounts. Below we show the verbatim wording from key sections of the questionnaire we administered. We used Questions 2 and 3 as screening questions to help determine if respondents were sufficiently knowledgeable about the current congressional or DOD processes. Question 4 and its sub-questions below were repeated for each alternative presented above (i.e., as Questions 4 through 7 in the questionnaire). We also asked sub-questions “b” through “e” in Question 4 for the current approaches Congress and DOD use (presented in Questions 2 and 3). Finally, we asked respondents to identify up to five additional alternatives in Questions 8 through 12. 2. Are you familiar with any of the current approaches that the military services or DOD organizations use to separate operation and maintenance (O&M) amounts designated for Overseas Contingency Operations (OCO) from amounts designated for base activities during the allotment, obligation, and/or disbursement phases? Please check one box.  Please continue to “a” through “e”  Please skip to Question 3  Please skip to Question 3 3. Are you familiar with the current approach that Congress uses to designate amounts for OCO in the appropriations process for DOD? Please check one box.  Please continue to “a” through “e”  Please skip to Question 4  Please skip to Question 4 4. GAO has identified the following as a possible alternative to the current approach for separating amounts designated for OCO from amounts designated for base activities in the appropriations process: a. Were you aware of this alternative before completing this questionnaire? Please check one box. Please continue to “b” through “e” b. What are the positive aspects associated with this alternative, if any? Please consider factors impacting both taxpayers and the DOD. The box will expand as you type. c. What are the negative aspects associated with this alternative, if any? Please consider factors impacting both taxpayers and the DOD. The box will expand as you type. d. What are the costs associated with this alternative, if any? Please consider costs impacting both taxpayers and the DOD. The box will expand as you type. e. What are the requirements associated with implementing this alternative? Consider factors such as: changes to existing systems, policies, or processes; new systems, policies, or processes; new budget estimations; required training; etc. These could be requirements for DOD or the Congress. The box will expand as you type. 8. Are you aware of any alternative approaches for separating amounts designated for OCO from amounts designated for base activities other than the ones listed above? Please consider both approaches DOD could implement on its own (such as approaches to separating OCO from base in the O&M account or changes that make that unnecessary) and legislative approaches the Congress could take. We are aware of the Enterprise Resource Planning (ERP) systems listed above. For this question, we are interested in the implementation of new potential alternatives other than the ERP system. Please check one box.  Please continue to “a” through “e” to tell us about one alternative. If you are aware of more than one, you will be able to tell us about others in Questions 9-12.  Please skip to Question 13 Please skip to Question 13 a. If yes, please briefly describe the first alternative approach. The box will expand as you type. Elizabeth Field, (202) 512-2775 or fielde1@gao.gov. In addition to the contact named above, Richard K. Geiger, Assistant Director; Arkelga Braxton, Assistant Director; Rebekah Boone; Amie Lesser; Felicia Lopez; James P. Klein (Analyst-in-Charge); Shylene Mata; Sheila Miller; Richard Powelson; and Michael Silver made key contributions to this report.", "summary": "Since 2001, DOD has received more than $1.8 trillion in OCO funds. DOD defines “contingency operations” as small, medium, or large-scale military operations, while “base” activities include operating support for installations, civilian pay, and other costs that would be incurred, regardless of contingency operations. Congress separately appropriates amounts for base and OCO activities into the same appropriation accounts and directs how funds are to be spent by designating amounts in conference reports or explanatory statements accompanying the annual appropriations acts. The National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to report on the feasibility of separating OCO expenditures from other DOD expenditures. This report (1) describes internal controls that selected DOD components use to separately account for OCO and base amounts during budget execution and (2) identifies and examines alternatives that Congress or DOD could use to separate funding for OCO and base activities. GAO reviewed documentation of DOD internal controls for separating OCO and base amounts in the O&M account, interviewed financial management officials, and, among other things, conducted a literature review to identify alternatives that Congress or DOD could use to separate funding for OCO and base activities. Also, GAO administered a questionnaire to DOD and non-DOD officials to identify positive and negative aspects of these alternatives. Selected Department of Defense (DOD) components use coding and other internal control activities to separately account for overseas contingency operations (OCO) and base amounts in their operation and maintenance (O&M) accounts during budget execution. To record and track OCO and base amounts separately, the military services, U.S. Special Operations Command, and the Defense Security Cooperation Agency use coding in their financial systems. These DOD components also have instituted some internal control activities to help ensure separation of OCO amounts. For example, Army and Defense Security Cooperation Agency officials stated that the financial systems they use incorporate system controls that automatically maintain the categories of funding, such as OCO, designated during allotment through subsequent actions to ensure the OCO coding remains throughout budget execution. GAO identified at least four alternatives to the processes used to separate funding for DOD's OCO and base activities: Move enduring costs to the base budget . DOD could request funding for enduring costs—costs that would continue in the absence of contingency operations—through its base budget rather than its OCO budget. Use specific purpose language . Congress could use legally binding language in the annual DOD appropriations acts to specify the purposes—programs, projects and activities—for which OCO amounts may be obligated. Create separate appropriation accounts . Congress could create separate appropriation accounts for OCO and base funding. Use a transfer account . Congress could appropriate funds for OCO into a non-expiring transfer account. DOD would fund OCO with its base budget and later reimburse its base accounts using funds from a transfer account. Implementing these alternatives would require Congress and DOD to take action in different phases of the budget process (see figure). Each alternative includes tradeoffs that Congress and DOD would have to consider to strike the desired balance between agency flexibility and congressional control. The alternatives, and GAO's summary of their positive and negative aspects identified by questionnaire respondents, could be a reference for Congress and DOD as they consider potential changes to processes for separating the funding of amounts for OCO and base activities.", "document_type": "gao"}
{"report": "Executive branch agencies are required to take various steps regarding improper payments under IPIA, as amended by IPERA and IPERIA, and related OMB guidance. The steps include the following: 1. reviewing all programs and activities and identifying those that may be susceptible to significant improper payments (commonly referred to as a risk assessment), 2. developing improper payment estimates for those programs and activities that the agency identified as being susceptible to significant improper payments, 3. analyzing the root causes of improper payments and developing corrective actions to reduce them for those programs and activities that the agency identified as being susceptible to significant improper payments, and 4. reporting on the results of addressing the foregoing requirements. Figure 1 lays out these steps, as well as the major components of developing an improper payment estimate. IPERA also directs executive branch agencies’ inspectors general to annually determine and report on whether their respective agencies complied with six criteria listed in the law. On an annual basis, agencies are required to develop improper payment estimates for programs that they consider susceptible to significant improper payments. This generally involves selecting a sample of program payments (or other items, such as invoices) and reviewing them in order to determine whether the relevant payments were proper. OMB guidance for developing improper payment estimates focuses on the statistical nature of the estimates and provides agencies with flexibility in developing their estimates. IPIA, as amended, provides the definition of “improper payment” with IPERIA further instructing OMB to issue guidance requiring agencies to include in the estimate all improper payments, regardless of whether those payments have been or are being recovered. OMB incorporated this requirement into Appendix C to Circular No. A-123, Requirements for Effective Estimation and Remediation of Improper Payments. In accordance with these relevant laws and OMB guidance, agencies must apply “improper payment” in the context of their programs when developing improper payment estimates. The 10 programs we reviewed serve a variety of purposes and are administered by various agencies across the federal government. Table 2 summarizes each of these programs. IPIA, as amended, requires agencies to develop statistically valid improper payment estimates or estimates that are otherwise appropriate using a methodology approved by the Director of OMB. The six agencies we reviewed reported using either statistically valid or alternative sampling approaches for the 10 selected programs, and some agencies reported additionally incorporating actual improper payment amounts into their estimates, as shown in table 3. If an agency is unable to produce a statistically valid improper payment estimate, it can use an alternative approach if approved by OMB. For example, the Department of Education (Education) reported using an alternative methodology for the Direct Loan program after conducting a cost-benefit analysis comparing use of a statistical and an alternative methodology. Similarly, the Department of Health and Human Services (HHS) reported using an alternative methodology for Medicaid to better manage resources needed to conduct the required reviews. In addition to their statistical approaches, two agencies reported incorporating actual improper payment amounts into the estimates for 2 of the programs we reviewed. Officials at the Department of Defense (DOD) stated that the agency calculates its Military Pay improper payment estimate by adding the amount of debts due to DOD entered into its financial system based on overpayments (i.e., debts due to DOD by a recipient of an overpayment) identified during the fiscal year to a projected estimate of improper payments. Officials at the Office of Personnel Management (OPM) stated that the agency calculates its Retirement program improper payment estimate by adding the amount of debts due to OPM entered into its financial system based on overpayments (i.e., debts due to OPM by a recipient of an overpayment) identified during the fiscal year to a projected estimate of underpayments. To implement their sampling approaches, agencies select a sample of data to test from a larger, specified population of data. For the six agencies we reviewed, data sampled varied by program and include payments, claims, tax returns, and pay accounts. For example, according to their policies and procedures DOD samples invoices related to payments made from 12 financial systems for Defense Finance and Accounting Service Commercial Pay, HHS samples medical claims for Medicare Fee-for-Service, and DOD samples pay accounts for Military Pay. Agencies subject specific data populations to sampling, which may not include all payments made for a program. Reasons for sampling exclusions varied across programs, as shown by the examples in table 4. Some of the selected agencies reported sampling multiple sets of data. For example, for its Direct Loan improper payment estimate, Education officials stated that the agency reviews Program Review Reports to identify improper payments in originations and also samples loan consolidation and refund payments. According to agency officials, Direct Loan origination, consolidation, and refund transactions carry different risks of improper payment. To estimate improper payments for fiscal year 2017, the six agencies we reviewed reported sampling and testing data that varied in age from calendar year 2013 to fiscal year 2017. Figure 2 shows the range of data used. OMB guidance states that to the extent possible, data used for estimating improper payments should coincide with the fiscal year being reported, but agencies may use a different 12-month reporting period with approval from OMB. OMB staff acknowledged there are costs and benefits to sampling newer or older data. OMB staff stated that although they review agencies’ sampling and estimation plans, they defer to the agencies regarding the appropriateness of the age of data used to estimate improper payments. OMB staff stated that they approve the timeframe of the data used in alternative methodologies as part of the approval of the methodology overall, whereas OMB silence provides tacit approval (i.e., no communication to the agency) for statistically valid methodologies. After agencies determine what subsets of data and types of transactions to review, they generally test the data and calculate their improper payment estimates. Testing processes varied among the 10 programs, with some of the six agencies using processes designed specifically to estimate improper payments and others leveraging existing processes designed for other purposes. Some of the selected agencies reported using multiple testing processes and combining the results to develop a program’s improper payment estimate. For example, according to their policies and procedures the Direct Loan estimate comprises three component estimates for loan originations, consolidations, and refunds and the Medicaid estimate includes fee-for-service, managed care, and eligibility components. Table 5 summarizes the processes used by the six agencies we reviewed. Although agencies’ testing processes varied, most included steps to address aspects of eligibility of beneficiaries, goods, or services—a key component of determining the appropriateness of a payment—in their programs. For example, according to their policies and procedures for Medicare Fee-for-Service, reviewers examine the medical necessity, compliance with documentation requirements, and coding of services provided, among other things; for the Earned Income Tax Credit (EITC), auditors examine whether the taxpayer properly reported income and whether the taxpayer meets eligibility criteria, including income and qualifying child requirements, and auditors examine, among other things, whether the taxpayer is subject to a disallowance period on receiving EITC; for Medicaid, reviewers examine fee-for-service claims and managed care payments to determine the eligibility status of the beneficiary and the provider, as well as support for the medical necessity of fee-for- service claims, among other things; for Old-Age, Survivors, and Disability Insurance (OASDI), reviewers examine factors to support the beneficiary’s eligibility, including, among other things, citizenship, relationship (in the case of survivor benefits), and receipt of other government benefits; and although Education’s Direct Loan program reviews can vary in scope, they may include, among other things, steps to verify educational institution eligibility (such as licensing and accreditation) and student eligibility (such as enrollment status and satisfactory academic progress). In contrast, per their policies and procedures, eligibility is not tested for DOD’s Military Pay or the overpayment component of OPM’s Retirement estimate. DOD Military Pay. DOD reported using the results of monthly payment reviews to calculate a projected improper payment amount for Military Pay. However, DOD’s policies and procedures do not require a review of servicemember eligibility for special pay or allowances as part of these monthly reviews. DOD’s Standard Operating Procedures (SOP) direct reviewers to recalculate payments to servicemembers solely based on the pay account data included in DOD systems (i.e., to verify that components of servicemember pay were calculated appropriately). DOD’s SOP does not direct reviewers to verify that servicemembers were eligible for special pay or allowances by verifying the information included in the pay account (such as pay grade) with supporting documentation. According to DOD officials, reviewers may investigate potential inconsistencies in pay account data identified during their reviews—which may include eligibility issues—but this process is not consistently performed or documented. According to DOD officials, an example of a potential inconsistency is when a servicemember receives jump pay (a hazard pay for parachute jumps) but is located at a site where no jump activity occurred. According to DOD officials, to help compensate for the limitations of its monthly reviews, DOD calculates the final reported Military Pay improper payment estimate by adding actual debts due to DOD (related to overpayments) identified during the year to the projected estimate of the monthly reviews. DOD identifies the actual overpayments through various methods, including other postpayment reviews and servicemember self- reporting. Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to risks related to achieving the defined objectives. DOD has acknowledged internal control deficiencies related to the Military Pay program, which—if addressed in improper payment testing—could have an impact on the program’s improper payment rate. However, these deficiencies were identified through other internal control reviews not related to estimating improper payments. For the purposes of estimating improper payments, DOD has not fully assessed the risks in its Military Pay program and evaluated whether its approach for estimating improper payments effectively addresses these risks. As a result, DOD’s process for estimating Military Pay improper payments may not reflect significant risks of improper payment in the program, specifically whether servicemembers are eligible for the special pay or allowances they receive, calling into question the improper payment estimate and its usefulness for developing effective corrective actions. OPM Retirement. OPM relies on its existing Quality Assurance (QA) process to estimate Retirement underpayments. The QA process is designed to determine whether new Retirement claims (i.e., claims paid for the first time) have been adjudicated correctly. Therefore, only new Retirement claims are sampled and tested for accuracy. OPM applies historical results of QA testing to older claims; however, these historical results do not reflect any different risks of underpayment that the older claims may face. Although OPM’s QA process also produces an estimate of overpayments, the agency’s policies and procedures instead use actual debts due to OPM (related to overpayments) that were identified during the fiscal year as its overpayment amount (i.e., the overpayment amount does not reflect any testing of Retirement payments to verify eligibility or accuracy). These actual overpayments represent amounts that have been identified through various means, such as inspector general fraud referrals. OPM officials stated that the agency uses actual amounts because the QA estimate may overstate overpayments. However, the fiscal year 2016 QA overpayment estimate was lower than the actual amount of debts identified as due to OPM. Standards for Internal Control in the Federal Government states that management should identify, analyze, and respond to risks related to achieving the defined objectives. OPM has not fully assessed the risks of improper payments in its Retirement program—particularly related to the risk of underpayments in older claims and the risk of overpayments— and evaluated whether its approach for estimating improper payments effectively addresses these risks. As a result, OPM’s processes for estimating Retirement improper payments may not reflect significant risks of improper payment in the program, calling into question the improper payment estimate and its usefulness for developing effective corrective actions. OMB guidance. OMB issues guidance for agencies to implement various requirements of the improper payment laws. Specifically, OMB is required by IPERIA to issue guidance to set standards for agencies to follow in determining the underlying validity of sampled payments to ensure that amounts being billed, paid, or obligated for payment are proper. Although existing OMB guidance addresses requirements for sampling, it does not address how agencies test to identify improper payments, such as using a risk-based approach to help ensure that key risks of improper payments, like eligibility, are addressed through testing processes. Without such guidance, there is increased risk that agencies’ processes may not address key risks of improper payments in their programs—for example, the cases of DOD Military Pay and OPM Retirement described above—calling into question the improper payment estimates for such programs and their usefulness for developing effective corrective actions. According to OMB guidance, when an agency’s review is unable to determine whether a payment was proper because of insufficient or lack of documentation, the payment must be considered an improper payment. Among the six agencies and 10 programs we reviewed, treatment of insufficient documentation varied by program, as did the classification of these issues for root cause reporting in the AFRs. HHS’s programs were the only ones we reviewed that reported improper payments in the insufficient documentation root cause category for fiscal years 2016 or 2017, as shown in table 6. Some agencies stated that they report insufficient documentation in other root cause categories that they consider more appropriate. For example, Education officials stated that for the Direct Loan program, payments that lack sufficient supporting documentation may be placed in the “Administrative or Process Error Made by Other Party” root cause category. In these cases, a third party—such as a loan servicer—is unable to provide sufficient documentation supporting that the sampled payment was proper. OMB guidance states that in cases where the agency believes that more than one root cause category might be suitable, the agency should determine which category it believes to be the most appropriate. Additionally, some agencies stated that the “insufficient documentation” category was not always relevant when they recreated sampled cases to estimate a program’s improper payments. For example, according to officials, to complete an OASDI stewardship review of a sampled case, a Social Security Administration (SSA) quality reviewer reviews the documentation related to the original determination and then independently re-develops all factors of the payment and interviews the associated beneficiary. According to agency officials, insufficient documentation would not apply as all improper payments identified in the stewardship sample are supported by documentation and payment has been verified in all reviewed cases. As noted previously, the processes for estimating DOD Military Pay and OPM Retirement improper payments were limited, and these limitations may have an impact on the agencies’ ability to identify improper payments related to insufficient documentation. Treatment of cases of nonresponse. Some agencies contact outside entities—such as payees or beneficiaries—as part of their improper payment testing processes. Among the six agencies we reviewed, treatment of cases of nonresponse differed. For example: SSA officials stated that in cases where quality reviewers do not receive responses from OASDI beneficiaries they contact, they exclude the cases from review (unless the reviewer identifies an improper payment in the initial review that is completed prior to reaching out to the beneficiary). For EITC improper payment estimation purposes, the Internal Revenue Service (IRS) stated that the agency does not consider the sampled payment associated with a nonresponse case to be proper or improper. It sets the sampling weight of nonresponse cases to zero and adjusts the sampling weights of respondents upward to account for the nonresponse cases. IRS’s methodology assumes nonresponse and response cases have an equal likelihood of improper payment. For Medicare Fee-for-Service and Medicaid, HHS’s policies and procedures consider payments associated with nonresponse cases to be improper. OMB guidance states that when an agency’s review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation, this payment must be considered an improper payment. However, it does not specifically address the appropriate treatment of nonresponse cases for improper payment estimation purposes. As a result, without clearer guidance there is increased risk that agencies’ improper payment estimates may be understated and that estimates for similar programs may not be comparable. When agencies identify improper payments, they must determine the amount of the payment that was improperly made. The six agencies we reviewed generally reported using the definition of improper payment in relevant laws and OMB guidance to determine the amount of improper payments identified. OMB guidance provides agencies with instructions on how to calculate the amount of improper payments. However, when developing its improper payment estimate for EITC, IRS subtracted overpayments that were paid out and later recovered. By subtracting recovered overpayments, IRS excluded them from the EITC improper payment estimate. For 2013—the tax year used to produce the fiscal year 2017 improper payment estimate—IRS estimated that $1.2 billion in EITC overpayments would be recovered. IPERIA directed OMB to provide guidance that requires agencies to include all improper payments in their improper payment estimates, regardless of whether they have been or are being recovered. Although the OMB guidance was revised in October 2014 to implement this requirement, IRS has not updated its estimation methodology for EITC. By not updating its guidance and continuing to remove EITC overpayments that may be subsequently recovered, IRS is understating its improper payment estimate and potentially limits its ability to address these types of improper payments before they occur. Improper payments are a long-standing, significant problem in the federal government. Estimation of improper payments is key to understanding the extent of the problem and to developing effective corrective actions to address it. Among the six agencies we reviewed, processes to estimate improper payments in their programs varied, and certain differences in these processes may affect the quality of the resulting estimates and consequently these agencies’ efforts to reduce improper payments. Specifically, policies and procedures for DOD’s Military Pay and OPM’s Retirement programs’ improper payment estimation methodologies do not address certain key risks, like eligibility, in part because these agencies have not fully assessed their processes. Further, although OMB guidance addresses requirements for sampling, it does not address how agencies test to identify improper payments. Without such assessments and guidance, there is increased risk that agencies’ processes may not address key risks of improper payments in their programs, calling into question the improper payment estimates for such programs and their usefulness for developing effective corrective actions. Additionally, for agencies we reviewed that contact outside entities as part of their improper payment estimation processes, the treatment of cases of nonresponse varied. OMB guidance does not specifically address the appropriate treatment of nonresponse cases for improper payment estimation purposes. Without clearer guidance there is increased risk that agencies’ improper payment estimates may be understated and that estimates for similar programs may not be comparable. Finally, although IPERIA directed OMB to provide guidance that requires agencies to include all improper payments in their improper payment estimates, regardless of whether they have been or are being recovered, IRS has not updated its processes to reflect the change. By not updating its guidance and continuing to remove EITC overpayments that may be subsequently recovered, IRS is understating its improper payment estimate and potentially limits its ability to address these types of improper payments before they occur. We are making two recommendations to the Director of OMB that have government-wide implications and specific recommendations to DOD, OPM, and IRS regarding their programs included in this review. The Director of OMB should develop guidance on how agencies test to identify improper payments, such as using a risk-based approach to help ensure that key risks of improper payments, such as eligibility, are addressed through testing processes. (Recommendation 1) The Director of OMB should develop guidance clarifying the appropriate treatment of nonresponse cases during improper payment testing. (Recommendation 2) The Under Secretary of Defense (Comptroller) should assess the processes for estimating Military Pay improper payments to determine whether they effectively address key risks of improper payments— including eligibility for different types of pay and allowances—and take steps to update the processes to incorporate key risks that are not currently addressed. (Recommendation 3) The Director of OPM should assess the processes to estimate Retirement improper payments to determine whether they effectively address key risks of improper payments—including eligibility and whether older claims face different risks of improper payments than new claims—and take steps to update the processes to incorporate key risks that are not currently addressed. (Recommendation 4) The Commissioner of IRS should update IRS’s improper payment estimation methodology to not exclude recovered overpayments from its EITC improper payment estimate. (Recommendation 5) We provided a draft of this report for comment to OMB, DOD, Education, HHS, Treasury, OPM, SSA, and USDA. OMB provided oral comments, which are summarized below. OPM, DOD, and IRS provided written comments, which are reproduced in appendixes II through IV, respectively. Education, HHS, SSA, and USDA did not provide written comments on the draft report. In addition, HHS, IRS, OMB, OPM, and SSA provided technical comments, which we have incorporated, as appropriate. In oral comments provided on April 30, 2018, a Senior Policy Advisor in OMB’s Office of Federal Financial Management stated that OMB partially agreed with our first recommendation and agreed with our second recommendation. Regarding the first recommendation, the Senior Policy Advisor stated that OMB should not have to develop more specific guidance as each program and activity has its own risks. Instead, inspectors general are better equipped and positioned to review the sampling and estimation plans as part of their annual IPERA compliance audits and that agencies, their statisticians, and inspectors general should work out the best testing procedures for their agencies. OMB could provide suggestions during OMB’s annual town hall meeting related to improper payments for areas that inspectors general may consider. Although we agree that programs and activities may face different risks of improper payment, we continue to believe that guidance from OMB on how agencies test to identify improper payments—such as directing agencies to take a risk-based approach in developing their testing procedures—could help ensure that agencies address the specific risks they identify when developing improper payment estimates. Further, such guidance could also help ensure that testing processes are designed to address an agency’s identified risks before the estimate is developed, whereas an inspector general’s review—as well as related recommendations for improvement—would generally occur after the agency’s improper payment estimate had been developed and reported. Regarding the second recommendation, the Senior Policy Advisor noted that OMB plans to update its guidance to direct agencies to treat nonresponse cases as improper payments and to include a new category for tracking such cases. In its written comments, OPM partially concurred with our recommendation to assess the processes to estimate Retirement improper payments to determine whether they effectively address the key risks of improper payments. OPM agreed to conduct an audit of older claims to determine if they face different risks than new claims. However, OPM did not agree with the part of the recommendation to assess the risk of improper payments related to eligibility in the estimation process. OPM stated that eligibility is determined before annuity or survivor benefits are fully adjudicated. However, the objective of an improper payment estimate is to determine whether payments were made properly. To do so, an agency should determine whether the payee was eligible for the payment that was made, among other things. As such, we continue to believe that the recommendation—including the assessment of the risk of improper payments related to eligibility—is warranted. In their written comments, DOD and IRS both agreed with our recommendations directed to them and described the steps they plan to take to implement them. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Agriculture, Defense, Education, Health and Human Services, and the Treasury; the Director of the Office of Personnel Management; the Administrator of the Social Security Administration; the Director of the Office of Management and Budget; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Table 7 lists the fiscal year 2017 improper payment estimates by agency and program, as reported by agencies in their fiscal year 2017 agency financial reports and compiled on the Office of Management and Budget’s payment integrity website, paymentaccuracy.gov. In addition to the contact named above, Phillip McIntyre (Assistant Director), James M. Healy (Auditor in Charge), Daniel Flavin, and Fabiola Torres made key contributions to this report.", "summary": "Improper payments—which include payments that should not have been made or were made in an incorrect amount—are a long-standing, significant problem in the federal government, estimated at almost $141 billion for fiscal year 2017. Executive branch agencies are required to annually estimate improper payments for certain programs. Estimation of improper payments is key to understanding the extent of the problem and to developing effective corrective actions. Relevant laws and guidance provide agencies flexibility in developing estimates. This report describes agencies' processes to estimate improper payments in selected programs for fiscal year 2017 and the extent to which certain differences in these processes can affect the usefulness of the resulting estimates. GAO selected 10 programs across six agencies with the largest reported program outlays in fiscal years 2015 and 2016. For these programs, GAO reviewed relevant laws and guidance, analyzed agencies' policies and procedures, and interviewed officials at relevant agencies and OMB staff. The six agencies GAO reviewed reported taking various approaches related to key components of estimating improper payments—shown in the figure below—for 10 selected programs, which collectively reported outlays of over $2.5 trillion for fiscal year 2017. Sample selection. Eight of the 10 programs GAO reviewed reported using statistically valid approaches, and the remaining 2 reported using alternative methodologies approved by the Office of Management and Budget (OMB). The sampled data elements varied, including payments, medical claims, and tax returns. The age of the data used to develop fiscal year 2017 improper payment estimates also varied, ranging from calendar year 2013 to fiscal year 2017. Identification of improper payments. Some of the six agencies reported using processes designed specifically to estimate improper payments, whereas others reported leveraging existing reviews. These agencies' policies and procedures include a review of aspects of eligibility, except for those related to the Department of Defense's (DOD) Military Pay and the Office of Personnel Management's (OPM) Retirement overpayments. DOD and OPM have not fully assessed whether their estimation processes effectively consider key program risks. OMB guidance does not specifically address how agencies are to test to identify improper payments, such as using a risk-based approach to help ensure that key risks of improper payments are addressed. The six agencies also varied in the treatment of insufficient documentation, both in identifying and in reporting the root causes of improper payments. For the agencies that contact entities outside the agency to estimate improper payments, the treatment of nonresponse differed, with one agency including nonresponses as improper payments and another generally excluding the nonresponse cases from review. Although OMB guidance states that agencies should treat cases of insufficient documentation as improper payments, it does not specifically address the treatment of nonresponse cases. Calculation of the improper payment estimate. The six agencies generally reported using law and OMB guidance to calculate improper payment estimates for the selected programs, except for the Earned Income Tax Credit (EITC). The Internal Revenue Service (IRS) removed overpayments that were recovered when developing its estimate. OMB guidance requires agencies to include recovered amounts in their estimates. Removing these overpayments understates the EITC improper payment estimate and may limit IRS's ability to develop corrective actions to prevent improper payments. GAO recommends that OMB develop guidance on treatment of nonresponse cases and testing to identify improper payments, that DOD and OPM assess their estimation processes, and that IRS revise its methodology to not exclude recovered payments from its estimate. All of the agencies either agreed or partially agreed with the specific recommendations to them. GAO believes that the actions are warranted, as discussed in the report.", "document_type": "gao"}
{"report": "The FMS program provides support to over 150 foreign partners, with sales totaling $416 billion between fiscal years 2007 and 2017. Annual sales were over $30 billion in each of these years except two, and grew 80 percent over the period to $42 billion in fiscal year 2017 (see fig. 1). The types of equipment and services sold to foreign partners ranged from fighter jets and integrated air and missile defense systems to combat helmets and training on the use of equipment. According to DSCA officials, fluctuations in annual sales are driven by changes in individual foreign partners’ needs for equipment and other goods and services from year to year. For example, the fiscal year 2012 annual sales of $69 billion were substantially driven by one sale to Saudi Arabia that was valued at $29 billion. According to DOD and State officials, FMS provides multiple benefits to foreign governments and the U.S. government. Foreign governments that choose to use FMS rather than direct commercial sales receive greater assurances of a reliable product, benefit from DOD’s economies of scale, improve interoperability with the U.S. military, and build a stronger relationship with the U.S. government. DSCA anticipates strong annual sales to continue, although using FMS is generally not the quickest or least expensive option for foreign governments. From the U.S. perspective, FMS expands the market for U.S. businesses and contributes to foreign policy and national security objectives. The administrative and CAS fee rates have varied over time, as seen in figure 2. The administrative fee was first implemented in 1970 and was originally set at 2 percent. Since 1970, the administrative fee rate has been changed four times, staying within the range of 2.0 to 3.8 percent. Since November 2012, the rate has been set at 3.5 percent. The CAS fee was first implemented in 1981 and was originally set at 1.5 percent. In 2002, a supplementary CAS fee was created for cases managed outside the United States (and set at an additional 0.2 percent), and in 2014 the base CAS fee rate for all cases was decreased to 1.2 percent. Administrative and CAS fee collections are held in the FMS trust fund, which is comprised of separate accounts for each country and several distinct accounts for fees. Each country’s individual account, referred to as a country account, holds funds that country has paid for FMS purchases of equipment and services until the funds are expended. The fee accounts, including the administrative and the CAS accounts, do not separate funds by country and instead comingle funds paid for fees by all purchasers. These accounts hold their deposits without accruing interest. According to DOD officials, once fees are deposited into one of the fee accounts, they are considered U.S. government funds and do not expire. Expenses related to administrative and CAS services are paid respectively from the related fee account. The timing and calculation of collections differs between the administrative and CAS fees, as shown in the example case of a $10 million equipment sale in figure 3. In particular, for the administrative fee, half of the amount owed is collected with the first payment made on most cases. The remaining administrative fees owed are timed with deliveries on the case. For the CAS fee, nothing is collected upfront. Instead, whenever the contractor providing goods or services on the case bills for work on the contract, a corresponding payment of the CAS fee is moved from the country account to the CAS account. According to DSCA data, the average length of a standard FMS case closed in fiscal year 2017 was 9 years. The administrative and CAS accounts need to maintain sufficient balances to pay for related operational expenses over that time period. DOD does not track administrative or CAS costs by case. Instead, collected funds are comingled and expenditures from the administrative and CAS accounts are made to DOD implementing agencies to pay for their overall FMS work. We have previously found that DOD does not have sufficient information on program costs to determine the amount needed to support the FMS program. While State reviews and approves FMS purchases, DSCA is responsible for administering the FMS program for DOD, including managing the administrative and CAS accounts and coordinating with other DOD components. In this role, DSCA sets policies for the FMS process, including for how implementing agencies can use administrative and CAS account funds; monitors the administrative and CAS account balances; and sets the administrative and CAS fee rates. DFAS provides DSCA’s accounting services for FMS and in this role is responsible for accounting, billing, disbursing, and collecting funds for the FMS program. DFAS’ accounting duties also include reconciliation and correction of errors related to collection of fees from foreign customers and disbursement of funds out of the administrative and CAS accounts, as governed by an agreement with DSCA. Congress and DSCA both have roles in defining what expenses are covered by the administrative fee. Congress defines in the act what administrative expenses DSCA can charge to FMS purchasers. Congress amended the act in 1989 to exclude salaries of the Armed Forces of the United States and estimated costs of unfunded civilian retirement and other benefits from the expenses that shall be recovered by the administrative fee. Since that change, the Armed Forces salaries and the estimated costs of unfunded civilian retirement and other benefits are paid instead from other appropriated funds. Within the parameters specified in the act, DSCA is responsible for defining whether administrative expenses should be paid from funds charged to the foreign partner, either from funds collected into the administrative account or from case-specific funds held in the related country account, or from other DOD annual appropriations. DSCA does this by outlining the expected funding source for specific types of administrative tasks carried out for FMS cases. For example, DSCA has determined that functions that are a normal part of all FMS cases—such as identifying defense requirements to help write an offer letter—should be paid from the administrative account. Conversely, functions that are requested to provide supplementary support on a case—such as conducting a site survey—should be paid with case fees from the partner’s country account. The administrative account balance grew steadily over the last decade due in part to the insufficient controls DSCA has in place to manage the account balance. Although DSCA has set a minimum desired level for the account and a process for regular monitoring, it has not completed timely comprehensive reviews of the administrative fee rate. In addition, DSCA has not adopted the best practice of establishing a method to calculate an upper bound of a target range for the account balance. As a result, DSCA’s monitoring and rate review practices are limited in their ability to prevent excessive growth in the account balance. Our analysis indicates that even if the administrative fee rate were reduced to as low as 2.9 percent and administrative expenditures were to increase 15 percent above expected growth, the administrative account balance would likely remain sufficient to pay for projected expenditures while maintaining a reserve balance through at least fiscal year 2024. The administrative account balance grew each year from the beginning of fiscal year 2007 through the end of fiscal year 2017—from $391 million to $4.1 billion, or 953 percent (see fig. 4). According to DSCA officials, the account balance has grown in part due to the fact that 50 percent of the administrative fee is usually paid when the first payment is made on a case while funds need to be available to pay for administrative work on the case as long as it remains open. Thus, as sales have grown on average over recent years, the amount of these upfront collections made on cases and the amount of expenditures that would be needed to work on these cases have also grown. However, administrative account collections and expenditures grew at slower rates than the overall account balance growth. Specifically, administrative account collections and expenditures grew 86 percent and 149 percent, respectively. Administrative account collections exceeded expenditures in each fiscal year between 2007 and 2017, contributing to the growing account balance. As shown in figure 5, collections were at least 1.5 times expenditures in 6 of these years, and the difference between collections and expenditures was $324 million in fiscal year 2017. At the end of each fiscal year, the value of collections that exceeds expenditures remains in the administrative account and is carried over to the next fiscal year’s beginning balance, which compounds the growth from year to year. Administrative fees are transferred from the foreign partner’s country account to the administrative account when agreements for new sales are signed and when deliveries are made on cases. Fluctuations in collections from year to year are due to the variations in the timing of these events and the value of the related cases. Despite these year-to- year fluctuations, expenditures from the administrative account to pay implementing agencies to work on FMS cases have generally increased more steadily over time. Annual growth in the administrative account balance has slowed in recent years; however, the overall balance has continued to grow. DSCA reduced the administrative fee rate in November 2012 from 3.8 to 3.5 percent following a review prompted by concerns that the balance appeared excessive as it neared $2 billion. Growth in the account balance from fiscal years 2007 to 2012 averaged $412 million a year compared with $273 million a year in fiscal years 2013 to 2017. Therefore, the rate reduction may have helped to decrease the annual growth in the account balance, yet the account balance itself has continued to grow. DSCA has established a minimum desired level for the administrative account and has processes for regularly monitoring the account’s balance. DSCA also has a process for reviewing the fee rate, called a comprehensive review, although it has not completed its most recent comprehensive reviews as frequently as required by DSCA policy. In addition, DSCA has not set an upper bound of a target range for the account balance. As a result, DSCA cannot provide adequate assurance that the account maintains an appropriate balance that is both sufficient but not excessive. Best practices in managing federal user fees suggest that federal agencies use a risk-based strategy to establish a target range for fee account balances so that there are reserves sufficient to cover varying or unpredictable revenues or expenses. This risk-based strategy should match the level of risk identified for the program, based on past experience and realistic risks. DSCA has set a minimum desired level for the administrative account, which it calls the safety level. It considers the safety level the minimum balance required to allow sufficient time to respond to volatility in the FMS business environment and to complete ongoing FMS cases. Prior to fiscal year 2013, the safety level was determined based on the assumption that FMS business might cease and 2 years of administrative expenses would be needed to wind down operations. An estimate of such shut-down expenses was difficult to calculate, according to DSCA officials. DSCA and the DOD Comptroller determined that the initial assumption for calculating the safety level was not valid because FMS would not likely cease operations given its integral role in U.S. government and DOD strategies. They therefore decided to change the calculation, and in so doing to increase the safety level to further mitigate risk and provide more flexibility. Specifically, starting in fiscal year 2013, the safety level has instead been defined as 18 months of funding, a period of time considered sufficient to respond to volatility in the FMS business environment and to complete ongoing FMS cases. According to DSCA officials, maintaining the safety level helps to ensure that there are sufficient funds in the account to pay for expenses throughout the life- cycle of individual cases. Since fiscal year 2007, the administrative account balance has been above this safety level every year, with the balance $2.7 billion above the safety level (of $1.4 billion) at the close of fiscal year 2017. Since the safety level calculation was modified for fiscal year 2013, the account balance has been between 2.4 and 3.2 times the safety level, and was 3 times the safety level at the close of fiscal year 2017 (see fig. 6). DSCA policy describes certain processes for account monitoring to occur on a monthly, quarterly, and annual basis: Monthly reviews: On a monthly basis, DSCA officials are to review a report from DFAS on the status of the administrative account. These reviews focus on whether: an expected amount of expenditures were made from the account, collections into the account are commensurate with past and current sales, the account balance is trending up or down, and the balance is near the safety level. According to DSCA officials, the results of these reviews are provided to DSCA leadership through monthly oral briefings from October through August, and the same information is reviewed and briefed weekly during September as the end of the fiscal year approaches. Quarterly reviews: On a quarterly basis, DSCA officials supplement their monthly briefings to DSCA leadership with other information on the FMS business environment, according to DSCA officials. Such information could, for example, focus on changes in bilateral relationships with key FMS customers, regional conflicts, changes in the global economy, or the status of annual sales. Annual assessments: DSCA has completed annual assessments of the administrative account since 2006, according to DSCA officials. These assessments involve a review of the previous year’s sales, administrative fee collections, expenditures from the administrative account, and the administrative account balance. The health of the account is determined by comparing the current and projected account balances with the account’s safety level, which is also recalculated for the new fiscal year as part of the annual assessment process. To assess the health of the account over the next year, DSCA officials use DSCA’s sales forecast and budgeted expenditures. These assessments are based on the current fee rate and do not include testing of any alternative fee rates. These assessments result in a report that is shared with DSCA leadership and the implementing agencies to keep them informed of the account’s health at a more detailed level. DSCA policy requires that a comprehensive review of the administrative fee rate be completed at least every 5 years. In addition, DSCA policy encourages more frequent comprehensive reviews in the case of certain events, such as a period of sales consistently below the forecasted level, which may put the account balance at risk of dropping below the safety level. However, DSCA has completed its three most recent comprehensive reviews of the administrative fee rate more than 6 years apart, which is less frequently than required by DSCA policy. Specifically: Fiscal year 2005: DSCA decided to conduct a comprehensive review of the administrative fee rate because the account balance ($260 million) was approaching the account’s safety level ($250 million). For this review, DSCA conducted an internal study that concluded that, with no changes to the fee rate, the administrative account would have a negative balance in fiscal year 2009. To perform this study, DSCA officials projected what would happen to the administrative account balance given different administrative fee rates, while estimating annual sales between $12.5 billion and $14.5 billion for future years. As a result of this study, DSCA decided to increase the fee rate from 2.5 to 3.8 percent. According to independent analysis undertaken by the Naval Postgraduate School (NPS) in 2011 for the next rate review, this decision addressed short-term concerns about a possible negative account balance but did not account for the projected long-term growth of the balance at the new fee rate. Fiscal years 2011 to 2012: DSCA enlisted NPS to perform a comprehensive review of the administrative fee rate in fiscal year 2011. NPS built a model to assess how various administrative fee rates would affect the administrative account balance through fiscal year 2015, using multiple methodologies to project future annual sales based on historical sales data. The model was also used to estimate what the administrative account balance would have been if various fee rates had been in effect since fiscal year 1999. Based on this analysis, NPS recommended that the fee rate be lowered to within the range of 3.0 to 3.4 percent, stating that 3.0 percent would be ideal for minimizing large variations in the account balance from year to year while mitigating the risk of falling below the safety level or accruing an excessive balance. However, following a 2012 internal DSCA review of this report, DSCA leadership decided to decrease the fee rate from 3.8 percent to 3.5 percent. According to DSCA officials, this decision was made due to uncertainty regarding future annual sales and because DSCA officials had learned to avoid making significant rate changes that can make foreign partners’ budgeting more difficult. Fiscal year 2018: According to DSCA officials, after performing some preparatory work during the prior fiscal year, DSCA began another comprehensive review of the administrative fee rate in fiscal year 2018. According to DSCA officials, this review was to be conducted internally and involve modeling various scenarios for the administrative account, making projections based on DSCA’s fiscal year 2018 sales forecast, recent sales data, expenditure trends, and historical collection rates on ongoing cases. In addition to using historical sales data to project future sales, DSCA planned to model alternate scenarios to account for the possibility of certain high or low sales years. In April 2018, DSCA announced that, as a result of this review, the administrative fee will be reduced to 3.2 percent as of June 1, 2018. DSCA established the policy of a 5-year period between comprehensive rate reviews because, according to DSCA officials, foreign partners prefer stability in the administrative fee rate to facilitate their budgeting. In addition, 5 years between rate reviews would allow DSCA to identify sales and expenditure patterns that could determine whether a rate change would be needed. According to DSCA officials, the most recent rate review was originally scheduled to be completed on time but was delayed due to competing priorities and limited resources. However, without timely comprehensive reviews, there is greater likelihood that large changes would be needed in the administrative fee rate to correct for large variations in the administrative account balance, thus hindering DSCA’s ability to provide stability in the administrative fee rate. DSCA has not established a method to calculate an upper bound of a target range for the administrative account balance as suggested by best practices. Setting an upper bound could help DSCA determine when the balance is excessive and an out-of-cycle comprehensive review of the fee rate might be warranted. An upper bound could be based on a certain number of months or years in expenditures and would thereby change over time to reflect the size and needs of the FMS program. DSCA could thus use the upper bound of a target range as another management tool to help more closely monitor the account during its periodic reviews. Given the lack of data on actual FMS costs per case and uncertainty about future annual sales, such a management tool could usefully inform future DSCA decisions based on its comprehensive rate reviews. We developed a model to understand potential changes in the administrative account balance for fiscal years 2018 through 2024 given a range of annual sales, administrative fee rates, and annual administrative expenditures. We found that, if no changes were made to the fee rate or expected expenditure levels, the administrative account balance would likely be above the projected safety level by at least $1.6 billion in fiscal year 2024. If DSCA were to reduce the administrative fee rate as low as 2.9 percent and annual expenditures were to increase as much as 15 percent, the administrative account balance would also likely be above the projected safety level in fiscal year 2024 by at least $25 million. We used cautious assumptions to model eight scenarios to assess the likelihood of the administrative account balance remaining above a projected safety level in fiscal years 2018 through 2024. The projected safety level reflects DSCA’s definition of the minimum balance required for the administrative account to allow sufficient time to respond to volatility in the FMS business environment and to complete ongoing FMS cases. We consider our assumptions cautious because they are more likely to lead us to underestimate the administrative account balance and to inflate the risk of it dropping below the projected safety level (see text box). Cautious Assumptions Used in GAO Modeling of the Administrative Account Balance in Future Years Sales: We assumed a minimum of $15 billion and a maximum of $47 billion in sales each year, using a uniform distribution that assumes an equal likelihood of any sales value within that range each year. In reality, annual sales have increased overall since fiscal year 2000 and have remained above $20 billion since fiscal year 2006 and above $33 billion since fiscal year 2014. Higher annual sales lead to larger administrative fee collections. This sales range likely leads to underestimating collections in some years. Expenditures: We assume expenditure levels that reflect both fluctuations in sales and overall steady annual growth in expenditures even when our annual sales values do not increase on average. Therefore, we likely overestimate expenditures in some years. Safety level: We assume steady annual growth in the safety level, even though we would expect the safety level to be lower when collections and expenditures are lower. Since our safety level projections do not take this into account, we likely overestimate the safety level, and therefore inflate the risk of dropping below it. We developed our baseline scenario, in which we maintain the current 3.5 percent administrative fee rate and typical growth based on current trends in expenditures. In additional scenarios, we adjusted the baseline projections with two key levers affecting the administrative account balance: (1) the fee rate and (2) the amount of expenditures out of the account. Given that the administrative account balance was $2.7 billion above the safety level as of the end of fiscal year 2017, we made adjustments to these levers in ways that could lead to a decline in the account balance by decreasing the fee rate, increasing expenditures, or through a combination of the two. Below, we describe the results of the baseline scenario and where we adjust either or both levers to the maximum extent we considered. See appendix II for a full description of our modeling methodology and results from four additional scenarios. For each scenario, we estimated the expected range of the administrative account balance and then assessed the likelihood of the account balance remaining above the projected safety level. We consider 10 percent as an acceptable risk threshold and therefore consider any outcome as favorable if it involves a 90 percent or greater likelihood of the balance remaining above the projected safety level. As shown in figure 7, our projections indicate that the administrative account balance will remain sufficient to maintain operations through fiscal year 2024 in all scenarios. Specifically: In the baseline scenario, if no changes were made to the fee rate or to annual expenditures, the estimated administrative account balance would be between $2.5 billion and $5.7 billion in fiscal year 2024, with a 90 percent likelihood that the balance would be above the projected safety level by at least $1.6 billion. If DSCA were to reduce the fee rate to 2.9 percent, we estimate the administrative account balance would be between $2.1 billion and $4.7 billion, with a 90 percent likelihood that the balance would be above the projected safety level in fiscal year 2024 by at least $1.0 billion. If annual expenditures from the administrative account were to increase 15 percent above expected levels, we estimate the administrative account balance would be between $1.5 billion and $4.6 billion, with a 90 percent likelihood the balance would be above the projected safety level in fiscal year 2024 by at least $622 million. If this increase in annual expenditures were coupled with a reduction in the administrative fee rate to 2.9 percent, we estimate the account balance would be between $1.1 billion and $3.6 billion in fiscal year 2024, with a 90 percent likelihood the balance would be above the projected safety level in fiscal year 2024 by at least $25 million. The range of the estimated balance in each scenario gets larger from year to year due to increasing uncertainty for longer-term projections. Our modeling shows that, even with a substantially reduced administrative fee rate, the estimated administrative account balance would likely well exceed the account’s projected safety level through at least fiscal year 2024. Even if DSCA reduced the fee rate an additional 0.3 percent lower than it plans to as of June 2018, we project the estimated balance of the administrative account would be over $1 billion above the account’s safety level in fiscal year 2024. In addition, our modeling demonstrates that administrative funds are sufficient to cover a higher amount of expenditures for the work the U.S. government performs for the benefit of its foreign partners, and could be used in place of the other appropriated funds used to support some of the associated expenses today. As enacted in 1976, the provision of the act that authorized the collection of administrative fees required that sales contracts include appropriate fees for administrative services to recover the full estimated costs of the administration of sales made under the act. Subsequently, Congress amended the act to exclude some expenses from the administrative fee. In particular, according to a House report and DOD testimony, to avoid raising the administrative fee at a time when annual sales were low and the account was insolvent, Congress, at DOD’s request, amended the act in 1989 to exclude from the administrative fee certain expenses associated with military personnel who work on the FMS program as well as the estimated costs of unfunded civilian retirement and other benefits. Since then, these expenses—with one exception for fiscal year 2000— have been funded with other appropriated funds rather than with foreign partners’ administrative fees. For fiscal year 2000, Congress required DOD to recover expenses attributable to salaries of members of the Armed Forces and the unfunded estimated costs of civilian retirement and other benefits by including them in the administrative fee, resulting in $52 million in additional FMS administrative expenses, or 13.5 percent of total FMS administrative expenses, for that year. Applying the same percentage, these costs would approximate $119 million in fiscal year 2017; however, DOD does not track the costs of military pay or unfunded civilian retirement and other benefits for FMS, so the current value of these costs is unknown. Our modeling shows that, even if DSCA were to decrease the administrative fee rate an additional 0.3 percent lower than it plans to effective June 2018 and annual expenditures increased as high as 15 percent above expected levels, the account balance would likely remain sufficient through at least fiscal year 2024. By then, DSCA would have had an opportunity to reassess the fee rate through another comprehensive rate review. The circumstances of the administrative account balance have changed substantially since the 1980s. Revisiting the provisions in the act authorizing and defining the collection of administrative expenses could allow other appropriated funds currently used to pay for some of these expenses to be used for other authorized purposes. Officials within DSCA and DOD’s Comptroller Office have stated they are receptive to revisiting these provisions. The CAS account balance grew substantially between fiscal years 2007 and 2015 because CAS collections exceeded expenditures in each year and insufficient controls were in place to manage the balance. The account balances for fiscal years 2016 and 2017 overstate available CAS funds due to a systems issue and limited related oversight. Since fiscal year 2014, DSCA has created some controls to help better manage this account; however, DSCA does not plan to conduct timely comprehensive reviews of the CAS fee rate, has inconsistently implemented internal guidance related to calculating the minimum desired level for the account, and has not established a method to calculate an upper bound of a target range for the account, thus allowing the account to continue to grow. The CAS account balance grew every fiscal year, from $69 million at the beginning of 2007 to $981 million at the end of 2015, or 1,329 percent over the period (see fig. 8). As annual sales grew during this period, CAS collections and expenditures also grew, but at slower rates than the account balance growth—at 133 percent and 187 percent, respectively. CAS account collections exceeded expenditures each fiscal year from 2007 through 2015, contributing to the growing account balance. As shown in figure 9, collections were at least double expenditures in five of these years, with a $49 million difference between collections and expenditures in fiscal year 2015. DSCA reduced the CAS fee rate from 1.5 to 1.2 percent in 2014 due to concerns over growth in the CAS account balance, according to DSCA officials. After the rate reduction, the account balance continued to grow but at a slower rate. The account balance increased 5 percent during fiscal year 2015 compared with an average of 38 percent from fiscal years 2006 through 2014. The balance would continue to grow if this trend continues. The CAS account balance data that DFAS provided to DSCA overstated the amount of CAS funds available by about $187 million for fiscal year 2016 and continued to be overstated for fiscal year 2017 due to a systems issue and limited related oversight. According to Defense Contract Management Agency (DCMA) officials, in October 2015, DCMA, the largest recipient of CAS funds, began using a new accounting system called the Defense Agencies Initiative. According to DCMA officials and internal data, DCMA submitted bills for about $187 million of CAS work for fiscal year 2016. To process its requests for this CAS funding in its new system, DCMA used an incorrect accounting code, according to DFAS officials. As a result, DCMA was paid for some of its fiscal year 2016 CAS bills, totaling about $89 million, from a different account, according to DFAS officials. Consequently, this amount paid to DCMA was not reflected in the CAS account expenditures or balance for fiscal year 2016. Further, DCMA and DFAS data differ regarding what additional amounts have been reimbursed to DCMA for its remaining fiscal year 2016 and its fiscal year 2017 CAS funding and suggest that DFAS underreported CAS expenditures to DSCA for both years. Although DSCA has financial management responsibility for the FMS trust fund, DSCA has played a minimal role in correcting DCMA’s incorrect billings or low reimbursement levels. After DSCA officials noticed low fiscal year 2016 CAS disbursements in December 2016, DSCA officials asked DFAS and DCMA officials to look into the cause and to resolve the issue. However, as of January 2018, DSCA had not provided any specific directions to DFAS or DCMA on a process or timeline for fixing it. DCMA began to submit vouchers totaling approximately $89 million in November 2017 for DFAS to process to be correctly paid out of the CAS account. According to DFAS officials, DFAS processed corrections related to these vouchers by January 2018 so that the approximately $89 million would be taken from the CAS account and returned to the other account. DFAS officials believe that these transactions resolved DCMA’s billing issues since they have not received any additional vouchers from DCMA or direction from DSCA. However, according to DCMA officials, they continue to have difficulty getting reimbursed for CAS work dating back to FY2016 and discrepancies remain between related DCMA and DFAS data. Federal standards for internal control state that management should use quality information that is current, complete, accurate, and provided on a timely basis to achieve the agency’s objectives and make informed decisions. However, as a result of DCMA’s difficulties in getting reimbursed from the CAS account, the CAS account balance remains overstated as of January 2018, hampering DSCA’s ability to perform oversight of the account. Since 2014, DSCA has put in place various management controls for the CAS account. Nevertheless, these remain insufficient due to inconsistent implementation of internal guidance and lack of a key control. From June to August 2013, DSCA conducted its first comprehensive review of the CAS fee rate since the early 2000s, according to DSCA officials. This comprehensive fee rate review was called for in DSCA’s strategic plan and was also prompted by substantial growth of the CAS account, according to DSCA officials. To conduct this review, DSCA officials worked with an internal support contractor to develop a model to project future CAS account balances based on historical data on CAS expenditures and collections, historical data and future projections for annual sales, and future budget estimates made by CAS implementing agencies. In this model, DSCA varied future annual sales projections and the CAS fee rate within the range of 1.0 to 1.5 percent to determine if the CAS account could maintain a healthy balance over the next 10 years under different conditions. As a result, in November 2014, DSCA issued a policy memo that specified a reduction in the CAS fee base rate from 1.5 to 1.2 percent for all cases starting after December 1, 2014. The decision to reduce the rate to 1.2 percent was supported by their modeling outcomes that showed that the CAS account balance would be above a safety level set for the account even if annual sales were as low as $12 billion in each of the following 10 years. The November 2014 policy memo that resulted from the 2013 comprehensive fee rate review specified three new controls for managing the CAS account: Periodic comprehensive fee rate reviews: DSCA determined that it would conduct comprehensive rate reviews of the CAS account every 5 years. A safety level for the CAS account: DSCA established a safety level, or minimum desired balance, for the CAS account at 3 years of average annual expenses. According to DSCA officials, the basis for the calculation of the safety level was rooted in a Federal Acquisition Regulation requirement to complete contract closeout within 3 years of final delivery for some types of contracts. As a result, even if no new sales were made, the CAS account would have sufficient funds to pay for contract management on existing cases. The CAS account balance was 1.7 times or $371 million above the safety level in fiscal year 2014 and 1.8 times or $420 million above the safety level in fiscal year 2015. Annual reviews of the health of the CAS account: For each year since fiscal year 2014, DSCA has conducted an annual assessment of the health of the CAS account. To perform this assessment, a DSCA official reviews information such as the CAS account balance from the end of the prior fiscal year against the account’s safety level, prior year account expenditures and collections, and information that may be relevant to the account moving forward, such as budget requests submitted by implementing agencies. This annual assessment culminates in a report that is provided to and signed off by DSCA’s Director of Business Operations. These practices were formalized by incorporating them into DSCA’s Manager’s Internal Control Program (MICP). In addition to these practices, MICP documentation for the CAS account also lays out a fourth management control: monthly reviews, which are meant to ensure that the account stays above its safety level throughout the year and that any large variances in expected expenditures or collections are reported to DFAS so that errors can be identified and corrected as needed. According to DSCA’s MICP Handbook, all MICP documentation should be reviewed at least annually to ensure it is kept up to date. As mentioned above, DSCA’s internal guidance indicates DSCA should conduct comprehensive reviews of the CAS fee rate every 5 years, which would make the next review in the summer of 2018. However, DSCA officials do not expect to begin their next comprehensive rate review until fiscal year 2019. DSCA officials stated that they intend to complete the review sometime by the beginning of fiscal year 2020, to complete it within 5 years of when the last CAS rate reduction took effect. However, this plan extends the time between reviews by a year and a half due to the amount of time it took for DSCA to decide on and implement the rate reduction after the last review. More frequent comprehensive reviews would provide timely in-depth information to decision makers to ensure that the CAS fee rate is set appropriately. In addition, more frequent fee rate changes would allow for smaller corrections when needed, limiting the impact that large fee rate changes would have on customers’ ability to budget. The guidance in the MICP procedures specifying how to calculate the safety level has not been consistently implemented and has not been updated to align with current practices. Federal internal control standards indicate that management should document the organization’s internal control responsibilities in its policies at the appropriate level of detail to allow management to monitor the control activity effectively. These standards also state that if there is a significant change in an entity’s process, management should review this process in a timely manner after the change to determine that the control activities are designed and implemented appropriately. Figure 10 outlines the guidance in the MICP procedures with regard to the safety level and how this guidance was implemented from fiscal years 2014 through 2017. In particular, the MICP procedures indicate that the safety level should be calculated based on a 3-year average of disbursements. The procedures also allow DSCA officials to determine whether to update the safety level in each year without providing specific criteria for making this determination. As a result, no change to the safety level was made in fiscal year 2015 or 2016 despite increases in CAS expenditures. However, for the years when the safety level was calculated, the calculation was performed differently than what is prescribed in the MICP guidance. For example, for fiscal year 2017, the DSCA official in charge of managing the CAS account stated the method was modified to be based on the amount of obligation authority (or total CAS budget) instead of the amount of disbursements. This approach was taken because of the incomplete fiscal year 2016 disbursement data. However, the method used was not consistent with the guidance. Accordingly, for future years it is not clear how the safety level should be calculated. As previously stated, best practices in managing federal user fees indicate that it is advisable for federal agencies to use a risk-based strategy to establish a target range for fee accounts. Although DSCA has followed this best practice and set a safety level, or minimum desired balance for the CAS account, DSCA has not established a method to calculate an upper bound of a target range for the CAS account balance, which would help officials identify when the account balance becomes excessive. DSCA’s MICP procedures indicate that, as part of the annual assessment process, DSCA officials should review account activity to determine if an out-of-cycle comprehensive review of the CAS fee rate is needed, specifying that this should be done either because the CAS account balance should be higher to cover expenses or lower because too many fees are being collected. However, in the absence of an upper bound for the account, it is up to the judgment of DSCA officials to determine when the account is excessive. DSCA officials told us that they were reluctant to set an upper bound for the account due to uncertainty regarding future sales and future CAS expenditures. Nevertheless, as with the safety level, an upper bound could be based on a certain number of months or years in expenditures and could be flexible and adjusted over time. Without establishing a target range for the account balance, DSCA officials lack a key tool to help determine the appropriate CAS fee rate. From fiscal years 2007 to 2017, the balance of the Foreign Military Sales administrative account grew dramatically to $4.1 billion. DSCA has set a minimum desired level for the account balance and designed various account monitoring practices to ensure the minimum level is not reached. However, DSCA has not performed comprehensive reviews of the administrative fee rate at least every five years, consistent with DSCA policy, and has not set an upper bound that would provide a target range for the account. These conditions limit DSCA’s ability to appropriately target the fee rate and to protect against excessive growth in the account balance. Our analysis demonstrates that the administrative account is likely to stay above its safety level even if the rate were reduced to as low as 2.9 percent and expenditures from the account were raised by 15 percent, signifying there should be even more room for the account to absorb increased expenditures now that DSCA has announced that the rate will be reduced to 3.2 percent as of June 1, 2018. Thus, this account should now have sufficient funds to pay for additional expenses that are currently paid from appropriated funds, such as those excluded by statute. Thereby, more of the costs for the work performed for the benefit of our foreign partners could be paid through the administrative fee, rather than having those some of those expenses paid through other appropriated funds. The CAS account has also experienced significant growth since fiscal year 2007, although the current account balance is unknown because of an accounting error and difficulty using a new accounting system. Specifically, in fiscal year 2016, a different account was charged about $89 million in DCMA’s CAS billings and DCMA has had continuing difficulty getting reimbursed for its CAS bills for fiscal years 2016 and 2017. DSCA did not become aware of this issue for over a year after it began, and DSCA has played a minimal role in coordinating DCMA and DFAS to fix it. Since 2014, DSCA has strengthened some management controls over the CAS account, but they could be further enhanced if DSCA conducted more timely comprehensive reviews, provided more clarity on the expected calculation of the account’s minimum level, and set an upper bound of a target range for the account. In particular, such an upper bound could allow DSCA officials to identify when the CAS balance is excessive, as directed by DSCA’s internal guidance. Adopting such controls would enhance DSCA leadership’s ability to monitor the account’s balance and make timely decisions to ensure the rate is set to cover DOD costs but not overcharge foreign partners. Congress should consider redefining what can be considered an allowable expense to be charged from the administrative account. (Matter for Consideration 1) We propose making the following six recommendations to DSCA: The Director of DSCA should take steps to ensure that comprehensive reviews of the administrative fee rate are completed at least every 5 years. (Recommendation 1) The Director of DSCA should define a method for calculating an upper bound of a target range for the administrative account that could be used to guide the agency’s reviews of administrative account balances and decision making in setting the fee rate. (Recommendation 2) The Director of DSCA should direct DCMA and DFAS to work together to ensure timely correction of the fiscal years 2016 and 2017 DCMA CAS reimbursement issues. (Recommendation 3) The Director of DSCA should take steps to ensure that comprehensive reviews of the CAS fee rate are completed at least every 5 years. (Recommendation 4) The Director of DSCA should clarify internal guidance to ensure consistency in the calculation of the CAS account’s minimum (safety) level. (Recommendation 5) The Director of DSCA should define a method for calculating an upper bound of a target range for the CAS account that could be used to guide the agency’s reviews of CAS account balances and decision making in setting the fee rate. (Recommendation 6) We provided a draft of this report for review and comment to DOD and State. DSCA provided written comments on behalf of DOD, which we reproduce in appendix III. In its comments, DSCA concurred with five of our recommendations and partially concurred with one. In commenting on our first recommendation for DSCA to take steps to ensure that it completes timely comprehensive reviews of the administrative fee rate, DSCA asserted that its last two reviews were conducted in time to meet its 5-year requirement. However, as we outline in this report, these reviews were conducted about 6 to 7 years apart. These included a fiscal year 2005 review that led to an August 2006 rate change, a review that began in fiscal year 2011 that led to a November 2012 rate change, and a fiscal year 2018 review that led to a June 2018 rate change. By following its own policy to complete the reviews every 5 years instead, DSCA would better be able to keep the administrative fee rate up-to-date with program changes. In partially concurring with our fourth recommendation for DSCA to take steps to ensure that it completes timely comprehensive reviews of the CAS fee rate, DSCA asserts that it plans to begin its next review later than 5 years after the last one to provide more time for DCMA’s billing issues to be resolved and to inform the review with 5 years of data since the December 2014 rate reduction. Implementing this recommendation, including for its next review, would allow DSCA to meet its own guidance. In addition, the process of performing a comprehensive review of the fee rate could further provide impetus for addressing DCMA’s billing issues that have led to inaccuracies in the account balance and expenditure information since fiscal year 2016. Finally, if DSCA were to delay data collection until more than 5 years after the last rate reduction, that would cause the reviews to start more than 6-1/2 years apart. Given how long the review process has taken in the past, an earlier start will help ensure completion within 5 years. In commenting on our fifth recommendation, DSCA noted that it updated its internal guidance for calculating the CAS safety level in March 2018. We plan to verify full implementation of this recommendation as part of our routine follow up process. DOD also provided technical comments, which we incorporated as appropriate. State did not provide any written or technical comments. We are sending copies of this report to the appropriate congressional committees, and the Secretaries of Defense and State. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Thomas Melito at (202) 512-9601 or MelitoT@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. The Defense Security Cooperation Agency (DSCA) manages fees collected on transfers of defense articles and services to foreign countries that occur through the Foreign Military Sales (FMS) program. These fees are collected into separate accounts in the FMS trust fund. This report examines (1) the balance maintained in the administrative account in fiscal years 2007 to 2017, the controls used to manage it, and the extent to which the Department of Defense (DOD) has the ability to pay for FMS administrative expenses under different scenarios; and (2) the balance maintained in the contract administration services (CAS) account in fiscal years 2007 to 2017 and the controls used to manage it. To determine which fees to include in our review, we reviewed the International Security Assistance and Arms Export Control Act of 1976 (the act), which is the authorizing legislation for FMS, and DOD documents and data. We also interviewed DOD officials. We determined that there are three primary fees charged on FMS cases: (1) the administrative fee, (2) the CAS fee, and (3) the transportation fee. These three fees represented 99 percent of the amount of funding held in FMS trust fund overhead accounts as of the beginning of fiscal year 2016. We will review the transportation account in a separate report because of the different ways in which the collections and expenditures from the account operate. To assess the balance of the administrative account, we analyzed administrative account collections, expenditures, and balance data for fiscal years 2007 to 2017 maintained in the Defense Integrated Financial System by the Defense Finance and Accounting Service (DFAS), the DOD component that acts as the accounting service for the FMS program. According to DFAS, the Defense Integrated Financial System was implemented in 1980, and is used for FMS case management, financial reporting, and customer billing. We chose to review this number of fiscal years of data based on data availability. To understand the structure and functioning of the administrative account and to determine the reliability of these data, we reviewed relevant DOD documents, including explanations of changes to the administrative fee rate over time, and we interviewed DFAS and DSCA officials in various policy, financial, or technical roles. We asked knowledgeable agency officials a set of standard questions on this system, data entry procedures and checks, and other relevant aspects of data reliability. We reviewed their responses, examined the data ourselves, and conducted basic logic checks. Where questions arose, we followed up with agency officials for explanation and clarification. We did not conduct any independent testing of these data to determine whether these were the amounts that should have been paid into and out of the account during that period, such as through correct payments having been made based on accurate billings. We determined the administrative account data to be sufficiently reliable for assessing the account balance and related trends over the period, and for projecting future trends in the account balances, under a variety of assumptions, using statistical modeling. To assess the controls DSCA uses to manage the administrative account balance, we reviewed relevant documents and interviewed DOD officials. To determine what controls DSCA should be using to manage the account, we reviewed DOD’s Financial Management Regulations, DSCA’s Security Assistance Management Manual, DSCA’s Managers’ Internal Control Program procedures, and other internal DSCA guidance. We also reviewed reports resulting from DSCA’s implementation of its account monitoring and comprehensive rate review processes, including annual administrative account assessments from fiscal years 2012 to 2016, quarterly administrative account assessments from fiscal years 2015 and 2016, and reports resulting from the 2005 and 2011-2012 comprehensive fee rate reviews. We chose to review the annual and quarterly assessments for different periods of time to review manageable numbers of the most recent assessments conducted. We also interviewed DSCA policy officials regarding their implementation of these processes. To assess the extent to which DOD has the ability to pay for FMS administrative expenses from the administrative account under different conditions, we modeled eight scenarios to determine the projected account balance in fiscal years 2018 to 2024 across a range of potential annual sales values in each year while varying the administrative fee rate and expenditures from the account. Appendix II provides a complete description of our modeling methodology and the results of our analysis. In addition to the modeling, we also performed legal research to determine the extent to which Congress and DOD have a role in defining what can be paid from the administrative account. In particular, we reviewed sections 2761 and 2792 of the act regarding DOD’s authority to charge fees. We also reviewed DOD documentation and legislative history to determine the conditions that led to the 1989 amendments to the act that excluded certain costs associated with military personnel who work on the FMS program as well as unfunded civilian retirement and other benefits from administrative expenses. Additionally, we reviewed DSCA’s definitions of which FMS administrative services should be paid from different funding sources, as specified in DSCA’s Security Assistance Management Manual. We also interviewed DOD officials about the agency’s role in defining administrative expenses. Similar to the administrative account, to assess the balance of the CAS account, we initially attempted to analyze CAS account collections, expenditures, and balance data for fiscal years 2007 to 2017 maintained by DFAS in the Defense Integrated Financial System. We chose to review this number of fiscal years of data based on data availability. To understand the structure and functioning of the CAS account and to determine the reliability of these data, we reviewed relevant documents from DOD, including those explaining changes to the CAS account fee rate over time, and interviewed DFAS and DSCA officials in various policy, financial, or technical roles. We asked knowledgeable agency officials a set of standard questions on this system, data entry procedures and checks, and other relevant aspects of data reliability. We reviewed their responses, examined the data, and conducted logic checks. Where questions arose, we asked agency officials to explain and clarify. We performed additional cross-checks that compared CAS expenditures data provided by DFAS with disbursement data from the implementing agencies that used the CAS funds in fiscal years 2012 to 2017. We found some discrepancies in these data that we were subsequently able to reconcile with agency officials for fiscal years 2007 through 2015 for the purposes of reporting overall annual expenditures from the account. We did not conduct any independent testing of these data to determine whether these were the amounts that should have been paid into and out of the account during that period, such as through correct payments having been made based on accurate billings. We determined the CAS account data for fiscal years 2007 to 2015 to be sufficiently reliable for assessing the account balance and related trends over the period. We did not determine the CAS account data to be sufficiently reliable for these purposes for fiscal years 2016 and 2017 due to a large share of CAS billings for those fiscal years that either had been disbursed from the incorrect account or were delayed, and were therefore not reflected in the CAS expenditures and balance data. Accordingly, the CAS data for fiscal years 2016 and 2017 were excluded from our analysis. To assess the controls DSCA uses to manage the CAS account balance, we reviewed relevant statutes, DOD financial management regulations, DOD guidance, and DOD documentation of such controls, and interviewed DSCA officials. To determine what controls DSCA should be following to manage the account, we reviewed DSCA’s Managers’ Internal Control Program procedures and a related DSCA policy memo, and interviewed DSCA policy officials. We also reviewed reports resulting from DSCA’s implementation of its account monitoring and comprehensive rate review processes, including all of DSCA’s annual CAS account assessments completed to date (covering fiscal years 2014 to 2016) and reports showing the process used and results of the fiscal year 2013 comprehensive review of the CAS fee rate. We also interviewed DSCA officials regarding their implementation of these processes. We were unable to perform modeling to assess the extent to which DOD has the ability to pay for CAS expenses from the CAS account under different conditions due to the limited data available at the time of our review and data reliability concerns for fiscal years 2016 and 2017. We conducted this performance audit from February 2017 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To determine whether the administrative account balance would be sufficient to maintain Foreign Military Sales (FMS) operations if there were a reduction in the administrative fee rate or an increase in annual expenditures, we used a Monte Carlo simulation methodology to project the account balance across a range of annual sales values for fiscal years 2018 through 2024. This technique approximates the likelihood of certain outcomes by performing multiple trial runs, called simulations, using random variables within a specified range. The simulations capture the volatility of sales in the projection of the future balance of the administrative account. We determined to report projections through fiscal year 2024 for two main reasons. First, there is increasing uncertainty for longer-term projections. Second, by then, DSCA should have had an opportunity to reassess the fee rate through another comprehensive rate review, given that the current review is to be completed in fiscal year 2018 and DSCA policy requires such reviews every 5 years. To construct our baseline model, we used the 3.5 percent administrative fee rate, which was current during the period of our review. We also used historical annual sales and appropriations data provided by the Defense Security Cooperation Agency (DSCA) and annual administrative account collections, expenditures, and balance data provided by the Defense Finance and Accounting Service (DFAS). To assess the reliability of the data provided by both DSCA and DFAS, we interviewed officials from both agencies, performed manual error checks on the data, and reviewed relevant documents from DOD and other sources, including DSCA’s annual assessments of the administrative account and congressional appropriations laws dating back to fiscal year 2000. In addition, for collections data, we cross-checked the data provided by DFAS with reports the agency provided to DSCA on administrative fees owed on cases implemented since fiscal year 2000 as well as checked for any anomalies in the data. Through this process, we found errors in the way a key variable in these reports was pulled for data on cases prior to March 2013. We did not find such errors in the data for fiscal years 2014 to 2017, which led us to only using data on the status of cases in fiscal years 2014 to 2017 in our modeling. We did not conduct independent testing or an audit of DSCA or DFAS data. We found these specific data to be sufficiently reliable for use in our modeling. We conducted 10,000 simulations for each year using the following parameters: Sales: We used annual sales data from fiscal years 2000 to 2017 and the Monte Carlo methodology to build an annual sales distribution for fiscal years 2018 to 2024. We chose to review this number of fiscal years of data based on availability of reliable data. For that distribution, we assumed a uniform distribution with a minimum possible sales value of $15 billion and a maximum of $47 billion, which has an equal probability of annual sales values falling anywhere within that range. A uniform distribution was selected because, as compared to other potential distributions (e.g., normal, triangular), it more accurately reflected the current reality of annual sales, including the increasing trend seen since fiscal year 2000 and the jump in sales seen in fiscal year 2006. Although annual sales have grown steadily over time with values of at least $27.8 billion since fiscal year 2008, DSCA officials explained that the FMS market could shrink at any time based on global geopolitical and economic factors. As a result, we took a cautious approach to determining the minimum level of our sales projections by allowing for the possibility of annual sales dropping to $15 billion in each year. We set our maximum possible sales value at $47 billion to reflect the second highest sales value between fiscal years 2000 and 2017. Sales in fiscal year 2012 were $69 billion due in large part to one large purchase made by Saudi Arabia. We excluded this as a possible maximum value in future years due to DSCA officials’ explanation that this high value of sales was considered an exception. We also do not take into account any time trend effects such as inflation, technological advances, or new product development that could increase the value of future annual sales. The uniform distribution used in the model produces average sales of $30.8 billion, with a standard deviation of $9.2 billion, while the average sales from fiscal years 2006 through 2017 were $36.4 billion, with a standard deviation of $12.1 billion. Collections: First, to calculate collections on ongoing cases for fiscal years 2018 to 2024, we used administrative account collections data from fiscal years 2010 to 2017, a schedule of the average percentage of administrative fee collections for each year in the life of an FMS case, and administrative fee rates from fiscal years 2010 to 2017. To develop an average collection schedule for cases, we used a DFAS report that shows the percentage of the administrative fee that should have been collected in each year on each case implemented in fiscal years 2008 to 2017. To address the inaccuracies in the data in this report prior to March 2013, we developed a schedule of the average rate of collections in each of the first 9 years of case implementation by summing the pertinent amounts of the administrative fee that should have been paid on cases divided by the total amounts of the administrative fee owed on cases implemented in fiscal years 2008 to 2017 as of fiscal years 2014 to 2017. We excluded from the collections schedule the large sale made to Saudi Arabia in fiscal year 2012 because that case had a reduced first-year collection rate that skewed the first-year average. This 9-year collection schedule accounts for about 91 percent of total expected collections on cases. We then calculated expected collections for new cases in a given year by multiplying the dollar value of sales in that year by the average collection rate for the first year of a case and the applicable fee rate. Finally, we added new and ongoing collections to arrive at total collections projected for each year. Expenditures: We used administrative account expenditure and collection data from fiscal years 2006 to 2017 to develop a regression model to project administrative account collections in fiscal years 2018 to 2024. We used available data from fiscal years 2006 to 2017 to produce an estimate of the relationship between collections and expenditures, employing a simple linear regression model where the dependent variable was expenditures against collections, a linear time trend, and a constant. We chose to review this number of fiscal years of data based on availability of reliable data. We then used the coefficients from the regression model to estimate future expenditures against simulated collections and a time trend. As designed, to provide a cautious estimate of future expenditures, this model reflected an overall increasing trend in expenditures even when annual sales simulated in future years did not increase on average. Safety level: The administrative account safety level is established each year by DSCA as the minimum balance required to continue operations and respond to potential volatility in the FMS market. DSCA calculates the account’s annual safety level as 18 months of operational funding, as determined by the congressional obligation limit, which has been annually set in the foreign operations appropriation since 1992. To project the administrative account safety level for fiscal years 2018 to 2024, we used the congressional obligation limit for the administrative account from fiscal years 2000 to 2017, as reported by DSCA, to develop a simple regression model where the dependent variable was the obligation limit against a linear time trend and a constant. We chose to review this number of fiscal years of data based on availability of reliable data. Then, based on DOD guidance, we divided the projected obligation limit by 12 and multiplied it by 18 to calculate the projected safety level. This regression model projects steady growth in the obligation limit and therefore steady growth in the safety level every year. The same projected safety level applies to all simulations for each year so that we can apply a consistent threshold against which to compare the account balance, although some simulations involved lower future sales, which could lead to lower future expenditures and hence lower safety levels. Finally, using these parameters, we calculated the administrative account balance for each year by adding the net income projected for that year (that year’s projected collections minus that year’s projected expenditures) to the previous year’s account balance. All of our estimated projections are in nominal dollars. Building upon the baseline projection, we conducted 10,000 simulations for each year for seven additional scenarios: three in which the administrative fee rate is reduced from the current 3.5 percent to as low as 2.9 percent, three in which annual expenditures are increased as high as 15 percent above expected levels, and one in which both changes occur (see table 1). We modeled decreases of the fee rate to as low as 2.9 percent to look at the effect of a wide range of possibilities lower than the current rate. We modeled increases in annual expenditures of up to 15 percent above typical growth because this amount is a little higher than 1.5 times the average annual growth in expenditures between fiscal years 2007 and 2017 (9.3 percent). As such, our model accounted for the potential of large sustained expenditure growth. Finally, we modeled the effects of adjusting both levers to the maximum extent through a scenario with a 2.9 percent fee rate and a 15 percent increase above expected annual expenditures. Using the account balance and safety level projections for each scenario, we assessed the likelihood of the balance dropping below the safety level in each year through fiscal year 2024. In the baseline scenario, we projected what would happen to the administrative account balance if the fee rate were to remain 3.5 percent and expenditures were to remain stable based on historical data. There is a 100 percent likelihood of the account balance remaining above the safety level in each year in this scenario. There is a 90 percent likelihood that the account balance would remain above the projected safety level in fiscal year 2024 by at least $1.6 billion (see fig. 11). We used the model to determine what would happen to the account balance if the administrative fee rate were decreased to 3.3, 3.1, and 2.9 percent. We projected a 100 percent likelihood that the account balance would remain above the projected safety level in fiscal year 2024 in each of these scenarios. There is a 90 percent likelihood that the account balance would remain above the projected safety level in fiscal year 2024 by at least $1.4 billion if the fee rate is decreased to 3.3 percent, by at least $1.2 billion if decreased to 3.1 percent, and by at least $1.0 billion if decreased to 2.9 percent (see fig. 12). We used the model to determine what would happen to the account balance if annual expenditures were to increase 5, 10, and 15 percent above levels expected in the baseline scenario. There is more than a 99 percent likelihood that the account balance would remain above the projected safety level in fiscal year 2024 in each of these scenarios. There is a 90 percent likelihood that the account balance would remain above the projected safety level by at least $1.3 billion if annual expenditures increased 5 percent, by at least $974 million if annual expenditures increased 10 percent, and by at least $622 million if annual expenditures increased 15 percent (see fig. 13). We used the model to determine what would happen to the account balance if both the fee rate were decreased to 2.9 percent and annual expenditures were to increase 15 percent above expected levels. There is at least a 91 percent likelihood that the account balance would remain above the projected safety level in fiscal year 2024 in this scenario. There is a 90 percent likelihood the account balance would remain above the projected safety level in fiscal year 2024 by at least $25 million (see fig. 14). In addition to the contact named above, Hynek Kalkus (Assistant Director), Heather Latta (Analyst-in-charge), Lynn Cothern, Elisabeth Helmer, Jessica Mausner, and Moon Parks made key contributions to this report. Martin De Alteriis, Jeff Isaacs, Christopher Keblitis, Grace Lui, Susan Murphy, Laurel Plume, Heather Rasmussen, Chanetta Reed, and Aldo Salerno provided technical assistance.", "summary": "The FMS program is one of the primary ways the U.S. government supports its foreign partners, by providing them with defense equipment and services. The program charges FMS customers overhead fees to cover the U.S. government's operating costs. They include the administrative fee for costs such as civilian employee salaries and facilities, and the CAS fee for the cost of contract quality assurance, management, and audits. In 1989, Congress excluded from administrative expenses certain costs associated with military personnel who work on the FMS program as well as unfunded civilian retirement and other benefits. As of May 2018, the administrative fee rate is 3.5 percent, and the CAS fee rate is 1.2 percent. House Report 114-537 and Senate Report 114-255 included provisions that GAO review DSCA's collection and management of these fees. This report examines, for fiscal years 2007 to 2017, the balance of and controls over (1) the administrative account and (2) the CAS account. GAO analyzed Department of Defense (DOD) data and documents, modeled projections for the administrative account, and interviewed DOD officials. The Foreign Military Sales (FMS) administrative account balance grew by over 950 percent from fiscal years 2007 to 2017—from $391 million to $4.1 billion—due in part to insufficient management controls, including the lack of timely rate reviews. The Defense Security Cooperation Agency (DSCA) has some controls to manage the account balance. For example, DSCA has established a method for calculating a minimum desired balance to ensure it has sufficient funds to complete FMS cases despite uncertain future sales. At the end of fiscal year 2017, the account balance was $2.7 billion above this minimum. DSCA, however, has completed rate reviews less frequently than directed by its policy. Moreover, DSCA has not adopted the best practice of setting an upper bound for the account that would, along with the minimum level, provide a target range for the account balance. By not performing timely rate reviews or setting an upper bound, DSCA has limited its ability to prevent excessive balance growth. GAO modeling indicates that, even with a planned fee rate reduction to 3.2 percent, the account balance would likely remain above its minimum level through fiscal year 2024, including if annual expenditures increased by 15 percent more than expected. As such, the account has the potential to pay for additional expenses. These could include expenses first excluded by statute in 1989 at a time when the account balance was negative and which have since been paid from other appropriated funds. DOD told GAO it is willing to revisit these exclusions. The FMS contract administration services (CAS) account grew from fiscal years 2007 to 2015 from $69 million to $981 million, due in part to insufficient management controls, including not setting an upper bound. The balances for fiscal years 2016 and 2017 overstated the amount of funds available due to a systems issue and limited related oversight. Since 2014, DSCA has implemented some controls for the CAS account, such as regular reviews of the account balance, but weaknesses remain. In particular, DSCA does not plan to follow its internal guidance to conduct the next CAS fee rate review within 5 years. DSCA also has inconsistently calculated the desired minimum level for the account. Finally, DSCA has not set an upper bound for the account to help officials follow internal guidance that directs them to determine when the balance is excessive and a fee rate reduction should be considered. As a result, DSCA is limited in its ability to make timely, appropriate decisions on the fee rate. Congress should consider redefining what it considers an allowable expense to be charged from the administrative account. GAO is making six recommendations to help DSCA improve its controls over both accounts, including completing more timely reviews and establishing a desired range for balance levels. DOD generally concurred.", "document_type": "gao"}
{"report": "The federal government has consistently recognized Indian tribes as distinct, independent political communities with inherent powers of limited sovereignty. The 2013 amendments in SRIA allow tribes to decide how to request federal disaster assistance, thereby allowing tribes to exercise their sovereignty. As of April 2018, there were 573 federally recognized Indian tribes, residing on more than 56 million acres. Thirty-six states have at least parts of a tribe within their borders, with fewer tribes located on the East Coast of the United States and over 300 tribes are located in Alaska and California. These tribes are each sovereign governments and vary in size, demographics, and location. For instance, Navajo Nation has the largest reservation covering over 17.5 million acres, stretching across New Mexico, Arizona and Utah, and is home to approximately 174,000 residents, while the Mashantucket Pequot Reservation in Connecticut covers over 2,000 acres and is home to about 350 residents. Only tribes that are federally recognized can make disaster declaration requests. The 10 FEMA Regions and the location of each regional office, along with the number of federally recognized tribes in each region, are illustrated in figure 1. Before a disaster occurs, tribes may need certain resources to assist in the development of their local emergency management capacity. In addition to offering technical assistance for certain administrative requirements, such as developing a hazard mitigation plan, FEMA administers four pre-disaster grant programs that tribes may access. These grant programs could provide tribes, either directly or as a sub- grantee through a state, with funds that would help support aspects of their emergency management capability. They are: Emergency Management Performance Grant (EMPG). The purpose of EMPG is to help build and sustain core emergency management capabilities. EMPG is particularly important for building the capacity to declare and manage a disaster, because it is the primary federal program for which salaries and training for emergency management personnel is an allowable expense. Only states and U.S. territories are eligible to receive EMPG funds directly. According to FEMA officials, after states receive EMPG funds, they make determinations about whether and under what conditions to provide the funds to tribes and local governments within their geographical boundaries. However, according to officials, not all states will distribute EMPG funds to tribes. State Homeland Security Program (SHSP). The purpose of SHSP is to help states and U.S. territories prevent, prepare for, protect against, and respond to acts of terrorism and otherwise reduce overall risk. Allowable expenses include, but are not limited to, equipment, training, and exercises. As with EMPG, states and territories receive SHSP funds and subsequently decide how to distribute them. Tribal Homeland Security Grant Program (THSGP). THSGP is a tribal- specific grant program intended to serve the same general purpose as SHSP. THSGP is available to tribes that meet one or more specific criteria, including comprising at least 1,000 square miles of Indian country or being near an international border, near prioritized critical infrastructure, or within or adjacent to one of the 50 most populous regions in the United States. Pre-Disaster Mitigation (PDM). A PDM grant primarily funds development and upkeep of hazard mitigation plans, but can be used for hazard mitigation projects as well. All nonfederal governments—including tribal governments—must have an up-to-date, FEMA-approved hazard mitigation plan in place before receiving disaster assistance following a major disaster declaration. After a disaster, tribal chief executives may request federal assistance, if the disaster is of such severity and magnitude that effective response is beyond the capabilities of the affected tribal government and federal assistance is necessary. Tribes may make a request for assistance as a direct recipient, or they may join a state’s request as a sub-recipient. Similar to the state request process, FEMA Regional Administrators evaluate the tribe’s request and make a recommendation to FEMA headquarters. The FEMA Administrator then sends the recommendation to the President for a final decision as to whether the tribe’s, or a state’s, request for a major disaster declaration should be approved or denied. Figure 2 illustrates the process tribes follow to make a direct request or join a state’s request. When a major disaster is declared, FEMA provides disaster assistance for eligible disaster recovery projects through the Disaster Relief Fund (DRF). The three types of post-disaster grants, through the DRF, that state governors or tribal chief executives may request are: (1) Public Assistance (PA), which provides grants for eligible emergency work and repairs or restoration to infrastructure. (2) Individual Assistance (IA), which provides assistance to individuals and households to meet their sustenance, shelter, and medical needs. (3) Hazard Mitigation Grant Program (HMGP), which provides grants for eligible projects to reduce the potential for future damage. According to FEMA data, between 2013 and 2016, 36 tribes made requests for disaster assistance as a direct recipient or by joining a state’s request. Of those 36 tribes: Fifteen tribes made a total of 17 direct requests to the U.S. President through FEMA for major disaster declarations. Eight of these requests were approved across 7 tribes. From 2013 through 2016, the Pueblo of Santa Clara, New Mexico was the only tribe approved for two major disaster declarations for severe storms and flooding in 2013. The remaining 9 direct requests were denied across 9 tribes. Twenty-nine tribes were sub-recipients under 36 state major disaster declaration requests. Eight tribes made a direct request and also joined at least one state request for a major disaster declaration. Figure 3 below shows the types of state requests tribes joined as well as the direct tribal requests that were approved and denied between 2013 and 2016. See appendix II for background information on the 36 tribes that made requests for disaster assistance and those that received pre- disaster grants during the study period. Officials from the tribes that responded to our survey and those we interviewed reported that there are several factors they took into consideration when deciding whether to make a direct request or to join a state’s request for a disaster declaration, during the 2013 to 2016 period. On the basis of the cumulative responses from these officials, we found that tribal sovereignty, financial matters, FEMA support, and the tribe’s emergency management capacity were key factors in their decision- making process. As shown in figure 4, the 23 survey respondents fall into three subsets, which totals 29 direct and state requests made by the survey respondents. Nine of 10 survey respondents that made at least one direct request during the 2013 to 2016 period reported that tribal sovereignty was a major factor they considered when making a direct request. Two survey respondents reported that the new authority is of strategic importance for tribal sovereignty because they are no longer required to join a state’s request when seeking a major disaster declaration. For example, in instances where the state’s request for a major disaster declaration has been denied, tribes now have the option to request disaster assistance directly as a result of this new authority. This factor was also of practical importance for tribes with reservations located in more than one state or county. During our site visit interviews, officials from one tribe said it was a challenge to manage multiple state bureaucracies when the reservation spans multiple states. In some cases, portions of a reservation may not receive disaster assistance if one state—or county—did not request or receive a major disaster declaration. Officials from 5 tribes we visited said they prefer making direct requests because of the government-to-government relationship with the United States, and because working through the state as an intermediary impinged on their sovereignty. An official from one small rural tribe said that the tribe currently does not have the capacity to make a direct request but is taking the steps to do so in the future because it is important to their tribal sovereignty. Tribal officials responding to our survey and interview questions reported that the potential to receive additional assistance from states to pay the non-federal cost share might influence them to join a state’s request. Conversely, the timeliness of reimbursement and the potential to receive administrative costs and HMGP grants might be factors in deciding to make a direct request. Eight out of 13 respondents that received disaster assistance only as a sub-recipient of a state reported that they had concerns about paying the required nonfederal cost-share. When managing disaster assistance grants as a direct recipient, a tribal government is solely responsible for the entire nonfederal cost share. On the other hand, if the tribe is a sub- recipient to a state request, the tribe may have a lighter financial burden since several states offer partial or full nonfederal cost share assistance to their local and tribal sub-recipients. For example, officials from one tribe said that there is a strong financial incentive to join a state’s request because the state reimburses the tribal government’s half of the cost share. In addition, some tribes may face financial hardship with the startup cost for recovery projects because PA and HMGP are reimbursement programs. For example, one tribal official said that it is especially difficult for small, rural, non-gaming tribes to find the financial capital to initiate recovery and hazard mitigation projects. While some tribes may have the money set aside for this purpose or may be able to secure loans to begin projects like the one illustrated in figure 5, other tribes are unable to start certain internal processes until the FEMA funds have been obligated. At a minimum, recipients have to present a scope of work before they can receive funds, the preparation of which usually requires the services of engineers or other technical experts. Therefore, the timeliness of the reimbursements, especially when the tribe is a sub- recipient under a state request, can result in financial challenges. For example, one tribal official we interviewed said that it takes much longer, on average, to request and receive reimbursement for recovery projects when the tribe has to submit the request through the state. Conversely, the official noted that reimbursement processes are typically much quicker when working directly with FEMA. During our site visit interviews, officials from one tribe told us that they prefer to make direct requests so they could receive HMGP funds to make decisions about the hazard mitigation projects on their reservation. Generally, as a direct recipient, a state or tribe will receive HMGP funding based on a percentage, usually 15 percent, of the total amount of PA and IA funds received for the disaster recovery. HMGP funds can be used for eligible hazard mitigation projects or to create or renew hazard mitigation plans. Under a state declaration, the state receives these funds and can, at its discretion, use them anywhere within its boundaries for eligible projects. According to officials from one tribe, they can ensure they receive the total amount of HMGP funds to use on hazard mitigation projects within their own jurisdiction when they are a direct recipient. Tribal officials’ confidence in the level of support they expected to receive from FEMA influenced their decision whether to make a direct request or to join a state. Specifically, in response to our survey, tribes that made direct requests largely reported that they believed FEMA’s policies and requirements would be clear enough for them to effectively navigate the processes and that timely and accurate information would be available. In contrast, multiple tribes that decided to join a state’s request reported that their concerns in those areas influenced their decisions to join a state’s request. Eight of the 10 tribes responding to our survey that requested a direct disaster declaration during the 2013 to 2016 period stated that the clarity of policy and guidance was a factor (five called it a major factor and three deemed it minor) in their decision making. Conversely, eight of the 13 tribes that only joined a state request reported that concern about FEMA’s policies and requirements being clear enough to seek a direct request was a factor in their decision to join a state request. During our site visit interviews, officials from 2 tribes discussed challenges they have experienced with FEMA’s policies and requirements for estimating IA-related damages. Applicants for IA, including owners and renters, must be able to prove they occupied the damaged dwelling, pre-disaster, as their primary residence before receiving assistance. However, according to tribal officials, many homeowners on reservations do not possess formal deeds to their home or do not carry insurance, making it difficult for FEMA to ensure that potential recipients of the IA funds meet the requirements of the program. According to FEMA officials, the agency has attempted to be flexible during the pilot phase of the tribal declarations program. For example, FEMA officials in one region told us that they would accept a tribal government’s declaration of home ownership in lieu of a formal deed. FEMA officials told us they will continue to evaluate how issues of homeownership will be adjudicated. In addition, during our site visit interviews, officials from 3 tribes discussed various types of difficulty with completing and maintaining the paperwork associated with recovery projects. For example, officials from a tribe stated that they are not equipped to manage and comply with processes such as permit requirements or federal procurement procedures and as a result are currently seeking to hire a full time emergency manager. Throughout the life of a major disaster declaration, tribal officials are required to maintain paperwork to document the recovery projects, which can require both physical and electronic recordkeeping systems, space, time, and expertise. For example, figure 6 below shows an example of the volume of paperwork needed to support and close out the recovery projects associated with a landslide in Washington State, according to the tribal and state officials involved. Nine of 10 tribes responding to our survey that were awarded a direct disaster declaration reported that a factor (six major and three minor) in their decision making was their determination that the availability of timely and accurate assistance from FEMA would help them successfully manage the request process. For tribes that only joined state requests, fewer tribes reported that concerns about receiving timely and accurate technical assistance affected their decisions than those that had concerns about the clarity of FEMA’s policy and guidance. Four of the 13 total tribes that only joined a state declaration cited concerns about having access to technical assistance as a factor (one called it a major and three deemed it minor). Damage Assessments After a disaster occurs, the first step in the declaration process is for the tribe to conduct an assessment of the impacts of the disaster to determine if there are needs that cannot be addressed with tribal resources or through insurance. Using this assessment—known as an initial damage assessment–-a tribal government can determine what, if any, needs or damages are eligible for FEMA disaster assistance. If a tribe determines that such needs or damages are beyond its capabilities to address with its own resources or insurance, the next step is to request a Joint Preliminary Damage Assessment (Joint PDA) from their FEMA Regional Administrator so that FEMA and the tribe can go through a process of reaching agreement about what damages and needs are eligible. According to FEMA officials, the agency has assigned staff as dedicated Regional Tribal Liaisons (RTL) in all FEMA regional offices. RTLs help tribes maintain awareness of various program requirements, including those for conducting damage assessments and submitting requests for major disaster declarations. RTLs accomplish this role by connecting tribes with FEMA subject matter experts, who help tribes navigate the major disaster declaration processes and programs. During our site visit interviews, officials from 5 tribes we interviewed discussed the importance of having a good working relationship with FEMA regional officials. Some of the steps FEMA has taken to provide technical assistance to tribes are discussed further below. Tribal officials’ confidence in the tribe’s capacity to manage the major disaster declaration process and subsequently administer the recovery without assistance from a state was a key factor in determining whether or not to seek a request directly or join a state request. Tribes, like states, have to carry out specific tasks and meet eligibility requirements to be able to make a direct request and manage the recovery processes for a major disaster declaration, as shown in figure 7. While states have had decades to develop the emergency management capacity needed to request and administer federal disaster assistance, tribes have had the opportunity to apply directly for federal disaster assistance since the passage of SRIA in 2013. Developing and maintaining such a capacity requires, among other things, having in- house knowledge or the ability to contract for (or otherwise access) specialized expertise to navigate through complex planning and processes. Multiple officials from tribes we interviewed and surveyed reported challenges building and maintaining emergency management capacity that affected their ability to make direct requests for, and manage the recovery effort associated with, a major disaster declaration. Specifically, 9 of 10 tribes responding to our survey that made a direct request said determining that their tribes had the emergency management capacity to successfully manage the major disaster declaration request process was a factor (6 identified it as minor, 3 as major). Conversely, 7 of the 13 tribes responding to our survey that only joined a state request said determining that they did not have the emergency management capacity to successfully manage the major disaster declaration request process was a factor in their decisions (4 identified as major, 3 as minor). As with the capacity to handle the declaration process, determining whether the tribe had the capacity to manage the recovery process, as illustrated in figure 7, also affected decision making. Officials from one tribe we interviewed who had not made direct requests told us that unless they have the emergency management capacity to manage both the request and the recovery process, they plan to continue joining states’ requests whenever possible. Tribal Hazard Mitigation Plan A Tribal Hazard Mitigation Plan describes sustained actions that may be taken by the tribal government to reduce or eliminate the long-term risk of future damage to human life and property from hazards. When making a direct request for a major disaster declaration, a tribal government must have a Federal Emergency Management Agency (FEMA)- approved Tribal Mitigation Plan that meets the requirements in 44 C.F.R. § 201.7 before receiving FEMA disaster assistance funds under certain programs. If electing to be a sub-recipient under a state’s major disaster declaration request, the tribal government may be eligible to receive disaster assistance funds through the state without having a Tribal Mitigation Plan. A tribal emergency management consultant who works with several tribes in one of the areas where we conducted site visits told us that the lack of a FEMA-approved tribal hazard mitigation plan limits the ability of many of these tribes to receive disaster funding. A hazard mitigation plan is required prior to a recipient being able to receive PA permanent work or HMGP. As of December 2017, 143 out of 567 tribes had a FEMA- approved Tribal Mitigation Plan, according to FEMA. In addition, the consultant reported that some tribes also lacked a designated emergency manager and hiring one may be unaffordable or in some cases, the applicants lack qualifications. For another tribe, the designated emergency manager had several job titles, including the tribe’s first responder and fire chief, which the official said makes it difficult to dedicate the time required to hone the skills necessary to manage the FEMA declaration processes. The official recounted an attempt to develop a hazard mitigation plan that at the time of our interview was still incomplete due, in part, to the complexity of the FEMA guidelines. In such cases, tribes may need to hire a specialist to assist with this administrative requirement, but may not have the budget to do so. Another challenge tribal officials identified is that tribes face barriers to accessing federal pre-disaster funding that could help them build capacity to manage post-disaster grants following a successful declaration request. During our site visit interviews, officials from two tribes told us they have considered seeking federal grant opportunities to help enhance emergency management capacity, but the eligibility requirements, such as the requirement to be near designated critical infrastructure or within 100 miles of the border, for the tribal homeland security grants program precluded them from applying. They also said that they have received few, if any, state homeland security grant funds from states. EMPG pays for salaries and is the primary source of support for developing and maintaining the requisite emergency management expertise. According to the FEMA and tribal officials we spoke with, as well as grant data provided by FEMA, tribes receive relatively low amounts of EMPG funding (see table 1 below) through the states. Tribes are not eligible to apply directly to FEMA for EMPG funds. In addition, according to tribal officials, when tribes apply to states for EMPG funds, the states can impose conditions that impinge on tribal sovereignty. For example, one state requires tribes to waive their legal immunity and agree to follow state laws, which some tribal officials viewed as contradictory to their sovereignty. As a result, these officials said they choose not to apply for these grants through the states and have never received EMPG funds. FEMA officials acknowledged that tribes face challenges getting federal grant funds to help them enhance their emergency management capacity. According to the officials there are statutory, policy, and budget considerations that limit their ability to make significant changes in the way such grant funds are distributed. However, they told us that they continue to work under their current authorities to assist tribes that seek to develop and maintain their emergency management capacity, primarily through training and technical assistance, as described later in this report. Since the passage of SRIA in 2013, FEMA has implemented various policies tailored to tribes that wish to make a direct request to the President, through FEMA, for federal disaster assistance. In December 2013, FEMA issued a policy regarding coordination with tribal governments. As part of this policy, FEMA committed to consulting tribal governments before taking proposed actions that would have a substantial direct effect on tribes. In addition, the policy recognized the tribes’ rights to self-governance and tribal sovereignty. Since 2013, according to FEMA officials, the agency has provided multiple opportunities through Federal Register notices and ongoing consultations for input into the development of the guidance that currently governs the tribal request process for major disaster declarations. Specifically, FEMA reported that it is implementing this authority in three phases: (1) use of existing regulations, (2) pilot period, and (3) rulemaking. During phase 1, from 2013-2016, FEMA processed tribal declaration requests using existing state declaration regulations in order to allow tribal governments the choice to use the new authority immediately and to provide time for consultation on drafts of the Tribal Declarations Pilot Guidance. In January 2016, FEMA published a draft of the Tribal Declarations Pilot Guidance and requested comments on the draft guidance through April 2016. Based on feedback received, FEMA issued a final version of the guidance, with which it will manage tribal declaration requests during the pilot phase, in January 2017. The publication of this guidance in January 2017 officially started phase 2, the pilot phase, of the tribal declarations implementation. FEMA officials told us that, before beginning the development of regulations on tribal disaster declarations, they intend to operate under the pilot guidance for at least 2 years. They noted that they cannot specify an exact date on which they expect to finalize the guidance because there is uncertainty about what kind of disasters will strike and where. According to officials, they have identified data they would like to collect to assess the guidance before finalizing it. Among other things, they said they plan to do economic analyses using quantitative data such as the types of disaster assistance requests from tribes (PA, IA, and HMGP) and the amount of funding allocated to tribes. In addition, these officials said they plan to conduct focus groups with tribal officials to learn more about how the disaster declaration policies and guidance have worked for tribal governments that used them. In the meantime, according to these officials, their aim is to be as flexible as possible while maintaining consistency with other relevant disaster regulations, so that they can respond to any unique challenges that arise in implementing this new authority. In addition to assessing how the pilot is working for tribes, FEMA has developed and implemented training to help tribes understand the disaster declaration process and provided technical assistance to tribes as needed, prior to, during, and after disasters. FEMA has offered training opportunities at the Emergency Management Institute in Emmitsburg, Maryland, and has hosted regional training workshops and consultations throughout the country. According to tribal officials, these training courses have helped increase tribes’ emergency management expertise. One of the offerings, Tribal Declarations Pilot Guidance, was a 1-hour briefing offered in multiple locations and provided to dozens of tribes and other government agencies. In addition, FEMA has RTLs in each regional office that are a primary point of contact for tribal governments that have questions or require technical assistance on FEMA programs. Officials from one tribe we visited told us they believe the technical assistance they received from a FEMA RTL was timely and thorough. These officials said the tribe contacted FEMA for assistance following the Tribal Council’s decision to declare a state of emergency on the reservation. According to the tribal officials, a fire had started on a Sunday and the FEMA team was on-site at the reservation by Wednesday to conduct a joint preliminary damage assessment with tribal officials. The officials also said they were impressed with FEMA’s quick response on the damage assessment results, which they received within a week. The tribe did not ultimately request a major disaster declaration because the damage assessment fell short of the minimum damage amount at that time. However, officials from the tribe said the experience they gained was helpful for the tribe’s emergency management staff and that they are now confident they will be able to conduct an initial damage assessment should a future disaster occur. We provided a draft of this report to the Department of Homeland Security and FEMA for review and comment. They provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. The objectives of this study were to examine (1) the factors that influence selected tribes’ decisions about how to seek federal assistance through a major disaster declaration and (2) the actions the Federal Emergency Management Agency (FEMA) is taking to assist tribal efforts to request and manage disaster declarations. To report on the factors that tribes consider when seeking federal disaster assistance, we reviewed FEMA’s pilot guidance for tribal disaster declarations that was published in January 2017 and discussed the program’s pilot plans with key agency officials. We also interviewed officials from two national tribal organizations (the National Congress of American Indians and the National Tribal Emergency Management Council) and FEMA to develop a preliminary list of potential factors that may influence a tribe’s decision to make a direct request or to join a state’s request as a sub-recipient. Using these factors, we developed a survey with both closed and open-ended questions. To minimize non- response error, we pre-tested the survey instrument with officials from two tribes in FEMA Regions VI and X (see figure 1) to ensure the questions were clear and unbiased and that the survey questions were culturally appropriate. We also consulted tribal officials during a FEMA training course and held additional interviews with officials from tribal organizations to ensure that the questions were clear, understandable, and appropriate. An independent reviewer within our agency also reviewed a draft of the survey prior to the pre-tests. We made appropriate revisions to the content and format of the questionnaire based on the pretests and independent review. We sent our survey to the 36 tribal governments that either (1) received declaration funds through a direct request, (2) received declaration funds as a sub-recipient of a state’s request, or (3) made a direct request that was denied between January 2013 and December 2016.The time period we chose coincides with the year SRIA was enacted to the most recent calendar year in which a full year of data on major disaster declarations was available when we began this work. Using e-mail addresses provided by FEMA Regional offices, we emailed the survey in an attached document that respondents could complete electronically or by hand and return via email or mail. We sent an invitation letter to the tribes on July 12, 2017, informing them of the purpose of the survey and the date it would be sent. We then sent the survey on July 18, 2017 and began soliciting survey responses from August 7, 2017 until January 12, 2018, by phone and email. We received completed surveys from 23 of the 36 tribes in the target population. We compared selected characteristics of the tribes responding to the survey with the same characteristics of the 36 tribes in the target population, as well as the completion of individual questions, and did not find a nonresponse bias. The final survey questionnaire is in appendix III. To complement the survey responses, we conducted site visits to 7 tribes selected from among the 23 tribes that responded to our survey. The objectives of these site visits were to obtain added information from the tribal officials regarding the factors influencing their disaster declaration decisions during this period. We also observed recent disaster damage; ongoing recovery projects; and aspects of each tribe’s emergency management capability. We selected these various sites so that, as a set, they included a mixture of tribes that had participated in direct declarations; in state declarations as a sub-recipient; participated in declarations that were granted and denied; and were located in different FEMA regions. The selected tribes are located in Arizona, New Mexico, Washington, and Idaho, representing FEMA Regions VI, VIII, IX, and X. During our site visits, we interviewed tribal executives and emergency management officials and toured completed projects. Although the information gathered from our survey and site visits cannot be generalized across the tribes, our observations and the tribal officials’ responses underscored the uniqueness of each tribe and each disaster, as well as offering important details regarding the opportunities and challenges for tribes under this new authority. To report on related FEMA grant funds obligated from 2013 through 2016, we collected data regarding the Homeland Security Grant Program, Tribal Homeland Security Grant Program, Emergency Management Performance Grant, and the Pre Disaster Mitigation grant data from FEMA Grants Program Division officials. We selected these programs because they provide pre-disaster grant funds to states and tribes that are, in part, intended to enhance grantees emergency management capacity. To assess the reliability of these data, we performed electronic data testing for obvious errors in accuracy and completeness, and interviewed agency officials knowledgeable about the collection and processing of these data. We determined these data to be sufficiently reliable for the purposes of reporting FEMA’s awards of these grant funds. To address the second objective, we reviewed federal documentation— such as FEMA’s Tribal Declarations Pilot Guidance, federal regulations and statutes governing the major disaster declaration process to see what actions FEMA has taken specifically related to tribe’s requesting and managing major disaster declarations. We also reviewed disaster-related documentation provided by tribal governments and available on-line, including correspondence between tribes and FEMA, testimony statements, and additional documents that provided details of tribes’ experiences requesting and managing major disaster declarations. In addition, we interviewed officials from the two aforementioned national tribal organizations to discuss any successes or challenges they were familiar with related to the new authority that allows tribes to request a major disaster declaration directly from the President of the United States. During our interviews with tribal organizations and tribal officials, we examined challenges related to implementing the new authority and carrying out the various requirements associated with requesting and managing a major disaster declaration. We also interviewed FEMA officials about the actions they had taken to help tribes make informed decisions about whether they would prefer to exercise the new authority. In addition, we interviewed FEMA officials about how they assisted tribes that were considering whether to exercise the new authority and how to do so, if desired, as well as what, if any, steps they had taken to address the challenges identified by tribes. For example, we discussed what actions FEMA has taken to assess the pilot program, offer training opportunities, and provide technical assistance to tribes that seek to enhance their emergency management capacity. We also attended a tribal emergency management conference in June 2017, attended a FEMA tribal emergency management training session in person in March 2017, and attended two FEMA-sponsored webinars designed specifically for tribal participants. We conducted this performance audit from October 2016 through May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. State Homeland Security Program (SHSP) provides funding to support states’ implementation of homeland security strategies to address the identified planning, organization, equipment, training, and exercise needs at the state and local levels to prevent, protect against, respond to, and recover from acts of terrorism and other catastrophic events. Tribal Homeland Security Grant Program (THSGP) provides funding to eligible tribes to strengthen their capacity to prevent, protect against, mitigate, respond to, and recover from potential terrorist attacks and other hazards. Emergency Management Performance Grant (EMPG) program provides funding to assist local, tribal, territorial, and state governments in enhancing and sustaining all-hazards emergency management capabilities. Pre-Disaster Mitigation (PDM) grant program provides funds to communities for hazard mitigation planning and the implementation of mitigation projects prior to a disaster event. Funding these plans and projects reduces overall risks to life and property and the future cost of recovering from a disaster event. The goal of the program is to reduce overall risk to the population and structures, while at the same time also reducing reliance on Federal funding from actual disaster declarations. Individual Assistance (IA) provides financial assistance to individuals. Public Assistance (PA) provides financial assistance to jurisdictions for debris removal, emergency protective measures, and the restoration of disaster-damaged, publicly-owned facilities and the facilities of certain private nonprofit organizations, such as utilities. Hazard Mitigation Grant Program (HMGP) provides additional funds to assist communities in implementing long-term measures to help reduce the potential risk of future damages to facilities. In addition to the contact named above, Kathryn Godfrey (Assistant Director), R. Denton Herring (Analyst-In-Charge), Pat Donahue, Dainia Lawes, and Claudia Rodriguez made key contributions to this report. In addition, Eric Hauswirth, Susan Hsu, Tracey King, Gary Malavenda, Jeff Malcolm, and Heidi Nielson also provided assistance.", "summary": "Since the Sandy Recovery Improvement Act (SRIA) of 2013, federally recognized Indian tribes affected by major disasters have had the option to make disaster declaration requests directly to the President of the United States or join a state's request for federal disaster assistance. Prior to this, tribes had to receive assistance through a state. GAO was asked to assess the implementation of this new authority. This report addresses (1) the factors that influenced selected tribes' decisions about how to seek federal disaster assistance, and (2) the actions FEMA has taken to help tribes exercise the new authority. GAO analyzed FEMA's pilot guidance for tribal declarations and interviewed FEMA and tribal emergency management experts. GAO also surveyed the 36 tribes who made requests for disaster assistance in fiscal years 2013-2016 about the factors that influenced their decision making. Twenty three tribes responded. GAO visited seven tribes selected from among the survey respondents to represent different FEMA regions and disaster types. The site visits cannot be generalized but provided valuable insights into the opportunities and challenges of exercising this new authority. According to tribal officials GAO surveyed and interviewed, there are several factors they considered when deciding whether to make a direct request or to join a state's request for a major disaster declaration. Key factors that tribes reported considering were the (1) importance of tribal sovereignty, (2) financial matters such as the timeliness with which they receive funds, (3) the level of support they anticipated receiving from the Federal Emergency Management Agency (FEMA), and (4) their own emergency management capacity. For example, survey results showed that tribal officials' confidence in their capacity to manage the declaration was a key factor in determining whether to make a request directly. Specifically, various elements of emergency management capacity, as illustrated below, could affect tribes' ability to manage a declaration. FEMA has developed pilot guidance for tribal declarations and solicited comments from tribes, as part of its effort to consider the needs of tribes and develop regulations. According to FEMA officials, they are currently assessing the effectiveness of policies and procedures based on data collected from tribal declarations since the passage of SRIA. These officials said they intend to begin the rulemaking process as soon as 2 years into the pilot, but may delay if they cannot collect enough data about different disaster situations during that time to conduct a complete analysis. Until the regulations are final, officials say they will exercise flexibility whenever possible. In addition, the agency offers training on the tribal declaration process and has dedicated staff who act as primary points of contact for tribal governments that require technical assistance. GAO is not making any recommendations in this report.", "document_type": "gao"}
{"report": "Over 4 million people in the United States identified as Native American based on 2016 United States Census estimates, of which 29 percent were youth. As of June 2018, there were 573 federally recognized Indian tribes. According to BIA, as of June 2018, there were approximately 497 Indian land areas in the United States administered as federal Indian reservations or other tribal lands (e.g., pueblos, villages, and communities). These land areas, which span more than 56 million acres and 37 states, and vary in size, can generally be referred to as Indian country. Indian country is in remote, rural locations, and also near urban areas. Native Americans live both inside and outside of these land areas, and Indian country may have a mixture of Native American and non- Native American residents. Jurisdiction over crime in Indian country differs according to several factors and affects how Native American youth become involved with justice systems, as discussed further below. Youth who commit offenses can enter one or more justice systems at the state and local, federal, and tribal levels. Although state and local, federal, and tribal justice systems have unique characteristics, they all generally proceed through certain phases, including arrest, prosecution and adjudication, and in some instances, placement and confinement in a detention facility. State and local. State and local justice systems have specific courts– often at the county or city level–with jurisdiction over youth alleged to have committed an act of juvenile delinquency or a crime. This jurisdiction can be conferred by the state’s laws and exercised by courts at the city, county, or municipal levels, and each state and local entity’s processing of youth is unique. There are more than 2,400 courts across the country with juvenile jurisdiction, and a majority of these are at the city, county, or municipal, i.e., local, level. Generally, a youth is either referred to juvenile court or released. Juvenile courts handle two types of petitions: delinquency or waiver. A delinquency petition is the official charging document filed in juvenile court by the state. A juvenile’s case may be dismissed, handled informally (without filing a petition for adjudication), or handled through adjudication by the court. In some more serious situations, the case can be handled by a criminal court. Juvenile cases that are handled informally or through adjudication can result in various outcomes, including probation, commitment to an institution or other residential facility, another sanction (e.g., community service), or dismissal. Federal. Unlike state systems, the federal justice system does not have a separate court with jurisdiction over juvenile cases. Youth that are proceeded against in federal court are generally adjudicated in a closed hearing before a U.S. district or magistrate judge and their cases are either declined or they can be adjudicated delinquent. Delinquent adjudications can result in outcomes such as probation, commitment to a correctional facility, or the requirement to pay restitution. Youth under the age of 18 who are confined in federal facilities, including Native American youth, are housed in juvenile facilities overseen by the Federal Bureau of Prisons (BOP), which contracts with other entities to manage those facilities. Tribal. Tribal justice systems vary. A number of tribes have tribal judicial systems, some with separate juvenile courts, and others rely on state courts or the federal system. As of April 2018, there were approximately 89 adult and juvenile jail facilities and detention centers in Indian country, according to BIA officials. In addition, DOI’s BIA directly manages some facilities, called juvenile detention centers, on tribal lands. Outside Indian country. A state generally has jurisdiction to proceed against a youth who has committed a crime or act of juvenile delinquency outside of Indian country. This jurisdiction is generally exercised in each state by local courts (e.g., at the county and city levels). Federal law limits federal jurisdiction over youth if a state has jurisdiction over the youth and has a system of programs and services adequate for their needs. Since the passage of the Juvenile Justice and Delinquency Prevention Act in 1974, federal law has reflected an intent to support state and local community-level programs for the prevention and treatment of juvenile delinquency, and to avoid referral of juvenile cases out of the state and local systems while balancing against the need to protect the public from violent offenders. Consistent with this, the Federal Juvenile Delinquency Code provides that a youth alleged to have committed an act of juvenile delinquency, with certain exceptions, will not fall under federal jurisdiction unless (1) the juvenile court or other appropriate court of a state does not have jurisdiction over the youth, (2) the state does not have available programs and services adequate for the needs of the youth, or (3) the offense charged is a violent felony or an enumerated offense involving controlled substances and there is a substantial federal interest in the case or the offense to warrant the exercise of federal jurisdiction. Inside Indian country. For both youth and adults, the exercise of criminal jurisdiction in Indian country depends on several factors. These factors include the nature of the crime, the status of the alleged offender and victim—that is, whether they are Indian or not—and whether jurisdiction has been conferred on a particular entity by statute. Additionally, the Federal Juvenile Delinquency Code generally applies to all juveniles alleged to have committed an act of juvenile delinquency, whether inside or outside Indian country. As a general principle, the federal government recognizes Indian tribes as “distinct, independent political communities” that possess powers of self-government to regulate their “internal and social relations,” which includes enacting substantive law over internal matters and enforcing that law in their own forums. The federal government, however, has authority to regulate or modify the powers of self-government that tribes otherwise possess, and has exercised this authority to establish jurisdiction over certain crimes in Indian country. For example, the Major Crimes Act, as amended, provides the federal government with criminal jurisdiction over Indians in Indian Country charged with serious, felony-level offenses enumerated in the statute, such as murder, manslaughter, kidnapping, burglary, and robbery. The General Crimes Act, the Major Crimes Act, and Public Law 280, which are broadly summarized in table 1, are the three federal laws central to the exercise of criminal jurisdiction in Indian country. The exercise of criminal jurisdiction by state governments in Indian country is generally limited to two instances: when both the alleged offender and victim are non-Indian, or when a federal statute confers, or authorizes, a state to assume criminal jurisdiction over Indians in Indian country. Otherwise, only the federal and tribal governments have jurisdiction in Indian country. Table 2 summarizes aspects of federal, state, and tribal jurisdiction over crimes committed in Indian country. Federal agencies that come into contact with youth alleged to have committed an act of juvenile delinquency are to do so in accordance with the Federal Juvenile Delinquency Code. When a youth enters the federal justice system, several components within DOJ and DOI, among others, have responsibility for investigating and prosecuting his or her crimes. DOJ’s Federal Bureau of Investigation (FBI) has investigative responsibilities, including in Indian country, where it works with tribes to investigate crime. The FBI refers criminal investigations to a United States Attorney’s Office for prosecution. In the course of the federal criminal justice process, a U.S. attorney is involved in the process of investigating, charging, and prosecuting an offender, among other responsibilities. Under the direction of the Attorney General, the United States Attorney’s Office may prosecute crimes committed in Indian country where federal jurisdiction exists, as discussed above. DOJ’s U.S. Marshals Service (USMS) also has a role in the federal criminal justice process. Its mission areas include fugitive apprehension and federal prisoner security and transportation, among other responsibilities. USMS has arrest jurisdiction for enforcing the federal process anywhere in the United States, including Indian country. DOJ’s BOP is responsible for the custody and care of federal inmates and offenders, including youth. BOP works in coordination with the federal courts to assist in locating a detention facility within the youth’s jurisdiction, where possible. Figure 1 describes the key DOJ entities and their respective responsibilities related to the federal criminal justice process. Within DOI, BIA is statutorily responsible for enforcing not only federal law in Indian country but also tribal law, with the consent of the tribe. However, in certain situations, a tribe may assume this function from DOI pursuant to a self-determination contract or self-governance compact. BIA supports tribes in their efforts to ensure public safety and administer justice within Indian country through, for example, providing uniformed police and criminal investigative services for a number of tribes. Other agencies and departments with roles in the federal criminal justice process for youth include federal courts, the Administrative Office of the U.S. Courts, and the U.S. Sentencing Commission. Federal courts have the authority to decide cases and sentence offenders, among other things. The Administrative Office of the U.S. Courts provides a broad range of support services to the federal courts, which are responsible for adjudicating the cases of youth in the federal justice system. The U.S. Sentencing Commission is an independent judicial branch agency responsible for, among other things, collection, preparation, and dissemination of information on sentences imposed across federal courts. There is no single, centralized data source that contains data for youth involved in all justice systems and across all phases of the justice process. Rather, there are several disparate data sources at each level (federal, state and local, or tribal) and phase (arrest, prosecution, and confinement). Further, while some agencies, such as USMS and BOP, share a unique identifier for an individual within the federal data sources, there is no unique identifier across all federal and state and local data sources. For purposes of this review, and given privacy concerns related to juvenile data, we were unable to track individuals across all phases of the federal justice system or identify the number of unique youth who came into contact with federal, state and local, or tribal justice systems. In addition to there being no single database that houses all relevant data on youth in the tribal, state and local, and federal justice systems, each database also varies in how it defines Native American, as well as how it determines whether youth are Native American for purposes of the data source. For example, some agencies define Native American broadly, as an individual having origins in any of the indigenous peoples of North America, including Alaska Natives. In contrast, DOJ’s Executive Office for United States Attorneys (EOUSA), in its prosecution data, defines the term Indian based on statute and case law, which generally considers an Indian to have both a significant degree of Indian blood and a connection to a federally recognized tribe. In addition, BOP determines that a youth is Native American for purposes of its data by reviewing documentation including charging documents, while USMS relies on individuals self- reporting their race upon being taken into custody. See appendix II for additional information and descriptions of these differences. Federal departments and agencies, including DOJ and HHS, provide funding through several types of mechanisms for Native American populations and tribal lands, including mandatory grant programs, compacts and contracts, discretionary grants, and cooperative agreements. As discussed above, our analysis focused on discretionary grants and cooperative agreements. Discretionary grants are competitive in nature, whereby the granting agency has discretion to choose one applicant over another. DOJ’s Office of Justice Programs (OJP) awards discretionary grants to states, tribal organizations, territories, localities, and organizations to address a variety of issues, including to help prevent and reduce juvenile delinquency and victimization and improve their youth justice systems. DOJ also provides grant funding for training and technical assistance to enhance and support tribal governments’ efforts to reduce crime and improve the function of criminal justice in Indian country. Cooperative agreements are similar to discretionary grants in that federal agencies generally award them to grantees based on merit and eligibility. However, in contrast to a discretionary grant, federal agencies generally use cooperative agreements when they anticipate that there will be substantial federal, programmatic involvement with the recipient during the performance of the financially-assisted activities, such as agency collaboration or participation in program activities. Two reports focused on Native American youth exposure to violence and ways to address and mitigate the negative impact of this exposure when it occurs, as well as ways to develop knowledge and spread awareness about children’s exposure to violence. In addition, both reports discussed factors that indicate Native American youth are uniquely positioned in regards to their contact with the justice systems, and included recommendations specific to Native American youth interaction with justice systems at the federal, state, and tribal levels. Appendix III describes actions agencies reported taking related to selected recommendations from these reports. From 2010 through 2016, the number of Native American youth involved with state and local and federal justice systems declined, according to our analysis of available data. This decline occurred across all phases of the justice process: arrest, adjudication, and confinement in facilities. The involvement of these Native American youth in the state and local and federal justice systems was also concentrated in certain geographic areas. Further, the vast majority of these Native American youth came into contact with state and local justice systems, not the federal system. Analysis of available data also indicates that the percent of Native American youth involved in the federal justice system during the period reviewed was greater than their representation in the nationwide youth population. In contrast, the percent of Native American youth involved in most state and local justice systems was similar to their representation in youth populations in those states. Moreover, the involvement of Native American and non-Native American youth in the federal justice system showed several differences (in types of offenses, for example), while their involvement in state and local justice systems showed several similarities. DOJ officials and representatives of Native American organizations we interviewed attributed the greater percent of Native American youth involved in the federal justice system and the differences shown by our analysis to federal government jurisdiction over crimes in Indian country, as well as the absence of general federal government jurisdiction over non-Native American youth. The number of Native American youth involved with state and local and federal justice systems declined from 2010 through 2016 across all phases of the justice process—arrest, adjudication, and confinement in facilities, according to our analysis of available data. The majority of Native American youth involved with state and local justice systems were located in 11 of the 50 states, and all Native American youth involved with the federal justice system were located in 5 of the 12 federal circuits. Further, most Native American youth were involved in state and local justice systems rather than in the federal system. Comprehensive data from tribal justice systems on the involvement of Native American youth were not available. However, we identified and reviewed a few data sources that provided certain insights about the arrest, adjudication, and confinement of Native American youth by tribal justice systems. See appendix IV for a summary of our analysis of data from these sources. State and local and federal. Analysis of available data indicates that from calendar years 2010 through 2016, there were 105,487 arrests of Native American youth by state and local law enforcement agencies (LEAs), and over this period, arrests generally declined by 40 percent. As shown in table 3, arrests declined from 18,295 in 2010 to 11,002 in 2016. During the same period, there were 246 federal custodies of Native American youth due to arrest by federal LEAs; the number of federal custodies also generally declined during the period—from 60 in 2010 to 20 in 2016. According to available data, the majority (about 75 percent) of Native American youth arrested by state and local LEAs from calendar years 2010 through 2016 were located in 10 states: Alaska, Arizona, Minnesota, Montana, New Mexico, North Dakota, Oklahoma, South Dakota, Washington, and Wisconsin. All of these ten states had a higher than average percentage of Native Americans among the states’ overall youth populations, according to 2016 U.S. Census estimates we reviewed. For example, of all the states Alaska had the largest percentage of Native Americans among its youth population, at 19 percent in 2016. In contrast, the percent of Native American youth in the youth population in many (26) states was less than 1 percent. In 2016, the largest number of arrests by state and local LEAs occurred in Arizona and South Dakota, as shown in figure 2. All Native American youth in federal custody with USMS due to a federal LEA arrest from fiscal years 2010 through 2016 were located in 4 of the 12 federal circuits—the 2nd, 8th, 9th, and 10th circuits (see figure 3), according to our analysis of available data. These four circuits include 25 states. State and local. Available data show that from calendar year 2010 through calendar year 2014, state and local courts processed fewer cases involving Native American youth. For example, during the period, state and local courts received about 86,400 delinquency cases involving Native American youth, and the number of cases declined by about 19 percent from 19,200 in 2010 to 15,600 in 2014, as shown in table 4. The number of cases petitioned, or requested that a court adjudicate, and the number of cases adjudicated delinquent also declined, by about 20 percent and 26 percent, respectively. Among delinquency cases received during the period, state and local courts petitioned about half (49,000 cases, or 57 percent). Among all petitioned cases, about two-thirds (32,900 cases, or 67 percent) were adjudicated delinquent. Among youth found delinquent during the period, more than half—65 percent (21,300)—received probation, 24 percent (7,800) were placed in an institution or other residential facility, and 12 percent (3,800) received some other sanction, such as community service. Federal. Available data show that federal courts received 349 Native American youth suspects from fiscal years 2010 through 2014 (see table 4, above), and the annual number fluctuated over the period but declined slightly overall (59 in 2010 compared to 57 in 2014). Of the suspects received, federal courts declined to adjudicate 138 and adjudicated 167 youth as delinquent or guilty. The number of delinquent or guilty outcomes declined overall from 37 in 2010 to 20 in 2014. According to analysis of available data, all Native American youth referred to a United States Attorney from fiscal years 2010 through 2014 were located in 4 of the 12 federal circuits—the 6th, 8th, 9th, and 10th circuits, as shown in figure 4. These four circuits include 26 states. Annually, the number of referrals to each circuit was similar throughout the period. State and local. The number of Native American youth confined in state and local residential facilities declined by about 37 percent between 2011 and 2015, from at least 861 in 2011 to at least 544 in 2015, according to our analysis of data from the biennial Census of Juveniles in Residential Placement survey. The majority of Native American youth (approximately 65 percent) were confined in 9 states when the biennial survey was taken in 2011, 2013, and 2015. Generally, these states included Alaska, Arizona, Minnesota, Montana, North Dakota, Oklahoma, Oregon, South Dakota, and Washington (see figure 5 for 2015 census results). All of these states had a higher than average percentage of Native Americans among the states’ overall youth population in 2015. Federal. From fiscal years 2010 through 2016, a total of 138 Native American youth who had been sentenced were admitted to juvenile facilities overseen by BOP; this number declined over the period from 37 in 2010 to 6 in 2016, according to our analysis of available data. Court proceedings for these individuals had been finalized and the individuals were sentenced to a juvenile facility overseen by BOP. DOJ officials and representatives from five Native American organizations we interviewed provided various perspectives on the decline and geographic distribution of Native American youth in justice systems that our analysis showed. Specifically, DOJ officials noted that the number of youth involved in state and local, federal, and tribal systems has been declining for several years across all races, not just Native American youth. However, when asked about this decline, representatives from three of the five Native American organizations we interviewed stated that data on the number of Native American youth in justice systems, especially at the state level, is underreported and often inconsistent. Representatives from two of those organizations noted that when a youth comes into contact with state juvenile justice systems, states are not required to ask about Native American status, which results in inconsistent tracking and underreporting of Native American youth involved with state systems. Representatives from one of these organizations, which provides assistance in national policy areas, noted that states are not required to contact a youth’s identified tribe to confirm the youth’s tribal affiliation. These representatives also noted that some states may inquire about tribal affiliation when youth come into contact with the state’s justice system, but the states do not have a reliable process to identify Native American youth. In addition, these same representatives noted that Native American youth are often unlikely to share their ethnicity with state officials, or anyone outside of their community. Representatives from another organization noted that state court judges are not required to ask about Native American status, which could also potentially result in undercounting of Native American youth in state systems. Representatives from another organization which commented on the decline stated that because state and federal data only capture more serious offenses, lesser crimes handled at the tribal level often go unreported. Representatives from two of the organizations we interviewed did not question the decline in the number of Native American youth involved in federal and state and local systems, but noted that there has been a movement away from criminalizing youth in general. Rather, these representatives explained that there is more of a focus on restorative justice, diversion, and alternatives to incarceration, as well as a movement toward more trauma-informed care. Representatives from one of these two organizations noted that a number of states have worked out civil diversion agreements with local tribes, which provide opportunities for the tribe to practice restorative justice with delinquent youth instead of confining them. Regarding the distribution of Native American youth by state, representatives from four of the five organizations we interviewed noted that the number of youth involved with state justice systems is higher in those states with a larger Native American population, and thus were not surprised by the states our analysis showed to have the highest numbers of Native American youth involved in their state and local justice systems. These representatives also provided additional perspectives on why some states might have higher numbers of youth involved with their justice systems. For example, representatives from one organization noted that in certain states, not all tribes have tribal law enforcement, which could potentially lead to higher state involvement in Native American juvenile cases that might otherwise be handled by tribes. Representatives from another organization noted that some states have a reputation for more aggressively adjudicating delinquent Native American youth. The percentage of youth who were Native American among those involved with the federal justice system from 2010 through 2016 was greater than the percent of Native American youth in the nationwide youth population, according to analysis of available data. In contrast, state-by- state analysis showed that the percent of youth who were Native American among those involved with state and local justice systems during the period was similar to many states’ Native American youth population. Federal justice system. The percent of youth arrested, referred for adjudication, and confined at the federal level from 2010 through 2016 who were Native American (13 to 19 percent) was greater than the percent of Native Americans in the nationwide youth population during the same period (1.6 percent). For example, the percent of youth in USMS custody and arrested by federal LEAs during the period who were Native American was 18 percent (246 Native American youth out of 1,358 total youth arrested from fiscal years 2010 through 2016), as shown in table 5. According to DOJ officials, the federal juvenile population of Native Americans has historically been higher than their representation in the nationwide population due to federal government jurisdiction over certain crimes in Indian country, which requires the federal government to prosecute offenses that would commonly be prosecuted by states if committed outside of Indian country. According to DOJ officials, a small handful of federal criminal statutes apply to all juveniles, such as immigration and drug statutes, but the federal government has been granted greater jurisdiction over Native American youth than non-Native American youth by federal laws that apply to crimes committed in Indian Country, such as the Major Crimes Act. For example, one DOJ official noted that the Major Crimes Act gives the federal government exclusive jurisdiction over crimes such as burglary and sex offenses committed in Indian country. This differs from the treatment of non-Native American youth, who are not prosecuted in the federal system for the same types of offenses, because the federal government does not have jurisdiction over those youth for such offenses. Non-Native American youth are instead subject to the general juvenile delinquency jurisdiction of state and local courts. Further, DOJ officials stated that a significant portion of Indian country is in states where Public Law 280 does not apply, and thus the federal government generally has criminal jurisdiction for major crimes in Indian Country. Additionally, DOJ officials stated that tribal justice systems are often underfunded and do not have the capacity to handle Native American youths’ cases. Therefore, when both federal and tribal justice systems have jurisdiction, they said that the federal system may be the only system in which the youth’s case may be adjudicated. For these reasons, the number of Native American youth offenders in the federal justice system is disproportionate to non-Native American juveniles in accordance with population size, according to DOJ officials. State and local justice systems. State-by-state analysis of arrest data showed some variation in the percentage of Native Americans among youth arrested by state and local LEAs from calendar years 2010 through 2016. For example, as figure 6 illustrates, in most states, the percentage of youth arrested by state and local LEAs in 2016 who were Native American was similar to the percent of Native American youth in the states’ population. However, in four states—Alaska, Montana, North Dakota, and South Dakota—the percentage of Native Americans among the youth arrested by state and local LEAs was at least 5 percentage points higher. In two states—New Mexico and Oklahoma—it was at least 4 percentage points lower. State-by-state analysis of state and local confinement data for 2015 showed a similar pattern. As figure 7 illustrates, in most states, the percent of youth confined at state and local facilities in 2015 who were Native American was similar to the percent of Native American youth in the states’ population. However, six states—Alaska, Minnesota, Montana, North Dakota, South Dakota, and Wyoming—the percentage of Native Americans among the youth confined in state and local facilities was at least 5 percentage points higher. In one state—New Mexico—it was 11 percentage points lower. Agency and organization perspectives. According to DOJ officials, as noted above, federal jurisdiction over crimes in Indian country results in a higher percentage of Native American youth (compared to non-Native American youth) involved with the federal justice system. In addition, a DOJ official noted that that certain states may have a higher percentage of Native Americans among youth confined in that state’s facilities if those Native American youth reside more in urban or other areas that are not Indian country, and are thus more likely subject to state and local jurisdiction. Conversely, the official said that for those states with lower Native American youth confined in state facilities compared to the Native American youth population in the state overall, the youth may reside more in Indian country, resulting in their contact with the federal judicial system more than the state or local justice systems. Representatives from four of the five Native American organizations we interviewed noted that federal jurisdiction is a key contributor to the higher percentage of Native American youth involved at the federal justice level. Although the involvement of youth in the federal justice systems declined for both Native Americans and non-Native Americans from 2010 through 2016, analysis of available data indicates that there were several differences between the two groups in characteristics such as types of offenses charged. According to DOJ officials, some of these differences were due to federal jurisdiction over Indians for major crimes (such as person offenses) in Indian country as well as the absence of general federal government jurisdiction over non-Native American youth. Available data indicate that the involvement of youth in the different stages of the federal justice system declined for both Native Americans and non-Native Americans from fiscal years 2010 through 2016. For example, federal custodies due to arrests by federal LEAs declined for both groups, as shown in table 6; the number of suspects referred to federal courts declined for both groups (table 7); and BOP confinements declined for both groups (table 8). Native American and non-Native American youth were involved with the federal justice system for different offenses from fiscal years 2010 through 2016. We analyzed the types of offenses for all youth and grouped them into five broad categories—drug and alcohol, person, property, public order, and other. Analysis of available data indicates that the majority of Native American youth were involved with the federal justice system for offenses against a person. In contrast, the majority of involvement of non-Native American youth was due to public order or drug and alcohol offenses. Arrests. As figure 8 illustrates, out of the broad offense categories, 49 percent of Native American youth were arrested by a federal LEA and in USMS custody due to an offense against a person. In contrast, 5 percent of non-Native American youth were arrested by a federal LEA for person offenses during the period. Instead, most non-Native American youth were arrested by a federal LEA for public order or drug and alcohol offenses (70 percent total for both). The top two specific offenses among Native American youth were assault and sex offenses; the top two specific offenses among non-Native Americans were drug-related and immigration violations, according to analysis of available data. Federal data include youth in USMS custody after a federal arrest but may not capture all arrests by federal law enforcement agencies. USMS uses the race category “American Indian or Alaskan Native” and includes persons having origins in any of the indigenous peoples of North America, including Alaskan Natives. According to USMS officials, race is self- reported by the individual at the time of the custody intake. Non-Native American categories in USMS data are Asian, Black, and White. Referrals for adjudication. As figure 9 illustrates, most Native American youth referred to federal courts were referred for the broad category of offenses against a person (67 percent). However, most non-Native American youth were referred to federal courts for the broad categories of public order offenses or drug and alcohol offenses (44 and 31 percent, respectively). Among Native American youth, the top two specific offenses were sex offenses and assault. Among non-Native Americans, the top two specific offenses were drug-related and immigration violations. EOUSA defines the term Indian based on statute and case law, which generally considers an Indian to have both a significant degree of Indian blood and a connection to a federally recognized tribe. According to EOUSA officials, race is identified by the U.S. Attorney when reviewing documentation associated with the individual, such as tribal enrollment certifications. Confinement. As figure 10 illustrates, out of the five broad offense categories, 67 percent of Native American youth were sentenced and confined by the federal justice system from fiscal years 2010 through 2016 for an offense against a person; most non-Native American youth were confined by the federal justice system for drug and alcohol offenses (about 39 percent) or public order offenses (also 30 percent). The top two specific offenses among Native American youth were sex offenses and assault. The top two specific offenses among non-Native American youth were for drug-related and immigration violations. Agency and organization perspectives on variations in offenses. According to DOJ officials, the reason most Native American youth were arrested, adjudicated, and confined for person offenses was due to federal jurisdiction over Indians for major crimes (such as person offenses like burglary and sex offenses) in Indian country. Specifically, officials noted that Native American youth are arrested and confined in the federal system for more serious offenses because the Major Crimes Act confers jurisdiction on the federal government for person offenses. In contrast, agency officials also noted that the federal government does not have jurisdiction over the same types of offenses committed by non-Indian youth and therefore those youth cannot be arrested by federal agencies for person offenses. Rather, according to one DOJ official, the federal government only has general jurisdiction applying to both Native American and non-Native American youth in limited instances, such as for certain immigration and drug offenses. The jurisdictional structure present in Indian country requires the federal government to prosecute offenses that would otherwise be handled in state court outside of Indian country, according to DOJ officials. Representatives from all of the five Native American organizations we interviewed noted, similarly to DOJ officials, that federal jurisdiction over crimes in Indian country is typically for more serious offenses (specifically under the Major Crimes Act), such as person offenses. In contrast, as noted by one organization, youth engaged in property and substance abuse offenses are more typically brought into state custody. Two of the organizations’ representatives we met with noted in addition that alcohol abuse plays a role in person offenses, often co-occurring with these offenses. The distribution of outcomes among youth who were referred to federal prosecutors for adjudication in federal courts between fiscal years 2010 and 2016 was different for Native American and non-Native American youth. For example, as figure 11 shows, a larger percentage of referrals for adjudication involving Native American youth were declined by federal prosecutors compared to non-Native American cases—36 percent among Native American youth compared to 12 percent among non-Native American. Further, a smaller percentage of Native American than non- Native American referrals resulted in delinquent or guilty outcomes—42 percent among Native American youth compared to 63 percent among non-Native American. Length of sentence. Native American youth who were sentenced and confined by the federal justice system—in BOP’s custody—had longer sentences compared to non-Native American youth from fiscal years 2010 through 2016, according to analysis of available data. About half (52 percent) of the Native American youth confined during the period were sentenced for 13 to 36 months. Most non-Native American youth (62 percent) had shorter sentences of up to 12 months. According to DOJ officials, Native American youth had longer sentences due to federal government jurisdiction over major crimes in Indian country. As a result of its jurisdiction, officials said that the federal government arrests and incarcerates Native American youth for more serious crimes, such as sex offenses, which carry longer sentences. In contrast, non-Native American youth served sentences for crimes which carried shorter sentences, such as immigration and drug offenses, as noted above. The difference in sentence length may also be attributed to a number of additional variables that can affect the length of sentence, such as prior delinquent or criminal history and the nature and circumstances of the offense. Distance from residence. Among youth admitted and confined in the federal justice system from fiscal years 2010 through 2016, data show that Native American youth were in facilities closer to their residences or homes compared to non-Native American youth (see table 9). For example, on average, Native American youth who were under the supervision of the United States Probation Office were 296 miles closer to their residence or home compared to non-Native Americans. In addition, on average, Native American youth who were in BOP’s custody were 175 miles closer to their residence compared to non-Native Americans. Further, among both groups and on average, youth under the supervision of the United States Probation Office were closer to their residence or home compared to youth who were in BOP’s custody. Age category and gender of youth involved in the federal justice system from fiscal years 2010 through 2016 were similar among Native American and non-Native American youth. Specifically: Most youth arrested by federal LEAs and in USMS custody were male (89 and 91 percent, respectively) and 15 to 17 years old (86 and 92 percent, respectively). Most youth who came into contact with federal courts were 15 to 17 years old (80 and 88 percent, respectively). Most youth confined at federal facilities were male (89 and 96 percent, respectively) and 15 to 17 years old (93 and 99 percent, respectively). Analysis of available data indicates that there were several similarities between Native American and non-Native American youth involvement with state and local justice systems over the period analyzed. The involvement of both Native American and non-Native American youth in state and local justice systems declined for arrests, referrals for adjudication, and confinements in recent years (see tables 10 through 12). However, the extent of the decline varied between the two groups. For example, as the tables show, the declines in arrests and referrals for adjudication were greater for Native American youth, while the decline in confinements was greater for non-Native American youth. The distribution of offenses for youth involved in state and local justice systems in recent years was similar among Native American and non- Native American youth. As noted above, we analyzed the types of offenses for all youth and grouped them into five broad categories—drug and alcohol, person, property, public order, and other. Arrests. Available data show that among youth arrested by state and local LEAs between calendar years 2010 through 2016, a similar percentage of Native American and non-Native American youth were arrested for the five broad offense category types. For example, as figure 12 illustrates, the largest percent of offenses among both groups during the period were in the broad category of offenses against property—with 25 percent among Native American youth and 28 percent among non- Native American youth. The next most common broad category of offense for Native Americans arrested by state and local LEAs was drug and alcohol offenses (23 percent); a smaller percent of non-Native Americans were arrested for drug and alcohol offenses (16 percent). The top four specific offenses among Native American youth arrested by state and local LEAs during the period were larceny/theft, alcohol, assault, and status offenses. Similarly, the top four specific offenses among non- Native American youth during the period were larceny/theft, assault, status offenses, and drugs. Adjudication. Generally, the offenses associated with delinquency cases received by state and local courts between calendar years 2010 and 2014 were similar for both Native American and non-Native American youth, according to analysis of available data. The largest percentage of offenses among delinquency cases for both groups was for the broad offense category of property offenses (38 and 36 percent). Confinement. Generally, Native American and non-Native American youth adjudicated and confined at state and local facilities were admitted for similar offenses, according to our analysis of DOJ biennial census data from 2011, 2013, and 2015. As figure 13 illustrates, in 2015, a similar percentage of youth, for both groups, were confined due to three broad categories of offenses—public order, person, and property. At least 29 percent and at most 32 percent of youth were confined for each category of offense. A much smaller percentage of youth, for both groups, were confined for the broad category of drug and alcohol offenses. Some of the most common specific offenses among both Native American and non-Native American youth in 2015 were assault, probation or parole violation, sex offenses, and burglary. The majority of Native American and non-Native American youth referred to state and local courts and confined at state and local facilities were male and 15 to 17 years old during the periods for which we obtained data. For example, table 13 illustrates the demographics of youth adjudicated and confined in state and local facilities. Outcomes of delinquency cases in state and local courts were generally similar for Native American youth and non-Native American youth between 2010 and 2014, according to analysis of available data. For example, more than half of all cases received by the courts for both groups were petitioned—formally processed—as table 14 illustrates. Facility types. Native American and non-Native American youth confined at state and local facilities were placed in similar types of facilities. As table 15 illustrates, the majority of youth for both groups were in private facilities at the time of DOJ’s 2015 biennial census. Time of confinement. Native American and non-Native American youth at state and local facilities had similar characteristics for the length of time they had been confined at the time of the 2015 biennial census. As table 16 illustrates, the majority of youth, for both groups, had been confined for more than 120 days. We identified 122 discretionary grant programs across several issue areas such as violence or trauma, justice system reform, and alcohol and substance abuse that DOJ and HHS offered from fiscal years 2015 through 2017 that grantees could use to help prevent or address delinquency among Native American youth. DOJ and HHS awarded approximately $1.2 billion in first year awards during this period, about $207.7 million of which they collectively awarded to tribal governments and Native American organizations. Tribal governments and Native American organizations were eligible for almost all of these grant programs, but we found in a sample we reviewed that they primarily applied for those that specified tribes or Native Americans as a primary beneficiary. Additionally, officials from selected tribal governments, Native American organizations, DOJ, and HHS stated that certain factors affect tribal governments and Native American organizations’ ability to apply successfully for grant programs that awardees could use to help prevent or address delinquency among Native American youth. We identified 122 discretionary grants and cooperative agreements (grant programs) for which DOJ and HHS offered funding from fiscal years 2015 through 2017 that grantees could use to help prevent or address delinquency among Native American youth. See appendix V for a list of these programs. DOJ and HHS awarded approximately $1.2 billion in first-year awards to grantees through the 122 programs over the period, as shown in figure 14. Of the $1.2 billion, HHS and DOJ collectively awarded $207.7 million to tribal governments and Native American organizations. HHS awarded $106.5 million and DOJ awarded $101.2 million. As previously discussed, tribal governments and Native American organizations also received other federal funding that could help prevent or address delinquency among Native American youth. The DOJ and HHS grant programs we identified included 27 programs that specified tribes or Native Americans as a primary beneficiary and 95 programs that did not specify this but that could include tribes or Native Americans as beneficiaries. For example, the Cooperative Agreements for Tribal Behavioral Health, which HHS’s Substance Abuse and Mental Health Services Administration (SAMHSA) offered in fiscal years 2016 and 2017, is a grant program that specified tribes or Native Americans as a primary beneficiary. Its purpose is to prevent and reduce suicidal behavior and substance use, reduce the impact of trauma, and promote mental health among Native American youth. On the other hand, the Sober Truth on Preventing Underage Drinking Act grant program, which SAMHSA offered in fiscal year 2016 to prevent and reduce alcohol use among youth and young adults, is an example of a program that did not specify tribes or Native Americans as a primary beneficiary but could nonetheless benefit them. As previously discussed, available data indicate that alcohol offenses constitute the second-highest specific offense for which Native American youth were arrested by state and local LEAs from calendar years 2010 through 2016. Within DOJ’s OJP, an example of a grant program that specified tribes or Native Americans as a primary beneficiary is the Defending Childhood American Indian/Alaska Native Policy Initiative: Supporting Trauma- Informed Juvenile Justice Systems for Tribes program. This grant program was offered by OJP’s Office of Juvenile Justice and Delinquency Prevention (OJJDP) for funding in fiscal year 2016. The goal of the grant program is to increase the capacity of federally recognized tribes’ juvenile justice and related systems to improve the life outcomes of youth who are at risk or who are involved in the justice system and to reduce youth exposure to violence. Another grant program, the Youth with Sexual Behavior Problems Program, which OJJDP offered from fiscal years 2015 through 2017, is an example of a grant program that did not specify tribes or Native Americans as a primary beneficiary but that could nonetheless benefit them. As previously discussed, available data indicate that the second-highest specific offense for which Native American youth were arrested by federal LEAs from 2010 through 2016 was sex offenses. This grant program provided services for youth sexual offenders, their victims, and the parents and caregivers of the offending youth and victims. The 27 grant programs that specified tribes or Native Americans as a primary beneficiary awarded a total of $250.2 million over the fiscal year 2015 through 2017 period, while the 95 programs that did not were awarded $944.4 million (see fig.15). Of the 122 grant programs we identified, tribal governments and Native American organizations received funding primarily from the 27 grant programs that specified tribes or Native Americans as a primary beneficiary. Of the $250.2 million in awards from these 27 grant programs, tribal governments and Native American organizations received $193.2 million, or about 77 percent of the total. Alternatively, of the $944.4 million in awards from the 95 grant programs that did not specify tribes or Native Americans as a primary beneficiary, tribal governments and Native American organizations received $14.5 million, or 1.5 percent of the total. The 122 grant programs focused on one or more issue areas in their funding opportunity announcements relevant to helping prevent or address delinquency among Native American youth. The most common issue areas were violence or trauma (34 programs), justice system reform (25 programs), and alcohol and substance abuse (22 programs). Table 17 lists the issue areas and the number of DOJ and HHS grant programs that focus on each issue area. Violence or trauma. Thirty-four of the 122 grant programs supported activities such as researching, preventing, addressing, or providing services related to youth violence or trauma. For example, the purpose of the Communities Addressing Childhood Trauma grant program, administered by HHS’s Office of Minority Health, is to test the effectiveness of activities that seek to promote healthy behaviors among minority or disadvantaged youth who have experienced childhood trauma and are thus at risk for poor health and life outcomes. Another example is DOJ’s Coordinated Tribal Assistance Solicitation’s (CTAS) Tribal Youth Program. One of the priority areas of this grant program is preventing, intervening, and treating children exposed to violence through the development and implementation of trauma-informed practices in pertinent programs and services. DOJ’s Comprehensive Anti-gang Strategies and Programs grant supports evidence-based strategies in communities trying to reduce and control gang-related crime and violence through coordinating prevention, intervention, enforcement, and reentry programs. As mentioned earlier in the report, available data indicate the top specific offense for which Native American youth were arrested by federal LEAs from 2010 through 2016 was assault. Justice system reform. Twenty-five of the 122 grant programs supported activities such as researching and analyzing the effectiveness of efforts to reform the youth justice system and enhancing the capacity of justice system institutions with which youth could come into contact. For example, one goal of the Tribal Civil and Criminal Legal Assistance Grants, Training, and Technical Assistance grant program, administered by DOJ’s Bureau of Justice Assistance, is to enhance tribal court systems and improve access to them, as well as to provide training and technical assistance related to tribal justice systems. Another example is DOJ’s National Girls Initiative grant program. The goal of this program is to support the engagement of stakeholders such as youth justice specialists, law enforcement officers, advocates, and youth defenders to improve the justice system and its responses to girls and young women. Alcohol and substance abuse. Twenty-two of the 122 grant programs supported activities such as preventing or reducing youth consumption of alcohol and drugs. For example, the stated purpose of DOJ’s CTAS Juvenile Healing to Wellness Courts grant program is to support tribes seeking to establish new courts within their existing judicial institutions to respond to alcohol and substance use issues among youth and young adults. (See text box below for an example of the activities a grantee planned to implement with this grant program.) As previously discussed, one of the top offenses we observed of Native American youth arrested by state and local LEAs is drug and alcohol offenses. Department of Justice (DOJ) Coordinated Tribal Assistance Solicitation (CTAS) Juvenile Healing to Wellness Court Grantee: Confederated Tribes of Coos, Lower Umpqua and Siuslaw Indians In fiscal year 2015, the Confederated Tribes of Coos, Lower Umpqua and Siuslaw Indians, a federally recognized tribe located within the state of Oregon, received funding from the DOJ CTAS Juvenile Healing to Wellness Court grant program. Tribal officials told GAO that they are in the process of growing their healing to wellness court and aim to use this grant program to reduce the criminal penalties for substance abuse in their community. Moreover, they said that the “peace-giving court” would look at solutions such as treatment and restorative justice rather than focus on criminal fines and incarceration. As of October 2017, tribal officials said they had three court employees and were planning to use some of the program funding to hire a liaison between other court systems to refer tribal members to their tribal court. Mental and emotional health. Sixteen of the 122 grant programs supported activities such as improving the mental health and wellness of youth. For example, HHS’s Planning and Developing Infrastructure to Improve the Mental Health and Wellness of Children, Youth and Families in American Indian/Alaska Natives Communities grant program focuses on increasing the capacity and effectiveness of mental health systems serving tribal and urban Indian communities by designing a coordinated network of community-based services and supports that address the needs of Native American youth and their families. (See text box below for an example of the activities a grantee planned to implement with this grant program.) Department of Health and Human Services (HHS) Planning and Developing Infrastructure to Improve the Mental Health and Wellness of Children, Youth and Families in American Indian/Alaska Natives Communities Grantee: Native Health of Phoenix In fiscal year 2017, Native Health of Phoenix—an urban Indian community health center with a mission to increase the health and well-being of Native American and other residents in the Phoenix, Arizona metropolitan area—received funding from the HHS Planning and Developing Infrastructure to Improve the Mental Health and Wellness of Children, Youth and Families in American Indian/Alaska Natives Communities grant program. Native Health of Phoenix explained that the grant program would allow the organization to work on trauma-informed care, provide counseling services through role models (with a particular interest in using Native American veterans as mentors), and possibly expand the age group served by an existing program, Wellness Warriors, which currently focuses on promoting healthy living for 7- to 12-year-old youth and their families. Reentry and recidivism. Twelve of the 122 grant programs supported activities such as facilitating youths’ successful reintegration into their communities and reducing the likelihood of subsequent contact with the criminal justice system. For example, the objective of the Second Chance Act Technology-Based Career Training Program for Incarcerated Adults and Juveniles, administered by DOJ’s Bureau of Justice Assistance, is to provide career training programs for incarcerated adults and youth in the 6 to 36 months before their release and to connect them with follow-up services after their release. Another example is DOJ’s Second Chance Act Strengthening Relationships Between Young Fathers, Young Mothers, and Their Children grant program offered funding in fiscal year 2016. The goal of this grant program is to reduce recidivism and support responsible parenting practices of young fathers and mothers who were transitioning from detention, out-of-home placement, or incarceration back to their families and communities. Mentoring. Eleven of the 122 grant programs supported activities such as providing mentoring services to at-risk or high-risk youth and researching or evaluating the impact of various mentoring programs and practices on youth outcomes. For example, DOJ’s Mentoring for Youth: Underserved Populations grant program supports the implementation and delivery of various mentoring services for youth with disabilities, youth in foster care, and lesbian, gay, bisexual, transgender, and questioning youth. Another example is HHS’s Native Youth Initiative for Leadership, Empowerment, and Development grant program. One area of interest in the program includes peer role model development where young Native American adults (18 to 24 years old) serve as role models for mid- adolescents (15 to 17 years old), who in turn serve as role models for even younger members (younger than 15 years old) in their communities. Suicide prevention. Seven of the 122 grant programs supported activities such as preventing or reducing the risk of suicidal thoughts or behavior and self-harm among youth. For example, one purpose of the Substance Abuse and Suicide Prevention Program, formerly known as the Methamphetamine and Suicide Prevention Initiative grant program, administered by HHS’s Indian Health Service, is to support early intervention strategies and positive youth development to reduce the risk for suicidal behavior and substance abuse among Native American youth. (See text box below for an example of the activities a grantee planned to implement with this grant program.) Department of Health and Human Services (HHS) Substance Abuse and Suicide Prevention Program Grantee: Fairbanks Native Association In fiscal year 2016, the Fairbanks Native Association, whose officials describe it as a Native American non-profit organization that provides social services, education, and behavioral health services to residents of the Fairbanks and North Pole communities as well as other residents of Alaska, received funding from HHS’s Indian Health Service’s Substance Abuse and Suicide Prevention Program (formerly known as the Methamphetamine and Suicide Prevention Initiative grant program). According to Fairbanks Native Association officials, one of the evidence-based practices they implemented for the Substance Abuse and Suicide Prevention Program was Coping and Support Training (CAST). CAST is a 12-lesson skills training program used by schools, community centers, and other organizations for middle and high school-aged youth whose program features include building self-esteem and creating a crisis response plan for responding to a range of suicide-risk behavior, among other activities. Justice system data and analysis. Seven of the 122 grant programs supported activities such as collecting, improving the collection of, or analyzing data related to the youth or tribal justice systems. For example, DOJ’s Annual Survey of Jails in Indian country, 2016-2019 grant program funded the collection of information from all known correctional facilities operated by tribal governments or the Bureau of Indian Affairs. Some of the information the program sought to collect included the number of adults and youth held, the gender of the inmates, and average daily population, among other data. Runaway and homeless youth. Six of the 122 grant programs supported activities such as providing services to youth who have run away from home or who are experiencing homelessness. For example, the primary goal of HHS’s Transitional Living Program and Maternity Group Homes grant program is to help runaway and homeless youth establish sustainable living and well-being for them and, if applicable, their dependent children through the provision of shelter and other services. Cultural identity. Four of the 122 grant programs supported activities such as promoting and preserving Native American cultural traditions to and for tribal youth. For example, the purpose of HHS’s Native American Language Preservation and Maintenance grant program is to ensure the survival and vitality of Native American languages. Other. Six of the 122 grant programs supported activities in other issue areas above such as school safety, tribal justice infrastructure, and social and economic development. Tribal governments or Native American organizations were eligible for almost all of the 122 DOJ and HHS grant programs we identified from fiscal years 2015 through 2017 that grantees could use to prevent or address delinquency among Native American youth: they were eligible for 70 of 73 DOJ programs and 48 of 49 HHS programs. For the 3 DOJ grant programs for which these entities were not eligible to apply, DOJ officials explained that tribal governments or Native American organizations were not eligible for the Smart on Juvenile Justice: Reducing Out-of-Home Placement grant program because the funding stream that supports the program—unallocated funds from Title II of the Juvenile Justice and Delinquency Prevention Act—can only be awarded to states that are in compliance with the four core requirements of the act. For the other 2 grant programs, DOJ OJP officials explained that because the focus of these programs is statewide or countywide, eligibility under this program was limited to states and local units of government that have developed a statewide or countywide plan to reduce recidivism and improve outcomes for youth in contact with the juvenile justice system. These officials added that tribal governments would not have the capacity to respond to the requirements of these programs as designed since tribal juvenile justice systems operate differently than states and counties. The one HHS program that neither tribal governments nor Native American organizations were eligible to apply for was the Preventing Teen Dating and Youth Violence by Addressing Shared Risk and Protective Factors program, administered by the Centers for Disease Control and Prevention (CDC). CDC officials explained that this grant program was limited to funding to local, city, and county public health departments with a demonstrated high burden of violence and the highest capacity to prevent teen dating violence and youth violence based on research findings on teen dating violence and youth violence prevention, as well as lessons learned from their previous investments in these areas. These officials also said that CDC encourages local, city, and county public health departments to work with tribal populations in the area. Although tribal governments and Native American organizations were eligible for almost all of the DOJ and HHS grant programs we identified, we found in a non-generalizable sample of applications we reviewed that these organizations applied primarily for grant programs that specified tribes or Native Americans as a primary beneficiary. Specifically, for the applications we reviewed for 18 DOJ grant programs, tribal governments and Native American organizations accounted for over 99 percent of the applications for the 5 grant programs within the sample that specified tribes or Native Americans as a primary beneficiary and approximately 1 percent of the applications in the 13 DOJ grant programs that did not specify them as a primary beneficiary. See figure 16. In our review of applications for 19 HHS grant programs, tribal governments and Native American organizations accounted for 90 percent of the applications for the 6 grant programs in the sample that specified tribes or Native Americans as a primary beneficiary. However, they accounted for only 2 percent of the applications for the 13 HHS grant programs in our sample that did not specify tribes or Native Americans as a primary beneficiary. See figure 17. DOJ and HHS officials identified various reasons why tribal governments and Native American organizations might not apply for grant programs that do not specify tribes or Native Americans as a primary beneficiary: Tribal governments and Native American organizations might not be aware that they are eligible to apply for certain grant programs. Tribal governments and Native American organizations might believe that that their applications to a grant program that do not specify tribes or Native Americans as a primary beneficiary will not be competitive with other applications. For example, DOJ OJP officials told us that tribes may have concerns about devoting resources to preparing applications for such grant programs because they may not end up being successful. Tribal governments and Native American organizations might prefer to apply for those grant programs that specify tribes or Native Americans as a primary beneficiary. For example, DOJ OJP officials stated that tribes might be familiar and comfortable with applying for the CTAS, a single application for the majority of DOJ’s tribal grant programs. In addition, HHS CDC officials stated that more tribes apply and successfully compete for grant programs that specify tribes or Native Americans as a primary beneficiary because they are designed specifically for tribal populations, thus allowing for “culturally- appropriate activities,” which may include healing and religious practices that promote wellness, language integration that promote cultural sustainability and identity, and traditional storytelling that promotes life lessons and teachings. Officials from 10 tribal governments and Native American organizations also provided perspectives on whether or not a grant program’s focus on tribes or Native Americans as a primary beneficiary affected their decision to apply for the program. Officials from 6 of 10 of the tribal governments and Native American organizations indicated that they would consider any grant program that met the needs of their communities, although officials from 3 of these 6 indicated a preference in some instances for grant programs that focused on tribes or Native Americans. Officials from the remaining 4 of 10 tribal governments and Native American organizations indicated that a grant program’s focus or lack thereof on tribes or Native Americans could affect their ability to apply for it. For example, officials from one federally recognized Oregon tribe explained that their tribe does not apply for grant programs that do not specify tribes or Native Americans as a primary beneficiary because their applications are not typically competitive in a state or nationwide applicant pool. Instead, they said that their tribe applies for funding specific to their community because they are more likely to succeed with those applications. These officials also said that a benefit of applying for grant programs that specify tribes or Native Americans as a primary beneficiary is that technical assistance provided to grant recipients is tailored to tribes. Officials from another federally recognized tribe in Oklahoma noted that their tribe prefers to apply for grant programs that specify tribes or Native Americans as primary beneficiaries due to the limited resources they have available to prepare grant applications, as well as the high level of competition for nationwide federal grant programs. Finally, officials from a tribal nonprofit corporation in Alaska that represents several federally recognized tribes explained that although their decision to apply for any federal grant program depends on the needs of their community, grant programs that specify tribes or Native Americans as a primary beneficiary understand the challenges of tribal communities, particularly living in rural environments and having to travel vast distances to implement grant program funding. Officials from tribal governments and Native American organizations that applied for federal grant programs that could help prevent or address delinquency among Native American youth, as well as DOJ and HHS officials, identified various factors they believe affect the ability of tribal governments and Native American organizations to successfully apply for federal grant programs. For example, some tribal governments and Native American organizations found being able to call or meet with federal officials during the application process to be helpful but that short application deadlines are a challenge. Additionally, a non-generalizable sample of DOJ and HHS summary statements that provide peer review comments for unsuccessful applications that tribal governments and Native American organizations submitted for these grant programs noted various weaknesses within these unsuccessful applications. Perspectives from tribal governments and Native American organizations. We collected perspectives from a non-generalizable sample of 10 tribal governments and Native American organizations on what federal practices they find helpful or challenging when applying for grant programs related to preventing or addressing delinquency among Native American youth. Regarding helpful federal practices during the application process, the tribal governments and Native American organizations most frequently responded that they found being able to call or meet with federal officials if they had questions about or need help on their application particularly helpful. For example, representatives from one federally recognized tribe in Nevada explained some agencies have help desks that provide a systematic walkthrough of technical issues applicants might encounter when applying for grant programs. In addition, officials from a tribal nonprofit corporation in Alaska that represents several federally recognized tribes stated attending grantee meetings and having face-to-face contact with agency officials to ask questions was very useful when applying for a particular HHS award. Officials from 9 of the 10 tribal governments and Native American organizations provided the following perspectives on the biggest challenges they have faced when applying to receive federal grant program funding. The window available for applying for federal grant programs is too short. Six of 9 tribal governments and Native American organizations noted this as a challenge. For example, officials from a federally recognized tribe based in the Southwest said that the tribe’s biggest challenge is a short turnaround, usually 4 to 8 weeks, from a grant program’s funding opportunity announcement to its deadline. Similarly, officials from a federally recognized tribe in Oklahoma suggested that federal agencies provide longer application periods for grant programs. These officials added that more time would allow the tribes to coordinate amongst themselves better, prepare stronger applications, and obtain the necessary tribal approvals for a grant program. Collecting data for grant program applications is difficult. Four of 9 tribal governments and Native American organizations we spoke with noted this as a challenge. For example, a representative from a federally recognized tribe in Nevada stated that the tribe needs accurate data for its grant applications to describe the tribe and its needs, yet the tribe does not currently have quality data on issues such as substance abuse or youth employment. In addition, officials from a tribal nonprofit corporation in Alaska that represents several federally recognized tribal governments told us that the biggest challenge in preparing a CTAS application is collecting data specific to their tribes’ region. These officials explained that for reports on juvenile justice, their tribes’ region is sometimes grouped with another area, which makes it difficult to extrapolate data specific to their tribes. According to these officials, due to the challenges in obtaining these data, preparing grant applications to address gaps and for services needed is difficult. Scarcity of grant writers and other personnel makes it difficult to complete a quality application. Four of 9 tribal governments and Native American organizations noted this as a challenge. For example, officials from a federally recognized tribe in Oklahoma said that not having a grant writer is a significant challenge for the tribe when applying for federal grant programs. These officials mentioned that additional training sessions on grant writing and feedback from grant reviewers would help the tribe prepare stronger applications. In addition, representatives from a federally recognized tribe in Oregon stated that they encounter challenges with the research and evaluation requirements of some grant programs because hiring someone to fulfill this role can take 2 to 3 months and the number of qualified individuals in their service area is limited. Perspectives from DOJ and HHS officials. We also obtained perspectives from officials from DOJ OJP and seven HHS operating divisions on reasons why some tribal governments and Native American organizations might be more successful than others in applying for federal funding, as well as the challenges these entities face when applying for federal funding. According to DOJ and HHS officials, some of the reasons why some tribal governments and Native American organizations might be more successful than others are in applying for federal funding include the following: Larger and better-resourced tribal governments and Native American organizations are more successful at applying for federal funding. For example, DOJ OJP officials explained that larger tribes with more resources are more successful at applying successfully for grant programs because they are able to hire grant writers to assist with applications. In addition, officials from HHS’s SAMHSA noted that successful applicants are usually larger tribes that have ample resources and experienced staff to write proposals for federal funding. HHS Centers for Disease Control officials stated that larger and better-resourced tribes with sufficient public health infrastructure and capacity tend to apply more and to be more competitive when they do. Tribal governments and Native American organizations that have received federal funding before are more likely to be successful again. Specifically regarding the CTAS program, DOJ OJP officials explained that once tribes are successful at one CTAS application, they are typically successful on subsequent CTAS submissions because they use the successful application as a template. In addition, officials from the HHS’s Indian Health Service explained that tribes that are repeat grantees might be more likely to submit applications to even more grants because they are well-versed in the process. Moreover, officials from SAMHSA explained that tribes that have previously received federal funding might be better equipped to document their experience in a specific area in subsequent grant applications. According to agency officials, one of the biggest organizational challenges that tribal governments and Native American organizations encounter when applying to receive federal grant program funding is obtaining and retaining staff. For example, officials from HHS’s National Institutes of Health stated that the limited scientific and grant writing staff, as well as high staff turnover within tribes pose the biggest challenges they face when applying for federal funding. Officials from HHS’s CDC and Administration for Children and Families operating divisions also identified limited grant writing staff as one of the biggest challenges that tribal governments and Native American organizations face when applying to receive federal funding from grant programs. Moreover, officials from HHS’s SAMHSA explained that tribes have difficulty finding qualified staff to live and work in the remote areas where many tribes are located. Finally, DOJ OJP officials explained that some tribes might not have sufficient resources more generally to put together a competitive application due to specific tribal government structures and justice systems being relatively new compared to state and local governments. Review of summary statements on unsuccessful applications. We reviewed a sample of 29 DOJ summary statements from fiscal years 2015 through 2017 that provided peer review comments for unsuccessful applications that tribal governments and Native American organizations submitted for the grant programs we identified. These summary statements most frequently cited the following overall weaknesses within the unsuccessful applications from tribal governments and Native American organizations: Application contained unclear or insufficient details on how the applicant would implement or achieve outcomes of the proposed program (19 of 29 peer review summary statements); Application contained unclear or insufficient details on how the applicant would measure the success or ensure the sustainability of the proposed program (15 of 29 peer review summary statements); Application contained unclear or insufficient details on the budget of the proposed program (14 of 29 peer review summary statements); Applicant submitted a poorly written or organized application (12 of 29 peer review summary statements); Application contained unclear or insufficient data/statistical information to support the proposed program (12 of 29 peer review summary statements); and Application contained unclear or insufficient details on the goals and objectives of the proposed program (11 of 29 peer review summary statements). We also reviewed a sample of 30 HHS peer review summary statements from fiscal years 2015 through 2017 provided to tribal governments and Native American organizations that unsuccessfully submitted applications for the grant programs we identified. Specifically, all of these statements contained a section that evaluated the strengths and weaknesses of the applicant’s proposed approach or plan for implementing the grant program funding. These 30 statements most frequently cited the following weaknesses in that section: Insufficient details regarding activities or strategies of proposed approach or plan (24 of 30 peer review summary statements); Insufficient details on the goals or objectives of the proposed approach or plan (12 of 30 peer review summary statements); Insufficient details on the potential partners or stakeholders involved in the proposed approach or plan (12 of 30 peer review summary statements); Insufficient linkages between various elements in proposal or plan (11 of 30 peer review summary statements); Insufficient details on the project timeline presented within the proposed approach or plan (9 of 30 peer review summary statements); and Insufficient details on how the applicant organization would staff the proposed approach or plan (8 of 30 peer review summary statements). We asked officials from the tribal governments and Native American organizations from which we collected perspectives how useful they found the feedback federal agencies provided through peer review comments or other means on unsuccessful grant program applications since fiscal year 2015. Some tribal governments and Native American organizations found the feedback useful while others noted that feedback was sometimes not particularly helpful. For example, officials from a tribal university affiliated with a federally recognized tribe based in the Southwest noted that they have received helpful feedback on unsuccessful applications through e-mail correspondence. However, officials from a tribal nonprofit corporation in Alaska that represents several federally recognized tribes noted that the peer review feedback they received was inconsistent year to year. Meanwhile, officials from a federally recognized tribe in Oklahoma noted that they have found the peer review feedback to be helpful overall and that they use the feedback to improve their weaknesses and reinforce their strengths when submitting future applications. We provided a draft of this report to DOJ, HHS, DOI, the Administrative Office of the United States Courts, the U.S. Sentencing Commission, and the Department of Education for review and comment. DOJ, DOI, and the Administrative Office of the United States Courts provided technical comments that we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Attorney General, Secretary of Health and Human Services, Secretary of the Interior, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Gretta L. Goodwin at (202) 512-8777 or GoodwinG@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix VI. This report addresses (1) what available data show about the number and characteristics of Native American youth in the federal, state and local, and tribal justice systems; and (2) what discretionary grant programs federal agencies fund that could help prevent or address delinquency among Native American youth, and the extent to which tribal governments and Native American organizations have access to them. To address the first objective, we obtained and analyzed record-level and summary data from federal, state and local, and tribal justice systems from 2010 through 2016. Figure 18 illustrates the data sources we included in our report for each phase of the justice process (arrest, adjudication, and confinement) in each justice system (federal, state and local, and tribal). Generally, state and local entities include those managed by states, counties, or municipalities. As figure 18 illustrates, we utilized a number of data sources. When analyzing the data, certain characteristics and a number of methodological decisions were applicable to multiple data sources: Generally, state and local data we obtained were maintained by calendar year. In contrast, federal data were maintained by fiscal year. For purposes of this report, we refer where appropriate to calendar years or fiscal years in presenting the results of our analysis. Generally, the record-level and summary data we analyzed included information about youth who had come into contact with the justice systems, such as their age, race, gender, type of offense, and the year they came into contact with the justice system. For purposes of our analysis, we defined youth to include persons who were under 18 years of age at the time of arrest, adjudication, or confinement, unless otherwise noted. In many instances, the agencies calculated the youth’s age for us and placed the record in one of the following age categories: under 13, 13-14, and 15-17. For purposes of our analysis, we identified Native American youth as defined by each data source and identified by the agencies providing the data. For example, the Department of Justice (DOJ) Federal Bureau of Investigation’s (FBI) Uniform Crime Reporting (UCR) Summary Reporting System (SRS) data uses the race category “American Indian or Alaska Native” and includes persons having origins in any of the original peoples of North and South America (including Central America) and who maintain tribal affiliation or community attachment. In comparison, the Executive Office for United States Attorneys (EOUSA), in its prosecution data, defines the term Indian based on statute and case law, which generally considers an Indian to have both a significant degree of Indian blood and a connection to a federally recognized tribe. If a record did not contain race information we did not include the record in any our analysis. In regard to type of offense, unless otherwise noted, we obtained and analyzed information about the lead or most serious offense associated with the youth who came into contact with the federal or state and local justice systems. The data sources contained hundreds of specific offenses, such as simple assault, illegal entry, and rape. To assist our analysis of the data, we took the following steps: 1. We categorized specific offenses for all data sources into 1 of 22 offense categories, such as assault, immigration, and sex offense. To determine the 22 categories we considered categories used in our prior work and consulted FBI’s UCR offense codes. The placement of specific offenses into offense categories was carried out by an analyst, reviewed by additional analysts, and confirmed by an attorney. 2. We grouped the offense categories into five broad categories— drug and alcohol, person, property, public order, and other. To determine the five broad categories we considered categories presented in National Center for Juvenile Justice’s (NCJJ) annual Juvenile Court Statistics reports. The placement of offense categories into a broad category was carried out by an analyst and confirmed by an attorney. Table 18 describes the five broad categories and 22 offense categories. Some data sources contained additional information about youth, such as the youths’ geographic location (i.e., state or U.S. Circuit), outcome of the youths’ involvement with the justice system (e.g., adjudicated delinquent; placed in a facility or on probation), type of facility where the youth was placed (e.g., private, state, tribal), length of sentence, distance between youth’s residence and facility, and time in confinement. Generally, record-level information contained in these data systems are collected when the youth comes into contact with the justice system. In some instances, youth provide certain information (e.g., gender and race) to justice system officials. In other cases, justice officials obtain information from documentation associated with the youth, such as identification documents (e.g., tribal enrollment certifications) or pre- sentence investigation reports. Several of the record-level data sets we obtained were administrative data maintained by agencies. These data generally included information generated as cases are handled and are used to help the agency manage its operations. In particular, we obtained and analyzed record-level and summary data from the following federal, state and local, and tribal data sources: Record-level data from four DOJ agencies: 1. The United States Marshals Service’s (USMS) Justice Detainee Information System. This data system is USMS’s case management system for prisoners in custody, among other things. USMS provided us a data set with 1,589 records for youth admitted into USMS custody after being arrested by a law enforcement agency (LEA). Our analysis focused on the following key variables: fiscal year of custody start date, race, gender, age category, original offense description, arresting agency, and circuit. USMS collects information about individuals admitted into custody. USMS receives youth from various LEAs and collects information on the LEA that arrests the individual. We limited our analysis to youth arrested by federal agencies (e.g. FBI) and did not include youth who had been arrested by non-federal LEAs (e.g., municipalities). USMS custody data may not represent all individuals arrested by federal agencies, but identifies a minimum number of arrests for a given period. We used USMS custody data because we did not identify a data source for all federal arrests. The data USMS provided us was limited to individuals who were under 18 when they were admitted to USMS custody and USMS determined the age category for each record. 2. EOUSA’s Legal Information Office Network System. This data system was the EOUSA’s case management system for tracking declinations and litigation in criminal matters and cases, among other things. EOUSA provided us a data set with 2,361 records for suspects received. Our analysis of EOUSA data focused on the following key variables: fiscal year suspect was received, Native American status, age category, lead charge, circuit, and disposition. EOUSA used multiple variables from its Legal Information Office Network System to confirm that the individual was under 18. However, for 25 percent of the records (583 of 2,361), EOUSA could not provide an age category for the juvenile because the age was either unknown or EOUSA officials questioned the age information. When we analyzed the data by age categories, we excluded records with unknown or unreliable age categories. However, we included all EOUSA records when we analyzed other variables contained in the EOUSA data (e.g., offense). To analyze the offense associated with the individual, we used EOUSA’s “lead charge” variable which consists of statutory citations. To identify the offense, we researched each statutory citation. 3. The Office of Justice Programs’ (OJP) Census of Juveniles in Residential Placement (CJRP). This data source contains data collected through a biennial census of state and local (not federal) residential facilities housing youth in 2011, 2013 and 2015 that was administered by the United States Census Bureau on behalf of OJP. OJP provided us a data set with 165,141 records. Our analysis of CJRP data focused on the following key variables: calendar year, age group, race, facility state, gender, most serious offense, agency type (who placed the individual), facility type, and time in placement. State and local facilities include those managed by states, counties, municipalities, and tribal governments as well as private facilities, among others. CJRP has historically achieved response rates near or above 90 percent. However, participation in the CJRP is voluntary and response rates from tribal facilities have been lower. The source for the information collected by the census, such as age, were administrative records maintained by individual residential facilities. These data include youth who were in custody on the day of the census. We limited our analysis of the CJRP data to (1) individuals who were under the age of 18 on the date of the census and (2) youth who had been adjudicated—we did not include youth who were awaiting a trial or whose adjudication was pending. Finally, we excluded youth who were located in the Virgin Islands and Puerto Rico because no other data set appeared to include data for these geographic areas. The data set we analyzed contained 98,830 records. 4. Federal Bureau of Prisons’ (BOP) SENTRY data system. This system is BOP’s case management system for tracking information (e.g., admission type and sentencing) about prisoners in BOP’s custody. For this review, BOP provided two data sets. One data set was limited to youth who were adjudicated and sentenced to a facility overseen by BOP and contained 1,324 records. Our analysis of these BOP data was focused on the following key variables: fiscal year sentenced, age category, race, offense, and sentence length. BOP determined the age category for each record and the data were limited to individuals who were under 18. The second data set included youth who were admitted into a facility overseen by BOP but were not necessarily adjudicated and contained 925 records. Our analysis of these BOP data was focused on the following key variables: fiscal year admitted, race, distance, and admission assignment. BOP ensured the data were limited to individuals who were under 18. BOP provided the distance information by calculating the distance between a juvenile’s residence and the facility where a juvenile was placed. To analyze the distance information we created two categories of admission types: juveniles under the supervision of the United States Probation Office and juveniles in custody of BOP. Our analysis of these four DOJ data sources was limited through 2016 because when we initiated our analysis in April 2017 it was the most current data available. Record-level data from the Department of the Interior’s (DOI) Bureau of Indian Affairs (BIA) for youth arrested and admitted to three BIA- operated juvenile detention centers. We reviewed juvenile detention documents maintained by the three centers: Northern Cheyenne, Standing Rock, and Ute Mountain Ute. The types of documents included admission sheets and arrestee custody receipts, among others. We created a data set of admissions to the three centers using information contained in the documents provided. Our data set contained 956 records and included the following variables: unique ID, admission date, and charges (offense). Documents contained information about multiple offenses for individual admissions and did not identify the most serious or lead offense. As such, we included all offenses in our analysis of the centers’ information. Our analysis of this information was limited to 2012 through 2016 because records prior to 2012 were not available for any center when we initiated our analysis in April 2017. However, our data set does not contain records for 2012 for the Ute Mountain Ute center because that center did not have any of the source documents before 2013. Also, our data set did not contain records for 2012 through 2015 for the Standing Rock Youth Services Center because that center opened in May 2016. Summary data from DOJ’s FBI UCR SRS. The FBI’s primary objective is to generate a reliable set of crime statistics for use in law enforcement administration, operation, and management. FBI provided us with 7 years of data in separate annual files, which initially contained 1,529,736 gender-specific records. To analyze race, we summarized the data across gender. In addition, the records included summary records for drug and gambling offenses as well as records for specific drug offenses (e.g., sale, possession) and gambling offenses (e.g., bookmaking, lottery). To prevent over-counting, we excluded records with specific information from our analysis. These steps reduced our data set to 582,089 records with which we performed our analysis of UCR SRS data, which focused on the following key variables: calendar year, race, state, and offense. The majority of law enforcement agencies submit arrest data to the FBI through the UCR program. In 2016, about 90 percent of city, county, university and college, state, tribal, and federal agencies eligible to participate in the UCR Program submitted data (16,782 of 18,481). Although UCR SRS predominantly contains data from state and local LEAs, some federal and tribal LEAs report data into SRS. Agencies submit data monthly that must meet UCR’s data quality guidelines, such as using uniform definitions. There is no available data for the state of Florida because, according to DOJ officials, Florida does not follow UCR guidelines and reports only arrest totals which cannot be housed in the UCR SRS database. Further, a few states reported limited arrest data during the scope of our review (e.g., Illinois). Our analysis of these data was limited through 2016 because when we initiated our analysis in April 2017 it was the most current data available. Summary data from the NCJJ Easy Access to Juvenile Court Statistics (NCJJ’s juvenile court data) which is supported through funding from DOJ’s OJP. NCJJ obtains case-level and court-level data from state and local juvenile courts. This online juvenile court data is an interactive web-based application that allows users to analyze the actual databases that NCJJ uses to produce its annual Juvenile Court Statistics reports. The summary data available represents national estimates of delinquency cases handled by U.S. courts with juvenile jurisdiction. Our analysis of these data was limited to 2010 through 2014 because this was the most current data available when we conducted our analysis. The summary data we downloaded contained 86,400 cases spanning calendar years 2010 through 2014. Our analysis of NCJJ’s juvenile court data online focused on the following key variables: calendar year, race, offense, gender, and age. Summary data included in DOJ’s Bureau of Justice Statistics reports, such as the Jails in Indian Country report from 2016. This report provides information gathered from Bureau of Justice Statistics’ annual survey of Indian country jails, and includes all Indian country correctional facilities operated by tribal authorities or BIA. Our analysis of these data was limited to the survey reports covering years 2014, 2015, and 2016, and contained the number of Native American youth confined in tribal operated jails in Indian country as of June each year. We assessed the reliability of the record-level and some of the summary data by conducting electronic testing of the data and interviewing knowledgeable agency officials about the data systems. We assessed the reliability of the remaining summary data by interviewing knowledgeable agency officials about the summary data. We determined that the record-level and summary data sources included in this report were sufficiently reliable for the purposes of our reporting objectives. We determined that some record-level and summary data sources, such as certain data related to arrests and sentencing information, contained information already provided by other data sources or contained too few Native American youth observations to provide reliable, reportable information. We did not include these data sources in our report. We also determined that some data variables in certain data sources were not reliable for our purposes. For example, two data sources did not contain reliable information for the race of individuals. We did not include these data sources in our report. For each data source, we calculated the number and percent of Native American and non-Native American youth involved at each phase of the justice process (arrest, referral for adjudication, and confinement) for all three justice systems (federal, state and local, and tribal), where data were available. Generally, non-Native American records included Asian, Black, and White. Some data sources included other race categories— such as Pacific Islander and Hispanic. We then analyzed the characteristics of youth involvement with the justice system, such as the youths’ race, age category, gender, type of offense, geographic location, outcome of the youths’ involvement with the justice system, type of facility where the youth was placed (e.g., private, state, tribal), length of sentence, distance between youth’s residence and facility, and time in confinement, where data were available. If a record was missing a value for the characteristic we were analyzing (e.g., race, offense, gender, or age)—for example, the value was either blank or was “unknown”—we did not include the record in the analysis of that characteristic. We also analyzed the representation of Native American youth involved with the federal and state and local justice systems by comparing justice system data to 2010 U.S. Decennial Census information and U.S. Census estimates from 2011 to 2016. Specifically, for the federal system, we identified the representation of Native American youth in USMS’s custody data, EOUSA’s adjudication data, and BOP’s confinement data for fiscal years 2010 through 2016. We then identified the representation of Native American youth among the total youth population for the United States from the 2010 U.S. Decennial Census (as of April 1, 2010) and its updated estimates from 2011 through 2016 (as of July 1 for each year). Using these data, we compared the representation of Native American youth among each component of the federal justice system (i.e., USMS custody, EOUSA adjudication, and BOP confinement) to the total youth population for the United States. Similarly, we also compared the representation of Native American youth by individual states. To do this, we identified the representation of Native American youth in FBI’s UCR SRS arrest data as well as CJRP’s confinement data for individual states. We then identified the representation of Native American youth among the youth population for individual states from the U.S. Census’s 2010 decennial data and its updated estimates from 2011 through 2016. Using these data, we compared the representation of Native American youth among state and local justice systems (i.e., FBI’s UCR SRS arrest and CJRP’s confinement data) to the representation of Native Americans among the youth population for individual states. Because there is no single, centralized data source that contains data for youth involved in all justice systems (federal, state and local, tribal) and across all phases of the justice process (arrest, adjudication, confinement), it is not possible to track individuals through all phases of the justice system or identify the number of unique youth who have come into contact with the justice systems. Further, data are not comparable across data sources because data sources vary in how they define Native American and how they determine whether youth are Native American. Some federal agencies, such as USMS and BOP, share a unique identifier for an individual within the federal data sources. However, for purposes of this review and given privacy concerns related to juvenile data, we were unable to track individuals across phases of the federal justice system. We also collected perspectives from agency officials and five Native American organizations regarding factors that might contribute to the data characteristics we observed. We selected the five Native American organizations to include organizations whose mission and scope focuses in whole or in part on Native American juvenile justice issues and that have a national or geographically-specific perspective. The views of these organizations are not generalizable to all Native American organizations but provide valuable insights. To address our second objective on discretionary grant programs that federal agencies fund that could help prevent or address delinquency among Native American youth, we analyzed discretionary grants and cooperative agreements available for funding from fiscal years 2015 through 2017. To identify the discretionary grants and cooperative agreements, we conducted a keyword search of “youth or juvenile” in Grants.gov—an online repository that houses information on over 1,000 different grants across federal grant-making agencies. For the purposes of this review, we define “discretionary grant programs” to include both discretionary grants and cooperative agreements. We focused on discretionary grants and cooperative agreements because federal agencies generally award them to an array of entities based on a competitive review process, whereas federal agencies are generally required by statute to limit awards from the other types of grants to specific entities, typically U.S. state, local, and territorial governments. We then reviewed the search results of the three agencies with the highest number of grant program matches—DOI, DOJ, and the Department of Health and Human Services (HHS). Two analysts independently read the Grants.gov summary descriptions of the programs included in these search results and selected programs for which the description related to risk or protective factors discussed in the DOJ Office of Juvenile Justice and Delinquency Prevention (OJJDP) Tribal Youth in the Juvenile Justice System literature review; risk or protective factors identified in the July 2015 Technical Assistance Network for Children’s Behavioral Health brief on American Indian and Alaska Native Youth in the Juvenile Justice System; juvenile justice system reform principles, findings, or recommendations identified in Chapter 4 of the November 2014 Attorney General’s Advisory Committee on American Indian/Alaska Native Children Exposed to Violence report, Ending Violence so Children Can Thrive;or proposals to reform the juvenile justice system identified in Chapter 6 of the November 2013 Indian Law and Order Commission Report to the President and Congress of the United States, A Roadmap for Making Native America Safer. We also used the following principles to identify and select relevant grant programs: We excluded grant programs that focused specifically on victims as opposed to at risk youth or offenders. We included grant programs that specify tribes or Native Americans if the program’s funding opportunity announcement mentioned youth explicitly. We included grant programs that do not specify tribes or Native Americans as a primary beneficiary if the program’s funding opportunity announcement mentioned youth explicitly and if the program focused primarily on serving youth populations. After two analysts independently completed their initial determinations of which grant programs they considered relevant, they either confirmed their agreement or discussed any differences of opinion until they reached a consensus. If they could not reach agreement on whether a given program was relevant, a third, supervisory analyst made the final determination. We also reviewed the grant program funding opportunity announcements on HHS and DOJ’s websites and worked with officials from these agencies to identify any additional grant programs that could be relevant for the purposes for our review. We provided a list of the grant programs that we identified to DOJ and HHS for confirmation both during and after fiscal year 2017. Our final list of grant programs includes 122 programs. Despite these steps, it is possible that our analysis did not identify all relevant grant programs. We next determined which of 122 grant programs we identified specified tribes or Native Americans as a primary beneficiary and which did not by reviewing funding opportunity announcements for the programs to determine if the funding opportunity announcement’s title, executive summary, overview, or purpose specifically referenced tribes or Native Americans as the main or one of few beneficiaries of the proposed grant program funding. After a first analyst completed initial determinations of which of the grant programs specified tribes or Native Americans as a primary beneficiary, a second analyst reviewed those determinations and either confirmed agreement or discussed any differences of opinion until both analysts reached a consensus. We categorized each program into one or more issue areas (e.g., violence or trauma, substance abuse, mentoring, etc.). We used the risk and protective factors discussed in the OJJDP Tribal Youth in the Juvenile Justice System literature review as initial issue areas and added additional areas, as needed, for programs that did not fit within the initial areas. To determine the extent to which tribal governments or Native American organizations had access to the 122 grant programs, we reviewed both the eligibility of those organizations to apply for the grant programs and their level of success in applying for the grant programs. We defined “tribal governments” as the governing bodies of federally recognized tribes. We defined “Native American organizations” as organizations affiliated with federally recognized tribes, such as tribal colleges and universities, as well as non-tribal organizations that focus on serving Native American populations, such as urban Indian organizations. To determine whether tribal governments or Native American organizations were eligible to apply for the grant programs we identified, an analyst first reviewed the eligibility information within each of the grant program’s funding opportunity announcements. In instances where the analyst could not definitively determine whether tribal government or Native American organizations were eligible to apply for a given grant program, the analyst reviewed the program’s Grants.gov synopsis or followed up with agency officials. After the analyst made an initial determination of eligibility, a second analyst reviewed those determinations and either confirmed agreement or discussed any differences of opinion until both analysts reached a consensus. We also consulted with DOJ and HHS officials regarding those grant programs for which tribal governments or Native American organizations were ineligible to apply to determine the reasons why. To determine tribal governments and Native American organizations’ level of success in applying for the grant programs, we analyzed fiscal year 2015 through 2017 award data for the programs to determine the extent to which tribal governments and Native American organizations received funding from them. We also reviewed a non-generalizable sample of applications from 37 grant programs to determine the extent to which tribal governments and Native American organizations applied for these grant programs. Specifically, we requested the sample of applications from each of the five DOJ OJP offices and bureaus and seven HHS operating divisions from which we identified the 122 grant programs that either had a relatively larger estimated total program funding amount on Grants.gov for fiscal years 2015, 2016, or 2017 than other grant programs within the same OJP offices or HHS operating divisions or had specified tribes or Native Americans as a primary beneficiary. We assessed the reliability of the data we used by questioning knowledgeable officials. We determined that the data were sufficiently reliable for the purposes of this report. To determine some of the factors that affected the ability of tribal governments and Native American organizations to apply successfully for grant programs that could help prevent or address delinquency among Native American youth, we: interviewed or received written responses from DOJ and HHS officials to obtain their perspectives, interviewed or received written responses from representatives from a non-generalizable sample of 10 tribal governments and Native American organizations that applied for or received funding from one or more of the 122 grant programs, and reviewed a non-generalizable sample of 29 DOJ and 30 HHS peer review summary statements from unsuccessful applications that tribal governments and Native American organizations submitted for selected grant programs that we identified as relevant for the purposes of this review. We selected our non-generalizable sample of tribal governments and Native American organizations to include those that received multiple awards from relevant grant programs; tribal governments and Native American organizations that applied unsuccessfully for more than one relevant grant program; tribal governments with juvenile detention centers with the highest average daily populations in 2016; and tribal governments located in the states with the largest number of juvenile offenders in residential placement per 100,000 juveniles for American Indians according to the 2015 Easy Access to the Census of Juvenile Residential Placement. We analyzed the results of our interviews with representatives of the tribal governments and Native American organizations as well as with agency officials to discern possible themes regarding factors that affect tribal governments and Native American organizations’ ability to apply successfully for the relevant grant programs we identified. We selected the non-generalizable sample of peer review summary statements from grant programs that had a larger estimated total program funding amount on Grants.gov for fiscal years 2015, 2016, or 2017 than other grant programs within the same OJP offices or HHS operating divisions or had specified tribes or Native Americans as a primary beneficiary. However, if we could not identify an application from a tribal government or Native American organization from a given grant program from which we requested applications, we did not request peer review summary statements from that program. We then conducted a content analysis of the weaknesses noted in the statements submitted by tribal governments or Native American organizations in order to discern common themes. The information we obtained from the agency officials as well as representatives of the tribal governments and Native American organizations cannot be generalized more broadly to all tribal governments and Native American organizations or the applications they submitted for federal funding from fiscal year 2015 through 2017. However, the information provides important context and insights into the challenges tribal governments and Native American organizations face in applying for federal funding that could help prevent or address delinquency among Native American youth, as well as some of the common weaknesses that DOJ and HHS peer reviewers identified in unsuccessful applications from tribal governments and Native American organizations. We conducted this performance audit from November 2016 through September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The 2014 Attorney General Task Force report, Ending Violence so Children Can Thrive and the 2013 Indian Law and Order Commission report, A Roadmap for Making Native America Safer, both recommended actions related to Native American youth and youth justice issues. These recommendations included actions federal agencies could take to address some of the challenges noted in the reports, such as exposure to violence, abuse and neglect, and poverty. Table 20 provides examples of actions relevant federal agencies reported taking related to these recommendations. Comprehensive data from tribal justice systems on the involvement of Native American youth were not available. However, we identified and reviewed a few data sources that provided certain insights about the arrest, adjudication, and confinement of Native American youth by tribal justice systems. Following is a summary of our analysis of data from these sources. Arrests. Although comprehensive data on the number of tribal law enforcement agency (LEA) arrests were not available, we obtained and reviewed admission records from three juvenile detention centers in Indian country managed by the Department of the Interior’s Bureau of Indian Affairs (BIA). Based on those records, at least 388 Native American tribal youth were admitted to these three facilities in 2016, as shown in table 21. In the Northern Cheyenne facility for which we obtained records for 5 years, the number of youth admitted increased yearly between 2012 and 2016, from 14 to 204. According to BIA officials, this growth in the number of youth admitted to the Northern Cheyenne facility likely reflects an increase in admissions of Native American youth from surrounding tribes. Specifically, because the Northern Cheyenne facility is centrally located, they said it admits youth from other tribes which have grown accustomed to sending their youth to the facility. BIA officials also noted that the Northern Cheyenne facility services an area where there is a high rate of delinquency among youth, and because the facility works well with Native American youth struggling with delinquency issues, many tribes elect to send their delinquent youth to the facility. Further, since 2012, the Northern Cheyenne facility increased its bed space and staff, thus increasing its capacity to admit more youth, according to BIA officials. Even though comprehensive tribal arrest data are not available, DOJ’s Bureau of Justice Statistics (BJS) is currently undertaking an effort to increase collection of arrest data from tribal LEAs. Specifically, this data collection activity is the Census of Tribal Law Enforcement Agencies. This collection activity, which BJS plans to conduct in 2019, is to capture information including tribal LEA workloads and arrests, tribal LEA access to and participation in regional and national justice database systems, and tribal LEA reporting of crime data into FBI databases. Adjudication. Comprehensive data were not available to describe the extent to which tribal courts processed Native American youth, or adjudicated them delinquent or found them guilty. However, BJS concluded a tribal court data collection effort—the National Survey of Tribal Court Systems—in 2015. Through this survey, BJS gathered information from more than 300 tribal courts and other tribal judicial entities on their criminal, civil, domestic violence and juvenile caseloads, and pretrial and probation programs, among other things. DOJ officials told us that BJS has analyzed the data, and plans to release results in the future. Confinement. According to data published by DOJ’s Bureau of Justice Statistics, the number of youth in Indian country jails declined from 190 in 2014 to 170 in 2016 (about an 11 percent decrease). Appendix V: Selected Grant Programs That Could Help Prevent or Address Delinquency among Native American Youth Department of Justice (73 grant programs) Office of Juvenile Justice and Delinquency Prevention (OJJDP) Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Tribal government or Native American organizations eligible to apply (Yes/No)? Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Tribal government or Native American organizations eligible to apply (Yes/No)? Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Tribal government or Native American organizations eligible to apply (Yes/No)? Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Bureau of Justice Statistics (BJS) Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking Department of Health and Human Services (49 grant programs) Substance Abuse and Mental Health Services Administration (SAMHSA) Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Tribal government or Native American organizations eligible to apply (Yes/No)? Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? Administration for Children and Families Administration for Children and Families Office of Minority Health Yes Office of Minority Health Yes Office of Minority Health Yes Office of Minority Health Yes Centers for Disease Control and Prevention (CDC) Tribal government or Native American organizations eligible to apply (Yes/No)? Grant program specified tribes or Native Americans as a primary beneficiary (Yes/No)? For the purposes of the review, we define “tribal governments” as the governing bodies of federally recognized tribes and “Native American organizations” as organizations affiliated with federally recognized tribes, such as tribal colleges and universities, as well as non-tribal organizations that focus on serving Native American populations, such as urban Indian organizations. According to DOJ officials, the National Intertribal Youth Leadership Development Initiative grant program had no successful applicants in fiscal year 2017. grantees. Tribal governments and Native American organizations are eligible to apply for the Drug- Free Communities Support Program, thus making them potentially eligible for the Sober Truth on Preventing Underage Drinking Act Grants program. Health Resources Services Administration issued a fiscal year 2017 Behavioral Health Workforce Education and Training for Paraprofessionals and Professionals funding opportunity announcement, but according an agency official the fiscal year 2017 funding opportunity announcement does not focus on professionals who provide services to youth, whereas the fiscal year 2016 funding opportunity does. In addition to the contact name above, Taylor Matheson, Assistant Director; Tonnye’ Conner-White, Analyst-in-Charge; Anne Akin; Steven Rocker; and Emily Flores made key contributions to this report. Also contributing were Jessica Ard; Melinda Cordero; Elizabeth Dretsch; Eric Hauswirth; Kristy Love; Grant Mallie; Amanda Miller; Heidi Nielson; and Claire Peachey.", "summary": "Native American youth face unique challenges when it comes to their contact with justice systems. Research shows that risk factors such as high rates of poverty and substance abuse make them susceptible to being involved with justice systems at the federal, state and local, and tribal levels. GAO was asked to examine the extent of Native American youth involvement in justice systems, and federal grant programs that may help address Native American youth delinquency. This report examines (1) what available data show about the number and characteristics of Native American youth in federal, state and local, and tribal justice systems; and (2) federal discretionary grant programs that could help prevent or address delinquency among Native American youth, and tribal government and Native American organizations' access to those grants. GAO analyzed federal, state and local, and tribal arrest, adjudication, and confinement data from 2010 through 2016 (the most recent available) from DOJ and the Department of the Interior. GAO also analyzed DOJ and HHS grant program award documentation from fiscal years 2015 through 2017, and application information for a sample of the grant programs chosen based on the amount of funding awarded and other factors. GAO also interviewed officials from DOJ, HHS, and 10 tribal governments or Native American organizations chosen to include successful and unsuccessful applicants to the grant programs, among other things. GAO's analysis of available data found that the number of American Indian and Alaska Native (Native American) youth in federal and state and local justice systems declined across all phases of the justice process—arrest, adjudication, and confinement—from 2010 through 2016. During this period, state and local arrests of Native American youth declined by almost 40 percent from 18,295 in 2010 to 11,002 in 2016. The vast majority of Native American youth came into contact with state and local justice systems rather than the federal system. However, more Native American youth were involved in the federal system than their percentage in the nationwide population (1.6 percent). For example, of all youth arrested by federal entities during the period, 18 percent were Native American. According to Department of Justice (DOJ) officials, this is due to federal jurisdiction over certain crimes involving Native Americans. Comprehensive data on Native American youth involvement in tribal justice systems were not available for analysis. GAO's analysis showed several differences between Native American and non-Native American youth in the federal justice system. For example, the majority of Native American youths' involvement was for offenses against a person, such as assault and sex offenses. In contrast, the majority of non-Native American youths' involvement was for public order offenses (e.g., immigration violations) or drug or alcohol offenses. On the other hand, in state and local justice systems, the involvement of Native American and non-Native American youth showed many similarities, such as similar offenses for each group. DOJ and the Department of Health and Human Services (HHS) offered at least 122 discretionary grants and cooperative agreements (grant programs) from fiscal years 2015 through 2017 that could be used to address juvenile delinquency among Native American youth. DOJ and HHS made approximately $1.2 billion in first-year awards to grantees during the period, of which the agencies awarded approximately $207.7 million to tribal governments or Native American organizations. Officials from the agencies, tribal governments, and Native American organizations identified factors they believe affect success in applying for grant programs. For example, some tribal governments and Native American organizations found being able to call or meet with federal officials during the application process helpful but found that short application deadlines are a challenge.", "document_type": "gao"}
{"report": "In July 2017, we found that State and UNHCR have worked together on several measures designed to ensure integrity in the process through which UNHCR refers refugees to USRAP for potential resettlement in the United States (or, the resettlement referral process). Since 2000, State and UNHCR have outlined their formal partnership using a Framework for Cooperation. State and UNHCR signed the most recent framework document in 2016, covering the period of March 14, 2016 to December 31, 2017. The organizations developed the framework to guide their partnership, emphasizing measures such as oversight activities and risk management. Among other things, the framework emphasizes improved accountability at UNHCR through effective oversight measures, close cooperation with State, and organization-wide risk management. In addition, the framework notes that State will work to ensure that UNHCR allocates sufficient resources to fully implement measures to provide oversight and accountability. For instance, UNHCR has several offices that are responsible for overseeing antifraud activities, in addition to providing audit services, investigating instances of fraud, and conducting broad reviews of country-level operations such as the United Nations Office of Internal Oversight Services and the Board of Auditors. The framework also describes regular coordination and communication between State and UNHCR as an important principle in the relationship between the two organizations. Specifically, at the headquarters level, the U.S. Mission in Geneva, Switzerland, has a humanitarian affairs office that, according to State officials, coordinates with UNHCR on a regular basis. Additionally, UNHCR has developed standard operating procedures (SOPs) and identity management systems to combat the risk of fraud and worked with State to implement these activities in the resettlement process. Despite the complexity and regional variations in its refugee registration, refugee status determination, and resettlement referral processes, UNHCR officials said that standardizing procedures ensures that the organization has established basic antifraud practices worldwide. These officials added that they believe that the SOPs are among the most important tools with which they ensure the integrity of the resettlement referral process. UNHCR officials also collect biometric information on refugees, such as iris scans and fingerprints. State and UNHCR developed a Memorandum of Understanding (MOU) regarding the sharing of some biometric information. According to a Letter of Understanding that accompanies the MOU, it provides a framework whereby data from UNHCR is shared with State, which allows for increased efficiency and accuracy in processing resettlement referrals to the United States. See figure 2 for photographs of technology that UNHCR uses to register and verify refugee identities. State and RSCs have policies and procedures for processing refugee applications, but, as we found in July 2017, State has not established outcome-based performance measures to assess whether RSCs are meeting their objectives under USRAP. State’s USRAP Overseas Processing Manual includes requirements for information RSCs should collect when prescreening applicants and initiating national security checks, among other things. RSCs communicate directly with USRAP applicants and prepare their case files. For example, RSCs are to conduct prescreening interviews to record key information, such as applicants’ persecution stories and information about their extended family, and submit certain security checks based on the information collected during the interview to U.S. agencies. In addition, State developed SOPs for processing and prescreening refugee applications at RSCs, which State officials indicated provide baseline standards for RSC operations. Further, all four of the RSCs we visited provided us with their own local SOPs that incorporated the topics covered in State’s SOPs. Directors at the remaining five RSCs also told us that they had developed local SOPs that covered the overarching USRAP requirements. We observed how RSC staff implemented State’s case processing and prescreening policies and procedures during our site visits to four RSCs from June 2016 to September 2016. Specifically, we observed 27 prescreening interviews conducted by RSC caseworkers at the four RSCs we visited and found that these caseworkers generally adhered to State requirements during these interviews. In addition, we observed how RSC staff in all four locations implemented additional required procedures during our site visits, such as initiating required security checks and compiling case file information for USCIS interviewing officers, and found that these RSC staff were generally complying with SOPs. State has control activities in place to monitor how RSCs implement policies and procedures for USRAP, but it does not have outcome-based performance indicators to assess whether RSCs are meeting their objectives under USRAP. Consistent with State’s January 2016 Federal Assistance Policy Directive, and according to State officials, State is required to monitor the RSCs it funds, whether through cooperative agreements or voluntary contributions. On the basis of our interviews with State officials and as reflected in documentation from all nine RSCs, including quarterly reports to State, all RSCs have generally undergone the same monitoring regime regardless of funding mechanism. Further, according to State officials, the department has dedicated Program Officers located in Washington, D.C., and Refugee Coordinators based in U.S. embassies worldwide, who are responsible for providing support to RSCs and monitoring their activities—including conducting annual monitoring visits. Further, State has established objectives for RSCs, which include interviewing applicants to obtain relevant information for the adjudication and ensuring the accuracy of information in State’s database and the case files. State also establishes annual targets for the number of refugees who depart for the United States from each RSC. Although State has established objectives and monitors several quantitative goals for RSCs, it has not established outcome-based performance indicators for key RSC activities such as prescreening applicants or accurate case file preparation, or monitored RSC performance consistently across such indicators. Specifically, neither the quarterly reports nor other monitoring reports we examined have or use consistent outcome-based performance indicators from which State could evaluate whether RSCs were consistently and effectively prescreening applicants and preparing case files—key RSC activities that have important implications for timely and effective USCIS interviews and security checks. Developing outcome-based performance indicators, as required by State policy and performance management guidance, and monitoring RSC performance against such indicators on a regular basis, would better position State to determine whether all RSCs are processing refugee applications in accordance with their responsibilities under USRAP. USCIS has developed policies and procedures for adjudicating refugee applications. In July 2017, we found that these policies and procedures apply to all USCIS officers who adjudicate refugee applications—those from USCIS’s Refugee Affairs Division (RAD), International Operations Division (IO), and temporary officers from offices throughout USCIS—and include those for how officers are to review the case file before the interview and conduct the interview, as well as how supervisors are to review applications to ensure they are legally sufficient. We observed 29 USCIS refugee interviews at the four RSCs that we visited from June 2016 to September 2016 and found that the interviewing officers completed all parts of the assessment tool and followed other required policies. We also observed that the USCIS officers documented the questions they asked and the answers the applicants provided. We also observed USCIS supervisors while they reviewed officers’ initial decisions, interview transcripts, and case file documentation, consistent with USCIS policy, at two of the sites we visited. Further, all six of the officers that we met with stated that supervisors conducted the required supervisory case file review during their circuit rides and the four supervisory officers we met with were aware of the requirements and stated that they conducted the supervisory reviews. USCIS also provides specialized training to all officers who adjudicate applications abroad, but we found that USCIS could provide additional training for officers who work on a temporary basis. According to USCIS policy, all USCIS officers who adjudicate refugee applications must complete specialized training, and the training varies based on the USCIS division of the officer. However, temporary officers receive a condensed (or shortened) version of the trainings received by full time refugee officers and do not receive infield training. Although temporary officers receive training prior to conducting in-person interviews with refugee applicants, we found that they sometimes face challenges adjudicating refugee applications. Specifically, we reviewed 44 summary trip reports USCIS supervisors completed following officers’ trips overseas to interview USRAP applicants from the fourth quarter of 2014 through the third quarter of 2016 that included adjudications by temporary officers. In 15 of the 44 reports, the supervisors noted that temporary officers faced challenges adjudicating refugee applications. Standards for Internal Control in the Federal Government state that management should demonstrate a commitment to recruit, develop, and retain competent individuals. The standards also note that competence is the qualification to carry out assigned responsibilities, and requires relevant knowledge, skills, and abilities, which are gained largely from professional experience, training, and certifications. To the extent that USCIS uses temporary officers on future circuit rides, providing them with additional training, such as in-field training, would help better prepare them to interview refugees and adjudicate their applications, increase the quality and efficiency of their work, and potentially reduce the supervisory burden on those who oversee temporary officers. In addition to training, USCIS has developed guidance documents and tools to help officers identify USRAP applicants with potential national security concerns. However, we found that USCIS could strengthen its efforts by developing and implementing a plan for deploying officers with national security expertise on selected circuit rides. USCIS provides a number of resources to officers to help them identify and address potential national security-related concerns in USRAP applications. In addition, USCIS’s national security policies and operating procedures require that cases with national security concerns be placed on hold by interviewing officers. These cases are then reviewed by USCIS headquarters staff who have additional specialized training and expertise in vetting national security issues. While USCIS has training and guidance to adjudicate cases with national security-related concerns, USCIS trip reports we analyzed and officers we interviewed indicated that it can be challenging to adjudicate such applications. USCIS officials identified several reasons why it is challenging to provide training and guidance on how to adjudicate cases with potential national security concerns. For example, according to RAD and IO headquarters officials, indicators of national security concerns and the country conditions that give rise to them evolve and change; as a result, USCIS guidance on how to address those concerns also changes over time. To further help interviewing officers adjudicate cases with national security concerns, in 2016, USCIS completed a pilot program that included sending officers with national security expertise overseas to support interviewing officers in some locations. USCIS determined the pilot was successful and has taken steps to formalize it; however, USCIS has not developed and implemented a plan for deploying these additional officers, whose expertise could help improve the efficiency and effectiveness of the adjudication process. In light of the evolving and significant nature of national security concerns, developing and implementing a plan to deploy additional USCIS officers with national security expertise on circuit rides—including timeframes for deployment and how USCIS will select circuit rides for deployment—would better ensure that USCIS provides interviewing officers with the resources needed to efficiently and effectively adjudicate cases with national security concerns. We also found that USCIS has not regularly assessed the quality of refugee adjudications, which help ensure that case files are completed accurately and that decisions by USCIS officers are well-documented and legally sufficient. USCIS conducted a quality assurance review of refugee adjudications in fiscal year 2015, which included a sample of applications adjudicated by RAD and IO during one quarter of the fiscal year. The 2015 quality assurance review found that most cases in the sample were legally sufficient. However, the review indicated that there were differences between RAD and IO adjudications. Specifically, the review rated 69 of 80 RAD case files (86 percent) as good or excellent, and rated 36 of 73 IO case files (49 percent) as good or excellent. Two of 80 RAD case files (less than 3 percent) in the review and 17 of 73 IO case files (23 percent) were rated as not legally sufficient. USCIS developed action items to address identified deficiencies and has taken steps to implement them. Among cases rated not legally sufficient, the most common deficiency identified was that interviewing officers did not fully develop the interview record with respect to possible inadmissibilities. Other deficiencies reported included interview records not being fully developed with respect to well-founded fear of persecution, improper documentation and analysis of terrorism-related inadmissibility concerns, incorrect hold determination, and required sections of the assessment leading to the adjudication decision that were incomplete. Although there have been major changes in the refugee caseload in the past 2 years (such as an increase in Syrian refugees), an increased use of temporary staff to conduct refugee adjudications in fiscal year 2016, and the difference in quality between RAD and IO adjudications noted in the 2015 quality assurance review, USCIS did not conduct quality reviews in 2016 and had no plans to conduct them in 2017. Standards for Internal Control in the Federal Government states that management should establish and operate monitoring activities to monitor the internal control system and evaluate the results. In addition, standard practices for program management state that program quality should be monitored on a regular basis to provide confidence that the program will comply with the relevant quality policies and standards. USCIS officials stated that supervisors continue to review each refugee case file for legal sufficiency and completeness at the time of the interview. While supervisory review is an important quality control step, it does not position USCIS to identify systematic quality concerns, such as those identified in the fiscal year 2015 quality assessment results. Conducting such reviews would help ensure that case files are completed accurately and that decisions by USCIS officers are well-documented and legally sufficient. According to State officials we interviewed for our July 2017 report, staff fraud at RSCs occurs infrequently, but instances of staff fraud have taken place in recent years, such as RSC staff soliciting bribes from applicants in exchange for promises of expediting applicants through RSC processing. State and RSCs reported instituting a number of activities to combat the risk of fraud committed by RSC staff. Many of these activities correspond with leading practices identified in GAO’s Fraud Risk Framework which identifies leading antifraud practices to aid program managers in managing fraud risks that affect their program. For instance, State and RSCs reported that they have taken steps to commit to an organizational culture and structure to help manage staff fraud risks and established collaborative relationships with both internal and external partners to share information. Officials from all nine RSCs stated that they assign staff fraud risk management responsibilities to designated individuals. In addition, State and RSCs reported that RSCs have designed control activities to address staff fraud risk. State officials identified two key guidance documents containing control activities: RSC SOPs and the Program Integrity Guidelines. The Program Integrity Guidelines are a list of 87 measures designed to prevent and mitigate staff fraud at RSCs. The measures were developed by State and provided to RSCs in response to a staff fraud incident in 2013 that resulted in the termination of two RSC staff. These measures include control activities addressing issues such as background checks, interpreter assignment, antifraud training, office layout, case file reviews, electronic data management, and reporting and responding to instances of suspected fraud. State required RSCs to comply with the original Program Integrity Guidelines by October 2014; however, our review of RSC documents found that RSCs reported complying with most, but not all, of the required measures applicable to their operations. Reported compliance with required, applicable measures at individual RSCs ranged from 86 percent to 100 percent. For 53 of the 72 measures, compliance was reported by all RSCs for which the measure was applicable. Some RSCs have reported that they face challenges in fully implementing certain controls. State officials told us that they work to ensure that each RSC complies with all required controls in the Program Integrity Guidelines. If an RSC reports that it does not yet fully comply with a measure listed in the Program Integrity Guidelines, State expects the RSC to report its progress toward compliance to State. While this reporting assists State in its implementation efforts, we found that gaps remain. Full compliance with these measures could help RSCs ensure the integrity of their operations and guard against staff fraud. In addition, State has taken some steps to assess the risks posed by staff fraud to RSC operations; however, we found that not all RSCs have conducted staff fraud risk assessments that follow leading practices identified in the Fraud Risk Framework, including (1) conducting assessments at regular intervals or when the program experiences changes, (2) tailoring assessments to the program and its operations, and (3) examining the suitability of existing fraud controls. State officials told us that not all RSCs had conducted staff fraud risk assessments because State’s Program Integrity Guidelines recommend but do not require these assessments. Without State requiring RSCs to conduct regular staff fraud risk assessments tailored to their specific operations, staff fraud risk assessments conducted by individual RSCs have varied. Further, we found that State and most RSCs have not examined the suitability of existing fraud controls. For example, while one RSC has regularly assessed the suitability of its existing staff fraud controls by conducting regular staff fraud risk assessments that examine the likelihood and impact of potential fraudulent activity and related fraud controls, the remaining eight RSCs have not done so. State officials told us that because State does not require RSCs to conduct risk assessments, information needed to assess the suitability of existing controls is not available from all RSCs. As the number of refugees accepted varies each year by RSC, internal control systems may need to be changed to respond to the potential increased fraud risk. Without requiring RSCs to conduct regular staff fraud risk assessments that are tailored to their specific operating environments and reviewing these assessments to examine the suitability of existing fraud controls, State may lack necessary information about staff fraud risks and therefore not have reasonable assurance that existing controls effectively reduce these risks. Information from such risk assessments could help State and RSCs revise existing controls or develop new controls to mitigate the staff fraud risks faced by the program, if necessary. Fraud can occur in the refugee process in a number of ways, and State, RSCs, and USCIS have implemented certain mechanisms to help detect and prevent fraud by USRAP applicants. USCIS officers can encounter indicators of fraud while adjudicating refugee applications, and State has suspended USRAP programs in the past because of fraud. To detect and prevent applicant fraud in USRAP, State, RSCs, and USCIS have put mechanisms in place such as DNA testing for certain applicants; training on applicant fraud trends for USCIS officers; and procedures at RSCs to require, where possible, that different interpreters be involved in different stages of the USRAP application process to decrease the likelihood that applicants collude with interpreters. However, State and USCIS have not jointly assessed applicant fraud risks program-wide. The Fraud Risk Framework calls for program managers to plan and conduct regular fraud risk assessments. In addition, Standards for Internal Control in the Federal Government states that management should consider the potential for fraud when identifying, analyzing, and responding to risks, and analyze and respond to identified fraud risks, through a risk analysis process, so that they are effectively mitigated. Although State and USCIS perform a number of fraud risk management activities and have responded to individual instances of applicant fraud, we found that these efforts do not position the agencies to assess fraud risks program-wide for USRAP or know if their controls are appropriately targeted to the areas of highest risk in the program. State and USCIS officials told us that each agency has discrete areas of responsibility in the refugee admissions process, and each agency’s antifraud activities are largely directed at their portions of the process. Because the management of USRAP involves several agencies, without jointly and regularly assessing applicant fraud risks and determining the fraud risk tolerance of the entirety of USRAP, in accordance with leading practices, State and USCIS do not have comprehensive information on the inherent fraud risks that may affect the integrity of the refugee application process and therefore do not have reasonable assurance that State, USCIS, and other program partners have implemented controls to mitigate those risks. Moreover, regularly assessing applicant fraud risks program-wide could help State and USCIS ensure that fraud prevention and detection efforts across USRAP are targeted to those areas that are of highest risk, in accordance with the program’s fraud risk tolerance. In our July reports, we made several recommendations to State and DHS. Specifically, we recommended that State take the following actions in GAO-17-706: develop outcome-based indicators for RSC, as required by State monitor RSC performance against such indicators on a regular basis; And we recommended that State take the following actions in GAO-17-737: actively pursue efforts to ensure that RSCs comply with required, applicable measures in the Program Integrity Guidelines; update guidance, such as the Program Integrity Guidelines, to require each RSC to conduct regular staff fraud risk assessments that are tailored to each RSC’s specific operations; and regularly review RSC staff fraud risk assessments and use them to examine the suitability of existing staff fraud controls and revise controls as appropriate. We recommended that USCIS take the following actions in GAO-17-706: provide additional training for any temporary officers who adjudicate develop and implement a plan to deploy officers with national security conduct regular quality assurance assessments of refugee application adjudications across RAD and IO. We also recommended that State and USCIS conduct regular joint risk assessments of applicant fraud risk across USRAP. State and USCIS concurred with all of our recommendations and have actions underway to address them. For example, State noted that it has developed new guidance to enhance the monitoring of RSCs, which outlines roles, responsibilities, and tools for program officers and refugee coordinators. In addition, USCIS provided documentation that USCIS officials conducted a quality assurance assessment of refugee adjudications in July 2017. Moreover, in July 2017, USCIS provided documentation indicating that it instituted additional headquarters and overseas training for temporary officers consistent with our recommendation. Therefore, we closed this recommendation as implemented. Chairman Labrador, Ranking Member Lofgren, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have. For further information regarding this testimony, please contact Rebecca Gambler, Director, Homeland Security and Justice at (202) 512-8777 or gamblerr@gao.gov, or Thomas Melito, Director, International Affairs and Trade at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are David Alexander, Ashley Alley, Kathryn Bernet, Anthony Costulas, Martin De Alteriis, Brian Hackney, Paul Hobart, Thomas Lombardi, and Elizabeth Repko. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "According to UNHCR, as of June 2017, more than 21 million people were refugees worldwide. State manages the U.S. Refugee Admissions Program (USRAP) and coordinates with UNHCR, which refers the most applicants to USRAP, and USCIS, which adjudicates refugee applications. Deterring and detecting fraud is essential to ensuring the integrity of USRAP and an increase in the number of applicants approved for resettlement in the United States from countries where terrorists operate has raised questions about the adequacy of applicant screening. This statement addresses (1) how State works with UNHCR to ensure program integrity in the UNHCR resettlement referral process; (2) the extent to which State and RSCs have policies and procedures on refugee case processing and State has overseen RSC activities; (3) the extent to which USCIS has policies and procedures for adjudicating refugee applications; and (4) the extent to which State, USCIS, and their partners follow leading practices to reduce the risk of staff and applicant fraud in USRAP. This statement is based on GAO's July 2017 reports regarding USRAP. To conduct that work, GAO analyzed State, USCIS, and UNHCR policies; interviewed relevant officials; conducted fieldwork in 2016 at selected UNHCR offices, as well as at RSCs in Austria, Jordan, Kenya, and El Salvador, where GAO observed a nongeneralizable sample of refugee screening interviews (selected based on application data and other factors). The Department of State (State) and the United Nations High Commissioner for Refugees (UNHCR) have worked together on measures designed to ensure integrity in the refugee resettlement referral process and have established a framework to guide their partnership. Working with State, UNHCR has implemented standard operating procedures and other guidance that, according to UNHCR officials, provides baseline requirements throughout the referral process. UNHCR also uses databases to help verify the identities of, and manage information about, refugees. State and the nine worldwide Resettlement Support Centers (RSC) have policies and procedures for processing refugee applications. Overseen by State, the organizations that operate RSCs hire staff to process and prescreen applicants who have been referred for resettlement consideration. GAO observed 27 prescreening interviews conducted by RSC caseworkers in four countries and found that, for example, RSCs generally recorded key information and submitted any required security checks. However, State has not established outcome-based performance indicators to evaluate whether RSCs were consistently and effectively prescreening applicants and preparing case files—key RSC activities that have important implications for timely and effective adjudication and security checks. Developing outcome-based performance indicators would better position State to determine whether RSCs are meeting their responsibilities. The Department of Homeland Security's U.S. Citizenship and Immigration Services (USCIS) has policies and procedures for adjudicating refugee applications for resettlement in the United States, including how officers are to conduct interviews and adjudicate applications. GAO observed 29 USCIS interviews and found that officers completed all parts of the required assessment. USCIS also provides guidance to help officers identify national security concerns in applications, which can be challenging to identify as country conditions evolve. In 2016, USCIS determined that its pilot to send officers with national security expertise overseas to support interviewing officers was successful. USCIS has taken steps to fill these positions, but it has not yet developed a plan for deploying these additional officers, whose expertise could help improve the effectiveness of the adjudication process. State, USCIS, and their partners have implemented antifraud measures to reduce the risk of staff and applicant fraud—both of which have occurred—but could further assess fraud risks. Officials from all nine RSCs stated that they assign staff fraud risk management responsibilities to designated individuals. However, not all RSCs reported complying with all required program integrity measures—reported compliance at individual RSCs ranged from 86 to 100 percent. State has also not required RSCs to conduct regular staff fraud risk assessments tailored to each RSC or examined the suitability of related controls. Without taking additional steps to address these issues, State and RSCs may face challenges in identifying new staff fraud risks or gaps in the program's internal control system and implementing new control activities to mitigate them. Further, State and USCIS have not jointly assessed applicant fraud risk program-wide. Doing so could help them ensure that fraud detection and prevention efforts across USRAP are targeted to those areas that are of highest risk. GAO made recommendations to State and USCIS to strengthen the implementation of USRAP. State and USCIS agreed with GAO's recommendations and have begun taking actions to address them.", "document_type": "gao"}
{"report": "We have consistently stressed the importance of IRS conducting tax compliance research. Likewise, analyzing compliance data can help IRS identify ways to enhance taxpayer compliance. Without such data, it is more difficult for IRS to decide whether its efforts to address specific areas of noncompliance should focus on non-enforcement activities, such as improved forms or publications, or enforcement activities. Analyzing the data can also help identify changes that could be made to tax laws and regulations that may improve compliance. In April 2016, IRS released its most recent tax gap estimate. IRS estimated that taxpayers should have paid an average of about $2.5 trillion dollars per year in federal taxes for tax years 2008 to 2010. IRS also estimated that taxpayers paid approximately $2.04 trillion voluntarily and on time for those years, on average, leaving $458 billion in unpaid taxes per year. However, IRS estimates that through late payments and enforcement actions it eventually will collect an additional $52 billion on average for those years, leaving the average net tax gap at $406 billion for 2008 to 2010, as shown in figure 1. The tax gap estimate is an aggregate estimate of the five types of taxes that IRS administers—individual income, corporation income, employment, estate, and excise taxes. For each tax type, IRS attempts to estimate the tax gap based on three types of noncompliance: (1) underreporting of tax liabilities on timely filed tax returns; (2) underpayment of taxes due from timely filed returns; and (3) nonfiling, when a taxpayer fails to file a required tax return altogether or on time. IRS has not developed specific estimates for the tax gap related to income earned from illegal activities (e.g., prostitution) or certain forms of fraud. However, if IRS discovers these types of income over the course of an audit, it could be included in the tax gap estimates. In general, refund fraud related to identity theft would not be included in the tax gap estimate because it does not involve evading a tax liability. The tax gap includes unintentional errors as well as intentional evasion, such as intentionally underreporting income, intentionally overreporting expenses, and engaging in abusive tax shelters or frivolous tax schemes. There is no single approach to estimating all of the components of the tax gap. IRS uses NRP examinations of a stratified, random sample of tax returns along with statistical modeling to produce estimates of noncompliance for the population of individual income tax return filers. Other areas of the tax gap are estimated using payment data or other statistical models. Each approach IRS uses is subject to non-sampling error and the areas of the estimate that are samples are subject to additional sampling errors. The uncertainty of the estimates is not readily captured by standard errors that typically accompany estimates based on sample data. For that reason, IRS does not report standard errors, confidence intervals, and statistical comparisons across years. Prior to the 2008–2010 estimate, IRS had released two other tax gap estimates that used data from NRP examinations: (1) a tax year 2001 tax gap estimate that was released in February 2007 and (2) a tax year 2006 tax gap estimate that was released in December 2011. As shown in figure 2, the gross tax gap estimate has increased, in nominal terms, from $345 billion for 2001 to $458 billion, on average, for 2008–2010, an increase of $113 billion or about 33 percent. However, when we adjusted for inflation (using fiscal year 2016 dollars), the gross tax gap estimates amount to $460 billion in 2001, $530 billion in 2006, and $509 billion in 2008–2010. The inflation-adjusted gross tax gap increased by about 11 percent from 2001 to 2008–2010; however, the 2008–2010 estimate is slightly lower, by about 4 percent, than the 2006 estimate. Over the three estimates, the voluntary compliance rate (VCR)—the percentage of owed tax for a given year that is paid voluntarily and timely—has decreased slightly from 83.1 percent for 2006 to 81.7, on average, for 2008–2010. IRS also estimated the VCR and distribution of tax liability for each component of the tax gap. Generally, employment taxes have the highest estimated compliance rates while individual income and estate taxes have the lowest estimated compliance rates. There was a decrease in the VCR for individual income tax from 79 percent for tax year 2001 to 74 percent in the recent 2008–2010 estimate. According to IRS, this decline, along with the individual income tax’s increase in the share of liability, contributes to the slight decline in the overall VCR. The amount of the tax gap that IRS estimated it would collect through enforcement efforts and late payments varied across the three estimates. In 2001, IRS estimated it would collect $55 billion and that figure would increase by $10 billion, to $65 billion in 2006. However, for the 2008– 2010 tax gap estimate, the enforced collections or late payments decreased by $13 billion per year, on average, from the 2006 estimate, to $52 billion. According to IRS, the methodology used to calculate prior estimates may have been too optimistic, resulting in an overstatement of as much as 25 percent. Additionally, IRS stated that the economic downturn in 2008 reduced the total tax liability from which IRS could collect revenue over this period. However, differences in the tax gap estimates across years may not all be attributed to changes in taxpayer behavior (voluntary compliance) or IRS enforcement activities. According to IRS, the tax gap estimates have increased in part because IRS included some new tax gap components and updated some methods, which it believes increased the comprehensiveness and accuracy of the estimates. IRS reported that changes in economic activity and changes in tax law and administration also contribute to differences in tax gap estimates over time. In our 2017 High-Risk Report we continued to include Enforcement of Tax Laws as a high-risk area. Key components of this high-risk area include both addressing the tax gap and improving tax compliance. IRS enforcement of the tax laws helps fund the U.S. government by collecting revenue from noncompliant taxpayers and, perhaps more importantly, promoting voluntary compliance by giving taxpayers confidence that others are paying their fair share. However, IRS still faces challenges to its capacity for implementing new initiatives and carrying out ongoing enforcement and taxpayer service programs under an uncertain budgetary environment. Given the estimated size of the tax gap, even modest reductions would yield significant financial benefits for the country. We have made numerous recommendations over time to help IRS, the Department of the Treasury (Treasury), and Congress address tax noncompliance. Nonetheless, as we have reported in the past, closing the entire gap is not feasible since it could entail more burdensome record keeping or reporting than the public is willing to accept or more resources than IRS is able to commit. For example, third-party information reporting has shown to improve accuracy of income reporting by individual taxpayers; however, it requires increased record keeping and reporting by the third party and requires IRS resources to properly match the third-party information to individual tax returns. Underreporting of tax liabilities accounted for most of the tax gap estimate for tax years 2008–2010, making up 84 percent of the entire estimated gross tax gap, as shown in figure 3. Individual income taxes made up the largest portion of underreporting, followed by employment taxes and corporation income taxes. Underreporting of business income accounted for nearly half of the individual income tax underreporting gap. This includes income from sole proprietors, which accounted for the largest share of individual income tax underreporting, as shown in table 1. Most business related income tax return items also had high net misreporting percentages, which is the sum of the net misreported amount divided by the sum of the absolute values of the amounts that should have been reported, as a percentage. To show additional detail on aspects of the tax gap, we conducted some additional analysis on selected line items of the individual NRP data, which is presented in appendix II. As we have previously reported, the extent to which individual income tax taxpayers accurately report their income is closely aligned to the amount of income that is reported to them and to IRS by third parties. For example, according to 2008–2010 IRS data, taxpayers misreported over half of the types of income for which there is little or no third-party information reporting, such as business income. In contrast, when employers withhold taxes and report the wages and salaries to employees and IRS through Form W-2, Wage and Tax Statement (W-2), there is better compliance. As shown in figure 4, 1 percent of these types of income were misreported while nearly 99 percent were accurately reported on individual income tax returns. Similarly, taxpayers misreported less than 10 percent of income for which banks and other financial institutions provided information returns (Forms 1099) to account holders and IRS that show taxpayers’ annual income from some types of investments. Generally, new requirements on third parties to submit information returns would require statutory changes. We have previously identified additional information reporting opportunities as well as improvements that IRS could make on its own to existing forms and how it uses them. For example, we suggested in August 2008 that Congress may wish to make all taxpayers with rental real estate activity subject to the same information reporting requirements as other taxpayers operating a trade or business; however, no legislative action has been taken on this suggestion. We recommended in August 2010 that IRS require mortgage-secured property addresses to be reported on other forms (Forms 982 and 1099-C) to help IRS detect taxpayers who fail to pay taxes on certain forgiven mortgage debts. Legislative and executive actions have been taken consistent with our recommendation. However, IRS has not revised two forms to collect specific information from taxpayers and lenders concerning the amount of forgiven debt attributable to a principle residence and the locations of a taxpayer’s principle residence. For items subject to substantial third-party information reporting, IRS is able to use automated processes to address noncompliance. The automated underreporter program, through which IRS matches amounts reported on returns with amounts reported on information returns submitted by third parties, is one such process. This computer matching program allows IRS to identify discrepancies between tax returns and information returns and propose automatic changes to taxpayers. For items with little to no third-party information reporting, IRS has to rely on more resource-intensive methods, such as correspondence or face-to- face examinations, to address noncompliance. While these examinations may be started by reviewing specific line items, they may also be expanded to cover other areas of the tax returns if there are indications of misreporting in areas of the return not previously identified. However, it is harder for IRS to detect noncompliance in areas with little third-party information reporting. The second largest part of the underreporting tax gap is made up of employment taxes, which are comprised of three main components: self- employment tax, Federal Insurance Contribution Act (FICA) Social Security and Medicare withholding, and Federal Unemployment Tax Act (FUTA) taxes, as shown in table 2. The self-employment component is estimated from IRS’s NRP individual income tax data. However, IRS lacks NRP data for other components of employment tax. Therefore, it estimates both FICA and FUTA by applying the estimated compliance rates from a 1993 employment tax gap report, which used tax year 1984 employment tax return data, to the current reported taxes. IRS recently completed an NRP study of employment tax returns that reviewed federal income tax withholding and FICA, the first such study IRS had conducted in over 30 years. We reported that although the examinations for the study were completed, IRS had not developed formal plans to analyze the results to (1) identify areas of noncompliance, (2) address such noncompliance, or (3) update its employment tax gap estimate. According to IRS officials, they had not developed formal plans due to competing research priorities and limited resources and because the NRP results had not yet been finalized. We recommended that IRS develop plans to analyze the NRP results in 2017 to address areas of noncompliance identified and update its employment tax gap estimates. IRS agreed with our recommendations and stated that it will be determining how to use the data from this new study to update the employment tax gap estimate. As shown in table 3, IRS developed corporation income tax underreporting estimates for two types of corporations: small corporations (those without a balance sheet or with assets less than $10 million) and large corporations (those with assets of $10 million or more). IRS estimated the voluntary compliance rate for all corporations to be 83 percent for tax years 2008–2010. The estimates are based on adjusted data from operational examinations, which focus on the tax returns most likely to have substantive noncompliance rather than examinations of a statistically representative sample of corporation tax returns. IRS does not have a program comparable to NRP for corporation income tax because of the difficulty of constructing a representative sample for a small group of highly diverse large corporations, among other reasons. The limited scope and selection criteria for non-NRP examinations introduce statistical bias, meaning that the examination issues and results from examinations of corporation tax returns are not necessarily representative of the overall corporation population. However, IRS has developed some methods to project the results of the examinations to the larger population of corporations, and, despite these limitations, IRS considers the corporation estimates to provide a rough gauge of corporation income tax noncompliance. IRS’s divisions responsible for large and small corporation examinations each have management systems in place to track issues identified from corporation examinations. While this information is not derived from the tax gap estimates, IRS has identified several common examination issues for both large and small corporations, as shown in table 4. For the 2008–2010 tax gap estimate, IRS for the first time estimated the net tax gap by each type of tax, as shown in table 5. Unlike most of the tax gap, IRS can tabulate late payments. Since enforcement and other late payments often happen many years after a given tax year has ended, IRS must project into the future to estimate how much tax it will eventually collect for that tax year. IRS expects to recoup the smallest percentage of taxes from the gross individual income tax estimate. IRS officials stated IRS believes the tax gap estimates are sufficiently reliable for the intended purpose of providing a snapshot of tax compliance as a whole. The tax gap estimate is actually many estimates used together to develop one overall picture of tax compliance. IRS has more certainty in some areas of the estimate than others. Generally, IRS officials consider those components of the tax gap estimate that are based on the most current data (2008–2010 data) to be more robust. However, as shown in table 6, IRS recognizes that some component estimates of the tax gap estimate are more uncertain than others, in part because some component estimates rely on older data and it is inherently difficult to estimate some types of noncompliance. IRS has no estimates for some areas of the tax gap. According to IRS officials, IRS has higher amounts of confidence in all of the underpayment components, because they are based on data from systems that can distinguish enforcement and late payments from other payments (IRS has the most confidence in these components); the individual income nonfiling component, because it is based on a new methodology combining two methods that incorporate improvements to the methods used in prior estimates; the individual income underreporting component, because it is primarily based on adjusted NPR examination data, which is a statistically representative sample of individual tax returns; and the corporation underreporting component, because it is based on operational examination data, adjusted for selection bias. IRS has a lesser amount of confidence in the estate nonfiling and underreporting data, because they are forecasts updating estimates based on assumptions made in studies completed in 2000; and the withholding taxes (FICA and FUCA) part of the employment underreporting data, because the data are partially a forecast based on data from an older compliance study. The methodologies used to develop the component estimates differ by component, resulting in a mix of statistical sample and operational-based data being used, as well as forecasts from earlier estimates. IRS is therefore unable to calculate confidence intervals for any of the tax gap estimates. IRS officials stated that that they continue to try to identify a value for those components without estimates, such as corporation income, excise tax nonfiling, and excise tax underreporting, but have not yet found a sufficiently reliable data source nor method upon which to base estimates. To increase its confidence in the estimates of underreported individual income, IRS uses an econometric technique called detection controlled estimation (DCE). This regression-based model controls for variables that could affect the amount of underreporting IRS examiners detected. IRS uses this adjustment because it knows its examiners do not detect all underreported income during examinations, and therefore it adjusts the NRP data to account for such undetected income when estimating the tax gap. The statistical technique estimates the noncompliance detected by a hypothetical “best practices” examiner—an ideal that is unattainable—and then statistically estimates the noncompliance detected by the hypothetical examiner to adjust upward the findings from research examinations conducted by actual examiners. The DCE adjustment accounts for more than half (about $150 billion) of the total individual income tax underreporting estimate. IRS also used the DCE adjustment for the self-employment tax estimates used in the employment tax underreporting estimate. Appendix III provides more information on the extent to which DCE adjustments contributed to the 2008–2010 tax gap estimate. IRS has taken steps to improve the tax gap estimate. For example, IRS used an updated methodology to calculate the estimated nonfiling amount for the 2008–2010 estimate that combined two prior methodologies. Specifically, IRS expanded how it matches information between the U.S. Census Bureau’s annual Current Population Survey and IRS data to estimate the amount of taxes that were not filed. IRS believes this updated methodology allows it to create a better matched dataset and identify nonfilers more accurately. See appendix IV for details on changes to IRS’s tax gap methodology. IRS plans to release its next tax gap estimate in 2019 to cover tax years 2011 to 2013. IRS is also undertaking several additional studies that may offer data IRS can use to improve the tax gap estimate, including these examples: Taxpayers’ tipping behavior: IRS is surveying taxpayers to help estimate total tip income and tipping rates by industry/occupation and by major method of payment (e.g., credit card, debit card, and cash). Limited studies on C corporations and other midsize corporations: IRS studied compliance of C corporations with assets less than $250,000 and with a balance sheet, and corporations with assets of $10 to $50 million for tax year 2010. These studies plan to identify potential areas of noncompliance. Partnership misreporting pilot: In 2016, IRS initiated this study to measure reporting compliance for certain partnerships, as well as to estimate tax misreported at the taxable partner level as a result of partnership misreporting. This study was initiated in response to a recommendation from a prior report. NRP employment tax estimates: As previously mentioned, IRS is determining how it will use the NRP employment tax study it concluded in 2017 to improve the tax gap estimates. IRS’s current strategic plan (2014–2017) discusses general approaches to make voluntary compliance easier for taxpayers and to ensure taxes owed are paid. However, in some areas, the plan does not include specific tactics for improving compliance strategies. Rather, it addresses the elements of voluntary compliance and enforcement actions through two of its goals: Delivering high-quality and timely service to reduce taxpayer burden and encourage voluntary compliance. Effectively enforcing the law to ensure compliance with tax responsibilities and combat fraud. IRS officials stated the strategic plan goals are a component of IRS’s Future State—which is a vision for agency-wide operations that aims to improve services across different taxpayer interactions such as individual account assistance, exams, and collections—and are directly reflected in three of its six themes: facilitate voluntary compliance by empowering taxpayers with secure innovative services, tools, and support; understand noncompliant taxpayer behavior, and develop approaches to deter and change it; and select highest value work using data analytics and a robust feedback loop. According to IRS officials, the remaining themes support these goals indirectly by seeking to improve IRS’s effectiveness. IRS officials noted the IRS Future State vision has outlined two measures that will support the overall goal of increased compliance. The first will be the percentage of compliance issues resolved within 1 year of filing. The second is the percentage of taxpayers with recurring compliance issues. However, IRS has not yet determined the target levels for these goals. According to officials, the levels for these goals will be published with the next IRS strategic plan (2018–2022), which IRS is scheduled to release in mid- 2018. IRS previously set or acknowledged quantitative goals to improve voluntary compliance. However, IRS has since moved away from that approach. In 2005, we recommended that IRS establish a long-term quantitative voluntary compliance goal for individual income tax underreporting and for tax underpayment, as well as for other areas of noncompliance. IRS agreed with the concept of our recommendation and, in response, established a voluntary compliance rate goal of 85 percent by 2009, which was published in IRS’s fiscal year 2007 budget request. In 2006, Treasury issued its Comprehensive Strategy for Reducing the Tax Gap, with a seven-component strategy for reducing the tax gap: (1) reduce opportunities for evasion, (2) make a multiyear commitment to research, (3) continue improvements in information technology, (4) improve compliance activities, (5) enhance taxpayer service, (6) reform and simplify the tax law, and (7) coordinate with partners and stakeholders. In 2007, IRS developed a more detailed report that emphasized the same seven components outlined in the Treasury report and also outlined projects, initiatives, legislative proposals, and other actions designed to combat the sources of noncompliance. In the 2007 report, IRS acknowledged the goal set by the then Chairman of the Senate Finance Committee for IRS to meet a 90 percent voluntary compliance rate by tax year 2017 and the goal set by the IRS Oversight Board of 86 percent by tax year 2009. In 2009, IRS published another report that followed up on the efforts discussed in the 2006 and 2007 Treasury and IRS reports. However, IRS has not published any reports since that time that focus on goals for reducing the tax gap. In 2012, Treasury, along with IRS, set an agency priority goal to increase voluntary tax compliance from 83.1 to 86 percent by September 30, 2013. However, Treasury and IRS decided not to renew the agency priority goal because they said the measure did not satisfy the criteria of having indicators and quarterly milestones against which to track process or being able to determine whether the goal has been achieved by the end of a 2-year period, as established by the Office of Management and Budget. Since the tax gap estimates are only updated every few years, Treasury and IRS officials said there was no way for Treasury or IRS to show improvements or declines in meeting the goal on a quarterly basis or over the 2-year goal term. More recently, IRS officials told us that while they want to achieve a high level of voluntary compliance, neither IRS nor Treasury has set a recent high level department- or agency-wide quantitative goal aimed at reducing the tax gap or increasing voluntary compliance. Establishing clear compliance goals and measuring progress toward them benefit both IRS and external stakeholders and are consistent with the results-oriented performance management principles set forth in the Government Performance and Results Act of 1993 and the GPRA Modernization Act of 2010. As we have previously reported, setting long-term strategic goals is essential for results-oriented management, because such goals explain in greater specificity the results an agency is intending to achieve. The goals form a basis for an organization to identify potential strategies for fulfilling its mission and for improving its operations to support achievement of that mission. Directly aligning strategic goals and strategies for achieving those goals is important for assessing an agency’s ability to achieve those goals. Further, when program results could be influenced by external factors, agencies can use intermediate goals and measure to identify the program’s discrete contribution to a specific result. IRS has moved away from specific numeric goals to improve compliance because it now believes there are limited benefits to them. According to IRS officials, IRS actions alone do not determine the level of taxpayer compliance and there are also several challenges associated with establishing meaningful and useful compliance goals. IRS officials reported that many of these challenges are due to the tax gap only being estimated every few years. As a result, fluctuations in the estimate over time may not be generally attributed to changes in compliance behavior but the fluctuations might instead result from the imprecision of the estimates or updated methodologies. According to IRS, changes in the economy may also have an effect on tax compliance rates. For example, a downturn in the economy would likely result in less tax needing to be paid, but it might also cause some taxpayers to comply less than they otherwise would. Further, separating those two effects would be difficult, particularly given the unobserved nature of most noncompliance. Finally, IRS officials stated other factors, such as IRS services, enforcement efforts, evolving social norms, or changes in legislation, may affect the overall compliance rate. Although IRS may not have full control over all of the factors that affect voluntary compliance, it does have an impact on taxpayer’s compliance through its service and enforcement programs. Furthermore, IRS is not alone in not having full control over the results it seeks to achieve. A number of methods can be used to map or model the causal relationships among the inputs, processes, and outputs produced by various strategies and the forces that influence achievement of outcomes, such as results mapping and logic modeling. Recognizing that outside influences may present risks or challenges to achieving outcomes, OMB Circular Number A-11 states that while agencies cannot mitigate all risks related to achieving strategic objectives and performance goals, they should identify, measure, and assess challenges related to mission delivery, to the extent possible. We have previously reported that setting long-term quantitative goals for IRS offers several benefits. First, compliance goals coupled with periodic measurements of compliance levels would provide IRS with a better basis for determining to what extent its various service and enforcement efforts contribute to compliance. Second, long-term, quantitative goals would help IRS consider new strategies to improve compliance, especially since these strategies could take several years to implement. Third, focusing on intended results can promote strategic and disciplined management decisions that are more likely to be effective because managers who use fact-based performance analysis are better able to target areas most in need of improvement and to select appropriate interventions. Fourth, agency accountability can be enhanced when both agency management and external stakeholders—such as Congress—can assess an agency’s progress toward meeting its goals. Likewise, a survey of the Organization for Economic Cooperation and Development countries and other advanced economies found that some governments are paying increased attention to estimating tax gaps for their major types of taxes. Several countries shared their quantitative goals for reducing the tax gap or increasing their tax revenue with the survey. For example, Denmark set a target to ensure that the tax gap does not exceed 2 percent of estimated total tax liability. Without long-term, quantitative voluntary compliance goals and related performance measures, it will be more difficult for IRS to determine the success of its strategies, adjust its approach when necessary, and remain focused on results, especially since factors that affect compliance change over time. Having compliance goals as IRS has had in the past, coupled with data, would provide a solid base upon which IRS could develop a more strategic, results-oriented approach to improving compliance. IRS officials told us tax gap data are used as a high-level overview of tax compliance. IRS officials also stated they use the underlying tax gap data (i.e., NRP data and other data) in several ways to update compliance efforts. However, IRS has not documented a comprehensive strategy that shows, for example, how it intends to analyze and use the tax gap data, particularly from the NRP, to develop or improve compliance programs. IRS officials told us they use the NRP data to study specific compliance behaviors. For example, IRS has studied taxpayer behavior in claiming the Earned Income Tax Credit (EITC), the child tax credit, and the additional child tax credit. Sometimes these studies are used to develop legislative proposals that are included as part of the annual budget process and outlined in Treasury’s annual revenue proposals. Officials stated the legislative proposals are based on the knowledge of compliance derived from analysis of NRP data and they are organized into themes, such as reducing the tax gap, improving voluntary compliance, or improving tax administration. However, these revenue proposals are requests for changes to the tax laws and, ultimately, it is at Congress’s discretion whether to enact them. IRS officials reported that other times NRP data are used to compute the annual improper payment rate for the EITC. According to officials, IRS also uses these data to annually categorize the root causes of EITC noncompliance. IRS uses the NRP data to update compliance plans by updating the Discriminate Function (DIF) formulas. DIF formulas are designed to score returns for the likelihood that the tax reported on the return is significantly underreported. DIF scores help IRS ensure that noncompliant taxpayers are more likely to be selected for examination and compliant taxpayers are less likely to be unnecessarily examined. IRS determines DIF scores for individual income, small corporation income, partnership, and S corporation returns. IRS officials described high-level concepts of how the various NRP and other studies contribute to compliance and enforcement strategies. Officials from IRS’s Office of Research, Applied Analytics, and Statistics (RAAS) said they think the various uses of the NRP are widely known from general documentation about the NRP and its study design. RAAS officials also noted the fiscal year 2009 budget justification that led to special funding for the NRP still reflects IRS’s current strategy for undertaking various NRP studies. Further, IRS officials pointed us to documentation from the 2000s that discussed a need for a multiyear research commitment and IRS’s goal to move NRP studies beyond the individual income tax to include other taxes. We previously recognized IRS’s commitment to multiyear research and have noted the gains it has made in regularly estimating compliance. Our analysis of the decade-old documents found evidence of a commitment to research that generally seemed sufficient for that period. However, IRS officials did not provide us more recent documents that describe its current efforts to study compliance or show how it plans to use NRP data to update compliance strategies. IRS officials also provided us with business plans for some of their other business units and divisions. The plans we reviewed noted, at a high level, that data and analysis will be used to improve workload selection but did not discuss how specific research efforts or the results of those efforts would be integrated into the missions. The Internal Revenue Manual section on the NRP states that IRS needs to measure taxpayer compliance with federal income tax laws along with contributing factors so that customer-focused programs and services can be enhanced or developed and so that compliance information and tools can be improved. A 2001 NRP prospectus states the NRP will help to increase public confidence in the fairness of our tax system by helping IRS identify where compliance problems occur and focus its resources accordingly. Further, it states that for strategic planning and budget purposes, IRS requires regular estimates of compliance. The NRP research efforts support this critical need. According to IRS, the NRP will also improve IRS’s ability to detect noncompliance; reduce the burden of unnecessary IRS contacts on compliant taxpayers; and support the strategic goals, program development, and resource allocation of IRS operating divisions. Using quality information, such as NRP data, to achieve the agency’s objectives is one of the 17 principles for internal controls. Further, the standards for internal controls also recognize documentation is a necessary part of an effective system, but the level and nature of documentation vary based on the size of an entity and the complexity of the operational process. Documentation is required to demonstrate the design, implementation, and operating effectiveness of a system. Considering the size and relative importance of the tax gap, documenting a strategy for how IRS plans to use NRP data to reduce the tax gap would be consistent with internal controls. However, without a strategy that provides an overall picture of how NRP data are used, it may be difficult for Congress and other decision makers to understand the merits of what they are being asked to fund. Further, without developing and documenting a strategy for incorporating the results of NRP data, IRS risks not fully leveraging the compliance data it collects or not allocating enforcement resources in the most cost-effective manner. We have a long-standing history of reporting on the need for IRS to develop a comprehensive compliance strategy: In 1994, we concluded that until IRS produces a comprehensive compliance strategy, existing data could be used as part of an interim compliance strategy that directs resources at the most noncompliant taxpayers. We found that using such a starting point, IRS could focus more of its efforts on highly noncompliant areas, such as small corporation income and sole proprietorship income that made up almost a third of the tax gap. In 2005, we concluded that reducing the tax gap will be a challenging task given persistent levels of noncompliance and will not likely be achieved through a single solution. Rather, the tax gap must be attacked on multiple fronts and with multiple strategies over a sustained period, thus building a foundation to help taxpayers voluntarily comply. Between 2005 and 2007, we testified six times on the need for IRS to develop a strategy to attack the tax gap on multiple fronts with multiple approaches. In 2007, we reported on the need for IRS to develop a strategy to address noncompliant sole proprietor income, which accounts for a significant share of the tax gap. Further, documenting a strategy for using NRP data to guide compliance efforts would be consistent with two key criteria for removal from the High-Risk List: Action plan: A corrective action plan exists that defines the root cause and solutions and that provides for substantially completing corrective measures, including steps necessary to implement solutions we recommended. Demonstrated progress: Ability to demonstrate progress in implementing corrective measures and resolving the high-risk area. The nation’s long-term fiscal projections show that the federal government is on an unsustainable fiscal path. One way to help improve the nation’s fiscal position would be to reduce the tax gap. Reducing the tax gap will be a challenging task given persistent levels of taxpayer noncompliance. However, even modest reductions would yield significant financial benefits and help improve the government’s fiscal position. IRS has shown a continued commitment to study sources of noncompliance and has made strides in improving NRP and other tax gap data. However, additional efforts could further assist IRS in addressing the tax gap. A long-term, quantitative goal for improving voluntary compliance may provide IRS with a concrete target the agency can use in fulfilling its mission. Without a quantitative goal, it will be more difficult for IRS to determine the success of its strategies, adjust its approach when necessary, and remain focused on results, especially since factors that affect compliance change over time. Likewise, a strategy that outlines how IRS plans to use NRP data to update compliance strategies would help IRS determine resource tradeoffs and more fully leverage the investment it makes in compliance research, while providing Congress with a better understanding of the merits of the research it is being asked to fund. We are making the following two recommendations to IRS: The Commissioner of Internal Revenue should re-establish long-term, quantitative goals for improving voluntary compliance. (Recommendation 1) The Commissioner of Internal Revenue should instruct the appropriate officials to develop and document a strategy that outlines how IRS will use National Research Program data to update compliance strategies that could help address the tax gap. (Recommendation 2) We provided a draft of this report to the Commissioner of Internal Revenue. IRS provided written comments, which are summarized below and reprinted in appendix V. IRS also provided technical comments, which we incorporated where appropriate. IRS disagreed with our recommendation that it re-establish long-term, quantitative goals for improving voluntary compliance. In its letter, IRS stated that the voluntary compliance rate is ill-suited as a strategic or performance metric for IRS for various reasons. For example, IRS stated that improving voluntary compliance, determining the success of its strategies, and adjusting its approach could be accomplished in the absence of a quantitative goal. However, as we note in the report, setting long-term strategic goals is essential for results-oriented management, because such goals explain in greater specificity the results an agency is intending to achieve. Further, focusing on intended results can promote strategic and disciplined management decisions that are more likely to be effective because managers who use fact-based performance analysis are better able to target areas most in need of improvement and to select appropriate interventions. IRS also stated that its actions alone do not determine the level of voluntary compliance, which is determined by the interaction of many factors, such as taxpayer behavior, tax law complexity, and IRS resources. We agree that IRS may not control all factors that affect voluntary compliance. However, IRS does influence taxpayer compliance through its service and enforcement programs. Furthermore, as we point out in the report, while agencies cannot mitigate all outside influences that may present risks or challenges to achieving outcomes, they should identify, measure, and assess such challenges to the extent possible. Given the benefits of setting long-term quantitative goals—as discussed in this report—we continue to believe it is prudent for IRS to establish such goals. IRS agreed with our recommendation that it develop and document a strategy that outlines how IRS will use National Research Program data to update compliance strategies that could help address the tax gap. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Chairmen and Ranking Members of other Senate and House committees and subcommittees that have appropriation, authorization, and oversight responsibilities for IRS. We will also send copies of the report to the Commissioner of Internal Revenue and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix VI. Our objectives were to determine (1) the main drivers of the tax gap; (2) the Internal Revenue Service’s (IRS) confidence in the tax gap estimates; (3) IRS goals, if any, for reducing the tax gap; and (4) the extent to which IRS uses tax gap estimates and underlying data to develop strategies and actions to reduce the tax gap. To determine the main drivers of the tax gap and IRS’s confidence in the estimates, we reviewed IRS’s tax gap estimates and underlying data; IRS technical papers and reports; third-party reviews of the data; and past GAO and Treasury Inspector General for Tax Administration reports on the 2001, 2006, and 2008–2010 tax gap estimates. We also interviewed officials from IRS’s Office of Research, Applied Analytics, and Statistics (RAAS) who are responsible for estimating the tax gap. We determined that IRS’s tax gap and compliance estimates were sufficiently reliable for the purposes of this report, particularly since IRS already has publicly released its tax gap estimates and disclosed their limitations. These purposes include discussing the major tax gap components, the orders of magnitude for various components, and IRS’s opinions about the certainty of its estimates. To determine IRS’s goals for increasing voluntary compliance, we reviewed IRS’s and the Department of the Treasury’s (Treasury) strategic plans and Treasury’s General Explanations of the Administrations Fiscal Year Revenue Proposals (commonly referred to as the Green Book) from 2011 to 2017. We also reviewed other IRS and Treasury documentation, such as the strategies for improving voluntary compliance that were developed in the mid-2000s. Additionally, we reviewed Treasury’s agency priority goals, including the goal it set in 2012 to increase voluntary compliance. We also reviewed the statutory requirements for agency performance goals under GPRAMA. We interviewed Treasury officials in the Office of Tax Analysis and the Office of Strategic Planning and Performance Improvement about prior goals that were set and the goal- setting process. We interviewed IRS officials responsible for developing strategies and establishing goals to reduce the tax gap, specifically officials in the Deputy Commissioner’s Office for Service and Enforcement and the Small Business/Self-Employed, Large Business and International, and Wage and Investment divisions. To determine the extent to which IRS uses the tax gap and other underlying data to update compliance efforts, we requested documentation on any plans or strategies that show how the various tax gap and other compliance studies work together toward a larger compliance strategy. We found that the agency had not developed these documents. We interviewed staff from the Deputy Commissioner’s Office for Service and Enforcement and RAAS about the agency’s plans to use tax gap data and other compliance studies when developing compliance strategies. To show additional detail on aspects of compliance using the same data upon which the individual income tax underreporting tax gap estimates are based, we examined IRS’s tax gap estimates for tax years 2008– 2010 and the underlying data from its National Research Program (NRP) study of individual income tax returns. This information is presented in appendix II. Unlike other IRS examinations, NRP examinations can be used to estimate taxpayer reporting compliance because they are drawn from a stratified, statistically representative sample of the population of individual income tax returns. We interviewed IRS officials from RAAS about their research and analysis of the NRP data, and we gathered related documentation where available. IRS officials described the quality review and data reliability processes they used to collect data from the NRP examinations. Because the NRP sample was based on random selections, the sample was only one of a large number of samples that IRS could have drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our estimates based on the sample as a 95 percent confidence interval plus or minus a margin of error. This is the interval that would contain the actual population value for 95 percent of the samples that could have been drawn. The estimates presented in appendix II have margins of error of less than 10 percent or 10 percentage points. In analyzing the NRP data, we conducted several reliability tests to ensure the data we used were sufficiently complete. For example, we electronically tested the data for obvious errors. We concluded that the data were sufficiently reliable for the purposes of this report based on these steps and on our previous reviews of tax gap estimates and NRP data. We conducted this performance audit from July 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We analyzed the raw National Research Program (NRP) data for individual income tax returns, including itemized deductions, for tax years 2008–2010. These data do not account for the undetected income that the Internal Revenue Service (IRS) adjusts for when developing tax gap estimates. Therefore these data are not comparable to the tax gap data presented elsewhere in this report, but they allow additional analysis of areas of misreporting. Table 7 provides greater details on certain line items from the individual income tax return that align with various third-party information reporting levels determined by IRS. Line items with substantial or some information reporting tended to have lower overall misreporting percentages. Line items that had the largest percentage of taxpayers with misreported income were those for sole proprietor and farming income, both of which are subject to little to no information reporting. Based on the analysis of these data, we also estimate that line items with the largest mean amounts of underreporting are business sale and supplemental income or loss; the business sale line item also has the largest mean amount of overreporting, averaging $21,000 per return; and sole proprietor income and farm income have very similar misreporting data; over 75 percent of the income is misreported and, of that, over 80 percent is under reported while under 20 percent is overreported. We also analyzed selected credits and deductions to determine the average noncompliance rates of these line items, as shown in table 8. Because credits and deductions offset taxpayers’ income or tax owed, taxpayers who underreported a credit or deduction overreport their tax liability or tax owed; taxpayers who overreport a credit or deduction underreport their tax liability or tax owed. However, we did not determine the extent to which misreporting was because of issues specific to how taxpayers claimed the credits and deductions or because taxpayers misreported their income, which could affect eligibility for certain credits and deductions. For example, the 2016 income limit to claim the Earned Income Tax Credit (EITC) is $39,296 for single, surviving spouse, or head of household taxpayers with one qualifying child. If IRS determined that such taxpayers who claimed the EITC and reported less than $39,296 in income on their tax returns had underreported their income in order to stay under the threshold, those taxpayers would no longer be eligible for the credit and would have overreported the credit. Based on the analysis of these data, we estimate that of the selected credits, EITC is the most claimed credit and about half of the time it is misreported; thirty-five percent of the time the child tax credit was misreported with about two- thirds of that being underreported, which is inconsistent with filing patterns for most of the other credits and deductions; of the selected deductions, the deduction for real estate taxes is most often claimed and about a quarter of the time it is misreported; the medical expenses line item has the highest percentage of misreporting; 80 percent of the time the deduction is overreported; and the mortgage interest deduction has the highest average overreported amount, over $4,000 per return. In estimating the individual income tax gap, the Internal Revenue Service (IRS) applies an econometric technique called detection controlled estimation (DCE), which is a regression-based model that controls for variables that could affect the amount of underreporting detected. The statistical technique first produces a hypothetical ‘‘best practices’’ examiner—an ideal which is unattainable—based on who conducted the examinations and the observed examination results. It then statistically estimates the noncompliance detected by the hypothetical examiner to adjust upward the findings from research examinations conducted by actual examiners. The technique estimates total undetected underreporting by imputing the average underreporting undetected by IRS’s National Research Program (NRP) examination to the detected underreporting, controlling for certain return line item characteristics. According to IRS officials, this approach is reasonable and the best currently available to attempt to estimate the full amount of underreported individual income. As shown in table 9, more than half of the underreporting component of the tax gap consists of income that IRS did not detect during examinations. DCE is not applicable to the underpayment and nonfiling components of the tax gap. In efforts to improve the tax gap estimates, the Internal Revenue Service (IRS) updated two areas of the 2008–2010 tax gap estimate by developing updated methodologies. Nonfiling individual income tax: IRS summed together the total of taxpayers who do not file tax returns and those who filed late. The 2008–2010 estimate of taxpayers not filing a return was made by combining the two methods used to estimate the 2006 and 2001 tax gap estimates. In 2006, IRS used a sample of individuals not appearing on filed tax returns. In 2001, IRS conducted an “exact match” between the Census Bureau’s annual Current Population Survey and IRS data. The 2008–2010 estimate of late filers was based on the total balance due from late filed tax returns, adjusted for income reported to IRS on information returns. IRS believes its current methodology is an improvement over the 2006 estimate as it uses the population data rather than a sample, avoiding disadvantages resulting from sampling. IRS reported improvements in the Census and IRS information associated with nonfilers allowed them to create a better matched dataset and identify nonfilers more accurately. Nonfiling self-employment data: The methodology IRS used to calculate self-employment tax nonfiling is the same that it used for individual income tax. However, for the 2008–2010 estimate, IRS changed where it reports self-employment tax nonfiling within the tax gap estimate. For the 2008–2010 estimate, this tax is now reported in the employment tax category, whereas for the 2001 and 2006 estimates it was reported in the individual income tax category. IRS officials stated that for the 2006-2010 estimate IRS decided to break self-employment out separately and report it with the employment tax because they believe it allows a more comprehensive view of employment taxes. IRS also updated how the underlying data supporting the tax gap are organized in two ways: Changes in net tax gap estimates: As previously mentioned, IRS published net tax gap estimates by each tax type (individual income, corporation income, employment, and estate tax) for the first time in the 2008–2010 estimate. IRS officials stated that they made progress by providing this data. However, IRS is unable to break out the net tax gap further by tax component because during examinations, adjustments are not categorized by component (i.e., underreporting, underpayment, and nonfiling). Changes in individual income underreporting: Starting in 2008– 2010, IRS modified the categories it uses to break down the individual income underreporting component. These changes affect how IRS calculates the net misreporting percentage (NMP) for individual income tax, but not how it calculates the tax gap. IRS uses the NMP to show the relationship between third-party information reporting and individual income tax reporting compliance. IRS reported the changes reflect an improvement in methodology. IRS cautions that any comparison of the 2008–2010 NMP to the 2006 NMP estimates should consider those improvements. The prior calculation method involved adding offsets to income, such as deductions, exemptions, and adjustments, which distorted the comparison across categories. IRS determined a better approach was to combine income items into categories and to report offsets to income as a separate category. (See figure 5.) In addition to the contact named above, Jeff Arkin (Assistant Director), James Ashley, Jehan Chase, Charles Fox, John Hussey, Donna Miller, John Mingus, Edward Nannenhorn, Cynthia Saunders, Robyn Trotter, and Elwood White made significant contributions to this report.", "summary": "The tax gap—the difference between tax amounts that taxpayers should have paid and what they actually paid—has been a persistent problem for decades. The tax gap estimate is an aggregate estimate of the five types of taxes that IRS administers—individual income, corporation income, employment, estate, and excise taxes. For each tax type, IRS attempts to estimate the tax gap based on three types of noncompliance: (1) underreporting of tax liabilities on timely filed tax returns; (2) underpayment of taxes due from timely filed returns; and (3) nonfiling, when a taxpayer fails to file a required tax return altogether or on time. GAO was asked to review IRS's tax gap estimate for tax years 2008 to 2010. This report provides information on (1) the main drivers of the tax gap; (2) IRS's confidence in the tax gap estimates; (3) IRS's goals, if any, for reducing the tax gap; and (4) the extent to which IRS uses tax gap estimates and underlying data to develop strategies to reduce the tax gap. GAO reviewed IRS tax gap data and reports and interviewed IRS officials. The Internal Revenue Service's (IRS) latest tax gap estimate found that taxpayers voluntarily and timely paid about 81.7 percent of the taxes they should have paid for tax years 2008-2010. As with past estimates, underreporting of individual income taxes accounted for the largest portion of the 2008-2010 tax gap. IRS believes the tax gap estimates are sufficiently reliable to provide a snapshot of tax compliance as a whole because much of the estimates are based on the most current data available, such as from IRS's National Research Program (NRP). IRS previously set or acknowledged goals to improve voluntary compliance. However, IRS has since moved away from that approach. IRS officials now believe there are limited benefits to establishing goals because IRS cannot control all aspects of compliance and updated methodologies may cause fluctuations in the estimates. IRS does, however, have an impact on taxpayers' compliance through its service and enforcement programs. Without long-term, quantitative goals for improving voluntary compliance, it will be difficult for IRS to determine the success of its compliance efforts and adjust its approaches. The Internal Revenue Manual states IRS needs to measure taxpayer compliance and other factors so compliance information and tools can be improved. IRS uses tax gap data to study compliance behaviors and update computer formulas designed to identify tax returns with a high likelihood of noncompliance. Yet IRS has not documented a comprehensive strategy that shows how it intends to use NRP data to update compliance strategies. Officials said the uses of NRP are widely known from general documentation about NRP. Without developing and documenting a strategy for using the NRP data to update compliance strategies, IRS may not fully leverage the compliance data or allocate enforcement resources in the most cost-effective manner, and it may be difficult for Congress and others to understand the merits of what they are being asked to fund. GAO recommends that IRS re-establish goals for improving voluntary compliance and develop and document a strategy that outlines how it will use its data to update compliance strategies to address the tax gap. IRS disagreed with GAO's recommendation on establishing goals and agreed with the recommendation on compliance strategies. GAO continues to believe that goals are essential for results-oriented management.", "document_type": "gao"}
{"report": "PTC systems are required by law to prevent certain types of accidents or incidents. In particular, a PTC system must be designed to prevent train- to-train collisions, derailments due to excessive speed, incursions into work zone limits, and the movement of a train through a switch left in the wrong position. While railroads may implement any PTC system that meets these requirements, the majority of passenger railroads are implementing one of four types of systems. PTC’s intended safety benefits can be fully achieved nationwide when all required railroads have successfully installed PTC components, tested that these components work together and the systems function as designed, and are interoperable with other host and tenant railroads’ PTC systems that share track. Interoperability means the locomotives of any host railroad and tenant railroad operating over the same track segment will communicate with and respond to the PTC system, allowing uninterrupted movements over property boundaries. Interoperability is critical to PTC functioning properly given the complexity of the rail network in the United States. In much of the country, Class I freight railroads function as hosts for Amtrak and commuter railroads. For example, one of the seven major Class I freight railroads reports that 24 tenant railroads operate over its PTC-equipped tracks, including freight, Amtrak, and commuter railroads. A notable exception to this is the Northeast Corridor, which runs from Washington, D.C., to Boston, Massachusetts, which Amtrak predominantly owns and over which six freight and seven commuter railroads operate as tenants. PTC implementation involves multiple stages to achieve full implementation, including planning and system development, equipment installation and testing, system certification, and full deployment, including interoperability. Each railroad must develop an FRA-approved PTC implementation plan that includes project schedules and milestones for certain activities, such as equipment installation. The equipment installation stage involves many components, including communication systems; hardware on locomotives and along the side of the track (called “wayside equipment”); and software in centralized office locations as well as onboard the train and along the track. Each railroad is required to report quarterly and annually to FRA on its PTC implementation status relative to its implementation plan. A railroad can also revise its implementation plan to reflect changes to the project, which then must be reviewed and approved by FRA. In addition, railroads must demonstrate that the PTC systems are deployed safely and meet functional requirements through multiple stages of testing. Before initiating testing on the general rail system, railroads must submit a formal test request for FRA approval that includes, among other things, the specific test procedures, dates and locations for testing, and the effect the tests will have on current operations. The multiple stages of PTC testing include: Laboratory testing: locomotive and wayside equipment testing in a lab environment to verify that individual components function as designed. Field testing: includes several different tests of individual components and the overall system, such as testing of each locomotive type to verify that it meets functional requirements and field integration testing—a key implementation milestone to verify that each PTC component is integrated and functioning safely as designed. Revenue service demonstration (RSD): an advanced form of field testing in which the railroad operates PTC-equipped trains in regular service under specific conditions. RSD is intended to validate the performance of the PTC system as a whole and to test the system under normal, real-world operations. Interoperability testing: host and tenant railroads that operate on the same track must work together to test interoperability to ensure each railroad can operate seamlessly across property boundaries. Almost all of the 40 railroads currently required to implement PTC must demonstrate interoperability with at least one other railroad’s PTC system. Using results from field and RSD testing, combined with other information, host railroads must then submit a safety plan to FRA for approval. We have previously reported that these safety plans are about 5,000 pages in length. Once FRA approves a safety plan, the railroad receives PTC system certification, which is required for full implementation, and is authorized to operate the PTC system in revenue service. According to FRA officials, the FRA may impose conditions to the PTC safety plan approval as necessary to ensure safety, resulting in a conditional certification. Railroads may receive a maximum 2-year extension from FRA past the December 31, 2018, deadline if they meet six criteria set forth in statute. Specifically, railroads must demonstrate, to the satisfaction of FRA, that they have: (1) installed all PTC system hardware consistent with the total amounts identified in the railroad’s implementation plan; (2) acquired all necessary spectrum consistent with the implementation plan; (3) completed required employee training; (4) included in a revised implementation plan an alternative schedule and sequence for implementing the PTC system as soon as practicable but no later than December 31, 2020; (5) certified to FRA that they will be in full compliance with PTC statutory requirements by the date provided in the alternative schedule and sequence; and (6) for Class I railroads and Amtrak, initiated RSD or implemented a PTC system on more than 50 percent of the track they own or control that is required to have PTC. For commuter and Class II and III railroads, the sixth statutory criterion is to have either initiated RSD on at least one territory required to have operations governed by a PTC system or “met any other criteria established by the Secretary,” which FRA refers to as “substitute” criteria. FRA is responsible for overseeing railroads’ implementation of PTC, and the agency monitors progress and provides direct assistance to railroads implementing PTC. For example, FRA officials provide technical assistance to railroads, address questions, and review railroad-submitted documentation. FRA has a PTC Staff Director, designated PTC specialists in the eight FRA regions, and additional engineers and test monitors responsible for overseeing technical and engineering aspects of implementation and reviewing railroads’ submissions and requests, as well as programmatic support staff. In anticipation of the upcoming implementation deadline, in May 2017, FRA began to send notification letters to railroads it determined were at risk of both not meeting the December 31, 2018, implementation deadline and not completing the requirements necessary to qualify for an extension. FRA identified “at- risk” railroads by comparing a railroad’s hardware installation status to the total hardware required for PTC implementation, according to the railroad’s implementation plan. FRA has increased the “at-risk” threshold percentage over time as the deadline approaches. (See Table 1). FRA has additional oversight tools, which include use of its general civil penalty enforcement authority for failure to meet certain statutory PTC requirements. FRA has used this authority in 2017 and 2018 to assess civil penalties, primarily against passenger railroads that failed to comply with the equipment installation milestones, the spectrum acquisition milestones, or both, that the railroads had established in their implementation plans for the end of 2016 and 2017. As part of our body of work on PTC, we found that railroads face numerous PTC implementation challenges and made recommendations to FRA to improve its oversight of implementation. Specifically, in 2013 and 2015 we found that many railroads were struggling to make progress due to a number of complex and interrelated challenges, such as developing system components and identifying and correcting issues discovered during testing. For example, we found in March 2018 that FRA had not systematically communicated information or used a risk-based approach to help commuter railroads prepare for the 2018 deadline or to qualify for an extension. We also found that many railroads were concerned about FRA’s ability to review submitted documentation in a timely manner, particularly given the length of some required documentation such as safety plans and FRA’s limited resources for document review. In March 2018, we recommended FRA identify and adopt a method for systematically communicating information to railroads and use a risk-based approach to prioritize its resources and workload. FRA agreed with our recommendations. Most recently, in September 2018, we testified on the status of railroads’ implementation of PTC. As of June 30, 2018, many passenger railroads reported that they remain in the equipment installation and field-testing stages, which are early stages of PTC implementation. However, since we testified in March 2018, railroads have made progress on equipment installation. Based on our analysis of the 40 railroads’ reported status as of June 30, 2018, about half of the railroads have completed equipment installation, and many others are nearing completion of this stage. Specifically, 20 of the 29 passenger railroads reported being more than 90 percent complete with locomotive equipment installation. Nearly two-thirds of passenger railroads that must install wayside equipment reported being more than 90 percent complete. One-third of passenger railroads are among those designated by FRA as at-risk of both not meeting the end of 2018 implementation deadline and not completing the requirements necessary to qualify for an extension. Specifically, in August 2018, FRA identified nine railroads—all commuter railroads—as at-risk, fewer than the 12 railroads FRA had previously designated as at-risk in its June 2018 letters to railroads. Since we reported in March 2018, Amtrak reported that it has initiated both field testing and RSD, but most commuter railroads reported slower progress with testing, especially with RSD. For example: Laboratory and initial field testing: 19 of 28 commuter railroads reported having initiated this testing as of June 30, 2018; this number represents six more commuter railroads than the 13 we previously reported as having initiated field testing as of September 30, 2017. RSD testing: Eight of 28 commuter railroads reported initiating RSD testing as of June 30, 2018; this number represents two more commuter railroads than the six we previously reported as having entered RSD testing as of September 30, 2017. As noted earlier, unless a commuter railroad receives approval for using substitute criteria, the railroad must initiate RSD, a final stage of PTC testing, on at least one territory by December 31, 2018, to qualify for an extension. Passenger railroad representatives reported that they continued to face many of the same challenges we have previously identified, including limited industry-wide availability of vendors and expertise and software defects. For example, in response to our questionnaire, 12 of 29 passenger railroads reported challenges with PTC vendors and contractors. One passenger railroad noted that because its contractor manages PTC projects across the country with the same deadline and requirements, it can be difficult for all railroads to get the resources they need from their contractor. We previously reported that there are a limited number of vendors available to design PTC systems, provide software and hardware, and conduct testing. For example, we reported in 2015 that, according to railroad industry representatives, there were two vendors for the onboard train management computer and three vendors for the wayside equipment. One small passenger railroad recently testified that, because a single manufacturer was providing PTC equipment and software to many railroads across the country, it had to wait over a year for PTC equipment to be delivered and installed. We also previously reported that railroads face software challenges, and noted that railroads had concerns with the number of defects identified during software testing, since these take time to address. In response to our questionnaire, nine passenger railroads reported encountering challenges related to maturity of the PTC software systems, such as working through software bugs or defects during testing. As passenger railroads work to complete PTC implementation activities, some have made service or schedule adjustments to accommodate the need to install equipment or perform testing. Moreover, several passenger railroads told us that as PTC implementation schedules become more compressed, avoiding effects on passengers becomes more difficult. We identified 10 passenger railroads that have made changes to their operations due, in part, to PTC implementation, including the six largest commuter railroads in the country, which collectively reported over 400 million passenger trips in 2017. These changes had effects such as reduced service or longer travel times. For example, one of the largest passenger railroads in the country reduced service on certain routes and eliminated some express trains to accommodate schedules enabling them to complete PTC equipment installation prior to the December 2018 deadline. Another large passenger railroad has shutdown weekend service—providing bus service to transport passengers between stations—for PTC testing. Several passenger railroads had to reduce service for equipment or track installation or testing, resulting in fewer locomotives or less track available for service. In June, July, and August 2018, FRA held three PTC symposiums that were attended by representatives from all 40 railroads and that focused on the extension process and substitute criteria, PTC testing, and safety plans, respectively. FRA’s June 2018 symposium covered information consistent with our March 2018 recommendation that the agency adopt a method for systematically communicating information related to the requirements and process for an extension to railroads. Specifically, FRA presented information on the procedures for requesting and obtaining FRA’s approval for an extension to implement PTC beyond the December 2018 deadline including FRA’s review process. FRA also clarified that for commuter railroads, initiating field testing was one approach that could potentially qualify as substitute criteria, rather than initiating RSD. Representatives we interviewed from the passenger railroads that participated in the symposiums found them to be helpful, and some passenger railroads reported that the information presented led them to adjust their approach to meeting the December 2018 deadline. For example, one passenger railroad representative we spoke to said that until the symposium, he was unaware that using field testing as substitute criteria was a potential option. Some passenger railroads we met with also told us they are re-evaluating what activities and documentation need to be revised and submitted to FRA before the December 2018 deadline based on the information presented at the symposiums. For example, representatives from one passenger railroad we met with said that FRA officials encouraged them to update their PTC implementation plan right away with current equipment installation totals, to ensure consistency across all required documentation by the end of 2018. A couple of passenger railroads noted that the information presented at the symposiums clarified many questions and would have been beneficial to know a year or two earlier in the implementation process. In addition, in recent months FRA has continued to provide assistance to railroads and has taken a series of steps to better prepare railroads for the 2018 deadline. These steps include meeting regularly with individual railroads and developing approaches intended to help many railroads meet the requirements necessary for a deadline extension. For example, representatives from one commuter railroad said agency officials have been willing to share lessons learned, clarify requirements, and review draft documentation to provide informal feedback. Almost three-quarters of passenger railroads (21 of 29) reported to us that they plan to apply for an extension. Five passenger railroads reported to us that they planned to submit their extension request by the end of September 2018, but as of September 21, 2018, only one had submitted the request and required documentation. However, FRA officials noted that with the exception of possibly one or two railroads, they anticipate that all passenger and freight railroads will likely need an extension, and that railroads must submit their requests by the end of the year to be considered in compliance with PTC requirements. A railroad must demonstrate that it has met all of the statutory criteria necessary to qualify before, or when, it formally requests an extension. And as previously discussed, many railroads remain in the early stages of PTC implementation. Of the eight passenger railroads that anticipate reaching full implementation by December 31, 2018, six are already operating under conditionally certified safety plans; one has submitted its safety plan for review; one plans to submit its safety plan to FRA in fall 2018 for certification. FRA officials stated that it is unclear whether the passenger railroads that have obtained conditional PTC System Certification will have achieved full implementation on all route miles by December 31, 2018. Of the 21 passenger railroads that intend to apply for an extension, more than half—all commuters—reported that they plan to use substitute criteria to qualify. Moreover, two-thirds of the commuter railroads (8 of 12) that plan to use substitute criteria intend to apply to use their initiation of field integration or functional testing as substitute criteria, and many of these will apply to begin field testing on only a portion of their track. Figure 1 depicts the stage of PTC implementation that passenger railroads at least expect to reach by December 31, 2018, in order to be in compliance with the deadline, based on railroads’ responses to our July- August 2018 questionnaire. Although FRA has recently made clear that it is authorized to grant extensions based on initiating field testing or other FRA-approved substitute criteria, this approach defers time-intensive RSD testing into 2019 and beyond. For example, one commuter railroad we met with has applied for, and was granted approval by FRA to use, the initiation of field testing on a 16.5-mile segment of track as substitute criteria to qualify for an extension. That railroad must ultimately implement PTC over 321 miles of track that it owns and operates over, meaning that it will need to complete field testing, RSD, and interoperability testing on the remaining 95 percent of its track and achieve system certification prior to the 2020 deadline. In March 2018, we testified that FRA officials told us that moving from the start of field testing to the start of RSD can take between 1 and 3 years, and has averaged about 2 years for those railroads that have completed that stage. We also reported that FRA officials believe that most railroads underestimate the amount of time needed for testing. FRA officials told us that they do not consider railroads that are approved for an extension under substitute criteria to be necessarily at a higher risk of not completing PTC implementation by 2020. However, in light of these time estimates and the unknown challenges that railroads may face during testing, railroads that are in the early field-testing stage moving into 2019 could face challenges completing PTC implementation by the extended December 2020 deadline. Railroads further behind in PTC implementation may need to apply for an extension due to factors such as compressed implementation schedules, as well as the time needed for FRA approvals. For example, representatives from one commuter railroad said that they hope to reach RSD before the December 31, 2018, deadline, but that it would be difficult to meet the extension requirements, apply for, and receive an extension given the volume of paperwork FRA will be receiving at the end of the year. Instead, the railroad plans to submit an extension request using substitute criteria consisting of field testing in order to be in compliance at the end of the year. Such an approach involves first applying for and receiving approval for substitute criteria and then formally requesting an extension and submitting supporting documentation to FRA before the end of the year. Entering RSD prior to the deadline could be difficult given that FRA officials told us they have advised railroads to allow at least a month for FRA’s review of test requests, which must be approved prior to initiating field testing and RSD. Some passenger railroads also reported challenges regarding host and tenant responsibilities, including coordination and interoperability—which are likely to continue beyond 2018. Some passenger railroads told us that coordinating with host or tenant railroads that are in different implementation stages as the 2018 deadline approaches poses several challenges. For example, a few passenger railroads told us that they are unable to conduct interoperability testing because their host or tenant railroad has not yet reached that stage of implementation. Additionally, officials from Amtrak—which interoperates with 21 other railroads—noted that the host-tenant relationship can be complicated and requires a high level of coordination to resolve issues between railroads. Amtrak officials also told us they were conducting risk assessments to determine whether and how to continue service in situations where their host or tenant railroad has not completed PTC implementation or met the requirements necessary for an extension. While few passenger railroads have reached the interoperability stage, one railroad association stated that interoperability is, and will continue to be, a substantial challenge for metropolitan areas with dense and complex rail networks with several host-tenant relationships. For example, according to one passenger railroad, 14 different freight and passenger railroads will need to interoperate in the Chicago area. FRA’s already substantial workload is expected to increase as railroads continue to submit documentation necessary for extensions and continue PTC implementation activities. FRA is focused on ensuring railroads are in compliance by the December 2018 deadline—whether via an extension or by completing implementation. While FRA officials report that they anticipate almost all railroads will likely request an extension, only one passenger railroad had submitted an application for an extension as of September 21, 2018. FRA will need to review and approve all related documentation associated with each extension request and make a determination within 90 days, meaning if a railroad were to submit its extension request on December 31, 2018, FRA would have until the end of March 2019 to approve or deny the railroad’s extension request. In addition to extension requests and supporting documentation, many passenger railroads will also be submitting to FRA: requests for substitute criteria, test requests to initiate field testing or RSD, revisions to PTC implementation plans, and PTC safety plans. Some of these documents can be lengthy and require back and forth between FRA and railroads before approval. For example, we previously reported that PTC safety plans are about 5,000 pages in length and take between 6 and 12 months for FRA to review. To help manage the forthcoming influx of documentation, FRA officials have offered to review draft documentation, such as substitute criteria requests and test requests, and have advised railroads to take FRA’s review times into account prior to submitting required documentation. FRA officials told us that in trying to manage their workload, they initially told railroads they did not have time to review draft submittals. However, they found that taking the time to conduct draft reviews ultimately led to higher quality formal submittals and accelerated the overall review process. In addition, FRA officials said that their goal is to not delay any railroad that is ready to move into testing, and that they advised railroads to build 30 to 45 days for test request reviews into their project schedules. Despite these efforts, some passenger railroads remain concerned about the agency’s ability to manage the PTC workload in the coming months and beyond 2018. For example, seven of 29 passenger railroads identified FRA’s resources and review times as a challenge leading up to the December 2018 deadline. In addition, three passenger railroads reported that they would complete all the requirements for full PTC implementation by the December 31, 2018, deadline, but planned to apply for an extension due to concerns that FRA would not be able to review and certify their safety plans to enable them to reach full implementation prior to the deadline. Based on similar concerns, in March 2018, we recommended FRA develop an approach to prioritize the allocation of resources to address areas of greatest risk as railroads work to complete PTC implementation. FRA has acknowledged the railroads’ concern given the surge of submissions requiring FRA approval in 2018 and has reported the agency is reallocating existing expertise and expanding the PTC workforce through training, expanding contracts with existing support contractors, and initiating one additional contract to provide technical support. For example, FRA officials told us that they reallocated resources to shift PTC specialists’ responsibilities to focus exclusively on testing-related activities because their involvement is critical for the testing stage. Taking steps to prioritize limited resources will only increase in importance as the amount of documentation needing FRA review continues to grow in 2019 and 2020, as railroads move through testing and submit complex and lengthy safety plans. Although FRA has taken steps to provide key extension information to railroads and to help ensure railroads’ compliance with PTC deadlines, uncertainty remains, particularly in regard to FRA’s enforcement strategy if railroads are noncompliant with the PTC implementation requirements, such as if railroads were to fail to apply for an extension by the deadline. Representatives from all railroads implementing PTC with whom we met told us that FRA’s planned enforcement approach for any railroad that fails to meet the requirements for an extension beyond 2018 is unclear. FRA officials told us they have shared the range of applicable civil penalties with railroads for years, but that any policy decision about how potential fines will be levied for non-compliant railroads has not yet been made. In addition, it is also unclear how the agency would approach enforcement for railroads that have a host or tenant operating on their tracks that has not completed implementation or met the requirements necessary for an extension. Ten of the 13 passenger railroads we met with told us they do not currently have or see a need to develop contingency plans. For example, representatives from one passenger railroad said they did not have a contingency plan because FRA has made clear they are committed to helping railroads comply with the 2018 deadline. FRA officials said that the goal of enforcement is to help bring all railroads into compliance and that they would look at the specific circumstances for any host-tenant issues before assessing a fine. In conclusion, almost all passenger railroads will likely request an extension beyond 2018, which will require FRA approval. Many commuter railroads plan to request substitute criteria which may result in those railroads remaining in the early stages of PTC implementation at the start of 2019. However, given that only one passenger railroad has submitted an extension request, it is unlikely we will know how many railroads will be granted an extension by the December 31, 2018 deadline. While few passenger railroads had developed contingency plans when we met with them, as December nears and schedules become further compressed, additional railroads may have to make service or schedule adjustments to help them reach compliance with the deadline. Although FRA has reported taking some actions in response to our March 2018 recommendation that they better prioritize resources, FRA resources and review times remain a significant concern—both for near-term efforts such as extension requests and for the safety plans that need to be reviewed and certified prior to the end of 2020. These issues—combined with the ongoing implementation, testing, and interoperability challenges that a number of railroads reported to us—raise questions as to the extent FRA and the nation's passenger railroads are poised for full PTC implementation by December 31, 2020. Chairman Thune, Ranking Member Nelson, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Susan Fleming, Director, Physical Infrastructure at (202) 512- 2834 or FlemingS@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Susan Zimmerman (Assistant Director); Katherine Blair; Greg Hanna; Delwen Jones; Emily Larson; Joanie Lofgren; SaraAnn Moessbauer; Maria Wallace; and Crystal Wesco. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "Forty railroads are currently required by statute to implement PTC, a communications-based system designed to slow or stop a train that is not being operated safely. Of these, 29 passenger railroads collectively provide over 500 million passenger trips annually. Although the deadline for PTC implementation is December 31, 2018, railroads may receive a maximum 2-year extension to December 31, 2020, if they meet certain statutory criteria. GAO was asked to review passenger railroads' progress toward PTC implementation. This statement discusses (1) passenger railroads' PTC progress and FRA's steps to assist them, and (2) how passenger railroads and FRA plan to approach the 2018 and 2020 deadlines. GAO analyzed railroads' most recent quarterly reports covering activities through June 30, 2018; sent a brief questionnaire to all 40 railroads; and interviewed officials from FRA and 16 railroads, selected in part based on those identified as at-risk by FRA. As of June 30, 2018, passenger railroads (28 commuter railroads and Amtrak) generally remained in the early stages of positive train control (PTC) implementation—including equipment installation and early field testing. However, many passenger railroads are nearing completion of the equipment installation stage. For example, two-thirds of passenger railroads reported being more than 90 percent complete with equipment installation. With regard to testing, Amtrak has reported that it has initiated both field testing and revenue service demonstration (RSD), an advanced form of field testing that is required to fully implement PTC. However, most commuter railroads reported slower progress with testing. Of the 28 commuter railroads required to implement PTC, 19 reported initiating field testing, but only eight reported initiating RSD. The Federal Railroad Administration (FRA) recently clarified the criteria railroads must meet to qualify for a 2-year extension past the December 31, 2018, PTC implementation deadline. To receive an extension, railroads must meet six statutory criteria. For the sixth criterion, commuter railroads are authorized to either initiate RSD on at least one track segment or use FRA-approved substitute criteria. FRA clarified these and other requirements at three PTC symposiums hosted for railroads in summer 2018. For example, FRA officials said that initiating field testing instead of RSD was one approach that commuter railroads could potentially take to receive FRA's approval of substitute criteria. FRA's actions are consistent with GAO's March 2018 recommendation that the agency communicate to railroads the requirements and process for an extension. Challenges related to PTC implementation and FRA's resources raise questions as to the extent FRA and the passenger railroad industry are poised for full PTC implementation by December 31, 2020. Most passenger railroads anticipate needing an extension, leaving substantial work for both railroads and FRA to complete before the end of 2020. Almost three-quarters of passenger railroads (21 of 29) reported that they, or the railroad which owns the track on which they operate, will apply for an extension. More than half of these railroads reported planning to apply for an extension using substitute criteria, and of these, eight intend to apply for substitute criteria based on field testing. Though use of substitute criteria is authorized in law, this approach defers time-intensive RSD testing into 2019 and beyond. In addition, passenger railroads reported that they continue to face many of the same challenges GAO previously identified, such as software defects and limited industry-wide availability of vendors. Further, passenger railroads expressed concern that FRA's workload will markedly increase as railroads submit requests for extension approvals. FRA has acknowledged concerns about the pending surge of submissions and agency officials said they have taken recent steps to help manage the forthcoming influx of documentation, such as reallocating resources. However, as of September 21, 2018, only one passenger railroad had applied for an extension. It remains unclear how many extension requests FRA will receive or what FRA's enforcement strategy will be for noncompliance with the statute, such as for railroads that fail to apply for an extension by the deadline. In March 2018, GAO recommended FRA take steps to systematically communicate extension information to railroads and to use a risk-based approach to prioritize agency resources and workload. FRA has taken some steps to address these recommendations, such as recently communicating and clarifying extension requirements to all railroads during three symposiums. GAO will continue to monitor FRA's progress.", "document_type": "gao"}
{"report": "USPS undertakes capital-spending projects for a number of reasons and more than one reason may apply to a single project. According to USPS documentation on its capital spending processes, these reasons include: to support USPS’s organizational objectives and strategic plan, to help sustain existing operations and meet USPS’s universal service obligation, to protect the health and safety of employees and customers or meet legal requirements, or to generate a positive return-on-investment—such as by increasing revenues or decreasing costs—thus improving USPS’s finances. USPS generally categorizes its capital spending in four broad categories: vehicles, facilities, information technology and other, and mail processing equipment, as shown in figure 1. USPS has processes for setting an annual capital-spending budget and approving specific capital projects. USPS prepares an annual capital- spending budget as part of its annual organization-wide budget. According to USPS documentation on its capital spending process, and USPS officials the process includes the following steps: In advance of each fiscal year, USPS’s Finance and Planning Department reviews estimated revenues and expenses to determine an appropriate total capital-spending budget. Next, USPS’s Executive Leadership Team and the leadership of relevant departments develop requests for each department’s estimated capital-spending needs for the upcoming year, including a ranking of desired projects. These lists provide information on projects’ purposes, estimated capital and operating expenses, potential return-on-investment, and relationship to USPS’s strategic initiatives. The Finance and Planning Department then reviews these lists in light of the previously determined total capital-spending budget and sets a capital spending budget for each of the broad categories of capital spending. The Executive Leadership Team votes on this preliminary capital spending budget, which, if approved, is included in the organization- wide budget that is subject to approval by USPS’s Board of Governors. The budget approved by the Board of Governors includes the total and categorical capital-spending budget, but does not include approvals for specific projects. According to USPS officials, USPS also uses these capital-spending requests, along with other information, such as historical capital-spending data and information on already identified specific future capital-spending projects, to annually update a 10-year projection of capital spending. USPS uses this 10-year projection to estimate USPS’s potential future capital spending and requirements for capital project cash outlays. USPS also has processes for approving specific capital projects. Project sponsors—those departments that wish to undertake a capital-spending project—must obtain approval from different groups within USPS to initiate capital projects. According to USPS documentation, the level of approval required depends on the estimated total cost of the project: Total costs over $5 million: The project sponsor must submit a DAR to USPS’s Investment Review Committee for review. DARs contain estimated project cost, return-on-investment, and other information used to justify the project. If the committee approves, it makes a recommendation to the Postmaster General for final approval. USPS’s Office of Inspector General also reviews and assesses the adequacy and the depth of the information in the DAR, assesses whether the project is in USPS’s best business interest, and may provide input to the Investment Review Committee, which may take that information into consideration when reviewing projects. Total costs from $1 million to $5 million: The project sponsor must submit a DAR to USPS’s Technical Review Committee for review and approval. Total costs under $1 million: The project is reviewed by USPS’s Finance and Planning department, and approval is subject to the level of budgetary resources available. USPS does not require a DAR for these projects, although the process involves other documents, such as a one-page “Justification of Expense” that is required for many of the projects. USPS faces organization-wide uncertainty that may affect its capital spending. We define “organizational uncertainty” as those uncertainties— such as business, budgetary, legislative or regulatory, or other conditions—that may affect USPS’s ability to remain competitive and achieve its mission. For example, in the absence of adequate revenues that would cover all of USPS’ expenses, these uncertainties may affect the extent to which USPS can undertake its identified capital-spending plans. According to USPS, organizational uncertainties include the following: Business uncertainty includes potential changes to USPS’s business and the market for its products and services. Such uncertainty may be affected by changing customer preferences—such as continuing diversion of First Class Mail to electronic alternatives (e.g., e-mail or online banking)—and increased competition for package shipments. Budgetary uncertainty includes potential uncertainty and changes to revenues and expenses that affect USPS’s finances. Legislative or regulatory uncertainty includes potential actions intended to address some of USPS’s financial challenges. For example, postal reform legislation has been introduced that, if enacted, could improve USPS’s financial position. Both H.R. 756 and S. 2629 propose to relieve USPS of some of its retiree health and pension obligations and provide a reinstatement of a partial rate surcharge. Similarly, the Postal Regulatory Commission—an independent establishment of the executive branch that regulates USPS— is considering providing USPS with additional flexibility on pricing, which could also improve USPS’s finances. According to USPS documentation on capital-spending processes as well as DARs for individual capital-spending projects, capital-spending projects also can face project-specific risks, such as the following: Technological risks, which include complexity, quality, and security concerns: For example, capital projects deploying new technology intended to increase operational efficiency may face the risk that the new technology could become obsolete given future technological advances. Operational risks, which include maintenance and performance of projects: For example, equipment purchased as part of a capital project could involve the risk that it may not perform as expected. Integration risks, which include network and system integration and user acceptance of projects: For example, a project involving new retail technology may face the risk that USPS’s customers will not accept the new technology, and, as a result, the project does not meet its target for customer use. According to USPS, the organization has critical capital-spending needs after years of reduced capital spending. Starting in fiscal year 2009, USPS sharply decreased its capital spending for several years, in response to decreased volume and revenues; however, USPS now plans to increase its spending. Specifically, USPS projects average annual capital-spending cash outlays of $2.4 billion from fiscal years 2018 through 2028—about 70 percent more than the average of $1.4 billion from fiscal years 2007 through 2017. (See fig. 2.) While this projected spending is largely driven by plans to acquire a new fleet of delivery vehicles, USPS also projects increased spending in the other categories of facilities, information technology, and mail-processing equipment. In addition, while some of USPS’s planned capital spending is intended specifically to generate a return-on-investment—such as by increasing revenues or decreasing costs—much of USPS’s planned capital spending is to help sustain operations. Specifically, according to our analysis of USPS data, roughly 80 percent of USPS’s projected capital spending for fiscal year 2018 is for projects intended to help sustain operations. In its latest projection of capital spending, covering fiscal years 2018 through 2028, USPS projects an annual average of roughly $821 million on capital spending for vehicles, primarily driven by a multi-year acquisition of new delivery vehicles starting in fiscal year 2019. According to USPS officials, USPS decided a number of years ago to defer purchasing new delivery vehicles and instead continued using and maintaining its existing fleet. Because USPS started acquiring most of its existing delivery fleet in 1987, the majority of its delivery vehicles are several decades old. USPS officials said these vehicles incur high maintenance costs, averaging about $4,500 per vehicle annually. In acquiring new vehicles, USPS plans to take a number of steps to ensure that the vehicles best meet the organization’s needs. According to USPS officials, it will spread the acquisition over multiple years to avoid a large cash outlay in any given year and to enable USPS to modify the vehicle purchases over time to take advantage of any technological changes, such as advances in alternative fuel technologies. Officials added that USPS is considering vehicles that will encourage operational efficiencies. For example, USPS is considering taller vehicles that will better allow carriers to handle trays of mail and packages. The officials also noted that USPS may consider different vehicle designs for different market needs. The officials said that USPS is currently testing various vehicle prototypes and has not decided on any one vehicle design at this time. In total, USPS projects that its acquisition of new delivery vehicles will require about $5.7 billion in capital-spending cash outlays distributed over a number of years. In addition to its planned future acquisition of delivery vehicles, USPS has also conducted smaller acquisitions of vehicles in recent years. According to USPS officials, in the past few years USPS has been replacing most of its non-delivery vehicles and will have done so by 2019, while also purchasing a small number of delivery vehicles to replace ones that have exceeded their useful life or will serve route growth. For example, in April 2017 USPS approved a capital spending project to purchase more than 2,000 cargo vans used to transport large volumes of mail from postal plants to post offices and other facilities, and about 375 spotter vehicles used to move trailers among docks at processing facilities. In May 2017 USPS approved a capital spending project to purchase approximately 8,000 off-the-shelf delivery vehicles needed to serve route growth and replace existing high-maintenance-cost vehicles. (See fig. 3.) USPS projects an annual average of about $607 million in capital spending for facilities from fiscal years 2018 through 2028. According to USPS officials, USPS faces little need for capital spending on new facility construction given changes to USPS’s business such as decreasing mail volumes. As a result, most of USPS’s projected capital spending is for rehabilitation and repair of existing facilities, such as the replacement of roofs or heating, ventilation, and air-conditioning systems needed to sustain operations. For example, in December 2016, USPS approved ca capital spending project to replace the roof at a mail processing facility in Tulsa, Oklahoma. USPS had concluded that the roof was in a state of failure, and there were no economically feasible repair options. In addition, in 2017 USPS approved about a capital spending project to repair facilities in the U.S. Virgin Islands damaged during Hurricane Maria. Although most facilities spending is related to rehabilitation and repair, some USPS capital spending is on new facilities. According to USPS officials, new facilities projects are generally approved because of the need to completely replace an existing facility that is beyond repair or to construct a new facility that will replace multiple existing facilities. For example, in May 2017 USPS approved a capital spending project to construct a mail-processing facility in Nashville, Tennessee. The facility is intended to replace and close four existing facilities which will eliminate space deficiencies, reduce transportation costs, and improve operating efficiencies. In addition, according to USPS officials, USPS may need to make capital spending investments to facilities to accommodate growth in package volume, should that growth continue. USPS projects an annual average of about $541 million in capital spending for information technology and other capital projects, such as customer support equipment, from fiscal years 2018 through 2028. Information technology spending, which makes up an average of 98 percent of the projected spending in this category from fiscal years 2018 through 2028, is intended to maintain the infrastructure used to support USPS and provide security from cyber-threats, among other things. According to USPS officials, while it is difficult to project capital spending on information technology because future needs are uncertain, they can more accurately predict some future needs, such as hardware replacement. For example, there is a baseline of projected costs to replace servers because USPS knows the length of the technologies’ useful lives and when they will need to be replaced. According to USPS officials, while much of its capital spending on information technology is intended to replace outdated servers and other hardware, some spending is for developing new information technology systems. For example, in March 2017 USPS approved a capital spending project to purchase 67 video conferencing systems intended to increase productivity and encourage collaboration among USPS offices. In addition, USPS officials told us that in recent years USPS has undertaken more capital spending than expected on cybersecurity, a trend that will likely continue for the next few years. According to a DAR for cybersecurity investments, USPS is undertaking such investments to proactively identify and respond to security threats that have the potential to cause financial or other damage to the organization’s assets or employees, including threats that could disrupt or destroy information. Capital spending on information technology can also support USPS strategic goals and provide a positive return-on-investment. For example, in January 2017 USPS approved an additional capital spending to support development of its Informed Visibility program, which is a system that provides tracking and reporting of mail shipments for commercial mailers. According to the Informed Visibility DAR, these capabilities will provide users with access to valuable business information, helping improve operational efficiencies and marketing, among other things. According to the DAR, Informed Visibility will also provide a positive return-on-investment by eliminating some redundant costs and programs. USPS projects an annual average of about $464 million on capital spending for mail-processing equipment from fiscal years 2018 through 2028. USPS intends to maintain or replace existing aging equipment used to process mail and purchase new equipment that USPS expects will increase efficiency and provide other business benefits. According to USPS officials, equipment projects can also generate a positive return- on-investment in a number of ways, such as by increasing automation to reduce costs or by improving customer service. For example, in August 2017 USPS approved a capital spending project to provide new control systems for about 1,000 bar code sorter machines that USPS expects will decrease mail-processing costs. Some of USPS’s mail-processing equipment investments may also specifically address the growing market for package shipments. For example, in July 2017 USPS approved a capital spending project for upgrades to automated package-processing machines—upgrades intended to reduce package-handling costs and improve collection of data on when and where packages are processed. USPS first deployed these machines in 2004. According to the DAR, by 2017, the machines were nearing the end of their useful life, resulting in reduced reliability. Although USPS is projecting increased capital spending over the next 10 years, it has reported that it faces uncertainties, such as the level of future revenues, that could affect its ability to undertake planned and projected spending. USPS faces continuing declines in First Class Mail volume, and while it has experienced increased volume in packages, future increases in package volume are uncertain. Specifically, according to USPS, some of its major shipping customers are now building their own delivery capability that may enable them to divert some package shipments away from USPS. USPS has also stated that it faces challenges in ensuring that future operations generate sufficient revenues to support planned capital spending and that it is constrained in its ability to reduce costs. We have previously testified that USPS continues to face a serious financial situation with insufficient revenues to cover its expenses. This uncertain financial outlook may result in USPS changing its current capital-spending plans, including setting new priorities across its planned projects and other business needs. These prioritization decisions can involve tradeoffs among projects and between capital and operations spending. USPS has already faced these types of tradeoffs, as in fiscal year 2017, when it did not make $6.9 billion in required prefunding payments for retiree health and pension benefits, stating that it lacked sufficient cash to make those payments while ensuring it could continue to provide service, and stating that it required sufficient cash reserves for capital spending. While USPS officials noted that USPS must always make prioritization decisions regarding capital spending, its financial future may make such decisions more critical given its currently projected increased capital spending. For example, unless USPS increases its revenues or decreases other expenses, such prioritization decisions may involve USPS undertaking less future capital spending than it currently projects over the next 10 years. Further, even if USPS’s financial situation were to dramatically improve, USPS may not necessarily undertake more capital spending than currently projected, because of significant other business needs, such as funding operating expenses. Should USPS have more resources than expected in the coming years, though, USPS may be able to make fewer tradeoffs regarding capital spending. USPS has processes that can help it to identify uncertainties and risks that could affect its capital spending and adjust its spending to changing circumstances. USPS has adopted the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) internal control framework, which includes how organizations should address uncertainties and risks. Specifically, this framework states that organizations should identify uncertainties and risks to the achievement of their objectives and analyze these uncertainties and risks to determine how they should be managed. Additionally, COSO’s internal control framework asserts that organizations should not only identify and analyze uncertainties and risks but also assess any changes in conditions that could affect the organization including its capital spending. USPS has processes for identifying and analyzing organizational uncertainties, such as business and budgetary uncertainties, which can affect capital spending. These processes align with aspects of COSO’s internal control framework. For example, according to USPS documentation on its strategic-planning process, USPS conducts a business environment assessment and an enterprise risk assessment every 3 years to identify its organizational uncertainties, such as the effect of changes in the number of delivery points or mail volume. Additionally, USPS has processes to analyze the effects of its organizational uncertainties. For example, some department managers analyze the potential effects of organizational uncertainty by modeling different scenarios to help inform their department’s capital-spending decisions. For example, USPS officials stated that the vehicles department models the interactions among key variables—such as stabilizing or declining mail volume, route structures, and vehicle cargo sizes—as it considers various vehicle acquisition options. In addition, USPS facilities department officials told us that they plan to develop on a model to consider how key variables, such as mail volume, affect USPS’s facility needs. In addition to identifying and analyzing the potential effects of organizational uncertainties, USPS also has processes for assessing changes in these organizational uncertainties. For example, USPS documentation shows that USPS leadership holds a monthly business review meeting in which officials discuss any changes in internal conditions, such as labor costs, or external conditions, such as mail volume, that could affect the organization and, when applicable, how these conditions could affect capital spending. Officials told us that USPS also distributes a survey every 18 months to internal and external stakeholders to obtain perspectives on changes, if any, in some of the conditions addressed by USPS’s strategic plan. The survey also covers other conditions such as uncertainty about the extent to which USPS will have funds to maintain, repair, and replace infrastructure. Individual capital projects face inherent risks—such as technological, operational, and integration risks. We found that USPS’s capital-spending processes align with aspects of COSO’s internal control framework by incorporating processes to identify and analyze project-specific risks through the use of DARs. As discussed earlier, USPS’s capital spending processes require DARs to justify proposed capital projects with total costs of $1 million or more. Specifically, internal USPS guidelines state that DARs should identify the technological, operational, and integration risks that could affect capital projects and any tradeoffs related to potential alternatives to the proposed capital project. For example, we reviewed one DAR for mail-processing equipment that explained that the project has a low level of operational risk noting that the new equipment will not require training for operators, thus avoiding potential costs and delays associated with training. Another DAR we reviewed for a project intending to improve the customer experience and reduce costs through more efficient staffing at retail locations identified integration risks and noted that the project's proposed deployment schedule might not allow time for delays. USPS leadership may also request additional analyses to verify, or support, information in a DAR before deciding whether to approve a project. For example, according to documentation we reviewed, USPS leadership recently requested that its Finance and Planning division review economic data, such as population growth rates, to confirm the economic growth projections used in support of a DAR for a new facility in Bismarck, North Dakota. We found that USPS has processes that are designed to help it respond to identified organizational uncertainties, specifically future budgetary uncertainty. According to OMB’s Capital Programming Guide, capital spending “...should be consistent with the level of future budgetary resources that will be available.” USPS officials said USPS seeks to minimize the budgetary uncertainty that capital spending will outpace available resources by developing its annual capital-spending budget as part of USPS’s overall annual budget. As a result, USPS can determine an annual capital spending budget based on the most recent conditions, including the most recent revenue forecasts, and consider possible tradeoffs—such as those between capital spending and other spending needs such as operating expenses. Further, while the creation of a capital-spending budget establishes capital-spending levels, the process does not commit capital spending on any particular project. Instead, USPS reviews and approves new capital projects throughout the fiscal year, allowing USPS to make capital spending-decisions based on its most current financial condition, which may have evolved during the fiscal year. After USPS has set the annual capital spending budget, USPS’s capital- spending process also allows the organization to respond to any changes in its financial outlook, business environment, or other organizational uncertainties that might occur during the fiscal year. As stated previously, USPS’s capital spending budget establishes capital spending levels for the fiscal year and does not include approvals for specific projects. Project sponsors must obtain approval from different groups within USPS to initiate capital projects. USPS may approve less capital spending for capital projects than budgeted for at the start of the year. Our analysis of capital-spending cash outlays from fiscal year 2007 through 2017 shows that on average, USPS spent about 18 percent less than was budgeted for at the start of each year. According to USPS officials, capital spending can be below budgeted levels for a variety of reasons. USPS may shift strategic priorities based on business conditions and cancel or delay some planned projects that it determines are no longer aligned with its priorities. For example, USPS canceled a previously approved centralized distribution facility project in Brooklyn, New York, and decided to look for less costly alternatives to support the area’s increased package processing needs. Also, officials stated that projects could come in below budget because of a reduction in project scope or because a multi-year project falls behind schedule and has less cash outlays in a given year than were planned. In other instances, USPS’s capital-spending approval process provides flexibility to re-allocate capital funds as USPS identifies and assesses changing conditions that affect the organization, or when contingencies or emergencies arise. For example, according to USPS officials, as USPS monitors the economic indicators that affect its business, the indicators may signal an increase in package volume. USPS might respond by allocating more capital toward additional purchases of package-sorting equipment. According to USPS officials, USPS’s capital-spending process also allows USPS to respond to contingencies. In fiscal year 2017, USPS approved capital spending to repair facilities in the U.S. Virgin Islands damaged during Hurricane Maria. (See fig. 4.) In the event that such unplanned projects arise to repair damages or are required for safety, project sponsors can expedite the capital spending approval process, such as by submitting an advance funding request to USPS. In addition to having processes to respond to organizational uncertainties, we also found that USPS has processes for responding to the risks affecting individual capital projects. According to USPS documentation, capital projects with total costs of over $5 million are reviewed at certain stages in their implementation to assess any changes, including changes in the return-on-investment, timeline, and performance of the projects. USPS may alter project specifications or time frames to respond to these changes. During the implementation stage of some major capital projects, such as the installation of mail-processing equipment, departments may initially test a limited number of units with the option to request the purchase of additional units if the tests are successful. Additionally, some major capital projects, such as the replacement of USPS’s delivery vehicles, require acquisitions over multiple years, which, USPS officials told us, can be used to limit risk. As mentioned earlier, USPS is planning to replace its fleet by purchasing vehicles over a number of years, potentially allowing it to capitalize on technological advances that may develop over the time period. After a capital project is complete, USPS has a process for reviewing the results as a way to inform and improve future capital-spending decisions, including better addressing project risks. USPS’s capital-spending process requires USPS to evaluate capital projects with total costs over $25 million after project completion, reviewing the cost, schedule, and performance results of these projects. For example, in November 2017, USPS discussed the results of two package processing and sorting projects that experienced delays associated with accommodating new equipment at the facilities due to design issues. As a result, USPS recommended that project sponsors conduct more research about any site-specific risks before submitting a DAR for future package processing and sorting projects. In addition, USPS’s Office of Inspector General prepares an annual capital-project-compliance report that evaluates the soundness of USPS’s capital spending. According to USPS officials, the organization considers the results of these reports and seeks to address any resulting recommendations. For example, we reviewed documentation explaining that, in response to one recent Office of Inspector General recommendation, USPS stated it would revise its capital spending guidance to define review and approval procedures, validation, and compliance report requirements for all investments. We provided a draft of this report to USPS for review and comment. USPS provided a written letter (see appendix II) in which USPS provided no comments. Via email, USPS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to interested congressional committees and the Postmaster General. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix III. Our objectives for this report were to (1) describe the U.S. Postal Service’s (USPS) projected capital spending over the next 10 years and (2) assess whether USPS’s processes support its ability to address uncertainties and risks that affect its capital spending. For our second objective, our scope was limited to assessing whether USPS had designed processes; that is, we did not assess the quality of any analyses that USPS conducted regarding risks or any determinations that USPS made regarding capital-spending projects as this was beyond the scope of our review. Such assessments are routinely conducted by the USPS Office of Inspector General. To address USPS’s planned capital spending over the next 10 years, we reviewed USPS data on capital spending from fiscal years 2007 through 2017 and USPS documentation on projected capital spending from fiscal years 2018 through 2028. In both cases, we focused on a fiscal year’s actual or projected capital-spending cash outlays—or the amount of cash spent on capital projects—as opposed to capital-spending commitments made in that fiscal year. For historical data, we used data from USPS’s annual budgets, known as Integrated Financial Plans, for fiscal years 2008 through 2018. Each annual budget contains data on actual capital spending levels from prior fiscal years. The annual budgets generally report capital spending in four broad categories: vehicles, facilities, information technology and other, and mail-processing equipment. Because the categories used in past annual budgets were not consistent, we recategorized some years’ spending to be consistent. Specifically, we considered “mail-processing equipment” or “equipment” as part of “mail- processing equipment.” We considered “infrastructure and support,” “information technology and other,” and “customer service and support equipment” as part of the “information technology and other” category. The past budgets consistently used “facilities” and “vehicles” categories. We obtained input from USPS officials on our recategorizations. To determine the reliability of these data, we reviewed the data for any obvious errors, reviewed relevant documentation, and interviewed officials. We determined that these data were sufficiently reliable for the purposes of reporting on USPS’s past capital spending. For information on USPS’s projected capital spending from fiscal years 2018 through 2028 we reviewed USPS’s 10-year capital-spending forecast for those years, which USPS created in 2017. This 10-year forecast is a projection of capital spending, but is not a commitment for any level of investment. The 10-year forecast categorizes capital spending projects into the following categories: construction and building purchases, building improvements, mail processing equipment, vehicles, capitalized software, customer service equipment, and postal support equipment. For our analysis, we combined “postal support equipment,” “information technology,” and “customer service equipment” into one overall “information technology and other” category, and “construction and building purchases” and “building improvements” into one overall “facilities” category. USPS officials agreed with this approach. To determine the reliability of these data, we interviewed USPS officials, reviewed data for any obvious errors, and reviewed relevant documentation. We determined that these data were sufficiently reliable for the purposes of providing information on USPS’s projected capital spending. In addition, we interviewed four USPS vice presidents in charge of the departments that correspond with the four broad categories of capital-spending investments about historic, ongoing, and projected capital spending. We also selected and reviewed a non-generalizable sample of 14 Decision Analysis Reports (DAR)—internal USPS documents used to justify and obtain approval for some proposed capital-spending projects— of the 66 approved by USPS for fiscal year 2017 and part of fiscal year 2018. USPS requires DARs for all proposed capital spending projects with a total project cost of at least $1 million. The DARs contain information on, among other things, project specifications, purpose, risks and tradeoffs, and timeframes. We reviewed the DARs for this and other information; we did not review the quality of the analyses contained in the DARs. We obtained a list of all approved DARs for fiscal years 2017 and 2018 and selected DARs of the two largest and two smallest capital projects by total value in each of the four categories (i.e., vehicles, facilities, information technology and other, and mail processing equipment). Because the vehicles category had only two approved DARs at the time we received the list of approved DARs from USPS, we reviewed 14 DARs instead of 16. While the information from our reviews cannot be generalized to all DARs, the information provides insights into USPS’s reasons for undertaking capital spending projects. To assess whether USPS has processes that support its ability to address uncertainties and risks that affect its capital spending, we reviewed USPS documentation, including USPS’s policies and procedures for capital spending, internal guidance documents, and others related to processes that affect its capital spending. We identified criteria for addressing uncertainties and risks, including those specific to capital spending. Specifically, we identified criteria from the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) Internal Control-Integrated Framework (the internal control standards adopted by USPS) and the Office of Management and Budget’s Capital Programming Guide. COSO Principle 7 states, “The organization identifies risks to the achievement of its objectives across the entity and analyzes risks as a basis for determining how the risks should be managed.” Further, COSO Principle 9 states, “The organization identifies and assesses changes that could significantly affect the system of control.” The Office of Management and Budget’s Capital Programming Guide element I.1.1 states, “The plan should also be consistent with the level of future budgetary resources that will be available.” We evaluated USPS’s processes that affect capital spending against these criteria to determine whether USPS had designed processes to address uncertainties and risks related to capital spending. We did not review the capital spending projects USPS has undertaken to determine, for example, if USPS made appropriate decisions regarding selected projects. We also interviewed USPS officials regarding USPS’s capital- spending processes. Specifically, we interviewed officials with USPS’s Capital Investment and Business Analysis Department; Finance and Planning Department; Technical Analysis, Accounting, and Finance Department; and the four vice presidents mentioned above about how they address uncertainties and risks related to capital spending within their departments. We conducted this performance audit from September 2017 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact above, Kyle Browning and Faye Morrison (Assistant Directors); Matthew Rosenberg (Analyst in Charge); Amy Abramowitz; Sara Ann Moessbauer; Josh Ormond; Joshua Parr; Amy Rosewarne; and Crystal Wesco made key contributions to this report. Also contributing to this report were Carol Henn, Sabine Paul, and Carolyn Voltz.", "summary": "USPS faces significant financial challenges as it continues to experience declining mail volumes and revenues. Capital spending is needed to support USPS's operations, but can be affected by various uncertainties and risks, such as those related to future business activities and revenues. In the past, USPS has reduced its capital spending in response to declining revenues. GAO was asked to review USPS's capital-spending plans and examine how its capital-spending processes address uncertainties and risks. This report: (1) describes USPS's projected capital spending over the next 10 years and (2) assesses whether USPS's processes support its ability to address uncertainties and risks that affect its capital spending. GAO reviewed USPS data and information on actual capital spending from fiscal years 2007 to 2017 and projected capital spending for fiscal years 2018 through 2028. GAO also reviewed USPS reports on 14 approved capital projects in fiscal years 2017 and 2018, selected to provide a mix of project type and value; examined documentation related to USPS's processes that affect capital spending and compared USPS's processes to internal control standards adopted by USPS; and interviewed USPS officials. On a draft of this report, USPS provided technical comments, which GAO incorporated as appropriate. The United States Postal Service (USPS) projects increased capital spending over the next 10 years. According to USPS, this spending will support its mission and improve its financial position. USPS projects average annual capital cash outlays of $2.4 billion from fiscal years 2018–2028—about 70 percent more than the $1.4 billion average from fiscal years 2007–2017 (see figure). For example, USPS plans to acquire a new fleet of delivery vehicles starting in 2019 to replace its aging existing fleet and plans to purchase new mail-processing equipment to increase efficiency. However, USPS faces a serious financial situation with insufficient revenues to cover expenses. This uncertainty may result in USPS's making capital-spending prioritization decisions that can lead to tradeoffs across planned capital projects and potentially between capital spending and other organizational needs such as operational expenses. Such prioritization could lead to USPS's undertaking less capital spending than currently projected in the absence of increased revenues or decreased expenses. USPS has processes that help it identify the uncertainties and risks that may affect its capital spending and adjusts its capital spending accordingly, in line with internal control standards adopted by USPS. For example, USPS identifies organizational uncertainties, such as mail volumes and revenues, as part of its strategic planning process and considers them when creating its capital spending budget. It also identifies individual project risks through a project review process, and considers tradeoffs inherent in different project scenarios. USPS's processes also allow it to respond to these uncertainties and risks. Specifically, USPS sets a capital-spending budget in its overall financial plan, to help ensure that spending is in line with expected resources. USPS's process also allows it to shift funds if needed, such as to repair a facility damaged during a natural disaster. USPS also reviews individual capital projects during implementation and can change specifications or time frames based on changing circumstances.", "document_type": "gao"}
{"report": "The GRF EXORD generally establishes the GRF as a set, or “menu,” of forces from the military services—each of which possesses unique capabilities—that the Secretary of Defense can deploy rapidly anywhere in the world. According to Joint Staff officials, deployment is for a duration that can range from a few weeks to several months. The GRF EXORD was first issued in 2007 and, according to DOD officials, has been revised several times to modify the number or types of assigned units. The current version, which was issued in 2015, continues to identify two uses for the GRF, described as follows: One is to enhance DOD’s ability to respond quickly to a range of worldwide contingencies. In this scenario, the GRF would generally be used as a tailorable joint force. For example, in the event of a humanitarian crisis such as an earthquake, GRF units possessing the capabilities needed to meet the crisis can be combined into a joint force and rapidly deployed to the affected area. In this scenario, the GRF units selected would act together as a joint force under the GRF- supplied Joint Task Force headquarters or a preexisting one. The other identified use of the GRF is to augment the capabilities of geographic combatant commands in light of unexpected challenges. In this scenario, GRF units would generally be deployed as individual units or in groups. For example, a combatant command may on occasion require additional intelligence, surveillance, and reconnaissance capability, and accordingly a GRF unit possessing that requisite capability can be taken from the GRF and temporarily allocated to the combatant command for a certain period of time. Although the GRF EXORD identifies these two intended uses, the document does not prioritize one use over the other. To meet the range of capabilities delineated in the GRF EXORD, the services nominate and assign units to the GRF on a rotating basis for a certain period of time. Each nominated and assigned unit possesses a specific capability outlined in the GRF EXORD. These specific capabilities correspond to the operational requirements of eight global mission scenarios listed in the GRF EXORD. For example, the GRF includes a Marine Expeditionary Unit and an Airborne Brigade Combat Team because of the unique capabilities of those units. According to DOD officials, once a force is assigned to the GRF, it is on alert status for a period of typically 6 to 9 months, with a potential to be deployed. Accordingly, services rotate units onto and off of the GRF in order to maintain a high state of readiness, which, in turn, allows them to meet the rapid response timeframes required by the GRF EXORD. To gain access to units assigned to the GRF, according to Joint Staff officials, combatant commanders submit an emergent request for forces to the Joint Staff. Generally as part of the global force management process, when a combatant command identifies an emergent requirement for a force that cannot be met using units already assigned or allocated to the combatant command, the combatant command then submits a request for forces. If the Joint Staff, joint force providers, and military services determine that a GRF-assigned unit is the most appropriate solution for the combatant command’s requirement, the Joint Staff will recommend it as the sourcing solution to the Secretary of Defense. Once approved, the GRF-assigned unit will be allocated to the combatant commander. According to an official from the Joint Staff office responsible for managing the GRF across DOD, since 2010 DOD has used the GRF 35 times in support of worldwide contingencies—with 32 of those uses involving individual GRF units being deployed in support of or to augment combatant commander needs. However, according to Joint Staff officials overseeing the management of the GRF, DOD has not assessed the extent to which it assumes risk associated with the potential unavailability of GRF units for a short-notice deployment as a joint force in response to a contingency, given the predominant use of the GRF as a resource for combatant commands to obtain individual units. According to an official from the Joint Staff, deployment of select GRF units as part of a joint task force has occurred three times: once to Haiti in support of an earthquake humanitarian response, and twice to Afghanistan in July 2010 and June 2011 in support of Operation Enduring Freedom. According to these officials, GRF capabilities in support of Haiti included command and control, security, and transportation and distribution of humanitarian supplies. GRF units in support of Operation Enduring Freedom provided force protection to coalition forces as well as train, advise, and assist capabilities. The predominant use—32 of 35 deployments—of individual GRF units to augment a combatant commander’s needs has, in turn, diminished the set of units available for mission scenarios related to the GRF’s use as a tailorable joint force, and accordingly the capabilities available for inclusion under a GRF joint task force. For example, Joint Staff officials stated that DOD deployed a ballistic missile defense unit designated for the GRF to a geographic combatant commander’s area of responsibility to augment that combatant command’s missile defense capabilities. According to Joint Staff officials, the deployment of individual GRF- assigned units is intended to be a temporary solution for a specified period of time. According to these officials, the ballistic missile defense unit’s deployment was extended beyond its original timeframe and it was not replaced on the GRF menu of forces with another such unit because there are not enough of these particular types of units to meet the requirements across the combatant commands. Therefore, during the ballistic missile defense unit’s deployment, the particular capability that unit supplied to the GRF was not available as part of a tailorable joint force to respond quickly to a potential worldwide contingency—the other broad intended use of the GRF. Given that DOD has not defined an acceptable level of risk—relative to the length of time during which units remain committed to augmenting combatant commanders’ needs—DOD lacked reasonable assurance that extending the ballistic missile defense unit’s deployment would not surpass an acceptable level of risk to mission for either of the GRF’s uses. Two other units with capabilities particularly suited for use as part of a joint force have also been deployed individually to augment combatant command capabilities. One is U.S. Transportation Command’s Joint Enabling Capabilities Command, which provides joint communications, planning, and public affairs support to a joint force or joint task force headquarters. A second is U.S. Transportation Command’s Joint Task Force – Port Opening, which provides capabilities able to deploy within 12 to 36 hours to support the opening of a port, including the capability to rapidly establish and initially operate an aerial or sea port of debarkation, conduct cargo handling and movement operations to a forward distribution node, and facilitate port throughput in support of contingency operations. Like ballistic missile defense units, these two units are limited in number. According to officials from U.S. Transportation Command, because the units have been used primarily to augment geographic combatant command capabilities, they are at times unavailable for use as part of a tailorable joint force that can be used to respond quickly to unforeseen worldwide contingencies. Because DOD has not defined the risk it assumes in its use of GRF units, it cannot determine the likelihood that units used to augment combatant commanders’ needs might be required to constitute a joint force composed of GRF units, nor has DOD defined the significance of the risk it incurs by not having a given capability available to the GRF. Further, although DOD has used the GRF primarily to augment combatant commanders’ needs, risks for both uses should be identified and analyzed appropriately since neither use is prioritized over the other. While DOD did not encounter issues accessing GRF units that it required during any of the three instances in which the GRF was deployed as part of a joint force, Joint Staff officials have nonetheless raised an issue concerning the degree of risk that DOD continues to assume by using GRF capabilities to augment combatant commander needs that may be needed by the GRF to constitute a joint force. DOD officials stated that using GRF units to augment geographic combatant command requirements leaves them unavailable for use as part of a joint force ready to respond to an unforeseen worldwide contingency. They stated that this is largely due to the fact that some GRF units are limited in quantity but in high demand worldwide. For example, according to DOD officials, while intelligence, surveillance, and reconnaissance systems are in such high demand that they are consistently used to augment combatant commanders’ requirements, they are also typically used as an essential part of a joint force. As such, there is a likelihood that a GRF joint force might require, but not have access to these capabilities, thus potentially increasing the risk of not accomplishing a given mission. DOD officials stated that in the event of a crisis requiring the employment of GRF units as part of a joint task force, GRF units currently employed elsewhere could be reassigned. It is uncertain, however, whether such reassignment would enable a GRF joint task force to meet its timeframes for deployment given that GRF units are expected to be ready for deployment on very short notice. Moreover, the potential effect of and risks associated with such an occurrence—specifically, the unavailability of required forces to assemble GRF units as part of a joint force—has not been assessed. The identification and analysis of risks provides the basis for developing appropriate risk responses, such as, in this case, further defining and prioritizing the GRF’s intended uses and missions. Because DOD has not identified or analyzed risks associated with the uses of the GRF, it may lack reasonable assurance that this response will be sufficient to mitigate the risks. Further, without identifying risk, DOD is not well positioned to develop other risk-mitigating strategies, and to know when to activate them. Standards for Internal Control in the Federal Government establish that management should assess risks related to achieving defined objectives. Specifically, the standards state that management should analyze the identified risks to estimate their significance and define tolerances for levels of risk assumed, thereby providing a basis for responding to the risks. The standards also call for management to design responses such that risks are contained within the defined risk tolerance for the identified objective. DOD has not assessed the risks to readiness for mission scenarios that it might assume for both uses of the GRF because of its general reliance upon the GRF as an augmentation capability available to individual geographic combatant commands for response to unforeseen challenges or opportunities. Furthermore, we found that there are varying perspectives within DOD concerning the intended uses of the GRF, although the GRF EXORD generally identifies two overarching uses, as previously discussed. Specifically, officials from the Office of the Under Secretary of Defense for Personnel and Readiness and the Joint Staff stated the view that the GRF is a menu of forces, each unit possessing unique capabilities that can be used either individually to address geographic combatant command-identified capability gaps or collectively as a joint force to react to unforeseen worldwide contingencies. However, officials from U.S. Africa Command and U.S. Central Command view the GRF primarily as a pool from which they can draw forces, and it is these geographic combatant commands that have most often requested those capabilities provided by individual GRF units. Officials from the Army expressed another perspective, based in large part on the requirement for the Army to provide a joint task force headquarters for the GRF. Army officials said that, in their view, the GRF serves primarily as a pool of forces from which a joint task force can be created to meet unforeseen worldwide contingencies. Although the GRF EXORD generally identifies the two uses, it does not prioritize the use of GRF assets to meet either. Additionally, DOD has not defined the risk to meeting the objectives of either of the two uses, and, thus does not have the necessary knowledge to determine when to deploy units for one use or the other. As previously stated, DOD has used the GRF to augment combatant commanders’ forces more frequently—32 out of 35 deployments—rather than retaining the units assigned to the GRF to support a rapidly deploying joint force. Conducting a risk assessment that identifies any risks associated with the use of the GRF could help DOD to design responses, such as further defining and prioritizing the GRF’s intended uses and missions in an effort to mitigate any identified risks. Without conducting a risk assessment and taking steps to address any identified risk to accomplishing either of the GRF’s uses, DOD’s attempt to satisfy one of the two intended uses of the GRF may inadvertently hamper the other intended use. GRF units train individually to meet GRF missions, but there are no GRF- specific joint training exercises, and the individual GRF units have limited opportunities to train as part of an integrated joint force, according to DOD officials. Specifically, according to service officials, GRF readiness, and that of assigned units, is based on the assigned force’s participation in their respective service training exercises and are generally focused on the respective units’ core missions or functions. In addition to service- level training, GRF units can also participate in joint training exercises sponsored by one of the geographic combatant commands. These commands can give authoritative direction to subordinate commands and forces necessary to carry out missions assigned to the command, including over all aspects of joint training. However, if GRF units are service retained or assigned to different combatant commands, they would not all fall under the authority of a single commander that could direct joint training. According to military service officials, there are no GRF-specific joint training exercises. However, according to some combatant command officials, some joint training exercises have included units currently assigned to the GRF. Few, if any of these exercises, however, provide opportunities to conduct training for the GRF’s joint task force headquarters in conjunction with GRF-assigned units. For example, according to U.S. Southern Command officials, the Joint Staff’s 2017 Joint Task Force Forming Exercises will be held in U.S. Southern Command’s area of responsibility, and will include the unit currently assigned as the GRF’s Joint Task Force headquarters. However, the exercise will not include any other GRF-assigned units. Therefore, the training will not provide an opportunity for the GRF to demonstrate readiness, gain efficiencies, or identify deficiencies associated with deploying elements of the GRF as a tailorable joint task force. Chairman of the Joint Chiefs of Staff Instruction 3500.01H, Joint Training Policy for the Armed Forces of the United States, notes that U.S. forces may be employed across the range of military operations, and that DOD must support national security requirements with joint military capabilities designed to adapt and succeed in any operational environment. It further states that the department and its mission partners must prepare to operate in a joint, interagency, intergovernmental, and multinational environment. Finally, it notes that the joint training challenge is to be responsive to all emerging and extant mission requirements of the combatant commanders. The need for interoperability is especially important for units assigned to the GRF not only because the GRF EXORD requires that they be ready for eight global mission scenarios, but because the overall GRF concept suggests they need to be capable of integration into a tailorable joint force. Underscoring this need for interoperability and jointness, the GRF EXORD outlines that combatant commanders should integrate elements of the GRF into Joint Exercise Program events to help sustain the readiness and capabilities of those units to execute various mission capability requirements. It also notes that combatant commanders should conduct a training event with the GRF’s Joint Task Force-capable headquarters at least once every 30 months in order to maintain the headquarters’ readiness to support each geographic combatant command. While these requirements are important to ensure the GRF units receive the proper training and are integrated into combatant command joint exercises, there are no specific GRF joint training exercises that provide opportunities for individual units assigned to the GRF to train as a tailorable joint task force. Joint Staff and service officials told us that the GRF’s assigned forces do not require additional or special training because they will perform the core missions for which they train regardless of whether they are deployed individually or as part of the GRF joint task force. These officials stated, therefore, that existing training is sufficient to develop and determine readiness of the GRF. However, the importance of exercising the GRF Joint Task Force headquarters and associated GRF-assigned units was demonstrated to us when we observed an Army-sponsored joint training event involving GRF-assigned forces during a January 2017 Deployment Readiness Exercise at Fort Bragg, North Carolina, during which several interoperability challenges arose. For example, the Army and Air Force faced a challenge in calculating the weight of Army heavy equipment being loaded onto Air Force aircraft preparatory to a simulated airdrop mission. Based on the Army’s calculations, the equipment load was well under the specified weight limit for the aircraft, but the Air Force’s onboard computers showed the load as being over the limit. While the cause of the difference in the two figures was not identified to us at the time, Army officials suspected that it could be attributed to a double-counting of the weight of the parachute. In another example, inclement weather at Fort Bragg during the exercise caused ice build-up on participating aircraft. This showed that the Air Force’s de-icing capability was limited to a few aircraft at a time, which caused delays in loading and preparing the aircraft for take-off. According to Army officials, had the mission required more personnel, equipment, and aircraft, this issue would have created a risk to meeting the GRF’s mission timelines. Despite the challenges encountered during the exercise, Army officials told us that exercises, such as the Deployment Readiness Exercise conducted at Fort Bragg, are important because they give units from different services the opportunity to identify challenges and develop solutions. As a result, these exercises can enhance the GRF’s joint task force capability. Additionally, a senior official from the Office of the Under Secretary of Defense for Personnel and Readiness’ Force Training Directorate told us that the ability to act jointly was very important in military operations and noted the need for joint training. Two studies conducted on behalf of DOD further underscore the importance of joint exercises for developing GRF force readiness. The first study, released by the Institute for Defense Analysis in 2015, reported that the current joint exercise program did not ensure a proficient and ready GRF. Specifically, the study identified three key issues associated with GRF training. First, realistic interoperability training of individual units assigned to the GRF was not sufficient to ensure overall GRF readiness. Second, while the then-current version of the GRF EXORD assigned joint training responsibilities to the services, according to the study, the service responsible for the Joint Task Force-capable headquarters element lacked the authority to direct the required level of joint training for GRF elements provided by other services. Third, the GRF, in its entirety, had not been exercised or deployed as a joint force since its inception and thus had not demonstrated the ability to rapidly deploy as an operationally coherent joint task force. The report recommended that DOD designate a single commander with authority to establish and enforce joint integrated training at the tactical level, make changes to improve training for the GRF’s Joint Task Force headquarters, and implement a joint demonstration campaign for the GRF. According to Joint Staff officials, they are not aware of any actions taken in response to these recommendations. The second study, released by RAND in 2016, also emphasized that realistic exercises were key to ensuring and validating the GRF’s readiness. The report added that current exercises rarely included full and realistic force packages and recommended that joint airborne exercises be designed explicitly to identify and assess the implications of possible challenges and validate planning assumptions about a GRF joint task force. According to Army officials, a major factor inhibiting joint training exercises focused at GRF-assigned units as a joint task force is the fact that it can be difficult to get other services to agree to participate in service-sponsored events because—as the Institute for Defense Analysis study pointed out—services lack the authority to direct other services to supply forces for joint training exercises, even when those forces are currently on a GRF rotation. Moreover, since the disestablishment of U.S. Joint Forces Command in 2011, which was responsible, among other things, for being the lead agent for joint force training, there is no single commander with the authority to require joint force training. As noted above, although geographic combatant commanders may direct joint training of forces under their command, units designated for the GRF mission may come from forces assigned to different geographic combatant commands or service-retained forces, according to officials. According to a senior Office of the Under Secretary of Defense for Personnel and Readiness’ Force Training Directorate official, the challenge to conducting joint GRF training is that there is no entity having authority and responsibility for such training. He noted that because the GRF is department-wide and is not assigned to a single service or geographic combatant command, there is no single advocate for the GRF mission and training with the authority to direct the services and geographic combatant commands with GRF-dedicated units to prepare for the joint requirements inherent in the GRF mission. As a result, there are no joint training exercises specifically designed to exercise GRF units as a joint force. According to Standards for Internal Control in the Federal Government, management should develop an organizational structure with an understanding of the overall responsibilities, and assign these responsibilities to enable the organization to operate in an efficient and effective manner, comply with applicable laws and regulations, and reliably report quality information. To achieve this, management should assign responsibility and delegate authority to key roles throughout the entity. Without an entity having the responsibility and authority to plan, direct, and conduct joint training exercises focused on GRF-assigned units deploying as a joint task force as appropriate, DOD risks undermining the effectiveness of the rapid deployment of a GRF joint task force in response to unforeseen worldwide contingencies. DOD has developed the GRF as a rapid response force available to react to unforeseen contingencies or crises. While the GRF has responded to worldwide contingencies, GRF units have been primarily used to augment existing geographic combatant command capabilities. DOD has not assessed the risks it assumes by its reliance upon the GRF for augmenting combatant commanders’ forces as opposed to having the GRF-assigned units available for allocation to a joint task force in response to a contingency. Without performing a risk assessment and, as appropriate, designing responses to mitigate any identified unacceptable risks to accomplishing either of the two GRF uses, DOD cannot ensure that the GRF is able to meet its mission. Additionally, without a designated authority to establish and enforce integrated joint training for GRF-assigned units as appropriate, DOD has not developed GRF- specific joint training exercises or fully integrated the GRF into existing joint exercises. Without making improvements in these areas, DOD risks the ability of the GRF to respond to unforeseen, worldwide contingencies as an integrated joint force in a timely fashion with all the resources it needs. We are making the following three recommendations to DOD: The Secretary of Defense, in conjunction with the Chairman of the Joint Chiefs of Staff, should assess the risks to accomplishing both of the GRF’s uses: that is, its use as an augmentation capability available as needed to individual geographic combatant commands; and its use as a tailorable joint force available for rapid response to a specific threat. (Recommendation 1) The Secretary of Defense, in conjunction with the Chairman of the Joint Chiefs of Staff, should, as appropriate following the assessment of risk, design responses, such as further defining and prioritizing the GRF’s intended uses and missions, to mitigate any identified risks. (Recommendation 2) The Secretary of Defense, in conjunction with the Chairman of the Joint Chiefs of Staff, should designate an authority to establish and enforce integrated joint training for GRF-assigned units, as appropriate. (Recommendation 3) We provided a draft of this report to DOD for review and comment. In its written comments, DOD concurred with our three recommendations and noted planned actions to address them. DOD’s comments are reprinted in their entirety in appendix II. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Under Secretary for Personnel and Readiness, the Chairman of the Joint Chiefs of Staff; the Secretaries of the Army, the Navy and the Air Force; and the Commandant of the Marine Corps. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-5431, or russellc@gao.gov. Contact points for our Offices of Congressional Relations and of Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. The objectives of our review were to examine the extent to which (1) Department of Defense (DOD) has used the Global Response Force (GRF) and assessed any risks associated with its use; and (2) GRF- assigned units are trained to meet GRF missions, both individually and as a joint force. For our objective of determining the extent to which DOD has used the GRF and assessed any risks associated with its use, we reviewed the Chairman of the Joint Chiefs of Staff GRF Execute Order (EXORD) to identify the GRF’s overall uses and the global mission scenarios it is intended to meet, as well as the operational requirements and forces assigned to meet the requirements. We also interviewed the responsible DOD officials to understand how DOD selects, designates, and validates forces on the GRF, and the processes for making changes to the GRF EXORD, as well as how DOD decides when to use GRF forces for either of the two intended uses of the GRF. Also, we reviewed Standards for Internal Control in the Federal Government to identify relevant internal controls—specifically, that management should assess risks related to achieving defined objectives, analyze the identified risks to estimate their significance, define tolerances for levels of risk assumed, and design responses such that risks are within the defined risk tolerance—and compare them with DOD’s risk assessment efforts for the GRF. Also, we reviewed the Joint Staff’s GRF deployment information from 2010 to 2017 to understand the frequency of GRF deployments and identify specific instances in which the GRF’s ability to accomplish its missions was affected—specifically, instances in which GRF capabilities were unavailable for use during a GRF operation. For our objective of determining the extent to which GRF-assigned units are trained to meet GRF missions, both individually and as a joint force, we reviewed the Chairman of the Joint Chiefs of Staff GRF EXORD and DOD’s Guidance for the Defense Readiness Reporting System to understand how GRF readiness is developed, reported, and evaluated. We also reviewed DOD’s Joint Training Policy for the Armed Forces of the United States to identify existing requirements related to joint training, and documents related to GRF training to determine the extent to which the frequency and types of GRF training meet overall joint training requirements as well as training requirements established in the GRF EXORD. We observed a Deployment Readiness Exercise at Fort Bragg, North Carolina, to learn about the types of GRF training, as well as challenges and potential benefits of training exercises for GRF units. We also interviewed senior officials from the Joint Staff, military service force providers, and geographic combatant commands to better understand training practices for the GRF and its assigned units, as well as varying perspectives regarding the challenges and potential benefits of GRF training exercises for accomplishing GRF missions. We interviewed senior officials from the Office of the Under Secretary of Defense for Personnel and Readiness; Joint Staff; and Army, Marine Corps, Navy, and Air Force headquarters, and conducted site visits to force providers at Army Forces Command, Marine Forces Command, Navy Fleet Forces Command, Air Force Air Combat Command, and U.S. Transportation Command. We also interviewed officials from U.S. Africa Command, U.S. European Command, and U.S. Pacific Command, and visited U.S. Central Command and U.S. Southern Command. Our interviews focused on understanding the degree to which DOD organizations assess and maintain a consistent understanding of the risks entailed in using GRF forces and gaining an understanding of the challenges encountered in identifying, designating, and employing forces on the GRF, as well as the extent to which the GRF’s ability to accomplish its intended missions has been affected. We conducted this performance audit from May 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, individuals who made key contributions to this report include Guy LoFaro, Assistant Director; Adam Anguiano; Alberto Leff; Michael Shaughnessy; Michael Silver; Yong Song; and Cheryl Weissman.", "summary": "DOD must be able to rapidly deploy forces to respond to a range of worldwide contingencies, and in 2007 it established the GRF to enhance that capability. The GRF is a set, or “menu,” of forces from the military services, each of which possesses unique capabilities, and which the Secretary of Defense can deploy rapidly anywhere in the world. House Report 114-537, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to evaluate challenges DOD may be facing regarding the GRF. GAO reviewed the extent to which (1) DOD has used the GRF, and assessed any risks associated with its use of the GRF; and (2) GRF-assigned units are trained to meet GRF missions individually and as a joint force. GAO reviewed GRF deployment information from 2010 to 2017 and the GRF Execute Order, observed a training exercise, and interviewed knowledgeable officials. The Department of Defense's (DOD) Global Response Force (GRF) has two distinct uses: one is to enhance DOD's ability to rapidly deploy forces in response to a range of worldwide contingencies with a tailorable joint force; and the other is to provide a set, or “menu,” of units that combatant commands can request to augment their capabilities in light of unexpected challenges when requirements exceed their capabilities. Since 2010, according to officials, DOD has used the GRF 35 times in support of worldwide contingencies, with 32 of those times involving deployment of individual GRF units to augment combatant commander needs, and 3 times involving their use as part of a joint task force. This predominant use of individual GRF units to augment combatant commanders' needs has diminished the set of units available for mission scenarios related to the GRF's use as a tailorable joint force. For example, when DOD deployed a ballistic missile defense unit as a part of the GRF to augment a combatant command's missile defense capabilities, the particular capability it supplied to the GRF was not available for participation in a tailorable joint force to respond quickly to a potential worldwide contingency, if such an event occurred. DOD does not know what risks it assumes to readiness for GRF mission scenarios due to its general reliance upon the GRF as an augmentation capability available to individual geographic combatant commands, because DOD has not assessed those risks. Without conducting a risk assessment and taking steps to address any identified risk to accomplishing the GRF's intended uses, DOD's attempt to satisfy one of the uses (that is, individual GRF-assigned units assisting combatant commands) may hamper the other use (that is, deployment of a joint task force for a contingency). GRF units train individually to meet GRF missions, but DOD does not conduct any GRF-specific joint training exercises, and the individual GRF units have limited opportunities to train as part of an integrated joint force, according to DOD officials. While the GRF Execute Order calls for integrating elements of the GRF into existing joint training, the military services lack the authority to direct other services to supply forces for joint training exercises, even when those forces are currently on a GRF rotation. Moreover, since the disestablishment in 2011 of U.S. Joint Forces Command—which, among other things, was the lead agent for joint force training—and because units designated for the GRF mission may be assigned to different combatant commands or may be service-retained, no single commander has the authority to require joint force training of GRF units. As a result, no joint training exercises are specifically designed to exercise GRF units as a joint task force. Army officials told GAO that joint exercises are important because they give individual units from different services the opportunity to identify challenges and develop solutions, thereby enhancing the GRF's joint task force capability. Without an entity having the responsibility and authority to plan, direct, and conduct joint training exercises focused on GRF-assigned units deploying as a joint task force as appropriate, DOD risks undermining the effectiveness of the rapid deployment of a GRF joint task force in response to unforeseen worldwide contingencies. GAO recommends that DOD (1) assess the risks assumed in its reliance upon the GRF as both an augmentation capability and a tailorable joint force; (2) design appropriate responses following the risk assessment; and (3) designate an authority to establish and enforce integrated joint training as appropriate for GRF-assigned units. DOD concurred with GAO's three recommendations.", "document_type": "gao"}
{"report": "The FMS program, which transfers defense articles and services to international partners and organizations, is essentially an acquisition process through which the U.S. government procures military equipment, training, and other services on behalf of foreign customers. Multiple organizations have a role in the FMS program. The Department of State has overall responsibility for the program, including approving what defense items and services can be sold to specific countries. DOD administers the FMS program and manages the procurements executed within the military departments on behalf of foreign governments. Within DOD, DSCA carries out key functions such as supporting development of policy for FMS. The military departments carry out the day-to-day implementation of FMS procurements which can include providing price and availability data at the customer’s request. Typically, defense items—such as weapon systems—made available for transfer or sale to foreign customers are systems that have completed operational testing and are entering or have entered full rate production. In addition, DOD also sells non-standard items, which are defined as items that DOD does not currently manage and may include items that (1) are commercially available, (2) DOD previously purchased and have since been retired, or (3) were purchased in a different configuration for DOD components. For example, a customer may express interest in buying tanks that DOD no longer buys for its own needs. A customer may also express interest in buying a tank that DOD currently procures but with a radio communications configuration that is different from what DOD uses. A single DOD entity may not have full responsibility for all aspects of responding to a foreign customer’s request to purchase U.S. defense items and services. Under DSCA policy, FMS procurements must generally be managed at “no cost” or “no profit” to the U.S. government. DOD’s work related to developing price and availability data and other FMS operations is generally paid for through the administrative charges collected from foreign customers. Depending on the complexity of the customer’s request, coordination within and across DOD components may be necessary to obtain complete information on pricing and availability. DOD may also need to coordinate with defense contractors who ultimately develop and provide the equipment or services. The FMS process generally begins when a foreign government submits a letter of request to the Department of State or DOD to purchase defense articles or services. In the letter of request, the foreign customer may express interest in obtaining preliminary price and availability data for the capabilities it seeks. While DOD describes price and availability data as rough order of magnitude estimates, DSCA’s guidance does not define the precision of these estimates. According to DOD, FMS price and availability data are non-binding estimates for the defense items and services and are not intended to be budget-quality estimates. Requests for price and availability data can signal to DOD and defense contractors the potential for future sales. DOD and contractors may also draw upon these requests to forecast staffing needs and production line availability. DOD security cooperation organizations working in U.S. embassies around the world can assist potential customers with defining and refining their requirements prior to submitting a request for price and availability data. The security cooperation organizations engage in this early coordination to help customers articulate their capability needs. This early coordination also gives DOD components advance notice of upcoming requests so they can initiate technology security and foreign disclosure processes for the timely release of information. Requests for price and availability data represent an optional step in the process. Customers may forgo the price and availability process and instead submit a formal assistance request for a letter of offer and acceptance, which when signed by the customer and U.S. government becomes an executable FMS case. Figure 1 illustrates where the option to request price and availability occurs in the overall FMS process. The National Defense Authorization Act for Fiscal Year 2017 required DOD to establish a process for defense contractors to provide input on any differences regarding the appropriateness of government price and availability data prior to delivery of formal responses to customers. In response, DSCA issued a policy memorandum in October 2018 that was rescinded 2 months later due to concerns about the sensitivity of information to be shared with contractors. The policy memorandum had instructed DOD components to formally request rough order of magnitude estimates from the prime defense contractor if (1) the total value of the primary article or service requested exceeds $50 million, and (2) the customer has a preference for a non-competitive sole source acquisition or only a single source exists for the primary defense item. Additionally, the memorandum stated that DOD components will allow the prime contractor 5 business days to provide feedback on the appropriateness of the estimate for its items that is included in the price and availability response prior to the customer receiving this response. The memorandum had established a formal process to obtain contractor feedback and resolve issues that may occur, such as differences between the program office’s and prime contractors’ estimates, and emphasized the importance of being aware of program deadlines when following the process to coordinate with contractors. According to a DSCA official, this new policy would have helped alleviate industry concerns about how DOD incorporates estimates provided by industry to develop price and availability responses provided to foreign customers. However, according to DSCA officials, when implementing the process, DOD found that the potential level of detail and precision in price and availability estimates could provide an unfair competitive advantage to contractors coordinating with DOD on price and availability responses to foreign customers. As discussed in further detail later in the report, in some instances we found price and availability estimates DOD offered included more precise information than rough order of magnitude estimates. According to DSCA officials, such information could offer the contractor insight into the government’s pricing methodologies. DSCA subsequently rescinded the October 2018 policy memorandum. DSCA plans to conduct a 120-day review to reassess options to find a solution, if any, on what information can be shared with contractors to satisfy the legal requirement to obtain contractor input and feedback on price and availability estimates before DOD responds to customers. From fiscal years 2014 through 2018, DOD reported receiving 3,038 requests for price and availability data from foreign customers from 93 countries and the North Atlantic Treaty Organization. Foreign customer requests included services and items such as training and support services for weapon systems, missiles and ammunition, aircraft, and communication equipment. We found that most requests came from the same foreign customers. Specifically, 10 customers accounted for 56 percent of requests, with one customer accounting for 28 percent of all requests during the 5-year period within our review. Customers in the Indo-Pacific region accounted for the largest share of requests, as shown in figure 2. Among DOD components, the military departments—Army, Navy, and Air Force—received almost all price and availability requests, as shown in figure 3. The Army received slightly more requests over the 5-year period, closely followed by the Navy. Foreign customers we obtained information from noted that they request price and availability data to inform their acquisition strategy, obtain a sense of affordability, and for budget planning. For example, when considering potential acquisition strategies, some customers may request data for different options, variants, or quantities of similar items or services, resulting in multiple requests for price and availability data to inform a potential purchase. In cases when a customer is interested in procuring a specific item, the customer may request data to obtain information about prices and lead times to determine affordability. The customer may also request the data when considering whether to purchase from the United States or from foreign countries. Requesting price and availability data can also provide foreign customers with information on whether the U.S. government will make the requested defense item or service available for sale. While preliminary estimates are not an official acknowledgement that the item or service will be made available to the customer, the request can trigger a U.S. government review that includes application of policies that govern the release of certain technologies or systems and a discussion with the customer about the item or service. In some cases, customers can receive responses with partial information if some requested items are not available for release. DOD does not collect data on which customers’ requests for price and availability data resulted in a formal request to purchase defense items or services under FMS. Army security assistance officials told us it can take years between when price and availability data are provided and when a customer submits a request for a letter of offer and acceptance, if at all. For their part, customers we obtained information from noted that there may be numerous reasons for why they might choose not to pursue a potential sale. For example, the item or service could not be made available within a timeframe to meet their needs; the overall capability was not affordable; or price and availability estimates were higher than estimates from other foreign sources. The military departments do not consistently track information on the status of responses sent to foreign customers. We found the Navy and Army generally captured the status of a response in the system, identifying when a response is in development, has been sent to the customer, or has been canceled but, according to security assistance officials, this information may not be entered consistently. In addition, the Air Force does not generally update the status of a response in the system. Further, Air Force security assistance officials told us the department does not update data in the system to reflect that the Air Force provided price and availability data to the customer. According to DSCA and military department officials, there is no requirement that DOD components record when a response is sent to a customer. A DSCA official told us that DSCA does not have a specific need to monitor the status of price and availability responses, in part because these are not formal offers, and DOD prioritizes data collection for formal FMS cases— cases for which a signed agreement between the U.S. government and foreign customer is in place. DSCA has established DOD-wide guidance—the Security Assistance Management Manual—for responding to foreign customers’ requests for information on defense items and services available for purchase through the FMS program. The manual includes some guidance on developing, documenting, and communicating price and availability data to foreign customers, but largely pertains to a customer’s request for a letter of offer and acceptance with the intent to buy. Security assistance officials from across the military departments told us they rely on the manual to guide their efforts throughout the price and availability process, and that DSCA’s guidance provides a framework for the process and is not always prescriptive, allowing military departments latitude in how they implement it. DSCA and military department officials we spoke with said that a flexible process is needed to account for various circumstances specific to each request. The price and availability process outlined in guidance and described by DSCA and military department officials involves input from numerous organizations within and external to DOD, as shown in figure 4. The guidance states the process should be completed within 45 days. Generally, we found that DSCA’s guidance reflected attributes conducive to using quality information as called for by federal internal control standards. For example, the standards call for agencies to define information requirements and obtain relevant data from reliable sources. DOD’s guidance reflects this, stating that price and availability data should serve as rough order of magnitude estimates of the cost and availability of defense items or services and are for rough-order planning purposes. The guidance also instructs officials to assess whether a foreign customer’s request contains the necessary information to develop price and availability data, such as the major item or service, quantity, anticipated delivery schedule, and other specifications; suggests that price and availability data also provide customers with information about costs for not only buying equipment but also the related operation and sustainment costs; assumes responses will include standard items—nonstandard items identifies relevant data sources that the military departments can consult to develop price and availability data, such as last contract award, stock price, or information from defense contractors; states that military departments and DSCA should use the Defense Security Assistance Management System to prepare responses to price and availability requests; suggests that data should be itemized by separating main equipment from training, technical publication, transportation costs, and other elements, as applicable; and states that responses should be developed and communicated to customers within 45 days from when DOD receives the request. When selling defense items and services to foreign customers, military department officials indicated that they strive to offer a complete and sustainable capability, referred to as the total package approach. Using this approach, DOD takes into account the related support, such as training, logistics, spare parts, warranties, contractor support, and other considerations necessary for operating and sustaining the defense items or services being purchased. The total package approach represents the initial and follow-on cost of owning and supporting the capability. For example, a DOD program official may develop a cost estimate for the capability, including several years of technical support for maintaining it. DOD may also provide a customer with cost estimates for maintaining the capability over the course of its expected lifetime. Specifically, in the five examples we reviewed, we found that DOD officials generally used a total package approach when developing price and availability data. For example, military department officials developed price and availability data that not only included the items and services requested by the customer, but also included rough order of magnitude estimates for additional costs to reflect the expected ownership costs. Ownership costs may include development, procurement, operation, and sustainment costs for the defense item, as part of a total package approach. The timeframe of ownership costs provided may vary. According to a DSCA official, ownership costs generally cover the first 2 years. In four of the five cases we reviewed, the customer requested a capability and, in response, the program office provided estimates for not only the equipment but also the support needed to achieve the desired capability ranging from one week of training to five years of technical support. For example, in one case, a customer requested data for a complex naval weapon system that they had not previously used. Navy program officials provided estimates for the system, spare parts, training, and other items as requested by the customer. Program officials also included estimates on radio navigation equipment and software that are essential for the system to function as intended, but were not part of the customer’s initial request. Officials stated that they included these additional costs to give the customer a comprehensive view of the costs to acquire, operate, and maintain the weapon system. In the fifth case, program officials told us they did not have to include training or support as this customer was replacing missiles in their inventory, previously purchased through FMS. However, in considering the foreign customer’s ownership costs, the officials said they included costs for containers for storing the missiles. For the selected examples, program officials obtained data from defense contractors and previous sales, adjusting estimates from data sources to ensure the price and availability estimate reflected what the customer could expect to pay for the item or service—initial and follow-on cost of owning and supporting the capability—if the customer decided to proceed with the purchase. Defense contractors responsible for providing data for four of the five examples told us they consider the quantity and specific requirements of the request, such as training, spares, and support; as well as inflation and anticipated production and delivery schedules in some cases. We found that for the selected examples program officials adjusted estimates from contractors and other data sources for a number of reasons, such as to account for potential changes in production schedules and adding program management support provided by the U.S. government to administer system upgrades. By accounting for these likely costs, program officials stated that they were providing the customer with estimates that would more closely reflect expected costs if the customer proceeded with the sale. For example: In two of the responses we reviewed for missiles and communication systems, Navy and Air Force officials increased contractors’ estimates, in part, to account for possible changes to production plans. In the Navy response, for example, program officials increased the contractor’s estimate for the missiles by approximately 14 percent. Officials told us this was to account for possible changes in the production schedule and quantity. Contractor representatives told us that their estimate was based on a specific number of missiles being produced in a certain production lot. Program officials told us that the customer would not likely have a signed agreement in place to receive missiles from that specific production lot. According to program officials, this means the price per missile could be higher than forecasted in the contractor’s initial estimate because there may be fewer quantities in production, resulting in fixed production costs spread among fewer missiles. In an Army response we reviewed for non-standard upgrades to several hundred tanks, the program official used estimates provided by the contractor to develop the price and availability data. These tank upgrades are considered non-standard because the U.S. government no longer uses these tanks. In light of this, the program official included costs for program management support provided by the U.S. government because he said the magnitude of the program would likely require an Army office to execute and manage the upgrades, which is projected to last up to 10 years. In an Air Force response we reviewed for a warning system, program officials considered historical data from similar DOD contracts. The program officials increased the price by $2.4 million dollars from past procurements based on the customer’s request to add a new full-time onsite engineer to support the warning system. This price also included costs for housing, living allowance, and travel expenses. Further, in our review of selected cases, we found that program officials may include other charges in price and availability data, such as nonrecurring costs that are unique one-time program-wide expenditures for certain major defense equipment sold under the FMS program; a contract administration charge—generally, 1.2 percent of the value of procured items—for services such as quality assurance and inspection; transportation costs for delivery of the item, which are generally calculated based on rates established by DSCA; and an administrative charge—currently set at 3.2 percent of the total value of the sale to recover civilian employee salaries and operational costs for administering the FMS acquisition. Military department officials told us that various factors influence the level of effort and information involved in developing price and availability data, some of which may also affect how long a response takes and whether the 45-day timeframe suggested by DSCA’s guidance is achieved. When a foreign customer requests price and availability data, DOD and defense contractors, if involved, expend time and resources to provide a response, all without any certainty that a sale will materialize. As such, DOD officials and defense contractors determine what level of response is appropriate, given the nature of the customer’s request and whether it includes non-standard items or items that require customization, among other things. DSCA and Navy program officials said customers are interested in receiving price and availability responses quickly and recognize that timeliness is an area of concern with the FMS process, in general. Over half of the 12 foreign customers we obtained information from noted that they are concerned with the length of time DOD’s responses can take. Lengthy response times could result in customers missing opportunities to consider potential requests in upcoming budget cycles. Several customers communicated that some responses took considerably longer than 45 days, with some taking anywhere from 6 to 12 months. Among the five examples we reviewed, responses took from 45 to 320 days, as shown in table 1. Program and security assistance officials we interviewed told us they consider the following factors: Customer interest and commitment. Insight into the degree of customer commitment to purchase through FMS may influence the time and resources military departments expend on developing a price and availability response. For example, Air Force security assistance officials told us that they may develop a more detailed response if advised by in-country personnel that a request for price and availability data will likely become a request for an actual purchase. Clarity and completeness of customer’s request. Customers may submit requests that lack the clarity and details needed to develop accurate data and estimate delivery timeframes. Several military department officials told us that when reviewing the customer’s requests for price and availability data, they often have discussions with customers to clarify requirements and in some cases estimated delivery schedules before developing a response. Defining the customer’s requirement—even at this early stage—can be an iterative process that requires multiple interactions between the foreign customer and DOD officials. In one of the examples we reviewed, the defense contractor was also involved. These discussions to clarify the customer’s requirements can prolong the process, according to several program officials. Existing policy to release price and availability data. The U.S. government’s relationship with the foreign customer and the type of defense item or service being requested—such as a weapon system with protected critical technologies versus medical evacuation equipment—can influence the length of time to obtain necessary approvals for the release of price and availability data, according to Navy program and Air Force security assistance officials. Requests for price and availability data may spur the U.S. government to review the current list of countries that have access to particular critical technologies, as shown in one Navy response to a request for a ballistic missile defense system. Initially, the Navy’s Foreign Disclosure Office determined the system would not be available for potential release and the Navy program office excluded it from the price and availability data. About a year later, according to Navy officials, following a change in U.S. policy, the Foreign Disclosure Office approved the release of price and availability data for the system and the Navy included it in a subsequent price and availability response. Complexity of the request. Requests for a non-standard system, integration with foreign components, or a complex system may cause program offices to spend additional resources and time to develop price and availability data. For example, in response to a request for a complex weapon system to be integrated into a foreign customer’s ship, Navy program officials said that they needed several months to develop price and availability data due to the complexity of this request, which required program officials to work with multiple contractors and DOD entities to develop price and availability data. In contrast, Army security assistance officials said that they generally aim to conserve resources and time by developing price and availability data based on standard items, even in instances when customers may request non-standard or complex systems. Existing workload. The volume of requests and competing priorities can also affect the timeliness and the level of effort applied to the response. For example, Army security assistance officials stated that they may prioritize a customer’s request for a letter of offer and acceptance, which initiates an executable FMS case, over a request for price and availability data because there are not resources available to do both at the same time. Availability of requested item or service. When obtaining the items from defense contractors, for example, military department officials consider production schedule and quantity—both of which require additional assumptions to estimate unknown costs. For items that are in DOD’s inventory and will not be replaced, officials are to take into account the item’s actual value when developing price and availability data, according to a DSCA publication. External factors. In cases where a customer is requesting price and availability data to decide whether to purchase defense items or services from the United States or another foreign government, military departments may expend additional resources to develop detailed price and availability data. For example, a Navy security assistance official stated that when officials are aware the customer plans to hold competitions between U.S. and foreign defense contractors, they solicit more detailed technical and cost information from defense contractors to present a competitive estimate. Individually and combined, these factors, as well as the overall process, can influence response times. We provided a draft of this report to the Department of Defense (DOD) for comment. DOD’s response letter is reproduced in appendix II. DOD separately provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Acting Secretary of Defense. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In this report, we (1) described foreign military sales (FMS) price and availability requests Department of Defense (DOD) received from fiscal years 2014 through 2018, (2) assessed DOD’s guidance on developing price and availability data, (3) described how DOD develops price and availability data for the requested capability, and (4) identified factors that can influence the timeliness for DOD to provide price and availability data to the customer. To describe requests for price and availability data DOD received from foreign customers, we analyzed data from the Defense Security Cooperation Agency (DSCA). We reviewed data for fiscal years 2014 through 2018, the most recent 5-year period available. DSCA and other DOD components, including the military departments, use the Defense Security Assistance Management System as a workflow resource to process price and availability data requests, among other things. The system does not track which of the estimates result in a letter of offer and acceptance. To assess the reliability of Defense Security Assistance Management System data, we tested for missing data, duplicates, inconsistent coding, and compared data for five examples to price and availability documentation we received from the Army, Navy, and Air Force. We interviewed DSCA officials responsible for the data system to identify the quality controls in place to help ensure the data are accurate and reliable and discussed military department practices for using the system with security assistance officials. We found that generally the documentation for the five selected preliminary estimates matched the data DSCA provided and requests matched across multiple datasets we received from DSCA. Based on these steps, we determined the data were sufficiently reliable to report examples of the types of items and services requested and the number of requests DOD received by region, DOD component, and foreign customer. We did not report the number of responses DOD provided for these requests or how long it took DOD to provide a response to foreign customers using this data because military departments do not consistently update information in the Defense Security Assistance Management System to track the status of responses or dates when a response is provided to the customer. To assess available guidance, we reviewed DSCA and Army, Navy, and Air Force guidance for developing preliminary estimates in response to requests for price and availability data. We compared the DOD-wide guidance—the Security Assistance Management Manual—to the Standards for Internal Control in the Federal Government, which call for agencies to use quality information collected from relevant and reliable sources. Specifically, we reviewed the guidance to determine if it contained attributes that contribute to quality information such as identifying the information requirements and relevant data sources needed to develop the price and availability data. To describe factors that DOD considers when developing price and availability data and illustrate how these factors influence the process, we selected a non-generalizable sample of five responses from fiscal year 2017 data provided by the military departments. Fiscal year 2017 represented the last complete year of data available when we selected this sample. Because the sample is not generalizable, we cannot report whether practices used among the responses are used across DOD for all price and availability responses. However, these examples provide useful insight into the process and the assumptions used when developing price and availability data. We selected the five examples— one from Army, two from Navy, two from Air Force—to obtain a variety of responses, including median and large case values and a median response time. We determined there were inconsistencies in the data provided, but that the data were sufficient for our purposes of selecting a non-generalizable sample from across the military departments. For each selected example, we collected and analyzed the letter of request, price and availability data, DOD’s response to the customer, supporting documentation if provided such as clarification of the customer’s request, and data collected from defense contractors or program offices. We reviewed the assumptions and factors used in developing the data and the various elements that make up the data, such as administrative charges and costs for training and spares. We interviewed relevant DOD security assistance and program officials, and defense contractor representatives to understand the context and decisions made in developing, documenting, and communicating the price and availability data. To identify the factors that can influence the timeliness of responses, we interviewed officials from DSCA and the Army, Navy, and Air Force. We also obtained information from defense contractors and foreign customers who, as stakeholders in the FMS price and availability process, have broad insights and perspectives on the process. To gather input from foreign customers, we interviewed representatives from the Foreign Procurement Group who also solicited information from its consortium of 46 member countries on our behalf. We received responses from 12 countries—one of which was also a customer for one of the examples included in our review. To obtain contractor’s perspectives, we gathered information from five companies through interviews and attended a meeting hosted by the National Defense Industrial Association. Three of the companies we obtained information from were involved in providing cost and schedule data for four of the examples in our sample. The information we obtained from these foreign customers and defense contractors is not generalizable to all foreign customers and defense contractors. As mentioned previously, we did not assess the timeliness of DOD’s responses because DOD does not consistently track when price and availability data responses are provided to customers in the Defense Security Assistance Management System. However, the information we gathered for the five examples in our sample provided some insight about how long it took DOD to provide a response to the customer. We conducted this performance audit from June 2018 to February 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Candice Wright (Assistant Director) and Leslie Ashton (Analyst-in-Charge) managed this review. Bruna Oliveira, Carmen Yeung, Kurt Gurka, Robin Wilson, and Emily Bond made significant contributions to the work.", "summary": "DOD manages the procurement of billions of dollars in defense items and services on behalf of foreign customers through the FMS program. These sales help support the defense industrial base and are vital to U.S. foreign policy and national security interests. The FMS process generally begins with a request by a foreign government for information about a U.S. defense item or service. Requests for price and availability data are an optional step in the process. DOD guidance is to generally respond to such requests within 45 days. The fiscal year 2018 National Defense Authorization Act included a provision for GAO to review DOD's process for developing price and availability data for foreign customers. This report addresses, among other objectives, (1) price and availability requests DOD received from fiscal years 2014 through 2018, (2) how DOD develops price and availability data, and (3) the factors that can influence the timeliness of DOD's responses to foreign customers with price and availability data. GAO analyzed DOD price and availability data for fiscal years 2014 through 2018, the latest data available; and reviewed documents for a non-generalizable sample of five price and availability responses—varying by estimate value—provided to foreign customers by the Army, Navy, and Air Force. GAO also interviewed defense contractors and DOD officials. GAO is not making any recommendations at this time. The Department of Defense (DOD) reported receiving 3,038 requests for Foreign Military Sales (FMS) price and availability data in fiscal years 2014 through 2018 from 93 countries across six geographic regions, as shown in the figure. Foreign customer requests included services and items such as training and support services for weapon systems, missiles, aircraft, and communication equipment. Not all countries in each region submitted a price and availability request. DOD officials indicated they generally strove to offer price and availability data that reflected rough order of magnitude estimates of total anticipated costs for a complete and sustainable capability. Contractors often provide input to DOD for these cost and schedule estimates. In the five examples GAO reviewed, DOD officials considered factors such as possible production delays and included anticipated costs for support services, operations, and sustainment, when needed. DOD officials also included FMS administrative charges and, as applicable, nonrecurring and transportation costs. GAO found that when DOD considered these factors in developing the response to the customer, at times, they made adjustments to the estimates provided by contractors to more fully reflect expected costs if the items are purchased. Among the five examples, GAO found that response times ranged from 45 to 320 days and that a number of factors can affect timeliness. For example, the complexity of the system or capability the customer is interested in acquiring may require involvement from multiple program offices and defense contractors, requiring more time than the 45 days suggested by DOD's guidance.", "document_type": "gao"}
{"report": "CDC—an operating division of the Department of Health and Human Services (HHS)—serves as the national focal point for disease prevention and control, environmental health, and promotion and education activities designed to improve the health of Americans. The agency is also responsible for leading national efforts to detect, respond to, and prevent illnesses and injuries that result from natural causes or the release of biological, chemical, or radiological agents. To achieve its mission and goals, the agency relies on an array of partners, including public health associations and state and local public health agencies. It collaborates with these partners on initiatives such as monitoring the public’s health, investigating disease outbreaks, and implementing prevention strategies. The agency also uses its staff located in foreign countries to aid in international efforts, such as guarding against global diseases. Table 1 describes the organization of CDC. CDC is staffed by approximately 20,000 employees across the United States and around the world. For fiscal year 2017, according to agency officials, the agency’s total appropriation was approximately $12 billion, of which it reported spending approximately $424 million on information technology. In addition, the officials stated that approximately $31 million (or about 7.3 percent of the amount spent on information technology) was for information security across all CDC information technology investments. CDC relies extensively on information technology to fulfill its mission and support related administrative needs. Among the approximately 750 systems reported in its inventory, the agency has systems dedicated to supporting public health science, practice, and administration. All of these systems rely on an information technology infrastructure that includes network components, critical servers, and data centers. At CDC, the chief information officer (CIO) is responsible for establishing and enforcing policies and procedures protecting information resources. The CIO is to lead the efforts to protect the confidentiality, integrity, and availability of the information and systems that support the agency and its operations, and is to report quarterly to the HHS CIO on the overall effectiveness of CDC’s information security and privacy program, including the progress of remedial actions. The CIO designated a chief information security officer (CISO), who is to oversee compliance with applicable information security and privacy requirements of the agency. The CISO, among other things, is responsible for providing information security protections commensurate with the risk and magnitude of the harm resulting from unauthorized access, use, disclosure, and disruption of information and information systems that support the operations and assets of the agency. To further ensure information security compliance, information systems security officers (ISSO) are responsible for managing the information security program within their respective organizations and report on security program matters to the CISO, including computer security-related incidents. ISSO responsibilities include ensuring that vendor-issued security patches are expeditiously installed and that system owners establish processes for timely removal of access privileges when a user’s system access is no longer necessary. In addition, security stewards are to perform operational security analyses supporting the efforts of the ISSO. Further, business stewards serve as program managers, accepting full accountability for the operations of the systems and ensuring that security is planned, documented, and properly resourced for each aspect of the information security program. The Federal Information Security Modernization Act (FISMA) of 2014 provides a comprehensive framework for ensuring the effectiveness of information security controls over information resources that support federal operations and assets. FISMA assigns responsibility to the head of each agency for providing information security protections commensurate with the risk and magnitude of the harm resulting from unauthorized access, use, disclosure, disruption, modification, or destruction of information systems used or operated by an agency or by a contractor of an agency or other organization on behalf of an agency. The law also delegates to the agency CIO (or comparable official) the authority to ensure compliance with FISMA requirements. The CIO is responsible for designating a senior agency information security officer whose primary duty is information security. The law also requires each agency to develop, document, and implement an agency-wide information security program to provide risk-based protections for the information and information systems that support the operations and assets of the agency. In addition, FISMA requires agencies to comply with National Institute of Standards and Technology (NIST) standards, and the Office of Management and Budget (OMB) requires agencies to comply with NIST guidelines. NIST Federal Information Processing Standards (FIPS) Publication 199 requires agencies to categorize systems based on an assessment of the potential impact that a loss of confidentiality, integrity, or availability of such information or information system would have on organizational operations, organizational assets, individuals, other organizations, and the nation. NIST FIPS 200 requires agencies to meet minimum security requirements by selecting the appropriate security controls, as described in NIST Special Publication (SP) 800-53. This NIST publication provides a catalog of security and privacy controls for federal information systems and a process for selecting controls to protect organizational operations and assets. The publication provides baseline security controls for low-, moderate-, and high-impact systems, and agencies have the ability to tailor or supplement their security requirements and policies based on agency mission, business requirements, and operating environment. Further, in May 2017, the President issued an executive order requiring agencies to immediately begin using NIST’s Cybersecurity Framework for managing their cybersecurity risks. The framework, which provides guidance for cybersecurity activities, is based on five core security functions: Identify: Develop the organizational understanding to manage cybersecurity risk to systems, assets, data, and capabilities. Protect: Develop and implement the appropriate safeguards to ensure delivery of critical infrastructure services. Detect: Develop and implement the appropriate activities to identify the occurrence of a cybersecurity event. Respond: Develop and implement the appropriate activities to take action regarding a detected cybersecurity event. Recover: Develop and implement the appropriate activities to maintain plans for resilience and to restore any capabilities or services that were impaired due to a cybersecurity event. According to NIST, these 5 functions occur concurrently and continuously, and provide a strategic view of the life cycle of an organization’s management of cybersecurity risk. Within the 5 functions are 23 categories and 108 subcategories that include controls for achieving the intent of each function. Appendix II provides a description of the framework categories and subcategories of controls. We reported in June 2018 that CDC had implemented numerous controls over the 24 systems we reviewed, but had not always effectively implemented controls to protect the confidentiality, integrity, and availability of these systems and the information maintained on them. Deficiencies existed in the technical controls and agency-wide information security program that were intended to (1) identify risk, (2) protect systems from threats and vulnerabilities, (3) detect cybersecurity events, (4) respond to these events, and (5) recover system operations. These deficiencies increased the risk that sensitive personally identifiable and health-related information, including information regarding the transfer of biological agents and toxins dangerous to public health, could be disclosed or modified without authorization. As shown in table 2, deficiencies existed in all 5 core security function areas for the selected systems we reviewed. Controls associated with the identify core security function are intended to help an agency develop an understanding of its resources and related cybersecurity risks to its systems, assets, data, and capabilities. These controls include identifying and assessing cybersecurity risk and establishing information security policies, procedures, and plans. We reported in June 2018 that, although CDC had taken steps to implement these controls, it had not (1) categorized the risk-related impact of a key system, identified threats, or reassessed risk for systems or facilities when needed; (2) sufficiently documented technical requirements in policies, procedures, and standards; and (3) described intended controls in facility security plans. CDC Categorized Systems Based on Potential Impact of Compromise, but Did Not Appropriately Categorize a Key General Support System As discussed earlier, FIPS Publication 199 requires agencies to categorize systems based on an assessment of the potential impact that a loss of confidentiality, integrity, or availability of such information or information system would have on organizational operations, organizational assets, individuals, other organizations, and the nation. For networks and other general support systems, NIST SP 800-60 notes that the categorization should be based on the high water mark of supported information systems, and on the information types processed, transmitted across the network, or stored on the network or support system. Further, CDC’s architecture design principles state that high- impact systems are to be maintained on dedicated machinery and be physically and logically secured from lower-risk systems. CDC had categorized the 24 systems we reviewed, but the assigned impact level was not always appropriate. In this regard, the agency did not ensure that high-impact systems were logically secured from a lower- risk system. Specifically, seven selected high-impact systems relied on a general support system that the agency had categorized as a moderate- impact system (i.e., a lower-risk system). As a result, the high-impact systems were relying on controls in a less secure environment. Officials from the Office of the Chief Information Officer (OCIO) explained that the categorization of the supporting system was outdated based on changes to the agency’s operating environment and that they planned to re- evaluate the assigned impact level. CDC Assessed Risk at the System Level, but Did Not Assess Threats, Document Risk-based Decisions, or Reassess Risk When Needed According to NIST SP 800-30, risk is determined by identifying potential threats to an organization and vulnerabilities in its systems, determining the likelihood that a particular threat may exploit vulnerabilities, and assessing the resulting impact on the organization’s mission, including the effect on sensitive and critical systems and data. NIST also states that assessments should be monitored on an ongoing basis to keep current on risk-impacting changes to the operating environment. CDC had developed system-level risk assessments for the 8 selected mission-essential systems, and had summarized its risks in a risk assessment report. However, only two of the eight risk assessments had identified potential threats, and only one of these assessments determined the likelihood and impact of threats to that system. Further, CDC had not always documented risks associated with less secure configuration settings or monitored its assessments to address changes to the operating environment. For example, among the 94 technical control deficiencies that we identified for the 24 systems we reviewed, OCIO officials stated that the agency had not implemented controls for 20 deficiencies due to technical constraints. However, CDC did not address risks associated with decisions not to implement controls for these reasons in the system risk assessments. OCIO officials also partially attributed 5 of the 94 technical control deficiencies to new cybersecurity threats and to threat vectors that turned initially sound architecture decisions into vulnerabilities. However, CDC had not addressed such changes in the risk assessments for the affected systems. By not assessing threats or the likelihood of their occurrence and impact and by not documenting the risks, CDC cannot have assurance that appropriate controls are in place commensurate with the level of risk. CDC Had a Process in Place to Assess Risk to Systems from an Entity-wide Perspective Beyond the system level, newly discovered threats or vulnerabilities may require an agency to make risk decisions from an entity-wide perspective. An entity-wide perspective is needed because the threats and vulnerabilities may affect more than specific systems. CDC had a process in place to assess risk from an entity-wide perspective. This process included regular meetings among OCIO and program office staff to discuss policy, threats, and incidents. Specifically, ISSOs held monthly meetings as a continuous monitoring working group to discuss policy updates. In addition, an OCIO official held quarterly briefings that included presentations on incident response tools, incident statistics, and potential threats. OCIO officials also held ad hoc meetings, as necessary, regarding vulnerability and threat concerns when the agency received email alerts from the Federal Bureau of Investigation, the Department of Homeland Security (DHS), or HHS. CDC Had Not Updated Facility Risk Assessments In addition to assessing risks for systems, agencies are to assess the risk to their facilities. The Interagency Security Committee (ISC) requires agencies to determine the security level for federal facilities, and to conduct risk assessments at least once every 5 years for Level I and Level II facilities and at least once every 3 years for Level III, Level IV, and Level V facilities. However, the two facility risk assessments that we reviewed had not been updated in a timely manner. Specifically, the risk assessments, covering Level III and Level IV facilities that house the 24 reviewed systems, had been last updated in January 2009 and March 2014—8 years earlier and just over 3 years earlier, at the time of our review in July 2017. According to a CDC physical security official, the agency had previously relied on a third-party assessor to perform the assessments. The official also said that the agency planned to conduct its own facility risk assessments and had recently developed procedures for conducting these assessments. Until it performs these assessments, CDC may not be aware of new risks to its facilities or the controls needed to mitigate the risks. FISMA requires each agency to develop, document, and implement an information security program that, among other things, includes policies and procedures that (1) are based on a risk assessment, (2) cost- effectively reduce information security risks to an acceptable level, (3) ensure that information security is addressed throughout the life cycle of each system, and (4) ensure compliance with applicable requirements. According to NIST SP 800-53, an agency should develop policies and procedures for each of the 18 NIST families of security controls to facilitate the implementation of the controls. CDC had documented numerous policies, procedures, and standards that addressed each of the 18 control families identified in NIST SP 800-53. For example, the agency had developed policies and procedures governing physical access to CDC facilities, role-based training of personnel with significant security responsibilities, security assessment and authorization of systems, and continuity of operations, in addition to standard operating procedures that covered numerous other controls. The agency had also developed the CDC IT Security Program Implementation Standards, which describes the agency’s security program requirements and minimum mandatory standards for the implementation of information security and privacy controls. In addition, the agency had documented configuration standards, which specified minimum configuration settings, for devices such as firewalls, routers, switches, as well as Unix and Windows servers. However, these policies and standards sometimes lacked the technical specificity needed to ensure controls were in place. To illustrate, the agency had not sufficiently documented detailed guidance or instructions to address numerous technical control deficiencies we identified, such as insecure network devices, insecure database configurations, not blocking certain email attachments, and not deploying a data loss prevention capability. According to OCIO officials, the agency’s periodic reviews and updates to existing cybersecurity policies and standards did not reveal and address these issues. Nevertheless, without clear and specific guidance or instructions for implementing technical controls, the agency had less assurance that controls were in place and operating as intended. FISMA requires each agency to develop, document, and implement an information security program that, among other things, includes subordinate plans for providing adequate information security for networks, facilities, and systems or a group of information systems, as appropriate. NIST states that plans should be reviewed and updated to ensure that they continue to reflect the correct information about the systems, such as changes in system owners, interconnections, and authorization status, among other things. HHS and CDC policies require that such plans be reviewed annually. In addition, the ISC requires that agencies develop and implement an operable and effective facility security plan. CDC standards require the organization to prepare a facility security plan (or similar document). CDC had developed security plans for the 8 selected mission-essential systems. With a few exceptions, the plans addressed the applicable security controls for those systems. The agency also had reviewed and updated the plans annually. However, CDC had not developed security plans for the facilities housing resources for the selected systems. Physical security officials stated that they had not developed security plans because they did not have a sufficient number of staff to develop them. Without comprehensive security plans for the facilities, CDC’s information and systems would be at an increased risk that controls to address emergency situations would not be in place and personnel at the facilities would not be aware of their roles and responsibilities for implementing sound security practices to protect systems housed at these CDC locations. The protect core security function is intended to help agencies develop and implement the appropriate safeguards for their systems to ensure achieving the agency’s mission and to support the ability to limit or contain the impact of a potential cybersecurity event. Controls associated with this function include implementing controls to limit access to authorized users, processes or devices; encrypting data to protect its confidentiality and integrity; configuring devices securely and updating software to protect systems from known vulnerabilities; and providing training for cybersecurity awareness and performing security-related duties. Although CDC had implemented controls that were intended to protect its operating environment, we reported in June 2018 that the agency did not consistently (1) implement access controls effectively, (2) encrypt sensitive data, (3) configure devices securely or apply patches in a timely manner, or (4) ensure staff with significant security responsibilities received role-based training. A basic management objective for any agency is to protect the resources that support its critical operations from unauthorized access. Agencies accomplish this objective by designing and implementing controls that are intended to prevent, limit, and detect unauthorized access to computing resources, programs, information, and facilities. Access controls include those related to identifying and authenticating users, authorizing access needed to perform job duties, protecting system boundaries, and physically protecting information system assets. However, CDC had not consistently implemented these controls. CDC Implemented Enterprise-wide Identification and Authentication Controls, but Did Not Consistently and Securely Configure Password Controls for Certain Accounts on Devices and Systems NIST SP 800-53 states that agencies should implement multi-factor authentication for their users of information systems. Multi-factor authentication involves using two or more factors to achieve authentication. A factor is something you know (password or personal identification number), something you have (token and personal identity verification (PIV) card), or something you are (biometric). Also, NIST and CDC policy state that information systems shall have password management controls established to include minimum password complexity requirements, password lifetime restrictions, prohibitions on password reuse, and user accounts temporarily locked out after a certain number of failed login attempts during a specified period of time. CDC had applied enterprise-wide solutions to ensure appropriate identification and multi-factor authentication of its general user community through, for example, the use of PIV cards. However, instances of weak password management controls existed for certain accounts on network devices, servers, and database systems. According to OCIO officials, password control deficiencies existed primarily due to technical constraints, administrators not being aware of technical requirements, or administrators not adequately monitoring configuration settings. Without more secure password settings, CDC’s information and systems are at an increased risk that unauthorized individuals could have guessed passwords and used them to obtain unauthorized access to agency systems and databases. CDC Authorized Users More Access than Needed to Perform Their Jobs NIST SP 800-53 states that agencies should employ the principle of least privilege, allowing only authorized access for users (or processes acting on behalf of users) that are necessary to accomplish assigned tasks. It also states that privileged accounts—those with elevated access permissions—should be strictly controlled and used only for their intended administrative purposes. CDC had implemented controls intended to ensure that users were granted the minimum level of access permissions necessary to perform their legitimate job-related functions. However, the agency had granted certain users more access than needed for their job functions, including excessive access permissions on a key server. According to OCIO officials, CDC systems had deficiencies related to restricting access primarily due to technical constraints or administrators not adequately monitoring configuration settings. By not appropriately restricting access, CDC’s information and systems are at an increased risk that individuals could deliberately or inadvertently compromise database systems or gain inappropriate access to information resources. CDC Did Not Effectively Implement Boundary Controls to Ensure Network Integrity NIST SP 800-53 states that agencies should control communications at information systems’ external boundaries. It states that, to manage risks, agencies should use boundary protection mechanisms to separate or partition computing systems and network infrastructures containing higher-risk systems from lower-risk systems. Although CDC had implemented multiple controls that were designed to protect system boundaries, the agency had not sufficiently separated higher-risk systems from lower-risk systems. According to OCIO officials, deficiencies in boundary protection controls existed due to new cybersecurity threats turning initially sound architecture decisions into vulnerabilities, technical constraints, and administrators not being aware of technical requirements or adequately monitoring configuration settings. Without stronger boundary controls, CDC’s information and systems are at an increased risk that an attacker could have exploited these boundary deficiencies and leveraged them to compromise CDC’s internal network. CDC Physically Protected Information System Assets, but Did Not Consistently Ensure Access Remained Appropriate NIST SP 800-53 states that agencies should implement physical access controls to protect employees and visitors, information systems, and the facilities in which they are located. In addition, NIST states that agencies should review access lists detailing authorized facility access by individuals at the agency-defined frequency. In its standards, CDC requires implementation of the NIST special publication and requires that access lists detailing authorized facility access by individuals be reviewed at least every 365 days. CDC had implemented physical security controls. The agency had implemented physical security measures to control access to certain areas and to ensure the safety and security of its employees, contractors, and visitors to CDC facilities. For example, CDC had issued PIV cards and Cardkey Proximity Cards to its employees and contractors, and had limited physical access to restricted areas based on the permissions it granted via these cards. However, the agency had not consistently reviewed authorized access lists. In this regard, CDC did not have a process in place for periodically reviewing the lists of individuals with access to rooms containing sensitive resources to ensure that such access remained appropriate. Without reviewing authorized access lists, CDC has reduced assurance that individual access to its computing resources and sensitive information is appropriate. NIST SP 800-53 states that agencies should encrypt passwords both while stored and transmitted, and configure information systems to establish a trusted communication path between the user and the system. Additionally, NIST requires that, when agencies use encryption, they use an encryption algorithm that complies with FIPS 140-2. CDC had used FIPS-compliant encryption for its PIV card implementation, but had not effectively implemented encryption controls in other areas. According to OCIO officials, encryption control deficiencies existed primarily due to technical constraints, administrators not being aware of a technical solution, or configuration settings not being adequately monitored. By not using encryption effectively, CDC limits its ability to protect the confidentiality of sensitive information, such as passwords. NIST SP 800-53 states that agencies should disable certain services with known security vulnerabilities. This includes configuring security control settings on operating systems in accordance with publicly available security checklists (or benchmarks) promulgated by NIST’s National Checklist Program repository. This repository contains, for example, the security configuration benchmarks established by the Center for Internet Security (CIS) for Windows servers. NIST also states that agencies should test and install newly-released security patches, service packs, and hot fixes in a timely manner. In addition, CDC policy required that software patches for remediating vulnerabilities designated as critical or high risk be applied to servers within 45 days of being notified that a patch is available or within 7 days of when an exploit is known to exist. Further, agency policy specified that administrators configure Windows servers in accordance with the CDC- approved security benchmarks. CDC had documented security configuration baselines, but had not always securely configured its systems or applied patches. In addition, the agency had not consistently configured security settings in accordance with prescribed security benchmarks or applied patches in a timely manner. For example: CDC had configured Windows servers to run unnecessary services. CDC had configured only about 62 percent of the security settings in accordance with prescribed benchmark criteria on the Windows and infrastructure servers supporting five systems that we reviewed. During our site visit in April 2017, CDC had not installed 21 updates on about 20 percent of the network devices, including 17 updates that the vendor considered to be critical or high-risk. The oldest of the missing updates dated back to January 2015. CDC had not updated database software supporting two selected systems to a more recent version that addressed vulnerabilities with a medium severity rating. According to OCIO officials, CDC had deficiencies in configuration and patching primarily due to administrators not being aware that there was a technical solution or did not adequately monitor configuration settings. By not securely configuring devices and installing updates and patches in a timely manner, the agency is at increased risk that individuals could have exploited known vulnerabilities to gain unauthorized access to agency computing resources. According to NIST SP 800-53, agencies should provide adequate security training to individuals in a role such as system/network administrator and to personnel conducting configuration management and auditing activities, tailoring the training to their specific roles. In addition, one of the cybersecurity cross-agency priority goals requires that agencies implement training that reduces the risk that individuals will introduce malware through email and malicious or compromised web sites. Consistent with NIST SP 800-53, CDC policy required network users to receive annual security awareness training. Accordingly, for fiscal year 2017, all CDC staff completed the required annual security awareness training. CDC policy also required that those staff identified as having significant security responsibilities receive role-based training every 3 years. However, not all staff with significant security responsibilities received role-based training within the defined time frames. The agency used a tracking system to monitor the status of role-based training for 377 individuals who had been identified as having significant security responsibilities. As of May 2017, 56 (about 15 percent) of the 377 individuals had not completed the training within the last 3 years, and 246 (about 65 percent) of them had not taken training within the last year. In addition, CDC had not identified at least 30 other staff with significant security responsibilities who required role-based training. Specifically, none of the 18 security and database administrators for four selected systems were included among the individuals being tracked, although these administrators had significant security responsibilities. Further, the agency provided us with a list of 42 individuals whose job series indicated that they required role-based training. However, 12 of the 42 were not included among the tracked individuals. Furthermore, given the number of deficiencies identified and the rapidly evolving nature of cyber threats, CDC’s requirement that staff take role-based training only once every 3 years is not sufficient for individuals with significant cybersecurity responsibilities. According to OCIO officials, managers are responsible for identifying those individuals with significant security responsibilities. The process used to track training was manual and required an individual’s manager to specify training requirements. The officials noted that the agency plans to implement a new HHS annual role-based training requirement in fiscal year 2018 and that they intend to work to enhance oversight as the new requirement is implemented. The officials also stated that at least 10 of the 94 technical control-related deficiencies identified in our June 2018 report had resulted, at least in part, from staff not being aware of control requirements or solutions to address the deficiencies. As a result, CDC’s information and systems are at increased risk that staff may not have the knowledge or skills needed to appropriately protect them. The detect core security function is intended to allow for the timely discovery of cybersecurity events. Controls associated with this function include logging and monitoring system activities and configurations, assessing security controls in place, and implementing continuous monitoring. In June 2018, we reported that, although CDC had implemented controls intended to detect the occurrence of a cybersecurity event, it had not sufficiently implemented logging and monitoring capabilities or effectively assessed security controls. NIST SP 800-53 states that agencies should enable system logging features and retain sufficient audit logs to support the investigations of security incidents and the monitoring of select activities for significant security-related events. In addition, National Archives and Records Administration records retention guidance states that system files containing information requiring special accountability that may be needed for audit or investigative purposes should be retained for 6 years after user accounts have been terminated or passwords altered, or when an account is no longer needed for investigative or security purposes, whichever is later. NIST also states that agencies should monitor physical access to facilities where their information systems reside to detect physical security incidents. Further, NIST SP 800-53 states that agencies should monitor and control changes to configuration settings. Although CDC had implemented centralized logging and network traffic monitoring capabilities, the capabilities were limited. For example, the agency’s centralized logging system used for security monitoring had a limited storage capacity and did not meet the National Archives and Records Administration requirements. In addition, CDC had not centrally collected and monitored security event data for many key assets connected to the network. As a result, increased risk existed that CDC would not have been able to detect anomalous activities that may have occurred from malware attacks over time. OCIO officials stated that, as a compensating measure, the agency prevents direct communications between workstations. However, such a measure does not allow the agency to detect potentially inconsistent activities that may have occurred from malware attacks within the same data center. CDC also had not consistently reviewed physical access logs to detect suspicious physical access activities, such as access outside of normal work hours and repeated access to areas not normally accessed. Program offices responsible for 7 of the 8 selected mission-essential systems did not conduct such a review. According to OCIO officials, the offices were not aware of the need for a review. However, without reviewing physical access logs, CDC has reduced assurance that the agency would detect suspicious physical access activities. Further, CDC had not routinely monitored the configuration settings of its systems to ensure that the configurations were securely set. For example, for at least 41 of 94 technical control deficiencies we identified, OCIO officials cited quality control gaps where the change management process or system administrators had not discovered deficiencies resulting from insecure configuration settings. Without an effective monitoring process in place for system configurations, the agency was not aware of insecure system configurations. FISMA requires each agency to periodically test and evaluate the effectiveness of its information security policies, procedures, and practices. The law also requires agencies to test the management, operational, and technical controls for every system identified in the agency’s required inventory of major information systems at a frequency depending on risk, but no less than annually. In addition, NIST SP 800- 53A identifies three assessment methods—interview, examine, and test— and describes the potential depth and coverage for each. Assessing a control’s effectiveness based on an interview is likely less rigorous than examining a control; similarly, examining a control is likely less rigorous than testing the control’s functionality. CDC had not sufficiently tested or assessed the effectiveness of the security controls for the 8 mission-essential systems that we reviewed. Although CDC annually assessed security controls of selected systems, the agency had only examined control descriptions in security plans to ensure accuracy. At least once every 3 years, the agency selected controls for a more in-depth assessment of the 8 mission-essential systems we reviewed. However, CDC had assessed only 191 (about 7 percent) of 2,818 controls described in the security plans for the selected systems. In addition, the agency used methods for assessing controls that were often not rigorous enough to identify the control deficiencies that we identified. For example, as depicted in figure 1, CDC relied exclusively on interviews—a less rigorous method—to assess 20 percent of the 191 controls it assessed for the selected systems. The security control tests and assessments were insufficient in part because CDC had not developed comprehensive security assessment plans or had not consistently implemented the plans for the 8 selected mission-essential systems we reviewed. For example, one system’s assessment plan indicated that five controls should be assessed using a testing methodology; instead, however, the assessor conducted interviews to determine whether controls were effective or not. OCIO officials stated that the security control test and assessment process is manual and staffing is limited. They stated that the agency intends to rely increasingly on automated tools—such as the tools implemented by the Continuous Diagnostics and Mitigation program—for performing the assessments. Nevertheless, by not assessing controls in an in-depth and comprehensive manner, CDC has limited assurance that the security controls are in place and operating as intended. Further, without developing and implementing comprehensive assessment plans, assessments may not be performed with sufficient rigor to identify control deficiencies. The respond core security function is intended to support the ability to contain the impact of a potential cybersecurity event. Controls associated with this function include implementing an incident response capability and remediating newly-identified deficiencies. Although CDC had implemented controls for incident response to detect cybersecurity events, we reported in June 2018 that the agency had not maintained adequate information to support its incident response capability or taken timely corrective actions to remediate identified control deficiencies. NIST SP 800-53 and SP 800-61 state that agencies should develop and document an incident response policy with corresponding implementation procedures and an incident response plan, and keep them updated according to agency requirements. NIST also states that agencies should implement an incident handling capability, including an incident response team that consists of forensic/malicious code analysts. In addition, agencies are to provide incident response training for the team and test the incident response capability to determine the effectiveness of the response. Further, NIST states that agencies are to monitor incidents by tracking and documenting them and maintain records about each incident, including forensic analysis. Finally, National Archives and Records Administration guidance states that records and data relevant to security incident investigations should be retained for 3 years. CDC had implemented an incident response capability. The agency had developed policy, procedures, and a plan that addressed incident response, and updated them annually. CDC had an incident response team that managed all of the incident handling and response efforts for the agency, and conducted forensic analyses for reported security incidents. Team members had undergone training, such as an advanced network forensic and analysis course offered by a private firm. In addition, the agency had periodically tested its incident handling capability by conducting penetration testing exercises. These exercises allowed the team to test its real-time response capabilities. CDC’s incident response procedures state that incident tickets should include a description of actions taken, response time, and whether actions have been completed or not. The agency’s procedures also require that computers affected by an incident be removed from the network immediately. Nevertheless, CDC had shortcomings in implementing its incident response capability and monitoring procedures. For the 11 security incidents CDC considered most significant over a 19-month period ending in March 2017, the agency had not consistently described the actions taken, the response times, or whether remedial actions had been completed. The agency also had not maintained audit log records for its security incidents. For example, the agency described recommended actions for 10 of the 11 incidents, but did not describe the actions that had been taken. In addition, although incident response team officials told us that all incident ticket records had been saved, CDC had not retained system log data that supported incident resolution for at least five of the incidents. The agency’s policy did not address record retention in accordance with National Archives and Records Administration guidance. Further, for two of the security incidents, the security incident tickets did not clearly indicate when two compromised workstations had been removed from the network. According to OCIO officials, shortcomings in fully documenting incidents resulted from the organization being understaffed, primarily due to budget limitations and the inability to hire qualified personnel. Without effectively tracking and documenting information system security incidents, CDC’s systems are at increased risk that the impact of security incidents would not be fully addressed. FISMA requires each agency to develop, document, and implement an information security program that, among other things, includes a process for planning, implementing, evaluating, and documenting remedial actions to address any deficiencies in information security policies, procedures, or practices. NIST SP 800-53 states that agencies are to develop a plan of action and milestones (POA&M) for an information system to document the agency’s planned remedial actions to correct identified deficiencies. CDC policy was consistent with the NIST guidelines. CDC had developed POA&Ms for deficiencies identified by its security control assessments, but had not remediated the deficiencies in a timely manner. For each of the 8 selected mission-essential systems, the agency had created plans for correcting control deficiencies. However, the agency did not implement several remedial actions by their due date. For example, expected completion dates had passed for correcting deficiencies associated with 4 of the 8 selected mission-essential systems. For these 4 systems, the completion dates were 1 to 8 months beyond the due dates at the time of our review in September 2017. According to Office of the Chief Information Security Officer officials, program offices that own the systems did not always communicate updates on the status of remedial actions for their respective systems, noting that deficiencies may have been corrected. Without effective communication to update its POA&Ms, CDC was not in a position to effectively manage its remedial actions and correct known deficiencies in a timely manner. The recover core security function is intended to support timely recovery of normal operations to reduce the impact from a cybersecurity event. Controls associated with this function include developing and testing contingency plans to ensure that, when unexpected events occur, critical operations can continue without interruption or can be promptly resumed, and that information resources are protected. Losing the capability to process, retrieve, and protect electronically maintained information can significantly affect an agency’s ability to accomplish its mission. If contingency planning is inadequate, even relatively minor interruptions can result in lost or incorrectly processed data, which can cause financial losses, expensive recovery efforts, and inaccurate or incomplete information. NIST SP 800-53 states that agency systems should have a contingency plan that includes the identification of key personnel and the systems’ essential mission functions and addresses full information system restoration. For high-impact systems, NIST specifies that agencies test contingency plans at an alternate processing site that is separated from the primary processing site to reduce susceptibility to the same threats. In addition, NIST states that organizations should initiate corrective actions based on testing if they are needed. As we reported in June 2018, CDC had developed and fully tested contingency plans for each of the 8 selected mission-essential systems that we reviewed. Each plan identified key personnel and their contact information, essential mission functions of the systems, and instructions on how to fully restore the systems in the event of a disruption. Additionally, between January 2015 and May 2017, CDC had tested whether the 8 systems could be recovered at their respective alternate sites, and had initiated corrective actions based on the results of the tests. However, the alternate site for 6 of the 8 selected mission-essential systems was located in relatively close proximity to the main processing site. Although 2 systems had alternate sites located in another state, the alternate site for the other 6 systems was within the same metropolitan area. As a result, an event such as a natural disaster or substantial power outage could affect both the main and alternate sites for these systems, potentially rendering CDC unable to complete functions associated with its mission. Prompt restoration of service is necessary because the required recovery time for these systems ranged from 4 to 24 hours. Security plans for 3 of the systems recognized the hazards of having the sites within the same geographical region, but stated that CDC had accepted this risk. According to OCIO officials, having a site further away was cost prohibitive; however, the officials had not documented this analysis or the associated risk of having the agency’s processing sites located within the same geographical area. Without documenting the analysis and associated risk, CDC had less assurance that senior leadership was aware of the risk of agency systems being unavailable. As a consequence, senior leadership may not agree whether acceptance of the risk was warranted. An underlying reason for the information security deficiencies in selected systems was that, although the agency had developed and documented an agency-wide information security program, it had not consistently or effectively implemented elements of the program. FISMA requires each agency to develop, document, and implement an information security program that, among other things, includes the following elements: periodic assessments of the risk and magnitude of the harm that could result from the unauthorized access, use, disclosure, disruption, modification, or destruction of information and information systems that support the operations and assets of the agency; policies and procedures that (1) are based on risk assessments, (2) cost-effectively reduce information security risks to an acceptable level, (3) ensure that information security is addressed throughout the life cycle of each system, and (4) ensure compliance with applicable requirements; plans for providing adequate information security for networks, facilities, and systems or group of information systems, as appropriate; security awareness training to inform personnel of information security risks and of their responsibilities in complying with agency policies and procedures, as well as training personnel with significant security responsibilities for information security; periodic testing and evaluation of the effectiveness of information security policies, procedures, and practices, to be performed with a frequency depending on risk, but no less than annually, and that includes testing of management, operational, and technical controls for every system identified in the agency’s required inventory of major information systems; a process for planning, implementing, evaluating, and documenting remedial actions to address any deficiencies in the information security policies, procedures, or practices of the agency; and plans and procedures to ensure continuity of operations for information systems. As discussed previously in this report, CDC had implemented aspects of each of these elements. For example, the agency had conducted risk assessments, developed security plans, assessed security controls, developed remedial action plans, and developed and tested contingency plans for each of the 8 selected mission-essential systems. In addition, the agency had documented numerous policies and procedures and ensured that staff had completed annual security awareness training. However, CDC’s program had shortcomings. For example, as discussed earlier in this report, CDC had not consistently or effectively: addressed threats, technical constraints, and the changing threat environment in its system risk assessments, or assessed the risk of having alternate processing sites within close proximity to each other; documented detailed technical requirements in policies and procedures, or facility controls in facility security plans; tracked and trained staff with significant security responsibilities; monitored configuration settings and comprehensively assessed remediated deficiencies in a timely manner; or documented its cost analysis and associated risk of having an alternate processing site within the same geographical region as its primary processing site. Until CDC addresses these shortcomings and consistently and effectively implements all elements of its information security program, the agency will lack reasonable assurance that its computing resources are protected from inadvertent or deliberate misuse. In our June 2018 report, we made 195 recommendations to CDC to strengthen its technical security controls and bolster its agency-wide information security program. Specifically, we recommended that the agency take 184 actions to resolve technical control deficiencies by implementing stronger access controls, encrypting sensitive data, configuring devices securely, applying patches in a timely manner, strengthening firewall rules, and implementing logging and monitoring controls more effectively, among other actions. We also made 11 recommendations for CDC to improve its information security program by, among other things, assessing risks as needed, documenting more detailed technical requirements, monitoring and assessing controls more comprehensively, and remediating deficiencies in a timely manner. Since the issuance of our June 2018 report, CDC has made significant progress in implementing the recommendations we made to resolve the technical security control deficiencies in the information systems we reviewed and to improve its information security program. In this regard, the agency has implemented many of the recommendations for improving technical security controls for the systems we reviewed and has developed plans to implement recommendations for enhancing its information security program. Specifically, as of August 3, 2018, CDC had fully implemented 102 (55 percent) of the 184 recommendations we made to fortify the technical security controls over the systems we reviewed. In addition, the agency had partially implemented 20 (11 percent) of the 184 recommendations. In these instances, CDC had made progress toward implementing the recommendations, but had not completed all of the necessary corrective actions for us to close the recommendations. Therefore, these recommendations remain open. Further, CDC did not provide any evidence that it had implemented the remaining 62 technical control- related recommendations. Table 3 summarizes the status of CDC’s efforts to implement the 184 recommendations that we made to resolve the technical control deficiencies, as of August 3, 2018. By implementing 102 recommendations, CDC (as of August 3, 2018) reduced some of the risks associated with certain key activities. Specifically, these efforts included protecting network boundaries and logging and monitoring security events for indications of inappropriate or unusual activity on systems—that we highlighted in our June 2018 report as being particularly vulnerable and requiring the agency’s greater priority and attention. In addition, the agency had implemented several of our recommendations to rectify a number of the security control deficiencies. These efforts included strengthening firewall rules, implementing stronger access controls, configuring devices securely, and expanding its audit monitoring capabilities. In addition, CDC had developed a plan of action and milestones (POA&M) for each of the identified technical control deficiencies and related recommendations that remained open as of August 3, 2018. The POA&Ms assigned organization responsibilities, identified estimated costs, identified points of contact, and established time frames for resolving the deficiencies and closing the related recommendations. The agency’s plans called for it to implement the majority of the remaining open technical control-related recommendations by September 2019, and all recommendations by September 2020, as shown in figure 2. Our June 2018 report also included 11 recommendations to CDC to improve its information security program. In particular, we recommended that the agency, among other things, evaluate system impact level categorizations to ensure they reflect the current operating environment; update risk assessments to identify threats and the likelihood of impact of the threat on the environment; and update the facility risk assessments. In addition, we recommended that the agency take the necessary steps to make sure staff with significant security roles and responsibilities are appropriately identified and receive role-based training; monitor the configuration settings of agency systems to ensure the settings are set as intended; update security control assessments to include an assessment of controls using an appropriate level of rigor; and remediate POA&Ms in a timely manner. Further, we recommended that the agency document the cost-benefit analysis with associated risk of having an alternate site within the same geographical region as the main site. As of August 3, 2018, the agency had partially implemented 1 of the 11 information security program-related recommendations, but had not provided any evidence that it had implemented the remaining 10 recommendations. Regarding the partially implemented recommendation, CDC had provided role-based training to all personnel performing significant security responsibilities. However, the agency still needed to establish and automate the identification process and the tracking of training records for individuals needing specialized security role-based training. CDC had developed plans to fully implement this recommendation and each of the remaining 10 information security program-related recommendations by July 2019. Fully implementing the open recommendations is essential to ensuring that the agency’s systems and sensitive information are not at increased and unnecessary risk of unauthorized use, disclosure, modification, or disruption. We received written comments on a draft of this report from CDC. In its comments, which are reprinted in appendix III, the agency stated that it recognizes the risks associated with operating a large, global information technology enterprise and has implemented processes, procedures, and tools to better ensure the prevention, detection, and correction of potential incidents. CDC also said cybersecurity remains a high priority and that it takes the responsibilities for protecting public health information and data entrusted to it seriously. To strengthen its cybersecurity program, the agency stated that it is restructuring and streamlining the cyber program and IT infrastructure of its Office of the Chief Information Officer. Further, CDC stated that it has leveraged GAO’s limited official use only report, issued in June 2018, to accelerate its implementation, infrastructure, and software deployments to complete phrases one and two of DHS’s Continuous Diagnostics and Mitigation program. The agency also said it concurred with, and highlighted a number of actions that it had planned or begun taking to remediate, the 11 security program recommendations that we made to CDC in our June 2018 report. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and the department’s Office of the Inspector General, the Director of CDC, and interested congressional parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov, or Dr. Nabajyoti Barkakati at (202) 512-4499 or barkakatin@gao.gov. GAO staff who made key contributions to this report are listed in appendix IV. Our objective was to assess the extent to which CDC had effectively implemented an information security program and controls to protect the confidentiality, integrity, and availability of its information on selected information systems. In June 2018, we issued a report which detailed the findings from our work in response to this objective. In the report, we made 184 recommendations to CDC to resolve the technical security control deficiencies in the information systems we reviewed and 11 additional recommendations to improve its information security program. We designated that report as “limited official use only” (LOUO) and did not release it to the general public because of the sensitive information it contained. This report publishes the findings discussed in our June 2018 report, but we have removed all references to the sensitive information. Specifically, we deleted the names of the information systems and computer networks that we examined, disassociated identified control deficiencies from named systems, deleted certain details about information security controls and control deficiencies, and omitted an appendix that was contained in the LOUO report. The appendix contained sensitive details about the technical security control deficiencies in the CDC’s information systems and computer networks that we reviewed, and the 184 recommendations we made to mitigate those deficiencies. We also provided a draft of this report to CDC officials to review and comment on the sensitivity of the information contained herein and to affirm that the report can be made available to the public without jeopardizing the security of CDC’s information systems and networks. In addition, this report addresses a second objective that was not included in the June 2018 report. Specifically, this objective was to determine the extent to which CDC had taken corrective actions to address the previously identified security program and technical control deficiencies and related recommendations for improvement that we identified in the earlier report. As noted in our June 2018 report, we determined the extent to which CDC had effectively implemented an information security program and controls to protect the confidentiality, integrity, and availability of its information on selected information systems. To do this, we initially gained an understanding of the overall network environment, identified interconnectivity and control points, and examined controls for the agency’s networks and facilities. We conducted site visits at two CDC facilities in Atlanta, Georgia. To evaluate CDC’s controls over its information systems, we used our Federal Information System Controls Audit Manual, which contains guidance for reviewing information system controls that affect the confidentiality, integrity, and availability of computerized information. We based our assessment of controls on requirements identified by the Federal Information Security Modernization Act of 2014 (FISMA), which establishes key elements for an effective agency-wide information security program; NIST guidelines and standards; Department of Health and Human Services and CDC policies, procedures, and standards; and standards and guidelines from relevant security organizations, such as the National Security Agency, the Center for Internet Security, and the Interagency Security Committee. We had reviewed a non-generalizable sample of the agency’s information systems, focusing on those systems that (1) collect, process, and maintain private or potentially-sensitive proprietary business, medical, and personally identifiable information; (2) are essential to CDC’s mission; and (3) were assigned a Federal Information Processing Standard rating of moderate or high impact. Based on these criteria, we had selected eight mission-essential systems for our review. Of these systems, the agency had categorized 7 as high-impact systems and 1 as a moderate-impact system. For these 8 selected mission- essential systems, we had reviewed information security program-related controls associated with risk assessments, security plans, security control assessments, remedial action plans, and contingency plans. To assess the safeguards CDC implemented for its systems, we had examined technical security controls for 24 CDC systems, including systems the agency designated as high-value assets. These included 10 key systems, 8 of which were high- and moderate-impact mission- essential systems just described, 1 additional high-impact system, 1 additional moderate-impact system, and 14 general support systems. We selected the additional high-impact system because the agency re- categorized it as a high-impact system during our review. We selected the additional moderate-impact system because the agency used it to control physical access to highly sensitive CDC biologic lab facilities, including facilities that handle dangerous and exotic substances that cause incurable and deadly diseases. We selected 10 key systems, 8 of which were mission-essential systems, for review that (1) collect, process, and maintain private or potentially sensitive proprietary business, medical, and personally identifiable information; (2) are essential to CDC’s mission; (3) could have a catastrophic or severe impact on operations if compromised; or (4) could be of particular interest to potential adversaries. We also selected 14 general support systems that were part of the agency’s network infrastructure supporting the 10 key systems. To review controls over the 10 key systems and 14 general support systems, we had examined the agency’s network infrastructure and assessed the controls associated with system access, encryption, configuration management, and logging and monitoring. For reporting purposes, we had categorized the security controls that we assessed into the five core security functions described in the National Institute of Standards and Technology’s (NIST) cybersecurity framework. The five core security functions are: Identify: Develop the organizational understanding to manage cybersecurity risk to systems, assets, data, and capabilities. Protect: Develop and implement the appropriate safeguards to ensure delivery of critical infrastructure services. Detect: Develop and implement the appropriate activities to identify the occurrence of a cybersecurity event. Respond: Develop and implement the appropriate activities to take action regarding a detected cybersecurity event. Recover: Develop and implement the appropriate activities to maintain plans for resilience and to restore any capabilities or services that were impaired due to a cybersecurity event. These core security functions are described in more detail in appendix II. For the identify core security function, we had examined CDC’s reporting for its hardware and software assets; analyzed risk assessments for the eight selected mission-essential systems to determine whether threats and vulnerabilities were being identified; reviewed risk assessments for two facilities; analyzed CDC policies, procedures, and practices to determine their effectiveness in providing guidance to personnel responsible for securing information and information systems; and analyzed security plans for the eight selected systems to determine if those plans had been documented and updated according to federal guidance. We also evaluated the risk assessments for two facilities that housed the 8 mission-essential selected systems. For the protect core security function, we had examined access controls for the 24 systems. These controls included the complexity and expiration of password settings to determine if password management was being enforced; administrative users’ system access permissions to determine whether their authorizations exceeded the access necessary to perform their assigned duties; firewall configurations, among other things, to determine whether system boundaries had been adequately protected; and physical security controls to determine if computer facilities and resources were being protected from espionage, sabotage, damage, and theft. We also had examined configurations for providing secure data transmissions across the network to determine whether sensitive data were being encrypted. In addition, we had examined configuration settings for routers, network management servers, switches, firewalls, and workstations to determine if settings adhered to configuration standards, and inspected key servers and workstations to determine if critical patches had been installed and/or were up-to-date. Further, we had examined training records to determine if employees and contractors had received security awareness training according to federal requirements, and whether personnel who have significant security responsibilities had received training commensurate with those responsibilities. For the detect core security function, we had analyzed centralized logging and network traffic monitoring capabilities for key assets connected to the network; analyzed CDC’s procedures and results for assessing security controls to determine whether controls for the eight selected mission- essential systems had been sufficiently tested at least annually and based on risk. We also had reviewed the agency’s implementation of continuous monitoring practices to determine whether the agency had developed and implemented a continuous monitoring strategy to manage its information technology assets and monitor the security configurations and vulnerabilities for those assets. For the respond core security function, we had reviewed CDC’s implementation of incident response practices, including an examination of incident tickets for 11 incidents; and had examined the agency’s process for correcting identified deficiencies for the eight selected mission-essential systems. For the recover core security function, we had examined contingency plans for eight selected mission-essential systems to determine whether those plans had been developed and tested. In assessing CDC’s controls associated with this function, as well as the other four core functions, we had interviewed Office of the Chief Information Officer officials, as needed. Within the core security functions, as appropriate, we had evaluated the elements of CDC’s information security program based on elements required by FISMA. For example, we analyzed risk assessments, security plans, security control assessments, and remedial action plans for each of the 8 selected mission-essential systems. In addition, we had assessed whether the agency had ensured staff had completed security awareness training and whether those with significant security responsibilities received commensurate training. We also had evaluated CDC’s security policies and procedures. To determine the reliability of CDC’s computer-processed data for training and incident response records, we had evaluated the materiality of the data to our audit objective and assessed the data by various means, including reviewing related documents, interviewing knowledgeable agency officials, and reviewing internal controls. Through a combination of methods, we concluded that the data were sufficiently reliable for the purposes of our work. To accomplish our second objective—on CDC’s actions to address the previously identified security program and technical control deficiencies and related recommendations—we requested that the agency provide a status report of its actions to implement each of the recommendations. For each recommendation that CDC indicated it had implemented as of August 3, 2018, we examined supporting documents, observed or tested the associated security control or procedure, and/or interviewed the responsible agency officials to assess the effectiveness of the actions taken to implement the recommendation or otherwise resolve the underlying control deficiency. Based on this assessment and CDC status reports, we defined the status of each recommendation into the following 3 categories: closed-implemented—CDC had implemented the recommendation; open-partially implemented—CDC had made progress toward, but had not completed, implementing the recommendation; and open-not implemented—CDC had not provided evidence that it had acted to implement the recommendation. We conducted this performance audit from December 2016 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The National Institute of Standards and Technology’s cybersecurity framework consists of five core functions: identify, protect, detect, respond, and recover. Within the five functions are 23 categories and 108 subcategories, as described in the table. In addition to the individuals named above, Gary Austin, Jennifer R. Franks, Jeffrey Knott, and Chris Warweg (assistant directors); Chibuikem Ajulu-Okeke, Angela Bell, Sa’ar Dagani, Nancy Glover, Chaz Hubbard, George Kovachick, Sean Mays, Kevin Metcalf, Brandon Sanders, Michael Stevens, Daniel Swartz, and Angela Watson made key contributions to this report. Edward Alexander, Jr. and Duc Ngo (assistant directors); David Blanding, and Christopher Businsky also provided assistance.", "summary": "CDC is responsible for detecting and responding to emerging health threats and controlling dangerous substances. In carrying out its mission, CDC relies on information technology systems to receive, process, and maintain sensitive data. Accordingly, effective information security controls are essential to ensure that the agency's systems and information are protected from misuse and modification. GAO was asked to examine information security at CDC. In June 2018, GAO issued a limited official use only report on the extent to which CDC had effectively implemented technical controls and an information security program to protect the confidentiality, integrity, and availability of its information on selected information systems. This current report is a public version of the June 2018 report. In addition, for this public report, GAO determined the extent to which CDC has taken corrective actions to address the previously identified security program and technical control deficiencies and related recommendations for improvement. For this report, GAO reviewed supporting documents regarding CDC's actions on previously identified recommendations and interviewed personnel at CDC. As GAO reported in June 2018, the Centers for Disease Control and Prevention (CDC) implemented technical controls and an information security program that were intended to safeguard the confidentiality, integrity, and availability of its information systems and information. However, GAO identified control and program deficiencies in the core security functions related to identifying risk, protecting systems from threats and vulnerabilities, detecting and responding to cyber security events, and recovering system operations (see table below). GAO made 195 recommendations to address these deficiencies. As of August 2018, CDC had made significant progress in resolving many of the security deficiencies by implementing 102 of 184 (about 55 percent) technical control recommendations, and partially implementing 1 of 11 information security program recommendations made in the June 2018 report. The figure shows the status of CDC's efforts to implement the 195 recommendations. Additionally, CDC has created remedial action plans to implement the majority of the remaining open recommendations by September 2019. Until CDC implements these recommendations and resolves the associated deficiencies, its information systems and information will remain at increased risk of misuse, improper disclosure or modification, and destruction.", "document_type": "gao"}
{"report": "During a disease outbreak, including the Zika virus, HHS is the lead federal agency for public health and medical response, and it leverages national public health and medical resources to prepare for and respond to the outbreak. The Zika virus is primarily transmitted to humans by infected mosquitoes, but can also be transmitted from mother to child during pregnancy or around the time of birth, or from person-to-person through sexual contact or blood transfusion. According to CDC, once an individual has been infected with the Zika virus, they are likely to be protected from future infections. The Aedes aegypti mosquitoes are reportedly the primary mosquito spreading the Zika virus, while the Aedes albopictus mosquitoes, which share many of the same traits as Aedes aegypti, also have the ability to spread the virus. Local transmission of the virus has occurred in American Samoa, Florida, Puerto Rico, Texas, and the U.S. Virgin Islands. Travel-associated cases of Zika virus infection have been reported in every state, with the largest numbers of cases reported in California, Florida, New York, and Texas. There is no vaccine to prevent the Zika virus, so CDC guidance recommends preventing the spread of the virus by protecting against mosquito bites by wearing protective clothing, using insect repellant, and staying in places with air conditioning and window and door screens to keep mosquitoes outside, among other actions. Mosquito control in the United States is implemented and overseen at the state and local levels by entities such as mosquito control districts and health agencies. Federal agencies support such control entities with funding and subject matter experts, and may regulate some control methods such as pesticides. In April 2016, the Office of Management and Budget and the Secretary of Health and Human Services announced that they had identified $589 million—$510 million of it from existing Ebola virus disease resources within HHS, the Department of State, and the U.S. Agency for International Development—that could quickly be redirected and spent on immediate efforts to control and respond to the spread of the Zika virus. According to HHS, out of the $589 million, $374 million was redirected to domestic Zika virus control activities. HHS reports that almost all of this funding ($354 million) was distributed to three HHS agencies, as follows: CDC received $222 million for various activities including field staff, state response teams, Zika virus testing, tracking of pregnant women who were infected with the Zika virus, and grants for mosquito control and other Zika prevention activities; BARDA received $85 million for private sector development of Zika vaccines, treatments, and technologies to protect the blood supply, and other countermeasures; and NIH received $47 million for Zika medical countermeasure development, including clinical trials on the leading Zika vaccine candidate. Additionally, according to HHS officials, in August 2016, the Secretary of Health and Human Services notified Congress of the department’s intent to redirect an additional $81 million in unobligated HHS funds for Zika vaccine development activities. Of this amount, $34 million was drawn from accounts at NIH and $47 million was drawn from funds transferred from other HHS agencies and reprogrammed from within PHSSEF. From these redirected funds, $34 million (i.e., the amount drawn from other NIH accounts) was to be used by NIH to continue clinical trials on its lead Zika vaccine candidate. The remaining $47 million was to be used by BARDA for continued private sector Zika vaccine development. In September 2016, Congress appropriated $932 million to HHS and its agencies in the Zika Response and Preparedness Act. Of that amount, $394 million was appropriated directly to CDC and $152 million was appropriated directly to NIH. The remainder was appropriated to HHS’s PHSSEF, from which HHS allocated $245 million to BARDA within the Office of the Assistant Secretary for Preparedness and Response, $75 million to CMS, and $66 million to HRSA. (See fig. 1.) The Zika supplemental funding remained available for obligation until September 30, 2017, for the following purposes: CDC: to prevent, prepare for, and respond to the Zika virus, health conditions related to the virus, and other vector-borne diseases, domestically and internationally. NIH: for research on the virology, natural history, and pathogenesis of the Zika virus infection, and preclinical and clinical development of vaccines and other medical countermeasures for the Zika virus and other vector-borne diseases, domestically and internationally. PHSSEF: for various activities, including to prevent, prepare for, and respond to the Zika virus, health conditions related to the virus and other vector-borne diseases, domestically and internationally; and to develop necessary countermeasures and vaccines, including the development and purchase of vaccines, therapeutics, diagnostics, necessary medical supplies, and administrative activities. BARDA: HHS allocated funding to BARDA to support further development of Zika vaccine candidates, diagnostics, and pathogen reduction technologies initiated in fiscal year 2016 to advance these projects toward licensure or approval by the Food and Drug Administration. CMS: HHS allocated funding to CMS for expenses to support states, territories, tribes, or tribal organizations with active or local transmission cases of the Zika virus, as confirmed by CDC. The funding was allocated to reimburse the costs of health care for health conditions related to the Zika virus, other than costs that are covered by private health insurance, of which not less than $60 million were for territories with the highest rates of Zika virus transmission. HRSA: HHS allocated $20 million for projects of regional and national significance in Puerto Rico and other U.S. territories, $40 million to expand the delivery of primary health services in Puerto Rico and the other territories, and $6 million to be used to assign National Health Service Corps members to Puerto Rico and the other territories to provide primary health services in areas affected by the Zika virus or other vector-borne diseases through the National Health Service Corps Loan Repayment Program. Agencies have until September 30, 2022, to disburse the Zika supplemental funding appropriated by the Zika Response and Preparedness Act. We found that as of September 30, 2017—the end of the Zika supplemental appropriation’s period of availability—nearly all Zika supplemental funding had been obligated, primarily through cooperative agreements, grants, and contracts. BARDA obligated 100 percent of its Zika supplemental funding, while CDC, CMS, HRSA, and NIH obligated over 99 percent of their funding. (See table 1.) Three of the five agencies had obligated over half of their Zika supplemental funding by January 31, 2017, 4 months after enactment of the appropriation. For example, according to CDC officials, using cooperative agreements with application processes familiar to the awardees helped enable the agency to obligate its funding soon after receiving the appropriation. Some agencies began obligating later in the one-year obligation time frame based on their approach to obligating the Zika supplemental funding. For example, CMS withheld a portion of its supplemental funds in the event additional awardees became eligible for funding within the obligation time frame—eligibility included having active or local transmission of the Zika virus. Agency officials told us that they used cooperative agreements, grants, and contracts to award Zika supplemental funding to existing and new awardees. The agencies also used other mechanisms to obligate the Zika supplemental funding, such as interagency agreements, intramural research awards, and funding used within the agency for travel and other expenses. According to officials, agencies used these mechanisms to award Zika supplemental funding in the following ways. BARDA executed new contracts and modified existing contracts through the agency’s typical contracting process, officials said, for research in the areas of Zika clinical diagnostics and vaccine development. BARDA did not use any Zika supplemental funding to support internal administrative or personnel costs. (See app. I for the contracts BARDA awarded with its Zika supplemental funding.) CDC generally obligated Zika supplemental funding to current awardees through existing cooperative agreements, according to agency officials. (See app. II through VII for the cooperative agreements CDC used to award Zika supplemental funding to existing awardees.) CDC also awarded funding through contracts and interagency agreements, and obligated about $24 million for internal CDC expenses, such as salaries and benefits, travel, supplies, and equipment. (See app. VIII for the contracts and interagency agreements CDC awarded with its Zika supplemental funding.) CMS created a new program—the Zika Health Care Services Program—to award its Zika supplemental funding through cooperative agreements, according to agency officials. The purpose of the 3-year program is to support prevention activities and treatment services for women (including pregnant women), children, and men adversely or potentially affected by the Zika virus. CMS awarded funding through the Zika Health Care Services Program to those states, territories, tribes, or tribal organizations with active or local transmission of the Zika virus, as confirmed by CDC. CMS awarded funding to the health departments in American Samoa, Florida, Puerto Rico, and the U.S. Virgin Islands in January 2017. In June 2017, CMS awarded funding to the health department in Texas, the only new state or territory with local transmission of the Zika virus. In both CMS award rounds, only states and territories received awards, because they were the only areas with active or local transmission of the Zika virus. CMS retained about $3.6 million of the Zika supplemental funding to use for administrative support services, as well as for travel for monitoring and oversight. (See app. IX for the awards CMS made with its Zika supplemental funding.) HRSA generally obligated Zika supplemental funding through grants to existing awardees, according to agency officials. HRSA did not retain any Zika supplemental funding for internal activities. (See app. X for the grants HRSA awarded.) NIH used grants and contracts to award its Zika supplemental funding to new and existing awardees. NIH also used about $95 million of the Zika supplemental funding for internal activities—studies conducted by NIH researchers. According to NIH officials, the somewhat unique aspects of the Zika virus as an arbovirus infectious disease led NIH to focus on vaccines as a priority, along with development of diagnostics, therapeutics, vector control, and surveillance. (See app. XI for NIH’s Zika supplemental awards.) For more information on the funding provided by CDC, CMS, and HRSA—the only agencies that provided funding for states and territories—and the number of reported Zika cases by state or territory, see an interactive graphic at https://www.gao.gov/products/GAO-18-389. Officials from all five agencies cited coordination initiatives through regular interagency or organizational teleconferences and participation in working groups. According to CMS officials, during the Zika virus response, CDC, CMS, HRSA, and other federal partners held interagency Zika coordination calls to discuss ongoing developments related to the Zika virus. Additionally, because CMS and HRSA were both awarding funding for perinatal health care services, officials said they collaborated to ensure that activities available through the CMS grants complemented the activities available through HRSA’s Special Projects of Regional and National Significance. In addition, HRSA officials reported conducting joint site visits with CDC and CMS, as well as streamlining reporting requirements to reduce grantee reporting burden. Furthermore, BARDA officials said that they awarded and administered a contract for CDC on the development of a vector control product. CDC provided the funding and topical subject matter expertise for the award, and BARDA provided management services for the contract, because of BARDA’s experience with these types of contracts. BARDA and NIH officials also reported collaborating on vaccine development. BARDA officials explained that while the vaccine development process requires that different agencies support multiple vaccine development candidates, the two agencies coordinated to avoid redundancy. We found that as of December 31, 2017, the HHS agencies had disbursed about 21 percent (approximately $195.5 million of $932 million) of the Zika supplemental funding. According to agency officials and selected awardees we spoke with, various factors can affect the disbursement of funding after obligation. These factors include time to draw down funding from the federal agencies, allowing for program implementation and a planning period, and awardees’ internal administrative processes and unique characteristics, as described below. Drawdown procedures. CDC officials said that awardees draw down federal funding on their individual schedules based upon how they manage their federal funding. Some awardees draw down on a daily basis, as needed, while others draw down on a biweekly or monthly basis. Additionally, drawdowns for personnel costs coincide with payroll schedules, which could be biweekly or monthly. For example, in the case of monthly payroll, two awardees told us that the federal funding for a particular month’s expenses would be drawn down the following month. Furthermore, selected awardees we spoke with said that they draw down federal funding after they have incurred an expense, such as when they receive an invoice. For example, Los Angeles County officials reported that in order to draw down the funds for the organization that is responsible for servicing their vector control activities, they have to first receive an invoice from the organization, which the county pays with its own funds. Only then can the county draw down the federal funding. This process usually results in at least a 3-month period between receiving the invoice and drawing down the federal funding, officials said. Program implementation and planning period. According to CMS officials, the agency awarded funding to health departments in American Samoa, Florida, Puerto Rico, Texas, and the U.S. Virgin Islands from the Zika Health Care Services Program, which was a new collaboration between CMS and these specific awardees. The officials said that the steps awardees needed to take to stand-up new programs—such as budget review and approval processes, selection of key personnel to administer the grant, grant activities related to contracting, and hiring and procurement—can delay start-up and implementation of the grant programs. Additionally, CMS gave awardees in the Zika Health Care Services Program a 3-month planning period after they received their notices of award to amend their activities. For example, Texas officials reported that they used the 3-month planning period to work on executing contracts with the local health departments in three counties bordering Mexico. Texas officials explained that collaborating with the local health departments entailed determining the greatest potential benefit of the use of the funds, because the award itself was not enough to cover all of the costs of direct health care services associated with the Zika virus. Awardees’ processes and characteristics. Local administrative processes for spending federal supplemental funds can result in varied disbursement time frames. For example, California received Zika supplemental funding for an award that required an amendment to an administrative contract, which state officials said takes about 7 to 8 months for internal state approval. Additionally, certain awardees’ characteristics affect disbursements. For example, Houston officials said the city was eligible for and was directly awarded a CDC cooperative agreement, but because it does not conduct vector control activities itself, the city had to negotiate a contract with the surrounding county to conduct these activities, adding additional time before it could begin disbursements. Officials also noted that awardees’ personnel hiring issues can affect disbursement time frames. For example, CMS officials said that some territories experienced delays in carrying out activities due to provider shortages, particularly among specialists needed to care for children with developmental delays and birth defects caused by the Zika virus. CMS officials noted that island jurisdictions, such as the U.S. territories, can find hiring more difficult due to a shortage of health care professionals available within the territory, thus requiring individuals to be recruited from outside the territory, which adds time to the process and raises costs. In addition, Florida officials in Miami-Dade County reported that the necessary staff surge during the Zika response was challenging to fill, noting that it was particularly difficult to find phlebotomists and nurses, because they were in high demand. Standard vaccine development processes also influenced the rate of disbursement. Due to the long duration of the vaccine development process, BARDA officials said, disbursements to certain awardees have occurred at varying intervals. For example, some contract invoices are received on a monthly basis, or twice a month if the company is a small business. The invoices are then reviewed and if deemed acceptable, they are processed for payment. The 2017 hurricane season may have affected certain awardees’ use of their Zika supplemental funding, which prompted agencies to respond by approving various types of short-term relief for administrative, financial management, and audit requirements for awardees affected by the hurricanes. Three agencies—CDC, CMS, and HRSA—awarded Zika supplemental funding to areas affected by hurricanes Harvey, Irma, and Maria in 2017: Florida, Puerto Rico, Texas, and the U.S. Virgin Islands. CDC officials told us, for example, that because of the hurricanes they granted extensions at the request of the awardees for submitting financial and progress reports, and continuation of activities. Similarly, CMS offered hurricane-affected awardees of the Zika Health Care Services Program the option to extend the deadline for deliverables, if necessary. CMS officials told us that grant activities had been affected by the hurricanes, and all grantees had communicated the intent to fully resume activities as soon as they are able to do so. Due to the 3-year project period for grantees, CMS officials said that the affected entities can still accomplish programmatic responsibilities, even if there is a temporary halt in project activities. Furthermore, HRSA officials said that they provided Puerto Rico and the U.S. Virgin Islands with extensions on required program, financial, and audit reports. Selected awardees we spoke with used Zika supplemental funding for a variety of activities. Collectively, the activities included four primary types: medical surveillance, vector control, laboratory capacity building, and providing health care services, as described below. Medical surveillance activities include identifying and reporting Zika virus disease cases to CDC, as well as reporting Zika virus infections in pregnant women and infants to the U.S. Zika Pregnancy Registry. Vector control activities include detecting and monitoring Aedes aegypti and Aedes albopictus mosquito distribution and mosquito control, and monitoring of insecticide resistance and management. Laboratory capacity building activities include developing laboratory capacity to perform Zika virus testing. Health care service activities for those selected awardees that received funding from CMS (Florida and Texas) included increasing access to contraceptive services for men and women; increasing access to and reducing barriers to diagnostic testing, screening, and counseling for pregnant women and newborns; and increasing access to appropriate specialized health care services for pregnant women, children born to mothers with maternal Zika virus infection, and their families. Table 2 provides examples of the types of activities funded by the selected awardees we interviewed. This table does not include a comprehensive list of all of the awardees’ Zika activities—see appendixes II through VI, and appendix IX for more information on the Zika supplemental funding CDC and CMS awarded to states, territories, and local jurisdictions. Of the awardees we spoke with, Florida and Texas were the only states that had experienced local mosquito-borne transmission of the Zika virus. Other selected awardees—which included Arizona, Los Angeles County, and Louisiana—were primarily responding to travel-related cases of Zika virus disease. The following are additional examples of activities funded using Zika supplemental funding. For more information on the types of activities authorized under each award, see appendixes II-VI and IX. Florida. Florida, which has a centralized health department with county- based offices, used Zika supplemental funding for laboratory capacity and vector control activities, among other activities. According to state officials, funding for state-run laboratories was used for purchasing materials, such as those used for testing urine for the Zika virus, and funding staff located in counties to assist with handling Zika samples and testing, data entry, and result reporting to surveillance networks. Additionally, Florida used Zika supplemental funding for local vector control activities. For example, Miami-Dade County officials said that they purchased mosquito traps and removed mosquito breeding grounds, including plants, tires, and other objects that can hold standing water. (See fig. 2 for examples of the mosquito control activities in Miami-Dade County.) Through CMS’s Zika Health Care Services Program, Florida received funding for, among other things, two part-time advanced registered nurse practitioners to provide consultation and technical assistance in family planning clinics, and assist in the prescribing and management of various birth control methods. Florida also funded a health educator for Zika prevention and response duties, which included assisting local health care organizations in the development of educational programming to ensure that health care services are provided in accordance with CDC guidelines. The health educator’s duties also included ensuring that pregnant women with the Zika virus and infants with congenital Zika infection are referred to proper care and other available programs and resources. Texas. Texas officials said that the state used a CDC award to rapidly identify cases and conduct data analysis of Zika-related birth defects, to enhance surveillance of Zika virus-related birth defects by improving the Texas Birth Defects Registry database, and to facilitate remote access to electronic records. Texas also disseminated prevention materials and interviewed mothers of children with Zika-related birth defects about their experience in dealing with the health system in order to help identify developmental outcomes of the children. Texas intends to use its CMS Zika Health Care Services Program funding—awarded on June 30, 2017—to increase clients’ access to contraceptives; for care management, including counseling on Zika virus testing for pregnant women and their families; and for counseling to refer clients for services and support. State officials provided the following information on some of the activities intended for the program. 1. Increasing clients’ access to contraceptives: Community health workers and case management staff will assist clinic providers with informing women and their partners about contraceptive availability and about the potential Zika virus risks during pregnancy. They will also work with the women to determine what messages work best with their partners regarding contraceptives. 2. Care management that includes pre- and post-test counseling on Zika virus testing for pregnant women and their families: Officials said that this activity is important because the CDC testing algorithm is complex, the results from various tests can be confusing, and there can be false positives from the tests. Generally, doctors do not have the time to go through the complexities of these issues with clients, such as how to understand the laboratory tests and results. 3. Counseling to refer clients for services and supports: This can include counseling about various types of resources to support clients pre- delivery, after delivery, and during the infant’s first year of life. Arizona. According to state officials, Zika supplemental funding was used to create an action plan with counties, and increase the state’s ability to raise public awareness about the threat of the Zika virus, its transmission routes, and prevention measures. Officials stated that Arizona’s border with Mexico makes communicating about Zika more complex, because individuals frequently cross the border for a variety of reasons including work, school, and to visit family, and do not necessarily consider themselves to be travelers. Additionally, the state used funding to increase the amount of personal protective equipment for the vector surveillance staff, and set up vector control contracts that could be accessed if the Zika virus spread locally, and in the event that vector control could not be handled at the local level. However, this contracting mechanism was not used, because there was no local transmission of the Zika virus in Arizona. According to state officials, Arizona plans to ask for an extension to use the funding in the next mosquito season. The state health department also sponsored training on mosquito identification. Los Angeles County. County officials said that some funding was used to support personnel involved with Zika surveillance, testing, and case management. This included the detection of cases—individuals diagnosed with Zika infection—and also the dissemination of information to Los Angeles County’s Maternal and Child Health group, which follows pregnant women through delivery and then transfers the cases to the county’s Children’s Medical Services group. For example, according to officials, once a case is identified, information is shared with the relevant vector control district about the location of the case, and the vector control district can then conduct inspection and abatement activities to reduce the risk of a local outbreak. Los Angeles County officials found that this process takes about one week from finding out about a case to completion of inspection and abatement. This included 1 day to get information to the vector control district and 1 to 5 days for completing inspection and abatement. The funding was also used to provide funds to the vector control districts to augment Aedes mosquito detection efforts and support outreach activities, according to county officials. Louisiana. Louisiana officials said they used a CDC award, in part, to provide equipment and mileage reimbursement for nurses, who served as clinical liaisons between the birth defects surveillance program and hospitals and physicians statewide, to help enable rapid surveillance activities. Awardees also funded other activities, such as outreach campaigns. See figure 3 for examples of outreach funded with Zika supplemental funding. While a majority of the 12 selected awardees we spoke with reported positive experiences with the process of applying for and managing the Zika supplemental funding, some awardees cited aspects of the process that were challenging. The awardees we spoke with received much of their supplemental funding from CDC and noted that the process went well: there was good communication with CDC officials; CDC’s Epidemiology and Laboratory Capacity for Infectious Diseases cooperative agreement process to apply for Zika supplemental funds was more streamlined than the regular application process; and awardees said they were familiar with the mechanisms, which helped them navigate the process. Awardees we spoke to also cited some challenges to applying for and managing the Zika supplemental funding. These awardees noted that various time frames among multiple awards and restrictions on authorized activities under the awards added administrative burdens that officials had to deal with while responding to the outbreak. Florida officials said that the state received funding from different federal agencies, from different cooperative agreement awards, with different deadlines, and different rules on what the funding could be used for. For example, CDC distributed Zika supplemental funds to states and certain localities and territories through five cooperative agreements—some of which had multiple application rounds. Florida officials said that they had to track funding separately and identify the activities that could be funded under each award—administrative requirements that were burdensome during an emergency response. Figure 4 presents the period of time Florida had to use the Zika supplemental funding from multiple awards received from CDC. In addition, awardees we spoke with cited challenges with adjusting their plans when federal funding was more or less than anticipated. For example, CDC officials said that they provided average award amount ranges as guidance for awardees as part of the application process for one of CDC’s cooperative agreements. Los Angeles County officials said that they applied for an amount that was near the limit, and county officials said that they had to adjust the activities they planned to fund when they received less than what they applied for. Iowa officials said that without knowing exactly how much funding would be available it was difficult to know what to apply for and made staffing changes difficult. Iowa officials had to adjust their initial plan when they later received additional unexpected funding. In October 2017, CDC issued a new notice of funding opportunity that, according to agency officials, was intended to help minimize the administrative burden on these awardees (e.g., preparing applications and other paperwork) during significant public health emergencies by pre- approving public health departments in these jurisdictions to rapidly receive future awards. This new notice of funding opportunity will be used to establish a list of awardees, with existing emergency preparedness and response capacity, that would be pre-approved for funding by CDC when a public health threat occurs, including infectious disease threats. It requires that awardees have structures and plans in place to receive funding, as well as plans to respond to a public health threat. According to CDC officials, awards could potentially be provided within 2 weeks to pre-approved awardees after supplemental appropriations are enacted. According to CDC officials, as of February 2018, the agency had approved all 64 applicants for the notice of funding opportunity. This means that CDC will consider these approved applicants for future funding if an emergency occurs and funding becomes available. We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate. We also provided relevant draft portions of this report to the Zika supplemental funding awardees we interviewed. Specifically, we provided the excerpts to officials in Alaska; Arizona; California; Colorado; Florida; Houston, Texas; Iowa; Kansas; Los Angeles County, California; Louisiana; Oklahoma; and Texas. All but one awardee responded. Awardees provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and to other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or crossem@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XII. The Biomedical Advanced Research and Development Authority (BARDA), within the Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response, executed contracts to obligate its Zika supplemental funding for research in the areas of (1) vaccine development, (2) diagnostic development, and (3) pathogen reduction systems. Table 3 presents information for each award as it was provided to us by BARDA. This appendix presents information on Zika supplemental funding awards made by the Centers for Disease Control and Prevention (CDC) through the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) cooperative agreement. CDC awarded Zika supplemental funding for the ELC cooperative agreement for the following activities: Zika vector surveillance and control, Zika epidemiology and laboratory surveillance, and U.S. Zika Pregnancy Registry. The Zika supplemental funding awarded through the ELC cooperative agreement was to further support and strengthen activities to protect the public’s health, especially pregnant women, through epidemiologic surveillance and investigation, improving mosquito control and monitoring, and strengthening laboratory capacity. The funding will also support participation in the U.S. Zika Pregnancy Registry to monitor pregnant women with the Zika virus disease and their infants. For each award, we present information as it was provided to us by CDC, as well as the activities funded. Table 4 provides information on ELC Zika supplemental funding awarded to states and territories, and table 5 presents information on awards to local health departments. In addition to states and territories, six large city and county local health departments—Chicago, the District of Columbia, Houston, Los Angeles County, New York City, and Philadelphia—received ELC Zika supplemental awards. This appendix presents information on Zika supplemental funding awards made by the Centers for Disease Control and Prevention (CDC) through the Surveillance, Intervention, and Referral to Services Activities for Infants with Microcephaly or other Adverse Outcomes Linked with the Zika Virus (birth defects) cooperative agreement. The Zika supplemental funding awarded through the birth defects cooperative agreement was to provide additional resources to better establish, enhance, and maintain rapid population-based surveillance of microcephaly and other adverse outcomes (especially central nervous system defects) possibly linked to Zika virus infection during pregnancy using an active case-finding methodology; participation in centralized pooled clinical and surveillance data projects; ensuring affected infants and families are referred to services; and assessing health and developmental outcomes of these children. Table 6 presents information for each award as it was provided to us by CDC. This appendix presents information on Zika supplemental funding awards made by the Centers for Disease Control and Prevention (CDC) through the Behavioral Risk Factor Surveillance System (BRFSS) cooperative agreement. The Zika supplemental funding awarded through the BRFSS cooperative agreement was to conduct a rapid population-based assessment of women and couples using or in need of contraceptives in order to provide comprehensive contraceptive services related to Zika virus exposure. Table 7 presents information for each award as it was provided to us by CDC. This appendix presents information on Zika supplemental funding awards made by the Centers for Disease Control and Prevention (CDC) through the Pregnancy Risk Assessment Monitoring System (PRAMS) cooperative agreement. The Zika supplemental funding awarded through the PRAMS cooperative agreement was to assess maternal behaviors and experiences related to Zika virus exposure among recently pregnant women who deliver a live- born infant in the United States. Table 8 presents information for each award as it was provided to us by CDC. This appendix presents information on Zika supplemental funding awards made by the Centers for Disease Control and Prevention (CDC) through the Public Health Preparedness and Response (PHPR) Cooperative Agreement for All-Hazards Public Health Emergencies. According to CDC officials, the Zika supplemental funding awarded through the PHPR cooperative agreement was to enable identified state, territorial, and local jurisdictions to address Zika virus disease planning and operational response gaps. Table 9 presents information for each award as it was provided to us by CDC. This appendix presents information on Zika supplemental funding awards made by the Centers for Disease Control and Prevention (CDC) through additional cooperative agreements. Tables 10-17 present information for each award as it was provided to us by CDC. The Zika supplemental funding awarded through the Sentinel Enhanced Dengue Surveillance System Project cooperative agreement was to support sites working to provide new information on dengue and other acute febrile illnesses in Puerto Rico, which is located in the subtropics and where dengue epidemiology is similar to dengue endemic areas worldwide. The Zika supplemental funding was for two studies: (1) pregnant women with Zika infection, and (2) postnatal Zika infection by following 0-5 year old children. The Zika supplemental funding awarded through the Vector-Borne Disease Regional Centers of Excellence cooperative agreement is to establish regional centers of excellence aimed at building the capacity to address the problem of emerging and exotic vector-borne diseases in the United States, including Zika virus infection. The Zika supplemental funding awarded through the Enhancing Capacity for Vector Surveillance and Control to Prevent Zika, Dengue and Chikungunya Infection in Puerto Rico cooperative agreement is to fund activities to increase the surveillance and control of vectors, specifically Aedes aegypti mosquitoes (the vector of dengue, chikungunya, and Zika). The purpose of the program is to establish a vector control unit to oversee and implement comprehensive vector control activities in Puerto Rico. The Zika supplemental funding awarded through the Immunization Grants-CDC Partnership: Strengthening Public Health Laboratories cooperative agreement is to promote quality and safe public health laboratory practice, improve public health laboratory infrastructure, strengthen the public health laboratory system, and develop a well-trained public health laboratory workforce. According to CDC officials, the Zika supplemental funding awarded through the Building Capacity of the Public Health System to Improve Population Health through National, Nonprofit Organizations cooperative agreement is to ensure national capacity for responding to the Zika outbreak and meeting the needs of those affected, such as by reaching out to specialized constituents to ensure they were informed on epidemiology and practice guidelines. The Zika supplemental funding awarded through the Strengthening the Public Health System in the U.S.-Affiliated Pacific Islands cooperative agreement is to provide capacity building assistance through a regional, nonprofit organization to strengthen the U.S.-Affiliated Pacific Islands’ public health leadership, workforce, and public health systems and infrastructure in response to Zika virus within the U.S. Pacific territories. The Zika supplemental funding awarded through the Pan American Health Organization: Building Capacity and Networks to Address Emerging Infectious Diseases in the Americas cooperative agreement is for various activities including technical assistance, such as to develop standard operating procedures for diagnostic and integrated surveillance activities, as well as to support the development, implementation, and evaluation of diagnostic and surveillance guidelines. According to CDC officials, the Zika supplemental funding awarded through the Global Health Security Partner Engagement: Expanding Efforts and Strategies to Protect and Improve Public Health Globally cooperative agreement is for enhanced surveillance for pregnant women in Colombia, including laboratory testing and case investigations. This appendix presents information on Zika supplemental funding awards made by the Centers for Disease Control and Prevention (CDC) through additional contracts and interagency agreements. Tables 18 and 19 present information for each award as it was provided to us by CDC, as well as the activity funded. This appendix presents information on Zika supplemental funding awards made by the Centers for Medicare & Medicaid Services (CMS) through the Zika Health Care Services Program. The Zika Health Care Services Program is aimed at supporting prevention activities and treatment services for women (including pregnant women), children, and men adversely or potentially affected by the Zika virus. According to CMS documentation, the Zika Health Care Service Program is intended to address four critical components of a comprehensive response to Zika: 1. Increase access to contraceptive services for women and men. 2. Increase access to and reduce barriers to diagnostic testing, screening, and counseling for pregnant women and newborns. 3. Increase access to appropriate specialized health care services for pregnant women, children born to mothers with maternal Zika virus infection, and their families. 4. Improve provider capacity and capability. CMS awarded funding through the Zika Health Care Services Program, in two award rounds, to states, territories, tribes, or tribal organizations with active or local transmission of the Zika virus, as confirmed by the Centers for Disease Control and Prevention. In January 2017, CMS awarded funding to American Samoa, Florida, Puerto Rico, and the U.S. Virgin Islands. In June 2017, CMS awarded funding to Texas, the only new area with local transmission of the Zika virus. Table 20 presents the awards CMS made through its Zika Health Care Services Program. This appendix presents information on Zika supplemental funding awards made by the Health Resources and Services Administration (HRSA) to health centers and for Special Projects of Regional and National Significance. Health centers: HRSA provided awards to health centers through supplemental grant awards to support existing health centers in Puerto Rico and other territories in their efforts to expand the delivery of health care services, including the prevention of Zika and prevention and treatment of Zika-related illness. HRSA also provided supplemental grant awards to existing Health Center Program cooperative agreement awardees for efforts to provide training and technical assistance for Zika-related health center expansion activities. Special Projects of Regional and National Significance: HRSA provided awards for Special Projects of Regional and National Significance to support public health departments and other entities in Puerto Rico and other territories in efforts to ensure access to recommended services for pregnant women, infants, and children infected by the Zika virus in the prenatal, perinatal, and neonatal period. Activities include early identification through developmental screening, regular assessments and monitoring, telemedicine, care coordination, enabling services, family engagement and family-to- family support; purchasing of diagnostic equipment and health information technology; and the training of health care providers, care coordinators, and other health care and public health professionals to ensure delivery of comprehensive, interdisciplinary health and social services for this population. Tables 21 and 22 present information for each award as it was provided to us by HRSA. The National Institutes of Health (NIH) awarded Zika supplemental funding to support research to better understand Zika and its complications, and inform the development of new interventions. The three primary activities of funding include (1) vaccine development; (2) Zika in Infants and Pregnancy study; and (3) diagnostics, therapeutics, vector control, and other interventions. NIH used contracts, grants, intramural research awards, and other awards to provide funding for research on the Zika virus and its complications. Tables 23-26 present information for each award as it was provided to us by NIH. In addition to the contact named above, Karen Doran (Assistant Director), Sarah Resavy (Analyst-in-Charge), and Hannah Grow made key contributions to this report. Also contributing were Muriel Brown, Christine Davis, and Drew Long.", "summary": "Zika—a virus primarily transmitted through mosquito bites—can cause symptoms that include fever, rash, and joint and muscle pain. In pregnant women, the Zika virus can be passed to the fetus and cause severe brain defects. In response to an outbreak in the United States and its territories, Congress appropriated $932 million in September 2016 through the Zika Response and Preparedness Act to HHS and its agencies to prevent, prepare for, and respond to the Zika virus and its related health conditions, and conduct related research. The act also included a provision that GAO study the activities supported with the appropriated funds. This report describes (1) the status of funds obligated and disbursed from the Zika supplemental funding appropriated to HHS and its agencies; and (2) how selected awardees used their Zika supplemental funding, and their experiences with applying for and managing the funding. To do this work, GAO reviewed agency documents on Zika supplemental funding and activities, and interviewed officials from the HHS agencies and selected awardees. To select awardees, GAO identified states based on the amount of initial Zika supplemental funding they received from CDC, the Centers for Medicare & Medicaid Services, and the Health Resources and Services Administration; and selected states with the highest and lowest funding. In total, GAO selected 12 awardees: 10 states, as well as one county and one city from 2 of the 10 states. GAO provided a draft of this report to HHS. In response, HHS provided technical comments, which were incorporated as appropriate. As of September 30, 2017, Department of Health and Human Services’ (HHS) agencies had obligated nearly all of the $932 million of Zika supplemental funding Congress appropriated in 2016 through the use of multiple funding mechanisms, including cooperative agreements, grants, and contracts. Four HHS agencies had small unobligated balances as of the September 30, 2017, obligation deadline; these balances cannot be used to incur new obligations, but may be used to adjust award amounts in future years. Disbursement of the obligated funds was ongoing, with about 21 percent of the Zika supplemental funding (approximately $195.5 million) disbursed as of December 31, 2017. The agencies have until September 30, 2022, to disburse the remainder. The 12 awardees GAO interviewed—officials from 10 states and two local entities—funded multiple activities with their Zika supplemental funding, and had varying experiences applying for and managing the funds. Awardees told GAO that they used their funding to support such activities as collection of information about individuals affected by the Zika virus (human surveillance), mosquito control activities, laboratory capacity building, public outreach, and health care services. For example, Florida used Zika supplemental funding in its state-run laboratories to purchase materials for testing Zika virus-related specimens. A majority of the awardees GAO spoke with reported positive experiences applying for and managing the Zika supplemental funding, including good communication with agency officials and awardees’ familiarity with the mechanisms used to make the awards. However, some awardees noted challenges, such as time frames to use the funding that varied among multiple awards and identifying the activities that could be funded. These challenges added administrative burdens to applying for and managing the Zika supplemental funding while officials were responding to the outbreak, according to the awardees. In October 2017, the Centers for Disease Control and Prevention (CDC) issued a new notice of funding opportunity that agency officials said is intended to help minimize the administrative burden on states and certain localities during emergencies—such as preparing applications—by pre-approving public health departments in these jurisdictions to be eligible to rapidly receive future awards.", "document_type": "gao"}
{"report": "The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) includes provisions related to IPR enforcement, among other things. According to CBP, the act codified existing CBP activities and supports CBP’s efforts to protect U.S. economic security through trade enforcement, to collaborate with the private sector, and to streamline and modernize business processes to meet the demands and complexities of a changing global supply chain. The act defines trade enforcement as the enforcement of the customs and trade laws of the United States. TFTEA requires the development and implementation of Centers of Excellence and Expertise (Centers), which CBP began piloting in 2010, and centralizes CBP’s trade enforcement and trade facilitation efforts. Among other things, TFTEA directs the CBP Commissioner to establish IPR as a priority trade provides CBP with explicit authority to share certain information with trademark and copyright owners prior to completing a seizure; directs the Secretary of the Department of Homeland Security to establish the government-wide National Intellectual Property Rights Coordination Center (IPR Center) within ICE; requires the Assistant Director of the IPR Center to coordinate with CBP and ICE, along with other agencies; and requires the Assistant Director of the IPR Center to work with CBP and other federal agencies to conduct outreach to the private sector. TFTEA also includes reporting requirements for CBP and ICE. Specifically, TFTEA requires CBP and ICE to submit a joint strategic plan every 2 years that, among other things, describes their efforts to enforce IPR and makes recommendations for the optimal allocation of resources to ensure adequate enforcement. TFTEA also requires the agencies to submit a joint report annually that includes specific IPR criminal and border enforcement metrics, a summary of outreach efforts, and a summary of efforts to address the challenges presented by Internet commerce and the transit of small packages. CBP and ICE both play critical roles in IPR enforcement. CBP’s responsibilities include identifying and seizing IPR-infringing goods at the U.S. border, a function that also includes assessing penalties and denying entry to certain types of IPR-infringing goods. ICE’s responsibilities include investigating IPR violations, building cases for federal prosecution, and serving as the lead agency for the IPR Center. CBP employs a risk-based approach that uses targeting and other tools to identify for further examination a selection of imported goods that have arrived at U.S. ports; when violations are found, CBP seizes infringing goods and may refer cases to ICE for criminal investigation. Figure 1 shows CBP’s and ICE’s roles in IPR enforcement at the U.S. border. CBP. CBP’s trade policy, processing, and enforcement operations, including those related to IPR, are primarily carried out by two offices— the Office of Trade and the Office of Field Operations. The Office of Trade develops policies to guide trade enforcement efforts. The Office of Field Operations conducts a range of trade processing and enforcement activities at more than 300 ports, where people and goods enter the country by land, air, or sea. At these ports, CBP officers and import specialists target potentially IPR- infringing goods, conduct examinations, and detain items if officers suspect they are counterfeit. Import specialists working for the Office of Field Operations’ 10 Centers appraise and evaluate detained goods to identify any IPR violation. As we reported in June 2017, the creation of the Centers represented a shift in CBP’s approach to trade operations, centralizing the processing of imported goods on a national scale through industry-focused Centers rather than individual ports of entry. In determining goods’ authenticity, CBP relies on product information supplied by rights holders and prioritizes enforcement of IPR that rights holders have recorded with CBP, using the Intellectual Property Rights e- Recordation database. CBP also uses product identification manuals that are prepared by rights holders and linked to the database. In addition, CBP may consult with rights holders as part of the examination process. If CBP determines that a good is counterfeit, it seizes and destroys the good and may assess penalties if warranted. IPR enforcement is one of seven priority trade issues around which CBP focuses its activities and resources for trade facilitation and enforcement. Priority trade issues represent high-risk areas that can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people, according to CBP. In 2017, we evaluated CBP’s trade enforcement efforts and found that CBP’s plans for its priority trade issues generally lacked performance targets that would enable it to assess the effectiveness of its enforcement activities. We recommended that CBP include performance targets in its plans for priority trade issues; CBP concurred with this recommendation. ICE. ICE’s Homeland Security Investigations is responsible for a wide range of domestic and international criminal investigations arising from the illegal movement of people and goods into, within, and out of the United States, including the importation and exportation of counterfeit goods. ICE field agents work with CBP and various partners in their investigations of identified cases of IP crime. In addition, the ICE-led, multi-agency IPR Center coordinates with other federal agencies on IPR infringement investigations, law enforcement training, and private sector and public outreach. The IPR Center brings together many of the key domestic and foreign investigative agencies to leverage resources and promote a comprehensive response to IP crime. Counterfeit goods may pose risks to the health and safety of consumers. CBP and ICE have seized and investigated counterfeit goods, such as health and personal care products and consumer electronics, that carried a number of health and safety risks. For example, CBP has seized counterfeit versions of personal care products such as contact lenses, perfume, hair removal devices, hair curlers and straighteners, skin cleansing devices, and condoms, which pose risks to the consumer that include damage to skin or eyes caused by dangerous chemicals and bacteria, burning or electrocution due to nonstandardized wiring, or ineffectual family planning protection. ICE has also investigated IP crimes involving counterfeit airbags, phone accessories, pharmaceuticals, and other items that present risks to the health and safety of consumers. Counterfeit electronics and batteries can also pose significant risks, including the risk of injury or death, according to CBP. For instance, in December 2015, CBP seized 1,378 hoverboards with counterfeit batteries that carried a risk of causing fires. In addition, the sale of counterfeit goods can pose a threat to national security. For example, CBP and ICE have seized and investigated counterfeit goods, such as integrated circuits, destined for Department of Defense supply chains. Additionally, counterfeiting has been linked to transnational organized crime and terrorist organizations. According to the United Nations Office of Drugs and Crime, the illicit trafficking of counterfeit goods is an increasingly attractive avenue for criminal organizations to diversify their product range. Criminal networks use similar routes and methods to move counterfeit goods as they use to smuggle drugs, firearms, and people, according to reports from U.S. law enforcement and international organizations. The high rate of return on investment and perceived low risk of prosecution associated with IP crimes make counterfeiting attractive to criminal organizations as a lucrative source of revenue, according to the IPR Center. In 2010, we reported that counterfeiting also posed a wide range of economic risks to consumers, industry, government, and the economy as a whole. Counterfeiting’s economic effects on consumers include, for example, financial losses resulting from counterfeit products that fail due to inferior quality. In addition, counterfeiting may pose risks to industry and government by increasing IPR protection and enforcement costs, by affecting sales and brand value for the businesses whose products are counterfeited, and by potentially reducing tax revenue collected by the government. Finally, counterfeiting may harm the U.S. economy as a whole by slowing economic growth, resulting in the loss of jobs in IP- intensive industries, according to the Congressional Research Service. Driven in part by the rise of e-commerce, the market for counterfeit goods in the United States has shifted in recent years from one in which consumers often knowingly purchased counterfeits to one in which counterfeiters try to deceive consumers into buying goods they believe are authentic. According to CBP officials and seizure data, the volume, value, and variety of counterfeit goods entering the United States increased in fiscal years 2012 through 2016, and counterfeit goods were increasingly imported in smaller express-carrier or mail packages. The results of our undercover purchases from third-party sellers indicate that counterfeit goods are available on a variety of popular e-commerce websites frequented by U.S. consumers. These changes in the marketplace present a number of challenges for U.S. agencies, the private sector, and consumers. The rise of e-commerce has contributed to a fundamental change in the market for counterfeit goods, according to our analysis of documents from CBP, ICE, and international organizations and our interviews with CBP and ICE officials. U.S. agencies and international organizations have observed a shift in the sale of counterfeit goods from “underground” or secondary markets, such as flea markets or sidewalk vendors, to primary markets, including e-commerce websites, corporate and government supply chains, and traditional retail stores, where consumers typically believe they are purchasing authentic goods. This shift has been accompanied by changes in the ways in which counterfeit goods are sold, as shown in table 1. In the past, consumers could often rely on indicators such as appearance, price, or location of sale to identify counterfeit goods in the marketplace, but counterfeiters have adopted new ways to deceive consumers. Consumers may have difficulty differentiating between counterfeit and authentic goods in the primary market for several reasons: The physical appearance of counterfeit goods may no longer serve as a “red flag” for consumers that the good they are considering purchasing is not genuine. Counterfeit goods and their packaging are becoming more sophisticated and closely resemble genuine goods, making it difficult for consumers, law enforcement, and sometimes even manufacturers to identify counterfeit goods, according to CBP and ICE officials. When selling online, counterfeiters may post pictures of authentic goods on the websites where they are selling counterfeits and may post pseudonymous reviews of their products or businesses in order to appear legitimate. By setting the price of a counterfeit at, or close to, the retail price of a genuine good, counterfeiters are able to deceive consumers, who will pay the higher price because they believe the goods are real or who believe that they are getting a slight bargain on genuine goods. Counterfeiters exploit third-party online marketplaces to gain an appearance of legitimacy and access to consumers, according to the Federal Bureau of Investigation. The growth of e-commerce has provided additional opportunities for counterfeiters to deceive consumers, according to U.S. agencies and international organizations. In June 2000, approximately 22 percent of Americans reported having made a purchase online, but by December 2016 that portion of the population had risen to 79 percent, according to a study by Pew Research Center. Worldwide e-commerce sales are expected to reach over $4 trillion by 2020, and e-commerce retail sales are expected to reach nearly 15 percent of overall global retail spending in 2020, according to CBP’s E-Commerce and Small Business Branch. CBP also has reported that e-commerce is increasing and altering global trade, as consumers import and export goods and services when they make purchases over the Internet, allowing for more cross-border transactions and giving counterfeiters direct access to consumers through the Internet. According to CBP seizure data and CBP officials, the volume, value, and variety of counterfeit goods seized by CBP and ICE have increased. CBP reports indicate the number of IPR seizures increased by 38 percent in fiscal years 2012 through 2016, from approximately 22,850 seizures in fiscal year 2012 to an estimated 31,560 seizures in fiscal year 2016. The total estimated value of the seized goods, had they been genuine, increased by 10 percent, from about $1.26 billion in fiscal year 2012 to an estimated value of over $1.38 billion in fiscal year 2016. According to CBP data, most of the goods seized during this period were shipped from China and Hong Kong. Counterfeit goods originating in China accounted for approximately half of all IPR seizures in fiscal years 2012 through 2016, and counterfeit goods shipped from Hong Kong represented over one-third of all IPR seizures over the same time frame. As the number of IPR seizures increased from 2012 to 2016, the proportion of seizures shipped from China and Hong Kong remained fairly stable, ranging from 83 percent of all IPR seizures in 2014 and 2015 to 94 percent in 2013, as shown in figure 2. The variety of products being counterfeited has also increased, according to CBP officials. CBP and ICE noted that, while many consumers typically think of luxury handbags or watches as the most commonly counterfeited goods, counterfeiting occurs in nearly every industry and across a broad range of products. According to CBP officials we interviewed in headquarters and CBP and ICE port officials, almost any product can be counterfeited. For example, major seizure operations in fiscal year 2016 resulted in the confiscation of automobile parts, consumer electronics, pharmaceuticals, sports-related merchandise, semiconductor devices, furniture, and hoverboards. In fiscal year 2016, the commodity types with the highest number of seizures were apparel, consumer electronics, footwear, watches, and jewelry. In addition, according to CBP data and officials, the ways in which counterfeit goods are imported into the United States have changed in recent years. Specifically, express carriers and international mail have become the predominant forms of transportation for IPR-infringing goods entering the United States, constituting approximately 90 percent of all IPR seizures in fiscal years 2015 and 2016, according to CBP data and officials. The number of IPR seizures from express carrier shipments increased by 105 percent from fiscal year 2012 through fiscal year 2016, while the number of IPR seizures shipped by cargo increased by 6 percent over the same period. Similarly, the total value of express carrier seizures increased by 337 percent from fiscal year 2012 through fiscal year 2016, while the total value of cargo seizures decreased by 34 percent over the same period. CBP and ICE have attributed the increase in seizures of mail and express carrier shipments to three factors: continued growth of online counterfeit merchandise sales, which facilitate direct-to-consumer shipments of infringing goods; training by rights holders and coordination between CBP and ICE, which have helped CBP and ICE to focus more enforcement efforts on express carrier operations; and counterfeiters’ response to enforcement efforts. According to an IPR Center report, counterfeiters may assume that multiple, smaller packages are more likely to elude seizure than a single large shipment and may view the seizure of a few packages as the cost of doing business. In an attempt to understand the frequency with which consumers may unknowingly encounter counterfeit products online, we purchased a nongeneralizable sample of four types of consumer products—shoes, travel mugs, cosmetics, and phone chargers—from third-party sellers on five popular e-commerce websites. According to CBP data and officials, CBP often seizes IPR-infringing counterfeits of these types of products. As table 2 shows, the rights holders for the four selected products determined 20 of the 47 items we purchased to be counterfeit. We did not identify any clear reasons for the variation among the counterfeit and authentic that we purchased based on the products they represented, the e-commerce websites from which they were purchased, or the third-party sellers from whom they were purchased. For three of the four product types, at least one item we purchased was determined to be counterfeit, with results varying considerably by product. Representatives of the rights holders could not provide a specific explanation for the variation among authentic and counterfeit goods that we received. They noted that the results of undercover purchases can fluctuate depending on enforcement activities and the variety of goods and sellers on a particular website on a given day. Rights-holder testing also showed that we purchased at least one counterfeit item and one authentic item from each of the five e-commerce websites. In addition, our analysis of the customer ratings of third-party sellers from whom we made purchases did not provide any clear indications that could warn consumers that a product marketed online may be counterfeit. For example, we received both counterfeit and authentic items from third-party sellers with ratings that were less than 70 percent positive as well as sellers with ratings that were up to 100 percent positive. Some counterfeit items we purchased were easily identifiable as likely counterfeit once we received them. Rights holders were able to determine that they were not authentic on the basis of inferior quality, incorrect markings or construction, and incorrect labeling. For example, one item contained misspellings of “Austin, TX” and “Made in China,” as figure 3 shows. Other items could be more difficult for a typical consumer to identify as counterfeit. For example, the rights holder for a cosmetic product we purchased identified one counterfeit item on the basis of discrepancies in the color, composition, and design of the authentic and counterfeit items’ packaging, as figure 4 shows. Counterfeit goods may also lack key elements of certification markings and other identifiers. For example, on a counterfeit phone charger we purchased, the UL certification mark did not include all components of the authentic mark, as shown in figure 5. The risks associated with the types of counterfeit goods we purchased can extend beyond the infringement of a company’s IPR. For example, a UL investigation of counterfeit iPhone adapters found a 99 percent failure rate in 400 counterfeit adapters tested for safety, fire, and shock hazards and found that 12 of the adapters posed a risk of lethal electrocution to the user. Similarly, counterfeits of common consumer goods, such as Yeti travel mugs, may contain higher-than-approved concentrations of dangerous chemicals such as lead, posing health risks to consumers. According to ICE, seized counterfeit cosmetics have been found to contain hazardous substances, including cyanide, arsenic, mercury, lead, urine, and rat droppings. Representatives of rights holders and e-commerce websites whom we interviewed reported taking independent action to try to protect IPR within their areas of responsibility. Both rights holders and e-commerce websites maintain IPR protection teams that work with one another and with law enforcement to address infringement issues. These teams may include global networks of investigators and contracted brand-protection companies. E-commerce websites may also take a variety of steps to block and remove counterfeit items listed by third-party sellers. These efforts rely on data collected through a variety of means, including consumer reporting of counterfeits, notification by rights holders of IPR infringement, and corporate efforts to vet potential third-party sellers, according to private sector representatives. According to these representatives, both rights holders and e-commerce websites have utilized technology to aid their efforts. For example, one rights holder uses search-engine “crawlers” to find terms commonly associated with counterfeit sales, in an effort to identify illicit sites and the individuals behind them, while one e-commerce website maintains a large database of information on the history and activity of its sellers. According to representatives of rights holders, consumers can best protect themselves by buying directly from the manufacturer or its authorized retailers online, avoiding prices that look “too good to be true,” and reporting counterfeit purchases. For additional actions that consumer protection organizations, government agencies, and private companies have recommended consumers take to limit the risk of purchasing counterfeits online, see appendix II. We identified a number of key challenges that the changes in the market for counterfeit goods can pose to CBP and ICE as well as to the private sector. First, the increasing sophistication of counterfeits can make it difficult for law enforcement officers to distinguish between legitimate and counterfeit goods. According to CBP officers, because the quality of counterfeits is improving, inspecting and processing a seizure can be time consuming and often requires working with private industry to test potential counterfeits. Second, the increased variety and quantity of counterfeit goods crossing the border complicate CBP and ICE enforcement efforts. As the range of counterfeit goods expands, CBP has a wider variety of goods to screen, which requires CBP officials to have in-depth knowledge of a broad range of products and of how to identify counterfeits. The overall volume of goods entering the country—including more than 11 million maritime containers; 13 million containers carried over land borders by truck or rail; and 250 million cargo, mail, and express carrier packages annually—can also be difficult to manage, according to CBP officials. CBP has responsibility for facilitating trade as well as preventing the importation of illicit goods—missions that can conflict when attempts to identify illicit goods threaten to slow the movement of legitimate trade. Additionally, the increased volume of imports at specific locations can strain CBP resources. For example, CBP officials at one international mail facility noted that the volume of both incoming mail and counterfeit goods increased exponentially when some international mail shipments from China were rerouted to enter the United States through that port. Third, shifts in the mode of transportation of counterfeit goods to the United States pose additional challenges to CBP and ICE. According to CBP officials, seizure processing takes roughly the same amount of time and costs the same regardless of shipment size or value, which means that CBP must expend the same resources to seize an express carrier shipment that contains a few infringing goods as it would to seize a large cargo container with hundreds of infringing goods. Another effect of the shift in transportation mode is that seizures have become less of a deterrent for counterfeiters who break up large shipments into multiple smaller express carrier or mail packages. Each of these smaller packages includes fewer goods than a single large shipment, decreasing the counterfeiter’s risk of losing significant quantities of merchandise to a single seizure. Furthermore, the shift in mode of transportation affects CBP’s ability to target shipments in advance. For example, as we have previously reported, the mail environment generally does not provide CBP with access to advance information that can be used for targeting or package retrieval. In other shipping environments, CBP officials may have access to advance information that they can use to target potentially counterfeit goods. Fourth, counterfeiters may use a variety of methods to try to deceive law enforcement or evade detection. A large majority of infringing products are produced overseas and shipped to the United States, according to the Intellectual Property Enforcement Coordinator. According to CBP officials and CBP, IPR Center, and Intellectual Property Enforcement Coordinator reports, counterfeiters may try to evade detection in a number of ways. For example, counterfeiters sometimes separate IPR- infringing labels from counterfeit goods during the transportation process and then complete the labeling and packaging of the goods in the United States (see fig. 6). In fiscal year 2016, CBP seized 572 shipments containing counterfeit labels and tags intended to be applied to articles after importation to create non-genuine products, which CBP estimated would be worth more than $17 million if they were genuine. Finally, CBP and ICE officials noted that targeting the root causes of IPR infringement requires international cooperation to disrupt the networks that produce, sell, and ship counterfeit goods. IPR enforcement is a global issue, as counterfeit operations may cross several borders; however, officials said some countries are more receptive to working with U.S. agencies than others. For example, ICE officials noted that some countries, such as China, do not have stringent IP laws in place or do not enforce existing laws. Officials added that it can be difficult to convince some countries to take IP theft seriously when it constitutes a large part of their economy. The changing marketplace also presents challenges to the private sector, according to representatives from rights holders and e-commerce websites: It is more difficult for rights holders and e-commerce websites to identify and investigate individual counterfeit cases, as e-commerce websites face growing inventory from a larger registry of sellers. Tracking goods from known counterfeiters through various website fulfillment and delivery mechanisms is also a significant challenge for the private sector. The growth of e-commerce has accelerated the pace at which counterfeiters can gain access to consumers or reinvent themselves if shut down. E-commerce platforms on mobile devices, for example, represent the newest space in which counterfeiters can operate. CBP and ICE engage in a number of activities to enhance IPR enforcement and have collected performance data on the activities we reviewed. However, CBP has conducted limited evaluation of its IPR enforcement, while ICE has taken some steps to evaluate the impact of its efforts. According to our analysis of CBP and ICE documents and interviews with CBP and ICE officials, CBP and ICE undertake a variety of activities to enforce IPR, including (1) detecting potentially infringing goods, (2) conducting special operations, (3) engaging with international partners, and (4) undertaking localized pilot programs or port-led initiatives. Detecting potentially IPR-infringing goods. CBP and ICE engage in a number of activities to detect imports of potentially IPR-infringing goods. For example, CBP officers at each port have responsibilities for targeting such goods, and CBP conducts targeting and trend analysis at the national level. As we observed during our port visits, CBP also uses its Automated Targeting System to review data on inbound and outbound shipments and to identify shipments of potential concern. CBP has created two IPR targeting models for the system. In addition, CBP and ICE both maintain online systems for reporting allegations of counterfeiting and other IPR infringements. Conducting special operations. CBP and ICE periodically conduct special operations—such as operations focused on particular products or surge operations that provide additional manpower to examine a larger number of shipments—at U.S. ports of entry. CBP’s Mobile Intellectual Property Enforcement Team (MIPET) and ICE’s national operations are examples of activities in this area of effort. Engaging with international partners. IPR enforcement requires coordination with international partners. The IPR Center includes representatives of the governments of Canada and Mexico, as well as international law enforcement entities like Interpol and Europol. CBP and ICE also work with the customs and law enforcement agencies in other countries to share information, provide training, and conduct joint operations. Undertaking localized pilots and port-led initiatives. CBP and ICE delegate much of the responsibility for day-to-day enforcement to ports, Centers, and field offices. This allows CBP’s headquarters offices to test pilot programs in a small number of ports and allows ports and Centers to initiate their own activities to enhance IPR enforcement. CBP engaged in localized pilots or port-led initiatives to enhance IPR enforcement at each of the locations we visited. Within these areas of effort, CBP and ICE have undertaken activities to enhance their IPR enforcement. We selected and reviewed eight activities in these four categories, as shown in table 3. Consistent with federal internal control standards, CBP and ICE have collected some data on the results of each of the eight activities we reviewed. Generally, the agencies collected information on the outputs of the selected activities, such as the number and value of seizures resulting from these activities (see table 4). We found that CBP has conducted limited evaluation of the impact of its efforts to enhance IPR enforcement. In particular, (1) CBP’s metrics for tracking the overall effectiveness of its IPR enforcement have limitations, (2) CBP has not systematically evaluated individual IPR enforcement activities, and (3) CBP lacks a defined process for assessing port-led initiatives and sharing information about effective practices. First, CBP’s metrics for tracking the overall effectiveness of its IPR enforcement have limitations. When asked how they assess effectiveness of CBP’s IPR enforcement, CBP officials in headquarters cited an increase in the number and value of IPR seizures as an indication of the effectiveness of CBP’s IPR enforcement efforts. However, while seizure statistics provide important information about CBP activities, using seizure data to measure the effectiveness of CBP’s IPR enforcement has limitations. For example, according to the U.S. Joint Strategic Plan on Intellectual Property Enforcement for fiscal years 2017 through 2019, it is difficult to determine whether an increase in the number of IPR seizures represents a result of more-effective IPR enforcement or reflects a higher volume of trade in counterfeits. Also, according to CBP officials, the increasing shift from seizures of large cargo shipments to seizures of smaller express carrier and mail shipments may partially explain the growth in the number of reported seizures. Further, while CBP officials in headquarters noted that the overall value of IPR seizures has increased, CBP officials in the field observed that presenting CBP seizure statistics in relation to the overall volume of trade could provide additional context on whether CBP is seizing a larger portion of overall shipments or whether increased seizures might be partially attributable to an increase in the volume of trade. Other CBP officials noted that, in theory, effective enforcement could cause the number of seizures to decrease as the number of counterfeits entering the country also decreases. Finally, given the volume of trade in counterfeits, CBP officials commented that CBP cannot “seize its way out of” the problem of IP theft. Second, CBP has not systematically evaluated its individual IPR enforcement activities and has not followed through on previous plans to conduct such evaluations. We identified one instance in which CBP evaluated an IPR enforcement activity. Specifically, CBP officials conducted an analysis of the fiscal year 2016 expedited seizure processing pilot and identified several benefits, including savings of frontline officer hours and time and cost savings, associated with seizure processing. While CBP has acknowledged the need to evaluate other IPR enforcement activities, it has not followed through on previous plans to conduct evaluations. For example, CBP’s 2010 IPR Enforcement Strategy: 5-Year Plan laid out goals and corresponding activities that it planned to pursue. CBP outlined specific plans to evaluate all but one of these goals at least once over the course of the 5-year period covered by the strategy. In response to our questions about what activities had been undertaken and how they had been evaluated, CBP could not provide evidence that it had conducted evaluations of any of these activities as planned. CBP has more recently said that it plans to evaluate other IPR enforcement efforts to better understand their impact. For example, one goal of MIPET and other surge operations is to build the capacity of officers at participating ports. The U.S. Joint Strategic Plan on Intellectual Property Enforcement for fiscal years 2017 through 2019 notes that CBP intends to assess ports after surge operations to determine their effect on long-term interdiction rates. Additionally, although CBP tracks the accuracy of its Automated Targeting System’s IPR targeting models, a CBP official stated that CBP has not evaluated the extent to which its officers use these models at ports of entry. Officials said that such evaluation would be beneficial for determining whether to continue using the models and, if so, whether policy changes are needed to improve their use. The U.S. Joint Strategic Plan on Intellectual Property Enforcement also states that CBP plans to evaluate the voluntary abandonments pilot, and CBP officials noted their intention to evaluate compliance rates in various e-commerce environments to inform future enforcement efforts. Finally, CBP does not have a standard process for collecting information about the results of port-led initiatives to enhance IPR enforcement and for sharing this information internally. We have previously noted that agencies can use pilots and demonstration projects to identify innovative ways to improve performance, because pilots and demonstration projects allow for experiences to be evaluated, shared systematically with others, and adjusted as appropriate. CBP’s decentralized structure allows it to pilot new activities at individual ports. CBP officials stated that they currently collect information on special operations conducted at ports but that they do not have a standardized process for assessing port-led efforts and sharing information on process improvements. Officials also noted that they sometimes share information about port-led efforts during quarterly phone calls and stated that they had shared information about the expedited seizure processing initiative and the Special Operations Team in such calls. However, they were unable to provide examples of information about other port-led initiatives that had been shared through this process. Officials we interviewed in the field and in headquarters indicated that sharing of such information could be useful. Federal internal control standards state that agency management should use data it collects to make informed decisions and evaluate the agency’s performance in achieving key objectives. According to federal program evaluation guidance, which articulates best practices for program evaluation, a program evaluation is a systematic study using research methods to collect and analyze data to assess how well a program is working and why. Program evaluation is closely related to performance measurement and reporting. Evaluations answer specific questions about program performance; may focus on assessing program operations or results; and can play a key role in strategic planning and program management, providing feedback on both program design and execution. CBP officials acknowledged that further steps to evaluate their IPR enforcement efforts would be useful. Without evaluations of, or more complete information about, the results of its efforts, CBP may not have the information it needs to direct its resources to the most effective enforcement activities. While ICE officials identified a number of challenges that affect their ability to track the effectiveness of IPR enforcement activities, the agency has taken steps to understand the impacts of some of its efforts. ICE officials noted that evaluating the impacts of specific IPR enforcement activities, including those we reviewed, can be difficult, because these impacts ultimately rely on prosecutors’ decisions to pursue criminal charges—that is, decisions over which ICE has no control. ICE officials also noted factors that limit the usefulness of enforcement statistics, such as arrests or convictions for IPR-related offenses, as measures of the effectiveness of ICE’s IPR enforcement activities. First, according to ICE officials, prosecutors for some cases that start as IPR investigations ultimately pursue money laundering or other, related charges, because they carry harsher penalties. Second, while ICE collects data on enforcement outcomes by fiscal year, the complicated nature of some investigations often causes a significant amount of time to elapse between an investigation’s start and any results. Thus, various IPR enforcement statistics reported for a single fiscal year, such as the number of cases initiated, arrests made, or convictions secured, may be unrelated, making it sometimes difficult to link enforcement outcomes to ICE investigations. To address some of these challenges, ICE has created a process to track cases it deems significant, which, according to ICE officials, will allow it to better understand the impact of its efforts. ICE officials told us that ICE had developed a set of criteria for what constitutes a significant case and that a panel reviews proposals from the field to determine whether an investigation meets the criteria for a significant case. If a case is deemed significant, ICE tracks it until (1) the criminal activity is disrupted (i.e., actions taken as part of the investigation impede the operations of the target organization) or (2) a criminal organization is dismantled (i.e., the leadership, network, and financial base of the target organization are impeded to the point where it is unable to reconstitute itself). According to ICE, of the 115 IPR-related investigations that were deemed significant cases in fiscal years 2012 through 2016, 59 cases, or about 51 percent, had resulted in a disruption of criminal activity or dismantlement of a criminal organization as of January 2017. Our analysis showed that CBP and ICE collaboration on IPR enforcement is generally consistent with selected key practices for interagency collaboration and that the agencies collaborated to address some challenges they have faced with the creation of the Centers. CBP and ICE also coordinate with the private sector in a variety of ways. However, according to private sector representatives we spoke to, restrictions on CBP’s information sharing limit the ability of rights holders and e- commerce websites to protect IPR. CBP and ICE collaborate on IPR enforcement in ways that are generally consistent with the following selected key practices that we have previously identified as important for enhancing and sustaining collaboration among federal agencies: (1) define and articulate a common outcome; (2) establish mutually reinforcing or joint strategies; (3) identify and address needs by leveraging resources; (4) agree on roles and responsibilities; and (5) establish compatible policies, procedures, and other means to operate across agency boundaries. In developing the U.S. Joint Strategic Plan on Intellectual Property Enforcement, CBP and ICE, among other agencies, defined and articulated common IPR enforcement outcomes, and they continue to define common outcomes through interagency efforts. The plan’s seven objectives, mandated by the Prioritizing Resources and Organization for Intellectual Property Act of 2008, include reducing counterfeit and infringing goods in domestic and international supply chains, among others. For example, through the IPR Center, CBP and ICE coordinate special interagency operations that target IPR violations for specific industries or product types, such as beauty products, pharmaceuticals, or automotive parts (e.g., airbags). CBP and ICE, among other agencies, participated in the development of the U.S. Joint Strategic Plan on Intellectual Property Enforcement for fiscal years 2017 through 2019 and completed a TFTEA-required joint strategic plan. The Prioritizing Resources and Organization for Intellectual Property Act of 2008 requires the U.S. Intellectual Property Enforcement Coordinator to coordinate the development of the Joint Strategic Plan on Intellectual Property Enforcement. This plan serves as a blueprint for the work CBP, ICE, and other federal agencies are to carry out in support of IPR enforcement. The joint strategic plan for fiscal years 2017 through 2019 notes that CBP and ICE will, among other things, engage in joint efforts, such as meeting at least annually with industry stakeholders to discuss potential new opportunities for employing technology to enhance identification and investigation of illicit trade. In addition, TFTEA required CBP and ICE to develop, by February 2017 and every 2 years thereafter, an interagency strategic plan for trade enforcement that includes information related to IPR enforcement. The agencies finalized this strategy in October 2017 and provided us with a copy after we had sent them our draft report for comment. CBP and ICE have leveraged IPR enforcement resources in a variety of ways. For example, according to a strategy issued by the IPR Center, ports and field offices may establish Trade Enforcement Coordination Centers and colocate CBP and ICE personnel to enhance information sharing and foster collaboration on enforcement actions. Officials in three of the locations we visited told us that colocating CBP and ICE staff or temporarily assigning some agency staff to the other agency improves the two agencies’ ability to work together. In addition, ICE officials at two of the locations we visited said that CBP officers share their expertise in operating the Automated Targeting System, which CBP officers use more frequently. ICE officials in one location also told us that CBP officers sometimes accompany ICE agents on investigative operations and that the ICE agents without IPR backgrounds find the CBP officers’ expertise helpful. Internally, CBP also has taken steps to leverage resources. For example, CBP conducts surge operations, such as MIPET operations, to temporarily focus resources on specific IPR violations. In addition, according to CBP, the agency created the Centers to increase CBP’s industry knowledge. CBP and ICE have defined roles and responsibilities for a variety of interagency IPR enforcement efforts. For example, after CBP established the Centers, CBP and ICE jointly issued guidance that explained the Centers’ role in CBP and clarified CBP’s and ICE’s roles and responsibilities in the case-referral process. This guidance describes the process by which CBP may refer IPR-infringement cases to ICE, which is then responsible for determining whether to initiate an investigation. CBP defines intra-agency roles and responsibilities in its Trade Special Operations Standard Operating Procedures, which provide CBP personnel with direction for initiating, developing, and executing national- level trade targeting operations. For example, the standard operating procedures define the targeting roles for three CBP targeting groups—the National Targeting and Analysis Group, the Commercial Targeting and Analysis Center, and the Tactical Trade Targeting Unit—as well as for the Centers. CBP and ICE have established compatible policies, procedures, and other means to operate across agency boundaries. For example, CBP and ICE developed standard operating procedures for the Commercial Enforcement Analysis Response (CEAR) process—a process to ensure coordination between the agencies when violations are detected, agree on a response best suited to remedy the problem, and follow up on actions taken. CBP and ICE have also taken steps to address some challenges they encountered following the creation of the Centers. Both CBP and ICE officials noted that the creation of the Centers has posed communication challenges, but the agencies have taken steps to address some of the challenges posed by the new organizational structure. Officials at ports we visited and Centers we interviewed noted that there were challenges associated with integrating the Centers, which operate nationally, into local efforts, like the CEAR process. This is consistent with our June 2017 report, in which we noted that ICE officials have had to adjust to working in the new, nationwide environment of the Centers. For example, ICE officials in one city may be working on a case with an import specialist located in another city. This has diminished cooperation and communication between CBP and ICE and resulted in fewer investigations, according to ICE officials. CBP and ICE have initiated steps to address some of the challenges posed by the new organizational structure. For example, CBP and ICE issued joint guidance in December 2016 outlining how the two agencies would coordinate with one another in light of the creation of the Centers. Additionally, according to CBP officials, the CEAR process was revised in September 2017 with the Centers in a lead role. CBP officials also noted they have had to adapt to new ways of sharing information within the agency between officers and import specialists at Centers when processing a seizure. Officials at port locations we visited and at the Centers where we conducted interviews noted that the creation of the Centers has enhanced IPR enforcement. However, officials at the Centers and ports also noted challenges related to the sharing of information. For example, Center and port officials stated that sharing information about seizures via email and coordinating remotely—often across time zones—can extend the amount of time needed to process a seizure. Center officials also stated that ports may use different procedures for processing seizures, which can be challenging for the Centers because they operate on a national level and therefore may interact with a number of ports. CBP has initiated steps to address some challenges related to sharing information about seizures. For example, CBP is adding a function to upload photos and forms to its seizures database, allowing for enhanced information sharing across locations, according to CBP officials. CBP and ICE work with a variety of private sector entities—including rights holders, industry groups, importers, and e-commerce websites, among others—to enforce IPR and prevent the sale of counterfeit goods on e-commerce websites, according to CBP and ICE documents and our interviews with CBP and ICE officials and private sector representatives. In particular, CBP and ICE work with the private sector to encourage rights holders to record trademarks and copyrights, make determinations on the authenticity of goods, conduct training, and collaborate with e- commerce websites. Recording trademarks and copyrights. CBP and ICE conduct outreach with rights holders to ensure recordation of trademarks and copyrights in CBP’s online recordation system. According to CBP officials, business owners are often unaware of CBP’s recordation process, and many may not recognize that CBP prioritizes enforcement of IP that has been recorded with CBP after it has been registered with the U.S. Patent and Trademark Office or the U.S. Copyright Office. CBP engages in efforts to enhance awareness of this process, such as meeting with industry groups, according to CBP. Representatives of one rights holder told us that increasing the number of trademarks recorded with CBP was an important component of the company’s enhanced IPR enforcement efforts. Determining goods’ authenticity. CBP officials noted that they often coordinate with rights holders to determine whether a detained item is counterfeit. ICE also works with rights holders during criminal investigations, according to ICE officials. When CBP officers and import specialists are uncertain about the authenticity of a particular item, they work with rights holders to evaluate the item, because rights holders have the most detailed knowledge of how a product is made and packaged and therefore can determine whether seemingly authentic goods are in fact counterfeit. Representatives of all of the rights holders we spoke with noted that this was an important part of their interaction with CBP. In addition, representatives of rights holders and e-commerce websites stated that they share information to assist with law enforcement and with potential criminal prosecution. Conducting training. CBP and ICE coordinate with rights holders, industry groups, and other private sector entities to receive training on topics like detection, supply chains, and packaging. For example, CBP officials said they work with rights holders to arrange trainings about specific products to help officers identify potentially counterfeit goods. CBP reported that in fiscal year 2016, rights holders conducted 11 “webinars” and over 50 trainings for agency personnel to increase CBP expertise regarding their products. CBP also conducted three industry roundtables on IPR enforcement. In addition, to combat the illegal importation and distribution of counterfeit goods, the IPR Center engages in training and outreach to rights holders, manufacturers, importers, and others through its Operation Joint Venture initiative. The IPR Center reported that it reached out to more than 14,000 people at over 300 outreach and training events in fiscal year 2016 through Operation Joint Venture. Representatives of one rights holder we spoke with noted that the company hosts two large conferences every year to discuss issues in IPR enforcement with other private sector entities and U.S. and international law enforcement. Working with e-commerce websites. CBP and ICE officials noted that their agencies collaborate with e-commerce companies in a number of national and international working groups to better understand the challenges associated with IPR enforcement in e- commerce. In 2016, CBP created an E-Commerce and Small Business Branch within its Office of Trade, which, among other things, is charged with helping CBP understand the complexities resulting from the increasing volume of online trade. Representatives of one e- commerce website stated that the IPR Center, in particular, has been effective in private sector outreach. ICE officials noted that in November 2017, the IPR Center hosted a symposium on e-commerce with over 150 attendees from the private sector and government. Representatives from most rights holders and websites we spoke with stated that coordination with U.S. agencies is effective and that CBP and ICE work well with the private sector. Rights holders told us they are aware that, due to competing priorities, CBP and ICE are unable to focus as extensively on IPR enforcement as rights-holding companies would like, but they noted that the agencies are willing partners in enforcement as resources permit. Private sector representatives of rights holders and e-commerce websites stated that restrictions on the amount and type of information that CBP shares about seized goods impede their ability to protect IPR. CBP officials stated that they share information about identified counterfeits with e-commerce websites and rights holders to the extent possible under current regulations. However, the officials noted that there are legal limitations to the amount and type of information they can share, particularly if the e-commerce website is not listed as the importer on forms submitted to CBP. One rights holder representative stated that the information CBP provides, such as importer names from bills of lading, is sometimes not useful, because counterfeiters use fake identities or otherwise mask their identities. Several private sector representatives stated that receiving additional information from CBP would enhance their ability to protect IPR. Rights holders noted that additional identifying information about the counterfeiter would aid rights-holding companies in their own investigations and enforcement activities. One rights holder said that some European customs agencies are able to share more information than CBP, better enabling rights holders to take action following a seizure. Representatives of one website noted that information on the exterior of seized packages, such as business identifiers on packages destined for distribution centers, would be helpful for identifying groups of counterfeit merchandise from the same seller. However, according to CBP officials, CBP cannot provide such information to e-commerce websites. Without this information, websites may be unable to identify additional counterfeit goods from the same seller in their distribution centers. Representatives of one e-commerce website noted that ICE sometimes shares information when it relates to an investigation, but ICE’s involvement in the enforcement process begins only after CBP has identified and seized counterfeit items. Representatives of two e-commerce websites stated that, because of the limited information shared by CBP, they may not be aware of IPR- infringing goods offered for sale on their website even if CBP has seized related items from the same seller. CBP officials stated that they have not yet determined whether changes to the amount and type of information provided to e-commerce websites would require regulatory changes or additional legal authorities. These officials noted that CBP is reviewing options for sharing additional information with rights holders and e- commerce websites and is assessing what, if any, additional information would be beneficial to share with private sector entities. They also said that they have discussed differences in CBP’s and ICE’s information sharing with ICE officials. Representatives of rights holders and e-commerce websites noted that information shared by law enforcement is critical to private sector IPR enforcement, such as pursuing civil action against a counterfeiter or removing counterfeit items from websites. Congress has also demonstrated an interest in CBP’s sharing information with the private sector in certain instances. Specifically, in TFTEA, Congress provided CBP with explicit authority to share certain information with trademark and copyright owners prior to completing a seizure. However, CBP has not yet completed an assessment of additional information that would be beneficial to share with the private sector or determined whether it can share such information under current regulations and statutes. As a result, CBP does not know whether it needs to revise its regulations or seek additional authorities. Counterfeit goods provide a lucrative market for criminal activity and can pose serious risks to consumers. Growth in e-commerce has changed the way counterfeiters interact with consumers, and the accompanying increase in the volume and sophistication of counterfeit goods has created challenges for CBP and ICE enforcement. While CBP and ICE have undertaken activities to enhance IPR enforcement and collected some performance data on their activities, CBP has conducted limited evaluation of its efforts. Managing the huge volume of both legitimate and counterfeit goods entering the country requires efficient use of resources. Without better information on the effectiveness of its activities, CBP may not be able to focus its resources on the most efficient or effective efforts. Additionally, without collecting and disseminating effective practices resulting from port-led initiatives, CBP may be missing an opportunity to scale up or improve on existing efforts. With the growth of e-commerce, the private sector—including rights holders and e-commerce websites—can play an important role in helping to enforce IPR and protect consumers. Information shared by CBP plays an important role in facilitating private sector enforcement, but CBP has not determined what, if any, additional information would be beneficial to share with private sector entities. Until it completes an assessment of information sharing, CBP will not know whether sharing additional information requires regulatory or legal changes. We are making the following two recommendations to CBP: The Commissioner of CBP should take steps to evaluate the effectiveness of CBP’s IPR enforcement efforts, such as by improving its metrics to track the overall effectiveness of its IPR enforcement efforts, evaluating selected activities to enhance IPR enforcement, and developing a process to assess and share information on port-led initiatives to enhance IPR enforcement (Recommendation 1) The Commissioner of CBP, in consultation with ICE, should assess what, if any, additional information would be beneficial to share with the private sector and, as appropriate, take action to enhance information sharing, where possible, such as by proposing regulatory revisions or requesting additional legal authorities from Congress. (Recommendation 2) We provided a draft of this report to the Department of Homeland Security for comment. In its comments, reproduced in appendix III, the department concurred with our recommendations to (1) take steps to evaluate the effectiveness of CBP’s IPR enforcement efforts and (2) assess what, if any, additional information would be beneficial to share with the private sector. The department also described actions that CBP plans to take to implement our recommendations. CBP and ICE also provided technical comments, which we incorporated as appropriate. Our draft report also included recommendations to CBP and to ICE to complete a joint strategic plan, as required by TFTEA. After the agencies received our draft report, they notified us that this plan had been completed in October 2017, and they provided us with a copy of the plan. As a result, we removed these recommendations from the final report. We also provided relevant excerpts of the draft report to the private sector companies mentioned in it and incorporated their technical comments as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report please contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. We examined (1) what is known about counterfeit goods entering the United States and the challenges they present, (2) efforts U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) have undertaken to enhance intellectual property rights (IPR) enforcement and the extent to which they have assessed the results of these efforts, and (3) the extent to which CBP and ICE collaborate on IPR enforcement as well as ways in which they coordinate with the private sector in enforcing IPR. To examine what is known about counterfeit goods that enter the United States and the challenges they present, we reviewed U.S. government reports and strategic plans, including those produced by CBP, ICE, the National Intellectual Property Rights Coordination Center (IPR Center), and the Office of the U.S. Intellectual Property Rights Enforcement Coordinator. We also reviewed reports on the counterfeits market and illicit trafficking from international organizations, including the Organisation for Economic Cooperation and Development and the United Nations Office on Drugs and Crime. In addition, we analyzed data from annual CBP public reports on IPR seizures from fiscal years 2012 through 2016 to identify the types of goods seized, the goods’ countries’ of origin, the modes of transportation used to import the goods, and the value of the goods. We analyzed data from CBP’s public IPR reports because, according to CBP officials, those data are refined prior to the issuance of the reports and therefore are more accurate than data extracted directly from CBP’s seizure database. We reviewed the data, conducted electronic tests of the data, and interviewed knowledgeable agency officials to determine that these data were sufficiently reliable for our purposes. We interviewed CBP and ICE officials in Washington, D.C., and in field locations in Chicago, Illinois; Los Angeles, California; Miami, Florida; and New York, New York, to discuss the composition of IPR- infringing goods and challenges the agencies face in enforcing IPR. We selected these locations on the basis of the number and composition of IP seizures in each location, the availability of multiple ports of entry covering different modes of transportation, and geographic diversity. We also interviewed representatives of IP rights–holding companies and e- commerce websites to discuss the challenges counterfeit goods pose in online marketplaces. In addition, in an attempt to understand the frequency with which consumers may unknowingly encounter counterfeit products online, we used investigative tools and techniques to conduct nongeneralizable, undercover purchases of consumer goods from third-party sellers on popular consumer websites and asked the rights holders to test the goods to determine whether they were authentic or counterfeit. We selected four trademarked consumer products of which CBP often seizes counterfeits, according to CBP seizure data and CBP officials, and that represented a range of consumer goods: Nike Air Jordan shoes, Yeti travel mugs, Urban Decay cosmetics, and UL–certified phone chargers. We selected five popular e-commerce websites that (1) were among the top 50 consumer shopping websites as of March 2017, according to Alexa, a data analytics company, and (2) received a rating of “B” or better from the Better Business Bureau. From the top 50 consumer shopping websites, we chose those that (1) offered platforms for third- party sales, (2) sold a variety of trademarked products to the public, and (3) offered a minimum of two items from at least two different third-party sellers. We purchased, and had rights holders test, a total of 47 items from third-party sellers on the five e-commerce websites. We selected items that were advertised as new, brand-name items, and we generally selected the lowest-priced items, factoring in both purchase price and shipping while also targeting a variety of sellers and product options. We did not select items whose cost exceeded the manufacturer’s suggested retail price or exceeded that of an identical item sold and fulfilled by the host website. Where seller ratings were available, we selected items from third-party sellers with ratings of 60 percent (or the equivalent, such as 3 of 5 stars) or higher; on average, the sellers of the items we selected had customer ratings above 90 percent as of August 2017. For each selected product, we purchased a minimum of two items and a maximum of five items from different third-party sellers on any of the five e-commerce websites that listed the product. Across all the websites, we purchased a minimum of eight items for each product. On each website, we purchased a maximum of one item from any third-party seller. We contacted the companies that held the trademark or copyright for each of the four products, asking for their assistance in reviewing the items we purchased to determine whether they were authentic or counterfeit. These companies made their assessments with no knowledge of the websites or sellers from which we purchased the items. We discussed the results of these tests with representatives of the rights-holding companies and the e-commerce websites where we purchased the items. To examine the efforts CBP and ICE have undertaken to improve IPR enforcement and the extent to which they have assessed the results of those efforts, we reviewed agency and government-wide strategic plans for IPR enforcement, and we spoke with agency officials in headquarters and selected field locations. We reviewed a selection of eight CBP and ICE activities, which we grouped under four major areas of effort on the basis of the activities highlighted in these strategic plans and agency interviews. The list of activities we reviewed does not constitute the entirety of activities undertaken by CBP and ICE to enhance IPR enforcement and is intended to highlight significant efforts. We did not review activities that officials told us were in early stages, because it would not be reasonable to expect the agencies to have assessed the results of those activities. Our discussion of activities does not include activities related to private sector engagement, which we discuss elsewhere in the report. We reviewed documentation pertaining to the eight activities we reviewed, and we interviewed CBP and ICE officials about the activities and any efforts to assess their results. We reviewed federal internal control standards and prior GAO reports to identify good practices for assessing the results of activities, and we determined the extent to which CBP and ICE had followed those practices. To examine the extent to which CBP and ICE follow selected practices for effective interagency collaboration, we reviewed agency documentation and spoke with CBP and ICE officials in headquarters and in selected field locations. We reviewed prior GAO reports to identify effective practices for interagency collaboration and selected five of eight practices that we had identified in a fiscal year 2006 report. The five practices we selected as most relevant to the ways in which CBP and ICE coordinate with one another are (1) establish mutually reinforcing or joint strategies; (2) define and articulate a common outcome; (3) agree on roles and responsibilities; (4) identify and address needs by leveraging resources; and (5) establish compatible policies, procedures, and other means to operate across agency boundaries. We did not evaluate CBP and ICE’s interagency collaboration against the remaining three practices identified in our fiscal year 2006 report. We also assessed CBP’s intra-agency collaboration against three of the five selected practices on the basis of interviews with CBP officials in headquarters and selected field locations and reviews of CBP documentation. We did not evaluate internal CBP collaboration against the other two practices—establish mutually reinforcing or joint strategies and define and articulate a common outcome—because we determined that such practices were not applicable to intra-CBP collaboration. To determine the ways in which CBP and ICE collaborate with the private sector, we interviewed CBP and ICE officials in headquarters and selected field locations, reviewed CBP and ICE documentation, and interviewed representatives of rights-holding companies and e-commerce websites. We conducted this performance audit from September 2016 to January 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work in accordance with investigation standards prescribed by the Council of the Inspectors General on Integrity and Efficiency. According to consumer protection organizations and government agencies, consumers can take the following steps to try to limit the risks of buying counterfeit goods online. 1. Locate the listed retailer on the product page and determine whether it is a third party. “Fulfilled by” does not mean “Sold by.” 2. Look for external consumer trust–building features, such as a mailing address or telephone number, real-time customer service, customer reviews, or third-party accreditation that can be verified through the accreditor. 3. Buy products only from authorized retailers, such as official brand stores. If uncertain whether a retailer acquired its product from a legitimate distributor, ask for verifiable information from the retailer about the source of the goods. 4. Be aware of pricing. While some counterfeiters may try to legitimize their merchandise with realistic prices, others may attract buyers with low prices. If a price seems too good to be true, it probably is. 5. During checkout, ensure your payments are submitted via a website beginning with https:// and look for a lock symbol in your web browser. 6. After receiving an item, look for signs that it may be counterfeit, such as irregular brand markings; missing “use by” dates, safety seals, or markings; and missing warranty information. Verify the item’s serial number by checking the manufacturer’s website. 7. If you suspect that you have purchased a counterfeit product, notify the brand owner and contact the place of purchase. Also, report the counterfeit at http://www.iprcenter.gov/referral. To report an unsafe consumer product, visit http://www.SaferProducts.gov. According to the National Intellectual Property Rights Coordination Center, word-of-mouth is the best way to spread information about illegitimate products as well as sources of safe, affordable, and legal alternatives. For further information, consult http://www.stopfakes.gov. Kimberly Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov. In addition to the contact named above, Joyee Dasgupta (Assistant Director), Kara Marshall (Analyst-in-Charge), Kristen Timko, Katie Bassion, Reid Lowe, Sarah Collins, Neil Doherty, Ramon Rodriguez, Helina Wong, Julie Spetz, Kevin Loh, Wayne McElrath, Grace Lui, James Murphy, Mary Moutsos, Justin Fisher, Rachel Stoiko, and Sarah Veale made key contributions to this report.", "summary": "Infringement of IPR through the illegal importation and distribution of counterfeit goods harms the U.S. economy and can threaten the health and safety of U.S. consumers. CBP leads IPR enforcement at U.S. ports of entry by detecting and seizing counterfeit goods that enter the United States. CBP works with ICE, which investigates IPR violations and builds cases for prosecution. GAO was asked to review CBP's and ICE's IPR enforcement at U.S. borders. In this report, GAO examines (1) what is known about counterfeit goods entering the United States and the challenges they present, (2) efforts CBP and ICE have undertaken to enhance IPR enforcement and the extent to which they have assessed the results, and (3) the extent of CBP's and ICE's collaboration on IPR enforcement and ways they coordinate with the private sector. GAO reviewed agency data and documents, interviewed agency officials, and conducted field work at port locations selected on the basis of factors such as the volume of IPR seizures and variety of modes of transportation at each location. GAO also conducted undercover purchases of commonly counterfeited consumer goods on popular consumer websites, using investigative tools and techniques. Changes in the market for counterfeit goods entering the United States pose new challenges for consumers, the private sector, and U.S. agencies that enforce intellectual property rights (IPR). Specifically, growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products. For example, 20 of 47 items GAO purchased from third-party sellers on popular consumer websites were counterfeit, according to testing by the products' rights holders (see table), highlighting potential risks to consumers. The changes in the market for counterfeit goods can also pose challenges to the private sector—for example, the challenge of distinguishing counterfeit from authentic goods listed for sale online—and complicate the enforcement efforts of U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE). CBP and ICE engage in a number of activities to enhance IPR enforcement; however, while ICE has assessed some of its efforts, CBP has taken limited steps to do so. CBP's and ICE's IPR enforcement activities broadly include detecting imports of potentially IPR-infringing goods, conducting special operations at U.S. ports, engaging with international partners, and undertaking localized pilot programs or port-led initiatives. CBP and ICE have collected some performance data for each of the eight activities GAO reviewed, and ICE has taken some steps to understand the impact of its efforts. However, CBP has conducted limited evaluation of its efforts to enhance IPR enforcement. Consequently, CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities. CBP and ICE generally collaborate on IPR enforcement, but according to private sector representatives, restrictions on CBP's information sharing limit private sector enforcement efforts. GAO found that CBP and ICE have undertaken efforts that align with selected key practices for interagency collaboration, such as participating in developing a national IPR enforcement strategy and agreeing on roles and responsibilities. However, sharing additional information about seized items with rights-holding companies and e-commerce websites could improve enforcement, according to private sector representatives. CBP officials said they share information to the extent allowed under current regulations, but CBP has not completed an assessment of what, if any, additional information would be beneficial to share with private sector entities. Without such an assessment, CBP will not know if sharing additional information requires regulatory or legal changes. GAO is making two recommendations to CBP, recommending that it (1) evaluate its efforts to enhance IPR enforcement and (2) assess potential additional information sharing with the private sector. CBP agreed with these recommendations.", "document_type": "gao"}
{"report": "DOD has historically faced organizational and management challenges that can limit effective and efficient coordination across the department to fulfill its mission, and Congress has taken steps to address these challenges through, among other things, legislation. For example, in the early 1980s, Congress expressed concern that DOD’s structure primarily served the needs of the services and encouraged interservice rivalries that led to operational failures. In response, Congress passed the Goldwater-Nichols Department of Defense Reorganization Act of 1986 to improve the management and administration of the department, among other purposes. One of the changes emanating from this act included specifying the military department secretaries’ responsibility for training and equipping forces, while making clear that the military service chiefs were not in the chain of command for military operations. The act also required that military personnel selected for promotion to brigadier general or rear admiral (lower half) to have joint duty experience unless waived by the Secretary of Defense or an authorized official. However, shortfalls in strategic integration at DOD—how DOD and the military services align their efforts and resources across different regions, functions, and domains—continue. Congress intended that section 911 of the NDAA for Fiscal Year 2017 improve strategic integration across the organizational and functional boundaries of DOD by, among other things, requiring the Secretary of Defense to develop an organizational strategy to advance a collaborative culture across DOD and create cross- functional teams to address critical objectives and outputs. As required by section 911 of the NDAA for Fiscal Year 2017, DOD awarded a contract to study how best to implement effective cross- functional teams in DOD. The study, conducted by McKinsey & Company and completed in August 2017, presented findings on leading practices for implementing cross-functional teams that were drawn from a literature review, DOD and non-DOD case studies, and interviews. It identified seven critical factors for cross-functional team success: (1) mission; (2) objective; (3) delegated authorities; (4) team membership; (5) ways of working; (6) collaborative environment; and (7) an implementation plan. While not required by the contract, the study also contained a checklist for implementing cross-functional teams, which includes recommendations to assist DOD in assembling, initiating, and operating a team. The checklist distinguished action items by implementation phases: prelaunch, at launch, throughout the project, and at the project’s close. For example, the checklist suggested that, at launch, DOD should onboard the team and tailor training to the team experience and timeframe. DOD transmitted the report to Congress in September 2017. ODCMO officials also began collecting information in March 2017 to conduct their own internal study of cross-functional teams within DOD to help inform their implementation of section 911. This internal study, completed in August 2017, evaluated four case studies of prior DOD cross-functional teams, including their structure, returns, and implementation costs. From the case studies, ODCMO officials identified lessons learned to inform establishing and monitoring cross- functional teams. The ODCMO’s internal study found that cross-functional teams require significant senior leader attention. For example, the Secretary of Defense was directly involved in the sampled cross- functional teams, and he publicly stated his support for the teams, gave the teams precedence over other programs, and endorsed non-standard funding practices to accelerate their work. Further, the Secretary of Defense regularly engaged with teams. The study also found that DOD should provide team members with background information and the context behind the team’s mission and goals. Finally, the internal study found that cross-functional teams had the most robust decision-making authority when it came to integration and implementation of the Secretary of Defense’s priority initiatives. Through a review of literature and case studies as well as interviews with subject-matter experts, we identified eight leading practices for effective cross-functional teams, as shown in figure 1. These leading practices are similar to those identified by the McKinsey & Company contracted study and the ODCMO’s internal study as well as leading practices for interagency collaboration that we previously identified. Further, we found that leading practices for implementing effective cross- functional teams include the key characteristics shown in table 1. The ODCMO developed a draft organizational strategy that addresses the two statutory elements required under section 911 of the NDAA for Fiscal Year 2017—identifying critical objectives and outputs that would benefit from the use of cross-functional teams, and providing for the appropriate use of these teams—but DOD has not issued that strategy as required by September 1, 2017. In addition, while the draft strategy contains the two required elements, it does not outline how DOD will achieve several future outcomes required under section 911 of the NDAA for Fiscal Year 2017 that are designed to advance a collaborative culture within the department. Further, ODCMO officials did not coordinate with key stakeholders, such as the Secretary of Defense, military departments, and defense agencies, in developing the organizational strategy. Our leading practices for collaboration highlight the value of agencies including stakeholders when defining and articulating a common outcome. The ODCMO developed a draft organizational strategy, but DOD did not issue the organizational strategy as required by September 1, 2017, and as of February 2018 has not issued the strategy. The August 2017 draft organizational strategy we reviewed is intended to be an organizational design that focuses on the responsibilities, functions, and authorities of— and relationships between—the leaders of DOD components and those of cross-functional teams. It describes DOD’s current organizational structure and processes and how they will change as a result of recent legislation and reform initiatives, and it describes best practices and lessons learned for implementing cross-functional teams, as well as areas that may benefit from the use of such teams. Although the act required the Secretary of Defense to issue the strategy by September 1, 2017, the Acting DCMO told us that other reform initiatives and organizational changes have a higher priority and that therefore he did not take steps to finalize the strategy. ODCMO officials told us that they plan to align the strategy with the revised National Defense Strategy, which was released in January 2018, and the Agency Strategic Plan, which was expected to be issued in February 2018. We found that DOD’s draft organizational strategy contains the two elements required under section 911 of the NDAA for Fiscal Year 2017. According to the act, among other things, the organizational strategy must (1) identify the critical objectives and other organizational outputs for the department that span multiple functional boundaries and would benefit from the use of cross-functional teams to ensure collaboration and integration across organizations within the department; and (2) provide for the appropriate use of cross-functional teams to manage such objectives and outputs. To address the first statutory element, the draft organizational strategy identifies several mission-focused and business- operations areas that would benefit from the use of cross-functional teams. For example, the strategy identifies three primary candidates for business operations, including Military Health Systems reforms, financial auditability, and security clearance backlog mitigation. To address the second statutory element, the draft organizational strategy identifies considerations for the appropriate use of cross-functional teams. For example, the strategy states that cross-functional teams should be used only for the Secretary of Defense’s highest-priority issues and that cross- functional teams require significant engagement with the Secretary of Defense and other top leadership. Section 911 of the NDAA for Fiscal Year 2017 also identifies several outcomes that DOD should achieve to advance a collaborative culture within the department; however, we found that DOD’s draft organizational strategy does not clearly articulate how the department will achieve these outcomes. The act states that DOD’s organizational strategy should, among other things: provide for the furtherance and advancement of a collaborative, team- oriented, results-driven, and innovative culture within the department that fosters an open debate of ideas and alternative courses of action, and supports cross-functional teaming and integration; improve the manner in which the department integrates the expertise and capacities of the functional components of the department for effective and efficient achievement of critical objectives and other organizational outputs that span multiple functional boundaries and would benefit from the use of cross-functional teams; improve the management of relationships and processes involving the Office of the Secretary of Defense, the Joint Staff, the combatant commands, the military departments, and the defense agencies with regard to such objectives and outputs; improve the ability of the department to work effectively in interagency processes with regard to such objectives and outputs in order to better serve the President; and achieve an organizational structure that enhances performance with regard to such objectives and outputs. We found that the draft strategy does not outline how the department will achieve these outcomes. For example, the draft organizational strategy notes that DOD leaders recognize the department must fully embrace and operationalize the cultural attributes set forth in section 911, including a more collaborative, team-oriented, results-driven, and innovative culture; however, it does not identify actions the department will take to help ensure that leaders embrace these attributes, such as through guidance or training. When we asked how the draft organizational strategy will help achieve these outcomes, ODCMO officials stated that the strategy contains references to cultural attributes for the department. For example, the draft organizational strategy describes cultural attributes of the department’s management and business operations, such as visibility across components and collaboration. However, ODCMO officials stated that they agree that the strategy could do more to address collaboration. The ODCMO officials said they originally interpreted section 911 to mean that the organizational strategy should focus on DOD’s organizational structure, processes, and leading practices for implementing cross- functional teams, rather than on how to transform the department’s culture more broadly. Nonetheless, the outcomes called for under the act refer to the need to advance a collaborative culture across the department. These officials also stated that they plan to revise the draft organizational strategy to include additional information on collaboration and information-sharing processes and systems, among other things. While not required to do so, OCMO, which will now lead the department’s efforts to implement section 911, could utilize our leading practices for mergers and organizational transformations to revise the organizational strategy to address how the department will advance a culture that is collaborative, team-oriented, results-driven, and innovative. We previously reported on leading practices and implementation steps for mergers and organizational transformations that can help agencies transform their cultures so that they are more results-oriented, customer- focused, and collaborative. The leading practices and implementation steps listed in table 2 were built on the lessons learned from large private and public sector organizational mergers, acquisitions, and transformations. These leading practices state that organizations should ensure that top leadership drives the transformation by defining and articulating a succinct and compelling reason for change. Doing so helps employees and stakeholders understand the expected outcomes of the transformation and engender not only their cooperation, but also their ownership of the outcomes. In addition, our leading practices state that organizations should establish a coherent mission and integrated strategic goals by adopting our leading practices for results-oriented strategic planning. Lastly, our leading practices state the organizations should include implementation goals and a timeline for achieving the transformation. By demonstrating progress toward these goals, the organization builds momentum and keeps employees excited about the opportunities change brings and helps to ensure the transformation’s successful completion. The incorporation of these leading practices in its organizational strategy to better articulate how the department will achieve the outcomes that generally advance a collaborative culture across DOD—as section 911 of the NDAA required—would better position DOD to transform and meet its mission. ODCMO did not collaborate with key stakeholders on the development of the organizational strategy. Specifically, as of November 2017, ODCMO officials had not collaborated with or obtained input from the Secretary of Defense on the development of DOD’s organizational strategy. The Acting DCMO noted that the Secretary of Defense has multiple competing priorities related to reorganizing the department, such as creating a separate CMO position required in the NDAA for Fiscal Year 2017, as well as other reform initiatives. In addition, ODCMO officials told us that they did not collaborate with other stakeholders, such as the military departments and defense agencies, on the development of the organizational strategy. According to a draft memorandum from the Acting DCMO to the Deputy Secretary of Defense, the Acting DCMO plans to recommend that the Deputy Secretary of Defense coordinate the review and approval of the organizational strategy with stakeholders such as the Chairman of the Joint Chiefs of Staff, the Director of Cost Assessment and Program Evaluation, and DOD’s General Counsel. However, the memorandum did not specify other stakeholders, such as the military departments, the combatant commands, and defense agencies. ODCMO officials stated that their office plans to coordinate the review and approval of the strategy with other stakeholders, such as the military departments and defense agencies. However, as of November 2017, the officials had not provided documentation, such as a revised memorandum, showing specific plans to do so. Section 911 of the NDAA for Fiscal Year 2017 states that the Secretary of Defense should formulate and issue an organizational strategy that identifies the critical objectives and other organizational outputs for the department that span multiple functional boundaries and would benefit from the use of cross-functional teams. In addition, the act states that the organizational strategy should, among other things, improve the management of relationships and processes involving the Office of the Secretary of Defense, the Joint Staff, the combatant commands, the military departments, and the defense agencies with regard to such objectives and outputs. Our leading practices for collaboration state that when defining and articulating a common outcome, where appropriate, agencies should include stakeholders. In doing so, agencies can better address their interests and expectations and gain their support in achieving the objectives of the collaboration. Without obtaining key stakeholder input on the development of the organizational strategy, such as from the Secretary of Defense, military departments, the combatant commands, and defense agencies, DOD may not be well positioned to issue an organizational strategy that reflects the Secretary of Defense’s objectives and improves collaboration across the department. In August 2017, the Secretary of Defense issued a memorandum authorizing a cross-functional team to address challenges with personnel vetting and background investigation programs within DOD. Although the memorandum refers to section 951 of the NDAA for Fiscal Year 2017, which requires DOD to develop a plan to transfer responsibility for conducting DOD personnel background investigations to the Defense Security Service, ODCMO officials told us that the cross-functional team reviewing personnel vetting was established pursuant to section 911 requirements, as the team will report directly to the Secretary’s office, among other things. Therefore, this team is considered a Secretary of Defense-empowered cross-functional team. The memorandum notes that a backlog of background investigations affects DOD’s mission readiness, critical programs, and operations. According to the memorandum, this cross-functional team will conduct a full review of current personnel vetting processes to identify a redesigned process for DOD’s security, suitability and fitness, and credential vetting. The cross-functional team’s objectives are to develop options and recommendations to mitigate shortcomings, ensure necessary resourcing, and transform the personnel vetting enterprise. An ODCMO official told us that DOD had selected an interim leader for the team. ODCMO officials developed draft guidance for Secretary of Defense- empowered cross-functional teams. The draft guidance fully addresses six and partially addresses one of the section 911 required statutory elements. We also found that the draft guidance fully addresses five leading practices, partially addresses two leading practices, and does not address one leading practice for effective cross-functional teams. Table 3 shows our assessment of the extent to which DOD’s draft guidance meets required statutory elements. The draft cross-functional team guidance briefly describes the characteristics of a cross-functional team and highlights the team’s direct reporting line to the Secretary of Defense, the team’s delegated authorities, and team leader and member selection. The guidance also states expectations for cross-functional team members’ dedication to the team and for leaders of functional components to support their participating staff. Further, DOD’s draft guidance discusses the role of the teams in addressing complex, enterprise-wide issues, and discusses training for and operations of the cross-functional teams. The guidance additionally describes DOD’s commitment to collaboration and integration across the department. Finally, we found that the draft guidance partially addresses the required statutory element of identifying key practices on leadership, organizational practice, collaboration or functioning of cross- functional teams. The draft guidance discusses key practices for senior leaders on the functioning of cross-functional teams, but we found that it does not identify any practices on leadership, organizational practice, or collaboration. We also found that DOD’s draft guidance for cross-functional teams could more fully incorporate leading practices for cross-functional teams, which are similar to those identified by the McKinsey & Company contracted study and the ODCMO’s internal study as well as leading practices for interagency collaboration that we previously identified. Figure 2 shows our assessment of the extent to which DOD’s draft cross-functional team guidance incorporates our leading practices for effective cross-functional teams. We found that the draft guidance fully incorporates five of the leading practices for effective cross-functional teams: well-defined team structure, autonomy, senior management support, committed cross-functional team members, and well-defined team goals. In addition, the draft guidance partially addresses the leading practice for open and regular communication, as it discusses that teams will update the Secretary of Defense and senior staff at regular staff meetings to reflect on progress and seek feedback. The draft guidance, however, does not address information sharing and communication within the cross-functional team. Also, the draft guidance partially addresses the leading practice for empowered cross-functional team leaders by indicating that team leaders should report directly to the Secretary of Defense, select team members, and seek feedback from other federal agencies. Further, the guidance states that cross-functional team leaders will contribute to the performance evaluations of their team members. The guidance states that the Secretary of Defense will select the team leaders, but does not elaborate on what qualities the team leader should possess. Finally, the draft guidance does not address the leading practice for an inclusive team environment. For example, the draft guidance does not contain any reference to developing a unified team culture and trust among team members. ODCMO officials told us that they anticipate the Secretary of Defense reviewing and approving this guidance, including a detailed terms of reference that addresses information on mechanics of team operations and guidance for each team. However, without initial guidance that fully addresses the required statutory elements in section 911 of the NDAA for Fiscal Year 2017 and incorporates leading practices, DOD’s cross- functional teams may not be able to consistently and effectively approach the Secretary of Defense’s strategic objectives or further promote a collaborative culture within the department. As of October 2017, the ODCMO developed a draft training curriculum on cross-functional teams for presidential appointees, but this curriculum does not address all statutory requirements. Furthermore, as of February 2018, 22 individuals have been nominated by the President, confirmed by the Senate, and appointed to positions within the Office of the Secretary of Defense, but none have received training required by section 911. Section 911 of the NDAA for Fiscal Year 2017 requires that, within 3 months of the appointment of an individual to a position in the Office of the Secretary of Defense appointable by and with the advice and consent of the Senate, the individual complete a course of instruction in leadership, modern organizational practice, collaboration, and the operation of cross-functional teams. The training requirement may be waived by the President upon a request by the Secretary of Defense if the Secretary of Defense determines in writing that the individual possesses, through training and experience, the skill and knowledge otherwise to be provided through a course of instruction. ODCMO officials stated that they intend to recommend that the Secretary of Defense seek such a waiver; however, this requirement had not been waived for any appointees as of November 2017. In addition, according to an ODCMO official, DOD has not developed criteria for determining who would be eligible for such a waiver and on what basis. We found that the draft curriculum addresses only one of four required elements in section 911 of the NDAA for Fiscal Year 2017. Specifically, the draft curriculum addresses the required statutory element for training on the operation of cross-functional teams by including information on elements of successful teams and when to use them. It does not, however, incorporate the required statutory elements for leadership, modern organizational practice, or collaboration. According to the Acting DCMO, these appointees do not need this type of training because they are already experts in their field, have considerable leadership experience, and have likely already received this type of training. However, our leading practices of a well-designed training program note that it is important for agencies to consider the need for continuous and lifelong learning, recognizing that learning is an investment in success rather than a cost to be minimized. In addition, our leading practices state that a core characteristic of a strategic training and development process is leadership commitment, meaning that agency leaders consistently demonstrate that they support and value continuous learning and set the expectation that effective training and development will improve individual and organizational performance. Further, as organizations are typically resistant to change and need top leadership to drive a successful organizational transformation, ensuring that senior officials receive this training will be important for DOD’s overall organizational transformation to succeed in driving a more collaborative culture. Without the provision of training for top leadership within the Office of the Secretary of Defense that includes the required elements in section 911 of the NDAA for Fiscal Year 2017 or developing criteria for obtaining a waiver from providing the training, DOD may have difficulty implementing its new organizational strategy as top leadership commitment is a key element of an organizational transformation. We found that DOD has developed a draft training curriculum for cross- functional team members and their supervisors that addresses required statutory elements, including the element focused on collaboration. This training has not been provided since no team members have been named for the one Secretary of Defense-empowered cross-functional team to address challenges with personnel vetting and background investigation programs within DOD. Section 911 of the NDAA for Fiscal Year 2017 requires that team members and their supervisors of Secretary- empowered cross-functional teams receive training in elements of successful cross-functional teams, including teamwork, collaboration, conflict resolution, and in appropriately representing the views and expertise of their functional components. Table 4 summarizes the requirements of section 911 of the NDAA for Fiscal Year 2017 and shows our assessment of the draft training curriculum against these required statutory elements. According to ODCMO officials, this training should take place soon after team members have been announced. In addition, ODCMO officials stated that they considered having an expert from another federal agency lead the training, but were prepared to conduct the training themselves if that expert was unavailable. Congress has been encouraging DOD to undertake transformative organizational change and improve collaboration and more effectively accomplish its missions across its military departments and functional organizations. While ODCMO officials drafted an organizational strategy that includes the two required statutory elements, the strategy does not address how the department will achieve several outcomes that advance a collaborative culture in the department, as required under section 911 of the NDAA for Fiscal Year 2017. A revised strategy that addresses how the department will achieve these outcomes and is consistent with our leading practices for mergers and organizational transformations would better position DOD to further a culture within the department that is collaborative, team oriented, results driven, and innovative. DOD could also address three other areas to improve the department’s collaborative efforts. First, OCMO officials need to collaborate with key stakeholders across the department—such as the Secretary of Defense, military departments, the combatant commands, and defense agencies— to strengthen the organizational strategy and ensure a more successful implementation. Without this stakeholder input, the organizational strategy may meet resistance and not result in the desired organizational change. Second, DOD’s guidance for cross-functional teams is critical to their consistent and effective implementation across the department. This guidance would also help ensure that such teams are provided with the leadership support and resources, among other things, to address the Secretary of Defense’s strategic objectives and further promote collaboration across the department. Third, without training for presidential appointees to positions within the Office of the Secretary of Defense that includes leadership, modern organizational practice, collaboration, and the operation of cross-functional teams or developing criteria for who could receive a waiver for this training and on what basis, DOD may have difficulty aligning the perspective of these leaders to most effectively bring about change when implementing its new organizational strategy. We are making a total of four recommendations to the Secretary of Defense and the Chief Management Officer (CMO). The Secretary of Defense should ensure that: The CMO, in its revisions to the draft organizational strategy, address how the department will promote and achieve a collaborative culture, as required under section 911 of the NDAA for Fiscal Year 2017. The CMO could accomplish this by incorporating our leading practices on mergers and organizational transformations. (Recommendation 1) The CMO obtain stakeholder input on the development of the organizational strategy from key stakeholders, including the Secretary of Defense, the military departments, the combatant commands, and defense agencies. (Recommendation 2) The CMO fully address all requirements in section 911 of the NDAA for Fiscal Year 2017 and incorporate leading practices for effective cross- functional teams in guidance on Secretary of Defense-empowered cross- functional teams. (Recommendation 3) The CMO either: (a) provide training for presidentially-appointed, Senate- confirmed individuals in the Office of the Secretary of Defense that includes the required elements—leadership, modern organizational practice, and collaboration—in section 911 of the NDAA for Fiscal Year 2017, or (b) develop criteria for obtaining a waiver and have the Secretary of Defense request such a waiver from the President for these required elements if the individual possesses—through training and experience— the skill and knowledge otherwise to be provided through a course of instruction. (Recommendation 4) We provided a draft of this report to DOD for review and comment. In written comments, DOD concurred with our recommendations. DOD also provided technical comments, which we incorporated where appropriate. DOD’s comments are reprinted in their entirety in appendix III. We initially made our recommendations to the DCMO; however, because section 910 of the NDAA for Fiscal Year 2018 disestablished the position of DCMO on February 1, 2018 and established the position of CMO, we have updated our recommendations to be directed to the CMO. In response to our first recommendation, DOD emphasized the importance of collaboration across the department in pursuing DOD’s goals. In response to our second recommendation, DOD stated that finalizing the organizational strategy has been dependent on finalizing the National Defense Strategy and the Agency Strategic Plan. DOD also mentioned the reform teams established by the Deputy Secretary of Defense being aligned with strategic guidance. While DOD’s efforts to establish these reform teams are notable, as we discussed in our report, these reform teams do not meet the requirements for cross-functional teams established pursuant to section 911 of the NDAA for Fiscal Year 2017. Finally, DOD concurred with our third and fourth recommendations and stated that criteria for waiving training for presidentially-appointed, Senate-confirmed individuals will be completed and appropriate waivers submitted to the President for key personnel by March 30, 2018. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and DOD’s Chief Management Officer. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Section 911 of the National Defense Authorization Act for Fiscal Year 2017 requires the Secretary of Defense to take several actions. Table 5 below summarizes some of these requirements, the due date, and the date completed. We identified leading practices for effective cross-functional teams and compared the Department of Defense’s (DOD) steps to establish cross- functional teams against these leading practices. To identify the leading practices, we reviewed literature as well as five case studies of cross- functional teams. In addition, we selected six academic and practitioner experts to interview based on their publications or research, prior testimony before the Senate Armed Services Committee on the implementation of cross-functional teams at DOD, and recommendations from DOD officials. We identified eight broad categories of leading practices associated with effective cross-functional teams: (1) open and regular communication, (2) well-defined team goals, (3) inclusive team environment, (4) senior management support, (5) well-defined team structure, (6) autonomy, (7) committed cross-functional team members, and (8) an empowered cross-functional team leader. To identify what is known from published research about factors contributing to effective cross-functional teams, we conducted a literature search among relevant articles published from January 1990 through September 2017. We conducted a search for relevant peer-reviewed articles in 19 databases, including JSTOR, Academic OneFile, and ProQuest. Key terms included various combinations of “cross-functional team,” “best practice,” “characteristics,” “effective,” and “success.” From all database sources, we identified 46 relevant articles. We first reviewed the abstracts for each of these articles for relevancy in identifying contributing factors related to effective cross-functional teams. For the 17 articles that we found relevant and based on empirical research, we reviewed the full article for methodological rigor. GAO social scientists read and assessed each study, using a standardized data collection instrument. The assessment focused on information such as the population examined, the research design and data sources used, and methods of data analysis. The assessment also focused on the quality of the data used in the studies as reported by the researchers, any limitations of data sources for the purposes for which they were used, and inconsistencies in reporting study results. A second GAO social scientist reviewed each completed data collection instrument to verify the accuracy of the information included. We determined that the studies were sufficiently sound to support their results and conclusions. We excluded articles that lacked enough information about their methodologies for us to evaluate them. We then reviewed the citations and literature reviews of the relevant articles for additional sources. After including these articles and excluding others, 14 articles remained, covering cross-functional teams in both the private and public sectors. We took several additional steps to identify leading practices. First, we reviewed five case studies developed by subject-matter experts on cross- functional teams and interagency task forces employing similar collaboration tactics for national security issues. We reviewed these studies for academic rigor and determined that we could use them to inform our leading practice development. Second, we reviewed three relevant congressional testimonies from a Senate Armed Services Committee hearing in June 2016 about the use of cross-functional teams for improving strategic integration within DOD and incorporated them as well into the identification of leading practices. Third, we interviewed six subject-matter experts on cross-functional teams, utilizing a semi- structured set of questions, and used their responses to inform our cross- functional team leading practices. These experts include current and former government officials involved with cross-functional teams and academic researchers, who are listed below. Honorable Michael B. Donley—Former Secretary of the Air Force from 2008 to 2013, Dr. Amy Edmondson—Novartis Professor of Leadership and Management, Harvard Business School, Chris Fussell—Managing Partner at the McChrystal Group, former Navy SEAL and aide-de-camp to General Stanley McChrystal, Dr. Christopher J. Lamb—Distinguished Research Fellow, Center for Strategic Research in the Institute of National Strategic Studies, National Defense University, Honorable James R. Locher III—Former President and CEO, Project on National Security Reform, and Dr. Jeffrey Polzer—UPS Foundation Professor of Human Resource Administration, Harvard Business School. We documented our interviews with the selected subject-matter experts in a record of interview. To determine appropriate subject-matter experts to interview, we received recommendations from the Senate Armed Services committee and DOD officials, and identified subject-matter experts who testified before Congress on the topic of cross-functional teams. We also solicited names of other cross-functional team experts during our initial subject-matter expert interviews. Additionally, we examined the top business programs and research institutes at universities in the country identified in the top five rankings by U.S. News & World Report and identified researchers with expertise in cross- functional teams. Finally, we identified subject-matter experts through reviewing the Academy of Management’s Annual Meeting program from 2014 to 2016. The experts identified from this search were based in the United States and had papers in the program relating to cross-functional teams. We conducted a content analysis of cross-functional team practices identified in our literature review, the case studies, the congressional testimonies, and the subject-matter expert interviews. To do so, team members first reviewed: the results sections from the scholarly articles, the texts of the case studies, the transcripts of the testimonies, and the records of interview from the subject-matter interviews in order to identify characteristics of effective cross-functional teams. Then the team members independently reviewed the characteristics to identify themes. They subsequently compared the themes and developed a series of conceptual categories to be used as a coding structure for the content analysis. To conduct the content analysis of all identified characteristics, two analysts independently assigned each identified characteristic from the sources to one or more categories and sub-categories. Then, the team members met to compare their categorization decisions and to discuss the differences. Any disagreements regarding the categorizations of the characteristics were discussed and reconciled. The team members then tabulated the number of characteristics in each category and sub- category and reached agreement on the final set of categories and sub- categories. We assessed the outcome of our content analysis by comparing leading practices we identified to the contractor and internal DOD studies, as well as to our key considerations for implementing interagency collaborative mechanisms. In addition to the contact named above, Tina Won Sherman (Assistant Director), Tracy Barnes, Leslie Bharadwaja, Arkelga Braxton, Adelle Dantzler, David Dornisch, Jessica Du, Michael Holland, Amie Lesser, Ned Malone, Judy McCloskey, Sheila Miller, Richard Powelson, Terry Richardson, Ron Schwenn, Jared Sippel, Pam Snedden, Sarah Veale, and Richard Zarrella made key contributions to this report.", "summary": "DOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for Fiscal Year 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives which span multiple functional boundaries and that would benefit from the use of cross-functional teams. Additionally, DOD is to establish cross-functional teams to support this strategy. The NDAA also included a provision for GAO to assess DOD's actions in response to section 911. This report evaluates the extent to which DOD, in accordance with statutory requirements and leading practices, has (1) developed and issued an organizational strategy, (2) established Secretary of Defense-empowered cross-functional teams, and (3) provided associated training for Office of the Secretary of Defense leaders. GAO analyzed DOD's draft organizational strategy, draft guidance on establishing cross-functional teams, and draft training curriculum. GAO also interviewed DOD officials and subject-matter experts and identified leading practices for effective cross-functional teams. The Department of Defense (DOD) has implemented some of the statutory requirements outlined in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017 to address organizational challenges, but could do more to promote department-wide collaboration, as required under the NDAA. Specifically, DOD: Drafted an organizational strategy that includes the two required statutory elements, but does not outline how DOD will advance a more collaborative culture, as required by statute. Incorporating GAO's leading practices on mergers and organizational transformations, such as setting goals, would help DOD better advance a collaborative culture. Plans to coordinate review of the organizational strategy with some DOD offices, but has not followed GAO's leading practices for collaboration—to coordinate with key stakeholders, such as the Secretary of Defense and the military departments—in drafting the strategy. Without obtaining key stakeholder input, DOD may not be well positioned to improve collaboration across the department. Established one cross-functional team to address the backlog on security clearances and developed draft guidance for cross-functional teams that addresses six of seven required statutory elements and incorporates five of eight leading practices that GAO has identified for effective cross-functional teams (see figure). Fully incorporating all statutory elements and leading practices will help the teams consistently and effectively address DOD's strategic objectives. Developed a draft training curriculum for Presidential appointees in the Office of the Secretary of Defense. However, the curriculum addresses only one of four required statutory elements, and has not been provided to appointees. In addition, although the statute allows a waiver for this training, DOD has not developed criteria for such a waiver. Providing training for these officials or ensuring that appropriate criteria are used to waive training will improve DOD's ability to implement its new organizational strategy. GAO is making four recommendations to DOD, including revising its organizational strategy, collaborating with key stakeholders on the development of its organizational strategy, revising cross-functional team guidance, and providing training. DOD concurred with GAO's recommendations.", "document_type": "gao"}
{"report": "NRFU is a field-based operation that the Bureau administers following the self-response period so that it can (1) determine the occupancy status of individual non-responsive housing units and (2) enumerate them. In most instances, the Bureau typically allows up to six enumeration attempts for each nonresponsive housing unit, or case. If the Bureau is unable to enumerate the housing unit in the field, it may have to impute attributes of the household based on the demographic characteristics of surrounding housing units as well as administrative records. Within the test site in Providence County, Rhode Island, the Bureau set up an area census office to administer field operations. Figure 1 provides an overview of the managerial hierarchy of the area census office. The area census office manager oversees day-to-day operations within the office and acts as a liaison with the Bureau’s New York Regional Census Center, which is a Bureau regional office with jurisdiction over the Providence area census office. Census field managers are to monitor operational progress and performance indicators to understand any areas of concern and shift resources as needed within the test site. Census field supervisors are to act as front-line supervisors for individual performance and payroll processes and receive procedural questions from enumerators, who conduct the count. The Bureau has another operation—Group Quarters—to enumerate those living or staying in a group facility that provides housing or services. Such facilities can include skilled nursing facilities, college and university student housing, and correctional facilities. Within the Group Quarters enumeration, the Bureau also enumerates places such as soup kitchens, homeless shelters, and other service-based enumeration facilities. Prior to Group Quarters enumeration in the field, the Bureau attempts to establish the facilities’ approximate population count and preferred enumeration method through the Advance Contact operation. These facilities can choose among methods including paper listing, where the facility provides a roster of residents as of census day to the Bureau, and in-person enumeration, where a team of enumerators count residents. For the 2020 cycle, the Bureau is also adding an “eResponse” option, tested on a small scale in 2016, whereby facility administrators can electronically submit enumeration data at a date of their choosing within operational time frames. The Bureau’s testing of the peak operations that we observed during the 2018 Census Test was intended to test collection of census data from those either not responding themselves via paper, telephone, or over the Internet or those living in group quarters. Prior to the start of NRFU during the 2018 test, roughly 45 percent of anticipated housing units in the test area of Providence County, Rhode Island, self-responded, leaving more than 140,000 remaining housing units to be attempted by NRFU itself, which took place between May 9 and July 31, 2018. The Bureau conducted a test of its Group Quarters enumeration from July 25 through August 24, 2018, including service-based enumeration. Both portions of Group Quarters fieldwork were preceded by the Advance Contact activity. Dates for the peak operations we observed during the 2018 test are listed in table 1. The Bureau’s operational plans for this phase of the fieldwork for the 2018 test incorporated two innovation areas that the Bureau hopes will produce savings for 2020. Reengineered field operations. For most of NRFU during the 2018 test, the Bureau relied on automated data collection methods, including a system-based, automated process for assigning work to enumerators, a smartphone-based application for collecting enumeration data in the field, and system-generated supervisory alerts. Use of administrative records. To help reduce costly NRFU visits during the 2018 test, the Bureau reviewed and, where appropriate, applied administrative records—information already provided to the government as it administers other programs, such as Social Security, the Selective Service, or the Special Supplemental Nutrition Program for Women, Infants, and Children—to determine the occupancy status of housing units and thus remove vacant housing units from the NRFU workload, as well as to provide population counts of households not responding. The Bureau also tested multiple operational features for the first time this decennial cycle under full census-like production conditions in 2018: NRFU Closeout. During the 2018 test, the Bureau tested how best to relax certain business rules and enumeration procedures late in the NRFU operation so that it can enumerate persistently non-responsive housing units. Examples of procedural modifications include increasing the maximum allowable number of enumeration attempts for each housing unit and manually assigning cases to the highest- performing enumerators. Office-Based Group Quarters Advance Contact. In the 2010 Census, the Bureau sent enumerator crews in person to each facility in advance of enumeration to establish the facility’s preferred method of enumeration and to obtain an approximate population count. In the 2018 Census Test, the Bureau implemented a new method for 2020 that instead involved clerical staff contacting facilities by telephone and updating the group quarters address list and enumeration information remotely to reduce expenses associated with field visits for its enumerator crews. The Bureau began the last phase of NRFU data collection in the 2018 test without having yet determined the procedures it would use for that critical phase. Bureau planning documentation from February 2018 described a late-operation “closeout” phase of NRFU that would attempt to resolve cases that had not yet responded. However, we found that the Bureau had not determined the procedural modifications this phase would involve, either in terms of rules enumerators followed or business rules for how cases were to be assigned. By late May, nearly 3 weeks into the operation, the Bureau issued a set of closeout procedures to census areas where most cases had either been completed or where at least four of the six allowable enumeration attempt day assignments had been made. The Bureau also placed a priority on having high-performing enumerators—in terms of their ability to complete cases—available to work these cases during this phase of the NRFU testing. Table 2 summarizes the chronology for when the Bureau implemented and documented procedural changes governing the transition from early to late-NRFU data collection, as well as the nature of those changes. In late June 2018, the Bureau began testing the third phase of NRFU data collection, what it referred to as the “final attempt” phase, with officials citing a high incidence of non-interviews during prior phases as the reason. However, the Bureau had also begun this phase’s data collection before it had established the procedural modifications it would be using. The modifications were intended to further increase the chances of enumerators completing cases in the field, such as by removing the limit on the number of attempts enumerators could make at each remaining case before NRFU ended. Standards for Internal Control in the Federal Government states that agencies should implement control activities by, for example, documenting policies. However, the Bureau did not determine procedures for the final attempt phase until after testing for this phase of NRFU had begun. Enumerators and census field supervisors thus began working closeout and final attempt cases without a standardized set of test procedures. Without determining the procedural changes the Bureau would be testing—or the business rules guiding when to make those changes—the Bureau was not well positioned to collect data to assess the alternatives it used during the test to inform planning for 2020. Bureau officials shared with us that they believed their automated case assignment approach is most effective during initial data collection but that it is less effective at targeting the toughest cases to resolve late in NRFU data collection. Yet, in part because the Bureau had not established when the transition from automated to manual case management would occur—or the business rules for determining when—some of the highest-performing enumerators were unavailable to receive assignments when the Bureau needed to begin the final attempt phase, according to the area census office manager. By not establishing the scope and timing of procedural changes for late-NRFU data collection in 2020, the Bureau may not be in a position to efficiently shift from its automated assignment approach to a manual one at the right time and position its most effective enumerators to receive assignments when needed. In November 2018, the Bureau provided a draft contact strategy for NRFU in 2020 that included an outline of a multi-phase strategy for late- NRFU data collection. By including multiple phases of (1) shifting away from a fully-automated case assignment process and (2) relaxing management controls to complete as much casework as possible in areas with continued high non-response rates, this strategy appears to follow what the Bureau ultimately implemented during the 2018 test. It will be important, however, for the Bureau to determine the business rules for procedural changes and their timing in advance so that it can maximize the value of NRFU in reducing the number of housing units that have to be imputed for the 2020 Census. Census field supervisors were not integrated into casework management. As described in the Bureau’s training and operational planning documents, census field supervisors were to be the primary points of contact in fielding and addressing enumerator questions. Census field managers—the next step above census field supervisors— were to focus their efforts on monitoring progress in completing the caseload, reviewing cases flagged by enumerators as problematic in one of a small number of pre-defined ways (e.g., dangerous addresses), and resolving significant performance issues. Among field supervisors’ key responsibilities, according to the Bureau’s plan for NRFU, were providing guidance to help enumerators understand procedural matters and to offer coaching and problem-solving support to enumerators who may need it. They also led enumerator training prior to the beginning of NRFU and generally were to train their specific team of enumerators. However, census field managers and enumerators indicated that census field supervisors were often not the primary actors involved in fielding and addressing enumerator questions. Instead, enumerators and census field managers reported having direct contact with each other over procedural questions. Moreover, seven of the nine enumerators participating in the Bureau’s operational debrief focus group who responded said they thought finding someone who could answer their questions was either difficult or very difficult. We found that census field supervisors went underutilized in part because the Bureau did not recruit and position them to assume front-line supervising and coaching responsibilities. As outlined in training documentation, the Bureau vested supervisory review authority (for special cases, such as resident refusals and language barrier issues) within census field managers, the area census office manager, clerks, and office operations supervisors instead of census field supervisors. Additionally, as part of the Bureau’s reengineered field operations for 2020, census field supervisors are given automated tools to monitor enumerators, and enumerators we observed told us that they generally did not interact in person with their supervisors apart from training. We believe that the combination of these factors resulted in census field supervisors having limited exposure to NRFU casework and any problematic situations enumerators might encounter. Officials also told us that the Bureau did not screen census field supervisors for their supervisory or coaching skillsets, though officials noted that this has been the practice in prior censuses, too. Rather, they hired census field supervisors based on their scores on the online enumerator training and because they reported an interest in supervising. Additionally, census field supervisors lacked access to certain data streams from the test that could have helped them answer or troubleshoot enumerator questions. According to two census field managers, the Bureau did not regularly share consolidated records of procedural changes with census field supervisors. Information technology (IT) and census field managers also noted that the Bureau did not share or compare observations between the census field supervisor hotline and the decennial IT hotline, even though enumerators could potentially call either or both with technical or procedural questions. As a result, without sharing how best to respond to similar questions across support lines, enumerators could receive different answers for related questions depending on which hotline they contacted. Standards for Internal Control in the Federal Government states that agency management should demonstrate a commitment to recruit, develop, and retain competent individuals. Management should establish expectations for competence in key roles and should consider the level of assigned responsibility and delegated authority when establishing expectations. Yet, the role the Bureau envisioned census field supervisors having was not aligned with the authority supervisors were given, the skills for which the Bureau hired them, or the access to information that they had for the 2018 test. When we raised this issue related to using census field supervisors, Bureau officials agreed and cited feedback they had received that census field managers felt inundated with the combination of the volume of supervisory review cases that flowed to them and with troubleshooting day-to-day enumerator questions. In October 2018, the Bureau provided documentation to us proposing a set of questions that they could use in screening applicants for the census field supervisor position to identify supervisory skills. Officials also said they were still evaluating options for granting census field supervisors more supervisory review authority. As the Bureau continues to learn from the 2018 test as part of its planning for 2020, it will be important to align census field supervisor roles with their authorities, skills, and information flows so that the Bureau does not underutilize a key portion of its field management chain. Doing so could also lessen the operational burden on higher-level census field managers. Enumerators did not receive training to address mid-operation issues. Prior to the start of 2018 NRFU testing, the Bureau trained enumerators with a series of online training modules and assessments and one full day of in-person training facilitated by census field supervisors. The training included modules on data stewardship requirements, payroll responsibilities, and procedural directions for conducting respondent interviews. However, officials acknowledged that when the Bureau implemented its closeout and final attempt phases of NRFU, it did not provide standardized training to enumerators on the rollout of procedural changes. Five enumerators we observed during these stages said they relied on informal communications from their census field supervisors or census field managers for guidance. The initial practice had been for enumerators to receive daily assignments and follow pre-specified case sequencing and routing based on the Bureau’s automated system. During the final attempt phase, enumerators were given discretion over the sequencing, routing, and number of attempts to make for cases that could be manually assigned, yet they were not given standardized training on how to handle this shift. During our field observations, some enumerators we spoke with said they were uncertain about core procedures. For example, enumerators were not consistently aware that they had some discretion in large multi-unit settings to deviate from the assigned sequence of their cases provided by the automated system. Enumerators we observed and spoke to were also not always clear on how to flag within their field enumeration application the commonly occurring cases with confusing address markings and numberings. For example, enumerators had the option of selecting a case outcome of “missing unit designation,” but they were not always sure whether this selection would capture the nuances of what they were seeing on the ground or how it differed from other selection options. Standards for Control in the Federal Government states that agencies should demonstrate a commitment to competence by, for example, tailoring training based on employee needs and helping personnel adapt to an evolving environment. Targeted informational training would help the Bureau ensure that staff understand mid-operation procedural changes, and the training could be an opportunity for the Bureau to address commonly-observed and persistent implementation issues that may be arising. By developing brief, targeted mid-operation training, either as formal modules, guidance, or other standardized job aids, such as “frequently asked questions” worksheets, the Bureau could better position itself to react nimbly to enumerator feedback. We have previously reported challenges the Bureau faces with its field work in other locations, such as connecting to the Internet during testing of address canvassing in rural West Virginia in 2017 and dealing with language barriers and other circumstances in unincorporated communities in southern Texas or with migrant and seasonal farmworkers in southern California during the 2000 Census. All challenges are not universal to all locations. Given that some of the enumeration challenges enumerators encountered in 2018 NRFU testing might not occur everywhere, and that some other areas of the country will have their own types of challenges, locally- or regionally-specific training or guidance may better address some needs. By relying solely on pre-NRFU training, the Bureau risks having little opportunity to course-correct with enumerators who may not have absorbed all of the training and are experiencing difficulty completing interviews or not collecting quality data. We observed and discussed with Bureau officials in real time several other implementation issues that occurred during the 2018 test. Bureau officials acknowledged these issues and, as of September 2018, were assessing them and developing mitigation strategies as part of their test evaluation process. These issues include: Training certification. Census field managers estimated that roughly 100 enumerators were unable to transmit their final test scores because the Bureau’s online learning management system had an erroneous setting. According to Bureau officials, this problem delayed the start of unsupervised work for these otherwise-qualified enumerators by an average of 2 days per enumerator and resulted in the attrition of some who were able to quickly find other work. Bureau officials told us they have fixed the system setting and are considering an alternative means to certify training, such as by having the option of trainees taking and verifying their final assessment as part of their final capstone day of classroom training. According to Bureau officials, development of this backup strategy will begin in December 2018. Assigning cases manually in batches. During the 2018 test, the Bureau’s automated case management system was not configured for non-Headquarters staff to manually assign multiple cases to an enumerator at once. Rather, according to officials, census field managers were faced with having to manually assign thousands of cases individually during latter stages of NRFU. According to field management, this problem presented an unexpected burden on them, delayed assignments of the hardest-to-count cases, and contributed to high- performing enumerators not receiving work timely and in some cases for days in a row. Officials told us that, as a work-around, the Bureau shifted responsibility for assigning cases to a headquarters official with access rights in the system to assign large numbers of cases at once. Bureau officials acknowledge the unsustainability of this work-around if needed at a national level and the importance of resolving this before the 2020 Census. As of October 2018, Bureau officials showed us system screenshots of how census field managers would be able to manually assign batches of cases and indicated that this functionality would be ready for the 2020 Census. Monitoring operational progress. The Bureau’s reporting on its progress in completing the NRFU casework for the 2018 test emphasized a process-oriented measure that overstated the extent to which the NRFU efforts were resulting in completed workload. In planning documentation, the Bureau listed the outcomes of interview attempts that it considered complete and thus not in need of further enumeration assignments. These outcomes—such as a full interview of the household or confirmation of a housing unit being vacant or nonexistent—would also result directly in reduction in the number of incomplete cases needing to have some of their missing data imputed by the Bureau later. Yet the daily Bureau progress report and “dashboard” the Bureau provided us for the 2018 test, which decennial leadership also identified as their primary monitoring report, did not reflect these pre-planned definitions of completed workload. Rather, as officials acknowledged, it included cases that the Bureau had unsuccessfully attempted to enumerate the maximum number of allowable times for the initial phase of NRFU being tested, even though those cases could still—and did— receive additional attempts during later phases of NRFU. Officials noted that the measure reported could be helpful during early stages of the operation in determining whether enough employees had been hired, or whether case assignments were being worked quickly enough. Figure 2 demonstrates the gap that arose during 2018 NRFU test implementation between the reported progress measure and the number of cases actually being completed. The totals reflected in the Bureau’s reported measure include those that either have to be re-worked in the field during the final attempt phase as discussed or have their data imputed after fieldwork had ended. By contrast, an outcome-based measure of operational progress, like the one the Bureau designed, would capture only those cases where the Bureau had completed enumeration of the nonresponding housing units and thus be a more accurate representation of the operation’s status. Bureau officials acknowledged the need to maintain measures that focus on process as well as outcomes—such as avoiding having to impute data for cases after field work—when measuring progress completing NRFU. They said that managers in the field and in Bureau headquarters had access to alternative measures and reports that more closely identified outcomes. The officials noted that the reporting mechanism expected to be used in 2020 was not fully available in time for the beginning of NRFU testing in 2018, so the reporting format and measures will likely differ. In addition, in October 2018, the Bureau provided a draft dashboard for 2020 that included greater detail on the number of cases that could still require work to enumerate. Such detail could help assist with determining when to transition to the final-attempt phase of the operation to address cases without sufficient information yet collected. Integrating key systems settings. At the beginning of NRFU test implementation, the Bureau’s case assignment and case sequencing systems were operating as if they were on time zones 4 hours apart. Bureau officials said that this resulted in enumerators receiving mismatched case assignment times, which hampered early NRFU production, and census field supervisors having to process erroneous “work not started” supervisory alerts. Bureau officials said they addressed the problem within the first week of the operation and that they would ensure that future updates and key settings would be coordinated across systems. Tracking employees and equipment. The Bureau used two different sets of employee identification numbers to track their payroll status and use of Bureau-issued equipment (e.g., smart phones), respectively, without cross-walking them. According to census field managers, this resulted in extra work when trying to monitor changes in enumerators’ employment statuses and whether enumerators had returned their equipment to the Bureau. The managers noted that office staff had to spend extra time comparing different lists of staff, while one manager developed a spreadsheet listing all staff by their two different identification numbers. Bureau officials said they considered this a priority issue to be resolved during final systems development for 2020 and had already developed a fix within their case management system so that the cross- walk between the two systems would be integrated within their management system. This would eliminate the need for manually reconciling the differing identification numbers. Having more enumerators work weekends. Until the latter stages of 2018 NRFU testing, the Bureau assigned cases to enumerators based on the alignment of the Bureau’s estimated probability of finding respondents at home at certain times and enumerator-reported work availability. Bureau officials told us that Saturdays are generally one of the best days to find a household member home to respond to the census. However, during the test, our analysis showed that Saturdays had the second- fewest number of enumerators assigned to cases of any day of the week. Bureau officials said that they would review whether the incentive structure for working on Saturdays should be altered and that they would examine ways to ensure that more enumerators are working on those days. This includes exploring the feasibility of hiring and assigning work to applicants who may only want to work weekends and being clearer with enumerators about what the expected peak enumeration hours are. Increasing electronic completion rates for Group Quarters. The Bureau hopes to reduce field costs for Group Quarters (such as skilled nursing homes, college and university student housing, and correctional facilities) by, for the first time, encouraging facilities to self-enumerate electronically, when possible. As previously discussed, clerical staff first establish facility enumeration preferences during Group Quarters Advance Contact, and enumeration (either in person or otherwise) takes place afterward. During the 2018 test, the Bureau reported that only 25 of the 75 facilities that selected the “eResponse” enumeration option during Advance Contact submitted responses by the enumeration deadline. As of September 2018, Bureau officials said they were still evaluating potential causes of the low response rate by Group Quarters facilities but noted that issues with the required format for the submission of response files may have prevented some submissions. Bureau officials also acknowledged the need to conduct more active follow-up with these facilities during the eResponse period to ensure a full and accurate count of Group Quarters facilities. We reported to the Bureau during the 2015 Census Test that information enumerators were typing into their case notes did not appear to be systematically used by their managers. We also reported that, during the 2016 Census Test, the Bureau was not reviewing case notes written by enumerators providing respondent information on better times-of-day for future NRFU visits to their housing unit, and enumerators did not always have this note-taking feature available. During the 2018 test, enumerators were trained to take notes and, when appropriate, identify special cases that would later require supervisory review. We also observed that enumerators appeared to be consulting case notes from prior enumerator visits when planning NRFU visits to the same housing unit. Enumerators can use markings within their automated interview instrument to describe certain types of cases (e.g., hearing barriers and dangerous situations), which the automated system would then route to receive supervisory review. Enumerators could select other case outcomes that the automated system would apply predetermined business rules to either reassign the cases (e.g., refusal, no one home) or treat them as completed (verified vacant or not a housing unit). However, we identified multiple scenarios in which enumerators had described cases in their case notes but for which the enumerators had not selected the corresponding case flag for the situation that would have resulted automatically in a supervisory review. One census field manager described discovering several dozen cases that had been inactive where enumerators had written case notes describing language barriers encountered but had not specifically marked the flag within the device for “language barrier.” Because these cases thus were not triggered for supervisory review, they were eligible to be reassigned by the Bureau’s standard automated system. As a result, the Bureau was not controlling for the requisite language skills in assigning the cases for subsequent enumeration attempts. The Bureau’s use of automated systems to apply business rules to efficiently manage field casework for 2020—including identifying which cases receive supervisory review—relies critically on field staff understanding how to reflect what they are seeing on the ground within the choices provided to them with which to flag cases in their interview device. The Bureau’s use of remote management as part of reengineered field operations also relies on enumerators knowing when and how to report issues to their supervisors. We observed multiple field scenarios that called these conditions into question, however. For example, enumerators we observed during NRFU told us that they indicated address listing issues in their case notes, such as if the unit designation was missing or incorrectly marked. Yet, these enumerators did not know how to flag such cases in their interview instrument to trigger supervisory review. According to Bureau officials, this type of address listing issue turned out to be a broadly experienced challenge within the test area. Additionally, during Group Quarters, an enumerator we observed received supplemental information about the number of residents at a neighboring facility after that facility had been enumerated. The enumerator made note of this discrepancy and included the original facility’s identifying information but was uncertain about how, if at all, to alert the supervisor about the discrepancy. Moreover, we saw little evidence that census field supervisors or managers were systematically reviewing case notes for the purpose of identifying either cases not being marked properly or for which the selected flags may not have been fully describing the case characteristics. For example, a census field manager confirmed that case notes recorded at Group Quarters facilities that were enumerated would not be reviewed during clerical processing, leaving the possibility—such as we observed—that if enumerators relied on case notes to communicate information about the accuracy of data collected, it would not be acted on. Bureau officials told us that reviewing all case notes could require more staff time than budgeted for, and changing the automation process to selectively present unflagged cases for supervisory review could necessitate requirements changes to systems whose development is already pressed for time. Standards for Internal Control in the Federal Government states that agencies should use quality information by, for example, processing reliable information to help it make informed decisions. Bureau enumerators can record useful local knowledge about their cases with their choice of case type flags and within their descriptive case notes. While the Bureau has anticipated a broad range of types of cases for enumerators to select from when documenting their casework, enumerators we observed did not uniformly understand those options, and the descriptors did not fully anticipate what enumerators were encountering. Improving training and guidance to field staff on the intended use of case notes and on alternative ways to communicate their concerns about cases, such as flags for different types of cases, can help ensure the Bureau has reliable data on the cases during its field operations relying on automated interviewing instruments. During the 2015 Census Test, we reported that certain technical and procedural problems that enumerators were encountering in the field were going unreported and that enumerators did not always know who to contact for assistance. We further noted that the Bureau was not systematically assessing or tracking the extent of these issues during testing, and we recommended that it enable such capture of information by training enumerators on where to record issues and whom to contact. The Bureau agreed with our recommendation. During the 2018 test, the Bureau had both an information technology (IT) hotline and a census-field-supervisor hotline established for technical and procedural questions, respectively. Yet, enumerators we observed told us they did not always report to their support lines the technical issues that they were easily able to resolve by, for example, turning their devices on and off to reset. This lack of reporting kept the Bureau from getting information on commonly-occurring challenges that might be useful real- time feedback in the testing environment. Moreover, a Bureau IT manager noted that the Bureau does not formally review and share observations and troubleshooting notes from IT hotline and census field supervisor hotline calls. Because enumerators may call either or both hotlines when having difficulty operating their Bureau-issued smart phone, operators of these hotlines could be unaware of the prevalence of or solutions to a given problem if the Bureau does not monitor troubleshooting information across the two operational silos. For the Bureau to be informed on any additional training needs or other operational decisions for 2020, it will need to continue to expand its efforts in collecting information on enumerator-reported problems per our 2015 recommendation. Depending on the size of a Group Quarters facility (e.g., skilled nursing facility, college and university student housing), the Bureau can use varying sizes of enumerator crews to conduct an onsite count. During the 2010 Census, we observed overstaffing during the service-based enumeration (e.g., homeless shelters and soup kitchens) portion of Group Quarters. While determining staffing levels at these facilities can be challenging, such overstaffing can lead to poor productivity and unnecessarily high labor costs. We recommended that the Bureau determine and address the factors that led to this overstaffing prior to 2020. The Bureau agreed with our recommendation. However, the Bureau has faced challenges determining the right staffing ratios in light of complications with the Advance Contact phase of Group Quarters. As previously noted, the Bureau used this phase to establish facilities’ enumeration method preferences. For the 2018 test, most Group Quarters facilities selected the facility-provided paper listing and the eResponse enumeration options. Therefore, the Bureau allocated a large share of its enumerator and census field supervisor workforce in the test area to the 44 known service-based enumeration facilities, which were restricted in terms of the enumeration options they could select and tended to select in-person enumeration. However, only 11 of these facilities responded to initial inquiries, so the Bureau had less work than anticipated for its enumerator crews. At multiple sites we observed in the test area, enumerators appeared either idle or underutilized. Moreover, several of the Group Quarters facilities we observed had changed their initial choice of enumeration method on the day of enumeration. Enumerator crews thus ran the risk of either being overstaffed (in the case of switching to a facility-provided paper listing) or understaffed (in the case of switching to an in-person enumeration). The Bureau’s Advance Contact activities have a potential benefit—if the Bureau can get accurate information on the method of enumeration and approximate population within a facility ahead of time, Bureau managers and enumerator crews can more proactively allocate resources and prepare for the count. Bureau officials said they are still assessing outcomes of Advance Contact to see if these gains were realized and may have completed the assessment by as early as January 2019. Doing so will help the Bureau determine appropriate staffing sizes and thus address our prior recommendation. According to preliminary data from the 2018 Census Test, the Bureau experienced similarly high rates of cases coded as non-interviews as it did during its last major field test of NRFU in 2016. Non-interviews are cases where enumerators collect no data or insufficient data from households either because enumerators made the maximum number of visits without a successful interview, or because of special circumstances like language barriers or dangerous situations. When this happens, the Bureau may have to impute the census data for the case, such as whether the housing unit is vacant or not, the population counts of the households, or demographic characteristics of their residents. In January 2017, we reported that, during the 2016 Census Test, the Bureau incurred what it considered high non-interview rates (31 and 22 percent across the two test sites, respectively, as the Bureau preliminarily reported at the time), and we recommended that the Bureau determine the causes of these rates. Using the same method to calculate the rate of non-interviews for the test as in 2016, the 2018 Census Test had similarly high non-interview rates— 33 percent of all NRFU cases. Bureau officials said they are still examining causes of these elevated non-interview rates and whether final attempts helped to mitigate the non-interview rate and will report out on what they learn as part of their comprehensive assessment of the test, planned for December 2018. A draft of the Bureau’s revised contact strategy for NRFU, provided in November 2018, indicates that as part of enumerator training in 2020 the Bureau will need to incorporate messaging that emphasizes the importance of obtaining sufficient data from interview attempts. Officials noted that any interim lessons learned from this assessment process would inform updates to the field enumeration contact strategies for 2020. Enumerators are directed to try and complete a NRFU case by interviewing a proxy for a household respondent, like a neighbor, after multiple failed attempts have been made to contact someone in the household for that case. We previously observed in the 2016 Census Test that enumerators did not seem to understand the procedures for conducting these interviews and, as a result, underutilized the interviewing method. In our January 2017 report, we therefore recommended that, as part of determining the causes of its non-interview rate, the Bureau revise and test any needed changes to proxy procedures and associated training. The Bureau agreed with our recommendation and subsequently developed automated supervisory performance alerts for census field supervisors and census field managers that would inform them when an enumerator was not following prompts to conduct proxy interviews for eligible cases. However, in implementing proxy interview procedures for the 2018 Census Test, the Bureau experienced a technical glitch resulting in some confusion among some enumerators and their supervisors about related procedures. Early in NRFU data collection for the test, a programming error within the field enumeration application was prompting enumerators to make more than the allowable three attempts to interview a proxy respondent. The Bureau reported promptly implementing a technical fix to this issue; yet, enumerators we observed reported receiving varying guidance from their supervisors on whether to abide by the erroneous prompts. While some of these enumerators appeared to understand the importance of attempting proxy interviews, some did not appear to understand Bureau guidance that enumerators should make no more than three attempts to interview a proxy respondent, and some appeared conditioned to follow the erroneous prompts. Proxy interviews can be a substantial portion of completed interviews during the census. In 2018 NRFU testing, interviews of proxy respondents accounted for 27 percent of all successful interview-based enumerations of occupied housing units—compared to 24 percent during the 2010 Census and 9 percent during the 2016 Census Test. Given the role that proxy interviews play in completing census data collection, it will be important for the Bureau to fully implement our recommendation so that enumerators are properly pursuing and conducting these interviews. Initial visits to property managers of multi-unit residences can help the Bureau identify vacant and occupied housing units before sending enumerators to individual units within the facilities. We have previously reported that property managers can also be a helpful source of information on respondents who are not at home, thereby making subsequent follow-up visits to individual units more productive. During the 2016 Census Test, we observed that enumerators were uncertain of how to handle individual cases within a multi-unit once they were unsuccessful in contacting a property manager initially. As a result, we recommended in January 2017 that the Bureau revise and test procedural and training modifications as needed to aid enumerators and their supervisors in these cases. The Bureau agreed with this recommendation and indicated that the evaluations of the 2018 test would inform its strategies for 2020. However, we observed a similar issue during the 2018 Census Test in that enumerators were unclear on what, if any, proxies to attempt if they were unsuccessful in finding the listed property manager. Additionally, we observed multiple enumerators leave voicemails with their contact information—not a central number—for the listed property manager, but it was unclear how these voicemails would produce a successful interview because, later, the automated system could reassign other enumerators to visit the manager. When we raised this concern with Bureau officials, they acknowledged that they need to continue to refine procedures for handling initial property manager visits for 2020. Previously, during the 2016 Census Test, we observed that enumerators were unable to re-open closed non-interview cases even if they happened upon the respondent in question soon after and nearby. We noted this inefficiency, since these cases would get re-assigned later, and in January 2017, we recommended that the Bureau revise and test procedures that would grant flexibility to enumerators to access cases in these circumstances. The Bureau agreed with our recommendation. For the 2018 Census Test, the Bureau provided a list in the field enumeration application of the cases that had been worked by the enumerator that day but that had not been submitted for processing or reassignment. Training for enumerators described this enumeration option, and enumerators were authorized to access these cases when needed, but not all enumerators we observed were consistently aware of how to do so. Enumerators we spoke with cited uncertainty over how to access these cases and whether enumerators were allowed to do so as considerations. Continuing to review the procedures and guidance to enumerators on this flexibility for completing interviews, consistent with our prior recommendation, will help the Bureau make better use of it in 2020. As we reported in 2017, the Bureau previously modified how it would treat some of the households that did not respond to the 2020 Census and that the Bureau’s use of administrative records had determined to be not occupied. The Bureau’s earlier testing had determined that the Bureau should require two—instead of just one—notices from the United States Postal Service that mail could not be delivered to these households before removing their addresses from the NRFU workload. After we provided a draft of this report to the Department of Commerce to obtain agency comments, Bureau officials provided us with findings from an evaluation of the 2018 Census Test. In the evaluation, Bureau officials observed that there were households for which they had received multiple notices from the United States Postal Service that mail was undeliverable but that Bureau enumerators recorded as occupied. While Bureau officials believe, based on their follow-up research, that these addresses may likely be vacant or not housing units, they are concerned about possible undercounting from not enumerating people who may be at these addresses. As of November 2018, the Bureau was considering adding one physical visit for each of these cases. Bureau officials said they are continuing to analyze these evaluation results and expect to document and include changes within its final operational plan for the 2020 Census due in January 2019. The 2018 Census Test offered the Bureau its last opportunity to test key procedures, management approaches, and systems under decennial-like conditions prior to the 2020 Census. As the Bureau studies the results of its NRFU and Group Quarters testing to inform 2020, it will be important that it address key program management issues that arose during implementation of the test. Namely, by not establishing the intended procedural changes for late-NRFU data collection ahead of time, the Bureau risked not getting the most out of NRFU to minimize the number of housing units having to have their information imputed by the Bureau later. Additionally, by not aligning the skills, responsibilities, and information flows for census field supervisors, the Bureau limited their role in support of enumerators within the reengineered field operation. The Bureau also lacks mid-operation training or guidance, which, if implemented in a targeted, localized manner, could further help enumerators navigate procedural modifications and any commonly- encountered problems when enumerating. Finally, without enumerators understanding how to use case notes and flags for various types of cases in their enumeration device and to report enumeration challenges to supervisors and managers, the Bureau may be unaware of field work issues that could affect the efficiency of its operations and the quality of its data. We provided near real-time feedback to the Bureau across a range of test implementation issues. Some, such as those related to staffing ratios for the Group Quarters operation, build on long-standing implementation issues that, if addressed, can contribute to the efficiency and effectiveness of 2020 field operations. Others, like not having NRFU progress measures that provide true indications of completed workload, are issues specific to this test that the Bureau is assessing as part of its 2018 Census Test evaluations. It will be important for the Bureau to prioritize its mitigation strategies for these implementation issues so that it can maximize readiness for the 2020 Census. We are making four recommendations to the Department of Commerce and the Census Bureau: The Secretary of Commerce should ensure that the Director of the Census Bureau determines in advance of Non-Response Follow-Up what the procedural changes will be for the last phases of its data collection and what the business rules will be for determining when to begin those phases, which cases to assign, and how to assign them. (Recommendation 1) The Secretary of Commerce should ensure that the Director of the Census Bureau identifies and implements changes to align census field supervisor screening, authorities, and information flows to allow greater use of the census field supervisor position to provide supervisory support to enumerators. (Recommendation 2) The Secretary of Commerce should ensure that the Director of the Census Bureau enables area census offices to prepare targeted, mid- operation training or guidance as needed to address procedural changes or implementation issues encountered locally during Non-Response Follow-Up. (Recommendation 3) The Secretary of Commerce should ensure that the Director of the Census Bureau improves training and guidance to field staff on the intended use of case notes and flags, as well as on alternative ways to alert supervisors and managers when case characteristics are not readily captured by those flags. (Recommendation 4) We provided a draft of this report to the Secretary of Commerce. In its written comments, reproduced in appendix II, the Department of Commerce agreed with our findings and recommendations and said it would develop an action plan to address them. The Census Bureau also provided technical comments and an update on their evaluation of the test, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Commerce, the Undersecretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and the appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) how peak field operations were implemented during the 2018 Census Test; and (2) the extent to which implementation issues raised in prior 2020 Census tests have been addressed, and what actions the Census Bureau (Bureau) is taking to address them. To address these objectives, we reviewed 2018 Census Test and 2020 Census operational planning and training documentation. We also reviewed our prior reports and documentation on prior census testing operations. Non-Response Follow-Up (NRFU) operations took place from May 8 through July 31, 2018, while Group Quarters took place from July 25, 2018 through August 24, 2018, with the service-based enumeration portion taking place July 25, 2018 through July 27, 2018. To review the Bureau’s test implementation and mitigation strategies for previously-identified implementation issues for peak operations, we visited Providence, Rhode Island, multiple times between May and August 2018 to observe enumerators, census field supervisors, and management operations. NRFU visits took place between mid-May and late-July 2018, while we also conducted two iterations of visits of Group Quarters in late July and early-August 2018. These multiple iterations both across and within operations enabled us to see how, if at all, implementation of procedures varied over time. It also enabled us to get direct feedback from Bureau field managers on how various phases of test operations were proceeding. These visits consisted of non- generalizable observations of field enumeration and office clerical work, as well as interviews with local managers. For each of these visits, we developed data collection instruments to structure our interviews and to cover topics that were pertinent to the given phase of the operation we were observing. We also observed debrief sessions with multiple levels of the Bureau’s field workforce following the field work. To translate our observations into actionable feedback for the Bureau, we shared high-level observations in near real-time to Bureau headquarters management overseeing the operations so that the Bureau could mitigate and adapt to known issues in a timely manner. We also discussed any mitigation or evaluation strategies developed in response to our observations with the cognizant Bureau headquarters officials. For objective two specifically, we reviewed Bureau test planning documentation and our work from prior tests to examine how, if at all, the Bureau planned to address known implementation issues. To gain insight into how implementation was proceeding when we were not directly observing test implementation, we received daily management progress reports from the Bureau throughout the NRFU operation testing that included information on the total number of NRFU cases, the final outcomes of each case, and the number of cases that the Bureau reported as completed for each day of the NRFU operation. We also received Periodic Management Reports that summarized high level outcomes of both the NRFU and Group Quarters workload. To fully understand the source of the Bureau’s daily progress reports, we requested and received all transactional data collected during NRFU production. We reconciled case totals and outcomes with the final numbers in the NRFU progress reports and then used these data to analyze the Bureau’s progress during NRFU production. We also received and analyzed Bureau payroll data on enumerator hours worked during NRFU operations. Specifically, we assessed the number of enumerators working each day, the number of enumerator’ hours paid each day, and the days of the week that were worked the most by enumerators. We found the Bureau’s transactional and payroll data sources to be sufficiently reliable for our reporting purposes. We conducted this performance audit from April to December of 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Ty Mitchell (Assistant Director), Devin Braun, Karen Cassidy, Joseph Fread, Robert Gebhart, Krista Loose, Kathleen Padulchick, Lisa Pearson, Kayla Robinson, Robert Robinson, and Cynthia Saunders made significant contributions to this report.", "summary": "The cost of the decennial census has steadily increased over the past several decades, with self-response rates declining over the same period. The largest and costliest operation that the Bureau undertakes, NRFU is the Bureau's attempt to enumerate households not initially self-responding to the census. GAO was asked to review NRFU implementation during the 2018 Census Test as well as the Bureau's overall readiness for peak field operations, which cover the actual enumeration of residents. This report examines (1) how peak field operations, including NRFU, were implemented during the test; and (2) the extent to which prior test implementation issues have been addressed. GAO reviewed test planning and training documentation, as well as production and payroll data. At the test site, GAO observed and interviewed enumerators, field supervisors, and managers conducting peak operations. In preparation for the 2020 census, the Census Bureau (Bureau) set out to enumerate over 140,000 housing units during the 2018 Census Test at a site in Providence County, Rhode Island. The 2018 Census Test marked the Bureau's last chance to test enumeration procedures for peak field operations under census-like conditions before 2020. Implementation of this test identified the following concerns: The Bureau experienced operational issues during implementation of the Non-Response Follow-Up (NRFU) as part of the 2018 Census Test. For example, the Bureau had not finalized procedures for data collection during late phases of NRFU (e.g., after multiple attempts to interview had been made) until after the work had already started. As a result, enumerators and their supervisors did not have standardized procedures during the test, which made it difficult to evaluate the effectiveness of the test procedures. GAO also observed a range of other NRFU implementation issues during the test, such as the Bureau's use of progress reporting that overstates the number of NRFU cases not needing any additional fieldwork and the Bureau having fewer of its enumerators work Saturdays, which can be among the most productive interview days. The Bureau is taking steps to assess and mitigate these and other issues that GAO identified. The Bureau's field workforce was not fully prepared to face all of the enumeration challenges that arose during the test. For instance, the Bureau expects census field supervisors to provide front-line coaching to enumerators but did not screen these employees to ensure they had the needed skills. Moreover, it did not provide them with the authorities and information that would have helped them serve that role. As a result, we believe that supervisors did not have the casework expertise, information, or authority to help enumerators with procedural questions, and higher-level census field managers ended up providing direct support to enumerators. While the Bureau provided extensive online and in-person training to enumerators prior to NRFU fieldwork for the 2018 Census Test, the Bureau lacked any standardized form of mid-operation training or guidance as new procedures were implemented. GAO observed that during the test some enumerators continued to have questions and were uncertain about procedures. Developing targeted, location-specific training could help ensure that, in 2020, enumerators receive the guidance they need to collect census data consistently and in accordance with NRFU procedures. The Bureau has made progress addressing prior test implementation issues but still faces challenges. For example, the Bureau improved its collection of enumerator case notes, which reflect real-time knowledge gained during enumeration. However, enumerators did not always report cases using flags built in to their interviewing device that would benefit from supervisory review, such as for language barriers. Moreover, supervisors were not systematically analyzing case notes to identify cases not flagged properly. As a result, critical data on fieldwork challenges were not being communicated effectively to those who could analyze and use them. GAO recommends that the Bureau (1) determine procedures for late-NRFU data collection; (2) align census field supervisor screening, authorities, and information flows; (3) prepare for targeted mid-operation training or guidance as needed; and (4) improve training on reporting cases that need supervisory attention and alternative ways to communicate these cases. The Department of Commerce agreed with GAO's findings and recommendations, and the Bureau provided technical comments that were incorporated as appropriate.", "document_type": "gao"}
{"report": "The Rehabilitation Act of 1973 (Rehabilitation Act), as amended by WIOA, authorizes a number of grant programs to support employment and independent living for persons with disabilities, including the State Vocational Rehabilitation Services program. This program is the primary federal government effort to help individuals with disabilities prepare for and obtain employment. An individual who is deemed eligible works with state VR agency staff to prepare an individualized plan for employment, which describes the employment goal and the specific services needed to achieve that goal. Education’s Rehabilitation Services Administration (RSA) awards funds to state VR agencies through the program to help individuals with disabilities engage in gainful employment. States must provide a 21.3 percent nonfederal match of these funds. In fiscal year 2016, total program funds for VR—including state match funds—were $3.81 billion. States, territories, and the District of Columbia generally designate a single agency to administer the program, although, depending on state law, states may designate more than one agency. Twenty-three states have two separate agencies, one that exclusively serves blind and visually impaired individuals (known as agencies for the blind) and another that serves individuals who are not blind or visually impaired (known as general agencies). Twenty-seven states, the District of Columbia, and the five territories have a single combined agency that serves both blind and visually impaired individuals and individuals with other types of impairments (known as combined agencies). In total, there are 79 state VR agencies. In 2014, WIOA amended the Rehabilitation Act to require state VR agencies to provide students with disabilities with pre-employment transition services. According to information Education provided with its regulations, WIOA emphasized the provision of services to students with disabilities to ensure that they have meaningful opportunities to receive training and other supports and services they need to achieve employment outcomes. WIOA requires states to make pre-employment transition services available statewide to all students with disabilities in need of such services, who are eligible or potentially eligible, regardless of whether a student has submitted an application for services from a state VR agency. In this context, students with disabilities include those with an individualized education program (IEP) for special education services through the school system, those receiving an accommodation for their disability, and others. In information provided with the regulations, Education stated that state VR agencies should work closely with school systems and others to identify these students. WIOA requires each state to reserve at least 15 percent of a state’s VR allotment for a fiscal year for pre-employment transition services for students with disabilities. If a state cannot use or match all of its VR funding, it relinquishes funds to the federal government and the state’s total award amount is then reduced. However, the state must still reserve 15 percent of what it did not relinquish for the provision of pre- employment transition services. WIOA established required activities under pre-employment transition services that states must make available to students with disabilities. Education has provided states with additional information about each of the activities (see table 1). After making the required pre-employment transition services available, if a state has funding remaining, WIOA lists nine other “authorized” activities that a state may implement. For example, in providing the authorized activities, states may, among other things, provide training to local VR and educational service providers; coordinate transition services with local educational agencies; and disseminate information about innovative, effective, and efficient approaches to achieve the goals (see appendix II for a full listing of authorized activities). Education’s guidance indicates that such authorized activities should improve the transition of students with disabilities from school to postsecondary education or an employment outcome and support the arrangement or provision of the required activities. WIOA also requires local offices of state VR agencies to conduct coordination responsibilities, which includes coordinating with state and local educational agencies to ensure the provision of pre-employment transition services. These can be conducted concurrently with the “required” activities, and states can use the reserved funds for them. Examples of coordination responsibilities that local offices of state VR agencies must undertake are attending meetings, when invited, about IEPs; and working with the local public workforce system and employers to develop work opportunities for students with disabilities. In support of this coordination and in recognition that VR and educational agencies both offer transition services to students, WIOA requires that VR agencies establish or update their interagency agreements with states educational agencies. Interagency agreements between the state VR and educational agencies are intended to describe the steps each agency will take to implement pre-employment transition services and determine the roles and responsibilities of each agency, including financial responsibilities and procedures for identifying students in need of pre- employment transition services. Following the passage of WIOA, Education, through its Rehabilitation Services Administration (RSA), issued regulations and guidance to implement pre-employment transition services requirements (see fig. 1). Education also provided technical assistance to state VR agencies through webinars, conference calls, and presentations at conferences. For example, Education presented information to state officials in a series of webinars about the new programmatic and financial processes and procedures related to pre-employment transition services just after the final regulations were issued in 2016. In addition, Education funded technical assistance centers to help state VR agencies and their partners answer questions and provide training about WIOA. Two of these centers are the Workforce Innovation Technical Assistance Center (WINTAC) and the National Technical Assistance Center on Transition (NTACT). Each center focuses its efforts on a specific set of issues: WINTAC on helping state VR agencies implement WIOA requirements, including pre- employment transition services; and NTACT on helping state VR and educational agencies improve outcomes for students receiving transition services. RSA is to conduct periodic monitoring visits to assess state VR agencies’ implementation of the VR program, including pre-employment transition services. RSA is to monitor states for compliance with the administrative, financial, and performance requirements of the program, as well as identify technical assistance needs at individual state VR agencies. According to Education officials, RSA plans to follow a 5-year monitoring cycle that began in fiscal year 2017 and will generally include monitoring visits to 10 states per year through fiscal year 2021. In fiscal year 2017, Education visited 14 VR agencies in 10 states, and in fiscal year 2018, Education plans to visit 15 VR agencies in 12 states. Most state VR agencies that responded to our survey reported expanding services for students with disabilities since WIOA’s enactment in July 2014 by either serving more students through pre-employment transition services or by initiating new or additional services. Most state VR agencies that responded to our survey reported that they provided the five required activities to more students with disabilities since WIOA’s enactment (see fig. 2). State VR agencies indicated in their survey responses that they had previously provided and continue to provide transition services to students who apply and are eligible for the VR program, and many of the activities were not entirely new to state VR agencies. Most agencies that responded to our survey reported providing each of the required activities to students with disabilities before the enactment of WIOA, while fewer reported initiating these services since enactment (see fig. 3). Of the five required activities, instruction in self-advocacy saw the biggest expansion during this time. In information provided with the regulations, Education described instruction in self-advocacy as, for example, classroom lessons in which students learn about their rights, responsibilities, and how to request accommodations or services and supports needed during transition. In written comments on our survey, 10 state VR agencies reported partnering with other organizations, such as universities or centers for independent living, to provide instruction in self- advocacy. One agency reported on our survey that it offers peer mentoring as an additional component of self-advocacy services, and another reported providing self-advocacy and mentoring for deaf-blind students by deaf-blind adults. In October 2016, based on views of an expert panel that we convened on autism spectrum disorders and transitioning youth, we reported that it is critically important that all transitioning youth, regardless of their level of disability, be given the opportunity to state their own preferences to the extent of their capabilities to reach their maximum independence. State VR agencies reported developing additional programming as a result of WIOA’s enactment, including expanding programs for more students, adding new opportunities and experiences, and creating new partnerships. Officials from all four of the state VR agencies we interviewed said they had programs in place prior to WIOA that offered activities similar to pre-employment transition services, but they have since expanded these services or created additional programs for students with disabilities. For example, an official we interviewed from the Idaho Division of Vocational Rehabilitation said the agency had previously worked to enroll students in the VR program prior to graduation, but has since begun developing new programming and instruction aimed at serving larger groups and providing other services, such as a paid work experience. An official from Maryland’s Division of Rehabilitation Services said many of the services they previously offered were during school hours, and students had limited access to these services if they wanted to stay in class. The agency has since added services after school and during the summer, such as opportunities for students to meet with employers, according to Maryland officials. Officials from the Illinois Department of Human Services, Division of Rehabilitation Services, said that while the agency had previously provided work-based learning experiences, it has since expanded the number of spots available for students in an existing program and created a new work-based learning program that is a collaboration between school districts, a community rehabilitation partner, and businesses. Providing new services with specific requirements to an expanded population has been a significant change, according to officials in one of the state VR agencies we interviewed and in all three of our discussion groups. For example, officials from Maryland’s Division of Rehabilitation Services said that, while they provided all five required activities before WIOA, they now provide the activities to a younger population and make the activities available statewide. State VR officials in all three of our discussion groups said that providing pre-employment transition services allows them to provide these services to more students with disabilities or at an earlier age, which will likely have positive effects on students’ transition from school to work. For example, officials in one discussion group noted that the provision of pre-employment transition services is increasing awareness, enhancing services, and increasing the likelihood that VR program outcomes will improve. In another discussion group, officials said their agencies had already seen benefits from pre- employment transition services and the services have raised students’ expectations for the types of jobs they might obtain. While 32 of the state VR agencies responding to our survey reported that they had identified all potentially eligible students, another 37 reported that they were currently in the process of identifying these students. State VR officials in all three of our discussion groups and who we interviewed in two of four state VR agencies said they have had challenges finding the population eligible for services. In written comments on our survey, one agency reported that while statewide information on students was not readily available, officials worked with the state educational agency to identify potentially eligible students, including more than 137,000 students with an IEP and an estimated 13,000 additional students that do not have an IEP. We previously reported on the difficulties state VR officials faced in obtaining data they could use to identify other youth with disabilities. Compared to combined and general agencies, more agencies for the blind reported in our survey that they did not provide the five required activities to more students with disabilities, and officials in some of these agencies said they can serve a much smaller population. For example, 57 percent (12 of 21) of agencies for the blind reported providing job exploration counseling to more students, compared to 83 percent (25 of 30) of combined agencies and 91 percent (20 of 22) of general agencies since WIOA enactment. Similarly, 67 percent (14 of 21) of agencies for the blind reported providing work-based learning experiences to more students, compared to 83 percent (25 of 30) for combined agencies and 86 percent (19 of 22) for general agencies. Officials in some of these agencies for the blind and from the National Council of State Agencies for the Blind (NCSAB) told us in interviews that agencies for the blind have far fewer potentially eligible students they could serve compared to other types of agencies. For example, officials we interviewed with Idaho’s Commission for the Blind and Visually Impaired said that Idaho has only 40 students being provided pre-employment transition services. In contrast, the Idaho Division of Vocational Rehabilitation reportedly provided at least one pre-employment transition service to approximately 700 students in a one-year period. The ability of agencies for the blind to serve more students may also be restricted because they are not able to provide pre-employment transition services to younger students in some cases, according to officials with NCSAB and Idaho’s Commission for the Blind and Visually Impaired. NCSAB officials told us that state VR agencies have traditionally provided VR services to youth who are blind or visually impaired at younger ages compared to general agencies that serve youth with other types of disabilities. The ages at which students may be provided pre-employment transition services varied by agency, based on responses to our survey, but the most common age range reported across all types of agencies was 14 to 21 years old. According to Education officials, as a result of WIOA, two agencies in the same state must agree on a common age range during which students can be provided pre-employment transition services. Most agencies in states with two VR agencies responding to our survey (35 of 44) reported agreeing on an age range for receiving pre- employment transition services. NCSAB officials said that in some cases agencies for the blind have had to raise the minimum age at which they would begin providing services to students. Officials with Idaho’s Commission for the Blind and Visually Impaired, for example, said they would prefer to begin services at younger ages because their agency has the resources to do so. However, officials with Idaho’s Division of Vocational Rehabilitation said they do not have the resources to provide pre-employment transition services to the relatively large number of students with disabilities at a younger age. State VR agencies reported taking a range of actions to build their administrative capacity to implement pre-employment transition services. These actions included building staff capacity and expanding contracts with services providers. Building staff capacity. Most state VR agencies reported building staff capacity to facilitate and carry out the requirements of pre- employment transition services by: Establishing a new specialist position. More than half (45 of 74) of VR agencies reported in our survey establishing at least one new transition specialist position specifically for pre-employment transition services. For example, the Idaho Division of Vocational Rehabilitation reported establishing this position and officials told us that they hired a specialist who was previously the transition coordinator for the state’s educational agency. In written comments on our survey, a respondent from another state commented that their agency has hired 20 pre-employment transition services specialists to provide the five required activities. Officials we interviewed from Maryland’s Division of Rehabilitation Services said they added six salaried positions dedicated to providing pre-employment transition services. Another agency responding to our survey reported dedicating a supervisor and 15 percent of their counselors exclusively to this purpose. Training staff. All 74 state VR agencies reported providing training on pre-employment transition services to their staff. For example, in written comments, one agency reported developing training tools for its counselors, such as answers to frequently asked questions, posting guidance on its intranet, and having WINTAC provide training. Expanding contracts and agreements with service providers. In addition to being provided by state VR agency staff, pre-employment services can be offered through a variety of methods and service providers, and many state VR agencies reported entering into new or additional contracts with service providers or expanding contracts with existing providers. Pre-employment transition services can be provided directly by state VR agency staff or through agreements with third parties, such as community rehabilitation programs, independent living agencies, public colleges and universities, and school districts. In our survey, 62 of 74 agencies reported entering into new or additional contracts with third-party providers to provide pre- employment transition services. Officials we interviewed from three of four state VR agencies said they either established or expanded existing contracts and agreements. For example, officials from the Illinois Department of Human Service, Division of Rehabilitation Services told us that after the enactment of WIOA, they expanded arrangements with independent living centers and initiated a new program that provides students with work experiences. Agencies reported several examples of approaches using third parties: establishing contracts with community rehabilitation programs to partnering with independent living agencies to work with youth on entering into provider agreements with local workforce centers to assist with providing job preparation and a paid work experience, developing programs with public colleges and universities focused on financial literacy and self-advocacy, and contracting with individual school districts to deliver services in the school environment. Twenty-one of 56 states (50 states, 5 territories, and the District of Columbia) reported using the full amount of grant funds they reserved for pre-employment transition services for students with disabilities for fiscal year 2016, according to the most recent full year of data available from Education (see fig. 4). In aggregate, states reportedly expended approximately $357 million out of the approximately $465 million reserved (about $108 million less than the target) for fiscal year 2016. For fiscal year 2015, states reportedly expended approximately $324 million on pre-employment transition services out of the approximately $453 million reserved for that purpose (about $130 million less than the target). Results from our 2017 survey of state VR agencies revealed similar trends: Fewer than half the 74 agencies reported that they used at least 15 percent of their VR grant allotment each year. Thirty-two of the 74 agencies responding to our survey reported using the minimum required 15 percent of federal VR grant funds reserved for the provision of pre- employment transition services for fiscal years 2016 and 2017. For fiscal year 2015, 25 agencies reported using the required 15 percent minimum reserved funds. Officials we interviewed in two of four state VR agencies and officials in all three discussion groups explained that some of the services they generally provided to participants in the VR program are not allowable for the funds reserved for pre-employment transition services. These expenditures included transportation, tuition, and others associated with individualized services. For example, officials in Maryland’s Division of Rehabilitation Services told us that transportation costs for students to get to the place where the services are provided are not covered. VR agency officials in two of our discussion groups told us that assistive technology, such as hearing aids, could not be paid for with the 15 percent of funds reserved for pre-employment transition services. In another group, participants said that some expenditures, such as tuition or for the services of a job coach to help students with the most significant disabilities, could not be paid with reserved funds. In information provided with the regulations, Education stated that it does not have the statutory authority to allow these expenditures to be paid for with the funds reserved for pre-employment transition services and these services must be paid with other VR funds. When it promulgated its final regulations, Education noted that state VR agencies would experience challenges in using their funds because many of the services provided to students with disabilities prior to WIOA’s enactment would not qualify as pre-employment transition services. Education reviewed past expenditures for a subset of students and estimated that 82 percent of state VR agencies’ reported purchases for those students would not meet the statutory definition of pre-employment services under WIOA. Education concluded that states would have to reach a larger number of students with disabilities in order to meet the spending requirement and that state VR agencies would need to develop and implement aggressive strategies to expend these funds in these initial years of implementation. According to WINTAC officials, state VR agency officials are commonly unclear about what kinds of activities they can provide using the funds reserved for pre-employment transition services. For instance, they said that states must make required activities (e.g. work-based learning experiences and self-advocacy) available to all students with disabilities before providing authorized activities (e.g. model projects, partnerships), in accordance with WIOA. However, state officials have commonly interpreted that to mean that all students must actually receive the required activities before the agency can begin providing other activities, according to WINTAC officials. WINTAC officials explained that states may have been conducting authorized or coordination activities without knowing these activities could be paid for with the reserved funds. None of the state VR agency officials we interviewed said they had yet moved beyond providing required activities to providing authorized activities. Officials from two of the agencies we interviewed told us they were in the process of planning authorized activities. For example, officials with the Idaho Division of Vocational Rehabilitation said they were completing an assessment of their needs, which would help them plan authorized activities. Officials we interviewed from the other two agencies—the Idaho Commission for the Blind and Visually Impaired and the Illinois Division of Rehabilitation Services—said they did not have the resources to provide authorized activities or were unsure about how to properly transition from required to authorized activities under the current guidance. Education communicated with states on broad requirements but provided little detailed information directly to states on the allowable use of funds reserved for pre-employment transition services. Education provided information when it promulgated final regulations, in grant award notifications, on its website, and in presentations at conferences. In each of these formats, Education described activities on which states could not spend funds, but provided little detailed information on what expenditures are allowed. Regulations: Education’s final regulations restate many provisions in WIOA, including the prohibition on using any of the reserved funds for administrative costs. In responding to comments it received on its proposed regulations, Education provided examples of services that commenters requested would be considered pre-employment transition services, such as, postsecondary education, on-the-job supports, job coaching, travel expenses, and uniforms. In information provided with the regulations, Education explained that it had no statutory authority to expand or limit the pre-employment transition services listed in WIOA. Education stated that a state VR agency can allocate costs associated with staff time spent providing pre- employment transition services, including an employee’s salary and fringe benefits, to the funds reserved for pre-employment transition services. However, Education did not provide additional information on what specific types of expenditures states were permitted to spend funds on in providing pre-employment transition services as required by WIOA. Grant award notification: The notification that accompanies each state’s VR grant award lists the three sets of activities for which the reserved money can be used: required, authorized, and coordination; it lists each of the activities as they are listed in WIOA. It also discusses the prohibition on using any of the reserved funds for administrative costs. It does not list or describe what specific expenditures the reserved funds can be used for to undertake each of the listed activities. Education’s website: A list of frequently asked questions on Education’s website outlines the requirements of WIOA and explains that the reserved funds must only be used to provide pre-employment transition services as listed in WIOA. Similar to the regulations, the website explains that the total costs of an employee’s salary and fringe benefits may be allocated to the reserved funds if that employee is providing only pre-employment transition services to students with disabilities but does not include additional detail for any other expenditures. Presentation materials: In one set of presentation materials, Education provided an example of a potential allowable expenditure for one of the required activities, work-based learning. It did not include information on allowable expenditures for the other four required activities, or any of the nine authorized activities. In another set of presentation materials, Education provided examples of services for each of the five required pre-employment transition services activities. According to Education officials, these examples would be allowable expenditures. Education, however, provided the most detailed information through WINTAC. WINTAC’s website provided answers to some specific questions on the use of funds reserved for pre-employment transition services. In one set of frequently asked questions, WINTAC included a list of 28 questions with detailed answers, including what specific expenditures may be charged to the reserved funds. For example, based upon guidance issued by RSA, the website explains that reserved funds may be used to pay for auxiliary aids and services, such as interpreters, if they are directly related to one of the five required pre-employment transition services activities. However, the reserved funds may not be used to pay for the costs of foreign language interpreters because they are not an auxiliary aid or serve that is required due to the individual’s disability. WINTAC’s website also included answers provided by Education on 13 other frequently asked questions. Information included that reserved funds cannot be used to pay for the cost of an assessment to determine whether a student met the definition of a student with a disability; they can be used to pay for items required by an employer for work-based learning activities. Some state VR agencies we surveyed and those that participated in one of our three discussion groups said they would like more detailed information directly from Education. Seven survey respondents reported that they would like Education to provide answers to their specific questions. In one discussion group, participants noted that when states approach WINTAC with a new question, the technical assistance center sometimes needs to obtain the answer from Education. This process can be inefficient at times. In addition, the answer may not be broadly shared with all the states, limiting its benefit, whereas information issued directly from Education could help communicate the answer more efficiently and broadly. One survey respondent reported, for example, that guidance varied by source—training, Education’s RSA staff, or technical assistance center websites—and said that Education should provide all state VR agencies with the same information at the same time. According to standards for federal internal control, management should communicate externally through reporting lines so that external parties can help the entity achieve its objectives and address related risks. Management should also periodically evaluate its methods of communication so it has the appropriate tools to communicate quality information throughout and outside of the entity on a timely basis. Education officials said that during fiscal years 2015 and 2016, states were unclear about allowable expenditures using reserved funds, and that they plan to clarify guidance as they learn about the issues from states during their monitoring. According to Education officials, they respond to issues that need clarification and provide answers to questions as part of formal monitoring visits or through other communications with state agencies. Education officials said they expect to complete a round of monitoring visits to all states by the end of fiscal year 2021. However, an Education official said they have no timeframe for providing further information on allowable costs to states. With better information on timeframes for when this information will be provided, states would be able to better plan their use of the remaining funds reserved for pre- employment transition services. Most state VR agencies (61 of 74) that responded to our survey reported providing training on pre-employment transition services along with their state’s educational agency since WIOA’s enactment in 2014. Joint training may help coordination between state VR and educational agencies, as state VR officials participating in our discussion groups said that some educators were not familiar with pre-employment transition services. Similarly, an official we interviewed from Idaho’s state educational agency said it was common in the past for teachers and VR counselors not to know one another. Joint trainings provided to VR staff and teachers have improved these relationships, and teachers can invite VR counselors to students’ IEP meetings, the official said. Joint training includes staff presentations at conferences and participation in other training sessions. For example, officials we interviewed from the Idaho Division of Vocational Rehabilitation said their transition coordinator has given presentations to education directors around the state about changes resulting from WIOA and how the inclusion of pre-employment transition services can affect special education for the school districts. In written comments on our survey, one agency reported that it co-sponsors an annual conference with VR, special education, developmental services, and other public and private entities. During this conference, they plan how to improve services for students with disabilities. About one-third of state VR agencies (23 of 74) reported issuing joint guidance with their state’s educational agency, a recommended practice according to WINTAC. The other two-thirds of survey respondents reported that joint guidance was either in progress (27 of 74) or that they had not issued such guidance (23 of 74). Joint guidance can include written policies and procedures that are created by and provided to state VR and educational agency staff. For example, in written comments on our survey, one agency reported developing written policies and guidance for transition counselors that the state educational agency endorses and provides to special education staff. In Maryland, VR and special education officials told us that they issued guidance through jointly created materials on pre-employment transition services. Less than half the state VR agencies that responded to our survey (34 of 74) reported updating their interagency agreement with their state’s educational agency, which is intended to facilitate collaboration and coordination on delivery of pre-employment transition services. The majority of agencies reported that their agreement is either in progress (37 of 74) or not yet updated (3 of 74). These required agreements outline how VR agencies and schools will plan and coordinate service provision, provide for each agency’s responsibilities, including financial responsibilities, and provide for student outreach procedures, among other things. Discussion group participants and CSAVR representatives emphasized the value of completing their interagency agreements with the state educational agency. In one group, officials whose agencies had completed their agreements said they are essential for state VR agencies to provide services in schools. Participants in another discussion group explained that once they have a state-level agreement in place, they can discuss what services school districts need for students and then determine how to provide those services. According to state educational agency officials we interviewed, Individuals with Disabilities Education Act (IDEA) requirements are similar to requirements for pre-employment transition services, and they need to coordinate with VR officials at both the state and local levels to agree on each agency’s assigned tasks and expectations. These officials said state VR and educational agencies should coordinate funding to make services available where they are needed and to complement each other’s transition efforts. Illinois’s agreement, for example, specifies that the state educational agency is responsible for providing outreach, guidance, and coordination to local educational agencies regarding the provision of pre-employment transition services. According to the agreement, Illinois’s VR agency is responsible for providing pre-employment transition services, both directly and through cooperative agreements with local educational agencies, and for providing written information to the state educational agency regarding services available to students with disabilities. Officials we interviewed with CSAVR said state VR agencies that have made progress in developing their interagency agreements with state educational agencies tend to be more successful in implementing pre-employment transition services. According to Education officials, Education provides guidance and technical assistance on interagency agreements to states as part of Education’s monitoring or when asked by states. Education officials said they provide technical assistance during periodic monitoring visits, which are currently limited to about 10 states per year from fiscal years 2017- 2021; by helping state VR agencies develop policies and procedures; and by making sure pre-employment transition services are coordinated with the state educational agency and through interagency agreements. According to Education officials, there is no statutory provision authorizing Education to identify states that have not updated their interagency agreement. Education officials said they do not collect information from state VR agencies on the status of these agreements except when they conduct monitoring visits in specific states. In addition, Education officials said that when monitoring, they may meet with state educational agency partners to help them understand the new components of pre- employment transition services in an agreement, or they may refer the state agencies to WINTAC or NTACT resources. Providing assistance during monitoring may be helpful for some states. However, given that less than half of state VR agencies we surveyed reported updating and finalizing their agreements and Education officials say they will take another three years to complete this round of monitoring, additional action by Education may be needed to raise awareness among the remaining states about the importance of these agreements to help states coordinate services to students with disabilities. Additional action could include, for example, conducting earlier state outreach or monitoring to assess state progress on finalizing the interagency agreements and offering technical assistance when appropriate. However, Education officials said there is no requirement that state educational agencies provide pre-employment transition services to meet their obligations to IDEA-eligible students with disabilities under part B of the Individuals with Disabilities Education Act. As a result, WINTAC and participants in our discussion groups explained that it can be difficult to get state educational agencies to work with state VR agencies to update interagency agreements. Education officials said that WIOA requires state VR agencies to update these interagency agreements to include pre- employment transition services but they do not track their completion because states are not required to report when the agreements are finalized. Moreover, Education officials said they have heard from states that some reasons that interagency agreements are not specifically updated are that the agreements are written broadly enough so that they can remain in effect when there are additional changes to the law, the details of actual practices are rarely reflected in the high level of an interagency agreement, and that modifications to agreements are time- consuming and would not result in changes to the interagency coordination practice. Without an updated agreement between the state VR and educational agencies, efforts to collaborate on pre-employment transition services may be hindered. Officials with the National Technical Assistance Center on Transition (NTACT) told us that some of the state agencies for which they provided in-depth technical assistance were not working closely together. Officials from two of the three state educational agencies we interviewed said they viewed pre-employment transition services as primarily the responsibility of the VR agency. State VR officials in all three of our discussion groups said they have experienced coordination challenges, including difficulty determining each agency’s responsibilities for providing pre-employment transition services, obtaining data needed to identify and provide services to students, and determining which agency will pay for which services, among other challenges. Interagency agreements can help to address these types of issues. Federal internal controls recommend that management communicate with and obtain information to identify, analyze, and respond to risks related to achieving defined objectives, such as those that can arise from new laws and regulations. Moreover, we found in prior work that it is important to establish ways to operate across agency boundaries, with measures such as developing common terminology and fostering open lines of communication. A lack of collaboration between state VR and educational agencies increases the risk that some students will not successfully transition from school to post-school activities. In addition, our prior work has identified lack of collaboration among and between federal agencies and state and local governments as a challenge to effective grant implementation. Interagency agreements are intended to serve as a mechanism related to collaboration practices, which include defining a common outcome, establishing joint strategies, and agreeing on roles and responsibilities of each agency. By taking additional steps, such as discussing the benefits of finalizing interagency agreements, and reminding states of existing technical assistance resources pertaining to updating and finalizing interagency agreements, Education would help raise awareness about the importance of the agreements and be better positioned to help states efficiently and effectively coordinate services to students with disabilities. Most state VR agencies (63 of 74) that responded to our survey reported that additional assistance with identifying best practices would be useful to their agencies. Similarly, state VR officials in all three of our discussion groups spoke to the need for Education to develop and disseminate best practices to help states, for example, comply with program requirements. WIOA requires Education to highlight best state practices on pre-employment transition services. Best practices may also help states address the challenges they reported facing in implementing and administering pre-employment transition services for students with disabilities, such as (1) coordinating with state educational agencies, (2) using VR resources more efficiently and effectively to help states balance providing pre-employment services with the full VR program, and (3) collecting data on services provided, and (4) updating data tracking systems. Coordinating service delivery with state educational agencies. Over half (41 of 74) of state VR agencies reported in our survey that additional assistance on coordinating with state educational agencies would be useful for them. Similarly, officials from all three state educational agencies we interviewed said they would like additional assistance on interagency collaboration. Officials with NTACT told us that some of the state agencies for which they provided in-depth technical assistance were not working closely together. Officials from two of the three state educational agencies we interviewed said they viewed pre-employment transition services as primarily the responsibility of the VR agency. State VR officials in all three of our discussion groups said they have experienced coordination challenges, including difficulty determining each agency’s responsibilities for providing pre-employment transition services, obtaining data needed to identify and provide services to students, and determining which agency will pay for which services, among other challenges. An official we interviewed from the Idaho Department of Education said it would be helpful to have more clearly defined roles, obligations, and means of sharing data between the state-level agencies. In written responses to our survey, one respondent said having examples of highly successful collaborations between a state educational agency and state VR agencies would be helpful. According to Education’s guidance, a student’s transition from school to post-school activities is a shared responsibility and coordination and collaboration between the state VR and educational agencies is essential. However, according to information Education provided with the regulations, while some have sought clarification and additional guidance in this area, Education determined that decisions on agencies’ responsibilities must be made at the state level to allow states maximum flexibility allowed under the law. In the absence of more specific guidelines for how state agencies should collaborate, best practices from other states could provide helpful examples. Balancing pre-employment transition services with VR services. Several state VR agencies in both our written survey responses and in discussion groups noted that by increasing services mandated for pre-employment transition services for students, they have had to reduce VR services to adults, which has made it difficult to balance the two programs. In issuing its final regulations, Education acknowledged that reserving funds would decrease amounts available for the full VR program, resulting in a transfer of benefits from individuals historically served by VR to students with disabilities in need of transition services. According to state VR directors with the National Council of State Agencies for the Blind (NCSAB), agencies for the blind have had to restrict VR services while also not being able to use all of the funds reserved for pre-employment transition services for students with disabilities because VR services cannot be paid with reserved funds. Most state VR agencies that completed our survey (50 of 74) reported that balancing pre-employment transition services with other vocational rehabilitation services was moderately difficult, very difficult, or extremely difficult during federal fiscal year 2017. Collecting data. Data collection was one of the top challenges identified by state VR agencies in our survey, with 48 of 74 reporting that collecting data on the provision of pre-employment transition services was moderately difficult, very difficult, or extremely difficult during fiscal year 2017. Prior to WIOA, agencies collected and reported data only on individuals who had applied and enrolled in the VR program. For pre-employment transition services, agencies now collect data on who provided and received each of the five required activities, including for individuals who have not submitted a VR application. State VR officials in two of our three discussion groups said that they have experienced challenges collecting sensitive information (such as social security numbers) for minors and collecting data on individuals for group services. Officials in one of the three discussion groups also said that these problems are particularly significant when trying to collect information on potentially eligible students for whom they do not have open VR cases. These students could include all those with an IEP and those that receive accommodations in school based on their disability, among others. Updating data tracking systems. Updating data systems was also one of the top challenges reported in our survey, and was cited as an additional administrative burden by state VR officials in our discussion groups. Specifically, 53 of 74 state VR agencies reported that it was moderately difficult, very difficult, or extremely difficult to update tracking systems to collect and report financial and service data on pre-employment transition services during fiscal year 2017. According to a state VR agency official we interviewed, updating that state’s tracking system is difficult because data collected on pre-employment transition services—such as the type of service provider and how the service was provided—do not fit well into a case management system designed for the full VR program. Updating these tracking systems also created an additional administrative burden for VR agency staff, according to officials from all three discussion groups and three of the four state agencies that we interviewed. Officials in two of our three discussion groups said that they have one or more full-time staff members doing only administrative tasks or that they have had to hire additional staff to handle data tracking. Education officials said that they plan to document and share best practices with states; however, they said the agency does not have a final written plan for managing these efforts because plans are still under discussion in light of inquiries received. Education officials said they are collecting information on state VR agencies’ practices through monitoring and they are sharing this information with WINTAC—information that could be useful for sharing best practices across states—but a comprehensive summary of states’ efforts will not be available until after Education officials conduct monitoring visits of all states by the end of fiscal year 2021. In addition, in a 2015 technical assistance circular, Education recommended that state VR agencies consult with other federal, state, and local agencies to identify best practices for providing pre-employment transition services to students and youth with a variety of disabilities. Education officials also said that they are looking for opportunities, such as webinars and conferences, to share information with states. However, Education does not have set timeframes and has not detailed the specific steps and activities for fully leveraging knowledge to address common challenges, or for finalizing and disseminating best practices. By doing so, Education would be better positioned to provide best practices information to state VR agencies to better serve students with disabilities who are transitioning from high school. Pre-employment transition services are designed to help students with disabilities begin to identify career interests and move from high school to post-secondary education or employment. Using federal funding, state VR agencies reported that they have generally enhanced their services and staff capacity and begun to coordinate with state educational agencies. As a result, state VR agencies generally reported serving an increased number of students. However, most states reported they have not used all the funds reserved for pre-employment transition services or updated interagency agreements between state VR and educational agencies. Education has developed multiple forms of guidance and made presentations, either directly or through its technical assistance centers. Education officials said they plan to issue additional guidance as needed. However, without clear timeframes for the issuance of this guidance, states do not know when information will become available to help them make decisions on allowable expenditures for pre-employment transition services. As a result, opportunities may be missed to identify and serve all students who might be eligible, and unserved students could continue to face difficulties preparing for a future of meaningful post-secondary education or employment. In addition, agreements between state VR and educational agencies can help facilitate the effective coordination of and financial responsibility for services. Finally, WIOA requires Education to highlight best state practices for implementing pre-employment transition services. Developing a written plan with specific timeframes would help Education provide states with information on best practices, such as balancing service delivery between pre-employment transition services and other VR services and collecting data that other states may have successfully addressed. We are making the following three recommendations to Education: The Secretary of Education should establish timeframes for providing states with additional information on allowable expenditures of funds reserved for pre-employment transition services. (Recommendation 1) The Secretary of Education should take additional steps to provide states assistance on updating and finalizing their interagency agreements with state educational agencies to include pre-employment transition services. These steps could include, for example, accelerating their efforts to discuss the benefits of finalizing interagency agreements, and reminding states of existing technical assistance resources pertaining to updating and finalizing interagency agreements. (Recommendation 2) The Secretary of Education should develop a written plan with specific timeframes and activities for identifying and disseminating best practices that address, as appropriate, implementation challenges for pre- employment transition services, such as those identified in this report. (Recommendation 3) We provided a draft of this report to Education for review and comment. Education’s written comments are reproduced in appendix III. Education also provided technical comments, which we incorporated into our report where appropriate. Education concurred with recommendation 1 and disagreed with recommendations 2 and 3 in the draft report. With regard to recommendation 1, Education stated that it agreed and will establish projected timeframes for providing states with additional information on allowable expenditures for the provision of pre- employment transition services. Education also stated that it intends to provide states with additional information in at least two forums before the end of calendar year 2018 and to review and analyze previous guidance provided to states on allowable expenditures. With regard to the draft report’s recommendation 2, which called for Education to identify states that have not updated and finalized their interagency agreements to include pre-employment transition services, Education stated that it disagreed, in large part, because there is no statutory provision authorizing the agency to identify such states. However, Education is taking some steps as part of its ongoing monitoring of the VR program to provide assistance to states that have not updated their interagency agreements, which is consistent with the intention of our recommendation, but more could be done. Education stated that it will continue to offer and provide technical assistance if it becomes known through the onsite monitoring of the VR program or through other means that states have not updated their interagency agreements between VR agencies and state educational agencies. It also noted that the Rehabilitation Services Administration (RSA) and its Office of Special Education Programs will provide information related to sources of technical assistance, as appropriate, to VR agencies and state educational agencies. While these steps may be helpful, given the number of states that have not updated and finalized their agreements and the length of time Education officials say they will take to complete this round of monitoring where Education asks state VR agencies about these agreements, additional action by Education may be needed to help states more efficiently and effectively coordinate services to students with disabilities. Education also wrote that while the Rehabilitation Act requires an interagency agreement, the Individuals with Disabilities Education Act does not contain a parallel requirement for state and local educational agencies with respect to the provision of pre-employment transition services or the incorporation of such discussion into the interagency agreement. In light of these differing requirements, as we state in our report, stakeholders with whom we spoke indicated it can be difficult to get state educational agencies to work with state VR agencies to update interagency agreements. Therefore, it is all the more important for Education to take additional action to engage with VR agencies regarding interagency agreements and to work closely with VR agencies as Education becomes aware of states that have not updated their agreements. Education suggested a modified recommendation that removed reference to Education identifying states that have not updated and finalized their agreements. We modified the recommendation and the report to address Education’s concerns about its authority to identify states. By taking additional steps, such as discussing the benefits of finalizing interagency agreements, and reminding states of existing technical assistance resources pertaining to updating and finalizing interagency agreements, Education would help raise awareness about the importance of the interagency agreements and be better positioned to help states efficiently and effectively coordinate services to students with disabilities. With regard to recommendation 3, Education stated that it disagreed because it is premature to develop a timeline for the dissemination of best practices. Education stated that the identification of “best” practices, meaning those that are clearly supported by a body of evidence derived from valid and reliable research findings, is still emerging as states implement the requirements. Education suggested a modified recommendation that included planning for the dissemination of best practices identified by states as they become available. Education stated in its comments that as RSA identifies best practices through its monitoring and technical assistance activities, it will, in collaboration with its Office of Special Education Programs, consider when and how best to disseminate this information to state VR and educational agencies. With regard to including specific timeframes and activities in a written plan, by detailing the specific steps Education is taking and plans to take along with the amount of time it expects them to take, Education would be better positioned to complete those steps in a timely manner and meet the statutory requirement that Education highlight best state practices and support state agencies. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of Education. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Elizabeth H. Curda at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. The objectives of this report are to examine (1) the steps states have reported taking to implement pre-employment transition services, and (2) the implementation challenges, if any, states reported facing, and how the Department of Education (Education) has addressed them. To address these objectives, we reviewed federal laws and regulations, and Education’s guidance and technical assistance documents, including circulars, policy directives, and transition guides. We also reviewed expenditure data reported by state vocational rehabilitation (VR) agencies to Education for fiscal years 2015 and 2016, the most recent full years of data available. To assess the reliability of the data, we interviewed Education officials about their collection of the data and their opinion of the data’s quality, completeness, and accuracy. We also electronically tested the data for any obvious errors. We determined that the data were reliable for the purposes of our review. We interviewed representatives from the Council of State Administrators of Vocational Rehabilitation (CSAVR) and the National Council of State Agencies for the Blind. In addition, we interviewed officials from Education’s Office of Special Education and Rehabilitation Services, Rehabilitation Services Administration, Office of Special Education Programs, and the Workforce Innovation Technical Assistance Center and National Technical Assistance Center on Transition—two technical assistance centers funded by Education. To address both of the objectives, we conducted a survey of all 79 state VR agencies from October through December 2017. Seventy-four of the 79 agencies (94 percent) responded. The survey questionnaire included open-ended and closed-ended questions about agencies’ efforts to train staff, update interagency agreements, expand services to students with disabilities, and other issues. We took steps to minimize the potential errors that may be introduced by the practical difficulties of conducting any survey. Because we selected the entire population of VR agencies for our survey, our estimates are not subject to sampling error. We conducted pretests of the draft questionnaire with three agencies in the population and made revisions to reduce the possibility of measurement error from differences in how questions were interpreted and the sources of information available to respondents. We reviewed state officials’ submitted survey responses and conducted follow-up, as necessary, to determine that their responses were complete, reasonable, and sufficiently reliable for the purposes of this report. A second independent analyst checked the accuracy of all computer analyses we performed to minimize the likelihood of errors in data processing. We made multiple follow-up attempts during the survey with agencies that had not yet responded. The five agencies that did not respond had smaller values, on average, on three characteristics related to size, than those that did respond. The nonrespondents tended to be smaller than respondent agencies. The sums totals for each of these three characteristics across the five nonresponding agencies comprised less than 1 percent of the totals for the population, suggesting a lower possibility of material error in our results from nonresponse. For more in-depth information on both of the objectives, we conducted interviews and held discussion groups. We conducted interviews with officials in Idaho, Illinois, and Maryland. For each state, we interviewed state VR officials and state educational agency officials. We selected these states for variety using the following criteria: size of the special education population (large, medium, and small); state agency organization, for example, whether the VR agency was organized under the state’s educational or other department; and whether the state had a second agency for serving individuals who are blind or visually impaired. We convened three discussion groups with state VR agency directors or their designated officials, with a total of 39 participants from 29 separate agencies (10 to 12 agencies represented per discussion group). These discussion groups took place during a conference of state VR directors in November 2017 in Greenville, South Carolina. To select participants, we worked with the conference organizer, CSAVR, to send invitations for our discussion groups to all conference attendees. We additionally included a question in our survey asking respondents whether they would like to participate in discussion groups at the conference, and contacted those who responded affirmatively via phone and email. We moderated each discussion to keep participants focused on the specified issues within discussion timeframes. To assess Education’s efforts to address state VR agencies’ challenges in providing pre-employment transition services, we applied standards for internal control in the federal government. Specifically, we applied principle 15 related to communicating with external parties. In addition, regarding Education’s assistance to state VR agencies’ efforts to update interagency agreements with state educational agencies, we also applied key considerations for implementing interagency collaborative mechanisms that we have previously identified. We conducted this performance audit from February 2017 to September 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Elizabeth H. Curda, (202) 512-7215 or curdae@gao.gov. In addition to the contact named above, Sara Schibanoff Kelly (Assistant Director), Paul Schearf (Analyst-In-Charge), Matthew Rabe, and Paul Wright made key contributions to this report. Also contributing to this report were James Bennett, Kristy Kennedy, Sheila R. McCoy, Thomas James, Jessica Orr, Sam Portnow, Carl Ramirez, Monica Savoy, Kate Van Gelder, Adam Wendel, and James Whitcomb. Workforce Innovation and Opportunity Act: States and Local Areas Report Progress in Meeting Youth Program Requirements. GAO-18-475. Washington, D.C.: June 15, 2018. Supplemental Security Income: SSA Could Strengthen Its Efforts to Encourage Employment for Transition-Age Youth. GAO-17-485. Washington, D.C.: May 17, 2017. Youth with Autism: Federal Agencies Should Take Additional Action to Support Transition-Age Youth. GAO-17-352. Washington, D.C.: May 4, 2017. Youth with Autism: Roundtable Views of Services Needed During the Transition into Adulthood. GAO-17-109. Washington, D.C.: October 18, 2016. Students with Disabilities: Better Federal Coordination Could Lessen Challenges in the Transition from High School. GAO-12-594. Washington, D.C.: July 12, 2012.", "summary": "WIOA requires states to reserve at least 15 percent of their total State Vocational Rehabilitation Services program funds to provide pre-employment transition services to help students with disabilities transition from school to work. GAO was asked to review how states were implementing these services. This report examines (1) steps states reported taking to implement pre-employment transition services, and (2) implementation challenges states reported and how Education has addressed them. GAO reviewed documents and funding data from Education, and federal laws and regulations; surveyed all 79 state VR agencies (74 responded); held discussion groups with representatives of 29 state VR agencies; and interviewed officials from Education and three states (Idaho, Illinois, and Maryland) GAO selected for variety in size and type of agencies, among other factors. Of the 74 state vocational rehabilitation (VR) agencies that responded to GAO's survey, most reported expanding services to help students with disabilities transition from school to work as required under the Workforce Innovation and Opportunity Act (WIOA), enacted in July 2014. Most state agencies reported serving more students and providing work-based learning experiences and other activities, referred to as pre-employment transition services (see figure). State VR agencies reported two key challenges with implementing pre-employment transition services for students as required by WIOA. Spending reserved funds : States reported spending about $357 million out of the $465 million reserved for these services in fiscal year 2016. Education officials said that states had difficulty determining what expenditures were allowable, and some state officials said they would like more detailed information from Education. Education officials said they plan to clarify guidance but have no timeframe for providing further information, which would help states to better plan their use of reserved funds. Finalizing interagency agreements : Fewer than half the state VR agencies that responded to GAO's survey (34 of 74) reported updating their interagency agreement with their state's educational agency. Interagency agreements can help promote collaboration by, for example, establishing roles and responsibilities of each agency. Although Education offers technical assistance on interagency agreements, without increased efforts to raise awareness about the importance of these agreements and provide assistance to states where needed, Education may miss opportunities to help state VR and educational agencies efficiently and effectively coordinate services. In addition, WIOA requires Education to highlight best state practices, and most VR agencies responding to GAO's survey (63 of 74) reported this would be useful. Education does not have a written plan or timeframe for identifying and disseminating best practices. As a result, Education may miss opportunities to help more students with disabilities successfully transition from school to work. GAO is recommending that Education (1) establish timeframes for providing additional information on allowable expenditures, (2) take additional steps to assist states that have not updated and finalized their interagency agreements, and (3) develop a written plan with specific timeframes and activities for identifying and disseminating best practices. Education agreed with the first recommendation and disagreed with the other two. GAO revised the second recommendation and maintains that specific information is needed for the third, as discussed in the report.", "document_type": "gao"}
{"report": "In 2017, three major hurricanes made landfall in the United States and historic wildfires struck California. According to FEMA, the 2017 hurricanes and wildfires collectively affected 47 million people—nearly 15 percent of the nation’s population. See figure 1 for a timeline of these major disasters. When disasters hit, state and local entities are typically responsible for disaster response efforts. The Robert T. Stafford Disaster Relief and Emergency Assistance Act established a process by which a state may request a presidential disaster declaration to obtain federal assistance. According to the DHS National Response Framework—a guide to how the federal government, states and localities, and other public and private sector institutions should respond to disasters and emergencies—the Secretary of Homeland Security is responsible for ensuring that federal preparedness actions are coordinated to prevent gaps in the federal government’s efforts to respond to all major disasters, among other emergencies. The framework also designates FEMA to lead the coordination of the federal disaster response efforts across federal agencies. The National Response Framework identifies 14 emergency support functions that serve as the federal government’s primary coordinating structure for building, sustaining, and delivering disaster response efforts across more than 30 federal agencies. Each function addresses a specific need—such as communication, transportation, and energy—and designates a federal department or agency as the coordinating agency. For example, the emergency support function for public works and engineering assists DHS by coordinating engineering and construction services, such as temporary roofing or power, and USACE is the primary agency responsible for these functions during disaster response activities. FEMA coordinates disaster response efforts through mission assignments—work orders that FEMA issues to direct other federal agencies to utilize the authorities and the resources granted to it under federal law. Mission assignments are authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act and can consist of federal operations support or direct federal assistance, which includes federal contracts. FEMA’s contracting efforts are supported by its Office of the Chief Procurement Officer and its contracting workforce. While the majority of FEMA’s contracting workforce is located in headquarters, contracting officers are also located in each of FEMA’s 10 regional offices. See appendix II for the location of FEMA’s 10 regional offices as well as the states each one is responsible for coordinating with to address National Response Framework responsibilities. Congress enacted PKEMRA in 2006, which addressed various shortcomings identified in preparation for and response to Hurricane Katrina, which hit the Gulf Coast in 2005 and was one of the largest, most destructive natural disasters in U.S. history. Among the provisions included were requirements for FEMA to identify and establish advance contracts to ensure that goods and services are in place to help FEMA rapidly mobilize resources in immediate response to disasters. Examples of these goods and services are: Goods: construction supplies and tarps; food and water; cleaning and hygiene supplies; and power equipment and generators. Services: engineering; information technology and communication support; transportation of goods; and housing and lodging assistance. As of June 2018, FEMA reported having advance contracts in place for 56 different types of goods and services. Among other contracting requirements, PKEMRA requires FEMA to develop a contracting strategy that maximizes the use of advance contracts to the extent practical and cost effective; coordinate advance contracts with state and local governments; encourage state and local governments to engage in similar pre- planning and contracting; and submit quarterly reports to the appropriate committees of Congress on each disaster contract entered into by the agency using non- competitive procedures. According to FEMA’s advance contracting strategy, the agency will maximize the use of advance contracts to the extent they are practical and cost-effective, which will help preclude the need to procure goods and services under unusual and compelling urgency. When disasters strike, contracting officers may use the unusual and compelling urgency exception to full and open competition to support non-competitive contract awards. FEMA’s strategy also states that advance contracts will help to ensure that goods and services are in place to help FEMA rapidly mobilize resources in immediate response to disasters. USACE also has its own advance contracts in place as a preparedness measure. According to USACE officials, they established advance contract initiatives in 2003, two years prior to Hurricane Katrina, to help facilitate their emergency support function under the National Response Framework—public works and engineering. As of September 2018, USACE reported having advance contracts in place for three services— debris removal, temporary roofing, and temporary power. Appendix III provides details on specific advance contracts established by FEMA and USACE. According to FEMA documentation, most of its advance contracts are indefinite delivery contracts, which can facilitate the goal of having contracts available if there is a disaster. One type of indefinite delivery contract—an indefinite delivery, indefinite quantity contract—can be awarded to single or multiple vendors and provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. Under these contracts, the government places orders for individual requirements. These contracts also require the government to order and the contractor to provide at least a stated minimum quantity of supplies and services. Additionally, the contracting officer should also establish a reasonable maximum quantity for the contract based on market research, trends in similar recent contracts, or any other rational basis. Minimum and maximum quantity limits can be stated as the number of units or as dollar values, and may also be referred to by contracting officers as minimum guarantees or contract ceilings, respectively. As part of its overall acquisition strategy, FEMA officials identified other vehicles aside from its own advance contracts through which they obtain goods and services. DHS strategic sourcing vehicles: When a disaster occurs, FEMA contracting officers are first required to use any available DHS strategic sourcing vehicles—a broader, aggregate approach for procuring goods and services—with limited exceptions. Blanket purchase agreements: FEMA also relies on blanket purchase agreements, such as those established through the General Service Administration Federal Supply Schedule program, to provide some commercial goods and services needed for disaster response. Interagency Agreements: FEMA may also leverage interagency agreements, by which it obtains needed supplies or services from another agency by an assisted or direct acquisition. FEMA and other agencies may also award new contracts to support disaster response efforts following a disaster declaration. According to FEMA officials, these post-disaster contract awards may be required, for example, if advance contracts reach their ceilings, or if goods and services that are not suitable for advance contracts are needed. The FAR requires agencies to perform acquisition planning activities for all acquisitions to ensure that the government meets its needs in the most effective, economical, and timely manner possible. Generally, program and contracting officials share responsibility for the majority of acquisition planning activities, which include the following: Pre-Solicitation: The program office identifies a need, and develops key acquisition documents to summarize that need, such as market research, a statement of work defining requirements, cost estimates, and a written acquisition plan. The pre-solicitation process ends when the program office submits these documents, typically referred to as an acquisition package, to the contracting officer to determine what type of contract is appropriate to fulfill the requirements. Solicitation: The contracting officer develops a solicitation, in consultation with other agency stakeholders, to request bids or proposals from contractors. The acquisition planning process ends once a solicitation is issued. Contracting for disaster relief and recovery efforts can also present unique circumstances in which to solicit, award, and administer contracts. Under the FAR, agencies are generally required to use full and open competition when soliciting offers and awarding contracts. However, an agency may award contracts noncompetitively when the need for goods or services is of such unusual and compelling urgency that the federal government faces the risk of serious financial or other type of injury. When it becomes evident that a base contract period and any option periods will expire before a subsequent contract to meet the same need can be awarded, contracting officers may, for example, extend the existing contract, or award a short-term stand-alone contract to the incumbent contractor on a non-competitive basis to avoid a lapse in services, along with sufficient justification and approval. These extensions and new sole source contracts are informally referred to as bridge contracts by some in the acquisition community, and we use that terminology in this report. In October 2015, we established the following definitions related to bridge contracts: Bridge contract: An extension to an existing contract beyond the period of performance (including base and option years), and a new, short-term contract awarded on a sole-source basis to an incumbent contractor to avoid a lapse in service caused by a delay in awarding a follow-on contract. Predecessor contract: The contract that was in place prior to the award of a bridge contract. Follow-on contract: A longer-term contract that follows a bridge contract for the same or similar services. This contract can be competitively awarded or awarded on a sole-source basis. Contracts, orders, and extensions (both competitive and non-competitive) are included in our definition of a “bridge contract” because the focus of the definition is on the intent of the contract, order, or extension. However, the FAR does not formally define bridge contracts or require that they be tracked. We recommended that the Office of Federal Procurement Policy amend the FAR to incorporate a definition of bridge contracts. The Office of Federal Procurement Policy agreed with our recommendation to provide guidance to agencies on bridge contracts and has taken steps to develop that guidance, but has not yet implemented our recommendations. If a contracting officer opts to extend the existing contract in place—often referred to as a predecessor contract—the contracting officer may use a number of different mechanisms to do this. One of these is the “option to extend services” clause. If the contract includes this clause, the contracting officer may use it to extend the contract for up to six months. While this option may be exercised more than once, the total extension of performance shall not exceed 6 months. FEMA and USACE obligations on advance contracts—as of May 31, 2018—accounted for about half of total federal contract obligations for the three hurricanes, and more than three quarters of the contract obligations identified by those agencies for the California wildfires. However, an outdated strategy and lack of guidance to contracting officers resulted in confusion about whether and how to prioritize and use advance contracts to quickly mobilize resources in response to the three 2017 hurricanes and the California wildfires. Government-wide contract obligations for the three hurricanes were about $8.2 billion as of May 31, 2018. FEMA and USACE obligated 46 percent, or about $3.8 billion, of the $8.2 billion spent government-wide on the three hurricanes through advance contracts. Data on government- wide contract obligations for the California wildfires were not able to be identified because national interest action codes were not established for them in FPDS-NG. However, FEMA and USACE provided information on their contracting activities related to the wildfires. Their use of advance contracts accounted for 86 percent, or about $667 million, of the contract obligations they identified. FEMA and USACE advance contract obligations for the three hurricanes and California wildfires totaled about $4.5 billion, about 56 percent of the total contract obligations made by these agencies for these disasters. See figure 2 for details on FEMA and USACE’s advance and post-disaster contract obligations by event. The greatest proportion of FEMA and USACE’s obligations on advance contracts supported Hurricane Maria disaster relief efforts—41 percent and 59 percent, respectively. About 39 percent of USACE’s obligations on advance contracts were used in support of the California wildfires, compared to less than 1 percent of FEMA’s obligations. FEMA awarded orders against 72 base advance contracts in response to the three 2017 hurricanes and California wildfires, and USACE awarded orders against 15 of its advance contracts. See figure 3 for FEMA and USACE’s obligations on advance contracts by event. FEMA and USACE procured a variety of goods and services through advance contracts in response to the three hurricanes and wildfires, but about 86 percent of obligations, or $3.8 billion, were used to procure services. For example, all of USACE’s $1.7 billion in advance contract obligations were for services, such as debris removal. FEMA obligated about $2.2 billion on services, such as architect and engineering services to rebuild roads and bridges. FEMA’s obligations on goods totaled $624 million and included prefabricated buildings, such as manufactured housing units to provide lodging, and food and water. See figure 4 for examples of obligations on goods or services by event. FEMA lacks an updated strategy and guidance on advance contract use, despite the PKEMRA requirement to develop a contracting strategy that maximizes their use to the extent practical and cost effective. As we found in May 2006 following Hurricane Katrina, and reiterated in our September 2015 report, agencies need to have competitively awarded contracts in place before a disaster to be effective in their response. Our current review found that FEMA has established advance contracts for goods and services to enable it to respond following a disaster. However, FEMA’s lack of an updated strategy and guidance on advance contract use resulted in confusion about whether and how to maximize their use to the extent cost-effective and practical to facilitate a faster response when providing goods and services to survivors. PKEMRA required the FEMA Administrator to identify specific goods and services that the agency could contract for in advance of a natural disaster in a cost-effective manner. PKEMRA also required the FEMA Administrator to develop a contracting strategy that maximizes the use of advance contracts to the extent practical and cost-effective. Following the enactment of PKEMRA, in 2007 FEMA issued the Advance Contracting of Goods and Services Report to Congress, in part to address the requirement for an advance contracting strategy. In addition to the strategy, FEMA provides information on advance contracts in its Disaster Contracting Officer Desk Guide. The 2007 strategy notes that advance contracts will help to preclude the need to procure goods and services for disaster response under the unusual and compelling urgency exception to full and open competition, and allow FEMA to rapidly mobilize resources in immediate response to disasters. Several contracting officials we spoke with said that it is a requirement to use advance contracts before awarding new contracts. Moreover, a senior FEMA contracting official told us that advance contracts are intended to be used before awarding post-disaster contracts, even if the advance contract is not capable of fulfilling all of the requirements for a needed good or service. However, our review of the strategy found that it does not provide any specific direction on how contracting officers should award or use advance contracts to meet PKEMRA’s objectives, or how they should be prioritized in relation to post-disaster contracts. Further, there is no mention in FEMA’s 2017 Disaster Contracting Officer Desk Guide that advance contracts should be considered prior to the award of post-disaster contracts. In September 2015, we found shortfalls with the information available to contracting officers about advance contracts and recommended that FEMA provide new or updated guidance with information on how advance contracts should be used. FEMA agreed with this recommendation and stated that in 2015 it included information on advance contracts and their use in training documentation. However, our review of semi-annual training documentation provided in May 2018 found that it only lists some of the advance contracts that are available, and not guidance on their use. A report by the Senate Committee on Homeland Security and Governmental Affairs identified concerns about FEMA’s use of advance contracts for self-help tarps in response to the 2017 hurricanes. Specifically, the report found that while FEMA ordered some tarps through one of its existing advance contracts, that order was placed after a post-disaster contract for tarps was signed, raising questions about whether FEMA’s actions were informed by an overall strategy for using its advance contracts, in this case, for tarps. Our current review identified similar concerns, and found that the lack of an updated strategy and guidance on the use of advance contracts contributed to challenges in using these contracts to respond to the 2017 disasters. In our review of advance contracts for meals and tarps, we found the following: Meals: Prior to the 2017 disasters, FEMA had advance contracts in place to provide meals with specific nutritional requirements. According to FEMA contracting officials, the advance contract vendors were at capacity for these specific meals following the response to Hurricane Harvey, requiring FEMA to issue a new post-disaster competitive solicitation and award new contracts with less specific nutritional requirements following Hurricane Maria. Based on our review of contract documentation, two of the existing advance contract vendors were awarded these new post-disaster contracts, but at different prices than those negotiated through their advance contracts. FEMA officials told us that contracting officers will negotiate to ensure the price of the contract is fair and reasonable and may utilize historical information or current contract prices to inform this determination. Normally, adequate price competition establishes a fair and reasonable price. According to a contracting officer involved with the award, FEMA relied on competition and historical prices, but not the existing advance contract prices, to determine that the new post- disaster contract meal prices were fair and reasonable. Guidance on the extent to which advance contract prices should be considered when comparing proposed prices to historical prices paid could help to further inform contracting officers’ decision-making during a disaster. Tarps: Our review of FEMA’s use of contracts for tarps is another example of how FEMA lacked an updated advance contracting strategy and guidance to provide goods and services to facilitate a faster response to the 2017 disasters. For example, in September 2014, FEMA awarded multiple award indefinite delivery, indefinite quantity advance contracts to three small businesses for self-help tarps, which are used to cover small areas of roof damage. In November 2014, these contracts were modified by the contracting officer to include delivery requirements for providing tarps to replenish FEMA’s stock during steady state operations or during emergency response operations, such as a natural disaster. The contract modification added that during an emergency response, vendors would be expected to deliver up to 150,000 tarps within 96 hours of being issued a task order. However, these small businesses were not required to meet the emergency response delivery time frames and amounts since they would not be expected to store tarps on FEMA’s behalf, limiting the use of FEMA’s advance tarp contracts for immediate disaster response needs. According to a contracting officer involved with these contracts, the tarp advance contracts are typically used only to replenish tarp stockpiles in FEMA’s distribution centers. However, the contracting officer also noted that not being able to fully use the existing advance contracts for tarps to respond to the three 2017 hurricanes was a challenge and required FEMA to award post- disaster contracts to meet tarp requirements. Furthermore, we found that FEMA awarded post-disaster contracts for tarps before utilizing its advance contracts with the small businesses. Contract file documentation for the post-disaster contracts stated that FEMA’s advance contract holders for tarps had reached their capacity, and that market research had confirmed that it would be difficult for small businesses to meet the urgent delivery timeframes for tarps. Yet, after the award of the post-disaster tarp contracts, FEMA awarded task orders to one of the advance contractors to provide tarps in response to Hurricane Maria. Another small business advance contractor, which according to FEMA’s post-disaster contract documentation had reached its capacity, also submitted a proposal as part of the post-disaster contract solicitation. According to FEMA, neither of the post-disaster contract holders ultimately provided the required tarps. The timing and use of the existing tarp advance contracts raises questions about their ability to provide tarps immediately following a disaster, and whether an updated advance contracting strategy would have enabled FEMA to more quickly provide the needed tarps to survivors, considering the additional time and staff resources needed to award new post-disaster contracts. FEMA established advance contracts to provide critical goods, like meals and tarps, following a disaster; however FEMA’s 2007 contracting strategy does not provide direction on the objectives of advance contracts or how to maximize their use to the extent practical and cost-effective, as required by PKEMRA. According to FEMA officials, they had not considered updating the 2007 advance contracting strategy because they believed the use of advance contracts following PKEMRA had been incorporated into their disaster contracting practices. FEMA has also not communicated specific guidance to program and contracting officials on whether and how advance contracts should be prioritized before issuing new post-disaster solicitations and awarding contracts for the same or similar requirements, or how to maximize their use to the extent practical and cost-effective following a disaster, as required by PKEMRA. FEMA officials also acknowledged that additional guidance regarding advance contracts, including their availability and use during a disaster, could be useful. Without an updated strategy—and clear guidance that is incorporated into training—on the use of advance contracts and how they should be prioritized and used in relation to new post-disaster contract awards, FEMA lacks reasonable assurance that it is maximizing the use of advance contracts to quickly and cost-effectively provide goods and services following a disaster. This places FEMA at risk of continued challenges in quickly responding to subsequent disasters. While FEMA used a variety of advance contracts to respond to the 2017 disasters, we found weaknesses in the process of awarding and overseeing selected advance contracts in our review. These weaknesses were: (1) challenges in FEMA’s acquisition planning; (2) limited record keeping or management of certain FEMA contracts; and (3) incomplete reporting on FEMA’s advance contract actions to certain congressional committees. Related to USACE, we did not identify any planning or management challenges based on our review of its four selected contracts, and USACE is not required to report on its advance contract actions to the congressional committees. FEMA has taken some steps since 2016 to improve competition and develop processes and guidance on the acquisition process for advance contracts, but shortfalls in acquisition planning have resulted in a number of bridge contracts. Bridge contracts can be a useful tool in certain circumstances to avoid a gap in providing products and services. We have previously reported that when non-competitive bridge contracts are used frequently or for prolonged periods, the government is at risk of paying more than it should for products and services. Based on our analysis, 63 of FEMA’s 72 advance contracts used in response to the 2017 disasters were initially competed. All 15 of USACE’s advance contracts used in responding to the three hurricanes and California wildfires in 2017 were initially competed. We found that at least 10 of FEMA’s advance contracts used in 2017 were bridge contracts. Within the 10 FEMA advance contracts we identified as bridge contracts, 6 were part of our selected case studies. The six advance contracts with subsequent bridges in our review obligated roughly $778 million in response to the three hurricanes and California wildfires in 2017. These bridge contracts included five that are associated with two of FEMA’s largest programs used in 2017—the Individual Assistance Program and Public Assistance Program—and one that is associated with a telecommunications program. Three of the six bridge advance contracts we reviewed were awarded to support FEMA’s Individual Assistance Program, which provides mass care services such as food and water as well as financial and direct assistance, among other services, to survivors whose property has been damaged or destroyed and whose losses are not covered by insurance. In 2017, this assistance was supported through the Individual Assistance- Technical Assistance Contract (IA-TAC), known as IA-TAC III. The IA- TAC III predecessor contracts had an original period of performance from a base year starting in May 2009 with four 1-year options that ended in May 2014. However, FEMA program and contracting officials were unable to implement changes to the requirements—recommended by FEMA senior leadership in 2010—prior to expiration. According to FEMA officials, staffing shortfalls, operational tempo, and unrealistic contract requirements led to acquisition planning delays. These challenges, in turn, led to a series of extensions from May 2014 to November 2016 and a new non-competitive bridge contract (base with options) from November 2016 to May 2018. At that point new, competitive follow-on indefinite delivery indefinite quantity contracts—the Individual Assistance Support Contract (IASC) and Logistics Housing Operations Unit Installation, Maintenance, and Deactivation (LOGHOUSE)—were awarded. See figure 5. Two of our six selected advance contracts that were bridge contracts were awarded to support FEMA’s Public Assistance Program, which provides supplemental federal assistance to state, tribal, territorial, and local governments for debris removal, life-saving emergency protective measures, and the repair, replacement, or restoration of damaged facilities. The predecessor Public Assistance-Technical Assistance Contract (PA-TAC) used in 2017, known as PA-TAC III, was awarded with an original period of performance from a base year in February 2012 with four 1-year options that ended in February 2017. FEMA officials noted that changes to the PA-TAC III contract requirements and acquisition strategy were identified in 2015. Yet due to the time needed to incorporate these changes, FEMA was unable to complete required acquisition planning activities, such as finalizing the acquisition plan, prior to the expiration of PA-TAC III. Following 11 months of extensions to complete these activities, FEMA competitively awarded new contracts in December 2017. These awards were protested to the GAO and the protests were denied and are currently under review at the Court of Federal Claims. According to FEMA officials, these events required PA- TAC III to be extended until January 2019, as shown in figure 6. The remaining bridge contract in our sample is associated with the Wireline Services Program, a telecommunication program that provides FEMA employees deployed to respond to a disaster with local and long- distance telephone, high-speed data, and cable television services. The 5 year wireline predecessor contract was awarded in 2003 and again in 2008, but FEMA was unable to award a competed contract when the 2008 contract expired in December 2013 due to the time it took to update program requirements. FEMA contracting officials extended the contract for 6 months before letting it expire altogether. Due to high staff turnover and inconsistent record keeping, at the time of our review FEMA officials were unable to determine the cause for this lapse of service, which occurred after the contract’s expiration in June 2014. Starting in January 2015, FEMA contracting officials used a series of bridge contracts over more than three years to address changing contract requirements and delays in completing acquisition planning documentation, as shown in figure 7. FEMA contracting officials anticipated awarding a competitive contract by the end of fiscal year 2018, but the award has been delayed and the existing contract extended through January 2019. In one of the bridge contracts included in our review, FEMA improperly used FAR clause 52.217-8. According to that clause, an agency may extend a contract’s period of performance for up to 6 months and is generally used in the event of circumstances outside of the contracting officer’s control that prevent the new contract award, such as a bid protest. This clause may be used multiple times to extend the contract so long as the total extension of performance does not exceed 6 months. Our analysis found that FEMA used the clause for a total of 14 months to justify two 6-month extensions and one 2-month extension to the second bridge contract. The FEMA contracting official associated with the advance contract reported uncertainty over the proper use of this clause and what other authorities should have been used instead to extend the contract. FEMA’s Office of Chief Counsel and contracting officials acknowledged this error. While not all bridge contracts that we identified during our review were non-competitive, FEMA officials acknowledged that the use of non- competitive bridge contracts is not an ideal practice as they cannot ensure the government is paying what it should for products and services. In October 2015 we identified delays in the completion of acquisition planning documentation as one of the leading causes of awarding bridge contracts. In an effort to decrease the need for non-competitive bridge contracts and provide ample time for acquisition planning, FEMA began implementing a 5-Year Master Acquisition Planning Schedule (MAPS) in 2016. MAPS is a tracking tool that monitors the status of and provides acquisition planning timeframes for certain FEMA acquisitions over $5 million, as well as for all advance contracts and any acquisition deemed by the agency to be mission critical, regardless of dollar value. As we previously noted, acquisition planning includes both the pre- solicitation and solicitation phases. Based on our review of MAPS documentation, the tool generates a timeline of discretionary acquisition milestones across these two phases, based on certain considerations like the type of acquisition and whether it will be competed. Using this timeline, MAPS sends email alerts to program and contracting staff when certain acquisition milestones should occur. Specific to the solicitation phase, FEMA’s Office of the Chief Procurement Officer has developed annual lead time guidance for how long contracting officers should be given to award new contracts following the completion of the acquisition package, which is then conveyed through MAPS. For example, for acquisitions $150,000 and under, FEMA’s 2018 lead time guidance states contracting officers should be given 60 days to award the contract following completion of the acquisition package. FEMA officials we spoke with acknowledged that these discretionary timeframes are frequently shortened when program office officials are delayed in completing acquisition packages. While FEMA has lead time guidance to establish timeframes for completing the solicitation phase, FEMA currently has no guidance establishing timeframes for the pre-solicitation phase, when program offices complete the acquisition packages. Figure 8 provides an example timeline of the major milestones tracked in MAPS. In its analysis of 12 fiscal year 2017 contracts tracked in MAPS that were awarded late, FEMA found that half were late because contracting officials were not given enough lead time to award a new contract following the program office’s completion of the acquisition package. Not adhering to suggested timeframes can place a burden on contracting officers and increase the likelihood of not awarding the contract on schedule, requiring FEMA to non-competitively extend the existing contract. According to FEMA’s lead time guidance, based on the contract values for the bridge contracts in our review contracting officers should have been given between 240 and 300 days to award a new contract once the acquisition package was completed. However, as we mention earlier, due to delays from changing program requirements and acquisition strategies we found that the acquisition plans for the follow-on contracts related to these bridge contracts were not completed until after the predecessor contract had already expired, as shown in figure 9 below. Timely completion of the acquisition package was a key challenge identified in the contracts we reviewed. However, according to officials from the Office of the Chief Procurement Officer, they do not have the authority to establish guidance for FEMA program officials on completing pre-solicitation phase activities. In August 2011, we identified challenges with acquisition planning across DHS. Specifically, we found that DHS and other agencies did not measure or incorporate into guidance the amount of time it takes to develop and obtain approvals of the acquisition planning documents required during the pre-solicitation phase. We recommended that DHS procurement offices collect information about the timeframes needed for the acquisition planning process to establish timeframes for when program officials should begin acquisition planning. DHS did not concur with this recommendation, stating that its acquisition manual already encourages early planning, and has not implemented the recommendation. At the time, we maintained that program officials needed more guidance to have a better understanding of how much time to allow for completing acquisition planning steps, and that the component procurement offices are best positioned to provide guidance on how long these planning processes may take. Given the current challenges we identified with FEMA’s ability to complete acquisition planning activities in a timely manner and the resulting delays in awarding new contracts for critical advance contract goods and services, additional information and guidance on acquisition planning timeframes remains important. Additionally, while MAPS has been in place since 2016 and FEMA officials have instituted training to communicate the system’s intent, program and contracting officials we spoke with varied in their familiarity with it. For example, officials responsible for MAPS stated that by March 2016, 90 percent of FEMA’s contracting staff had attended an hour long training session and additional training sessions were held for all program office staff at various points in 2016 and 2017. However, most of the program office and contracting officials responsible for the bridge contracts in our review reported limited familiarity with MAPS. While FEMA has taken some positive steps to institute training and has guidance on timeframes for part of the acquisition planning process, program and contracting staff we spoke with were still uncertain how best to utilize MAPS to identify the time needed to effectively complete acquisition planning activities. According to federal internal control standards, agency management should internally communicate the necessary quality information to achieve their objectives. Given FEMA’s emphasis on planning before a disaster and using advance contracts to help reduce the need to award non-competitive contracts during a disaster, establishing clear guidance on the factors that can affect acquisition planning activities, and requiring officials to follow the timeframes needed to complete them to meet the goal of awarding competitive contracts, is essential. Until FEMA provides detailed guidance about timeframes and considerations that affect the entire acquisition planning process—both the pre-solicitation and solicitation phases—to all officials responsible for acquisition planning, and clearly communicates the intent of MAPS, it cannot ensure that MAPS will be effective at reducing the number of non-competitively awarded bridge contracts, as is FEMA’s intent. While FEMA has procedures regarding the documentation required for its contract files, current practices limited visibility into the advance contracts in our review. Specifically we found that acquisition plans and some other contract documents were unable to be located in certain cases. Acquisition plans provide the program and contract history as well as other information on which acquisition decisions, such as the type of contract required, are based. FEMA contracting officials were unable to locate acquisition plans for 4 of our 10 FEMA selected advance contracts despite FAR and DHS acquisition guidance requiring plans for these particular contracts to be completed and stored in the contract file. Three of these acquisition plans are associated with the IA-TAC bridge contract which, as previously noted, was associated with one of FEMA’s largest programs used in 2017. FEMA contracting officials were also unable to locate the acquisition plans completed for the prior iteration of IA-TAC because they were not in the hard copy contract file or contract writing system, meaning that no acquisition plan guiding the IA-TACs since before its 2009 award could be found. In 2011, the DHS Office of the Inspector General conducted a review of FEMA’s IA-TAC and identified, among other things, incomplete contract files as a problem. Not being able to locate acquisition plans can result in the loss of contract knowledge and lessons learned from prior awards. Additionally, we found instances of contract documentation for advance contracts related to our case studies that contract officials could not locate. For instance, FEMA was unable to confirm whether or not an option year for the last competed Wireline contract included in the contract was exercised due to a lack of documentation. In order to obtain this answer, FEMA officials had to reach out to the vendor for their records. Moreover, the modification exercising the first option year for one of the IA-TAC III predecessor contracts was missing, as were the determination and findings documents exercising the first option year for all three of the predecessor IA-TAC III contracts that were associated with the advance contracts in our review. After we made FEMA officials aware of the missing documentation, they subsequently added clarifying memos to the contract files. FEMA standard operating procedures state that the acquisition documents in the official contract file will be sufficient to constitute a complete history of the entire transaction for the purpose of providing a complete background, and as a basis for informed decisions at each step in the acquisition process. Additionally, these procedures require headquarters staff to place modifications to contracts and orders and associated supporting documentation in the contract file within 5 business days of awarding a contract or issuing an order. FEMA officials stated they are required to follow these procedures until DHS has fully transitioned to an electronic filing system. According to DHS officials, that system is currently in the testing phase and a timeframe for implementation has not yet been finalized. Furthermore, according to these officials, DHS has not yet decided which, if any, existing contracts will be required to be retroactively entered into the system. Until this decision has been made and implementation occurs, FEMA’s official file of record for its advance contracts consists of a hardcopy file, which contracting officers at FEMA headquarters are required to add completed contract documentation to, per the standard operating procedures. A FEMA official told us that some documentation, including some of the missing documentation we identified, has been lost due to staff turnover and an office move in 2016. FEMA officials anticipate some of the challenges associated with managing the hard copy advance contract files will be alleviated after implementation of the Electronic Contract File System. However, DHS officials have not decided whether components will be required to retroactively enter contract information for any contract awarded prior to the implementation date. This would require FEMA and other DHS components to continue to maintain hardcopy files for some contracts— including large strategic sourcing vehicles and advance contracts—for the foreseeable future. For example, FEMA’s $2.7 billion LOGHOUSE, and $14 million IASC advance contracts were awarded in 2018 and have a period of performance lasting until 2023. Until FEMA adheres to existing contract file management requirements, whether the contract files will be transferred into the electronic system or remain in hard copy format, it is at continued risk of having incomplete contract files and a loss of institutional knowledge regarding these advance contracts. Since December 2007, FEMA has submitted quarterly reports to congressional committees that list all disaster contracting actions in the preceding three months. These quarterly reports also include details on contracts awarded by non-competitive means, as required by PKEMRA. However, our analysis shows that some reports from fiscal year 2017 and 2018 have been incomplete. In September 2015, we found that FEMA’s quarterly reports to congressional committees in fiscal years 2013 and 2014 did not capture all of FEMA’s noncompetitive orders. At that time, FEMA attributed this to an error in data compilation prior to mid-2013 and explained that it had updated its process for collecting these data and strengthened the review process, resulting in accurate reports starting in the fourth quarter of fiscal year 2013. Despite this change in the data collection process, our current analysis found that 29 contract actions associated with the 10 selected advance contracts in our review were not reported across FEMA’s fourth quarter fiscal year 2017 and first quarter fiscal year 2018 reports. For example, FEMA’s fourth quarter fiscal year 2017 report did not include 13 contract actions equaling about $83 million, or 15 percent, of the $558 million in total obligations associated with the 10 selected advance contracts in our review. Similarly, FEMA’s first quarter fiscal year 2018 report did not include 16 contract actions equaling about $122 million, or 23 percent, of the $532 million in total obligations associated with the 10 selected advance contracts in our review. Figure 10 provides a breakdown of the total contract action obligations by extent of competition. To compile the quarterly reports, FEMA officials told us that their methodology is to pull contract action data that is documented in their contract writing system and FPDS-NG roughly one week after the end of each fiscal quarter. Once the data are pulled from these two sources, officials said they compare the data to ensure all reported actions are captured. However, according to officials, the data may not include all contract actions. Specifically, during disaster response efforts like those in 2017, FEMA policy allows contracting officers to execute what it refers to as “notice to proceed”, which is a notice to a construction contractor to begin work under certain circumstances. FEMA officials responsible for the quarterly reports stated that if notice to proceed documentation is used, information on some contract actions that were issued during the fiscal quarter, but not entered into the systems until after the quarter ended, may be missed during the data compilation process. FEMA policy requires that contracting officers who execute the notice to proceed documentation complete the contract award documentation in the contract writing system within three days of when the contracting officer receivers the contractor’s acceptance of the notice. However, a FEMA policy official acknowledged that during disaster response, this does not always occur. Further, FEMA officials responsible for compiling the reports stated that it is not part of their methodology to review data from prior fiscal quarters to see whether any contract actions have been entered that were not previously reported. By not adhering to FEMA policy that establishes timeframes for entering data in a disaster response scenario, FEMA risks reporting incomplete information. Moreover, without taking steps to ensure its reporting methodology provides complete information on all competed and not competed disaster contract actions, FEMA cannot be certain it is providing the congressional committees with visibility into all of its overall disaster contract awards or the extent of non- competitive contract obligations over time. The four selected USACE advance contracts in our review—one supporting USACE’s temporary power mission and three supporting its debris removal mission—were awarded in 2014 with a period of performance lasting until 2019. Since these contracts have not reached the end of their period of performance, we were unable to assess the effectiveness of USACE planning activities. According to contracting officials, USACE is performing acquisition planning activities for both the temporary power and debris removal advance contracts and anticipates awarding the new contracts prior to the current contracts’ expiration. Additionally, USACE was able to provide the acquisition plans for each of the four advance contracts in our review. Unlike FEMA, which retains hard copy files of its contract documentation, USACE uses three official systems of record to store contract file documentation electronically. Officials acknowledged that while moving between the three official systems to find documents may be time consuming, contract documents are typically able to be located. Both FEMA and USACE have processes for identifying and assessing lessons learned following a disaster. Contracting officials from these agencies identified several lessons learned from the 2017 major hurricanes and the California wildfires that directly affected their use of advance contracts. These include the need for: (1) additional advance contracts for certain goods and services; (2) flexibility to increase contract ceilings; (3) use of USACE’s debris removal advance contracts to respond to the California wildfires; and (4) federal coordination and information sharing with state and local governments on advance contracts. While officials identified some lessons learned, they also identified challenges related to FEMA’s outreach with state and local governments on advance contracting efforts. FEMA and USACE have processes for identifying and assessing lessons learned through after-action reviews and reports following major disasters. According to FEMA and USACE officials, they routinely perform these reviews and then compile after-action reports to identify lessons learned and proposed actions to address them. Due to the concurrent nature of hurricanes Harvey, Irma, and Maria, FEMA headquarters completed one combined after-action review for all three hurricanes in July 2018. The resulting report identified 18 strategic-level key findings across five focus areas, and recommendations for improvement. These recommendations included some that were specific to advance contracts, such as the need for additional advance contracts to support future disaster response efforts, and improved state and local coordination to support state and local contracting and logistics operations. In addition, USACE officials performed after-action reviews following disasters, and have a process in place to discuss challenges and recommendations for improvement on their use of advance contracts for temporary power, temporary roofing, and debris removal. While the scope of FEMA’s and USACE’s after-action reports are broader than just advance contracts, we identified, based on our review of reports and interviews with FEMA and USACE officials, several lessons learned related to advance contracts following the 2017 hurricanes and California wildfires, as shown in table 1. We also found that while FEMA has updated its guidance to reflect some requirements for state and local coordination over the use of advance contracts, inconsistencies in FEMA’s outreach and information on the use of advance contracts remains a challenge. PKEMRA required that FEMA encourage state and local governments to establish their own advance contracts with vendors for goods and services in advance of natural disasters. In September 2015, we found that FEMA’s outreach with state and local governments to encourage the establishment of advance contracts can result in more efficient contracting after a disaster. PKEMRA also required that FEMA establish a process to ensure that federal advance contracts are coordinated with state and local governments, as appropriate. In our September 2015 report, we also found that these efforts can ensure that states are aware of and can access certain federal advance contracts, such as General Services Administration schedule contracts. However, in the same report, we found that inconsistencies in whether and how the regions perform state and local outreach limited FEMA’s ability to support advance contracting efforts. We recommended that FEMA provide new or updated guidance to ensure that all contracting officers are aware of requirements concerning the need to conduct outreach to state and local governments to support their use of advance contracts. DHS concurred with this recommendation and in 2017 FEMA updated its Disaster Contracting Desk Guide to state that contracting officers should inform their state and local counterparts of the availability and use of federal advance contracts established by FEMA. Our review of the guide found that it does remind contracting officers to coordinate with states and localities over the use of federal advance contracts, but does not provide any details on how often or what types of advance contract information should be shared with states and localities, or provide any instructions to contracting officers on PKEMRA’s requirement to encourage states and localities to establish their own advance contracts for the types of goods and services needed during a disaster. Our current review also found inconsistencies with FEMA’s efforts to encourage states and localities to establish their own advance contracts with vendors and ensure coordination with them on their use of federal advance contracts. For example, some regional FEMA officials explained that they regularly perform outreach, which can assist states and localities with establishing advance contracts for goods and services commonly needed during a disaster, like security, transportation, and office supplies. Regional officials we spoke with said more frequent coordination allows them to avoid overlap across state and federal contracting efforts, and know what resources the states have in place and how long states are capable of providing these resources following a disaster. However, other regional officials reported having less frequent coordination with state and local governments. For example, a FEMA official stated that one of the regions has less frequent meetings with state and local governments because the region is geographically dispersed and has fewer disasters. According to another regional official, coordination between some regional offices and state and local officials over advance contracting was minimal prior to Hurricane Harvey, and in some cases only occurred when FEMA and state and local officials were co-located during a disaster. Officials from some state and local governments and USACE reported examples where increased coordination between FEMA, states, and localities could have improved the use of advance contracts in 2017. For example, in September 2018 we found that some localities were relying on the same contractors to perform debris removal activities following Hurricanes Harvey in Texas and Irma in Florida. As a result, we reported that some contractors that were removing debris in Texas did not honor existing contracts in Florida, leading to delays in debris removal. Additional communication and coordination between FEMA and contracting officials in these states and localities about which contractors they had established advance contracts with could have helped to prevent this overlap and subsequent delay in removing debris. During our current review, USACE and California officials also reported miscommunications about state and local expectations for USACE’s debris removal contracts following the wildfires. Specifically, USACE and state and local officials reported differing expectations about the work to be performed under USACE’s debris removal contracts, such as what structures would be removed from private property and acceptable soil contamination levels. According to USACE officials, they relied on FEMA, as the lead for coordinating federal disaster response, to manage communication with states and localities and to identify and manage expectations about the scope of work to be performed using their advance debris removal contracts. While state and local officials we met with in California reported working closely with some FEMA officials not responsible for regional contracting during the response to the wildfires, FEMA regional contracting officials said that they had no direct coordination with California officials. We also identified inconsistencies in the information available to FEMA’s contracting officials on existing advance contracts, which can be used to facilitate coordination with states and localities on the establishment and use of advance contracts. Our review of FEMA’s advance contract list found that it does not include all of the advance contracts that FEMA has in place, and contracting officers we spoke with cited other resources they also use to identify advance contracts, like biannual training documentation provided to contracting staff. For example, while FEMA officials told us the advance contract list is updated on a monthly basis, our analysis found that 58 advance contracts identified on the June 2018 advance contract list were not included in the May 2018 biannual training documentation, including contracts for telecommunications services, generators, and manufactured housing units. Further, 26 of the contracts included in the May training documentation were not included on the June advance contract list, including contracts for foreign language interpretation services, hygiene items, and short-shelf life meals. Some contracting officers we spoke with said they referred to the advance contract list as the primary resource for identifying advance contracts, while others referenced the biannual training as their primary resource. FEMA has recognized some shortcomings in how it coordinated and communicated with state and local governments over the use of advance contracts following the 2017 disasters, and identified some action to address these issues moving forward. In the 2017 Hurricane Season FEMA After-Action Report, FEMA identified the need to expand its capabilities to support state, local, tribal, and territorial governments in improving their capabilities for advance contracting, among other issues. The report recommends that FEMA should continue efforts to develop a toolkit that will provide state and local governments with recommendations for advance contracts, emergency acquisition guidance, and solicitation templates. According to FEMA contracting officials, the development of the toolkit has been prioritized by FEMA’s Administrator to help better prepare the states and localities and decrease their reliance on FEMA for assistance following a disaster. However, as of August 2018 the specific contents of the toolkit were still being decided. For example, officials familiar with the development of the toolkit originally said they intended for it to include FEMA’s advance contract list, to provide states with recommendations on the types of advance contracts that may be useful. But in subsequent discussions these officials told us they did not plan to provide states and localities with a full list of advance contracts to avoid being overly prescriptive, and because not all of the contracts on the list are relevant for the types of disasters some states experience. Officials further stated that since it is the responsibility of the federal coordinator in each region to communicate available federal advance contracts to states and localities, providing a full list of advance contracts is unnecessary. Federal internal control standards state that agency management should use quality information to achieve their objectives. Agency management should also internally and externally communicate that information to achieve their objective. However, FEMA’s guidance does not clearly communicate its objectives and requirements for contracting officers to encourage states and localities to enter into their own advance contracts, nor is there a consolidated resource listing available advance contracts that states and localities can use to inform their advance contracting efforts. According to FEMA officials, information on advance contracts is fluid, as new contracts are established or old contracts expire. Officials also told us that the advance contract list is updated monthly, yet as mentioned earlier, contracts identified in the May training documentation were not reflected in the list that was updated as of June. Ensuring that advance contract information is complete and updated regularly is important, because differences across FEMA’s resources listing advance contracts could result in FEMA’s contracting officers not being aware of the availability of certain contracts during a disaster, and states not receiving recommendations on what advance contracts may be helpful for them to establish. Without clear guidance on FEMA’s expectations for coordination with states and localities on advance contracting efforts, and a centralized resource listing up to date information on FEMA’s advance contracts, FEMA contracting officers and their state and local counterparts lack reasonable assurance they will have the tools needed to effectively communicate about advance contracts, and use them to respond to future disasters. Moreover, given FEMA’s recent emphasis on the importance of states and localities having the capability to provide their own life-saving goods and services in the immediate aftermath of a disaster, clearly communicating consistent and up to date information on the availability and limitations of federal advance contracts through the toolkit, or other means, is critical to informing state and local disaster response efforts. Contracting during a disaster can pose a unique set of challenges as officials face a significant amount of pressure to provide life-sustaining goods and services to survivors as quickly as possible. Advance contracts are a tool that FEMA and others within the federal government can leverage to rapidly and cost-effectively mobilize resources, while also helping to preclude the need to procure critical goods and services non- competitively after a disaster. Given the circumstances surrounding the 2017 disasters and the importance of preparedness for future disasters, it is critical to ensure that the federal government is positioned to maximize its advance contracts to the extent practical and cost-effective to provide immediate disaster response. Although FEMA has identified advance contracts for use during a disaster, without an updated strategy—and guidance that is incorporated into training—on how to maximize their use during a disaster, as well as the development of clear guidance on acquisition planning timeframes, FEMA is at risk of these contracts not being effectively planned and used. Furthermore, FEMA officials have not always maintained complete information on the advance contracts available for them to quickly respond to disasters, or completely reported competitively and non- competitively awarded advance contract information to better help congressional committees evaluate spending over time. Finally, without continued efforts to improve outreach with states and localities and centralize information on available advance contracts, FEMA’s contracting officers and their state and local counterparts may not have the information needed to efficiently respond to a disaster. We are making nine recommendations to FEMA. FEMA’s Administrator should update the strategy identified in its 2007 Advance Contracting of Goods and Services Report to Congress to clearly define the objectives of advance contracts, how they contribute to FEMA’s disaster response operations, and whether and how they should be prioritized in relation to new post-disaster contract awards. (Recommendation 1) FEMA’s Administrator should ensure the Head of the Contracting Activity updates the Disaster Contracting Desk Guide to include guidance for whether and under what circumstances contracting officers should consider using existing advance contracts prior to making new post- disaster contract awards, and include this guidance in existing semi- annual training given to contracting officers. (Recommendation 2) FEMA’s Administrator should update and implement existing guidance for program office and contracting officer personnel to identify acquisition planning timeframes and considerations across the entire acquisition planning process, and clearly communicate the purpose and use of MAPS. (Recommendation 3) FEMA’s Administrator should ensure the Head of the Contracting Activity adheres to current hard copy contract file management requirements to ensure advance contract files are complete and up to date, whether they will be transferred into the new Electronic Contract Filing System or remain in hard copy format. (Recommendation 4) FEMA’s Administrator should ensure the Head of the Contracting Activity reminds contracting officers of the three day timeframe for entering completed award documentation into the contract writing system when executing notice to proceed documentation. (Recommendation 5) FEMA’s Administrator should ensure the Head of the Contracting Activity revises its reporting methodology to ensure that all disaster contracts are included in its quarterly reports to congressional committees on disaster contract actions. (Recommendation 6) FEMA’s Administrator should ensure the Head of the Contracting Activity revises the Disaster Contracting Officer Desk guide to provide specific guidance for contracting officers to perform outreach to state and local governments on the use and establishment of advance contracts. (Recommendation 7) FEMA’s Administrator should ensure the Head of the Contracting Activity identifies a single centralized resource listing its advance contracts and ensure that source is updated regularly to include all available advance contracts. (Recommendation 8) FEMA’s Administrator should ensure the Head of the Contracting Activity communicates information on available advance contracts through the centralized resource to states and localities to inform their advance contracting efforts. (Recommendation 9) We provided a draft of this report to DOD, DHS, and FEMA for review and comment. DOD did not provide any comments on the draft report. In its comments, reprinted in appendix IV, DHS and FEMA concurred with our nine recommendations. DHS and FEMA also provided technical comments, which we incorporated as appropriate. In its written comments, FEMA agreed to take actions to address our recommendations, such as updating guidance on advance contract use and management, adding an addendum to its quarterly report that captures the contract actions that were previously unreported, and better communicating information on advance contracts to states and localities. In its concurrence with two of our recommendations, FEMA requested that we consider these recommendations resolved and close as implemented based on our actions it had previously taken. For example, in its response to our third recommendation, FEMA agreed to update and implement existing guidance to identify acquisition timeframes and the purpose and use of its 5-Year MAPS program. In its response, FEMA reiterated that it has conducted training sessions for its contracting and program staff on the 5-Year MAPS program and provides notice to program managers when acquisition planning is set to begin, which the agency believes satisfies this recommendation. We acknowledge FEMA’s training in this report; however, we noted that not all program and contracting staff we spoke with were familiar with 5-Year MAPS, and there is no formal guidance on timeframes for the entire acquisition planning process. We continue to believe this recommendation remains open and encourage FEMA to formalize guidance on the timeframes and considerations for planning various types of acquisitions across the entire acquisition planning process, and to document the purpose and use of the 5-Year MAPS program to ensure a uniform understanding of the program. Further, in its concurrence with our eighth recommendation, FEMA stated that it believes its current advance contract list satisfies our recommendation for internally communicating available advance contracts. We acknowledge in this report that the advance contract list is updated monthly; however, we found inconsistencies in the advance contract list and other documentation identifying advance contracts, which could result in FEMA’s contracting officers not having full visibility into available advance contracts. We continue to believe the recommendation remains open and encourage FEMA to identify a centralized resource with all available advance contracts and ensure that it is regularly updated for contracting staff. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the U.S. Army Corps of Engineers Director of Contracting, the Secretary of Homeland Security, the Administrator of the Federal Emergency Management Agency, and the Federal Emergency Management Agency’s Chief Procurement Officer. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. This report reviews the federal government’s contracting efforts for preparedness, response, and recovery efforts related to the three 2017 hurricanes and California wildfires. This report specifically addresses the use of advance contracts, assessing the extent to which (1) the Federal Emergency Management Agency (FEMA) and the U.S. Army Corps of Engineers (USACE) used advance contracts, (2) the planning, management, and reporting of selected FEMA and USACE advance contracts met certain contracting requirements, and (3) FEMA and USACE identified any lessons learned and challenges with their use of these contracts. We also have an ongoing review on post-disaster contracting that is expected to be completed in early 2019. To identify the extent to which FEMA and USACE used advance contracts, we reviewed data on contract obligations for the 2017 disasters from the Federal Procurement Data System-Next Generation (FPDS-NG) through May 31, 2018. We identified hurricane obligations using the national interest code, as well as the contract description. Data on obligations for the California wildfires is limited to those contracts that FEMA and USACE identified as being used to respond to those events because no national interest code was established in FPDS-NG. To determine which obligations were made through the use of advance contracts, we reviewed documentation provided by FEMA and USACE identifying the advance contracts they have in place and that were used in support of the 2017 disasters. We analyzed the FPDS-NG data to identify FEMA and USACE advance contract obligations compared to overall contract obligations by disaster, competition procedures used, and the types of goods and services procured. We assessed the reliability of FPDS-NG data by reviewing existing information about the FPDS-NG system and the data it collects—specifically, the data dictionary and data validation rules—and performing electronic testing. We determined the FPDS-NG data were sufficiently reliable for the purposes of this report. To assess the extent to which FEMA used its advance contracts, we reviewed FEMA contracting policies and guidance, such as FEMA’s 2017 Disaster Contracting Desk Guide and FEMA’s Advance Contracting of Goods and Services Report to Congress to identify available guidance on the use and intent of advance contracts. Based on our review of documentation, we identified examples of goods—tarps and meals—that FEMA had advance contracts in place for, but experienced challenges using in response the 2017 disasters. We reviewed FPDS-NG data to determine whether these goods were procured through post-disaster contracts rather than advance contracts, and selected advance and post- disaster contracts for further review. To identify limitations that affected the use of tarp and meal advance contracts, we gathered and reviewed advance and post-disaster contract documentation and interviewed contracting officials involved in the award and use of the contracts in 2017. To assess the extent to which the planning, management, and reporting of advance contracts used in response to the three hurricanes and California wildfires in 2017 met selected applicable contracting requirements, we reviewed relevant documentation, including the Post- Katrina Emergency Management Reform Act (PKEMRA), the Federal Acquisition Regulation (FAR), and Department of Homeland Security (DHS, FEMA, and USACE contracting policies. We identified a non- generalizable sample of advance contracts based on advance contract obligation data from FPDS-NG as of March 31, 2018. We analyzed the data to identify 10 competed and four h non-competed contracts. To obtain a range of competed contracts, we identified contracts used for goods and services with obligations above $50 million. All of the non- competed contracts used were for FEMA services; to obtain a range of non-competed contracts we identified contracts with obligations above $10 million. Our selected advance contracts included 10 from FEMA and four from USACE. Findings based on information collected from the 14 contracts cannot be generalized to all advance contracts. Additional details on our selected contracts can be found in table 2. To review our selected FEMA and USACE advance contracts, we developed a data collection instrument to gather selected contract information, such as period of performance, contract type, estimated contract value, and the presence of key contract documents, among others. To assess FEMA and USACE’s planning of selected advance contracts, we reviewed information from our data collection instrument on advance contract award date and period of performance, and determined that six of FEMA’s contracts met GAO’s definition of a bridge contract. To identify any planning challenges that contributed to these extensions, we reviewed FEMA acquisition planning policies, timeframes and relevant contract file documentation, such as written acquisition strategies and justification and approval documents, to determine whether acquisition planning activities for the selected advance contracts were completed according to guidance. We interviewed FEMA officials associated with these contracts on acquisition planning efforts, and factors that affected their ability to award new contracts. We also reviewed documentation and interviewed officials on FEMA’s acquisition planning system—the 5 Year Master Acquisition Planning Schedule (MAPS). To assess FEMA and USACE’s management of selected advance contracts, we reviewed information gathered from our data collection instrument on the presence of selected acquisition documents, such as acquisition strategies and contract modifications in the contract file, that typically provide the history of a contract. We reviewed relevant procurement regulations, the DHS Acquisition Manual, and other FEMA and USACE policies, to identify acquisition documentation requirements and record keeping processes. For contracts where documentation was not found in the contract file or system of record, we requested the missing documentation from FEMA and USACE officials to determine whether it had been completed. We also interviewed FEMA and USACE headquarters officials to supplement our understanding of FEMA and USACE’s record keeping policies, practices, and challenges. To assess the reporting of selected advance contracts, we compared advance contract action data identified in FPDS-NG to data reported in FEMA’s Disaster Contracts Quarterly Report Fourth Quarter, Fiscal Year 2017 and Disaster Contracts Quarterly Report First Quarter, Fiscal Year 2018 to congressional committees on disaster contracting to identify any unreported actions. We interviewed FEMA officials to discuss the methodology and data sources for the congressional committee reports, and any limitations to the accuracy of the data reported. To assess what challenges and lessons learned FEMA and USACE identified with the use of advance contracts in 2017, we reviewed PKEMRA advance contract requirements, FEMA and USACE documentation on the use of advance contracts, and after-action reports from 2017 and prior years, including the Hurricane Sandy FEMA After- Action Report, and the 2017 Hurricane Season FEMA After-Action Report, and federal internal control standards for information and communications. As part of our review, we identified FEMA and USACE’s processes for documenting lessons learned following a disaster, lessons learned specific to advance contracts, and any recommendations or actions planned by the agencies to address them. We interviewed FEMA and USACE headquarters officials on reported lessons learned, any other challenges related to the use of advance contracts, and ongoing or completed actions to address them. To describe challenges related to coordination with state and local officials on the use of advance contracts, we interviewed FEMA and USACE regional staff. To obtain perspectives and examples from state and local government officials involved in disaster response efforts we interviewed officials in California on advance contracting efforts. The information gathered from these officials is not generalizable to all officials. We also analyzed information on available advance contracts from FEMA’s June 2018 advance contract list and FEMA’s May 2018 training documentation identifying advance contracts to identify any differences in the information available to FEMA regional contracting officers, and their state and local contracting counterparts. We conducted this performance audit from March 2018 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Katherine Trimble (Assistant Director), Meghan Perez (Analyst in Charge), Erin Butkowski, and Suzanne Sterling were principal contributors. In addition, the following people made contributions to this report: Sonja Bensen, Emily Bond, Lorraine Ettaro, Suellen Foth, Julia Kennon, Elisha Matvay, Carol Petersen, Sylvia Schatz, Alyssa Weir, and Robin Wilson.", "summary": "Following Hurricane Katrina, Congress required FEMA to establish advance contracts for goods and services to enable the government to quickly and effectively mobilize resources in the aftermath of a disaster, like those that affected the United States in 2017. GAO was asked to review the federal government's response to the three 2017 hurricanes and California wildfires. This report assesses, among other things, (1) FEMA and USACE's use of advance contracts, (2) FEMA's planning and reporting of selected advance contracts, and (3) challenges, if any, with FEMA's use of these contracts. GAO analyzed data from the Federal Procurement Data System-Next Generation through May 31, 2018; selected a non-generalizable sample of 14 FEMA and USACE advance contracts that were competed and obligated over $50 million, or non-competed and obligated over $10 million, in response to the 2017 disasters; and interviewed FEMA and USACE officials. In response to Hurricanes Harvey, Irma, and Maria, as well as the 2017 California wildfires, the Federal Emergency Management Agency (FEMA) and U.S. Army Corps of Engineers (USACE) relied heavily on advance contracts. As of May 31, 2018, FEMA and USACE obligated about $4.5 billion for various goods and services through these contracts, see figure below. GAO found limitations in FEMA's use of some advance contracts that provided critical goods and services to survivors, including an outdated strategy and unclear guidance on how contracting officers should use advance contracts during a disaster, and challenges performing acquisition planning. FEMA also did not always provide complete information in its reports to congressional committees. Specifically, GAO found 29 advance contract actions that were not included in recent reports due to shortcomings in FEMA's reporting methodology, limiting visibility into its disaster contract spending. FEMA identified challenges with advance contracts in 2017, including federal coordination with states and localities on their use. FEMA is required to coordinate with states and localities and encourage them to establish their own advance contracts with vendors. However, GAO found inconsistencies in that coordination and the information FEMA uses to coordinate with states and localities on advance contracts. Without consistent information and coordination with FEMA, states and localities may not have the tools needed to establish their own advance contracts for critical goods and services and quickly respond to future disasters. GAO is making nine recommendations to FEMA, including that it update its strategy and guidance to clarify the use of advance contracts, improve the timeliness of its acquisition planning activities, revise its methodology for reporting disaster contracting actions to congressional committees, and provide more consistent guidance and information to contracting officers to coordinate with and encourage states and localities to establish advance contracts. FEMA concurred with our recommendations.", "document_type": "gao"}
{"report": "U.S. agencies perform a wide variety of activities that contribute to export promotion, and responsibility for these activities is widely dispersed. Some of the services these agencies provide are intended, at least in part, to assist U.S. companies in entering foreign markets or expanding their presence abroad. For example, the U.S. government distributes trade-related information to exporters, conducts foreign country market research, and provides counseling to U.S. companies throughout the export process. U.S. agencies may also use diplomatic tools to advocate on behalf of U.S. companies to help ensure they can compete on a level playing field in export markets. Three of these agencies—State, Commerce, and USDA—receive appropriations that are restricted from being used to promote the sale or export of U.S. tobacco or tobacco products. These agencies promote the growth of other U.S. exports through various activities, as discussed in table 1. Congress has restricted the use of funds that are generally appropriated for State, Commerce, and USDA from being used to promote the sale or export of U.S. tobacco and tobacco products since the 1990s. In 1990, we reported that U.S. policy and programs for assisting the export of tobacco and tobacco products worked at cross purposes to U.S. health policy and initiatives, both domestically and internationally. Congress later restricted the use of funds that are generally appropriated to State, Commerce, and USDA from being used to promote the sale or export of U.S. tobacco and tobacco products. During fiscal years 1994 through 2003, Congress prohibited funds generally appropriated for USDA through annual appropriations acts from being used to promote the sale or export of tobacco or tobacco products. In fiscal year 2004, Congress permanently prohibited funds appropriated for USDA from being used to promote the sale or export of tobacco or tobacco products. According to USDA officials, USDA stopped its efforts to gather and disseminate tobacco-related production and consumption information overseas in the early 2000s. Congress restricted the use of certain appropriated funds, including appropriations for Commerce and State, from being used to promote the sale or export of U.S. tobacco and tobacco products from fiscal years 1998 through 2017. Congress passed the Departments of Commerce, Justice, State, the Judiciary and Related Agencies Appropriations Act, 1998, which prohibited the funds provided by the act from being used to promote the sale or export of tobacco or tobacco products. This act also prohibited the funds provided by the act from being used to seek the reduction or removal of foreign country restrictions on the marketing of tobacco or tobacco products. The act provided an exception for the funds to be used to address foreign-country restrictions on tobacco marketing that are not applied equally to all tobacco or tobacco products of the same type. These restrictions have been enacted through annual appropriations acts through fiscal year 2018. In fiscal year 2018, Congress altered the restriction language on tobacco promotion in the act making appropriations for State, which, according to State, makes promotion activities permissive with respect to the use of State appropriations. Congress used the term “should” in the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2018 (2018 State Appropriations Act) instead of the term “shall” as in prior acts making appropriations for State. Specifically, the 2018 State Appropriations Act states that “None of the funds made available by this Act should be available to promote the sale or export of tobacco or tobacco products. . . .” In contrast, prior acts making appropriations for State stated “None of the funds made available by this Act shall be available to promote the sale or export of tobacco or tobacco products. . . .” According to State officials, they interpreted the term “shall” in prior appropriations acts as a mandatory action, whereas the use of the term “should” gives the agency more discretion in how it addresses the restrictions. However, State has not changed how it addresses the restrictions and does not plan to promote the sale or export of U.S. tobacco, according to State officials. The legislation restricting fiscal year 2018 appropriations provided to Commerce and USDA from being used to promote tobacco retains the mandatory “shall” language. According to Commerce and USDA officials, the change to State’s restriction language does not affect the agencies’ activities because Commerce and USDA are still subject to the mandatory restrictions outlined in their agencies’ appropriations language. State collaborates with Commerce, USDA, and other agencies to develop and periodically issue an interagency guidance cable to implement funding restrictions on promoting tobacco. According to officials, this cable serves as the primary source of guidance for implementing the restrictions on promoting tobacco for their officials at all posts overseas. State collaborates with Commerce, USDA, and other agencies to develop and periodically issue an interagency guidance cable to all posts overseas to facilitate their implementation of funding restrictions on promoting tobacco. State officials draft the updated cable and Commerce, USDA, and other agency officials have the opportunity to review and comment on it before State issues it through its cable system. This cable serves as the primary source of guidance for implementing the restrictions, according to officials at these agencies (see table 2). State has updated and issued the interagency guidance cable four times since 2013 to address changes in tobacco technology and other emerging issues, according to State officials. We identified two significant changes to the cable over the past 5 years. Addition of information concerning attendance at corporate social responsibility events: In May 2013, State added a provision that post officials should consult with headquarters before attending corporate social responsibility events involving U.S. tobacco companies. State officials in headquarters acknowledged that post officials may not link some activities, such as participating in corporate social responsibility events, to the promotion of or selling of products. They noted that this is why it is important to make post officials aware of the actions they should or should not take through the interagency guidance cable. Changes to the scope of tobacco products: In recent updates to the cable, State expanded the description of “tobacco and tobacco products” to address the emergence of new delivery systems for tobacco. Specifically, in 2014 State added the language “tobacco delivering products, such as electronic cigarettes” to provide an example of a tobacco product. In 2016, State changed the description to “electronic nicotine delivery systems such as e-cigarettes.” Then in 2018, State added “non-combustible products such as smokeless tobacco” to the description of tobacco products. In response to the revised funding restriction language in the 2018 State Appropriations Act, State modified the 2018 cable stating that the changes make promotion activities permissive with respect to the use of State appropriations. However, State decided not to change the portion of the cable describing specific actions officials should or should not take in the version it issued in April 2018, because according to State officials, they do not plan to promote tobacco. In addition, Commerce and USDA officials said that the change to State’s restriction language has not changed how they interpret the guidance. Commerce relies on both the interagency guidance cable as well as its client eligibility policy to implement restrictions on promoting tobacco. Commerce’s client eligibility policy applies to all export promotion services that Commerce provides and educates officials on how to effectively manage U.S. company requests for commercial assistance. The policy’s section on exceptions and other bases for declining services to companies states that Commerce is prohibited by law from promoting the export of tobacco or tobacco-related products. Commerce issued its updated client eligibility policy in October 2018. USDA relies on the interagency guidance cable to provide direction to its officials overseas, and does not have agency-specific guidance for implementing its permanent funding restrictions on promoting tobacco. USDA officials said that the cable sufficiently addresses the funding restrictions on the agency’s promotion activities and helps to ensure that all officials serving at posts overseas conduct activities in a consistent manner. Most State, Commerce, and USDA officials overseas we interviewed were aware of the restrictions on promoting tobacco. Most officials we interviewed had received some guidance concerning the restrictions, but several officials did not recall receiving the interagency guidance cable. Moreover, two of the agencies’ current training courses do not address the restrictions. Officials in 21 of the 24 offices overseas we interviewed were aware of the restrictions. The three offices that were not aware of the restrictions were from State. Although these officials were not aware of the restrictions, they said they had never provided services to U.S. tobacco companies. Commerce and USDA headquarters officials said that it is widely known within their agencies that staff should not promote tobacco. Commerce and USDA officials said the guidance concerning these restrictions has been consistent for many years and that staff in the field and in headquarters are very aware of the restrictions. Most officials overseas had received some guidance concerning the restrictions on promoting tobacco. Officials in 21 of the 24 offices overseas we interviewed had received written or verbal guidance concerning the restrictions on promoting tobacco at some point in their career. For example, officials in 15 offices mentioned receiving the State-issued interagency guidance cable when we asked them what type of tobacco-related guidance they had received. In addition, officials in four of the eight Commerce offices recalled receiving agency-specific guidance. Some officials said that their supervisors had informed them they are not allowed to promote tobacco exports. Some officials did not recall receiving the interagency guidance cable, which agency officials said serves as the primary source of guidance for implementing the restrictions, and some were not aware that State periodically issues the cable. For example, one USDA official stated that he could not recall the last time he received guidance and noted that cables can easily be overlooked. He recommended that USDA improve its efforts to distribute the cable and have supervisors maintain an annual checklist to ensure staff have read and understand it or incorporate it into annual training. A State official told us that he was in Washington, D.C. when State issued the prior cable and he did not learn about it until he had been stationed at his next overseas post for several months. A Commerce official noted that some officials new to post may not receive the interagency guidance cable for several months. All officials working overseas can access the interagency guidance cable through the State cable database or access other resources if a tobacco- related issue arises. For example, the Commerce client eligibility policy and the interagency guidance cable are available on an internal Commerce website. USDA officials in headquarters stated that they do not remind officials overseas about the restrictions or available guidance, but that, in response to our audit work, they plan to send an annual reminder. Finally, many post officials we interviewed said that they are aware of the activities their colleagues are undertaking and would have the opportunity to educate their colleagues before they provided any services to a tobacco company. Officials in 15 of the 24 offices overseas we interviewed said they did not receive any training concerning restrictions on promoting tobacco. In the past, State, Commerce, and USDA did not include information about the funding restrictions or related guidance in training materials. State and USDA officials in headquarters confirmed that training materials for officials conducting export promotion activities overseas do not address funding restrictions on promoting tobacco. According to an official at State’s Foreign Service Institute, tobacco products may be discussed in a trade-related course when describing those products officials should not advocate for, or in the 6-month economic studies course when examining the nexus between trade issues and public policy. However, State could not provide documentation of where this is specifically addressed in its curriculum. A USDA official stated that none of the Foreign Agricultural Service training courses explicitly discuss restrictions on promoting tobacco. According to Commerce officials, the training for new trade specialists did not include information about the restrictions on promoting tobacco when Commerce last provided the training in 2014. However, in response to our audit work, Commerce added this information into its training materials for new trade specialists in September 2018. Officials who do not receive training on the restrictions early in their careers may not be aware that they are prohibited from promoting tobacco. For example, one Commerce official told us he did not know about the restrictions while serving at his first post when he attended a meeting that involved representatives from the tobacco industry. He noted that he now questions whether he would have attended the meeting if he had known about the restrictions. Federal internal control standards state that appropriate training, aimed at developing employee knowledge, skills, and abilities, is essential to an organization’s operational success. If agencies do not explicitly include information about the restrictions and related guidance in training materials for officials conducting export promotion activities overseas, officials may work at a post for several months, or longer, before learning about the restrictions. The State, Commerce, and USDA officials we interviewed said they have implemented the funding restrictions on tobacco as outlined in the interagency guidance cable issued by State. For example, post officials said they have not promoted the sale or export of tobacco or tobacco products or attended events solely sponsored by tobacco companies, though many officials said they attended events at which officials from tobacco companies were present. Post officials identified three areas of the guidance that may benefit from additional clarification, according to interviews with agency officials and our review of agency emails. Our interviews with State, Commerce, and USDA officials in 24 offices in nine countries and our review of agency documents, showed that posts have implemented the interagency guidance outlining actions they should not take (see table 3.) Post officials identified three areas of the guidance that may benefit from additional clarification, according to our interviews with agency officials and our review of agency emails: attendance at events, the types of permitted services, and the description of tobacco products. Officials from all three agencies raised questions about whether and when it is permissible to attend events at which tobacco company representatives are present. The guidance does not specifically address attendance at events also attended by representatives of tobacco companies. State headquarters officials said the vast majority of questions received from posts concern whether personnel at a post may participate in an event when representatives from a company engaged in the tobacco industry are also expected to participate in that event. We also reviewed emails in which Commerce officials asked for additional guidance about attending events or meetings with tobacco companies. For example, one post official asked whether the embassy could invite a tobacco company to participate in an embassy-organized trade mission that would include meetings with the local governor and mayor. In this case, Commerce headquarters officials advised that the tobacco company’s participation could be construed as U.S. government support for the company’s commercial activities and recommended against including the tobacco company. A USDA official in headquarters also noted that attending events could, in some cases, be construed as supporting tobacco companies, and noted that this is an area where staff could use more guidance. Representatives from several tobacco control organizations expressed concern that interactions between U.S. government officials and representatives from tobacco companies at events organized by business associations created a perception that the U.S. government supported tobacco company sales in the country. For example, in 2017 a business association hosted a trade mission to one Southeast Asian country that included representatives from 30 U.S. companies, including a U.S. tobacco company. In response, two tobacco control organizations wrote to the U.S. ambassador in that country voicing their concern that U.S. government officials’ attendance at meetings that included the tobacco company representatives violated the spirit of the interagency guidance cable and gave the appearance that the U.S. government supports the tobacco company. Subsequently, the Deputy Chief of Mission distributed guidance specific to that post stating that officials were not allowed to attend a trade mission’s events or meetings if representatives from a tobacco company were scheduled to give a presentation. Several post officials said that attending events organized by business associations is a key function of their job. They attend these events to, among other things, exchange information about the local business climate and learn about the concerns of American companies. Commerce and USDA officials identified ambiguities in the guidance concerning the types of services they are allowed to provide to tobacco companies or the tobacco industry. In 14 of the 21 Commerce emails we reviewed, officials at posts asked for additional guidance about the types of services they are permitted to provide to tobacco companies or the types of companies or products they can support. For example, some post officials asked whether they could engage with the host country government to obtain information about pending tobacco-related legislation at the request of a tobacco company. In one case, Commerce headquarters advised post officials that the restrictions did not prohibit them from raising concerns on a legislative proposal that would discriminate against foreign tobacco companies. They further noted that because of the sensitive nature of tobacco-related issues, any policy decision to engage should be weighed carefully. Commerce’s client eligibility policy does not provide a description of the types of actions Commerce officials should and should not take with regards to tobacco companies and products. The interagency guidance cable also does not provide information about some types of services, such as whether officials should engage with host country government officials to learn about pending tobacco-related legislation. According to a USDA official, some officials overseas interpret “promotional” activities differently and did not agree on whether both marketing and trade-related activities, such as enforcing trade agreements, are promotional activities. Commerce officials at post asked for additional guidance about whether they could provide export promotion services to companies exporting certain tobacco-related products in 3 of the 21 emails we reviewed. For example, some Commerce officials asked whether they could provide services to companies selling component parts for electronic nicotine delivery systems, such as e-liquids. Commerce’s prior client eligibility policy, issued in May 2017, did not include a list of tobacco products covered by the policy; whereas, the interagency guidance cable issued in 2014 states that tobacco products include tobacco delivery systems, such as electronic cigarettes, and the updated version issued in 2018 added non-combustible products, such as smokeless tobacco, to this description. However, neither the interagency guidance cable nor Commerce’s updated client eligibility policy specifically states whether the description includes component parts for electronic cigarettes and other tobacco products. GAO previously reported that electronic cigarettes include a wide range of products that share the same basic design and generally consist of three main parts: a power source, a heating element, and a cartridge or tank containing liquid solution, which is often sold separately. According to State officials in headquarters, the guidance on promoting tobacco was written for a broad audience and to make post officials mindful of the restrictions. They said they trust that officials overseas will use their professional judgment and in-country expertise to determine if post’s support for an event or a company will be construed as promotion of a tobacco product. Moreover, State and Commerce officials said that they expect officials overseas to ask headquarters questions to clarify the interagency guidance cable. While federal standards for internal control state that management should clearly document internal controls in policies and guidance to prevent officials from failing to achieve an objective or address a risk, we found that the interagency guidance does not provide examples of the factors post officials should consider when attending business association events. The guidance also lacks sufficient examples of the types of services officials are allowed to provide to tobacco companies and a clear description of tobacco products. More specific guidance would help ensure that State, Commerce, and USDA officials consistently implement their agency-specific funding restrictions on promoting tobacco exports. The United States exported over $2 billion in tobacco and tobacco-related products in 2017. Congress has enacted restrictions on the use of certain appropriated funds to promote the sale or export of U.S. tobacco or tobacco products since the 1990s, and State, Commerce, and USDA have developed and updated guidance to implement these restrictions. However, not all officials were aware of the restrictions and more than half had not received training about the restrictions. Including information about the restrictions in training materials would help make officials aware of the restrictions early in their careers and prompt them to seek guidance if a tobacco-related issue arises. If officials conducting export promotion activities are unaware of the funding restrictions on promoting tobacco sales and exports, they may also be unaware of the activities they should and should not undertake. Moreover, some officials said that the guidance is unclear in some areas. Although officials said they need to attend business association events to support all U.S. companies conducting business in a country, they were unsure whether they can attend events where representatives from U.S. tobacco companies may be present. In addition, some officials also indicated that the current guidance lacks clarity on the types of services officials are allowed to provide to tobacco interests and what constitutes a tobacco product. Although we did not identify any instances in which a State, Commerce, or USDA official directly promoted U.S. tobacco products, clearer guidance would help to ensure that officials will consistently implement their agency-specific funding restrictions. We are making three recommendations, including two to State and one to USDA. Specifically: The Secretary of State should work with the Foreign Service Institute to include information about the funding restrictions and relevant guidance on promoting the sale or export of tobacco or tobacco products in its training materials for employees conducting export promotion activities overseas. (Recommendation 1) The Secretary of Agriculture should include information about the funding restrictions and relevant guidance on promoting the sale or export of tobacco or tobacco products in training materials for employees conducting export promotion activities overseas. (Recommendation 2) The Secretary of State, in consultation with the Secretary of Commerce and the Secretary of Agriculture, should assess the interagency guidance cable on promoting tobacco in light of questions raised by officials at posts overseas and update it to address ambiguities, as needed. (Recommendation 3) We provided a draft of this report to State, Commerce, USDA, and USTR for review and comment. In their comments, reproduced in appendix III, State concurred with our recommendations and described planned actions to address them. USDA concurred with the recommendation and told us that they had no comments on the draft report. Commerce and USTR told us that they had no comments on the draft report. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Department of State, the Secretary of the Department of Commerce, the Secretary of the U.S. Department of Agriculture, the U.S. Trade Representative, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. This report examines (1) the guidance select U.S. agencies have issued to implement funding restrictions on promoting tobacco exports overseas, (2) to what extent overseas officials from select U.S. agencies were aware of the restrictions and guidance, and (3) to what extent select U.S. agencies have implemented this guidance overseas. To address our first objective, we reviewed U.S. appropriations laws that prohibited the funds appropriated therein from being used to promote the sale or export of tobacco or tobacco products. We also reviewed guidance issued by the Departments of State (State) and Commerce (Commerce) concerning the promotion of tobacco exports overseas. We also interviewed officials in headquarters from State, Commerce, the U.S. Department of Agriculture (USDA), and the Office of the U.S. Trade Representative (USTR) about the funding restrictions on promoting tobacco exports overseas and the development and revision of guidance on tobacco promotion. To address our second objective, we interviewed officials in headquarters from State, Commerce, and USDA about any training officials posted overseas receive concerning the funding restrictions on promoting tobacco exports. In addition, we held structured interviews with 35 State, Commerce, and USDA officials overseas conducting export promotion activities and reached out to an additional 10 officials to ask about activities associated with the solicitation of gifts and attendance at corporate social responsibility events. These officials were located across 11 posts and in 9 countries. We interviewed officials in Cambodia, Croatia, Dominican Republic, Honduras, Indonesia, Philippines, South Africa, Thailand, and Vietnam. Because multiple officials from one agency attended a meeting in some cases, we are reporting their combined responses as one “office” response. Thus, we are reporting the results from the 24 offices we interviewed—9 State, 8 Commerce, and 7 USDA offices. We selected this non-generalizable sample of countries based on criteria that included the countries’ large or increasing amounts of U.S. tobacco imports, relatively high tobacco smoking prevalence rates, and geographic dispersion. The information obtained from these interviews is neither generalizable nor reflects the experiences of all State, Commerce, and USDA officials serving at posts overseas, but it does provide insights into officials’ experiences at post and illustrative examples across our sample on the topics discussed. To address our third objective, we interviewed officials in headquarters from State, Commerce, and USDA about post officials’ implementation of guidance regarding the promotion of tobacco exports, the types of questions they receive from post officials about the funding restrictions and guidance, and the additional advice they provide to post officials overseas. We asked post officials about the clarity of guidance, whether they attended events sponsored or attended by representatives of U.S. tobacco companies, and whether they discussed tobacco-related issues with host country government officials during our structured interviews with the 24 State, Commerce, and USDA offices overseas. We also analyzed a Commerce database, agency emails, and State cables and conducted a literature search. Commerce documents all the fee-based services it provides to companies in a database. We obtained a list of approximately 30,000 fee-based services Commerce provided in fiscal years 2013 through 2017, which included the name of the companies to which Commerce provided these services. We then downloaded a list of 763 U.S. tobacco companies from Nexus using criteria such as industry classification codes related to tobacco and tobacco products and the location of company headquarters. We limited the list of U.S. tobacco companies to those with revenues greater than $5 million. We then compared the two lists to determine if Commerce provided any fee-based services to U.S. tobacco companies. To assess the reliability of the Commerce fee-based services data, we reviewed relevant documentation and interviewed knowledgeable officials about system controls. We determined that Commerce’s fee-based services data were sufficiently reliable for the purposes of our reporting objectives. In addition, we requested State, Commerce, and USDA email communications concerning tobacco-related issues sent between January 2015 and February 2018 from post officials to headquarters. State was only able to provide one such email. USDA provided several emails, but the emails were not from USDA post officials to USDA officials in headquarters. Commerce provided us 21 emails that matched our request and an additional 20 emails from officials working throughout the United States. We analyzed the Commerce email communications to identify commonly asked questions or concerns about the existing guidance and actions the agencies should take to support U.S. tobacco companies or the tobacco industry. We also requested State cables from the eight countries in our sample sent between January 2013 and December 2017 that referenced at least 1 of the 10 U.S. tobacco companies with the highest revenues. We received and reviewed cables from six of these countries. We also conducted a literature search to identify instances in which U.S. government officials may have conducted activities addressed by the interagency tobacco guidance cable. To identify relevant articles, such as trade or industry articles, we searched various databases, including ProQuest and Nexus. From these sources, we identified one article relevant to our research objective. We performed these searches in December 2017 and searched for articles published from January 2013 to December 2017. We also interviewed representatives of the tobacco control community and business associations to obtain their perspectives concerning U.S. government support for tobacco exports and U.S. government interactions with U.S. tobacco companies. Specifically, we interviewed the World Health Organization (WHO), four global or regional tobacco control nongovernmental organizations, and several local nongovernmental organizations in two countries in our scope. In addition, we interviewed officials from the local American Chamber of Commerce and the U.S.- Association of Southeast Asian Nations Business Council in two countries. The information obtained from these interviews is neither generalizable nor reflects the experiences of all tobacco control organizations or business associations, but it does provide insights into these officials’ experiences. We conducted this performance audit from November 2017 to December 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The United States exported over $2.1 billion in tobacco and tobacco products in 2017. Figure 1 shows how tobacco exports fluctuated from 2007 to 2017. Specifically, total tobacco exports have ranged from a high of approximately $2.4 billion in 2007 to a low of about $1.7 billion in 2012. U.S. tobacco exports to Asia have decreased by 68 percent over the past 11 years, whereas exports to North America have increased 10-fold (see fig. 2). Most of the decrease in exports to Asia is attributable to reduced exports to Japan, which fell 95 percent from 2007 to 2017. Most of the increases in exports to North America are attributable to Canada, which accounted for approximately 40 percent of total U.S. tobacco exports in 2017. David B. Gootnick, (202) 512-3149 or gootnickd@gao.gov. In addition to the contact named above, Cheryl Goodman (Assistant Director), Celia Thomas (Assistant Director), Amanda Bartine, Leah DeWolf, Jewel Conrad, Aldo Salerno, and Neil Doherty made key contributions to this report. Grace Lui, Justin Fisher, and Ming Chen provided technical assistance.", "summary": "The World Health Organization estimates that tobacco use kills over 7 million people each year, more than tuberculosis, HIV/AIDS, and malaria combined. Since the 1990s, Congress has enacted restrictions regarding the use of certain appropriated funds to promote U.S. tobacco exports. GAO was asked to review the implementation of these restrictions. This report examines (1) guidance select U.S. agencies have issued to implement these restrictions, (2) whether overseas officials from select U.S. agencies were aware of the restrictions and guidance, and (3) select U.S. agencies' implementation of the guidance overseas. GAO reviewed U.S. laws, agency guidance, and internal communications; analyzed Commerce data; and interviewed agency officials in Washington, D.C. and in 24 offices across 11 overseas posts in 9 countries. GAO selected these countries based on criteria that included U.S. tobacco export totals, smoking rates, and geographic dispersion. Congress has restricted the use of certain appropriated funding to promote tobacco exports and the Departments of State (State), Commerce (Commerce), and Agriculture (USDA) have issued interagency guidance through the cable system that they rely on to implement these restrictions. State collaborates with these and other agencies to periodically update this cable. The cable informs officials about the types of actions they should take—such as providing routine business facilitation services to all U.S. companies—and the types of actions they should not take—such as attending events sponsored by tobacco companies. Most, but not all, officials overseas that GAO interviewed were aware of the restrictions and received some guidance concerning the restrictions. However, GAO found that some officials did not recall receiving the interagency guidance cable. In addition, State and USDA's current training materials do not address the restrictions. Federal internal control standards state that appropriate training is essential to an organization's operational success. Thus, providing officials overseas with training about the funding restrictions and related guidance would help to ensure that officials are aware of the restrictions. U.S. officials overseas have implemented restrictions on promoting tobacco, but some officials said that the interagency guidance lacks clarity. Officials said that they have not promoted tobacco by, for example, attending events sponsored solely by tobacco companies. However, officials identified three areas of the guidance that are unclear: (1) attendance at events not sponsored by U.S. tobacco companies but attended by representatives of these companies; (2) the types of services officials can provide tobacco companies; and (3) the description of tobacco products, such as whether component parts for electronic cigarettes are included. Federal standards for internal control state that management should clearly document internal controls in policies and guidance to prevent officials from failing to achieve an objective or address a risk. By providing more specific guidance, the agencies would help ensure that officials consistently implement the funding restrictions on promoting tobacco. GAO recommends that (1) State and USDA include information about the funding restrictions and guidance in training materials for relevant employees and (2) State, in consultation with Commerce and USDA, assess and update the interagency guidance cable, as needed, on promoting tobacco in light of questions raised by officials at posts overseas. State and USDA concurred with the recommendations.", "document_type": "gao"}
{"report": "The United States has many international agreements that require treaty partners to provide certain information to IRS, which can help prevent the use of foreign bank accounts to facilitate tax evasion. FATCA goes much further, requiring FFIs to report more detailed information to IRS about their U.S. customers annually. These provisions are important developments in efforts to combat tax evasion by U.S. persons holding investments in offshore accounts. FATCA generally requires certain taxpayers to report foreign financial accounts and other specified foreign financial assets whose aggregate value exceeds specified thresholds to IRS on Form 8938. These taxpayers must report these assets and income generated from such assets to IRS with their tax return on Form 8938. These thresholds vary by filing status—such as single or married filing jointly—and by domestic or foreign residency. FATCA also promotes third-party reporting of foreign financial assets by requiring a withholding agent to withhold 30 percent on certain payments to an FFI unless the FFI or the jurisdiction in which the FFI is located has entered into an agreement with the United States to report certain account information of their U.S. customers. Under such an agreement, participating FFIs report detailed information to IRS annually about accounts held by their U.S. customers using an IRS Form 8966, FATCA Report (Form 8966). According to IRS, FATCA improves visibility into taxable income from foreign sources, and enhances the agency’s ability to identify and pursue taxpayer noncompliance. For example, FATCA allows IRS to compare information reported by FFIs on Forms 8966 to information reported by U.S. persons on Forms 8938. According to IRS, this comparison can be used to ensure taxpayers and FFIs are properly reporting foreign financial assets and income from international investments. This type of comparison is a common IRS enforcement technique. For example, IRS can directly compare information it receives from financial institutions’ IRS Form 1099-INT, Interest Income, against a tax return to determine if the taxpayer reported income generated from interest earned. To facilitate FATCA implementation for FFIs operating in jurisdictions with laws that would prohibit FFIs from complying with the terms of the FFI agreement, Treasury developed two alternative intergovernmental agreements (IGA)—Model 1 and Model 2—to facilitate the effective and efficient implementation of FATCA by removing partner jurisdictions’ legal impediments to comply with FATCA reporting requirements, and reducing burdens on FFIs located in partner jurisdictions. FFIs from countries with Model 1 IGAs report information on U.S. persons’ accounts to their respective host country tax authorities (HCTAs). The HCTAs, in turn, compile the information from FFIs and transmit it to IRS. In contrast, FFIs from countries with Model 2 IGAs, or countries treated as not having an IGA in effect, directly report information on U.S. persons’ accounts to IRS. Separate from the FATCA requirements, regulations implementing the Bank Secrecy Act of 1970 (BSA) also impose a separate self-reporting requirement for foreign accounts. Specifically, certain taxpayers and residents are required to file an FBAR with FinCEN annually if they have financial interest or signature or other authority over one or more foreign financial accounts with a total of more than $10,000, regardless of whether they reside within or outside the United States. Federal, state, and local law enforcement agencies can use information from these reports to combat financial crimes, including terrorist financing and tax evasion. Appendix IV provides a comparison of Form 8938 and FBAR reporting requirements. Figure 1 depicts the flow of foreign financial account information from U.S. persons and FFIs to IRS and FinCEN through the FATCA and FBAR reporting processes. As part of the FATCA reporting requirements, IRS collects information on financial accounts through forms and reports submitted by both taxpayers and FFIs. As part of this effort, IRS requires taxpayers to identify their TINs on Forms 8938 they submit. IRS also requires participating FFIs to report the TINs of each account holder who is a specified U.S. person on Forms 8966. IRS intends to use reported TINs to link Form 8938 data filed by taxpayers to Form 8966 data filed by the FFIs to ensure that taxpayers and FFIs are properly reporting foreign financial assets. However, IRS often could not link account information collected from FFIs to the account’s owner because of incorrect or missing TINs. In July 2018, the Treasury Inspector General for Tax Administration (TIGTA) found that almost half of new Forms 8966 filed by FFIs did not include a TIN or included an invalid TIN. A consulting firm working with FFIs to implement FATCA reporting requirements told us that FFIs encountered significant challenges obtaining accurate TINs from U.S. persons as part of the self-certification process. For instance, FFIs encountered situations where U.S. persons provided incomplete or inaccurate TINs—such as Social Security Numbers (SSN) with less than nine digits—on forms used to self-certify their status as U.S. persons. FFIs also encountered situations where U.S. persons may not have obtained TINs or were unwilling to provide them to FFIs. Additionally, banking associations told us that it has taken time, effort, and expense for FFIs to report TINs, as they had to upgrade computer systems to collect and record TINs from U.S. customers. Finally, Treasury told us that jurisdictions that have an IGA with the United States but no legal requirement to collect TINs are not in compliance with the requirements of the IGA. Treasury and IRS determined that some FFIs reporting from countries with Model 1 IGAs needed additional time to implement procedures to obtain and report required U.S. TINs for preexisting accounts that are U.S. reportable accounts. Consequently, IRS provided a transition period, through the end of 2019, for compliance with the TIN requirements for FFIs under Model 1 IGAs. Specifically, in September 2017, IRS issued a notice modifying procedures for FFIs reporting from countries with Model 1 IGAs to become compliant with TIN reporting requirements for preexisting accounts. For calendar years 2017-2019, IRS will not determine that certain FFIs in countries with Model 1 IGAs are significantly noncompliant with their obligations under the IGA solely as a result of a failure to report U.S. TINs associated with the FFI’s U.S. reportable accounts, providing they (1) obtain and report the date of birth of each account holder and controlling person whose TIN is not reported, (2) make annual requests for missing TINs from each account holder, and (3) search electronically searchable data maintained by such FFIs for missing required U.S. TINs before reporting information that relates to calendar year 2017 to a partner jurisdiction. As a result, even without any further extensions, calendar year 2020 is the earliest IRS will be enforcing requirements for FFIs from countries with Model 1 IGAs to provide accurate and complete information on U.S. account holders’ TINs to IRS. Without valid TINs on Forms 8966 submitted by FFIs, according to IRS officials, IRS faces significant hurdles in matching accounts reported by FFIs to those reported by individual tax filers on their Forms 8938. As a result, IRS must rely on information such as names, dates of birth, and addresses that the filers and/or FFIs may not consistently report. Without data that can be reliably matched between Forms 8938 and 8966, IRS’s ability to identify taxpayers not reporting accurate or complete information on specified foreign financial assets is hindered, interfering with its ability to enforce compliance with FATCA reporting requirements, and ensure taxpayers are paying taxes on income generated from such assets. In July 2018, TIGTA reported that IRS lacked success in matching FFI and individual taxpayer data because reports FFIs filed did not include or included invalid TINs. This, in turn, affected IRS’s ability to identify and enforce requirements for individual taxpayers. TIGTA recommended, among other things, that IRS initiate compliance efforts to address and correct missing or invalid TINs on Form 8966 filings from FFIs from countries with Model 2 IGAs or without any IGAs with the United States. IRS management said it disagreed with this recommendation because a system to ensure validation of every TIN upon submission of a Form 8966 would be cost prohibitive. However, IRS management said that IRS would address invalid TINs as they are uncovered on other compliance efforts, such as initiating development of a data product to automate risk assessments across the FATCA filing population. IRS also said it continues efforts to systematically match Form 8966 and Form 8938 data to identify nonfilers and underreporting related to U.S. holders of foreign accounts. However, IRS management told us they are waiting until they have a full set of data, including TINs, before doing analysis to develop a compliance strategy. According to TIGTA, IRS management believed that having the FFI’s Global Intermediary Identification Number (GIIN) on Form 8938, which is filed by the taxpayer, would help with matching records. However, Form 8938 instructions identify that the field is optional for taxpayers to complete. TIGTA recommended that to reduce taxpayer burden in obtaining GIINs from FFIs, IRS add guidance to Form 8938 instructions to inform taxpayers on how to use the FFI List Search and Download Tool on the IRS’s website to obtain an FFI’s GIIN. IRS agreed with this recommendation. However, even if an individual taxpayer provided GIINs, IRS may continue to have difficulty matching accounts with U.S. taxpayers if the TIN and name of the account holder reported on the Form 8966 do not match the TIN and name of the taxpayer on the Form 8938. IRS officials said they are aware of these difficulties and have attempted to match Forms 8938 and 8966 based on other criteria such as dates of birth. In its response to our draft report, IRS said that all financial institutions and foreign tax authorities that file required account information receive a notification listing administrative and other minor errors contained in their reporting. According to IRS, its Large Business and International division follows up with foreign tax authorities regarding these errors to ensure the tax authorities are working with financial institutions to correct these errors in compliance with the countries’ IGAs. IRS added it has initiated a campaign addressing FFIs that do not meet their compliance responsibilities with respect to account opening requirements. Additionally, IRS drafted a risk acceptance form and tool addressing risks in implementing FATCA compliance and business process capabilities. This risk assessment focused on the limitations IRS faces due to budget constraints, but did not address the specific risks it faces from not receiving complete and valid TINs on U.S. account holders. We previously reported that risk management could help stakeholders make decisions about assessing risk, allocating resources, and taking actions under conditions of uncertainty. Key management practices for risk management we identified from our prior work include identifying, analyzing, and prioritizing risks; developing a mitigation plan to address identified risks; implementing the plan; and monitoring, reporting, and controlling risks. Without developing a risk mitigation plan to address risks IRS faces from not receiving complete and valid TINs moving forward, IRS may lose opportunities to adjust its compliance programs to better identify U.S. persons who are not fully reporting specified foreign financial assets as required under FATCA. Several IRS databases store data collected from individuals’ electronic and paper filings of Form 8938 and/or elements of parent individual tax returns to which the Form 8938 is attached—the filer’s country of residence and filing status—used to determine specified reporting thresholds for Form 8938 filers. Additionally, data from these databases and other sources are transferred downstream to IRS’s Compliance Data Warehouse (CDW)—a database used for research and analytical purposes. We extracted data from copies of Individual Return Transaction File (IRTF) and Modernized Tax Return Database (MTRDB) data copied into CDW to obtain information reported on Forms 8938 and relevant information from parent tax returns, such as filing status and filers’ country of residence. We found that IRTF and MTRDB had inconsistent and incomplete data. For example, neither database had consistent and complete information on foreign financial account and other asset information submitted by Form 8938 filers. While IRS officials told us that IRTF is the authoritative source for filers of Form 8938, it does not store account and other asset information submitted on Forms 8938. Additionally, IRS officials said MTRDB is not designed to store information submitted on paper filings of Forms 8938 and parent tax returns. Officials from IRS’s Research, Applied Analytics and Statistics (RAAS) division also noted that CDW did not have reliable information from Form 8938 paper filings. Because of the lack of foreign financial asset information from such filings, we could not report complete information on assets reported by Form 8938 filers. Further, IRS does not provide instructions to CDW users on how to extract appropriate data from CDW—such as data copied from IRTF and MTRDB—leading to confusion on which databases to use for extracting Form 8938 and relevant parent tax return data. For example, five distinct tables within CDW are required to identify the TIN, parent form, filing status, country of residence, and amount of foreign assets accurately. Without clear explanations of how data in each of these tables relate to each other and to the underlying filings, errors could be introduced into CDW users’ analyses of foreign asset information. Standards for Internal Control in the Federal Government notes that management should use quality information to achieve the entity’s objectives. One attribute of this principle includes processing data into quality information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis. Additionally, the Internal Revenue Manual states that IRS needs to measure taxpayer compliance so that customer-focused programs and services can be enhanced or developed so that compliance information and tools can be improved. According to IRS officials, IRS researchers have been taking additional steps to obtain and review Form 8938 and parent tax return data stored in the Integrated Production Model (IPM) database. They said IPM is the only database that contains complete data from individuals’ electronic and paper filings of Forms 8938 and relevant elements of parent tax returns. IRS officials said that RAAS has been working with IRS’s information technology (IT) division to obtain read-only access to IPM, and import Forms 8938 and 8966 data from IPM into CDW for analysis. However, as of February 2019, this effort has been delayed due to budget constraints. In its response to our draft report, IRS said that obtaining read-only access would require a new technical process and plans to continue working with IT on the feasibility and timeframe for enabling this access. Enabling access to consistent and complete Form 8938 and parent tax return data for compliance staff and researchers from RAAS and other IRS business units would help IRS strengthen its efforts to enforce compliance with FATCA reporting requirements and conduct research to bolster enforcement efforts. However, such efforts may be hampered until IRS can ensure readily available access to such data. We previously recommended that IRS develop a broad strategy, including a timeline and performance measures, for how IRS intends to use FATCA information to improve tax compliance. IRS agreed with this recommendation and developed a strategy for FATCA in July 2013. IRS updated the strategy in 2016 by creating the FATCA Compliance Roadmap as a comprehensive plan to articulate IRS’s priorities to facilitate compliance with FATCA reporting requirements. The roadmap also provided an overview of compliance activities used solely for enforcing FATCA reporting requirements or enhancing existing compliance efforts. However, in July 2018, TIGTA reported that IRS had not updated the FATCA Compliance Roadmap since 2016, and had taken limited or no action on a majority of the planned activities outlined in it. We also found that IRS had not yet evaluated the effects of FATCA, including the effects on voluntary tax compliance. IRS documentation states that only 7 of 31 capabilities outlined in the FATCA Compliance Roadmap were delivered due to funding constraints. As of October 2018, IRS has stopped using the FATCA Compliance Roadmap and has not developed a revised comprehensive plan to manage efforts to leverage FATCA data to improve taxpayer compliance. According to IRS officials, IRS moved away from updating broad strategy documents, such as the FATCA Compliance Roadmap, to focus on individual compliance campaigns. These include a campaign to match individual tax filers to the reports from FFIs, and another campaign to identify FFIs with FATCA reporting requirements who are not meeting all of their obligations. According to what IRS told us, with the passage of time and as FATCA is becoming more integrated into agency operations, it has moved from updating the broad strategy documents focused on FATCA to working on compliance campaigns that incorporate FATCA into overall tax administration. Additionally, IRS and outside researchers plan to study the role of enforcement in driving overall patterns in reporting offshore assets and income generated from such assets. Though IRS maintains that FATCA is more integrated into its operations, TIGTA’s 2018 report concluded that IRS was still unprepared to enforce compliance with FATCA in part because it took limited or no action on the majority of planned activities outlined in the FATCA Compliance Roadmap. Documenting a framework for using FATCA reporting requirements to improve taxpayer compliance and measure their effect is consistent with three steps we found leading public sector organizations take to increase the accountability of their initiatives: (1) define clear missions and desired outcomes; (2) measure performance to gauge progress; and (3) use performance information as a basis for decision-making. We also previously reported that it is important for IRS to use a documented framework that defines a clear strategy, timeline, and plans for assessment. Having such a framework in place can help IRS better allocate resources and avoid unnecessary costs resulting from not having the necessary or appropriate data available to execute its objectives. In light of the challenges IRS faces to collect, manage, and use FATCA data to improve compliance in a resource-constrained environment, employing a comprehensive plan would help IRS maximize the use of collected data and better leverage individual campaigns to increase taxpayer compliance. Without such a plan, IRS’s ability to collect and leverage data collected under FATCA for compliance enforcement and other purposes is constrained. We could not report on total values of foreign financial assets on Forms 8938 in tax years 2015 and 2016. However, we could provide a range of total maximum account values reported on FBARs during the same period. Specifically, we determined that more than 900,000 individuals filed FBARs in calendar years 2015 and 2016, and declared total maximum values of accounts ranging from about $1.5 trillion to more than $2 trillion each year. A little more than one in five—or about 21.7 percent—of the approximately 404,800 Forms 8938 filed with IRS in tax year 2016 were done so from U.S. persons living abroad, with the other 78.3 percent living in the United States. Table 1 shows that a higher proportion of Form 8938 filings from U.S. persons living abroad for tax year 2016 were filed on paper (43.3 percent) than Form 8938 filings from U.S. persons living in the United States during the same period (14.7 percent). We extracted these data from IRTF, which IRS officials said is the authoritative source for filers of Form 8938. However, we could not report complete information on foreign financial assets reported by Form 8938 filers because such data are incomplete; as noted above, IRS databases we used to extract Form 8938 data—IRTF and MTRDB—do not include asset information reported on paper filings of Forms 8938. Of the approximately 404,800 Forms 8938 filed by individuals for tax year 2016—the most recent data available—we could access information on residency of filers and reported foreign financial assets from about 277,600 Forms 8938 that did not indicate that foreign financial assets and values were declared on other forms besides the Form 8938. Of the subset of these Forms 8938, more than one quarter—or about 73,500— reported foreign financial assets in amounts that indicate the Form 8938 may have been filed unnecessarily, since they reported specified foreign financial assets with aggregate values at or below reporting thresholds as of the last day of the tax year. Based on available Form 8938 data from tax year 2016, table 2 shows that about 61,900 filings from U.S. persons living in the United States and about 11,600 filings from U.S. persons living abroad during the same tax year reported specified foreign financial assets with aggregate values at or below end of tax year thresholds. These totals likely understate the total number of Forms 8938 that U.S. persons may have filed unnecessarily in tax year 2016; due to data limitations, these totals exclude Forms 8938 without asset information stored in IRS’s databases, including most Forms 8938 filed on paper and Forms 8938 where filers identified that they declared foreign financial assets on other forms besides the Form 8938. There is no clear explanation as to why some U.S. persons may have filed Forms 8938 unnecessarily. However, we identified a number of potential reasons from focus groups and other interviews with stakeholder groups. In focus groups we conducted, participants expressed confusion about IRS’s instructions for completing the Form 8938 and information provided on IRS’s website. In the instructions for completing Form 8938, IRS described the specific types of foreign financial assets that are to be reported on Form 8938, and the asset value thresholds that must be met for required reporting, depending on the location of residence and filing status of the taxpayer. IRS also posted responses to frequently asked questions on meeting FATCA reporting requirements on its website, and established a separate page on its website comparing foreign financial assets that must be reported on Form 8938 and/or FBAR. Nonetheless, focus group participants reported confusion on whether and how to report investment and retirement accounts and compulsory savings plans managed by their country of residence. In a meeting we convened with an organization representing tax attorneys, they told us taxpayers are unsure about what account values to report on the Form 8938. Tax practitioners participating in another focus group added that they filed Forms 8938 regardless of the aggregate value of the assets because it was too cumbersome for them to identify whether the assets exceeded reporting thresholds as of the end of the year or at any time during the year. IRS officials also cited a number of possible reasons why U.S. persons may be filing Forms 8938 unnecessarily. For example, it may be easier for U.S. persons to report all specified foreign financial assets they hold on the Form 8938, rather than determine whether the value of such assets met applicable thresholds. IRS officials also said that U.S. persons might complete a Form 8938 for reasons besides meeting tax-filing requirements, such as providing evidence of assets for a loan application. IRS’s Taxpayer Bill of Rights states that taxpayers are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. Furthermore, one of IRS’s strategic goals is to empower taxpayers by making it easier for them to understand and meet their filing, reporting, and payment obligations. IRS officials said they hosted sessions for tax practitioners at IRS Nationwide Tax Forums to address FATCA reporting requirements. However, they said IRS has not taken direct steps to identify or implement actions to further clarify instructions and related guidance on IRS’s website for completing Form 8938, such as information on which foreign financial assets to report, how to calculate asset values, and determine whether such values exceed required reporting thresholds. Additionally, IRS officials said they have not conducted additional outreach to educate taxpayers on required reporting thresholds under FATCA, or notify Form 8938 filers of instances where aggregate values of specified foreign financial assets reported on Forms 8938 were below reporting thresholds. IRS officials said they have not made efforts to determine whether there is a pattern of unnecessary Form 8938 filings that they could address. Rather, they said they believed resources should be devoted to FATCA implementation in general. However, as shown above, we have identified many tens of thousands of instances where U.S. persons may have filed Forms 8938 unnecessarily. Without assessing factors contributing to unnecessary Form 8938 reporting—and identifying or implementing actions to further clarify and educate taxpayers on FATCA reporting requirements—IRS is missing opportunities to help taxpayers understand their filing and reporting obligations and minimize their compliance burdens while properly meeting their tax obligations. Additionally, IRS may be missing opportunities to reduce costs in processing forms that taxpayers did not need to file. Because of overlapping statutory reporting requirements, IRS and FinCEN—both bureaus within Treasury—collect duplicative foreign financial asset data using two different forms (Form 8938 and FBAR). Our evaluation and management guide for fragmentation, overlap, and duplication states that overlap occurs when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries. Table 3 shows that individuals required to report foreign financial assets on Form 8938, in many cases, also must meet FBAR reporting requirements. For example, specified individuals with foreign financial accounts exceeding $50,000 in aggregate value on the last day of the tax year must file both Form 8938 and FBAR if such values exceed the minimum Form 8938 thresholds; these thresholds depend on the filing status and address of specified individuals. Table 3 also shows that, in many cases, specified interests in foreign financial assets as defined in Form 8938 instructions are the same as the financial interest in such assets under FBAR. Further, as noted in table 3, the overlapping requirements lead to IRS and FinCEN collecting the same information on certain types of foreign financial assets. For example, both Form 8938 and FBAR collect information on foreign financial accounts for which a person has signature authority and a financial interest in the account. Form 8938 and FBAR also both collect duplicative information on several other types of foreign financial assets, such as foreign mutual funds and accounts at a foreign financial institution that include foreign stock or securities. Overlapping reporting requirements result in most Form 8938 filers also filing an FBAR during the same reporting year. Table 4 shows that close to 75 percent of Form 8938 filers in tax years 2015 and 2016 percent also filed an FBAR for the same year using the same TIN. Overlapping requirements to file both Form 8938 and FBAR increases the compliance burden on U.S. persons and adds complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting. Focus group participants in all five countries included in our study affirmed that U.S. persons experienced confusion and frustration with having to report duplicative foreign financial asset information on both forms. Focus group participants and others we interviewed also noted that U.S. persons incurred additional financial costs to complete and file both Form 8938 and FBAR. For instance, one tax practitioner in Canada said the charge was about $190 to report four-to-five accounts on an FBAR in addition to charging about $540 for basic tax return packages. An accounting firm based in Japan typically charged between $300 and $800 to complete a Form 8938 and between $150 and $500 to complete an FBAR, depending on the number of accounts reported on the forms. Proposed revisions to regulations implementing BSA proposed by FinCEN may also increase the number of duplicative foreign financial accounts reported on Form 8938 and FBAR. Currently, U.S. persons must report detailed information on all foreign financial accounts on Form 8938 if the value of such accounts and other specified foreign financial assets reaches applicable reporting thresholds. In contrast, U.S. persons are generally exempted from reporting detailed account information on FBARs if they report having signature or other authority over 25 or more foreign financial accounts. FinCEN’s proposed revisions to BSA regulations would eliminate the exemption, requiring U.S. persons to report detailed information on all foreign financial accounts in which he or she has a financial interest if the value of such accounts exceed FBAR’s $10,000 reporting threshold. FinCEN estimated that it will receive account information for the first time on about 5.4 million foreign financial accounts if it finalizes the proposed revisions. In turn, these revisions may lead to increased filings of duplicative asset data on both Form 8938 and FBAR, as U.S. persons may have to report detailed information on all foreign financial accounts using both forms. U.S. persons also face exposure to two different penalty regimes for any failures in accurately and completely reporting foreign financial asset information to two bureaus within Treasury—IRS and FinCEN. Officials from one organization representing U.S. persons living abroad said penalties due to failure to report certain accounts on one or both forms can be significant, even if little or no taxes are owed on those accounts. The duplicative reporting of foreign financial asset data on two different forms also creates additional costs to the government to process and store the same or similar information twice, and enforce reporting compliance with both requirements. In 2012, we recommended that Treasury direct the Office of Tax Policy, IRS, and FinCEN to determine whether the benefits of implementing a less duplicative reporting process exceed the costs and, if so, implement that process. Treasury did not implement our recommendation. While we continue to believe that the agencies should have considered whether less duplicative reporting could have been implemented, we do recognize that FATCA and FBAR were enacted under two different statutes to serve different purposes. As mentioned above, according to IRS, FATCA improves visibility into taxable income from foreign sources and enhances the agency’s ability to identify and pursue taxpayer noncompliance. In contrast, the information reported on the FBAR is collected to identify money laundering and other financial crimes; law enforcement agencies can use BSA information—including information collected from FBARs— to aid regulatory and criminal investigations. Additionally, data collected from Form 8938 and FBAR are used in different systems for use by different bureaus within Treasury. Fully addressing issues stemming from overlapping reporting requirements and the resulting collection of duplicative information—while at the same time ensuring that such information can be used for tax compliance and law enforcement purposes—can only be done by modifying the statutes governing the requirements. Further, IRS and FinCEN have varying degrees of access to foreign financial asset information collected from Form 8938 and FBAR to enforce tax compliance and financial crime laws. FATCA was enacted, in part, to improve visibility into taxable income from foreign sources. However, information provided on Forms 8938 is taxpayer return information protected by section 6103 of the Internal Revenue Code (IRC), which generally prohibits IRS from disclosing information provided on Forms 8938. IRS can share return information with other government agencies and others when it is allowed by statute. For example, under section 6103, IRS may disclose return information related to taxes imposed under the IRC—such as self-employment income tax, Social Security and Medicare tax and income tax withholding—to the Social Security Administration (SSA) as needed to carry out its responsibilities under the Social Security Act. However, according to FinCEN officials, FinCEN, law enforcement, and regulators often cannot access information submitted on Forms 8938. While section 6103 provides other exceptions to disclosure prohibitions—such as allowing IRS to share return information with law enforcement agencies for investigation and prosecution of nontax criminal laws—such information is generally only accessible pursuant to a court order. As noted above, information reported on the FBAR can be used by law enforcement agencies to aid regulatory and criminal investigations. This includes IRS, which has been delegated responsibility from FinCEN to enforce compliance with FBAR reporting requirements. IRS has used FBAR information in addressing taxpayer noncompliance with reporting and paying taxes on foreign assets and income. For example, taxpayers accepted into one of IRS’s offshore voluntary disclosure programs must have filed amended or late FBARs as part of their program applications. Investigators from IRS’s Criminal Investigation division generally reviewed applications to determine if the taxpayer has made a complete and truthful disclosure. IRS examiners can also use information from case files of program participants—such as information disclosed on FBARs— to identify new groups of taxpayers suspected of hiding income offshore. IRS can then choose to continue offering offshore programs and encourage these newly identified groups of taxpayers, as well as all taxpayers with unreported offshore accounts, to disclose their accounts voluntarily. In addition to eliminating overlapping reporting requirements, harmonizing statutes governing foreign financial asset reporting and use of information collected on such assets to make such statutes fully consistent could yield additional benefits to both IRS and the law enforcement community. Specifically, and as shown in appendix IV, there are specified foreign financial assets reported on Form 8938—such as foreign hedge funds and foreign private equity funds—that are not required to be reported on an FBAR. In contrast, there are other specified foreign financial assets reported on an FBAR—such as indirect interests in foreign financial assets through an entity—that are not required to be reported on Form 8938. Without congressional action to address overlap in foreign financial asset reporting requirements, IRS and FinCEN will neither be able to coordinate efforts to collect and use foreign financial asset information, nor reduce unnecessary burdens faced by U.S. persons in reporting duplicative foreign financial asset information. Two reporting systems for sharing foreign account information from foreign financial institutions are in operation globally—FATCA and the Common Reporting Standard (CRS). According to officials from banking associations and a consulting firm, FFIs in the countries where we examined FATCA implementation encountered challenges implementing and now maintaining two overlapping reporting systems for collecting and transmitting account information to other countries for a seemingly similar purpose, and collecting sufficient information from customers to ensure they meet the requirements of both systems. As noted above, we previously identified overlap as occurring when multiple agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries. According to an IRS official, collecting account information under FATCA ushered in an era of greater transparency; as noted above, FATCA’s passage sought to reduce tax evasion by creating greater transparency and accountability with respect to offshore accounts and other assets held by U.S. taxpayers. When FATCA was first introduced, there was no international platform to share account information between countries. The United States and other countries worked together to reach an agreement on the electronic formatting that would be used to share the information. Other countries tax authorities’ became more interested in understanding the financial assets held abroad by their residents through an exchange of account information among themselves. In response, the Organisation for Economic Co-operation and Development (OECD) established the CRS reporting system for automatic exchange of information among member countries. According to the OECD, CRS was developed with a view to maximize efficiency and reduce cost for financial institutions. Thus, CRS drew extensively on the intergovernmental approach used to implement FATCA reporting requirements for FFIs. Countries participating in CRS exchange account information with each other using OECD’s Common Transmission System, which was modeled on FATCA’s International Data Exchange System. Figure 2 depicts the flow of account information between countries under FATCA and CRS. CRS reporting requirements are in many ways similar to FATCA, including required reporting of the account holders’ name and address, taxpayer identification number, account number, account balance, and income and sales proceeds. However, the requirements differ in significant ways. The biggest differences in requirements are driven by the nature of the U.S. tax system. The United States, like many countries, generally taxes citizens and resident aliens on their worldwide income regardless of where that income is earned. However, the United States differs from other countries because it generally subjects U.S. citizens who reside abroad to U.S. taxation in the same manner as U.S. residents. In contrast to U.S. policy, most other countries do not tax their citizens if they reside in a country other than their country of citizenship. Further, IGAs implementing FATCA require FFIs to report the foreign-held accounts of U.S. citizens and residents—including resident aliens—while CRS requires financial institutions in jurisdictions participating in CRS to report on almost all accounts held by nonresidents of the reporting country. Appendix V provides more detailed information on differences in reporting requirements, due diligence requirements, and definitions under FATCA and CRS. These differences in tax systems drive variations in due diligence procedures between FATCA and CRS. For example, FATCA aims to identify whether an account holder at a foreign institution is a U.S. person based on citizenship and tax residency information. In contrast, CRS aims to identify the tax residency of all account holders of a financial institution, and does not consider citizenship. Due to the multilateral nature of CRS, if an account holder is determined on the basis of the due diligence procedures to have residency in two or more countries, information would be exchanged with all jurisdictions in which the account holder is determined a resident for tax purposes. Under CRS rules, information about foreign accounts held by a U.S. citizen with a tax residence abroad would not be reported to IRS, but rather to the jurisdiction in which they were a resident for tax purposes. Because the United States taxes the worldwide income of U.S. citizens, CRS rules would need to require identification of account holders’ citizenship in member countries where they are residents if FATCA were to be aligned with CRS. Table 5 shows a comparison of individuals reported to IRS under FATCA and hypothetically under CRS. Treasury and IRS, as part of its 2017-2018 Priority Guidance Plan, are considering modifying certain elements of the existing FATCA regulations. For instance, Treasury and IRS are considering coordinating certain documentation requirements for participating FFIs with the requirements under IGAs. In December 2018, Treasury and IRS also proposed regulations intended, in part, to reduce the burdens of FATCA. The proposed regulations included a clarification of the definition of an investment entity that is similar to the guidance published by OECD interpreting the definition of a “managed by” investment entity under CRS. If the United States wanted to adopt CRS, some of the key differences between FATCA and CRS—as outlined above and in appendix V—could be aligned through regulation while others would require legislation. According to Treasury officials, to align FATCA and CRS, Congress would need to revise statutes to: provide for the collection of information for accounts that residents of partner jurisdictions maintain at U.S. financial institutions; require certain U.S. financial institutions to report the account balance (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value) for all financial accounts maintained at a U.S. office and held by foreign residents; expand the current reporting required with respect to U.S. source income paid to accounts held by foreign residents to include similar non-U.S. source payments; require financial institutions to report the gross proceeds from the sale or redemption of property held in, or with respect to, a financial account; and require financial institutions to report information with respect to financial accounts held by certain passive entities with substantial foreign owners. While better aligning FATCA and CRS to some extent is possible, anything short of the United States fully adopting CRS would not fully eliminate the burdens of overlapping requirements that FFIs must currently meet under the two different systems. While having the United States adopt the CRS reporting system in lieu of FATCA could benefit FFIs that may otherwise have to operate two overlapping reporting systems, it would result in no additional benefit to IRS in terms of obtaining information on U.S. accounts. Additionally, it could generate additional costs and reporting burdens to U.S. financial institutions that would need to implement systems to meet CRS requirements. The extent of these costs is unknown. Further, adoption of CRS would create the circumstance where foreign accounts held by U.S. citizens with a tax residence in partner jurisdiction—including U.S. citizens who have a U.S. tax obligation—would not be reported to IRS. Tax practitioners and others we interviewed said that U.S. persons living abroad—whether or not they are required to complete a Form 8938—risk being denied access to foreign financial services. U.S. persons and tax practitioners located in four of the five countries where we conducted focus groups and interviews reported that some U.S. persons and U.S.- owned businesses encountered difficulties opening bank accounts with FFIs after FATCA was enacted, with some FFIs closing U.S. persons’ existing accounts or denying them opportunities to open new accounts. One focus group participant, for example, said that the financial institution closed down all accounts including business checking, savings, and money market accounts after FATCA was implemented, requiring this individual to find a local resident who could co-sign on a new account. Costs FFIs would incur from implementing FATCA were cited as a significant factor in increasing barriers faced by U.S. persons in accessing foreign financial services. Officials from one organization representing tax attorneys said that as a result of costs associated with FATCA implementation, FFIs have found it less burdensome to close accounts of U.S. persons or require the accounts to be moved to a Securities and Exchange Commission registered affiliate than comply with FATCA. Tax practitioners and an official from a bankers association added that because FFIs may gain only small margins of profit from U.S. persons, FFIs may believe it is too troublesome to do business with them. Additionally, officials from a foreign government agency told us that because FATCA is expensive for FFIs to continue implementing, banks in their country might charge U.S. persons seeking access to financial services additional fees to account for FATCA implementation costs. Tax practitioners, consultants working with FFIs to implement FATCA reporting requirements, and the National Taxpayer Advocate told us that FFIs with smaller asset sizes such as smaller trust companies were more prone to decline business with U.S persons. Officials from an advocacy group representing U.S. persons living abroad told the National Taxpayer Advocate that some smaller banks declined U.S. persons as customers as a business decision, believing it would cost more for them to comply with FATCA reporting requirements than maintain U.S. expatriates’ accounts. Banking associations we interviewed said that decisions made by FFIs on whether to accept U.S. persons as customers also depends on the overall risks and benefits of taking on individual U.S. persons, shaped in part from risks in not meeting FATCA reporting requirements. Representatives of a banking association and an advocacy group told us that some FFIs decided to avoid doing business with U.S. persons after they became concerned about potential penalties for failure to comply—either willfully or in error—with FATCA reporting requirements. One banking association added that such errors could affect other aspects of FFIs’ relationships with the U.S. government, such as nonprosecution agreements made with the U.S. Department of Justice. Officials from one consulting firm that helped FFIs meet FATCA reporting requirements added that FFIs’ determination of risk depends on many layers, such as the value of clients’ assets or the country in which clients reside or possess citizenship. After FATCA’s implementation, according to officials from the consulting firm, FFIs decided to turn away U.S. persons in some cases because the benefits of doing business with U.S. persons were less than the potential risks. For example, if a U.S. person only maintained a payroll account, the FFI may determine it would not make enough money to account for risks in incorrectly identifying the status of the customer as a U.S. or non-U.S. person. However, focus group participants from two countries said that FFIs may agree to accept U.S persons as customers if they have higher account balances that offset risks from FATCA reporting requirements. One focus group participant, for instance, said banks in his country will do business with a U.S. person if he or she has more than $500,000 in assets. Additionally, U.S. persons and tax practitioners we interviewed said that other factors such as language barriers and U.S. regulations designed to prevent money laundering may also inhibit U.S. persons’ access to brokerage accounts while overseas. Focus group participants and others we interviewed said that Form 8938 reporting requirements contributed to denials of employment and promotion opportunities for U.S. persons living abroad. Treasury officials noted that requirements imposed by FATCA do not directly hinder U.S. persons from gaining employment or promotion opportunities overseas. However, focus group participants, a consulting firm, and a foreign government agency noted that foreign-owned companies and nonprofit organizations such as churches did not want to hire or promote U.S. persons because they wanted to avoid exposing information to the U.S. government on their organizations’ accounts and client trust accounts where the U.S. person would have signature authority. As noted above, a U.S. person is generally required to report on the Form 8938 foreign financial accounts for which the person has signature authority if he or she has a financial interest in the account. Focus group participants and others noted that such requirements have adversely affected the ability of U.S. persons to serve on a corporate board or in a nonprofit organization, or maintain business relationships. Treasury and Department of Commerce officials stationed in one country included in our review added that FATCA implementation has played a role in dissuading foreign-owned corporations in some Asian countries from considering U.S. persons for corporate leadership positions such as directorships. This is in part because FATCA has triggered additional paperwork burden and operating costs for onboarding U.S. employees since they have had to help them meet Form 8938 reporting requirements. Two advocacy groups representing U.S. persons living abroad added that it is also harder for U.S.-based companies to justify relocating U.S. persons overseas and paying for such relocations since they also have had to help their U.S. employees meet Form 8938 reporting requirements in addition to meeting other tax filing requirements. U.S. embassy documents indicate there was increased demand for Social Security Numbers (SSN) since FATCA’s passage in 2010, driven in part by U.S. citizens applying for an SSN to gain access to foreign financial services or resolve outstanding U.S. tax obligations before completing renunciation. However, officials from two organizations representing Americans living abroad cited significant challenges faced by some U.S. persons living abroad in obtaining SSNs required to meet their U.S. tax obligations or obtain financial services. U.S. persons living abroad might not possess an SSN because their parents did not obtain one for them as a minor. Often, this may have been due to the parents leaving the United States when the child was young. State officials also said that U.S. citizens applying for U.S. passports while overseas frequently forget their SSNs or do not know if their parents ever applied for an SSN on their behalf. Officials from organizations representing U.S. persons living abroad added that without an SSN, these persons are unable to claim refunds or other tax benefits when filing their tax returns, or participate in IRS programs to voluntarily disclose previously unreported tax liabilities and assets. Additionally, some might be unable to gain or maintain access to financial accounts or other assets in their countries of residence without an SSN. According to these officials and tax practitioners we interviewed, U.S. persons living abroad face greater challenges in obtaining SSNs than those living in the United States. For instance, they faced difficulties obtaining documentation from the United States that the Social Security Administration (SSA) requires with SSN applications; traveling to Social Security offices and U.S. embassies or consulates to certify documents or submit applications in person; and receiving valid SSNs from SSA in a timely manner to file tax returns or participate in offshore disclosure programs. SSA officials also identified several challenges U.S. persons experience when applying for an SSN from abroad. For instance, SSA officials said that efforts to authenticate documents submitted with SSN applications can cause delays for U.S. persons living abroad in obtaining an SSN. Additionally, SSN applicants living abroad face significantly longer wait times than applicants living in the United States once their applications are processed. According to SSA officials, after an application is processed, it can take 3 to 6 months–-depending on the country’s mail service–-for an individual to receive a Social Security Card. This is significantly longer than the 2-week period it takes SSN applicants to receive a card after mailing in their applications from within the United States. According to Department of State (State) data, the annual number of approvals of requests for renunciations of U.S. citizenships increased nearly 178 percent during a 6-year period, from 1,601 in 2011—the year after FATCA was enacted—to 4,449 in 2016, the most recent year to which full data on renunciations were available. According to U.S. embassy documents and information provided by focus group participants and interviewees across all the countries we examined, FATCA was the reason or a contributing factor in some of these decisions and the resulting increase in total renunciations. Specific effects of FATCA implementation contributing to decisions to renounce U.S. citizenship included reduced access to foreign financial services and employment or promotion opportunities in a foreign-owned company—as identified above from our document reviews, focus groups, and interviews—and burdens in meeting FATCA reporting requirements. However, the extent to which FATCA implementation contributed to increased renunciations is unclear. State officials said that data are unavailable to determine the extent to which these renunciation decisions were the direct result of FATCA because State has no legal obligation to collect information on the motivation behind renunciation of citizenship. In response to concerns about the availability of foreign financial services, Treasury implemented regulations that allow certain low-risk local FFIs to be deemed compliant with FATCA, but only if the FFIs do not implement policies or practices that discriminate against opening or maintaining accounts for specified U.S. persons. Treasury and State also previously established joint strategies to address these challenges. For instance, Treasury and State developed guidance on FATCA that was posted on embassy websites to educate U.S. persons and others. Additionally, Treasury and State officials conducted outreach events and workshops through U.S. embassies and American chambers of commerce worldwide to provide information on FATCA and other tax filing requirements, According to State officials, the U.S. embassies in at least two countries—Switzerland and France—also worked with foreign officials and/or FFIs to increase access to financial services for U.S. citizens residing in those countries. For instance, Treasury and State officials reached agreements with FFIs in Switzerland to provide a wider range of financial services to U.S. persons. Similarly, in 2017, SSA and State implemented an interagency agreement to streamline processes for providing SSNs to U.S. persons living abroad after FATCA’s implementation in 2010. SSA officials said they are also in discussions with State on improving SSA’s website to include more transparent, specific information for SSN overseas applicants about SSA documentation requirements. Tax practitioners, advocacy groups, and Treasury officials we interviewed said FFIs have become more willing to accept U.S. persons as customers compared to when FATCA was enacted in 2010. However, U.S. persons living abroad continue to face issues gaining access to foreign financial services. For example, in a September 2018 letter sent by the Chair of the Finance Committee of the Netherlands House of Representatives to a member of Congress, U.S. citizens born outside the United States and who have never lived, studied, or worked in the United States are effectively being denied access to financial services in the Netherlands. Focus group participants added that some banks will reject U.S. clients or charge heavy fees for them to open an account. Agencies have ongoing efforts to address FATCA-related issues, as listed below, but some are ad hoc, fragmented, or otherwise not part of a broader effort between Treasury and other agencies such as State or SSA to use ongoing collaborative mechanisms to monitor and share information on such issues, and jointly develop and implement steps to address them: Treasury officials said they are participating in discussions with FFIs to address residual issues with access to foreign financial services. However, they said they have not involved other agencies in these discussions. IRS officials, in response to concerns from the French government, said they are developing a program to help streamline foreign asset- related tax compliance requirements for a small group of U.S. born citizens that have been French residents most of their lives without an SSN, and—according to State officials—did not wish to take the necessary steps to renounce their citizenship. However, no effort has been made to address these issues more broadly. State encouraged U.S. citizens to alert the nearest U.S. embassy of any practices they encounter with regard to the provision of financial services. State documents noted that some Americans have been turned away by banks or required to meet a higher deposit threshold in part because of FATCA reporting requirements. State documentation also noted that there have been cases of U.S. citizens with existing bank accounts who have been asked to close them. However, State documentation we reviewed does not highlight collaborative efforts currently underway with Treasury or other agencies to address banking access issues U.S. persons living abroad are presently encountering worldwide. As described above, SSA and State streamlined processes and policies for U.S. persons abroad seeking to obtain SSNs. However, SSA officials said they have not been involved in any ongoing efforts involving Treasury to identify systemic issues and related solutions involving SSNs for the purposes of tax compliance and citizenship renunciations. Treasury officials said they spoke with SSA officials about problems U.S. persons living abroad face in obtaining SSNs, but SSA believed that cycle times for processing SSN applications submitted by U.S. persons living abroad were not significantly greater than for applications submitted by U.S. persons living in the United States, although mailing times could vary significantly and take up to 3 to 6 months. We have previously identified key practices to enhance and sustain interagency collaboration, including defining and articulating a common outcome, establishing mutually reinforcing or joint strategies, and developing mechanisms to monitor, evaluate, and report on results. One goal in IRS’s strategic plan is to collaborate with external partners proactively to improve tax administration, while objectives in SSA’s strategic plan include improving service delivery and expanding service delivery options. Additionally, according to State’s Bureau of Consular Affairs website, one of State’s key priorities is to protect the interests of U.S. citizens overseas, such as through ensuring responsive and efficient provision of consular services overseas. As noted above, there are a host of ongoing issues and challenges for U.S. persons living abroad from implementation of FATCA, such as loss of access to foreign financial services, denial of employment and promotion opportunities overseas, and difficulty obtaining SSNs from abroad. However, Treasury currently lacks a collaborative mechanism to coordinate efforts with other agencies to address these issues, and Treasury officials said they do not plan to establish them. Without effective collaborative mechanisms to monitor and share information and implement cross-agency solutions, future efforts to address such issues will continue to be fragmented and less effective than they otherwise could be. In enacting FATCA, Congress sought to reduce tax evasion by creating greater transparency and accountability over offshore assets held by U.S. taxpayers. Because of FATCA, IRS receives information on foreign financial assets from hundreds of thousands of filers annually. IRS could use this information to help ensure taxpayers holding offshore assets report and pay taxes owed on income generated from such assets. However, to take full advantage of the information, IRS must address key challenges. Specifically, Taxpayer Identification Numbers (TIN) reported by FFIs are often inaccurate or incomplete, which makes it difficult for IRS to match information reported by FFIs to individual taxpayers. As such, IRS must develop a plan to mitigate the risks that these data issues pose to agency efforts to identify and combat taxpayer noncompliance. Lack of consistent, complete, and readily available Form 8938 and related parent individual tax return data also affects IRS’s compliance activities, making it more difficult for IRS business units to extract and analyze FATCA data to improve tax compliance efforts and reduce tax revenue loss from income generated from offshore assets. At the same time, IRS has stopped following its FATCA Compliance Roadmap it developed in 2016 because, according to IRS officials, IRS moved away from updating broad strategy documents to focus on individual compliance campaigns. However, in light of the challenges IRS continues to face in fully integrating FATCA information into its compliance programs, it will not maximize use of such information and effectively leverage individual compliance campaigns unless it employs a comprehensive plan that enables IRS to better leverage such campaigns to improve taxpayer compliance. Our analysis of available data indicates that many of the Forms 8938 filed in tax year 2016 may have been filed unnecessarily. Factors that are contributing to this unnecessary reporting are unclear. While IRS has provided instructions and guidance on its website for completing Form 8938, focus group participants and tax practitioners reported confusion on whether and how to report investments in foreign accounts. Taking steps to identify and address factors contributing to unnecessary Form 8938 reporting would help reduce taxpayer burden and reduce processing costs for IRS. Reporting requirements for foreign financial assets under FATCA overlap with reporting requirements under FBAR. These overlapping requirements—implemented under two different statutes—have resulted in most taxpayers filing Forms 8938 also filing FBARs with FinCEN. Duplicative filings on foreign financial assets cause confusion, frustration, and compliance burdens for taxpayers. Duplicative filings also increased costs to the government to process and store the same or similar information. Modifying the statutes governing the requirements can fully address the issues outlined above, and can allow for the use of FATCA information for prevention and detection of financial crimes. This is similar to other statutory allowances for IRS to disclose return information for other purposes, such as for determining Social Security income tax withholding. Lastly, FATCA has created challenges for some U.S. persons living abroad that go beyond increasing their tax compliance burdens. Some U.S. persons living abroad are still facing issues accessing financial services and employment and obtaining SSNs. Treasury, State, and SSA have taken some steps to address these issues both separately and in coordination with each other. However, Treasury, as the agency ultimately responsible for effective administration of FATCA, currently lacks a collaborative mechanism with State and SSA to address ongoing issues. Establishing a formal means to collaboratively address burdens faced by Americans abroad from FATCA can help agencies develop effective solutions to mitigate such burdens. We are making the following matter for congressional consideration: Congress should consider amending the Internal Revenue Code, Bank Secrecy Act of 1970, and other statutes, as needed, to address overlap in foreign financial asset reporting requirements for the purposes of tax compliance and detection, and prevention of financial crimes, such as by aligning the types of assets to be reported and asset reporting thresholds, and ensuring appropriate access to the reported information. We are making the following four recommendations to IRS: The Commissioner of Internal Revenue should develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete TINs of U.S. account holders collected from FFIs. (Recommendation 1) The Commissioner of Internal Revenue should ensure that appropriate business units conducting compliance enforcement and research have access to consistent and complete data collected from individuals’ electronic and paper filings of Form 8938 and elements of parent individual tax returns. As part of this effort, the Commissioner should ensure that IRS provides clear guidance to the business units for accessing such data in IRS’s Compliance Data Warehouse. (Recommendation 2) The Commissioner of Internal Revenue should employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts. The plan should document and track activities over time to ensure individuals and FFIs comply with FATCA reporting assess and mitigate data quality risks from FFIs; improve the quality, management, and accessibility of FATCA data for compliance, research, and other purposes; and establish, monitor, and evaluate compliance efforts involving FATCA data intended to improve voluntary compliance and address noncompliance with FATCA reporting requirements. (Recommendation 3) The Commissioner of Internal Revenue should assess factors contributing to unnecessary Form 8938 reporting and take steps, as appropriate, to address the issue. Depending on the results of the assessment, potential options may include: identifying and implementing steps to further clarify IRS Form 8938 instructions and related guidance on IRS’s website on determining what foreign financial assets to report, and how to calculate and report asset values subject to reporting thresholds; and conducting additional outreach to educate taxpayers on required reporting thresholds, including notifying taxpayers that may have unnecessarily filed an IRS Form 8938 to reduce such filings. (Recommendation 4) We are also making the following recommendation to Treasury: The Secretary of the Treasury should lead efforts, in coordination with the Secretary of State and Commissioner of Social Security, to establish a formal means to collaboratively address ongoing issues— including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 5) We are also making the following recommendation to State: The Secretary of State, in coordination with the Secretary of the Treasury and Commissioner of Social Security, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 6) We are also making the following recommendation to SSA: The Commissioner of Social Security, in coordination with the Secretaries of State and Treasury, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 7) We provided a draft of this report to the Secretaries of State and the Treasury, Commissioner of Internal Revenue, and Acting Commissioner of Social Security. IRS provided written comments that are summarized below and reprinted in appendix VI. IRS did not state whether it agreed or disagreed with our four recommendations but otherwise provided responses. Regarding our recommendation to develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete TINs of U.S. account holders collected from FFIs (recommendation 1), IRS reiterated that it provided a transition period, through the end of 2019, for compliance with the TIN requirements for FFIs in countries with Model 1 IGAs with the United States. IRS also said that it continued to make progress on improving FATCA filing compliance, citing efforts such as initiating a campaign addressing FFIs that do not meet their compliance responsibilities. While these efforts may help IRS obtain more accurate and complete information from financial accounts, IRS did not specify how it will mitigate the ongoing hurdles it faces in matching accounts reported by FFIs without valid TINs to accounts reported by individual tax filers and ensure compliance. Regarding our recommendation that appropriate business units have access to consistent and complete data collected from Forms 8938 and tax returns filed by individuals (recommendation 2), IRS reiterated that RAAS has been working to obtain read-only access to the IPM database but that limited budgetary resources are delaying implementation. Enabling access to consistent and complete Form 8938 and tax return data would help IRS better target compliance initiatives and leverage limited available enforcement resources. While IRS continues to work on enabling access to IPM, it could still provide clear guidance to its business units for accessing Form 8938 and tax return data in IRS’s Compliance Data Warehouse, as we recommended. Regarding our recommendation to employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts (recommendation 3), IRS said the resources that would be required to develop a comprehensive plan would be better spent on enforcement activities. While implementing enforcement activities could increase compliance with FATCA reporting requirements, it risks not maximizing the value of such efforts without a comprehensive plan to manage and address the myriad of challenges discussed in this report. Further, it is our belief that IRS’s failure to execute the FATCA roadmap is not justification for abandoning a strategic approach going forward. Regarding our recommendation to assess factors contributing to unnecessary Form 8938 reporting and take appropriate steps to address the issue (recommendation 4), IRS said it will continue to observe filings of Form 8938 and, to the extent that there are unnecessary filings, assess options to inform account holders to reduce reporting and filing burdens followed by appropriate steps to implement any selected options. Our analysis of available data indicates that many Forms 8938 may have been filed unnecessarily. Implementing our recommendation reduces the risk that taxpayers file—and IRS processes—forms unnecessarily. Treasury provided written comments but did not state whether it agreed or disagreed with our recommendation that it lead efforts, in coordination with State and SSA, to establish a formal means to collaboratively address ongoing issues that U.S. persons living abroad encounter from implementation of FATCA reporting requirements (recommendation 5). Treasury said it will work collaboratively with State and SSA to answer questions that Americans abroad have regarding their tax obligations and, where appropriate, to direct U.S. citizens to resources that will help them understand the procedures applied by SSA to apply for an SSN. However, Treasury said it is not the appropriate agency to lead coordination efforts involving foreign employment issues and issues regarding access to foreign financial services and obtaining SSNs. As we noted above, Treasury is ultimately responsible for effective administration of FATCA. As such, it is in a better position than State or SSA to adjust regulations and guidance implementing FATCA to address burdens FFIs and foreign employers face from FATCA implementation while ensuring tax compliance. Additionally, Treasury has an interest in helping U.S. persons receive valid SSNs from SSA in a timely manner to meet their tax obligations. Treasury’s written response is reprinted in appendix VII. State and SSA also provided written comments in which they concurred with our recommendations to establish a formal means to address collaboratively together with Treasury ongoing issues that U.S. persons living abroad encounter with FATCA (recommendations 6 and 7). State and SSA’s written comments are reprinted in appendices VIII and IX, respectively. Treasury, State, and SSA provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretaries of State and the Treasury, Commissioner of Internal Revenue, Acting Commissioner of Social Security, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who contributed to this report are listed in appendix X. The objectives of this report are to (1) assess the Internal Revenue Service’s (IRS) efforts to use information collected under the Foreign Account Tax Compliance Act (FATCA) to improve taxpayer compliance; (2) examine available foreign financial asset reports submitted by U.S. persons, including submissions that were below required filing thresholds; (3) examine the extent to which the Department of the Treasury (Treasury) administers overlapping reporting requirements on foreign financial assets; (4) describe similarities and differences between FATCA and Common Reporting Standard (CRS) reporting requirements; and (5) examine the effects of FATCA implementation that are unique to U.S. persons living abroad. For our first objective, we reviewed Treasury Inspector General for Tax Administration reports and collected information from Treasury and IRS to summarize efforts to collect complete and valid Taxpayer Identification Numbers (TIN) from foreign financial institutions (FFI). We identified criteria from our prior work identifying key practices for risk management. The key practices are derived from the Software Engineering Institute’s Capability Maturity Model® Integration for Development and Office of Management and Budget guidance. We applied these criteria to assess steps IRS has taken to manage risks in not receiving complete and valid TIN information from FFIs. We also applied criteria from our prior work on use of documented frameworks to IRS documentation on FATCA compliance activities to determine the extent to which IRS implemented a comprehensive plan to maximize use of collected data to enforce compliance with FATCA. For our second objective, we identified total maximum account values reported by individual filers of Financial Crimes Enforcement Network (FinCEN) Form 114s (commonly known as the Report of Foreign Bank and Financial Accounts, or FBAR) in calendar years 2015 and 2016. See appendix III for more details on our methodology to evaluate these data. We also summarized the numbers of IRS Forms 8938, Statement of Specified Foreign Financial Assets (Form 8938) filed in tax year 2016, accounting for the data limitations described below. We also identified Forms 8938 filed in tax year 2016—the most recent year for which data were available—with available residency and asset information that reported specified foreign financial assets with aggregate values at or below end-of-year tax thresholds, which vary depending on the location of residence and filing status of such filers. For our third objective, we reviewed IRS and FinCEN documentation, and applied criteria from Fragmentation, Overlap, and Duplication: An Evaluation and Management Guide to identify the extent to which IRS and FinCEN were engaged in overlapping activities, and collecting duplicative information on foreign financial assets held by U.S. persons. We assessed the extent to which individual filers who submitted a Form 8938 in 2015 and 2016 also submitted an FBAR for the same year by determining the number and percentage of Forms 8938 with TINs that also match the TIN listed on the corresponding FBAR for the same year. For the three objectives described above, we assessed the reliability of data submitted on Forms 8938 filed by individuals for tax years 2015 and 2016, the most recent data available. These data were extracted from IRS’s Individual Return Transaction File (IRTF) and Modernized Tax Return Database (MTRDB) through IRS’s Compliance Data Warehouse (CDW). We also assessed the reliability of data from FBARs for calendar years 2015 and 2016 by (1) reviewing documentation about the data and the systems that produced them; (2) conducting electronic tests, such as identifying data with significant numbers of missing Form 8938 or FBAR records, or values of foreign financial assets reported outside an expected range; (3) tracing selections or random samples of data to source documents; and (4) interviewing IRS and FinCEN officials knowledgeable about the data. We also reviewed Form 8938 and relevant parent tax return data stored in IRS databases to determine whether IRS management is using quality information collected from Forms 8938 to achieve its objectives, as defined in our Standards for Internal Control in the Federal Government. We determined that data extracted from IRTF on characteristics of Form 8938 filers and from FBAR filings was sufficiently reliable for our purposes, subject to caveats identified in this report. However, we determined we could not obtain complete data on foreign financial assets reported on Forms 8938 filed on paper. For our fourth objective, we reviewed model international agreements and other documentation, and interviewed officials from Treasury, IRS, and the Organisation for Economic Co-operation and Development to compare and contrast FATCA and CRS reporting requirements. We also used the collected information to identify what changes, if any, the United States and other countries could implement to align FATCA and CRS reporting requirements. For our fifth objective, we collected documentation and conducted focus groups and semi-structured interviews with 21 U.S. persons living abroad that were subject to FATCA reporting requirements. We also conducted focus groups and interviews with tax practitioners, banking and CPA organizations, government agencies, advocacy groups representing Americans living abroad, and other organizations from the United States and five other countries (Canada, Japan, Singapore, Switzerland, and the United Kingdom). We selected these countries based on geography, relatively high numbers of U.S. expatriates and Form 8938 filers, tax information sharing agreements, and other tax treaties with the United States. The findings from the focus groups and interviews are not generalizable to other U.S. persons, tax practitioners or organizations, but were selected to represent the viewpoints of U.S. persons, FFIs, and host country tax authorities required to transmit information on foreign accounts and other specified foreign financial assets to IRS. We conducted a thematic analysis of the focus groups and interviews, and reviewed cables from U.S. embassies to identify the unique effects of FATCA implementation on U.S. persons living abroad. We collected documentation from and interviewed Treasury, IRS, Department of State, and Social Security Administration officials on steps to monitor and mitigate such effects. We also identified criteria from our prior work on key practices to enhance and sustain interagency collaboration and mechanisms to facilitate coordination. We applied the criteria to agencies’ collaborative efforts addressing issues U.S. persons living abroad faced from FATCA’s implementation, and identified the extent to which agencies established effective collaborative mechanisms to identify, assess, and implement cross-agency solutions to such issues. We conducted this performance audit from August 2017 to April 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following IRS databases store data collected from individuals’ electronic and paper filings of Forms 8938 and/or elements of individual parent tax returns—the filer’s address and filing status—used to determine specified reporting thresholds for Form 8938 filers: Individual Master File (IMF), which serves as IRS’s system for processing individual taxpayer account data. Using this system, accounts are updated, taxes are assessed, and refunds are generated as required during each tax-filing period. Individual Returns Transaction File (IRTF), which stores edited, transcribed, and error-corrected data from the Form 1040 series and related forms for the current processing year and two prior years. Modernized Tax Return Database (MTRDB), which serves as the official repository of all electronic returns processed through IRS’s Modernized e-File system. Tax return data is stored immediately after returns are processed. International Compliance Management Model (ICMM)-FATCA International Returns (ICMM-FIR), which collects, parses, and stores data from incoming form reports–such as Forms 8938 and 8966–into the FATCA Database (FDB), which serves as the repository where ICMM-FIR stores data and from which downstream applications can pull data. Integrated Production Model (IPM), which is a downstream data repository that houses IMF data, information returns, and other data. According to IRS officials, data from IPM are consolidated and made available to a variety of downstream, security certified, systems for use in conducive analysis, case selection, and report preparation. Additionally, data from these and other IRS databases are copied to IRS’s Compliance Data Warehouse (CDW) periodically, which captures data from multiple production systems and organizes the data in a way that is conductive to analysis. Table 6 highlights several problems with the consistency and completeness of Form 8938 and relevant parent tax return data stored across the listed databases. Inconsistent and incomplete data on address and filing status of Form 8938 filers: As noted above, elements of parent tax returns— specifically the filer’s country of residence and filing status—are used to determine specified reporting thresholds for Form 8938 filers. However, IRTF and MTRDB have inconsistent and incomplete data on addresses linked to Form 8938 filers, and report inconsistent numbers of Forms 8938 filed from a U.S. residence. For example, the variable identified as containing data on foreign countries of residence in IRTF shows approximately 8,100 foreign filers in tax years 2015 and 2016, whereas a similar variable in MTRDB shows approximately 89,000 foreign filers for those same years. Additionally, FDB does not contain country codes from paper filings of Form 8938. ICCM-FIR stores information from some elements from parent tax returns—such as TINs and document locator numbers. According to IRS officials, however, ICMM-FIR lacks data on country codes and filing status of Form 8938 filers. IRS officials said that ICMM-FIR was not designed or intended to store data on Form 8938 filers; rather, it was designed to be a database for use in comparing Form 8938 and 8966 data. In general, IRS officials indicated that they would like to adjust the way ICMM-FIR stores data, but that would require modifying the way the database was established. Incomplete data on assets reported on Forms 8938: MTRDB contains detailed information on specified foreign financial assets submitted on electronic filings of Form 8938 and the country code from which the Form 8938 was filed. IRS officials said it is not designed to store information submitted on paper filings of Forms 8938 and parent tax returns. IRS officials said that while IMF processes information transcribed from individual income tax returns, there is no requirement to cross-reference information from the tax return with information submitted with an accompanying Form 8938. Additionally, while IRS officials told us that IRTF is the authoritative source for filers of Form 8938, it does not store account and other asset information submitted from Forms 8938. When asked whether there is any move to store account and other asset information collected from Forms 8938 into IRTF, IRS officials said that the decision on what returns or portions of returns are transcribed are subject to resource constraints and are prioritized from year to year. Table 7 shows that more than 900,000 individuals filed Financial Crimes Enforcement Network (FinCEN) Form 114s (commonly known as the Report of Foreign Bank and Financial Accounts, or FBAR) in calendar years 2015 and 2016, and declared total maximum values of accounts ranging from about $1.5 trillion to more than $2 trillion each year. We are providing a range of estimates because we found a large number of filings made potentially in error. In some cases, for instance, FBAR filers reported more than $100 trillion in foreign financial accounts. We assume many of these filings are likely made in error, but have only limited means to determine which filings have errors, and which filings have accurate information. Because we cannot independently verify the accuracy of all self-reported FBAR data, we decided to present a range of data with (1) a lower bound discarding all FBAR filings reporting total values of reported foreign financial accounts at or above $1 billion; and (2) an upper bound discarding all filings reporting total values of such accounts at or above $5 billion. Table 2 excludes amended and duplicated FBAR filings. This table also excludes FBAR filings that reported a financial interest in 25 or more financial accounts, but reported total maximum account values of $0 from parts II and III of the FBAR. Although we identified problems with the data, we determined they were reliable enough to provide an estimated range of asset values to report the scale of foreign financial accounts held by U.S. persons. Table 8 shows a detailed breakdown of 2015 and 2016 FBAR filings by residence and categories of total maximum account values reported on the FBARs. Appendix IV: Detailed Comparison of Individual Foreign Financial Asset Reporting Requirements 26 U.S.C. § 6038D; 26 C.F.R. §§ 1.6038D-1 to 1.6038D-8. 26 C.F.R. § 1.6038D-2. Filers in this category include those who identify as single, married filing separately, “head of household,” or “qualifying widow(er).” Includes maximum value of specified foreign financial assets (Form 8938) or maximum value of financial accounts maintained by a financial institution physically located in a foreign country (FBAR). Under FATCA, any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account are or would be required to be reported, included, or otherwise reflected on a person’s income tax return. Under FBAR reporting requirements, a person has signature or other authority if he or she has the authority (alone or in conjunction with another) to control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained. The account itself is subject to reporting, but the contents of the account do not have to be separately reported. In addition to the contact named above, Brian James (Assistant Director), Mark Ryan (Analyst-in-Charge), Ariana Graham, George Guttman, Krista Loose, Daniel Mahoney, Cynthia Saunders, A.J. Stephens, and Elwood White made key contributions to this report. Michael John Bechetti, Ted Burik, and Jacqueline Chapin also provided assistance.", "summary": "Concerns over efforts by U.S. taxpayers to use offshore accounts to hide income or evade taxes contributed to the passage of FATCA in 2010, which sought to create greater transparency and accountability over offshore assets held by U.S. taxpayers. House Report 114-624 included a provision for GAO to evaluate FATCA implementation and determine the effects of FATCA on U.S. citizens living abroad. GAO—among other things—(1) assessed IRS's efforts to use FATCA-related information to improve taxpayer compliance; (2) examined the extent to which Treasury administers overlapping reporting requirements on financial assets held overseas; and (3) examined the effects of FATCA implementation unique to U.S. persons living abroad. GAO reviewed applicable documentation; analyzed tax data; and interviewed officials from IRS, other federal agencies and organizations, selected tax practitioners, and more than 20 U.S. persons living overseas. Data quality and management issues have limited the effectiveness of the Internal Revenue Service's (IRS) efforts to improve taxpayer compliance using foreign financial asset data collected under the Foreign Account Tax Compliance Act (FATCA). Specifically, IRS has had difficulties matching the information reported by foreign financial institutions (FFI) with U.S. taxpayers' tax filings due to missing or inaccurate Taxpayer Identification Numbers provided by FFIs. Further, IRS lacks access to consistent and complete data on foreign financial assets and other data reported in tax filings by U.S. persons, in part, because some IRS databases do not store foreign asset data reported from paper filings. IRS has also stopped pursuing a comprehensive plan to leverage FATCA data to improve taxpayer compliance because, according to IRS officials, IRS moved away from updating broad strategy documents to focus on individual compliance campaigns. Ensuring access to consistent and complete data collected from U.S. persons—and employing a plan to leverage such data—would help IRS better leverage such campaigns and increase taxpayer compliance. Due to overlapping statutory reporting requirements, IRS and the Financial Crimes Enforcement Network (FinCEN)—both within the Department of the Treasury (Treasury)—collect duplicative foreign financial account and other asset information from U.S. persons. Consequently, in tax years 2015 and 2016, close to 75 percent of U.S. persons who reported information on foreign accounts and other assets on their tax returns also filed a separate form with FinCEN. The overlapping requirements increase the compliance burden on U.S. persons and add complexity that can create confusion, potentially resulting in inaccurate or unnecessary reporting. Modifying the statutes governing the requirements to allow for the sharing of FATCA information for the prevention and detection of financial crimes would eliminate the need for duplicative reporting. This is similar to other statutory allowances for IRS to disclose return information for other purposes, such as for determining Social Security income tax withholding. According to documents GAO reviewed, and focus groups and interviews GAO conducted, FFIs closed some U.S. persons' existing accounts or denied them opportunities to open new accounts after FATCA was enacted due to increased costs, and risks they pose under FATCA reporting requirements. According to Department of State (State) data, annual approvals of renunciations of U.S. citizenship increased from 1,601 to 4,449—or nearly 178 percent—from 2011 through 2016, attributable in part to the difficulties cited above. Treasury previously established joint strategies with State to address challenges U.S. persons faced in accessing foreign financial services. However, it lacks a collaborative mechanism to coordinate efforts with other agencies to address ongoing challenges in accessing such services or obtaining Social Security Numbers. Implementation of a formal means to collaboratively address burdens faced by Americans abroad from FATCA can help federal agencies develop more effective solutions to mitigate such burdens by monitoring and sharing information on such issues, and jointly developing and implementing steps to address them. GAO is making one matter for congressional consideration to address overlap in foreign asset reporting requirements. GAO is making seven recommendations to IRS and other agencies to enhance IRS's ability to leverage FATCA data to enforce compliance, address unnecessary reporting, and better collaborate to mitigate burdens on U.S. persons living abroad. State and Social Security Administration agreed with GAO's recommendations. Treasury and IRS neither agreed nor disagreed with GAO's recommendations.", "document_type": "gao"}
{"report": "Federal agencies and our nation’s critical infrastructures—such as energy, transportation systems, communications, and financial services— are dependent on computerized (cyber) information systems and electronic data to carry out operations and to process, maintain, and report essential information. The information systems and networks that support federal operations are highly complex and dynamic, technologically diverse, and often geographically dispersed. This complexity increases the difficulty in identifying, managing, and protecting the myriad of operating systems, applications, and devices comprising the systems and networks. Cybersecurity professionals can help to prevent or mitigate the vulnerabilities that could allow malicious individuals and groups access to federal IT systems. The ability to secure federal systems depends on the knowledge, skills, and abilities of the federal and contractor workforce that uses, implements, secures, and maintains these systems. Nevertheless, the Office of Management and Budget (OMB) has noted that the federal government and private industry face a persistent shortage of cybersecurity and IT talent to implement and oversee information security protections to combat cyber threats. In addition, the RAND Corporation and the Partnership for Public Service have reported that there is a nationwide shortage of cybersecurity experts, in particular, in the federal government. According to these reports, this shortage of cybersecurity professionals makes securing the nation’s networks more challenging and may leave federal IT systems vulnerable to malicious attacks. The persistent shortage of cyber-related talent has given rise to efforts to identify and assess the federal cybersecurity workforce. NICE, led by NIST, is a partnership among government, academia, and the private sector focused on cybersecurity education, training, and workforce development. The mission of NICE is to energize and promote a robust network and an ecosystem of cybersecurity education, training, and workforce development. NICE fulfills this mission by coordinating with government, academic, and industry partners to build on existing successful programs, facilitate change and innovation, and bring leadership and vision to increase the number of skilled cybersecurity professionals that are helping to keep our nation secure. NICE issued an initial draft of the National Cybersecurity Workforce Framework (National Framework) for public comment in September 2011 and the final version 1.0 in April 2013. The National Framework was intended to help identify, describe, and assess all cybersecurity roles within an organization. The National Framework organized cybersecurity job functions into 7 categories and 31 specialty areas: Category: a high-level grouping of common cybersecurity functions. Categories group together work and workers that share common major functions, regardless of job titles or other occupational terms. Specialty area: an area of concentrated work, or function, within cybersecurity and related work. Related specialty areas are grouped together into categories. In version 1.0 of the National Framework, each specialty area was also associated with a distinct set of cybersecurity related tasks and knowledges, skills, and abilities. In November 2016, NIST issued draft special publication 800-181 which revised and replaced earlier versions of the National Framework. The draft was co-authored by NIST, DOD, and DHS and was renamed the NICE Cybersecurity Workforce Framework (NICE Framework). In August 2017, NIST published the final version of the special publication. The NICE Framework is intended to help the federal government better identify cybersecurity workforce needs by enabling agencies to examine specific cybersecurity work roles, and identify personnel skills gaps, rather than merely examine the number of vacancies by job series. The NICE Framework added 2 additional specialty areas within the 7 categories. Figure 1 identifies the 7 categories and the 33 specialty areas in the NICE Framework. The NICE Framework also introduced the concept of work roles as the third component of cybersecurity job functions. Work roles provide a more detailed description of the roles and responsibilities of cybersecurity job functions than do the category and specialty area components of the NICE Framework. The NICE Framework defines one or more work roles within each specialty area. For example, as depicted in figure 2, the NICE Framework defined 11 work roles within the 7 specialty areas in the “Securely Provision” category. In October 2012, in coordination with a NICE interagency working group, OPM published a cybersecurity employment coding structure that aligned with the initial draft version of the National Cybersecurity Workforce Framework. The coding structure assigned a unique 2-digit cybersecurity employment code to each category and specialty area in the NICE Framework. According to OPM, the coding of federal positions with cybersecurity functions was intended to enhance agencies’ ability to identify critical cybersecurity workforce needs, recruit and hire employees with needed skills, and provide appropriate training and development opportunities to cybersecurity employees. In July 2013, OPM initiated the Special Cybersecurity Workforce Project to support federal efforts to reduce the cybersecurity workforce skills gaps across agencies. Agencies were to use the definitions of cybersecurity work, as described in the National Cybersecurity Workforce Framework, along with OPM’s cybersecurity coding structure, to code positions performing cybersecurity work by the end of fiscal year 2014. The project was intended to enable agencies to identify and address their needs for cybersecurity skill sets to meet their missions. In July 2016, OPM and the Office of Management and Budget (OMB) issued the Federal Cybersecurity Workforce Strategy. The strategy details government-wide actions to identify, expand, recruit, develop, retain, and sustain a capable and competent workforce in key functional areas to address complex and ever-evolving cyber threats. The strategy identifies a number of actions intended to address cybersecurity workforce challenges in: (1) identifying cybersecurity workforce needs, (2) expanding the cybersecurity workforce through education and training, (3) recruiting and hiring highly skilled talent, and (4) retaining and developing highly skilled talent. The strategy states that OPM is to expand cybersecurity position coding and agencies are to conduct strategic workforce planning. These actions are related to the requirements of the Federal Cybersecurity Workforce Assessment Act of 2015, under which OPM is to establish an employment coding structure and agencies are to identify and report on cybersecurity workforce critical needs. Figure 3 depicts a timeline of recent efforts to assess the federal cybersecurity workforce. As required by the Federal Cybersecurity Workforce Assessment Act of 2015, OPM developed a cybersecurity coding structure under NICE, issued guidance to implement the coding structure to identify all federal civilian cybersecurity positions, and provided a progress report to Congress on the implementation of the act. However, the coding structure and procedures were issued later than the act’s deadlines because OPM was working with the National Institute of Standards and Technology (NIST) to align the structure and procedures with the draft version of the NICE Cybersecurity Workforce Framework, which NIST issued later than planned. The delays in issuing the coding structure and procedures have extended the expected time frames for implementing subsequent provisions of the act. The Federal Cybersecurity Workforce Assessment Act of 2015 (the act) required OPM, in coordination with NIST, to develop a cybersecurity coding structure by June 15, 2016. OPM addressed this requirement by developing a 3-digit cybersecurity employment coding structure that fully aligns with the NICE Cybersecurity Workforce Framework. OPM issued version 1 of the coding structure on November 15, 2016, 5 months after the deadline established in the act. The coding structure assigns a unique 3-digit cybersecurity employment code to each work role outlined in the draft version of the NICE Cybersecurity Workforce Framework. Table 1 presents an example of the 3-digit employment codes associated with one category—”Securely Provision”—and its component specialty areas and work roles. Although the act had called for the coding structure to be established by June 15, 2016, OPM officials explained that the coding structure was issued 5 months later than the established deadline because the structure was to be aligned with the NICE Cybersecurity Workforce Framework. However, the draft version of the NICE Framework was not issued until November 2, 2016. According to NIST officials, the issuance of the draft NICE Framework was delayed because some of the knowledge, skills, and abilities (KSA) and task statements that had been originally developed by the intelligence community were marked as sensitive. NIST delayed publication of the draft NICE Framework until officials in the intelligence community had removed any sensitivity designations on the KSAs and task statements. The act required OPM, in coordination with NIST, DHS, and ODNI to establish procedures to assist agencies in implementing the cybersecurity coding structure. OPM was to develop the procedures no later than September 18, 2016. In accordance with this requirement, OPM coordinated with NIST, DHS, and ODNI to develop its Guidance for Assigning New Cybersecurity Codes to Positions with Information Technology, Cybersecurity, and Cyber-Related Functions. The guidance provides instructions on how agencies are to assign the 3-digit cybersecurity employment codes to filled and vacant positions, including required activities for identifying and assigning codes to cybersecurity positions. The guidance also referenced additional updates and guidance that were to be posted on OMB’s MAX website. OPM posted the guidance on the Chief Human Capital Officers Council website on January 4, 2017, 4 months after the deadline established in the act. OPM officials said they delayed issuance of the guidance so that it could be released in coordination with the cybersecurity coding structure, which was dependent on the release of the draft NICE Framework. The act required OPM to report on the progress of agencies’ implementation of the act’s requirements, as well as OPM’s efforts to develop a coding structure and government-wide coding procedures. OPM was to submit the progress report to the appropriate congressional committees no later than June 15, 2016. OPM prepared and submitted its progress report to the congressional committees identified in the act on July 12, 2016, about 1 month after the act’s deadline. Among other things, the report stated the following: OPM was coordinating closely with NICE to revise the cybersecurity coding structure to align with the latest version of the NICE Framework, which was scheduled to be finalized in September 2016. OPM had begun an education campaign to inform the federal community of the act and its requirements and was collaborating with stakeholders and interagency partners on ideas for how to implement the requirements of the act. An official in OPM’s Employee Services division stated that OPM was delayed in completing and submitting the report to congressional committees due to the agency’s internal review process. Because the deadlines for agencies to implement certain provisions of the act are contingent on the completion of earlier activities, delays by OPM in issuing the revised cybersecurity coding structure and the government- wide coding procedures have extended the due dates for agencies to implement other provisions of the act by about 4 months. Specifically: The act required agencies to establish procedures for identifying all IT or cybersecurity positions and for assigning the appropriate employment code to each position no later than 3 months after OPM issued the government-wide coding procedures. If OPM had issued the coding procedures by September 2016 as the act required, agencies would have been required to establish their coding procedures by December 2016. However, because OPM did not issue the government-wide procedures until January 2017, agencies did not have to develop their coding procedures until April 2017. Similarly, agencies were to assign employment codes to all of their cybersecurity positions no later than 1 year after establishing their coding procedures. Had agencies been required to establish their procedures by December 2016, they would have been required to assign the employment codes by December 2017. However, because they did not have to develop coding procedures until April 2017, they were therefore required to complete the assignment of employment codes by April 2018. Further, agencies are required to identify and report on cybersecurity work roles of critical need beginning 1 year after the employment codes are assigned. If agencies had been required to assign employment codes by December 2017, they would have to begin reporting on their critical needs by December 2018. However, because they did not have to complete the assignment of employment codes until April 2018, they are therefore required to identify and begin reporting on critical needs by April 2019. Figure 4 depicts the delays in earlier activities which can result or have resulted in later implementation of subsequent provisions of the act. Most of the 24 CFO Act agencies conducted baseline assessments identifying the extent to which their cybersecurity employees held certifications and submitted them to Congress as required by the act. However, 3 agencies did not complete the assessments for various reasons, such as a lack of resources and tools to do so. Further, of the 21 agencies that did complete the assessments, 4 agencies did not address all of the reportable information, such as the extent to which personnel without certifications were ready to obtain them or strategies for mitigating any gaps. In addition, the assessments conducted by the 21 agencies did not contain complete, comprehensive, or consistent information on the certifications held by agencies’ cybersecurity employees due to limitations in the ability of the agencies to collect the needed information. As a result, the information collected and reported by most agencies about the certifications held by agency cybersecurity personnel may be of limited value for assessing the credentials and qualifications of their cybersecurity workforces. The Federal Cybersecurity Workforce Assessment Act of 2015 required agencies to prepare baseline assessment reports identifying the extent to which their cybersecurity workforces held industry-recognized certifications as identified under NICE. OPM’s August 2016 memorandum on the requirements and time frames of the act further stated that agencies were to report the results of the assessments to the appropriate congressional committees of jurisdiction by December 2016. In the absence of a NICE-defined list of appropriate industry-recognized certifications, 21 of the 24 agencies covered by the CFO Act had conducted baseline assessments of the certifications held by their cybersecurity workforces and submitted the baseline assessment reports to Congress as of March 2018. Table 2 shows the status of the agencies’ submissions of the baseline assessments as of March 2018. Three agencies did not conduct baseline assessments: Instead of conducting a baseline assessment as called for by the act, DHS submitted its 2016 Comprehensive Cybersecurity Workforce Update to Congress in March 2017. However, this report did not include a baseline assessment of the department’s workforce as called for by the act. The report noted that DHS’s Office of the Chief Human Capital Officer lacked the ability to view or easily produce consolidated reports on employee certifications from all DHS components, and lacked consistent and detailed information about the readiness of additional employees to complete certification exams and specific certifications identified by components as being required for success in their positions. The report further noted that the department was working with cybersecurity subject matter experts from each component to revalidate the certifications most important to the work of their organizations and to organize the information according to the NICE Framework. The Department of Housing and Urban Development (HUD) prepared an assessment of IT specialist skills, but did not conduct a baseline assessment that identified the extent to which its cybersecurity workforce held industry-recognized certifications. Officials in HUD’s Office of the Chief Information Officer (CIO) and Office of the Chief Human Capital Officer stated that the department intends to conduct a workforce assessment of its cybersecurity employees. The officials did not provide a time frame for when the assessment would be conducted. The CIO and Chief Human Capital Officer of the Small Business Administration (SBA) stated that the agency has been unable to complete a baseline assessment due to resource constraints. The officials added that the agency intends to conduct workforce planning efforts in the future. However, they did not provide a time frame for when the assessment would be conducted. By not conducting baseline assessments, DHS, HUD, and SBA lack valuable information about the knowledge and skills of their cybersecurity employees. This lack of information limits the agencies’ ability to effectively gauge the competency of individuals who are charged with ensuring the confidentiality, integrity, and availability of federal information and information systems. Additionally, by not conducting or reporting on the assessment, the agencies have not provided Congress the information it required in the act regarding existing credentials and certifications of personnel with information technology, cybersecurity, or other cyber-related job functions. The act required agencies’ baseline assessment reports to identify the following: the percentage of personnel with cybersecurity job functions who held the appropriate industry-recognized certifications as identified under NICE; the level of preparedness of cybersecurity personnel without existing credentials to take certification exams; and a strategy for mitigating any gaps in (1) personnel holding industry- recognized certifications and (2) the preparedness of personnel without existing credentials to take certification exams. In September 2016, OPM provided a template that agencies could use in reporting on their baseline assessments. Using the template, agencies could report on the number and percentage of surveyed staff with current certifications and the number and percentage of staff without such certifications that were planning to obtain them within the next year. Human resource strategists and program management officials in OPM’s Employee Services division stated that the template was a guide to help agencies with the reporting process; however, agencies were not required to use the template or report their results in the format described in the template. The 21 CFO agencies that prepared baseline assessment reports did not always address the reportable information in their baseline assessments. Specifically, of the 21 assessments that the CFO agencies had prepared, all of the assessments included information on the percentage of cybersecurity personnel holding certifications; 17 assessments discussed the level of preparedness for personnel without certifications to take certification exams; and 20 included strategies for mitigating certification gaps. Table 3 shows the extent to which the 21 agencies’ assessments reported this information. Moreover, 4 of the 21 agencies did not address all reportable information in their baseline assessments. Specifically: The Department of Commerce did not assess and did not report information on (1) the level of preparedness for personnel who did not hold certifications to take certification exams or (2) strategies for mitigating gaps. Officials in Commerce’s Office of Human Resources Management and Office of the CIO stated that information on the level of preparedness and gaps was not readily available because they have not fully identified and coded the department’s cybersecurity workforce, and there is no federal requirement for cybersecurity personnel to hold certifications. The officials stated that they did not have the time or resources to assess these reporting requirements. Officials in the Department of Energy’s Office of the Chief Human Capital Officer stated that they did not assess the level of preparedness for personnel without certifications to take certification exams because the department does not require its cybersecurity personnel to hold certifications. As a result, they did not have criteria for identifying personnel who are prepared to take certification exams. According to the Department of the Interior’s Principal Deputy Assistant Secretary for Policy, Management, and Budget, the department did not assess the level of preparedness for personnel without certifications to take certification exams because neither OPM nor the department currently requires certifications for these cybersecurity positions. However, the department's Office of Human Resources and Office of the Chief Information Officer are exploring options to determine the level of preparedness across its IT workforce. According to the National Aeronautics and Space Administration’s (NASA) baseline assessment report, the agency did not assess the level of preparedness for personnel without certifications to take certification exams because the agency does not require its cybersecurity personnel to maintain certifications. The agency did not know how many of its personnel were planning to seek certifications on their own. Data regarding the number of cybersecurity employees that hold certifications and the level of preparedness of personnel without certifications can be a useful indicator of the skills and knowledge of an agency’s cybersecurity workforce. In addition, strategies for addressing gaps can help an agency increase the skills and knowledge of its cybersecurity workforce. By not including all reportable information in the assessments, these four agencies may lack valuable information that could help them identify and meet the certification and training needs of their cybersecurity employees who are charged with protecting federal information and information systems from cyberattacks. However, as discussed later in this report, the absence of NICE identified appropriate industry-recognized certifications may have also contributed to uncertainty for agencies in their efforts to comply with the requirements of the act. Limitations in the 21 agencies’ baseline assessments raise concerns about the reliability of the assessments, thus constraining the conclusions that can be drawn from their results about the federal cybersecurity workforce’s certifications. The 21 agencies in our review that conducted assessments were not able to collect complete, comprehensive, or consistent information about the certifications held by their cybersecurity workforces for various reasons. As a result, these agencies had limited assurance that the certification information contained in their baseline assessment reports was reliable, thereby diminishing the usefulness of the assessments in determining the certification and training needs of their cybersecurity employees. As previously noted, OPM’s August 2016 memorandum on the requirements of the act stated that, agencies were to report their baseline assessments to Congress by December 2016. However, according to OPM’s January 2017 coding guidance, agencies were not required to complete the assignment of the appropriate 3-digit employment codes to each position until April 2018. Consequently, agencies were required to submit their reports on the percentage of personnel performing cybersecurity functions who possessed certifications before the agencies had identified all members of their cybersecurity workforce and assigned the 3-digit cybersecurity employment codes to each position. Because the agencies had not yet fully defined their cybersecurity workforces using the NICE Framework and the 3-digit coding structure, the 21 agencies in our review that prepared assessments did not use consistent criteria to define the population of personnel with cybersecurity job functions that were included in their baseline assessments. Examples of the criteria that these agencies used to define the target populations for their assessments included: cybersecurity employees who had been coded with the 2-digit cybersecurity employment codes during the 2013 Special Cybersecurity Workforce Project; employees within certain occupational series, such as the 2210 Information Technology Management series; personnel within certain roles or organizations, such as the Office of Information Security or the Office of the CIO; or personnel who performed cybersecurity duties for a defined percentage of the time. As a result of not having fully defined their cybersecurity workforces prior to conducting their baseline assessments, the agencies have limited assurance that their baseline assessments reflected all relevant agency positions or personnel performing cybersecurity functions as defined by the NICE Framework. Several agencies reported that they were not able to obtain information on certifications from all of the employees they surveyed when conducting their baseline assessments. Specifically, 6 of the 21 agencies that prepared assessments reported response rates of between 15 and 42 percent to their surveys or data calls to employees for such information. Also, officials from two agencies told us that employees’ responses to their information requests were voluntary due to union and legal concerns. As a result, these agencies have limited assurance that their baseline assessment reports conveyed comprehensive information about all agency cybersecurity personnel and the certifications that they held because of the limited response from employees. Although the act required agencies to report on the percentage of personnel who held appropriate industry-recognized certifications as identified under NICE, NICE had not defined such a list of certifications as of the agencies’ reporting deadline of December 2016. In August 2017, a NICE official told us that the organization did not believe it was appropriate for NICE, which is led by NIST, to identify industry appropriate certifications because doing so may be perceived as endorsing certain private certifications over other certifications. Currently, the NICE website describes an effort under a NICE working group—which includes representatives from government, academia, and the private sector—to map industry-recognized certifications to work roles based on the updated NICE Framework. However, this effort has not yet been completed. According to NICE officials, the mapping of certifications to the NICE Framework is expected to be completed by November 2018. In the absence of a defined list of industry-recognized certifications, the agencies in our review developed their own approaches for determining the certifications on which they based their assessments. Examples of agencies’ approaches included: asking that cybersecurity staff provide input on any or all certifications using a list of certifications developed by the DHS National Initiative for Cybersecurity Careers and Studies, which was referenced in OPM’s reporting template; using certifications identified in the Department of Defense’s (DOD) Information Assurance Workforce Improvement Program; or having the agency Office of the CIO or cybersecurity workforce- planning workgroup identify certifications to include in the assessment. Because the baseline assessments were not based on a defined list of certifications, there is limited assurance that the assessments consistently or accurately conveyed the extent to which federal cybersecurity professionals held industry-recognized certifications that are appropriate for their job functions. In addition, no government-wide requirement exists for cybersecurity personnel to hold certifications, and most of the agencies in our review did not require certifications. Specifically: Although OPM guidance states that agencies may use certifications as a selective factor for some positions where specific qualifications are required, no government-wide requirement exists for positions performing cybersecurity related functions to hold certifications. Most agencies did not require IT or cybersecurity personnel to hold certifications. Only 6 of the 24 agencies reported that they had requirements for personnel to hold an industry-recognized certification, while only one agency—DOD—required certifications for all cybersecurity positions. As a result, the information collected by most agencies about the certifications held by agency cybersecurity personnel may be of limited value for assessing the qualifications and skills of their cybersecurity workforces. Almost all of the CFO Act agencies established procedures to identify all of their civilian positions and assign the appropriate cybersecurity employment codes to the positions as called for by the act. However, 6 agencies’ procedures did not fully address 1 or more of 7 activities required by OPM, such as the activities to review all encumbered and vacant positions and annotate reviewed position descriptions with the appropriate employment code. Additionally, DOD did not establish procedures for coding noncivilian cybersecurity positions. By not developing coding procedures that address all of the required activities in their procedures, these agencies may not have reasonable assurance that they will fully realize the benefits of (1) comprehensively identifying the cybersecurity workforce, and (2) applying the employment codes to meet the intended goal of defining the workforce and helping to address critical mission needs. The act required agencies to establish procedures for identifying cybersecurity positions and assigning employment codes to each position. In January 2017, OPM issued a memorandum that required agencies to establish their coding procedures by April 2017. The memorandum also required agencies to perform a number of activities to identify and assign codes to cybersecurity positions. Among others, the memorandum stated that agencies were to: use the updated cybersecurity coding structure to find the appropriate cybersecurity employment code(s); identify encumbered and vacant positions with cybersecurity functions; have their CIO staff, managers, and human resources (HR) and classification staff work together to identify cybersecurity positions; annotate reviewed position descriptions with the appropriate employment code(s); account for the fact that cybersecurity positions will extend beyond the Information Technology Management 2210 (GS-2210) occupational series; assign code “000” to positions that do not perform cybersecurity assign up to three employment codes to each position, in the order of the level of criticality. Most of the agencies in our review had established coding procedures. Specifically, of the 24 CFO Act agencies, 23 had established procedures. Fourteen of these 23 agencies established their procedures by April 2017 as OPM required, while the remaining 9 agencies established their procedures by March 2018. Officials from the 9 agencies that did not complete their procedures by April 2017 gave several reasons for their late development or completion of the procedures. For example: General Services Administration officials said that the procedures were delayed due to their internal review processes. DOD officials said that the procedures were delayed because of the size and complexity of the processes required to identify and code the large number of civilian cybersecurity positions across the department, and because of the length and complexity of the department’s policy review processes. In October 2017, an official in DHS’s Office of the Chief Human Capital Officer stated that the department did not plan to develop procedures until the National Finance Center (NFC) payroll systems were updated to accept the 3-digit cybersecurity codes. The NFC systems were updated to accept the new codes in December 2017, and DHS issued its procedures in March 2018. One agency—the Department of Energy—had not established coding procedures: An official in the Department of Energy’s Office of the Chief Human Capital Officer stated that, because responsibility for IT is not centralized under the department-level CIO organization (but rather, is distributed throughout the component agencies), the official had not determined who had the authority to issue coding procedures for the entire department. By not establishing coding procedures, the Department of Energy faces increased risk that it will not fully identify its cybersecurity workforce or assign the appropriate employment codes to each position, limiting its ability to identify cybersecurity skills gaps or work roles of critical need. The agencies that developed coding procedures generally, but did not always, address the seven required activities that we reviewed in their procedures. Specifically, 17 of the 23 agencies that developed procedures addressed all 7 activities in their procedures, while the remaining 6 agencies partially addressed or did not address 1 or more of the 7 activities. Table 4 describes the extent to which agency procedures addressed the activities required by OPM. The six agencies that did not address all activities required by OPM cited a variety of reasons for not including them in their coding procedures. For example: An official in the Department of Education’s Office of Human Resources explained that it was not necessary for the coding procedures that were provided to each component to address assigning code “000” to noncybersecurity positions because the Office of Human Resources would assign the “000” code to any position that did not have an assigned code. An official from the National Science Foundation’s Division of Human Resources Management stated that not addressing all activities may have been an oversight by the agency. Officials in NASA’s Office of Human Capital Management and its Office of the CIO said they felt that it was unnecessary to address assigning code “000” to noncybersecurity positions in the agency’s coding procedures because the agencies’ existing guidance for assigning the old 2-digit codes specified that such positions should be coded with “00.” By not addressing all of the activities required by OPM in their procedures, these 6 agencies lack assurance that the activities will be performed or performed consistently throughout their organizations. In addition to developing procedures for civilian positions, the act required DOD to establish government-wide procedures for identifying and assigning employment codes to noncivilian (i.e., military) positions with cybersecurity job functions by June 2017. The act also required DOD to establish its internal departmental procedures for military positions by September 30, 2017. According to officials in the department’s Office of the CIO and Office of the Chief Human Capital Officer, the only military personnel not currently within DOD are in the Coast Guard (which resides within DHS). Therefore, the department planned to fulfill its requirements to establish government-wide procedures and internal departmental procedures for identifying and coding military positions by establishing a single consolidated procedure. The officials added that the consolidated procedure is to include procedures for DHS to implement the coding structure for uniformed Coast Guard personnel along with the internal DOD procedures. However, as of February 2018, DOD had not finalized its consolidated coding procedures. An official in the department’s Office of the CIO in February 2018 stated that, because the military services use multiple Human Resources systems that all have to be updated to accommodate the cybersecurity employment codes, the office was working with each of the military services on guidance to meet the act’s deadlines while the services develop implementation plans for updating their human resources systems. Until DOD establishes both government-wide and DOD-specific procedures for identifying and coding noncivilian cybersecurity positions, increased risk exists that DOD and DHS will not be able to identify and code all positions in their noncivilian cybersecurity workforce, limiting the departments’ ability to identify cybersecurity skills gaps or work roles of critical need in their noncivilian cybersecurity workforce. To implement the objectives of the Federal Cybersecurity Workforce Assessment Act of 2015, OPM and NIST, although delayed, have revised the coding structure and cybersecurity workforce framework, and developed coding procedures to support the identification and assignment of codes to federal cybersecurity positions. In addition, most CFO Act agencies have developed baseline assessments to identify cybersecurity personnel within their agencies that held certifications. Having information on the certifications held by cybersecurity employees can be a useful indicator of the skills and knowledge of an agency’s cybersecurity workforce. However, because agencies have not consistently defined the workforce and NICE had not developed a list of appropriate certifications, efforts such as conducting the baseline assessment to determine the percentage of cybersecurity personnel that hold appropriate certifications have yielded inconsistent and potentially unreliable results. By not conducting assessments or including all required information in the assessments, some of these agencies may lack valuable information that could help them identify the certification and training needs of their cybersecurity employees that are charged with protecting federal information and information systems from cyberattacks. Lastly, while most CFO agencies have developed procedures for assigning cybersecurity codes to positions, several agencies did not address activities required by OPM. Unless those agencies address all of the activities, they may not have reasonable assurance that they are comprehensively identifying the cybersecurity workforce and applying the correct employment codes. As such, increased risk exists that the federal government will not meet its intended goal to define the cybersecurity workforce and address the critical mission needs for a qualified cybersecurity workforce. We are making a total of 30 recommendations to 13 agencies in our review to develop and submit their baseline assessments and to fully address the required activities in OPM’s guidance in their procedures for assigning employment codes to cybersecurity positions. Specifically: The Secretary of Commerce should evaluate the level of preparedness for cybersecurity personnel not currently holding certifications to take certification exams, identify strategies for mitigating any gaps identified, and report this information to Congress. (Recommendation 1) The Secretary of Defense should develop, document, and implement government-wide procedures for identifying IT, cybersecurity, and cyber- related noncivilian positions and assigning employment codes to those positions. (Recommendation 2) The Secretary of Defense should develop, document, and implement internal departmental procedures for identifying IT, cybersecurity, and cyber-related noncivilian positions and assigning employment codes to those positions. (Recommendation 3) The Secretary of Education should include requirements to assign code “000” to positions that do not perform IT, cybersecurity, and cyber-related functions in departmental procedures. (Recommendation 4) The Secretary of Energy should evaluate the level of preparedness for cybersecurity personnel not currently holding certifications to take certification exams and report this information to Congress. (Recommendation 5) The Secretary of Energy should develop, document, and implement departmental procedures for identifying IT, cybersecurity, and cyber- related positions and assigning employment codes to those positions, taking into account the key elements described in OPM’s instructions for agencies’ procedures. (Recommendation 6) The Secretary of Homeland Security should conduct a baseline assessment of the department’s cybersecurity workforce that includes (1) the percentage of personnel with IT, cybersecurity, or other cyber-related job functions who hold certifications; (2) the level of preparedness of other cyber personnel without existing credentials to take certification exams; and (3) a strategy for mitigating any gaps identified with appropriate training and certification for existing personnel. (Recommendation 7) The Secretary of Homeland Security should submit a report of the department’s baseline assessment of its existing cybersecurity workforce to the appropriate congressional committees of jurisdiction. (Recommendation 8) The Secretary of Housing and Urban Development should conduct a baseline assessment of the department’s cybersecurity workforce that includes (1) the percentage of personnel with IT, cybersecurity, or other cyber-related job functions who hold certifications; (2) the level of preparedness of other cyber personnel without existing credentials to take certification exams; and (3) a strategy for mitigating any gaps identified with appropriate training and certification for existing personnel. (Recommendation 9) The Secretary of Housing and Urban Development should submit a report of the department’s baseline assessment of its existing cybersecurity workforce to the appropriate congressional committees of jurisdiction. (Recommendation 10) The Secretary of the Interior should evaluate the level of preparedness for cybersecurity personnel not currently holding certifications to take certification exams and report this information to Congress. (Recommendation 11) The Secretary of Labor should include requirements to annotate reviewed position descriptions with the appropriate cybersecurity data standard code(s) in departmental procedures. (Recommendation 12) The Secretary of Labor should ensure that departmental procedures fully account for the fact that IT, cybersecurity, and cyber-related positions will extend beyond the Information Technology Management 2210 occupational series. (Recommendation 13) The Secretary of Labor should fully clarify requirements to assign code “000” to positions that do not perform IT, cybersecurity, and cyber-related functions in departmental procedures. (Recommendation 14) The Secretary of Labor should include requirements to assign up to three employment codes per position in order of their criticality in departmental procedures. (Recommendation 15) The Administrator of the National Aeronautics and Space Administration should evaluate the level of preparedness for cybersecurity personnel not currently holding certifications to take certification exams and report this information to Congress. (Recommendation 16) The Administrator of the National Aeronautics and Space Administration should include requirements to assign code “000” to positions that do not perform IT, cybersecurity, and cyber-related functions in agency procedures. (Recommendation 17) The Director of the National Science Foundation should fully clarify requirements to review all encumbered and vacant positions performing IT, cybersecurity, and cyber-related functions in agency procedures. (Recommendation 18) The Director of the National Science Foundation should include requirements to annotate reviewed position descriptions with the appropriate cybersecurity data standard code(s) in agency procedures. (Recommendation 19) The Director of the National Science Foundation should ensure that agency procedures account for the fact that IT, cybersecurity, and cyber- related positions will extend beyond the Information Technology Management 2210 occupational series. (Recommendation 20) The Director of the National Science Foundation should include requirements to assign code “000” to positions that do not perform IT, cybersecurity, and cyber-related functions in agency procedures. (Recommendation 21) The Director of the National Science Foundation should include requirements to assign up to three employment codes per position in order of their criticality in agency procedures. (Recommendation 22) The Chairman of the Nuclear Regulatory Commission should ensure that agency procedures account for the fact that IT, cybersecurity, and cyber- related positions will extend beyond the Information Technology Management 2210 occupational series. (Recommendation 23) The Chairman of the Nuclear Regulatory Commission should fully clarify requirements to assign up to three employment codes per position in order of their criticality in agency procedures. (Recommendation 24) The Administrator of the Small Business Administration should conduct a baseline assessment of the department’s cybersecurity workforce that includes (1) the percentage of personnel with IT, cybersecurity, or other cyber-related job functions who hold certifications; (2) the level of preparedness of other cyber personnel without existing credentials to take certification exams; and (3) a strategy for mitigating any gaps identified with appropriate training and certification for existing personnel. (Recommendation 25) The Administrator of the Small Business Administration should submit a report of its baseline assessment of its existing cybersecurity workforce to the appropriate congressional committees of jurisdiction. (Recommendation 26) The Administrator of the U.S. Agency for International Development should fully clarify requirements to review all encumbered and vacant positions performing IT, cybersecurity, and cyber-related functions in agency procedures. (Recommendation 27) The Administrator of the U.S. Agency for International Development should fully clarify requirements to annotate reviewed position descriptions with the appropriate cybersecurity data standard code(s) in agency procedures. (Recommendation 28) The Administrator of the U.S. Agency for International Development should include requirements to assign code “000” to positions that do not perform IT, cybersecurity, and cyber-related functions in agency procedures. (Recommendation 29) The Administrator of the U.S. Agency for International Development should include requirements to assign up to three employment codes per position in order of their criticality in agency procedures. (Recommendation 30) We provided a draft of this report to the 24 CFO Act agencies for their review and comment. Of the 13 agencies to which we made recommendations, 7 agencies stated that they agreed with all of the recommendations directed to them; 1 agency agreed with one and did not agree with one recommendation; 2 agencies provided comments but did not state whether they agreed or disagreed with the recommendations; 2 agencies stated that they had no comments; and 1 agency—DOD—did not respond to our request for comments on the report. In addition, of the 11 agencies to which we did not make recommendations, 2 provided comments on the report and 9 responded that they had no comments on the report. We also received technical comments from 2 agencies, which we have incorporated into the report as appropriate. The following seven agencies agreed with our recommendations: In its written comments (reprinted in appendix II), the Department of Commerce agreed with our recommendation. The department stated that it will evaluate the level of preparedness for cybersecurity personnel who do not hold certifications to take certification exams, identify strategies for mitigating any gaps identified, and report this information to Congress. In its written comments (reprinted in appendix III), the Department of Education agreed with our recommendation. The department stated that it had updated its coding guidance to require that positions that do not perform substantial work in information technology, cybersecurity, or cyber-related functions be assigned a code of “000.” In its written comments (reprinted in appendix IV), the Department of Energy agreed with our recommendations and stated that it has planned, or taken steps to address them. Specifically, with regard to our recommendation concerning cybersecurity certification, the department stated that it plans to conduct a department-wide evaluation of the level of preparedness for its cybersecurity personnel without existing credentials to take certification exams and will report the information to Congress. In addition, the department stated that it had developed and issued procedures for identifying and coding IT, cybersecurity, and cyber- related positions, as we recommended, and that it had since completed its coding of applicable positions across the department. The department also provided us its updated coding procedures, along with its written comments. In its written comments (reprinted in appendix V), the Department of Homeland Security agreed with our recommendations. Regarding the recommendation to conduct a baseline assessment of its cybersecurity workforce, the department stated that it is taking steps to collect data about certifications relevant to DHS cybersecurity work. The department also stated that it plans to identify the percentage of its cybersecurity workforce that holds certifications, the percentage prepared to take a relevant certification exam, and strategies for mitigating any gaps. The department added that it plans to provide this information to Congress, as we recommended. The department also provided technical comments, which we have incorporated into this report as appropriate. In its written comments (reprinted in appendix VI), the Department of the Interior stated that it agreed with our recommendation. The department also indicated that it is exploring options to determine the extent to which its cybersecurity employees who currently do not hold certifications are prepared to take certification exams. In its written comments (reprinted in appendix VII), the Small Business Administration agreed with our recommendations. The agency also stated that it had recently completed an assessment of its IT workforce and reported on existing skills gaps, and that it plans to execute its IT workforce plan to address the requirements of the Federal Cybersecurity Workforce Assessment Act of 2015. In comments on a draft of this report provided via email on May 15, 2018, a Program Analyst in the National Science Foundation’s Office of Integrative Activities stated that the agency concurred with our recommendations. One agency did not agree with one of the two recommendations directed to it: In its written comments (reprinted in appendix VIII), the National Aeronautics and Space Administration did not agree with our first recommendation and agreed with the second. Specifically: NASA did not concur with our recommendation to evaluate the level of preparedness for cybersecurity personnel not currently holding certifications to take certification exams and report this information to Congress. The agency stated that there is no federal or NASA requirement for employees in cybersecurity positions to hold and/or maintain a certification, and therefore the agency has no plans to assess the readiness of its cybersecurity personnel to take certification exams. Nonetheless, we continue to believe our recommendation remains valid because the level of preparedness of personnel without certifications to take certification examinations can be a useful indicator of the skills and knowledge of an agency’s cybersecurity workforce. In addition, this information could help the agency identify and meet the certification and training needs of its cybersecurity employees who are charged with protecting NASA’s information and information systems from cyberattacks. Moreover, the act contains provisions that demonstrate congressional interest in assessing agency use of professional certifications. NASA concurred with our recommendation to include in the agency’s coding procedures, requirements to assign code “000” to positions that do not perform IT, cybersecurity, and cyber-related functions. The agency stated that it planned to update its procedures to include this requirement, and indicated that supervisors and human resource specialists had been trained to assign cybersecurity codes to all positions, including code “000.” The following two agencies provided comments, but did not state whether they agreed or disagreed with our recommendations: In its written comments (reprinted in appendix IX), the Nuclear Regulatory Commission stated that it was in general agreement with the overall content of the draft report. However, the agency asked that we revise the final report to reflect that the Nuclear Regulatory Commission had updated its cybersecurity coding procedures to include language explaining that IT, cybersecurity, and cyber-related positions will extend beyond the GS-2210 occupational series, and to outline the requirement that positions can be assigned up to three different employment codes in order of criticality. The agency provided its updated coding procedures along with its written comments. In its written comments (reprinted in appendix X), the U.S. Agency for International Development stated that it had completed various actions related to coding its cybersecurity positions which addressed our four recommendations. For example, among other actions, the agency said it had updated its plan for coding cybersecurity positions to include procedures for assigning codes for multiple functional areas, with the predominant functional area being coded first. In addition, two agencies to which we made recommendations---the Departments of Housing and Urban Development and Labor—stated via email that they did not have comments on the report. The agencies did not state whether they agreed or disagreed with our recommendations. Of the agencies to which we did not make recommendations, the Social Security Administration also provided a letter acknowledging its review of the report. The agency’s letter is reprinted in appendix XI. The remaining nine agencies to which we did not make recommendations—the Departments of Agriculture, Health and Human Services, Justice, State, Transportation, and Treasury; the Environmental Protection Agency; the General Services Administration; and the Office of Personnel Management—stated that they did not have any comments on our report. We are sending copies of this report to interested congressional committees, the Director of the Office of Management and Budget, the secretaries and agency heads of the departments and agencies addressed in this report, and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov. If you have any questions regarding this report, please contact me at (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix XII. Our objectives were to determine whether (1) OPM developed a coding structure and procedures for assigning codes to cybersecurity positions and submitted a progress report to Congress, (2) Chief Financial Officers (CFO) Act agencies submitted complete and reliable baseline assessment reports of their cybersecurity workforces, and (3) CFO Act agencies established procedures to identify and assign codes to cybersecurity positions. The scope of our review included the 24 departments and agencies (hereafter referred to as agencies) covered by the Chief Financial Officers Act of 1990. It also included OPM, DOD, DHS, and NIST in their roles related to the development of a cybersecurity coding structure and related guidance. Our work focused on the agencies’ cybersecurity positions and on workforce planning actions that the act required the agencies to complete by November 2017. To address the first objective, we obtained and compared OPM’s federal cybersecurity employment coding structure, issued in November 2016, to the work roles described in the National Initiative for Cybersecurity Education (NICE) Cybersecurity Workforce Framework, issued in draft form by NIST in November 2016. We also examined OPM memorandums to identify if and when OPM had issued procedures to agencies for identifying cybersecurity positions and assigning employment codes. Additionally, we reviewed any progress reports submitted by OPM to Congress on the implementation of the act. We compared the issuance date of each of these documents to the deadlines by which OPM was to issue them, as established in the act. Also, we interviewed OPM and NIST officials about their efforts to develop these documents and the reasons for any delays. To address the second objective, we obtained available baseline assessments from each of the 24 CFO Act agencies and evaluated them against the act’s requirements to include information on (1) cybersecurity personnel holding certifications, (2) the level of preparedness of other personnel to take certification exams, and (3) strategies for mitigating any gaps identified. We also obtained agencies’ letters transmitting their assessments to the relevant congressional committees and evaluated them against the reporting deadline established in OPM guidance. In addition, we analyzed other relevant agency documentation and interviewed cognizant agency officials about their efforts to identify the appropriate certifications, identify relevant personnel, and collect information on employee certifications. We obtained the officials’ views on the reasons for any delays in agencies’ submissions of the assessments and the reliability of assessment results. To address the third objective, we obtained and analyzed available cybersecurity coding procedures established by each of the 24 CFO Act agencies. We reviewed the required coding activities described in OPM’s Guidance for Assigning New Cybersecurity Codes to Positions with Information Technology, Cybersecurity, and Cyber-Related Functions. We judgementally selected seven of the activities that we determined to be particularly important for effectively identifying and coding all relevant encumbered and vacant cybersecurity positions. We then evaluated each agency’s procedures against these seven required coding activities. We also compared the issuance date of the procedures to the deadline established in OPM’s coding guidance for agencies to issue the procedures. In addition, we interviewed agency officials about their efforts to complete the procedures by the required deadline and the reasons for any delays. Further, the Federal Cybersecurity Workforce Assessment Act of 2015 established a separate requirement and deadline for DOD to develop government-wide procedures for implementing the coding structure for federal noncivilian cyber positions. As such, we reviewed relevant documentation and interviewed cognizant officials from the Department of Defense’s Office of the Chief Information Officer and Office of the Under Secretary for Personnel and Readiness about their efforts to establish coding procedures for both civilian and noncivilian positions by the deadlines set forth in the act. We conducted this performance audit from October 2016 to June 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, Nick Marinos (director), Tammi Kalugdan (assistant director), William Cook (analyst in charge), Chris Businsky, Virginia Chanley, Wayne Emilien, Lisa Maine, David Plocher, Priscilla Smith, Dwayne Staten, Daniel Wexler, and Merry Woo made significant contributions to this report.", "summary": "A key component of mitigating and responding to cyber threats is having a qualified, well-trained cybersecurity workforce. The Federal Cybersecurity Workforce Assessment Act of 2015 requires OPM and federal agencies to take several actions related to cybersecurity workforce planning. GAO is to monitor agencies' progress in implementing the act's requirements. For this report, GAO assessed whether: (1) OPM developed a coding structure and procedures for assigning codes to cybersecurity positions and submitted a progress report to Congress; (2) CFO Act agencies submitted complete, reliable baseline assessments of their cybersecurity workforces; and (3) CFO Act agencies established procedures to assign codes to cybersecurity positions. GAO examined OPM's coding procedures and progress report on the act's implementation, and baseline assessments and coding procedures from the 24 CFO Act agencies. GAO also interviewed relevant OPM and agency officials about efforts to address the act's requirements. As required by the Federal Cybersecurity Workforce Assessment Act of 2015 (act), the Office of Personnel Management (OPM) developed a cybersecurity coding structure under the National Initiative for Cybersecurity Education (NICE) as well as procedures for assigning codes to federal civilian cybersecurity positions. However, OPM issued the coding structure and procedures 5 and 4 months later than the act's deadlines because OPM was working with the National Institute of Standards and Technology (NIST) to align the structure and procedures with the draft NICE Cybersecurity Workforce Framework , which NIST issued later than planned. OPM also submitted a progress report to Congress on the implementation of the act 1 month after it was due. The delays in issuing the coding structure and procedures have extended the expected time frames for implementing subsequent provisions of the act. Most of the 24 agencies covered by the Chief Financial Officers (CFO) Act submitted baseline assessment reports to Congress but the results may not be reliable. As of March 2018, 21 of the 24 CFO Act agencies had conducted baseline assessments identifying the extent to which their cybersecurity employees held professional certifications and had submitted the assessment reports to Congress as required by the act. Three agencies had not conducted the assessments for various reasons, such as a lack of resources and tools to do so. Of the 21 agencies that did, 4 did not address all of the reportable information, such as the extent to which personnel without professional certifications were ready to obtain them or strategies for mitigating any gaps. Additionally, agencies were limited in their ability to obtain complete or consistent information about their cybersecurity employees and the certifications they held. This was because agencies had not yet fully identified all members of their cybersecurity workforces or did not have a consistent list of appropriate certifications for cybersecurity positions. As a result, the agencies had limited assurance that their assessment results accurately reflected all relevant employees or the extent to which those employees held appropriate certifications. This diminishes the usefulness of the assessments in determining the certification and training needs of these agencies' cybersecurity employees. Most of the 24 CFO Act agencies established coding procedures, but 6 agencies only partially addressed certain activities required by OPM in their procedures. Of the 24 agencies reviewed, 23 had established procedures to identify their civilian cybersecurity positions and assign the appropriate employment codes to the positions as called for by the act. However, 6 of the 23 agencies did not address one or more of 7 activities required by OPM in their procedures, such as the activities to review all filled and vacant positions and annotate reviewed position descriptions with the appropriate employment code. These 6 agencies cited a variety of reasons for not addressing all of the required activities in their coding procedures. For example, these agencies stated that they addressed the activities in existing guidance or did not include activities that their components did not have the responsibility to perform. By not addressing all of the required activities in their coding procedures, the 6 agencies lack assurance that the activities will be performed or performed consistently throughout their agency. GAO is making 30 recommendations to 13 agencies to fully implement two of the act's requirements on baseline assessments and coding procedures. Of the 12 agencies to which we made recommendations that provided comments on the report, 7 agreed with the recommendations made to them, 4 did not state whether they agreed or disagreed, and 1 did not agree with one of two recommendations made to it. GAO continues to believe that the recommendation is valid as discussed in this report.", "document_type": "gao"}
{"report": "The IGSA statute (10 U.S.C. § 2679) authorizes such agreements based on a determination that the agreement will serve the best interests of the department by creating efficiencies or economies of scale, including by reducing costs, or by enhancing mission effectiveness. The law also states that IGSAs are not subject to other provisions of law governing the award of federal government contracts for goods and services. In addition, IGSAs may be entered into on a sole source basis with a state or local government and may use wage rates normally paid by that state or local government. At the same time, there are limitations on the use of IGSAs. Specifically, any installation services obtained through an IGSA must already be provided by the state or local government for its own use, and any contract awarded by the federal government or by a state or local government pursuant to an IGSA must be awarded competitively. In addition, IGSAs cannot be used to circumvent the requirements of Office of Management and Budget Circular A-76, which governs competitions to determine whether commercial activities should be performed by government employees or by private contractors. Finally, IGSAs are statutorily limited to a term of no more than 10 years, but the statute does not preclude their renewal after the initial agreement period ends. The military services each have a process for developing, approving, and implementing IGSAs. These processes generally begin with meetings between installation and state or local government officials to discuss services the installation requires that the state or local government could provide. If there is agreement that an IGSA could be beneficial to both parties, installation officials put together an IGSA proposal for obtaining the service from the state or local government. Proposals are required to include a business case analysis showing the proposed IGSA is expected to provide a financial or nonfinancial benefit. For example, Army Regulation 5-9, Installation Agreements, states that an Army installation must submit a proposal and a cost benefit analysis that demonstrates the IGSA will bring financial benefits. Similarly, a memorandum from the Assistant Secretary of the Navy for Energy, Installations, and Environment requires that Navy and Marine Corps installations include material describing the IGSA’s risks and benefits, including financial benefits and enhanced mission effectiveness. Air Force guidance requires that IGSA proposals include a business case analysis and meet the purpose of 10 U.S.C. § 2679 by either bringing financial benefits or enhancing mission effectiveness. Once an IGSA proposal is complete, installation commanders either approve it or submit it to a higher command for review and approval, according to certain dollar thresholds. Figure 1 shows the office within each military service that reviews the proposed IGSA for approval, based on the dollar thresholds. Once a proposed IGSA is approved, installation officials draft the agreement in coordination with state or local government officials. When finalized, representatives of the military service and the state or local government sign the agreement. For Army, Navy, and Marine Corps IGSAs, the installation commander has authority to sign the IGSA, while Air Force IGSAs must be signed by an installation contracting officer. The IGSA is then implemented. Our analysis of a sample of 8 implemented IGSAs, and interviews with officials about these and other IGSAs, found that the military services have realized financial (i.e., cost savings and cost avoidances) and nonfinancial (e.g., enhanced mission effectiveness) benefits from these agreements. In 5 of the 8 IGSAs in our sample, we found that the actual cost of each IGSA during its first year of implementation was lower than the expected cost of obtaining the installation service through an alternative contract, as shown in the respective business case analysis for each IGSA. Table 1 provides each installation’s estimated cost for obtaining the installation service through an alternative contract and the estimated cost for obtaining the installation service through an IGSA; the actual cost paid by the installation to the local government for the first year of each IGSA, based on our analysis of monthly invoices; and our calculation of the estimated realized cost savings achieved from using the IGSA, relative to the alternative. Overall, we found that the estimated cost savings realized by these 5 IGSAs totaled about $2.4 million during the first year of implementation. For example: Fort Polk realized an estimated $1.9 million in cost savings by implementing an IGSA for waste removal with its local government. Specifically, installation officials estimated that a private contract would have cost the installation about $4.5 million from June 2017 through May 2018, while we found that the implemented IGSA cost about $2.6 million for the same period. Moody Air Force Base realized an estimated $270,000 in savings in fiscal year 2017 by implementing an IGSA for water and wastewater treatment. In the IGSA’s business case analysis, officials estimated that continuing to obtain this service from their existing contractor would have cost about $642,000, while the implemented IGSA cost was about $372,000, according to our analysis. Marine Corps Logistics Base Barstow realized an estimated $68,000 in cost savings during the first 9 months of its IGSA for water testing and analysis with the local government. Specifically, installation officials estimated that renewing the previous contract would have cost about $153,000 for 1 year, or about $115,000 for 9 months, while we found that the actual cost under the implemented IGSA was about $47,000 for 9 months. The other 3 IGSAs in our sample resulted in cost avoidances, according to installation officials. First, officials at Fort Sill, Oklahoma, told us that the Army Medical Command and the Army Public Health Command had previously provided stray animal control without cost to the installation. When this arrangement ended, Fort Sill had to find an alternative. Officials stated that implementing an IGSA with the city of Lawton, Oklahoma, allowed the installation to avoid the higher costs of a private contractor or of renovating facilities and hiring civilians to perform these duties. Second, Fort Bragg, North Carolina, implemented an IGSA for stray animal control with Cumberland County, North Carolina, that, according to its proposal documentation, allowed the installation to avoid the cost of replacing its stray animal control facility, which was inadequate and sub-standard. Finally, after 2 years with no contract in place, Fort Bragg implemented an IGSA with the city of Fayetteville, North Carolina, for maintenance services at the Airborne and Special Operations Museum that allowed the installation to avoid the overhead costs and fee involved in securing the services through a contract with the Army Corps of Engineers. According to officials from all four services, achieving financial benefits has been a primary purpose for utilizing IGSAs, but IGSAs can also provide nonfinancial benefits—such as enhanced mission effectiveness and readiness, reduced administrative time, and greater flexibility. Enhanced mission effectiveness and readiness. Military service officials cited examples of IGSAs that led to enhanced mission effectiveness and readiness. For example, according to its IGSA proposal package, Fort Polk was using military personnel to conduct grounds maintenance, which was contrary to the Army’s guidance that military personnel, while at Fort Polk, should be training for their mission. Officials told us that once the IGSA was implemented military personnel were no longer assigned to grounds maintenance duty, thus potentially enhancing mission effectiveness. In addition, an official in the Army Partnerships Office told us that the IGSA at the Presidio of Monterey, California, for various installation services enabled the installation to obtain a work order for flood damage to a satellite component within a matter of minutes. Direct contact between installation officials and the local government, he stated, provides a quicker response time and has a significant impact on installation readiness. Reduced administrative time and greater flexibility. Installation officials stated that IGSAs had reduced the time personnel spent on managing the services being provided. For example, Marine Corps Logistics Base Barstow officials stated that the installation’s IGSA with the city of Barstow, California, for water testing and analysis had eliminated the time that installation personnel had to use to manage the previous contract. At the time of our review, they were considering further IGSAs, such as one for tree-trimming, that they said would likely not bring cost savings, but that would provide flexibility and ease of managing due to reduced administrative time and regular communication with city officials. Similarly, officials at Fort Polk and Fort Bragg stated that managing their IGSAs is easier than managing other contracts for services, as they can make any needed changes to the IGSA by working directly with the local government. Other benefits. Installation officials also cited benefits such as improved relations with the local government, better quality of service, and the local community’s stronger commitment to working with the installation, compared with contractors. For example, Moody Air Force Base officials noted that the installation’s IGSA for water and wastewater treatment has been positive because the local government cares about the overall good of the installation, due to its importance to the community. As part of the approval process for IGSAs, the military services collect information on IGSAs’ potential expected benefits, which are estimated prior to IGSA implementation. However, once IGSAs are implemented, the services do not fully monitor whether these IGSAs are resulting in actual financial and nonfinancial benefits. Standards for Internal Control in the Federal Government states that management should design processes, and document them in policy, to obtain relevant, accurate information that it can use to evaluate the entity’s performance in achieving key objectives and make informed decisions about any needed changes. The standards also state that management communicates such information throughout the entity to support achieving those key objectives. Following are descriptions of the status of each military service’s approach and plans for monitoring the benefits of implemented IGSAs. Army headquarters collects data on the expected financial benefits of IGSAs, based on information provided in the IGSAs’ business case analyses. These data reflect the financial benefits that the installations expect to achieve by using IGSAs, which are estimated prior to IGSA implementation. Army headquarters does not, however, currently monitor whether financial or nonfinancial benefits are actually realized from IGSAs after implementation. Army officials told us in May 2018 that they were drafting guidance that likely will assign responsibility for tracking both the realized financial and nonfinancial benefits of IGSAs, on an annual basis, to the Army’s four land-holding commands. They noted, however, that they have not yet decided what specifically to track or finalized a process for monitoring IGSA benefits and evaluating program performance, but stated that their goal was to have a process in place by the end of 2018. Navy headquarters collected information on the expected benefits of the IGSAs it has thus far approved. In addition, in May 2018, the Navy Installations Command chose 12 high-priority IGSA opportunities identified by its regional commands to focus on for implementation and monitoring. According to the Navy Installations Command official who oversees the Navy’s IGSA efforts, this effort is in the very early stages. The official also stated that the expected financial benefits for these 12 will likely be tracked by the Navy Installations Command, but any monitoring of realized financial benefits after the IGSAs are implemented would be left to the regional commands. On the other hand, the official stated that nonfinancial benefits are very subjective and the Navy has not yet determined what information will be collected. Marine Corps headquarters officials stated that they collect information on the expected benefits of IGSAs, but they are not currently monitoring the actual performance of implemented IGSAs because few are in place and existing IGSAs are less than 2 years old. They added that the Marine Corps plans to establish a process to track and analyze the realized financial benefits of IGSAs, but the headquarters official with lead responsibility for IGSAs did not provide a timeline for doing so. He added that the process will likely task the regional installation commands with tracking cost savings, with headquarters officials collecting and maintaining consolidated regional data. In addition, he did not indicate that the Marine Corps plans to monitor whether nonfinancial benefits are realized by implemented IGSAs. In addition to collecting data on the expected benefits of IGSAs prior to their implementation, Air Force headquarters has taken some steps to monitor the benefits realized by the 8 implemented IGSAs it had in place as of July 2018. Specifically, Air Force Community Partnership Program officials have taken the initiative to request information at the beginning of each fiscal year from Air Force installations on any actual financial benefits realized from their implemented IGSAs, including cost savings and cost avoidance. However, officials stated that submitting information is voluntary for installations, and some installations do not always provide timely information. For example, two installations with IGSAs in place beginning in fiscal year 2015 did not provide information in response to the fiscal years 2016 and 2017 data requests. Officials with the partnerships office also noted that they plan to monitor nonfinancial benefits to use for lessons learned and program talking points, but that information on any nonfinancial benefits from implemented IGSAs was currently being collected anecdotally. The military services generally are not monitoring whether all of their IGSAs are bringing financial and nonfinancial benefits because they have not established formal processes to obtain this information and documented them in their policies or procedures, as called for in Standards for Internal Control in the Federal Government. Specifically, the Army, Navy, and Marine Corps IGSA policies do not include processes for monitoring the degree to which expected benefits from IGSAs were actually realized after implementation. The military services also differ in regard to the types of benefits they plan to monitor in the future. In addition, the informal process used by the Air Force to collect some data on realized IGSA benefits is not documented in Air Force policy or procedures. Officials from all four services stated that they are still in the early stages of developing their IGSA processes. In addition, officials from the Army and the Air Force told us that they believed that it may be premature to monitor IGSA performance because the authorization to use IGSAs has only been in use for 3 years and only a limited number of IGSAs have been approved. We recognize the use of IGSAs is relatively new, but developing and documenting formal processes to collect and monitor information on the benefits realized through implemented IGSAs now, as the services continue to refine their IGSA programs, could assist the services in at least two ways. First, it would provide the services with information they could use to assess the performance of IGSAs in comparison with the expected benefits outlined in the IGSAs’ business case analyses. An accurate assessment of actual performance would provide decision makers with important context when reviewing individual IGSAs for possible renewal, and could inform the services’ decisions on developing and implementing similar agreements in other locations. Second, developing formal processes to monitor the performance of implemented IGSAs would provide information that the military services could communicate internally to their installations as part of their outreach efforts to increase awareness of and, when beneficial, expand the use of IGSAs as a means of achieving financial benefits or enhancing mission effectiveness. The military services have developed various approaches for supporting their installations’ use of IGSAs. These include issuing policies on the use of IGSAs; issuing procedures and templates for IGSA development and approval; and providing headquarters-level support, such as facilitating meetings between installation and state and local government officials. The following are descriptions of these approaches for supporting installations’ use of IGSAs. Policies. The services have issued IGSA policies that, among other things, either direct their installations to evaluate opportunities for using IGSAs to obtain installation services or to implement mutually beneficial partnerships that include IGSAs. Army Installation Management Command policy states that installations are to explore opportunities to enter into IGSAs with state or local governments, and it directs installations to review current, soon-to-expire installation support contracts for possible transition to an IGSA. Similarly, Navy Installations Command and Marine Corps Installations Command policies direct regional commands and installations to investigate and identify existing and potential services that could be provided by the state or local governments surrounding their installations. While Air Force policy does not specifically direct its installations to evaluate opportunities for using IGSAs, it does direct Air Force installations to implement mutually beneficial partnerships with their local communities. Procedures and templates. Each of the military services has issued procedures for its installations to follow in order to develop, obtain approval for, and implement IGSAs. For example, the Marine Corps has issued an IGSA handbook that provides information on the roles and responsibilities of installation and headquarters officials in the IGSA process. The handbook also outlines a process installations can follow to develop an IGSA, which includes identifying a need that an IGSA could address, meeting with potential state and local partners, developing a draft and final IGSA, and signing and implementing the IGSA. Additionally, the Army and the Air Force have provided templates of required documents to help installations through the IGSA approval process. For example, Army Installation Management Command’s IGSA procedures include templates and examples of documents installations are to develop, such as a memorandum from the installation commander describing the IGSA proposal; a business case analysis that demonstrates the benefits of the proposed IGSA; and the IGSA document to be signed by the installation and the state or local government. Similar to the Army and the Air Force, one of the Navy’s regional commands has included templates along with their region-specific IGSA procedures, and a Navy Installation Command official told us that the Navy may adapt those procedures and templates for Navy-wide use. Headquarters support. The Army and the Air Force have established partnership offices within their headquarters that serve as resources to support installations interested in using IGSAs. Support includes facilitating meetings between installation and state and local government officials to identify IGSA opportunities. For example, the Army facilitated such meetings at Fort Polk in late 2016, during which officials identified the IGSA opportunity between Fort Polk and Vernon Parish, Louisiana, for waste removal that was implemented in June 2017. The Air Force partnership office also provides periodic training on IGSAs and other topics, as well as a website with various resources for installations to use in developing IGSAs. Marine Corps Installations Command officials stated that they provide headquarters support to installations for developing IGSAs—to include facilitating meetings between installation and local and state officials—but as a collateral duty to other responsibilities. Navy Installation Command officials said that their regions and installations are to take the lead on IGSA development but that they have offered assistance to regions, as needed. Service officials added that representatives from each military service meet quarterly to discuss their IGSA programs, including best practices and lessons learned. Officials from all four military services told us that they are not fully monitoring whether all of the services’ installations are complying with their respective service policies to evaluate opportunities to use IGSAs to reduce costs or enhance mission effectiveness. Army headquarters officials told us that their efforts to date have been focused on raising awareness of IGSAs at installations and removing any obstacles that prevent IGSAs from being approved. However, Army officials stated that they currently do not monitor whether Army installations are evaluating opportunities to use IGSAs, but they said that installations may need greater encouragement from higher headquarters to use IGSAs. Thus, Army officials said they are planning to revise Army IGSA policy to include a process for obtaining information from installation officials on whether they evaluated expiring contracts for transition to IGSAs, as well as any reasons for not doing so, and expect it to be complete by the end of 2018. Additionally, Army officials said they plan to review installation contracts for waste removal services to determine whether IGSAs can be used instead, and that additional installation services will be identified for review in the future. The Navy Installations Command has, as discussed previously, collected a list of IGSA opportunities from the Navy’s regional commands and plans to focus on implementing 12 of them, according to the Navy Installation Command official who oversees the Navy’s IGSA efforts. However, the official said that the Navy Installations Command does not know how the regions identified these IGSA opportunities, and it has not directed the Navy regions to monitor whether each of their installations are evaluating opportunities to use IGSAs going forward. The Navy official said that asking each installation whether it identified any IGSA opportunities would be a fair question in order to avoid missing any potential IGSA opportunities. Marine Corps Installation Command officials said they monitor the efforts of installations that are already in the process of developing an IGSA or that have already implemented an IGSA, but they do not monitor the efforts of other installations in the Marine Corps to identify IGSA opportunities. However, a Marine Corps Installation Command official said that such monitoring could help expand the use of IGSAs in the Marine Corps. Officials in the Air Force partnerships office told us that beginning in fiscal year 2018 they had begun to monitor whether some of their installations are evaluating IGSA opportunities for certain installation services that are needed at all Air Force installations—specifically, waste management, grounds maintenance, and pavement maintenance. Air Force officials stated that they are in the process of contacting installations that have volunteered for the Air Force’s community partnership program—which includes most, but not all, installations for active-duty personnel—to determine whether they have evaluated IGSAs as a means to obtain these services. As of July 2018, the military services had approved 45 IGSAs at 33 installations (see app. I). Opportunities for more IGSAs—and thus opportunities to achieve more financial and nonfinancial benefits similar to those we found in our analysis of 8 selected IGSAs—may exist at the services’ installations, including their more than 160 active-duty installations. Recognizing this potential, the services have directed their installations to evaluate IGSA opportunities or to implement mutually beneficial partnerships with local communities, which can include IGSAs. However, the military services do not know the extent to which their installations are evaluating opportunities for IGSAs because service IGSA policies and procedures do not include a process for monitoring whether these evaluations are occurring or for obtaining information on the outcome of any such evaluations. Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives, such as monitoring actual performance and comparing it with established goals and objectives. Additionally, those standards state that management should implement those control activities by, for example, documenting responsibilities in policies. Army, Navy, and Marine Corps IGSA policies and procedures do not include a process for monitoring whether installations are complying with service directives to evaluate IGSA opportunities, or for obtaining information on the outcome of those evaluations. Additionally, the process that the Air Force is currently using to monitor whether some of its installations are evaluating opportunities to use IGSAs for specific types of installation services is not documented in Air Force policy or procedures. As a result, it is uncertain whether these and any other monitoring efforts will continue beyond the current leadership of the Air Force partnerships office. Without establishing, implementing, and documenting a process to monitor whether installations are evaluating opportunities to use IGSAs and obtain information on the outcome of those evaluations, which may also identify challenges that could hamper the ability to use IGSAs, the military services do not fully know whether their installations are conducting these evaluations, and thus may be missing opportunities to reduce costs or enhance mission effectiveness. Air Force and Army officials identified instances in which they did not implement an IGSA because of provisions in the IGSA statute on the term limit for IGSAs—which was originally 5 years and is currently 10 years— and on the prohibition against contracting for services that are designated for federal civilians to provide. Term limits. Buckley Air Force Base, Colorado, and Fairchild Air Force Base, Washington, did not use IGSAs to obtain firing range services because of the IGSA term limit, according to Air Force headquarters and installation officials. In both cases, the installations were considering using IGSAs in which local governments would construct new firing ranges that would be shared by the installation and those local governments. Air Force officials told us that in each case the local governments planned to fund the new construction costs with municipal bonds; however, the repayment periods for those bonds would have been longer than the IGSA term limit, and thus the Air Force would not have been able to sign an IGSA that would have covered the entire term of the repayment periods. For example, an official at Fairchild Air Force Base told us that the local government would not sign an IGSA with a term limit of fewer than 20 years because the local government wants to ensure they receive sufficient funding to repay their bond. As a result, that official from Fairchild Air Force Base told us that the Air Force has continued to use its existing firing range for training, but it needs to be replaced because of ventilation problems and limitations on the types of weapons that can be fired at the range. At Buckley Air Force Base, an official told us that the installation received military construction appropriation funding in fiscal year 2017 to build a new firing range at a cost of $10.5 million—approximately $2 million more than the estimated cost of the IGSA. Air Force officials added that they had discussed increasing the IGSA term limit with Members of Congress. Prohibition against contracting for services designated for federal civilians. According to Army officials, two Army installations— Aberdeen Proving Ground, Maryland, and Fort Leonard Wood, Missouri—decided not to use IGSAs for grounds maintenance because of legal concerns regarding the IGSA statute’s prohibition on using IGSAs to circumvent the requirements of Office of Management and Budget Circular A-76 regarding public-private competitions. According to those requirements, public-private competitions must be performed to determine if government personnel should perform commercial activities that are required by an agency. Further, 10 U.S.C. § 2461 states that no function of DOD that is performed by civilian employees may be converted to performance by a contractor unless based on a public-private competition that follows a detailed list of requirements under that statute. Currently, however, DOD is prohibited from conducting such competitions. Army officials told us that Aberdeen Proving Ground submitted an IGSA proposal in 2016 for grounds maintenance that they expected to result in a cost savings of approximately $1 million annually. However, those services had previously been provided by temporary Army civilian employees. Because of this and based on the Army’s interpretation of the IGSA statute, Army officials said the IGSA proposal was not approved. Additionally, Army officials told us that Fort Leonard Wood also considered using an IGSA for grounds maintenance services in 2017 because it had unfilled civilian positions and was using military personnel instead, which took those personnel away from their primary mission. However, officials said that the installation did not submit an IGSA proposal because officials did not think it would be approved, due to the existing civilian positions. Army officials told us they worked with the Office of the Secretary Defense to try to address some of the legal concerns within the Army regarding these types of IGSA proposals. Specifically, language was included in a May 2018 memorandum from the Assistant Secretary of Defense for Manpower and Reserve Affairs stating that even though DOD is prohibited from conducting Circular A-76 public-private competitions, this does not preclude the use of an IGSA as long as the IGSA is not used to circumvent Circular A-76 requirements. Although the memorandum does not provide any further details, an official with the Army Partnerships Office stated that the memorandum may provide more support for the use of IGSAs during internal legal reviews of IGSA proposals and could result in additional IGSAs being approved. If not, Army officials plan to communicate to Congress the effects of the current language in the IGSA statute and make any appropriate recommendations to address those effects. Officials from each of the 6 installations we met with during our review told us that the length of time to review and approve IGSAs was a challenge, in part due to the multiple levels of review required before an IGSA is approved. For example: Marine Corps Logistics Base Barstow officials told us that their IGSA proposal for water testing and analysis took approximately 1 year to be reviewed and approved—first at the installation level, then at Marine Corps Installation Command-West (a regional command), and finally at Marine Corps Installation Command headquarters. As a result, officials said they had to continue to pay their contractor for an additional year to perform those services, which they estimate cost them approximately $80,000 more than if the IGSA had been approved and in place. The officials added that IGSAs are a new way to obtain installation services within the Marine Corps, and this IGSA was the Marine Corps’ first, which likely contributed to the long review time. In July 2017, Fort Polk submitted an IGSA proposal for both facility maintenance and repair services and also grounds maintenance services, which would be provided by a local government. However, Fort Polk officials said that approval of the proposal was delayed at Army headquarters because there was concern by those headquarters officials about replacing the existing AbilityOne contractor at Fort Polk, which was providing facility maintenance and repair services for the installation. As a result, Fort Polk re-submitted an IGSA proposal only for the grounds maintenance services, and this narrower IGSA was approved in March 2018—8 months after the original IGSA proposal was submitted. The military services have delegated responsibility to approve IGSAs to lower levels, which could decrease the review and approval time for IGSAs. For example, in January 2018 the Air Force delegated approval authority to installation commanders for IGSAs that cost less than $15 million over a 10-year time frame—with the exception of any IGSAs that obtain installation services currently obtained from an AbilityOne contractor. An installation may lack a financial incentive to use IGSAs because that installation’s military service may choose to use any realized cost savings for service-level priorities elsewhere. As discussed earlier, we found that 5 installations in our sample realized cost savings from their implemented IGSAs. Three of those installations—Fort Polk, Luke Air Force Base, and Marine Corps Logistics Base Barstow—were able to retain those savings to apply to other installation needs that were not funded, according to installation officials. For example, Fort Polk officials stated that they were able to reallocate savings from the waste removal IGSA to repair landing strips at the installation, and Luke Air Force Base officials told us that the ability to retain IGSA cost savings was an incentive for them to put in the effort to implement an IGSA. Officials at the other 2 installations with IGSA cost savings—Moody Air Force Base and Fort Bragg—told us that those savings were retained by the installations’ higher headquarters. The military services are at various stages in deciding how IGSA cost savings are to be used, according to service officials. Air Force officials said they are considering letting their installations retain IGSA cost savings to incentivize the use of IGSAs. Army officials stated that they do not yet have a policy on using IGSA savings, but their commands are responsible for contributing resources to supporting readiness, which may include the use of IGSA cost savings. Marine Corps officials similarly told us that they have not yet developed a policy, but added that IGSA cost savings will be retained within Marine Corps Installation Command. Finally, Navy officials told us that they have not yet considered a policy that would allow installations to retain any cost savings, although they added that Navy Installations Command does not intend to recoup any IGSA cost savings achieved by an installation or a region. DOD budgets about $25 billion annually to operate and support its installations, and our analysis shows that IGSAs have provided opportunities for the military services to reduce some of those costs. However, the services could improve the visibility they have over the performance of IGSAs after implementation. Specifically, developing processes to monitor any benefits being realized from implemented IGSAs and documenting these processes in policies or procedures would enhance the military services’ ability to evaluate the performance of these agreements and provide lessons learned that could inform their efforts to encourage greater use of IGSAs. In addition, the military services have already taken steps to direct and facilitate the use of IGSAs. However, without a process to monitor whether their installations are evaluating opportunities to use IGSAs and obtain explanations of the outcomes of such evaluations, the military services do not have visibility over whether their installations are considering the use of IGSAs, as directed in guidance. Consequently, the services may be missing opportunities to reduce costs or enhance mission effectiveness. Furthermore, by documenting their processes in policies or procedures, the military services will increase the likelihood that such oversight will endure beyond the initiatives of current leadership and officials. Taking these actions would support the military services’ oversight of IGSAs and could potentially expand interest in and the use of IGSAs. We are making the following eight recommendations to DOD: The Secretary of the Army should (a) finalize and implement a process to collect and monitor information on the extent to which all implemented IGSAs have resulted in financial and nonfinancial benefits and (b) complete documentation of that process in Army IGSA policy or procedures. (Recommendation 1) The Secretary of the Navy should (a) establish and implement a process to collect and monitor information on the extent to which all implemented IGSAs have resulted in financial and nonfinancial benefits and (b) document that process in Navy IGSA policy or procedures. (Recommendation 2) The Commandant of the Marine Corps should (a) establish and implement a process to collect and monitor information on the extent to which all implemented IGSAs have resulted in financial and nonfinancial benefits and (b) document that process in Marine Corps IGSA policy or procedures. (Recommendation 3) The Secretary of the Air Force should (a) establish and implement a formal process to collect and monitor information on the extent to which all implemented IGSAs have resulted in financial and nonfinancial benefits and (b) document that process in Air Force IGSA policy or procedures. (Recommendation 4) The Secretary of the Army should (a) finalize and implement a process to monitor whether Army installations are evaluating opportunities for using IGSAs and to obtain explanations from installations on the outcome of their evaluations and (b) complete documentation of that process in Army IGSA policy or procedures. (Recommendation 5) The Secretary of the Navy should (a) establish and implement a process to monitor whether Navy installations are evaluating opportunities for using IGSAs and to obtain explanations from installations on the outcome of their evaluations and (b) document that process in Navy IGSA policy or procedures. (Recommendation 6) The Commandant of the Marine Corps should (a) establish and implement a process to monitor whether Marine Corps installations are evaluating opportunities for using IGSAs and to obtain explanations from installations on the outcome of their evaluations and (b) document that process in Marine Corps IGSA policy or procedures. (Recommendation 7) The Secretary of the Air Force should document in Air Force IGSA policy or procedures its process for monitoring whether Air Force installations are evaluating opportunities for using IGSAs. (Recommendation 8) We provided a draft of this report to DOD for comment. DOD provided written comments, which are reproduced in appendix III. DOD concurred with six recommendations and non-concurred with two recommendations, but DOD’s response indicates that the department plans to implement all of the actions we recommend. DOD concurred with our six recommendations to the Army, the Navy, and the Air Force. DOD did not concur with our two recommendations to the Marine Corps, stating that the Marine Corps is one of two military services within the Department of the Navy and that the recommendations are unnecessary. While we understand that the Marine Corps is within the Department of the Navy, we made recommendations to the Marine Corps because we learned during the course of our review that the Marine Corps had developed service-specific IGSA processes. For our two recommendations to the Navy, DOD stated that the Deputy Assistant Secretary of the Navy (Installations and Facilities) will issue policy by November 30, 2018, directing the Chief of Naval Operations and the Commandant of the Marine Corps to implement our recommendations. We believe that implementing these actions will meet the intent of our recommendations to the Marine Corps. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretaries of the Army, the Navy, and the Air Force; and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. Table 2 shows the military service, installation, state or local government, and type of installation service for each of the 45 intergovernmental support agreements that have been approved within the military services as of July 25, 2018. We met with officials from the following offices, installations, and local governments during this review. Unless otherwise specified, these organizations are located in or near Washington, D.C. In addition to the contact named above, individuals who made key contributions to this report include Maria Storts (Assistant Director), Whitney Allen, Vincent Buquicchio, Michele Fejfar, Mae Jones, Amie Lesser, Geoffrey Peck, Ophelia Robinson, Jack Wang, and Erik Wilkins- McKee.", "summary": "The Department of Defense (DOD) budgets about $25 billion annually to operate and support its installations. GAO has designated DOD support infrastructure management as a high-risk area since 1997, in part because DOD has needed to reduce its installation support costs. In 2013, Congress authorized the military services to enter into IGSAs with local and state governments to receive installation services, if an agreement will provide financial benefits or enhance mission effectiveness. As of July 2018, the military services had approved 45 IGSAs at 33 installations. In this report, GAO, among other objectives, evaluated the extent to which the military services have (1) realized and monitored the benefits from IGSAs and (2) supported the use of IGSAs and monitored whether installations are evaluating opportunities to use IGSAs. GAO reviewed the IGSA statute and policies and procedures; evaluated a nongeneralizable sample of 8 IGSAs, selected based on factors including the military service involved, the amount of expected financial benefits, and the length of time in place; compared the services' processes and actions against standards for internal control; and interviewed service, installation, and local government officials. Based on analysis of 8 selected intergovernmental support agreements (IGSAs) and interviews with officials, GAO found that the military services have realized financial and nonfinancial benefits from using IGSAs with local or state governments to obtain installation services such as waste removal, grounds maintenance, and stray animal control. Financial benefits. Of the 8 selected IGSAs, 5 resulted in cost savings, in which the actual cost of each IGSA during its first year was lower than the expected cost of a contract the installation had previously used to obtain the installation service. For example, Moody Air Force Base realized an estimated cost savings of $270,000 by using an IGSA for water and wastewater treatment services, versus continuing to obtain this service via contract. Installation officials stated that the other 3 selected IGSAs resulted in cost avoidances, in which the installations used the IGSAs to obtain a service they were not previously paying for at a lower cost than other alternatives. Nonfinancial benefits. According to officials from all four services, IGSAs have provided nonfinancial benefits such as enhanced mission effectiveness and readiness, reduced administrative time, and improved relationships with local communities. However, the military services are not fully monitoring benefits being realized from implemented IGSAs because they have not established formal processes to do so. For example, Navy and Marine Corps officials stated that they are not monitoring the financial and nonfinancial performance of implemented IGSAs in part because they are in the early stages of using IGSAs. The Air Force monitors some information on realized IGSA financial benefits, but this information is not complete because reporting by installations is voluntary. Developing and documenting processes to monitor any realized benefits of implemented IGSAs would provide the services with useful information on IGSA performance as they make decisions on devoting resources to developing and implementing these agreements in other locations. The military services have developed various approaches for supporting the use of IGSAs to reduce costs or enhance mission effectiveness. For example, the services have issued policies and procedures for their installations to follow in order to develop, obtain approval for, and implement IGSAs. However, officials from each of the military services told us they are not fully monitoring whether installations are evaluating opportunities to use IGSAs. For example, Army policy states that installations are to review current, soon-to-expire contracts for possible transition to an IGSA, but Army officials said they are not yet monitoring whether installations are doing so. Without a process in place to monitor whether installations are evaluating opportunities to use IGSAs, the military services do not know the extent to which this is occurring and thus may be missing opportunities to further reduce costs or enhance mission effectiveness. GAO is making eight recommendations to monitor both the benefits realized from implemented IGSAs and whether installations are evaluating IGSA opportunities. DOD concurred with six recommendations and non-concurred with two, but plans to implement them all.", "document_type": "gao"}
{"report": "Enacted in July 2014, WIOA emphasizes the alignment and integration of workforce programs, primarily administered by the departments of Labor and Education, that provide education and training services to help job seekers obtain employment and advance in the labor market. WIOA also provides for state workforce development boards to help oversee a system of local workforce development boards that, in turn, deliver services through a network of one-stop centers. In its guidance on implementing WIOA, DOL states that this network is a shared responsibility of states, local boards, and other partners, including one- stop programs. It also encourages integration of services across one-stop programs to promote seamless service delivery. The public workforce system is available to all job seekers, including UI claimants, and through it claimants may access reemployment services from a variety of federally funded workforce programs. At one-stop centers, states make services such as job search assistance and career counseling available to UI claimants and other job seekers using programs including the DOL-administered Wagner-Peyser Employment Service, the WIOA Adult program, and the WIOA Dislocated Worker program. The WIOA Adult program and WIOA Dislocated Worker program may also be used to provide training (see table 1). UI claimants may also access services from other programs offered through the public workforce system. One such program, RESEA, is designated for the provision of reemployment services to UI claimants specifically. Established as a discretionary grant program in 2015, RESEA makes funding available to states for reemployment services to UI claimants identified by their state as most likely to exhaust their benefits, as well as veterans who receive UI benefits through the Unemployment Compensation for Ex-Servicemembers (UCX) program. During fiscal year 2017, 49 states and the District of Columbia participated in RESEA, and DOL made $115 million in grant funds available through the program. In February 2018, legislation was enacted that established RESEA as a formula grant program with incentive payments for states meeting or exceeding outcome goals, and authorized up to approximately $3.9 billion in funding for the program through fiscal year 2027. In July 2018, DOL announced that it was developing an implementation plan for the new RESEA program provisions, and would provide details on this plan in the coming months. RESEA aims to link UI claimants to the public workforce system, address their individual reemployment needs, and help states prevent and detect improper payments by conducting UI eligibility reviews. Once a UI claimant is selected for RESEA, the claimant is required to attend a one- stop orientation and meet one-on-one with a caseworker, who conducts a UI eligibility assessment, helps the claimant develop an individualized reemployment plan, and provides or refers the claimant to other reemployment services, as appropriate (see fig. 1). In some states, claimants participate in a second caseworker meeting to receive follow-up services, either in person or by phone. Since 1994, states have been required by law to develop and use profiling systems to identify UI claimants who are likely to exhaust their benefits, and to refer such claimants to reemployment services. In response to this legislation, DOL launched a Worker Profiling and Reemployment Services (WPRS) initiative in 1994. Currently, most states provide services to such claimants through their RESEA programs, using the profiling systems they developed under the WPRS initiative. DOL issued WPRS guidance in 1994 describing minimum profiling requirements for all states and listing two profiling options: Statistical profiling systems predict each UI claimant’s likelihood of exhausting benefits based on claimant characteristics (such as education level, prior claims history, and industry or occupation) and other factors. The system produces a ranked list, and claimants with the highest predicted likelihood of exhausting benefits are selected for reemployment services. Non-statistical characteristic screens sort claimants into two groups, based on the presence of certain characteristics. Claimants with one or more of these characteristics are considered not likely to exhaust their benefits, and are excluded from selection for services. Remaining claimants are considered likely to exhaust their benefits, and a subset is randomly selected for reemployment services. This guidance also specifies characteristics that states must, may, and are forbidden to use in their profiling systems. Specifically, states are required to include certain characteristics to identify UI claimants who are permanently laid off and unlikely to return to their previous industry or occupation. States may also use a claimant’s education, tenure at a previous job, and the state unemployment rate. States are prohibited from using claimant age, race or ethnic group, sex, disability, religion, political affiliation, and citizenship, among others. DOL determined that use of these characteristics could produce discriminatory effects, as UI claimants selected for reemployment services through the profiling process are required to attend services, or may lose their eligibility to receive UI benefits. DOL-commissioned research suggests that reemployment services may help UI claimants find work more quickly and reduce UI program expenditures, though results have differed across states reviewed. A 2008 study found that the Reemployment and Eligibility Assessment (REA) program, the predecessor to RESEA, was effective in reducing the average duration of UI benefits in one of two states reviewed. Specifically, this study found that the REA program led to a statistically significant reduction in the duration of UI benefit claims of about a week for claimants with multiple caseworker meetings in Minnesota, but did not find statistically significant effects for claimants in North Dakota. A subsequent 2011 study found significant reductions in UI benefit duration and amount of benefits received among REA participants in three of four states reviewed, with the largest effects exhibited in Nevada. A more in- depth 2012 evaluation of Nevada’s REA program during the 2007 to 2009 Great Recession found that, on average, REA participants exited the UI program about three weeks sooner and used $873 less in benefits than non-participants as a result. This impact on UI benefit duration and benefit amounts includes both reductions in regular UI benefits and in Emergency Unemployment Compensation (EUC) benefits. Additionally, REA participants were nearly 20 percent more likely to obtain employment in the first two quarters after entering the program. Officials from all six of our selected states said they provide reemployment services designed to help UI claimants get back to work quickly. These services include assessing claimant skills and service needs, providing job search assistance and referrals, and conducting interviewing and resume workshops, among others. State officials said they may also refer claimants with more extensive needs to additional services, such as longer-term case management or retraining. Officials from all six of our selected states described operating reemployment programs that connect many UI claimants to the state’s public workforce system; we refer to these as primary reemployment programs. While the services available through these programs are similar, state approaches to selecting participants for and delivering services through these programs vary. According to information from state officials, these selected states’ primary reemployment programs generally follow the RESEA model of a one-stop center orientation and one-on-one meeting with a caseworker. Officials in all six of our selected states said they served UI claimants identified as most likely to exhaust their benefits, as required by law, through their primary reemployment programs, but some select additional claimants for these programs as well. Officials in two states, Massachusetts and Nebraska, said they believe it is important for all claimants to have access to reemployment services and that they require all claimants to report to a one-stop center for an orientation and meeting with a caseworker. (See text box.) State Spotlight: Service Goals In 2015, Nebraska expanded its primary reemployment program, called NEres, to all unemployment insurance claimants, with state officials noting that all claimants can benefit from the high-quality services it offers. In contrast, officials from three selected states said they prioritize claimants who are most likely to exhaust their benefits for reemployment services, and noted that these claimants have the greatest service needs. Officials from Wisconsin, for example, said claimants who are not selected for the state’s RESEA program are considered job ready and typically do not need in-person services. In addition to prioritizing claimants who are most likely to exhaust their benefits, our sixth selected state, Nevada, randomly selects additional claimants to participate in a state-funded reemployment program that is similar to the state’s RESEA program. Officials in Nevada said they believe their state-funded program allows them to serve claimants with less intensive needs more efficiently and builds upon the success of the state’s prior REA program. Officials in the six selected states described varying approaches to providing reemployment services online versus in person. Officials in two states said their state strongly encourages the use of online services. For example, officials in Utah said all UI claimants are required to fill out an online needs assessment when filing a claim, and based on their responses, are required to complete up to five additional online workshops. These officials said leveraging online self-service options helps UI claimants adapt to using technology in the workplace and helps the state preserve limited financial resources (see text box). Similarly, officials in Wisconsin said claimants are required to complete an online needs assessment and orientation, and claimants can access various online workshops to address identified service needs. These officials believe this emphasis on online services will help claimants become more self-sufficient and in control of their job search. State Spotlight: Online Services Officials in Utah described the one-stop center’s motto as “self-directed.” One-stop center staff encourage customers to access services independently through the state’s online portal in the computer lab so that they feel empowered to use online services at home. In contrast, officials in three other selected states emphasized the benefits of in-person service provision. In Nebraska, officials said in- person meetings help one-stop center staff observe a claimant’s potential employment barriers that might otherwise be hard to identify. Officials provided an example of a claimant who seemed well-positioned on paper to obtain employment, but in person clearly lacked good interviewing skills, prompting the caseworker to refer the claimant to additional interviewing support. In Texas, officials said in-person service provision, where possible, also helps promote program integrity as it enables caseworkers to more easily set the expectation that claimants must search for work to qualify for UI benefits. Additionally, officials in Nevada said establishing a personal connection with claimants can help one-stop staff encourage those struggling with the experience of applying for dozens of jobs online without receiving any feedback from prospective employers (see text box). Officials in the six selected states also described varying approaches in the extent to which they provide reemployment services in group settings or on an individual basis. In RESEA guidance, DOL has encouraged the use of group services as a way to enhance efficiency, and officials in four selected states said they conduct group orientations through their primary reemployment programs. For example, in Massachusetts, officials said that all UI claimants attend a group Career Center Seminar, where one- stop center staff provide an overview of available reemployment services and local labor market conditions, and UI claimants complete a needs assessment and career action plan. In Nebraska, a caseworker said the use of group orientations is a strength of the state’s program because it provides an opportunity for claimants to discuss shared challenges and network with each other. In contrast, Nevada provides all services through its primary reemployment program individually, which officials said they believe is more effective than group service provision. Officials said that during these individual meetings, caseworkers identify each claimant’s barriers to employment and assess whether the claimant needs ongoing individual case management or if additional service referrals would be appropriate. Officials from all six selected states said they use technology and integrate resources from across federally funded workforce programs as strategies that help enhance efficiency and improve UI claimant customer experiences. To help provide services more cost-effectively and enhance service delivery capacity, officials in two selected states, Utah and Wisconsin, said they invested resources into expanding the array of online self- service options available to UI claimants. Utah officials said the state increased its use of technology to meet heightened service demand during the Great Recession, and continues to encourage online self- services as a cost-effective, fiscally sustainable means of maintaining service levels with fewer staff. Similarly, officials in Wisconsin said the state’s enhanced self-service options are central to its strategy for meeting current UI claimant needs and prepare the state for potential increases in UI claimant demand in an economic downturn. Officials in five selected states said they have also used technology to help make services more customer-friendly, including the four selected states in which officials described improvements to their online job banks. One of these states, Nebraska, added a mobile job bank application that, according to officials, has made it easier for UI claimants to use job bank features on their mobile devices and allows them to search for postings within a certain radius of their physical location. Nevada and Wisconsin officials also described other investments in mobile technology. Nevada, for instance, plans to implement a tool that will allow UI claimants to communicate with caseworkers via text message, such as by sending a picture of their first paystub to document that they found a job. Additionally, Wisconsin implemented a self-scheduling feature for initial RESEA meetings as part of broader upgrades to the state’s UI and workforce data systems. Officials in all six selected states said they use technology to help caseworkers maximize their time. For example, officials in four states said integrating their state UI and workforce data systems has enabled them to automate some caseworker responsibilities. In Massachusetts and Wisconsin, officials said data system integration allows caseworkers to instantly transfer relevant information from the workforce data system to the UI data system, enabling them, for instance, to automatically trigger UI adjudication proceedings after a UI claimant fails to meet RESEA requirements. Officials from Wisconsin, Massachusetts, and Utah said their online self-scheduling features help save time that caseworkers would otherwise spend scheduling and rescheduling missed appointments. (See text box.) Officials in four selected states said they also use technological tools to help caseworkers focus their time on providing individualized services. For example, Nebraska developed a series of orientation videos designed to deliver clear, standardized information on job search requirements and available resources for claimants. As a result, caseworkers who manage in-person orientation sessions are able to focus on answering participant questions and emphasizing key information. State Spotlight: Self-Scheduling Tool Wisconsin officials said their online self-scheduling tool for participants in the Reemployment Services and Eligibility Assessment (RESEA) program has both freed up staff time and increased RESEA attendance rates. According to data provided by state officials, the percentage of scheduled RESEA meetings attended by claimants increased from about 69 percent in 2014 to 87 percent in 2016. Officials attributed this increase to the implementation of the self-scheduling tool in March 2015. Officials from all six selected states cited the benefits, such as improving UI claimant access to services, of enhancing program integration. Officials from four selected states said they aim to improve UI claimants’ customer experience using a “no wrong door” service delivery framework in which one-stop center staff guide claimants and other job seekers to the services they need without requiring them to approach different siloed programs for services (see text box). Additionally, officials from three selected states said state workforce agencies work behind the scenes using integrated budgeting, or “braided funding,” to align the appropriate federal resources so one-stop center staff can focus on service provision rather than funding source constraints. Officials in Utah and Wisconsin said integrated budgeting helped them support system-wide improvements, such as IT updates. For example, Wisconsin state officials said they strategically set aside funding from multiple programs to support the technology upgrades needed for a redesign of their reemployment program. State Spotlight: Program Integration Massachusetts cross-trains one-stop center staff on available workforce programs to increase collaboration and make the experiences of “shared” customers—those who receive services from more than one program—more seamless. Finally, officials from all six of our selected states said that the Wagner- Peyser Employment Service—a federally funded workforce program that can be used to support any job seeker—is a critical federal resource that they use in conjunction with other workforce programs to meet the needs of UI claimants specifically. These six selected states described using the Wagner-Peyser Employment Service for a wide range of functions, including expanding reemployment service provision to claimants, supporting one-stop center staff or computer labs, and maintaining continuity of RESEA operations in periods of funding uncertainty. In program year 2015 (July 2015 through June 2016), states reported providing services to UI claimants through four key federally funded workforce programs, most often the Wagner-Peyser Employment Service, followed by RESEA, the WIOA Dislocated Worker program, and the WIOA Adult program (see fig. 2). (See appendix I for selected state participation data.) States likewise served the largest number of all job seekers through the federally funded Wagner-Peyser Employment Service in program year 2015, followed by RESEA, the WIOA Adult program, and the WIOA Dislocated Worker program. The proportion of service recipients who were UI claimants, and the amount of DOL funding provided to states under these programs, also varied (see fig. 3). The following sections discuss these programs in more detail. Officials from all six of our selected states said their accounting systems did not generally track expenses by the UI claimant status of jobseekers served, and as a result, they could not isolate all reemployment service spending on UI claimants specifically. For instance, Utah officials said they allocated workforce system costs across multiple funding streams by surveying staff members about their activities at random moments in time. Officials said that while a jobseeker’s UI claimant status may be relevant to some staff time charges (such as helping a jobseeker apply for UI benefits), it would not be relevant, or even known, in other cases (such as providing computer lab assistance). Officials from DOL said it would be burdensome for states to track and report workforce program expenditures on reemployment services provided to UI claimants specifically, as states have flexibility to use funds from multiple federal sources on services to both claimants and other jobseekers. DOL officials said they believe states mainly rely on RESEA, Wagner-Peyser, WIOA Dislocated Worker, and WIOA Adult funds to support UI claimant reemployment services. DOL has also reported that some states, including one of our selected states (Nevada), collect taxes designated for purposes that may include reemployment services. Our six selected states also provided some UI claimant reemployment services through their primary reemployment programs, and five of these states were able to provide us with summary expenditure data from these programs. These five states chiefly leveraged RESEA funds to support these programs in state fiscal year 2017, and three states supplemented RESEA funds with funds from other sources (see fig. 8). Of the three states that supplement RESEA funds with other sources, two (Nebraska and Wisconsin) used Wagner-Peyser funds, and one (Nevada) used state funds. Nebraska officials said they leveraged flexible Wagner- Peyser funds to enable the state to serve all UI claimants through its primary reemployment program. Wisconsin officials said that they, too, used Wagner-Peyser funds to expand the capacity of their state’s primary reemployment program, but did not aim to serve all UI claimants. Nevada officials said they used state funds from an employer payroll tax to provide reemployment services to randomly selected UI claimants not already selected for RESEA. Past national studies and our review of information from nine selected states indicate that the practices used by states to profile, or identify, UI claimants who are most likely to exhaust their benefits and need assistance returning to work differ. A 2007 DOL-sponsored study and a 2014 follow-up questionnaire to states found that, nationally, a large majority of states reported using statistical profiling systems, while a few states used a type of non-statistical profiling system known as a characteristic screen. (See text boxes.) The 2007 study also found that the performance of states’ profiling systems varied widely. Specifically, while some systems predicted claimants’ likelihood of benefit exhaustion relatively well, others did not perform much better than random chance. Accepted statistical practices recommend that profiling systems be updated regularly, and DOL has recommended that states update their profiling systems every 2 to 4 years. However, more than half of states that responded to the 2014 questionnaire reported that they had not updated their systems since before 2008. Statistical Profiling Systems Statistical profiling systems predict each unemployment insurance (UI) claimant’s likelihood of exhausting benefits based on claimant characteristics (see examples below), which are each assigned weights through a statistical process. The system produces a ranked list, and claimants with the highest predicted likelihood of exhausting benefits are selected for reemployment services. Sample Characteristics Used to Predict Benefit Exhaustion Weeks of UI benefits used in the past 3 years Non-Statistical Profiling Systems (example: Characteristic Screen) Non-statistical profiling systems select claimants for services using a process that does not rely on statistical analysis. One example of these, characteristic screens, sort unemployment insurance (UI) claimants into two groups, based on the presence of certain characteristics (see examples below). Claimants with one or more of these characteristics are considered not likely to exhaust their benefits, and are excluded from service requirements. Remaining claimants are considered likely to exhaust their benefits, and a subset is randomly selected for reemployment services. Of the nine selected states whose profiling systems we reviewed, six use statistical systems and three use non-statistical systems, and profiling practices vary widely, even among states using the same type of system. The six states with statistical systems have varying levels of system sophistication, and different system assessment and updating practices. For example, officials in one state said they invested substantial time and resources in building a sophisticated statistical profiling system and assessing its performance. To maintain the system, officials said they update it biannually through a yearlong, resource- intensive process. Officials described this process as important, noting that employer needs and the economy change over time, as do other factors that influence UI claimants’ likelihood of exhausting their benefits. State officials further said that as part of a large umbrella agency with oversight of numerous federal workforce programs, they have the resources needed to sustain a centralized data office with the capacity to build and maintain a sophisticated statistical system. Officials in another state told us they had recently replaced their sophisticated statistical profiling system, which was based on the principles of machine learning, with a new, more straightforward, statistical system. While DOL officials said the state’s prior system was innovative, state officials said that after the person who developed it left the agency, they did not know how to update it. The official charged with developing the state’s new profiling system said he had to re-familiarize himself with statistical modeling practices in order to build it, and that it took months to complete. State officials said they had not yet established a performance assessment and updating process for the new system, and that they would need to gather additional data and determine how to address certain analytical challenges before doing so. Officials from a third state agency said they were using a statistical profiling system that had not been updated in over 25 years, and had asked DOL to help them develop a new statistical profiling system because they lacked the expertise to do so themselves. In March 2017, DOL provided the new system to the contractor that maintains the state’s UI data system and will be responsible for running the new system. However, in June 2018, state officials told us they had delayed implementing the new system until the state completed a UI modernization project. Further, while state officials said they plan to keep the system up-to-date once implemented, they acknowledged that they do not have staff with the skills to do so, and will likely need continued DOL support. For the three selected states that use non-statistical profiling systems, state officials said that these systems generally require little effort to maintain. Officials in two of these states reported using characteristic screens, which sort claimants into two groups to identify and exempt from service requirements those claimants who meet certain conditions, such as being only temporarily unemployed or in an approved training program. An official from each state said they aim to serve all non-exempt claimants through their reemployment programs. The third state recently implemented a non-statistical claimant needs assessment that replaced the state’s outdated statistical profiling system, which officials said had never been updated and was only used to comply with the federal profiling requirement. With the new needs assessment, claimant responses to questions such as, “Do you have a resume?” and “How many job interviews have you had in the last month?” are scored to determine whether the claimant is job-ready or needs reemployment services. (See text box.) Caseworkers can also use these responses to make more effective service referrals during their appointments with claimants. For instance, if a claimant reported not having a current resume, a caseworker might refer the claimant to a resume workshop. In addition, officials said that program administrators can easily adjust the scoring and weights used in the assessment, and that they review it each year for potential updates. Sample Alternative Non-Statistical Profiling System (Needs Assessment) One selected state’s claimant needs assessment scores claimant responses to a questionnaire about job readiness to determine if claimants need reemployment services. Those responses also provide caseworkers with direct information about claimant needs. How long have you been looking for work? Do you have a cover letter? Do you need help preparing for an interview? Do you have the computer skills needed to complete online job applications? Despite past research identifying weaknesses in state profiling systems, DOL has not systematically collected information on these systems, which limits its ability to oversee their performance. DOL officials said that they communicate with states about their profiling practices and gather some profiling system information in the course of their periodic UI and RESEA reviews. However, DOL technical staff do not review or maintain this profiling system information for oversight purposes, and DOL does not have a systematic method of tracking state profiling practices across states. DOL officials said that they view their primary role, related to profiling systems, as providing technical assistance; however, by law, DOL is also responsible for ensuring that states’ profiling systems meet federal requirements. Further, GAO recommended in a 2007 report that DOL take a more active role in ensuring profiling system accuracy, and federal internal control standards state that agencies should obtain timely and relevant data to conduct effective monitoring. Without such data, DOL’s ability to effectively oversee state profiling practices is limited. In addition, DOL provides technical assistance—which can range from answering specific questions to developing a new statistical profiling system on a state’s behalf—to individual states only upon request, rather than identifying and providing assistance to states at higher risk of poor profiling system performance. This approach necessitates that states recognize when they need technical assistance and request it. However, states may not know that their profiling systems are performing poorly and may not request needed technical assistance as a result. For example, officials from four of our six selected states with statistical systems told us that they do not currently have a process to assess their systems’ performance. As a result, these states may not be aware of potential issues they may need to address to improve their system performance. Additionally, officials responsible for maintaining another selected state’s profiling system had incorrectly identified the system type. As a result, officials may have difficulty identifying problems and seeking support. DOL has an opportunity to use its new UI state self-assessment to systematically collect information that could inform its oversight of state profiling practices and technical assistance efforts. This questionnaire, which DOL designed to help states self-identify and correct UI system weaknesses, covers 15 functional areas. Self-assessment questions in one of these areas will collect some information on state profiling systems, such as system type and date of last update. However, as currently designed, the self-assessment will not solicit other information that could help DOL identify states at risk of poor system performance. For example, it does not ask whether states have experienced challenges maintaining their systems (for instance, due to staff turnover), or how states have assessed system performance. DOL officials told us regional staff will review state responses to the self-assessment, the first of which are due in March 2019, and which will be one piece of information used to identify states that DOL might prioritize for general UI program oversight. While DOL officials said it would make sense to use the information gathered to inform oversight of profiling systems as well, they did not have specific plans about how they would do so. Federal internal control standards state that agencies should identify, analyze, and respond to risks. Without collecting more detailed and consistent profiling system information and having a clearer plan for how to use it, DOL’s ability to conduct effective monitoring and respond to risks will continue to be limited. More specifically, DOL may miss opportunities to help states at risk of poor profiling system performance better identify UI claimants most in need of reemployment services. DOL’s current profiling guidance does not clearly and comprehensively communicate the profiling system options available to states, which may prevent states from using the profiling systems that best suit their needs. While the law does not specify a particular type of profiling system states must use, DOL’s only formal profiling guidance, issued in 1994, describes only two state options: statistical systems and characteristic screens, a type of non-statistical system. Further the guidance encourages states to use statistical systems, which it asserts are more efficient and precise, and easier to manage and adapt, than non-statistical systems. DOL officials who provide technical assistance to states told us they also encourage all states to use statistical profiling systems for the same reasons. However, DOL officials acknowledged that, in practice, not all statistical profiling systems predict benefits exhaustion well, particularly outdated systems. The 2007 DOL-sponsored study similarly found that some state profiling systems did not predict benefit exhaustion much more accurately than random chance. Additionally, statistical profiling systems may be more difficult for some states to develop and maintain than non-statistical systems. DOL officials acknowledged that states with technical capacity issues, such as staffing and data system limitations, may experience particular challenges. Officials we spoke to in four of our six selected states with statistical profiling systems told us that they have faced these challenges. In contrast, officials from all of our selected states with non-statistical profiling systems said their systems are easy to maintain. Officials from one state that uses a claimant needs assessment said this system also provides useful information that caseworkers can review prior to one-on- one meetings with claimants. DOL officials told us they are supportive of state experimentation with alternative profiling approaches. However, officials in our selected states had differing perspectives on DOL’s views on state flexibility and options for pursuing experimentation. For example, an official in one state was interested in making a change to the outcome variable that the state’s statistical system predicted, believing it could reduce UI program expenditures. As a result, the state consulted with regional DOL staff about the possible revision and made the change with DOL’s support. In contrast, an official in another state who wanted to make a similar change to its statistical profiling system has not pursued the change or discussed it with DOL officials because he believes such a change would not be allowed. Further, some of our selected states differed in their understanding of state flexibility to use the type of profiling system that works best for them. For example, officials in one of our selected states said they are switching to a statistical system after longstanding encouragement by DOL to do so, even though a key official expressed concern that a statistical system may not be useful, given the state’s goal of providing services to all UI claimants. In contrast, officials in another state said they had recently replaced their outdated statistical profiling system with a claimant needs assessment that differs from the options described in DOL’s 1994 guidance, after requesting DOL review of their revised approach. The differences in states’ perspectives on allowable options for profiling systems may in part be due to the fact that DOL’s current profiling guidance is limited and outdated. The guidance was issued in 1994, and it does not clearly reflect all of the options available to states, such as using a different outcome variable in a statistical system, or implementing an alternative type of non-statistical system to meet worker profiling requirements. Further, while a key DOL official said they are open to reviewing alternative state profiling approaches, they do not have a formal process for doing so, nor does guidance address the option for DOL to review alternative approaches. DOL officials said they believe the existing guidance provides states relatively wide latitude in designing their profiling systems and, as a result, they have not found the need to change those guidelines. However, federal internal control standards emphasize the importance of periodically reviewing policy for continued relevance and effectiveness in achieving objectives. Without clearer, more current policy information from DOL on profiling requirements and available options, state officials may continue to have differing understandings of what they can do, and states may not pursue innovations that could improve their profiling systems, better suit their technical capacity, and, ultimately, better target claimants for reemployment services. With 5.7 million UI claimants receiving nearly $30 billion in unemployment benefits in 2017, reemployment services have the potential to substantially improve employment outcomes and conserve resources by shortening UI claimants’ periods of unemployment. Earlier this year, Congress authorized up to approximately $3.9 billion in funding over the next decade for the RESEA program, which states use to provide services to UI claimants most likely to exhaust their benefits. However, DOL has not taken key steps to help states effectively identify and select such claimants for the program. DOL has the opportunity to collect more systematic information on state practices for profiling UI claimants through its new UI state self-assessment, but the information it is planning to collect is limited and may not enable DOL to identify states that are having trouble identifying claimants in need of services. Further, DOL does not have a process for how it can use information on state risks of poor profiling system performance to guide its oversight and technical assistance efforts, choosing largely to assist individual states only when asked. Some states may not be equipped to identify weaknesses in their profiling systems, and as a result may not request the assistance they need. In addition, DOL encourages all states to use statistical profiling systems despite acknowledging that some states’ statistical systems, particularly outdated ones, may not perform well in practice. Moreover, its profiling guidance to states has not been updated since 1994, and may not reflect the flexibility afforded states to pursue alternative profiling options. Without clearer, more current information from DOL, states may not pursue innovations that could help them better identify the UI claimants who need reemployment services most. We are making the following three recommendations to the Department of Labor: The Secretary of Labor should systematically collect sufficient information on state profiling systems, possibly through DOL’s new UI state self-assessment process, to identify states at risk of poor profiling system performance. For instance, DOL could collect information on challenges states have experienced using and maintaining their profiling systems, planned changes to the systems, or state processes for assessing the systems’ performance. (Recommendation 1) The Secretary of Labor should develop a process to use information on state risks of poor profiling system performance to provide technical assistance to states that need to improve their systems. DOL may also wish to tailor its technical assistance based on state service delivery goals and technical capacity. (Recommendation 2) The Secretary of Labor should update agency guidance to ensure that it clearly informs states about the range of allowable profiling approaches. (Recommendation 3) We provided a draft of this product to the Department of Labor for comment. In its comments, reproduced in appendix II, DOL agreed with our recommendations and stated that it would take action to address them. DOL reiterated its commitment to providing technical assistance to states and strengthening the connection between the UI program and the public workforce system. DOL also provided technical comments, which we incorporated as appropriate. Additionally, we provided relevant excerpts of the draft report to officials in the selected states we included in our review. We incorporated their technical comments as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Department of Labor, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at 202-512-7215 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. We selected six states—Massachusetts, Nebraska, Nevada, Texas, Utah, and Wisconsin—for in-depth review. These six selected states all served unemployment insurance (UI) claimants through several key federally funded workforce programs in program year 2015 (July 2015 through June 2016). For the five states that confirmed the reliability of the data they reported to the Department of Labor (DOL) over this time period, the numbers of UI claimants served through each program and percent of all service recipients who were UI claimants varied. Summary data from each of these five states are presented in figures 9 through 13. In addition to the contact named above, Rebecca Woiwode (Assistant Director), Ellen Phelps Ranen (Analyst-In-Charge), Caitlin Croake, Margaret Hettinger, Efrain Magallan, and Amrita Sen made key contributions to this report. Also contributing to this report were Lilia Chaidez, Alex Galuten, Thomas James, Nicole Jarvis, Serena Lo, Mimi Nguyen, Jessica Orr, Karissa Robie, Almeta Spencer, and Jeff Tessin.", "summary": "In 2017, the UI program provided about $30 billion in temporary income support to 5.7 million claimants who became unemployed through no fault of their own. The federal government provides various resources states can use to help UI claimants achieve reemployment. GAO was asked to review how states identify and serve claimants who need such assistance. This report examines, among other things, (1) what key federal programs and approaches states used to help UI claimants return to work, and (2) how states used profiling systems to identify claimants who are most likely to exhaust their benefits and need assistance returning to work. GAO reviewed relevant federal laws and guidance; analyzed the most recent available national data on UI claimant participation in key workforce programs, from July 2015 through June 2016; interviewed officials from DOL, six states with key reemployment practices, and three additional states with a variety of profiling practices; and reviewed national studies examining state profiling systems. Nationwide, four key federally funded workforce programs helped states provide reemployment services, such as career counseling and job search assistance, to millions of unemployment insurance (UI) claimants, according to data from July 2015 through June 2016, the most recent period available (see table). The six selected states GAO reviewed in-depth reported using these key programs to support their efforts to help claimants return to work. Selected state officials described skills assessments, job search assistance, and interview and resume workshops as the types of services they use to connect UI claimants to jobs quickly. Officials also described varying service delivery approaches, with some of the selected states emphasizing the use of online services, while others relied to a greater extent on in-person services. According to a 2014 national questionnaire to states, most states used a statistical system to identify UI claimants who are most likely to exhaust their benefits and need assistance returning to work (known as profiling). Six of the nine states GAO reviewed used statistical systems and three used non-statistical approaches. GAO identified several concerns with the Department of Labor's (DOL) oversight and support of state UI profiling systems: Although a 2007 DOL-commissioned study found that some statistical systems may not perform well, DOL has not collected the information needed to identify states at risk of poor profiling system performance. Some selected states have faced technical challenges in implementing and updating their statistical systems. However, DOL does not have a process for identifying and providing technical assistance to states at risk of poor system performance or those facing technical challenges. Instead, it only provides assistance to those states that request it. While states have latitude to choose their preferred profiling approach, DOL's 1994 guidance encourages all states to use statistical systems. Because DOL has not updated this guidance to ensure that it clearly communicates all available profiling system options, some states may not be aware that they have greater flexibility in choosing an option that best suits their needs. GAO recommends that DOL (1) systematically collect sufficient information to identify states at risk of poor profiling system performance, (2) develop a process for providing risk-based technical assistance to such states, and (3) update guidance to clarify state profiling options. DOL agreed with these recommendations.", "document_type": "gao"}
{"report": "We found that as of July 1, 2017, about one-third of the more than 12,000 covered entities in the 340B Program had contract pharmacies. A higher percentage of hospitals (69.3 percent) had at least one contract pharmacy compared to federal grantees (22.8 percent). Among covered entities that had at least one contract pharmacy, the number of contract pharmacies ranged from 1 to 439, with an average of 12 contract pharmacies per entity. The number of contract pharmacies varied by covered entity type, with disproportionate share hospitals having the most on average (25 contract pharmacies), and critical access hospitals having the least (4 contract pharmacies). Across all covered entities, the distance between the entities and their contract pharmacies ranged from 0 miles (meaning that the contract pharmacy and entity were co-located) to more than 5,000 miles; the median distance was 4.2 miles. About half of the entities had all their contract pharmacies located within 30 miles, but this varied by entity type. Specifically, more than 60 percent of critical access hospitals and federally qualified health centers, a type of federal grantee, had all of their contract pharmacies within 30 miles. In contrast, 45 percent of disproportionate share hospitals had at least one pharmacy that was more than 1,000 miles away compared to 11 percent or less for critical access hospitals and grantees. Contracts we reviewed between selected covered entities and contract pharmacies showed that entities generally agreed to pay their contract pharmacies a flat fee per 340B prescription, with some entities also paying additional fees based on a percentage of revenue. The flat fees generally ranged from $6 to $15 per prescription, but varied by several factors, including the type of covered entity and drug, as well as the patient’s insurance status. In addition to flat fees, many of the contracts we reviewed included provisions for the covered entity to pay the pharmacy a fee based on the percentage of revenue generated by each prescription. These percentage fees only applied to prescriptions provided to patients with insurance, and ranged from 12 to 20 percent of the revenue generated by the prescriptions. Selected covered entities and TPAs included in our review indicated two main methods entities use to pay for TPA services: 1) per prescription processed, or 2) per contract pharmacy. Officials with the two TPAs we interviewed and the covered entities that responded to our questionnaire reported that agreements between the parties most frequently involved covered entities compensating their TPAs with a fee for each prescription processed on behalf of the entity, but the exact method and the amount of the fee varied. For example, some covered entities reported paying their TPAs for each prescription regardless of whether it was determined to be 340B eligible, others limited the fees to prescriptions that were 340B eligible, and some reported paying TPAs for 340B-eligible prescriptions dispensed to an insured patient. Thirty of the 55 covered entities responding to our questionnaire reported providing low-income, uninsured patients discounts on 340B drugs at some or all of their contract pharmacies. Federal grantees were more likely than hospitals to provide patients with discounts on the price of drugs and to provide them at all contract pharmacies. Of the 30 covered entities that provided discounts, 23 indicated that they pass on the full 340B discount to patients, resulting in patients paying the 340B price or less for drugs. In many cases, these covered entities indicated that patients received drugs at no cost. The 30 covered entities providing 340B discounts to low-income, uninsured patients, reported using a variety of methods to determine whether patients were eligible for these discounts. Fourteen of the covered entities said they determined eligibility for discounts based on whether a patient’s income was below certain thresholds as a percentage of the federal poverty level, 11 reported providing discounts to all patients, and 5 said they determined eligibility for discounts on a case-by-case basis. Some covered entities that did not provide discounts on 340B drugs at their contract pharmacies reported assisting patients with drug costs through other mechanisms. For example, some covered entities reported providing charity care to low-income patients, including free or discounted prescriptions; and some reported providing discounts on drugs dispensed by their in-house pharmacies. We found weaknesses in HRSA’s oversight that impede its ability to ensure compliance with 340B Program requirements at contract pharmacies. Specifically: Incomplete Data. We found that HRSA does not have complete data on all contract pharmacy arrangements in the 340B Program to inform its oversight efforts, including its audits of covered entities—the agency’s primary method for assessing entity compliance with program requirements. Although HRSA requires covered entities to register their contract pharmacies with the agency, it does not require covered entities to separately register contract pharmacies to each site of the covered entity with which a contractual relationship exists. HRSA officials told us that the number of registered contract pharmacy arrangements increases a covered entity’s chance of being randomly selected for a risk-based audit. Our analysis of HRSA data showed that the registration of contract pharmacies for 57 percent of covered entities with multiple sites only specified relationships between contract pharmacies and each entity’s main site, as opposed to all sites contracted to distribute drugs on that entity’s behalf. Thus, the likelihood of an entity being selected for an audit is dependent, at least in part, on how an entity registers its pharmacies as opposed to the entity’s actual number of pharmacy arrangements. We concluded that without more complete information on covered entities’ contract pharmacy arrangements, HRSA cannot ensure that it is optimally targeting the limited number of risk-based audits done each year to entities that are at a higher risk for compliance issues because they have more contract pharmacy arrangements. Limited Oversight of Duplicate Discounts. We found that HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, covered entities are prohibited from subjecting manufacturers to “duplicate discounts” in which drugs prescribed to Medicaid beneficiaries are subject to both the 340B price and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care, despite the fact that the majority of Medicaid enrollees, prescriptions and spending for drugs were in managed care. HRSA officials told us that they do not assess the potential for duplicate discounts in Medicaid managed care as part of their audits because they have yet to issue guidance as to how covered entities should prevent these duplicate discounts. We concluded that until HRSA develops guidance and includes an assessment of the potential for duplicate discounts in Medicaid managed care as part of its audits, the agency does not have assurance that covered entities’ efforts are effectively preventing noncompliance, and manufacturers are at risk of being required to erroneously provide duplicate discounts for Medicaid prescriptions. Lack of Information on Full Scope of Noncompliance. We found that HRSA requires covered entities for which it identifies issues of noncompliance during audits to assess the full extent of the noncompliance, but it does not provide guidance as to how entities should make these assessments. Specifically, HRSA does not specify the time period covered entities must review to see if any related noncompliance occurred and instead, relies on each entity to make this determination. Additionally, HRSA does not require most covered entities that were audited to communicate the methodology used to assess the full scope of noncompliance, or the findings of their assessments, including how many or which manufacturers were due repayment. As a result, we concluded that HRSA does not know the scope of covered entities’ assessments and whether they were effective at identifying the full extent of the noncompliance identified in the audit. Lack of Evidence of Corrective Actions. We found that prior to closing an audit, HRSA’s audit procedures do not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements. Instead, HRSA relies on the 90 percent of covered entities subject to risk-based audits to self-attest that all audit findings have been addressed and that the entity has come into compliance with 340B Program requirements. We concluded that HRSA, therefore, does not have reasonable assurance that the majority of covered entities audited have corrected the issues identified in the audit, and are not continuing practices that could lead to noncompliance, thus increasing the risk of diversions, duplicate discounts, and other violations of 340B Program requirements. Limited Guidance on Contract Pharmacy Oversight. We found that HRSA’s contract pharmacy oversight guidance for covered entities lacks specificity and thus, provides entities with considerable discretion on the scope and frequency of their oversight practices. Specifically, HRSA’s 2010 guidance on contract pharmacy services specifies that covered entities are responsible for overseeing their contract pharmacies to ensure that the drugs entities distribute through them comply with 340B Program requirements, but states that, “the exact method of ensuring compliance is left up to the covered entity.” According to HRSA officials, if a covered entity indicates that it has performed oversight in the 12 months prior to a HRSA audit, then HRSA considers the entity to have met its standards for conducting contract pharmacy oversight, regardless of what the oversight encompassed. However, due, at least in part, to a lack of specific guidance, we found that some covered entities performed minimal contract pharmacy oversight. Additionally, the identified noncompliance at contract pharmacies raises questions about the effectiveness of covered entities’ current oversight practices. For example, 66 percent of the 380 diversion findings in HRSA audits since 2012 involved drugs distributed at contract pharmacies, and 33 of the 813 audits for which results were available had findings for lack of contract pharmacy oversight. We concluded that as a result of the lack of specific guidance and the numerous HRSA audit findings of noncompliance occurring at contract pharmacies, HRSA does not have assurance that covered entities’ contract pharmacy oversight practices are sufficiently identifying 340B noncompliance. Our June 2018 report contained seven recommendations to HRSA to strengthen its oversight of the 340B Program. HHS concurred with our four recommendations that HRSA should 1) issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care; 2) incorporate an assessment of covered entities’ compliance with the prohibition on duplicate discounts, as it relates to Medicaid managed care claims, into its audit process once the guidance is issued; 3) issue guidance on the length of time covered entities must look back following audits to identify the full scope of noncompliance identified during audits; and 4) provide more specific guidance to covered entities regarding contract pharmacy oversight, including the scope and frequency of such oversight. HHS did not concur with our three recommendations that HRSA should 1) require covered entities to register contract pharmacies for each site of the entity for which a contract exists; 2) require all covered entities to specify their methodology for determining the full scope of noncompliance identified during the audit as part of their corrective action plans, and incorporate reviews of covered entities’ methodology into their audit process to ensure that entities are adequately assessing the full scope of noncompliance; and 3) require all covered entities to provide evidence that their corrective action plans have been successfully implemented prior to closing audits, including documentation of the results of the entities’ assessments of the full scope of noncompliance identified during each audit. HHS cited concerns that implementing these recommendations would be burdensome on covered entities and HRSA. However, as explained in our report, we believe that these recommendations would only create limited additional burden on covered entities and the agency and are warranted to improve HRSA’s oversight of the 340B Program. Chairman Burgess, Ranking Member Green, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. If you or your staff members have any questions concerning this testimony, please contact Debra A. Draper at (202) 512-7114 or draper@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. In addition to the contact named above, Michelle Rosenberg (Assistant Director), Amanda Cherrin (Analyst in Charge), Jennie Apter, George Bogart, and David Lichtenfeld made key contributions to this statement. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "This testimony summarizes the information contained in GAO's June 2018 report, entitled Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement ( GAO-18-480 ). The 340B Drug Pricing Program (340B Program), which is administered by the U.S. Department of Health and Human Services' (HHS) Health Resources and Services Administration (HRSA), requires drug manufacturers to sell outpatient drugs at a discount to covered entities so that their drugs can be covered by Medicaid. Covered entities include certain hospitals and federal grantees (such as federally qualified health centers). About one-third of the more than 12,000 covered entities contract with outside pharmacies--contract pharmacies--to dispense drugs on their behalf. GAO's review of 30 contracts found that all but one contract included provisions for the covered entity to pay the contract pharmacy a flat fee for each eligible prescription. The flat fees generally ranged from $6 to $15 per prescription, but varied by several factors, including the type of drug or patient's insurance status. Some covered entities also agreed to pay pharmacies a percentage of revenue generated by each prescription. Thirty of the 55 covered entities GAO reviewed reported providing low-income, uninsured patients discounts on 340B drugs at some or all of their contract pharmacies. Of the 30 covered entities that provided discounts, 23 indicated that they pass on the full 340B discount to patients, resulting in patients paying the 340B price or less for drugs. Additionally, 14 of the 30 covered entities said they determined patients' eligibility for discounts based on whether their income was below a specified level, 11 reported providing discounts to all patients, and 5 determined eligibility for discounts on a case-by-case basis. GAO found weaknesses in HRSA's oversight that impede its ability to ensure compliance with 340B Program requirements at contract pharmacies, such as: HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care. HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance. HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements. Given these weaknesses, HRSA does not have a reasonable assurance that covered entities have adequately identified and addressed noncompliance with 340B Program requirements.", "document_type": "gao"}
{"report": "Contact with infected animals or consumption of contaminated water and food—including produce, meat, poultry, and processed products—can cause foodborne illness. Many different pathogens can contaminate food, including harmful bacteria such as Salmonella and Campylobacter. CDC reported that in 2015 there were 902 foodborne disease outbreaks reported in the United States that resulted in 15,202 illnesses, 950 hospitalizations, 15 deaths, and 20 food product recalls. According to CDC, fish, chicken, and pork were the most common single food categories implicated in these outbreaks. More recently, in 2016, there were 233 foodborne illnesses from 10 outbreaks linked to beef, 426 foodborne illnesses from 17 outbreaks linked to pork, and 417 foodborne illnesses from 20 outbreaks linked to poultry, according to CDC’s National Outbreak Reporting System (see fig. 1). Common symptoms of foodborne diseases include nausea, vomiting, stomach cramps, and diarrhea. Symptoms can sometimes be severe, and some foodborne illnesses can be life-threatening. Although anyone can get a foodborne illness, some people are more likely to have one. Those groups include young children, older adults, pregnant women, and people with immune systems weakened from medical conditions, such as diabetes, liver, and kidney disease. Patients receiving chemotherapy or radiation treatment are also more susceptible. We have previously reported that to improve its food safety approach, FSIS moved to an increasingly science-based, data-driven, risk-based approach by adopting the Pathogen Reduction; HACCP regulations in 1996. Under the HACCP approach, each plant is responsible for (1) identifying food safety hazards, such as fecal material, that are reasonably likely to occur and (2) establishing controls that prevent or reduce these hazards in its processes. As part of this approach, plants must develop plans that identify the point (known as the critical control point) where they will take steps to prevent, eliminate, or reduce each hazard identified. FSIS inspectors at slaughter and processing plants routinely check records to verify a plant’s compliance with those plans. FSIS inspectors also observe operations at plants as part of their inspection activities. Under the 1996 HACCP regulations, the agency also established Salmonella pathogen standards used to assess the effectiveness of plants’ controls in reducing levels of pathogens in meat and poultry products. According to the regulations, FSIS selected Salmonella for pathogen standards because, among other things, it was the most common bacterial cause of foodborne illness, and they believed that intervention strategies aimed at reducing fecal contamination and other sources of Salmonella on raw product should be effective against other pathogens. FSIS has a verification-testing program in which FSIS inspectors at plants collect samples of certain products and test them to determine whether plants meet the pathogen standards. Test results from this program help FSIS inspectors verify that plant HACCP plans are working and identify and assist plants whose process controls may be underperforming. FSIS also requires products to be labeled with instructions for safe handling. In contrast to Salmonella and Campylobacter, which are subject to pathogen standards, FSIS considers certain serotypes of Escherichia coli (E. coli), another type of disease-causing pathogen, adulterants under the definition of “adulterated” in the Meat Inspection Act and the Poultry Inspection Act. The acts define an adulterant in meat and poultry products to include, among other things, “any poisonous or deleterious substance which may render it injurious to health.” Meat and poultry products contaminated with any level of adulterants are not permitted to enter commerce—a stricter standard than the pathogen standards, which allow certain levels of contamination. FSIS initially declared E. coli O157:H7 as an adulterant in ground beef following an outbreak from 1992 to 1993 that involved Jack-in-the-Box hamburgers and, in 2011, declared an additional six non-O157 Shiga-toxin-forming E. coli in certain raw beef products as adulterants. In the early 1990s, a strain of Escherichia coli (E. coli) bacteria linked to hamburger resulted in a deadly foodborne outbreak and led to changes in food regulations. E. coli are bacteria found in the environment, food, and intestines of people and animals. E. coli are a large and diverse group of bacteria. Most strains of E. coli are generally harmless, but others can cause diarrhea, urinary tract infections, respiratory illness and pneumonia, other illnesses, and death. From November 1992 through February 1993, more than 500 laboratory-confirmed infections with E. coli O157:H7 and four associated deaths occurred in four states—Washington, Idaho, California, and Nevada. During the outbreak, contaminated hamburger patties were traced to a fast food restaurant chain and then ultimately to five slaughter plants in the United States and one in Canada as likely sources of carcasses used to produce the contaminated ground beef. No one slaughter plant or farm was identified as the source. In 1994, USDA’s Food Safety and Inspection Service declared that any raw ground beef found contaminated with E. coli O157:H7 would be adulterated under the Federal Meat Inspection Act—rendering the meat unlawful to sell in commerce. Meat and Poultry in the United States Beef: According to the U.S. Department of Agriculture (USDA), beef is a highly consumed meat in the United States, averaging 56 pounds per person per year. Beef comes from full-grown cattle that are about 2 years old and weigh about 1,000 pounds. There are at least 50 breeds of beef cattle, but fewer than 10 make up most cattle produced. Veal is meat from a calf (young cattle) that weighs about 150 pounds. Calves that are mainly milk-fed usually are less than 3 months old. Pork: According to the USDA, the United States is the world’s third-largest producer and consumer of pork and pork products. Pork is meat from hogs, or domestic swine, and is from young animals (6 to 7 months old) that weigh from 175 to 240 pounds. FSIS coordinates with numerous federal agencies, state agencies, and local entities to help ensure the safety of meat and poultry products from the farm to the consumer (known as the farm-to-table continuum). FSIS coordinates with USDA’s Animal and Plant Health Inspection Service (APHIS) to share information when investigating foodborne illnesses. FSIS also coordinates with the Department of Health and Human Services’ Food and Drug Administration (FDA) and with CDC on a number of activities. For example, FSIS works collaboratively with FDA and CDC through the Interagency Food Safety Analytics Collaboration to, among other things, estimate foodborne illness source attribution. Attribution entails identifying which foods are the most important sources of selected major foodborne illnesses. According to FSIS officials, determining the sources of illness is an important part of identifying opportunities to improve food safety. FSIS also coordinates with CDC and state health departments to respond to foodborne illness outbreaks, including identifying the pathogen, the product, and where the product became contaminated along the farm-to-table continuum (see fig. 2). Poultry: According to USDA, consumption of poultry (chicken and turkey) in the United States is higher than beef or pork. Chicken includes broiler-fryer chickens and roaster chickens. Broiler-fryer chickens are young, tender chickens about 7 weeks old that weigh from 2 ½ to 4 ½ pounds. Roaster chickens are young chickens from 8 to 12 weeks old with a ready-to-cook carcass weight of 5 pounds or more. Turkey is a large, widely domesticated North American bird. They grow to full maturity in about 4 to 5 months, depending on the desired market weight. USDA’s FSIS has developed or revised pathogen standards for assessing the effectiveness of plants’ controls in reducing the level of pathogens in certain meat and poultry products. More specifically, the agency has developed pathogen standards for some beef, pork, chicken, and turkey products but not for other products that are widely available, and its basis for deciding which products to consider for new pathogen standards is unclear. In addition, as of 2011, the agency has revised pathogen standards for chicken and turkey products, but standards for other products are outdated, with no time frames for revision. FSIS has developed pathogen standards for beef, pork, chicken, and turkey carcasses; specific chicken parts (i.e., breasts, thighs, and legs); and ground beef, chicken, and turkey (see Figure 3). The initial pathogen standards FSIS developed in 1996 were all for Salmonella because, among other things, it was the most common bacterial cause of foodborne illness and intervention strategies aimed at reducing Salmonella in raw products might be effective against other pathogens, according to agency documents. Subsequently, in 2011, FSIS developed Campylobacter standards for chicken and turkey carcasses and in 2016 developed Salmonella and Campylobacter standards for chicken parts. FSIS has not developed pathogen standards for other widely available products, such as pork cuts (e.g., pork chops), turkey parts (e.g., turkey breasts), and ground pork. The agency is taking steps that may lead to the development of new pathogen standards for additional products. For example, according to FSIS documents, the agency is collecting information on the presence of Salmonella and other pathogens in pork cuts and ground pork, among other pork products. According to FSIS officials, this could lead to the development of new standards. However, the agency’s process for deciding which products to consider for new pathogen standards is unclear because it is not fully documented. In December 2016, the agency documented a part of its process: who will make the decisions about which products to consider. According to the December 2016 document, certain agency officials are to meet as needed to discuss emerging food safety risks and propose related data collection efforts to senior management, who will decide which products to consider for new standards. However, the document does not explain the basis for management’s decisions. FSIS has informed stakeholders that it will take into account factors including consumption and foodborne- illness data, as it did when setting standards for chicken parts, but the agency has not documented this process going forward. Several researchers and consumer advocacy representatives we interviewed questioned whether the agency’s process proactively addresses food safety risks. Previously, FSIS developed new pathogen standards after the agency was directed to do so or after widespread outbreaks indicated the need. For example, in 2011, FSIS revised Salmonella standards for chicken and turkey carcasses and developed new standards for Campylobacter in these same products after being charged with doing so by the Presidential Food Safety Working Group. Additionally, in a 2016 Federal Register notice, FSIS, after reviewing outbreaks from these products in 2011, 2013, and 2015—outbreaks in which 794 people were sickened and 1 died—concluded that new pathogen standards were needed for comminuted (including ground and other mechanically separated) poultry and chicken parts. Under federal standards for internal control, federal entities are to design control activities to achieve objectives and respond to risks, including appropriate documentation of transactions and internal control. With appropriate documentation of internal control, management clearly documents internal control and allows the documentation to be readily available for examination; the documentation may appear in management directives, administrative policies, or operating manuals. Until FSIS clearly documents its process for deciding which products to consider for new pathogen standards, including the basis on which such decisions should be made, FSIS will not have assurance that its decisions are risk- based and that agency personnel will know the process when making such decisions. USDA’s FSIS has revised Salmonella standards for chicken and turkey carcasses and for comminuted chicken and turkey but has not revised other Salmonella standards since 1996, and the agency has not set time frames for determining whether revisions are needed. Specifically, as noted above, FSIS revised Salmonella standards for chicken and turkey carcasses in 2011 in response to a charge from the President’s Food Safety Working Group that the agency develop new or revised standards to reduce the prevalence of Salmonella in poultry products. The agency revised the pathogen standards for comminuted chicken and turkey in 2016 to help achieve public health goals for reducing human illness from Salmonella, among other things. The revisions have generally involved reductions in the maximum allowable percentage of products that test positive for this pathogen. For example, in 2016, when the agency revised the Salmonella standards for comminuted chicken, the allowable percentage changed from 44.6 to 25.0. (See table 1.) However, FSIS has not revised the Salmonella standards for beef and pork carcasses and ground beef since they were first developed in 1996. Although USDA announced in a 2014 Federal Register notice that it intended to propose new pathogen standards for ground beef, FSIS has not done so. Furthermore, FSIS set the pathogen standards for beef and pork carcasses and ground beef at industry-wide prevalence levels found at that time, not at levels intended to be protective of human health. In 2017, FSIS reviewed data on Salmonella in beef carcasses and ground beef and determined that the agency will not reach public health goals for reducing foodborne illness from Salmonella without further reduction in Salmonella contamination in beef. FSIS officials said that the agency is developing options for how it might move forward and could determine that revised or new standards are not needed and that other policies could suffice in addressing pathogens in beef. In the meantime, however, the agency in 2014 suspended monitoring against the existing Salmonella standards for ground beef until the agency develops a revised standard. The agency also suspended monitoring whether plants were meeting the pathogen standard for Salmonella on pork carcasses because, according to agency officials, the percentage of pork carcass samples that tested positive for Salmonella was consistently low. FSIS officials said that the agency is collecting data on pathogens in pork that could lead to new standards for pork products. In the absence of testing against the standards, the agency has other tools to ensure plants are controlling pathogens. For example, the agency continues to test beef for levels of E. coli, and FSIS inspectors at plants are to routinely check records to verify a plant’s compliance with its HACCP plans. FSIS officials told us that they would begin monitoring against the Salmonella standards for these products if the standards are revised or determined to be sufficient (in the case of beef and pork carcasses and ground beef) or if the agency develops new standards (in the case of pork cuts and ground pork). Generally, FSIS begins monitoring against a standard once the agency announces a standard and after a phase-in period has ended. For example, when FSIS developed new Campylobacter and Salmonella standards for chicken parts in 2016, the agency began monitoring whether plants met the standard 5 months after the standards were announced in the Federal Register. Monitoring for compliance with pathogen standards is a key tool as envisioned by the 1996 Pathogen Reduction; HACCP Systems final rule for verifying the effectiveness of a plant’s processing controls to prevent, eliminate, or reduce food safety hazards. It is unclear when FSIS plans to resume the use of this tool and complete the revisions of the Salmonella standards for beef carcasses or ground beef or develop new standards for additional pork products because the agency has not set time frames for doing so. According to FSIS officials, developing or revising pathogen standards takes time and resources, in part because the agency must first collect and analyze data to estimate the prevalence of pathogens in FSIS-regulated products, notify the public of proposed standards, and open a comment period, all of which can take years. However, according to FSIS officials, the agency has no time frames for determining what actions to take. Program schedule planning is recognized as a leading practice to ensure organizational activities are completed as planned, according to the Project Management Institute’s Standard for Program Management. Such planning includes setting time frames for completing a project. By setting time frames for determining what pathogen standards or additional policies are needed to address pathogen levels in beef carcasses, ground beef, and pork products, FSIS could better ensure it completes these activities in a timely manner to protect human health. In addition to taking steps to develop or revise pathogen standards, USDA’s FSIS is addressing other challenges we identified in September 2014 with respect to poultry pathogens, but these challenges are ongoing and also apply to meat products. These challenges include FSIS’s limited control over factors that affect the level of pathogens outside of plants, pathogens not designated as hazards, the complex nature of Salmonella, limited Campylobacter research and testing, limited enforcement authority, absence of mandatory recall authority, and insufficient prevalence estimates. Limited Control Outside of Plants In September 2014, we found that the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) faced a challenge in reducing levels of Salmonella and Campylobacter in poultry products in part because the agency did not have regulatory jurisdiction over farm practices to reduce contamination in poultry before they reach a plant for slaughter and processing. At the time, we noted that FSIS had worked to address the on-farm limitation by issuing guidelines that detailed, among other things, several on-farm practices to reduce Salmonella and Campylobacter in live poultry. We recommended that in future revisions of the guidelines, FSIS include information on the effectiveness of on-farm practices to explain the potential benefits of adopting such practices on poultry farms. USDA concurred with our recommendation. In addition, we found that once poultry products leave a plant, factors beyond FSIS’s control may affect contamination of poultry products, such as cross-contamination from poultry products (i.e., when bacteria spread from a food to a surface, from a surface to another food, or from one food to another) that can occur at retail establishments, in restaurants, and in consumers’ homes, according to a food safety researcher we interviewed. Pathogen Contamination after Products Leave the Plant According to the Centers for Disease Control and Prevention (CDC), even if meat and poultry products leave the processing or slaughter plant with no detectable pathogen, it does not ensure that the products are safe, as opportunities exist for them to become contaminated at any point along the farm-to- table continuum. To illustrate, frozen hamburger patties might be trucked from a plant to a supplier, stored in the supplier’s warehouse for a few days, trucked again to a local distribution facility, and then delivered to a restaurant. According to CDC, if refrigerated food is left on a loading dock during transportation for an extended time in warm weather, the food could reach temperatures that allow pathogens to grow. among other things, on-farm practices to reduce levels of Salmonella contamination in hogs. The draft Salmonella guidelines are available on the agency’s website. Even though the guidelines are not yet finalized, FSIS encourages producers to use them, according to agency officials we interviewed. However, unlike the poultry and beef cattle guidelines, the draft Salmonella guidelines do not contain information on the effectiveness of on-farm practices, as recommended in 2011 by USDA’s National Advisory Committee on Meat and Poultry Inspection. According to the draft guidelines, when a plant makes changes at the appropriate processing location, process control should result in raw pork products that have less contamination with pathogens, including Salmonella. FSIS officials we interviewed told us that there is not as much research available for such practices for hogs as there is for beef cattle and poultry. However, the officials agreed that including available information would be beneficial. By including available information on the effectiveness of these practices to reduce the level of pathogens as it finalizes its guidelines for controlling Salmonella in hogs, FSIS would have better assurance that it is keeping industry informed of the potential benefits of adopting on-farm practices and encourage their implementation. Contamination can also occur during preparation in consumers’ homes if food is not properly stored, prepared, heated, or served. For example, according to CDC, once contamination occurs, if meat and poultry are stored or cooked at unsafe temperatures, pathogens will grow quickly, which may lead to foodborne illness. With respect to reducing pathogens after slaughter, FSIS continues to update its guidance to consumers and work with federal partners to ensure the safety of meat and poultry products after they leave the plant. For example: In 2015, the agency developed the FoodKeeper mobile application to educate consumers on how to use food while at peak quality and store food properly. It updated the application in 2017 so users could receive automatic notifications when FDA or FSIS announces food safety recalls. In 2016, FSIS and FDA announced that they would work together to revise the FDA Food Code—a model that local, state, tribal, and federal regulators use to ensure food safety at retail stores, restaurants, and institutions such as nursing homes, among others— to ensure consistency with FSIS regulations and guidance. In 2017, FSIS expanded the operating hours for its Meat and Poultry Hotline, through which consumers could speak with an agency representative or listen to recorded messages regarding food safety, such as the proper storage, handling, and preparation of meat and poultry products. Pathogens Not Designated as Hazards In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter contamination in poultry products when plants do not designate these pathogens as hazards. Under the Hazard Analysis and Critical Control Point (HACCP) approach, plants have discretion about whether to include Salmonella or Campylobacter as a hazard “reasonably likely to occur” in their HACCP plans and develop mitigation strategies to reduce these pathogens. FSIS’s 2014 final rule for modernizing poultry slaughter inspection requires plants to develop, implement, and maintain written procedures to prevent contamination of carcasses and parts by enteric pathogens—bacteria that normally reside in the intestines of many animals, including humans, such as Salmonella and Campylobacter—as well as fecal material. Plants must incorporate these procedures into their HACCP plans, sanitation procedures, and other programs. Since our September 2014 report, FSIS has not required hog and beef plants to designate Salmonella or Campylobacter as hazards likely to occur, but it has taken other steps to reduce Salmonella and Campylobacter contamination when plants do not designate these pathogens as hazards. More specifically, in February 2018, FSIS proposed a rule to modernize hog slaughter inspections. The proposed rule would require plants to develop, implement, and maintain written procedures to prevent contamination by enteric pathogens in pork. Stakeholders we interviewed representing industry and consumer advocacy groups disagreed on whether plants should be required to designate specific pathogens as a hazard reasonably likely to occur. However, in response to instances in which inadequate validation of HACCP plans led to the production of adulterated food, and in some cases illnesses, FSIS released compliance guidance outlining best practices for designing and implementing adequate HACCP plans for all plants in 2015. According to FSIS, plants can use the guidance to properly design and execute HACCP plans and reduce the likelihood of contamination of the products they produce. Specifically, the guidance outlines, among other things, best practices for gathering scientific and technical support, as part of the HACCP plan validation process, to demonstrate that the plants’ processes prevent, reduce, or eliminate the hazards identified. Complex Nature of Salmonella In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella contamination in poultry products because of the complex nature of this pathogen. The majority of the representatives from industry and consumer groups we interviewed at the time, as well as FSIS officials, agreed that Salmonella is difficult to control in poultry products because it is widespread in the natural environment. According to Centers for Disease Control and Prevention officials we interviewed for our past work, there are more than 2,500 serotypes of Salmonella (with different strains), some of which pose greater risk to human health than others. Therefore, it is important to understand the genetic makeup of each to determine which ones are more or less likely to cause human illness. FSIS officials said that, in the future, there may be opportunities to improve how the agency protects human health by focusing inspections on plants and products that have tested positive for the more dangerous strains of Salmonella in meat and poultry products. To this end, FSIS collaborates with USDA’s Agricultural Research Service and APHIS, CDC, FDA, and local and state public health partners to develop new technologies that can more precisely determine if a strain of Salmonella detected is particularly dangerous to people. One such technology is whole genome sequencing, which allows the agency to determine the complete set of genes, or strain, within a Salmonella serotype. According to FSIS officials, it is more challenging to link the strain associated with an illness to a specific meat or poultry product that has sickened consumers; whole genome sequencing technology can more definitively identify the strain involved in an outbreak and help reduce incidents of illness or death due to foodborne pathogens. FSIS is currently planning how to integrate this technology into its food safety program. For example, current pathogen standards are based on the presence or absence of generic Salmonella, not on specific strains. FSIS held a public meeting in October 2017 to get input from state, federal, and international public health partners and other stakeholders on the use of this technology in a regulatory setting to improve food safety and public health. Limited Campylobacter Research and Testing In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service faced a challenge in reducing levels of Campylobacter in poultry products in part because less was known about Campylobacter than about Salmonella. Specifically, technologies, such as clinical diagnostics, used to detect Campylobacter may have underdiagnosed cases of illness from this pathogen, and the methods used by many diagnostic laboratories to isolate Campylobacter from samples were not standardized, according to a 2012 World Health Organization report on illnesses from the pathogen. Additionally, the agency’s ability to measure a reduction in Campylobacter illnesses depended on its ability to attribute Campylobacter illnesses to poultry and other food types, according to agency officials, and attribution analyses needed improvement. Since our report in September 2014, FSIS has had efforts under way with other agencies to improve foodborne illness source attribution to meat and poultry products and has independent data collection efforts under way to determine the presence of Campylobacter on these products. More specifically, in collaboration with CDC and FDA through the Interagency Food Safety Analytics Collaboration, FSIS has taken steps to improve and standardize methods to estimate the source attribution for Campylobacter foodborne illness. In 2015, this interagency collaboration improved the method for estimating the number of Campylobacter illnesses from meat and poultry products by standardizing the approach used by all three food safety agencies. The interagency collaboration’s new estimates for the proportion of Campylobacter illnesses included all food products—including beef, pork, and poultry. The interagency collaboration also released updated foodborne illness source attribution estimates in December 2017. According to FSIS officials, the three agencies are collaborating on multiple analytic projects, in line with the interagency collaboration’s 2017–2021 strategic plan, to improve models to estimate foodborne illnesses from Campylobacter and other pathogens. These projects involve using new methods and whole genome sequencing and other data sources. In addition to this interagency effort, in 2015, FSIS tested about 200 samples of pork products for Campylobacter as part of an exploratory sampling effort, according to agency documents summarizing the efforts. FSIS found that about 1 percent of products tested were positive for Campylobacter and, therefore, chose not to continue testing pork products for this pathogen. For poultry, in 2016, FSIS revised a laboratory guidebook describing standard protocols for isolating and analyzing Campylobacter in raw products. In 2017, the agency concluded a literature review of Campylobacter contamination in beef and, as of October 2017, is discussing the development of an exploratory sampling project to test for Campylobacter in beef products, according to agency officials. Limited Enforcement Authority In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a potential challenge in reducing Salmonella contamination in poultry products, according to agency officials and representatives of some stakeholder groups we interviewed, because (1) a 2000 federal court ruling stated that FSIS could not withdraw inspectors, effectively shutting down the plant, solely because a plant did not meet Salmonella pathogen standards, and (2) FSIS has not classified Salmonella as an adulterant in raw poultry products, so products contaminated with this pathogen generally may be permitted to enter commerce. FSIS adopted the position that the court ruling did not affect its ability to use the Salmonella pathogen standards as part of verifying a plant’s sanitation and Hazard Analysis and Critical Control Point plans and that it had tools, such as food safety assessments (an evaluation of a plant’s food safety system), to prevent contaminated products from entering the market. Representatives from consumer groups we interviewed at the time said that even with these tools, the agency does not have sufficient authority to ensure plants comply with the standards because FSIS cannot shut down plants when they fail the Salmonella standards alone. Representatives from industry groups we interviewed at the time disagreed and stated that FSIS has sufficient authority to ensure plants comply with standards because the agency has broad statutory authority and oversight. Regarding FSIS not classifying Salmonella as an adulterant, representatives from consumer groups we interviewed for our previous work said that the agency should declare some serotypes of Salmonella as adulterants, such as those with specific antibiotic-resistant patterns. FSIS officials we interviewed for our previous work said they found no conclusive evidence that antibiotic-resistant strains of Salmonella or Campylobacter have a greater resistance to the interventions used in plants but that the agency would continue to review relevant scientific evidence to identify any potential challenges these serotypes may present to public health. Since our report in September 2014, FSIS continues to stand by the position that the 2000 court ruling does not affect its ability to use pathogen standards as a tool to prevent contaminated products from entering the market. FSIS reaffirmed its position in a 2016 Federal Register notice. Our review of FSIS data from 2016 through 2017 for poultry plants shows that some plants are still not meeting pathogen standards—in some cases repeatedly not meeting the standards—and are allowed to operate. We were unable to review similar data for beef or hog plants since, as noted above, FSIS suspended monitoring these plants against pathogen standards. FSIS stands by its assessment that its enforcement tools are sufficient. Moreover, in 2015, FSIS announced an additional tool to help FSIS identify and assess problems or trends that may be of concern. Specifically, FSIS investigators must now conduct a public health risk evaluation at every plant that does not meet a pathogen standard. This is a positive step for those products that have pathogen standards, such as chicken parts. However, as previously stated, FSIS does not test for whether plants producing beef carcasses, ground beef, and pork carcasses meet the pathogen standards for those products, and other products such as ground pork do not have pathogen standards. Representatives from consumer groups and industry we interviewed continue to disagree on whether FSIS’ existing enforcement tools are sufficient to ensure that meat and poultry plants meet pathogen standards. Regarding antibiotic-resistant strains of Salmonella, FSIS officials continue to state that the pathogen does not meet the criteria for classifying it as an adulterant and that the agency will continue to examine options for regulating the presence of antibiotic-resistant strains of Salmonella in raw meat and poultry products. Agency officials told us that to classify a pathogen as an adulterant in raw meat and poultry products, FSIS must determine that the pathogen meets certain criteria established both in its authorizing statutes and by case law. Specifically, in American Public Health Association v. Butz, a federal appeals court in 1974 held that Salmonella did not adulterate raw poultry because ordinary consumer methods of preparing and cooking the product would eliminate the pathogen. In contrast, FSIS declared certain types of E. coli as adulterants in beef, as discussed above, because ordinary consumer cooking does not eliminate the pathogen. According to FSIS officials, the available data do not appear to indicate that Salmonella presents the same issues as E. coli or meets the necessary criteria, regardless of whether it is resistant or susceptible to antibiotics. This issue continues to be contentious among the stakeholders we interviewed. Six of the seven industry stakeholders we interviewed stated that FSIS’s current enforcement authority is sufficient. Two of four food safety researchers we interviewed stated that the agency does not need additional authority to label Salmonella as an adulterant because FSIS has labeled other pathogens as adulterants when it made sense to do so, such as E. coli¸ and there is no need to label naturally occurring bacteria as adulterants on raw product. In contrast, all four of the consumer advocacy groups and two of the four food safety researchers we interviewed stated that FSIS needs more authority to label Salmonella as an adulterant. No Mandatory Recall Authority In September 2014, we found that the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter contamination in poultry products because it did not have mandatory food recall authority similar to that of the Food and Drug Administration (FDA) for the food products FDA regulates, such as milk, seafood, fruits, and vegetables. In 2011, Congress passed the FDA Food Safety Modernization Act, giving FDA mandatory recall authority. We recommended in October 2004 that Congress consider legislation to increase FSIS’s authority to include mandatory recalls, but the agency continues to not have such authority. Instead, to protect human health from potentially contaminated meat and poultry products, FSIS can issue public health alerts, which notify the public on specific actions to take to avoid illness, or request voluntary recalls, which are voluntary actions taken by plants, among other actions. Before requesting a voluntary recall, FSIS must gather sufficient evidence through its investigation and determine that a product is adulterated and mislabeled, among other things. In September 2014, we reported that this can be challenging to do. FSIS officials told us at the time that rather than focusing on the lack of mandatory recall authority, it was more productive to work aggressively with the tools they had, such as withdrawing inspectors, thus preventing products from entering commerce. According to FSIS officials, this can be as effective for keeping unsafe food from the marketplace as FDA’s recall authority. To encourage poultry slaughter and processing plants to control for Salmonella and Campylobacter—disease-causing pathogens that can sicken consumers—USDA publicly releases information on individual plant performance for reducing these pathogens. According to the agency’s 2017 annual plan, publishing plant-specific data allows consumers to make more informed choices, motivates individual plants to improve performance, and leads to industry-wide improvements in food safety. USDA’s Economic Research Service found that publicly releasing the identities of plants with poor or mediocre performance on tests for Salmonella is strongly correlated with about a 60 percent decline of chicken carcass samples testing positive for Salmonella from 2006 to 2010. In 2016, USDA temporarily replaced posting information on individual plants’ performance for chicken and turkey carcasses, chicken parts, and comminuted poultry (e.g., ground), with information on aggregate results to allow time for plants to update their food safety systems. In January 2018, FSIS began reposting individual plants’ category status for poultry carcasses on a monthly basis. According to the agency’s annual plan for fiscal year 2017, USDA intends to resume publicly releasing individual plant performance information for turkey carcasses and to add data for plants producing chicken parts and comminuted chicken and turkey. The agency also intends to release data for plants producing some beef products, according to its 2016 strategic plan on publicly releasing data. Since our September 2014 report, FSIS officials said that they continue to believe that mandatory recall authority is not necessary for the reasons previously mentioned. According to FSIS officials, the agency continues to refine and improve its procedures for requesting voluntary recalls of adulterated and misbranded meat and poultry products, confirming the effectiveness of these recalls, and alerting the public about adulterated and misbranded products that may remain in commerce. Therefore, FSIS officials stated that the agency does not see the lack of mandatory recall authority as an obstacle or hindrance to its efforts to protect public health and ensure that meat and poultry products are safe, wholesome, and properly labeled. In contrast, FDA officials told us that having mandatory recall authority protects human health from foodborne illness because the agency does not have to rely upon manufacturers’ voluntary recall efforts or obtain a court order to remove contaminated or misbranded food, other than infant formula, from the food supply. In our review of FDA’s annual reports to Congress on the use of mandatory recall authority from 2013 to 2016, the most recent available, the agency has used its mandatory recall authority twice. The majority (12 of 17) of the stakeholders we interviewed stated that the absence of mandatory recall authority is not a challenge for FSIS in reducing pathogen contamination of meat and poultry products. However, according to 3 of 4 stakeholders from consumer groups and 1 of 4 food safety researchers we interviewed, acquiring mandatory recall authority would enable FSIS to better protect human health because the agency would then have an additional tool to stop an outbreak of foodborne illness and address the level of pathogens in products once they leave the plant. Insufficient Prevalence Estimates In September 2014, we found that the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) faced a challenge in reducing Salmonella and Campylobacter contamination in poultry products as a result of not having sufficient prevalence estimates. Prevalence is the proportion of a product that would test positive for a pathogen if the entire population of that product was sampled and analyzed during a specific period of time. FSIS collects and analyzes data to estimate the prevalence of pathogens when the agency develops or revises pathogen standards for products it regulates. However, we reported that there were numerous problems with the data FSIS used to estimate prevalence. For example, assessing levels of poultry pathogens across the entire industry was difficult using data from FSIS’s verification-testing program because the program was not designed to assess prevalence of pathogens industry-wide and the agency does not randomly select plants for inspection. According to USDA’s National Advisory Committee on Microbiological Criteria for Food, estimating the prevalence of pathogens in food is critical to understanding and addressing the public health risk of foodborne illness, and these estimates provide a mechanism for measuring performance against public health goals, among other things. FSIS officials told us at that time that the agency had plans to propose a new testing approach for all of its poultry products, which would allow for more frequent data collection and improve prevalence estimates, among other things. In 2016, FSIS implemented this new testing approach for all poultry products for which there are pathogen standards and for some meat products, but according to officials, the agency did not do so for all products that it regulates because of resource constraints. Specifically, according to a 2016 Federal Register notice, FSIS now routinely samples chicken and turkey carcasses, chicken parts (legs, wings, and breasts), and comminuted chicken and turkey for Salmonella and Campylobacter pathogens over an entire year—rather than a set period of time—based on the volume of poultry products produced in plants. It also uses this approach to test for Salmonella in ground beef, beef manufacturing trimmings, and other ground beef components, according to a 2014 Federal Register notice. This new approach allows for better prevalence estimates and for monitoring changes in prevalence over time, according to agency officials. As discussed earlier, FSIS began exploratory sampling of pork products, including pork cuts and comminuted (including ground) pork, in 2015. According to a 2017 agency notice describing the sampling, FSIS collects and analyzes samples of pork products in a way that allows for prevalence estimates. FSIS does not use the same approach to sample other products, such as raw components used in ground beef (e.g., esophagus, head meat, cheek meat, and hearts), chicken half carcasses, and chicken necks, because of limited resources, according to agency officials. These officials stated that the agency first conducts exploratory sampling—such as its current program for pork products—to determine if FSIS should allocate resources for routine sampling of these products that would allow for prevalence estimates. To help ensure the safety of meat and poultry products and protect against foodborne illness, USDA’s FSIS has transitioned to an increasingly science-based, data-driven, risk-based approach. As part of this approach, FSIS has taken several actions to reduce levels of Salmonella and Campylobacter in poultry products, including strengthening existing pathogen standards for Salmonella in poultry carcasses and developing new Salmonella and Campylobacter standards for certain chicken parts. However, the agency has not set pathogen standards for many widely available products, such as pork cuts and ground pork, and the agency’s process for deciding which products to consider for new pathogen standards is not fully documented. Previously, FSIS has developed new pathogen standards after the agency has been directed to do so or after widespread outbreaks indicated the need. Until FSIS clearly documents its process for deciding which products to consider for new pathogen standards, including the basis on which such decisions should be made, FSIS will not have assurance that its decisions will be risk-based and that agency personnel will know the process when making such decisions. As part of its new approach, FSIS is collecting data that could enable it to set new pathogen standards for pork cuts and ground pork, and the agency is analyzing data that could lead to revising the Salmonella standards for beef carcasses and ground beef—which are decades old and not set at levels that are health protective. However, the agency has not set time frames for completing these efforts. In the absence of pathogen standards against which the agency tests, the agency is not using a valuable tool that could be used to help verify that plants’ processing controls to prevent, eliminate, or reduce food safety hazards are working. By setting time frames for determining what pathogen standards or additional policies are needed to address pathogens in these products, FSIS could better ensure it completes these activities in a timely manner to better protect human health. In addition, FSIS continues to face several challenges that hinder its ability to reduce the level of pathogens in meat and poultry products. For example, practices outside the slaughter plant, such as conditions on cattle, hog, and poultry farms, can affect levels of pathogens on meat and poultry products. To help overcome this challenge, the agency has developed draft guidance on practices for controlling levels of Salmonella and Campylobacter on beef cattle, hog, and poultry farms, but the draft guidance for hogs does not include available information on the effectiveness for each practice, as an internal agency committee recommended. As FSIS finalizes this guidance, FSIS could better inform industry of the potential benefits of adopting on-farm practices and encourage implementation of these practices by including available information on their effectiveness. We are making three recommendations to FSIS. Specifically: The Administrator of FSIS should document the agency’s process for deciding which products to consider for new pathogen standards, including the basis on which such decisions should be made. (Recommendation 1). The Administrator of FSIS should set time frames for determining what pathogen standards or additional policies are needed to address pathogens in beef carcasses, ground beef, pork cuts, and ground pork. (Recommendation 2). The Administrator of FSIS should include available information on the effectiveness of on-farm practices to reduce the level of pathogens as it finalizes its guidelines for controlling Salmonella in hogs. (Recommendation 3). We provided a draft of this report to USDA and the Department of Health and Human Services. In written comments, reproduced in appendix II, USDA agreed with our three recommendations and described actions it will take to implement them. In particular, with respect to our first recommendation, USDA stated that FSIS will complete an internal document that delineates the agency’s process for creating or updating pathogen standards. However, USDA stated that although it agrees it can take additional steps to document its process, it does not agree that FSIS does not have assurance its decisions are risk based. In particular, it cited a Federal Register notice indicating that it designed its pathogen standards for chicken parts and comminuted chicken and turkey to achieve certain reductions in illnesses from Salmonella and Campylobacter. USDA also stated that FSIS has consistently documented and published its process in the Federal Register, and it noted that agency personnel use these Federal Register notices as guidance and historical reference. While these notices can be a useful historical record and document the steps FSIS took to ensure that agency decisions were risk-based, we continue to believe that, until FSIS clearly documents its process for deciding which products to consider for new pathogen standards going forward—including the basis on which such decisions should be made—FSIS will not have assurance that its decisions will be risk-based and that agency personnel know the process when making such decisions in the future. Completing documentation of the agency’s process would address our recommendation. Concerning our second recommendation, USDA stated that in 2018 FSIS will continue to assess data from sampling projects, along with baseline data and outbreak/illness data, to determine whether new or revised standards or additional policies are needed to address Salmonella in beef products. USDA further stated that in 2019, it will use data collected during its raw pork exploratory study to determine whether standards or additional policies (e.g., training, guidance to industry, or instructions to field personnel) are needed to address Salmonella in pork products. Finalizing analysis of these data and determining if additional standards or policies are needed to address Salmonella in beef in 2018 or pork in 2019 would address our recommendation. In response to our third recommendation, USDA stated that FSIS will include available scientific information on the effectiveness of each recommended farm practice in the guidelines for reducing Salmonella in market hogs. Doing so would address our recommendation. USDA also provided technical comments. We incorporated these comments as appropriate. The Department of Health and Human Services did not have any comments. As agreed with your offices, unless you publicly announce the contents earlier, we plan no further distribution of this report until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Administrator of the Food Safety and Inspection Service, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or morriss@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. In addition to regulating meat and poultry sold in commerce, the U.S. Department of Agriculture (USDA) also purchases food and, in some cases, has additional food safety requirements for food it purchases. USDA’s Agricultural Marketing Service (AMS) purchases beef and other food for various federal nutrition assistance programs, including the National School Lunch Program. USDA provides this food to states in support of about 100,000 public and private nonprofit schools that provide lunches to about 30 million children. Ground beef is a staple of school menus. For example, according to AMS officials, during fiscal year 2016, the agency purchased more than 110 million pounds of raw beef, over 90 percent of which was delivered to the National School Lunch Program. Further, according to AMS officials, about 41 million pounds (37 percent) were delivered raw while the rest was delivered to a federally inspected processing facility for cooking prior to delivery to school lunch program agencies. Beef to be delivered raw to the National School Lunch program is tested for pathogens (Salmonella and Shiga-toxin-producing E. coli, two pathogens that can cause foodborne illness in humans) and certain microorganisms such as aerobic plate count bacteria, coliform bacteria, and generic E. coli that serve as indicators of the effectiveness of slaughter and processing plants’ process controls to limit pathogens. National School Lunch Program According to USDA, the National School Lunch Program is a federally assisted meal program operating in public and nonprofit private schools and residential childcare institutions. It provides nutritionally balanced, low-cost or free lunches to children each school day. The program was established under the National School Lunch Act, signed by President Harry Truman in 1946. USDA’s Food and Nutrition Service administers the program at the federal level. At the state level, the program is administered by state agencies, operating through agreements with school food authorities. Participating school districts and independent schools receive cash subsidies and food. In exchange, participating institutions must serve lunches that meet federal nutrition requirements and offer the lunches at a free or reduced price to eligible children. USDA’s Agricultural Marketing Service purchases beef and other food for various federal nutrition assistance programs, including the National School Lunch Program. According to AMS officials, these indicator microorganisms indicate the quality of the food safety controls at the plant. For raw beef products that AMS considers for purchase for its programs, the agency rejects any beef that tests positive for Salmonella, a pathogen that can cause foodborne illness in humans. According to AMS officials, this requirement that beef purchased for these programs not test positive for Salmonella differs from the regulatory standard for beef inspected by USDA’s Food Safety and Inspection Service (FSIS). Further, according to AMS officials, AMS set this requirement because raw beef was considered the product with the most risk for recipients and enough plants were able to meet the requirement. AMS officials said that as a purchaser for various federal nutrition assistance programs, the agency has discretion to set requirements for qualified suppliers, and plants can choose whether to become qualified suppliers. In addition to the contact named above, Mary Denigan-Macauley (Assistant Director); Thomas Cook (Assistant Director); James R. Jones, Jr. (Assistant Director); David Bennett (Analyst in Charge); Kevin Bray; Cindy Gilbert; Cynthia Norris; Gloria Ross; and Kiki Theodoropoulos made key contributions to this report. Foot-and-Mouth Disease: USDA’s Evaluations of Foreign Animal Health Systems Could Benefit from Better Guidance and Greater Transparency. GAO-17-373. Washington, D.C.: April 28, 2017. Antibiotic Resistance: More Information Needed to Oversee Use of Medically Important Drugs in Food Animals. GAO-17-192. Washington, D.C.: March 2, 2017. Food Safety: A National Strategy Is Needed to Address Fragmentation in Federal Oversight. GAO-17-74. Washington, D.C.: January 13, 2017. Seafood Safety: Status of Issues Related to Catfish Inspection. GAO-17-289T. Washington, D.C.: December 7, 2016. Imported Food Safety: FDA’s Targeting Tool Has Enhanced Screening, but Further Improvements Are Possible. GAO-16-399. Washington, D.C.: May 26, 2016. Food Safety: FDA Coordinating with Stakeholders on New Rules but Challenges Remain and Greater Tribal Consultation Needed. GAO 16- 425. Washington, D.C.: May 19, 2016. Federal Food Safety Oversight: Additional Actions Needed to Improve Planning and Collaboration. GAO-15-180. Washington, D.C.: December 18, 2014. Food Safety: USDA Needs to Strengthen Its Approach to Protecting Human Health from Pathogens in Poultry Products. GAO-14-744. Washington, D.C.: September 30, 2014. Food Safety: More Disclosure and Data Needed to Clarify Impact of Changes to Poultry and Hog Inspections. GAO-13-775. Washington, D.C.: August 22, 2013.", "summary": "The U.S. food supply is generally considered safe, but the Centers for Disease Control and Prevention (CDC) estimate that Salmonella and Campylobacter in food cause about 2 million human illnesses per year in the United States. In 2014, GAO identified challenges USDA faced in reducing pathogens in poultry products, including standards that were outdated or nonexistent and limited control over factors that affect pathogen contamination outside of meat and poultry slaughter and processing plants, such as practices on the farm. GAO was asked to review USDA's approach to reducing pathogens in meat and poultry products. This report examines (1) the extent to which USDA has developed standards for meat and poultry products and (2) any additional steps USDA has taken to address challenges GAO identified in 2014. GAO reviewed relevant regulations, documents, and data and interviewed officials from USDA and CDC, as well as 17 stakeholders representing industry, consumer groups, and researchers selected based on their knowledge of USDA's meat and poultry slaughter inspections and food safety. To help ensure the safety of our nation's food supply, the U.S. Department of Agriculture (USDA) has developed standards limiting the amount of Salmonella and Campylobacter —pathogens that can cause foodborne illness in humans—permitted in certain meat (beef and pork) and poultry (chicken and turkey) products, such as ground beef, pork carcasses, and chicken breasts. However, the agency has not developed standards for other products that are widely available, such as turkey breasts and pork chops. Further, its process for deciding which products to consider for new standards is unclear because it is not fully documented, which is not consistent with federal standards for internal control. For example, USDA has informed stakeholders that it will take into account factors including consumption and illness data, but the agency has not documented this process going forward. Previously, USDA had developed new standards after widespread outbreaks indicated the need. For example, in 2016, USDA concluded that new standards were needed for certain poultry products to reduce Salmonella after reviewing outbreaks from these products in 2011, 2013, and 2015—outbreaks in which 794 people were sickened and 1 died. By documenting the agency's process for deciding which products to consider for new standards, USDA could better ensure that such decisions will be risk-based. USDA is taking steps to address challenges GAO identified in 2014 for reducing pathogens in poultry products, but these challenges are ongoing and could affect USDA's ability to reduce pathogens in meat as well. For example, one challenge GAO identified is that the level of pathogens in poultry products can be affected by practices on farms where poultry are raised. GAO recommended in 2014 that to help overcome this challenge, USDA guidelines on practices for controlling Salmonella and Campylobacter on farms include information on the effectiveness of each of the practices, consistent with a recommendation from a USDA advisory committee. Since GAO's 2014 report, USDA drafted revised guidelines to include information on the effectiveness of on-farm practices for controlling pathogens in poultry and beef cattle, in 2015 and 2017, respectively. However, USDA's draft guidelines for controlling Salmonella in hogs do not contain such information. By including such information as it finalizes its draft guidelines, USDA could better inform industry of the potential benefits of adopting on-farm practices included in the guidelines and encourage implementation of such practices. GAO is making three recommendations, including that USDA document its process for deciding which products to consider for new standards and that it include information on the effectiveness of on-farm practices in its guidelines for Salmonella control in hogs. USDA agreed with GAO's recommendations and described actions it will take to implement them.", "document_type": "gao"}
{"report": "In our June 2017 report, we found that FirstNet has conducted key efforts to establish the network, namely releasing the request for proposal for the network in January 2016 and awarding the network contract to AT&T in March 2017. As the contractor, AT&T will be responsible for the overall design, development, production, operation, and evolution of the network, as well as the marketing, product management, sales, distribution, and customer care. Further, we found that FirstNet has established a framework to meet the financial requirements established in the 2012 Act, as depicted in figure 1. This framework focuses on leveraging FirstNet’s spectrum through the use of payments and fees with the aim of ensuring that the network is financially sustainable over the life of the contract and that FirstNet sustains self-funding operations. By establishing a single, dedicated network for public safety use, FirstNet’s network is expected to foster greater interoperability and meet public safety officials’ reliability and other needs. However, the actual use (or “adoption”) of the network by public safety users will be voluntary. Thus, even with the establishment of this framework, substantial unknowns remain regarding how many public safety users will adopt the network, the extent to which AT&T will be successful in monetizing the spectrum to retain revenue from commercial users, and the extent to which this revenue will be sufficient or appropriate in relation to the capital needed to build, operate, and maintain the network. Therefore, we noted that, at the time of our report, we could not assess the viability of this framework and whether FirstNet’s structures for overseeing the contractor’s use of the spectrum for commercial users will be appropriate. We also found that FirstNet has made progress consulting with state and local, federal, and tribal stakeholders through a variety of mechanisms. State officials we contacted were generally satisfied with FirstNet’s efforts to engage them. However, tribal stakeholders we contacted expressed concern with FirstNet’s efforts to consult with tribes per the 2012 Act’s requirements. In particular, four of the five tribal organizations we contacted said that FirstNet has not fully engaged in effective communication or has relied on state points of contact too much as opposed to engaging directly with tribes; the other tribal organization was not aware of FirstNet or its mission at all. Further, tribes noted that individuals with first-hand knowledge of tribes’ experiences are not able to represent tribal views directly among FirstNet’s key decision makers. FirstNet has stated that, indeed, the 2012 Act requires that it consult with tribes through state points of contact. Nevertheless, several federal agencies have identified seeking a full understanding of tribal concerns— and reaching consensus where possible—as a key principle of effective tribal communication, noting that agencies should adapt to changing circumstances, contemplate creative problem solving, identify options for addressing concerns, and exhaust alternatives to achieve mutually agreeable solutions. We concluded that, by fully exploring and proposing actions to address tribal stakeholders’ concerns, FirstNet could help improve its relations with tribes and better meet stakeholders’ needs. As such, we recommended in our report that FirstNet fully explore tribal concerns and propose actions, as needed, to address those concerns. FirstNet agreed with this recommendation and, in September 2017, described to us the actions it has taken to implement it. For example, according to FirstNet, in September 2017 it began a process to formally explore the tribal outreach concerns raised in our report and expects to propose improvements by the end of this year. FirstNet has also said that it adopted an organization-wide tribal consultation policy which it expects to take effect towards the end of this year. If implemented as planned, these actions should address the intent of the recommendation. In our report, we found that—according to stakeholders we contacted— FirstNet faces various challenges to ensure the network’s reliability, security, and interoperability. For example, stakeholders raised concerns related to: providing network coverage to rural areas, in buildings, or ensuring the network’s overall resiliency and cybersecurity; and managing frameworks for user identity, credentialing of users, access management, and prioritization of users on the network. However, we also found that both FirstNet and the PSCR have begun research and other efforts to help ensure the reliability, security, and interoperability of the network and address the challenges raised by stakeholders. For example, in November 2016, FirstNet opened an Innovation and Test Lab at its technical headquarters in Boulder, Colorado. According to FirstNet documentation, FirstNet plans to use— and allow AT&T to use—the lab to test public safety devices and applications before deploying them on the network. Additionally, the PSCR has conducted research on behalf of FirstNet and, using $300 million in funds provided to NIST by the 2012 Act, is also planning for and implementing other research activities to support FirstNet. For instance, in January 2016, PSCR launched its Public Safety Innovation Accelerator Program to support these research activities, and in December 2016, NIST issued a funding announcement to fund research in several areas. At the time of our report, we found that PSCR’s research process generally aligned with key phases of sound research programs identified by leading national organizations, including the American Evaluation Association and the National Academy of Sciences. For example, PSCR has established a structured process for developing research priorities that includes both internal and external stakeholders, and has identified criteria it uses to help it select the research areas to fund and procedures to help it guide and monitor its research. Similarly, FirstNet has determined its research priorities to date based on its network- planning needs and in consultation with internal and external stakeholders, and worked with the PSCR to define criteria to help it select research areas. Further, we found that the majority of stakeholders we contacted were satisfied with the planning efforts to ensure the reliability, security, and interoperability of the network. However, many stakeholders also said that there is much remaining uncertainty about how this will be implemented in practice. Additionally, one public safety official we contacted told us that FirstNet and its contractor will have to balance the costs associated with implementing features that make the network reliable and secure with the need to establish compelling and competitively priced service packages and fees that will encourage user adoption of the network. Indeed, numerous stakeholders we contacted cited the cost of subscribing to the network as a key factor affecting user adoption, noting that the pricing must be comparable to what they pay for commercial service now, that budgets are constrained in the public safety community, or that local governments do not want costs to increase. Further, commercial carriers could choose to compete with FirstNet. FirstNet has stated that it expects AT&T to provide services at a competitive price and deliver affordable, high-quality services that will encourage public safety users to adopt the network. Ultimately—because the network must be self-funding and FirstNet has stated that revenue from network users will be critical to this funding—the success of the network depends on whether FirstNet and AT&T generate enough revenue to operate it over the long term and whether public safety users adopt it, no matter how reliable and secure it is. FirstNet must manage and oversee the implementation of the network contract to build, operate, and maintain the network. Federal internal- control standards also state that an entity’s management retains responsibility for the performance of processes assigned to service organizations (such as contractors) and that management should hold these organizations accountable for their performance. In our report, we found that FirstNet has taken a number of steps to establish contract oversight mechanisms, but has not fully assessed the staffing needs of its oversight workforce. FirstNet’s oversight mechanisms include developing policies and procedures to guide contract administration and establishing offices to oversee its network contractor. In particular, FirstNet established the Network Program Office to oversee the contractor’s performance and facilitate quality assurance of contract deliverables, among other things. FirstNet is also receiving assistance from the Department of the Interior, which has experience with contract administration, although FirstNet plans to assume full responsibility for contract administration in the future. We also found that FirstNet’s efforts to develop contract oversight mechanisms aligned with several key actions that we identified as contributing to effective contract oversight. However, although FirstNet’s Network Program Office will perform essential contract administration functions, FirstNet had not conducted long-term projections of staffing needs for the office as of April 2017. Planning for and assigning adequate resources, including people, and performing an assessment of the resources needed to oversee projects is one of the key actions we identified for planning and executing effective contract oversight. We concluded that FirstNet lacks reasonable assurance that it will have sufficient resources to handle increases in its responsibilities over time and that, by performing a long-term staffing assessment for the Network Program Office, FirstNet would be in a better position to fully understand its staffing needs and respond to staffing changes and risks as it assumes full responsibility of contract administration in the future. As such, we recommended in our report that FirstNet assess the long-term staffing needs in the Network Program Office prior to assuming full responsibility for administering the network contract. FirstNet agreed with this recommendation and, in September 2017, described the actions it has taken to implement it. According to FirstNet, in August 2017 the Network Program Office adopted a strategic workforce plan for fiscal years 2018 to 2022, which it expects to update annually. According to FirstNet, this plan provides a comprehensive view of current and future human capital needs required to support the implementation of the network and identifies strategies the office will employ to fill gaps between current and future needs, among other things. If implemented as planned, this action should address the intent of the recommendation. Chairman Donovan, Ranking Member Payne, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Mark L. Goldstein, Director, Physical Infrastructure Issues at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Sally Moino and Nalylee Padilla. Other staff who made contributions to the report cited in this testimony are identified in the source product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.", "summary": "FirstNet is charged with establishing a nationwide public-safety broadband network that is reliable, secure, and interoperable. To inform this work, FirstNet is consulting with a variety of stakeholders. In March 2017, FirstNet awarded a 25-year contract to AT&T to build, operate, and maintain the network. FirstNet's oversight of AT&T's performance is important given the scope of the network and the duration of the contract. This testimony provides information on (1) FirstNet's efforts to establish the network; (2) stakeholder views on network reliability, security, and interoperability challenges FirstNet faces and its efforts to address them; and (3) FirstNet's plans to oversee its network contractor. This statement is based on GAO's June 2017 report ( GAO-17-569 ). For this report, GAO reviewed FirstNet documentation, key contract oversight practices identified in federal regulations and other sources, tribal communication practices identified by federal agencies, and assessed FirstNet's efforts and plans against these practices. GAO also interviewed FirstNet officials and a nongeneralizable selection of public safety, tribal, and other stakeholders selected to obtain a variety of viewpoints. In June 2017, GAO reported that the First Responder Network Authority (FirstNet) had conducted key efforts to establish the network, namely releasing the request for proposal (RFP) for the network and awarding the network contract to AT&T. As the contractor, AT&T will be responsible for the overall design, development, production, operation, and evolution of the network. Additionally, FirstNet consulted with state and local, federal, and tribal stakeholders. State officials GAO contacted were generally satisfied with FirstNet's efforts to engage them. However, tribal stakeholders GAO contacted expressed concern that FirstNet has not fully engaged in effective communication with tribes. FirstNet engaged tribes through a variety of mechanisms, such as through state points of contact and a working group, but tribes noted that individuals with first-hand knowledge of tribes' experiences are unable to represent tribal views directly among FirstNet's key decision makers. Although FirstNet is required to consult with tribes through state points of contact, a key principle of effective tribal communication is to seek full understanding of tribal concerns and reach consensus where possible. By fully exploring and proposing actions to address tribal stakeholders' concerns, FirstNet could help improve its relations with tribes and better meet stakeholders' needs. According to stakeholders GAO contacted, FirstNet faces various challenges to ensure the network's reliability, security, and interoperability. For example, stakeholders raised concerns related to: providing coverage to rural areas, in buildings, or underground; ensuring the network's overall resiliency and cybersecurity; and managing frameworks for user identity, credentialing of users, access management, and prioritization of users on the network. FirstNet has taken action to address these challenges, such as by opening a test lab to test public safety devices and applications before deploying them on the network. The majority of stakeholders GAO contacted were satisfied with FirstNet's efforts but many noted that much uncertainty remains about how the network will be implemented. FirstNet established offices to oversee its network contractor, developed policies and procedures to guide contract administration—including management and oversight—and is receiving assistance from another federal agency with contract administration experience, although FirstNet plans to assume full responsibility in the future. For example, FirstNet established the Network Program Office to oversee the contractor's performance and facilitate quality assurance of contract deliverables, among other things. Although this office will perform essential contract-administration functions, FirstNet had not conducted long-term projections of staffing needs for the office as of April 2017. As a result, FirstNet lacks reasonable assurance that it will have sufficient resources to handle increases in its responsibilities over time. Planning for and assigning adequate resources, including people, and assessing resource needs is a key practice for planning and executing effective contract oversight. By performing a long-term staffing assessment for the Network Program Office, FirstNet would be in a better position to fully understand its staffing needs and respond to staffing changes and risks as it assumes full responsibility of contract administration in the future. In June 2017, GAO recommended that FirstNet fully explore tribal stakeholders' concerns and assess its long-term staffing needs. FirstNet agreed with GAO's recommendations and described actions to address them.", "document_type": "gao"}
{"report": "DOD has defined various types of unwanted sexual behaviors, including sexual assault, sexual harassment, and domestic violence. Sexual assault: DOD defines sexual assault as intentional sexual contact, characterized by use of force, threats, intimidation, abuse of authority, or when the victim does not or cannot consent. The term includes a broad category of sexual offenses consisting of the following specific Uniform Code of Military Justice offenses: rape, sexual assault, aggravated sexual contact, abusive sexual contact, forcible sodomy (forced oral or anal sex), or attempts to commit these acts. Sexual harassment: DOD defines sexual harassment as a form of sex discrimination that involves unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature when (1) submission to such conduct is made either explicitly or implicitly a term or condition of a person’s job, pay, or career; (2) submission to or rejection of such conduct by a person is used as a basis for career or employment decisions affecting that person; or (3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creates an intimidating, hostile, or offensive working environment. However, as noted earlier, a provision of the NDAA for FY 2017 changed the definition of sexual harassment for the military for purposes of investigations by commanding officers so that it is no longer defined solely as a form of sex discrimination, but is recognized as an adverse behavior on the spectrum of behavior that can contribute to an increase in the incidence of sexual assault. We discuss this changed definition of sexual harassment later in this report. Domestic violence: DOD defines domestic violence as an offense under the United States Code, the Uniform Code of Military Justice, or state law involving the use, attempted use, or threatened use of force or violence against a person, or a violation of a lawful order issued for the protection of a person who is a current or former spouse, a person with whom the abuser shares a child in common or a current or former intimate partner with whom the abuser shares or has shared a common domicile. Sexual assault of spouses and intimate partners is a subset of domestic violence. Various offices and organizations within DOD play a role in addressing unwanted sexual behaviors in the military. The Under Secretary of Defense for Personnel and Readiness is responsible for developing the overall policy and guidance for the department’s efforts to prevent and respond to instances of sexual assault, except for criminal investigative policy matters assigned to the DOD Inspector General and legal processes in the Uniform Code of Military Justice. The Under Secretary of Defense for Personnel and Readiness oversees the Sexual Assault Prevention and Response Office (SAPRO), which serves as the department’s single point of authority, accountability, and oversight for its sexual assault prevention and response program. The responsibilities of the Under Secretary of Defense for Personnel and Readiness and SAPRO with regard to sexual assault prevention and response include providing the military services with guidance and technical support and facilitating the identification and resolution of issues; developing programs, policies, and training standards for the prevention of, reporting of, and response to sexual assault; developing strategic program guidance and joint planning objectives; overseeing the department’s collection and maintenance of data on reported alleged sexual assaults involving servicemembers; establishing mechanisms to measure the effectiveness of the department’s sexual assault prevention and response program; and preparing the department’s mandated annual reports to Congress on sexual assaults involving servicemembers. The Secretaries of the military departments are responsible for establishing policies for preventing and responding to sexual assault within their respective military service, and for ensuring compliance with DOD’s policy. Further, they are responsible for establishing policies that ensure commander accountability for program implementation and execution. Each military service has established an office that is responsible for overseeing and managing the military service’s sexual assault prevention and response program. Each military service also maintains a primary policy document on its sexual assault prevention and response program. Much like DOD’s directive and instruction on sexual assault prevention and response, the military service policies outline responsibilities of relevant stakeholders, including commanders, sexual assault response coordinators, and victim advocates and training requirements for all personnel. The Under Secretary of Defense for Personnel and Readiness has responsibility for developing the overall policy for DOD’s military equal opportunity program and monitoring compliance with the department’s policy. According to the policy, all servicemembers are afforded equal opportunity in an environment free from harassment, including sexual harassment, and unlawful discrimination on the basis of race, color, national origin, religion, sex (including gender), and sexual orientation. The chain of command is used as the primary and preferred channel to (1) identify and correct unlawful discrimination practices, (2) process and resolve complaints of unlawful discrimination or harassment, to include sexual, and (3) ensure that military equal opportunity matters are taken seriously and acted on as necessary. The Office of Diversity Management and Equal Opportunity (ODMEO) oversees the department’s efforts to promote equal opportunity, diversity, and inclusion management, and to help prevent unlawful discrimination and harassment throughout DOD. The Defense Equal Opportunity Management Institute develops training and studies on equal opportunity. Behaviors under the purview of the military equal opportunity program include unlawful discrimination on the basis of color, national origin, race, religion, or sex. The Secretaries of the military departments are responsible for developing policies to prevent unlawful discrimination and harassment, (including sexual harassment), ensuring compliance with DOD’s policy, and establishing both formal and informal means of resolving complaints. The chain of command is the primary and preferred channel for identifying and correcting discriminatory practices and resolving servicemembers’ complaints of sexual harassment. The military services encourage servicemembers to resolve any complaints of sexual harassment they may have at the lowest possible level first. For servicemembers who wish to report a complaint of sexual harassment, DOD provides two complaint options—formal and informal. A formal complaint is an allegation of sexual harassment that a complainant submits in writing to the authority designated for the receipt of such complaints in military service implementing guidance. Formal complaints require specific actions to be taken, are subject to timelines, and require documentation of the actions taken, in accordance with federal law. In contrast, an informal complaint is an allegation of sexual harassment, made either orally or in writing, which is not submitted as a formal complaint. Informal complaints may be resolved directly by the complainant, such as by confronting the individual or by involving another individual or the chain of command. Servicemembers who elect to resolve their complaints informally may submit a formal complaint if they are dissatisfied with the outcome of the informal process. In 2014, DOD directed the military services to develop implementing instructions and mechanisms for reporting instances of sexual harassment anonymously. The Deputy Assistant Secretary of Defense for Military Community and Family Policy under the Under Secretary of Defense for Personnel and Readiness is responsible for the development and oversight of policy for the military departments to implement a coordinated community response approach to addressing domestic abuse. The DOD Family Advocacy Program (FAP) office provides guidance and technical assistance to the military departments and DOD components to support their efforts to address, among other things, domestic abuse. The Secretaries of the military departments are responsible for developing military service-wide policies, supplementary standards, and instructions to provide for the requirements within their respective installations FAPs. Each military service has established a FAP that is responsible for overseeing and managing, among other things, the installation-level FAPs and the military service’s domestic violence and domestic abuse prevention and response programs. When domestic abuse does occur, the military service installation FAP conducts a risk assessment and works to ensure the safety of the victims and help military families overcome the effects as well as change destructive patterns. CDC is one of the major operating components of the Department of Health and Human Services, which serves as the federal government’s principal agency for protecting the health of U.S. citizens. As part of its health-related mission, CDC serves as the national focal point for developing and applying disease prevention and control, environmental health, and health promotion and education activities. CDC, among other things, conducts research to enhance prevention, develops and advocates public health policies, implements prevention strategies, promotes healthy behaviors, fosters safe and healthful environments, and provides associated training. In 1992, CDC established the National Center for Injury Prevention and Control as the lead federal organization for violence prevention. The center’s Division of Violence Prevention focuses on stopping violence, including sexual violence, before it begins and works to achieve this by conducting research on the factors that put people at risk for violence, examining the effective adoption and dissemination of prevention strategies, and evaluating the effectiveness of violence prevention programs. In 2004, CDC published a framework for effective sexual violence prevention strategies. This framework includes prevention concepts and strategies, such as identifying risk and protective factors (i.e., factors that may put a person at risk for committing sexual assault or that, alternatively, may prevent harm). CDC’s framework defines sexual violence as including non-contact unwanted sexual behaviors, sexual harassment, and physical sexual assault. DOD has acknowledged that connections exist across the continuum of unwanted sexual behaviors including sexual harassment and sexual assault and that this continuum of harm is reflected in key documents that guide prevention and response activities. For example, SAPRO has also reported that certain behavior and activities, such as hazing, can lead to sexual assault. Additionally, DOD’s Prevention Roundtable and 2014- 2016 Sexual Assault Prevention Strategy have both adopted CDC’s definition of “prevention” as it applies to sexual violence. CDC defines sexual violence to include sexual harassment and sexual assault. In 2014 and 2017, DOD contracted with RAND to conduct independent assessments of behaviors across the continuum of harm, including sexual assault and sexual harassment. In its 2014 report, RAND found that (1) 34 percent of male servicemembers who were surveyed reported that the sexual assault was part of a hazing incident, (2) servicemembers who experienced sexual harassment or gender discrimination in the past year also experienced higher rates of sexual assault, and (3) approximately one-third of servicemembers who are sexually assaulted stated the offender sexually harassed them before the assault. In its 2017 report, RAND found that (1) people are more likely to engage in problematic behaviors, such as sexual harassment, if that person perceives that peers and leaders condone those actions and (2) some organizations responsible for addressing unlawful discrimination and sexual harassment lack adequate policies, plans, information systems, and resources needed to establish a departmental approach to certain behavioral issues, inform senior leadership about these problems, and ensure that leadership’s decisions about problematic behaviors are uniformly enforced. CDC research revealed that behaviors such as bullying and homophobic teasing in early adolescence are significant predictors of sexual harassment over time. According to the CDC, these youth are at an increased potential to perpetrate sexual violence and engage in sexually harassing behavior. In response, CDC recommends that communities work to prevent all types of violence from occurring and coordinate and integrate responses to violence in a way that recognizes these connections. CDC’s research has also established that survivors of one form of violence are more likely to be victims of other forms of violence, that survivors of violence are at higher risk for behaving violently, and that people who behave violently are more likely to commit other forms of violence. Further, CDC states that violence prevention and intervention efforts that focus on only one form of violence can be broadened to address multiple, connected forms of violence to increase the public health impact. DOD’s policies on sexual harassment include some but not all of CDC’s principles and most relevant legislative elements. OSD and military service-specific sexual harassment policies generally include prevention strategies that CDC has identified in its principles for sexual violence prevention but leave out risk and protective factors, as well as risk domains. Additionally, DOD’s sexual harassment policies include most elements identified in section 579 of the NDAA for FY 2013, but do not consistently include mechanisms for anonymous reporting. ODMEO officials stated that they plan to issue a new policy that is intended to focus on sexual harassment and other forms of harassment, but it is too early to know whether that policy will include all the CDC principles or mechanisms for anonymous reporting. We also noted during our review that most existing policies have not yet been updated to reflect a provision in the fiscal year 2017 NDAA that redefined sexual harassment for certain purposes so it is no longer defined solely as a form of sex discrimination but is recognized also as an adverse behavior on the spectrum of behaviors that can contribute to an increase in the incidence of sexual assault. DOD’s sexual harassment policies include some of the principles that have been developed by CDC as part of a framework for preventing sexual violence, but other principles are not included. OSD includes sexual harassment as part of its broader military equal opportunity policy. It addresses, among other things, processes for preventing and responding to cases of discrimination, including sexual harassment; education and training in equal opportunity; and complaints processing. The military services’ policies on sexual harassment cover similar topics, such as chain of command responsibilities, complaint processing, and definitions for sexual harassment; however, they have some differences. For example, while all policies include provisions on sexual harassment prevention training, the Army’s and the Navy’s policies include specific characteristics of effective training. Both policies also specify what should be included in trainings for different levels of the chain of command. The Marine Corps and Air Force policies simply state that commanders must conduct sexual harassment prevention training. CDC’s framework defines sexual violence as including non-contact unwanted sexual behaviors, sexual harassment, and physical sexual assault. We applied six principles for sexual violence prevention from CDC’s framework to DOD’s sexual harassment policies. These principles are: Risk factors: Factors that may put people at risk for sexual violence perpetration or victimization, such as an organizational climate that either explicitly or implicitly condones sexual harassment. Protective factors: Factors that may protect high-risk people from harm, such as an organizational climate that promotes respect amongst personnel at all levels. Primary strategies for prevention: Strategies that occur before sexual violence takes place to prevent initial perpetration, such as sexual harassment prevention training. Secondary strategies for prevention: Immediate responses after sexual violence has occurred to address the early identification of victims and the short-term consequences of violence, such as mechanisms for reporting instances of sexual harassment and immediate interventions. Tertiary strategies for prevention: Long-term responses after sexual violence has occurred to address the lasting consequences of violence and sex-offender treatment interventions, such as long-term treatment of the victim and perpetrator. Risk domains: Levels at which risk and protective factors should be categorized, including: individual, relationship, community, and societal. In its sexual assault prevention strategy, DOD adapted risk domains to the military population, using the levels of: individual, relationship, leaders at all levels, military community, and society. Our comparison of DOD sexual harassment policies with CDC’s framework for preventing sexual violence showed that the policies include some of the principles in the framework but not others (see table 1.) Our analysis showed that the OSD and the Air Force policies each include two of the six principles in CDC’s framework, and the Army, the Navy, and the Marine Corps policies include three principles. Specifically, the policies generally identify sexual harassment prevention training for the armed forces, a primary strategy for prevention. In addition, the policies generally outline mechanisms for reporting and responding to sexual harassment, considered a secondary strategy for prevention. The Army, the Navy, and the Marine Corps policies outline counseling support and referral services, as well as specifying the options available for administrative or judicial punishment, including discharge from service for perpetrators, which can be considered to be tertiary strategies for prevention. Common elements missing from DOD’s sexual harassment policies are risk factors and protective factors, which identify conditions or behaviors that might heighten or lower the risk of sexual harassment victimization or perpetration, respectively. Examples of risk factors for sexual violence identified by the CDC include, but are not limited to, alcohol and drug use, hypermasculinity, emotionally unsupportive family environments, general tolerance of sexual violence within the community, and societal norms that support male superiority and sexual entitlement. Examples of protective factors from the CDC include emotional health and connectedness, and empathy and concern for how one’s actions affect others. Additionally, RAND identified an organizational climate that is oppositional to sexual violence as a protective factor. The policies also did not include risk domains, which would categorize risk and protective factors at the individual, relationship, community, and society levels. ODMEO officials told us that they are familiar with the CDC framework and are considering using it as a source of best practices for a new sexual harassment prevention strategy. DOD has previously used CDC’s sexual violence prevention framework to guide its sexual assault prevention strategy. In the absence of more comprehensive policies on sexual harassment that fully include principles in the CDC framework for sexual violence prevention, DOD may be missing opportunities to address and potentially reduce incidents of sexual harassment in the military population based on risk and protective factors and effective, tested strategies. Specifically, DOD may be missing the opportunity to identify risk factors, which would help to recognize situations where individuals and populations may be at a higher risk of sexual harassment perpetration or victimization; identify protective factors to lower the risk of sexual harassment; develop mechanisms to address sexual harassment across risk domains—at the individual, relationship, community, and society levels; and develop tertiary strategies, or long-term responses after sexual violence has occurred to address the lasting consequences of violence and sex- offender treatment interventions. DOD’s sexual harassment policies include three elements required by section 579 of the NDAA for FY 2013 but some do not include one element involving the anonymous reporting of incidents. Section 579 mandated that DOD, among other things, develop a comprehensive sexual harassment policy that includes the following elements: (1) prevention training for members of the armed forces; (2) mechanisms for reporting sexual harassment, including mechanisms for anonymous reporting; and (3) mechanisms for resolving sexual harassment that include the prosecution of perpetrators. In 2014, the Office of the Undersecretary of Defense for Personnel and Readiness issued a policy memorandum addressing the provisions of Section 579 and directed the military services to develop implementing instructions that include mechanisms for anonymous reporting. We compared DOD’s policies with the required elements in section 579 and found that OSD and military service policies generally include required elements except for the element focused on DOD including anonymous reporting in its policies for sexual harassment. The OSD, Army, and Marine Corps policies do not include anonymous reporting, while the Air Force policy and a new Navy policy do. Officials from ODMEO said that providing an option for anonymous reporting is important because it increases the odds that incidents will be reported. ODMEO officials also told us that the services have hotlines that servicemembers can use to anonymously report complaints of sexual harassment, and the Air Force and Navy policies note that their respective military servicemembers have options for anonymous reporting. While the military services may have mechanisms in place for anonymous reporting of sexual harassment, these mechanisms are not included in OSD’s policy—as required by section 579—or the policies of two of the Services, those of the Army and the Marine Corps. Without including anonymous reporting of sexual harassment complaints in DOD’s sexual harassment policies, the statutory requirement for anonymous reporting may be interpreted and applied inconsistently throughout the military services, or left unmet. OSD is developing a new policy—planned to be issued in fiscal year 2018—that will specifically focus on various forms of harassment, including sexual harassment, hazing, and bullying. ODMEO officials who are developing the new policy stated that it is intended, among other things, to enhance oversight of sexual harassment prevention and response within the department. However, because the policy is under development, it is too early to determine how the policy will address the CDC principles and anonymous reporting, as discussed earlier. Further, it is unclear how OSD plans to improve oversight and whether it intends to include performance goals, objectives, milestones, and metrics as we previously recommended in 2011. Although OSD in 2014 directed the military services to improve their oversight of sexual harassment, none of the military services were able to demonstrate that they had implemented all the required elements. Specifically, DOD’s 2014 policy memorandum addressing the provisions of section 579 also directs the military services to develop a sexual harassment oversight framework to be reviewed quarterly by a senior leadership forum that includes long-term goals, objectives, and milestones; criteria for measuring progress; results-oriented performance measures to assess effectiveness of service sexual harassment policies and programs; standards for holding leaders accountable for promoting, supporting, and enforcing policies, plans and programs; and strategies to implement the oversight framework. While some of the military services have included elements of the oversight framework directive from the 2014 policy memorandum, none of them were able to provide information that demonstrated that they had fulfilled all requirements set forth by that policy memorandum. For instance, when asked, none of the military services were able to provide details that they have senior leader forums that review their oversight efforts on a quarterly basis. Officials from the Air Force told us that they were waiting for ODMEO to release a new sexual harassment policy before establishing the oversight framework. Officials from the Navy referred us to their July 2017 sexual harassment policy, which instructs the Navy Sexual Harassment Prevention and Equal Opportunity Office to develop and implement standards for holding leaders accountable for promoting, supporting, and enforcing sexual harassment prevention and response policies, plans, and programs, and to develop results-oriented performance measures to assess the effectiveness of sexual harassment prevention and response policies and programs. Officials from the Army referred us to their SHARP Campaign Plan, which outlines methods to hold leaders accountable for taking appropriate action to address sexual harassment; goals and objectives for the program; and ways to measure program effectiveness. The Marine Corps did not respond to our request for information regarding an oversight framework for sexual harassment. A new department-wide policy on sexual harassment could be helpful to the military services as they review and update their respective policies. As noted earlier, military service policies have some differences in how they address aspects of sexual harassment. The Marine Corps told us that they have been waiting for additional guidance from OSD before updating their sexual harassment policies. However, following publicized incidents of Marines posting inappropriate photos on line of female servicemembers without their consent, the Marine Corps updated its guidance in May 2017 adding “the distribution or broadcasting of an intimate image, without consent” to its list of sexual harassment incidents that mandate separation processing. Additionally, in May 2017, a Marine Corps official said the service was revising its sexual harassment policy. The Navy updated its sexual harassment policy in July 2017 without additional guidance from OSD. We also noted during our review that most existing policies have not yet been updated to reflect a provision in the fiscal year 2017 NDAA that redefined sexual harassment for certain purposes so it is no longer defined solely as a form of sex discrimination but is recognized also as an adverse behavior on the spectrum of behavior that can contribute to an increase in the incidence of sexual assault. We asked DOD officials from several offices about the implications of this change. They identified some actions they will take, but the full implications, if any, of the change are unclear. Officials from the Assistant Secretary of Defense for Readiness said that there are no significant implications of the sexual harassment definition change beyond making conforming revisions to policy documents and guidance. ODMEO officials said that adjusting to the new definition of sexual harassment would not significantly affect their work at the OSD level, since they are already updating their sexual harassment policy to reflect this change and since sexual harassment is expected to remain within the responsibilities of ODMEO. They added that the military services will likely have to adjust to the new definition of sexual harassment, but did not offer details in how they would have to adjust. The Navy’s new policy dated July 2017 reflects the new definition, but the other military services have yet to incorporate the change. Officials from SAPRO said that they are working with ODMEO to revise surveys on unwanted sexual behaviors to reflect the new definition. SAPRO officials further stated that sexual harassment should remain under ODMEO’s purview since ODMEO personnel are trained specifically in sexual harassment response. Officials from the Army’s SHARP program said that the new definition means that sexual harassment will more often be considered misconduct, and taken more seriously. Since OSD is in the process of updating its policy, we are not making any recommendations. However, it will be important for OSD and the military services to address our prior recommendation regarding improving the oversight framework as well as incorporating the new definition of sexual harassment required by the fiscal year 2017 NDAA while updating their policies. DOD has processes for maintaining and reporting consistent data on sexual assault incidents and domestic violence incidents that involve sexual assault, but the department does not have similar assurance of consistent data on incidents of sexual harassment. SAPRO and FAP each use centralized databases that enable them to maintain and report consistent data on those incidents that fall under their purview. In contrast, DOD relies on military service-specific databases on sexual harassment incidents and does not have assurance of consistent data from these databases because it has not established standard data elements and definitions to guide the military services in maintaining and reporting these data. DOD uses centralized databases to maintain and report data on sexual assault incidents in the military and domestic violence incidents involving sexual assault. Specifically, SAPRO and the military services use the Defense Sexual Assault Incident Database (DSAID), and FAP uses the DOD Central Registry. These databases maintain data on incidents that are included in statutorily required annual reports to Congress on sexual assaults in the military. In 2011, Congress mandated that DOD provide annual reports that include: the number of sexual assaults committed against and by members of the armed forces that were reported to military officials, including unsubstantiated and substantiated reports with a synopsis of each substantiated case organized by offense and the action taken, including disciplinary actions; the policies, processes, and procedures implemented by the Secretary concerned during the year covered by the report in response to incidents of sexual assaults; the number of substantiated sexual assault cases in which the victim is deployed where the assailant is a foreign national; and a description of the implementation of the accessibility plan, including a description of the steps taken to ensure that trained personnel, appropriate supplies, and transportation resources are available to deployed units. The most recent DOD annual report on sexual assault was issued in May 2017 and covered fiscal year 2016. The report includes data on the number of both restricted and unrestricted reports of sexual assault involving servicemembers. The report also contains separate enclosures for the Army, the Navy (including the Marine Corps), the Air Force, and the National Guard, as well as annexes on the Workplace and Gender Relations Survey of Active Duty Members (WGRA) and the Military Investigation and Justice Experience Survey (MIJES). The WGRA annex discusses topics including the continuum of harm and the MIJES annex contains information on closed cases of sexual assault. SAPRO and FAP both contributed sexual assault incident data to the fiscal year 2016 report, and our review of the underlying databases found that data elements and definitions were defined and management was able to process the data into consistent information. Specifically, the two databases used are the: DSAID Data on Sexual Assault Incidents: DSAID captures DOD-wide data on certain incidents of sexual assault that involve a servicemember or in some cases, when a sexual assault involves a servicemember’s spouse or adult family member or a DOD civilian or contractor. However, FAP-related sexual assault incidents are not captured in DSAID. Using information generated by DSAID, SAPRO includes both substantiated and unsubstantiated reports of sexual assault in its annual report. In 2017, we reviewed DSAID and found that DOD had taken steps to ensure the quality and consistency of data in DSAID as well as to monitor the data entered into the system. In addition, OSD had provided the military services with definitions for required data elements in the database, which include details on the incident, victim, and alleged offender. In addition, we identified several technical challenges with the system, including issues with the system’s speed and ease of use; interfaces with other external DOD databases; and users’ ability to query data and generate reports. At the time of the report’s release, DOD had plans to modify DSAID. As of July 2017, DOD officials told us that they are still in the process of making modifications to DSAID to resolve or alleviate the technical challenges for users. DOD Central Registry Data on Domestic Abuse Incidents Involving Sexual Assault: The DOD Central Registry captures DOD-wide data on reports of domestic abuse on populations within FAP’s purview, including on family members of servicemembers as well as on their intimate partners. The DOD Central Registry includes details of each case such as the status of cases, the demographics of the perpetrator and victim, the specific type of abuse, and other details surrounding the incident. FAP officials explained that they do not use the “substantiated” and “unsubstantiated” terminology like SAPRO does. Rather, FAP, which is not responsible for determining criminal or legal disposition, uses the terms “met criteria” and “not met criteria” for maltreatment. This difference in terminology has to do with FAP’s process for determining if an incident meets the clinical criteria to be classified as abuse for the purpose of developing an intervention/treatment plan for both the victim and the offenders involved in the allegations of domestic violence. Incidents that are determined as having met criteria are entered into the DOD Central Registry. We reviewed the DOD Central Registry and found that it includes well defined data elements and descriptions for collecting data on cases of domestic violence including those that involve sexual assault. The data in the DOD Central Registry includes 46 discrete data elements, including the relationship between the victim and perpetrator, the timeline of the case, and actions taken and treatments administered in response to the incident. The elements are defined and described in an OSD policy. In its annual reporting to Congress, FAP provides the number of domestic violence incidents involving sexual assault that met criteria and the total number of instances of domestic violence that did not meet criteria. However, FAP does not maintain or report data on the total number of reported domestic violence incidents that specifically involve sexual assault. That is because only the details of cases that meet criteria are recorded in the DOD Central Registry. A FAP official said that the military services likely have more detailed information about cases that did not meet the criteria, but it does not collect these data in the DOD Central Registry. A provision in the NDAA for FY 2017 requires DOD to submit an annual report on child abuse and domestic abuse incident data, including the number of incidents reported during the year involving the physical or sexual abuse of a spouse, intimate partner, or child. This report is to be submitted simultaneously with submission of DOD’s annual sexual assault report to Congress. FAP officials told us that they are currently working with SAPRO to ensure that all reported incidents of domestic violence involving sexual assault, including those that did not meet the criteria, are included in the annual sexual assault report. Though not required to do so, DOD has included sexual harassment incident data in an appendix of its annual report on sexual assault in the military. The appendix provides information on the total number of sexual harassment reports over the fiscal year and the total number of substantiated sexual harassment reports. It also breaks down complaints by sex, service, and pay grade. ODMEO generates the reported data through annual data calls to each military service; however, it does not have assurance that the services maintain consistent data on sexual harassment incidents consistent with federal standards of internal control. The military services maintain sexual harassment incident data in military service-specific databases, and there is no centralized database similar to DSAID or the Central Registry. The military service databases are intended to collect data on formal complaints. According to the military services, the Army, the Air Force, and the Marine Corps use web-based systems, and the Navy tracks data using an Excel spreadsheet. Each service has a discrete process for entering and performing quality checks on sexual harassment incident data in its respective database, as shown in table 2. Although the military services perform some data quality checks as shown in table 2, ODMEO does not have assurance the military services are maintaining consistent data because it has not defined standard data elements and definitions for the information in their databases. Rather, the individual military services have established their own data elements and definitions. We compared data elements and definitions from each of the military services and found that there are several data elements that remain consistent throughout the services. For example, each military service records whether the complainant and offender are in the same unit, what their relationship is to each other, and the disposition of cases. However, we also found inconsistencies in data fields and their definitions across the military services, and some of the military services have data fields and definitions that do not exist in other databases. For example, the Marine Corps records whether or not the incident involves alcohol or drug use, which the rest of the military services do not record, and the military services record dates differently between their respective databases. For example, the Air Force records an initial date, the date the complaint form was signed, the date the general court martial was sent, the date the legal review was completed, and the final review date. The Marine Corps records the date the incident was reported, the date the incident occurred and whether the incident occurred over multiple dates; the dates associated with notifications and status updates to general courts martial proceedings; the dates associated with steps in the investigation, including any extensions; the dates associated with dispositions; and the dates associated with appeals. Additionally, the military services have different ways of categorizing sexual harassment incidents, as shown in table 3. As shown in table 3, while some data descriptions are similar—for instance, each of the military services include crude/offensive behavior, unwanted sexual attention, and sexual coercion—there are differences as well. The Air Force also categorizes sexual harassment into verbal, nonverbal, physical, and other, for example, whereas the other military services’ top-level categories are different. The Navy has a “not applicable” category that it describes as sexual harassment complaints that do not fall under sexual harassment, and only the Air Force has an “other” category. Because the military services have different descriptors for similar data fields, DOD cannot ensure that the services are categorizing similar types of sexual harassment in the same way. In addition, we found that the Army is more detailed in characterizing different types of sexual harassment. Specifically, as shown in table 4, the Army has an additional data field that provides more detailed descriptions of three types of sexual harassment; the other military services’ respective databases do not have this level of detail. Because the Army has this additional data field, it can capture information on multiple types of harassment that may occur in a single incident. The other military services, in contrast, do not have this capability in their respective databases. To illustrate, if one case of sexual harassment involved both verbal and nonverbal forms of sexual harassment, the Army could choose a more specific characterization to describe the incident, while the other military services would characterize the incident in more general terms. ODMEO officials are considering adapting an existing system to track instances of sexual harassment department-wide. That system, called Force Risk Reduction (FR2), is currently used to track safety issues like military injuries, civilian workers’ compensation claims, and casualty notifications at DOD. ODMEO recently completed a pilot of the system with the Marine Corps, the Navy, and the Army to test whether it would be useable for adaptation for sexual harassment data, and is planning a second pilot to include the Air Force and the National Guard Bureau. According to ODMEO officials, their adaptation of FR2 is intended to collect aggregate-level sexual harassment data from the military services, and the military services will continue to operate and rely on their individual databases to maintain more detailed case-level information on incidents. For example, ODMEO’s adaptation of FR2 would not have details such as descriptions of specific incidents, or information on dates associated with investigations or appeals. These types of data will continue to be maintained in the service systems. ODMEO officials told us that their new data system, if implemented, is not designed to collect case-level details in order to avoid personally identifiable information. Federal internal control standards state that management should define the identified information requirements at the relevant level and requisite specificity for appropriate personnel. Management should also process the obtained data into quality information. Consistency of information meets the identified information requirements when relevant data from reliable sources are used. While DOD is exploring implementing a system to track instances of sexual harassment department-wide, as currently planned this system will not collect case-level details and individual military service systems will continue to be relied upon for this type of information. Inconsistencies in data elements and definitions among the military services generally mean that one military service may be maintaining sexual harassment data that are more or less detailed than sexual harassment data maintained by other military services, or that is simply different from the data maintained by other military services. Additionally, inconsistent data elements and definitions may create difficulties in reporting sexual harassment data from the military services to OSD for a department-wide report, since ODMEO has to adapt data from the services to fit reporting requirements. Without standard data elements and definitions for sexual harassment data, DOD will continue to lack assurance about the consistency of these data across the military services. DOD has several overarching efforts to address unwanted sexual behaviors across the continuum of harm. Specifically, the department established an office to oversee the integration and coordination of unwanted sexual behaviors in 2015 and is in the process of developing an overarching prevention strategy. However, because the strategy is under development, it is unclear whether it will contain key elements for long-term and results-oriented strategic planning. DOD also has ongoing collaborative efforts to address unwanted sexual behaviors along the continuum of harm. Specifically, we identified 15 collaborative efforts, including regular meetings, Integrated Product Teams, and working groups that involve multiple entities that address unwanted sexual behaviors. DOD has taken steps to integrate activities related to the continuum of harm and is in the process of developing an overarching prevention strategy. Based on its research, DOD has sought to understand and define the continuum of harm, including the shared characteristics that contribute to increased unwanted sexual behaviors along the continuum and implications for prevention and response efforts. Also, in November 2015, DOD established a new entity—the Office of the Executive Director for Force Resiliency, within the Office of the Assistant Secretary of Defense for Readiness—to oversee policies and initiatives related to the continuum of harm. Specifically, the Executive Director for Force Resiliency was expected to provide senior leader policy guidance and oversight on high visibility departments that include SAPRO and ODMEO. In November 2016, the Office of the Executive Director for Force Resiliency was absorbed under the Assistant Secretary of Defense for Readiness. According to the Assistant Secretary of Defense for Readiness, the functions of the Office of the Executive Director for Force Resiliency remain and coordination of the efforts of several offices that address the continuum of harm continues. Officials from the Assistant Secretary of Defense for Readiness and SAPRO told us that they are drafting an overarching prevention strategy to encompass behaviors along the continuum of harm. However, because the strategy is still under development, its contents and timelines are unclear. We have previously identified six elements of strategic management planning that are key for establishing a long-term, results- oriented strategic planning framework: (1) a mission statement, (2) long- term goals, (3) strategies to achieve goals, (4) external factors that could affect goals, (5) the use of metrics to gauge progress, and (6) evaluations of the plan to monitor goals and objectives. By incorporating the elements of a comprehensive and results-oriented strategy into its overarching prevention strategy, the department will be better positioned to effectively coordinate and integrate prevention activities and reduce unwanted sexual behaviors. A mission statement, along with long-term goals and strategies to achieve those goals, should help to focus efforts in integrating prevention activities, and metrics and evaluations will allow the department to gauge progress and make changes as necessary, while also accounting for external factors that may impact progress towards goals. Our review identified 15 collaborative efforts that DOD has used to address behaviors along the continuum of harm, including sexual harassment, sexual assault, and domestic violence involving sexual assault. Three of these efforts are cross-cutting between all three of the key OSD stakeholders—ODMEO, FAP, and SAPRO—and five involve cross-cutting efforts by at least two of the key stakeholders. Figure 1 lists DOD’s 15 collaborative efforts. Regarding the three cross-cutting efforts involving all three of the key stakeholders, The Sexual Assault Prevention and Response Integrated Product Team provides a forum for OSD, the military departments, and the National Guard Bureau to address sexual assault prevention efforts. The team meets bimonthly and serves as the implementation and oversight arm for DOD’s Sexual Assault Prevention and Response (SAPR) program. The team also coordinates new policies; reviews existing SAPR policies and programs to ensure they are consistent with applicable instructions; and monitors the progress of program elements including DOD’s SAPR strategic plan tasks, DOD’s sexual assault prevention strategy tasks, and implementation of NDAA- related sexual assault issues. SAPRO leads this effort. The Prevention Collaboration Forum and working group develops coordinated prevention approaches that address factors impacting personnel readiness such as sexual harassment, sexual assault, and domestic violence involving sexual assault. According to its proposed charter, the focus of the forum is on enhancing the health of military unit and family climates as well as strengthening and promoting the resiliency and readiness of the total force through a coordinated effort around integrated policies, collaborative direction of research, alignment of resources, analysis of gaps, and synchronization of activities. The Assistant Secretary of Defense for Readiness leads this effort with SAPRO providing administrative and facilitation support. The Victim Assistance Leadership Council advises the Under Secretary of Defense for Personnel and Readiness on policies and practices related to victim assistance across DOD. According to its charter, the council provides a forum for senior leaders to exchange information and collaborate on issues affecting victims of all forms of crime and harassment within DOD, including but not limited to victims of sexual harassment, sexual assault, and domestic violence involving sexual abuse. Leadership rotates between SAPRO, FAP, and ODMEO and other offices. Regarding the cross-cutting efforts involving two of the three key stakeholders, the Sexual Harassment Prevention and Response Working Group is led by ODMEO and includes SAPRO. The group was established to evaluate how to best position sexual harassment prevention and response policy and oversight and to leverage technology to automate annual reporting requirements. The four other cross-cutting efforts are (1) the hazing and bullying working group, (2) retaliation working groups created under the SAPR Integrated Process Team, (3) domestic abuse rapid improvement events, and (4) ODMEO and SHARP meetings. The remaining collaborative efforts we identified are specific to FAP, SAPRO, and ODMEO. For example, the Sexual Assault Prevention Roundtable is a forum for representatives from OSD, the military departments, and the National Guard Bureau to share information on sexual assault prevention efforts and requirements. According to its charter, the roundtable’s activities include, among other things, sharing promising practices and prevention updates; discussing challenges in prevention program implementation, including servicemember training, and identifying approaches to address them; identifying metrics to assess the impact and effectiveness of prevention efforts, and opportunities to collaborate on research projects; and tracking the implementation of prevention tasks identified in the DOD SAPR strategy. SAPRO leads this effort. The Defense Diversity Working Group is an ODMEO-specific group that collaborates with various OSD and military service offices on military and civilian diversity and inclusion issues and implements mandated diversity plans and programs. Studies by DOD and others have shown that unwanted sexual behaviors do not exist in isolation but are part of a range of interconnected, inappropriate behaviors that are connected to the occurrence of a sexual assault. While DOD has policies and procedures to prevent and respond to these types of unwanted behaviors, some of the policies do not include key elements like anonymous reporting of sexual harassment and principles in the CDC framework for sexual violence prevention. Fully including these elements in the department’s policies can help ensure that the military services are interpreting and applying prevention and response efforts consistently and may also decrease the risk of perpetration or victimization related to instances on unwanted sexual behaviors. Further, DOD has developed reliable data systems for collecting and reporting data on some of the unwanted sexual behaviors including sexual assault and instances of domestic violence with sexual assault. However, inconsistencies in sexual harassment data elements and definitions may be creating difficulties in developing department-wide reports on unwanted sexual behaviors. Improving and standardizing data collection efforts will not only improve the quality of data that DOD and the military services collect but may also increase the ability for DOD to further develop its understanding of the connection between unwanted sexual behaviors. Finally, DOD officials have stated that they are in the early stages of developing an overarching strategy to address the interconnected nature of the range of unwanted sexual behaviors. To ensure that the department is appropriately concentrating its efforts to prevent and respond to the full range of unwanted behaviors, it is important that DOD include elements of a long-term, results-oriented strategy into its overarching prevention strategy. In doing so, DOD will be in a better position to effectively coordinate and integrate prevention activities and ultimately reduce instances of unwanted sexual behaviors. We are making the following four recommendations to DOD: The Under Secretary of Defense for Personnel and Readiness should fully include in the new policy for sexual harassment the principles in the Centers for Disease Control’s framework for sexual violence prevention, including risk and protective factors, risk domains, and tertiary strategies. (Recommendation 1) The Under Secretary of Defense for Personnel and Readiness should include in the new policy for sexual harassment mechanisms for anonymous reporting of incidents consistent with section 579 of the National Defense Authorization Act for FY 2013. (Recommendation 2) The Under Secretary of Defense for Personnel and Readiness should (1) direct the Office of Diversity Management and Equal Opportunity to develop standard data elements and definitions for maintaining and reporting information on sexual harassment incidents at the military service level, and (2) direct the military services to incorporate these data elements and definitions into their military service-specific databases. (Recommendation 3) The Under Secretary of Defense for Personnel and Readiness should direct the Assistant Secretary of Defense for Readiness to incorporate in its continuum of harm prevention strategy all the elements that are key for establishing a long-term, results-oriented strategic planning framework. The elements are (1) a mission statement, (2) long-term goals, (3) strategies to achieve goals, (4) external factors that could affect goals, (5) use of metrics to gauge progress, and (6) evaluations of the plan to monitor goals and objectives. (Recommendation 4) We provided a draft of this report to DOD and CDC for review and comment. In its written comments, DOD concurred with three recommendations and partially concurred with one, noting planned actions to address this recommendation. DOD’s comments are reprinted in their entirety in appendix II. DOD and CDC also provided technical comments, which we incorporated into the report as appropriate. DOD concurred with our three recommendations that DOD fully include in the new policy for sexual harassment the principles in the CDC's framework for sexual violence prevention, that DOD also include in the new sexual harassment policy mechanisms for anonymous reporting, and that DOD incorporate in its continuum of harm strategy all the elements that are key for establishing a long-term, results-oriented strategic planning framework. With regard to our recommendation that DOD develop standard data elements and definitions for maintaining and reporting information on sexual harassment incidents and direct the military services to incorporate these into their databases, DOD partially concurred and stated that while a 2013 policy memorandum provides standard data elements and definitions, the services collect other data elements based on their unique needs. DOD stated that ODMEO will conduct a review to determine compliance with DOD reporting requirements and identify emerging policy modifications or changes/additions to standard definitions. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense for Personnel and Readiness, and the Director, Centers for Disease Control and Prevention. In addition, the report is available at no charge on the GAO website http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. To determine the extent to which the Department of Defense (DOD) has policies on sexual harassment that include Centers for Disease Control and Prevention (CDC) principles and relevant legislative elements, we obtained and reviewed Office of the Secretary of Defense (OSD) and service-level sexual harassment policies. We compared the policies with a framework developed by the CDC for preventing sexual violence, which CDC defines as including non-contact unwanted sexual behaviors, sexual harassment, and physical sexual assault. CDC’s model is based on the concept of addressing the health of a given population based on common risk and protective factors and effective, tested strategies. We reviewed CDC’s framework for preventing sexual violence as well as our report on DOD’s sexual assault prevention strategy to identify six principles that an organization can include in a sexual violence prevention strategy or policy: Risk factors: Factors that may put people at risk for sexual violence perpetration or victimization, such as an organizational climate that either explicitly or implicitly condones sexual harassment; Protective factors: Factors that may protect high-risk people from harm, such as an organizational climate that promotes respect among personnel at all levels; Primary strategies for prevention: Strategies that occur before sexual violence takes place to prevent initial perpetration, such as sexual harassment prevention training; Secondary strategies for prevention: Immediate responses after sexual violence has occurred to address the early identification of victims and the short-term consequences of violence, such as reporting mechanisms and immediate interventions; Tertiary strategies for prevention: Long-term responses after sexual violence has occurred to address the lasting consequences of violence and sex-offender treatment interventions, such as the long- term treatment of the victim and perpetrator; and Risk domains: Levels at which risk and protective factors should be categorized, including: individual, relationship, community, and society. DOD has previously adapted risk domains to the military population, using the levels of: individual, relationship, leaders at all levels, military community, and society. DOD previously used CDC’s framework for preventing sexual violence in the department’s 2014-2016 Sexual Assault Prevention Strategy. In addition, we reviewed the OSD and service-level sexual harassment policies to determine the extent to which they included three elements identified in the National Defense Authorization Act (NDAA) for FY 2013, which directed DOD to develop a comprehensive policy that includes sexual harassment prevention training for the armed forces; mechanisms for reporting incidents, including mechanisms for anonymous reporting; and mechanisms for responding to and resolving instances of sexual harassment, including for the prosecution of perpetrators. Two GAO analysts independently reviewed the policies and determined whether or not each element was included. Any discrepancies were resolved through discussion and consultation with a third analyst. We interviewed officials in the Under Secretary of Defense for Personnel and Readiness’ Office of Diversity Management and Equal Opportunity, who oversee department- wide policy on sexual harassment, to obtain an understanding of their roles and processes regarding sexual harassment as well as the status of policy development in that area. We also interviewed officials from military equal opportunity offices in the Air Force, the Navy, and the Marine Corps, as well as officials from the Army’s Sexual Harassment/Assault Response and Prevention Office to obtain an understanding of the service sexual harassment offices and roles, as well as the status of updates to their respective policies. To determine the extent to which DOD has processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors, we reviewed DOD reports to Congress that provide incident data regarding unwanted sexual behaviors, including DOD’s most recent annual report on sexual assault in the military. We identified the databases that generate the reported data and evaluated the processes for assuring the quality and consistency of data in those databases—including the Defense Sexual Assault Incident Database, which maintains sexual assault data; the Central Registry database, which maintains data on domestic violence involving sexual assault; and various military service- level databases that maintain sexual harassment data. To evaluate DOD’s reported data we reviewed pertinent statutory provisions, DOD guidance, and the Standards for Internal Control in the Federal Government that address agencies’ use of quality data and our prior reports evaluating sexual assault data. In evaluating the reported data, we obtained and reviewed statutory provisions with reporting requirements, as well as DOD guidance on data collection for sexual harassment, sexual assault, and domestic violence involving sexual abuse. With regard to DOD efforts to collect and maintain sexual assault data, we met with OSD, Navy, Air Force, and Marine Corps officials in their respective Sexual Assault Prevention and Response offices as well as officials in the Army’s Sexual Harassment/Assault Response and Prevention office. We also reviewed our prior report on DOD’s Defense Sexual Assault Incident Database and our prior report that evaluated sexual assault data across agencies. To determine whether DOD has processes for collecting and maintaining consistent data for domestic violence with sexual assault, we obtained and compared data elements and processes from DOD’s Central Registry database, which contains data for domestic violence throughout the department. We also obtained and reviewed policies that outline processes for collecting and reporting domestic violence involving sexual abuse data, and interviewed officials from Family Advocacy Program offices in OSD and the Army, Navy, Marine Corps, and Air Force to determine data reliability and comprehensiveness. To determine the extent to which reports of sexual assault, including reports of sexual assault among servicemembers and reports of domestic abuse involving sexual assault, meet statutory requirements for reporting, we reviewed DOD reports to Congress that provide sexual assault incident data, including DOD’s most recent annual report on sexual assault in the military and compared those reports with requirements in the NDAA for FY 2011, which directs DOD to report the total number of substantiated and unsubstantiated sexual assault incidents, among other things. With regard to sexual harassment data, we interviewed officials in the Under Secretary of Defense for Personnel and Readiness’ Office of Diversity Management and Equal Opportunity, as well as officials from the Military Equal Opportunity offices in the Air Force, Marine Corps, and Navy, and officials from the Army Sexual Harassment/Assault Response and Prevention office. We collected and compared data fields and data definitions from the Army, Navy, Marine Corps, and Air Force offices that address sexual harassment. We compared the data elements to determine whether the data elements and definitions across the services are consistent. To identify the extent to which DOD has overarching efforts, including a prevention strategy, to address unwanted sexual behaviors across the continuum of harm, we met with officials in the Office of the Assistant Secretary of Defense for Readiness and DOD’s Sexual Assault Prevention and Response office. We reviewed our prior work and provisions from the Government Performance and Results Act to identify key elements that should be included in strategic plans as well as standards for coordinating within agencies. Key elements include (1) mission statement, (2) long-term goals, (3) strategies to achieve goals, (4) external factors that could affect goals, (5) use of metrics to gauge progress, and (6) evaluations of the plan to monitor goals and objectives. We identified and reviewed coordinating mechanisms used by OSD and the service offices that guide and oversee efforts to address unwanted sexual behaviors. We reviewed DOD, RAND Corporation, and CDC reports that addressed the continuum of harm and the relationship between the various forms of unwanted sexual behaviors. We interviewed officials from OSD and service-level Sexual Assault Prevention and Response, Family Advocacy, and Military Equal Opportunity offices and the Army’s Sexual Harassment/Assault Response and Prevention to identify the various efforts in which they participate. We also collected and reviewed charters and meeting notes for integrated product teams and working groups to identify their intended purposes, their activities, their membership, and whether they involved multiple offices addressing unwanted sexual behaviors. In identifying DOD’s collaborative efforts, we also reviewed our prior work on collaboration among federal agencies but we did not assess the effectiveness of department’s collaborative efforts. We conducted this performance audit from August 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the staff named above, key contributors to this report include Thomas Gosling (Assistant Director); Isabel Band; Matthew Bond; Vincent Buquicchio; Caroline DeCelles; Mae Jones; Kirsten Lauber; and Brian Pegram. Sexual Assault: Better Resource Management Needed to Improve Prevention and Response in the Army National Guard and Army Reserve. GAO-17-217. Washington, D.C.: February 27, 2017. Military Personnel: DOD Has Processes for Operating and Managing Its Sexual Assault Incident Database. GAO-17-99. Washington, D.C.: January 10, 2017. Sexual Violence Data: Actions Needed to Improve Clarity and Address Differences Across Federal Data Collection Efforts. GAO-16-546. Washington, D.C.: July 19, 2016. DOD and Coast Guard: Actions Needed to Increase Oversight and Management Information on Hazing Incidents Involving Servicemembers. GAO-16-226. Washington, D.C.: February 9, 2016. Sexual Assault: Actions Needed to Improve DOD’s Prevention Strategy and to Help Ensure It Is Effectively Implemented. GAO-16-61. Washington, D.C.: November 4, 2015. Military Personnel: Actions Needed to Address Sexual Assaults of Male Servicemembers. GAO-15-284. Washington, D.C.: March 19, 2015. Military Personnel: DOD Needs to Take Further Actions to Prevent Sexual Assault during Initial Military Training. GAO-14-806. Washington, D.C.: September 9, 2014. Military Personnel: DOD Has Taken Steps to Meet the Health Needs of Deployed Servicewomen, but Actions Are Needed to Enhance Care for Sexual Assault Victims. GAO-13-182. Washington, D.C.: January 29, 2013. Preventing Sexual Harassment: DOD Needs Greater Leadership Commitment and an Oversight Framework. GAO-11-809. Washington, D.C.: September 21, 2011. Military Justice: Oversight and Better Collaboration Needed for Sexual Assault Investigations and Adjudications. GAO-11-579. Washington, D.C.: June 22, 2011. Military Personnel: DOD’s and the Coast Guard’s Sexual Assault Prevention and Response Programs Need to Be Further Strengthened. GAO-10-405T. Washington, D.C.: February 24, 2010. Military Personnel: Additional Actions Are Needed to Strengthen DOD’s and the Coast Guard’s Sexual Assault Prevention and Response Programs. GAO-10-215. Washington, D.C.: February 3, 2010. Military Personnel: DOD’s and the Coast Guard’s Sexual Assault Prevention and Response Programs Face Implementation and Oversight Challenges. GAO-08-924. Washington, D.C.: August 29, 2008. Military Personnel: The DOD and Coast Guard Academies Have Taken Steps to Address Incidents of Sexual Harassment and Assault, but Greater Federal Oversight Is Needed. GAO-08-296. Washington, D.C.: January 17, 2008.", "summary": "Unwanted sexual behaviors in the military—including sexual harassment, sexual assault, and domestic violence involving sexual assault—undermine core values, unit cohesion, combat readiness, and public goodwill. Recent studies suggest that these behaviors are part of a “continuum of harm,” which DOD defines as a range of interconnected, inappropriate behaviors that are connected to the occurrence of sexual assault and that support an environment that tolerates these behaviors. Senate Report 114-255 included a provision for GAO to review efforts by DOD to prevent unwanted sexual behaviors in the military. GAO assessed the extent to which DOD has (1) policies on sexual harassment that include CDC principles and relevant legislative elements; (2) processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors; and (3) overarching efforts, including a prevention strategy, to address unwanted sexual behaviors across the continuum of harm. GAO reviewed DOD policies and pertinent databases, and interviewed agency officials. The Department of Defense's (DOD) policies on sexual harassment include some but not all of the Centers for Disease Control's (CDC) principles for preventing sexual violence and include most relevant legislative elements. GAO identified six principles from CDC's framework for preventing sexual violence, which CDC defines as including sexual harassment. GAO found that Office of the Secretary of Defense (OSD) and military service policies generally include CDC's principles regarding prevention strategies, but none address risk and protective factors, which identify conditions or behaviors that might heighten or lower the risk of sexual harassment victimization or perpetration, respectively. Additionally, a statutory provision in fiscal year 2013 mandated that DOD, among other things, develop a comprehensive sexual harassment policy that includes prevention training, mechanisms for anonymous reporting, and mechanisms for resolving incidents of sexual harassment. OSD and service policies are generally consistent with those required elements except for the inclusion of anonymous reporting. DOD is developing a new department-wide policy that will address sexual harassment, but it is too early to determine how the policy will address these issues. Without policies that include CDC's principles and mechanisms for anonymous reporting, DOD may miss opportunities to address and potentially reduce incidents of unwanted sexual behaviors. Finally, a statutory change in fiscal year 2017 redefined sexual harassment for certain purposes so it is no longer defined solely as a form of sex discrimination but is recognized also as an adverse behavior on the spectrum of behavior that can contribute to an increase in the incidence of sexual assault. While officials indicated a need to update policies, they were unclear on the full implications, if any, of this change. DOD has processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors including sexual assault and incidents of domestic violence that involve sexual assault, but does not have similar processes for maintaining and reporting data on incidents of sexual harassment. Specifically, DOD uses centralized databases to maintain and report data on incidents of sexual assault and domestic violence that involve sexual assault, but relies on military service-specific databases for information on incidents of sexual harassment. DOD has not established standard data elements and definitions to guide the services in maintaining and reporting data on sexual harassment. Inconsistencies in data elements and definitions generally mean that one service may be maintaining data that is more or less detailed than, or that differs from, the data maintained by other services. Such inconsistencies may create difficulties in reporting department-wide sexual harassment data, since the individual service data must be adapted to fit reporting requirements. DOD has several overarching efforts to address unwanted sexual behaviors across the continuum of harm, including developing an overarching prevention strategy. However, it is unclear whether the strategy under development will contain key elements for long-term and results-oriented strategic planning such as long-term goals, strategies to achieve goals, and metrics to gauge progress. Without incorporating these elements into its overarching prevention strategy, DOD may not be in a position to effectively coordinate and integrate prevention activities and reduce instances of unwanted sexual behaviors. GAO recommends that DOD fully include in its new policy on sexual harassment CDC's principles for sexual violence prevention and mechanisms for anonymous reporting, develop standard data elements and definitions for reporting sexual harassment incidents, and incorporate in its overarching prevention strategy elements key for a long-term, results-oriented strategy. DOD generally concurred with the recommendations.", "document_type": "gao"}
{"report": "On January 5, 2011, the House of Representatives adopted an amendment to House Rule XII to require that Members of the House state the constitutional basis for Congress's power to enact the proposed legislation when introducing a bill or joint resolution. (The amendment does not pertain to concurrent or simple resolutions.) The Constitutional Authority Statement (CAS) rule, found at House Rule XII, clause 7(c), was subsequently adopted in the 113th, 114th, 115th, and 116th Congresses. As the CAS rule begins its ninth year, the requirement continues to be a topic of congressional debate and inquiry, as Members of the House contemplate how to comply with the rule prior to every submission of a bill or joint resolution. This report aims to aid in understanding the CAS requirement. It begins by providing a broad overview of (1) Congress's powers under the Constitution and (2) Congress's role in interpreting this document. The report then specifically addresses House Rule XII, clause 7(c), discussing its key requirements and limits, the legal effect of a CAS, and the debate over the rule's value. The report concludes by discussing trends with regard to the House's recent CAS practices and by providing considerations for congressional personnel drafting CASs. The report contains two tables: Table 1 identifies the constitutional provisions most commonly cited in CASs during the last six months of the 114 th and 115 th Congresses, and Table 2 lists suggested constitutional authorities for various types of legislation. Understanding the purpose and logic of the CAS rule first requires an understanding of both the powers provided to the Congress under the Constitution and Congress's role in interpreting the Constitution. The Framers of the Constitution feared tyranny as the result of the \"accumulation of all powers\" of government \"in the same hands\" and, thus, \"sought to guard against it by dispersing federal power to three interdependent branches of Government.\" Reflecting this fear, the federal Constitution divides the government's power among the legislative, executive, and judicial branches, with the Congress exercising the legislative power, the President exercising the executive power, and the federal courts exercising the judicial power. \"It is a breach of the National fundamental law\" if Congress \"gives up its legislative power\" to one of the other branches or if Congress \"attempts to invest itself or its members with either executive power or judicial power.\" While only Congress may exercise the legislative power, this power, like those belonging to the other branches of the federal government, is cabined by the terms of the Constitution. Article I, Section 1, of the Constitution vests \"all legislative Powers herein granted ... in a Congress of the United States,\" with the phrase \"herein granted\" indicating that the Congress's authority to legislate is \"confined to those powers expressly identified in the document.\" As a result, the Supreme Court has interpreted Article I's Vesting Clause as creating a Congress of specified or \"enumerated powers.\" As the Court noted in United States v. Morrison , \"[e]very law enacted by Congress must be based on one or more of its powers enumerated in the Constitution.\" Congress's specified powers are primarily, but not exclusively, found in Section 8 of Article I of the Constitution. This section contains 18 clauses, 17 of which enumerate relatively specific powers granted to the Congress. Among the powers enumerated are Congress's powers to impose taxes, and spend the money collected to pay debts and provide for the \"common defence\" and \"general welfare,\" regulate commerce, establish laws respecting naturalization and bankruptcy, regulate currency, establish post offices and roads, promote the \"Progress of Science and useful Arts\" by giving authors and inventors \"exclusive rights\" to their writings and discoveries (i.e., copyright and patent protections), and establish a judicial system. In addition, six of the clauses in Article I, Section 8, defining the substantive legislative jurisdiction of Congress, deal exclusively with wartime and military matters and include Congress's power to declare war and provide for an Army and Navy. Outside of Article I, Section 8, the Constitution contains several other provisions providing Congress with a specified power. For example, Article IV of the Constitution empowers Congress to enact laws regulating the validity of state \"public Acts, Records, and judicial Proceedings\" and rules respecting the territory and property belonging to the United States. And Article V authorizes Congress to propose amendments to the Constitution. Outside of the original constitutional text, many of the amendments to the Constitution explicitly restrict the power of Congress. Several of the Constitution's amendments, however, provide Congress with the power to enact certain legislation. For instance, the Thirteenth, Fourteenth, and Fifteenth Amendments, adopted following the Civil War, empower Congress to \"enforce\" the amendments' provisions prohibiting slavery, preventing the deprivations of certain civil rights, and outlawing the denial or abridgement of the right to vote on account of \"race, color, or previous condition of servitude.\" The final clause of Article I, Section 8, the Necessary and Proper Clause, supplements Congress's enumerated powers, providing the legislative branch the power to adopt measures that assist in the achievement of ends contemplated by other provisions in the Constitution. Specifically, that clause provides Congress with the power to make \"all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.\" The Supreme Court has interpreted the scope of Congress's power under the Necessary and Proper Clause as \"broad,\" in that the clause leaves to \"Congress a large discretion as to the means that may be employed in executing a given power.\" In so holding, the Court has described the clause as providing the \"broad power to enact laws that are 'convenient, or useful' or 'conducive' to\" a more specific authority's \"beneficial exercise.\" Consistent with this view, the Court has upheld legislation criminalizing perjury and witness tampering as an extension of Congress's power to constitute federal tribunals. Similarly, the Court upheld legislation prohibiting the bribery of officials who receive federal funds, as an extension of Congress's power to \"appropriate federal moneys to promote the general welfare.\" More broadly, the Court has taken the view that other powers, such as the power to conduct oversight, are implied from the general vesting of legislative powers in Congress. Importantly, however, the Necessary and Proper Clause is not an independent source of power for Congress that, standing in isolation, permits it to exercise the legislative power. As the Supreme Court has noted, the clause is \"not itself a grant of power, but a caveat that the Congress possesses all the means necessary to carry out the specifically granted 'foregoing' powers of § 8 'and all other Powers vested by this Constitution....'\" Instead, in legislating, Congress \"must rely upon its independent (though quite robust) Article I, § 8, powers\" or in other powers implicitly or explicitly vested elsewhere in the Constitution to Congress. Importantly as well, the Necessary and Proper Clause authorizes Congress to not only take action to assist in the execution of its own powers under the Constitution, but also to provide support for the execution of \"all other Powers vested by this Constitution in the Government of the United States.\" Pursuant to this authority, Congress may permissibly enact legislation to assure the proper exercise of powers given to other branches of the federal government. The Constitution imposes two central types of limitations on the powers of Congress. First, the concept of enumerated powers creates what is often referred to as an \"internal limit\" on Congress's powers—that is, Congress's powers are restricted by and to the terms of their express grant. For instance, in United States v. Lopez , the Supreme Court interpreted the Commerce Clause as empowering Congress to regulate \"three broad categories of activities\": (1) \"channels of interstate commerce,\" like roads and canals; (2) \"persons or things in interstate commerce,\" and (3) activities that substantially affect interstate commerce. Having determined those limits to the clause, the Court held that Congress's power over commerce does not permit it to enact legislation prohibiting the possession of guns near a school (absent a connection to commercial activity) because such legislation does not regulate an economic activity that substantially affects interstate commerce. Likewise, the Court has interpreted the Fourteenth Amendment's Enforcement Clause as necessarily requiring a \"congruence and proportionality\" between the injury to be prevented or remedied by congressional legislation and the means that Congress adopted to that end. Applying this standard in City of Boerne v. Flores , the Court held that Congress exceeded the scope of its enforcement power under the Fourteenth Amendment by enacting the Religious Freedom Restoration Act (RFRA) insofar as that law unduly invaded the sovereign rights of the states. Adopted to protect the constitutional right to the free exercise of religion, RFRA, in relevant part, invalidated any state law that imposed a \"substantial burden\" on a religious practice without sufficient justification and narrow tailoring. Describing RFRA's operative standard as imposing a \"stringent test\" that amounted to a \"considerable intrusion into the States' traditional prerogatives and general authority to regulate for the health and welfare of their citizens,\" the Court concluded that there was \"a lack of proportionality or congruence between the means adopted and the legitimate end to be achieved\" by RFRA. Second, beyond the internal limits on Congress's powers, the Constitution also imposes \"external\" constraints on congressional action, or affirmative prohibitions found elsewhere in the text or structure of the document. Article I, Section 9, lists specific constraints on the power of the federal government. Section 9 prohibits Congress from suspending the writ of habeas corpus in peacetime; passing bills of attainder or ex post facto laws; imposing taxes or duties on exports \"from any state\"; and granting titles of nobility. Section 9 also provides that Congress can suspend the writ of habeas corpus only in \"cases of rebellion or invasion\" when \"public safety may require\" such a suspension. Similarly, money can be drawn from the Treasury only upon an appropriation made by law. More broadly, Congress's powers are constrained by three principles undergirding the Constitution: federalism, separation of powers, and individual rights. Federalism constraints are grounded in states' status as separate and distinct sovereign entities and seek to preserve states' retained prerogatives under the U.S. constitutional system by enforcing certain limits on the federal government's jurisdiction. For instance, the Supreme Court has identified federalism-based constraints stemming from the Tenth Amendment—the provision of the Bill of Rights that reads, \"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.\" More specifically, the Court has interpreted the Tenth Amendment to prevent the federal government from \"commandeering\" or requiring state executive officers or state legislators to carry out federal directives. Similarly, the Court has held that Congress cannot indirectly commandeer state governments by imposing limits on monetary grants that go so far as to functionally coerce states, leaving them with no choice but to comply with a federal directive. Second, separation of powers constraints are concerned with the proper allocation of authority among the three branches within the federal government. The Constitution assigns each branch of government distinct, but interrelated, roles, and one branch may not aggrandize its power by attempting to exercise powers assigned to another branch. For example, the Appointments Clause of the Constitution gives the President the authority to appoint principal officers of the United States with the Senate's advice and consent. Thus, when Congress purported to reserve to itself the right to appoint certain members of the Federal Election Commission in 1971, the Supreme Court struck down that law as being in violation of the Appointments Clause. Finally, constraints based on individual rights serve to prohibit congressional interference with the rights that individuals retain under the Constitution and, in particular, under the first 10 amendments to the Constitution, the Bill of Rights. The First Amendment, for example, prohibits Congress from enacting a law that abridges the freedom of speech. The Supreme Court has interpreted the First Amendment to mean that speech restrictions promulgated as a result of the content of the speech are presumptively unconstitutional. In keeping with this presumption, in United States v. Alvarez , the Court struck down a law that made it a crime to falsely claim that one had received military medals or decorations on the grounds that the law risked \"significant First Amendment harm\" by broadly empowering prosecutions of speech based on its content, without any notable limitations. Given the powers of Congress and the limits on those powers under the Constitution, the question remains as to which branch of the federal government may interpret the scope of Congress's powers. The question is one that has been debated from the very beginnings of the country. In its 1803 decision in Marbury v. Madison, the Supreme Court held that the logic of having a written Constitution that enumerates the legal limits imposed on the federal government, coupled with the tenure protections provided to the federal judiciary under the Constitution, confirmed the Supreme Court's role in interpreting the Constitution and invalidating acts of other branches of government that contravene this document in the context of a live case or controversy. Pursuant to Marbury ' s famous command, it is \"the province and duty of the judicial department to say what the law is.\" While Marbury firmly established that the judicial branch has a role in interpreting the Constitution, including the power to strike down laws held to be incompatible with the founding document, it did not, however, expressly state that the judiciary has a final or even exclusive role in defining the basic powers and limits of the federal government. To the contrary, the early history of the United States is replete with examples of all three branches of the federal government playing a role in constitutional interpretation, with Congress and the Executive openly questioning the Supreme Court's pronouncements on constitutional law, such as the Court's rulings on the National Bank or slavery. As these examples show, Marbury was not seen to interfere with the ability of either Congress or the President to interpret the Constitution. Rather, Marbury only asserted the judiciary's power to act as the ultimate expositor of the Constitution in the limited context of cases that were properly before the Court. Instead, Thomas Jefferson's view that \"each of the three departments has equally the right to decide for itself what is its duty under the Constitution, without any regard to what the others may have decided for themselves under a similar question,\" appears to have prevailed in Congress during the early days of the United States. This is evidenced by the fact that Members of Congress spent \"a considerable amount of time\" \"debating the constitutional limitations on\" legislation during the first 100 years of the nation. In the mid-20 th century, however, the Supreme Court began articulating a theory of judicial supremacy, wherein the Court no longer shared its role in interpreting the Constitution with the other branches of the federal government, but rather characterized its role as being the preeminent arbiter of the Constitution's meaning. For example, in Cooper v. Aaron, the Court read Marbury as \"declaring the basic principle that the federal judiciary is supreme in the exposition of the law of the Constitution, and [this] principle has ever since been respected by this Court and the Country as a permanent and indispensable feature of our constitutional system.\" In other words, the Cooper Court concluded that the \"interpretation[s] of the [Constitution] enunciated by this Court ... [are] the supreme law of the land,\" with constitutional interpretations by other actors, including Congress, necessarily lacking the same force. Supporters of the judicial supremacy view assert that it promotes stability and uniformity in constitutional interpretation, as well as preserves constitutional norms from majoritarian pressures. The Court's decision in Cooper , coupled with broader institutional factors that may further constrain Congress's ability to engage in constitutional interpretation, has provided support for the notion of judicial supremacy in constitutional interpretation within the coordinate branches of government. As a result, while Congress certainly continues to debate about the Constitution during the legislative process, in the modern era, the Court's views on the Constitution appear to have taken on an elevated role vis-á-vis those views of the other branches of government. The theory of judicial supremacy is far from a consensus view, however, and several aspects of the American constitutional system may counsel for a more robust role for Congress in constitutional interpretation. In recent decades, a number of legal scholars and government officials have criticized the judicial supremacy view, instead advancing the view that the Constitution should more regularly be the subject of interpretation by those outside of the judicial branch. This view posits that Congress and others outside of the government possess independent and coordinate authority to interpret the Constitution. Supporters of this view point to the fact that the Constitution requires all Members of Congress to \"be bound by Oath or Affirmation ... to support [the] Constitution ... ,\" a requirement that presumes Senators and Representatives must understand and interpret the Constitution in their work in Congress. Similarly, courts' practice of affording a presumption of constitutionality to laws passed by Congress necessarily assumes that Members of Congress engage in constitutional interpretation during the legislative process. In addition, if Congress opts not to engage in interpreting the Constitution, a vacuum could arise in constitutional dialogue because various judicially crafted doctrines generally serve to keep the courts from making pronouncements on a wide range of constitutional questions. Indeed, as Justice Kennedy observed in his concurring opinion in Trump v. Hawaii, because there are \"numerous instances in which the statements and actions of Government officials are not subject to judicial scrutiny or intervention,\" it is \"imperative\" for public officials to \"adhere to the Constitution and to its meaning and promise.\" These arguments can be seen as relevant to the current CAS requirement imposed under the House rules insofar as they suggest that Congress should have some role in interpreting the Constitution. Originally adopted as an amendment to House Rule XII on January 5, 2011, the CAS rule prohibits Members from introducing a bill or joint resolution without a \"statement citing as specifically as practicable the power or powers granted to Congress in the Constitution to enact the bill or joint resolution.\" The current CAS rule functionally replaced a requirement that existed during the 105th through 111th Congresses, mandating that committee reports for bills reported out of committee \"include a statement citing the specific powers granted to the Congress in the Constitution to enact the law proposed by the bill or joint resolution.\" A CAS is not part of the text of the legislation; instead, it \"accompanie[s]\" the legislation. The CAS must be \"submitted at the time the bill or joint resolution\" is presented for introduction and referral, that is, when the legislation is dropped in the \"hopper.\" The submitted CAS appears in the Congressional Record and is published electronically on Congress.gov. While the rule, on its face, requires Members to provide as \"specific[] as practicable\" \"a statement citing ... the power or powers to Congress in the Constitution to enact the bill or joint resolution,\" the CAS rule itself is silent on various issues. For example, the rule does not prescribe any particular format or level of detail for CASs. The House Committee on Rules (Rules Committee) provided guidance soon after the rule was adopted, identifying the following five examples of citations to constitutional authority: 1. \"The constitutional authority on which this bill rests is the power of Congress to make rules for the government and regulation of the land and naval forces, as enumerated in Article I, Section 8, Clause 14 of the United States Constitution.\" 2. \"This bill is enacted pursuant to Section 2 of Amendment XV of the United States Constitution.\" 3. \"This bill is enacted pursuant to the power granted to Congress under Article I, Section 8, Clause 3 of the United States Constitution.\" 4. \"The Congress enacts this bill pursuant to Clause 1 of Section 8 of Article I of the United States Constitution and Amendment XVI of the United States Constitution.\" 5. \"This bill makes specific changes to existing law in a manner that returns power to the States and to the people, in accordance with Amendment X of the United States Constitution.\" This guidance suggests that compliant CASs should generally discuss the affirmative constitutional authority that empowers Congress to enact particular legislation, but need not discuss any external constraints on Congress's powers to enact the legislation. For example, under this guidance, a CAS for a bill that proposed to ban all interstate shipments of religious pamphlets could be seen as compliant if it cited the Commerce Clause as the source of congressional power, even though the bill may run afoul of the Free Exercise and Free Speech Clauses of the First Amendment. Nonetheless, the last example provided by the Rules Committee suggests that a citation to a provision of the Constitution that does not explicitly grant power to the Congress—such as the Tenth Amendment, which preserves the powers of the states —may suffice to comply with the rule. More broadly, the Rules Committee guidance indicates that Members have significant discretion in determining whether particular CASs comply with the rule. The Rules Committee guidance notes that it is ultimately \"the responsibility of the bill sponsor to determine what authorities [he or she] wish[es] to cite and to provide that information to the Legislative Counsel staff.\" In practice, outside commentators have noted that Members have generally complied with House Rule XII, clause 7(c). Such observations may be the result of how the rule is enforced. The Rules Committee has noted, \"The adequacy and accuracy of the citation of constitutional authority is a matter for debate in the committees and in the House.\" This statement suggests that the CAS rule is enforced only insofar as \"the House clerk ... acts to verify that each bill has a justification\" and \"not [in judging] the adequacy of the justification itself.\" Studies of past practices under House Rule XII, clause 7(c), support the view that Members have considerable leeway and discretion in crafting CASs. Professor Hanah Volokh of Emory University conducted a study of CAS practices early in the 112 th Congress, aggregating more than 1,700 statements submitted during the first four months of 2011. According to Professor Volokh, a \"handful\" of these CASs \"engage[d],\" in her opinion, \"in a thorough and highly detailed explanation of the constitutional ramifications of the proposed legislation\" by discussing the Federalist Papers or Supreme Court doctrine, among other things. The remainder, however, were less specific in their identification of Congress's powers. For example, 8% of the statements reviewed by Professor Volokh generally cited Article I, Section 8–without providing any further specificity as to the particular clauses within that section providing constitutional support for the proposed legislation. A study of the CASs for \"every bill and joint resolution introduced\" from January 5, 2011, to January 5, 2012, of that same Congress reported similar findings. According to the House Republican Study Committee, 15% of submitted CASs relied on Article I, Section 8 alone. In preparing various versions of this report, CRS conducted a similar study of CASs from the 114th and 115th Congresses. First, in 2017, CRS staff examined the 937 statements submitted between July 1, 2016, and January 1, 2017, consisting of 13 joint resolutions and 924 bills. In 2019, CRS staff examined 1,110 statements submitted between July 1, 2018, and January 2, 2019, consisting of 10 joint resolutions and 1,100 bills. Most commonly, in 58% of cases, the CAS cited to a specific clause in Article I, Section 8, such as the Taxing and Spending Clause or the Commerce Clause. Few submitted CASs consisted of more than a bare citation to an affirmative power granted to Congress in the Constitution. For example, four CASs examined from 2016 and six CAS examined from 2018 explicitly discussed Supreme Court case law that purportedly support the bill or joint resolution. Forty-four of the statements from 2016 and thirteen statements from 2018 cited to provisions of the Constitution that constrain rather than empower Congress or one of the other federal branches, such as the restrictions in Article I, Section 9 or the Bill of Rights. Few CASs went beyond the scope of the rule to detail why the constitutional provision cited empowers Congress to enact the proposed legislation. In line with the studies on CASs in the 112 th Congress, CRS found that numerous statements submitted during the sample periods contained general, rather than specific, references to the Constitution. As Table 1 below indicates, the most frequent citation in CASs accompanying recent legislation was a general reference to Article I, Section 8, of the Constitution. This occurred in 30% of all CASs during the 2016 sample period and 33% of all CASs during the 2018 sample period, a marked increase from the House Republican Study Committee and Volokh studies of the 112 th Congress. Similarly, the sixth and ninth most frequently cited constitutional provision in submitted statements during the respective sample periods was even broader: a general reference to Article I of the Constitution. Beyond CAS practices with regard to specificity, the sample of recently submitted Rule XII statements is also noteworthy in that it highlights the specific clauses of the Constitution that Members have most frequently relied upon in submitted CASs. In particular, numerous recently submitted CASs are notable in that the statements raise certain questions about how a particular clause has been interpreted, both as a matter of historical practice and by the courts, and how that same clause is being cited by the relevant CAS. Among the most prominent examples of CASs that could be seen as adopting an interpretation of the Constitution that potentially diverges from historical understandings or judicial interpretations of a particular clause include statements that cite to the following clauses: Necessary and Proper Clause : One of the most frequently cited clauses in recent CASs was the Necessary and Proper Clause, which allows Congress to \"make all Laws which shall be necessary and proper for carrying into Execution\" the powers enumerated in Article I and \"all other Powers vested by [the] Constitution in the Government of the United States, or in any Department or Officer thereof.\" About a quarter of all CASs in the CRS studies contained a citation to that clause, with 14% of the 2016 CASs and 19% of the 2018 CASs citing the Necessary and Proper Clause as the sole power to enact the underlying legislation. Citations to the Necessary and Proper Clause in isolation could be seen as somewhat anomalous, as that clause has never been viewed by the Court or by the Framers of the Constitution as a general source of power for Congress to do whatever is \"necessary and proper.\" Instead, \"[w]hile the Necessary and Proper Clause authorizes congressional action 'incidental to [an enumerated] power, and conducive to its beneficial exercise,'\" it does not provide Congress with \"great substantive and independent power.\" General Welfare Clause: The General Welfare Clause refers to a specific phrase contained within the language in Article I, Section 8, clause 1 empowering Congress to enact certain taxes and spend the money collected from taxation. Specifically, the first clause of Section 8 of Article I affords Congress the power to \"lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the Common Defence and general Welfare of the United States .... \" In CRS's studies, the Taxing and Spending Clause was the third most frequently cited clause by CASs. Not infrequently, a citation to this clause—commonly described in CASs as the \"General Welfare Clause\"—was used for legislation unrelated to the spending of money by the federal government. Importantly, the phrase \"general Welfare\" does not exist in isolation in the clause, which might otherwise empower Congress to enact laws that broadly promote the general welfare of the nation. Instead, the phrase \"general Welfare\" in Article I, Section 8, clause 1, is tied to the preceding language in the clause regarding the raising of revenue, and thus requires Congress to spend the money it collects from taxation to promote the general welfare. While this power is considerable, it is necessarily tied to spending legislation. Military Regulation Clause: The constitutional provision affording Congress with the power to \"make rules for the Government and Regulation of the land and naval forces\" is another frequently cited clause in recent CASs. Several of the bills to which such CASs are attached, however, do not purport to regulate the United States' armed forces, but instead prescribe broad regulations for the government as a whole. Such references to the Military Regulation Clause appear to stem from reading the first phrase of the clause—\"make rules for the Government\"—in isolation from the rest of the clause, as an independent power. However, such an understanding of the clause is inconsistent with traditional interpretations of the scope of that clause, which view it as solely related to Congress's power over the military. This interpretation also runs contrary to traditional rules of legal interpretation that counsel for reading phrases in a legal text in their context and not in isolation from the rest of the text. More broadly, interpreting the Military Regulation Clause to allow Congress to direct the actions of the federal government generally in whatever manner Congress wishes would arguably transform the clause from a narrow power, confined to matters related to the armed forces, to an open-ended police power, something otherwise rejected by the Framers of the Constitution. Appropriations Clause: A number of recent CASs cite provisions in Article I, Section 9, including several CASs that cite the Appropriations Clause as the authority for Congress to provide money for a particular project. The Appropriations Clause states, in relevant part, that \"No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.\" Like other provisions found in Section 9 of Article I, this clause generally has not been interpreted to grant Congress any affirmative power. Instead, in keeping with other provisions in Section 9, the Appropriations Clause has been seen to function as a restriction on the powers of the federal government. Specifically, the Appropriations Clause ensures that when the federal government spends money, \"the payment of money from the Treasury must be authorized by a statute.\" It thus serves as an affirmative restriction on the power of the Executive and makes Congress's \"power over the purse\" exclusive in nature. As discussed above, Congress's power to spend money derives from the Taxing and Spending Clause. Bill of Rights: While not among the most frequent citations in CASs, occasionally one of the first 10 amendments to the Constitution—the Bill of Rights—has been cited in support of Congress's power to enact legislation. Congress may certainly have an interest in protecting the rights listed in the Bill of Rights, but it should be noted that the first 10 amendments to the Constitution do not themselves empower Congress to take any action, and they instead consist of \"negative rights\" protecting individuals from certain government conduct. The Bill of Rights often prohibits congressional action. As a result, if a sponsor proposes legislation intended to support individual liberties protected by the Constitution, the CAS for such legislation could instead rely on an affirmative power of the Congress, such as the powers provided in Article I, Section 8 of the Constitution. Another alternative would be the enforcement power of the Fourteenth Amendment, which the Supreme Court has held allows \"Congress [to] enact so-called prophylactic legislation\" aimed at \"prevent[ing] and deter[ing] unconstitutional conduct.\" Nonetheless, it should be noted that the House Rules Committee has suggested that a citation to a provision of the Constitution that does not explicitly grant power to Congress may suffice to comply with the CAS rule. For example, a Member seeking to rescind or narrow the scope of an existing law could arguably believe it appropriate to identify constitutional principles found in the Bill of Rights or elsewhere that the Member believes are advanced by the proposed legislation. CASs have limited legal import, in that the CAS of a bill enacted into law will likely not alter a court's view of the constitutionality of the legislation. At bottom, a CAS is a statement by one Member of Congress (i.e., the sponsor) when a piece of legislation is introduced. It is not formally part of a bill or joint resolution. Therefore, even if the underlying legislation is enacted into law, the CAS would have no formal legal effect because the CAS was not subject to the approval of both houses of Congress, or presented to the President, as is required by Article I, Section 7. Instead, CASs are a type of legislative history material that describes the initial thoughts of a single Member as to Congress's power to enact the bill. In this sense, one might view a CAS as akin to an isolated statement in the Congressional Record or a statement issued by the sponsor of a bill, which courts generally regard as \"weak\" forms of legislative history when considering Congress's intent in passing a law. In practice, in the few court cases that cite to a law's CAS, the underlying statement is mentioned merely in passing and had no apparent effect on the decision, as courts have independently evaluated the constitutionality of the legislation in question notwithstanding the existence of the CAS. This practice is in keeping with broader principles of constitutional law as adopted by the courts. One such principle holds that Congress generally may not independently and without further scrutiny in the context of a case or controversy before a court define its own powers under the Constitution. Another principle holds that an otherwise unconstitutional law will not be found to be permissible by a court merely because Congress believes the provision to be within its powers. Given the seeming ease of compliance with House Rule XII, clause 7(c) , and the tendency of some CASs to cite to general or arguably inapplicable provisions of the Constitution, questions might be raised about the desirability of the CAS rule. Critics have argued for its repeal, contending that the rule is symbolic and has little impact on congressional debate or dialogue about Congress's authority under the Constitution. In addition, some have asserted that Congress lacks the institutional capacity to interpret the Constitution, and the CAS rule demonstrates this insofar as there have been few meaningful debates in Congress over the scope of Congress's powers under the rule. Others contend that the administrative costs of complying with the rule outweigh any benefits from the CAS requirement. On the other hand, proponents characterize House Rule XII, clause 7(c), as an extension of the broader debate over Congress's role in interpreting the Constitution, providing a limited means by which Members of Congress may expressly engage in constitutional interpretation. As one commentator notes, \"[f]undamentally, a [CAS] is a congressional interpretation of the Constitution,\" and supporters of the rule see several benefits to having the House of Representatives engage in a limited form of constitutional interpretation through the submission of CASs. According to the rule's proponents, statements submitted under House Rule XII are a \"simple and straightforward self-monitoring mechanism\" to ensure that Congress does not \"usurp\" powers not granted to it in the Constitution. In this sense, according to its proponents, the CAS rule serves to remind Members of the limits on Congress's institutional power. Additionally, supporters of House Rule XII, clause 7(c), argue that the rule enhances constitutional dialogue outside of the judiciary and promotes constitutional literacy within Congress by formally requiring Members to engage in even limited constitutional interpretation when introducing legislation. According to one commentator, the CAS rule could provide a foundation for a new sense within ... [Congress] ... that there is both reason and need for its members to develop deeper and broader understandings of the Constitution and constitutional interpretation—in the direction of Congress becoming ... not only a co-equal branch of the federal government, but a co-equal interpreter of the federal Constitution, if not more. Proponents of the rule have further contended that the rule could enhance the institutional credibility and reputation of Congress by making clear to constituents that Members \"take seriously the constitutionality of their actions.\" According to one former Member, Congress's reputational problems partially relate to a belief that Congress is not really debating or deliberating in good faith but is simply retreating to partisan battle lines. This concern has been exacerbated by Congress abdicating and leaving to the courts its historical responsibility to consider constitutionality on its own. In this respect, the House Rule ... is a foot in the door. Under the House Rule, all members of the House are required, essentially for the first time, to take at least one aspect of their obligation to consider constitutionality more seriously. Nonetheless, even among proponents of the rule, informal suggestions have been made to improve the constitutional dialogue surrounding CASs. Among the primary changes proposed are the following: Enhancing the Content of CASs: Prompted by criticisms about how \"thin many of [the CASs] are,\" some have suggested that the House rules be altered to require more formal and robust debate over the constitutionality of proposed legislation. One proposal called for time to be set aside for formal debate on the House floor about the constitutionality of legislation upon the motion of a single Member. Other proposals focus on changing the content of the CASs themselves by requiring more expansive statements that discuss the relationship between the cited provision of the Constitution and the bill itself. In addition, others have advocated that the CAS rule formally require that the statement discuss \"[w]ith some depth\" any \"precedent germane to the authority to enact the\" legislation. Finally, several commentators have proposed altering the rule so that Members must not only cite to the Constitution's affirmative grants of authority to Congress, but also discuss any potential limitations the Constitution may impose on Congress's power to legislate. Better Enforcing the CAS R ule : Given the large number of CASs that lack specificity or cite seemingly inapplicable clauses of the Constitution, supporters of the rule have argued that Members must be held accountable for ensuring that submitted CASs comply with both the letter and spirit of the requirement. One early version of the current CAS rule proposed in the 111th Congress would have deemed general citations to the \"common defense clause, the general welfare clause, or the necessary and proper clause\" insufficient to satisfy House Rule XII, clause 7(c). In addition, this proposal would have allowed a Member to initiate a point of order challenging the adequacy of a CAS, thereby subjecting the measure to a short debate that would resolve whether the submitted statement complied with House Rule XII. Others have urged that the Clerk of the House or a designee be empowered to \"evaluate the content\" of a submitted statement formally and \"add a note indicating that the Statement submitted does not properly satisfy the Rule's specificity requirement.\" Under this proposal, any bill with such a notation could be \"subject to a special privileged motion by a Member to recommit the bill for failure to follow the Rule.\" Changing Other Procedures Regarding CASs : Currently, the CAS focuses on a single moment: the initial introduction of a bill or joint resolution. Viewing this limitation on the use of a CAS as a shortcoming that prevents more robust constitutional debate, several proponents of the CAS rule have argued that the rule should apply during all stages of the legislative process, including during committee deliberations, so that the constitutionality of a bill or resolution is subject to broader consideration. Relatedly, because the CAS rule only applies at the beginning of the legislative process, the only Member who currently assesses Congress's authority to enact the legislation in question is the Member who introduced the legislation. In order to ensure that Members, who ordinarily must decide how to vote on another Member's bill, consider the constitutional implications of the legislation in question, some have suggested that the House rule \"explicitly acknowledge\" the independent \"obligation\" of Members to be \"mindful of any constitutional objections\" regarding the bill that is the subject of a vote. In what may be the broadest means to allow more Members to weigh in on the constitutional implications of a bill, at least one commentator has suggested (but ultimately rejects) changing the House rule so that the CAS is part of the text of a bill, as opposed to a statement attached to the bill. Such an approach could, at least in theory, formalize and elevate the role of the CAS because when a bill that contains a CAS in its text is put to a vote, multiple Members could potentially voice their agreement or disagreement with the bill's language assessing Congress's power to enact the underlying legislation. Each of the proposed modifications to the CAS rule could raise new concerns, however. For example, if House Rule XII were modified to require more robust discussions of the constitutionality of a given piece of legislation throughout the legislative process, such a modification could amplify the criticisms that the CAS rule requires considerable resources to ensure compliance. Moreover, if the rule were modified to require that CASs include additional content, without any changes to its current enforcement regime, the additional requirements could, in the view of at least one commentator, be ignored. This section of the report identifies issues that Members and congressional staffers may find useful to consider when assessing whether and how a constitutional provision may provide a source of authority for legislation. First, the section notes available resources that may aid in interpreting the Constitution. Second, the section suggests potential constitutional bases for various types of legislation. There are numerous resources that Members and staff could use to learn more about the affirmative powers afforded Congress by the Constitution and the limitations on those powers. The Constitution and its current amendments contain a little more than 7,500 words, and Congress regularly authorizes the printing and distribution of pocket versions of the Constitution for Members and staff. Moreover, a host of primary historical documents from the founding era are available electronically for those interested, including the following: Farrand ' s Records : Documentary records from the Constitutional Convention, including the notes gathered by various attendees, complied by historian Max Farrand. The Federalist Papers : A series of newspaper articles written by Alexander Hamilton, John Jay, and James Madison urging the ratification of the Constitution. Founder ' s Constitution : A joint venture of the University of Chicago Press and the Liberty Fund, providing various primary sources for each clause of the Constitution. Constitutional Sources Project (ConSource): ConSource provides free access to a \"digital library of historical sources related to the creation, ratification, and amendment of the United States Constitution.\" In addition to these primary sources, Members and staff may wish to consult a number of secondary sources that are publicly available explaining the various clauses of the Constitution, including the following: Constitution Annotated ( CONAN ) : The Library of Congress, through the Congressional Research Service, regularly publishes and updates The Constitution of the United States of America: Analysis and Interpretation (popularly known as the Constitution Annotated or CONAN). CONAN contains an in-depth, accessible, and objective record of how each provision in the Constitution has been interpreted by the Supreme Court and other entities. Commentaries on the Constitution of the United States : Commentaries on the Constitution of the United States is a three-volume treatise written by Associate Justice Joseph Story in 1833. It is widely cited as an authoritative understanding of the Constitution. Interactive Constitution : For an overview of the Constitution, the congressionally chartered National Constitution Center has created the Interactive Constitution wherein \"scholars of different perspectives discuss what they agree upon, and what they disagree about\" with regard to broad concepts in constitutional law. The Heritage Foundation ' s Guide to the Constitution : The Heritage Foundation's Guide to the Constitution provides a clause-by-clause analysis of the Constitution with a series of explanatory essays from a number of legal scholars. The American Constitution Society ' s Keeping Faith With the Constitution : The American Constitution Society's Keeping Faith With the Constitution examines the text and history of the Constitution with a view toward how the Constitution's \"words and principles\" have been interpreted throughout U.S. history. To aid drafters of CASs, Table 2 provides a list of suggested citations that could potentially be submitted in a CAS pursuant to House Rule XII, clause 7(c), for various types of commonly introduced legislation. Beyond these suggestions for citations to specific provisions of the Constitution, given the broader trends with regard to CAS practices discussed above, it may also be helpful to consider the following questions before submitting a CAS: Does the CAS cite to a specific clause of the Constitution? While several recent CASs have adopted the practice of citing to an entire Article of the Constitution or a section of the Constitution, such as Article I, Section 8, the prevailing customary practice has been to cite to a specific clause of the Constitution. To the extent a Member wishes to cite to a specific clause in a CAS, Table 2 may be a helpful resource to consult. Does the CAS cite only to the Necessary and Proper Clause? While a considerable number of CASs cite exclusively to the Necessary and Proper Clause, such a citation may raise questions with regard to whether the clause is intended to do more than supplement Congress's other enumerated powers under the Constitution. To the extent a Member may wish to cite to Congress's other, more specific enumerated powers for support for a given piece of legislation, Table 2 may be a helpful resource to consult. Does the CAS cite to a clause that affirmatively empowers Congress to take an action? Citations in CASs to clauses in Article I, Section 9 of the Constitution, which contains a list of limitations on the powers of the federal government, or the Bill of Rights, which consists of a number of rights retained vis-á-vis the federal government, may suggest a broader interpretation of such clauses. To the extent a Member prefers to cite to a clause that is more generally recognized to grant an affirmative power to Congress, Article I, Section 8 contains the vast majority of commonly cited clauses that provide Congress the power to legislate with respect to various subjects. Does the CAS cite to a clause that relates to and authorizes the underlying legislation? Perhaps most importantly, a Member may wish cite to a provision of the Constitution whose power, based on either historical understandings or judicial interpretations of a particular clause, has some relationship with the subject matter of the legislation. As discussed earlier in this report, citations to constitutional provisions like the General Welfare Clause and the Military Regulation Clause may be more limited than the language of the Constitution might suggest at first blush. To the extent a Member may want to confirm that a particular CAS citation relates to and authorizes the underlying legislation, attorneys in CRS's American Law Division can provide advice with regard to specific CAS citations. A House Rule XII, clause 7(c), statement regarding the constitutionality of legislation is required only when a Member of the House introduces legislation. The CAS, by its nature, is just the starting point for constitutional dialogue respecting a bill or joint resolution. Nothing in the rule prohibits further discussions about the constitutional issues that a piece of legislation may implicate. While the customary practice with regard to CASs, to date, has been to provide a short citation to the provision in the Constitution that affirmatively grants Congress the authority to enact the underlying legislation, it is not unprecedented for Members to cite sources beyond the text of the Constitution, such as Supreme Court case law, primary source materials on the Constitution, or a constitutional law treatise. Other CASs have gone beyond citing to the affirmative powers that the Constitution provides Congress and have discussed potential restraints the Constitution imposes that may prohibit the enactment of the underlying legislation. Outside of a CAS, Members can request a formal floor debate respecting the constitutionality of pending legislation, and constitutional debate and dialogue can occur in a host of other contexts, including voting to enact legislation, committee hearings, committee reports, and more \"informal practices, norms, and traditions.\" Also, Members of Congress have a variety of resources available to help inform their participation in constitutional debate, including \"expert witnesses at hearings, their legally trained staff, [and] constitutional experts at the [CRS].\" In particular, CRS's American Law Division regularly provides legal advice to Members and their staff on constitutional questions regarding pending legislation, whether by providing suggestions for a CAS or by formally rendering an opinion on the constitutionality of pending legislation. In this vein, Members and their staff have the capability to meaningfully participate in ongoing debates over the interpretation of the Constitution, beginning with the CAS.", "summary": "On January 5, 2011, the House of Representatives adopted an amendment to House Rule XII to require that Members state the constitutional basis for Congress's power to enact the proposed legislation when introducing a bill or joint resolution. (The amendment does not pertain to concurrent or simple resolutions). This Constitutional Authority Statement (CAS) rule, found at House Rule XII, clause 7(c), was subsequently adopted by every subsequent Congress. Understanding the CAS rule first requires an understanding of both the powers provided to the Congress under the Constitution and Congress's role in interpreting the founding document. Article I's Vesting Clause creates a Congress of specified or \"enumerated\" powers, and every law Congress enacts must be based on one or more of its powers enumerated in the Constitution. The Constitution creates two central types of limitations on Congress's powers: (1) internal limits and (2) external limits. Internal limits are the restrictions inherent in the constitutional grants of power themselves, such as the limits on the scope of Congress's powers under the Commerce Clause. External limits, on the other hand, are the constraints contained in affirmative prohibitions found elsewhere in the text or structure of the document, such as the First Amendment's prohibition on Congress abridging the freedom of speech. While the Court's 1803 decision in Marbury v. Madison firmly cemented the judicial branch's role in interpreting the Constitution by recognizing the power of the Court to strike down legislation as unconstitutional, the early history of the nation is replete with examples of all three government branches playing a substantial role in constitutional interpretation. By the mid-20th century, however, the Supreme Court began articulating a theory of judicial supremacy that became widely accepted, wherein the federal judiciary is the final and exclusive arbiter of the Constitution's meaning. Nonetheless, in recent decades, a number of legal scholars and government officials have criticized this theory, instead promoting the view that the political branches of government possess the independent and coordinate authority to interpret the Constitution. In support of this view, some point to (1) the Constitution itself requiring all Members of Congress to be bound by an oath to support the Constitution; (2) the presumption of constitutionality that courts afford legislation enacted by Congress; and (3) the wide range of questions the Constitution requires Congress to resolve. A CAS is fundamentally a congressional interpretation of the Constitution, in that House Rule XII requires each Member introducing a piece of legislation to attach a statement that cites the power(s) that allows Congress to enact the legislation. The submitted CAS appears in the Congressional Record and is published on Congress.gov. The House Rules Committee has indicated that Members have significant discretion in determining whether particular CASs comply with the rule. The CAS rule is enforced only insofar as \"the House clerk ... acts to verify that each bill has a justification\" and \"not [in judging] the adequacy of the justification itself.\" The most common means of complying with the rule is to cite to a specific clause in Article I, Section 8, such as the Taxing and Spending Clause. The CAS rule has itself been subject to much debate, with proponents arguing that the rule promotes constitutional dialogue in the House, while critics contend that the rule provides minimal benefits and is administratively costly.", "document_type": "crs"}
{"report": "Under the Constitution, the war powers are divided between Congress and the President. Among other relevant grants, Congress has the power to declare war and raise and support the armed forces (Article I, Section 8), while the President is Commander in Chief (Article II, Section 2). It is generally agreed that the Commander-in-Chief role gives the President power to utilize the armed forces to repel attacks against the United States, but there has long been controversy over whether he is constitutionally authorized to send forces into hostile situations abroad without a declaration of war or other congressional authorization. Congressional concern about presidential use of armed forces without congressional authorization intensified after the Korean conflict. During the Vietnam War, Congress searched for a way to assert authority to decide when the United States should become involved in a war or the armed forces be utilized in circumstances that might lead to hostilities. On November 7, 1973, it passed the War Powers Resolution ( P.L. 93-148 ) over the veto of President Nixon. The main purpose of the Resolution was to establish procedures for both branches to share in decisions that might get the United States involved in war. The drafters sought to circumscribe the President's authority to use armed forces abroad in hostilities or potential hostilities without a declaration of war or other congressional authorization, yet provide enough flexibility to permit him to respond to attack or other emergencies. The record of the War Powers Resolution since its enactment has been mixed, and after 40 years it remains controversial. Some Members of Congress believe the Resolution has on some occasions served as a restraint on the use of armed forces by Presidents, provided a mode of communication, and given Congress a vehicle for asserting its war powers. Others have sought to amend the Resolution because they believe it has failed to assure a congressional voice in committing U.S. troops to potential conflicts abroad. Others in Congress, along with executive branch officials, contend that the President needs more flexibility in the conduct of foreign policy and that the time limitation in the War Powers Resolution is unconstitutional and impractical. Some have argued for its repeal. This report examines the provisions of the War Powers Resolution, actual experience in its use from its enactment in 1973 through March 2015, and proposed amendments to it. Appendix A lists instances which Presidents have reported to Congress under the War Powers Resolution, and Appendix B lists certain instances of the use of U.S. Armed Forces that were not reported. Section 1 establishes the title, \"The War Powers Resolution.\" The law is frequently referred to as the \"War Powers Act,\" the title of the measure passed by the Senate. Although the latter is not technically correct, it does serve to emphasize that the War Powers Resolution, embodied in a joint resolution which complies with constitutional requirements for lawmaking, is a law. Section 2 states the Resolution's purpose and policy, with Section 2(a) citing as the primary purpose to \"insure that the collective judgment of both the Congress and the President will apply to the introduction of United States Armed Forces into hostilities, or into situations where imminent involvement in hostilities is clearly indicated by the circumstances, and to the continued use of such forces in hostilities or in such situations.\" Section 2(b) points to the Necessary and Proper Clause of the Constitution as the basis for legislation on the war powers. It provides that \"Under Article I, section 8, of the Constitution it is specifically provided that Congress shall have the power to make all laws necessary and proper for carrying into execution, not only its own powers but also all other powers vested by the Constitution in the Government of the United States....\" Section 2(c) states the policy that the powers of the President as Commander in Chief to introduce U.S. Armed Forces into situations of hostilities or imminent hostilities \"are exercised only pursuant to— (1) a declaration of war, (2) specific statutory authorization, or (3) a national emergency created by attack upon the United States, its territories or possessions, or its armed forces.\" Section 3 of the War Powers Resolution requires the President \"in every possible instance\" to consult with Congress before introducing U.S. Armed Forces into situations of hostilities and imminent hostilities, and to continue consultations as long as the armed forces remain in such situations. The House report elaborated: A considerable amount of attention was given to the definition of consultation . Rejected was the notion that consultation should be synonymous with merely being informed. Rather, consultation in this provision means that a decision is pending on a problem and that Members of Congress are being asked by the President for their advice and opinions and, in appropriate circumstances, their approval of action contemplated. Furthermore, for consultation to be meaningful, the President himself must participate and all information relevant to the situation must be made available. The House version specifically called for consultation between the President and the leadership and appropriate committees. This was changed to less specific wording in conference, however, in order to provide more flexibility. Section 4 requires the President to report to Congress whenever he introduces U.S. Armed Forces abroad in certain situations. Of key importance is Section 4(a)(1) because it triggers the time limit in Section 5(b). Section 4(a)(1) requires reporting within 48 hours, in the absence of a declaration of war or congressional authorization, the introduction of U.S. Armed Forces \"into hostilities or into situations where imminent involvement in hostilities is clearly indicated by the circumstances.\" Some indication of the meaning of hostilities and imminent hostilities is given in the House report on its War Powers bill: The word hostilities was substituted for the phrase armed conflict during the subcommittee drafting process because it was considered to be somewhat broader in scope. In addition to a situation in which fighting actually has begun, hostilities also encompasses a state of confrontation in which no shots have been fired but where there is a clear and present danger of armed conflict. \" Imminent hostilities\" denotes a situation in which there is a clear potential either for such a state of confrontation or for actual armed conflict. Section 4(a)(2) requires the reporting of the introduction of troops \"into the territory, airspace or waters of a foreign nation, while equipped for combat, except for deployments which relate solely to supply, replacement, repair, or training of such forces.\" According to the House report this was to cover the initial commitment of troops in situations in which there is no actual fighting but some risk, however small, of the forces being involved in hostilities. A report would be required any time combat military forces were sent to another nation to alter or preserve the existing political status quo or to make the U.S. presence felt. Thus, for example, the dispatch of Marines to Thailand in 1962 and the quarantine of Cuba in the same year would have required Presidential reports. Reports would not be required for routine port supply calls, emergency aid measures, normal training exercises, and other noncombat military activities. Section 4(a)(3) requires the reporting of the introduction of troops \"in numbers which substantially enlarge United States Armed Forces equipped for combat already located in a foreign nation.\" The House report elaborated: While the word \"substantially\" designates a flexible criterion, it is possible to arrive at a common-sense understanding of the numbers involved. A 100% increase in numbers of Marine guards at an embassy—say from 5 to 10—clearly would not be an occasion for a report. A thousand additional men sent to Europe under present circumstances does not significantly enlarge the total U.S. troop strength of about 300,000 already there. However, the dispatch of 1,000 men to Guantanamo Bay, Cuba, which now has a complement of 4,000 would mean an increase of 25%, which is substantial. Under this circumstance, President Kennedy would have been required to report to Congress in 1962 when he raised the number of U.S. military advisers in Vietnam from 700 to 16,000. All of the reports under Section 4(a), which are to be submitted to the Speaker of the House and the President pro tempore of the Senate, are to set forth (A) the circumstances necessitating the introduction of United States Armed Forces; (B) the constitutional and legislative authority under which such introduction took place; and (C) the estimated scope and duration of the hostilities or involvement. Section 4(b) requires the President to furnish such other information as Congress may request to fulfill its responsibilities relating to committing the nation to war. Section 4(c) requires the President to report to Congress periodically, and at least every six months, whenever U.S. forces are introduced into hostilities or any other situation in Section 4(a). The objectives of these provisions, the conference report stated, was to \"ensure that the Congress by right and as a matter of law will be provided with all the information it requires to carry out its constitutional responsibilities with respect to committing the Nation to war and to the use of United States Armed Forces abroad.\" Section 5(a) deals with congressional procedures for receipt of a report under Section 4(a)(1). It provides that if a report is transmitted during a congressional adjournment, the Speaker of the House and the President pro tempore of the Senate, when they deem it advisable or if petitioned by at least 30% of the Members of their respective Houses, shall jointly request the President to convene Congress in order to consider the report and take appropriate action. Section 5(b) was intended to provide teeth for the War Powers Resolution. After a report \"is submitted or is required to be submitted pursuant to section 4(a)(1), whichever is earlier,\" Section 5(b) requires the President to terminate the use of U.S. Armed Forces after 60 days unless Congress (1) has declared war or authorized the action; (2) has extended the period by law; or (3) is physically unable to meet as a result of an armed attack on the United States. The 60 days can be extended for 30 days by the President if he certifies that \"unavoidable military necessity respecting the safety of United States Armed Forces\" requires their continued use in the course of bringing about their removal. Section 5(c) requires the President to remove the forces at any time if Congress so directs by concurrent resolution; the effectiveness of this subsection is uncertain because of the 1983 Supreme Court decision on the legislative veto. It is discussed in Part II of this report. Section 6 establishes expedited procedures for congressional consideration of a joint resolution or bill introduced to authorize the use of armed forces under Section 5(b). They provide for (a) a referral to the House Foreign Affairs [International Relations] or Senate Foreign Relations Committee, the committee to report one measure not later than 24 calendar days before the expiration of the 60 day period, unless the relevant House determines otherwise by a vote; (b) the reported measure to become the pending business of the relevant House and be voted on within three calendar days, unless that House determines otherwise by vote; in the Senate the debate is to be equally divided between proponents and opponents; (c) a measure passed by one House to be referred to the relevant committee of the other House and reported out not later than 14 calendar days before the expiration of the 60 day period, the reported bill to become the pending business of that House and be voted on within 3 calendar days unless determined otherwise by a vote; (d) conferees to file a report not later than four calendar days before the expiration of the 60 day period. If they cannot agree within 48 hours, the conferees are to report back in disagreement, and such report is to be acted on by both Houses not later than the expiration of the 60-day period. Section 7 establishes similar priority procedures for a concurrent resolution to withdraw forces under Section 5(c). For a recent use of these procedures see the section on the \" Legislative Veto ,\" below. Section 8 sets forth certain interpretations relating to the Resolution. Section 8(a) states that authority to introduce armed forces is not to be inferred from any provision of law or treaty unless such law, or legislation implementing such treaty, specifically authorizes the introduction of armed forces into hostilities or potential hostilities and states that it is \"intended to constitute specific statutory authorization within the meaning of this joint resolution.\" This language was derived from a Senate measure and was intended to prevent a security treaty or military appropriations act from being used to authorize the introduction of troops. It was also aimed against using a broad resolution like the Tonkin Gulf Resolution to justify hostilities abroad. This resolution had stated that the United States was prepared to take all necessary steps, including use of armed force, to assist certain nations, and it was cited by Presidents and many Members as congressional authorization for the Vietnam war. Section 8(b) states that further specific statutory authorization is not required to permit members of United States Armed Forces to participate jointly with members of the armed forces of one or more foreign countries in the headquarters operations of high-level military commands which were established prior to the date of enactment of this joint resolution and pursuant to the United Nations Charter or any treaty ratified by the United States prior to such date. This section was added by the Senate to make clear that the resolution did not prevent U.S. forces from participating in certain joint military exercises with allied or friendly organizations or countries. The conference report stated that the \"high-level\" military commands meant the North Atlantic Treaty Organization, (NATO), the North American Air Defense Command (NORAD) and the United Nations command in Korea. Section 8(c) defines the introduction of armed forces to include the assignment of armed forces to accompany regular or irregular military forces of other countries when engaged, or potentially engaged, in hostilities. The conference report on the War Powers Resolution explained that this was language modified from a Senate provision requiring specific statutory authorization for assigning members of the Armed Forces for such purposes. The report of the Senate Foreign Relations Committee on its bill said The purpose of this provision is to prevent secret, unauthorized military support activities and to prevent a repetition of many of the most controversial and regrettable actions in Indochina. The ever deepening ground combat involvement of the United States in South Vietnam began with the assignment of U.S. \"advisers\" to accompany South Vietnamese units on combat patrols; and in Laos, secretly and without congressional authorization, U.S. \"advisers\" were deeply engaged in the war in northern Laos. Section 8(d) states that nothing in the Resolution is intended to alter the constitutional authority of either the Congress or the President. It also specifies that nothing is to be construed as granting any authority to introduce troops that would not exist in the absence of the Resolution. The House report said that this provision was to help insure the constitutionality of the Resolution by making it clear that nothing in it could be interpreted as changing the powers delegated by the Constitution. Section 9 is a separability clause, stating that if any provision or its application is found invalid, the remainder of the Resolution is not to be affected. From its inception, the War Powers Resolution was controversial because it operated on the national war powers, powers divided by the Constitution in no definitive fashion between the President and Congress. Congress adopted the resolution in response to the perception that Presidents had assumed more authority to send forces into hostilities than the framers of the Constitution had intended for the Commander in Chief. President Nixon in his veto message challenged the constitutionality of the essence of the War Powers Resolution, and particularly two provisions. He argued that the legislative veto provision, permitting Congress to direct the withdrawal of troops by concurrent resolution, was unconstitutional. He also argued that the provision requiring withdrawal of troops after 60-90 days unless Congress passed legislation authorizing such use was unconstitutional because it checked presidential powers without affirmative congressional action. Every President since the enactment of the War Powers Resolution has taken the position that it is an unconstitutional infringement on the President's authority as Commander in Chief. The heart of the challenge to the constitutionality of the War Powers Resolution rests on differing interpretations by the two branches of the respective war powers of the President and Congress. These differing interpretations, especially the assertions of presidential authority to send forces into hostile situations without a declaration of war or other authorization by Congress, were the reason for the enactment of the Resolution. The congressional view was that the framers of the Constitution gave Congress the power to declare war, meaning the ultimate decision whether or not to enter a war. Most Members of Congress agreed that the President as Commander in Chief had power to lead the U.S. forces once the decision to wage war had been made, to defend the nation against attack, and perhaps in some instances to take other action such as rescuing American citizens. But, in this view, he did not have the power to commit armed forces to war. By the early 1970s, the congressional majority view was that the constitutional balance of war powers had swung too far toward the President and needed to be corrected. Opponents argued that Congress always held the power to forbid or terminate U.S. military action by statute or refusal of appropriations, and that without the clear will to act the War Powers Resolution would be ineffective. In his veto message, President Nixon said the Resolution would impose restrictions upon the authority of the President which would be dangerous to the safety of the Nation and \"attempt to take away, by a mere legislative act, authorities which the President has properly exercised under the Constitution for almost 200 years.\" The War Powers Resolution in Section 2(c) recognized the constitutional powers of the President as Commander in Chief to introduce forces into hostilities or imminent hostilities as \"exercised only pursuant to (1) a declaration of war, (2) specific statutory authorization, or (3) a national emergency created by attack upon the United States, its territories or possessions, or its armed forces.\" The executive branch has contended that the President has much broader authority to use forces, including for such purposes as to rescue American citizens abroad, rescue foreign nationals where such action facilitates the rescue of U.S. citizens, protect U.S. Embassies and legations, suppress civil insurrection, implement the terms of an armistice or cease-fire involving the United States, and carry out the terms of security commitments contained in treaties. On June 23, 1983, the Supreme Court in INS v. Chadha , ruled unconstitutional the legislative veto provision in Section 244(c)(2) of the Immigration and Nationality Act. Although the case involved the use of a one-House legislative veto, the decision cast doubt on the validity of any legislative veto device that was not presented to the President for signature. The Court held that to accomplish what the House attempted to do in the Chadha case \"requires action in conformity with the express procedures of the Constitution's prescription for legislative action: passage by a majority of both Houses and presentment to the President.\" On July 6, 1983, the Supreme Court affirmed a lower court's decision striking down a provision in another law that permitted Congress to disapprove by concurrent (two-House) resolution. Since Section 5(c) requires forces to be removed by the President if Congress so directs by a concurrent resolution, it is constitutionally suspect under the reasoning applied by the Court. A concurrent resolution is adopted by both chambers, but it does not require presentment to the President for signature or veto. Some legal analysts contend, nevertheless, that the War Powers Resolution is in a unique category which differs from statutes containing a legislative veto over delegated authorities. Perhaps more important, some observers contend, if a majority of both Houses ever voted to withdraw U.S. forces, the President would be unlikely to continue the action for long, and Congress could withhold appropriations to finance further action. Because the War Powers Resolution contains a separability clause in Section 9, most analysts take the view that the remainder of the joint resolution would not be affected even if Section 5(c) were found unconstitutional. Congress has taken action to fill the gap left by the possible invalidity of the concurrent resolution mechanism for the withdrawal of troops. On October 20, 1983, the Senate voted to amend the War Powers Resolution by substituting a joint resolution, which requires presentment to the President, for the concurrent resolution in Section 5(c), and providing that it would be handled under the expedited procedures in Section 7. The House and Senate conferees agreed not to amend the War Powers Resolution itself, but to adopt a free standing measure relating to the withdrawal of troops. The measure, which became law, provided that any joint resolution or bill to require the removal of U.S. Armed Forces engaged in hostilities outside the United States without a declaration of war or specific statutory authorization would be considered in accordance with the expedited procedures of Section 601(b) of the International Security and Arms Export Control Act of 1976, except that it would be amendable and debate on a veto limited to 20 hours. The priority procedures embraced by this provision applied in the Senate only. Handling of such a joint resolution by the House was left to that Chamber's discretion. House Members attempted to use Section 5(c) to obtain a withdrawal of forces from Somalia. On October 22, 1993, Representative Benjamin Gilman introduced H.Con.Res. 170 , pursuant to Section 5(c) of the War Powers Resolution, directing the President to remove U.S. Armed Forces from Somalia by January 31, 1994. Using the expedited procedures called for in Section 5(c), the Foreign Affairs Committee amended the date of withdrawal to March 31, 1994, (the date the President had already agreed to withdraw the forces), and the House adopted H.Con.Res. 170 . The Foreign Affairs Committee reported: Despite such genuine constitutionality questions, the committee acted in accordance with the expedited procedures in section 7. The committee action was premised on a determination that neither individual Members of Congress nor Committees of Congress should make unilateral judgments about the constitutionality of provisions of law. Despite the use of the phrase \"directs the President,\" the sponsor of the resolution and Speaker of the House Thomas Foley expressed the view that because of the Chadha decision, the resolution would be nonbinding. The March 31, 1994, withdrawal date was later enacted as Section 8151 of P.L. 103-139 , signed November 11, 1993. The automatic withdrawal provision has become perhaps the most controversial provision of the War Powers Resolution. Section 5(b) requires the President to withdraw U.S. forces from hostilities within 60-90 days after a report is submitted or required to be submitted under Section 4(a)(1). The triggering of the time limit has been a major factor in the reluctance of Presidents to report, or Congress to insist upon a report, under Section 4(a)(1). Drafters of the War Powers Resolution included a time limit to provide some teeth for Congress, in the event a President assumed a power to act from provisions of resolutions, treaties, or the Constitution which did not constitute an explicit authorization. The Senate report called the time limit \"the heart and core\" of the bill that \"represents, in an historic sense, a restoration of the constitutional balance which has been distorted by practice in our history and, climatically, in recent decades.\" The House report emphasized that the Resolution did not grant the President any new authority or any freedom of action during the time limits that he did not already have. Administration officials have objected that the provision would require the withdrawal of U.S. forces simply because of congressional inaction during an arbitrary period. Since the resolution recognizes that the President has independent authority to use armed forces in certain circumstances, they state, \"on what basis can Congress seek to terminate such independent authority by the mere passage of time?\" In addition, they argue, the imposition of a deadline interferes with successful action, signals a divided nation and lack of resolve, gives the enemy a basis for hoping that the President will be forced by domestic opponents to stop an action, and increases risk to U.S. forces in the field. This issue has not been dealt with by the courts. Perceptions of the War Powers Resolution tended to be set during the Cold War. During the 1970s the issues revolved largely around the adequacy of consultation. The 1980s raised more serious issues of presidential compliance and congressional willingness to use the War Powers Resolution to restrain presidential action. With regard to Lebanon in 1983, Congress itself invoked the War Powers Resolution, but in the 1987-1988 Persian Gulf tanker war Congress chose not to do so. Following is a summary of major U.S. military actions and the issues they raised relating to the War Powers Resolution from its enactment in 1973 to August 1990. As the Vietnam War ended, on three occasions, in April 1975, President Ford used U.S. forces to help evacuate American citizens and foreign nationals. In addition, in May 1975 President Ford ordered the retaking of a U.S. merchant vessel, the SS Mayaguez which had been seized by Cambodian naval patrol vessels. All four actions were reported to Congress citing the War Powers Resolution. The report on the Mayaguez recapture was the only War Powers report to date to specifically cite Section 4(a)(1), but the question of the time limit was moot because the action was over by the time the report was filed. Among the problems revealed by these first four cases were differences of opinion between the two branches on the meaning of consultation. The Ford Administration held that it had met the consultation requirement because the President had directed that congressional leaders be notified prior to the actual commencement of the introduction of armed forces. The prevailing congressional view was that consultation meant that the President seek congressional opinion, and take it into account, prior to making a decision to commit armed forces. After an unsuccessful attempt on April 24, 1980, to rescue American hostages being held in Iran, President Carter submitted a report to Congress to meet the requirements of the War Powers Resolution, but he did not consult in advance. The Administration took the position that consultation was not required because the mission was a rescue attempt, not an act of force or aggression against Iran. In addition, the Administration contended that consultation was not possible or required because the mission depended upon total surprise. Some Members of Congress complained about the lack of consultation, especially because legislative-executive meetings had been going on since the Iranian crisis had begun the previous year. Just before the rescue attempt, the Senate Foreign Relations Committee had sent a letter to Secretary of State Cyrus Vance requesting formal consultations under the War Powers Resolution. Moreover, shortly before the rescue attempt, the President outlined plans for a rescue attempt to Senate Majority Leader Robert Byrd but did not say it had begun. Senate Foreign Relations Committee Chairman Frank Church stressed as guidelines for the future: (1) consultation required giving Congress an opportunity to participate in the decisionmaking process, not just informing Congress that an operation was underway; and (2) the judgment could not be made unilaterally but should be made by the President and Congress. One of the first cases to generate substantial controversy because it was never reported under the War Powers Resolution was the dispatch of U.S. military advisers to El Salvador. At the end of February 1981, the Department of State announced the dispatch of 20 additional military advisers to El Salvador to aid its government against guerilla warfare. There were already 19 military advisers in El Salvador sent by the Carter Administration. The Reagan Administration said the insurgents were organized and armed by Soviet bloc countries, particularly Cuba. By March 14, the Administration had authorized a total of 54 advisers, including experts in combat training. The President did not report the situation under the War Powers Resolution. A State Department memorandum said a report was not required because the U.S. personnel were not being introduced into hostilities or situations of imminent hostilities. The memorandum asserted that if a change in circumstances occurred that raised the prospect of imminent hostilities, the Resolution would be complied with. A justification for not reporting under Section 4(a)(2) was that the military personnel being introduced were not equipped for combat. They would, it was maintained, carry only personal side arms which they were authorized to use only in their own defense or the defense of other Americans. The State Department held that Section 8(c) of the War Powers Resolution was not intended to require a report when U.S. military personnel might be involved in training foreign military personnel, if there were no imminent involvement of U.S. personnel in hostilities. In the case of El Salvador, the memorandum said, U.S. military personnel \"will not act as combat advisors, and will not accompany Salvadoran forces in combat, on operational patrols, or in any other situation where combat is likely.\" On May 1, 1981, 11 Members of Congress challenged the President's action by filing suit on grounds that he had violated the Constitution and the War Powers Resolution by sending the advisers to El Salvador. Eventually there were 29 co-plaintiffs, but by June 18, 1981, an equal number of Members (13 Senators and 16 Representatives) filed a motion to intervene in the suit, contending that a number of legislative measures were then pending before Congress and that Congress had ample opportunity to vote to end military assistance to El Salvador if it wished. On October 4, 1982, U.S. District Court Judge Joyce Hens Green dismissed the suit. She ruled that Congress, not the court, must resolve the question of whether the U.S. forces in El Salvador were involved in a hostile or potentially hostile situation. While there might be situations in which a court could conclude that U.S. forces were involved in hostilities, she ruled, the \"subtleties of fact-finding in this situation should be left to the political branches.\" She noted that Congress had taken no action to show it believed the President's decision was subject to the War Powers Resolution. On November 18, 1983, a federal circuit court affirmed the dismissal and on June 8, 1984, the Supreme Court declined consideration of an appeal of that decision. As the involvement continued and casualties occurred among the U.S. military advisers, various legislative proposals relating to the War Powers Resolution and El Salvador were introduced. Some proposals required a specific authorization prior to the introduction of U.S. forces into hostilities or combat in El Salvador. Other proposals declared that the commitment of U.S. Armed Forces in El Salvador necessitated compliance with Section 4(a) of the War Powers Resolution, requiring the President to submit a report. Neither approach was adopted in legislation, but the Senate Foreign Relations Committee reported that the President had \"a clear obligation under the War Powers Resolution to consult with Congress prior to any future decision to commit combat forces to El Salvador.\" On July 26, 1983, the House rejected an amendment to the Defense Authorization bill ( H.R. 2969 ) to limit the number of active duty military advisers in El Salvador to 55, unless the President reported any increase above that level under Section 4(a)(1) of the War Powers Resolution. Nevertheless, the Administration in practice kept the number of trainers at 55. Military exercises in Honduras in 1983 and subsequent years raised the question of when military exercises should be reported under the War Powers Resolution. Section 4(a)(2) requires the reporting of introduction of troops equipped for combat, but exempts deployments which relate solely to training. On July 27, 1983, President Reagan announced \"joint training exercises\" planned for Central America and the Caribbean. The first contingent of U.S. troops landed in Honduras on August 8, 1983, and the series of ground and ocean exercises continued for several years, involving thousands of ground troops plus warships and fighter planes. The President did not report the exercises under the War Powers Resolution. He characterized the maneuvers as routine and said the United States had been regularly conducting joint exercises with Latin American countries since 1965. Some Members of Congress, on the other hand, contended that the exercises were part of a policy to support the rebels or \"contras\" fighting the Sandinista Government of Nicaragua, threatening that government, and increased the possibility of U.S. military involvement in hostilities in Central America. Several Members of Congress called for reporting the actions under the War Powers Resolution, but some sought other vehicles for congressional control. In 1982, the Boland amendment to the Defense Appropriations Act had already prohibited use of funds to overthrow the Government of Nicaragua or provoke a military exchange between Nicaragua or Honduras. Variations of this amendment followed in subsequent years. After press reports in 1985 that the option of invading Nicaragua was being discussed, the Defense Authorization Act for Fiscal Year 1986 stated the sense of Congress that U.S. Armed Forces should not be introduced into or over Nicaragua for combat. In 1986, after U.S. helicopters ferried Honduran troops to the Nicaraguan border area, Congress prohibited U.S. personnel from participating in assistance within land areas of Honduras and Costa Rica within 120 miles of the Nicaraguan border, or from entering Nicaragua to provide military advice or support to paramilitary groups operating in that country. Gradually the issue died with peace agreements in the region and the electoral defeat of the Sandinista regime in Nicaragua in 1990. The War Powers Resolution faced a major test when Marines sent to participate in a Multinational Force in Lebanon in 1982 became the targets of hostile fire in August 1983. During this period President Reagan filed three reports under the War Powers Resolution, but he did not report under Section 4(a)(1) that the forces were being introduced into hostilities or imminent hostilities, thus triggering the 60-90 day time limit. On September 29, 1983, Congress passed the Multinational Force in Lebanon Resolution determining that the requirements of Section 4(a)(1) of the War Powers Resolution became operative on August 29, 1983. In the same resolution, Congress authorized the continued participation of the Marines in the Multinational Force for 18 months. The resolution was a compromise between Congress and the President. Congress obtained the President's signature on legislation invoking the War Powers Resolution for the first time, but the price for this concession was a congressional authorization for the U.S. troops to remain in Lebanon for 18 months. The events began on July 6, 1982, when President Reagan announced he would send a small contingent of U.S. troops to a multinational force for temporary peacekeeping in Lebanon. Chairman of the House Foreign Affairs Committee Clement Zablocki wrote President Reagan that if such a force were sent, the United States would be introducing forces into imminent hostilities and a report under Section 4(a)(1) would be required. When the forces began to land on August 25, President Reagan reported but did not cite Section 4(a)(1) and said the agreement with Lebanon ruled out any combat responsibilities. After overseeing the departure of the Palestine Liberation Organization force, the Marines in the first Multinational Force left Lebanon on September 10, 1982. The second dispatch of Marines to Lebanon began on September 20, 1982. President Reagan announced that the United States, France, and Italy had agreed to form a new multinational force to return to Lebanon for a limited period of time to help maintain order until the lawful authorities in Lebanon could discharge those duties. The action followed three events that took place after the withdrawal of the first group of Marines: the assassination of Lebanon President-elect Bashir Gemayel, the entry of Israeli forces into West Beirut, and the massacre of Palestinian civilians by Lebanese Christian militiamen. On September 29, 1982, President Reagan submitted a report that 1,200 Marines had begun to arrive in Beirut, but again he did not cite Section 4(a)(1), saying instead that the American force would not engage in combat. As a result of incidents in which Marines were killed or wounded, there was again controversy in Congress on whether the President's report should have been filed under Section 4(a)(1). In mid-1983 Congress passed the Lebanon Emergency Assistance Act of 1983 requiring statutory authorization for any substantial expansion in the number or role of U.S. Armed Forces in Lebanon. It also included Section 4(b) that stated: Nothing in this section is intended to modify, limit, or suspend any of the standards and procedures prescribed by the War Powers Resolution of 1983. President Reagan reported on the Lebanon situation for the third time on August 30, 1983, still not citing Section 4(a)(1), after fighting broke out between various factions in Lebanon and two Marines were killed. The level of fighting heightened, and as the Marine casualties increased and the action enlarged, there were more calls in Congress for invocation of the War Powers Resolution. Several Members of Congress said the situation had changed since the President's first report and introduced legislation that took various approaches. Senator Charles Mathias introduced S.J.Res. 159 stating that the time limit specified in the War Powers Resolution had begun on August 31, 1983, and authorizing the forces to remain in Lebanon for a period of 120 days after the expiration of the 60-day period. Representative Thomas Downey introduced H.J.Res. 348 directing the President to report under Section 4(a)(1) of the War Powers Resolution. Senator Robert Byrd introduced S.J.Res. 163 finding that Section 4(a)(1) of the war powers resolution applied to the present circumstances in Lebanon. The House Appropriations Committee approved an amendment to the continuing resolution for FY1984 ( H.J.Res. 367 ), sponsored by Representative Clarence Long, providing that after 60 days, funds could not be \"obligated or expended for peacekeeping activities in Lebanon by United States Armed Forces,\" unless the President had submitted a report under Section 4(a)(1) of the War Powers Resolution. A similar amendment was later rejected by the full body, but it reminded the Administration of possible congressional actions. On September 20, congressional leaders and President Reagan agreed on a compromise resolution invoking Section 4(a)(1) and authorizing the Marines to remain for 18 months. The resolution became the first legislation to be handled under the expedited procedures of the War Powers Resolution. On September 28, the House passed H.J.Res. 364 by a vote of 270 to 161. After 3 days of debate, on September 29, the Senate passed S.J.Res. 159 by a vote of 54 to 46. The House accepted the Senate bill by a vote of 253 to 156. As passed, the resolution contained four occurrences that would terminate the authorization before 18 months: (1) the withdrawal of all foreign forces from Lebanon, unless the President certified continued U.S. participation was required to accomplish specified purposes; (2) the assumption by the United Nations or the Government of Lebanon of the responsibilities of the Multinational Force; (3) the implementation of other effective security arrangements; or (4) the withdrawal of all other countries from participation in the Multinational Force. Shortly afterward, on October 23, 1983, 241 U.S. Marines in Lebanon were killed by a suicide truck bombing, bringing new questions in Congress and U.S. public opinion about U.S. participation. On February 7, 1984, President Reagan announced the Marines would be redeployed and on March 30, 1984, reported to Congress that U.S. participation in the Multinational Force in Lebanon had ended. On October 25, 1983, President Reagan reported to Congress \"consistent with\" the War Powers Resolution that he had ordered a landing of approximately 1,900 U.S. Army and Marine Corps personnel in Grenada. He said that the action was in response to a request from the Organization of Eastern Caribbean States which had formed a collective security force to restore order in Grenada, where anarchic conditions had developed, and to protect the lives of U.S. citizens. Many Members of Congress contended that the President should have cited Section 4(a)(1) of the War Powers Resolution, which would have triggered the 60-90 day time limitation. On November 1, 1983, the House supported this interpretation when it adopted, by a vote of 403-23, H.J.Res. 402 declaring that the requirements of Section 4(a)(1) had become operative on October 25. The Senate did not act on this measure and a conference was not held. The Senate had adopted a similar measure on October 28 by a vote of 64 to 20, but on November 17 the provision was deleted in the conference report on the debt limit bill to which it was attached. Thus both Houses had voted to invoke Section 4(a)(1), but the legislation was not completed. On November 17, White House spokesman Larry Speakes said the Administration had indicated that there was no need for action as the combat troops would be out within the 60-90 day time period. Speaker Thomas O'Neill took the position that, whether or not Congress passed specific legislation, the War Powers Resolution had become operative on October 25. By December 15, 1983, all U.S. combat troops had been removed from Grenada. Eleven Members of Congress filed a suit challenging the constitutionality of President Reagan's invasion of Grenada. A district judge held that courts should not decide such cases unless the entire Congress used the institutional remedies available to it. An appellate court subsequently held that the issue was moot because the invasion had been ended. The use of U.S. forces against Libya in 1986 focused attention on the application of the War Powers Resolution to use of military force against international terrorism. Tensions between the United States and Libya under the leadership of Col. Muammar Qadhafi had been mounting for several years, particularly after terrorist incidents at the Rome and Vienna airports on December 27, 1985. On January 7, 1986, President Reagan said that the Rome and Vienna incidents were the latest in a series of brutal terrorist acts committed with Qadhafi's backing that constituted armed aggression against the United States. The War Powers issue was first raised on March 24, 1986, when Libyan forces fired missiles at U.S. aircraft operating in the Gulf of Sidra. In response, the United States fired missiles at Libyan vessels and at Sirte, the Libyan missile site involved. The U.S. presence in the Gulf of Sidra, an area claimed by Libya, was justified as an exercise to maintain freedom of the seas, but it was widely considered a response to terrorist activities. Subsequently, on April 5, 1986, a terrorist bombing of a discotheque in West Berlin occurred and an American soldier was killed. On April 14 President Reagan announced there was irrefutable evidence that Libya had been responsible, and U.S. Air Force planes had conducted bombing strikes on headquarters, terrorist facilities, and military installations in Libya in response. The President reported both cases to Congress although the report on the bombing did not cite Section 4(a)(1) and the Gulf of Sidra report did not mention the War Powers Resolution at all. Since the actions were short lived, there was no issue of force withdrawal, but several Members introduced bills to amend the War Powers Resolution. One bill called for improving consultation by establishing a special consultative group in Congress. Others called for strengthening the President's hand in combating terrorism by authorizing the President, notwithstanding any other provision of law, to use all measures he deems necessary to protect U.S. persons against terrorist threats. The War Powers Resolution became an issue in activities in the Persian Gulf after an Iraqi aircraft fired a missile on the USS Stark on May 17, 1987, killing 37 U.S. sailors. The attack broached the question of whether the Iran-Iraq war had made the Persian Gulf an area of hostilities or imminent hostilities for U.S. forces. Shortly afterwards, the U.S. adoption of a policy of reflagging and providing a naval escort of Kuwaiti oil tankers through the Persian Gulf raised full force the question of whether U.S. policy was risking involvement in war without congressional authorization. During 1987 U.S. Naval forces operating in the Gulf increased to 11 major warships, 6 minesweepers, and over a dozen small patrol boats, and a battleship-led formation was sent to the Northern Arabian Sea and Indian Ocean to augment an aircraft carrier battle group already there. For several months the President did not report any of the deployments or military incidents under the War Powers Resolution, although on May 20, 1987, after the Stark incident, Secretary of State Shultz submitted a report similar to previous ones consistent with War Powers provisions, but not mentioning the Resolution. No reports were submitted after the USS Bridgeton struck a mine on July 24, 1987, or the U.S.-chartered Texaco-Caribbean struck a mine on August 10 and a U.S. F-14 fighter plane fired two missiles at an Iranian aircraft perceived as threatening. Later, however, after various military incidents on September 23, 1987, and growing congressional concern, the President began submitting reports \"consistent with\" the War Powers Resolution and on July 13, 1988, submitted the sixth report relating to the Persian Gulf. None of the reports were submitted under Section 4(a)(1) or acknowledged that U.S. forces had been introduced into hostilities or imminent hostilities. The Reagan administration contended that the military incidents in the Persian Gulf, or isolated incidents involving defensive reactions, did not add up to hostilities or imminent hostilities as envisaged in the War Powers Resolution. It held that \"imminent danger\" pay which was announced for military personnel in the Persian Gulf on August 27, 1987, did not trigger Section 4(a)(1). Standards for danger pay, namely, \"subject to the threat of physical harm or danger on the basis of civil insurrection, civil war, terrorism, or wartime conditions,\" were broader than for hostilities of the War Powers Resolution, and had been drafted to be available in situations to which the War Powers Resolution did not apply. Some Members of Congress contended that if the President did not report under Section 4(a)(1), Congress itself should declare such a report should have been submitted, as it had in the Multinational Force in Lebanon Resolution. Several resolutions to this effect were introduced, some authorizing the forces to remain, but none were passed. The decisive votes on the subject took place in the Senate. On September 18, 1987, the Senate voted 50-41 to table an amendment to the Defense authorization bill ( S. 1174 ) to apply the provisions of the War Powers Resolution. The Senate also sustained points of order against consideration of S.J.Res. 217 , which would have invoked the War Powers Resolution, on December 4, 1987, and a similar bill the following year, S.J.Res. 305 , on June 6, 1988. The Senate approach was to use legislation to assure a congressional role in the Persian Gulf policy without invoking the War Powers Resolution. Early in the situation, both Chambers passed measures requiring the Secretary of Defense to submit a report to Congress prior to the implementation of any agreement between the United States and Kuwait for U.S. military protection of Kuwaiti shipping, and such a report was submitted June 15, 1987. Later, the Senate passed a measure that called for a comprehensive report by the President within 30 days and provided expedited procedures for a joint resolution on the subject after an additional 30 days. The House did not take action on the bill. As in the case of El Salvador, some Members took the War Powers issue to court. On August 7, 1987, Representative Lowry and 110 other Members of Congress filed suit in the U.S. District Court for the District of Columbia, asking the court to declare that a report was required under Section 4(a)(1). On December 18, 1987, the court dismissed the suit, holding it was a nonjusticiable political question, and that the plaintiffs' dispute was \"primarily with fellow legislators.\" Compliance with the consultation requirement was also an issue. The Administration developed its plan for reflagging and offered it to Kuwait on March 7, 1987, prior to discussing the plan with Members of Congress. A June 15, 1987, report to Congress by the Secretary of Defense stated on the reflagging policy, \"As soon as Kuwait indicated its acceptance of our offer, we began consultations with Congress which are still ongoing.\" This was too late for congressional views to be weighed in on the initial decision, after which it became more difficult to alter the policy. Subsequently, however, considerable consultation developed and the President met with various congressional leaders prior to some actions such as the retaliatory actions in April 1988 against an Iranian oil platform involved in mine-laying. With recurring military incidents, some Members of Congress took the position that the War Powers Resolution was not being complied with, unless the President reported under Section 4(a)(1) or Congress itself voted to invoke the Resolution. Other Members contended the Resolution was working by serving as a restraint on the President, who was now submitting reports and consulting with Congress. Still other Members suggested the Persian Gulf situation was demonstrating the need to amend the War Powers Resolution. As a result of the Persian Gulf situation, in the summer of 1988 both the House Foreign Affairs Committee and the Senate Foreign Relations Committee, which established a Special Subcommittee on War Powers, undertook extensive assessments of the War Powers Resolution. Interest in the issue waned after a cease-fire between Iran and Iraq began on August 20, 1988, and the United States reduced its forces in the Persian Gulf area. On December 20, 1989, President George H.W. Bush ordered 14,000 U.S. military forces to Panama for combat, in addition to 13,000 already present. On December 21, he reported to Congress under the War Powers Resolution but without citing Section 4(a)(1). His stated objectives were to protect the 35,000 American citizens in Panama, restore the democratic process, preserve the integrity of the Panama Canal treaties, and apprehend General Manuel Noriega, who had been accused of massive electoral fraud in the Panamanian elections and indicted on drug trafficking charges by two U.S. federal courts. The operation proceeded swiftly and General Noriega surrendered to U.S. military authorities on January 3. President Bush said the objectives had been met, and U.S. forces were gradually withdrawn. By February 13, all combat forces deployed for the invasion had been withdrawn, leaving the strength just under the 13,597 forces stationed in Panama prior to the invasion. The President did not consult with congressional leaders before his decision, although he did notify them a few hours in advance of the invasion. Some Members of Congress had been discussing the problem of General Noriega for some time. Before Congress adjourned, it had called for the President to intensify unilateral, bilateral, and multilateral measures and consult with other nations on ways to coordinate efforts to remove General Noriega from power. The Senate had adopted an amendment supporting the President's use of appropriate diplomatic, economic, and military options \"to restore constitutional government to Panama and to remove General Noriega from his illegal control of the Republic of Panama,\" but had defeated an amendment authorizing the President to use U.S. military force to secure the removal of General Noriega \"notwithstanding any other provision of law.\" The Panama action did not raise much discussion in Congress about the War Powers Resolution. This was in part because Congress was out of session. The first session of the 101 st Congress had ended on November 22, 1989, and the second session did not begin until January 23, 1990, when the operation was essentially over and it appeared likely the additional combat forces would be out of Panama within 60 days of their deployment. The President's action in Panama was popular in American public opinion and supported by most Members of Congress because of the actions of General Noriega. After it was over, on February 7, 1990, the House Passed H.Con.Res. 262 which stated that the President had acted \"decisively and appropriately in ordering United States forces to intervene in Panama.\" After the end of the Cold War in 1990, the United States began to move away from unilateral military actions toward actions authorized or supported by the United Nations (U.N.). Under the auspices of U.N. Security Council resolutions, U.S. forces were deployed in Kuwait and Iraq, Somalia, former Yugoslavia/Bosnia/Kosovo, and Haiti. This raised the new issue of whether the War Powers Resolution applied to U.S. participation in U.N. military actions. It was not a problem during the Cold War because the agreement among the five permanent members required for Security Council actions seldom existed. An exception, the Korean War, occurred before the War Powers Resolution was enacted. The more basic issue—under what circumstances congressional authorization is required for U.S. participation in U.N. military operations—is an unfinished debate remaining from 1945. Whether congressional authorization is required depends on the types of U.N. action and is governed by the U.N. Participation Act (P.L. 79-264, as amended), as well as by the War Powers Resolution and war powers under the Constitution. Appropriations action by Congress also may be determinative as a practical matter. For armed actions under Articles 42 and 43 of the United Nations Charter, Section 6 of the U.N. Participation Act authorizes the President to negotiate special agreements with the Security Council \" which shall be subject to the approval of the Congress by appropriate Act or joint resolution ,\" providing for the numbers and types of armed forces and facilities to be made available to the Security Council. Once the agreements have been concluded, further congressional authorization is not necessary, but no such agreements have been concluded. Section 7 of the United Nations Participation Act, added in 1949 by P.L. 81-341, authorizes the detail of up to 1,000 personnel to serve in any noncombatant capacity for certain U.N. peaceful settlement activities. The United States has provided personnel to several U.N. peacekeeping missions, such as observers to the U.N. Truce Supervision Organization in Palestine since 1948, that appear to fall within the authorization in Section 7 of the Participation Act. Controversy has arisen when larger numbers of forces have been deployed or when it appears the forces might be serving as combatants. The War Powers Resolution neither excludes United Nations actions from its provisions nor makes any special procedures for them. Section 8(a)(2) states that authority to introduce U. S. Armed Forces into hostilities shall not be inferred from any treaty unless it is implemented by legislation specifically authorizing the introduction and stating that it is intended to constitute specific statutory authorization within the meaning of the War Powers resolution. One purpose of this provision was to ensure that both Houses of Congress be affirmatively involved in any U.S. decision to engage in hostilities pursuant to a treaty, since only the Senate approved a treaty. From 1990 through 1999, Congress primarily dealt with the issue on a case-by-case basis, but Members also enacted some measures seeking more control over U.S. participation in future peacekeeping actions wherever they might occur. The Defense Appropriations Act for FY1994 stated the sense of Congress that funds should not be expended for U.S. Armed Forces serving under U.N. Security Council actions unless the President consults with Congress at least 15 days prior to deployment and not later than 48 hours after such deployment, except for humanitarian operations. The Defense Authorization Act for FY1994 required a report to Congress by April 1, 1994, including discussion of the requirement of congressional approval for participation of U.S. Armed Forces in multinational peacekeeping missions, proposals to conclude military agreements with the U.N. Security Council under Article 43 of the U.N. Charter, and the applicability of the War Powers Resolution and the U.N. Participation Act. In 1994 and 1995, Congress attempted to gain a greater role in U.N. and other peacekeeping operations through authorization and appropriation legislation. A major element of the House Republicans' Contract with America, H.R. 7 , would have placed notable constraints on presidential authority to commit U.S. forces to international peacekeeping operations. Senator Dole's S. 5 , The Peace Powers Act, introduced in January 1995, would have also placed greater legislative controls on such operations. General and specific funding restrictions and presidential reporting requirements were passed for peacekeeping operations underway or in prospect. Some of these legislative enactments led to presidential vetoes. These representative legislative actions are reviewed below as they apply to given cases. On August 2, 1990, Iraqi troops under the direction of President Saddam Hussein invaded Kuwait, seized its oil fields, installed a new government in Kuwait City, and moved on toward the border with Saudi Arabia. Action to repel the invasion led to the largest war in which the United States had been involved since the passage of the War Powers Resolution. Throughout the effort to repel the Iraqi invasion, President Bush worked in tandem with the United Nations, organizing and obtaining international support and authorization for multilateral military action against Iraq. A week after the invasion, on August 9, President George H.W. Bush reported to Congress \"consistent with the War Powers Resolution\" that he had deployed U.S. Armed Forces to the region prepared to take action with others to deter Iraqi aggression. He did not cite Section 4(a)(1) and specifically stated, \"I do not believe involvement in hostilities is imminent.\" The President did not consult with congressional leaders prior to the deployment, but both houses of Congress had adopted legislation supporting efforts to end the Iraqi occupation of Kuwait, particularly using economic sanctions and multilateral efforts. On August 2, shortly before its recess, the Senate by a vote of 97-0 adopted S.Res. 318 urging the President \"to act immediately, using unilateral and multilateral measures, to seek the full and unconditional withdrawal of all Iraqi forces from Kuwaiti territory\" and to work for collective international sanctions against Iraq including, if economic sanctions prove inadequate, \"additional multilateral actions, under Article 42 of the United Nations Charter, involving air, sea, and land forces as may be needed....\" Senate Foreign Relations Committee Chairman Pell stressed, however, that the measure did not authorize unilateral U.S. military actions. Also on August 2, the House passed H.R. 5431 condemning the Iraqi invasion and calling for an economic embargo against Iraq. The United Nations imposed economic sanctions against Iraq on August 7, and the United States and United Kingdom organized an international naval interdiction effort. Later, on August 25, the U.N. Security Council authorized \"such measures as may be necessary\" to halt shipping and verify cargoes that might be going to Iraq. Both Houses adopted measures supporting the deployment, but neither measure was enacted. On October 1, 1990, the House passed H.J.Res. 658 supporting the action and citing the War Powers Resolution without stating that Section 4(a)(1) had become operative. The resolution quoted the President's statement that involvement in hostilities was not imminent. Representative Fascell stated that H.J.Res. 658 was not to be interpreted as a Gulf of Tonkin resolution that granted the President open-ended authority, and that it made clear that \"a congressional decision on the issue of war or peace would have to be made through joint consultation.\" The Senate did not act on H.J.Res. 658 . On October 2, 1990, the Senate by a vote of 96-3 adopted S.Con.Res. 147 , stating that \"Congress supports continued action by the President in accordance with the decisions of the United Nations Security Council and in accordance with United States constitutional and statutory processes, including the authorization and appropriation of funds by the Congress, to deter Iraqi aggression and to protect American lives and vital interest in the region.\" As in the House, Senate leaders emphasized that the resolution was not to be interpreted as an open-ended resolution similar to the Gulf of Tonkin resolution. The resolution made no mention of the War Powers Resolution. The House did not act on S.Con.Res. 147 . Congress also supported the action by appropriating funds for the preparatory operation, called Operation Desert Shield, and later for war activities called Operation Desert Storm. Some Members introduced legislation to establish a special consultation group, but the Administration objected to a formally established group. On October 23, 1990, Senate Majority Leader Mitchell announced that he and Speaker Foley had designated Members of the joint bipartisan leadership and committees of jurisdiction to make themselves available as a group for consultation on developments in the Persian Gulf. By this time U.S. land, naval, and air forces numbering more than 200,000 had been deployed. After the 101 st Congress had adjourned, President Bush on November 8, 1990, ordered an estimated additional 150,000 troops to the Gulf. He incurred considerable criticism because he had not informed the consultation group of the buildup although he had met with them on October 30. On November 16, President Bush sent a second report to Congress describing the continuing and increasing deployment of forces to the region. He stated that his opinion that hostilities were not imminent had not changed. The President wrote, \"The deployment will ensure that the coalition has an adequate offensive military option should that be necessary to achieve our common goals.\" By the end of the year, approximately 350,000 U.S. forces had been deployed to the area. As the prospect of a war without congressional authorization increased, on November 20, 1990, Representative Ron Dellums and 44 other Democratic Members of Congress sought a judicial order enjoining the President from offensive military operations in connection with Operation Desert Shield unless he consulted with and obtained an authorization from Congress. On November 26, 11 prominent law professors filed a brief in favor of such a judicial action, arguing that the Constitution clearly vested Congress with the authority to declare war and that federal judges should not use the political questions doctrine to avoid ruling on the issue. The American Civil Liberties Union also filed a memorandum in favor of the plaintiffs. On December 13, Judge Harold Greene of the federal district court in Washington denied the injunction, holding that the controversy was not ripe for judicial resolution because a majority of Congress had not sought relief and the executive branch had not shown sufficient commitment to a definitive course of action. However, throughout his opinion Judge Greene rejected the Administration's arguments for full presidential war powers. On November 29, 1990, U.N. Security Council Resolution 678 authorized member states to use \"all necessary means\" to implement the Council's resolutions and restore peace and security in the area, unless Iraq complied with the U.N. resolutions by January 15, 1991. As the deadline for Iraqi withdrawal from Kuwait neared, President Bush indicated that if the Iraqi forces did not withdraw from Kuwait, he was prepared to use force to implement the U.N. Security Council resolutions. Administration officials contended that the President did not need any additional congressional authorization for this purpose. After the 102 nd Congress convened, on January 4, 1991, House and Senate leaders announced they would debate U.S. policy beginning January 10. A week before the January 15 deadline, on January 8, 1991, President Bush, in a letter to the congressional leaders, requested a congressional resolution supporting the use of all necessary means to implement U.N. Security Council Resolution 678. He stated that he was \"determined to do whatever is necessary to protect America's security\" and that he could \"think of no better way than for Congress to express its support for the President at this critical time.\" It is noteworthy that the President's request for a resolution was a request for congressional \"support\" for his undertaking in the Persian Gulf, not for \"authority\" to engage in the military operation. In a press conference on January 9, 1991, President Bush reinforced this distinction in response to questions about the use of force resolution being debated in Congress. He was asked whether he thought he needed the resolution, and if he lost on it would he feel bound by that decision. President Bush in response stated: \"I don't think I need it.... I feel that I have the authority to fully implement the United Nations resolutions.\" He added that he felt that he had \"the constitutional authority—many attorneys having so advised me.\" On January 12, 1991, both houses passed the \"Authorization for Use of Military Force Against Iraq Resolution\" ( P.L. 102-1 ). Section 2(a) authorized the President to use U.S. Armed Forces pursuant to U.N. Security Council Resolution 678 to achieve implementation of the earlier Security Council resolutions. Section 2(b) required that first the President would have to report that the United States had used all appropriate diplomatic and other peaceful means to obtain compliance by Iraq with the Security Council resolution and that those efforts had not been successful. Section 2(c) stated that it was intended to constitute specific statutory authorization within the meaning of Section 5(b) of the War Powers Resolution. Section 3 required the President to report every 60 days on efforts to obtain compliance of Iraq with the U.N. Security Council resolution. In his statement made after signing H.J.Res. 77 into law, President Bush said the following: \"As I made clear to congressional leaders at the outset, my request for congressional support did not, and my signing this resolution does not, constitute any change in the long-standing positions of the executive branch on either the President's constitutional authority to use the Armed Forces to defend vital U.S. interests or the constitutionality of the War Powers Resolution.\" He added that he was pleased that \"differences on these issues between the President and many in the Congress have not prevented us from uniting in a common objective.\" On January 16, President Bush made the determination required by P.L. 102-1 that diplomatic means had not and would not compel Iraq to withdraw from Kuwait. On January 18, he reported to Congress \"consistent with the War Powers Resolution\" that he had directed U.S. forces to commence combat operations on January 16. After the beginning of the war many Members of Congress strongly supported the President as Commander in Chief in his conduct of the war. On March 19, 1991, President Bush reported to Congress that the military operations had been successful, Kuwait had been liberated, and combat operations had been suspended on February 28, 1991. Prior to passage of P.L. 102-1 , some observers questioned the effectiveness of the War Powers Resolution on grounds that the President had begun the action, deployed hundreds of thousands of troops without consultation of Congress, and was moving the Nation increasingly close to war without congressional authorization. After the passage of P.L. 102-1 and the war had begun, Chairman of the House Committee on Foreign Affairs Fascell took the position that \"the War Powers Resolution is alive and well\"; the President had submitted reports to Congress, and Congress, in P.L. 102-1 , had provided specific statutory authorization for the use of force. In his view, the strength and wisdom of the War Powers Resolution was that it established a process by which Congress could authorize the use of force in specific settings for limited purposes, short of a total state of war. The question is sometimes raised why Congress did not declare war against Iraq. Speaker Foley told the National Press Club on February 7, 1991, that \"The reason we did not declare a formal war was not because there is any difference I think in the action that was taken and in a formal declaration of war with respect to military operations, but because there is some question about whether we wish to excite or enact some of the domestic consequences of a formal declaration of war—seizure of property, censorship, and so forth, which the President neither sought nor desired.\" After the end of Operation Desert Storm, U.S. military forces were used to deal with three continuing situations in Iraq. These activities raised the issue of how long a congressional authorization for the use of force lasts. The first situation resulted from the Iraqi government's repression of Kurdish and Shi'ite groups. U.N. Security Council Resolution 688 of April 5, 1991, condemned the repression of the Iraqi civilian population and appealed for contributions to humanitarian relief efforts. On May 17, 1991, President George H.W. Bush reported to Congress that the Iraqi repression of the Kurdish people had necessitated a limited introduction of U.S. forces into northern Iraq for emergency relief purposes. On July 16, 1991, he reported that U.S. forces had withdrawn from northern Iraq but that the U.S. remained prepared to take appropriate steps as the situation required and that, to this end, an appropriate level of forces would be maintained in the region for \"as long as required.\" A second situation stemmed from the cease-fire resolution, Security Council Resolution 687 of April 3, 1991, which called for Iraq to accept the destruction or removal of chemical and biological weapons and international control of its nuclear materials. On September 16, 1991, President Bush reported to Congress that Iraq continued to deny inspection teams access to weapons facilities and that this violated the requirements of Resolution 687, and the United States if necessary would take action to ensure Iraqi compliance with the Council's decisions. He reported similar noncooperation on January 14, 1992, and May 15, 1992. On July 16, 1992, President Bush reported particular concern about the refusal of Iraqi authorities to grant U.N. inspectors access to the Agricultural Ministry. The President consulted congressional leaders on July 27, and in early August the United States began a series of military exercises to take 5,000 U.S. troops to Kuwait. On September 16, 1992, the President reported, \"We will remain prepared to use all necessary means, in accordance with U.N. Security Council resolutions, to assist the United Nations in removing the threat posed by Iraq's chemical, biological, and nuclear weapons capability.\" The third situation was related to both of the earlier ones. On August 26, 1992, the United States, Britain, and France began a \"no-fly\" zone, banning Iraqi fixed wing and helicopter flights south of the 32 nd parallel and creating a limited security zone in the south, where Shi'ite groups were concentrated. After violations of the no-fly zones and various other actions by Iraq, on January 13, 1993, the Bush Administration announced that aircraft from the United States and coalition partners had attacked missile bases in southern Iraq and that the United States was deploying a battalion task force to Kuwait to underline the U.S. continuing commitment to Kuwait's independence. On January 19, 1993, President Bush reported to Congress that U.S. aircraft had shot down an Iraqi aircraft on December 27, 1992, and had undertaken further military actions on January 13, 17, and 18. President Clinton said on January 21, 1993, that the United States would adhere to the policy toward Iraq set by the Bush Administration. On January 22 and 23, April 9 and 18, June 19, and August 19, 1993, U.S. aircraft fired at targets in Iraq after pilots sensed Iraqi radar or anti-aircraft fire directed at them. On September 23, 1993, President Clinton reported that since the August 19 action, the Iraqi installation fired upon had not displayed hostile intentions. In a separate incident, on June 28, 1993, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that on June 26 U.S. naval forces at his direction had launched a Tomahawk cruise missile strike on the Iraqi Intelligence Service's main command and control complex in Baghdad and that the military action was completed upon the impact of the missiles. He said the Iraqi Intelligence Service had planned the failed attempt to assassinate former President Bush during his visit to Kuwait in April 1993. The question was raised as to whether the Authorization for the Use of Force in Iraq ( P.L. 102-1 ) authorized military actions after the conclusion of the war. P.L. 102-1 authorized the President to use U.S. Armed Forces pursuant to U.N. Security Council Resolution 678 to achieve implementation of previous Security Council Resolutions relating to Iraq's invasion of Kuwait. The cease-fire resolution, Security Council Resolution 687, was adopted afterwards and therefore not included in Resolution 678. Congress endorsed the view that further specific authorization was not required for U.S. military action to maintain the cease-fire agreement. Specifically, Section 1095 of P.L. 102-190 stated the sense of Congress that it supported the use of all necessary means to achieve the goals of Security Council Resolution 687 as being consistent with the Authorization for Use of Military Force Against Iraq Resolution. Section 1096 supported the use of all necessary means to protect Iraq's Kurdish minority, consistent with relevant U.N. resolutions and authorities contained in P.L. 102-1 . The issue of congressional authorization was debated again in 1998. On March 31, 1998, the House passed a Supplemental Appropriations bill ( H.R. 3579 ) that would have banned the use of funds appropriated in it for the conduct of offensive operations against Iraq, unless such operations were specifically authorized by law. This provision was dropped in the conference with the Senate. A more broad-gauged approach to the issue of congressional authorization of military force was attempted in mid-1998. On June 24, 1998, the House passed H.R. 4103 , the Defense Department Appropriations bill for FY1999, with a provision by Representative David Skaggs that banned the use of funds appropriated or otherwise made available by this act \"to initiate or conduct offensive military operations by United States Armed Forces except in accordance with the war powers clause of the Constitution (Article 1, Section 8), which vests in Congress the power to declare and authorize war and to take certain specified, related actions.\" The Skaggs provision was stricken by the House-Senate conference committee on H.R. 4103 . As events developed, beginning in late 1998, and continuing into the period prior to the U.S. military invasion of Iraq in March 2003, the United States conducted a large number of ad-hoc air attacks against Iraqi ground installations and military targets in response to violations of the northern and southern \"no-fly zones\" by the Iraqis, and threatening actions taken against U.S. and coalition aircraft enforcing these \"no-fly\" sectors. Congressional authorization to continue these activities was not sought by the President, nor were these many incidents reported under the War Powers Resolution. The \"no-fly zones\" activities were terminated following the 2003 War with Iraq. In Somalia, the participation of U.S. military forces in a U.N. operation to protect humanitarian assistance became increasingly controversial as fighting and casualties increased and the objectives of the operation appeared to be expanding. On December 4, 1992, President George H.W. Bush ordered thousands of U.S. military forces to Somalia to protect humanitarian relief from armed gangs. Earlier, on November 25, the President had offered U.S. forces, and on December 3, the United Nations Security Council had adopted Resolution 794 welcoming the U.S. offer and authorizing the Secretary-General and members cooperating in the U.S. offer \"to use all necessary means to establish as soon as possible a secure environment for humanitarian relief operations in Somalia.\" The resolution also called on member states to provide military forces and authorized the Secretary-General and the states concerned to arrange for unified command and control. On December 10, 1992, President Bush reported to Congress \"consistent with the War Powers Resolution\" that on December 8, U.S. Armed Forces entered Somalia to secure the air field and port facility of Mogadishu and that other elements of the U.S. Armed Forces were being introduced into Somalia to achieve the objectives of U.N. Security Council Resolution 794. He said the forces would remain only as long as necessary to establish a secure environment for humanitarian relief operations and would then turn over responsibility for maintaining this environment to a U.N. peacekeeping force. The President said that it was not intended that the U.S. Armed Forces become involved in hostilities, but that the forces were equipped and ready to take such measures as might be needed to accomplish their humanitarian mission and defend themselves. They would also have the support of any additional U.S. forces necessary. By mid-January, U.S. forces in Somalia numbered 25,000. Since the President did not cite Section 4(a)(1), the 60-day time limit was not necessarily triggered. By February, however, the U.S. force strength was being reduced, and it was announced the United States expected to turn over responsibility for protecting humanitarian relief shipments in Somalia to a U.N. force that would include U.S. troops. On March 26, 1993, the Security Council adopted Resolution 814 expanding the mandate of the U.N. force and bringing about a transition from a U.S.-led force to a U.N.-led force (UNOSOM II). By the middle of May, when the change to U.N. control took place, the U.S. forces were down to approximately 4,000 troops, primarily logistics and communications support teams, but also a rapid deployment force of U.S. Marines stationed on Navy ships. Violence within Somalia began to increase again. On June 5, 1993, attacks killed 23 Pakistani peacekeepers, and a Somali regional leader, General Aidid, was believed responsible. The next day the U.N. Security Council adopted Resolution 837 reaffirming the authority of UNOSOM II to take all necessary measures against those responsible for the armed attacks. On June 10, 1993, President Clinton reported \"consistent with the War Powers Resolution\" that the U.S. Quick Reaction Force had executed military strikes to assist UNOSOM II in quelling violence against it. On July 1, President Clinton submitted another report, not mentioning the War Powers Resolution, describing further air and ground military operations aimed at securing General Aidid's compound and neutralizing military capabilities that had been an obstacle to U.N. efforts to deliver humanitarian relief and promote national reconstruction. From the beginning, a major issue for Congress was whether to authorize U.S. action in Somalia. On February 4, 1993, the Senate had passed S.J.Res. 45 that would authorize the President to use U.S. Armed Forces pursuant to U.N. Security Council Resolution 794. S.J.Res. 45 stated it was intended to constitute the specific statutory authorization under Section 5(b) of the War Powers Resolution. On May 25, 1993, the House amended S.J.Res. 45 to authorize U.S. forces to remain for one year. S.J.Res. 45 was then sent to the Senate for its concurrence, but the Senate did not act on the measure. As sporadic fighting resulted in the deaths of Somali and U.N. forces, including Americans, controversy over the operation intensified, and Congress took action through other legislative channels. In September 1993 the House and Senate adopted amendments to the Defense Authorization Act for FY1994 asking that the President consult with Congress on policy toward Somalia, and report the goals, objectives, and anticipated jurisdiction of the U.S. mission in Somalia by October 15, 1993; the amendments expressed the sense that the President by November 15, 1993, should seek and receive congressional authorization for the continued deployment of U.S. forces to Somalia. On October 7, the President consulted with congressional leaders from both parties for over two hours on Somalia policy. On October 13, President Clinton sent a 33-page report to Congress on his Somalia policy and its objectives. Meanwhile, on October 7 President Clinton said that most U.S. forces would be withdrawn from Somalia by March 31, 1994. To ensure this, the Defense Department Appropriations Act for FY1994, cut off funds for U.S. military operations in Somalia after March 31, 1994, unless the President obtained further spending authority from Congress. Congress approved the use of U.S. military forces in Somalia only for the protection of American military personnel and bases and for helping maintain the flow of relief aid by giving the U.N. forces security and logistical support; it required that U.S. combat forces in Somalia remain under the command and control of U.S. commanders under the ultimate direction of the President. Earlier, some Members suggested that the U.S. forces in Somalia were clearly in a situation of hostilities or imminent hostilities, and that if Congress did not authorize the troops to remain, the forces should be withdrawn within 60 to 90 days. After a letter from House Foreign Affairs Committee Ranking Minority Member Benjamin Gilman and Senate Foreign Relations Committee Ranking Minority Member Jesse Helms, Assistant Secretary Wendy Sherman replied on July 21, 1993, that no previous Administrations had considered that intermittent military engagements, whether constituting hostilities, would necessitate the withdrawal of forces pursuant to Section 5(b); and the War Powers Resolution, in their view, was intended to apply to sustained hostilities. The State Department did not believe congressional authorization was necessary, although congressional support would be welcome. On August 4, 1993, Representative Gilman asserted that August 4 might be remembered as the day the War Powers Resolution died because combat broke out in Somalia on June 5 and the President had not withdrawn U.S. forces and Congress had \"decided to look the other way.\" On October 22, 1993, Representative Gilman introduced H.Con.Res. 170 directing the President pursuant to Section 5(c) of the War Powers Resolution to withdraw U.S. forces from Somalia by January 31, 1994. The House adopted an amended version calling for withdrawal by March 31, 1994. The Senate did not act on this nonbinding measure. However, the Defense Appropriations Act for FY1995 ( P.L. 103-335 , signed September 30, 1994) prohibited the use of funds for the continuous presence of U.S. forces in Somalia, except for the protection of U.S. personnel, after September 30, 1994. Subsequently, on November 4, 1994, the U.N. Security Council decided to end the U.N. mission in Somalia by March 31, 1995. On March 3, 1995, U.S. forces completed their assistance to United Nations forces evacuating Somalia. Another war powers issue was the adequacy of consultation before the dispatch of forces. On December 4, 1992, President Bush had met with a number of congressional leaders to brief them on the troop deployment. In his December 10 report, President Bush stressed that he had taken into account the views expressed in H.Con.Res. 370 , S.Con.Res. 132 , and P.L. 102-274 on the urgent need for action in Somalia. However, none of these resolutions explicitly authorized U.S. military action. The issue of war powers and U.S. participation in United Nations actions was also raised by efforts to halt fighting in the territory of former Yugoslavia, initially in Bosnia. Because some of the U.S. action has been taken within a NATO framework, action in Bosnia has also raised the issue of whether action under NATO is exempt from the requirements of the War Powers Resolution or its standard for the exercise of war powers under the Constitution. Article 11 of the North Atlantic Treaty states that its provisions are to be carried out by the parties \"in accordance with their respective constitutional processes,\" inferring some role for Congress in the event of war. Section 8(a) of the War Powers Resolution states that authority to introduce U.S. forces into hostilities is not to be inferred from any treaty, ratified before or after 1973, unless implementing legislation specifically authorizes such introduction and says it is intended to constitute an authorization within the meaning of the War Powers Resolution. Section 8(b) states that nothing in the War Powers Resolution should be construed to require further authorization for U.S. participation in the headquarters operations of military commands established before 1973, such as NATO headquarters operations. On August 13, 1992, the U.N. Security Council adopted Resolution 770 calling on nations to take \"all measures necessary\" to facilitate the delivery of humanitarian assistance to Sarajevo. Many in Congress had been advocating more assistance to the victims of the conflict. On August 11, 1992, the Senate had passed S.Res. 330 urging the President to work for a U.N. Security Council resolution such as was adopted, but saying that no U.S. military personnel should be introduced into hostilities without clearly defined objectives. On the same day, the House passed H.Res. 554 urging the Security Council to authorize measures, including the use of force, to ensure humanitarian relief. During 1993 the United States participated in airlifts into Sarajevo, naval monitoring of sanctions, and aerial enforcement of a \"no-fly zone.\" On February 10, 1993, Secretary of State Warren Christopher announced that under President Clinton, the United States would try to convince the Serbs, Muslims, and Croats to pursue a diplomatic solution and that if an agreement was reached, U.S. forces, including ground forces, would help enforce the peace. On February 28, 1993, the United States began an airdrop of relief supplies aimed at civilian populations, mainly Muslims, surrounded by fighting in Bosnia. On March 31, 1993, the U.N. Security Council authorized member states to take all necessary measures to enforce the ban on military flights over Bosnia, the \"no-fly zone.\" NATO planes, including U.S. planes, began patrolling over Bosnia and Herzegovina on April 12, 1993, to enforce the Security Council ban, and the next day, President Clinton reported the U.S. participation \"consistent with Section 4 of the War Powers Resolution.\" Conflict continued, but the situation was complicated and opinion in Congress and among U.N. and NATO members was divided. President Clinton consulted with about two dozen congressional leaders on potential further action on April 27 and received a wide range of views. On May 2, the Administration began consultation with allies to build support for additional military action to enforce a cease-fire and Bosnian Serb compliance with a peace agreement, but a consensus on action was not reached. On June 10, 1993, Secretary of State Christopher announced the United States would send 300 U.S. troops to join 700 Scandinavians in the U.N. peacekeeping force in Macedonia. The mission was established under U.N. Security Council Resolution 795 (1992), which sought to prevent the war in Bosnia from spilling over to neighboring countries. President Clinton reported this action \"consistent with Section 4 of the War Powers Resolution\" on July 9, 1993. He identified U.S. troops as part of a peacekeeping force, and directed in accordance with Section 7 of the U.N. Participation Act. Planning for U.N. and NATO action to implement a prospective peace agreement included the possibility that the United States might supply 25,000 out of 50,000 NATO forces to enforce U.N. decisions. This possibility brought proposals to require congressional approval before the dispatch of further forces to Bosnia. On September 23, 1993, Senate Minority Leader Robert Dole said he intended to offer an amendment stating that no additional U.S. forces should be introduced into former Yugoslavia without advance approval from Congress. Assistant Secretary of State Stephen Oxman said on October 5 that the Clinton Administration would consult with Congress and not commit American troops to the implementation operation for a peace agreement without congressional support, and that the Administration would act consistent with the War Powers Resolution. Congress sought to assure this in Section 8146 of P.L. 103-139 , the Defense Appropriations Act for FY1994, stating the sense of Congress that funds should not be available for U.S. forces to participate in new missions or operations to implement the peace settlement in Bosnia unless previously authorized by Congress. This provision was sponsored by the Senate by leaders Mitchell and Dole. At the NATO summit conference in Brussels on January 11, 1994, leaders, including President Clinton, repeated an August threat to undertake air strikes on Serb positions to save Sarajevo and to consider other steps to end the conflict in Bosnia. On February 17, 1994, President Clinton reported \"consistent with\" the War Powers Resolution that the United States had expanded its participation in United Nations and NATO efforts to reach a peaceful solution in former Yugoslavia and that 60 U.S. aircraft were available for participation in the authorized NATO missions. On March 1, 1994, he reported that on the previous day U.S. planes patrolling the \"no-fly zone\" under the North Atlantic Treaty Organization (NATO) shot down 4 Serbian Galeb planes. On April 12, 1994, the President reported that on April 10 and 11, following shelling of Gorazde, one of the \"safe areas,\" and a decision by U.N. and NATO leaders, U.S. planes bombed Bosnian Serbian nationalist positions around Gorazde. On August 22, 1994, President Clinton similarly reported that on August 5, U.S. planes under NATO had strafed a Bosnian Serb gun position in an exclusion zone. On September 22, 1994, two British and one U.S. aircraft bombed a Serbian tank in retaliation for Serb attacks on U.N. peacekeepers near Sarajevo; and on November 21 more than 30 planes from the United States, Britain, France, and the Netherlands bombed the runway of a Serb airfield in Croatia. As the conflict in Bosnia continued, leaders in Congress called for greater congressional involvement in decisions. Senator Dole introduced S. 2042 , calling for the United States to end unilaterally its arms embargo, conducted in accordance with a U.N. Security Council Resolution, against Bosnia and Herzegovina. On May 10, 1994, Senate Majority Leader George Mitchell introduced an amendment to authorize and approve the President's decision to carry out NATO decisions to support and protect UNPROFOR forces around designated safe areas; to use airpower in the Sarajevo region; and to authorize air strikes against Serb weapons around certain safe areas if these areas were attacked. The Mitchell amendment favored lifting the arms embargo but not unilaterally; it also stated no U.S. ground combat troops should be deployed in Bosnia unless previously authorized by Congress. The Senate adopted both the Dole proposal, as an amendment, and the Mitchell amendment on May 12, 1994, by votes of 50-49. The less stringent Mitchell amendment passed on a straight party line vote. Yet thirteen Democrats voted for the Dole amendment, indicating a sentiment in both parties to assist the Bosnians in defending themselves. The Senate then adopted S. 2042 as amended. The House did not act on the measure. The Defense Authorization Act for FY1995 ( P.L. 103-337 , signed October 5, 1994) provided, in Section 1404, the sense of the Congress that if the Bosnian Serbs did not accept the Contact Group proposal by October 15, 1994, the President should introduce a U.N. Security Council resolution to end the arms embargo by December 1, 1994; if the Security Council had not acted by November 15, 1994, no funds could be used to enforce the embargo other than those required of all U.N. members under Security Council Resolution 713. That sequence of events occurred and the United States stopped enforcing the embargo. In addition, Section 8100 of the Defense Appropriations Act, FY1995 ( P.L. 103-335 , signed September 30, 1994), stated the sense of the Congress that funds made available by this law should not be available for the purposes of deploying U.S. Armed Forces to participate in implementation of a peace settlement in Bosnia unless previously authorized by Congress. On May 24, 1995, President Clinton reported \"consistent with the War Powers Resolution\" that U.S. combat-equipped fighter aircraft and other aircraft continued to contribute to NATO's enforcement of the no-fly zone in airspace over Bosnia-Herzegovina. U.S. aircraft, he noted, are also available for close air support of U.N. forces in Croatia. Roughly 500 U.S. soldiers were still deployed in the former Yugoslav Republic of Macedonia as part of the U.N. Preventive Deployment Force (UNPREDEP). U.S. forces continue to support U.N. refugee and embargo operations in this region. On September 1, 1995, President Clinton reported \"consistent with the War Powers Resolution,\" that \"U.S. combat and support aircraft\" had been used beginning on August 29, 1995, in a series of NATO air strikes against Bosnian Serb Army (BSA) forces in Bosnia-Herzegovina that were threatening the U.N.-declared safe areas of Sarajevo, Tuzla, and Gorazde.\" He noted that during the first day of operations, \"some 300 sorties were flown against 23 targets in the vicinity of Sarajevo, Tuzla, Gorazde, and Mostar.\" On September 7, 1995, the House passed an amendment to the FY1996 Department of Defense Appropriations Bill ( H.R. 2126 ), offered by Representative Mark Neumann that prohibited the obligation or expenditure of funds provided by the bill for any operations beyond those already undertaken. However, in conference the provision was softened to a sense-of-the-Congress provision that said that President must consult with Congress before deploying U.S. forces to Bosnia. The conference report was rejected by the House over issues unrelated to Bosnia on September 29, 1995, by a vote of 151-267. The substitute conference report on H.R. 2126 , which was subsequently passed and signed into law, did not include language on Bosnia, in part due to the President's earlier objections to any provision in the bill that might impinge on his powers as Commander in Chief. On September 29, the Senate passed by a vote of 94-2 a sense-of-the-Senate amendment to H.R. 2076 , the FY1996 State, Commerce, Justice Appropriations bill, sponsored by Senator Judd Gregg that said no funds in the bill should be used for the deployment of U.S. combat troops to Bosnia-Herzegovina unless Congress approves the deployment in advance or to evacuate endangered U.N. peacekeepers. The conference report on H.R. 2076 , agreed to by the House and the Senate, included the \"sense of the Senate\" language of the Gregg amendment. In response to mounting criticism of the Administration's approach to Bosnian policy, on October 17-18, 1995, Secretary of State Christopher, Secretary of Defense Perry and Joint Chiefs of Staff Chairman Shalikashvili testified before House and Senate Committees on Bosnia policy and the prospect of President Clinton deploying approximately 20,000 American ground forces as part of a NATO peacekeeping operation. During testimony before the Senate Foreign Relations Committee on October 17, Secretary Christopher stated that the President would not be bound by a resolution of the Congress prohibiting sending of U.S. forces into Bosnia without the express prior approval of Congress. Nevertheless, on October 19, 1995, President Clinton in a letter to Senator Robert C. Byrd stated that \"[w]hile maintaining the constitutional authorities of the Presidency, I would welcome, encourage and, at the appropriate time, request an expression of support by the Congress\" for the commitment of U.S. troops to a NATO implementation force in Bosnia, after a peace agreement is reached. Subsequently, on October 30, 1995, the House, by a vote of 315-103, passed H.Res. 247 , expressing the sense of the House that \"no United States Armed forces should be deployed on the ground in the territory of the Republic of Bosnia and Herzegovina to enforce a peace agreement until the Congress has approved such a deployment.\" On November 13, President Clinton's 9-page letter to Speaker Gingrich stated he would send a request \"for a congressional expression of support for U.S. participation in a NATO-led Implementation Force in Bosnia ... before American forces are deployed in Bosnia.\" The President said there would be a \"timely opportunity for Congress to consider and act upon\" his request for support. He added that despite his desire for congressional support, he \"must reserve\" his \"constitutional prerogatives in this area.\" On November 17, 1995, the House passed (243-171) H.R. 2606 , which would \"prohibit the use of funds appropriated or otherwise available\" to the Defense Department from \"being used for the deployment on the ground of United States Armed Forces in the Republic of Bosnia-Herzegovina as part of any peacekeeping operation or as part of any implementation force, unless funds for such deployment are specifically appropriated\" by law. On December 4, 1995, Secretary of Defense Perry announced the deployment of about 1,400 U.S. military personnel (700 to Bosnia/700 to Croatia) as part of the advance elements of the roughly 60,000 person NATO Implementation Force in Bosnia, scheduled to deploy in force once the Dayton Peace Agreement is signed in Paris on December 14, 1995. Secretary Perry noted that once the NATO I-Force was fully deployed, about 20,000 U.S. military personnel would be in Bosnia, and about 5,000 in Croatia. On December 6, 1995, President Clinton notified the Congress, \"consistent with the War Powers Resolution,\" that he had \"ordered the deployment of approximately 1,500 U.S. military personnel to Bosnia and Herzegovina and Croatia as part of a NATO 'enabling force' to lay the groundwork for the prompt and safe deployment of the NATO-led Implementation Force (IFOR),\" which would be used to implement the Bosnian peace agreement after its signing. The President also noted that he had authorized deployment of roughly 3,000 other U.S. military personnel to Hungary, Italy, and Croatia to establish infrastructure for the enabling force and the IFOR. In response to these developments, Congress addressed the question of U.S. ground troop deployments in Bosnia. Lawmakers sought to take action before the final Bosnian peace agreement was signed in Paris on December 14, 1995, following which the bulk of American military forces would be deployed to Bosnia. On December 13, 1995, the House considered H.R. 2770 , sponsored by Representative Dornan, which would have prohibited the use of federal funds for the deployment \"on the ground\" of U.S. Armed Forces in Bosnia-Herzegovina \"as part of any peacekeeping operation, or as part of any implementation force.\" H.R. 2770 was defeated in the House by a vote of 210-218. On December 13, the House considered two other measures. It approved H.Res. 302 , offered by Representative Buyer, by a vote of 287-141. H.Res. 302 , a nonbinding measure, reiterated \"serious concerns and opposition\" to the deployment of U.S. ground troops to Bosnia, while expressing confidence, \"pride and admiration\" for U.S. soldiers deployed there. It called on the President and Defense Secretary to rely on the judgement of the U.S. ground commander in Bosnia and stated that he should be provided with sufficient resources to ensure the safety and well-being of U.S. troops. H.Res. 302 , further stated that the U.S. government should \"in all respects\" be \"impartial and evenhanded\" with all parties to the Bosnian conflict \"as necessary to ensure the safety and protection\" of American forces in the region. Subsequently, the House defeated H.Res. 306 , proposed by Representative Hamilton, by a vote of 190-237. H.Res. 306 stated that the House \"unequivocally supports the men and women of the United States Armed Forces who are carrying out their mission in support of peace in Bosnia and Herzegovina with professional excellence, dedicated patriotism and exemplary bravery.\" On December 13, the Senate also considered three measures related to Bosnia and U.S. troop deployments. The Senate defeated H.R. 2606 by a vote of 22-77. This bill would have prohibited funds to be obligated or expended for U.S. participation in peacekeeping in Bosnia unless such funds were specifically appropriated for that purpose. The Senate also defeated S.Con.Res. 35 , a nonbinding resolution of Senators Hutchison and Inhofe. This resolution stated that \"Congress opposes President Clinton's decision to deploy\" U.S. troops to Bosnia, but noted that \"Congress strongly supports\" the U.S. troops sent by the President to Bosnia. The Senate did pass S.J.Res. 44 , sponsored by Senators Dole and McCain, by a vote of 69-30. This resolution stated that Congress \"unequivocally supports the men and women of our Armed Forces\" who were to be deployed to Bosnia. S.J.Res. 44 stated that \"notwithstanding reservations expressed about President Clinton's decision\" to deploy U.S. forces, \"the President may only fulfill his commitment\" to deploy them to Bosnia \"for approximately one year\" if he made a determination to Congress that the mission of the NATO peace implementation force (IFOR) will be limited to implementing the military annex to the Bosnian peace agreement and to protecting itself. The presidential determination must also state that the United States will \"lead an immediate international effort,\" separate from IFOR, \"to provide equipment, arms, training and related logistics assistance of the highest possible quality\" to the Muslim-Croat Federation so that it may provide for its own defense. The President could use \"existing military drawdown authorities and requesting such additional authority as may be necessary.\" S.J.Res. 44 also required President Clinton to submit to Congress a detailed report on the armament effort within 30 days, and required regular presidential reports to Congress on the implementation of both the military and nonmilitary aspects of the peace accords. The House and Senate did not appoint and direct conferees to meet to reconcile the conflicting elements of the Bosnia related measures each had passed on December 13, 1995. A number of Members and Senators had wished to express their views on the troop deployment before the Dayton Accords were formally signed in Paris. That action had occurred, and the leadership of both parties apparently believed nothing further would be achieved by a conference on the measures passed. As result, no final consensus on a single specific measure was reached on the issue by the two chambers. The President meanwhile continued with the Bosnian deployment. On December 21, 1995, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that he had ordered the deployment of approximately 20,000 U.S. military personnel to participate in the NATO-led Implementation Force (IFOR) in the Republic of Bosnia-Herzegovina, and approximately 5,000 U.S. military personnel would be deployed in other former Yugoslav states, primarily in Croatia. In addition, about 7,000 U.S. support forces would be deployed to Hungary, Italy, Croatia, and other regional states in support of IFOR's mission. The President ordered participation of U.S. forces \"pursuant to\" his \"constitutional authority to conduct the foreign relations of the United States and as Commander-in-Chief and Chief Executive.\" Subsequently, President Clinton in December 1996, agreed to provide up to 8,500 ground troops to participate in a NATO-led follow-on force in Bosnia termed the Stabilization Force (SFOR). On March 18, 1998, the House defeated by a vote of 193-225, H.Con.Res. 227 , a resolution of Representative Tom Campbell, directing the President, pursuant to Section 5(c) of the War Powers Resolution to remove United States Armed Forces from the Republic of Bosnia and Herzegovina ( H.Rept. 105-442 ). The issue of presidential authority to deploy forces in the absence of congressional authorization, under the War Powers Resolution, or otherwise, became an issue of renewed controversy in late March 1999 when President Clinton ordered U.S. military forces to participate in a NATO-led military operation in Kosovo. This action was the focus of a major policy debate over the purpose and scope of U.S. military involvement in Kosovo. The President's action to commit forces to the NATO Kosovo operation also led to a suit in federal District Court for the District of Columbia by Members of Congress seeking a judicial finding that the President was violating the War Powers Resolution and the Constitution by using military forces in Yugoslavia in the absence of authorization from the Congress. The Kosovo controversy began in earnest when on March 26, 1999, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that on March 24, 1999, U.S. military forces, at his direction and in coalition with NATO allies, had commenced air strikes against Yugoslavia in response to the Yugoslav government's campaign of violence and repression against the ethnic Albanian population in Kosovo. Prior to the President's action, the Senate, on March 23, 1999, had passed, by a vote of 58-41, S.Con.Res. 21 , a nonbinding resolution expressing the sense of the Congress that the President was authorized to conduct \"military air operations and missile strikes in cooperation with our NATO allies against the Federal Republic of Yugoslavia (Serbia and Montenegro).\" Subsequently, the House voted on a number of measures relating to U.S. participation in the NATO operation in Kosovo. On April 28, 1999, the House of Representatives passed H.R. 1569 , by a vote of 249-180. This bill would prohibit the use of funds appropriated to the Defense Department from being used for the deployment of \"ground elements\" of the U.S. Armed Forces in the Federal Republic of Yugoslavia unless that deployment is specifically authorized by law. On that same day the House defeated H.Con.Res. 82 , by a vote of 139-290. This resolution would have directed the President, pursuant to Section 5(c) of the War Powers Resolution, to remove U.S. Armed Forces from their positions in connection with the present operations against the Federal Republic of Yugoslavia. On April 28, 1999, the House also defeated H.J.Res. 44 , by a vote of 2-427. This joint resolution would have declared a state of war between the United States and the \"Government of the Federal Republic of Yugoslavia.\" The House on that same day also defeated, on a 213-213 tie vote, S.Con.Res. 21 , the Senate resolution passed on March 23, 1999, that supported military air operations and missile strikes against Yugoslavia. On April 30, 1999, Representative Tom Campbell and 17 other members of the House filed suit in federal District Court for the District of Columbia seeking a ruling requiring the President to obtain authorization from Congress before continuing the air war, or taking other military action against Yugoslavia. The Senate, on May 4, 1999, by a vote of 78-22, tabled S.J.Res. 20 , a joint resolution, sponsored by Senator John McCain, that would authorize the President \"to use all necessary force and other means, in concert with United States allies, to accomplish United States and North Atlantic Treaty Organization objectives in the Federal Republic of Yugoslavia (Serbia and Montenegro).\" The House, meanwhile, on May 6, 1999, by a vote of 117-301, defeated an amendment by Representative Ernest Istook to H.R. 1664 , the FY1999 defense supplemental appropriations bill, that would have prohibited the expenditure of funds in the bill to implement any plan to use U.S. ground forces to invade Yugoslavia, except in time of war. Congress, meanwhile, on May 20, 1999, cleared for the President's signature, H.R. 1141 , an emergency supplemental appropriations bill for FY1999, that provided billions in funding for the existing U.S. Kosovo operation. The Senate tabled two other amendments that would have restricted military operations by President Clinton in Kosovo. On May 24, 1999, it tabled, by a vote of 52-48, an amendment offered by Senator Arlen Specter to state that no funds available to the Defense Department may be obligated or expended for the deployment of U.S. ground troops to Yugoslavia unless authorized by a declaration of war or a joint resolution authorizing the use of military force. The Specter amendment did not apply to certain actions, such as rescuing U.S. military personnel or citizens. On May 26, 1999, the Senate tabled an amendment, by a vote of 77-21, offered by Senator Bob Smith to prohibit, effective October 1, 1999, the use of funds for military operations in Yugoslavia unless Congress enacted specific authorization in law for the conduct of these operations. On May 25, 1999, the 60 th day had passed since the President notified Congress of his actions regarding U.S. participation in military operations in Kosovo. Representative Campbell, and those who joined his suit, noted to the federal Court that this was a clear violation of the language of the War Powers Resolution stipulating a withdrawal of U.S. forces from the area of hostilities after 60 days in the absence of congressional authorization to continue, or a presidential request to Congress for an extra 30 day period to safely withdraw. The President did not seek such a 30 day extension, noting instead his view that the War Powers Resolution is constitutionally defective. On June 8, 1999, Federal District Judge Paul L. Friedman dismissed the suit of Representative Campbell and others that sought to have the court rule that President Clinton was in violation of the War Powers Resolution and the Constitution by conducting military activities in Yugoslavia without having received prior authorization from Congress. The judge ruled that Representative Campbell and the other congressional plaintiffs lacked legal standing to bring the suit. On June 24, 1999, Representative Campbell appealed the ruling to the U.S. Court of Appeals for the District of Columbia. The appeals court subsequently agreed to hear the case on an expedited basis before Judges Silberman, Randolph, and Tatel. On February 18, 2000, the appeals court affirmed the opinion of the District Court that Representative Campbell and his co-plaintiffs lacked standing to sue the President. On May 18, 2000, Representative Campbell and 30 other Members of Congress appealed this decision to the United States Supreme Court. On October 2, 2000, the United States Supreme Court, without comment, refused to hear the appeal of Representative Campbell, thereby letting stand the holding of the U.S. Court of Appeals. While Representative Campbell's litigation was continuing, Yugoslavia, on June 10, 1999, agreed to NATO conditions for a cease-fire and withdrawal of Yugoslav military and paramilitary personnel from Kosovo, and the creation of a peacekeeping force (KFOR) which had the sanction of the United Nations. Further, on June 10, 1999, the House of Representatives defeated, by a vote of 328-97, an amendment to H.R. 1401 , the National Defense Authorization Act for FY2000-FY2001, that would have prohibited the use of any Defense Department funding in FY2000 for \"military operations in the Federal Republic of Yugoslavia.\" On that same day, the House approved, by a vote of 270-155, an amendment that deleted, from the House reported version of H.R. 1401 , language that would have prohibited any funding for \"combat or peacekeeping operations\" in the Federal Republic of Yugoslavia. On June 12, 1999, President Clinton announced and reported to Congress \"consistent with the War Powers Resolution\" that he had directed the deployment of about \"7,000 U.S. military personnel as the U.S. contribution to the approximately 50,000-member, NATO-led security force (KFOR)\" being assembled in Kosovo. He also noted that about \"1,500 U.S. military personnel, under separate U.S. command and control, will deploy to other countries in the region, as our national support element, in support of KFOR.\" Thus, by the summer of 1999, the President had been able to proceed with his policy of intervention in the Kosovo crisis under the aegis of NATO, the Congress had not achieved any position of consensus on what actions were appropriate in Yugoslavia, and a U.S. District Court had dismissed a congressional lawsuit (a position subsequently affirmed the following year by the Appeals Court, and the U.S. Supreme Court) attempting to stop presidential military action in Yugoslavia in the absence of prior congressional authorization under the War Powers Resolution. On July 3, 1993, Haitian military leader Raoul Cedras and deposed President Jean-Bertrand Aristide signed an agreement providing for the restoration of President Aristide on October 30. The United Nations and the Organization of American States took responsibility for verifying compliance. In conjunction with the agreement, President Clinton offered to send 350 troops and military engineers to Haiti to help retrain the Haitian armed forces and work on construction projects. A first group of American and Canadian troops arrived on October 6. When additional U.S. forces arrived on October 11, a group of armed civilians appeared intent upon resisting their landing, and on October 12 defense officials ordered the ship carrying them, the U.S.S. Harlan County , to leave Haitian waters. Because the Haitian authorities were not complying with the agreement, on October 13 the U.N. Security Council voted to restore sanctions against Haiti. On October 20, President Clinton reported \"consistent with the War Powers Resolution\" that U.S. ships had begun to enforce the U.N. embargo. Some Members of Congress complained that Congress had not been consulted on or authorized the action. On October 18, Senator Dole said he would offer an amendment to the Defense Appropriations bill ( H.R. 3116 ) which would require congressional authorization for all deployments into Haitian waters and airspace unless the President made specified certifications. Congressional leaders and Administration officials negotiated on the terms of the amendment. As enacted, Section 8147 of P.L. 103-139 stated the sense of Congress that funds should not be obligated or expended for U.S. military operations in Haiti unless the operations were (1) authorized in advance by Congress, (2) necessary to protect or evacuate U.S. citizens, (3) vital to the national security of the United States and there was not sufficient time to receive congressional authorization, or (4) the President reported in advance that the intended deployment met certain criteria. Enforcement of the embargo intensified. On April 20, 1994, President Clinton further reported \"consistent with the War Powers Resolution\" that U.S. naval forces had continued enforcement in the waters around Haiti and that 712 vessels had been boarded. On May 6, 1994, the U.N. Security Council adopted Resolution 917 calling for measures to tighten the embargo. On June 10, 1994, President Clinton announced steps being taken to intensify the pressure on Haiti's military leaders that included assisting the Dominican Republic to seal its border with Haiti, using U.S. naval patrol boats to detain ships suspected of violating the sanctions, a ban on commercial air traffic, and sanctions on financial transactions. As conditions in Haiti worsened, President Clinton stated he would not rule out the use of force, and gradually this option appeared more certain. Many Members continued to contend congressional authorization was necessary for any invasion of Haiti. On May 24, 1994, the House adopted the Goss amendment to the Defense Authorization bill ( H.R. 4301 ) by a vote of 223-201. The amendment expressed the sense of Congress that the United States should not undertake any military action against the mainland of Haiti unless the President first certified to Congress that clear and present danger to U.S. citizens or interests required such action. Subsequently, on June 9 the House voted on the Goss amendment again. This time the House reversed itself and rejected the amendment by a vote of 195-226. On June 27, a point of order was sustained against an amendment to the State Department appropriations bill that sought to prohibit use of funds for any U.N. peacekeeping operation related to Haiti. On June 29, 1994, the Senate in action on H.R. 4226 repassed a provision identical to Section 8147 of P.L. 103-139 but rejected a measure making advance congressional authorization a binding requirement. On August 5 it tabled (rejected) by a vote of 31 to 63 an amendment to H.R. 4606 by Senator Specter prohibiting the President from using U.S. Armed Forces to depose the military leadership unless authorized in advance by Congress, necessary to protect U.S. citizens, or vital to U.S. interests. President Clinton sought and obtained U.N. Security Council authorization for an invasion. On July 31, the U.N. Security Council authorized a multinational force to use \"all necessary means to facilitate the departure from Haiti of the military leadership ... on the understanding that the cost of implementing this temporary operation will be borne by the participating Member States\" (Resolution 940, 1994). On August 3, the Senate adopted an amendment to the Department of Veterans Affairs appropriation, H.R. 4624 , by a vote of 100-0 expressing its sense that the Security Council Resolution did not constitute authorization for the deployment of U.S. forces in Haiti under the Constitution or the War Powers Resolution. The amendment, however, was rejected in conference. President Clinton said the same day that he would welcome the support of Congress but did not agree that he was constitutionally mandated to obtain it. Some Members introduced resolutions, such as H.Con.Res. 276 , calling for congressional authorization prior to the invasion. On September 15, 1994, in an address to the Nation, President Clinton said he had called up the military reserve and ordered two aircraft carriers into the region. His message to the military dictators was to leave now or the United States would force them from power. The first phase of military action would remove the dictators from power and restore Haiti's democratically elected government. The second phase would involve a much smaller force joining with forces from other U.N. members which would leave Haiti after 1995 elections were held and a new government installed. While the Defense Department continued to prepare for an invasion within days, on September 16 President Clinton sent to Haiti a negotiating team of former President Jimmy Carter, former Joint Chiefs of Staff Chairman Colin Powell, and Senate Armed Services Committee Chairman Sam Nunn. Again addressing the Nation on September 18, President Clinton announced that the military leaders had agreed to step down by October 15, and agreed to the immediate introduction of troops, beginning September 19, from the 15,000 member international coalition. He said the agreement was only possible because of the credible and imminent threat of multinational force. He emphasized the mission still had risks and there remained possibilities of violence directed at U.S. troops, but the agreement minimized those risks. He also said that under U.N. Security Council resolution 940, a 25-nation international coalition would soon go to Haiti to begin the task of restoring democratic government. Also on September 18, President Clinton reported to Congress on the objectives in accordance with the sense expressed in Section 8147 (c) of P.L. 103-139 , the FY1994 Defense Appropriations Act. U.S. forces entered Haiti on September 1994. On September 21, President Clinton reported \"consistent with the War Powers Resolution\" the deployment of 1,500 troops, to be increased by several thousand. (At the peak in September there were about 21,000 U.S. forces in Haiti.) He said the U.S. presence would not be open-ended but would be replaced after a period of months by a U.N. peacekeeping force, although some U.S. forces would participate in and be present for the duration of the U.N. mission. The forces were involved in the first hostilities on September 24 when U.S. Marines killed 10 armed Haitian resisters in a fire-fight. On September 19, the House agreed to H.Con.Res. 290 commending the President and the special delegation to Haiti, and supporting the prompt and orderly withdrawal of U.S. forces from Haiti as soon as possible; on September 19, the Senate agreed to a similar measure, S.Res. 259 . On October 3, 1994, the House Foreign Affairs Committee reported H.J.Res. 416 authorizing the forces in Haiti until March 1, 1995, and providing procedures for a joint resolution to withdraw the forces. In House debate on October 6 the House voted against the original contents and for the Dellums substitute. As passed, H.J.Res. 416 stated the sense that the President should have sought congressional approval before deploying U.S. forces to Haiti, supporting a prompt and orderly withdrawal as soon as possible, and requiring a monthly report on Haiti as well as other reports. This same language was also adopted by the Senate on October 6 as S.J.Res. 229 , and on October 7 the House passed S.J.Res. 229 . President Clinton signed S.J.Res. 229 on October 25, 1994 ( P.L. 103-423 ). After U.S. forces began to disarm Haitian military and paramilitary forces and President Aristide returned on October 15, 1994, the United States began to withdraw some forces. On March 31, 1995, U.N. peacekeeping forces assumed responsibility for missions previously conducted by U.S. military forces in Haiti. By September 21, 1995, President Clinton reported the United States had 2,400 military personnel in Haiti as participants in the U.N. Mission in Haiti (UNMIH), and 260 U.S. military personnel assigned to the U.S. Support Group Haiti. On February 29, 1996, the U.S. Commander of the UNMIH was replaced and U.S. forces ceased to conduct security operations in Haiti, except for self-defense. The majority of the 1,907 U.S. military personnel in Haiti were withdrawn by mid-March 1996, and the remainder, who stayed to arrange the dismantlement and repatriation of equipment, were withdrawn in mid-April 1996. After that, a U.S. support unit of 300 to 500 troops, made up primarily of engineers, remained in Haiti carrying out public works such as building bridges, repairing schools, and digging wells. In December 1997, President Clinton ordered the Dept. of Defense to maintain hundreds of U.S. troops in Haiti indefinitely. In September 1999, however, the 106 th Congress passed the FY2000 DOD authorization bill ( P.L. 106-65 ) that prohibited DOD funding to maintain a continuous U.S. military presence in Haiti beyond May 31, 2000. The troops were withdrawn by the end of January 2000. According to the conference report accompanying the FY2000 DOD authorization bill ( H.Rept. 106-301 ), the President is not prohibited from engaging in periodic theater engagement activities in Haiti. On September 11, 2001, terrorists hijacked four U.S. commercial airliners, crashing two into the twin towers of the World Trade Center in New York City, and another into the Pentagon building in Arlington, VA. The fourth plane crashed in Shanksville, PA, near Pittsburgh, after passengers struggled with the highjackers for control of the aircraft. The death toll from these incidents was more than three thousand, making the attacks the most devastating of their kind in United States history. President George W. Bush characterized these attacks as more than acts of terror. \"They were acts of war,\" he said. He added that \"freedom and democracy are under attack,\" and he asserted that the United States would use \"all of our resources to conquer this enemy.\" In the days immediately after the September 11 attacks, the President consulted with the leaders of Congress on appropriate steps to take to deal with the situation confronting the United States. One of the things that emerged from discussions with the White House and congressional leaders was the concept of a joint resolution of the Congress authorizing the President to take military steps to deal with the parties responsible for the attacks on the United States. Between September 13 and 14, draft language of such a resolution was discussed and negotiated by the President's representatives and the House and Senate leadership of both parties. Other members of both Houses suggested language for consideration. On Friday, September 14, 2001, the text of a joint resolution was introduced. It was first considered and passed by the Senate in the morning of September 14, as Senate Joint Resolution 23, by a vote of 98-0. The House of Representatives passed it later that evening, by a vote of 420-1, after tabling an identical resolution, H.J.Res. 64 , and rejecting a motion to recommit by Representative John Tierney that would have had the effect, if passed and enacted, of requiring a report from the President on his actions under the resolution every 60 days. Senate Joint Resolution 23, titled the \"Authorization for Use of Military Force,\" passed by Congress on September 14, 2001, was signed into law on September 18, 2001. The joint resolution authorizes the President to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons. The joint resolution further states that Congress declares that this resolution is intended to \"constitute specific statutory authorization within the meaning of section 5(b) of the War Powers Resolution.\" Finally, the joint resolution also states that \"[n]othing in this resolution supercedes any requirement of the War Powers Resolution.\" A notable feature of S.J.Res. 23 is that unlike all other major legislation authorizing the use of military force by the President, this joint resolution authorizes military force against \"organizations and persons\" linked to the September 11, 2001, attacks on the United States. Past authorizations of the use of force have permitted action against unnamed nations in specific regions of the world or against named individual nations. This authorization of military action against \"organizations or persons\" is unprecedented in American history, with the scope of its reach yet to be determined. The authorization of use of force against unnamed nations is more consistent with some previous instances where authority was given to act against unnamed states as appropriate when they became aggressors or took military action against the United States or its citizens. President George W. Bush in signing S.J.Res. on September 18, 2001, noted the Congress had acted \"wisely, decisively, and in the finest traditions of our country.\" He thanked the \"leadership of both Houses for their role in expeditiously passing this historic joint resolution.\" He noted that he had had the \"benefit of meaningful consultations with members of the Congress\" since the September 11 attacks and that he would \"continue to consult closely with them as our Nation responds to this threat to our peace and security.\" President Bush also asserted that S.J.Res. 23 \"recognized the authority of the President under the Constitution to take action to deter and prevent acts of terrorism against the United States.\" He also stated: \"In signing this resolution, I maintain the longstanding position of the executive branch regarding the President's constitutional authority to use force, including the Armed Forces of the United States and regarding the constitutionality of the War Powers Resolution.\" Prior to its enactment, there was concern among some in Congress that the President might not adhere to the reporting requirements of the War Powers Resolution when he exercised the authority provided in S.J.Res. 23 . There appeared to be general agreement that the President had committed himself to consult with Congress on matters related to his military actions against terrorists and those associated with the attacks on the United States on September 11. On September 24, 2001, President Bush reported to Congress, \"consistent with the War Powers Resolution,\" and \"Senate Joint Resolution 23\" that in response to terrorist attacks on the World Trade Center and the Pentagon he had ordered the \"deployment of various combat-equipped and combat support forces to a number of foreign nations in the Central and Pacific Command areas of operations.\" The President noted that as part of efforts to \"prevent and deter terrorism\" he might find it necessary to order additional forces into these and other areas of the world....\" He stated that he could not now predict \"the scope and duration of these deployments,\" nor the \"actions necessary to counter the terrorist threat to the United States.\" Subsequently, on October 9, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" and \"Senate Joint Resolution 23\" that on October 7, 2001, U.S. Armed Forces \"began combat action in Afghanistan against Al Qaida terrorists and their Taliban supporters.\" The President stated that he had directed this military action in response to the September 11, 2001, attacks on U.S. \"territory, our citizens, and our way of life, and to the continuing threat of terrorist acts against the United States and our friends and allies.\" This military action was \"part of our campaign against terrorism\" and was \"designed to disrupt the use of Afghanistan as a terrorist base of operations.\" Thus, in light of the September 11, 2001, terrorist attacks against United States territory and citizens, the President and Congress, after consultations, agreed to a course of legislative action that did not invoke the War Powers Resolution itself, but substituted a specific authorization measure, S.J.Res. 23 . Pursuit of such an action is contemplated by the language of the War Powers Resolution itself. As of the end of October 2001, President Bush had chosen to state in his reports to Congress that the military actions he had taken relating to the terrorists attacks were \"consistent with\" both the War Powers Resolution and Senate Joint Resolution 23. His actions follow the practice of his White House predecessors in not formally citing the language of the War Powers Resolution in Section 4(a)(1) that would trigger a military forces withdrawal timetable. Congress for its part in S.J.Res. 23 stated that this legislation constituted \"specific statutory authorization within the meaning of section 5(b) of the War Powers Resolution.\" It also noted that \"nothing\" in S.J.Res. 23 \"supercedes any requirement of the War Powers Resolution.\" The President and Congress, in sum, maintained their respective positions on the constitutionality of the War Powers Resolution and the responsibilities of the President under it, while finding a legislative vehicle around which both branches could unite to support the President's response to the terrorist attacks on the United States. In summer 2002, the Bush Administration made public its views regarding what it deemed a significant threat to U.S. interests and security posed by the prospect that Iraq had or was acquiring weapons of mass destruction. Senior members of the Bush Administration cited a number of violations of U.N. Security Council resolutions by Iraq regarding the obligation imposed at the end of the Gulf War in 1991 to end its chemical, biological and nuclear weapons programs. On September 4, 2002, President George W. Bush met with leaders from both Houses and parties at the White House. At that meeting the President stated that he would seek congressional support, in the near future, for action deemed necessary to deal with the threat posed to the United States by the regime of Saddam Hussein of Iraq. The President also indicated that he would speak to the United Nations shortly and set out his concerns about Iraq. On September 12, 2002, President Bush addressed the U.N. General Assembly and set out the history of Iraqi misdeeds over the last two decades and the numerous times that Iraq had not fulfilled its commitments to comply with various U.N. Security Council resolutions, including disarmament, since the Gulf War of 1991. He stated that the United States would work with the U.N. Security Council to deal with Iraq's challenge. However, he emphasized that if Iraq refused to fulfill its obligations to comply with U.N. Security Council resolutions, the United States would see that those resolutions were enforced. Subsequently, on September 19, 2002, the White House sent a \"draft\" joint resolution to House Speaker Dennis Hastert, House Minority Leader Richard Gephardt, Senate Majority Leader Thomas Daschle and Senate Minority Leader Trent Lott. This draft would have authorized the President to use military force not only against Iraq but \"to restore international peace and security in the region.\" Subsequently introduced as S.J.Res. 45 on September 26, it served as the basis for an extensive debate over the desirability, necessity, and scope of a new congressional authorization for the use of force. The Senate used this bill as the focus for a debate which began, after cloture was invoked, on October 3. The Senate debate continued from October 4 until October 11, 2002, and involved consideration of numerous amendments to the measure. In the end the Senate adopted H.J.Res. 114 in lieu of S.J.Res. 45 . The draft measure was not formally introduced in the House. Instead, the vehicle for House consideration of the issue was H.J.Res. 114 . Cosponsored by Speaker Hastert and Minority Leader Gephardt and introduced on October 2, 2002, H.J.Res. 114 embodied modifications to the White House draft that were agreeable to the White House, most House and Senate Republicans, and the House Democratic leader. The House International Relations Committee reported out a slightly amended version of the joint resolution on October 7, 2002 ( H.R. 721 ). The House adopted the rule governing debate on the joint resolution ( H.R. 474 ) on October 8, 2002; and debated the measure until October 10, when it passed H.J.Res. 114 by a vote of 296-133. Subsequently, the Senate passed the House version of H.J.Res. 114 on October 11 by a vote of 77-23, and President Bush signed the \"Authorization for Use of Military Force against Iraq Resolution of 2002\" into law on October 16, 2002. In signing H.J.Res. 114 into law, President Bush noted that by passing this legislation Congress had demonstrated that \"the United States speaks with one voice on the threat to international peace and security posed by Iraq.\" He added that the legislation carried an important message that \"Iraq will either comply with all U.N. resolutions, rid itself of weapons of mass destruction, and ... its support for terrorists, or will be compelled to do so.\" While the President noted he had sought a \"resolution of support\" from Congress to use force against Iraq, and appreciated receiving that support, he also stated that my request for it did not, and my signing this resolution does not, constitute any change in the long-standing positions of the executive branch on either the President's constitutional authority to use force to deter, prevent, or respond to aggression or other threats to U.S. interests or on the constitutionality of the War Powers Resolution. The President went on to state that on the \"important question of the threat posed by Iraq,\" his views and goals and those of Congress were the same. He further observed that he had extensive consultations with Congress in the past months, and that he looked forward to \"continuing close consultation in the months ahead.\" He stated his intent to submit written reports to Congress every 60 days on matters \"relevant to this resolution.\" The central element of P.L. 107-243 is the authorization for the President to use the armed forces of the United States as he determines to be necessary and appropriate in order to (1) defend the national security of the United States against the continuing threat posed by Iraq; and (2) enforce all relevant United Nations Security Council resolutions regarding Iraq. As predicates for the use of force, the statute requires the President to communicate to Congress his determination that the use of diplomatic and other peaceful means will not \"adequately protect the United States ... or ... lead to enforcement of all relevant United Nations Security Council resolutions\" and that the use of force is \"consistent\" with the battle against terrorism. Like P.L. 102-1 and P.L. 107-40 , the statute declares that it is \"intended to constitute specific statutory authorization within the meaning of section 5(b) of the War Powers Resolution.\" It also requires the President to make periodic reports to Congress \"on matters relevant to this joint resolution.\" Finally, the statute expresses Congress' \"support\" for the efforts of the President to obtain \"prompt and decisive action by the Security Council\" to enforce Iraq's compliance with all relevant Security Council resolutions. http://www.congress.gov/cgi-lis/bdquery/R?d107:FLD002:@1(107+243) P.L. 107-243 clearly confers broad authority on the President to use force. In contrast to P.L. 102-1 , the authority granted is not limited to the implementation of previously adopted Security Council resolutions concerning Iraq but includes \"all relevant ... resolutions.\" Thus, it appears to incorporate resolutions concerning Iraq that may be adopted by the Security Council in the future as well as those already adopted. The authority also appears to extend beyond compelling Iraq's disarmament to implementing the full range of concerns expressed in those resolutions. Unlike P.L. 107-40 , the President's exercise of the authority granted is not dependent upon a finding that Iraq was associated in some direct way with the September 11, 2001, attacks on the United States. Moreover, the authority conferred can be used for the broad purpose of defending \"the national security of the United States against the continuing threat posed by Iraq.\" Nevertheless, P.L. 107-243 is narrower than P.L. 107-40 in that it limits the authorization for the use of force to Iraq. It also requires as a predicate for the use of force that the President determine that peaceful means cannot suffice and that the use of force against Iraq is consistent with the battle against terrorism. It further limits the force used to that which the President determines is \"necessary and appropriate.\" Finally, as with P.L. 107-40 , the statutory authorization for use of force granted to the President in P.L. 107-243 is not dependent for its exercise upon prior authorization by the U.N. Security Council. In the form that P.L. 107-243 is drafted, and given the context in which it was debated, one could argue that it is a classic example of an authorization vehicle contemplated by the original War Powers Resolution. During U.S. military operations in Libya from mid-March through June 2011, President Barack Obama—having received legal advice from the Office of Legal Counsel (OLC) at the Justice Department and State Department Legal Advisor Harold Koh—took the position that U.S. military operations in Libya did not constitute \"hostilities\" for purposes of the language of the War Powers Resolution nor was the United States involved in a \"war\" in Libya for purposes of Article I of the Constitution. Given those conclusions by the Administration, the President's view was that express statutory authorization from Congress to conduct the military operations in Libya was not required under the framework of the War Powers Resolution. The President did comply with the reporting requirements of the War Powers Resolution, when the Libya operation was first launched in March 2011, and followed up with a letter to congressional leaders on May 20, 2011—the 60 th day after U.S. military forces were \"introduced\" into the conflict in Libya. In his May 20 letter, the President pointed out that on April 4, 2011, the United States had transferred responsibility for military operations in Libya to NATO forces, and that from that time forward the U.S. had assumed only a supporting role for the NATO-led operation. This support included, \"since April 23, [36 days after the initial introduction of U.S. military forces into Libya], precision strikes by unmanned aerial vehicles against a limited set of clearly defined targets in support of the NATO-led coalition's efforts.\" The President held from the outset that the actions he had directed were \"in the national security and foreign policy interests of the United States.\" He took them, the President stated, \"pursuant to my constitutional authority to conduct U.S. foreign relations and as Commander in Chief and Chief Executive.\" On June 15, 2011 (86 days after the initial introduction of U.S. military forces into Libya), the Obama Administration submitted a 32-page unclassified report, together with a classified annex, that described U.S. actions in Libya to that date. On page 25 of that unclassified report was a \"Legal Analysis\" consisting of one long paragraph summarizing the Administration's view of what the President's authority was to take the actions he had taken in Libya, and his rationale for not having to obtain congressional authorization to do so. This paragraph from the report states Given the important U.S. interests served by U.S. military operations in Libya and the limited nature, scope and duration of the anticipated actions, the President had constitutional authority, as Commander in Chief and Chief Executive and pursuant to his foreign affairs powers, to direct such limited military operations abroad. The President is of the view that the current U.S. military operations in Libya are consistent with the War Powers Resolution and do not under that law require further congressional authorization, because U.S. military operations are distinct from the kind of \"hostilities\" contemplated by the Resolution's 60 day termination provision. U.S. forces are playing a constrained and supporting role in a multinational coalition, whose operations are both legitimated by and limited to the terms of a United Nations Security Council Resolution that authorizes the use of force solely to protect civilians and civilian populated areas under attack or threat of attack and to enforce a no-fly zone and an arms embargo. U.S. operations do not involve sustained fighting or active exchanges of fire with hostile forces, nor do they involve the presence of U.S. ground troops, U.S. casualties or a serious threat thereof, or any significant chance of escalation into a conflict characterized by these factors. There are various legal arguments available to the Administration to justify use of UAVs for military action abroad against terrorist organizations and individuals. The following addresses the potential interplay of the War Powers Resolution's statutory requirements and the use of UAVs for military operations abroad. In another situation, it is possible that the President might use the same basic formulation he and his legal advisors set out regarding the application of the War Powers Resolution to U.S. military actions in Libya discussed above. Directly put, if it is accepted that the President's use of UAVs for military attacks against terrorist targets abroad constitutes an action that is limited in scope and duration, and does not require introduction of U.S. military forces directly and physically into \"hostilities,\" then the War Powers Resolution, under this interpretation, does not apply to this presidential action, nor require congressional statutory authorization. The President, under this construction, has sufficient authority to act to defend the United States based only on his own Constitutional authorities as Commander in Chief, as set out in the legal memorandum of the Office of Legal Counsel of April 1, 2011, and in the President's June 15, 2011, report to Congress. To date, based on public reports, instances of the use of UAVs to attack terrorist targets abroad have not required a time period in excess of 60 days to execute, nor have U.S. military personnel been placed directly into harm's way or in places where hostilities that could directly involve them were indicated. The very nature of UAV technology permits their employment from locations remote from the places they are used to attack. Thus, the argument could be made that in these circumstances, the War Powers Resolution, as currently drafted, does not require the President to obtain statutory congressional approval for the use of UAVs in military operations abroad. In his War Powers Resolution report to Congress, on June 15, 2012, the President noted that he had authorized, during the previous six months, the U.S. military to work closely with the government of Yemen \"to operationally dismantle and ultimately eliminate the terrorist threat posed by al-Qa'ida in the Arabian Peninsula (AQAP), the most active and dangerous affiliate of al-Qa'ida today.\" The President added that Our joint efforts have resulted in direct action against a limited number of AQAP operatives and senior leaders in that country who posed a terrorist threat to the United States and our interests. While the term \"direct action\" is not defined in the President's June 15, 2012, report quoted above, its context, coupled with public reporting on the U.S. use of UAVs to attack al-Qa'ida terrorist personnel in Yemen, strongly suggests that this is what the President is referring to in this report. The President further notes in this report that similar actions may be undertaken by the United States in the future. He stated: The United States is committed to thwarting the efforts of al-Qa'ida and its associated forces to carry out future acts of international terrorism, and we have continued to work with our CT [counter-terrorism] partners to disrupt and degrade the capabilities of al-Qa'ida and its associated forces. As necessary, in response to the terrorist threat, I will direct additional measures against al-Qa'ida, the Taliban, and associated forces to protect U.S. citizens and interests. The June 15, 2012, report also stated that a \"classified annex\" to it \"would provide further information\" on such matters. That annex would perhaps elaborate on the specifics of the topics alluded to in the unclassified text, and clarify the express meaning of \"direct action,\" and, in particular, how it was employed by the United States. In light of the above considerations, it appears that the existing statutory language of the War Powers Resolution, as interpreted by the Administration, does not require congressional authorization for the President to use UAVs in military operations against terrorists abroad, in Yemen or in other countries. It does appear that the President may believe that in fulfilling his reporting obligations to Congress under the WPR he should at least implicitly note the use of UAVs in military attacks against terrorists when he submits his supplementary WPR report every six months. Perhaps the President also believes he should, in keeping with WPR reporting requirements, report more explicitly about such actions in classified reports every six months. Even though the President has not publicly reported the specific use of UAVs in military operations within 48 hours of their use, private consultations with the congressional leadership about their use may have occurred in individual cases. Should Congress agree with what appears to be the President's position regarding his minimal obligations under the War Powers Resolution regarding the military use of UAVs, it need do nothing further. However, should Congress conclude that the War Powers Resolution should unambiguously require statutory congressional authorization of the military use of UAVs for counter-terrorism operations, then it would likely have to amend this statute, unless other mutually agreeable alternatives can be devised with the President. Beginning in June 2014, forces of the Islamic State (IS; also known as ISIL, ISIS, or the Arabic acronym Da' esh ) rapidly expanded their control of several Iraqi cities and threatened attack on Baghdad. These developments caused worries of debilitating destabilization of Iraq's government and increased U.S. concerns for the safety of the U.S. embassy, other U.S. facilities, and U.S. personnel in Iraq, as well as the Iraqi population. After first ordering multiple deployments of U.S. troops to Iraq to provide security to diplomatic personnel and facilities, advise Iraqi security forces, and conduct intelligence gathering and reconnaissance, President Obama began ordering U.S. military airstrikes on IS forces in Iraq in August 2014. Later in September, after laying out plans for expanded use of military force against the Islamic State in a televised speech to the American people, the President ordered U.S. military airstrikes in Syria against both IS forces and forces of the \"Khorasan Group,\" identified by the President as part of Al Qaeda. U.S. military operations against the Islamic State have since expanded in limited fashion to Libya; targeted anti-IS airstrikes have been detailed in periodic presidential War Powers Resolution reporting to Congress. In addition, it has been reported that the Trump Administration plans a new deployment of approximately 1,000 U.S. troops to Syria, seemingly signaling further expansion of the anti-IS military campaign. U.S. military engagement in hostilities against these groups in Iraq, Syria, and elsewhere has raised numerous questions in Congress and beyond about the President's authority to use military force in this conflict. Questions concerning President Obama's WPR notifications to Congress and his eventual reliance on existing authorizations for use of military force to meet the requirements of the WPR have arisen, and Congress has considered proposals to enact a new authorization for use of military force targeting the Islamic State, including a February 2015 proposal from President Obama. The Trump Administration has continued the previous Administration's reliance on existing AUMFs to conduct the military campaign against the Islamic State, and many Members of Congress remain concerned and active in calling for congressional action to oversee, authorize, or limit presidential authority to continue the use of military force. President Obama began providing WPR notifications concerning the U.S. military response in Iraq to the Islamic State crisis in June 2014. On June 16, 2014, President Obama notified the Speaker of the House and President pro tempore of the Senate, \"consistent with the War Powers Resolution,\" that he had deployed combat-equipped troops to Iraq to provide security for U.S. diplomatic personnel and facilities. On August 8, 2014, the President sent the first notification during the current crisis concerning the use of military force in Iraq. Prior to the President's announcement of a wider, sustained military campaign against the Islamic State on September 10, 2014, President Obama made seven WPR notifications for deployments and actions in Iraq, four concerning combat-equipped troop deployments with no hostilities active or imminent, and three concerning airstrikes against ISIL forces June 16, 2014, Security for U.S. Embassy Baghdad: notification informed Congress of the deployment of up to 275 U.S. Armed Forces personnel to Iraq to provide support and security for U.S. personnel and the U.S. Embassy in Baghdad. June 26, 2014, Military Advisers: notification informed Congress of the deployment of up to approximately 300 additional U.S. Armed Forces personnel in Iraq to \"assess how we can best train, advise, and support Iraqi security forces and to establish joint operations centers with Iraqi security forces to share intelligence and coordinate planning to confront the threat posed by ISIL,\" and for presidential orders to \"increase intelligence, surveillance, and reconnaissance that is focused on the threat posed by the Islamic State of Iraq and the Levant (ISIL).\" June 30, 2014, Increased Security Deployment: notification informed Congress of the deployment of up to approximately 200 additional U.S. Armed Forces personnel to Iraq to \"reinforce security at the U.S. Embassy, its support facilities, and the Baghdad International Airport.\" August 8, 2014, Airstrikes and Humanitarian Assistance and Intervention: notification informed Congress of airstrikes to protect U.S. personnel in Erbil and to assist a humanitarian mission to protect Iraqi civilians trapped on Mount Sinjar in northern Iraq. August 17, 2014, Airstrikes to Assist Iraq, Protect Civilians, Provide Security for U.S. Facilities and Personnel: notification informed Congress of airstrikes against ISIL forces to assist Iraqi security forces in retaking Mosul Dam in northern Iraq. September 1, 2014, Airstrikes to Assist Iraq, Humanitarian Assistance and Intervention: notification informed Congress of airstrikes near Amirli in northern Iraq targeting ISIL forces besieging the town and as part of a mission to provide humanitarian assistance. September 5, 2014, Increased Security Deployment: notification explained the deployment of 350 additional combat-equipped troops to provide security for diplomatic facilities and personnel in Baghdad. September 8, 2014, Airstrikes to Assist Iraq, Protect Civilians, Provide Security for U.S. Facilities and Personnel: notification of airstrikes \"in the vicinity of the Haditha Dam in support of Iraqi forces in their efforts to retain control of and defend this critical infrastructure site from ISIL,\" stating that \"[t]hese additional military operations will be limited in their scope and duration as necessary to address this threat and prevent endangerment of U.S. personnel and facilities and large numbers of Iraqi civilians.\" In each of these notifications, President Obama cited no war declaration or legislative authorization for use of military force that authorized his actions, but instead relied on his constitutional authority under Article II as Commander in Chief and Chief Executive. Without such legislative authority, any engagement in hostilities could have been considered to trigger the 60-day withdrawal requirement under Section 5(b). Although there was no indication from the President, the deployments announced in the June 16, June 24, June 30, and September 5 WPR notifications could have been construed as falling under Section 4(a)(2) and/or (3) of the WPR; such interpretation would not have triggered the WPR withdrawal requirement. The airstrikes notifications of August 8, August 17, and September 1, 2014, seem more likely to concern activities considered hostilities under the WPR, and therefore could be considered Section 4(a)(1) notifications, triggering the 60-day withdrawal period, although again, neither the President nor Congress took any action to definitively characterize such actions as triggering the WPR withdrawal requirement. President Obama's multiple notifications, some of which involved hostilities, raised questions about whether multiple WPR notifications for short-term, circumscribed military action in relation to the same enemy in the same conflict should be considered separately or be combined for purposes of the operation of the WPR withdrawal requirement. Analysts and Members of Congress struggled with how to determine whether the 60-day period was running, on what date it began, or whether it had reset each time one of the three discrete military operations had ceased. From the description in the airstrikes notifications, the Mount Sinjar, Mosul Dam, and Amirli operations involved operations by U.S. Armed Forces conducting airstrikes that lasted only a few days at most, such forces engaged in airstrikes likely entered, fought, and withdrew from Iraqi airspace in a matter of hours, and the troops that remained in Iraq after the airstrikes were apparently not engaged in hostilities or present where hostilities were imminent. In addition, the Obama Administration has been careful to state that the first airstrikes were solely to halt the advance of ISIL on Erbil and break the siege of Mount Sinjar, both of which were accomplished at the end of operations, that the second airstrikes were to help with the recapture of Mosul Dam, which was also completed, and that the third airstrikes were solely to protect ISIL-besieged Iraqi citizens in Amirli, and that objective also seemed to have been met, each within a matter of days. Some analysts raised the question whether the President's frequent notifications, each explaining a discrete operation that would last only a few days, were intended simply to ensure that Congress was kept informed in detail about ongoing U.S. military action in Iraq or, alternatively, whether they were intended to have some consequence for assessing when and whether the WPR's 60-day deadline for termination of hostilities begins and ends—that is to say, that each of the particular actions reported constitutes a separate military action that is subject to its own 60-day deadline for termination. Because the operations were short in duration, considering each operation to operate under its own 60-day period, despite seemingly being part of a larger campaign against one enemy, would arguably undercut the WPR's goal of ensuring that U.S. forces were not engaged in hostilities against an enemy force for a sustained period of time without congressional authorization. Notifications of discrete, time-limited deployments and hostilities have occurred in the past. Since Congress enacted the War Powers Resolution, Presidents have made Section 4 notifications that refer to military deployments and operations, including the use of military force, that are relatively small in scope and duration, involving individual strikes. These limited WPR notifications, however, often involve either planned strikes against foreign targets that can be regarded as isolated and not part of a larger, connected military campaign against an enemy, or address one-time defensive military action against armed attack. After relying on Article II authority as Commander in Chief and Chief Executive in his first seven WPR notifications concerning military action against the Islamic State, President Obama changed course and began relying on existing authorizations for the continuing and expanding military campaign. Obama Administration officials and the President's September 2014 notifications to Congress for airstrikes and other actions in Iraq and Syria stated that two enacted authorizations for use of military force (AUMFs) currently in force, the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40 ), and the Authorization for Use of Military Force Against Iraq Resolution of 2002 (2002 AUMF; P.L. 107-243 ), provide authorization for certain U.S. military strikes against the Islamic State in Iraq and Syria, as well as the Khorasan Group of Al Qaeda in Syria. As it regarded the requirements of the WPR, President Obama by citing 2001 and 2002 AUMF authority provided a legislative basis for his decision to engage U.S. Armed Forces in hostilities against the Islamic State and other groups, which would meet the WPR's notification requirements, and prevent application of Section 5(b)'s 60-day withdrawal requirement and the WPR's provisions for consideration of legislative proposals to approve or disapprove of his actions. Trump Administration officials have also argued that existing legislative authority covers U.S. military operations against the Islamic State in Iraq, Syria, and elsewhere. Congress enacted the 2001 AUMF in response to the September 11, 2001, terrorist attacks, authorizing the President to use military force against \"those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons....\" The executive branch has since relied on the 2001 AUMF to fight Al Qaeda and the Taliban in Afghanistan, and has stated that the 2001 AUMF authorizes limited, targeted U.S. military strikes against Al Qaeda and associated forces that have been carried out in other countries, including Pakistan, Yemen, Somalia, and Libya. President Obama's reliance on 2001 AUMF authority to undertake a large-scale, long-term military campaign outside Afghanistan to fight the Islamic State represented to some observers an expansion of the interpretation of 2001 AUMF authority. The Obama Administration stated that the Islamic State can be targeted under the 2001 AUMF because its predecessor organization, Al Qaeda in Iraq, communicated and coordinated with Al Qaeda; the Islamic State currently has ties with Al Qaeda fighter and operatives; the Islamic State employs tactics similar to Al Qaeda; and the Islamic State, with its intentions of creating a new Islamic caliphate, is the \"true inheritor of Osama bin Laden's legacy.\" The 2002 AUMF authorizes the President to use U.S. Armed Forces to enforce relevant United Nations Security Council resolutions and to \"defend the national security of the United States against the continuing threat posed by Iraq....\" Although the 2002 AUMF has no sunset provision and Congress has not repealed it, one view is that after the establishment of a new Iraqi government, the restoration of full Iraqi sovereignty, and the U.S. withdrawal from Iraq, all completed by the end of 2011, the 2002 AUMF no longer has force. During the Obama Administration, executive branch officials voiced support for repealing the 2002 AUMF, reflecting the belief that it is no longer needed. Conversely, another view asserts that, although its preamble focuses on the Saddam Hussein regime and its WMD programs, the 2002 AUMF's authorization language is broad, referring only to a \"continuing threat\" from Iraq, and that the 2002 AUMF could provide authority to defend against threats to Iraq as well as threats posed by Iraq. Indeed, 2002 AUMF authority was the basis for the U.S. military presence in Iraq from the fall of Saddam Hussein and completion of the WMD search to its 2011 withdrawal, a span of over eight years, a period that could be characterized as dealing with threats to Iraq rather than threats from Iraq. The IS threat in Iraq could therefore be seen as breathing new life into 2002 AUMF authority. In addition, former supporters of Saddam Hussein reportedly provide support to the Islamic State, possibly forming a link between the original aims of the 2002 AUMF and any future actions taken against the Islamic State. A number of legislative proposals have been introduced responding to presidential decisions to deploy U.S. Armed Forces and order the use of military force against the Islamic State and other groups. Some Members of Congress have proposed legislation restricting military action against the Islamic State under the 2001 and 2002 AUMFs, repealing these authorizations, and authorizing military force against the Islamic State in a new standalone AUMF. Proposals related to the WPR and its operation generally have been introduced during this period as well, possibly spurred by current U.S. use of military force against the Islamic State. On June 19, 2014, three days after President Obama's first WPR notification concerning new deployments to Iraq, Congress considered two amendments to a Department of Defense appropriations bill ( H.R. 4870 , 113 th Congress), the first of which prohibiting the use of funds appropriated to the department pursuant to the 2002 AUMF, and the second prohibiting use of such funds under the 2001 AUMF after December 31, 2014. Both amendments were defeated by roll call vote. Some Members of Congress also proposed legislation to require the President to either withdraw troops from Iraq pursuant to the procedures of the WPR or seek a new authorization for use of military force. A concurrent resolution ( H.Con.Res. 105 , 113th Congress) was introduced in the House of Representatives on July 11, 2014, requiring withdrawal from Iraq. Section 1. Removal of United States Armed F orces from I raq. Pursuant to section 5(c) of the War Powers Resolution (50 U.S.C. 1544(c)), Congress directs the President to remove United States Armed Forces, other than Armed Forces required to protect United States diplomatic facilities and personnel, from Iraq— (1) by no later than the end of the period of 30 days beginning on the day on which this concurrent resolution is adopted; or (2) if the President determines that it is not safe to remove such United States Armed Forces before the end of that period, by no later than December 31, 2014, or such earlier date as the President determines that the Armed Forces can safely be removed. H.Con.Res. 105 was later amended to remove the direction to withdraw U.S. Armed Forces, replacing it with language stating that the \"President shall not deploy or maintain United States Armed Forces in a sustained combat role in Iraq without specific statutory authorization for such use enacted after the date of the adoption of this concurrent resolution,\" and that nothing in the concurrent resolution supersedes the requirements of the WPR. This version of H.Con.Res. 105 passed the House by a vote of 370-40 on July 25, 2014. It was received in the Senate on July 28, 2014 and referred to the Senate Committee on Foreign Relations; no further action was taken. After President Obama ordered airstrikes against IS forces in Iraq in August 2014, debate in Congress for the most part turned toward crafting a new authorization for use of military force against the Islamic State (IS AUMF), which would meet the requirements for continued military action after 60 days, rather than proposals prohibiting the use of funds for military operations or requiring an end to hostilities and withdrawal of U.S. Armed Forces from Iraq. Beginning in September 2014, several proposed IS AUMFs were introduced, many with provisions intended to define and circumscribe U.S. military engagement, likely a reaction to a perceived over-expansive interpretation and application of the 2001 AUMF by the executive branch since its initial enactment. Provisions in these proposals that would have restricted or limited Congress's overall grant of authority included limiting the type of military action or military unit to be utilized, including broad prohibitions on the use of U.S. ground forces; limiting the geographic area where military action was authorized; limiting the lawful targets of military force, including limitations on targeting \"associated forces\" of the Islamic State; and terminating the authority automatically after a specific time period, from 120 days to three years after enactment. One IS AUMF proposal, S.J.Res. 47 (113 th Congress), was debated, amended, and reported favorably to the full Senate by the Committee on Foreign Relations. After the resolution was reported to the Senate, no further action was taken in the 113 th Congress. On February 11, 2015, President Obama provided Congress with his draft proposal for a new IS AUMF, The proposal would have authorized the use of U.S. Armed Forces that he deems \"necessary and appropriate\" against the Islamic State and associated persons or forces, meaning \"individuals and organizations fighting for, on behalf of, or alongside ISIL or any closely-related successor entity in hostilities against the United States or its coalition partners.\" The authorization does not include authority for the use of U.S. Armed Forces for \"enduring offensive ground combat operations.\" The proposal's authorization would terminate three years after enactment. The President would be required to report to Congress at least every six months on actions taken under the proposed IS AUMF, matching the timing of the reporting requirement in Section 4(c) of the WPR. Since President Obama's proposal, Members of Congress have continued to introduce new IS AUMFs. Many of these proposals, however, have not included provisions limiting the authority provided to the President to use military force against the Islamic State as several previous proposals had. Some of the proposals do contain a three-year sunset provision for such authority, however. Conversely, a few legislative proposals have been introduced to limit the President's use of military force against the Islamic State. H.Con.Res. 55 (114 th Congress), directing the President, pursuant to Section 5(c) of the War Powers Resolution, to remove U.S. Armed Forces deployed after August 7, 2014, in Iraq and Syria, was similar to the concurrent resolution from the 113 th Congress discussed above. It failed passage in the House by a vote of 139-288 on June 17, 2015. After the anti-IS strikes the United States conducted in Libya, an amendment was offered in the 114 th Congress to the House version of the Department of Defense Appropriations Act, 2017 ( H.Amdt. 1213 to H.R. 5293 , 114 th Congress), prohibiting the use of funds to engage in hostilities in Libya in contravention of the War Powers Resolution. The amendment failed passage by voice vote on June 16, 2016. Provisions in the House version of the Defense appropriations bill in the 115 th Congress (Sections 8115 and 9019 of H.R. 1301 , 115 th Congress) would prohibit the use of appropriated funds for deployments of U.S. Armed Forces in contravention of the consultation and reporting requirements of Sections 3 and 4 of the War Powers Resolution. In addition, during the nearly three years since the U.S. military campaign against the Islamic State began, a number of proposals to repeal or sunset the 2001 and 2002 AUMFs have been introduced, both as part of IS AUMF and war declaration proposals as well as contained in standalone legislative vehicles. Proposed repeals were introduced both before and after President Obama announced his reliance on 2001 and 2002 AUMF authority for his decision to order a wider military campaign against IS and other forces in September 2014, and have continued into the first session of the 115 th Congress. An incident involving casualties among U.S. Armed Forces deployed to provide nonlethal assistance under Title 10, U.S. Code authorities, raised the question of whether previous presidential reporting of a combat-equipped deployment is sufficient when hostilities break out involving such deployed forces, and whether the exercise of Title 10 authorities to train and assist foreign militaries might necessarily involve authorities for the use of military force in some cases. On October 4, 2017, four U.S. soldiers were killed and two were wounded when they and their Nigerien partners were ambushed in western Niger while on a reconnaissance patrol as part of overall U.S. counterterrorism operations in Niger and the Sahel region generally. The Department of Defense (DOD) later identified those responsible for the ambush as members of a group affiliated with the Islamic State, the Islamic State in the Greater Sahel (ISGS). A DOD investigation later revealed that the actions of U.S. forces involved in the patrol had improperly exposed the troops to potential attack and harm, outside the mission approved under applicable Title 10 training and assistance authority. The Trump Administration later reported another ISGS attack on U.S. and Nigerien troops on December 6, 2017. Presidential reporting to Congress consistent with the War Powers Resolution with regard to U.S. Armed Forces operating in Niger began several years before the October 2017 ambush. President Obama, on February 22, 2013, notified Congress of the deployment of U.S. Armed Forces to that country. The notification stated, This deployment will provide support for intelligence collection and will also facilitate intelligence sharing with French forces conducting operations in Mali, and with other partners in the region…. The recently deployed forces have deployed with weapons for the purpose of providing their own force protection and security. Providing an explanation of applicable constitutional and/or legislative authority, President Obama stated that he had directed the deployment \"pursuant to my constitutional authority to conduct U.S. foreign relations and as Commander in Chief and Chief Executive.\" Subsequent notifications updating Congress on the status of U.S. Armed Forces in Niger have been included regularly in the six-month periodic reports under the War Powers Resolution, reflecting an increase of total numbers of troops from approximately 40 in early 2013 to approximately 800 as of the June 2018 notification. The notifications referenced only activities for \"support for intelligence collection [and] intelligence sharing with French forces in Mali, and with other forces in the region\" until the June 2017 reporting, where it described U.S. forces in Niger and elsewhere in the Sahel region as \"provid[ing] a wide variety of support to African partners conducting counterterrorism operations in the region,\" seemingly encompassing a wider possible range of CT operations for U.S. troops. Some Members of Congress expressed surprise after the deaths of U.S. troops in Niger, not only regarding the circumstances of the ambush but also the overall mission and activities of U.S. Armed Forces in Niger overall. Despite certain presidential and other DOD reporting on U.S. military operations in Niger and the Lake Chad Basin and Sahel region in general, there was still a belief among some Members that Congress had not been adequately informed of these operations, especially as their scope and purpose had seemingly expanded from 2013 to 2017. U.S. Armed Forces deployed while equipped for combat were operating in Niger and many other countries in Africa and elsewhere under Title 10 authority to assist foreign militaries: it seemed to some that such forces might at any time be engaged in hostilities against terrorist groups or other enemies alongside foreign military partners, just as had occurred in Niger. In such circumstances, Congress would be notified of a Title 10 deployment, but would have little chance to authorize or otherwise offer input concerning a decision to use military force or place U.S. troops in a situation where such use of force might be necessary. A question in the context of the Niger situation is whether the presidential reporting requirements in the War Powers Resolution might have been utilized to provide more timely information to Congress. As described earlier in this report, Section 4(a) of the War Powers Resolution requires the President, absent a relevant declaration of war from Congress, to notify Congress within 48 hours after introducing U.S. Armed Forces \"into hostilities or situations where imminent involvement in hostilities is clearly indicated by the circumstances\" (paragraph (a)(1)), or, short of hostilities, introducing U.S. combat-equipped armed forces into a foreign country (paragraphs (a)(2) or (3)). Although the executive branch maintains that hostilities occur only with exchanges of fire between U.S. and enemy forces, the legislative history of the War Powers Resolution refers to hostilities as also including \"a state of confrontation in which no shots have been fired but where there is a clear and present danger of armed conflict,\" and that imminent hostilities means \"a situation in which there is a clear potential either for such a state of confrontation or for actual armed conflict.\" A original deployment absent imminent or active hostilities reported under Section 4(a)(2) or (3) might later be expected to generate a new notification under Section 4(a)(1), if hostilities were to commence. In the case of the deployments to Niger beginning in 2013, presidential reporting first referred only to intelligence support in describing the U.S. mission, but later described broader U.S. military operations to include conducting patrols with Nigerien forces. With U.S. forces placed in the same \"state of confrontation\" and possible active hostilities with terrorist and other enemy groups as their Nigerien partners, a presidential report under Section 4(a)(1) of the War Powers Resolution, requiring reporting within 48 hours, might have been expected. Similarly, when the extended firefight between U.S. and Nigerien forces and ISGS elements occurred October 4, 2017, resulting in U.S. dead and wounded, a Section 4(a)(1) might also have been expected within 48 hours of the exchange of fire, but no such notification was made. The President did, however, include information concerning the ambush in Niger in his December 2017 six-month periodic reporting consistent with Section 4(c) of the War Powers Resolution. As the Niger operation represented a use of military force, however limited, in a new foreign country, some observers and Members of Congress raised questions about the U.S. military activities leading up to the October 2017 ambush and the possibility that further hostilities might occur in Niger and other foreign countries where U.S. Armed Forces were engaged in close cooperation with partner forces facing active enemy groups. Of particular interest was whether the use of military force in Niger by U.S. troops would be considered authorized by the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40 ; 50 U.S.C. §1541 note), which had been applied to the use of military force against Al Qaeda, the Taliban, the Islamic State, and several \"associated forces\" in Afghanistan, Iraq, Libya, Somalia, Syria, and Yemen. Trump Administration officials, including Secretary of Defense James Mattis, initially asserted that U.S. troops were operating under Title 10 training and assistance authorities, and were not acting under 2001 AUMF authority. Later Administration statements seemed to call this initial assertion into question, however. DOD identified the attackers in the two Niger incidents as elements of the Islamic State, a group the executive branch had already determined was a targetable entity under the 2001 AUMF. These IS elements were eventually referred to as an IS-associated force known as ISGS, or ISIS-GS in DOD documents. A May 2018 DOD report on the October 2017 ambush stated that U.S. Special Operations Forces in Niger \"have the authority to conduct CT operations with partner Nigerien forces,\" including operations \"targeting … key member[s] of ISIS-GS,\" seemingly outside nonlethal Title 10 authorities. In a reversal of initial statements, in March 2018 the Administration explained that the 2001 AUMF did in fact apply to U.S. use of military force in Niger: On October 4, 2017 and December 6, 2017, those U.S. forces and their Nigerien partner forces were attacked by forces assessed to be elements of ISIS, a group within the scope of the 2001 AUMF, and responded with force in self-defense. The Administration has concluded that this use of force was also conducted pursuant to the 2001 AUMF. Despite finding that 2001 AUMF authority applies to the use of military force in Niger, DOD reportedly has also explained that U.S. use of military force in Niger and in other foreign countries where U.S. Armed Forces are operating under Title 10 is authorized under the \"collective self-defense supplemental rule of engagement,\" which permits U.S. Armed Forces working alongside foreign partner forces to use military force against enemies who attack either U.S. forces or partner forces, including enemies not authorized to be targeted under \"by the 2001 AUMF or other congressional authorizations for the use of force.\" While utilization of self-defense and collective self-defense concepts would seem to be necessary in individual instances where U.S. forces conducting training and other assistance operations and their foreign partners come under attack, some argue such concepts might be applied to permit ongoing uses of military force where no congressional authorization exists. From the standpoint of the operation of the War Powers Resolution, this might be expected to produce more situations in which presidential notifications under Section 4(a)(2) or (3), reporting combat-equipped deployments but no hostilities, are used to satisfy presidential reporting requirements without additional reporting of hostilities under Section 4(a)(1), as initially occurred in the Niger situation. This might make it more difficult for Congress to engage in a timely manner as to the details of individual instances of the introduction of U.S. Armed Forces into hostilities, their estimated scope and duration, and the proper constitutional and legislative authority for such uses of military force. Responding to the outbreak of civil war in Yemen and the Ansar Allah/Houthi movement's ouster of the Yemeni government in 2015, Saudi Arabia in the intervening years has led a coalition of countries in a military campaign to reverse gains made by the Houthi and restore Yemen's government to power. The air forces of the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) have continued to conduct airstrikes against Houthi targets in Yemen during this time. Houthi forces have conducted cross border missile and mortar attacks against Saudi Arabia and the UAE, with some apparent support from Iran. U.S. Armed Forces have provided discrete support to some Saudi and Emirati military operations against Houthi forces, with current operations reported to be specifically focused on Houthi missile force targets. Operating pursuant to bilateral agreements, the United States has provided \"the KSA-led coalition defense articles and services, including air-to-air refueling; certain intelligence support; and military advice, including advice regarding compliance with the law of armed conflict and best practices for reducing the risk of civilian casualties,\" according to the Department of Defense. In June 2018, President Trump notified Congress, consistent with the War Powers Resolution, that \"United States Armed Forces, in a non-combat role, have continued to provide military advice and limited information, logistics, and other support to regional forces combatting the Houthi insurgency in Yemen. United States forces are present in Saudi Arabia for this purpose.\" On November 9, 2018, the United States and Saudi Arabia announced that U.S. Armed Forces would cease air-to-air refueling of Saudi and Emirati aircraft engaged in the counter-Houthi campaign in Yemen. U.S. refueling missions had resupplied some Saudi and Emirati aircraft since 2015 pursuant to bilateral acquisition and cross-servicing agreements. In a bid to counter weapons proliferation to the Houthi and limit opportunities for Houthi exploitation of commerce, Saudi forces have imposed strict limits on the transit of vessels via air and sea to Yemen since 2015. These limits have been moderated to some extent by coalition coordination with a U.N. Verification and Inspection Mechanism (UNVIM) but nevertheless have contributed to shortages of food, fuel, and commercial products across the country. Along with ongoing conflict and disruption of infrastructure, the coalition-imposed limits have become a key factor in what the United Nations and various humanitarian and human rights organizations describe as a humanitarian emergency in Yemen. As of November 2018, U.N. officials have warned that as many as 14 million Yemenis are at risk of famine because of the ongoing conflict and related restrictions and disruptions of shipments of food, fuel, and goods. Military operations by the KSA-led coalition, especially some air-to-ground strikes by Saudi and other coalition aircraft, also have been identified as having caused high levels of civilian casualties and destruction of civilian infrastructure. KSA-led coalition officials state they are committed to protecting civilians, improving their military operations, and supporting humanitarian access and aid delivery programs. Saudi Arabia and the UAE continue to pledge considerable financial support to relief efforts while, until recently, carrying forward military campaigns aimed at evicting Houthi fighters from the Red Sea port of Hodeidah and the capital Sanaa, and targeting Houthi leaders and forces involved in cross-border attacks. In December 2018, the parties to the conflict met in Stockholm, Sweden, for talks on the conflict, ultimately ending in a ceasefire agreement to be implemented with assistance from the United Nations. In February 2019, it was announced that the Yemeni government and the Houthis had agreed to execute a significant part of the Stockholm agreement, withdrawing troops from Hodeidah. But subsequent reports that fighting has intensified in the north of Yemen, among other escalations, continue to cast doubt on the overall durability of the ceasefire and future prospects for an end to the conflict. Some Members of Congress have voiced concerns about the overall situation in Yemen, the actions of the Saudi military in its prosecution of its conflict with the Houthis, and the involvement of the U.S. military to date in the KSA-led campaign. Some Members have also argued that current U.S. operations to support the KSA-led campaign in Yemen represent a use of U.S. Armed Forces requiring a new, specific authorization from Congress. Driven by a range of Yemen-related concerns, Representative Ro Khanna and three co-sponsors on September 27, 2017, introduced a concurrent resolution ( H.Con.Res. 81 ) \"pursuant to section 5(c) of the War Powers Resolution\" directing the President \"to remove United States Armed Forces from hostilities in the Republic of Yemen, except United States Armed Forces engaged in operations directed at Al Qaeda in the Arabian Peninsula or associated forces, by not later than the date that is 30 days after the date of the adoption\" of the resolution. In the preamble, the resolution asserts that U.S. Armed Forces \"have been involved in hostilities between Saudi-led forces and the Houthi-Saleh alliance, including\" airstrike targeting assistance and mid-air refueling of Saudi and UAE aircraft. The resolution further states that \"[n]o authorization for the use of United States Armed Forces with respect to the conflict between Saudi-led forces and the Houthi-Saleh alliance in Yemen has been enacted, and no provision of law authorizes the provision of midair refueling services to warplanes of Saudi Arabia or the United Arab Emirates that are engaged in such conflict.\" H.Con.Res. 81 was treated as a privileged resolution entitled to expedited consideration under Section 7 of the WPR. On October 11, the House adopted by unanimous consent a motion to consider the resolution under Section 7 expedited procedures, but delayed the operation of such procedures until not earlier than November 2, 2017. Before expedited procedures became applicable to H.Con.Res. 81 , proponents of the resolution, leaders of both parties in the House, and the House Foreign Affairs and Rules Committees, agreed to consider a separate simple resolution on the situation in Yemen, H.Res. 599, which was introduced by Representative Khanna on November 1, 2017. On the same day, the House adopted a motion stating that Section 7 of the WPR should not apply to H.Con.Res. 81 , and that it was in order to consider H.Res. 599 at any time, with one hour of debate on H.Res. 599 to take place before a vote of the full House. Like H.Con.Res. 81 , the language of H.Res. 599 also included the assertion, among other things, that Congress has not enacted an authorization to use military force against parties to the Yemeni civil war not otherwise subject to the 2001 or 2002 AUMFs, but did not require a withdrawal of U.S. Armed Forces from any hostilities related to the conflict in Yemen. After floor debate, the House voted 366-30 to adopt H.Res. 599 on November 13, 2017. The Senate subsequently took up a similar proposal to H.Con.Res. 81 . On February 28, 2018, Senator Bernard Sanders and two co-sponsors introduced S.J.Res. 54, a joint resolution requiring the President to remove U.S. Armed Forces from hostilities \"in or affecting\" Yemen, except forces fighting Al Qaeda or its associated forces. Because it is a joint resolution directing a termination of hostilities, S.J.Res. 54 relied on the authority provided in Section 1013 of the Department of State Authorization Act, Fiscal Years 1984 and 1985 (\"Section 1013\"; 50 U.S.C. §1546a), rather than Section 5(c) of the WPR. Incorporating the expedited procedure in Section 601(b) of the International Security Assistance and Arms Export Control Act of 1976 (\"Section 601(b)\"; P.L. 94-329 ; 90 Stat. 765), Section 1013 authorizes a motion to discharge a joint resolution such as S.J.Res. 54 from the Foreign Relations Committee if the committee has not reported the resolution to the full Senate within 10 calendar days. In accordance with this provision, on March 20, 2018, Senator Sanders made a motion to discharge S.J.Res. 54 from the committee. Senator Bob Corker, Chairman of the Foreign Relations Committee, arguing that the Foreign Relations Committee had committed to active oversight over the Yemen situation and had not yet been able to complete such oversight, moved to table the motion to discharge. After debate, the motion to table the motion to discharge S.J.Res. 54 was adopted by a vote of 55-44 on March 20, 2018. On September 26, 2018, Representative Khanna and 26 cosponsors introduced H.Con.Res. 138 , another concurrent resolution to disapprove U.S. military activities with regard to Yemen and to require removal of U.S. Armed Forces from hostilities related to the KSA-led counter-Houthi campaign. The resolution is similar in its aims to H.Con.Res. 81 , but contains new language, including a specific reference to Section 8(c) of the WPR (50 U.S.C. §1547(c)): (4) Section 8(c) of the War Powers Resolution (50 U.S.C. 1547(c)) defines the introduction of United States Armed Forces to include \"the assignment of members of such armed forces to command, coordinate, participate in the movement of, or accompany the regular or irregular military forces of any foreign country or government when such military forces are engaged, or there exists an imminent threat that such forces will become engaged, in hostilities\". In addition, H.Con.Res. 138 , in its provision directing removal of U.S. Armed Forces, references military activities authorized pursuant to the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40 ; 50 U.S.C. §1541 note), rather than describing counterterrorism operations against Al Qaeda in the Arabian Peninsula (AQAP) in Yemen, as does H.Con.Res. 81 . The executive branch has relied on 2001 AUMF authority to conduct its anti-AQAP operations in Yemen, but some Members of Congress have long disagreed with what they see as the executive branch's over-expansive interpretation of 2001 AUMF authority, including its application in Yemen. On November 13, 2018, the House Rules Committee voted to submit a separate resolution to the full House that would, among other things, rescind the applicability of the expedited consideration privilege in Section 7 of the WPR (50 U.S.C. §1546) to H.Con.Res. 138 . The next day, November 14, the full House voted 201-187 to adopt this resolution, H.Res. 1142, thus effectively \"deprivileging\" H.Con.Res. 138 in the House. On November 29, 2018, Representative Khanna introduced H.Con.Res. 142 , containing identical language to H.Con.Res. 138 . In the Senate, S.J.Res. 54 became the pending business of the chamber once again in the last week of November 2018, with Senator Sanders making a motion to discharge the Senate disapproval resolution from the Foreign Relations Committee and subject the resolution to debate in the full Senate under the Section 1013 provisions described above. On November 28, 2018, the Senate voted 63-37 in favor of the motion to discharge, clearing the way for debate on the measure in the Senate. Senate Consideration of S.J.Res. 54 Consideration of S.J.Res. 54 in the Senate proceeded in December 2018 under Section 601(b) procedure. After the Senate's adoption of the motion to discharge S.J.Res. 54 from the Foreign Relations Committee, Section 601(b) states that a motion to consider the resolution in the Senate is in order and is privileged. Senator Sanders made such a motion to proceed to consideration on December 12, 2018, which the Senate adopted by a 60-39 vote. The Senate also agreed, by a vote of 96-3, to a point of order that any amendments offered under Section 1013 must be germane to the underlying subject of S.J.Res. 54, U.S. involvement in the conflict in Yemen. The Senate then proceeded to debate S.J.Res. 54 on December 12-13, 2018. The Senators who spoke on the floor raised a number of issues related both to the substance of the resolution, as well as the appropriateness of applying expedited consideration procedures under Section 1013 to a resolution in this particular instance. Supporters of the resolution argued that U.S. military activities to support the KSA-led counter-Houthi campaign constituted involvement in a war amounting to \"hostilities\" under the War Powers Resolution and Section 1013, citing language in the War Powers Resolution that refers to U.S. forces engaging in activities to \"command, coordinate, participate in the movement of, or accompany\" foreign forces, and characterizing U.S. forces supporting the KSA-led coalition as co-belligerents in the Yemen war. Citing Congress's sole power to declare war under the Constitution, supporters stated that because Congress had not authorized U.S. involvement in the war in Yemen, U.S. involvement in the war was unconstitutional and therefore must end. Senators opposed to the resolution responded that U.S. activities to provide aircraft refueling, targeting assistance, and intelligence sharing to the KSA-led coalition did not amount to \"hostilities\" under Section 1013 or the War Powers Resolution, because U.S. Armed Forces were not involved in \"direct military action\" against Houthi forces, nor were they operating alongside coalition forces engaging in such direct action. Characterizing U.S. support operations as hostilities in this case, they argued, would set a precedent that would prevent the U.S. military from carrying out many of the support operations it conducts around the world, including in crisis situations, unless Congress specifically authorized such use of the military. With regard to the resolution's substance and purpose, proponents argued that U.S. involvement in the KSA-led campaign against the Houthis was supporting actions that had led to a severe humanitarian crisis and large numbers of civilian casualties. They asserted that stopping military assistance to the KSA-led campaign and a shift to diplomatic and multilateral tools would better alleviate the suffering of the Yemeni population. Some senators also stressed the troubling actions of the Saudi regime generally on human rights issues, especially the Saudi government's actions in the killing of journalist Jamal Khashoggi, and stated that continued support for the Saudi regime for its war in Yemen was not appropriate. Other senators countered these arguments, stating that continued U.S. involvement would better ensure fewer civilian deaths and an improvement in the humanitarian situation in Yemen. They also argued that withdrawing support from the KSA-led campaign would weaken Saudi Arabia and strengthen Iran, which has supported the Houthis, in Yemen. Opponents also raised the possibility that U.S. interests and national security might be threatened by terminating U.S. support, including through an increased risk to terrorist attacks against the United States and U.S. forces in the Middle East by elements of terror groups operating in Yemen, such as AQAP. After debate on the resolution, the Senate also debated and voted on six amendments to S.J.Res. 54 on December 13, 2018. The Senate agreed to amendments to include \"refueling of non-United States aircraft\" participating in the Yemen conflict in the definition of \"hostilities\" for purposes of S.J.Res. 54; to ensure nothing in the resolution be interpreted to disrupt U.S. military operations and cooperation with Israel; and to require reporting on the risks involved with ceasing certain U.S. support to the KSA-led coalition with regard to the people of the United States and Saudi Arabia, regional humanitarian crises, and terrorist attacks against the United States. The Senate did not adopt two amendments that would have limited the scope of application of the resolution's prohibitions by excluding military operations intended to reduce civilian casualties or to enable adherence to the international law of armed conflict, and operations to support strikes against Houthi targets outside Yemen. Immediately after these votes, the Senate proceeded to vote on passage of S.J.Res. 54, as amended, and the resolution passed the Senate by a vote of 56-41. The resolution was received in the House on December 19, 2018, where no further action was taken before the end of the 115 th Congress. Because Section 1013 expedited consideration procedure applies only in the Senate, the resolution was not privileged in the House. On January 30, 2019, Representative Khanna and 96 co-sponsors introduced H.J.Res. 37 , which again would direct \"the removal of United States Armed Forces from hostilities in the Republic of Yemen that have not been authorized by Congress.\" The language in H.J.Res. 37 as introduced was identical to the amended version of S.J.Res. 54 that passed the Senate in the 115 th Congress. The resolution was referred to the House Foreign Affairs Committee, which on February 6, 2019, considered the resolution at a markup session after a hearing of the full committee regarding U.S. policy in the Arabian peninsula. During markup, opponents of the measure argued that U.S. support operations related to the counter-Houthi campaign in Yemen were not \"hostilities,\" and that passage of H.J.Res. 37 would set a precedent under which any Member of Congress could force votes calling into question \"all U.S. security cooperation agreements throughout the world.\" Those in favor of the measure stated that U.S. actions in Yemen in this specific case involved direct involvement in an armed conflict, and that \"support for ongoing hostilities by a third power and ally … qualify\" as involvement of U.S. Armed Forces in hostilities. The committee voted 25-17 to report H.J.Res. 37 to the full House and recommend its passage. On February 11, 2019, the House Rules Committee reported on H.Res. 122, which provided for immediate consideration in the House of H.J.Res. 37 , with one hour for general debate and 10 minutes for two amendments deemed in order by the rule. A motion to recommit with or without instruction was also permitted. On February 13, 2019, the House adopted H.Res. 122 and proceeded to debate on the resolution. Supporters of the measure reiterated that U.S. military support for the KSA-led coalition was counter to American interests and values and that the actions of the coalition were creating a humanitarian crisis in Yemen. Opponents stated that the situation would not improve if the United States removed its support, and that such a decision would embolden Iran's involvement in the Yemen conflict and take pressure off elements of Al Qaeda and the Islamic State in Yemen. With regard to the provisions of the War Powers Resolution and Section 1013, Members continued to disagree on the definition of hostilities and the appropriate use of the expedited consideration procedures afforded to Congress in that legislation. The House considered one amendment in order, which would have added language to ensure that nothing in the resolution would be construed to hinder U.S. forces and officials from collecting, analyzing, and sharing intelligence. The amendment was agreed to by a 252-177 rollcall vote. The House then considered a motion to recommit H.J.Res. 37 to the House Foreign Affairs Committee, with an instruction to report the resolution back to the House with an amendment to the findings section of the resolution. The amendment would have added language stating that it is in the \"national security interest of the United States to combat anti-Semitism around the world,\" among other supporting statements. The motion to recommit with instruction was agreed to by a 424-0 vote. The House then proceeded to vote on H.J.Res. 37 , as amended, passing the resolution 248 to 177. On February 14, the House transmitted H.J.Res. 37 as adopted to the Senate, where it was referred to the Foreign Relations Committee. H.J.Res. 37 is a joint resolution introduced with specific reference to Section 1013 expedited consideration procedure, and therefore could have been expected to receive expedited consideration once it passed the House and was received in the Senate. Its privileged status in the Senate, however, was eliminated on February 25, 2019, when the Senate Parliamentarian ruled that elements of the House-passed resolution were not germane to the subject of withdrawal of U.S. Armed Forces from hostilities in Yemen, and therefore the resolution could not be treated as privileged under Section 1013 procedure. At issue it seemed were the provisions on combating anti-Semitism added to the resolution in the motion to recommit that the House agreed to on February 13, 2019. After the decision of the Parliamentarian, Senators Sanders, Mike Lee, and Chris Murphy, co-authors of S.J.Res. 7, the companion measure in the Senate to H.J.Res. 37 , stated that they would take steps to ensure that their joint resolution, which does not contain the anti-Semitism language, receives consideration and a vote in the Senate under the Section 1013 privilege. The Senate is expected to take up S.J.Res. 7 in some fashion in March 2019. In the case of U.S. operations supporting the KSA-led counter-Houthi campaign, the executive branch and certain Members of Congress have disagreed over the meaning of \"hostilities\" as it relates to the application of the WPR provisions. The executive branch has maintained that \"hostilities\" for the purposes of the WPR means only \"a situation in which units of U.S. armed forces are actively engaged in exchanges of fire with opposing units of hostile forces,\" something that it argues is not occurring in the context of the counter-Houthi operations. Congress's intent in using the term \"hostilities,\" however, seems to evidence a definition that is wider in scope, to include diverse circumstances in which no exchanges of fire have yet occurred. Some indication of this intended wider meaning of hostilities and imminent hostilities is given in the House report on its War Powers bill: The word hostilities was substituted for the phrase armed conflict during the subcommittee drafting process because it was considered to be somewhat broader in scope. In addition to a situation in which fighting actually has begun, hostilities also encompasses a state of confrontation in which no shots have been fired but where there is a clear and present danger of armed conflict. \" Imminent hostilities \" denotes a situation in which there is a clear potential either for such a state of confrontation or for actual armed conflict. In this conception, a range of situations into which U.S. Armed Forces are deployed could be considered active or imminent hostilities subject to the reporting and termination requirements of the WPR, for example U.S. Armed Forces actively exchanging fire with enemy forces; a standoff between U.S. and enemy forces poised to engage in armed conflict; or a circumstance where U.S. Armed Forces are equipped for combat in a foreign country where an opposing military might be expected to take an adversarial stance at some point in the near future against such U.S. Armed Forces. In the context of U.S. operations related to the counter-Houthi campaign in Yemen, however, this conception does not necessarily answer whether U.S. Armed Forces acting in noncombat support roles in an armed conflict, or a \"state of confrontation,\" involving foreign partner military forces, are properly considered engaged in active hostilities or where hostilities are imminent. According to the House report quoted above, hostilities encompass armed conflict, involving the exchange of fire between U.S. Armed Forces and enemy forces, or a state of confrontation with a clear and present danger of armed conflict. As the term is used in the WPR, \"hostilities\" might not, then, include a situation in which U.S. Armed Forces are serving only in a noncombat support role, and would not engage in exchanges of fire with enemy forces in the case of active armed combat, or operate under a clear and present danger of exchanging fire in the case of a state of confrontation. This is the argument the Trump Administration is currently making with regard to U.S. military operations connected to the KSA-led counter-Houthi campaign in Yemen. This approach to defining hostilities, however, might be considered overly narrow. Under international law, all members of the armed forces of a party to an armed conflict are considered combatants with the right to participate in such armed conflict. To the extent the United States can be considered a party to an armed conflict in Yemen, all U.S. Armed Forces participating arguably would be engaged in such armed conflict and thus \"hostilities,\" under the more expansive definition of the term set out in the House report language above. Proponents in Congress of the several pending Yemen disapproval resolutions in the 115 th Congress have also argued that U.S. support operations aiding the KSA-led campaign in Yemen link U.S. operations to ongoing offensive strikes by Saudi and Emirati forces, thus introducing U.S. Armed Forces into hostilities under the interpretive provisions of Section 8 of the WPR. Section 8(c) defines the introduction of armed forces to include activities of U.S. Armed Forces in connection with the operations of foreign military forces: (c) For purposes of this joint resolution, the term \"introduction of United States Armed Forces\" includes the assignment of members of such armed forces to command, coordinate, participate in the movement of, or accompany the regular or irregular military forces of any foreign country or government when such military forces are engaged, or there exists an imminent threat that such forces will become engaged, in hostilities. The conference report on the WPR explained that this was language modified from a Senate provision requiring specific statutory authorization for assigning members of the Armed Forces for such purposes. The report of the Senate Foreign Relations Committee on its bill said The purpose of this provision is to prevent secret, unauthorized military support activities and to prevent a repetition of many of the most controversial and regrettable actions in Indochina. The ever deepening ground combat involvement of the United States in South Vietnam began with the assignment of U.S. \"advisers\" to accompany South Vietnamese units on combat patrols; and in Laos, secretly and without congressional authorization, U.S. \"advisers\" were deeply engaged in the war in northern Laos. This interpretive provision could be confusing from the standpoint of determining whether an \"introduction of U.S. armed forces\" specifically into active or imminent hostilities under Section 4(a)(1) has occurred. Section 8(c) on the one hand seems to indicate some intention that if U.S. Armed Forces are operating alongside foreign military forces engaged in hostilities, those hostilities could be attributed to such U.S. Armed Forces as well, triggering a report under Section 4(a)(1) and possibly the termination provisions of Section 5. Yet, while Section 8(c) refers to a situation where foreign military forces are actively engaged or will be engaged imminently in hostilities, when this occurs and U.S. Armed Forces are operating alongside such foreign forces, this seems to meet only the definition of an \"introduction of United States Armed Forces\" for purposes of Section 4(a) of the WPR, not the definition of \"hostilities\" or \"introduction of United States Armed Forces into hostilities .\" Under Section 4(a), there are situations in which an introduction does not involve hostilities: an introduction can also involve foreign deployments of combat-equipped troops absent any U.S. forces engaged in active or imminent hostilities. Thus, it seems that Section 8(c) contemplates situations where \"assignment of [U.S.] armed forces to command, coordinate, participate in the movement of, or accompany\" foreign forces engaged in or about to engage in hostilities would not necessarily be considered an introduction of U.S. Armed Forces into such hostilities. In addition, the Senate Foreign Relations Committee report quoted above refers specifically to Section 8(c) preventing \" secret , unauthorized military support activities,\" something a report under Section 4(a)(2) or (3) could accomplish by bringing an otherwise secret deployment to light, without a deployment being considered an \"introduction into hostilities.\" The executive branch has notified Congress of the activities of U.S. military personnel in support of Saudi-led coalition military operations in Yemen in letters to Congress consistent with the War Powers Resolution. In February 2018, Department of Defense counsel argued in a letter to Congress, The limited military and intelligence support that the United States is providing to the KSA-led coalition does not involve any introduction of U.S. forces into hostilities for purposes of the War Powers Resolution or of section 1013 of the Department of State Authorization Act, Fiscal Years 1984 and 1985 (50 USC 1546a). The Department specifically argued that since U.S. personnel providing support to the Saudi-led coalition were not then engaged themselves in exchanges of fire, they had not been introduced into hostilities or situations where hostilities were imminent. The Department further stated that U.S. forces did not then \"currently command, coordinate, accompany, or participate in the movement of coalition forces in counter-Houthi operations,\" nor were they \"accompanying the KSA-led coalition when its military forces are engaged, or an imminent threat exists that they will become engaged, in hostilities.\" After four decades in existence, controversy continues over the War Powers Resolution and its effectiveness and appropriateness as a system for maintaining a congressional role in the use of armed forces in conflict. One view is that the War Powers Resolution is basically sound and does not need amendment. Those who hold this opinion believe it has brought about better communication between the two branches in times of crisis, and has given Congress a vehicle by which it can act when a majority of Members wish to do so. The Resolution served as a restraint on the use of armed forces by the President in some cases because of awareness that certain actions might invoke its provisions. For example, the threat of invoking the War Powers Resolution may have been helpful in getting U.S. forces out of Grenada, in keeping the number of military advisers in El Salvador limited to 55, and in prodding Congress to take a stand on authorizing the war against Iraq. A contrary view is that the War Powers Resolution is an inappropriate instrument that restricts the President's effectiveness in foreign policy and should be repealed. Those with this perspective believe that the basic premise of the War Powers Resolution is wrong because in it, Congress attempts excessive control of the deployment of U.S. military forces, encroaching on the responsibility of the President. Supporters of repeal contend that the President needs more flexibility in the conduct of foreign policy and that the time limitation in the War Powers Resolution is unconstitutional and impractical. Some holding this view contend that Congress has always had the power, through appropriations and general lawmaking, to inquire into, support, limit, or prohibit specific uses of U.S. Armed Forces if there is majority support. The War Powers Resolution does not fundamentally change this equation, it is argued, but it complicates action, misleads military opponents, and diverts attention from key policy questions. A third view is that the War Powers Resolution has not been adequate to accomplish its objectives and needs to be strengthened or reshaped. Proponents of this view assert that Presidents have continued to introduce U.S. Armed Forces into hostilities without consulting Congress and without congressional authorization. Presidents have cited Section 4(a)(1) on only one occasion—Mayaguez—and by the time the action was reported, it was virtually over. Holders of this third view have proposed various types of amendments to the War Powers Resolution. These include returning to the version originally passed by the Senate, establishing a congressional consultation group, adding a cutoff of funds, and providing for judicial review. A general discussion of these categories of possible changes follows. In 1977, Senator Thomas Eagleton proposed that the War Powers Resolution return to the original language of the version passed by the Senate, and this proposal has been made several times since. This would require prior congressional authorization for the introduction of forces into conflict abroad without a declaration of war except to respond to or forestall an armed attack against the United States or its forces or to protect U.S. citizens while evacuating them. The amendment would eliminate the construction that the President has 60 to 90 days in which he can militarily act without authorization. Opponents fear the exceptions to forestall attacks or rescue American citizens abroad would serve as a blanket authorization and might be abused, yet might not allow the needed speed of action and provide adequate flexibility in other circumstances. Another proposal is to shorten the time period that the President could maintain forces in hostile situations abroad without congressional authorization from 60 to 30 days, or eliminate it altogether. Some proponents of this amendment contend the current War Powers Resolution gives the President 60 to 90 days to do as he chooses and that this provides too much opportunity for mischief or irreversible action. The original Senate version provided that the use of armed forces in hostilities or imminent hostilities in any of the emergency situations could not be sustained beyond 30 days without specific congressional authorization, extendable by the President upon certification of necessity for safe disengagement. Opponents of this and related measures argue that they induce military opponents to adopt strategies to win given conflicts in Congress that they could not win in the field over time. The War Powers Resolution has an automatic requirement for withdrawal of troops 60 days after the President submits a Section 4(a)(1) report. Some Members of Congress favor replacing this provision with expedited procedures for a joint resolution to authorize the action or require disengagement. One of the main executive branch objections to the War Powers Resolution has been that the withdrawal requirement could be triggered by congressional inaction, and that adversaries can simply wait out the 60 days. By providing for withdrawal by joint resolution, this amendment would also deal with the provision for withdrawal by concurrent resolution, under a cloud because of the Chadha decision. On the other hand, a joint resolution requiring disengagement could be vetoed by the President and thus would require a two-thirds majority vote in both Houses for enactment. Some proposals call for prohibiting the obligation or expenditure of funds for any use of U.S. Armed Forces in violation of the War Powers Resolution or laws passed under it except for the purpose of removing troops. Congress could enforce this provision by refusing to appropriate further funds to continue the military action. This has always been the case, some contend, and would not work because Congress would remain reluctant to withhold financial support for U.S. Armed Forces once they were abroad. Many proposed amendments eliminate Section 5(c) providing that U.S. forces engaged in hostilities abroad without congressional authorization are to be removed if Congress so directs by concurrent resolution, and Section 7 providing priority procedures for a concurrent resolution. Those who hold this view contend the concurrent resolution section is invalid because of the Chadha decision. Several proposals call for new and more detailed priority procedures for joint resolutions introduced under the War Powers Resolution. These would apply to joint resolutions either authorizing a military action or calling for the withdrawal of forces, and to congressional action to sustain or override a presidential veto of the joint resolution. Several proposed amendments have focused on improving consultation under the War Powers Resolution, particularly by establishing a specific consultation group in Congress for this purpose. Senators Byrd, Nunn, Warner, and Mitchell have proposed the President regularly consult with an initial group of 6 Members—the majority and minority leaders of both Chambers plus the Speaker of the House and President pro tempore of the Senate. Upon a request from a majority of this core group, the President is to consult with a permanent consultative group of 18 Members consisting of the leadership and the ranking and minority members of the Committees on Foreign Relations, Armed Services, and Intelligence. The permanent consultative group would also be able to determine that the President should have reported an introduction of forces and to introduce a joint resolution of authorization or withdrawal that would receive expedited procedures. Other Members have favored a consultation group, but consider that amendment of the War Powers Resolution is not required for Congress to designate such a group. On October 28, 1993, House Foreign Affairs Chairman Lee Hamilton introduced H.R. 3405 to establish a Standing Consultative Group. Its purpose would be to facilitate improved interaction between the executive branch and Congress on the use of U.S. military forces abroad, including under the War Powers Resolution or United Nations auspices. Members of the Consultative Group would be appointed by the Speaker of the House and the Majority Leader of the Senate, after consultation with the minority leaders. The Group would include majority and minority representatives of the leadership and the committees on foreign policy, armed services, intelligence, and appropriations. Another proposal would attempt to improve consultation by broadening the instances in which the President is required to consult. This proposal would cover all situations in which a President is required to report, rather than only circumstances that invoke the time limitation, as is now the case. Proposals have been made that any Member of Congress may bring an action in the United States District Court for the District of Columbia for judgment and injunctive relief on the grounds that the President or the U.S. Armed Forces have not complied with any provision of the War Powers Resolution. The intent of this legislation is to give standing to Members to assert the interest of the House or Senate, but whether it would impel courts to exercise jurisdiction is uncertain. Most recent federal court decisions have rejected War Powers lawsuits by congressional litigants on the grounds they lacked standing to sue. Proposals have also called for the court not to decline to make a determination on the merits, on the grounds that the issue of compliance is a political question or otherwise nonjusticiable; to accord expedited consideration to the matter; and to prescribe judicial remedies including that the President submit a report or remove Armed Forces from a situation. Other proposals would construct a Hostilities Act or Use of Force Act and repeal the War Powers Resolution. A possible objection to invoking the War Powers Resolution is reluctance to escalate international tension by implying that a situation is war. Some would see this as a step in the wrong direction; in the Korean and Vietnam conflicts, some contend, it was self-deceptive and ultimately impractical not to recognize hostilities of that magnitude as war and bring to bear the Constitutional provision giving Congress the power to declare war. With the increase in United Nations actions since the end of the Cold War, the question has been raised whether the War Powers Resolution should be amended to facilitate or restrain the President from supplying forces for U.N. actions without congressional approval. Alternatively, the United Nations Participation Act might be amended, or new legislation enacted, to specify how the War Powers Resolution is to be applied, and whether the approval of Congress would be required only for an initial framework agreement on providing forces to the United Nations, or whether Congress would be required to approve an agreement to supply forces in specified situations, particularly for U.N. peacekeeping operations. Appendix A. Instances Reported Under the War Powers Resolution This appendix lists reports Presidents have made to Congress through early 2017 as the result of the War Powers Resolution. Each entry contains the President's reference to the War Powers Resolution. The reports generally cite the President's authority to conduct foreign relations and as Commander in Chief; each entry indicates any additional legislative authority a President cites for his action. Several of the reports listed for the period since 1991, in particular, are reports regarding ongoing operations previously reported by the President, rather than completely new instances of use of the U.S. military overseas. (1) Danang, Vietnam . On April 4, 1975, President Ford reported the use of naval vessels, helicopters, and Marines to transport refugees from Danang and other seaports to safer areas in Vietnam. His report mentioned Section 4(a)(2) of the War Powers Resolution and authorization in the Foreign Assistance Act of 1961 for humanitarian assistance to refugees suffering from the hostilities in South Vietnam. Monroe Leigh, Legal Adviser to the Department of State, testified later that the President \"advised the members of the Senate and House leadership that a severe emergency existed in the coastal communities of South Vietnam and that he was directing American naval transports and contract vessels to assist in the evacuation of refugees from coastal seaports.\" (2) Cambodia . On April 12, 1975, President Ford reported the use of ground combat Marines, helicopters, and supporting tactical air elements to assist with the evacuation of U.S. nationals from Cambodia. The report took note of both Section 4 and Section 4(a)(2) of the War Powers Resolution. On April 3, 1975, the day the President authorized the Ambassador to evacuate the American staff, he directed that the leaders of the Senate and House be advised of the general plan of evacuation. On April 11, the day he ordered the final evacuation, President Ford again directed that congressional leaders be notified. (3) Vietnam . On April 30, 1975, President Ford reported the use of helicopters, Marines, and fighter aircraft to aid in the evacuation of U.S. citizens and others from South Vietnam. The report took note of Section 4 of the War Powers Resolution. On April 10, the President had asked Congress to clarify its limitation on the use of forces in Vietnam to insure evacuation of U.S. citizens and to cover some Vietnamese nationals, but legislation to this effect was not completed. On April 28, the President directed that congressional leaders be notified that the final phase of the evacuation of Saigon would be carried out by military forces within the next few hours. (4) Mayaguez . On May 15, 1975, President Ford reported that he had ordered U.S. military forces to rescue the crew of and retake the ship Mayaguez that had been seized by Cambodian naval patrol boats on May 12, that the ship had been retaken, and that the withdrawal of the forces had been undertaken. The report took note of Section 4(a)(1) of the War Powers Resolution. On May 13, Administration aides contacted 10 Members from the House and 11 Senators regarding the military measures directed by the President. (5) Iran . On April 26, 1980, President Carter reported the use of six aircraft and eight helicopters in an unsuccessful attempt of April 24 to rescue the American hostages in Iran. The report was submitted \"consistent with the reporting provision\" of the War Powers Resolution. President Carter said the United States was acting in accordance with its right under Article 51 of the United Nations Charter to protect and rescue its citizens where the government of the territory in which they are located is unable or unwilling to protect them. The Administration did not inform congressional leaders of the plan on grounds that consultation could endanger the success of the mission. (6) Sinai . The United States, Egypt, and Israel signed an executive agreement on August 3, 1981, outlining U.S. participation in a Multinational Force and Observers unit to function as a peacekeeping force in the Sinai after Israel withdrew its forces. In anticipation of this accord, on July 21, 1981, President Reagan requested congressional authorization for U.S. participation. Congress authorized President Reagan to deploy military personnel to the Sinai in the Multinational Force and Observers Participation Resolution, P.L. 97-132 , signed December 29, 1981. On March 19, 1982, President Reagan reported the deployment of military personnel and equipment to the Multinational Force and Observers in the Sinai. The President said the report was provided \"consistent with Section 4(a)(2) of the War Powers Resolution\" and cited the Multinational Force and Observers Participation Resolution. (7) Lebanon . On August 24, 1982, President Reagan reported the dispatch of 800 Marines to serve in the multinational force to assist in the withdrawal of members of the Palestine Liberation force from Lebanon. The report was provided \"consistent with\" but did not cite any specific provision of the War Powers Resolution. President Reagan had begun discussions with congressional leaders on July 6, 1982, after the plan had been publicly announced, and after leaks in the Israeli press indicated that he had approved the plan on July 2. (8) Lebanon . On September 29, 1982, President Reagan reported the deployment of 1,200 Marines to serve in a temporary multinational force to facilitate the restoration of Lebanese government sovereignty. He said the report was being submitted \"consistent with the War Powers Resolution.\" On this second Multinational Force in Lebanon there was a considerable amount of negotiation between the executive branch and Congress, but most of it occurred after the decision to participate had been made and the Marines were in Lebanon. (9) Chad . On August 8, 1983, President Reagan reported the deployment of two AWACS electronic surveillance planes and eight F-15 fighter planes and ground logistical support forces to Sudan to assist Chad and other friendly governments helping Chad against Libyan and rebel forces. He said the report was being submitted consistent with Section 4 of the War Powers Resolution. On August 23, 1983, a State Department spokesman announced that the planes were being withdrawn. (10) Lebanon . On August 30, 1983, after the Marines participating in the Multinational Force in Lebanon were fired upon and two were killed, President Reagan submitted a report \"consistent with Section 4 of the War Powers Resolution.\" In P.L. 98-119 , the Multinational Force in Lebanon Resolution, signed October 12, 1983, Congress determined Section 4(a) had become operative on August 29, 1983, and authorized the forces to remain for 18 months. (11) Grenada . On October 25, 1983, President Reagan reported that U.S. Army and Marine personnel had begun landing in Grenada to join collective security forces of the Organization of Eastern Caribbean States in assisting in the restoration of law and order in Grenada and to facilitate the protection and evacuation of U.S. citizens. He submitted the report \"consistent with the War Powers Resolution.\" President Reagan met with several congressional leaders at 8 p.m. on October 24. This was after the directive ordering the landing had been signed at 6 p.m., but before the actual invasion that began at 5:30 a.m., October 25. (12) Libya . On March 26, 1986, President Reagan reported (without any mention of the War Powers Resolution) that, on March 24 and 25, U.S. forces conducting freedom of navigation exercises in the Gulf of Sidra had been attacked by Libyan missiles. In response, the United States fired missiles at Libyan vessels and at Sirte, the missile site. (13) Libya . On April 16, 1986, President Reagan reported, \"consistent with the War Powers Resolution,\" that on April 14 U.S. air and naval forces had conducted bombing strikes on terrorist facilities and military installations in Libya. President Reagan had invited approximately a dozen congressional leaders to the White House at about 4 p.m. on April 14 and discussed the situation until 6 p.m. He indicated that he had ordered the bombing raid and that the aircraft from the United Kingdom were on their way to Libya and would reach their targets about 7 p.m. (14) Persian Gulf . On September 23, 1987, President Reagan reported that, on September 21, two U.S. helicopters had fired on an Iranian landing craft observed laying mines in the Gulf. The President said that while mindful of legislative-executive differences on the interpretation and constitutionality of certain provisions of the War Powers Resolution, he was reporting in a spirit of mutual cooperation. (15) Persian Gulf . On October 10, 1987, President Reagan reported \"consistent with the War Powers Resolution\" that, on October 8, three U.S. helicopters were fired upon by small Iranian naval vessels and the helicopters returned fire and sank one of the vessels. (16) Persian Gulf . On October 20, 1987, President Reagan reported an attack by an Iranian Silkworm missile against the U.S.-flag tanker Sea Isle City on October 15 and U.S. destruction, on October 19, of the Iranian Rashadat armed platform used to support attacks and mine-laying operations. The report was submitted \"consistent with the War Powers Resolution.\" (17) Persian Gulf . On April 19, 1988, President Reagan reported \"consistent with the War Powers Resolution\" that in response to the U.S.S. Samuel B. Roberts striking a mine on April 14, U.S. Armed Forces attacked and \"neutralized\" two Iranian oil platforms on April 18 and, after further Iranian attacks, damaged or sank Iranian vessels. The President called the actions \"necessary and proportionate.\" Prior to this action, the President met with congressional leaders. (18) Persian Gulf . On July 4, 1988, President Reagan reported that on July 3 the USS Vincennes and USS Elmer Montgomery fired upon approaching Iranian small craft, sinking two. Firing in self-defense at what it believed to be a hostile Iranian military aircraft, the Vincennes had shot down an Iranian civilian airliner. The President expressed deep regret. The report was submitted \"consistent with the War Powers Resolution.\" (19) Persian Gulf . On July 14, 1988, President Reagan reported that, on July 12, two U.S. helicopters, responding to a distress call from a Japanese-owned Panamanian tanker, were fired at by two small Iranian boats and returned the fire. The report was submitted \"consistent with the War Powers Resolution.\" (20) Philippines . On December 2, 1989, President George H. W. Bush submitted a report to congressional leaders \"consistent with\" the War Powers Resolution, describing assistance of combat air patrols to help the Aquino government in the Philippines restore order and to protect American lives. After the planes had taken off from Clark Air Base to provide air cover, Vice President Quayle and other officials informed congressional leaders. On December 7, House Foreign Affairs Committee Chairman Dante Fascell wrote President Bush expressing his concern for the lack of advance consultation. In reply, on February 10, 1990, National Security Adviser Brent Scowcroft wrote Chairman Fascell that the President was \"committed to consultations with Congress prior to deployments of U.S. Forces into actual or imminent hostilities in all instances where such consultations are possible. In this instance, the nature of the rapidly evolving situation required an extremely rapid decision very late at night and consultation was simply not an option.\" (21) Panama . On December 21, 1989, President George H. W. Bush reported \"consistent with the War Powers Resolution\" that he had ordered U.S. military forces to Panama to protect the lives of American citizens and bring General Noriega to justice. By February 13, 1990, all the invasion forces had been withdrawn. President Bush informed several congressional leaders of the approaching invasion of Panama at 6 p.m. on December 19, 1989. This was after the decision to take action was made, but before the operation actually began at 1:00 a.m., December 20. (22) Liberia . On August 6, 1990, President George H. W. Bush reported to Congress that following discussions with congressional leaders, a reinforced rifle company had been sent to provide additional security to the U.S. Embassy in Monrovia and helicopter teams had evacuated U.S. citizens from Liberia. The report did not mention the War Powers Resolution or cite any authority. (23) Iraq . On August 9, 1990, President George H. W. Bush reported to Congress \"consistent with the War Powers Resolution\" that he had ordered the forward deployment of substantial elements of the U.S. Armed Forces into the Persian Gulf region to help defend Saudi Arabia after the invasion of Kuwait by Iraq. The Bush Administration notified congressional leaders that it was deploying U.S. troops to Saudi Arabia on August 7, the date of the deployment. After the forces had been deployed, President Bush held several meetings with congressional leaders and members of relevant committees, and committees held hearings to discuss the situation. (24) Iraq . On November 16, 1990, President George H. W. Bush reported, without mention of the War Powers Resolution but referring to the August 9 letter, the continued buildup to ensure \"an adequate offensive military option.\" Just prior to adjournment, Senate Majority Leader Mitchell and Speaker Foley designated Members to form a consultation group, and the President held meetings with the group on some occasions, but he did not consult the members in advance on the major buildup of forces in the Persian Gulf area announced November 8. (25) Iraq . On January 18, 1991, President George H. W. Bush reported to Congress \"consistent with the War Powers Resolution\" that he had directed U.S. Armed Forces to commence combat operations on January 16 against Iraqi forces and military targets in Iraq and Kuwait. On January 12, Congress had passed the Authorization for Use of Military Force against Iraq Resolution ( P.L. 102-1 ), which stated it was the specific statutory authorization required by the War Powers Resolution. P.L. 102-1 required the President to submit a report to the Congress at least once every 60 days on the status of efforts to obtain compliance by Iraq with the U.N. Security Council resolution, and Presidents submitted subsequent reports on military actions in Iraq \"consistent with\" P.L. 102-1 . An exception is report submitted June 28, 1993, described below. (26) Somalia . On December 10, 1992, President George H. W. Bush reported \"consistent with the War Powers Resolution\" that U.S. Armed Forces had entered Somalia on December 8 in response to a humanitarian crisis and a U.N. Security Council Resolution determining that the situation constituted a threat to international peace. He included as authority applicable treaties and laws, and said he had also taken into account views expressed in H.Con.Res. 370 , S.Con.Res. 132 , and the Horn of Africa Recovery and Food Security Act, P.L. 102-274 . On December 4, the day the President ordered the forces deployed, he briefed a number of congressional leaders on the action. (27) Bosnia . On April 13, 1993, President Clinton reported \"consistent with Section 4 of the War Powers Resolution\" that U.S. forces were participating in a NATO air action to enforce a U.N. ban on all unauthorized military flights over Bosnia-Hercegovina, pursuant to his authority as Commander in Chief. Later, on April 27, President Clinton consulted with about two dozen congressional leaders on potential further action. (28) Somalia . On June 10, 1993, President Clinton reported that in response to attacks against U.N. forces in Somalia by a factional leader, the U.S. Quick Reaction Force in the area had participated in military action to quell the violence. He said the report was \"consistent with the War Powers Resolution, in light of the passage of 6 months since President Bush's initial report....\" He said the action was in accordance with applicable treaties and laws, and said the deployment was consistent with S.J.Res. 45 as adopted by the Senate and amended by the House. (The Senate did not act on the House amendment, so Congress did not take final action on S.J.Res. 45 .) (29) Iraq . On June 28, 1993, President Clinton reported \"consistent with the War Powers Resolution\" that on June 26 U.S. naval forces had launched missiles against the Iraqi Intelligence Service's headquarters in Baghdad in response to an unsuccessful attempt to assassinate former President Bush in Kuwait in April 1993. (30) Macedonia . On July 9, 1993, President Clinton reported \"consistent with Section 4 of the War Powers Resolution\" the deployment of approximately 350 U.S. Armed Forces to Macedonia to participate in the U.N. Protection Force to help maintain stability in the area of former Yugoslavia. He said the deployment was directed in accordance with Section 7 of the United Nations Participation Act. (31) Bosnia . On October 13, 1993, President Clinton reported \"consistent with the War Powers Resolution\" that U.S. military forces continued to support enforcement of the U.N. no-fly zone in Bosnia, noting that more than 50 U.S. aircraft were now available for NATO efforts in this regard. (32) Haiti . On October 20, 1993, President Clinton submitted a report \"consistent with the War Powers Resolution\" that U.S. ships had begun to enforce a U.N. embargo against Haiti. (33) Macedonia . On January 8, 1994, President Clinton reported \"consistent with the War Powers Resolution\" that approximately 300 members of a reinforced company team (RCT) of the U.S. Army's 3 rd Infantry Division (Mechanized) had assumed a peacekeeping role in Macedonia as part of the United Nations Protection Force (UNPROFOR) on January 6, 1994. (34) Bosnia . On February 17, 1994, President Clinton reported \"consistent with the War Powers Resolution\" that the United States had expanded its participation in United Nations and NATO efforts to reach a peaceful solution in former Yugoslavia and that 60 U.S. aircraft were available for participation in the authorized NATO missions. (35) Bosnia . On March 1, 1994, President Clinton reported \"consistent with\" the War Powers Resolution that on February 28 U.S. planes patrolling the \"no-fly zone\" in former Yugoslavia under the North Atlantic Treaty Organization (NATO) shot down 4 Serbian Galeb planes. (36) Bosnia . On April 12, 1994, President Clinton reported \"consistent with\" the War Powers Resolution that on April 10 and 11, U.S. warplanes under NATO command had fired against Bosnian Serb forces shelling the \"safe\" city of Gorazde. (37) Rwanda . On April 12, 1994, President Clinton reported \"consistent with\" the War Powers Resolution that combat-equipped U.S. military forces had been deployed to Burundi to conduct possible noncombatant evacuation operations of U.S. citizens and other third-country nationals from Rwanda, where widespread fighting had broken out. (38) Macedonia . On April 19, 1994, President Clinton reported \"consistent with the War Powers Resolution\" that the U.S. contingent in the former Yugoslav Republic of Macedonia had been augmented by a reinforced company of 200 personnel. (39) Haiti . On April 20, 1994, President Clinton reported \"consistent with the War Powers Resolution\" that U.S. naval forces had continued enforcement in the waters around Haiti and that 712 vessels had been boarded. (40) Bosnia . On August 22, 1994, President Clinton reported the use on August 5 of U.S. aircraft under NATO to attack Bosnian Serb heavy weapons in the Sarajevo heavy weapons exclusion zone upon request of the U.N. Protection Forces. He did not cite the War Powers Resolution but referred to the April 12 report that cited the War Powers Resolution. (41) Haiti . On September 21, 1994, President Clinton reported \"consistent with the War Powers Resolution\" the deployment of 1,500 troops to Haiti to restore democracy in Haiti. The troop level was subsequently increased to 20,000. (42) Bosnia . On November 22, 1994, President Clinton reported \"consistent with the War Powers Resolution\" the use of U.S. combat aircraft on November 21, 1994, under NATO to attack bases used by Serbs to attack the town of Bihac in Bosnia. (43) Macedonia . On December 22, 1994, President Clinton reported \"consistent with the War Powers Resolution\" that the U.S. Army contingent in the former Yugoslav Republic of Macedonia continued its peacekeeping mission and that the current contingent would soon be replaced by about 500 soldiers from the 3 rd Battalion, 5 th Cavalry Regiment, 1 st Armored Division from Kirchgons, Germany. (44) Somalia . On March 1, 1995, President Clinton reported \"consistent with the War Powers Resolution\" that on February 27, 1995, 1,800 combat-equipped U.S. Armed Forces personnel began deployment into Mogadishu, Somalia, to assist in the withdrawal of U.N. forces assigned there to the United Nations Operation in Somalia (UNOSOM II). (45) Haiti . On March 21, 1995, President Clinton reported \"consistent with the War Powers Resolution\" that U.S. military forces in Haiti as part of a U.N. Multinational Force had been reduced to just under 5,300 personnel. He noted that as of March 31, 1995, approximately 2,500 U.S. personnel would remain in Haiti as part of the U.N. Mission in Haiti UNMIH). (46) Bosnia . On May 24, 1995, President Clinton reported \"consistent with the War Powers Resolution\" that U.S. combat-equipped fighter aircraft and other aircraft continued to contribute to NATO's enforcement of the no-fly zone in airspace over Bosnia-Herzegovina. U.S. aircraft, he noted, are also available for close air support of U.N. forces in Croatia. Roughly 500 U.S. soldiers continue to be deployed in the former Yugoslav Republic of Macedonia as part of the U.N. Preventive Deployment Force (UNPREDEP). U.S. forces continue to support U.N. refugee and embargo operations in this region. (47) Bosnia . On September 1, 1995, President Clinton reported \"consistent with the War Powers Resolution,\" that \"U.S. combat and support aircraft\" had been used beginning on August 29, 1995, in a series of NATO air strikes against Bosnian Serb Army (BSA) forces in Bosnia-Herzegovina that were threatening the U.N.-declared safe areas of Sarajevo, Tuzla, and Gorazde.\" He noted that during the first day of operations, \"some 300 sorties were flown against 23 targets in the vicinity of Sarajevo, Tuzla, Goradzde and Mostar.\" (48) Haiti . On September 21, 1995, President Clinton reported \"consistent with the War Powers Resolution\" that the United States had 2,400 military personnel in Haiti as participants in the U.N. Mission in Haiti (UNMIH). In addition, 260 U.S. military personnel are assigned to the U.S. Support Group Haiti. (49) Bosnia . On December 6, 1995, President Clinton notified Congress, \"consistent with the War Powers Resolution,\" that he had \"ordered the deployment of approximately 1,500 U.S. military personnel to Bosnia and Herzegovina and Croatia as part of a NATO 'enabling force' to lay the groundwork for the prompt and safe deployment of the NATO-led Implementation Force (IFOR),\" which would be used to implement the Bosnian peace agreement after its signing. The President also noted that he had authorized deployment of roughly 3,000 other U.S. military personnel to Hungary, Italy, and Croatia to establish infrastructure for the enabling force and the IFOR. (50) Bosnia . On December 21, 1995, President Clinton notified Congress \"consistent with the War Powers Resolution\" that he had ordered the deployment of approximately 20,000 U.S. military personnel to participate in the NATO-led Implementation Force (IFOR) in the Republic of Bosnia-Herzegovina, and approximately 5,000 U.S. military personnel would be deployed in other former Yugoslav states, primarily in Croatia. In addition, about 7,000 U.S. support forces would be deployed to Hungary, Italy and Croatia and other regional states in support of IFOR's mission. The President ordered participation of U.S. forces \"pursuant to\" his \"constitutional authority to conduct the foreign relations of the United States and as Commander-in-Chief and Chief Executive.\" (51) Haiti . On March 21, 1996, President Clinton notified Congress \"consistent with the War Powers Resolution\" that beginning in January 1996 there had been a \"phased reduction\" in the number of United States personnel assigned to the United Nations Mission in Haiti (UNMIH). As of March 21, 309 U.S. personnel remained a part of UNMIH. These U.S. forces were \"equipped for combat.\" (52) Liberia . On April 11, 1996, President Clinton notified Congress \"consistent with the War Powers Resolution\" that on April 9, 1996, due to the \"deterioration of the security situation and the resulting threat to American citizens\" in Liberia he had ordered U.S. military forces to evacuate from that country \"private U.S. citizens and certain third-country nationals who had taken refuge in the U.S. Embassy compound....\" (53) Liberia . On May 20, 1996, President Clinton notified Congress, \"consistent with the War Powers Resolution\" of the continued deployment of U.S. military forces in Liberia to evacuate both American citizens and other foreign personnel, and to respond to various isolated \"attacks on the American Embassy complex\" in Liberia. The President noted that the deployment of U.S. forces would continue until there was no longer any need for enhanced security at the Embassy and a requirement to maintain an evacuation capability in the country. (54) Central African Republic . On May 23, 1996, President Clinton notified Congress, \"consistent with the War Powers Resolution\" of the deployment of U.S. military personnel to Bangui, Central African Republic, to conduct the evacuation from that country of \"private U.S. citizens and certain U.S. Government employees,\" and to provide \"enhanced security\" for the American Embassy in Bangui. (55) Bosnia . On June 21, 1996, President Clinton notified Congress, \"consistent with the War Powers Resolution\" that United States forces totaling about 17,000 remain deployed in Bosnia \"under NATO operational command and control\" as part of the NATO Implementation Force (IFOR). In addition, about 5,500 U.S. military personnel are deployed in Hungary, Italy and Croatia, and other regional states to provide \"logistical and other support to IFOR.\" The President noted that it was the intention that IFOR would complete the withdrawal of all troops in the weeks after December 20, 1996, on a schedule \"set by NATO commanders consistent with the safety of troops and the logistical requirements for an orderly withdrawal.\" He also noted that a U.S. Army contingent (of about 500 U.S. soldiers) remains in the Former Yugoslav Republic of Macedonia as part of the United Nations Preventive Deployment Force (UNPREDEP). (56) Rwanda and Zaire . On December 2, 1996, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that in support of the humanitarian efforts of the United Nations regarding refugees in Rwanda and the Great Lakes Region of Eastern Zaire, he had authorized the use of U.S. personnel and aircraft, including AC-130U planes to help in surveying the region in support of humanitarian operations, although fighting still was occurring in the area, and U.S. aircraft had been subject to fire when on flight duty. (57) Bosnia . On December 20, 1996, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that he had authorized U.S. participation in an IFOR follow-on force in Bosnia, known as SFOR (Stabilization Force), under NATO command. The President said the U.S. forces contribution to SFOR was to be \"about 8,500\" personnel whose primary mission was to deter or prevent a resumption of hostilities or new threats to peace in Bosnia. SFOR's duration was Bosnia is expected to be 18 months, with progressive reductions and eventual withdrawal. (58) Albania . On March 15, 1997, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that on March 13, 1997, he had utilized U.S. military forces to evacuate certain U.S. Government employees and private U.S. citizens from Tirana, Albania, and to enhance security for the U.S. embassy in that city. (59) Congo and Gabon . On March 27, 1997, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that on March 25, 1997, a standby evacuation force of U.S. military personnel had been deployed to Congo and Gabon to provide enhanced security for American private citizens, government employees and selected third country nationals in Zaire, and be available for any necessary evacuation operation. (60) Sierra Leone . On May 30, 1997, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that on May 29 and May 30, 1997, U.S. military personnel were deployed to Freetown, Sierra Leone to prepare for and undertake the evacuation of certain U.S. Government employees and private U.S. citizens. (61) Bosnia . On June 20, 1997, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that U.S. Armed Forces continued to support peacekeeping operations in Bosnia and other states in the region in support of the NATO-led Stabilization Force (SFOR). He reported that most U.S. military personnel then involved in SFOR were in Bosnia, near Tuzla, and about 2,800 U.S. troops were deployed in Hungary, Croatia, Italy, and other regional states to provide logistics and other support to SFOR. A U.S. Army contingent of about 500 also remained deployed in the Former Yugoslav Republic of Macedonia as part of the U.N. Preventative Deployment Force (UNPREDEP). (62) Cambodia . On July 11, 1997, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that in an effort to ensure the security of American citizens in Cambodia during a period of domestic conflict there, he had deployed a Task Force of about 550 U.S. military personnel to Utapao Air Base in Thailand. These personnel were to be available for possible emergency evacuation operations in Cambodia. (63) Bosnia . On December 19, 1997, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that he intended \"in principle\" to have the United States participate in a security presence in Bosnia when the NATO SFOR contingent withdrew in the summer of 1998. (64) Guinea-Bissau . On June 12, 1998, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that, on June 10, 1998, in response to an army mutiny in Guinea-Bissau endangering the U.S. Embassy and U.S. government employees and citizens in that country, he had deployed a standby evacuation force of U.S. military personnel to Dakar, Senegal, to remove such individuals, as well as selected third country nationals, from the city of Bissau. (65) Bosnia . On June 19, 1998, President Clinton reported to Congress \"consistent with the War Powers Resolution\" regarding activities in the last six months of combat-equipped U.S. forces in support of NATO's SFOR in Bosnia and surrounding areas of former Yugoslavia. (66) Kenya and Tanzania . On August 10, 1998, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that he had deployed, on August 7, 1998, a Joint Task Force of U.S. military personnel to Nairobi, Kenya to coordinate the medical and disaster assistance related to the bombings of the U.S. embassies in Kenya and Tanzania. He also reported that teams of 50-100 security personnel had arrived in Nairobi, Kenya and Dar es Salaam, Tanzania to enhance the security of the U.S. embassies and citizens there. (67) Albania . On August 18, 1998, President Clinton reported to Congress, \"consistent with the War Powers Resolution,\" that he had, on August 16, 1998, deployed 200 U.S. Marines and 10 Navy SEALS to the U.S. Embassy compound in Tirana, Albania to enhance security against reported threats against U.S. personnel. (68) Afghanistan and Sudan . On August 21, 1998, by letter, President Clinton notified Congress \"consistent with the War Powers Resolution\" that he had authorized airstrikes on August 20 th against camps and installations in Afghanistan and Sudan used by the Osama bin Laden terrorist organization. The President did so based on what he termed convincing information that the bin Laden organization was responsible for the bombings, on August 7, 1998, of the U.S. embassies in Kenya and Tanzania. (69) Liberia . On September 29, 1998, by letter, President Clinton notified Congress \"consistent with the War Powers Resolution\" that he had deployed a stand-by response and evacuation force to Liberia to augment the security force at the U.S. Embassy in Monrovia, and to provide for a rapid evacuation capability, as needed, to remove U.S. citizens and government personnel from the country. (70) Bosnia . On January 19, 1999, by letter, President Clinton notified Congress \"consistent with the War Powers Resolution\" that pursuant to his authority as Commander in Chief he was continuing to authorize the use of combat-equipped U.S. Armed Forces to Bosnia and other states in the region to participate in and support the NATO-led Stabilization Force (SFOR). He noted that U.S. SFOR military personnel totaled about 6,900, with about 2,300 U.S. military personnel deployed to Hungary, Croatia, Italy and other regional states. Also some 350 U.S. military personnel remain deployed in the Former Yugoslav Republic of Macedonia (FYROM) as part of the UN Preventive Deployment Force (UNPREDEP). (71) Kenya . On February 25, 1999, President Clinton submitted a supplemental report to Congress \"consistent with the War Powers Resolution\" describing the continuing deployment of U.S. military personnel in Kenya to provide continuing security for U.S. embassy and American citizens in Nairobi in the aftermath of the terrorist bombing there. (72) Yugoslavia/Kosovo . On March 26, 1999, President Clinton notified Congress \"consistent with the War Powers Resolution,\" that on March 24, 1999, U.S. military forces, at his direction and acting jointly with NATO allies, had commenced air strikes against Yugoslavia in response to the Yugoslav government's campaign of violence and repression against the ethnic Albanian population in Kosovo. (73) Yugoslavia/Albania . On April 7, 1999, President Clinton notified Congress, \"consistent with the War Powers Resolution,\" that he had ordered additional U.S. military forces to Albania, including rotary wing aircraft, artillery, and tactical missiles systems to enhance NATO's ability to conduct effective air operations in Yugoslavia. About 2,500 soldiers and aviators are to be deployed as part of this task force. (74) Yugoslavia/Albania . On May 25, 1999, President Clinton reported to Congress, \"consistent with the War Powers Resolution\" that he had directed \"deployment of additional aircraft and forces to support NATO's ongoing efforts [against Yugoslavia], including several thousand additional U.S. Armed Forces personnel to Albania in support of the deep strike force located there.\" He also directed that additional U.S. forces be deployed to the region to assist in \"humanitarian operations.\" (75) Yugoslavia/Kosovo . On June 12, 1999, President Clinton reported to Congress, \"consistent with the War Powers Resolution,\" that he had directed the deployment of about \"7,000 U.S. military personnel as the U.S. contribution to the approximately 50,000-member, NATO-led security force (KFOR)\" being assembled in Kosovo. He also noted that about \"1,500 U.S. military personnel, under separate U.S. command and control, will deploy to other countries in the region, as our national support element, in support of KFOR.\" (76) Bosnia . On July 19, 1999, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that about 6,200 U.S. military personnel were continuing to participate in the NATO-led Stabilization Force (SFOR) in Bosnia, and that another 2,200 personnel were supporting SFOR operations from Hungary, Croatia, and Italy. He also noted that U.S. military personnel remain in the Former Yugoslav Republic of Macedonia to support the international security presence in Kosovo (KFOR). (77) East Timor . On October 8, 1999, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that he had directed the deployment of a limited number of U.S. military forces to East Timor to support the U.N. multinational force (INTERFET) aimed at restoring peace to East Timor. U.S. support had been limited initially to \"communications, logistics, planning assistance and transportation.\" The President further noted that he had authorized deployment of the amphibious ship USS Belleau Wood , together with its helicopters and her complement of personnel from the 31 st Marine Expeditionary Unit (Special Operations Capable) (MEU SOC) to the East Timor region, to provide helicopter airlift and search and rescue support to the multinational operation. U.S. participation was anticipated to continue until the transition to a U.N. peacekeeping operation was complete. (78) Yugoslavia/Kosovo . On December 15, 1999, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that U.S. combat-equipped military personnel continued to serve as part of the NATO-led security force in Kosovo (KFOR). He noted that the American contribution to KFOR in Kosovo was \"approximately 8,500 U.S. military personnel.\" U.S. forces were deployed in a sector centered around \"Urosevac in the eastern portion of Kosovo.\" For U.S. KFOR forces, \"maintaining public security is a key task.\" Other U.S. military personnel are deployed to other countries in the region to serve in administrative and logistics support roles for U.S. forces in KFOR. Of these forces, about 1,500 U.S. military personnel are in Macedonia and Greece, and occasionally in Albania. (79) Bosnia . On January 25, 2000, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that the U.S. continued to provide combat-equipped U.S. Armed Forces to Bosnia and Herzegovina and other states in the region as part of the NATO-led Stabilization Force (SFOR). The President noted that the U.S. force contribution was being reduced from \"approximately 6,200 to 4,600 personnel,\" with the U.S. forces assigned to Multinational Division, North, centered around the city of Tuzla. He added that approximately 1,500 U.S. military personnel were deployed to Hungary, Croatia, and Italy to provide \"logistical and other support to SFOR,\" and that U.S. forces continue to support SFOR in \"efforts to apprehend persons indicted for war crimes.\" (80) East Timor . On February 25, 2000, President Clinton reported to Congress \"consistent with the War Powers Resolution\" that he had authorized the participation of a small number of U.S. military personnel in support of the United Nations Transitional Administration in East Timor (UNTAET), with a mandate to maintain law and order throughout East Timor, facilitate establishment of an effective administration there, deliver humanitarian assistance, and support the building of self-government. The President reported that the U.S. contingent was small: three military observers, and one judge advocate. To facilitate and coordinate U.S. military activities in East Timor, the President also authorized the deployment of a support group (USGET), consisting of 30 U.S. personnel. U.S. personnel would be temporarily deployed to East Timor, on a rotational basis, and through periodic ship visits, during which U.S. forces would conduct \"humanitarian and assistance activities throughout East Timor.\" Rotational activities should continue through the summer of 2000. (81) Sierra Leone . On May 12, 2000, President Clinton, \"consistent with the War Powers Resolution\" reported to Congress that he had ordered a U.S. Navy patrol craft to deploy to Sierra Leone to be ready to support evacuation operations from that country if needed. He also authorized a U.S. C-17 aircraft to deliver \"ammunition, and other supplies and equipment\" to Sierra Leone in support of United Nations peacekeeping operations there. (82) Yugoslavia/Kosovo . On June 16, 2000, President Clinton reported to Congress, \"consistent with the War Powers Resolution,\" that the U.S. was continuing to provide military personnel to the NATO-led KFOR security force in Kosovo. U.S. forces were numbered at 7,500, but were scheduled to be reduced to 6,000 when ongoing troop rotations were completed. U.S. forces in Kosovo are assigned to a sector centered near Gnjilane in eastern Kosovo. Other U.S. military personnel are deployed to other countries to serve in administrative and logistics support roles, with approximately 1,000 U.S. personnel in Macedonia, Albania, and Greece. (83) Bosnia . On July 25, 2000, President Clinton reported to Congress, \"consistent with the War Powers Resolution,\" that combat-equipped U.S. military personnel continued to participate in the NATO-led Stabilization Force (SFOR) in Bosnia and Herzegovina, being deployed to Bosnia, and other states in the region in support of peacekeeping efforts in former Yugoslavia. U.S. military personnel levels have been reduced from 6,200 to 4,600. Apart from the forces in Bosnia, approximately 1,000 U.S. personnel continue to be deployed in support roles in Hungary, Croatia, and Italy. (84) East Timor . On August 25, 2000, President Clinton reported to Congress,\" consistent with the War Powers Resolution,\" that the United States was contributing three military observers to the United Nations Transitional Administration in East Timor (UNTAET) that is charged by the UN with restoring and maintaining peace and security there. He also noted that the U.S. was maintaining a military presence in East Timor separate from UNTAET, comprised of about 30 U.S. personnel who facilitate and coordinate U.S. military activities in East Timor and rotational operations of U.S. forces there. U.S. forces conduct humanitarian and civic assistance activities for East Timor's citizens. U.S. rotational presence operations in East Timor were presently expected, the President said, to continue through December 2000. (85) Yemen . On October 14, 2000, President Clinton reported to Congress, \"consistent with the War Powers Resolution,\" that on October 12, 2000, in the wake of an attack on the USS C ole in the port of Aden, Yemen, he had authorized deployment of about 45 military personnel from U.S. Naval Forces Central Command to Aden to provide \"medical, security, and disaster response assistance.\" The President further reported that on October 13, 2000, about 50 U.S. military security personnel arrived in Aden, and that additional \"security elements\" may be deployed to the area, to enhance the ability of the U.S. to ensure the security of the USS Cole and the personnel responding to the incident. In addition, two U.S. Navy surface combatant vessels are operating in or near Yemeni territorial waters to provide communications and other support, as required. (86) Yugoslavia/Kosovo . On December 18, 2000, President Clinton reported to Congress, \"consistent with the War Powers Resolution,\" that the United States was continuing to provide approximately 5,600 U.S. military personnel in support of peacekeeping efforts in Kosovo as part of the NATO-led international security force in Kosovo (KFOR). An additional 500 U.S. military personnel are deployed as the National Support Element in Macedonia, with an occasional presence in Albania and Greece. U.S. forces are assigned to a sector centered around Gnjilane in the eastern portion of Kosovo. The President noted that the mission for these U.S. military forces is maintaining a safe and secure environment through conducting \"security patrols in urban areas and in the countryside throughout their sector.\" (87) Bosnia . On January 25, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that about 4,400 combat-equipped U.S. Armed Forces continued to be deployed in Bosnia and Herzegovina, and other regional states as part of the NATO-led Stabilization Force (SFOR). Most were based at Tuzla in Bosnia. About 650 others were based in Hungary, Croatia, and Italy, providing logistical and other support. (88) East Timor . On March 2, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that the U. S. armed forces were continuing to support the United Nations peacekeeping effort in East Timor aimed at providing security and maintaining law and order in East Timor, coordinating delivery of humanitarian assistance, and helping establish the basis for self-government in East Timor. The U.S. had three military observers attached to the United Nations Transitional Administration in East Timor (UNTAET). The United States also has a separate military presence, the U.S. Support Group East Timor (USGET), of approximately 12 U.S. personnel, including a security detachment, which \"facilitates and coordinates\" U.S. military activities in East Timor. (89) Yugoslavia/Kosovo . On May 18, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that the United States was continuing to provide approximately 6,000 U.S. military personnel in support of peacekeeping efforts in Kosovo as part of the NATO-led international security force in Kosovo (KFOR). An additional 500 U.S. military personnel are deployed as the National Support Element in Macedonia, with an occasional presence in Greece and Albania. U.S. forces in Kosovo are assigned to a sector centered around Gnjilane in the eastern portion. President Bush noted that the mission for these U.S. military forces is maintaining a safe and secure environment through conducting security patrols in urban areas and in the countryside through their sector. (90) Bosnia . On July 24, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" about 3,800 combat-equipped U.S. Armed Forces continued to be deployed in Bosnia and Herzegovina, and other regional states as part of the NATO-led Stabilization Force (SFOR). Most were based at Tuzla in Bosnia. About 500 others were based in Hungary, Croatia, and Italy, providing logistical and other support. (91) East Timor . On August 31, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that the U. S. armed forces were continuing to support the United Nations peacekeeping effort in East Timor aimed at providing security and maintaining law and order in East Timor, coordinating delivery of humanitarian assistance, and helping establish the basis for self-government in East Timor. The U.S. had three military observers attached to the United Nations Transitional Administration in East Timor (UNTAET). The United States also has a separate military presence, the U.S. Support Group East Timor (USGET), of approximately 20 U.S. personnel, including a security detachment, which \"facilitates and coordinates\" U.S. military activities in East Timor, as well as a rotational presence of U.S. forces through temporary deployments to East Timor. The President stated that U.S. forces would continue a presence through December 2001, while options for a U.S. presence in 2002 are being reviewed, with the President's objective being redeployment of USGET personnel, as circumstances permit. (92) Anti-terrorist operations . On September 24, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" and \"Senate Joint Resolution 23\" that in response to terrorist attacks on the World Trade Center and the Pentagon he had ordered the \"deployment of various combat-equipped and combat support forces to a number of foreign nations in the Central and Pacific Command areas of operations.\" The President noted in efforts to \"prevent and deter terrorism\" he might find it necessary to order additional forces into these and other areas of the world....\" He stated that he could not now predict \"the scope and duration of these deployments,\" nor the \"actions necessary to counter the terrorist threat to the United States.\" (93) Afghanistan . On October 9, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" and \"Senate Joint Resolution 23\" that on October 7, 2001, U.S. Armed Forces \"began combat action in Afghanistan against Al Qaida terrorists and their Taliban supporters.\" The President stated that he had directed this military action in response to the September 11, 2001, attacks on U.S. \"territory, our citizens, and our way of life, and to the continuing threat of terrorist acts against the United States and our friends and allies.\" This military action was \"part of our campaign against terrorism\" and was \"designed to disrupt the use of Afghanistan as a terrorist base of operations.\" (94) Yugoslavia/Kosovo . On November 19, 2001, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that the United States was continuing to provide approximately 5,500 U.S. military personnel in support of peacekeeping efforts in Kosovo as part of the NATO-led international security force in Kosovo (KFOR). An additional 500 U.S. military personnel are deployed as the National Support Element in Macedonia, with an occasional presence in Greece and Albania. U.S. forces in Kosovo are assigned to a sector centered around Gnjilane in the eastern portion. President Bush noted that the mission for these U.S. military forces is maintaining a safe and secure environment through conducting security patrols in urban areas and in the countryside through their sector. (95) Bosnia . On January 21, 2002, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that about 3,100 combat-equipped U.S. Armed Forces continued to be deployed in Bosnia and Herzegovina, and other regional states as part of the NATO-led Stabilization Force (SFOR). Most were based at Tuzla in Bosnia. About 500 others were based in Hungary, Croatia, and Italy, providing logistical and other support. (96) East Timor . On February 28, 2002, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that U. S. armed forces were continuing to support the United Nations peacekeeping effort in East Timor aimed at providing security and maintaining law and order in East Timor, coordinating delivery of humanitarian assistance, and helping establish the basis for self-government in East Timor. The U.S. had three military observers attached to the United Nations Transitional Administration in East Timor (UNTAET). The United States also has a separate military presence, the U.S. Support Group East Timor (USGET), comprised of approximately 10 U.S. personnel, including a security detachment, which \"facilitates and coordinates\" U.S. military activities in East Timor, as well as a rotational presence of U.S. forces through temporary deployments to East Timor. The President stated that U.S. forces would continue a presence through 2002. The President noted his objective was to gradually reduce the \"rotational presence operations,\" and to redeploy USGET personnel, as circumstances permitted. (97) Anti-terrorist operations . On March 20, 2002, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" on U.S. efforts in the \"global war on Terrorism.\" He noted that the \"heart of the al-Qaeda training capability\" had been \"seriously degraded,\" and that the remainder of the Taliban and the al-Qaeda fighters were being \"actively pursued and engaged by the U.S., coalition and Afghan forces.\" The United States was also conducting \"maritime interception operations ... to locate and detain suspected al-Qaeda or Taliban leadership fleeing Afghanistan by sea.\" At the Philippine Government's invitation, the President had ordered deployed \"combat-equipped and combat support forces to train with, advise, and assist\" the Philippines' Armed Forces in enhancing their \"existing counterterrorist capabilities.\" The strength of U.S. military forces working with the Philippines was projected to be 600 personnel. The President noted that he was \"assessing options\" for assisting other nations, including Georgia and Yemen, in enhancing their \"counterterrorism capabilities, including training and equipping their armed forces.\" He stated that U.S. combat-equipped and combat support forces would be necessary for these efforts, if undertaken. (98) Yugoslavia/Kosovo . On May 17, 2002, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that the U.S. military was continuing to support peacekeeping efforts of the NATO-led international security force in Kosovo (KFOR). He noted that the current U.S. contribution was about 5,100 military personnel, with an additional 468 personnel in Macedonia; and an occasional presence in Albania and Greece. (99) Bosnia . On July 22, 2002, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that the U.S. military was continuing to support peacekeeping efforts of the NATO-led Stabilization Force (SFOR) in Bosnia and Herzegovina and other regional states. He noted that the current U.S. contribution was \"approximately 2,400 personnel.\" Most U.S. forces in Bosnia and Herzegovina are assigned to the Multinational Division, North headquartered in Tuzla. An additional 60 U.S. military personnel are deployed to Hungary and Croatia to provide logistical and other support. (100) Anti-terrorist operations . On September 20, 2002, President Bush reported to Congress \"consistent with the War Powers Resolution,\" that U.S. \"combat-equipped and combat support forces\" have been deployed to the Philippines since January 2002 to train with, assist and advise the Philippines' Armed Forces in enhancing their \"counterterrorist capabilities.\" He added that U.S. forces were conducting maritime interception operations in the Central and European Command areas to combat movement, arming, or financing of \"international terrorists.\" He also noted that U.S. combat personnel had been deployed to Georgia and Yemen to help enhance the \"counterterrorist capabilities\" of their armed forces. (101) Cote d'Ivoire . On September 26, 2002, President Bush reported to Congress \"consistent with the War Powers Resolution,\" that in response to a rebellion in Cote d'Ivoire that he had on September 25, 2002, sent U.S. military personnel into Cote d'Ivoire to assist in the evacuation of American citizens and third country nationals from the city of Bouake; and otherwise assist in other evacuations as necessary. (102) Yugoslavia/Kosovo . On November 15, 2002, the President reported to Congress \"consistent with the War Powers Resolution\" that the U.S. was continuing to deploy combat equipped military personnel as part of the NATO-led international security force in Kosovo (KFOR). The U.S. had approximately 4,350 U.S. military personnel in Kosovo, with an additional 266 military personnel in Macedonia. The U.S. also has an occasional presence in Albania and Greece, associated with the KFOR mission. (103) Bosnia . On January 21, 2003, President George W. Bush reported to Congress, \"consistent with the War Powers Resolution,\" that about 1,800 U.S. Armed Forces personnel continued to be deployed in Bosnia and Herzegovina, and other regional states as part of the NATO-led Stabilization Force (SFOR). Most were based at Tuzla in Bosnia. About 80 others were based in Hungary and Croatia, providing logistical and other support. (104) Anti-terrorist operations . On March 20, 2003, President Bush reported to Congress, \"consistent with the War Powers Resolution,\" as well as P.L. 107-40 , and \"pursuant to\" his authority as Commander in Chief, that he had continued a number of U.S. military operations globally in the war against terrorism. These military operations included ongoing U.S. actions against al-Qaeda fighters in Afghanistan; collaborative anti-terror operations with forces of Pakistan in the Pakistan/Afghanistan border area; \"maritime interception operations on the high seas\" in areas of responsibility of the Central and European Commands to prevent terrorist movement and other activities; and military support for the armed forces of Georgia and Yemen in counter-terrorism operations. (105) War against Iraq . On March 21, 2003, President Bush reported to Congress, \"consistent with the War Powers Resolution,\" as well as P.L. 102-1 and P.L. 107-243 , and \"pursuant to\" his authority as Commander in Chief, that he had \"directed U.S. Armed Forces, operating with other coalition forces, to commence operations on March 19, 2003, against Iraq.\" He further stated that it was not possible to know at present the duration of active combat operations or the scope necessary to accomplish the goals of the operation—\"to disarm Iraq in pursuit of peace, stability, and security both in the Gulf region and in the United States.\" (106) Yugoslavia/Kosovo . On May 14, 2003, President Bush reported to Congress, \"consistent with the War Powers Resolution,\" that combat-equipped U.S. military personnel continued to be deployed as part of the NATO-led international security force in Kosovo (KFOR). He noted that about 2,250 U.S. military personnel were deployed in Kosovo, and additional military personnel operated, on occasion, from Macedonia, Albania, and Greece in support of KFOR operations. (107) Liberia . On June 9, 2003, President Bush reported to Congress, \"consistent with the War Powers Resolution,\" that on June 8 he had sent about 35 combat-equipped U.S. military personnel into Monrovia, Liberia, to augment U.S. Embassy security forces, to aid in the possible evacuation of U.S. citizens if necessary. The President also noted that he had sent about 34 combat-equipped U.S. military personnel to help secure the U.S. embassy in Nouakchott, Mauritania, and to assist in evacuation of American citizens if required. They were expected to arrive at the U.S. embassy by June 10, 2003. Back-up and support personnel were sent to Dakar, Senegal, to aid in any necessary evacuation from either Liberia or Mauritania. (108) Bosnia . On July 22, 2003, President Bush reported to Congress, \"consistent with the War Powers Resolution,\" that the United States continued to provide about 1,800 combat-equipped military personnel in Bosnia and Herzegovina in support of NATO's Stabilization Force (SFOR) and its peacekeeping efforts in this country. (109) Liberia . On August 13, 2003, President Bush reported to Congress, \"consistent with the War Powers Resolution,\" that in response to conditions in Liberia, on August 11, 2003, he had authorized about 4,350 U.S. combat-equipped military personnel to enter Liberian territorial waters in support of U.N. and West African States efforts to restore order and provide humanitarian assistance in Liberia. (110) Anti-terrorist operations . On September 19, 2003, President Bush reported to Congress \"consistent with the War Powers Resolution,\" that U.S. \"combat-equipped and combat support forces\" continue to be deployed at a number of locations around the world as part of U.S. anti-terrorism efforts. American forces support anti-terrorism efforts in the Philippines, and maritime interception operations continue on the high seas in the Central, European and Pacific Command areas of responsibility, to \"prevent the movement, arming, or financing of international terrorists.\" He also noted that \"U.S. combat equipped and support forces\" had been deployed to Georgia and Djibouti to help in enhancing their \"counterterrorist capabilities.\" (111) Yugoslavia/Kosovo . On November 14, 2003, the President reported to Congress \"consistent with the War Powers Resolution\" that the United States was continuing to deploy combat equipped military personnel as part of the NATO-led international security force in Kosovo (KFOR). The United States had approximately 2,100 U.S. military personnel in Kosovo, with additional American military personnel operating out of Macedonia, Albania, and Greece, in support of KFOR operations. (112) Bosnia . On January 22, 2004, the President reported to Congress \"consistent with the War Powers Resolution\" that the United States was continuing to deploy combat equipped military personnel in Bosnia and Herzegovina in support of NATO's Stabilization Force (SFOR) and its peacekeeping efforts in this country. About 1,800 U.S. personnel are participating. (113) Haiti . On February 25, 2004, the President reported to Congress \"consistent with the War Powers Resolution\" that, on February 23, he had sent a combat-equipped \"security force\" of about \"55 U.S. military personnel from the U.S. Joint Forces Command\" to Port-au-Prince, Haiti to augment the U.S. Embassy security forces there and to protect American citizens and property in light of the instability created by the armed rebellion in Haiti. (114) Haiti . On March 2, 2004, the President reported to Congress \"consistent with the War Powers Resolution\" that on February 29 he had sent about \"200 additional U.S. combat-equipped, military personnel from the U.S. Joint Forces Command\" to Port-au-Prince, Haiti for a variety of purposes, including preparing the way for a UN Multinational Interim Force, and otherwise supporting UN Security Council Resolution 1529 (2004). (115) Anti-terrorist operations . On March 20, 2004, the President sent to Congress \"consistent with the War Powers Resolution,\" a consolidated report giving details of multiple ongoing United States military deployments and operations \"in support of the global war on terrorism (including in Afghanistan),\" as well as operations in Bosnia and Herzegovina, Kosovo, and Haiti. In this report, the President noted that U.S. anti-terror related activities were underway in Georgia, Djibouti, Kenya, Ethiopia, Yemen, and Eritrea. He further noted that U.S. combat-equipped military personnel continued to be deployed in Kosovo as part of the NATO-led KFOR (1,900 personnel); in Bosnia and Herzegovina as part of the NATO-led SFOR (about 1,100 personnel); and approximately 1,800 military personnel were deployed in Haiti as part of the U.N. Multinational Interim Force. (116) Anti-terrorist operations . On November 4, 2004, the President sent to Congress, \"consistent with the War Powers Resolution,\" a consolidated report giving details of multiple ongoing United States military deployments and operations \"in support of the global war on terrorism.\" These deployments, support or military operations include activities in Afghanistan, Djibouti, as well as Kenya, Ethiopia, Eritrea, Bosnia and Herzegovina, and Kosovo. In this report, the President noted that U.S. anti-terror related activities were underway in Djibouti, Kenya, Ethiopia, Yemen, and Eritrea. He further noted that U.S. combat-equipped military personnel continued to be deployed in Kosovo as part of the NATO-led KFOR (1,800 personnel); and in Bosnia and Herzegovina as part of the NATO-led SFOR (about 1,000 personnel). Meanwhile, he stated that the United States continued to deploy more than 135,000 military personnel in Iraq. (117) Anti-terrorist operations . On May 20, 2005, the President sent to Congress \"consistent with the War Powers Resolution,\" a consolidated report giving details of multiple ongoing United States military deployments and operations \"in support of the global war on terrorism,\" as well as operations in Iraq, where about 139,000 U.S. military personnel were stationed. U.S. forces are also deployed in Kenya, Ethiopia, Yemen, Eritrea, and Djibouti assisting in \"enhancing counter-terrorism capabilities\" of these nations. The President further noted that U.S. combat-equipped military personnel were deployed in Kosovo as part of the NATO-led KFOR (1,700 personnel). Approximately 235 U.S. personnel were also deployed in Bosnia and Herzegovina as part of the NATO Headquarters-Sarajevo who assist in defense reform and perform operational tasks, such as counter-terrorism and supporting the International Criminal Tribunal for the Former Yugoslavia. (118) Anti-terrorist operations . On December 7, 2005, the President sent to Congress \"consistent\" with the War Powers Resolution, a consolidated report giving details of multiple ongoing United States military deployments and operations \"in support of the global war on terrorism,\" and in support of the Multinational Force in Iraq, where about 160, 000 U.S. military personnel are deployed. U.S. forces are also deployed in the Horn of Africa region—Kenya, Ethiopia, Yemen, and Djibouti—assisting in \"enhancing counter-terrorism capabilities\" of these nations. The President further noted that U.S. combat-equipped military personnel continued to be deployed in Kosovo as part of the NATO-led KFOR (1,700 personnel). Approximately 220 U.S. personnel are also deployed in Bosnia and Herzegovina as part of the NATO Headquarters-Sarajevo who assist in defense reform and perform operational tasks, such as \"counter-terrorism and supporting the International Criminal Tribunal for the Former Yugoslavia.\" (119) Anti-terrorist operations . On June 15, 2006, the President sent to Congress \"consistent\" with the War Powers Resolution, a consolidated report giving details of multiple ongoing United States military deployments and operations \"in support of the war on terror,\" and in Kosovo, Bosnia and Herzegovina, and as part of the Multinational Force (MNF) in Iraq. Presently, about 131, 000 military personnel were deployed in Iraq. U.S. forces were also deployed in the Horn of Africa region, and in Djibouti to support necessary operations against al-Qaida and other international terrorists operating in the region. U.S. military personnel continue to support the NATO-led Kosovo Force (KFOR). The current U.S. contribution to KFOR is about 1,700 military personnel. The NATO Headquarters-Sarajevo was established in November 22, 2004, as a successor to its stabilization operations in Bosnia-Herzegovina to continue to assist in implementing the peace agreement. Approximately 250 U.S. personnel are assigned to the NATO Headquarters-Sarajevo who assist in defense reform and perform operational tasks, such as \"counter-terrorism and supporting the International Criminal Tribunal for the Former Yugoslavia.\" (120) Lebanon . On July 18, 2006, the President reported to Congress \"consistent\" with the War Powers Resolution, that in response to the security threat posed in Lebanon to U.S. Embassy personnel and citizens and designated third country personnel,\" he had deployed combat-equipped military helicopters and military personnel to Beirut to assist in the departure of the persons under threat from Lebanon. The President noted that additional combat-equipped U.S. military forces may be deployed \"to Lebanon, Cyprus and other locations, as necessary\" to assist further departures of persons from Lebanon and to provide security. He further stated that once the threat to U.S. citizens and property has ended, the U.S. military forces would redeploy. (121) Anti-terrorist operations . On December 15, 2006, the President sent to Congress \"consistent\" with the War Powers Resolution, a consolidated report giving details of multiple ongoing United States military deployments and operations \"in support of the war on terror,\" in Kosovo, Bosnia and Herzegovina, and as part of the Multinational Force (MNF) in Iraq. Presently, about 134, 000 military personnel are deployed in Iraq. U.S. forces were also deployed in the Horn of Africa region, and in Djibouti to support necessary operations against al-Qaida and other international terrorists operating in the region, including Yemen. U.S. military personnel continue to support the NATO-led Kosovo Force (KFOR). The U.S. contribution to KFOR was about 1,700 military personnel. The NATO Headquarters-Sarajevo was established in November 22, 2004, as a successor to its stabilization operations in Bosnia-Herzegovina to continue to assist in implementing the peace agreement. Approximately 100 U.S. personnel are assigned to the NATO Headquarters-Sarajevo who assist in defense reform and perform operational tasks, such as \"counter-terrorism and supporting the International Criminal Tribunal for the Former Yugoslavia.\" (122) Anti-terrorist operations . On June 15, 2007, the President sent to Congress, \"consistent\" with the War Powers Resolution, a consolidated report giving details of ongoing U.S. military deployments and operations \"in support of the war on terror,\" and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. \"combat-equipped and combat-support forces\" were deployed to \"a number of locations in the Central, Pacific, European (KFOR), and Southern Command areas of operation\" and were engaged in combat operations against al-Qaida terrorists and their supporters. The United States was \"pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan.\" U.S. forces in Afghanistan totaled approximately 25,945. Of this total, \"approximately 14,340 were assigned to the International Security Assistance Force (ISAF) in Afghanistan.\" The U.S. military continued to support peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). The U.S. contribution to KFOR in Kosovo was approximately 1,584 military personnel. (123) Anti-terrorist operations . On December 14, 2007, the President sent to Congress, \"consistent with the War Powers Resolution,\" a consolidated report giving details of ongoing U.S. military deployments and operations \"in support of the war on terror,\" and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. \"combat-equipped and combat-support forces\" were deployed to \"a number of locations in the Central, Pacific, European, and Southern Command areas of operation\" and were engaged in combat operations against al-Qaida terrorists and their supporters. The United States was \"pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan.\" U.S. forces in Afghanistan totaled approximately 25,900. Of this total, \"approximately 15,180 were assigned to the International Security Assistance Force (ISAF) in Afghanistan.\" The U.S. military supports peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). The U.S. contribution to KFOR in Kosovo was approximately 1,498 military personnel. (124) Anti-terrorist operations . On June 13, 2008, the President sent to Congress \"consistent with the War Powers Resolution,\" a consolidated report giving details of ongoing U.S. military deployments and operations \"in support of the war on terror,\" and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. \"combat-equipped and combat-support forces\" were deployed to \"a number of locations in the Central, Pacific, European, and Southern Command areas of operation\" and were engaged in combat operations against al-Qaida terrorists and their supporters. The United States is \"pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan.\" U.S. forces in Afghanistan totaled approximately 31,122. Of this total, \"approximately 14,275 were assigned to the International Security Assistance Force (ISAF) in Afghanistan.\" The U.S. military continued to support peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). The U.S. contribution to KFOR in Kosovo was about 1,500 military personnel. (125) Anti-terrorist operations . On December 16, 2008, President George W. Bush sent to Congress \"consistent with the War Powers Resolution,\" a consolidated report giving details of ongoing U.S. military deployments and operations \"in support of the war on terror,\" and in support of the NATO-led Kosovo Force (KFOR). The President reported that various U.S. \"combat-equipped and combat-support forces\" were deployed to \"a number of locations in the Central, Pacific, European, Southern, and Africa Command areas of operation\" and were engaged in combat operations against al-Qaida and their supporters. The United States is \"actively pursuing and engaging remnant al-Qaida and Taliban fighters in Afghanistan.\" U.S. forces in Afghanistan total approximately 31,000. Of this total, \"approximately 13,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan.\" The U.S. military continued to support peacekeeping operations in Kosovo, specifically the NATO-led Kosovo Force (KFOR). The U.S. contribution to KFOR in Kosovo was about 1,500 military personnel. (126) Anti-terrorist operations . On June 15, 2009, President Barack Obama sent to Congress \"consistent with the War Powers Resolution\" a supplemental consolidated report giving details of \"ongoing contingency operations overseas.\" The report noted that the total number of U.S. forces in Afghanistan was \"approximately 58,000,\" of which approximately 20,000 were assigned to the International Security Assistance Force (ISAF) in Afghanistan.\" The United States continued to pursue and engage \"remaining al-Qa'ida and Taliban forces in Afghanistan.\" The U.S. also continued to deploy military forces in support of the Multinational Force (MNF) in Iraq. The current U.S. contribution to this effort is \"approximately 138,000 U.S. military personnel.\" U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently the United States contributed approximately 1,400 U.S. military personnel to KFOR. In addition, the United States continued to deploy \"U.S. combat-equipped forces to help enhance the counterterrorism capabilities of our friends and allies\" not only in the Horn of Africa region, but globally through \"maritime interception operations on the high seas\" aimed at blocking the \"movement, arming and financing of international terrorists.\" (127) Anti-terrorist operations . On December 5, 2009, the President sent to Congress \"consistent with the War Powers Resolution,\" a consolidated report giving details of \"global deployments of U.S. Armed Forces equipped for combat.\" The report detailed \"ongoing U.S. contingency operations overseas.\" The report noted that the total number of U.S. forces in Afghanistan was \"approximately 68,000,\" of which approximately 34,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continued to pursue and engage \"remaining al-Qa'ida and Taliban forces in Afghanistan.\" The United States has deployed \"various combat-equipped forces to a number of locations in the Central, Pacific, European, Southern, and African Command areas of operation\" in support of anti-terrorist and anti-al-Qa'ida actions. The U.S. also continued to deploy military forces in Iraq to \"maintain security and stability\" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the U.S. and Iraq, which entered into force on January 1, 2009. The U.S. force level in Iraq was \"approximately 116,000 U.S. military personnel.\" U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). The United States contributed approximately 1,475 U.S. military personnel to KFOR. In addition, the United States continued to deploy \"U.S. combat-equipped forces to assist in enhancing the counterterrorism capabilities of our friends and allies\" not only in the Horn of Africa region, but globally through \"maritime interception operations on the high seas\" aimed at blocking the \"movement, arming and financing of international terrorists.\" (128) Anti-terrorist operations . On June 15, 2010, the President sent to Congress, \"consistent with the War Powers Resolution,\" a consolidated report, giving details of \"deployments of U.S. Armed Forces equipped for combat.\" The report noted that the total number of U.S. forces in Afghanistan was \"approximately 87,000,\" of which over 62,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continues combat operations \"against al-Qa'ida terrorists and their Taliban supporters\" in Afghanistan. The United States has deployed \"combat-equipped forces to a number of locations in the U.S. Central, Pacific, European, Southern and African Command areas of operation\" in support of anti-terrorist and anti-al-Qa'ida actions. The United States also continues to deploy military forces in Iraq to \"maintain security and stability\" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The current U.S. force level in Iraq is \"approximately 95,000 U.S. military personnel.\" U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently, the United States contributes approximately 1,074 U.S. military personnel to KFOR. In addition, the United States continues to \"conduct maritime interception operations on the high seas\" directed at \"stopping the movement, arming and financing of international terrorist groups.\" (129) Anti-terrorist operations . On December 15, 2010, the President submitted to Congress, \"consistent with the War Powers Resolution,\" a consolidated report, detailing \"deployments of U.S. Armed Forces equipped for combat.\" The report noted that the total number of U.S. forces in Afghanistan was \"approximately 97,500,\" of which over 81,500 were assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States is continuing combat operations \"against al-Qa'ida terrorists and their Taliban supporters\" in Afghanistan. The United States has deployed \"combat-equipped forces to a number of locations in the U.S. Central, Pacific, European, Southern, and African Command areas of operation\" in support of anti-terrorist and anti-al-Qa'ida actions. In addition, the United States continues to conduct \"maritime interception operations on the high seas in the areas of responsibility of the geographic combatant commands\" directed at \"stopping the movement, arming and financing of international terrorist groups.\" The United States also continues to deploy military forces in Iraq in support of Iraqi efforts to \"maintain security and stability\" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The current U.S. force level in Iraq is \"approximately 48,400 U.S. military personnel.\" U.S. military operations also continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). The United States currently contributes approximately 808 U.S. military personnel to KFOR. (130) Anti-terrorist operations . On June 15, 2011, the President sent to Congress, \"consistent with the War Powers Resolution,\" a supplemental consolidated report, giving details of \"global deployments of U.S. Armed Forces equipped for combat.\" The report detailed ongoing U.S. contingency operations overseas. The report noted that the total number of U.S. forces in Afghanistan was \"approximately 99,000,\" of which approximately 83,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continues to pursue and engage \"remaining al-Qa'ida and Taliban fighters in Afghanistan.\" The United States has deployed various \"combat-equipped forces\" to a number of locations in the Central, Pacific, European, Southern, and African Command areas of operation\" in support of anti-terrorist and anti-al-Qa'ida actions. This includes the deployment of U.S. military forces globally to assist in enhancing the counterterrorism capabilities of our friends and allies through maritime interception operations on the high seas \"aimed at stopping the movement, arming and financing of certain international terrorist groups.\" A combat-equipped security force of about \"40 U.S. military personnel from the U.S. Central Command\" were deployed to Cairo, Egypt, on January 31, 2011, for the sole purpose of \"protecting American citizens and property.\" That force remains at the U.S. Embassy in Cairo. The United States also continues to deploy military forces in Iraq to help it \"maintain security and stability\" there. These Iraqi operations continue pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The current U.S. force level in Iraq is \"approximately 45,000 U.S. military personnel.\" In Libya, since April 4, 2011, the United States has transferred responsibility for military operations there to NATO, and U.S. involvement \"has assumed a supporting role in the coalition's efforts.\" U.S. support in Libya has been limited to \"intelligence, logistical support, and search and rescue assistance.\" The U.S. military aircraft have also been used to assist in the \"suppression and destruction of air defenses in support of the no-fly zone\" over Libya. Since April 23, 2011, the United States has supported the coalition effort in Libya through use of \"unmanned aerial vehicles against a limited set of clearly defined targets\" there. Except in the case of operations to \"rescue the crew of a U.S. aircraft\" on March 21, 2011, \"the United States has deployed no ground forces to Libya.\" U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently the United States contributes approximately 800 U.S. military personnel to KFOR. (131) Libya . On March 21, 2011, the President submitted to Congress, \"consistent with the War Powers Resolution,\" a report stating that at \"approximately 3:00 p.m. Eastern Daylight Time, on March 19, 2011,\" he had directed U.S. military forces to commence \"operations to assist an international effort authorized by the United Nations (U.N.) Security Council and undertaken with the support of European allies and Arab partners, to prevent a humanitarian catastrophe and address the threat posed to international peace and security by the crisis in Libya.\" He further stated that U.S. military forces, \"under the command of Commander, U.S. Africa Command, began a series of strikes against air defense systems and military airfields for the purposes of preparing a no-fly zone.\" These actions were part of \"the multilateral response authorized under U.N. Security Council Resolution 1973,\" and the President added that \"these strikes will be limited in their nature, duration, and scope. Their purpose is to support an international coalition as it takes all necessary measures to enforce the terms of U.N. Security Council Resolution 1973. These limited U.S. actions will set the stage for further action by other coalition partners.\" The President noted that United Nations Security Council Resolution 1973 authorized Member States, under Chapter VII of the U.N. Charter, to take all necessary measures to protect civilians and civilian populated areas under threat of attack in Libya, including the establishment and enforcement of a \"no-fly zone\" in the airspace of Libya. United States military efforts are discrete and focused on employing unique U.S. military capabilities to set the conditions for our European allies and Arab partners to carry out the measures authorized by the U.N. Security Council Resolution. The President stated further that the \"United States has not deployed ground forces into Libya. United States forces are conducting a limited and well-defined mission in support of international efforts to protect civilians and prevent a humanitarian disaster.\" Accordingly, he added, \"U.S. forces have targeted the Qadhafi regime's air defense systems, command and control structures, and other capabilities of Qadhafi's armed forces used to attack civilians and civilian populated areas.\" It was the intent of the United States, he said, to \"seek a rapid, but responsible, transition of operations to coalition, regional, or international organizations that are postured to continue activities as may be necessary to realize the objectives of U.N. Security Council Resolutions 1970 and 1973.\" The President said that the actions he had directed were \"in the national security and foreign policy interests of the United States.\" He took them, the President stated, \"pursuant to my constitutional authority to conduct U.S. foreign relations and as Commander in Chief and Chief Executive.\" (132) Central Africa . On October 14, 2011, the President submitted to Congress, \"consistent with the War Powers Resolution,\" a report stating that \"he had authorized a small number of combat-equipped U.S. forces to deploy to central Africa to provide assistance to regional forces that are working toward the removal of Joseph Kony,\" leader of the Lord's Resistance Army (LRA), from the battlefield. For over two decades, the LRA has murdered, kidnapped, and raped tens of thousands of men, women, and children throughout central Africa, and has continued to commit atrocities in South Sudan, the Democratic Republic of the Congo, and the Central African Republic. The U.S. Armed Forces, the President noted, would be a \"significant contribution toward counter-LRA efforts in central Africa.\" The President stated that on \"October 12, 2011, the initial team of U.S. military personnel with appropriate combat equipment deployed to Uganda.\" In the \"next month, additional forces will deploy, including a second combat-equipped team and associated headquarters, communications, and logistics personnel.\" The President further stated that the \"total number of U.S. military personnel deploying for this mission is approximately 100. These forces will act as advisors to partner forces that have the goals of removing from the battlefield Joseph Kony and other senior leadership of the LRA.\" U.S. forces \"will provide information, advice, and assistance to select partner nation forces.\" With the approval of the respective host nations, \"elements of these U.S. forces will deploy into Uganda, South Sudan, the Central African Republic, and the Democratic Republic of the Congo. The support provided by U.S. forces will enhance regional efforts against the LRA.\" The President emphasized that even though the \"U.S. forces are combat-equipped, they will only be providing information, advice, and assistance to partner nation forces, and they will not themselves engage LRA forces unless necessary for self-defense. All appropriate precautions have been taken to ensure the safety of U.S. military personnel during their deployment.\" The President took note in his report that Congress had previously \"expressed support for increased, comprehensive U.S. efforts to help mitigate and eliminate the threat posed by the LRA to civilians and regional stability\" through the passage of the Lord's Resistance Army Disarmament and Northern Uganda Recovery Act of 2009, P.L. 111-172 , enacted May 24, 2010. (133) Anti-terrorist operations . On December 15, 2011, the President submitted to Congress, \"consistent with the War Powers Resolution,\" a supplemental consolidated report, giving details of \"deployments of U.S. Armed Forces equipped for combat.\" The report detailed ongoing U.S. contingency operations overseas. The report noted that the total number of U.S. forces in Afghanistan was \"approximately 93,000,\" of which approximately 78,000 are assigned to the International Security Assistance Force (ISAF) in Afghanistan. The United States continues to pursue and engage \"remaining al-Qa'ida and Taliban fighters in Afghanistan.\" The United States has deployed various \"combat-equipped forces\" to a number of locations in the Central, Pacific, European, Southern, and African Command areas of operation in support of anti-terrorist and anti-al-Qa'ida actions. This includes the deployment of U.S. military forces globally: \"including special operations and other forces\" for \"sensitive operations\" in various places, as well as forces to assist in enhancing the counterterrorism capabilities of our friends and allies. U.S. forces also have engaged in maritime interception operations on the high seas \"aimed at stopping the movement, arming and financing of certain international terrorist groups.\" The United States continued to deploy military forces in Iraq to help it \"maintain security and stability\" there. These Iraqi operations were undertaken pursuant to the terms of a bilateral agreement between the United States and Iraq, which entered into force on January 1, 2009. The U.S. force level in Iraq on October 28, 2011, was \"36,001 U.S. military personnel.\" The U.S. was committed to withdraw U.S. forces from Iraq by December 31, 2011. (This occurred, as scheduled, after this report was submitted.) In Libya, after April 4, 2011, the United States transferred responsibility for military operations there to NATO, and U.S. involvement \"assumed a supporting role in the coalition's efforts.\" U.S. support in Libya was limited to \"intelligence, logistical support, and search and rescue assistance.\" The U.S. military aircraft were also used to assist in the \"suppression and destruction of air defenses in support of the no-fly zone\" over Libya. After April 23, 2011, the United States supported the coalition effort in Libya through use of \"unmanned aerial vehicles against a limited set of clearly defined targets\" there. Except in the case of operations to \"rescue the crew of a U.S. aircraft\" on March 21, 2011, and deploying 16 U.S. military personnel to aid in re-establishing the U.S. Embassy in Tripoli in September 2011, \"the U.S. deployed no ground forces to Libya.\" On October 27, 2011, the United Nations terminated the \"no-fly zone\" effective October 31, 2011. NATO terminated its mission during this same time. U.S. military operations continue in Kosovo, as part of the NATO-led Kosovo Force (KFOR). Presently the United States contributes approximately 800 U.S. military personnel to KFOR. (134) Somalia . On January 26, 2012, the President submitted to Congress, \"consistent with the War Powers Resolution,\" a report detailing a successful U.S. Special Operations Forces operation in Somalia of January 24, 2012, to rescue Ms. Jessica Buchanan, a U.S. citizen who had been kidnapped by a group linked to Somali pirates and financiers. This operation was undertaken \"by a small number of joint combat-equipped U.S. forces\" following receipt of reliable intelligence establishing her location in Somalia. A Danish national Poul Hagen Thisted, kidnapped with Ms. Buchanan, was also rescued with her. (135) Anti-terrorist operations . On June 15, 2012, the President reported to Congress, \"consistent with\" the War Powers Resolution, a consolidated report regarding various deployments of U.S. Armed Forces equipped for combat. In the efforts in support of U.S. counterterrorism (CT) objectives against al-Qa'ida, the Taliban and, associated forces, he noted that U.S. forces were engaged in Afghanistan in the above effort were \"approximately 90,000.\" With regard to other counter-terrorism operations, the President stated that the United States had deployed \"U.S. combat-equipped forces to assist in enhancing the CT capabilities of our friends and allies including special operations and other forces for sensitive operations in various locations around the world.\" He noted that the \"U.S. military has taken direct action in Somalia against members of al-Qa'ida, including those who are also members of al-Shabaab, who are engaged in efforts to carry out terrorist attacks against the United States and our interests.\" The President further stated that the U.S. military had been \"working closely with the Yemini government to operationally and ultimately eliminate the terrorist threat posed by al-Qa-ida in the Arabian Peninsula (AQAP), the most active and dangerous affiliate of al-Qa'ida today.\" He added that these \"joint efforts have resulted in direct action against a limited number of AQAP operatives and senior leaders in that country who posed a terrorist threat to the United States and our interests.\" The President noted that he would direct \"additional measures against al-Qa'ida, the Taliban, and associated forces to protect U.S. citizens and interests.\" Further information on such matters is provided in a \"classified annex to this report....\" Other military operations reported by the President include the deployment of U.S. combat-equipped military personnel to Uganda \"to serve as advisors to regional forces that are working to apprehend or remove Joseph Kony and other senior Lord's Resistance Army (LRA) leaders from the battlefield and to protect local populations.\" The total number of U.S. military personnel deployed for this mission is \"approximately 90,\" and elements of these U.S. forces have been sent to \"forward locations in the LRA-affected areas of the Republic of South Sudan, the Democratic Republic of the Congo, and the Central African Republic.\" These U.S. forces \"will not engage LRA forces except in self-defense.\" The President also reported that presently the U.S. was contributing \"approximately 817 military personnel\" to the NATO-led Kosovo Force (KFOR) in Kosovo. He also reported that the U.S. remained prepared to engage in \"maritime interception operations\" intended to stop the \"movement, arming, and financing of certain international terrorist groups,\" as well as stopping \"proliferation by sea of weapons of mass destruction and related materials.\" Additional details about these efforts are included in \"the classified annex\" to this report. (136) Libya/Yemen . On September 14, 2012, the President reported to Congress, \"consistent with\" the War Powers Resolution, that on September 12, 2012, he ordered deployed to Libya \"a security force from the U.S. Africa Command\" to \"support the security of U.S. personnel in Libya.\" This action was taken in response to the attack on the U.S. \"diplomatic post in Benghazi, Libya,\" that had killed four America citizens, including U.S. Ambassador John Christopher Stevens. The President added on September 13, 2012, that \"an additional security force arrived in Yemen in response to security threats there.\" He further stated that \"Although these security forces are equipped for combat, these movements have been undertaken solely for the purpose of protecting American citizens and property.\" These security forces will remain in Libya and in Yemen, he noted, \"until the security situation becomes such that they are no longer needed.\" (137) Six-Month Periodic Report. On December 14, 2012, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, military operations in Central Africa, maritime interception operations, military operations in Egypt, U.S./NATO Operations in Kosovo, and regional security operations in Libya and Yemen. (138) Chad/Central African Republic. On December 29, 2012, President Obama reported to Congress that he had ordered deployment of \"a stand-by response and evacuation force of approximately 50 U.S. military personnel from U.S. Africa Command\" to Chad \"to support the evacuation of U.S. embassy personnel and U.S. citizens from the Central African Republic,\" due to the \"the deteriorating security situation\" in that country. (139) Somalia. On January 13, 2013, the President notified Congress that U.S. combat aircraft entered Somali airspace on January 11, 2013, in support of a French mission to rescue a French citizen held hostage by the al-Shabaab terror group, but did not \"employ weapons\" and departed Somali airspace the same day. (140) Niger. On February 22, 2013, the President notified Congress of deployment of \"the last elements of ... approximately 40 additional U.S. military personnel\" to Niger to \"provide support for intelligence collection and will also facilitate intelligence sharing with French forces conducting operations in Mali, and with other partners in the region.\" The President stated that the forces are combat-equipped \"for the purpose of providing their own force protection and security.\" (141) Six-Month Periodic Report. On June 14, 2013, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, military operations in Central Africa, maritime interception operations, military operations in Egypt, U.S./NATO Operations in Kosovo, and regional security operations in Libya and Yemen. He also notified Congress that forces deployed to Chad in December 2012 had withdrawn. (142) Jordan. On June 21, 2013, the President reported to Congress on deploying U.S. Armed Forces to Jordan \"solely to participate in a training exercise,\" and \"a combat-equipped detachment of approximately 700 of these forces remained in Jordan after the conclusion of the exercise to join other U.S. forces already in Jordan.\" (143) Six-Month Periodic Report. On December 13, 2013, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, military operations in Central Africa, maritime interception operations, military operations in Egypt, military operations in Jordan, U.S./NATO Operations in Kosovo, and regional security operations in Libya and Yemen. (144) South Sudan. On December 19, 2013, the President notified Congress that \"45 U.S. Armed Forces personnel deployed to South Sudan to support the security of U.S. personnel and our Embassy\" for \"the purpose of protecting U.S. citizens and property.\" (145) South Sudan. On December 22, 2013, the President notified Congress of deployment of \"46 additional U.S. military personnel deployed by military aircraft to the area of Bor, South Sudan, to conduct an operation to evacuate U.S. citizens and personnel.\" According to the notification, U.S. aircraft \"came under fire\" and withdrew from South Sudan without completing the evacuation. (146) Uganda/South Sudan/Democratic Republic of the Congo/Central African Republic. On March 25, 2014, the President notified Congress of a new deployment of U.S. aircraft and 150 U.S. aircrew and support personnel to Uganda, South Sudan, the Democratic Republic of the Congo, and the Central African Republic \"to support regional forces from the African Union's Regional Task Force that are working to apprehend or remove Lord's Resistance Army leader Joseph Kony and other senior leaders from the battlefield and to protect local populations.\" (147) Chad. On May 21, 2014, the President notified Congress that \"[a]pproximately 80 U.S. Armed Forces personnel have deployed to Chad as part of the U.S. efforts to locate and support the safe return of over 200 schoolgirls who are reported to have been kidnapped in Nigeria\" in support of the \"operation of intelligence, surveillance, and reconnaissance aircraft for missions over northern Nigeria and the surrounding area.\" (148) Six-Month Periodic Report. On June 12, 2014, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, military operations related to the Lord's Resistance Army, military operations in Egypt, military operations in Jordan, U.S./NATO Operations in Kosovo, and regional security operations in Libya and Yemen. (149) Iraq. On June 16, 2014, the President notified Congress of the deployment of up to 275 U.S. Armed Forces personnel to Iraq to provide support and security for U.S. personnel and the U.S. Embassy in Baghdad. (150) Iraq. On June 26, 2014, the President notified Congress of the deployment of up to approximately 300 additional U.S. Armed Forces personnel in Iraq to \"assess how we can best train, advise, and support Iraqi security forces and to establish joint operations centers with Iraqi security forces to share intelligence and coordinate planning to confront the threat posed by ISIL,\" and for presidential orders to \"increase intelligence, surveillance, and reconnaissance that is focused on the threat posed by the Islamic State of Iraq and the Levant (ISIL).\" (151) Iraq. On June 30, 2014, the President notified Congress of the deployment of up to approximately 200 additional U.S. Armed Forces personnel to Iraq to \"reinforce security at the U.S. Embassy, its support facilities, and the Baghdad International Airport.\" (152) Iraq. On August 8, 2014, the President notified Congress of airstrikes against Islamic State (IS) forces to protect U.S. personnel in Erbil and to assist a humanitarian mission to protect Iraqi civilians trapped on Mount Sinjar in northern Iraq. (153) Iraq. On August 17, 2014, the President notified Congress of airstrikes against IS forces to assist Iraqi security forces in retaking Mosul Dam in northern Iraq. (154) Iraq. On September 1, 2014, the President notified Congress of airstrikes near Amirli in northern Iraq targeting IS forces besieging the town and as part of a mission to provide humanitarian assistance. (155) Iraq. On September 5, 2014, the President notified Congress of the deployment of 350 additional combat-equipped troops to provide security for diplomatic facilities and personnel in Baghdad. (156) Iraq. On September 8, 2014, President Obama notified Congress of airstrikes \"in the vicinity of the Haditha Dam in support of Iraqi forces in their efforts to retain control of and defend this critical infrastructure site from ISIL,\" stating that \"[t]hese additional military operations will be limited in their scope and duration as necessary to address this threat and prevent endangerment of U.S. personnel and facilities and large numbers of Iraqi civilians.\" (157) Central African Republic. President Obama notified Congress on September 11, 2014, of the deployment of \"approximately 20 U.S. Armed Forces personnel\" to the Central African Republic \"to support the resumption of the activities of the U.S. Embassy in Bangui.\" (158) Syria/Khorasan Group. On September 23, 2014, the President notified Congress that he directed U.S. Armed Forces to begin \"a series of strikes in Syria against elements of al-Qa'ida known as the Khorasan Group.\" (159) Iraq/Syria/Islamic State. On September 23, 2014, President Obama notified Congress that he had \"ordered implementation of a new comprehensive and sustained counterterrorism strategy to degrade, and ultimately defeat, ISIL,\" The notification states that the President deployed \"475 additional U.S. Armed Forces personnel to Iraq,\" and \"that it is necessary and appropriate to use the U.S. Armed Forces to conduct coordination with Iraqi forces and to provide training, communications support, intelligence support, and other support, to select elements of the Iraqi security forces, including Kurdish Peshmerga forces.\" The President also notified Congress that he had ordered U.S. forces \"to conduct a systematic campaign of airstrikes and other necessary actions against these terrorists in Iraq and Syria,\" \"in coordination with and at the request of the Government of Iraq and in conjunction with coalition partners.\" The President stated that the duration of the deployments and operations is not known. (160) Six-Month Periodic Report. On December 11, 2014, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, including the military campaign against the Islamic State in Iraq and Syria, military operations related to the Lord's Resistance Army, military operations in Egypt, military operations in Jordan, U.S./NATO Operations in Kosovo, and regional security operations in the Central African Republic, Libya, Tunisia, and Yemen. (161) Six-Month Periodic Report. On June 11, 2015, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, including the military campaign against the Islamic State in Iraq and Syria, military operations related to the Lord's Resistance Army, military operations in Egypt, military operations in Jordan, and U.S./NATO Operations in Kosovo. (162) Cameroon. On October 14, 2015, President Obama notified Congress that he had deployed approximately 90 U.S. Armed Forces personnel to Cameroon to \"conduct airborne intelligence, surveillance, and reconnaissance operations in the region.\" (163) Six-Month Periodic Report. On December 11, 2015, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, including the military campaign against the Islamic State in Iraq and Syria (of note were deployments of combat aircraft and personnel to Turkey and airstrikes in Libya), as well as new counterterrorism deployments to Cameroon, military operations related to the Lord's Resistance Army, military operations in Egypt, military operations in Jordan, and U.S./NATO Operations in Kosovo. (164) Six-Month Periodic Report. On June 13, 2016, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, including the military campaign against the Islamic State in Iraq and Syria, military operations related to the Lord's Resistance Army, military operations in Egypt, military operations in Jordan, and U.S./NATO Operations in Kosovo. (165) South Sudan. On July 13, 2016, President Obama notified Congress that he had ordered deployment of approximately 47 U.S. Armed Forces personnel to South Sudan to support the security of U.S. personnel and the U.S. embassy in Juba. (166) Uganda. On July 15, 2016, President Obama notified Congress of the deployment of approximately 200 U.S. Armed Forces personnel in Uganda, for the purpose of supporting the security of U.S. citizens and property in South Sudan. (167) Yemen. On October 14, 2016, President Obama reported to Congress that he had ordered U.S. armed force to conduct missile strikes in Houthi-controlled territory in Yemen, targeting radar facilities in response to anti-ship cruise missile launches conducted by Houthi insurgents against U.S. Navy warships in the Red Sea. (168) Six-Month Periodic Report. On December 5, 2016, President Obama reported to Congress concerning ongoing military deployments for U.S. counterterrorism operations, including the military campaign against the Islamic State in Iraq and Syria, military operations related to the Lord's Resistance Army, military operations in the Red Sea (previously reported missile strikes against Houthi insurgents in Yemen), military operations in Egypt, military operations related to the security of U.S. citizens and property in South Sudan, and U.S./NATO Operations in Kosovo. Appendix B. Instances Not Formally Reported to the Congress Under the War Powers Resolution In some instances where U.S. Armed Forces have been deployed in potentially hostile situations abroad, Presidents did not submit reports to Congress under the War Powers Resolution and the question of whether a report was required could be raised. Representative examples of these instances from 1973 to 1998 include evacuation of civilians from Cyprus in 1974 evacuation of civilians from Lebanon in 1976 Korean DMZ tree-cutting incident of 1976 transport of European troops to Zaire in 1978 dispatch of additional military advisers to El Salvador in 1981 shooting down of two Libyan jets over the Gulf of Sidra on August 19, 1981, after one had fired a heat-seeking missile the use of training forces in Honduras after 1983 dispatch of AWACS to Egypt after a Libyan plane bombed a city in Sudan March 18, 1983 shooting down of two Iranian fighter planes over Persian Gulf on June 5, 1984, by Saudi Arabian jet fighter planes aided by intelligence from a U.S. AWACS interception by U.S. Navy pilots on October 10, 1985, of an Egyptian airliner carrying hijackers of the Italian cruise ship Achille Lauro use of U.S. Army personnel and aircraft in Bolivia for anti-drug assistance on July 14, 1986 buildup of fleet in Persian Gulf area in 1987 force augmentations in Panama in 1988 and 1989 shooting down 2 Libyan jet fighters over the Mediterranean Sea on January 4, 1989 dispatch of military advisers and Special Forces teams to Colombia, Bolivia, and Peru, in the Andean initiative, announced September 5, 1989, to help those nations combat illicit drug traffickers transport of Belgian troops and equipment into Zaire September 25-27, 1991 evacuation of nonessential U.S. government workers and families from Sierra Leone, May 3, 1992 a bombing campaign against Iraq, termed Operation Desert Fox, aimed at destroying Iraqi industrial facilities deemed capable of producing weapons of mass destruction, as well as other Iraqi military and security targets, December 16-23, 1998. Appendix C. Text of the War Powers Resolution War Powers Resolution P.L. 93-148 (H.J.Res 542), 87 Stat. 555, passed over President's veto November 7, 1973 JOINT RESOLUTION Concerning the war powers of Congress and the President. Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, SHORT TITLE Section 1. This joint resolution may be cited as the \"War Powers Resolution.\" PURPOSE AND POLICY Section 2. (a) It is the purpose of this joint resolution to fulfill the intent of the framers of the Constitution of the United States and insure that the collective judgment of both the Congress and the President will apply to the introduction of United States Armed Forces into hostilities, or into situations where imminent involvement in hostilities is clearly indicated by the circumstances, and to the continued use of such forces in hostilities or in such situations. (b) Under article I, section 8, of the Constitution, it is specifically provided that the Congress shall have the power to make all laws necessary and proper for carrying into execution, not only its own powers but also all other powers vested by the Constitution in the Government of the United States, or in any department or officer thereof. (c) The constitutional powers of the President as Commander in Chief to introduce United States Armed Forces into hostilities, or into situations where imminent involvement in hostilities is clearly indicated by the circumstances, are exercised only pursuant to (1) a declaration of war, (2) specific statutory authorization, or (3) a national emergency created by attack upon the United States, its territories or possessions, or its armed forces. CONSULTATION Section 3. The President in every possible instance shall consult with Congress before introducing United States Armed Forces into hostilities or into situations where imminent involvement in hostilities is clearly indicated by the circumstances, and after every such introduction shall consult regularly with the Congress until United States Armed Forces are no longer engaged in hostilities or have been removed from such situations. REPORTING Section 4. (a) In the absence of a declaration of war, in any case in which United States Armed Forces are introduced— (1) into hostilities or into situations where imminent involvement in hostilities is clearly indicated by the circumstances; (2) into the territory, airspace, or waters of a foreign nation, while equipped for combat, except for deployments which relate solely to supply, replacement, repair, or training of such forces; or (3) in numbers which substantially enlarge United States Armed Forces equipped for combat already located in a foreign nation; the President shall submit within 48 hours to the Speaker of the House of Representatives and to the President pro tempore of the Senate a report, in writing, setting forth— (A) the circumstances necessitating the introduction of United States Armed Forces; (B) the constitutional and legislative authority under which such introduction took place; and (C) the estimated scope and duration of the hostilities or involvement. (b) The President shall provide such other information as the Congress may request in the fulfillment of its constitutional responsibilities with respect to committing the Nation to war and to the use of United States Armed Forces abroad. (c) Whenever United States Armed Forces are introduced into hostilities or into any situation described in subsection (a) of this section, the President shall, so long as such armed forces continue to be engaged in such hostilities or situation, report to the Congress periodically on the status of such hostilities or situation as well as on the scope and duration of such hostilities or situation, but in no event shall he report to the Congress less often than once every six months. CONGRESSIONAL ACTION Section 5. (a) Each report submitted pursuant to section 4(a)(1) shall be transmitted to the Speaker of the House of Representatives and to the President pro tempore of the Senate on the same calendar day. Each report so transmitted shall be referred to the Committee on Foreign Affairs of the House of Representatives and to the Committee on Foreign Relations of the Senate for appropriate action. If, when the report is transmitted, the Congress has adjourned sine die or has adjourned for any period in excess of three calendar days, the Speaker of the House of Representatives and the President pro tempore of the Senate, if they deem it advisable (or if petitioned by at least 30% of the membership of their respective Houses) shall jointly request the President to convene Congress in order that it may consider the report and take appropriate action pursuant to this section. (b) Within sixty calendar days after a report is submitted or is required to be submitted pursuant to section 4(a)(1), whichever is earlier, the President shall terminate any use of United States Armed Forces with respect to which such report was submitted (or required to be submitted), unless the Congress (1) has declared war or has enacted a specific authorization for such use of United States Armed Forces, (2) has extended by law such sixty-day period, or (3) is physically unable to meet as a result of an armed attack upon the United States. Such sixty-day period shall be extended for not more than an additional thirty days if the President determines and certifies to the Congress in writing that unavoidable military necessity respecting the safety of United States Armed Forces requires the continued use of such armed forces in the course of bringing about a prompt removal of such forces. (c) Notwithstanding subsection (b), at any time that United States Armed Forces are engaged in hostilities outside the territory of the United States, its possessions and territories without a declaration of war or specific statutory authorization, such forces shall be removed by the President if the Congress so directs by concurrent resolution. CONGRESSIONAL PRIORITY PROCEDURES FOR JOINT RESOLUTION OR BILL Section 6. (a) Any joint resolution or bill introduced pursuant to section 5(b) at least thirty calendar days before the expiration of the sixty-day period specified in such section, shall be referred to the Committee on Foreign Affairs of the House of Representatives or the Committee on Foreign Relations of the Senate, as the case may be, and such committee shall report one such joint resolution or bill, together with its recommendations, not later than twenty-four calendar days before the expiration of the sixty-day period specified in such section, unless such House shall otherwise determine by the yeas and nays. (b) Any joint resolution or bill so reported shall become the pending business of the House in question (in the case of the Senate the time for debate shall be equally divided between the proponents and the opponents), and shall be voted on within three calendar days thereafter, unless such House shall otherwise determine by yeas and nays. (c) Such a joint resolution or bill passed by one House shall be referred to the committee of the other House named in subsection (a) and shall be reported out not later than fourteen calendar days before the expiration of the sixty-day period specified in section 5(b). The joint resolution or bill so reported shall become the pending business of the House in question and shall be voted on within three calendar days after it has been reported, unless such House shall otherwise determine by yeas and nays. (d) In the case of any disagreement between the two Houses of Congress with respect to a joint resolution or bill passed by both Houses, conferees shall be promptly appointed and the committee of conference shall make and file a report with respect to such resolution or bill not later than four calendar days before the expiration of the sixty-day period specified in section 5(b). In the event the conferees are unable to agree within 48 hours, they shall report back to their respective House in disagreement. Notwithstanding any rule in either House concerning the printing of conference reports in the Record or concerning any delay in the consideration of such reports, such report shall be acted on by both Houses not later than the expiration of such sixty-day period. CONGRESSIONAL PRIORITY PROCEDURES FOR CONCURRENT RESOLUTION Section 7. (a) Any concurrent resolution introduced pursuant to section 5(c) shall be referred to the Committee on Foreign Affairs of the House of Representatives or the Committee on Foreign Relations of the Senate, as the case may be, and one such concurrent resolution shall be reported out by such committee together with its recommendations within fifteen calendar days, unless such House shall otherwise determine by the yeas and nays. (b) Any concurrent resolution so reported shall become the pending business of the House in question (in the case of the Senate the time for debate shall be equally divided between the proponents and the opponents) and shall be voted on within three calendar days thereafter, unless such House shall otherwise determine by yeas and nays. (c) Such a concurrent resolution passed by one House shall be referred to the committee of the other House named in subsection (a) and shall be reported out by such committee together with its recommendations within fifteen calendar days and shall thereupon become the pending business of such House and shall be voted upon within three calendar days, unless such House shall otherwise determine by yeas and nays. (d) In the case of any disagreement between the two Houses of Congress with respect to a concurrent resolution passed by both Houses, conferees shall be promptly appointed and the committee of conference shall make and file a report with respect to such concurrent resolution within six calendar days after the legislation is referred to the committee of conference. Notwithstanding any rule in either House concerning the printing of conference reports in the Record or concerning any delay in the consideration of such reports, such report shall be acted on by both Houses not later than six calendar days after the conference report is filed. In the event the conferees are unable to agree within 48 hours, they shall report back to their respective Houses in disagreement. INTERPRETATION OF JOINT RESOLUTION Section 8. (a) Authority to introduce United States Armed Forces into hostilities or into situations wherein involvement in hostilities is clearly indicated by the circumstances shall not be inferred— (1) from any provision of law (whether or not in effect before the date of the enactment of this joint resolution), including any provision contained in any appropriation Act, unless such provision specifically authorizes the introduction of United States Armed Forces into hostilities or into such situations and states that it is intended to constitute specific statutory authorization within the meaning of this joint resolution; or (2) from any treaty heretofore or hereafter ratified unless such treaty is implemented by legislation specifically authorizing the introduction of United States Armed Forces into hostilities or into such situations and stating that it is intended to constitute specific statutory authorization within the meaning of this joint resolution. (b) Nothing in this joint resolution shall be construed to require any further specific statutory authorization to permit members of United States Armed Forces to participate jointly with members of the armed forces of one or more foreign countries in the headquarters operations of high-level military commands which were established prior to the date of enactment of this joint resolution and pursuant to the United Nations Charter or any treaty ratified by the United States prior to such date. (c) For purposes of this joint resolution, the term \"introduction of United States Armed Forces\" includes the assignment of members of such armed forces to command, coordinate, participate in the movement of, or accompany the regular or irregular military forces of any foreign country or government when such military forces are engaged, or there exists an imminent threat that such forces will become engaged, in hostilities. (d) Nothing in this joint resolution— (1) is intended to alter the constitutional authority of the Congress or of the President, or the provisions of existing treaties; or (2) shall be construed as granting any authority to the President with respect to the introduction of United States Armed Forces into hostilities or into situations wherein involvement in hostilities is clearly indicated by the circumstances which authority he would not have had in the absence of this joint resolution. SEPARABILITY CLAUSE Section 9. If any provision of this joint resolution or the application thereof to any person or circumstances is held invalid, the remainder of the joint resolution and the application of such provision to any other person or circumstance shall not be affected thereby. EFFECTIVE DATE Section 10. This joint resolution shall take effect on the date of its enactment.", "summary": "This report discusses and assesses the War Powers Resolution and its application since enactment in 1973, providing detailed background on various cases in which it was used, as well as cases in which issues of its applicability were raised. In the post-Cold War world, Presidents have continued to commit U.S. Armed Forces into potential hostilities, sometimes without a specific authorization from Congress. Thus the War Powers Resolution and its purposes continue to be a potential subject of controversy. On June 7, 1995, the House defeated, by a vote of 217-201, an amendment to repeal the central features of the War Powers Resolution that have been deemed unconstitutional by every President since the law's enactment in 1973. In 1999, after the President committed U.S. military forces to action in Yugoslavia without congressional authorization, Representative Tom Campbell used expedited procedures under the Resolution to force a debate and votes on U.S. military action in Yugoslavia, and later sought, unsuccessfully, through a federal court suit to enforce presidential compliance with the terms of the War Powers Resolution. The War Powers Resolution (P.L. 93-148) was enacted over the veto of President Nixon on November 7, 1973, to provide procedures for Congress and the President to participate in decisions to send U.S. Armed Forces into hostilities. Section 4(a)(1) requires the President to report to Congress any introduction of U.S. forces into hostilities or imminent hostilities. When such a report is submitted, or is required to be submitted, Section 5(b) requires that the use of forces must be terminated within 60 to 90 days unless Congress authorizes such use or extends the time period. Section 3 requires that the \"President in every possible instance shall consult with Congress before introducing\" U.S. Armed Forces into hostilities or imminent hostilities. From 1975 through March 2017, Presidents have submitted 168 reports as the result of the War Powers Resolution, but only one, the 1975 Mayaguez seizure, cited Section 4(a)(1), which triggers the 60-day withdrawal requirement, and in this case the military action was completed and U.S. Armed Forces had disengaged from the area of conflict when the report was made. The reports submitted by the President since enactment of the War Powers Resolution cover a range of military activities, from embassy evacuations to full-scale combat military operations, such as the Persian Gulf conflict, and the 2003 war with Iraq, the intervention in Kosovo, and the anti-terrorism actions in Afghanistan. In some instances, U.S. Armed Forces have been used in hostile situations without formal reports to Congress under the War Powers Resolution. On one occasion, Congress exercised its authority to determine that the requirements of Section 4(a)(1) became operative on August 29, 1983, through passage of the Multinational Force in Lebanon Resolution (P.L. 98-119). In 1991 and 2002, Congress authorized, by law, the use of military force against Iraq. In several instances none of the President, Congress, or the courts has been willing to initiate the procedures of or enforce the directives in the War Powers Resolution. In the 115th Congress, U.S. military operations related to the joint counter-Houthi campaign conducted by the Kingdom of Saudi Arabia and the United Arab Emirates (UAE) in Yemen spurred congressional legislative action in both houses of Congress. The Senate on December 13, 2018, voted to adopt S.J.Res. 54, a joint resolution to \"direct the removal of United States Armed Forces from hostilities in the Republic of Yemen that have not been authorized by Congress,\" marking the first instance that such a joint resolution received consideration and passed the full Senate under the expedited consideration provisions of Section 1013 of the Department of State Authorization Act, Fiscal Years 1984 and 1985 (P.L. 98-164; 50 U.S.C. §1546a). In the 116th Congress, the House of Representatives on February 13, 2019, voted to adopt a similar joint resolution on U.S. military involvement in Yemen, H.J.Res. 37, and the Senate is expected to take up a companion measure, S.J.Res. 7, in March 2019.", "document_type": "crs"}
{"report": "The Social Security Act of 1935 established a federal old-age pension financed with employee-employer payroll taxes. Since then, Congress has amended the Social Security program for multiple purposes, including to expand coverage, change the minimum age for retirement benefits, provide an automatic cost-of-living adjustment to benefits, and address concerns about solvency of the Social Security Trust Funds. This report traces the major decisions affecting the Social Security program, from the earliest enacting legislation through the most recent congressional session. It provides a summary of the provisions and voting records for each bill, focusing on amendments to Old-Age, Survivors and Disability Insurance (OASDI). (OASDI is the formal name for Social Security.) For an overview of the Social Security program, see CRS Report R42035, Social Security Primer . Table 1 lists major Social Security legislation from 1935 to 2018. The Social Security Act became law on August 14, 1935, when President Franklin Roosevelt signed H.R. 7260. Title II of the act created a compulsory national old-age benefits program, covering nearly all workers in commerce and industry and providing monthly pensions for insured workers aged 65 or older. A benefit weighted toward lower-paid workers was to be based on cumulative wages and was to be payable beginning in 1942 to persons aged 65 or older who had paid Social Security taxes for at least five years. The benefit was to be withheld from otherwise qualified persons in any month in which they did any work. Under Title VIII of the act, a payroll tax of 1%, each, on employees and employers, payable on earnings up to $3,000 each year, was to be imposed on covered jobs as of January 1, 1937, and was scheduled to rise in steps to 3% each by 1949. Besides old-age benefits, the act provided for a system of federal-state unemployment compensation funded with employer payroll taxes, and for grants to states to help fund assistance payments to certain categories of needy persons (i.e., the aged, the blind, and children under 16 who had been deprived of parental support), child welfare services, and maternal and child health services. When the act was debated in Congress, prominent Republicans in the House and Senate made attempts to delete the provisions creating the old-age pension system. They said they preferred to rely solely on the assistance (i.e., charity/welfare) approach to help the aged. They argued that the payroll tax/insurance mechanism of the old-age benefits provisions might be unconstitutional and that it would impose a heavy tax burden on businesses that would retard economic development. Members of the minority stated, in the Ways and Means Committee's report to the House, that the old-age benefits program (Title II) and the method by which the money was to be raised to pay for the program (Title VIII) established a \"bureaucracy in the field of insurance in competition with private business.\" They contended further that the program would \"destroy old-age retirement systems set up by private industries, which in most instances provide more liberal benefits than are contemplated under Title II.\" Although some party members tried to remove the old-age benefits provisions, the majority of Republicans in both chambers nevertheless did vote for the final Social Security bill. During congressional debate, Democrats generally supported the proposed old-age benefits program, and the vast majority of Democrats voted for the final bill. Debate on the Social Security bill started in the House on April 11 and lasted until April 19, 1935. Approximately 50 amendments were offered, but none passed. According to Edwin Witte, a key player in the development of the Social Security Act, House leaders passed the word that they wanted all amendments defeated. Four particularly significant votes were Representative Monaghan's amendment proposing a revised \"Townsend plan\" and Representative Connery's amendment proposing the Lundeen plan, both of which (described below) called for a more generous social insurance system; Representative Treadway's motion to recommit H.R. 7260 to delete the old-age benefits program and its related taxes; and the vote on final passage of the bill. On April 18, 1935, Representative Monaghan (D-MT) offered an amendment, introduced in its original form by Representative Groarty (D-CA) and referred to as the Townsend plan, which required the federal government to pay a $200-a-month pension to everyone 60 years of age or older, to be financed by a 2% tax on \"all financial\" transactions (essentially a sales tax). (For more details on the Townsend plan, see discussion of the 1939 amendments below.) Representative Monaghan's amendment, although less costly than the original Townsend plan, was rejected by a vote of 56 to 206. On April 18, 1935, Representative Connery (D-MA) offered an amendment that contained the provisions of a bill sponsored by Representative Lundeen (Farmer-Laborite-MN). The Lundeen bill, which was approved 7-6 by the House Labor Committee, called for the \"establishment of a system of social insurance to compensate all workers and farmers, 18 years of age or older, in all industries, occupations, and professions, who are unemployed through no fault of their own.... \" Representative Lundeen's plan offered higher benefits than the bill reported out of the Committee on Ways and Means, and it tied benefits to the cost of living. Under the Lundeen proposal, a more generous social insurance program was to be extended to all workers and farmers unable to work because of illness, old age, maternity, industrial injury, or any other disability. This system was to be financed by taxes falling most heavily on persons with higher incomes (by levying additional taxation on inheritances, gifts, and individual and corporation incomes of $5,000 or more per year). There was a division vote of 52 in favor and 204 opposed. Representative Connery asked for tellers. The Connery amendment was rejected by a 40-158 teller vote. On April 18, 1935, Representative Treadway (R-MA), the ranking minority Member of the Ways and Means Committee, offered an amendment to strike Title II, the old-age benefit provisions, from the bill. Representative Treadway was opposed to the old-age benefits provision and to the taxing provisions of Title VIII. He said that the financing arrangement was unconstitutional. He indicated that the tax would be particularly burdensome on industry, running up to 6% on payrolls. He said that \"business and industry are already operating under very heavy burdens\" and maintained that to add a payroll tax to their burden would probably cause more unemployment and more uncertainty. Representative Jenkins (R-OH), supporter of the Treadway amendment, stated that making each worker pay 3% of his money for old-age benefits, whether he wanted to or not, and requiring employers to do the same, was clearly unconstitutional. He said, \"Why talk about wanting to relieve the Depression, why talk about charity, why talk about all these other things when you are placing a financial lash upon the backs of the people whose backs are breaking under a load of debts and taxes?\" He described the old-age benefits system as \"compulsion of the rankest kind.\" The Treadway amendment was defeated by a 49-125 teller vote. On April 19, 1935, Representative Treadway made a motion to recommit H.R. 7260, including instructions to the Ways and Means Committee to strike out the old-age and unemployment insurance provisions and to increase the federal contribution for the welfare program of old-age assistance, Title I of the bill. Representative Treadway stated that the old-age benefit and unemployment insurance provisions of the bill were not emergency measures and that they \"would not become effective in time to help present economic conditions, but, on the contrary would be a definite drag on recovery.\" He was opposed to levying a tax against both the employer and the employee. During his remarks on April 12, 1935, he stated that he would \"vote most strenuously in opposition to the bill at each and every opportunity.\" During his April 19, 1935, remarks, Representative Treadway said he was disgusted \"at the attitude of business in that it has not shown the proper interest in protecting itself by stating its case before Congress.\" His motion to recommit was rejected by a vote of 149 (95-R, 45-D, 9-I) to 253 (1-R, 252-D). On April 19, 1935, the House passed the Social Security bill by a vote of 372 (77-R, 288-D, 7-I) to 33 (18-R, 13-D, 2-I). There were also four major votes in the Senate: Senator Long's (D-LA) proposal to substitute taxes on wealth and property for the payroll tax; Senator Clark's amendment to exempt from coverage employees in firms with private pensions; Senator Hastings's motion to recommit; and the vote on final passage of the bill. On June 17, 1935, Senator Long offered an amendment to liberalize the proposed old-age assistance program (Title I of the bill) and delete the payroll tax provisions (Title VIII and IX). In place of the payroll tax, Senator Long recommended that states levy a tax on wealth or property. Senator Long's amendment was rejected by voice vote. On June 19, 1935, Senator Clark (D-MO) offered an amendment to exempt from coverage under the old-age benefits system employees in firms with private old-age pension systems. This idea came from an official of a Philadelphia insurance brokerage firm that specialized in group annuity contracts. Proponents of the amendment stated that employees would benefit from more liberal private annuities that would be in true proportion to earnings and service; joint annuities to protect spouses; earlier retirement for disability; and other factors. Supporters of the amendment also maintained that the government would benefit because the reserves of private annuity plans would increase investment and create more income to tax. The Administration (being opposed to the amendment) argued that the amendment did not provide true retirement income guarantees because private pension programs could be cancelled, or the firm sponsoring them could go out of business. Critics maintained that the amendment discouraged the employment of older men. The Ways and Means Committee rejected the proposal and so did the Finance Committee (by a narrow margin), but when Senator Clark offered it as an amendment on the Senate floor, it was passed by a vote of 51 (16-R, 35-D) to 35 (3-R, 30-D, 2-I). On June 19, 1935, Senator Hastings (R-DE) made a motion to strike out the old-age benefits provisions from the bill. Senator Hastings stated that those provisions were an effort to write into law a forced annuity system for a certain group of people. He maintained that the reserve account to take care of people in the future was not a contract and the American public could not depend upon it. He stated that the accumulation of huge sums of money for persons who had not yet reached retirement age would be subjected to many demands and most likely could not be preserved intact. He also said \"let us not deceive that youth by making him believe that here is an annuity whereby he is contributing 50% and his employer is contributing 50%, and that it goes to his credit, when as a matter of fact, part of it is taken from him in order that we may take care of the older people of today.\" Senator Hastings's amendment was rejected by a vote of 15 (12-R, 3-D) to 63 (7-R, 54-D, 2-I). On June 19, 1935, Senator George (D-GA) offered an amendment to encourage formation of industrial pensions as a substitute for Titles II and VIII. Under the amendment, employers were to operate and manage their own plans. The amendment called for a uniform schedule of benefits nationwide and provided for disability and survivor benefits along with old-age and unemployment benefits. The amendment was defeated by voice vote. The Senate passed the bill on June 19, 1935, by a vote of 77 (15-R, 60-D, 2-I) to 6 (5-R, 1-D). The conferees settled all differences except on the Clark amendments related to employees under private pension plans. The conference committee reported the bill without the Clark amendments, but with an understanding that the chairmen of the Ways and Means and Finance Committees would appoint a special joint committee to study whether to exempt industrial employers with private pension plans from coverage under Social Security and to report to the next Congress. On July 17, 1935, the House rejected Representative Treadway's motion to accept the Clark amendment by a vote of 78 to 268; then agreed by a vote of 269 to 65 to a motion by Representative Doughton (D-NC) that the House insist that the Senate drop the Clark amendment. On July 17, 1935, the Senate agreed, by voice vote, to Senator Harrison's motion to insist on keeping the Clark amendment and ask for a further conference. On August 8, 1935, the conference report cleared the House by a voice vote. On August 9, 1935, the Senate conferees agreed to delete the Clark amendment; the Senate then agreed to the conference report by a voice vote. H.R. 6635, the Social Security Amendments of 1939, was signed into law on August 10, 1939, by President Franklin Roosevelt. Congress expressly provided in the 1935 Act that the Social Security Board (a three-member panel appointed by the President with advice and consent of the Senate) study and make recommendations on the most effective methods of providing economic security through social insurance. An advisory council appointed by the Senate Special Committee on Social Security and the Social Security Board was created in May 1937 to work with the Social Security Board to study amending Titles II and VII of the Social Security Act. Some members of the advisory council represented employees, some represented employers, and others represented the general public. Both the Social Security Board and the advisory council made recommendations on how the old-age benefits program should be changed, and many of their recommendations were the same. President Roosevelt sent the Social Security Board's recommendations to Congress on January 16, 1939. The 1939 amendments incorporated most of the board's recommendations. The 1939 amendments extended benefits to dependents and survivors of workers covered by Social Security. Dependents included an aged wife, a child under 16 (under 18 if attending school), a widowed mother caring for an eligible child, an aged widow, and a dependent aged parent if there were no eligible widow or child. Widows would receive 75% of the primary insurance amount (PIA) of the worker, and all other dependents would receive 50% of the PIA. The starting date for monthly benefits was accelerated to January 1, 1940, instead of January 1, 1942. Benefits were based on average monthly wages rather than on cumulative wages. In addition, Congress repealed the tax rate increase to 1.5%, scheduled to go into effect in 1940, replacing it with an increase to 2% in 1943-1945. The amendments also modified qualifying provisions, including the definition of insured status, for consistency with other changes in the act. Further, people receiving OASI benefits were permitted to earn up to $14.99 monthly: no benefits were to be paid in any month in which the recipient earned $15 or more in covered employment. The system now was called Old-Age and Survivors Insurance (OASI). Congress also changed the old-age reserve account to a trust fund, managed by a board of trustees. On June 2, 1939, following public hearings on the proposed amendments and six weeks of executive sessions, the Committee on Ways and Means reported to the House H.R. 6635, embodying its recommendations for amendments to the Social Security Act. The day before, the House had debated on and voted against the Townsend old-age pension bill. The Townsend plan, embodied in H.R. 6466 introduced by Representative McGroarty (D-CA) in January 1935, was offered as a substitute for H.R. 6635. The Townsend plan would have provided a monthly pension of $200 to every citizen aged 60 or older who had not been convicted of a felony. To receive the pension, a person could not earn wages and was required to spend the entire pension within 30 days. The plan would have been financed by a 2% tax on every commercial and financial transaction; the President would have been given discretionary power to raise the tax to 3% or to lower it to 1%. During a 1935 Ways and Means Committee hearing, Representative Townsend stated that his plan was only incidentally a pension plan. He said the principal objectives of the proposal were to solve the unemployment problem and to restore prosperity by giving people purchasing power. He cited Census Bureau data that 4 million people over the age of 60 held jobs in 1930. He reiterated that to be eligible for the proposed pension of $200 a month, those elderly people would have to give up their jobs, which he said meant that 4 million jobs would become available to middle-aged and younger people. In addition, he said that requiring 8 million elderly persons to buy $200 worth of goods and services each month would increase demand and result in more jobs. Representative Sabath (D-IL) said he thought it was \"decidedly out of place to bring the Townsend bill to the floor.\" He said that the bill \"had no chance of passing in the first place; neither was it feasible nor possible of operation.\" Others branded the bill as \"crackpot,\" and in general objected because they thought that the Social Security program was a better means of caring for the aged, asserting that any liberalization of pensions should be done within the framework of the Social Security Act. Edwin Witte wrote, The members of the House of Representatives at all times took the Townsend movement much more seriously than did the senators. The thousands of letters that the members received in support of this plan worried them greatly. With the exception of probably not more than a half dozen members, all felt that the Townsend plan was utterly impossible; at the same time they hesitated to vote against it. The House rejected H.R. 6466, the Townsend plan bill, on June 1, 1939, by a vote of 97 (55-R, 40-D, 2-I) to 302 (107-R, 194-D, 1-I). A New York Times editorial reported that \"the psychological effect of the presentation of the Townsend bill was to make these liberalized benefits, referring to the provisions in H.R. 6635, seem small. Most of those who voted against the Townsend plan will be eager to vote for these liberalized benefits to show that their hearts are in the right place. The result is that the real cost of the new Social Security scale of benefits is not likely to receive very serious attention.\" The House took up H.R. 6635 on June 6, 1939. The bill had the general support of the Ways and Means Committee. The minority stated in the committee's report to the House that \"while the bill in no sense represents a complete or satisfactory solution of the problem of Social Security, it at least makes certain improvements in the present law (some of which we have ourselves heretofore suggested) which we believe justify us in supporting it despite its defects.\" On June 9, 1939, Representative Havenner (D-CA) offered an amendment, endorsed by the American Federation of Labor, to extend Social Security coverage to workers employed in college clubs or fraternities or sororities; employees in nonprofit religious, charitable, or educational institutions; student nurses; and some agricultural workers. The amendment was rejected by voice vote. On June 9, 1939, Representative Kean (R-NJ) offered an amendment that required that the money derived from the Social Security payroll tax be invested in one-year marketable U.S. government bonds rather than in special nonmarketable Treasury obligations. Representative Kean remarked that the adoption of the amendment would \"prevent the present practice of using old-age taxes for current expenses.\" The amendment was rejected by voice vote. On June 9, 1939, Representative Carlson (R-KS) offered an amendment to exclude non-citizens from coverage under Social Security. He was opposed to putting foreigners under the U.S. old-age insurance provisions. Opponents of the amendment argued that exemption of such people would give employers of aliens a competitive advantage over vessels owned and manned by Americans. Representative Carlson's amendment was rejected 24 to 59 by a division vote. On June 10, 1939, Representative Carlson moved to recommit H.R. 6635 to the Committee on Ways and Means. The motion was rejected by voice vote. On June 10, 1939, the House passed H.R. 6635 by a vote of 364 (142-R, 222-D) to 2 (2-R). On July 13, 1939, Senator Downey (D-CA), in the course of his statement on how \"unworkable, unjust, and unfair\" the Social Security Act was, moved that the bill be recommitted to the Finance Committee for more study of the whole pension and savings field. Senator Downey stated that under H.R. 6635 covered workers in 1942 would receive only one-half as much in old-age benefits as those receiving government subsidies (old-age assistance benefits/cash relief). Under H.R. 6635, the average monthly Social Security benefit was projected at between $19 and $20 for 80% of workers in 1942, whereas the maximum old-age assistance benefit was $40. The motion was rejected by a vote of 18 (12-R, 5-D, 1-I) to 47 (4-R, 41-D, 2-I). On July 13, 1939, Senator Reynolds (D-NC) offered an amendment to prohibit non-U.S. citizens from being eligible for Social Security coverage or benefits. Senator Harrison (D-MS) offered additional language to Senator Reynolds's amendment that allowed benefit payments to aliens if they lived within 50 miles of the United States. The amendment as modified was agreed to by voice vote. The Senate passed H.R. 6635 on July 13, 1939, by a vote of 57 (8-R, 45-D, 4-I) to 8 (6-R, 2-D). The conference report was approved by the House on August 4, 1939, by voice vote, and by the Senate on August 5, 1939, by a vote of 59 (14-R, 42-D, 3-I) to 4 (4-D). Between 1942 and 1947, the Social Security payroll tax rate increase was postponed seven times. It was not until 1950 that the 1% Social Security tax rate was allowed to rise to 1.5%. The Revenue Act of 1942, P.L. 753 (H.R. 7378, 77 th Congress) was signed by President Franklin Roosevelt on October 21, 1942. It provided that for calendar year 1943, the payroll tax rate for old-age and survivors benefits would be frozen at the existing rate of 1% for employees and employers, each, instead of being increased to 2% on each as otherwise would have been required. P.L. 211 (H.J.Res. 171, 78 th Congress), a joint resolution regarding the Tariff Act, signed by President Roosevelt on December 22, 1943, froze the payroll tax at the 1% rate until March 1, 1944. The purpose of the resolution was to give Congress time to consider the scheduled payroll tax increase before it went into effect. The Revenue Act of 1943, P.L. 235 (H.R. 3687, 78 th Congress), was vetoed by President Roosevelt on February 22, 1944; the veto was overridden by the House on February 24, 1944, and by the Senate on February 25, 1944. The bill deferred the scheduled payroll tax increase (from 1 to 2%) until 1945. P.L. 235 also contained an amendment by Senator Murray (D-MT) that authorized the use of general revenues if payroll taxes were insufficient to meet Social Security benefit obligations. Senator Murray stated that the amendment merely stated in law what had been implied in the Senate committee report. Senator Vandenberg (R-MI) replied that the amendment \"has no immediate application, it has no immediate menace, it contemplates and anticipates no immediate appropriation; but as the statement of a principle, I agree with the amendment completely.\" The amendment passed by voice vote. The \"Murray-Vandenberg\" general revenue provision was repealed in 1950, when the tax rate was increased. The Federal Insurance Contributions Act (FICA) of 1945, P.L. 495 (H.R. 5564, 78 th Congress), signed by President Roosevelt on December 16, 1944, froze the payroll tax rate at 1% until 1946 and scheduled the payroll tax rate to rise to 2.5% for the years 1946 through 1948, and to 3% thereafter. The Revenue Act of 1945, P.L. 214 (H.R. 4309, 79 th Congress), signed by President Truman on November 8, 1945, deferred the tax rate increase until 1947. The Social Security Amendments of 1946, P.L. 719 (H.R. 7037, 79 th Congress), signed by President Truman on August 10, 1946, deferred the tax rate increase until 1948. The Social Security Amendments of 1947, P.L. 379 (H.R. 3818, 80 th Congress), signed by President Truman on August 6, 1947, continued the freeze on the tax rate increase until 1950 and provided that it would rise to 1.5% for 1950-1951 and to 2% thereafter. Members who favored these payroll tax freezes argued that the Social Security reserves were adequate and that benefit payments in the immediate future could be met with the current payroll tax rate. In a 1942 letter to the Senate Finance Committee, President Roosevelt said that \"a failure to allow the scheduled increase in rates to take place under the present favorable circumstances would cause a real and justifiable fear that adequate funds will not be accumulated to meet the heavy obligations of the future and that the claims for benefits accruing under the present law may be jeopardized.\" He also stated that \"expanded Social Security, together with other fiscal measures, would set up a bulwark of economic security for the people now and after the war and at the same time would provide anti-inflationary sources for financing the war.\" Members who were opposed to the freeze argued that the scheduled payroll tax increase was important for the long-term soundness of the OASI trust fund and that postponing the tax increase would mean higher payroll tax rates in the future and perhaps government subsidies to meet obligations. Some proponents of the freeze maintained that the Administration wanted the tax increase to retire the public debt accumulated by wartime expenditures. Although Senator Vandenberg (R-MI) was the main spokesman for postponing the payroll tax increases, the legislative effort to defer tax increases was bipartisan. \"Without regard to party or ideology, elected representatives of the people were not willing to argue for increases in an earmarked tax if a current need for them could not be demonstrated,\" one scholar observed. Two pieces of 1948 legislation, H.R. 5052 and H.J.Res. 296, settled the argument of who was considered an employee for purposes of Social Security coverage. The term employee was not defined in the Social Security Act or in the Internal Revenue Code. However, in 1936, the Social Security Board and the Treasury Department issued regulations that to a certain extent explained the meaning of the terms employee and employer . In defining employer, both sets of regulations emphasized the concept of \"control\"—the right to give instructions—but other significant factors, such as the right to discharge, the furnishing of tools, and a place to work, were also mentioned in the regulations. During the next few years, the Social Security Board and the Treasury Department issued numerous rulings to clarify the boundaries of the employee-employer relationship and a number of court cases established generally applicable precedents. The common-law meaning of employee, however, was very unclear in cases of outside salesmen. On December 31, 1946, the U.S. District Court for the Northern District of California, in the case of Hearst Publications, Inc. v. The United States , ruled that newspaper vendors should be considered employees rather than independent contractors. H.R. 5052, introduced in 1948, proposed to treat newspaper and magazine vendors as independent contractors rather than employees and thereby to exclude them from Social Security coverage. In addition, in 1948, Congress addressed the broader issue of who was to be considered an employee by passing H.J.Res. 296, a resolution to maintain the status quo of treating newspaper vendors as independent contractors, by stating that Congress, not the courts or the Social Security Administration (SSA), should determine national policy regarding Social Security coverage. It was reported that H.J.Res. 296 was introduced primarily to prevent the release of new federal regulations defining the meaning of employee along the lines interpreted by the Supreme Court in three cases decided in June 1947. H.J.Res. 296 excluded from Social Security coverage (and unemployment insurance) any person who was not considered an employee under the common-law rules. In effect, H.J.Res. 296 said that independent contractors (e.g., door-to-door salesmen, insurance salesmen, and pieceworkers) were not to be considered employees. H.R. 5052 and H.J.Res. 296 were vetoed by President Truman. Congress overrode both vetoes. In his veto of H.R. 5052, President Truman asserted that the nation's security and welfare demanded that Social Security be expanded to cover the groups excluded from the program: \"Any step in the opposite direction can only serve to undermine the program and destroy the confidence of our people in the permanence of its protection against the hazards of old age, premature death, and unemployment.\" The action taken on H.R. 5052 illustrated the controversial issues involved in determining who should be covered under Social Security. On March 4, 1948, Representative Gearhart (R-CA) asked unanimous consent for immediate consideration of H.R. 5052. He stated that \"until the rendition of the federal court decisions I have referred to were rendered the status of the newspaper and magazine vendors was considered by everyone, and as this Congress clearly intended, to be that of independent contractors since they bought their periodicals at a low price and sold them at a higher price, deriving their livelihood from the profit in the operation.\" Under the court decisions \"these vendors were arbitrarily declared to be employees and therefore subject to the payroll taxes though the money they receive is not wages, as generally understood, but profits derived from an independent business operation of their own.\" Under the court decisions, newspaper and magazine vendors were in essence employees of all of the newspaper and magazine companies with which they had an arrangement. H.R. 5052 excluded newspaper and magazine vendors from coverage under the Social Security Act. Representative Gearhart stated in his remarks that \"when newspaper vendors are covered into the Social Security system—and I believe they will be by act of Congress before this session ends—they will be brought in as the independent contractors which they are, as the self-employed.... \" The House passed H.R. 5052 on March 4, 1948, by unanimous consent. On February 27, 1948, H.J.Res. 296 was passed by a vote of 275 to 52. On March 23, 1948, the Senate passed by unanimous consent H.R. 5052 in form identical to that passed by the House. On June 4, 1948, H.J.Res. 296 was passed, after public assistance amendments increasing federal assistance to states were added, by a vote of 74 to 6. Although there was no conference on H.J.Res. 296, the House concurred with the Senate amendments on June 4, 1948, by voice vote. On April 6, 1948, in the veto message on H.R. 5052, President Truman stated that some vendors work under arrangements, \"which make them bona fide employees of the publishers, and, consequently, are entitled to the benefits of the Social Security Act.\" President Truman further stated that \"It is said that news vendors affected by this bill could more appropriately be covered by the Social Security laws as independent contractors when and if coverage is extended to the self-employed. Whether that is true or not, surely they should continue to receive the benefits to which they are now entitled until the broader coverage is provided. It would be most inequitable to extinguish their present rights pending a determination as to whether it is more appropriate for them to be covered on some other basis.\" On June 14, 1948, President Truman vetoed H.J.Res. 296, saying that \"If our Social Security program is to endure, it must be protected against these piecemeal attacks. Coverage must be permanently expanded and no employer or special group of employers should be permitted to reverse that trend by efforts to avoid the burden which millions of other employers have carried without serious inconvenience or complaint.\" The House overrode President Truman's veto of H.R. 5052 and passed the bill on April 14, 1948, by a vote of 308 (207-R, 101-D) to 28 (2-R, 24-D, 2-I). On April 20, 1948, the Senate overrode the President's veto and passed H.R. 5052 by a vote of 77 (48-R, 29-D) to 7 (7-D). On June 14, 1948, President Truman's veto of H.J.Res. 296 was overridden in the House by a vote of 298 to 75 and in the Senate by a vote of 65 (37-R, 28-D) to 12 (2-R, 10-D). H.R. 6000, the Social Security Act Amendments of 1950, was signed by President Truman on August 28, 1950. H.R. 6000 broadened the Social Security Act to cover roughly 10 million additional persons, including regularly employed farm and domestic workers; self-employed people other than doctors, lawyers, engineers, and certain other professional groups; certain federal employees not covered by government pension plans; and workers in Puerto Rico and the Virgin Islands. On a voluntary group basis, coverage was offered to employees of state and local governments not under public employee retirement systems and to employees of nonprofit organizations. Dependent husbands, widowers, and, under certain circumstances children of insured women were also made eligible for benefits (before, such benefits were not generally available to children of female workers). In addition, Congress raised benefits by about 77%; raised the wage base from $3,000 to $3,600; raised employer and employee taxes gradually from 1.5% to an ultimate rate of 3.25% each in 1970 and years thereafter; set the OASI tax rate for the self-employed at 75% of the combined employer-employee rate; eased requirements for eligibility for benefits by making 1950 the starting date for most people in determining the quarters of coverage needed; permitted recipients to have higher earnings ($50 a month) without losing any OASI benefits (i.e., those aged 75 or older could now earn any amount without losing OASI benefits); and gave free wage credits of $160 for each month in which military service was performed between September 16, 1940, and July 24, 1947. On August 22, 1949, the Committee on Ways and Means reported H.R. 6000. H.R. 6000 did not include President Truman's recommendations for health insurance or his request to lower the OASI eligibility age to 60 for women, but it did include disability protection for both Social Security and public assistance recipients. It also extended coverage to farm and domestic workers. All 10 Republicans on the committee (including 7 who voted to send H.R. 6000 to the floor) filed a minority report stating that OASI coverage and benefits should be limited so as to provide only a \"basic floor\" of economic protection. The minority report opposed the disability insurance provision, saying that aid to the disabled should be limited to charity aid provided under the proposed public assistance program for the permanently and totally disabled. The Committee on Rules at first refused to send H.R. 6000 to the floor, but, after much debate, a closed rule barring floor amendments was granted. A number of Members opposed the rule because they said it foreclosed their right to improve the bill through floor amendments. On October 4, 1949, Representative Sabath (D-IL) offered a resolution for four days of debate, with only the Committee on Ways and Means having the right to offer amendments, and with only a motion to recommit being in order. Those favoring the resolution stated that the Ways and Means Committee had devoted six months to considering the bill, had heard testimony from 250 witnesses and thus knew best how to improve the program. Those opposing the closed rule said the bill was very controversial and that the whole House should settle difficult questions of policy. They said the closed rule negated the importance of other House Members and usurped their rights. The House agreed to the resolution for a closed rule by a vote of 189 (12-R, 176-D, 1-I) to 135 (123-R, 12-D) on October 4, 1949. On October 5, 1949, Representative Mason (R-IL) moved to recommit H.R. 6000, and offered H.R. 6297 (a bill that carried out the minority view on H.R. 6000) as its substitute. H.R. 6297, introduced by Representative Kean (R-NJ) on October 3, 1949, held the wage base to $3,000; recommended greater coverage for domestic workers so that those who were less regularly employed would be included; exempted teachers, firemen, and policemen with their own pension systems from coverage; confined disability payments to the public assistance program; and recommended that Congress establish an independent Social Security system in Puerto Rico, the Virgin Islands, and other possessions rather than include them in the existing OASI program. The motion to recommit was defeated by a vote of 113 (112-R, 1-D) to 232 (29-R, 202-D, 1-I). Immediately following the rejection of the motion, H.R. 6000 was passed in the House by a vote of 333 (R-130, D-202, 1-I) to 14 (R-12, D-2). Since Congress adjourned shortly after the House action, the Senate did not consider H.R. 6000 until 1950. The Senate Finance Committee held extensive hearings and adopted many amendments to H.R. 6000. The committee stated that the chief purpose of the bill was to strengthen the OASI system so that OASI would be the primary method of offering \"basic security to retired persons and survivors,\" with public assistance (particularly old-age assistance) playing strictly a supplementary and secondary role. The Finance Committee version of the bill did not include the disability insurance provision passed by the House nor the provision providing federal grants to states for needy persons who were permanently and totally disabled, nor President Truman's health insurance proposal. The bill was reported to the Senate on May 17, 1950, and debate began on June 12, 1950. On June 14, 1950, following a Senate Republican Policy Committee meeting, Senator Millikin (R-CO) and Senator Taft (R-OH) indicated that Republicans would support H.R. 6000 but favored a study to determine whether the OASI and old-age assistance programs eventually should be united in a universal pay-as-you-go system. Under this proposal, all elderly persons in the United States would become eligible for subsistence-level pensions at the age of 65, with pension amounts the same for all (rather than varied to reflect earnings during the work career), and financed from current revenues rather than a trust fund. An amendment offered by Senator Myers (D-PA) to add a disability insurance program to OASI was rejected by a voice vote. On June 20, 1950, another amendment offered by Senator Myers to boost the OASI wage base from $3,000 to $4,200, closer to what President Truman had requested (instead of $3,600 specified in the George amendment—see below), was rejected 36 (9-R, 27-D) to 45 (27-R, 18-D). On June 20, 1950, Senator Long (D-LA) introduced an amendment to provide federal grants to States for needy disabled persons. The amendment was rejected by a vote of 41 (4-R, 37-D) to 42 (33-R, 9-D). On June 20, 1950, Senator George's (D-GA) amendment to increase the basic wage base from $3,000 to $3,600 was agreed to by voice vote. On June 20, 1950, by a voice vote, the Senate adopted S.Res. 300, authorizing a study of a universal pay-as-you-go old-age pension system. The Senate passed H.R. 6000 on June 20 by a vote of 81 (35-R, 47-D) to 2 (2-R). Conferees dropped the disability insurance proposal, but retained the public assistance program for the permanently and totally disabled (i.e., the so-called charity approach). The conference report was submitted to the House on August 1, 1950. On August 16, 1950, Representative Byrnes (R-WI) moved to recommit the conference report on H.R. 6000. He stated that his main reason for doing so was to prevent any attempt to remove from the bill a Senate floor amendment by Representative Knowland (R-CA) to reduce federal control over state-administered unemployment insurance. Representative Doughton (D-NC) moved the previous question on the motion to recommit. The motion on the previous question was passed by a vote of 188 (120-R, 68-D) to 186 (20-R, 165-D, 1-I). The motion to recommit the conference report was rejected. The conference report passed the House on August 16, 1950, 374 (140-R, 234-D) to 1 (1-R); and the Senate on August 17, 1950, by voice vote. H.R. 7800, the Social Security Amendments of 1952, was signed into law on July 18, 1952, by President Truman. The amendments increased OASI benefits for both present and future recipients (by an average of 15% for those on the rolls), permitted recipients to earn $75 a month (instead of $50) without losing OASI benefits, extended wage credits of $160 for each month in which active military or naval service was performed during the period from July 24, 1947, through December 1953, and provided for a disability \"freeze,\" which in principle preserved the Social Security benefits of qualified workers who became permanently and totally disabled before retirement by averaging the person's wages only over his or her working years. (See following conference action section for more details.) In the House, debate centered largely on a so-called disability freeze proposed by the Committee on Ways and Means. Under the provision, if a person became permanently and totally disabled, the period of disability was to be excluded in computing the number of quarters of coverage he or she needed to be eligible for benefits, and in computing the average earnings on which the benefits would be based. The provision, in effect, preserved benefit rights while a person was disabled. Medical examinations by doctors and public institutions would be designated and paid for by the Federal Security Agency (FSA). The American Medical Association (AMA) claimed that this arrangement would lead to socialized medicine. Representative Reed (R-NY), the minority leader of the Ways and Means Committee, was the primary spokesman for Members who endorsed the AMA position. On May 19, 1952, when H.R. 7800 was brought to the floor under suspension of the rules procedure—requiring a two-thirds vote for passage and barring amendments—the majority of Republicans voted against it because of the disability provision, and it was rejected by a vote of 151 (52-R, 98-D, 1-I) to 141 (99-R, 42-D), failing to win a two-thirds vote. On June 16, 1952, Democratic leaders brought H.R. 7800 to the floor under suspension of the rules. An amended version of the revised bill empowered the FSA to make disability determinations but omitted the language specifying how the FSA administrator should do so. Representative Reed said \"... let no person on this floor be deceived. You have the same old H.R. 7800 here before you. While the socialized medicine advocates pretend to remove the specific instructions to the Administrator, they now give him more powers under general provisions of the law than he had before. You have socialized medicine here stronger in this bill than was H.R. 7800, heretofore defeated.\" Representative Reed later contended that because of the approaching election, many Members chose to go on record in favor of the other OASI provisions and so voted for the amended version of H.R. 7800. The bill was approved 361 (165-R, 195-D, 1-I) to 22 (20-R, 2-D) on June 17, 1952. When the bill came to the Senate Finance Committee, it dropped the disability freeze provision. The Finance Committee said there was inadequate time to study the issue properly. The committee amendment, offered by Senator George (D-GA), to drop the disability freeze provision, was passed by voice vote on June 26, 1952. H.R. 7800 (without the disability freeze provision) was passed in the Senate by a voice vote on June 26, 1952. The conferees retained the disability freeze provision, in principle. The compromise terminated the freeze provision on June 30, 1953; at the same time, it did not allow an application to be accepted before July 1, 1953. Thus, the disability freeze provision was made inoperative unless Congress, in subsequent legislation, were to take action to remove the bar. The stated intent in making the provision inoperative was to permit \"the working out of tentative agreements with the States for possible administration of these provisions.\" In addition, the conferees gave responsibility for determining whether an applicant was disabled to appropriate state agencies (such as public assistance, vocational rehabilitation, or workmen's compensation), instead of the FSA. The Federal Security administrator would be able to overturn a ruling by the state agencies that a person was disabled, but would not be able to reverse a ruling by the state agencies that a person was not disabled. The conference report was agreed to July 5, 1952, by voice votes in both chambers. H.R. 9366, the Social Security Amendments of 1954, was signed by President Eisenhower on September 1, 1954. In his 1953 State of the Union Message, the President recommended that \"OASI should promptly be expanded to cover millions of citizens who have been left out of the Social Security system.\" The Social Security Amendments of 1954 extended mandatory coverage to, among others, some self-employed farmers, engineers, architects, accountants, and funeral directors, all federal employees not covered by government pension plans, and farm and domestic service workers not covered by the 1950 amendments, and it extended voluntary coverage to ministers and certain state and local government employees already covered by staff retirement systems. The bill also raised the wage base for the OASI tax to $4,200; raised the tax rate to 3.5%, each, for employers and employees beginning in 1970, and to 4.0%, each, beginning in 1975, with the tax rate for the self-employed continuing at 1.5 times the employee rate (or 75% of the combined employee-employer rate). OASI benefits for recipients were raised by roughly 15%, with the maximum individual benefit rising from $85 to $98.50 a month, and a revised benefit formula was provided for future retirees that increased benefits by roughly 27%, with the maximum benefit rising from $85 a month to $108.50. The bill also put the disability freeze into effect (see discussion of House action on the 1952 amendments below), with disability determinations to be made by the appropriate State agencies, permitted a recipient to earn up to $1,200 a year without deductions, eliminated the earnings test for people aged 72 or older, and dropped the five years of lowest earnings from average monthly wage determinations for benefit computation purposes. On June 1, 1954, Representative Smith (D-VA) and other farm area Democrats objected to bringing H.R. 9366 to the floor under a closed rule because coverage of farmers was included in the bill. Representative Smith stated, \"I object to the feature of this bill that prohibits you from offering any amendment. I think that requires a little discussion and a little understanding. We all agree that on an ordinary tax bill it is not feasible or practical to write it on the floor of the House, and therefore we have adopted the theory that we have closed rules on tax bills ... all we asked for in the Rules Committee was that the individual members of this House be given an opportunity to offer amendments to designate what classifications of persons should be included.\" On June 1, 1954, by a vote of 270 (171-R, 98-D, 1-I) to 76 (5-R, 71-D), debate of the closed rule was cut off, and the closed rule was then adopted by voice vote. The House bill also included provisions extending mandatory coverage to all self-employed professionals but doctors (dentists and other medical professionals would have been covered). The House passed H.R. 9366 on June 1, 1954, by a vote of 356 (181-R, 174-D, 1-I) to 8 (2-R, 6-D). H.R. 9366 as reported by the Finance Committee included the coverage of farm and domestic service workers, ministers, state and local government employees covered by a retirement system, and a small number of professionals. It also increased the earnings test threshold to $1,200 a year; reduced the age at which the earnings test no longer applied to 72; and increased the lump-sum death benefit from $255 to $325.50. During the Senate debate on H.R. 9366, nine amendments were adopted, six were rejected, and six were presented and then withdrawn. Among the amendments adopted on the floor by the Senate was a provision by Senator Long (D-LA) to require the Department of Health, Education, and Welfare to study the feasibility and costs of providing increased minimum benefits of $55, $60, and $75 a month under the Social Security program. On August 13, 1954, Senator Long's amendment was agreed to by voice vote. Among the amendments defeated were the Johnston (D-SC) amendment to reduce the Social Security eligibility age to 60; the Stennis (D-MS) amendments that would have left the coverage of farm workers unchanged; and the Humphrey (D-MN) amendment to increase the widow's benefit to 100% of the primary insurance amount. On August 13, 1954, Senator Johnston's amendment was rejected by voice vote. On August 13, 1954, the Stennis amendments were rejected en bloc by voice vote. On August 13, 1954, Senator Humphrey's amendment was rejected on a division vote. Among the amendments that were presented and then withdrawn was an amendment by Senator Lehman (D-NY) to extend Social Security coverage, increase benefits, add permanent and total disability and temporary disability Social Security benefits, and to make other changes. On August 13, 1954, the Senate passed H.R. 9366, by voice vote. The conferees, among other things, accepted a provision mandatorily covering self-employed farmers, accountants, architects, engineers, and funeral directors, but excluding lawyers, doctors, dentists, or other medical professionals, and extended coverage to federal employees not covered by staff retirement systems. Both chambers agreed to the conference report without amendments by voice vote on August 20, 1954, the last day of the session. H.R. 7225, the Social Security Amendments of 1956, was signed by President Eisenhower on August 1, 1956. The amendments provided benefits, after a six-month waiting period, for permanently and totally disabled workers aged 50 to 64 who were fully insured and had at least 5 years of coverage in the 10-year period before becoming disabled; to a dependent child 18 years or older of a deceased or retired insured worker if the child became disabled before age 18; to female workers and wives at the age of 62, instead of 65, with actuarially reduced benefits; reduced from 65 to 62 the age at which benefits were payable to widows or parents, with no reduction; extended coverage to lawyers, dentists, veterinarians, optometrists, and all other self-employed professionals except doctors; increased the tax rate by 0.25% on employer and employee each (0.375% for self-employed people) to finance disability benefits (thereby raising the aggregate tax rate ultimately to 4.25% each for employees and employers); and created a separate Disability Insurance (DI) trust fund. The Social Security program now consisted of Old-Age, Survivors, and Disability Insurance (OASDI). Major House Ways and Means Committee provisions provided benefits to disabled persons aged 50 or older and reduced the age at which women could first receive OASI benefits to 62. Although some Members maintained that not enough time was spent in working out the details of these two controversial provisions, H.R. 7225 was brought to the floor under suspension of the rules, which barred floor amendments and required a two-thirds vote for passage. H.R. 7225 was passed by the House on July 18, 1955, by a vote of 372 (169-R, 203-D) to 31 (23-R, 8-D). At Senate Finance Committee hearings on the House-passed bill, the Secretary of Health, Education, and Welfare, Marion Folsom stated that the Administration was opposed to reducing the retirement age to 62 for women and providing disability benefits. According to Congress and the Nation , Senator Folsom said that OASI had stayed actuarially sound without excessive taxes because it had been restricted to one purpose with \"predictable costs\": providing income for the aged. Spokesmen for the AFL-CIO and several other groups maintained that union experience with welfare plans and federal studies dating back to 1937 showed that disability insurance was both administratively and financially sound. On June 5, 1956, the Senate Finance Committee reported H.R. 7225 after eliminating the Disability Insurance program and the tax increase to pay for it and limiting retirement benefits at age 62 to widows only. On July 17, 1956, Senator George (D-GA) offered an amendment reinstating the Disability Insurance program and the tax increase to finance it. The amendment provided for a separate disability insurance trust fund (instead of operating the new program out of the OASI fund). The amendment was passed by a vote of 47 (6-R, 41-D) to 45 (38-R, 7-D). Also, on July 17, 1956, the Senate agreed to Senator Kerr's (D-OK) amendment to permit women to receive benefits at age 62 at actuarially reduced rates. The amendment passed by a vote of 86 (40-R, 46-D) to 7 (5-R, 2-D). On July 17, 1956, the Senate passed H.R. 7225 by a vote of 90 (45-R, 45-D) to 0. The House on July 26, 1956, and the Senate on July 27, 1956, cleared the conference report on H.R. 7225 without amendments by voice votes. H.R. 13549, the Social Security Amendments of 1958, was signed by President Eisenhower on August 28, 1958. The amendments raised recipients' benefits an average of 7%, with benefits ranging from $33 to $127 per month for future recipients; increased maximum family benefits from $200 to $254; raised the wage base from $4,200 to $4,800 a year; increased the tax rate by 0.25% on employers and employees each and 0.375% for the self-employed; provided benefits to dependents of workers receiving disability benefits; and permitted the aged dependent parents of an insured deceased worker to receive survivors' benefits even if the worker's widow or dependent widower or child were alive and also eligible for benefits. Most of the controversy over H.R. 13549 pertained to public assistance programs. There was relatively little controversy over the proposed OASDI provisions. During debate on H.R. 13549, Representative Reed (R-NY) stated that the bill would strengthen the actuarial soundness of the Social Security program. On July 31, 1958, the House passed H.R. 13549 by a vote of 374 to 2. On August 15, 1958, Senator Yarborough (D-TX) offered an amendment to increase benefits by 10%, rather than 7% as proposed in H.R. 13549. Senator Yarborough stated that in many states old-age public assistance payments were higher than the \"Social Security payments the people have earned by putting their money into the Social Security fund.\" Proponents of the amendment mentioned that a 10% increase would alleviate erosion of benefits due to inflation. Opponents of the amendment argued that many persons getting Social Security also received income from other sources. Some opponents of the amendment maintained that it would jeopardize the enactment of the bill. Senator Yarborough's amendment was rejected by a vote of 32 (6-R, 26-D) to 53 (33-R, 20-D). On August 16, 1958, Senator Kennedy (D-MA) offered an amendment to increase Social Security benefits by 8% (rather than 7%). The Kennedy-Case amendment was rejected by voice vote. On August 16, 1958, Senator Morse (D-OR) offered an amendment to increase Social Security benefits by 25%, provide health insurance, and make other changes. Senator Morse's amendment was rejected by voice vote. On August 16, 1958, Senator Humphrey (D-MN) offered an amendment to provide health insurance. (Senator Morse's amendment was based in part on this Humphrey amendment.) Senator Humphrey withdrew his amendment. On August 16, 1958, Senator Kennedy offered an amendment for himself and Senator Smathers (D-NJ) to eliminate the dollar ceiling of $255 on the lump-sum death benefit and restore the 3-to-1 ratio between the death benefit and the regular monthly benefit. The amendment was rejected by voice vote. On August 16, 1958, Senator Revercomb (R-WV) offered an amendment to provide full Social Security retirement benefits at age 62, for both men and women. Senator Revercomb's amendment was rejected by voice vote. The Senate passed H.R. 13549 on August 16, 1958, by a vote of 79 (37-R, 42-D) to 0. On August 19, 1958, the House by a voice vote agreed to the Senate amendments. H.R. 12580, the Social Security Amendments of 1960, was signed by President Eisenhower on September 13, 1960. Health care for the aged was the primary issue in 1960. At the crux of the debate was the question of whether the federal government should assume major responsibility for the health care of the nation's elderly people, and, if so, whether medical assistance should be provided through the Social Security system or through the public assistance programs (i.e., charity approach). The 1960 amendments provided more federal funds for old-age assistance (OAA) programs so that states could choose to improve or establish medical care services to OAA recipients. In addition, the legislation known as \"Kerr-Mills\" established a new voluntary program (under jurisdiction of the OAA program) of medical assistance for the aged, under which states received federal funds to help pay for medical care for persons aged 65 or older who were not recipients of OAA but whose income and resources were insufficient to meet their medical expenses. The 1960 amendments also contained a number of OASDI provisions. The amendments made disability benefits available to workers under the age of 50; established a new earnings test whereby each dollar of yearly earnings between $1,200 and $1,500 would cause only a 50-cent reduction in benefits with a dollar-for-dollar reduction in benefits for earnings above $1,500; liberalized requirements for fully insured status so that to be eligible for benefits a person needed only one quarter of covered work for every three calendar quarters (rather than one for every two quarters, as under the old law), elapsing after 1950 and before retirement, disability, or death; and raised the survivor benefit of each child to 75% of the parent's PIA. H.R. 12580 as reported by the Ways and Means Committee contained two medical care provisions for elderly people. The first provision provided the states with additional funding to improve or to establish medical care programs for old-age assistance recipients. The second provision established a new federal-state program (under a new title of the Social Security Act) designed to assist aged persons who were not eligible for public assistance but who were unable to pay their medical bills. The Ways and Means Committee rejected H.R. 4700, introduced by Representative Forand (D-RI), which would have provided insurance against the cost of hospital, nursing home, and surgical services for OASDI recipients, by a vote of 17 to 8. Proponents of H.R. 12580 said that it provided medical assistance for every aged person in any state that implemented a medical assistance program. Representative Thompson (D-NJ), a supporter of the Forand bill stated that under H.R. 12580 people would be \"denied the opportunity of contributing to their old-age health insurance coverage while employed and would be forced to rely upon charity after their working days were over.\" He contended further that \"even this charity ... is contingent upon the action of the separate states.\" The House passed H.R. 12580 on June 23, 1960, by a vote of 381 (137-R, 244-D) to 23 (7-R, 16-D). The Senate deleted the bill's new title, and instead adopted an amendment by Senator Kerr (D-OK) and Senator Frear (D-DE) that amended Title I of the Social Security Act to provide medical services for medically needy aged persons. On August 20, 1960, Senator Javits (R-NY) offered an amendment to provide federal matching grants to states to enable them to give health care to needy persons aged 65 or older. (This proposal was more generous than the provisions—also based on the public assistance, i.e., charity approach—already in the report by the Finance Committee.) On August 23, 1960, Senator Javits's amendment was rejected by a vote of 28 (28-R) to 67 (5-R, 62-D). Also on August 20, 1960, Senator Anderson (D-NM) offered an amendment to use Social Security as well as the public assistance program for the aged to provide health care to the elderly. On August 23, 1960, Senator Anderson's amendment was rejected by a vote of 44 (1-R, 43-D) to 51 (32-R, 19-D). On August 23, 1960, the Senate passed by voice vote Senator Byrd's (D-WV) amendment to permit men to retire at the age of 62 with actuarially reduced benefits. (The amendment was later dropped in conference.) The Senate passed H.R. 12580 on August 23, 1960, by a vote of 91 (31-R, 60-D) to 2 (1-R, 1-D). The conferees agreed to the medical care provisions in the Senate-passed bill (i.e., no new title for a program for aged persons not eligible for OAA benefits). The medical provisions became known as the Kerr-Mills program, named for Senator Robert Kerr (D-OK) and House Ways and Means Committee Chairman Wilbur Mills (D-AR). The House agreed to the conference report on August 26, 1960, by a vote of 369 (132-R, 237-D) to 17 (8-R, 9-D). The Senate agreed to the conference report on August 29, 1960, by a vote of 74 (31-R, 43-D) to 11 (1-R, 10-D). H.R. 6027, the Social Security Amendments of 1961, was signed into law on June 30, 1961, by President Kennedy. In general, the amendments made many of the changes in the Social Security program recommended by President Kennedy in his February 2, 1961, message to Congress, in which he outlined a program to restore momentum to the national economy. The amendments raised the minimum benefit to $40 per month; permitted men to claim retired worker's benefits at the age of 62, instead of 65, with actuarially reduced benefits; liberalized the insured status requirement so that, subject to the 6-quarter minimum and the 40-quarter maximum, an individual was fully insured if he had one quarter of coverage for every calendar year that elapsed between January 1, 1951, or age 21, whichever was later, and the year before he died, became disabled, or reached retirement age; increased benefits to a surviving aged widow, widower, or dependent parent of an insured deceased worker from 75 to 82.5% of the benefit the worker would have been entitled to if alive; changed the earnings test so that an aged recipient had no benefits withheld if earnings were $1,200 a year or less, $1 withheld for each $2 earned between $1,200 and $1,700, and a $1 reduction in benefits for each additional dollar of earnings above $1,700; and raised the employer and employee tax rates by 0.125% and the self-employed tax rate by 0.1875%. In the House, the principal point of dissension was the provision in H.R. 6027 that lowered the eligibility age for men from 65 to 62. Several Republicans opposed the provision on the basis that it would likely start a trend toward \"compulsory retirement\" at age 62. Speaking for himself and most of the minority committee members, Representative Curtis (R-MO) stated, \"The reason [we are] against the age 62 [provision] is this: our older people are having a hard enough time now to stay in the labor market. This provides further incentive to drive them out.\" On April 20, 1961, Representative Curtis made a motion to recommit H.R. 6027 and substitute a measure that cut out the provisions for lowering the first eligibility age for men, increased benefits for widows, and raised the minimum benefit from $33 to $40. The motion was rejected by voice vote. Note that the provisions raising the minimum benefit and increasing benefits for widows were already in H.R. 6027 as reported out of committee. The House passed H.R. 6027 on April 20, 1961, by a vote of 400 (149-R, 251-D) to 14 (14-R). In the Senate, debate focused on Senator Cotton's (R-NH) amendment made on June 26, 1961, to increase the earnings test limit to $1,800 a year. Senator Kerr (D-OK) said that Senator Cotton's amendment failed to provide increased OASDI taxes to pay for the additional $427 million to $615 million that would be paid out each year under the proposed amendment. Senator Kerr stated that \"an amendment which would result in the impairment of the fiscal integrity of the fund should not be pressed.\" Senator Hartke (D-IN) offered a substitute amendment that provided a slightly less generous new earnings test limit ($1,700). The substitute amendment was passed June 26, 1961, by a vote of 59 (3-R, 56-D) to 30 (30-R). Provisions to finance this change were agreed to by unanimous consent. On June 26, 1961, Senator Hartke's amendment to broaden the definition of disability was rejected by voice vote. The Senate passed H.R. 6027 90 (33-R, 57-D) to 0 on June 26, 1961. Both chambers cleared the conference report by voice votes June 29, 1961. H.R. 11865, the proposed Social Security Amendments of 1964, was passed by both the House and the Senate but the conference committee could not reach agreement, adjourning on October 3, 1964, without making any recommendations. The proposed Social Security Amendments of 1964 as passed by the House contained a 5% across-the-board Social Security benefit increase; extended the child's benefit to age 22 if he or she were in school; allowed widows to retire at age 60, with actuarially reduced benefits; provided limited benefits to persons aged 72 or older who had some Social Security coverage but not enough to meet the minimum requirements of existing law; and extended Social Security coverage to groups of persons who previously had been excluded. The House-passed bill contained no provision relating to hospital insurance for the aged. The proposed Social Security Amendments of 1964 as passed by the Senate contained a hospital insurance program, the so-called King-Anderson bill; increased benefits: raised the earnings base; liberalized the earnings test; changed the eligibility requirements for the blind; and permitted religious groups to reject Social Security coverage if they had religious objections to social insurance. H.R. 11865, the proposed Social Security Amendments of 1964, was reported out of the Ways and Means Committee on July 7, 1964. The bill was debated under a rule that permitted only committee amendments. No amendments were offered. On July 29, 1964, the House passed H.R. 11865 by a vote of 388 to 8. The Finance Committee approved H.R. 11865 on August 21, 1964. The committee rejected several amendments that would have created a hospital insurance program for the aged through the Social Security program. On August 31, 1964, Senator Gore (D-TN) offered an amendment to Senator Long's (D-LA) amendment to increase the proposed across-the-board benefit increase to 7% (instead of the proposed 5% increase) and to liberalize the earnings test. Senator Gore's amendment included the 1963 King (D-CA)-Anderson (D-NM) bill (H.R. 3920/S. 880), which would have provided hospital insurance benefits for the aged under the Social Security program. On September 2, 1964, the Gore amendment passed by a vote of 49 to 44. On September 3, 1964, the Senate passed H.R. 11865 by a vote of 60 to 28. The conference committee on H.R. 11865 could not reach agreement. The conferees from the Senate voted 4 to 3 to insist on including the hospital insurance provisions; the conferees from the House, by a 3 to 2 vote, refused to accept such provisions. The conference committee adjourned on October 2, 1964. H.R. 6675, the Social Security Amendments of 1965, was signed into law on July 30, 1965, by President Lyndon Johnson. Although a federally operated health insurance program covering the entire nation was considered by the Franklin Roosevelt Administration in 1935, it was not explicitly endorsed until January 1945, when President Roosevelt's budget message called for an \"extended Social Security including medical care.\" Such a plan was submitted to Congress by President Truman in November 1945, but neither chamber acted on the proposal, in large part due to strong opposition by the AMA. The controversy surrounding the establishment of a federal health insurance program for the aged was finally ended by the 1965 amendments (H.R. 6675), which established a basic two-part health insurance program called Medicare (Title XVIII of the Social Security Act). The costs of hospitalization and related care would be met in part by a compulsory program of Hospital Insurance (HI, Part A), financed by a separate payroll tax. The program would serve recipients of the Social Security and railroad retirement programs, aged 65 or older. A voluntary Supplementary Medical Insurance (SMI) plan (Part B) would help pay doctor bills and related services, for all persons aged 65 or older, financed through monthly premiums paid by the recipient and a matching federal payment from general revenues. The amendments also provided a 7% across-the-board increase in OASDI benefits, extended compulsory self-employment coverage to doctors, made child's benefits available through age 21 if the child were a full-time student (under prior law, they were available only through age 17), permitted widows to receive actuarially reduced benefits at age 60 rather than age 62, provided benefits to divorced wives and widows under certain conditions, increased the earnings test amount to $1,500 with $1 withheld for every $2 earned up to $2,700, and provided that an insured worker would be eligible for disability benefits if his or her disability was expected to end in death or to last for 12 consecutive months, instead of indefinitely. The 1965 amendments also increased the payroll tax rate and the taxable wage base. In addition, P.L. 89-97 reduced the number of quarters of work necessary for persons aged 72 or older to have insured status (from 6 quarters to 3 quarters for a worker and from 6 quarters to 3 quarters for a wife who reached age 72 in or before 1966, to 4 quarters for a wife who turned 72 in 1967, and to 5 quarters for a wife who attained age 72 in 1968). Further, a new federal-state medical assistance program established under Title XIX of the Social Security Act replaced the Kerr-Mills law (medical assistance for the aged that was enacted in 1960). The program was to be administered by the states, with federal matching funds. The new Medicaid program was available to all people receiving assistance under the public assistance titles (Title I, Title IV, Title X, and Title XIV) and to people who were able to provide for their own maintenance but whose income and resources were insufficient to meet their medical costs. A federal hospital insurance program, or \"Medicare,\" had been passed only once by the Senate, in 1964, and then by a narrow margin. It had never been approved by the Ways and Means Committee and thus had not been put to a House vote. The 1964 congressional elections, however, brought 42 new Northern Democrats into the House, almost all of them Medicare supporters. The Ways and Means Committee began holding executive sessions on H.R. 1, a bill to establish a social insurance program for hospital and related care for the aged, on January 27, 1965. The committee reported H.R. 6675 March 29, 1965, with all 17 Democrats favoring the bill and all 8 Republicans opposing it. House floor debate centered on the Medicare proposal. Supporters said it was long overdue. Critics opposed its compulsory nature, argued that it would be financed by a \"regressive\" payroll tax, and said it would endanger the Social Security cash benefit program. Republican spokesmen instead wanted a voluntary health plan (as opposed to a mandatory social insurance approach) with a Medicaid-like program underpinning it to provide medical assistance for the needy aged. On April 8, 1965, the House rejected Representative Byrnes's (R-WI) motion to recommit H.R. 6675 to the Ways and Means Committee with instructions to substitute the text of H.R. 7057, a bill that Representative Byrnes had introduced a week earlier. H.R. 7057 was not offered as an amendment because the rule did not permit such action. H.R. 7057 provided for all hospitalization, nursing home, medical and surgical care to be financed through a voluntary system with payment split between the patient and general revenues, rather than from a tax on the payrolls of employers. The motion to recommit was rejected by a vote of 191 (128-R, 63-D) to 236 (10-R, 226-D). On April 8, 1965, the House passed H.R. 6675 by a vote of 313 (65-R, 248-D) to 115 (73-R, 42-D). On June 30, 1965, the Finance Committee reported its version of H.R. 6675. The committee approved the bill by a vote of 12 (2-R, 10-D) to 5 (4-R, 1-D). On July 7 and 8, 1965, three moves to expand H.R. 6675 were rejected. Senator Ribicoff's (D-CT) amendment to remove all time limits on length of hospital stays under Medicare was rejected by a vote of 39 (13-R, 26-D) to 43 (12-R, 31-D). Senator Miller's (R-IA) amendment to provide for an automatic 3% increase in Social Security pensions whenever a 3% increase occurred in the \"retail\" price index was rejected by a vote of 21 (15-R, 6-D) to 64 (9-R, 55-D). Senator Prouty's (R-VT) amendment to provide benefit increases ranging from 75% in the low-income brackets to 7% in the upper-income brackets was rejected by a vote of 12 (10-R, 2-D) to 79 (18-R, 61-D). In addition, Senator Curtis's (R-NE) amendment to provide that the Medicare patient pay a deductible based on ability to pay was rejected by a vote of 41 (25-R, 16-D) to 51 (4-R, 47-D). On July 7, 1965, Senator Byrd's (D-WV) amendment to lower the age at which workers could receive Social Security benefits to 60 (rather than age 62, the existing minimum) was agreed to by voice vote. On July 8, 1965, Senator Kennedy's (D-NY) amendment to prohibit federal payments to any hospital not meeting the standards required by the state or local government was passed by voice vote. On July 9, 1965, Senator Hartke's (D-IN) amendment to liberalize the definition of blindness under the Social Security program, provide benefits to blind workers with at least 6 quarters of Social Security coverage, and permit blind workers to receive benefits regardless of other earnings was passed by a vote of 78 (28-R, 50-D) to 11 (11-D). On July 9, 1965, Senator Hartke's amendment to eliminate the time limit on hospital care under the proposed program was agreed to by voice vote. On July 9, 1965, Senator Smathers's (D-FL) amendment to raise payroll taxes to finance the benefits provided in floor amendments passed by a voice vote. On July 9, 1965, Senator Curtis (R-NE) offered an amendment to strike Medicare, Parts A and B, from the bill. The amendment was rejected by a vote of 26 (18-R, 8-D) to 64 (11-R, 53-D). Senator Curtis also reintroduced, in a slightly different form, his amendment to provide a deductible based on the Medicare patient's ability to pay. This amendment, too, was rejected by a vote of 40 to 52. In addition, Senator Curtis moved to recommit H.R. 6675 with instructions to strike out the portions related to Medicare and substitute a plan patterned after the health insurance program used by retired federal employees, but financed from current premiums. The motion to recommit H.R. 6675 was rejected by a vote of 26 (18-R, 8-D) to 63 (10-R, 53-D). H.R. 6675 was passed by the Senate on July 9, 1965, by a vote of 68 (13-R, 55-D) to 21 (14-R, 7-D). On July 27, 1965, the House adopted the conference report by a vote of 307 (70-R, 237-D) to 116 (68-R, 48-D). On July 28, 1965, the Senate adopted the conference report by a vote of 70 (13-R, 57-D) to 24 (17-R, 7-D). H.R. 12752, signed by President Johnson on March 15, 1966, raised income taxes to help pay for the Vietnam War. It extended OASI benefits of $35 per month to persons over the age of 71 who were not covered, but with the benefit reduced by the amount of payments received under government pension plans, veteran's or civil service pensions, teacher's retirement pension plans, or welfare programs. The House passed H.R. 12752, the Tax Adjustment Act of 1966, by a vote of 246 (46-R, 200-D) to 146 (88-R, 58-D). The bill did not contain any Social Security provisions. During the floor debate on H.R. 12752, Senator Prouty (R-VT) offered an amendment to extend a minimum Social Security payment of $44 a month to all persons aged 70 or older who were not then eligible for benefits (an estimated 1.8 million persons at a cost of $760 million in FY1967). On March 8, 1966, Senator Long (D-LA) moved to table the Prouty amendment but his motion was rejected by a vote of 37 (1-R, 36-D) to 51 (30-R, 21-D). On March 8, 1966, the Senate passed the Prouty amendment by a vote of 45 (21-R, 24-D) to 40 (9-R, 31-D) and adopted by a vote of 44 (25-R, 19-D) to 43 (6-R, 37-D) a motion by Senator Prouty to table Senator Mansfield's (D-MT) motion to reconsider the vote on passage of the amendment. On March 9, 1966, the Senate passed the Tax Adjustment Act of 1966 by a vote of 79 (24-R, 55-D) to 9 (4-R, 5-D). On March 10, 1966, the conferees included the Prouty amendment in the final version of H.R. 12752, but changed the monthly benefit to $35. On March 15, 1966, the House adopted the conference report on H.R. 12752 by a vote of 288 (68-R, 220-D) to 102 (59-R, 43-D). On March 15, 1966, the Senate adopted the conference report on H.R. 12752 by a vote of 72 (23-R, 49-D) to 5 (4-R, I-D). H.R. 12080, the Social Security Amendments of 1967, was signed by President Johnson on January 2, 1968. The amendments provided a 13% across-the-board increase in benefits; raised the taxable wage base from $6,600 to $7,800; increased the payroll tax rate from 4.4% on employers and employees each to 4.8% in 1969; raised the minimum benefit from $44 to $55 per month; raised the earnings test limit to $1,680 a year instead of $1,500 (recipient lost $1 in benefits for every $2 earned between $1,680 and $2,880, and lost $1 for each additional dollar earned above $2,880); added benefits for disabled widows and widowers at age 50, with a stricter definition of disability; liberalized the definition of blindness for disability payments; and clarified the definition of disability. President Johnson had called for a 15% across-the-board increase in OASDI benefits and numerous other changes in the Social Security Act. The proposals were embodied in H.R. 5710, introduced in the House on February 20, 1967, by the Committee on Ways and Means chairman, Wilbur Mills (D-AR). The Ways and Means Committee held hearings on the Administration's bill (H.R. 5710) in March and April 1967. On August 7, 1967, it reported a new bill, H.R. 12080, that included most of the Administration's Social Security proposals, notably a provision that raised the earnings test limit from $1,500 to $1,680. On August 17, 1967, Representative Utt (R-CA) moved to recommit H.R. 12080. The motion was rejected by voice vote. On August 17, 1967, the House passed H.R. 12080 by a roll call vote of 416 (182-R, 234-D) to 3 (1-R, 2-D). The bill was debated under a closed rule prohibiting floor amendments. On November 14, 1967, the Senate Finance Committee reported a heavily amended bill that contained several OASDI provisions as recommended by the Administration rather than as modified by the House. The Senate bill provided a 15% across-the-board Social Security increase, in contrast to the 12.5% increase in the House bill. On November 17, 1967, Senator Prouty (R-VT) offered an amendment to finance the higher benefits out of general revenues rather than Social Security taxes. The amendment was rejected by a vote of 6 (3-R, 3-D) to 62 (23-R, 39-D). On November 17, 1967, Senator Metcalf (D-MT) offered an amendment to delete from H.R. 12080 a more stringent definition of disability. The Metcalf amendment was passed by a vote of 34 (6-R, 28-D) to 20 (16-R, 4-D). On November 21, 1967, Senator Williams (R-DE) offered an amendment to implement the Finance Committee's recommended payroll tax increase in January 1968 (before the general election) rather than in January 1969. The amendment was defeated by a vote of 27 (22-R, 5-D) to 49 (4-R, 45-D). On November 21, 1967, the Senate, by a vote of 22 (17-R, 5-D) to 58 (9-R, 49-D), rejected a Republican proposal offered by Senator Curtis (R-NE) and Senator Williams (R-DE) substituting the 12.5% OASDI benefit increase and financing plan contained in the House bill for the 15% benefit increase and financing plan recommended by the Finance Committee. On November 21, 1967, Senator Bayh (D-IN) offered an amendment to raise the earnings test limit from $1,680 to $2,400. The amendment passed by a vote of 50 (14-R, 36-D) to 23 (10-R, 13-D). The Senate passed H.R. 12080 on November 22, 1967, by a 78 (23 R, 55-D) to 6 (4-R, 2-D) roll call vote. The conference report on H.R. 12080 was filed on December 11, 1967. All of the major Senate floor amendments were dropped from the bill. The conferees split the difference between many of the other provisions. The House adopted the conference report on December 13, 1967, by a vote of 390 (167-R, 223-D) to 3 (1-R, 2-D). The Senate adopted the conference report on December 15, 1967, by a vote of 62 (26-R, 36-D) to 14 (3-R, 11-D). H.R. 13270, the Tax Reform Act of 1969, was signed by President Nixon on December 30, 1969. The new law included a 15% increase in Social Security benefits beginning in January 1, 1970. On August 7, 1969, the House passed H.R. 13270 by a vote of 395 (176-R, 219-D) to 30 (10-R, 20-D). The bill did not contain any Social Security provisions. On December 5, 1969, Senator Long (D-LA) offered an amendment to raise basic Social Security benefits by 15% beginning in January 1970. Senator Long's amendment was passed by a vote of 73 (23-R, 50-D) to 14 (14-R). A Byrd (D-WV)-Mansfield (D-MT) amendment to increase the minimum benefit to $100 for single persons and to $150 for couples and to increase the taxable wage base from $7,800 to $12,000 beginning in 1973 was passed December 5, 1969, by a vote of 48 (8-R, 40-D) to 41 (28-R, 13-D). On December 5, 1969, Senator Williams (R-DE) offered a substitute amendment to provide a 10%, rather than a 15% benefit increase. The substitute amendment was rejected by a vote of 34 (33-R, 1-D) to 56 (5-R, 51-D). On December 11, 1969, the Senate passed H.R. 13270 by a vote of 69 (18-R, 51-D) to 22 (20-R, 2-D). The conferees agreed to increase Social Security benefits by 15%, effective January 1, 1970. The House had not included the increase in H.R. 13270 but had approved an identical provision in another bill, H.R. 15095. The conferees dropped the other provisions that were added on the Senate floor. On December 22, 1969, the House adopted the conference report on the Tax Reform Act, H.R. 13270, by a vote of 381 (169-R, 212-D) to 2 (2-R). On December 22, 1969, the Senate adopted H.R. 13270 by a vote of 71 (25-R, 46-D) to 6 (6-R). President Nixon signed H.R. 4690 on March 17, 1971. It provided a 10% across-the-board increase in OASDI benefits, retroactive to January 1, 1971; raised the minimum benefit from $64 to $70.40 per month; increased the taxable wage base from $7,800 to $9,000 effective January 1, 1972; increased the OASDI tax rates on employers and employees to 5.15% each beginning in 1976 (from 5% scheduled to take effect in 1973 under prior law); and provided a 5% increase in special benefits payable to individuals aged 72 or older who were not insured for regular benefits, retroactive to January 1, 1971. In 1970, a comprehensive Social Security bill (H.R. 17550) was passed by the House by a vote of 344 (166-R, 178-D) to 32 (32-D). H.R. 17550 increased benefits by 5%, provided for automatic benefit increases with rises in the cost of living, and made other changes in the OASDI and Medicare programs. In the Senate, H.R. 17550 became a conglomerate bill containing import quotas and welfare provisions as well. On December 29, 1970, the Senate separated Social Security changes from the rest of the bill. H.R. 17550, with provisions raising benefits by 10%, providing a $100 minimum monthly benefit, raising the taxable wage base from $7,800 to $9,000, and making changes in the Medicare and Medicaid programs, was passed by the Senate on December 29, 1970, by a vote of 81 (35-R, 46-D) to 0. However, the House never agreed to a conference. Senator Long (D-LA), chairman of the Finance Committee and floor manager of H.R. 4690, said that he had asked the House to take immediate action to raise Social Security benefits and as the House had not responded, he was offering a benefit increase as an amendment to H.R. 4690, a bill to increase the debt ceiling. On March 12, 1971, Senator Long's amendment to provide a 10% increase in Social Security payments, a $100 minimum monthly benefit, increases in earnings limitations, and other changes passed by a vote of 82 (38-R, 44-D) to 0. The Senate, on March 12, 1971, passed H.R. 4690, after approving several Social Security changes, including the benefit increase proposed by Senator Long, by a vote of 80 (37-R, 43-D) to 0. Conferees accepted the Senate's 10% benefit increase but reduced the $100 minimum benefit to $70.40 and made several other modifications. On March 16, 1971, the House adopted the conference report by a vote of 360 (150-R, 210-D) to 3 (3-R). On March 16, 1971, the Senate adopted the report by a vote of 76 (37-R, 39-D) to 0. President Nixon signed H.R. 15390, a bill to extend the limit on the public debt, on July 1, 1972. At the beginning of the year, the President included a number of Social Security proposals, along with a controversial welfare reform plan, in H.R. 1. Congress at midyear used a more promising vehicle to pass a separate 20% increase in Social Security benefits. The increase was added in the Senate to a House-passed bill that raised the debt limit (H.R. 15390). The bill also provided for future automatic increases in Social Security benefits when the consumer price index (CPI) rose by 3% or more. To finance the increase, the taxable wage base was raised from $9,000 to $10,800 in 1973 and to $12,000 in 1974, with automatic adjustment thereafter. The Congressional Quarterly Almanac reported that, Backers of the Social Security benefits package decided to attach it to the debt increase bill for two reasons: (1) President Nixon, who opposed a 20% increase as inflationary, would be unlikely to veto a bill that contained a debt limit increase, and (2) H.R. 1, the bill under which a benefit increase was then being considered, faced an uncertain future because of controversy over its welfare provisions. On June 22, 1971, the House had passed H.R. 1 (see P.L. 92-603, below) which included provision for a general benefit increase of 5%. On February 23, 1972, Representative Mills (D-AR), chairman of the Ways and Means Committee, introduced H.R. 13320, which provided for an immediate benefit increase of 20%. On June 27, 1972, the House passed H.R. 15390, providing only for an increase in the debt ceiling, by a vote of 211 to 168. On June 29, 1972, Senator Aiken (R-VT) offered an amendment to the Church amendment to increase Social Security benefits by 30%. Following Senator Long's (D-LA) motion, Senator Aiken's amendment was tabled by a vote of 71 (31-R, 40-D) to 18 (8-R, 10-D). On June 30, 1972, an amendment by Senator Bennett (R-UT) to increase Social Security benefits by 10% instead of 20% was rejected by the Senate by a vote of 20 (17-R, 3-D) to 66 (21-R, 45-D). On June 30, 1972, Senator Church's (D-ID) amendment calling for a 20% benefit increase and the automatic adjustment of benefits and the taxable wage base in the future was adopted by the Senate by a vote of 82 (34-R, 48-D) to 4 (4-R). The amendment made benefit increases automatic whenever the CPI rose by 3% or more in any calendar year. On June 30, 1972, the Senate passed H.R. 15390 by a vote of 78 (36-R, 42-D) to 3 (1-R, 2-D). H.R. 15390 was then sent back to the House. The House sent the debt ceiling bill to the conference committee on June 30, 1972, without accepting the Senate-passed benefit increase. Immediate congressional action was necessary because the debt limit was to revert automatically to $400 billion (from the existing $450 billion) at midnight on June 30, 1972. On June 30, 1972, the conferees informally accepted the Senate-passed version of H.R. 15390. Under House rules, however, House conferees could not agree to nongermane amendments added by the Senate. Thus, the conference report was reported back to the House in disagreement. On June 30, 1972, Representative Byrnes (R-WI) called the proposed 20% increase \"irresponsible\" and moved that the House concur with the Senate amendment but with the benefit increase limited to 10%. The motion was rejected by a vote of 83 (63-R, 20-D) to 253 (73-R, 180-D). On June 30, 1972, Representative Mills's (D-AR) motion that the House concur with the Senate-passed amendment granting a 20% Social Security benefit increase and annual automatic cost-of-living adjustments (COLAs) was accepted by a vote of 302 (108-R, 194-D) to 35 (28-R, 7-D). H.R. 1, the Social Security Amendments of 1972, was signed into law on October 30, 1972, by President Nixon. From1969 to 1972, Congress raised OASDI benefits three times. Benefits were raised by 15% in 1969, 10% in 1971, and 20% in 1972 (discussed above, the latter with the adoption of P.L. 92-336). P.L. 92-336 also provided for future automatic benefit increases, or COLAs, starting in January 1975, whenever the consumer price index rose more than 3% in a year. These benefit increases were amendments to bills dealing with other subjects. President Nixon had requested a number of other Social Security liberalizations in 1969, but those proposals were entangled with his controversial welfare reform plan. It was not until 1972, when H.R. 1 became P.L. 92-603, that the requested Social Security recommendations became law. The 1972 amendments (H.R. 1) increased benefits for widows and widowers; raised the earnings limit from $1,680 to $2,100 with automatic adjustment to average wages thereafter (benefits were reduced by $1 for every $2 in earnings in excess of $2,100); reduced the waiting period for disability benefits from six to five months; extended Medicare protection to disabled recipients who had received benefits for at least two years; and provided a special minimum benefit of up to $170 a month for those who had worked many years, but at low earnings. In addition, OASDHI tax rate-increases scheduled for the periods 1973-1977, 1978-1980, 1981-1985, 1986-1992, 1993-1997, 1998-2010, and 2011 and years thereafter, were further raised. H.R. 1 also contained the President's controversial Family Assistance Plan. The bill remained in the Senate for more than a year because of controversy over welfare reform. The Senate finally approved H.R. 1 with a provision for tests of rival welfare plans, but in conference all family welfare provisions were dropped. In addition, the final version of H.R. 1 contained provisions federalizing and consolidating adult public assistance programs for needy aged, blind, or disabled persons in a new Supplemental Security Income (SSI) program. Most of the debate on H.R. 1 dealt with the family welfare provisions, with little debate on the OASDI and Medicare provisions. H.R. 1 was passed by the House on June 22, 1971, by a vote of 288 (112-R, 176-D) to 132 (64-R, 68-D). On September 27, 1972, Senator Mansfield (D-MT) offered an amendment to increase the earnings test limit from $1,680 to $3,000. The amendment was agreed to by a vote of 76 (32-R, 44-D) to 5 (4-R, 1-D). On September 28, 1972, Senator Percy's (R-IL) amendment to require the Secretary of the Department of Health, Education, and Welfare to review the Social Security earnings test, and report to Congress on the feasibility of eliminating it, was accepted by voice vote. On September 29, 1972, Senator Long (D-LA) offered an amendment to provide a federal SSI program for needy aged, blind, or disabled persons (in place of the existing state adult assistance programs). The amendment was passed by a vote of 75 (32-R, 43-D) to 0. n September 29, 1972, the Finance Committee's amendment to guarantee every person who worked in employment covered under the Social Security program for at least 30 years a minimum monthly benefit of $200 ($300 for a couple) passed by a vote of 73 (30-R, 43-D) to 0. On September 30, 1972, Senator Byrd's (D-WV) amendment to lower to 60 the age at which reduced Social Security benefits could be received and to 55 the age at which a woman could receive reduced widow's benefits was agreed to by a vote of 29 (10-R, 19-D) to 25 (12-R, 13-D). On September 27, 1972, Senator Goldwater (R-AZ) offered an amendment to repeal the earnings limitation for all Social Security recipients aged 65 or older. The amendment was rejected by voice vote. H.R. 1 passed the Senate on October 5, 1972, by a vote of 68 (33-R, 35-D) to 5 (1-R, 4-D). On October 17, 1972, the House adopted the conference report on H.R. 1 by a vote of 305 (129-R, 176-D) to 1 (1-D). On October 17, 1972, the Senate adopted the conference report on H.R. 1 by a vote of 61 (24-R, 37-D) to 0. A two-step 11% benefit increase became law when President Nixon signed H.R. 11333 on December, 31, 1973. This increase was in lieu of a 5.9% increase scheduled by P.L. 93-66 , which had been enacted in July 1973. In passing H.R. 11333 , congressional sentiment was that the earlier increase was inadequate to offset recent rapid increases in inflation. P.L. 93-233 increased benefits by 7% in March 1974 and by another 4% in June 1974. To finance the increases, the Social Security taxable wage base was raised from $12,600 to $13,200 in January 1974. In addition, the automatic COLA mechanism was revised. Under P.L. 93-233 , the COLA was to be based on the rise in the CPI from the first quarter of one year to the first quarter of the next year, rather than second quarter to second quarter, with benefit increases starting in June 1975 rather than in January. As a result, the increases would appear in checks received in July, creating only a three-month lag from the close of the measuring period (i.e., the first quarter) rather than the seven-month lag under the prior mechanism. With a rule allowing only one floor amendment (pertaining to SSI), the House passed H.R. 11333 on November 15, 1973. The November 14-15 debate on H.R. 11333 was devoted to the need for a quick cost-of-living Social Security benefit increase and to questions about the fiscal soundness of the Social Security trust funds. H.R. 11333 as reported by the Ways and Means Committee recommended a two-step 11% Social Security benefit increase in 1974, accelerated SSI benefit increases, and payroll tax increases. On November 15, 1973, the House passed H.R. 11333 by a vote of 391 (168-R, 223-D) to 20 (15-R, 5-D). The Senate Finance Committee approved a number of provisions affecting Social Security, including an initial 7% benefit increase effective upon enactment and a further 4% increase in June 1974. Rather than acting on H.R. 11333 , the Senate attached its Social Security amendments to H.R. 3153 , a Social Security bill passed by the House on April 2, 1973. ( H.R. 3153 made a number of technical and conforming amendments to the Social Security Act that had been omitted in drafting the conference agreement on H.R. 1, which became P.L. 92-603.) The Senate debated H.R. 3153 for three days and adopted 38 amendments. On November 29, 1973, Senator Byrd (D-WV) introduced an amendment that reduced to 55 the age at which a woman could claim a Social Security widow's benefit. Under existing law, a widow could elect to retire at 60 with reduced benefits. Senator Byrd said that his amendment would help widows between the ages of 55 and 60, who would be unlikely and perhaps unable to establish a new career or to reactivate an old one. Terming the Byrd amendment \"inequitable,\" Senator Curtis (R-NE) objected that it would be unjust to reduce the eligibility age for widows \"who have not worked under covered employment\" while keeping the existing requirement at age 62 for \"women who have had to work all their lives and will have to work until they are of retirement age.\" Senator Byrd's amendment was adopted by a vote of 74 (28-R, 46-D) to 13 (9-R, 4-D). Senator Byrd introduced a second amendment that increased the earnings test limit from $2,400 to $3,000 and lowered from 72 to 70, the age at which the earnings limit would no longer apply. The amendment was accepted November 29, 1973, by a vote of 83 (33-R, 50-D) to 1 (1-R). On November 29, 1973, Senator Hartke's (D-IN) amendment making blind persons eligible for disability benefits after working 18 months in covered employment was adopted by voice vote. (Ordinarily a disabled person had to have covered employment in 20 quarters out of the last 40 quarters to be eligible.) On November 30, 1973, the Senate passed H.R. 3153 by a vote of 66 (24-R, 42-D) to 8 (6-R, 2-D). After the Senate passed H.R. 3153 , it asked the House for a conference, but the House appointed conferees only two days before the end of the session. The conferees did not act on H.R. 3153 . Instead, they agreed to work on revisions to H.R. 11333 , the House-passed Social Security bill, on which the Senate had never acted. As part of a compromise reached on December 20, the House conferees agreed to hold a further conference on H.R. 3153 in 1974 to consider additional Senate amendments, but the conference never took place. The conference report on H.R. 11333 included a two-step 11% increase in benefits, effective March 1974 and June 1974, raised the wage base to $13,200 in 1974, and increased the initial federal SSI benefit level. The Senate passed H.R. 11333 with the amendments agreed to in conference on December 21, 1973, by a vote of 64 to 0. The House, on December 21, 1973, concurred in passing the bill by a vote of 301 (123-R, 178-D) to 13 (10-R, 3-D). H.R. 9346 , the Social Security Amendments of 1977, was signed by President Carter on December 20, 1977. H.R. 9346 was passed to meet major Social Security financing problems that emerged in the mid-1970s. The Congressional Quarterly Almanac says that the main cause of the immediate financial problems was the \"combination of rapid inflation and a recession, which together raised Social Security benefit costs and reduced tax receipts.\" In addition to fixing short-run problems, the amendments sought to eliminate the medium-range deficit (over the next 25 years) and to reduce the projected long-range deficit (next 75 years) from more than 8% of taxable payroll to less than 1.5%. The basic approach was to (1) handle the short-term financing problem either through increased payroll taxes or infusions from the general fund; and (2) reduce and possibly eliminate the projected long-run deficit by modifying the benefit formula to stabilize replacement rates. Neither house of Congress gave much attention to an Administration proposal to authorize use of general revenues for Social Security during periods of high unemployment (i.e., the so-called counter cyclical use of general revenues). Instead, the new law met the short-run problem mostly by increasing Social Security tax rates and the taxable earnings base and also by somewhat reducing expenditures. The final bill contained \"decoupling\" procedures, which also had been supported by the Ford Administration, for correcting a basic flaw in the benefit computation formula, and thereby largely reduced the long-run problem. P.L. 95-216 also liberalized the earnings test by providing a five-step ad hoc increase in the earnings limits for recipients aged 65 or older (the limit for persons under age 65 continued to be adjusted only for increases in average wages after 1978); eliminated the earnings test for recipients aged 70 or older (reduced from age 72), beginning in 1982; reduced spousal benefits for government annuitants whose government jobs were not covered by Social Security; and liberalized the treatment of divorced and widowed recipients. Legislation that incorporated the Administration's recommendations ( H.R. 8218 ) was introduced on July 12, 1977, by Representative Burke (D-MA), chairman of the House Ways and Means Committee's Social Security Subcommittee. After reworking the Administration's package, the subcommittee made recommendations to the full committee that were introduced by Chairman Ullman (D-OR) on September 27, 1977, as H.R. 9346 . On October 6, 1977, the full committee approved a financing plan combining payroll tax increases with basic changes in benefits and coverage. H.R. 9346 , was reported to the House on October 12, 1977. The House floor debate on H.R. 9346 began on October 26, 1977. On October 26, 1977, the House considered an amendment from the Committee on Post Office and Civil Service. The amendment would have deleted the provision in the Ways and Means Committee bill covering federal, state, local, and nonprofit employees under Social Security. Representative Fisher (D-VA) offered a substitute for the Post Office and Civil Service Committee amendment. The Fisher substitute provided that federal employees would continue to be exempt from the Social Security system and that state and local governments and nonprofit organizations would continue to have the option of electing to cover their employees. While the amendment deleted mandatory coverage of these employees, the bill retained a provision requiring a study of mandatory coverage to be conducted jointly by the Civil Service Commission, the Departments of Treasury and Health, Education, and Welfare, and the Office of Management and Budget. Many Members endorsed the concept of universal mandatory Social Security coverage, but supporters of the Fisher amendment asserted that a study of the universal coverage issue should be conducted first. Opponents, in contrast, argued that the committee bill, by postponing the extension of coverage until 1982, allowed sufficient time to work out details. To make up for the revenue loss due to deletion of the mandatory coverage provisions, the amendment also provided for greater increases in the Social Security tax rate and wage base than those included in the committee bill. The Administration, as well as representatives of many groups that would have been affected by the coverage extension, lobbied for the Fisher amendment. Representative Fisher's substitute amendment was agreed to by a vote of 386 (129-R, 257-D) to 38 (14-R, 24-D). The House then adopted the Post Office and Civil Service Committee amendment, as amended by the Fisher amendment, by a vote of 380 (124-R, 256-D) to 39 (14-R, 25-D). On October 26, 1977, Representative Pickle (D-TX) offered an amendment to strike another committee provision authorizing standby loans to the OASDI system from general revenues whenever trust fund reserves dipped below 25% of a year's outgo. Representative Pickle argued that any use of general treasury funds for Social Security undermined the contributory nature of the program. He remarked that he did not want to see the Social Security program turned into a \"welfare or need program.\" The Pickle amendment was rejected by a vote of 196 (122-R, 74-D) to 221 (15-R, 206-D). On October 26, 1977, Representative Corman (D-CA) offered an amendment to eliminate the minimum Social Security benefit for new recipients. He said that the minimum benefit gave those who had paid very little in Social Security taxes a benefit \"far in excess of his or her average monthly wage.\" He stated that his amendment restored \"a measure of the social insurance principle of relating benefits to contributions.\" The amendment was rejected by a vote of 131 (68-R, 63-D) to 271 (64-R, 207-D). On October 27, 1977, Representative Ketchum (R-CA) offered an amendment to gradually raise the earnings limitation on recipients over age 65 and to phase it out completely in 1982. The amendment included a tax rate increase to meet the cost of the additional benefit payments. The amendment was adopted by a vote of 268 (139-R, 129-D) to 149 (1-R, 148-D). On October 27, 1977, Representative Conable (R-NY) moved to recommit H.R. 9346 to the Ways and Means Committee with instructions to report out the bill with an amendment that mandated coverage of federal workers, diverted half of the HI portion of the payroll tax to OASDI in 1980, and replaced the lost HI revenues with general revenues. Representative Conable argued that an amendment containing the above would enable both the wage base and the tax rate to remain as scheduled under existing law. The recommittal motion was rejected by a vote of 57 (44-R, 13-D) to 363 (97-R, 266-D). H.R. 9346 passed the House on October 27, 1977, by a vote of 275 (40-R, 235-D) to 146 (100-R, 46-D). Preliminary hearings and markup sessions on financing and decoupling were held by the Senate Committee on Finance in the summer and fall of 1977, even though the House had not yet passed its Social Security bill. Before H.R. 9346 was passed by the House, the Finance Committee had tentatively agreed that its amendments would be attached to H.R. 5322 , an unrelated tariff bill that had originated in the House. H.R. 5322 was to be a convenient vehicle for putting the Senate Finance Committee proposals before the Senate promptly. When H.R. 9346 as passed by the House came up for debate on the Senate floor on November 2, 1977, Senator Long (D-LA) introduced an amendment to substitute the Finance Committee Social Security proposals in H.R. 5322 for the House bill. The Finance Committee proposals included decoupling measures similar to those in the House bill. They also included provisions that would require employers to pay Social Security taxes on a higher wage base than employees and would reduce spousal benefits by the amount of a government pension that was based on work not covered by Social Security. Senator Long's amendment was agreed to with no recorded vote. Thus, the text of H.R. 5322 became H.R. 9346 as amended by the Senate. On November 3, 1977, Senator Curtis (R-NE) offered an amendment that would have kept the taxable wage base the same for employers and employees (at the level specified for employees in the committee proposal) but would have raised the tax rate above the committee-recommended levels. Senator Curtis said his amendment would take care of the deficit in the Social Security fund. He stated that raising the wage base would put half of the financing burden exclusively on the people with higher incomes. Senator Nelson (D-WI) acknowledged that the Curtis amendment would supply the necessary funding to keep the retirement system solvent, but stressed that the average worker would pay a higher tax under the Curtis plan than under the committee proposal. Senator Nelson's motion to table the Curtis amendment lost by a vote of 44 (3-R, 41-D) to 45 (31-R, 14-D), but the Senate then rejected the Curtis amendment, 40 (27-R, 13-D) to 50 (7-R, 43-D). On November 4, 1977, Senator Goldwater (R-AZ) offered an amendment to lower the age at which the earnings test would no longer apply from 72 to 65. Senator Goldwater said that his amendment would end the discrimination that allowed full benefits to relatively wealthy retirees who had unearned income in excess of $3,000, but reduced benefits for retirees who relied entirely on additional earned income to supplement their Social Security benefits. Opponents of the amendment said that it would provide a windfall to professionals who continued to work at lucrative jobs past retirement age. Senator Church (D-ID offered a substitute amendment to lower from 72 to 70 the age at which the earnings test would no longer apply. Senator Goldwater's motion to table the Church amendment was rejected 33 (25-R, 8-D) to 53 (7-R, 46-D). The Senate adopted the Church substitute amendment 59 (12-R, 47-D) to 28 (20-R, 8-D) and then adopted the Goldwater amendment as amended by the Church substitute by a vote of 79 (30-R, 49-D) to 4 (4-D). An amendment offered by Senator Church on November 4, 1977, to provide for semiannual COLAs when the rate of inflation for a six-month period was 4% or greater was adopted by a vote of 50 (11-R, 39-D) to 21 (15-R, 6-D). On November 4, 1977, Senator Bayh (D-IN) offered an amendment to remove the earnings limit for blind persons collecting disability benefits and to set the number of quarters blind persons must work to qualify for disability benefit at six. The Bayh amendment was adopted by voice vote. The Senate passed H.R. 9346 , as amended, by a vote of 42 (9-R, 33-D) to 25 (15-R, 10-D) on November 4, 1977. The conference agreement provided for higher payroll tax rates than those proposed by either the House or Senate. The House-approved authority for loans to the trust funds from general revenues was dropped, as was the Senate-passed proposal to raise the wage base for employers higher than that for employees. Rather than phase out the earnings test, as in the House-passed bill, the conferees agreed to raise, over five years, the earnings tests limit for the elderly (aged 65 or older). Despite numerous differences between the House and Senate versions of the bill, the Congressional Quarterly Almanac stated that the conferees resolved their differences \"without trouble.\" The main controversy involved provisions dealing with welfare programs and college tuition tax credits. On December 15, 1977, the House agreed to the conference report by a vote of 189 (15-R, 174-D) to 163 (109-R, 54-D). There was unease in the House because of the large tax increases. Representative Conable (R-NY) claimed that more reasonable non-tax alternatives were available. On December 15, 1977, Representative Ullman (D-OR) stated that the conference report \"responsibly faces up to the issues of Social Security, both short range and long range.\" He assured Members that he would \"move as expeditiously as possible ... toward adopting a new revenue mechanism whereby we can back off from these major increases.... \" On December 15, 1977, the Senate passed the conference report with little controversy by a vote of 56 (17-R, 39-D) to 21 (14-R, 7-D). H.R. 3236 , the Social Security Disability Amendments of 1980, was signed by President Carter on June 9, 1980. H.R. 3236 changed the Social Security disability insurance program in four major ways: (1) it placed a new limit on family benefits to prevent Social Security benefits from exceeding the worker's previous average earnings; (2) it provided incentives for recipients to return to work; (3) it required a higher percentage of federal reviews of new disability awards and more frequent periodic state-level reexamination of existing recipients; and (4) it modified the administrative relationship between the federal government and states. The amendments also made similar changes in disability payments under the SSI program and established federal standards for \"medigap\" insurance policies sold by private insurance companies to supplement federal Medicare health insurance. The House Ways and Means Committee's Subcommittee on Social Security held public hearings in February and March 1979. Following these hearings, the subcommittee held markup sessions on H.R. 2854 , the Administration's proposals, and incorporated its recommendations into H.R. 3236 , which was introduced on March 27, 1979. After considering the subcommittee's recommendations, the full Committee on Ways and Means reported the bill to the House on April 23, 1979. Action on the bill was delayed as several major groups raised questions about the legislation, and controversy arose as to the rules under which the bill would be considered on the House floor. Many of the interested parties wanted an opportunity to consider several of the provisions separately when H.R. 3236 was considered on the floor, rather than to vote for or against the bill as a whole. The Rules Committee held hearings on June 6 and 7, 1979, and reported out on June 7, 1979, H.Res. 310 , which provided for a modified rule and one hour of debate on H.R. 3236 . The rule provided that the only amendments that would be in order would be those recommended by the Ways and Means Committee (which were not amendable) and an amendment offered by Representattive Simon (D-IL) that would delay the implementation of a provision affecting vocational rehabilitation funding by one year. Despite the passage of the rule, \"the opposition coalition was able to block floor consideration of the measure for 3 months.\" Floor debate on H.R. 3236 did not begin until September 6, 1979. On September 6, 1979, the House agreed to the Ways and Means Committee and Representative Simon's amendments and passed H.R. 3236 by a vote of 235 (108-R, 127-D) to 162 (36-R, 126-D). In October 1979, the Senate Finance Committee held hearings on proposed disability legislation. The committee completed its markup on November 7, 1979, and reported H.R. 3236 to the Senate on November 8, 1979. On December 5, 1979, the Senate began floor debate. Final debate, which occurred in late January 1980, centered primarily on the provision to establish a lower limit on family benefits. On January 30, 1980, Senator Metzenbaum's (D-OH) amendment to increase the limit on disability benefits from 85% to 100% of the worker's previous average earnings was defeated by a vote of 47 (7-R, 40-D) to 47 (31-R, 16-D). On January 30, 1980, Senator Bayh (D-IN) offered an amendment to exempt terminally ill applicants from the waiting period. The amendment was limited to people who, in the opinion of two doctors, would probably die within a year. Senator Bayh said it was cruel to deny assistance to desperately ill people on the basis of an arbitrary waiting period that lasted longer than most of them were likely to live. Senator Long (D-LA) said elimination of the waiting period for one group would eventually lead to its elimination for all disabled persons, at a cost of $3 billion a year. Senator Long also argued that the amendment was not germane because there was nothing in the bill relating to the waiting period for benefits. The amendment was ruled out of order but the Senate voted 37 (19-R, 18D) to 55 (17-R, 38-D) against the ruling of the chair and then adopted the Bayh amendment by a vote of 70 (25-R, 45-D) to 23 (12-R, 11-D). On January 31, 1980, the Senate passed H.R. 3236 , with amendments, by a vote of 87 (35-R, 52-D) to 1 (1-D). On May 13, 1980, the conference committee reported the bill. On the key issue of limiting future family benefits, the conferees combined the Senate limit of 85% of the worker's previous average work earnings and the House provision limiting benefits to no more than 150% of the worker's basic individual benefit. The conferees also made a modification to the medigap provision (added by the Senate) and dropped the Senate amendment regarding the waiting period for the terminally ill, calling for a study of the issue instead. On May 22, 1980, the House passed H.R. 3236 , as agreed to by the conferees, by a vote of 389 (147-R, 242-D) to 2 (2-D). On May 29, 1980, the Senate passed the conference report on H.R. 3236 by a voice vote. On October 9, 1980, H.R. 7670 , the Reallocation of Social Security Taxes Between OASl and Dl Trust Funds, was signed into law by President Carter. Although the Social Security Amendments of 1977 did, in part, remedy the program's financing problems, high inflation increased Social Security benefits and higher than expected unemployment reduced income to the trust funds. The outlook for the OASI program, in particular, was deteriorating fairly rapidly. H.R. 7670 shifted revenues from the Disability Insurance Trust Fund to the Old-Age and Survivors Trust Fund during 1980 and 1981 so that adequate reserves could be maintained in both trust funds at least through the end of calendar year 1981. On July 21, 1980, Representative Pickle (D-TX) moved to suspend the rules and pass H.R. 7670 . In his remarks, Representative Pickle said that \"the bill we bring today is a deliberate step both to insure the stability of the trust funds and to provide the Congress the time it will need to make any further changes necessary.\" He also stated that \"Reallocation, the mechanism used in H.R. 7670 , has been the traditional way of redistributing the OASDI tax rates when there have been changes in the law and in the experience of programs and in order to keep all the programs on a more or less even reserve ratio.... Reallocation means that the formula for allocating the incoming payroll tax receipts is changed in the law so that funds will flow into the various funds in a different mix than currently projected.\" On July 21, 1980, the House suspended the rules and passed H.R. 7670 . There was no roll call vote. On September 25, 1980, H.R. 7670 was passed by unanimous consent. On October 19, 1980, H.R. 5295 was signed by President Carter. It made various changes in the earnings test provisions enacted in 1977 and limited the circumstances under which Social Security benefits could be paid to prisoners. Before enactment of P.L. 96-473 , two earnings tests applied to Social Security benefits. One was an annual test, the other a monthly test. If a recipient earned more than the annual limit, benefits were reduced $1 for every $2 of excess earnings until all Social Security benefits were withheld. Under the monthly earnings test, however, if a person's earnings were less than one-twelfth of the annual amount, he or she could get full benefits for that month, regardless of annual earnings. The 1977 provision eliminating the monthly earnings test was designed with retirees in mind. However, the language as enacted applied to all classes of recipients affected by the earnings limitation. Generally, these recipients are likely to get a job and have substantial earnings in the year their benefits end. If these earnings were over the annual earnings limitation, some of the benefits they already received in the year become overpayments and had to be repaid. P.L. 96-473 modified this by allowing individuals who received certain dependents' benefits (a child or student's benefit, mother's benefit, or father's benefit) to use the monthly earnings test in the year in which their entitlement to such benefits ended. P.L. 96-473 also allowed all recipients to qualify for at least one \"grace year\" in which the monthly earnings test applies and made other changes relating to the earnings test for the self-employed, particularly those whose incomes were often in \"deferred\" forms. In addition, P.L. 96-473 prohibited payment of Social Security disability insurance benefits or of student benefits (based on any kind of Social Security status) to prisoners convicted of a felony, except where the individual is participating in a court-approved rehabilitation program (but allowed benefits to be paid to their dependents); disallowed impairments that arise from or are aggravated by the commission of a crime to be considered in determining whether a person is disabled; and disallowed impairments developed while an individual is in prison to be considered in determining disability while the person remains in prison. On July 23, 1979, the House Ways and Means Committee's Subcommittee on Social Security held a hearing on the Social Security earnings test. In the spring of 1980, Congress also was concerned with the issue of paying Social Security benefits to prisoners. The Subcommittee on Social Security held hearings on the subject, and numerous bills prohibiting payments to prisoners were introduced. On December 19, 1979, Senator Long (D-LA) in discussing the earnings test as amended by the 1977 amendments said, \"The purpose of the change was to simplify the test and make more evenhanded the treatment of those who had similar amounts of annual earnings but differences in monthly work patterns. Several categories of recipients have been experiencing unforeseen problems with the new annual earnings test, however, and have been disadvantaged by it. H.R. 5295 is designed to correct those inequities.\" On December 19, 1979, H.R. 5295 , as amended, was passed unanimously by the House, 383 to 0. On April 21, 1980, the Senate Finance Committee's Subcommittee on Social Security held a hearing on the Social Security earnings test. During the spring of 1980, the subcommittee also held hearings on the subject of denying Social Security benefits to prisoners. When S. 2885 , the 1981 Budget Reconciliation bill, was reported out of the Senate Finance, it included a provision that prohibited payment of Social Security disability benefits to prisoners convicted of crimes. The Finance Committee also included this measure in H.R. 5295 . On September 30, 1980, the Senate passed H.R. 5295 , with amendments, by unanimous consent. On October 1, 1980, Representative Conable (R-NY) remarked \"The only amendment that we are asking to be attached here that goes to the Senate is an amendment that changes the word 'crime' to the words 'crime in the nature of a felony,' so that it would apply only to more serious crimes and not possibly to traffic infractions and things of that sort.\" On October 1, 1980, the House concurred in the Senate amendments with an amendment by unanimous consent. On October 1, 1980, Senator Byrd's motion that the Senate concur with the House amendment to the Senate amendment was agreed to by voice vote. H.R. 3982 , the Omnibus Budget Reconciliation Act of 1981, was signed into law ( P.L. 97-35 ) by President Reagan on August 13, 1981. It included most of the Social Security changes proposed as part of the President's 1982 budget, as well as some added by the House. The Social Security provisions were among many outlay reduction measures intended to constrain federal expenditures. The Administration argued that the benefits it targeted for elimination or reduction were not directed at the basic goals of the program, and it did not consider them to have been \"earned.\" The budget proposals eliminated the minimum Social Security benefit for both current and future recipients, phased out benefits for students in postsecondary schools (aged 18 or older, except for those under aged 19 still in high school), made lump-sum death benefits available only to a spouse who was living with the worker or a spouse or child eligible for immediate monthly survivor benefits, and reduced benefits for those whose Social Security disability payments and certain other public pensions exceed 80% of pre-disability earnings. The amendments also eliminated reimbursement of the cost of state vocational rehabilitation services from the trust funds except where it could be shown that the services had resulted in the disabled person leaving the rolls; postponed the lowering of the earnings test exempt age (from 72 to 70) until 1983; ended parents' benefit when the youngest child reaches age 16; and provided that workers and their spouses would not receive benefits unless they meet the requirements for entitlement throughout the month. These last three provisions were initiatives added by the Ways and Means Committee. Because the Social Security legislation was considered in the context of the budget and reconciliation processes, there was virtually simultaneous consideration of the proposals by the House and the Senate. After final adoption on May 21, 1981, of the First Concurrent Budget Resolution, both the House and the Senate were acting within similar reconciliation guidelines. On June 10, 1981, the Finance Committee reported its recommendations for spending reductions. These were included by the Senate Budget Committee in S. 1377 , the Omnibus Budget Reconciliation Act of 1981, which was reported by the Budget Committee to the Senate on June 17, 1981. The Social Security proposals included in S. 1377 were basically those proposed by the Administration with some minor modifications. On June 22-25, 1981, the Senate debated S. 1377 . The most controversial aspect of the bill relating to the Social Security program was the elimination of the minimum benefit for people already on the benefit rolls. On June 23, 1981, Senator Riegle (D-MI) offered an amendment that would have eliminated the minimum benefit only for future recipients. The amendment was defeated by a vote of 45 (4-R, 41-D) to 53 (48-R, 5-D). On June 25, 1981, the Senate passed S. 1377 , with the Finance Committee's Social Security proposals, by a vote of 80 (52-R, 28-D) to 15 (0-R, 15-D). The Ways and Means Committee recommendations, while touching on some of the same benefit categories as the Administration's proposals, were notably different. These proposals were incorporated by the Budget Committee into its version of the Omnibus Budget Reconciliation Act of 1981, H.R. 3982 , which was reported to the House on June 19, 1981. The adoption of the rule for floor consideration of H.R. 3982 became, in itself, a highly controversial issue. The Democratic leadership argued for allowing six separate votes on the grounds that this would allow for greater accountability for individual Members and avoid criticisms of \"rubber-stamping\" the Administration's proposals. A bipartisan group of Members (generally supported by the Administration) argued instead for a rule that allowed only an up-or-down vote on a substitute for the Budget Committee bill sponsored by Representative Gramm (D-TX) and Representative Latta (R-OH). Those arguing for the substitute said it would facilitate future conference agreement by bringing H.R. 3982 more closely in line with the President's original proposals and with S. 1377 then pending in the Senate. On June 25, 1981, the original rule for floor consideration of the bill was defeated by a vote of 210 (1-R, 209-D) to 217 (188-R, 29-D). A package of amendments by Representative Latta, the so-called Gramm-Latta II alternative, called for (1) deleting the Ways and Means' proposal to move the COLA from July to October and (2) changing the effective date of the Senate-passed minimum benefit proposal, affecting both current and future recipients, and (3) modifying the Senate-passed student benefit phase-out proposal (which contained a faster phase-out than the Ways and Means Committee version). The Gramm-Latta II alternative package passed the House on June 26, 1981, by a vote of 217 (188-R, 29-D) to 211 (2-R, 209-D). On June 26, 1981, the House passed the Omnibus Budget Reconciliation Act of 1981 by a vote of 232 (185-R, 47-D) to 193 (5-R, 188-D). The passage of the alternative budget package resulted in House-passed Social Security measures that were very similar to the Administration's original proposals and to those in the Senate-passed reconciliation bill. On July 13, 1981, the Senate voted to substitute the reconciliation proposals from S. 1377 for those passed by the House in H.R. 3982 and to go to conference to resolve the differences. On July 30, 1981, Representative Bolling (D-MO), chairman of the House Rules Committee, threatened to prevent the conference agreement from being brought to the House floor for final approval until something could be negotiated to modify the minimum benefit provision. An agreement was worked out permitting a bill that would modify the minimum benefit provision to be brought to the House floor before the vote on the reconciliation conference report. This bill was H.R. 4331 , the Social Security Amendments of 1981. (See following section for further details.) On July 31, 1981, both the House and the Senate approved the conference report on the 1981 Budget Reconciliation bill, the House by a voice vote and the Senate by a vote of 80 (49-R, 31-D) to 14 (1-R, 13-D). H.R. 4331 , the Social Security Amendments of 1981, was signed by President Reagan on December 29, 1981. The amendments restored the minimum benefit for current recipients but eliminated it for people becoming eligible for benefits after December 31, 1981 (see discussion of P.L. 97-35 above). In July 1981, as part of P.L. 97-35 , Congress had enacted the elimination of the minimum benefit effective in April 1982. However, the public outcry was so great that both houses and the Administration thought it prudent to reconsider the measure. H.R. 4331 also allowed the financially troubled OASI trust fund to borrow from the healthier disability insurance and hospital insurance trust funds until December 31, 1982. The law specified that the borrowing could not exceed amounts needed to pay full benefits for six months and provided for repayment of any amounts borrowed. OASI borrowed $17.5 billion from the two trust funds late in December 1982, an amount limited to that necessary to keep benefits flowing until June 1983. In addition, the bill (1) allowed members of religious orders who had taken a vow of poverty and were covered by Social Security before enactment of the bill to continue to become eligible for the minimum benefit during the next 10 years; (2) extended the payroll tax to the first six months of sick pay; (3) made it a felony to alter or counterfeit a Social Security card; and (4) allowed the Department of Health and Human Services (DHHS) access to recorded Social Security numbers to prevent ineligible prisoners from receiving disability benefits. On July 21, 1981, the House, by a vote of 405 (176-R, 229-D) to 13 (10-R, 3-D), adopted a nonbinding resolution ( H.Res. 181 ) urging that steps be taken \"to ensure that Social Security benefits are not reduced for those currently receiving them.\" After the conference report on the reconciliation bill was filed, the House Rules Committee Chairman Richard Bolling (D-MO) held up the reconciliation bill in his committee in an effort to restore the minimum benefit. An agreement was subsequently reached whereby the budget bill would be reported out of the Rules Committee intact, and a separate bill to restore the minimum benefit for all current and future recipients ( H.R. 4331 ) would be taken up by the House before the vote on the budget bill. The House passed H.R. 4331 on July 31, 1981. It repealed the section of P.L. 97-35 that eliminated the minimum benefit, thereby reinstating the minimum benefit for current and future recipients. On July 31, 1981, the House passed H.R. 4331 by a vote of 404 (172-R, 232-D) to 20 (17-R, 3-D). When H.R. 4331 was sent to the Senate, Senators Riegle (D-MI), Moynihan (D-NY), and Kennedy (D-MA) moved to have the Senate immediately consider it. The Senate's presiding officer ruled the motion out of order, and the ruling was upheld by a vote of 57 to 30, thereby permitting consideration of the bill by the Finance Committee and delaying a Senate vote until October. The bill reported by the Finance Committee in September 1981 included provisions that restored the minimum benefit for current recipients, except for those with government pensions, whose so-called windfall Social Security benefits would be reduced dollar for dollar by the extent their government pension exceeded $300 a month. The bill provided that members of religious orders who became eligible for Social Security in 1972 could remain eligible for the minimum benefit for the next 10 years. To offset the cost of restoring the minimum benefit, the Senate agreed to apply the payroll tax to the first six months of all sick pay received and to lower the maximum family retirement and survivor benefit to 150% of the worker's primary insurance amount (PIA). The bill also allowed interfund borrowing. On October 14, 1981, the Senate by a voice vote agreed to (1) Senator Danforth's (R-MO) amendment to override provisions of the federal Privacy Act to allow access to prison records so that disability payments to ineligible inmates could be stopped; and (2) Senator Baucus's (D-MT) amendment to make it a felony to alter or counterfeit a Social Security card. On October 15, 1981, Senator Dole's (R-KS) amendment to apply the Social Security payroll tax to the first six months of all employer-financed sick pay, except that paid as insurance, was accepted by voice vote. On October 15, 1981, Senator Moynihan's (D-NY) amendment requiring counterfeit-proof Social Security cards was agreed to by voice vote. On October 15, 1981, Senator Eagleton (D-MO) offered an amendment to repeal a provision of the Economic Recovery Tax Act of 1981 ( P.L. 97-34 ) that had reduced windfall profit taxes on newly discovered oil, and then use these tax savings to build an emergency reserve for the Social Security trust funds. The amendment was tabled 65 (42-R, 23-D) to 30 (7-R, 23-D). On October 15, 1981, by a unanimous vote of 95 (48-R, 47-D) to 0, the Senate passed H.R. 4331 , as amended. The Congressional Quarterly Almanac states that the major dispute of the conference was whether to pay for the cost of restoring the minimum benefit by tax increases or by benefit cuts. The conferees finally agreed to accept only the sick pay tax \"on the condition that inter-fund borrowing be allowed for just one year.\" The conference agreement restored the minimum benefit to recipients eligible for benefits before 1982, and it rejected the Senate provisions (1) to reduce the minimum for those also receiving government pensions above $300 per month and (2) to limit further family benefits in OASI cases. The Senate agreed to the conference report on December 15, 1981, by a vote of 96 (50-R, 46-D) to 0. The House agreed to the conference report on December 16, 1981, by a vote of 412 (181-R, 231-D) to 10 (7-R, 3-D). President Reagan signed H.R. 7093 on January 12, 1983. In March 1981, the Administration began implementing the continuing disability investigation process mandated (beginning in 1982) under the 1980 amendments ( P.L. 96-265 ), with the result that thousands of recipients lost their benefits, although many were restored upon appeal to an administrative law judge. P.L. 97-455 was a \"stopgap\" measure to remedy some of the perceived procedural inequities in the disability review process. It provided, temporarily, an opportunity for individuals dropped from the rolls before October 1, 1983, to elect to receive DI and Medicare benefits while they appealed the decision; June 1984 was to be the last month for which such payments could be made. The DI benefits would have to be repaid if the appeal were lost. The measure also required the DHHS to provide, as of January 1, 1984, face-to-face hearings during reconsideration of any decision to terminate disability benefits. Previously, recipients did not have such a meeting until they appeared before an administrative law judge. The bill also required the Secretary to report to Congress semiannually on the rate of continuing disability reviews and terminations and gave the Secretary authority to decrease the number of disability cases sent to state agencies for review. On September 28, 1982, the Finance Committee marked up S. 2942 , which contained a number of continuing disability review provisions. The chairman, Senator Dole (R-KS), asked that S. 2942 be attached to a House-passed bill ( H.R. 7093 ) dealing with Virgin Islands taxation. Thus, H.R. 7093 , with provisions of S. 2942 , was reported to the Senate on October 1, 1982. On December 3, 1982, Senator Heinz (R-PA) said, \"... this emergency legislation does not completely solve the problem of the unfair terminations of hundreds of thousands of disabled individuals ... nonetheless. It means that in the immediate future, at least, individuals who have been wrongly terminated will not be financially ruined because they have been deprived of their benefits during a lengthy appeals process.\" On December 3, 1982, the Senate passed H.R. 7093 by a vote of 70 (43-R, 27-D) to 4 (1-R, 3-D). On September 20, 1982, the House passed H.R. 7093 by voice vote. This version of the bill contained no Social Security provisions. On December 14, 1982, the House amended the Senate-passed version of H.R. 7093 and passed it by unanimous consent. H.R. 7093 was then sent back to the Senate for consideration of the added amendments. These amendments required the Secretary to (1) provide face-to-face hearings during reconsideration of any decision to terminate disability benefits; (2) advise recipients of what evidence they should bring to and what procedures they should follow at the reconsideration hearing; and (3) provide that, for a five-year period beginning December 1, 1982, only one-third of a spouse's government pension would be taken into account when applying the government pension offset provision enacted in 1977. The bill as agreed to by the conferees was identical to the House-passed bill, except for the modification in the government pension offset provision. The House passed the conference report on H.R. 7093 on December 21, 1982, by a vote of 259 (115-R, 144-D) to 0. The Senate passed the report by a voice vote on December 21, 1982. H.R. 1900 , the Social Security Amendments of 1983, was signed by President Reagan on April 20, 1983. The latest projections showed that the OASDI program was projected to run out of funds by mid-1983 and to need about $150 billion to $200 billion to provide reasonable assurance that it would remain solvent for the rest of the decade. Once this short-run problem was addressed, the program was projected to be adequately financed for about 35 years. However, beginning about 2025, the effects of the retirement of the baby-boom were projected to plunge the system into deficit again. The National Commission on Social Security Reform, a bipartisan panel appointed by President Reagan and congressional leaders, was formed to seek a solution to the system's financing problems. On January 15, 1983, a majority of the commission members reached agreement on a package of changes. Conforming to most of the recommendations in the commission's package, the 1983 amendments put new federal employees and all nonprofit organization employees under the OASDI program as of January 1, 1984; prohibited state and local and nonprofit agencies from terminating Social Security coverage; moved the annual cost-of-living adjustments in benefits from July to January of each year (which caused a delay of six months in 1983); made up to one-half of the benefits received by higher income recipients subject to federal income taxation; gradually raised the full benefit retirement age from 65 to 67 early in the 21 st century; increased benefits for certain groups of widow(er)s; liberalized the earnings test; increased the delayed retirement credit; reduced benefits for workers also getting pensions based on noncovered employment; called for the earlier implementation of scheduled payroll tax increases; and substantially raised payroll tax rates on the self-employed. P.L. 98-21 also stipulated that beginning with the FY1993 budget, income and expenditures for OASDI and HI would no longer be included in federal budget totals. The 1983 amendments also stipulated that only two-thirds of a spouse's government pension would be taken into account when applying the government pension offset provision, eliminated remaining gender-based distinctions, and made numerous additional technical changes in the law. On March 4, 1983, the Ways and Means Committee reported out H.R. 1900 . The bill included most of the recommendations of the National Commission, numerous additional relatively minor Social Security provisions, and other measures mostly related to long-run financing issues, along with provisions affecting the Medicare and Unemployment Insurance programs. On March 9, 1983, the House debated H.R. 1900 . Proponents of the bill maintained that, although there were many provisions that individuals or certain groups might find troublesome, there was an overriding need to deal quickly and effectively with the Social Security financing issues. Opponents questioned whether this was the best way to solve the system's projected financial difficulties. Many favored raising the retirement age instead of increasing payroll taxes. On March 9, 1983, Representative Pickle's (D-TX) amendment calling for increases in the age at which \"full\" retirement benefits (i.e., unreduced for early retirement) are payable to 66 by 2009 and to 67 by 2027 was approved by a vote of 228 (152-R, 76-D) to 202 (14-R, 188-D). Early retirement at age 62 would be maintained but at 70% of full benefits (instead of 80%) after the \"full retirement age\" reached 67. Representative Pepper (D-FL) then offered a substitute amendment to raise the OASDI tax rate from 6.20% to 6.73% beginning in 2010. The amendment was rejected by a vote of 132 (1-R, 131-D) to 296 (16-R, 131-D). Had the amendment passed, it would have superseded Representative Pickle's amendment. The House passed H.R. 1900 , as it had been amended, by a vote of 282 (97-R, 185-D) to 148 (69-R, 79-D) on March 9, 1983. The Senate Finance Committee reported out S. 1 on March 11, 1983. As with the House bill, the committee adopted long-term financing measures along the lines of the recommendations of the National Commission and provisions affecting the Medicare and Unemployment Insurance programs. The full Senate began consideration of H.R. 1900 on March 16, 1983. Seventy-two amendments were offered to the bill on the floor; the Senate adopted 49 of them. The following were among the major amendments debated. On March 23, 1983, Senator Long (D-LA) offered an amendment to make coverage of newly hired federal employees contingent upon enactment of a supplemental civil service plan for them. It was passed by a voice vote. An amendment to the Long amendment by Senator Stevens (R-AL) and Senator Mathias (R-MD) to exclude federal workers from coverage altogether was rejected by a vote of 12 (8-R, 4-D) to 86 (46-R, 40-D) on March 23, 1983. Senator Stevens's amendment to the Long amendment to require the creation of a supplemental civil service retirement program by October 1985, while granting new employees wage credits toward such a plan in the meantime, was rejected 45 (41R, 4-D) to 50 (12-R, 38-D) on March 23, 1983. The Senate passed H.R. 1900 on March 23, 1983, by a vote of 88 (47-R, 41-D) to 9 (6-R, 3-D). On March 24, 1983, conferees agreed to the final provisions of H.R. 1900 . The primary issue was how to solve the system's long-run financial problems. The House measure called for a two-year increase in the retirement age, whereas the Senate bill proposed to increase the retirement age to 66, eliminate the earnings test, and cut initial benefit payments 5%. Another major difference was a provision in the Senate bill delaying coverage of new federal employees until a supplemental civil service retirement plan could be developed. House conferees charged that if the change were made, no revenues from the proposed coverage could be counted on for the Social Security bailout plan because, if such a plan were not subsequently developed, federal workers might escape coverage altogether. The conferees agreed to the House retirement age change. Senate conferees then agreed to recede on the federal employee coverage issue. On March 24, 1983, the House passed the conference report by a vote of 243 (80-R, 163-D) to 102 (48-R, 54-D). On March 25, 1983, the Senate passed H.R. 1900 , as agreed to in the conference report, by a vote of 58 (32-R, 26-D) to 14 (8-R, 6-D). On October 9, 1984, President Reagan signed H.R. 3755 , the Social Security Disability Benefits Reform Act of 1984. P.L. 98-460 ended three years of controversy over the Administration's efforts to rid the DI program of ineligible recipients through an expanded periodic review process. The expanded reviews had been authorized by the 1980 disability amendments. Shortly after implementation of periodic review, the public and Congress began to criticize the process. The major complaints were the large number of persons dropped from the Dl rolls, of whom many had been receiving benefits for years and had not expected their cases to be reviewed; the great increase in the number of cases subjected to continuing disability reviews; and the number of cases in which recipients were erroneously dropped from the rolls. More than half of those removed from the rolls were reinstated upon appeal, fueling complaints that many terminations were unjustified. Advocacy groups for the disabled raised questions about the Social Security Administration's termination policies and procedures and petitioned Congress for legislative relief. In addition, concerns about the disability process were raised by the federal courts and the states. P.L. 98-460 provided that (1) with certain exceptions, benefit payments can be terminated only if the individual has medically improved and can engage in substantial gainful activity; (2) benefit payments can be continued until a decision by the administrative law judge in cases where a termination of benefits for medical reasons is being appealed; (3) reviews of all mental impairment disabilities be delayed until regulations stipulating new medical listings for mental impairments are published; (4) in cases of multiple impairments, the combined effect of all the impairments must be considered in making a disability determination; (5) the DHHS Secretary initiate demonstration projects providing personal appearance interviews between the recipient and state agency disability examiner in potential termination cases and potential initial denials; (6) the Secretary issue uniform standards, binding at all levels of adjudication, for disability determinations under Social Security and SSI disability; (7) the Secretary federalize disability determinations in a state within six months of finding that a state is not in substantial compliance with federal laws and standards; and (8) the qualifications of representative payees be more closely examined, and that the Secretary establish a system of annual accountability monitoring where benefit payments are made to someone other than a parent or spouse living in the same household with the recipient. It also established a temporary statutory standard for the evaluation of pain and directed that a study of the problem of evaluating pain be made by a commission to be appointed by the Secretary. On March 14, 1984, the House Committee on Ways and Means reported H.R. 3755 with amendments. During debate on H.R. 3755 , Representative Conable (R-NY) remarked that the intent of the 1980 legislation, requiring continuing disability reviews, was meritorious, but the results were not what the drafters intended. He further stated, \"Not only were ineligible recipients terminated, but some eligible recipients were taken from the rolls, as well. Many, especially those with mental impairments, suffered duress and the economic hardship of interrupted benefits.\" Representative Conable also said, \"Both Congress and the administration have taken remedial steps ... we approved P.L. 97-455 , which, on an interim basis, provided for the continuation of benefits during an appeal of an adverse decision ... H.R. 3755 represents the next step.\" The sponsor of H.R. 3755 , Representative Pickle (D-TX), said, \"In the past 3 years nearly half a million disabled recipients have been notified that their benefits will end. Far too often this notice has been sent in error, and corrected only at the recipient's expense ... we who serve on the Social Security Subcommittee have heard those pleas from the disabled, from Governors, and from those who must administer this program in the states ... for over a year now we have carefully drafted legislation to bring order to the growing chaos ... This bill does not attempt to liberalize the disability program. It does restore order and humanity to the disability review process.\" On March 27, 1984, the House passed H.R. 3755 by a vote of 410 (160-R, 250-D) to 1 (1-R). Six months before legislation was enacted, Secretary Heckler imposed a moratorium on periodic continuing disability reviews. The Secretary said, Although we have made important progress in reforming the review process with Social Security, the confusion of differing court orders and state actions persists. The disability program cannot serve those who need its help when its policies are splintered and divided. For that reason, we must suspend the process and work together with Congress to regain order and consensus in the disability program. On May 16, 1984, the Finance Committee approved S. 476 . Major provisions of the bill allowed disabled persons to continue collecting Social Security benefits if their medical condition had not improved since they were determined disabled. The major difference between the medical improvement provision in S. 476 and H.R. 3755 was that the Senate bill stated that the recipient bore the burden of proof that his or her condition had not improved. On May 22, 1984, Senator Cohen (R-ME), one of the sponsors of S. 476 , said, \"The need for fundamental change in the disability reviews has been evident for some time. Since the reviews began, more than 12,000 individuals have filed court actions challenging the SSA's termination of their benefits. An additional 40 class action suits had been filed as of last month. The legislation before the Senate today would end this chaos and insure an equitable review process.\" Senator Levin (D-MI), another sponsor, said, \"It has taken us 3 years to come to grips with the problems in the disability review process as a legislative body. And while it was long in coming, I am pleased with the final outcome. The bill I, along with Senator Cohen and others introduced on February 15, 1983, S. 476 , as reported by the Finance Committee contains the essential ingredients to the development of a fair and responsible review process.\" On May 22, 1984, the Senate passed H.R. 3755 , after substituting the language of S. 476 for the House-passed version, 96 (52-R, 44-D) to 0. On September 19, 1984, the conferees filed the conference report. The conference committee generally followed the House version of the medical improvement standard (with some modifications) and added the requirement that any continuing disability review be made on the basis of the weight of the evidence with regard to the person's condition. On September 19, 1984, the House and Senate passed H.R. 3755 unanimously; 402 to 0 in the House, and 99 to 0 in the Senate. The Balanced Budget and Emergency Deficit Control Act, which was included as Title II of H.J.Res. 372 , increasing the national debt, was signed by President Reagan on December 12, 1985. The act stipulated that budget deficits must be decreased annually, and under certain circumstances required across-the-board cuts of nonexempt programs by a uniform percentage to achieve this result. Under the act, if annual deficit amounts were larger than the law established, a formula would be used to reduce the deficit annually until it reached zero in FY1991. This part of P.L. 99-177 is generally referred to by the names of its sponsors—Senators Gramm (R-TX), Rudman (R-NH), and Hollings (D-SC). The Gramm-Rudman-Hollings Act accelerated the \"off-budget\" treatment of OASDI, as prescribed by P.L. 98-21 , from FY1993 to FY1986. (However, Social Security income and outgo still would be counted toward meeting Gramm-Rudman-Hollings deficit reduction targets.) The HI trust fund was not affected (i.e., not to be separated from the budget until FY1993). In addition, the act exempted Social Security benefits (including COLAs) from automatic cuts and required the Secretary of the Treasury to restore to the trust funds any interest lost as a result of 1984 and 1985 debt ceiling constraints, and to issue to the trust funds obligations bearing interest rates and maturities identical to those of securities redeemed between August 31, 1985, and September 30, 1985. On August, 1, 1985, the House approved the debt-limit increase, unamended, as part of the FY1986 budget resolution ( S.Con.Res. 32 ) by a vote of 309 (127-R, 182-D) to 119 (52-R, 67-D). On October 9, 1985, the Senate adopted the Gramm-Rudman-Hollings amendment to H.J.Res. 372 (Balanced Budget and Emergency Control Act of 1985) by a vote of 75 (48-R, 27-D) to 24 (4-R, 20-D). On October 10, 1985, the Senate passed H.J.Res. 372 , with amendments, by a vote of 51 (38-R, 13-D) to 37 (8-R, 29-D). On November 1, 1985, the conference report was filed in disagreement. The House asked for another conference on November 6, 1985, the Senate agreeing on November 7, 1985. The second conference report was filed on December 10, 1985. On December 11, 1985, both the House and the Senate agreed to the conference report, the House by a vote of 271 (153-R, 118-D) to 154 (24-R, 130-D) and the Senate by a vote of 61 (39-R, 22-D) to 31 (9-R, 22-D). In 1985, the Senate voted to skip the 1986 COLA for various federal programs, including Social Security, when it passed S.Con.Res. 32 , the first concurrent budget resolution for FY1986. However, the House-passed version had no COLA freeze, and the proposal was dropped in conference. In his FY1986 Budget submitted in January 1985, President Reagan proposed that there be no COLA for several federal benefit programs, among them civil service and military retirement, in 1986. However, Social Security was exempted from the proposal. In considering S.Con.Res. 32 , the first concurrent budget resolution for FY1986 (which involves the goal-setting stage of the congressional budget process) on March 14, the Senate Budget Committee, by a vote of 11 (11-R, 0-D) to 10 (0-R, 10-D) added Social Security to the list of programs whose COLAs were to be skipped in 1986. The Social Security portion of the COLA \"freezes,\" as they were called, was estimated to yield $22 billion in savings over the FY1986-FY1988 period and larger savings thereafter. An alternative COLA cutback proposal emerged shortly thereafter, as part of a substitute deficit-reduction package developed by the Administration and the Senate Republican leadership. Instead of freezing COLAs in the affected federal retirement programs for one year, it would have limited the COLAs for the next three years to 2% per year plus any amount by which inflation exceeded the Administration's assumptions (its assumptions at that time suggested that inflation would hover in the high 3% or low 4% range). It further included a guarantee provision under which the affected COLAs could not be less than 2%. It, too, would have resulted in about $22 billion in Social Security savings over the following three years (as well as higher savings in later years). When the Senate took up the Budget Committee's first budget resolution, it rejected both the COLA freeze and the alternative COLA limitation by agreeing on May 1, 1985, by a vote of 65 (19-R, 46-D) to 34 (33-R, 1-D) to an amendment by Senator Dole (R-KS), for Senators Hawkins (R-FL) and D'Amato (R-NY), to provide for full funding of Social Security COLAs. However, on May 10, 1985, after considering many amendments, the Senate adopted by a vote of 50 (49-R, 1-D) to 49 (4-R, 45-D) an entirely revised budget package, introduced by Senator Dole, which incorporated the original COLA freeze recommended by the committee. Subsequently, the Senate considered an amendment by Senator Moynihan (D-NY) to provide a full Social Security COLA in January 1986, but it was tabled by a vote of 51 (49-R, 2-D) to 47 (3-R, 44-D). The final budget resolution, passed by a voice vote, assumed later enactment of the 1986 COLA freezes, including one affecting Social Security. The House-passed version of the FY1986 first budget resolution, H.Con.Res. 152 , assumed that full COLAs would be paid in all federal benefit programs. On May 22, 1985, the House rejected an amendment by Representative Dannemeyer (R-CA) to limit Social Security COLAs to 2% per year for the three-year period FY1986-FY1988 by a vote of 382 (135-R, 247-D) to 39 (39-R, 0-D). On May 23, 1985, the House also rejected by a vote of 372 (165-R, 207-D) to 56 (15-R, 41-D) an amendment offered by Representative Leath (D-TX) to freeze 1986 COLAs for Social Security, federal retirement, and veterans' compensation while adding back 20% of the anticipated savings to programs that aid needy elderly and disabled people. Provisions of the House-passed resolution were inserted in S.Con.Res. 32 , in lieu of the Senate-passed measures, which was approved by a vote of 258 (24-R, 234-D) to 170 (155-R, 15-D) on May 23, 1985. Conferees for the House and Senate met throughout June and July 1985 to work out an agreement on a deficit reduction package. Among the number of ideas that surfaced were proposals to delay the Senate-passed COLA freezes until 1987, means test the COLAs, make both the COLAs and adjustments to income tax brackets effective every other year (instead of annually), and increase the amount of Social Security benefits that would be subject to income taxes. Ultimately, however, agreement could not be reached on any form of Social Security constraint, and the conference agreement on the First Concurrent Resolution on the Budget for FY1986, passed on August 1, 1985, did not assume any such savings. President Reagan signed H.R. 5300 , the Omnibus Budget Reconciliation Act of 1986, on October 21, 1986. During 1986, inflation slowed to a rate that made it unlikely that it would reach the 3% threshold necessary to provide a COLA in that year. P.L. 99-509 permanently eliminated the 3% requirement, which enabled a 1.3% COLA to be authorized for December 1986. The Senate Finance Committee, as part of its budget provisions incorporated in S. 2706 , the Omnibus Budget Reconciliation Act of 1986, included a measure that would have provided a Social Security COLA in January 1987 no matter how low inflation turned out to be, that is, it permanently eliminated the 3% requirement. The Senate approved S. 2706 on September 20, 1986, by a vote of 88 (50-R, 38-D) to 7 (0-R, 7-D). The House Ways and Means Committee, as part of its budget reconciliation provisions incorporated in H.R. 5300 , its version of the Omnibus Budget Reconciliation Act of 1986, included a similar measure. The House passed H.R. 5300 with this measure on September 24, 1986, by a vote of 309 (99-R, 210-D) to 106 (71-R, 35-D). The conference report on H.R. 5300 , including the COLA provision, was approved by both houses on October 17, 1986, by a vote of 305 (112-R, 193-D) to 70 (R-51, D-19) in the House and 61 (33-R, 28-D) to 25 (10-R, 15-D) in the Senate. H.R. 3545 , the Omnibus Budget Reconciliation Act of 1987, was signed into law on December 22, 1987, by President Reagan. Several of its provisions affected Social Security. P.L. 100-203 extended FICA coverage to military training of inactive reservists, the employer's share of all cash tips, and several other categories of earnings; lengthened from 15 months to 36 months the period during which a disability recipient who returns to work may become automatically re-entitled to benefits; and extended the period for appeal of adverse disability decisions through 1988. H.R. 3545 was a bill to meet the deficit reduction targets set by the FY1988 budget resolution ( H.Con.Res. 93 ). Earlier, in July, the Ways and Means Committee also had approved changes in Social Security. Two of these provisions—extending coverage to military training of inactive reservists and group term life insurance—had been requested by President Reagan. In addition, the committee agreed to lengthen from 15 months to 36 months the period during which a disability recipient who returns to work may become automatically re-entitled to benefits, to extend the period for appeal of adverse disability decisions through 1988, and to cover certain agricultural workers, children and spouses in family businesses. The house passed H.R. 3545 on October 29, 1987, by a vote of 206 (1-R, 205-D) to 205 (164-R, 41-D). When the Finance Committee approved H.R. 3545 on December 3, 1987, it included the House Social Security coverage provisions. On December 10, 1987, the Senate rejected an amendment by Senator Kassebaum (R-KS) that would have limited the 1988 Social Security COLA to 2%, by a vote of 71 (34-R, 37-D) to 25 (11-R, 14-D). On December 11, 1987, the Senate approved H.R. 3545 by a voice vote. The conference committee generally accepted the House-passed version of H.R. 3545 . On December 21, 1987, the House passed the conference report by a vote of 237 (44-R, 193-D) to 181 (130-R, 51-D). On December 21, 1987, the Senate passed the conference report by a vote of 61 (18-R, 43-D) to 28 (23-R, 5-D). On November 10, 1988, President Reagan signed H.R. 4333 , the Technical and Miscellaneous Revenue Act of 1988. In addition to various tax measures the bill contained several provisions affecting Social Security. Among these, H.R. 4333 provided interim benefits to individuals who have received a favorable decision upon appeal to an Administrative Law Judge but whose case has been under review by the Appeals Council for more than 110 days; extended the existing provision for continued payment of benefits during appeal; denied benefits to Nazis who are deported; and lowered the number of years of substantial Social Security-covered earnings that are needed to begin phasing out the windfall benefit formula (which applies to someone receiving a pension from noncovered employment) from 25 years to 20 years. On July 14, 1988, the Ways and Means Committee approved a \"tax corrections\" bill, H.R. 4333 , that also included some measures affecting Social Security. The House passed H.R. 4333 on August 4, 1988, by a vote of 380 (150-R, 230-D) to 25 (19-R, 6-D). The Finance Committee adopted about half of the House Social Security provisions. The Senate approved H.R. 4333 on October 11, 1988, by a vote of 87 (38-R, 49-D) to 1 (0-R, 1-D). The conference committee generally accepted the House-passed version of H.R. 4333 . On October 21, 1988, the House passed the conference report by a vote of 358 (150-R, 208-D) to 1 (0-R, 1-D). On October 21, 1988, the Senate passed the conference report by a voice vote. On December 19, 1989, President George H. W. Bush signed H.R. 3299 , the Omnibus Budget Reconciliation Act of 1989. Among other things, its Social Security provisions extended benefits to children adopted after the worker became entitled to benefits, regardless of whether the child was dependent on the worker before the worker's entitlement; further extended the existing provision for continued payment of benefits during appeal; increased the calculation of average wages, used for purposes of computing of benefits and the maximum amount of earnings subject to FICA tax, by including deferred compensation; and, beginning in 1990, required that SSA provide estimates of earnings and future benefits to all workers over the age of 24. When the Ways and Means Committee considered H.R. 3299 on October 5, 1989, it proposed several Social Security-related measures. Among these was a provision making SSA an independent agency; raising the Special Minimum benefit by $35 a month; increasing the earnings test limits for recipients over the age of 64; extending benefits to children adopted after the worker became entitled to benefits, regardless of whether the child was dependent on the worker before the worker's entitlement; further extending the existing provision for continued payment of benefits during appeal; and including deferred compensation in the determination of average wages for purposes of determining benefits and the maximum amount of earnings subject to the FICA tax. On October 5, 1989, the House passed H.R. 3299 by a vote of 333 (R-146, D-187) to 91 (R-28, D-63). The Finance Committee approved its version of H.R. 3299 on October 3, 1989. Like the House version, it included an increase in the maximum amount of earnings subject to the FICA tax, but it specifically earmarked the revenue therefrom to pay for proposed increases in the earnings test limits. It also approved making SSA an independent agency, but with a single administrator as opposed to the three-person board specified in the House version. However, because it was thought that a \"clean bill\" would improve chances of passage, the bill was stripped of its Social Security provisions before it reached the floor. The senate approved its version of H.R. 3299 on October 13, 1989, by a vote of 87 (R-40, D-47) to 7 (R-2, D-5). In conference, most of the House provisions were accepted (but the major exclusion was making SSA an independent agency). Although neither version of H.R. 3299 included it, a provision was added that, beginning in 1990, required that SSA provide estimates of earnings and future benefits to all workers over the age of 24. On November 22, 1989 (legislative day November 21), the House approved the conference report by a vote of 272 (R-86, D-186) to 128 (R-81, D-47). The Senate approved it the same day by a voice vote. On November 5, 1990, President George H. W. Bush signed H.R. 5835 , the Omnibus Budget Reconciliation Act of 1990. Among its Social Security provisions, it made permanent a temporary provision, first enacted in 1984 and subsequently extended, that provides the option for recipients to choose to continue to receive disability and Medicare benefits while their termination is being appealed; liberalized the definition of disability for disabled widow(er)s by making it consistent with that for disabled workers; extended benefits to spouses whose marriage to the worker is otherwise invalid, if the spouse was living with the worker before he or she died or filed for benefits; removed the operation of the trust funds from budget deficit calculations under the Gramm-Rudman-Hollings Act; established separate House and Senate procedural safeguards to protect trust fund balances; extended coverage to employees of state and local governments who are not covered by a retirement plan; and raised the maximum amount of earnings subject to HI taxes to $125,000, effective in 1991, with raises thereafter indexed to increases in average wages. In 1990, the congressional agenda was dominated by the debate over how to reduce a large budget deficit, which, under the Gramm-Rudman-Hollings (GRH) sequestration rules, would have required billions of dollars of cuts in many federal programs. The Administration's FY1991 budget contained several Social Security measures, the most prominent of which was to extend Social Security coverage to state and local government workers not covered by a retirement plan. The Ways and Means Social Security Subcommittee included some of them in a package of Social Security provisions it forwarded to the full committee. For several months budget negotiations stalled, as the democratic majority in Congress disagreed with the Administration's position that the deficit should be reduced entirely with spending cuts. As a result of a budget \"summit\" between congressional and Administration leaders, an agreement was reached in which the President would put tax increases on the table and the Congress would consider spending cuts in entitlements, including Social Security and Medicare. The resulting bill reported from the Budget Committee on October 15, H.R. 5835 , extended Social Security coverage to state and local government workers not covered by a retirement plan and raised the maximum amount of earnings subject to HI taxes to $100,000, effective in 1991. However, the same day the Ways and Means Committee reported out H.R. 5828 , a bill making miscellaneous and technical amendments to the Social Security Act, which incorporated most of the provisions that had earlier been approved by the Social Security Subcommittee. On October 16, 1990, the House approved H.R. 5835 by a vote of 227 (10-R, 217-D) to 203 (163-R, 40-D). During 1990, the debate about Social Security was largely dominated by a proposal by Senator Moynihan (D-NY) to cut the Social Security payroll tax and return the program to true pay-as-you-go financing. The driving force behind the proposal was the growing realization that the rapid rise in Social Security yearly surpluses, caused by payroll tax revenues that exceeded the program's expenditures, were significantly reducing the size of the overall federal budget deficit. This had led to charges that the Social Security trust funds were being \"raided\" to finance the rest of government and \"masking\" the true size of the deficit. In S. 3167 , Senator Moynihan proposed that the payroll tax rate be scheduled to fall and rise with changes in the program's costs. On October 10, 1990, Senator Moynihan asked that the Senate vote on S. 3167 . While the Senate leadership agreed to bring the bill to the floor, a point of order was raised against it on the basis that it violated the Budget Act. Although a majority of Senators voted to override the point of order, 54 (R-12, D-42) to 44 (31-R, 13-D), the measure fell short of the 60 votes required. When the Senate considered H.R. 5835 on October 18, 1990, it accepted by a vote of 98 (43-R, 55-D) to 2 (2-R, 0-D) an amendment by Senators Hollings (D-SC) and Heinz (R-PA) to remove Social Security from GRH budget deficit calculations. On October 19, 1990 (legislative day October 18), the Senate passed the budget reconciliation bill by a vote of 54 (23-R, 31-D) to 46 (22-R, 24-R). On October 27, 1990 (legislative day October 26), the House passed the conference report on H.R. 5835 by a vote of 228 (47-R, 181-D) to 200 (126-R, 74-D). On October, 27, 1990, the Senate passed the conference report by a vote of 54 (19-R, 35-D) to 45 (25-R, 20-D) On August 10, 1993, President Clinton signed H.R. 2264 , the Omnibus Budget Reconciliation Act of 1993. Effective in 1994, H.R. 2264 made up to 85% of Social Security benefits subject to the income tax for recipients whose income plus one-half of their benefits exceed $34,000 (single) and $44,000 (couple); and eliminated the maximum taxable earnings base for the HI payroll tax, (i.e., subjected all earnings to the HI tax), effective in 1994. As part of his plan to cut the federal fiscal deficit, President Clinton proposed in his first budget that the proportion of benefits subject to taxation should be increased from 50% to 85%, effective in 1994. His budget document said this would \"move the treatment of Social Security and railroad retirement Tier I benefits toward that of private pensions\" and would generate $32 billion in new tax revenues over five years. The proceeds from the change would not be credited to the Social Security trust funds, as under current law, but to the Medicare Hospital Insurance program, which had a less favorable financial outlook than did Social Security. Doing so also would have avoided procedural obstacles that could have been raised in the budget reconciliation process. The budget also proposed that the maximum taxable earnings base for HI be eliminated entirely beginning in 1994. Both proposals, especially the increase in the taxation of benefits, were opposed vigorously by the Republican minority. Critics maintained that the increase was unfair as it changed the rules in the middle of the game, penalizing recipients who relied on old law and who could not change past work and savings decisions. Regardless of abstract arguments about tax principles, many recipients regarded increased taxation as simply a reduction in the benefits they had been promised. They regarded taxation of benefits as an indirect means test, which would weaken the \"earned right\" nature of the program and make it more like welfare, where need determines the level of benefits. Finally, they maintained that it grossly distorts marginal tax rates and provides a strong disincentive for many recipients to work. H.Con.Res. 64 , the FY1994 Concurrent Budget Resolution, included the additional revenue from the President's proposal. On March 18, 1993, the House passed H.Con.Res. 64 by a vote of 243 (0-R, 242-D, 1-I) to 183 (172-R, 11-D), which included the additional revenue from the President's proposal. The Senate devoted six days of debate to H.Con.Res. 64 at the end of March. On March 24, 1993, the Senate rejected by a vote of 47 (43-R, 4-D) to 52 (0-R, 52-D) an amendment by Senator Lott (R-MS) that would have deleted from the resolution the revenue projected from the President's proposal. On March 24, 1993, the Senate approved, by a vote of 67 (12-R, 55-D) to 32 (31-R, 1-D), an amendment by Senators Lautenberg (D-NJ) and Exon (D-NE) expressing the sense of the Senate that the revenues set forth in the resolution assume that the Finance Committee would make every effort to find alternative sources of revenue before imposing additional taxes on the Social Security benefits of recipients with threshold incomes of less than $32,000 (single) and $40,000 (couples). The thresholds for taxing 50% of benefits were to remain at the current law levels of $25,000 and $32,000. On March 25, 1993, the Senate approved H.Con.Res. 64 by a vote of 54 (0-R, 54-D) to 45 (43-R, 1-D). On March 31, 1993, the House approved the conference report on H.Con.Res. 64 by a vote of 240 (0-R, 239-D, 1-I) to 184 (172-R, 12-D). On April 1, 1993, the Senate approved the conference report by a vote of 55 (0-R, 55-D) to 45 (43-R, 2-D). It included the sense of the Senate resolution. On May 13, 1993, by a party-line vote of 24-14, the House Committee on Ways and Means approved the President's proposal, but modified it so that the additional proceeds would be credited to the General Fund instead of to Medicare. This measure was included in H.R. 2264 , the 1993 Omnibus Budget Reconciliation Act. On May 27, 1993, the House passed H.R. 2264 by a vote of 219 (0-R, 218-D, 1-I) to 213 (175-R, 38-D). On June 18, 1993, by a party-line vote of 11-9, the Finance Committee approved H.R. 2264 , but included the Lautenberg-Exon amendment to raise the taxation thresholds to $32,000 (single) and $42,000 (couple). On June 24, 1993, the Senate rejected, by a vote of 46 (41-R, 5-D) to 51 (1-R, 50-D), an amendment by Senator Lott to delete the taxation of benefits provision. It also rejected, by a vote of 46 (3-R, 43-D) to 51 (40-R, 11-D) an amendment by Senator DeConcini to increase the 85% thresholds to $37,000 (single) and $54,000 (couple), and, by a vote of 41 (40-R, 1-D) to 57 (3-R, 54-D) an amendment by Senator McCain to direct that the proceeds of increased taxation of benefits be credited to the Social Security trust funds. On June 24, 1993, the Senate approved, by a vote of 50 (0-R, 50-D) to 49 (43-R, 6-D), the Budget Reconciliation bill. It included the Lautenberg-Exon amendment creating second-tier thresholds of $32,000 and $40,000. On July 14, 1993, the House adopted, by a vote of 415 to 0, an amendment by Representative Sabo (D-MN) to instruct its conferees on the bill to accept the Senate version of taxation of benefits. When the House and Senate versions of the budget package were negotiated in conference, the conferees modified the Senate taxation of Social Security benefits provision by setting the second tier thresholds at $34,000 (single) and $44,000 (couple). The measure was included in the final version of the reconciliation bill passed by the House on August 5, 1993, by a vote of 218 (0-R, 217-D, 1-I) to 216 (175-R, 41-D). On August 6, 1993, the Senate passed H.R. 2264 by a vote of 51 (0-R, 51-D) to 50 (44-R, 6-D). President Clinton signed H.R. 4277 , the Social Security Administrative Reform Act of 1994, on August 15, 1994. P.L. 103-296 established the SSA as an independent agency, effective March 31, 1995. It restricted DI and SSI benefits payable to drug addicts and alcoholics by creating sanctions for failing to get treatment, limiting their enrollment to three years, and requiring that those receiving DI benefits have a representative payee (formerly required only of SSI recipients). Representatives of the Clinton Administration initially opposed making SSA an independent agency, but President Clinton supported H.R. 4277 's final passage. Interest in making SSA independent began in the early 1970s, when Social Security's impact on fiscal policy was made more visible by including it in the federal budget. During congressional budget discussions in the early 1980s, proponents of independence wanted to insulate Social Security from benefit cuts designed to meet short-term budget goals rather than policy concerns about Social Security. Many argued that making the agency independent would help insulate it from political and budgetary discussions, lead to better leadership, and reassure the public about Social Security's long-run survivability. Opponents argued that Social Security's huge revenue and outlays should not be isolated from policy choices affecting other HHS social programs and that its financial implications for the economy and millions of recipients should be evaluated in conjunction with other economic and social functions of the government. They further believed that making SSA independent would not necessarily resolve its administrative problems, which were heavily influenced by ongoing policy changes to its programs resulting from legislation and court decisions. Starting in 1986, a number of attempts were made in Congress to make SSA independent. Various Administrations generally opposed the idea, and a disagreement persisted between the House and Senate over how such an agency should be administered. The House preferred an approach under which an independent SSA would be run by a three-member bipartisan board; the Senate preferred an approach where it would be run by a single administrator. On May 12, 1994, the Ways and Means Committee reported out H.R. 2264 (incorporating the three-member bipartisan board approach), introduced by Representative Jacobs (D-IN). The House passed H.R. 2264 on May 17, 1994, by a vote of 413-0. On January 25, 1994, the Senate Finance Committee reported out S. 1560 (incorporating the single-administrator approach), introduced by Senator Moynihan (D-NY). The Senate passed S. 1560 by voice vote on March 2, 1994. On May 23, 1994, the Senate approved H.R. 4277 , after striking its language and substituting that of S. 1560 , by voice vote. Conferees reached an agreement on July 20, 1994, under which SSA would be run by a single administrator appointed for a six-year term, supported by a seven-member bipartisan advisory board. The Senate passed the agreement by voice vote on August 5, 1994. The House passed the agreement on August 11, 1994, by a vote of 431-0. President Clinton signed H.R. 4278 , Social Security Domestic Reform Act of 1994, on October 22, 1994. H.R. 4278 raised the threshold for Social Security coverage of household employees from $50 in wages a quarter to $1,000 a year, which would rise thereafter with the growth in average wages and reallocated taxes from the OASI fund to the DI fund. In early 1993, the issue of coverage of domestic workers burst into public awareness when several Cabinet nominees revealed that they had failed to report the wages they had paid to childcare providers. Subsequent media scrutiny made it apparent that under-reporting of household wages was common. It also highlighted that householders were supposed to be reporting even occasional work such as babysitting and lawn mowing. As the threshold had not been changed for 43 years, the question naturally arose of whether it should be raised. Several measures were introduced in the 103 rd Congress that would have raised the threshold by varying amounts. On March 22, 1994, Representative Andrew Jacobs (D-IN) introduced H.R. 4105 , which would have raised the threshold to $1,250 a year in 1995, to be indexed thereafter to increases in average wages. This measure was included in H.R. 4278 , approved by the House on May 12, 1994, by a vote of 420-0. When the Senate considered H.R. 4278 on May 25, 1994, it struck the House language and substituted the text of S. 1231 , a bill by Senator Moynihan (D-NY) that would have raised the annual threshold to the same level as that needed to earn a quarter of coverage ($620 in 1994) and exempted from Social Security taxes the wages paid to domestic workers under the age of 18. The Senate passed the revised version of H.R. 4278 on May 25, 1994, by unanimous consent. On October 5, 1994, conferees agreed to a measure that raised the threshold for Social Security coverage of household workers to $1,000, effective in 1994. The measure also provided that the threshold would rise in the future, in $100 increments, in proportion to the growth in average wages in the economy. On October 6, 1994, the conference report was approved in the House by a vote of 423-0. The same day, the Senate approved the conference report by unanimous consent. On March 29, 1996, President Clinton signed H.R. 3136 , the Senior Citizens Right to Work Act of 1996. H.R. 3136 : raised the annual earnings test exempt amount, for recipients who have attained the full retirement age (FRA), over a period of seven years, reaching $30,000 in 2002, and then indexed that amount to wages; prohibited DI and SSI eligibility to individuals whose disability is based on drug addiction or alcoholism; tightened eligibility requirements for entitlements to benefits as a stepchild; and, as a way to produce program savings that would help compensate for the increased costs to the Social Security system due to liberalizing the earnings test, provided funds for additional continuing disability reviews. On September 27, 1994, 300 Republican congressional candidates presented a \"Contract with America\" that listed 10 proposals that they would pursue if elected. One of the proposals, the \"Senior Citizens Equity Act,\" included a measure to increase the earnings test limits, for those over age 64, over a period of five years, reaching $30,000 in 2000. After the Republican victory in the election, the Senior Citizens Equity Act was sponsored by 131 Members in H.R. 8 , introduced January 4, 1995. Although the House approved the measure as part of H.R. 1215 , it was not included in the Balanced Budget Reconciliation bill ( H.R. 2491 ) passed by the Congress on November 20, 1995. On November 28, 1995, the Social Security Subcommittee of the Ways and Means Committee approved H.R. 2684 , the Senior Citizens Right to Work Act, introduced by Chairman Bunning (R-KY), that would gradually increase the earnings test limits for those aged 65-69 to $30,000 in 2002. The full committee approved H.R. 2684 by a vote of 31-0 on November 30, 1995. The House approved H.R. 2684 on December 5, 1995, by a vote of 411 (230-R, 180-D, 1-I) to 4 (0-R, 4-D). On March 21, 1996, reportedly with the agreement of the Administration, a modified version of H.R. 2684 was included in H.R. 3136 , the Contract with America Advancement Act of 1996, introduced by Representative Archer (D-TX). H.R. 3136 , also included an increase in the debt ceiling and other measures. The part of H.R. 3136 relating to the earnings test was similar to H.R. 2684 , but modified to slow the rise in the exempt amounts during the first five years of the phase-in. On March 28, 1996, H.R. 3136 was passed by the House by a vote of 328 (201-R, 127-D) to 91 (30-R, 60-D, 1-I). On December 14, 1995, the Senate Committee on Finance approved S. 1470 , a bill similar to H.R. 2684 . On March 28, 1996, H.R. 3136 was passed by the Senate by unanimous consent. President Clinton signed H.R. 1180 , the Ticket to Work and Work Incentive Act of 1999, on December 17, 1999. H.R. 1180 provided disabled recipients with vouchers they can use to purchase rehabilitative services from public or private providers and extended Medicare coverage for up to 4.5 additional years for disabled recipients who work. In the 1990s, there was a growing movement to mitigate what was seen as a fundamental dilemma faced by many disabled Social Security recipients. While the disabled were encouraged to try to leave the Social Security rolls by attempting to work, in doing so they faced a limited choice in seeking rehabilitation services and a potentially serious loss of Medicare and Medicaid benefits. Proponents of providing greater work opportunity argued that incentives for the disabled to attempt to work should be enhanced. On October 19, 1999, the House approved H.R. 1180 , The Ticket to Work and Work Incentives Improvement Act of 1999, introduced by Representative Rick Lazio (R-NY), by a vote of 412 (206-R, 205-D, 1-I) to 9 (9-R, 0-D). On June 16, 1999, the Senate passed a similar bill, S. 331 , the Work Incentives Improvement Act of 1999, introduced by Senator James S. Jeffords (R-VT), by a vote of 99-0. On October 21, 1999, the Senate passed H.R. 1180 , after striking its language and substituting that of S. 331 , by unanimous consent. On November 18, 1999, the House adopted the conference report by a vote of 418 (212-R, 205-D, 1-I) to 2 (0-R, 2-D). On November 19, 1999, the Senate adopted the conference report by a vote of 95 (51-R, 44-D) to 1 (1-R, 0-D). President Clinton signed H.R. 5 , the Senior Citizens Right to Work Act, on April 7, 2000. H.R. 5 eliminated the earnings test for recipients who have attained FRA, effective in 2000. The earnings test has always been one of the most unpopular features of the Social Security program. Critics said it was unfair and inappropriate to impose a form of means test for a retirement benefit that has been earned by a lifetime of contributions to the program, that it has a strong negative effect on work incentives, and that it can hurt elderly individuals who need to work to supplement their Social Security benefits. Defenders of the provision said that it is a reasonable means of executing the purpose of Social Security. Because the system is social insurance that protects workers from loss of income due to the retirement, death, or disability of the worker, they consider it appropriate to withhold benefits from workers who show by their substantial earnings that they have not in fact \"retired.\" They also argued that eliminating or significantly liberalizing the benefit would primarily help those who do not need help (i.e., the better-off). However, over the years probably the main impediment to eliminating the earnings test was its negative effect on the program's financial status and on current federal budgets, which perennially were in deficit. By 2000, the federal budget was running large surpluses, so major alterations to the test were deemed affordable. In addition, it was projected that eliminating the test would have no negative impact on Social Security's long-range financing because of offsetting savings. The ground work for this offsetting effect had been laid in 1983, when Congress increased the Delayed Retirement Credit (DRC). The DRC increases benefits for retirees by a certain percentage for each month they do not receive benefits after they attained FRA. The 1983 legislation provided for a long phase-in of the increase in the DRC, so that its ultimate rate would not be achieved until 2008. At that point, it would be \"actuarially fair,\" meaning that the additional benefits a person would receive over his or her lifetime due to the DRC would be approximately equal to the value of the benefits lost due to the earnings test. Thus, the long-range cost of eliminating the earnings test for those above FRA would be offset by the savings produced by fewer payments of DRCs. Because there was no threat to Social Security's long-range solvency and the short-range costs were judged to be affordable, the momentum to repeal the test for those at or over the retirement age was overwhelming. On March 1, 2000, the House approved H.R. 5 , a bill that would eliminate the earnings test for recipients who have attained FRA, introduced by Representative Sam Johnson (R-TX), by a vote of 422-0. On March 22, 2000, the Senate approved H.R. 5 , with a modification to the monthly exempt amounts in the year of attaining FRA, by a vote of 100-0. On March 28, 2000, the House approved the Senate version of H.R. 5 by a vote of 419-0. President George W. Bush signed H.R. 743 , the Social Security Protection Act of 2004, on March 2, 2004. The measure included various provisions designed to reduce fraud and abuse in the Social Security and SSI programs. Among other changes, H.R. 743 imposed stricter standards on individuals and organizations that serve as representative payees for Social Security and SSI recipients; made nongovernmental representative payees liable for misused funds and subjected them to civil monetary penalties; tightened restrictions on attorneys who represent Social Security and SSI disability claimants; limited assessments on attorney fee payments; prohibited fugitive felons from receiving Social Security benefits; modified the last day rule under the Government Pension Offset provision; and required certain noncitizens to have authorization to work in the United States at the time a Social Security number is assigned, or at some later time, to gain insured status under the Social Security program. Several major provisions of the law are described below. SSA may designate a \"representative payee\" to accept monthly benefit payments on behalf of Social Security and SSI recipients who are physically or mentally incapable of managing their own funds, or on behalf of children under the age of 18. Before P.L. 108-203 , SSA was required to reissue benefits misused by an individual or organizational representative payee only in cases where the Social Security Commissioner found that SSA negligently failed to investigate or monitor the payee. The new law eliminated the requirement that the reissuance of benefits be subject to a finding of negligence on the part of SSA. As a result, SSA is required to reissue any benefits misused by an individual representative payee who represents 15 or more recipients, or by an organizational representative payee. In addition, the law made nongovernmental representative payees (i.e., those other than federal, state, and local government agencies) liable for the reimbursement of misused funds. Under the new law, SSA has the authority to impose a civil monetary penalty (up to $5,000 for each violation) and an assessment (up to twice the amount of misused benefits) on representative payees who misuse benefits. The new law included a number of other provisions aimed at strengthening the accountability of representative payees. Social Security and SSI disability claimants may choose to have an attorney or other qualified individual represent them in proceedings before SSA, and the claimant representative may charge a fee for his or her services. The fee, which is subject to limits, must be authorized by SSA. If a Social Security disability claimant is awarded past-due benefits and his or her representative is an attorney, SSA withholds the attorney's fee payment from the benefit award and sends the payment directly to the attorney. To cover the administrative costs associated with the fee withholding process for attorney representatives of Social Security disability claimants, SSA withholds an assessment of up to 6.3% from the attorney's fee. Before P.L. 108-203 , if the claimant representative was not an attorney, or the claim was for SSI benefits, SSA would send the full benefit award to the claimant and the claimant representative would be responsible for collecting his or her fee from the individual. The new law capped the assessment for processing attorney fee payments at the lesser of 6.3% of the attorney's fee and $75 (indexed to inflation); provided for a temporary (five-year) extension of the attorney fee withholding process to SSI claims; authorized a five-year demonstration project to extend the fee withholding process to non-attorney representatives in both Social Security and SSI claims; and required the Government Accountability Office to study the fee payment process for claimant representatives. Before P.L. 108-203 , SSA was prohibited from paying SSI benefits only (not Social Security benefits) to fugitive felons (i.e., persons fleeing prosecution, custody, or confinement after conviction, and persons violating probation or parole). In addition, upon written request, SSA was required to provide information about these individuals (current address, Social Security number, and photograph) to law enforcement officials. The new law prohibited SSA from paying Social Security benefits as well to fugitive felons and required SSA, upon written request, to provide information to law enforcement officials to assist in the apprehension of these individuals. The new law authorized the Social Security Commissioner to pay, with good cause, SSI and Social Security benefits previously denied because of an individual's status as a fugitive felon. If an individual receives a government pension from work that was not covered by Social Security, his or her Social Security spousal or widow(er) benefit is reduced by an amount equal to two-thirds of the noncovered government pension, under a provision known as the Government Pension Offset (GPO). Before P.L. 108-203 , a state or local government employee who was not covered by Social Security would be exempt from the GPO if he or she worked in a Social Security-covered government position on the last day of employment . That is, under the last day rule , a noncovered state or local government employee could avoid having his or her Social Security spousal or widow(er) benefit reduced under the GPO by switching to a Social Security-covered government position for one day (or longer). Under the new law, a state or local government employee must be covered by Social Security for at least the last 60 calendar months of employment to be exempt from the GPO. Before P.L. 108-203 , a noncitizen was not required to have authorization to work in the United States at any point to qualify for Social Security benefits. Under the new law, a noncitizen who is assigned a Social Security number (SSN) in 2004 or later is required to have work authorization at the time the SSN is assigned, or at some later time, to gain insured status under the Social Security program. Specifically, if the individual obtains work authorization at some point, all of his or her Social Security-covered earnings count toward qualifying for benefits (all authorized and unauthorized earnings). If the individual never obtains authorization to work in the United States, none of his or her Social Security-covered earnings count toward qualifying for benefits. A noncitizen who was assigned an SSN before 2004 is not subject to the work authorization requirement established under the new law (i.e., all of the individual's Social Security-covered earnings count toward qualifying for benefits, regardless of his or her work authorization status). On April 2, 2003, the House approved H.R. 743 , the Social Security Protection Act of 2003, introduced by Representative E. Clay Shaw (R-FL), by a vote of 396 (219-R, 176-D, 1-I) to 28 (3-R, 25-D). On September 17, 2003, the Senate Finance Committee approved an amendment in the nature of a substitute to H.R. 743 , as passed by the House, by a voice vote. On December 9, 2003, the Senate approved H.R. 743 , with an amendment that substituted for the version of the bill approved by the Senate Finance Committee, by unanimous consent. On February 11, 2004, the House agreed to the Senate version and passed H.R. 743 (renamed the Social Security Protection Act of 2004), by a vote of 402 (221-R, 180-D, 1-I) to 19 (4-R, 15-D). President Obama signed H.R. 4853 , the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, on December 17, 2010. Section 601 of the law reduced, in 2011 only, the Social Security portion of the payroll tax applied to both the wages and salaries of FICA-covered workers and to the net earnings of SECA-covered self-employed workers, each by two percentage points. The Social Security initiative was just one among other provisions included in the legislation intended to stimulate the economy by creating jobs, extending public payments to the unemployed, and providing workers with more disposable income. The act temporarily reduced the FICA tax rate from 6.2% of covered earnings to 4.2% for employees, and the SECA tax rate from 12.4% of covered net self-employed earnings to 10.4%. The law did not change the FICA rate for employers in 2011, which remained at 6.2%. Net revenue to the Social Security trust funds was not affected by P.L. 111-312 . Any decline in tax revenue in 2011 attributed to the act was covered by appropriate transfers from the General Fund of the U.S. Treasury. On March 17, 2010, the House approved H.R. 4853 , under suspension of the rules by voice vote. The bill, introduced by Representative James Oberstar (D-MN), at the time was known as the ultimately unrelated Federal Aviation Administration Extension Act of 2010. On September 23, 2010, the Senate passed the bill, with an amendment in the nature of a substitute to H.R. 4853 , as passed by the House, by unanimous consent. The Senate's amendment, still focused on the aviation industry, was titled the Airport and Airway Extension Act of 2010, Part III. After a few days of debate on tax relief and the economy in early December, the House moved to strip out all aviation provisions in H.R. 4853 and subsequently used the bill as a vehicle for tax relief measures. On December 2, 2010, the House agreed to adopt an amendment to H.R. 4853 , as amended by the Senate, by a vote of 234 (231-D, 3-R) to 188 (168-R, 20-D). The Senate immediately began deliberation of its version of tax relief in response to the House amendment to the Senate amendment of H.R. 4853 . On December 9, 2010, the Senate produced a new substitute to H.R. 4853 , in the form of yet another amendment. This version included a provision to grant a one year partial payroll tax \"holiday\" to workers and the self-employed in 2011. The holiday was packaged as a two percentage point reduction in the FICA and SECA payroll tax rates. On December 15, 2010, the Senate approved this new version of the bill, by a vote of 81 (43-D, 37-R, 1-I) to 19 (13-D, 5-R, 1-I). On December 17, 2010, the House approved the latest Senate version of H.R. 4853 (officially, the Senate amendment to the House amendment to the Senate amendment of H.R. 4853 ). The House approved the measure by a vote of 277 (139-D, 138-R) to 148 (112-D, 36-R). President Obama signed H.R. 3765 , the Temporary Payroll Tax Cut Continuation Act of 2011, on December 23, 2011. Section 101 of the law extended the expiring temporary Social Security payroll tax contribution rates that were provided in P.L. 111-312 , the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ), effective in calendar year 2011, into calendar year 2012. In addition to the Social Security payroll tax provisions, P.L. 112-78 also included extensions of unemployment insurance and health provisions, as well as provisions relating to mortgage fees and the construction of a transcontinental oil pipeline. Specifically, the Social Security portion of the payroll tax applied to the covered net earnings of SECA-covered self-employed workers remained reduced throughout 2012 at 10.4%, down from the SECA tax rate of 12.4%. The act also extended the 2011 temporary reduction of the FICA tax rate on employee covered earnings from 6.2% to 4.2% through February 2012 only. Throughout 2011, several proposals were introduced to extend the 2011 temporary payroll tax reductions through calendar year 2012. H.R. 3630 received attention as the vehicle for a year-long extension, which had bipartisan and bicameral support, but the bill stalled as respective versions advanced by the House and Senate differed on how to replace revenue lost as a result of the payroll tax rate reductions. Ultimately, H.R. 3765 emerged as a short-term compromise, and it extended the payroll tax reductions for two months. The year-long extension of payroll tax cuts through calendar year 2012 is addressed in the \"P.L. 112-96, The Middle Class Tax Relief and Job Creation Act of 2012\" section below, in which Congress revisited H.R. 3630 after the adoption of H.R. 3765 into P.L. 112-78 . On December 23, 2011, the House approved H.R. 3765 , introduced by Representative Dave Camp (R-MI) without objection. On December 23, 2011, the Senate approved H.R. 3765 by unanimous consent. President Obama signed H.R. 3630 , the Middle Class Tax Relief and Job Creation Act of 2012, on February 22, 2012. Section 1001 of the law further extended, through 2012, expiring reduced Social Security payroll tax contribution rates first provided in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). The payroll tax rate reductions included in P.L. 113-312 addressed above in the \"P.L. 111-312, The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010\" section, were initially intended to be applied only in 2011. These rate reductions were extended for an additional two months, through February 2012, by the Temporary Payroll Tax Cut Continuation Act of 2011 ( P.L. 112-78 ). The Middle Class Tax Relief and Job Creation Act of 2012 further extended the rate reductions through the end of calendar year 2012. In addition to the Social Security payroll tax provisions, P.L. 112-96 also included extensions of unemployment insurance, health, and welfare provisions, as well as provisions relating to the retirement contributions for federal employees and to public safety programs. In the second session of the 112 th Congress, the House and Senate came to an agreement on how to pay for the provisions in H.R. 3630 , and the legislation advanced with the filing of a conference report on February 16, 2012. The temporary payroll tax rates extended under P.L. 112-96 expired at the end of 2012. The tax rates returned to 6.2% of covered earnings for employees and 12.4% of covered net earnings for the self-employed in 2013. On December 13, 2011, the House approved H.R. 3630 , the Middle Class Tax Relief and Job Creation Act of 2011, introduced by Representative Dave Camp (R-MI), by a vote of 234 (224-R, 10-D) to 193 (14-R, 179-D). On December 17, 2011, the Senate approved its version of H.R. 3630 , as an amendment in the nature of a substitute and renamed the Temporary Payroll Tax Cut Continuation Act of 2011 by Majority Leader Harry Reid (D-NV), by a vote of 89 (49-D, 39-R, 1-I) to 10 (2-D, 7-R, 1-I). On February 17, 2012, the House agreed to the conference report of the bill, now identified as the Middle Class Tax Relief and Job Creation Act of 2012, by a vote of 293 (147-D, 146-R) to 132 (91-R, 41-D). On February 17, 2012, the Senate agreed to the conference report by a vote of 60 (45-D, 14-R, 1-I) to 36 (30-R, 5-D, 1-I). President Barack Obama signed into law H.R. 5739 , the No Social Security for Nazis Act, on December 18, 2014. Before P.L. 113-270 , Title II of the Social Security Act provided for the termination of Social Security benefits for individuals who were ordered removed due to participation in Nazi persecutions, genocide, torture, or extrajudicial killings under Section 237(a)(4)(D) of the Immigration and Nationality Act. SSA was required to terminate benefits for such individuals upon notification that final orders of removal were issued against the individuals. Physical removal of the individual from the United States was not a necessary condition for the termination of benefits in such cases as it is with all other individuals who have been ordered removed; rather, the issuance of a final order of removal was the basis for the termination of benefits. P.L. 113-270 expanded the conditions under which Social Security benefits would be terminated for those who participated in Nazi persecutions. In addition, under P.L. 113-270 , benefits would be reinstated for those who are ordered removed based on participation in genocide, torture, or extrajudicial killings until those persons are physically removed. The act broadened the existing provision of the Social Security Act described above for those who participated in Nazi persecutions in response to concerns that certain individuals believed to have participated in Nazi persecutions during World War II have been living outside the United States and receiving Social Security benefits. Specifically, concern focused on a small surviving group of individuals who had lived in the United States previously and, due to their participation in Nazi persecutions, had been under investigation by the Department of Justice and left the country before being ordered removed. Because these individuals left the United States before being issued an order of removal, their Social Security benefits were not subject to termination. (These individuals would also have met other requirements for the payment of Social Security benefits outside the United States.) P.L. 113-270 provided for the termination of Social Security benefits for these additional individuals determined to have participated in Nazi persecutions, and it prohibited them from receiving Social Security benefits based on another person's work record. It also clarified the timeframe in which the Department of Justice or the Department of Homeland Security must notify SSA of certain actions involving these individuals. The change in benefit eligibility for those who participated in genocide, torture, or extrajudicial killings as a result of P.L. 113-270 (i.e., making the physical removal of such individuals from the United States a necessary condition for the termination of benefits, rather than the issuance of a final order of removal ) is likely an unintended consequence of the legislative language. On December 2, 2014, the House moved to suspend the rules and pass H.R. 5739 by a vote of 420 (228-R, 192-D) to 0. On December 4, 2014, H.R. 5739 was passed by the Senate without amendment by unanimous consent. President Barack Obama signed into law the Bipartisan Budget Act of 2015 ( H.R. 1314 ) on November 2, 2015. The broad budget legislation contained a number of Social Security-related provisions, including changes to rules that apply when a person files an application for Social Security benefits, and a temporary reallocation of Social Security payroll tax revenues from the Old-Age and Survivors Insurance (OASI) Trust Fund to the Disability Insurance (DI) Trust Fund. Section 831 of P.L. 114-74 made changes to two types of filing rules: (1) deemed filing and (2) the voluntary suspension of benefits . The changes affect options available to claimants who are full retirement age (FRA) or older (the FRA ranges from 65 to 67, depending on the person's year of birth). A worker who qualifies for both a retired-worker benefit and a spousal benefit generally cannot restrict his or her application to only one type of benefit. Rather, when the person files for one benefit, he or she is required (or deemed) to file for the other benefit at the same time. The person becomes simultaneously entitled to a retired-worker benefit and a spousal benefit, and the spousal benefit is reduced under the dual entitlement rule . Under the dual entitlement rule, a person receives his or her own retired-worker benefit first, plus a spousal benefit that has been reduced by the amount of the retired-worker benefit (the spousal benefit may be reduced to zero). In effect, the person receives the higher of the two benefit amounts (not both). Before P.L. 114-74 , deemed filing applied only to claimants who are below FRA . A claimant who was FRA or older could file a restricted application for benefits; that is, he or she could file for spousal benefits only, for example, and wait until a later time to file for retired-worker benefits. This would allow the person to receive a full spousal benefit now (the dual entitlement rule would not be applied at this time) and to file for a higher retired-worker benefit later. When the person filed for his or her own retired-worker benefit later on, the spousal benefit would then be reduced under the dual entitlement rule. Some beneficiaries used this \"claiming strategy\" as a way to maximize their Social Security retired-worker and spousal benefits. P.L. 114-74 eliminated the restricted application option for claimants who are FRA or older. Like claimants who are below FRA, they are deemed to file for both a retired-worker benefit and a spousal benefit, if eligible for both. The deemed filing change is effective for people born in 1954 or later (i.e., people who reach age 62—the age at which one first becomes eligible for retirement benefits—on or after January 2, 2016). People born before 1954 (i.e., people who reached age 62 before January 2, 2016) are \"grandfathered\" under the old rules. They can file a restricted application for spousal benefits only or retired-worker benefits only when they reach FRA . If they claim benefits before FRA, they are subject to deemed filing rules. Social Security benefits replace a portion of earnings lost due to the worker's retirement, disability, or death. Therefore, family members generally cannot claim benefits on a worker's record if the worker has not claimed benefits. Before P.L. 114-74 , a worker who was FRA or older could file an application for retired-worker benefits and then request that the benefit payments be suspended. This \"file and suspend\" approach (1) allowed the worker to accrue delayed retirement credits (DRCs) during the period of voluntary suspension (i.e., his or her retired-worker benefit would increase 8% per year from FRA up to age 70) and at the same time (2) allowed eligible family members (such as a spouse or dependent child) to claim benefits on the worker's record. In addition, a beneficiary who had voluntarily suspended his or her own retired-worker benefit could receive a spousal or widow(er)'s benefit based on another person's record. A spousal or widow(er)'s benefit would be reduced under the dual entitlement rule as if the beneficiary's own retired-worker benefit had not been suspended (i.e., the beneficiary could receive any excess spousal or widow(er)'s benefits). A worker could also \"unsuspend\" his or her benefits on a retroactive basis and receive a lump sum payment for the past-due period. Under P.L. 114-74 , a worker who is FRA or older can file for retired-worker benefits and voluntarily suspend benefits between FRA and age 70 to accrue DRCs (as before). This approach could be used by a beneficiary who claims retired-worker benefits and then returns to work, for example. Under the new rules, however, benefits are no longer payable to eligible family members based on the worker's record during the period of voluntary suspension, with the exception of divorced spouses . A divorced spouse may collect benefits on the worker's record during the period of suspension. Widow(er)'s benefits are also payable on the record of a deceased worker who had suspended his or her own retired-worker benefits. In addition, a worker can no longer receive benefits based on another person's record while his or her own retired-worker benefit is suspended; nor can a worker \"unsuspend\" his or her benefits retroactively and receive a lump sum payment. The period of voluntary suspension ends with the earlier of (1) the month before the person turns age 70, or (2) the month following the person's request to resume benefit payments. The changes apply to requests for the voluntary suspension of benefits made after April 29, 2016. The changes to Social Security's filing rules were intended to prevent the use of \"claiming strategies\" viewed as inconsistent with the concept behind Social Security spousal benefits, and that otherwise allowed workers and spouses to collect more in Social Security benefits than Congress intended. Before P.L. 114-74 , a person who was FRA or older could claim spousal benefits only, when he or she also qualified for retired-worker benefits. As a result, the person could receive full spousal benefits for several years, before claiming a higher retired-worker benefit and only then being subject to the dual entitlement rule. In addition, the \"restricted application\" and \"file and suspend\" options were being used in combination by some married couples, for example, to allow both members of the couple to maximize their own retired-worker benefit (through the accrual of DRCs) and to allow one member of the couple to receive full spousal benefits at the same time (by avoiding the dual entitlement rule). In July 2015, the Social Security Board of Trustees (the Trustees) released projections showing that the asset reserves held by the DI trust fund would be depleted by the end of calendar year 2016; had this occurred, Social Security would have been unable to pay disability benefits in full and on time from that point forward. Section 833 of P.L. 114-74 provided a temporary reallocation of the Social Security payroll tax rate between the OASI and DI trust funds, directing a larger share of total payroll tax revenues to the DI trust fund over a three-year period (2016 through 2018). Updated projections following enactment of P.L. 114-74 show that the reallocation extends DI trust fund solvency from the end of calendar year 2016 to c alendar year 202 3 . The reallocation did not change the year of projected reserve depletion for the OASI trust fund; it is projected to remain solvent until calendar year 2035. P.L. 114-74 also contained a number of other provisions designed to address fraud and other program integrity issues in SSA's disability programs. On March 4, 2015, Representative Patrick Meehan (PA) introduced H.R. 1314 , the Ensuring Tax Exempt Organizations the Right to Appeal Act. At the time, the bill contained no Social Security provisions. The bill was approved by the House on April 15, 2015, and was moved to the Senate. On May 22, 2015, the Senate passed H.R. 1314 , with an amendment in the nature of a substitute, and it was now known as the Trade Act of 2015. After attempts by the House to resolve differences with the Senate amendment (which still did not contain Social Security provisions), the Trade Act of 2015 was tabled on June 25, 2015. On October 28, 2015, the House reported an amendment to the Senate amendment of H.R. 1314 , now titled the Bipartisan Budget Act of 2015. The version of H.R. 1314 reported in the House amendment included the Social Security tax rate reallocation and the unrelated provisions mentioned above. Details of congressional action prior to the bill being renamed the Bipartisan Budget Act of 2015 are not reflected in this report. On October 28, 2015, the House adopted their amendment to H.R. 1314 , as amended by the Senate, by a vote of 266 (187-D, 79-R) to 167 (167-R). On October 30, 2015, the Senate agreed to the House amendment to the Senate amendment to H.R. 1314 by a vote of 64 (44-D, 18-R, 2-I) to 35 (35-R). President Donald Trump signed H.J.Res . 40 on February 28, 2017. Under the Congressional Review Act, the law nullified the \"Implementation of the NICS Improvement Amendments Act of 2007\" rule which was finalized by the SSA on December 19, 2016, and had been scheduled to be implemented as of January 18, 2017. The final rule would have required the SSA to send the names of individuals meeting certain criteria to the National Instant Criminal History Background Check System. The criteria included individuals who received benefit payments through a representative payee because they had been determined to be mentally incapable of managing benefit payments on their own. The proposed rule received over 90,000 comments. This law vacated the SSA final rule. It also barred the SSA from issuing any future rule that would be \"substantially the same\" as the vacated rule unless the agency received a new statutory authorization to do so. In the retraction of the rule, SSA notes that, \"Although the final rule had an effective date of January 18, 2017, we delayed the compliance date of the rule until December 19, 2017 (81 FR at 91720). Therefore, we did not report any records to the National Instant Criminal Background Check System (NICS) pursuant to the final rule.\" H.J.Res . 40 was i ntroduced by Representative Sam Johnson (R-TX) on January 30, 2017, and the House debated the joint resolution on February 2, 2017 . Members raised multiple issues, including the concern that the SSA rule stigmatized those with mental health issues or intellectual disabilities. They cited letters from several advocacy groups, as well as a letter from the National Council on Disability favoring the joint resolution. Representatives voicing opposition to the joint resolution cited several factors including that the SSA final rule only impacted a small subset of beneficiaries and that the joint resolution disregarded the decisionmaking processes of the agency. At the conclusion of debate, the resolution was passed by a voice vote. A recorded vote occurred later that afternoon, and H.J.Res . 40 was passed by a vote of 235 (R-229, D-6) to 180 (R-2, D-178). On February 15, 2017, H.J.Res . 40 was passed by the Senate without amendment by a vote of 57 (R-52, D-4, I-1) to 43 (D-42, I-1). President Donald Trump signed H.R. 624 , the Social Security Number Fraud Prevention Act of 2017, on September 15, 2017. The law included several provisions to limit federal agencies from including an individual's SSN on documents sent by mail. It requires the head of each CFO (chief financial officer) Act agency to issue regulations no later than five years after enactment, which specify the circumstances under which a Social Security number would be necessary to include on a document sent by mail. In addition, it stipulates that each agency must issue several reports demonstrating the agency's progress in removing the SSN from agency documents. The final report would list any remaining documents produced by the CFO Act agency that continued to include an SSN. H.R. 624 was introduced by Representative David G. Valadao (R-CA) on January 24, 2017. The Committee on Oversight and Government Reform adopted, by voice vote, a substitute amendment extending the deadline for issuing regulations from one year to five years on February 14, 2017. The House approved the bill, as amended, under suspension of the rules by a voice vote on May 24, 2017. On September 6, 2017, H.R. 624 was passed by the Senate without amendment by unanimous consent. President Donald Trump signed H.R. 4547 on April 13, 2018. The law amended Titles II, VIII, and XVI of the Social Security Act. It was designed to increase oversight of representative payees and protect vulnerable beneficiaries. The law required the SSA to make annual grants to each state's protection and advocacy system for the purpose of conducting reviews of representative payees under the Supplemental Security Income (SSI) program and the Old-Age, Survivors, and Disability Insurance (OASDI) program. Impetus for this law came as details emerged of significant cases of abuse by representative payees. In one case, reported by the SSA's Office of Inspector General, a woman in Philadelphia imprisoned mentally ill adults and confiscated their Social Security benefits by identifying herself as their representative payee. This case, and similar ones, led to the publication of two reports by the Social Security Advisory Board: Representative Payees: A Call to Action (2016) and Improving Social Security's Representative Payee Program (2018). The GAO also published a report, SSA Representative Payee Program: Addressing Long-Term Challenges Requires a More Strategic Approach (2013). The Social Security Subcommittee of the House Committee on Ways and Means held hearings in 2017 on the representative payee program, including Examining the Social Security Administration's Representative Payee Program: Determining Who Needs Help on February 7, 2017, and Examining the Social Security Administration's Representative Payee Program: Who Provides Help on March 22, 2017. P.L. 115-165 included a provision designed to enhance personal control by allowing beneficiaries to designate their preferred payee in advance. It directed SSA to take a greater role in assessing the appropriateness of representative payees, and banned individuals with certain criminal convictions from serving as payees. In addition, it prohibited individuals who have a payee from serving as a payee for others. H.R. 4547 was introduced on December 5, 2017, by Representative Sam Johnson (R-TX). It was referred to the House Committee on Ways and Means. On February 5, 2018, the House moved to suspend the rules and passed H.R. 4547 , as amended, by a vote of 396 (225-R, 171-D) to 0. On March 23, 2018, the Senate passed the House bill without amendment by unanimous consent. President Donald Trump signed H.R. 6124 , the Tribal Social Security Fairness Act of 2018, on September 20, 2018. The law amended Title II of the Social Security Act and directed the SSA to extend Old-Age, Survivors and Disability Insurance benefits to tribal council leaders, if requested to do so by an Indian tribe. The law also allowed tribal council members to receive Social Security credit for taxes paid prior to the establishment of the agreement, if taxes were paid in good faith and not subsequently refunded. It reversed an SSA policy that prevented tribal leaders from being covered under the Social Security program. H.R. 6124 was introduced by Representative Dave Reichert (R-WA) on June 15, 2018. An amendment in the nature of a substitute was presented in the Committee on Ways and Means by Representative Kevin Brady (R-TX). The substitute amendment was adopted by a voice vote in committee on June 21, 2018. H.R. 6124 , as amended, was considered by the House under suspension of the rules and passed by a voice vote on July 24, 2018. On September 6, 2018, the House bill passed the Senate without amendment by unanimous consent. President Donald Trump signed S. 2155 , the Economic Growth, Regulatory Relief, and Consumer Protection Act, on May 24, 2018. Section 215 required SSA to accept the electronic signature of an individual who consents to allow a financial institution to verify his or her name, date of birth, and Social Security number using SSA's Consent Based Social Security Number Verification (CBSV) Service. Some identity thieves use a technique called synthetic identity theft in which they apply for credit using a mixture of real, verifiable information of an existing person with fictitious information, thus creating a \"synthetic\" identity. Often the information includes real SSNs of people who are unlikely to have existing credit files, such as children or recent immigrants. The SSA Consent-Based Social Security Number Verification Service was created to fight identity fraud such as this, but prior to the enactment of P.L. 115-174 it required financial institutions to obtain a physical written signature to make a verification request. Some observers believed this requirement was outdated and time consuming, undermining the effectiveness of the program. Section 215 aimed to modernize SSA's verification system and make it more efficient by allowing the use of electronic signatures. Section 215 directed the SSA to allow certain financial institutions to receive customers' consent by electronic signature to verify their name, date of birth, and Social Security number with SSA. In addition, the section directed SSA to modify their databases and systems to allow financial institutions to electronically and quickly request and receive accurate verification of the consumer data. Senator Mike Crapo introduced S. 2155 on November 16, 2017. As introduced, the bill did not include any Social Security provisions. S.Amdt. 2151 , an amendment in the nature of a substitute, which included the Social Security provisions in Section 215, was offered on the Senate floor on March 7, 2018. During floor debate, Senator Tim Scott identified himself as the author of the provisions in Section 215. Senator Scott explained that the purpose of Section 215 was to reduce synthetic identity theft by providing options for entities to crosscheck consumer information with the SSA. Senator Scott also expressed his expectation that the database that SSA would create to allow this cross check to occur would be operational within one year of enactment. S.Amdt. 2151 , as modified, passed the Senate by a roll call vote of 67 (R-50, D-16, I-1) to 31(D-30, I-1) on March 14, 2018. On May 22, 2018, the House passed the Senate version of the bill in a roll call vote of 258 (R-225, D-33) to 159 (R-1, D-158).", "summary": "The Social Security program, enacted in 1935, has been amended numerous times. Lists and summaries of individual major Social Security amendments may illuminate the tone and context of the debate of the program in the House and Senate. Major statutory decisions made by Congress on the Social Security program, vote information, summaries of major legislative actions, and descriptions of floor amendments and congressional debate may be informative to current discussions of the Social Security program. During the 115th Congress, lawmakers enacted several pieces of Social Security legislation that included the following: P.L. 115-59, the Social Security Number Fraud Prevention Act of 2017, which restricted federal agencies from including any individual's Social Security number (SSN) on documents sent by mail; P.L. 115-165, the Strengthening Protections for Social Security Beneficiaries Act of 2018, which made a variety of changes to the Social Security Administration's (SSA's) representative payee program; P.L. 115-243, the Tribal Social Security Fairness Act of 2018, which allowed federally recognized Indian tribes to enter into voluntary agreements with SSA to extend Social Security coverage to tribal council members; and P.L. 115-174, the Economic Growth, Regulatory Relief and Consumer Protection Act, which required SSA to accept electronic signatures of individuals who consent to allow a financial institution to verify their name, SSN, and date of birth with the information contained in SSA's records.", "document_type": "crs"}
{"report": "The Federal Reserve's (the Fed's) responsibilities as the nation's central bank fall into four main categories: monetary policy, provision of emergency liquidity through the lender of last resort function, supervision of certain types of banks and other financial firms for safety and soundness, and provision of payment system services to financial firms and the government. Congress has delegated responsibility for monetary policy to the Fed, but retains oversight responsibilities to ensure that the Fed is adhering to its statutory mandate of \"maximum employment, stable prices, and moderate long-term interest rates.\" The Fed has defined stable prices as a longer-run goal of 2% inflation—the change in overall prices, as measured by the Personal Consumption Expenditures (PCE) price index. By contrast, the Fed states that \"it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision.\" Monetary policy can be used to stabilize business cycle fluctuations (alternating periods of economic expansions and recessions) in the short run, while it mainly affects inflation in the long run. The Fed's conventional tool for monetary policy is to target the federal funds rate —the overnight, interbank lending rate. This report provides an overview of how monetary policy works and recent developments, a summary of the Fed's actions following the financial crisis, and ends with a brief overview of the Fed's regulatory responsibilities. In December 2008, in the midst of the financial crisis and the \"Great Recession,\" the Fed lowered the federal funds rate to a range of 0% to 0.25%. This was the first time rates were ever lowered to what is referred to as the zero lower bound . The recession ended in 2009, but as the economic recovery consistently proved weaker than expected in the years that followed, the Fed repeatedly pushed back its time frame for raising interest rates. As a result, the economic expansion was in its seventh year and the unemployment rate was already near the Fed's estimate of full employment when it began raising rates on December 16, 2015. This was a departure from past practice—in the previous two economic expansions, the Fed began raising rates within three years of the preceding recession ending. Since then, the Fed has continued to raise rates in a series of steps to incrementally tighten monetary policy. The Fed raised rates once in 2016, three times in 2017, and four times in 2018, by 0.25 percentage points each time. The Fed has stated that \"some further gradual increases in ... the federal funds rate\" are necessary to fulfill its mandate. The Fed describes its plans as \"data dependent,\" meaning they would be altered if actual employment or inflation deviate from its forecast. Although monetary policy is now less stimulative than it had been at the zero lower bound, the Fed is still adding stimulus to the economy as long as the federal funds rate is below what economists call the \"neutral rate\" (or the long-run equilibrium rate). To illustrate, the federal funds rate is currently similar to the inflation rate, meaning that the real (i.e., inflation-adjusted) federal funds rate is around zero. However, there is uncertainty as to what constitutes a neutral rate today. By historical standards, a zero real interest rate would be well below the neutral rate, but the neutral rate appears to have fallen following the financial crisis, so that current rates may be close to the neutral rate today. Typically, the Fed keeps interest rates below the neutral rate when the economy is operating below full employment, at neutral levels when the economy is near full employment, and above the neutral rate when the economy is at risk of overheating. Indeed, the Fed identifies this as one of its \"three key principles of good monetary policy.\" Because of lags between changes in interest rates and their economic effects, in the past, the Fed has often preemptively changed its monetary policy stance before the economy reaches the state that the Fed is anticipating. In this business cycle, the Fed has maintained a (progressively less) stimulative monetary policy throughout the expansion, boosting economic activity. In one sense, this policy could be viewed as having successfully delivered on the Fed's mandated goals of full employment and stable prices. The unemployment rate has been below 5% since 2015 and is now lower than the rate believed to be consistent with full employment. Other labor market measures are also consistent with full employment, with the possible exception of the still-low labor force participation rate. Economic theory posits that lower unemployment will lead to higher inflation in the short run, but inflation has not proven responsive to lower unemployment in recent years. After remaining persistently below the Fed's 2% target from mid-2012 to early 2018 as measured by core PCE, inflation has remained around 2% in 2018 as measured by headline or core PCE. Economic growth has also picked up beginning in the second quarter of 2017, after being persistently low by historical standards throughout the expansion. Contributing to the 2018 growth acceleration, a more expansionary fiscal policy (larger structural budget deficit) added more stimulus to the economy in the short run. Two notable policy changes contributing to fiscal stimulus in 2018 were the 2017 tax cuts ( P.L. 115-97 ) and the boost to discretionary spending in FY2018 and FY2019 agreed to in P.L. 115-123 . The Fed did little to offset this fiscal stimulus, as the pace of monetary tightening in 2018 was only slightly faster than in 2017. Despite strong economic data (which is only available with a lag), the Fed announced in January 2019 that it would be \"patient\" before raising rates again in light of increased economic uncertainty and financial volatility. The Fed's intended policy path poses risks. If the Fed waits too long to raise rates again, the economy could overheat, resulting in high inflation and posing risk to financial stability. As an example of how overly stimulative monetary policy can lead to the latter, critics contend that the Fed contributed to the precrisis housing bubble by keeping interest rates too low for too long during the economic recovery starting in 2001. Critics see these risks as outweighing any marginal benefit associated with monetary stimulus when the economy is already so close to full employment. Raising rates more quickly would also provide more \"headroom\" for the Fed to lower rates more aggressively during the next economic downturn. The potential percentage point reduction in rates before hitting the zero bound is currently smaller than the rate cuts that the Fed has undertaken in past recessions. Alternatively, there is uncertainty about whether strong growth, low unemployment, inflation around 2%, and the generally benign economic environment will continue. Economic expansions do not \"die of old age\"; nevertheless, the current expansion is already the second longest on record and cannot last forever. The flattening of the yield curve (i.e., long-term Treasury yields are similar to short-term Treasury yields) is seen by some as a warning signal that rates are too high. Although there is a risk of stimulative monetary policy causing the economy to overheat, there is also a risk that tightening too quickly could be harmful if the economy slows. Some critics would prefer clear evidence that inflation is above the Fed's target or financial conditions are unstable before the Fed raises rates again. Monetary policy refers to the actions the Fed undertakes to influence the availability and cost of money and credit to promote the goals mandated by Congress, a stable price level and maximum sustainable employment. Because the expectations of households as consumers and businesses as purchasers of capital goods exert an important influence on the major portion of spending in the United States, and because these expectations are influenced in important ways by the Fed's actions, a broader definition of monetary policy would include the directives, policies, statements, economic forecasts, and other Fed actions, especially those made by or associated with the chairman of its Board of Governors, who is the nation's central banker. The Fed's Federal Open Market Committee (FOMC) meets every six weeks to choose a federal funds target and sometimes meets on an ad hoc basis if it wants to change the target between regularly scheduled meetings. The FOMC is composed of the 7 Fed governors, the President of the Federal Reserve Bank of New York, and 4 of the other 11 regional Federal Reserve Bank presidents serving on a rotating basis. The Fed targets the federal funds rate to carry out monetary policy. The federal funds rate is determined in the private market for overnight reserves of depository institutions (called the federal funds market). At the end of a given period, usually a day, depository institutions must calculate how many dollars of reserves they want or need to hold against their reservable liabilities (deposits). Some institutions may discover a reserve shortage (too few reservable assets relative to those they want to hold), whereas others may have reservable assets in excess of their wants. These reserves can be borrowed and lent on an overnight basis in a private market called the federal funds market. The interest rate in this market is called the federal funds rate. If it wishes to expand money and credit, the Fed will lower the target, which encourages more lending activity and, thus, greater demand in the economy. Conversely, if it wishes to tighten money and credit, the Fed will raise the target. The federal funds rate is linked to the interest rates that banks and other financial institutions charge for loans. Thus, whereas the Fed may directly influence only a very short-term interest rate, this rate influences other longer-term rates. However, this relationship is far from being on a one-to-one basis because longer-term market rates are influenced not only by what the Fed is doing today, but also by what it is expected to do in the future and by what inflation is expected to be in the future. This fact highlights the importance of expectations in explaining market interest rates. For that reason, a growing body of literature urges the Fed to be very transparent in explaining what its policy is, will be, and in making a commitment to adhere to that policy. The Fed has responded to this literature and is increasingly transparent in explaining its policy measures and what these measures are expected to accomplish. The Federal Reserve uses two methods to maintain its target for the federal funds rate: The Fed can also change the federal funds rate by changing reserve requirements, which specify what portion of customer deposits (primarily checking accounts) banks must hold as vault cash or on deposit at the Fed. Thus, reserve requirements affect the liquidity available within the federal funds market. Statute sets the numerical levels of reserve requirements, although the Fed has some discretion to adjust them. Currently, banks are required to hold 0% to 10% of customer deposits that qualify as net transaction accounts in reserves, depending on the size of the bank's deposits. This tool is used rarely—the percentage was last changed in 1992. Each of these tools works by altering the overall liquidity available for use by the banking system, which influences the amount of assets these institutions can acquire. These assets are often called credit because they represent loans the institutions have made to businesses and households, among others. The Fed's control over monetary policy stems from its exclusive ability to alter the money supply and credit conditions more broadly. The Fed directly controls the monetary base , which is made up of currency (Federal Reserve notes) and bank reserves. The size of the monetary base, in turn, influences broader measures of the money supply, which include close substitutes to currency, such as demand deposits (e.g., checking accounts) held at banks. The Fed's definition of monetary policy as the actions it undertakes to influence the availability and cost of money and credit suggests two ways to measure the stance of monetary policy. One is to look at the cost of money and credit as measured by the rate of interest relative to inflation (or inflation projections), and the other is to look at the growth of money and credit itself. Thus, it is possible to look at either interest rates or the growth in the supply of money and credit in coming to a conclusion about the current stance of monetary policy—that is, whether it is expansionary (adding stimulus to the economy), contractionary (slowing economic activity), or neutral. During the high inflation experience of the 1970s the Fed placed greater emphasis on money supply growth, but since then, most central banks including the Fed have preferred to formulate monetary policy in terms of the cost of money and credit rather than in terms of their supply. The Fed conducts monetary policy by focusing on the cost of money and credit as proxied by the federal funds rate. A simple comparison of market interest rates over time as an indicator of changes in the stance of monetary policy is potentially misleading, however. Economists call the interest rate that is essential to decisions made by households and businesses to buy capital goods the real interest rate. It is often proxied by subtracting from the market interest rate the actual or expected rate of inflation. If inflation rises and market interest rates remain the same, then real interest rates have fallen, with a similar economic effect as if market rates (called nominal rates) had fallen by the same amount with a constant inflation rate. The federal funds rate is only one of the many interest rates in the financial system that determines economic activity. For these other rates, the real rate is largely independent of the amount of money and credit over the longer run because it is determined by the interaction of saving and investment (or the demand for capital goods). The internationalization of capital markets means that for most developed countries the relevant interaction between saving and investment that determines the real interest rate is on a global basis. Thus, real rates in the United States depend not only on U.S. national saving and investment but also on the saving and investment of other countries. For that reason, national interest rates are influenced by international credit conditions and business cycles. How do changes in short-term interest rates affect the overall economy? In the short run, an expansionary monetary policy that reduces interest rates increases interest-sensitive spending, all else equal. Interest-sensitive spending includes physical investment (i.e., plant and equipment) by firms, residential investment (housing construction), and consumer-durable spending (e.g., automobiles and appliances) by households. As discussed in the next section, it also encourages exchange rate depreciation that causes exports to rise and imports to fall, all else equal. To reduce spending in the economy, the Fed raises interest rates and the process works in reverse. An examination of U.S. economic history will show that money- and credit-induced demand expansions can have a positive effect on U.S. GDP growth and total employment. The extent to which greater interest-sensitive spending results in an increase in overall spending in the economy in the short run will depend in part on how close the economy is to full employment. When the economy is near full employment, the increase in spending is likely to be dissipated through higher inflation more quickly. When the economy is far below full employment, inflationary pressures are more likely to be muted. This same history, however, also suggests that over the longer run, a more rapid rate of growth of money and credit is largely dissipated in a more rapid rate of inflation with little, if any, lasting effect on real GDP and employment. Economists have two explanations for this paradoxical behavior. First, they note that, in the short run, many economies have an elaborate system of contracts (both implicit and explicit) that makes it difficult in a short period for significant adjustments to take place in wages and prices in response to a more rapid growth of money and credit. Second, they note that expectations for one reason or another are slow to adjust to the longer-run consequences of major changes in monetary policy. This slow adjustment also adds rigidities to wages and prices. Because of these rigidities, changes in the growth of money and credit that change aggregate demand can have a large initial effect on output and employment, albeit with a policy lag of six to eight quarters before the broader economy fully responds to monetary policy measures. Over the longer run, as contracts are renegotiated and expectations adjust, wages and prices rise in response to the change in demand and much of the change in output and employment is undone. Thus, monetary policy can matter in the short run but be fairly neutral for GDP growth and employment in the longer run. In societies in which high rates of inflation are endemic, price adjustments are very rapid. During the final stages of very rapid inflations, called hyperinflation, the ability of more rapid rates of growth of money and credit to alter GDP growth and employment is virtually nonexistent, if not negative. Either fiscal policy (defined here as changes in the structural budget deficit, caused by policy changes to government spending or taxes) or monetary policy can be used to alter overall spending in the economy. However, there are several important differences to consider between the two. First, economic conditions change rapidly, and in practice monetary policy can be more nimble than fiscal policy. The Fed meets every six weeks to consider changes in interest rates and can call an unscheduled meeting any time. Large changes to fiscal policy typically occur once a year at most. Once a decision to alter fiscal policy has been made, the proposal must travel through a long and arduous legislative process that can last months before it can become law, whereas monetary policy changes are made instantly. Both monetary and fiscal policy measures are thought to take more than a year to achieve their full impact on the economy due to pipeline effects. In the case of monetary policy, interest rates throughout the economy may change rapidly, but it takes longer for economic actors to change their spending patterns in response. For example, in response to a lower interest rate, a business must put together a loan proposal, apply for a loan, receive approval for the loan, and then put the funds to use. In the case of fiscal policy, once legislation has been enacted, it may take some time for authorized spending to be outlayed. An agency must approve projects and select and negotiate with contractors before funds can be released. In the case of transfers or tax cuts, recipients must receive the funds and then alter their private spending patterns before the economy-wide effects are felt. For both monetary and fiscal policy, further rounds of private and public decisionmaking must occur before multiplier or ripple effects are fully felt. Second, monetary policy is determined based only on the Fed's mandate, whereas fiscal policy is determined based on competing political goals. Fiscal policy changes have macroeconomic implications regardless of whether that was policymakers' primary intent. Political constraints have prevented increases in budget deficits from being fully reversed during expansions. Over the course of the business cycle, aggregate spending in the economy can be expected to be too high as often as it is too low. This means that stabilization policy should be tightened as often as it is loosened, yet increasing the budget deficit has proven to be much more popular than implementing the spending cuts or tax increases necessary to reduce it. As a result, the budget has been in deficit in all but five years since 1961, which has led to an accumulation of federal debt that gives policymakers less leeway to potentially undertake a robust expansionary fiscal policy, if needed, in the future. By contrast, the Fed is more insulated from political pressures, as discussed in the previous section, and experience shows that it is willing to raise or lower interest rates. Third, the long-run consequences of fiscal and monetary policy differ. Expansionary fiscal policy creates federal debt that must be serviced by future generations. Some of this debt will be \"owed to ourselves,\" but some (presently, about half) will be owed to foreigners. To the extent that expansionary fiscal policy crowds out private investment, it leaves future national income lower than it otherwise would have been. Monetary policy does not have this effect on generational equity, although different levels of interest rates will affect borrowers and lenders differently. Furthermore, the government faces a budget constraint that limits the scope of expansionary fiscal policy—it can only issue debt as long as investors believe the debt will be honored, even if economic conditions require larger deficits to restore equilibrium. Fourth, openness of an economy to highly mobile capital flows changes the relative effectiveness of fiscal and monetary policy. Expansionary fiscal policy would be expected to lead to higher interest rates, all else equal, which would attract foreign capital looking for a higher rate of return, causing the value of the dollar to rise. Foreign capital can only enter the United States on net through a trade deficit. Thus, higher foreign capital inflows lead to higher imports, which reduce spending on domestically produced substitutes and lower spending on exports. The increase in the trade deficit would cancel out the expansionary effects of the increase in the budget deficit to some extent (in theory, entirely if capital is perfectly mobile). Expansionary monetary policy would have the opposite effect—lower interest rates would cause capital to flow abroad in search of higher rates of return elsewhere, causing the value of the dollar to fall. Foreign capital outflows would reduce the trade deficit through an increase in spending on exports and domestically produced import substitutes. Thus, foreign capital flows would (tend to) magnify the expansionary effects of monetary policy. Fifth, fiscal policy can be targeted to specific recipients. In the case of normal open market operations, monetary policy cannot. This difference could be considered an advantage or a disadvantage. On the one hand, policymakers could target stimulus to aid the sectors of the economy most in need or most likely to respond positively to stimulus. On the other hand, stimulus could be allocated on the basis of political or other noneconomic factors that reduce the macroeconomic effectiveness of the stimulus. As a result, both fiscal and monetary policy have distributional implications, but the latter's are largely incidental whereas the former's can be explicitly chosen. In cases in which economic activity is extremely depressed, monetary policy may lose some of its effectiveness. When interest rates become extremely low, interest-sensitive spending may no longer be very responsive to further rate cuts. Furthermore, interest rates cannot be lowered below zero so traditional monetary policy is limited by this \"zero lower bound.\" In this scenario, fiscal policy may be more effective. As is discussed in the next section, some argue that the U.S. economy experienced this scenario following the recent financial crisis. Of course, using monetary and fiscal policy to stabilize the economy are not mutually exclusive policy options. But because of the Fed's independence from Congress and the Administration, the two policy options are not always coordinated. If Congress and the Fed were to choose compatible fiscal and monetary policies, respectively, then the economic effects would be more powerful than if either policy were implemented in isolation. For example, if stimulative monetary and fiscal policies were implemented, the resulting economic stimulus would be larger than if one policy were stimulative and the other were neutral. Alternatively, if Congress and the Fed were to select incompatible policies, these policies could partially negate each other. For example, a stimulative fiscal policy and contractionary monetary policy may end up having little net effect on aggregate demand (although there may be considerable distributional effects). Thus, when fiscal and monetary policymakers disagree in the current system, they can potentially choose policies with the intent of offsetting each other's actions. Whether this arrangement is better or worse for the economy depends on what policies are chosen. If one actor chooses inappropriate policies, then the lack of coordination allows the other actor to try to negate its effects. When the United States experienced the worst financial crisis since the Great Depression, the Fed undertook increasingly unprecedented steps in an attempt to restore financial stability. These steps included reducing the federal funds rate to the zero lower bound, providing direct financial assistance to financial firms, and \"quantitative easing.\" These unconventional policy decisions continue to have consequences for monetary policy today, as the Fed embarks on monetary policy \"normalization.\" The bursting of the housing bubble led to the onset of a financial crisis that affected both depository institutions and other segments of the financial sector involved with housing finance. As the delinquency rates on home mortgages rose to record numbers, financial firms exposed to the mortgage market suffered capital losses and lost access to liquidity. The contagious nature of this development was soon obvious as other types of loans and credit became adversely affected. This, in turn, spilled over into the broader economy, as the lack of credit soon had a negative effect on both production and aggregate demand. In December 2007, the economy entered a recession. As the housing slump's spillover effects to the financial system, as well as its international scope, became apparent, the Fed responded by reducing the federal funds target and the discount rate. Beginning on September 18, 2007, and ending on December 16, 2008, the federal funds target was reduced from 5.25% to a range between 0% and 0.25%, where it remained until December 2015. Economists call this the zero lower bound to signify that once the federal funds rate is lowered to zero, conventional open market operations cannot be used to provide further stimulus. The Fed attempted to achieve additional monetary stimulus at the zero bound through a pledge to keep the federal funds rate low for an extended period of time, which has been called forward guidance or forward commitment . The decision to maintain a target interest rate near zero was unprecedented. First, short-term interest rates have never before been reduced to zero in the history of the Federal Reserve. Second, the Fed waited much longer than usual to begin tightening monetary policy in the current recovery. For example, in the previous two expansions, the Fed began raising rates less than three years after the preceding recession ended. With liquidity problems persisting as the federal funds rate was reduced, it appeared that the traditional transmission mechanism linking monetary policy to activity in the broader economy was not working. Monetary authorities became concerned that the liquidity provided to the banking system was not reaching other parts of the financial system. As noted above, using only traditional monetary policy tools, additional monetary stimulus cannot be provided once the federal funds rate has reached its zero bound. To circumvent this problem, the Fed decided to use nontraditional methods to provide additional monetary policy stimulus. First, the Federal Reserve introduced a number of emergency credit facilities to provide increased liquidity directly to financial firms and markets. The first facility was introduced in December 2007, and several were added after the worsening of the crisis in September 2008. These facilities were designed to fill perceived gaps between open market operations and the discount window, and most of them were designed to provide short-term loans backed by collateral that exceeded the value of the loan. A number of the recipients were nonbanks that are outside the regulatory umbrella of the Federal Reserve; this marked the first time that the Fed had lent to nonbanks since the Great Depression. The Fed authorized these actions under Section 13(3) of the Federal Reserve Act, a seldom-used emergency provision that allowed it to extend credit to nonbank financial institutions and to nonfinancial firms as well. The Fed provided assistance through liquidity facilities, which included both the traditional discount window and the newly created emergency facilities mentioned above, and through direct support to prevent the failure of two specific institutions, American International Group (AIG) and Bear Stearns. The amount of assistance provided was an order of magnitude larger than normal Fed lending, as shown in Figure 1 . Total assistance from the Federal Reserve at the beginning of August 2007 was approximately $234 million provided through liquidity facilities, with no direct support given. In mid-December 2008, this number reached a high of $1.6 trillion, with a near-high of $108 billion given in direct support. From that point on, it fell steadily. Assistance provided through liquidity facilities fell below $100 billion in February 2010, when many facilities were allowed to expire, and support to specific institutions fell below $100 billion in January 2011. The last loan from the crisis was repaid on October 29, 2014. Central bank liquidity swaps (temporary currency exchanges between the Fed and central foreign banks) are the only facility created during the crisis still active, but they have not been used on a large scale since 2012. All assistance through expired facilities has been fully repaid with interest. In 2010, the Dodd-Frank Act changed Section 13(3) to rule out direct support to specific institutions in the future. From the introduction of its first emergency lending facility in December 2007 to the worsening of the crisis in September 2008, the Fed sterilized the effects of lending on its balance sheet (i.e., prevented the balance sheet from growing) by selling an offsetting amount of Treasury securities. After September 2008, assistance exceeded remaining Treasury holdings, and the Fed allowed its balance sheet to grow. Between September 2008 and November 2008, the Fed's balance sheet more than doubled in size, increasing from less than $1 trillion to more than $2 trillion. The loans and other assistance provided by the Federal Reserve to banks and nonbank institutions are considered assets on this balance sheet because they represent money owed to the Fed. With the federal funds rate at its zero bound and direct lending falling as financial conditions began to normalize in 2009, the Fed faced the decision of whether to try to provide additional monetary stimulus through unconventional measures. It did so through two unconventional tools—large-scale asset purchases (quantitative easing) and forward guidance. With short-term rates constrained by the zero bound, the Fed hoped to reduce long-term rates through large-scale asset purchases, which were popularly referred to as quantitative easing (QE). Between 2009 and 2014, the Fed undertook three rounds of QE, buying U.S. Treasury securities, agency debt, and agency mortgage-backed securities (MBS). These securities now comprise most of the assets on the Fed's balance sheet. To understand the effect of quantitative easing on the economy, it is first necessary to describe its effect on the Fed's balance sheet. In 2009, the Fed's emergency lending declined rapidly as market conditions stabilized, which would have caused the balance sheet to decline if the Fed took no other action. Instead, asset purchases under the first round of QE (QE1) offset the decline in lending, and from November 2008 to November 2010, the overall size of the Fed's balance sheet did not vary by much. Its composition changed because of QE1, however—the amount of Fed loans outstanding fell to less than $50 billion at the end of 2010, whereas holdings of securities rose from less than $500 billion in November 2008 to more than $2 trillion in November 2010. The second round of QE, QE2, increased the Fed's balance sheet from $2.3 trillion in November 2010 to $2.9 trillion in mid-2011. It remained around that level until September 2012, when it began rising for the duration of the third round, QE3. It was about $4.5 trillion (comprised of $2.5 trillion of Treasury securities, $1.7 trillion MBS, and $0.4 trillion of agency debt) when QE3 ended in October 2014, and has remained at that level since. Table 1 summarizes the Fed's QE purchases. In total, the Fed's balance sheet increased by more than $2.5 trillion over the course of the three rounds of QE, making it about five times larger than it was before the crisis. This increase in the Fed's assets must be matched by a corresponding increase in the liabilities on its balance sheet. The Fed's liabilities mostly take the form of currency, bank reserves, and cash deposited by the U.S. Treasury at the Fed. QE has mainly resulted in an increase in bank reserves, from about $46 billion in August 2008 to $820 billion at the end of 2008. Since October 2009, bank reserves have exceeded $1 trillion, and they have been between $2.5 trillion and $2.8 trillion since 2014. The increase in bank reserves can be seen as the inevitable outcome of the increase in assets held by the Fed because the bank reserves, in effect, financed the Fed's asset purchases and loan programs. Reserves increase because when the Fed makes loans or purchases assets, it credits the proceeds to the recipients' reserve accounts at the Fed. The intended purpose of QE was to put downward pressure on long-term interest rates. Purchasing long-term Treasury securities and MBS should directly reduce the rates on those securities, all else equal. The hope is that a reduction in those rates feeds through to private borrowing rates throughout the economy, stimulating spending on interest-sensitive consumer durables, housing, and business investment in plant and equipment. Indeed, Treasury and mortgage rates have been unusually low since the crisis compared with the past few decades, although the timing of declines in those rates does not match up closely to the timing of asset purchases. Determining whether QE reduced rates more broadly and stimulated interest-sensitive spending requires controlling for other factors, such as the weak economy, which tends to reduce both rates and interest-sensitive spending. The increase in the Fed's balance sheet has the potential to be inflationary because bank reserves are a component of the portion of the money supply controlled by the Fed (called the monetary base ), which grew at an unprecedented pace during QE. In practice, overall measures of the money supply have not grown as quickly as the monetary base, and inflation has remained below the Fed's goal of 2% for most of the period since 2008. The growth in the monetary base has not translated into higher inflation because bank reserves have mostly remained deposited at the Fed and have not led to increased lending or asset purchases by banks. Another concern is that by holding large amounts of MBS, the Fed is allocating credit to the housing sector, putting the rest of the economy at a disadvantage compared with that sector. Advocates of MBS purchases note that housing was the sector of the economy most in need of stabilization, given the nature of the crisis (this argument becomes less persuasive as the housing market continues to rebound); that MBS markets are more liquid than most alternatives, limiting the potential for the Fed's purchases to be disruptive; and that the Fed is legally permitted to purchase few other assets, besides Treasury securities. On October 29, 2014, the Fed announced that it would stop making large-scale asset purchases at the end of the month. Now that QE is completed, attention has turned to the Fed's \"exit strategy\" from QE and zero interest rates. The Fed laid out its plans to normalize monetary policy in a statement in September 2014. It plans to continue implementing monetary policy by targeting the federal funds rate. The basic challenge to doing so is that the Fed cannot effectively alter the federal funds rate by altering reserve levels (as it did before the crisis) because QE has flooded the market with excess bank reserves. In other words, in the presence of more than $2 trillion in bank reserves, the market-clearing federal funds rate is close to zero even if the Fed would like it to be higher. The most straightforward way to return to normal monetary policy would be to remove those excess reserves by shrinking the balance sheet through asset sales. The Fed does not intend to sell any securities, however. Instead, it is gradually reducing the balance sheet by ceasing to roll over securities as they mature, which began in September 2017—almost three years after QE ended. Initially, it allowed only $6 billion of Treasuries and $4 billion of MBS to run off each month, which was gradually increased to $30 billion of Treasuries and $20 billion of MBS per month, where it will remain until normalization is completed. The Fed believes that it would only cease shrinking the balance sheet or use QE again in the future if it its ability to stimulate the economy using reductions in the federal funds rate were insufficient. The Fed intends to ultimately reduce the balance sheet until it holds \"no more securities than necessary to implement monetary policy efficiently and effectively.\" The Fed has stated that it foresees a balance sheet size that is consistent with this goal will be larger than it was before the crisis. In part, that is because other liabilities on the Fed's balance sheet are larger—there is more currency in circulation now than there was before the crisis, and the Treasury has kept larger balances on average in its account at the Fed. But the balance sheet will also be significantly larger because the Fed decided in January 2019 to continue using its new method of targeting the federal funds rate even after normalization is completed. Under the new method, the federal funds rate is not determined by supply and demand in the market for bank reserves, and the Fed would prefer to maintain abundant bank reserves so that it does not have to use open market operations to respond to changes in banks' demand for reserves. By contrast, if it went back to the pre-crisis method of targeting the federal funds rate, only minimal excess reserve balances would be necessary (but perhaps more than before the crisis), so its balance sheet could be much smaller. The Fed has not yet announced when the wind-down will be completed or how large the balance sheet would be upon completion, but the January 2019 FOMC minutes noted the wind-down could be completed as soon as this year. In that case, the balance sheet would not be much smaller than its current size of $4 trillion when normalization is completed—more than four times larger than its pre-crisis size. Although the Fed has stated that it intends to eventually stop holding MBS, the Fed would still have sizable MBS holdings in 2025, according to projections from the New York Fed. In order to raise the federal funds rate in the presence of large reserves, the Fed has raised the two market interest rates that are close substitutes—it has directly raised the rate it pays banks on reserves held at the Fed and used large-scale reverse repurchase agreements (repos) to alter repo rates. In 2008, Congress granted the Fed the authority to pay interest on reserves. Because banks can earn interest on excess reserves by lending them in the federal funds market or by depositing them at the Fed, raising the interest rate on bank reserves should also raise the federal funds rate. In this way, the Fed can lock up excess liquidity to avoid any potentially inflationary effects because reserves kept at the Fed cannot be put to use by banks to finance activity in the broader economy. In practice, the interest rate that the Fed has paid banks on reserves has been slightly higher than the federal funds rate, which some have criticized as a subsidy to banks. Reverse repos are another tool for draining liquidity from the system and influencing short-term market rates. They drain liquidity from the financial system because cash is transferred from market participants to the Fed. As a result, interest rates in the repo market, one of the largest short-term lending markets, rise. The Fed has long conducted open market operations through the repo market, but since 2013 it has engaged in a much larger volume of reverse repos with a broader range of nonbank counterparties, including the government-sponsored enterprises (such as Fannie Mae and Freddie Mac) and certain money market funds, through a new Overnight Reverse Repurchase Operations Facility. The Fed is currently not capping the amount of overnight reverse repos offered through this facility. There has been some concern about the potential ramifications of the Fed becoming a dominant participant in this market and expanding its counterparties. For example, will counterparties only be willing to transact with the Fed in a panic, and will the Fed be exposed to counterparty risk with nonbanks that it does not regulate? The Fed has distinct roles as a central bank and a regulator. Its main regulatory responsibilities are as follows: B ank regulation . The Fed supervises bank holding companies (BHCs) and thrift holding companies (THCs), which include all large and thousands of small depositories, for safety and soundness. The Dodd-Frank Act requires the Fed to subject BHCs with more than $50 billion in consolidated assets to enhanced prudential regulation (i.e., stricter standards than are applied to similar firms) in an effort to mitigate the systemic risk they pose. The Fed is also the prudential regulator of U.S. branches of foreign banks and state banks that have elected to become members of the Federal Reserve System. Often in concert with the other banking regulators, it promulgates rules and supervisory guidelines that apply to banks in areas such as capital adequacy, and examines depository firms under its supervision to ensure that those rules are being followed and those firms are conducting business prudently. The Fed's supervisory authority includes consumer protection for banks under its jurisdiction that have $10 billion or less in assets. P rudential regulat ion of nonbank systemically important financial institutions . The Dodd-Frank Act allows the Financial Stability Oversight Council (FSOC) to designate nonbank financial firms as systemically important (SIFIs). Designated firms are supervised by the Fed for safety and soundness. Since enactment, the number of designated firms has ranged from four, initially, to none today. R egulation of the payment system . The Fed regulates the retail and wholesale payment system for safety and soundness. It also operates parts of the payment system, such as interbank settlements and check clearing. The Dodd-Frank Act subjects payment, clearing, and settlement systems designated as systemically important by the FSOC to enhanced supervision by the Fed (along with the Securities and Exchange Commission and the Commodity Futures Trading Commission, depending on the type of system). M argin requirements . The Fed sets margin requirements on the purchases of certain securities, such as stocks, in certain private transactions. The purpose of margin requirements is to mandate what proportion of the purchase can be made on credit. The Fed attempts to mitigate systemic risk and prevent financial instability through these regulatory responsibilities, as well as through its lender of last resort activities and participation on the FSOC (whose mandate is to identify risks and respond to emerging threats to financial stability). The Fed has focused more on attempting to mitigate systemic risk through its regulations since the financial crisis, and has also restructured its internal operations to facilitate a macroprudential approach to supervision and regulation.", "summary": "Congress has delegated responsibility for monetary policy to the Federal Reserve (the Fed), the nation's central bank, but retains oversight responsibilities for ensuring that the Fed is adhering to its statutory mandate of \"maximum employment, stable prices, and moderate long-term interest rates.\" To meet its price stability mandate, the Fed has set a longer-run goal of 2% inflation. The Fed's control over monetary policy stems from its exclusive ability to alter the money supply and credit conditions more broadly. Normally, the Fed conducts monetary policy by setting a target for the federal funds rate, the rate at which banks borrow and lend reserves on an overnight basis. It meets its target through open market operations, financial transactions traditionally involving U.S. Treasury securities. Beginning in 2007, the federal funds target was reduced from 5.25% to a range of 0% to 0.25% in December 2008, which economists call the zero lower bound. By historical standards, rates were kept unusually low for an unusually long time to mitigate the effects of the financial crisis and its aftermath. Starting in December 2015, the Fed has been raising interest rates and expects to gradually raise rates further. The Fed raised rates once in 2016, three times in 2017, and four times in 2018, by 0.25 percentage points each time. In light of increased economic uncertainty and financial volatility, the Fed announced in January 2019 that it would be \"patient\" before raising rates again. The Fed influences interest rates to affect interest-sensitive spending, such as business capital spending on plant and equipment, household spending on consumer durables, and residential investment. In addition, when interest rates diverge between countries, it causes capital flows that affect the exchange rate between foreign currencies and the dollar, which in turn affects spending on exports and imports. Through these channels, monetary policy can be used to stimulate or slow aggregate spending in the short run. In the long run, monetary policy mainly affects inflation. A low and stable rate of inflation promotes price transparency and, thereby, sounder economic decisions. The Fed's relative independence from Congress and the Administration has been justified by many economists on the grounds that it reduces political pressure to make monetary policy decisions that are inconsistent with a long-term focus on stable inflation. But independence reduces accountability to Congress and the Administration, and recent legislation and criticism of the Fed by the President has raised the question about the proper balance between the two. While the federal funds target was at the zero lower bound, the Fed attempted to provide additional stimulus through unsterilized purchases of Treasury and mortgage-backed securities (MBS), a practice popularly referred to as quantitative easing (QE). Between 2009 and 2014, the Fed undertook three rounds of QE. The third round was completed in October 2014, at which point the Fed's balance sheet was $4.5 trillion—five times its precrisis size. After QE ended, the Fed maintained the balance sheet at the same level until September 2017, when it began to very gradually reduce it to a more normal size. The Fed has raised interest rates in the presence of a large balance sheet through the use of two new tools—by paying banks interest on reserves held at the Fed and by engaging in reverse repurchase agreements (reverse repos) through a new overnight facility. In January 2019, the Fed announced that it would continue using these tools to set interest rates permanently, in which case the balance sheet may not get much smaller than its current size of $4 trillion. With regard to its mandate, the Fed believes that unemployment is currently lower than the rate that it considers consistent with maximum employment, and inflation is close to the Fed's 2% goal by the Fed's preferred measure. Even after recent rate increases, monetary policy is still considered expansionary. This monetary policy stance is unusually stimulative compared with policy in this stage of previous expansions, and is being coupled with a stimulative fiscal policy (larger structural budget deficit). Debate is currently focused on how quickly the Fed should raise rates. Some contend the greater risk is that raising rates too slowly at full employment will cause inflation to become too high or cause financial instability, whereas others contend that raising rates too quickly will cause inflation to remain too low and choke off the expansion.", "document_type": "crs"}
{"report": "The U.S. Constitution does not clearly specify how military bases should be managed. Article II, Section 2, appoints the President as the commander-in-chief, with the implied power to deploy, and redeploy, the armed forces as necessary for national defense. In common practice, this has included the authority to create and close military installations needed to accommodate and train personnel under the President's command. However, Article I, Section 8, charges Congress with the responsibility to raise armies, maintain a Navy, and regulate the militia. Through annual authorization and appropriation legislation, Congress legislates policy for managing DOD real property assets and funds the construction, maintenance, operation, and disposal of military infrastructure. Throughout most of American history, the President has exercised broad, relatively unchallenged authority for opening, closing, or realigning military installations. Congress largely deferred to the Executive branch primarily because the President, as commander-in-chief, is empowered with the responsibility of deploying military forces. Prompted by large-scale closures of World War II era infrastructure during the 1960s and 1970s, Congress enacted legislation in 1977 that effectively limited the Executive branch's ability to close or realign major military installations. The new statute, later codified as 10 U.S.C. 2687 (Section 612 of the Military Construction Authorization Act of 1978, P.L. 95-82 ), generally required DOD to conduct comprehensive and lengthy assessments of major basing decisions as part of a congressional report-and-wait process. These assessments could be challenged in court on environmental grounds or on questions related to their sufficiency, further lengthening delays. The new legislation effectively halted DOD's ability to close or realign domestic bases of significant size. In the decade that followed the passage of 10 U.S.C. 2687, congressional pressure grew to accommodate DOD basing priorities. By 1988, ongoing negotiations between the Secretary of Defense and the House and Senate Armed Service Committees led to new legislation ( P.L. 100-526 ) that authorized a limited number of base closures based on the oversight of an independent panel. Though later modified, the effort marked the beginning of the first Base Realignment and Closure (BRAC) process, which was intended to insulate base closings from considerations such as favoritism or other political interference. Widely considered a success, the 1988 BRAC legislation was taken up again and modified in succeeding BRAC rounds; first in 1991, 1993, and 1995; and again in 2005. The modern BRAC process refers to a temporary authority that amends the Defense Base Closure and Realignment Act of 1990 ( P.L. 101-510 ), hereinafter referred to as the Base Closure Act , and features a framework of elements that entrusts an independent commission with certifying closure and realignment recommendations made by the Secretary of Defense. In general, the process has required the Secretary to submit a list of military installations recommended for closure or realignment to an independent, bipartisan BRAC commission. After analyzing the Secretary's recommendations, the commission may accept, reject, or modify the list. Upon completing its review, the commission forwards its final findings and recommendations to the President. Upon acceptance of commission's recommendations, the President then submits them to Congress. If the President does not submit the recommendations to Congress within the timeframe required under the Base Closure Act, the BRAC process is terminated. Upon receipt of the report from the President, Congress has the opportunity to disapprove of the recommendations in toto through the enactment of a joint resolution. The hallmarks of this framework include establishment of an independent commission whose members are appointed by the President, in consultation with congressional leadership (and the advice and consent of the Senate); reliance on objective and uniform criteria for evaluating basing recommendations; GAO review and certification of DOD data; deliberations that include open hearings, solicitation of feedback, installation visits, and data available for public review; requirement that the commission's final list of closure and realignment actions be accepted or rejected in its entirety; and presidential and congressional off-ramps that would terminate the BRAC process when certain conditions are not met. The timeline to complete an entire BRAC round has varied; however, the most recent one conducted in 2005 took approximately 10 years, from authorization to completion (end of the six-year BRAC implementation period). Key milestones of a typical BRAC timeline include DOD force structure plan, infrastructure inventory, and analysis of options (up to four years); nomination and confirmation of BRAC commissioners; DOD submission of BRAC recommendations (and associated reports) to the commission; commission deliberations (typically four months); final report sent to the President for approval; 45-day deadline for Congress to reject recommendations in their entirety (Joint Resolution of Disapproval) or allow implementation to begin; DOD implementation (two years to begin; six years to complete); and DOD disposal of real property (indeterminate). BRAC is often characterized as a cost efficiency measure that enables DOD to more effectively manage its real property assets by allowing it to shed excess infrastructure, but historically, potential costs and savings have been a consideration that have ranked below military value. No BRAC round has established cost savings targets, floors, or ceilings. During BRAC rounds in 1991, 1993, and 1995, Congress required the Secretary of Defense to develop and report a set of objective selection criteria that would be used for identifying bases for closure and realignment. For the 2005 round, Congress amended the BRAC statute to require the Secretary to regard military value (defined below) as the primary consideration. Other factors, such as potential costs and savings, were explicitly categorized as lower priority. Because the amended legislative language reflected longstanding DOD policy, the 2005 BRAC criteria appear almost identical when compared with previous versions, with additional language added for emphasis or included for explanatory examples. The excerpt below indicates the 2005 BRAC selection criteria. Emphasized text (in italics) represents new language not included as part of the 1995 criteria. SEC. 2913. SELECTION CRITERIA FOR 2005 ROUND. (a) FINAL SELECTION CRITERIA.—The final criteria to be used by the Secretary in making recommendations for the closure or realignment of military installations inside the United States under this part in 2005 shall be the military value and other criteria specified in subsections (b) and (c). (b) MILITARY VALUE CRITERIA.—The military value criteria are as follows: (1) The current and future mission capabilities and the impact on operational readiness of the total force of the Department of Defense, including the impact on joint warfighting, training, and readiness. (2) The availability and condition of land, facilities, and associated airspace (including training areas suitable for maneuver by ground, naval, or air forces throughout a diversity of climate and terrain areas and staging areas for the use of the Armed Forces in homeland defense missions) at both existing and potential receiving locations. (3) The ability to accommodate contingency, mobilization, surge, and future total force requirements at both existing and potential receiving locations to support operations and training. (4) The cost of operations and the manpower implications. (c). OTHER CRITERIA.—The other criteria that the Secretary shall use in making recommendations for the closure or realignment of military installations inside the United States under this part in 2005 are as follows: (1) The extent and timing of potential costs and savings, including the number of years, beginning with the date of completion of the closure or realignment, for the savings to exceed the costs. (2) The economic impact on existing communities in the vicinity of military installations. (3) The ability of the infrastructure of both the existing and potential receiving communities to support forces, missions, and personnel. (4) The environmental impact , including the impact of costs related to potential environ mental restoration, waste management, and environmental compliance activities. The transfer and disposal of DOD real property made available following the implementation of a BRAC round is a complex process that may extend for years beyond the initial six-year implementation window. Disposal may be delayed or otherwise affected by the participation of local and state communities and the degree to which environmental remediation by federal authorities is necessary. The graph below shows the total acreage from previous BRAC rounds yet to be disposed. The Base Closure Act authorizes a variety of conveyance mechanisms not otherwise available for the transfer and disposal of federal property, a process typically performed by the General Services Administration (GSA). Under a BRAC, conveyance authority is delegated from GSA, through the Secretary of Defense to the various military departments, which receive special approval to supersede GSA regulations with BRAC specific regulations. The primary difference between the routine disposal of federal property and real property conveyed under a BRAC is the role of local communities. Under normal (non-BRAC) circumstances, the General Services Administration (GSA) is directly responsible for disposing of any surplus federal real property, which includes defense property. A military department in possession would, for example, declare property as excess to its needs and turn over the administration of a site to the GSA. The GSA would then follow a number of consecutive steps for disposal of federal property laid out in statute. It would first offer the excess property to other federal agencies. If none expressed an interest, the excess property would be declared surplus . The GSA would then offer the surplus property to state or local governments and non-profits that might use it for a public benefit ( public benefit conveyance) , such as a homeless shelter or medical center. Finally, if the property has neither been transferred nor conveyed in the previous steps, the surplus property would be offered for sale to the public. Under a BRAC, local communities can significantly affect the BRAC property transfer and disposal decisions, which are managed by the Secretary of the responsible military department. Once approved for closure, communities around an installation typically organize a Local Redevelopment Authority (LRA) for the purpose of creating and executing a redevelopment plan for the property. While the plan is not binding on DOD, the Department has been statutorily directed to give the plan considerable weight. DOD makes economic development grants and technical support available through its Office of Economic Adjustment (OEA) to assist LRAs with the process. In recent BRAC rounds, Congress has authorized a special transfer authority that has permitted DOD to transfer title to property at less than fair market value, or even at no cost, if the LRA agrees to certain conditions designed to create employment at the former defense facility. This has been referred to as an Economic Development Conveyance (EDC). DOD has asserted that savings generated from BRAC are generally the result of avoiding the cost of retaining and operating unneeded infrastructure, with upfront costs eventually offset by annual savings. Between FY2012 and FY2018, the Department consistently argued for a new BRAC, asserting that \"absent another BRAC round, the Department will continue to operate some of its installations sub-optimally as other efficiency measures, changing force structure, and technology reduce the number of missions and personnel.\" Emphasizing the potential cost savings, DOD has suggested a new \"efficiency-focused BRAC\" could save the Department billions of dollars annually: \"Savings from BRAC rounds are real and substantial. The last five BRAC rounds are collectively saving the Department $12B annually. A new efficiency-focused BRAC could save the Department an additional ~$2B annually (based on the '93/'95 rounds).\" In its ongoing series of BRAC-related reports, the GAO has noted the unreliability of DOD cost savings estimates. In 2013, GAO concluded that, though the Department had achieved annual recurring savings as the result of the 2005 round, visibility into the outcome has been limited due to missing and inconsistent recordkeeping. Similar studies have raised questions about the data DOD has used to predict and monitor BRAC effectiveness, long-term savings, and outcomes. For example \"... the services did not develop baseline operating costs before implementing the BRAC recommendations, which would have enabled it to determine whether savings were achieved.\" \"... We found that DOD's process for providing the BRAC commission with cost and savings estimates was hindered by underestimating recommendation-specific requirements and that DOD did not fully anticipate information technology requirements for many of the recommendations.\" \"The department cannot provide documentation to show to what extent it reduced plant replacement value or vacated leased space as it reported in May 2005 that it was intended to do.... In addition, DOD bundled multiple closures ... thus limiting visibility into the estimated costs and savings for individual closures and realignments.\" \"... DOD has not reported to Congress how the cleanup of emerging contaminants, especially certain perfluorinated compounds, at installations closed under BRAC will significantly increase the estimated (BRAC) cleanup costs.\" \"... We found that OSD (Office of the Secretary of Defense) did not have a fully developed method for accurately collecting information on costs, savings, and efficiencies achieved specifically from joint basing, and that OSD had not developed a plan to guide joint bases in achieving cost savings and efficiencies....\" \"... DOD has not committed to take action on some of our recommendations related to implementing any future BRAC rounds, such as improving DOD's ability to estimate potential liabilities, and savings to achieve desired outcomes.\" In its final report to the President, the 2005 BRAC commission noted DOD's initial estimate of savings had been \"vastly overestimated,\" and suggested that the Department had claimed savings that were \"not truly savings in the commonly understood sense of the term.\" Reflecting on the quality of cost estimates and savings associated with 2005 BRAC round, Anthony Principi, Chairman of the 2005 Defense Base Closure and Realignment Commission, has suggested opportunities exist for the DOD to improve its analysis by adopting more consistent accounting practices and inclusive metrics: To start, DoD has to do a better job estimating the true cost of any closure or realignment.... Second, the cost of base realignment actions (COBRA) accounting procedure, used by DoD as a basis of comparison among scenarios, should include cost estimates for environmental restoration not just \"clean to current use\" standards. In addition, COBRA or some other cost evaluation process should also include transportation and infrastructure costs and burden sharing with the federal government.... In addition to refining DOD accounting metrics, some observers have suggested congressional visibility into BRAC cost and long-term effectiveness could be improved by amending the process to require the Department to disclose how closure and realignment recommendations meet expected cost saving and reduced infrastructure targets. A BRAC process is the chief means by which DOD disposes of excess infrastructure. Each year between 2013 and 2017, the Department requested a new BRAC round as a means of realizing greater efficiency and reducing excess infrastructure. It has also attempted to allay concerns related to the 2005 BRAC experience - marked by unexpectedly high costs and complexity - by emphasizing cost savings and efficiencies rather than force transformation. In April 2016, DOD submitted to the House Armed Services Committee an I nfrastructure C apacity R eport (interim version) that assessed 22% of the Department's base infrastructure excess to its needs. The methodology used in the report—required by Section 2815 of the National Defense Authorization Act (NDAA) for FY2016 (P.L. 114-92)—remained consistent with excess capacity reports submitted prior to the 1998 and 2005 BRAC rounds round. The Department stated its purpose for obtaining \"a sense of excess and whether excess remains after various changes, such as (prior) BRAC or force structure reductions.\" A final infrastructure capacity report, submitted to Congress in October 2017, modified the original excess capacity estimate to 19%. The Department concluded its infrastructure capacity analysis by arguing it had established sufficient justification for a new BRAC round, a process that would allow it to more effectively dispose of excess infrastructure and manage remaining real property assets. The Department believes we have addressed all congressional concerns.... The time to authorize another BRAC round is now. The BRAC process requires considerable time to analyze and develop recommendations, have those recommendations reviewed by the independent BRAC Commission, and then implemented over a six-year period of time. The longer authorization is delayed, the longer the Department will be forced to expend valuable resources on unnecessary facilities instead of weapons systems, readiness, and other national security priorities. Critics of the Department's methodology for estimating excess infrastructure have asserted it includes unreasonable research assumptions and metrics, undermining the basis for DOD's conclusion. For example, observers have cited the report's reliance on Cold War baseline values to establish excess capacity, inconsistent application of existing metrics for measuring capacity shortfalls, and overly broad categorization schemes. Some observers have also cited longstanding data management challenges that continue to affect the Department's ability to measure current excess facility inventory and utilization rates. Others have noted the dearth of data that support DOD claims related to BRAC effectiveness and the disposal of excess property. During a news briefing on the FY2019 defense budget, Undersecretary of Defense (Comptroller) David L. Norquist noted that the Department had declined to propose a BRAC round that year, stating that it would work instead to focus on internal reforms while preparing for a financial audit. And so, I think we're looking at doing two things, going forward. One is, working with Congress to find common areas where we can make reforms and changes that don't create the same types of obstacles. The other is that we are undergoing a financial-statement audit that includes a look at property, and assets and investments and improving the accuracy of the data behind it. And as a view of being able to take advantage of the data coming out of that process, to help us make better decision-making on real property. But, yes, you are correct, there is not (a) request for another BRAC round in this budget. In testimony before the Senate Appropriations Committee Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, Lucian Niemeyer, Assistant Secretary of Defense for Energy, Installations and Environment, indicated DOD would be working in FY2019 to improve its excess infrastructure accounting processes and demolish unneeded infrastructure: In lieu of another request for legislation in FY 2019 to authorize an additional Base Realignment and Closure (BRAC) round, we will review our facilities, to include facility usage optimization review to ensure we have a better accounting of excess infrastructure. We also have proposed for FY 2019 increased efforts to demolish unneeded or obsolete facilities over the course of this year. The 2005 BRAC round was unique among all previous rounds due to its relative size, scope and complexity. (See Figure 2 for comparison of major and minor BRAC actions between rounds.) Colloquially called \"the mother of all BRACs,\" the objectives of the 2005 round were primarily about transforming military infrastructure; however, unanticipated expenses have played a role in shaping subsequent congressional views of the BRAC process and, according to many observers, dampened support for consideration of a new round. Savings estimates submitted during the 2005 round were overvalued by as much as 67%, according to GAO analysis, with one-time implementation costs rising from $21 to $35.1 billion. GAO found that the $14.1 billion increase was due primarily to the rising cost of new construction associated with subsidiary projects not included in the original BRAC implementation plan. Referring to the implementation of the 2005 round, Assistant Secretary Niemeyer, noted, \"BRAC legislation effectively limited the ability of Congress to oversee BRAC implementation costs and the Department made deliberate decisions to use BRAC implementation as a recapitalization tool, expanding facility requirements and associated costs.\" To address congressional concerns about spiraling costs in new BRAC rounds, DOD has periodically proposed legislative language that would constrain the Secretary's ability to recommend BRAC actions that would not yield savings within 20 years and to emphasize recommendations that would yield net savings within five years. Each year, Congress appropriates funding for the Department of Defense Base Closure Account, part of the Military Construction Defense-Wide appropriation. With no BRAC round authorized or underway, the primary purpose of continuing BRAC appropriations is to fund the environmental cleanup and caretaker functions at bases that were closed under prior rounds (see Figure 3 ). In FY2020, the Trump Administration has requested $278.5 million for BRAC continuing environmental and caretaker costs, with $158.3 million provided for the Navy (57%), $66.1 million for the Army (24%), and $54 million for the Air Force (19%). The total request represents a $63 million decrease (19%) from FY2019 enacted levels ($342 million). In FY2018, Congress urged DOD to accelerate environmental remediation at BRAC sites. In report language, appropriators stated that additional funds were provided to speed environmental remediation at installations closed under previous rounds. Accelerated cleanup.—The agreement includes additional funding to accelerate environmental remediation at installations closed during previous Base Realignment and Closure (BRAC) rounds. Priority should be given to those sites with newly identified radiological cleanup cost. There are many factors hindering the cleanup of BRAC sites. However, strategic investments can lead to quicker clean-ups and faster turnover of DOD property to the local community. Therefore, the Department is directed to submit to the congressional defense committees a spend plan for the additional BRAC funds not later than 30 days after enactment of this Act. Congressional authorizers and appropriators have regularly inserted language into annual defense legislation that would disallow the use of funds for the purpose of a new BRAC round. In FY2019, for example, though DOD did not propose a BRAC, authorizers inserted language into the annual NDAA that prohibited a new round: SEC. 2703. Prohibition on Conducting Additional Base Realignment and Closure (BRAC) Round. Nothing in this Act shall be construed to authorize an additional Base Realignment and Closure (BRAC) round. A similar provision was included in the final FY2019 defense appropriations bill: SEC. 8122. None of the funds made available by this Act may be used to propose, plan for, or execute a new or additional Base Realignment and Closure (BRAC) round. In 2017, Members in both chambers proposed legislation that would have authorized a new round of base closures. Though no legislation for a full BRAC was enacted, a provision included the following year in the final FY2019 NDAA. Under the new scenario described by Section 2702 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( H.R. 5515 , P.L. 115-232 ), BRAC-like actions are authorized within the confines of a state based on the recommendation of the governor and support of local communities affected by the proposed actions. Unlike a traditional BRAC process, the new authorities would forgo the creation of an independent review panel. The Secretary of Defense is, instead, required to deliver a report of planned BRAC actions to congressional defense committees and, following a 90-day waiting period, begin implementation. For details, please refer to \"In-State BRAC\" in Appendix A of this report. The BRAC related legislative proposals above illustrate the flexibility Congress has for amending or adopting the template of past BRAC processes that DOD has called \"the only fair, objective, and comprehensive process to achieve these goals (eliminating excess infrastructure).\" Congress may consider whether future legislative proposals for base closures and realignments will adopt the lessons learned from previous rounds while retaining the basic framework, or fundamentally alter the process. No BRAC legislation has so far been proposed in the 116 th Congress. Additionally, the Department has asserted that it does not intend to use the new BRAC-like authorities authorized by Section 2702 of the FY2019 NDAA. To date, DOD has received no state requests under this authority. Appendix A. Legislative References BRAC Authorizing Legislation 1988 Round The Defense Authorization Amendments and Base Closure and Realignment Act, enacted October 24, 1988 (P.L.100-526) 1991, 1993, 1995 Rounds National Defense Authorization Act for Fiscal Year 1991, enacted November 5, 1990 (P.L. 107-107, Base Closure and Realignment Act of 1990, Title XXIX) 2005 Round National Defense Authorization Act for Fiscal Year 2002, ( P.L. 101-510 ; amended the Defense Base Closure and Realignment Act of 1990 ( P.L. 101-510 ) 10 U.S.C. 2687, 10 U.S.C. 993 Summary In 1977, Congress enacted 10 U.S.C. 2687, the first statutory restriction on the President's ability to close or realign military installations. Amended over the years, the statute has retained its essential elements, establishing procedures the Secretary of Defense must follow before closing a military installation where a threshold number (currently 300) of civilian personnel are authorized to be employed, or realigning an installation that involves a reduction by more than 50% (or 1,000) of civilian workers. A more recent statute, 10 U.S.C. 993, introduced additional reporting requirements that would restrict the Secretary's ability to realign installations if the plan would affect more than 1,000 assigned members of the Armed Forces. In-State BRAC Section 2702 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( H.R. 5515 , P.L. 115-232 ) authorizes new in-state BRAC authorities. Text of the provision is included below in its entirety. SEC. 2702. ADDITIONAL AUTHORITY TO REALIGN OR CLOSE CERTAIN MILITARY INSTALLATIONS. (a) Authorization.—Notwithstanding sections 993 or 2687 of title 10, United States Code, and subject to subsection (d), the Secretary of Defense may take such actions as may be necessary to carry out the realignment or closure of a military installation in a State during a fiscal year if— (1) the military installation is the subject of a notice which is described in subsection (b); and (2) the Secretary includes the military installation in the report submitted under paragraph (2) of subsection (c) with respect to the fiscal year. (b) Notice From Governor of State.—A notice described in this subsection is a notice received by the Secretary of Defense from the Governor of a State (or, in the case of the District of Columbia, the Mayor of the District of Columbia) in which the Governor recommends that the Secretary carry out the realignment or closure of a military installation located in the State, and which includes each of the following elements: (1) A specific description of the military installation, or a specific description of the relevant real and personal property. (2) Statements of support for the realignment or closure from units of local government in which the installation is located. (3) A detailed plan for the reuse or redevelopment of the real and personal property of the installation, together with a description of the local redevelopment authority which will be responsible for the implementation of the plan. (c) Response to Notice.— (1) Mandatory response to governor and congress.—Not later than 1 year after receiving a notice from the Governor of a State (or, in the case of the District of Columbia, from the Mayor of the District of Columbia), the Secretary of Defense shall submit a response to the notice to the Governor and the congressional defense committees indicating whether or not the Secretary accepts the recommendation for the realignment or closure of a military installation which is the subject of the notice. (2) Acceptance of recommendation.—If the Secretary of Defense determines that it is in the interests of the United States to accept the recommendation for the realignment or closure of a military installation which is the subject of a notice received under subsection (b) and intends to carry out the realignment or closure of the installation pursuant to the authority of this section during a fiscal year, at the time the budget is submitted under section 1105(a) of title 31, United States Code, for the fiscal year, the Secretary shall submit a report to the congressional defense committees which includes the following: (A) The identification of each military installation for which the Secretary intends to carry out a realignment or closure pursuant to the authority of this section during the fiscal year, together with the reasons the Secretary of Defense believes that it is in the interest of the United States to accept the recommendation of the Governor of the State involved for the realignment or closure of the installation. (B) For each military installation identified under subparagraph (A), a master plan describing the required scope of work, cost, and timing for all facility actions needed to carry out the realignment or closure, including the construction of new facilities and the repair or renovation of existing facilities. (C) For each military installation identified under subparagraph (A), a certification that, not later than the end of the fifth fiscal year after the completion of the realignment or closure, the savings resulting from the realignment or closure will exceed the costs of carrying out the realignment or closure, together with an estimate of the annual recurring savings that would be achieved by the realignment or closure of the installation and the timeframe required for the financial savings to exceed the costs of carrying out the realignment or closure. (d) Limitations.— (1) Timing.—The Secretary may not initiate the realignment or closure of a military installation pursuant to the authority of this section until the expiration of the 90-day period beginning on the date the Secretary submits the report under paragraph (2) of subsection (c). (2) Total costs.—Subject to appropriations, the aggregate cost to the government in carrying out the realignment or closure of military installations pursuant to the authority of this section for all fiscal years may not exceed $2,000,000,000. In determining the cost to the government for purposes of this section, there shall be included the costs of planning and design, military construction, operations and maintenance, environmental restoration, information technology, termination of public-private contracts, guarantees, and other factors contributing to the cost of carrying out the realignment or closure, as determined by the Secretary. (e) Process for Implementation.—The implementation of the realignment or closure of a military installation pursuant to the authority of this section shall be carried out in accordance with section 2905 of the Defense Base Closure and Realignment Act of 1990 (title XXIX of P.L. 101-510 ; 10 U.S.C. 2687 note) in the same manner as the implementation of a realignment or closure of a military installation pursuant to the authority of such Act. (f) State Defined.—In this section, the term ``State'' means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, the United States Virgin Islands, and the Commonwealth of the Northern Mariana Islands. (g) Termination of Authority.—The authority of the Secretary to carry out a realignment or closure pursuant to this section shall terminate at the end of fiscal year 2029. Appendix B. BRAC Acreage Disposal Status, By State", "summary": "Since 1977, statutory thresholds have effectively constrained the President's ability to close or realign major military installations in the United States. Congress has instead periodically granted temporary authorities—known as a Base Realignment and Closure (BRAC)—that have established independent commissions for the review and approval of basing changes submitted by the Secretary of Defense. These unique and transient authorities last expired on April 16, 2006. There have been five rounds of base closures: 1988, 1991, 1993, 1995, and 2005. Though Congress has periodically adjusted the BRAC process to account for lessons learned, the modern framework has remained generally consistent with earlier rounds, and includes establishment of an independent commission; reliance on objective and uniform criteria; Government Accountability Office (GAO) review and certification of Department of Defense (DOD) data; deliberations designed to be transparent that include open hearings, solicitation of feedback, installation visits, and data available for public review; and requirement that the final list of closure and realignment recommendations be accepted or rejected in their entirety. Congress has defined BRAC selection criteria in statute, thus requiring the Secretary to prioritize military value over cost savings. Additionally, Congress has required the Secretary to align the Department's recommendations with a comprehensive 20-year force structure plan. The commission may modify, reject, or add recommendations during its review before forwarding a final list to the President. After receiving the Commission's list of recommendations, the President may either accept the report in its entirety or seek to modify it by indicating disapproval and returning it to the commission for further evaluation. If the President accepts the commission's recommendations, they are forwarded to Congress. BRAC implementation begins by default unless Congress rejects the recommendations in their entirety within 45 days by enacting a joint resolution. During the implementation phase, DOD is required to initiate closures and realignments within two years and complete all actions within six years. The BRAC process represents a legislative compromise between the executive and legislative branches wherein each shares power in managing the closure and realignment of military bases. The imposition of an independent, third-party mediator was intended to insulate base closings from political considerations by both branches that had complicated similar actions in the past. This report provides background on the development of BRAC, describes its major elements and milestones, and outlines issues frequently cited in the context of new rounds, such as potential savings.", "document_type": "crs"}
{"report": "During World War II and then again after the outbreak of fighting in Korea, Congress found that the existence of thousands of small business concerns was being threatened by war-induced shortages of materials coupled with an inability to obtain defense contracts or financial assistance. Concerned that many small businesses might fail without government assistance, in 1953, Congress passed and President Dwight Eisenhower signed into law the Small Business Act (P.L. 83-163), which authorized the Small Business Administration (SBA). The act specifies that it is the declared policy of Congress to promote the interests of small businesses to \"preserve free competitive enterprise.\" Congress specified that one of the ways to preserve free competitive enterprise was to insure that small businesses received a \"fair proportion\" of federal contracts and subcontracts: It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation. Congress indicated that its intent in supporting small businesses was not to \"favor small business at the expense of its larger competitors. Our only purpose in supporting the creation and effective operation of the SBA is to equalize the scales when necessary to guarantee the continued vigor of our competitive free enterprise system.\" More recently, a House committee report indicated that the primary rationale for small business contracting programs is the positive economic benefits they provide, as well as assisting small businesses overcome the complexities of the system. The economic benefits of these programs can be seen in two primary areas—market competition and local economic development. First, [these] programs … are designed to increase and diversify small contractors with the intent of expanding the federal supplier base. This leads to increased competition, which results in higher quality, greater product variety, and lower prices. Second, these contracting initiatives lower barriers to entry in a wide range of markets for small businesses. This provides greater market access for small firms' goods and services. From an economic perspective, such access is critical to generating positive macroeconomic benefits, including higher job creation, wage growth, and greater income distribution. Over the years, Congress has approved legislation to support small business in various ways. For example, the SBA administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. In recent years, congressional interest in these programs has increased, primarily because assisting small businesses is viewed as a means to stimulate economic activity and create jobs. This report describes the various federal programs, requirements, procurement officers, and procurement offices involved in promoting federal contracting and subcontracting with small businesses, small disadvantaged businesses (SDBs), SDBs participating the SBA's \"8(a) Program,\" Historically Underutilized Business Zone (HUBZone) small businesses, women-owned small businesses (WOSBs), and service-disabled veteran-owned small businesses (SDVOSBs). The SBA administers many, but not all, of these programs. It examines the following federal requirements and authorities in promoting contracting and subcontracting with small businesses: 1. The requirement that federal agencies generally reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000) but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased. 2. The establishment of small business procurement goals, both government-wide and agency specific, to promote the awarding of contracts to small businesses. 3. The requirement that federal agencies generally set aside contracts that have an anticipated value exceeding the simplified acquisition threshold exclusively for small businesses when there is a reasonable expectation that offers will be obtained from at least two responsible small businesses offering the products of different small businesses (Rule of Two) and the award will be made at a fair market price. 4. The authority provided federal agencies to make sole source awards to small businesses when the award could not otherwise be made (e.g., only a single source is available, under urgent and compelling circumstances). 5. The authority provided federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e.g., 8(a) small businesses, HUBZone small businesses, WOSBs, and SDVOSBs). It discusses the SBA's oversight and responsibilities concerning the small business goaling program, small business mentor-protégé programs, the 7(j) management and training program, and the surety bond guaranty program. It also discusses the role of the Office of Small and Disadvantaged Business Utilization (OSDBU), located in each federal agency, in promoting contracting with small businesses, and examines the role and responsibilities of various federal procurement officers, including procurement center representatives, commercial market representatives, and business opportunity specialists, in promoting small business contracting opportunities. This report concludes with a brief discussion of the strong bipartisan support for small business contracting programs. However, that does not mean that these programs face no opposition, or that issues have not been raised concerning the impact and operations of specific programs. For example, small business advocates note that implementing regulations in the Federal Acquisition Regulation (FAR) narrow the reach (and impact) of some small business contracting preferences by excluding specific types of contracts, such as those listed in the Federal Supply Schedules, from FAR requirements pertaining to small business contracting. Advocates want the federal government to enact policies that reduce or eliminate exclusions that narrow the reach of small business contracting preferences. Critics have questioned some of these programs' effectiveness, in terms of promoting both small business opportunities to win federal contracts and a more diversified, robust economy. With a few exceptions, businesses interested in bidding on a federal contract must obtain a Dun & Bradstreet Data Universal Numbering System (DUNS) number (i.e., a unique nine-digit identification number) for each of the business's physical locations, and register with the federal government's System for Award Management (SAM). SAM is used by government agencies for several purposes, including to find contractors. Businesses also must match their products and services to a North American Industry Classification System (NAICS) code. Businesses generally have a primary NAICS code, and may have multiple NAICS codes if they sell multiple products and services. Businesses that identify themselves as a small business in SAM must (1) meet the Small Business Act's definition of a small business and (2) not exceed size standards established, and updated periodically, by the SBA. The Small Business Act defines a small business as one that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis. The business may be a sole proprietorship, partnership, corporation, or any other legal form. The Small Business Act authorizes the SBA to establish size standards to ensure that only small businesses are provided SBA assistance. The SBA currently uses two types of size standards to determine SBA program eligibility: industry-specific size standards and alternative size standards , for some lending and venture capital investment programs based on the applicant's maximum tangible net worth and average net income after federal taxes. The SBA's industry-specific size standards are used to determine eligibility for federal small business contracting purposes. The SBA determines if a business is small by comparing that business's economic characteristics (typically number of employees or average annual receipts) to size standards listed in the SBA's Table of Small Business Size Standards . The table has size standards for 1,036 industrial classifications in the North American Industrial Classification System. Businesses that exceed the applicable size standard for their primary industry do not meet the requirement of being small. The SBA's size standards are designed to (1) encourage competition within each industry and (2) ensure that SBA assistance is provided only to firms that are not dominant in their field on a national basis. The size standards are derived through an assessment of four economic factors: (1) the average firm size, (2) the average assets size as a proxy of start-up costs and entry barriers, (3) the four-firm concentration ratio (the cumulative share of total industry receipts of that industry's four biggest firms) as a measure of industry competition, and (4) the size distribution of firms. The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors \"as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses.\" Historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small (ranging from fewer than 50 employees for some industries to fewer than 1,500 employees for others) and average annual receipts for most other industries (ranging from no more than $1 million for some industries to no more than $40 million for others). To make it easier to determine if an offeror meets the SBA's definition of a small business, prior to soliciting bids, federal agencies are required to classify a product or service being acquired in only one (NAICS code) industry, \"whose definition best describes the principal nature of the product or service being acquired even though for other purposes it could be classified in more than one.\" When acquiring a product or service that could be classified in two or more industries with different size standards, contracting officers must \"apply the size standard for the industry accounting for the greatest percentage of the contract price.\" If a solicitation calls for more than one item and allows offers to be submitted on any or all of the items, \"an offeror must meet the size standard for each item it offers to furnish.\" If a solicitation calling for more than one item requires offers on all or none of the items, \"an offeror may qualify as a small business by meeting the size standard for the item accounting for the greatest percentage of the total contract price.\" With several notable exceptions (e.g., HUBZone small businesses, SBA 8(a) program participants, and veteran-owned small businesses [VOSBs] and SDVOSBs seeking contracts with the Department of Veterans Affairs), businesses generally self-certify their status as small when they register their business in the SAM database. The contracting officer is required to accept an offeror's representation in a specific bid or proposal that it is a small business unless \"(1) another offeror or interested party challenges the concern's small business representation or (2) the contracting officer has a reason to question the representation.\" If an offeror's small business status is challenged, the contracting officer is generally not allowed to award the contract until the SBA has made a size determination or 15 business days after the SBA receives the protest, whichever occurs first. The SBA's Office of Government Contracting Area Office (Area Office) serving the area in which the headquarters of the offeror is located initially reviews the protest. The Area Office is required, by regulation, to determine the offeror's size status within 15 business days after receipt of the protest, or \"within any extension of time granted by the contracting officer.\" If the SBA does not make a determination within the required time, the contracting officer \"may award the contract after determining in writing that there is an immediate need to award the contract and that waiting until SBA makes its determination will be disadvantageous to the government.\" An appeal of the Area Office's decision may be filed with the SBA's Office of Hearings and Appeals (OHA) . If the OHA accepts the appeal for consideration and finds the protested concern to be ineligible for award, the contracting officer must \"terminate the contract unless termination is not in the best interests of the government, in keeping with the circumstances described in the [aforementioned] written determination. However, the contracting officer shall not exercise any options or award further task or delivery orders.\" Furthermore, a concern cannot become eligible for a specific award after the SBA has determined that it is not a small business, even if the concern takes action to meet the definition of a small business. The SBA or the federal agency may suspend or debar a firm from future government contracts for misrepresenting its size status. In addition, individuals that knowingly misrepresent a business's size to secure a federal contract can be subject to civil and criminal penalties. 15 U.S.C. §644(e)(1) states, \"To the maximum extent practicable, procurement strategies used by a Federal department or agency having contracting authority shall facilitate the maximum participation of small business concerns as prime contractors, subcontractors, and suppliers.\" To accomplish this goal, FAR regulations (FAR §19.202-1) require contracting officers, when applicable, to take the following actions prior to awarding a federal contract: 1. \"Divide proposed acquisitions of supplies and services (except construction) into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement.\" 2. \"Plan acquisitions such that, if practicable, more than one small business concern may perform the work, if the work exceeds the amount for which a surety may be guaranteed by the SBA against loss under 15 U.S.C. §694b [generally $6.5 million, or $10 million if the contracting officer certifies that the higher amount is necessary].\" 3. \"Ensure that delivery schedules are established on a realistic basis that will encourage small business participation to the extent consistent with the actual requirements of the Government.\" 4. \"Encourage prime contractors to subcontract with small business concerns [primarily through the agency's role in negotiating an acceptable small business subcontracting plan with prime contractors on contracts anticipated to exceed $700,000 or $1.5 million for construction contracts].\" 5. \"Provide a copy of the proposed acquisition package to the SBA procurement center representative [PCR, duties are described later]\" for his or her review, comment and recommendation, or, if a PCR is not assigned, to the SBA Area Office serving the area in which the procuring activity is located \"at least 30 days prior to the issuance of the solicitation if (i) The proposed acquisition is for supplies or services currently being provided by a small business and the proposed acquisition is of a quantity or estimated dollar value, the magnitude of which makes it unlikely that small businesses can compete for the prime contract; (ii) The proposed acquisition is for construction and seeks to package or consolidate discrete construction projects and the magnitude of this consolidation makes it unlikely that small businesses can compete for the prime contract; or (iii) The proposed acquisition is for a consolidated or bundled requirement.… The contracting officer shall provide all information relative to the justification for the consolidation or bundling, including the acquisition plan or strategy and if the acquisition involves substantial bundling, the information identified in [FAR] 7.107-4. The contracting officer shall also provide the same information to the agency Office of Small and Disadvantaged Business Utilization [duties are described later].\" 6. \"Provide a statement explaining why the (i) Proposed acquisition cannot be divided into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement; (ii) Delivery schedules cannot be established on a realistic basis that will encourage small business participation to the extent consistent with the actual requirements of the government; (iii) Proposed acquisition cannot be structured so as to make it likely that small businesses can compete for the prime contract; (iv) Consolidated construction project cannot be acquired as separate discrete projects; or (v) Consolidation or bundling is necessary and justified.\" 7. \"Process the 30-day notification concurrently with other processing steps required prior to the issuance of the solicitation.\" 8. \"If the contracting officer rejects the SBA procurement center representative's recommendation … document the basis for the rejection and notify the SBA procurement center representative [who (as described later) may appeal the rejection to the chief of the contracting office and, ultimately, to the agency head].\" The SBA may assign one or more procurement center representatives (PCRs) to any contracting activity or contract administration office to implement the SBA's policies and programs. The SBA currently has 49 PCRs located in the SBA's six Area Offices. PCRs are required to comply with the contracting agency's directives governing the conduct of contracting personnel and the release of contract information. PCR duties include the following: Review proposed acquisitions to recommend \"the setting aside of selected acquisitions not unilaterally set aside by the contracting officer;\" new qualified small business sources; and the feasibility of breaking out components of the contract for competitive acquisitions. Review proposed acquisition packages. If the PCR (or, if a PCR is not assigned, the SBA Area Office serving the area in which the procuring activity is located) \"believes that the acquisition, as proposed, makes it unlikely that small businesses can compete for the prime contract,\" the PCR can recommend any alternate contracting method that he or she \"reasonably believes will increase small business prime contracting opportunities.\" The recommendation must be made to the contracting officer within 15 days after the package's receipt. Recommend small businesses \"for inclusion on a list of concerns to be solicited in a specific acquisition.\" Appeal to the contracting office's chief \"any contracting officer's determination not to solicit a concern recommended by the SBA for a particular acquisition, when not doing so results in no small business being solicited.\" This appeal may be further appealed to the agency head. Conduct periodic reviews of the agency's contracting activity, including the agency's assessment of any required small business subcontracting plan, \"to ascertain whether the agency is complying with the small business policies in this regulation.\" Sponsor and participate in conferences and training \"designed to increase small business participation in the contracting activities of the office.\" Every federal agency (except the SBA) that has procurement powers is required to have an OSDBU, whose director, by statute, reports directly to the head of the agency and has supervisory authority over agency staff performing certain procurement functions. The OSDBU's primary responsibility is to ensure that small businesses, SDBs, WOSBs, SDVOSBs, and HUBZone small businesses are treated fairly and that they have an opportunity to compete and be selected for a fair amount of the agency's contract dollars. Among its statutory responsibilities are the following: \"Identify proposed solicitations that involve significant bundling of contract requirements, and work with the agency acquisition officials and the Administration to revise the procurement strategies for such proposed solicitations where appropriate to increase the probability of participation by small businesses as prime contractors, or to facilitate small business participation as subcontractors and suppliers, if a solicitation for a bundled contract is to be issued.\" Assist small businesses \"to obtain payments, required late payment interest penalties, or information regarding payments due to the concern from an executive agency or a contractor.\" Assign \"a small business technical adviser to each office to which the SBA has assigned\" a PCR. The small business technical advisor \"shall be a full-time employee of the procuring activity, well qualified, technically trained and familiar with the supplies or services purchased at the activity; and whose principal duty shall be to assist\" the PCR. Provide the agency's \"Chief Acquisition Officer and senior procurement executive … with advice and comments on acquisition strategies, market research, and justifications [related to limitations on the consolidation of contracts as a means to provide small businesses appropriate opportunities to participate as prime contractors and subcontractors].\" Provide training to small businesses and contract specialists, provided that the training does not interfere with the director carrying out his or her other responsibilities. Ensure that a small business that notifies the PCR prior to a contract's award that \"a solicitation, request for proposal, or request for quotation unduly restricts [its] ability … to compete for the award … is aware of other resources and processes available to address unduly restrictive provisions … even if such resources and processes are provided by such agency, the Administration, the Comptroller General, or a Department of Defense (DOD) procurement technical assistance program [described below].\" Review all subcontracting plans \"to ensure that the plan provides maximum practicable opportunity for small business concerns to participate in the performance of the contract to which the plan applies.\" In accordance with P.L. 109-163 , the National Defense Authorization Act of 2006, the DOD renamed its OSDBU the Office of Small Business Programs (OSBP). The act also redesignated the Army, Navy, and Air Force's OSDBUs to OSBPs of the Department of the Army, Navy, and Air Force, respectively. At the agency level, procurement department heads (sometimes titled senior procurement executive ) are responsible for implementing small business programs at their agencies, including achieving program goals. In general, procurement department staff who work on small business issues (often titled small business specialists ) coordinate with OSDBU directors on their agencies' small business programs. Chief acquisition officers provide a focal point for acquisition in agency operations. Their key functions include \"monitoring and evaluating agency acquisition activities, increasing the use of full and open competition, increasing performance-based contracting, making acquisition decisions, managing agency acquisition policy, acquisition career management, acquisition resources planning, and conducting acquisition assessments.\" The SBA must assign a breakout procurement center representative (breakout PCR) to each major procurement center. A major procurement center is, in the opinion of the SBA Administrator, a procurement center that purchases substantial dollar amounts of other than commercial items, and has the potential to incur significant savings as a result of the placement of a breakout PCR. The breakout PCR advocates for (1) the appropriate use of full and open competition, and (2) the breakout of items, \"when appropriate and while maintaining the integrity of the system in which such items are used.\" The breakout PCR is in addition to the PCR. When a breakout PCR is assigned, the SBA must assign at least two co-located small business technical advisors. SBA breakout PCRs and technical advisors must comply with the contracting agency's directives governing the conduct of contracting personnel and the release of contract information. The SBA must obtain security clearances for its breakout PCRs and technical advisors as required by the contracting agency. The SBA has four commercial market r epresentatives who, among other duties, help prime contractors find small businesses that are capable of performing subcontracts; provide counseling on the contractor's responsibility to maximize subcontracting opportunities for small businesses; and conduct periodic reviews of contractors awarded contracts requiring an acceptable subcontracting plan that provides small businesses \"the maximum practicable opportunity to participate in contract performance consistent with its efficient performance\" (generally any solicitation to perform a contract that is expected to exceed $700,000 ($1.5 million for construction) and that has subcontracting possibilities). The SBA's business opportunity s pecialists provide, among other duties, guidance, counseling, and referrals for assistance with technical, management, financial, or other matters intended to improve the competitive viability of SBA 8(a) program participants. They provide 8(a) program participants comprehensive assessments of the firm's strengths and weaknesses; monitor and document their compliance with 8(a) program requirements; advise them on compliance with contracting regulations after the award of a 8(a) program contract or subcontract; review and monitor their compliance with mentor-protégé agreements; represent the interests of the SBA Administrator and small businesses in the award, modification, and administration of 8(a) program contracts and subcontracts; and report fraud or abuse involving the 8(a) program. The Small Business Procurement Advisory Council (SBPAC), whose members are composed of the SBA Administrator (or his or her designee), the director of the Minority Business Development Agency, and the head of each OSDBU in each federal agency having procurement powers, has the following statutory duties: 1. Develop positions on proposed procurement regulations affecting the small business community. 2. Submit comments reflecting such positions to appropriate regulatory authorities. 3. Conduct reviews of each OSDBU to determine the office's compliance with its statutory requirements. 4. Identify best practices for maximizing small business utilization in federal contracting that may be implemented by federal agencies having procurement powers. 5. Submit annually, to the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship, a report describing (1) the comments submitted to appropriate regulatory authorities, including any outcomes related to the comments; (2) the results of its review of each OSDBU ; and (3) best practices identified for maximizing small business contracting . The Defense Logistic Agency's Procurement Technical Assistance Program (PTAC) helps \"businesses pursue and perform under contracts with the Department of Defense, other federal agencies, state and local governments and with government prime contractors. Most of the assistance the PTACs provide is free. PTAC support to businesses includes registration in systems such as the System for Award Management (SAM), identification of contract opportunities, and help in understanding requirements and in preparing and submitting bids.\" The Competition in Contracting Act of 1984 generally requires \"full and open competition\" for government procurement contracts. However, various provisions of the Small Business Act authorize or, in some cases, require federal agencies to provide for other than \"full and open competition through the use of competitive procedures\" when contracting with small businesses. For example, as mentioned previously, federal agencies are generally required to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased. In addition, federal agencies are generally required to set aside contracts that have an anticipated value exceeding the simplified acquisition threshold exclusively for small businesses when there is a reasonable expectation by the contracting officer that offers will be obtained by at least two responsible small businesses offering the products of different small businesses (Rule of Two) and the award will be made at a fair market price; may similarly set aside contracts exceeding the simplified acquisition threshold for competition reserved for specific types of small businesses (e.g., 8(a) small businesses, HUBZone small businesses, WOSBs and SDVOSBs); may enter into negotiations directly with particular types of small businesses (e.g., a sole source award) when the award could not otherwise be made (e.g., only a single source is available or under urgent and compelling circumstances); and are required to grant HUBZone small businesses a price evaluation preference of not more than 10% in open and unrestricted competitions. Several SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts. These include various prime contracting programs; subcontracting programs; and other assistance (e.g., contracting technical training assistance and oversight of the federal small business goaling program and the Surety Bond Guarantee program). Several contracting programs allow small businesses to compete only with similar firms for government contracts or receive sole source awards in circumstances in which such awards could not be made to other firms. These programs provide small businesses an opportunity to win government contracts without having to compete against larger and more experienced companies. The 8(a) Minority Small Business and Capital Ownership Development Program (named for the section of the Small Business Act from which it derives its authority) provides business development assistance to businesses owned and controlled by persons who are socially and economically disadvantaged. African Americans, Hispanics, Native Americans (including American Indians, Eskimos, Aleuts, and Native Hawaiians), Asian-Pacific Americans, and Subcontinent Asian Americans are presumed to be socially and economically disadvantaged. Other individuals can also qualify as socially and economically disadvantaged on a case-by-case basis. To be considered economically disadvantaged, an individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter. Federal agencies are authorized to award contracts for goods or services, or to perform construction work, to the SBA for subcontracting to 8(a) firms. The SBA is authorized to delegate the function of executing contracts to the procuring agencies and often does so. Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded through either a set-aside or on a sole source basis, with the contract amount generally determining the acquisition method used. When the contract's anticipated total value, including any options, is less than $4 million ($7 million for manufacturing contracts), the contract is normally awarded without competition (as a sole source award). In contrast, when the contract's anticipated value exceeds these thresholds, the contract generally must be awarded via a set-aside with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price. The SBA also provides technical assistance and training to 8(a) firms. Firms may participate in the 8(a) Program for no more than nine years. In FY2017, the federal government awarded $27.2 billion to 8(a) firms. $16.4 billion was awarded with an 8(a) preference ($8 billion through an 8(a) set-aside and $8.4 billion through an 8(a) sole source award); $4.8 billion was awarded to an 8(a) firm in open competition with other firms; and $6 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for HUBZone firms, women-owned small businesses, and service-disabled veteran-owned small businesses). This program assists small businesses located in Historically Underutilized Business Zones (HUBZones) through set-asides, sole source awards (so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million, or $7 million for manufacturing contracts) and price evaluation preferences (of up to 10%) in full and open competitions. The HUBZone program targets assistance to small businesses located in areas with low income, high poverty, or high unemployment. To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone. In FY2017, the federal government awarded $7.53 billion to HUBZone-certified small businesses. $1.90 billion was awarded with a HUBZone preference ($1.49 billion through a HUBZone set-aside, $65.3 million through a HUBZone sole source award, and $346.9 million through a HUBZone price-evaluation preference); $1.53 billion was awarded to HUBZone-certified small businesses in open competition with other firms; and $4.10 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses). This program allows agencies to set aside contracts for SDVOSBs. Also, federal agencies may award sole source contracts to SDVOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). For purposes of this program, veterans and service-related disabilities are defined as they are under the statutes governing veterans affairs. In FY2017, the federal government awarded $18.2 billion to SDVOSBs. $6.8 billion was awarded through a SDVOSB set-aside award; $4.3 billion was awarded to a SDVOSB in open competition with other firms; and $7.1 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for HUBZone firms, 8(a) firms, and WOSBs). Under this program, contracts may be set aside for economically disadvantaged WOSBs in industries in which women are underrepresented and substantially underrepresented. Federal agencies may award sole source contracts to WOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). In FY2017, the federal government awarded $21.3 billion to WOSBs. $648.9 million was awarded with a WOSB preference ($580.5 million through a WOSB set-aside and $68.4 million through a WOSB sole source award); $7.0 billion was awarded to a WOSB in open competition with other firms; and $13.7 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for HUBZone firms, 8(a) firms, and SDVOSBs). Federal contracting officers are required to provide the SBA's PCR (or, if a PCR is not assigned, the SBA Area Office serving the procuring activity area) a \"reasonable period of time\" to review any solicitation requiring submission of a small business subcontracting plan and to submit advisory findings before the solicitation is issued. The PCR's advisory comments regarding the small business subcontracting plan's acceptability must be submitted, in writing, to the appropriate contracting officer within five working days after the plan's receipt. As mentioned previously, the SBA's commercial market representatives help prime contractors find small businesses to perform subcontracts; counsel contractors on their responsibility to maximize subcontracting opportunities for small businesses; and conduct periodic reviews, often in concert with a SBA PCR, of contractors awarded contracts that require an acceptable small business subcontracting plan. Federal agencies may also set aside contracts or make sole source awards to small businesses not participating in any other program under certain conditions. The Department of Transportation's (DOT's) Disadvantaged Business Enterprise (DBE) Program originally began in 1980 as a minority/women's business enterprise program \"established by regulation under the authority of Title VI of the Civil Rights Act of 1964 and other nondiscrimination statutes that apply to DOT financial assistance programs.\" Congress has reauthorized the DBE program several times since its inception; most recently in P.L. 114-94 , the Fixing America's Surface Transportation Act (FAST-Act). The FAST-Act provides, that, except to the extent the Secretary of Transportation determines otherwise, not less than 10% of the amounts made available for any program under Titles I (federal-aid highways), II (innovative project finance), III (public transportation) and VI (innovation) of the act and 23 U.S. Code 403 (highway safety research and development), shall be expended with DBEs. DOT also has a separate DBE program for airport concessions. A DBE is a for-profit small business owned and controlled by socially and economically disadvantaged individuals. Eligibility for the DBE program differs somewhat from the 8(a) program. For example, under the DBE program, women are presumed to be socially and economically disadvantaged individuals. Also, to be regarded as economically disadvantaged, an individual must have a personal net worth (excluding ownership interest in the firm and equity in his or her primary personal residence) that does not exceed $1.32 million. The DBE must also meet SBA size criteria and have average annual gross receipts not exceeding $23.98 million. Size limits for the airport concessions DBE program are higher. The DBE program's eight objectives are to 1. ensure nondiscrimination in the award and administration of DOT-assisted contracts in the department's highway, transit, and airport financial assistance programs; 2. create a level playing field on which DBEs can compete fairly for DOT-assisted contracts; 3. ensure that the department's DBE program is narrowly tailored in accordance with applicable law; 4. ensure that only firms that fully meet the program's eligibility standards are permitted to participate as DBEs; 5. help remove DBE-participation barriers in DOT-assisted contracts; 6. promote the use of DBEs in all types of federally-assisted contracts and procurement activities conducted by recipients; 7. assist the development of firms that can compete successfully in the marketplace outside the DBE program; and 8. provide appropriate flexibility to recipients of federal financial assistance in establishing and providing opportunities for DBEs. Other federal programs promote subcontracting with small disadvantaged businesses (SDBs). SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups. Individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence). Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do. Federal agencies must negotiate \"subcontracting plans\" with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs \"have an equitable opportunity to compete for subcontracts.\" Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract or give contractors \"monetary incentives\" to subcontract with SDBs. As of February 11, 2019, the SBA's Dynamic Small Business Search database included 2,538 SBA-certified SDBs and 100,595 self-certified SDBs. The SBA's 7(j) Management and Technical Assistance program provides \"a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities.\" Eligible individuals and businesses include \"8(a) certified firms, SDBs, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals.\" In FY2017, the 7(j) Management and Technical Assistance program assisted 4,100 small businesses. The SBA's Surety Bond Guarantee program aims to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. The program guarantees individual contracts of up to $6.5 million and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee ranges from not to exceed 80% to not to exceed 90% of the surety's loss if a default occurs. In FY2017, the SBA guaranteed 10,397 bid and final surety bonds with a total contract value of more than $6.3 billion. A surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. The surety bond reduces the risk associated with contracting. Surety bonds are meant to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract's terms and conditions. Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors—prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States—to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government. Small business mentor-protégé programs typically seek to pair new businesses with more experienced businesses in mutually beneficial relationships. Protégés may receive financial, technical, or management assistance from mentors in obtaining and performing federal contracts or subcontracts, or serving as suppliers under such contracts or subcontracts. Mentors may receive credit toward subcontracting goals, reimbursement of certain expenses, or other incentives. The federal government currently has several mentor-protégé programs to assist small businesses in various ways. The 8(a) Mentor-Protégé Program is a government-wide program designed to assist small businesses \"owned and controlled by socially and economically disadvantaged individuals\" participating in the SBA's Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) program) in obtaining and performing federal contracts. For that purpose, mentors may (1) form joint ventures with protégés that are eligible to perform federal contracts set aside for small businesses; (2) make certain equity investments in protégé firms; (3) lend or subcontract to protégé firms; and (4) provide technical or management assistance to their protégés. The SBA's A ll S mall B usiness Mentor-Protégé Program is a government-wide mentor-protégé program for all small business concerns, consistent with the SBA's mentor-protégé program for participants in the SBA's 8(a) Business Development program. The Department of Defense (DOD) Mentor-Protégé Program , in contrast, is agency-specific. It assists various types of small businesses and other entities in obtaining and performing DOD subcontracts and serving as suppliers on DOD contracts. Mentors may (1) make advance or progress payments to their protégés that DOD reimburses; (2) award subcontracts to their protégés on a noncompetitive basis when they would not otherwise be able to do so; (3) lend money to or make investments in protégé firms; and (4) provide or arrange for other assistance. Other agencies also have agency-specific mentor-protégé programs to assist various types of small businesses or other entities in obtaining and performing subcontracts under agency prime contracts. The Department of Homeland Security (DHS), for example, has a mentor-protégé program wherein mentors may provide protégés with rent-free use of facilities or equipment, temporary personnel for training, property, loans, or other assistance. Because these programs are not based in statute, unlike the SBA and DOD programs, they generally rely upon preexisting authorities (e.g., authorizing use of evaluation factors) or publicity to incentivize mentor participation. Currently, more than 1,200 mentor-protégé agreements are in place, even though there are issues with the accuracy and thoroughness of some federal agency records. Since 1978, federal agency heads have been required to establish federal procurement goals, in consultation with the SBA, \"that realistically reflect the potential of small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals\" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting the goals to the SBA. In 1988, Congress authorized the President annually to establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. Congress required the government-wide minimum participation goal for small businesses to be \"not less than 20% of the total value of all prime contract awards for each fiscal year\" and \"not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year\" for small businesses owned and controlled by socially and economically disadvantaged individuals. Each federal agency was also directed to \"have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency.\" The SBA was also required to report to the President annually on the attainment of the goals and to include the information in an annual report to Congress. The SBA negotiates the goals with each federal agency and establishes a small business eligible baseline for evaluating the agency's performance. The agency head is required to \"make consistent efforts to annually expand participation by small business concerns from each industry category.\" If the SBA and the agency cannot agree on the goals, the agency may submit the case to the Office of Management and Budget (OMB) Office of Federal Procurement Policy (OFPP) for resolution. The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., non-appropriated funds), contracts not covered by the FAR, acquisitions on behalf of foreign governments, and contracts not reported in the Federal Procurement Data System – Next Generation, or FPDS-NG (such as government procurement card purchases and contracts valued less than $10,000). These exclusions typically account for 18% to 20% of all federal prime contracts each year. The SBA then evaluates the agencies' performance against their negotiated goals annually, using FPDS-NG data, managed by the U.S. General Services Administration (GSA), to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually. Each agency that fails to achieve any proposed prime or subcontract goal is required to submit a justification to the SBA on why it failed to achieve a proposed or negotiated goal with a proposed plan of corrective action. Agencies can take credit in every category that is applicable to the recipient of the contract. For example, \"when counting goaling achievements, a contract awarded to a service-disabled Veteran-Owned Woman-Owned Small Business would be counted toward the Small Business (SB) goal, the Service-Disabled Veteran-Owned Small Business (SDVOSB) goal and the Women-Owned Small Business (WOSB) goal. However, these category counts are not summed to triple the total count. The Sum of Parts Does Not Equal the Whole (italics in original).\" Over the years, federal government-wide procurement goals have been established for small businesses generally ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, and P.L. 105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997); small businesses owned and controlled by socially and economically disadvantaged individuals ( P.L. 100-656 ); women ( P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994); small businesses located within a HUBZone ( P.L. 105-135 ); and small businesses owned and controlled by a service-disabled veteran ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999). The current federal small business procurement goals are at least 23.0% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year; 5.0% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses (including participants in the SBA's 8(a) Program) for each fiscal year; 5.0% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses; 3.0% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses; and 3.0% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses. There are no punitive consequences for not meeting these goals. However, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings. As shown in Table 1 , the FY2017 Small Business Goaling Report , using FPDS-NG data, indicates that federal agencies met the federal procurement goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017. Table 1 also provides, for comparative purposes, the percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017. Before awarding a federal contract, the contracting officer must affirmatively determine that the business is responsible to perform the contract. If the contracting officer determines that an apparent successful small business offeror lacks certain elements of responsibility (e.g., is unable to fulfill the requirements of a specific government procurement because it lacks capability, competency, capacity, credit, integrity, perseverance, tenacity, or limitations on subcontracting), the officer is required to refer the matter in writing to the SBA for review and a possible Certificate of Competency (COC), even if the next acceptable offer is also from a small business. The COC certifies in writing that the small business meets all required elements of responsibility for the purpose of receiving and performing a specific government contract. The \"COC program empowers the SBA to certify to contracting officers as to all elements of responsibility of any small business concern to receive and perform a specific government contract. The COC program does not extend to questions concerning regulatory requirements imposed and enforced by other federal agencies.\" As mentioned previously, the SBA's commercial market representatives conduct periodic compliance reviews of contractors awarded contracts that require an acceptable small business subcontracting plan. In addition, once the contract is completed, federal agencies are required to pay the contractor on a timely basis and pay interest penalties for late payments. Under specified circumstances, federal agencies may also pay contractors before the contract's payment's due date. The periodic compliance review can take place on-site, at the contracting agency, or virtual. Materials that may be reviewed include the contractor's contract files, correspondence that is directly or indirectly related to the contract, IT systems, subcontracting methods, and procedures. Contractors are selected randomly for audit. The SBA may enter into agreements with other federal agencies to conduct these assessments. The compliance report includes compliant and non-compliant items found during the assessment of the contractor's subcontracting activities and a rating indicating the contractor's level of compliance or non-compliance, ranging from unsatisfactory to outstanding. If any deficiencies are found, the contractor is required to submit, within 30 days of the compliance review rating letter date, a corrective action plan (CAP). The CAP is submitted to the SBA Area Office via email, or any method designated by the SBA. The commercial market representative conducts a follow-up compliance report within six months to a year of the date the SBA acknowledges receipt of the contractor's CAP to ensure that corrective actions have been taken to eliminate the deficiencies. The SBA keeps the federal agency that awarded the contract informed of the contractor's adherence to correcting the deficiencies. If the contractor refuses to provide or address all deficiencies in the CAP, a delinquent CAP letter is sent advising the contractor that it has 15 days from the letter's date to comply with federal regulations. If an acceptable CAP is not received in the allotted time frame the case is escalated to the SBA's subcontracting program manager who informs the SBA's Office of Government Contracting director and works with the SBA's Office of General Counsel and the federal agency that awarded the contract for resolution or to begin accessing liquidated damages. Once a contract is awarded, federal agencies are generally required to pay interest to prime contractors on any invoice payments the agency fails to make by the date(s) specified in the contract, or within 30 days of receipt of a proper invoice for the amount due if no date is specified in the contract. Similar requirements exist for prime contractors in paying subcontractors on construction contracts. These requirements are especially important for small businesses in the construction industry. Specifically, every construction contract awarded by a federal agency must contain clauses obligating the prime contractor to (1) pay the subcontractor for \"satisfactory performance\" under the subcontract within seven days of receiving payment from the agency and (2) pay interest on any amounts that are not paid within the proper time frame. The contract must also obligate the prime contractor to include similar payment and interest penalty terms in its subcontracts, as well as require its subcontractors to impose these terms on their subcontractors. This latter provision ensures that the payment and interest penalty requirements flow down to all tiers of construction subcontractors. In addition, required subcontracting plans must incorporate terms obligating the prime contractor to notify the agency awarding the contract in writing if a subcontractor is paid a reduced price for goods supplied or services completed under the contract, or if payment is made to the subcontractor more than 90 days past due. The prime contractor must include the reason for the reduction in payment or failure to pay a subcontractor within 90 days. If the contracting officer for a covered contract (a contract that requires an acceptable subcontracting plan) determines that a prime contractor has a history of unjustified, untimely payments to contractors, the contracting officer shall record the contractor's identity, describe the circumstances under which the contractor may be determined to have a history of unjustified, untimely payments to subcontractors, and include the contractor's identity in, and make publicly available through, the Federal Awardee Performance and Integrity Information System, or any successor. This information is used by federal agencies to \"evaluate the business ethics and quality of prospective contractors competing for Federal contracts and to protect taxpayers from doing business with contractors that are not responsible sources.\" Federal agencies are permitted to make an accelerated payment up to seven days before the required payment date in a federal contract, or earlier if the agency deems it necessary on a case-by-case basis if, after receiving a proper invoice, it is in the best interest of the government, and any of the following is true: the invoice in under $2,500; the payment is to a small business; or the payment is related to an emergency, disaster, or military deployment. In addition, the Secretary of Defense is required, to the fullest extent permitted by law, to establish an accelerated payment date for its small business prime contractors, with a goal of 15 days after receipt of a proper invoice for the amount due if a specific payment date is not established by contract. The Secretary of Defense is also required to establish, to the fullest extent permitted by law, an accelerated payment date for its prime contractors that subcontract with small businesses, with a goal of 15 days after receipt of a proper invoice for the amount due if a specific payment date is not established by contract and the prime contractor agrees to make payments to the subcontractor \"in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor.\" The small business contracting programs described in this report generally have strong bipartisan support. However, that does not mean that these programs face no opposition or that issues have not been raised concerning the impact or operations of specific programs. For example, small business advocates seek policies that reduce or eliminate exclusions that narrow the reach of small business contracting preferences, want the SBA to use the total value of all prime contract awards in the Small Business Goaling Report, and want the SBA to use a more discerning methodology for awarding performance grades to federal agencies in meeting its small business contracting goals. Critics have questioned some of these programs' effectiveness, in terms of both promoting small business opportunities to win federal contracts and a more diversified, robust economy. Many observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by whether the federal government and individual federal agencies meet the procurement goals in the annual Small Business Goaling Report. In recent years, the federal government has generally succeeded in meeting the government-wide goals of awarding 23% of the total value of all small business eligible prime contract awards to small businesses generally, 5% to SDBs, and 3% to SDVOSBs. However, it has had difficulty meeting the goals of 5% to WOSBs and 3% to HUBZone small businesses. The Small Business Goaling Report is the most convenient measure available to compare federal small business contracting performance over time, but it has limitations. For example, the report does not include all federal contracts, because some are not deemed to be small business eligible and others are not recorded in the FPDS-NG. In addition, the report does not evaluate the effect these contracts have on small businesses, industry competitiveness, or the overall economy. As one group of researchers has argued, the entire goal-setting process … is geared to measuring the dollars and contracts awarded to small business, and pays little attention to the effect that access to government contracts has on small business starts, growth, and wealth generation. Results of the program are also hard to isolate, difficult to measure, and generally not judged against the next best or other alternative policies [emphasis in original]. Comprehensive studies examining the effect of small business contracting preferences on small business startups, growth, wealth generation, and industry competitiveness may prove useful for congressional oversight. In the meantime, although the Small Business Goaling Report has its limitations, it can help policymakers identify programs most in need of examination. For example, the SBA has announced that it is focusing additional efforts on promoting the HUBZone program to federal contracting officials, primarily due to the continuing difficulties federal agencies have had in meeting the 3% goal for HUBZone small businesses.", "summary": "Congress has broad authority to impose requirements upon the federal procurement process, that is, the process whereby agencies obtain goods and services from the private sector. One way in which Congress has exercised this authority is by adopting measures to promote contracting and subcontracting between \"small businesses\" and federal agencies. These measures, among other things, declare a congressional policy of ensuring that a \"fair proportion\" of federal contract and subcontract dollars is awarded to small businesses; establish government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars awarded to small businesses; establish an annual Small Business Goaling Report to measure progress in meeting these goals; generally require federal agencies, under specified circumstances, to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses; authorize federal agencies, under specified circumstances, to set aside contracts that have an anticipated value greater than the simplified acquisition threshold exclusively for small businesses; authorize federal agencies to make sole source awards to small businesses when the award could not otherwise be made (e.g., only a single source is available, under urgent and compelling circumstances); authorize federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e.g., 8(a) small businesses, HUBZone small businesses, women-owned small businesses (WOSBs) and service-disabled veteran-owned small businesses (SDVOSBs)); and task the Small Business Administration (SBA) and other federal procurement officers with reviewing and restructuring proposed procurements to maximize opportunities for small business participation. Small business contracting programs generally have strong bipartisan support. However, that does not mean that these programs face no opposition, or that issues have not been raised concerning the impact and operations of specific programs. For example, small business advocates note that implementing regulations in the Federal Acquisition Regulation (FAR) narrow the reach (and impact) of some small business contracting preferences by excluding specific types of contracts, such as those listed in the Federal Supply Schedules, from FAR requirements pertaining to small business contracting. Advocates want the federal government to enact policies that reduce or eliminate such exclusions. Critics have questioned some of these programs' effectiveness, in terms of both promoting small business opportunities to win federal contracts and promoting a more diversified, robust economy. Many observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by whether federal government and individual federal agencies meet the predetermined procurement goals in the annual Small Business Goaling Report. In recent years, the federal government has generally succeeded in meeting the government-wide goals of awarding 23% of the total value of all small business eligible prime contract awards to small businesses, 5% to small disadvantaged businesses (SDBs), and 3% to SDVOSBs. It has had difficulty meeting the goals of 5% to WOSBs and 3% to HUBZone small businesses. The Small Business Goaling Report is the most convenient measure available to compare federal small business contracting performance over time, but it has limitations. For example, the SBA excludes some contracts from the report in its determination of what is \"small business eligible\" and some federal procurement activities are not included because they are not recorded in the Federal Procurement Data System—Next Generation. It also does not evaluate the effect these contracts have on small businesses, industry competitiveness, or the overall economy.", "document_type": "crs"}
{"report": "The U.S. Fourth National Climate Assessment, released in 2018, concluded that \"the impacts of global climate change are already being felt in the United States and are projected to intensify in the future—but the severity of future impacts will depend largely on actions taken to reduce greenhouse g as [GHG] emissions and to adapt to the changes that will occur.\" Although a variety of efforts seeking to reduce GHG emissions are currently underway on the international and sub-national level, federal policymakers and stakeholders have different viewpoints over what to do, if anything, about future climate change and related impacts. Their views regarding climate change cover a wide range of perspectives. For example, some contend that climate change poses a \"direct, existential threat\" to human society and that nations must start making significant reductions in GHG emissions in order to avoid \"dire effects.\" To support this argument, proponents of climate change mitigation highlight the evidence and conclusions from recent reports that are generally considered authoritative, including: 1. The Intergovernmental Panel on Climate Change, Global W arming of 1.5°C , 2018; and 2. The U.S. Global Change Research Program, Fourth National Climate Assessment , Volume II: Impacts, Risks, and Adaptation in the United States , 2018. On the other hand, some question whether there are sufficient risks of climate change to merit a federal program requiring GHG emission reductions. In addition, others argue that a unilateral approach to climate change by the United States could disproportionately impact domestic industries while achieving minimal results in global climate change mitigation. If Congress were to consider establishing a program to reduce GHG emissions, one option would be to apply a tax or fee on GHG emissions or the inputs that produce them. This type of approach is commonly called a carbon tax or a GHG emissions fee (see \"Terminology Issues: A Carbon Tax or an Emissions Fee?\"). This report does not compare and analyze the multiple policy tools available to Congress that could address climate change (see text box \"Other Policy Options for Addressing GHG Emissions\"). This report focuses on the policy considerations and potential impacts of using a carbon tax or GHG emissions fee to control GHG emissions. The key human-related GHG is CO 2 , which is generated primarily through the combustion of fossil fuels: coal, oil, and natural gas. In 2016, fossil fuel combustion accounted for 94% of U.S. CO 2 emissions and 76% of U.S. GHG emissions. A carbon tax could apply either directly to GHG emissions or to the materials—based on their carbon contents—that ultimately generate the emissions (i.e., \"emissions inputs\"). A carbon price on emissions or their emissions inputs—mainly fossil fuels—would increase the relative price of the more carbon-intensive energy sources, particularly coal. This result could spur innovation in less carbon-intensive technologies (e.g., renewable energy, nuclear power, carbon capture and sequestration [CCS]) and stimulate other behavior that may decrease emissions, such as efficiency improvements. The energy price increases could also have both economy-wide impacts and negative effects on specific industries and particular demographic groups. A carbon tax approach has received some attention and debate in recent years. In the 115 th Congress, Members introduced nine carbon tax or fee proposals. Outside of Congress, the Climate Leadership Council—a bipartisan group of former policymakers and industry leaders—published a conceptual carbon tax approach in 2017 that generated some interest. Some of the industry leaders on the council represent major energy companies, including Shell, BP, and ExxonMobil. On the other hand, many Members have expressed their opposition to a carbon tax. Starting in the 112 th Congress and going through the 115 th Congress, Members have introduced resolutions in both the House and Senate expressing the view that a carbon tax is not in the economic interests of the United States. In 2018, the House passed a resolution \"expressing the sense of Congress that a carbon tax would be detrimental to the United States economy\" ( H.Con.Res. 119 ). An analogous resolution was not introduced in the Senate in the 115 th Congress. The first section of this report examines carbon tax design issues, including the point of taxation, the rate of taxation, and potential border carbon adjustments. The second section discusses issues related to the distribution of carbon tax revenues. The third section discusses additional considerations associated with a carbon tax program, including estimates of GHG emissions, federal revenue, and fossil fuel prices and changes in energy use. The fourth section provides concluding observations. If policymakers decide to establish a carbon tax system, Congress would face several key design decisions, including the point of taxation—where to impose the tax and what to tax—the rate of taxation, and whether and/or how to address imported carbon-intensive materials. Alternatively, Congress could direct one or more federal agencies to determine these design features through a rulemaking procedure. Although a few of the GHG emission reduction proposals in prior Congresses delegated such authority to an agency, such as the U.S. Environmental Protection Agency (EPA), all of the proposals since the 111 th Congress have included some degree of design details in the statutory language. (A later section discusses carbon tax revenue application considerations.) The point of taxation would determine which entities would be required to (1) make tax payments based on emissions or emission inputs, such as fossil fuels, (2) monitor emissions or emission inputs, and (3) maintain records of relevant activities and transactions. This section provides some considerations for policymakers deciding which GHG emissions and/or emission sources to cover in a carbon tax system. Throughout the U.S. economy, millions of discrete sources generate GHG emissions: power plants, industrial facilities, motor vehicles, households, commercial buildings, livestock, etc. Administrative costs and challenges would likely increase with a broader scope of an emissions tax. A carbon tax may apply to CO 2 emissions alone, which account for most U.S. GHG emissions, or to multiple GHGs. Carbon tax proposals that apply only to CO 2 generally attach a price to a metric ton of CO 2 emissions (mtCO 2 ). Some sources emit non-CO 2 GHGs, such as methane, nitrous oxides, and sulfur hexafluoride. GHG emissions from these sources could be addressed by attaching a price to a metric ton of CO 2 emissions-equivalent (mtCO 2 e). This term of measure is used because GHGs vary by global warming potential (GWP). At these sources, the determined GWP values would be an important issue. Policymakers may consider limiting the tax to sectors or sources that emit above a certain percentage of total U.S. GHG emissions, many of which currently report their emissions to the government. For more than 20 years, monitoring devices or systems have been installed in smokestacks of most large facilities, such as power plants, which are required to periodically report emissions data to EPA. In addition, since 2010, EPA has collected annual emissions data from approximately 8,000 facilities that directly release above certain amounts of GHG emissions. Using these established monitoring frameworks, policymakers could employ a \"downstream\" approach, applying a carbon tax at the point where the GHGs from these facilities are released to the atmosphere. Alternatively, the tax could be applied to reliable proxies for emissions, such as emission inputs. For example, the carbon content of fossil fuels—coal, natural gas, petroleum—can serve as a proxy for the emissions released when the fuels are combusted. Applying a tax on emission inputs allows for the consideration of various points of taxation. For instance, emission inputs could be taxed at \"upstream\" (e.g., wells) or \"midstream\" stages in that process (e.g., refineries), the latter allowing for potential tax administration advantages that may be provided by specific infrastructure chokepoints in the fossil fuel market. For example, with respect to petroleum, the number of upstream sources—wells that produce crude oil—is over 445,000, but the number of midstream sources—facilities that refine crude oil—is only 137. Table A-1 (in Appendix A) lists the top GHG emission sources in the United States. These sources combined to account for approximately 95% of U.S. GHG emissions in 2016. Table A-1 identifies the number of entities for each source category (e.g., number of coal mines, number of steel production facilities) and the percentage of total U.S. GHG emissions the category contributes. In the case of fossil fuel combustion—which accounted for 76% of total U.S. GHG emissions—the table provides several options for segmenting the universe of sources if policymakers choose to implement a carbon tax. It identifies the number of entities that might be subject to the carbon tax under a particular option (pending any exclusions). For example, policymakers could address fossil fuel combustion emissions by applying a carbon tax to fossil fuels (based on their carbon content) at the following entities, which include both upstream and midstream infrastructure chokepoints: 137 petroleum refineries (based on 2017 data) and 166 petroleum importers (based on 2018 data); 671 coal mines and eight companies supplying imported coal (based on 2017 data); and 1,679 entities that report natural gas deliveries to the Energy Information Administration (EIA) on Form EIA-176 and 123 natural gas fractionators (based on 2016 data). Some of the above points of taxation might take advantage of the administrative frameworks for existing federal excise taxes. For example, a per-barrel federal excise tax on crude oil at the refinery supports the Oil Spill Liability Trust Fund. An excise tax on the sale or use of coal supports the Black Lung Disability Trust Fund. A central policy choice when establishing a price on GHG emissions is the rate of the carbon tax. Several approaches, which are discussed below, could inform the decision. One approach would set the carbon tax rate at a level or pathway—based on modeling estimates—that would achieve a specific GHG emissions target. For example, a 2018 study estimated the carbon tax rate needed to meet the U.S. GHG emission reduction targets established under the 2015 Paris Agreement: 26%-28% below 2005 net GHG emission levels by 2025. The study found that a constant tax rate of $43/ton starting in 2019 would meet the 2025 reduction target. Emissions reduction estimates from carbon tax programs are based on multiple assumptions. Accordingly, such estimates provide different tax rates needed to meet a particular emissions target depending on these assumptions. See \" Impacts on GHG Emission Levels \" for selected analyses of emission reductions for a given carbon price and rate of price increase. Under another approach, policymakers could base the carbon tax rate on the estimated marginal net benefits associated with reduced CO 2 emissions. The net benefits would be the avoided net damages (i.e., costs) of climate change. The estimates of net benefits of avoided emissions often rely on analyses of the social cost of carbon (SC-CO 2 ) or the social cost of greenhouse gases (SC-GHG ). Therefore, policymakers could use SC-CO 2 measurements—as the basis for an estimate of the net benefits of a marginal change in emissions—to set the rate of a carbon tax or emissions fee. One potential challenge of relying on SC-CO 2 estimates to set a carbon fee are methodological concerns. For example, the existing estimates in peer-reviewed research cover a wide range. In addition, some argue that the underlying simulation models for estimating the SC-CO 2 values are insufficient. For any level of emissions, the projected increase in global average temperature may cover multiple degrees Fahrenheit, and other measures of climate change, such as precipitation patterns, may encompass directional uncertainties. No estimates of impacts are comprehensive at this time, and many of the risks are difficult to estimate and value. When valuing the SC-CO 2 , analysts encounter a range of views on methods and assumptions, and establishing study parameters may be challenging. For example, estimates of the monetary values of climate change impacts may be difficult or controversial to estimate, such as the monetary values associated with human deaths or sickness. A related framework question is whether to include global climate impacts or just domestic impacts. In addition, the element of time in climate change impacts particularly complicates the valuation. The fact that many impacts of climate change will occur in the distant future requires consideration of society's willingness to pay in the near term to reduce emissions that would cause future damages, mostly to future generations. To take time into account, economists discount future values to a calculated \"present value.\" Economists do not agree on the appropriate discount rate(s) to use for a multi-generational, largely nonmarket issue such as human-induced climate change. The choice of discount rate can significantly increase or decrease values of the SC-CO 2 . A low discount rate would give greater value today to future impacts than would a higher discount rate. High discount rates can reduce the value today of future climate change impacts to a small fraction of their undiscounted values. A high discount rate would recommend applying fewer of today's resources to addressing climate change impacts in the future. Since 2008, federal agencies have used SC-CO 2 estimates in dozens of final rulemakings as a method to estimate the net benefits of abating CO 2 emissions. An Interagency Working Group prepared SC-CO 2 estimates, which were updated over time and subjected to expert and public comment. On March 28, 2017, President Trump issued Executive Order 13783, \"Promoting Energy Independence and Economic Growth,\" which effectively withdrew the federal SC-CO 2 estimates. Nonetheless, federal agencies have used new, interim values generated by EPA in 2017, modified from the withdrawn technical support documents, in regulatory and other decisions. Legislation could set a carbon price citing any of these SC-CO 2 values or others available from nonfederal researchers or prescribe methods for estimating new ones. Using SC-CO 2 estimates to set the tax rate would involve a cost-benefit framework. Although many posit that a cost-benefit framework remains the best option, some economists argue that a cost-benefit framework may be inappropriate for climate change policy for these reasons Many experts expect climate change—and policies to address it—to cause nonmarginal changes to economies and ecosystems. The changes are expected to increase disproportionately with incremental climate change with a potential for crossing critical \"tipping points\" after which systems change dramatically and rapidly. Climate change impacts are multi-generational, and uncertainty and disagreement exists about whether and how to assign a present value to social costs and benefits over generations. Some impacts from climate change may be irreversible on the timescale of human civilizations, such as melting of major ice sheets in Antarctica or Greenland. Policymakers might consider a carbon tax as a fiscal tool to help reduce the federal deficit, reduce other taxes, or pay for specific programs that may or may not be related to climate change policy. In addition, some have proposed a phased-in approach, setting a rate that is initially lower but increases at an announced or adjustable rate either for a fixed period or indefinitely. Advantages of this approach include providing an opportunity for consumers and investors to adjust their behavior before the higher tax rates go into effect, such as purchasing more energy efficient appliances or investing in low-emissions technologies. Phasing in a carbon tax, however, could delay climate-related benefits. If Congress finds agreement in principle on carbon pricing, the rate(s) could emerge from the process of reaching political agreement. Elements that might be considered include the options described above or consideration of the magnitude of overall economic impact; impacts on certain economic sectors, regions, or population groups; timing to motivate and allow an orderly transition to a lower-GHG economy; or other factors. Many stakeholders have voiced concerns over how a U.S. carbon price system would interact with policies in other nations, particularly if the United States were to enact a carbon tax system that covers more sources or is more stringent than enacted elsewhere. A central concern is that a U.S. carbon tax could raise U.S. prices more than the prices of goods manufactured abroad, potentially creating a competitive disadvantage for some domestic businesses. Certain businesses may become less profitable, lose market share, and reduce jobs. The industries generally expected to experience disproportionate impacts under a U.S. carbon tax are often described as \"emission-intensive, trade-exposed\" industries. An industry's CO 2 emission intensity is a function of both direct CO 2 emissions from its manufacturing process (e.g., CO 2 from cement or steel production) and indirect CO 2 emissions from the inputs to the manufacturing process (e.g., electricity, natural gas). Such industries are likely to experience greater cost increases than less carbon intensive industries, all else being equal. In general, trade-exposed industries are those that face greater international competition compared to other domestic industries. A carbon tax could present a particular challenge for these industries, because they might be less able to pass along the tax in the form of higher prices, because they may lose global market share—and jobs—to competitors in countries lacking comparable carbon policies. Policymakers might consider approaches to mitigate these potential economic impacts in several ways. One approach that has received interest in recent years is a border adjustment mechanism, which is often described as a border carbon adjustment (BCA) in the carbon tax context. A BCA would apply a tariff to emission-intensive, imported goods such as steel, aluminum, cement, and certain chemicals. Each of the carbon price proposals in the 115 th Congress would have established a BCA to address emission-intensive imports. Another rationale for adding a BCA to a carbon tax system is the possibility that it would encourage other nations to adopt comparable carbon price policies. Many of the recently proposed BCA mechanisms allow for exemptions for nations with comparable programs. To date, no nations have implemented a BCA as part of their climate change policies. Establishing an economically efficient BCA would likely present substantial challenges. For example, policymakers must decide which goods and/or industries would be covered by a BCA and how the adjustment program would assess the comparability of varied climate-related policies in other nations. In addition, accurately determining and verifying the volume of GHG emissions embodied in a particular imported product would be data intensive and challenging. To alleviate some of the measurement complexity, policymakers could limit the program to selected industries and apply default values and assumptions to particular manufacturing processes. However, this simplified approach could result in less accurate import price adjustments, which could potentially affect the accuracy of GHG emission reductions achieved by the carbon tax program. Another option would be to allow companies to provide measured, independently verified emissions data as an alternative to default values. In addition, the border adjustment approach would likely raise concerns of violating international trade rules. Further, some researchers have highlighted the potential for unintended consequences from a BCA. For example, some studies have found that a border adjustment may lead to lower net exports than the carbon price alone, due to the adjustment's terms-of-trade effect on U.S. currency. These issues are beyond the scope of this report, but some of the concerns may be lessened to some degree if a larger number of nations establish comparable emission reduction policies, as many have agreed to do under the Paris Agreement. Another possible rationale for a BCA is to address the concern of \"emissions leakage\" (or \"carbon leakage\"). Emissions leakage \"occurs when economic activity is shifted as a result of the emission control regulation [e.g., a carbon tax program] and, as a result, emission abatement achieved in one location that is subject to emission control regulation is [diminished] by increased emissions in unregulated locations.\" The concern of emissions leakage has been central in the debate over whether the United States (or any nation) should unilaterally address GHG emissions. A BCA may diminish the potential for emissions leakage by reducing the incentive to shift economic activity to a nation without a comparable carbon tax. However, some recent studies raise questions regarding the degree to which emissions leakage would be a concern under a unilateral U.S. carbon tax. Although a tax may be levied on fossil fuels or GHG emission sources at various points in the economy, the carbon tax impacts may be experienced elsewhere. Policymakers have multiple options to address these expected impacts. Policymakers would face challenging decisions regarding the distribution of the new carbon tax revenues. As discussed below, some economic analyses indicate that certain distributions of tax revenue—depending on the level of the tax—would have a greater economic impact than the direct effects from the tax or fee on GHG emissions. Carbon tax revenues could be treated as general fund revenue without a dedication to a specific purpose in the enacting legislation (i.e., subject to the annual appropriations process), or policymakers could state that the new revenues would support deficit (or debt) reduction. Alternatively, the enacting legislation could return the tax revenue to the economy in some manner, sometimes called \"revenue recycling.\" All of the carbon tax legislative proposals in recent Congresses have proposed some manner of revenue recycling, specifically directing the carbon tax revenue to support specific policy objectives. Carbon tax revenues may be used to support a variety of policy goals. When deciding how to allocate the new revenue stream, policymakers would likely encounter trade-offs among objectives, including: reducing the economy-wide costs resulting from a carbon tax program; alleviating the costs borne by subgroups in the U.S. population, particularly low-income households and/or communities most dependent on carbon-intensive economic activity; and supporting specific policy objectives, such as domestic employment, climate change adaptation, energy efficiency, technological advance, energy diversity, or federal deficit reduction, among others. In general, economic carbon tax studies have found that the relative ranking of revenue recycling options to mitigate the economy-wide impacts is generally the opposite of the relative ranking for alleviating distributional impacts. The contrasting relative rankings highlight a central tradeoff policymakers would face when deciding how to allocate carbon tax revenues. The following sections discuss these trade-offs and some of the revenue application options that have received attention in recent years. A large body of economic literature has examined the economic impacts of hypothetical carbon tax programs, particularly the impacts of using the carbon tax revenues for different purposes. Many of the economic studies cited below were prepared prior to the enactment of the Tax Cuts and Jobs Act (TCJA, P.L. 115-97 ). Signed by President Trump in December 2017, the act changed various elements of the U.S. federal tax system. In particular, the act lowered the corporate income tax rate from 35% to 21%. As discussed below, adjusting the corporate income tax rate is one of the central policy options generally considered in carbon tax economic literature both before and after enactment of P.L. 115-97 . Based on a selected review of the economic literature that includes the tax code changes in P.L. 115-97 , the central conclusions from carbon tax literature regarding revenue recycling appear to be largely unchanged. A primary concern with a carbon tax is the potential economy-wide costs that may result. Generally, a tax or fee on GHG emissions or the fuels that generate them would increase certain energy prices, namely fossil fuels, in the near- to medium-term as well as the prices of goods and services produced using these materials, like electricity. This outcome is inherent to the carbon tax, as its purpose is to increase the relative price of the more carbon-intensive energy sources compared to less carbon-intensive alternatives, encourage innovation in less carbon-intensive technologies, and promote other activity (e.g., energy efficiency) that may decrease emissions. These expected outcomes will have some economy-wide impacts. Ultimately, the economy-wide effects would depend on a number of factors, including, but not limited to, the magnitude and scope of the carbon tax and, most importantly, use of the ensuing revenues. Economy-wide costs (referred to as macroeconomic costs) are often measured in terms of changes in projected gross domestic product (GDP) or another societal-scale metric, such as economic welfare. The magnitude of macroeconomic impacts from a carbon tax has been a subject of debate among policymakers and stakeholders. In addition, results of economy-wide impacts will not include comparisons of impacts to different subpopulations or geographic regions, which may be of interest to policymakers. Multiple economic studies and models have examined and compared various options for addressing the economy-wide impacts that may result from a carbon tax. One option for reducing the economic cost of a carbon tax is using the revenue to reduce existing taxes, such as those on labor, income, and investment. Economists generally describe such taxes as distortionary, because the taxes discourage economically beneficial activity, such as employment and investment. Another option for policymakers is to use the tax revenues to address the national debt. Fewer studies have examined deficit reduction scenarios, because \"modeling the effects of budget deficits is much more difficult than modeling the effects of tax cuts.\" Some studies have concluded that using tax revenues for this purpose would help alleviate economy-wide costs from a carbon tax because of the reduced need to impose distortionary taxes in the future. These studies indicate that the economy-wide benefit would be delayed and its realization assumes policymakers would, sometime in the future, address the deficit by raising taxes. Many recent legislative proposals would distribute the carbon tax revenue back to households in lump-sum payments. Policymakers have generally included this carbon tax revenue application to address distribution impacts (discussed below). These payments could take multiple forms. Economic analyses typically assume an equal payment to individuals or households regardless of their income or location or the effects of the carbon price on them individually. Alternatively, payments could be targeted or scaled to different segments of the population. Among the options mentioned above, economic studies indicate that using carbon tax revenues to offset reductions in existing, distortionary taxes would be the most economically efficient use of the revenues and yield the greatest benefit to the economy overall. This concept is sometimes referred to as a \"tax swap.\" Using carbon tax or fee revenues to offset other distortionary taxes (e.g., labor or capital) may yield a \"double-dividend,\" which includes: reduced GHG emissions; and reduced market distortions by reducing other distortionary taxes, such as investment or income. The economic models that examine the economic impacts of a carbon tax differ in their frameworks and underlying assumptions and often include multiple scenarios involving different uses of carbon tax revenue. In general, the economic models find that certain revenue recycling options may reduce the economy-wide carbon tax impacts but may not eliminate them entirely. Some studies cite particular economic modeling scenarios in which a carbon tax with certain revenue recycling applications would produce a net increase in GDP or economic welfare compared to a baseline scenario. These results indicate that, in certain modeling conditions, the economic improvements gained by reducing existing distortionary taxes would be greater than the costs imposed by the new carbon tax (without including the intended climate benefits of the policy). For example, results from a 2018 study demonstrated a net increase in GDP, compared to baseline conditions, when carbon tax revenues were used to finance proportionate reductions in labor tax rates (payroll tax). In general, the economic carbon tax studies usually agree on the relative ranking of revenue recycling options in terms of their ability to mitigate the economy-wide impacts of a carbon tax program. The studies indicate that the approaches that use carbon tax revenue to proportionately lower existing tax rates are able to mitigate more of the carbon tax economy-wide costs than using the revenue to provide a lump-sum distribution to individuals or households. Researchers prepared multiple carbon tax analyses prior to the enactment of the TCJA in 2017 that estimated the magnitude GDP impacts. As with other estimates relating to carbon tax impacts, the results depend on the scope of the carbon tax, underlying assumptions in the analytical model, and the terms of measurement: Some estimates measure GDP growth rates; others measure actual GDP. Figure 1 illustrates the modeled GDP results from a 2018 carbon tax analysis that includes the changes made by the TCJA. This study assessed the GDP impacts under a $50/mtCO 2 e carbon tax (starting in 2020 and increasing by 2% annually) that would apply to CO 2 emissions from fossil fuel combustion and methane emissions from fossil fuel production activities. The figure compares projected GDP impacts under a baseline scenario (i.e., no carbon tax) with three carbon tax revenue applications: a payroll tax rate reduction tax swap, a lump-sum distribution to households, and a scenario that would use tax revenue to reduce the national debt for 10 years and then use revenues for a lump-sum distribution to households. The figure projects GDP impacts in 2020, 2024, 2029, and 2039. As the figure indicates, the payroll tax rate scenario would result in a 0.1% loss of GDP in the first year (2020), but would yield GDP gains in subsequent years compared to baseline. The lump-sum distribution approach would yield GDP losses each year, ranging from 0.3% to 0.4% below the projected baseline. The deficit reduction approach would yield a range of GDP losses in the first 10 years—ranging from 0.4% to 0.04%—but would yield a GDP gain in 2039 (if not before), compared to baseline. Opponents of a carbon tax approach often highlight the GDP losses that would result from a carbon tax. Policymakers and stakeholders may have different perspectives regarding whether the magnitude of the GDP impacts are significant. In addition, GDP impact estimates may be presented in several ways. For example, one could compare the differences in GDP value for a particular year between carbon tax scenarios and a baseline scenario. This approach is employed in the above figure. Alternatively, one could present the GDP losses with a cumulative measure. For instance, if one were to add up the annual GDP losses (for example, over a 10-year period) from the lump-sum scenario compared to the baseline scenario, the resulting sum would be much larger. These types of calculations would require assumptions about annual GDP growth rates. Some may point out that the GDP impact estimates do not account for the environmental and public health benefits for reducing GHG emissions and that the GDP projections should be compared with the climate benefits achieved from the program as well as the estimated costs of taking no action. As discussed above, estimates of climate-related benefits and costs often contain considerable uncertainty and have generated debate in recent years. Many economic analyses have found that a carbon tax (before revenue recycling) would produce a regressive outcome among households, with lower-income households facing a larger impact from the tax than higher-income households. However, \"the degree to which a carbon tax is found to disproportionately burden low-income households varies across studies, based on the metrics against which analysts measure costs.\" Entities that pay the carbon tax may pass its costs back to fuel producers or forward to fuel consumers. If entities pass the costs forward, consumers would face higher prices for fuels and electricity and carbon-intensive products. When the carbon tax is passed forward to consumers, lower-income households in particular would likely face a disproportionate impact (i.e., regressive outcome), because a larger percentage of their income is used to pay for energy needs, such as electricity, gasoline, or home heating oil. Many economic analyses of carbon price scenarios assume that the vast majority (if not all) of the carbon tax impact is passed forward to consumers, leading to a regressive outcome. On the other hand, if entities pass the costs backward to producers, the tax impacts would fall on labor through reduced wages or owners of capital through reduced returns on investment. Economic models that assume this outcome produce more progressive results (absent revenue recycling), with lower-income households experiencing smaller impacts than higher-income households. The economic analyses appear to agree that the distributional effects among households (i.e., regressive vs. progressive) of a carbon tax program would be largely dependent on how the carbon tax revenues were used. A number of economic studies have used models to estimate the impacts of a carbon tax across households under several revenue distribution scenarios. The results vary because the studies use different modeling frameworks, carbon tax rates and scopes, underlying assumptions, and ways to measure impacts. For example, a 2018 study assessed the impacts to household income for different household quintiles under a carbon tax of $50/mtCO 2 e, starting in 2020. This study examined four revenue distribution scenarios: 1. reduce federal deficit, 2. reduce corporate income tax rate, 3. reduce payroll tax rate, and 4. provide a per-capita rebate to households. This report highlights this study, because it includes carbon tax revenue applications that have generated interest in recent years. In addition, this analysis was prepared after the 2017 tax rate changes in P.L. 115-97 . Figure 2 illustrates the modeled results, which the study measured as percentage reductions to household income. Thus, negative percentages illustrated in the figure are gains to household income. The per-capita rebate approach provides the most progressive result, yielding a net benefit for the bottom three household quintiles but a net loss for the top quintile. The fourth quintile impact is zero. By comparison, the other approaches produce varying degrees of regressive outcomes while providing a net gain for wealthier groups in two particular instances. Of the four options, the payroll tax rate reduction approach estimates the smallest variance between the income quintiles, ranging from a 0.5% loss for the lowest quintile to a 0.2% gain for the fourth quintile. The fifth quintile impact is zero. The relative ranking among options for progressivity is generally the opposite of the relative ranking for mitigating economy-wide impacts. Other economic analyses have found similar relative rankings of revenue recycling options. The contrasting rankings highlight a central tradeoff policymakers would face when deciding how to allocate carbon tax revenues. Policymakers could allot some portion of the revenues to partially support both objectives. In a 2018 carbon tax study, economic modelers assessed a scenario in which a portion of the revenue was used to offset the welfare impacts for the lowest-income household quintile and the remaining revenue supported reductions in capital tax rates. The study's models estimated that a carbon tax's impacts on the lowest-income household quintile could be counteracted with approximately 10% of the revenue. This would allow for 90% of the revenue to be used to reduce capital tax rates and thus address the economy-wide impacts from the carbon tax. As discussed above, a carbon tax is projected to disproportionately impact certain industries, particularly those that are described as \"emission-intensive, trade-exposed industries.\" To address these concerns, many of the recent carbon tax legislative proposals have included design mechanisms that would attach a carbon price to certain imported materials and products (see \" Border Carbon Adjustments \"). Another approach to addressing the competitiveness concerns of domestic industries would involve distributing a portion of the carbon tax revenues to emission-intensive, trade-exposed industries as rebates based on their output. Output rebate proposals generally determine rebate amounts by measuring emissions intensity at the relevant sector level or by a benchmark that would encourage facilities to reduce their emissions intensity. These rebates could be phased out over time or continue until other nations adopt comparable carbon price policies. Under a carbon tax system in Canada, which is scheduled to take effect in 2019, industries will be subject to an \"output-based pricing system.\" Some contend that the data and administrative resources necessary to implement such a program would be substantial. A carbon tax system is also expected to disproportionately impact fossil fuel industries and the communities that rely on their employment. In particular, coal-mining communities are expected to experience substantial impacts based on the coal production declines predicted in carbon tax analyses. For example, one model estimates that under a $50/mtCO 2 e carbon tax, annual U.S. coal production would decline by almost 80% in 2030 compared to a reference case. Policymakers may consider supporting worker transition or community transition assistance to help mitigate the economic impacts. Several of the recent carbon tax proposals would have devoted carbon tax revenues for this objective. Policymakers may also consider using the carbon tax revenues to provide funding to support a range of objectives, which may include policy goals that are not directly related to climate change. Some options are identified below, and many have been included in recent legislative proposals or in state GHG mitigation programs that raise revenues: Technology development and deployment: Efforts to reduce the costs of emission mitigation technologies—particularly carbon capture, utilization, and sequestration—are often considered in carbon tax programs, and Congress has funded such programs in other legislation. Energy efficiency programs: Although a carbon tax would likely stimulate energy efficiency to some degree, Congress may consider using the revenues to provide additional incentives and/or technical assistance, particularly to encourage households and small businesses to increase efficiency, which would also reduce the effects of the tax on their energy bills. States in the Regional Greenhouse Gas Initiative (RGGI) have used revenues from the program to support efficiency improvements, among other objectives. Biological sequestration: Trees, plants, and soils sequester carbon, removing it from the earth's atmosphere. Revenues could be used to promote carbon sequestration efforts, particularly forestry or agricultural activities, which would supplement the GHG reductions of the carbon tax. Adaptation to climate change: Regardless of emission reduction efforts taken today, climatic changes are expected due to the ongoing accumulation of GHGs in the atmosphere. Therefore, some advocate using revenues to reduce potential damage—domestically and internationally—of a changing climate. Deficit reduction: The possible contribution of a carbon tax to deficit reduction would depend on the magnitude and scope of the carbon tax, various market factors, and assumptions about the size of the deficit. Some carbon tax proposals in recent congressional sessions would have allotted a portion of revenues for deficit reduction. Infrastructure funding: Some recent proposals have provided funding for infrastructure projects. This objective could be combined with funding for adaptation activities. Multiple economic studies have estimated the emission reductions that particular carbon tax designs could achieve. Economic models provide estimates based on the best information available at the time. Comparing results from different studies is problematic, because the studies' scenarios differ in multiple ways, including the tax rate, start date, scope of the program, assumptions about economic growth and technological advances, and assumptions about other federal and state policies and their effects. A 2018 study avoided some of these comparison difficulties by inviting modeling teams to analyze a coordinated set of scenarios. The 2018 Stanford Energy Modeling Forum study (\"EMF 32\") assembled 11 modeling teams to analyze the economic impacts of four carbon tax scenarios starting in 2020: a $25/metric ton and $50/metric ton carbon tax, increasing annually by 1% and 5%. Within each of these carbon price frameworks, the models ran separate revenue distribution scenarios: a reduction in labor tax rates, a reduction in capital tax rates, and household rebates. Figure 3 illustrates the study's estimates of CO 2 emissions from fossil fuel combustion. The red lines in the figure display the average values for the 11 models. The shaded areas illustrate the range of results, highlighting the uncertainties in emission reduction estimates. Based on these results, the study authors concluded that each of the tax rate scenarios would likely achieve the U.S. CO 2 emission reduction targets under the Paris Agreement. As Figure 3 indicates, a carbon tax or emissions fee could be set with the expectation that it would achieve an emissions reduction target, but the resulting level of emissions would be uncertain. The uncertainty of resulting emissions may lead some stakeholders to disfavor a carbon tax or fee option to control GHG emissions. Although uncertain emissions are inherent with a carbon tax approach, Congress could employ certain design elements to enhance the emission control certainty. For example, the existing GHG emission reporting data could be used to track the impact and performance of a carbon price. If policymakers determine that emission reduction is not occurring at a desired pace, the price could be amended. Legislation could establish the conditions and process by which price changes could occur. Some may argue that adjusting the carbon price to reflect actual emissions performance would undermine the benefits of price certainty. Others may point out that unplanned adjustments to the carbon price could be politically unpalatable. For example, it may be difficult for policymakers to increase the tax rate, especially during periods of high energy prices. Some have suggested that Congress authorize an independent board or agency with the mandate to modify the tax rate administratively in order to meet pre-determined emission reduction objectives. Although this approach would likely improve emission certainty, long-term price certainty may be sacrificed to some degree, depending on the authority of the delegated entity to adjust the tax rate. Some would argue that potential year-to-year emission variations under a carbon tax would not undermine efforts to control climate change so long as long-term emission goals are achieved. Indeed, they would assert that annual emission fluctuations are preferable to price volatility that could result from an emissions cap program. They support their preference for price control by suggesting that CO 2 generates damages through its overall accumulation as concentrations in the atmosphere, not its annual flow. A potential concern of a carbon tax is whether it would be effective in reducing GHG emissions in all of its covered sectors, particularly emissions in the transportation sector. As of 2016, the transportation sector contributes the largest percentage (36%) of CO 2 emissions from fossil fuel combustion, with electric power second at 35%. Carbon tax analyses generally agree that the majority of the emission reductions resulting from a carbon tax program would occur in the electricity sector. By comparison, economic models generally conclude that a carbon tax would have much less of an impact on emissions in the transportation sector. Several factors explain this projected outcome. The transportation sector offers fewer opportunities to switch to less carbon-intensive fuels in the short term than does the electric power sector, which can displace coal with natural gas relatively quickly. In addition, short-term emission changes in the transportation sector are largely influenced by changes in driving demand, which has historically been relatively insensitive to gasoline price increases. Based on these projected outcomes, some may contend that to achieve deeper, long-term reductions in total GHG emissions, policymakers would need to complement a carbon tax with other programs, such as vehicle technology standards (e.g., Corporate Average Fuel Economy, CAFE) or fuel performance standards, among other options. The quantity of revenues generated under a carbon tax system depend on the program's design features, namely the tax base and rate, as well as such independent factors as prices in global energy markets. They would also depend on how covered emission sources respond to the carbon price, for example by adopting alternative technologies or changing behavior. Several carbon tax studies have prepared revenue estimates, which are presented in Table 1 . From a public finance perspective, a carbon tax may not be a reliable source of long-term funding, because a primary goal of the carbon tax is to reduce its tax base—GHG emissions. The estimates in Table 1 project carbon tax revenue values in 2020. Multiple studies have projected carbon tax revenue trajectories beyond 2020. In the 2018 EMF 32 study, all but one of eight models projected carbon tax revenue increases from 2020 through 2040. The carbon tax scenarios with larger annual rate increases resulted in steeper trajectories of increasing revenues through 2040. The models' estimates of annual carbon tax revenue in 2040 ranged from approximately $250 billion to $475 billion (under the tax rate scenario of $50/metric ton, increasing 5% annually). Fossil fuels have a wide range of CO 2 emission intensity (i.e., emissions per unit of energy). As illustrated in Figure 4 , the CO 2 emission intensity of coal is approximately 30% more than oil and approximately 80% more than natural gas. These emissions intensity differences would lead to different tax rates per unit of energy across different fuels in a carbon tax regime. Carbon taxes could affect fuel prices in complex ways. The change in consumer fuel prices would likely not be the same as the price paid by the party directly subject to the tax. Actual price impacts for consumers would depend on multiple factors, including whether: a carbon tax is applied at the beginning of the production process (\"upstream\") to fossil fuels; and the price impacts are passed through to end users and not absorbed by upstream energy producers or midstream entities, such as retailers. In addition, market participants such as electric power plant operators can avoid paying the increased costs by substituting fuels or technologies. Energy consumers may modify their behavior in the marketplace—energy conservation, consuming less or different products and services—to mitigate impacts from the increased prices. Table 2 includes estimates of price increases on coal, crude oil, natural gas, home heating oil, and motor gasoline based on a carbon tax rate of $25/mtCO 2 that applies CO 2 emissions from fossil fuel combustion. As indicated in the table, a carbon tax would have the greatest impact on the price of coal due to coal's relatively high CO 2 emissions intensity. By comparison, a carbon tax is expected to have less of an impact on the price of gasoline, increasing its price by 8%. Economic models have projected how carbon prices would impact energy use, particularly the consumption of different fossil fuels and less carbon-intensive alternatives, such as renewables or nuclear power. For example, the 2018 EMF 32 study, which included results from 11 modeling groups, assessed how several carbon tax scenarios would impact energy consumption. Highlights of these models' results (compared to reference case scenarios) include the following: Coal consumption could decline by 40% to nearly 100% by 2030 under a $50/mtCO 2 carbon tax, though one model projected an increase in coal due to the model incorporating CCS technology. Natural gas consumption estimates vary across the models, with some showing minimal change in 2030 and others showing declines ranging between 40% and 60%. Oil consumption estimates indicate that the largest decline (approximately 4% by 2030) would occur under the $50/mtCO 2 carbon tax scenario. Wind energy consumption could increase by 48% to 300% by 2030 under a $50/mtCO 2 carbon tax scenario. A carbon tax is one policy option to address U.S. GHG emission levels, which contribute to climate change and related impacts. Economic modeling indicates that a carbon tax would achieve emission reductions, the level of which would depend on which GHG emissions and sources are covered and the rate of the carbon tax. A carbon tax would generate a new revenue stream. The magnitude of the revenues would depend on the scope and rate of the tax and multiple market factors, which introduce uncertainty in the revenue projections. A 2018 CBO study estimated that a $25/metric ton tax on CO 2 emissions from energy-related activities and other selected GHG emission sources would yield approximately $100 billion in the first year of the program. To put this estimate in context, the CBO projected that total federal revenue would be $3.5 trillion in FY2019. Policymakers would face challenging decisions regarding the distribution of the new carbon tax revenues. Depending on the level of the tax, some economic analyses indicate that the distribution of tax revenue could yield greater economic impacts than the direct impacts of the tax. Some models indicate that the economic impacts are greatest in the early years of the carbon tax. Policymakers could apply the tax revenues to support a range of policy objectives. When deciding how to allocate the revenues, policymakers would encounter trade-offs among objectives. The central trade-offs involve minimizing economy-wide costs, lessening the costs borne by specific groups—particularly low-income households—and supporting a range of specific policy objectives. A primary concern with a carbon tax is the potential economy-wide costs that may result. The potential costs would depend on a number of factors, including the magnitude, design, and use of revenues of the carbon tax. In general, economic literature finds that some of the modeled revenue applications would reduce the economy-wide costs imposed by a carbon tax but may not eliminate them entirely. Policymakers and stakeholders may have different perspectives regarding whether these estimated economy-wide costs (typically measured in terms of GDP loss) represent a significant concern. Some argue that the estimated economy-wide costs should be compared with the policy option of not establishing a carbon tax. This comparison is uncertain as carbon tax analyses do not generally consider the benefits that would be gained by reducing GHG emissions and avoiding climate change and its adverse impacts. Some studies cite particular economic modeling scenarios in which a carbon tax and revenue recycling could produce a net increase in GDP or economic welfare, compared to a baseline scenario. These scenarios involve using carbon tax revenues to offset reductions in existing, distortionary taxes, such as corporate income or payroll taxes. Although the models indicate that these revenue applications would yield the greatest benefit to the economy overall, the models also find that lower-income households would likely face a disproportionate impact under such revenue applications. As lower-income households spend a greater proportion of their income on energy needs, these households are expected to experience disproportionate impacts from a carbon tax if revenues were not recycled back to them in some fashion, such as a lump-sum distribution. Carbon tax revenues that are used to offset the burden imposed on various sectors or specific population groups would not be available to support other objectives. An additional concern with a carbon tax involves potential disproportionate impacts to \"emission-intensive, trade-exposed industries.\" Policymakers could select among several options to address these concerns, either by establishing a border carbon adjustment program or allocating some of the carbon tax revenues to selected industry sectors based on an output-based metric. If other nations were to adopt comparable carbon price policies, this concern may be alleviated to some degree. Relatedly, a carbon tax is projected to disproportionately impact fossil fuel industries, particularly coal, and the communities that rely on their employment. To alleviate these impacts, policymakers could allocate some of the carbon tax revenue to provide transition assistance to employees or affected communities. Table A-1 identifies sources of GHG emissions that account for 0.5% or more of total U.S. GHG emissions. The sources are listed in descending order by their percentage contribution. CO 2 emissions from fossil fuel combustion, which accounts for almost 76% of total U.S. GHG emissions, are broken down by fossil fuel type: petroleum, coal, and natural gas. The table identifies potential points in the economy at which a carbon tax could be applied. The table lists the approximate number of entities that would be involved with different tax applications. The number of entities listed is current as of the most recent data available and varies accordingly by category. See table notes for details. The right-hand column of the table provides additional comments for some of the emission sources. In some cases the comments discuss potential opportunities for additional GHG emissions coverage at a particular source. In other cases, the comments address potential limitations of covering all of the emissions from a particular source.", "summary": "The U.S. Fourth National Climate Assessment, released in 2018, concluded that \"the impacts of global climate change are already being felt in the United States and are projected to intensify in the future—but the severity of future impacts will depend largely on actions taken to reduce greenhouse gas [GHG] emissions and to adapt to the changes that will occur.\" Members of Congress and stakeholders articulate a wide range of perspectives over what to do, if anything, about GHG emissions, future climate change, and related impacts. If Congress were to consider establishing a program to reduce GHG emissions, one option would be to attach a price to GHG emissions with a carbon tax or GHG emissions fee. In the 115th Congress, Members introduced nine bills to establish a carbon tax or emissions fee program. However, many Members have expressed their opposition to such an approach. In particular, in the 115th Congress, the House passed a resolution \"expressing the sense of Congress that a carbon tax would be detrimental to the United States economy.\" Multiple economic studies have estimated the emission reductions that particular carbon tax would achieve. For example, a 2018 study analyzed various impacts of four carbon tax rate scenarios: a $25/metric ton of CO2 and $50/metric ton of CO2 carbon tax, increasing annually by 1% and 5%. The study concluded that each of the scenarios would likely achieve the U.S. GHG emission reduction target pledged under the international Paris Agreement (at least in terms of CO2 emissions). A carbon tax system would generate a new revenue stream, the magnitude of which would depend on the scope and rate of the tax, among other factors. In 2018, the Congressional Budget Office (CBO) estimated that a $25/metric ton carbon tax would yield approximately $100 billion in its first year. CBO projected that federal revenue would total $3.5 trillion in FY2019. Policymakers would face challenging decisions regarding the distribution of the new carbon tax revenues. Congress could apply revenues to support a range of policy objectives but would encounter trade-offs among the objectives. The central trade-offs involve minimizing economy-wide costs, lessening the costs borne by specific groups—particularly low-income households and displaced workers in certain industries (e.g., coal mining)—and supporting other policy objectives. A primary argument against a carbon tax regards it potential economy-wide impacts, often measured as impacts to the U.S. gross domestic product (GDP). Some may argue that projected impacts should be compared with the climate benefits achieved from the program as well as the estimated costs of taking no action. The potential impacts would depend on a number of factors, including the program's magnitude and design and, most importantly, the use of carbon tax revenues. In general, economic literature finds that some of the revenue applications would reduce the economy-wide costs from a carbon tax but may not eliminate them entirely. In addition, some studies cite particular economic modeling scenarios in which certain carbon tax revenue applications produce a net increase in GDP compared to a baseline scenario. These scenarios involve using carbon tax revenues to offset reductions in other tax rates (e.g., corporate income or payroll taxes). Although economic models generally indicate that these particular revenue applications would yield the greatest benefit to the economy overall, the models also find that lower-income households would likely face a disproportionate impact under such an approach. As lower-income households spend a greater proportion of their income on energy needs (electricity, gasoline), these households are expected to experience disproportionate impacts from a carbon tax if revenues were not recycled back to them in some fashion (e.g., lump-sum distribution). A price on GHG emissions could create a competitive disadvantage for some industries, particularly \"emission-intensive, trade-exposed industries.\" Policymakers have several options to address this concern, including establishing a \"border carbon adjustment\" program, which would levy a fee on imports from countries without comparable GHG reduction programs. Alternatively, policymakers could allocate (indefinitely or for a period of time) some of the carbon tax revenues to selected industry sectors or businesses. Relatedly, a carbon tax system is projected to disproportionately impact fossil fuel industries, particularly coal, and the communities that rely on their employment. To alleviate these impacts, policymakers may consider using some of the revenue to provide transition assistance to employees or affected communities.", "document_type": "crs"}
{"report": "The Merit Systems Protection Board (MSPB or Board) is a n independent , executive branch agency that works to protect current, former, and prospective federal employees against inappropriate employment-related actions, in accordance with \" merit system principles ,\" statutorily defined standards governing the performance and management of the federal workforce. The MSPB also aims to promote an effective federal workforce free of prohibited personnel practices. The Board mainly carries out its mission through adjudication of federal employee appeals of adverse actions . When the Board determines that a federal employee has been subject to an improper adverse action, it may order relief, including reins tatement, backpay, and attorney' s fees. The Board may also order federal agencies to comply with Board orders, conduct special studies of the civil service and other executive branch merit systems, and review Office of Personnel Management (OPM) rules and regulations to determine, for example, whether a federal agency has invalidly implemented the OPM requirements. This report focuses on the Board's adjudicatory authority. Federal law specifies that the Board consists of three members appointed by the President with the advice and consent of the Senate. However, as of March 2019, the Board lacks any sitting members. Although other MSPB employees, including administrative judges who issue initial decisions in cases, will continue their work, some Members of Congress and others have raised concerns about the extent to which these vacancies limit the agency's ability to perform its other functions. This report discusses the establishment of the MSPB and its structure, as well as the role of the Office of Special Counsel, an independent, prosecutorial agency that operates concurrently with the Board. The report then addresses the Board's authority to adjudicate matters within its jurisdiction and the scope of this jurisdiction, as well as the availability of judicial review for the Board's decisions. Finally, the report examines the effect of the lack of a quorum of Board members. The origins of the MSPB may be traced back more than a century, as part of efforts to curtail the practice of political patronage in the federal government. Under the \"spoils system\" that existed in the first century of the Republic, \"federal employees came and went, depending upon party service and changing administrations, rather than meritorious performance.\" In response to the \"strong discontent with the corruption and inefficiency of the patronage system of public employment,\" Congress passed the Civil Service Act of 1883, also known as the Pendleton Act, which generally created a merit-based system for hiring federal employees. More specifically, the Act established a Civil Service Commission (CSC) authorized to aid the President in preparing suitable civil service rules for open, competitive examinations of applicants for federal employment. Over the next few decades, Congress enacted additional measures addressing issues such as merit hiring, due process rights, and appeals of agency adverse personnel actions, and the CSC played an increasingly larger role in implementing these requirements. Even so, some Members of Congress and others expressed concerns with the regulatory structure of the civil service system. One central criticism of this structure involved the CSC and its simultaneous handling of managerial and adjudicatory matters. A 1978 Senate committee report described the issue: At the present time the Civil Service Commission has a variety of functions . . . The CSC must now simultaneously serve as a management agent for a President elected through a partisan political process as well as the protection of the merit system from partisan abuse. The Commission serves, too, as the provider of services to agency management in implementing personnel programs, while maintaining sufficient neutrality to adjudicate disputes between agency managers and their employees. As a result, the Commission's performance of its conflicting functions has suffered. Expected to be all things to all parties—Presidential counsellor, merit \"watchdog,\" employee protector, and agency advisory—the Commission has become progressively less credible in all of its roles. In response to these and other issues, Congress passed the Civil Service Reform Act (CSRA), the most comprehensive reform of the civil service system since the Pendleton Act and the current legal framework governing the federal civilian workforce. As part of this reform, and in conjunction with an earlier reorganization plan developed by President Carter, the CSRA split the functions of the Commission between two separate new agencies, OPM and the MSPB. In general, the CSRA charged OPM with conducting personnel management functions formerly performed by the CSC, such as providing training and productivity programs, examining for civil service positions, classifying positions, and administering pay and benefits. The MSPB retained the CSC's hearing, adjudication, and appeals functions, as well as authority to enforce agency compliance with its decisions. The CSRA further authorized the MSPB to develop its adjudicatory processes and procedures, and gave the Board power to, among other functions, issue subpoenas, call witnesses to testify at hearings, and enforce compliance with its final decisions. As noted above, the Board consists of three members—a Chairman, a Vice Chairman, and a third member—all appointed by the President with the advice and consent of the Senate. Not more than two members may be adherents of the same political party. In order to serve on the Board, members must have demonstrated ability, background, training, or experience that makes them \"especially qualified\" to carry out the MSPB's functions. The term of office of each Board member is seven years, and terms are nonrenewable. While a sitting member may not be reappointed after a seven-year term, a member may continue to serve on the Board for up to one additional year if no successor has been appointed. Board members also have for-cause removal protection and may be removed by the President only \"for inefficiency, neglect of duty, or malfeasance in office.\" While the three Board members make decisions in all cases by majority vote, the Chairman of the Board is the chief executive and administrative officer, responsible for handling issues related to the Board's organization and personnel policies. The Vice Chairman is tasked with performing the Chairman's functions during absence, disability, or vacancy. During the absence or disability of both the Chairman and Vice Chairman or vacancies in both offices, the remaining Board member performs the Chairman's functions. Neither the CSRA nor the Board's regulations expressly address a scenario in which the Board is entirely vacant. The Office of Special Counsel (OSC) in an independent federal agency that protects employees, former employees, and applicants for employment from prohibited personnel practices by receiving and investigating complaints of those practices. The OSC is headed by the Special Counsel, who is appointed by the President, by and with the advice and consent of the Senate, for a term of five years. After receiving and investigating allegations of prohibited personal practices, the Special Counsel may petition the MSPB for corrective action if an agency does not correct the practice, and may seek disciplinary action against any employee who has committed such a practice. The Special Counsel may also petition the Board to order a stay of any personnel action that he believes was taken or is to be taken as a result of a prohibited personnel practice. The Special Counsel position originally resided in the MSPB. In 1989, Congress established the OSC as an independent agency to be headed by the Special Counsel. The MSPB hears and adjudicates matters within its jurisdiction, as provided by the CSRA and by any other statute, rule, or regulation. The Board maintains both original and appellate jurisdiction over cases. The Board has original jurisdiction over actions brought by the Special Counsel for corrective and disciplinary action, specified removals of persons in the Senior Executive Service (SES), and certain adverse personnel actions taken against administrative law judges (ALJs). In cases involving its original jurisdiction, the Board adjudicates the case initially rather than reviews an agency decision. The MSPB has appellate jurisdiction to review any action that is appealable to the Board under any statute, rule, or regulation by an employee or applicant for employment. For example, an agency's decision to remove or suspend an employee for more than 14 days may be appealed to the Board. Cases may be heard by Board members directly, or referred to ALJs or Board employees called \"administrative judges.\" ALJs typically adjudicate and issue initial decisions in cases involving corrective and disciplinary action. Administrative judges adjudicate cases and issue initial decisions under the Board's appellate jurisdiction. Once decided, an initial decision may be appealed to the full Board. While both ALJs and administrative judges are attorneys who are licensed to practice law, administrative judges do not enjoy the tenure and job protections of ALJs. An ALJ, for example, may only be removed for cause. The MSPB's jurisdiction does not depend solely on the nature of the action taken, but also requires consideration of the party involved. For example, the Board's ability to hear and adjudicate appeals of agency-imposed adverse actions, such as removals, reductions in grade or pay, and suspensions for more than 14 days, has been limited by statute to actions involving only specified employees: individuals in the competitive service who are not serving a probationary or trial period or who have completed one year of current continuous service; preference eligibles in the excepted service who have completed one year of current continuous service in an executive agency, the Postal Service, or the Postal Rate Commission; and non-preference eligible individuals in the excepted service who are not serving a probationary or trial period or who have completed two years of current or continuous service in an executive agency. For other actions, however, the Board's ability to hear and adjudicate an appeal may be broader, involving individuals other than current employees. For example, the Board can review cases involving employees, former employees, and applicants for employment when a personnel action was allegedly taken as a reprisal for whistleblowing. An employee in a collective bargaining unit that is represented by a union can generally appeal an agency's major disciplinary action, such as a removal or a reduction in grade or pay, to the MSPB or pursuant to a collective bargaining agreement's negotiated grievance procedure, but not both. The U.S. Supreme Court has also determined that the Board's jurisdiction over certain subject matters is constrained. For example, in Department of the Navy v. Egan , the Court concluded that the Board does not have jurisdiction to review the substance of a security clearance determination. The Court maintained that the Board may evaluate only: (1) whether an agency determined that an employee's position required a clearance; (2) whether the clearance was denied or revoked; and (3) whether the employee was provided procedural protections including notice of charges, an opportunity to respond to them, and representation by an attorney or other representative. In Kaplan v. Conyers , the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) interpreted the holding in Egan expansively. The court maintained that the MSPB not only lacks jurisdiction to review the substance of agency security clearance determinations, but also cannot review agency determinations regarding which employees are eligible to occupy sensitive positions. The MSPB has original jurisdiction over cases brought by the Special Counsel to correct personnel actions involving a prohibited personnel practice. An employee, former employee, or applicant for employment, who believes that a prohibited personal practice has occurred, exists, or is to be taken, may seek corrective action from the OSC. If the Special Counsel believes that there are reasonable grounds to believe that a personnel action was taken or is to be taken as a result of a prohibited personnel practice, he may request a stay of the action from any Board member. A stay will be ordered unless the member determines that it would not be appropriate. If, following an investigation of the complaint, the Special Counsel determines that a prohibited personal practice has occurred, exists, or is to be taken, and corrective action is required, he or she will report that determination and any findings or recommendations to the MSPB, the agency involved, and OPM. If the agency does not correct the prohibited personnel practice, the Special Counsel may petition the Board for an order requiring the agency to do so. In general, the Board will order corrective action it considers appropriate so long as the Special Counsel has demonstrated that the prohibited personnel practice has occurred, exists, or is to be taken. In cases involving a personnel action taken against an employee for making a whistleblower disclosure or exercising a right granted by statute, rule, or regulation, the Board will order corrective action if the Special Counsel has demonstrated that the disclosure or activity was a contributing factor in the personnel action. However, in cases involving a whistleblower disclosure, corrective action may not be ordered if an agency demonstrates by clear and convincing evidence that it would have taken the same personnel action in the absence of the disclosure. A Board order to correct a prohibited personnel practice may require the reinstatement of the individual in the position that he would have occupied if the practice had not occurred, reimbursement for attorney's fees, back pay and related benefits, medical costs, travel expenses, other reasonable and foreseeable consequential damages, and any other compensatory damages. An employee, former employee, or applicant for employment who is adversely affected by the Board's final order or decision regarding corrective action may obtain judicial review. The MSPB also has original jurisdiction over actions brought by the Special Counsel to discipline an employee for committing a prohibited personnel practice, violating the provisions of any statute, rule, or regulation, engaging in misconduct within the Special Counsel's jurisdiction, or knowingly and willfully refusing or failing to comply with a Board order. If the Special Counsel determines that disciplinary action should be taken, he is to prepare a written complaint against the employee that includes his determination and a statement of supporting facts. The complaint and statement are then presented to the employee and the MSPB. Upon receipt of a complaint, the employee is given an opportunity to provide an answer and to furnish affidavits and other documentary evidence in support of that answer. The employee is also entitled to be represented by an attorney or other representative, to a hearing before the MSPB or an ALJ designated by the Board, and to a written decision that includes a copy of any final order imposing disciplinary action. A final Board order may provide for an employee's removal, reduction in grade, debarment from federal employment for up to five years, suspension, or reprimand. The Board may also order a civil penalty not to exceed $1,000, or any combination of the aforementioned disciplinary actions. In general, an employee who is subject to a final order imposing disciplinary action may obtain judicial review of the order in the Federal Circuit. A career appointee who is removed from the SES for less than fully successful performance as a manager is entitled to an informal hearing before an ALJ designated by the MSPB. The appointee may appear and present arguments at such a hearing, but his removal will not be delayed as a result of the hearing. But the right to an informal hearing does not provide an appointee with a right to appeal a removal from the SES to the Board. The MSPB also has original jurisdiction over certain adverse actions taken against an ALJ, such as removals and reductions in grade or pay. An ALJ who faces such action has various rights, including the right to answer the agency's complaint and the right to be represented in an MSPB hearing on the record before a Board-designated ALJ. The ALJ who hears the case is to issue an initial decision, which may be reviewed by the Board. The MSPB is to uphold an agency-proposed disciplinary action against an ALJ only if it determines that an agency has established good cause. Good cause has been held to differ from the standard that the Board must find to sustain an adverse disciplinary action for misconduct involving most other employees. For employees who are neither ALJs nor members of the SES, the applicable standard is cause \"as will promote the efficiency of the service.\" An ALJ who is subject to a final Board decision authorizing a proposed agency action may obtain judicial review before the Federal Circuit. A qualifying employee or applicant for employment may submit an appeal to the MSPB from any action that is appealable to the Board under any statute, rule, or regulation. For example, Section 7513(d) of title 5, U.S. Code, permits an employee who, because of misconduct, is subject to removal, suspension for more than 14 days, a reduction in grade or pay, or a furlough of 30 days or less to appeal his agency's action to the MSPB. This type of action is often referred to as a \"chapter 75 action.\" Under Section 4303(e) of title 5, U.S. Code, an employee who is removed or reduced in grade because of unacceptable performance may also appeal his agency's action to the MSPB. This type of action is often described as a \"chapter 43 action.\" An individual who appeals a personnel action to the Board is entitled to a hearing and legal or other representation. Once an appeal is filed, the case may be heard by the Board or it may be referred to an ALJ or administrative judge for hearing. An initial decision rendered by the Board, ALJ, or administrative judge generally becomes the Board's final decision, unless a party to the appeal or the Director of OPM files a petition for review within 30 days after receiving the decision, or the Board reopens and reconsiders the case on its own motion. One Board member may grant a petition for review or otherwise direct the full Board to review a decision unless an ALJ's decision is required to be acted upon by the Board. An agency's personnel action is to be sustained only if it is supported by substantial evidence in cases involving an employee's unacceptable performance, or by a preponderance of the evidence in all other cases, such as those involving misconduct. An agency's action may not be sustained if the appellant shows: (1) harmful error in the application of the agency's procedures in arriving at its decision; (2) that the decision was based on a prohibited personnel practice; or (3) that the decision was not in accordance with law. In general, an agency must establish three factors to withstand an individual's challenge of his adverse personnel action. First, the agency must prove, by a preponderance of the evidence, that the charged conduct occurred. Second, it must establish a nexus between that conduct and the efficiency of the civil service. Finally, the agency must demonstrate that the penalty imposed on the employee is reasonable. If a member of a collective bargaining unit exercises a right to appeal a personnel action under a negotiated grievance procedure rather than through the MSPB, an arbitrator must apply the same standards of proof—substantial evidence for unacceptable performance actions and preponderance of the evidence for other personnel actions—that the Board applies. Penalties imposed by an agency for actions involving misconduct may be mitigated by the MSPB. In Douglas v. Veterans Administration , the Board concluded that its statutory authority to take final action on matters within its jurisdiction includes the ability to modify or reduce a penalty imposed on an employee by his or her agency's adverse action. While the Board acknowledged that the management of the federal workforce and the maintenance of discipline among its members are not among its functions, it maintained that it did have the authority to mitigate a penalty when it determines that the penalty is clearly excessive, disproportionate to the sustained charges, or arbitrary, capricious, or unreasonable. Noting that this authority had previously been vested in the CSC and was not altered by the CSRA, the Board identified factors that are relevant for consideration when evaluating the appropriateness of a penalty. These factors include the nature and seriousness of the offense, and its relationship to the employee's duties, position, and responsibilities, and the employee's past disciplinary record. The Board indicated that an agency's selection of an appropriate penalty must involve a balancing of the relevant factors in an individual case. Penalties imposed by an agency for actions involving an employee's unacceptable performance under chapter 43 of title 5, U.S. Code, may not be mitigated by the MSPB. In Lisiecki v. MSPB , the Federal Circuit maintained that the CSRA's legislative history suggested that such actions should be distinguished from actions involving misconduct. The court explained that the legislative history \"repeatedly cautions that the old standards of review are not applicable under chapter 43 and . . . that the MSPB and the courts should 'give deference to the judgment by each agency of the employee's performance in light of the agency's assessment of its own personnel needs and standards.'\" The Federal Circuit noted that allowing the Board to mitigate penalties in chapter 43 actions would give the agency more authority than Congress intended. The court observed that chapter 43 prescribes certain standards that do not apply to actions involving misconduct, such as a lighter burden of proof to sustain agency action. If Congress intended \"more intrusive review of agency action\" by the Board, the court maintained, \"Congress knew what to say if such was its desire.\" Cases involving an adverse personnel action and allegations of discrimination may be subject to review by both the MSPB and the Equal Employment Opportunity Commission (EEOC). When an employee or applicant for employment has been (1) affected by an agency personnel action that may be appealed to the MSPB and (2) believes that the basis for the action was discrimination prohibited by certain federal antidiscrimination provisions, he may appeal such action to the Board, which will decide both the discrimination issue and the appealable action. The Board's decision in a so-called \"mixed case\" may be appealed to the EEOC. However, if the individual does not seek review by the EEOC or if the agency decides not to review the Board's decision, that decision becomes judicially reviewable. An employee in a collective bargaining unit who alleges that he was affected by a prohibited personnel practice involving discrimination may raise the matter under a statutory procedure or a negotiated grievance procedure, but not both. An employee who selects a negotiated grievance procedure may request that MSPB review an arbitrator's final decision. Under 5 U.S.C. § 7703, federal employees or applicants for employment who are adversely affected by a final order or decision of the MSPB may obtain judicial review. This section also specifies the judicial forum for these decisions. In general, a petition for judicial review may be filed in the Federal Circuit within 60 days after the date the petitioner received notice of a Board final decision. The Federal Circuit must examine these cases under a standard of review that is deferential to the MSPB's determination. More specifically, the Federal Circuit is required to review the record in these cases and hold unlawful and set aside only any agency action, findings, or conclusions found to be: (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) obtained without procedures required by statute, rule, or regulation having been followed; or (3) unsupported by substantial evidence. Under this standard of review, the Supreme Court has recognized that the Federal Circuit's ability to review the merits of MSPB decisions is \"extremely narrow.\" As the Court has further explained, in examining these MSPB decisions, \"it is not for the Federal Circuit to substitute its own judgment for that of the Board.\" Accordingly, the Federal Circuit typically upholds Board decisions. According to a 2019 MSPB report, over the past few years, the Federal Circuit has affirmed Board decisions in 93 to 96 percent of the cases it reviewed. Courts have also acknowledged that the CSRA, as amended, provides the Federal Circuit with exclusive jurisdiction over appeals of MSPB final decisions. However, one central exception to this exclusivity, found under 5 U.S.C. § 7702, is for so-called \"mixed cases\" involving allegations of federal antidiscrimination laws in connection with an improper adverse personnel action. Following the MSPB's decision in a mixed case, affected employees may seek judicial review in federal district court, rather than the Federal Circuit. District court review may be preferable for the petitioning federal employee, as district courts generally review these discrimination-related claims under a de novo standard (i.e., affording no deference to the determination of the MSPB). While this special jurisdictional rule for mixed cases may appear straightforward, courts have grappled with its application in a variety of circumstances. Two recent Supreme Court decisions, Kloeckner v. Solis and Perry v. Merit Systems Protection Board , illustrate some of the issues that courts have confronted with respect to the judicial review of MSPB decisions involving mixed cases. The Court in Kloeckner considered the proper judicial forum when the Board dismisses a mixed case on procedural grounds. Although the Federal Circuit generally held that the appropriate forum for review was the district court if the MSPB dismissed a mixed case on the merits, other courts reached varying conclusions with respect to cases dismissed by the MSPB for procedural reasons. In Kloeckner , a former Labor Department employee filed a discrimination claim with the agency, and the employee was subsequently terminated from her position. The employee filed her case with the MSPB, but the Board dismissed her claim as untimely. In a unanimous opinion written by Justice Kagan, the Supreme Court examined the statutory language in 5 U.S.C. § 7702 and held that when the MSPB decides a mixed case, the proper forum for review is the district court, irrespective of whether the MSPB dismissed the case on the merits or procedural grounds. The Court in Perry also explored the judicial review of mixed case appeals, particularly in situations where the MSPB dismissed a case for lack of Board jurisdiction. Traditionally, lower courts had commonly held that the Federal Circuit, and not a district court, was the appropriate court to hear these types of cases. In Perry , a U.S. Census Bureau employee received notice that he would be removed from his position for poor attendance. After the employee and the agency reached a settlement involving suspension from service and early retirement, the employee appealed to the MSPB. The MSPB found that the employee's separation from service was voluntary, and, therefore, not an issue that the Board had jurisdiction to examine. The employee appealed the case to the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), but the court transferred the case to the Federal Circuit. In a 6-2 decision penned by Justice Ginsburg, the Supreme Court reversed the judgment of the D.C. Circuit. Similar to Kloeckner , the Court's opinion hinged on its interpretation of the statutory language in 5 U.S.C. § 7702, under which district court review of a mixed case applies only when an employee \"(A) has been affected by an action which the employee . . . may appeal to the [MSPB] and \"(B) alleges . . . discrimination.\" While the federal government had argued for purposes of this section that a case constitutes a mixed case only if the employee \"may appeal to the Board,\" the Court rejected this argument. Instead, the Court declared that under this language, what matters is not what the MSPB determined about its ability to hear an appeal, but rather \"the nature of an employee's claim that he had been \"'affected by an action [appealable] to the [MSPB]'\" (in this case, suspension and removal). The Court also relied on its decision in Kloe c kner and found that when it comes to mixed cases, there was nothing in the statutory language that demonstrated Congress's intent to treat jurisdictional dismissals differently from other types of MSPB dismissals. Accordingly, the Kloe c kner and Perry decisions both arguably demonstrate that despite MSPB's grounds for dismissing a mixed case, if an employee (or a former employee) \"complains of serious adverse action prompted . . . by the employing agency's violation of federal antidiscrimination laws,\" the appropriate forum for judicial review is the district court. In recent years, Congress has passed legislation that, for some types of cases, expressly extends judicial review of MSPB decisions beyond the Federal Circuit. The Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017 addressed MSPB appeal rights for Veterans Affairs Department employees who have been suspended, demoted, or removed from federal service for performance or misconduct. Among other things, the act specifies that employees may appeal a decision of the MSPB to the Federal Circuit or any court of appeals of competent jurisdiction. Additionally, in 2018, Congress passed the All Circuit Review Act, which extends judicial review of MSPB decisions in certain whistleblower and other retaliation cases not only to the Federal Circuit, but also to federal circuit court of appeals. This act is a permanent extension of the Whistleblower Protection Enhancement Act, as amended, which provided for this expanded jurisdiction for a period that terminated on November 26, 2017. According to the Office of Special Counsel, the new Act will, among other things, promote more \"robust implementation of whistleblower protection laws.\" The Special Counsel further maintained that given the number of district and appellate courts that will now be hearing these cases, \"[d]iffering interpretations may result in 'circuit splits,' which make it more likely that the U.S. Supreme Court will take up questions that arise regarding how these important laws are applied. This expanded judicial accountability is precisely the outcome Congress intended and will strengthen whistleblower protections.\" The MSPB currently has no sitting members. Board member Mark A. Robbins, who served most recently as the MSPB's Acting Chairman, ended his term on February 28, 2019. The Board has lacked a quorum since January 8, 2017, when former Board Chairman Susan Tsui Grundmann resigned. Prior to that time, there were only two members on the Board. MSPB regulations provide generally that its members will make decisions in all cases by majority vote. These regulations do allow for some decision making when a majority vote is not possible because of a vacancy or recusal, but such decisionmaking is available only when there are at least two members in office. Without a quorum, the Board is unable to issue final decisions in cases where an initial decision has been appealed. As of December 31, 2018, there were approximately 1,800 cases pending before the Board. The absence of a quorum also restricts the Board's ability to publish reports on merit system studies or promulgate new regulations in response to any legislative changes involving the MSPB. In 2018, President Trump nominated three individuals to serve as Chairman, Vice Chairman, and Board member. A confirmation hearing for these nominees was subsequently held, but the nominees were not confirmed by the Senate before the adjournment of the 115th Congress. On January 16, 2019, the President resubmitted the nominations for consideration by the 116th Congress. On February, 13 , 2019, the Senate Committee on Homeland Security and Governmental Affairs approved two of the nominees, but the President's nominee for Vice Chairman withdrew from consideration prior to the committee's vote. The committee's chairman has indicated that he will not advance the two nominees to the full Senate until the President nominates, and the committee supports, a third member.", "summary": "The Merit Systems Protection Board (MSPB or Board) is a quasi-judicial independent agency in the executive branch charged with protecting federal employees against improper employment-related actions. The Board works to ensure, for example, that federal agencies avoid taking arbitrary action against employees, exhibiting favoritism, or engaging in reprisals against whistleblowers. The MSPB also aims to promote an effective federal workforce free of certain types of discrimination and other prohibited personnel practices. While the Board mainly carries out its mission through adjudication of federal employment-related disputes, it also performs specified oversight functions related to federal employment, including conducting special studies of the civil service and other executive branch merit systems. Established by the Civil Service Reform Act of 1978, the MSPB consists of three Board members, appointed by the President with the advice and consent of the Senate. Not more than two Board members may be adherents of the same political party. The term of office of each Board member is seven years, and terms are nonrenewable. Board members may be removed by the President only for inefficiency, neglect of duty, or malfeasance in office. The Board operates concurrently with the Office of Special Counsel, an independent, prosecutorial federal agency. The Special Counsel receives and investigates complaints related to certain kinds of federal agency misconduct and may petition the Board for corrective action. The MSPB operates like a tribunal and maintains procedures for conducting hearings, examining evidence, and rendering decisions. Most cases the Board reviews are federal employee appeals of adverse actions, including those related to removal or suspension of employment. When the MSPB determines that a federal employee has been subject to an improper adverse action, the Board can issue orders that compel agencies to reverse these actions and, depending upon the particular agency action in question, may order relief, including reinstatement, backpay, and attorney's fees. The Board also maintains original jurisdiction over certain types of cases in which it hears and decides the case initially rather than reviews an agency decision. For example, the MSPB may adjudicate cases brought by the Office of Special Counsel related to a prohibited personnel practice. The Special Counsel may, among other things, petition the Board for a stay of an adverse employment action in relation to this practice. Some of the Board's adjudicatory functions, including appeals of adverse action decisions, typically are carried out by \"administrative judges\" employed by the Board, while administrative law judges (ALJs) may examine matters coming under the Board's original jurisdiction. Federal employees or applicants for employment who are adversely affected by a final order or decision of the MSPB may obtain judicial review. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) is generally the proper judicial forum for these cases. Federal law compels the Federal Circuit to examine these cases under a standard of review that is deferential to the MSPB's determination. Consequently, the Federal Circuit typically upholds Board decisions. But a special jurisdictional rule exists for so-called \"mixed cases\" involving an alleged violation of federal antidiscrimination laws in connection with an improper adverse personnel action. Following the MSPB's decision in a mixed case, affected employees may seek judicial review in federal district court rather than the Federal Circuit. District court review is generally preferable for the petitioning federal employee, as district courts typically review these discrimination-related claims under a de novo standard (i.e., affording no deference to the determination of the MSPB). Since March 2019, the Board has lacked sitting members. Lack of a quorum prevents the Board from performing some of its review functions, including issuing final decisions in cases when an initial decision issued by an administrative judge has been appealed to the full Board. As a result, a significant case backlog has developed. President Trump has submitted nominees to the Senate to fill vacancies on the Board.", "document_type": "crs"}
{"report": "The federal government is the nation's largest employer, with over two million workers employed in the United States, U.S. Territories, and foreign countries. A majority of these employees work in the competitive service of the executive branch. Applicants for competitive service positions compete with other applicants and are evaluated according to objective standards. The executive branch includes two other service classifications—the excepted service and the Senior Executive Service (SES)—with hiring and removal standards that diverge from those prescribed for the competitive service. Positions in the excepted service are specifically excepted from the competitive service by statute, by the President, or by the Office of Personnel Management (OPM). SES positions are also not in the competitive service. The SES includes senior managerial, supervisory, and policy positions that are subject to a different pay scale, as well as different hiring and removal standards. This report examines the three service classifications, and reviews some of the central features and notable differences among these classifications. The competitive service consists of all civil service positions in the executive branch, except the following: positions that are specifically excepted from the competitive service by or under statute; positions to which appointments are made by presidential nomination for confirmation by the Senate, unless the Senate otherwise directs; and positions in the SES. The competitive service also includes non-executive branch positions and positions in the District of Columbia government that are specifically included in the competitive service by statute. OPM administers examinations for entrance into the competitive service. These examinations are meant to be \"practical in character\" and relate to \"matters that fairly test the relative capacity and fitness of the applicants for the appointment sought[.]\" OPM identifies the relative weights for the subjects in an examination, and assigns numerical ratings on a 100-point scale. Applicants who meet the minimum requirements for entrance to an examination, such as citizenship and residence requirements, and are rated 70 or more in the examination are eligible for appointment in the competitive service. These individuals are placed on registers or lists of eligibles. When an agency seeks to fill a competitive service position, it requests a certificate of eligibles from OPM. This certificate is to include enough names from the top of the relevant register to allow an agency appointing official to consider at least three individuals for every position to be filled. The competitive service includes several types of appointments. An individual selected for a continuing position is generally appointed as a career-conditional employee subject to an initial one-year probationary period. After three continuous years of service in a career-conditional appointment, an employee will be converted to a career appointment. A term appointment is a nonpermanent appointment for a period of more than one year, but less than four years. An agency may make a term appointment when the need for an employee's services is not permanent, but involves a special project, extraordinary workload, or reorganization. A temporary appointment is a time-limited appointment for a period not to exceed one year. An agency may make a temporary appointment to fill a short-term position or meet an employment need that is scheduled to end within a specified timeframe. Employees in the competitive service are generally paid in accordance with the General Schedule, a schedule of annual basic pay rates that consists of 15 grades, designated \"GS-1\" through \"GS-15.\" The grades include 10 steps that provide for increasing rates of pay. An employee who has not reached the maximum pay rate for his or her position is generally advanced to the next step at specified intervals. General Schedule salaries are based on the principles that there is equal pay for substantially equal work within a local pay area, that any pay distinctions are based on work and performance, that federal pay rates are comparable with non-federal pay rates for the same level of work, and that any pay disparities between federal and non-federal employees should be eliminated. Employees in the competitive service who are not serving a probationary or trial period, or have completed one year of current continuous service in a position other than a temporary appointment limited to one year or less, maintain specified notice and appeal rights for adverse personnel actions. Before an agency may suspend such a qualifying employee for 14 days or less, the employee must be given an advance written notice that identifies the specific reasons for the suspension. The employee must also be provided a reasonable time to answer the notice and furnish affidavits and other evidence to support the answer. Similar notice is required before an agency may subject a qualifying employee to other adverse personnel actions. Before a removal, a suspension for more than 14 days, a reduction in grade or pay, or a furlough of 30 days or less, the agency must provide at least 30 days' advance written notice to the employee. The employee must also be given a reasonable time to respond to the notice and provide affidavits and other evidence to support the answer. Unlike suspensions for 14 days or less, these adverse actions may be appealed to the Merit Systems Protection Board (MSPB or Board), an independent, quasi-judicial agency that reviews and adjudicates specified personnel actions taken against qualifying federal employees. In general, an agency must establish three factors to withstand an individual's challenge of his or her adverse personnel action. First, the agency must prove, by a preponderance of the evidence, that the charged conduct occurred. Second, it must establish a nexus between that conduct and the efficiency of the civil service. Finally, the agency must show that the penalty imposed on the employee is reasonable. An agency's action may not be sustained if the appellant shows: (1) harmful error in applying the agency's procedures in arriving at its decision; (2) that the decision was based on a prohibited personnel practice; or (3) that the decision was not in accordance with law. About one-third of all federal workers are employed in the excepted service. The excepted service consists of those civil service positions that are not in the competitive service or the SES. Positions in the excepted service may be designated by statute or by OPM, and are not subject to competitive examination. OPM will exempt a position from the competitive service when it determines that an appointment through competitive examination is not practicable, or the recruitment of certain students or recent graduates would be better achieved through alternate recruitment and assessment processes. For example, OPM may determine that a position should be excepted from the competitive service because it is impracticable to examine the knowledge, skills, and abilities required for a position. Positions in the excepted service are categorized into four schedules. Schedule A includes positions that are not of a confidential or policy-determining character for which it is not practicable to examine applicants. Attorneys, chaplains, and short-term positions for which there is a critical hiring need are examples of schedule A positions. Schedule B also includes positions that are not of a confidential or policy-determining character for which it is not practicable to examine applicants. Unlike Schedule A positions, however, these positions require an applicant to satisfy basic qualification standards established by OPM for the relevant occupation and grade level. Individuals appointed to schedule B positions engage in a variety of activities, including policy analysis, teaching, and technical assistance. Positions in schedule C are policy-determining or involve a close and confidential working relationship with the head of an agency or other key appointed officials. These positions include most political appointees below the cabinet and subcabinet levels. An agency's senior advisor and special assistant positions are typically in schedule C. Finally, schedule D includes positions that are not of a confidential or policy-determining character for which competitive examination makes it difficult to recruit a sufficient number of certain students or recent graduates. Examples of schedule D positions include those involving science, technology, engineering, or mathematics (STEM) occupations and positions in the Presidential Management Fellows Program. Schedule D positions generally require an applicant to satisfy basic qualification standards established by OPM for the relevant occupation and grade level. Like employees in the competitive service, excepted service employees are generally paid in accordance with the General Schedule. In addition, excepted service employees maintain the same notice and appeal rights for adverse personnel actions. Some employees in the excepted service, however, must satisfy different durational requirements before these rights become available. So-called \"preference eligibles\" in an executive agency, the Postal Service, or the Postal Rate Commission must complete one year of current continuous service to avail themselves of the relevant notice and appeal rights. The term \"preference eligible\" refers to specified military veterans and some of their family members, such as an unmarried widow, and the wife or husband of a service-connected disabled veteran. Employees in the excepted service who are not preference eligibles and (1) are not serving a probationary or trial period under an initial appointment pending conversion to the competitive service, or (2) have completed two years of current or continuous service in the same or similar position, have the same notice and appeal rights as qualifying employees in the competitive service. The SES is a cadre of high-level government administrators who manage major programs and projects within most federal agencies. While they are considered federal employees within the civil service system, the SES is governed by a regulatory structure separate from the competitive and excepted services. As defined in statute, SES positions are generally managerial or supervisory positions that are classified above the GS-15 grade (or certain equivalent positions) and need not be appointed by the President and confirmed by the Senate. In these leadership roles, SES members may serve as intermediaries between top-level political appointees of an agency who seek to carry out the objectives of a particular President and career civil servants with institutional experience relating to relevant issues. According to a 2018 report, there are currently more than 7,000 permanent SES positions. There are two types of SES positions: (1) career reserved and (2) general. Career reserved positions must be filled with career appointees to shield certain SES roles from political influence. Generally, agency heads are to determine whether a particular SES position warrants a career reserved designation, to \"ensure impartiality, or the public's confidence in the impartiality, of the Government.\" OPM regulations reflect the types of SES roles in which this designation is appropriate, including those involving adjudication and appeals, auditing, and law enforcement duties. General positions may be filled by career appointees, as well as other noncareer and limited term (i.e., political) appointees. There are four types of SES appointments: career, noncareer, limited term, and limited emergency appointees. The SES mainly consists of \"career appointees\" chosen through a merit-based competitive hiring process. As part of this process, each agency must maintain a recruitment program for career appointees, as well as at least one executive board that reviews qualifications and makes recommendations regarding SES candidates. An OPM-convened Qualification Review Board (QRB) must certify the executive and managerial qualifications of a selected candidate before a career appointment may be made to an SES position. Unlike career appointees, noncareer appointees are not subject to the competitive selection process, but agency heads must determine that these appointees meet the qualifications of the SES position. While noncareer appointees are not QRB-certified, OPM must approve these appointees. Limited term and limited emergency appointees make up a small subset of the SES, and their terms are non-renewable. These appointments are used when a position is needed for a specified period (such as to manage a special project), or a position is established to meet a \"bona fide, unanticipated, urgent need.\" Limited term and limited emergency appointments are also subject to OPM approval. To restrict the politicization of the SES, Title 5 of the U.S. Code (Title 5) limits the number of noncareer and limited term appointees who may serve in SES positions. The SES pay structure is also distinct from the rest of the civil service. Title 5 specifies that the pay rate of each senior executive is based on the executive's individual performance or contribution to agency performance (or both), as measured under a \"rigorous\" performance appraisal system. Each federal agency must maintain at least one of these appraisal systems, subject to OPM standards, review, and approval. Performance appraisals of SES members may consider factors such as improvements in efficiency, productivity, and quality of work or service, cost efficiency, and performance timeliness. In response to earlier concerns that SES appraisal systems were flawed because most executives received the highest rating, Title 5 tasks OPM, in collaboration with the Office of Management and Budget, with the establishment and maintenance of a government-wide performance appraisal system certification process, in an effort to ensure that an agency's appraisal systems for SES employees make \"meaningful distinctions based on relative performance.\" Title 5 also sets out different pay rates for the SES, with a minimum rate of basic pay equal to 120 percent of the rate for GS-15, step 1, and a maximum rate of basic pay equal to the rate for Level III of the Executive Schedule. But SES members' annual aggregate pay (that includes additional compensation such as bonuses, awards, and other payments in addition to basic pay) is capped at the rate for Level I of the Executive Schedule. If a senior executive's total compensation exceeds the aggregate limitation, the executive receives the overage in the following calendar year. To encourage federal agencies to establish and maintain an OPM-certified performance appraisal system, Title 5 allows for a higher range of SES pay for agencies that have these certified systems. Title 5 also articulates conditions and procedures for removing, suspending, or taking other adverse actions against a member of the SES. Career SES appointees who have successfully completed a one-year probationary period may be removed or subject to adverse action only for specified reasons. For example, an SES career appointee may be removed from the civil service or suspended for more than 14 days only for misconduct, neglect of duty, malfeasance, or failure to accept a directed reassignment or to accompany a position in a transfer of function. SES members must receive advance written notice about the action and opportunity to provide an answer or receive hearing, subject to exception. The senior executive may also appeal the employment action to the MSPB. A career appointee receiving a single unsatisfactory performance rating may be reassigned or transferred within the SES or removed from the SES. A career SES member who receives two unsatisfactory ratings in any period of five consecutive years, or twice in any period of three consecutive years receives less than fully successful ratings, must be removed from the SES. Affected SES career appointees must receive advance written notice of these actions. While these appointees may not appeal these actions to the MSPB, they may request an informal hearing before the Board. SES career appointees are also generally entitled to be placed in a civil service position at GS-15 or above (or an equivalent position). In comparison, noncareer, limited term, and limited emergency appointees are generally not subject to the same removal protections and may be removed from the SES at any time. The procedures for removal of noncareer and limited term appointees are largely not addressed in federal statute, and the terms and procedures for their removal are mainly at the discretion of the agency head. In response to concerns about performance and accountability of SES members employed by the Department of Veterans Affairs (VA), Congress recently created special removal requirements that apply to these positions. In 2017, Congress passed the Department of Veterans Affairs Accountability and Whistleblower Protection Act, which amended an existing provision concerning removal procedures for these covered senior executives. Under the 2017 Act, the VA Secretary has discretion to suspend, demote, remove, or take other actions against SES career appointees or other high-level executives if the Secretary determines that the individual's misconduct or performance warrants such action. To address SES job performance issues more expeditiously, SES employees at the VA Department are entitled to abbreviated notice and appeals rights, as compared to the removal procedures in place in other federal agencies.", "summary": "According to the Office of Personnel Management (OPM), the federal workforce consists of an estimated two million civilian employees. Federal law categorizes these employees into three types of service—the competitive service, the excepted service, and the Senior Executive Service (SES)—that may be distinguished by different selection, compensation, and other standards. Title 5 of the U.S. Code (Title 5) contains most of the standards governing federal employment, and OPM is generally responsible for implementing these requirements. The competitive service largely consists of all civil service positions in the executive branch, other than (1) positions excepted from the competitive service by statute; (2) positions appointed by the President and confirmed by the Senate; and (3) the SES. Traditionally, OPM has administered examinations for entrance into the competitive service. These examinations are meant to be \"practical in character\" and relate to \"matters that fairly test the relative capacity and fitness of the applicants for the appointment sought.\" Title 5 also authorizes OPM to prescribe rules allowing agencies to hire candidates directly under specified circumstances. The excepted service includes designated civil service positions that are not in the competitive service or the SES and are not subject to competitive examination. OPM maintains authority to exempt a position from the competitive service when it determines that an appointment through competitive examination is not practicable, or the recruitment of students or recent graduates would be better achieved through alternate recruitment and assessment processes. The pay structure for the competitive service and the excepted service is similar. Both services are typically paid in accordance with the General Schedule, a schedule of annual basic pay rates that consists of 15 grades, designated \"GS-1\" through \"GS-15.\" This fixed pay scale is generally designed to reflect, among other things, equal pay for substantially equal work within a local pay area. Additionally, the competitive service and the excepted service generally have similar notice and appeal rights for adverse personnel actions. For example, before a removal, a suspension for more than 14 days, a reduction in grade or pay, or a furlough of 30 days or less, the agency must provide at least 30 days' advance written notice to the affected employee. The employee must also be given a reasonable time to respond to the notice and provide affidavits and other evidence to support the answer. Some adverse actions may also be appealed to the Merit Systems Protection Board (MSPB or Board), an independent, quasi-judicial agency that reviews and adjudicates specified personnel actions taken against qualifying federal employees. The SES is a corps of some 7,000 high-level government administrators who manage major programs and projects within most federal agencies. In these leadership roles, SES members may serve as a link between top-level political appointees of an agency and career civil servants within the agency. The SES is governed by a regulatory structure separate from the competitive and excepted services. While SES members are primarily career appointees chosen through a merit-based competitive hiring process, others are noncareer, limited term or limited emergency appointees (commonly political appointees) selected by agency leadership. To shield certain SES roles from political influence, some SES positions (career reserved positions) must be filled with career appointees, and Title 5 limits the number of noncareer and limited term appointees that may serve in SES positions. The SES pay structure is distinct from the rest of the civil service. Title 5 specifies that SES members are paid within a particular range based on an executive's individual performance or contribution to agency performance (or both), as measured under a performance appraisal system. In addition, Title 5 articulates special conditions and procedures for removing, suspending, or taking other adverse actions against a member of the SES. For example, career SES appointees who have successfully completed a one-year probationary period may be removed or subject to adverse action only for specified reasons, including misconduct and substandard performance. Career appointees must receive advance written notice of these actions, and an opportunity to appeal the action. In comparison, noncareer, limited term, and limited emergency appointees are generally not subject to the same protections and may be removed from the SES at any time.", "document_type": "crs"}
{"report": "The military compensation system is complex and includes an array of cash compensation elements, noncash compensation (benefits), deferred compensation (retirement pay, Thrift Savings Plan, retiree health care, and other retirement benefits), and tax advantages. This report focuses primarily on the cash compensation provided to members of the active component Armed Forces. Other CRS reports cover military retirement and health care. This report uses a question and answer format to highlight key aspects of the military compensation system and to address topics of recurring congressional interest, including the following: Compensation elements and rates. Statutory formulas for increasing compensation elements. Historical increases in basic pay. Comparability with civilian pay. Additional compensation for those serving in Iraq or Afghanistan. There are three main ways in which military personnel are compensated: cash compensation, noncash compensation, and deferred compensation. Cash compensation takes a variety of forms and includes basic pay, housing and subsistence allowances, enlistment bonuses, skill proficiency pay, and additional pay for particularly demanding or dangerous duty. Non cash compensation includes various benefits such as medical and dental care, government-provided housing, educational benefits, space-available travel on military aircraft, and access to subsidized grocery stores (commissaries), retail stores (exchanges), and child care centers. The main elements of deferred compensation are retired pay and retiree health care, but commissary and exchange access, space-available travel, and other benefits are also part of this. Servicemembers may also participate in the Thrift Savings Plan (TSP), although until 2018 they generally did not receive matching contributions from the government. However, recent changes to the military retirement system made matching contributions to the Thrift Savings Plan a key component of many servicemembers' deferred compensation starting in 2018. The basic compensation package provided to all servicemembers includes basic pay, a housing allowance (or government-provided housing), a subsistence allowance (or government-provided meals), free medical and dental care for servicemembers, free or low-cost medical and dental care for dependents, paid annual leave, and certain other benefits. Table 1 summarizes the main elements of compensation provided to all servicemembers. Servicemembers may also receive additional cash compensation based on their occupational specialty, duty assignment, and other factors. When people talk about military pay, they are often only referring to basic pay . Although basic pay is usually the largest component of cash compensation that a servicemember receives, there are other types of military pay that increase it significantly. There are tax benefits as well. Regular Military Compensation is a statutorily defined measure of the cash or in-kind compensation elements that all servicemembers receive every payday. It is widely used as a basic measure of military cash compensation levels and for comparisons with civilian salary levels. RMC, as defined in law, is \"the total of the following elements that a member of the uniformed services accrues or receives, directly or indirectly, in cash or in kind every payday: basic pay, basic allowance for housing, basic allowance for subsistence, and federal tax advantage accruing to the aforementioned allowances because they are not subject to federal income tax.\" Though military compensation is structured much differently than civilian compensation, making comparison difficult, RMC provides a more complete understanding of the cash compensation provided to all servicemembers. Therefore, it is usually preferred over simple basic pay when comparing military with civilian compensation, analyzing the standards of living of military personnel, or studying military compensation trends over time. For most servicemembers, basic pay is the largest element of the compensation they receive in their paycheck and typically accounts for about two-thirds of an individual's RMC. All members of the Armed Forces receive basic pay, although the amount varies by pay grade (rank) and years of service (also called longevity). Table 2 provides illustrative examples of basic pay rates. All servicemembers are entitled to either government-provided housing or a housing allowance, known as basic allowance for housing (BAH) for those living within the United States or Overseas Housing Allowance (OHA) for those living outside of the United States. Roughly one-third of servicemembers receive government-provided housing (in the form of barracks, dormitories, ship berthing, or government-owned family housing), with the remainder receiving BAH or OHA to offset the costs of the housing they rent or purchase in the civilian economy or the privatized housing they rent on or near military bases. The proportion of housing costs covered by housing allowances has varied over time. See the section entitled \" Basic Allowance for Housing: Increases Are Linked to Increases in Housing Costs \" later in this report for more information on this topic. The amount of BAH a servicemember receives is based on three factors: paygrade (rank), geographic location, and whether the servicemember has dependents. Paygrade and dependency status are used to determine the type of accommodation—or \"housing profile\"—that would be appropriate for the servicemember (for example, one-bedroom apartment, two-bedroom townhouse, or three-bedroom single family home). Geographic location is used to determine the median costs associated with each of these housing profiles. The median costs of these housing profiles are the basis for BAH rates, with some additional adjustments made on the basis of paygrade (that is, an E-7 without dependents will receive more than an E-6 without dependents, even though the appropriate housing profile for both of them is \"two bedroom apartment\"). As a result of this methodology, BAH rates are much higher in some areas than others, but servicemembers of similar paygrade and dependents status should be able to pay for roughly comparable housing regardless of their duty location. BAH rates are paid to the servicemember at the specified rate, regardless of the actual housing expenses incurred. Table 2 provides illustrative examples of how much BAH servicemembers receive annually. OHA is also based on paygrade, geographic location, and whether the servicemember has dependents, but the manner in which it is calculated is significantly different than BAH. OHA is paid based on the servicemember's reported actual housing expenses, up to a maximum amount that varies by location, plus an allowance for utilities. The amount is reduced if the servicemember resides with one or more \"sharers.\" There is also a fixed one-time allowance to cover certain move-in expenses (such as real estate agents' fees, phone and utility connections, and security improvements). Nearly all servicemembers receive a monthly payment to defray their personal food costs. This is known as basic allowance for subsistence (BAS). BAS is provided at a flat rate: In 2019, enlisted personnel receive $369.39 a month, while officers receive $254.39 a month. There have been calls in the past to merge BAS with basic pay to reduce the complexity of military compensation and the need for BAS computations each year. Certain types of military compensation are not subject to federal income tax, thus generating a tax benefit for servicemembers. The various types of military pay—basic pay, special pay, and incentive pay—are considered part of gross income and are usually subject to federal income tax. Military allowances, on the other hand, are generally not considered part of gross income and are not subject to federal income tax; nor are the various in-kind benefits of the military—for example, government housing, health care, fitness centers, and subsidized grocery stores. , RMC considers only the federal income tax advantage provided by the exemption of BAH and BAS from gross income. The precise value of the federal tax advantage for an individual servicemember will vary depending on his or her unique tax situation. RMC does not include the full array of compensation elements (e.g., special pays and bonuses, reimbursements, educational assistance, deferred compensation, or any estimate of the cash value of nonmonetary benefits such as health care, child care, recreational facilities, commissaries, and exchanges). As the value of these forms of compensation can be very substantial, RMC should not be considered a measure of total military compensation. Mentions of the \"military pay raise\" are almost always references to the annual increase in basic pay. The statutory formula for calculating each year's pay raise is discussed below, but b asic pay is only one element of RMC. BAH and BAS are also subject to periodic adjustment, although they typically do not receive as much attention as increases in basic pay. Section 1009 of Title 37 provides a permanent formula for an automatic annual increase in basic pay that is indexed to the annual increase in the Employment Cost Index (ECI) for \"wages and salaries, private industry workers.\" For 2000-2006, the statute required the military raise to be equal to the ECI increase plus an additional one half percentage point (i.e., if the ECI annual increase were to be 3.0%, the military raise would be 3.5%). For 2007 and onward, the statute required the raise be equal to the ECI, although Congress continued to enact increases above the ECI through 2010. Under subsection (e) of this statute, the President can specify an alternative pay adjustment that supersedes the automatic adjustment. President Obama invoked this option with regard to the 2014-2016 pay raises. Additionally, Congress can pass legislation to specify the annual pay raise which, if enacted, would supersede the automatic adjustment and/or any proposed presidential adjustment. The frequency of such congressional action is discussed below. The automatic adjustment under 37 U.S.C. 1009 is tied to the increase in the ECI from the third quarter of the third preceding year to the third quarter of the second preceding year. For example, in the 12-month period between the quarter which ended in September 2015 and the quarter which ended in September 2016, the ECI increased by 2.4%. Hence the pay raise for 2018, as calculated by the statutory formula, was 2.4%. An illustration of how the formula operates is provided in Figure 1 . This methodology results in a substantial lag between increases in the ECI and increases in basic pay; the lag appears to be related to the stages of the federal budget process. Despite the statutory formula, which could operate each year without any further action, Congress has frequently waived the automatic adjustment and legislated particular percentage increases. For the pay raises effective in fiscal years 1981 and1982 and calendar years 1984-2010, 2013, and 2017-2018 Congress specified the increase that was to take effect in the annual defense authorization act. Congress specified no percentage increase for 1983, 2011, 2012, 2014-2016, or 2019, thereby allowing the statutory formula or the presidential alternative adjustment to go into effect. The statutory formula is important even when it does not go into effect, as it provides a benchmark around which alternatives are developed and debated. Basic Allowance for Housing is paid to servicemembers living in the United States who do not choose or are not provided government quarters. By law, the Secretary of Defense sets the BAH rates for localities, known as military housing areas (MHAs), throughout the United States. However, the law requires the Secretary to set the rates \"based on the costs of adequate housing determined for the area\" and ties this determination to \"the costs of adequate housing for civilians with comparable income levels in the same area.\" As increases in BAH are tied to increases in local housing costs, they are not affected by the annual percentage increase in the ECI. Thus, the average increase in BAH almost always differs from the increase in basic pay. To determine the cost of adequate housing, DOD conducts an annual survey of rental costs in each of the MHAs. DOD employs a contractor to collect rental costs for various types of housing, including apartments, townhouses, and single‐family units of varying bedroom sizes. Costs for utilities are also collected. DOD uses these annual surveys to determine how much housing costs have increased or decreased in each MHA. If costs in a given MHA increase, it adjusts BAH rates for that locality upward accordingly at the start of the next calendar year. If costs in a given MHA decrease, it adjusts the BAH rates downward. However, in the case of a downward adjustment, a \"save pay\" provision on the BAH statute prevents the decrease from applying to individuals currently assigned to that locality: \"So long as a member of a uniformed service retains uninterrupted eligibility to receive a basic allowance for housing within an area of the United States, the monthly amount of the allowance for the member may not be reduced as a result of changes in housing costs in the area or the promotion of the member.\" Thus, only personnel newly assigned to the area receive the lower payment. Congress has periodically changed the law with regard to the proportion of housing costs covered by BAH or its predecessor, known as Basic Allowance for Quarters (BAQ) and Variable Housing Allowance (VHA). DOD estimated that BAQ+VHA covered about 80% of housing costs in 1996. In 1997, Congress replaced BAQ+VHA with BAH, and subsequently raised BAH rates so that they covered 100% of the cost of adequate housing by 2005. More recently, the FY2015 National Defense Authorization Act allowed the Secretary of Defense to reduce BAH payments by 1% of the national average monthly housing cost, and the FY2016 National Defense Authorization Act extended this authority, authorizing an additional 1% reduction per year through 2019 (for a maximum reduction of 5% under the national monthly average housing cost). DOD has indicated that a save pay provision, discussed above, will apply to these changes. BAS is paid at a uniform rate to all eligible enlisted personnel, and at a uniform but lower rate for all eligible officers. By law, BAS is adjusted each year according to a formula that is linked to changes in food prices. The increase is identical to \"the percentage increase in the monthly cost of a liberal food plan for a male in the United States who is between 20 and 50 years of age over the preceding fiscal year, as determined by the Secretary of Agriculture each October 1.\" The following subsections itemize action on the basic pay increase going back to 1997. Unless otherwise noted, all increases were proposed to be effective on January 1 of the year indicated in bold. The public law number for each year's National Defense Authorization Act is included at the end of each section below, even for those years in which there was no statutory language relevant to the pay raise. For a table that summarizes recent increases in basic pay, see CRS In Focus IF10260, Defense Primer: Military Pay Raise , by Lawrence Kapp. 2019 . Statutory Formula: 2.6 %. Administration request: 2.6 %. The House-passed version of the FY2019 National Defense Authorization Act (NDAA) contained no provision to specify the rate of increase in basic pay. Section 601 of the Senate-passed version of the FY2019 NDAA waived the automatic increase in basic pay under the statutory formula of 37 U.S.C. §1009, and set the pay raise at 2.6%. The John S. McCain National Defense Authorization Act for FY 2019 ( P.L. 115-232 ) contained no provision relating to a general increase in basic pay, thereby leaving the automatic adjustment of 37 U.S.C. 1009 in place. Final increase: 2. 6 % across-the-board . 2018. Statutory Formula: 2.4 %. Administration request: 2.1 %. Section 601 of the House-passed version of the FY2018 National Defense Authorization Act (NDAA) required the statutory formula increase (2.4%) to go into effect, \"notwithstanding any determination made by the President under subsection (e) of such section with respect to an alternative pay adjustment.... \" Section 601 of the Senate-passed version of the FY2018 NDAA waived the automatic increase in basic pay under the statutory formula of 37 U.S.C. §1009, and set the pay raise at 2.1%. On August 31, 2017, President Trump sent a letter to congressional leaders invoking his authority under 37 U.S.C. 1009(e) to set the pay raise at 2.1%. However, Section 601 of the enacted version of the FY2018 NDAA ( P.L. 115-91 ) specified the statutory formula increase (2.4%) would go into effect, superseding the President's alternative adjustment. Therefore, basic pay for all servicemembers increased by 2.4% on January 1, 2018. Final increase : 2. 4 % across-the-board ( P.L. 115-91 ) . 2017. Statutory Formula: 2.1 %. Administration request: 1 .6 %. Section 601 of the House version of the FY2017 NDAA ( H.R. 4909 ) required the statutory formula increase (2.1%) to go into effect, \"notwithstanding any determination made by the President under subsection (e) of such section with respect to an alternative pay adjustment.... \" Section 601 of the Senate version of the FY2017 NDAA ( S. 2943 ) waived the automatic increase in basic pay under the statutory formula of 37 U.S.C. §1009, and set the pay raise at 1.6%. On August 31, 2016, the President sent a letter to congressional leaders invoking his authority under 37 U.S.C. 1009(e) to set the pay raise at 1.6%. However, Section 601 of the final version of the FY2017 NDAA set the pay raise at 2.1%, and President Obama signed this bill into law on December 23, 2016. This statutory adjustment supplanted the President's alternative pay adjustment. Therefore, basic pay for all servicemembers increased by 2.1% on January 1, 2017. Final increase : 2.1% across-the-board ( P.L. 114-328 ) . 2016. Statutory Formula: 2.3 %. Administration request: 1 .3 %. The House version of the FY2016 NDAA ( H.R. 1735 ) contained no provision to specify the rate of increase in basic pay, although the report accompanying it stated that the committee supported a 2.3% increase. The Senate version ( H.R. 1735 ) contained a provision that waived the automatic adjustment of 37 U.S.C. §1009 and set the pay increase at 1.3%, but excluded generals and admirals. On August 28, the President exercised his authority to specify an alternative adjustment, setting the increase at 1.3%. No general pay raise provision was included in the final version of the NDAA, thereby leaving in place the 1.3% increase specified by President Obama. However, Section 601 of the FY2016 NDAA prevented the pay increase from applying to generals and admirals. Final increase : 1.3% across-the-board, excluding generals and admirals ( P.L. 114-92 ). 2015. Statutory Formula: 1.8 %. Administration request: 1 .0 %. The House version of the FY2015 NDAA contained no statutory provision to specify the rate of increase in basic pay, although the report accompanying it stated that the committee supported a 1.8% increase; it also included a provision to prevent general and flag officers from receiving any increase in basic pay in 2015. The Senate committee-reported version contained a provision waiving the automatic adjustment of 37 U.S.C. 1009 and setting the pay increase at 1.0% for servicemembers, but excluded generals and admirals. On August 29, President Obama sent a letter to Congress invoking 37 U.S.C. 1009(e) to set the pay raise for 2015 at 1.0%. No general pay raise provision was included in the final version of the NDAA, thereby leaving in place the 1.0% increase specified by President Obama. However, Section 601 of the FY2015 NDAA prevented the pay increase from applying to generals and admirals. Final increase : 1% across-the-board, excluding generals and admirals ( P.L. 113-291 ). 2014. Statutory Formula: 1. 8 %. Administration request: 1. 0 %. The House version of the FY2014 NDAA contained no provision to specify the rate of increase in basic pay, while the Senate committee-reported bill specified an increase of 1.0%. On August 30, President Obama sent a letter to Congress invoking 37 U.S.C. 1009(e) to set the pay raise for 2014 at 1.0%. No provision was included in the final version of the NDAA, thereby leaving in place the 1.0% increase specified by the President. Final increase : 1% across-the-board ( P.L. 113-66 ). 2013. Statutory Formula: 1. 7 %. Administration request: 1. 7 %. The House version of the FY2013 NDAA supported a 1.7% across-the-board pay raise. The Senate bill contained no statutory language. The final bill specified a 1.7% increase. Final increase : 1 .7 % across-the-board ( P.L. 112-239 ). 2012. Statutory Formula: 1.6%. Administration request: 1.6%. The House version of the FY2012 NDAA supported a 1.6% across-the-board pay raise, equal to the ECI. Both the Senate-reported bill and the final version were silent on the pay raise issue. As a result, the statutory formula became operative with an automatic January 1, 2012, across-the-board raise equal to 1.6%. Final increase : 1.6% across-the-board ( P.L. 112-81 ). 2011. Statutory formula: 1.4%. Administration request : 1.4%. The House version of the FY2011 NDAA supported a 1.9% across-the-board pay raise, 0.5% above the ECI. Both the Senate-reported bill and the final bill were silent on the pay raise issue. As a result, the statutory formula became operative with an automatic across-the-board raise of 1.4%; equal to the ECI. Final increase : 1.4% across-the-board ( P.L. 111-383 ). 2010. Statutory formula: 2.9%. Administration request: 2.9%. The FY2010 NDAA specified a 3.4% increase. Final increase : 3.4% across-the- board ( P.L. 111-84 ). 2009. Statutory formula: 3.4%. Administration request: 3.4%. The FY2009 NDAA specified a 3.9% increase. Final increase : 3.9% across -the-board ( P.L. 110-417 ). 2008. Statutory formula: 3.0%. Administration request: 3.0% across-the-board. The presidential veto of the initial FY2008 NDAA resulted in a 3.0% pay raise taking effect on January 1, 2008 (statutory formula). The final version of the NDAA, signed into law on January 28, specified that basic pay be increased by 3.5% retroactive to January 1. Final increase : 3.5 % across -the-board ( P.L. 110-181 ). 2007. Statutory formula: 2.2%. The statutory formula for 2007 was based solely on the ECI and not a rate 0.5% higher than the ECI that had been specified for 2000-2006. Administration request: 2.2%. The NDAA specified a minimum 2.2% increase, with greater increases for certain pay cells. Final increase : 2.2% across-the- board but with an additional April 1, 2007 , targeted pay raise that would be as high as 8.3% for some warrant officers and range from 2.5 % for E-5s to 5.5 % for E-9s ( P.L. 109-364 ). 2006. Statutory formula: 3.1%. Administration request: 3.1% across-the-board. The NDAA specified a 3.1% increase. Final increase : 3.1% across-the- board ( P.L. 109-163 ). 2005. Statutory formula: 3.5%. Administration request: 3.5%. The NDAA specified a 3.5% increase. Final increase : 3.5% across-the-board ( P.L. 108-375 ). 2004. Statutory formula: 3.7%. Administration request: Average 4.1%; minimum 2.0%; maximum of 6.5%. The NDAA specified a 3.7% minimum increase, with greater increases for certain pay cells. Final increase : 3.7% minimum, 4.15% average, 6.25% maximum for some senior NCOs ( P.L. 108-136 ). 2003. Statutory formula: 4.1%. Administration request: minimum 4.1%; average 4.8%; between 5.0% and 6.5% for some mid-level and senior noncommissioned officers, warrant officers, and mid-level commissioned officers. The NDAA specified increases identical to the Administration request. Final increase: I dentical to the Administration request ( P.L. 107-314 ). 2002. Statutory formula: 4.6%. Administration request: numerous figures for the \"Administration request\" were mentioned in the pay raise debate, depending on when and which agency produced the figures. In general, however, they all proposed increases of at least 5% and no more than 15% (the latter applying only to a very few individuals), depending on pay grade and years of service; the average increase was 6.9%. The NDAA specified a 5% minimum increase, with greater increases for certain pay cells. Final increase: Between 5 and 10%, depending on pay grade and years of service ( P.L. 107-107 ). 2001. Statutory formula: 3.7%. Administration request : 3.7%. The FY2001 NDAA specified a 3.7% minimum increase of 3.7%, with greater increases for certain pay cells . The NDAA specified a 3.7% minimum increase, with greater increases for certain pay cells. Final increase: 3.7% across-the-board, effective January 1, 2001, plus additional raises of between 1.0 and 5.5% for mid -grade officer and enlisted personnel , to be effective July 1, 2001 ( P.L. 106-398 ). 2000. Statutory formula: 4.8% (based on the change to the statutory formula; the original statutory formula would have led to a proposed raise of 3.8%). Administration request: 4.4% on January 1, 2000, plus increases averaging an additional 1.4% for mid-grade officer and enlisted personnel, effective July 1, 2000. The NDAA specified a 4.8% minimum increase, with greater increases for certain pay cells. Final increase: 4.8% on January 1, 2000, plus increases averaging an additional 1.4% for mid-grade officer and enlisted personnel, effective July 1, 2000 ( P.L. 106-65 ). 1999. Statutory formula : 3.1%. Administration request : 3.6%. The House approved 3.6%, or whatever percentage increase was approved for federal GS civilians, whichever was higher. The Senate approved 3.6%. The final version accepted the House provision. Final increase : 3.6%, as GS civilians also received 3.6% ( P.L. 105-261 ). Since the end of the draft in 1973, the \"adequacy\" of military pay has tended to become an issue for Congress if it appears that the military services are having trouble recruiting enough new personnel, or keeping sufficient career personnel, of requisite quality; or the standard of living of career personnel is perceived to be less fair or equitable than that of demographically comparable civilians (in terms of age, education, skills, responsibilities, and similar criteria). The first issue is an economic inevitability in some periods. In the absence of a draft, the services must compete in the labor market for new military personnel, and—a fact often overlooked—have always had to compete in the labor market to retain the more experienced individuals who make up the career force. When unemployment is low, employment opportunities in the civilian world abound and military recruiting is more difficult. When unemployment is high, military service becomes a more attractive alternative, and military recruiting is easier. From 2010 to 2017, recruiting and retention in the Armed Forces were quite strong, hence weakening the case for compensation increases based on competition with the civilian economy and generating discussion of possible compensation cuts and/or restructuring. However, the strong recruiting and retention results in those years were due in part to a civilian economy still recovering from recession and to force reductions in the Air Force, Marine Corps, and Army, which generated lower recruiting and retention goals. Congress approved active duty end-strength increases for all four Services in FY2018. Subsequently, the Army did not meet its FY2018 recruiting goal and senior defense officials have testified that a strong economy has made it more challenging for them to recruit new personnel. If recruiting problems were to become more widespread, increased advocacy for compensation increases could well occur. The second situation is frequently stated in moral or ethical terms. Proponents of this viewpoint argue that, even if quantitative indexes of recruiting and retention appear to be satisfactory, the crucial character of the military's mission of national defense, and its acceptance of the professional ethic that places mission accomplishment above survival, demands certain enhanced levels of compensation. However, the compensation increases that occurred in the 2000s have led many analysts to conclude that military compensation is currently quite robust in comparison to civilian counterparts. The issue of a military-civilian \"pay gap\" raises several additional questions: How can the existence of a gap be determined and the gap be measured? Is there a gap and, if so, are civilians or military personnel being paid more? How much more? If there is a gap, does that in itself require action? A wide range of studies over the past several decades have attempted to compare military and civilian (both federal civil service and private sector) compensation. In general, the markedly different ways in which civilian public and private sector compensation and benefit systems are structured, compared to those of the Armed Forces, make it difficult to validate any generalizations about whether there is a \"gap\" between military and civilian pay. It is difficult to find a common index or indicator to compare the dollar values of military and civilian compensation. First, military compensation includes numerous separate components, whose receiving population and taxability vary widely. Which of these, if any, should be included in a military-civilian pay comparison? Furthermore, total military compensation includes a wide range of noncash benefits—health care, commissary access, recreational facilities—as well as a unique deferred compensation package. Few civilians work in organizations where analogous benefits are provided. Attempts to facilitate a comparison by assigning a cash value to noncash benefits almost always founder on the large number of debatable assumptions that must be made to generate such an estimate. Second, it is also difficult to establish a comparison between military ranks and pay grades on the one hand and civilian jobs on the other. The range of knowledge, supervision, and professional judgment required of military personnel and civilians performing similar duties in a standard peacetime industrial or office milieu may be roughly equivalent. However, when the same military member's job in the field and in combat is concerned, comparisons become difficult. Third, generally speaking, the conditions of military service are frequently much more arduous than those of civilian employment, even in peacetime, for families as well as military personnel themselves. This aspect of military service is sometimes cited as a rationale for military compensation being at a higher level than it otherwise might be. On the other hand, the military services all mention travel and adventure in exotic places as a positive reason for enlistment and/or a military career, so it may be misleading to automatically assume that this is always a liability. Thus, it can be difficult to make direct comparisons between military and civilian occupations. As noted by the Congressional Budget Office: Comparing compensation in the military and civilian sectors can be problematic. One obvious limitation is that such comparisons cannot easily account for different job characteristics. Many military jobs are more hazardous, require frequent moves, and are less flexible than civilian jobs in the same field. Members of the armed forces are subject to military discipline, are considered to be on duty at all times, and are unable to resign, change jobs at will or negotiate pay. Military personnel also receive extensive training, paid for by the government. Family support programs are generally more available in the military compared with civilian employers. Intangible rewards, such as a shared sense of purpose, may be higher among military personnel as well. Quantifying those elements among military and civilian personnel is extremely difficult. Fourth, differing methodologies for calculating compensation can yield different results. For example, comparing the percentage increase in pay over different time periods can produce widely varying rates of increase. Likewise, when indexes of compensation include different elements (for example, basic pay versus RMC), the results will typically diverge as well. Finally, the level of specificity used in a pay comparison can lead to differing results, especially when the comparison is between private sector and federal pay, both civil service and military. For instance, Army colonels may, according to some indexes, be paid roughly as much as federal civil service GS-15s, or as much as private sector managers with certain responsibilities. However, if the pay comparisons focus on those occupational specialties that are highly paid in the private sector—health care, information technology, and some other scientific and engineering skills are examples—the comparison may not be as favorable. Other common subcategories for comparison—such as age, gender, years in the labor force, and educational levels—can also produce differing results. Various comparisons of military and civilian compensation exist which illustrate a gap that favors civilian pay levels, refute the existence of such a gap, or show that the pay gap favors the military. Some of these reports lack precision in identifying what aspects of military pay were compared with civilian pay, which indexes were used to make the comparison, or the length of time covered by the comparison. One method of estimation, which indicates there is a pay gap in favor of civilians, asserts that rough pay parity existed between civilian and military personnel in 1982, but that increases since then in military basic pay have generally not kept up with increases in civilian pay (as measured by the ECI). As a result, a pay gap of about 13% in 1999 was gradually eliminated by 2011 due to above-ECI increases in basic pay. It reappeared in 2014 with military pay estimated to be 2.6% lower than civilian pay in 2018. However, using the same starting date (1982) but considering RMC rather than just basic pay, the Congressional Budget Office (CBO) came to a much different conclusion in 2010. In congressional testimony, a CBO analyst answered the question \"Is there a 'gap' between civilian and military pay raises over the past few decades,\" as follows: The answer depends on how narrowly military cash pay is defined. One common method of comparison is to calculate the cumulative difference between increases in military and civilian pay using military basic pay, a narrow measure of cash compensation that does not include, for example, tax-free allowances for housing and food. Applying that method would indicate that cumulatively, civilian pay rose by about 2 percent more than military pay between 1982 and the beginning of 2010. But that measure does not encompass the full scope of military cash compensation. Using a broader measure that includes cash allowances for housing and food indicates that the cumulative increase in military compensation has exceeded the cumulative increase in private-sector wages and salaries by 11 percent since 1982. That comparison excludes the value of noncash and deferred benefits, which would probably add to the cumulative difference, because benefits such as military health care have expanded more rapidly than corresponding benefits in the private sector. Another approach to estimating a pay gap attempts to compare actual compensation levels of military personnel to civilians with similar education and experience, rather than comparing rates of compensation increase over time. For example, the 9 th Quadrennial Review of Military Compensation (QRMC), published in 2002, compared the RMC of junior enlisted personnel to the earnings of civilian high school graduates, middle grade NCOs with civilians with some college education, and senior enlisted personnel with civilians who are college graduates. It compared the RMC of officers to the earnings of civilians with bachelors or advanced degrees in professional or managerial occupations. Based on a separate body of research, it argued that \"pay at around the 70 th percentile of comparably educated civilians has been necessary to enable the military to recruit and retain the quantity and quality of personnel it requires\" and pointed out those groups of military personnel that fell short of this compensation goal. Congress approved several rounds of pay table reform to address situations where servicemembers fell below the 70% mark. Additionally, general increases in basic pay higher than the rate of increase in the ECI (2000-2010) and the elimination of \"out-of-pocket\" housing expenses by 2005 pushed servicemember RMC up substantially in relation to civilian compensation. According to the 11 th QRMC, by 2009 military compensation had substantially exceeded this goal: In 2009, average RMC for enlisted members exceeded the median wage for civilians in each relevant comparison group—those with a high school diploma, those with some college, and those with an associate's degree. Average RMC for the enlisted force corresponded to the 90 th percentile of wages for civilians from the combined comparison groups. For officers, average RMC exceeded wages for civilians with a bachelor's or graduate-level degree. Average RMC for the officer force corresponded to the 83 rd percentile of wages for the combined civilian comparison groups. Since that time, Congress and the executive branch have made efforts to slow the growth of military compensation. Recent initiatives have included presidentially directed increases in basic pay below the ECI for 2014-2016 and statutory authority for DOD to reduce BAH payments by 1% of the national average monthly housing cost per year from 2015 to 2019 (for a maximum reduction of 5% of the national monthly average housing cost). In 2018, RAND published a report that compared RMC in 2016 to civilian pay levels, and compared those results to those generated by the 11 th QRMC in 2009. Using a similar, though not identical, methodology the RAND report found that RMC had remained well above the 70 th percentile of comparability educated civilians: The 11 th QRMC, using 2009 data, placed RMC at the 90 th percentile of civilian pay for enlisted and the 83 rd for officers. Our percentiles for 2016—the 84 th for enlisted and 77 th for officers—are somewhat lower than those of the 11 th QRMC. Although the estimates differ, both estimates show relatively high percentiles, yet methodological differences contribute to the discrepancy. Taking into account the somewhat different methodology used by RAND in 2018, its authors conclude \"overall RMC percentiles for 2016 for enlisted personnel and officers were virtually the same as for 2009.\" Some have suggested that the emphasis on a pay gap, whether real or not, is an inappropriate guide to arriving at sound policy. They argue that the key issue is, or should be, not comparability of military and civilian compensation, but the competitiveness of the former. Absent a draft, the Armed Forces must compete in the labor market for new enlisted and officer personnel. The career force by definition has always been a \"volunteer force,\" and thus has always had to compete with civilian opportunities, real or perceived. Given these facts, some ask what difference it makes whether military pay is much lower, the same, or higher than that of civilians? If the services are having recruiting difficulties, then pay increases might be appropriate, even if the existing \"gap\" favors the military. Conversely, if military compensation is lower than equivalent civilian pay, and if the services are doing well in recruiting and retaining sufficient numbers of qualified personnel, then there might be no reason to raise military pay. The 11 th QRMC voiced similar sentiments when it argued the following: A comparison between military and civilian wages does not, by itself, determine if military pay is at the optimal level. As previously noted, other factors are also at play including: recruiting and retention experiences and outlook; unemployment in the civilian economy; political factors, such as a wartime environment or risk of war; and the expected frequency and duration of overseas deployments. But the relative standing of military compensation provides context to help make decisions about RMC and other elements of the compensation system, such as those studied by the QRMC. Members of the Armed Forces serving in Iraq or Afghanistan are entitled to various additional forms of compensation, described below. Those serving in nearby countries are often eligible as well. Military personnel serving in Iraq or Afghanistan are eligible for Hostile Fire Pay (HFP) or Imminent Danger Pay (IDP). HFP is paid at the rate of $225 per month; IDP is paid at an equivalent rate, but on a daily basis ($7.50 per day). The purpose of this pay is to compensate servicemembers for physical danger. An individual can collect either Hostile Fire Pay or Imminent Danger Pay, not both simultaneously. Iraq and Afghanistan are designated imminent danger locations; any servicemember in these locations is entitled to IDP by virtue of their presence. Certain areas surrounding these countries were formerly designated as imminent danger locations, but DOD revoked this designation in 2014. For a list of all imminent danger locations, see the DOD Financial Management Regulations. Military personnel serving for over 30 days in Iraq, Afghanistan, and certain surrounding countries are eligible for Hardship Duty Pay (HDP). HDP is compensation for the exceptional demands of certain duty. In the case of Iraq and Afghanistan, it is compensation for the austere living conditions of the location. The rate for HDP in Iraq and Afghanistan is $100 per month. Military personnel serving in Iraq, Afghanistan, and surrounding areas may be eligible for Family Separation Allowance (FSA). FSA provides a special pay for those servicemembers with dependents who are separated from their families for more than 30 days. The purpose of this pay is to \"partially reimburse, on average, members of the uniformed services involuntarily separated from their dependents for the reasonable amount of extra expenses that result from such separation, and to reimburse members who must maintain a home in the United States for their dependents and another home overseas for themselves for the average expenses of maintaining the overseas home.\" To be eligible for this allowance, U.S. military personnel must be separated from their dependents for 30 continuous days or more; but once the 30-day threshold has been reached, the allowance is applied retroactively to the first day of separation. The authorizing statute for FSA sets the rate at $250 per month. Military personnel using military facilities and serving in Iraq and Afghanistan receive per diem equivalent to $105 per month to cover incidental expenses. The rate is the same for all personnel. One of the more generous benefits for many of those serving in Iraq or Afghanistan, and certain surrounding areas, is the \"combat zone tax exclusion.\" Military personnel serving in direct support of operations in these combat zones are also eligible for the combat zone tax exclusion, as are those \"hospitalized as a result of wounds, disease, or injury incurred while serving in a combat zone.\" For enlisted personnel and warrant officers, this means that all compensation for active military service in a combat zone is free of federal income tax. For commissioned officers, their compensation is free of federal income tax up to the maximum amount of enlisted basic pay plus any imminent danger pay received. While this benefit applies only to federal income tax, almost all states have provisions extending the benefit to their state income tax as well. In addition, military personnel who qualify for a reenlistment or retention bonus while stationed in a combat zone do not have to pay federal income tax on the bonus (though commissioned officers are still subject to the cap mentioned above). The amounts involved can be substantial, often in the tens of thousands of dollars, and occasionally over $100,000. Another benefit available to those deployed to a combat zone is eligibility for the Savings Deposit Program. This program allows servicemembers to earn a guaranteed rate of 10% interest on deposits of up to $10,000, which must have been earned in the designated areas. The deposit is normally returned to the servicemember, with interest, within 90 days after he or she leaves the eligible region, although earlier withdrawals can sometimes be made for emergency reasons. Currently, the survivors (typically, spouses and children) of military personnel who die on active duty, whether serving in combat zones or not, are eligible for a number of monetary and other benefits. These generally include the following: A death gratuity of $100,000, payable within a few days of the death to assist families in dealing with immediate expenses. Servicemembers' Group Life Insurance (SGLI) of up to $400,000. Disbursement of unpaid pay and allowances. One year of government housing or BAH. Three years of TRICARE coverage at the active duty dependent rate, followed by coverage at the retiree dependent rate (children remain covered as active duty family members until age 21, or until age 23 if enrolled in school full-time). Commissary and Exchange access. Burial expenses. One or more survivor benefit annuities (Social Security Survivor Benefits, DOD Survivor Benefit Plan , and/or Veterans Affairs Dependency and Indemnity Compensation; receipt of more than one annuity may require offsets between the annuities). Note, however, that each type of benefit described above has its own eligibility criteria. Survivors may, or may not, qualify for a given benefit based on their unique circumstances. For more detailed information on who qualifies for a given benefit, see the Department of Defense's A Survivor's Guide to Benefits .", "summary": "From the earliest days of the republic, the federal government has compensated members of the Armed Forces for their services. While the original pay structure was fairly simple, over time a more complex system of compensation has evolved. The current military compensation system includes cash payments such as basic pay, special and incentive pays, and various allowances. Servicemembers also receive noncash benefits such as health care and access to commissaries and recreational facilities, and may qualify for deferred compensation in the form of retired pay and other retirement benefits. This report provides an overview of military compensation generally, but focuses on cash compensation for current servicemembers. Since the advent of the all-volunteer force in 1973, Congress has used military compensation to improve recruiting, retention, and the overall quality of the force. Congressional interest in sustaining the all-volunteer force during a time of sustained combat operations led to substantial increases in compensation in the decade following the attacks of September 11, 2001. Subsequently, in the earlier part of the 2010s, concerns over government spending generated congressional and executive branch interest in slowing the rate of growth in military compensation. Initiatives to slow compensation growth included presidentially directed increases in basic pay below the rate of increase for the Employment Cost Index (ECI) for 2014-2016 and statutory authority for the Department of Defense (DOD) to reduce Basic Allowance for Housing (BAH) payments by 1% of the national average monthly housing cost per year from 2015 to 2019 (for a maximum reduction of 5% under the national monthly average housing cost). Some have raised concerns about the impact of personnel costs on the overall defense budget, arguing that they decrease the amount of funds available for modernizing equipment and sustaining readiness. Others argue that robust compensation is essential to maintaining a high-quality force that is vigorous, well-trained, experienced, and able to function effectively in austere and volatile environments. The availability of funding to prosecute contingency operations in Iraq and Afghanistan mitigated the pressure to trade off personnel, readiness, and equipment costs, but the current budgetary environment appears to have brought these trade-offs to the fore again. DOD spends about $100,000-$110,000 per year to compensate the average active duty servicemember—to include cash, benefits, and contributions to retirement programs—although some estimates of compensation costs are substantially higher. However, gross compensation figures do not tell the full story, as military compensation relative to civilian compensation is a key factor in an individual's decision to join or stay in the military. Thus, the issue of comparability between military and civilian pay is an often-discussed topic. Some analysts and advocacy groups have argued that a substantial \"pay gap\" has existed for decades—with military personnel earning less than their civilian counterparts—although they generally concede that this gap is fairly small today. Others argue that the methodology behind this \"pay gap\" is flawed and does not provide a suitable estimate of pay comparability. Still others believe that military personnel, in general, are better compensated than their civilian counterparts. The Department of Defense takes a different approach to pay comparability. The 9th Quadrennial Review of Military Compensation (QRMC), published in 2002, argued that compensation for servicemembers should be around the 70th percentile of wages for civilian employees with similar education and experience. According to the 11th QRMC, published in 2012, regular military compensation for officers was at the 83rd percentile of wages for civilian employees with similar education and experience, and at the 90th percentile for enlisted personnel. A 2018 RAND report concluded that these overall percentiles were nearly the same in 2016.", "document_type": "crs"}
{"report": "Since 1952, when a cabal of Egyptian Army officers, known as the Free Officers Movement, ousted the British-backed king, Egypt's military has produced four presidents; Gamal Abdel Nasser (1954-1970), Anwar Sadat (1970-1981), Hosni Mubarak (1981-2011), and Abdel Fattah el Sisi (2013-present). In general, these four men have ruled Egypt with strong backing from the country's security establishment. The only significant and abiding opposition has come from the Egyptian Muslim Brotherhood, an organization that has opposed single party military-backed rule and advocated for a state governed by a vaguely articulated combination of civil and Shariah (Islamic) law. Egypt's sole departure from this general formula took place between 2011 and 2013, after popular demonstrations sparked by the \"Arab Spring,\" which had started in neighboring Tunisia, compelled the military to force the resignation of former President Hosni Mubarak in February 2011. During this period, Egypt experienced tremendous political tumult, culminating in the one-year presidency of the Muslim Brotherhood's Muhammad Morsi. When Morsi took office on June 30, 2012, after winning Egypt's first truly competitive presidential election, his ascension to the presidency was supposed to mark the end of a rocky 16-month transition period. Proposed time lines for elections, the constitutional drafting process, and the military's relinquishing of power to a civilian government had been constantly changed, contested, and sometimes even overruled by the courts. Instead of consolidating democratic or civilian rule, Morsi's rule exposed the deep divisions in Egyptian politics, pitting a broad cross-section of Egypt's public and private sectors, the Coptic Church, and the military against the Brotherhood and its Islamist supporters. The atmosphere of mutual distrust, political gridlock, and public dissatisfaction that permeated Morsi's presidency provided Egypt's military, led by then-Defense Minister Sisi, with an opportunity to reassert political control. On July 3, 2013, following several days of mass demonstrations against Morsi's rule, the military unilaterally dissolved Morsi's government, suspended the constitution that had been passed during his rule, and installed an interim president. The Muslim Brotherhood and its supporters declared the military's actions a coup d'etat and protested in the streets. Weeks later, Egypt's military and national police launched a violent crackdown against the Muslim Brotherhood, resulting in police and army soldiers firing live ammunition against demonstrators encamped in several public squares and the killing of at least 1,150 demonstrators. The Egyptian military justified these actions by decrying the encampments as a threat to national security. As Egyptian President Abdel Fattah al Sisi consolidates his power amid a continuing macroeconomic recovery, Egypt is poised to play an increasingly active role in the region, albeit from a more independent position vis-a-vis the United States than in the past. Although Egyptian relations with the Trump Administration are solid, and Egypt has relied on the International Monetary Fund (IMF) program to guide its economic recovery, Egypt seems committed to broadening its international base of support. The United States plays a key role in that international base, but Egypt also has other significant partners, including the Arab Gulf states, Israel, Russia, and France. The Egyptian government blames American criticism of its human rights record for preventing closer U.S.-Egyptian ties. From the U.S. perspective, some Members of Congress, U.S. media outlets, and advocacy groups document how Egyptian authorities have widened the scope of a crackdown against dissent, which initially was aimed at the Muslim Brotherhood but has evolved to encompass a broader range of political speech. Egypt's parliament is currently considering whether to adopt a package of draft constitutional amendments that would extend presidential term limits and executive branch control over the judiciary. If Egypt's 2019 constitutional amendments are approved, President Sisi will attain unprecedented power in the political system over the military and the judiciary and, if reelected, will have the potential to remain in office until 2034. He has inserted his older brother and oldest son into key security and intelligence positions while stymying all opposition to his rule and criticism of his government. This consolidation of power and crackdown against dissent has taken place during a period of steady economic growth, which has not benefitted wide swaths of the population. The state has enacted a series of austerity measures to reduce debt in compliance with IMF-mandated reforms. In the year ahead, economists anticipate gross domestic product (GDP) growth of 5.3%, driven by an expansion in tourism and natural gas production. Nevertheless, Egyptians continue to endure double-digit inflation stemming in part from the 2016 flotation of the currency, tax increases, and reductions in food and fuel subsidies. While it is difficult to ascertain how dissatisfied the public is with rising prices, President Sisi has responded to criticisms of his economic policies, stating: \"The path of real reform is difficult and cruel and causes a lot of suffering.... But there is no doubt that the suffering resulting from the lack of reform is much worse.\" The IMF has praised the Egyptian government's record of reform implementation, while also highlighting the need for private sector growth \"that will absorb the rapidly growing labor force and ensure that the benefits are perceived more widely.\" After several years of observers seeing Egypt as more inwardly focused, several recent developments suggest an increasingly active foreign policy. In January 2019, Egypt hosted an international forum on Mediterranean gas which included European and Arab countries together with Israel. A month later, President Sisi was elected head of the African Union for a year-long term. In February 2019, Egypt hosted the first-ever European Union- Arab summit in Sharm el Sheikh, where officials discussed terrorism, migration, and the need for greater European-Arab cooperation to counter a perceived growing Chinese and Russian interest in the Middle East. Personnel moves and other developments in Egypt highlight apparent efforts by President Sisi to consolidate power with the help of political allies, including colleagues from Egypt's security establishment. In June 2018, Sisi reshuffled his cabinet, making key changes to the defense and interior ministries, among other appointments. Sisi appointed Mohamed Ahmed Zaki, former head of the Republican Guard, as defense minister and Mahmoud Tawfik, former head of the National Security Service, as interior minister. According to one account, Sisi may have been rewarding Zaki for his role in arresting former Egyptian President Mohamed Morsi in 2013. In July 2018, parliament passed Law 161 of 2018, providing judicial immunity to senior military commanders for military acts committed during the two-and-a-half-year period beginning with the military coup of July 2013. The new law grants immunity to senior commanders while potentially keeping high-ranking officers on reserve duty for life, making them ineligible to run for president. In order for a senior commander to be prosecuted under this new law, a case would have to be first authorized by the Supreme Council of the Armed Forces (SCAF), which President Sisi appoints. According to one analysis, the law deters senior officers from challenging President Sisi (for example, some challenges occurred during the run-up to the 2018 presidential election), thereby acting \"as a guarantor of President Sisi's authoritarian rule, setting the stage for him to remain president for life.\" Per the 2014 Egyptian constitution (article 140), President Sisi, who was reelected in April 2018, may only serve two four-year terms in office (current term ends in 2022). However, his supporters have proposed a set of amendments to the constitution which, if approved by parliament and public referendum, have the potential to make President Sisi eligible for an additional two six-year terms when his current term ends in 2022. Other proposed changes to the constitution include granting the president the authority to appoint all chief justices of Egyptian judicial bodies, and the public prosecutor; requiring that at least one-quarter of the seats in the parliament be allocated to women and reducing the number of the seats in the House of Representatives from 596 to 450; and establishing an upper house of parliament (Senate) consisting of 250 members, two-thirds of whom would be elected and one-third of whom would be appointed by the president. President Sisi has come under repeated international criticism for an ongoing government crackdown against various forms of political dissent and freedom of expression. Certain practices of Sisi's government, the parliament, and the security apparatus have been contentious. According to the U.S. State Department's report on human rights conditions in Egypt in 2017: The most significant human rights issues included arbitrary or unlawful killings by the government or its agents; major terrorist attacks; disappearances; torture; harsh or potentially life-threatening prison conditions; arbitrary arrest and detention; including the use of military courts to try civilians; political prisoners and detainees; unlawful interference in privacy; limits on freedom of expression, including criminal \"defamation of religion\" laws; restrictions on the press, internet, and academic freedom; and restrictions on freedoms of assembly and association, including government control over registration and financing of NGOs [nongovernmental organizations]. LGBTI persons faced arrests, imprisonment, and degrading treatment. The government did not effectively respond to violence against women, and there were reports of child labor. Select international human rights, democracy, and development monitoring organizations provide the following rankings for Egypt globally: Other human rights issues of potential interest to Congress may include the 2013 convictions of American, European, and Egyptian civil society representatives; the controversial 2017 NGO law; the detention of American citizens in Egypt; and the treatment of Coptic Christians, discussed in the following sections. In 2013, an Egyptian court convicted and sentenced 43 individuals from the United States, Egypt, and Europe, including the Egypt country directors of the National Democratic Institute (NDI) and the International Republican Institute (IRI), for spending money from organizations that were operating in Egypt without a license and for receiving foreign funds (known as Case 173 or the \"foreign funding case\"). Some lawmakers had protested that those individuals were wrongfully convicted and had requested that the Egyptian government and judiciary resolve the matter. In 2018, a retrial began and, on December 20, 2018, the individuals were acquitted of all charges. In January 2019, U.S. Secretary of State Michael R. Pompeo traveled to Cairo, where he remarked: \"I was happy to see our citizens, wrongly convicted of improperly operating NGOs here, finally be acquitted. And we strongly support President Sisi's initiative to amend Egyptian law so that this does not happen again. More work certainly needs to be done to maximize the potential of the Egyptian nation and its people. I'm glad that America will be a partner in those efforts.\" However, Case 173 remains active, as the judiciary has imposed asset freezes and travel bans on several Egyptian civil society activists. In May 2017, President Sisi signed Law 70 of 2017 on Associations and Other Foundations Working in the Field of Civil Work. The parliament had passed this bill six months earlier, and both the passage and signing drew widespread international condemnation. The new law (which replaced a 2002 NGO law) requires NGOs to receive prior approval from internal security before accepting foreign funding. It also restricts the scope of permitted NGO activities and increases penalties for violations, including possible imprisonment for up to five years. However, the government did not issue implementing regulations for the new NGO law. At Egypt's November 2018 World Youth Forum in Sharm el Sheikh, President Sisi announced plans to amend Law 70. According to Sisi, \"I want to reassure those who are listening to me inside Egypt and outside of Egypt, that in Egypt, we are keen that the law becomes balanced and achieves what is required of it to regulate the work of these groups in a good way. This is not just political talk.\" Since then, Egypt's Ministry of Social Solidarity has held multiple rounds of talks with local NGOs aimed at determining which articles of the law need to be amended. A draft proposal is expected to be ready in the spring of 2019, when it will be sent to parliament for consideration. The detention of American citizens in Egypt has continued to strain U.S.-Egyptian relations. Some Members of Congress are concerned about the case of 53-year-old New York resident Mustafa Kassem, who was detained by authorities in 2013 and sentenced to 15 years in prison in a mass trial in September 2018. These lawmakers insist that Kassem, who has been on a limited hunger strike, was wrongfully arrested and convicted, and they have sought Trump Administration support in securing his release from the government of Egypt. In January 2018, Vice President Pence raised Kassem's case directly with President Sisi in a meeting in Cairo, saying \"I told him we'd like to see those American citizens restored to their families and restored to our country.\" Since taking office, President Sisi has publicly called for greater Muslim-Christian coexistence and national unity. In January 2019, he inaugurated Egypt's Coptic Cathedral of Nativity in the new administrative capital east of Cairo saying, \"This is an important moment in our history.... We are one and we will remain one.\" Despite these public calls for improved interfaith relations in Egypt, the minority Coptic Christian community continues to claim that they face professional and social discrimination, along with occasional sectarian attacks by terrorists and vigilantes. Coptic Christians have also voiced concern about state regulation of church construction. They have long demanded that the government reform long-standing laws (with two dating back to 1856 and 1934, respectively) on building codes for Christian places of worship. Article 235 of Egypt's 2014 constitution mandates that parliament reform these building code regulations. In 2016, parliament approved a church construction law (Law 80 of 2016) that expedited the government approval process for the construction and restoration of Coptic churches, among other structures. Although Coptic Pope Tawadros II welcomed the law, others claim that it continues to be discriminatory. According to Human Rights Watch , \"the new law allows governors to deny church-building permits with no stated way to appeal, requires that churches be built 'commensurate with' the number of Christians in the area, and contains security provisions that risk subjecting decisions on whether to allow church construction to the whims of violent mobs.\" For 2019, the IMF projects 5.3% GDP growth for the Egyptian economy, noting that the outlook remains \"favorable, supported by strong policy implementation.\" In 2016, the IMF and Egypt reached a three-year, $12 billion loan agreement, $10 billion of which has been disbursed as of March 2019. Key sources of foreign exchange (tourism and remittances) are up and unemployment is at its lowest level since 2011. In line with IMF recommendations, the government has taken several steps to reform the economy, including depreciating the currency, reducing fuel subsidies, enacting a value-added tax (VAT), and providing cash payments to the poor in lieu of subsidizing household goods (though many food subsidies continue). Egypt's energy sector also is contributing to the economy's rebound. Egypt is the largest oil producer in Africa outside of the Organization of the Petroleum Exporting Countries (OPEC) and the third-largest natural gas producer on the continent following Algeria and Nigeria. In December 2017, an Egyptian and Italian partnership began commercial output from the Zohr natural gas field (est. 30 trillion cubic feet of gas), the largest ever natural gas field discovered in the Mediterranean Sea (see Figure 3 ). The Egyptian government also has repaid debts owed to foreign energy companies, allowing for new investments from BP and BG Group. Egypt is attempting to position itself as a regional gas hub, whereby its own gas fields meet domestic demand while imported gas from Israel and Cyprus can be liquefied in Egypt and reexported. Israeli and Egyptian companies have bought significant shares of an unused undersea pipeline connecting Israel to the northern Sinai Peninsula (see Figure 4 ). The pipeline will be used to transport natural gas from Israel to Egypt for possible reexport, as part of an earlier 10-year, $15 billion gas deal between the U.S. Company Noble Energy, its Israeli partner Delek, and the Egyptian company Dolphinus Holdings. In January 2019, Egypt convened the first ever Eastern Mediterranean Gas Forum (EMGF), a regional consortium consisting of Egypt, Israel, Jordan, the Palestinian Authority, Cyprus, Greece, and Italy, intended to consolidate regional energy policies and reduce costs. Despite Egypt's positive economic outlook, significant challenges remain. Inflation remains over 11%, making the cost of goods high for many Egyptians. In addition, while the fiscal deficit may be decreasing, Egypt's overall public and foreign debt have grown significantly in recent years and remain high, leading the government to allocate resources (nearly 38% of Egypt's budget) toward debt-service payments and away from spending on health and education. Economists forecast that total public debt will reach 84.8% of GDP and external debt 32% of GDP ($101.7 billion) in 2019. Some observers assert that Egypt's recent economic reforms, while successful in the short term, have not addressed deeper structural impediments to growth. For example, Egypt's industrial sector is heavily dependent upon imports and, as the economy expands, the demand for foreign currency increases. According to Bloomberg , \"this means, the more the economy grows, the greater the pressure on dollar reserves. It doesn't help that these were built up almost entirely through foreign borrowing, pushing Egypt's foreign debt from $55 billion in 2016 to $92 billion in late 2018. It won't be long before the country's finances are once again in crisis.\" Many experts argue that to sustain growth over the long term, Egypt requires dramatic expansion of the nonhydrocarbon private sector. For decades, Egypt's military has played a key role in the nation's economy as a food producer and low-cost domestic manufacturer of consumable products; however, due to political sensitivities, the extent of its economic power is rarely quantified. Egypt's military is largely economically self-sufficient. It produces what it consumes (food and clothes) and then sells surplus goods for additional revenue. Egyptian military companies have been the main beneficiaries of the massive infrastructure contracts Sisi has commissioned. Moreover, military-owned manufacturing companies have expanded into new markets, producing goods (appliances, solar panels, some electronics, and some medical equipment) that are cheaper than either foreign imports or domestically produced goods made by the private sector. President Sisi, who led the 2013 military intervention and was elected president in mid-2014, came to power promising not only to defeat violent Salafi-Jihadi terrorist groups militarily, but also to counter their foundational ideology, which President Sisi and his supporters often attribute to the Muslim Brotherhood. President Sisi has outlawed the Muslim Brotherhood while launching a more general crackdown against a broad spectrum of opponents, both secular and Islamist. While Egypt is no longer beset by the kind of large-scale civil unrest and public protest it faced during the immediate post-Mubarak era, it continues to face terrorist and insurgent violence, both in the Sinai Peninsula and in the rest of Egypt. Terrorists based in the Sinai Peninsula (the Sinai) have been waging an insurgency against the Egyptian government since 2011. While the terrorist landscape in Egypt is evolving and encompasses several groups, the Islamic State's Sinai Province affiliate (IS-SP) is known as the most lethal. Since its affiliation with the Islamic State in 2014, IS-SP has attacked the Egyptian military continually, targeted Coptic Christian individuals and places of worship, and occasionally fired rockets into Israel. In October 2015, IS-SP targeted Russian tourists departing the Sinai by planting a bomb aboard Metrojet Flight 9268, which exploded midair, killing all 224 passengers and crew aboard. Two years later, on November 24, 2017, IS-SP gunmen launched an attack against the Al Rawdah mosque in the town of Bir al Abed in northern Sinai. That attack killed at least 305 people, making it the deadliest terrorist attack in Egypt's modern history. Combating terrorism in the Sinai is particularly challenging due to an array of factors, including the following: Geograph y : The peninsula's interior is mountainous and sparsely populated, providing militants with ample freedom of movement. Demograph y and Culture : The Sinai's northern population is a mix of Palestinians and Bedouin Arab tribes whose relationship to the state is filled with distrust. Sinai Bedouin have faced discrimination and exclusion from full citizenship and access to the economy. In the absence of development, a black market economy based primarily on smuggling has thrived, further contributing to the popular portrayal of Bedouin as outlaws. State authorities charge that the Sinai Bedouin seek autonomy from the central government, while residents insist on obtaining basic rights, such as property rights, full citizenship, and access to government services such as education and health care. Econom ics : Bedouins claim that Egypt has underinvested in northern Sinai, channeling development toward southern tourist destinations that cater to foreign visitors. Northern Sinai consists of mostly flat desert terrain inhospitable to large-scale agriculture without significant investment in irrigation. For decades, the Egyptian state has claimed to follow successive Sinai development plans. However, Egyptian governance and development of the Sinai has been hampered by corruption. Diploma cy : The 1979 Israeli-Egyptian peace treaty limits the number of soldiers that Egypt can deploy in the Sinai, subject to the parties' ability to negotiate changes as circumstances necessitate. Egypt and Israel mutually agree upon any short-term increase of Egypt's military presence in the Sinai. Since Israel returned control over the Sinai to Egypt in 1982, the area has been partially demilitarized, and the Sinai has served as an effective buffer zone between the two countries. The Multinational Force and Observers, or MFO, are deployed in the Sinai to monitor the terms of the Israeli-Egyptian peace treaty (see Figure 5 ). Egypt and Israel reportedly continue to cooperate in countering terrorism in the Sinai. In a televised interview, President Sisi responded to a question on whether Egyptian-Israeli military cooperation was the closest it has ever been, saying \"That is correct. The [Egyptian] Air Force sometimes needs to cross to the Israeli side. And that's why we have a wide range of coordination with the Israelis.\" One news account suggests that Israel, with Egypt's approval, has used its own drones, helicopters, and aircraft to carry out more than 100 covert airstrikes inside Egypt against militant targets. In order to counter IS-SP in northern Sinai, the Egyptian armed forces and police have declared a state of emergency, imposed curfews and travel restrictions, and erected police checkpoints along main roads. Authorities also have limited domestic and foreign media access to the northern Sinai, declaring it an active combat zone and unsafe for journalists. According to Jane's Defence Weekly , Egypt may be upgrading an old air base in the Sinai (Bir Gifgafa), where it could deploy Apache attack helicopters and unmanned aerial vehicles for use in counterterrorism operations. While an increased Egyptian military presence in the Sinai may be necessary to stabilize the area, many observers have argued that military means alone are insufficient. These critics say that force should be accompanied by policies to reduce the appeal of antigovernment militancy by addressing local political and economic grievances. According to one account: Sinai residents are prohibited from joining any senior post in the state. They cannot work in the army, police, judiciary, or in diplomacy. Meanwhile, no development projects have been undertaken in North Sinai the past 40 years. The villages of Rafah and Sheikh Zuwayed have no schools or hospitals and no modern system to receive potable water. They depend on rainwater and wells, as if it were the Middle Ages. Egyptian counterterrorism efforts in the Sinai appear to have reduced the frequency of terrorist attacks somewhat. In February 2018, the military launched an offensive campaign, dubbed \"Operation Sinai 2018.\" During the campaign, the military deployed tens of thousands of troops to the peninsula and was able to eliminate several senior IS-SP leaders. One report suggests that unlike previous military operations against militants in the Sinai, this time the Egyptian military armed progovernment tribesmen to assist conventional forces in combating IS-SP. According to one analysis, the military's recent campaign has \"to some degree, restricted the militants' movements, destroyed a number of hideouts, and most importantly eliminated several trained and influential elements.\" However, as in previous major operations, once the military reduces its presence in northern Sinai, terrorist groups may reconstitute themselves. In March 2019, CENTCOM Commander General Joseph L. Votel testified before Congress, stating that the \"Egyptian Armed Forces have more effectively fought ISIS in the Sinai and are now taking active measures to address the underlying issues that give life to—to these violent extremist groups and are helping to contain the threat.\" Outside of the Sinai, either in the western desert near the Libya border or other areas (Cairo, Nile Delta, Upper Egypt), small nationalist insurgent groups, such as Liwa al Thawra (The Revolution Brigade) and Harakat Sawaed Misr (Arms of Egypt Movement, referred to by its Arabic acronym HASM), have carried out high-level assassinations of military/police officials and bombings of infrastructure. According to one expert, these insurgent groups are comprised mainly of former Muslim Brotherhood activists who have splintered off from the main organization to wage an insurgency against the government. On January 31, 2018, the U.S. State Department designated Liwa al Thawra and HASM as Specially Designated Global Terrorists (SDGTs) under Section 1(b) of Executive Order (E.O.) 13224. The State Department noted that some of the leaders of both groups \"were previously associated with the Egyptian Muslim Brotherhood.\" Terrorist attacks against key sectors of the economy continue. In December 2018, a bus carrying a group of Vietnamese tourists to the pyramids in Giza hit a roadside bomb killing 4 people and injuring 11 others. No group claimed responsibility for the attack. In February 2019, a terrorist detonated a suicide bomb he was carrying while being pursued by police, killing himself and two officers near Cairo's popular Khan el Khalili market and famous Al Azhar Mosque. Egypt and Israel have continued to find specific areas in which they can cooperate. In 2018, Israeli and Egyptian companies entered into a decade-long agreement by reaching a $15 billion natural gas deal, according to which Israeli off-shore natural gas will be exported to Egypt for liquefaction before being exported elsewhere (see \" The Economy \" above). While people-to-people relations remain cold, Israel and Egypt continue to cooperate against Hamas in the Gaza Strip. In mid-November 2018, Egyptian mediation between Israel and Hamas helped calm tensions after an Israeli raid inside Gaza escalated tensions. Egypt reportedly continues to broker indirect Israel-Hamas talks aimed at establishing a long-term cease-fire. Egypt is opposed to Islamist groups wielding political power across the Middle East, and opposes Turkish and Qatari support for Hamas. On the Egyptian-Gaza border, Egypt has tried to thwart arms tunnel smuggling into Gaza and has accused Palestinian militants in Gaza of aiding terrorist groups in the Sinai. In order to weaken Hamas's rule in Gaza, Egypt has sought to restore a Palestinian Authority (PA) presence in Gaza by reconciling it with the PA. Though Egypt has helped broker several agreements aimed at ending the West Bank-Gaza split, Hamas still effectively controls Gaza. Egypt controls the Rafah border crossing into Gaza, the only non-Israeli-controlled entryway into the Strip, which it periodically closes for security reasons. Control over the Rafah border crossing provides Egypt with some leverage over Hamas, though Egyptian authorities use it carefully in order not to spark a humanitarian crisis on their border. Egypt's relations with most Gulf Arab monarchies are strong. Saudi Arabia, the United Arab Emirates (UAE), and Kuwait have provided billions of dollars in financial assistance to Egypt's military-backed government since 2013. Saudi Arabia also hosts nearly 3 million Egyptian expatriates who work in the kingdom, providing a valuable source of remittances for Egyptians back home. From 2013 onward, Emirati companies have made significant investments in the Egyptian economy. Egypt transferred sovereignty to Saudi Arabia over two islands at the entrance to the Gulf of Aqaba—Tiran and Sanafir—that had been under Egyptian control since 1950, in a move that sparked rare public criticism of President Sisi. In June 2017, Egypt joined other Gulf Arab monarchies in boycotting Qatar. In Yemen, Egypt is officially part of the Saudi-led coalition against Houthi forces, though its contribution to the war effort has been minimal. The Egyptian government supports Field Marshal Khalifa Haftar and the Libyan National Army (LNA) movement, which controls most of eastern Libya. Haftar's politics closely align with President Sisi's, as both figures hail from the military and broadly oppose Islamist political forces. From a security standpoint, Egypt seeks the restoration of order on its western border, which has experienced occasional terrorist attacks and arms smuggling. From an economic standpoint, thousands of Egyptian guest workers were employed in Libya's energy sector prior to unrest in Libya in 2011, and Egypt seeks their return to Libya and a resumption of the vital remittances those workers provided the Egyptian economy. Diplomatically, Egypt has tried to leverage its close ties to Haftar and the LNA in order to play the role of mediator between the LNA and Fayez al Sarraj, the Chairman of the Presidential Council of Libya and Prime Minister of the U.N.-backed Government of National Accord. Egypt's policy toward Libya also is closely aligned with other foreign backers of the LNA, including France and the United Arab Emirates (UAE). Reportedly, the three countries are working in concert to strengthen the position of Haftar in order to facilitate the eventual reunification of the Libyan army. A 2019 LNA offensive into southern Libya has placed additional pressure on the Government of National Accord and may complicate U.S.-backed efforts by the United Nations to facilitate a national dialogue, constitutional referendum, and elections in 2019. To Egypt's south, the government is embroiled in regional disputes with Nile Basin countries, such as Ethiopia, which is nearing completion of the $4.2 billion Grand Ethiopian Renaissance Dam, a major hydroelectric project. Egypt argues that the dam, once filled, will limit the flow of the Nile River below Egypt's agreed share. However, many analysts expect that Egypt will address the dispute by increasing water-use efficiency and investing in desalination, rather than using its military to bomb the dam. Reduced Nile flow into Egypt may exacerbate existing water shortages and cause short-term political problems for the Egyptian government, which faces extensive domestic water needs. In February 2019, President Sisi assumed the one-year chairmanship of the African Union, during which he is expected to promote closer relations with fellow African states. Egypt and Russia, close allies in early years of the Cold War, have again strengthened bilateral ties under President Sisi, who has promised to restore Egyptian stability and international prestige. His relationship with Russian President Vladimir Putin has rekindled, in the words of one observer, \"a romanticized memory of relations with Russia during the Nasser era.\" President Sisi first turned to Russia during the Obama Administration, when U.S.-Egyptian ties were strained, and Egypt seemed intent on signaling its displeasure with U.S. policy. Since 2014, Egypt and Russia have improved ties in a number of ways, including through arms deals. Reportedly, Egypt is upgrading its aging fleet of legacy Soviet MiG-21 aircraft to a fourth generation MiG-29M variant with additional deliveries to Egypt in 2018 (first delivered in April 2017). Egypt also has purchased 46 standard Ka-52 Russian attack helicopters for its air force. Egypt reportedly also has purchased the naval version of the Ka-52 for use on Egypt's two French-procured Mistral-class helicopter dock vessels (see below), and the S-300VM surface-to-air missile defense system from Russia. In August 2018, Egyptian Defense Minister Mohamed Zaki visited Russia, where he attended a Russian arms exhibition. Additionally, Egypt and Russia reportedly have expanded their cooperation on nuclear energy. In 2015, Egypt reached a deal with Russian state energy firm Rosatom to construct a 4,800-megawatt nuclear power plant in the Egyptian Mediterranean coastal town of Daba'a, 80 miles northwest of Cairo. Russia is lending Egypt $25 billion over 35 years to finance the construction and operation of the nuclear power plant (this will cover 85% of the project's total costs). The contract also commits Russia to supply the plant's nuclear fuel for 60 years and transfer and store depleted nuclear fuel from the reactors. As Egyptian and Russian foreign policies have become more closely aligned in conflict zones such as eastern Libya, bilateral military cooperation has expanded. One report suggests that Russian Special Forces based out of an airbase in Egypt's western desert (Sidi Barrani) may be aiding General Haftar. In November 2017, Egypt and Russia signed a draft agreement governing the use of each other's air space. While Egyptian-Russian ties have grown warmer in recent years, they are not without complications. In the aftermath of an October 2015 terrorist attack against a Russian passenger jet departing from Sharm El Sheikh, visits to Egypt by Russian tourists, previously the country's largest source of tourists, dropped significantly. Russian commercial aircraft have resumed direct flights to Cairo but not to Sharm El Sheikh. Egypt and Russia also engaged in a trade dispute in 2016 over Russian wheat imports. Egypt is the largest global importer of wheat, and the largest export market for Russian wheat. Aside from Russia, France stands out as a non-U.S. country with which President Sisi has sought to build a diplomatic and military procurement relationship. In the last five years, as French-Egyptian ties have improved, Egypt has purchased major air and naval defense systems from French defense contractors, including the following: Four Gowind Corvettes (produced by Naval Group)—This deal was signed in July 2014. As part of the French-Egyptian arrangement, some of the Corvette construction has taken place at the Alexandria Shipyard in Egypt. One FREMM multi-mission Frigate (produced by Naval Group)—Named the Tahya Misr (Long Live Egypt), this vessel was delivered to Egypt in 2015. This ship has participated in an annual joint French-Egyptian naval exercise, known as Cleopatra. In February 2015, Egypt purchased 24 Rafale multirole fighters (produced by Dassault Aviation). Under the initial agreement, Egypt and France may enter into a new procurement agreement for 12 additional Rafale fighters. According to the manufacturer, the Rafale has flown in combat in Afghanistan, Libya, Mali, Iraq, and Syria and is used by Egypt, Qatar, and India. In 2018, French officials said that the United States would not permit France to export the SCALP air-launched land-attack cruise missile used on the Rafale to Egypt under the International Trade in Arms Regulation (ITAR) agreement. The United States may have been concerned over the transfer of sensitive technology to Egypt. Two Mistral-class Helicopter Carriers (produced by Naval Group)—In the fall of 2015, France announced that it would sell Egypt two Mistral-class Landing Helicopter Dock (LHD) vessels (each carrier can carry 16 helicopters, 4 landing craft, and 13 tanks) for $1 billion. The LHDs (ENS Anwar El Sadat and ENS Gamal Abdel Nasser ) were delivered in 2016. In 2017, Egypt announced that it would purchase Russian 46 Ka-52 Alligator helicopters, which can operate on the LHDs. In January 2019, French President Emmanuel Macron paid a three-day visit to Egypt, where he raised human rights issues in public and with Egyptian authorities and civil society representatives. According to Macron, \"I can't see how you can pretend to ensure long-term stability in this country, which was at the heart of the Arab Spring and showed its taste for freedom, and think you can continue to harden beyond what's acceptable or justified for security reasons.\" President Trump has praised the Egyptian government's counterterrorism efforts while his Administration has worked to restore high-level diplomatic engagement, joint military exercises, and arms sales. Many commentators initially expected President Trump to bring the United States and Egypt closer together, and that largely has been the case. The Administration has withheld some foreign assistance for policy reasons on at least one occasion, however, and the United States has not had an ambassador in Cairo since June 30, 2017. As evidence of improved bilateral ties, the U.S. Defense Department notified Congress in November 2018 of a major $1 billion sale of defense equipment to Egypt, consisting of 10 AH-64E Apache Attack Helicopters, among other things. The Egyptian Air Force already possesses 45 less advanced versions of the Apache that were acquired between 2000 and 2014. In January 2019, U.S. Secretary of State Michael Pompeo delivered a major policy speech at the American University in Cairo, where he stated: \"And as we seek an even stronger partnership with Egypt, we encourage President Sisi to unleash the creative energy of Egypt's people, unfetter the economy, and promote a free and open exchange of ideas. The progress made to date can continue.\" U.S. officials have not yet publicly criticized efforts by supporters of President Sisi to advance amendments to the constitution (see above) to extend the possibility of Sisi's continued presidency. Human rights advocates have called for Western governments to withhold assistance to Egypt if the amendments are approved. According to Human Rights Watch , \"Al-Sisi's government is encouraged by the continued silence of its allies, and if the US, UK, and France want to avoid the destabilizing consequences of entrenching authoritarian rule in Egypt, they should act now.\" On February 22, 2019, a bipartisan group of national security experts called on U.S. officials to \"express strong concern about the amendments to the Egyptian constitution now moving through a rapid approval process.\" Egypt's poor record on human rights and democratization has sparked regular criticism from U.S. officials and some Members of Congress. Since FY2012, Members have passed appropriations legislation that withholds the obligation of FMF to Egypt until the Secretary of State certifies that Egypt is taking various steps toward supporting democracy and human rights. With the exception of FY2014, lawmakers have included a national security waiver to allow the Administration to waive these congressionally mandated certification requirements under certain conditions. Over the last year, the Administration has obligated several tranches of FMF to Egypt, including the following: In September 2018, the Administration obligated $1 billion in FY2018 FMF. Per Section 7041(a)(3)(A) of P.L. 115-141 , the Consolidated Appropriations Act, FY2018, $300 million in FMF remains withheld from obligation until the Secretary of State certifies that Egypt is taking various steps toward supporting democracy and human rights. In previous acts, the amount withheld had been $195 million. FY2018 FMF for Egypt remains available to be expended until September 30, 2019. In August 2018, the Administration waived the certification requirement in Section 7041(a)(3)(B) of P.L. 115-31 , the Consolidated Appropriations Act, FY2017, allowing for the obligation of $195 million in FY2017 FMF, which occurred in September 2018. However, according to one report, Senator Patrick Leahy has placed a hold on $105 million in FY2017 FMF and is seeking more information on the plight of detained Egyptian-American Moustafa Kassem. In January 2018, the Administration notified Congress of its intent to obligate $1.039 billion in FY2017 FMF out of a total of $1.3 billion appropriated for FY2017. It chose not to obligate $65.7 million in FY2017 FMF. The remaining $195 million had been withheld until a national security waiver was issued in August 2018 (see above). For FY2019, the President requested a total of $1.381 billion in foreign assistance for Egypt, the same amount requested for the previous year. Nearly all of the requested funds for Egypt are for the FMF account. For FY2020, the request is nearly identical from previous years, as the President is seeking a total of $1.382 billion in bilateral assistance for Egypt. The FY2019 Omnibus ( P.L. 116-6 ) provides the following for Egypt: a total of $1.419 billion in bilateral U.S. foreign assistance for Egypt, of which $1.3 billion is in FMF, $112.5 million in ESF, $3 million in NADR, $2 million in INCLE, and $1.8 million in IMET; and a reauthorization of ESF to support future loan guarantees to Egypt; P.L. 116-6 sets the following conditions for Egypt: As in previous years, it requires that funds may only be made available when the Secretary of State certifies that the government of Egypt is sustaining the strategic relationship with the United States and meeting its obligations under the 1979 Egypt-Israel Peace Treaty. As in previous years, the act withholds ESF that \"the Secretary determines to be equivalent to that expended by the United States Government for bail, and by nongovernmental organizations for legal and court fees, associated with democracy-related trials in Egypt until the Secretary certifies and reports to the Committees on Appropriations that the Government of Egypt has dismissed the convictions issued by the Cairo Criminal Court on June 4, 2013, in Public Prosecution Case No. 1110 for the Year 2012 and has not subjected the defendants to further prosecution or if convicted they have been granted full pardons .\" This last condition (bolded) was added in 2019 to account for the acquittal of the 43 foreign defendants in Case 173 (see above). As in previous years, the FY2019 Omnibus also includes a limitation on ESF, stating that no FY2018 ESF or prior-year ESF \"may be made available for a contribution, voluntary or otherwise, to the Civil Associations and Foundations Support Fund, or any similar fund, established pursuant to Law 70 on Associations and Other Foundations Working in the Field of Civil Work [informally known as the NGO law].\" As in previous years, the act also includes a provision that withholds $300 million of FMF funds until the Secretary of State certifies that the Government of Egypt is taking effective steps to advance, among other things, democracy and human rights in Egypt. The Secretary of State may waive this certification requirement, though any waiver must be accompanied by, among other things, an assessment of the Government of Egypt's compliance with United Nations Security Council Resolution 2270 and other such resolutions regarding North Korea. There has been some concern in the Administration and Congress over Egypt's alleged weapons procurement from North Korea in recent years. P.L. 115-245 , the Department of Defense (DOD) and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019, specifies that the Secretary of Defense may provide Egypt with funds from the Counter-ISIS Train and Equip Fund (CTEF) to enhance its border security. To date, Egypt has not received security assistance from DOD-managed accounts. Between 1946 and 2016, the United States provided Egypt with $78.3 billion in bilateral foreign aid (calculated in historical dollars—not adjusted for inflation). The 1979 Peace Treaty between Israel and Egypt ushered in the current era of U.S. financial support for peace between Israel and its Arab neighbors. In two separate memoranda accompanying the treaty, the United States outlined commitments to Israel and Egypt, respectively. In its letter to Israel, the Carter Administration pledged to \"endeavor to take into account and will endeavor to be responsive to military and economic assistance requirements of Israel.\" In his letter to Egypt, former U.S. Secretary of Defense Harold Brown wrote the following: In the context of the peace treaty between Egypt and Israel, the United States is prepared to enter into an expanded security relationship with Egypt with regard to the sales of military equipment and services and the financing of, at least a portion of those sales, subject to such Congressional review and approvals as may be required. All U.S. foreign aid to Egypt (or any foreign recipient) is appropriated and authorized by Congress . The 1979 Egypt-Israel Peace Treaty is a bilateral peace agreement between Egypt and Israel, and the United States is not a legal party to the treaty. The treaty itself does not include any U.S. aid obligations, and any assistance commitments to Israel and Egypt that could be potentially construed in conjunction with the treaty were through ancillary documents or other communications and were—by their terms—subject to congressional approval (see above). However, as the peace broker between Israel and Egypt, the United States has traditionally provided foreign aid to both countries to ensure a regional balance of power and sustain security cooperation with both countries. In some cases, an Administration may sign a bilateral \"Memorandum of Understanding\" (MOU) with a foreign country pledging a specific amount of foreign aid to be provided over a selected time period subject to the approval of Congress. In the Middle East, the United States has signed foreign assistance MOUs with Israel and Jordan. Currently, there is no U.S.-Egyptian MOU specifying a specific amount of total U.S. aid pledged to Egypt over a certain time period. Congress typically specifies a precise allocation of most foreign assistance for Egypt in the foreign operations appropriations bill. Egypt receives the bulk of foreign aid funds from three primary accounts: Foreign Military Financing (FMF), Economic Support Funds (ESF), and International Military Education and Training (IMET). The United States offers IMET training to Egyptian officers in order to facilitate U.S.-Egyptian military cooperation over the long term. Since the 1979 Israeli-Egyptian Peace Treaty, the United States has provided Egypt with large amounts of military assistance. U.S. policymakers have routinely justified this aid to Egypt as an investment in regional stability, built primarily on long-running military cooperation and sustaining the treaty—principles that are supposed to be mutually reinforcing. Egypt has used U.S. military aid through the FMF to (among other things) purchase major U.S. defense systems, such as the F-16 fighter aircraft, the M1A1 Abrams battle tank, and the AH-64 Apache attack helicopter. For decades, FMF grants have supported Egypt's purchases of large-scale conventional military equipment from U.S. suppliers. However, as mentioned above, the Obama Administration announced that future FMF grants may only be used to purchase equipment specifically for \"counterterrorism, border security, Sinai security, and maritime security\" (and for sustainment of weapons systems already in Egypt's arsenal). It is not yet clear how the Trump Administration will determine which U.S.-supplied military equipment would help the Egyptian military counter terrorism and secure its land and maritime borders. Overall, some defense experts continue to view the Egyptian military as inadequately prepared, both doctrinally and tactically, to face the threat posed by terrorist/insurgent groups such as Sinai Province. According to a former U.S. National Security Council official, \"they [the Egyptian military] understand they have got a problem in Sinai, but they have been unprepared to invest in the capabilities to deal with it.\" To reorient the military toward unconventional warfare, the Egyptian military needs, according to one assessment, \"heavy investment into rapid reaction forces equipped with sophisticated infantry weapons, optics and communication gear ... backed by enhanced intelligence, surveillance and reconnaissance platforms. In order to transport them, Egypt would also need numerous modern aviation assets.\" In addition to substantial amounts of annual U.S. military assistance, Egypt has benefited from certain aid provisions that have been available to only a few other countries. For example Early Disbursal and Interest - Bearing Account : Between FY2001 and FY2011, Congress granted Egypt early disbursement of FMF funds (within 30 days of the enactment of appropriations legislation) to an interest-bearing account at the Federal Reserve Bank of New York. Interest accrued from the rapid disbursement of aid has allowed Egypt to receive additional funding for the purchase of U.S.-origin equipment. In FY2012, Congress began to condition the obligation of FMF, requiring the Administration to certify certain conditions had been met before releasing FMF funds, thereby eliminating their automatic early disbursal. However, Congress has permitted Egypt to continue to earn interest on FMF funds already deposited in the Federal Reserve Bank of New York. The Excess Defense Articles (EDA) program provides one means by which the United States can advance foreign policy objectives—assisting friendly and allied nations through provision of equipment in excess of the requirements of its own defense forces. The Defense Security Cooperation Agency (DSCA) manages the EDA program, which enables the United States to reduce its inventory of outdated equipment by providing friendly countries with necessary supplies at either reduced rates or no charge. As a designated \"major non-NATO ally,\" Egypt is eligible to receive EDA under Section 516 of the Foreign Assistance Act and Section 23(a) of the Arms Export Control Act. Over the past two decades, U.S. economic aid to Egypt has been reduced by over 90%, from $833 million in FY1998 to a request of $75 million for FY2019. Beginning in the mid to late 1990s, as Egypt moved from an impoverished country to a lower-middle-income economy, the United States and Egypt began to rethink the assistance relationship, emphasizing \"trade not aid.\" Congress began to scale back economic aid both to Egypt and Israel due to a 10-year agreement reached between the United States and Israel in the late 1990s known as the \"Glide Path Agreement,\" which gradually reduced U.S. economic aid to Egypt to $400 million by 2008. U.S. economic aid to Egypt stood at $200 million per year by the end of the George W. Bush Administration, whose relations with then-President Hosni Mubarak suffered over the latter's reaction to the Administration's democracy agenda in the Arab world. During the final years of the Obama Administration, distrust of U.S. democracy promotion assistance led the Egyptian government to obstruct many U.S.-funded economic assistance programs. According to the Government Accountability Office (GAO), the Department of State and the U.S. Agency for International Development (USAID) reported hundreds of millions of dollars ($460 million as of 2015) in unobligated prior year ESF funding. As these unobligated balances grew, it created pressure on the Obama Administration to reobligate ESF funds for other purposes. In 2016, the Obama Administration notified Congress that it was reprogramming $108 million of ESF that had been appropriated for Egypt in FY2015 but remained unobligated for other purposes. The Administration claimed that its actions were due to \"continued government of Egypt process delays that have impeded the effective implementation of several programs.\" In 2017, the Trump Administration also reprogrammed FY2016 ESF for Egypt. U.S. economic aid to Egypt is divided into two components: (1) USAID-managed programs (public health, education, economic development, democracy and governance); and (2) the U.S.-Egyptian Enterprise Fund. Both are funded primarily through the Economic Support Fund (ESF) appropriations account. ", "summary": "Historically, Egypt has been an important country for U.S. national security interests based on its geography, demography, and diplomatic posture. Egypt controls the Suez Canal, which is one of the world's most well-known maritime chokepoints, linking the Mediterranean and Red Seas. Egypt, with its population of more than 100 million people, is by far the most populous Arabic-speaking country. Although it may not play the same type of leading political or military role in the Arab world as it has in the past, Egypt may retain some \"soft power\" by virtue of its history, media, and culture. Cairo plays host both to the 22-member Arab League and Al Azhar University, which claims to be the oldest continuously operating university in the world and has symbolic importance as a leading source of Islamic scholarship. Additionally, Egypt's 1979 peace treaty with Israel remains one of the most significant diplomatic achievements for the promotion of Arab-Israeli peace. While people-to-people relations remain cold, the Israeli and Egyptian governments have increased their cooperation against Islamist militants and instability in the Sinai Peninsula and Gaza Strip. Personnel moves and possible amendments to the Egyptian constitution highlight apparent efforts by President Sisi to consolidate power with the help of political allies, including colleagues from Egypt's security establishment. President Sisi has come under repeated international criticism for an ongoing government crackdown against various forms of political dissent and freedom of expression. The Egyptian government has defended its human rights record, asserting that the country is under pressure from terrorist groups seeking to destabilize Arab nation-states. The Trump Administration has tried to normalize ties with the Sisi government that were generally perceived as strained under President Obama. In January 2019, U.S. Secretary of State Michael Pompeo delivered a major policy speech at the American University in Cairo, where he stated, \"And as we seek an even stronger partnership with Egypt, we encourage President Sisi to unleash the creative energy of Egypt's people, unfetter the economy, and promote a free and open exchange of ideas.\" The United States has provided significant military and economic assistance to Egypt since the late 1970s. Successive U.S. Administrations have justified aid to Egypt as an investment in regional stability, built primarily on long-running cooperation with the Egyptian military and on sustaining the 1979 Egyptian-Israeli peace treaty. All U.S. foreign aid to Egypt (or any recipient) is appropriated and authorized by Congress. Since 1946, the United States has provided Egypt with over $83 billion in bilateral foreign aid (calculated in historical dollars—not adjusted for inflation). Annual appropriations legislation includes several conditions governing the release of these funds. All U.S. military aid to Egypt finances the procurement of weapons systems and services from U.S. defense contractors. For FY2019, Congress has appropriated $1.4 billion in total bilateral assistance for Egypt, the same amount it provided in FY2018. For FY2020, the President is requesting a total of $1.382 billion in bilateral assistance for Egypt. Nearly all of the U.S. funds for Egypt come from the FMF account (military aid). In November 2018, the U.S. Defense Department notified Congress of a major $1 billion sale of defense equipment to Egypt, consisting of 10 AH-64E Apache Attack Helicopters, among other things. Beyond the United States, President Sisi has broadened Egypt's international base of support to include several key partners, including the Arab Gulf states, Israel, Russia, and France. In the last five years, as French-Egyptian ties have improved, Egypt has purchased major air and naval defense systems from French defense companies.", "document_type": "crs"}
{"report": "This report provides a comprehensive summary of the federal financial assistance provided to the Gulf Coast states of Alabama, Florida, Louisiana, Mississippi, and Texas in response to the widespread destruction that resulted from Hurricanes Katrina, Rita, and Wilma in 2005 and Hurricanes Gustav and Ike in 2008. The damages caused by the hurricanes are some of the worst in the history of the United States in terms of lives lost and property damaged and destroyed. The federal government played a significant role in the response to the hurricanes and Congress appropriated funds for a wide range of activities and efforts to help the Gulf Coast states recover and rebuild from the storms. In addition, Congress appropriated a significant amount of funds for mitigation activities and projects to reduce or eliminate the impacts of future storms. Though the storms happened over a decade ago, Congress remains interested in the types and amounts of federal assistance that were provided to the Gulf Coast for several reasons. For one, Congress continues to be interested in how the money has been spent, what resources have been provided to the region, and whether the money has reached the people and entities intended to receive the funds. The financial information is also useful for congressional oversight and evaluation of the federal entities that were responsible for response and recovery operations. Similarly, it gives Congress a general idea of the federal assets that are needed and can be brought to bear when catastrophic disasters take place in the United States. As such, the financial information from the storms can help frame the congressional debate concerning federal assistance for current and future disasters. The financial information provided in this report includes a summary of appropriations provided to the Gulf Coast states by Congress in response to the 2005 and 2008 hurricanes. In addition, when available, hurricane-specific and state-specific funding information is provided by federal entity. The 2005 hurricane season was a record-breaking season for hurricanes and storms. There were 13 hurricanes in 2005, breaking the old record of 12 hurricanes set in 1969. The 2005 season also set a record for the number of category 5 storms (three) in a season. Most of the damaging effects caused by the hurricanes were experienced in the Gulf Coast states of Louisiana, Arkansas, Florida, Mississippi, and Texas. The 2008 hurricane season was also an active hurricane season that caused additional damage in the Gulf Coast. On August 23, 2005, Hurricane Katrina began about 200 miles southeast of Nassau in the Bahamas as a tropical depression. It became a tropical storm the following day. On August 24-25, 2005, the storm moved through the northwestern Bahamas and then turned westward toward southern Florida. Katrina became a hurricane just before making landfall near the Miami-Dade/Broward county line during the evening of August 25, 2005. The hurricane moved southwestward across southern Florida into the eastern Gulf of Mexico on August 26, 2005. Katrina then strengthened significantly, reaching category 5 intensity on August 28. On August 29, 2005, Hurricane Katrina made landfall in southern Plaquemines Parish, LA. The storm affected a broad geographic area—stretching from Alabama, across coastal Mississippi, to southeast Louisiana. Hurricane Katrina was reported as a category 4 storm when it initially made landfall in Louisiana, but was later downgraded to a category 3 storm. Even as a category 3 storm, Hurricane Katrina was one of the strongest storms to impact the U.S. Gulf Coast. The force of the storm was significant. The winds to the east of the storm's center were estimated to be nearly 125 mph (see Figure 1 ). The Gulf Coast has had a history of devastating hurricanes, but Hurricane Katrina was singular in many respects. Approximately 1.2 million people evacuated from the New Orleans metropolitan area. While the evacuation helped to save lives, over 1,800 people died in the storm. In addition, Hurricane Katrina destroyed or made uninhabitable an estimated 300,000 homes and displaced over 400,000 citizens. Economic losses from the storm were estimated to be between $125 billion and $150 billion. Two other hurricanes made landfall in the Gulf Coast shortly after Hurricane Katrina that added to recovery costs and impeded recovery efforts. On September 24, 2005, Hurricane Rita made landfall on the Texas and Louisiana border as a category 3 storm. Rita also hit parts of Arkansas and Florida. Hurricane Rita caused widespread property damage to the Gulf Coast; however, there were few deaths or injuries reported. Rita produced rainfalls of 5 to 9 inches over large portions of Louisiana, Mississippi, and eastern Texas, with isolated amounts of 10 to 15 inches. In addition, storm surge flooding and wind damage occurred in southwestern Louisiana and southeastern Texas, with some surge damage occurring in the Florida Keys (see Figure 2 ). On October 24, 2005, Hurricane Wilma made landfall as a category 3 hurricane in Cape Romano, FL. The eye of Hurricane Wilma crossed the Florida Peninsula and then moved into the Atlantic Ocean north of Palm Beach (see Figure 3 ). Hurricane Wilma killed five people in Florida and caused widespread property damage in the Gulf Coast region. In 2008, the Gulf Coast was once again affected by storms that caused billions of dollars in additional damage. On September 1, 2008, Hurricane Gustav made landfall near Cocodrie, LA, as a category 2 storm, then swept across the region causing damages in Alabama, Florida, Mississippi, and Texas (see Figure 4 ). Gustav produced rains over Louisiana and Arkansas that caused moderate flooding along many rivers, and is known to have produced 41 tornadoes: 21 in Mississippi, 11 in Louisiana, 6 in Florida, 2 in Arkansas, and 1 in Alabama. Hurricane Ike made landfall as a category 2 storm near Galveston, Texas, on September 13, 2008, with maximum sustained winds of 110 mph. The hurricane weakened as it moved inland across eastern Texas and Arkansas. Hurricane Ike's storm surge devastated the Bolivar Peninsula of Texas, and surge, winds, and flooding from heavy rains caused widespread damage in other portions of southeastern Texas, western Louisiana, and Arkansas and killed 20 people in these areas (see Figure 5 ). Additionally, as an extratropical system over the Ohio Valley, Ike was directly or indirectly responsible for 28 deaths and more than $1 billion in property damage in areas outside of the Gulf Coast. The following two sections provide funding data and narratives describing the assistance that was provided to the Gulf Coast in response to the 2005 and 2008 hurricane seasons. Section I presents funding provided to the five Gulf Coast states (Alabama, Florida, Louisiana, Mississippi, and Texas) after Hurricanes Katrina, Rita, Wilma, Gustav, and Ike. Funding amounts were compiled by CRS analysts who reviewed legislative texts of supplemental appropriations. The amounts are disaggregated by federal entity and subentity, insofar as possible and applicable. The data are based on the analysts' interpretations of disaster assistance. Some data were excluded from Section I because CRS analysts found that the data either were too ambiguous or covered disasters not limited to the Gulf Coast. Certain amounts pertaining to a range of disasters were included, however, because CRS analysts determined that most of the funds went to the Gulf Coast states. Section II presents funding by federal agency. The amounts reported may reflect expenditures, obligations, allocations, or appropriations. The data in this section are not based solely on those in Section I . Rather, the data in Section II were derived from a variety of authoritative sources, including agency websites, CRS experts who received information directly from agencies, and governmental reports. Section II presents funding information by federal entity and includes a narrative summarizing each agency's disaster assistance efforts. The sections also provide the authorities that authorized the activities that were provided. When possible, funding data are provided in tabular form. It should be noted that the data on appropriations in Section I , Table 1 , are not directly comparable to funding data in Section II . The former were drawn solely from the public laws cited in the source note to Table 1 . The data in Section II were obtained, as cited in each subsection, from a range of published and unpublished sources, and include various fiscal years. Funding data on federal (and nonfederal) assistance are not systematically collected. Given the absence of comprehensive federal information on disaster assistance, the data provided in this report should only be considered as an approximation, and should not be viewed as definitive. In addition to the above, the following caveats apply to this report: It is difficult to identify all of the federal entities that provide disaster relief because many federal entities provide aid through a wide range of programs, not necessarily through those designated specifically as \"disaster assistance\" programs. Because data on federal (and nonfederal) assistance are not systematically collected, funding data were drawn from a wide range of sources including published and unpublished data that have been collected at different times and under inconsistent reporting methods. Following the exodus of thousands of residents from the Gulf Coast states after Hurricane Katrina in 2005, many other states received federal assistance to cope with the influx of those seeking aid. The aid provided to the states outside the Gulf Coast is not discussed in this report. The appropriations language reviewed for Section I usually designates funds to a federal entity for a range of disasters without identifying how much funding is to be disbursed to each incident. For example, P.L. 110-329 , signed into law on September 30, 2008, provided funds for several disasters that occurred in 2008, including Hurricanes Gustav and Ike, wildfires in California, and the Midwest floods. Determining the funding amounts directed toward each individual disaster is difficult, if not impossible, unless the legislative text specifies these amounts. An additional difficulty occurs in tracking funding at the agency level because appropriations might be made, not to specific entities, but to budget accounts, and then allocated for specified purposes. The degree of transparency in reporting funding levels for disaster relief varies tremendously among federal entities. As an example, Congress requires the Federal Emergency Management Agency (FEMA) to submit monthly status reports on the Disaster Relief Fund (DRF). The DRF is FEMA's disaster assistance account. The DRF is used to fund existing recovery projects (including reimbursements to other federal agencies for their work) and provide funding for future emergencies and disasters as needed. The DRF reports must detail obligations, allocations, and expenditures for Hurricanes Katrina, Rita, and Wilma. This requirement has not been extended to other agencies, and scant data exist, particularly on a state-by-state basis, on other federal funding for emergencies and major disasters. Appropriations may be subject to transfers or rescissions after enactment of appropriations statutes. It is possible that such emendations to the initial appropriations have not been identified in this research. In addition to the above caveats, it should also be noted that there may have been funding changes since this report was originally published in 2013 that are not represented in this updated version. In some cases, additional obligations may have been provided and in other cases some funding may have been recouped or otherwise transferred. The funding information in this report should therefore be interpreted as illustrative as opposed to definitive, and used with appropriate caution. Table 1 presents data on the appropriations enacted after Hurricanes Katrina, Rita, Wilma, Gustav, and Ike from FY2005 to FY2009, by federal entity and subentity, when possible and applicable. As mentioned earlier, in many cases funding for disaster relief is appropriated for multiple incidents. Therefore, Table 1 may include data on appropriations that also provided funding for non-Gulf Coast incidents. Some appropriations designated for a range of disasters were excluded, however, in an attempt to avoid artificially inflating the amount of funding directed to the Gulf Coast for hurricane relief. Since FY2005, at least 10 appropriations bills have been enacted to address widespread destruction caused by the 2005 and 2008 Gulf Coast hurricanes. These appropriations consisted of eight emergency supplemental appropriations acts, one reconciliation act, and one continuing appropriations resolution. In addition to these statutes that specifically identify the hurricanes or the Gulf Coast states, it is likely that regular appropriations legislation also provided assistance to the Gulf Coast. Because these statutes did not specify that they were providing such assistance, regular appropriations are not included in Table 1 . In the course of this research, CRS identified 11 federal departments, 4 federal agencies (or other entities), and numerous subentities, programs, and activities that supplied roughly $121.7 billion in federal assistance to the Gulf Coast states after the major hurricanes of 2005 (Katrina, Rita, and Wilma) and 2008 (Gustav and Ike). Section II provides information on the most significant programs, or categories of programs, through which the aid was provided. Each narrative contains a summary of activities of each federal entity providing disaster relief. When possible, the information is presented in tabular form and is disaster and state specific. Unless otherwise specified, all figures are stated in nominal dollars. As mentioned earlier, the data in Section II may not correspond to the emergency funds appropriated by Congress for hurricane relief purposes specified in Section I. Reasons for the difference include the following: the tables in Section II present information from a variety of funding measures, including obligations, allocations, and expenditures; some funds made available may have been reallocated or deobligated from other purposes; and money from accounts that did not terminate at the end of a fiscal year (known as no-year accounts) may have been allocated to the Gulf Coast states. The U.S. Department of Agriculture (USDA) provides a variety of disaster assistance for hurricanes and other natural disasters. For the hurricanes covered in this report, the bulk of the department's funding has been disaster payments to producers who suffered production losses and funding for land rehabilitation programs for cleanup and restoration projects, primarily under P.L. 109-234 and through other authorities. The total USDA budget authority was over $1.0 billion for disaster relief following Hurricanes Katrina, Rita, and Wilma ( Table 2 ). For these three hurricanes, USDA also paid an additional $112 million in farm disaster benefits to farmers in the Gulf States under various Farm Service Agency indemnity and grant programs, using funds allocated from USDA's \"Section 32\" Program (see \" Farm Service Agency \" section below). Hurricane-related support by individual agency for the 2005 and 2008 hurricanes is described in separate sections below. State-specific data are provided where available and are current as of the dates cited. The Agricultural Research Service (ARS) is USDA's chief scientific research agency. Under P.L. 109-234 , USDA received funding for cleanup and salvage efforts at the ARS facility in Poplarville, MS, and the Southern Regional Research Center in New Orleans, LA. Total budget authority was $39 million for the 2005 hurricanes provided under P.L. 109-234 and through reallocations from existing funds. The mission of the Farm Service Agency (FSA) is to serve farmers, ranchers, and agricultural partners through the delivery of agricultural support programs. Besides administering general farm commodity programs, FSA administers disaster payments for crop and livestock farmers who suffer losses from natural disasters. Following the 2005 hurricanes, producer benefits were provided under five new programs created by USDA for tropical fruit, citrus, sugarcane, nursery crops, fruits and vegetables, livestock death, feed losses, and dairy production and spoilage losses. These USDA-created programs were the Hurricane Indemnity Program (HIP), Livestock Indemnity Program (LIP), Feed Indemnity Program (FIP), and an Aquaculture Grant Program (AGP). Payments under the previously established Tree Indemnity Program (TIP) were provided to eligible owners of commercially grown fruit trees, nut trees, bushes, and vines producing annual crops that were lost or damaged. Total outlays for 2005 hurricanes to the Gulf States under the aforementioned five programs were $132 million under P.L. 109-234 (see Table 2 ) and $112 million for four programs under \"Section 32\" (see Table 3 for Section 32 data). Section 32 is a permanent appropriation (originating from P.L. 74-320) that supports a variety of USDA activities, including disaster relief, federal child nutrition programs, and surplus commodity purchases. Following Hurricanes Gustav and Ike in 2008, payments were provided to qualifying producers under five nationwide agricultural disaster programs authorized in the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , 2008 farm bill). Under the largest disaster program, Supplemental Revenue Assistance Payments Program (SURE), the combined payments for Alabama, Florida, Louisiana, Mississippi, and Texas totaled $285 million in 2008 for a variety of natural disaster losses, including hurricane damage ( Table 4 ). Payments for these states under the other four programs (three livestock-related programs and the Tree Assistance Program (TAP)) were approximately $66 million. FSA also administered two land rehabilitation disaster programs: (1) the Emergency Forestry Conservation Reserve Program (EFCRP), which compensated private, nonindustrial forest landowners who experienced losses from hurricanes in calendar year 2005, for temporarily retiring their land; and (2) the Emergency Conservation Program (ECP), which provides emergency funding and technical assistance for farmers and ranchers to rehabilitate farmland damaged by natural disasters. For the 2005 hurricanes, Congress provided $82 million in budget authority for EFCRP and $84.7 million in budget authority for ECP. Of the $84.7 million in budget authority for ECP, FSA obligated over $70 million. Previously unobligated funds from 2005 hurricane recovery efforts were reprogrammed in 2009 under P.L. 111-32 to be used for then current disasters, including hurricanes. On July 14, 2009, USDA announced $71 million in ECP funding, which included the 2005 reprogrammed funds, for repairing farmland damaged by natural disasters, including the hurricanes that occurred in 2008. Of the five hurricane-affected states, Texas received the largest allocation ($11 million) to address 2008 hurricane restoration efforts. The Food and Nutrition Service (FNS) administers several programs that are crucial in hurricane relief efforts. These include the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program (FSP)), child nutrition programs (e.g., school meals programs), and federally donated food commodities delivered through relief organizations. Existing laws authorize USDA to change eligibility and benefit rules to facilitate emergency aid. Disaster FSP benefits provided approximately $1 billion worth of support directly due to Hurricanes Katrina, Rita, Wilma, Gustav, and Ike. Assistance provided by FSP (now, SNAP) and the child nutrition programs required no additional appropriations because the benefits are treated as entitlements. Other than a small one-time increase in appropriations, in P.L. 109-148 , to replenish some commodity stocks used for hurricane-relief purposes, no significant action was taken for hurricane relief or to pay for commodity distribution costs. This is because funding and federally provided food commodities were generally available without a need for a large appropriation. The Natural Resources Conservation Service (NRCS) assists private land owners with conserving soil, water, and other natural resources. Following natural disasters, NRCS works with FEMA, state and federal agencies, and local units of government to conduct postdisaster cleanup and restoration projects. NRCS administers the Emergency Watershed Protection (EWP) Program, which assists landowners and operators in implementing emergency recovery measures for slowing runoff and preventing erosion to relieve imminent hazards to life and property created by a natural disaster that causes a sudden impairment of a watershed. In the wake of 2005 and 2008 hurricane events, NRCS staff also assessed the demand and requirements for the disposal of animal carcasses, through authority delegated by FEMA. As of November 29, 2012, NRCS had obligated approximately $300 million for disaster relief stemming from these hurricanes. State EWP data for the 2005 and 2008 hurricanes are provided in Table 5 below. The Forest Service (FS) administers programs for protecting and managing the natural resources of the National Forest System (NFS, primarily national forests and national grasslands) and for assisting states and nonindustrial private forestland owners in protecting and managing the natural resources of nonfederal forestlands. Through its State and Private Forestry (SPF) program, the FS provides financial and technical assistance, typically through state forestry agencies, to nonfederal landowners to restore forests damaged by hurricanes (and other disasters). The state agencies are authorized to use such funds in numerous ways, such as assisting landowners to clear damaged trees and to plant new stands on cleared sites. While emergency and supplemental funding is sometimes enacted for natural disasters (e.g., hurricanes), the funding often is expended through ongoing, existing programs, and commonly cannot be distinguished from regular appropriations for these purposes (i.e., protecting and managing NFS lands and resources and assisting nonfederal landowners in protecting and managing their forests). Funding for the FS to conduct work after a natural disaster can be categorized generally as response efforts and recovery efforts. Response tasks are identified through the National Response Framework (NRF), administered by FEMA, which grants the FS certain responsibilities (e.g., firefighting) to coordinate during a presidentially declared emergency or major disaster. The FS reports it spent approximately $77 million for Hurricanes Katrina, Rita, and Wilma, respectively, on response efforts in FS region 8 (state-level data were not available). The FS estimates it spent a total of $2.5 million on response efforts for Hurricane Gustav ($1.4 million in Alabama, $0.9 million in Louisiana, $0.1 million in Mississippi, and $0.1 million in Texas). The FS reports it spent a total of $2.1 million on response efforts for Hurricane Ike (all funding spent in Texas). Although the FS does not have the authority for specific programs to grant recovery assistance to states, the FS can use its regular program authorities to assist state and private landowners broadly following a disaster. For example, after a hurricane, the FS may receive supplemental funding under the state and private forestry (SPF) programs appropriation to conduct recovery work via a SPF program. Eight existing FS programs were used to assist the states following Hurricanes Katrina, Rita, Wilma, Gustav, and Ike (see Table 6 ). The FS may also grant funding for the FSA Emergency Forest Restoration Program. FS recovery funding amounts by state for the 2005 hurricanes (Katrina, Rita, and Wilma) and 2008 hurricanes (Gustav and Ike) are provided in Table 7 . The Rural Housing Service (RHS) provides loan and grant assistance for single-family and multifamily housing. RHS also administers the Community Facilities loan and grant program to provide assistance to communities for health facilities, fire and police stations, and other essential community facilities. Following the hurricanes, RHS provided housing relief to residents of the affected areas through payment moratoriums of six months, a three-month moratorium on initiating foreclosures under the single family guaranteed homeownership loans, loan forgiveness, loan reamortization, and refinancing. In addition, RHS provided temporary rental assistance to displaced family farm labor housing tenants. Assistance was provided for single-family homeowners (e.g., Section 502 loans), multifamily housing owners (e.g., Section 504 loans), and rental housing assistance (Section 521). Under P.L. 109-234 , total budget authority for RHS programs for the 2005 hurricanes was $128 million. The Disaster Relief and Recovery Supplemental Appropriations Act of 2008 ( P.L. 110-329 ) provided funding for activities under the Rural Development Mission Area for relief and recovery from natural disasters (including hurricanes) during 2008. The act specifically provided $38 million for activities of the Rural Housing Service for areas affected by Hurricanes Katrina and Rita. The Rural Utilities Service (RUS) is responsible for administering electric, telecommunications, and water assistance programs that help finance the infrastructure necessary to improve the quality of life and promote economic development in rural areas. Hurricane relief included grants for rebuilding, repairing, or otherwise improving water and waste disposal systems in designated disaster areas. Increased technical assistance under the Circuit Rider program was also provided to rural water districts. With the approval of lenders, RUS also suspended preauthorized debit payments for water and waste disposal loan guarantees for six months. Under permanent authority of P.L. 92-419, total budget authority for RUS programs for the 2005 hurricanes was $53 million. The federal government may provide disaster relief to the fishing industry when there is a commercial fishery failure. A commercial fishery failure occurs when fishermen endure hardships resulting from fish population declines or other disruptions to the fishery. Two statutes, the Interjurisdictional Fisheries Act (16 U.S.C. §4107) and the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. §1864a and §1864), provide the authority and requirements for fishery disaster assistance. Under both statutes, a request for a fishery disaster determination is generally made by the governor of a state, or by a fishing community, although the Secretary of Commerce may also initiate a review at his or her own discretion. If the Secretary determines that a fishery disaster has occurred, Congress may appropriate funds for disaster assistance, which are administered by the Secretary. Funding is usually distributed as grants to states or regional marine fisheries commissions by the National Oceanic and Atmospheric Administration (NOAA) of the Department of Commerce. Since 2005, Congress has appropriated almost $260 million of hurricane disaster relief to the Gulf of Mexico fishing industry (see Table 8 ). Of this total, $213 million was appropriated for damages and disruptions caused by Hurricanes Katrina and Rita ( P.L. 109-234 and P.L. 110-28 ). Assistance provided for the direct needs of fishermen and related businesses, and supported related fisheries programs such as oyster bed and fishery habitat restoration, cooperative research, product marketing, fishing gear studies, and seafood testing. Many of these activities such as habitat restoration are ongoing management priorities for these fisheries. For damage caused by Hurricanes Gustav and Ike, $47 million was appropriated to restore damaged oyster reefs, remove storm debris, and rebuild fishing infrastructure in Texas and Louisiana ( P.L. 110-329 ). In addition, $85 million was provided to NOAA for scanning, mapping, and removing marine debris; repairing and reconstructing the NOAA Science Center; procuring a replacement emergency response aircraft and sensor package; and other activities ( P.L. 109-234 and P.L. 110-28 ). The Economic Development Administration (EDA) was created with the passage of the Public Works and Economic Development Act of 1965 (PWEDA), P.L. 89-136, (42 U.S.C. §3121, et. al) to provide assistance to communities experiencing long-term economic distress or sudden economic dislocation. Among the programs administered by EDA is the Economic Adjustment Assistance (EAA) program. The PWEDA (42 U.S.C. §3149(c)(2)) authorizes EDA to provide EAA funds for disasters or emergencies, in areas with respect to which a major disaster or emergency has been declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act for post-disaster economic recovery. In addition to funding disaster-recovery efforts using Emergency Assistance Act (EAA) funds available under its regular appropriation, 42 U.S.C. §3233 authorizes the appropriation of such sums as are necessary to fund EAA disaster recovery activities authorized under 42 U.S.C. §3149(c)(2). Funds appropriated under 42 U.S.C. §3233 may be used to cover up to 100% of the cost of a project or activity authorized under 42 U.S.C. §3149(c)(2). Funds appropriated under a regular appropriations act may be used to cover only 50% of the cost of disaster recovery activities. However, the authorizing statute also grants EDA the authority to increase the federal share of a project's cost to 100%. Presidentially declared disasters or emergencies are one of five specific qualifying events eligible for EAA funding assistance. EAA grants are competitively awarded and may be used to help finance public facilities; public services (including job training and counseling) business development (including funding a revolving loan fund (RLF); planning; and technical assistance that support the creation or retention of private sector jobs. Regions submitting an application for EAA disaster assistance must demonstrate a clear connection between the proposed project and disaster recovery efforts. EAA disaster grants can cover 100% of a project's cost. In order to qualify for assistance, the Secretary of Commerce must find that a proposed project or activity will help the area respond to a severe increase in unemployment, or economic adjustment problems resulting from severe changes in economic conditions. EAA regulations also require an area seeking such assistance to prepare or have in place a Comprehensive Economic Development Strategy (CEDS) outlining the nature and level of economic distress in the region, and proposed activities that could be undertaken to support private-sector job creation or retention efforts in the area. Congress did not provide EAA supplemental appropriations for disaster recovery activities related to Hurricanes Katrina, Rita, or Wilma. However, EDA allocated $24.2 million from its regular appropriations in response to the hurricanes of 2005. In response to Hurricanes Gustav and Ike and other disasters occurring in 2008, Congress appropriated $400 million in EAA disaster supplemental funding when it approved P.L. 110-329 . It also appropriated an additional $100 million in supplemental EAA disaster assistance without limiting it to disasters occurring in a specific year when it passed the Supplemental Appropriations Act of 2008, P.L. 110-252 . Of the $500 million appropriated for EAA disaster grants in 2008, EDA allocated, based on its 2010 annual report to Congress, the latest data available, a total of $63.8 million to 33 recipients in five of the six states identified in this report. The U.S. Army Corps of Engineers (Corps) is a unique federal agency in the Department of Defense, with military and civilian responsibilities. Under its civil works program, the Corps plans, builds, operates, and maintains a wide range of water resources facilities, including hurricane protection and flood damage reduction projects, and performs emergency actions for flood and coastal emergencies. Table 9 shows, for each Gulf Coast state, the direct appropriations that the Corps received for its water resources work related to the five hurricanes. According to data the Corps provided to CRS, of the total $15.6 billion appropriated, more than $11.2 billion has been obligated. The Military Personnel accounts fund military pay and allowances, permanent change of station travel, retirement and health benefit accruals, uniforms, and other personnel costs. For the hurricane response efforts, funds have been used primarily to pay per diem to DOD personnel evacuated from affected areas, for the pay and allowances of activated Guard and Reserve personnel supporting the hurricane relief effort, and for increased housing allowances to compensate for housing rate increases in hurricane-affected areas. Military personnel funds obligated by the Alabama, Florida, Texas, Louisiana, and Mississippi National Guard are detailed in Table 10 . Data on the obligation of other Military Personnel funds, by state, were not readily available. The Operations and Maintenance (O&M) accounts fund training and operation costs, pay for civilians, maintenance service contracts, fuel, supplies, repair parts, and other expenses. For the hurricane response efforts, funds have been used primarily to repair facilities, establish alternate operating sites for displaced military organizations, repair and replace equipment, remove debris, clean up hazardous waste, repair utilities, evacuate DOD personnel from affected areas, and support the operations of activated Army and Air National Guard units. O&M funds obligated by the Alabama, Florida, Texas, Louisiana, and Mississippi National Guard are detailed in Table 10 . Data on the obligation of other O&M funds, by state, were not readily available. The Procurement accounts generally fund the acquisition of aircraft, ships, combat vehicles, satellites, weapons, ammunition, and other capital equipment. For the hurricane response efforts, $2.85 billion was appropriated, of which $2.5 billion was used primarily to pay for extraordinary shipbuilding and ship repair costs, including not only damage to ships under construction and replacement of equipment and materials, but also additional overhead and labor costs resulting from schedule delays due to the hurricane damage to shipyards, primarily Avondale in New Orleans, Louisiana, and Ingalls in Pascagoula, Mississippi.  These funds also included $140 million to improve the infrastructure at damaged shipyards. Budget authority, obligations, and outlays for procurement, allocated by state for Alabama, Florida, Texas, Louisiana, and Mississippi are detailed in Table 10 . The Research, Development, Test, and Evaluation (RDT&E) accounts fund modernization efforts by way of basic and applied research, creation of technology-demonstration devices, developing prototypes, and other related costs. For the hurricane response efforts, funds have been used to replace damaged test equipment and repair damaged test facilities. Data allocating RDT&E funds by state were not readily available. The MILCON accounts fund the acquisition, construction, installation, and equipment of temporary or permanent public works, military installations, facilities, and real property. The Family Housing Construction accounts fund costs associated with the construction of military family housing (including acquisition, replacement, addition, expansion, extension, and alteration), while the Family Housing O&M accounts fund expenses such as debt payment, leasing, minor construction, principal and interest charges, and insurance premiums on military family housing. For the hurricane response efforts, $1.4 billion was appropriated to finance the planning, design, and construction of military facilities and infrastructure that were damaged or destroyed by hurricane winds and water. Of this, $918 million was dedicated to military operations and training facilities, while an additional $460 million was appropriated for family housing construction and family housing O&M to rebuild destroyed, damaged, or new housing units and a housing office. Budget authority for MILCON and family housing construction allocated to the states of Alabama, Florida, Texas, Louisiana, and Mississippi is detailed in Table 10 . Of the $1.4 billion appropriated, $1.2 billion could be allocated to the five specified states, while $167 million was devoted to planning and design activities not associated with specific locations. This category includes the Defense Working Capital Fund, the National Defense Sealift Fund, and a commissary fund. For the hurricane response efforts, these funds have been used primarily to rebuild and repair damaged commissaries, replace commissary inventories, and cover transportation and contingency costs of the Defense Logistics Agency. Data allocating these funds by state were not readily available. This category includes the Defense Health Program (DHP) and the Office of the Inspector General (OIG). The DHP title funds medical and dental care to current and retired members of the Armed Forces, their family members, and other eligible beneficiaries. For the hurricane response efforts, these funds have been used primarily to pay for costs associated with displaced beneficiaries seeking care from private-sector providers rather than at military health care facilities, to pay the health care costs of activated Guard and Reserve personnel, and to replace medical supplies and equipment. Data allocating DHP funds by state were not readily available. Of the $589,000 appropriated for the OIG, $263,000 was provided to replace and repair damaged equipment in the Inspector General's office in Slidell, LA, and to cover relocation costs. Following the Gulf Coast hurricanes, funding to support elementary and secondary schools affected by Hurricane Katrina or Hurricane Rita was provided through three public laws: P.L. 109-148 ($1.4 billion), P.L. 109-234 ($235 million), and P.L. 110-28 ($30 million). P.L. 109-148 created two new programs: (1) Immediate Aid to Restart School Operations ($750 million) and (2) Temporary Impact Aid for Displaced Students ($645 million), which were specifically designed to address needs resulting from the hurricanes. It also added $5 million to the McKinney-Vento Homeless Assistance Act to serve homeless children and youth who had been displaced by the Gulf Coast hurricanes. P.L. 109-234 provided additional funding of $235 million for the Temporary Impact Aid for Displaced Students enacted under P.L. 109-148 . P.L. 110-28 appropriated $30 million for elementary and secondary schools affected by the hurricanes through the Hurricane Educator Assistance program to assist in recruiting, retaining, and compensating staff in those schools. Congress then appropriated an additional $15 million through P.L. 110-329 to provide support to local educational agencies (LEAs) whose enrollment of homeless students increased as a result of hurricanes, including Hurricanes Gustav and Ike, floods, or other natural disasters during 2008. Congress subsequently appropriated $12 million through P.L. 111-117 for the Gulf Coast Recovery Initiative to improve education in areas affected by Hurricanes Katrina, Rita, or Gustav. A brief description of each of these programs and the amount of funding each received is presented below. Table 11 details how much funding various states received under each of the programs. The Immediate Aid to Restart School Operations provided support for LEAs and nonpublic schools in Louisiana, Mississippi, Alabama, and Texas to restart school operations, reopen schools, and re-enroll students. P.L. 109-148 provided $750 million for this program. This program is no longer authorized. The Temporary Emergency Impact Aid for Displaced Students program provided federal funding to assist schools in enrolling students who had been displaced by the Gulf Coast hurricanes. Funds were made available to LEAs and schools based on the number of displaced students that enrolled, irrespective of whether the school in which parents chose to enroll their child was a public or nonpublic school. P.L. 109-148 appropriated $645 million for this program. Subsequently, P.L. 109-234 appropriated an additional $235 million for this program, bringing the total program appropriation to $880 million. Portions of the funds appropriated were provided to 49 states and the District of Columbia based on the number of displaced students each enrolled. Louisiana, Texas, and Mississippi received the largest proportion of funds. This program is no longer authorized. The Hurricane Educator Assistance Program made federal funding available to Louisiana, Mississippi, and Alabama to use for recruiting, retaining, and compensating school staff who committed to work for at least three years in public elementary and secondary schools affected by Hurricanes Katrina or Rita. States were required to apply to receive funds, and the funds were allocated based on the number of public elementary and secondary schools that were closed for 19 days or more from August 29, 2005, through December 31, 2005. P.L. 110-28 provided $30 million for these purposes to Louisiana and Mississippi only. This program is no longer authorized. The McKinney-Vento Homeless Assistance Act provides funding to states to ensure that homeless children and youth are provided equal access to a free, appropriate public education in the same manner as provided other children and youth. P.L. 109-148 appropriated $5 million for this program for LEAs serving homeless children and youth who had been displaced by Hurricane Katrina or Hurricane Rita. Eight states received funding under this program, with the largest grants provided to Texas and Louisiana. While the McKinney-Vento Homeless Assistance Act continues to provide funding related to the education of homeless students, the provisions enacted specifically in response to the Gulf Coast hurricanes are no longer authorized. P.L. 110-329 provided $15 million to LEAs whose enrollment of homeless students increased as a result of hurricanes, floods, or other natural disasters that occurred during 2008 and for which the President declared a major disaster under Title IV of the Stafford Act. ED was required to distribute the funds through the McKinney-Vento Homeless Assistance Act based on demonstrated need. These funds provided assistance to LEAs in Gulf Coast states affected by Hurricanes Gustav and Ike, as well as LEAs affected by natural disasters in other parts of the nation, such as flooding in the Midwest. The majority of the funds were provided to LEAs in Louisiana and Texas. This program is no longer authorized. P.L. 111-117 provided $12 million for competitive awards to LEAs located in counties in Louisiana, Mississippi, and Texas that were designated by FEMA as counties eligible for individual assistance as a result of damage caused by Hurricanes Katrina, Rita, or Gustav. The funds had to be used to improve education in areas affected by these hurricanes and had to be used for activities such as replacing instructional materials and equipment; paying teacher incentives; modernizing, renovating, or repairing school buildings; supporting charter school expansion; and supporting extended learning time activities. The majority of the funds were provided to LEAs in Louisiana. This program is no longer authorized. Appropriations to support institutions of higher education (IHEs) following the Gulf Coast hurricanes of 2005 were provided through P.L. 109-148 ($200 million), P.L. 109-234 ($50 million), and P.L. 110-28 ($30 million). P.L. 110-329 subsequently provided an additional $15 million for IHEs in areas affected by hurricanes, including Hurricanes Gustav and Ike, floods, or other natural disasters in 2008. Table 11 details the amount of funding allocated to various states under these provisions. Of the $200 million provided under P.L. 109-148 for higher education, $95 million was specifically appropriated for the Louisiana Board of Regents, and $95 million was specifically appropriated for the Mississippi Institutes of Higher Learning for hurricane education recovery from the 2005 Gulf Coast hurricanes. Subsequently, P.L. 109-234 and P.L. 110-28 provided additional funds for hurricane education recovery under the Fund for the Improvement of Postsecondary Education (FIPSE), authorized by Title VII of the Higher Education Act, to assist IHEs adversely affected by the 2005 Gulf Coast hurricanes. Under both laws, funds were provided to help defray the expenses incurred by IHEs that were forced to close, relocate, or reduce their activities due to hurricane damage. Under P.L. 110-28 , IHEs also were permitted to use these funds to make grants to students enrolled at these institutions on or after July 1, 2006. A total of $80 million was provided for IHEs affected by Hurricane Katrina or Hurricane Rita under the FIPSE for hurricane education recovery. The majority of funds appropriated for hurricane education recovery were provided to Mississippi and Louisiana. These activities are no longer authorized. The remaining $10 million appropriated under P.L. 109-148 for higher education disaster relief was provided to assist IHEs with unanticipated costs associated with the enrollment of students displaced as a result of Hurricane Katrina or Hurricane Rita. Overall, 99 IHEs in 24 states and the District of Columbia received funds related to the enrollment of displaced higher education students. Louisiana and Texas received the largest state grants. This program is no longer authorized. P.L. 110-329 provided an additional $15 million for IHEs that were located in an area affected by hurricanes, floods, and other natural disasters that occurred during 2008 and for which the President declared a major disaster under Title IV of the Stafford Act. Funds provided through the Higher Education Disaster Relief program could be used to defray the expenses incurred by IHEs that were forced to close or relocate or whose operations were adversely affected by the natural disaster, and to provide grants to students who attended such IHEs for academic years beginning on or after July 1, 2008. The majority of these funds were provided to Louisiana and Texas for hurricane-related education disaster assistance related to Hurricanes Gustav and Ike. This program is no longer authorized. Following the Gulf Coast hurricanes of 2005, Congress appropriated $1.943 billion for ED to provide support to LEAs, schools, and IHEs in the Gulf Coast region and nationwide that were affected by Hurricane Katrina or Hurricane Rita. Subsequently, FY2009 supplemental appropriations provided an additional $30 million for education-related disaster relief for LEAs and IHEs affected by natural disasters during the 2008 calendar year. Most recently, FY2010 appropriations provided an additional $12 million for LEAs located in specific areas affected by Hurricanes Katrina, Rita, or Gustav. Of the $1.985 billion provided for education-related disaster relief and administered by ED since the Gulf Coast hurricanes, nearly all of these funds ($1.826 billion, 92%) were provided to Alabama, Florida, Louisiana, Mississippi, Tennessee, and Texas in response to the 2005 and 2008 hurricanes. Table 11 details how much of this funding was allocated to each of these states for each of the programs discussed in this section. The federal Head Start program, authorized at 42 U.S.C. §9801 et seq., provides comprehensive early childhood development services to low-income children. The program seeks to promote school readiness by enhancing the social and cognitive development of children through the provision of educational, health, nutritional, social, and other services. Federal Head Start funds are provided directly to local grantees (e.g., public and private nonprofit and for-profit agencies) rather than through states. Most children served in Head Start programs are three- and four-year-olds, but services are authorized for children from birth through compulsory school age. In December 2005, Congress appropriated $90 million in supplemental Head Start funds for the costs of serving displaced children and the renovation of Head Start facilities affected by the Gulf Coast hurricanes of 2005. The Department of Health and Human Services (HHS) Administration for Children and Families (ACF) reported awarding approximately $74 million of the total appropriation based on grantee requests; the remaining funds ($16 million) reverted to the U.S. Treasury Department. The majority of the funds awarded to grantees ($72.5 million, or 98% of the $74 million) went to Head Start programs in Alabama, Florida, Louisiana, Mississippi, and Texas (see Table 12 ). The Social Services Block Grant (SSBG), permanently authorized by 42 U.S.C. §1397 et seq., is a flexible source of funds that states use to support a wide variety of social services activities, ranging from child care to special services for the disabled. States have broad discretion over the use of SSBG funds, which are typically allocated to states according to a population-based formula. In December 2005, Congress appropriated $550 million in supplemental SSBG funds for necessary expenses related to the consequences of the Gulf Coast hurricanes of 2005. ACF distributed these funds based on the number of FEMA registrants from Hurricanes Katrina, Rita, and Wilma, as well as the percentage of individuals in poverty in each state. Funds were allocated to all states that took in evacuees, not just the states that were directly affected. The appropriations language expanded potential services for which these funds could be used to include \"health services (including mental health services) and for repair, renovation, and construction of health facilities (including mental health facilities).\" In September 2008, Congress appropriated $600 million for necessary expenses resulting from major disasters occurring in 2008, including hurricanes, floods, and other natural disasters, as well as expenses resulting from Hurricanes Katrina and Rita. ACF reserved a portion of these funds for states affected by major disasters of 2008 and a portion for states facing ongoing needs as a result of Hurricanes Katrina and Rita. ACF distributed both sets of funds based on each state's share of FEMA registrants, as well as the overall population for each state. Like the previous supplemental, the 2008 supplemental appropriation again expanded potential services for which SSBG funds could be used, this time to include \"health services (including mental health services) and for repair, renovation, and construction of health facilities (including mental health facilities), child care centers, and other social services facilities.\" Combined, these two supplemental appropriations provided $1.150 billion for the SSBG. According to ACF, the bulk of these funds—$944 million, or 82% of the $1.150 billion—were allocated to Alabama, Florida, Louisiana, Mississippi, and Texas (see Table 12 ). Typically, SSBG funds are subject to a two-year expenditure period—meaning that funds must be spent by the end of the fiscal year subsequent to the fiscal year in which they were allotted to states. However, most states had not spent all of their funds from either supplemental within the standard two-year period and, in both cases, Congress passed legislation extending the spending deadline for these supplemental funds. According to data from ACF, states had spent about $521 million (95%) of the 2005 $550 million supplemental before the extended deadline of September 30, 2009. ACF data indicate that states had spent about $522 million (87%) of the 2008 $600 million supplemental before the extended expenditure deadline of September 30, 2011. Unspent funds were to revert to the U.S. Treasury. According to the FY2009 SSBG annual report, states spent supplemental funds on 28 of the 29 SSBG service categories defined in federal regulation, including education and training, counseling services, and health-related services. The FY2009 report indicated that most supplemental funds were spent in the \"other services\" category, including expenditures for certain construction and renovation costs, as well as costs related to certain health and mental health services. Notably, the FY2009 annual report only includes expenditures from the December 2005 supplemental appropriation. The Department of Health and Human Services (HHS) is the coordinating agency for Emergency Support Function 8 (ESF #8), Public Health and Medical Services, under the National Response Framework . The Stafford Act authorizes reimbursements to HHS for many of its emergency or major disaster response activities, including (among others): deployment of operational assets (medical surge and mortuary teams, portable field hospitals, and the Strategic National Stockpile of drugs and medical supplies); disease surveillance; food and water safety activities; and workforce assistance to health departments. Reimbursements to HHS for mission assignments are presented in Table 17 , Table 18 , and Table 19 . Pursuant to Section 416 of the Stafford Act, the President may provide assistance for the establishment of crisis counseling services in areas affected by declared major disasters. CCP, a program to provide short-term mental health screening, counseling, and referral services in presidentially declared disasters, is jointly administered by FEMA, the Substance Abuse and Mental Health Services Administration (SAMHSA) in HHS, and affected states. Amounts provided to each state for the response to the Gulf Coast hurricanes are displayed in Table 13 . In response to Hurricane Katrina, Congress authorized and appropriated a one-time program of up to $2.1 billion to cover full federal funding of the state match that would normally have been required under the Medicaid and State Children's Health Insurance (CHIP) programs, and the costs of uncompensated care, for eligible individuals from disaster-affected areas. Assistance was provided both to directly affected states and to certain states that hosted evacuees. Funding was also authorized \"to restore access to health care in impacted communities,\" and was provided to stabilize the primary care workforce in three directly affected states: Alabama, Louisiana, and Mississippi. Outlay amounts are presented in Table 14 . In response to the 2005 hurricanes, Congress provided, in emergency supplemental appropriations for affected areas, $4 million for communications equipment for community health centers, and $8 million for mosquito abatement in affected states. The amounts obligated from this emergency supplemental funding are presented in Table 15 . In some cases, funds available in existing HHS accounts were provided for hurricane relief. For example, the Centers for Medicare and Medicaid Services (CMS) Emergency Prescription Assistance Program provided up to $2 million in individual assistance for affected counties in Texas following Hurricane Ike. Also, the HHS Office of Minority Health provided $12 million in grants to minority-serving organizations following Hurricane Katrina. Third, SAMHSA Emergency Response Grants (SERG) provided funds to states for mental health and substance abuse services following Hurricane Katrina. Amounts for SERG grants are presented in Table 13 . The federal government funds a significant portion of the nation's health care costs, through the Medicare and Medicaid programs, veterans and Indian health care systems, and other activities. In response to the major hurricanes, HHS invoked numerous waiver authorities that allowed state, local, tribal, and private health care providers and facilities affected by the disasters to continue receiving federal health care services and/or reimbursements under altered conditions, such as the use of temporary facilities, the use of volunteer providers, and care provided to individuals not usually eligible. Although these waivers did not provide new funds to disaster-affected areas, they prevented the loss of substantial federal revenues. Several HHS agencies also allowed states to reprogram federal grant funds, including from most of the grants administered by the Centers for Disease Control and Prevention (CDC). The Secretary of HHS has authority to use a no-year fund for public health emergencies. However, the fund has not had a balance since the 1990s, so it was not available for the response to the 2005 and 2008 hurricanes. The Stafford Act authorizes the President to issue major disaster or emergency declarations in response to incidents in the United States that overwhelm state and local governments. Section 403(a)(1) of Stafford authorizes the President to direct federal resources to provide assistance essential to meeting immediate threats to life and property resulting from a major disaster. Section 304 of the Stafford Act authorizes the reimbursement of other agencies from funds appropriated to the DRF for services or supplies furnished under the authority of the Stafford Act. The primary mission of FEMA is to \"reduce the loss of life and property and protect the Nation from all hazards, including natural disasters, acts of terrorism, and other man-made disasters, by leading and supporting the Nation in a risk-based, comprehensive emergency management system of preparedness, protection, response, recovery, and mitigation.\" FEMA provides assistance to states, local governments, tribal nations, individuals and families, and certain nonprofit organizations through the Disaster Relief Fund (DRF). The more significant aid programs authorized under the Stafford Act include the Public Assistance Program (PA); and the Individual and Household Program (IHP), which includes Other Needs Assistance (ONA) and Debris Removal, the Hazard Mitigation Grant Program (HMGP), and Essential Assistance. P.L. 112-175 requires the FEMA Administrator to provide a report by the fifth day of each month on the DRF which includes DRF funding summaries. The DRF report provides funding information by state for the 2005 and 2008 hurricanes. As shown in Table 16 , the DRF report aggregates funding for Hurricanes Katrina, Rita, and Wilma. Mission assignments are directives from FEMA (on behalf of the requesting state) to other federal agencies to perform specific work in disaster operations on a reimbursable basis. The mission assignment contains information that is used by FEMA management to evaluate requests for assistance from states, other federal agencies, and internal FEMA organizations. Mission assignments are paid out of the DRF through funds appropriated to FEMA rather than funds appropriated directly to the respective agency. Table 17 contains a list of mission assignment funding by entity for Hurricanes Katrina, Wilma, and Rita. Table 18 contains mission assignment data for Hurricane Gustav and Table 19 contains mission assignment funding for Hurricane Ike. As shown in Tables 1 7 , 1 8 , and 19 , mission assignment funding can be assigned directly to an agency, directly to an agency's program/activity, or both. The Community Development Block Grant (CDBG) program was first authorized as Title I of the Housing and Community Development Act of 1974, P.L. 93-383 , (42 U.S. C. §5301, et al.). Funds are allocated by formula to states, Puerto Rico, and eligible (entitlement) communities to be used to fund eligible housing, neighborhood revitalization, and economic development activities. After funds are set aside for Indian tribes and insular areas 70% of each year's annual CDBG program appropriation must be allocated to CDBG entitlement communities, including metropolitan cities with populations of 50,000 persons or more, central cities of metropolitan areas, and statutorily defined urban counties. The remaining 30% of appropriated funds are allocated to states for distribution to non-entitlement communities. Eligible activities must meet one of three national objectives. The activity must principally benefit low or moderate income persons; aid in preventing or eliminating slums or blight; or address an imminent threat to the health or welfare of residents of an area, including disaster relief, mitigation, and long-term recovery activities. In addition, a state or entitlement community grantee must certify that it will expend at least 70% of its CDBG allocation over a three-year period on eligible activities principally benefiting low- and moderate-income persons. In addition to allowing a state or entitlement community to fund disaster-recovery efforts under the CDBG's imminent threat national objective using CDBG regular appropriation, Congress has, at its discretion, appropriated additional supplemental CDBG funds in response to presidentially declared disasters. In addition to appropriating funds for disaster recovery activities, the statute authorizing the CDBG program grants the Department of Housing and Urban Development (HUD) the authority to waive or modify program regulations, except those relating to public notice, fair housing, civil rights, labor standards, environmental review, and the program's low- and moderate-income targeting requirement, when CDBG funds are used to respond to presidentially declared major disasters. Funds are allocated to states and communities to cover unmet needs not covered by state and local efforts, private insurers, and standard federal disaster programs administered by the Federal Emergency Management Agency, the Small Business Administration, and the Army Corps of Engineers. As a condition of funding, grantees are required to submit, for HUDs approval, a disaster recovery plan. In the aggregate, the six states identified in Table 20 were awarded a total of $23.971 billion in CDBG disaster relief assistance to fund disaster relief activities in response to the five hurricanes identified in the table. Nearly 60% of this amount was allocated to Louisiana while Mississippi received approximately 30% of the total. Five of the six states included in Table 20 received a total allocation of $19.672 billion in response to the Gulf Coast hurricanes of 2005. Louisiana received the largest share (75%) of this amount followed by Mississippi (28%), Texas (2.5%), Florida (1%), and Alabama (less than 1%). A total of $4.296 billion was awarded to five of six states included in Table 20 to support disaster recovery activities in response to Hurricane Ike. Texas accounted for 71% of the total followed by Louisiana (25%), Tennessee (2%), Florida (1.8%), and Mississippi (less than 1%). The Section 8 Housing Choice Voucher program, authorized at 42 U.S.C. §1437f(o), provides portable rent subsidies that low-income families can use to rent housing units offered by private market landlords. Families with vouchers contribute an income-based payment towards their rent (generally equal to 30% of a family's income), and the federal government, through local public housing authorities (PHAs), pays the landlord the difference between the tenant's contribution and the contract rent for the unit. Congress provided over $555 million to HUD to provide rental assistance (in the form of Section 8 Housing Choice Vouchers) to families displaced by Hurricanes Katrina and Rita. The first $390 million of that amount was appropriated to HUD to provide temporary rental assistance vouchers to families that were previously assisted by HUD programs, but were displaced by the 2005 hurricanes. Later, HUD was given a mission assignment by FEMA to begin providing rental assistance to all remaining households displaced by the 2005 hurricanes. HUD named this program the Disaster Housing Assistance Program (DHAP), and the cost of the DHAP was covered by FEMA's Disaster Relief Fund. Following Hurricane Ike, FEMA and HUD established another Disaster Housing Assistance Program (DHAP-Ike) for families displaced by that storm, also funded through the DRF under a mission assignment. Following the first appropriation, and establishment of the mission assignments, Congress appropriated $85 million for HUD to fund the cost of ongoing, permanent Section 8 rental assistance vouchers for displaced families whose temporary housing assistance under DHAP-Katrina was expiring. Congress later appropriated an additional $80 million to create new Section 8 rental assistance vouchers in the areas affected by Hurricanes Katrina and Rita. Table 21 provides the total appropriations for disaster-related rental assistance vouchers. It does not provide allocations by state for all rental assistance funding because that information is not readily available and would be difficult to determine. Most of the funding for rental assistance was not allocated to the local public housing authorities (PHAs) administering the program by state. Rather, it was allocated based on where displaced families were living. For example, a PHA in Texas may have been administering a voucher on behalf of the Housing Authority of New Orleans for a family who was living in New Orleans before the storm, but relocated to Alabama after the storm. The $80 million for new vouchers was allocated to housing authorities and Table 21 provides a breakdown by state for those funds. The Louisiana Recovery Corporation titled its recovery plan, which was primarily funded with emergency CDBG funding, the \"Road Home\" program. As shown in Table 21 , Congress appropriated $73 million to HUD for allocation to Louisiana's Road Home program (Supportive Housing) to fund the creation of permanent supportive housing units for the elderly and persons with disabilities. Of that amount, $50 million was appropriated through an existing homeless assistance grant program that serves homeless persons with disabilities (called Shelter Plus Care) (authorized at 42 U.S.C. Chapter 119) and $23 million was appropriated through the Section 8 Housing Choice Voucher program. Low-rent public housing is federally subsidized housing owned and operated by local PHAs and available to low-income families. Several public housing developments, particularly in New Orleans, suffered severe damage after Hurricane Katrina. As shown in Table 21 , Congress appropriated $15 million in emergency funding to HUD's public housing capital fund (authorized at 42 U.S.C. §1437g), which was allocated to PHAs to aid in the repair of severely damaged public housing in Louisiana. As shown in Table 21 , Congress appropriated $7 million for the HUD Inspector General to help fund the cost of enhanced oversight over disaster recovery funding. Established by an \"Act to Establish the Department of Justice\" with the Attorney General at its head, the Department of Justice (DOJ) provides counsel for the government in federal cases and protects citizens through law enforcement. It represents the federal government in all proceedings, civil and criminal, before the U.S. Supreme Court. In legal matters, generally, the department provides legal advice and opinions, upon request, to the President and executive branch department heads. To date, the DOJ has received a total of $287.5 million in supplemental appropriations for departmental expenses related to hurricanes in the Gulf of Mexico and to award grants to Gulf Coast states. Table 22 provides a breakdown of how DOJ obligated disaster funding among Alabama, Florida, Louisiana, Mississippi, and Texas. Subtitle A of Title XI of the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) authorized appropriations for the General Legal Activities and U.S. Attorneys accounts. For the General Legal Activities account the act authorized $679.7 million for FY2006, $706.8 million for FY2007, $735.1 million for FY2008, and $764.5 million for FY2009. For the U.S. Attorneys account the act authorized $1.626 billion for FY2006, $1.691 billion for FY2007, $1.795 billion for FY2008, and $1.829 billion for FY2009. The Legal Activities account includes several subaccounts, including General Legal Activities and the U.S. Attorneys. The General Legal Activities subaccount funds the Solicitor General's supervision of DOJ's conduct in proceedings before the Supreme Court. It also funds several departmental divisions (tax, criminal, civil, environment and natural resources, legal counsel, civil rights, INTERPOL, and dispute resolution). The U.S. Attorneys enforce federal laws through prosecution of criminal cases and represent the federal government in civil actions in all of the 94 federal judicial districts. Since 2005, Congress has appropriated a total of $17.5 million in supplemental appropriations for this account. This amount included $2.0 million for General Legal Activities and a total of $15.5 million for the U.S. Attorneys. Chapter 8 of Title II of the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror and Hurricane Recovery, 2006 ( P.L. 109-234 ) provided $2 million for General Legal Activities \"to investigate and prosecute fraud cases related to hurricanes in the Gulf Coast region.\" Chapter 8 of Title I of Division B of the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) provided $9 million for the U.S. Attorneys \"to support operational recovery from hurricane-related damage in the Gulf Coast region.\" Chapter 8 of Title II of the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror and Hurricane Recovery, 2006 ( P.L. 109-234 ) provided the U.S. Attorneys with $6.5 million \"to investigate and prosecute fraud cases related to hurricanes in the Gulf Coast region.\" Subtitle A of Title XI of the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) authorized $800.3 million for FY2006, $832.3 million for FY2007, $865.6 million for FY2008, and $900.2 million for FY2009 for the United States Marshals Service (USMS) account. The federal marshals' service was founded in 1789, making it the oldest federal law enforcement agency. A presidentially appointed U.S. marshal directs the operations of the marshals' services in each of the 94 federal judicial districts. The USMS facilitates the functioning of the federal judicial process by providing protection for judges, attorneys, witnesses, and jurors and providing physical security in courthouses. The USMS is the federal government's primary agency for fugitive investigations. USMS task forces combine the efforts of federal, state, and local law enforcement agencies to locate and arrest fugitives. The Marshals Service also works with international law enforcement agencies to apprehend fugitives who have fled abroad and to apprehend foreign fugitives who have entered the United States. The USMS executes all federal arrest warrants. The USMS manages and sells assets which were seized or forfeited by federal law enforcement agencies. The assets managed and sold by the USMS are assets that represent the proceeds of, or were used to facilitate federal crimes. The Marshals Service is responsible for housing and transporting all federal detainees from the time they are arrested until they are either acquitted or convicted and delivered to their designated federal prison. The USMS operates the Justice Prisoner and Alien Transportation System (JPATS), which transports prisoners between judicial districts, correctional facilities, and foreign countries. The USMS is also responsible for administering the federal witness security program, which provides for the security and safety of government witnesses and their authorized family members, whose lives are in danger as a result of their cooperation with the U.S. government. Since 2005, Congress has appropriated $9 million in supplemental appropriations for the U.S. Marshal's Service. Chapter 8 of Title I of Division B of the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) provided $9 million for the USMS's salaries and expenses account \"to support operational recovery from hurricane-related damage in the Gulf Coast region.\" Subtitle A of Title XI of the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) authorized $5.761 billion for FY2006, $5.992 billion for FY2007, $6.231 billion for FY2008, and $6.481 billion for FY2009 for the Federal Bureau of Investigation (FBI) account. The FBI was founded in 1908. Its headquarters is in Washington, DC, and it has 56 field offices located in major cities throughout the United States and its territories and another 380 resident agencies in cities and towns across the nation. In addition, the FBI has more than 60 international offices called \"legal attachés\" in U.S. embassies worldwide. The FBI is the lead federal investigative agency charged with defending the country against foreign terrorist and intelligence threats; enforcing federal criminal laws; and providing leadership and criminal justice services to federal, state, municipal, tribal, and territorial law enforcement agencies and partners. The FBI focuses on protecting the United States from internal and external threats and investigations that are too large or too complex for state and local authorities to handle on their own. The priorities of the FBI include protecting the United States from terrorist attack; protecting the United States against foreign intelligence operations and espionage; protecting the United States against cyber-based attacks and high-technology crimes; combating public corruption; protecting civil rights; investigating transnational/national criminal organizations and enterprises; investigating major white-collar crime; investigating significant violent crime; and supporting federal, state, local and international partners. The FBI collects and disseminates national crime data through the Uniform Crime Reports (UCR). The FBI also operates several national law enforcement information sharing systems such as the Combined DNA Index System (CODIS), the Law Enforcement National Data Exchange (N-Dex), the Next Generation Identification System (NGI), the National Instant Criminal Background Check System (NICS), and the National Crime Information Center (NCIC). Since 2005, Congress has appropriated $45 million in supplemental appropriations for the FBI. Chapter 8 of Title I of Division B of the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) provided $45 million for the FBI's salaries and expenses account \"to support operational recovery from hurricane-related damage in the Gulf Coast region.\" Subtitle A of Title XI of the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) authorized $1.716 billion for FY2006, $1.785 billion for FY2007, $1.856 billion for FY2008, and $1.930 billion for FY2009 for the Drug Enforcement Administration (DEA) account. The DEA was established in 1973 through an executive order issued by President Nixon. The DEA has 226 domestic and 85 foreign offices. The DEA's mission is \"to enforce the controlled substances laws and regulations of the United States and bring to the criminal and civil justice system of the United States, or any other competent jurisdiction, those organizations and principal members of organizations, involved in the growing, manufacture, or distribution of controlled substances appearing in or destined for illicit traffic in the United States; and to recommend and support nonenforcement programs aimed at reducing the availability of illicit controlled substances on the domestic and international markets.\" The DEA's primary responsibilities include investigating major violators of controlled substance laws operating at interstate and international levels; management of a national drug intelligence program in cooperation with federal, state, local, and foreign officials to collect, analyze, and disseminate strategic and operational drug intelligence information; seizure and forfeiture of assets derived from, traceable to, or intended to be used for illicit drug trafficking; enforcement of the provisions of the Controlled Substances Act as they pertain to the manufacture, distribution, and dispensing of legally produced controlled substances; reduction of illicit drugs on the United States market through methods such as crop eradication, crop substitution, and training of foreign officials; and liaison with the United Nations, Interpol, and other organizations on matters relating to international drug control programs. Since 2005, Congress has appropriated $10 million in supplemental appropriations for this account. Chapter 8 of Title I of Division B of the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) provided $10 million for the DEA's salaries and expenses account \"to support operational recovery from hurricane-related damage in the Gulf Coast region.\" Subtitle A of Title XI of the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) authorized $923.6 million for FY2006, $960.6 million for FY2007, $999.0 million for FY2008, and $1.039 billion for FY2009 for the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) account. The ATF enforces federal criminal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. The ATF's responsibilities were transferred from the Department of the Treasury to the Department of Justice as a part of the Homeland Security Act ( P.L. 107-296 ). The ATF works both independently and through partnerships with industry groups, international, state, and local governments, and other federal agencies to investigate and reduce crime involving firearms and explosives, acts of arson and bombings, and illegal trafficking of alcohol and tobacco products. Since 2005, Congress has appropriated $20 million in supplemental appropriations for the ATF. Chapter 8 of Title I of Division B of the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) provided $20 million for the ATF's salaries and expenses account \"to support operational recovery from hurricane-related damage in the Gulf Coast region.\" Subtitle A of Title XI of the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) authorized $5.066 billion for FY2006, $5.268 billion for FY2007, $5.479 billion for FY2008, and $5.698 billion for FY2009 for the Federal Prison System account. The Bureau of Prisons (BOP) was established in 1930 to house federal inmates, to professionalize the prison service, and to ensure consistent and centralized administration of the federal prison system. The BOP's mission is to protect society by confining offenders in prisons and community-based facilities that are safe, humane, cost-efficient, and appropriately secure, and that provide work and other self-improvement opportunities for inmates so that they can become productive citizens after they are released. BOP currently operates 118 correctional facilities across the country. Since 2005, Congress has appropriated $11 million in supplemental appropriations for the BOP. Chapter 8 of Title I of Division B of the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) provided $11 million for the BOP's buildings and facilities account \"to repair hurricane-related damage in the Gulf Coast region.\" Congress has not traditionally authorized appropriations for the Office of Justice Programs (OJP); rather it has authorized appropriations for grant programs administered by the OJP. The funding appropriated by Congress for the OJP under the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) was not appropriated pursuant to any authorized grant program. Congress appropriated funding for OJP's State and Local Law Enforcement assistance account for the OJP to award to states affected by hurricanes in the Gulf of Mexico in 2005. The funding appropriated by Congress for the OJP under the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ) was appropriated pursuant to an authorization for the Byrne Discretionary Grant program. This program was previously authorized under Part B of Subchapter V of Chapter 46 of Title 42 of the U.S. Code. However, the authorization was repealed by Section 1111(b)(1) of the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ). Congress continued to appropriate funding for the Byrne Discretionary Grant program until FY2011 when the program's funding was eliminated due to the earmark ban put in place by the 112 th Congress. The OJP manages and coordinates the National Institute of Justice (NIJ), Bureau of Justice Statistics (BJS), Office of Juvenile Justice and Delinquency Prevention (OJJDP), Office of Victims of Crime (OVC), Bureau of Justice Assistance (BJA), and related grant programs. Through its component offices and bureaus, OJP disseminates knowledge and practices across America and provides grants for the implementation of crime fighting strategies. NIJ focuses on research, development, and evaluation of crime control and justice issues. NIJ funds research, development, and technology assistance, as well as assesses programs, policies, and technologies. BJS collects, analyzes, publishes, and disseminates information on crime, criminal offenders, crime victims, and criminal justice operations. BJS also provides financial and technical support to state, local, and tribal governments to improve their statistical capabilities and the quality and the utility of their criminal history records. OJJDP assists local community endeavors to effectively avert and react to juvenile delinquency and victimization. OJJDP seeks to improve the juvenile justice system and its policies so that the public is better protected, youth and their families are better served, and offenders are held accountable. OVC distributes federal funds to victim assistance programs across the country. OVC offers training programs for professionals and their agencies that specialize in helping victims. BJA provides leadership and assistance to local criminal justice programs that improve and reinforce the nation's criminal justice system. BJA's goals are to reduce and prevent crime, violence, and drug abuse and to improve the way in which the criminal justice system functions. Since 2005, Congress has appropriated $175 million for OJP for grants to assist states affected by hurricanes in the Gulf of Mexico. Chapter 8 of Title I of Division B of the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) included $125 million for OJP's State and Local Law Enforcement Assistance account for \"necessary expenses related to the direct or indirect consequences of hurricanes in the Gulf of Mexico in calendar year 2005.\" Chapter 2 of Title IV of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ) included $50 million under OJP's State and Local Law Enforcement Assistance Account for the Byrne Discretionary Grant program. Language in the law stated that funds provided under this program were to be used for local law enforcement initiatives in the Gulf Coast region related to the aftermath of Hurricane Katrina. Congress also required OJP to award the $50 million it received under the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 based upon each affected state's level of reported violent crime in 2005. The Employment and Training Administration (ETA) of the Department of Labor administers \"federal government job training and worker dislocation programs, federal grants to states for public employment service programs, and unemployment insurance benefits. These services are primarily provided through state and local workforce development systems.\" The Workforce Innovation and Opportunity Act (WIOA, P.L. 113-128 ), whose programs are administered primarily by ETA, is the primary federal employment and training legislation. WIOA authorizes several job training programs: state formula grants for Adult, Youth, and Dislocated Worker Employment and Training Activities; Job Corps; and other national programs, including Native American Programs, Migrant and Seasonal Farmworker Programs, and a series of competitive grant programs authorized under Section 169 of WIOA. ETA provides funding assistance for disaster relief activities primarily through the Dislocated Worker program, specifically by National Dislocated Worker Grants (DWG). DWGs are authorized under WIOA Section 170 and are for employment and training assistance to workers affected by major economic dislocations, such as plant closures, mass layoffs, or natural disasters. These DWGs are awarded primarily to states and local Workforce Development Boards (WDBs) to provide services for eligible individuals, including dislocated workers, civilian employees of the Departments of Defense or Energy employed at an installation that is being closed within 24 months of eligibility determination, employees or contractors with the Department of Defense at risk of dislocation due to reduced defense expenditures, or certain other members of the Armed Forces. Services include job search assistance and training for eligible workers. In addition, DWG funding may be used to provide direct employment (\"disaster relief employment\") to individuals for a period of up to 12 months for work related to a disaster. A majority of WIOA funding for the Dislocated Worker program is allocated by formula grants to states (which in turn allocate funds to local entities) to provide training and related services to individuals who have lost their jobs and are unlikely to return to those jobs or similar jobs in the same industry. The remainder of the appropriation is reserved by DOL for a National Reserve account, which in part provides for the DWGs. The Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 2006 ( P.L. 109-148 ) provided $125 million in appropriations to ETA to award National Emergency Grants (NEGs) related to the consequences of hurricanes in the Gulf of Mexico in calendar year 2005. P.L. 109-148 specified that the appropriations were to remain available until June 30, 2006, and that the funds could be used to replace NEG funds previously obligated to the hurricane-impacted areas. In calendar year (CY) 2006, Alabama received $667,000, Louisiana $36.4 million, Mississippi $46.7 million, and Texas $64.9 million in NEG funding. The total of $148.6 million in NEG funding awarded to the five states, shown in Table 23 , exceeds the $125 million appropriated in P.L. 109-148 . In providing the award amounts and projects, ETA does not distinguish awards by funding source. Thus, some of the funding shown in Table 23 is from the NEG funding in the regular annual WIA National Reserve appropriations. The Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006 ( P.L. 109-234 ) provided $16 million in appropriations to ETA for \"necessary expenses related to the consequences of Hurricane Katrina and other hurricanes of the 2005 season, for the construction, rehabilitation, and acquisition of Job Corps centers.\" P.L. 109-234 specified that the funds were to remain available until expended. Job Corps, which is administered by ETA, is primarily a residential job training program first established in 1964 that provides educational and career services to low-income individuals ages 16 to 24, primarily through contracts administered by DOL with corporations and nonprofit organizations. Most participants in the Job Corps program work toward attaining a high school diploma or a General Educational Development (GED) certificate, with a subset also receiving career technical training. Currently, Job Corps centers operate in 50 states, the District of Columbia, and Puerto Rico. The $16 million provided in P.L. 109-234 for construction, rehabilitation, and acquisition of Job Corps centers was most likely used for repair of the Gulfport (Mississippi) and New Orleans Job Corps centers, which were damaged during Hurricane Katrina. DOT is the lead support agency under Emergency Support Function #1: Transportation, under the NRF. DOT reports on damage to transportation infrastructure and coordinates alternative transportation services and the restoration and recovery of the transportation infrastructure. At the time that Hurricanes Katrina, Rita, and Wilma struck, DOT also worked with FEMA in providing and coordinating transportation support, such as evacuation aid and shipping of critical supplies to the disaster area. However, by the time Gustav and Ike struck, DOT had turned over its role in evacuation aid and the shipping of critical supplies to FEMA. During the hurricane response, DOT had only one permanent disaster program, the Federal Highway Administration Emergency Relief Program (ER). Other operating administrations, such as the Federal Aviation Administration and the Federal Transit Administration, also provided disaster assistance. From a budgetary perspective, however, the DOT response to the Gulf Coast hurricanes may be viewed as either DOT funding or as FEMA funding provided to DOT for the mission assignment activities assumed by its operating administrations (see Table 17 , Table 18 , and Table 19 ). Funding by the FHWA, FAA, and FTA is briefly described below, and the cumulative total allocations to the Gulf of Mexico states are provided in Table 24 . The Federal Highway Administration's Emergency Relief Program (ER) is authorized by Title 23, U.S.C. §125 (Section 120 (e) for federal share payable). The ER program provides funds for the repair and reconstruction of roads on the federal-aid highway system that have suffered serious damage as a result of either (1) a natural disaster over a wide area, such as a flood, hurricane, tidal wave, earthquake, tornado, severe storm, or landslide; or (2) a catastrophic failure from any external cause (for example, the collapse of a bridge that is struck by a barge). Historically, however, the vast majority of ER funds have gone for natural disaster repair and reconstruction. ER funding allocations for Hurricanes Katrina, Rita, Wilma, Gustav, and Ike totaled almost $3.2 billion. Of this amount, just over $2.8 billion has been obligated; see Table 24 . Funding provided for hurricane relief includes funds from the program's annual $100 million authorization and from additional sums provided in supplemental or other appropriations acts. ER funds can only be used for roads and bridges on the federal-aid highway system. Repair and reconstruction costs for other damaged roads (mostly local roads and neighborhood streets) may be reimbursed by FEMA. FAA has approved $110.5 million for repair and improvements to hurricane-damaged airport and air traffic control infrastructure. Of this amount, $40.6 million was appropriated under the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act of 2006 ( P.L. 109-148 ). FAA also provided Airport Improvement Program discretionary funds for airport repairs in the Gulf of Mexico states. The U.S. Troop Readiness Veterans' Care Katrina Recovery and Iraq Accountability Appropriations Act of 2007 ( P.L. 110-28 ) appropriated $35 million for transit relief to the Gulf Coast states. The distribution of this funding across the Gulf Coast states is shown in Table 25 . It is not unusual for FTA to be tasked by FEMA under a mission assignment to provide transit assistance to disaster victims. Table 25 does not include these FEMA-reimbursed costs. The Department of Veterans Affairs (VA) administers programs that provide benefits and other services to veterans and their spouses, dependents, and beneficiaries. The VA has three primary organizations to provide these benefits: the Veterans Benefits Administration (VBA), the Veterans Health Administration (VHA), and the National Cemetery Administration (NCA). The VHA provides medical care to eligible veterans and dependents. Hurricane Katrina caused extensive damage to the VA Medical Center in New Orleans. P.L. 109-148 appropriated additional funds for necessary expenses due to the consequences of the hurricanes in the Gulf of Mexico in 2005. Funds were appropriated by category, including $198.3 million for medical services, and $26.9 million for general operating expenses, minor construction, and the National Cemetery Administration. P.L. 109-148 appropriated $367.5 million for major construction, of which $292.5 million was for a new facility in Biloxi, MS, and $75 million was for advance planning and design work to replace the VA Medical Center in New Orleans. The total amount of appropriations authorized for the new Biloxi VA Medical Center was $310 million. This amount included $292.5 million provided in. P.L. 109-148 and $17.5 million in regular appropriations. P.L. 111-212 transferred $6 million in bid savings to the Filipino Veterans Compensation Fund, and $18 million was transferred to New Orleans Medical Center project. Later another $11 million was reprogramed from the working reserve for the new Biloxi VA Medical Center. The total estimated cost of the new Biloxi VA Medical Center is $297 million. While a majority of buildings were completed in December 2011, as of FY2018 some buildings are still under construction. P.L. 109-234 appropriated $585.9 million for major construction by the VA, of which $550 million was for replacing the New Orleans Medical Center. P.L. 112-10 appropriated $310 million for FY2011, and P.L. 112-74 appropriated $60 million for FY2012, for the New Orleans Medical Center. In FY2015 $39.5 million and in FY2016 $50 million were respectively reprogrammed from the working reserve. The total estimated cost of replacing the VA Medical Center in New Orleans is approximately $1.09 billion. The site decision for the new VA Medical Center in New Orleans was announced on November 25, 2008, and a groundbreaking ceremony was held on June 25, 2010. However, VA could not acquire all the land parcels necessary to construct the new medical center until late April 2011. The construction of the new facility began in May 2011. The new medical center was formally opened on November 18, 2016, and activation of various clinics would occur in various phases. The Armed Forces Retirement Home Trust Fund provides funds to operate and maintain the Armed Forces Retirement Homes (AFRH) in Washington, DC (also known as the United States Soldiers' and Airmen's Home), and in Gulfport, MS (originally located in Philadelphia, PA, and known as the United States Naval Home). These two facilities provide long-term housing and medical care for approximately 1,600 needy veterans. The Gulfport campus, encompassing a 19-story living accommodation and medical facility tower, was severely damaged by Hurricane Katrina, and closed at the end of August 2005. P.L. 109-148 appropriated $65.8 million for the AFRH for expenses necessary because of the Gulf of Mexico hurricanes. Of the $65.8 million, $45 million was for advance planning and design work to replace the Gulfport, MS, facility, which was nearly destroyed by Hurricane Katrina. The facility had almost 600 residents, the majority of whom were transferred to the Washington, DC, facility after the storm. P.L. 109-234 appropriated $176 million for construction of the new Gulfport facility, and consolidated an additional $64.7 million in previously appropriated funds for construction of the new facility. P.L. 110-329 and P.L. 111-117 provided additional funds ($8.0 million and $72.0 million, respectively) for construction and renovation at the Washington, DC, and Gulfport facilities (a breakdown between the facilities for the funding is not available). In October 2010, the new Gulfport facility was completed to which residents returned. The National Civilian Community Corps (NCCC), authorized under the National and Community Service Act of 1990, as amended, is a residential program for individuals age 18 through 24 that conducts projects related to, among other things, disaster preparedness and relief and recovery efforts. The $10 million in Emergency Supplemental Funds provided for NCCC in P.L. 109-234 was used to support a range of program operations in the Gulf Region, from staff and member payroll and travel to covering communications, equipment, and supply costs. Funding was used in FY2007. Approximately $1.3 million went directly to the National Service Trust, which provides educational awards to NCCC members who complete 10 months of full-time service. The remaining $8.7 million was used to support program operations; it was not used to support a specific project or service. Instead, it was combined with the program's FY2007 appropriation of $26.8 million and allowed NCCC to direct members from all of its campuses to the Gulf Region for the recovery effort. The FY2007 appropriation, combined with the $8.7 million in supplemental funds, was used, among other things, to enable 1,063 members to serve 810,000 hours on 341 relief and recovery projects in the Gulf Region. To support this work, NCCC partnered with numerous national and local organizations, local universities and churches, as well as local and federal government, including (but not limited to) the American Red Cross; Habitat for Humanity; City Year Louisiana; The Salvation Army; Hands On Network; Federal Emergency Management Agency; St. Bernard Parish; Tulane, Xavier, and Dillard Universities; United Way of Acadiana, Louisiana; New Orleans Recovery School District; Christian Contractors Association, Mississippi; Council on Aging, Louisiana; Alliance for Affordable Energy; Arc of Greater New Orleans; Blackbelt and Central Alabama Housing Authority; various Boys and Girls Clubs; Mississippi Commission for Volunteers; and New Orleans Recreation Department. The U.S. Environmental Protection Agency's (EPA's) primary responsibilities include the implementation of federal statutes regulating air quality, water quality, pesticides, and toxic substances; the regulation of the management and disposal of solid and hazardous wastes; and the cleanup of environmental contamination. In the case of declared disasters, FEMA may call on EPA to provide assistance to state and local governments, most notably in response to releases of hazardous materials and contaminants from a major disaster or emergency. In addition to the authorities of a Presidential declaration under the Stafford Act, three federal laws authorized the development of the regulations that are embodied in the National Oil and Hazardous Substances Pollution Contingency Plan (NCP). These regulations serve as EPA's standing authority and plan for response to oil spills and releases of hazardous substances. Section 311 of the Clean Water Act authorizes federal emergency response to oil spills into U.S. waters, onto adjoining shorelines, or that may affect natural resources under the jurisdiction of the United States. The Oil Pollution Act of 1990 (OPA) amended the response authorities in Section 311 of the Clean Water Act, and established a liability and compensation framework for oil spills. The Comprehensive, Environmental Response, Compensation, and Liability Act (CERCLA, commonly referred to as Superfund) authorizes federal emergency response to releases of hazardous substances into the environment. The President's response authorities under these laws are delegated by executive order to the Environmental Protection Agency (EPA) in the inland zone and to the U.S. Coast Guard in the coastal zone. Other response authorities apply to oil released under certain circumstances not covered by the NCP. EPA also has additional emergency response roles related to protecting water infrastructure under other response plans and authorities if required. EPA is the lead federal agency for the water sector under the National Infrastructure Protection Plan. EPA also has statutory \"emergency powers\" under the Safe Drinking Water Act to issue orders and commence civil action if a contaminant likely to enter a public water supply system poses a substantial threat to public health, and state or local officials have not taken adequate action. EPA's primary disaster response role is carried out in accordance with the (NCP) as outlined in the NRF, Emergency Support Function 10 (ESF#10)—Oil and Hazardous Materials Annex. Under ESF#10, EPA is the lead federal agency for inland incidents and those affecting both inland and coastal zones. EPA also has various other response roles under the NRF and may perform a wide array of support functions in responding to a disaster or emergency. In accordance with various ESFs, EPA support to other federal agencies (primarily FEMA and the Army Corps of Engineers) and state and local governments, includes activities necessary to address threats to human health and the environment focusing on impacts to drinking water and wastewater treatment facilities and postdisaster cleanup. EPA also may support the Army Corps of Engineers in its mission under ESF #3—Public Works and Engineering Annex—to remove disaster debris and cleanup of water infrastructure facilities, and to DOE under ESF #12—Energy Annex—in its effort to maintain continuous and reliable energy supplies. In practice, EPA support for this latter function has generally involved waiving environmental requirements applicable to motor vehicle fuel under the Clean Air Act. For example, as part of the federal response to hurricanes in 2005, EPA granted certain waivers under this statute in response to requests from state and local officials when significant disruptions in fuel production or distribution occurred in the wake of these natural disasters. EPA's activities following the 2005 and 2008 hurricanes included retrieval and disposal of orphan (oil) tanks and drums, the collection of household hazardous waste, and the collection of liquid and semiliquid waste. Additionally, EPA and Corps of Engineers staff conducted assessments, providing assistance to state and local government personnel to evaluate damages to public works. Steps involved in actually restoring service include drying out and cleaning engines; testing and repairing waterlogged electrical systems; testing for toxic chemicals that may have infiltrated pipes and plants; restoring pressure (drinking water distribution lines); activating disinfection units; restoring bacteria needed to treat wastes (wastewater plants); and cleaning, repairing, and flushing distribution and sewer lines. EPA also assisted local agencies with contaminated (nonhazardous) debris management activities. Initially following the 2005 and 2008 hurricanes, EPA conducted assessments and provided assistance to state and local governments using existing programs and regular funding. After the initial period EPA was eligible for reimbursement by FEMA for costs associated with these efforts under a FEMA mission assignment. Funding for EPA's response to Hurricanes Katrina, Rita, Wilma, Gustav, and Ike was primarily through the FEMA mission assignments and interagency agreements with FEMA. EPA indicated that of the $505 million received cumulatively through interagency agreements for its response to the five hurricanes, $497 million was expended. In addition to the mission assignment from FEMA, EPA received a cumulative total of $21 million in emergency supplemental appropriations under P.L. 109-148 enacted December 30, 2005, and P.L. 109-234 , enacted June 15, 2006. Under P.L. 109-148 , EPA received $8 million in emergency supplemental FY2006 appropriations for the Leaking Underground Storage Tank Program (LUST) for necessary expenses to address the most immediate underground storage tank needs in areas affected by Hurricanes Katrina and Rita. P.L. 109-234 increased EPA's FY2006 appropriation by an additional $7 million for assessing underground storage tanks that may have leaked in affected areas, and made $6 million available through EPA's Environmental Programs and Management (EPM) appropriations account for increased environmental monitoring, assessment, and analytical support to protect public health during the ongoing recovery and reconstruction efforts related to the consequences of the 2005 hurricane season. EPA provided the cumulative $15 million included in the two supplemental appropriations under the LUST program to Alabama, Louisiana, and Mississippi in the form of grants for assessment and containment of underground tanks (by statute not to exceed $85,000 per project). EPA reported no allocation of this funding to Florida or Texas. The per-state distribution was determined jointly by EPA and the affected states based on the site evaluation information available at the time. The Alabama Department of Environmental Management (ADEM) indicated completion of site work related to Katrina and initiated a return of unliquidated obligations totaling $364,670. The majority of the $6 million emergency appropriations provided within the EPA Environmental Programs and Management appropriations account was used to fund contractors for analytical and other disaster support and to purchase equipment, including replacement of expended or damaged air monitors, within Louisiana and Mississippi. Funding was also provided for similar purposes in Alabama and Florida. No EPM funding allocation was reported for Texas. EPA provided $1.4 million of the EPM supplemental funding to its Office of Research and Development and Office of Air and Radiation for continued disaster and emergency response support, including analysis in its laboratories and air monitoring, across states affected by Hurricanes Katrina and Rita. General appropriation funds available to states in the form of grants from EPA may also have been used in the 2005 and 2008 hurricane recovery efforts, in particular, capitalization grants from the Clean Water and the Drinking Water State Revolving Funds (SRFs). The SRFs are funded within the EPA's State and Tribal Assistance Grants (STAG) appropriations account. SRF grant funding is used for local wastewater and drinking water infrastructure projects, such as construction of and modification to municipal sewage treatment plants and drinking water treatment plants, to facilitate compliance with Clean Water Act and Safe Drinking Water Act requirements, respectively. Although, following a presidentially declared emergency, public drinking water and wastewater utilities are eligible for FEMA supplemental federal disaster grant assistance for the repair, replacement, or restoration of disaster damaged facilities, the portions of the annual fiscal year SRF grant allotments to states may have also been used to supplement these projects. EPA allocates annual appropriations for these capitalization grants among the states based on an established formula authorized in the Clean Water Act and based on needs surveys under the Safe Drinking Water Act. States must provide 20% matching funds in order to receive the federal funds. States combine their matching funds with the federal monies to capitalize their SRFs, which they use to issue low-interest or no interest loans to finance local water infrastructure projects in communities. The recipients generally must repay the loan to the issuing state. For FY2006-FY2011, the cumulative total allotment to the five Gulf States examined in this report from Clean Water SRF annual appropriations was $1.20 billion. The cumulative total during the six-year period for the Drinking Water SRF was $1.16 billion. What portion of these funds was used to support projects for infrastructure affected by the five hurricanes is not known. The mission of the federal courts is to protect the rights and liberties guaranteed under the Constitution. The courts are charged with interpreting and applying the law to resolve disputes through fair and impartial judgments, and ensuring fairness and equal justice for all citizens of the United States. According to the Budget Office of the Administrative Office of the U.S. Courts, Congress appropriated $18 million in emergency judiciary funding for disaster relief in the aftermath of Hurricanes Katrina and Rita. These monies were obligated to (1) reimburse per diem for judges, court staff, and federal public defenders' staff who were on temporary duty assignment, and their dependents; (2) reimburse all judges and court staff who were on temporary duty assignment for travel purposes; (3) pay for furniture, equipment, and security in the temporary locations; and (4) replace furniture and equipment in courts affected by the hurricanes. Table 27 presents the funding provided to Louisiana, Mississippi, Texas, and Florida, as well as the additional funding to the Fifth Circuit. The Small Business Administration's (SBA's) Disaster Assistance Program is authorized by the Small Business Act (P.L. 85-536, Section 7(b) 72 Stat. 387, as amended). The SBA's Disaster Assistance Program provides low-interest disaster loans to homeowners, renters, and businesses, as well as to private and nonprofit organizations to repair or replace real estate, personal property, machinery and equipment, inventory, and business assets that have been damaged or destroyed in a declared disaster. The SBA provides three categories of loans: (1) home loans, (2) business loans, and (3) Economic Injury Disaster Loans (EIDLs). Home disaster loans help homeowners and renters repair or replace disaster-related damages to homes or personal property. SBA regulations limit home loans to $200,000 for the repair or replacement of real estate and $40,000 to repair or replace personal property. Business disaster loans help business owners repair or replace disaster-damaged property, including inventory and supplies. Business loans are limited to $2 million. EIDLs provide assistance to small businesses, small agricultural cooperatives, and certain private, nonprofit organizations that have suffered substantial economic injury resulting from a physical disaster or an agricultural production disaster. EIDLs are limited to $2 million. Table 28 lists the number of approved disaster loan applications by state and by type of loan for all five hurricanes. The actual number of loans made may be somewhat lower than the number of loan applications approved, because not all approved loan applications are subsequently accepted by the borrower. Table 29 lists the amount of the approved loans, by state. P.L. 110-28 , the \"U.S. Troops Readiness, Veterans Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007,\" which provided supplemental appropriations legislation for the war in Iraq and disaster recovery from Hurricane Katrina, provided cost-share reductions for disaster assistance provided to the affected states along the Gulf Coast. The reductions provided to Alabama, Florida, Louisiana, Mississippi, and Texas were among the largest ever granted. P.L. 110-28 provided a waiver of all state and local cost-shares for four disaster assistance programs that are a part of the Stafford Act. These programs included Section 403 (Essential Assistance), Section 406 (Repair, Restoration, and Replacement of Damaged Facilities), Section 407 (Debris Removal), and Section 408 (Federal Assistance to Individuals and Households). These programs are generally cost-shared in statute at 75% federal and 25% state and local with the possibility, under specified circumstances, for a 90% federal, 10% state and local ratio. Also significant was the cost-share waiver for the Other Needs Assistance Program under Section 408, which had never been waived previously. That section of Stafford states that the \"Federal share shall be 75 percent.\" Section 4501 of P.L. 110-28 , also states in part, the following: (a) Notwithstanding any other provision of law, including any agreement, the Federal share of assistance, including direct Federal assistance, provided for the States of Louisiana, Mississippi, Florida, Alabama and Texas in connection with Hurricanes Katrina, Wilma, Dennis and Rita under sections 403, 406, 407, and 408 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 USC 5170b, 5172, 5173, and 5174) shall be 100 percent of the eligible costs under such sections. (b) APPLICABILITY 1) IN GENERAL—The federal share provided by subsection (a) shall apply to disaster assistance applied for before the date of enactment of this Act. (2) LIMITATION—In the case of disaster assistance provided under Section 403, 406 and 407 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, the Federal share provided by subsection (a) shall be limited to assistance provided for projects for which a \"request for public assistance form\" has been submitted. The statutory cost-share waivers were provided for five states. Per capita damage for Louisiana, Mississippi, and Alabama from Hurricane Katrina, and for Louisiana from Hurricane Rita, had already qualified those states for a decreased state cost-share (from 25% to 10%) through FEMA's regulatory formula based on estimated damage. Congress' inclusion of Florida and Texas may have been an effort to not separate out related damages within a devastating hurricane season. Also, the decision to grant cost-share waivers to Florida and Texas may have been in recognition of the amount of help both states had provided to Mississippi and Louisiana, respectively, in both the provision of emergency management resources and in hosting large numbers of evacuees in the wake of the storms of 2005. The \"Limitation\" in the legislation was intended to ensure that the projects receiving the waiver were ones already identified by applicants and not newly created projects, or perhaps, projects not necessarily related to the event that were attempting to capitalize on the reduced cost-share provision. The legislation states that a \"request for public assistance\" submitted prior to enactment of the bill (May 25, 2007) will require no cost-share. Any \"requests for public assistance\" not submitted prior to the enactment of the bill will be cost-shared at the 90% federal, 10% state and local cost-share for the affected states. This provision appeared to be intended to provide the more generous cost-share to those projects already selected by the state rather than projects that could be developed or submitted based on 100% federal funding. There have been several instances when Congress chose to adjust a state's cost-share by legislation. Prior to large cost-share adjustments made to several FEMA programs as noted above, Congress also legislatively reduced cost-shares for states affected by Hurricane Rita. This report demonstrates not only the significant amount of assistance the federal government provides for major disasters, but also the wide range of federal programs that are brought to bear to help individuals and communities respond and recover from major disasters, as well as prepare and mitigate against future disasters. Yet, this is only a partial picture of the amounts and types of disaster assistance that have been provided by the federal government on a yearly basis. The research focus for this report was on supplemental appropriations for the 2005 and 2008 Gulf Coast hurricanes. The federal government, however, also annually provides disaster assistance through regular appropriations and continuing resolutions, as well as supplemental appropriations. For example, with respect to the DRF, Congress provided roughly $42 billion in annual appropriations for FY2007 to FY2016 (see Table 30 ). This amount does not include what was provided in annual appropriations for other agencies, nor does it include what was provided through supplemental appropriations. There are indications that expenditures on disaster assistance may increase. In recent years there has been an uptick in the number of declarations issued each year. For example, the average number of major disasters declared per year from 1953 to 2016 was 35.8. However, beginning in the 1990s there has been an uptick in the frequency with which major disasters are declared. During the 1990s the average number of major disaster declarations per year was 45.8, the average number from 2000 to 2009 was 57.1, and the average number from 2010 to 2016 was 58.7 (see Figure 1 ). Thus, while this report provides the most detailed information on federal assistance for the 2005 and 2008 Gulf Coast hurricanes, there is a need for further research on the subject of federal disaster assistance—including the assistance provided in response to disasters in other regions of the United States—to address existing gaps in funding information. This information would be useful because, arguably, congressional oversight and debates concerning disaster relief can be better informed with more accurate data and information on the amounts and types of assistance provided by the federal government to states, localities, and tribal nations. Potential policy methods for addressing gaps in funding information may include requiring the issuance of disaster assistance reports on an annual or quarterly basis from all federal entities that provide significant amounts of disaster assistance; the Office of Management and Budget (OMB) to compile a report on an annual or quarterly basis with funding information that details all federal spending for emergencies and major disasters; a standardization of how expenditure data are reported across federal agencies to facilitate cost comparisons; reports to include state-specific as well as disaster-specific information. State-specific information could be used to target mitigation projects; disaster assistance reports to include supplemental as well as regular appropriations data; federal agencies to flag monies used for disaster relief that has been taken from their regular budgets; and disaster assistance reports to contain cost share information as well as detailed information on state expenditures. If the increase in the number of declarations and their associated costs are of concern, in addition to requiring improved data reporting Congress may choose to address the issue through a variety of policy measures. The following sections could be used to frame a potential debate on limiting the number of declarations being issued, limiting the assistance provided after a declaration has been declared, or both. To many, providing relief to disaster victims is an essential role of the government. In their view, the concern over costs is understandable given concerns over the national budget. However, they may argue that the increase in the amount of assistance provided over the past decade is justified because the occurrences of disasters are on the rise (see Figure 6 ). The rise may be due to a number of factors including increases in inclement weather, population growth, and building development. Moreover, proponents of keeping the current system in place may say that providing assistance to disaster-stricken areas is both acceptable and needed to help a state and region's economy recover from a storm that it otherwise may not be able to recover from on its own. Others may contend that too many major disasters are being declared and should be limited. The following sections review some policy mechanisms that could be employed to decrease the number of declarations that are being issued. The primary option consists of preventing what may be perceived by some to be marginal incidents from triggering federal assistance. Potential methods to achieve this include changing the definitions of a major disaster in Stafford Act, changing the per capita formula for determining whether a disaster is sufficiently large to warrant federal assistance, or the use of other indicators instead of, or in conjunction with, the per capita formula. Some argue that the Stafford Act has enhanced presidential declaration authority because the definition of a major disaster in Section 102(2) of Stafford Act is ill-defined. Because of the expansive nature of this definition under the Stafford Act, they assert, there are not many restrictions on the types of major disasters for which the President may issue a declaration. For example, some would argue that snowstorms do not warrant major disaster declarations. One potential method of reducing the number of major disasters being declared is to increase the per capita amount used by FEMA to make major disaster recommendations to the President. A per capita formula based on damages caused by an incident is used by FEMA to make recommendations to the President concerning whether to issue a major disaster declaration. The current per capita amount used by FEMA to make recommendations is $1.43. This amount could be increased (for example, by 10%) to reduce the number of incidents eligible for federal assistance. If increased, Congress might require that the per capita be adjusted annually for inflation. The DHS Inspector General issued a report in May 2012, which noted that FEMA had been using a $1 per capita damage amount since 1986 for determining during its preliminary damage assessment process if it would recommend to the President that the event was beyond the capacity of state and local governments to deal with without federal assistance. The DHS Inspector General also explained that FEMA did not begin adjusting that number for inflation until 1999. The DHS Inspector General pointed out that if the inflation adjustment had been occurring over that 13-year period, from 1986 to 1999, fully 36% fewer disasters would have qualified for a presidential declaration based on that factor. However, it is also useful to understand that the actual public announcement of factors considered for a declaration did not become public until 1999. At the behest of Congress, it was in that year that FEMA began to print the factors that were considered in regulation. Until then, all of that information had been within the \"pre-decisional\" part of the process in the executive branch. However, in 1999 FEMA began to identify factors considered for both Public and Individual Assistance. That is not to say FEMA was not using the per capita amount in its considerations, only that the process was not widely known or understood as it presently is. As the DHS IG notes, FEMA could have been raising that amount gradually, a process that did not begin until more than a dozen years later. On the other hand, it should also be considered that when FEMA discussed such proposals (e.g., per capita figures gradually increasing) with Congress, the result was a new Section 320 of the Stafford Act that stated the following: No geographic area shall be precluded from receiving assistance under this Act solely by virtue of an arithmetic formula or sliding scale based on income of population. In 2001, the Government Accountability Office (GAO) issued a report on disaster declaration criteria. The GAO report was a comprehensive review of FEMA's declaration criteria factors. GAO recommended that FEMA \"develop more objective and specific criteria to assess the capabilities of state and local governments to respond to a disaster\" and \"consider replacing the per capita measure of state capacity with a more sensitive measure, such as a state's total taxable resources.\" The state's Total Taxable Resources (TTR) was developed by the Department of the Treasury. GAO reported that TTR: is a better measure of state funding capacity in that it provides a more comprehensive measure of the resources that are potentially subject to state taxation. For example, TTR includes much of the business income that does not become part of the income flow to state residents, undistributed corporate profits, and rents and interest payments made by businesses to out-of-state stock owners. This more comprehensive indicator of state funding capacity is currently used to target federal aid to low-capacity states under the Substance Abuse and Mental Health Service Administration's block grant programs. In the case of FEMA's Public Assistance program, adjustments for TTR in setting the threshold for a disaster declaration would result in a more realistic estimate of a state's ability to respond to a disaster. It could be argued that the use of TTR would conflict with the prohibition against the use of arithmetic formulas established by Congress. However, just as FEMA's per capita measurement is one of several factors considered and not the \"sole\" determinant of a declaration, GAO stated that TTR would not violate Section 320 because TTR could also be used with other criteria such as those identified in regulations. Thus, some could contend that TTR could fill a similar role with perhaps more accuracy. It may also help reduce federal costs for disaster assistance by denying assistance to marginal incidents that could be otherwise handled by the state. Some have proposed the use of an independent expert panel to review gubernatorial requests for major disaster declarations. Such panels would be comprised of individuals with specialized knowledge in certain subject areas, such as disasters, economics, and public health. The panel would take into account the severity of the incident as well as other factors that might indicate how well the state could respond to and recover from the incident. The panel would then make recommendations to the President whether the circumstances of the incident were worthy of federal assistance based on their assessment. Some might argue that the use of an expert panel would make decisions about whether to provide assistance more objective. Others might argue that the use of a panel may slow down the declaration process and impede the provision of important assets and resources. It may be argued that the panel's recommendation would infringe on the President's authority to issue a declaration. On the other hand, it could also be argued that the President would retain the authority to issue a declaration despite the panel's recommendation. Another potential method to reduce the number of declarations and the costs of federal disaster assistance would be to create incentives to dissuade states from requesting assistance. One method would be converting some, or all, federal assistance provided through emergency declarations into a loan program. For example, emergency declarations could be altered to provide up to a specified amount (for example, $5 billion dollars) in low interest recovery loans. Under this arrangement a state could elect to handle the incident without federal assistance rather than having to reimburse the federal government for recovery loans. The following section discusses some potential changes to the Stafford Act that might limit the number of declarations being issued each year. As mentioned previously, Section 320 of the Stafford Act restricts the use of an arithmetic or sliding scale to provide federal assistance. Repealing Section 320 would allow formulas that establish certain thresholds that states would have to meet to qualify for assistance. Section 404 of the Stafford Act authorizes the President to contribute up to 75% of the cost of an incident toward mitigation measures that reduce the risk of future damage, loss of life, and suffering. Section 404 could be amended to make mitigation assistance contingent on state codes being in place prior to an event. For example, states that have met certain mitigation standards could remain eligible for the 75% federal cost share. States that do not meet the standards would be eligible for a smaller share, such as 50% federal cost share. The amendment may incentivize mitigation work on the behalf of the state and possibly help reduce damages to the extent that a request for assistance is not needed, or the cost of the federal share may be lessened. The amendment could be set to take effect in three years, giving states time to act, or not. Other amendments to the Stafford Act could either limit the number of declarations being issued, or the amount of assistance provided to the state by the federal government. The Stafford Act could be amended so that there could be no administrative adjustment of the cost-share. The cost-share could only be adjusted through congressional action. The amendment could be designed to apply immediately. The Stafford Act could be amended so that federal assistance would only be available for states with corollary programs (such as Public Assistance, Individual Assistance, and housing assistance). Establishing these programs at the state level may increase state capacity to handle some incidents without federal assistance. The amendment could be designed to take effect in three years, giving states time to act, or not. The Stafford Act could be amended to discontinue all assistance for snow removal unless directed by Congress. The amendment could be designed to take effect in three years to give states and localities an opportunity to increase snow removal budgets, or not. Most discussions regarding state cost-shares in disaster programs and projects involve ways in which the state amount may be reduced and the federal share increased. Some may contend, however, that the opposite approach should be adopted and efforts should be undertaken to reduce disaster costs by shifting the costs to the state and local level. Currently, state and local governments provide 25% of disaster costs on projects and grants to families and individuals with the federal government assuming, at a minimum, 75% of all costs. There is no statutory limit on the number of people that can be helped following a disaster. Similarly, when assessing damage to state and local infrastructure there is no cap on the amount of federal funds that can be expended to make the repairs or accomplish a replacement. The only limitation is that the damage must be to eligible facilities and that it is disaster-related damage. Given that open-ended commitment by the federal government, some may argue that increasing the state share of 25% to a higher percentage would be warranted given the federal government's fiscal condition. Another option would be to make the cost-share arrangement not subject to administrative adjustment. As mentioned previously, the assistance provided for emergency declarations could be provided through the form of loans. Similarly, some or all of the assistance provided to the state after a major disaster could be converted to low-interest or no-interest loans. For example, a state may receive the traditional 75% cost share for an incident but be required to reimburse 25% of that funding to the federal government. Loans for disaster recovery could also be incentivized. For instance, states that undertook certain pre-established preparedness mitigation measures could qualify for a larger federal share or a lower interest rate. Congress has always debated the federal role in disaster relief. In recent years the debate has intensified in light of the federal budgetary environment. Policymakers have, or may ask, a number of questions relating to federal expenditures on disaster relief to assist and improve oversight, and to better inform deliberations on legislation designed to assist individuals and communities respond and recover from incidents. Such questions may include the following: To what degree should the federal government be involved in providing disaster assistance? Is the federal government providing enough assistance, or being overly generous in providing financial assistance to states? Was the funding provided for the Gulf Coast storms delivered efficiently and to its intended targets? If not, how can the process be improved without slowing the provision of necessary services and resources? How were funding allocations to each federal entity determined? Was the process accurate, or could it be improved in upcoming disasters? Are there increased instances of fraud, abuse, and waste when large sums of funding are provided for disaster relief? If so, what oversight mechanisms are in place to prevent such occurrences? Is there unnecessary duplication of services and/or efforts given the large number of federal entities involved in disaster relief? The assistance provided by the federal government to the Gulf Coast was provided, in part, by a number of supplemental appropriations. Is it better to provide funding overtime through multiple supplemental appropriations, or to provide the funding once through a single supplemental appropriation? The following authors contributed sections in this report.", "summary": "This report provides information on federal financial assistance provided to the Gulf States after major disasters were declared in Alabama, Florida, Louisiana, Mississippi, and Texas in response to the widespread destruction that resulted from Hurricanes Katrina, Rita, and Wilma in 2005 and Hurricanes Gustav and Ike in 2008. Though the storms happened over a decade ago, Congress has remained interested in the types and amounts of federal assistance that were provided to the Gulf Coast for several reasons. This includes how the money has been spent, what resources have been provided to the region, and whether the money has reached the intended people and entities. The financial information is also useful for congressional oversight of the federal programs provided in response to the storms. It gives Congress a general idea of the federal assets that are needed and can be brought to bear when catastrophic disasters take place in the United States. Finally, the financial information from the storms can help frame the congressional debate concerning federal assistance for current and future disasters. The financial information for the 2005 and 2008 Gulf Coast storms is provided in two sections of this report: 1. Table 1 of Section I summarizes disaster assistance supplemental appropriations enacted into public law primarily for the needs associated with the five hurricanes, with the information categorized by federal department and agency; and 2. Section II contains information on the federal assistance provided to the five Gulf Coast states through the most significant federal programs, or categories of programs. The financial findings in this report include the following: Congress has appropriated roughly $121.7 billion in hurricane relief for the 2005 and 2008 hurricanes in 10 supplemental appropriations statutes. The appropriated funds have been distributed among 11 departments, 3 independent agencies/entities, numerous subentities, and the federal judiciary. Congress appropriated almost half of the funds ($53.8 billion, or 44% of the total) to the Department of Homeland Security, most of which went to the Disaster Relief Fund (DRF) administered by the Federal Emergency Management Agency (FEMA). Congress targeted roughly 22% of the total appropriations (almost $27 billion) to the Department of Housing and Urban Development for community development and housing programs. Approximately 20% ($25 billion) was appropriated to Department of Defense entities: $15.6 billion for civil construction and engineering activities undertaken by the Army Corps of Engineers and $9.2 billion for military personnel, operations, and construction costs. FEMA has reported that roughly $5.9 billion has been obligated from the DRF after Hurricanes Katrina, Rita, and Wilma to save lives and property through mission assignments made to over 50 federal entities and the American Red Cross (see Table 17), $160.4 million after Hurricane Gustav through 32 federal entities (see Table 18), and $441 million after Hurricane Ike through 30 federal entities (see Table 19). In total, federal agencies obligated roughly $6.5 billion for mission assignments after the five hurricanes. The Small Business Administration approved almost 177,000 applications in the region for business, home, and economic injury loans, with a total loan value of almost $12 billion (Table 28 and Table 29). The Department of Education obligated roughly $1.8 billion to the five states for elementary, secondary, and higher education assistance (Table 11). This report also includes a brief summary of each hurricane and a discussion concerning federal to state cost-shares. Federal assistance to states is triggered when the President issues a major disaster declaration. In general, once declared the federal share for disaster recovery is 75% while the state pays for 25% of recovery costs. However, in some cases the federal share can be adjusted upward when a sufficient amount of damage has occurred, or when altered by Congress (or both). In addition, how much federal assistance is provided to states for major disasters is influenced not only by the declaration, but also by the percentage the federal government pays for the assistance. This report includes a cost-share discussion because some of these incidents received adjusted cost-shares in certain areas.", "document_type": "crs"}
{"report": "This report provides background information and analysis on the following topics: Various aspects of U.S.-Turkey relations, including (1) Turkey's strategic orientation; (2) U.S./NATO cooperation and how a Turkish purchase of an S-400 air defense system from Russia could endanger its acquisition of U.S.-origin F-35 aircraft; (3) the situation in northern Syria, including with Kurdish-led militias; (4) criminal cases of note since the failed 2016 coup attempt in Turkey; and (5) congressional proposals. Domestic Turkish developments, including politics under President Recep Tayyip Erdogan's largely authoritarian and polarizing rule (with local elections scheduled for March 2019), and significant economic concerns. For additional information, see CRS Report R41368, Turkey: Background and U.S. Relations , by Jim Zanotti and Clayton Thomas. Numerous points of bilateral tension have raised questions within the United States and Turkey about the two countries' alliance. Turkish actions and statements on a number of foreign policy issues have contributed to problems with the United States and its other NATO allies, fueling concern about Turkey's commitment to NATO and Western orientation. For its part, Turkey may bristle because it feels like it is treated as a junior partner, and may seek greater foreign policy diversification through stronger relationships with more countries. In the months since the apparent October 2018 killing of Saudi journalist Jamal Khashoggi in Saudi Arabia's Istanbul consulate, some observers speculate that President Erdogan has sought to use information from the event to gain leverage in Turkey's dealings with the United States, and to boost Turkey's regional and global profile. A number of considerations drive the complicated dynamics behind Turkey's international relationships. Turkey's history as both a regional power and an object of great power aggression translates into wide popularity for nationalistic political actions and discourse. This nationalistic sentiment might make some Turks wary of Turkey's partial reliance on other key countries (for example, the United States for security, European Union countries for trade and investment, and Russia and Iran for energy). Moreover, Turkey's cooperative relationships with countries whose respective interests may conflict involves a balancing act. Turkey's vulnerability to threats from Syria and Iraq increases the pressure on it to manage this balance. Involvement in Syria and Iraq by the United States, Russia, and Iran further complicates Turkey's situation. Additionally, grievances that President Erdogan and his supporters espouse against seemingly marginalized domestic foes (the military and secular elite who previously dominated Turkey, the Fethullah Gulen movement, Kurdish nationalists, and liberal activists) extend to the United States and Europe due to apparent suspicions of Western sympathies for these foes. Turkey's Middle Eastern profile expanded in the 2000s as Erdogan (while serving as prime minister) sought to build economic and political linkages—often emphasizing shared Muslim identity—with Turkey's neighbors. However, efforts to increase Turkey's influence and offer it as a \"model\" for other regional states appear to have been set back by a number of developments since 2011: (1) conflict and instability that engulfed the region and Turkey's own southern border, (2) Turkey's failed effort to help Muslim Brotherhood-aligned groups gain lasting power in Syria and North Africa, and (3) domestic polarization accompanied by government repression. Although Turkey shares some interests with traditional Sunni Arab powers Saudi Arabia and Egypt in countering Iran, these countries' leaders regard Turkey suspiciously because of the Turkish government's Islamist sympathies and close relationship with Qatar. Turkey maintains relations with Israel, but these have become distant and—at times—contentious during Erdogan's rule. Turkey's location near several global hotspots makes the continuing availability of its territory for the stationing and transport of arms, cargo, and personnel valuable for the United States and NATO. From Turkey's perspective, NATO's traditional value has been to mitigate its concerns about encroachment by neighbors. Turkey initially turned to the West largely as a reaction to aggressive post-World War II posturing by the Soviet Union. In addition to Incirlik air base near the southern Turkish city of Adana, other key U.S./NATO sites include an early warning missile defense radar in eastern Turkey and a NATO ground forces command in Izmir. Turkey also controls access to and from the Black Sea through its straits pursuant to the Montreux Convention of 1936. Current tensions have fueled discussion from the U.S. perspective about the advisability of continued U.S./NATO use of Turkish bases. Reports in 2018 suggested that some Trump Administration officials were contemplating significant reductions in the U.S. presence in Turkey. There are historical precedents for such changes. On a number of occasions, the United States has withdrawn military assets from Turkey or Turkey has restricted U.S. use of its territory or airspace. These include the following: 196 2— Cuban Missile Crisis . The United States withdrew its nuclear-tipped Jupiter missiles from Turkey as part of the secret deal to end this crisis with the Soviet Union. 1975— Cyprus. Turkey closed most U.S. defense and intelligence installations in Turkey during the U.S. arms embargo that Congress imposed in response to Turkey's military intervention in Cyprus. 2003— Iraq. A Turkish parliamentary vote did not allow the United States to open a second front from Turkey in the Iraq war. Some of the plotters of an unsuccessful coup attempt in Turkey in July 2016 apparently used Incirlik air base, causing temporary disruptions of some U.S. military operations. This may have eroded some trust between the two countries, while also raising U.S. questions about Turkey's stability and the safety and utility of Turkish territory for U.S. and NATO assets. As a result of these questions and U.S.-Turkey tensions, some observers have advocated exploring alternative basing arrangements in the region. The cost to the United States of finding a replacement for Incirlik and other sites in Turkey would likely depend on a number of variables including the functionality and location of alternatives, where future U.S. military engagements may happen, and the political and economic difficulty involved in moving or expanding U.S. military operations elsewhere. While an August 2018 report cited a Department of Defense (DOD) spokesperson as saying that the United States is not leaving Incirlik, some reports suggest that expanded or potentially expanded U.S. military presences in Greece and Jordan might be connected with concerns about Turkey. Calculating the costs and benefits to the United States of a U.S./NATO presence in Turkey, and of potential changes in U.S./NATO posture, revolves to a significant extent around three questions: To what extent does strengthening Turkey relative to other regional actors serve U.S. interests? To what extent does the United States rely on the use of Turkish territory or airspace to secure and protect U.S. interests? To what extent does Turkey rely on U.S./NATO support, both politically and functionally, for its security and regional influence? Turkey's plans to take delivery of an S-400 air defense system from Russia sometime in 2019 could hamper its acquisition of U.S.-origin F-35 Joint Strike Fighter aircraft. Turkey is a member of the international consortium that has developed the F-35, and plans to purchase 100 of the aircraft. Training on the F-35 for Turkish pilots is now underway on U.S. soil, and the first aircraft is reportedly scheduled to leave the United States for Turkey sometime in 2020. Turkey justified its preliminary decision to acquire S-400s instead of U.S. or European alternatives by claiming that it turned to Russia because NATO allies rebuffed its attempts to purchase an air defense system from them. Turkey has also cited various practical reasons, including cost, technology sharing, and territorial defense coverage. However, one analysis from December 2017 asserted that the S-400 deal would not involve technology transfer, would not defend Turkey from ballistic missiles (because the system would not have access to NATO early-warning systems), and could weaken rather than strengthen Turkey's geopolitical position by increasing Turkish dependence on Russia. For some observers, the S-400 issue raises the possibility that Russia could take advantage of U.S.-Turkey friction to undermine the NATO alliance. Previously, in 2013, Turkey reached a preliminary agreement to purchase a Chinese air and missile defense system, but later (in 2015) withdrew from the deal, perhaps partly due to concerns voiced within NATO, as well as China's reported reluctance to share technology. While U.S. officials express desires to avoid disruptions to the F-35's manufacture and rollout, they also express concern that Turkey's potential operation of the S-400 alongside the F-35 could compromise sensitive technology. According to one analysis, \"the Pentagon fears that Turkey's operation of the S-400 would allow the Russian military to study how the F-35 stealth fighters [show up on] Russian-built air defense radars, and potentially facilitate the infiltration of [the F-35] computer system. This could compromise the F-35's effectiveness around the world.\" According to one Turkish press report, Turkey has taken a step intended to assuage U.S. concerns by insisting on an arrangement that allows Turkish technicians to operate the S-400 without Russian involvement, and Turkey may also allow U.S. officials to examine the S-400. Congress has enacted legislation that has subjected the F-35 transfer to greater scrutiny. Under Section 1282 of the FY2019 John S. McCain National Defense Authorization Act ( P.L. 115-232 ), DOD submitted a report to Congress in November 2018 on a number of issues affecting U.S.-Turkey defense cooperation, including the S-400 and F-35. Much of the report was classified, but an unclassified summary said that the U.S. government has told Turkey that purchasing the S-400 would have \"unavoidable negative consequences for U.S.-Turkey bilateral relations, as well as Turkey's role in NATO,\" including potential sanctions against Turkey under Section 231 of the Countering America's Adversaries Through Sanctions Act (CAATSA, P.L. 115-44 ); risk to Turkish participation in the F-35 program (both aircraft acquisition and industrial workshare); risk to other potential U.S. arms transfers to Turkey, and to broader bilateral defense industrial cooperation; reduction in NATO interoperability; and introduction of \"new vulnerabilities from Turkey's increased dependence on Russia for sophisticated military equipment.\" In July 2018, a State Department official confirmed ongoing U.S. efforts to persuade Turkey to purchase a Patriot air defense system instead of an S-400. However, in October 2018, Turkish Defense Minister Hulusi Akar said that talks with U.S. and European air defense system suppliers had \"not yielded desired results,\" and announced plans for Turkey to begin deploying the S-400 in October 2019. Previously, Turkish officials had indicated some concern about whether Congress would approve a Patriot sale, perhaps because of some congressional opposition for other arms sales to Turkey. The unclassified summary of the November 2018 DOD report to Congress indicated that U.S. officials were continuing to offer a Patriot system to Turkey: The Administration has developed an alternative package to provide Turkey with a strong, capable, NATO-interoperable air and missile defense system that meets all of Turkey's defense requirements. Parts of the package require Congressional Notification. Congressional support for Foreign Military Sales and Direct Commercial Sales to Turkey is essential to provide a real alternative that would encourage Turkey to walk away from a damaging S-400 acquisition. In December 2018, the Defense Security Cooperation Agency (DSCA) notified Congress that \"the State Department has made a determination approving a possible Foreign Military Sale [FMS] of eighty (80) Patriot MIM-104E Guidance Enhanced Missiles (GEM-T) missiles, sixty (60) PAC-3 Missile Segment Enhancement (MSE) missiles and related equipment for an estimated cost of $3.5 billion.\" Reportedly, discussions between U.S. and Turkish officials over a Patriot sale are ongoing. Turkish officials have stated their intention to proceed with the S-400 purchase regardless of how negotiations over the Patriot sale proceed. In 2009, DSCA notified Congress of a possible FMS to Turkey of Patriot missiles and associated equipment, but the countries did not enter into a transaction for that equipment. Since 2007, Turkey has solicited a number of outside bids to sell it an air defense system, but has not finalized a transaction to date. Turkey's involvement in Syria's conflict since 2011 has been complicated and costly. During that time, Turkey's priorities in Syria appear to have evolved. While Turkey still officially calls for Syrian President Bashar al Asad to leave power, it has engaged in a mix of coordination and competition with Russia and Iran (Asad's supporters) on some matters since intervening militarily in Syria starting in August 2016. Turkey may be seeking to protect its borders, project influence, promote commerce, and counter other actors' regional ambitions. Turkey's chief objective has been to thwart the Syrian Kurdish People's Protection Units (YPG) from establishing an autonomous area along Syria's northern border with Turkey. The YPG has links with the PKK (Kurdistan Workers' Party), a U.S.-designated terrorist organization that for decades has waged an on-and-off insurgency against the Turkish government while using safe havens in both Syria and Iraq. Turkey appears to view the YPG and its political counterpart, the Democratic Union Party (PYD), as the top threat to its security, given the boost the YPG/PYD's military and political success could provide to the PKK's insurgency within Turkey. The YPG plays a leading role in the umbrella group known as the Syrian Democratic Forces (SDF), which also includes Arabs and other non-Kurdish elements. Since 2014, the SDF has been the main U.S. ground force partner against the Islamic State (IS, also known as ISIS/ISIL). Even though Turkey is also a part of the anti-IS coalition, U.S. operations in support of the SDF—largely based from Turkish territory—has fueled U.S.-Turkey tension because of Turkey's view of the YPG as a threat. As part of SDF operations to expel the Islamic State from the Syrian city of Raqqah in 2017, the U.S. government pursued a policy of arming the YPG directly while preventing the use of such arms against Turkey, and Secretary of Defense Jim Mattis announced an end to the direct arming of the YPG near the end of the year. Following the Raqqah operation, U.S. officials contrasted their long-standing alliance with Turkey with their current but temporary cooperation with the YPG. After Turkey moved against IS-held territory in northern Syria as a way to prevent the YPG from consolidating its rule across much of the border area between the two countries (Operation Euphrates Shield, August 2016-March 2017), Turkey launched an offensive directly against the YPG in the Afrin province in January 2018. In Afrin and the other areas Turkey has occupied since 2016 with the help of allied Syrian opposition militias (see Figure 2 below) , Turkey has organized local councils and invested in infrastructure . Q uestions persist about how deeply Turkey will influence future governance in these areas . President Trump's announcement in December 2018 that the United States would withdraw approximately 2,000 U.S. troops stationed in Syria has major implications for Turkey and the YPG. The announcement came shortly after a call between Presidents Trump and Erdogan, during which Trump reportedly accepted Erdogan's offer to take responsibility for countering the Islamic State in Syria. U.S. officials have been cited as saying that U.S. troops will redeploy from Syria by summer 2019. How a U.S. withdrawal would happen remains unclear, as does how Turkey and the many other actors in Syria would respond. Turkey has refused to agree to a demand from National Security Advisor John Bolton to guarantee the YPG's safety, with Erdogan insisting that Turkey should have a free hand with the YPG and other groups it considers to be terrorists. In January, amid reports that the U.S. military had begun preparing for withdrawal, President Trump tweeted that he would \"devastate Turkey economically\" if it hit the Kurds, and at the same time proposed the creation of a 20-mile-deep \"safe zone\" on the Syria side of the border. Secretary of State Mike Pompeo later said that the U.S. \"twin aims\" are to make sure that those who helped take down the IS caliphate have security, and to prevent terrorists from attacking Turkey out of Syria. Some sources suggest that U.S. officials favor having a Western coalition patrol any kind of buffer zone inside the Syrian border, with some U.S. support, while Turkey wants its forces and Syrian rebel partners to take that role. Uncertainty surrounding the announced U.S. withdrawal from northeast Syria also applies to how Turkish forces might operate there. One analyst calculates that additional Turkish military intervention might focus on areas, such as Tal Abyad (aka Tell Abiad), that are less historically Kurdish than others, in an effort to reduce the YPG's control over territorially contiguous regions. Some observers express doubts that Turkish-supported militias would be able to counter the Islamic State as effectively as the YPG-led SDF, and one journalist has stated concerns about what could happen to the IS foreign fighters held by the SDF if Turkey clashes with the YPG. Turkish officials have requested U.S. air and logistical support for their potential operations, despite the two countries' different stances on the YPG. In a New York Times column in January, President Erdogan envisioned that if Turkish-backed forces gain control of predominantly Kurdish areas in Syria currently under YPG rule, these regions would be run by popularly elected local councils advised by Turkish officials. Various analyses surmise that a U.S. troop withdrawal would lead the YPG toward an accommodation with Russia and the Syrian government. A reference by Russian President Vladimir Putin to the 1998 Adana Protocol between Turkey and Syria suggests that Russia may seek to limit direct Turkish involvement in Syria under the premise that Syria's government would take greater responsibility for constraining YPG actions. How U.S.-Turkey coordination plays out in northeastern Syria could influence Turkey's presence in western Syria, particularly in key contested areas like the town of Manbij and Idlib province. Russia and the Syrian government have sent forces near Manbij, possibly as a check on Turkish personnel there who are intent on eradicating YPG influence from the town. In Idlib, Turkey-backed forces stationed at points around the province appear to have failed to prevent territorial gains by Al Qaeda-linked Hayat Tahrir al Sham (HTS) jihadists who also oppose the Syrian government. The HTS gains in Idlib may lead to a Russian-backed Syrian military operation there with the potential for new refugee flows to Turkey. A number of cases involving criminal allegations or detentions have generated controversy between the United States and Turkey since the July 2016 coup attempt in Turkey. Shortly after the attempt, Turkey's government called for the extradition of Fethullah Gulen (the U.S.-based former cleric whom Turkey's government has accused of involvement in the plot), and the matter remains pending before U.S. officials. Since the coup attempt, sharp criticism of U.S. actions related to Gulen's case has significantly increased in Turkish media. Additionally, Turkey's government has dismissed around 130,000 Turks from government posts, detained more than 60,000, and taken over or closed various businesses, schools, and media outlets. The government's measures appear to have targeted many who are not connected with Gulen. As part of Turkish authorities' postcoup crackdown, they detained Pastor Andrew Brunson (who was released, after a two-year imprisonment, in October 2018) and a number of other U.S. citizens (most of them dual U.S.-Turkish citizens), along with Turkish employees of the U.S. government. Reports suggest that Congress and the State Department are trying to obtain the release of those currently detained, though the Administration lifted sanctions on senior Turkish officials following Pastor Brunson's release. Separately, two prominent Turkish citizens with government ties were arrested by U.S. authorities in 2016 and 2017 for conspiring to evade sanctions on Iran. One, Reza Zarrab, received immunity for cooperating with prosecutors, while the other, Mehmet Hakan Atilla, was convicted and sentenced in May 2018 to 32 months in prison. The case was repeatedly denounced by Turkish leaders, who reportedly expressed concern about the potential implications for Turkey's economy if the case led U.S. officials to impose penalties on Turkish banks. This has not yet happened. Bilateral tensions contributed to various legislative proposals by Members of Congress during the 115 th Congress. The most significant congressional action against Turkey to date has been an arms embargo that Congress enacted in response to Turkish military intervention in Cyprus. That embargo lasted from 1975 to 1978. In the 116 th Congress, the House-passed Consolidated Appropriations Act, 2019 ( H.R. 648 ) contains foreign aid provisions that also have been introduced in the Senate Appropriations Committee. Section 7046(d) of H.R. 648 includes the following proposals regarding Turkey: Requiring DOD to update its FY2019 NDAA report to Congress on Turkey's possible S-400 acquisition. The update, including a detailed description of plans to impose sanctions under CAATSA, is required by November 1, 2019. Until the report is submitted, funding cannot be used to transfer F-35 aircraft to Turkey. Restricting transfer of arms to Turkish P residential Protection Directorate (TPPD) . This restriction, which is subject to a few exceptions, would apply unless the State Department reports to Congress that members of the TPPD who were involved in a violent incident against protestors during a May 2017 Washington, DC, trip by President Erdogan have been \"brought to justice.\" H.R. 648 is less stringent than an earlier FY2019 appropriations bill ( S. 3108 ) from the 115 th Congress that would have prohibited transferring F-35s to Turkey if it purchased the S-400, and would have denied entry to senior Turkish officials involved in detaining U.S. citizens. President Erdogan has ruled Turkey since becoming prime minister in 2003. After Erdogan became president in August 2014 via Turkey's first-ever popular presidential election, he claimed a mandate for increasing his power and pursuing a \"presidential system\" of governance. Analyses of Erdogan sometimes characterize him as one or more of the following: a pragmatic populist, a protector of the vulnerable, a budding authoritarian, an indispensable figure, and an Islamic ideologue. Erdogan's consolidation of power has continued amid domestic and international concerns about growing authoritarianism in Turkey. He outlasted the July 2016 coup attempt, and then scored victories in the April 2017 constitutional referendum and the June 2018 presidential and parliamentary elections—emerging with the expanded powers he had sought. Some allegations of voter fraud and manipulation surfaced in both elections. U.S. and European Union officials have expressed a number of concerns about rule of law and civil liberties in Turkey, including the government's influence on media and Turkey's reported status as the country with the most journalists in prison. While there may be some similarities between Turkey under Erdogan and countries like Russia, Iran, or China, some factors distinguish Turkey from them. For example, unlike Russia or Iran, Turkey's economy cannot rely on significant rents from natural resources if foreign sources of revenue or investment dry up. Unlike Russia and China, Turkey does not have nuclear weapons under its command and control. Additionally, unlike all three others, Turkey's economic, political, and national security institutions and traditions have been closely connected with those of the West for decades. Erdogan is a polarizing figure, with about half the country supporting his rule, and half the country against it. To obtain a parliamentary majority in the June 2018 elections, Erdogan's Islamist-leaning Justice and Development Party ( Adalet ve Kalkinma Partisi , or AKP) relied on a coalition with the Nationalist Action Party ( Milliyet Halk Partisi , or MHP). The MHP is the country's traditional Turkish nationalist party, and is known for opposing political accommodation with the Kurds. Local elections scheduled for March 2019 could be a significant barometer of domestic support for Erdogan under the difficult economic circumstances described below. The Turkish economy appears to be slowing down, with negative consequences both for consumer demand and for companies seeking or repaying loans in global markets. Economic growth was down from over 7% in 2017 to around 3% in 2018, with forecasts for 2019 at or below 1%. By the end of 2018, inflation had essentially doubled year-on-year to more than 20%. During 2018, the Turkish lira depreciated close to 30% against the dollar in an environment featuring a globally stronger dollar, rule of law concerns and political uncertainty, and significant corporate debt. In August 2018, amid U.S.-Turkey tensions on the Pastor Brunson matter, President Trump announced a doubling of tariffs on Turkish steel and aluminum imports. This prompted retaliatory action from Turkey. The lira plunged in value, but recovered somewhat in the final months of 2018 after Turkey's central bank raised its key interest rate by 6.25% in September. In November 2018, the United States granted Turkey (along with seven other countries) a six-month exception from U.S. sanctions on Iranian oil. Some observers speculate that Turkey may need to turn to the International Monetary Fund (IMF) for a financial assistance package. This would be a sensitive challenge for President Erdogan because his political success story is closely connected with helping Turkey become independent from its most recent IMF intervention in the early 2000s. Before the central bank's rate hike in September 2018, some commentators voiced concerns about the bank's independence as Erdogan publicly opposed increasing rates. In January 2019, Turkey's parliament voted to grant Erdogan broader emergency powers in case of a financial crisis. The government appears to be trying to stimulate growth via familiar measures to boost consumer demand. A former Turkish economic official has claimed that by offloading the \"debt crisis of the real sector\" onto the banking sector, the government has exacerbated the crisis. In his opinion, a \"harsh belt-tightening policy\" with or without the IMF is thus inevitable after the March 2018 local elections.", "summary": "The United States and Turkey have been NATO allies since 1952 and share some vital interests, but harmonizing their priorities can be difficult. These priorities sometimes diverge irrespective of who leads the two countries, based on contrasting geography, threat perceptions, and regional roles. Turkey's core security and economic relationships and institutional links remain with Western nations, as reflected by some key U.S. military assets based in Turkey and Turkey's strong trade ties with the European Union. However, various factors complicate U.S.-Turkey relations. For example, Turkey relies to some degree on nations such as Russia and Iran for domestic energy needs and coordination on regional security, and therefore balances diplomatically between various actors. Additionally, Turkey's president and longtime leader Recep Tayyip Erdogan appears to be concerned that the United States and some other Western countries harbor sympathies for some of the groups that have been marginalized domestically under Erdogan. Also, Turkey has played a larger role in the Middle East since the 2000s, but has faced a number of setbacks and has problematic relations with Israel and most Sunni Arab countries other than Qatar. Bilateral relations between the Trump Administration and the Erdogan government have been difficult, but have improved somewhat since October 2018, when a Turkish court allowed Pastor Andrew Brunson to return to the United States after a two-year imprisonment. The following are current points of tension in the U.S.-Turkey relationship. F-35 aircraft acquisition endangered by possible S-400 acquisition from Russia. Turkey's planned purchase of an S-400 air defense system from Russia could trigger U.S. sanctions under existing law and decrease Turkey's chances of acquiring U.S.-origin F-35 aircraft. The possible S-400 transaction has sparked broader concern over Turkey's relationship with Russia and implications for NATO. U.S. officials seek to prevent the deal by offering Patriot air defense systems as an alternative to the S-400. Syria and the Kurds. Turkey's political stances and military operations in Syria have fed U.S.-Turkey tensions, particularly regarding Kurdish-led militias supported by the United States against the Islamic State over Turkey's strong objections. President Trump's announcement in December 2018 that U.S. troops would withdraw from Syria came after a call with President Erdogan in which Erdogan accepted responsibility for countering the Islamic State in Syria. Efforts to coordinate U.S. and Turkish actions related to a U.S. withdrawal have triggered debate about the possible consequences of Turkish intervention in northeast Syria, especially for those Kurdish-led militias, which have links with the PKK (Kurdistan Workers' Party). The PKK is a U.S.-designated terrorist organization that originated in Turkey and wages an on-and-off insurgency against the Turkish government while using safe havens in both Syria and Iraq. Congressional initiatives. Within the tense bilateral context, the 115th Congress required the Trump Administration—in the FY2019 John S. McCain National Defense Authorization Act (NDAA, P.L. 115-232)—to report on the status of U.S.-Turkey relations, with particular emphasis on the possible S-400 deal and its implications. The Department of Defense (DOD) submitted a mostly classified report to Congress in November 2018. Appropriations legislation proposed for FY2019 in the 116th Congress (H.R. 648) would require an update to the DOD report. Turkey's domestic trajectory and financial distress. President Erdogan rules in an increasingly authoritarian manner, with his power further consolidated in June 2018 presidential and parliamentary elections. A number of developments (a globally stronger dollar, rule of law concerns and political uncertainty, significant corporate debt) led to a precipitous drop in the value of Turkey's currency during 2018. A major September 2018 interest rate hike by Turkey's central bank helped reverse some of the currency's downward slide, but concerns remain about Turkey's financial position and the possible consequences that higher interest rates might have for economic growth. Local elections are scheduled for March 2018 against the backdrop of these economic concerns. The next steps in relations between the United States and Turkey will take place with Turkey facing a number of political and economic challenges. Given Erdogan's consolidation of power, observers now question how he will govern a polarized electorate and deal with the foreign actors who can affect Turkey's financial solvency, regional security, and political influence. U.S. officials and lawmakers can refer to Turkey's complex history, geography, domestic dynamics, and international relationships in evaluating how to encourage Turkey to align its policies with U.S. interests.", "document_type": "crs"}
{"report": "T he Public Safety Officers' Benefits (PSOB) program provides cash benefits to federal, state, and local law enforcement officers; firefighters; employees of emergency management agencies; and members of emergency medical services agencies who are killed or permanently and totally disabled as the result of personal injuries sustained in the line of duty. The Public Safety Officers' Educational Assistance (PSOEA) program, a component of the PSOB program, provides higher-education assistance to the children and spouses of public safety officers killed or permanently disabled in the line of duty. Both programs are administered by the PSOB Office of the Department of Justice (DOJ), Bureau of Justice Assistance (BJA). Congress appropriates funds for these programs in the annual Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act. For FY2019, the one-time lump-sum PSOB benefit is $359,316 and the monthly full-time attendance PSOEA assistance is $1,224. The PSOB and PSOEA benefit amounts are indexed to reflect changes in the cost of living. Table 1 shows PSOB and PSOEA claims and approvals as reported by DOJ. To be eligible for PSOB benefits for death or disability, a person must have served in one of the following categories of public safety officers: law enforcement officer, firefighter, or chaplain in a public agency; FEMA employee or a state, local, or tribal emergency management agency employee; or emergency medical services member. There is no minimum amount of time a person must have served to be eligible for benefits. To be eligible for PSOB benefits as a law enforcement officer, firefighter, or chaplain, a person must have served in a \"public agency\" in an official capacity, with or without compensation. For the purposes of PSOB eligibility, a public agency is defined as the federal government and any department, agency, or instrumentality of the federal government; and any state government, the District of Columbia government, and any U.S. territory or possession; and any local government, department, agency, or instrumentality of a state, the District of Columbia, or any U.S. territory or possession. For the purposes of PSOB eligibility, a law enforcement officer is defined as \"an individual involved in crime and juvenile delinquency control or reduction, or enforcement of the criminal laws (including juvenile delinquency), including, but not limited to, police, corrections, probation, parole, and judicial officers.\" For the purposes of PSOB eligibility, the definition of firefighter includes both professional firefighters and persons serving as an \"officially recognized or designated member of a legally organized volunteer fire department.\" A chaplain is eligible for PSOB benefits (1) if he or she is either an \"officially recognized or designated member of a legally organized volunteer fire department or legally organized police department\" or public employee of a police or fire department and (2) only if he or she was performing the duties of a chaplain in an official capacity while responding to a police, fire, or rescue emergency. Employees of the Federal Emergency Management Agency (FEMA) and state, local, or tribal emergency management agencies may be eligible for PSOB benefits under certain conditions provided in statute. A FEMA employee or an employee of a state, local, or tribal emergency management agency working with FEMA is eligible for PSOB benefits if he or she is performing official duties that are related to a major disaster or an emergency declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) and that are considered hazardous by the FEMA Administrator or the head of the state, local, or tribal agency. A member, including a volunteer member, of a rescue squad or \"ambulance crew\" who is authorized or licensed by law and the applicable agency and is engaging in rescue services or providing emergency medical services may be eligible for PSOB benefits. The rescue squad or ambulance service may provide ground or air ambulance services and may be either a public agency or a nonprofit entity authorized to provide rescue or emergency medical services. By PSOB regulation, eligible emergency medical services workers include rescue workers, ambulance drivers, paramedics, health care responders, emergency medical technicians, or others who are trained in rescue activity or emergency medical services and have the legal authority and responsibility to provide such services. The PSOB program pays benefits if a public safety officer becomes permanently and totally disabled or dies \"as the direct and proximate result of a personal injury sustained in the line of duty.\" To qualify for coverage under the PSOB program, a public safety officer's disability or death must have been the result of a personal injury. The PSOB regulation defines an injury for the purposes of benefit eligibility as a traumatic physical wound (or a traumatized physical condition of the body) directly and proximately caused by external force (such as bullets, explosives, sharp instruments, blunt objects, or physical blows), chemicals, electricity, climatic conditions, infectious disease, radiation, virii, or bacteria ... The regulation also provides that the definition of an injury does not include an occupational disease or a condition of the body caused by stress or strain, including psychological conditions such as post-traumatic stress disorder. However, the PSOB statute specifically provides for deaths caused by certain cardiovascular conditions. The death of a public safety officer due to a heart attack, stroke, or vascular rupture shall be presumed to be a death from a personal injury for the purposes of PSOB eligibility if the officer engaged in nonroutine stressful or strenuous physical activity as part of an emergency response or training exercise; and if the condition began during the physical activity, while the officer remained on duty after the physical activity, or within 24 hours of the physical activity. The PSOB program covers a public safety officer's death or disability if it occurred as the result of an injury incurred in the line of duty. The PSOB regulations provide that an injury occurs in the line of duty if it (1) is the result of the public safety officer's authorized activities while on duty, (2) occurs while responding to an emergency or request for assistance, or (3) occurs while commuting to or from duty in an authorized department or personal vehicle. In addition, if there is convincing evidence that the injury was the result of the individual's status as a public safety officer, that injury is covered by the PSOB program. The lump-sum PSOB death and disability benefit for FY2019 is $359,316. The benefit amount is adjusted annually to reflect changes in the cost of living using the annual percentage change in the Consumer Price Index for Urban Consumers (CPI-U) for the one-year period ending in the previous June. If a public safety officer receives a disability benefit and later dies from the same injury, the officer's survivors may not receive a PSOB death benefit. The payable benefit amount is based on the date of the public safety officer's death or the date of the injury that caused the disability, rather than on the date of application for benefits or disability determination. Thus, if a benefit increase occurs while an application is pending, the benefit is payable at the previous, lower, benefit level. Death and disability benefits are not subject to the federal income tax. In general, PSOB death and disability benefits are paid in addition to any other workers' compensation, life insurance, or other benefits paid for the death of a public safety officer. However, the PSOB death benefit is offset by the following benefits: benefits under the Federal Employees' Compensation Act (FECA) payable to state and local law enforcement officers injured or killed while enforcing federal law; benefits under the D.C. Retirement and Disability Act of 1916 for certain police officers and firefighters in the District of Columbia; and payments from the September 11 th Victim Compensation Fund (VCF). PSOB death benefits are payable to the eligible spouse and children of a public safety officer. A spouse is the person to whom the officer is legally married, even if physically separated, under the marriage laws of the jurisdiction where the marriage took place. Pursuant to regulations issued after the Supreme Court struck down the federal Defense of Marriage Act in United States v. Windsor , the legally married spouse of a public safety office may be of the same sex as the officer. A child is defined as any \"natural, illegitimate, adopted, or posthumous child or stepchild\" of the public safety officer who, at the time of the public safety officer's fatal or catastrophic injury, is 18 years of age or under; between 18 and 23 years of age and a full-time student in high school or undergraduate higher education; or over 18 years of age and incapable of self-support because of physical or mental disability. PSOB death benefits are paid to eligible survivors in the following order: 1. if the officer is survived by only a spouse, 100% of the death benefits are payable to the spouse; 2. if the officer is survived by a spouse and children, 50% of the death benefits are payable to the spouse and the remaining 50% is distributed equally among the officer's children; 3. if the officer is survived by only children, the death benefits are equally distributed among the officer's children; 4. if the officer has no surviving spouse or children, the death benefits are paid to the individual or individuals designated by the officer in the most recently executed designation of beneficiary on file at the time of the officer's death; or if the officer does not have a designation of beneficiary on file, the benefits are paid to the individual or individuals designated by the officer in the most recently executed life insurance policy on file at the time of the officer's death; 5. if the officer has no surviving spouse or eligible children, and the officer does not have a life insurance policy, the death benefits are equally distributed between the officer's surviving parents; or 6. if the officer has no surviving spouse, eligible children, or parents, and the officer did not have a designation of beneficiary or a life insurance policy on file at the time of his or her death, the death benefits are payable to surviving adult, nondependent, children of the officer. PSOB disability benefits are paid only in cases of permanent and total disability. There are no benefits payable for partial or short-term disabilities. A disability is considered permanent for the purposes of PSOB eligibility if, given the current state of medicine in the United States, there is a degree of medical certainty that the condition will remain constant or deteriorate over the person's lifetime or that the public safety officer has reached maximum medical improvement. A public safety officer is considered to be totally disabled for the purposes of PSOB eligibility if given the current state of medicine in the United States, there is a degree of medical certainty that the officer is unable to perform any gainful work. PSOB regulation defines gainful work as \"full- or part-time activity that is compensated or commonly compensated.\" Applications for PSOB death and disability benefits are filed with the PSOB office, which determines benefit eligibility and commences benefit payment. Unless extended for good cause, application deadlines must be met. Complete benefit applications must be filed no later than for death benefits: three years after the death; one year after the determination of the officer's employing agency to award or deny death benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any death benefits; and for disability benefits: three years after the date of the injury; one year after the determination of the officer's employing agency to award or deny workers' compensation or disability benefits payable by that agency; or one year after certification by the officer's employing agency that the agency is not authorized to pay any workers' compensation or disability benefits. A lump-sum interim payment of up to $3,000 may be made if a PSOB death benefit will \"probably be paid.\" The interim payment amount reduces the final PSOB payment amount. If the ultimate decision is to deny death benefits, the interim payment must be returned to the federal government, unless this repayment is waived because it would create a hardship for the beneficiary. Section 611 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act; P.L. 107-56 ) provides for expedited payment of PSOB death and disability benefits if the officer's injury occurred \"in connection with prevention, investigation, rescue, or recovery efforts related to a terrorist attack.\" In such cases, PSOB benefits must be paid within 30 days of certification from the officer's employing agency that the officer's death or disability was related to terrorism. The Public Safety Officers' Education Assistance (PSOEA) program provides financial assistance with costs associated with higher education to the spouse or children of a public safety officer who is eligible for PSOB death or disability benefits. The spouse or child of a public safety officer who is eligible for PSOB death or disability benefits may be eligible for PSOEA benefits. To be eligible for PSOEA benefits, a spouse must have been married to an eligible public safety officer at the time of the officer's death or injury. A child is eligible for PSOEA benefits until the age of 27. This age limit can be extended by the Attorney General in extraordinary circumstances, or, pursuant to Section 3 of the Public Safety Officers' Benefits Improvement Act of 2017 ( P.L. 115-36 ), if there is a delay of more than one year in approving PSOB or PSOEA benefits. In addition, to be eligible for PSOEA benefits, the spouse or child must be enrolled at an eligible educational institution. For the purposes of PSOEA eligibility, an eligible education institution is one that meets the definition of an \"institution of higher education\" as provided by Section 102 of the Higher Education Act of 1965 and that is eligible for federal student aid. PSOEA benefits are payable to the claimant and may be used only to defray costs associated with higher education attendance, including tuition, room, board, book and supplies, and education-related fees. The monthly PSOEA benefit amount is equal to the monthly benefit amount payable under the GI Bill Survivors' and Dependents' Educational Assistance (DEA) program, which is administered by the Department of Veterans Affairs (VA) for spouses and dependents of veterans with disabilities or who died as a result of service-connected conditions. The PSOEA benefit amounts are adjusted annually to reflect changes in the cost of living in accordance with changes to the GI Bill DEA benefit amounts. For FY2019, the PSOEA monthly benefit for a student attending an educational institution full-time is $1,224. The PSOEA benefit rates are prorated for less than full-time attendance. The maximum duration of PSOEA benefits for any person is 45 months of full-time education or a proportionate duration of part-time education. A person is ineligible for PSOEA if he or she is in default on a federal student loan or is ineligible for federal benefits due to a drug trafficking or drug possession conviction. In addition, the Attorney General may discontinue PSOEA benefits for a student that fails to make satisfactory progress in his or her course of study as defined by Section 484(c) of the Higher Education Act of 1965. A claimant who is dissatisfied with a PSOB disability benefit denial may request a reconsideration. There is no reconsideration offered for denials of PSOB death or PSOEA benefits. A claimant who is dissatisfied with a PSOB or PSOEA benefit denial may request a de novo hearing before a hearing officer assigned by the director of the DOJ PSOB Office. The determination of a hearing officer may be appealed to the PSOB Office director. The director's determination is considered the final agency determination and is not subject to any further agency administrative review or appeal. However, provided all administrative appeals remedies have been exhausted, the PSOB Office director's determination may be appealed to the United States Court of Appeals for the Federal Circuit. The PSOB statute authorizes the BJA to prescribe the maximum fee that an attorney or other representative may charge a claimant for services rendered in connection with a claim, with attorney fees generally limited to between 3% and 6% of the total benefit paid, depending on the level in the administrative appeals process the claim is approved. Program regulation prohibits stipulated-fee and contingency-fee arrangements for PSOB representation. Congress provides funding for PSOB and PSOE benefits and associated administrative expenses in the annual Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act. Funding for PSOB death benefits and associated administrative expenses is considered mandatory spending and Congress appropriates \"such sums as may be necessary\" for the payment of these benefits. Funding for PSOB disability and PSOEA benefits is considered discretionary and is subject to specific congressional appropriations. Annual appropriations language grants the Attorney General the authority to transfer from any available appropriations to the DOJ the funds necessary to respond to emergent circumstances that require additional funding for PSOB disability benefits and PSOEA benefits. ", "summary": "The Public Safety Officers' Benefits (PSOB) program provides cash benefits to federal, state, and local law enforcement officers; firefighters; employees of emergency management agencies; and members of emergency medical services agencies who are killed or permanently and totally disabled as the result of personal injuries sustained in the line of duty. The Public Safety Officers' Educational Assistance (PSOEA) program, a component of the PSOB program, provides higher-education assistance to the children and spouses of public safety officers killed or permanently disabled in the line of duty. The PSOB and PSOEA programs are administered by the Department of Justice (DOJ), Bureau of Justice Assistance (BJA). However, claimants dissatisfied with denials of benefits may pursue administrative appeals within DOJ and may seek judicial review before the United States Court of Appeals for the Federal Circuit. Each year, Congress appropriates funding for PSOB death benefits, which is considered mandatory spending, and for PSOB disability benefits and PSOEA benefits, which is subject to annual appropriations. For FY2019, the one-time lump-sum PSOB death and disability benefit is $359,316 and the PSOEA monthly benefit for a student attending an educational institution full-time is $1,224. In FY2017, the DOJ approved 399 claims for PSOB death benefits, 82 claims for PSOB disability benefits, and 601 claims for PSOEA benefits.", "document_type": "crs"}
{"report": "USAspending.gov, available to the public at http://www.usaspending.gov , is a government source for data on federal grants, contracts, loans, and other financial assistance. The website enables searching of federal awards from FY2008 to the present by state, congressional district (CD), county, and zip code. Grant awards include money the federal government commits for projects in states, local jurisdictions, regions, territories, and tribal reservations, as well as payments for eligible needs to help individuals and families. Contract awards refer to bids and agreements the federal government makes for specific goods and services. USAspending.gov also provides tools for examining the broader picture of federal spending obligations by categories, such as budget function, agency, and object class. Budget function refers to the major purpose that the spending serves, such as Social Security, Medicare, and national defense. Object class refers to the type of item or service purchased by the federal government, such as grants, contracts, and personnel compensation and benefits. For Congress, the ability to more accurately track these federal awards is necessary to better inform oversight of federal spending. In recent years, Congress has passed laws to create and improve systems used by government departments and agencies to report and input data on federal awards for contracts, grants, and other financial assistance: P.L. 109-282 , the Federal Funding Accountability and Transparency Act of 2006 (FFATA), called for the creation of a database that became USAspending.gov. The publicly available database replaced data collection and annual reports issued for more than 30 years in the Census Bureau's Federal Aid to States (FAS) report and Consolidated Federal Funds Report (CFFR). P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), required federal agencies awarding stimulus funding and state and local recipients of such funding to report spending back to the ARRA Recovery Board; this reporting also became a part of USAspending.gov. P.L. 113-101 , the Digital Accountability and Transparency Act of 2014 (DATA Act), transferred responsibility for USAspending.gov from the Office of Management and Budget (OMB) to the Department of the Treasury and required that expenditures data be added to the federal agency obligations data already included in the USAspending.gov database. The DATA Act also required Treasury and OMB to develop government-wide data standardization to facilitate consolidating, automating, and simplifying reports on grant awards and contracts and to improve USAspending.gov underreporting and inconsistencies. However, finding accurate and complete data on federal funds received by states and congressional districts continues to be challenging due to ongoing data quality problems identified by the Government Accountability Office (GAO) in June 2014. A GAO report released in November 2017 assessed the quality of data reported by agencies in May 2017 under new DATA Act standards. GAO identified issues and challenges with the completeness and accuracy of the data submitted, use of data elements, and disclosure of data limitations on what was, at the time, a beta version of the new USAspending.gov website. The beta version has since become the official site as of March 2018 and the previous version is no longer available. According to a note on the site, data quality and display improvements will be continually made on a rolling basis. Users of USAspending.gov should be aware that although search results may be useful for informing consideration of certain questions, these results may also be incomplete or contain inaccuracies. FFATA required OMB to create a public database of all federal funds awarded to the final recipient level. The DATA Act followed eight years later and required the Department of the Treasury and OMB to develop government-wide data standardization to consolidate, automate, and simplify reports on grant awards and contracts to improve underreporting and inconsistencies as identified by GAO. These requirements in the DATA Act were intended to expand on the transparency efforts originally mandated by FFATA, specifically by disclosing direct agency expenditures and linking federal contract, loan, and grant spending information to federal agency programs; establishing government-wide data standards for financial data and providing consistent, reliable, and searchable data that are displayed accurately; simplifying reporting, streamlining reporting requirements, and reducing compliance costs, while improving transparency; and improving the quality of data submitted to USAspending.gov by holding agencies accountable. In addition, no later than four years after enactment (by spring 2018), Treasury and OMB must ensure that all information published on USAspending.gov conforms to government-wide data standards. OMB is also required to issue guidance so that all agencies can follow government-wide data standards when reporting on grantee and contractor awards. The data in USAspending.gov are submitted by federal agencies and represent awards, including grants, contracts, loans, and other financial assistance (e.g., Medicare benefits, food stamps, unemployment benefits). USAspending.gov does not include data on actual spending by recipients. Federal agencies are required to submit reports on awards transactions within 30 days after transactions are implemented. There may be a longer lag-time with data from the Department of Defense, generally 90 days. USAspending.gov enables congressional staff and the public to search back to FY2008 for prime and subaward data by state, congressional district, and other jurisdictions. The site includes the following features: Advanced Award Search of prime and subaward data back to FY2008 allows filtering by award type, awarding agency, recipient, country, state, zip, county, CD, and other criteria. To identify where money is being spent, search on Place of Performance versus Recipient Location . Search results include awards that are active during the selected fiscal year, regardless of when the award initially started. Details on an individual award, including transaction history and subawards, may be viewed by clicking on the Award ID . The results list displayed can be downloaded at either the award or transaction level, along with additional details about each award, into a spreadsheet. The advanced search is currently being developed and improved on a rolling basis, so new features may have become available since the publication of this report. Spending Explorer enables \"big picture\" browsing of federal spending obligations and offers interactive data visualization by budget function, agency, and object class. With this tool, users can see the budget function breakdown by categories, such as Social Security, Medicare, and national defense; obligated amounts by agency; and obligations by object class categories, such as grants, contracts, and personnel compensation and benefits. Profile s Tab includes the following subtabs: Agencies features data on each agency's total budgetary resources, a dollar amount that has been obligated (or committed to be spent) against those budgetary resources, the breakdown of these obligations by object class, and the federal accounts through which the obligations are administered. Federal Accounts features a list of nearly 2,000 federal accounts through which users can track spending obligations. Data in this section are presented visually through graphs and other infographics. States provides tables, interactive maps, and graphs showing a breakdown of a total awarded amount to each state back to FY2008. Breakdowns include totals by award type, county, and CD. Profiles also include top five rankings in various categories, such as awarding agencies and recipients. Recipients contains profiles of entities that have received federal awards in the form of contracts, grants, loans, or other financial assistance back to FY2008. Profiles include data on award trends over time and top five rankings in various categories. Download Center allows bulk exporting of large, pregenerated award data sets by agency, award type, and fiscal year through the Award Data Archive . The custom download pages— Custom Award Data and Custom Account Data (which covers all spending data, including nonaward spending)—also allow downloading of large data sets but provide additional filtering options. In addition to the data quality problems in USAspending.gov mentioned earlier, the following issues should be taken into consideration. As recipients of federal grant funding, state and local governments may provide services directly to beneficiaries. Alternatively, a state may act as a pass-through, redisbursing federal grant funding to localities using a formula or a competitive process through subgrants or subcontracts. Both federal grant and procurement awards thus may have a where awarded vs. where spent component that is not fully identified in grant or procurement records. For example, most federal grant funding is awarded to states, which then subaward or subcontract to eligible recipients elsewhere in the state (see Figure 1 ) . So, a project's place of performance (where the award is spent) may therefore differ from the initial recipient location (where the funding is awarded). In addition, a funding award may pass through multiple different jurisdictions (in different CDs) before reaching the final place of performance. For example Federal grants may go first to the state (the state capital, in one CD), then be distributed to a city or county government (in one or more additional CDs), which then may pass the funds to an organization that spends the money in other CDs. A CD in which a state capital is located may appear to receive more federal funds than other CDs in the state, but searching USAspending.gov data by place of performance rather than recipient location would identify data by the project location. Procurement awards may be given to a corporation headquartered in one state (and one CD), but the company may spend the money manufacturing the purchased product at one or more of its manufacturing facilities in one or more additional states (and CDs). The USAspending.gov advanced award search enables filtering by state and congressional district. When searching for CD data, note the following: For CD data, search USAspending.gov by place of performance rather than recipient location to identify awards by project location (see \" Recipient Location Versus Place of Performance ,\" above). Use caution when comparing CD data over time. During decennial redistricting, CD borders and numbers may change, but past data are not revised to account for redistricting. For example, comparing data from the 115 th or 114 th Congress with earlier data must take into account new district borders created by the 2010 decennial redistricting. Other geographic search options, such as by zip code or county, could be used to track funds within a CD, although borders may not exactly align. CDs that include state capitals will appear to receive more federal funds because states are prime recipients of federal block and formula grants. State Administering Agencies (SAAs) then pass through or subaward federal funding for projects throughout the state. The General Services Administration (GSA) maintains the Federal Procurement Data System–Next Generation (FPDS–NG) at https://www.fpds.gov/fpdsng_cms/index.php/en/ , which contains statistical information on federal contracts. The FPDS–NG serves as the source of USAspending.gov contracts data; makes available Federal Procurement Reports from FY2000 forward on its website; includes data on contracts of more than $25,000 and summary data of procurements less than $25,000; and provides selected search capabilities by state (including aggregate county statistics), contractor name, and product or service category. For more refined searching, such as by CD, the FPDS Help Desk can guide congressional staff and the public through filtering for data needed (called ad hoc reports ). States, local governments, and nonprofits (including universities) spending $750,000 or more in federal grants during a fiscal year are required to submit an audit detailing expenditures. Data from the audits are posted on the Census Bureau's Federal Audit Clearinghouse site, at https://harvester.census.gov/facweb/Default.aspx . No printed documents are produced. Because the audit data are for the fiscal year of the filing agency or organization (which may differ from the federal fiscal year), they are not comparable with data from any other federal source. Searches may be conducted by organization or institution, Catalog of Federal Domestic Assistance (CFDA) program number, and geographic location (by city or state but not by congressional district). See search options at https://harvester.census.gov/facweb/ . The Analytical Perspectives volume of the President's budget covers various topics, including \"Aid to State and Local Governments\" (Chapter 17 in the FY2020 report). Federal grants-in-aid to state and local governments, U.S. territories, and American Indian tribal governments are intended to support government operations or the provision of services to the public. Grants are most often awarded as direct cash assistance, but federal grants-in-aid also can include payments for grants-in-kind—nonmonetary aid such as commodities purchased for the National School Lunch Program. Federal revenues shared with state and local governments also are considered grants-in-aid. The FY2020 budget proposes $751 billion in outlays for aid to state and local governments, an increase of less than one percent from FY2019. Individual program tables with state-by-state obligation data for grants-in-aid programs to state and local governments may be found on the OMB website. Tables 17-3 through 17-39 show state-by-state obligations for 35 federal grants-in-aid programs. Federal grants generally fall into one of two broad categories—categorical grants or block grants, depending on the requirements of the grant program. In addition, grants may be characterized by how the funding is awarded, such as by formula, by project, or by matching state and local funds. As recipients of federal grant funding, state and local governments may provide services directly to beneficiaries or states may act as a pass-through, disbursing grant funding to localities using a formula or a competitive process. As discussed above, this pass-through, or subawarding, at the state level makes tracking federally originated funds to the final recipient a challenge. These Census Bureau reports, published from FY1983 to FY2010 and available at https://www.census.gov/govs/pubs/title.html , were the federal government's primary documents summarizing the geographic distribution of federal monies to states and counties, whether grants, contracts, or appropriations. The FY2010 Federal Aid to States (FAS) and Consolidated Federal Funds Report (CFFR) were the last reports issued due to the termination of the Census Bureau's Federal Financial Statistics program. Federal obligations data continue to be posted on USAspending.gov, now the official source collecting federal awards data. FAS covered federal government expenditures to state and local governments and presented figures to the state level by program area and agency. CFFR included payments to state and local governments as well as to nongovernmental recipients. Dollar amounts reported represented either actual expenditures or obligations (see CFFR introduction and source notes for each table or graph). CFFR provided data to the state and county level for grants, salaries and wages, procurement contracts, direct payments for individuals, other direct payments, direct loans, guaranteed or insured loans, and insurance. Although CFFR indicated congressional districts (one or more) for each county, it did not give separate data by CD. USAspending.gov collects brief data on all federal grants and contracts awarded. However, some agencies, in particular those awarding research grants, also continue to post information on their own websites. Department of Agriculture (USDA) Current Research Information System https://cris.nifa.usda.gov/ Ongoing agricultural, food science, human nutrition, and forestry research, education and extension activities, with a focus on the National Institute of Food and Agriculture (NIFA) grant programs. Projects are conducted or sponsored by USDA research agencies, state agricultural experiment stations, land-grant universities, other cooperating state institutions, and participants in NIFA-administered grant programs, including Small Business Innovation Research and the Agriculture and Food Research Initiative. Department of Education (ED) Institute of Education Sciences, Funded Research Grants and Contracts http://ies.ed.gov/funding/grantsearch/index.asp Department of Health and Human Services (HHS) Tracking Accountability in Government Grants System (TAGGS) http://taggs.hhs.gov/AdvancedSearch.cfm Database of awards from HHS and its subsidiaries. National Institutes of Health (NIH) Research Portfolio Online Reporting Tools RePORTER http://projectreporter.nih.gov/reporter.cfm Includes projects funded by the NIH, Administration for Children and Families, Agency for Health Care Research and Quality, Centers for Disease Control and Prevention, Food and Drug Administration, and the U.S. Department of Veterans Affairs. National Library of Medicine (NLM) https://hsrproject.nlm.nih.gov/ Database of ongoing health services research and public health projects, whether government, corporate, or private. Department of Homeland Security (DHS) Federal Emergency Management Agency (FEMA), Public Assistance Grant Awards Activity 2013-2016: https://www.fema.gov/media-library/assets/documents/30731 2017-2019: https://www.fema.gov/media-library/assets/documents/128200 Daily activity of Public Assistance Grant Awards, including FEMA region, state, disaster declaration number, event description, mission assigned agency, assistance requested, obligated federal dollars, and date of obligation. Department of Justice (DOJ) Office of Justice Programs (OJP), OJP Grant Award Data http://ojp.gov/funding/Explore/OJPAwardData.htm Department of Labor (DOL) Employment and Training Administration (ETA), Grants Awarded http://www.doleta.gov/grants/grants_awarded.cfm Environmental Protection Agency (EPA) Grant Awards Database https://yosemite.epa.gov/oarm/igms_egf.nsf/HomePage?ReadForm Contains a summary record for all nonconstruction EPA grants awarded in the last 10 years plus grants that were awarded before that time that are still open. EPA Active Contracts Listing https://www.epa.gov/contracts/epa-active-contracts-listing Lists of all currently active EPA Contracts. The listing is available by Contract Number and by Vendor Name. Institute of Museum and Library Services (IMLS) IMLS Awarded Grants http://www.imls.gov/recipients/grantsearch.aspx National Endowment for the Arts (NEA) Grant Search https://apps.nea.gov/grantsearch/ NEA grants awarded since 1998. National Endowment for the Humanities (NEH) Funded Projects https://securegrants.neh.gov/publicquery/main.aspx National Science Foundation (NSF) NSF Awards http://www.nsf.gov/awardsearch/ Includes data from 1989 to the present. Research.gov is a partnership of federal research-oriented grant-making agencies led by the NSF http://www.research.gov/research-portal/appmanager/base/desktop?_nfpb=true&_eventName=viewQuickSearchFormEvent_so_rsr&wtlink=RSR_Search_homepage . Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) SBIR and STTR Awards https://www.sbir.gov/sbirsearch/award/all The SBIR/STTR program's mission is to stimulate technology innovation by strengthening the role of innovative small business in federal research and development. Currently, 11 federal agencies participate in the program: the Departments of Agriculture, Commerce (National Institute of Standards and Technology and the National Oceanic and Atmospheric Administration), Defense, Education, Energy, Health and Human Services, Homeland Security, and Transportation, and the Environmental Protection Agency, National Aeronautics and Space Administration, and National Science Foundation. Transportation Research Board (TRB) Research in Progress http://rip.trb.org/ View projects by subject, individuals, or organizations. Data Foundation and Deloitte, \"DATA Act 2022: Changing Technology, Changing Culture,\" report, May 2017, at http://www.datafoundation.org/data-act-2022/ . U.S. Senate, Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, \"Federal Agency Compliance with the DATA Act,\" report, July 2018, at https://www.hsgac.senate.gov/subcommittees/investigations/media/new-psi-report-details-failure-of-federal-agencies-to-submit-accurate-data-on-how-they-spend-taxpayer-dollars . Urban Institute, \"Follow the Money: How to Track Federal Funding to Local Governments,\" research report, February 26, 2018, at https://www.urban.org/research/publication/follow-money-how-track-federal-funding-local-governments .", "summary": "USAspending.gov, available at http://www.USAspending.gov, is a government source for data on federal awards by state, congressional district (CD), county, and zip code. The awards data in USAspending.gov are provided by federal agencies and represent contracts, grants, loans, and other forms of financial assistance. USAspending.gov also provides tools for examining the broader picture of federal spending obligations by categories, such as budget function, agency, and object class. Using USAspending.gov to locate and compile accurate data on federal awards can be challenging due, in part, to continuing data quality issues that have been identified by the U.S. Government Accountability Office (GAO). Users of USAspending.gov need to be aware that while search results may be useful for informing consideration of certain questions, these results may be incomplete or contain inaccuracies. USAspending.gov was created under P.L. 109-282, the Federal Funding Accountability and Transparency Act of 2006 (FFATA), and is being enhanced under requirements in P.L. 113-101, the Digital Accountability and Transparency Act of 2014 (DATA Act). Other federal awards data sources reviewed in this report include the following: Federal Procurement Data System (FPDS); Census Federal Audit Clearinghouse; U.S. Budget: Aid to State and Local Governments; Census Federal Aid to States (FAS) and Consolidated Federal Funds Report (CFFR); and Additional federal grant awards databases, including sources tracking medical, scientific, and technical research.", "document_type": "crs"}
{"report": "The federal government subsidizes a wide range of activities through the tax code. The majority of available tax incentives are claimed directly by the party engaged in the activity targeted by the subsidy. There are several tax credits, however, that often require or encourage the intended beneficiary of the subsidy to partner with a third party to use the tax incentive. This may happen because the tax credits are nonrefundable and the intended beneficiary of the tax credit has little or no tax liability (e.g., a nonprofit), or because the credits are delivered over multiple years whereas upfront funding is needed to break g round. This situation often results in a tax equity transaction—the intended beneficiary of the tax credit agrees to transfer the rights to claim the credits to a third party in exchange for an equity financing contribution. One estimate placed the size of the tax equity market in 2017 at $20 billion. This report provides an introduction to the general tax equity financing mechanism. To facilitate the presentation of the tax equity approach to subsidization, three categories of tax credits that either currently use or have recently used this mechanism are examined: the low-income housing tax credit (LIHTC); the new markets tax credit (NMTC); and two energy-related tax credits—the renewable electricity production tax credit (PTC) and energy investment tax credit (ITC). This report does not evaluate the economic rationale for subsidizing the activities targeted by these tax credits, and does not analyze whether these subsidies increase net investment in these activities. Instead, this report focuses on explaining the structure and functioning of tax equity arrangements. T ax equity investment is not a statutorily defined term, but rather identifies transactions that pair the tax credits or other tax benefits generated by a qualifying physical investment with the capital financing associated with that investment. These transactions involve one party agreeing to assign the rights to claim the tax credits to another party in exchange for an equity investment (i.e., cash financing). The exchange is sometimes referred to as \"monetizing,\" \"selling,\" or \"trading\" the tax credits. Importantly, however, the \"sale\" of federal tax credits occurs within a partnership or contractual agreement that legally binds the two parties to satisfy federal tax requirements that the tax credit claimant have an ownership interest in the underlying physical investment. This makes the trading of tax credits different than the trading of corporate stock, which occurs between two unrelated parties on an exchange. The partnership form also allows for income (or losses), deductions, and other tax items to be allocated directly to the individual partners. In some cases, nonprofit entities can form a partnership with taxable investors and benefit from tax credits through this relationship. While the specifics of a tax equity arrangement vary depending on the project and tax credit program involved, these deals often share some general common structural features. Figure 1 provides a graphical summary of the structure and mechanics of one kind of project that relies on tax equity investment. The process begins with a developer, also sometimes referred to as a \"sponsor,\" identifying a potential project eligible for federal tax credits. For projects where an application is required, the developer will apply to the entity in charge of awarding the credits. At the same time, the developer will seek out potential investors willing to contribute equity capital in exchange for the tax credits expected to be awarded. A developer can partner directly with an investor, or, as is also common, partner with a tax credit \"syndicator\" that manages a tax credit fund for multiple investors that may not have the expertise to partner directly with a developer, or that may want to diversify their tax equity investment portfolio. The syndicator will earn a syndication fee for identifying, evaluating, and managing tax equity investments for the fund. Regardless of whether the partnership with investors is direct or via a syndicator, the tax equity investors are typically large corporations with predictable tax liabilities. The developer and investors will negotiate how much equity capital will be contributed in exchange for the right to claim the tax credits and other tax benefits. As previously mentioned, this is commonly referred to as the \"selling,\" \"trading,\" or \"monetizing\" of tax credits. The tax equity investors will serve as the \"limited\" partners in the partnership, meaning they generally have a passive role and do not participate in management decisions. The developer will serve as the \"general\" partner overseeing day-to-day operations in exchange for a fee and possibly any cash distributions the project may generate. The developer may also contribute their own capital to or arrange or coordinate other sources of capital for the project, depending on the particular tax credit program being used. While tax equity investors are not generally required to have an active management role, they have an incentive to monitor the project to ensure it complies with the program's rules, since compliance violations can result in forfeiture of tax credits. A tax equity investor's return depends on the price paid per credit and associated benefits the investor secures in exchange. In the simplest case, the only benefit the investor receives from the credits is the ability to reduce their tax liability. For example, consider a project that will cost $1.5 million to complete and that will generate $1 million in federal tax credits that its owner is seeking to sell to finance the upfront cost of the project. An outside investor has agreed to contribute 90 cents in equity financing in exchange for each $1.00 of tax credit. Thus, the investor pays (contributes in capital) $900,000 in exchange for $1 million in tax credits. The net return to the investor is $100,000 (in reduced taxes), or 11.1% ($100,000 divided by $900,000). The project developer will need to make up the difference between the project's cost ($1.5 million) and tax equity investor's capital contribution ($900,000). This difference is often referred to as the \"equity gap.\" Possible options for filling the equity gap include traditional loans or equity financing from other sources. The gap could also be filled with additional federal, state, or local subsidies. These might be grants, below-market-rate loans, or other tax incentives. Depending on the structure of the arrangement, the tax equity investor may also secure other benefits, such as additional state and federal tax incentives, a claim to operating income and losses, a share of any capital gains when the underlying investment is sold, or goodwill with the community or regulators. With regard to regulatory-driven motives, investments in LIHTC and NMTC projects, for example, can assist financial institutions in satisfying requirements under the Community Reinvestment Act (CRA; P.L. 95-128 ), which is intended to encourage banks to make credit more readily available in low- and moderate-income communities. Tax equity investors in renewable energy projects generally have returns that consist of both tax attributes and operating cash flow to conform to guidance provided by the Internal Revenue Service (IRS). The price investors are willing to pay for tax credits not only depends on the benefits attached to the credits, but on factors associated with the underlying project. These factors can include the risk associated with the project, how it is financed, and the time period over which benefits accrue. Due to the complexity of tax equity transactions and the size of investors' tax liabilities they desire to offset, the current federal tax equity mechanism may not, in some cases, be well suited for assisting small individual projects. When possible, tax equity investors typically seek large projects expected to generate a fairly significant amount of credits. Since tax equity investors require a financial return in exchange for providing financial capital, a portion of the subsidy is diverted away from the targeted activity. Returning to the previous example, if a tax equity investor agrees to contribute 90 cents in equity financing per $1.00 of federal tax credit, it means that for every $1.00 in government subsidy (i.e., tax credit), 10 cents is diverted away from subsidizing the underlying activity and to the investor and middlemen. Put differently, every 90 cents in federal subsidy that reaches the targeted industry actually costs the government $1.00 in lost tax revenue. This aspect of the tax equity mechanism is discussed in more detail in the \" Policy Options and Considerations \" section. The use of the tax equity mechanism can create fluctuations in the amount of subsidy qualified activities receive. The subsidy flowing into a project depends on the price tax equity investors receive in exchange for their financing contributions. All else equal, higher tax credit prices imply more federal subsidization of the targeted activity per dollar loss of federal tax revenue. Therefore, factors that cause variability in tax credit prices also cause variability in the subsidization rate. This can lead to fluctuation in the subsidy delivered via the tax equity mechanism, even though there has been no direct policy change regarding the tax credit program itself. For example, during the Great Recession, falling corporate tax liabilities reduced investor demand for credits, leading to depressed credit prices. In turn, qualified investments had difficulty raising enough equity to finance projects. To bypass the tax equity mechanism, some credits were temporarily converted into direct grants. Policies enacted by Congress, but not directly related to the underlying tax credit program itself, can also lead to subsidy fluctuations. This occurred most recently with the 2017 tax revision ( P.L. 115-97 ). Although some direct changes were made to several incentives that use the tax equity mechanism, there have also been concerns that the reduction in corporate tax rates and overall corporate tax liabilities could curb investor appetite for credits, and reduce the amount of tax equity investment being offered in the market. With less tax equity being supplied in the market, tax equity investors might demand higher rates of return, which could increase the cost of financing from the perspective of investors in targeted activities. Additionally, the subsidies delivered by LIHTC and NMTC can also vary geographically due to the CRA. Policies can also affect the demand for tax equity. For example, with renewable energy tax incentives phasing down, renewable energy investors may have fewer tax credits they are seeking to monetize. Less demand for tax equity could tend to reduce tax equity financing costs from the perspective of investors in targeted activities, reducing the overall rate of return for tax equity investors. While several current federal tax credits use the tax equity financing mechanism, no two credits do so in the same manner. For example, affordable housing developers are awarded LIHTCs by officials in each state who review applications, decisions regarding NMTC applications are made by federal officials, and renewable energy tax credits have no similar application and review process. The rate of subsidization and time frame over which the various tax credits may be claimed are also different, as are many of the intricacies of the rules and requirements of each. This section reviews three large tax credits that employ the tax equity financing mechanism to illustrate the various ways the approach is used in practice. The LIHTC program was created by the Tax Reform Act of 1986 ( P.L. 99-514 ) to replace various affordable housing tax incentives that were viewed as inefficient and uncoordinated at the time. The tax credits are given to developers over a 10-year period in exchange for constructing affordable rental housing. Originally scheduled to expire in 1989, the program was extended several times before being made permanent in the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). According to the Joint Committee on Taxation's (JCT's) most recent tax expenditure estimates, the LIHTC is estimated to cost the government an average of approximately $9.9 billion annually in reduced federal tax revenues. The mechanics of the program are complex. The process begins at the federal level, with each state receiving an annual LIHTC allocation based on population. In 2019, states received an LIHTC allocation of $2.75625 per person, with a minimum small-population state allocation of $3,166,875. These amounts reflect a temporary increase in the amount of credits each state received as a result of the 2018 Consolidated Appropriations Act ( P.L. 115-141 ). The increase is equal to 12.5% above what states would have received absent P.L. 115-141 , and is in effect through 2021. State or local housing finance agencies (HFAs) then award credits to developers using a competitive application process to determine which developers receive a credit award. HFAs review developer applications to ensure that proposed projects satisfy certain federally required criteria, as well as criteria established by each state. For example, some states may choose to give priority to buildings that offer specific amenities such as computer centers or that are located close to public transportation, while others may give priority to projects serving a particular demographic, such as the elderly. Delegating authority to HFAs to award credits gives each state the flexibility to address its individual housing needs, which is important given the local nature of housing markets. Upon receipt of an LIHTC award, developers typically \"sell\" the tax credits to investors in exchange for an equity investment. This transaction occurs within a partnership structure and in a manner similar to the generalized example discussed in the previous section. While LIHTC prices fluctuate over time and geographic regions, they typically range from the mid-$0.80s to mid-$0.90s per $1.00 of tax credit. In addition to the tax credits, the equity investor may also receive tax benefits related to any tax losses and other deductions, as well as residual cash flow. The NMTC program was created by the Community Renewal Tax Relief Act of 2000 ( P.L. 106-554 ) to provide an incentive to stimulate investment in low-income communities (LICs). The original allocation authority eligible for the NMTC program was $15 billion from 2001 to 2007. Congress subsequently increased the total allocation authority to $61 billion and extended the program through 2019. The tax credits are awarded to community development entities (CDEs) to make eligible low-income community investments. According to JCT's most recent tax expenditure estimates, the NMTC is estimated to cost the government an average of approximately $1.2 billion annually in reduced federal tax revenues. The process by which the NMTC affects eligible low-income communities involves multiple agents and steps. The multiple steps and agents are designed to ensure that the tax credit achieves its primary goal: encouraging investment in low-income communities. For example, the Department of the Treasury's Community Development Financial Institutions Fund (CDFI) reviews NMTC applicants submitted by CDEs, issues tax credit authority to those CDEs deemed most qualified, and plays a significant role in program compliance. To receive an allocation, a CDE must submit an application to the CDFI, which asks a series of standardized questions about the CDE's track record, the amount of NMTC allocation authority being requested, and the CDE's plans for any allocation authority granted. The application is reviewed and scored to identify those applicants most likely to have the greatest community development impact and ranked in descending order of aggregate score. Tax credit allocations are then awarded based upon the aggregate ranking until all of the allocation authority is exhausted. Upon receipt of an NMTC award, developers often \"sell\" the tax credits to investors in exchange for an equity investment. This transaction typically occurs through a limited liability corporation obtaining a loan from a bank and combining the loan proceeds with the tax credit proceeds to invest in the low-income community. While NMTC prices fluctuate over time, geographic regions, and the business cycle, they typically range from the mid-$0.70s to mid-$0.80s per $1.00 of tax credit. Unlike the LIHTC investor, the NMTC equity investor does not generally receive tax benefits related to any tax losses and other deductions. Investment tax credits for renewable energy date back to the late 1970s. The production tax credit (PTC) for renewable energy was enacted in the Energy Policy Act of 1992 ( P.L. 102-486 ). In recent years, the cost of both of these incentives has increased, as investment in renewable energy technologies has accelerated. For FY2018, the JCT estimates tax expenditures for the renewable energy investment tax credit (ITC) will be $2.8 billion. Tax expenditures estimates for the PTC are $5.1 billion for FY2018. Most of the forgone revenue associated with the ITC is attributable to solar ($2.5 billion of the $2.8 billion for all eligible technologies). In the case of the PTC, most of the forgone revenue is associated with tax credits claimed for using wind to produce electricity ($4.7 billion of the $5.1 billion for all eligible technologies). The energy credit for solar is 30% of the amount invested in solar projects that start construction before the end of calendar year 2019. In 2020, the credit rate is reduced to 26% for property beginning construction in 2020, before being reduced again to 22% in 2021. For property that begins construction after 2021, the credit is 10%. As an investment credit, the ITC is generally claimed in the year the property is placed in service. The energy credit may be recaptured, meaning a taxpayer must add all or part of the tax credit to their tax liability, if a taxpayer disposes of the energy property or ceases to use the property for the purpose for which a tax credit was claimed. The recapture period is five years. The PTC is a per-kilowatt-hour (kWh) tax credit that can be claimed for the first 10 years of qualified renewable energy production. In 2018, the tax credit for wind was 2.4 cents per kWh. The amount of the credit is adjusted annually for inflation. Since 2009, taxpayers have had the option of electing to receive an ITC in lieu of the PTC. Wind or solar projects that began construction in 2009, 2010, or 2011 had an option to elect to receive a one-time grant in lieu of tax credits. Using tax equity financing arrangements has allowed developers to monetize the tax benefits, essentially trading future tax benefits for upfront capital. The ITC and PTC were not designed as tax equity incentives. Rather, they were intended to subsidize investment in and production of renewable energy. Unlike the LIHTC and the NMTC, the energy tax credits were not intended to rely on taxpayer investors to deliver the subsidy. In the case of the PTC, when enacted, it was anticipated that tax credits would be claimed for electricity produced at facilities owned by the taxpayer and later sold by the taxpayer. Over time, however, partnerships began to form to efficiently use tax benefits. Recognizing that tax equity transactions were being undertaken with respect to wind development, in 2007 the IRS released Revenue Procedure 2007-65, which established a safe harbor under which the allocation of tax credits in a tax equity partnership structure would not be challenged as long as certain ownership requirements were met. While separate guidance has not been issued for solar projects claiming the ITC, industry practice has generally been to follow the safe harbor guidance provided to wind projects claiming the PTC. Partnership flips are a common tax equity financing structure in renewable energy markets. Under a partnership flip structure, a renewable energy developer partners with a third-party tax equity investor. The tax equity investor has (or expects to have) sufficient tax liability to use the tax credits associated with the renewable energy investment or production. The tax equity investor and renewable energy developer establish a partnership, which is the project company. The tax equity investor may provide upfront cash to the project company, in exchange for production or investment tax credits, depreciation, interest deductions, and operating income. During the initial phase of the project, the tax equity investor will receive most of the tax benefits, as well as the income or loss (often the share is 99%). The developer retains a small allocation of tax benefits and income (profit or loss). Once the tax equity investor has achieved a targeted internal rate of return (IRR), the partners' interests in the project company will flip, with the developer now receiving most of the tax benefits and income (profit or loss) associated with the project (typically 95%, leaving the tax equity investor with 5%). The developer may also buy out the tax equity investor, such that the tax equity investor no longer owns any part of the project. Tax equity generally provides a portion of a project's capital needs—somewhere from 30% to 60%, depending on the specifics of the project. For renewable energy projects, tax equity is generally more expensive than other sources of debt financing. For example, tax equity investors require rates of return that are 7% to 10% higher than the return on a comparable debt product. Tax equity yields (or the after-tax return required by tax equity investors) can vary widely across energy projects, but often fall in the 6% to 8% range, depending on the technology and specifics of the project. There are a range of policy options to consider when it comes to using tax equity markets to monetize tax benefits. For existing programs and new tax policies that could involve tax equity transactions, consideration of various options might ask whether the use of tax equity markets is an efficient and effective means of delivering federal financial support. At first glance, it may appear that the government would get more \"bang for its buck\" by structuring the subsidy delivery mechanism to eliminate investors. However, such a conclusion overlooks one role that tax equity investors often play in addition to providing financing: tax equity investors evaluate the quality of projects before investing, as well as provide continuing oversight and compliance monitoring. Effectively, the tax equity mechanism outsources a portion of the oversight and compliance monitoring to the investors in exchange for a financial return. There may be value to the federal government in being able to rely on outside investors to provide oversight and monitoring. It could be argued, though, that for some tax equity programs that have a government entity overseeing participant compliance, the monitor role of investors is redundant. This section presents several policy options frequently discussed in debates regarding tax equity. The options are with respect to the general tax equity approach. Due to important differences in the underlying structure of various current or future credits, some options may be better suited for particular credits than others. Careful consideration on a case-by-case basis is part of evaluating the appropriateness of each option. The list of options presented here is by no means exhaustive. Making the tax credits refundable could, in some cases, reduce or eliminate the need for tax equity. In other cases, making the tax credits refundable could reduce the cost of such financing for those who still need to access tax equity markets. All the tax credits currently using the tax equity approach are nonrefundable. Nonrefundable credits have value only to the extent that there is a tax liability to offset. In contrast, refundable credits have value regardless of tax liability. For example, if a developer has $1,000 in refundable tax credits and no tax liability, they may claim the credits and receive a tax refund of $1,000. Thus, fully refundable credits are similar to direct grants administered through the tax system. Even if the relevant tax credits were made refundable, there could still be a role for tax equity investment. Current tax credits relying on tax equity are delivered over multiple years or when the investment in qualifying property is complete and tax returns are filed. Project developers, however, typically need upfront capital to make their investments. Thus, developers (for-profit and nonprofit) may still choose to rely on tax equity markets to monetize tax credits even if they were refundable. Alternatively, allowing tax credits to be refundable could make it easier for projects to rely on debt financing. Lenders may be more willing to lend on favorable terms to a project that expects a refundable tax benefit in the future. Moving to refundable credits could potentially increase the amount of subsidy per dollar of federal revenue loss. That is, it could increase the efficiency of the subsidy delivery mechanism and result in more of the targeted activity taking place. As discussed previously, all else equal, higher tax credit prices imply there is more federal subsidization per dollar loss of federal tax revenue. With refundable tax credits, current tax equity investors would be expected to pay more for each tax credit because the risk of not having sufficient tax liability to use the credits would be removed. Additionally, potential investors who are currently not purchasing tax credits because of uncertainty over their ability to use nonrefundable tax credits may enter the market now that the uncertainty is gone. This would add to the competition among investors and would likely put upward pressure on tax credit prices, further enhancing the subsidy mechanism. Transitioning to refundable business tax credits raises two potential concerns. The first is the federal cost. Refundable tax credits typically result in a large revenue loss because they may be fully utilized regardless of tax liability, whereas nonrefundable credits may be claimed only to the extent there is a tax liability, which can result in a portion of nonrefundable credits ultimately going unused. This concern is likely less of an issue with LIHTC and NMTC, since few of these tax credits currently go unclaimed. This implies that converting these to refundable credits would likely not result in a significant increase in federal revenue loss. Making the energy credits (PTC and ITC) refundable could result in considerable federal revenue loss. ITCs and PTCs that are currently carried forward and ultimately go unused under current law could instead be claimed immediately by taxpayers. For energy tax credits, many are claimed without the involvement of tax equity investors. Tax equity investors typically require projects to be of a certain size (i.e., generate a certain amount of tax benefits) to invest. As a result, there are many PTC- and ITC-eligible projects that are not able to monetize tax benefits using tax equity investors. Making energy tax credits refundable could (1) make the tax credits more attractive to developers that are not currently participating in tax equity markets; and (2) reduce the cost of tax equity for developers that are participating. Without a cap on the amount of ITCs or PTCs that can be claimed, if policy changes were made that increased demand for credits, the cost associated with delivering those credits would increase. One option to address concerns about the potential cost associated with an unlimited tax credit would be to limit the amount of tax credits that could be claimed. There is some experience with refundable energy tax credits. The energy tax credits enacted for wind and solar in the late 1970s were refundable, although legislation was enacted to make the credits nonrefundable in 1980. Also, several states offer tax credits designed to promote renewable energy that are refundable. The second concern is allowing businesses to claim a refundable tax credit generally. Refundable tax credits are a useful tool for providing income support via the tax code. For this reason, refundable tax credits have generally been reserved for households, and mostly for lower-income households. Some may take issue with allowing businesses to access an income-support tax incentive. Others assert that allowing the credits to be refundable would likely result in each dollar of federal tax revenue loss yielding more subsidy flowing into the intended activity. The tax credits could be replaced with grants. A concern with the current tax equity mechanism is the amount of subsidy that is diverted away from the underlying activity and toward third-party investors and middlemen. Even if the tax credits were fully refundable, as discussed above, tax equity might still be used to monetize tax credits to get upfront financing. Nonprofit entities that do not file federal income tax returns would also not generally benefit directly from an incentive delivered through the tax code. Another concern with the current tax equity structure that has already been mentioned is that it can potentially create a bias toward larger-scale projects because of tax credit investors' appetite for credits combined with the cost savings from evaluating and monitoring fewer projects. One way to potentially overcome or mitigate these concerns would be to provide lump-sum grants. The effective subsidy would correspond to the federal revenue loss, and there would no longer be a bias toward larger projects resulting from the way the subsidy was delivered. The tradeoff, however, is that there would be no outside investors scrutinizing the long-term feasibility of potential projects or monitoring compliance after construction—though a mechanism such as that used to award NMTCs may help address this concern. Thus, there could be an increase in project failure and noncompliance, without the federal government (and in some cases, state governments) filling the role of tax credit investors. Carefully designed recapture provisions would also be needed in the case of project failure. In the end, replacing tax credits with grants would likely increase government administrative costs that could offset the increased subsidy flowing to the projects from the removal of tax credit investors. An option for maintaining the role of investors would be to deliver a portion of the tax credits as upfront grants, and deliver the remaining tax credits over time. To maintain a feasible tax credit market and investor participation, the proportion of grant funding would have to be such that enough developers sold their remaining tax credits. It is not clear exactly what proportion would achieve the appropriate balance, although there are several options. The federal government could statutorily determine a particular split, such as 50% grants and 50% tax credits. For programs primarily administered by states, such as the LIHTC, the decision could be left to the states. Alternatively, developers could request that a specific amount of their funding be in the form of grants up to a certain percentage. In any case, if enough developers chose not to sell their credits, then the tax credit market would not function well, and project feasibility assessment and compliance monitoring responsibilities would fall on the government. There is recent precedent for allowing grants in lieu of tax credits. During the Great Recession, falling corporate tax liabilities reduced investor demand for credits, leading to depressed credit prices. In response to the general macroeconomic conditions at the time, Congress passed the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) in early 2009. The act allowed a portion of LIHTCs to be converted into grants. Renewable energy tax credits also had the option of receiving a grant in exchange for forgoing future tax benefits. In the case of the LIHTC, the grants were awarded via the competitive process used for awarding the credits. The need to intervene in tax credit markets highlights that the tax equity mechanism can create fluctuations in the subsidy qualified activities receive, as was discussed in the \" Subsidy Fluctuations \" section. In addition, ARRA allowed taxpayers who otherwise would have been eligible for the PTC or ITC to elect to receive a one-time grant from the Treasury in lieu of these tax benefits. Initially, the grant option was to be available for 2009 and 2010, although the policy was later extended such that projects that began construction before the end of 2011 could qualify. Since the grant was designed to be in lieu of existing tax benefits, tax benefits that could be claimed only by tax-paying entities, tax-exempt entities were not eligible. The tax code could be modified to allow the direct transfer of tax credits without having to form a legal partnership. Currently, federal tax law requires tax equity investors to have an ownership interest in the underlying business venture in order to claim the associated tax credits. To meet this requirement, monetization of federal tax credits typically takes place within a partnership structure that legally binds the project's sponsor and investors for a period of time. In contrast, certain states permit state tax credits to be sold directly to investors without the need to establish a legal relationship. Removing the need to form a partnership to invest in tax equity projects could broaden the pool of potential investors. In turn, this could enhance competition for tax credits, resulting in more equity finance being raised per dollar of forgone federal tax revenue. It is unclear, however, what impact the direct transfer of credits would have on deals involving other tax benefits that are often bundled with the tax credits. For example, the section titled \" The Tax Equity Investor's Return \" notes that investors may also secure a claim to other state and federal tax incentives, operating income and losses, capital gains when the underlying investment is sold, or goodwill with the community or regulators. A number of issues would need to be addressed before allowing tax credits to be directly transferred. For example, allowing credits to be sold to anonymous investors with no formal ties to the underlying project potentially removes the tax equity investors' oversight incentives, which are a crucial feature of the current approach. Additionally, procedures would need to be implemented to track who has the right to claim the credits and prevent credits from being claimed (or from being recaptured) in instances of noncompliance or project failure. A decision would also need to be made about whether credits could be transferred only once, or if purchasers could resell credits. This would determine the resources needed to accurately track eligible credit claimants. Policymakers would also face the issue of who could participate in this market. Unsophisticated investors may not fully understand the risks or how to properly scrutinize these investments. Some of these issues may be resolved by the market itself if direct transfers were permitted. For example, at the state level, tax credit brokers have emerged to facilitate the exchange of transferable credits. There are also a number of online tax credit exchanges where state tax credits are traded. Brokers or exchanges can provide some level of expertise and guidance on the risks of these transactions. Their services also come at a cost that reduces the subsidy directed to the targeted activity. Imposing reporting requirements on brokers or exchanges may help with the administration of a direct transfer regime. Another option would be to allow more flexibility in transferring tax credits among various project participants. For example, tax-exempt entities engaged in a subsidized activity could be allowed to transfer their tax credit to someone else involved in the project (a designer or builder, or the provider of financing, for example) without entering into a formal partnership. As was the case with general transferability of credits, even allowing more restricted transfer of credits could impose additional administrative and oversight burdens on both taxpayers and the government. Accelerating the credits could potentially reduce the cost of tax equity. This option, however, would not eliminate the need to rely on tax equity markets altogether. Further, this option is most directly applicable to tax credits or other tax benefits that accrue and reduce tax liability over a multiyear period, as opposed to the current tax year. A straightforward way to accelerate the credits would be to shorten the time period over which they are claimed. Alternatively, acceleration could also be achieved by leaving the claim periods unaltered, and frontloading the credits so that a greater proportion could be claimed in the earlier years. Either of these changes would likely increase the amount of equity a developer could raise from a given tax credit award because tax equity investors would be willing to pay a higher price per dollar of tax credit. This, in turn, would result in more subsidy flowing into the targeted investment, and allow for more projects to be undertaken for the same federal revenue loss. Tax equity investors would be willing to pay more if credits were accelerated for two reasons. First, a shorter claim period means that investors would reduce the discount applied to the total stream of tax credits, since they could offset tax liabilities sooner. Second, longer claim periods result in more uncertainty (risk) over whether an investor will have sufficient tax liability to use purchased credits. Accelerating the tax credit reduces that risk, and less risk would lead to current investors being willing to pay higher prices for tax credits. Less risk could also bring new tax equity investors into the market, which would also tend to increase tax credit prices. A concern with accelerating the tax credits is the potential for participants to lose focus on the investment after they have claimed all the credits. This concern could be addressed with a compliance period that is longer than the claim period and with credit recapture. For example, currently LIHTC is claimed over a 10-year period, but investors and developers are subject to a 15-year compliance period. Should the project fall out of compliance with the LIHTC rules in the last five years, the investors are subject to recapture of previously claimed tax credits. For purposes of this example, the claim period could be shortened to five years while leaving the 15-year compliance period in place.", "summary": "This report provides an introduction to the general tax equity financing mechanism. The term tax equity investment describes transactions that pair the tax credits or other tax benefits generated by a qualifying physical investment with the capital financing associated with that investment. These transactions involve one party agreeing to assign the rights to claim the tax credits to another party in exchange for an equity investment (i.e., cash financing). The exchange is sometimes referred to as \"monetizing,\" \"selling,\" or \"trading\" the tax credits. Importantly, however, the \"sale\" of federal tax credits usually occurs within a partnership or contractual agreement that legally binds the two parties. Three categories of tax credits that either currently use or have recently used this mechanism are presented in this report to help explain the structure and function of tax equity arrangements. These include the low-income housing tax credit (LIHTC); the new markets tax credit (NMTC); and two energy-related tax credits—the renewable electricity production tax credit (PTC) and energy investment tax credit (ITC). While these credits all use the tax equity financing mechanism, no two credits do so in the same manner. The economic rationale for subsidizing the activities targeted by these tax credits is not evaluated. Instead, this report focuses on explaining the structure and functioning of tax equity arrangements, analyzing the delivery of federal financial support using this mechanism, and discussing various policy options related to tax credits that rely on tax equity. Four policy options are presented to help Congress should it consider modifications to an existing tax equity program, or create a new one. The options are with respect to the general tax equity approach and include making the credits refundable, converting the credits to grants, allowing for the direct transfer of credits, and accelerating the credit claim periods. This list of options is not exhaustive. Due to important differences in the underlying structure of various current or future credits, some options may be better suited for particular credits than others. Careful consideration on a case-by-case basis is part of evaluating the appropriateness of each option. Consideration of various options might ask whether the use of tax equity markets is an efficient and effective means of delivering federal financial support. At first glance, it may appear that the government would get more \"bang for its buck\" by delivering subsidies more directly, without a role for tax equity markets. However, such a conclusion overlooks one role that tax equity investors play in some industries in addition to providing financing: they evaluate the quality of projects before investing, as well as provide continuing oversight and compliance monitoring. Effectively, the tax equity mechanism outsources a portion of the oversight and compliance monitoring to investors in exchange for a financial return. On the one hand, there may be value to the federal government in being able to rely on outside investors to provide oversight and monitoring. On the other hand, for some tax equity programs that have a government entity overseeing participant compliance, the monitor role of investors may be redundant. There also may be ways to improve the current delivery approach.", "document_type": "crs"}
{"report": "Social Security provides dependent benefits and survivors benefits , sometimes collectively referred to as auxiliary benefits , to the spouses, former spouses, widow(er)s, children, and parents of retired, disabled, or deceased workers. Auxiliary benefits are based on the work record of the household's primary earner. Social Security spousal benefits (i.e., benefits for a wife or husband of the primary earner) are payable to the spouse or divorced spouse of a retired or disabled worker. Social Security survivors benefits are payable to the survivors of a deceased worker as a widow(er), as a child, as a mother or father of the deceased worker's child(ren), or as a dependent parent of the deceased worker. Although Social Security is often viewed as a program that primarily provides benefits to retired or disabled workers, 33% of new benefit awards in 2017 were made to the dependents and survivors of retired, disabled, and deceased workers. Spousal and survivors benefits play an important role in ensuring women's retirement security. However, women continue to be vulnerable to poverty in old age, due to demographic and economic reasons. This report presents the current-law structure of auxiliary benefits for spouses, divorced spouses, and surviving spouses. It makes note of adequacy and equity concerns of current-law spousal and widow(er)'s benefits, particularly with respect to female beneficiaries, and discusses the role of demographics, the labor market, and current-law provisions on adequacy and equity. The report concludes with a discussion of proposed changes to spousal and widow(er) benefits to address these concerns. The original Social Security Act of 1935 (P.L. 74-271) established a system of Old-Age Insurance to provide benefits to individuals aged 65 or older who had \"earned\" retirement benefits through work in jobs covered by the system. Before the Old-Age Insurance program was in full operation, the Social Security Amendments of 1939 (P.L. 76-379) extended monthly benefits to workers' dependents and survivors. The program now provided Old-Age and Survivors Insurance (OASI). The 1939 amendments established benefits for the following dependents and survivors: (1) a wife aged 65 or older; (2) a child under the age of 18; (3) a widowed mother of any age caring for an eligible child; (4) a widow aged 65 or older; and (5) a surviving dependent parent aged 65 or older. In its report to the Social Security Board (the predecessor to the Social Security Administration) and the Senate Committee on Finance, the 1938 Social Security Advisory Council justified creating spousal benefits on the grounds of the adequacy of household benefits: The inadequacy of the benefits payable during the early years of the old-age insurance program is more marked where the benefits must support not only the annuitant himself but also his wife. In 1930, 63.8 per cent of men aged 65 and over were married. Payment of supplementary allowances to annuitants who have wives over 65 will increase the average benefit in such a manner as to meet the greatest social need with the minimum increase in cost. The Council believes that an additional 50 percent of the basic annuity would constitute a reasonable provision for the support of the annuitant's wife. The Social Security Board concurred in its own report, which it wrote based on the council's report. The board also found that benefit adequacy was the primary justification for spousal benefits: The Board suggests that a supplementary benefit be paid for the aged dependent wife of the retired worker which would be related to his old-age benefit. Such a plan would take account of greater presumptive need of the married couple without requiring investigation of individual need. Since 1939, auxiliary benefits have been modified by Congress many times, including the expansion of benefits to husbands, widowers, and divorced spouses. The legislative history of auxiliary benefits is outlined in detail in Appendix A . Auxiliary benefits for a spouse, survivor, or other dependent are based on the benefit amount received by a primary earner (an insured worker). The primary earner may receive a Social Security retirement or disability benefit. Social Security retirement benefits are based on the average of a worker's highest 35 years of earnings (less up to 5 years for years of disability) from covered employment. A worker's basic benefit amount ( primary insurance amount or PIA) is computed by applying the Social Security benefit formula to the worker's career-average, wage-indexed monthly earnings ( average indexed monthly earnings or AIME). The benefit formula replaces a higher percentage of the preretirement earnings of workers with low career-average earnings than for workers with high career-average earnings. The primary earner's initial monthly benefit is equal to his or her PIA if benefits are claimed at full retirement age (FRA, which ranges from age 65 to age 67, depending on year of birth). A worker's initial monthly benefit will be less than his or her PIA if the worker begins receiving benefits before FRA, and it will be greater than his or her PIA if the worker begins receiving benefits after FRA. The purpose of the actuarial adjustment to benefits claimed before or after FRA is to ensure that the worker receives roughly the same total lifetime benefits regardless of when he or she claims benefits (assuming he or she lives to average life expectancy). Auxiliary benefits are paid to the spouse, former spouse, survivor, child, or parent of the primary earner. Auxiliary benefits are determined as a percentage of the primary earner's PIA, subject to a maximum family benefit amount. For example, the spouse of a retired or disabled worker may receive up to 50% of the worker's PIA, and the widow(er) of a deceased worker may receive up to 100% of the worker's PIA. As with benefits paid to the primary earner, auxiliary benefits are subject to adjustments based on age at entitlement and other factors. A basic description of auxiliary benefits is provided in the following sections, with more detailed information provided in Appendix B . Social Security provides a spousal benefit that is equal to 50% of a retired or disabled worker's PIA. A qualifying spouse must be at least 62 years old or have a qualifying child (a child who is under the age of 16 or who receives Social Security disability benefits) in his or her care. A qualifying spouse may be either married to or separated from the worker. An individual must have been married to the worker for at least one year before he or she applies for spousal benefits, with certain exceptions. In addition, the worker must be entitled to (generally, collecting) benefits in order for an eligible spouse to become entitled to benefits. If a spouse claims benefits before FRA, his or her benefits are reduced to take into account the longer expected period of benefit receipt. An individual who is entitled to a Social Security benefit based on his or her own work record and to a spousal benefit in effect receives the higher of the two benefits (see \" Dually Entitled Beneficiaries \" below). Under current law, surviving spouses (including divorced surviving spouses) may be eligible for aged widow(er) benefits beginning at the age of 60. If the surviving spouse has a qualifying disability and meets certain other conditions, survivors benefits are available beginning at the age of 50. The aged widow(er)'s basic benefit is equal to 100% of the deceased worker's PIA. A qualifying widow(er) must have been married to the deceased worker for at least nine months and must not have remarried before the age of 60 (or before age 50 if the widow[er] is disabled). Widow(er)s who remarry after the age of 60 (or after age 50 if disabled) may become entitled to benefits based on the prior deceased spouse's work record. Widow(er)s who are caring for children under the age of 16 or disabled may receive survivors benefits at any age and do not have to meet the length of marriage requirement—see \" Mothers and Fathers \" below. If an aged widow(er) claims survivors benefits before FRA, his or her monthly benefit is reduced (up to a maximum of 28.5%) to take into account the longer expected period of benefit receipt. In addition, survivors benefits may be affected by the deceased worker's decision to claim benefits before FRA under the widow(er)'s limit provision (see Appendix B ). As with spouses of retired or disabled workers, a surviving spouse who is entitled to a Social Security benefit based on his or her own work record and a widow(er)'s benefit receives in effect the higher of the two benefits (see \" Dually Entitled Beneficiaries \" below). Social Security provides benefits to a surviving spouse or divorced surviving spouse of any age who is caring for the deceased worker's child, when that child is either under the age of 16 or disabled. Mother's and father's benefits are equal to 75% of the deceased worker's PIA, subject to a maximum family benefit. There are no length of marriage requirements for mother's and father's benefits, whether the beneficiary was married to, separated from, or divorced from the deceased worker; however, remarriage generally ends entitlement to mother's and father's benefits. Spousal benefits are available to a divorced spouse beginning at the age of 62, if the marriage lasted at least 10 years before the divorce became final and the person claiming spousal benefits is currently unmarried. A divorced spouse who is younger than 62 years old is not eligible for spousal benefits even with an entitled child in his or her care. Survivors benefits are available to a divorced surviving spouse beginning at the age of 60 (or beginning at age 50 if the divorced surviving spouse is disabled) if the divorced surviving spouse has not remarried before the age of 60 (or before age 50 if disabled), or if the surviving divorced spouse has an entitled child in his or her care. Divorced spouses who are entitled to benefits receive the same spousal and survivors benefits as married or separated persons. If a divorced spouse claims benefits before FRA, his or her benefits are reduced to take into account the longer expected period of benefit receipt. In addition, a divorced spouse who is entitled to a Social Security benefit based on his or her own work record and a spousal or survivor benefit receives in effect the higher of the two benefits (see \" Dually Entitled Beneficiaries \" below). A divorced person who was married to a primary earner for less than 10 years does not qualify for spousal benefits on that spouse's record (although he or she may qualify for benefits based on his or her own record or on another spouse's record). First marriages that end in divorce have a median duration of 8 to 12 years. Table 1 shows that the proportions of males and females who have a marriage that lasted longer than 10 years was higher from 1960 to 1964 than those in recent decades. About 83% of women who married for the first time during the early 1960s stayed married for 10 years or longer; however, for women who married between 1970 and 1999, about 71%-75% of women's first marriages have lasted for 10 years or more. This percentage dropped to 58% for women who first married during the early 2000s. Other data suggest that, for men and women aged 15 to 44 between 2006 and 2010, the probability of a first marriage lasting 10 years or longer was 68%. The probability that a first marriage would remain intact for at least 10 years was 73%, 56%, and 68% for Hispanic, black, and white women, respectively. In addition, among the women who were first divorced in 2012, 60% of them had a marriage lasting for 10 or more years. A person may qualify for a spousal or survivor benefit as well as for a Social Security benefit based on his or her own work record (a retired-worker benefit). In such cases, the person in effect receives the higher of the worker benefit and the spousal or survivor benefit. When the person's retired-worker benefit is higher than the spousal or survivor benefit to which he or she would be entitled, the person receives only the retired-worker benefit. Conversely, when the person's retired-worker benefit is lower than the spousal or survivor benefit, the person is referred to as dually entitled and receives the retired-worker benefit plus a spousal or survivor benefit that is equal to the difference between the retired-worker benefit and the full spousal or survivor benefit. In essence, the person receives a total benefit amount equal to the higher spousal benefit. Women have increasingly become entitled to Social Security benefits based on their own work records, either as retired-worker beneficiaries only or as dually entitled beneficiaries. As shown in Figure 1 , the percentage of women aged 62 or older entitled to benefits based on their own work records—as retired workers or as dually entitled beneficiaries—grew from 43% in 1960 to 79.3% in 2017. More than half of this growth was in the percentage of dually entitled beneficiaries. The percentage of women aged 62 or older entitled to benefits based solely on their own work records fluctuated between 36% and 42% between 1960 and 2005, before increasing to 54.2% in 2017. In 2017, 45.7% of women aged 62 or older relied to some extent on benefits received as a spouse or survivor: 25% of spouse and survivor beneficiaries were dually entitled and 20.7% received spousal or survivors benefits only. As shown in Table 2 , among wives who were dually entitled spousal beneficiaries in December 2017, the retired-worker benefit accounted for 68% of the combined monthly benefit (the retired-worker benefit with a top-up provided by the spousal benefit) and the spousal benefit accounted for 32% of the combined monthly benefit, on average. Among widows who were dually entitled survivor beneficiaries, the retired-worker benefit and the widow(er)'s benefit each accounted for about half of the combined monthly benefit, on average. Many more women than men are dually entitled to retired-worker benefits and spousal or widow(er)'s benefits. As shown in the table, in December 2017, about 6.9 million women and 235,533 men were dually entitled to benefits. Spousal and survivors benefits play an important role in ensuring women's retirement security. In December 2017, about 25.4 million elderly (aged 65 and older) women received Social Security benefits, including 13.3 million women who received only retired-worker benefits, 2.1 million women who were entitled solely as the spouse of a retired worker, 3.2 million women who were entitled solely as the survivor of a deceased worker, and 6.7 million women who were dually entitled to a retired-worker benefit and a spousal or survivor benefit. In 2017, Social Security provided 50% or more of family income for more than 53% of elderly women in beneficiary families and 90% or more of family income for about 28% of elderly women in beneficiary families. Women, however, continue to be vulnerable to poverty in old age for several reasons. These reasons can generally be split into demographic reasons and economic reasons. In addition, the design of auxiliary benefits can lead to equity concerns. With respect to demographic and economic reasons that lead to adequacy concerns, Women on average live longer than men, and thus more women are likely to be widowed than are men. Women reaching the age of 65 in 2017 are likely to live another 20.7 years, on average, compared with another 18.2 years for men. About 5% of women aged 50-59, about 16% of women aged 60-75, and about 56% of women aged 75 and older are currently widowed. By comparison, about 2% of men aged 50-59, about 5% of men aged 60-75, and about 21% of men aged 75 and older are widowed. As a consequence, women may spend more time in retirement and are more vulnerable to inflation and the risk of outliving other assets. The real value of private pension benefits declines with age, as private pensions are generally not adjusted for inflation, and some private pensions cease with the death of the retired worker. Women are more likely to take employment breaks to care for children or parents, and thus have a lower labor force participation rate than men. During 2016, 88.5% of men and 74.3% of women aged 25-54 participated in the labor force. The rate for women with children under three years old was lower, at 63%. Breaks in employment result in fewer years of contributions to Social Security and employer-sponsored pension plans and thus lower retirement benefits. The median earnings of women who are full-time wage and salary workers are 82% of their male counterparts. Because Social Security and private pension benefits are linked to earnings, this \"earnings gap\" can lead to lower benefit amounts for women than for men. Social Security benefits are designed in a way that can result in inequities between households with similar earning profiles. Spousal and survivors benefits were added to the Social Security system in 1939. At that time, the majority of households consisted of a single earner—generally the husband—and a wife who was not in the paid workforce but instead stayed home to care for children. However, in recent decades, women have increasingly assumed roles as wage earners or as heads of families. A beneficiary who qualifies for both a retired-worker benefit and a spousal benefit does not receive both benefits in full. Instead, the spousal benefit is reduced by the amount of the retired-worker benefit; this effectively means the beneficiary receives the higher of the two benefit amounts. Because of this, a two-earner household receives lower combined Social Security benefits than a single-earner household with identical total Social Security-covered earnings, despite paying more in Social Security taxes. Moreover, after the death of one spouse, the disparity in benefits may increase: in a one-earner couple, the surviving spouse receives two-thirds of what the couple received on a combined basis, whereas in some two-earner couples with roughly equal earnings, the surviving spouse receives roughly one-half of what the couple received on a combined basis. Social Security is credited with keeping many of the elderly out of poverty. However, in 2017, 6.5% of Social Security beneficiaries aged 65 or older were below the poverty line. Figure 2 highlights the differences in poverty status among men and women aged 65 or older who received Social Security benefits in 2017, after Social Security is combined with other sources of income such as earnings from work, pensions, income from assets, and cash assistance. Figure 2 shows that married beneficiaries have significantly lower poverty rates than nonmarried beneficiaries and that nonmarried women aged 65 or older—including widowed, divorced, and never-married women—are more likely to be in poverty than their male counterparts. Particularly vulnerable among women are divorced beneficiaries and the never-married. Among women aged 65 and older, about 13.7% of divorced Social Security beneficiaries and 18.0% of never-married Social Security beneficiaries have total incomes below the official poverty line in 2017. Among Social Security beneficiaries aged 65 and over, poverty rates are also high among never-married men, at a rate of 17.5% in 2017. The reasons for the disparity in poverty rates among elderly men and women relate in part to women's lower lifetime earnings, which affect Social Security benefits and private pensions. Low lifetime earnings can be due to lower labor force participation of women and the earnings gap. In addition, women live two to three years longer than men on average, making them more likely to exhaust retirement savings and other assets before death. In addition, if the deceased husband was receiving a pension, the widow's benefit may be significantly reduced, or the pension may cease with the husband's death, depending on whether the couple had a joint and survivor annuity and how the joint and survivor annuity was structured. Elderly widows also may be at risk if assets are depleted by health-related expenses prior to the spouse's death. During the past several decades, the labor force participation rate among women increased, but still remained below the rate among men. In 1950, about 34% of women aged 16 or older participated in the labor force, compared with about 86% of men aged 16 or older. By 2016, about 57% of women aged 16 or older participated in the labor force, compared with 69% of men in the same age group. Women are also more likely than men to work part-time (i.e., less than 35 hours per week in a sole or principal job). In 2016, 25% of women in wage and salary jobs worked part-time, compared with 12% of men. Women with children under the age of 18 have increasingly entered the labor force in recent decades (see Figure 3 ). However, women with children have fewer years of paid work, on average. By the age of 50, women without children who were born between 1948 and 1958 had worked on average about two years less than men overall (i.e., men with and without children). For a woman with two children, however, the gap at the age of 50 was about 6.5 years less than the average man with or without children. In 2017, about 69% of mothers were employed, compared with 91% of fathers. In addition to childcare, women are also more likely than men to provide care to a spouse, a parent, or some other adult relative. One survey estimates that, among 39.8 million caregivers who have provided unpaid care to an adult in 2015, 60% of them are female. Some researchers find that female caregivers tend to work fewer hours per week and earn a lower wage than non-caregivers. Another study shows that women who leave work to provide care may face relatively low probabilities of returning to work. Another reason why women receive lower retired-worker benefits than men is that full-time women workers earn about 80%-82% of the median weekly earnings of their male counterparts. In 2016, women who were full-time wage and salary workers had median weekly earnings of $749, or about 82% of the $915 median earned by their male counterparts. The women's-to-men's earnings ratio was about 62% in 1979 and, after increasing gradually during the 1980s and 1990s, has ranged between 80% and 82% since 2004. In 2016, the earnings gap between women and men varied among age groups (see Table 3 ). Among full-time workers, women aged 16-24 earned about 95% as much as men; women aged 25-34 earned about 89% as much as men; and women aged 55-64 earned about 74% as much as men. Over time, the earnings gap between women and men has narrowed for most age groups. For example, among full-time workers aged 25-34, the women's-to-men's earnings ratio increased from 68% in 1979 to 89% in 2016. For workers aged 35-44, the earnings ratio increased from 58% in 1979 to 83% in 2016. Similarly, for workers aged 45-54, the earnings ratio increased from 57% in 1979 to 78% in 2016. Part of the earnings gap can be attributed to differences between men's and women's years of education, full-time work experience, and occupations. Comparing the annual earnings of women and men may understate differences in total earnings across longer periods. Using a 15-year time frame (1983-1998), one study found that women in the prime working years of 26 to 59 had total earnings that were 38% of what prime-age men earned, in total, over the same 15-year period. Another study found that women born between 1955 and 1959 who worked full-time, year-round each year would have an average lifetime loss of $531,500 by age 59, compared with men. As women enter the work force in greater numbers, more women will qualify for Social Security benefits based on their own work records, instead of a spousal benefit that is equal to 50% of the husband's PIA. However, retired-worker and disabled-worker benefits for women continue to be lower than those for men on average for a variety of reasons, as discussed above. Consequently, after the death of a husband, the survivor's benefit, which is equal to 100% of the husband's PIA, will continue to play an important role in the financial well-being of widows. Although Social Security provides essential income support to nonworking spouses and widows, the current-law spousal benefit structure can lead to a variety of incongruous benefit patterns that have been documented in the literature. For example, a woman who was never employed but is married to a man with high Social Security-covered wages may receive a Social Security spousal benefit that is higher than the retirement benefit received by a single woman, or a woman who was married less than 10 years, who worked a full career in a low-wage job. The current system provides proportionately more benefits relative to payroll-tax contributions to one-earner couples (which predominated when Social Security was created in the 1930s) than to single persons or to couples with two earners, on average. As a result, the current system can lead to situations in which Social Security provides unequal benefits to one-earner and two-earner couples with the same total household lifetime earnings. Putting this in a different perspective, some two-earner couples may have to contribute significantly more to Social Security to receive the same retirement and spousal benefits that the system provides to a one-earner couple with identical total household earnings. As women's share of household income has increased, and also as women have increasingly become heads of families, these anomalies could become more relevant. Table 4 illustrates the disparate treatment of one-earner and two-earner couples with examples developed by the American Academy of Actuaries. In the table, a one-earner couple with household earnings of $50,000 is compared with two different two-earner couples. The second couple in the comparison is a two-earner couple with the same total household earnings ($50,000) as the one-earner couple, with the earnings evenly split between the two spouses (each spouse earns $25,000). The third couple in the comparison is a two-earner couple in which one spouse earns $50,000 (the same as the primary earner in the one-earner couple) and the other spouse earns half that amount, or $25,000, for total household earnings of $75,000. As the table illustrates, a one-earner couple may receive higher retirement and survivors benefits than a two-earner couple with identical total household earnings. Specifically, the first couple with one earner receives a total of $2,655 in monthly retirement benefits, compared with the second couple with two earners, who receives a total of $2,240 in monthly retirement benefits. Similarly, the survivor of the one-earner couple receives $1,770 in monthly benefits (either as a retired worker or as a surviving spouse). In comparison, the survivor of the two-earner couple with identical total household earnings receives $1,120 in monthly benefits. In the third couple shown in Table 4 , both spouses work in Social Security-covered employment, but in this example one spouse earns $50,000 annually and the other spouse earns $25,000. This couple receives monthly benefits that are $235 higher than the monthly benefits received by the one-earner couple ($2,890 compared with $2,655); however, this couple has earned much more over time ($25,000 annually) and contributed commensurately more in Social Security payroll taxes ($1,550 annually). The survivor benefit received by the third couple is identical to that received by the one-earner couple. Thus, the current-law Social Security spousal benefit structure requires some two-earner couples to make substantially higher contributions for similar benefit levels. With higher earnings but similar benefits to the one-earner couple, the third couple's replacement rate of 46% (i.e., family total monthly benefits as a percentage of preretirement earnings) is lower than that of the one-earner couple, which is 64%. After the death of one spouse, the disparity in benefits between one-earner and two-earner couples may increase, as shown in the table. For the one-earner couple, the surviving spouse receives a benefit equal to two-thirds of the couple's combined benefit (for a reduction equal to one-third of the couple's combined benefit). For a two-earner couple with equal earnings (the second couple), the surviving spouse receives a benefit equal to one-half of the couple's combined benefit. Further, the surviving spouse in the first couple (the one-earner couple) receives a larger monthly benefit than the survivor of the second couple (a two-earner couple with earnings evenly split)—$1,770 compared with $1,120—although both couples paid the same amount of Social Security payroll tax contributions. Similarly, compared with the one-earner couple, the surviving spouse in the third couple (a two-earner couple with unequal earnings and higher total earnings than the one-earner couple) receives the same monthly benefit ($1,770) although the couple paid a higher amount of Social Security payroll tax contributions. For both two-earner couples in these examples, after the death of one spouse, the second earnings record does not result in the payment of any additional benefits. When spousal and survivors benefits were first established, most households consisted of a single earner—usually the husband—and a wife who cared for children and remained out of the paid workforce. As a result, benefits for nonworking spouses were structured to be relatively generous. Over the past six decades, women's earnings have increased and the share of households who have one earner has declined, and thus the share of women beneficiaries who received Social Security benefits solely based on husband's earnings record has decreased (see Figure 1 ). In addition to inequities among couples with different work histories and earnings levels, the current structure of Social Security auxiliary benefits creates inequities among the divorced. Divorced spouses with 9½ years of marriage, for example, receive no Social Security spousal and survivors benefits, whereas divorced spouses with 10 or more years of marriage may receive full spousal and survivors benefits. The current structure of Social Security spousal and survivors benefits raises other considerations for lawmakers with respect to potential policy changes. Social Security automatically provides pension rights to one or more eligible divorced spouses, in contrast to private pensions. Further, the benefit payable to the primary earner is not reduced for benefits paid to a current or one or more former spouses, again in contrast to private pensions. Divorced spouses receive a higher benefit after the death of their former spouse (the primary earner): benefits for a divorced spouse are equal to 50% of the primary earner's PIA, while benefits for a divorced surviving spouse are equal to 100% of the primary earner's PIA. This can create volatility in the income of divorced spouses. Widow(er)s who had high-earning spouses may face disincentives to marry a lower-earning second husband (if remarriage occurs before the eligibility age for widow[er]'s benefits). In response to the adequacy, equity, and other program design issues described above, policymakers and researchers have proposed a number of ways to restructure Social Security auxiliary benefits. Some of these proposals are discussed in the following section. A number of proposals have been put forward to modify the current structure of Social Security spousal and survivors benefits. These proposals have different potential consequences for benefit levels of current, divorced, and surviving spouses; for the redistribution of benefits among couples from different socioeconomic levels; for the eligibility of means-tested programs such as Supplemental Security Income; and for work incentives. Earnings sharing has been suggested as a way to address the unequal treatment of one-earner versus two-earner couples under current law. As noted above, Social Security often provides higher benefits to one-earner couples than to two-earner couples with the same total household earnings. In addition, earnings sharing has sometimes been suggested as a way to provide benefits to divorced women whose marriages did not last long enough (at least 10 years) to allow them to qualify for divorced spousal or survivors benefits. By definition, earnings sharing would not affect never-married persons. Under the most basic form of earnings sharing, spousal and survivors benefits would be eliminated. Instead, for each year of marriage, a couple's covered earnings would be added together and divided evenly between the spouses. For years when an individual is not married, his or her own earnings would be recorded. If a person has multiple marriages, the earnings sharing would occur during each period of marriage. Both members of a couple would have individual earnings records reflecting shared earnings as a member of the couple as well as any earnings before or after the marriage. Social Security benefits would be computed separately for each member of the couple, based on the individual earnings records and using the current-law benefit formula. For couples who were married for the entire career of one or both members, both members of the couple would receive identical benefits and the couple's combined benefit would be equal to twice that of either member of the couple. The two spouses would receive different benefits, however, if either had earnings before or after the marriage. Earnings sharing proposals would reduce benefits for the majority of individuals, relative to current law, and in the absence of other benefit enhancements. For example, a 2009 Social Security Administration (SSA) study (hereinafter, 2009 SSA Study) found that 61% of individuals would receive average benefit reductions of about 17%. About 11% of individuals would experience no change in benefits, and 28% would experience benefit increases averaging about 10%. Among married couples, the benefit decrease under earnings sharing proposals would be substantially larger among individuals in one-earner married couples than two-earner married couples. This is mainly because the current system on average provides proportionately more benefits relative to payroll-tax contributions to one-earner couples than to couples with two earners, but under earnings sharing, couples with the same total lifetime earnings generally would receive the same benefits regardless of their individual earnings profiles, all things being equal. Studies have found that the largest benefit reductions under earnings sharing could affect widows and divorced women. The 2009 SSA study found that about 93% of widows would experience an average benefit reduction of 27% while 45% of divorced women would experience benefit reductions averaging about 22%. A 2016 study found that 39% of divorced women and 62% of widows would experience a median decrease in benefits of 6% and 14%, respectively. The decline in widow's benefits results from eliminating the surviving spouse benefit under current law and replacing it with earnings credits. The widow's benefit under current law is equal to 100% of the husband's PIA, where the husband's PIA is determined based on unshared earnings. Although earnings sharing would increase the amount of earnings credited to the surviving wife (assuming the husband was the higher earner), the benefit payable to the surviving wife based on shared earnings would be lower than the current-law widow's benefit. Another study found that the gains experienced by divorced spouses and some married women under earnings sharing would come largely at the expense of widowed men and women. Some earnings sharing proposals would mitigate these effects by providing enhanced benefits to survivors or other targeted groups. For example, an \"inheritance provision\" could allow a surviving spouse to count all (instead of half) of a deceased spouse's earnings (or those of a deceased former spouse) during each year of marriage, in addition to all of his or her own earnings. An inheritance provision would protect some, though not all, surviving spouses. For example, the 2009 SSA study found that 40% of widows would receive lower benefits relative to current law under earnings sharing with an inheritance provision (compared with 93% without the inheritance provision). Alternatively, benefits for surviving spouses could be based on an amount equal to two-thirds of the combined benefit the couple was receiving when both members of the couple were alive (see \" Survivor's Benefit Increased to 75% of Couple's Combined Benefit \" below), or special provisions could be targeted to surviving disabled spouses. Provisions to protect survivors from benefit reductions, however, would reduce the amount of savings that would otherwise be achieved through program changes. Similarly, provisions to increase benefits for survivors relative to current law would increase program costs. A higher survivor benefit could be self-financed by reducing, on an actuarially fair basis, the combined benefit the couple receives while both members of the couple are alive. Under the current Social Security program, a divorced spouse must have been married to the worker for at least 10 years to qualify for spousal and survivors benefits based on the worker's record, as discussed above. Benefits for divorced spouses are equal to 50% of the worker's PIA; benefits for divorced surviving spouses are equal to 100% of the worker's PIA. One approach to extend Social Security spousal and survivors benefits to more divorced spouses would be to lower the 10-year marriage requirement (for example, to 5 or 7 years). Proposals to lower the length-of-marriage requirement for divorced spouses would improve benefit adequacy for some, although not all, divorced women. One study estimated that lowering the marriage-duration requirement from 10 to 7 years would increase benefits for about 8% of divorced women and 2% of widowed women aged 60 or older in the year 2030. Lowering the marriage-duration requirement to 5 years (with a proportional decrease to benefit amounts) would increase benefits for about 11% of all divorced women in the year 2030. The study found that, among divorced women aged 60 and over who would receive higher benefits as a result of lowering the marriage-duration requirement to 5 or 7 years, the outcomes were moderately progressive in the sense that they channeled a greater share of benefit increases to low-income and non-college-educated divorced women in old age. For example, under a 7-year marriage-duration requirement, about 10% of divorced women in the lowest retirement income quintile would receive a benefit increase compared with around 4% in the highest quintile who would receive a benefit increase. Among divorced women who gain, women in the lowest retirement income quintile would see a median benefit increase of 79%, compared with a median increase of 25% among women in the highest quintile. An earlier study found a similar result. Some researchers contend that the 50% benefit rate for divorced spouses (50% of the worker's PIA) is not sufficient to prevent many divorced spouses from falling into poverty. The 50% benefit rate for spouses initially was established to supplement the benefit received by a one-earner couple (i.e., in 1939, a spousal benefit was provided for a dependent wife to supplement the benefit received by the worker). Some observers contend that it may not be sufficient for persons (divorced spouses) who may be living alone. As described above, about 13.7% of divorced women and 10.3% of divorced men aged 65 and older have incomes below the poverty line, compared with 2.1% and 2.4% of married women and men respectively in 2017 (see Figure 2 ). Another type of benefit modification would increase benefits for the oldest old (for example, beneficiaries aged 80 or older, or after 20 years of benefit receipt) by a specified percentage such as 5%. One rationale for this proposal is that beneficiaries tend to exhaust their personal savings and other assets over time, becoming more reliant on Social Security at advanced ages. Another rationale is that, after the age of 60, Social Security retirement benefits do not keep pace with rising living standards. In particular, the formula for computing a worker's initial retirement benefit is indexed to national average wage growth through the age of 60 and then to price inflation (the Consumer Price Index for Urban Wage and Clerical Workers, or CPI-W) starting at the age of 62. Once a beneficiary begins receiving benefits, his or her benefits increase each year with price inflation (the annual cost-of-living adjustment, based on the CPI-W) so that the initial benefit amount is effectively fixed in real terms. Some argue that the CPI-W is an inaccurate measure of price inflation that seniors face. According to one study, a 5% bump-up in benefits at the age of 80 would result in a slight decline in poverty rates among widows and nonmarried retired-worker beneficiaries aged 80 or older (declines of 3 percentage points and 4 percentage points, respectively). The same study found that this option is not targeted toward low-income beneficiaries: less than 30% of the additional benefits would accrue to beneficiaries in the bottom quintile of the income distribution. Another SSA study finds that a 5% benefit increase in the individual's primary insurance amount for beneficiaries aged 85 or older in 2030 would decrease the projected poverty rate from 1.5% to 1.2%. Alternatively, a benefit increase for the oldest old could be limited to beneficiaries who receive a below-poverty-level benefit. One proposal along these lines would provide a benefit to persons aged 82 or older that would be prorated based on the number of years the person contributed to Social Security. Other proposals would link the Social Security COLA to the Experimental Consumer Price Index for Americans Aged 62 and Older (CPI-E), which grows faster than the CPI-W on average, and is projected to increase Social Security benefits. Although the changes were targeted to all Social Security beneficiaries, those who received COLAs under the new policy for many years, such as the very old or people who had been disabled for a long period, tend to receive the largest benefit increase. Social Security already has a \"special minimum\" benefit designed to help workers with long careers at low wages. A worker is awarded the special minimum benefit only if it exceeds the worker's regular benefit. The value of the special minimum benefit, which is indexed to prices, is rising more slowly than the value of the regular Social Security benefit, which is indexed to wages. As a result, the number of beneficiaries who receive the special minimum benefit under current law declines each year, and the Social Security Administration projected that the special minimum benefit provision would have no effect on people turning 62 years old in 2019 or later. Some observers argue that a carefully designed minimum benefit has the potential to reduce poverty rates among older women, including divorced and never-married women, more efficiently than existing spousal and survivors benefits. Minimum benefit proposals are aimed at improving the adequacy of benefits, in comparison with some other proposals that address issues of equity among individuals and couples with different marital statuses. Most minimum benefit proposals would require the worker to have between 30 and 40 years of Social Security-covered earnings to qualify for a minimum benefit at the poverty line or somewhat above it (for example, 120% of the poverty line). These work tenure requirements are intended to address, although not resolve, concerns that providing a minimum benefit could discourage work effort. Setting eligibility for a full minimum benefit at 30 to 40 years of covered earnings would allow many workers to take several years out of the labor force to care for children (or other family members) and still receive a higher benefit than they would have qualified for in the absence of a minimum benefit. Arguably, intermittent work histories play a greater role than long-term low earnings in leading to below-poverty-level benefits among women. Therefore, proposals for a minimum benefit based on a specified number of years of covered employment could be combined with modified spousal benefits or with a caregiver credit to balance recognition of longer work effort with recognition of the requirements of caregiving. To maintain the minimum benefit at a constant ratio to average living standards, some proposals would link the minimum benefit to wage growth instead of setting the minimum benefit equal to a specified percentage of the poverty line. The official poverty line is indexed to price growth, whereas living standards rise with increases in wages and productivity. Wage growth generally outpaces price growth. The 2010 National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center both proposed packages that included, among other measures, provisions to create new minimum benefits. Some researchers propose modernizing the special minimum benefit by tying it to a poverty level that is in line with the recommendations of the National Academy of Social Insurance. If a new minimum benefit is provided, it would be necessary to address interactions between Social Security benefits and eligibility for Supplemental Security Income, Medicaid, and other means-tested programs for low-income individuals. Women are more likely than men to take career breaks to care for a child or other relative, as discussed above. The Social Security retired-worker benefit is based on the average of a worker's 35 highest years of covered earnings. If a worker has fewer than 35 years of earnings, for example due to years of unpaid caregiving, years of no earnings are entered as zeros in the computation of career-average earnings. Years of zero earnings lower the worker's career-average earnings, resulting in a lower initial monthly benefit. One approach is to replace years of low or zero earnings with a caregiver credit equal to a specified dollar amount. Some proposals would provide the same fixed credit to all eligible persons. Other proposals would link the amount of the credit to foregone earnings, so that higher earners would receive higher credits. The latter proposal would require that the caregiver have been in the paid labor force previously. Some proposals to base benefits on caregiving, rather than on marriage, would eliminate the current spousal benefit. A second approach is to drop years of caregiving , up to a fixed maximum number of years, from the benefit computation period. This approach could be implemented either by dropping years of zero earnings or by dropping years of low earnings. The proposal to drop years of zero earnings (rather than low earnings) would require a person to leave the workforce completely. This could be problematic for many women, making the proposal less likely to reach as many women as a caregiver credit. Allowing a parent to drop up to 5 years of zero (or low) earnings for caring for a child at home would cause the parent's AIME to be calculated based on the highest 30 years of earnings, rather than the highest 35 years of earnings (the benefit computation periods would be reduced from 35 years to 30 years). This change in the benefit computation would result in higher initial monthly benefits for these workers (and higher benefits for family members who receive benefits based on their work records). The Social Security Disability Insurance program allows up to three \"drop-out\" years for caregiving. Policies to credit years of caregiving in the provision of public pension benefits have been implemented in other countries in a variety of ways. In making such a provision, one question to consider is whether the credit should be available only to parents who have stopped working completely or also to parents who continue to work part-time or full-time. Another question to consider is whether to provide credits only for the care of young children or also for the care of other immediate family members such as an aging parent. For example, Canada excludes years of caring for children under the age of 7 from the averaging period in the pension calculation and from the contributory period under its earnings-related scheme, while Germany provides one pension point (equal to a year's contributions at the national average earnings) for three years per child, which can be taken by either the employed or nonemployed parent, or shared between parents (there are also credits for working while children are under the age of 10). Other recent proposals, however, would count additional years of earnings (more than 35 years) in the Social Security benefit computation. For example, some proposals would increase the averaging period from 35 to 38 years. These proposals are aimed at helping improve Social Security's projected long-range financial position and at encouraging people to work longer. Such proposals generally would affect women disproportionately. A criticism of proposals to drop or credit years of caregiving is that they may be of most benefit to higher-wage households that can afford to forego one spouse's earnings over a period of several years. Lower-wage spouses, and single working mothers, may not be in a position to stop working for any period of time. In addition, a practical issue involves ascertaining that years out of the workforce are actually spent caring for children or other family members. Under current law, an aged surviving spouse receives the higher of his or her own retired-worker benefit and 100% of the deceased spouse's PIA. This leads to a reduction in benefits compared with the combined benefit the couple was receiving when both members of the couple were alive. The reduction ranges from one-third of the combined benefit for a one-earner couple to one-half of the combined benefit for some two-earner couples. However, there is not always a corresponding reduction in household expenses for the surviving member of the couple. Some contend that 75% of the income previously shared by the couple more closely approximates the income needed by the surviving spouse to maintain his or her standard of living. One frequently mentioned proposal would increase the surviving spouse's benefit to the higher of (1) the deceased spouse's benefit, (2) the surviving spouse's own benefit, and (3) 75% of the couple's combined monthly benefit when both spouses were alive. The couple's combined monthly benefit when both spouses were alive would be the sum of (1) the higher-earner's benefit and (2) the higher of the lower-earner's worker benefit and spousal benefit. Some proposals for a 75% survivor benefit would target the provision to lower-income households by capping the survivor benefit, for example, at the benefit amount received by the average retired-worker beneficiary. A 75% minimum survivor benefit would increase benefits for many surviving spouses, both in dollar terms and as a replacement rate for the combined benefit received by the couple when both spouses were alive. For a one-earner couple, the benefit for the surviving spouse would increase from 100% to 112% of the worker's benefit (112% = 75% of 150% of the worker's benefit that the couple received when both spouses were alive). For a two-earner couple with similar earnings histories, the surviving spouse's benefit would increase from roughly 50% of the couple's combined benefit when both spouses were alive (under current law, the surviving spouse receives the benefit received by the higher-earning spouse while he or she was alive) to 75% of the couple's combined benefit when both spouses were alive. A 75% minimum survivor benefit provision would \"reward\" the second income of a two-earner couple and improve equity between one-earner and two-earner couples. Under current law, upon the death of either spouse, the earnings record of the lower-earning spouse does not result in the payment of any additional benefits (i.e., in addition to the benefits payable on the earnings record of the higher-earning spouse). Stated another way, the earnings record of the lower-earning spouse effectively \"disappears\" with the death of either spouse. Because a 75% survivor benefit would increase costs to the Social Security system, some have proposed financing it through a gradual reduction in the spousal benefit from 50% to 33% of the primary earner's benefit, while both spouses are alive. For a one-earner couple, the couple's combined benefit would be reduced from 150% to 133% of the worker's benefit. This is broadly consistent with the structure of private annuities, where the annuity payout is lower to adjust for a longer expected payout period. As a result, more dually entitled spouses would likely qualify for a retirement benefit based on their own work record only, because more dually entitled spouses would likely have a retired-worker benefit of their own that is equal to at least 33% (rather than 50%) of the higher-earning spouse's retired-worker benefit. Reducing a one-earner couple's combined monthly benefit to 133% of the worker's benefit, as a way to finance a 75% survivor benefit, could be problematic for low-income couples. Effectively, the increased survivor benefit would help the survivors of both one-earner and two-earner couples, but it would be financed by reducing the combined benefits of one-earner couples from 150% to 133% of the worker's benefit. In addition, unless this proposal were modified for divorced spouses, it would also reduce the spousal benefits received by divorced spouses from 50% to 33% of the primary earner's benefit. After the death of the primary earner, benefits for a divorced spouse would jump to 100% of the primary earner's benefit, creating income volatility unless this outcome is addressed for divorced spouses. Although the 75% survivor benefit option could increase benefits for vulnerable groups such as aged widows, it would not address the needs of other vulnerable groups, such as individuals who were never married or who divorced before reaching 10 years of marriage. In addition, a 75% survivor benefit option would provide somewhat more additional benefits to higher-income beneficiaries than to lower-income beneficiaries. To address this outcome, as noted above, some proposals would cap the 75% survivor benefit at the average retired-worker benefit. Although more women have qualified for Social Security benefits based on their own earning records in recent decades, Social Security auxiliary benefits continue to play a crucial role in improving income security for older women, as well as for young surviving spouses and children of deceased workers. Some policymakers and researchers, however, have expressed concerns about the current structure of Social Security auxiliary benefits on both equity and adequacy grounds. For example, the current structure can lead to situations in which a one-earner couple receives higher retirement and survivors benefits than a two-earner couple with identical total household earnings. In addition, auxiliary benefits do not reach certain groups, such as persons who divorced before 10 years of marriage or mothers who never married. Some proposals have been suggested to increase Social Security benefits to certain, but not all, vulnerable groups. For example, an enhanced widow(er)'s benefit would provide income support to many elderly women and men, but it would not help those who divorced before 10 years of marriage or who never married. Similarly, a caregiver credit for workers who stay at home to care for young children would increase benefits for never-married and divorced women, but it would not help those without children, whether married or unmarried. The consideration of potential changes to Social Security spousal and survivors benefits involves balancing improvements in benefit equity, for example, between one-earner and two-earner couples, with improvements in benefit adequacy for persons who experience relatively higher poverty rates, such as never-married men and women. In addition, the policy discussion about auxiliary benefits may involve balancing benefit increases for spouses and survivors, divorced spouses, or never-married persons with other potential program changes to offset the higher program costs in light of the Social Security system's projected long-range financial outlook. Appendix A. Major Changes in Social Security Auxiliary Benefits Appendix B. Summary of Possible Adjustments to Social Security Spousal and Widow(er)'s Benefits Under Current Law Social Security benefits for spouses and widow(er)s are based on a percentage of the worker's primary insurance amount (PIA), with various adjustments for age at entitlement and other factors. The following section describes some of the adjustments that apply to benefits for spouses and widow(er)s. Age-Related Benefit Adjustment for Spouses Spousal benefits (including those for divorced spouses) are reduced when the spouse claims benefits before full retirement age (FRA) to take into account the longer expected period of benefit receipt (assuming the individual lives to average life expectancy). A spouse who claims benefits at the age of 62 (the earliest eligibility age for retirement benefits) may receive a benefit that is as little as 32.5% of the worker's PIA. Age-Related Benefit Adjustments for Widow(er)s The earliest age a widow(er) can claim benefits is age 60. If a widow or widower (including divorced and disabled widow(er)s) claims survivors benefits before FRA, his or her monthly benefit is reduced by a maximum of 28.5% to take into account the longer expected period of benefit receipt (assuming he or she lives to average life expectancy). In addition, survivors benefits may be affected by the deceased worker's decision to claim benefits before FRA. If the deceased worker claimed benefits before FRA (and therefore was receiving a reduced benefit) and the widow(er) claims survivors benefits at FRA, the widow(er)'s benefit is reduced under the widow(er)'s limit provision . Under the widow(er)'s limit provision, which is intended to prevent the widow(er)'s benefit from exceeding the deceased worker's retirement benefit, the widow(er)'s benefit is limited to (1) the benefit the worker would be receiving if he or she were still alive, or (2) 82.5% of the worker's PIA, whichever is higher. Benefit Adjustments Based on Other Factors Benefits for spouses and widow(er)s may be subject to other reductions, in addition to those based on entitlement before FRA. For example, under the dual entitlement rule, a Social Security spousal or widow(er)'s benefit is reduced or fully offset if the person also receives a Social Security retired-worker or disabled-worker benefit (see \" Dually Entitled Beneficiaries \" above). Similarly, under the g overnment p ension o ffset (GPO), a Social Security spousal or widow(er)'s benefit is reduced or fully offset if the person also receives a pension based on his or her own employment in certain federal, state, or local government positions that are not covered by Social Security. In some cases, a spousal or widow(er)'s benefit may be reduced to bring the total amount of benefits payable to family members based on the worker's record within the maximum family benefit amount. Under the Social Security retirement earnings test (RET), auxiliary benefits may be reduced if the auxiliary beneficiary is below the FRA and has earnings above specified dollar thresholds. Also, under the RET, benefits paid to spouses may be reduced if the benefits are based on the record of a worker beneficiary who is affected by the RET (excluding benefits paid to divorced spouses who have been divorced for at least two years). Table B-1 shows the percentage of a worker's PIA on which various categories of spousal and widow(er)'s benefits are based. It also shows the age at which benefits are first payable on a reduced basis (the eligibility age) and the maximum reduction to benefits claimed before FRA relative to the worker's PIA. ", "summary": "Social Security auxiliary benefits are paid to the spouse, former spouse, survivor, child, or parent of a Social Security-covered worker and are equal to a specified percentage of the worker's basic monthly benefit amount (subject to a maximum family benefit amount). For example, the spouse of a retired worker may receive up to 50% of the retired worker's basic benefit and the widow(er) of a retired worker may receive up to 100% of the retired worker's basic benefit. When auxiliary benefits were first established, most households consisted of a single earner—usually the husband—and a wife who cared for children and remained out of the paid workforce. As a result, benefits for nonworking spouses were structured to be relatively generous. A woman who was never employed but is married to a man with high Social Security-covered wages may receive a Social Security spousal benefit that is higher than the retirement benefit received by a single woman, or a divorced woman who was married less than 10 years, who worked a full career in a low-wage job. In recent decades, this household structure has changed in part because women have entered the workforce in increasing numbers. The labor force participation rate of women with children under the age of 18 increased from 47% in 1975 to 70.8% in March 2016. As a result, many women now qualify for Social Security benefits based on their own work records. Women are, however, more likely than men to take breaks in employment to care for family members, which can result in fewer years of contributions to Social Security and employer-sponsored pension plans. Beneficiaries who qualify for multiple benefits do not receive both benefits in full, however. For example, for a beneficiary eligible for his or her own retired-worker benefits as well as spousal benefits, the spousal benefit is reduced by the amount of the retired-worker benefit. The beneficiary receives a reduced spousal benefit (if not reduced to zero) in addition to his or her retired-worker benefit. This effectively means the beneficiary receives the higher of the two benefit amounts. Because of this, a two-earner household may receive lower total Social Security benefits than a single-earner household with identical total Social Security-covered earnings. Another change since 1939 has been an increase in the number of men and women who remain single or who have divorced. Persons who have never been married, or divorced before 10 years of marriage, do not qualify for Social Security spousal or survivors benefits under current law. Proposals to modify the Social Security auxiliary benefit structure are often motivated by desire to improve adequacy for certain beneficiaries, or equity between a two-earner household and a one-earner household with similar earning profiles. For example, some proposals address the adequacy of benefits for certain groups of beneficiaries, such as elderly and widowed women. Although Social Security plays an important role in the retirement security of aged women, about 13.9% of widowed women aged 65 or older, 15.8% of divorced elderly women, and 21.5% of never-married elderly women have family incomes below the official poverty line in 2017.", "document_type": "crs"}
{"report": "The Pension Benefit Guaranty Corporation (PBGC) is a federal agency established by the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406 ). It was created to protect the pe nsions of participants and beneficiaries covered by private sector defined benefit (DB) plans. These pension plans provide a specified monthly benefit at retirement, usually either a percentage of salary or a flat dollar amount multiplied by years of service. Defined contribution (DC) plans, such as 401(k) plans, are not insured. PBGC runs two distinct insurance programs: one for single-employer pension plans and a second for multiemployer plans. Single-employer pension plans are sponsored by one employer and cover eligible workers employed by the plan sponsor. Multiemployer plans are collectively bargained plans to which more than one company makes contributions. PBGC maintains separate reserve funds for each program. In FY2018, PBGC insured about 25,000 DB pension plans covering about 37 million people. It paid or owed benefits to 1.4 million people. PBGC is the trustee of 4,919 single-employer plans. PBGC provided financial assistance to 78 multiemployer pensions. PBGC pays a maximum benefit to plan participants. Most workers in single-employer plans taken over by PBGC and multiemployer plans that receive financial assistance from PBGC receive the full pension benefit that they earned. However, among participants in multiemployer plans that were terminated and likely to need financial assistance in the future, 49% have a benefit below the PBGC maximum guarantee and 51% have a benefit larger than the PBGC maximum guarantee. PBGC is a government-owned corporation. A three-member board of directors, chaired by the Secretary of Labor, administers the corporation. The Secretary of Commerce and the Secretary of the Treasury are the other members of the board of directors. The Director of PBGC is appointed by the President with the advice and consent of the Senate. ERISA also provides for a seven-member Advisory Committee, appointed by the President, for staggered three-year terms. The Advisory Committee advises PBGC on issues, such as investment of funds, plan liquidations, and other matters. The Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) altered some of the governance structures of PBGC. Some of these changes include setting the term of the PBGC Director at five years, unless removed by the President or by the board of directors; requiring that the Board of Directors meet at least four times each year; and establishing a Participant and Plan Sponsor Advocate within PBGC to act as a liaison between PBGC, participants in plans trusteed by PBGC, and the sponsors of pension plans insured by PBGC. PBGC is required by ERISA to be self-supporting and receives no appropriations from general revenue. ERISA states that the \"United States is not liable for any obligation or liability incurred by the corporation,\" and some Members of Congress have expressed a reluctance to consider providing financial assistance to PBGC. The most reliable source of PBGC revenue is the premiums set by Congress and paid by the private-sector employers that sponsor DB pension plans. Other sources of income are assets from terminated plans taken over by PBGC, investment income, and recoveries collected from companies when they end underfunded pension plans. The Multiemployer Pension Plan Amendments Act of 1980 ( P.L. 96-364 ) requires that PBGC's receipts and disbursements be included in federal budget totals. The sponsors of private-sector pension plans pay a variety of premiums to PBGC. The sponsors of single-employer and multiemployer pension plans pay a flat-rate, per-participant premium. The sponsors of underfunded single-employer pension plans pay an additional premium that is based on the amount of plan underfunding. In addition, pension plans that are terminated in certain situations pay a per-participant premium per year for three years after termination. The premiums for 2019 are as follows: Single-employer flat-rate premium : The sponsors of single-employer DB pension plans pay an annual premium of $80 for each participant in the plan. Single-employer variable-rate premium : In addition to the flat-rate premium, the sponsors of underfunded single-employer DB pension plans pay an additional annual premium of $43 for each $1,000 of unfunded vested benefits. There is a per-participant limit of $541 for this premium. Single-employer termination premium : The sponsors of single-employer DB pension plans that end in certain situations pay an annual premium of $1,250 per participant per year for three years following plan termination. Multiemployer flat-rate premium : The sponsors of multiemployer DB pension plans pay an annual premium of $29 for each participant in the plan in 2019. In the Appendix, Table A-1 and Table A-2 provide a history of PBGC premium rates. Table 1 details the amounts of premium income in FY2017 and FY2018. PBGC covers only those DB plans that meet the qualification requirements of Section 401 of the Internal Revenue Code (IRC). DC plans (such as 401(k) and 403(b) plans) are not insured by PBGC. Plans must meet these requirements to receive the tax benefits available to qualified pension plans. If a plan meets the requirements of IRC Section 401, the employer's contributions to the plan are treated as a tax-deductible business expense, and neither the employer's contributions to the plan nor the investment earnings of the plan are treated as taxable income to the participants. When a pension plan participant begins to receive income from the plan, it is taxed as ordinary income. In general, to be qualified under the IRC, a pension plan must be established with the intent of being a permanent and continuing arrangement; must provide definitely determinable benefits; may not discriminate in favor of highly compensated employees with respect to coverage, contributions, or benefits; and must cover a minimum number or percentage of employees. Pension plans specifically excluded by law from being insured by PBGC include governmental plans, church plans, plans of fraternal societies financed entirely by member contributions, plans maintained by certain professionals (such as physicians, attorneys, and artists) with 25 or fewer participants, and plans established and maintained exclusively for substantial owners of businesses. PBGC's single-employer and multiemployer insurance programs operate differently and PBGC maintains separate reserve funds for each program. Funds from the reserve of one program may not be used for the other program. In the single-employer program, PBGC becomes the trustee of the terminated, underfunded single-employer DB pension plans. The assets of the terminated plan are placed in a trust fund operated by PBGC. The participants in the trusteed plans receive their benefits from PBGC. In the multiemployer program, PBGC does not become the trustee of plans. PBGC makes loans to multiemployer DB pension plans when the plans become insolvent. An insolvent multiemployer plan has insufficient assets available from which to pay participant benefits. An employer can voluntarily terminate a single-employer plan in either a standard or distress termination. The participants and PBGC must be notified of the termination. PBGC may involuntarily terminate an underfunded plan if the sponsor is unable to fund its pension obligations. A company may voluntarily end its pension plan if the plan's assets are sufficient to cover benefit liabilities. In such cases, PBGC does not pay any benefits to plan participants. Its role is to confirm that the requirements for termination have been met by the plan. Generally, benefit liabilities equal all benefits earned to date by plan participants, including vested and nonvested benefits (which automatically become vested at the time of termination), plus certain early retirement supplements and subsidies. Benefit liabilities also may include certain contingent benefits. If assets are sufficient to cover benefit liabilities (and other termination requirements, such as notice to employees, have not been violated), the plan distributes benefits to participants. The plan provides for the benefit payments it owes by purchasing annuity contracts from an insurance company, or otherwise providing for the payment of benefits, for example, by providing the benefits in lump-sum distributions. Assets in excess of the amounts necessary to cover benefit liabilities may be recovered by the employer in an asset reversion. The asset reversion is included in the employer's gross income and is subject to a nondeductible excise tax. The excise tax is 20% of the amount of the reversion if the employer establishes a qualified replacement plan or provides certain benefit increases in connection with the termination. Otherwise, the excise tax is 50% of the reversion amount. When an underfunded plan terminates in a distress or involuntary termination, the plan goes into PBGC receivership. PBGC becomes the trustee of the plan, takes control of any plan assets, and assumes responsibility for liabilities under the plan. PBGC makes payments for benefit liabilities promised under the plan with assets received from two sources: (1) assets in the plan before termination and (2) assets recovered from employers. The balance, if any, of guaranteed benefits owed to beneficiaries is paid from PBGC's revolving funds. Distress Terminations If assets in the plan are not sufficient to cover benefit liabilities, the employer may not terminate the plan unless the employer meets one of four criteria necessary for a \"distress\" termination: 1. The plan sponsor, and every member of the controlled group (companies with the same ownership) of which the sponsor is a member, has filed or had filed against it a petition seeking liquidation in bankruptcy or any similar federal law or other similar state insolvency proceedings; 2. The plan sponsor, and every member of the sponsor's controlled group, has filed or had filed against it a petition to reorganize in bankruptcy or similar state proceedings. This criterion is also met if the bankruptcy court (or other appropriate court) determines that, unless the plan is terminated, the employer will be unable to continue in business outside the reorganization process and approves the plan termination; 3. PBGC determines that termination is necessary to allow the employer to pay its debts when due; or 4. PBGC determines that termination is necessary to avoid unreasonably burdensome pension costs caused solely by a decline in the employer's work force. These requirements were added by the Single Employer Pension Plan Amendments Act of 1986 (SEPPAA; P.L. 99-272 ) and modified by the Omnibus Budget Reconciliation Act of 1987 ( P.L. 100-203 ) and the Retirement Protection Act of 1994 (RPA; P.L. 103-465 ). They are designed to ensure that the liabilities of an underfunded plan remain the responsibility of the employer, rather than PBGC, unless the employer meets strict standards of financial need indicating genuine inability to continue funding the plan. Involuntary Terminations PBGC may terminate a plan involuntarily, either by agreement with the plan sponsor or pursuant to a federal court order. PBGC may institute such proceedings only if the plan in question has not met the minimum funding standards, the plan will be unable to pay benefits when due, the plan has a substantial owner who has received a distribution greater than $10,000 (other than by reason of death) and the plan has unfunded vested benefits, or the long-run loss to PBGC with respect to the plan is expected to increase unreasonably if the plan is not terminated. PBGC must terminate a plan if the plan is unable to pay benefits that are currently due. A federal court may order termination of the plan to protect the interests of participants, to avoid unreasonable deterioration of the plan's financial condition, or to avoid an unreasonable increase in PBGC's liability under the plan. Table 2 provides information on the number of terminations since 1974 by single-employer DB pension plans and the number of these terminations that resulted in PBGC becoming trustee of the pension plan. From FY1974 through FY2016, PBGC became the trustee of 4,769 single-employer DB pension plans. The number of single-employer plan terminations that result in claims against PBGC is a relatively small fraction of all plan terminations. Most pension plan terminations are standard terminations. Following a distress or involuntary termination, the plan's sponsor and every member of that sponsor's controlled group are liable to PBGC for the plan's shortfall. The shortfall is measured as the value of the plan's liabilities as of the date of the plan's termination minus the fair market value of the plan's assets on the date of termination. The liability is joint and several, meaning that each member of the controlled group can be held responsible for the entire liability. Generally, the obligation is payable in cash or negotiable securities to PBGC on the date of termination. Failure to pay this amount upon demand by PBGC may trigger a lien on the property of the contributing employer's controlled group. Often, however, a plan undergoing a distress termination is sponsored by a company that is in bankruptcy proceedings, in which case PBGC does not have legal authority to create (or perfect) a lien against the plan sponsor. In such instances, PBGC has the same legal standing as other creditors of the plan sponsor, and its ability to recover assets is limited. When an underfunded plan terminates, the benefits PBGC will pay depend on the statutory limit on guaranteed benefits, the amount of the terminated plan's assets, and recoveries by PBGC from the employer that sponsored the terminated plan. Guaranteed Benefits Within limits set by Congress, PBGC guarantees any retirement benefit that was nonforfeitable (vested) on the date of plan termination other than benefits that vest solely on account of the termination, and any death, survivor, or disability benefit that was owed or was in payment status at the date of plan termination. Generally, only that part of the retirement benefit that is payable in monthly installments (rather than, for example, lump-sum benefits payable to encourage early retirement) is guaranteed. Retirement benefits that commence before the plan's normal age of retirement are guaranteed, provided they meet the other conditions of guarantee. Contingent benefits (for example, early retirement benefits provided only if a plant shuts down) are guaranteed only if the triggering event occurs before plan termination. Following enactment of the Pension Protection Act of 2006 (PPA; P.L. 109-280 ), PBGC guarantee for such benefits is phased in over a five-year period commencing when the event occurs. Maximum Benefits for Participants in Single-Employer Pension Plans ERISA sets a maximum on the individual benefit amount that PBGC can guarantee. The ceiling for single-employer plans is adjusted annually for national wage growth. The maximum pension guarantee is $67,295 a year for workers aged 65 in plans that terminate in 2019. This amount is adjusted annually and is decreased if a participant begins receiving the benefit before the age of 65 (reflecting the fact that they will receive more monthly pension checks over their expected lifetime) or if the pension plan provides benefits in some form other than equal monthly payments for the life of the retiree. The benefit is increased if a participant begins receiving the benefit after the age of 65 (reflecting the fact that they will receive fewer monthly pension checks over their expected lifetime). Table 3 contains examples of PBGC's annual maximum benefit for individuals who begin receiving benefits at the ages of 60, 65, or 70 and who receive either a straight-life annuity or a joint and 50% survivor annuity. The reduction in the maximum guarantee for benefits paid before the age of 65 is 7% for each of the first 5 years under age 65, 4% for each of the next 5 years, and 2% for each of the next 10 years. The reduction in the maximum guarantee for benefits paid in a form other than a straight-life annuity depends on the type of benefit, and if there is a survivor's benefit, the percentage of the benefit continuing to the surviving spouse and the age difference between the participant and spouse. Only \"basic benefits\" are guaranteed. These include benefits beginning at normal retirement age (usually 65), certain early retirement and disability benefits, and benefits for survivors of deceased plan participants. Only vested benefits are insured. The average monthly benefit received by retirees in FY2015 was $606. In a study released in 2008, PBGC indicated that more than 80% of PBGC recipients in single-employer plans trusteed by PBGC received their full benefits. Among participants whose benefits were reduced, the average reduction was 28%. Assets of a terminated plan are allocated to pay benefits according to a priority schedule established by statute. Under this schedule, some nonguaranteed benefits are payable from plan assets before certain guaranteed benefits. For example, benefits of participants who have been receiving pension payments for more than three years have priority over guaranteed benefits of participants not yet receiving payments. PBGC also is required to pay participants a portion of their unfunded, nonguaranteed benefits based on a ratio of assets recovered from the employer to the amount of PBGC's claim on employer assets (called Section 4022(c) benefits). In the case of multiemployer plans, PBGC insures plan insolvency, rather than plan termination. Accordingly, a multiemployer plan need not be terminated to qualify for PBGC financial assistance. A plan is insolvent when its available resources are not sufficient to pay the plan benefits for the plan year in question, or when the sponsor of a plan in reorganization reasonably determines, taking into account the plan's recent and anticipated financial experience, that the plan's available resources will not be sufficient to pay benefits that come due in the next plan year. If it appears that available resources will not support the payment of benefits at the guaranteed level, PBGC will provide the additional resources needed as a loan, which PBGC indicates are rarely repaid. PBGC may provide loans to the plan year after year. If the plan recovers from insolvency, it must begin repaying loans on reasonable terms in accordance with regulations. Only one multiemployer plan has repaid any of its financial assistance. PBGC guarantees benefits to multiemployer plans as it does for single-employer plans, although a different guarantee ceiling applies. Multiemployer plans determine benefits by multiplying a flat dollar rate by years of service, so the benefit guarantee ceiling is tied to this formula. The benefit guarantee limit for participants in multiemployer plans equals a participant's years of service multiplied by the sum of (1) 100% of the first $11 of the monthly benefit rate and (2) 75% of the next $33 of the benefit rate. For a participant with 30 years of service, the guaranteed limit is $12,870. This benefit formula is not adjusted for increases in the national wage index. PBGC estimated in 2015 that 79% of participants in multiemployer plans that receive financial assistance received their full benefit. However, in plans that may need financial assistance in the future, only 49% of participants would receive their full benefit payment. Among ongoing plans (neither receiving PBGC financial assistance nor terminated and expected to receive financial assistance), the average benefit is almost twice as large as the average benefit in terminated plans. This suggests that a larger percentage of participants in plans that receive PBGC financial assistance in the future are likely to see benefit reductions as a result of the PBGC maximum guarantee level. The most commonly used measure of PBGC's financial status is its net financial position, which is the difference between PBGC's assets and its liabilities. At the end of FY2018, PBGC's assets were $112.3 billion, PBGC liabilities were $163.7 billion, and its net financial position was -$51.4 billion. PBGC's main assets are the value of its trust fund and revolving funds. The trust fund contains the assets of the pension plans of which PBGC becomes trustee and the returns on the trust fund investments. The revolving funds contain the premiums that plan sponsors pay to PBGC, transfers from the trust fund that are used to pay for participants' benefits, and returns on the revolving funds' investments in U.S. Treasury securities. PBGC's main liabilities are the estimated present values of (1) future benefits payments in the single-employer program and (2) future financial assistance to insolvent plans in the multiemployer program. Table 4 provides information on the net financial position of PBGC from FY1999 through FY2018. PBGC has had an end of fiscal year deficit each year since FY2002. The weakness in the economy in 2001, particularly in the steel and airline industries, led to large and expensive plan terminations that created a deficit for PBGC. By the end of 2004, the single-employer program had a deficit of $23.3 billion. For the first time since FY2001, partly as a result of increases to the premiums that employers pay, the single-employer program showed a surplus in FY2018. The multiemployer program had a surplus from FY1982 to FY2002, but PBGC reported deficits each year since. PBGC projects that the multiemployer program will be likely become insolvent in FY2025 and there is a less than 1% chance that the program will remain solvent in FY2026. Both the single-employer and multiemployer programs are on the Government Accountability Office's (GAO's) list of high-risk government programs. Table 5 shows that approximately 825,000 participants received monthly payments from PBGC in FY2015 (the most recent year for which comprehensive data on benefit payments are available). The average monthly payment was $536 and the median monthly payment was $279. Among retiree payees, the average monthly benefit was $606 and among beneficiary payees, the average monthly benefit was $307. Approximately 40,000 participants received a lump-sum payment in FY2015, and the average amount of the lump-sum payment was $2,054. Figure 1 displays the net financial position of PBGC's single-employer program from FY1980 to FY2018. In FY1996, PBGC showed a surplus in its single-employer program for the first time in its history. That surplus peaked at $9.7 billion in FY2000, helped by the strong performance of the equity markets in the mid- and late 1990s. In FY2018, PBGC the single-employer program showed a surplus of $2.44 billion. The improvement in the financial condition of the single-employer program is a result of several factors, such as investment income (there has not been an investment loss since FY2008) and increase in premium income (premium income was 3.6 times greater in FY2018 compared to FY2008). Table 6 provides data on the number of plans that have received financial assistance and the annual amounts of the financial assistance from FY1995 to FY2018. Seventy-eight multiemployer plans received financial assistance in FY2018. The FY2018 annual report indicated that approximately 62,300 multiemployer plan participants received financial assistance in FY2018 and that approximately 27,800 participants will receive benefits in the future because they are in plans that are currently receiving financial assistance. Figure 2 indicates that the financial condition of the multiemployer insurance program has been worsening. The deficit in the multiemployer insurance program increased from $8.3 billion in FY2013 to $42.4 billion in FY2014, and $65.1 billion in FY2017. It decreased to $53.8 billion in FY2018. The large increase in the deficit in FY2014 was the result of the increase in the likelihood of the insolvency of several large multiemployer pension plans in financial distress. PBGC's budgetary cash flows are based on its premium income, interest income, benefit outlays, and the interaction of PBGC's trust and revolving funds. The trust fund contains the assets of the pension plans of which PBGC becomes trustee and the returns on the trust fund investments. Revolving funds contain the premiums that plan sponsors pay to PBGC, transfers from the trust fund that are used to pay for participants' benefits, and returns on the revolving funds' investments in U.S. Treasury securities. When PBGC becomes trustee of a single-employer pension plan, the assets of the terminated pension plan are transferred to PBGC and placed in a nonbudgetary trust fund. Transfers of assets to the trust fund do not appear in the federal budget and the assets of this trust fund do not appear on the federal balance sheet. The assets of the trust fund are managed by private-sector money managers in accordance with an investment policy established by PBGC's Board of Directors. The current investment policy establishes assets allocations of 30% for equities and other nonfixed income assets, and 70% for fixed income. Trust fund investments totaled $70.2 billion at the end of FY2018. ERISA authorized the creation of seven revolving funds for PBGC, although only three revolving funds have been used by PBGC. The revolving funds contain the premiums paid by single-employer and multiemployer pension plan sponsors, returns on revolving funds' investments, and transfers from the trust fund that are used to pay benefits. Each year, PBGC transfers funds from the trust fund to the revolving funds to pay for a share of participants' benefits. The investments of the revolving funds are, by law, invested exclusively in U.S. Treasury securities. The revolving funds' assets at the end of FY2018 were $1.8 billion for Fund 1, $2.1 billion for Fund 2, and $29.3 billion for Fund 7, for a total of $33.2 billion. The revolving funds are on-budget accounts: increases or decreases in the revolving funds appear as on-budget federal receipts and outlays. The funds' gross outlays include PBGC benefit payments and administrative expenses and receipts include premiums paid, interest on federal securities, and reimbursements from the trust fund. Because increases in the premiums paid by pension plan sponsors to PBGC are increases in federal revenue, some stakeholders and policymakers have criticized recent PBGC premium increases because they feel increases in premiums are used to offset other federal spending, do not address the financial condition of PBGC, and may discourage employers from maintaining their DB pension plans. In its FY2017 Projections Report, PBGC estimated its financial condition over the next 10 years. The report indicated that the single-employer program's deficit is likely to shrink and the multiemployer program is likely to run out of money in FY2025. PBGC projected that the single-employer program was likely to emerge from deficit by FY2018 (which it did). The average estimate of PBGC's simulations was a $26 billion surplus for the single-employer program in 10 years. PBGC projected that there is a 90% chance that the multiemployer program will be insolvent before the end of FY2025 and a 99% chance that the multiemployer program will be insolvent by 2026. This is a result of the likely insolvency of several large multiemployer pension plans. PBGC's FY2018 Annual Report indicated that the multiemployer program's probable exposure to future financial assistance would be $53.8 billion. Premium levels are likely inadequate to provide continued financial assistance to insolvent multiemployer plans. The financial assistance to these plans could exhaust PBGC's ability to guarantee participants' benefits. PBGC has indicated that once resources are exhausted in the PGBC's multiemployer program, insolvent plans would be required to reduce benefits to levels that could be sustained through premium collections only. The Multiemployer Pension Reform Act of 2014 (MPRA, enacted as part of P.L. 113-235 ), allowed, among other provisions, multiemployer DB pension plans that expect to become insolvent to reduce benefits to participants in these plans. An insolvent plan has no assets from which to pay any benefits. Plans that reduce benefits to forestall insolvency would not require financial assistance from PBGC, and would reduce the amount of future financial assistance PBGC would expect to provide. This would likely improve PBGC's financial condition. PBGC indicated that there is uncertainty in how the provisions of MPRA that allow benefit suspensions and plan partitions will be used. PBGC estimated that the effect of MPRA would likely not change PBGC projections of future solvency. In response to the increasing concerns of policymakers and stakeholders (such as participants, participating employers, and plans), the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) created a new joint select committee of the House and Senate: The Joint Select Committee on Solvency of Multiemployer Pension Plans. The committee was tasked with formulating recommendations and legislative language by November 30, 2018, that would \"significantly improve the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation.\" The committee did not release a report containing recommendations or legislative language by the deadline. Table A-1 provides historical data on the single-employer program premium levels. Table A-2 provides historical data on the multiemployer program premium levels.", "summary": "The Pension Benefit Guaranty Corporation (PBGC) is a federal agency established by the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406). It was created to protect the pensions of participants and beneficiaries covered by private sector defined benefit (DB) plans. These pension plans provide a specified monthly benefit at retirement, usually either a percentage of salary or a flat dollar amount multiplied by years of service. Defined contribution (DC) plans, such as 401(k) plans, are not insured. PBGC is chaired by the Secretary of Labor, with the Secretaries of the Treasury and Commerce serving as board members. PBGC runs two distinct insurance programs: one for single-employer pensions and a second for multiemployer plans. Single-employer pension plans are sponsored by one employer and cover eligible workers employed by the plan sponsor. Multiemployer plans are collectively bargained plans to which more than one company makes contributions. PBGC maintains separate reserve funds for each program. A firm must be in financial distress to end an underfunded single-employer plan and for PBGC to become the trustee of the plan. Multiemployer plans do not terminate. When a multiemployer plan becomes insolvent and is not able to pay promised benefits, PBGC provides financial assistance to the plan in the form of loans, although PBGC does not expect the loans to be repaid. In FY2018, PBGC insured about 25,000 DB pension plans covering approximately 37 million people. PBGC became the trustee of 58 newly terminated single-employer pension plans and began providing financial assistance to an additional 6 multiemployer pension plans. PBGC paid benefits to 861,371 participants in 4,919 single-employer pension plans and 62,300 participants in 78 multiemployer plans. There is a statutory maximum benefit that PBGC can pay. Participants receive the lower of their benefit as calculated under the plan or the statutory maximum benefit. If a participant's benefit is higher than the statutory maximum benefit, the participant's benefit is reduced. Participants in single-employer plans that terminate in 2019 and are trusteed by PBGC may receive up to $67,295 per year if they begin taking their pension at the age of 65. The single-employer maximum benefit is adjusted depending on the age at which the participant begins taking the benefit and on the form of the benefit (e.g., the maximum benefit is lower for a joint-and-survivor annuity). The maximum benefit for participants in multiemployer plans that receive financial assistance depends on the number of years of service in the plan. For example, a participant with 30 years of service may receive up to $12,870 per year. Currently, most workers in single-employer plans taken over by PBGC and multiemployer plans that receive financial assistance from PBGC receive the full pension benefit that they earned. However, among participants in multiemployer plans that were terminated and likely to need financial assistance in the future, 49% have a benefit below the PBGC maximum guarantee and 51% have a benefit larger than the PBGC maximum guarantee. At the end of FY2018, PBGC had a total deficit of $51.4 billion, which consisted of a $2.4 billion surplus from the single-employer program and a $53.9 billion deficit from the multiemployer program. PBGC's single-employer program has been on the Government Accountability Office's (GAO's) list of high-risk government programs since 2003. PBGC's multiemployer program was added in 2009. PBGC projects the financial position of the single-employer program to improve slightly, but the financial position of the multiemployer program is expected to worsen considerably over the next 10 years.", "document_type": "crs"}
{"report": "The Energy and Water Development appropriations bill includes funding for civil works projects of the U.S. Army Corps of Engineers (USACE), the Department of the Interior's Central Utah Project (CUP) and Bureau of Reclamation (Reclamation), the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). Figure 1 compares the major components of the Energy and Water Development bill from FY2017 through the FY2020 request. President Trump submitted his FY2020 detailed budget proposal to Congress on March 18, 2019 (after submitting a general budget overview on March 11). The budget requests for agencies included in the Energy and Water Development appropriations bill total $38.02 billion—$6.64 billion (15%) below the FY2019 appropriation. (See Table 3 .) A $1.309 billion increase (12%) is proposed for DOE nuclear weapons activities. For FY2019, the conference agreement on H.R. 5895 ( H.Rept. 115-929 ) provided total Energy and Water Development appropriations of $44.66 billion—3% above the FY2018 level and 23% above the FY2019 request. The bill was signed by the President on September 21, 2018 ( P.L. 115-244 ). Figures for FY2019 exclude emergency supplemental appropriations totaling $17.419 billion provided to USACE and DOE for natural disaster response by the Bipartisan Budget Act of 2018 ( P.L. 115-123 ), signed February 9, 2018. For more details, see CRS Report R45258, Energy and Water Development: FY2019 Appropriations , by Mark Holt and Corrie E. Clark, and CRS Report R45326, Army Corps of Engineers Annual and Supplemental Appropriations: Issues for Congress , by Nicole T. Carter. The FY2020 budget request proposes substantial reductions from the FY2019 enacted level for DOE energy research and development (R&D) programs, including a reduction of $178 million (-24%) in fossil fuels and $502 million (-38%) in nuclear energy. Energy efficiency and renewable energy R&D would decline by $1.724 billion (-83%). DOE science programs would be reduced by $1.039 billion (-16%). Programs targeted by the budget for elimination or phaseout include energy efficiency grants, the Advanced Research Projects Agency—Energy (ARPA-E), and loan guarantee programs. Funding would be reduced for USACE by $2.172 billion (-31%), and Reclamation and CUP by $462 million (-29%). Congress did not enact similar reductions included in the FY2018 and FY2019 budget requests. Congressional consideration of the annual Energy and Water Development appropriations bill is affected by certain procedural and statutory budget enforcement measures. These consist primarily of limits associated with the budget resolution on total discretionary spending and allocations of this amount that apply to spending under the jurisdiction of each appropriations subcommittee. Statutory budget enforcement is derived from the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The BCA established separate limits on defense and nondefense discretionary spending. These limits are in effect for each of the fiscal years from FY2012 through FY2021, and are primarily enforced by an automatic spending reduction process called sequestration, in which a breach of a spending limit would trigger across-the-board cuts within that spending category. The BCA's statutory discretionary spending limits were increased for FY2018 and FY2019 by the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), enacted February 9, 2018. However, the BCA discretionary spending limits have not been increased for FY2020. As a result, the limits currently in place for FY2020 are substantially lower than the limits that were in place for FY2019. For discretionary defense spending, the FY2020 limit drops from $647 billion to $576 billion (-11%), while the nondefense limit drops from $597 billion to $542 billion (-9%). A bill to raise the defense and nondefense spending limits for FY2020 and FY2021 was reported by the House Budget Committee April 5, 2019 ( H.R. 2021 , H.Rept. 116-35 ). (For more information, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions , by Grant A. Driessen and Megan S. Lynch.) Several issues raised by the Administration's budget request could generate controversy during congressional consideration of Energy and Water Development appropriations for FY2020. The issues described in this section—listed approximately in the order the affected agencies appear in the Energy and Water Development bill—were selected based on the total funding involved, the percentage of proposed increases or decreases, and potential impact on broader public policy considerations. For USACE, the Trump Administration requested $4.827 billion for FY2020, which is $2.172 billion (-31%) below the FY2019 appropriation. The request includes no funding for initiating new studies and construction projects (referred to as new starts). The FY2020 request seeks to limit funding for ongoing navigation and flood risk-reduction construction projects to those whose benefits are at least 2.5 times their costs, or projects that address safety concerns. Many congressionally authorized USACE projects would not meet that standard. The Administration also proposes to transfer the Formerly Utilized Sites Remedial Action Program from USACE to DOE. For Reclamation, FY2020 funding would be reduced by $461.6 million (29%) from the FY2019 level, to $1.11 billion. For more details, see CRS In Focus IF11137, Army Corps of Engineers: FY2020 Appropriations , by Nicole T. Carter and Anna E. Normand; CRS In Focus IF11158, Bureau of Reclamation: FY2020 Appropriations , by Charles V. Stern; and CRS Report R45326, Army Corps of Engineers Annual and Supplemental Appropriations: Issues for Congress , by Nicole T. Carter. DOE's FY2020 budget request includes three mandatory proposals related to the Power Marketing Administrations (PMAs)—Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA). PMAs sell the power generated by the dams operated by Reclamation and USACE. The Administration proposes to divest the assets of the three PMAs that own transmission infrastructure: BPA, SWPA, and WAPA. These assets consist of thousands of miles of high voltage transmission lines and hundreds of power substations. The budget request projects that mandatory savings from the sale of these assets would total approximately $5.8 billion over a 10-year period. The FY2020 budget request includes a proposal to repeal the borrowing authority for WAPA's Transmission Infrastructure Program, which facilitates the delivery of renewable energy resources. The FY2020 budget also proposes eliminating the statutory requirement that PMAs limit rates to amounts necessary to recover only construction, operations, and maintenance costs; the budget proposes that the PMAs instead transition to a market-based approach to setting rates. The Administration has estimated that this proposal would yield $1.9 billion in new revenues over 10 years. The budget also calls for repealing $3.25 billion in borrowing authority provided to WAPA for transmission projects enacted under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). The proposal is estimated to save $640 million over 10 years. All of these proposals would need to be enacted in authorizing legislation, and no congressional action has been taken on them to date. The proposals have been opposed by groups such as the American Public Power Association and the National Rural Electrical Cooperative Association, and they have been the subject of opposition letters to the Administration from several regionally based bipartisan groups of Members of Congress. PMA reforms have been supported by some policy research institutes, such as the Heritage Foundation. For further information, see CRS Report R45548, The Power Marketing Administrations: Background and Current Issues , by Richard J. Campbell. The FY2020 budget request proposes to terminate both the DOE Weatherization Assistance Program and the State Energy Program (SEP). The Weatherization Assistance Program provides formula grants to states to fund energy efficiency improvements for low-income housing units to reduce their energy costs and save energy. The SEP provides grants and technical assistance to states for planning and implementation of their energy programs. Both the weatherization and SEP programs are under DOE's Office of Energy Efficiency and Renewable Energy (EERE). The weatherization program received $257 million and SEP $55 million for FY2019, after also having been proposed for elimination in that year's budget request, as well as in FY2018. According to DOE, the proposed elimination of the grant programs is \"due to a departmental shift in focus away from deployment activities and towards early-stage R&D.\" Appropriations for DOE R&D on energy efficiency, renewable energy, nuclear energy, and fossil energy would be reduced from $4.133 billion in FY2019 to $1.729 billion (-58%) under the Administration's FY2020 budget request. Major proposed reductions include bioenergy technologies (-82%), vehicle technologies (-79%), natural gas technologies (-79%), advanced manufacturing (-75%), building technologies (-75%), wind energy (-74%), solar energy (-73%), geothermal technologies (-67%), and nuclear fuel cycle R&D (-66%). DOE says the proposed reductions would primarily affect the later stages of energy research, which tend to be the most costly. \"The Budget focuses DOE resources toward early-stage R&D, where the Federal role is strongest, and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies,\" according to the FY2020 DOE request. Similar reductions proposed by the Administration for FY2019 were not enacted. The Administration's FY2020 budget request, for the first time since FY2010, would provide new funding for a proposed nuclear waste repository at Yucca Mountain, NV; similar Administration requests for the repository project were not included in the enacted funding measures for FY2018 and FY2019. Under the FY2020 request, DOE would receive $116 million to seek an NRC license for the repository and to develop interim nuclear waste storage capacity. NRC would receive $38.5 million to consider DOE's application. DOE's total of $116 million in nuclear waste funding would come from two appropriations accounts: $90 million from Nuclear Waste Disposal and $26 million from Defense Nuclear Waste Disposal (to pay for defense-related nuclear waste that would be disposed of at Yucca Mountain). DOE submitted a license application for the Yucca Mountain repository in 2008, but NRC suspended consideration in 2011 for lack of funding. The Obama Administration had declared the Yucca Mountain site \"unworkable\" because of opposition from the state of Nevada. The House voted to provide the Yucca Mountain funding requested for FY2018 and a $100 million increase for FY2019, but the Senate Appropriations Committee did not include it for FY2018, and it was not included in the Senate-passed bill for FY2019. Also as in FY2018, the FY2019 Senate bill included an authorization for a pilot program to develop an interim nuclear waste storage facility at a voluntary site (§304). The enacted FY2019 appropriations measure did not include the House-passed funding for Yucca Mountain or the Senate's nuclear waste pilot program provisions. For more background, see CRS Report RL33461, Civilian Nuclear Waste Disposal , by Mark Holt. The FY2020 budget request would halt further loans and loan guarantees under DOE's Advanced Technology Vehicles Manufacturing Loan Program and the Title 17 Innovative Technology Loan Guarantee Program. Similar proposals to eliminate the programs in FY2018 and FY2019 were not enacted. The FY2020 budget request would also halt further loan guarantees under DOE's Tribal Energy Loan Guarantee Program. Under the FY2020 budget proposal, DOE would continue to administer its existing portfolio of loans and loan guarantees. Unused prior-year authority, or ceiling levels, for loan guarantee commitments would be rescinded, as well as $169.5 million in unspent appropriations to cover loan guarantee \"subsidy costs\" (which are primarily intended to cover potential losses). On March 22, 2019, after the FY2020 budget request had been submitted, DOE provided $3.7 billion in additional Title 17 loan guarantees for two new reactors under construction at the Vogtle nuclear plant in Georgia. The Vogtle project had previously received $8.3 billion in loan guarantees under the DOE program. The Administration's request for DOE includes $107 million in FY2020 for the U.S. contribution to the International Thermonuclear Experimental Reactor (ITER), which is under construction in France by a multinational consortium. \"ITER will be the first fusion device to maintain fusion for long periods of time\" and is to lay the technical foundation \"for the commercial production of fusion-based electricity,\" according to the consortium's website. The FY2020 DOE appropriation request, 19% below the FY2020 level, would pay for components supplied by U.S. companies for the project, such as central solenoid superconducting magnet modules. ITER has long attracted congressional concern about management, schedule, and cost. The United States is to pay 9% of the project's construction costs, including contributions of components, cash, and personnel. Other collaborators in the project include the European Union, Russia, Japan, India, South Korea, and China. The total U.S. share of the cost was estimated in 2015 at between $4.0 billion and $6.5 billion, up from $1.45 billion to $2.2 billion in 2008. DOE funding for the project was $122 million in FY2018 and $132 million in FY2019. The Trump Administration's FY2020 budget would eliminate the Advanced Research Projects Agency—Energy (ARPA-E) and rescind $287 million of the agency's unobligated balances. ARPA-E funds research on technologies that are determined to have potential to transform energy production, storage, and use. \"This elimination facilitates opportunities to integrate the positive aspects of ARPA-E into DOE's applied energy research programs,\" according to the DOE request. The Administration also proposed to terminate ARPA-E in its FY2018 and FY2019 budget requests, but Congress increased the program's funding in both years. Because ARPA-E provides advance funding for projects for up to three years, oversight and management of the program would still be required during a phaseout period. According to the Administration budget request, \"ARPA-E will utilize the remainder of its unobligated balances to execute the multi-year termination of the program, with all operations ceasing by FY 2022.\" The FY2020 budget request for DOE Weapons Activities is 12% greater than the FY2019 enacted level ($12.4 billion vs. $11.1 billion). Weapons Activities programs are carried out by the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE. Under Weapons Activities, FY2020 funding for nuclear warhead life-extension programs (LEPs) would increase by 10% ($2.1 billion vs $1.9 billion). The two most notable increases within that account are the funding request for W80-4 LEP, which increases by 37% ($898.6 million vs. $654.8 million) and the initiation of funding for the W87-1 LEP. The increase in the request for the W80-4 warhead, which is due to be carried on the new long-range standoff weapon (a new cruise missile), apparently is the result of a new budget estimate, as the Department of Defense is not accelerating development of the missile. The FY2020 request seeks $112 million for the W87-1 warhead (formerly the Interoperable Warhead 1, or IW-I), which received $53 million in FY2019. This warhead is to be carried by the Ground Based Strategic Deterrent, a new land-based missile that is scheduled to enter the force in the 2030s. The FY2020 budget request seeks $10 million for the W76-2 LEP, down from $65 million in FY2019. Work on this warhead is nearly complete. It is a low-yield modification of the current W76 warhead carried by U.S. submarine-launched ballistic missiles. It remains controversial in Congress despite its relatively low price tag. In FY2020, NNSA is seeking $51.5 million, in the Stockpile Systems account, for surveillance efforts for the B83 gravity bomb, the most powerful bomb in the U.S. inventory. This effort represents a 47% increase over the $35 million request in FY2019. The Obama Administration had planned to retire this bomb, but the Trump Administration reversed that decision in its 2018 Nuclear Posture Review. This decision may also prove controversial, as several Senators have been vocal supporters of the plan to retire the bomb. Within the Strategic Materials account in the NNSA budget, funding for Plutonium Sustainment would increase 97%, from $361 million enacted for FY2019 to $712 million requested for FY2020. This increase would support the Administration's plans to produce plutonium pits (or cores) for nuclear warheads at two facilities—Los Alamos National Laboratory in New Mexico and the Savannah River Site in South Carolina. The Administration is seeking $410 million to begin conceptual design and pre-Critical Decision (CD)-1 activities at Savannah River. For more information, see CRS Report R44442, Energy and Water Development Appropriations: Nuclear Weapons Activities , by Amy F. Woolf. DOE's Office of Environmental Management (EM) is responsible for environmental cleanup and waste management at the department's nuclear facilities. The total FY2020 appropriations request for EM activities of $6.469 billion would be a decrease of $706 million (-10%) from FY2019. The budgetary components of the EM program are Defense Environmental Cleanup (-9%), Non-Defense Environmental Cleanup (-20%), and the Uranium Enrichment Decontamination and Decommissioning Fund (-15%). The FY2020 request includes a proposal to transfer management of the Formerly Utilized Sites Remedial Action Program (FUSRAP) from USACE to the Office of Legacy Management (LM), the DOE office responsible for long-term stewardship of remediated sites. The FY2020 LM budget request includes $141 million for FUSRAP, down from $150 million appropriated to USACE for the program in FY2019. According to the DOE budget justification, \"USACE will continue to conduct cleanup of FUSRAP sites on a reimbursable basis.\" Table 1 indicates the steps during consideration of FY2020 Energy and Water Development appropriations. (For more details, see the CRS Appropriations Status Table at http://www.crs.gov/AppropriationsStatusTable/Index .) As of the publication date of this report, no markups had been held. Table 2 includes budget totals for energy and water development appropriations enacted for FY2011 through FY2019, plus the FY2020 request. The annual Energy and Water Development appropriations bill includes four titles: Title I—Corps of Engineers—Civil; Title II—Department of the Interior (Central Utah Project and Bureau of Reclamation); Title III—Department of Energy; and Title IV—Independent Agencies, as shown in Table 3 . Major programs in the bill are described in this section in the approximate order they appear in the bill. Previous appropriations and budget recommendations for FY2020 are shown in the accompanying tables, and additional details about many of these programs are provided in separate CRS reports as indicated. For a discussion of current funding issues related to these programs, see \" Funding Issues and Initiatives ,\" above. Congressional clients may obtain more detailed information by contacting CRS analysts listed in CRS Report R42638, Appropriations: CRS Experts , by James M. Specht and Justin Murray. FY2020 budget justifications for the largest agencies funded by the annual Energy and Water Development appropriations bill can be found through the following links: Title I, U.S. Army Corps of Engineers, Civil Works, http://www.usace.army.mil/Missions/CivilWorks/Budget Title II Bureau of Reclamation, https://www.usbr.gov/budget/ Central Utah Project, https://www.doi.gov/sites/doi.gov/files/uploads/fy2020_cupca_budget_justification.pdf Title III, Department of Energy, https://www.energy.gov/cfo/downloads/fy-2020-budget-justification Title IV, Independent Agencies Appalachian Regional Commission, http://www.arc.gov/images/newsroom/publications/fy2020budget/FY2020PerformanceBudgetMar2019.pdf Nuclear Regulatory Commission, https://www.nrc.gov/docs/ML1906/ML19065A279.pdf Defense Nuclear Facilities Safety Board, https://www.dnfsb.gov/about/congressional-budget-requests Nuclear Waste Technical Review Board, http://www.nwtrb.gov/about-us/plans USACE is an agency in the Department of Defense with both military and civilian responsibilities. Under its civil works program, which is funded by the Energy and Water appropriations bill, USACE plans, builds, operates, and in some cases maintains water resources facilities for coastal and inland navigation, riverine and coastal flood risk reduction, and aquatic ecosystem restoration. In recent decades, Congress has generally authorized Corps studies, construction projects, and other activities in omnibus water authorization bills, typically titled Water Resources Development Acts (WRDA), prior to funding them through appropriations legislation. Recent Congresses enacted the following omnibus water resources authorization acts: in June 2014, the Water Resources Reform and Development Act of 2014 (WRRDA, P.L. 113-121 ); in December 2016, the Water Resources Development Act of 2016 (Title I of P.L. 114-322 , the Water Infrastructure Improvements for the Nation Act [WIIN]); and in October 2018, the Water Resources Development Act of 2018 (Title I of P.L. 115-270 , America's Water Infrastructure Act of 2018 [AWIA 2018]). These acts consisted largely of authorizations for new USACE projects, and they altered numerous USACE policies and procedures. Unlike in highways and municipal water infrastructure programs, federal funds for USACE are not distributed to states or projects based on formulas or delivered via competitive grants. Instead, USACE generally is directly involved in planning, designing, and managing the construction of projects that are cost-shared with nonfederal project sponsors. Prior to FY2010, in addition to site-specific project funding included in the President's annual budget request for USACE, Congress, during the discretionary appropriations process, had identified many additional USACE projects to receive funding or had adjusted the funding levels for the projects identified in the President's request. Starting in the 112 th Congress, site-specific project line items added or increased by Congress (i.e., earmarks) became subject to House and Senate earmark moratorium policies. As a result, Congress generally has not added funding at the project level since FY2010. In lieu of the project-based increases, Congress has included \"additional funding\" for select categories of USACE projects and provided direction and limitations on the use of these funds. For more information, CRS In Focus IF11137, Army Corps of Engineers: FY2020 Appropriations , by Nicole T. Carter and Anna E. Normand. Previous appropriations and the President's request for FY2020 are shown in Table 4 . Most of the large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau of Reclamation. While the Corps of Engineers built hundreds of flood control and navigation projects, Reclamation's original mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West for farming and ranching. Reclamation has evolved into an agency that assists in meeting the water demands in the West while working to protect the environment and the public's investment in Reclamation infrastructure. The agency's municipal and industrial water deliveries have more than doubled since 1970. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs, in 17 western states. These projects provide water to approximately 10 million acres of farmland and 31 million people. Reclamation is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control, recreation, and other benefits. Reclamation facility operations are often controversial, particularly for their effect on fish and wildlife species and because of conflicts among competing water users during drought conditions. As with the Corps of Engineers, the Reclamation budget is made up largely of individual project funding lines, rather than general programs that would not be covered by congressional earmark requirements. Therefore, as with USACE, these Reclamation projects have often been subject to earmark disclosure rules. The current moratorium on earmarks restricts congressional steering of money directly toward specific Reclamation projects. Reclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, dam safety, and ecosystem restoration, among others. Reclamation also typically requests funds in a number of smaller accounts, and has proposed additional accounts in recent years. Implementation and oversight of the Central Utah Project (CUP), also funded by Title II, is conducted by a separate office within the Department of the Interior. For more information, see CRS In Focus IF11158, Bureau of Reclamation: FY2020 Appropriations , by Charles V. Stern. Previous appropriations and recommendations for FY2020 are shown in Table 5 . The Energy and Water Development bill has funded all DOE programs since FY2005. Major DOE activities include (1) research and development (R&D) on renewable energy, energy efficiency, nuclear power, fossil energy, and electricity; (2) the Strategic Petroleum Reserve; (3) energy statistics; (4) general science; (5) environmental cleanup; and (6) nuclear weapons and nonproliferation programs. Table 6 provides the recent funding history for DOE programs, which are briefly described further below. DOE's Office of Energy Efficiency and Renewable Energy (EERE) conducts research and development on transportation energy technology, energy efficiency in buildings and manufacturing processes, and the production of solar, wind, geothermal, and other renewable energy. EERE also administers formula grants to states for making energy efficiency improvements to low-income housing units and for state energy planning. The Sustainable Transportation program area includes electric vehicles, vehicle efficiency, and alternative fuels. DOE's electric vehicle program aims to \"reduce the cost of electric vehicle batteries by more than half, to less than $100/kWh [kilowatt-hour] (ultimate goal is $80/kWh), increase range to 300 miles, and decrease charge time to 15 minutes or less.\" DOE's vehicle fuel cell program is focusing on the costs of fuel cells and their hydrogen fuel. According to the FY2020 budget request, \"To be cost competitive with gasoline-powered internal combustion engines on a cents-per-mile driven basis, the cost of hydrogen delivered and dispensed needs to be less than $4/gge [gasoline gallon equivalent] (untaxed), and the cost of a durable fuel cell system to be less than $40/kW.\" Bioenergy goals include the development of \"drop-in\" fuels—fuels that would be largely compatible with existing energy infrastructure and vehicles, with a goal of $3/gge. Renewable power programs focus on electricity generation from solar, wind, water, and geothermal sources. The solar energy program has a goal of achieving, by 2030, costs of 3 cents per kWh for unsubsidized, utility-scale photovoltaics (PV). Wind R&D is to focus on early-stage research and testing to reduce costs and improve performance and reliability. The geothermal program is to focus on developing \"enhanced geothermal systems\" with an electricity generation cost target of 20.8 cents/kWh by 2022. In the energy efficiency program area, the advanced manufacturing program focuses on improving the energy efficiency of manufacturing processes and on the manufacturing of energy-related products. The building technologies program includes R&D on lighting, space conditioning, windows, and control technologies to reduce building energy-use intensity. The energy efficiency program also provides weatherization grants to states for improving the energy efficiency of low-income housing units and state energy planning grants. For more details, see CRS Report R44980, DOE's Office of Energy Efficiency and Renewable Energy (EERE): Appropriations Status , by Corrie E. Clark. The Office of Cybersecurity, Energy Security, and Emergency Response (CESER) was created from programs that were previously part of the Office of Electricity Delivery and Energy Reliability. The programs that were not moved into CESER became part of the DOE Office of Electricity (OE). OE's mission is to lead DOE efforts \"to strengthen, transform, and improve energy infrastructure so that consumers have access to secure and resilient sources of energy.\" Major priorities of OE are developing a model of North American energy vulnerabilities, pursuing megawatt-scale electricity storage, integrating electric power system sensing technology, and analyzing electricity policy issues. The office also includes the DOE power marketing administrations, which are funded from separate appropriations accounts. CESER is the federal government's lead entity for energy sector-specific responses to energy security emergencies—whether caused by physical infrastructure problems or by cybersecurity issues. The office conducts R&D on energy infrastructure security technology; provides energy sector security guidelines, training, and technical assistance; and enhances energy sector emergency preparedness and response. DOE's Multiyear Plan for Energy Sector Cybersecurity describes the department's strategy to \"strengthen today's energy delivery systems by working with our partners to address growing threats and promote continuous improvement, and develop game-changing solutions that will create inherently secure, resilient, and self-defending energy systems for tomorrow.\" The plan includes three goals that DOE has established for energy sector cybersecurity: strengthen energy sector cybersecurity preparedness; coordinate cyber incident response and recovery; and accelerate game-changing research, development, and demonstration (RD&D) of resilient energy delivery systems. DOE's Office of Nuclear Energy (NE) \"focuses on three major mission areas: the nation's existing nuclear fleet, the development of advanced nuclear reactor concepts, and fuel cycle technologies,\" according to DOE's FY2020 budget justification. It calls nuclear energy \"a key element of United States energy independence, energy dominance, electricity grid resiliency, national security, and clean baseload power.\" The Reactor Concepts program area includes research on advanced reactors, including advanced small modular reactors, and research to enhance the \"sustainability\" of existing commercial light water reactors. Advanced reactor research focuses on \"Generation IV\" reactors, as opposed to the existing fleet of commercial light water reactors, which are generally classified as generations II and III. R&D under this program focuses on advanced coolants, fuels, materials, and other technology areas that could apply to a variety of advanced reactors. To help develop those technologies, the Reactor Concepts program is developing a Versatile Test Reactor that would allow fuels and materials to be tested in a fast neutron environment (in which neutrons would not be slowed by water, graphite, or other \"moderators\"). Research on extending the life of existing commercial light water reactors beyond 60 years, the maximum operating period currently licensed by NRC, is being conducted by this program with industry cost-sharing. The Fuel Cycle Research and Development program includes generic research on nuclear waste management and disposal. One of the program's primary activities is the development of technologies to separate the radioactive constituents of spent fuel for reuse or solidifying into stable waste forms. Other major research areas in the Fuel Cycle R&D program include the development of accident-tolerant fuels for existing commercial reactors, evaluation of fuel cycle options, and development of improved technologies to prevent diversion of nuclear materials for weapons. The program is also developing sources of high-assay low enriched uranium (HALEU), in which uranium is enriched to between 5% and 20% in the fissile isotope U-235, for potential use in advanced reactors. For more information, see CRS Report R45706, Advanced Nuclear Reactors: Technology Overview and Current Issues , by Danielle A. Arostegui and Mark Holt. Much of DOE's Fossil Energy R&D Program focuses on carbon capture and storage for power plants fueled by coal and natural gas. Major activities include Advanced Coal Energy Systems and Carbon Capture, Utilization, and Storage (CCUS); Natural Gas Technologies; and Unconventional Fossil Energy Technologies from Petroleum—Oil Technologies. Advanced Coal Energy Systems includes R&D on modular coal-gasification systems, advanced turbines, solid oxide fuel cells, advanced sensors and controls, and power generation efficiency. Elements of the CCUS program include the following: Carbon Capture subprogram for separating CO 2 in both precombustion and postcombustion systems; Carbon Utilization subprogram for R&D on technologies to convert carbon to marketable products, such as chemicals and polymers; and Carbon Storage subprogram on long-term geologic storage of CO 2 , focusing on saline formations, oil and natural gas reservoirs, unmineable coal seams, basalts, and organic shales. For more information, see CRS In Focus IF10589, FY2019 Funding for CCS and Other DOE Fossil Energy R&D , by Peter Folger, and CRS Report R44472, Funding for Carbon Capture and Sequestration (CCS) at DOE: In Brief , by Peter Folger. The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in 1975, consists of caverns built within naturally occurring salt domes in Louisiana and Texas. The SPR provides strategic and economic security against foreign and domestic disruptions in U.S. oil supplies via an emergency stockpile of crude oil. The program fulfills U.S. obligations under the International Energy Program, which avails the United States of International Energy Agency (IEA) assistance through its coordinated energy emergency response plans, and provides a deterrent against energy supply disruptions. DOE has been conducting a major maintenance program to address aging infrastructure and a deferred maintenance backlog at SPR facilities. The federal government has not purchased oil for the SPR since 1994. Beginning in 2000, additions to the SPR were made with royalty-in-kind (RIK) oil acquired by DOE in lieu of cash royalties paid on production from federal offshore leases. In September 2009, the Secretary of the Interior announced a phaseout of the RIK Program. By early 2010, the SPR's capacity reached 727 million barrels. A series of oil sales and purchases since then have resulted in a net reduction of the SPR inventory. Currently, the SPR contains about 649 million barrels. Congress has enacted several laws since 2015 that mandate sales of SPR oil, including the Bipartisan Budget Act of 2015 ( P.L. 114-74 ), the Fixing America's Surface Transportation Act ( P.L. 114-94 ), the 21 st Century Cures Act of 2016 ( P.L. 114-255 ), the 2017 Tax Revision ( P.L. 115-97 ), the Bipartisan Budget Act of 2018 ( P.L. 115-123 ), and the Consolidated Appropriations Act, 2018. Broadly considered, this legislation requires oil to be sold from the reserve over the period FY2017 through FY2027, totaling 266 million barrels. For more information, see CRS Report R45577, Strategic Petroleum Reserve: Mandated Sales and Reform , by Robert Pirog, and CRS In Focus IF10869, Reconsidering the Strategic Petroleum Reserve , by Robert Pirog. The DOE Office of Science conducts basic research in six program areas: advanced scientific computing research, basic energy sciences, biological and environmental research, fusion energy sciences, high-energy physics, and nuclear physics. According to DOE's FY2020 budget justification, the Office of Science \"is the Nation's largest Federal sponsor of basic research in the physical sciences and the lead Federal agency supporting fundamental scientific research for our Nation's energy future.\" DOE's Advanced Scientific Computing Research (ASCR) program focuses on developing and maintaining computing and networking capabilities for science and research in applied mathematics, computer science, and advanced networking. The program plays a key role in the DOE-wide effort to advance the development of exascale computing, which seeks to build a computer that can solve scientific problems 1,000 times faster than today's best machines. DOE has asserted that the department is on a path to have a capable exascale machine by the early 2020s. Basic Energy Sciences (BES), the largest program area in the Office of Science, focuses on understanding, predicting, and ultimately controlling matter and energy at the electronic, atomic, and molecular levels. The program supports research in disciplines such as condensed matter and materials physics, chemistry, and geosciences. BES also provides funding for scientific user facilities (e.g., the National Synchrotron Light Source II, and the Linac Coherent Light Source-II), and certain DOE research centers and hubs (e.g., Energy Frontier Research Centers, as well as the Batteries and Energy Storage and Fuels from Sunlight Energy Innovation Hubs). Biological and Environmental Research (BER) seeks a predictive understanding of complex biological, climate, and environmental systems across a continuum from the small scale (e.g., genomic research) to the large (e.g., Earth systems and climate). Within BER, Biological Systems Science focuses on plant and microbial systems, while Biological and Environmental Research supports climate-relevant atmospheric and ecosystem modeling and research. BER facilities and centers include four Bioenergy Research Centers and the Environmental Molecular Science Laboratory at Pacific Northwest National Laboratory. Fusion Energy Sciences (FES) seeks to increase understanding of the behavior of matter at very high temperatures and to establish the science needed to develop a fusion energy source. FES provides funding for the International Thermonuclear Experimental Reactor (ITER) project, a multinational effort to design and build an experimental fusion reactor. According to DOE, ITER \"aims to provide fusion power output approaching reactor levels of hundreds of megawatts, for hundreds of seconds.\" However, many U.S. analysts have expressed concern about ITER's cost, schedule, and management, as well as the budgetary impact on domestic fusion research. The High Energy Physics (HEP) program conducts research on the fundamental constituents of matter and energy, including studies of dark energy and the search for dark matter. Nuclear Physics supports research on the nature of matter, including its basic constituents and their interactions. A major project in the Nuclear Physics program is the construction of the Facility for Rare Isotope Beams at Michigan State University. A separate DOE office, the Advanced Research Projects Agency—Energy (ARPA-E), was authorized by the America COMPETES Act ( P.L. 110-69 ) to support transformational energy technology research projects. DOE budget documents describe ARPA-E's mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. For more details, see CRS Report R45150, Federal Research and Development (R&D) Funding: FY2019 , coordinated by John F. Sargent Jr. DOE's Loan Programs Office provides loan guarantees for projects that deploy specified energy technologies, as authorized by Title 17 of the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ), direct loans for advanced vehicle manufacturing technologies, and loan guarantees for tribal energy projects. Section 1703 of the act authorizes loan guarantees for advanced energy technologies that reduce greenhouse gas emissions, and Section 1705 established a temporary program for renewable energy and energy efficiency projects. Title 17 allows DOE to provide loan guarantees for up to 80% of construction costs for eligible energy projects. Successful applicants must pay an up-front fee, or \"subsidy cost,\" to cover potential losses under the loan guarantee program. Under the loan guarantee agreements, the federal government would repay all covered loans if the borrower defaulted. Such guarantees would reduce the risk to lenders and allow them to provide financing at below-market interest rates. The following is a summary of loan guarantee amounts that have been authorized (loan guarantee ceilings) for various technologies: $8.3 billion for nonnuclear technologies under Section 1703; $2.0 billion for unspecified projects from FY2007 under Section 1703; $18.5 billion for nuclear power plants ($12.0 billion committed); $4 billion for loan guarantees for uranium enrichment plants; $1.18 billion for renewable energy and energy efficiency projects under Section 1703, in addition to other loan guarantee ceilings, which can include applications that were pending under Section 1705 before it expired; and In addition to the loan guarantee ceilings above, an appropriation of $161 million was provided for subsidy costs for renewable energy and energy efficiency loan guarantees under Section 1703. If the subsidy costs averaged 10% of the loan guarantees, this funding could leverage loan guarantees totaling about $1.6 billion. The only loan guarantees under Section 1703 were $8.3 billion in guarantees provided to the consortium building two new reactors at the Vogtle plant in Georgia. DOE committed an additional $3.7 billion in loan guarantees for the Vogtle project on March 22, 2019. Another nuclear loan guarantee is being sought by NuScale Power to build a small modular reactor in Idaho. In the absence of explosive testing of nuclear weapons, the United States has adopted a science-based program to maintain and sustain confidence in the reliability of the U.S. nuclear stockpile. Congress established the Stockpile Stewardship Program in the National Defense Authorization Act for Fiscal Year 1994 ( P.L. 103-160 ). The goal of the program, as amended by the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 , §3111), is to ensure \"that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing.\" The program is operated by NNSA, a semiautonomous agency within DOE established by the National Defense Authorization Act for Fiscal Year 2000 ( P.L. 106-65 , Title XXXII). NNSA implements the Stockpile Stewardship Program through the activities funded by the Weapons Activities account in the NNSA budget. Most of NNSA's weapons activities take place at the nuclear weapons complex, which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City National Security Campus, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 National Security Complex, TN); and the Nevada National Security Site (formerly the Nevada Test Site). NNSA manages and sets policy for the weapons complex; contractors to NNSA operate the eight sites. Radiological activities at these sites are subject to oversight and recommendations by the independent Defense Nuclear Facilities Safety Board, funded by Title IV of the annual Energy and Water Development appropriations bill. There are three major program areas in the Weapons Activities account. Directed Stockpile Work includes the life extension programs (LEPs) on existing warheads and stockpile services programs that monitor their condition; and maintaining warheads through repairs, refurbishment, and modifications. It also includes funding for research and development in support of specific warheads, and dismantlement of warheads that have been removed from the stockpile. This last activity received more significant funding as the number of warheads in the U.S. stockpile declined after the Cold War; it also provides a source for critical components for warheads remaining in the stockpile. Directed Stockpile Work also involves programs that work on the materials needed for nuclear warheads, including the plutonium pits that are the core of the weapons. Research, Development, Test, and Evaluation (RDT&E) includes five programs that focus on \"efforts to develop and maintain critical capabilities, tools, and processes needed to support science based stockpile stewardship, refurbishment, and continued certification of the stockpile over the long-term in the absence of underground nuclear testing.\" This area includes operation of some large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory. Infrastructure and Operations has, as its main funding elements, material recycle and recovery, recapitalization of facilities, and construction of facilities. The latter include two major projects that have generated congressional controversy: the Uranium Processing Facility (UPF) at the Y-12 National Security Complex and the Chemistry and Metallurgy Research Replacement (CMRR) Project, which deals with plutonium, at Los Alamos National Laboratory. Nuclear Weapons Activities also has several smaller programs, including the following: Secure Transportation Asset, providing for safe and secure transport of nuclear weapons, components, and materials; Defense Nuclear Security, providing operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and related activities; and Information Technology and Cybersecurity, whose elements include cybersecurity, secure enterprise computing, and Federal Unclassified Information Technology. For more information, see CRS Report R44442, Energy and Water Development Appropriations: Nuclear Weapons Activities , by Amy F. Woolf, and CRS Report R45306, The U.S. Nuclear Weapons Complex: Overview of Department of Energy Sites , by Amy F. Woolf and James D. Werner. DOE's nonproliferation and national security programs provide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weapons worldwide. These programs are administered by NNSA's Office of Defense Nuclear Nonproliferation. The Materials Management and Minimization program conducts activities to minimize and, where possible, eliminate stockpiles of weapons-useable material around the world. Major activities include conversion of reactors that use highly enriched uranium (useable for weapons) to low-enriched uranium, removal and consolidation of nuclear material stockpiles, and disposition of excess nuclear materials. Global Materials Security has three major program elements. International Nuclear Security focuses on increasing the security of vulnerable stockpiles of nuclear material in other countries. Radiological Security promotes the worldwide reduction and security of radioactive sources, including the removal of surplus sources and substitution of technologies that do not use radioactive materials. Nuclear Smuggling Detection and Deterrence works to improve the capability of other countries to halt illicit trafficking of nuclear materials. Nonproliferation and Arms Control works to \"to support U.S. nonproliferation and arms control objectives to prevent proliferation, ensure peaceful nuclear uses, and enable verifiable nuclear reductions,\" according to the FY2020 DOE justification. This program conducts reviews of nuclear export applications and technology transfer authorizations, implements treaty obligations, and analyzes nonproliferation policies and proposals. Other programs under Defense Nuclear Nonproliferation include research and development and construction, which advances nuclear detection and nuclear forensics technologies. Nuclear Counterterrorism and Incident Response provides \"interagency policy, contingency planning, training, and capacity building\" to counter nuclear terrorism and strengthen incident response capabilities, according to the FY2020 budget justification. The development and production of nuclear weapons during half a century since the beginning of the Manhattan Project resulted in a waste and contamination legacy managed by DOE that continues to present substantial challenges today. DOE also manages legacy environmental contamination at sites used for nondefense nuclear research. In 1989, DOE established the Office of Environmental Management primarily to consolidate its responsibilities for the cleanup of former nuclear weapons production sites that had been administered under multiple offices. DOE's nuclear cleanup efforts are broad in scope and include the disposal of large quantities of radioactive and other hazardous wastes generated over decades; management and disposal of surplus nuclear materials; remediation of extensive contamination in soil and groundwater; decontamination and decommissioning of excess buildings and facilities; and safeguarding, securing, and maintaining facilities while cleanup is underway. DOE's cleanup of nuclear research sites adds a nondefense component to the EM's mission, albeit smaller in terms of the scope of their cleanup and associated funding. DOE has identified more than 100 separate sites in over 30 states that historically were involved in the production of nuclear weapons and nuclear energy research for civilian purposes. The geographic scope of these sites is substantial, collectively encompassing a land area of approximately 2 million acres. Cleanup remedies are in place and operational at the majority of these sites. Responsibility for the long-term stewardship of them has been transferred to the Office of Legacy Management and other offices within DOE for the operation and maintenance of cleanup remedies and monitoring. Some of the smaller sites for which DOE initially was responsible were transferred to the Army Corps of Engineers in 1997 under the Formerly Utilized Sites Remedial Action Program (FUSRAP). Once USACE completes the cleanup of a FUSRAP site, it is transferred back to DOE for long-term stewardship under the Office of Legacy Management, which is separate from EM and has its own funding account. Three appropriations accounts fund the Office of Environmental Management. The Defense Environmental Cleanup account is the largest in terms of funding, and it finances the cleanup of former nuclear weapons production sites. The Non-Defense Environmental Cleanup account funds the cleanup of federal nuclear energy research sites. Title XI of the Energy Policy Act of 1992 ( P.L. 102-486 ) established the Uranium Enrichment Decontamination and Decommissioning Fund to pay for the cleanup of three federal facilities that enriched uranium for national defense and civilian purposes. Those facilities are located near Paducah, KY; Piketon, OH (Portsmouth plant); and Oak Ridge, TN. Title X of P.L. 102-486 authorized the reimbursement of uranium and thorium producers for their costs of cleaning up contamination attributable to uranium and thorium sold to the federal government. The adequacy of funding for the Office of Environmental Management to attain cleanup milestones across the entire site inventory has been a recurring issue. Cleanup milestones are enforceable measures incorporated into compliance agreements negotiated among DOE, the Environmental Protection Agency, and the states. These milestones establish time frames for the completion of specific actions to satisfy applicable requirements at individual sites. DOE's four Power Marketing Administrations were established to sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers. Preference in the sale of power is given to publicly owned and cooperatively owned utilities. The PMAs operate in 34 states; their assets consist primarily of transmission infrastructure in the form of more than 33,000 miles of high voltage transmission lines and 587 substations. PMA customers are responsible for repaying all power program expenses, plus the interest on capital projects. Since FY2011, power revenues associated with the PMAs have been classified as discretionary offsetting receipts (i.e., receipts that are available for spending by the PMAs), thus the agencies are sometimes noted as having a \"net-zero\" spending authority. Only the capital expenses of WAPA and SWPA require appropriations from Congress. For more information, see CRS Report R45548, The Power Marketing Administrations: Background and Current Issues , by Richard J. Campbell. Independent agencies that receive funding in Title IV of the Energy and Water Development bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Defense Nuclear Facilities Safety Board. NRC is by far the largest of the independent agencies, with a total budget of more than $900 million. However, as noted in the description of NRC below, about 90% of NRC's budget is offset by fees, so that the agency's net appropriation is less than half of the total funding in Title IV. The recent appropriations history for all the Title IV agencies is shown in Table 7 . Established in 1965, the Appalachian Regional Commission (ARC) is a regional economic development agency. It awards grants and contracts to state and local governments and nonprofit organizations to foster economic opportunities, improve workforce skills, build critical infrastructure, strengthen natural and cultural assets, and improve leadership skills and capacity in the region. ARC's authorizing statute defines the Appalachian Region as including all of West Virginia and parts of Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, and Virginia. More than 25 million people currently live in the region as defined. ARC provides funding to several hundred projects each year, with particular focus on the region's most economically distressed counties. Major areas of infrastructure support broadband communication systems, transportation, and water and wastewater systems. ARC has supported development of the Appalachian Development Highway System (ADHS), a planned 3,000-mile system of highways that connect with the U.S. Interstate Highway System. According to ARC, 90.5% of ADHS is currently \"complete, open to traffic, or under construction.\" NRC is an independent agency that establishes and enforces safety and security standards for nuclear power plants and users of nuclear materials. Major appropriations categories for NRC are shown in Table 8 . Nuclear Reactor Safety is NRC's largest program and is responsible for licensing and regulating the U.S. fleet of 98 power reactors, plus two under construction. NRC is also responsible for licensing and regulating nuclear waste facilities, such as the proposed underground nuclear waste repository at Yucca Mountain, NV. NRC is required by law to offset about 90% of its total budget, excluding specified items, through fees charged to nuclear reactor owners and other holders of NRC licenses. As a result, NRC's net appropriation can be as low as 10% of its total funding level, depending on the activities that Congress excludes from fee recovery. For example, excluded items in NRC's FY2019 enacted appropriation are prior-year balances, development of advanced reactor regulations, and international activities. The following hearings have been held by the Energy and Water Development subcommittees of the House and Senate Appropriations Committees on the FY2020 budget request. Testimony and opening statements are posted on most of the web pages cited for each hearing, along with webcasts in many cases. Department of Energy , March 26, 2019, https://appropriations.house.gov/legislation/hearings/budget-department-of-energy . Corps of Engineers (Civil Works) and the Bureau of Reclamation , March 27, 2019, https://appropriations.house.gov/legislation/hearings/budget-us-army-corps-of-engineers-and-bureau-of-reclamation . National Nuclear Security Administration , April 2, 2019, https://appropriations.house.gov/legislation/hearings/budget-department-of-energy-national-nuclear-security-administration. DOE Science, Energy, and Environmental Management Programs , April 3, 2019, https://appropriations.house.gov/legislation/hearings/budget-science-energy-and-environmental-management-programs. Department of Energy , March 27, 2019, https://www.appropriations.senate.gov/hearings/review-of-the-fy2020-budget-request-for-the-us-department-of-energy . National Nuclear Security Administration , April 3, 2019, https://www.appropriations.senate.gov/hearings/review-of-the-fy2020-budget-request-for-the-national-nuclear-security-administration . U.S. Army Corps of Engineers and the Bureau of Reclamation , April 10, 2019, https://www.appropriations.senate.gov/hearings/review-of-the-fy2020-budget-requests-for-army-corps-of-engineers-and-bureau-of-reclamation .", "summary": "The Energy and Water Development appropriations bill provides funding for civil works projects of the U.S. Army Corps of Engineers (USACE); the Department of the Interior's Bureau of Reclamation (Reclamation) and Central Utah Project (CUP); the Department of Energy (DOE); the Nuclear Regulatory Commission (NRC); and several other independent agencies. DOE typically accounts for about 80% of the bill's funding. President Trump submitted his FY2020 detailed budget proposal to Congress on March 18, 2019 (after submitting a general budget overview on March 11). The budget requests for agencies included in the Energy and Water Development appropriations bill total $38.02 billion—$6.64 billion (15%) below the FY2019 appropriation. The largest exception to the overall decrease proposed for energy and water programs is a $1.309 billion increase (12%) for DOE nuclear weapons activities. For FY2019, the conference agreement on H.R. 5895 (H.Rept. 115-929) provided total Energy and Water Development appropriations of $44.66 billion—3% above the FY2018 level, excluding supplemental funding, and 23% above the FY2019 request. It was signed by the President on September 21, 2018 (P.L. 115-244). Emergency supplemental appropriations totaling $17.419 billion were provided to USACE and DOE for hurricane response by the Bipartisan Budget Act of 2018 (P.L. 115-123), signed February 9, 2018. Major Energy and Water Development funding issues for FY2020 are listed below. They were selected based on the total funding involved, the percentage of proposed increases or decreases, and potential impact on broader public policy considerations. Water Agency Funding Reductions. The Trump Administration requested reductions of 31% for USACE and 29% for Reclamation for FY2020 from the FY2019 enacted levels. The largest reductions would be from USACE Operation and Maintenance (-48%) and Reclamation's Water and Related Resources account (-31%). Similar reductions proposed by the Administration for FY2019 were not enacted. Power Marketing Administration (PMA) Reforms. DOE's FY2020 budget request includes mandatory proposals to sell PMA electricity transmission lines and other assets, repeal certain PMA borrowing authority, and eliminate cost-based limits on the electricity rates charged by the PMAs. The proposals would need to be enacted in authorizing legislation. Termination of Energy Efficiency Grants. DOE's Weatherization Assistance Program and State Energy Program would be terminated under the FY2020 budget request. The Administration had proposed to eliminate the grants in FY2018 and FY2019, but Congress continued funding. Reductions in Energy Research and Development. Under the FY2020 budget request, DOE research and development appropriations would be reduced for energy efficiency and renewable energy (EERE) by 83%, nuclear energy by 38%, and fossil energy by 24%. Similar reductions proposed by the Administration for FY2019 were not enacted. Nuclear Waste Repository. The Administration's budget request would provide new funding for the first time since FY2010 for a proposed nuclear waste repository at Yucca Mountain, NV. DOE would receive $116 million to seek an NRC license for the repository and develop interim waste storage capacity. NRC would receive $38.5 million to consider DOE's repository license application. Similar Administration funding requests for FY2018 and FY2019 were not enacted. Elimination of Advanced Research Projects Agency—Energy (ARPA-E). The Trump Administration proposes no new appropriations for ARPA-E in FY2020 and to cancel $287 million in unobligated balances from previous appropriations. Similar proposals to terminate ARPA-E in FY2018 and FY2019 were not enacted. Loan Programs Termination. The FY2020 budget request would terminate DOE's Title 17 Innovative Technology Loan Guarantee Program, the Advanced Technology Vehicles Manufacturing Loan Program, and the Tribal Energy Loan Guarantee Program. Administration proposals to eliminate the programs were not included in the enacted appropriations measures for FY2018 and FY2019. Weapons Activities. The FY2020 budget request for DOE Weapons Activities is 12% greater than it was in FY2019 ($12.4 billion vs. $11.1 billion), in contrast to a proposed 10% reduction in DOE's total funding. Notable proposed increases would be used for warhead life extension programs and preparations for increase production of plutonium pits (warhead cores).", "document_type": "crs"}
{"report": "This report provides background information for Congress on the levels of Department of Defense (DOD) military servicemembers and contractor personnel deployed in support of prior and ongoing military operations in Iraq and Afghanistan. For more information on DOD's use of contractor personnel, see CRS In Focus IF10600, Defense Primer: Department of Defense Contractors , by Heidi M. Peters and Moshe Schwartz and CRS Report R43074, Department of Defense's Use of Contractors to Support Military Operations: Background, Analysis, and Issues for Congress , by Moshe Schwartz. Throughout its history, DOD has relied on contractors to support a wide range of military operations. Operations over the past 30 years have highlighted the critical role that contractors play in supporting U.S. military servicemembers, both in terms of the number of contractors and the type of work being performed. During recent U.S. military operations in Iraq and Afghanistan, contractors frequently averaged 50% or more of the total DOD presence in-country. Since 2008, U.S. Central Command (CENTCOM) has published quarterly contractor census reports that provide aggregated data – including elements such as mission category and nationality – on contractors employed through DOD-funded contracts who are physically located within the CENTCOM area of responsibility. Analysts and observers have previously raised questions about the reliability of the data gathered by DOD regarding the number of contractors it employs in theater in support of military operations. DOD officials, however, have stated that since 2009, the DOD has implemented a variety of mechanisms to improve the reliability of contractor data it gathers, including modifications to information technology systems, such as data collection systems like the joint Synchronized Predeployment and Operational Tracker (SPOT) database; updates and changes to related departmental policies; and changes in \"leadership emphasis\" within DOD and the combatant commands. For the fourth quarter of Fiscal Year (FY) 2018, CENTCOM reported 49,451 contractor personnel working for DOD within its area of responsibility, which included 28,189 individuals located in Afghanistan, Iraq, and Syria (see Figure 1 and Figure 2 ). From FY2009 to FY2018, obligations for all DOD-funded contracts performed within the Iraq and Afghanistan areas of operation totaled approximately $208 billion in FY2019 dollars (see Table 5 ). Force management levels, sometimes also described as troop caps, troop ceilings, or force manning levels, have historically been used by the United States to establish bounds on the number of military personnel that may be deployed in a country or region. The executive and legislative branches of the U.S. government have used force management levels to guide the execution of certain overseas U.S. military operations, as well as the associated presence of DOD personnel. During the 1980s, for example, Congress used provisions within annual appropriations legislation to establish force management levels limiting the number of active duty U.S. military personnel stationed ashore in Europe. The Obama Administration used force management levels to manage its drawdown of the U.S. military presence in Afghanistan, and to manage the U.S. military presence in Iraq and Syria under Operation Inherent Resolve. The Trump Administration has reportedly delegated the authority to establish force management levels for Afghanistan, Iraq, and Syria to the Secretary of Defense. In August 2017, the DOD announced that it was revising its force management level accounting and reporting practices for Afghanistan to also include U.S. Armed Forces personnel in-country for short-duration missions, personnel in a temporary duty status, personnel assigned to combat support agencies, and forces assigned to the material recovery element and the Resolute Support sustainment brigade in reported totals. In late 2017, the Defense Department stopped reporting the number of U.S. military personnel deployed in support of operations in Afghanistan, Iraq, and Syria as part of its quarterly manpower reports and in other official releases. These data remain withheld, leading to criticism from some observers and Members of Congress. Some observers and experts argued that external \"resource limits\" of force management levels may have increased DOD's \"reliance on…contractor and temporary duty personnel\" to effectively execute ongoing military operations in Afghanistan, Iraq, and Syria. In February 2017, U.S. Army General John Nicholson, then Commander of the NATO Resolute Support Mission and United States Forces–Afghanistan, testified before the Senate Armed Services Committee that DOD had to \"substitute contractors for soldiers in order to meet the force manning levels\" in Afghanistan. While the drawdown of U.S. forces contributed to a demonstrable increase in the ratio of contractors to uniformed servicemembers in Afghanistan between 2012 and 2017, it is difficult to assess if the increased ratio supported General Nicholson's assertion. The House-passed version of the FY2018 National Defense Authorization Act (NDAA, H.R. 2810 ) contained a provision (Section 923) that would have expressed the sense of Congress that the DOD should discourage the practice of substituting contractor personnel for available members of the Armed Forces when a unit deploys overseas. This section also would have required the Secretary of Defense to provide a related briefing to the congressional defense committees. A similar provision was not included in the Senate amendment to H.R. 2810 . While the House receded in conference, the conferees directed the Secretary of Defense to provide a briefing detailing steps taken by DOD to revise deployment guidelines to ensure readiness, unit cohesion, and maintenance were prioritized, as well as the Secretary of Defense's plan to establish a policy to avoid the practice of directly substituting contractor personnel for U.S. military personnel when practicable in the future. Concern about DOD's use of contractors in contingency operations predates the recent usage of force management levels. For example, the Commission on Wartime Contracting in Iraq and Afghanistan, in its 2011 final report to Congress, expressed its view that operations in Iraq and Afghanistan between FY2002 and FY2011 had led to an \"unhealthy over-reliance\" on contractors by DOD, Department of State, and USAID. In Iraq and Afghanistan, armed and unarmed private security contractors have been employed to provide services such as protecting fixed locations; guarding traveling convoys; providing security escorts; and training police and military personnel. The number of private security contractor employees working for DOD in Iraq and Afghanistan has fluctuated significantly over time, and is dependent on a variety of factors, including current force management levels in-country and U.S. operational needs. The presence of private security contractors peaked in Afghanistan in 2012 at more than 28,000 individuals and in Iraq in 2009 at more than 15,000 individuals. For the fourth quarter of FY2018, DOD reported 4,172 private security contractors in Afghanistan, with 2,397 categorized as armed private security contractors (see Table 2 ). DOD reported 418 security contractor personnel in Iraq and Syria during the same period, none of whom were identified as armed private security contractors (see Table 4 ). As of the fourth quarter of FY2018, 25,239 DOD contractor personnel were located in Afghanistan (see Table 1 ). Approximately 44% of DOD's reported individual contractors were U.S. citizens (10,989), approximately 42% were third-country nationals (10,628), and roughly 14% were local nationals (3,622). Of the 25,239 DOD contractor personnel, about 9% were armed private security contractors (2,397). As of May 2019, observers and analysts estimated the number of U.S. Armed Forces personnel in Afghanistan to be between 14,000 and 15,000. Reports in early 2019 indicate the Trump Administration may be contemplating withdrawing some portion of in-country U.S. forces (a subject of ongoing U.S.-Taliban negotiations). U.S. officials have stated that no final policy decision has been made. DOD ceased publicly reporting numbers of DOD contractor personnel working in Iraq in December 2013, following the conclusion of the U.S. combat mission in Iraq (Operation Iraqi Freedom and Operation New Dawn), and the subsequent drawdown of DOD contractor personnel levels in Iraq. In late 2014, in response in part to developing operations in the region, DOD reinitiated reporting broad estimates of DOD contractor personnel deployed in Iraq in support of Operation Inherent Resolve (OIR). As the number of DOD contractor personnel in Iraq increased over the first six months of 2015, DOD resumed reporting exact numbers and primary mission categories of OIR contractor personnel in June 2015. In the second quarter of FY2018, DOD began reporting a combined total of contractor personnel physically located in Iraq and Syria. As of the fourth quarter of FY2018, there were 6,318 DOD contractor personnel in Iraq and Syria (see Table 3 ). Approximately 49% of DOD's reported individual contractors were U.S. citizens (3,086), approximately 38% were third-country nationals (2,405); and roughly 13% were local/host-country nationals. As of FY2018, CENTCOM has not resumed reporting data on DOD-funded private security personnel in Iraq. In December 2017, DOD indicated the number of U.S. Armed Forces personnel in Iraq was roughly 5,200, and indicated the number of U.S. Armed Forces personnel in Syria was approximately 2,000. In December 2018, President Donald J. Trump announced that U.S. forces had defeated the Islamic State and would leave Syria; however, in February 2019, the White House indicated that several hundred U.S. troops would remain in Syria.", "summary": "Throughout its history, the Department of Defense (DOD) has relied on contractors to support a wide range of military operations. Operations over the last thirty years have highlighted the critical role that contractors play in supporting U.S. troops—both in terms of the number of contractors and the type of work being performed. During recent U.S. military operations in Iraq and Afghanistan, contractors often accounted for 50% or more of the total DOD presence in-country. For the fourth quarter of fiscal year (FY) 2018, U.S. Central Command (CENTCOM) reported 49,451 contractor personnel working for DOD within its area of responsibility, which included 28,189 individuals located in Afghanistan, Iraq, and Syria. From FY2009 to FY2018, obligations for all DOD-funded contracts performed within the Iraq and Afghanistan areas of operation totaled approximately $208 billion in FY2019 dollars. In late 2017, the DOD stopped reporting the number of U.S. military personnel deployed in support of operations in Afghanistan, Iraq, and Syria as part of its quarterly manpower reports and in other official releases. These data remain withheld.", "document_type": "crs"}
{"report": "A ccording to Article 1, Section 7, of the Constitution, when the President chooses not to sign a bill and instead returns it to the chamber that originated it, the chamber shall enter the message of the President detailing the reasons for the veto in its Journal and then \"proceed to reconsider\" the bill. A vetoed bill can become law if two-thirds of the Members voting in each chamber agree, by recorded vote, a quorum being present, to repass the bill and thereby override the veto of the President. The chamber that originated the bill sent to the President acts first on the question of its reconsideration. In other words, the House acts first on vetoed bills that carry an \"H.R.\" or \"H.J. Res.\" designation, and the Senate acts first on vetoed bills that carry an \"S.\" or \"S.J. Res.\" designation. If the chamber of origin votes to repass the bill, then the bill with the veto message is transmitted to the second chamber, which then also reconsiders it. Nothing in the Constitution requires that either chamber vote directly on the question of repassing a vetoed bill. The chambers have, for example, referred a vetoed bill to committee instead. If either chamber fails to vote on the question of repassing the bill, then the measure dies at the end of the Congress. Both chambers will not necessarily even have a chance to take up the question. If two-thirds of the Members of the chamber of origin do not agree to override a veto, then the measure dies, and the other chamber does not have an opportunity to vote on the question of repassing the bill. The Constitution does not otherwise address how Congress should consider a vetoed bill, and it is therefore House and Senate rules and practices that additionally govern the treatment of bills vetoed and returned by the President. The consideration of a vetoed bill is a matter of high privilege in the House, and the chamber generally votes to override or sustain the veto shortly after the message is received from the President or the Senate. Time for debate on the question is usually controlled and allocated by members of the committee of jurisdiction, and a majority of the House can vote to bring consideration to a close. To repass the bill over the veto of the President requires the support of two-thirds of the Members voting, a quorum being present. On the day a vetoed bill and accompanying presidential message are received, the Speaker lays the message before the House. The veto message is read and entered in the House Journal . It is not necessary for a Member to make a motion to reconsider the vetoed bill. If no Member seeks recognition after the message is read, the Speaker will put the question of overriding the veto before the House by stating: The pending question is whether the House will, on reconsideration, pass the bill, the objections of the President to the contrary notwithstanding. If Members do not wish to debate the question immediately, several preferential motions can be made before the Speaker states it. The House can agree by motion (or unanimous consent) to postpone the consideration of a veto message to a named day or to refer it to committee. The motion to postpone consideration of a veto message and the motion to refer a veto message are debatable under the hour rule. The House may also agree to a nondebatable motion to lay the vetoed bill on the table. While the motion to table usually permanently and adversely disposes of a matter, that is not true in the case of a vetoed bill. A motion to remove the bill from the table could be made at any time. Debate on the question of overriding a veto takes place under the hour rule. In practice, the Speaker recognizes the chair of the committee with jurisdiction over the vetoed bill for an hour of debate, and the chair in turn yields 30 minutes to the ranking minority member for purposes of the debate only. The chair and ranking member of the committee serve as floor managers of the debate, yielding portions of time to other Members who wish to speak. Typically, after the hour is consumed or yielded back, the majority floor manager moves the previous question. If a majority of the House votes to order the previous question, the vote immediately occurs on the question of overriding the veto. To override a veto, two-thirds of the Members voting, a quorum being present, must agree to repass the bill over the President's objections. The Constitution requires that the vote be by the \"yeas and nays,\" which in the modern House means that Members' votes will be recorded through the electronic voting system. The vote on the veto override is final because, in contrast to votes on most other questions in the House, a motion to reconsider the vote on the question of overriding a veto is not in order. If the override vote on a House or Senate bill is unsuccessful, then the House informs the Senate of this fact and typically refers the bill and veto message to committee. If the House votes to override a veto of a bill that originated in the House (H.R. or H.J. Res.), the bill and veto message are sent to the Senate for action. If the House successfully overrides a veto of a bill that originated in the Senate (S. or S.J. Res.), then the bill becomes law, because two-thirds of both chambers have agreed to override the veto. If the Senate wishes to reconsider a vetoed bill, Senators generally enter into a unanimous consent agreement that the message be considered as read, printed in the Congressional Record , and, as required by the Constitution, entered in the Senate Journal . Senators often also agree, by unanimous consent, to limit time for debate on the question of overriding the veto. When the Senate receives a vetoed measure from the President or the House, it is quite common for it to be \"held at the desk\" for several days and considered only after unanimous consent has been reached on the terms of its consideration. When the vote on the question occurs, it must be taken by roll-call vote and receive support from two-thirds of the Senators voting, a quorum being present. Although generally the Senate reconsiders a vetoed bill under the terms of a unanimous consent agreement, it is not necessary to secure the support of all 100 Senators to consider a vetoed bill in the Senate. Absent an arrangement to hold the veto message at the desk, it would be read and then entered into the Journal after its receipt from the President or the House. The presiding officer would then state: Shall the bill pass, the objections of the President of the United States to the contrary notwithstanding? Several debatable motions are in order, however, that could displace consideration of the veto message. The message could be referred to committee, for example, or postponed to a specific time. Alternatively, the majority leader might make a motion to proceed to another matter. The question of overriding the veto could be brought back before the Senate with the consent of all Senators or by a numerical majority through a nondebatable motion to proceed. Finally, once the veto message has been laid before the Senate, it could also be tabled or indefinitely postponed, which would normally preclude any further action on the matter. The question of overriding a veto is debatable under the regular rules of the Senate. The question could be debated as long as any Senator sought recognition to discuss it. Debate on the question of overriding a veto can be limited by unanimous consent or by invoking cloture. Ending debate through a cloture motion requires the support of three-fifths of Senators duly chosen and sworn, or 60 Senators if there is no more than one vacancy. Cloture is rarely used to end debate on overriding a presidential veto. The number of Senators required to end debate is less than the number required to override a veto (assuming that there are no vacancies and more than 90 Senators vote on the override question). Two-thirds of the Senators voting, a quorum being present, must agree to override the veto and repass the bill. The vote must be a roll-call vote and not a voice vote, due to the constitutional requirement that the vote be by the \"yeas and nays.\" A motion to reconsider the vote on the question of overriding a veto is in order only if the Senate fails to override the veto. In other words, if two-thirds of the Senators agree to override the veto, a motion to reconsider that vote is not in order. If the Senate fails to override a veto of a Senate-originated bill (S. or S.J. Res.), then the question of override never reaches the House. The Senate simply informs the House that the override vote on a House or Senate bill was unsuccessful. If the override vote on a Senate-originated measure (S. or S.J. Res.) is successful in the Senate, the bill and veto message are sent to the House for action. If the override vote on a House-originated measure (H.R. or H.J. Res.) is successful, then the bill becomes law, because two-thirds of both chambers have agreed to override the veto.", "summary": "A bill or joint resolution that has been vetoed by the President can become law if two-thirds of the Members voting in the House and the Senate each agree to pass it over the President's objection. The chambers act sequentially on vetoed measures: The House acts first on House-originated measures (H.R. and H.J. Res.), and the Senate acts first on Senate-originated measures (S. and S.J. Res.). If the first-acting chamber fails to override the veto, the other chamber cannot consider it. The House typically considers the question of overriding a presidential veto under the hour rule, with time customarily controlled and allocated by the chair and ranking member of the committee with jurisdiction over the bill. The Senate usually considers the question of overriding a veto under the terms of a unanimous consent agreement.", "document_type": "crs"}
{"report": "On December 20, 2018, President Trump signed into law a new five-year omnibus farm bill, the Agricultural Improvement Act of 2018 ( P.L. 115-334 ; the 2018 farm bill). The U.S. Department of Agriculture (USDA) will implement the provisions, most of which take effect in calendar year 2019. The 2018 farm bill includes 12 titles covering different program areas. The first title, Title I—Commodities, authorizes several major revenue support and disaster assistance programs (see shaded box below). This report briefly describes the major revenue support programs in Title I of the 2018 farm bill. In addition, it reviews changes to key administrative provisions such as program eligibility and signup, payment acres and yields, payment limits, and cost projections. Appendixes at the end of this report ( Table A-1 to Table A-5 ) provide side-by-side comparisons of the provisions for five of the subtitles of Title I with prior law (as indicated in the shadow box above—Subtitle C, sugar, and Subtitle D, dairy, are discussed elsewhere). Aside from dairy and sugar, which have their own specific programs, most grain and oilseed crops produced in the United States are eligible for two tiers of revenue support under Title I of the 2018 farm bill. Specialty crops such as fruits, vegetables, and tree nuts are not covered. The first tier of support is provided by the Marketing Assistance Loan (MAL) program, which offers a minimum price guarantee for production of \"loan\" commodities in the form of a short-term loan at statutorily set prices ( Table 1 ). The MAL program may be supplemented by a higher, second tier of revenue support comprised of two other programs: (1) the Price Loss Coverage (PLC) program, which provides price protection via statutory fixed \"reference\" prices for eligible crops, or (2) the Agricultural Risk Coverage (ARC) program, which provides revenue protection via historical moving average revenue guarantees based on the five most recent years of crop prices and yields. PLC and ARC are available for producers that own or rent historical \"base\" acres of \"covered\" commodities. The sugar and dairy sectors are supported by separate federal farm programs that are tailored more specifically to the physical differences associated with each of their products—refined sugar and liquid fresh milk—and their respective markets. Disaster assistance is available for producers of most tree crops and livestock. The Noninsured Crop Assistance Program is available for all agricultural commodities that are not covered by a federal crop insurance policy. All of these Title I programs existed under the previous 2014 farm bill. The 2018 farm bill extends their authority through crop year 2023 but with some modifications to most of them. Occasionally, agricultural producers may receive federal support under programs authorized outside of the farm bill. The Secretary of Agriculture has broad latitude under the authority of the Commodity Credit Corporation (CCC) Charter Act to make direct payments in support of U.S. agriculture. Two such programs implemented in recent years under CCC authority are the Cotton Ginning Cost Share program and the Market Facilitation Program. Separately, under the federal crop insurance program, Title I program commodities—along with more than 100 other crops including fruits and vegetables—are also eligible for subsidized crop insurance, which provides within-year yield (or revenue) protection. The federal crop insurance program is permanently authorized outside of the omnibus farm bill by the Federal Crop Insurance Act (7 U.S.C. §1501 et seq. ). The 2018 farm bill includes Title XI—Crop Insurance, which makes minor adjustments to program implementation but does not alter the underlying authority of the federal crop insurance program. Neither the federal crop insurance program nor programs authorized under the CCC Charter Act are discussed in this report. Federal farm support began in the 1930s through Depression-era efforts to raise farm household income when commodity prices were low because of prolonged weak consumer demand. While initially intended to be a temporary effort, the commodity support programs have continued. However, several of them have been modified away from supply control and management of commodity stocks (which was designed to prop up prices) that directly linked support payments to farm production activities into decoupled revenue support that makes payments on historical program acres—referred to as base acres. Proponents of farm revenue support programs argue that federal involvement in the sector is needed to stabilize and support farm incomes by shifting some of the production risks to the federal government. These risks include short-term market price instability often due to weather or international events—both of which are outside the farmer's control. Proponents see the goal of farm policy as maintaining the economic health of the nation's farm sector so that it can use its comparative advantage in supplying domestic demand and competing in the global market for food and fiber. Critics argue that farm revenue support programs waste taxpayer dollars, distort producer behavior in favor of certain crops, capitalize benefits to the owners of the resources, encourage concentration of production, and comparatively harm smaller domestic producers and farmers in lower-income foreign nations. The authority for USDA to operate farm revenue support programs comes from three permanent laws, as amended: the Agricultural Adjustment Act of 1938 (P.L. 75-430), the Agricultural Act of 1949 (P.L. 81-439), and the CCC Charter Act of 1948 (P.L. 80-806). Congress typically alters these laws through multi-year omnibus farm bills to address current market conditions, budget constraints, or other concerns. If a new farm bill is not enacted when an old one expires, farm programs would revert to the permanent laws mentioned above for most of the major program crops. Under permanent law, eligible commodities would be supported under a parity-price formula at levels much higher than they are now, and many of the currently supported commodities might not be eligible. Since reverting to permanent law is incompatible with current national economic objectives, global trading rules, and federal budgetary policies, pressure builds at the end of each farm bill for policymakers to enact another. The 2018 farm bill ( P.L. 115-334 ) contains the most recent version of the farm commodity support programs. It supersedes the commodity provisions of previous farm bills and includes a provision (Section 1702) that suspends the relevant price support provisions of permanent law for the crop (and marketing) years 2019-2023. Federal support exists for about two dozen farm commodities representing about one-third of gross farm sales. During the five marketing years of 2014 through 2018, six crops (corn, wheat, soybeans, peanuts, cotton, and rice) accounted for an estimated 92% of farm commodity program payments. The 2018 farm bill continues to define covered commodities as the crops eligible for the farm revenue support programs PLC and ARC: wheat, oats, barley (including wheat, oats, and barley used for haying and grazing), corn, grain sorghum, long-grain rice, medium-grain rice, seed cotton (unginned upland cotton that contains both lint and seed), pulse crops (dry peas, lentils, small chickpeas, and large chickpeas), soybeans, other oilseeds (including sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, and sesame seed), and peanuts (7 U.S.C. §9011). Each of these commodities has a statutorily defined PLC reference price (listed in Table 1 ). Upland cotton was removed from eligibility as a covered commodity by the 2014 farm bill ( P.L. 113-79 ). However, it indirectly regained its status as a covered commodity, via seed cotton, under the Bipartisan Budget Act of 2018 ( P.L. 115-113 ). \"Loan commodities\" include all of the \"covered commodities\" plus upland cotton, extra-long-staple cotton, wool, mohair, and honey. These commodities have statutory loan rates ( Table 1 ) and are eligible for the MAL program. Support for milk production is available in the form of subsidized protection for producer milk margins (milk prices minus feed costs) under the Dairy Margin Coverage program. Sugar support is indirect through import quotas, processor price guarantees, and domestic marketing allotments. No direct payments are made to sugar growers or processors. Livestock, poultry, fruits, vegetables, nuts, hay, and nursery products (about two-thirds of U.S. farm sales) are not eligible to participate in a Title I revenue support program under the 2018 farm bill. However, livestock and fruit tree producers may qualify for partial relief from losses related to natural disasters under one of the four permanently authorized agricultural disaster assistance programs under Title I of the 2018 farm bill. Also, subsidized federal crop insurance is available for more than 100 crops, including fruits, vegetables, and selected livestock activities that are not supported by Title I farm programs. Crop insurance is designed primarily to cover losses from natural disasters or disease and within-season price or revenue declines. Another Title I farm bill program—the Noninsured Crop Disaster Assistance Program—is available for crops not currently covered by crop insurance. The definition of farm used to administer the revenue support programs is different from common perception or statistical definitions of farm based on size or output. Under USDA's Farm Service Agency (FSA) regulations, a \"farm\" for program payment purposes is one or more tracts of land considered to be a separate operation. A producer must register each farm operation with USDA and identify the resources (land, labor, equipment, capital, and management) associated with it. Land in a farm does not need to be contiguous. However, all tracts within a farm must have the same operator and the same owner (unless all owners agree to combine multiple tracts into a single FSA farm). Thus, one producer may be operating several \"farms\" if he or she is renting land from several landlords or has purchased land in several tracts. B ase acres describes the historical planted acreage on each FSA farm using a multi-year average from as far back as the 1980s, for purposes of calculating program payments under one of the two revenue support programs—PLC or ARC. As of crop year 2015, USDA reported 273 million base acres, of which 254 million acres were enrolled in either ARC or PLC ( Figure 1 ). Base acres are calculated for each covered commodity and remain with the land when real estate is sold, thus making the new landowner eligible for farm programs. A farm's base acres may increase from year to year if base acres expire from a conservation contract or easement or a producer has eligible oilseed acreage as a result of the Secretary of Agriculture designating a new oilseed eligible as a covered commodity. Similarly, base acres may decline from year to year if some base acres are enrolled in a conservation easement; are converted to certain nonfarm or residential uses and are unlikely to return to agriculture; or are planted to fruits, vegetables, or wild rice in excess of certain planting flexibility rules. Under the PLC and ARC program payment-acre provisions (7 U.S.C. 9014; Table A-1 ), planting flexibility rules allow crops other than the program crop to be grown, but eligible payment acreage is reduced when fruits, vegetables (other than mung beans and pulse crops), or wild rice are planted in excess of 15% of base acres (or 35% depending upon a farmer's program choice discussed below). The reduction to payment acres is one-for-one for every acre in excess of these percentages for that year. A farm with base acres is not obligated to participate in farm programs. For those farms that do participate, once a farm's base acres are enrolled in either ARC or PLC, the farm does not have to plant a particular program crop to be eligible for a program payment. This is because ARC and PLC payments are decoupled from actual crop plantings. However, all participating producers must maintain conservation compliance, which requires planting a cover crop on highly erodible land. Under both the 2014 farm bill ( P.L. 113-79 ) and the Bipartisan Budget Act of 2018 ( P.L. 115-113 ), the calculation of base acres underwent several changes. These are briefly discussed next. Because a farmer's actual plantings may differ from farm base acres, program payments may not necessarily align with financial losses associated with market prices or crop revenue. To better match program payments with farm risk, the 2014 farm bill provided farmers with a one-time opportunity to update individual crop base acres by reallocating acreage within their current base portfolio to match their actual crop mix (plantings) during the crop years 2009-2012. Farmers could also choose to not reallocate their base acres if they expected payments to be maximized under their then-current base acres. Even after the opportunity to update base acres to better match actual farm plantings, disparities remained between base and planted acres ( Figure 2 ). The 2014 farm bill also removed upland cotton from eligibility for the ARC and PLC programs due to a ruling from a World Trade Organization dispute settlement case successfully brought by Brazil against U.S. cotton support programs. Former cotton base acres were renamed \"generic base\" and added to a producer's base for potential payments if a covered commodity (now excluding upland cotton) was planted on the farm. However, upland cotton remained eligible for the MAL program. In 2018, seed cotton was added as a covered commodity, but not as a MAL loan commodity, by the Bipartisan Budget Agreement (BBA) of 2018 ( P.L. 115-123 ). Under the BBA, producers were given a choice of how to allocate their generic base acres—either as base acres assigned to seed cotton or to another covered commodity and thus eligible for either ARC or PLC payments or into an unassigned pool where they would be ineligible for ARC or PLC program payments. The 2018 farm bill retained base acres as defined on September 30, 2018, under the 2014 farm bill and inclusive of the BBA changes. Thus, upland cotton remains ineligible for PLC or ARC but is so indirectly via seed cotton. The 2018 farm bill also added a provision (Section 1102(b)) regarding base-acre eligibility for ARC or PLC program payments. If base acres were planted continuously to grass or pasture (including fallow acres) during the nine-year period extending from January 1, 2009, through December 31, 2017, then those affected base acres are not eligible for ARC or PLC payments during the life of the 2018 farm bill—that is, during crop years 2019-2023. However, these acres would remain eligible to be counted as base acres for a future farm bill. The 2018 farm bill defines producer (for purposes of revenue support program benefits) as an owner-operator, landlord, tenant, or sharecropper who shares in the risk of producing a crop and is entitled to a share of the crop produced on the farm. Participation in revenue support programs is free. However, an individual must comply with certain requirements to be eligible for most program payments. These requirements include: Actively engaged in farming (AEF) . Each individual must provide a significant contribution of capital (land or equipment) and personal labor or active personal management to the farm operation, share in the risk of loss from the farm operation, and receive a share of the output as compensation. Legal entities can be actively engaged if members collectively contribute personal labor or active personal management. Special classes allow landowners to be considered actively engaged if they receive income based on the farm's operating results without providing labor or management (as described below). Conservation co mpliance . A producer agrees to maintain a minimum level of conservation on highly erodible land and not to convert or make production possible on wetlands. Adjusted gross income (AGI) thr eshold . Persons with combined farm and nonfarm AGI in excess of $900,000 are ineligible for most program benefits. Average AGI is measured from the three tax years prior to the most recent taxable year. The AGI limit may be waived on a case-by-case basis to protect environmentally sensitive land of special significance. Minimum farm size . A producer on a farm may not receive farm program payments if the sum of the base acres on the farm is 10 acres or less. Two producer groups are excluded from this prohibition: beginning farmers and ranchers and veteran farmers and ranchers. A farm operation usually involves some combination of owned and rented land. The amount of total land in farms rented by farm operators has ranged between 34% and 43% of farmland during 1964-2012. In 2014, an estimated 39% of farmland was rented—80% of rented farmland is owned by non-operator landlords. Two types of rental arrangements are common: cash rent and share rent. Under cash rental contracts, the tenant pays a fixed cash rent to the landlord. The landlord receives the same rent irrespective of market conditions, bears no risk in production, and thus fails to meet the AEF criteria and is not eligible to receive program payments. The tenant bears all of the risk, takes all of the harvest, and receives all of the program payment. Even though tenants might receive all of the government payments under cash rent arrangements, they might not keep all of the benefits if landlords demand higher rent. Economists widely agree that a large portion of government farm payments passes through to landlords, since government payments boost the rental value of land. Under share rental contracts, the tenant usually supplies most or all of the labor and machinery, while the landlord supplies land and perhaps some machinery or management. Both the landlord and the tenant bear risk in producing a crop and receive a portion of the harvest. In most cases, both meet the AEF criteria and are eligible to share in the government subsidy. The farm revenue support program provisions from Title I of the 2014 farm bill are largely preserved under the 2018 farm bill but with some modifications, as identified below. The MAL program has been in existence, in one form or another, since the 1930s. Its longevity as a farm program derives from its utility at providing both short-term financing and a guaranteed floor price. This is done by offering producers a nonrecourse nine-month loan—valued at a commodity-specific, statutorily-fixed loan rate—for all harvested production of qualifying crops. These qualifying crops are referred to as loan commodities ( Table 1 ). Because MAL benefits are directly linked to the harvested output, benefits are said to be \"coupled.\" No pre-planting signup is necessary to participate in the MAL program, and a producer does not need to own or rent base acres to be eligible. However, a producer must have a harvested crop to use as collateral for the loan. Thus, if a producer suffers a crop failure due to a natural disaster and has no marketable crop, the MAL program is not available as a program option. At harvest time, crop prices are usually at their lowest point for the year because of the large supply of harvested crops entering the marketplace at the same time. To avoid selling into a weak market, the MAL program offers producers the option to put a harvested loan commodity under a nine-month nonrecourse loan valued at a statutorily fixed, per-unit commodity loan rate ( Table 1 ) using the crop as collateral. Thus, MAL benefits are coupled to the harvested crop. Nonrecourse means that USDA must accept the pledged crop (i.e., the collateral) as full payment of an outstanding loan if the collateral is forfeited. During the nine-month loan period, producers will consider whether market prices are above or below the MAL loan rate. If they are above the loan rate, producers will pay off their loans and reclaim their collateral crops to sell into the higher priced marketplace. However, if market prices are below the loan rate, then producers may consider forfeiting their crop to USDA and keeping the loan value as payment. Thus, the statutory loan rate, in effect, establishes a price guarantee. Under the 2018 farm bill a producer has additional choices besides forfeiture in claiming MAL benefits when market prices are low (see \" Policy Evolution of the MAL Program \" section below). In the 1960s, 1970s, and 1980s, during extended periods when commodity prices were below the MAL loan rates, many producers chose to forfeit their crops to USDA rather than repay their MAL loans at the higher loan rate. These forfeitures led to large accumulations of grain and oilseed stocks by USDA. These government-held stocks were costly to taxpayers and contributed to market conditions of oversupply. In the 1980s and 1990s, Congress redesigned the MAL program to avoid government stock accumulation by offering alternative repayment prices to the statutory loan rates (see box below). Under current law, prior to loan maturity, producers may compare the repayment prices announced by USDA for their localities with the statutory MAL loan rates for each eligible commodity before selecting from among several potential MAL program benefits. Under current law (as continued by the 2018 farm bill), a producer with a commodity under an MAL loan has several repayment options. If the USDA-announced repayment rate is at or above the loan rate, the farmer repays the loan principal and interest and reclaims the commodity. In contrast, when the announced repayment rate is below the loan rate, the farmer may choose from among four potential options: Loan deficiency payment ( LDP ). Rather than putting the harvested crop under an MAL, a farmer may request an LDP with the per-unit payment rate equal to the difference between the loan rate and loan repayment rate. The farmer receives the LDP payment and keeps the crop to sell or use on farm. Marketing loan gain (MLG) . A participating farmer with a crop under an MAL loan can repay the loan at the USDA-announced repayment price and pocket the difference (between the loan rate and the repayment rate) as an MLG. The farmer keeps the MLG and the crop to sell or use on farm. Commodity certificate exchange . A farmer may use commodity certificates—paper certificates with a dollar denomination that may be exchanged for commodities in USDA inventory—to repay an MAL loan at the lower USDA-announced price and keep the associated price gain. The farmer keeps the gain and the crop to sell or use on farm. Forfeiture . A producer can forfeit the pledged crop to USDA at the end of the loan period. The producer may keep any price gains associated with forfeiture but relinquishes access to the crop. The level of revenue support provided by the MAL program varies with market conditions and the relationship between MAL loan rates and market prices. The 2018 farm bill raised MAL loan rates for several loan commodities, including barley, corn, grain sorghum, oats, extra-long-staple cotton, sugar, rice, soybeans, dry peas, lentils, and small and large chickpeas. The MAL program's usefulness as a risk management and marketing tool varies widely across program crops depending on the relationship between farm prices and the statutory loan rates. Under the 2018 farm bill (Section 1703): MAL benefits are no longer subject to annual payment limits (this includes MLG and LDP benefits, as well as any gains under commodity certificates and forfeiture). Under the previous 2014 farm bill: MLG and LDP benefits combined with payments under PLC and ARC were subject to a payment limit of $125,000 per person for all covered commodities (except peanuts, which has a separate limit of $125,000). However, MAL gains under commodity certificates and forfeiture were excluded from payment limits. A second tier of revenue support is available under the PLC and ARC programs. PLC and ARC provide income support to covered commodities at levels above the price protection offered by the MAL program's loan rates. ARC and PLC were first authorized under the 2014 farm bill ( P.L. 113-79 ). The 2018 farm bill extends both programs but with several modifications intended to increase producer flexibility in their use. Participation is free. However, a producer must own or rent base acres to participate. In addition, a producer must elect ARC or PLC for the farm's historical base acres and enroll his or her farm operation in the elected program. Unlike MAL payments, which are coupled to harvested crops, PLC and ARC payments are decoupled and made proportional to base acres. Producers choose between PLC and ARC depending on their preference for protection against a decline in (a) crop prices or (b) crop revenue, respectively. Payments under the PLC program are triggered when the national market-year average farm price (MYAP) for a covered commodity is below its \"effective reference price\" ( Figure 3 ). In contrast, ARC payments are triggered when crop revenue is below its guaranteed level based on a multi-year moving average of historical crop revenue ( Figure 5 ). Producers can elect ARC at either the county (ARC-CO) or individual farm (ARC-IC) level. PLC and ARC-CO choices can vary by \"covered\" commodities (for a list of covered commodities, see Table 1 ), whereas ARC-IC includes all \"covered\" commodities on a farm under a single whole-farm revenue guarantee. Under the 2014 farm bill, producers had a one-time choice between ARC and PLC, on a commodity-by-commodity basis that lasted for five crop years (2014-2018). In contrast, the 2018 farm bill allows producers to alter their program choices more frequently. In 2019, producers may select ARC or PLC coverage, on a commodity-by-commodity basis, effective for both crop years 2019 and 2020. If no initial choice is made, then the default is whichever program was in effect during crop years 2015 through 2018 under the 2014 farm bill. Then, beginning in 2021, producers may again choose (i.e., make a new election) between ARC and PLC annually by covered commodity for each of crop year 2021, 2022, and 2023. In addition, producers now may remotely and electronically sign annual or multi-year contracts for ARC and PLC. PLC price protection is based on a statutorily fixed reference price ( Table 1 ) that may be temporarily increased under certain conditions. Under the 2014 farm bill version of the PLC program, producers received payments on a portion of their enrolled base acres when the national MYAP for the enrolled covered commodity was below its reference price set in statute. This option was attractive if farmers expected farm prices to drop below the reference price for a covered commodity. The 2018 farm bill added a provision (Section 1101) that replaced the statutory reference price with an \"effective reference price\" that may increase to as much as 115% of the statutory PLC reference price based on market conditions. The effective reference price is determined by a formula as the higher of the statutory reference price or 85% of the five-year Olympic average of the national MYAP for the five preceding years. Under the 2018 farm bill, the PLC program will make a payment when the MYAP for a covered commodity is less than the effective reference price. See Figure 3 for a graphical interpretation of the formula and Figure 4 for a hypothetical example for rice. The farm's total PLC payments for a covered commodity may be calculated as follows: The PLC per-unit payment rate equals the difference between the effective PLC reference price and the higher of the MYAP or the MAL loan rate. The PLC per-acre payment rate equals the PLC per-unit payment rate times the program yield (described below). The PLC total payment equals the PLC per-acre payment rate times 85% of base acres signed up for the respective covered commodity. PLC payment yields are similar to base acres in that they are historical farm-level, crop-specific measures that are used to determine program payments under the PLC program. Producers were given the option of updating their payment yields under the 2002, 2014, and 2018 farm bills. Under the 2014 farm bill, producers were given an opportunity to update payment yields, on a covered-commodity-by-covered-commodity basis, using 90% of average yields for the 2008-2012 crop years—excluding any year in which acreage planted to the covered commodity was zero. Producers could also use a \"plug\" yield in the update calculation, equal to 75% of the five-year average county yield for a covered commodity, if the farm-level yield for any of the 2008-2012 crop years was less than 75% of the average county yield during that period. The yield update election had to be made so as to be in effect beginning with the 2014 crop year. Under the 2018 farm bill, producers could again update program yields, on a covered-commodity-by-covered-commodity basis, using 90% of the average of the yield per planted acre for the 2013-2017 crop years. However, unlike the 2014 farm bill yield update which used the simple average for the data period, the 2018 farm bill yield update was subject to a commodity-specific adjustment factor to account for any national increase in trend yield. Producers could again use a \"plug\" yield in the update calculation, equal to 75% of the average county yield for a covered commodity during the 2013-2017 crop years, if the farm-level yield for any year was less than 75% of the average county yield during that period. Any year in which planted acreage to the covered commodity was zero could be excluded from the calculation. The yield update election must be made so as to be in effect beginning with the 2020 crop year. Producers more concerned about declines in crop revenue (i.e., yield times price) than price can select the county ARC program (ARC-CO) as an alternative to PLC for each covered commodity. Under ARC-CO, payments are triggered when the annual county revenue for a covered commodity is less than 86% of its recent five-year average revenue. If farmers prefer farm-level revenue protection based on farm-level yields, then they could choose to combine all covered commodities into a single, whole-farm revenue guarantee under the farm-level \"individual\" ARC (ARC-IC) program. The ARC-CO program has a county revenue guarantee, and only a crop revenue loss at the county level triggers a payment. The ARC-CO crop revenue guarantee equals 86% of the county benchmark revenue ( Figure 5 ). The benchmark revenue is the product of the five-year Olympic average of county yields (measured as units of output per acre) and the five-year Olympic average of the higher of the national MYAP or the PLC effective reference price. An ARC-CO payment is made if the current-year county revenue (calculated as the product of county yield and national MYAP) is below the ARC-CO revenue guarantee. The ARC-CO payment rate, which equals the difference between the per-acre county revenue guarantee and the actual county per-acre crop revenue, is capped at 10% of benchmark revenue. With the revenue guarantee set at 86% of the benchmark revenue, the producer absorbs the first 14% of any shortfall, and the government absorbs the next 10% of revenue shortfall. Remaining losses may be backstopped by crop insurance if purchased at sufficient coverage levels by the producer and by the MAL program. Similar to PLC, the ARC-CO payment formula for a particular covered commodity is the ARC-CO payment rate times 85% times the number of base acres enrolled in ARC-CO. See Figure 5 for a graphical interpretation of the formula and Figure 6 for a hypothetical example for corn. Under the 2014 farm bill, USDA's National Agricultural Statistics Service (NASS) was the primary source for the county yield estimates used in the ARC-CO formulas. However, when USDA announced its first ARC-CO payments under the then-new program in 2015, significant discrepancies in county-level payments were discovered. These discrepancies appeared to be due, in part, to how average county yield calculations were being made. If a county lacked sufficient NASS data, then USDA would use Risk Management Agency (RMA) yield data based on crop insurance program participation. A comparison of the two estimates suggested that RMA yields were frequently higher than NASS yields at the county level. As a result, payments to producers in counties where RMA yields were used could be substantially lower than payments in counties using NASS yields. Congress showed interest in minimizing such discrepancies. Since RMA yield data were more widely available at the county level than NASS yield data, there was considerable debate about switching yield data prioritization for ARC-CO calculations to the RMA data. Under the 2018 farm bill (Section 1107), yield data from RMA are made the primary source for county average yield calculations for the ARC-CO benchmark revenue. Where RMA data are not available, USDA is to determine the data source considering data from NASS or the yield history of representative farms in the state, region, or crop-reporting district. Also, ARC-CO is to use a trend-adjusted yield to calculate the benchmark revenue, as is done by RMA for the federal crop insurance program. Finally, the five-year Olympic average county yield calculations are to include a yield plug (equal to 80% of the 10-year average county yield) for each year where actual county yield is lower than the estimated plug. Other 2018 farm bill (Section 1107) modifications to ARC-CO include allowing yields used in ARC-CO revenue calculations to be calculated separately for irrigated and non-irrigated land in each county and basing ARC-CO payments on the physical location of the farm—farms that cross multiple counties are prorated for each county. Finally, up to 25 counties nationwide may subdivide for ARC-CO yield calculations to reflect significant yield deviations within a county. Such subdivision is to be based on certain criteria: A county must be larger than 1,400 square miles and have more than 190,000 base acres. Instead of an ARC-CO revenue guarantee on a crop-by-crop basis, farmers could select a farm-level guarantee that includes all covered commodities on a farm under one revenue guarantee. The farm-level revenue guarantee is again based on a five-year moving average of farm-level yields for each crop year, multiplied by the higher of the reference price or the MYAP, that aggregates all crop revenue into a single, whole-farm guarantee. The individual ARC payment formula is 65% times the number of total base acres for the farm times the difference between the whole-farm revenue guarantee and the actual whole-farm crop revenue. The calculation for the guarantee and actual revenue are based on the aggregation of all covered commodities on the farm using individual farm yields instead of county yields. A participating farmer does not have to plant or harvest a covered commodity to receive a PLC or ARC payment. However, a portion of the farm's base acres must be enrolled in either PLC or ARC for that covered commodity. This is because ARC-CO, ARC-IC, and PLC payments are decoupled: Payments are made on a portion of a crop's enrolled base acres rather than actual production. If ARC-CO or PLC program payments are triggered, then they are made on 85% of the producer's base acres that were enrolled for that covered commodity irrespective of actual plantings. ARC-IC payments are made on a reduced 65% of base acres. Payments are made with a lag of approximately one year, as a full 12-month marketing year must be completed to compile the annual price and yield data necessary for USDA's calculations. According to statute (Section 1106 for PLC, Section 1107 for ARC), USDA is to announce payments no later than 30 days after the end of each marketing year. However, the actual payments may not be made prior to October 1 after the end of the applicable marketing year for the covered commodity. The marketing year varies by crop. For example, the marketing year for corn or soybeans harvested in fall 2019 ends on August 31, 2020. Thus, corn and soybean payments must be announced by September 30, 2020, but may not be made before October 1, 2020. The enacted 2018 farm bill sets a $125,000 per-person cap on the total combined payments of PLC and ARC for all covered commodities on a farming operation except peanuts, which has a separate $125,000 limit. In addition, a provision in the 2018 farm bill (Section 1603) specifies that any reductions in PLC and ARC payments due to sequestration must be applied before evaluating payment limit criteria. The 2018 farm bill (Section 1703) removed MAL program payments from any payment limit criteria. Payment limits may be doubled if the farm operator has a spouse. On family farming operations, all family members ages 18 or older are deemed to meet AEF criteria and are eligible for a separate payment limit. Prior to the 2018 farm bill, family membership was based on lineal ascendants or descendants but was also extended to siblings and spouses. The 2018 farm bill (Section 1703(a)(1)(B)) expands the definition of family farm to include cousins, nephews, and nieces. Producers of upland cotton may also benefit from payments under two 2018 farm bill provisions: Section 1203(b), which provides economic adjustment assistance to users of upland cotton, and Section 1201(b)(2), which authorizes cotton storage cost reimbursements under certain market conditions. Economic adjustment assistance payments are made to domestic users for all documented use of upland cotton on a monthly basis, regardless of the origin of the upland cotton (imported or domestic). The payment rate is $0.03 per pound. Although the payments are made to cotton users, at least a portion of the payment is likely returned to producers in the form of higher prices associated with the increased demand from domestic users. The cotton storage cost reimbursement is generally referred to as a storage credit, since it is used to reduce the loan repayment rate by a portion of the accrued storage costs for upland cotton that has been placed under a MAL loan. It does not involve any actual CCC budgetary outlay but rather is a reduction in potential receipts from the CCC budget. The availability of a cotton storage credit is determined by the relationship between the MAL rate for upland cotton, the weekly announced average world price, and the accrued interest and storage charges specific to each bale of cotton placed under the MAL program. Federal crop insurance directly intersects with farm programs when producers choose between the ARC and PLC programs. For producers who select the PLC, additional price protection is available by purchasing Supplemental Coverage Option (SCO). SCO is a crop insurance product that was permanently authorized under the 2014 farm bill (Section 11003). SCO is designed to cover part of the deductible on a producer's underlying crop insurance policy. SCO is not available for base acres enrolled in ARC. The sugar (Subtitle C) and dairy (Subtitle D) programs are essential parts of Title I of the 2018 farm bill. However, their programs differ markedly from the MAL, PLC, and ARC programs. Neither dairy nor sugar program benefits are subject to any per-person payment limit. In addition, the commodities themselves differ from the other Title I commodities (primarily grain and oilseed crops) in the nature of their output—fluid milk and refined sugar, how these commodities are processed and stored, and the markets that they are sold into. As a result, the dairy and sugar programs are briefly discussed below but are described in more detail in other reports. The current U.S. dairy program—known as the Dairy Margin Coverage (DMC) program—was first authorized by the 2014 farm bill under the previous name of Margin Protection Program (MPP). The DMC offers milk producers a range of milk price margin protection levels based on their historical milk production. The milk margin is defined as the difference between the farm price per hundred pounds (cwt) of milk and the price of a representative feed ration based on USDA-announced prices for milk and major feed ingredients (corn, soymeal, and alfalfa hay). The DMC pays participating dairy producers the difference (when positive) between a producer-selected DMC margin protection level and the actual national milk margin. Producers must sign up for the program and pay an administrative fee of $100. Producers choose coverage either at the free $4.00/cwt margin or pay a premium that increases for higher milk production coverage levels and higher margin protection thresholds. The 2018 farm bill significantly revised the margin program, including renaming it as the DMC. Premium rates for the first 5 million pounds of milk coverage were lowered; the range of margin protection for the first 5 million pounds of production was expanded (the previous range was $4.50/cwt to $8.00/cwt; the new range is $4.50/cwt to $9.50/cwt); the range of margin protection available for the production beyond the first 5 million pounds retains the previous $4.50-$8.00/cwt range of choices but with slightly higher premiums; and producers may now cover a larger quantity of milk production (up to 95% of their historical base production). DMC is authorized through December 31, 2023. Also, under the 2018 farm bill, dairy producers may receive a 25% discount on their premiums if they select and lock in their margin and production coverage levels for the entire five years (calendar years 2019-2023) of the DMC program. Otherwise, producers may select coverage levels annually. Also under DMC, dairy producers may apply to USDA for reimbursement of MPP premiums paid, less any payments received, during calendar years 2014-2017. Unlike MPP, the DMC program allows dairy producers to participate in both margin coverage and the Livestock Gross Margin-Dairy insurance program that insures the margin between feed costs and a designated milk price. Current law mandates that raw cane and refined beet sugar prices are supported through a combination of limits on domestic output that can be sold (marketing allotments), nonrecourse marketing assistance loans for domestic sugar (but at the processor level), quotas that limit imports, and a sugar-to-ethanol backstop program (Feedstock Flexibility Program). These sugar program features result in essentially no federal outlays. The only change to the sugar program under the 2018 farm bill was a 5% increase in the MAL rate for raw cane and refined beet sugar ( Table 1 ). U.S. producers of both sugar and milk receive important price support via import protection from international competitor products under tariff-rate quotas (TRQs). Such TRQ support does not incur a direct cost to the federal government. Instead, domestic consumers bear the costs. For example, despite incurring no federal outlays, the U.S. government notifies sugar TRQ protection annually to the World Trade Organization as market price support (valued at over $1.4 billion in 2014). Four disaster assistance programs that focus primarily on livestock and tree crops were permanently authorized in the 2014 farm bill. These disaster assistance programs provide federal assistance to help farmers and ranchers recover financially from natural disasters, including drought and floods. Participation is free. The Livestock Indemnity Program (LIP) compensates producers at a rate of 75% of market value for livestock mortality or livestock sold at a loss. Eligible loss conditions may include (1) extreme or abnormal damaging weather that is not expected to occur during the loss period for which it occurred, (2) disease that is caused or transmitted by a vector and is not susceptible to control by vaccination, and (3) an attack by animals reintroduced into the wild by the federal government or protected by federal law. The Livestock Forage Disaster Program (LFP) provides payments to eligible livestock producers who have suffered grazing losses on drought-affected pastureland (including cropland planted specifically for grazing) or on rangeland managed by a federal agency due to a qualifying fire. The Tree Assistance Program (TAP) provides payments to eligible orchardists and nursery growers to replant or rehabilitate trees, bushes, and vines damaged by natural disasters, disease, and insect infestation. Eligible losses must exceed 15% after adjustment for normal mortality. Payments cover 65% of the cost of replanting trees or nursery stock and 50% of the cost of rehabilitation (e.g., pruning and removal). The Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP) provides payments to producers of livestock, honey bees, and farm-raised fish as compensation for losses due to disease, adverse weather, feed or water shortages, or other conditions (such as wildfires) that are not covered under LIP or LFP. The 2018 farm bill amended the permanent agricultural disaster assistance programs by expanding the definition of eligible producer to include Indian tribes or tribal organizations. It also expanded payments under LIP for livestock losses caused by disease and for losses of unweaned livestock that occur before vaccination. It increased replanting and rehabilitation payment rates for orchardists who are beginning farmers or veterans under TAP. Finally, it removed payment limits on ELAP. Of the four disaster assistance programs, only the LFP is now subject to the $125,000 per-person payment limit. NAP is available for production of all agricultural commodities that are not covered by a federal crop insurance policy. NAP was permanently authorized by the 1996 farm bill (Federal Agriculture Improvement and Reform Act; P.L. 104-127 ). The 2018 farm bill (Section 1601) amended NAP by increasing the per-crop signup fee to $325 per crop, or $825 per producer per county, but not to exceed $1,950 per producer. Also, NAP eligibility was expanded to include crops that may be covered by select forms of crop insurance but only under whole farm plans or weather index policies. The 2018 farm bill also amended the payment calculation to consider the producer's share of the crop. NAP offers both catastrophic coverage (a crop loss of at least 50% valued at 55% of the average market price) and additional buy-up coverage (ranging from 50% to 65% of established yields and 100% of the average market price). The 2018 farm bill made buy-up coverage permanent, added data collection and program coordination requirements, and created separate payment limits for catastrophic ($125,000 per person) and buy-up ($300,000 per person) coverage. CBO projects USDA spending for Title I farm commodity and disaster programs under the 2018 farm bill at $31.3 billion for the five-year 2019-2023 period. This translates to $6.3 billion annually, including projected annual outlays of $4.1 billion for PLC and $1.2 billion for ARC ( Table 2 ). This contrasts with estimated annual outlays on Title I programs under the 2014 farm bill of $7.2 billion, including $1.8 billion for PLC and $3.3 billion for ARC. Under the 2014 farm bill, most acres of corn, soybeans, and wheat—the three largest crops produced annually in the United States—were enrolled in ARC (93%, 97%, and 56%, respectively). This preference for enrollment in ARC contributed to larger annual payment outlays under ARC ($3.3 billion per year on average) than PLC ($1.8 billion per year) under the 2014 farm bill. CBO's spending projections assume that a large proportion of producers will switch from participating in ARC to PLC under the 2018 farm bill ( Figure 7 ). The assumed shift in participation between the two programs is driven by projections of farm prices for major program crops to track near or below PLC reference prices throughout the 10-year projection period, thus implying greater potential for PLC payments. The substantial projected shift in participation from ARC to PLC is projected to result in significantly larger annual outlays under the PLC program ($4.1 billion per year) than under the ARC program ($1.2 billion per year) under the five-year life of the 2018 farm bill, crop years 2019-2023 ( Table 2 and Figure 8 ). Annual program outlays can be highly variable. This is because spending on the farm revenue support programs—MAL, PLC, and ARC—is market-driven, and disaster assistance payments are associated with unpredictable acts of nature. Given the counter-cyclical design of the PLC and ARC programs, if commodity prices turn out to be higher than projected, then outlays will be lower than projected levels (and vice versa). This appendix provides a side-by-side comparison of provisions from Title I (the Commodity title) of the 2018 farm bill with prior law—that is, provisions from Title I of the 2014 farm bill ( P.L. 113-79 ) as amended by subsequent law including the Bipartisan Budget Agreement (BBA) of 2018 ( P.L. 115-123 ). The BBA made substantial changes to both the dairy program and the treatment of cotton under the PLC and ARC programs. Each subtitle (A-G) is individually examined in a separate table with the exception of Subtitle C (Sugar) and Subtitle D (Dairy), which are examined in more detail by other CRS products. This appendix includes the following tables by subtitle. Table A-1. Subtitle A—Commodity PolicyTable A-2. Subtitle B—Marketing LoansTable A-3. Subtitle E—Supplemental Agricultural Disaster AssistanceTable A-4. Subtitle F—Noninsured Crop AssistanceTable A-5. Subtitle G—Administration For information on the dairy and sugar programs and their explicit legislative text, see: CRS Report R45525, The 2018 Farm Bill (P.L. 115-334): Summary and Side-by-Side Comparison , coordinated by Mark A. McMinimy; CRS In Focus IF10750, Farm Bill Primer: Dairy Safety Net , by Joel L. Greene; CRS In Focus IF10833, Dairy Provisions in the Bipartisan Budget Act (P.L. 115-123) , by Joel L. Greene; CRS In Focus IF10223, Fundamental Elements of the U.S. Sugar Program , by Mark A. McMinimy; and CRS Report R43998, U.S. Sugar Program Fundamentals , by Mark A. McMinimy.", "summary": "The farm commodity program provisions in Title I of the Agricultural Improvement Act of 2018 (P.L. 115-334; the 2018 farm bill) include revenue support programs for major program crops and permanent agricultural disaster assistance programs for producers of most tree crops and livestock. Aside from dairy and sugar, which have their own specific programs, most grain and oilseed crops produced in the United States are eligible for two tiers of revenue support under Title I of the 2018 farm bill—specialty crops such as fruits, vegetables, and tree nuts are not covered. The first tier of support is provided by the Marketing Assistance Loan (MAL) program, which offers interim financing for production of \"loan\" commodities in the form of a nine-month nonrecourse loan at statutorily set prices. A producer must have a harvested crop to offer as collateral for the MAL loan. Nonrecourse means that, if forfeited, USDA must accept the crop pledged as collateral as full payment of an outstanding loan. Thus, the statutory loan rates serve as minimum price guarantees for eligible commodities. The MAL program may be supplemented by a higher, second tier of revenue support comprised of (1) the Price Loss Coverage (PLC) program, which provides price protection at the national level via statutory fixed \"reference\" prices for eligible crops, or (2) the Agricultural Risk Coverage (ARC) program, which provides revenue protection via historical moving average revenue guarantees based on the five most recent years of national crop prices and county or farm average yields. Participation is free for both ARC and PLC. However, a producer must own or rent historical \"base\" acres of \"covered\" commodities. In addition, producers must sign up and elect either PLC or a county-coverage ARC program (ARC-CO) on a crop-by-crop basis or enroll all covered commodities together in a whole-farm revenue guarantee under an individual-coverage ARC program (ARC-IC). The dairy and sugar sectors are supported by separate federal farm programs that are tailored more specifically to the physical differences associated with each of their products—liquid fresh milk and refined sugar—and their respective markets. For dairy, the Dairy Margin Coverage (DMC) program offers producers milk margin protection for a range of margin thresholds—the milk margin equals the difference between the all-milk farm price and the price of a formula-based feed ration—and for a producer-selected portion (ranging from 5% to 95%) of historical milk production. Milk producers must sign up, select both margin and milk production coverage levels, and pay a premium that varies with coverage levels. The U.S. dairy sector also benefits from tariff-rate quotas (TRQs) on selected dairy products. The sugar program provides revenue support through a combination of limits on domestic output sales (marketing allotments), nonrecourse MAL loans for domestic sugar production (but at the processor level), a sugar-to-ethanol backstop program (Feedstock Flexibility Program), and quotas that limit imports. The import quotas for dairy and sugar are authorized outside of the omnibus farm bill. Disaster assistance is available for producers of most tree crops and livestock. The Noninsured Crop Assistance Program (NAP) is available for all agricultural production that is not covered by a federal crop insurance policy. All of these programs have permanent authority. However, the 2018 farm bill amends most of them. The enacted 2018 farm bill continues a $125,000 per-person cap on combined PLC and ARC payments but excludes MAL program benefits from the limit. The limit applies to the total from all covered commodities except peanuts, which has a separate $125,000 limit. To be eligible for payments, persons must be actively engaged in farming (AEF). Payment limits are doubled if the farm operator has a spouse. On family farming operations, all family members 18 years or older are deemed AEF and eligible for payments, including cousins, nephews, and nieces. The 2018 farm bill retains the adjusted gross income (AGI) limit for payment eligibility of $900,000. The Congressional Budget Office (CBO) projects outlays for Title I provisions of the 2018 farm bill for the five-year period (FY2019-FY2023) to average $6.3 billion compared with an estimated $7.2 billion in annual outlays under the 2014 farm bill. Based on projected market-price-to-PLC-reference price ratios, producers are expected to shift their preference toward PLC over ARC under the 2018 farm bill, resulting in a shift in program outlays concentrated more on PLC than ARC. The farm commodity program provisions in Title I of the Agricultural Improvement Act of 2018 (P.L. 115-334; the 2018 farm bill) include revenue support programs for major program crops and permanent agricultural disaster assistance programs for producers of most tree crops and livestock. Aside from dairy and sugar, which have their own specific programs, most grain and oilseed crops produced in the United States are eligible for two tiers of revenue support under Title I of the 2018 farm bill—specialty crops such as fruits, vegetables, and tree nuts are not covered. The first tier of support is provided by the Marketing Assistance Loan (MAL) program, which offers interim financing for production of \"loan\" commodities in the form of a nine-month nonrecourse loan at statutorily set prices. A producer must have a harvested crop to offer as collateral for the MAL loan. Nonrecourse means that, if forfeited, USDA must accept the crop pledged as collateral as full payment of an outstanding loan. Thus, the statutory loan rates serve as minimum price guarantees for eligible commodities. The MAL program may be supplemented by a higher, second tier of revenue support comprised of (1) the Price Loss Coverage (PLC) program, which provides price protection at the national level via statutory fixed \"reference\" prices for eligible crops, or (2) the Agricultural Risk Coverage (ARC) program, which provides revenue protection via historical moving average revenue guarantees based on the five most recent years of national crop prices and county or farm average yields. Participation is free for both ARC and PLC. However, a producer must own or rent historical \"base\" acres of \"covered\" commodities. In addition, producers must sign up and elect either PLC or a county-coverage ARC program (ARC-CO) on a crop-by-crop basis or enroll all covered commodities together in a whole-farm revenue guarantee under an individual-coverage ARC program (ARC-IC). The dairy and sugar sectors are supported by separate federal farm programs that are tailored more specifically to the physical differences associated with each of their products—liquid fresh milk and refined sugar—and their respective markets. For dairy, the Dairy Margin Coverage (DMC) program offers producers milk margin protection for a range of margin thresholds—the milk margin equals the difference between the all-milk farm price and the price of a formula-based feed ration—and for a producer-selected portion (ranging from 5% to 95%) of historical milk production. Milk producers must sign up, select both margin and milk production coverage levels, and pay a premium that varies with coverage levels. The U.S. dairy sector also benefits from tariff-rate quotas (TRQs) on selected dairy products. The sugar program provides revenue support through a combination of limits on domestic output sales (marketing allotments), nonrecourse MAL loans for domestic sugar production (but at the processor level), a sugar-to-ethanol backstop program (Feedstock Flexibility Program), and quotas that limit imports. The import quotas for dairy and sugar are authorized outside of the omnibus farm bill. Disaster assistance is available for producers of most tree crops and livestock. The Noninsured Crop Assistance Program (NAP) is available for all agricultural production that is not covered by a federal crop insurance policy. All of these programs have permanent authority. However, the 2018 farm bill amends most of them. The enacted 2018 farm bill continues a $125,000 per-person cap on combined PLC and ARC payments but excludes MAL program benefits from the limit. The limit applies to the total from all covered commodities except peanuts, which has a separate $125,000 limit. To be eligible for payments, persons must be actively engaged in farming (AEF). Payment limits are doubled if the farm operator has a spouse. On family farming operations, all family members 18 years or older are deemed AEF and eligible for payments, including cousins, nephews, and nieces. The 2018 farm bill retains the adjusted gross income (AGI) limit for payment eligibility of $900,000. The Congressional Budget Office (CBO) projects outlays for Title I provisions of the 2018 farm bill for the five-year period (FY2019-FY2023) to average $6.3 billion compared with an estimated $7.2 billion in annual outlays under the 2014 farm bill. Based on projected market-price-to-PLC-reference price ratios, producers are expected to shift their preference toward PLC over ARC under the 2018 farm bill, resulting in a shift in program outlays concentrated more on PLC than ARC.", "document_type": "crs"}
{"report": "T he Congressional Review Act (CRA) allows Congress to review certain types of federal agency actions that fall under the statutory category of \"rules.\" Enacted in 1996 as part of the Small Business Regulatory Enforcement Fairness Act, the CRA requires agencies to report the issuance of \"rules\" to Congress and provides Congress with special procedures under which to consider legislation to overturn those rules. A joint resolution of disapproval will become effective once both houses of Congress pass a joint resolution and it is signed by the President, or if Congress overrides the President's veto. For an agency's action to be eligible for review under the CRA, it must qualify as a \"rule\" as defined by the statute. The class of rules covered by the CRA is broader than the category of rules that are subject to the Administrative Procedure Act's (APA's) notice-and-comment requirements. As such, some agency actions, such as guidance documents, that are not subject to notice-and-comment rulemaking procedures may still be considered rules under the CRA and thus could be overturned using the CRA's procedures. The 115 th Congress used the CRA to pass, for the first time, a resolution of disapproval overturning an agency guidance document that had not been promulgated through notice-and-comment procedures. The resolution was signed into law by the President on May 21, 2018. In all of the previous instances in which the CRA was used to overturn agency actions, the disapproved actions were regulations that had been adopted through APA rulemaking processes. Congress's use of the CRA in this instance raised questions about the scope of the CRA and Congress's ability to use the CRA to overturn agency actions that were not promulgated through APA notice-and-comment procedures. Under the CRA, the expedited procedures for considering legislation to overturn rules become available only when agencies submit their rules to Congress. In many cases in which agencies take actions that meet the legal definition of a \"rule\" but have not gone through notice-and-comment rulemaking procedures, however, agencies fail to submit those rules. Thus, questions have arisen as to how Members can use the CRA's procedures to overturn agency actions when an agency does not submit the action to Congress. This report first describes what types of agency actions can be overturned using the CRA by providing a close examination and discussion of the statutory definition of \"rule.\" The report then explains how Members can use the CRA to overturn agency rules that have not been submitted to Congress. Under the CRA, before a rule can take effect, an agency must submit to both houses of Congress and the Government Accountability Office (GAO) a report containing a copy of the rule and information on the rule, including a summary of the rule, a designation of whether the rule is \"major,\" and the proposed effective date of the rule. For most rules determined to be \"major,\" the agency must allow for an additional period to elapse before the rule can take effect—primarily to give Congress additional time to consider taking action on the most economically impactful rules—and GAO must write a report on each major rule to the House and Senate committees of jurisdiction within 15 days. The report is to contain GAO's assessment of the agency's compliance with various procedural steps in the rulemaking process. After a rule is received by Congress, Members have the opportunity to use expedited procedures to overturn the rule. A Member must submit the resolution of disapproval and Congress must take action on it within certain time periods specified in the CRA to take advantage of the expedited procedures, which exist primarily in the Senate. Those expedited, or \"fast track,\" procedures include the following: a Senate committee can be discharged from the further consideration of a CRA joint resolution disapproving the rule by a petition signed by at least 30 Senators; any Senator may make a nondebatable motion to proceed to consider the disapproval resolution, and the motion to proceed requires a simple majority for adoption; and if the motion to proceed is successful, the CRA disapproval resolution would be subject to up to 10 hours of debate, and then voted upon. No amendments are permitted and the disapproval resolution requires a simple majority to pass. If both houses pass the joint resolution, it is sent to the President for signature or veto. If the President were to veto the resolution, Congress could vote to override the veto under normal veto override procedures. If a joint resolution of disapproval is submitted and acted upon within the CRA-specified deadlines and signed by the President (or if Congress overrides the President's veto), the CRA states that the \"rule shall not take effect (or continue).\" In other words, if part or all of the rule had already taken effect, the rule would be deemed not to have had any effect at any time. If a rule is disapproved, the status quo that was in place prior to the issuance of the rule would be reinstated. In addition, when a joint resolution of disapproval is enacted, the CRA provides that a rule may not be issued in \"substantially the same form\" as the disapproved rule unless it is specifically authorized by a subsequent law. The CRA does not define what would constitute a rule that is \"substantially the same\" as a nullified rule. The CRA governs \"rules\" promulgated by a \"federal agency,\" using the definition of \"agency\" provided in the APA. That APA definition broadly defines an agency as \"each authority of the Government of the United States, ... but does not include ... Congress; ... the courts of the United States; ... courts martial and military commissions.\" Accordingly, the CRA generally covers rules issued by most executive branch entities. In the context of the APA, however, courts have held that this definition excludes actions of the President. The more difficult interpretive issue is what types of agency actions should be considered \"rules\" under the CRA. The CRA adopts a broad definition of the word \"rule\" from the APA, but then creates three exceptions to that definition. This APA definition of \"rule\" encompasses a wide range of agency action, including certain agency statements that are not subject to the notice-and-comment rulemaking requirements outlined elsewhere in the APA: \"[R]ule\" means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing[.] The CRA narrows this definition by providing that the term \"rule\" does not include (A) any rule of particular applicability, including a rule that approves or prescribes for the future rates, wages, prices, services, or allowances therefor, corporate or financial structures, reorganizations, mergers, or acquisitions thereof, or accounting practices or disclosures bearing on any of the foregoing; (B) any rule relating to agency management or personnel; or (C) any rule of agency organization, procedure, or practice that does not substantially affect the rights or obligations of non-agency parties. Determining whether any particular agency action is a rule subject to the CRA therefore entails a two-part inquiry: first, asking whether the statement qualifies as a rule under the APA definition and, second, asking whether the statement falls within any of the exceptions noted above to the CRA's definition of rule. These two steps are illustrated below in Figure 1 . This section of the report walks through the two elements of this inquiry in more detail. First, while the APA's definition of \"rule\" is expansive, courts have held that \"Congress did not intend that the ... definition ... be construed so broadly that every agency action\" should be encompassed under this provision. As a preliminary matter, courts have distinguished agency rulemaking actions from adjudicatory and investigatory functions. And under the statutory text, to qualify as a rule, an agency statement must meet three requirements: it must be \"of general ... applicability,\" have \"future effect,\" and be \"designed to implement, interpret, or prescribe law or policy.\" Second, even if an agency statement does qualify as an APA \"rule,\" the CRA expressly exempts three categories of rules from its provisions: rules \"of particular applicability,\" rules \"relating to agency management or personnel,\" and \"any rule of agency organization, procedure, or practice that does not substantially affect the rights or obligations of non-agency parties.\" Both inquiries are heavily fact specific, and require looking beyond a document's label to the substance of the agency's action. The CRA defines the word \"rule\" by incorporating in part the APA's definition of that term. Although there is very little case law interpreting the meaning of \"rule\" under the CRA, cases interpreting the APA's definition of \"rule\" may provide persuasive authority for interpreting the CRA because the CRA explicitly relies on that provision as the basis for its own definition of the term \"rule.\" The APA provides a general framework governing most agency action—not only agency rulemaking, but also administrative adjudications. The APA accordingly distinguishes different types of agency actions, separating rules from orders and investigatory acts. These distinctions may also be relevant when deciding whether an agency action is a rule subject to the CRA. The APA distinguishes a \"rule\" from an \"order,\" defining an \"order\" as \"the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing.\" Orders are the product of agency adjudication, in contrast to rules, which result from rulemaking. To determine whether an agency action is a rule or an order in the context of the APA, courts look beyond the document's label to the substance of the action. One federal court of appeals described the distinction between rulemaking and adjudication as follows: First, adjudications resolve disputes among specific individuals in specific cases, whereas rulemaking affects the rights of broad classes of unspecified individuals.... Second, because adjudications involve concrete disputes, they have an immediate effect on specific individuals (those involved in the dispute). Rulemaking, in contrast, is prospective, and has a definitive effect on individuals only after the rule subsequently is applied. Courts have also distinguished rules from agency investigations. A separate provision of the APA addresses an agency's authority to compel the submission of information and perform \"investigative act[s] or demand[s].\" When agencies conduct investigative actions such as requiring regulated parties to submit informational reports, courts have held that they are not subject to the APA's rulemaking requirements. However, courts have also noted that some actions related to investigations may qualify as rules. For instance, in one case, a federal court of appeals observed that the procedures governing an agency's decision to investigate \"are separate from and precede the agency's ultimate act,\" concluding that the procedures at issue constituted a rule. An agency statement will qualify as a \"rule\" under the APA definition if it (1) is \"of general or particular applicability,\" (2) has \"future effect,\" and (3) is \"designed to implement, interpret, or prescribe law or policy.\" With regard to the first requirement, as the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) has noted, most agency statements will be \"of general or particular applicability\" and will fulfill this condition. The second requirement—that a rule be \"of ... future effect\" —is the subject of some ambiguity. Courts have largely agreed that this requirement is likely intended to distinguish agency rulemaking from agency adjudication. Courts often differentiate rules and orders by noting that orders are retrospective, while rules have \"future effect.\" Rules operate prospectively, in the sense that they are intended to \"inform the future conduct\" of those subject to the rules. Additionally, courts have sometimes said that the \"future effect\" requirement excludes any agency statements that do not \"bind the agency.\" Thus, for example, in a concurring opinion in a 1988 Supreme Court case, Justice Scalia suggested that the \"future effect\" requirement must be read to mean \"that rules have legal consequences only for the future.\" He argued that the only way to distinguish rules from orders—which can have both future and past legal consequences—was to define rules as having only prospective operation. Judge Silberman of the D.C. Circuit, concurring in an opinion from that court, drew on Justice Scalia's interpretation of this requirement to argue that it would be unreasonable to conclude that every single agency statement with future effect is a rule under the APA. Instead, he argued that only agency statements that \"seek to authoritatively answer an underlying policy or legal issue\" should be considered rules. These opinions raise several unanswered questions, which could suggest some hesitation before reading the phrase \"future effect\" in the APA definition of a rule to mean \"binding.\" First, these cases do not fully explain what it means for an agency statement to be binding or address the case law suggesting that the term \"future effect\" merely pertains to the prospective nature of the statement. Second, and perhaps more critical, this case law reading \"future effect\" to mean that APA \"rules\" must bind the agency does not explain how to distinguish this requirement from the separate inquiry into whether an agency action is subject to notice-and-comment rulemaking procedures. As discussed in more detail below, some (but not all) APA \"rules\" must go through procedures commonly known as notice-and-comment rulemaking. To distinguish so-called \"legislative\" rules that are subject to notice-and-comment procedures from \"interpretive\" rules, which are not, courts generally ask whether the rule has \"the force of law\" —or stated another way, whether the rule is \"legally binding.\" Arguably, then, this \"legal effect\" test for notice-and-comment rulemaking may be equivalent to asking whether a rule binds an agency. However, the \"future effect\" inquiry tests whether an agency action is a \"rule\" under 5 U.S.C. §551(4), and the \"legal effect\" inquiry tests whether such a rule is subject to the notice-and-comment procedures outlined in 5 U.S.C. §553. Because the tests are tied to two distinct statutory provisions, they arguably should not both turn on whether a rule is legally binding. This is especially true where courts have generally held that interpretive rules may not be subject to notice-and-comment but are nonetheless \"rules\" within the meaning of the APA. The fact that Congress expressly exempted \"interpretative rules\" from the rulemaking procedures applicable to \"rules\" may itself suggest that such agency actions are rules—otherwise, the exemption would be unnecessary. The third requirement for an agency action to be considered an APA rule is that it must be \"designed to implement, interpret, or prescribe law or policy.\" The D.C. Circuit has held that agency documents that merely state an \"established interpretation\" and \"tread no new ground\" do not \"implement, interpret, or prescribe law or policy\" and therefore are not rules. Similarly, an agency statement is not a rule if it \"does not change any law or official policy presently in effect.\" Thus, courts have concluded that \"educational\" documents that merely \"reprint[]\" or \"restate\" existing law are not rules under the APA. The D.C. Circuit has also held that an agency's budget request is not a rule. The APA outlines specific rulemaking procedures that agencies must follow when they formulate, amend, or repeal a rule. The APA generally requires publication in the Federal Register and institutes procedural requirements that are often referred to as notice-and-comment rulemaking. Under notice-and-comment rulemaking, agencies must notify the public of a proposed rule and then provide a meaningful opportunity for public comment on that rule. However, not all agency acts that qualify as \"rules\" under the APA definition are required to comply with the APA's rulemaking procedures. In particular, the APA provides that notice and comment is not required for \"interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.\" Additionally, the APA's rulemaking procedures do not, in relevant part, apply to \"matter[s] relating to agency management or personnel.\" Therefore, agency statements such as guidance documents or procedural rules may not be required to undergo notice-and-comment rulemaking, but may still be APA \"rules.\" Courts frequently hold that agency's guidance documents are exempt from APA notice-and-comment rulemaking requirements because those documents are properly classified either as interpretative rules or as general policy statements. Interpretive rules merely explain or clarify preexisting legal obligations without themselves \"purport[ing] to impose new obligations or prohibitions,\" while general policy statements simply describe how an agency \"will exercise its broad enforcement discretion\" without binding the agency. But as mentioned above, the critical factor distinguishing both interpretive rules and general policy statements from \"legislative\" rules that must be promulgated through notice-and-comment procedures is \"whether the agency action binds private parties or the agency itself with the 'force of law,'\" or whether the rule \"has legal effect.\" General policy statements ordinarily are not legally binding, and accordingly are not \"substantive\" rules required to undergo notice-and-comment rulemaking procedures. It should be noted that some cases from the D.C. Circuit have suggested that general policy statements are not \"rules\" at all under the APA definition. For example, in one case, the D.C. Circuit said that the \"primary distinction between a substantive rule—really any rule—and a general statement of policy, then, turns on whether an agency intends to bind itself to a particular legal position.\" As discussed above, courts have also sometimes held that where an agency statement does not \"bind\" an agency, it has no \"future effect\" and therefore cannot qualify as an APA \"rule.\" This \"binding effect\" requirement has clear parallels to these cases holding that general policy statements are not rules because they do not bind the agency. However, these latter decisions do not explicitly ground this characterization of general policy statements in the text of the APA requiring rules to have \"future effect.\" Accordingly, it is not clear how these two inquiries interrelate. Other cases have characterized general policy statements as APA rules, notwithstanding the fact that such a statement may not be legally binding in a future administrative proceeding. The CRA incorporates the APA definition of \"rule\" by reference, and, consequently, should likely be read to incorporate judicial constructions of that definition. Thus, for example, although the CRA does not itself reference agency \"orders,\" some courts have nonetheless imported the APA's distinction between rules and orders when interpreting the CRA. Accordingly, if an agency acts through an order or investigatory act, rather than a rule, the requirements of the CRA likely will not apply. In recent years, some commentators have discussed using the CRA to revoke agencies' guidance documents, raising the question of which guidance documents qualify as CRA \"rules.\" As a preliminary matter, it is important to note that \"guidance document\" is not a defined term under either the CRA or the APA. Even if an agency has characterized a statement as a guidance document rather than a rule, it still may qualify as a \"rule\" under the CRA. Instead, the relevant question is whether any agency statement labeled as guidance—which could include, for example, actions such as memoranda, letters, or agency bulletins—falls within the statutory definition of \"rule\" and, if so, whether it is nonetheless exempt from the CRA under any of the exceptions to that definition. As discussed above, agency statements labeled as guidance are frequently exempt from the APA's notice-and-comment rulemaking procedures because they fall within the exceptions for interpretive rules or general policy statements. However, while the CRA adopts the APA's definition of rule, the CRA's exceptions to that definition are not identical to the APA's exemptions from its notice-and-comment procedures. Notably, the CRA does not exclude from its definition of rule either general policy statements or interpretative rules. Instead, the category of agency \"rules\" subject to the requirements of the CRA appears to encompass most \"rules\" that must go through the APA's notice-and-comment rulemaking procedures, along with some that do not. Consequently, agency guidance documents that are exempt from the APA's notice-and-comment procedural requirements may nonetheless be subject to the CRA, if they do not fall within one of the CRA's exceptions. But the effect of a disapproval resolution in such a case may be limited because such guidance documents generally lack legal effect in the first place. The post-enactment legislative history of the CRA indicates that the CRA was intended to encompass some agency statements that would not be subject to the APA's notice-and-comment rulemaking requirements. Following the enactment of the CRA in 1996, the law's sponsors inserted into the Congressional Record a statement in which they asserted that the law would cover a wide swath of agency actions: The committees intend this chapter to be interpreted broadly with regard to the type and scope of rules that are subject to congressional review. The term \"rule\" in subsection 804(3) begins with the definition of a \"rule\" in subsection 551(4) and excludes three subsets of rules that are modeled on APA sections 551 and 553. This definition of a rule does not turn on whether a given agency must normally comply with the notice-and-comment provisions of the APA.... The definition of \"rule\" in subsection 551(4) covers a wide spectrum of activities. This statement suggests that Congress intended the CRA to reach a broad range of agency activities, including agency policy statements, interpretive rules, and certain rules of agency organization, despite the fact that those actions are not subject to the APA's requirements for notice and comment. However, as discussed above, there is some ambiguity regarding whether certain non-binding statements are rules at all. If general policy statements or other non-binding agency actions are not \"rules\" under the APA definition, then arguably, they are not rules under the CRA. But importantly, GAO has concluded that general policy statements should be considered \"rules\" under the CRA. As discussed in more detail below, GAO's resolution of this issue may stand as the last word on the matter, given the role that GAO has come to play in advising Congress on which agency actions are subject to the CRA. Even if an agency action is a \"rule\" within the APA definition, it will not be subject to the CRA if it falls within one of the three exceptions to the CRA's definition of a \"rule.\" The CRA incorporates the APA definition of rule, but exempts from that definition any rules \"of particular applicability,\" rules \"relating to agency management or personnel,\" and \"any rule of agency organization, procedure, or practice that does not substantially affect the rights or obligations of non-agency parties.\" Some of these exemptions track language in the APA, and accordingly, cases interpreting those APA provisions may be useful to interpret the CRA exceptions. Additionally, the CRA does not \"apply to rules that concern monetary policy proposed or implemented by the Board of Governors of the Federal Reserve System or the Federal Open Market Committee.\" The CRA also contains a partial exception for rules where an agency has, \"for good cause,\" dispensed with notice-and-comment rulemaking procedures, as well as for rules related to \"a regulatory program for a commercial, recreational, or subsistence activity related to hunting, fishing, or camping .\" However, this section does not exempt rules from the CRA procedures entirely; it merely allows the agency to determine when the rule shall take effect, notwithstanding the CRA's requirements. While the APA's definition of \"rule\" includes agency statements \"of general or particular applicability,\" the CRA expressly exempts \"any rule of particular applicability.\" Courts have said that this language refers to \"legislative-type promulgations\" that are \"directed to\" specifically named parties. In opinions from GAO analyzing whether various agency actions fall within the particular-applicability exception, GAO has stated that to be generally applicable, the CRA does not require a rule to \"generally apply to the population as a whole.\" Instead, \"all that is required is a finding\" that a rule \"has general applicability within its intended range, regardless of the magnitude of that range.\" For example, in one case, GAO concluded that an agency decision adopting and implementing a plan to counter decreased river flows in a certain river basin was not a matter of particular applicability. Although the decision applied to a specific geographic area, it would, in the view of GAO, nonetheless \"have significant economic and environmental impact throughout several major watersheds in the nation's largest state.\" The CRA gives examples of some types of rules of particular applicability by specifying that this exemption includes any \"rule that approves or prescribes for the future rates, wages, prices, services, or allowances therefor, corporate or financial structures, reorganizations, mergers, or acquisitions thereof, or accounting practices or disclosures bearing on any of the foregoing.\" Moreover, the post-enactment statement for the record written by the CRA's sponsors maintained that \"IRS private letter rulings and Customs Service letter rulings are classic examples of rules of particular applicability.\" Under the APA, courts have also held, for example, that agency actions designating specific sites as covered by environmental laws are rules of \"particular applicability.\" The second CRA exemption excludes \"any rule relating to agency management or personnel.\" The APA contains a similar exemption from its general rulemaking requirements. Within the context of the APA, courts have concluded that this exemption covers agency statements such as policies for hiring employees. A rule will not fall within this exemption solely because it is \"directed at government personnel.\" Instead, courts have viewed this APA exception to cover internal matters that do not substantially affect parties outside an agency. Notwithstanding the general presumption of courts that where Congress adopts language from another statute, it also intends to incorporate any settled judicial interpretations of that same language, it is unclear whether this substantial-effect requirement developed by courts in the context of the APA should be read into the CRA. The CRA's second exemption, for \"any rule relating to agency management or personnel,\" does not expressly mention a rule's effect on third parties. By contrast, the CRA's third exemption does. This distinction in language could be read to mean that Congress intentionally chose to create a substantial-effect requirement for the third exception while omitting this limitation from the second one, so that the CRA's second exception excludes \"any rule relating to agency management or personnel\" regardless of its impact on third parties. On this view, this difference in phrasing would displace the ordinary presumption that Congress incorporates case law interpreting similar statutory provisions. This interpretation of the second exemption could mean that the CRA's exception for rules relating to agency management or personnel may be interpreted more broadly than the APA exception. However, it is also possible that Congress chose not to include the substantial-effect requirement in this second exception because \"prior judicial interpretation\" of the identical phrases in the APA made such language unnecessary. Congress may have added a substantial-effect requirement to the third exception in order to settle some ambiguity in the cases interpreting the parallel provision of the APA, as described below. Finally, the CRA exempts \"any rule of agency organization, procedure, or practice that does not substantially affect the rights or obligations of non-agency parties.\" The APA also excludes \"rules of agency organization, procedure, or practice\" from notice-and-comment rulemaking procedures. Courts have held that this APA exception includes actions like agency decisions relating to how regulated entities must go about satisfying investigative requirements. Unlike the CRA, the APA does not explicitly limit this exception to those rules that do not \"substantially affect the rights or obligations of non-agency parties.\" Nonetheless, because courts have read such a limitation into the APA exemption, the case law defining this requirement may be relevant to determine the scope of this CRA exemption. However, in the cases interpreting this parallel APA exclusion, the impact of a rule on a third party is not the only factor courts use to distinguish between substantive rules, which are required to go through notice-and-comment procedures, and procedural rules, which are not. Instead, courts have engaged in two kinds of inquiries. The first is the \"substantial impact test,\" which asks whether the agency action substantially impacts the regulated industry. However, the D.C. Circuit has noted that even rules best characterized as procedural measures may have a significant effect on regulated parties, and, accordingly, has held that \"a rule with a 'substantial impact' upon the persons subject to it is not necessarily a substantive rule.\" Consequently, the D.C. Circuit has also asked whether the rule \"encodes a substantive value judgment.\" Nonetheless, because the text of the CRA expressly excludes rules \"of agency organization, procedure, or practice\" that do not \"substantially affect the rights or obligations of non-agency parties,\" the CRA appears to mandate the use of something akin to the substantial impact test to determine whether a rule falls within this exception. In fact, one of the sponsors of the CRA emphasized prior to its passage that to determine whether a rule should be excluded under this provision, \"the focus ... is not on the type of rule but on its effect on the rights or obligations of nonagency parties.\" He went on to say that the exclusion covered only rules \"with a truly minor, incidental effect on nonagency parties.\" GAO has sometimes drawn on the APA case law described above in its own opinions analyzing whether various actions fall within the purview of the CRA. However, because the substantial-impact test and the substantive-value-judgment test were developed in the context of the APA to test whether rules \"implicate the policy interests animating notice-and-comment rulemaking,\" these judicially created tests might not be directly applicable to determine whether an agency statement is subject to the CRA. The CRA requires that agencies submit actions that fall within the CRA's definition of a rule to both houses of Congress and to GAO before the actions may take effect. Thus, the submission requirement applies generally to rules that are promulgated through APA notice-and-comment procedures, as well as to other types of agency statements, as discussed above. Specifically, Section 801(a)(1)(A) of the CRA requires the agency to submit a report containing a copy of the rule to each house of Congress and the Comptroller General; a concise general statement relating to the rule, including whether it is a major rule; and the proposed effective date of the rule. The agency is also required to submit additional information pertaining to any cost-benefit analysis the agency conducted, along with information on the agency's actions resulting from other regulatory impact analysis requirements, including the Regulatory Flexibility Act and the Unfunded Mandates Reform Act. For major rules, after receiving this information, GAO is then required to assess the agency's compliance with these additional informational requirements and include its assessment in the major rule report. The report is required to be submitted to the House and Senate committees of jurisdiction within 15 calendar days of the submission of the rule or its publication in the Federal Register , whichever date is later. The \"report\" that agencies are required to submit along with the rule, in practice, is a two-page form on which they provide the information required under Section 801(a)(1)(A) and, for major rules, most of the information required to be included in GAO's major rule report. In FY1999 appropriations legislation, Congress required the Office of Management and Budget (OMB) to provide agencies with a standard form to use to meet this reporting requirement. OMB issued the form in March 1999 as part of a larger guidance to agencies on compliance with the CRA. A copy of the form is provided in Appendix A of this report. When final rules are submitted to Congress, notice of each chamber's receipt and referral appears in the respective House and Senate sections of the daily Congressional Record devoted to \"Executive Communications.\" Notice of each chamber's receipt is also entered into a database that can be searched using Congress.gov. When the rule is submitted to GAO, a record of its receipt at GAO is noted in a database on GAO's website as well. Once the rule is received in Congress and published in the Federal Register , the time periods during which the CRA's expedited procedures are available begin, and Members can use the procedures to consider a resolution of disapproval. Thus, submission of rules to Congress under the CRA is critical because the receipt of the rule in Congress triggers the CRA's expedited procedures for introduction and consideration of a joint resolution disapproving the rule. In other words, if an agency fails to submit a rule to Congress, the House and Senate are unable to avail themselves of the special \"fast track\" procedures to consider a joint resolution striking down the rule. Following enactment of the CRA in 1996, some Members of Congress and others raised concerns over agencies not submitting their rules on several occasions. At a hearing on the CRA in 1997, one year after its enactment, witnesses noted that agencies were not in full compliance with the submission requirement. It was also noted at the hearing, however, that it appeared agencies were seeking \"in good faith\" to comply with the statute. At a hearing in 1998 on implementation of the CRA, GAO's general counsel testified that agencies were often not sending their rules to GAO or Congress. Also in 1998, to further improve agency compliance with the CRA, Congress required OMB to issue guidance on certain provisions of the CRA, specifically including the submission requirement in 5 U.S.C. §801(a)(1). To meet this requirement, then-OMB Director Jacob J. Lew issued a memorandum for agencies in March 1999. The Lew memorandum provided information such as where agencies should send their rules in the House and Senate, including the addresses of the Office of the President of the Senate and the Speaker of the House, the offices in each chamber that receive the rules; what information the agencies should include with the rule; and an explanation of what types of rules are required to be submitted. Because agencies were initially inconsistent about fulfilling the submission requirement, GAO began to monitor agencies' compliance with the submission requirement by comparing the final rules that were published in the Federal Register with rules that were submitted to GAO. This was not a role that was required under the CRA; rather, GAO conducted these reviews voluntarily. As then-GAO general counsel Robert Murphy testified in 1998, GAO conducted a review to determine whether all final rules covered by the Congressional Review Act and published in the Register were filed with the Congress and the GAO. We performed this review both to verify the accuracy of our own data base and to ascertain the degree of agency compliance with the statute. We were concerned that regulated entities may have been led to believe that rules published in the Federal Register were effective, when, in fact, they were not unless filed in accordance with the statute. After its review of agency compliance with the submission requirement, in November 1997, GAO submitted to OMB's Office of Information and Regulatory Affairs (OIRA) a list of the rules that had been published in the Federal Register but had not been submitted to GAO. According to GAO, OIRA distributed this list to affected agencies; GAO then followed up again with the agencies that had rules that remained un-submitted in February 1998. GAO stated in its March 1998 testimony that \"In our view, OIRA should have played a more proactive role in assuring that the agencies were both aware of the statutory filing requirements and were complying with them.\" GAO continued to conduct similar reviews regularly, comparing the list of rules that agencies submitted to GAO against rules that were published in the Federal Register . Until 2012, GAO periodically sent letters to OIRA regarding rules that it had not received. In March 2012, GAO notified OIRA that, due to constraints on its resources, it would no longer be sending lists of rules not received. Instead, GAO decided to continue to track only major rules not received, not all final rules, as they had previously done. In general, although there have been exceptions noted by GAO, agencies appear to be fairly comprehensive in submitting rules to Congress and GAO when those rules have been promulgated through an APA rulemaking process. GAO's federal rules database lists thousands of such rules each year. In the case of rules that are not subject to notice-and-comment procedures, however, agencies often do not fulfill the submission requirement, and tracking compliance for these types of agency actions is more difficult. Although GAO has voluntarily tracked agency compliance with the submission requirement, its methodology for doing so did not result in a complete list of agency actions that should have been submitted. GAO's point of reference was to compare regulations that were published in the Federal Register against regulations it received pursuant to the CRA. Most rules that are required to be published in the Federal Register are indeed subject to the CRA, making this a potentially helpful method of identifying rules that were not submitted. However, many of the other agency actions that are not subject to notice-and-comment requirements are not generally published in the Federal Registe r and are also not submitted to GAO. Therefore, using this method, many rules that should have been submitted likely were undetected by GAO and thus not included in the lists of un-submitted rules it sent to OIRA and to the agencies. It is precisely this issue that led to Members requesting GAO's opinion on individual agency actions that were of specific interest to them and were not submitted to Congress (nor, in most cases, published in the Federal Register ). The higher incidence of noncompliance with the CRA's submission requirement for agency actions that were conducted outside the notice-and-comment rulemaking process is likely due in large part to the practical difficulty of submitting the substantial number of agency statements that qualify as rules under the CRA. The CRA's submission requirement could potentially include a wide variety of items such as FAQs posted on agency websites, press releases, bulletins, information memoranda, and statements made by agency officials. In congressional testimony in 1997, one administrative law scholar argued that agencies \"annually take tens of thousands of actions\" that would fall under the CRA's definition of rule, and that Were agencies to comply fully with [the CRA's] requirement that all these matters be filed with Congress as a condition of their effectiveness (as it appears, thus far, they are not doing), Congress and the GAO would be swamped with filings. Burying Congress in paper might even seem a useful means of diverting attention from larger, controversial matters; haystacks can be useful for concealing needles. No one believes many, if any, of these rules will be the subjects of resolutions of disapproval. Yet for them even simple accompanying documents to permit data analysis and tracking, such as GAO has been proposing, would impose significant aggregate costs, well beyond their possible benefit. In addition, it seems possible that many agencies are unaware of the breadth of the CRA's coverage. Reading through various agencies' responses to the GAO opinions discussed below suggests that many agencies appear to be aware that notice-and-comment rules are generally covered by the CRA, but they may be unaware that many other types of actions are covered. For example, in an opinion it issued in 2012 regarding an action taken by the Department of Health and Human Services, GAO stated that \"We requested the views of the General Counsel of HHS on whether the July 12 Information Memorandum is a rule for purposes of the CRA by letter dated August 3, 2012. HHS responded on August 31, 2012, stating that the Information Memorandum was issued as a non-binding guidance document, and that HHS contends that guidance documents do not need to be submitted pursuant to the CRA.\" GAO concluded, however, \"We cannot agree with HHS's conclusion that guidance documents are not rules for the purposes of the CRA and HHS cites no support for this position.\" Because submission of rules is key to Congress's ability to use the CRA, if an agency does not submit a rule to Congress, this could potentially frustrate Congress's ability to review rules under the act. To avoid Congress being denied its opportunity for review of rules in this way, however, the Senate appears to have developed a practice that allows it to employ the CRA's review mechanism even when an agency does not submit a rule for review. That practice has involved seeking an opinion from GAO on whether an agency action should have been submitted under the CRA (i.e., whether the action is covered by the CRA's definition of \"rule\"). In several instances since the enactment of the CRA in 1996, Members of Congress sought an opinion from GAO as to whether certain agency actions were covered by the CRA, despite the agency not having undertaken notice-and-comment rulemaking or having submitted the action to Congress. GAO has issued 21 opinions of this type as of March 5, 2019. In many of these opinions, GAO has defined the term \"rule\" as used in the CRA expansively. In 11 of the 21 opinions, GAO opined that the agency statement in question was a rule under the CRA that should have been submitted to the House and Senate for review. These opinions are summarized below in this report and are listed in a table in Appendix B . In recent years, the Senate has considered publication in the Congressional Record of a GAO opinion classifying an agency action as a rule as the trigger date for the initiation period to submit a disapproval resolution and for the action period during which such a joint resolution qualifies for expedited consideration in the Senate. Thus, the question of whether Congress may use the CRA's expedited parliamentary disapproval mechanism generally hinges upon the nature of GAO's opinion in such cases. By allowing the GAO opinion to serve as a substitute for the actual submission of a rule, the Senate can still avail itself of the CRA's expedited procedures to overturn rules. In responding to these requests from Members for opinions on whether certain agency actions are covered, GAO has played an important role in determining the applicability of the CRA, although the specific role that GAO has played in this regard is not explicitly outlined in the statute. But a review of the history of the early implementation of the CRA, and a consideration of GAO's other activities under the CRA, suggests that the role GAO currently plays with regard to determining whether a specific agency action is a \"rule\" is linked to other activities GAO has engaged in regarding the CRA. As has been noted, GAO's primary statutory requirement under the CRA is to provide a report to the committees of jurisdiction on each major rule, and to include in the report information about the agency's compliance with various steps of the rulemaking process for each major rule. For non-major rules, soon after the CRA was enacted, GAO voluntarily created an online database of rules submitted to it under the CRA, suggesting that it was willing to go beyond what was required of it by the statute to facilitate implementation. As GAO's general counsel explained in congressional testimony in 1998, \"Although the law is silent as to GAO's role relating to the nonmajor rules, we believe that basic information about the rules should be collected in a manner that can be of use to Congress and the public. To do this, we have established a database that gathers basic information about the 15-20 rules we receive on the average each day.\" The database can be used to search for rules by elements such as the title, issuing agency, date of publication, type of rule (major or non-major), and effective date. The website also contains links to each of GAO's major rule reports. Perhaps most notably, however, GAO's determination of whether agency actions are considered \"rules\" under the CRA appears to be closely linked to its monitoring of agency compliance with the submission requirement as discussed above. The question of whether an agency action is a rule under the CRA is also a question of whether it should be submitted; arguably, then, GAO is addressing a very similar question in its opinions on whether certain agency actions are covered as it was in its initial reports to OIRA on agency compliance with the submission requirement. A discussion of GAO's role in a congressional hearing on the Tongass Land Management Plan in 1997 provides some evidence of the voluntary and, initially, ad hoc nature of GAO's role in this regard. One of the issues that was addressed at the hearing was whether the plan should be considered a rule under the CRA; GAO's general counsel was invited to testify at the hearing. Six days before the hearing, GAO issued its second opinion on the applicability of the CRA, in which it stated that the Tongass Land Management Plan should have been submitted as a rule under the CRA. Former Senator Larry Craig, who had requested the opinion, asked GAO's general counsel at the hearing about GAO's role: It is our understanding of your testimony and our own reading of the Regulatory Flexibility Act that the General Accounting Office has been given the role of advising Congress and perhaps agencies on whether their policy decisions constitute rules. It is our understanding that the GAO's independent opinion is generally given considerable weight by the agencies. Is this also the GAO's understanding of its role? In response, GAO's general counsel, Robert Murphy, stated that the CRA does not provide any identification of who is to decide what a rule is, unlike the issue of whether a rule is a major rule or not, which, as [OIRA Administrator] Ms. Katzen pointed out, has been assigned to her. So in that sense, I cannot say that GAO has a special role under the statute for making that determination. The decision, the opinion, that we issued last week on the question [of whether the Tongass Land Management Plan was a rule under the CRA] was done in our role as adviser to the Congress in response to the request of three chairmen of congressional committees. Thus, GAO acknowledged that its opinion was provided not pursuant to any specific provision of the statute, but in a more general, advisory capacity. In the years following, Members continued to request GAO opinions advising Congress on the matter of whether an agency action should have been submitted. Although GAO has issued 21 opinions on the applicability of the CRA since 1996, Congress's response to those opinions has varied over time. Initially, the GAO opinions finding that the agency actions in question were rules under the CRA did not lead to the introduction of joint resolutions of disapproval—Members appear not to have introduced any joint resolutions of disapproval following a GAO opinion until 2008. In 2008, GAO issued an opinion stating that a letter from the Centers for Medicare & Medicaid Services to state health officials concerning the State Children's Health Insurance Program was a rule for the purposes of the CRA; in response, Senator John D. Rockefeller introduced S.J.Res. 44 to disapprove the guidance provided in the letter. According to a press release from the Committee on Finance at the time, however, the committee did not take further action on the resolution of disapproval because it had missed the window during which the action would have been required to be taken under the CRA to use its expedited procedures. The first time either chamber took action on a resolution of disapproval introduced following a GAO opinion was in 2012, when the House passed H.J.Res. 118 (112 th Congress), a resolution of disapproval that would have overturned an information memorandum issued by the Department of Health and Human Services relating to the implementation of the Temporary Assistance for Needy Families (TANF) program. The first time the Senate took action on such a resolution of disapproval was on April 18, 2018, when it passed S.J.Res. 57 , overturning guidance from the Bureau of Consumer Financial Protection (CFPB) pertaining to indirect auto lending and the Equal Credit Opportunity Act. The House passed S.J.Res. 57 on May 8, 2018, and the President signed it into law on May 21, 2018. Standing alone, a GAO opinion deciding whether an agency action is a \"rule\" covered by the CRA does not have legal effect. As discussed, GAO's role in determining whether actions are subject to the CRA is not provided for in the CRA, and its opinions are, in essence, advisory. The opinions do not have any immediate effect other than advising Congress as to whether GAO considers an agency action to meet the definition of \"rule\" under the CRA. As a matter of course, however, it appears that the Senate has chosen to treat the GAO opinions as dispositive on the issue. In several cases, individual Senators have stated that once a GAO opinion determining that an agency action is a rule is published in the Congressional Record , the time periods under the CRA commence and the agency action in question becomes subject to the CRA disapproval mechanism. The enactment in May 2018 of a joint resolution of disapproval that was introduced following a GAO opinion regarding a 2013 CFPB bulletin that had not been submitted by the agency further indicates that Congress, in at least some cases, is willing to consider the GAO opinion as a substitute for the agency's submission of a rule to Congress. GAO described this practice in November 2018 in one of its opinions relating to the applicability of the CRA: \"Congress has opted to treat the receipt of a GAO opinion concluding that an agency action is a rule as triggering the statutory provisions that otherwise would have been triggered by the agency's submission. Thus, Congress has used GAO opinions to cure the impediment created by the agency's failure to submit the rule, protecting its review and oversight authorities.\" In sum, GAO opinions facilitate congressional review of rules that were not—but should have been—submitted under the CRA. A CRA provision barring judicial review makes it unlikely that a GAO opinion or any other congressional determination stating that a rule is subject to the CRA would be subject to challenge in court. This provision states that \"[n]o determination, finding, action, or omission under this chapter shall be subject to judicial review.\" Accordingly, most courts have refused to review any claims arguing that an agency action should have been submitted to Congress as a rule under the CRA. As a result, the question of whether an agency action is subject to the CRA and its fast-track procedures will likely be settled in the political arena rather than in the courts, and, if Congress continues to treat GAO opinions as determinative, those opinions likely will be the final word on the issue. The provision barring judicial review may mean that one other critical aspect of the CRA may be addressed outside of the courts and through GAO opinions: whether a rule has taken effect. As discussed previously, the CRA states that agencies must submit covered rules to Congress and the Comptroller General \"before a rule can take effect,\" suggesting that a rule may not become operative until the report required by the CRA is submitted to Congress. Indeed, the post-enactment statement inserted into the Congressional Record by the CRA's sponsors stated that, barring two exceptions listed in the CRA, \"any covered rule not submitted to Congress and the Comptroller General will … not [take] effect until it is submitted pursuant to subsection 801(a)(1)(A).\" However, courts have refused to adjudicate claims arguing that various rules are not in effect because an agency has failed to submit the rules to Congress. Accordingly, it is unlikely that a court would be willing to enforce this provision and declare that a rule lacks effect because it was not submitted to Congress. If an agency has not submitted a disputed action to Congress, it is possible that this inaction was the result of the agency's view that the rule was not subject to the CRA. A GAO opinion stating that an agency action does constitute a rule, while not itself rendering a rule ineffective, may be the first indication to the agency that the rule did not \"take effect\" because the agency did not fulfill the CRA submission requirement. But in the context of agency rules that inherently lack legal effect, the determination that they lack \"effect\" under the CRA may not have much practical impact. In the context of rulemaking, to \"take effect\" usually means that something has become legally effective. As noted, however, the CRA encompasses some non-legislative rules that inherently lack legal effect. The fact that the CRA requires agencies to submit some agency statements that lack legal effect suggests that the term \"effect,\" as used in the CRA's submission requirement, means something other than legal effect. While reviewing notice-and-comment rulemakings, some courts have held that the CRA suspends a rule's operation notwithstanding the fact that a rule may technically have become effective. With respect to rules such as general policy statements that generally lack legal force, however, even if an agency failed to comply with the CRA's submission requirement and erroneously regarded the rule as being operative, it is less likely that the operation of the statement had a discernible and independent effect on the agency's actions. This section briefly summarizes each of the 21 GAO opinions to date on whether certain agency actions were rules and, thus, eligible for disapproval under the CRA. When GAO appeared to consider one or more of the CRA exceptions to the definition of \"rule\" as fundamental to its analysis, the summaries identify which exception GAO focused on in its opinion. The opinions are listed in chronological order by the date on which GAO issued the opinion. For a more concise summary of each of these opinions, see the table in Appendix B . The Emergency Sale Timber Program was enacted as part of the Emergency Supplemental Appropriations and Rescissions Act of 1995. The program was intended to \"increase the sales of salvage timber in order to remove diseased and damaged trees and improve the health and ecosystems of federally owned forests.\" On July 2, 1996, the Secretary of Agriculture sent a memorandum entitled \"Revised Direction for Emergency Timber Salvage Sales Conducted Under Section 2001(b) of P.L. 104-19 \" to the Chief of the Forest Service, containing \"clarifications in policy\" for the program. GAO concluded that the memorandum was a rule under the CRA because some of its contents \"clearly are of general applicability and future effect in interpreting section 2001 of P.L. 104-19 \" and because, contrary to the argument the Department of Agriculture made to GAO when GAO requested its views on the matter, the memorandum \"does not fall within the agency procedure or practice exclusion [in 5 U.S.C. §804(3)(C)].\" On May 23, 2007, the Department of Agriculture's Forest Service issued the Tongass National Forest Land and Resource Management Plan, which \"sets forth the management direction for the Tongass Forest and the desired condition of the Forest to be attained through Forest-wide multiple-use goals and objectives.\" GAO concluded that the plan was a rule under the CRA and was not excepted under 5 U.S.C. §804(3) because \"decisions made in the Plan substantially affect non-agency parties and are, therefore, not 'agency procedures.'\" President William Clinton signed Executive Order 13061 on September 11, 1997, announcing policies related to the American Heritage River Initiative (AHRI). The AHRI was intended to support American communities' efforts to restore and protect their rivers; the President was to designate, by proclamation, 10 rivers that would take part in the program. GAO concluded that Executive Order 13061 was not a rule under the CRA because the President is not an \"agency\" for the purposes of the CRA (or, for that matter, under the APA). As such, actions taken by the President are not subject to the CRA. On February 5, 1998, the Environmental Protection Agency (EPA) issued its \"Interim Guidance for Investigating Title VI Administrative Complaints Challenging Permits.\" According to EPA, the intent of the guidance was to update EPA's procedural and policy framework regarding complaints alleging discrimination in the environmental permitting context. GAO concluded that \"considered as a whole, the Interim Guidance clearly affects the rights of non-agency parties\" and thus was a rule under the CRA and not exempt under 5 U.S.C. §804(3). On May 3, 2000, the Farm Credit Administration (FCA) issued a booklet entitled \"National Charters,\" and then the FCA published the booklet in the Federal Register on July 20, 2000. The booklet \"provide[d] guidance on the national charter application process and the national charter territory. Specifically, the Booklet explain[ed] how a direct lender association can apply for a national charter; what the territory of a national charter will be; and what conditions the FCA will impose in connection with granting a national charter.\" GAO concluded that \"we find that the Booklet, while labeled a statement of policy by the FCA, in actuality, meets the requirements of a legislative rule—which should have been issued using informal rulemaking procedures, including notice and comment.\" GAO then concluded that the booklet constituted a rule under the CRA and was not exempt under 5 U.S.C. §804(3) because the policies established in the booklet would have an effect on non-agency parties, and because statements made within the booklet clearly indicate that \"the FCA recognizes the effect of the Booklet and national charters on other parties.\" The Trinity River Record of Decision (ROD) was issued in December 2000 and documented the Department of the Interior's selection of the actions that it deemed necessary to \"restore and maintain the anadromous fish in the Trinity River.\" The ROD identified the department's selected courses of action for addressing the decreased river flows in the Trinity River Basin. GAO concluded that the ROD was a \"rule\" under the CRA because \"its essential purpose is to set policy for the future,\" it was not a rule of agency procedure or practice under 5 U.S.C. §804(3), and \"it will have broad effect on both rivers' ecosystems and potentially significant economic effect within the Sacramento and Trinity River basins.\" On July 18, 2002, the Department of Veterans Affairs (VA) issued a memorandum to network directors regarding the VA's marketing activities to enroll new veterans in the VA health care system. Specifically, the memorandum directed the network directors to no longer engage in trying to enroll new veterans through the use of certain types of activities, such as health fairs, veteran open houses, and enrollment displays at VSO meetings. GAO concluded that the memorandum was not a rule under the CRA because it \"is clearly excluded from the coverage of the CRA by one of the enumerated exceptions found in 5 U.S.C. §804(3)\"—specifically, GAO considered the memorandum to be a statement of agency procedure or practice that did not affect the rights or obligations of non-agency parties. Rather, the memorandum governed internal agency procedures and did not affect the ability of veterans to enroll in the VA health care system. On January 23, 2003, the VA issued a memorandum terminating the Vendee Loan Program, a program that allowed the VA to make loans for the sale of foreclosed VA-loan-guaranteed property. In the memorandum, which was addressed to all directors and loan guarantee officers, the VA Secretary announced that it would no longer finance the sale of acquired properties. GAO concluded that the memorandum was not a rule under the CRA because it was a rule relating to agency management (i.e., excepted under 5 U.S.C. §804(3)(B)) or a rule of agency organization, procedure, or practice that does not substantially affect the rights or obligations of non-agency parties (i.e., excepted under 5 U.S.C. §804(3)(C)). GAO noted that \"this is the type of management decision left to the discretion of the Secretary of VA in order to maintain the effective functioning and long-term stability of the program,\" and that \"since the vendee loans were a purely discretionary method for VA to use to dispose of foreclosed properties, the change in the agency's 'organization' or 'practice' does not affect any party's right or obligation.\" On August 17, 2007, the Centers for Medicare & Medicaid Services issued a letter to state health officials concerning the State Children's Health Insurance Program (SCHIP). The letter \"purports to clarify the statutory and regulatory requirements concerning prevention of crowd out for states wishing to provide SCHIP coverage to children with effective family incomes in excess of 250 percent of the federal poverty level (FPL) and identifies a number of particular measures that these states should adopt.\" GAO concluded that the letter was a rule for the purposes of the CRA because it was a \"statement of general applicability and future effect designed to implement, interpret, or prescribe law or policy with regard to the SCHIP program,\" and because GAO did \"not believe that the August 17 letter comes within any of the exceptions to the definition of rule contained in the Review Act.\" On July 12, 2012, the Department of Health and Human Services' Administration for Children and Families issued an information memorandum concerning the Temporary Assistance for Needy Families (TANF) program. The memorandum notified states that HHS was willing to exercise waiver authority over some of the program's work requirements. GAO concluded that the information memorandum was a rule for the purposes of the CRA because it was a \"statement of general applicability and future effect, designed to implement, interpret, or prescribe law or policy with regard to TANF,\" and it did not fall within any of the three exceptions to the definition of a rule. As GAO stated, the memorandum applied to states and therefore was of general applicability, rather than particular applicability; it applied to the states and not agency management or personnel; and it established \"the criteria by which states may apply for waivers from certain requirements of the TANF program. These criteria affect the obligations of the states, which are non-agency parties.\" On January 8, 2014, the Environmental Protection Agency issued a proposed rule entitled \"Standards of Performance for Greenhouse Gas Emissions from New Stationary Sources: Electric Utility Generating Units.\" The proposed rule was intended to establish \"standards for fossil fuel-fired electric steam generating units (utility boilers and Integrated Gasification Combined Cycle (IGCC) units) and for natural gas-fired stationary combustion turbines.\" GAO concluded that the proposed rule in question was not an action that was covered by the CRA, because the CRA was intended to apply only to final rules: \"The issuance of a proposed rule is an interim step in the rulemaking process intended to satisfy APA's notice requirement, and, as such, is not a triggering event for CRA purposes.\" Furthermore, GAO stated \"the precedent provided in our prior opinions underscores that proposed rules are not rules for CRA purposes, and GAO has no role with respect to them.\" On March 22, 2013, the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation, issued interagency guidance on leveraged lending. The guidance \"outline[d] for agency-supervised institutions high-level principles related to safe-and-sound leveraged lending activities, including underwriting considerations, assessing and documenting enterprise value, risk management expectations for credits awaiting distribution, stress-testing expectations, pipeline portfolio management, and risk management expectations for exposures held by the institution.\" GAO concluded that the leveraged-lending guidance was a rule under the CRA because it was a general statement of policy that had future effect and because GAO could \"readily conclude that the guidance does not fall within any of the three exceptions in the CRA.\" GAO's opinion, which was issued on October 19, 2017, was silent on the matter of the timing of its opinion relative to the guidance, which was issued in 2013. On December 9, 2016, the U.S. Department of Agriculture's Forest Service approved an amendment to the Tongass Land and Resource Management Plan. The plan identified the uses that may occur in each area of the forest. The Forest Service is required under the National Forest Management Act of 1976 to update forest plans at least every 15 years and potentially more frequently. GAO concluded that the amendment to the plan was a rule under the CRA because the amendment \"has a substantial impact on the regulated community such that it is a substantive rather than a procedural rule for purposes of CRA.\" As such, the plan could not be considered to fall within the exception in 5 U.S.C. §804(3)(C), despite the argument presented by USDA when GAO asked the agency its views on the matter. On December 30, 2016, the Department of the Interior's Bureau of Land Management issued its resource management plan for four areas in Alaska: the Draanjik Planning Area, the Fortymile Planning Area, the Steese Planning Area, and the White Mountains Planning Area. Land management plans such as these are intended to provide specific information for the use of public lands and are required under the Federal Land Policy and Management Act of 1976. GAO concluded that the plan was a rule under the CRA because it was of general applicability, had future effect, and was designed to implement, interpret, or prescribe law or policy, and because it did not fit into any of the three exceptions. Of particular relevance appeared to be the exception in 5 U.S.C. §804(3)(C): \"Because the Eastern Interior Plan designates uses by nonagency parties that may take place in the four areas it governs, it is not a rule of agency organization, procedure or practice.\" On March 21, 2013, the Consumer Financial Protection Bureau issued a bulletin on \"Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act.\" The bulletin \"provide[d] guidance about indirect auto lenders' compliance with the fair lending requirements of the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B.\" GAO concluded that the bulletin was a rule under the CRA because it \"is a statement of general applicability, since it applies to all indirect auto lenders; it has future effect; and it is designed to prescribe the Bureau's policy in enforcing fair lending laws,\" and because the bulletin \"does not fall within any of the [CRA's] exceptions.\" GAO's opinion, which was issued on October 19, 2017, was silent on the matter of the timing of its opinion relative to the bulletin, which was issued in 2013. On January 23, 2017, President Donald J. Trump released a presidential memorandum establishing his Administration's policy on global health assistance funding, often referred to as the \"Mexico City Policy.\" The policy prohibited assistance to foreign nongovernmental organizations and other entities that perform or promote abortion as a method of family planning. To implement this policy, the Department of State issued a fact sheet entitled \"Protecting Life in Global Health Assistance\" on May 15, 2017, and the U.S. Agency for International Development (USAID) issued revisions to its \"Standard Provisions for U.S. Nongovernmental Organizations\" on March 2, 2017. GAO concluded that the two agency actions in question were not rules for the purposes of the CRA because, although the fact sheets were issued by federal agencies, they were merely implementing a decision of the President, under a statute that specifically granted broad policymaking authority to the President. GAO based this decision on a 1989 D.C. Circuit case, DKT Memorial Fund v. Agency for International Development , which held that agency actions implementing the decision of President Ronald Reagan to establish the Mexico City Policy were not reviewable under the APA. The court held that the disputed decision involved \"not a rulemaking by an agency, but rather a policy-making at the highest level by the executive branch,\" concluding that it did not have authority under the APA \"to review the wisdom of policy decisions of the President\" where the relevant statute granted the President broad discretion in the area of foreign affairs. GAO determined that in accordance with this precedent, the agency actions implementing President Trump's policy decision were not subject to the CRA. In guidance for the 2018 tax filing season, IRS announced on its website that it \"would not accept electronically filed individual income tax returns where the taxpayer does not meet ACA reporting requirements, specifically to report full-year health coverage, claim a coverage exemption, or report a shared responsibility payment (known as 'silent returns').\" GAO concluded that the agency statement was not a rule under the CRA because it \"is a rule of agency procedure or practice that does not substantially affect taxpayers' rights or obligations,\" thus falling into the exception in 5 U.S.C. §804(3)(C). In effect, according to GAO, the \"statement changes the timing of IRS compliance measures, but it does not change IRS's basis for assessing taxpayers' compliance with existing law—namely, the requirement to file a complete tax return and to meet ACA reporting requirements.\" The Social Security Administration's (SSA) Hearings, Appeals, and Litigation Law Manual (HALLEX) describes how SSA will process and adjudicate claims for disability benefits under the Social Security Act. Two sections of the manual stated a policy under which an SSA adjudicator could not rely on information from the Internet, including from social media networks, in deciding a claim for benefits (with two exceptions). GAO concluded that these two sections of HALLEX were not rules under the CRA because they were merely \"procedures that govern the use of evidence from the Internet during those proceedings\" and they \"do not impose new burdens on claimants or alter claimants' rights or obligations during the SSA appeal process.\" Thus, GAO concluded that \"the HALLEX sections are procedural rules that meet the [5 U.S.C. §804(3)(C)] exception.\" On July 26, 2018, the IRS issued Revenue Procedure 2018-38, which \"modifies the information certain tax-exempt entities are required to report to IRS on their annual returns.\" On July 30, 2018, the IRS submitted Revenue Procedure 2018-38 to Congress under the CRA. On September 7, 2018, then-Senator Orrin Hatch submitted a request to GAO seeking its opinion on whether the revenue procedure was covered by the CRA's definition of \"rule.\" The IRS had apparently made the determination, despite having submitted the document under the CRA, that the document was not covered by the CRA. Rather, the IRS argued that it had submitted the rule \"out of an abundance of caution\" and to \"allow Congress to decide whether it is a rule by consulting GAO.\" The circumstances surrounding this GAO opinion were somewhat unique, because the IRS had already submitted the revenue procedure to Congress under the CRA by the time the question was raised as to whether the revenue procedure was covered by the definition of \"rule.\" This appeared to be the first time that GAO had considered the application of the CRA when an agency submitted a rule and later made the argument that the rule was not covered. In its opinion, GAO primarily addressed the issue of whether the submission of the rule was sufficient to trigger the CRA's timelines rather than whether the revenue procedure met the statutory definition of \"rule.\" GAO stated in its opinion that the purpose of the GAO opinions is \"to cure the impediment created by the agency's failure to submit the rule, protecting [Congress's] review and oversight authorities,\" and, therefore, because the IRS had already submitted the rule, a GAO opinion on the CRA's applicability would be unnecessary. Furthermore, GAO confirmed that the IRS revenue procedure was available for congressional review under the CRA because the IRS had already submitted it: \"IRS's submission triggered Congress's review and oversight powers under CRA, starting with the transmittal of the rule to the committees of jurisdiction.\" GAO also stated, \"As Congress is not deprived of exercising its powers under CRA, there is no impediment to those powers that a GAO opinion might cure. We, therefore, take no position on whether the revenue procedure is a rule otherwise.\" On April 6, 2018, the Attorney General issued a memorandum directing federal prosecutors to adopt a zero-tolerance policy for illegal border crossings at the southwestern border of the United States. GAO concluded that the April 2018 memorandum was not a rule under the CRA because it was a rule of agency organization, procedure, or practice, and it did not change individuals' rights or obligations: \"The rights and obligations in question are prescribed by existing immigration laws and remain unchanged by the agency's internal enforcement procedures at issue here.\" Thus, GAO concluded that the memorandum was covered by the exception in 5 U.S.C. §804(3)(C). In March 2018, the Secretary of Commerce issued a memorandum to the Under Secretary of Commerce for Economic Affairs justifying the Secretary's decision to add a citizenship question to the 2020 census. According to GAO, the memorandum \"described a December 12, 2017 request from the Department of Justice (DOJ) that the Census Bureau include a citizenship question on the 2020 census\" and directed the Under Secretary to include such a question. Soon after the Secretary issued the memorandum, pursuant to statutory requirements, the Census Bureau delivered a report to Congress containing its planned questions for the 2020 census, including the citizenship question. GAO concluded that the memorandum was not a rule under the CRA, stating that \"it was direction from a supervisor to a subordinate in conjunction with the statutory process whereby the Secretary informs Congress of the questions that will be on the census.… As such, the memorandum does not meet CRA's definition of a rule because it was not designed to implement, interpret, or prescribe law or policy.\" Because the memorandum did not meet the definition of \"rule\" under section 551 of the APA, GAO did not discuss whether the memorandum would have been covered by any of the exceptions. Appendix A. Submission Form for Rules Under the CRA Appendix B. Summary of GAO Opinions", "summary": "The Congressional Review Act (CRA) allows Congress to review certain types of federal agency actions that fall under the statutory category of \"rules.\" The CRA requires that agencies report their rules to Congress and provides special procedures under which Congress can consider legislation to overturn those rules. A joint resolution of disapproval will become effective once both houses of Congress pass a joint resolution and it is signed by the President, or if Congress overrides the President's veto. The CRA generally adopts a broad definition of the word \"rule\" from the Administrative Procedure Act (APA), defining a rule as \"the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency.\" The CRA, however, provides three exceptions to this broad definition: any rule of particular applicability, including a rule that approves or prescribes for the future rates, wages, prices, services, or allowances therefor, corporate or financial structures, reorganizations, mergers, or acquisitions thereof, or accounting practices or disclosures bearing on any of the foregoing; any rule relating to agency management or personnel; or any rule of agency organization, procedure, or practice that does not substantially affect the rights or obligations of non-agency parties. The class of rules the CRA covers is broader than the category of rules that are subject to the APA's notice-and-comment requirements. As such, some agency actions, such as guidance documents, that are not subject to notice-and-comment rulemaking procedures may still be considered rules under the CRA and thus could be overturned using the CRA's procedures. The effect of Congress disapproving a rule that is not subject to notice-and-comment rulemaking may be subject to debate, given that such rules are generally viewed to lack any legal effect in the first place. Nonetheless, the CRA does encompass some such rules, as highlighted by the recent enactment of a CRA resolution overturning a bulletin from the Consumer Financial Protection Bureau that was not subject to the notice-and-comment procedures. Even if an agency action falls under the CRA's definition of \"rule,\" however, the expedited procedures for considering legislation to overturn the rule only become available when the agency submits the rule to Congress. In many cases in which agencies take actions that fall under the scope of a \"rule\" but have not gone through notice-and-comment rulemaking procedures, agencies fail to submit those rules. Thus, questions have arisen as to how Members can avail themselves of the CRA's special fast-track procedures if the agency has not submitted the action to Congress. To protect its prerogative to review agency rules under the CRA, Congress and the Government Accountability Office (GAO) have developed an ad hoc process in which Members can request that GAO provide a formal legal opinion on whether a particular agency action qualifies as a rule under the CRA. If GAO concludes that the action in question falls within the CRA's definition of \"rule,\" Congress has treated the publication of the GAO opinion in the Congressional Record as constructive submission of the rule. In other words, an affirmative opinion from GAO can allow Congress to use the CRA procedures to consider legislation overturning an agency action despite the agency not submitting that action to Congress.", "document_type": "crs"}
{"report": "The Violence Against Women Act (VAWA) was originally enacted in 1994 ( P.L. 103-322 ). It addressed congressional concerns about violent crime, and violence against women in particular, in several ways. Among other things, it allowed for enhanced sentencing of repeat federal sex offenders; mandated restitution to victims of specified federal sex offenses; and authorized grants to state, local, and tribal law enforcement entities to investigate and prosecute violent crimes against women. This report provides a brief history of VAWA and an overview of the crimes addressed through the act. It includes brief descriptions of earlier VAWA reauthorizations and a more-detailed description of the most recent reauthorization in 2013. It also briefly addresses reauthorization activity in the 116 th Congress. The report concludes with a discussion of VAWA programs and a five-year history of funding from FY2015 through FY2019. The enactment of VAWA was ultimately spurred by decades of growing unease over a rising violent crime rate and a focus on women as crime victims. In the 1960s, the violent crime rate rose fairly steadily—it more than doubled from 1960 (160.9 per 100,000) to 1969 (328.7 per 100,000) —igniting concern from both the public and the federal government. Adding to this was the concern about violent crimes committed against women. In the 1970s, grassroots organizations began to stress the need for attitudinal change among both the public and the law enforcement community regarding violence against women. In the 1970s and 1980s, researchers increased their attention on the issue of violence against women as well. In one study, researchers collected data on family violence and attributed declines in spousal assault to heightened awareness of the issue in men as well as the criminal justice system. The public and the criminal justice system were beginning to view family violence as a crime rather than a private family matter. In 1984, Congress and President Reagan enacted the Family Violence Prevention and Services Act (FVPSA, P.L. 98-457 ) to assist states in preventing incidents of family violence and to provide shelter and related assistance to victims and their dependents. While FVPSA authorized programs similar to those discussed in this report and FVPSA reauthorizations subsequently reauthorized programs that were originally created by VAWA, such as the National Domestic Violence Hotline, it is a separate piece of legislation and beyond the scope of this report. In 1994, Congress passed and President Clinton signed into law, the Violent Crime Control and Law Enforcement Act of 1994 ( P.L. 103-322 ), which included VAWA as Title IV. The act created an unprecedented number of programs geared toward helping local law enforcement fight violent crime and providing services to victims of violent crime, among other things. In their opening remarks on VAWA in 1994, Senators Barbara Boxer and Joseph Biden highlighted the insufficient response to violence against women by police and prosecutors. The shortfalls of legal responses and the need for a change in attitudes toward violence against women were primary reasons cited for the passage of VAWA. VAWA has been reauthorized three times since its original enactment. Most recently, Congress passed and President Obama signed the Violence Against Women Reauthorization Act of 2013 ( P.L. 113-4 ), which reauthorized most of the programs under VAWA, among other things. In addition, this VAWA reauthorization amended and authorized appropriations for the Trafficking Victims Protection Act of 2000, enhanced measures to combat trafficking in persons, and amended VAWA grant purpose areas to include sex trafficking. Moreover, P.L. 113-4 gave American Indian tribes authority to enforce tribal laws pertaining to domestic violence and related crimes against non-tribal members, and established a nondiscrimination provision for VAWA grant programs. The reauthorization also included new provisions to address states' rape kit backlogs. The Violence Against Women Act of 1994, among other things, (1) enhanced investigations and prosecutions of sex offenses; (2) provided for a number of grant programs to address the issue of violence against women from a variety of angles, including law enforcement, public and private entities and service providers, and victims of crime; and (3) established immigration provisions for abused aliens. The sections below highlight examples of these VAWA provisions. As originally enacted, VAWA impacted federal investigations and prosecutions of cases involving violence against women in a number of ways. For instance, it established new offenses and penalties for the violation of a protection order or stalking in which an abuser crossed a state line to injure or harass another, or forced a victim to cross a state line under duress and then physically harmed the victim in the course of a violent crime. It added new provisions to require states, tribes, and territories to enforce protection orders issued by other states, tribes, and territories. VAWA allowed for enhanced sentencing of repeat federal sex offenders, and it also authorized funding for the Attorney General to develop training programs to assist probation and parole officers in working with released sex offenders. In addition, VAWA established a new requirement for pretrial detention of defendants in federal sex offense or child pornography felony cases. It also modified the Federal Rules of Evidence to include new procedures specifying that, with few exceptions, a victim's past sexual behavior was not admissible in federal criminal and civil cases of sexual misconduct. Moreover, VAWA directed the Attorney General to study states' actions to ensure confidentiality between sexual assault or domestic violence victims and their counselors. VAWA mandated restitution to victims of specified federal sex offenses, particularly sexual abuse, sexual exploitation, and other abuse of children. It also established new provisions such as a civil remedy that allows victims of sexual assault to seek civil penalties from their alleged assailants, and a provision that allows rape victims to demand that their alleged assailants be tested for HIV. The original VAWA created a number of grant programs for a range of activities, including programs aimed at (1) preventing domestic violence and sexual assault; (2) encouraging collaboration among law enforcement, judicial personnel, and public/private sector providers with respect to services for victims of domestic violence and related crimes; (3) investigating and prosecuting domestic violence and related crimes; (4) encouraging states, tribes, and local governments to treat domestic violence as a serious crime and implement arrest policies; (5) bolstering investigations and prosecutions of domestic violence and child abuse in rural states; and (6) preventing crime in public transportation as well as public and national parks. VAWA created new and reauthorized grants under FVPSA. These included grants for youth education on domestic violence and intimate partner violence as well as grants for community intervention and prevention programs. It authorized the grant for the National Domestic Violence Hotline and authorized funding for its operation. VAWA also reauthorized funding for battered women's shelters. VAWA authorized research and education grants for judges and court personnel in federal court circuits to gain a better understanding of the nature and the extent of gender bias in the federal courts. It additionally authorized grants for developing model programs for training of state and tribal judges and personnel on laws on rape, sexual assault, domestic violence, and other crimes of violence motivated by the victim's gender. It also authorized a new grant to be used for assisting state and local governments with entering data on stalking and domestic violence into local, state, and national databases—such as the National Crime Information Center (NCIC) database. VAWA authorized the expansion of grants under the Public Health Service Act to include rape prevention education. Additionally, it expanded the purposes of the Runaway and Homeless Youth Act to allow for grant funding to assist youth at risk of or who have been subjected to sexual abuse. VAWA reauthorized the Court-Appointed Special Advocate Program and the Child Abuse Training Programs for Judicial Personnel and Practitioners. It also authorized funding for Grants for Televised Testimony by Victims of Child Abuse. VAWA of 1994 addressed immigration-related problems faced by battered aliens. It included three provisions related to abused aliens: self-petitioning by abused foreign national spouses and their children, required evidence for demonstrating abuse, and suspension of deportation and cancellation of removal. These petitions allowed battered foreign national spouses and their children to essentially substitute a self-petition for lawful status in place of a petition for lawful status that was based on sponsorship by the abusive spouse, clarified the evidence required for joint petition waivers, and established requirements for battered foreign national spouses and children to stay deportation. Beyond the criminal justice improvements, grant programs, and immigration provisions, VAWA included provisions for several other activities, including requiring that the U.S. Postal Service take measures to ensure confidentiality of domestic violence shelters' and abused persons' addresses; mandating federal research by the Attorney General, National Academy of Sciences, and Secretary of Health and Human Services to increase the government's understanding of violence against women; and requesting special studies on campus sexual assault and battered women's syndrome. In 1995, the Office on Violence Against Women (OVW) was administratively created within the Department of Justice (DOJ) to administer grants authorized under VAWA. In 2002, OVW was codified through Title IV of the 21 st Century Department of Justice Appropriations Authorization Act ( P.L. 107-273 ). Since its creation through FY2018, OVW has awarded more than $8 billion in grants and cooperative agreements to state, tribal, and local governments, nonprofit organizations, and universities. While OVW administers the majority of VAWA-authorized grants, other federal agencies, including the Centers for Disease Control and Prevention (CDC) and the Office of Justice Programs (OJP), also manage VAWA programs. VAWA programs generally address domestic violence, sexual assault, dating violence, and stalking, although some VAWA programs address additional crimes. VAWA grant programs largely address the criminal justice system and community response to these crimes, but certain programs address prevention as well. These crimes involve a wide range of victim demographics, but the risk of victimization is highest for women. Public concern over violence against women prompted the original passage and enactment of VAWA. As such, VAWA legislation and programs have historically emphasized women victims. More recently, however, there has been a focus on ensuring that the needs of all victims are met through provisions of VAWA programs. Of note, while the title of the act and some headings and general purpose areas refer to women only, most VAWA grant purpose areas are not specific to women. National victimization data on domestic violence, sexual assault, dating violence, and stalking are available from two surveys, the National Crime Victimization Survey (NCVS) and the Youth Risk Behavior Surveillance System. Offense data are available from the Federal Bureau of Investigation's (FBI's) Uniform Crime Reporting (UCR) Program. UCR data differ from victimization data because the UCR data describe crimes that were reported to law enforcement, while victimization data include crimes that might not have been reported to law enforcement. Due to differences in what they are trying to measure, victimization data are not directly comparable to UCR data. Domestic violence can take many forms, but is often labeled as family violence or intimate partner violence. Under VAWA, domestic violence is generally interpreted as intimate partner violence; it includes felony or misdemeanor crimes committed by spouses or ex-spouses, boyfriends or girlfriends, and ex-boyfriends or ex-girlfriends. Crimes may include sexual assault, simple or aggravated assault, and homicide. As defined in statute for the purposes of VAWA grant programs, domestic violence includes felony or misdemeanor crimes of violence committed by a current or former spouse or intimate partner of the victim, by a person with whom the victim shares a child in common, by a person who is cohabitating with or has cohabitated with the victim as a spouse or intimate partner, by a person similarly situated to a spouse of the victim under the domestic or family violence laws of the jurisdiction receiving grant monies, or by any other person against an adult or youth victim who is protected from that person's acts under the domestic or family violence laws of the jurisdiction. From 1993 to 2017, the rate of serious intimate partner violence victimization declined by 70% for females, from 5.7 victimizations per 1,000 females aged 12 and older in 1993 to 1.7 per 1,000 in 2017; and 87% for males, from 1.5 victimizations per 1,000 males aged 12 and older in 1993 to 0.2 per 1,000 in 2017. In 2015, a survey conducted by the CDC included questions about lifetime victimization. The CDC estimates that 21.4% of women and 14.9% of men have experienced severe physical violence by an intimate partner in their lifetime. Since peaking in the early 1990s, the violent crime rate (including homicide and intimate partner homicide) has declined. Although it has fluctuated over the last several years, the violent crime rate remains far lower now than it was in the 1990s. In examining the initial decline in the 1990s and early 2000s, researchers studied a range of social factors that may influence homicide rates and suggested possible reasons for the decline in the intimate partner homicide rate. For instance, most intimate partner homicides involve married couples; as such, some researchers suggested the decline in marriage rates among young adults is a contributing factor in the decline in intimate partner homicide rates. Additionally, divorce and separation rates increased. Fewer marriages may result in less exposure to abusive partners, and may suggest that those who do marry are more selective in choosing a partner. Overall, homicide is committed largely by males, mostly victimizing other males. In 2017, males made up 84% of all offenders and 78% of all homicide victims; however, 78% of all intimate partner homicide victims were female. From 2003-2014, the CDC found that approximately 55% of female homicides for which circumstances were known were related to intimate partner violence. Sexual assault may include the crimes of forcible rape, attempted forcible rape, assault with intent to rape, statutory rape, and other sexual offenses. For VAWA programs, sexual assault is defined as \"any nonconsensual sexual act proscribed by Federal, tribal, or State law, including when the victim lacks capacity to consent.\" Sexual assault is termed as \"sexual abuse\" and \"aggravated sexual abuse\" under federal criminal law. Of note, intimate partner violence can, and often does, include sexual assault. Until 2012, and for the purposes of its UCR program, the FBI defined forcible rape as \"the carnal knowledge of a female forcibly and against her will.\" In January 2012, the FBI revised its definition of rape , and 2013-2017 rape data rely on the following definition: \"penetration, no matter how slight, of the vagina or anus with any body part or object, or oral penetration by a sex organ of another person, without the consent of the victim.\" The new, more inclusive definition includes either male or female victims or offenders, includes instances in which the victim is incapable of giving consent because of temporary or permanent mental or physical incapacity, and reflects the various forms of sexual penetration understood to be rape. Both the legacy definition and the current definition exclude statutory rape—nonforcible sexual intercourse with or between individuals, at least one of whom is younger than the age of consent. According to UCR data, and applying the revised definition of rape, 135,755 forcible rapes were reported to law enforcement in 2017—a rate of 41.7 per 100,000 people. From 2013-2017, the number of rapes (revised definition) increased by 19.4%, and the rate increased each year, from 35.9 per 100,000 in 2013 to 41.7 per 100,000 in 2017. Using the legacy definition, 99,856 forcible rapes were reported to law enforcement in 2017. Since 1990, when 102,555 forcible rapes (previous definition) were reported, the number has fluctuated but has generally declined, though it also has increased each year since 2013 (see Figure 1 ). According to statistics from the National Crime Victimization Survey (NCVS), it is estimated that there were 393,980 sexual assaults (1.4 per 1,000 aged 12 and older) in 2017—which is nearly triple the number of forcible rapes reported in the 2017 UCR. As noted, NCVS estimates are not directly comparable to UCR program data because victimizations are self-reported during interviews and may not have been reported to law enforcement. The UCR and NCVS also measure rape and sexual assault differently—among other variations, the NCVS combines rape and sexual assault into one category. As shown in Figure 2 , and similar to UCR data, NCVS data reflect a decline in sexual assaults since 1993; however, the victimization survey went through a redesign in 2006 and 2016, so data over time should be interpreted with caution. Figure 2 demonstrates that a fairly low percentage of rape/sexual assaults are reported to police each year. In 2017, it is estimated that 40% of rape or sexual assault incidents were reported to the police—nearly double the percentage that were reported in 2016. Under VAWA, dating violence refers to \"violence committed by a person who is or has been in a social relationship of a romantic or intimate nature with the victim.\" The relationship between the offender and victim is determined based on the following factors: (1) the length of the relationship, (2) the type of relationship, and (3) the frequency of interaction between the persons involved in the relationship. While teenagers are not the only demographic subject to dating violence, data reports on dating violence usually refer to teenagers as the relevant age demographic. According to the CDC's 2017 Youth Risk Behavior Survey , approximately 8.0% of high school students who dated or went out with someone during the 12 months before the survey reported being \"hit, slammed into something, or injured with an object or weapon on purpose by someone they were dating or going out with\" one or more times in the past year. The prevalence of physical dating violence victimization was higher among female students (9.1%) than male students (6.5%). The overall percentage of high school students experiencing physical dating violence has declined since the CDC first included the question in its 2013 survey. In 2013, approximately 10.3% of high school students reported being a victim of physical dating violence; in 2015, it was 9.6%; and in 2017, it was 8.0%. All 50 states, the District of Columbia, and U.S. territories have stalking laws, though they vary in definition. Federal law makes it unlawful to travel across state lines or use the mail or computer and electronic communication services with the intent to kill, injure, harass, or intimidate another person, and as a result, place that person in reasonable fear of death or serious bodily injury or cause substantial emotional distress to that person, a spouse or intimate partner of that person, or a member of that person's family. The NCVS Supplemental Victimization Survey (SVS) defines stalking as \"a course of conduct directed at a specific person that would cause a reasonable person to feel fear.\" The SVS measures these unwanted stalking behaviors: making unwanted phone calls; sending unsolicited or unwanted letters or emails; following or spying on; showing up at places without a legitimate reason; waiting at places for the victim; leaving unwanted items, presents, or flowers; or posting information or spreading rumors about the victim on the internet, in a public place, or by word of mouth. According to the NCVS SVS, an estimated 3.3 million individuals aged 18 and older were victims of stalking in 2006. More females than males were stalked. Also, the percentage of individuals targeted decreased with age; those aged 18-24 experienced the highest incidence of stalking. The CDC measures stalking differently than the NCVS. For the purposes of CDC reports, a person is considered a stalking victim \"if they experienced multiple stalking tactics or a single stalking tactic multiple times by the same perpetrator and felt very fearful, or believed that they or someone close to them would be harmed or killed as a result of the perpetrator's behavior.\" The CDC measured the following stalking tactics: unwanted phone calls, voice or text messages, hang-ups; unwanted emails, instant messages, messages through social media; unwanted cards, letters, flowers, or presents; watching or following from a distance, spying with a listening device, camera, or global positioning system (GPS); approaching or showing up in places, such as the victim's home, workplace, or school, when it was unwanted; leaving strange or potentially threatening items for the victim to find; sneaking into victim's home or car and doing things to scare the victim or let the victim know the perpetrator had been there. The CDC asked about two additional tactics after respondents were identified as possible stalking victims: damaged personal property or belongings, such as in their home or car; and made threats of physical harm. According to 2015 data from the CDC, 16.0% of women (19.1 million) and 5.8% of men (6.4 million) have been stalked by an intimate partner in their lifetimes. In the 12 months preceding the survey, approximately 4.5 million women and 2.1 million men were victims of stalking. See Figure 3 . The fundamental goals of VAWA are to prevent violent crime; respond to the needs of crime victims; learn more about crime; and change public attitudes through a collaborative effort by the criminal justice system, social service agencies, research organizations, schools, public health organizations, and private organizations. The federal government tries to achieve these goals primarily through federal grant programs that provide funding to state, tribal, territorial, and local governments; nonprofit organizations; and universities. As previously mentioned, OVW administers the majority of VAWA-authorized programs, while other federal agencies, including OJP and the CDC, also manage VAWA programs. Since its creation in 1995 through FY2018, OVW has awarded more than $8 billion in grants and cooperative agreements to state, tribal, and local governments; nonprofit organizations; and universities. In FY2018 and FY2019, $553 million and $559 million, respectively, were appropriated for VAWA programs administered by OVW, OJP, and the CDC, as shown in Table 1 . For program descriptions, authorization levels, and a five-year history of appropriations, see the Appendix . While authorizations of appropriations for VAWA programs have expired, the Administration has requested FY2020 funding for VAWA-authorized programs. The Administration's budget request proposes to fund OVW at $492.5 million for FY2020 (a 1% decrease from FY2019), all of which would be derived from a transfer from the Crime Victims Fund. The Administration requests $9.0 million for OJP (a 25% decrease from FY2019) for the Court Appointed Special Advocates (CASA). Also for FY2020, the Administration requests level funding ($49.4 million) for the Rape Prevention and Education Program at the CDC. Since it was enacted in 1994, VAWA has been reauthorized three times. Of note, the reauthorizations in 2000 and 2005 had broad bipartisan support, while the most recent reauthorization in 2013 had bipartisan support but faced greater opposition. This section will provide comparatively more detail for the 2013 reauthorization because it was the most recent and some issues may remain relevant to current reauthorization discussions. In 2000, Congress reauthorized VAWA through the Victims of Trafficking and Violence Protection Act ( P.L. 106-386 ; VAWA 2000). Modifications included additional protections for battered nonimmigrants, a new program for victims of domestic violence, dating violence, sexual assault, and stalking in need of transitional housing, a requirement for grant recipients to submit reports on the effectiveness of programs, new programs designed to protect elderly and disabled women, mandatory funds to be used exclusively for rape prevention and education programs, and inclusion of victims of dating violence. VAWA 2000 amended interstate stalking and domestic violence law to include (1) a person who travels in interstate or foreign commerce with the intent to kill, injure, harass, or intimidate a spouse or intimate partner, and who in the course of such travel commits or attempts to commit a crime of violence against the spouse or intimate partner; (2) a person who causes a spouse or intimate partner to travel in interstate or foreign commerce by force or coercion and in the course of such travel commits or attempts to commit a crime of violence against the spouse or intimate partner; (3) a person who travels in interstate or foreign commerce with the intent of violating a protection order or causes a person to travel in interstate or foreign commerce by force or coercion and violates a protection order; and (4) a person who uses the mail or any facility of interstate or foreign commerce to engage in a course of conduct that would place a person in reasonable fear of harm to themselves or their immediate family or intimate partner. In 2005, Congress reauthorized VAWA through the Violence Against Women and Department of Justice Reauthorization Act ( P.L. 109-162 ; VAWA 2005). VAWA 2005 added protections for battered and/or trafficked nonimmigrants, programs for American Indian victims, and programs designed to improve the public health response to domestic violence. The act emphasized collaboration among law enforcement; health and housing professionals; and women, men, and youth alliances, and it encourages community initiatives to address these issues. This reauthorization enhanced penalties for repeat stalking offenders and expanded the federal criminal definition of stalking to include cyberstalking. It also amended the federal criminal code to revise the definition of the crime of interstate stalking to (1) include placing someone under surveillance with the intent to kill, injure, harass, or intimidate that person; and (2) require consideration of substantial emotional harm to the stalking victim. Authorization for appropriations for the programs under VAWA expired in 2011; however, programs continued to receive appropriations in FY2012 and FY2013. In 2013, the 113 th Congress reauthorized VAWA through the Violence Against Women Reauthorization Act of 2013 ( P.L. 113-4 ; VAWA 2013). Most VAWA grants were reauthorized from FY2014 through FY2018. This section briefly describes provisions of VAWA 2013. VAWA 2013 reauthorized most VAWA grant programs and authorized appropriations at a lower level, in general. It consolidated several VAWA grant programs, and in doing so authorized new grant programs. These actions are summarized below. The Grants to Support Families in the Justice System program was created by consolidating two previously authorized programs: (1) the Safe Havens for Children program (also referred to as Supervised Visitation), and (2) the Court Training and Improvements program. The purpose of this program is to improve the civil and criminal justice systems' responses to families with a history of domestic violence, dating violence, sexual assault, or stalking, or in cases involving allegations of child sexual abuse. The Creating Hope Through Outreach, Options, Services, and Education for Children and Youth (CHOOSE Children & Youth) was created by consolidating two previously authorized programs: (1) Services to Advocate for and Respond to Youth (also referred to as Youth Services) and (2) Grants to Combat Domestic Violence, Dating Violence, Sexual Assault, and Stalking in Middle and High Schools (also referred to as Supporting Teens through Education and Protection, or STEP). The purpose of this program is to enhance the safety of youth and children who are victims of or exposed to domestic violence, dating violence, sexual assault, stalking, or sex trafficking. The program also aims to prevent future violence. The Saving Money and Reducing Tragedies Through Prevention (SMART Prevention) was created by consolidating two previously authorized programs: (1) Engaging Men and Youth in Prevention and Grants to Assist Children and (2) Youth Exposed to Violence. The SMART Prevention program aims to prevent domestic violence, sexual assault, dating violence, and stalking through awareness and education programs, and also through assisting children who have been exposed to violence and abuse. In addition, this program aims to prevent violence by engaging men as leaders and role models. The Grants to Strengthen the Healthcare System's Response to Domestic Violence, Dating Violence, Sexual Assault, and Stalking was created using the purpose areas of three previously unfunded programs—(1) Interdisciplinary Training and Education on Domestic Violence and Other Types of Violence and Abuse, (2) Research on Effective Interventions in the Health Care Setting, and (3) Grants to Foster Public Health Responses to Domestic Violence, Dating Violence, Sexual Assault, and Stalking—these programs were eliminated. The purpose of this program is to improve training and education for health professionals in preventing and responding to domestic violence, dating violence, sexual assault, and stalking. VAWA 2013 established new provisions for all VAWA grant programs. It established a nondiscrimination provision to ensure that victims are not denied services and are not subjected to discrimination based on actual or perceived race, color, religion, national origin, sex, gender identity, sexual orientation, or disability. It also enhanced protection of personally identifiable information of victims and specified the type of information that may be shared by grantees and subgrantees. It also required that any grantee or subgrantee that provides legal assistance must comply with certifications required under the Legal Assistance for Victims Grant Program. The 2013 reauthorization also added, modified, or expanded several definitions of terms in VAWA. Examples include the following: The definition of domestic violence was revised to specifically include \"intimate partners\" in addition to \"current and former spouses.\" The term linguistically was removed from the Culturally Specific Services Grant and the definition of \"culturally specific services\" was amended to address the needs of culturally specific communities. With respect to providing VAWA-related services, the act added the terms population specific services and population specific organizations , which focus on \"members of a specific underserved population.\" Underserved populations was redefined to include those who may be discriminated against based on religion , sexual orientation, or gender identity. The definition of cyberstalking was expanded to include use of any \"electronic communication device or electronic communication service or electronic communication system of interstate commerce.\" A definition of rape crisis center was added, meaning \"a nonprofit, nongovernmental, or tribal organization, or governmental entity in a State other than a Territory that provides intervention and related assistance ... to victims of sexual assault without regard to their age. In the case of a governmental entity, the entity may not be part of the criminal justice system ... and must be able to offer a comparable level of confidentiality as a nonprofit entity that provides similar victim services.\" Individual in later life was defined as a person who is 50 years of age or older. Youth was defined as a person who is 11 to 24 years of age. The definition of rural state was revised to include states with more densely populated rural areas than under the prior definition. VAWA 2013 imposed new accountability provisions, including an audit requirement and mandatory exclusion from eligibility if a grantee is found to have an unresolved audit finding. Additionally, it required OVW to establish a biennial conferral process with state and tribal coalitions and technical assistance providers that receive OVW funding. It prohibited conferences funded through cooperative agreements from using more than $20,000 in funding without prior written approval by DOJ officials. VAWA 2013 amended the DNA Analysis Backlog Elimination Act of 2000 ( P.L. 106-546 ) to strengthen audit requirements for sexual assault evidence backlogs. It also required that for each fiscal year through FY2018, not less than 75% of the total Debbie Smith grant amounts be awarded to carry out DNA analyses of samples from crime scenes for inclusion in the Combined DNA Index System (CODIS) and to increase the capacity of state or local government laboratories to carry out DNA analyses. Additionally, VAWA 2013 expanded the purpose areas of several VAWA grants to respond to the needs of sexual assault survivors by addressing rape kit backlogs. It also established a new requirement that at least 20% of funds within the STOP (Services, Training, Officers, Prosecutors) program and 25% of funds within the Grants to Encourage Arrest Policies and Enforce Protection Orders program be directed to programs that meaningfully address sexual assault. VAWA 2013 amended and authorized appropriations for the Trafficking Victims Protection Act of 2000 (Division A of P.L. 106-386 ). It enhanced measures to combat trafficking in persons, and amended the purpose areas for several grants to address sex trafficking. VAWA 2013 also clarified that victim services and legal assistance include services and assistance to victims of domestic violence, dating violence, sexual assault, or stalking who are also victims of severe forms of trafficking in persons. VAWA 2013 included new provisions for American Indian tribes. It granted authority to tribes to exercise special domestic violence criminal jurisdiction and civil jurisdiction to issue and enforce protection orders over any person. It also created a voluntary two-year pilot program for tribes that make a request to the Attorney General to be designated as a participating tribe to have special criminal jurisdiction over domestic violence cases. (Note: The Attorney General may grant a request after concluding that the tribe's criminal justice system has adequate safeguards in place to protect defendants' rights.) In addition, it created a new grant program to assist tribes in exercising special criminal jurisdiction in cases involving domestic violence. VAWA 2013 also expanded the purpose areas of grants for tribal governments and coalitions to include sex trafficking; develop and promote legislation and policies that enhance best practices for responding to violent crimes against Indian women; and raise awareness of and response to domestic violence, including identifying and providing technical assistance to enhance access to services for Indian women victims of domestic and sexual violence, including sex trafficking. VAWA 2013 extended VAWA coverage to derivative children whose self-petitioning parent died during the petition process, a benefit currently afforded to foreign nationals under the family-based provisions of the Immigration and Naturalization Act (INA). It also exempted VAWA self-petitioners, U visa petitioners, and battered foreign nationals from being classified as inadmissible for legal permanent resident status if their financial circumstances raised concerns about them becoming potential public charges. Additionally, it amended the INA to expand the definition of the nonimmigrant U visa to include victims of stalking. VAWA 2013 added several new purpose areas to the Grants to Encourage Arrest Policies and Enforcement of Protection Orders program (Arrest Program), one of which was to improve the criminal justice system response to immigrant victims of domestic violence, sexual assault, dating violence, and stalking. In addition to expanding the definition of underserved populations , VAWA 2013 established several new grant provisions to address the needs of underserved populations. It required STOP implementation plans to include demographic data on the distribution of underserved populations within states and how states will meet their needs. It expanded the purpose areas of the Grants to Combat Violent Crimes on Campuses program to address the needs of underserved populations on college campuses. It also dedicated 2% of annual appropriated funding for the Arrest and STOP programs to Grants for Outreach to Underserved Populations, a previously unfunded VAWA program. VAWA 2013 added housing rights for victims of domestic violence, dating violence, sexual assault, and stalking, including a provision stating that applicants may not be denied public housing assistance based on their status as victims of domestic violence, dating violence, sexual assault, or stalking. It also required each executive department carrying out a covered housing program to adopt a plan whereby tenants who are victims of domestic violence, dating violence, sexual assault, or stalking can be transferred to another available and safe unit of assisted housing. Additionally, it required the Secretary of Housing and Urban Development to establish policies and procedures under which a victim requesting such a transfer may receive Section 8 assistance under the U.S. Housing Act of 1937. Under the VAWA-authorized Transitional Housing Assistance Grant program, the act ensured that victims receiving transitional housing assistance are not subject to prohibited activities, including background checks or clinical evaluations, to determine eligibility for services. It removed the requirement that victims must be \"fleeing\" from a violent situation in order to receive transitional housing assistance. It also specified that transitional housing services may include employment assistance. VAWA 2013 made several changes to higher education policy. It amended the Clery Act and incorporated provisions from the Campus Sexual Violence Elimination Act. These provisions required, among other things, IHEs to report data on domestic violence, dating violence, and stalking in annual security reports (ASRs). Newly reportable crime categories included domestic violence, dating violence, and stalking. VAWA 2013 also added two new categories of bias applicable to hate crime reporting (i.e., national origin and gender identity). VAWA 2013 required ASRs to include a statement of the IHE's policy on programs to prevent sexual assaults, domestic violence, dating violence, and stalking; policies to address these incidents if they occur, including a statement on the standard of evidence that will be used during an institutional conduct proceeding regarding these crimes; and primary prevention programs to promote awareness of these crimes for incoming students and new employees, as well as providing ongoing awareness and prevention training for students and faculty. It also required that crime statistics on victims who were \"intentionally selected\" because of their national origin or gender identity are recorded and reported according to category of prejudice. In addition, VAWA 2013 required that students and employees receive written notification of available victim services including counseling, advocacy, and legal assistance, as well as options for modifying a victim's academic, living, transportation, or work arrangements. Victims were to be notified of their rights, including their right to notify or not notify law enforcement and campus authorities of a crime of sexual violence. The law also required that officials who investigate a complaint or conduct an administrative proceeding regarding sexual assault, domestic violence, dating violence, or stalking receive annual training on how to conduct investigations or proceedings that protect the safety of victims and promote accountability. VAWA 2013 amended rules for sexual acts in federal custodial facilities by adding \"the commission of a sexual act\" as grounds for civil action by a federal prisoner and mandating that detention facilities operated by the Department of Homeland Security and custodial facilities operated by the Department of Health and Human Services adopt national standards established pursuant to the requirements in the Prison Rape Elimination Act of 2003 ( P.L. 108-79 ). VAWA 2013 also enhanced criminal penalties for assaulting a spouse, intimate partner, or dating partner. In May 2015, as part of the Justice for Victims of Trafficking Act (Title IV, P.L. 114-22 ), the Rape Survivor Child Custody Act was enacted into law. It requires the Attorney General (through OVW) to increase grant funding under the STOP and SASP formula grant programs to states that have a law allowing the mother of a child conceived through rape to seek court-ordered termination of the parental rights of her rapist. The increase in formula grants is allowed to be provided for a total of four two-year periods (eight years), and is equal to not more than 10% of the total amount of funding provided to the state averaged over the previous three years. Of the increased funding, 25% is for STOP grants and 75% for the SASP grants. The Rape Survivor Child Custody Act authorized $5 million a year for FY2015 through FY2019 for the grant increases. There are several issues that Congress may consider in current reauthorization efforts. These include, but are not limited to, improvements to data collection, assessing tribal jurisdiction over non-tribal members who commit VAWA-related crimes on tribal lands, new approaches for law enforcement in assisting victims, and enforcement of the federal prohibition on firearms for those convicted of a misdemeanor crime of domestic violence and those who are subject to a domestic violence protective order. Congress may also consider further changes to VAWA programs. The Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ), as passed by the House, would address some of these issues. Among other things, it would reauthorize funding for VAWA programs and authorize new programs; amend and add definitions used for VAWA programs; amend federal criminal law relating to firearms, custodial rape, and stalking; and expand tribal jurisdiction over certain crimes committed on tribal lands. Congress may address issues concerning limited law enforcement data at the national level on the crimes of domestic violence and stalking. The data are limited because the UCR does not currently collect information on these offenses from state and local agencies like it does for its traditional violent and property crime offense categories. In 2019, the UCR program plans to begin collecting domestic violence offense data through the National Incident-Based Reporting System (NIBRS). NIBRS also includes stalking as part of an intimidation offense category. Even though the NIBRS data are not yet nationally representative, the FBI states that it is transitioning its UCR program to a \"NIBRS only data collection\" by 2021. Congress may consider options to expand the NIBRS program sooner than 2021 or to adjust the UCR program in other ways, such as by requiring the FBI to collect data on stalking as its own offense under NIBRS rather than incorporating it into the intimidation offense category. Congress may also address the availability of data on the sexual assault kit (SAK, or rape kit) backlog. According to the National Institute of Justice (NIJ), \"it is unknown how many unanalyzed [SAKs] there are nationwide.\" NIJ notes that while there are many reasons why there are no data on the number of untested SAKs in law enforcement's possession, one contributing factor is that there is no national system for collecting these data. Also, tracking and counting SAKs is an antiquated process in many jurisdictions (often done in nonelectronic formats), and the availability of computerized evidence-tracking systems has been an issue for many jurisdictions for years. The Joyful Heart Foundation, a grassroots organization, addressed the SAK data void by attempting to count the backlog (through public records requests) and track data in cities and states across the country. While the organization's data are incomplete, it has estimates of rape kit backlogs for various cities and states. Thus far, it has identified approximately 41 municipal and county jurisdictions with known rape kit backlogs ranging from several hundred to thousands—its current total is 40,000 untested SAKs. Congress may assess the SAK backlog and debate if the federal response should be changed as the issue evolves and agencies, including NIJ, capture the full breadth of the problem. H.R. 1585 , as passed by the House, would authorize several new activities related to increasing or improving data collection. These include, but are not limited to, the following: requiring the Attorney General to establish an interagency working group to study federal efforts to collect data on sexual violence and to make recommendations on the harmonization of such efforts, authorizing funding for tribal governments to improve data collection and to enter information into and obtain information from national crime information databases, and requiring NIJ to prepare a report on the status of women in federal incarceration—this requirement allows for inmate and personnel data to be collected from the Bureau of Prisons. As discussed previously, VAWA 2013 granted authority to American Indian tribes to exercise special domestic violence criminal jurisdiction and civil jurisdiction to issue and enforce protection orders over any person, including non-tribal members. As of March 2018, 18 tribes were exercising this authority. These tribes have reported 143 arrests of 128 non-tribal individuals, which led to 74 convictions and five acquittals with 24 cases pending as of March 2018. According to the National Congress of American Indians (NCAI), tribes are exercising jurisdiction \"with careful attention to the requirements of federal law and in a manner that upholds the rights of defendants.\" While NCAI issued its assessment report in 2018, Congress also may elect to assess implementation in the five years since this authority was granted. If it so chooses, Congress may require the Government Accountability Office (GAO) to evaluate tribal jurisdiction. Congress may elect to grant special jurisdiction over non-tribal members for additional VAWA crimes such as sexual assault and stalking, as well as non-VAWA crimes. NCAI stated in its assessment report that many implementing tribes were unable to prosecute non-tribal members for many crimes that co-occur with domestic violence such as drug and alcohol offenses. H.R. 1585 , as passed by the House, would amend tribal criminal jurisdiction authorized under Section 204 of the Indian Civil Rights Act. Among other changes, tribal jurisdiction over criminal behavior on tribal lands would consist of domestic violence ( H.R. 1585 would also expand the definition of domestic violence used for tribal jurisdiction), as well as obstruction of justice, assaulting a law enforcement officer, sex trafficking, sexual violence, and stalking. As there are further developments in the fields of criminal justice and public health, researchers and practitioners report new and developing approaches and methods for law enforcement and other criminal justice personnel in working with victims of domestic violence, sexual assault, dating violence, and stalking. Congress may consider these new approaches when debating additions to grant purpose areas or encouraging states to adopt certain practices. For example, over the last decade there has been a push for criminal justice professionals to incorporate trauma-informed policing and response policies. Congress may consider requiring law enforcement grantees to incorporate trauma-informed training and policies into their required training or standard operating procedures or creating new funding opportunities to develop these trainings and policies. Of note, OVW has supported several initiatives related to trauma-informed approaches. Other new and developing approaches include, but are not limited to, new protocols for police officers about when they would activate their body-worn cameras as they interact with victims of domestic violence, sexual assault, dating violence, or stalking and so-called \"red flag\" laws that allow law enforcement or family members to petition a court to have firearms removed from those who are a danger to themselves or others. H.R. 1585 , as passed by the House, would authorize a new demonstration program under OVW to promote trauma-informed training for law enforcement. Through this program, OVW would make grants on a competitive basis to eligible entities to implement evidence-based or promising policies and practices to incorporate trauma-informed techniques designed to prevent re-traumatization of crime victims and improve communication between victims and law enforcement officers, among other purpose areas, in an effort to increase the likelihood of successful investigations and prosecutions of reported crime in a manner that protects the victim to the greatest extent possible. The Gun Control Act (GCA) prohibits certain individuals from possessing firearms, including individuals who have been convicted of a misdemeanor crime of domestic violence and those who are subject to a protective order involving an intimate partner or child of an intimate partner. Congress may consider any number of issues surrounding prohibitions on firearms possession and matters of domestic violence, but the issue of enforcement of domestic violence and protection order prohibitions has been subject to some debate. While there is a federal process for preventing those convicted of a misdemeanor crime of domestic violence or those subject to a protective order from purchasing a firearm, there is not a federal process for these individuals to surrender their firearms. The process is left up to states and local jurisdictions, which vary in their approaches to enforcing these prohibitions. In some jurisdictions, the process for informing defendants/respondents they must surrender their firearms can vary by judge. Of note, VAWA 2005 established a provision that required states or units of local government to certify that its judicial policies and practices included notification to domestic violence offenders of the firearms prohibitions in Section 922(g)(8) and (g)(9) of Title 18 in order to be eligible to receive STOP funding. Congress may choose to take further steps to ensure the enforcement of these prohibitions, such as adding to the certification requirement, or it might leave the decisions to the states, some of which have enacted laws requiring the removal of firearms from those subject to the prohibitions. H.R. 1585 , as passed by the House, includes several provisions that seek to reduce firearms-related intimate partner violence. It would amend federal law to prohibit persons convicted of misdemeanor stalking crimes from receiving or possessing a firearm or ammunition, and revise related provisions governing domestic violence protection orders and the definition of \"intimate partner\" under current law. H.R. 1585 also includes other provisions related to improving enforcement of federal firearm possession prohibitions under 18 U.S.C. §922, subsections (g)(8), (g)(9), and (g)(10). In the next effort to reauthorize VAWA, Congress may debate additional changes to VAWA programs such as adding new grant purpose areas or additional crimes, creating new programs, or consolidating existing programs. Examples of potential changes Congress may consider should it choose to reauthorize VAWA appropriations include the following: Female genital mutilation or female genital cutting (FGM/C) may be added to grant programs in a variety of ways. For example, it can be added as a crime for services eligibility, or Congress may try to encourage or require states (in order to receive grant funding) to make FGM/C a crime. Many VAWA grant programs fund the same services and the same organizations. For example, nine separate VAWA programs may be used to fund emergency shelter or transitional housing. Congress may consider streamlining funding into fewer, larger grant programs. Currently, OVW administers 4 formula grant programs and 15 discretionary grant programs. Congress may opt to support domestic violence courts. While some grantees already use funds for this purpose and OVW has provided technical assistance to fund model domestic violence courts, Congress may elect to create a program to support these specialized courts. While there is a large amount of grantee data available on the VAWA programs administered by OVW, grantee data from the Rape Prevention and Education (RPE) formula grant program administered by the CDC are limited. Congress may choose to require the CDC to submit reports on the activities supported with RPE funds. H.R. 1585 , as passed by the House, would define FGM/C for VAWA grant purposes, and amend the purpose areas of three VAWA grant programs (STOP, Outreach and Services to Underserved Populations, and CHOOSE Children and Youth) to include providing culturally specific victim services regarding responses to, and prevention of, FGM/C. The bill would also require the Director of the FBI to classify FGM/C, or female circumcision, as a part II crime in the UCR (see \" Categories of Crime Addressed through VAWA \" for discussion of UCR crime data). H.R. 1585 would also amend the Rape Prevention and Education Grant Program to require the CDC Director to submit to Congress a report on the activities funded by grants and best practices relating to rape prevention and education. H.R. 1585 , if enacted, would make many other changes that are not discussed in detail in this report. These include changes to definitions used for VAWA grant purposes, new housing protections for victims, and the creation of new grant programs that address issues such as lethality assessment in domestic violence cases and economic security for victims. Of note, H.R. 1585 would reauthorize funding for most VAWA programs for FY2020-FY2024. The Violence Against Women Reauthorization Act of 2013 ( P.L. 113-4 ) authorized appropriations for most VAWA programs for FY2014 through FY2018. Table A-1 provides descriptions of currently funded VAWA programs, Table A-2 provides a list of unfunded VAWA-authorized programs, and Table A-3 provides a five-year funding history of VAWA programs by total funding amounts for each administrative office. For more-detailed program funding, see Table 1 .", "summary": "The Violence Against Women Act (VAWA; Title IV of P.L. 103-322) was originally enacted in 1994. It addressed congressional concerns about violent crime, and violence against women in particular, in several ways. It allowed for enhanced sentencing of repeat federal sex offenders; mandated restitution to victims of specified federal sex offenses; and authorized grants to state, local, and tribal law enforcement entities to investigate and prosecute violent crimes against women, among other things. VAWA has been reauthorized three times since its original enactment. Most recently, Congress passed and President Obama signed the Violence Against Women Reauthorization Act of 2013 (P.L. 113-4), which reauthorized most VAWA programs through FY2018, among other things. The fundamental goals of VAWA are to prevent violent crime; respond to the needs of crime victims; learn more about crime; and change public attitudes through a collaborative effort by the criminal justice system, social service agencies, research organizations, schools, public health organizations, and private organizations. The federal government tries to achieve these goals primarily through federal grant programs that provide funding to state, tribal, territorial, and local governments; nonprofit organizations; and universities. VAWA programs generally address domestic violence, sexual assault, dating violence, and stalking—crimes for which the risk of victimization is highest for women—although some VAWA programs address additional crimes. VAWA grant programs largely address the criminal justice system and community response to these crimes, but certain programs address prevention as well. The Office on Violence Against Women (OVW) administers the majority of VAWA-authorized programs, while other federal agencies, including the Centers for Disease Control and Prevention (CDC) and the Office of Justice Programs (OJP), also manage VAWA programs. Since its creation in 1995 through FY2018, OVW has awarded more than $8 billion in grants and cooperative agreements to state, tribal, and local governments, nonprofit organizations, and universities. In FY2019, approximately $559 million was appropriated for VAWA-authorized programs administered by OVW, OJP, and CDC. While several extensions of authorization for VAWA were provided through FY2019 continuing appropriations, authorizations for appropriations for all VAWA programs have since expired. However, all VAWA programs funded in FY2018 have been funded in FY2019 (select programs at slightly higher levels), and thus far it appears that the expiration of authorizations has not impacted the continuing operation of VAWA programs. The Administration has requested FY2020 funding for all VAWA-authorized programs funded in FY2019. There are several issues that Congress may consider in efforts to reauthorize VAWA. These include, but are not limited to, improvements to data collection on domestic violence and stalking or the rape kit backlog; assessing the implementation and future direction of tribal jurisdiction over non-tribal members, including potentially adding new crimes under VAWA; new approaches for law enforcement in assisting victims; and enforcement of the federal prohibition on firearms for those convicted of a misdemeanor crime of domestic violence and those who are subject to a domestic violence protective order. Congress may also consider further changes to VAWA programs. In the 116th Congress, the House passed the Violence Against Women Reauthorization Act of 2019 (H.R. 1585). Among other things, it would reauthorize funding for VAWA programs and authorize new programs; amend and add definitions used for VAWA programs; amend federal criminal law relating to firearms, custodial rape, and stalking; and expand tribal jurisdiction over certain crimes committed on tribal lands.", "document_type": "crs"}
{"report": "This report identifies selected current major trade issues for U.S. agriculture that may be of interest to the 116 th Congress. It provides background on individual trade issues and attempts to bring perspective on the significance of each for U.S. agricultural trade. Each trade issue summary concludes with an assessment of its current status. The report begins by examining a series of overarching issues. These issues include U.S. agricultural trade and its importance to the agricultural sector, a brief description of the trade policy being pursued by the Trump Administration and its ramifications for U.S. agricultural exports, the Administration's actions to mitigate the economic impact on agriculture from retaliatory actions by trading partners against its trade policies, and the implications for U.S. agriculture of the U.S. withdrawal from the Trans-Pacific Partnership (TPP) agreement. The report then reviews a number of ongoing trade disputes and trade negotiations while also examining a series of narrower trade issues of importance to the agricultural sector. The format for these more focused trade issues is similar, consisting of background and perspective on the issue at hand and an assessment of their current status. U.S. agricultural exports have long been a bright spot in the U.S. balance of trade, with exports exceeding imports in every year since 1960. In recent years, the value of farm exports have experienced a downturn from the record level recorded in FY2014. The U.S. Department of Agriculture (USDA) forecasts U.S. agricultural exports in FY2019 at $141.5 billion (see Figure 1 ). If realized, this total would represent a decline from FY2018, when exports totaled $143 billion. Exports in FY2018 were $3 billion above the FY2017 total but almost $11 billion below the peak of $152.3 billion in FY2014. The decline in the value of farm exports since FY2014 initially reflected lower market prices for bulk commodities, such as soybeans and corn. Agricultural prices and U.S. exports of certain bulk commodities such as soybeans were further affected in 2018 by retaliatory tariffs imposed on selected U.S. agricultural imports by China, Canada, Mexico, the European Union (EU), and Turkey. The retaliatory tariffs were in response to the Trump Administration's imposition of Section 301 tariffs on certain imports from China and Section 232 tariffs on U.S. imports of steel and aluminum. U.S. agricultural imports are forecast to total $128 billion in FY2019, slightly up from $127.6 billion in FY2018, resulting in an agricultural trade surplus of $13.5 billion. This would be below the surplus of $15.8 billion in FY2018 and below the record high in nominal dollars of $43.1 billion in FY2014. Agricultural exports are important both to farmers and to the U.S. economy. During the calendar years 2017 and 2018, the value of U.S. agricultural exports accounted for 8% and 9% of total U.S. exports, respectively, and 5% of total U.S. imports, according to the U.S. Census data. As for the contribution of U.S. agricultural exports to the overall U.S. economy, USDA's Economic Research Service (ERS) estimates that in 2017 each dollar of U.S. agricultural exports stimulated an additional $1.30 in business activity. Moreover, that same year, U.S. agricultural exports generated an estimated 1,161,000 full-time civilian jobs, including 795,000 jobs outside the farm sector. With the productivity of U.S. agriculture growing faster than domestic demand, farmers and agriculturally oriented firms rely on export markets to sustain prices and revenue. Within the agricultural sector itself, the importance of exports account for around 20% of total farm production by value. Export markets are a major outlet for many farm commodities, absorbing over one-half of U.S. output for cotton and about half of total U.S. production for wheat, soybeans, and some specialty crops. Within the overall mix of agricultural exports, soybeans, corn, other feed crops, and wheat continue to rank at or near the top of the list of farm exports by volume. The high-value product (HVP) category—which includes such products as live animals, meat, dairy products, fruits and vegetables, nuts, fats, hides, manufactured feeds, sugar products, processed fruits and vegetables, and other processed food products—comprises the largest share of exports in value terms. In FY2018, the HVP share of the value of U.S. agricultural exports represented 66% of the total. All U.S. states export agricultural commodities, but a minority of states account for a majority of farm export sales. In calendar year 2017, the 10 leading agricultural exporting states based on value—California, Iowa, Illinois, Texas, Minnesota, Nebraska, Kansas, Indiana, North Dakota, and Missouri—accounted for 57% of the total value of U.S. agricultural exports that year. Status : In December 2018, Congress reauthorized major agricultural export promotion programs through FY2023 with the passage of the so-called 2018 farm bill ( P.L. 115-334 ). Title III of the farm bill includes provisions covering export credit guarantee programs, export market development programs, and international science and technical exchange programs that are designed to develop agricultural export markets in emerging economies. In establishing policy for U.S. participation in international trade, the Trump Administration has placed increased emphasis on trade deficits, which it views as an indicator of \"unfair\" foreign trade practices, with potential implications for U.S. industry and jobs. With the objective of reducing trade deficits, the Administration's trade policy has focused on withdrawing from or renegotiating existing trade agreements that the Administration views as being \"unfair;\" initiating new bilateral agreements; and responding to the trade practices of U.S. trade partners (whether geopolitical ally or adversary) that it views as unfair, illegal, or threatening to U.S. industry, with punitive trade actions. The punitive actions have included the imposition of Section 232 tariffs on U.S. imports of steel and aluminum and Section 301 tariffs on U.S. imports of products from China. The direction of the Administration's trade policy—for example, withdrawing from the Trans-Pacific Partnership (TPP) agreement with Japan and 10 other Pacific-facing nations and engaging in trade disputes with important agricultural trading partners that have resulted in retaliatory tariffs on U.S. agricultural products—has coincided with market share losses for certain U.S. agricultural exports. The Trump Administration has taken the position that current trade agreements to which the United States is a party and where the U.S. has a trade deficit or where the Administration perceives that the United States is being treated unfairly must be renegotiated or the United States will withdraw from them. Furthermore, the Administration questions the benefits of multi-party agreements, viewing them in some instances as improper vehicles for achieving meaningful negotiations. The Administration has also threatened to withdraw from the World Trade Organization (WTO) if it fails to undergo certain reforms. In January 2017, the Trump Administration withdrew from the TPP, which was subsequently concluded by the remaining TPP signatories under a modified framework renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in March 2018. Under U.S. initiative, the North American Free Trade Agreement (NAFTA) was renegotiated as the U.S.-Mexico-Canada Agreement (USMCA). USMCA was signed by the leaders of the three nations in November 2018 but requires legislative ratification to enter into force. In contrast to the Trump Administration's view of regional or multilateral negotiations, the Administration believes that greater potential gains can be achieved under bilateral negotiations where two countries can negotiate directly in the absence of group consensus. The Administration has sought to update some existing bilateral trade agreements and open new bilateral negotiations: The Administration negotiated selected modifications to the U.S.-South Korea free trade agreement. The Administration has notified Congress of its intent to begin negotiations under Trade Promotion Authority (TPA) with trading partners including Japan, the EU, and the United Kingdom (UK). The Administration is currently engaged in bilateral trade negotiations with China in an attempt to resolve the current trade dispute that has resulted in retaliatory tariffs on a wide range of U.S. agricultural products. Status : The Administration's trade policy actions have in some cases resulted in retaliatory tariffs against U.S. agricultural product exports, while the status of new agreements with several important agricultural trading partners, such as Canada and Mexico, remains uncertain. U.S. agricultural exports continue to be subject to retaliatory tariffs imposed by trading partners in response to the Administration's imposition of Section 232 tariffs on steel and aluminum and Section 301 tariffs on China. The signed USMCA awaits consideration by Congress and ratification by Canada and Mexico. Numerous stakeholders have raised concerns that U.S. agriculture will lose export market shares to competitors due to U.S. withdrawal from TPP and its absence from CPTPP. Some stakeholders wonder whether agriculture will be prioritized in all planned bilateral negotiations. The Office of the U.S. Trade Representative (USTR) had indicated that it may pursue negotiations with Japan in stages, declaring that the automobiles sector will be a priority. At the same time, both President Trump and the Secretary of Agriculture have stated that U.S.-Japan negotiations would occur in stages with a \"very quick\" deal on agriculture. However, the Japanese economy minister has stated that the United States and Japan would not reach an agreement in any one sector before other sectors. Elsewhere, the EU negotiating mandate for conducting trade negotiations with the United States articulates that a key EU goal is \"a trade agreement limited to the elimination of tariffs for industrial goods only, excluding agricultural products.\" As for the UK, it cannot formally negotiate or conclude a new trade agreement with the United States until it exits the EU. On March 23, 2018, the Trump Administration applied a 25% tariff to certain U.S. steel imports and a 10% tariff to certain U.S. aluminum imports under Section 232 of the Trade Expansion Act of 1962. This action followed Department of Commerce (DOC) investigations that determined that current imports threaten U.S. national security. Citing objections to China's policies on intellectual property, technology, and innovation, the Administration also implemented three rounds of tariff increases under Section 301 on a total of $250 billion worth of Chinese products. Canada, China, Mexico, the EU, and Turkey—whose exports were affected by the steel and aluminum tariffs—retaliated with tariffs on imports of a range of U.S. agricultural and food products and other goods. India has proposed retaliatory tariffs on a number of U.S. agricultural products, but it has delayed implementation pending ongoing negotiations with the Trump Administration. In all, the retaliatory tariffs imposed by these trading partners have targeted more than 800 U.S. agricultural and food products. Exports of those products to these five trading partners amounted to $26.9 billion in calendar year 2017, or about 18% of global U.S. agricultural and food product exports of $150.8 billion that year. Retaliatory tariffs by China affect 99% of U.S. agricultural products exported to China. With a combination of Section 301 and Section 232 retaliations, China has levied retaliatory tariffs ranging from 5% to 50%, in addition to existing most-favored nation (MFN) tariffs, on more than 800 U.S. food and agricultural products that were worth about $20.6 billion in calendar year 2017. The products, subject to retaliatory tariffs, span all agricultural and food categories, including grains, meat and animal products, fruits and vegetables, seafood, and processed foods. The U.S. agricultural imports into China with the largest loss of markets since the tariffs were imposed in 2018, compared with 2017, are soybeans, cotton, sorghum, and hides and skins. Canada has levied retaliatory tariffs of 10% on more than 20 U.S. agricultural and food products that are otherwise duty free under NAFTA. U.S. exports most affected by these tariffs are roasted coffee, ketchup, various beverage waters, licorice and toffee, and orange juice. U.S. exports of the products subject to Canada's retaliatory tariffs were valued at $2.6 billion in 2017. Mexico has placed retaliatory tariffs of 15%-25% on a range of U.S. products that are otherwise duty free under NAFTA. U.S. exports to Mexico of these products amounted to approximately $2.5 billion in 2017. U.S. exports of cheese and pork have been the commodities most affected by Mexico's retaliatory tariffs as measured by reduced exports in 2018 compared with 2017. The EU has levied a 25% tariff on certain U.S. exports of prepared vegetables and legumes, grains, fruit juice, peanut butter, and whiskey, which together amounted to $1 billion in sales in 2017. Turkey has imposed retaliatory tariffs on U.S. tree nuts, rice, prepared foods, whiskey, and unmanufactured tobacco. U.S. exports of these products to Turkey totaled $250 million in 2017. A study from Purdue University found that the retaliatory tariffs could result in a reduction of U.S. agricultural exports by as much as $8 billion annually (in inflation adjusted values) after the markets have adjusted in the near future. The study also projects that the reduction in U.S. agricultural exports could lower agricultural land prices and result in the reallocation of 45,000 farm, ranch, and processing workers. Additionally, the authors suggest that U.S. soybean producers would see the most change in the wake of tariff retaliation, with exports potentially falling by 21% and land prices declining by about 18%. The impact estimated by the model would be affected over time by other policy shocks and technological and population changes that are not accounted for in the model. A recent United Nations study states that extended imposition of retaliatory tariffs will erode U.S. market share in favor of export competitors in the longer term. Status : U.S. agricultural exports continue to face retaliatory tariffs in response to the Administration's 2018 trade actions. The USDA forecasts U.S. agricultural exports for FY2019 at $141.5 billion compared with $143.4 billion in FY2018, reflecting its expectation that increased trade with other regions that are not involved in the tariff dispute will partially offset tariff-related trade losses, particularly with China. U.S. agricultural exports to China are forecast to decline in FY2019 by over $7 billion from $16 billion in FY2018. The United States and China are engaged in bilateral discussions to resolve the current trade dispute. USMCA—the proposed successor to NAFTA—does not address the Section 232 tariffs that led Canada and Mexico to impose retaliatory tariffs. Representatives of the U.S. business community, agriculture interest groups, other congressional leaders, and Canadian and Mexican government officials have stated that the Section 232 tariff issues must be resolved before USMCA enters into force. On July 24, 2018, Secretary of Agriculture Sonny Perdue announced that the USDA would take several temporary actions to assist farmers in response to trade-related consequences from what the Administration characterized as \"unjustified retaliation\" against several U.S. agricultural products in 2018. Specifically, the Secretary said that the USDA would authorize up to $12 billion in financial assistance—referred to as a trade aid package—for certain agricultural commodities using the authority provided under Section 5 of the Commodity Credit Corporation (CCC) Charter Act (15 U.S.C. §714c). The Secretary initially stated that there would be no further trade-related financial assistance beyond this $12 billion package. However, on May 10, 2019, Secretary Perdue tweeted that the White House had directed USDA to work on a new aid package. The 2018 trade aid package includes (1) a Market Facilitation Program (MFP) of direct payments (valued at up to $10 billion) to producers of commodities most affected by the trade retaliation, (2) a Food Purchase and Distribution Program to partially offset lost export sales of affected commodities ($1.2 billion), and (3) an Agricultural Trade Promotion program to expand foreign markets ($200 million). The largest component of the trade aid package, the MFP, provides direct financial assistance to producers of commodities that are most impacted by actions of foreign governments resulting in the loss of traditional exports. Affected commodities include soybeans, corn, cotton, sorghum, wheat, hogs, dairy, fresh sweet cherries, and shelled almonds. USDA announced MFP per-unit payment rates to be applied to certified production of eligible commodities in 2018. USDA's Farm Service Agency administers the MFP. Eligible participants had to sign up for payments from September 2018 to February 2019. They also had to meet additional criteria, including being \"actively engaged in farming,\" having an average adjusted gross income of less than $900,000, meeting conservation compliance provisions, and certifying their 2018 production with USDA by May 1, 2019. USDA determined the MFP per-unit payment rate based on the estimated \"direct trade damage\"—the difference in expected trade value for each affected commodity with and without the retaliatory tariffs. The estimated \"trade damage\" for each affected commodity was then divided by the crop's production in 2017 to derive a per-unit payment rate. Indirect effects—such as any decline in market prices for affected commodities that were used domestically rather than exported—were not included in the payment calculation. Based on 2017 production data, USDA estimated that approximately $9.6 billion would be distributed in MFP payments to eligible producers, with over three-fourths ($7.3 billion) of MFP payments provided to soybean producers. By linking MFP commodity payments only to the trade loss associated with each named MFP commodity, the payment formula favored commodities that relied more heavily on export markets than on domestic markets. Soybean growers and most farm-advocacy groups have generally been supportive of the payments, but some commodity groups—most notably associations representing corn, wheat, milk, and specialty crops—argued that the MFP payment formulation was inadequate to fully compensate their industries. For example, the National Corn Growers Association states that the 2018 trade disputes lowered corn prices by $0.44 per bushel for a potential total loss of $6.3 billion. Similarly, the National Association of Wheat Growers estimates a $0.75 per bushel decrease in domestic wheat prices that resulted in nearly $2.5 billion in lost value, while the National Milk Producers Federation has calculated that the retaliatory tariffs resulted in a $1.10 per hundredweight decline in domestic milk prices and over $1.2 billion in losses for milk producers based on milk futures prices. Similarly, many specialty crop groups contend that their tariff-related export losses were not fully compensated by the trade aid programs. To this point, a 2018 study by researchers at the University of California-Davis stated that, in California alone, specialty crops may suffer trade-related losses of over $3.3 billion on their 2018 production. Status: In March 2019, USDA estimated that a total of $8.7 billion in outlays would be made available under the MFP program, including $5.2 billion in 2018 and $3.5 billion in 2019. The large volume of payments could attract international attention about whether they are consistent with WTO rules and commitments on domestic support. The trade aid package raises a number of potential questions. For instance, if the United States and China do not reach an agreement in their ongoing tariff-driven trade negotiations, should another trade aid package, or some alternative compensatory measure, be provided in 2019, and possibly beyond? If MFP payments are to be repeated in the future, should USDA revise its payment formulation to provide a broader distribution of payments across the U.S. agricultural sector? The TPP was concluded on October 4, 2015, among 12 countries: the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The agreement had not yet entered into force when President Trump signed an executive order withdrawing the United States from TPP on January 23, 2017. On March 8, 2018, the remaining 11 countries concluded a revised agreement—the CPTPP. On December 30, 2018, the CPTPP entered into force among the first six countries to ratify the agreement—Canada, Australia, Japan, Mexico, New Zealand, and Singapore. On January 14, 2019, the CPTPP entered into force for Vietnam. With the United States, the TPP would have become the world's largest trade agreement, covering 40% of the global economy and providing comprehensive market access through the elimination and reduction of tariff and non-tariff barriers. The TPP provisions would have significantly increased the overseas markets to which U.S. farm and food products would have preferential access. The CPTPP provisions are based on the TPP. The agricultural provisions of the CPTPP seek to liberalize trade through lower tariffs, expanded tariff-rate quotas (TRQs), and agreements for reducing non-tariff barriers, including laws and regulations pertaining to products of agricultural biotechnology. In 2016, the U.S. International Trade Commission (USITC) had assessed the potential economic benefits from TPP ratification, projecting that by 2032 U.S. agricultural exports would be higher by $7.2 billion, or 2.6%, under TPP than without the agreement. Most of the increase in U.S. exports would have been concentrated in Japan (up $3.6 billion) and Vietnam (up $3.3 billion). CPTPP countries represent a major component of U.S. farm and food trade, providing markets for 42% of U.S. farm exports between 2015 and 2018 while also supplying 52% of U.S. agricultural imports. By one estimate, U.S. absence from CPTPP will lead to a decline in U.S. agricultural exports of about $1.8 billion (1.2% of FY2018 U.S. agricultural exports of $143 billion) per year. The combination of U.S. absence from CPTPP, retaliatory tariffs on U.S. farm and food exports, and the possibility of the United States withdrawing entirely from NAFTA—as President Trump has threatened in the absence of USMCA ratification—could lead to a potential annual drop in U.S. agricultural exports of $21.8 billion, according to a study commissioned by the Farm Foundation. As the CPTPP agreement is relatively new, the possible range of impact on U.S. agriculture is uncertain because of limited studies that are available. A broad cross-section of agricultural groups and food and agribusiness interests are concerned about losing potential export markets given U.S. absence from CPTPP. Under CPTPP, for example, Japanese tariffs on wheat imports will face a 50% reduction by 2025, which will put U.S. wheat exports to Japan at a competitive disadvantage. Similarly, the U.S. dairy industry estimates that by 2027, almost half of the U.S. dairy exports to Japan are likely to be replaced by dairy products from CPTPP and other countries with preferential trading agreements with Japan. Japan has historically accounted for more than a quarter of the total value of U.S. beef and pork exports. The U.S. share of Japan's imports of these commodities is expected to decline, because CPTPP competitors receive more favorable access to the Japanese market for beef and pork. U.S. Meat Export Federation states that annual beef export losses could reach $550 million by 2023 and more than $1.2 billion by 2028. Annual U.S. pork export losses are estimated to exceed $600 million by 2023 and reach $1 billion by 2028. USDA officials and representatives of the U.S. wheat and barley industries assert that U.S. wheat and barley exports are rapidly losing market share in Japan to CPTPP member countries and the EU. Status : U.S. agricultural exports appear to be at an increasing disadvantage in the CPTPP member country markets as these countries have begun to expand market access and reduce tariffs on imported products from CPTPP signatory countries. On October 16, 2018, under the TPA procedures, the Trump Administration gave Congress its official 90-day advance notification of intent to enter into trade negotiations with Japan, a CPTPP member country. In view of the Trump Administration's expressed objectives to \"achieve fairer, more balanced trade,\" including in auto trade, stakeholders are uncertain about the prospects of reaching a quick deal with Japan. At the same time, both President Trump and the Secretary of Agriculture have stated that U.S.-Japan negotiations would occur in stages with a \"very quick\" deal on agriculture. However, the Japanese economy minister has stated that the United States and Japan would not reach an agreement in any one sector before other sectors. Since 2002, Canada has been the United States' top agricultural export market, with U.S. agricultural exports averaging over $20 billion between FY2016 and FY2018. In FY2018, Canada accounted for 14% of the total value of U.S. agricultural exports to all destinations. Mexico has been the third-largest market for U.S. agricultural exports since FY2010. U.S. agricultural exports to Mexico averaged over $18 billion between FY2016 and FY2018, accounting for 13% of the total value of U.S. agricultural exports to all destinations in FY2018. On September 30, 2018, the Trump Administration announced an agreement with Canada and Mexico, USMCA, which it is promoting as a replacement for the NAFTA. Under NAFTA, all agricultural tariffs were phased out to zero except for certain products traded between the United States and Canada. These included U.S. imports from Canada of dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products and Canadian imports from the United States of dairy products, poultry, eggs, and margarine. Quotas that once governed bilateral trade in these commodities were redefined as TRQs to comply with WTO commitments. Under a TRQ, a lower tariff rate is levied on import quantities within the quota amount, while a higher tariff rate is imposed on quantities in excess of the quota. The United States and Mexico agreement under NAFTA did not exclude any agricultural products from trade liberalization. The proposed USMCA would expand upon the agricultural provisions of NAFTA. All food and agricultural products that have zero tariffs under NAFTA would remain at zero under USMCA. Under USMCA, market access would be expanded for the agricultural products traded between Canada and the United States that were exempt from tariff elimination under NAFTA. Canada agreed to create new U.S.-specific TRQs for U.S. dairy products and to replace the existing NAFTA poultry TRQs with new USMCA TRQs. All U.S. exports within the set TRQ volume limit would be subject to zero tariffs rates, but U.S. over-quota exports would still face the higher levels of tariffs currently in place under Canada's WTO commitment. The United States, in turn, agreed to improve access for imports of Canadian dairy, sugar, peanuts, and cotton. Canada and the United States also agreed to grade each other's like varieties of wheat as if they were produced domestically, a long-standing request of the U.S. wheat industry. Under USMCA, provisions are made for textiles and apparel to promote greater use of North American origin products, which may support domestic U.S. cotton production. Also, each country would offer the same treatment for distributing another USMCA country's spirits, wine, beer, and other alcoholic beverages as it would its own products. USMCA's Sanitary and Phytosanitary (SPS) chapter calls for greater transparency in SPS rules and improved regulatory alignment among the three countries. Under USMCA, the United States, Canada, and Mexico agreed to provide procedural safeguards for recognition of new geographic indications, which are place names used to identify products that come from certain regions or locations. The agricultural chapter of USMCA also lays out provisions for addressing the products of agricultural biotechnology, an issue NAFTA does not address. In April 2019, USITC released its report that provides an assessment of the likely effects of USMCA on the overall U.S. economy and its component sectors. Because NAFTA has already eliminated duties on most goods and reduced most non-tariff barriers, USITC's quantitative assessment includes changes that are not easily quantifiable. These provisions of trade negotiations were excluded from past USITC quantitative analyses. The provisions included in USMCA assessment by USITC—such as intellectual property rights, future commitments to open flows of data, and strengthening labor standards and rights—may reduce uncertainty in future trading regimes. Uncertainty reducing provisions are part of most free-trade agreements, including NAFTA, even if past assessments excluded them in the analyses. The USITC report finds that U.S. agricultural exports would increase by 1.1% in year 6 of USMCA implementation compared to its 2017 baseline export levels. In inflation-adjusted dollars, U.S. dairy exports to NAFTA countries would increase by $314.5 million (7.1%), and U.S. poultry exports would increase by $183.5 million (1%) compared to exports in 2017. A 2018 study commissioned by the Farm Foundation performs an economy-wide analysis, but the analysis takes into consideration only the changes in agricultural tariffs and TRQs proposed under USMCA. The market access changes are introduced as shocks into a multi-region, economy-wide model. The impacts of these changes are analyzed after the economy has adjusted to the shocks after full implementation of USMCA—year 6. The adjustment process can include changes in production and consumption structure, including production costs and changes in the volume of agricultural outputs. This study estimates, in 2014 dollars, a net increase in annual U.S. agricultural exports of $450 million under USMCA, or about 1% of U.S. agricultural exports under NAFTA—$41 billion in FY2014. It projects the export losses from the retaliatory tariffs imposed by Canada and Mexico in response to U.S. Section 232 tariffs on steel and aluminum imports to be $1.8 billion per year (in 2014 dollars), which would more than offset the projected export gain of $450 million from USMCA. These losses include changes in production decisions and volumes resulting from higher production costs. This study does not consider changes in other sectors of the economy that would result from the implementation of USMCA provisions in these other sectors. Moreover, the impact estimated by the model would be affected over time by other policy shocks and technological and population changes that are not accounted for in the model. According to an updated version of the Farm Foundation study, under the possible scenario of a complete withdrawal from NAFTA without ratification of USMCA, tariffs on U.S. exports to Canada and Mexico would be expected to return to the higher WTO MFN rates. Under this scenario, the study finds that, in 2014 dollars, U.S. agricultural and food exports to Canada and Mexico would decline by about $12 billion annually. A study conducted by researchers at the International Monetary Fund assesses the potential impacts of USMCA on North America as a region taking into consideration the following provisions of the proposed USMCA: (1) higher vehicle and auto parts regional value content requirement; (2) new labor value content requirement for vehicles; (3) stricter rules of origin for USMCA textile and apparel trade; (4) agricultural trade liberalization that increases U.S. access to Canadian supply-managed markets and reduces U.S. barriers on Canadian dairy, sugar and sugar products, and peanuts and peanut products; and (5) trade facilitation measures. The results describe a medium-term adjustment five to seven years after full implementation of USMCA—year 6. By this time, labor and capital would have been reallocated among sectors, but new investment spending would not yet have increased productive capacity. The study compares base period with what may happen five to seven years after full implementation of USMCA. This study finds that increasing higher regional vehicle and labor requirements would contribute to an economic loss for all three USMCA countries, with a decline in the production of vehicles and parts, shifts toward greater sourcing of both vehicles and parts from outside of the region, and higher prices for consumers. Regarding agricultural provisions of USMCA, the report highlights that Canada would stand to gain more than the United States. The study also highlights that the trade facilitation provisions of USMCA would potentially provide the largest gain to the region. Another researcher reiterates the findings of the International Monetary Fund study that the new domestic content provisions in USMCA would increase input costs for U.S. farmers who would end up paying more for trucks and machinery. As few studies have analyzed the potential impacts of USMCA, the diversity in the findings regarding the impacts from the implementation of USMCA is limited. Stakeholder groups have expressed mixed responses to USMCA. A broad coalition representing more than 200 U.S. companies and industry associations has advocated for USMCA's approval. The American Farm Bureau Federation, which is the largest general farm organization, expressed satisfaction that USMCA not only locks in market opportunities previously developed but also builds on those trade relationships in several key areas. On the other hand, the National Farmers Union and the Institute for Agriculture and Trade Policy have expressed concern that the proposed agreement does not go far enough to institute a fair trade framework that benefits family farmers and ranchers. Status: The proposed USMCA does not enter into force unless approved by the U.S. Congress and ratified by Canada and Mexico. A report by USITC that assesses the impact of USMCA on U.S. economy was submitted to Congress on April 18, 2019. The timeline for congressional approval of USMCA would likely be governed by the TPA procedures established under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 ) but would not be initiated until the President submits the draft implementing bill to Congress. Some policymakers have stated that the path to ratifying USMCA by Congress is uncertain, in part because the three countries have yet to resolve disputes over U.S. Section 232 tariffs on imports of steel and aluminum and over the retaliatory tariffs that Canada and Mexico have imposed on U.S. agricultural products. Senator Chuck Grassley is reported to have called on the Trump Administration to lift tariffs on steel and aluminum imports from Canada and Mexico before Congress begins considering legislation to implement USMCA. House Speaker Nancy Pelosi has reportedly stated that she wants \"stronger enforcement language\" and that USMCA talks should be reopened to tighten enforcement provisions for labor and environmental protections. For more information, see CRS Report R45661, Agricultural Provisions of the U.S.-Mexico-Canada Agreement . The Canadian dairy sector limits production, sets prices, and restricts imports. Canadian imports of dairy products are restricted through TRQs, with over-quota tariffs in excess of 200% for some products. Although Canada is the second-largest market for U.S. dairy product exports, U.S. exports would likely be higher but for Canadian import restrictions. In recent years, U.S. milk producers began exporting increased quantities of ultra-filtered (UF) milk to Canada. UF milk is a high-protein liquid product made by separating and concentrating certain milk components (such as protein and fat) for use as ingredients in dairy products, such as cheese, yogurt, and ice cream. U.S. UF milk found a market among Canadian cheese makers in 2008 after Canada revised its compositional standards for cheese. This revision significantly reduced the use of several milk products that U.S. processors had been supplying to Canadian food manufacturers, including milk protein concentrates and dried protein products. In recent years, growing demand for butterfat in Canada resulted in increased Canadian milk production and, consequently, surplus supplies of skim milk. To address the surplus, Canada adopted the Class 7 milk price classification in 2017 (Class 6 in Ontario). Milk classified as Class 7 comprises skim milk components—primarily milk protein concentrates (MPC) and skim milk powder (SMP)—used to process dairy products. Prices for Class 7 products were set at low levels. Once the Class 7 regime was implemented, Canadian skim milk products became cheaper. Canada expanded global exports of SMP with the consequence that U.S. producers lost exports of high-protein UF milk to Canadian cheese and yogurt processors. According to USDA, the value of U.S. UF milk exports to Canada peaked at nearly $107 million in 2015 but declined after the Class 7 regime was implemented in 2017 to $49 million in 2017 and $32 million in 2018. At the same time, Canada's exports of SMP more than tripled in 2017 to $133 million, compared with $42 million in 2016 before the Class 7 price regime was implemented. Eliminating Canada's Class 7 pricing regime became a priority for the U.S. dairy industry when NAFTA renegotiations commenced in 2017. Status : Under USMCA, Canada agreed to eliminate the Class 7 pricing regime six months after USMCA enters into force. Canada also agreed to reclassify Class 7 products according to their end use and base its selling price on a formula that takes into consideration the USDA reported nonfat dry milk price. Also under the agreement, Canada would be required to monitor its exports of MPC, SMP, and infant formula and report at the harmonized tariff schedule level monthly. Although Canada would maintain its milk supply management system under USMCA, it would expand TRQs for U.S. exports of milk, cheese, cream, skim milk powder, condensed milk, yogurt, and several other dairy products. U.S. dairy products within the USMCA TRQs would enter Canada duty free, while U.S. exports above the TRQ quantities would be subject to the existing higher over-quota tariffs. Likewise, the United States would establish TRQs for imports of Canadian dairy products. In total, under USMCA Canada would grant the United States duty-free access to nearly 17,000 metric tons (MT) of dairy products the first year of the agreement, 100,000 MT in the sixth year, and 109,000 MT in year 19. The USMCA quota is specific to the United States and would be in addition to the 93,648 MT of WTO global quota, which is available under NAFTA to exports from the United States as well as to exports from other WTO member countries. For more information, see CRS In Focus IF11149, Dairy Provisions in USMCA . In Canada, the authority to import and distribute alcohol rests with the provincial governments. Starting in 2015, British Columbia (BC) initiated a series of policies and regulations that provide BC wine exclusive access to retail channels and grocery store shelves, while imported wine maybe sold in grocery stores only through a \"store within a store\" physically separated from the main retail outlet and with separate cash registers. Overall, the U.S.-based Wine Institute reports that Canada is the leading export market for California wine—the leading wine producing state in the United States—accounting for $444 million in sales in 2017. Status: In January 2017, the Obama Administration initiated trade enforcement action against Canada at the WTO regarding Canada's BC wine measures. Subsequent actions by the Trump Administration, in September 2017, led to the United States requesting formal consultations with Canada regarding BC wine measures. USTR states that \"discriminatory regulations implemented by British Columbia are unfairly keeping U.S. wine off of grocery store shelves\" and that the measures are inconsistent with Canada's commitments and obligations under the WTO. The Canadian wine industry estimates that wine imports account for nearly 70% of the Canadian wine market. It also points out that the BC Vintners Quality Alliance has been issuing store licenses for the industry since the 1980s. The United States reiterated its concerns as part of a second complaint issued in this case in July 2018. Argentina, Australia, New Zealand, and the EU have requested to join the consultation. The proposed USMCA addresses U.S. concerns about Canada's BC wine measures as part of a side letter to the proposed agreement. As outlined in the side letter, Canada would modify certain measures that provide preferential grocery store shelf space to wines produced within the province and \"implement any changes no later than November 1, 2019.\" The proposed USMCA does not address all the issues that restrict U.S. agricultural exports to Mexico and Canada, nor does it include all of the changes sought by U.S. agricultural interest groups. For instance, Southeastern U.S. produce growers have been seeking changes to trade remedy laws to address imports of seasonal produce. Mexico's production of some fruits and vegetables—tomatoes, peppers, cucumbers, berries, and melons—has increased in recent years in part due to Mexico's investment in large-scale greenhouse production facilities and other types of technological innovations. Greenhouse production in Mexico continues to rise, with 2018 estimates of nearly 57,500 acres of produce grown under protection, up from an estimated 9,000 acres in 2017. USDA researchers reported that Mexico is the largest foreign supplier of U.S. imports of vegetables and fruits (excluding bananas). Representatives of the Florida Fruit and Vegetable Association (FFVA) claim that Mexico's investment in produce production is supported by government subsidies and should be addressed through countervailing duties (CVD) on U.S. imports of these products. They further state that these exports enter the United States at prices below the cost of production and should be countered by higher antidumping (AD) duties. FFVA also believes that Mexico's labor cost advantage in fruit and vegetable production gives Mexico a competitive advantage over U.S. produce growers. In general, trade concerns have centered on tomatoes, peppers, and berries. One of the Trump Administration's initial agriculture-related objectives in the renegotiation of NAFTA included a proposal to establish new rules for seasonal and perishable products, such as fruits and vegetables. The proposal would have established a separate domestic industry provision for perishable and seasonal products in AD and CVD proceedings, making it easier for a group of regional producers to initiate an injury case and to prove injury, thereby implementing CVD or AD duties to be levied on the imported products responsible for the injury. This could protect certain U.S. seasonal fruit and vegetable products in some regions by making it easier to initiate trade remedy cases. USITC has previously reviewed trade remedy cases involving perishable agricultural products that have proven difficult to settle. Some Members of Congress supported including seasonal protections as part of NAFTA's renegotiation. Others opposed including such protections, contending that seasonal production complements rather than competes with U.S. growing seasons, while still others worried it could open the door to an \"uncontrolled proliferation of regional, seasonal, perishable remedies against U.S. exports.\" Most U.S. food and agricultural sectors, including some fruit and vegetable producer groups, opposed including seasonal protections as part of the renegotiation. Some worried that efforts to push for seasonal protections would derail the renegotiation. Others claimed that such efforts would favor a few \"politically-connected, wealthy agribusiness firms from Florida\" at the expense of others in the U.S. produce industry and at the expense of both consumers and growers in other fruit and vegetable producing states, such as California. The Agricultural Technical Advisory Committee for Trade in Fruits and Vegetables (F&V ATAC) supported not including provisions in the NAFTA renegotiation, acknowledging that including such protections would generate \"significant opposition from Mexican and Canadian negotiators, in addition to raising concern by many in the U.S. agricultural community, including many in the fruit and vegetable industry.\" In January 2018, F&V ATAC passed a resolution supporting the withdrawal of the seasonal and perishable trade remedy proposal from the U.S. negotiating objectives. Status: The proposed USMCA that might replace NAFTA does not include changes to U.S. trade remedy laws to address seasonal produce trade. As a result, some in Congress have taken additional steps to try to address this issue. Bills were introduced in both the House and Senate in the 115 th Congress as part of the Agricultural Trade Improvement Act of 2018 ( S. 3510 ; H.R. 7015 ). These bills would have provided for CVD and AD procedures for seasonal producers and defined core seasonal industry in U.S. trade remedy laws, among other changes. These two bills were reintroduced in the 116 th Congress but renamed \"Defending Domestic Produce Production Act of 2019\" ( S. 16 ; H.R. 101 ). Current law generally requires that an injury case be supported by at least 50% of the domestic industry. The House and Senate bills would allow regional groups representing less than 50% of nationwide seasonal growers to initiate an injury investigation. Such changes could make it easier for a group of regional producers to initiate trade remedy cases. The U.S.-Mexico Tomato Suspension Agreement is an agreement between DOC and signatory producers/exporters of fresh tomatoes grown in Mexico that suspends the U.S. AD investigation into whether Mexican fresh tomatoes were sold into the U.S. market at less than fair value. Fresh tomatoes imported from Mexico have been governed by suspension agreements since 1996. The first suspension agreement on fresh tomatoes from Mexico became effective in November 1996. The Mexican signatory growers and the United States entered into new agreements in 2002 and 2008. The most recent agreement became effective in March 2013. Under the current agreement, the signatories agree to suspend the AD investigation and monitor compliance with the agreement. The basis for the suspension agreement was a commitment by each signatory producer/exporter to sell tomatoes at or above the stated reference price in order to eliminate the injurious effects of exports of fresh tomatoes to the United States. Analysis commissioned by the Fresh Produce Association of the Americas (FPAA) found that terminating the agreement could \"reduce the supply of tomatoes in the US market, and raise prices paid by consumers in the U.S., particularly during the winter tomato season (October-June).\" The agreement sets different floor prices for Mexican fresh tomatoes during the summer and winter and specifies prices for open field/adapted-environment and controlled-environment production. These price floors cover all types of fresh or chilled tomatoes from Mexico, including common round, cherry, grape, plum, pear, and greenhouse tomatoes. The agreement does not cover tomatoes that are for processing. In early 2018, DOC initiated consultations with the Mexican tomato growers and exporters to negotiate possible revisions to the 2013 agreement. In addition, DOC initiated its five-year sunset review of the suspended AD investigation and published the preliminary and final results of its analysis in late 2018. DOC's analysis indicated that dumping of fresh tomatoes was likely to occur or recur and calculated weighted-average dumping margins of up to 188%. In November 2018, the Florida Tomato Exchange requested that the United States withdraw from the suspension agreement, eliminate the reference prices, and resume the related initial 1996 AD investigation. Several Members of Congress in both the House and the Senate have expressed support for withdrawing from the suspension agreement. Among the groups that oppose withdrawal are the FPAA and other groups representing Mexican growers and exporters as well as businesses, various associations, and local and county governments. Status: On May 7, 2019, the United States terminated the 2013 Suspension Agreement on Fresh Tomatoes from Mexico but said it plans to continue negotiations regarding a possible revised agreement. DOC initially announced its intention to withdraw from the agreement in February 2019 following its periodic review of the agreement, which concluded that Mexican fresh tomatoes have been sold into the U.S. market at less than fair value. Without a suspension agreement, an AD order could be issued if USITC makes a determination of financial injury to U.S. growers. Reportedly, the DOC and Mexico have been unable to develop a revised agreement that is acceptable to both sides, despite ongoing negotiations since early 2018. In April 2019, Mexico's tomato growers proposed to eliminate a price distinction between winter and summer season tomatoes and increase the reference price for USDA-certified organic tomatoes. The government of Mexico has expressed its disappointment about the U.S. decision. In December 2014, DOC signed suspension agreements with the government of Mexico and Mexican sugar producers and exporters that prevented the imposition of CVD and AD on U.S. imports of Mexican sugar. This was a consequence of U.S. government determinations that Mexican sugar was being subsidized by the government of Mexico and was being sold into the U.S. market at less than fair value. The suspension agreements limit Mexico's sugar exports to the United States to the residual of U.S. needs for domestic human use in a given marketing year after subtracting U.S. production and imports from other countries. The agreements establish minimum reference prices for Mexican sugar that are above U.S. sugar program loan levels for domestically produced sugar. Another provision limits the share of Mexican sugar that can enter the United States as refined sugar. After the suspension agreements took effect, a number of stakeholders in the U.S. sugar market asserted that the suspension agreements had not worked as intended and had not entirely eliminated the injury caused by the subsidization and dumping of Mexican sugar. One widely held criticism was that cane refiners who were dependent on imports of raw cane from Mexico had received an inadequate share of sugar from Mexico. Another criticism leveled at the agreements was that Mexican exporters were not always adhering to limits on the share of Mexican sugar imports that are refined sugar as compared with raw sugar nor to the specified minimum reference prices. In November 2016, the American Sugar Coalition—representing sugar cane and sugar beet producers and sugar processors, refiners, and workers—called on DOC to withdraw from the agreements, an action that could have caused AD and CVD duties to be imposed on Mexican sugar. Imperial Sugar Company, a U.S. cane refiner, also advocated for withdrawal. The Sweetener Users Association, which represents sugar-using businesses, recommended renegotiating the agreements to address their shortcomings and warned that terminating them would virtually eliminate Mexican sugar from the U.S. market. In November 2016, DOC issued results of a preliminary administrative review. In it, the DOC concluded that the agreements may not have entirely redressed the injury, and that certain import transactions may not have adhered to the terms in the agreements. Status: In June 2017, the United States and Mexico agreed to amendments to the suspension agreements. Under the amendments, effective October 1, 2017, the price of imported Mexican raw sugar was increased from $0.2225 per pound to $0.23 per pound. The price of imported refined sugar was increased from $0.26 per pound to $0.28 per pound. The maximum share of refined sugar imports was limited to 30%, with raw sugar imports constituting at least 70% of the total, compared with 53% and 47%, respectively, under the 2014 agreement. The agreement also requires that imported raw sugar be loaded in bulk and free flowing—that is, not packaged. Any raw sugar imports that are packaged would be counted toward the refined sugar allotment. In addition, if USDA determines that the United States requires additional sugar imports to meet its needs, Mexico would be awarded the first opportunity to fill the need. For more information, see CRS In Focus IF10693, Amended Sugar Agreements Recast U.S.-Mexico Trade . Several other trade issues may be of interest to Congress. A key objective of U.S. trade negotiations has been to establish a common framework for approval, trade, and marketing of the products of agricultural biotechnology. Among other high-profile issues, geographical indications are increasingly becoming an agricultural trade issue. In addition, U.S. farm and food interests continue to see potential market expansion opportunities in Cuba, but interested exporters regard a prohibition on private U.S. financing as a major obstacle to this end. On the import side of the trade ledger, in March 2019, the United States initiated its review of the Generalized System of Preference (GSP), which provides duty-free tariff treatment for certain products imported from developing countries. Agricultural biotechnology refers primarily to the commercial use of recombinant DNA techniques to genetically modify or bioengineer plants and animals so that they have certain desired characteristics, primarily herbicide tolerance and pest resistance. More recently, the term has also come to encompass a range of new genetic technologies involving genomic editing (e.g., CRISPR-Cas9) rather than recombinant DNA techniques alone. U.S. soybean, corn, cotton, and sugar beet producers have rapidly adopted genetically engineered (GE) varieties of these crops since commercialization began in the mid-1990s. The United States is the leading country in cultivating GE crops, accounting for more than 40% of total acres growing GE crops worldwide. Elsewhere in the world, the adoption and cultivation of GE crops by both producers and consumers has been mixed. In the EU, for example, the European Commission (EC) may approve of GE products for import and marketing, but individual member states may maintain bans. GE crop production in the EU accounts for about 1% of crop acreage—about 325,000 acres—all in a single variety of pest-resistant GE corn: MON810. This particular variety is cultivated predominantly in Spain and Portugal. Eighteen EU member states ban cultivation of GE crops and/or have specific rules on the trade of GE seeds. EU officials have been cautious in permitting GE products to be cultivated within the EU, but EU-approved varieties of GE commodities can be imported. All GE-derived food and feed imported to the EU must be labeled as such. The EU's regulatory framework regarding biotechnology is generally regarded as one of the most stringent worldwide. Many U.S. producers assert that EU labeling and traceability regulations for approving GE crops have effectively limited certain U.S. agricultural exports to the EU. The EU's approval process for GE products—effectively a de facto moratorium since 1998—has been a source of dispute since 2003 and continues to be a contentious issue in the current U.S.-EU agricultural trade negotiations. While the EU as a policymaking entity generally supports GE production, public opinion remains strongly opposed to GE food and crops in most EU member states. This opposition in the EU has also been an important factor in the acceptance of GE crops in lesser developed countries. Most African countries have largely followed the EU in restricting or banning the cultivation of GE crops. The U.S. Secretary of Agriculture stated that the United States will not regulate plants created through genomic editing so long as they are developed without using a plant pest as the donor or vector and are not plant pests themselves. In contrast, the EU Court of Justice ruled that organisms obtained by mutagenesis are genetically modified organisms (GMOs) and are in principle within the scope of the GMO Directive, which governs the deliberate release of GMOs into the environment. The EU Court considers that the risks posed by new mutagenesis techniques such as gene editing (CRISPR-Cas9) to be similar to crops created from transgenesis, wherein GE crops have genetic material introduced from other organisms. China's reluctance to approve GE crops or GE imports is a source of frustration for U.S. agricultural interests. While GE crops are technically banned from China, U.S.-developed GMOs appear to be grown in China without authorization despite Chinese laws banning their cultivation. In September 2016, China agreed to improve its agricultural biotechnology approval process. That commitment did not include specific details, although China stated that they are committed to review eight long-pending applications of agricultural biotechnology in a \"timely, ongoing, and science-based manner.\" On January 8, 2019, the Chinese Ministry of Agriculture and Rural Affairs announced approval of five new biotech traits in imported crops for processing, the first new approvals since June 2017. At the same time, the ministry amended the regulations on safety assessment, import approval, and labeling of agricultural GMOs without notifying the changes to the WTO nor soliciting comments from stakeholders. With respect to the proposed USMCA, the agreement specifically includes provisions to improve transparency in approving and bringing to market products of agricultural biotechnology, something NAFTA did not cover. USMCA provisions cover crops produced with all biotechnology methods, including recombinant DNA and gene editing. Trade negotiations concerning agricultural biotechnology also involve labeling issues and other provisions that address the unintended presence of GE products in non-GE shipments. As the United States implements its new \"bioengineered food disclosure\" standard, it may raise concerns among some trading partners—particularly the EU. The food disclosure standard, for example, will not mandate labeling of highly refined ingredients from any GE crop if \"no modified genetic material\" is detectable. This provision would exclude food products, for example, containing high-fructose corn syrup, refined soybean oil, and sugar from sugar beets. Status: A key objective of U.S. trade negotiations, such as the U.S.-EU agricultural trade negotiations and U.S. negotiations with China, has been to establish a common framework for GE approvals. This includes labeling practices consistent with the U.S. guidelines and harmonized regulatory procedures concerning GE presence in products that are consistent with the Codex Alimentarius Commission Annex on Food Safety Assessment in Situations of Low-Level Presence of Recombinant-DNA Plant Material in Food . The proposed USMCA specifically includes provisions to improve transparency in approving and bringing to market products of agricultural biotechnology. For other negotiations, U.S. objectives on agricultural biotechnology, for the most part, remain aspirational. Additionally, the United States believes that U.S. export opportunities are being impaired due to EU pressure on lesser developed countries to adopt EU SPS measures that ban GE products. GIs are geographical names that act to protect the quality and reputation of a distinctive product originating in a certain region. The term GI is most often applied to wines, spirits, and agricultural products. Some food producers benefit from the use of GIs by giving certain foods recognition for their distinctiveness, thereby differentiating them in the marketplace. In this manner, GIs can be commercially valuable. GIs may also be eligible for relief from acts of infringement or unfair competition. While the use of GIs may protect consumers from deceptive or misleading labels, they also have the potential to impair trade when the use of names that are considered common or generic in one market are protected in another. Examples of registered or established GIs include Parmigiano Reggiano cheese and Prosciutto di Parma ham from the Parma region of Italy, Toscano olive oil from the Tuscany region of Italy, Roquefort cheese from France, Champagne from the region of the same name in France, Irish whiskey, Darjeeling tea, Florida oranges, Idaho potatoes, Vidalia onions, Washington State apples, and Napa Valley wines. GIs—along with other types of intellectual property such as patents, copyrights, trademarks, and trade secrets—are an example of intellectual property rights (IPR). The use of GIs has become a contentious international trade issue, particularly for U.S. wine, cheese, and sausage makers. In general, some consider GIs to be protected intellectual property, while others consider them to be generic or semi-generic terms. For example, in the United States, feta is considered the generic name for a type of cheese. However, it is protected as a GI in Europe. As such, feta cheese produced in the United States may not be exported for sale in the EU, since only feta produced in countries or regions currently holding GI registrations may be sold commercially. Laws and regulations governing GIs differ markedly between the United States and EU, which further complicates this issue. In addition, registered products often fall under GI protections in certain third-country markets, and some EU GIs have been trademarked in some non-EU countries. This has become a concern for U.S. agricultural exporters following a series of recently concluded trade agreements among the EU and Canada, Japan, South Korea, South Africa, and other countries that in many cases are also trading partners of the United States. As a result, Canada has agreed to recognize a list of 143 EU GIs in Canada, and Japan has agreed to recognize 71 EU GIs in Japan. More than 4,500 product names are registered and protected in the EU for foods, wine, and spirits originating in both EU member states and other countries. The EU's GI program remains a contentious issue for many in the U.S. Congress, particularly among Members with dairy constituencies. Some have long expressed their concerns about EU protections for GIs, which they claim are being misused to create market and trade barriers. A 2019 study commissioned by the U.S. dairy industry forecasts declining U.S. cheese exports due to expanding restrictions on the use of generic terms such as parmesan, asiago, and feta cheese. However, some U.S. agricultural industry groups are trying to create a system similar to the EU GI system for U.S. products to promote certain distinctive American agricultural products as part of the American Origin Products Association, which represents certain U.S. potato, maple syrup, ginseng, coffee, and chile pepper producers and certain U.S. winemakers, among other regional producer groups, and seeks to work with federal authorities to \"create of a list of qualified U.S. distinctive product names, which correspond to the GI definition.\" Status: GIs are included among other IPR issues in the current U.S. trade agenda. The proposed USMCA protects common names and limits the ability to register new GIs that some producers regard as common (generic) names. USMCA includes a side letter between the U.S. and Mexico regarding the use of 33 cheese names. GIs have been an active area of debate between the United States and EU in previous trade negotiations. GIs continue to be a trade issue for USTR, and the United States is working \"to advance U.S. market access interests in foreign markets and to ensure that GI-related trade initiatives of the EU, its Member States, like-minded countries, and international organizations, do not undercut such market access,\" stating that the EU's GI agenda \"significantly undermines the scope of trademarks and other [intellectual property] rights held by U.S. producers and imposes barriers on market access for American-made goods that rely on the use of common names.\" Previously, USDA officials have indicated that the United States would likely not agree to EU demands to reserve certain food names for EU producers and have expressed concerns about the EU's system of protections for GIs. GIs are also included in the United States' IPR negotiating objectives for the U.S.-EU and U.S.-Japan trade negotiations. The U.S. embargo on trade and financial transactions with Cuba dates from 1962. The sanctions on Cuba were partially eased in 2000 with regard to U.S. exports of agricultural products with the enactment of the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 ). The law allows for one-year export licenses for selling agricultural commodities to Cuba but without the availability of U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees to finance the trade. The law also denies exporters of agricultural goods access to U.S. private commercial financing or credit, although U.S. private export financing is permitted for all other authorized export trade to Cuba. Moreover, all agricultural product transactions must be conducted on a cash-in-advance basis or with financing from third countries. Cuba received almost $5.7 billion, in nominal dollars, in U.S. agricultural products from FY2001 to FY2018. U.S agricultural exports to Cuba peaked in FY2008, reaching $658 million. Major exports during the earlier years included poultry, corn, soybeans, wheat, rice, and feed and fodder products including soybean meal and distillers grains. Since FY2008, U.S. agricultural exports to Cuba declined partly due to negligible exports of rice, wheat, cotton, beef, pork, and distillers grains. Shipments of U.S. farm products to Cuba amounted to $230 million in FY2018, down from $266 million in FY2017. A USDA attaché report on Cuba contends that the decline in U.S. market share in Cuba \"is largely attributable to a decrease in bulk commodity exports from the United States in light of favorable credit terms offered by key competitors.\" The same report concluded that lifting U.S. restrictions on travel and capital flow to Cuba, and enabling USDA to conduct market development and credit guarantee programs in Cuba, would help the United States recapture its market share in Cuba. A 2016 USITC report noted that Cuba imports 70%-80% of its food needs, which amount to some $2 billion per year. Given the price competitiveness and logistical advantages of key U.S. agricultural products compared with export competitors, ITC indicated that U.S. agricultural exports could expand significantly—to about $800 million within five years—if the remaining U.S. restrictions on trade with Cuba were removed. The report identified corn, wheat, rice, and dairy products (particularly milk powder) as the commodities that could see the greatest dollar increase in exports over the near term. The same report observed that U.S. agricultural suppliers view prohibitions on providing credit on food and agricultural product sales and U.S. restrictions on travel to Cuba as key obstacles to increasing U.S. farm exports to the island nation. USDA also maintains that Cuba would likely develop comparative advantages in the production and export of certain citrus and tropical fruit, vegetables, tropical plants, and cut flowers. Some agricultural interests in Florida have expressed concern about potentially subsidized competition from Cuba and exposing U.S. agriculture to invasive pests and diseases. Sugar trade could be an area that would require negotiations. The United States is a major sugar importer, and Cuba is a sugar exporter. Should the embargo be further eased, Cuba may wish to export sugar to the United States. The United States tightly manages sugar imports, so any access for Cuba to export sugar to the U.S. market would have to be negotiated. Status: In December 2014, President Obama announced a major shift away from a sanctions-based policy with Cuba toward a policy of engagement. President Obama acknowledged that he did not have the authority to lift the embargo because it is codified into Section 102(h) of the Cuban Liberty and Democratic Solidarity Act of 1996, P.L. 104-114 . Removing the overall economic embargo would require amending or repealing that law as well as other statutes—such as the Cuban Democracy Act of 1992 (Title XVII of P.L. 102-484 ) and the Trade Sanctions Reform and Export Enhancement Act ( P.L. 106-387 )—that include provisions impeding normal economic relations with Cuba. In 2017, the Trump Administration introduced new sanctions and partially rolled back some of the Obama Administration's efforts to normalize relations, including adding restrictions on transactions with companies controlled by the Cuban military and the elimination of individual people-to-people travel. On March 4, 2019, the Administration allowed lawsuits to go forward against some 200 Cuban entities operated by the Cuban military, intelligence, or security services for trafficking in confiscated property. Amid this policy shift toward Cuba, the 2018 farm bill ( P.L. 115-334 ) permits funding to be used to operate two U.S. agricultural export promotion programs in Cuba—the Market Access Program and the Foreign Market Development Cooperator Program. For more on U.S. agricultural trade with Cuba, see CRS Report R44119, U.S. Agricultural Trade with Cuba: Current Limitations and Future Prospects . For information on U.S. policy toward Cuba, see CRS Report R44822, Cuba: U.S. Policy in the 115th Congress and CRS In Focus IF10045, Cuba: U.S. Policy Overview . The GSP provides duty-free tariff treatment for certain products from designated developing countries. U.S. agricultural imports under GSP totaled $2.4 billion in 2018, accounting for about 15% of the value of total U.S. GSP imports. Leading agricultural imports (based on value) include processed foods and food processing inputs, beverages and drinking waters, processed and fresh fruits and vegetables, sugar and sugar confectionery, olive oil, fresh fruits, and miscellaneous food preparations and inputs for further processing. In 2018, the six leading GSP countries—Thailand, India, Turkey, Indonesia, Brazil, and Argentina—accounted for nearly 70% of all GSP-eligible U.S. agricultural imports. In recent years, a debate has emerged over the limits of eligibility for GSP treatment. Over the past decade, GSP has been extended through a series of short-term extensions—most recently until December 31, 2020 ( P.L. 115-141 ). This latest extension made certain technical modifications related to GSP imports and required USTR to submit an annual report to Congress on its efforts to ensure that GSP countries are meeting the eligibility criteria for the program. Members of Congress have expressed a range of views on whether to include emerging market developing countries (e.g., India, Brazil) as GSP beneficiaries or limit the program to least-developed countries. Some GSP beneficiary countries have become ineligible to participate in the U.S. program. For example, in 2014, Russia's GSP status was terminated, and in 2017, Seychelles, Uruguay, and Venezuela were graduated out of the program because it was determined they had become \"high income\" countries. Argentina's GSP eligibility was suspended in 2012 but was reinstated in 2017. In early 2018, USTR initiated a series of actions regarding GSP as part of its ongoing review of specific country practices. USTR's review is in response to concerns about the countries' compliance under the program but is also part of its GSP country eligibility assessment and petition process. Some of the countries subject to USTR's review are actively exporting to the United States under GSP, including India, Indonesia, and Turkey. Combined, these three countries accounted for an estimated $800 million in 2018, or about one-third of the value of all GSP-eligible agricultural imports to the United States. The interagency Trade Policy Staff Committee, chaired by USTR, reviews and revises the lists of eligible products annually, generally on the basis of petitions received from beneficiary countries or interested parties requesting that additional products be added or removed. When a country's petition for product eligibility is approved, the product becomes GSP-eligible for all GSP-beneficiary developing countries (or only for least developed countries if so designated). Based on previous reviews, opinions within the U.S. agricultural industry are often mixed, reflecting both support for and opposition to the current program. Status: USTR initiated its current annual GSP product and country review in March 2019 and announced its intention to terminate GSP designations for Turkey and India \"because they no longer comply with the statutory eligibility criteria.\" Press reports suggest that continued U.S. GSP eligibility is a top priority for India, while other reports suggest that Turkey views U.S. GSP review standards as being in violation of WTO rules. Action by USTR to terminate GSP designations for Turkey and India could increase trade tensions between the United States and these two trading partners, potentially affecting future trade relations and U.S. agricultural exports. Some in Congress have expressed opposition to the Administration's stated intent to terminate India's designation as a GSP beneficiary. A survey of companies conducted by the Coalition for GSP suggests that terminating India's and Turkey's GSP beneficiary status could adversely affect U.S. businesses, including some food and agricultural companies, through higher tariffs for some imported products and ingredients. The EU has historically been one of the top U.S. agricultural export markets, currently ranking as the fourth-largest buyer of U.S. agricultural products. U.S. agricultural exports to the EU totaled $12.7 billion in FY2018 and for FY2019 is forecast to reach $13.4 billion. Tree nuts, soybeans, and alcoholic beverages are among the top U.S. exports to the EU based on value. The EU is also a major supplier of U.S. agricultural products. The United States imported $23.7 billion worth of agricultural products in FY2018, and USDA forecasts imports of $24 billion in FY2019. Processed agricultural products such as wine and beer, essential oils, cheese, and other consumer-oriented food products are the top U.S. purchases from the EU. Based on the value of agricultural trade, the U.S. agricultural trade deficit with the EU was $11 billion in FY2018 and is projected to be $10.6 billion in FY2019. The United States and the EU are the world's largest mutual trade and investment partners. Although this trading relationship is largely harmonious, the EU was among those U.S. trading partners that placed retaliatory tariffs on some U.S. products in response to Section 232 tariffs imposed by the Trump Administration on U.S. imports of steel and aluminum. Effective in June 2018, the EU imposed tariffs of 25% on U.S. exports of prepared vegetables and legumes, grains, fruit juice, peanut butter, and whiskey, among other products. These tariffs affect about $1 billion in U.S. agricultural exports to the EU, or about 8% of total U.S.-EU agricultural trade in recent years. In July 2018, the Trump Administration and the EC issued a joint statement announcing that they were forming an executive working group that will seek to reduce transatlantic barriers to trade, including eliminating non-auto industrial tariffs and non-tariff barriers. In October 2018, USTR officially notified Congress of the Administration's intention to start negotiations. The WTO reports that the simple average WTO MFN tariff applied to agricultural products entering the United States was 5.1% in 2014, compared to an average of 12.2% for products entering the EU. Including all products imported under an applied tariff or a TRQ, USDA reports that the calculated average rate across all U.S. agricultural imports is roughly 12%, well below the EU's average of 30%. Restrictive TRQs on EU imports of agricultural products are an issue for U.S. exporters. In 2013, the Obama Administration engaged in negotiations with the EU as part of the Transatlantic Trade and Investment Partnership (T-TIP) with the goal of concluding a \"comprehensive and high standard\" agreement within two years. T-TIP's last negotiating round was in October 2016, and negotiations were largely paused for both sides to evaluate progress. Underlying regulatory and administrative differences between the United States and the EU on issues of food safety, public health, and IPR for some types of agricultural products have been areas of contention in these negotiations. The United States and the EU have engaged in a series of long-standing disputes involving agricultural products and certain SPS standards. These include, for example, delays in reviews of biotech products (limiting U.S. exports of grain and oilseed products), prohibitions on growth hormones in beef production and certain antimicrobial and pathogen reduction treatments (limiting U.S. meat and poultry exports), and complex certification requirements (limiting U.S. exports of processed foods, animal products, and dairy products). Other EU regulations of concern to U.S. exporters include the arguable lack of a science-based focus in establishing SPS measures, difficulty meeting food safety standards and securing product certification, the perceived lack of cohesive labeling requirements, and stringent testing requirements that appear to be implemented often inconsistently among EU member nations. Some U.S. agricultural producers also oppose EU policies on GIs. (See section \" Geographical Indications (GIs) .\") Status: In January 2019, USTR announced its negotiating objectives for a U.S.-EU trade agreement following a public comment period and a hearing involving several leading U.S. agricultural trade associations. These include agricultural policies—both market access and non-tariff measures such as TRQ administration and other regulatory issues. Among regulatory issues, key U.S. objectives include harmonizing regulatory processes and standards to facilitate trade, including SPS standards, and establishing specific commitments for trade in products developed through agricultural biotechnologies. The U.S. objectives also include addressing GIs by protecting generic terms for common use. U.S. agricultural interests generally support including agriculture as part of the U.S. negotiating objectives for a U.S.-EU trade agreement. Several Members of Congress support this position and are opposed to the EU's decision to exclude agricultural policies in their negotiating mandate. A letter to USTR from a bipartisan group of 114 House Members states that \"an agreement with the EU that does not address trade in agriculture would be, in our eyes, unacceptable.\" Senate Finance Committee Chairman Chuck Grassley has reiterated, \"Bipartisan members of the Senate and House … have voiced their objections to a deal without agriculture, making it unlikely that such a deal would pass Congress.\" The EU, however, has indicated that it is planning for a more limited negotiation that does not include agricultural products and policies. In late January 2019, the EC published a progress report confirming that its joint agenda does not include agriculture, since it \"is a sensitivity for the EU side.\" The EU negotiating mandate states that a key EU goal is \"a trade agreement limited to the elimination of tariffs for industrial goods only, excluding agricultural products.\" Separately, the EU has taken certain measures to avoid escalating agricultural trade tensions with the United States, for example, by increasing imports of U.S. soybeans as a source of biofuels and by proposing to lift a ban on certain pest-resistant American grapes in EU wine production, among other measures. At the same time, the EU has announced that it would retaliate against \"unlawful subsidies given\" to Boeing by imposing increased tariffs on imports of U.S. food products such as frozen fish, fruits, wine, liquors, and ketchup. In 2018, the United States concluded an injury investigation regarding ripe olives imported from Spain based on complaints from two California-based olive producers. In June 2018, DOC announced its affirmative final determinations in the AD and CVD investigations. In the AD investigation, DOC found that Spanish ripe olives were being sold in the United States at less than fair value and calculated dumping margins ranging from about 17% to 25% on imports of ripe olives from Spain. In the CVD investigation, DOC determined that Spanish ripe olive producers and exporters were subsidized at rates ranging from about 8% to 27%. In July, USITC determined that U.S. producers were materially injured by imports of ripe olives from Spain. Given these determinations, AD and CVD duty orders on U.S. Spanish ripe olive imports were issued and became effective on August 1, 2018. Status: In January 2019, the EU requested WTO dispute consultations with the United States concerning U.S. AD and CVD duties imposed on imported ripe olives from Spain. The EU position is that these measures are inconsistent with the U.S. commitments under the WTO. USTR states that \"the EU's case is without merit\" and that it intends to \"fight it very aggressively.\" AD/CVD duties levied against ripe olives from Spain have reportedly already cost the Spanish olive industry an estimated $27 million in lost exports. The United States and the EU have engaged in a long-standing trade dispute over the EU's ban on hormone-treated meat. The EU adopted restrictions on livestock production in the early 1980s, limiting the use of natural hormones to therapeutic purposes, banning the use of synthetic hormones, and prohibiting imports of animals and meat from animals that have been administered the hormones. In response, the United States suspended trade concessions with the EU in 1999 by imposing retaliatory tariffs of 100% ad valorem on selected food products from EU countries. Despite an ongoing series of WTO dispute settlement proceedings and decisions, the United States and the EU continue to disagree on a range of legal and procedural issues, as well as the scientific evidence and consensus affirming the safety of hormone-treated beef. Many in the United States perceive EU's action and the use of SPS measures and non-tariff barriers as disguised protectionism intended to unjustifiably restrict and discriminate against product exports from certain countries. In January 2009, USTR announced its intent to make changes to the list of EU products subject to increased tariffs under the dispute, including changes to the EU countries and products affected, with additional tariffs on some products. The EU claimed that this action constituted an \"escalation\" of the dispute. In May 2009, following a series of negotiations, the United States and the EU signed a memorandum of understanding that phased in certain changes over the next several years, and the United States suspended its retaliatory tariffs for imported EU products under the dispute. As part of the 2009 memorandum, the EU granted market access to U.S. exports of beef raised without growth promotants as part of its High-Quality Beef (HQB) TRQ. The EU's HQB quota is currently set at 45,000 MT annually and assessed a customs tariff of 20%. However, the HQB quota remains open to other beef exporting nations, which effectively limits the ability for U.S. beef producers to fully benefit under the quota. According to USTR and the U.S. beef industry, most of the HQB quota has been filled by countries other than the United States, and the EU has been unwilling to consider an allocation that would reserve a significant part of the HQB quota for the United States. In December 2016, USTR proposed reinstating retaliatory tariffs on EU products under the dispute. In February 2017, USTR convened a hearing to review this possible retaliatory action. To date, the United States has not imposed retaliatory tariffs connected to the U.S.-EU beef hormone dispute. Status: The EU continues to impose bans and restrictions on meat produced using hormones, beta agonists, and other growth promotants, and it allows only imports of beef produced without hormones subject to the EU's HQB quota. The United States maintains that scientific evidence demonstrates that meat produced using hormones, beta agonists, and other growth promotants is safe for consumers. The United States continues to seek a U.S.-specific allocation of the EU's HQB import quota. In late 2018, the EU agreed to review its existing HQB quota and renegotiate its quota with the United States with the expectation that a revised HQB agreement would be implemented in early 2019. In March 2019, press reports indicated that the U.S. and EU had reached an \"agreement in principle\" for reallocating the EU's HQB quota, which could provide the United States a share of EU's annual quota. If realized, such an agreement could result in additional market access to the EU for U.S. beef certified as produced without hormones. In January 2009, the United States escalated a long-running dispute with the EU over its refusal to accept imports of U.S. poultry that are subject to certain pathogen reduction treatments (PRTs). PRTs are antimicrobial rinses that have been approved for use by the USDA in poultry production to reduce the amount of microbes on meat. Meat and poultry products processed with PRTs are judged safe by the United States and also by European food safety authorities. However, the EU prohibits the use of PRTs and the importation of poultry treated with these substances. The EU generally opposes such chemical interventions and asserts that its own poultry producers follow much stricter production and processing rules that are more effective in reducing microbiological contamination than simply washing poultry products. In general, EU consumer groups argue that the use of such treatments compensates for poor hygiene in the supply chain. The United States requested WTO consultations with the EU on the matter, a prerequisite first step toward the establishment of a formal WTO dispute settlement panel. A WTO panel was subsequently established in November 2009, but this case has not moved forward. In 2013, USDA submitted an application for the approval of peroxyacetic acid as a PRT for poultry. Although the EU initially put forward a proposal to authorize the PRT, the EU withdrew its proposal in December 2015, citing the European Food Safety Authority's (EFSA) opinion of insufficient evidence of peroxyacetic acid's efficacy against campylobacter. EFSA cleared lactic acid for reducing pathogens on beef carcasses, cuts, and trimmings in 2011. In 2013, the EU lifted its ban on the use of lactic acid in beef PRTs on beef carcasses, half-carcasses, and beef quarters in the slaughterhouse. In 2017, the National Pork Producers Council submitted an application to EFSA to approve organic lactic and acetic acid for use on pork carcasses and cuts. EFSA's panel report, issued in October 2018, concluded that use of the treatments do not pose a safety concern provided that the substances comply with the EU specifications for food additives and that their use is efficacious compared to untreated meat. However, EFSA raised questions about whether lactic and acetic acid were more efficacious than water treatment for certain applications. Status: The United States continues to maintain that PRTs are a \"critical tool during meat processing that helps further the safety of products being placed on the market\" and continues to seek approval of certain PRTs for beef, pork, and poultry. To date, however, the United States and the EU have not been able to agree on a number of issues related to veterinary equivalency, and the EU continues to prohibit any substance other than water to remove contamination from animal products unless the EU approves the substance. In December 2018, USDA's Animal and Plant Health Inspection Service (APHIS) responded to the WTO notification of a new EU regulation, 2017/625, concerning new requirements for gelatin and collagen entering the EU for human consumption. In FY2018, the U.S. exported over $199 million worth of raw materials to the EU for the production of gelatin and collagen that were intended for human consumption. APHIS and industry trade groups have objected to the EU's new requirement, which would be enforceable as of December 14, 2019. U.S. animal byproduct exports to the EU follow an EU regulation in force since 2011 that provides detailed rules for trade in animal byproducts. The current regulation allows APHIS to make changes to the list of eligible U.S. animal byproduct facilities that are authorized to export to the EU. The new EU regulation would require all U.S. animal byproduct exporters to register their establishments in the EU Trade Control Expert System (TRACES). APHIS contends that the TRACES registration process is cumbersome in that it could take more than a month to add a new facility or to amend an existing approval, creating delays that could potentially impede trade. Currently, the EU recognizes only U.S. meat intended for human consumption overseen by the Food Safety and Inspection Service (FSIS) of USDA as equivalent to EU-produced products. As a result, many FSIS-inspected establishments are already listed in TRACES. However, not all animal byproduct facilities in the United States are overseen by FSIS, and these may not already be listed on TRACES. Some raw materials intended for collagen or gelatin products may have originated from FSIS-inspected establishments, but processed products and animal feeds may be overseen by U.S. Food and Drug Administration or other federal agencies. The new EU proposed regulation would eventually allow many of these facilities to be listed in TRACES. Under the current EU Regulation 142/2011 Chapter 8 Health Certificate, APHIS is the recognized oversight authority for U.S. exports. The EU's proposed 2017 regulation Model Certificate would require that APHIS be present at all times during the loading of animal byproducts into a container. U.S. trade associations have expressed the view that the EU-specific certificate requirements are not consistent with guidance provided by Codex Alimentarius—the international food standards organization that sets guidelines to protect public health and ensure fair practices in the food trade. Instead, they allege that the EU requirements are unnecessarily restrictive and would have \"the effect of closing the EU market to the majority of U.S. hides and skins exported for the purposes of edible gelatin and collagen production.\" Status: In December 2018, APHIS submitted comments to the WTO in response to the proposed EU 2017 draft regulation. APHIS \"requests that the EU delay the proposed implementation date to allow for competent authorities [USDA] to adequately prepare for implementation and provide the EU additional time to clarify its requirements.\" Officials at APHIS await an official response from the EU. In 2018, exports of U.S. livestock and products totaled $29.6 billion, while imports totaled $16.5 billion. Foreign demand for U.S. animals and products supports prices of domestic livestock, poultry, and dairy products, while imports help to meet U.S. consumer demand for a variety of livestock and dairy products. U.S. producers in the livestock sector look to the U.S. government to negotiate market access agreements, monitor international trading policies, and settle trade disputes, including restrictions that certain countries impose on U.S. exports in response to animal disease concerns. In 2019, the USDA forecasts that exports of meat and poultry products will represent about 17% of U.S. domestic production. Periodically, foreign countries impose export bans on U.S. meat products in response to an outbreak of certain animal diseases. The bans are disruptive for livestock producers and meat exporters, are often inconsistent with internationally accepted protocols, and vary in terms of how broadly and how long trading partners apply them. For example, bans were imposed on U.S. beef exports because of the discovery of bovine spongiform encephalopathy (BSE, or mad cow disease) in 2003. An outbreak of highly pathogenic avian influenza (HPAI) at the end of 2014 and early 2015 in U.S. turkey and egg-laying flocks triggered export bans on poultry products by more than 30 countries. The bans on U.S. broiler meat exports were imposed for various periods of time even though the HPAI outbreaks were not in areas in close proximity of commercial broiler production. The World Organization for Animal Health (known as OIE) has established trade protocols when disease outbreaks occur in countries that export meat and poultry products. According to OIE, in most cases total export bans are not recommended or needed when there is a BSE or HPAI discovery or outbreak in exporting countries. In 2013, the OIE determined that the United States is at \"negligible risk\" for BSE, meaning that U.S. surveillance and safeguard systems are strong. For HPAI, USDA, in collaboration with states, has implemented increased flock biosecurity and has a system in place to rapidly contain and eradicate an outbreak of HPAI. Over the years, while some foreign markets imposed total bans on U.S. beef exports following the 2003 BSE incident, other export markets for U.S. beef imposed specific conditions for imports of U.S. beef. For example, Japan and South Korea—two importers of U.S. beef—require that imported U.S. beef be produced from cattle under 30 months of age. China did not lift its ban on U.S beef exports until 2017 and included an age restriction when it did. Regarding poultry, some foreign markets imposed total bans on poultry exports during the HPAI outbreak, while other markets imposed export bans only from the regions affected by the outbreak, consistent with the recommended OIE protocol. As the United States demonstrated that the outbreak was contained and then eliminated, most of these bans were lifted. Status: China lifted the ban on U.S. beef in 2017 but restricts imports of U.S. beef to cattle under 30 months of age, similar to other countries that maintain age restrictions. The OIE guidelines do not include age restrictions for countries with the \"negligible risk\" status. China also requires that U.S. exporters of beef to China participate in the USDA Agricultural Marketing Service export verification program, which verifies that U.S. suppliers are meeting importing country requirements. In 2017 and 2018, the U.S. shipped about 10,000 MT of beef to China, representing 0.5% total U.S. beef exports. China continues to ban U.S. exports of poultry meat because of the HPAI outbreak and has been unwilling to accept regionalization—the internationally accepted principle that export bans be applied only to areas affected by an animal disease outbreak. In 2018, the United States and South Korea reached an agreement accepting regionalization in the event of an HPAI outbreak in the United States instead of imposing nationwide bans. Currently, 33 countries are eligible to export meat and poultry to the United States. Before the United States authorizes imports of meat or poultry, APHIS conducts risk assessments of any foreign animal diseases that could pose a threat to U.S. animal health. Also, FSIS must determine if a foreign meat or poultry inspection system provides an \"equivalent\" level of sanitation and protection of public health as the U.S. system. Foreign governments document how inspection systems are regulated, and FSIS conducts onsite audits of foreign facilities. FSIS also conducts equivalency verification and periodic audits of countries already approved to export meat and poultry to the United States. In August 2013, FSIS confirmed that China's poultry processing inspection system was equivalent to the U.S. poultry inspection system. This determination allowed China to export processed (cooked) poultry meat that is sourced raw from the United States or from countries eligible to export poultry to the United States. In March 2016, FSIS recommended that the process of verifying equivalency for China's poultry slaughter inspection system move forward. In August 2017, FSIS released an audit report confirming that China's poultry processing system remained equivalent. To date, USDA has not issued a final rule on equivalency for China's poultry slaughter system. These actions were the culmination of a process that began in 2005, when China requested that USDA evaluate its poultry inspection system. Congress halted the process in FY2006, when appropriations provisions prohibited FSIS from expending funds to evaluate China's poultry inspection system. The process resumed in FY2010 on the condition that FSIS provide Congress with regular reports on the equivalency process. The possibility that the United States could import poultry meat from China has alarmed some food safety advocates and some Members of Congress because of concerns about relatively lax food safety enforcement in China for both domestically consumed products and exports. Testimony presented during a Congressional-Executive Commission on China hearing highlighted concerns regarding China's food safety. Status: In response to concern about China's record on food safety, Section 749 of Division B of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), prohibits USDA from using any funds to purchase Chinese raw or processed poultry products for feeding programs, including the school lunch and school breakfast programs. Section 753 of Division B of the FY2019 appropriations act prohibits USDA from finalizing the proposed rule to allow the importation of slaughtered Chinese poultry. In 2017, the United States imported about 500 pounds of processed poultry meat from China but did not import any processed poultry meat in 2018. If Congress were to lift the appropriations prohibition on finalizing the China poultry slaughter rule, China would still be restricted to sending only cooked/processed products because of APHIS restrictions on uncooked/processed products due to the presence of animal diseases in China, such as avian influenza. The United States restricts or prohibits the importation of animals or animal products (including meat) from countries where highly infectious animal diseases exist in order to protect U.S. herds. Fresh beef imports from Brazil and Argentina have been prohibited or restricted because of foot-and-mouth disease (FMD) in the two countries. U.S. beef imports from Brazil and Argentina have mostly been limited to fully cooked/processed product. Argentina was approved to export fresh beef to the United States from 1997 to 2001,\\ until the United States halted exports after an Argentine FMD outbreak in 2001. In December 2013, APHIS proposed a rule that would allow fresh beef imports from 13 regions in Brazil. In August 2014, APHIS proposed a separate rule to allow fresh beef imports from Patagonia and northern Argentina. In July 2015, APHIS released final rules to allow the import of fresh beef from these regions of Brazil and Argentina. USDA risk assessments determined that, under certain circumstances, fresh beef could be safely imported from Brazil and Argentina without threatening the FMD-free status of the United States. Some livestock industry stakeholders, such as the National Cattlemen's Beef Association and the National Farmers Union, have expressed opposition to allowing fresh beef from Brazil and Argentina because neither country is considered to be free of FMD. FMD was eradicated in the United States in 1929, and any introduction of the disease back into the United States could be economically devastating for the livestock industry. In 2013, the Department of Homeland Security estimated that the cost of an FMD outbreak in the United States could exceed $50 billion. In May 2015, FSIS found that Brazil's beef inspection system would provide an equivalent level of food safety as the U.S. system. In August 2016, USDA announced that Brazil was approved to ship fresh beef to the United States, and the first shipments arrived the following month. In June 2017, USDA suspended imports of fresh beef from Brazil after FSIS found problems with re-inspected Brazilian beef at the U.S. port of entry. According to USDA, FSIS was re-inspecting 100% of Brazilian fresh beef imports and refused entry to 11% of shipments, well above the 1% refusal rate for other beef imports. In November 2018, FSIS announced that the Argentine beef inspection system was equivalent, and the country could export fresh beef to the United States again. FSIS also announced that within six months of the November 2018 equivalency determination, the agency would undertake additional onsite audits of Argentina's raw beef inspection system. Status : The United States continues to suspend its approval of fresh beef imports from Brazil. The United States imported about 10,000 MT of fresh Brazilian beef since September 2016, when U.S. imports began, until shipments were suspended in June 2017. In a step to allow U.S. beef imports from Brazil to resume, President Trump and President Bolsonaro of Brazil issued a joint statement during President Bolsonaro's March 2019 visit in which the United States agreed to \"expeditiously schedule\" an audit of Brazil's beef inspection system once FSIS is \"satisfied with Brazil's food safety documentation.\" The United States imported nearly 1,100 pounds of fresh beef from Argentina in December 2018. Argentina holds a 20,000 MT ton duty-free TRQ allotment for beef shipments to the United States. Ractopamine, an animal drug that increases animal weight gain and meat yield, is approved by FDA for use in U.S. cattle, hog, and turkey production. It is also approved for use in countries such as Canada, Japan, Mexico, and South Korea, but many other countries ban the use of ractopamine in meat production. In 2012, the Codex Alimentarius—the international food standards organization that sets guidelines to protect public health and ensure fair practices in the food trade—set maximum residue levels for ractopamine in beef and pork. However, several of the largest markets for U.S. meat exports have restricted imports of meat produced with ractopamine, despite U.S. adherence to the residue standards established by Codex. The USTR, in its \"2019 National Trade Estimate Report on Foreign Trade Barriers,\" states that the EU, China, Taiwan, and Thailand continue to restrict U.S. meat exports produced with ractopamine. According to FSIS, U.S. meat exports—particularly pork—may be shipped to markets with ractopamine restrictions if the exported product is raised without ractopamine and is certified through USDA's Never Fed Beta Agonists Program. U.S. exports to markets that have ractopamine restrictions are subject to increased certification and testing costs, potentially affecting competitiveness and dampening market opportunities. Status : USDA and the USTR continue to engage with trading partners to encourage them to accept international standards on the use of ractopamine. In March 2009, USDA implemented a final rule to implement country-of-origin labeling (COOL) to provide consumers information on the origin of fresh fruits and vegetables, fish, shellfish, peanuts, pecans, macadamia nuts, ginseng, and ground and muscle cuts of beef, pork, lamb, chicken, and goat. The rules were required by the 2002 farm bill ( P.L. 107-171 ) as amended by the 2008 farm bill ( P.L. 110-246 ). In 2009, Canada and Mexico challenged U.S. COOL in the WTO, arguing that COOL reduced the value and number of cattle and hogs shipped to the U.S. market, thus violating WTO trade commitments. In 2011, the WTO found that COOL treated imported livestock less favorably than U.S. livestock and did not provide complete information to consumers on the origin of meat products. The United States appealed the WTO ruling, but the Appellate Body upheld the findings. USDA issued a revised COOL rule in May 2013, which required that production steps—born, raised, and slaughtered, by origin country—be included on meat labels, but in 2014 the WTO found that the revised COOL regulations still violated U.S. WTO obligations by discriminating against imported livestock. In December 2015, the WTO authorized Canada and Mexico to retaliate against $1 billion worth of products imported from the United States. In December 2015, Congress repealed the COOL requirements for beef and pork and ground beef and pork in Section 759 of Division A of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). USDA then issued a final rule that removed beef and pork from COOL regulations, thus settling the trade dispute. Even so, Canada and Mexico retain their rights granted by the WTO to retaliate if the United States should implement laws or regulations that violate the WTO findings on U.S. COOL for beef and pork. Status : Following the repeal of COOL for beef and pork, several state legislatures—including Wyoming, South Dakota, Montana, and Colorado—have considered bills that would require COOL on meat sold within the state, but thus far none has been enacted. The Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America and the Cattle Producers of Washington sued USDA to restore COOL for beef and pork in June 2017. In June 2018, the district court in eastern Washington ruled in favor of USDA because the plaintiffs had missed \"the applicable statute of limitations time period and because the regulations follow Congress's clear intent.\" In June 2018, the Organization for Competitive Markets and the American Grassfed Association petitioned FSIS to change its \"Product of USA\" label. The organizations state that foreign meat is imported into the United States, minimally processed, and then sold as \"Product of USA\" meat. The petition requests that FSIS change its Food Standards and Labeling Policy Book to clarify that the ingredients in a product must be of domestic origin to have a \"Product of USA\" label. To date, FSIS has not responded to this request. The 164-member WTO oversees and administers multilateral trade rules, serves as a forum for trade liberalization negotiations, and resolves trade disputes through its Dispute Settlement Understanding (DSU). As a signatory member of the WTO, the United States has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy. The WTO's general rules concerning subsidy disciplines, trade behavior, and market access concessions apply to all members. Two developments in 2018 have created some uncertainty about whether the United States will remain in compliance with rules and spending limits for domestic support programs that it has agreed to in the WTO. These developments are farm program changes under both the 2018 farm bill ( P.L. 115-334 ) and a new USDA direct payment program—the MFP—implemented in 2018 under other statutory authorities in response to foreign trade retaliation targeting U.S. agricultural products. The outcome will depend on market conditions, but the potential for non-compliance would be heightened if market prices for major commodity crops were to weaken and lower prices were to generate farm program payments above current USDA projections. In general, the farm program changes enacted in the 2018 farm bill incrementally shift farm safety net outlays away from decoupled programs that do not tie crop support payments to production and toward coupled programs that are potentially more market distorting. This resulted from the addition of a new, albeit temporary, coupled support program (the MFP) and, in the 2018 farm bill, from raising support levels for existing coupled programs and from removing several of the coupled programs from individual farm payment limit requirements. Direct farm support payments may occur under: One of the revenue-support programs authorized by the farm bill—the Market Assistance Loan (MAL), Agricultural Risk Coverage (ARC), Price Loss Coverage (PLC), and Dairy Margin Coverage (DMC) programs; A program authorized by the Secretary of Agriculture using authority under the CCC Charter to make payments in support of U.S. agriculture—two such programs are the Cotton Ginning Cost Share (CGCS) program and the MFP; or One of the four disaster assistance programs—the Livestock Forage Disaster Program (LFP), Livestock Indemnity Program (LIP), Tree Assistance Program (TAP), and Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP). In a change from previous policy, the 2018 farm bill excluded payments made under MAL, LIP, TAP, and ELAP from annual individual payment limits. DMC, like its predecessor—the Margin Protection Program—operates without any farm payment limit. The absence of a limit on benefits received by an individual farmer under these programs represents the potential for unlimited, fully coupled USDA farm support outlays that would count against U.S. domestic support limits agreed to under U.S. WTO commitments. MAL payments are coupled directly to actual production (subject to a producer's participation choice). DMC payments are made on a producer-selected share of a historical production base that is adjusted upward for annual growth in national average milk production. Milk producers must participate in the program to receive the annual base adjustment. Thus DMC payments are treated as coupled. The 2018 farm bill raised support levels for both dairy producers under the DMC and for several program crops under MAL, including barley, corn, grain sorghum, oats, extra-long-staple cotton, rice, soybeans, dry peas, lentils, and small and large chickpeas. Higher support levels increase the potential for higher payments during a market downturn. Such payments count against the market-distorting spending limit. Furthermore, coupled payments can influence producer production choices in favor of those farm activities expected to receive larger support payments. If such payments are noticeably large relative to the commodity's farm value and result in surplus production that moves into international markets, then they could attract the attention of competitor nations. Such spillovers, if measurably harmful to foreign export competitors or producers, could lead to challenges under the WTO's dispute settlement process. Of the direct payment programs, ARC and PLC are partially decoupled from producer behavior: Payments are made to a portion (85%) of historical base acres irrespective of actual plantings. Because of this they are notified as non-product specific and have been excluded from counting against WTO spending limits under a special \"de minimis\" exclusion, which allows minimum amounts of domestic support even if they are market distorting. Most of the other direct support programs—MAL, DMC, LFP, LIP, TAP, and ELAP—count against the United States' annual market-distorting \"amber box\" payment limit of $19.1 billion. CGCS and MFP are special cases. The United States has yet to notify spending under either of these programs to the WTO, so their exact WTO spending classification is currently unknown. However, because their payments are coupled directly to specific commodities, they could well be included with other market-distorting payments subject to the spending limit. To the extent that producers expect payments under these programs to recur, they can become market distorting and subject to potential WTO challenge. Secretary Perdue has, however, stated that MFP was a one-time assistance and would not be extended beyond the package announced in July 2018. CGCS outlays were $326 million in 2016 and $216 million in 2018. Actual outlays under MFP are estimated at $5.2 billion in 2018 and $3.5 billion in 2019. The U.S. sugar program does not rely on direct payments from USDA. Instead, USDA provides indirect price support via MAL loans to processors at statutorily fixed prices (which were raised slightly by the 2018 farm bill) while limiting the amount of sugar supplied for food use in the U.S. market. In its 2015 notification of domestic support to the WTO (the most recent notification year), USDA notified the implicit cost of the sugar program at $1.5 billion. The federally subsidized crop insurance program was largely unchanged by the 2018 farm bill. Annual USDA premium subsidies—which have averaged $6.4 billion per year since 2011—count against the U.S. trade-distorting spending limit of $19.1 billion. Payments under U.S. conservation programs are deemed generally non-market distorting and are notified as \"green box\" payments, which are not subject to any spending limit. Status: Most recent studies suggest that, for U.S. program spending to exceed the $19.1 billion cumulative spending limit, even with the addition of large MFP payments and higher MAL and DMC support levels, a combination of events would have to occur that would broadly depress commodity prices. Perhaps more relevant to U.S. agricultural trade is the concern that, because the United States plays such a prominent role in most international markets for agricultural products, any distortion resulting from U.S. policy would be both visible and potentially vulnerable to challenge under WTO rules. The United States was a major force behind the establishment of the WTO in 1995 and the rules and procedures governing its DSU. The United States has frequently used DSU, often successfully. Since the summer of 2017, the United States has blocked the appointment of new DSU Appellate Body (AB) jurists, which has limited the ability of the system to hear dispute cases. The AB currently has three jurists (the minimum number to hear a case) out of a total of seven positions. In December 2019, the terms of two of the three will expire, potentially leaving the AB unable to function if no new jurists are appointed. Status: Since the inception of the WTO in 1995, the United States has brought to it 46 cases on agriculture. Of these cases, 34 were fully or partially decided in favor of the United States by the WTO panel hearing the case. Most recently, the WTO ruled in favor of the United States against China over Chinese domestic support policies for its agricultural sector and over China's administration of its market access policies. The United States has notified the WTO on a similar domestic support case against India. However, if no new members are appointed to the WTO AB, then pending U.S. cases may be unable to move forward toward a ruling. In September 2016, USTR filed a dispute settlement case (DS511) at the WTO over Chinese domestic support policies for its agricultural sector that USTR alleged were inconsistent with WTO rules and commitments. Furthermore, USTR contended that China's policies had distorted international trade in wheat, rice, and corn and that government support payments were in excess of China's WTO spending limits. In December 2016, USTR requested that WTO establish a dispute settlement panel to examine China's domestic support levels for these crops, a request that was fulfilled in January 2017. In its challenge, USTR contended that the level of support that China provided for rice, wheat, and corn had exceeded—by nearly $100 million from 2012 through 2015—the level to which China had committed to when it joined the WTO. USTR also asserted that China's price support for domestic production had been above the world market prices since 2012, thereby creating an incentive for Chinese farmers to increase production of the subsidized crops, which in turn displaced imports from the United States and elsewhere. When China acceded to the WTO in 2001, some of its domestic support policies—including market price support and certain producer payments and input subsidies linked to production—became subject to an annual spending limit of 8.5% of each product's value based on China's domestic prices. Since all of China's domestic production was potentially eligible for the above-market support prices—and on the assumption that all domestic producers had incorporated the high support levels into their production decisions—USTR stated that the correct measure of total support should be based on the total production of wheat, rice, and corn in the provinces and regions where the support programs operated. However, USTR asserted that China reported the subsidies only on the smaller quantities purchased by the government. USTR also argued that China's fixed external reference price for wheat, rice, and corn should be based on the three-year averages of 1986-1988 world prices, as specified in the WTO Agreement on Agriculture. In contrast, China had used the much higher 1996-1998 prices, which had resulted in smaller price gap calculations. Finally, the United States and China disagreed on whether to measure the level of market price support for milled or unmilled rice and the appropriate conversion factor between the two. Status: On February 28, 2019, the WTO dispute settlement body (DSB) found that China had exceeded its domestic support limits for wheat and rice in each year between 2012 and 2015 and therefore was not in compliance with its WTO commitment. The panel agreed with China's reference price calculations based on 1996-1998 prices because these years had been used in China's WTO accession documentation. The panel disagreed with China's methodology of calculating domestic support taking into consideration only the purchases made by the government. The DSB panel made recommendations for calculation of reference prices and domestic support for China in order to comply with its WTO commitments. The DSB panel did not make a ruling on corn because, following the 2015 harvest, China made changes to its calculations of corn prices that were found to be less market distorting than the method used prior to 2015. If neither the United States nor China appeals the report, the findings and recommendations in the report would be adopted within 60 days of public circulation. China recently stated that it will not appeal the WTO ruling. On December 15, 2016, USTR filed another WTO dispute settlement case (DS517) against China, alleging that China's administration of its TRQs for wheat, rice, and corn are unclear and that China had failed to fill the within-quota commitments, thus undermining U.S. exports. While China announced on an annual basis the opening of TRQs, USTR stated that China's application criteria and procedures were unclear and that China did not provide meaningful information on how it actually administered the TRQs. When China joined the WTO in 2001, it agreed to create TRQs to allow imports of wheat, rice, and corn. Imports within the set quota volume would be levied a lower within-quota tariff rate, while imports beyond the set quota amount would be levied at a higher tariff rate. Under China's WTO commitments, by 2004, the wheat TRQ would reach 9.6 million metric tons, rice 5.4 million metric tons, and corn 7.2 million metric tons. The in-quota tariffs for all three commodities are 1%, while the over-quota tariffs are set at 65%. Despite the low within-quota tariff, China's TRQs for wheat, rice, and corn have never been filled even when imported grains were priced lower and were more competitive than domestic grains. According to prices reported by China's Ministry of Agriculture, during 2014-2016, the import prices were lower by about 30-40% for wheat, 25-35% for rice, and 15-35% for corn. USTR states that China's TRQ administration appears to restrict imports and fails to provide sufficient information to permit the processing of quota application and importation. Status: On September 22, 2017, a WTO DSB panel was established on \"China—Tariff Rate Quotas for Certain Agricultural Products\" (DS517). On April 18, 2019, the WTO ruled in favor of the United States, stating that \"China's administration of its TRQs for wheat, rice and corn were inconsistent with its obligations under the WTO to administer TRQs on a transparent, predictable and fair basis.\" The WTO recommends that China make changes to make its TRQ administration to conform with its WTO obligations. In May 2018, the United States challenged India's domestic agricultural support notifications at the WTO, charging that India had under-notified spending on its market price support for rice and wheat for the marketing years 2010/11 through 2013/14. The United States alleged that India's market price support for wheat and rice exceeded its allowable levels of trade distorting domestic support under the WTO. In November 2018, the United States also challenged India's domestic support for cotton, stating that it exceeded its allowable level under its WTO commitments. At about the same time, Australia, Brazil, and Guatemala challenged India's level of domestic support for sugar, charging that India had violated its WTO commitment levels. In February 2019, the United States further challenged India stating that it had substantially underreported its market price support for chickpeas, pigeon peas, black matpe (a type of black lentil), mung beans, and lentils. According to USTR, when calculated using the WTO Agreement on Agriculture methodology, India's market price support for each of these pulses has exceeded the allowable levels of trade-distorting domestic support under India's WTO commitments. Status: The United States' challenge to India's domestic support for rice and wheat was raised at the May 2018 WTO Committee on Agriculture (COA) meeting. USTR raised the issue concerning India's cotton price support during the November 2018 COA meeting, and the challenge against India's domestic support for pulses was raised at the February 2019 COA meeting. USTR raised these issues at the COA to alert India and other WTO members that the United States is aware and concerned about India's underreporting of its domestic agricultural subsidies. USTR intends to continue challenging India's domestic support for agriculture at upcoming COA meetings and, if necessary, could pursue these concerns through WTO's dispute settlement mechanism. ", "summary": "Sales of U.S. agricultural products to foreign markets absorb about one-fifth of U.S. agricultural production, thus contributing significantly to the health of the farm economy. Farm product exports, which totaled $143 billion in FY2018 (see chart below), make up about 9% of total U.S. exports and contribute positively to the U.S. balance of trade. The economic benefits of agricultural exports also extend across rural communities, while overseas farm sales help to buoy a wide array of industries linked to agriculture, including transportation, processing, and farm input suppliers. Congress has traditionally displayed a keen interest in agricultural trade issues given their importance to farmers and ranchers and to the overall economy. A major area of interest for the 116th Congress has been the loss of overseas export market shares for agricultural products due to the direction of the Trump Administration's trade policy, which places increased emphasis on reducing the overall U.S. trade deficit. In March 2018, the Trump Administration imposed Section 232 tariffs on U.S. imports of steel and aluminum from most countries and additional Section 301 tariffs on a number of imports from China. Following these actions, Canada, China, Mexico, the European Union (EU), and Turkey imposed retaliatory tariffs on more than 800 U.S. agricultural and food product exports. In response, USDA authorized $12 billion in short-term assistance to the affected agricultural producers and commodities under its Market Facilitation Program to help mitigate the economic impact on farmers. A number of policy developments undertaken by the Trump Administration in bilateral and regional trade agreements may affect agricultural markets as well. On the Administration's initiative, the North American Free Trade Agreement (NAFTA) has been renegotiated and signed as the U.S.-Mexico-Canada Agreement (USMCA). This agreement is subject to legislative ratification by Canada and Mexico and approval by U.S. Congress. President Trump withdrew the United States from the Trans-Pacific Partnership (TPP) in January 2017. In March 2018, the remaining 11 countries concluded a revised version of TPP, the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP). Signatories of CPTPP have begun to reduce tariffs and provide greater agricultural market access for imports from CPTPP signatory countries, actions that could potentially erode U.S. agricultural market shares in the region. At the bilateral level, the Trump Administration has notified Congress of its intent to begin trade negotiations with Japan (a CPTPP member), the EU, and the United Kingdom. At the global level, and at the initiative of the United States, the World Trade Organization (WTO) recently ruled that China has subsidized its agricultural production beyond the level permitted under its WTO obligations and that China's administration of its agricultural market access policies are inconsistent with its WTO obligations. The United States has also filed a counter notification against India at the WTO stating that India has underreported its agricultural domestic subsidies. Several other agricultural trade issues may be of interest to Congress. For example, the proposed USMCA does not address all the issues that restrict U.S. agricultural exports to Mexico and Canada, and Southeastern U.S. produce growers have been seeking changes to trade remedy laws to address imports of seasonal produce. A key objective of U.S. trade negotiations continues to be the establishment of a common framework for approval, trade, and marketing of the products of agricultural biotechnology. U.S. farm and food interests see the potential for market expansion opportunities in Cuba, but a prohibition on private U.S. financing is generally viewed as a major obstacle to this end. Moreover, the United States has announced its intention to withdraw eligibility for the Generalized System of Preference (GSP)—which provides duty-free tariff treatment for certain products from developing countries—from Turkey and India. On another front, U.S. exports of beef, pork, and chicken continue to face bans and trade restrictions over disease outbreaks even though the bans are inconsistent with international trade protocols, among which are China's ongoing bans on imports of U.S. beef and poultry and restrictions imposed by several foreign markets on U.S. ractopamine-fed pork.", "document_type": "crs"}
{"report": "Banks play a central role in the financial system by connecting borrowers to savers and allocating available funds across the economy. As a result, banking is vital to the U.S. economy's health and growth. Nevertheless, banking is an inherently risky activity involving extending credit and undertaking liabilities. Therefore, banking can generate tremendous societal and economic benefits, but banking panics and failures can create devastating losses. Over time, a regulatory system designed to foster the benefits of banking while limiting risks has developed, and both banks and regulatio n have coevolved as market conditions have changed and different risks have emerged. For these reasons, Congress often considers policies related to the banking industry. The last decade has been a transformative period for banking. The 2007-2009 financial crisis threatened the total collapse of the financial system and the real economy. Many assert only huge and unprecedented government interventions staved off this collapse. Others argue that government interventions were unnecessary or potentially exacerbated the crisis. In addition, many argue the crisis revealed that the financial system was excessively risky and the regulatory regime governing the financial system had serious weaknesses. Policymakers responded to the perceived weaknesses in the pre-crisis financial regulatory regime by implementing numerous changes to financial regulation, including to bank regulation. Most notably, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) in 2010 with the intention of strengthening regulation and addressing risks. In addition, U.S. bank regulators have implemented changes under their existing authorities, many of which generally adhere to the Basel III Accords—an international framework for bank regulation agreed to by U.S. and international bank regulators—that called for making certain bank regulations more stringent. In the ensuing years, some observers raised concerns that the potential benefits of those regulatory changes (e.g., better-managed risks, increased consumer protection, greater systemic stability, potentially higher economic growth over the long term) were outweighed by the potential costs (e.g., compliance costs incurred by banks, reduced credit availability for consumers and businesses, potentially slower economic growth). In response to these concerns, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act; P.L. 115-174 ). Among other things, the law modified certain (1) regulations facing small banks; (2) regulations facing banks large enough to be subjected to Dodd-Frank enhanced regulation but still below the size thresholds exceeded by the very largest banks; and (3) mortgage regulations facing lenders including banks. In addition, federal banking regulatory agencies—the Federal Reserve (the Fed), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC)—have proposed further changes in regulation. Implementing the regulatory changes prescribed in the aftermath of the crisis and made pursuant to the Dodd-Frank Act occurred over the course of years. In recent years—a period in which the leadership of the regulators has transferred from Obama Administration to Trump Administration appointees—the banking regulators have expressed the belief that, after having viewed the effects of the regulations, they now have the necessary information to determine which regulations may be ineffective or inefficient as currently implemented. Recently, these regulators have made of number of proposals with the aim of reducing regulatory burden. A key issue surrounding regulatory relief made pursuant to the EGRRCP Act and regulator-initiated changes is whether regulatory burden can be reduced without undermining the goals and effectiveness of the regulations. Meanwhile, market trends and economic conditions continue to affect the banking industry coincident with the implementation of new regulation. Some of the more notable conditions include the development of new technologies used in financial services (known as \"fintech\") and a rising interest rate environment following an extraordinarily long period of very low rates. This report provides a broad overview of selected banking-related issues, including issues related to \"safety and soundness\" regulation, consumer protection, community banks, large banks, what type of companies should be able to establish banks, and recent market and economic trends. This report is not an exhaustive look at all bank policy issues, nor is it a detailed examination of any one issue. Rather, it provides concise background and analyses of certain prominent issues that have been the subject of recent discussion and debate. In addition, this report provides a list of Congressional Research Service reports that examine specific issues. Banks face a number of regulations intended to increase the likelihood that banks are profitable without being excessively risky and prone to failures; decrease the likelihood that bank services are used to conceal the proceeds of criminal activities; and to protect banks and their customers' data from cyberattacks. This section provides background on these \"safety and soundness\" regulations and analyzes selected issues related to them, including prudential regulation related to capital requirements and the Volcker Rule (which restricts proprietary trading); requirements facing banks related to anti-money laundering laws, such as the Bank Secrecy Act (P.L. 91-508); and challenges related to cybersecurity. Bank failures can inflict large losses on stakeholders, including taxpayers via government \"safety nets\" such as deposit insurance and Federal Reserve lending facilities. Failures can cause systemic stress and sharp contraction in economic activity if they are large or widespread. To make such failures less likely—and to reduce losses when they do occur—regulators use prudential regulation designed to ensure banks are safely profitable and to reduce the likelihood of bank failure. In addition, banks are subject to regulations intended to reduce the prevalence of crime. Some of those are anti-money laundering measures aimed at stopping criminals from using the banking system to conduct or hide illegal operations. Others are cybersecurity regulations aimed at protecting banks and their customers from becoming victims of cybercrime, such as denial-of-service attacks or data theft. Banks profit in part because their assets are generally riskier, longer term, and more illiquid than their liabilities, which allows the banks to earn more interest on their assets than they pay on their liabilities. The practice is usually profitable, but does expose banks to risks that can potentially lead to failure. Failures can be reduced if (1) banks are better able to absorb losses or (2) they are less likely to experience unsustainably large losses. One tool regulators use to increase a bank's ability to absorb losses is to require banks to hold a minimum level of capital. Another tool regulators use to reduce the likelihood and size of potential losses is to prohibit banks from engaging in activities that could create excessive risks. For example, the Volcker Rule prohibits banks from engaging in proprietary trading —the buying and selling of securities that the bank itself owns with the aim of profiting from price changes. The EGRRCP Act mandated certain changes to these prudential regulations, and regulators have proposed changes under existing authorities. Regulators are to promulgate these changes through the rulemaking process in the coming months and years. In addition, whether policymakers have calibrated these regulations such that their benefits and costs are appropriately balanced is likely to be an area of ongoing debate. For these reasons, prudential regulation issues will likely continue to draw congressional attention. A bank's balance sheet is composed of assets, liabilities, and capital. Assets are largely the value of loans owed to the bank and securities owned by the bank. To make loans and buy securities, a bank secures funding by either issuing liabilities or raising capital. A bank's liabilities are largely the value of deposits and borrowings the bank owes savers and creditors. Capital is raised through various methods, including issuing equity to shareholders or special types of bonds that can be converted into equity. Banking is an inherently risky activity, because banks may suffer losses on assets but face rigid obligations on the liabilities owed to depositors and creditors. In contrast to liabilities, capital generally does not obligate the bank to repay or distribute a specified amount of money at a specified time. This characteristic means that, in the event a bank suffers losses, capital gives the bank the ability to absorb some amount of losses while meeting its obligations. Thus, banks can avoid failures if they hold sufficient capital. Banks are required to satisfy several requirements to ensure they hold enough capital. In the United States, these requirements are generally aligned with the Basel III standards developed as part of a nonbinding agreement between international bank regulators. In general, these are expressed as minimum ratios between certain balance sheet items that banks must maintain. A detailed examination of how these ratios are calculated and what levels must be met is beyond the scope of this report. This examination of policy issues only requires noting that capital ratios fall into one of two main types—a leverage ratio or a risk-weighted ratio. A leverage ratio treats all assets the same, requiring banks to hold the same amount of capital against assets regardless of how risky each asset is. A risk-weighted ratio assigns a risk weight—a percentage based on the riskiness of the asset that the asset value is multiplied by—to account for the fact that some assets are more likely to lose value than others. Riskier assets receive a higher risk weight, which requires banks to hold more capital to meet the ratio requirement. Whether the benefits of capital requirements (e.g., increased bank and financial system stability) are generally outweighed by the potential costs (e.g., reduced credit availability) is an issue subject to debate. Capital is typically a more expensive source of funding for banks than liabilities. Thus, requiring banks to hold higher levels of capital may make funding more expensive, and so banks may choose to reduce the amount of credit available. Some studies indicate this could slow economic growth. However, no economic consensus exists on this issue, because a more stable banking system with fewer crises and failures may lead to higher long-run economic growth. In addition, estimating the value of regulatory costs and benefits is subject to considerable uncertainty, due to difficulties and assumptions involved in complex economic modeling and estimation. Lack of consensus also surrounds questions over whether or under what circumstances risk-weighted ratios are necessary, effective, and efficient. Proponents of risk-based measures assert that it is important to use both risk-weighted and leverage ratios because each addresses weaknesses of the other. For example, riskier assets generally offer a greater rate of return to compensate the investor for bearing more risk. Without risk weighting, banks would have an incentive to hold riskier assets because the same amount of capital must be held against risky and safe assets. However, the use of risk-weighted ratios could be problematic for a number of reasons. Risk weights assigned to particular classes of assets could potentially be an inaccurate estimation of some assets' true risk, which could incent banks to misallocate available resources across asset classes. For example, banks held a high level of seemingly low-risk, mortgage-backed securities (MBSs) before the crisis, in part because those assets offered a higher rate of return than other assets with the same risk weight. MBSs then suffered unexpectedly large losses during the crisis. Another criticism is that the risk-weighted requirements involve \"needless complexity\" and their use is an example of regulatory micromanagement. The complexity could benefit the largest banks that have the resources to absorb the added regulatory cost compared with small banks that could find compliance costs more burdensome. (Small or \"community\" bank compliance issues will be covered in more detail in the \" Regulatory Burden on Community Banks \" section later in the report.) Section 201 of the EGRRCP Act is aimed at addressing concerns over the complexity of risk-weighted ratios and the costs they impose on community banks. This provision created an option for banks with less than $10 billion in assets to meet a higher leverage ratio—the Community Bank Leverage Ratio (CBLR)—in order to be exempt from having to meet the risk-based ratios described above. Bank regulators have issued a proposal to implement this provision wherein banks (1) below the threshold that (2) meet at least a 9% leverage ratio measure of equity and certain retained earnings to assets and (3) had limited off-balance sheet exposures and limited securities trading activity (among other requirements) would qualify for the exemption. The FDIC estimates that more than 80% of community banks will be eligible for the CBLR. However, this new optional exemption does not entirely settle the issue. One bank industry group has argued that 9% is set higher than is necessary, excluding deserving banks from the exemption. In addition, bills in the 115 th Congress, notably H.R. 10 , proposed a high-leverage-ratio option be available to banks regardless of size that would exempt qualifying banks from a wider range of prudential regulations. There are also specific policy issues relating to capital requirements for large banks, which are discussed in the \" Regulator Proposals Related to Large Bank Capital Requirements \" section below. Section 619 of Dodd-Frank—often referred to as the Volcker Rule—generally prohibits depository banks from engaging in proprietary trading or sponsoring a hedge fund or private equity fund. Proprietary trading refers to owning and trading securities for a bank's own portfolio with the aim of profiting from price changes. Put simply, if a bank is engaged in proprietary trading, it is itself an investor in stocks, bonds, and derivatives, which is commonly characterized as \"playing the market\" or \"speculating.\" The rule includes exceptions for when bank trading is deemed appropriate—such as (1) when a bank is hedging against risks the bank has assumed as a part of its traditional business and (2) market-making (i.e., buying available securities with the intention of quickly selling them to meet market demand). Proprietary trading is an inherently risky activity, and banks have faced varying degrees of restrictions over engaging in this activity for a number of decades. Sections 16, 20, 21, and 32 of the Banking Act of 1933 (P.L. 73-66)—commonly referred to as the Glass-Steagall Act—generally prohibited certain deposit-taking banks from engaging in certain securities markets activities. Over time, regulator interpretation of Glass-Steagall and legislative changes expanded permissible activities for certain banks, allowing them to make certain securities investments and authorizing bank-holding companies to own depositories and securities firms within the same organization. The financial crisis increased debate over whether banks were engaging in unnecessarily risky activities. Ultimately, certain provisions in Dodd-Frank placed restrictions on permissible activities to reduce banks' riskiness, and the Volcker Rule was designed to prohibit proprietary trading by depository banking organizations. One of the Volcker Rule's proponents' main rationales for the separation of deposit-taking and certain securities investments is that when banks analyze and assume risks, they may be subject to moral hazard —the willingness to take on excessive risk due to some outside protection from losses. Deposits are an important source of bank funding and insured (up to a limit on each account) by the government. This arguably reduces depositors' incentive to monitor their banks' riskiness. Thus, a bank could potentially take on excessive risk without concern about losing this funding because, in the event of large losses that lead to failure, at least part of the losses will be borne by the FDIC's Deposit Insurance Fund (which is backed by the full faith and credit of the U.S. government and so ultimately the taxpayer). Thus, supporters of the Volcker Rule have characterized it as preventing banks from \"gambling\" in securities markets with taxpayer-backed deposits. However, critics of the Volcker Rule doubt its necessity and efficiency. In regard to necessity, they assert that proprietary trading at commercial banks did not play a substantive role in the financial crisis. They note the rule would not have prevented a number of the major events that played a direct role in the crisis—including failures or bailouts of large investment banks and insurers and losses on loans held by commercial banks. On this point, they also argue that proprietary trading risks are no greater than those posed by \"traditional\" banking activities, such as mortgage lending, and allowing banks to take on risks in different markets might diversify their risk profiles, making them less likely to fail. Debates relating to the efficiency of the Volcker Rule involve its complexity, compliance burden, and potential to lead banks to reduce their engagement in beneficial market activities. Recall that the Volcker Rule is not a ban on all trading, as banks are still allowed to trade to hedge risks or make markets. This poses practical supervisory problems. For example, how can regulators determine whether a broker-dealer is holding a security for market-making, as a hedge against another risk, or as a speculative investment? Differentiating among these motives creates the aforementioned complexity and compliance costs that could affect banks' trading behavior, and so could reduce financial market efficiency. Another criticism of the Volcker Rule in its original form was that it unnecessarily subjected all banks to the rule and their associated compliance costs. Critics of this aspect asserted that the vast majority of community banks are not involved in complex trading activity, but nevertheless must incur costs in evaluating the rule to ensure they are in compliance. Both Congress and regulators have recently taken actions in response to concerns over the complexity of the Volcker Rule and its compliance burden for small banks. Section 203 of the EGRRCP Act exempted banks with less than $10 billion in assets that fell below certain trading activity limits from the rule. Independent of that mandate, the agencies that implemented and enforced the Volcker Rule released and called for public comment on a proposal to simplify the rule in May 2018. Under the proposal, the agencies would clarify certain of the rule's definitions and criteria in an effort to reduce or eliminate uncertainties related to how certain trading activity can qualify for exemption. The proposal would also further tailor the compliance requirements facing banks based on the size of an institution's trading activity. Proponents of the Volcker Rule are generally wary of size-based exemptions. They contend that community banks typically do not face compliance obligations under the rule and do not face an excessive burden by being subject to it. They argue that community banks that are subject to compliance requirements can comply by having clear policies and procedures in place for review during the normal examination process. In addition, Volcker Rule supporters are generally critical of the regulators' proposal, asserting that the changes would undermine \"the effective supervision and enforcement\" of the rule. Anti-money laundering (AML) regulation refers to efforts to prevent criminal exploitation of financial systems to conceal the location, ownership, source, nature, or control of illicit proceeds. The U.S. Department of the Treasury estimates domestic financial crime, excluding tax evasion, generates $300 billion in illicit proceeds that might involve money laundering. Despite robust AML efforts in the United States, the ability to counter money laundering effectively remains challenged by factors including (1) the diversity of illicit methods to move and store ill-gotten proceeds through the international financial system; (2) the introduction of new and emerging threats such as cyber-related financial crimes; (3) gaps in legal, regulatory, and enforcement regimes; and (4) the costs associated with financial institution compliance with global AML guidance and national laws. In the United States, the statutory foundation for domestic AML originated in 1970 with the Bank Secrecy Act (BSA; P.L. 91-508) and its major component, the Currency and Foreign Transaction Reporting Act. Amendments to the BSA and related provisions in the 1980s and 1990s expanded AML policy tools available to combat crime, particularly drug trafficking, and prevent criminals from laundering their illicitly derived profits. Key elements to the BSA/AML legal framework include requirements for customer identification, recordkeeping, reporting, and compliance programs intended to identify and prevent money laundering abuses. In general, banking regulators examine institutions for compliance with BSA/AML. When a regulator finds BSA violations or deficiencies in AML compliance programs, it may take informal or formal enforcement action, including possible civil fines. The BSA/AML policy framework is premised on banks and other covered financial entities filing a range of reports with the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), when their clients either engage in suspicious financial transactions, large cash transactions, or certain other transactions. For example, a bank generally must file a Suspicious Activity Report (SAR) if, among other reasons, it conducts a transaction of $5,000 or more that the bank suspects involves money laundering or other criminal activity. A bank must file a Currency Transaction Report (CTR) if it conducts a currency (i.e., cash) transaction of $10,000 or more as to which it has the same suspicions. The accurate, timely, and complete reporting of such activity to FinCEN flags situations that may warrant further investigation for law enforcement. Whether this regulatory framework adequately hinders criminals from using the banking system to launder their criminal proceeds and whether it does so efficiently without unduly burdening banks are debated issues. One aspect of this debate is whether current reporting requirements are inefficient and overly costly to the banking industry. Some industry observers—including officials from the OCC—have indicated that they believe certain areas of the current framework could be reformed in a way that reduces compliance costs without unduly weakening the ability to prevent money laundering. In contrast, officials from other agencies involved in AML and law enforcement—including FinCEN and the FBI—have stressed the importance of the information gathered under the current reporting requirements in combating money laundering. Another area of concern involves beneficial owners —that is, the natural person(s) who own or control a legal entity, such as a corporation or limited liability company. When such entities are set up without physical operations or assets, they are often referred to as shell companies . Shell companies can be used to conceal beneficial ownership and facilitate anonymous financial transactions. In recent years, policymakers have become increasingly concerned regarding potential risks posed by shell companies whose beneficial ownership is not transparent. This is due in part to a series of leaks to the media regarding the use of shell companies to facilitate criminal activity (such as \"the Panama Papers\") and sustained multilateral criticism of current U.S. practices by the Financial Action Task Force, an international standard-setting body. In May 2018, a new FinCEN regulation came into effect that increased the requirements for banks to conduct customer due diligence (CDD) and ascertain the identity of beneficial owners in certain cases. Central to the CDD rule is a requirement for financial institutions to establish and maintain procedures to identify and verify beneficial owners of a legal entity opening a new account. If Congress decides that reporting requirements facing banks are not appropriately calibrated, it could pass legislation amending those requirements. For example, Congress could change the CTR or SAR reporting threshold or index the threshold levels to inflation. Certain bills introduced in the 115 th Congress would have increased financial transparency and reporting requirements for beneficial owners in other nonbank fields, such as real estate, but could potentially indirectly impact the banking industry as well. Cybersecurity is a major concern of banks, other financial services providers, and federal regulators. In many ways, it is an important extension of physical security. For example, banks are concerned about both physical and electronic theft of money and other assets, and they do not want their businesses shut down by weather events or electronic denial-of-service attacks. Maintaining the confidentiality, security, and integrity of physical records and electronic data held by banks is critical to sustaining the level of trust that allows businesses and consumers to rely on the banking industry to supply services on which they depend. The federal government has increasingly recognized the importance of cybersecurity in the financial services industry, as evidenced by the inclusion of financial services in the government's list of critical infrastructure sectors. The basic authority that federal regulators use to establish cybersecurity standards emanates from the organic legislation that established the agencies and delineated the scope of their authority and functions. As previously discussed, federal banking regulators are required to promulgate safety and soundness standards for all federally insured depository institutions to protect the stability of the nation's banking system. Some of these standards pertain to cybersecurity issues, including information security, data breaches, and destruction or theft of business records. In addition, certain laws (at both the state and federal levels) have provisions related to cybersecurity of financial services that are often performed by banks, including the Dodd-Frank Act, the Gramm-Leach-Bliley Act of 1999 (GLBA; P.L. 106-102 ), and the Sarbanes-Oxley Act of 2002 ( P.L. 107-204 ). For example, Section 501 of GLBA imposes obligations on financial institutions to \"respect the privacy of ... [their] customers and to protect the security and confidentiality of those customers' nonpublic personal information.\" Federal banking regulators require the entities that they regulate to protect customer privacy of physical and electronic records as mandated by the privacy title of GLBA. Federal bank regulators also issue guidance in a variety of forms designed to help banks evaluate their risks and comply with cybersecurity regulations. Regulators bring adjudicatory enforcement actions on a case-by-case basis related to banks' violations of cybersecurity protocols. Banks often view these actions as signaling how an agency interprets aspects of its regulatory authority. For example, a number of recent consent orders issued by the FDIC have directed banks to perform assessments or audits of information technology programs and management to identify risks and ensure compliance with cybersecurity requirements. Thus, oversight of financial services and bank cybersecurity reflects a complex and sometimes overlapping array of state and federal laws, regulators, regulations, and guidance. However, whether this framework is effective and efficient, resulting in adequate protection against cyberattacks without imposing undue cost burdens on banks, is an open question. The occurrence of successful hacks of banks and other financial institutions, wherein huge amounts of individuals' personal information are stolen or compromised, highlights the importance of ensuring bank cybersecurity. For example, in 2014, JPMorgan Chase, the largest U.S. bank, experienced a data breach that exposed financial records of 76 million households. However, no consensus exists on how best to reduce the occurrence of such incidents. Financial products can be complex and potentially difficult for consumers to fully understand. Consumers seeking loans or financial services could be vulnerable to deceptive or unfair practices. To reduce the occurrence of bad outcomes, laws and regulations have been put in place to protect consumers. This section provides background on consumer financial protection and the Bureau of Consumer Financial Protection's (CFPB) authority. The section also analyzes related issues, including whether the CFPB has used its authorities and regulations of banking institutions appropriately; concerns relating to the lack of consumer access to banking services; and whether the Community Reinvestment Act as currently implemented is effectively and efficiently meeting its goal of ensuring banks provide credit to the areas in which they operate. Banks are subject to consumer compliance regulation, intended to ensure that banks are in compliance with relevant consumer-protection and fair-lending laws. Federal laws and regulations in this area take a variety of approaches and address different areas of concern. Certain laws provide disclosure requirements intended to ensure consumers adequately understand the costs and other features and terms of financial products. Other laws prohibit unfair, deceptive, or abusive acts and practices. Fair lending laws prohibit discrimination in credit transactions based upon certain borrower characteristics, including sex, race, religion, or age, among others. The financial crisis raised concerns among policymakers that regulators' mandates lacked sufficient focus on consumer protection. In response, the Dodd-Frank Act established the CFPB with the single mandate to implement and enforce federal consumer financial law, while ensuring consumers can access financial products and services. The CFPB also seeks to ensure the markets for consumer financial services and products are fair, transparent, and competitive. For banks with more than $10 billion in assets, the CFPB is the primary regulator for consumer compliance, whereas safety and soundness regulation continues to be performed by the prudential regulator. As a regulator of larger banks, the CFPB has rulemaking, supervisory, and enforcement authorities. A large bank, therefore, has different regulators for consumer protection and safety and soundness. For banks with $10 billion or less in assets, the rulemaking, supervisory, and enforcement authorities for consumer protection are divided between the CFPB and a prudential regulator. The CFPB may issue rules that apply to smaller banks, but the prudential regulators maintain primary supervisory and enforcement authority for consumer protection. The CFPB has limited supervisory and enforcement powers over small banks. Consumer protection and fair lending compliance continue to be important issues for banks for numerous reasons. Noncompliance can result in regulators taking enforcement actions that may involve substantial penalties. In addition, even in the absence of enforcement actions, an institution faces reputational risks if it comes to be perceived as dealing badly with customers. For example, the CFPB maintains a consumer complaints database that makes public consumer complaints against individual companies readily available, potentially affecting prospective customers' decisions on which companies to use for financial services. The recent public reaction to and enforcement actions pertaining to Wells Fargo's unauthorized opening of customer accounts show the importance of strong consumer protection compliance. Recently, banks and other nonbank financial institutions that provide financial products to consumers (e.g., mortgages, credit cards, and deposit accounts) have been affected by the implementation of new CFPB regulations. For example, banks and other lenders have begun to comply with major new mortgage rules such as the Ability-to-Repay and Qualified Mortgage Standards Rule (ATR/QM) and Truth in Lending Act/Real Estate Settlement Act Integrated Disclosure Rule (TRID). The ATR/QM encourages lenders to gather more information on prospective borrowers than they otherwise might have in order to reduce the likelihood that a borrower would receive an inappropriate loan. TRID requires lenders to provide borrowers with certain information about the mortgages for which they are applying. In addition to these and other new regulations, the CFPB also provides information on its supervisory activities related to banks, such as instances where its examiners found that certain financial institutions misrepresented service fees associated with deposit and checking accounts. Compliance with these new rules has increased banks' operational costs, which some argue potentially leads to higher costs for consumers in certain markets or a reduction in the availability of credit. Others stress that CFPB's regulatory, supervisory, and enforcement efforts reduce the likelihood of consumer harm in financial markets. Debates about how best to achieve the appropriate balance between consumer protection, credit access, and industry costs are unlikely to be resolved easily, and thus may continue to be an area of congressional interest. The banking sector provides valuable financial services for households that allow them to save, make payments, and access credit. Safe and affordable financial services allow households to avoid financial hardship, build assets, and achieve financial security. However, many U.S. households (often those with low incomes, lack of credit histories, or credit histories marked with missed debt payments) do not use banking services. According to the FDIC's National Survey of Unbanked and Underbanked Households, in 2017, 6.5% of households in the United States were unbanked (i.e., did not have an account at an insured institution) and 18.7% of households were underbanked (i.e., obtained financial products and services outside of the banking system in the past year). Lack of bank access leads some households to rely on alternative financial service providers and consumer credit products outside of the formal banking sector, such as payday or auto title loans. According to an FDIC estimate, 12.9% of households had unmet demand for mainstream small-dollar credit. Certain observers believe that financial outcomes for the unbanked and underbanked would be improved if banks—which may be more likely to be a stable source of relatively inexpensive financial services relative to certain alternatives—were more active in meeting this demand. For this reason, prudential regulators, like the OCC and the FDIC, are currently exploring ways to encourage banks to offer small-dollar credit products to consumers, and other policymakers and observers will likely continue to explore ways to make banking more accessible to a greater portion of the population. The Community Reinvestment Act of 1977 (CRA; P.L. 95-128 ) addresses how banking institutions meet the credit needs of the areas they serve, notably in low- and moderate-income (LMI) neighborhoods. The federal prudential banking regulators (the Fed, the OCC, and the FDIC) conduct examinations to evaluate how banks are fulfilling the objectives of the CRA. The regulators issue CRA credits, or points, where banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities—that occur within an assigned assessment area . These credits are then used to issue each bank a performance rating, from Outstanding to Substantial Noncompliance. The CRA requires regulators to take these ratings into account when banks request to merge with other banking institutions or otherwise expand their operations into new areas. Whether regulations as currently implemented are effectively and efficiently meeting the CRA's goals has been the subject of debate. The banking industry and other observers assert that CRA regulations can be altered in a way that would reduce regulatory burden while still meeting the law's goals. Recently, the OCC and Treasury have made proposals to address those concerns. However, consumer and community advocates argue that efforts to provide relief to banks may potentially be at the expense of communities that the CRA is intended to help. Treasury made a number of recommendations to the bank regulators for changes to CRA regulations in a memorandum it sent to those agencies in April 2018. Regarding the need for modernization, the memorandum recommends revisiting the approach for determining banks' assessment areas, given that geographically defined areas arguably may not fully reflect the community served by a bank because of technology developments. Treasury also recommends establishing clearer standards for CRA-eligible activities that provide flexibility and expand the types of loans, investments, and services that are eligible for CRA credit. Regarding aspects of CRA compliance that may be unnecessarily burdensome, Treasury recommends increasing the timeliness of the CRA performance examination process. Regarding improving the outcomes that the CRA was intended to encourage, such as increasing the availability of credit to LMI neighborhoods, Treasury recommendations include incorporating performance incentives that might result in more efficient lending activities. In September 2018, the OCC published an advance notice of proposed rulemaking (ANPR) seeking public comment on 31 questions pertaining to issues to consider and possible changes to CRA regulation. The OCC's ANPR does not propose specific changes, but its content and the questions posed suggest that the OCC is exploring the possibility of adopting a quantitative metric-based approach to CRA performance evaluation, changing how assessment areas are defined, expanding CRA-qualifying activities, and reducing the complexity, ambiguity, and burden of the regulations on the bank industry. The OCC received more than 1,300 comment letters in response to the ANPR that were alternatively supportive or critical of the various possible alterations to CRA regulation. Although some banks hold a very large amount of assets, are complex, and operate on a national or international scale, the vast majority of U.S. banks are relatively small, have simple business models, and operate within a local area. This section provides background on these simpler banks—often called community bank s —and analyzes issues related to them, including regulatory relief for community banks and the long-term decline in the number of community banks. Although there is no official definition of a community bank, policymakers and the public generally recognize that the vast majority of U.S. banks differ substantially from a relatively small number of very large and complex banking organizations in a number of ways. Community banks tend to hold a relatively small amount of assets (although asset size alone need not be a determining factor); be more concentrated in core bank businesses of making loans and taking deposits and less involved in other, more complex activities; and operate within a smaller geographic area, making them generally more likely to practice relationship lending wherein loan officers and other bank employees have a longer standing and perhaps more personal relationship with borrowers. Therefore, community banks may serve as particularly important credit sources for local communities and underserved groups of which large banks may have little familiarity. In addition, relative to large banks, community banks generally have fewer employees, less resources to dedicate to regulatory compliance, and individually pose less of a systemic risk to the broader financial system. Congress often faces policy issue questions related to community banks. Community bank advocates often assert the tailoring of regulations currently in place does not adequately balance the benefits and costs of the regulations when applied to community banks. Concerns have also been raised about the three-decade decline in the number and market presence of these institutions, and the predominant cause of that decline is a matter of debate. In recent decades, community banks, under almost any common definition, have seen their numbers decline and their collective share of banking industry assets fall in the United States. Overall, the number of FDIC-insured institutions fell from a peak of 18,083 in 1986 to 5,477 in 2018. The number of institutions with less than $1 billion in assets fell from 17,514 to 4,704 during that time period, and the share of industry assets held by those banks fell from 37% to 7%. Meanwhile, the number of banks with more than $10 billion in assets rose from 38 to 138, and the share of total banking industry assets held by those banks increased from 28% to 84%. The decrease in the number of community banks occurred mainly through three methods: mergers, failures, and lack of new banks. Most of the decline in the number of institutions in the past 30 years was due to mergers, which averaged more than 400 a year from 1990 to 2016. Failures were minimal from 1999 to 2007, but played a larger role in the decline during the late 1980s and following the 2007-2009 financial crisis and subsequent recession. As economic conditions have improved, failures have declined, but the number of n ew r eporters —new chartered institutions providing information to the FDIC for the first time—has been extraordinarily small in recent years. For example, in the 1990s, an average of 130 new banks reported data to the FDIC per year. Through September 30, five new banks reported data to the FDIC in 2018. Observers have cited several possible causes for this industry consolidation. Some observers argue the decline indicates that the regulatory burden on community banks is too onerous, driving smaller banks to merge to create or join larger institutions, an argument covered in more detail in the following section, \" Regulatory Burden on Community Banks .\" However, mergers—the largest factor in consolidation—could occur for a variety of reasons. For example, a bank that is struggling financially may look to merge with a stronger bank to stay in business. Alternatively, a community bank that has been outperforming its peers may be bought by a larger bank that wants to benefit from its success. In addition, other fundamental changes besides regulatory burden in the banking system could be driving consolidation, making it difficult to isolate the effects of regulation. Through much of the 20 th century, federal and state laws restricted banks' ability to open new branches and banking across state lines was restricted. Thus, many more banks were needed to serve every community. Branching and banking across state lines was not substantially deregulated at the federal level until 1997 through the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ( P.L. 103-328 ). When these restrictions were relaxed, it became easier for community banks to consolidate or for mid-size and large banks to spread operations to other markets. In addition, there may be economies of scale, not only in compliance, but in the business of banking in general. Furthermore, the economies of scale may be growing over time, which would also drive industry consolidation. For example, information technology has become more important in banking (e.g., cybersecurity and mobile banking), and certain information technology systems may be subject to economies of scale. Finally, the slow growth coming out of the most recent recession, and macroeconomic conditions more generally (such as low interest rates), may make it less appealing for new firms to enter the banking market. Community banks receive special regulatory consideration to minimize their regulatory burden. For example, many regulations—including a number of regulations implemented pursuant to the Dodd-Frank Act—include exemptions for community banks or are otherwise tailored to reduce compliance costs for community banks. Title I and Title II of the EGRRCP Act contained numerous provisions that provided new exemptions to community banks or raised the thresholds for existing exemptions, such as the Community Bank Leverage Ratio and Volcker Rule exemptions discussed above in the \" Prudential Regulation \" section. In addition, bank regulators are required to consider the effect of rules on community banks during the rulemaking process pursuant to provisions in the Regulatory Flexibility Act ( P.L. 96-354 ) and the Riegle Community Development and Regulatory Improvement Act ( P.L. 103-325 ). Supervision is also structured to pose less of a burden on small banks than larger banks, such as by requiring less-frequent bank examinations for certain small banks and less intensive reporting requirements. However, Congress often faces questions related to whether tailoring in general or tailoring provided in specific regulations is sufficient to ensure that an appropriate trade-off has been struck between the benefits and costs of regulations facing community banks. Advocates for further regulatory relief argue that certain realized benefits are likely to be relatively small, whereas certain realized costs are likely to be relatively large. One area where the benefits of regulation may be relatively small for community banks relative to large banks is regulations aimed at improving systemic stability, because community banks individually pose less of a risk to the financial system as a whole than a large, complex, interconnected bank. Many recent banking regulations were implemented at least in part in response to the systemic nature of the 2007-2009 crisis. Some community bank proponents argue that because small banks did not cause the crisis and pose less systemic risk, they need not be subject to new regulations made in response to the crisis. Opponents of these arguments note that systemic risk is only one of the goals of regulation, along with prudential regulation and consumer protection, and that community banks are exempted from many of the regulations aimed at systemic risk. They note that hundreds of small banks failed during and after the crisis, suggesting the prudential regulation in place prior to the crisis was not stringent enough. Another potential rationale for easing regulations on community banks would be if there are economies of scale to regulatory compliance costs, meaning that regulatory compliance costs may increase as bank size does but decrease as a percentage of overall costs or revenues. Put another way, as regulatory complexity increases, compliance may become relatively more costly for small institutions. Empirical evidence on whether compliance costs are subject to economies of scale is mixed, thus consider this illustrative example to show the logic behind the argument. Imagine a bank with $100 million in assets and 25 employees and a bank with $10 billion in assets and 1,250 employees each determine they must hire an extra employee to ensure compliance with new regulations. The relative burden is larger on the small institution that expands its workforce by 4% than on the large bank that expands by less than 0.1%. From a cost-benefit perspective, if regulatory compliance costs are subject to economies of scale, then the balance of costs and benefits of a particular regulation will differ depending on the size of the bank. For the same regulatory proposal, economies of scale could potentially result in costs outweighing benefits for smaller banks. Due to a lack of empirical evidence of the exact benefits and costs of each individual regulation at each individual bank (and even lack of consensus over which banks should qualify as community banks), debates over the appropriate level of tailoring of regulations is a debate over calibration involving qualitative assessments. Where should the lines be drawn? Should exemption thresholds be set high so that regulations apply only to the very largest, most complex banks? Should thresholds be set relatively low, so that only very small banks are exempt? At what point does a bank cease to have the characteristics associated with community banks? Often at issue in this debate are the so-called regional banks —banks that are larger and operate across a greater geographic market than the community banks but are also smaller and less complex than the largest, most complex organizations with hundreds of billions or trillions of dollars in assets. Should regulators provide regional banks the same exemptions as those provided to community banks? Policymakers, in the 116 th Congress, continue to face these and other questions concerning community banks. Along with the thousands of relatively small banks operating in the United States, there are a handful of banks with hundreds of billions of dollars of assets. The 2007-2009 financial crisis highlighted the problem of \"too big to fail\" (TBTF) financial institutions—the concept that the failure of a large financial firm could trigger financial instability, which in several cases prompted extraordinary federal assistance to prevent the failure of certain of these institutions. In response to the crisis, policymakers took a number of steps through the Dodd-Frank Act and the Basel III Accords to eliminate the TBTF problem, including subjecting the largest banks to enhanced prudential regulations, a new resolution regime to unwind these banks in the event of failure, and higher capital requirements. This section provides background on these large banks and examines issues related to them, including reductions in the application of enhanced prudential regulations facing certain large banks made pursuant to P.L. 115-174 and changes to capital requirements proposed by regulators that would reduce the amount of capital certain large banks would have to hold. As regulators implement these statutory changes and their proposed rules move forward, Congress faces questions about whether relaxing these regulations appropriately eases overly stringent requirements or unnecessarily increases the likelihood that large banks take on excessive risks. Some bank holding companies (BHCs) have hundreds of billions or trillions of dollars in assets and are deeply interconnected with other financial institutions. A bank may be so large that its leadership and market participants may believe that the government would save it if it became distressed. This belief could arise from the determination that the institution is so important to the country's financial system—and that its failure would be so costly to the economy and society—that the government would feel compelled to avoid that outcome. An institution of this size and complexity is said to be TBTF. In addition to fairness issues, economic theory suggests that expectations that a firm will not be allowed to fail creates moral hazard —if the creditors and counterparties of a TBTF firm believe that the government will protect them from losses, they have less incentive to monitor the firm's riskiness because they are shielded from the negative consequences of those risks. As a result, TBTF institutions may have incentives to be excessively risky, gain unfair advantages in the market for funding, and expose taxpayers to losses. Several market forces likely drive banks and other financial institutions to grow in size and complexity, thereby potentially increasing efficiency and improving financial and economic outcomes. For example, marginal costs can be reduced through economies of scale; risk can be diversified by spreading exposures over multiple business lines and geographic markets; and a greater array of financial products could be offered to customers allowing a bank to potentially attract new customers or strengthen relationships with existing ones. These market forces and the relaxation of certain interstate banking and branching regulations described in the \" Reduction in Community Banks \" section may have driven some banks to become very large and complex in the years preceding the crisis. At the end of 1997, two insured depository institutions held more than $250 billion in assets, and together accounted for about 9.3% of total industry assets. By the end of 2007, six banks held more than $250 billion in assets, accounting for 40.9% of industry assets. The trend has generally continued, and as of the third quarter of 2018, nine banks held more than $250 billion in assets, accounting for 49.5% of industry assets. Many assert that the worsening of the financial crisis in fall 2008 was a demonstration of TBTF-related problems. Large institutions had taken on risks that resulted in large losses, causing the institutions to come under threat of failure. In some cases, the U.S. government took actions to stabilize the financial system and individual institutions. Wachovia and Washington Mutual were large institutions that were acquired by other institutions to avoid their failure during the crisis. Bank of America and Citigroup received extraordinary assistance through the Troubled Asset Relief Program (TARP) to address financial difficulties. Other large (and small) banks participated in emergency government programs offered by the Treasury (TARP), the Federal Reserve, and the FDIC. In response, the Dodd-Frank Act attempted to end TBTF through (1) a new regulatory regime to reduce the likelihood that large banks would fail; (2) a new resolution regime to make it easier to safely wind down large bank holding companies that are at risk of failing; and (3) new restrictions on regulators' use of emergency authority to prevent \"bail outs\" of failing large banks. In addition, the Federal Reserve imposed additional capital requirements on the largest banks that largely aligned with proposed standards set out by the Basel III Accords, with some exceptions. To make it less likely that large banks would fail, certain large banks are now subject to an enhanced prudential regulatory regime administered by the Federal Reserve. Under this regime, large banks are subject to more stringent safety and soundness standards than other banks. They must comply with higher capital and liquidity requirements, undergo stress tests, produce living wills and capital plans, and comply with counterparty limits and risk management requirements. To make it easier to wind down complex BHCs with nonbank subsidiaries, the Dodd-Frank Act created the Orderly Liquidation Authority (OLA), a resolution regime administered by the FDIC that is similar to how the FDIC resolves bank subsidiaries. This replaced the bankruptcy process, focused on the rights of creditors, with an administrative process, focused on financial stability, for winding down such firms. To date, OLA has never been used. The Dodd-Frank Act initially applied enhanced prudential regulation requirements to all BHCs with more than $50 billion in assets, although more stringent standards were limited to banks with more than $250 billion in assets or $10 billion in foreign exposure, and the most stringent standards were limited to U.S. globally systemically important banks (G-SIBs), the eight most complex U.S. banks. Subsequent to the enactment of Dodd-Frank, critics of the $50 billion asset threshold argued that many banks above that size are not systemically important and that Congress should raise the threshold. In particular, critics distinguished between regional banks (which tend to be at the lower end of the asset range and, some claim, have a traditional banking business model comparable to community banks) and Wall Street banks ( a term applied to the largest, most complex organizations that tend to have significant nonbank financial activities). Opponents of raising the threshold disputed this characterization, arguing that some regional banks are involved in sophisticated activities, such as being swap dealers, and have large off-balance-sheet exposures. In response to concerns that the enhanced prudential regulation threshold was set too low, P.L. 115-174 exempted banks with between $50 billion and $100 billion in assets from enhanced prudential regulation, leaving them to be regulated in general like any other bank. Under the proposed rule implementing the P.L. 115-174 changes, the Fed has increased the tiering of enhanced regulation for banks with more than $100 billion in assets. The proposed rule would create four categories of banks based on size and complexity, and impose increasingly stringent requirements on each category. From most to least stringent, Category I would currently include the eight G-SIBs, Category II would include one bank, Category III would include four banks, and Category IV would include 11 banks. Compared with current policy, banks in all categories would face reduced regulatory requirements under this rule, other proposed rules, and forthcoming rules required by Section 402 of P.L. 115-174 , if finalized. In addition, P.L. 115-174 created new size-based exemptions from various regulations, increasing the tendency to subject larger banks to more stringent requirements than smaller banks. These changes include exemptions from the Volcker Rule and risk-weighted capital requirements for banks with less than $10 billion in assets (meeting certain criteria). Proponents of the changes assert they provide necessary and targeted regulatory relief. Opponents argue they needlessly pare back important Dodd-Frank protections to the benefit of large and profitable banks. As discussed in the \" Capital Requirements \" section, all banks must hold enough capital to meet certain capital ratio requirements. Broadly, those requirements take two forms—risk-weighted requirements and unweighted leverage requirements. In addition, a small subset of very large and very complex banks also face additional capital ratio requirements implemented by the U.S. federal bank regulators. The Federal Reserve has made two proposals to simplify and relax certain aspects of these additional requirements, and these proposals are subject to debate. All banks must hold additional high-quality capital on top of the minimum required levels—called the capital conservation buffer (CCB)—to avoid limitations on their capital distributions, such as dividend payments. In addition, certain large banks are subject to the Federal Reserve's stress tests, the results of which can lead to restrictions on the bank's capital distributions. Stress tests are intended to ensure that banks hold enough capital to withstand a hypothetical market stress scenario, but arguably have the effect of acting as additional capital requirements with which banks must comply. Advanced approaches banks must maintain a fixed minimum supplementary leverage ratio (SLR), an unweighted capital requirement that is more stringent than the leverage ratio facing smaller banks because it incorporates off-balance sheet exposures. A Congressional Research Service (CRS) analysis of large holding companies' regulatory filings indicates that, currently, 19 large and complex U.S. bank or thrift holding companies are classified as advanced approaches banks. G-SIBs must meet fixed enhanced SLR (eSLR) requirements, which sets the SLR higher for these banks. In addition, the G-SIBs are subject to an additional risk-weighted capital surcharge (on top of other risk-weighted capital requirements that all banks must meet) of between 1% and 4.5% based on the systemic importance of the institution. Whether these requirements are appropriately calibrated is a debated issue. Proponents of recalibrating some of these capital requirements argue that those requirements set at a fixed number—including the CCB and eSLR—are inefficient, because they do not reflect varying levels of risk posed by individual banks. Recalibration proponents also argue that compiling with these requirements in addition to stress test requirements is unnecessarily burdensome for banks. Opponents of proposals to relax current capital requirements facing large and profitable banks assert that doing so needlessly pares back important safeguards against bank failures and systemic instability. In response to concerns that fixed requirements do not adequately account for risk differences between institutions, the Fed has issued two proposals for public comment that would link individual large banks' requirements with other risk measures. One proposal would make bank CCB requirements a function of their stress tests results, and the other proposal would link large banks' eSLR requirements with individual G-SIB systemic importance scores. The Fed estimates that the new CCB requirement would generally reduce the amount of capital large banks would have to hold, but that some G-SIBs would see their required capital levels increase. The Fed estimates that the new eSLR requirement would generally reduce the amount of capital held by G-SIB parent companies by $400 million and the amount held by insured depository subsidiaries by $121 billion. To legally operate as a bank and perform the relevant activities, an institution generally must have a charter granted by either the OCC at the federal level or a state-level authority. In addition, to engage in certain activities, the institution must have federal deposit insurance granted by the FDIC. Currently, these requirements raise a number of policy questions, including whether companies established primarily as financial technology companies should be able to receive a national bank charter, as has been offered by the OCC; and whether the application process and determinations made by the FDIC as they relate to institutions seeking a specific type of state charter, called an industrial loan company (ILC) charter, is overly restrictive. An institution that makes loans and takes deposits—the core activities of traditional commercial banking—must have a government issued charter. Numerous types of charters exist, including national bank charters; state bank charters; federal savings association charters, and state savings association charters (saving associations are also referred to as thrifts ). Each charter type determines what activities are permissible for the institution, what activities are restricted, and which agency will be the institution's primary federal regulator (see Table 1 ). One of the main rationales for this system is that it gives institutions with different business models and ownership arrangements the ability to choose a regulatory regime appropriately suited to the institution's business needs and risks. The differences between institution business models and the attendant regulations are numerous, varied, and beyond the scope of this report. The issues examined in this section arise from each charter's granting an institution the right to engage in certain banking related activities, and thus generating the potential benefits and risks of those activities. Broadly, these issues relate to questions over whether companies that differ from traditional banks should be allowed to engage in traditional banking activities given the types and magnitudes of benefits and risks the companies might present. Recent advances in technology, including the proliferation of available data and internet access, have altered the way financial activities are performed in many ways. These innovations in financial technology, or fintech, have created the opportunity for certain activities that have traditionally been the business of banks to instead be performed by technology-focused, nonbank companies. Lending and payment processing are prominent examples. This development has raised questions over how these fintech companies should be regulated, and the appropriate federal and state roles in that regulation. One possible, though contested, proposal for addressing a number of these questions would be to make an OCC national bank charter available to certain fintech companies. Many nonbank fintech companies performing bank-like activities are regulated largely at the state level. They may have to obtain lending licenses or register as money transmitters in every state they operate and may be subject to the consumer protection laws of that state, such as interest rate limits. Proponents of fintech companies argue that subjecting certain technology companies to 50 different state level regulatory regimes is unnecessarily burdensome and hinders companies that hope to achieve nationwide operations quickly using the internet. In addition, a degree of uncertainty surrounding the applicability of certain laws and regulations to certain fintech firms and activities has arisen. For example, whether federal preemption of state interest rate limits apply to loans made through a marketplace lender —that is, online-only lenders that exclusively use automated, algorithmic underwriting—but originated by a bank faces legal uncertainty due to certain court decisions, including Madden v Midlands . One possible avenue to ease the state-by-state regulatory burdens and resolve the uncertainties facing some fintech firms would be to allow those firms that perform bank-like activities to apply for and (provided they meet necessary requirements) to grant them national bank charters. First proposed in 2016 by then-Comptroller of the Currency Thomas Curry, and following subsequent examination of the issue and review of public comments, the OCC announced in July 2018 that it would consider \"applications for special purpose bank charters from financial technology (fintech) companies that are engaged in the business of banking but do not take deposits.\" OCC argues that companies with such a charter would be explicitly subject to all laws and regulations (including those that preempt state law, a contentious issue addressed below) applicable to national banks. The OCC stated that fintech firms granted the charter \"will be subject to the same high standards of safety and soundness and fairness that all federally chartered banks must meet,\" and also that the OCC \"may need to account for differences in business models and activities, risks, and the inapplicability of certain laws resulting from the uninsured status of the bank.\" Thus, the argument goes, establishing a fintech charter would mean a new set of innovative companies would no longer face regulatory uncertainty and could safely and efficiently provide beneficial financial services, perhaps to populations and market-niches that banks with traditional cost structures do not find cost-effective to serve. Until the OCC actually grants such charters and fintech firms operate under the national bank regime for some amount of time, how well this policy fosters potential innovations and benefits while guarding against risks is the subject of debate. Proponents of the idea generally view the charter as a mechanism for freeing companies from what they assert is the unnecessarily onerous regulatory burden of being subject to numerous state regulatory regimes. They further argue that this would be achieved without overly relaxing regulations, as the companies would become subject to the OCC's national bank regulatory regime and its rulemaking, supervisory, and enforcement authorities. Opponents generally assert both that the OCC does not have the authority to charter these types of companies, as discussed below, and that doing so would inappropriately allow marketplace lenders to circumvent important state-level consumer protections. The OCC's assertion that it has the authority to grant such charters has been challenged. Shortly after the initial 2016 announcements that the OCC was examining the possibility of granting the charters, the Conference of State Bank Supervisors and the New York State Department of Financial Services sued the OCC to prevent it from issuing the charters on the grounds that it lacked the authority to do so. A federal district court dismissed the case after concluding that because the OCC had not yet issued charters to nonbanks, the plaintiffs (1) lacked standing to challenge the OCC's purported decision to move forward with chartering nonbanks, and (2) had alleged claims that were not ripe for adjudication. Subsequent to the OCC's July 2018 announcement, state regulators have again filed lawsuits. Industrial loan companies (ILCs) hold a particular type of charter offered by some states that generally allows ILCs to engage in certain banking activities. Depending on the state, those activities can include deposit-taking, but only if they are granted deposit insurance by the FDIC. Thus, ILCs that take deposits are state regulated with the FDIC acting as the primary federal regulator. Importantly, a parent company that owns an ILC that meets certain criteria is not necessarily considered a BHC for legal and regulatory purposes. This means ILC charters create an avenue for commercial firms (i.e., companies not primarily focused on the financial industry, such as manufacturers, retailers, or possibly technology companies) to own a bank. Nonfinancial parent companies of ILCs generally are not subject to Fed supervision and other regulations pursuant to the Bank Holding Company Act of 1956 (P.L. 84-511). A commercial firm may want to own a bank for a number of economic reasons. For example, an ILC can provide financing to the parent company's customers and clients and thus increase sales for the parent. In recent decades, household-name manufacturers have owned ILCs, including but not limited to General Motors, Toyota, Harley Davidson, and General Electric. However, while they can generate profits and potentially increase credit availability, ILCs pose a number of potential risks. The United States has historically adopted policies to generally separate commerce and banking, because allowing a single company to be involved in both activities could potentially result in a number of bad outcomes. A mixed organization's banking subsidiary could make decisions based on the interests of the larger organization, such as making overly risky loans to customers of a commerce subsidiary or providing funding to save a failing commerce subsidiary. Such conflicts of interest could threaten the safety and soundness of the bank. Relatedly, some have argued that having a federally insured bank within a commercial organization is an inappropriate expansion of federal banking safety nets (such as deposit insurance). Certain observers, including community banks, have concerns over whether purely commercial or purely banking organizations would be able to compete with combined organizations that could potentially use economies of scale and funding advantages to exercise market power. These arguments played a prominent role in the public debate that was sparked when Walmart and Home Depot made unsuccessful efforts to secure an ILC charter between 2005 and 2008. Amid this debate, the FDIC imposed a moratorium in 2006 on the acceptance, approval, or denial of ILC applications for deposit insurance while the agency reexamined its policies related to these companies. That moratorium ended in January 2008. Subsequently, concerns over ILCs led Congress to mandate another moratorium (this one lasting three years, ending in July 2013) on granting new ILCs deposit insurance in the Dodd-Frank Act. No consensus has been reached on the magnitude of these risks and validity of the concerns surrounding deposit-taking ILCs. Recently, two financial technology companies, Square and SoFi, have applied for ILC charters and renewed debates over ILCs. Even though the moratoriums on granting ILCs deposit insurance have expired, the FDIC has not approved any new ILC applications since the 2013 expiration. However, since becoming FDIC chairman in June 2018, Jelena McWilliams has made statements indicating that under her leadership the FDIC will again consider ILC applications. Given the interest in and debate surrounding this charter type, policymakers will likely examine questions over the extent to which ILCs create innovative sources of credit and financial services subject to appropriate safeguards or inadvisably allow commercial organizations to act as banks with federal safety nets while exempting them from certain bank regulation and supervision. In addition to regulation issues, market and economic conditions and trends continually affect the banking industry. This section analyzes such trends that may affect banks, including migration of financial activity from banks into nonbanks or the \"shadow banking\" system; increasing capabilities and market presence of financial technology or fintech; and a higher interest rate environment following a long period of extraordinarily low rates. Credit intermediation is a core banking activity and involves transforming short-term, liquid, safe liabilities into relatively long-term, illiquid, higher-risk assets. In the context of traditional banking, credit intermediation is performed by taking deposits from savers and using them to fund loans to borrowers. Nonbank institutions can also perform similar credit intermediation to banks—sometimes called shadow banking —using certain instruments such as money market mutual funds, short-term debt instruments, and securitized pools of loans. When illiquid assets are funded by liquid liabilities, an otherwise-solvent bank or nonbank might experience difficulty meeting short-term obligations without having to sell assets, possibly at \"fire sale\" prices. If depositors or other funding providers feel their money is not safe with an institution, many of them may withdraw their funds at the same time. Such a \"run\" could cause an institution to fail. Long-established government programs mitigate liquidity- and run-risk in the banking industry. The Federal Reserve is authorized to act as a \"lender of last resort\" for a bank experiencing liquidity problems, and the FDIC insures depositors against losses. Banks are also subject to prudential regulation—as discussed in the \" Prudential Regulation \" section. However, nonbank intermediation is performed without the government safety nets available to banks or the prudential regulation required of them. The lack of an explicit government safety net in shadow banking means that taxpayers are less explicitly or directly exposed to risk, but it also means that shadow banking may be more vulnerable to a panic that could trigger a financial crisis. Some argue that the increased regulatory burden placed on banks in response to the financial crisis—such as the changes in bank regulation mandated by Dodd-Frank or agreed to in Basel III—could result in a decreased role for banks in credit intermediation and an increased role for relatively lightly regulated nonbanks. Many contend the financial crisis demonstrated how risks to deposit-like financial instruments in the shadow banking sector—such as money market mutual funds and repurchase agreements—can create or exacerbate systemic distress. Money market mutual funds are deposit-like instruments that are managed with the goal of never losing principal and that investors can convert to cash on demand. Institutions can also access deposit-like funding by borrowing through short-term funding markets—such as by issuing commercial paper and entering repurchase agreements. These instruments can be continually rolled over as long as funding providers have confidence in the borrowers' solvency. During the crisis, all these instruments—which investors had previously viewed as safe and unlikely to suffer losses—experienced run-like events as funding providers withdrew from markets. Moreover, nonbanks can take on exposure to long-term loans through investing in mortgage-backed securities (MBS) or other asset-backed securities (ABS). During the crisis, as firms faced liquidity problems, the value of these assets decreased quickly, possibly in part as a result of fire sales. Since the crisis, many regulatory changes have been made related to certain money market, commercial paper, and repurchase agreement markets and practices. For example, in the United States, certain money market mutual funds now must have a floating net asset value . Among other benefits, this may signal to fund investors that a loss of principal is possible and thus reduce the likelihood that investors would \"run\" at the first sign of possible small losses. However, some observers are still concerned that shadow banking poses risks, because the funding of relatively long-term assets with relatively short-term liabilities will inherently introduce run-risk absent certain safeguards. As discussed above, f intech usually refers to technologies with the potential to alter the way certain financial services are performed. Banks are affected by technological developments in two ways: (1) they face choices over how much to invest in emerging technologies and to what extent they want to alter their business models in adopting technologies, and (2) they potentially face new competition from new technology-focused companies. Such technologies include online marketplace lending, crowdfunding, blockchain and distributed ledgers, and robo-advising, among many others. Certain financial innovations may create opportunities to improve social and economic outcomes, but there is also potential to create risks or unexpected financial losses. Potential benefits from fintech are greater efficiency in financial markets that creates lower prices and increased customer and small business access to financial services. These can be achieved if innovative technology replaces traditional processes that are outdated or inefficient. For example, automation may be able to replace employees, and digital technology can replace physical systems and infrastructure. Cost savings from removing inefficiencies may lead to reduced prices, making certain services affordable to new customers. Some customers who previously did not have access to services—due to such things as the lack of information about creditworthiness or geographic remoteness—could also potentially gain access. Increased accessibility may be especially beneficial to traditionally underserved groups, such as low-income, minority, and rural populations. Fintech could also create or increase risks. Many fintech products have only a brief history of operation, so it can be difficult to predict outcomes and assess risk. It is possible certain technologies may not in the end function as efficiently and accurately as intended. Also, the stated aim of a new technology is often to bring a product directly to consumers and eliminate a \"middle-man.\" However, that middle-man could be an experienced financial institution or professional that can advise consumers on financial products and their risks. In these ways, fintech could increase the likelihood that consumers engage in a financial activity and take on risks that they do not fully understand. Policymakers debate whether (and which) innovations can be integrated into the financial system without additional regulatory or policy action. Technology in finance largely involves reducing the costs or time involved in providing existing products and services, and the existing regulatory structure was developed to address risks from these financial products and activities. Existing regulation may be able to accommodate new technologies while adequately protecting against risks. However, there are two other possibilities. One is that some regulations may be stifling beneficial innovation. Another is that existing regulation does not adequately address risks created by new technologies. Some observers argue that regulation could potentially impede the development and introduction of beneficial innovation. For example, companies incur costs to comply with regulations. In addition, companies are sometimes unsure how regulators will treat the innovation once it is brought to market. A potential solution being used in other countries is to establish a regulatory \"sandbox\" or \"greenhouse\" wherein companies that meet certain requirements work with regulators as products are brought to market under a less onerous regulatory framework. In the United States, the CFPB has recently introduced a sandbox wherein companies can experiment with disclosure forms. Some are concerned that existing regulations may not adequately address certain risks posed by new technologies. Regulatory arbitrage—conducting business in a way that circumvents unfavorable regulations—may be a concern in this area. Fintech potentially could provide an opportunity for companies to claim they are not subject to certain regulations because of a superficial difference between how they operate compared with traditional banks. Another group of issues posed by fintech relates to cybersecurity (for general issues related to cybersecurity, see the \" Cybersecurity \" section above). As financial activity increasingly uses digital technology, sensitive data are generated. Data can be used to accurately assess risks and ensure customers receive the best products and services. However, data can be stolen and used inappropriately, and there are concerns over privacy issues. This raises questions over ownership and control of the data—including the rights of consumers and the responsibilities of companies in accessing and using data—and whether companies that use and collect data face appropriate cybersecurity requirements. The Federal Reserve's monetary policy response to the financial crisis, the ensuing recession, and subsequent slow economic growth was to keep interest rates unusually low for an extraordinarily long time. It accomplished this in part using unprecedented monetary policy tools such as quantitative easing —large-scale asset purchases that significantly increased the size of the Federal Reserve's balance sheet. Recently, as economic conditions improved, the Federal Reserve took steps to normalize monetary policy such as raising its target interest rate and reducing the size of its balance sheet. A rising interest rate environment—especially following an extended period of unusually low rates achieved with unprecedented monetary policy tools—is an issue for banks because they are exposed to interest rate risk . A portion of bank assets have fixed interest rates with long terms until maturity, such as mortgages, and the rates of return on these assets do not increase as current market rates do. However, many bank liabilities are short term, such as deposits, and can be repriced quickly. So although certain interest revenue being collected by banks is slow to rise, the interest costs paid out by banks can rise quickly. In addition to putting stress on net income, rising interest rates can cause the market value of fixed-rate assets to fall. Finally, banks incur an opportunity cost when resources are tied up in long-term assets with low interest rates rather than being used to make new loans at higher interest rates. The magnitude of interest rate risks should not be overstated, as rising rates can potentially increase bank profitability if they result in a greater difference between long-term rates banks receive and short-term rates they pay—referred to as net interest margin . However, thus far into the Federal Reserve interest rate normalization process, this has not materialized. During 2018, the difference between long-term rates and short-term rates has generally decreased (known as a flattening of the yield curve ). Whatever changes may occur to various interest rates in the coming months and years, banks and regulators typically recognize the importance of managing interest rate risk, carefully examine the composition of bank balance sheets, and plan for different interest rate change scenarios. While banks are well-practiced at interest rate risk management through normal economic and monetary policy cycles, managing bank risk through a period of interest rate growth could be more challenging because rates have been so low for so long and achieved through unprecedented monetary policy tools. Because rates have been low for so long, many loans made in different interest rate environments that preceded the crisis have matured. Meanwhile, all new loans made in the past 10 years were made in a low interest rate environment. This presents challenges to banks seeking to hold a mix of loans with different rates. In addition, because the Federal Reserve has used new monetary policy tools and grown its balance sheet to unprecedented levels, accurately controlling the pace of interest rate growth may be challenging. ", "summary": "Regulation of the banking industry has undergone substantial changes over the past decade. In response to the 2007-2009 financial crisis, many new bank regulations were implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203) or under the existing authorities of bank regulators to address apparent weaknesses in the regulatory regime. While some observers view those changes as necessary and effective, others argued that certain regulations were unjustifiably burdensome. To address those concerns, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (P.L. 115-174) relaxed certain regulations. Opponents of that legislation argue it unnecessarily pared back important safeguards, but proponents of deregulation argue additional pare backs are needed. Meanwhile, a variety of economic and technological trends continue to affect banks. As a result, the 116th Congress faces many issues related to banking, including the following: Safety and Soundness. Banks are subject to regulations designed to reduce the likelihood of bank failures. Examples include requirements to hold a certain amount of capital (which enables a bank to absorb losses without failing) and the so-called Volcker Rule (a ban on banks' proprietary trading). In addition, anti-money laundering requirements aim to reduce the likelihood banks will execute transactions involving criminal proceeds. Banks are also required to take steps to avoid becoming victims of cyberattacks. The extent to which these regulations (i) are effective, and (ii) appropriately balance benefits and costs is a matter of debate. Consumer Protection, Fair Lending, and Access to Banking. Certain laws are designed to protect consumers and ensure that lenders use fair lending practices. The Consumer Financial Protection Bureau has authorities to regulate for consumer protection. No consensus exists on whether current regulations strike an appropriate balance between protecting consumers while ensuring access to credit and justifiable compliance costs. In addition, whether Community Reinvestment Act regulations as currently implemented effectively and efficiently encourage banks to provide services in their areas of operation is an open question. Large Banks and \"Too Big To Fail.\" Regulators also regulate for systemic risks, such as those associated with very large and complex financial institutions that may contribute to systemic instability. Dodd-Frank Act provisions include enhanced prudential regulation for certain large banks and changes to resolution processes in the event one fails. In addition, bank regulators imposed additional capital requirements on certain large, complex banks. Subsequently, some argued that certain of these additional regulations were too broadly applied and overly stringent. In response, Congress reduced the applicability of the Dodd-Frank measures and regulators have proposed changes to the capital rules. Whether relaxing these rules will provide needed relief to these banks or unnecessarily pare back important safeguards is a debated issue. Community Banks. The number of small or \"community\" banks has declined substantially in recent decades. No consensus exists on the degree to which regulatory burden, market forces, and the removal of regulatory barriers to interstate branching and banking are causing the decline. What Companies Should Be Eligible for Bank Charters. To operate legally as a bank, an institution must hold a charter granted by a state or federal government. Traditionally, these are held by companies generally focused on and led by people with experience in finance. However, recently companies with a focus on technology are interested in having legal status as a bank, either through a charter from the Office of the Comptroller of the Currency or a state-level industrial loan company charter. Policymakers disagree over whether allowing these companies to operate as banks would create appropriately regulated providers of financial services or inappropriately extend government-backed bank safety nets and disadvantage existing banks. Recent Market and Economic Trends. Changing economic forces also pose issues for the banking industry. Some observers argue that increases in regulation could drive certain financial activities into a relatively lightly regulated \"shadow banking\" sector. Innovative financial technology may alter the way certain financial services are delivered. If interest rates rise, it could create opportunities and risks. Such trends could have implications for how the financial system performs and influence debates over appropriate banking regulations.", "document_type": "crs"}
{"report": "U.S. Code, Title 10, Section 5063, United States Marine Corps: Composition and Functions, dated October 1, 1986, states the following: The Marine Corps will be organized, trained and equipped to provide an amphibious and land operations capability to seize advanced naval bases and to conduct naval land campaigns. In this regard, the Marines are required by law to have the necessary equipment to conduct amphibious operations and land operations. The ACV and MPC were considered integral systems by the Department of Defense (DOD) and Marine Corps to meet this legal requirement, as well as providing critical capabilities to execute the nation's military strategy. On January 6, 2011, after spending approximately $3 billion in developmental funding, the Marine Corps—with \"encouragement\" from DOD—cancelled the Expeditionary Fighting Vehicle (EFV) program. The EFV was intended to replace the 40-year-old Amphibious Assault Vehicle (AAV), which currently transports Marines from ships to shore under hostile conditions. The Marine Corps cancelled the EFV due to excessive cost growth and poor performance in operational testing. Recognizing the need to replace the AAV, the Pentagon pledged to move quickly to develop a \"more affordable and sustainable\" vehicle to take the place of the EFV. The Amphibious Combat Vehicle (ACV) is intended to replace the AAV, incorporating some EFV capabilities but in a more practical and cost-efficient manner. In concert with the ACV, the Marines were developing the Marine Personnel Carrier (MPC) to serve as a survivable and mobile platform to transport Marines when ashore. At present, the Marines do not have a wheeled armored fighting vehicle that can operate as a dedicated infantry carrier with Marine maneuver forces inland. The MPC was not intended to be amphibious like an AAV, EFV, or the ACV but instead would be required to have a swim capability for inland waterways such as rivers, lakes, and other water obstacles such as shore-to-shore operations in the littorals. Because of a perceived amphibious \"redundancy,\" some have questioned the need for both the ACV and MPC. In June 2013, citing budgetary pressures, the Marines reportedly put the MPC program \"on ice\" and suggested that it might not be resurrected for about 10 years. Although some have questioned why the Marines cannot simply \"adopt\" a U.S. Army personnel carrier, Marine requirements for a personnel carrier reflect the need for this vehicle to be compatible with amphibious assault craft, as well as to have an enhanced amphibious capability, which is not necessarily an Army requirement. With the Marines involved in decades-long land conflicts in Iraq and Afghanistan and proliferating anti-access technologies such as guided missiles, some analysts questioned whether the Marines would ever again be called on to conduct a large-scale amphibious assault operation. In response to these questions and the perceived need to examine the post-Iraq and Afghanistan Marine Corps, the Department of the Navy and DOD studied the requirement to conduct large-scale amphibious operations and in early 2012 released a strategic vision for how amphibious operations will be conducted in the future. The primary assertion of this study is that the Marine Corps' and Navy's amphibious capabilities serve a central role in the defense of the global interests of a maritime nation. The need to maintain an amphibious assault capability is viewed by Marine Corps leadership as establishing the requirement for the ACV and MPC (as discussed in greater detail below). Congress is responsible for authorizing and appropriating funds for all weapon systems programs, including the ACV. In its oversight role, Congress could be concerned about how the ACV enables the Marines to conduct not only amphibious operations but also operations ashore. Another possible congressional concern is to what extent a robust amphibious assault capability is a necessary component of U.S. national security. Cost is another issue of interest to Congress. At present, the Marines use the AAV-7A1 series amphibious assault vehicle to move Marines from ship to shore. The Marines have used the AAV since 1971 and expect to continue to use it until replaced by the ACV or a similar vehicle. Over the years, the Marines have claimed the AAV has become increasingly difficult to operate, maintain, and sustain. As weapons technology and threat capabilities have evolved since the early 1970s, the AAV—despite upgrades—is viewed as having capabilities shortfalls in the areas of water and land mobility performance, lethality, protection, and network capability. The AAV's two-mile ship-to-shore range is viewed by many as a significant survivability issue not only for the vehicle itself but also for naval amphibious forces. Although the AAV has some armor protection and can operate inland to a limited extent, it is not intended for use as an infantry combat vehicle. The Marines do have the LAV-25, Light Armored Vehicle-25, an eight-wheeled armored vehicle that carries a crew of three and six additional marines. The LAV-25 is armed with a 25 mm chain gun and a 7.62 mm machine gun but is not fully amphibious, as it cannot cross a surf zone and would get to the beach via some type of connector such as the Landing Craft, Air Cushioned (LCAC). The LAV-25 has been in service since 1983. According to the Marine Program Executive Office (PEO) Land Systems, the LAV is not employed as an armored personnel carrier and usually carries a four-person Marine scout/reconnaissance team in addition to its crew. In this regard, the MPC was viewed as necessary by Marine leadership for the transport and enhanced armor protection of Marine infantry forces. The Marines' 2011 Request for Information (RFI) to industry provides an overview of the operational requirements for the ACV. These requirements include the following: The proposed vehicle must be able to self-deploy from amphibious shipping and deliver a reinforced Marine infantry squad (17 marines) from a launch distance at or beyond 12 miles with a speed of not less than 8 knots in seas with 1-foot significant wave height and must be able to operate in seas up to 3-foot significant wave height. The vehicle must be able to maneuver with the mechanized task force for sustained operations ashore in all types of terrain. The vehicle's road and cross-country speed as well as its range should be greater than or equal to the M-1A1. The vehicle's protection characteristics should be able to protect against direct and indirect fire and mines and improvised explosive device (IED) threats. The vehicle should be able to accommodate command and control (C2) systems that permit it to operate both at sea and on land. The vehicle, at a minimum, should have a stabilized machine gun in order to engage enemy infantry and light vehicles. The Marine Corps' 2011 Request for Information (RFI) to industry provided an overview of the operational requirements for the MPC. These requirements included the following: The vehicle must accommodate nine marines and two crew members and have a \"robust tactical swim capability (shore-to-shore [not designed to embark from an amphibious ship]) and be capable of operating at 6 knots in a fully developed sea.\" The vehicle must be able to operate on land with M-1A1s in mechanized task forces across the Marine Corps' mission profile. The vehicle shall provide protection for the occupants from the blasts, fragments, and incapacitating effects of attack from kinetic threats, indirect fire, and improvised explosive devices and mines. The vehicle shall be capable of firing existing Marine anti-structure and anti-armor missiles and should be able to accommodate existing command and control (C2) systems. Defense officials have noted the Marine Corps is \"not currently organized, trained and equipped to face a peer adversary in the year 2025\" and enemies with advanced air and shore defense will make amphibious operations even riskier. To counter this, the Navy is developing the Expeditionary Advance Base Operations (EABO) operational concept to address these concerns. EABO is described as follows: Expeditionary Advance Base Operations is a naval operational concept that anticipates the requirements of the next paradigm of US Joint expeditionary operations. The concept is adversary based, cost informed and advantage focused. EABO calls for an alternative, difficult to target forward basing infrastructure that will enable US naval and joint forces to create a more resilient forward based posture to persist, partner and operate within range of adversary long range precision fires. The alternative forward posture enabled by Expeditionary Advance Bases (EABs) is designed to mitigate the growing threat posed by the abundant quantity, expanded range and enhanced precision of potential adversary weaponry—particularly ballistic and cruise missiles designed to attack critical joint fixed forward infrastructure and large platforms. EABs provide a dispersed and largely mobile forward basing infrastructure that enables a persistent alternative force capability set that is similarly designed to be difficult to target and inherently resilient. The resilient, reduced signature infrastructure of EABs, combined with naval forces designed and structured to persist and operate within the arc of adversary anti-access/aerial denial (A2AD) capabilities enables naval commanders to conduct Expeditionary Advance Base Operations to support Joint Force Maritime Component Commander (JFMCC), and Fleet Commanders in the fight for sea control, by exploiting the opportunities afforded by key maritime terrain, particularly in close and confined seas. EABO advances, sustains and maintains the naval and joint sensor, shooter and sustainment capabilities of dispersed forces to leverage the decisive massed capabilities of the larger joint force with enhanced situational awareness, augmented fires and logistical support. The EABO Concept enables US naval forces to exercise 21 st Century naval operational art, meet new enemy A2AD threats with new capabilities and operate and thrive in and around close and confined seas. In terms of Marine Corps amphibious assault operations, the adoption of EABO could reportedly result in \"an entirely different approach to amphibious assaults as well as new weapon systems.\" Noting that \"missiles can now hit ships and landing craft while they are hundreds of miles from shore, making it far too dangerous for Marines to storm a beach with current capabilities,\" Marine officials are reportedly exploring ways to create temporary \"bubbles\" where Marines can get ashore. In response to these challenges, current and planned weapons systems might need to be modified to accommodate EABO operational concepts. As previously noted, in June 2013, citing budgetary pressures, the Marines reportedly put the MPC program \"on ice\" and suggested it might not be resurrected for about 10 years. At the time of the decision, the Marines' acquisition priorities were refocused to the ACV as well as the Joint Light Tactical Vehicle (JLTV). Although the Marines refocused budgetary resources to the ACV, difficulties in developing an affordable high water speed capability for the ACV continued to confront Marine leadership. In what was described as a \"drastic shift,\" the Marines decided in March 2014 to \"resurrect\" the MPC and designate it as ACV Increment 1.1 and initially acquire about 200 vehicles. The Marines also plan to develop ACV Increment 1.2, a tracked version, and to acquire about 470 vehicles and fund an ongoing high water speed study. Although ACV Increment 1.1 will have a swim capability, a connector will be required to get the vehicles from ship to shore. Plans called for ACV Increment 1.1 to enter the acquisition cycle at Milestone B (Engineering and Manufacturing Development) in FY2016, award prototype contracts leading to a down select to one vendor in FY2018, and enter low-rate initial production. On April 23, 2014, the Marines released an RFI for ACV Increment 1.1. Some of the required capabilities included the following: ... operate in a significant wave height of two feet and sufficient reserve buoyancy to enable safe operations; a high level of survivability and force protection; operate in four to six feet plunging surf with ship-to-shore operations and launch from amphibious ships as an objective; land mobility, operate on 30 percent improved surfaces and 70 percent unimproved surfaces; ability to integrate a .50 calibre remote weapon station (RWS) with growth potential to a dual mount 40 mm/.50 calibre RWS or a 30 mm cannon RWS; carrying capacity to include three crew and 10 embarked troops as the threshold, 13 embarked troops as the objective, carry mission essential equipment and vehicle ammunition; and the ability to integrate a command, control and communications suite provided as government furnished equipment ... The RFI included a requirement for industry to deliver 16 prototype vehicles nine months after contract award in April 2016 at a rate of 4 vehicles per month. The Marines estimated ACV Increment 1.1 would cost about $5 million to $6 million per vehicle, about $10 million less than what the previous ACV version was expected to cost. On November 5, 2014, the Marines reportedly released a draft RFP for ACV Increment 1.1. The Marines were looking for information from industry regarding program milestones, delivery schedules, and where in the program cost savings could be achieved. Plans were for two companies to build 16 prototype vehicles each for testing. Companies who competed for the two contracts included BAE Systems, General Dynamics Land Systems (GDLS), Lockheed Martin, and Scientific Applications International Corporation (SAIC). Under the provisions of the RFP, the ACV 1.1 was envisioned as an eight-wheeled vehicle capable of carrying 10 Marines and a crew of 3 that would cost between $4 million to $7.5 million per copy—a change from the RFI estimate of $5 million to $6 million per vehicle. In terms of mobility, the ACV 1.1 would need to be able to travel at least 3 nautical miles from ship to shore, negotiate waves up to at least 2 feet, travel 5 to 6 knots in calm seas, and be able to keep up with the M-1 Abrams tank once ashore. Proposals were due in April 2016 and the Marines reportedly planned to award two EMD contracts for 16 vehicles each to be delivered in November 2016. In 2018, the Marines would then down select to one vendor and start full production. The Marines reportedly plan to acquire 204 ACV 1.1s, to be allocated as follows: 1 st Marine Expeditionary Force, Camp Pendleton, CA— 67 ; 2 nd Marine Expeditionary Force, Camp Lejeune, NC— 46 ; 3 rd Marine Expeditionary Force, Okinawa, Japan— 21 ; Assault Amphibian School, Camp Pendleton, CA— 25 ; Exercise Support Division, Marine Corps Air Ground Combat Center, Twenty Nine Palms, CA— 25 ; and Program Manager, Quantico, VA, and Amphibious Vehicle Test Branch, Camp Pendleton, CA— 20 . In April 2016 testimony to the Senate Armed Services Committee, the Deputy Commandant for Combat Development and Integration testified that the Marines' Acquisition Objective for the ACV 1.1 remained at 204 vehicles, which would provide lift for two infantry battalions. Full Operational Capability (FOC) for ACV 1.1 is planned for FY2020. On November 24, 2015, the Marine Corps awarded BAE Systems and SAIC contracts to develop ACV 1.1 prototypes for evaluation. BAE's contract was for $103.8 million and SAIC's for $121.5 million, and each company is to build 16 prototypes. The Marines expect to down select to a single vendor in 2018. Initial operational capability (IOC) was expected by the end of 2020, and all ACV 1.1 vehicles are planned to be fielded by summer 2023. Plans are to equip six battalions with ACV 1.1s and 392 existing upgraded AAVs. Both BAE and SAIC reportedly have a long history related to amphibious vehicles, as BAE built the Marines' original AAV and SAIC has built hundreds of Terrex 1 vehicles used by Singapore, and both companies had Marine Corps contracts to modernize AAVs. ACV 1.1 is intended to have some amphibious capability but would rely on ship-to-shore connectors. ACV 1.2 is intended to have greater amphibious capability, including greater water speed and the ability to self-deploy from amphibious ships. BAE planned to team with Italian manufacturer Iveco (which owns Chrysler and Ferrari). BAE's prototype would accommodate 13 Marines and travel 11.5 miles at about 7 miles per hour (mph) in surf and 65 mph on land. BAE's version would incorporate a V hull design intended to protect passengers from underside blasts and have external fuel tanks for increased safety. BAE intends to produce its prototypes at its York, PA, facility. SAIC planned to team with Singapore Technology Kinetics to develop its prototype based on an existing design called Terrex. SAIC's version is said to travel 7 mph in water and incorporates a V hull design as well as blast-mitigating seats. It would carry a crew of 3 and can accommodate 11 Marines. SAIC's version plans for a Common Remote Weapons System (CROWS) (.50 calibre machine gun and a 30 mm cannon), which could be operated from inside the vehicle while buttoned up, therefore not exposing crewmen to hostile fire. On December 7, 2015, it was reported that GDLS would protest the award of the ACV 1.1 contract to BAE and SAIC, claiming the Marines asked for particular capabilities and then evaluated vendors by a different set of standards. On March 15, 2016, GAO denied GDLS's protest, noting that \"the Marine Corps' evaluation was reasonable and consistent with the evaluation scheme identified in the solicitation.\" The Marines reportedly stated that the protest put the ACV 1.1 program about 45 days behind schedule but anticipated the ACV 1.1 would still be fielded on time. BAE and SAIC reportedly delivered their ACV 1.1 prototypes, with BAE delivering its first prototype in December 2016 and SAIC delivering its prototype in February 2017. This early delivery could potentially result in an unspecified incentive fee award for both companies. EMD testing began the week of March 13 and was scheduled to last eight months. In early December 2017, the Marines reportedly sent the ACV 1.1 down select request for proposals to BAE and SAIC. Plans called for operational testing to start in January 2018, with the Marines anticipating announcing a contract winner in June 2018 for the delivery of 204 ACV 1.1s over a four-year period. In accordance with the provisions of the FY2014 National Defence Authorization Act ( P.L. 113-66 ) Section 251, GAO submitted its annual report to Congress on the ACV program in April 2018. GAO reviewed program cost estimates, updated schedules, and program assessments of test results and production readiness, and compared ACV acquisition efforts to DOD guidance and GAO-identified best practices. GAO found the following: The first version of the Amphibious Combat Vehicle (ACV 1.1) is on track to meet development cost goals with no additional anticipated delays for major acquisition milestones. With regard to costs, the development phase of ACV 1.1 is on pace to not exceed cost goals that were established at the start of development, based on a recent Navy estimate, the ACV program office, and reporting from the contractors. GAO recommended that the Marine Corps (1) not enter the second year of low rate production for ACV 1.1 until after the contractor has achieved an overall Manufacturing Readiness Level (MRL) of 8 and (2) not enter full-rate production until achieving an overall MRL of 9. DOD partially concurred with this recommendation but noted that it was \"reasonable to proceed at lower MRL levels if steps are taken to mitigate risks.\" On June 19, 2018, the Marine Corps selected BAE Systems to produce the ACV. Reportedly, the initial contract—valued at $198 million—will be for low-rate production of 30 vehicles to be delivered by the autumn of 2019. Eventually, 204 vehicles are to be delivered under the ACV 1.1 phase of the project. BAE will also produce the ACV 1.2 variant and, all told, the entire ACV 1.1 and 1.2 project is expected to deliver 700 vehicles, and, if all options are exercised, the total contract will reportedly be worth $1.2 billion. In December 2018, the Navy reportedly awarded BAE Systems a $140 million contract modification to build 30 Low Rate Initial Production (LRIP) ACVs as part of Lot 2, with the first vehicles expected to be delivered in the summer of 2020. Lot 1 is reportedly still scheduled to start delivery in the summer of 2019. In DOT&E's December 2018 FY2018 Annual Report, it was noted During the operational evaluation (OA), the ACV-equipped unit demonstrated the ability to maneuver to an objective, conduct immediate action drills, and provide suppressive fires in support of dismounted infantry maneuver in a desert environment. The ACV-equipped unit was able to maneuver in the littorals; embark aboard a landing craft air cushioned (LCAC), transit the open ocean and surf zone, and debark from the LCAC. The ACV demonstrated water mobility and the ability to self-deploy from the beach, cross the surf zone, enter the ocean, swim, and return to the beach. Based on data from the OA, reliability is below the program reliability growth curve (58 hours Mean Time Between Operational Mission Failures [MTBOMF]). BAE vehicles demonstrated 24.9 hours MTBOMF. There were no systemic problems identified that indicate a major redesign is required. The ACV section was successful in 15 of 16 missions and demonstrated the capability to negotiate terrain in the desert and littorals, operate with tanks and light armored vehicles, and maneuver to achieve tactical advantage over the opposing threat force. ACV crews, supported infantry, and the opposing force noted that the vehicles performed better than the legacy vehicle in a wide variety of areas. In terms of recommendations, DOT&E noted the Program Manager, Advanced Amphibious Assault should do the following: Modify the infantry troop commander's station to make it easier to move between the hatch and seat. Assess the capability of all existing Marine Corps recovery assets to recover the ACV. Investigate options for preventing damage to steering/suspension when encountering battlefield debris, such as concertina wire. According to reports, the Marines envisioned that the successor to ACV 1.1—the ACV 1.2—would have a threshold requirement of 12 miles from ship-to-shore. If this threshold can be achieved, it could help to reduce the vulnerability of U.S. naval vessels supporting Marine amphibious operations to enemy shore fire. On April 10, 2019, during testimony to the Subcommittee on Seapower of the Senate Armed Services Committee, Navy and Marine Corps leadership noted During the fall of 2018, ACV 1.1 prototypes demonstrated satisfactory water mobility performance in high surf conditions, and in doing so met the full water mobility transition requirement for ACV 1.2 capability. Subsequently, the Milestone Decision Authority Assistant Secretary of the Navy for Research, Development and Acquisition (ASN (RD&A)) approved the consolidation of increments one and two into a single program to enable continuous production of ACVs to completely replace the AAV. The next key acquisition event is the Full Rate Production decision scheduled for the third quarter of FY 2020 following Initial Operational Test & Evaluation. ACV remains on schedule to achieve Initial Operational Capability in the fourth quarter of FY 2020. With the consolidation of ACV variants into a single variant, there will likely be a number of programmatic changes and potential ramifications for the ACV and ACV 2.0 programs. Reportedly, the Marines plan to develop an ACV 2.0, capable of carrying 10 to 13 Marines plus crew, capable of high water speeds and deployment from ships far from the coast. ACV 2.0 is planned to be capable of operating on land alongside tanks and light armored vehicles. According to the Marines ACV 2.0 serves as a conceptual placeholder for a future Decision Point (~ 2025, or sooner) at which time knowledge gained in the fielding and employment of the first phase of ACV (1.1 and 1.2), the state of the naval connector strategy, and science & technology work towards a high water speed capable self-deploying vehicle will support an informed decision. The FY2020 presidential budget request includes RDT&E and Procurement funding requests in the Base Budget, as well as FY2020 requested quantities. The Marines did not request ACV Overseas Contingency operations (OCO) funding in FY2020. According to DOD, the FY2020 ACV budget request will fund The ACV 1.1 Full Rate Production (FRP) Lot 3 of 56 vehicles, plus procurement of related items such as production support, systems engineering, program management, Engineering Change Orders (ECOs), Government Furnished Equipment (GFE), and integrated logistics support. Research and Development efforts include the procurement of ACV 1.2 MRV test articles, associated GFE, and initiation of a Vehicle Protective System trade study and integration efforts. While from an overall programmatic perspective, the consolidation of the ACV 1.1 and ACV 1.2 variants could be viewed as a favourable programmatic outcome, there are likely ramifications that might be of interest to policymakers. Potential issues include the following: Will the consolidation of ACV 1.1 and ACV 1.2 result in an overall cost savings? Will this consolidation permit the acquisition of additional ACVs because of potential cost savings? With the consolidation and the stated intent to replace AAVs, what is the revised timeline for the replacement of AAVs and will this result in cost savings from not having to upgrade and maintain AAVs longer than previously intended? How will the consolidation of ACV 1.1 and ACV 1.2 affect the ACV 2.0 program? If the Navy and Marine Corps decide to adopt Expeditionary Advance Base Operations (EABO) as an operational concept, it could possibly have implications for the ACV program, including the following: At the weapon systems level, would EABO require any changes to the vehicles themselves, such as enhanced survivability, lethality, or Command, Control, Communications, Computer, Intelligence, Surveillance, and Reconnaissance (C4ISR) features? If changes are required to facilitate EABO, how would this affect the program's overall acquisition timeline and cost? If EABO does not require any technical changes in the ACV program, would the adoption of EABO modify the Marines' current procurement quantities of ACVs? If EABO requires different procurement quantities for the different ACV versions (more or fewer), how might this affect program timelines and program costs?", "summary": "On January 6, 2011, after spending approximately $3 billion in developmental funding, the Marine Corps cancelled the Expeditionary Fighting Vehicle (EFV) program due to poor reliability demonstrated during operational testing and excessive cost growth. Because the EFV was intended to replace the 40-year-old Amphibious Assault Vehicle (AAV), the Pentagon pledged to move quickly to develop a \"more affordable and sustainable\" vehicle to replace the EFV. The Amphibious Combat Vehicle (ACV) is intended to replace the AAV, incorporating some EFV capabilities but in a more practical and cost-efficient manner. In concert with the ACV, the Marines were developing the Marine Personnel Carrier (MPC) to serve as a survivable and mobile platform to transport Marines when ashore. The MPC was not intended to be amphibious like an AAV, EFV, or the ACV but instead would be required to have a swim capability for inland waterways such as rivers, lakes, and other water obstacles such as shore-to-shore operations in the littorals. Both vehicles were intended to play central roles in future Marine amphibious operations. On June 14, 2013, Marine leadership put the MPC program \"on ice\" due to budgetary pressures but suggested the program might be resurrected some 10 years down the road when budgetary resources might be more favorable. In what was described as a \"drastic shift,\" the Marines decided to \"resurrect\" the MPC in March 2014. The Marines designated the MPC as ACV Increment 1.1 and planned to acquire about 200 vehicles. The Marines also plan to develop ACV Increment 1.2, a tracked, fully amphibious version, and at the time planned to acquire about 470 vehicles and fund an ongoing high water speed study. Although ACV Increment 1.1 is to have a swim capability, another mode of transport (ship or aircraft) would be required to get the vehicles from ship to shore. The Marines are reportedly exploring the possibility of developing a high water speed ACV 2.0, which could accompany tanks and light armored vehicles into combat. On November 5, 2014, the Marines released a draft Request for Proposal (RFP) for ACV Increment 1.1. On November 24, 2015, the Marine Corps awarded BAE Systems and SAIC contracts to develop ACV 1.1 prototypes for evaluation. BAE's contract was for $103.8 million and SAIC's for $121.5 million, and each company was to build 16 prototypes to be tested over the next two years. Both BAE and SAIC delivered their prototypes early, and Engineering and Manufacturing Development (EMD) testing began mid-March 2017. In early December 2017, the Marines reportedly sent the ACV 1.1 down select request for proposals to BAE and Science Applications International Corporation (SAIC). On June 19, 2018, the Marine Corps selected BAE Systems to produce the ACV. The initial contract—valued at $198 million—was for low-rate production of 30 vehicles to be delivered by the autumn of 2019. On April 10, 2019, during testimony to the Senate Armed Services Committee, Navy and Marine Corps leadership announced that during the fall of 2018, ACV 1.1 prototypes demonstrated satisfactory water mobility performance in high surf conditions and, in doing so, met the full water mobility transition requirement for ACV 1.2 capability. As a result, ACV 1.1 and ACV 1.2 were to be consolidated into a single variant—the ACV—which is intended to replace all AAVs. Potential issues for Congress include the potential ramifications of the consolidation of the ACV 1.1 and ACV 1.2 programs and how the possible adoption of the Expeditionary Advance Base Operations (EABO) operational concept could affect the ACV program.", "document_type": "crs"}
{"report": "Essentially all of the outstanding debt of the federal government is subject to a statutory limit, which is set forth as a dollar limitation in 31 U.S.C. 3101(b). From time to time, Congress considers and passes legislation to adjust or suspend this limit. Legislation adjusting the debt limit takes the form of an amendment to 31 U.S.C. 3101(b), usually striking the current dollar limitation and inserting a new one. In recent years, such legislation has taken the form of suspending the debt limit through a date certain with an increase to the dollar limit made administratively at the end of the suspension period. At the beginning of the 116 th Congress, the House adopted a standing rule that would provide for legislation suspending the statutory debt limit to be considered as passed by the House, without a separate vote, when the House adopts the budget resolution for a fiscal year. This House rule is similar to a previous one related to the debt limit (commonly referred to as the \"Gephardt rule,\" named after its original sponsor, former Representative Richard Gephardt), which was first adopted in 1979 but was repealed at the beginning of the 112 th Congress in 2011. The House may also consider debt limit legislation without resorting to the new debt limit rule (and also did so under the former Gephardt rule) either as freestanding legislation, as part of another measure, or as part of a budget reconciliation bill. The Senate does not have (and has never had) a comparable procedure. If it chooses under the new rule to consider such debt limit legislation, it would do so under its regular legislative process. This report first explains the current House debt limit rule, particularly in relation to the former Gephardt rule. Then, it describes the legislative history of the former rule and reviews how the former rule operated before it was repealed at the beginning of the 112 th Congress. House Rule XXVIII requires that the House clerk, when the House adopts the budget resolution for a fiscal year, automatically engross and transmit to the Senate a joint resolution suspending the public debt limit through the end of that year. In other words, such legislation suspending the debt limit would be passed by the House without a separate vote on the debt limit legislation. Instead of a separate vote, the rule stipulates that the vote on the budget resolution is to be considered as the vote on the debt legislation. The new House debt limit rule differs from the former rule in two respects. First, under the new rule, the debt limit legislation is passed and sent to the Senate when the House adopts the budget resolution, not when the House and Senate agree to the budget resolution. Second, the debt legislation would suspend the debt limit, not explicitly set a new debt limit. Under the former rule, the debt limit legislation would provide for a specific new debt limit, indicating the amount by which the debt limit would be increased. In contrast, as a suspension of the debt limit, the new rule would provide for legislation that accommodates the variability of federal collections and past obligations but retain the ability of Congress to revisit the effects of such revenues and existing obligations. The current rule, as well as the former rule, does not affect the House Ways and Means Committee's exclusive jurisdiction over debt limit legislation. The full text of the current debt limit rule is provided in the Appendix . The Gephardt rule, initially codified as Rule XLIX of the Standing Rules of the House of Representatives, was established by P.L. 96-78 (93 Stat. 589-591), an act to provide for a temporary increase in the public debt limit. The House adopted the legislation ( H.R. 5369 ) by a vote of 219-198 on September 26, 1979. During consideration of the measure, Representative Gephardt explained that the purpose of the new House rule was to place the consideration of the public debt limit within the context of the overall budget policies contained in the annual budget resolution. In addition, it was intended to reduce the amount of time spent and the number of votes in the House and in committees on the issue of raising the public debt limit. One of the aggregate amounts required to be included in the annual budget resolution is the appropriate level of the public debt. The budget resolution, however, does not become law. Therefore, the enactment of subsequent legislation is necessary in order to change the statutory limit on the public debt. The Gephardt rule enables the House to combine the finalization of the budget resolution and the origination of debt limit legislation into a single step. Representative Gephardt stated that the new automatic engrossment process puts the consideration of the appropriate level for the debt ceiling where it legitimately and logically belongs. That is in the context of when we vote for the spending that creates the need to change the debt ceiling. In its original form, the rule required the engrossment of a joint resolution changing the temporary public debt limit. In 1983, the separate temporary and permanent statutory limits on the public debt were combined into one permanent statutory limit ( P.L. 98-34 ). Subsequently, the House amended the Gephardt rule to reflect this change by agreeing to H.Res. 241 (98 th Congress) by voice vote on June 23, 1983. Under the modified rule, the automatically engrossed joint resolution would contain a change to the permanent statutory limit. In addition to this modification, the rules change also provided that where a budget resolution contains more than one public debt limit figure (for the current and the next fiscal year), only one joint resolution be engrossed, containing the debt limit figure for the current fiscal year with a time limitation, and the debt limit figure for the following fiscal year as the permanent limit. During consideration of H.Res. 241 , Representative Butler C. Derrick explained the limitation of a single joint resolution by stating the following: The Committee on Rules ... believes that it is unnecessary and confusing to have ... a single concurrent resolution on the budget trigger the engrossment and passage of two separate joint resolutions to increase or decrease the public debt [limit]. At the beginning of the 106 th Congress (1999-2000), the House recodified the rule as House Rule XXIII. Certain language was deleted and modified from the existing rule, but the revisions were intended to continue the automatic engrossment process \"without substantive change.\" The House repealed the rule at the beginning of the 107 th Congress (2001-2002). On the opening day of the 108 th Congress (2003-2004), however, the House reinstated this automatic engrossing process as a new rule, Rule XXVII. The reinstated rule contained the same language as Rule XXIII of the 106 th Congress. The rule was redesignated (without change) as Rule XXVIII during the 110 th Congress upon the enactment of the Honest Leadership and Open Government Act of 2007 ( S. 1 , P.L. 110-81 , September 14, 2007, see Section 301(a)). Finally, as noted above, the House repealed the previous rule at the beginning of the 112 th Congress (2011-2012). More recently, the House restored and revised the rule at the beginning of the 116 th Congress. Table 1 provides information on the joint resolutions changing the public debt limit that were engrossed and deemed passed by the House pursuant to the Gephardt rule during calendar years 1980-2010. The rule, however, did not operate in all of these years. In 11 of the 31 years between 1980 and 2010, the rule was either suspended (1988, 1990-1991, 1994-1997, and 1999-2000) or repealed (2001-2002) by the House. In most cases, the House suspended the rule because legislation changing the statutory limit was not necessary. At the time, the existing public debt limit was expected to be sufficient. In three cases, the House passed or was expected to pass separate legislation to increase the statutory limit. As noted above, the rule was repealed at the beginning of the 107 th Congress and therefore did not apply in 2001 and 2002. During the remaining 20 years, when the rule was in effect, the House originated 20 joint resolutions under this procedure. The first seven of these 20 joint resolutions were generated under the Gephardt rule in its original form. As mentioned above, the rule was modified in 1983. It generally remained in this form through 2010. The subsequent 13 joint resolutions were generated under this modified language. In four years (calendar years 1998, 2004, 2006, and 2010), while the rule was in effect, the House and Senate did not agree to a conference report on the budget resolution, and therefore the automatic engrossment process under the Gephardt rule was not used. As Table 1 shows, although budget resolutions adopted during this period contained debt limit amounts for between three and 11 different fiscal years—as the time frame of each budget resolution dictated—the joint resolutions automatically engrossed under the Gephardt rule contained debt limit amounts for only one or two fiscal years, depending on the requirements of the rule at the time. The 1983 modification, as noted above, provided that the automatically engrossed joint resolution could include multiple debt limit increases—one temporary and another permanent. The first three of the 11 joint resolutions automatically engrossed pursuant to this modified version of the rule contained two different public debt limits, and the other eight contained a single public debt limit. The Senate passed 16 of the 20 joint resolutions automatically engrossed pursuant to the Gephardt rule, passing 10 without amendment and six with amendments. The 10 joint resolutions passed without amendment were sent to the President and signed into law. The six joint resolutions amended by the Senate required a vote of the House before being sent to the President. Five of these ultimately became law. Of the remaining four joint resolutions, the Senate began consideration on one but came to no resolution on it, and it took no action on three. Between 1980 and 2010, a total of 47 public debt limit changes were signed into law as independent measures or as part of other legislation. The Gephardt rule originated less than a third of these changes. That is, over two-thirds of the 47 public debt limit changes enacted into law during this period originated by procedures other than the House rule, each requiring the House to vote on such legislation. However, the rule effectively allowed the House to avoid a separate, direct vote on 10 (or 21%) of the 47 measures changing the debt limit that were ultimately enacted into law. RULE XXVIII STATUTORY LIMIT ON THE PUBLIC DEBT 1. Upon adoption by the House of a concurrent resolution on the budget under section 301 or 304 of the Congressional Budget Act of 1974, the Clerk shall prepare an engrossment of a joint resolution suspending the statutory limit on the public debt in the form prescribed in clause 2. Upon engrossment of the joint resolution, the vote by which the concurrent resolution on the budget was adopted by the House shall also be considered as a vote on passage of the joint resolution in the House, and the joint resolution shall be considered as passed by the House and duly certified and examined. The engrossed copy shall be signed by the Clerk and transmitted to the Senate for further legislative action. 2. The matter after the resolving clause in a joint resolution described in clause 1 shall be as follows: 'Section 3101(b) of title 31, United States Code, shall not apply for the period beginning on the date of enactment and ending on September 30, .' with the blank being filled with the budget year for the concurrent resolution. 3. Nothing in this rule shall be construed as limiting or otherwise affecting— (a) the power of the House or the Senate to consider and pass bills or joint resolutions, without regard to the procedures under clause 1, that would change the statutory limit on the public debt; or (b) the rights of Members, Delegates, the Resident Commissioner, or committees with respect to the introduction, consideration, and reporting of such bills or joint resolutions. 4. In this rule the term 'statutory limit on the public debt' means the maximum face amount of obligations issued under authority of chapter 31 of title 31, United States Code, and obligations guaranteed as to principal and interest by the United States (except such guaranteed obligations as may be held by the Secretary of the Treasury), as determined under section 3101(b) of such title after the application of section 3101(a) of such title, that may be outstanding at any one time.", "summary": "Essentially all of the outstanding debt of the federal government is subject to a statutory limit, which is set forth as a dollar limitation in 31 U.S.C. 3101(b). From time to time, Congress considers and passes legislation to adjust or suspend this limit. At the beginning of the 116th Congress, the House adopted a standing rule that would provide for legislation suspending the statutory debt limit to be considered as passed by the House, without a separate vote, when the House adopts the budget resolution for a fiscal year. This House rule is similar to a previous one related to the debt limit (commonly referred to as the \"Gephardt rule,\" named after its original sponsor, former Representative Richard Gephardt), which was first adopted in 1979 but was repealed at the beginning of the 112th Congress in 2011. The House may also consider debt limit legislation without resorting to the new debt limit rule (and also did so under the former Gephardt rule) either as freestanding legislation, as part of another measure, or as part of a budget reconciliation bill. The Senate does not have (and has never had) a comparable procedure. If it chooses under the new rule to consider such debt-limit legislation, it would do so under its regular legislative process. This report first explains the current House debt limit rule, particularly in relation to the former Gephardt rule. Then, it describes the legislative history of the former rule and reviews how the former rule operated before it was repealed at the beginning of the 112th Congress. Under the former Gephardt rule, in 11 of the 31 years between 1980 and 2010, the rule was either suspended (1988, 1990-1991, 1994-1997, and 1999-2000) or repealed (2001-2002) by the House. In most years in which the rule was suspended, legislation changing the statutory limit was not necessary—that is, at the time, the existing public debt limit was expected to be sufficient. During the years in which the rule applied (i.e., in the remaining 20 of the 31 years between 1980 and 2010), the rule led to the automatic engrossment of 20 House joint resolutions increasing the statutory limit on the public debt. In effect, under the rule, in these cases, the House was able to initiate legislation increasing the level of the public debt limit without a separate, direct vote on the legislation. Of these 20 joint resolutions, 15 became law. In 10 of these 15 cases, the Senate passed the measure without change, allowing it to be sent to the President for his signature without any further action by the House. In the remaining 5 cases, the Senate amended the rule-initiated legislation, requiring the House to vote on the amended legislation before it could be sent to the President. During this period, the House also originated and considered debt limit legislation without resorting to the Gephardt rule either as freestanding legislation, as part of another measure, or as part of a budget reconciliation bill. Of the 47 public debt limit changes enacted into law during the period 1980-2010, 32 were enacted without resorting to the Gephardt rule, each requiring the House to vote on such legislation. In total, between 1980 and 2010, the rule effectively allowed the House to avoid a separate, direct vote on 10 of the 47 measures changing the debt limit that were ultimately enacted into law. This report updates the previous one (dated July 27, 2015) with a description of the changes to the former rule.", "document_type": "crs"}
{"report": "The term child nutrition programs refers to several U.S. Department of Agriculture Food and Nutrition Service (USDA-FNS) programs that provide food to children in institutional settings. The largest are the National School Lunch Program (NSLP) and School Breakfast Program (SBP), which subsidize free, reduced-price, and full-price meals in participating schools. Also operating in schools, the Fresh Fruit and Vegetable Program provides funding for fruit and vegetable snacks in participating elementary schools, and the Special Milk Program provides support for milk in schools that do not participate in NSLP or SBP. Other child nutrition programs include the Child and Adult Care Food Program, which provides meals and snacks in child care and after-school settings, and the Summer Food Service Program, which provides food during the summer months. The child nutrition programs were last reauthorized by the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ). On September 30, 2015, some of the authorities created or extended by the HHFKA expired. However, these expirations had a minimal impact on program operations, as the child nutrition programs have continued with funding provided by annual appropriations acts. In the 114 th Congress, lawmakers began but did not complete child nutrition reauthorization, which refers to the process of reauthorizing and potentially making changes to multiple permanent statutes—the Richard B. Russell National School Lunch Act, the Child Nutrition Act, and sometimes Section 32 of the Act of August 24, 1935. Both committees of jurisdiction—the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Education and the Workforce—reported reauthorization legislation ( S. 3136 and H.R. 5003 , respectively). This legislation died at the end of the 114 th Congress, as is the case for any bill that has not yet passed both chambers and been sent to the President at the end of a Congress. There were no significant child nutrition reauthorization efforts in the 115 th Congress; however, 2018 farm bill proposals and the final enacted bill included a few provisions related to child nutrition programs. The implementation of the HHFKA, child nutrition reauthorization efforts in the 114 th Congress, and the child nutrition-related topics raised during 2018 farm bill negotiations have raised issues that may be relevant for Congress in future reauthorization efforts or other policymaking opportunities. These issues often relate to the content and type of foods served in schools: for example, the nutritional quality of foods and whether foods are domestically sourced. Other issues relate to access, including alternatives to on-site consumption in summer meals and implementation of the Community Eligibility Provision, an option to provide free meals to all students in certain schools. Stakeholders in these issues commonly include school food authorities (SFAs; school food service departments that generally operate at the school district level), hunger and nutrition-focused advocacy organizations, and food industry organizations, among others. This report provides an overview of these and other current issues in the child nutrition programs. It does not cover every issue, but rather provides a high-level review of some recent issues raised by Congress and/or program stakeholders, drawing examples from legislative proposals in the 114 th and 115 th Congresses . References to CRS reports with more detailed information or analysis on specific issues are provided where applicable, including the following: For an overview of the structure and functions of the child nutrition programs, see CRS Report R43783, School Meals Programs and Other USDA Child Nutrition Programs: A Primer . For more information on the child nutrition reauthorization proposals in the 114 th Congress, see CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview . For a summary of the HHFKA, see CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 . School meals must meet certain requirements to be eligible for federal reimbursement, including nutritional requirements. These nutrition standards were last updated following the enactment of the HHFKA, which required USDA to update the standards for school meals and create new nutrition standards for \"competitive\" foods (e.g., foods sold in vending machines, a la carte lines, and snack bars) within a specified timeframe. Specifically, the law required USDA to issue proposed regulations for competitive foods nutrition standards within one year after enactment and for school meals nutrition standards within 18 months after enactment. The law also provided increased federal subsidies (6 cents per lunch) for schools meeting the new requirements and funding for technical assistance. The nutrition standards in the HHFKA were championed by a variety of organizations and stakeholders, including nutrition and public health advocacy organizations, food and beverage companies, school nutrition officials, retired military leaders, and then-First Lady Michelle Obama. The precise nutritional requirements were largely written in the subsequent regulations, not the HHFKA. USDA-FNS published the final rule for school meals in January 2012 and the final rule for competitive foods in July 2016. As required by law, the nutrition standards were based on the Dietary Guidelines for Americans and recommendations from the Institute of Medicine (now the Health and Medicine Division of the National Academies). For school meals, the updated standards increased the amount of fruits, vegetables, and whole grains in school lunches and breakfasts. They also instituted limits on calories, sodium, whole grains, and proteins in meals and restricted milk to low-fat (unflavored) and fat-free (flavored or unflavored) varieties. Other requirements included a provision that senior high school students must select a half-serving of fruits or vegetables with a reimbursable meal. Similarly, the nutrition standards for competitive foods limited calories, sodium, and fat in foods sold outside of meals, among other requirements. The standards applied only to non-meal foods and beverages sold during the school day (defined as midnight until 30 minutes after dismissal) and include some exceptions for fundraisers. The meal standards began phasing in during school year (SY) 2012-2013, and the competitive foods standards took effect in SY2014-2015. However, sodium limits and certain whole grain requirements for school meals were scheduled to phase in over multiple school years. Some schools experienced challenges implementing the changes, reporting difficulty obtaining whole grain and low-sodium products, issues with student acceptance of foods, reduced participation, increased costs, and increased food waste. These accounts were shared in news stories and by the School Nutrition Association (SNA), a national, nonprofit professional and advocacy organization representing school nutrition professionals. Studies by the U.S. Government Accountability Office and USDA confirmed that many of these issues were present in SY2012-2013 and SY2013-2014, the first two years of implementation. SNA advocated for certain changes to the standards, while other groups called for maintaining the standards, arguing that they were necessary for children's health and that implementation challenges were easing with time. In January 2014, USDA removed weekly limits on grains and protein. Then, in the FY2015, FY2016, and FY2017 appropriations laws, Congress enacted provisions that loosened the milk, whole grain, and/or sodium requirements from SY2015-2016 through SY2017-2018. USDA implemented similar changes for SY2018-2019 in an interim final rule. In December 2018, USDA published a final rule that indefinitely changes these three aspects of the standards starting in SY2019-2020. Specifically, the rule allows all SFAs to offer flavored, low-fat (1%) milk as part of school meals and as beverages sold in schools, and requires unflavored milk to be offered alongside flavored milk in school meals; requires SFAs to adhere to a 50% whole grain-rich requirement (the original regulations required 100% whole grain-rich starting in SY2014-2015); states may make exemptions to allow SFAs to offer nonwhole grain-rich products; and maintains Target 1 sodium limits from SY2019-2020 through SY2023-2024, implements Target 2 limits starting in SY2024-2025 and thereafter, and eliminates Target 3 limits (the strictest target). Table 2 provides a timeline from the 2012 final rule to the 2018 final rule, showing the ways in which milk, whole grain, and sodium requirements have been modified over time. Apart from these changes, the nutrition standards for school meals remain largely intact. The changes to the milk requirements also affect other beverages sold in schools; otherwise, the nutrition standards for competitive foods have not been changed substantially. Legislative proposals related to the nutrition standards were considered in the 115 th Congress. For example, the House-passed version of 2018 farm bill (one version of H.R. 2 ) would have required USDA to review and revise the nutrition standards for school meals and competitive foods. According to the bill, the revisions would have had to ensure that the standards, particularly those related to milk, \"(1) are based on research based on school-age children; (2) do not add costs in addition to the reimbursements required to carry out the school lunch program … and (3) maintain healthy meals for students.\" This provision was not included in the enacted bill. Child nutrition reauthorization proposals in the House and Senate during the 114 th Congress also would have altered the nutrition standards. The House committee's proposal ( H.R. 5003 ) would have required USDA to review the school meal standards at least once every three years and revise them as necessary, following certain criteria. In addition, under the proposal, fundraisers by student groups/organizations would no longer have had to meet the competitive food standards and any foods served as part of a federally reimbursable meal would have been allowed to be sold a la carte. The Senate committee's proposal ( S. 3136 ) would have required USDA to revise the whole grain and sodium requirements for school meals within 90 days after enactment. Although not included in the proposal itself, negotiations between the Senate committee, the White House, USDA, and the School Nutrition Association resulted in an agreement that these revisions, if enacted, would have reduced the 100% whole grain-rich requirement to 80% and delayed the Target 2 sodium requirement for two years. Under current law, fruit and vegetable snacks served in FFVP must be fresh. According to USDA guidance, fresh refers to foods \"in their natural state and without additives.\" In recent years, some have advocated for the inclusion of frozen, dried, canned, and other types of fruits and vegetables in the program, while others have advocated for continuing to maintain only fresh products. Stakeholders on both sides include agricultural producers and processors. The 2014 farm bill (Section 4214 of P.L. 113-79 ) funded a pilot project that incorporated canned, dried, and frozen (CDF) fruits and vegetables in FFVP in a limited number of states. USDA selected schools in four states (Alaska, Delaware, Kansas, and Maine) that reported difficulty obtaining, storing, and/or preparing fresh fruits and vegetables. According to the final (2017) evaluation, 56% of the pilot schools chose to incorporate CDF fruits and vegetables during an average week of the demonstration. Schools most often introduced dried and canned fruits, which resulted in decreased vegetable offerings and increased fruit offerings in the FFVP. However, there was no significant impact on students' vegetable consumption, while fruit consumption declined on FFVP snack days (likely because students consumed a smaller quantity of fruit when it was dried or canned). There was also no significant impact on student participation. Student satisfaction with FFVP decreased slightly during the pilot, parents' responses to the pilot were mixed, and school administrators (who opted into the pilot) generally favored the changes. Legislative proposals to change FFVP offerings on a more permanent basis have also been considered. For example, in the 115 th Congress, the House version of H.R. 2 would have allowed CDF and puréed forms of fruits and vegetables in FFVP and removed \"fresh\" from the program name. This provision was not included in the enacted bill. In the 114 th Congress, child nutrition reauthorization legislation in the House ( H.R. 5003 ) included a similar proposal to allow participating schools to serve \"all forms\" of fruits and vegetables as well as tree nuts. The Senate committee's proposal ( S. 3136 ) would have provided temporary hardship exemptions for schools with limited storage and preparation facilities or limited access to fresh fruits and vegetables that would have allowed them to serve CDF fruits and vegetables in FFVP. Such schools would have to transition to 100% fresh products over time. Schools participating in the National School Lunch Program (NSLP) and/or School Breakfast Program (SBP) must comply with federal requirements related to sourcing foods domestically. These requirements are outlined in the school meals programs' authorizing laws and clarified in USDA guidance. Under the Buy American requirements, schools participating in the NSLP and/or SBP in the 48 contiguous states must purchase \"domestic commodities or products … to the maximum extent practicable.\" Statute defines \"domestic commodities or products\" as those that are both produced and processed substantially in the United States. Accompanying conference report language elaborated that \"processed substantially\" means the product is processed in the United States and contains over 51% domestically grown ingredients, and this definition is also included in USDA guidance (discussed below). USDA regulations essentially restate the statutory requirement. USDA has issued guidance on how SFAs and state agencies should implement the Buy American requirements. The most recent guidance (as of the date of this report) was published in a June 2017 memorandum. According to USDA-FNS guidance, the Buy American requirements apply to any foods purchased with funds from the nonprofit school food service account, whether or not they are federal funds (children's paid lunch fees, for example, also go into the nonprofit school food service account). The guidance encourages SFAs to integrate Buy American into their procurement processes; for example, by monitoring the USDA catalog for appropriate products and placing Buy American language in solicitations, contracts, and other procurement documents. The guidance explains that SFAs are permitted to make exceptions to the Buy American requirements on a limited basis when a product \"is not produced or manufactured in the U.S. in sufficient and reasonably available quantities of a satisfactory quality\" or when \"competitive bids reveal the costs of a U.S. product are significantly higher than the non-domestic product.\" SFAs must interpret when this is the case and document any exceptions they make. SFAs may also request a waiver from the requirements for a product that does not meet these criteria. State agencies must review SFAs' compliance with the Buy American requirements, including any exceptions an SFA has made, and take corrective action when necessary. The enacted 2018 farm bill (Section 4207 of P.L. 115-334 ) included a provision requiring USDA to \"enforce full compliance\" with the Buy American requirements and \"ensure that States and school food authorities fully understand their responsibilities\" within 180 days of enactment. In addition, the bill requires USDA to submit a report to Congress by the 180-day deadline on actions taken and plans to comply with the provision. The provision clarifies the definition of domestic products for the purposes of USDA's enforcement, stating that domestic products are those that are \"processed in the United States and substantially contain … meats, vegetables, fruits, and other agricultural commodities\" produced in the United States, the District of Columbia, Puerto Rico, or any territory or possession of the United States, or \"fish harvested\" in the Exclusive Economic Zone or by a U.S.-flagged vessel. The provision in the enacted bill amended a related provision in the Senate-passed version of the farm bill. Proponents of stricter requirements have cited economic and food safety reasons for domestic sourcing and expressed particular concern over sourcing from China. Others have argued for maintaining or increasing schools' discretion in food procurement, arguing that high-quality domestic options are not always available or cost-effective. Under current law, summer meals are generally provided in \"congregate\" or group settings where children come to eat while supervised. These meals are provided through the Summer Food Service Program (SFSP) and the National School Lunch Program's Summer Seamless Option (SSO). In recent years, policymakers have weighed different proposals and tested alternatives to congregate meals in SFSP and SSO. Some of these alternatives focus on rural areas, which may face particular barriers to onsite consumption of summer meals. According to a May 2018 study by the U.S. Government Accountability Office, states commonly reported that reaching children in rural areas was \"very\" or \"extremely\" challenging in SFSP. The 2010 Agriculture Appropriations Act (Section 749(g) of P.L. 111-80 ) provided $85 million in discretionary funding for \"demonstration projects to develop and test methods of providing access to food for children in urban and rural areas during the summer months.\" One of these is the Summer Electronic Benefit Transfer for Children (SEBTC or Summer EBT) project, which began in summer 2011 and has continued each summer since (as of the date of this report) in a limited number of states and Indian Tribal Organizations. The project provides electronic food benefits to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided on an electronic benefits transfer (EBT) card for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) or Supplemental Nutrition Assistance Program (SNAP). Participants in jurisdictions providing benefits through SNAP can redeem benefits for SNAP-eligible foods at any SNAP-authorized retailer, while participants in the WIC EBT jurisdictions are limited to the smaller set of WIC-eligible foods at WIC-authorized retailers. An evaluation of Summer EBT was conducted from FY2011 through FY2013. The study, which used a random assignment design, found a significant decline in the prevalence of very low food security among participants (9.5% of control group children experienced very low food security compared to 6.4% in the Summer EBT group). It also showed improvements in children's consumption of fruits, vegetables, and whole grains. Both the WIC and SNAP models showed increased consumption, but increases were greater at sites operating the WIC model. Congress has provided subsequent funding for Summer EBT projects (see Table 3 ). Most recently, the third FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) provided $28 million for the Summer EBT demonstration. Awardees for summer 2017 were Connecticut, Delaware, Michigan, Missouri, Nevada, Oregon, Virginia, and the Chickasaw and Cherokee nations. For summer 2018, USDA also awarded grants to Tennessee and Texas. Many of these jurisdictions participated in Summer EBT in previous summers as well. In October 2018, USDA-FNS announced a new strategy for determining grant recipients in FY2019, stating that the agency will prioritize new states that have not participated before, statewide projects, and projects that can operate in the summers of 2019 through 2021. There were proposals in the 114 th and 115 th Congresses to expand Summer EBT. For example, the Senate committee's child nutrition reauthorization proposal in the 114 th Congress ( S. 3136 ) would have allowed a portion of SFSP's mandatory funding to cover Summer EBT and authorized up to $50 million in discretionary funding for the program. In addition, in its FY2017 budget proposal, the Obama Administration recommended expansion of Summer EBT nationwide with a phase-in over 10 years. Freestanding bills in the 114 th and 115 th Congresses had similar objectives. Funding from the 2010 Agriculture Appropriations Act (Section 749(g) of P.L. 111-80 ) was also used for other demonstration projects. One of these, the Enhanced Summer Food Service Program (eSFSP), took place during the summers of 2010 through 2012 in eight states. It included four initiatives: (1) incentives for SFSP sites to lengthen operations to 40 or more days, (2) funding to add recreational or educational activities at meal sites, (3) meal delivery for children in rural areas, and (4) food backpacks that children could take home on weekends and holidays. Evaluations of eSFSP were published from 2011 to 2014. Summer meal participation rates rose during the demonstration periods for all four initiatives. In addition, children in the meal delivery and backpack demonstrations had consistent rates of food insecurity from summer to fall (this was not measured for the other initiatives). However, the results from these evaluations should be interpreted with caution due to a small sample size, the lack of a comparison group, and potential confounding factors. Another demonstration project, also operating under authority provided by the 2010 Agriculture Appropriations Act, provided exemptions from the congregate feeding requirement to SFSP and SSO outdoor meal sites experiencing excessive heat each summer since 2015 (as of the date of this report). Exempted sites must continue to serve children in congregate settings on days when heat is not excessive, and provide meals in another form (e.g., a take-home form) on days of excessive heat. USDA also offers exemptions on a case-by-case basis for other extreme weather conditions. This demonstration has not been evaluated. There were other proposals and hearings related to congregate feeding in SFSP in recent years. For example, in the 114 th Congress, committee-reported child nutrition reauthorization proposals in the Senate and the House ( S. 3136 and H.R. 5003 , respectively) would have enabled some rural meal sites to provide SFSP meals for consumption offsite. Specifically, both proposals would have allowed offsite consumption for children (1) in rural areas ( H.R. 5003 to a more limited extent than S. 3136 ) and (2) in nonrural areas in which more than 80% of students are certified as eligible for free or reduced-price meals. The bills would have also permitted congregate feeding sites to provide meals to be consumed offsite episodically under certain conditions such as extreme weather or public safety concerns. The HHFKA created the Community Eligibility Provision (CEP), an option to provide free meals (lunches and breakfasts) to all students in schools with high proportions of students who automatically qualify for free or reduced-price lunches. CEP became available to schools nationwide starting in SY2014-2015, and participation has increased since then. As of SY2016-2017, more than 20,700 schools participated in CEP, according to data from the Food Research and Action Center (FRAC), a nonprofit advocacy organization. This is roughly 22% of NSLP schools. Several groups have expressed support for CEP during its implementation, arguing that the provision improves access to meals, reduces stigma associated with receiving free or reduced-price meals, and reduces schools' administrative costs. Others have sought to change the option. For example, in the 114 th Congress, the House's committee-reported child nutrition reauthorization bill ( H.R. 5003 ) would have restricted schools' eligibility for CEP, which the committee majority argued was \"to better target resources to those students in need, while also ensuring all students who are eligible for assistance continue to receive assistance.\" One secondary effect of CEP is that it has created data issues for other nonnutrition federal and state programs. Many programs, most notably the federal Title I-A program (the primary source of federal funding for elementary and secondary schools), use free and reduced-price lunch data to determine eligibility and/or funding allocations. These data come from school meal applications, which are no longer collected under CEP's automatic eligibility determination process. For more information on this issue, see CRS Report R44568, Overview of ESEA Title I-A and the School Meals' Community Eligibility Provision . Students may qualify for free meals, or they may have to pay for reduced-price or full-price meals. In recent years, the issue of students owing and not paying their meal costs, and schools' responses to such situations, has received increased attention. In many cases, schools serve students a regular meal, charging the unpaid meal cost and creating a debt that they may try to collect later from the family. In other cases, schools respond with what some have called \"lunch shaming\" practices—most commonly, taking or throwing away a student's selected hot foods and providing an alternative cold meal or, less commonly, barring children from participation in school events until debt is repaid or having children wear a visual indicator of meal debt (e.g., a stamp or sticker). Lunch shaming instances have largely been reported in news articles from different states, and there are limited national data available on the prevalence of such practices (available data are discussed in the text box below). Many school districts report that unpaid meal costs create a financial burden on their meal programs (see text box below for more detail). In addition to federal funds, student payments for full and reduced-price meals are a primary source of revenue for school food programs. Schools have an interest in collecting this revenue to help fund operations. Also, according to federal regulations, if schools are unable to recover unpaid meal funds, the money becomes \"bad debt\" and the school or school district must use other nonfederal funding sources to cover the costs. Starting in 2010, Congress and USDA have taken actions to address the issue of unpaid meal costs. Section 143 of the HHFKA required USDA to examine states' and school districts' policies and practices regarding unpaid meal charges. As part of the review, the law required USDA to \"prepare a report on the feasibility of establishing national standards for meal charges and the provision of alternate meals\" and, if applicable, make recommendations related to the implementation of the standards. The law also permitted USDA to take follow-up actions based on the findings from the report. USDA's subsequent Report to Congress in June 2016 ultimately did not recommend national standards, but instead recommended \"clarifying and updating policy guidance on specific national policies impacting unpaid meal charges and facilitating the development and distribution of best practices to support decision making by States and localities.\" USDA-FNS followed up with a memorandum requiring SFAs to institute and communicate, by July 1, 2017, a written meal charge policy, which was to include instructions on how to address situations in which a child does not pay for a meal. USDA-FNS also provided clarification through webinars, other memoranda, and a best practice guide. In the Report to Congress, USDA stated that its recommendation was based on findings from a study published by USDA-FNS in March 2014 and a Request for Information (RFI) on \"Unpaid Meal Charges\" published by USDA-FNS in October 2014. The findings from both the study and the RFI—which garnered 462 comments—showed that meal charge policies were largely determined at the school and school district levels rather than the state level. The responses to the RFI also indicated that such policies ranged in formality, with varying degrees of review (e.g., some required school board approval while others did not) and enforcement. In the RFI comments, school and district officials generally expressed a preference for local control of meal charge policies, while national advocacy groups generally favored national standards. The topics of lunch shaming and unpaid meal costs also surfaced in the 115 th Congress. For example, a provision in the FY2018 appropriations law stated that funds appropriated in the law could not be used in ways that result in discrimination against children eligible for free or reduced-price meals, including the practices of segregating children and overtly identifying children by special tokens or tickets (note that this does not pertain to children paying for full-price meals). Legislative proposals in the 115 th Congress included the Anti-Lunch Shaming Act of 2017 ( H.R. 2401 / S. 1064 ), which sought to establish national standards for how schools treat children unable to pay for a meal. Unpaid meal costs and lunch shaming have also been active topics at the state level. In recent years, a number of states have enacted legislation aimed at addressing these issues. For example, in 2018, Illinois passed legislation that requires schools to serve a regular (reimbursable) meal to students who do not pay and allows school districts to request an offset from the state for debts exceeding $500. The HHFKA created new requirements related to schools' pricing of paid lunches (sometimes referred to as \"paid lunch equity\" requirements). Specifically, the law required all NSLP-participating SFAs to review their average price of paid lunches and, if necessary, gradually increase prices based on a formula. The law also gave SFAs the option to meet the requirements with specified nonfederal funding sources instead of raising prices. According to the Senate committee report on the HHFKA, the requirements were intended \"to ensure that children receiving free and reduced price lunches receive the full value of federal funds.\" Prior to the paid lunch equity requirements, a USDA study found that federal subsidies for free and reduced-price lunches were cross-subsidizing other aspects of the meals programs, likely including paid lunches. This can occur because federal reimbursements for free, reduced-price, and paid lunches are all mixed into the same SFA-run \"nonprofit school food service account\" (NSFSA). Some observers argue, however, that raising prices may reduce participation in paid lunches. Under the paid lunch equity formula, the price per paid lunch must eventually match or exceed the difference between the federal reimbursements for free and paid lunches. If this is not the case, schools must increase prices over time until they make up the difference. For example, the federal reimbursement was $3.37 for free lunches and $0.37 for paid lunches SY2018-2019 for some schools. Under the requirements, if schools were not charging at least $3.00 per paid lunch, they would be required to increase the price of a paid lunch gradually, based on a formula, until they closed the gap (see Figure 1 ). Schools cannot be required to raise the price by more than 10 cents annually, but they may choose to do so. The HHFKA also included related requirements for revenue from \"nonprogram\" (i.e., competitive) foods. The law required that any revenue from nonprogram foods accrue to the SFA-run NSFSA. In practice, this prevents revenue from competitive foods from being used for other school purposes outside of food service. The law also required that, broadly speaking, revenue from nonprogram foods equal or exceed the costs of obtaining nonprogram foods (see the regulations for a specific formula). In June 2011, USDA-FNS published an interim final rule implementing the requirements starting in SY2011-2012, offering some flexibility for that first year. USDA subsequently provided certain exemptions through agency guidance for SY2013-2014 through SY2017-2018 for SFAs \"in strong financial standing,\" as determined by state agencies based on different criteria. For SY2018-2019, the enacted FY2018 appropriation (Section 775 of P.L. 115-141 ) expanded the exemptions, requiring only SFAs with a negative balance in the NSFSA as of January 31, 2018, potentially to have to raise prices for paid meals. Other legislative proposals related to the paid lunch equity requirements were considered in recent Congresses. For example, the House committee's child nutrition reauthorization proposal in the 114 th Congress would have eliminated the requirements. The Senate committee's proposal would have replaced the requirements with a broader \"non-federal revenue target,\" which could have come from household payments for full-price lunches or other state and local contributions. CACFP: Child and Adult Care Food Program CDF: Canned, dried, or frozen CEP: Community Eligibility Provision eSFSP: Enhanced Summer Food Service Program FFVP: Fresh Fruit and Vegetable Program HHFKA: Healthy, Hunger-Free Kids Act NSFSA: Nonprofit school food service account NSLP: National School Lunch Program SBP: School Breakfast Program SFA: School food authority SFSP : Summer Food Service Program SMP: Special Milk Program SSO: Summer Seamless Option Summer EBT or SEBTC : Summer Electronic Benefit Transfer for Children SY: school year USDA-FNS: U.S. Department of Agriculture Food and Nutrition Service", "summary": "The term child nutrition programs refers to several U.S. Department of Agriculture Food and Nutrition Service (USDA-FNS) programs that provide food for children in institutional settings. These include the school meals programs—the National School Lunch Program and School Breakfast Program—as well as the Child and Adult Care Food Program, Summer Food Service Program, Special Milk Program, and Fresh Fruit and Vegetable Program. The most recent child nutrition reauthorization, the Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296), made a number of changes to the child nutrition programs. In some cases, these changes spurred debate during the law's implementation, particularly in regard to updated nutrition standards for school meals and snacks. On September 30, 2015, some of the authorities created by the HHFKA expired. Efforts to reauthorize the child nutrition programs in the 114th Congress, while not completed, considered several related issues and prompted further discussion about the programs. There were no substantial reauthorization attempts in the 115th Congress. Current issues discussed in this report include the following: Nutrition standards for school meals and snacks. The HHFKA required USDA to update the nutrition standards for school meals and other foods sold in schools. USDA issued final rules on these standards in 2012 and 2016, respectively. Some schools had difficulty implementing the nutrition standards, and USDA and Congress have taken actions to change certain parts of the standards related to whole grains, sodium, and milk. Offerings in the Fresh Fruit and Vegetable Program (FFVP). There have been debates recently over whether the FFVP should include processed and preserved fruits and vegetables, including canned, dried, and frozen items. Currently, statute permits only fresh offerings. \"Buy American\" requirements for school meals. The school meals programs' authorizing laws require schools to source foods domestically, with some exceptions, under Buy American requirements. Efforts both to tighten and loosen these requirements have been made in recent years. The enacted 2018 farm bill (P.L. 115-334) instructed USDA to \"enforce full compliance\" with the Buy American requirements and report to Congress within 180 days of enactment. Congregate feeding in summer meals. Under current law, children must consume summer meals on-site. This is known as the \"congregate feeding\" requirement. Starting in 2010, Congress funded demonstration projects, including the Summer Electronic Benefit Transfer (EBT) demonstration, to test alternatives to congregate feeding in summer meals. Congress has increased funding for Summer EBT in recent appropriations cycles and there have been discussions about whether to continue or expand the program. Implementation of the Community Eligibility Provision (CEP). The HHFKA created CEP, an option for qualifying schools, groups of schools, and school districts to offer free meals to all students. Because income-based applications for school meals are no longer required in schools adopting CEP, its implementation has created data issues for federal and state programs relying on free and reduced-price lunch eligibility data. Unpaid meal costs and \"lunch shaming.\" The issue of students not paying for meals and schools' handling of these situations has received increasing attention. Some schools have adopted what some term as \"lunch shaming\" practices, including throwing away a student's selected hot meal and providing a cold meal alternative when a student does not pay. Congress and USDA have taken actions recently to reduce instances of student nonpayment and stigmatization. Paid lunch pricing. One result of new requirements in the HHFKA was price increases for paid (full price) lunches in many schools. Attempts have been made—some successfully—to loosen these \"paid lunch equity\" requirements in recent years.", "document_type": "crs"}
{"report": "U.S. foreign aid is the largest component of the international affairs budget, for decades viewed by many as an essential instrument of U.S. foreign policy. Each year, the foreign aid budget is the subject of congressional debate over the size, composition, and purpose of the program. The focus of U.S. foreign aid policy has been transformed since the terrorist attacks of September 11, 2001. Global development, a major objective of foreign aid, has been cited as a third pillar of U.S. national security, along with defense and diplomacy, in the national security strategies of the George W. Bush and Barack Obama Administrations. Although the Trump Administration's National Security Strategy does not explicitly address the status of development vis-à-vis diplomacy and defense, it does note the historic importance of aid in achieving foreign policy goals and supporting U.S. national interests. This report addresses a number of the more frequently asked questions regarding the U.S. foreign aid program; its objectives, costs, and organization; the role of Congress; and how it compares to those of other aid donors. It attempts not only to present a current snapshot of American foreign assistance, but also to illustrate the extent to which this instrument of U.S. foreign policy has evolved over time. Data presented in the report are the most current, consistent, and reliable figures available, generally updated through FY2017. Dollar amounts come from a variety of sources, including the U.S. Agency for International Development (USAID) Foreign Aid Explorer database (Explorer) and annual State, Foreign Operations, and Related Programs (SFOPS) appropriations acts. As new data are obtained or additional issues and questions arise, the report will be revised. Foreign aid abbreviations used in this report are listed in Appendix B . In its broadest sense, U.S. foreign aid is defined under the Foreign Assistance Act of 1961 (FAA), the primary legislative basis of foreign aid programs, as any tangible or intangible item provided by the United States Government [including \"by means of gift, loan, sale, credit, or guaranty\"] to a foreign country or international organization under this or any other Act, including but not limited to any training, service, or technical advice, any item of real, personal, or mixed property, any agricultural commodity, United States dollars, and any currencies of any foreign country which are owned by the United States Government.... (§634(b)) For many decades, nearly all assistance annually requested by the executive branch and debated and authorized by Congress was ultimately encompassed in the foreign operations appropriations and the international food aid title of the agriculture appropriations. In the U.S. federal budget, these traditional foreign aid accounts have been subsumed under the 150 (international affairs) budget function. By the 1990s, however, it became increasingly apparent that the scope of U.S. foreign aid was not fully accounted for by the total of the foreign operations and international food aid appropriations. Many U.S. departments and agencies had adopted their own assistance programs, funded out of their own budgets and commonly in the form of professional exchanges with counterpart agencies abroad—the Environmental Protection Agency, for example, providing water quality expertise to other governments. These aid efforts, conducted outside the purview of the traditional foreign aid authorizing and appropriations committees, grew more substantial and varied in the mid-1990s. The Department of Defense (DOD) Nunn-Lugar effort provided billions in aid to secure and eliminate nuclear and other weapons, as did Department of Energy activities to control and protect nuclear materials—both aimed largely at the former Soviet Union. Growing participation by DOD in health and humanitarian efforts and expansion of health programs in developing countries by the National Institutes of Health and Centers for Disease Control and Prevention, especially in response to the HIV/AIDS epidemic, followed. During the past 15 years, DOD-funded and implemented aid programs in Iraq and Afghanistan to train and equip foreign forces and win hearts and minds through development efforts were often considerably larger than the traditional military and development assistance programs provided under the foreign operations appropriations. The recent decline in DOD activities in these countries has sharply decreased nontraditional aid funding. In FY2011, nontraditional sources of assistance, at $17.3 billion, represented 35% of total aid obligations. By FY2017, nontraditional aid, at $9.7 billion, represented 19% of total aid, still a significant proportion. While the executive branch has continued to request and Congress to debate most foreign aid within the parameters of the foreign operations legislation, both entities have sought to ascertain a fuller picture of assistance programs through improved data collection and reporting. Significant discrepancies remain between data available for traditional versus nontraditional types of aid and, therefore, the level of analysis applied to each. (See text box , \"A Note on Numbers and Sources,\" below.) Nevertheless, to the extent possible, this report tries to capture the broadest definition of aid throughout. Foreign assistance is predicated on several rationales and supports a great many objectives. The importance and emphasis of various rationales and objectives have changed over time. Throughout the past 70 years, there have been three key rationales for foreign assistance National Security has been the predominant theme of U.S. assistance programs. From rebuilding Europe after World War II under the Marshall Plan (1948-1951) and through the Cold War, U.S. aid programs were viewed by policymakers as a way to prevent the incursion of communist influence and secure U.S. base rights or other support in the anti-Soviet struggle. After the Cold War ended, the focus of foreign aid shifted from global anti-communism to disparate regional issues, such as Middle East peace initiatives, the transition to democracy of eastern Europe and republics of the former Soviet Union, and international illicit drug production and trafficking in the Andes. Without an overarching security rationale, foreign aid budgets decreased in the 1990s. However, since the September 11, 2001, terrorist attacks in the United States, policymakers frequently have cast foreign assistance as a tool in U.S. counterterrorism strategy, increasing aid to partner states in counterterrorism efforts and funding the substantial reconstruction programs in Afghanistan and Iraq. As noted, global development has been featured as a key element in U.S. national security strategy in both Bush and Obama Administration policy statements. Commercial Interests. Foreign assistance has long been defended as a way to either promote U.S. exports by creating new customers for U.S. products or by improving the global economic environment in which U.S. companies compete. Humanitarian Concerns. Humanitarian concerns drive both short-term assistance in response to crisis and disaster as well as long-term development assistance aimed at reducing poverty, hunger, and other forms of human suffering brought on by more systemic problems. Providing assistance for humanitarian reasons has generally been the aid rationale most broadly supported by the American public and policymakers alike. The objectives of aid generally fit within these rationales. Aid objectives include promoting economic growth and reducing poverty, improving governance, addressing population growth, expanding access to basic education and health care, protecting the environment, promoting stability in conflictive regions, protecting human rights, promoting trade, curbing weapons proliferation, strengthening allies, and addressing drug production and trafficking. The expectation has been that, by meeting these and other aid objectives, the United States will achieve its national security goals as well as ensure a positive global economic environment for American products, and demonstrate benevolent and respectable global leadership. Different types of foreign aid typically support different objectives. But there is also considerable overlap among categories of aid. Multilateral aid serves many of the same objectives as bilateral development assistance, although through different channels. Military assistance, economic security aid—including rule of law and police training—and development assistance programs may support the same U.S. political objectives in the Middle East, Afghanistan, and Pakistan. Military assistance and alternative development programs are integrated elements of American counternarcotics efforts in Latin America and elsewhere. Depending on how they are designed, individual assistance projects can also serve multiple purposes. A health project ostensibly directed at alleviating the effects of HIV/AIDS by feeding orphan children may also stimulate grassroots democracy and civil society through support of indigenous NGOs while additionally meeting U.S. humanitarian objectives. Microcredit programs that support small business development may help develop local economies while at the same time enabling client entrepreneurs to provide food and education to their children. Water and sanitation improvements both mitigate health threats and stimulate economic growth by saving time previously devoted to water collection, raising school attendance for girls, and facilitating tourism, among other effects. In 2006, in an effort to rationalize the assistance program more clearly, the State Department developed a framework that organizes U.S. foreign aid around five strategic objectives, each of which includes a number of program elements, also known as sectors. The five objectives are Peace and Security; Investing in People; Governing Justly and Democratically; Economic Growth; and Humanitarian Assistance. Generally, these objectives and their sectors do not correspond to any one particular budget account in appropriations bills. Annually, the Department of State and USAID develop their foreign operations budget request within this framework, allowing for an objective and program-oriented viewpoint for those who seek it. An effort by the State Department to obtain reporting from all departments and agencies of the U.S. government on aid levels categorized by objective and sector is ongoing. USAID's Explorer website (explorer.usaid.gov) currently provides a more complete picture from all parts of the U.S. government (see Table 1 ). The 2006 framework introduced by the Department of State organizes assistance by foreign policy strategic objective and sector. But there are many other ways to categorize foreign aid, one of which is to sort out and classify foreign aid accounts in the U.S. budget according to the types of activities they are expected to support, using broad categories such as military, bilateral development, multilateral development, humanitarian assistance, political/strategic, and nonmilitary security activities (see Figure 1 ). This methodology reflects the organization of aid accounts within the SFOPS appropriations but can easily be applied to the international food aid title of the Agriculture appropriations as well as to the DOD and other government agency assistance programs with funding outside traditional foreign aid budget accounts. In FY2017, these many aid accounts provided $49.9 billion in obligated assistance. For FY2017, U.S. government departments and agencies obligated about $16.2 billion in bilateral development assistance, or 33% of total foreign aid, primarily through the Development Assistance (DA) and Global Health (Global Health-USAID and Global Health-State) accounts and the administrative accounts that allow USAID to operate (Operating Expenses, Capital Investment Fund, and Office of the Inspector General). Other bilateral development assistance accounts support the development efforts of distinct institutions, such as the Peace Corps, Inter-American Foundation (IAF), U.S.-African Development Foundation, Trade and Development Agency, Millennium Challenge Corporation (MCC), and National Endowment for Democracy (NED). Development assistance programs aim to foster sustainable broad-based economic progress and social stability in developing countries. This aid is managed largely by USAID and is used for long-term projects in a wide range of areas. Many programs share the objective in the State Department framework of \"promoting economic growth and prosperity.\" Agriculture programs focus on reducing poverty and hunger, trade-promotion opportunities for farmers, and sound environmental practices for sustainable agriculture. Private sector development programs include support for business associations and microfinance services. Programs for managing natural resources and protecting the global environment focus on conserving biological diversity; improving the management of land, water, and forests; encouraging clean and efficient energy production and use; and reducing the threat of global climate change. Programs supporting the objective of \"governing justly and democratically\" include support for promoting rule of law and human rights, good governance, political competition, and civil society. Programs with the objective of \"investing in people\" include support for basic, secondary, and higher education; improving government ability to provide social services; water and sanitation; and health care. By far the largest portion of bilateral development assistance is devoted to global health. These programs include treatment of HIV/AIDS and other infectious diseases, maternal and child health, family planning and reproductive health programs, and strengthening the government health systems that provide care. Most funding for HIV/AIDS, malaria, and tuberculosis is directed through the State Department's Office of the Global AIDS Coordinator to other agencies, including USAID and the Centers for Disease Control and Prevention. The latter agency and the National Institutes for Health also conduct programs funded by Labor-Health and Human Services (HHS) appropriations. In addition to providing emergency food aid in crisis situations, a portion (about 25% in FY2017) of the Food for Peace (FFP) Title II international food aid program (also referred to as P.L. 480, named after the 1954 law that authorized it)—funded under the Agriculture appropriations—provides nonemergency food commodities to private voluntary organizations (PVOs) or multilateral organizations, such as the World Food Program, for development-oriented purposes. FFP funds are also used to support the \"farmer-to-farmer\" program, which sends hundreds of U.S. volunteers as technical advisors to train farm and food-related groups throughout the world. In addition, the McGovern-Dole International Food for Education and Child Nutrition Program, a program begun in 2002, provides commodities, technical assistance, and financing for school feeding and child nutrition programs. A share of U.S. foreign assistance—4% in FY2017 ($2.1 billion)—is combined with contributions from other donor nations to finance multilateral development projects. Multilateral aid is funded largely through the International Organizations and Programs (IO&P) account and individual accounts for each of the Multilateral Development Banks (MDBs) and global environmental funds. For FY2017, the U.S. government obligated $2.1 billion for development activities managed by international organizations and financial institutions, including contributions to the United Nations Children's Fund (UNICEF); the United Nations Development Program (UNDP); and MDBs, such as the World Bank. The U.S. share of donor contributions to each of the MDB concessional (subsidized) and nonconcessional (market rate) loan windows varies widely. For the largest MDB, the World Bank, the United States has contributed about 20.5% to the nonconcessional lending window (the International Development Associations [IDA]) and about 17.3% to the nonconcessional lending window (the International Bank for Reconstruction and Development [IBRD]). In determining the U.S. share of donor contributions to the various multilateral institutions, the U.S. faces the challenge of finding the right balance between the benefits of burden sharing and the constraints of sharing control when determining multilateral priorities. For FY2017, obligations for humanitarian assistance programs amounted to $8.9 billion, 18% of total assistance. Unlike development assistance programs, which are often viewed as long-term efforts that may have the effect of preventing future crises from emerging, humanitarian assistance programs are devoted largely to the immediate alleviation of human suffering in emergencies, both natural and man-made, as well as problems resulting from conflict associated with failed or failing states. The largest portion of humanitarian assistance is managed through the International Disaster Assistance (IDA) account by USAID, which provides relief and rehabilitation efforts to victims of man-made and natural disasters, such as the economic and social dislocations caused by the 2014/2015 Ebola epidemic, and the ongoing crises in Syria, South Sudan, Yemen, and Venezuela. A portion of IDA is used for food assistance through the Emergency Food Security Program. Additional humanitarian assistance goes to programs administered by the State Department and funded under the Migration and Refugee Assistance (MRA) and the Emergency Refugee and Migration Assistance (ERMA) accounts, aimed at addressing the needs of refugees and internally displaced persons. These accounts support a number of refugee relief organizations, including the U.N. High Commission for Refugees and the International Committee of the Red Cross. The Department of Defense provides disaster relief under the Overseas Humanitarian, Disaster, and Civic Assistance (OHDACA) account of the DOD appropriations. (For further information on humanitarian programs, see CRS In Focus IF10568, Overview of the Global Humanitarian and Displacement Crisis , by Rhoda Margesson.) The bulk of FFP Title II Agriculture appropriations—$1.3 billion in obligations, about 75% of total Food for Peace Act in FY2017—are used by USAID, mostly to purchase U.S. agricultural commodities, for emergency needs, supplementing both refugee and disaster programs. (For more information on food aid programs, see CRS Report R45422, U.S. International Food Assistance: An Overview , by Alyssa R. Casey.) A few accounts promote special U.S. political and strategic interests. Programs funded through the Economic Support Fund (ESF) account generally aim to promote political and economic stability, often through activities indistinguishable from those provided under regular development programs. However, ESF is also used for direct budget support to foreign governments and to support sovereign loan guarantees. For FY2017, USAID and the State Department obligated $4.8 billion, nearly 10% of total assistance, through this account. For many years, following the 1979 Camp David accords, most ESF funds went to support the Middle East Peace Process—in FY1997, for example, 87% of ESF went to Israel, Egypt, the West Bank and Jordan. Those proportions have declined significantly in recent decades. In FY2007, 22% of ESF funding went to these countries and, in FY2017, 25%. Since the September 2001 terrorist attacks, ESF has largely supported countries of importance in the U.S. global counterterrorism strategy. In FY2007, for example, activities is Afghanistan and Pakistan received 17% of ESF funding (25% in FY2017). Over the years, other accounts have been established to meet specific political or security interests and then were dissolved once the need was met. One example is the Assistance to Eastern Europe and Central Asia (AEECA) account, established in FY2009 to combine two aid programs that met particular strategic political interests arising from the demise of the Soviet empire. The SEED (Support for East European Democracy Act of 1989) and the FREEDOM Support Act (Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992) programs were designed to help Central Europe and the newly independent states of the former Soviet Union (FSA) achieve democratic systems and free market economies. With funding decreasing as countries in the region graduated from U.S. assistance, Congress discontinued use of the AEECA account in the FY2013 appropriations. Increasing requests and appropriations for countries in the former Soviet Union threatened by Russia, however, led to its re-emergence in the FY2017 and succeeding SFOPS appropriations. In the recent past, several DOD-funded nontraditional aid programs directed at Afghanistan also supported development efforts. The Afghanistan Infrastructure Fund and the Business Task Force wound down as the U.S. military presence in that country declined; the Commander's Emergency Response Program (CERP) still exists. The latter two programs had earlier iterations as well in Iraq. Several U.S. government agencies support programs to address global concerns that are considered threats to U.S. security and well-being, such as terrorism, illicit narcotics, crime, and weapons proliferation. In the past two decades, policymakers have given greater weight to these programs. In FY2017, they amounted to $2.9 billion, 6% of total assistance Since the mid-1990s, three U.S. agencies—State, DOD, and Energy—have provided funding, technical assistance, and equipment to counter the proliferation of chemical, biological, radiological, and nuclear weapons. Originally aimed at the former Soviet Union under the rubric cooperative threat reduction (CTR), these programs seek to ensure that these weapons are secured and their spread to rogue nations or terrorist groups prevented. In addition to nonproliferation efforts, the Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) account, managed by the State Department, encompasses civilian anti-terrorism efforts such as detecting and dismantling terrorist financial networks, establishing watch-list systems at border controls, and building developing country anti-terrorism capacities. NADR also funds humanitarian demining programs. The State Department is the main implementer of counternarcotics programs. The State-managed International Narcotics Control and Law Enforcement (INCLE) account supports counternarcotics activities, most notably in Afghanistan, Pakistan, Peru, and Colombia. It also helps develop the judicial systems—assisting judges, lawyers, and legal institutions—of many developing countries, especially in Afghanistan. DOD and USAID also support counternarcotics activities, the former largely by providing training and equipment, the latter by offering alternative crop and employment programs. The United States provides military assistance to U.S. friends and allies to help them acquire U.S. military equipment and training. At $14.5 billion, military assistance accounted for about 29% of total U.S. foreign aid in FY2017. The Department of State administers three programs, with corresponding appropriations accounts that are then implemented by DOD. Foreign Military Financing (FMF) is a grant program that enables governments to receive equipment and associated training from the U.S. government or to access equipment directly through U.S. commercial channels. Most FMF grants support the security needs of Israel, Egypt, Jordan, Pakistan, and Iraq. The International Military Education and Training program (IMET) offers military training on a grant basis to foreign military officers and personnel. Peacekeeping funds (PKO) are used to support voluntary non-U.N. peacekeeping operations as well as training for an African crisis response force. Since 2002, DOD appropriations have supported FMF-like programs, training and equipping security forces in Afghanistan and Iraq. These programs and the accounts that fund them are called the Afghanistan Security Forces Fund (ASFF) and, through FY2012, the Iraq Security Forces Fund (ISFF). Beginning in FY2015, similar support was provided Iraq under the Iraq Train and Equip Fund. The DOD-funded programs in Afghanistan and Iraq accounted for more than half of total military assistance in FY2017. How and in what form assistance reaches an aid recipient can vary widely, depending on the type of aid program, the objective of the assistance, and the agency responsible for providing the aid. Federal agencies may implement foreign assistance programs using funds appropriated directly to them or funds transferred to them from another agency. For example, significant funding appropriated through State Department and Department of Agriculture accounts is used for programs implemented by USAID (see Figure 2 ). The funding data in this section reflect the agency that implemented the aid, not necessarily the agency to which funds were originally appropriated. For 50 years, USAID has implemented the bulk of the U.S. bilateral economic development and humanitarian assistance. It directly implements the Development Assistance, International Disaster Assistance, and Transition Initiatives accounts, as well as a USAID-designated portion of the Global Health account. Jointly with the State Department, USAID co-manages ESF, AEECA, and Democracy Fund programs, which frequently support development activities as a means of promoting U.S. political and strategic goals. Based on historical averages, according to USAID, the agency implements more than 90% of ESF, 70% of AEECA, 40% of the Democracy Fund, and about 60% of the Global HIV/AIDS funding appropriated to the State Department. USAID also implements all Food for Peace Act Title II food assistance funded through agriculture appropriations. USAID obligated an estimated $20.55 billion to implement foreign assistance programs and activities in FY2017. The agency's staff in 2018 totaled 9,747 , of which about 67% were working overseas, overseeing the implementation of hundreds of projects undertaken by thousands of private sector contractors, consultants, and nongovernmental organizations. DOD implements all SFOPS-funded military assistance programs—FMF, IMET, PKO, and PCCF—in conjunction with the policy guidance of the Department of State. The Defense Security Cooperation Agency is the primary DOD body responsible for these programs. DOD also carries out an array of state-building activities, funded through defense appropriations legislation, which are usually in the context of training exercises and military operations. These sorts of activities, once the exclusive jurisdiction of civilian aid agencies, include development assistance to Iraq and Afghanistan through the Commander's Emergency Response Program (CERP), the Iraq Relief and Reconstruction Fund, and the Afghanistan Infrastructure Fund, and elsewhere through the Defense Health Program, counterdrug activities, and humanitarian and disaster relief. Training and equipping of Iraqi and Afghan police and military, though similar in nature to some traditional security assistance programs, has been funded and implemented primarily through DOD appropriations, though implementing the Iraq police training program was a State Department responsibility from 2012 until it was phased out in 2013. In FY2017, the Department of Defense implemented an estimated $14.50 billion in foreign assistance programs. The Department of State manages and co-manages a wide range of assistance programs. It is the lead U.S. civilian agency on security and refugee related assistance, and has sole responsibility for implementing the International Narcotics and Law Enforcement (INCLE) and Nonproliferation, Antiterror, and Demining (NADR) accounts, the two Migration and Refugee accounts (MRA and ERMA), and the International Organizations and Programs (IO&P) account. State is also home to the Office of the Global AIDS Coordinator (OGAC), which manages the State Department's portion of Global Health funding in support of HIV/AIDS programs, though many of these funds are transferred to and implemented by USAID, the National Institutes of Health, and the Centers for Disease Control and Prevention. In conjunction with USAID, the State Department manages the Economic Support Fund, AEECA assistance to the former communist states, and Democracy Fund accounts. For these accounts, the State Department largely sets the overall policy and direction of funds, while USAID implements the preponderance of programs. In addition, the State Department, through its Bureau of Political-Military Affairs, has policy authority over the Foreign Military Financing (FMF), International Military Education and Training (IMET), and Peacekeeping Operations (PKO) accounts, and, while it was active, the Pakistan Counterinsurgency Capability Fund (PCCF). These programs are implemented by the Department of Defense. Police training programs have traditionally been the responsibility of the International Narcotics and Law Enforcement (INL) Office in the State Department, though programs in Iraq and Afghanistan were implemented and paid for by the Department of Defense for several years. State is also the organizational home to the Office of U.S. Foreign Assistance Resources (formerly the Office of the Director of Foreign Assistance), known as \"F,\" which was created in 2006 to coordinate U.S. foreign assistance programs. The office establishes standard program structures and definitions, as well as performance indicators, and collects and reports data on State Department and USAID aid programs. The State Department implemented about $7.66 billion in foreign assistance funding in FY2017, though it has policy authority over a much broader range of assistance funds. The U.S. Department of Health and Human Services implements a range of global health programs through its various component institutions. As an implementing partner in the President's Emergency Plan for Aids Relief (PEPFAR), a large portion of HHS foreign assistance activity is related to HIV prevention and treatment, including technical support and preventing mother to child transmission of HIV/AIDS. The Centers for Disease Control and Prevention participates in a broad range of global disease control activity, including rapid outbreak response, global research and surveillance, information technology assistance, and field epidemiology and laboratory training. The National Institutes of Health (NIH) also conduct international health research that is reported as assistance. In FY2017, HHS institutions implemented $2.66 billion in foreign assistance activities. The Department of the Treasury's Under Secretary for International Affairs administers U.S. contributions to and participation in the World Bank and other multilateral development institutions. In this case, the agency manages the distribution of funds to the institutions, but does not implement programs. Presidentially appointed U.S. executive directors at each of the banks represent the United States' point of view. Treasury also deals with foreign debt reduction issues and programs, including U.S. participation in the Highly Indebted Poor Countries (HIPC) initiative, and manages a technical assistance program offering temporary financial advisors to countries implementing major economic reforms and combating terrorist finance activity. For FY2017, the Department of the Treasury managed foreign assistance valued at about $1.85 billion. Created in February 2004, the Millennium Challenge Corporation (MCC) seeks to concentrate significantly higher amounts of U.S. resources in a few low- and lower-middle-income countries that have demonstrated a strong commitment to political, economic, and social reforms relative to other developing countries. A significant feature of the MCC effort is that recipient countries formulate, propose, and implement mutually agreed multi-year U.S.-funded project plans known as compacts. Compacts in the 27 recipient countries selected to date have emphasized construction of infrastructure. The MCC is a U.S. government corporation, headed by a chief executive officer who reports to a board of directors chaired by the Secretary of State. The Corporation maintains a relatively small staff of about 300. The MCC obligated about $1.01 billion in FY2017. A number of other government agencies play a role in implementing foreign aid programs. The Peace Corps, an autonomous agency with FY2017 obligations of $445 million, supports about 7,300 volunteers in 65 countries. Peace Corps volunteers work in a wide range of educational, health, and community development projects. The Trade and Development Agency (TDA), which obligated $58 million in FY2017, finances trade missions and feasibility studies for private sector projects likely to generate U.S. exports. The Overseas Private Investment Corporation (OPIC) provides political risk insurance to U.S. companies investing in developing countries and finances projects through loans and guarantees. Its insurance activities have been self-sustaining, but credit reform rules require a relatively small appropriation to back up U.S. guarantees and for administrative expenses. The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), signed into law in October 2018 ( P.L. 115-254 ), authorized consolidation of OPIC and USAID's Development Credit Authority into a new U.S. International Development Finance Corporation (IDFC), which is expected to become operational in fall 2019. For FY2017, as for most prior years, OPIC receipts exceeded appropriations, resulting in a net gain to the Treasury. The Inter-American Foundation and the African Development Foundation, obligating $25.8 million and $20.2 million, respectively, in FY2017, finance small-scale enterprise and grassroots self-help activities aimed at assisting poor people. Most U.S. assistance is now provided as a grant (gift) rather than a loan, so as not to increase the heavy debt burden carried by many developing countries. However, the forms a grant may take are diverse. The most common type of U.S. development aid is project-based assistance (77% in FY2017), in which aid is channeled through an implementing partner to complete a project. Aid is also provided in the form of core contribution to international organizations such as the United Nations, technical assistance, and direct budget support (cash transfer) to governments. A portion of aid money is also spent on administrative costs ( Figure 3 ). Within these categories, aid may take many forms, as described below. Although it is the exception rather than the rule, some countries receive aid in the form of a cash grant to the government. Dollars provided in this way support a government's balance-of-payments situation, enabling it to purchase more U.S. goods, service its debt, or devote more domestic revenues to developmental or other purposes. Cash transfers have been made as a reward to countries that have supported the United States' counterterrorism operations (Turkey and Jordan in FY2004), to provide political and strategic support (both Egypt and Israel annually for decades after the 1979 Camp David Peace Accord), and in exchange for undertaking difficult political and economic reforms. Assistance may be provided in the form of food commodities, weapons systems, or equipment such as generators or computers. Food aid may be provided directly to meet humanitarian needs or to encourage attendance at a maternal/child health care program. Weapons supplied under the military assistance program may include training in their use. Equipment and commodities provided under development assistance are usually integrated with other forms of aid to meet objectives in a particular social or economic sector. For instance, textbooks have been provided in both Afghanistan and Iraq as part of a broader effort to reform the educational sector and train teachers. Computers may be offered in conjunction with training and expertise to fledgling microcredit institutions. Since PEPFAR was first authorized in 2004, antiretroviral drugs (ARVs) provided to individuals living with HIV/AIDS have been a significant component of commodity-based assistance. Although once a significant portion of U.S. assistance programs, construction of economic infrastructure—roads, irrigation systems, electric power facilities, etc.—was rarely provided after the 1970s. Because of the substantial expense of these projects, they were to be found only in large assistance programs, such as that for Egypt in the 1980s and 1990s, where the United States constructed major urban water and sanitation systems. The aid programs in Iraq and Afghanistan supported the building of schools, health clinics, roads, power plants, and irrigation systems. In Iraq alone, more than $10 billion went to economic infrastructure. Economic infrastructure is now also supported by U.S. assistance in a wider range of developing countries through the Millennium Challenge Corporation. In this case, recipient countries design their own assistance programs, most of which, to date, include an infrastructure component. Transfer of knowledge and skills is a significant part of most assistance programs. The International Military Education and Training Program (IMET) provides training to officers of the military forces of allied and friendly nations. Tens of thousands of citizens of aid recipient countries receive short-term technical training or longer-term degree training annually under USAID programs. More than one-quarter of Peace Corps volunteers are English, math, and science teachers. Other aid programs provide law enforcement personnel with anti-narcotics or anti-terrorism training. Many assistance programs provide expert advice to government and private sector organizations. The Department of the Treasury, USAID, and U.S.-funded multilateral banks all place specialists in host government ministries to make recommendations on policy reforms in a wide variety of sectors. USAID has often placed experts in private sector business and civic organizations to help strengthen them in their formative years or while indigenous staff are being trained. While most of these experts are U.S. nationals, in Russia, USAID funded the development of locally staffed political and economic think tanks to offer policy options to that government. USAID, the Inter-American Foundation, and the African Development Foundation often provide aid in the form of small grants directly to local organizations to foster economic and social development and to encourage civic engagement in their communities. Grants are sometimes provided to microcredit organizations, such village-level women's savings groups, which in turn provide loans to microentrepreneurs. Small grants may also address specific community needs. Recent IAF grants, for example, have supported organizations that help resettle Salvadoran migrants deported from the United States and youth programs in Central America aimed at gang prevention. Under the Foreign Assistance Act of 1961, the President may determine the terms and conditions under which most forms of assistance are provided. In general, the financial condition of a country—its ability to meet repayment obligations—has been an important criterion of the decision to provide a loan or grant. Some programs, such as humanitarian and disaster relief programs, were designed from the beginning to be entirely grant activities. During the past two decades, nearly all foreign aid—military as well as economic—has been provided in grant form. While loans represented 32% of total military and economic assistance between 1962 and 1988, this figure declined substantially beginning in the mid-1980s, until by FY2001, loans represented less than 1% of total aid appropriations. The de-emphasis on loan programs came largely in response to the debt problems of developing countries. Both Congress and the executive branch have generally supported the view that foreign aid should not add to the already existing debt burden carried by these countries. In the FY2019 budget request, the Trump Administration encouraged the use of loans over grants when providing military assistance (Foreign Military Financing), but Congress did not include language in support of that proposal in the enacted FY2019 appropriation ( P.L. 116-6 ). Although a small proportion of total current aid, there are significant USAID-managed programs that guarantee loans, meaning the U.S. government agrees to pay a portion of the amount owed in the case of a default on a loan. A Development Credit Authority (DCA) loan guarantee, in which risk is shared with a private sector bank, can be used to increase access to finance in support of any development sector. The DCA is to be transferred from USAID in 2019 to the new IDFC, established by the BUILD Act of 2018 ( P.L. 115-254 ), to enhance U.S. development finance capacity. Under the Israeli Loan Guarantee Program, the United States has guaranteed repayment of loans made by commercial sources to support the costs of immigrants settling in Israel from other countries and may issue guarantees to support economic recovery. USAID has also provided loan guarantees in recent years to improve the terms or amounts of financing from international capital markets for Ukraine and Jordan. In these cases, assistance funds representing a fraction of the guarantee amount are provided to cover possible default. Between 1946 and 2016, the United States loaned $112.7 billion in foreign economic and military aid to foreign governments, and while most foreign aid is now provided through grants, $9.18 billion in loans to foreign governments remained outstanding at the end of FY2016. For nearly three decades, Section 620q of the Foreign Assistance Act (the Brooke amendment) has prohibited new assistance to the government of any country that falls more than one year past due in servicing its debt obligations to the United States, though the President may waive application of this prohibition if he determines it is in the national interest. The United States has also forgiven debts owed by foreign governments and encouraged, with mixed success, other foreign aid donors and international financial institutions to do likewise. In some cases, the decision to forgive foreign aid debts has been based largely on economic grounds as another means to support development efforts by heavily indebted, but reform-minded, countries. The United States has been one of the strongest supporters of the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). These initiatives, which began in the late 1990s, include participation of the World Bank, the International Monetary Fund, and other international financial institutions in a comprehensive debt workout framework for the world's poorest and most debt-strapped nations. The largest and most hotly debated debt forgiveness actions have been implemented for much broader foreign policy reasons with a more strategic purpose. Poland, during its transition from a communist system and centrally planned economy (1990—$2.46 billion); Egypt, for making peace with Israel and helping maintain the Arab coalition during the Persian Gulf War (1990—$7 billion); and Jordan, after signing a peace accord with Israel (1994—$700 million), are examples. Similarly, the United States forgave about $4.1 billion in outstanding Saddam Hussein-era Iraqi debt in November 2004 and helped negotiate an 80% reduction in Iraq's debt to creditor nations later that month. Most development and humanitarian assistance activities are not directly implemented by U.S. government personnel but by private sector entities, such as individual personal service contractors, consulting firms, universities, private voluntary organizations (PVOs), or public international organizations (PIOs). Generally speaking, U.S. government foreign service and civil servants determine the direction and priorities of the aid program, allocate funds while keeping within legislative requirements, ensure that appropriate projects are in place to meet aid objectives, select implementers, and monitor the implementation of those projects for effectiveness and financial accountability. Both USAID and the State Department have promoted the use of public-private partnerships, in which private entities such as corporations and foundations are contributing partners, not paid implementers, in situations where business interests and development objectives coincide. In FY2017, the United States provided some form of bilateral foreign assistance to more than 150 countries. Aid is concentrated heavily in certain countries, reflecting the priorities and interests of United States foreign policy at the time. Table 2 identifies the top 15 recipients of U.S. foreign assistance for FY1997, FY2007 and FY2017. As shown in the table above, there are both similarities and sharp differences among country aid recipients for the three periods. The most consistent thread connecting the top aid recipients over the past two decades has been continuing U.S. strategic interests in the Middle East, with large programs maintained for Israel and Egypt and, for Iraq, following the 2003 invasion. Two key countries in the U.S. counterterrorism strategy, Afghanistan and Pakistan, made their first appearances on the list in FY2002 and continued to be among the top recipients in FY2017. In FY1997, one sub-Saharan African country appeared among leading aid recipients; in FY2017, 7 of the 15 are sub-Saharan African. Many are focus countries under the PEPFAR initiative to address the HIV/AIDS epidemic; South Sudan receives support as a newly independent country with multiple humanitarian and development needs. In FY1997, three countries from Eastern Europe and the former Soviet Union made the list, as many from the region had for much of the 1990s, representing the effort to transform the former communist nations to democratic societies and market-oriented economies. None of those countries appear in the FY2017 list. In FY1997, four Latin American countries make the list; no countries from the region appear in FY2017. On a regional basis, the Middle East/North Africa (MENA) region has received the largest share of U.S. foreign assistance for many decades. Although economic aid to the region's top two recipients, Israel and Egypt, began to decline in the late 1990s, the dominant share of bilateral U.S. assistance consumed by the MENA region was maintained in FY2005 by the war in Iraq. Despite the continued importance of the region, its share slipped substantially by FY2017 as the effort to train and equip Iraqi forces diminished. Since September 11, 2001, South and Central Asia has emerged as a significant target of U.S. assistance, rising from a roughly 3% share 20 years ago to 16% in FY2007 and 15% in FY2017, largely because of aid to Afghanistan and Pakistan. Similarly, the share represented by African nations has increased from 10% and 19%, respectively, in FY1997 and FY2007, to 25% in FY2017, largely due to the HIV/AIDS initiative that funnels resources mostly to African countries and to a range of other efforts to address the region's development challenges. Meanwhile, the share of aid to Europe/Eurasia, which greatly surpassed that of Africa in FY1997, has declined significantly in the past decade, to about 4% in FY2017, with the graduation of many East European aid recipients and the termination of programs in Russia. The Ukraine was responsible for about one third of aid to that region in FY2017. East Asia/Pacific has remained at a low level during the past two decades, while Latin America's share has risen and fallen based on U.S. interest in Colombia and a few Central American countries as aid has shifted to regions of more pressing strategic interest (see Figure 4 ). There are several methods commonly used for measuring the amount of federal spending on foreign assistance. Amounts can be expressed in terms of budget authority (funds appropriated by Congress), obligations (amounts contractually committed), outlays or disbursements (money actually spent). Assistance levels are also sometimes measured as a percentage of the total federal budget, as a percentage of total discretionary budget authority (excluding mandatory and entitlement programs), or as a percentage of the gross domestic product (GDP) (for an indication of the national wealth allocated to foreign aid). By nearly all of these measures, foreign aid resources fell gradually on average over several decades since the historical high levels of the late 1940s and early 1950s ( Appendix A ). This downward trend was sporadically interrupted, largely due to major foreign policy initiatives such as the Alliance for Progress for Latin America beginning in 1961, the infusion of funds to implement the Camp David Middle East Peace Accords in 1979, and an increase in military assistance to Egypt, Turkey, Greece and others in the mid-1980s. The lowest point in U.S. foreign aid spending since World War II came in 1997, when foreign assistance obligations fell to just above $20 billion (in 2017 dollar terms). ( Figure 5 ) While foreign aid consistently represented just over 1% of U.S. annual gross domestic product in the decade following World War II, it fell gradually to between 0.2% and 0.4% for most years in the past three decades. Foreign assistance spending has comprised, on average, around 3% of discretionary budget authority and just over 1% of total budget authority each year since 1977, though the percentages have sometimes varied considerably from year to year. Foreign aid dropped from 5% of discretionary budget authority in 1979 to 2.4% in 2001, before rising sharply in conjunction with U.S. activities in Afghanistan and Iraq starting in 2003. As a portion of total budget authority, foreign assistance reached 2.5% in 1979, but has hovered below 1.5% since 1987. In 2017, foreign assistance was estimated to account for 4.1% of discretionary budget authority and 1.2% of total budget authority ( Figure 6 ; Appendix A ). As previously discussed, since the September 11, 2001, terrorist attacks, foreign aid funding has been closely tied to U.S. counterterrorism strategy, particularly in Iraq, Afghanistan, and Pakistan. Bush and Obama Administration global health initiatives, the creation of the Millennium Challenge Corporation, and growth in counter-narcotics activities have driven funding increases as well. The Budget Control Act of 2011, and the drawdown of U.S. military forces in Iraq, and to some degree Afghanistan, led to a notable dip in aid obligations in FY2013, but aid levels have risen again with efforts to address the crisis in Syria, counter-ISIL activities, and humanitarian aid. The use of the Overseas Contingency Operations (OCO, discussed below) designation has enabled this growth despite the BCA limitations. Figure 7 shows how trends in foreign aid funding in recent decades can be attributed to specific foreign policy events and presidential initiatives. The Obama Administration's FY2012 international affairs budget proposed that the overseas contingency operations (OCO) designation, which had been applied since 2009 to war-related Defense appropriations, including to DOD assistance programs such as ISFF, ASFF and CERP, be extended to include \"extraordinary, but temporary, costs of the Department of State and USAID in the front line states of Iraq, Afghanistan and Pakistan.\" Congress not only adopted the OCO designation in the FY2012 SFOPS appropriations legislation, but expanded it to include funding for additional accounts and countries. In every fiscal year since, a portion of certain foreign assistance accounts—primarily ESF, FMF, IDA, MRA and INCLE—has been appropriated with the OCO designation. The OCO designation is significant because the Budget Control Act of 2011 (BCA), which set annual caps on discretionary funding from FY2013 through FY2021, specified that funds designated as OCO do not count toward the discretionary spending limits established by the act. OCO designation makes it possible to prevent war-related funding from crowding out core international affairs activities within the budget allocation. The OCO approach is reminiscent of the use of supplemental international affairs appropriations for the first decade after the September 11, 2001, terrorist attacks. Congress appropriated significant emergency supplemental funds for foreign operations and Defense assistance programs every year from FY2002 through FY2010 for activities in Iraq, Afghanistan, and elsewhere, which were not counted toward subcommittee budget allocations. Since the OCO designation was first applied to foreign operations in FY2012, supplemental appropriations for foreign aid have declined significantly. In the FY2019 and FY2020 budget requests, the Trump Administration did not request OCO funding within the international affairs budget, but did request OCO funding for the Department of Defense, including for DOD aid accounts. Congress used the OCO designation for both DOD and State/USAID accounts in the FY2019 appropriation, P.L. 116-6 , but a smaller portion of aid was designated as OCO compared to FY2018. It remains to be seen whether this is the beginning of a downward trend in OCO use for foreign aid. Congress historically sought to enhance the domestic benefits of foreign aid by requiring that most U.S. foreign aid be used to procure U.S. goods and services. The conditioning of aid on the procurement of goods and services from the donor-country is sometimes called \"tied aid,\" and while quite common for much of the history of modern foreign assistance, has become increasingly disfavored in the international community. Studies have shown that tying aid increases the costs of goods and services by 15%-30% on average, and up to 40% for food aid, reducing the overall effectiveness of aid flows. The United States joined other donor nations in committing to reduce tied aid in the Paris Declaration on Aid Effectiveness in March 2005, and the portion of tied aid from all donors fell from 70% of total bilateral development assistance in 1985 to an average of 12% in 2016. However, an estimated 32% of U.S. bilateral development assistance was tied in 2016, the highest percentage among major donors, perhaps reflecting the perception of policymakers that maintaining public and political support for foreign aid programs requires ensuring direct economic benefit to the United States. About 67% of U.S. foreign assistance funds in FY2017 were obligated to U.S.-based entities. A considerable amount of U.S. foreign assistance funds remain in the United States, through domestic procurement or the use of U.S. implementers, but the portion differs by program and is hard to identify with any accuracy. For some types of aid, the legislative requirements or program design make it relatively easy to determine how much aid is spent on U.S. goods or services, while for others, this is more difficult to determine. USAID. Most USAID funding (Development Assistance, Global Health, Economic Support Fund) is implemented through contracts, grants, and cooperative agreements with implementing partners. While many implementing partner organizations are based in the United States and employ U.S. citizens, there is little information available about what portion of the funds used for program implementation are used for goods and services provided by American firms. Procurement reform efforts initiated by USAID in 2010 have aimed to increase procurement and implementation by host country entities as a means to enhance country ownership, build local capacity, and improve sustainability of aid programs. Food assistance commodities, until recently, were purchased wholly in the United States, and generally required by law to be shipped by U.S. carriers, suggesting that the vast majority of food aid expenditures are made in the United States. Starting in FY2009, a small portion of food assistance was authorized to be purchased locally and regionally to meet urgent food needs more quickly. Successive Administrations and several Members of Congress have proposed greater flexibility in the food aid program, potentially increasing aid efficiency but reducing the portion of funds flowing to U.S. farmers and shippers. To date, these proposals have been largely unsuccessful. Foreign Military Financing , with the exception of certain assistance allocated to Israel, is used exclusively to procure U.S. military equipment and training. Millennium Challenge Corporation. The MCC bases its procurement regulations on those established by the World Bank, which calls for an open and competitive process, with no preference given to donor country suppliers. Between FY2011 and FY2017, the MCC awarded roughly 15% of the value of compact contracts to U.S. firms. Multilateral development aid. Multilateral aid funds are mixed with funds from other nations and the bulk of the program is financed with borrowed funds rather than direct government contributions. Information on the U.S. share of procurement financed by MDBs is unavailable. In addition to the direct benefits derived from aid dollars used for American goods and services, many argue that the foreign aid program brings significant indirect financial benefits to the United States. For example, analysts maintain that provision of military equipment through the military assistance program and food commodities through the Food for Peace program helps to develop future, strictly commercial, markets for those products. More broadly, as countries develop economically, they are in a position to purchase more goods from abroad and the United States benefits as a trade partner. Since an increasing majority of global consumers are outside of the United States, some business leaders assert that establishing strong economic and trade ties in the developing world, using foreign assistance as a tool, is key to U.S. economic and job growth. Since World War II, with the exception of several years between 1989 and 2001, during which Japan ranked first among aid donors, the United States has led the developed countries in net disbursements of economic aid, or \"Official Development Assistance (ODA)\" as defined by the Organization for Economic Cooperation and Development's (OECD) Development Assistance Committee (DAC). In 2017, the most recent year for which data are available, the United States disbursed $34.12 billion in ODA, or about 24% of the $144.71 billion in total net ODA disbursements by DAC donors that year. Germany ranked second at $24.16 billion, the United Kingdom followed at $18.59 billion, Japan ranked fourth at $11.85 billion, and France rounded out the top donors with $11.03 billion in 2017 (see Figure 8 ). While the top five donors have not varied for more than a decade, there have been shifts lower down the ranking. For example, Turkey has become a much more prominent ODA donor in recent years (ranked 6 th in 2017, with $9.08 billion in ODA, compared to 21 st in 2006), reflecting large amounts of humanitarian aid to assist Syrian refugees. Even as it leads in dollar amounts of aid flows to developing countries, the United States often ranks low when aid is calculated as a percentage of gross national income (GNI). This calculation is often cited in the context of international donor forums, as a level of 0.7% GNI was established as a target for donors in the 2000 U.N. Millennium Development Goals. In 2017, the United States ranked at the bottom among major donors at 0.18% of GNI, slightly lower than Portugal and Spain (0.18% and 0.19%, respectively). The United Arab Emirates, which has significantly increased its reported ODA in recent years, ranked first among top donors at 1.03% of GNI, followed by Sweden at 1.02% and Luxembourg at 1.00%. There has also been an increase in ODA from non-DAC countries. Between 2000 and 2014, China spent $81.1 billion in ODA, more than tripling its ODA commitments during this period. While reported Chinese ODA is still relatively small compared to that of major donor countries, policymakers are paying increasing attention to growing Chinese investments in developing countries that do not meet the ODA definition. China has touted its \"Belt and Road\" initiative as an effort to boost development and connectivity across as many as 125 countries to create \"strategic propellers\" for its own development. However, China has provided little official aggregate information on the initiative, including on the number of projects, countries involved, the terms of financing, and metrics for success. Numerous congressional authorizing committees and appropriations subcommittees maintain responsibility for U.S. foreign assistance. Several committees have responsibility for authorizing legislation establishing programs and policy and for conducting oversight of foreign aid programs. In the Senate, the Committee on Foreign Relations, and in the House, the Committee on Foreign Affairs, have primary jurisdiction over bilateral development assistance, political/strategic and other economic security assistance, military assistance, and international organizations. Food aid, primarily the responsibility of the Agriculture Committees in both bodies, is periodically shared with the Foreign Affairs Committee in the House. U.S. contributions to multilateral development banks are within the jurisdiction of the Senate Foreign Relations Committee and the House Financial Services Committee. The large nontraditional aid programs funded by DOD, such as Nunn-Lugar Cooperative Threat Reduction programs and the military aid programs in Afghanistan and Iraq, come under the jurisdiction of the Armed Services Committees. Some global health assistance, such as research and other activities done by the Centers for Disease Control and Prevention, may fall under the jurisdiction of the House Energy and Commerce and Senate HELP committees. Traditionally, most foreign aid appropriations fall under the jurisdiction of the SFOPS Subcommittees, with food assistance appropriated by the Agriculture Subcommittees. As noted earlier, however, certain military, global health, and other activities that have been reported as foreign aid have been appropriated through other subcommittees in recent years, including the Defense and the Labor, Health and Human Services, Education and Related Agencies subcommittees. (For current information on SFOPS Appropriations legislation, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations , by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill.) The most significant permanent foreign aid authorization laws are the Foreign Assistance Act of 1961, covering most bilateral economic and security assistance programs (P.L. 87-195; 22 U.S.C. 2151); the Arms Export Control Act (1976), authorizing military sales and financing (P.L. 90-629; 22 U.S.C. 2751); the Agricultural Trade Development and Assistance Act of 1954 (P.L. 480), covering food aid (P.L. 83-480; 7 U.S.C. 1691); and the Bretton Woods Agreement Act (1945), authorizing U.S. participation in multilateral development banks (P.L. 79-171; 22 U.S.C. 286). In the past, Congress usually scheduled debates every two years on omnibus foreign aid legislation that amended these permanent authorization measures. Congress has not enacted into law a comprehensive foreign assistance authorization measure since 1985, although foreign aid authorizing bills have passed the House or Senate, or both, on numerous occasions. Foreign aid bills have frequently stalled at some point in the debate because of controversial issues, a tight legislative calendar, or executive-legislative foreign policy disputes. In contrast, DOD assistance is authorized in annual National Defense Authorization legislation. In lieu of approving a broad State Department/USAID authorization bill, Congress has on occasion authorized major foreign assistance initiatives for specific regions, countries, or aid sectors in stand-alone legislation or within an appropriation bill. Among these are the SEED Act of 1989 ( P.L. 101-179 ; 22 U.S.C. 5401); the FREEDOM Support Act of 1992 ( P.L. 102-511 ; 22 U.S.C. 5801); the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 ; 22 U.S.C. 7601); the Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 ( P.L. 110-293 ); the Millennium Challenge Act of 2003 (Division D, Title VI of P.L. 108-199 ); the Enhanced Partnership With Pakistan Act of 2009 ( P.L. 111-73 ; 22 U.S.C. 8401); the Global Food Security Act of 2016 ( P.L. 114-195 ; 22 U.S.C. 9306), and the BUILD Act ( P.L. 115-254 ). In the absence of regular enactment of foreign aid authorization bills, appropriation measures considered annually within the SFOPS spending bill have assumed greater significance for Congress in influencing U.S. foreign aid policy. Not only do appropriations bills set spending levels each year for nearly every foreign assistance account, SFOPS appropriations also incorporate new policy initiatives that would otherwise be debated and enacted as part of authorizing legislation. Appendix A. Data Table Appendix B. Common Foreign Assistance Abbreviations", "summary": "Foreign assistance is the largest component of the international affairs budget and is viewed by many as an essential instrument of U.S. foreign policy. On the basis of national security, commercial, and humanitarian rationales, U.S. assistance flows through many federal agencies and supports myriad objectives. These include promoting economic growth, reducing poverty, improving governance, expanding access to health care and education, promoting stability in conflict regions, countering terrorism, promoting human rights, strengthening allies, and curbing illicit drug production and trafficking. Since the terrorist attacks of September 11, 2001, foreign aid has increasingly been associated with national security policy. At the same time, many Americans and some Members of Congress view foreign aid as an expense that the United States cannot afford given current budget deficits. In FY2017, U.S. foreign assistance, defined broadly, totaled an estimated $49.87 billion, or 1.2% of total federal budget authority. About 44% of this assistance was for bilateral economic development programs, including political/strategic economic assistance; 35% for military aid and nonmilitary security assistance; 18% for humanitarian activities; and 4% to support the work of multilateral institutions. Assistance can take the form of cash transfers, equipment and commodities, infrastructure, or technical assistance, and, in recent decades, is provided almost exclusively on a grant rather than loan basis. Most U.S. aid is implemented by nongovernmental organizations rather than foreign governments. The United States is the largest foreign aid donor in the world, accounting for about 24% of total official development assistance from major donor governments in 2017 (the latest year for which these data are available). Key foreign assistance trends in the past decade include growth in development aid, particularly global health programs; increased security assistance directed toward U.S. allies in the anti-terrorism effort; and high levels of humanitarian assistance to address a range of crises. Adjusted for inflation, annual foreign assistance funding over the past decade was the highest it has been since the Marshall Plan in the years immediately following World War II. In FY2017, Afghanistan, Iraq, Israel, Jordan, and Egypt received the largest amounts of U.S. aid, reflecting long-standing aid commitments to Israel and Egypt, the strategic significance of Afghanistan and Iraq, and the strategic and humanitarian importance of Jordan as the crisis in neighboring Syria continues. The Near East region received 27% of aid allocated by country or region in FY2017, followed by Africa, at 25%, and South and Central Asia, at 15%. This was a significant shift from a decade prior, when Africa received 19% of aid and the Near East 34%, reflecting significant increases in HIV/AIDS-related programs concentrated in Africa between FY2007 and FY2017 and the drawdown of U.S. military forces in Iraq and Afghanistan. Military assistance to Iraq began to decline starting in FY2011, but growing concern about the Islamic State in Iraq and Syria (ISIS) has reversed this trend. This report provides an overview of the U.S. foreign assistance program by answering frequently asked questions on the subject. It is intended to provide a broad view of foreign assistance over time, and will be updated periodically. For more current information on foreign aid funding levels, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations, by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill.", "document_type": "crs"}
{"report": "The low-income housing tax credit (LIHTC) was created by the Tax Reform Act of 1986 ( P.L. 99-514 ) to provide an incentive for the development and rehabilitation of affordable rental housing. These federal housing tax credits are awarded to developers of qualified projects via a competitive application process administered by state housing finance authorities (HFAs). Developers either use the credits or sell them to investors to raise capital for real estate projects, which, in turn, reduces the debt or equity contribu tion that would otherwise be required of developers. With lower financing costs, tax credit properties can potentially expand the supply of affordable rental housing. The LIHTC is estimated to cost the government an average of $9.9 billion annually. Two types of LIHTCs are available depending on the nature of the construction project. The so-called 9% credit is generally reserved for new construction, while the so-called 4% credit is typically used for rehabilitation projects and new construction that is financed with tax-exempt bonds. Each year, for 10 years, a tax credit equal to roughly 4% or 9% of a project's qualified basis (cost of construction) is claimed. The applicable credit rates have historically not actually been 4% and 9%. Instead, the credit rates have fluctuated in response to market interest movements so that the program has delivered a subsidy equal to 30% of the present value of a project's qualified basis in the case of the 4% credit, and 70% in the case of the 9% credit. For both the 4% and 9% credit it is the subsidy levels (30% or 70%) that are explicitly specified in the Internal Revenue Code (IRC), not the credit rates. Since 1986, the 4% rate has ranged between 3.15% and 3.97%, and the 9% credit between 7.35% and 9.27%. Since 2008, however, there has been a floor under the 9% credit below which the new construction credit rate cannot fall. A simplified example may help in understanding how the LIHTC program is intended to encourage affordable housing development. Consider a new affordable housing apartment complex with a qualified basis of $1 million. Since the project involves new construction it will qualify for the 9% credit and generate a stream of tax credits equal to $90,000 (9% × $1 million) per year for 10 years, or $900,000 in total. Under the appropriate interest rate the present value of the $900,000 stream of tax credits should be equal to $700,000, resulting in a 70% subsidy. The subsidy is intended to incentivize the development of affordable housing that otherwise may not be financially feasible or attractive relative to alternative investments. The situation would be similar if the project involved rehabilitated construction except the developer would be entitled to a stream of tax credits equal to $40,000 (4% × $1 million) per year for 10 years, or $400,000 in total. The present value of the $400,000 stream of tax credits should be equal to $300,000, resulting in a 30% subsidy. The process of allocating, awarding, and then claiming the LIHTC is complex and lengthy. The process begins at the federal level with each state receiving an annual LIHTC allocation in accordance with federal law. State housing agencies then allocate credits to developers of rental housing according to federally required, but state created, allocation plans. The process typically ends with developers selling allocated credits to outside investors in exchange for equity. A more detailed discussion of each level of the allocation process is presented below. LIHTCs are first allocated to each state according to its population. In 2019, states received an LIHTC allocation of $2.75625 per person, with a minimum small population state allocation of $3,166,875. These amounts reflect a temporary increase in the amount of credits each state received as a result of the 2018 Consolidated Appropriations Act ( P.L. 115-141 ). The increase is equal to 12.5% above what states would have received absent P.L. 115-141 , and is in effect through 2021. The state allocation limits do not apply to the 4% credits which are automatically packaged with tax-exempt bond financed projects. The administration of the tax credit program is typically carried out by each state's Housing Finance Agency (HFA). State HFAs allocate credits to developers of rental housing according to federally required, but state created, Qualified Allocation Plans (QAPs). Federal law requires that the QAP give priority to projects that serve the lowest-income households and that remain affordable for the longest period of time. Many states have two allocation periods per year. Developers apply for the credits by proposing plans to state agencies. Types of developers include nonprofit organizations, for-profit organizations, joint ventures, partnerships, limited partnerships, trusts, corporations, and limited liability corporations. An allocation to a developer does not imply that all allocated tax credits will be claimed. An allocation simply means tax credits are set aside for a developer. Once a developer receives an allocation it has several years to complete its project. Credits may not be claimed until a project is completed and occupied, also known as \"placed in service.\" Tax credits that are not allocated by states are added to a national pool and then redistributed to states that apply for the excess credits. To be eligible for an excess credit allocation, a state must have allocated its entire previous allotment of tax credits. This use-or-lose feature gives states an incentive to allocate all of their tax credits to developers. In order to be eligible for an LIHTC allocation, properties are required to meet certain tests that restrict both the amount of rent that is assessed to tenants and the income of eligible tenants. Historically, the \"income test\" for a qualified low-income housing project has required project owners to irrevocably elect one of two income level tests, either a 20-50 test or a 40-60 test. In order to satisfy the first test, at least 20% of the units must be occupied by individuals with income of 50% or less of the area's median gross income, adjusted for family size. To satisfy the second test, at least 40% of the units must be occupied by individuals with income of 60% or less of the area's median gross income, adjusted for family size. The 2018 Consolidated Appropriations Act ( P.L. 115-141 ) added a third income test option that allows owners to average the income of tenants. Specifically, under the income averaging option, the income test is satisfied if at least 40% of the units are occupied by tenants with an average income of no greater than 60% of AMI, and no individual tenant has an income exceeding 80% of AMI. Thus, for example, renting to someone with an income equal to 80% of AMI would also require renting to someone with an income no greater than 40% of AMI, so the tenants would have an average income equal to 60% of AMI. In addition to the income test, a qualified low-income housing project must also meet the \"gross rents test\" by ensuring rents do not exceed 30% of the elected 50% or 60% of area median gross income, depending on which income test option the project elected. The types of projects eligible for the LIHTC are apartment buildings, single-family dwellings, duplexes, and townhouses. Projects may include more than one building. Tax credit project types also vary by the type of tenants served. Housing can be for families or special needs populations including the elderly. Enhanced LIHTCs are available for difficult development areas (DDAs) and qualified census tracts (QCTs) as an incentive to developers to invest in more distressed areas: areas where the need is greatest for affordable housing, but which can be the most difficult to develop. In these distressed areas, the LIHTC can be claimed for 130% (instead of the normal 100%) of the project's total cost excluding land costs. This also means that available credits can be increased by up to 30%. HERA ( P.L. 110-289 ) enacted changes that allow an HFA to classify any nontax exempt bond financed LIHTC project as difficult to develop, and hence, eligible for the enhanced credit. Upon receipt of an LIHTC allocation, developers typically exchange the tax credits for equity. For-profit developers can either retain tax credits as financing for projects or sell them to investors; nonprofit developers sell tax credits. Taxpayers claiming the tax credits are usually investors, not developers. The tax credits cannot be claimed until the real estate development is complete and operable. This means that more than a year or two could pass between the time of the tax credit allocation and the time the credit is claimed. If, for example, a project were completed in July of 2018, depending on the filing period of the investor, the tax credits may not begin to be claimed until sometime in 2019. Trading tax credits, or selling them, refers to the process of exchanging tax credits for equity investment in real estate projects. Developers recruit investors to provide equity to fund development projects and offer the tax credits to those investors in exchange for their commitment. When credits are sold, the sale is usually structured with a limited partnership between the developer and the investor, and sometimes administered by syndicators who must adhere to the complex provisions of the tax code. As the general partner, the developer has a very small ownership percentage but maintains the authority to build and run the project on a day-to-day basis. The investor, as a limited partner, has a large ownership percentage with an otherwise passive role. Syndicators charge a fee for overseeing the investment transactions. Typically, investors do not expect their equity investment in a project to produce income. Instead, investors look to the credits, which will be used to offset their income tax liabilities, as their return on investment. The return investors receive is determined in part by the market price of the tax credits. The market price of tax credits fluctuates, but in normal economic conditions the price typically ranges from the mid-$0.80s to low-$0.90s per $1.00 tax credit. The larger the difference between the market price of the credits and their face value ($1.00), the larger the return to investors. The investor can also receive tax benefits related to any tax losses generated through the project's operating costs, interest on its debt, and deductions such as depreciation. The type of tax credit investor has changed over the life of the LIHTC. Upon the introduction of the LIHTC in 1986, public partnerships were the primary source of equity investment in tax credit projects, but diminished profit margins have driven some syndicators out of the retail investment market. Although there are individual tax credit investors, in recent years, the vast majority of investors have come from corporations, either investing directly or through private partnerships. Different types of investors have different motivations for investing in tax credits. Some investors are motivated by the Community Reinvestment Act (CRA), which considers LIHTC investments favorably. Other investors include real estate, insurance, utility, and manufacturing firms, many of which list the rate of return on investment as their primary purpose for investing in tax credits. Tax sheltering is the second-most highly ranked purpose for investing. The LIHTC finances part of the total cost of many projects rather than the full cost and, as a result, must be combined with other resources. The financial resources that may be used in conjunction with the LIHTC include conventional mortgage loans provided by private lenders and alternative financing and grants from public or private sources. Individual states provide financing as well, some of which may be in the form of state tax credits modeled after the federal provision. Additionally, some LIHTC projects may have tenants who receive other government subsidies such as housing vouchers. In late 2017, there was a revision to the Internal Revenue Code ( P.L. 115-97 ) that substantially changed the federal tax system. The revision did not directly alter the LIHTC program; however, the reduction in corporate taxes, along with the limits on deducting net operating losses that were part of the act, led affordable housing advocates at the time to voice concern about a reduction in the demand for LIHTCs. Most recently, the 2018 Consolidated Appropriations Act ( P.L. 115-141 ) made two changes to the LIHTC program. As was discussed in the \" The Allocation Process \" section, the act modified the so-called \"income test\" to allow for income averaging across tenants, and also increased the amount of credits available to states each year by 12.5% for years 2018 through 2021. These changes may have helped alleviate some concerns stemming from the 2017 tax revision's potential effect on LIHTC development. Still, it is not yet clear what, if any, impact there may be on the affordable housing supply in the long run as the result of these recent changes to the federal tax code.", "summary": "The low-income housing tax credit (LIHTC) program is one of the federal government's primary policy tools for encouraging the development and rehabilitation of affordable rental housing. These nonrefundable federal housing tax credits are awarded to developers of qualified rental projects via a competitive application process administered by state housing finance authorities. Developers typically sell their tax credits to outside investors in exchange for equity in the project. Selling the tax credits reduces the debt developers would otherwise have to incur and the equity they would otherwise have to contribute. With lower financing costs, tax credit properties can potentially offer lower, more affordable rents. The LIHTC is estimated to cost the government an average of approximately $9.9 billion annually. In late 2017, there was a revision to the Internal Revenue Code (P.L. 115-97) that substantially changed the federal tax system. The revision did not directly alter the LIHTC program; however, there had been early reports of downward pressure on tax credit demand stemming from the 2017 tax revision. Most recently, the 2018 Consolidated Appropriations Act (P.L. 115-141) made two changes to the LIHTC program. First, the act modified the so-called \"income test,\" which determines the maximum income an LIHTC tenant may have. Previously, each individual tenant was required to have an income below one of two threshold options (either 50% or 60% of area median gross income, depending on an election made by the property owner). With the modification, property owners may use a third income test option that allows them to average the income of tenants when determining whether the income restriction is satisfied. Second, the act also increased the amount of credits available to states each year by 12.5% for years 2018 through 2021. This report will be updated as warranted by legislative changes.", "document_type": "crs"}
{"report": "Social Security, which paid about $989 billion in benefits in 2018, is the largest program in the federal budget in term s of outlays. There are currently about 63 million Social Security beneficiaries. Most Social Security beneficiaries are retired or disabled workers, whose monthly benefits depend on their past earnings, their age, and other factors. Benefits are also paid to workers' dependents and survivors, based on the earnings of the workers upon whose work record they claim. Social Security has a significant impact on beneficiaries, both young and old, in terms of income support and poverty reduction. Under current law, Social Security's revenues are projected to be insufficient to pay full scheduled benefits after 2035. For both of those reasons, Social Security is of ongoing interest to policymakers. Most proposals to change Social Security outlays would change the benefit computation rules. Evaluating such proposals requires an understanding of how benefits are computed under current law. A person who has a sufficient history of earnings in employment subject to Social Security payroll taxes becomes insured for Social Security, which makes the worker and qualified dependents eligible for benefits. Insured status is based on the number of quart ers of coverage (QCs) earned. In 2019, a worker earns one QC for each $1,360 of earnings, and a worker may earn up to four QCs per calendar year. The amount needed for a QC increases annually by the growth in average earnings in the economy, as measured by Social Security's average wage index. To be eligible for most benefits, workers must be fully insured , which requires one QC for each year elapsed after the worker turns 21 years old, with a minimum of 6 QCs and a maximum of 40 QCs. A worker is first eligible for Social Security retirement benefits at 62, so to be eligible for retirement benefits, a worker must generally have worked for 10 years. Workers are permanently insured when they are fully insured and will not lose fully insured status when they stop working under covered employment, for example, if a worker has the maximum 40 QCs. Benefits may be paid to eligible survivors of workers who were fully insured at the time of death. Some dependents are also eligible if the deceased worker was currently insured , which requires earning 6 QCs in the 13 quarters ending with the quarter of death. To be eligible for disability benefits, workers must also satisfy a recency of work requirement. Workers aged 31 and older must have earned 20 QCs in the 10 years before becoming disabled. Fewer QCs are required for younger workers. In the case of workers having work history in multiple countries, international totalization agreements allow workers who divide their careers between the United States and certain countries to fill gaps in Social Security coverage by combining work credits under each country's system to qualify for benefits under one or both systems. The first step of computing a benefit is determining a worker's average indexed monthly earnings (AIME), a measure of a worker's past earnings. Rather than using the amounts earned in past years directly, the AIME computation process first updates past earnings to account for growth in overall economy-wide earnings. That is done by increasing each year of a worker's taxable earnings after 1950 by the growth in average earnings in the economy, as measured by the national average wage index, from the year of work until two years before eligibility for benefits, which for retired workers is at 62. For example, the Social Security average wage grew from $32,155 in 2000 to $41,674 in 2010. So if a worker earned $20,000 in 2000 and turned 60 in 2010, the indexed wage for 2000 would be $20,000 x ($41,674/$32,155), or $25,921. Earnings from later years—for retired workers, at ages 61 and above—are not indexed. For retired workers, the AIME equals the average of the 35 highest years of indexed earnings, divided by 12 (to change from an annual to a monthly measure). Those years of earnings are known as computation years . If the person worked fewer than 35 years in employment subject to Social Security payroll taxes, the computation includes some years of zero earnings. In the case of workers who die before turning 62 years old, the number of computation years is generally reduced below 35 by the number of years until he or she would have reached 62. For example, the AIME for a worker who died at 61 is based on 34 computation years. For disabled workers, the number of computation years depends primarily on the age at which they become disabled, increasing from 2 years for those aged 24 or younger to 35 years for those aged 62 or older. The next step in determining a benefit is to compute the primary insurance amount (PIA) by applying a benefit formula to the AIME. First, the AIME is sectioned into three brackets (or segments) of earnings, which are divided by dollar amounts known as bend points. In 2019, the bend points are $926 and $5,583. Those amounts are indexed to the national average wage index, so they generally increase each year. Three factors, which are fixed by law at 90%, 32%, and 15%, are applied to the three brackets of AIME. For workers with AIMEs of $926 or less in 2019, the PIA is 90% of the AIME. Because the other two factors are lower, that share declines as AIMEs increase, which makes the benefit formula progressive. For workers who become eligible for retirement benefits, become disabled, or die in 2019, the PIA is determined as shown in the example in Table 1 and in Figure 1 . Benefits are based on covered earnings. Earnings up to the maximum taxable amount ($132,900 in 2019) are subject to the Social Security payroll tax. If a worker earns the maximum taxable earnings in every year of a full work history and becomes eligible in 2019, the maximum PIA is $2,861. In the AIME computation, earnings are indexed to the average wage index, and the bend points in the benefit formula are indexed to growth in the average wage index. As a result, replacement rates—the portion of earnings that benefits replace—remain generally stable. That is, from year to year, the average benefits that new beneficiaries receive increase at approximately the same rate as average earnings in the economy. A cost-of-living adjustment (COLA) is applied to the benefit beginning in the second year of eligibility, which for retired workers is age 63. The COLA applies even if a worker has not yet begun to receive benefits. The COLA usually equals the growth in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one calendar year to the third quarter of the next year. Beneficiaries will receive a COLA of 2.8% for benefits paid in January 2019. The full retirement age (FRA, also called the normal retirement age) is the age at which a worker can receive the full PIA, increased by any COLAs. The FRA was 65 for people born before 1938, but the Social Security Amendments of 1983 ( P.L. 98-21 ) raised the FRA for those born later, as shown in Table 2 . Retired workers may claim benefits when they turn 62 years old, but the longer that they wait, the higher their monthly benefit. The higher monthly benefit is intended to offset the fewer number of payments that people who delay claim will receive over their lifetimes, so that the total value of lifetime benefits is approximately the same regardless of when they claim based on average life expectancy. The permanent reduction in monthly benefits that applies to people who claim before the FRA is called an actuarial reduction. It equals 6⅔% per year for the first three years of early claim and 5% for additional years. The permanent increase in monthly benefits that applies to those who claim after the FRA is called the delayed retirement credit. For people born in 1943 and later, that credit is 8% for each year of delayed claim after the FRA, up to age 70. For people with an FRA of 66, therefore, monthly benefits are 75% of the PIA for those who claim benefits at the age of 62 and 132% of the PIA for people who wait until the age of 70 to claim (see Figure 2 ). Because people who claim earlier receive more payments over a lifetime, the overall effect of claiming at different ages depends on how long the beneficiary lives. For example, someone who dies at 71 years old would be better off claiming early, but someone who survives to 95 would be better off claiming late. An increase in the FRA can result in lower benefits in two ways. First, monthly benefits will be different for individuals who have identical work histories and the same age of claiming benefits, but who have different FRAs. For example, someone with an FRA of 66 and who claims at age 62 will receive a monthly benefit equal to 75% of the PIA. For someone with an FRA of 67, claiming at 62 will result in a monthly benefit that is 70% of the PIA. Depending on the claim age, the scheduled increase in the FRA from 66 to 67 will reduce monthly benefits by between 6.1% and 7.7%. Second, lifetime benefits will be different for workers who have identical work histories and identical age of death, but different FRAs. For example, consider two workers who have FRAs of 65 and 67, respectively, both of whom claim at their FRA, and thus receive identical monthly benefits. If both workers die at age 75, the worker with an FRA of 65 will have received monthly benefits for 10 years, compared with the worker with an FRA of 67, who will have received monthly benefits for 8 years. Social Security benefits are payable to the spouse, divorced spouse, or dependent child of a retired or disabled worker and to the widow(er), divorced widow(er), dependent child, or parent of a deceased worker. When dependent beneficiaries also earned worker benefits, they receive the larger of the worker or the dependent benefit. A spouse's base benefit (that is, before any adjustments) equals 50% of the worker's PIA. A widow(er)'s base benefit is 100% of the worker's PIA. The base benefit for children of a retired or disabled worker is 50% of the worker's PIA, and the base benefit for children of deceased workers is 75% of the worker's PIA. Other benefit adjustments apply in certain situations, notably the windfall elimination provision (WEP), which reduces benefits for worker beneficiaries who have pensions from employment that was not subject to Social Security payroll taxes; the government pension offset (GPO), which reduces Social Security spousal benefits paid to people who have pensions from employment that was not subject to Social Security payroll taxes; the retirement earnings test , which results in a withholding of monthly Social Security benefits paid to beneficiaries who are younger than the full retirement age and have earnings above a certain level; and the maximum family benefit , which limits the amount of benefits payable to a family based on a worker's record. In some cases, a portion of Social Security benefits may be subject to federal income tax. Taxation is not a benefit adjustment, but it does affect the net income of beneficiaries. For additional information, see CRS Report RL32552, Social Security: Calculation and History of Taxing Benefits .", "summary": "Social Security, the largest program in the federal budget (in terms of outlays), provides monthly cash benefits to retired or disabled workers and their family members as well as to the family members of deceased workers. In 2018, benefit outlays were approximately $989 billion, with roughly 63 million beneficiaries and 176 million workers in Social Security-covered employment. Under current law, Social Security's revenues are projected to be insufficient to pay full scheduled benefits after 2035. Monthly benefit amounts are determined by federal law. Social Security is of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policymakers have considered numerous proposals to change its benefit computation rules. The Social Security benefits that are paid to worker beneficiaries and to workers' dependents and survivors are based on workers' past earnings. The computation process involves three main steps First, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME). Second, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings. Third, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA) and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits. Retired worker benefits can be affected by other adjustments. For example, the windfall elimination provision can reduce benefits for individuals who receive a pension from non-Social Security-covered earnings, and benefits can be withheld under the retirement earnings test if an individual continues to work and earns above a certain amount. Although not an adjustment, Social Security benefits can be subject to income tax, thereby affecting the beneficiary's net income. Benefits for eligible dependents and survivors are based on the worker's PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker's PIA, and a widow(er) receives a benefit equal to 100% of the worker's PIA. Dependent benefits may also be adjusted based on the age at which they are claimed and other factors.", "document_type": "crs"}
{"report": "Exposure to ozone (often referred to as \"smog\"), regardless of where that ozone originates, has been linked to negative human health effects, including respiratory ailments and premature death. Children, the elderly, and persons with respiratory illnesses are particularly susceptible to adverse health impacts from ozone exposure. EPA estimates that ozone exposure was responsible for more than 15,000 premature deaths in the United States in 2007 based on 2006-2008 average ambient ozone concentrations. Ozone has also been linked to plant damage and decreases in crop yield. Concentrations of ozone at the ground level, originally considered a local issue, is increasingly recognized as a global challenge. Ozone is not emitted directly but is formed in the atmosphere from chemical reactions of nitrogen oxides (NO x ) with volatile organic compounds (VOCs, a type of hydrocarbon) in the presence of sunlight. NO x and VOCs are known as \"precursor\" emissions, and their relative contributions to the formation of ozone depends on a number of factors, including weather conditions and concentrations of other pollutants. The lifetime of ozone in the atmosphere ranges from hours to weeks, providing time—under the right conditions—for pollution emitted in one location to affect the health and welfare of populations far downwind (see Figure 2 ). While local emissions of ozone precursors are still the dominant source of ozone in many areas, state and local air quality agencies face ozone pollution arising from sources outside of their jurisdictional control (\"background ozone\"). As will be described and discussed in this report, potential long-range transport of air pollutants presents a challenge to downwind communities. It can also be an opportunity for cooperation among localities, states, and countries. The Clean Air Act (CAA) directs the U.S. Environmental Protection Agency (EPA) to establish National Ambient Air Quality Standards (NAAQS) to protect public health (primary standards) and welfare (secondary standards). The law directs that \"the attainment and maintenance of [primary standards] are requisite to protect the public health.\" While the standards are set to limit adverse impacts, EPA acknowledges that these standards do not suggest that concentrations below these levels present zero risk. The NAAQS set limits for the concentrations in ambient air of six common \"criteria\" pollutants: lead, nitrogen oxides, sulfur dioxide, carbon monoxide, particulate matter, and ozone. There is no evidence of a safe level of ozone exposure below which no adverse health effects occur. However, uncertainty between exposure and health response increases at very low ozone concentrations—that is, below 20 parts per billion (ppb). Air quality monitoring stations in the United States measure concentrations of the six criteria pollutants, and these measurements are used to determine whether locations meet the NAAQS. If a monitor measures concentrations above the standard for any of those six pollutants for an averaging time specified in the NAAQS, the area around that monitor may face a \"nonattainment\" designation for that pollutant. Once designated nonattainment, the state containing that area must propose a plan to bring the area into attainment of the NAAQS. These State Implementation Plans (SIPs) require approval by EPA. State air quality regulators develop SIPs to attain NAAQS for ambient air in their states, and they have jurisdiction only over the sources of emissions within their borders. The levels of pollution flowing into nonattainment regions, generally referred to as \"background pollution,\" may be making it more difficult for some areas of the United States to meet attainment. Congress recognized this challenge when it enacted the original CAA, adding the \"good neighbor provision,\" which addressed interstate transport of human-caused air pollution that contributes to nonattainment. For detailed information about domestic air transport, see CRS Report R45299, The Clean Air Act's Good Neighbor Provision: Overview of Interstate Air Pollution Control , by Kate C. Shouse. The CAA also mandates EPA to review the NAAQS every five years and revise them as appropriate. EPA completed its most recent review of the ozone standard in 2015, when it lowered the standard from 75 ppb to 70 ppb. EPA reported that it has begun the next ozone NAAQS review and that it intends to complete it by 2020. The procedure for reviewing and setting the NAAQS explicitly does not consider what sources contribute to total ozone, including background sources. In 2018, EPA announced plans to streamline the NAAQS review process and obtain Clean Air Scientific Advisory Committee advice regarding background pollution and potential adverse effects from NAAQS compliance strategies. EPA's \"Back-to-Basics\" memorandum described concerns that background levels of pollution pose a challenge to meeting NAAQS standards. The memorandum noted a call from certain state regulators for advice on how to treat background ozone, stating that \"state environmental agencies have sought this advice, citing the 'absolute need for a valid source of information about background concentrations.'\" Additionally, EPA created a task force to develop \"additional flexibilities for states to comply with the ozone standard.\" Much of the focus of ozone transport and control has historically been on upwind domestic sources. Members of Congress may have an interest in better understanding background ozone from natural and international sources, particularly as EPA reviews the 2015 ozone standard. Contributions from sources of background ozone may become important as states with nonattainment areas develop SIPs that attempt to quantify these contributions and consider ways to address them. To assist Congress in understanding these issues, this report defines background ozone , focusing on natural and international sources, and describes what is currently known about these sources. The report then goes on to discuss the limitations in the scientific community's understanding and options for deepening that understanding. This report will discuss background air pollution primarily in the context of ground-level ozone. As of 2018, with the 2015 ozone standard set at 70 ppb, there are 52 areas in the United States designated \"nonattainment\" for ozone (see Figure 1 ). Current research suggests that natural sources and sources outside the United States may contribute to total ozone in those areas at certain times. Many of the issues discussed here are not unique to ozone, however, and may apply to other pollutants covered by NAAQS, and any potential actions taken to understand or reduce background ozone may also reduce background concentrations of other pollutants. This report deals exclusively with ozone measured at ground level and its adverse health and material effects. Ozone Transport 101 and Figure 2 provide additional information about ozone in different layers of the atmosphere and how each layer may interact with, or contribute to, ozone at ground level. EPA defined natural background (NB) and U.S. background (USB) in the final 2015 ozone rule (the chemical notation of ozone is O 3 ): NB is defined as the O 3 that would exist in the absence of any manmade precursor emissions. USB is defined as that O 3 that would exist in the absence of any manmade emissions inside the U.S. This includes anthropogenic emissions outside the U.S. as well as naturally occurring ozone. A third term, North American background , is also defined in this report for added clarity. Each is explained in more detail below. Natural background ozone is what the average concentration of ground-level ozone would be without any human influence. Ozone forms naturally in the lower levels of the atmosphere due to natural emissions of precursors from sources including lightning, vegetation, wildfires, and methane. Transport of ozone vertically from the stratosphere to the atmospheric layer at ground level (called stratospheric intrusions) is a fifth major source. No air pollution monitors today are able measure true present day NB because human contributions to the formation of ozone are so widespread globally. The only way to estimate NB is with global scale atmospheric chemistry simulation models with inputs representing conditions without human influence. The remainder of this section summarizes the five major contributors to NB. A key point is that t he estimated contri butions presented are uncertain and are very dependent on both location and timing . The \"Challenges in Estimating Background Ozone\" section discusses specific challenges and uncertainties associated with the data and the modeling projects. 1. Lightning (NO x ) . Lightning flashes cause naturally occurring nitrogen and oxygen in the atmosphere to react and generate NO x molecules. Lightning and the resulting emissions occur primarily during the warmer months and are released in the free troposphere, which is above the well-mixed ground layer (see Figure 2 ). There is data to suggest that lightning contributes to daily, as well as seasonal average, ozone concentrations in high impact areas. 2. Vegetation (VOCs) . Trees release VOCs as a byproduct of photosynthesis. Biogenic VOCs from vegetation are the largest emissions source of VOCs in the United States, making up about 70% of the total inventory. Vegetation emissions are largest during the spring and summer, when plants are actively growing. For plants and trees that have leaves only seasonally, emissions decline as leaves drop and photosynthesis ends. 3. Wildfires (VOCs and NO x ) . Wildfires release both NOx and VOCs (as well as fine particles), but the amount and the reactivity of the polluting emissions depend on the type of fuel that is burning and how quickly and how hot the fire burns. Controlled/prescribed fires tend to burn cooler and release fewer pollutants. Current research suggests that active fires contribute to daily as well as seasonal average ozone concentrations. Research to improve emissions inventories from fire events is ongoing. 4. Stratospheric intrusions . Ozone occurs naturally in the stratosphere at very high concentrations and can occasionally be transported down to lower atmospheric levels during certain weather events (see text box \"Ozone Transport 101\" for more information about atmospheric layers and vertical transport of ozone). Stratospheric intrusions are more likely to affect ground-level concentrations at high elevation sites in the western United States, simply because these areas are closer to the stratosphere. These events are more common in winter and spring months because the large storms that cause them are more likely to occur in late winter and spring. 5. Methane . Methane has not been traditionally considered an ozone precursor because it does not react quickly to produce ozone. Nonetheless, it will over time react and contribute to background ozone. Methane's atmospheric lifetime is on the order of a decade, compared to a timescale of months to days for other VOCs, and so it is considered well-mixed globally by the time it contributes to the formation of ozone. It is accumulating in the atmosphere as well, raising background ozone concentrations. This ozone contribution is considered approximately spatially uniform and is increasing as methane concentrations increase. The major source contributors to global methane are natural production by bacteria in anaerobic (oxygen-free) conditions in natural wetlands or in agriculture, fossil fuel emissions leaking or venting either naturally or from energy development, and incomplete combustion of biomass or carbon. North American background (NAB) is the estimated concentration of ozone that excludes the effects of all human-caused emissions in North America. NAB includes all NB sources as well as human-caused sources of emissions from countries outside of North America. Air quality monitors located at sites on the western coast of the United States are not consistently reliable measures of NAB for two reasons: (1) Air circulation can bring continental air over the Pacific Ocean and then back into North America. (2) If meteorological conditions are favorable, ozone pollution formed from emissions in North America can have a long enough lifetime to travel all the way around the globe and re-enter North America from the west. Therefore, like NB, modeling is the best way to estimate NAB. Human-caused sources outside of North America are currently dominated by Asian emissions. Estimates of Asian contribution to background ozone in the United States are highly time- and location-specific. Asian precursor emissions, and resulting ozone, travel across the Pacific Ocean in the free troposphere (see Figure 2 ). However, because this pollution is traveling at higher elevations, it is more likely to impact cities and locations in the western United States located at higher elevations. These upper-level air flows from areas in Asia are also more likely to affect the United States in the late winter, spring, and early summer due to seasonal variability in hemisphere-scale circulation patterns. Asian emissions begin to taper off in late winter, and a July/August monsoon season in eastern China reduces formation of ozone in late summer. These features suggest that the maximum impact from Asian pollution would likely occur in late winter/early spring. U.S. background (USB) includes all contributions from NB and NAB plus all human-caused emissions from Mexico and Canada. In the publication of the most recent NAAQS for ozone, EPA generically defined background ozone as USB: The term \"background\" O 3 is often used to refer to O 3 that originates from natural sources of O 3 ( e.g., wildfires and stratospheric O 3 intrusions) and O 3 precursors, as well as from man-made international emissions of O 3 precursors. Using the term generically, however, can lead to confusion as to what sources of O 3 are being considered. Relevant to the O 3 implementation provisions of the CAA, we define background O 3 the same way the EPA defines USB: O 3 that would exist in the absence of any man-made emissions inside the U.S. Mexican and Canadian emissions primarily impact locations on the borders of those two countries, with maximum contribution estimates from one study of about 30 ppb to border cities. Model estimates of the contribution of USB to total ozone range from 25 ppb to 50 ppb, with the highest values in the inter-mountain West, based on an EPA review of model data. The contribution of background ozone to total local ozone concentrations varies from location to location, day to day, and even hour to hour. These variations are driven both by changes in pollutant emissions from sources and by changing weather patterns that influence the chemistry and physical transport of the pollutants. There is also uncertainty associated with measuring or estimating these driving forces behind background ozone contributions. As mentioned, estimates of source contributions to background ozone rely on computer models that simulate atmospheric chemistry and transport and the resulting pollution. These models rely on large datasets of emissions inventories and meteorological data, both with detailed hourly and location-specific data. These input data are often not available at the temporal and spatial resolution needed, and so estimates and/or simplifications must be made, which increases uncertainty. Atmospheric measurements of ozone concentrations are then compared to model output to evaluate how well the model is performing. However, measurement data of the pollutants being modeled are also limited, which increases the challenge associated with evaluating the performance of the model in capturing ozone formation and movement. Modeling studies estimating background ozone and source attribution often present results as seasonal averages or represent time periods that may not be of specific use to regulators. See text box \"Pollution Exposure Averaging Metrics\" for additional information about averaging metrics. Retrospective studies face all the challenges mentioned. Forecasting studies face the additional challenge of attempting to model the future based on historical patterns and current conditions, adding another level of uncertainty. According to EPA, NO x emissions from electricity generating units have decreased 81% nationally compared to 1990 levels due in part to the acid rain program and ozone transport rules. While these reductions have resulted in total ozone decreases across most of the United States, models suggest that temperature increases in many areas of the United States during that same time frame have negated what would have been additional ozone benefits. Decreasing trends in total ozone concentrations measured at regulatory monitors between 1990 and 2010 generally occur in the eastern United States. Many western monitors do not show similar trends in total ozone over the same time period despite similar reductions in NO x from the power sector and individual personal vehicles. The lack of a decreasing ozone trend at many monitors in the West could be due to a number of causes: increasing seasonal average temperatures, an increase in incidents of fire since 1986, emissions from oil and gas development, increasing contributions from international transport of air pollution, and increasing global methane concentrations. According to the 2017 U.S. National Climate Assessment, on average since 1986 in the United States, the number of wildfires and the burn duration have both quadrupled. The number of acres burned has increased six-fold, compared to 1970 to 1986. The report also indicates that total NO x emissions from fire events are expected to increase with fire temperature, duration, and area burned. Figure 3 shows the annual count, and total area burned of all wildfires larger than 1,000 acres from 1984 through 2015. While emission inventories from Asia are highly uncertain—and outdated in some modeling cases—several sources of data suggest that Asian emissions, and potentially their impact on U.S. air quality, have peaked. Projections of fossil fuel combustion in Asian countries suggest uncertainty about peaking, although the Chinese government recently announced a target of a 15% reduction in NO x emissions by 2020 compared to 2015 emissions. A review of measurements of baseline ozone taken at monitors along the western coast of North America show that, after two decades of increasing trends, ozone flowing into the continental United States from the west stopped increasing in the mid-2000s and has begun to decrease. However, since about 2000, ozone levels measured at a rural site in Alaska have been increasing, with the source suspected in part to be transport of East Asian air. Demonstrations of high ozone directly related to wildfires and stratospheric intrusions may be eligible for exclusion from an ozone attainment calculation under the Exceptional Event Rule of the CAA. In order to facilitate successful demonstrations of exceptional events, EPA released a final guidance document in 2016 for preparations of exceptional events demonstrations for wildfires. A draft guidance document was released in August 2018 covering the preparation of exceptional events demonstrations for stratospheric ozone intrusions. These documents outline expectations, but they do not provide the specific modeling platforms or tools required to conduct the successful demonstrations. State, local, and tribal co-regulators recommended to EPA that the agency develop a similar guidance document for international emissions. Under Section 179B of the CAA, a demonstration of contribution by international sources may reduce attainment demonstration requirements in SIPs but does not provide regulatory relief from a potential nonattainment designation. Several issues may arise for congressional deliberations with regard to background ozone pollution. Stakeholders suggest challenges with meeting the NAAQS, in part due to the difficulty of reducing ozone in areas with potentially large contributions from background sources and in part due to lack of data availability to conduct demonstrations of those background contributions. Congress may seek to understand the progress of research on background ozone as EPA revisits the NAAQS for ozone. EPA released a state of the science background ozone white paper to stakeholders and requested feedback on major issues. The House Committee on Science, Space and Technology revisited the issue when its Subcommittee on Environment held a hearing on background ozone on June 21, 2018. The following four points summarize the opinions and policy and scientific challenges brought forth both by stakeholder responses to the EPA white paper and by the testimony from invited stakeholders at the recent background ozone hearing: 1. Some states, especially states in the western United States, have asserted that natural and non-U.S. sources of ozone and precursors have increased the ozone concentrations in their states. 2. Current statutory and regulatory options to address natural and non-U.S. sources often require technical data, modeling, and analyses that may be cost prohibitive. 3. Modeling results that attempt to quantify levels of contribution from sources are uncertain, and they represent historical, or average, impacts. 4. In most locations, especially urban locations, many studies (including the whitepaper published by EPA ) have shown that local sources contribute a large part to total local ozone. Most recently, the U.S. Court of Appeals for the D.C. Circuit considered whether EPA should take background ozone into account when setting NAAQS. The case has not been decided at the time this report was published. A potential avenue for Congress to address gaps in the scientific understanding of background ozone is through research and development. Therefore, Congress may consider funding implications of the following recommendations, made by stakeholders in the scientific and regulatory communities, that are intended to improve the understanding of contributions from background ozone: International engagement and/or cooperation at the federal level and through research collaborations that may improve understanding of non-U.S. contributions to U.S. air quality and may increase cooperation for pollution reduction goals. Increased monitoring at ground level and at higher levels in the atmosphere, through state or federal regulatory air quality monitoring projects or research campaigns, to aid in analysis of background ozone trends and improve confidence in the performance of the models used to estimate background contributions. Additional research and development into model estimates of background ozone, representing additional weather patterns (i.e., El Nino/La Nina patterns can influence background ozone), and model simplification schemes to provide more information about the variability associated with background ozone contributions. Finally, Congress may consider the role that methane plays in air quality. Methane is a precursor to ozone, and so methane emission reductions have been suggested as one option to reduce global background concentrations of ozone. Additionally, ozone itself is a strong greenhouse gas. EPA's review of the ozone NAAQS is underway and set to be completed in 2020, with background ozone contributions suggested as a topic to be addressed. Congress may conduct oversight as EPA carries out this effort. ", "summary": "Exposure to ozone, a common air pollutant, has been linked to early death, plant and crop damage, and damage to property. The U.S. Environmental Protection Agency (EPA) sets National Ambient Air Quality Standards (NAAQS) for ground-level ozone to protect human health and welfare with, by law, a \"margin of safety.\" States that contain areas with ozone concentrations above these standards must develop plans to reduce emissions and improve air quality. However, states have direct control only over emission sources located within their borders. The Clean Air Act (CAA) requires EPA to re-evaluate the NAAQS every five years to include the latest science and technological advancements. Studies reporting the human health impacts of ozone increasingly suggest that ozone exposure may not be completely safe at any level. With the potential for a NAAQS re-evaluation leading to science-based recommendations for a tighter standard, some stakeholders have expressed increasing concern that future—and even current—ozone standards could be difficult to meet due to the contribution of \"background ozone,\" which arises from a variety of sources described in this report. In some areas of the United States, background ozone may be approaching 70 parts per billion (ppb) on some days, the current level of the NAAQS. Some Members of Congress have expressed interest in adverse health effects that occur at or below the current standard, challenges some nonattainment areas may have in meeting current standards, and particularly the responsibilities for meeting the health standard, given interstate and international transport. EPA's review of the ozone NAAQS is underway and set to be completed in 2020, with background ozone contributions suggested as a topic to be addressed. Congress may have an interest in better understanding scientific capabilities, needs, and efforts to improve understanding of contributions from background sources, as well as options for regulatory responses. Defining Background Ozone Three terms are used for different types of background ozone, and distinguishing among them can be important for regulatory purposes. 1. Natural background. Ozone concentrations that would be present without any human influence or contribution from anywhere on the globe. Natural background includes contributions from wildfires, vegetation, lightning, ozone in the stratosphere, and global methane concentrations. Contributions to background ozone from wildfires and methane have been increasing over the past several decades. 2. North American background. Ozone concentrations absent human-caused emissions from North America. North American background includes all sources in natural background plus ozone from international sources outside North America. Studies suggest that Asian emissions may be contributing to ozone in the United States, especially in Western states, but that those contributions may be beginning to decrease. 3. United States background. Ozone concentrations absent human-caused emissions from the United States. U.S. background includes all sources in North American background plus ozone formed from emission sources in Mexico and Canada. Challenges in Estimating Background Ozone The CAA provides alternative regulatory options for areas that successfully demonstrate significant influence from some specific sources of natural background ozone on ozone exceedences. However, such demonstrations may be difficult to conduct and reliably assess, given data and analytical challenges: Emissions inventories. Current understanding of the amount, location, and type of pollutant emissions from many types of sources is insufficient. Therefore inventories typically provide estimations, which may not be precise enough for apportioning contributions. Weather data. Meteorological data (i.e., wind speed, wind direction, temperature, cloud cover, humidity, etc.) are not currently measured at a fine enough spatial scale to adequately represent relevant weather processes. Ambient air quality measurements. Data on pollutant concentrations are limited, which increases the challenge of understanding ozone formation and movement. Fine spatial and temporal measurements are needed both horizontally across the surface and vertically to higher levels of the atmosphere. Source contribution variability. Background ozone source contributions change by year, season, day, and hour and from location to location. This makes it difficult to project future contributions, including when contributions will be relevant to attainment status. This report provides information on sources of background ozone, presents key challenges in addressing these sources, and discusses potential options to overcome these challenges.", "document_type": "crs"}
{"report": "Illegal aliens have exploited asylum loopholes at an alarming rate. Over the last five years, DHS has seen a 2000 percent increase in aliens claiming credible fear (the first step to asylum), as many know it will give them an opportunity to stay in our country, even if they do not actually have a valid claim to asylum. —Department of Homeland Security (DHS) press release, December 20, 2018 The increased number of Central Americans petitioning for asylum in the United States is not because more people are \"exploiting\" the system via \"loopholes,\" but because many have credible claims…. There is no recorded evidence by any U.S. federal agency showing that the increased number of people petitioning for asylum in the United States is due to more people lying about the dangers they face back in their country of origin. —Washington Office on Latin America (WOLA) commentary, March 14, 2018 These statements and the conflicting views about asylum seekers underlying them suggest why the asylum debate has become so heated. Policymakers have faced a perennial challenge to devise a fair and efficient system that approves legitimate asylum claims while deterring and denying illegitimate ones. Changes in U.S. asylum po licy and processes over the years can be seen broadly as attempts to strike the appropriate balance between these two goals. Periods marked by increasing levels of asylum-seeking pose particular challenges and may elicit a variety of policy responses. Faced with an influx of Central Americans seeking asylum at the southern U.S. border, the Trump Administration has put forth policies to tighten the asylum system (see, for example, the \" 2018 Interim Final Rule \" and \" DHS Migrant Protection Protocols \" sections of this report); these policies typically have been met with court challenges. This report explores the landscape of U.S. asylum policy through an analysis of current asylum processes, available data, legislative and regulatory history, recent legislative and presidential proposals, and selected policy questions. In common usage, the word asylum often refers to protection or safety. In the immigration context, however, it has a narrower meaning. The Immigration and Nationality Act (INA) of 1952, as amended, provides for the granting of asylum to an alien who applies for such relief in accordance with applicable requirements and is determined to be a refugee . The INA defines a refugee, in general, as a person who is outside his or her country of nationality and is unable or unwilling to return to, or to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution based on one of five protected grounds: race, religion, nationality, membership in a particular social group, or political opinion. Asylum can be granted by the Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS) or the Department of Justice's (DOJ's) Executive Office for Immigration Review (EOIR), depending on the type of application filed (see \" Asylum Application Process \"). The INA distinguishes between applicants for refugee status and applicants for asylum by their physical location. Refugee applicants are outside the United States, while applicants for asylum are physically present in the United States or at a land border or port of entry. After one year as a refugee or asylee (a person granted asylum), an individual can apply to be become a U.S. lawful permanent resident (LPR). With some exceptions, aliens who are in the United States or who arrive in the United States, regardless of immigration status, may apply for asylum. This summary describes the asylum process for an adult applicant. As discussed in the next section of the report, asylum may be granted by a USCIS asylum officer or an EOIR immigration judge. There are no numerical limitations on asylum grants. In order to receive asylum, an alien must establish that he or she meets the INA definition of a refugee, among other requirements. Certain aliens, such as those who are determined to pose a danger to U.S. security, are ineligible for asylum. An asylum applicant who is not otherwise eligible to work in the United States may apply for employment authorization 150 days after filing a completed asylum application and may receive such authorization 180 days after the application filing date. An alien who has been granted asylum is authorized to work in the United States and may receive approval to travel abroad. A grant of asylum does not expire, but it may be terminated under certain circumstances, such as if an asylee is determined to no longer meet the INA definition of a refugee. After one year of physical presence in the United States as an asylee, an alien may be granted LPR status, subject to certain requirements. There are no numerical limitations on the adjustment of status of asylees to LPR status. Special asylum provisions apply to certain aliens without proper documentation who are determined to be subject to a streamlined removal process known as expedited removal. To be considered for asylum, these aliens must first be determined by a USCIS asylum officer to have a credible fear of persecution. Those determined to have a credible fear may apply for asylum during standard removal proceedings. (See \" Inspection of Arriving Aliens .\") Applications for asylum are either defensive or affirmative. A different set of procedures applies to each type of application. An asylum application is affirmative if an alien who is physically present in the United States (and not in removal proceedings) submits an application for asylum to DHS's USCIS. An alien may file an affirmative asylum application regardless of his or her immigration status, subject to applicable restrictions. There is no fee to apply for asylum. Figure 1 shows the number of new affirmative asylum applications filed with USCIS since FY1995, the year filings reached their historical high point. The years included in this figure and in the subsequent figures and tables differ due to the availability of data from the relevant agencies. The data displayed in Figure 1 are for applications, not individuals; an application may include a principal applicant and dependents. Figure 1 reflects the impact of various factors. For example, reforms in the mid-1990s, which made the asylum system more restrictive, contributed to the decline in applications in the earlier years shown. A contributing factor to the application increases in the later years depicted in Figure 1 was the influx of unaccompanied alien children from Central America seeking asylum. (See Appendix A for underlying data and data on the top 10 nationalities filing affirmative asylum applications.) The INA prohibits the granting of asylum until the identity of the asylum applicant has been checked against appropriate records and databases to determine if he or she is inadmissible or deportable, or ineligible for asylum. As part of the affirmative asylum process, applicants are scheduled for fingerprinting appointments. The fingerprints are used to confirm the applicant's identity and perform background and security checks. Asylum applicants are interviewed by USCIS asylum officers. In scheduling asylum interviews, the USCIS Asylum Division is currently giving priority to applications that have been pending for 21 days or less. According to USCIS, \"Giving priority to recent filings allows USCIS to promptly place such individuals into removal proceedings, which reduces the incentive to file for asylum solely to obtain employment authorization.\" Under DHS regulations, the asylum interview is to be conducted in \"a nonadversarial manner.\" The applicant may bring counsel or a representative to the interview, present witnesses, and submit other evidence. After the interview, the applicant or the applicant's representative can make a statement. An asylum officer's decision on an application is reviewed by a supervisory asylum officer, who may refer the case for further review. If an asylum officer ultimately determines that an applicant is eligible for asylum, the applicant receives a letter and form documenting the grant of asylum. If the asylum officer determines that an applicant is not eligible for asylum and the applicant has immigrant status, nonimmigrant status, or temporary protected status (TPS), the asylum officer denies the application. If the asylum officer determines than an applicant is not eligible for asylum and the applicant appears to be inadmissible or deportable under the INA, however, DHS regulations direct the officer to refer the case to an immigration judge for adjudication in removal proceedings. In those proceedings, the immigration judge evaluates the asylum claim independently as a defensive application for asylum. Figure 2 presents data on affirmative asylum applications considered by USCIS since FY2009. It shows four separate outcome categories. Closures are cases administratively closed for reasons such as abandonment or lack of jurisdiction. A closure in one fiscal year in Figure 2 could have been refiled or reopened in a subsequent year. Figure 2 shows that a majority of cases were referred to an immigration judge each year. These referrals included both applicants who were interviewed by USCIS and applicants who were not (e.g., they did not appear for the interview). (See Table B-1 for underlying data and additional detail. ) An asylum application is defensive when the applicant is in standard removal proceedings in immigration court and requests asylum as a defense against removal. Figure 3 provides data on defensive asylum applications filed since FY2009. The data include both cases that originated as defensive cases as well as cases that were first filed as affirmative applications with USCIS, as described in the preceding section. (See Table C-1 for underlying data and additional detail.) There are different ways that an alien can be placed in standard removal proceedings. An alien who is living in the United States can be charged by DHS with violating immigration law. In such a case, DHS initiates removal proceedings when it serves the alien with a Notice to Appear before an immigration judge. Another way to be placed in standard removal proceedings relates to the statutory expedited removal and credible fear screening provisions discussed more fully below (see \" Inspection of Arriving Aliens \"). Under the INA, an individual who is determined by DHS to be inadmissible to the United States because he or she lacks proper documentation or has committed fraud or willful misrepresentation of facts to obtain documentation or another immigration benefit (and thus is subject to expedited removal) and expresses the intent to apply for asylum or a fear of persecution is to be interviewed by an asylum officer to determine if he or she has a credible fear of persecution. Credible fear of persecution means that \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" If the alien is found to have a credible fear, the asylum officer is to refer the case to an immigration judge for a full hearing on the asylum request during removal proceedings. Figure 4 provides data on USCIS credible fear findings since FY1997. For each year, it shows the number of credible fear cases referred to and completed by USCIS and the outcomes of the completed cases. Closed cases are cases in which a credible fear determination was not made. (See Table B-2 and Table B-3 for underlying data and additional detail.) During a removal proceeding, an attorney from DHS's Immigration and Customs Enforcement (ICE) presents the government's case for removing the alien, the alien or their representative may present evidence on the alien's behalf and cross examine witnesses, and an immigration judge from EOIR determines whether the alien should be removed. An immigration judge's removal decision is generally subject to administrative and judicial review. Figure 5 presents data on EOIR decisions in defensive asylum cases since FY2009. (See Appendix D for underlying data and data for defensive cases that began with a credible fear claim. ) Figure 5 shows a sharp drop in administrative closures since FY2016. Administrative closing \"allows the removal of cases from the immigration judge's calendar in certain circumstances\" but \"does not result in a final order\" in the case; cases that are administratively closed can be reopened. Administrative closure has been used, for example, when an alien has a pending application for relief from another agency. In May 2018, Attorney General Jeff Sessions ruled that immigration judges and the BIA do not have general authority to administratively close cases. The INA, as originally enacted, did not contain refugee or asylum provisions. Language on the conditional entry of refugees was added by the INA Amendments of 1965. The 1965 act authorized the conditional entry of aliens, who were to include those who demonstrated to DOJ's Immigration and Naturalization Service (INS) that (i) because of persecution or fear of persecution on account of race, religion, or political opinion they have fled (I) from any Communist or Communist-dominated country or area, or (II) from any country within the general area of the Middle East, and (ii) are unable or unwilling to return to such country or area on account of race, religion, or political opinion, and (iii) are not nationals of the countries or areas in which their application for conditional entry is made. In 1968, the United States acceded to the 1967 United Nations Protocol Relating to the Status of Refugees (Protocol). The Protocol incorporated the 1951 United Nations Convention Relating to the Status of Refugees (Convention), which the United States had not previously been a party to, and expanded the Convention's definition of a refugee. The Convention had defined a refugee in terms of events occurring before January 1951. The Protocol eliminated that date restriction. It also provided that the refugee definition would apply without geographic limitation, while allowing for some exceptions. With the changes made by the Protocol, a refugee came to be defined as a person who \"owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country.\" The Protocol retained other elements of the Convention, including the latter's prohibition on refoulement (or forcible return), a fundamental asylum concept. Specifically, the Convention prohibited states from expelling or returning a refugee \"to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion.\" In the 1970s, INS issued regulations that established procedures for applying for asylum in the United States and for adjudicating asylum applications. For example, a 1974 rule provided that an asylum applicant could include his or her spouse and unmarried minor children on the application and that INS could deny or approve an asylum application as a matter of discretion. Despite the U.S. accession to the 1967 U.N. Protocol, the INA did not include a conforming definition of a refugee or a mandatory nonrefoulement provision until the enactment of the Refugee Act of 1980. As noted, the 1965 conditional entry provisions incorporated a refugee definition that was limited by type of government and geography. A 1999 INS report explained a goal of the Refugee Act as being \"to establish a politically and geographically neutral adjudication for both asylum status and refugee status, a standard to be applied equally to all applicants regardless of country of origin.\" The definition of a refugee, as added to the INA by the 1980 act, reads, in main part: (A) any person who is outside any country of such person's nationality ... and who is unable or unwilling to return to, and is unable or unwilling to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. (This first part of the definition of a refugee has not changed since enactment of the Refugee Act.) As explained by INS Acting Commissioner Doris Meissner at a 1981 Senate hearing, the primary focus of the Refugee Act of 1980 was the refugee process. According to Meissner's written testimony, \"The asylum process was looked upon as a separate and considerably less significant subject.\" In keeping with this secondary status, the asylum provisions added by the 1980 act to the INA (as INA §208) comprised three short paragraphs. The first directed the Attorney General to establish asylum application procedures for aliens physically present in the United States or arriving at a land border or port of entry, regardless of immigration status, and gave the Attorney General discretionary authority to grant asylum to aliens who met the newly added INA definition of a refugee. The second paragraph allowed for the termination of asylum status if the Attorney General determined that the alien no longer met the INA definition of a refugee due to \"a change in circumstances\" in the alien's home country. The third paragraph provided for the granting of asylum status to the spouse and children of an alien granted asylum. Separate language in the Refugee Act added a new Section 209 to the INA on refugee and asylee adjustment of status. Adjustment of status is the process of acquiring LPR status in the United States. The asylee provisions granted the Attorney General discretionary authority to adjust the status of an alien who had been physically present in the United States for one year after being granted asylum and met other requirements, subject to an annual numerical limit of 5,000. The Refugee Act amended an INA provision on withholding of deportation, making it consistent with the nonrefoulement language in the Convention. The INA provision in effect prior to the enactment of the Refugee Act \"authorized\" the Attorney General to withhold the deportation of an alien in the United States (other than an alien involved in Nazi-related activity) to \"any country in which in his opinion the alien would be subject to persecution on account of race, religion or political opinion.\" The Refugee Act revised this language to prohibit the Attorney General from deporting or returning any alien to a country where the Attorney General determines the alien's life or freedom would be threatened because of the alien's race, religion, nationality, membership in a particular social group, or political opinion. It also added exclusions beyond the one for participation in Nazi-related activity. Specifically, the new provision made an alien ineligible for withholding if the alien had participated in the persecution of another person based on race, religion, nationality, membership in a particular social group, or political opinion; the alien had been convicted of a \"particularly serious crime\" and thus was a danger to the United States; there existed \"serious reasons for considering that the alien had committed a serious nonpolitical crime outside the United States,\" or there existed \"reasonable grounds\" for considering the alien a danger to national security. (For subsequent changes to this provision, see \" Withholding of Removal .\") INS published interim regulations in June 1980 to implement the Refugee Act's provisions on refugee and asylum procedures. The asylum regulations included the following: INS district directors had jurisdiction over all requests for asylum except for those made by aliens in exclusion or deportation proceedings. An alien whose application for asylum was denied by the district director could renew the asylum request in exclusion or deportation proceedings. The applicant had the burden of proof to establish eligibility for asylum. The asylum applicant would be examined in person by an immigration officer or an immigration judge. The district director (or the immigration judge) would request an advisory opinion on the asylum application from the Department of State's (DOS's) Bureau of Human Rights and Humanitarian Affairs (BHRHA). The district director could grant work authorization to an asylum applicant who filed a \"non-frivolous\" application. The district director's decision on an asylum application was discretionary. The district director would deny an asylum application for various reasons, including that the alien had been firmly resettled in another country; the alien had participated in the persecution of another person based on race, religion, nationality, membership in a particular social group, or political opinion; the alien had been convicted of a \"particularly serious crime\" and thus was a danger to the United States; there existed \"serious reasons for considering that the alien had committed a serious non-political crime outside the United States;\" or there existed \"reasonable grounds\" for considering the alien a danger to national security. An initial grant of asylum was for one year and could be extended in one-year increments. Asylum status could be terminated for various reasons, including changed conditions in the asylee's home country. There was much discussion and debate about asylum in the 1980s, as related legislation and regulations were proposed, court cases were litigated, and the number of applications increased. In addition, in a 1983 internal DOJ reorganization, EOIR was established as a separate DOJ agency to administer the U.S. immigration court system. It combined the Board of Immigration Appeals (BIA) with the INS immigration judge function. With the creation of EOIR, the immigration courts became independent of INS. It was not until July 1990 that INS published a final rule to revise the 1980 interim regulations on asylum procedures. According to the supplementary information to the 1990 rule, the asylum policy established by the rule reflected two core principles: \"A fundamental belief that the granting of asylum is inherently a humanitarian act distinct from the normal operation and administration of the immigration process; and a recognition of the essential need for an orderly and fair system for the adjudication of asylum claims.\" The 1990 final rule created the position of asylum officer within INS to adjudicate asylum applications. As described in the supplementary information to a predecessor 1988 proposed rule, asylum officers were intended to be \"a specially trained corps\" that would develop expertise over time, with the expected result of greater uniformity in asylum adjudications. Under the 1990 rule, asylum applications filed with the district director were to be forwarded to the asylum officer with jurisdiction in the district. Under the 1990 rule, comments on asylum applications by DOS—a standard part of the adjudication process under the 1980 interim regulations—became optional. (In an earlier, related development, DOS announced that as of November 1987 it would no longer be able to provide an advisory opinion on every asylum application due to budget constraints and would focus on those cases where it thought it could provide input not available from other sources. ) The 1990 rule distinguished between asylum claims based on actual past persecution and on a well-founded fear of future persecution. To establish a well-founded fear of future persecution, the rule required, in part, that an applicant establish that he or she fears persecution in his or her country based on one of the five protected grounds and that \"there is a reasonable possibility of actually suffering such persecution\" upon return. The rule further detailed the \"burden of proof\" requirements for asylum applicants. It provided that the applicant's own testimony alone may be sufficient to prove that he or she meets the definition of a refugee. It also stated that an applicant could show a well-founded fear of persecution on one of the protected grounds without proving that he or she would be persecuted individually, if the applicant could establish \"that there is a pattern or practice\" of persecution of similarly situated individuals in his or her home country and that he or she is part of such a group. The 1990 rule provided that a grant of asylum to a principal applicant would be for an indefinite period. It also provided that the grant of asylum to a principal applicant's spouse and children would be indefinite, unless the principal's asylum status was revoked. Under the 1990 rule, an application for asylum was also to be considered an application for withholding of deportation; in cases of asylum denials, the asylum officer was required to decide whether the applicant was entitled to withholding of deportation. A 1987 proposed rule would have made asylum officers' decisions on asylum and withholding of deportation applications binding on immigration judges. That change was not retained in the 1990 final rule, however, which preserved immigration judges' role in adjudicating asylum and withholding of deportation claims in exclusion or deportation proceedings. Regarding eligibility for withholding of deportation, the 1990 rule stated, in part, \"The applicant's life or freedom shall be found to be threatened if it is more likely than not that he would be persecuted on account of race, religion, nationality, membership in a particular social group, or political opinion.\" The 1990 rule directed the asylum officer to grant an undetained asylum applicant employment authorization for up to one year if the officer determined that the application was not frivolous; frivolous was defined as \"manifestly unfounded or abusive.\" The employment authorization could be renewed in increments of up to one year. The asylum officer had to provide an applicant with a written decision on an asylum or withholding of deportation application, and had to provide an explanation in the case of a denial. The 1990 rule also granted specified officials in INS and DOJ the authority to review the decisions of asylum officers but did not grant applicants any right to appeal to these officials. The Immigration Act of 1990 and the Violent Crime Control and Law Enforcement Act of 1994 made several changes to the asylum-related provisions in the INA. The 1990 act amended INA §209 to increase the annual numerical limitation on asylee adjustment of status from 5,000 to 10,000. It also added new language to INA §208, making an alien who had been convicted of a crime categorized as an aggravated felony under the INA ineligible for asylum. The 1994 act further amended INA §208 to state that an asylum applicant was not entitled to employment authorization except as provided at the discretion of the Attorney General by regulation. In March 1994, INS published a proposed rule to streamline its asylum procedures that included a number of controversial provisions. The agency characterized the problem the proposal sought to address as follows: \"The existing system for adjudicating asylum claims cannot keep pace with incoming applications and does not permit the expeditious removal from the United States of those persons who[se] claims fail.\" The 1994 final rule, published in December 1994, made fundamental changes to the asylum adjudication process. Under the rule, INS asylum officers were no longer to deny asylum applications filed by aliens who appeared to be excludable or deportable, or to consider applications for withholding of deportation from such applicants, with limited exceptions. Instead, officers were to either grant such applicants asylum or immediately refer their claims to immigration judges, where the claims would be considered as part of exclusion or deportation proceedings. Asylum officers were to continue to issue approvals and denials in cases of asylum applications filed by aliens with a legal immigration status. The 1994 rule also made changes to the employment authorization process for asylum applicants that were intended to \"discourage applicants from filing meritless claims solely as a means to obtain employment authorization.\" Under the rule, an alien had to wait 150 days after his or her complete asylum application had been received to apply for employment authorization. INS then had 30 days to adjudicate that employment authorization application. (These 150-day and 30-day time frames remain in regulation. ) According to the supplementary information accompanying the rule, the goal was to make a decision on an asylum application before the end of 150 days: \"The Immigration and Naturalization Service (INS) and the Executive Office for Immigration Review (EOIR) would strive to complete the adjudication of asylum applications, through the decision of an immigration judge, within this 150-day period.\" Some of the provisions in the proposed rule were not adopted in the final rule. These included proposals to make asylum interviews discretionary and to charge fees for asylum applications and initial applications for employment authorization. The Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 significantly amended the INA's asylum provisions and made a number of other changes to the INA relevant to asylum policy. Many of the IIRIRA changes remain in effect. One set of changes, which had broad implications for the immigration system generally, concerned the INA grounds of exclusion. Applicable to aliens outside the United States, these provisions enumerated classes of aliens who were ineligible for visas and were to be excluded from admission. IIRIRA amended these provisions and replaced the concept of an excludable alien with that of an inadmissible alien—the latter being a person who, whether outside or inside the United States, has not been lawfully admitted to the country. In general, with the enactment of IIRIRA, an alien became ineligible for a visa or admission if he or she was described in the reconfigured grounds of inadmissibility. IIRIRA added restrictions to the general policy set forth in the 1980 Refugee Act and incorporated into the INA that an alien who is present in the United States or who arrives in the United States, regardless of immigration status, can apply for asylum. In general, under the IIRIRA amendments, which remain in effect, an alien is not eligible to apply for asylum unless the alien can show that he or she filed the application within one year of arriving in the United States. An alien is also generally ineligible to apply if he or she has previously had an asylum application denied. There is an exception to both restrictions if an alien can show \"changed circumstances which materially affect the applicant's eligibility for asylum,\" and an additional exception to the time limit requirement if the alien can show \"extraordinary circumstances\" related to the filing delay . IIRIRA also made an alien ineligible to apply for asylum if the Attorney General determined that the alien could be removed, pursuant to a bilateral or multilateral agreement, to a safe third country where the alien would be considered for asylum or equivalent temporary protection (see \" Safe Third Country Agreements \"). IIRIRA amended the INA to authorize, but not require, the Attorney General to impose fees on asylum applications and related applications for employment authorization. Among other new asylum provisions it added to the INA were a requirement to check the identity of applicants against \"all appropriate records or databases maintained by the Attorney General and by the Secretary of State\" and a permanent bar to receiving any immigration benefits for aliens who knowingly file frivolous asylum applications after being notified of the consequences for doing so. IIRIRA also put asylum processing-related time frames in statute, including a requirement that \"in the absence of exceptional circumstances,\" administrative adjudication of an asylum application be completed within 180 days after the filing date. All these provisions are still in statute. IIRIRA modified and codified some existing and prior asylum regulations. It amended an existing INA provision on employment authorization by adding language prohibiting an asylum applicant who is not otherwise eligible for employment authorization from being granted such authorization earlier than 180 days after filing the asylum application. It further amended the INA asylum provisions to add grounds for denying asylum. Similar to the mandatory denial language in the 1980 interim regulations, these grounds included an applicant's conviction for a \"particularly serious crime,\" \"serious reasons for believing the alien has committed a serious nonpolitical crime outside the United States,\" \"reasonable grounds\" for considering the alien a danger to national security, and the applicant's firm resettlement in another country prior to arrival in the United States. IIRIRA also added, as a new asylum denial ground, being inadmissible to the United States on certain terrorist-related grounds. In addition, IIRIRA provided that the Attorney General could establish additional ineligibilities for asylum by regulation that were consistent with the INA asylum provisions. These IIRIRA amendments remain a part of the INA, although the provision on terrorist-related grounds of inadmissibility has been revised. IIRIRA amended the INA language on termination of asylum to state that the granting of asylum \"does not convey a right to remain permanently in the United States.\" It also added new termination grounds to the existing ground of no longer meeting the INA definition of a refugee. IIRIRA provided that asylum could be terminated if the Attorney General determined that the asylee met one of the grounds for denying asylum noted in the preceding paragraph. Among IIRIRA's other new grounds for terminating asylum was a determination by the Attorney General, analogous to the \"safe third country\" determination described above, that the alien could be removed, pursuant to a bilateral or multilateral agreement, to a safe third country where the alien would be eligible for asylum or equivalent temporary protection. The IIRIRA asylum termination provisions remain part of the INA. IIRIRA amended the INA definition of a refugee to cover individuals subject to \"coercive population control.\" It provided that for purposes of meeting the definition of a refugee, an individual who had been forced to have an abortion or undergo sterilization or had been persecuted for resistance to a coercive population control program would be considered to have been persecuted on the basis of political opinion. Similarly, an individual with a well-founded fear that he or she would be forced to undergo a procedure or would be persecuted for resistance to a coercive population control program would be considered to have a well-founded fear of persecution on the basis of political opinion. This language remains part of the INA definition of a refugee. IIRIRA amended the INA provisions on the inspection of aliens by immigration officers to establish a new immigration enforcement mechanism known as expedited removal. In general, under expedited removal an alien who is determined by an immigration officer to be inadmissible to the United States because the alien lacks proper documentation or has committed fraud or willful misrepresentation of facts to obtain documentation or another immigration benefit may be removed from the United States without any further hearings or review, unless the alien indicates either an intention to apply for asylum or a fear of persecution. Under the INA, as amended by IIRIRA, this expedited removal procedure was to be applied to all arriving aliens , a term that includes aliens arriving at a U.S. port of entry. (An exception for Cuban citizens arriving at U.S. ports of entry by aircraft is no longer in effect. ) It also could be applied to any (or all) aliens in the United States, as designated by the Attorney General at his or her discretion, if an alien has not been admitted or paroled into the United States and \"has not affirmatively shown, to the satisfaction of an immigration officer, that the alien has been physically present in the United States continuously for the 2-year period immediately prior to the date of the determination of inadmissibility.\" Using this statutory authority, the application of expedited removal has been expanded to classes of aliens beyond arriving aliens (see \" Implementing Regulations \"). Under the IIRIRA amendments, an alien who is subject to expedited removal and expresses the intent to apply for asylum or a fear of persecution is to be interviewed by an asylum officer to determine if the alien has a credible fear of persecution. (Special procedures apply to aliens arriving in the United States at a U.S.-Canada land port of entry in accordance with a U.S.-Canada agreement; see \" Safe Third Country Agreements .\") Under the INA, credible fear of persecution means that \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" If an alien is found to have a credible fear, the asylum officer is to refer the case to an immigration judge for full consideration of the asylum request during standard removal proceedings. If an alien is found not to have a credible fear, the alien may request that an immigration judge review the negative finding. To ultimately receive asylum, however, an alien must meet the higher standard of showing past persecution or a well-founded fear of future persecution. As part of a larger set of changes to the INA replacing the concept of deportation with removal, IIRIRA added a withholding of removal provision (INA §241(b)(3)) to replace the existing INA withholding of deportation provision. The new withholding of removal provision stated, and continues to state, in main part, that \"the Attorney General may not remove an alien to a country if the Attorney General decides that the alien's life or freedom would be threatened in that country because of the alien's race, religion, nationality, membership in a particular social group, or political opinion.\" The IIRIRA provision retained language on ineligibility for withholding that had been enacted in 1980. It also included language on treatment of aggravated felonies for purposes of ineligibility for withholding of removal. The IIRIRA amendments on ineligibility for withholding of removal remain in current law. Some of the same ineligibility grounds apply to applicants for withholding of removal and applicants for asylum. As noted, however, asylum is also subject to a second set of restrictions, under which certain individuals are ineligible to apply for this form of relief. These restrictions include the requirement to apply for asylum within one year after arrival in the United States. Withholding of removal is not subject to an analogous set of restrictions. Another difference between withholding of removal and asylum concerns adjustment to LPR status. The INA provides for the adjustment of status of aliens granted asylum but not those granted withholding of removal (for further comparison of withholding of removal and asylum, see \" Implementing Regulations ,\" below). In March 1997, DOJ issued an interim rule, effective April 1, 1997, to amend existing regulations to implement the IIRIRA provisions on asylum, withholding of removal, expedited removal, and other immigration procedures. In December 2000, DOJ published a final rule on asylum procedures, which addressed jurisdiction, asylum application procedures, and withholding of removal, among other issues. The December 2000 rule included language on eligibility for asylum and eligibility for withholding of removal under INA §241(b)(3). Regarding eligibility for asylum based on a well-founded fear of future persecution, the 2000 regulations stated, in part, \"An applicant has a well-founded fear of persecution if: (A) The applicant has a fear of persecution in his or her country of nationality … on account of race, religion, nationality, membership in a particular social group, or political opinion; (B) There is a reasonable possibility of suffering such persecution if he or she were to return to that country.\" This language was similar to that in the 1990 rule. Unlike the earlier rule, however, the 2000 regulations also provided that an applicant would not be considered to have a well-founded fear of persecution if he or she could relocate within his or her home country \"if under all the circumstances it would be reasonable to expect the applicant to do so.\" Regarding eligibility for withholding of removal under INA §241(b)(3) based on a future threat to one's life or freedom, the 2000 regulations, like the earlier 1990 regulations on withholding of deportation, stated that an applicant could demonstrate a future threat \"if he or she can establish that it is more likely than not that he or she would be persecuted on account of race, religion, nationality, membership in a particular social group, or political opinion upon removal to that country.\" As with the regulations on asylum eligibility, the 2000 regulations on eligibility for withholding of removal provided that an applicant could not demonstrate a threat to life or freedom upon a finding that the applicant could avoid the threat by relocating within his or her home country if it were reasonable to expect him or her to do so. The December 2000 regulations on eligibility for asylum and withholding of removal under INA §241(b)(3) remain in effect. Comparing the above-cited standards for providing these two forms of relief in cases involving claims of future persecution, the threshold for granting withholding of removal ( more likely than not ) is higher than that for granting asylum ( reasonable possibility ). Regarding expedited removal, DOJ stated in the supplementary information to the March 1997 interim rule that for the time being, it would only apply the expedited removal provisions to arriving aliens (i.e., aliens arriving at ports of entry and certain others). At the same time, it reserved \"the right to apply the expedited removal procedures to additional classes of aliens within the limits set by the statute, if, in the [INS] Commissioner's discretion, such action is operationally warranted.\" Beginning in 2002, DOJ and then DHS, which assumed primary responsibility for immigration under the Homeland Security Act, acted to apply the expedited removal procedures to additional classes of aliens. In November 2002, DOJ extended expedited removal to aliens arriving by sea who are not admitted or paroled and who have not been continuously present in the United States for the prior two years. In August 2004, DHS authorized the placing in expedited removal proceedings of aliens who are present in the United States without having been admitted or paroled, and are found inadmissible due to lack of proper documentation or to commission of fraud or willful misrepresentation to obtain documentation or another immigration benefit, in certain circumstances. These circumstances were that the aliens \"are encountered by an immigration officer within 100 air miles of the U.S. international land border\" and \"have not established to the satisfaction of an immigration officer that they have been physically present in the United States continuously for the fourteen-day (14-day) period immediately prior to the date of encounter.\" Separate from asylum and withholding of removal under the INA, protection from removal is available to aliens in the United States who are more likely than not to be tortured in the country of removal, in accordance with the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (Convention Against Torture, or CAT), which entered into force for the United States in November 1994. Under Article 3 of the CAT, \"No State Party shall expel, return (\"refouler\") or extradite a person to another State where there are substantial grounds for believing that he would be in danger of being subjected to torture.\" Under current DHS and DOJ regulations, torture is defined, in part, as \"any act by which severe pain or suffering, whether physical or mental, is intentionally inflicted on a person … when such pain or suffering is inflicted by or at the instigation of or with the consent or acquiescence of a public official or other person acting in an official capacity.\" In February 1999, DOJ published an interim rule establishing procedures to implement U.S. obligations under Article 3 of the CAT in the removal process. These regulations have since been revised. DHS regulations set forth procedures for handling cases in which an alien subject to expedited removal expresses a fear of torture. In a process analogous to that for aliens subject to expedited removal who express a fear of persecution, DHS regulations provide that such an alien is to be interviewed by an asylum officer to determine if he or she has a credible fear of torture. To establish a credible fear of torture, an alien must show that \"there is a significant possibility that he or she is eligible for\" protection under the CAT. Eligibility for CAT protection, unlike for asylum, does not require the showing of a nexus between the torture claim and a protected ground (such as race). If the asylum officer makes an affirmative credible fear finding, the officer is to refer the case to an immigration judge for full consideration of the CAT application during standard removal proceedings. If the officer makes a negative finding, the alien may request a review of that determination by an immigration judge. If during removal proceedings the immigration judge determines that \"the alien is more likely than not to be tortured in the country of removal,\" the alien is entitled to CAT protection. That protection is to be granted in the form of either withholding of removal or deferral of removal depending on the circumstances of the case. The February 1999 CAT rule also established another screening process—for reasonable fear of persecution or torture. Modeled on but separate from the credible fear of persecution or torture screening processes, reasonable fear screening applies to certain aliens who are not eligible for asylum (these are aliens ordered removed under INA §238(b) for the commission of certain criminal offenses or aliens whose deportation, exclusion, or removal is reinstated under INA §241(a)(5)). Under current DHS and DOJ regulations, if an alien in this category expresses a fear of returning to the country of removal, USCIS is to make a reasonable fear determination, subject to review by an immigration judge. To establish a reasonable fear of persecution, an alien must establish \"a reasonable possibility that he or she would be persecuted on account of his or her race, religion, nationality, membership in a particular social group or political opinion\"; this is the same standard used to establish eligibility for asylum. To establish a reasonable fear of torture, an alien must establish \"a reasonable possibility that he or she would be tortured in the country of removal.\" If the alien receives a positive reasonable fear finding, the case is referred to an immigration judge to determine whether the alien is eligible for withholding of removal under INA §241(b)(3) or withholding of removal or deferral of removal under the CAT. DHS and DOJ regulations further state, however, that the granting of such withholding of removal or deferral of removal would not prevent the United States from removing the alien to a third country. While the IIRIRA amendments to the INA asylum provisions remain largely in place, subsequent laws have made further changes to the INA provisions. For example, the Real ID Act of 2005 amended the INA language on the conditions for granting asylum to add \"burden of proof\" provisions, which had previously been in regulations. These burden of proof provisions remain in law. They require an asylum applicant to show that \"race, religion, nationality, membership in a particular social group, or political opinion was or will be at least one central reason for persecuting the applicant\" to meet the definition of a refugee. The provisions further set forth standards for making determinations about an applicant's credibility and about the need for corroborating evidence to sustain an applicant's burden of proof. In addition, among its other asylum-related provisions, the Real ID Act eliminated the annual caps on asylee adjustment of status. The 2008 William Wilberforce Trafficking Victims Protection Reauthorization Act (TVPRA) added language to the INA asylum provisions that addressed asylum applications by unaccompanied alien children in the United States. This new language made certain statutory restrictions on applying for asylum inapplicable to these children and provided that a USCIS asylum officer would have initial jurisdiction over any asylum application filed by an unaccompanied child, even if the child was in removal proceedings. On November 9, 2018, DHS and DOJ jointly issued an interim final rule to govern \"asylum claims in the context of aliens who are subject to, but contravene, a suspension or limitation on entry into the United States through the southern border with Mexico that is imposed by a presidential proclamation or other presidential order.\" That same day, President Donald Trump issued a proclamation to suspend immediately the entry into the United States of aliens who cross the Southwest border between ports of entry (see \" Presidential Action \"). According to the supplementary information accompanying the interim rule, the rule would serve to \"channel inadmissible aliens to ports of entry, where such aliens could seek to enter and would be processed in an orderly and controlled manner.\" The interim rule, which is not in effect due to legal challenges, would bar an alien who enters the United States in contravention of the proclamation from eligibility for asylum. Under the rule, an asylum officer would make a negative credible fear of persecution determination in the case of such an alien. As explained in the supplementary information to the rule, however, aliens who enter the United States at the Southwest border without inspection would continue to be eligible for consideration for forms of protection from removal other than asylum—namely, withholding of removal under INA §241(b)(3) and protections under the CAT . The interim final rule addresses eligibility for asylum and screening procedures for aliens who enter the United States in contravention of the proclamation. Regarding claims for withholding of removal under the INA or withholding or deferral of removal under the CAT, the rule establishes that such claims would be assessed under the reasonable fear standard (see \" Convention Against Torture Protection and Implementing Regulations \"). The supplementary information includes the following summary of the two-stage screening protocol the rule would institute: Aliens determined to be ineligible for asylum by virtue of contravening a proclamation, however, would still be screened, but in a manner that reflects that their only viable claims would be for statutory withholding or CAT protection…. After determining the alien's ineligibility for asylum under the credible-fear standard, the asylum officer would apply the long-established reasonable-fear standard to assess whether further proceedings on a possible statutory withholding or CAT protection claim are warranted. This rule is being challenged in federal court. On December 19, 2018, a federal district court judge in California granted a nationwide preliminary injunction against it. On December 20, 2018, DHS announced the Migrant Protection Protocols (MPP), under which \"individuals arriving in or entering the United States from Mexico—illegally or without proper documentation—may be returned to Mexico for the duration of their immigration proceedings.\" The U.S. government notified the Mexican government about the MPP that same day. The MPP is separate and distinct from a safe third country agreement (see \" Safe Third Country Agreements \"). The DHS press release announcing the Migrant Protection Protocols characterized them as \"historic measures\" to address the \"illegal immigration crisis.\" In the words of the press release: Aliens trying to game the system to get into our country illegally will no longer be able to disappear into the United States, where many skip their court dates. Instead, they will wait for an immigration court decision while they are in Mexico. 'Catch and release' will be replaced with 'catch and return.' In doing so, we will reduce illegal migration by removing one of the key incentives that encourages people from taking the dangerous journey to the United States in the first place. This will also allow us to focus more attention on those who are actually fleeing persecution. According to DHS, the U.S. government will invoke INA §235(b)(2)(C), which permits the return of certain aliens arriving in the United States on land from a foreign contiguous territory to that foreign territory pending standard removal proceedings. An alien potentially subject to this return provision under the INA is an applicant for admission who \"is not clearly and beyond a doubt entitled to be admitted\" and thus is \"detained for a [standard removal] proceeding.\" INA §235(b)(2)(C) is explicitly inapplicable to aliens who are determined to be subject to expedited removal. On January 28, 2019, USCIS and DHS's Customs and Border Protection (CBP) issued memoranda on MPP implementation. The CBP memorandum announced that the agency would begin implementing the MPP that day. According to the memorandum, \"MPP implementation will begin at the San Ysidro port of entry [in California], and it is anticipated that it will be expanded in the near future.\" Also on January 28, 2019, CBP issued \"MPP Guiding Principles,\" which included the following: \"To implement the MPP, aliens arriving from Mexico who are amenable to the process … and who in an exercise of discretion the officer determines should be subject to the MPP process, will be issued [a] Notice to Appear (NTA) and placed into Section 240 removal proceedings. They will then be transferred to await proceedings in Mexico.\" Among the aliens identified as \" not amenable to MPP\" in the CBP guiding principles document are unaccompanied alien children, citizens or nationals of Mexico, aliens processed for expedited removal, and aliens who are more likely than not to face persecution or torture in Mexico. The MPP is in effect as of the date of this report, but it remains unclear how DHS is making decisions about which aliens to process under the protocols. The MPP is being challenged in federal court. Asylum-related legislation was considered in the 115 th Congress. Two immigration bills that were the subjects of unsuccessful House floor votes in June 2018—the Securing America's Future Act of 2018 ( H.R. 4760 ) and the Border Security and Immigration Reform Act of 2018 ( H.R. 6136 )—contained similar provisions on asylum. A third asylum-related House bill (the Asylum Reform and Border Protection Act of 2017 ( H.R. 391 )) that included some of the same provisions as the above measures was ordered to be reported by the House Judiciary Committee. In addition, the House and the Senate acted on several other measures containing more limited language on asylum. H.R. 4760 and H.R. 6136 , as considered on the House floor, included various provisions related to asylum. Both bills would have amended the INA \"safe third country\" asylum provision, under which an alien is ineligible to apply for asylum if it is determined that he or she can be removed to a safe country \"pursuant to a bilateral or multilateral agreement\" (see \" Safe Third Country Agreements \"). H.R. 4760 and H.R. 6136 would have eliminated the \"pursuant to a bilateral or multilateral agreement\" language. Both bills would have added a new provision to the INA stating that an alien's asylum status would be terminated if the alien returned to his or her home country (from which the alien sought refuge in the United States) absent changed country conditions. Both bills would have given DHS discretionary authority to waive this provision in individual cases. H.R. 4760 also included an exception to this provision for certain Cubans. Both bills would have amended the INA provisions on frivolous asylum applications (see \" Frivolous or Fraudulent Asylum Claims \"). Current INA provisions make an alien permanently ineligible for immigration benefits if he or she knowingly files a frivolous asylum application after receiving notice of the consequences for doing so. The bills would have changed the notification process. They would have required that a written notice appear on the asylum application advising the applicant of the consequences of filing a frivolous application. The bills would also have added language to the INA explaining that an application is frivolous if \"it is so insufficient in substance that it is clear that the applicant knowingly filed the application solely or in part to delay removal from the United States, to seek employment authorization as an applicant for asylum\" or \"any of the material elements are knowingly fabricated.\" H.R. 4760 and H.R. 6136 also would have changed the INA definition of credible fear of persecution, which an alien in expedited removal has to show to be able to pursue an asylum claim. The bills would have added a new requirement to the definition—that \"it is more probable than not that the statements made by, and on behalf of, the alien in support of the alien's claim are true.\" The bills would also have required audio or audio/visual recording of expedited removal and credible fear interviews. H.R. 391 , as ordered to be reported by the House Judiciary Committee, would have amended the INA provisions on safe third country removals, termination of asylum upon return to the home country, frivolous asylum applications, and credible fear similarly to H.R. 4760 and H.R. 6136 . In addition, this bill would have made a number of other changes to the asylum-related language in the INA. Among its asylum-related provisions, H.R. 391 would have clarified the INA definition of a refugee (which asylum applicants also have to satisfy), specifically the \"membership in a particular social group\" ground. It would have defined particular social group , which is not currently defined in statute, to mean a group that is \"defined with particularity,\" is \"socially distinct,\" and has members who share \"a common immutable characteristic.\" H.R. 391 would have explicitly provided that the \"membership in a particular social group\" ground would cover individuals who fail or refuse \"to comply with any law or regulation that prevents the exercise of the individual right of that person to direct the upbringing and education of a child of that person (including any law or regulation preventing homeschooling).\" At the same time, the bill sought to prohibit the application of this ground to asylum cases involving criminal gang membership or activity. H.R. 391 also included language related to the INA asylum provisions that enumerate certain determinations about an alien that preclude the granting of asylum. One of these determinations is that the alien was \"firmly resettled in another country\" before coming to the United States and requesting asylum. H.R. 391 would have considered the \"firmly resettled\" criterion to be satisfied \"by evidence that the alien can live in such country (in any legal status) without fear of persecution.\" Other bills that saw action in the 115 th Congress included more limited language on asylum. For example, the Criminal Alien Gang Member Removal Act ( H.R. 3697 ), as passed by the House, would have added a new item to the INA list of determinations that preclude the granting of asylum. It would have made an alien ineligible for asylum if he or she was inadmissible or deportable based on new INA criminal gang membership or criminal gang-related activity grounds that the bill would have established. Under H.R. 3697 , such an alien would also have been exempt from the INA restriction on removing an alien to a country where his or her life or freedom would be threatened based on race, religion, nationality, membership in a particular social group, or political opinion. Asylum-related provisions similar to those in H.R. 3697 were included in two other measures—the Michael Davis, Jr. and Danny Oliver in Honor of State and Local Law Enforcement Act ( H.R. 2431 ), as ordered to be reported by the House Judiciary Committee, and the SECURE and SUCCEED Act ( S.Amdt. 1959 to H.R. 2579 ), which failed on a Senate floor vote in February 2018. In addition, these two measures would have made further changes to the INA's asylum-related provisions. They would have made aliens ineligible for asylum if they were inadmissible on a broader array of terrorist-related grounds and would have exempted aliens who were inadmissible on this larger set of terrorist grounds from the general INA restriction on removing an alien to a country where his or her life or freedom would be threatened. H.R. 2431 and S.Amdt. 1959 would also have amended the INA provisions on asylee adjustment of status to LPR status. Current INA provisions generally require that applicants for adjustment be admissible to the United States as immigrants, but they grant the Secretary of Homeland Security or the Attorney General broad authority to waive applicable inadmissibility provisions for humanitarian purposes. While there were significant differences among the asylee adjustment of status amendments in S.Amdt. 1959 and H.R. 2431 , both measures would have limited existing DHS/DOJ inadmissibility waiver authority and added new deportability-related requirements to the INA asylee adjustment of status provisions. Citing constitutional and statutory authority, President Trump issued a presidential proclamation on November 9, 2018, to immediately suspend the entry into the United States of aliens who cross the Southwest border between ports of entry. The proclamation indicates that its entry suspension provisions will expire 90 days after its issuance date or on the date that the United States and Mexico reach a bilateral safe country agreement, whichever is earlier. Also on November 9, 2018, DHS and DOJ jointly issued an interim final rule to bar an alien who enters the United States in contravention of the proclamation from eligibility for asylum. The proclamation and the rule are being challenged in federal court (see \" 2018 Interim Final Rule \"). On February 7, 2019, President Trump renewed the proclamation with the issuance of a new proclamation with the same name. Asylum is a complex area of immigration law and policy. Much of the recent debate surrounding it has focused on efforts by the Trump Administration to tighten the asylum system. Several key policy considerations about asylum are highlighted below. Some, such as the grounds for granting asylum, have been long-standing issues for policymakers, while others, such as safe third country agreements, have been garnering attention more recently. There has been much discussion about an increasing backlog of asylum applications. The term asylum backlog may suggest that there is a single queue of pending asylum cases. In fact, as discussed above, USCIS and EOIR separately adjudicate affirmative asylum cases and defensive asylum cases, respectively. ( Backlog as used in this report is synonymous with pending caseload .) The numbers of pending USCIS affirmative asylum applications and EOIR defensive asylum cases have varied over the years, impacted by factors including international developments, changes to U.S. immigration laws, and agency resources. In the case of affirmative applications, there have been significant fluctuations in the size of the backlog over the history of the asylum program. Since FY2009, however, backlogs of both USCIS affirmative asylum applications and EOIR cases have increased annually. At the end of FY2009, there were about 6,000 pending affirmative asylum applications at USCIS ; that number stood at about 320,000 at the end of FY2018. During this same period, the number of pending cases before EOIR increased from about 224,000 at the end of FY2009 to about 786,000 at the end of FY2018. Not all the EOIR cases necessarily involve an asylum claim, however. According to EOIR, as of June 18, 2018, it had about 720,000 pending cases, and some 325,000 of those (about 45%) included asylum applications. A variety of arguments are made for prioritizing the reduction of the asylum backlog. These include the need to preserve the integrity of the asylum process and to provide protection in a timely manner to legitimate asylum seekers. More controversial arguments for addressing the backlog center on the perceived need to eliminate an incentive for unauthorized aliens without valid asylum claims to enter the United States and file frivolous applications (see \" Frivolous or Fraudulent Asylum Claims \"). Regarding the affirmative asylum backlog, USCIS described its January 2018 decision to interview more recent asylum applications before older filings as \"an attempt to stem the growth of the agency's asylum backlog.\" There is debate about whether this is an effective and judicious strategy. While some point to signs that this processing change is reducing the backlog, others argue that it is a wrongheaded approach and that USCIS should instead be dedicating more resources to adjudicating asylum cases. Those in the latter group argue that individuals with older, valid asylum claims will face even longer waits for relief under the last in-first out system. DHS efforts to reduce the asylum backlog are also impacting other humanitarian admissions programs. According to the report Proposed Refugee Admissions for Fiscal Year 2019 , \"DHS in FY 2017 and FY 2018 shifted a significant proportion of its refugee officers to processing affirmative asylum applications and conducting credible fear and reasonable fear screenings. This reduced the number of refugee interviews that could be conducted abroad in those years.\" The report also indicates that the Administration plans to \"continue to shift some refugee officers to assist the Asylum Division\" in FY2019 to address the asylum backlog. Regarding the backlog of immigration court cases, the director of EOIR testified at an April 2018 Senate hearing that the agency was addressing challenges that had contributed to the backlog. In his prepared testimony, he cited the challenges of \"declining case completions, protracted hiring times for new immigration judges, and the continued use of paper files.\" In June 2018 remarks at EOIR, Attorney General Sessions characterized the large and growing backlog of immigration court cases as unacceptable and outlined steps being taken to reduce it. In his prepared remarks, he asked each EOIR judge to complete at least 700 cases annually, which he described as \"about the average.\" He said, \"Setting this expectation is a rational management policy to ensure consistency, accountability, and efficiency in our immigration court system.\" He also explained that additional immigration judges were being hired and that DOJ was working with DHS to \"deploy judges electronically and by video-teleconference.\" Some question whether the approach being taken by DOJ to reduce the EOIR backlog—particularly the annual case completion goal—is advisable and will succeed. For example, Ashley Tabaddor, president of the National Association of Immigration Judges, has expressed concern about the ability of immigration judges to adjudicate asylum cases within the time frame dictated by that yearly goal. The INA definition of a refugee identifies five persecution grounds as the bases for receiving refugee status or asylum: race, religion, nationality, membership in a particular social group, and political opinion. It provides no definitions of these terms. As noted, however, it does state that an individual who has been forced to have an abortion or undergo sterilization or has been persecuted for resistance to a coercive population control program is to be considered to have been persecuted on the basis of political opinion. Legislation considered in the 115 th Congress would have further amended the INA refugee definition to provide that an individual who has been persecuted for failure to comply with or resistance to any law or regulation that prevents homeschooling is to be considered to have been persecuted on the basis of membership in a particular social group (see \" H.R. 391 \"). In June 2018, Attorney General Sessions issued a decision regarding the adjudication of asylum claims based on the \"membership in a particular social group\" ground. In the past, asylum had been granted to certain victims of domestic violence based on a finding of persecution or a well-founded fear of persecution on account of \"membership in a particular social group.\" Attorney General Sessions vacated a Board of Immigration Appeals' 2016 decision in one of these cases and remanded the case to the immigration judge for further proceedings, arguing that the appropriate legal standards had not been applied. He reached the following conclusion about asylum cases involving private criminal activity (footnotes excluded): Generally, claims by aliens pertaining to domestic violence or gang violence perpetrated by non-governmental actors will not qualify for asylum. While I do not decide that violence inflicted by non-governmental actors may never serve as the basis for an asylum or withholding application based on membership in a particular social group, in practice such claims are unlikely to satisfy the statutory grounds for proving group persecution that the government is unable or unwilling to address. The mere fact that a country may have problems effectively policing certain crimes—such as domestic violence or gang violence—or that certain populations are more likely to be victims of crime, cannot itself establish an asylum claim. The decision further noted that because claims by aliens pertaining to domestic violence or gang violence perpetrated by nongovernmental actors generally will not qualify for asylum, they would also generally not meet the threshold for a finding of a credible fear of persecution (see \" Inspection of Arriving Aliens \"). In July 2018, USCIS issued a policy memorandum to provide guidance to its asylum officers in light of the Attorney General's decision. Highlighting required findings about the home government in cases involving private violence, the memorandum stated: Few gang-based or domestic-violence claims involving particular social groups defined by the members' vulnerability to harm may merit a grant of asylum or refugee status—or pass the \"significant possibility\" test in credible fear screenings …—because an applicant must prove, or establish a significant possibility that, his or her government is unable or unwilling to protect him or her…. Again, the home government must either condone the behavior or demonstrate a complete helplessness to protect victims of such alleged persecution. Following issuance of the Attorney General's decision, immigration advocates expressed worry that the decision and the related USCIS policy memorandum could have wide-sweeping consequences, particularly for asylum seekers from Central America. In a letter to the New York Times , a counsel with the Tahirih Justice Center, which advocates for immigrant women and girls fleeing gender-based violence, wrote, \"As a result of that ruling, and the subsequent policy guidance, immigration officers may now feel emboldened to deny asylum to women fleeing domestic violence, even under the most life-threatening circumstances.\" On December 19, 2018, a federal district court judge in Washington, DC, ruled on a case challenging the policies regarding credible fear of persecution determinations set forth in former Attorney General Sessions' decision and the USCIS policy memorandum. The judge permanently enjoined the U.S. government from continuing some of the new policies. S ome who a re concerned about the potential impact of the former Attorney General's decision on women seeking asylum have discussed the possibility of amending the underlying INA definition of a refugee to explicitly address gender-based asylum claims. Among the l egislative options that have been put forward a re to add \"gender\" to the list of persecution gro unds or \"to define the phrase ' particular social group' by amending the law to include a non-exclusive list of (currently) common gender-based asylum claims, including domestic violence.\" Separate from the 2018 decision by former Attorney General Sessions and the related USCIS policy memorandum discussed in the preceding section, the credible fear of persecution threshold has been a focus of attention recently as the number of individuals being screened for and found to have a credible fear has grown. Individuals who are found to have a credible fear may remain in the United States while their court case proceeds. As noted, the INA asylum provisions define credible fear of persecution to mean \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" House bills considered in the 115 th Congress would have added a new requirement to this definition—that \"it is more probable than not that the statements made by, and on behalf of, the alien in support of the alien's claim are true.\" USCIS Director Francis Cissna has endorsed a tightening of the credible fear of persecution standard. In prepared testimony for a May 2018 House hearing on border security, he stated, \"The simple reality is that those who wish to gain access to or remain in the United States know they can likely effect that access and then delay their removal by simply saying the 'magic words' of 'fear' or 'asylum.' The standard for credible fear screenings at the border has been set so low that nearly everyone meets it.\" Others disagree that the credible fear standard should be raised. In a 2018 policy brief, the American Immigration Lawyers Association (AILA) argues that \"the lower threshold for credible fear determinations is necessary precisely because asylum seekers arriving at the border are typically detained, traumatized, and have limited access to counsel and documentation to support their claims.\" There have been concerns about frivolous asylum applications since the establishment of the U.S. asylum program. As noted, the 1980 interim regulations made reference to \"non-frivolous\" applications, and IIRIRA amended the INA to permanently bar an individual who knowingly files a frivolous asylum application from receiving immigration benefits. Under current regulations, an asylum application is considered \"frivolous\" for purposes of the INA benefit bar \"if any of its material elements is deliberately fabricated.\" These regulations also provide that for purposes of the bar, \"a finding that an alien filed a frivolous asylum application shall not preclude the alien from seeking withholding of removal.\" The issue of frivolous asylum claims was highlighted by Attorney General Sessions in 2017 remarks, in which he described the asylum system as being \"subject to rampant abuse and fraud.\" He further said, \"And as this system becomes overloaded with fake claims, it cannot deal effectively with just claims.\" Similarly, in his May 2018 House testimony, USCIS Director Cissna stated, \"The integrity of our entire immigration system is at risk because frivolous asylum applications impede our ability to help people who really need it.\" Several House bills considered in the 115 th Congress sought to tighten language in the INA on frivolous asylum claims. In his May 2018 testimony, USCIS Director Cissna called for legislation to address the problem of frivolous claims that would, among other provisions, \"impos[e] and enforce[e] penalties for the filing of frivolous asylum applications.\" A key point of contention in the current debate about frivolous or fraudulent asylum claims is the scope of the problem. According to a researcher at the immigration-restrictionist Center for Immigration Studies, \"Most asylum claims nowadays, whether in Europe or the United States, are not genuine. Migrants are more and more using the asylum ticket to gain entry into a country and stay.\" Other experts, such as Law Professor Lindsay M. Harris, reach different conclusions about the prevalence of fraud in recent asylum applications: \"One of the humanitarian crises producing refugees happens to be south of our border, in Central America, and this accounts for the exponential increase in asylum claims and individuals seeking protection in the U.S. through the credible fear system, rather than a sudden increase in fraudulent claims.\" Under current law, an asylum seeker who is not otherwise eligible for employment authorization cannot be granted such authorization until 180 days after filing an application for asylum. In general, under DHS regulations, an asylum applicant cannot submit an application for employment authorization and an employment authorization document (EAD) until 150 days after a complete asylum application has been received. There is no fee for an asylum applicant's initial application for employment authorization. Renewal applications are subject to standard fees. Although there seems to be general agreement that asylum seekers should be eligible for employment authorization at some point, aspects of this policy have long been debated. For example, for more than 20 years, some have argued that the availability of employment authorization creates an incentive for individuals to apply for asylum solely to be able to work legally in the United States. In his prepared testimony for the May 2018 House hearing on border issues, USCIS Director Cissna stated, \"While the number of mala fide claims is difficult to estimate, experience from the 1990s indicates that a significant amount of the growth in receipts since FY 2014 may be linked to individuals pursuing work authorization and not necessarily asylum status.\" Others dismiss the idea that asylum seekers act in response to particular U.S. policies, arguing that they are motivated by desperate circumstances. Commenting on Central American asylum seekers, a spokesperson for the U.N. High Commissioner for Refugees said, \"People are leaving because they are suffering from high levels of violence from gangs and other organized criminal groups.… This flow of families from Central America will not stop because if the root causes are still there these people will keep coming to the U.S. or to other countries.\" The complex system set up to track when an asylum seeker has reached the 180-day point for employment authorization purposes—known as the asylum EAD clock —has also been controversial. There are various events that stop the asylum EAD clock. USCIS and EOIR characterize these as \"delays requested or caused by an applicant while his or her asylum application is pending with USCIS and/or EOIR\" (e.g., the applicant's \"failure to appear at an interview or fingerprint appointment\" or \"the applicant or his or her attorney asks for additional time to prepare the case\"). Over the years, immigration advocacy groups have been critical of clock-related USCIS and EOIR policies and actions. In November 2017, the Transactional Records Access Clearinghouse (TRAC) published the report Asylum Outcome Continues to Depend on the Judge Assigned , which examined asylum decisions of judges on the same immigration court. It was based on combined data from FY2012 through FY2017 for judges who decided at least 100 asylum cases during this six-year period. Among its findings, the report identified the Newark and San Francisco Immigration Courts as having the greatest judge-to-judge differences in asylum cases decided during that time. For the San Francisco court, for example, it stated that \"the odds of denial varied from only 9.4 percent all the way up to 97.1 percent depending upon the judge.\" The TRAC analysis assumes that \"when individual judges [on the same court] handle a sufficient number of asylum requests, random case assignment will result in each judge being assigned a roughly equivalent mix of 'worthy' cases.\" It, thus, posits, \"any large differences in the denial rates of individual judges are unlikely to be the result of differences in the nature of the incoming cases. Instead, they are likely to reflect the personal perspective that each judge brings to the bench.\" TRAC first reported on differences in asylum decisions by immigration judges nationwide based on an analysis of asylum cases decided by judges from FY1994 through early FY2005. Published in July 2006, this TRAC report found a \"great disparity in the rate at which individual immigration judges declined the applications.\" Seemingly taking issue with the TRAC analysis but not mentioning it by name, a November 2007 EOIR fact sheet, \"Asylum Variations in Immigration Court,\" stated: Asylum adjudication does not lend itself well to statistical analysis. Each asylum application is adjudicated on a case-by-case basis, and each has many variables that need to be considered by an adjudicator. It is therefore important that any statistical analysis acknowledge these variables and not draw comparisons between substantially different cases. The U.S. Government Accountability Office (GAO) examined variations in the outcomes of asylum cases in reports issued in 2008 and 2016. The 2008 report, which was based on an analysis of asylum case data from FY1994 through April 2007, found that \"within immigration courts, there were pronounced differences in grant rates across immigration judges.\" While acknowledging the limits of its analysis, GAO concluded that \"the size of the disparities in asylum grant rates creates a perception of unfairness in the asylum adjudication process within the immigration court system.\" GAO analyzed EOIR data for FY1995 through FY2014 for its 2016 follow-up report. Although it was unable to control for \"the underlying facts and merits of individual asylum applications,\" GAO maintained that the available data allowed it to compare asylum outcomes across immigration courts and immigration judges. It estimated that for the May 2007-FY2014 period since its 2008 report, \"the affirmative and defensive asylum grant rates would vary by 47 and 57 percentage points, respectively, for the same representative applicant whose case was heard by different immigration judges.\" Under the INA, an alien is ineligible to apply for asylum in the United States if he or she can be removed, pursuant to a bilateral or multilateral agreement, to a third country where the \"alien's life or freedom would not be threatened on account of race, religion, nationality, membership in a particular social group, or political opinion, and where the alien would have access to a full and fair procedure for determining a claim to asylum or equivalent temporary protection.\" The United States and Canada signed a safe third country agreement in 2002, which went into effect in 2004. Under the agreement, asylum seekers must request protection in the first of the two countries they arrive in, unless they qualify for an exception. Under DHS regulations, a USCIS asylum officer must determine whether an alien arriving in the United States at a U.S.-Canada land border port of entry seeking asylum is subject to removal to Canada in accordance with the U.S.-Canada safe third country agreement. The Trump Administration has had preliminary discussions with Mexico about a possible safe third country agreement. According to an unidentified senior DHS official, \"We believe the flows [of Central Americans into the United States] would drop dramatically and fairly immediately\" if a U.S.-Mexico safe country agreement went in effect. Human Rights First, an advocacy organization, opposes such an agreement. The group found that Mexico was not a safe third country in 2017 and indicated in a July 2018 press release that that was still the case: \"Since [last year], the dangers facing refugees and migrants in Mexico have escalated. Recent reports confirm that Mexican authorities continue to improperly return asylum seekers to their countries of persecution and that the deficiencies in the Mexican asylum system have grown.\" Taking a different approach, House bills considered in the 115 th Congress would have amended the INA safe third country asylum provision to eliminate the \"pursuant to a bilateral or multilateral agreement\" language, presumably to provide for removals to a third country without a bilateral agreement. The asylum provisions in the INA are unusual in providing a standard mechanism for eligible unauthorized aliens in the United States to apply for a legal immigration status. This aspect of asylum also serves to make this form of relief particularly controversial, especially at times when large numbers of asylum seekers are arriving in the United States. The high volume of asylum cases has elicited policy responses from the Trump Administration, as described in this report. In October 2018 remarks at an immigration conference, USCIS Director Cissna offered context for DHS's and DOJ's asylum-related actions from the Administration's perspective when he referenced \"challenges associated with surges at the U. S. southern border, where migrants know that they can exploit a broken system to enter the U.S., avoid removal, and remain in the country.\" While the Administration maintains that its policies adhere to the INA and are necessary to preserve the integrity of the immigration system, others argue that it is tightening the asylum process in contravention of the law. It remains to be seen whether the Administration will continue to try to reshape U.S. asylum policy and whether Congress will take action, as it has at times in the past, to make legislative changes to the asylum system. Appendix A. Affirmative Asylum Applications Table A-1 provides the underlying data for Figure 1 on new affirmative asylum applications filed annually with USCIS since FY1995. Table A-2 expands on the data in Table A-1 to show the top 10 nationalities filing new affirmative asylum applications annually since FY2007. For each of the top 10 nationalities for each year, Table A-2 provides a rank and a percentage of all applications that were filed by applicants of that nationality. The table also includes annual data on the total number of applications filed by all applicants (the latter totals match the data in Table A-1 ). As shown in Table A-2 , the top four nationalities filing new affirmative asylum applications in FY2007 (China, Haiti, Mexico, and Guatemala) remained in the top 10 throughout the period, with China holding the top spot in all years except FY2017 and FY2018. Between FY2009 and FY2012, Chinese nationals filed one-third of all new affirmative asylum applications each year. In FY2017 and FY2018, however, China's rank fell to 2 nd and 4 th , respectively. In each of those two years, Venezuelans filed more new affirmative asylum applications than nationals of any other country, accounting for one-fifth of all applications filed in FY2017 and more than a quarter of the total in FY2018. Since FY2015, nationals of Venezuela and four other Latin American countries (Guatemala, El Salvador, Mexico, and Honduras) have accounted for five of the top six nationalities filing new affirmative asylum applications each year. Appendix B. USCIS Asylum Decisions and Credible Fear Findings Table B-1 provides the underlying data for Figure 2 on USCIS decisions on affirmative asylum applications issued annually from FY2009 through FY2017. It also includes an additional small outcome category (Cases Dismissed). These are cases where the applicant did not appear for fingerprinting/ biometrics collection. For the cases referred to an immigration judge (which involve applicants without lawful status), Table B-1 distinguishes among three mutually exclusive subcategories: cases that were interviewed by USCIS; cases that were interviewed by USCIS where the applicant did not meet the filing deadline; and cases that were not interviewed by USCIS. (The Referrals \"Total\" column in Table B-1 matches the Referrals data displayed in Figure 2 .) In addition to deciding affirmative asylum cases, USCIS is tasked with assessing the credible fear of persecution claims made by individuals in expedited removal. Table B-2 and Table B-3 provide the underlying credible fear-related data for Figure 4 . Table B-2 contains data on referrals of credible fear claims to USCIS and USCIS completions of these cases. Table B-3 provides breakdowns of the Table B-2 \"Completions\" data by case outcome. It also provides the percentage of the completed cases in which credible fear was found. Appendix C. Defensive Asylum Applications The \"Total Applications\" column in Table C-1 provides the underlying data for Figure 3 on defensive asylum applications filed annually since FY2008. In addition, Table C-1 provides data on the two components of that total: (1) asylum applications originally filed as affirmative applications with USCIS (column 2), and (2) asylum applications originally filed as defensive applications with EOIR (column 3) (see \" Defensive Asylum \"). As shown in Table C-1 , the growth in the total number of defensive asylum applications filed in recent years prior to FY2018 has been driven mainly by an increase in asylum applications first filed in immigration court. Appendix D. EOIR Asylum Decisions EOIR immigration judges decide defensive asylum cases. An asylum application is defensive when the applicant is in standard removal proceedings in immigration court (see \" Defensive Asylum \"). Table D-1 provides the underlying data for Figure 5 on defensive asylum cases decided annually since FY2009. Table D-2 provides data on a subset of EOIR asylum decisions involving credible fear claims. It is limited to decisions in defensive asylum cases that originated with an individual receiving a positive credible fear of persecution finding from USCIS. ", "summary": "Asylum is a complex area of immigration law and policy. While much of the recent debate surrounding asylum has focused on efforts by the Trump Administration to address asylum seekers arriving at the U.S. southern border, U.S. asylum policies have long been a subject of discussion. The Immigration and Nationality Act (INA) of 1952, as originally enacted, did not contain any language on asylum. Asylum provisions were added and then revised by a series of subsequent laws. Currently, the INA provides for the granting of asylum to an alien who applies for such relief in accordance with applicable requirements and is determined to be a refugee. The INA defines a refugee, in general, as a person who is outside his or her country of nationality and is unable or unwilling to return to that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Under current law and regulations, aliens who are in the United States or who arrive in the United States, regardless of immigration status, may apply for asylum (with exceptions). An asylum application is affirmative if an alien who is physically present in the United States (and is not in removal proceedings) submits an application to the Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS). An asylum application is defensive when the applicant is in standard removal proceedings with the Department of Justice's (DOJ's) Executive Office for Immigration Review (EOIR) and requests asylum as a defense against removal. An asylum applicant may receive employment authorization 180 days after the application filing date. Special asylum provisions apply to aliens who are subject to a streamlined removal process known as expedited removal. To be considered for asylum, these aliens must first be determined by a USCIS asylum officer to have a credible fear of persecution. Under the INA, credible fear of persecution means that \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" Individuals determined to have a credible fear may apply for asylum during standard removal proceedings. Asylum may be granted by USCIS or EOIR. There are no numerical limitations on asylum grants. If an alien is granted asylum, his or her spouse and children may also be granted asylum, as dependents. A grant of asylum does not expire, but it may be terminated under certain circumstances. After one year of physical presence in the United States as asylees, an alien and his or her spouse and children may be granted lawful permanent resident status, subject to certain requirements. The Trump Administration has taken a variety of steps that would limit eligibility for asylum. As of the date of this report, legal challenges to these actions are ongoing. For its part, the 115th Congress considered asylum-related legislation, which generally would have tightened the asylum system. Several bills contained provisions that, among other things, would have amended INA provisions on termination of asylum, credible fear of persecution, frivolous asylum applications, and the definition of a refugee. Key policy considerations about asylum include the asylum application backlog, the grounds for granting asylum, the credible fear of persecution threshold, frivolous asylum applications, employment authorization, variation in immigration judges' asylum decisions, and safe third country agreements.", "document_type": "crs"}
{"report": "Congress has demonstrated renewed interest in Mexico, a top trade partner and energy supplier with which the United States shares a nearly 2,000-mile border and strong cultural, familial, and historical ties (see Figure 1 ). Economically, the United States and Mexico are interdependent, and Congress closely followed efforts to renegotiate NAFTA, which began in August 2017, and ultimately resulted in a proposed United States-Mexico-Canada Agreement (USMCA) signed in November 2018. Similarly, security conditions in Mexico and the Mexican governments' ability to manage U.S.-bound migration flows affect U.S. national security, particularly at the Southwest border. Five months into his six-year term, Mexican President Andrés Manuel López Obrador enjoys an approval ratings of 78%, even as his government is struggling to address rising insecurity and sluggish growth. Discontent with Mexico's traditional parties and voters' desire for change led them to elect López Obrador president with 53% of the vote. Some fear that López Obrador, whose National Regeneration Movement (MORENA) coalition captured legislative majorities in both chambers of the Congress, will reverse the reforms enacted in 2013-2014. Others predict that pressure from business groups, civil society, and some legislators and governors may constrain López Obrador's populist tendencies. This report provides an overview of political and economic conditions in Mexico, followed by assessments of selected issues of congressional interest in Mexico: security and foreign aid, extraditions, human rights, trade, migration, energy, education, environment, and water issues. Over the past two decades, Mexico has transitioned from a centralized political system dominated by the Institutional Revolutionary Party (PRI), which controlled the presidency from 1929-2000, to a true multiparty democracy. Since the 1990s, presidential power has become more balanced with that of Mexico's Congress and Supreme Court. Partially as a result of these new constraints on executive power, the country's first two presidents from the conservative National Action Party (PAN)—Vicente Fox (2000-2006) and Felipe Calderón (2006-2012)—struggled to enact some of the reforms designed to address Mexico's economic and security challenges. The Calderón government pursued an aggressive anticrime strategy and increased security cooperation with the United States. Mexico arrested and extradited many drug kingpins, but some 60,000 people died due to organized crime-related violence. Mexico's security challenges overshadowed some of the government's achievements, including its economic stewardship during the global financial crisis, health care expansion, and efforts on climate change. In 2012, the PRI regained control of the presidency 12 years after ceding it to the PAN with a victory by Enrique Peña Nieto over López Obrador of the leftist Democratic Revolutionary Party (PRD). López Obrador then left the PRD and founded the MORENA party. Voters viewed the PRI as best equipped to reduce violence and hasten economic growth, despite concerns about its reputation for corruption. In 2013, Peña Nieto shepherded structural reforms through a fragmented legislature by forming a \"Pact for Mexico\" agreement among the PRI, PAN, and PRD. The reforms addressed a range of issues, including education, energy, telecommunications, access to finance, and politics (see Table A-1 in the Appendix ). The energy reform led to foreign oil and gas companies committing to invest $160 billion in the country. Despite that early success, Peña Nieto left office with extremely low approval ratings (20% in November 2018) after presiding over a term that ended with record levels of homicides, moderate economic growth (averaging 2% annually), and pervasive corruption and impunity. Peña Nieto's approval rating plummeted after his government botched an investigation into the disappearance of 43 students in Ayotzinapa, Guerrero in September 2014. Reports that surfaced in 2014 of how Peña Nieto, his wife, and his foreign minister benefitted from ties to a firm that won lucrative government contracts, further damaged the administration's reputation. In 2017, reports emerged that the Peña Nieto government used spyware to monitor its critics, including journalists. On July 1, 2018, Andrés Manuel López Obrador and his MORENA coalition dominated Mexico's presidential and legislative elections. Originally from the southern state of Tabasco, López Obrador is a 65-year-old former mayor of Mexico City (2000-2005) who ran for president in the past two elections. After his loss in 2012, he left the center-left Democratic Revolutionary Party (PRD) and established MORENA. MORENA, a leftist party, ran in coalition with the socially conservative Social Encounter Party (PES) and the leftist Labor Party (PT). López Obrador won 53.2% of the presidential vote, more than 30 percentage points ahead of his nearest rival, Ricardo Anaya, of the PAN/PRD/Citizen's Movement (MC) alliance who garnered 22.3% of the vote. López Obrador won in 31 of 32 states (see Figure 2 ). The PRI-led coalition candidate, José Antonio Meade, won 16.4% of the vote followed by Jaime Rodríguez, Mexico's first independent presidential candidate, with 5.2%. Andrés Manuel López Obrador's victory signaled a significant change in Mexico's political development. López Obrador won in 31 of 32 states, demonstrating that he had broadened his support from his base in southern Mexico.The presidential election results have prompted soul-searching within the traditional parties and shown the limits of independent candidates. Anaya's defeat provoked internal struggles within the PAN. Meade's performance demonstrated voters' deep frustration with the PRI. In addition to the presidential contest, all 128 seats in the Mexican senate and 500 seats in the chamber of deputies were up for election. Senators serve for six years, and deputies serve for three. Beginning this cycle, both senators and deputies will be eligible to run for reelection for a maximum of 12 years in office. MORENA's coalition won solid majorities in the Senate and the Chamber which convened on September 1, 2018. As of April 2019, the ruling coalition controls 70 of 128 seats in the Senate and 316 of 500 seats in the Chamber. The MORENA coalition lacks the two-thirds majority it needs to make constitutional changes or overturn reforms passed in 2013. The PAN is the second-largest party in each chamber. Mexican voters gave López Obrador and MORENA a mandate to change the course of Mexico's domestic policies. Nevertheless, López Obrador's legislative coalition may face opposition if it seeks to enact policies that would shift the balance of power between federal and state offices. López Obrador proposed having a federal representative in each state to liaise with his office and to oversee distribution of all federal funds, but governors opposed this proposal. As shown in Figure 3 , MORENA and allied parties control four of 32 governorships, including that of Mexico City. In 2018, López Obrador promised to bring about change by governing differently than recent PRI and PAN administrations. He focused on addressing voters' concerns about corruption, poverty and inequality, and escalating crime and violence.Although some of his advisers endorse progressive social policies, López Obrador personally has opposed abortion and gay marriage. López Obrador has set high expectations for his government and promised many things to many different constituencies, some of which appear to conflict with each other. Upon taking office, López Obrador pledged to bring about a \"fourth transformation\" that would make Mexico a more just and peaceful society, but observers question whether his ambitious goals are attainable, given existing fiscal constraints. As an example, he has promised to govern austerely but has started a number of new social programs. His finance minister has promised that existing contracts with private energy companies will be respected, but his energy minister has halted new auctions and is seeking to rebuild the heavily indebted state oil company ( Petróleos de México or Pemex). President López Obrador's distinct brand of politics has given him broad support. López Obrador has dominated the news cycle by convening daily, early morning press conferences. His decision to cut his own salary and public sector salaries generally have prompted high-level resignations among senior bureaucrats, but proven popular with the public. His government has started a new youth scholarship program and pensions for the elderly, while also promising to create jobs with infrastructure investments (including a new oil refinery and a railroad in the Yucatán) in southern Mexico regardless of their feasibility. Voters have given the government the benefit of the doubt even when its policies have caused inconveniences, such as fuel shortages that occurred after security forces closed some oil pipelines in an effort to combat theft. Investors have been critical of some of the administration's early actions. Many expressed concern after López Obrador cancelled a $13 billion airport project already underway after voters in a MORENA-led referendum rejected its location. Investors were somewhat assuaged, however, after the administration unveiled a relatively austere budget in late 2018 and then decided to allow energy contracts signed during Peña Nieto's presidency to proceed while halting new ones. With López Obrador's support, the Congress has enacted reforms to strengthen the protection of labor rights and workers' salaries, in part to comply with its domestic commitments related to the USMCA. On the other hand, it is unclear whether legislators' revisions will water down, or completely undo, education reforms passed in 2013 that were deemed a step forward toward raising education standards by many, but have been opposed by unions and ordered repealed by López Obrador. Critics maintain that President López Obrador has shunned reputable media outlets that have questioned his policies and cut funding for entities that could provide checks on his presidential power. He has dismissed data collected on organized crime-related violence by media outlets as \"fake news\" even as government data corroborate their findings that violence is escalating. His government has cut the budget for the national anticorruption commission, newly independent prosecutor general's office, and several regulatory agencies. Endemic violence, much of which is related to organized crime, has become an intractable problem in Mexico (see Figure 4 ). Organized crime-related violence has been fueled by U.S. drug demand, as well as bulk cash smuggling and weapons smuggling from the United States. Organized crime-related homicides in Mexico rose slightly in 2015 and significantly in 2016. In 2017, total homicides and organized crime-related homicides reached record levels. During Mexico's 2018 campaign, more than 150 politicians reportedly were killed. The homicide rate reached record levels in 2018 and rose even higher during the first three months of 2019 as fighting among criminal organizations intensified. Infighting among criminal groups has intensified since the rise of the Jalisco New Generation, or CJNG, cartel, a group that shot down a police helicopter in 2016. The January 2017 extradition of Joaquín \"El Chapo\" Guzmán prompted succession battles within the Sinaloa Cartel and emboldened the CJNG and other groups to challenge Sinaloa's dominance. Crime groups are competing to supply surging U.S. demand for heroin and other opioids. Mexico's criminal organizations also are fragmenting and diversifying away from drug trafficking, furthering their expansion into activities such as oil theft, alien smuggling, kidnapping, and human trafficking. Although much of the crime—particularly extortion—disproportionately affects localities and small businesses, fuel theft has become a national security threat, costing Mexico as much as $1 billion a year and fueling violent conflicts between the army and suspected thieves. Many assert that the Peña Nieto administration maintained Calderón's reactive approach of deploying federal forces—including the military—to areas in which crime surges rather than proactively strengthening institutions to deter criminality. These deployments led to a swift increase in human rights abuses committed by security forces (military and police) against civilians (see \" Human Rights \" below). High-value targeting of top criminal leaders also continued. As of August 2018, security forces had killed or detained at least 110 of 122 high-value targets identified as priorities by the Peña Nieto government; nine of those individuals received sentences. In August 2018, the Mexican government and the U.S. Drug Enforcement Administration (DEA) announced a new bilateral effort to arrest the leader of the CJNG. Even as many groups have developed into multifaceted illicit enterprises, government efforts to seize criminal assets have been modest and attempts to prosecute money laundering cases have had \"significant shortcomings.\" With violence reaching historic levels during the first quarter of 2019 and high-profile massacres occurring, President López Obrador is under increasing pressure to refine his security strategy. As a candidate, López Obrador emphasized anticorruption initiatives, social investments, human rights, drug policy reform, and transitional justice for nonviolent criminals. In line with those priorities, Mexico's security strategy for 2018-2024 includes a focus on addressing the socioeconomic drivers of violent crime. The administration has launched a program to provide scholarships to youth to attend university or to complete internships. Allies in the Mexican Congress are moving toward decriminalizing marijuana production and distribution. At the same time, President López Obrador has backed constitutional reforms to allow military involvement in public security to continue for five more years, despite a 2018 Supreme Court ruling that prolonged military involvement in public security violated the constitution. He secured congressional approval of a new 80,000-strong National Guard (composed of military police, federal police, and new recruits) to combat crime, a move that surprised many in the human rights community. After criticism from human rights groups, the Congress modified López Obrador's original proposal to ensure the National Guard will be under civilian command. Corruption is an issue at all levels of government in Mexico: 84% of Mexicans identify corruption as among the most pressing challenge facing the country. In Mexico, the costs of corruption reportedly reach as much as 5% of gross domestic product each year. Mexico fell 33 places in Transparency International's Corruption Perceptions Index from 2012 to 2018. At least 14 current or former governors (many from the PRI) are under investigation for corruption, including collusion with organized crime groups that resulted in violent deaths. A credible case against the chair of Peña Nieto's 2012 campaign (and former head of Pemex) for receiving $10.5 million in bribes from Odebrecht, a Brazilian construction firm, stalled after the prosecutor investigating the case was fired. Even though López Obrador has called for progress and transparency in anticorruption cases, his government has not unsealed information on investigations related to the Odebrecht case. New Criminal Justice System. By the mid-2000s, most Mexican legal experts had concluded that reforming Mexico's corrupt and inefficient criminal justice system was crucial for combating criminality and strengthening the rule of law. In June 2008, Mexico implemented constitutional reforms mandating that by 2016, trial procedures at the federal and state level had to move from a closed-door process based on written arguments presented to a judge to an adversarial public trial system with oral arguments and the presumption of innocence. These changes aimed to help make a new criminal justice system that would be more transparent, impartial, and efficient (through the use of alternative means of dispute settlement). Federal changes followed advances made in early adopters of the new system, including states such as Chihuahua. Under Peña Nieto, Mexico technically met the June 2016 deadline for adopting the new system, with states that have received technical assistance from the United States showing, on average, better results than others. Nevertheless, s problems in implementation occurred and public opinion turned against the system as many criminals were released by judges due to flawed investigations by police and/or weak cases presented by prosecutors. On average, fewer than 20% of homicides have been successfully prosecuted, suggesting persistently high levels of impunity. According to the World Justice Project, the new system has produced better courtroom infrastructure, more capable judges, and faster case resolution than the old system, but additional training for police and prosecutors is needed. It is unclear whether López Obrador will dedicate the resources necessary to strengthen the system. Reforming the Attorney General's Office. Analysts who study Mexico's legal system highlight the inefficiency of the attorney general's office (PGR). For years, the PGR's efficiency has suffered because of limited resources, corruption, and a lack of political will to resolve high-profile cases, including those involving high-level corruption or emblematic human rights abuses. Three attorneys general resigned from 2012 to 2017; the last one stepped down over allegations of corruption. Many civil society groups that pushed for the new criminal justice system in the mid-2000s also lobbied the Mexican Congress to create an independent prosecutor's office to replace the PGR. Under constitutional reforms adopted in 2014, Mexico's Senate would appoint an independent individual to lead the new prosecutor general's office. President Andrés Manuel López Obrador downplayed the importance of the new office during his presidential campaign, but Mexico's Congress established the office after he was inaugurated in December 2018. In January 2019, Mexico's Senate named Dr. Alejandro Gertz Manero, a 79-year old associate and former security advisor to López Obrador, as Prosecutor General. Gertz Manero's nomination and subsequent appointment has raised concerns about his capacity to remain independent, given his ties to the president. Many wonder if he will take up cases against the president and his administration. Gertz Manero is to serve a nine-year term. Making Electoral Fraud and Corruption Grave Crimes. In December 2018, López Obrador proposed constitutional changes that would expand the list of grave crimes for which judges must mandate pretrial detention to include corruption and electoral fraud. The proposal passed the Senate in December and the lower chamber in February 2019. Critics, such as the UN High Commissioner for Human Rights (OHCHR), noted that the change violates the presumption of innocence, an international human right under the UN's Universal Declaration of Human Rights. Increasing pretrial detention also goes against one of the stated goals of the NCJS. The president, however, welcomed the outcome. National Anticorruption System. In July 2016, Mexico's Congress approved legislation to fully implement the national anticorruption system (NAS) created by a constitutional reform in April 2015. The legislation reflected several of the proposals put forth by Mexican civil society groups. It gave the NAS investigative and prosecutorial powers and a civilian board of directors; increased administrative and criminal penalties for corruption; and required three declarations (taxes, assets, and conflicts of interest) from public officials and contractors. During the Peña Nieto government, federal implementation of the NAS lagged and state-level implementation varied significantly. In December 2017, members of the system's civilian board of directors maintained that the government had thwarted its efforts by denying requests for information. Although he campaigned on an anticorruption platform, President López Obrador has questioned the necessity of the NAS. Since taking office, López Obrador has not prioritized implementing the system. Nevertheless, Prosecutor General Gertz Manero named a special anticorruption prosecutor in February 2019. The 18 judges required to hear corruption cases are still to be named. In addition, many states have not fulfilled the constitutional requirements for establishing a local NAS. Criminal groups, sometimes in collusion with public officials, as well as state actors (military, police, prosecutors, and migration officials), have continued to commit serious human rights violations against civilians, including extrajudicial killings. The vast majority of those abuses have gone unpunished, whether prosecuted in the military or civilian justice systems. The government also continues to receive criticism for not adequately protecting journalists and human rights defenders, migrants, and other vulnerable groups. For years, human rights groups and U.S. State Department Country Reports on Human Rights Practices have chronicled cases of Mexican security officials' involvement in extrajudicial killings, \"enforced disappearances,\" and torture. In October 2018, the outgoing Peña Nieto government estimated that more than 37,000 people who had gone missing since 2006 remained unaccounted for. States on the U.S.-Mexico border (Tamaulipas, Nuevo León, and Sonora) have among the highest rates of disappearances. The National Human Rights Commission estimates that \"more than 3,900 bodies have been found in over 1,300 clandestine graves since 2007.\" In 2017, the Mexican Congress enacted a law against torture. After an April 2019 visit to Mexico, the U.N. Committee against Torture welcomed the passage of the 2017 law, but stated that torture by state agents occurred in a \" generalized manner \" in Mexico and found the use of torture to be \"endemic\" in detention centers. They also maintained that impunity for the crime of torture must be addressed: 4.6% of investigations into torture claims resulted in convictions. During a recent visit to Mexico, Michelle Bachelet, the United Nations High Commissioner for Human Rights recognized President López Obrador's efforts to put human rights at the center of his government. Bachelet highlighted the President's willingness to \"unveil the truth, provide justice, give reparations to victims and guarantee the nonrepetition\" of human rights violations. She commended the creation of the Presidential Commission for Truth and Access to Justice for the Ayotzinapa case and acknowledged the government's broader commitment to search for the disappeared. The commissioner welcomed the government's presentation of the Plan for the Implementation of the General Law on Disappearances (approved in 2017), the reestablishment of the National Search System, and the announcement of plans to create a Single Information System and a National Institute for Forensic Identification. In recent years, international observers have expressed alarm as Mexico has become one of the most dangerous countries for journalists to work outside of a war zone. From 2000 to 2018, some 120 journalists and media workers were killed in Mexico and many more have been threatened or attacked, according to Article 19 (an international media rights organization). A more conservative estimate from the Committee to Protect Journalists (CPJ) is that 41 journalists have been killed in Mexico since 2000. In addition, Mexico ranks among the top 10 countries globally with the highest rates of unsolved journalist murders as a percentage of population in CPJ's Global Impunity Index . Mexico is also a dangerous country for human rights defenders. During the first three months of the López Obrador government, at least 17 journalists and human rights defenders were killed, at least one of whom was receiving government protection. Although López Obrador has been critical of some media outlets and reporters, his government has pledged to improve the mechanism intended to protect human rights defenders and journalists. President Peña Nieto prioritized promoting trade and investment in Mexico as a core goal of his administration's foreign policy. During his term, Mexico began to participate in U.N. peacekeeping efforts and spoke out in the Organization of American States on the deterioration of democracy in Venezuela, a departure for a country with a history of nonintervention. Peña Nieto hosted Chinese Premier Xi Jinping for a state visit to Mexico, visited China twice, and in September 2017 described the relationship as a \"comprehensive strategic partnership.\" The Peña Nieto government negotiated and signed the proposed Trans-Pacific Partnership (TPP) trade agreement with other Asia-Pacific countries (and the United States and Canada). Even after President Trump withdrew the United States from the TPP agreement, Mexico and the 10 other signatories of the TPP concluded their own trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Mexico also prioritized economic integration efforts with the pro-trade Pacific Alliance countries of Chile, Colombia, and Peru and focused on expanding markets for those governments. In contrast to his predecessor, President López Obrador generally has maintained that the best foreign policy is a strong domestic policy. His foreign minister, Marcelo Ebrard (former mayor of Mexico City), is leading a return to Mexico's traditional, noninterventionist approach to foreign policy (the so-called Estrada doctrine ). Many analysts predict, however, that Mexico may continue to engage on global issues that it deems important. López Obrador reversed the active role that Mexico had been playing during the Peña Nieto government in seeking to address the crises in Venezuela. Mexico has not recognized Juan Guaidó as Interim President of Venezuela despite pressure from the United States and others to do so. As of January 2019, U.N. agencies estimated that some 39,000 Venezuelan migrants and refugees were sheltering in Mexico. Despite these changes, Mexico continues to participate in the Pacific Alliance, promote its exports and seek new trade partners, and support investment in the Northern Triangle countries (Guatemala, El Salvador, and Honduras). The Mexican government has long maintained that the best way to stop illegal immigration from Central America is to address the insecurity and lack of opportunity there. Nevertheless, fiscal limitations limit the Mexican government's ability to support Central American efforts to address those challenges. Mexico has transitioned from a closed, state-led economy to an open market economy that has entered into free trade agreements with 46 countries. The transition began in the late 1980s and accelerated after Mexico entered into NAFTA in 1994. Since NAFTA, Mexico has increasingly become an export-oriented economy, with the value of exports equaling more than 38% of Mexico's gross domestic product (GDP) in 2016, up from 10% of GDP 20 years prior. Mexico remains a U.S. crude oil supplier, but its top exports to the United States are automobiles and auto parts, computer equipment, and other manufactured goods. Reports have estimated that 40% of the content of those exports contain U.S. value added content. Despite attempts to diversify its economic ties and build its domestic economy, Mexico remains heavily dependent on the United States as an export market (roughly 80% of Mexico's exports in 2018 were U.S.-bound) and as a source of remittances, tourism revenues, and investment. Studies estimate that a U.S. withdrawal from NAFTA, could cost Mexico more than 950,000 low-skilled jobs and lower its GDP growth by 0.9%. In recent years, remittances have replaced oil exports as Mexico's largest source of foreign exchange. According to Mexico's central bank, remittances reached a record $33.0 billion in 2018. Mexico remained the leading U.S. international travel destination in 2017 (the most recent year calculated by the U.S. Department of Commerce). U.S. travel warnings regarding violence in resort areas such as Playa del Carmen, Los Cabos, and Cancún could result in declining arrivals. The Mexican economy grew by 2% in 2018, but growth may decline to 1.6% in 2019, due, in part, to lower projected private investment. Mexico's Central Bank has also cited slowing investment, gasoline shortages, and strikes as reasons for revising its growth forecast for 2019 downward to a range of 1.1% to 2.1% for 2019. Some observers believe that investor sentiment and the country's growth prospects could worsen if López Obrador continues to promote government intervention in the economy and to rely on popular referendums to make economic decisions. Economic conditions in Mexico tend to follow economic patterns in the United States. When the U.S. economy is expanding, as it is now, the Mexican economy tends to grow. However, when the U.S. economy stagnates or contracts, the Mexican economy also tends to contract, often to a greater degree. The negative impact of protectionist U.S. trade policies and a projected U.S. economic slowdown in 2020 could hurt Mexico's growth prospects. President Trump has threatened to close the U.S.-Mexico border in response to his concerns about illegal immigration and illicit drug flows. Closing the border could have immediate and serious economic consequences. As an example, the U.S. auto industry stated that U.S. auto production would stop after a week due to the deep interdependence of the North American auto industry. Sound macroeconomic policies, a strong banking system, and structural reforms backed by a flexible line of credit with the International Monetary Fund (IMF) have helped Mexico weather recent economic volatility. Nevertheless, the IMF has recommended additional steps to deal with potential external shocks. These steps include improving tax collection, reducing informality, reforming public administration, and improving governance. Over the past 30 years, Mexico has recorded a somewhat low average economic growth rate of 2.6%. Some factors—such as plentiful natural resources, a young labor force, and proximity to markets in the United States—have been counted on to help Mexico's economy grow faster in the future. Most economists maintain that those factors could be bolstered over the medium to long term by continued implementation of some of the reforms described in Table A-1 . At the same time, continued insecurity and corruption, a relatively weak regulatory framework, and challenges in its education system may hinder Mexico's future industrial competitiveness. Corruption costs Mexico as much as $53 billion a year (5% of GDP). A lack of transparency in government spending and procurement, as well as confusing regulations and red tape, has likely discouraged some investment. Deficiencies in the education system, including a lack of access to vocational education, have led to firms having difficulty finding skilled labor. Another factor affecting the economy is the price of oil. Because oil revenues make up a large, if lessening, part of the country's budget (32% of government revenue in 2017), low oil prices since 2014 and a financial crisis within Pemex have proved challenging. The Peña Nieto government raised other taxes to recoup lost revenue from oil, but the López Obrador administration has pledged to make budget cuts in order to maintain fiscal targets. Many analysts predict that Mexico will have to combine efforts to implement its economic reforms with other actions to boost growth. A 2018 report by the Organisation for Economic Co-operation and Development suggests that Mexico will need to enact complementary reforms to address issues such as corruption, weak governance, and lack of judicial enforcement to achieve its full economic growth potential. Mexico has long had relatively high poverty rates for its level of economic development (43.6% in 2016), particularly in rural regions in southern Mexico and among indigenous populations. Some assert that conditions in indigenous communities have not measurably improved since the Zapatistas launched an uprising for indigenous rights in 1994. Traditionally, those employed in subsistence agriculture or small, informal businesses tend to be among the poorest citizens. Many households rely on remittances to pay for food, clothing, health care, and other basic necessities. Mexico also experiences relatively high income inequality. According to the 2014 Global Wealth Report published by Credit Suisse, 64% of Mexico's wealth is concentrated in 10% of the population. Mexico is among the 25 most unequal countries in the world included in the Standardized World Income Inequality Database. According to a 2015 report by Oxfam Mexico, this inequality is due in part to the country's regressive tax system, oligopolies that dominate particular industries, a relatively low minimum wage, and a lack of targeting in some social programs. Economists have maintained that reducing informality is crucial for addressing income inequality and poverty, while also expanding Mexico's low tax base. The 2013-2014 reforms sought to boost formal-sector employment and productivity, particularly among the small- and medium-sized enterprises (SMEs) that employ some 60% of Mexican workers, mostly in the informal sector. Although productivity in Mexico's large companies (many of which produce internationally traded goods) increased by 5.8% per year between 1999 and 2009, productivity in small businesses fell by 6.5% per year over the same period. To address that discrepancy, the financial reform aimed to increase access to credit for SMEs and the fiscal reform sought to incentivize SMEs' participation in the formal (tax-paying) economy by offering insurance, retirement savings accounts, and home loans to those that register with the national tax agency. The Peña Nieto administration sought to complement economic reforms with social programs, but corruption within the Secretariat for Social Development likely siphoned significant funding away from some of those programs. It expanded access to federal pensions, started a national anti-hunger program, and increased funding for the country's conditional cash transfer program. Peña Nieto renamed that program Prospera (Prosperity) and redesigned it to encourage its beneficiaries to engage in productive projects. In addition to corruption, some of Peña Nieto's programs, namely the anti-hunger initiative, were criticized for a lack of efficacy. Despite his avowed commitment to austerity, López Obrador has endorsed state-led economic development and promised to rebuild Mexico's domestic market as part of his National Development Plan 2018-2024, which he presented on May 1, 2019. In addition to revitalizing Pemex, the president has promised to build a \"Maya Train\" to connect five states in the southeast and facilitate tourism (see Figure 5 ). In December 2018, López Obrador announced a plan to invest some $25 billion in southern Mexico to accompany an estimated $4.8 billion in potential U.S. public and private investments to promote job growth, infrastructure, and development in that region, including jobs for Central American migrants. López Obrador's pledges related to social programs include (1) doubling monthly payments to the elderly; (2) providing regular financial assistance to a million disabled people; (3) giving a monthly payment to students in 10 th to 12 th grades to lower the dropout rate, and (4) offering paid apprenticeships for 2.3 million young people. While some of these programs have already gotten underway, their ultimate scale and impacts will take time to evaluate. Some observers are concerned about his plan to decouple monthly support to families provided through the program formerly known as Prospera with requirements that children attend school and receive regular health checkup. Mexican-U.S. relations generally have grown closer over the past two decades. Common interests in encouraging trade flows and energy production, combating illicit flows (of people, weapons, drugs, and currency), and managing environmental resources have been cultivated over many years. A range of bilateral talks, mechanisms, and institutions have helped the Mexican and U.S. federal governments—as well as stakeholders in border states, the private sector, and nongovernmental organizations—find common ground on difficult issues, such as migration and water management. U.S. policy changes that run counter to Mexican interests in one of those areas could trigger responses from the Mexican government on other areas where the United States benefits from Mexico's cooperation, such as combating illegal migration. Despite predictions to the contrary, U.S.-Mexico relations under the López Obrador administration have thus far remained friendly. Nevertheless, tensions have emerged over several key issues, including trade disputes and tariffs, immigration and border security issues, and Mexico's decision to remain neutral in the crisis in Venezuela. The new government has generally accommodated U.S. migration and border security policies, but has protested recent policies that have resulted in extended border delays. President López Obrador has also urged the U.S. Congress to consider the USMCA. Security Cooperation: Transnational Crime and Counternarcotics Mexico is a significant source and transit country for heroin, marijuana, and synthetic drugs (such as methamphetamine) destined for the United States. It is also a major transit country for cocaine produced in the Andean region. Mexican-sourced heroin now accounts for nearly 90% of the total weight of U.S.-seized heroin analyzed in the U.S. Drug Enforcement Administration's (DEA's) Heroin Signature Program. In addition to Mexico serving as a transshipment point for Chinese fentanyl (a powerful synthetic opioid), the DEA suspects labs in Mexico may use precursor chemicals smuggled over the border from the United States to produce fentanyl. Mexican drug trafficking organizations pose the greatest crime threat to the United States, according to the DEA's 2018 National Drug Threat Assessment . These organizations engage in drug trafficking, money laundering, and other violent crimes. They traffic heroin, methamphetamine, cocaine, marijuana, and, increasingly, the powerful synthetic opioid fentanyl. Mexico is a long-time recipient of U.S. counterdrug assistance, but cooperation was limited between the mid-1980s and mid-2000s due to U.S. distrust of Mexican officials and Mexican sensitivity about U.S. involvement in the country's internal affairs. Close cooperation resumed in 2007, when Mexican President Felipe Calderón requested U.S. assistance to combat drug trafficking organizations, and worked with President George W. Bush to develop the Mérida Initiative. While initial U.S. funding for the initiative focused heavily on training and equipping Mexican security forces, U.S. assistance shifted over time to place more emphasis on strengthening Mexican institutions. In 2011, the U.S. and Mexican governments agreed to a revised four-pillar strategy that prioritized (1) combating transnational criminal organizations through intelligence sharing and law enforcement operations; (2) institutionalizing the rule of law while protecting human rights through justice sector reform and forensic assistance; (3) creating a \"21 st century border\" while improving immigration enforcement in Mexico; and (4) building strong and resilient communities with pilot programs to address the root causes of violence and reduce drug demand. The Mérida Initiative has continued to evolve along with U.S. and Mexican security concerns. Recent programs have focused on combating opioid production and distribution, improving border controls and interdiction, training forensic experts, and combating money laundering. Nevertheless, organized crime-related homicides in Mexico and opioid-related deaths in the United States have surged, leading some critics to question the efficacy of bilateral efforts. The future of the Mérida Initiative is unclear. Some observers predict López Obrador may seek to emphasize anticorruption initiatives, social investments in at-risk youth, human rights, and drug policy reform as he did during his presidential campaign. Others maintain that López Obrador has thus far accommodated the Trump Administration's emphasis on combating Central American migration and may back other U.S. priorities, such as combating the fentanyl trade. Other common interests may include countering human rights violations, combating weapons trafficking, and accelerating efforts against money laundering and corruption. There has been bipartisan support in Congress for the Mérida Initiative, which has accounted for the majority of U.S. foreign assistance to Mexico provided over the past decade (see Table 1 ). The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) provided some $145 million for accounts that fund the initiative ($68 million above the budget request). The increased resources are primarily for addressing the flow of U.S.-bound opioids. The joint explanatory statement accompanying the act ( H.Rept. 116-9 ) requires a State Department strategy on international efforts to combat opioids (including efforts in Mexico) and a report on how the Mérida Initiative is combating cocaine and methamphetamine flows. The Administration's FY2020 budget request asks Congress to provide $76.3 million for the Mérida Initiative. In contrast to Plan Colombia, the Department of Defense (DOD) did not play a primary role in designing the Mérida Initiative and is not providing assistance through Mérida accounts. However, DOD oversaw the procurement and delivery of equipment provided through the FMF account. Despite DOD's limited role in the Mérida Initiative, bilateral military cooperation has been increasing. DOD assistance aims to support Mexico's efforts to improve security in high-crime areas, track and capture suspects, strengthen border security, and disrupt illicit flows. A variety of funding streams support DOD training and equipment programs. Some DOD equipment programs are funded by annual State Department appropriations for FMF, which totaled $5.0 million in FY2018. International Military Education and Training (IMET) funds, which totaled $1.5 million in FY2018, support training programs for the Mexican military, including courses in the United States. Apart from State Department funding, DOD provides additional training, equipping, and other support to Mexico that complements the Mérida Initiative through its own accounts. Individuals and units receiving DOD support are vetted for potential human rights issues in compliance with the Leahy Law. DOD programs in Mexico are overseen by U.S. Northern Command, which is located at Peterson Air Force Base in Colorado. DOD counternarcotics support to Mexico totaled approximately $63.3 million in FY2018. Policymakers may want to receive periodic briefings on DOD efforts to guarantee that DOD programs are being adequately coordinated with Mérida Initiative efforts, complying with U.S. vetting requirements, and not reinforcing the militarization of public security in Mexico. During the Calderón government, extraditions were another indicator that the State Department used as an example of the Mérida Initiative's success. During the final years of the Calderón government, Mexico extradited an average of 98 people per year to the United States, an increase over the prior administration. When President Peña Nieto took office, extraditions fell to 54 in 2013 but rose to a high of 76 in 2016 (see Figure 6 ). The U.S. Congress has expressed ongoing concerns about human rights conditions in Mexico. Congress has continued to monitor adherence to the Leahy vetting requirements that must be met under the Foreign Assistance Act (FAA) of 1961, as amended (22 U.S.C. 2378d), which pertains to State Department aid, and 10 U.S.C. 2249e, which guides DOD funding. DOD reportedly suspended assistance to a brigade based in Tlatlaya, Mexico, due to concerns about the brigade's potential involvement in the extrajudicial killings previously described. From FY2008 to FY2015, Congress made conditional 15% of U.S. assistance to the Mexican military and police until the State Department sent a report to appropriators verifying that Mexico was taking steps to comply with certain human rights standards. In FY2014, Mexico lost $5.5 million in funding due to human rights concerns. For FY2016-FY2019, human rights reporting requirements applied to FMF rather than to Mérida Initiative accounts. U.S. assistance to Mexico has supported the Mexican government's efforts to reform its judicial system and to improve human rights conditions in the country. Congress has provided funding to support Mexico's transition from an inquisitorial justice system to an oral, adversarial, and accusatory system that aims to strengthen human rights protections for victims and the accused. The State Department has established a high-level human rights dialogue with Mexico. The U.S. Agency for International Development (USAID) supported Mexico's 2014-2018 human rights plan, including the development of legislation in compliance with international standards, prevention efforts, improved state responses to abuses, and expanded assistance to victims. One recent project addressed the way the Mexican government addresses cases of torture and enforced disappearances, another sought to help the government protect journalists and resolve crimes committed against them. In many of these areas, U.S. technical assistance to the government is complemented by support to think tanks and civil society organizations, including in the area of providing forensic assistance to help search for missing people. Congress may choose to augment Mérida Initiative funding for human rights programs, such as ongoing training programs for military and police, or to fund new efforts to support human rights organizations. Human rights conditions in Mexico, as well as compliance with conditions included in the FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) are likely to be closely monitored. Some Members of Congress have written letters to U.S. and Mexican officials regarding human rights concerns, including allegations of extrajudicial killings by security forces, abuses of Central American migrants, and the use of spyware against human rights activists. U.S. policymakers may question how the López Obrador administration moves to punish past human rights abusers, how it intends to prevent new abuses from occurring, and how the police and judicial reforms being implemented are bolstering human rights protections. The United States and Mexico have a strong economic and trade relationship that has been bolstered through NAFTA. Since 1994, NAFTA has removed virtually all tariff and nontariff trade and investment barriers among partner countries and provided a rules-based mechanism to govern North American trade. Most economic studies show that the net economic effect of NAFTA on the United States and Mexico has been relatively small but positive, though there have been adjustment costs to some sectors in both countries. Further complicating assessments of NAFTA, not all trade-related job gains and losses since NAFTA entered into force can be entirely attributed to the agreement. Numerous other factors have affected trade trends, such as Mexico's trade-liberalization efforts, economic conditions, and currency fluctuations. Mexico is the United States' third-largest trading partner. Mexico ranks third as a source of U.S. merchandise imports and second as an export market for U.S. goods. The United States is Mexico's most important export market for goods, with 80% of Mexican exports destined for the United States. Merchandise trade between the two countries in 2018 was six times higher (in nominal terms) than in 1993, the year NAFTA entered into force. The merchandise trade balance went from a U.S. surplus of $1.7 billion in 1993 (the year before NAFTA entered into force) to a widening deficit that reached $81.5 billion in 2018. In services, the United States had a trade surplus with Mexico of $7.4 billion in 2017 (latest available data); it largely consists of travel, transportation, business, and financial services. Total trade (exports plus imports) amounted to $561.3 billion in 2018. Much of that bilateral trade occurs in the context of supply chains, as manufacturers in each country work together to create goods. The expansion of trade has resulted in the creation of vertical supply relationships, especially along the U.S.-Mexican border. The flow of intermediate inputs produced in the United States and exported to Mexico and the return flow of finished products increased the importance of the U.S.-Mexican border region as a production site. Foreign direct investment (FDI) is also an integral part of the bilateral economic relationship. The stock of U.S. FDI in Mexico increased from $15.2 billion in 1993 to $109.7 billion in 2017. Although the stock of Mexican FDI in the United States is much lower, it has also increased significantly since NAFTA, from $1.2 billion in 1993 to $18.0 billion in 2017. The Obama Administration worked with Mexico to balance border security with facilitating legitimate trade and travel, promote economic competitiveness, and pursue energy integration. The U.S.-Mexican High-Level Economic Dialogue, launched in 2013, was a bilateral initiative to advance economic and commercial priorities through annual Cabinet meetings. The High-Level Regulatory Cooperation Council launched in 2012 helped align regulatory principles. Trilateral (with Canada) cooperation occurred under the aegis of the North American Leadership Summits. While those mechanisms have not continued under the Trump Administration, the bilateral Executive Steering Committee (ESC), which guides broad efforts along the border, and the Bridges and Border Crossings group on infrastructure have continued to meet. The U.S.-Mexico CEO Dialogue has also continued to convene biannual meetings to produce joint recommendations for the two governments. Mexican business leaders reportedly worked with U.S. executives, legislators, and governors to encourage the Trump Administration to back the proposed USMCA rather than just abandoning NAFTA. Despite positive advances on many aspects of bilateral and trilateral economic relations, trade disputes continue. The United States and Mexico have had a number of trade disputes over the years, many of which have been resolved. Some of them have involved: country-of-origin labeling, dolphin-safe tuna labeling, and NAFTA trucking provisions. In 2017, Mexico and the United States concluded a suspension agreement on a U.S. antidumping and countervailing duty investigation on Mexican sugar exports to the United States in which Mexico agreed to certain limitations on its access to the U.S. sugar market. In recent years, new trade disputes have emerged. In January 2018, President Trump announced new tariffs on imported solar panels and washing machines under the Trade Act of 1974 that included products coming from Mexico. In February 2019, U.S. Commerce Secretary Wilbur Ross announced that the United States intends to withdraw from a 2013 suspension agreement on fresh tomato exports from Mexico. The agreement effectively suspends an investigation by the U.S. International Trade Commission (USITC) into whether Mexican producers are dumping fresh tomatoes into the U.S. market. Mexico's ambassador to the United States has stated she is \"cautiously optimistic\" the United States and Mexico will agree to a new arrangement before a U.S. withdrawal. The United States and Mexico are in another trade dispute over U.S. actions to impose tariffs on imports of steel and aluminum under Section 232 of the Trade Expansion Act of 1962, which authorizes the President to impose restrictions on certain imports based on national security threats. Using these authorities, on May 31, 2018, the United States imposed a 25% duty on steel imports and a 10% duty on aluminum imports from Mexico and Canada. In response, Mexico applied retaliatory tariffs of 5% to 25% on U.S. exports valued at approximately $3.6 billion on pork, apples, potatoes, and cheese, among other items. On May 23, 2018, the Trump Administration initiated a Section 232 investigation into the imports of motor vehicles and automotive parts (83 FR 24735) to determine if those imports threaten to impair U.S. national security. On November 30, 2018, the United States, Canada, and Mexico signed the proposed USMCA, which, if approved by Congress and ratified by Mexico and Canada, would replace NAFTA. The proposed USMCA would retain many of NAFTA's chapters, while making notable changes to others, including market access provisions for autos and agriculture products, and new rules on investment, government procurement, and intellectual property rights (IPR). It would add new chapters on digital trade, state-owned enterprises, and currency misalignment. The USMCA would tighten rule of origin requirements for duty-free treatment of U.S. motor vehicle imports from Mexico. Under NAFTA, motor vehicles must contain 62.5% North American content, while all other vehicles and motor parts must contain 60% North American content to qualify for duty-free treatment. The new rules would require that 75% of a motor vehicle and 70% of its steel and aluminum originate in North America and that 40%-45% of auto content be made by workers earning at least $16 per hour. Side letters would exempt up to 2.6 million vehicles from Canada and Mexico annually from potential Section 232 auto tariffs. USMCA would maintain the NAFTA state-to-state mechanism for resolving most disputes, as well as NAFTA's binational mechanism for reviewing and settling trade remedy disputes. However, it would maintain an investor-state dispute settlement (ISDS) process only between the United States and Mexico, without Canada, but limit its scope to government contracts in oil, natural gas, power generation, infrastructure, and telecommunications sectors. It would also maintain U.S.-Mexico ISDS in other sectors provided the claimant exhausts national remedies first, among other changes and new limitations. Policymakers may consider numerous issues related to U.S.-Mexico trade as they debate the proposed USMCA. Some issues could include the timetable for congressional consideration under Trade Promotion Authority (TPA), whether the proposed USMCA meets TPA's negotiating objectives and other requirements, and the impact of the agreement on U.S.-Mexico trade relations. In April 2019, the USITC completed a required study on the possible economic impact of a USMCA on the United States. The report estimates that the agreement would have a very small but positive impact on the U.S. economy, potentially raising U.S. real GDP by \"0.35% and U.S. employment by 176,000 jobs (0.12 %).\" Other policymakers contend that the United States lift steel and aluminum tariffs on imports from Canada and Mexico before the agreement is considered by Congress and state that the tariffs act as a barrier hindering Mexican and Canadian ratification of the proposed USMCA. Congressional objectives and concerns are likely to shape timing of congressional consideration of the proposed USMCA. Some policymakers view the agreement as vital for U.S. firms, workers, and farmers, and believe that the updated agreement would benefit U.S. economic interests. Other issues of concern include a lack of worker rights protection in Mexico and the enforceability of labor provisions, the scaling back of ISDS provisions, which could affect U.S. investors, and possible adverse effects of auto rules of origin on U.S. automakers. Although USMCA would revise NAFTA labor provisions and provide the same dispute mechanism as other parts of the agreement, some critics contend that USMCA has the same limitations as NAFTA; they allege that the proposed USMCA enforcement tools do not go far enough to ensure the protection of worker rights to organize and bargain collectively. It is unclear whether labor reforms that have passed the Mexican Congress will be enough to assuage those concerns. Immigration policy has been a subject of congressional concern over many decades, with much of the debate focused on how to prevent unauthorized migration and address the large population of unauthorized migrants living in the United States. Mexico's status as both the largest source of migrants in the United States and a continental neighbor means that U.S. migration policies—including stepped-up border and interior enforcement—have primarily affected Mexicans. Beginning in FY2012, foreign nationals from countries other than Mexico began to comprise a growing percentage of total apprehensions. Due to a number of factors, more Mexicans have been leaving the United States than arriving. Nevertheless, protecting the rights of Mexicans living in the United States, including those who are unauthorized, remains a top Mexican government priority. Since the mid-2000s, successive Mexican governments have supported efforts to enact immigration reform in the United States, while being careful not to appear to be infringing upon U.S. authority to make and enforce immigration laws. Mexico has made efforts to combat transmigration by unauthorized migrants and worked with U.S. law enforcement to combat alien smuggling and human trafficking. In FY2018, the Trump Administration removed (deported) some 141,045 Mexicans, as compared to 128,765 removals in FY2017. During the Obama Administration, some of Mexico's past concerns about U.S. removal policies, including nighttime deportations and issues concerning the use of force by some U.S. Border Patrol officials, were addressed through bilateral migration talks and letters of agreement. President Trump's shifts in U.S. immigration policies have tested U.S.-Mexican relations. His repeated assertions that Mexico will pay for a border wall resulted in President Peña Nieto canceling a White House meeting in January 2017 and continued to strain relations throughout his term. The Mexican government expressed regret after the Administration's decision to rescind the Deferred Action for Childhood Arrivals (DACA) initiative, which has provided work authorization and relief from removal for migrants brought to the United States as children, but pledged to assist DACA beneficiaries who return to Mexico. In June 2018, Mexico criticized U.S. \"zero tolerance\" immigration policies. Despite these developments, Mexico has continued to work with the United States on migration management and border issues. In E.O. 13678, the Trump Administration broadened the categories of authorized immigrants prioritized for removal. As a result, the profile of Mexican deportees now include more individuals who have spent many decades in the United States than in recent years (when the Obama Administration had focused on recent border crossers and those with criminal records). The potential for large-scale removal of Mexican nationals present in the United States without legal status is an ongoing concern of the Mexican government that reportedly has been expressed to Trump Administration officials. Mexico's consular network in the United States has bolstered the services offered to Mexicans in the United States, including access to identity documents and legal counsel. It has launched a 24-hour hotline and mobile consultants to provide support, both practical and psychological, to those who may have experienced abuse or are facing removal. The Mexican government has expressed hope that the U.S. Congress will develop a solution to resolve the phased ending of the DACA initiative. As of July 2018, some 561,400 Mexicans brought to the United States as children had received work authorizations and relief from removal through DACA. Many DACA recipients born in Mexico have never visited the country, and some do not speak Spanish. Since 2014, Mexico has helped the United States manage a surge in unauthorized migration from the \"Northern Triangle\" (El Salvador, Guatemala, and Honduras). Collectively, those countries have overtaken Mexico as the primary source for migrants apprehended at the U.S.-Mexico border. From 2015 to November 2018, Mexico reported apprehending almost 524,000 migrants and asylum seekers from the Northern Triangle. As U.S. asylum policies have tightened, Mexico also has absorbed more Central Americans in need of humanitarian protection (see Figure 7 ). Mexico has received U.S. assistance for its immigration control efforts through the Mérida Initiative. Mexico has received support for its humanitarian protection efforts through global U.S. Migration and Refugee Assistance (MRA) implemented by the U.N. High Commissioner for Refugees (UNHCR) and others. Some U.S. policymakers have praised Mexico's management of these migration flows, whereas others have questioned Mexico's ability to protect migrants from abuse and to provide asylum to those in need of protection. The López Obrador administration has a broad vision of addressing immigration by protecting human rights, decriminalizing migration, and cooperating with Central America. Implementing this vision has thus far proved difficult in an environment of increased flows from the Northern Triangle and pressure from the United States to limit them. The Mexican government has long maintained that the best way to stop illegal immigration from Central America is to address the insecurity and lack of opportunity there, but fiscal limitations limit its ability to support Central American efforts to address those challenges. As previously mentioned, the U.S. and Mexican governments issued a joint statement in December 2018 pledging to boost public and private investment in Central America. On March 29, 2019, the Trump Administration announced that it intends to end foreign assistance programs for the Northern Triangle countries for failing to combat unauthorized migration, appearing to reverse its prior pledge. The State Department has indicated that the decision will affect approximately $450 million in FY2018 funding. The López Obrador administration has provided humanitarian relief to Central American migrants in Mexico, but not increased funding for the migration agency or asylum system. Under pressure from the United States and with its migration stations overcapacity, the Mexican government has recently limited protections and increased deportations, particularly for those traveling in large groups or caravans, to discourage future flows. From April 1-22, 2019, Mexico removed nearly 11,800 people, up from 9,650 removed in the month of April 2018. Mexico's asylum system is underfunded and overwhelmed; it received 29,000 applications in 2018 even as 80% of applications from 2017 still awaited resolution. President López Obrador's desire to maintain positive relations with the U.S. government has prompted domestic criticism and may cause strain in its relations with some Central American governments. His government's decision to allow Central American asylum seekers to be returned to Mexico under the U.S. Migrant Protection Protocols (MPP) to obtain humanitarian visas—rather than challenging the MPP—has put pressure on local governments and aid organizations to assist the migrants. Many state it may also be putting migrants' lives at risk; many Mexican border cities are among the countries most dangerous. Since the terrorist attacks of September 11, 2001, there have been significant delays and unpredictable wait times at the U.S.-Mexican border. The majority of U.S.-Mexican trade passes through a port of entry along the southwestern border, often more than once, due to the increasing integration of manufacturing processes in the United States and Mexico. Past bilateral efforts discussed below have contributed to reductions in wait times at some points of entry, but infrastructure and staffing issues remain on both the U.S. and Mexican sides of the border. One effort that has continued is the use of public-private partnerships to address those issues. On May 19, 2010, the United States and Mexico declared their intent to collaborate on enhancing the U.S.-Mexican border as part of pillar three of the Mérida Initiative. A Twenty-First Century Border Bilateral Executive Steering Committee (ESC) has met since then, most recently in November 2017, to develop binational action plans and oversee implementation of those plans. The plans set goals within broad objectives: coordinating infrastructure development, expanding trusted traveler and shipment programs, establishing pilot projects for cargo preclearance, improving cross-border commerce and ties, and bolstering information sharing among law enforcement agencies. In 2015, the two governments opened the first railway bridge in 100 years at Brownsville-Matamoros and launched three cargo pre-inspection test locations where U.S. and Mexican customs officials are working together. A Mexican law allowing U.S. customs personnel to carry arms in Mexico hastened these bilateral efforts. In recent months, wait times have lengthened as a result of U.S. efforts to deal with an influx of Central American asylum seekers and to hasten construction of additional border barriers. Businesses have been concerned that unless López Obrador speaks out, President Trump may adopt policies that could exacerbate the delays at the border resulting from his decision to transfer customs personnel from ports of entry to perform migration management duties. As an example, President Trump has recently threatened to close the U.S.-Mexico border or to impose 25% tariffs on Mexican motor vehicle exports to the United States if the Mexican government does not increase its efforts to stop U.S.-bound migrants over the coming year. Mexico has recently urged the U.S. government to reconsider policies resulting in extended border delays. As Congress carries out its oversight function on U.S.-Mexican migration and border issues, questions that may arise include the following: How well is Mexico fulfilling its pledges to increase security along its northern and southern borders and to enforce its immigration laws? What is Mexico doing to address Central American migration through its territory? What is the current level of bilateral cooperation on border security and immigration and border matters, and how might that cooperation be improved? How well are the U.S. and Mexican governments balancing security and trade concerns along the U.S.-Mexican border? To what extent would the construction of a new border wall affect trade and migration flows in the region? The future of energy production in Mexico is important for Mexico's economic growth and for the U.S. energy sector. Mexico has considerable oil and gas resources, but its state oil company (Pemex), has struggled to counter declining production and postponed needed investments due to fiscal challenges. Mexico's 2013 constitutional reforms on energy opened up oil, electricity, gas, transmission, production, and sales to private and foreign investment while keeping ownership of Mexico's hydrocarbons under state control, as established in its 1917 constitution. The 2013 reforms created opportunities for U.S. businesses in exploration, pipeline construction and ownership, natural gas production, and commercial gasoline sales. Although the reforms did not privatize Pemex, they did expose the company to competition and hastened its entrance into joint ventures. Because of the reforms, Mexico has received more than $160 billion in promised investment. However, the reforms ended subsidies that kept gasoline prices low for Mexican consumers and failed to reverse production declines and ongoing problems within Pemex. Pemex's debt increased by more than 60% from 2013 to 2017. While analysts still predict that the reforms will bring long-term benefits to the country, the Peña Nieto administration oversold their short-term impacts, which has emboldened those within the López Obrador government who have opposed private involvement in the sector. The United States sought to help lock in Mexico's energy reforms through the NAFTA renegotiations. NAFTA includes some reservations for investment in Mexico's energy sector. The proposed USMCA would reinforce Mexico's 2013 constitutional reforms and the current legal framework for private energy projects in Mexico. It also would apply similar investor-state dispute settlement mechanisms that currently exist in NAFTA to the oil and gas, infrastructure, and other energy sectors. In addition, the free trade agreement would allow for expedited exports of U.S. natural gas to Mexico, which have increased about 130% since the 2013 reforms. Private sector trade, innovation, and investment have created a North American energy market that is interdependent and multidirectional, with cross-border gas pipelines and liquefied natural gas (LNG) shipments from the United States to Mexico surging. In 2018, the value of U.S. petroleum products exports to Mexico totaled $30.6 billion, nearly double the value of U.S. energy imports from Mexico ($15.8 billion). Some experts estimate that the United States, Mexico, and Canada represent 20% of global oil and gas supply, as well as 20%-25% of the expected additions to international supply over the next 25 years. They believe that deepened energy cooperation with Mexico will give North America an industrial advantage. López Obrador's plans for Mexico's energy sector are still developing. He opposed the 2013 reforms, but he and his top officials have said that his government will honor existing contracts that do not involve any corruption. Despite that commitment, the new government has halted future rounds of auctions and plans to upgrade existing refineries and construct a new refinery in Tabasco rather than importing U.S. natural gas. López Obrador's energy plans also focus on revitalizing Pemex, although the company's financial problems have already become a financial burden for the government and its credit rating has been downgraded. The government's decision to halt new auctions in wind and solar energy, which had also attracted significant investment as a result of the reforms, has led some environmentalists to challenge López Obrador's commitment to a clean energy future for Mexico. Opportunities exist for continued U.S.-Mexican energy cooperation in the hydrocarbons sector, but the future of those efforts may depend on the policies of the López Obrador government. Leases have been awarded in the Gulf of Mexico under the U.S.-Mexico Transboundary Agreement, which was approved by Congress in December 2013 ( P.L. 113-67 ). Bilateral efforts to ensure that hydrocarbon resources are developed without unduly damaging the environment could continue, possibly through collaboration between Mexican and U.S. regulatory entities. Educational exchanges and training opportunities for Mexicans working in the petroleum sector could expand. The United States and Mexico could build upon efforts to provide natural gas resources to help reduce energy costs in Central America and connect Mexico to the Central American electricity grid, as discussed during conferences on Central America cohosted by both governments in 2017 and in 2018. Analysts also have urged the United States to provide more technical assistance to Mexico—particularly in deepwater and shale exploration. In addition to monitoring energy-related issues as they pertain to NAFTA, oversight questions may focus on how the Transboundary Hydrocarbons Agreement is implemented, the extent to which Mexico is developing capable energy-sector regulators, and the effects of transnational crime groups and violence on Mexico's energy industry and the safety of foreign workers employed in the energy sector. An emerging issue for congressional oversight may involve the fairness of policies adopted by the incoming Mexican government toward foreign investors. The United States and Mexico share the waters of the Colorado River and the Rio Grande. These shared rivers have long presented complex issues leading to cooperation and conflict in the U.S.-Mexican border region and between the United States and Mexico. A bilateral water treaty from 1944 (the 1944 Water Treaty) and other binational agreements guide how the two governments share the flows of these rivers. The binational International Boundary and Water Commission (IBWC) administers these agreements and includes a U.S. Section that operates under foreign policy guidance from the U.S. Department of State. Since 1944, the IBWC has been the principal venue for addressing river-related disputes between the United States and Mexico. The 1944 Water Treaty authorizes the IBWC to develop rules and to issue proposed decisions, called minutes , regarding matters related to the treaty's execution and interpretation. Under the 1944 Water Treaty, the United States is required to provide Mexico annually with 1.5 million acre-feet (AF) of Colorado River water. U.S. deliveries to Mexico in the Rio Grande basin near El Paso/Ciudad Juárez occur annually under a 1906 binational convention, whereas Mexico's deliveries downstream of Fort Quitman, TX, are established in the 1944 Water Treaty. Mexico is to deliver to the United States a minimum amount during a five-year cycle. IBWC also administers other binational boundary and water-related agreements and projects for flood control and sanitation (principally wastewater treatment facilities) and binational reservoirs. Recent Developments in the Colorado River Basin . The United States continues to meet its Colorado River annual delivery requirements to Mexico pursuant to the 1944 Water Treaty. Recent IBWC actions on the Colorado River have focused on how to manage the Colorado River's water and infrastructure to improve water availability during drought and to restore and protect riverine ecosystems. The most recent minute governing basin operations, Minute 323 (signed in September 2017) is a set of binational measures that provides for binational cooperative basin water management, including environmental flows to restore riverine habitat. Minute 323 also provides for Mexico to share in cutbacks during shortage conditions in the U.S. portion of the basin, including delivery reductions under Drought Contingency Plans that were authorized by Congress in April 2019. In addition, Minute 323 designates a \"Mexican Water Reserve\" through which Mexico can delay its water deliveries from the United States and store its delayed deliveries upstream at Lake Mead, thereby increasing the lake's elevation. For the Colorado River basin, issues before Congress may be largely related to oversight of Minute 323 implementation and water management associated with potential shortage conditions. Recent Development in the Rio Grande Basin . On multiple occasions since 1994, Mexico has not met its Rio Grande delivery obligations within the five-year cycle established by the 1944 Water Treaty, most recently during the five-year cycle from 2010 to 2015. Mexico made up for those shortfalls in subsequent five-year cycles, as authorized under the 1944 Treaty. The October 2015 to October 2020 cycle is under way. Mexico offset its below-target deliveries for the first year of this cycle with additional deliveries in the second year. IBWC indicates that Mexico delivered less than its 350,000 AF in the third year of the cycle; however, higher deliveries in the second year resulted in Mexico's deliveries being almost at 98% of the three-year cumulative delivery target. In recent years, IBWC reportedly has been working toward a binational model for water management in the Rio Grande and obtaining input from binational working groups with the objective of improved predictability and reliability in water deliveries and treaty compliance. To date, Congress has been primarily involved in conducting oversight through reporting requirements for the U.S. Department of State. The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) includes a reporting requirement from the Senate Appropriations Subcommittee on State, Foreign Operations, and Related Programs ( S.Rept. 115-282 ): Not later than 45 days after enactment of the act, the Secretary of State, in consultation with the IBWC Commissioner, shall submit to the Committee an update to the report required in section division J of Public Law 113–325 detailing efforts to establish mechanisms to improve transparency of data on, and predictability of, water deliveries from Mexico to the United States to meet annual water apportionments to the Rio Grande, in accordance with the 1944 Treaty between the United States and Mexico Respecting Utilization of Waters of the Colorado and Tijuana Rivers and of the Rio Grande, and actions taken to minimize or eliminate future water deficits to the United States. Pursuant to the various reporting requirements, various reports have been delivered to various committees of Congress, including in the spring of 2019. Recent Development in Wastewater and River Pollution . On border wastewater issues, congressional appropriators have shown interest in increasing oversight through statements and reporting requirements related to the pollution in the Tijuana River. Authorizing committees have engaged on issues related to wastewater management near Nogales, AZ. The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) includes a reporting requirement stating that Not later than 180 days after enactment of the act, the IBWC shall submit a report to the Committee quantifying the total annual volume and composition of transboundary flows that enter the United States from Mexico in the Tijuana watershed, as well as the amount of time between each discharge from Mexico and the notification of the U.S. Government and local communities, as recorded…by the IBWC. The report shall also include a description of steps taken by the IBWC and other relevant Federal agencies to implement additional mitigation measures to address increased flows in 2017 and 2018. Border Floodplain Encroachment . Discussion of increased U.S. security measures along the border, particularly the border between Texas and Mexico, may revive concerns regarding compliance with treaty provisions related to the construction of structures in the binational floodplain that increase flood risk. In addition to the water management and conservation issues addressed by the IBWC, the U.S. and Mexican governments have worked together on broader environmental issues in the border region since signing the La Paz Agreement in 1983. Led by the U.S. Environmental Protection Agency (EPA) and the Mexican secretary of environmental resources, the agreement committed the two governments to regularly consult and review environmental concerns. Federal funding and interest in border environmental issues peaked in the 1990s during the negotiations for and implementation of the environmental side agreement to NAFTA that created the North American Development Bank (NADB) and the Border Environment Cooperation Commission (BECC). Even after federal funding for border environmental projects decreased post-2000, the governments have continued to design and implement binational environmental programs. The current 10-year border program, Border 2020, is focused on cooperation in five areas: (1) reducing air pollution; (2) improving access to clean water; (3) promoting materials and waste management; (4) enhancing joint preparedness for environmental response; and (5) enhancing environmental stewardship. The Trump Administration's FY2020 budget request would zero out funding and staff for the U.S.-Mexican border programs run by the EPA. In FY2018 and FY2019, the Administration did not requested any funding for the programs, but Congress provided $3.0 million in EPA funding each year. In 2009, President Obama and then-President Calderón announced the Bilateral Framework on Clean Energy and Climate Change to jointly develop clean energy sources and encourage investment in climate-friendly technologies. Among others, its goals included enhancing renewable energy, combating climate change, and strengthening the reliability of cross-border electricity grids. USAID and Mexico also expanded cooperation through the Mexico Global Climate Change (GCC) Program, which began in 2010 and provided $50 million in funding through FY2016, although bilateral efforts on climate change began around 1990. By 2016, environmental protection and clean energy became a priority for North American cooperation. Mexico, Canada, and the United States all became parties to the Paris Agreement, which entered into force on November 4, 2016, under the U.N. Framework Convention on Climate Change. The Mexican Congress and the Canadian parliament ratified the Paris Agreement. In contrast, U.S. executive branch officials stated that the Paris Agreement is an executive agreement not requiring Senate advice and consent to ratification. President Obama signed an instrument of acceptance on behalf of the United States on August 29, 2016, without submitting it to Congress. On June 1, 2017, President Trump announced his intention to withdraw from the Paris Agreement. The Administration's FY2018 budget request, released on May 23, 2017, proposed to \"eliminate U.S. funding for the Green Climate Fund (GCF) in FY2018, in alignment with the President's promise to cease payments to the United Nations' climate change programs.\" The FY2018 budget request also eliminates funding for Global Climate Change programs run by USAID, the Department of State, and the Department of the Treasury. Congress did not provide funding for those programs in FY2018. President López Obrador's 2018-2014 plan for the environment includes pledges to adjust government policies to comply with the Paris Accord and meet Mexico's Nationally Determine Contribution (NDC). It is unlikely that those pledges will be met, however, as López Obrador has also pledged to bolster hydrocarbons production rather than renewable energy sources. Environmental groups are concerned about López Obrador's plans to build a coal-fired refinery, which would reverse prior pledges to reduce the country's coal-based electricity generation beginning in 2017. According to data from Mexico's National Institute of Ecology and Climate Change, Mexico would need to invest $8 billion per year from 2014 to 2030 to meet its NDC. In 2017, the country reportedly invested $2.4 billion. Educational and research exchanges between the United States and Mexico have been occurring for decades, but they rose higher in the bilateral agenda during the Obama Administration as part of the High-Level Economic Dialogue. In 2011, President Obama established a program called \"100,000 Strong in the Americas\" to boost the number of U.S. students studying in Latin America (including Mexico) to 100,000 (and vice versa) by 2020. Similarly, President Peña Nieto implemented Proyecta 100,000, which aimed to have 100,000 Mexican students and researchers studying in the United States by 2018. Together, the U.S. and Mexican governments launched a Bilateral Forum on Higher Education, Innovation, and Research (FOBESII) in May 2013, which led to more than 80 partnerships between U.S. and Mexican universities. Both programs are still being implemented, albeit mostly with private funding. Country and bilateral efforts face continued challenges. In 2016-2017 (the latest year available), the number of U.S. students studying in Mexico increased by 10.8% compared to 2015-2016. In contrast, the number of Mexicans studying in the United States decreased by 8.9% in 2017-2018 as compared to the previous year. Mexico ranks ninth on the Institute of International Education's list of countries with students studying in the United States. China is number one and India is number two. A lack of scholarship funding and a lack of English language skills have been barriers for many Mexican students. Many analysts praised President Peña Nieto and his advisers for shepherding structural reforms through the Mexican Congress but predicted that the reforms' impact would depend on their implementation. Mexico's ranking in the World Economic Forum's Global Competiveness Index for 2017 improved, in part due to some of the reforms. Nevertheless, critics have alleged that votes in favor of the reforms \"were duly purchased\" by the PRI.\" Some of Mexico's reforms have faced problems due to issues in implementation; others have faced opposition from entrenched interest groups. Still others have faced unfavorable global conditions. Fiscal reforms faced challenges in tax collection, and a 2017 Supreme Court ruling reportedly watered down the telecommunications reform. Teachers unions, particularly in southern Mexico, vehemently opposed education reforms requiring teacher evaluations and accountability measures. In June 2016, 8 people died and more than 100 were injured after unions and police clashed in Oaxaca. Although Mexico's energy sector has attracted significant international investment, low global oil prices thus far have rendered shale resources and other unconventional fields unfeasible to develop. ", "summary": "Congress has maintained significant interest in Mexico, an ally and top trade partner. In recent decades, U.S.-Mexican relations have grown closer through cooperative management of the 2,000-mile border, the North American Free Trade Agreement (NAFTA), and security and rule of law cooperation under the Mérida Initiative. Relations have been tested, however, by President Donald J. Trump's shifts in U.S. immigration and trade policies. On December 1, 2018, Andrés Manuel López Obrador, the leftist populist leader of the National Regeneration Movement (MORENA) party, which he created in 2014, took office for a six-year term after winning 53% of votes in the July 1, 2018, presidential election. Elected on an anticorruption platform, López Obrador is the first Mexican president in over two decades to enjoy majorities in both chambers of Congress. López Obrador succeeded Enrique Peña Nieto of the Institutional Revolutionary Party (PRI). From 2013-2014, Peña Nieto shepherded reforms through the Mexican Congress, including one that opened Mexico's energy sector to foreign investment. He struggled, however, to address human rights abuses, insecurity, and corruption. President López Obrador has pledged to make Mexico a more just and peaceful society, but also to govern with austerity. Given fiscal constraints and rising insecurity, observers question whether his goals are attainable. López Obrador aims to build infrastructure in southern Mexico, revive the state oil company, promote social programs, and maintain a noninterventionist position in foreign affairs, including the crisis in Venezuela. His power is constrained, however, by MORENA's lack of a two-thirds majority in Congress, which he would need to enact constitutional reforms or to roll back reforms. Non-MORENA governors have also opposed some of his policies. Still, as of April 2019, López Obrador had an approval rating of78%. U.S. Policy Despite predictions to the contrary, U.S.-Mexico relations under the López Obrador government have thus far remained friendly. Nevertheless, tensions have emerged over several key issues, including trade disputes and tariffs, immigration and border security issues, and Mexico's decision to remain neutral in the crisis in Venezuela. The new government has accommodated U.S. migration and border security policies, despite the domestic criticism it has received for agreeing to allow Central American asylum seekers to await U.S. immigration proceedings in Mexico and for rapidly increasing deportations. The Trump Administration requested $76.3 million for the Mérida Initiative for FY2020 (a 35% decline from the FY2018-enacted level). In November 2018, Mexico, the United States, and Canada signed a proposed U.S.-Mexico-Canada (USMCA) free trade agreement that, if approved by Congress and ratified by Mexico and Canada, would replace NAFTA. Mexico has applied retaliatory tariffs in response to U.S. tariffs on steel and aluminum imports imposed in 2018. Legislative Action The 116th Congress may consider approval of the USMCA. Congressional concerns regarding the USMCA include possible effect on the U.S. economy, working conditions in Mexico and the protection of worker rights, enforceability of USMCA labor provisions, U.S.-Mexican economic relations, and other issues. It is not known whether or when Congress will consider implementing legislation for USMCA. In January 2019, Congress provided $145 million for the Mérida Initiative ($68 million above the budget request) in the FY2019 Consolidated Appropriations Act (P.L. 116-6) and asked for reports on how bilateral efforts are combating flows of opioids, methamphetamine, and cocaine. The House also passed H.R. 133 (Cuellar), a bill that would promote economic partnership between the United States and Mexico, as well as educational and professional exchanges. A related bill, S. 587 (Cornyn), has been introduced in the Senate. Further Reading CRS In Focus IF10578, Mexico: Evolution of the Mérida Initiative, 2007-2019. CRS In Focus IF10400, Transnational Crime Issues: Heroin Production, Fentanyl Trafficking, and U.S.-Mexico Security Cooperation. CRS In Focus IF10215, Mexico's Immigration Control Efforts. CRS Report R45489, Recent Migration to the United States from Central America: Frequently Asked Questions. CRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and Implications. CRS Report R44981, NAFTA Renegotiation and the Proposed United States-Mexico-Canada Agreement (USMCA) CRS Report R45430, Sharing the Colorado River and the Rio Grande: Cooperation and Conflict with Mexico", "document_type": "crs"}
{"report": "Over the last decade, migration to the United States from Central America—in particular from El Salvador, Guatemala, and Honduras (known collectively as the Northern Triangle)—has increased considerably. From 2006 to 2016, the number of individuals living in the United States who were born in the Northern Triangle grew from 2.2 million to almost 3 million; this increase (37%) was more than twice the increase for the total foreign-born population (16%). During the same period, the foreign-born population from Mexico living in the United States held steady at 11.5 million (which is more than any other country-of-birth group). In 2016, the foreign-born population from the Northern Triangle comprised less than 1.0% of the U.S. population and 6.8% of the 43.7 million foreign-born residents of the United States, up from 5.8% in 2006. Even though total apprehensions of illegal border crossers were at a 45-year low in FY2017, the number of families from the Northern Triangle apprehended at the U.S.-Mexico border has increased in recent years. While earlier migrants apprehended at the Southwest border were predominantly single, adult males from Mexico, currently the majority of apprehended migrants are families and unaccompanied children, and the majority of apprehended migrants come from the Northern Triangle. An increasing share of those arriving at the Southwest border are requesting asylum, some at official ports of entry and others after entering the United States \"without inspection\" (i.e., illegally) between U.S. ports of entry. This is adding to a large backlog of asylum cases in U.S. immigration courts. In the past year, news reports of migrant \"caravans\" from the Northern Triangle traveling toward the U.S. border have sparked intense interest and many questions from Congress, including the following: What factors are contributing to the increase in migration from the Northern Triangle to the United States? Is the choice to migrate in large groups a new trend? How are the United States, Mexico, and Central American governments responding? How are U.S. policies at the border—including security screening, removal proceedings, military involvement, and asylum processing—being implemented? This report addresses these and other frequently asked questions. The increase in the number of Central American migrants apprehended at the Southwest border is occurring within the context of historically low levels of total alien apprehensions (see Figure 1 ). Apprehensions of migrants of all nationalities increased consistently beginning in 1960, fluctuated between two peaks of 1.62 million in FY1986 and 1.64 million in FY2000, and then declined to a 45-year low of approximately 304,000 in FY2017. Apprehensions increased in FY2018 to 397,000, which was comparable to the annual Southwest border average (401,000) for the most recent 10-year period (FY2009-FY2018). Two demographic shifts, illustrated in the apprehension data, characterize recent migrant flows. First, over the past two decades the national origins of apprehended aliens have changed. In FY2000, almost all Southwest border apprehensions (98%) were of Mexican nationals. Beginning in FY2012, however, the percentage of apprehended aliens from Honduras, Guatemala, and El Salvador started to increase as a share of total apprehensions. By FY2018, foreign nationals from those three countries made up 52% of all apprehensions. Second, the type of migrants apprehended has also shifted. In the past, single adult males made up over 90% of apprehended aliens. Currently, the majority of apprehended migrants are families and unaccompanied children. From FY2012 to FY2018, the predominant national origins of such families changed from Mexico to the Northern Triangle countries (see Figure 2 ). (For more information, see CRS Report R45266, The Trump Administration's \"Zero Tolerance\" Immigration Enforcement Policy .) Many factors—including those in their countries of origin, destination countries (often the United States), and other countries—contribute to people's decisions to emigrate from the Northern Triangle. Drivers of migration are interrelated, often reinforcing one another. Over time, weak institutions and corrupt government officials, economic growth that does not significantly reduce chronic poverty, rising levels of crime, and demand for illicit drugs result in insecurity and citizens' low levels of confidence in government institutions. These in turn contribute to an increased desire to leave a country. The Northern Triangle countries have long histories of autocratic rule, weak institutions, and corruption. A lack of political will and capacity, rampant bribery and embezzlement of state funds, and some of the lowest tax collection rates in Latin America divert and diminish resources, leaving state institutions and programs underfunded. These problems also limit the governments' abilities to respond to crises such as natural disasters and food insecurity. All of these factors help perpetuate chronic poverty. While often cited as a leading cause of emigration from the Northern Triangle, poverty alone does not explain it. Over the past decade, transnational criminal organizations have used the Central American corridor for a range of illicit activities, including trafficking approximately 90% of cocaine bound for the United States. As a result, Northern Triangle countries have experienced extremely elevated homicide rates and general crime committed by drug traffickers, gangs, and other criminal groups. For instance, clashes between street gangs and, in El Salvador, between gangs and security forces, have paralyzed cities and some rural areas. A recent study found that the probability that an individual intends to migrate is 10-15 percentage points higher for Salvadorans and Hondurans who have been victims of multiple crimes than for those who have not. Finally, Central America has always been particularly subject to climate variability. According to the World Risk Index, Guatemala and El Salvador are among the 15 countries in the world most exposed to natural disasters, especially earthquakes and droughts. About one-fourth of those employed in the Northern Triangle work in the agriculture sector; widespread crop failures can have a devastating impact on people's livelihoods and ability to feed their families. According to the 2018 Global Hunger Index, Guatemala and Honduras ranked second and third in hunger levels in Central America and the Caribbean, behind Haiti. Research indicates that more intense and erratic weather patterns in recent years are strongly linked to food insecurity and migration. (For more information, see CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress ; CRS Report RL34027, Honduras: Background and U.S. Relations ; CRS Report R43616, El Salvador: Background and U.S. Relations ; CRS Report R42580, Guatemala: Political and Socioeconomic Conditions and U.S. Relations ; and CRS Report RL34112, Gangs in Central America .) The factors discussed above intersect with factors attracting migrants to the United States. Economic opportunity may motivate Northern Triangle families and unaccompanied children to migrate. Despite challenging labor market conditions for low-skilled minority youth in the United States, economic prospects for industrial sectors employing low-skilled workers have improved recently. Educational opportunities may also be a motivating factor in migration, as perceptions of free public education through high school may be widespread among young migrants. Family reunification is a key motive, as many migrants have family members among the sizable Salvadoran, Guatemalan, and Honduran foreign-born populations residing in the United States. While the impacts of actual and perceived U.S. immigration policies have been widely debated, it remains unclear if, and how, specific immigration policies have motivated families and children to migrate to the United States. Some contend that the United States' asylum policy, which allows asylum seekers to remain in the United States while they await a decision on their cases, has encouraged recent family and unaccompanied child migration to the country. Currently, immigration courts face a backlog of over 700,000 asylum cases, resulting in wait times of months or years, and a substantial portion of asylum seekers fail to appear in court. Others have argued that the revised humanitarian relief policies for unaccompanied children included in the Trafficking Victims Protection Reauthorization Act (TVPRA) of 2008, which expanded immigration relief options for such children, fostered a similar result among this migrant population. (For more information, see archived CRS Report R43628, Unaccompanied Alien Children: Potential Factors Contributing to Recent Immigration .) Migrants from the Northern Triangle traveling to the United States customarily have used various means to get to the Mexico-U.S. border, including walking, hitchhiking, riding on the top of trains through Mexico, and riding buses, all with or without the assistance of smugglers. Central American migrants have joined into groups to make the journey together as a way to share resources, avoid the cost of smugglers, and gain protection by the safety offered in numbers. \"Caravans\" have reportedly occurred for a least a decade, but they received little attention until last spring when a group of roughly 1,000 Central American migrants headed to the United States. About 400 migrants eventually made it to the U.S. border. In past years, ad hoc processions have been loosely organized by nonprofit groups wanting to call attention to the plight of migrants in their home communities, particularly those of families with children fleeing unsafe environments, poverty, and lack of protection from gang violence and extortion. Mobile phone technology has facilitated navigation and affords communication with impromptu groups, resulting in migrations that can expand and contract along the way. Under the U.S. Strategy for Engagement in Central America, the United States is working with Central American governments to promote economic prosperity, improve security, and strengthen governance in the region. The Obama Administration launched the strategy following a surge in apprehensions of unaccompanied alien children in 2014, and the Trump Administration largely has left the strategy in place. Congress appropriated an estimated $2.1 billion to support the strategy from FY2016-FY2018, roughly doubling annual aid levels for the region. The governments of El Salvador, Guatemala, and Honduras are carrying out complementary efforts under their Plan of the Alliance for Prosperity in the Northern Triangle. They collectively allocated an estimated $7.7 billion to the initiative from 2016-2018, though some analysts have questioned whether those funds have been targeted effectively. On December 18, 2018, the Trump Administration committed to providing $5.8 billion in public and private investment to support institutional reforms and development in the Northern Triangle. Nearly all of the foreign assistance included in that figure was appropriated in prior years and the remainder consists of potential loans, loan guarantees, and private sector resources that the U.S. Overseas Private Investment Corporation could mobilize if it is able to identify commercially viable projects. (For more information, see CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress .) It is too early to assess the full impact of recent U.S. efforts because implementation did not begin until 2017 for many of the programs funded under the U.S. Strategy for Engagement in Central America. Nevertheless, the Northern Triangle countries, with U.S. support, have made some tentative progress. For example, they have implemented some policy changes that have contributed to economic stability. At the same time, living conditions have yet to improve for many residents because the Northern Triangle governments have not invested in effective poverty-reduction programs. Security conditions also have improved in some respects, as homicide rates have declined for three consecutive years. Still, many Northern Triangle residents continue to feel insecure, and the percentage of individuals reporting they were victims of crime increased in all three nations between 2014 and 2017. The countries' attorneys general—with the support of the U.N.-backed International Commission against Impunity in Guatemala and the Organization of American States-backed Mission to Support the Fight against Corruption and Impunity in Honduras—have made significant progress in the investigation and prosecution of high-level corruption cases. Those efforts could be undermined, however, as they have received considerable pushback from political and economic elites in the region. (For more information, see CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress .) Since a surge of unaccompanied child migrants from the Northern Triangle transited Mexico to the United States in 2014, Mexico has helped the United States manage flows of Central American migrants and has received more than $100 million in U.S. funding for those efforts. From 2015 through 2018, Mexico returned almost 524,000 migrants who entered it from the Northern Triangle countries. At the same time, Mexico has provided temporary visas for those who want to work in its southern border states, as well as humanitarian visas and access to asylum for those who do not raise criminal or terrorist concerns when their biometric information is run against U.S. databases. President Andrés Manuel López Obrador has thus far been willing to shelter some U.S.-bound Central American migrants, but he urged the U.S. government to invest in southern Mexico and Central America to prevent future unauthorized migration. On December 18, 2018, the two governments made a joint announcement in support of economic development in Mexico and the Northern Triangle. The Mexican government has faced pressure from the United States to help contain and disperse recent caravans of Central American migrants transiting the country; humanitarian groups, by contrast, have urged it to assist the migrants. In fall 2018, Mexican citizens, aid groups, and local, state, and federal entities provided migrants with food, shelter, and emergency aid. As of early December 2018, the U.N. High Commissioner for Refugees (UNHCR) reported that 3,300 members of migrant caravans had applied for asylum in Mexico. At the same time, more than 3,000 people had accepted voluntary repatriation to their countries of origin. With U.S. ports of entry limiting the number of migrants accepted each day for asylum screening, border cities may have to shelter thousands of migrants for many months. Mexico's refugee agency, which has received support from UNHCR (discussed below), was overwhelmed processing record numbers of applications prior to the arrival of recent migrant caravans. In late 2018, the U.S. and Mexican governments were negotiating an agreement—dubbed \"Remain in Mexico\"—that would have required U.S.-bound asylum seekers who could not demonstrate that they faced imminent danger in Mexico to remain there as their U.S. asylum claims were processed. Prior to the conclusion of a final bilateral agreement, the U.S. Department of Homeland Security (DHS) notified Mexico that it would implement a new policy under Section 235(b)(2)(C) of the Immigration and Nationality Act to return some non-Mexican asylum seekers (excluding unaccompanied minors) to Mexico to await their immigration court decisions. Mexico responded with a statement declaring that it has the right to admit or reject foreigners arriving in its territory, and that it would provide humanitarian visas and work permits to certain non-Mexicans awaiting U.S. immigration proceedings and offer some individuals the ability to apply for asylum in Mexico. Mexico reportedly began implementing this policy in mid-January, and the United States returned the first asylum seeker to Mexico under its new policy—dubbed the \"Migrant Protection Protocols\"—on January 29, 2019. Mexican officials have reportedly stated that they will not accept minors or individuals over age 60 awaiting asylum claims. Concerns over the costs to local governments of sheltering migrants and the safety of migrants could make this policy difficult to maintain. (For more information, see CRS In Focus IF10215, Mexico's Immigration Control Efforts .) A range of organizations provide humanitarian assistance to people traveling from the Northern Triangle toward the United States, including U.N. entities and other intergovernmental organizations, local and national non-governmental organizations, and the private sector. According to UNHCR —a key U.N. entity operating in the region— comprehensive assistance is needed at all phases of the journey, including food, medical care, shelter, protection, and, in many cases, legal support. Experts characterize this flow of people from the Northern Triangle as mixed migration, defined as different groups—such as economic migrants, refugees, asylum-seekers, trafficked persons, and unaccompanied children—who travel the same routes and use the same modes of transportation. The distinctions between groups in mixed migration flows raise questions about their status and rights. While refugees are granted certain rights and protection under international refugee law, migrants are not protected by a comparable set of rules or treaties. Nevertheless, UN HCR asserts that transit and destination countries should provide all of these groups access to humanitarian assistance, protection , and due process to assess their asylum claims, even if they do not qualify as refugees. Those who flee are often unsafe not only in their home countries, but also during their journey north where they face recruitment into criminal gangs, sexual and gender-based violence, and murder. Many are vulnerable, including women, children, the elderly, and those with disabilities. In Mexico, UNHCR provides immediate and longer-term support by working with local and federal governments and alongside civil society and other partners. In addition to shelter and cash-based humanitarian assistance, broader safety mechanisms include improved screening procedures and dissemination of information for those fleeing violence, increased ways to guard against smugglers and traffickers, and enhanced access to the Mexican asylum system. Even with additional support from UNHCR, Mexico's Commission for the Aid of Refugees (COMAR) lacks sufficient capacity to process claims. UNHCR and other organizations are also being mobilized along the caravan routes in places such as Chiapas, Oaxaca, and Tijuana. International humanitarian efforts aim to align with the Comprehensive Regional Protection and Solutions Framework, an intergovernmental agreement that defends the rights of migrants and refugees who live in or cross the territories of Belize, Costa Rica, Guatemala, Honduras, Mexico, and Panama. In general, most Latin American and Caribbean countries are part of an ongoing forum to address issues driving displacement such as poverty, economic decline, inflation, violence, disease, and food insecurity. In the current situation, U.N. and other experts urge donors to provide timely and predictable international funding to support host governments and local communities that are assisting arriv als. Several federal agencies are involved in immigration processing at land, air, and sea ports of entry and along U.S. borders shared with Mexico and Canada. The following descriptions are not exhaustive of all the duties carried out by each entity; they are a selection of duties relevant to immigration enforcement at the Southwest border at and between land ports of entry. The Department of Homeland Security (DHS) includes several relevant components: Customs and Border Protection (CBP) is responsible for facilitating lawful trade and travel while preventing unauthorized people and contraband from entering the country. Within CBP, U.S. Border Patrol is the law enforcement agency that secures U.S. borders at and between ports of entry; Border Patrol agents apprehend and hold foreign nationals who have no valid entry documents when they reach ports of entry or who attempt to cross between ports of entry. CBP's Office of Field Operations (OFO) operates U.S. ports of entry and conducts immigration inspections of arriving foreign nationals to determine their admissibility to the United States. Immigration and Customs Enforcement (ICE) is responsible for protecting the country from cross-border crime and illegal immigration that threatens national security and public safety. ICE's Enforcement and Removal Operations (ERO) enforces immigration laws pertaining to the detention and removal of unauthorized aliens and oversees detention centers, including family detention centers. ICE also finds and removes deportable aliens located in the U.S. interior. United States Citizenship and Immigration Services (USCIS) is responsible for adjudication of immigration and naturalization petitions, consideration of refugee and asylum claims and related humanitarian and international concerns, and other services, such as issuing employment authorizations and processing nonimmigrant change-of-status petitions. At the border, USCIS asylum officers interview foreign nationals who arrive without admissions documents at a port of entry or who encounter a Border Patrol agent and express a fear of return to their home countries based on persecution. If migrants are found to have \"credible fear,\" they are referred to an immigration judge for a hearing. The Department of Justice (DOJ) runs the Executive Office for Immigration Review (EOIR ), the federal government's immigration courts. Immigration judges determine whether an alien is removable or is eligible for some type of immigration relief during the removal process (e.g., asylum or withholding of removal). The standard removal process is a civil administrative proceeding involving a DHS attorney and an EOIR immigration judge to determine whether an alien should be removed. (For more information, see CRS Report R43892, Alien Removals and Returns: Overview and Trends .) The Department of Health and Human Services' (HHS ' ) Office of Refugee Resettlement (ORR) is responsible for the care of unaccompanied alien children (UAC) and their subsequent placement in appropriate custody. ICE handles custody transfer or repatriation. (For more information, see archived CRS Report R43599, Unaccompanied Alien Children: An Overview .) Aliens apprehended for illegally entering the United States between U.S. ports of entry generally face civil penalties for illegal presence in the United States and may face criminal penalties for illegal entry. Aliens who have been removed face additional criminal penalties if they are apprehended for illegal reentry. Aliens apprehended for illegal entry and reentry are subject to prosecution in federal criminal courts by DOJ. All apprehended aliens, including children, are placed into one of two types of immigration removal proceedings: standard proceedings that involve formal hearings in an immigration court run by DOJ's EOIR before an immigration judge, or streamlined \"expedited removal\" proceedings without such hearings. ICE is responsible for legally representing the government during removal proceedings. CBP may refer aliens to DOJ for criminal prosecution depending on whether they meet current criminal enforcement priorities. If CBP does not refer apprehended aliens to DOJ for criminal prosecution, CBP may either return them to their home countries using expedited removal or transfer them to ICE custody for immigration detention while they are in formal removal proceedings. (For more information, see CRS Report R45314, Expedited Removal of Aliens: Legal Framework .) Aliens who wish to request asylum may do so at a U.S. port of entry before a CBP officer or upon apprehension by a CBP officer between U.S. ports of entry. Aliens requesting asylum at the border are entitled to an interview assessing the credibility of their asylum claims. (For more information, see \" What is the process for seeking asylum in the United States? \" below.) During the brief period when the Trump Administration's \"zero tolerance\" policy was in effect (May and June 2018), DOJ sought the prosecution of all adults caught entering illegally, including asylum seekers and adults accompanied by children. On June 20, 2018, following considerable and largely negative public attention to family separations stemming from the zero tolerance policy, President Trump issued an executive order (EO) effectively ending the policy. While it was in effect, DHS classified all children accompanying criminally prosecuted adults as UAC and turned them over to HHS' ORR, where they were housed temporarily in its shelters. After the prosecuted adults served any applicable criminal sentence, they were transferred to ICE custody, placed in immigration detention, and eventually, in most cases, reunited with their children, either in family detention or upon release into the United States on bond, an order of supervision, or another condition of release. Other parents were deported before they were reunited with their children, and a small number of parents still in the United States remain separated from their children. (For more information, see CRS Report R45266, The Trump Administration's \"Zero Tolerance\" Immigration Enforcement Policy .) The Immigration and Nationality Act (INA) provides, subject to certain exceptions and restrictions, that aliens who are in the United States or who arrive in the United States (whether or not at an official port of entry) may apply for asylum, regardless of their immigration status. Asylum may be granted by a USCIS asylum officer or a DOJ EOIR immigration judge. To receive asylum, an alien must establish, among other requirements, that he or she is unable or unwilling to return to his or her home country because of past persecution or a well-founded fear of future persecution based on one of five protected grounds (race, religion, nationality, membership in a particular social group, or political opinion). Certain aliens, such as those who are determined to pose a danger to U.S. security, are ineligible to receive asylum. Special asylum provisions apply to aliens who are subject to a streamlined removal process known as expedited removal. In order for such an alien to be considered for asylum, a USCIS asylum officer first must determine that the alien has a credible fear of persecution. (For more information, see CRS Report R45314, Expedited Removal of Aliens: Legal Framework .) In June 2018, the Attorney General, whose decisions are binding on DHS officers and immigration judges, issued a decision regarding the adjudication of asylum claims based on \"membership in a particular social group.\" In the decision, Attorney General Sessions stated that \"[g]enerally, claims by aliens pertaining to domestic violence or gang violence perpetrated by non-governmental actors will not qualify for asylum\" based on the \"membership in a particular social group\" ground. He further noted that because such claims would not generally qualify for asylum, they also would not generally meet the threshold for a finding of a credible fear of persecution. USCIS subsequently issued a policy memorandum to provide guidance to its asylum officers in light of the Attorney General's decision. The memorandum included guidance on determining whether an alien is eligible for asylum as well as whether an alien has a credible fear of persecution and thus can pursue an asylum claim. The new policies regarding credible fear of persecution determinations were challenged in federal court. In December 2018, a federal district court judge permanently enjoined the U.S. government from continuing some of the new credible fear policies. Other components of the former Attorney General's decision and the USCIS memorandum, including standards for adjudicating asylum claims, remain in effect. (For more information, CRS Legal Sidebar LSB10207, Asylum and Related Protections for Aliens Who Fear Gang and Domestic Violence .) TECS (not an acronym) is the main system that CBP officers employ at the border and elsewhere to screen arriving travelers and determine their admissibility. CBP also uses the Automated Targeting System (ATS), which is a decision support tool. As one of its functions, ATS \"compares information about travelers and cargo arriving in, transiting through, or exiting the country, against law enforcement and intelligence databases,\" including information from the Terrorist Screening Databased (TSDB, commonly referred to as the terrorist watchlist). As its name suggests, Automated Targeting System-Passenger (ATS-P) is the portion of ATS focused on passengers, \"for the identification of potential terrorists, transnational criminals, and, in some cases, other persons who pose a higher risk of violating U.S. law\" and is used by CBP personnel at the border, ports of entry, and elsewhere, including screening the passenger manifests of all U.S. bound international flights. (For more information, see CRS Report R44678, The Terrorist Screening Database and Preventing Terrorist Travel .) Active duty and National Guard personnel have performed a variety of missions on the Southwest border in the past, including ground and aerial surveillance, road and fencing construction, intelligence analysis, transportation, maintenance, and communications support. According to a DOD news release, the National Guard personnel who deployed to the border in April 2018 would provide \"surveillance, engineering, administrative and mechanical support to border agents.\" A subsequent DOD news release announcing the deployment of active duty personnel in October 2018 stated that CBP \" requested aid in air and ground transportation, and logistics support, to move CBP personnel where needed. Officials also asked for engineering capabilities and equipment to secure legal crossings, and medical support units. CBP also asked for housing for deployed Border Protection personnel and extensive planning support.\" The Trump Administration issued a memo on November 20, 2018, which authorized military personnel to perform those military protective activities that the Secretary of Defense determines are reasonably necessary to ensure the protection of Federal personnel, including a show or use of force (including lethal force, where necessary), crowd control, temporary detention and cursory search. Department of Defense personnel shall not, without further direction from the President, conduct traditional civilian law enforcement activities, such as arrest, search, and seizure in connection with the enforcement of the laws. During a discussion with reporters on November 21, 2018, Secretary of Defense James Mattis responded to questions about the potential use of military personnel in a law enforcement role: The one point I want to make again is we are not doing law enforcement. We do not have arrest authority. Now the governors could give their troops arrest authority. I don't think they've done that, but there are—is no arrest authority under Posse Comitatus for the U.S. federal troops. You know, that can be done but it has to be done in accordance with the law, and that has not been done nor has it been anticipated. Later in the interview he stated On detention, we do not have arrest authority. Detention would—I would put it in terms of minutes. In other words, if someone's beating on a Border Patrolman and if we were in position to have to do something about it, we could stop them from beating on them and take him over and deliver him to a Border Patrolman, who would then arrest him for it…. There's no violation of Posse Comitatus, there's no violation here at all. We're not going to arrest or anything else. To stop someone from beating on someone and turn them over to someone else—this is minutes not even hours, okay? According to a January 14 news release from DOD, Acting Secretary of Defense Patrick Shanahan approved continued DOD assistance to DHS through September 30, 2019. It also noted that \"DOD is transitioning its support at the southwestern border from hardening ports of entry to mobile surveillance and detection, as well as concertina wire emplacement between ports of entry. DOD will continue to provide aviation support.\" The Posse Comitatus Act constrains how military personnel may be used in a law enforcement capacity at the border. The Posse Comitatus Act is a criminal prohibition that provides Whoever, except in cases and under circumstances expressly authorized by the Constitution or Act of Congress, willfully uses any part of the Army or the Air Force as a posse comitatus or otherwise to execute the laws shall be fined under this title or imprisoned not more than two years, or both. Consequently, there must be a constitutional or statutory authority to use federal troops in a law enforcement capacity to enforce immigration or customs laws directly by, for example, stopping aliens from entering the country unlawfully, apprehending gang members, or seizing contraband. As noted in a section below, federal law permits the Armed Forces to act in a supporting role for civil authorities by providing logistics or operating and maintaining equipment, among other things. Case law suggests that the Posse Comitatus Act is violated when (1) civilian law enforcement officials make a direct active use of military personnel to execute the law; (2) the use of the military pervades the activities of the civilian officials; or (3) the military is used so as to subject persons to the exercise of military power which is regulatory, prescriptive, or compulsory in nature. The Posse Comitatus Act does not apply to the National Guard unless it is activated for federal service. One possible statutory exception the President could potentially invoke for direct military enforcement is the Insurrection Act provision for sending troops whenever he determines that \"unlawful obstructions, combinations, or assemblages, or rebellion against the authority of the United States, make it impracticable to enforce the laws of the United States … by the ordinary course of judicial proceedings.\" However, the Insurrection Act appears never to have been invoked to respond to unlawful migrant border crossings, and its application in such a situation has not been tested in court. The executive branch has long asserted two constitutional exceptions to the Posse Comitatus Act \"based upon the inherent legal right of the U.S. Government … to insure the preservation of public order and the carrying out of governmental operations within its territorial limits, by force if necessary.\" These exceptions include the emergency authority \"to prevent loss of life or wanton destruction of property and to restore governmental functioning and public order when sudden and unexpected civil disturbances, disasters, or calamities seriously endanger life and property and disrupt normal governmental functions to such an extent that duly constituted local authorities are unable to control the situation\"; and the authority to \"protect Federal property and Federal governmental functions when the need for protection exists and duly constituted local authorities are unable or decline to provide adequate protection.\" (For more information, see CRS Report R42659, The Posse Comitatus Act and Related Matters: The Use of the Military to Execute Civilian Law .) President Trump has contemplated proclaiming a national emergency pursuant to the National Emergencies Act (NEA) in order to fund a physical barrier at the southern border with Mexico using DOD funds. Declaring a national emergency could permit the President to invoke two statutes that could potentially permit either the use of unobligated military construction funds or the reprogramming of Army Corps of Engineers civil works funds. Military Construction Funds . Upon declaring a national emergency pursuant to the NEA, the President may invoke the emergency military construction authority in 10 U.S.C. §2808. Originally enacted in 1982, Section 2808 provides that upon the President's declaration of a national emergency \"that requires use of the armed forces,\" the Secretary of Defense may \"without regard to any other provision of law ... undertake military construction projects ... not otherwise authorized by law that are necessary to support such use of the armed forces.\" Section 2808 limits the funds available for emergency military construction to \"the total amount of funds that have been appropriated for military construction\" that have not been obligated. With certain limited exceptions, Presidents have generally invoked this authority in connection with construction at military bases in foreign countries. The circumstances in which the Section 2808 authority could be used to deploy barriers along the border appears to be a question of first impression, and one that is likely to be vigorously litigated. It appears that three interpretive questions could impede such use. First , there may be dispute about whether conditions at the border provide a sufficient factual basis to invoke Section 2808. Before the Section 2808 authority may be used, the President must determine that the relevant construction project would address a problem qualifying as a national emergency \"that requires use of the armed forces.\" Moreover, the construction project must be \"necessary to support such use of the armed forces.\" Second , if the above criteria are met, then an assessment would be necessary to determine whether construction of a border wall qualifies as a \"military construction project\" within the meaning of Section 2808. Title 10 defines the term \"military construction project\" for purposes of Section 2808 to include \"military construction work,\" and defines \"military construction\" as \"includ[ing] any construction, development, conversion, or extension of any kind carried out with respect to a military installation ... or any acquisition of land or construction of a defense access road.\" Because there does not appear to be case law addressing the scope of this definition of \"military construction,\" the question of whether Section 2808 extends to the construction of a border wall appears to be an issue of first impression. Third , if a court were to review the invocation of Section 2808 to construct a border wall, its analysis might be informed by the location of particular barriers. It is possible that a border wall will be \"necessary to support such use of the armed forces\" at some locations but not others. Likewise, the construction of a wall over certain areas of the border—specifically, areas that directly abut military bases—would appear to have a greater claim to qualifying as construction undertaken \"with respect to a military installation\" than construction at other locations along the border. Army Corp s of Engineers Funds. Section 2293 of Title 33, U.S. Code, authorizes the Secretary of the Army to terminate or defer Army civil works projects that are \"not essential to the national defense\" upon a declaration of a national emergency under the NEA \"that requires or may require the use of the Armed Forces.\" The Secretary of the Army can then use the funds otherwise allocated to those projects for \"authorized civil works, military construction, and civil defense projects that are essential to the national defense.\" As with Section 2808, it is unsettled whether the construction of a border wall would qualify as an \"authorized civil works, military construction, [or] civil defense project[].\" This uncertainty is compounded by the difficulty of determining whether the qualifier \"authorized\" modifies all of the items enumerated in Section 2293 or only the term \"civil works.\" If the term \"authorized\" modifies all of the items in the relevant sentence, then Section 2293 arguably would not allow the President to construct a border wall if that term is read to mean specifically authorized by Congress. Courts have traditionally afforded significant deference to executive claims of military necessity, deference which may stand as a substantial obstacle to legal challenges to any factual findings supporting the invocation of either Section 2808 or Section 2293. (For more information, see CRS Legal Sidebar LSB10242, Can the Department of Defense Build the Border Wall? ) The President's authority to use military personnel to support border security operations depends on whether those personnel are active duty troops serving under Title 10, U.S. Code, or National Guard troops operating under Title 32, U.S. Code. Section 502 of Title 32, U.S. Code, provides the authority for the Secretary of the Army and the Secretary of the Air Force to call National Guard units to full-time duty under Title 32 status for training \"or other duty in addition to\" mandatory training. Section 502(f) \"other duty\" may include \"homeland defense activities.\" Such activities are defined to mean activities: undertaken for the military protection of the territory or domestic population of the United States, or of infrastructure or other assets of the United States determined by the Secretary of Defense as being critical to national security, from a threat or aggression against the United States. Chapter 15 of Title 10, U.S. Code—Military Support for Civilian Law Enforcement Agencies—provides general legislative authority for the Armed Forces to provide certain types of support to federal, state, and local law enforcement agencies, particularly in counterdrug, counterterrorism, and counter-transnational crime efforts. Such authorities permit the military to provide certain types of support for border security and immigration control operations. These authorities permit DOD to share information collected during the normal course of military operations, loan equipment and facilities, provide expert advice and training, and maintain and operate equipment. To assist federal law enforcement agencies, military personnel may maintain and operate equipment in conjunction with counterterrorism operations or the enforcement of counterdrug laws, immigration laws, and customs requirements. To assist federal law enforcement agencies in counter drug operations, military personnel may, among other things, engage in the \"[c]onstruction of roads and fences and installation of lighting to block drug smuggling corridors across international boundaries of the United States.\" Chapter 15 support authority \"does not include or permit direct participation by a member of the Army, Navy, Air Force, or Marine Corps in a search, seizure, arrest, or other similar activity unless participation in such activity by such member is otherwise authorized by law.\" One other possible source of authority is Section 1059 of the National Defense Authorization Act of 2016. That provision authorized the Secretary of Defense, with the concurrence of the Secretary of Homeland Security, to spend up to $75 million of 2016 DOD funds to provide assistance to CBP \"for purposes of increasing ongoing efforts to secure the southern land border of the United States.\" The types of assistance permitted include \"deployment of members and units of the regular and reserve components of the Armed Forces to the southern land border of the United States\" along with \"manned aircraft, unmanned aerial surveillance systems, and ground-based surveillance systems to support continuous surveillance of the southern land border of the United States\" and \"[i]ntelligence analysis support.\" (For more information, see CRS Legal Sidebar LSB10121, The President's Authority to Use the National Guard or the Armed Forces to Secure the Border .) Congress provided the President with significant discretion to reduce foreign assistance to Central America in FY2018. In the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), Congress designated \"up to\" $615 million for the Central America strategy, effectively placing a ceiling on aid but no floor. The act also requires the State Department to withhold 75% of assistance for the central governments of El Salvador, Guatemala, and Honduras until the Secretary of State certifies that those governments are addressing a variety of congressional concerns, including improving border security, combating corruption, and protecting human rights. The act empowers the Secretary of State to suspend and reprogram aid if he determines the governments have made \"insufficient progress\" in addressing the legislative requirements. The President's ability to modify assistance to the Northern Triangle countries for FY2019 will depend on provisions Congress may include in future appropriations legislation. Citing constitutional and statutory authority, the President issued a presidential proclamation on November 9, 2018, to immediately suspend the entry into the United States of aliens who cross the Southwest border between ports of entry. The proclamation indicates that its entry suspension provisions will expire 90 days after its issuance date or on the date that the United States and Mexico reach a bilateral agreement that allows for the removal of asylum seekers to Mexico, whichever is earlier. Also on November 9, 2018, DHS and DOJ jointly issued an interim final rule to bar an alien who enters the United States in contravention of the proclamation from eligibility for asylum. Under the rule, an asylum officer is to make a negative credible fear determination in the case of such an alien. (For more information, see CRS Insight IN10993, Presidential Proclamation on Unlawful Border Crossers and Asylum .) The proclamation and the rule are being challenged in federal court. As of the date of this report, the changes to the asylum process set forth in the rule are not in effect. (For more information, see CRS Legal Sidebar LSB10222, District Court Temporarily Blocks Implementation of Asylum Restrictions on Unlawful Entrants at the Southern Border .) For more information on relevant topics and issues Congress may consider, see the following reports or contact the authors: CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress , by Peter J. Meyer CRS Report R45120, Latin America and the Caribbean: Issues in the 115th Congress , coordinated by Mark P. Sullivan (see \"Migration Issues\" section) CRS In Focus IF10215, Mexico's Immigration Control Efforts , by Clare Ribando Seelke and Carla Y. Davis-Castro CRS Report R43616, El Salvador: Background and U.S. Relations , by Clare Ribando Seelke CRS Report RL34027, Honduras: Background and U.S. Relations , by Peter J. Meyer CRS Report R42580, Guatemala: Political and Socioeconomic Conditions and U.S. Relations , by Maureen Taft-Morales CRS Report R45266, The Trump Administration's \"Zero Tolerance\" Immigration Enforcement Policy , by William A. Kandel CRS Insight IN10993, Presidential Proclamation on Unlawful Border Crossers and Asylum , by Andorra Bruno CRS Report RS20844, Temporary Protected Status: Overview and Current Issues , by Jill H. Wilson CRS Legal Sidebar LSB10150, An Overview of U.S. Immigration Laws Regulating the Admission and Exclusion of Aliens at the Border , by Hillel R. Smith CRS Report R42138, Border Security: Immigration Enforcement Between Ports of Entry , coordinated by Audrey Singer CRS Report R43356, Border Security: Immigration Inspections at Ports of Entry , by Audrey Singer CRS Report R43599, Unaccompanied Alien Children: An Overview , by William A. Kandel CRS Legal Sidebar LSB10121, The President's Authority to Use the National Guard or the Armed Forces to Secure the Border , by Jennifer K. Elsea", "summary": "Over the last decade, migration to the United States from Central America—in particular from El Salvador, Guatemala, and Honduras (known collectively as the Northern Triangle)—has increased considerably. Families migrating from this region, many seeking asylum, have made up an increasing share of the migrants seeking admission to the United States at the U.S.-Mexico border. In the past year, news reports of migrant \"caravans\" from the Northern Triangle traveling toward the United States have sparked intense interest and questions from Congress. Many factors, both in their countries of origin and elsewhere, contribute to people's decisions to emigrate from the Northern Triangle. Weak institutions and corrupt government officials, chronic poverty, rising levels of crime, and demand for illicit drugs result in insecurity and citizens' low levels of confidence in government institutions. These \"push\" factors intersect with \"pull\" factors attracting migrants to the United States, including economic and educational opportunities and a desire to reunify with family members. Addressing these factors is complex. Under the U.S. Strategy for Engagement in Central America, the United States is working with Central American governments to promote economic prosperity, improve security, and strengthen governance in the region. Since 2014, Mexico has helped the United States manage flows of Central American migrants, including a recent decision to allow certain U.S.-bound asylum seekers to remain in Mexico while awaiting U.S. immigration proceedings. The United Nations High Commissioner for Refugees (UNHCR)—in collaboration with local and federal governments and civil society—is providing immediate and longer-term support for Mexico's refugee agency and migrants in transit. Central Americans who wish to request asylum in the United States may do so at a U.S. port of entry before a Customs and Border Protection (CBP) officer or upon apprehension by a CBP officer between U.S. ports of entry. Those requesting asylum at the border undergo screening to determine whether they can pursue an asylum claim. To receive asylum, a foreign national must establish, among other requirements, that he or she is unable or unwilling to return to his or her home country because of past persecution or a well-founded fear of future persecution based on one of five protected grounds (race, religion, nationality, membership in a particular social group, or political opinion). In 2018, President Trump, the Department of Homeland Security (DHS), and the Department of Justice (DOJ) took various actions to tighten the U.S. asylum system. These actions have been met with legal challenges. For example, on November 9, 2018, the President issued a presidential proclamation to suspend immediately the entry into the United States of aliens who cross the Southwest border between ports of entry. This proclamation and a related DHS-DOJ rule are being challenged in federal court. Chapter 15, Title 10 of the U.S. Code provides general legislative authority for the Armed Forces to provide certain types of support to federal, state, and local law enforcement agencies. In October 2018, active-duty personnel were deployed to the Southwest border to provide assistance in air and ground transportation, logistics support, engineering capabilities and equipment, medical support, housing, and planning support. The Posse Comitatus Act constrains the manner in which military personnel may be used in a law enforcement capacity at the border. President Trump has contemplated proclaiming a national emergency pursuant to the National Emergencies Act (NEA) in order to fund a physical barrier at the southern border with Mexico using DOD funds. Congress provided the President with significant discretion to reduce foreign assistance to Central America in FY2018, dependent on the governments of El Salvador, Guatemala, and Honduras addressing a variety of congressional concerns, including improving border security, combating corruption, and protecting human rights. The President's ability to modify assistance to the Northern Triangle for the remainder of FY2019 will depend on provisions Congress may include in future appropriations legislation.", "document_type": "crs"}
{"report": "The consumer data industry collects and subsequently provides information to firms about behavior when consumers conduct various financial transactions. Firms use this data to determine whether consumers have engaged i n behaviors that could be costly or beneficial to the firms. For example, lenders rely upon credit reports and scoring systems to determine the likelihood that prospective borrowers will repay their loans. The data may also be used to predict consumer behaviors that would financially benefit firms. Although the general public is likely to be more familiar with the use of credit reporting and scoring to qualify for mortgage and other consumer loans, the scope of consumer data use is much broader. Insured depository institutions (i.e., banks and credit unions) rely on consumer data service providers to determine whether to make checking accounts or loans available to individuals. Insurance companies use consumer data to determine what insurance products to make available and to set policy premiums. Some payday lenders use data regarding the management of checking accounts and payment of telecommunications bills to determine the likelihood that a consumer will fail to repay small-dollar cash advances. Merchants rely on the consumer data industry to determine whether to approve payment by check or electronic payment card. Employers may use consumer data information to screen prospective employees to determine, for example, the likelihood of fraudulent behavior. In short, numerous firms rely upon consumer data to identify and evaluate the risks associated with entering into financial relationships or transactions with consumers. Greater reliance by firms on consumer data significantly affects consumer access to financial products or opportunities. For example, negative or derogatory information, such as multiple overdrafts, involuntary account closures, loan defaults, and fraud incidents, may influence a lender to deny a consumer access to credit. Further, such information may stay on a consumer's reports for several years. The inclusion of negative information may be particularly limiting to consumers under circumstances in which such information is inaccurate or needs to be updated to reflect more current and possibly more favorable financial situations. Furthermore, consumers may find the process of making corrections to consumer data reports to be time-consuming, complex, and perhaps ineffective. The exclusion of more favorable information, such as the timely repayment of noncredit obligations, from standard credit reporting or scoring models may also limit credit access. This report first provides background information on the consumer data industry and various specialty areas. The report examines one prominent specialty area—consumer scoring—and describes various factors used to calculate credit scores. Next, the report provides a general description of the current regulatory framework of the consumer data industry. Finally, the report discusses selected policy issues pertaining to consumer data reports. Specifically, the report addresses policy issues concerning inaccurate or disputed consumer data provided in consumer data reports; how long negative or derogatory information should remain in consumer data reports; differences in billing and collection practices that can adversely affect consumer data reports, an issue of particular concern with medical billing practices; consumer's rights; whether uses of credit bureau data outside of the financial services, such as for employment decisions, adversely affect consumers and should be limited; whether the use of alternative consumer data or newer versions of credit scores may increase accuracy and credit access; and how to address data protection and security issues in consumer data reporting. For each policy issue, the report addresses corresponding legislative and regulatory developments. In the 116 th Congress, credit reporting and the consumer data industry is a topic of interest. On February 26, 2019, the House Financial Services Committee held a hearing on the consumer data industry, entitled, \" Who ' s Keeping Score? Holding Credit Bureaus Accountable and Repairing a Broken System .\" House Financial Services Committee Chairwoman Maxine Waters has also released two draft bills: the Comprehensive Credit Reporting Reform Act of 2019 (CCRRA) and the Protecting Innocent Consumers Affected by a Shutdown Act, which, if enacted, would address many of the policy issues discussed in this report. Where relevant, the report discusses the approach these bills would take to addressing the policy issues examined. This section provides background information on the consumer data industry, which generally includes credit reporting agencies (CRAs), also referred to as credit bureaus (both terms are used interchangeably in this report). This section also provides background on credit scoring, a specialty service the industry provides, including a summary of the key factors known to affect credit scores. According to the Fair Credit Reporting Act (FCRA), which generally regulates the business of credit reporting, CRAs are firms that prepare consumer reports based upon individuals' financial transactions history data. Such data may include historical information about credit repayment, tenant payment, employment, insurance claims, arrests, bankruptcies, and check writing and account management. Consumer files, however, do not contain information on consumer income or assets. Consumer reports generally may not include information on items such as race or ethnicity, religious or political preference, or medical history. Equifax, Experian, and TransUnion are the three largest nationwide providers of credit reports. Other CRAs provide a variety of specialized consumer reporting services. Some specialty CRAs collect data regarding payment for phone, utilities (e.g., electric, gas, water), and telecommunication (e.g., cable) services. Utility and telecommunication service providers use the reports to verify the identity of customers and determine downpayment requirements for new customers. Property management companies and rent payment services may report to CRAs that specialize in collecting rent payment data for tenant and employment screening. Some CRAs specialize in consumer reporting for the underbanked, near prime, and subprime consumer segments, including consumers with minimal recorded data. Some CRAs specialize in debt collection (recovering past due funds) and fraud verification data. Firms that use consumer reports may also report information to CRAs, thus serving as furnishers . A tradeline is an account attached to a particular consumer that is reported to a CRA by a furnisher. A tradeline serves as a record of the transaction (payment) activity associated with the account. Furnishing tradelines is voluntary, and furnishers are not required to submit tradelines to all CRAs. Furnishers also have different business models and policies, resulting in different reporting practices. Some furnishers may report all unpaid customer obligations that were deemed uncollectible and written off their balance sheets; some report when money balances owed surpass minimum threshold levels; some report only the principal balances owed minus the penalties and fees; and others may report all monies owed. Furnishers also have discretion over the types of obligations they wish to report. Benefits to users of consumer data increase as more individual companies choose to participate as furnishers, but furnishers do incur costs to report data. To become furnishers, firms must be approved and comply with the policies of a CRA, such as fee registration requirements. The transfer of consumer data involves security risks, and many CRAs have adopted standardized reporting formats and requirements approved by the Consumer Data Industry Association (CDIA) for transferring data. Furnishers must be able to comply with industry data transfer requirements or some CRAs are unlikely to accept their data. Compliance may require investing in technology compatible with the computer systems of a CRA. Compliance costs may be more burdensome for smaller firms, causing some to choose not to be furnishers. In addition, entities that elect to become furnishers face legal obligations under the FCRA. The FCRA requires furnishers to report accurate and complete information as well as to investigate consumer disputes. Hence, reporting obligations could possibly, under some circumstances, result in legal costs, which may also influence a firm's decision to become a furnisher. Business models and policies of CRAs are also different. Different CRAs may collect the same information on the same individuals but adopt different conventions for storing the information. One CRA may report a delinquent debt obligation separately from the penalties and fees whereas another CRA may choose to combine both items into one entry. Consequently, consumer reports obtained from different CRAs on the same consumer are likely to differ due to different policies adopted by furnishers, CRAs, or both. A consumer score is a (numeric) metric that can be used to predict a variety of financial behaviors. Consumer credit scores are prepared for lenders to determine, for example, the likelihood of loan default. Other consumer scores can be prepared to predict the likelihood of filing an insurance claim, overdrawing a bank account, failing to pay a utility bill, committing fraud, or a host of other adverse financial behaviors. Consumer scores are typically computed using the information obtained from one or more consumer reports. Rather than maintaining a repository of credit records, some firms are primarily engaged in the production of consumer scores. Hence, consumer scoring can be considered a specialty service in the consumer data industry. For example, if a user of a consumer report subsequently wants a consumer score, it may be charged an additional fee. Given the variety of different financial behaviors to predict, there are many consumer scores that can be calculated. Consumer scores for the same individual and behavior calculated by different scoring firms are also likely to differ. Consumer scoring firms may have purchased consumer information from different CRAs, which have their own policies for storing and reporting information. Each scoring firm has its own proprietary statistical model(s), meaning that each firm decides what consumer information should be included and excluded from calculations. Each firm can choose its own weighting algorithms. For example, included information can be equally weighted, or heavier weights can be placed on more recent information or on information otherwise deemed more pertinent. Sometimes the consumer scoring firm selects the appropriate weighting scheme, and sometimes the requestor of a consumer score may provide instructions to the preparer. Hence, consumers may not see the actual scores used until after the decisionmaking firms release them, particularly in cases when customized scores were requested and used in the decisionmaking process. This section provides a brief overview of existing consumer protections and regulation related to credit reporting. As noted, the Fair Credit Reporting Act, enacted in 1970, is the main statute regulating the credit reporting industry. The FCRA requires \"that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.\" The FCRA establishes consumers' rights in relation to their credit reports, as well as permissible uses of credit reports. It also imposes certain responsibilities on those who collect, furnish, and use the information contained in consumers' credit reports. The FCRA includes consumer protection provisions. Under the FCRA, consumers must be told when their information from a CRA has been used after an adverse action (generally a denial of credit) has occurred, and disclosure of that information must be made free of charge. Consumers have a right to one free credit report every year (from each of the three largest nationwide credit reporting providers) even in the absence of an adverse action (e.g., credit denial). Consumers also have the right to dispute inaccurate or incomplete information in their report. After a consumer alerts a CRA of such a discrepancy, the CRA must investigate and correct errors, usually within 30 days. The FCRA also limits the length of time negative information may remain on reports. Negative collection tradelines typically stay on credit reports for 7 years, even if the consumer pays in full the item in collection; a tradeline associated with a personal bankruptcy stays on a credit report for 10 years. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) established the Bureau of Consumer Financial Protection (CFPB), consolidating many federal consumer financial protection powers from other federal agencies. The CFPB has rulemaking and enforcement authorities over all CRAs for certain consumer protection laws; it has supervisory authority, or the authority to conduct examinations, over the larger CRAs. In July 2012, the CFPB announced that it would supervise CRAs with $7 million or more in annual receipts, which included 30 firms representing approximately 94% of the market. The CFPB conducts examinations of the CRAs, reviewing procedures and operating systems regarding the management of consumer data and enforcing applicable laws. In 2017, the CFPB released a report of its supervisory work in the credit reporting system. The report discusses the CFPB's efforts to work with credit bureaus and financial firms to improve credit reporting in three specific areas: data accuracy, dispute handling and resolution, and furnisher reporting. As the report describes, credit bureaus and financial firms have developed data governance and quality control programs to monitor data accuracy through working with the CFPB. In addition, the CFPB has encouraged credit bureaus to improve their dispute and resolution processes, including making it easier and more informative for consumers. Recently, Congress has also been interested in improving consumer protections in the credit reporting system, particularly in response to the 2017 Equifax data breach, which exposed personal information of millions of consumers. The Economic Growth, Regulatory Relief, and Consumer Protection Act ( P.L. 115-174 ), which was enacted in 2018, established new consumer protections relating to credit reporting, including the right to a free credit freeze. Credit freezes allow consumers to stop new credit from being opened in their name, to protect themselves from fraud and identity theft. This section examines selected policy issues pertaining to the use of credit reports and scores in consumer lending decisions. For each policy issue, the report highlights recent legislative and regulatory developments and discusses selected legislative proposals from the 116 th Congress that would address the issue. The accuracy of consumer information in consumer data reports has been an ongoing policy concern. Inaccurate information in a credit report may limit a consumer's access to credit in some cases or increase the costs to the consumer of obtaining credit in others. In 2012, the Federal Trade Commission (FTC) reported that 26% of participants in a survey of credit report accuracy were able to identify at least one potentially material error on at least one of approximately three different credit reports prepared using their consumer information. After the reports were corrected, 13% of participants in the FTC study saw one or more of their credit scores increase. For those who saw an increase, over 40% of their scores rose by more than 20 points, which could increase the likelihood that the consumer would be offered less expensive credit terms. Credit reporting inaccuracies may occur for various reasons. Consumers may inadvertently provide inaccurate data when applying for financial services. Furnishers may inadvertently input inaccurate information into their databases. Matching information to the proper individual poses challenges, such as in cases when multiple individuals have similar names and spellings. In some cases, the information may be properly matched, but the individual could be a victim of fraud or identity theft. The predictive power of consumer data, or the ability to accurately predict a consumer's likelihood to default on a loan, would be enhanced to the extent that consumer tradelines are regularly updated with correct and current information. As mentioned in the previous section, the CFPB has recently encouraged credit bureaus and financial firms to improve data accuracy in credit reporting. For example, since 2014, the CFPB has required the largest consumer reporting firms to provide standardized accuracy reports on a regular basis. The accuracy reports must specify the frequency that consumers dispute information, list furnishers and industries with the most disputes, and provide dispute resolution information. According to the CFPB, the top 100 furnishers provide 76% of tradeline information to the largest nationwide CRAs, and the furnishers regularly update the account status of reported tradelines. In addition, the larger CRAs have also made improvements to the communication tool they use to facilitate the dispute resolution process between consumers and furnishers. Further, effective July 1, 2017, the CRAs enhanced public record data standards for the collection and timely updating of civil judgements and tax liens. Public record data must contain minimum identifying information (i.e., name, address, and Social Security number or date of birth) and must be updated at least every 90 days; otherwise, the tax lien and civil judgment information will no longer be reported. The accuracy of credit reports, nonetheless, ultimately depends upon consumers to monitor and dispute any discrepancies. If enacted, Chairwoman Waters' draft bill—the Comprehensive Credit Reporting Reform Act of 2019 (CCRRA)—would address some concerns relating to inaccurate or disputed data by establishing new consumer rights around the dispute process. These rights would include guaranteeing consumers more information about dispute investigations and granting consumers the right to appeal disputes to credit bureaus, thus formalizing the process. The CCRRA also would explicitly establish consumers' right to seek injunctive relief, a legal remedy where a court requires future behavior change (e.g., removing adverse information from a credit record). Lastly, the bill would provide credit restoration to consumers who are the victims of some predatory activities, such as deceptive lender acts or discrimination. Policymakers have also considered the appropriate length of time negative information should be allowed to remain on a credit report. Negative information generally refers to delinquencies or defaults, which typically remain on credit reports for seven years. Negative information in a credit report often results in a consumer appearing to pose a greater risk of default or other negative behavior. This may lead a consumer to either pay more for financial services or, in some cases, be denied access to credit entirely. Limiting a consumer's access to certain financial services, such as depository checking accounts or lower cost loans, may disproportionately affect the consumer's cost of engaging in financial transactions. Similarly, the use of consumer data reports by potential employers, discussed further below, may limit job opportunities that could arguably help applicants overcome financial challenges and thereby improve their credit histories. Retaining negative information on credit reports for an extended period of time may pose benefits and detriments. On the one hand, under circumstances in which the underlying information in a consumer data report is inaccurate or out of date, consumers may improperly be considered to pose a greater risk to a firm. In that case, the consumer may be offered costlier credit options (or even face denials of credit) that do not accurately reflect the consumer's actual risk of default. In other cases, consumers also may unfairly be considered to pose a greater risk now due to circumstances in the past that they have since overcome. On the other hand, the longer information remains on the credit report arguably allows lenders to see long-term trends that may be helpful for distinguishing between a rare occurrence and a consistent pattern in a consumer's behavior. Shorter or insufficient periods of time in which negative tradelines appear on consumer reports may also compromise the ability to compute reliable scores. If lenders view credit reports and scores as unreliable due to premature removal of negative information, they could increase downpayment requirements across the board for all credit applicants or reduce loan amounts. In short, lenders who are uncertain about data reliability might adopt stricter underwriting and lending policies. In addition to restricting credit access generally, this could reduce competition by allowing lenders with an established relationship and more information on a consumer to provide more favorable terms to that consumer than other companies. In addition, the Association of Certified Fraud Examiners (ACFE) found that poor credit can signal criminal activity, and earlier removal of negative information may make it more difficult for an organization to detect fraud, which may be particularly costly for small businesses and nonprofit organizations. Many preparers and users of credit scores have adopted weighting schemes that place less weight on older information in a consumer data report. Maintaining longer (rather than shorter) durations of negative tradelines on reports allows preparers to make greater use of variable-weighted algorithms to calculate scores, which may be useful when the importance of a weight needs to be modified over time. In addressing this policy issue, the CCRRA would shorten the time period that adverse information could remain on a person's credit report by three years (such that it remains on the report for a total of four years), among other things. Another policy issue that often arises in connection with credit reporting is that different holders of consumer debt bill differently and report to the CRAs differently. Inconsistent reporting practices result in variation of the timing with which unpaid debts appear on consumer reports. For example, medical providers may assign unpaid bills to debt collectors or sell outstanding debts to debt buyers. Some medical providers may assign or sell the debt after 60 days, but some may do so after 30 days (by comparison, most bank credit card delinquencies are assigned or sold after 180 days). Some firms may turn obligations over to collections as a tool to encourage consumers to settle unpaid balances, blurring the distinction between billing and collecting policies. Debt collectors or buyers subsequently furnish negative information to CRAs, causing tradeline accounts to appear on consumer reports. The CFPB used a random sample of approximately 5 million consumers as of December 2012 to determine what types of tradeline accounts were reported most frequently and the amounts. The CFPB found that approximately 33% of credit reports surveyed had collection tradelines, and approximately 52% of those collection tradelines were related to medical collections. After medical obligations, the CFPB found that the remaining collection tradelines of significant relevance were associated with unclassified debts (17.3%), cable or cellular bills (8.2%), utilities (7.3%), and retail stores (7.2%). All other categories of collectible tradelines were approximately 2% or less of the survey. For 85% of the respondents, the amounts owed for medical debt were for less than $1,000. In short, more than half of collection tradelines were associated with medical debt, and they were for relatively small amounts. Specifically, the median amount owed for the medical collection tradelines was $207, and 75% of all medical collection tradelines were under $490. One form of consumer debt—medical debt—is most often disputed by consumers and raises specific policy issues related to inconsistent billing and reporting practices. According to the CFPB study, consumers are unlikely to know when and how much various medical services cost in advance, particularly those associated with accidents and emergencies. People often have difficulty understanding co-pays and health insurance deductibles. Consequently, consumers may delay paying medical obligations as they either assume their insurance companies will pay or attempt to figure out why they have been billed, which often results in medical debt appearing unpaid on credit reports. Regulators and industry have taken actions that may reduce medical tradelines and their associated negative effects on consumer credit data. On December 31, 2014, the Internal Revenue Service (IRS) announced a final rule requiring the separation of billing and collection policies of nonprofit hospitals. Under the rule, hospitals that have or are pursuing tax-exempt status are required to make reasonable efforts to determine whether their patients are eligible for financial assistance before engaging in \"extraordinary collection actions,\" which may include turning a debt over to a collection agency (thus creating a medical tradeline) or garnishing wages. In short, tax-exempt hospitals must allow patients 120 days from the date of the first billing statement to pay the obligation before initiating collection procedures. The IRS rule only impacts nonprofit hospitals, but, on September 15, 2017, the three major credit reporting agencies—Experian, Equifax, and TransUnion—established a 180-day (6 month) waiting period before posting a medical collection of any type on a consumer credit report. In addition, P.L. 115-174 , Section 302, amends the FCRA to provide credit reporting protections for veterans as follows: CRAs must exclude certain medical debt incurred by a veteran from his or her credit report if the hospital care or medical services relating to the debt predates the credit report by less than one year. CRAs must remove from the credit report a veteran's fully paid or settled medical debt previously characterized as delinquent, charged off, or in collection. CRAs must establish a dispute process and verification procedures for veterans' medical debt. Active duty military personnel receive free credit monitoring. The CCRRA would impose restrictions on the appearance of medical collections on consumer credit reports, codifying the CRA's 2017 180-day rule. It would also require expedited removal of all fully repaid or settled debts, including medical collections. Consumers sometimes find it difficult to advocate for themselves when credit reporting issues arise because they are not aware of their rights and how to exercise them. According to a CFPB report, some consumers are confused about what credit reports and scores are, find it challenging to obtain credit reports and scores, and struggle to understand the contents of their credit reports. The CFPB receives more credit reporting complaints than complaints in any other industry it regulates. Currently, the CFPB provides financial education resources on its website to help educate consumers about their rights regarding consumer reporting. The credit bureaus' websites also provide information about how to dispute inaccurate information, and consumers can contact them by phone or mail. The CCRRA proposes that CRAs provide free credit scores and explanations of those scores to consumers in their annual free credit report. In addition, consumers would be entitled to these free credit reports at other times, for example, whenever they apply for a new mortgage, auto loan, or student loan, or if a consumer's identity is stolen. The report and score used to make underwriting decisions in connection with these events would be provided to the consumer. The CCRRA also would direct the credit bureaus to give consumers more information on dispute rights, and it would require hard inquires to be limited for a longer 120-day shopping window for certain consumer credit products (as described in the box \"Some Factors Frequently Used to Calculate Credit Scores\" above). Policy questions exist regarding the appropriate uses of credit bureau data, particularly for uses outside of extending credit to consumers. For example, credit information can be used for employment decisions. According to the Society for Human Resource Management (a human resources professional society), in 2012, almost half of surveyed organizations in their membership used credit background checks on some of their job applications. Employers report that they use this information to reduce the likelihood of employee theft or embezzlement and to reduce legal liability for negligent hiring. To comply with the FCRA, employers must inform an applicant that his or her credit report is a part of a hiring decision, and acquire the applicant's written permission to obtain the report. If an applicant is denied a job, or if the employer takes another adverse action due to information on a credit report, then the applicant must be given a copy of the report and a summary of their FCRA rights. Whether the use of credit information in employment decisions unnecessarily harms prospective job applicants is debatable. For some occupations, past financial difficulties may increase the likelihood, for example, that the employee could be bribed or compromised in some way; however, this information may not be essential for success in all occupations. Currently, many states limit employers' use of credit information for employment decisions. The CCRRA would ban the use of credit information for employment decisions, unless required by law or for a national security investigation. The CFPB estimates that credit scores cannot be generated for approximately 20% of the U.S. population due to their limited credit histories. The CFPB distinguishes between different types of consumers with limited credit histories. One category of consumers, referred to as credit invisibles , have no credit record at the three largest credit bureaus and, thus, do not exist for the purposes of credit reporting. According to the CFPB, this group represents 11.0% of the U.S. adult population, or 26 million consumers. Another category of consumers do exist (have a credit record), but they still cannot be scored or are considered non scorable . Nonscorable consumers either have insufficient (short) histories or outdated (stale) histories. The insufficient and stale unscored groups, each containing more than 9 million individuals, collectively represent 8.3% of the U.S. adult population, or approximately 19 million consumers according to the CFPB. Younger adults may be part of the credit invisible or nonscorable population because they lack a sufficient credit history. As consumers get older, however, the problem of being credit invisible or belonging to the insufficient part of the nonscorable group typically declines, but may begin to reoccur after the age of 60. Older adults, who may have considerably reduced their credit usage, perhaps as they prepare to enter retirement years, may encounter the problem of having stale credit records. Because credit scoring models vary by firms, consumers that cannot be scored by some models might still have the ability to be scored by other models; thus, the state of being nonscorable may depend upon the credit reporting data records and scoring models used. Borrowers with missing or impaired credit histories may be able to improve their ability to get reliable credit scores by using credit building loans, such as secured credit cards that require either security deposits as collateral for the amount of the line of credit or links to checking or savings accounts, thereby allowing lenders to recover funds if payments are missed. The security deposit is refunded if borrowers do not miss payments. Secured credit card lending can help borrowers build or repair their credit histories, assuming that the more favorable customer payment activity is reported to credit bureaus. In addition, the use of alternative credit scores may also help the credit invisibles because other types of consumer payment activity (discussed below) may be predictive in regard to how borrowers would manage credit. In short, options that increase the ability to calculate scores for the invisible or currently nonscoreable consumer groups could allow lenders to better determine the quantity and scope of financial relationships they can establish with such groups. A lternative credit scoring models could potentially increase accuracy by including additional information beyond that which is traditionally included in a credit report. For example, some credit score models do not distinguish between unpaid and paid (resolved) tradelines. Most credit scores are calculated without utility and rent payments information. Arguably, including this information would benefit the credit scores for some individuals with limited or no credit histories, potentially increasing their access to—and lowering their costs of—credit. Conversely, information about medical debts has often been included in credit scores, but the unevenness in medical reporting, as previously discussed, and possibly the consumers' lack of choice in incurring medical debt raises questions about whether medical debt tradelines should be considered reliable predictors of creditworthiness or credit performance. For this reason, some newer versions of credit scoring apply less weight to medical debt. In short, developing credit scores with new information might allow lenders to find new creditworthy consumers. Regulators and Congress have considered the potential for alternative credit scoring. In 2014, the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac—the government-sponsored enterprises (GSEs) that purchase mortgages in the secondary market—to consider using more updated credit scoring models in their mortgage underwriting. Under P.L. 115-174 , FHFA is required to define, through rulemaking, the standards and criteria the GSEs will use for validating credit score models used when evaluating whether to purchase a residential mortgage. If enacted, the CCRRA would direct the CFPB to report to Congress on the impact of using nontraditional data on credit scoring. Full implementation of newer versions of credit scoring models, however, may not occur quickly. In the mortgage market, upgrading automated underwriting systems is costly for the GSEs, FHA, and loan originators. Not all originators will choose to update their automated underwriting systems. Even if alternative credit scoring models were widely adopted, the credit score is not the only variable considered during the underwriting process. Just as several factors are included in the development of a credit score, a credit score is only one of several factors included in an automated underwriting model (also referred to as an underwriting scorecard). The debt-to-income ratio, for example, may still be an important variable for mortgage underwriting. Higher levels of medical and student loan debts may still affect mortgage underwriting decisions. Hence, the use of alternative credit scores may help some borrowers close to a threshold or borderline, yet still not translate into significant changes in credit access across the board. Congressional interest in data protection and security in the consumer data industry has increased following the announcement, on September 7, 2017, of the Equifax cybersecurity breach that potentially revealed sensitive consumer data information for 143 million U.S. consumers. CRAs are subject to the data protection requirements of Section 501(b) of the Gramm-Leach-Bliley Act (GLBA). Section 501(b) requires the federal financial institution regulators to \"establish appropriate standards for the financial institutions subject to their jurisdiction relating to administrative, technical, and physical safeguard—(1) to insure the security and confidentiality of consumer records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access or use of such records or information which could result in substantial harm or inconvenience to any customer.\" The CFPB does not have the authority to prescribe regulations with regard to safeguarding the security and confidentiality of customer records. Instead, the FTC has the authority to enforce Section 501(b) as the federal functional regulator of nonbank financial institutions, including CRAs. The FTC has promulgated rules implementing the GLBA requirement. Because the FTC has little upfront supervisory or enforcement authority, the agency typically must rely upon its enforcement authority after an incident has occurred. In the 116 th Congress, bills such as H.R. 331 and H.R. 1282 would direct the FTC to ensure sufficient standards for safeguarding consumer information, including for the credit bureaus and data furnishers. In addition, in March 2019, a Government Accountability Office report became public that recommended actions for the FTC, the CFPB, and Congress to strengthen oversight of credit bureaus' data security. Meanwhile, P.L. 115-174 , Section 301, requires credit bureaus to provide fraud alerts for consumer files for at least a year under certain circumstances. In addition, credit bureaus must provide consumers with one free freeze alert and one free unfreeze alert per year. The law also established further requirements to protect minors. Currently, many credit bureaus provide consumers services such as credit monitoring for identity theft victims. In general, credit bureaus charge fees for these services, paid for by either a consumer or private company after a data breach incident. The CCRRA would expand protections for identity theft victims, including the right to free credit monitoring and identity theft services. It would require the CFPB to create new regulations to define the parameters for these new consumer benefits, including how long they should be provided and what services should be included. ", "summary": "The consumer data industry—generally referred to as credit reporting agencies or credit bureaus—collects and subsequently provides information to firms about the behavior of consumers when they participate in various financial transactions. Firms use consumer information to screen for the risk that consumers will engage in behaviors that are costly for businesses. For example, lenders rely upon credit reports and scores to determine the likelihood that prospective borrowers will repay their loans. Insured depository institutions (i.e., banks and credit unions) rely on consumer data service providers to determine whether to make available checking accounts or loans to individuals. Some insurance companies use consumer data to determine what insurance products to make available and to set policy premiums. Some payday lenders use data regarding the management of checking accounts and payment of telecommunications and utility bills to determine the likelihood of failure to repay small-dollar cash advances. Merchants rely on the consumer data industry to determine whether to approve payment by check or electronic payment card. Employers may use consumer data information to screen prospective employees to determine the likelihood of fraudulent behavior. In short, numerous firms rely upon consumer data to identify and evaluate potential risks a consumer may pose before entering into a financial relationship with that consumer. Greater reliance by firms on consumer data significantly affects—and potentially limits—consumer access to financial products or opportunities. Specifically, negative or derogatory information, such as late payments, loan defaults, and multiple overdrafts, may stay on consumer reports for several years and lead firms to deny a consumer access to credit, a financial product, or a job opportunity. Having a nonexistent, insufficient, or a stale credit history may also prevent credit access. Accordingly, various policy issues have been raised about the consumer data industry, most notably including the following: How to address inaccurate or disputed consumer data provided in consumer data reports; How long negative or derogatory information should remain in consumer data reports; How to address differences in billing and collection practices that can adversely affect consumer data reports, an issue of particular concern with medical billing practices; How to ensure that consumers are aware of their rights and how to exercise them in the event of a consumer data dispute; Whether uses of consumer data reports outside of the financial services, such as for employment decisions, adversely affect consumers and should be limited; Whether the use of alternative consumer data or newer versions of credit scores may increase accuracy and credit access; and How to address data protection and security issues in consumer data reporting. Congress has shown continuing interest in these and other policy questions surrounding the consumer data industry, particularly in its regulation and whether such regulation currently provides sufficient protection to consumers. In the 116th Congress, legislation has been introduced to address many of these concerns. The Comprehensive Credit Reporting Reform Act of 2019 (CCRRA) and the Protecting Innocent Consumers Affected by a Shutdown Act, both released as drafts by Chairwoman Maxine Waters, would amend the Fair Credit Reporting Act (FCRA) and create additional laws to address these concerns. Other relevant bills introduced in the 116th Congress address topics such as credit reporting and cybersecurity (H.R. 331 and H.R. 1282); credit information used for auto insurance (H.R. 1756); and federal employees affected by the shutdown (H.R. 935, H.R. 799, H.R. 1286, and S. 535).", "document_type": "crs"}
{"report": "The Military Personnel Records division of the National Personnel Records Center (NPRC), a component of the National Archives and Records Administration (NARA) located in St. Louis, Missouri, holds most existing U.S. military personnel, health, and medical records of discharged and deceased veterans of all services from World War I to the present. Neither the NPRC nor the Department of Defense (DOD) intends to destroy the physical records of U.S. servicemembers. Some older records have been electronically scanned to reduce the handling of fragile records. See NARA's site \"Access to Military Service and Pension Records\" at https://www.archives.gov/research/order/order-vets-records.html . Official Military Personnel File (OMPF) records may be requested online at https://www.archives.gov/veterans/military-service-records , by using the Standard Form 180 and submitting by mail (the appropriate address listed on the back of the form), or fax (314-801-9195). Veterans and their next-of-kin (NOK) may request these records. According to the NPRC, for the Air Force, Navy, Marine Corps, and Coast Guard, the NOK is defined as the unremarried widow or widower, son, daughter, father, mother, brother or sister; for the Army, the NOK is defined as the surviving spouse, eldest child, father or mother, eldest sibling or eldest grandchild. If an individual does not meet the definition of a NOK, he or she is considered a member of the general public and may request military personnel records via the Freedom of Information Act (FOIA). See \"Access to OMPFs for the General Public\" at https://www.archives.gov/st-louis/military-personnel/public/general-public.html . In 1973, a fire at NPRC destroyed approximately 16 million to 18 million Army and Air Force official military personnel files. In such cases where files were lost, NPRC uses alternate sources of information to respond to requests. More information about obtaining military personnel files can be found on the NPRC website, http://www.archives.gov/st-louis/military-personnel/ , or by contacting the center at National Personnel Records Center Military Personnel Records 1 Archives Drive St. Louis, MO 63138 Tel: [phone number scrubbed] congressional line Tel: [phone number scrubbed] public line Status Update Request Form: https://www.archives.gov/st-louis/forms Older military personnel records (generally prior to 1917) are located at National Archives and Records Administration (NARA) Textual Archives Division Washington, DC 20408 http://www.archives.gov/veterans/military-service-records/pre-ww-1-records.html For guidance on the review of discharges and military corrections boards, see NARA's \" Veterans' Service Records: Correcting Military Service Records \" . For i nformation on the military service review boards (Air Force, Army, Coast Guard, and Navy and Marine Corps) , see \" Boards for Correction of Military Records (BCMR) / Discharge Upgrades \" site. NARA's site also provides the following BCMR guidance: \" Prior to submitting a request to a Board for Correction of Military Records, ALL administrative avenues must be used. Generally, that means a request to NPRC for a correction (minor corrections can be made by NPRC), then a request to the military service department (service departments can make more corrections than NPRC), and finally if both these fail, then submit DD Form 149, with supporting evidence as instructed on the form .\" The NPRC also provides information and guidance on how to request military awards and decorations online and by mail for veterans and their NOK; replacing certain military medals; and obtaining a Cold War Recognition Certificate. This is available for the records of a servicemember who separated before or during 1956. For records for individuals who separated after 1956, these records can be requested through FOIA. The general public may also purchase a copy of the veteran's OMPF to determine the awards due and obtain the medals from a commercial source. Individuals can request information on military service medals, decorations and awards online: https://www.archives.gov/personnel-records-center/awards-and-decorations . By military service (Army, Navy, Marine Corps, and Air Force including Army Air Corps & Army Air Forces) via mail: National Personnel Records Center 1 Archives Drive St. Louis, MO 63138 For Coast Guard: Coast Guard Personnel Service Center 4200 Wilson Blvd., Suite 900 (PSC-PSD-MA) Stop 7200 Arlington, VA 20598-7200 The National Defense Authorization Act (NDAA) for Fiscal Year 1998 ( P.L. 105-85 ) in Section 1084 required the Secretary of Defense to prepare a certificate recognizing the Cold War service of qualifying members of the Armed Forces and civilian personnel of DOD and other government agencies contributing to national security. This certificate, known as the \"Cold War Recognition Certificate,\" may be awarded upon individual request to all members of the Armed Forces and qualified federal government civilian personnel who served the United States during the Cold War era from September 2, 1945, to December 26, 1991. The Modern Military Records office of NARA has custody of records relating to World War I, World War II, Korea, and Vietnam. The records vary by conflict and branch of service; for example, the records for Army units active during the interwar periods (1920-1939 and 1945-1950) are incomplete. For more information, contact the Textual Records office at Textual Records Office National Archives and Records Administration at College Park 8601 Adelphi Road College Park, MD 20740-6001 Tel: [phone number scrubbed] Email: [email address scrubbed] If a military unit record is not publicly available, a FOIA request may be submitted to the agency where the record is held. For example, for special access records held at the National Archives at College Park, contact the Archives FOIA office at the following: Special Access and FOIA Division National Archives at College Park 8601 Adelphi Road College Park, MD 20740-6001 Tel: [phone number scrubbed] Email: [email address scrubbed] For more information on how to submit a FOIA request, visit https://www.foia.gov/how-to.html . Other types of auxiliary and organizational records, including Army morning reports, Army unit rosters, Army officer pay cards, Navy muster rolls, U.S. Army Surgeon General's office records and Veterans Administration index cards are maintained at the National Archives in St. Louis, Missouri. Further information regarding these records, as well as the timespan of available records for each category, are available at http://www.archives.gov/st-louis/archival-programs/other-records/index.html . Certain published unit histories can also be found in the collections of the military departments (see Table 1 ). To support disability claims of exposure to hazardous materials (Agent Orange, asbestos, etc.), numerous veterans are culling through Army morning reports, unit rosters, pay cards, Navy muster rolls, Captain logs/Navy Deck logs, etc. during their military service. For more information on military exposures, see the VA's Military Exposure site: https://www.publichealth.va.gov/exposures/index.asp . At this time, VA continues to study the long-term health issues of deployed veterans and their exposure to burn pits used at military waste sites in Iraq and Afghanistan. Currently, there is no compensation available for exposure to burn pits. For more information, see the VA's Public Health site on Burn Pits at https://www.publichealth.va.gov/exposures/burnpits/ and related CRS products on VA health care and disability in the sources below. CRS Report R41386, Veterans' Benefits: Burial Benefits and National Cemeteries , by Scott D. Szymendera CRS Report R42324, Who Is a \"Veteran\"?—Basic Eligibility for Veterans' Benefits , by Scott D. Szymendera CRS Report R42747, Health Care for Veterans: Answers to Frequently Asked Questions , by Sidath Viranga Panangala CRS Report R44837, Benefits for Service-Disabled Veterans , by Benjamin Collins, Scott D. Szymendera, and Libby Perl CRS Report 95-519, Medal of Honor: History and Issues , by Barbara Salazar Torreon CRS Report R42704, The Purple Heart: Background and Issues for Congress , by Barbara Salazar Torreon CRS Report RS21405, U.S. Periods of War and Dates of Recent Conflicts , by Barbara Salazar Torreon American Battle Monuments Commission (ABMC) at http://www.abmc.gov The website contains databases of veterans interred or memorialized at overseas American military cemeteries and memorials. The Civil War Soldiers and Sailors System, National Park Service https://www.nps.gov/civilwar/soldiers-and-sailors-database.htm This website contains a database of the men who served in the Union and Confederate armies during the Civil War, as well as information on regiment histories, significant battles, and some prisoner-of-w ar records and cemetery records. Confederate States of America (CSA) Records at the Library of Congress https://www.loc.gov/collections/confederate-states-of-america-records/about-this-collection/ The records of the C SA span the years 1854-1889, with the bulk of the material concentrated in the period 1861-1865, during the Civil War . Provides links to Official Records of the Union and Confederate Armies External ; Official Records of the Union and Confederate Navies External ; and War Department Collection of Confederate Records. Military Resources: Veterans at the National Archives Library Information Center (ALIC) https://www.archives.gov/research/alic/reference/military/veterans-related.html This site provides links to v eterans ' i nformation , m ilitary c asualties , Prisoners of War/Missing in Action (POW/MIAs) , and m edals & h onors . Philippine Army and Guerilla Records at the National Archives http://www.archives.gov/st-louis/military-personnel/philippine-army-records.html The collection includes records of the Philippine Commonwealth Army of the United States Armed Forces Far East (USAFFE), including recognized Philippine Guerrilla forces ( not the Army of the United States or Philippine Scouts) during World War II. Veterans History Project (VHP) at the Library of Congress at http://www.loc.gov/vets/ VHP collects, preserves, and makes accessible the personal accounts of American veterans. Veterans Affairs (VA) Nationwide Gravesite Locator at http://gravelocator.cem.va.gov/ The database contains burial locations of veterans and their family members. Beers, Henry Putney. The Confederacy: A Guide to the Archives of the Government of the Confederate States of America . Washington, DC: National Archives and Records Administration, 1998. Borch, Fred L. For Military Merit: Recipients of the Purple Heart . Annapolis, MD: Naval Institute Press, 2010. Center of Military History. Order of Battle of the United States Land Force s in the World War. Washington, DC: Center of Military History, U.S. Army, 1988. 3 volumes. Controvich, James T. United States Army U nit and Organizational H istories: A B ibliography . Lanham, MD: Scarecrow Press, 2003. —— United States Air Force and I ts A ntecedents: P ublished and P rinted U nit H istories, a B ibliography . Lanham, MD: Scarecrow Press, 2004. Dinackus, Thomas D. Order of Battle: Allied Ground Forces of Operation Desert Storm. Central Point, OR: Hellgate Press, 2000. Dornbusch, C. E. Military Bibliography of the Civil War. New York: New York Public Library, 1971. Dyer, Frederick H. A Compendium of the War of the Rebellion. New York: T. Yoseloff, 1959. Johnson, Lt. Col. Richard S., and Debra Johnson Knox. How to Locate Anyone Who Is or Has Been in the Military: Armed Forces Locator Guide. Spartanburg, SC: MIE Publishing, 1999. Owens, Ron. Medal of Honor: Historical Facts and Figures. Paducah, KY: Turner Publishing Company, 2004. Plante, Trevor K. Military Service Records at the National Archives. Washington, DC: National Archives and Records Administration, 2009. Stanton, Shelby L. World War II O rder of B attle, U.S. Army ( G round F orce U nits ) . Mechanicsburg, PA: Stackpole Books, 2006. —— Vietnam Order of Battle. Mechanicsburg, PA: Stackpole Books, 2003. U.S. Department of the Army. Office of Military History. Order of Battle of the United States Army Ground Forces in World War II, Pacific Theater of Operations: Administrative and Logistical Commands, Armies, Corps, and Divisions. Washington, DC: Department of the Army, 1959. U.S. Naval War Records Office. Official Records of the Union and Confederate Navies in the War of the Rebellion. Harrisburg, PA: National Historical Society, 1987. 30 v. U.S. War Department. The War of the Rebellion: A Compilation of the Official Records of the Union and Confederate Armies . Washington, DC: GPO, 1880-1901. 70 v.", "summary": "This guide provides information on locating military unit histories and individual service records of discharged, retired, and deceased military personnel. It also provides information on locating and replacing military awards and medals. Included is contact information for military history centers, websites for additional sources of research, and a bibliography of other publications, including related CRS reports.", "document_type": "crs"}
{"report": "On a daily basis, the restaurants, cafeterias, and carryout facilities operated by the House of Representatives and the Senate serve Members of Congress, congressional employees, constituents, and other visitors to the Capitol, House office buildings, and Senate office buildings. The House and Senate restaurant systems have existed since the early 1800s and have grown and modernized over time. Although many of their services may seem similar, food operations are separately administered and managed for the House, for the Senate, and for the Capitol Visitor Center (CVC). By meeting congressional dining needs during workdays that frequently can be unpredictable, the restaurant systems help facilitate the legislative and representational work of Congress. Because many Members and staff visit these restaurants every day, they remain a subject of ongoing congressional interest. Since 1994, the House restaurants have been operated by a private vendor, with oversight provided by the House. Under the Rules of the House of Representatives, the House restaurants fall under the jurisdiction of the Committee on House Administration, which delegates much of the daily oversight and financial management of the restaurant system to the Chief Administrative Officer (CAO) of the House. On June 9, 2015, the CAO announced that Sodexo Government Services would be the new food service provider for the House. The contract with Sodexo is for an initial term of four years. Starting in 2019, six two-year options may extend the contract for up to 12 additional years. A comprehensive survey of House food service needs, based on analysis of restaurant records, and the experiences of secret shoppers, focus groups, and surveys, had been commissioned during fall 2013 to help inform the vendor selection process. The CAO issued a request for proposals (RFP) for vendors interested in running any or all of the House restaurants in October 2014. Prospective contractors were notified that \"the House will have no financial responsibility or liability under the terms of the contract,\" and that the contractor selected would pay the House a monthly commission, determined by an agreed-upon percentage of gross receipts. The CAO encouraged ideas from vendors to improve operations in the Members' dining room and also initiated service schedule changes. Food service providers would not be required to operate the Members' dining room when late votes were scheduled in the evenings, on weekends, or on holidays, and instead, the room would be available for hosting catered events. To address some of the suggestions from the 2013 food service study, the RFP required that contractors include three-tier pricing strategies (value, standard, and premium) for all areas except vending. Once prices were set, any price increases would be prohibited for the first two years of service. Vendors were also required to introduce a minimum of two branded eatery concepts that would suit the needs of House customers. Catering requirements and responsibilities for different locations in the Capitol and office buildings were detailed, and the new contractor would be expected to \"successfully execute events with less than four (4) hours' notice.\" The new contractor would be required to conduct at least one formal focus group per year to help ensure long-term customer satisfaction and was encouraged to \"utilize a variety of assessment tools\" to appraise customer service. Individuals from outside of the CAO's office were included on the panel that reviewed and evaluated vendor proposals, and the panel also included a staff member from a Member office. To aid in the service transition, once Sodexo was chosen as the new vendor, it designated a community relations officer, a position unique to its House operation, to help address comments and resolve problems raised by House dining patrons. It is not publicly known whether or not the past provider, Restaurant Associates, submitted a bid to renew its contract. Sodexo assumed its responsibilities as the House vendor on August 7, 2015, and immediately began renovations and other changes related to the transition, some of which continued in 2016. Currently, 10 dining areas and carryouts in the House of Representatives and the House office buildings are operated by Sodexo as part of the House food services. Additionally, Sodexo is responsible for in-house catering services and most vending machines for the House. Sodexo introduced SoGo Cards, a new form of payment, for House staff to use in the House cafeterias. The cards are available at the cash registers of the dining facilities, can be reloaded with funds online, and provide a reward program regular customers may enroll in. All the House food service facilities, including the vending machines, are required to accept all major credit and debit cards, and many vending machines also accept Apple Pay and Google Pay. Additional \"pop-up\" lunch options in the O'Neill House Office Building main lobby operate through a partnership with Fooda on certain weekdays, featuring foods from local restaurants. The facilities operated under the House restaurant system are listed in Table 1 . With the arrival of Sodexo in 2015, the CAO announced several major changes to House dining operations, including the following: For lunch and dinner, the Members' dining room would replace a la carte service with a buffet. The introduction of an online system that allows users to preorder their food items and pick them up in the Longworth Cafeteria. The replacement of some eateries with popular branded restaurant concepts. Members of the House Appropriations Subcommittee on Legislative Branch expressed continuing concerns about food quality, high prices, and poor service in the House restaurants under Sodexo during the House of Representatives FY2018 budget hearing in May 2017. At the hearing, the CAO stated that a quality assurance surveillance team, comprised of five CAO employees, had been created to continually appraise contractor performance in a number of areas. According to the CAO, observations and feedback from the surveillance team during its first two months had led to some improvements in food quality and changes in restaurant management personnel. A new chef was brought in to the Members' dining room and some table service was reintroduced in response to feedback. Several branded restaurant concepts have been introduced to the House dining facilities, beginning with a Dunkin' Donuts/Baskin Robbins in the Longworth House Office Building and a Subway in the Rayburn House Office Building, which opened in 2016. In January 2018, a food service survey conducted within the House community by the CAO \"indicated a strong desire for both cafeteria and branded food options,\" and the legislative branch conference report for FY2019 \"encourage[d] the CAO to continue exploring opportunities to add more [branded concepts]\" throughout the House restaurant system. Beginning in 2018, \"pop-up restaurants\" have been featured on a weekly basis in the Longworth cafeteria, offering food options from branded restaurant chains. Three additional branded concepts have opened or are scheduled to open in the House during 2019: an &pizza in Rayburn, an Au Bon Pain in Cannon, and a Steak 'n Shake in Rayburn. The FY2019 legislative branch appropriations conference report also directed the CAO to explore applying a \"branded option concept\" to the Members' dining room \"in an effort to provide consistent service, better food selection, and quality food to Members and their guests.\" Beginning in September 2018, the Members' dining room also began providing service to congressional employees. Since 2008, food services in the Senate have been provided by a private contractor, under the jurisdiction of the AOC and subject to policy directives from the Committee on Rules and Administration. Rule XXV of the Standing Rules of the Senate grants the committee authority over \"Services to the Senate, including the Senate restaurant.\" The food service vendor selected for the Senate in 2008 was Restaurant Associates, part of Compass Group, which was selected again under a new seven-year contract, signed December 18, 2015. A 2016 Department of Labor investigation revealed wage-related infractions that could lead to contract renegotiations sooner than 2022. Under current arrangements, additional food vendors may be subcontracted to provide some Senate restaurant services. In 2012, for example, requests to bring kosher meals to the Dirksen cafeterias were ultimately fulfilled by Bubbie's Gourmet; the decision was authorized by the Senate Rules and Administration Committee, and Restaurant Associates was responsible for selecting the subcontractor and overseeing its operations. In 2001, a coffee shop and cafe owned by a local family, Cups & Company, opened in the Russell Senate Office Building and remains independently operated. In the Senate and its office buildings, 12 dining areas and carryouts are operated as a part of the Senate Restaurant System, along with additional vending areas. The facilities included in the Senate Restaurant System are listed in Table 2 . Restaurant Associates also provides in-house catering services, including a \"Café to Go\" option that can serve groups of 40 or less with advance notice of 24 hours. Some of the issues affecting the restaurant systems are unique to the House and others are unique to the Senate, resulting from the fact that each chamber administers its own restaurant services. Other issues affect the restaurants in both chambers or are typical challenges in any food service operation. This section focuses on current issues related to the congressional restaurants, but many of the challenges the House and Senate restaurants face today are similar to issues they have faced in the past. For more background on these topics, see CRS Report R44600, History of House and Senate Restaurants: Context for Current Operations and Issues , by Sarah J. Eckman. Throughout history, the House and Senate restaurants have faced financial challenges. In part, this is a consequence of the operating practices adopted by the House and Senate restaurants tending to reflect the needs of Congress, even when these choices sometimes hurt the ability of the restaurants to break even. This approach illustrates the view that the restaurants should operate as a necessary service rather than a profit-generating enterprise—a perspective that originated with the earliest congressional restaurants in an underdeveloped Washington, DC, and persisted long after. Although more dining options exist in the Capitol Hill neighborhood today, the dining facilities in the Capitol and congressional office buildings often remain a more convenient option for Members, staff, and visitors. The operating hours of the House and Senate restaurants are one factor that, historically, have contributed to their financial challenges. The House and Senate restaurants, for example, operate primarily for breakfast and lunch service during weekdays, whereas some claim that typical restaurants often rely on dinner service and weekend customers to generate much of their revenue. The cost of labor associated with staffing the restaurants during nonpeak operating hours has often been a significant expense for the restaurant systems. While the restaurants were under congressional management during much of the 20 th century, their finances were particularly affected by legislative measures that established the wages and benefits of federal or congressional employees. Some dining establishments in each chamber have been consistently more profitable than others. Eateries that serve a smaller number of patrons, close when Congress is out of session, or offer full table service can be more expensive to operate. Over the years, the restaurant systems have sometimes operated at a net loss; in other years, revenue from catering or the cafeterias can help offset losses from other establishments to help the overall system break even or make a profit. Obtaining a complete picture of the House and Senate restaurant system finances has always been difficult, given that restaurant responsibilities have often been distributed across multiple actors. When the House and Senate managed their own restaurants, multiple congressional entities were involved in the restaurants' operation, which created challenges for obtaining a complete financial picture. Since the restaurants have been run by private contractors, many business records are not subject to the same public disclosure requirements that government entities would be. This ambiguity has sometimes led to incomplete reports about restaurant finances. The House and Senate restaurants today receive commission-based fees from the food service providers, but more detail is unavailable, since most of the financial records regarding the restaurants are maintained by the vendors and are not publicly accessible. Attempts to improve House and Senate restaurant finances over the years have frequently involved food price increases. Many of these price increases have been minimal adjustments required to keep up with increasing costs of food, energy, and labor, while others have been larger adjustments. Sometimes, the relatively small increase to revenue from price increases has not been sufficient to completely offset increased expenses. Contract agreements with vendors sometimes prohibit price increases for a specified amount of time, which can make it difficult for vendors to adjust and compensate for unexpected increases in their operating expenses. Thus, when price changes do occur, the restaurants are often adjusting for several years of increased costs, which can appear as a large jump to customers. In the transition to Sodexo in the House during 2015, for example, the CAO acknowledged that prices on many menu items would increase, explaining that while prices on many items will increase when the new contract takes effect, no price increases have been approved in House food service facilities over the past six years. Bidders were required to propose pricing comparable to similar government and corporate food service facilities. The new contract limits any future increases to changes in a subset of the Producer Price Index, with a three percent annual cap. Complaints about restaurant prices have persisted over the history of the restaurant systems, and the 2013 study of dining operations in the House suggested that many customers, particularly staff and visitors, remain price-conscious. When possible, customers may be willing to trade the convenience of on-site services for off-site alternatives if the dining options in the Capitol complex are not perceived as good values. In addition to reasonable prices, the House and Senate restaurants are expected to meet other customer standards, often related to food quality, nutrition, and variety. Food service vendors, through their experience in the broader restaurant industry, are often aware of current consumer interests, and the House and Senate restaurants solicit customer feedback to help ascertain what needs and values their particular customers have. When the current vendor, Sodexo, was selected for the House restaurants, the CAO acknowledged that providing quick dining options was a main priority for the restaurant service, although the quality of food, nutrition, and customer service were also considerations. The requirement for two branded restaurant concepts also reflected customer preferences. On its website for Senate dining, Restaurant Associates has, at times, highlighted its initiatives in \"sustainability as well as social and environmental responsibility.\" These include its efforts to provide organic food, locally produced food, sustainable seafood, cage-free eggs, and no trans-fats. To continue to meet expectations for food quality and safety, efficiency in service, and customer satisfaction, dining facilities may require more frequent updates and renovations than other areas within the Capitol complex. Many of the most significant changes to the restaurant facilities occur during or soon after the transition to a new restaurant system vendor, but upgrades to equipment may be an ongoing concern. The age of the rooms that house dining services may present additional construction challenges and safety concerns. In January 2016, for example, the Longworth Cafeteria was evacuated and temporarily closed after several employees reported feeling ill from possible exposure to lead paint dust stirred up by ongoing nighttime kitchen renovations. In addition to periodic updates to the restaurants themselves, large-scale renovations are sometimes necessary to improve and maintain the Capitol, House, and Senate facilities. Any closures to particular buildings can have an impact on House and Senate restaurant services, which are spread throughout these locations. The closure of a cafeteria with a full kitchen may require additional resources for other cafeterias, or a greater reliance on prepackaged food items prepared elsewhere in the restaurant system or off-site. The Cannon Renewal Project, for example, necessitated the closure of the Cannon Café in December 2014, and it was replaced with a convenience store, Cannon Twelve, which is expected to operate until the renovation is complete. The Longworth Cafeteria operated under limited hours and periodically closed while major renovations were undertaken between July and November of 2016. Because many customers value convenience, the temporary reorganization of congressional office space due to renovations may also shift demand for cafeterias or carryouts from one building to another. The degree to which Congress can and should be involved in the daily management of the House and Senate restaurants is a question that has persisted over time. Both chambers currently use private food service vendors to run the day-to-day operations of the restaurants, while retaining general authority for oversight of the restaurant systems. This, however, has not always been the case; the House operated its own restaurants as recently as 1994, and the Senate operated its own restaurants until 2008. The reasons given in support of congressional management or private management have varied over time and often overlap, as each side has claimed that its approach would be financially advantageous, benefit employees, and improve the quality of food services provided. Those who have advocated for private management note that modern restaurant systems are larger and more complex than many of the internal operations managed by the House or the Senate. Food service requires consistent quality, safety, and efficiency, and some believe professional contractors familiar with the business of running large institutional restaurants are better able to achieve these objectives. Those who have supported congressional management, however, believe that each chamber has sufficient administrative means to operate the restaurants, and that Congress better understands the unique needs of the House and Senate restaurant systems and the constraints under which they operate. Private management may also raise oversight challenges for Congress if company financial records are not made available for review. Some Members have expressed concerns that contractors do not have to follow the same guidelines for personnel or procurement that the federal government does, even though the restaurants operate within the Capitol complex. Issues related to employee wages and benefits affected the House and Senate restaurants during the 114 th Congress (2015-2016). A new contract for the House restaurants went into effect in August 2015, and a new contract for the Senate restaurants went into effect in December 2015. This created an opportunity for employees and others to advocate for changes, including higher wages for all restaurant employees and union representation for Senate restaurant employees, that they hoped to see before the terms of the new agreements were settled upon in each chamber. A summary of these recent events and ongoing concerns is below. Wages for House restaurant employees are a concern expressed by some House Members. While the search for a new vendor was underway in 2015, Representative Debbie Wasserman Schultz proposed an amendment during the committee markup of the FY2016 Legislative Branch Appropriations Bill that would affect House restaurant employee wages. The proposal \"directed the [CAO] to solicit and select a food service contractor who provides a livable wage to its employees to meet basic needs for food and shelter,\" using local economic indices to determine an appropriate wage amount. In a 21-29 vote, the amendment was not agreed to. The CAO noted that its office shares the \"understandable desire to ensure that the people who provide services to the House are compensated fairly,\" and indicated that the new House vendor was chosen, in part, based on \"the signals that Sodexo sent regarding the value it places on a strong, effective, fairly compensated workforce.\" When Sodexo took over the House restaurants in August 2015, it announced plans to voluntarily follow the D.C. Displaced Workers Protection Act of 1994, which guaranteed that no employees would be laid off for at least 90 days after the contractor change. Sodexo also agreed to recognize the restaurant employees' union, UNITE HERE Local 23, and signed a collective bargaining agreement. Many provisions in the collective bargaining agreement with Sodexo remain similar to those that applied to the previous House vendor, Restaurant Associates, including the pay scale, annual and sick leave, health insurance, short-term disability benefits, life insurance, and union pension. Workers who received higher wages or benefit levels based on their service under past House restaurant employer agreements continue to receive these levels. Sodexo provided starting wages for new employees ranging from $10.15 to $19.00 an hour, with a $0.20 per hour increase scheduled for June 1, 2016, and an additional $0.25 per hour increase to follow on December 1, 2016. Additionally, Sodexo offers House Restaurant System employees the option to enroll in a 401(k) plan and will match $0.35 of every dollar an employee contributes, up to 6% of the employee's earnings. Concerns have been raised about wages and benefits for Senate restaurant employees. A number of protests and advocacy initiatives occurred during late 2014 and throughout 2015 addressing pay and union representation for Senate restaurant employees. On April 22, 2015, approximately 40 Senate contract workers, some of whom were restaurant employees, participated in what was characterized as a strike with other workers and activists, calling for an executive order giving preference to federal contractors who would provide an hourly wage of at least $15 for their workers. Other labor action occurred during the summer and fall months, and an additional strike occurred on December 8, 2015. In addition to higher wages, some Senate restaurant employees also sought to form a union. Some Senators indicated their support for the restaurant employees' concerns. On April 27, 2015, nine Senators signed a letter to the Senate Rules and Administration Committee, arguing that it was wrong for \"American taxpayers [to] subsidize these contractors by allowing them to pay low wages that must be augmented by taxpayer-funded benefits.\" The Senators also wanted federal contractors to provide healthcare and other benefits. Another letter, reiterating these goals and advocating further executive action to \"[make] the government a 'model employer,'\" was signed by 18 Senators and sent to the President of the United States on May 15. An additional letter was sent on August 5 to the Rules and Administration Committee, advocating for higher restaurant employee wages, signed by 40 Senators. A group of 34 Senators signed a letter on November 13 to the CEO of Compass Group, the parent company of Restaurant Associates, asking the company to recognize a union if a majority of the restaurant employees wanted to unionize. Some Senators and congressional staffers also participated in the protests and advocacy for restaurant employees, including Wednesday \"sit-in\" lunches or \"brown bag boycotts\" throughout the fall in the Dirksen cafeteria. Senate restaurant employees maintained that, given the high costs of living in the Washington, DC, area, a wage increase was needed so they could live above the poverty line and provide for their families. The new seven-year contract with Restaurant Associates went into effect January 2016. It included pay increases, reportedly raising the average hourly wage from $11.50 to $14.50 and the minimum starting wage to $13.30. Workers received additional benefits for health insurance, retirement savings, or transportation amounting to $4.27 per hour. On July 26, 2016, the Department of Labor (DOL) found that Restaurant Associates, and its subcontractor, Personnel Plus, owed $1,008,302 in back wages to 674 Senate restaurant employees. DOL found that many Senate restaurant workers were improperly classified into lower paying job categories and were required to work without compensation prior to their scheduled start times, which also resulted in underestimated overtime pay. This finding has led to renewed calls by some Senators to terminate the Senate's contract with Restaurant Associates. Restaurant Associates stated that the error was due to \"administrative technicalities,\" and that it had paid the workers in full. The DOL investigation began after Good Jobs Nation, an advocacy group, filed a complaint on behalf of the restaurant employees with DOL on January 14, 2016. After the AOC's December 2015 contract with Restaurant Associates went into effect, employees alleged that job misclassification had occurred. Federal contractor worker occupational titles and job descriptions are set forth under the Service Contract Act of 1965, and the contract with Restaurant Associates specified particular minimum wages for different occupational titles in the Senate restaurant system. Employees were supposed to receive raises under the new contract, but if the employee's title changed from a higher-paying position to a lower-paying position when the contract took effect, the employee could receive little or no pay increase. The AOC identified some of the misclassified employees through its own internal investigation in early 2016 and worked with Restaurant Associates to provide back pay for these workers and correct the misclassifications. On March 15, 2016, the AOC spoke at a Senate Appropriations Legislative Branch Subcommittee hearing, noting that \"we thought that we were doing a good thing [by including a pay raise in the new contract], only to be surprised just a week or two later ... that the pay rates that we had adjusted to were not being implemented.\" The AOC also indicated that he believed Restaurant Associates' reclassifications did constitute a violation of the contract terms. A subsequent Government Accountability Office (GAO) review between December 2016 and May 2017 found that \"[t]he AOC's oversight of the Senate food services contract with Restaurant Associates has been consistent with its established oversight policies and practices in the AOC contracting manual.\" In addition to providing back pay to affected employees, DOL reports that Restaurant Associates agreed to retain an independent compliance monitor (at its own expense) and will not bid on any new federal service contracts for two years. DOL also reports that Restaurant Associates \"is taking additional proactive steps to ensure future compliance,\" including the appointment of a compliance manager and compliance supervisors and the creation of a confidential telephone hotline for employees or managers to report issues. In many regards, the House and Senate food services operate like many large, institutional cafeterias do. Similar to many office cafeterias, House and Senate food services primarily serve breakfast, lunch, and snacks during regular workday business hours, and provide vending options for patrons who may be on-site during other times. Recognizing the availability of other dining options, the House and Senate food service providers attempt to provide convenient service, keep their prices competitive, and offer the types of menu items that customers enjoy. Some aspects of House and Senate dining operations, however, are necessarily unique, given the congressional environment in which they exist. The Members' dining rooms, for example, provide an ambiance not typically found in workplace eateries. In addition to their historic and architectural value, these dining rooms also provide Members of Congress and staff members a more formal and private setting in which to meet with guests or one another. Another feature House and Senate dining operations must account for is that the schedule of Congress can be less predictable than that of other institutions, which can have a variety of effects on food services. An unscheduled recess, for example, can significantly reduce the number of customers the House and Senate dining services can expect. This often results in higher costs to the restaurants, which have to account for lost food and sometimes pay employees; as a result, recesses can also lead to temporary worker layoffs or reduced hours. Conversely, when Congress is in session, House and Senate food services must be able to handle high volumes of customers with a variety of needs. Because events like hearings or briefings can be added to, or moved around, the congressional schedule, food service providers, and catering in particular, must to be able to accommodate last-minute requests and changes. The House and Senate restaurants are operated by private food service contractors who handle most of the day-to-day concerns. Despite this delegation, the House and Senate remain responsible for food service oversight. This shared administration resulted from how the congressional restaurant systems developed and grew over time. As a result, many of the issues faced by the restaurants today are addressed by the contractors themselves. Other issues are addressed by the House Administration Committee, Senate Rules and Administration Committee, or other congressional support offices. Together, these entities strive to meet the needs of the Members and staff who rely upon congressional dining services to help them carry out their daily legislative and representational work. ", "summary": "Dining facilities in the Capitol and in House and Senate office buildings provide an essential convenience for Members of Congress and congressional staff, enabling them to easily obtain meals, beverages, and snacks, and quickly return to work. By providing an efficient way to meet congressional dining needs during unpredictable workdays, the restaurant systems help facilitate the legislative and representational work of Congress. These restaurants also provide spaces for constituents and other visitors to meet with staff and Members of Congress, or to purchase refreshments. House and Senate restaurant services are also available to provide catering to Members of Congress when they host events on Capitol grounds. The restaurants remain a subject of ongoing congressional interest, as many Members and staff visit them on a daily basis. Those involved with restaurant administration in the House and Senate have often considered how management choices affect operating costs, services available, oversight, and other elements of the restaurant systems. For much of their histories, the House and Senate operated their own restaurants, but since 1994 in the House and since 2008 in the Senate, private vendors have run the restaurants. In August 2015, the House entered an agreement with Sodexo to operate the 17 facilities in the House restaurant system, subject to direction from the Chief Administrative Officer (CAO) and the Committee on House Administration. In December 2015, the Senate entered a new contract with Restaurant Associates to operate the 12 facilities in the Senate restaurant system, subject to direction from the Architect of the Capitol (AOC) and the Committee on Rules and Administration. Many argue that this professional restaurant management experience is necessary to meet the variety of customer needs in the House and Senate restaurants in a cost-effective manner. Numerous nearby eateries compete with the congressional restaurants for customers. Often, an advantage the House and Senate restaurants are able to provide is convenience for Members, staff, and visitors. This advantage, however, may be undermined if the restaurants are not responsive to customer input and are unable to provide consistent food quality, sufficient variety, or reasonably priced service, relative to their competitors. Food and price issues, along with other day-to-day operational issues, including personnel matters, are largely the responsibility of the restaurant contractors. Some Members and observers have raised concerns about the degree of accountability for the House and Senate restaurant contractors, believing that the restaurants' administration reflects upon Congress and that the restaurants should set an example for other businesses to follow. Although the House and Senate are responsible for restaurant oversight, the delegation of restaurant operations to private contractors means the chambers have less control over employee wages and benefits, procurement, or other business decisions that affect the restaurant systems. The combination of entities involved in House and Senate dining operations creates a unique organizational arrangement, unlike other institutional dining systems. Other features of Congress also distinguish the House and Senate restaurants from similar-seeming restaurant operations. The restaurants' business volume, for example, is highly contingent on the congressional calendar, consisting of a fairly constant weekday breakfast and lunch business, but experiencing substantial, and sometimes unexpected, decreases if Congress adjourns for a recess. Information specific to the House and Senate restaurant systems may therefore be of particular interest to those concerned with their operations. Additional background and context on House and Senate restaurant operations is found in CRS Report R44600, History of House and Senate Restaurants: Context for Current Operations and Issues, by Sarah J. Eckman.", "document_type": "crs"}
{"report": "The Trump Administration's Nuclear Posture Review, released on February 2, 2018, includes plans for the United States to deploy two new types of nuclear weapons \"to enhance the flexibility and responsiveness of U.S. nuclear forces.\" The report highlights that these weapons represent a response to Russia's deployment of a much larger stockpile of lower-yield nonstrategic nuclear weapons and to Russia's apparent belief \"that limited nuclear first use, potentially including low yield weapons\" can provide \"a coercive advantage in crises and at lower levels of conflict.\" The two capabilities identified in the NPR are a new low-yield nuclear warhead to be deployed on U.S. long-range submarine-launched ballistic missiles and a new sea-launched cruise missile that could be deployed on Navy ships or attack submarines. The report states that the United States does not need to deploy \"non-strategic nuclear capabilities that quantitatively match or mimic Russia's more expansive arsenal.\" But it indicates that \"expanding flexible U.S. nuclear options now, to include low yield options, is important for the preservation of credible deterrence against regional aggression.\" The NPR's recommended deployment of U.S. nonstrategic nuclear weapons follows growing concerns, both in Congress and among analysts outside of government, about new nuclear challenges facing the United States. For example, In late January 2015, Representatives Mike Rogers and Mike Turner, both members of the House Armed Services Committee, sent a letter to then-Secretary of State John Kerry and then-Secretary of Defense Chuck Hagel, seeking information about the agreements that would be needed and costs that might be incurred if the United States sought to deploy dual-capable aircraft and nuclear bombs at bases on the territories of NATO members in Eastern Europe. Neither NATO, as an organization, nor any of the nations who are members of NATO had called on the United States to pursue such deployments. However, Representatives Rogers and Turner noted that Russian actions in 2014—including aggression against Ukraine, noncompliance with the 1987 INF Treaty, and threats to deploy nuclear weapons in Crimea—threatened European security and warranted a more potent U.S. response. Some analysts outside government have also called for the deployment of greater numbers and/or types of nuclear weapons in Europe in response to Russia's continuing aggression in Ukraine and its apparent increased reliance on nuclear weapons. Others, however, have argued that more nuclear weapons would do little to enhance NATO's security and that NATO would be better served by enhancing its conventional capabilities. This interest in possible new deployments of U.S. nonstrategic, or shorter-range, nuclear weapons differs sharply from previous years, when Members of Congress, while concerned about Russia's larger stockpile of such weapons, seemed more interested in limiting these weapons through arms control than expanding U.S. deployments. During the Senate debate on the 2010 U.S.-Russian Strategic Arms Reduction Treaty (New START), many Members noted that this treaty did not impose any limits on nonstrategic nuclear weapons and that Russia possessed a far greater number of these systems than did the United States. Some expressed particular concerns about the threat that Russian nonstrategic nuclear weapons might pose to U.S. allies in Europe; others argued that these weapons might be vulnerable to theft or sale to nations or groups seeking their own nuclear weapons. In response to these concerns, the Senate, in its Resolution of Ratification on New START, stated that the United States should seek to initiate within one year, \"negotiations with the Russian Federation on an agreement to address the disparity between the non-strategic (tactical) nuclear weapons stockpiles of the Russian Federation and of the United States and to secure and reduce tactical nuclear weapons in a verifiable manner.\" In addition, in the FY2013 Defense Authorization Act ( H.R. 4310 , §1037), Congress again indicated that \"the United States should pursue negotiations with the Russian Federation aimed at the reduction of Russian deployed and nondeployed nonstrategic nuclear forces.\" Although the United States did raise the issue of negotiations on nonstrategic nuclear weapons with Russia within the year after New START entered into force, the two nations have not moved forward with efforts to negotiate limits on these weapons. Russia has expressed little interest in such a negotiation, and has stated that it will not even begin the process until the United States removes its nonstrategic nuclear weapons from bases in Europe. According to U.S. officials, the United States and NATO have been trying to identify and evaluate possible transparency measures and limits that might apply to these weapons. This report provides basic information about U.S. and Russian nonstrategic nuclear weapons. It begins with a brief discussion of how these weapons have appeared in public debates in the past few decades, then summarizes the differences between strategic and nonstrategic nuclear weapons. It then provides some historical background, describing the numbers and types of nonstrategic nuclear weapons deployed by both nations during the Cold War and in the past decade; the policies that guided the deployment and prospective use of these weapons; measures that the two sides have taken to reduce and contain their forces, and the 2018 NPR's recommendation for the deployment of new U.S. nonstrategic nuclear weapons. The report reviews the issues that have been raised with regard to U.S. and Russian nonstrategic nuclear weapons, and summarizes a number of policy options that might be explored by Congress, the United States, Russia, and other nations to address these issues. During the Cold War, nuclear weapons were central to the U.S. strategy of deterring Soviet aggression against the United States and U.S. allies. Toward this end, the United States deployed a wide variety of systems that could carry nuclear warheads. These included nuclear mines; artillery; short-, medium-, and long-range ballistic missiles; cruise missiles; and gravity bombs. The United States deployed these weapons with its troops in the field, aboard aircraft, on surface ships, on submarines, and in fixed, land-based launchers. The United States articulated a complex strategy, and developed detailed operational plans, that would guide the use of these weapons in the event of a conflict with the Soviet Union and its allies. During the Cold War, most public discussions about U.S. and Soviet nuclear weapons—including discussions about perceived imbalances between the two nations' forces and discussions about the possible use of arms control measures to reduce the risk of nuclear war and limit or reduce the numbers of nuclear weapons—focused on long-range, or strategic, nuclear weapons. These include long-range land-based intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs), and heavy bombers that carry cruise missiles or gravity bombs. These were the weapons that the United States and Soviet Union deployed so that they could threaten destruction of central military, industrial, and leadership facilities in the other country—the weapons of global nuclear war. But both nations also deployed thousands of nuclear weapons outside their own territories with their troops in the field. These weapons usually had less explosive power and were deployed with launchers that would deliver them across shorter ranges than strategic nuclear weapons. They were intended for use by troops on the battlefield or within the theater of battle to achieve more limited, or tactical, objectives. These \"nonstrategic\" nuclear weapons did not completely escape public discussion or arms control debates. Their profile rose in the early 1980s when U.S. plans to deploy new cruise missiles and intermediate-range ballistic missiles in Europe, as a part of NATO's nuclear strategy, ignited large public protests in many NATO nations. Their high profile returned later in the decade when the United States and Soviet Union signed the 1987 Intermediate Range Nuclear Forces (INF) Treaty and eliminated medium- and intermediate-range ballistic and cruise missiles. Then, in 1991, President George Bush and Soviet President Mikhail Gorbachev each announced that they would withdraw from deployment most of their nonstrategic nuclear weapons and eliminate many of them. These 1991 announcements, coming after the abortive coup in Moscow in August 1991, but months before the December 1991 collapse of the Soviet Union, responded to growing concerns about the safety and security of Soviet nuclear weapons at a time of growing political and economic upheaval in that nation. They also allowed the United States to alter its forces in response to easing tensions and the changing international security environment. Consequently, for many in the general public, these initiatives appeared to resolve the problems associated with nonstrategic nuclear weapons. As a result, although the United States and Russia included these weapons in some of their arms control discussions, most of their arms control efforts during the rest of that decade focused on strategic weapons, with efforts made to implement the 1991 Strategic Arms Reduction Treaty (START) and negotiate deeper reductions in strategic nuclear weapons. The lack of public attention did not, however, reflect a total absence of questions or concerns about nonstrategic nuclear weapons. In 1997, President Clinton and Russia's President Boris Yeltsin signed a framework agreement that stated they would address measures related to nonstrategic nuclear weapons in a potential START III Treaty. Further, during the 1990s, outside analysts, officials in the U.S. government, and many Members of Congress raised continuing questions about the safety and security of Russia's remaining nonstrategic nuclear weapons. Congress sought a more detailed accounting of Russia's weapons in legislation passed in the late 1990s. Analysts also questioned the role that these weapons might play in Russia's evolving national security strategy, the rationale for their continued deployment in the U.S. nuclear arsenal, and their relationship to U.S. nuclear nonproliferation policy. The terrorist attacks of September 11, 2001, also reminded people of the catastrophic consequences that might ensue if terrorists were to acquire and use nuclear weapons, with continuing attention focused on the potentially insecure stock of Russian nonstrategic nuclear weapons. The George W. Bush Administration did not adopt an explicit policy of reducing or eliminating nonstrategic nuclear weapons. When it announced the results of its Nuclear Posture Review (NPR) in early 2002, it did not outline any changes to the U.S. deployment of nonstrategic nuclear weapons at bases in Europe; it stated that NATO would address the future of those weapons. Although there was little public discussion of this issue during the Bush Administration, reports indicate that the United States did redeploy and withdraw some of its nonstrategic nuclear weapons from bases in Europe. It made these changes quietly and unilaterally, in response to U.S. and NATO security requirements, without requesting or requiring reciprocity from Russia. The Bush Administration also did not discuss these weapons with Russia during arms control negotiations in 2002. Instead, the Strategic Offensive Reductions Treaty (Moscow Treaty), signed in June 2002, limited only the number of operationally deployed warheads on strategic nuclear weapons. When asked about the absence of these weapons in the Moscow Treaty, then-Secretary of State Colin Powell noted that the treaty was not intended to address these weapons, although the parties could address questions about the safety and security of these weapons during less formal discussions. These discussions, however, never occurred. Nevertheless, Congress remained concerned about the potential risks associated with Russia's continuing deployment of nonstrategic nuclear weapons. The FY2006 Defense Authorization Act ( P.L. 109-163 ) contained two provisions that called for further study on these weapons. Section 1212 mandated that the Secretary of Defense submit a report that would determine whether increased transparency and further reductions in U.S. and Russian nonstrategic nuclear weapons were in the U.S. national security interest; Section 3115 called on the Secretary of Energy to submit a report on what steps the United States might take to bring about progress in improving the accounting for and security of Russia's nonstrategic nuclear weapons. In the 109 th Congress, H.R. 5017 , a bill to ensure implementation of the 9/11 Commission Report recommendations, included a provision (§334) that called on the Secretary of Defense to submit a report that detailed U.S. efforts to encourage Russia to provide a detailed accounting of its force of nonstrategic nuclear weapons. It also would have authorized $5 million for the United States to assist Russia in completing an inventory of these weapons. The 109 th Congress did not address this bill or its components in any detail. In the 110 th Congress, H.R. 1 sought to ensure the implementation of the 9/11 Commission Report recommendations. However, in its final form ( P.L. 110-53 ), it did not include any references to Russia's nonstrategic nuclear weapons. Several events in the past decade have served to elevate the profile of nonstrategic nuclear weapons in debates about the future of U.S. nuclear weapons and arms control policy. For example, in January 2007, four senior statesmen published an article in the Wall Street Journal that highlighted the continuing threat posed by the existence, and proliferation, of nuclear weapons. They called on leaders in nations with nuclear weapons to adopt the goal of seeking a world free of nuclear weapons. After acknowledging that that this was a long-term enterprise, they identified a number of urgent, near-term steps that these nations might take. They included among these steps a call for nations to eliminate \"short-range nuclear weapons designed to be forward-deployed.\" In a subsequent article published in January 2008, they elaborated on this step, calling for \"a dialogue, including within NATO and with Russia, on consolidating the nuclear weapons designed for forward deployment to enhance their security, as a first step toward careful accounting for them and their eventual elimination.\" They noted, specifically, that \"these smaller and more portable nuclear weapons are, given their characteristics, inviting acquisition targets for terrorist groups.\" In addition, as a part of its renewed interest in the role of nuclear weapons in U.S. national security strategy, Congress established, in the FY2008 Defense Authorization Bill ( P.L. 110-181 §1062), a Congressional Commission on the Strategic Posture of the United States. The Congressional Commission, which issued its report in April 2009, briefly addressed the role of nonstrategic nuclear weapons in U.S. national security strategy and noted that these weapons can help the United States assure its allies of the U.S. commitment to their security. It also noted concerns about the imbalance in the numbers of U.S. and Russian nonstrategic nuclear weapons and mentioned that Russia had increased its reliance on these weapons to compensate for weaknesses in its conventional forces. The 110 th Congress also mandated ( P.L. 110-181 , §1070) that the next Administration conduct a new Nuclear Posture Review (NPR). The Obama Administration completed this NPR in early April 2010. This study identified a number of steps the United States would take to reduce the roles and numbers of nuclear weapons in the U.S. arsenal. A few of these steps, including the planned retirement of nuclear-armed, sea-launched cruise missiles, affected U.S. nonstrategic nuclear weapons. At the same time, though, the NPR recognized the role that U.S. nonstrategic nuclear weapons play in assuring U.S. allies of the U.S. commitment to their security. It indicated that the United States would \"retain the capability to forward-deploy U.S. nuclear weapons on tactical fighter-bombers\" and that the United States would seek to \"expand consultations with allies and partners to address how to ensure the credibility and effectiveness of the U.S. extended deterrent. No changes in U.S. extended deterrence capabilities will be made without close consultations with our allies and partners.\" Discussions about the presence of U.S. nonstrategic nuclear weapons at bases in Europe and their role in NATO's strategy also increased in 2009 and 2010 during the drafting of NATO's most recent strategic concept. Officials in some NATO nations called for the removal of U.S. nonstrategic weapons from bases on the continent, noting that they had no military significance for NATO's security. Others called for the retention of these weapons, arguing that they played a political role in NATO, with shared rights and responsibilities, and that they helped balance Russia's deployment of greater numbers of nonstrategic nuclear weapons. When it was published, the Strategic Concept did not call for the removal of U.S. nonstrategic nuclear weapons. It stated that \"deterrence, based on an appropriate mix of nuclear and conventional capabilities, remains a core element of our overall strategy.\" It also indicated that \"the circumstances in which any use of nuclear weapons might have to be contemplated are extremely remote,\" but indicated that \"as long as nuclear weapons exist, NATO will remain a nuclear alliance.\" It then concluded that NATO would \"maintain an appropriate mix of nuclear and conventional forces.\" NATO nations continue to share responsibility for basing and delivery of the weapons and would weigh in on decisions about their possible use. At the same time, NATO recognized that the new Strategic Concept would not be the last word on the role or presence of nonstrategic nuclear weapons in NATO. In the declaration released at the conclusion of the November 2010 Lisbon Summit, the allies agreed that they would continue to review NATO's overall posture in deterring and defending against the full range of threats to the Alliance. They commissioned a comprehensive Deterrence and Defense Posture Review (DDPR) that would examine the range of capabilities required for defense and deterrence, including nuclear weapons, missile defense, and other means of strategic deterrence and defense. The DDPR was presented at the May 2012 NATO summit in Chicago. It did not, however, recommend any changes in NATO's nuclear posture. Instead, it noted that \"nuclear weapons are a core component of NATO's overall capabilities for deterrence and defence,\" and that \"the Alliance's nuclear force posture currently meets the criteria for an effective deterrence and defence posture.\" NATO reaffirmed this conclusion after its summit in Wales in September 2014, noting that \"deterrence, based on an appropriate mix of nuclear, conventional, and missile defence capabilities, remains a core element of our overall strategy.\" NATO addressed this issue again during its summit in Warsaw in July 2016, and did not alter this conclusion about the value of nuclear weapons to the alliance. Moreover, although the alliance did not call for the deployment of additional nuclear weapons in Europe, the communique released at the end of the summit highlighted the continuing importance of U.S. nuclear weapons deployed in Europe and the nuclear sharing arrangements among the allies. Specifically, the allies reiterated that \"as long as nuclear weapons exist, NATO will remain a nuclear alliance\" and that \"the strategic forces of the Alliance, particularly those of the United States, are the supreme guarantee of the security of the Allies.\" At the same time, they noted that \"NATO's nuclear deterrence posture also relies, in part, on United States' nuclear weapons forward-deployed in Europe and on capabilities and infrastructure provided by Allies concerned.\" At the same time, NATO has begun to implement numerous initiatives in response to Russia's aggression in Ukraine and aggressive posture toward Europe. While some of these initiatives may strengthen NATO's planning and exercise capabilities, they are unlikely to result in changes in the numbers of deployed nuclear weapons. The 2018 Nuclear Posture Review picks up on many of the same themes highlighted in documents published in the past decade. Like the Strategic Posture Commission Report published in 2009, the NPR highlights the imbalance in the numbers of U.S. and Russian nonstrategic nuclear weapons and states that Russia has increased its reliance on these weapons in its national security strategy. It argues that Russia believes it could use these weapons to coerce the United States and its NATO allies to back down during a conventional conflict in Europe. The 2018 NPR also echoes the Obama Administration's NPR, indicating that the United States will maintain \"the capability to forward deploy nuclear bombers and DCA around the world.\" It also states that the United States will continue Obama-era programs to communicate with and consult allies \"on policy, strategy and capabilities.\" The 2018 NPR also supports of the recent changes in NATO's approach to nuclear modernization and planning, indicating that the United States is \"committed to upgrading DCA [dual capable aircraft] with the nuclear-capable F-35 aircraft\" and that the United States will \"work with NATO to best ensure—and improve where needed—the readiness, survivability, and operational effectiveness of DCA based in Europe.\" However, while the 2010 NPR called for the retirement of U.S. Tomahawk nuclear-armed sea-launched cruise missiles (TLAMN), the 2018 NPR calls for the development of a new sea-launched cruise missile (SLCM). The 2010 NPR argued that \"this system serves a redundant purpose in the U.S. nuclear stockpile\" and, although the United States \"remains committed to providing a credible extended deterrence posture and capabilities,\" the \"deterrence and assurance roles of TLAMN can be adequately substituted by these other means.\" The 2018 NPR disputes this conclusion. It states that \"the rapid development of a modern SLCM\" will address \"the increasing need for flexible and low-yield options to strengthen deterrence and assurance\" and \"will strengthen the effectiveness of the sea-based nuclear deterrence force.\" The distinction between strategic and nonstrategic (also known as tactical) nuclear weapons reflects the military definitions of, on the one hand, a strategic mission and, on the other hand, the tactical use of nuclear weapons. According to the Department of Defense Dictionary of Military Terms, a strategic mission is Directed against one or more of a selected series of enemy targets with the purpose of progressive destruction and disintegration of the enemy's warmaking capacity and will to make war. Targets include key manufacturing systems, sources of raw material, critical material, stockpiles, power systems, transportation systems, communication facilities, and other such target systems. As opposed to tactical operations, strategic operations are designed to have a long-range rather than immediate effect on the enemy and its military forces. In contrast, the tactical use of nuclear weapons is defined as \"the use of nuclear weapons by land, sea, or air forces against opposing forces, supporting installations or facilities, in support of operations that contribute to the accomplishment of a military mission of limited scope, or in support of the military commander's scheme of maneuver, usually limited to the area of military operations.\" During the Cold War, it was relatively easy to distinguish between strategic and nonstrategic nuclear weapons because each type had different capabilities that were better suited to the different missions. The long-range missiles and heavy bombers deployed on U.S. territory and missiles deployed in ballistic missile submarines had the range and destructive power to attack and destroy military, industrial, and leadership targets central to the Soviet Union's ability to prosecute the war. At the same time, with their large warheads and relatively limited accuracies (at least during the earlier years of the Cold War), these weapons were not suited for attacks associated with tactical or battlefield operations. Nonstrategic nuclear weapons, in contrast, were not suited for strategic missions because they lacked the range to reach targets inside the Soviet Union (or, for Soviet weapons, targets inside the United States). But, because they were often small enough to be deployed with troops in the field or at forward bases, the United States and Soviet Union could have used them to attack targets in the theater of the conflict, or on the battlefield itself, to support more limited military missions. Even during the Cold War, however, the United States and Russia deployed nuclear weapons that defied the standard understanding of the difference between strategic and nonstrategic nuclear weapons. For example, both nations considered weapons based on their own territories that could deliver warheads to the territory of the other nation to be \"strategic\" because they had the range needed to reach targets inside the other nation's territory. But some early Soviet submarine-launched ballistic missiles had relatively short (i.e., 500 mile) ranges, and the submarines patrolled close to U.S. shores to ensure that the weapons could reach their strategic targets. Conversely, in the 1980s the United States considered sea-launched cruise missiles (SLCMs) deployed on submarines or surface ships to be nonstrategic nuclear weapons. But, if these vessels were deployed close to Soviet borders, these weapons could have destroyed many of the same targets as U.S. strategic nuclear weapons. Similarly, U.S. intermediate-range missiles that were deployed in Europe, which were considered nonstrategic by the United States, could reach central, strategic targets in the Soviet Union. Furthermore, some weapons that had the range to reach \"strategic\" targets on the territory of the other nations could also deliver tactical nuclear weapons in support of battlefield or tactical operations. Soviet bombers could be equipped with nuclear-armed anti-ship missiles; U.S. bombers could also carry anti-ship weapons and nuclear mines. Hence, the range of the delivery vehicle does not always correlate with the types of targets or objectives associated with the warhead carried on that system. This relationship between range and mission has become even more clouded since the end of the Cold War because the United States and Russia have retired many of the shorter- and medium-range delivery systems considered to be nonstrategic nuclear weapons. Further, both nations could use their longer-range \"strategic\" systems to deliver warheads to a full range of strategic and tactical targets, even if long-standing traditions and arms control definitions weigh against this change. During the Cold War, the longer-range strategic delivery vehicles also tended to carry warheads with greater yields, or destructive power, than nonstrategic nuclear weapons. Smaller warheads were better suited to nonstrategic weapons because they sought to achieve more limited, discrete objectives on the battlefield than did the larger, strategic nuclear weapons. But this distinction has also dissolved in more modern systems. Many U.S. and Russian heavy bombers can carry weapons of lower yields, and, as accuracies improved for bombs and missiles, warheads with lower yields could achieve the same expected level of destruction that had required larger warheads in early generations of strategic weapons systems. The observable capabilities that allowed analysts to distinguish between strategic and nonstrategic nuclear weapons during the Cold War have not always been precise, and may not prove to be relevant or appropriate in the future. On the other hand, the \"strategic\" weapons identified by these capabilities—ICBMs, SLBMs, and heavy bombers—are the only systems covered by the limits in strategic offensive arms control agreements—the SALT agreements signed in the 1970s, the START agreements signed in the 1990s, the Moscow Treaty signed in 2002, and the New START Treaty signed in 2010. Consequently, an \"easy\" dividing line is one that would consider all weapons not covered by strategic arms control treaties as nonstrategic nuclear weapons. This report takes this approach when reviewing the history of U.S. and Soviet/Russian nonstrategic nuclear weapons, and in some cases when discussing remaining stocks of nonstrategic nuclear weapons. The definition by exclusion, although the most common form used in recent discussions, may not prove sufficient when discussing current and future issues associated with these weapons. Since the early 1990s, the United States and Russia have withdrawn from deployment most of their nonstrategic nuclear weapons and eliminated many of the shorter- and medium-range launchers for these weapons (these changes are discussed in more detail below). Nevertheless, both nations maintain roles for these weapons in their national security strategies. Russia has enunciated a national security strategy that allows for the possible use of nuclear weapons in regional contingencies and conflicts near the periphery of Russia. The United States also maintains these capabilities in its nuclear arsenal and does not rule out the possibility that it might need them to deter or defeat potential adversaries. Moreover, the 2018 Nuclear Posture Review, with its plans for the deployment of two new types of nonstrategic weapons, further complicates efforts to identify a single definition. The sea-launched cruise missile clearly meets several definitions of nonstrategic nuclear weapons—it would not have the long range of a strategic system, it would likely have a relatively low-yield warhead, and it would not count under existing treaties limiting strategic offensive weapons. But a new low-yield warhead for submarine-launched ballistic missiles is more complicated. For the NPR, yield seems to be the distinguishing characteristic. But the delivery system—a submarine-launched ballistic missile—is clearly a strategic system, as it has the long range of a strategic delivery vehicle and it is counted within the limits of the New START Treaty. Moreover, missiles with low-yield warheads could be deployed on the same submarines as missiles with higher yield, or strategic, warheads, complicating efforts to distinguish between strategic and nonstrategic SLBMs. Then-Secretary of Defense James Mattis further complicated the discussion during his testimony before the House Armed Services Committee on February 6, 2018, when he stated that he does not believe \"there is any such thing as a tactical nuclear weapon. Any nuclear weapon used any time is a strategic game changer.\" He also resisted using the phrase \"nonstrategic\" to describe U.S. capabilities, and instead referred to the U.S. ability to deliver a \"low-yield\" response. While his resistance to the phrases \"tactical\" and \"nonstrategic\" seemed to contradict the NPR's widespread use of the phrase \"non-strategic nuclear weapons,\" his response likely reflects a different definition of the dividing line between strategic and nonstrategic nuclear weapons. His comments reflect the view that any use of nuclear weapons would have \"strategic effect,\" possibly meaning that it would expand and escalate the conflict beyond the immediate battlefield. The distinction, therefore, between a strategic and a nonstrategic nuclear weapon could well reflect the nature of the target or the implications for the conflict, not the yield or delivery vehicle of the attacking warhead. Throughout the Cold War, the United States deployed thousands of shorter-range nuclear weapons with U.S. forces based in Europe and Asia and on ships around the world. The United States maintained these deployments to extend deterrence and to defend its allies. Not only did the presence of these weapons (and the presence of U.S. forces, in general) increase the likelihood that the United States would come to the defense of its allies if they were attacked, the weapons also could have been used on the battlefield to slow or stop the advance of the adversaries' conventional forces. In most cases, these weapons were deployed to defend U.S. allies against aggression by the Soviet Union and its Warsaw Pact allies, but the United States did not rule out their possible use in contingencies with other adversaries. In Europe, these weapons were a part of NATO's strategy of \"flexible response.\" Under this strategy, NATO did not insist that it would respond to any type of attack with nuclear weapons, but it maintained the capability to do so and to control escalation if nuclear weapons were used. This approach was intended to convince the Soviet Union and Warsaw Pact that any conflict, even one that began with conventional weapons, could result in nuclear retaliation. As the Cold War drew to a close, NATO acknowledged that it would no longer maintain nuclear weapons to deter or defeat a conventional attack from the Soviet Union and Warsaw Pact because \"the threat of a simultaneous, full-scale attack on all of NATO's European fronts has effectively been removed.\" But NATO documents indicated that these weapons would still play an important political role in NATO's strategy by ensuring \"uncertainty in the mind of any potential aggressor about the nature of the Allies' response to military aggression.\" Throughout the Cold War, the United States often altered the size and structure of its nonstrategic nuclear forces in response to changing capabilities and changing threat assessments. These weapons were deployed at U.S. bases in Asia, and at bases on the territories of several of the NATO allies, contributing to NATO's sense of shared responsibility for the weapons. The United States began to reduce these forces in the late 1970s, with the numbers of operational nonstrategic nuclear warheads declining from more than 7,000 in the mid-1970s to below 6,000 in the 1980s, to fewer than 1,000 by the middle of the 1990s. These reductions occurred, for the most part, because U.S. and NATO officials believed they could maintain deterrence with fewer, but more modern, weapons. For example, when the NATO allies agreed in 1970 that the United States should deploy new intermediate-range nuclear weapons in Europe, they decided to remove 1,000 older nuclear weapons from Europe. And in 1983, in the Montebello Decision, when the NATO defense ministers approved additional weapons modernization plans, they also called for a further reduction of 1,400 nonstrategic nuclear weapons. These modernization programs continued through the 1980s. In his 1988 Annual Report to Congress, Secretary of Defense Caspar Weinberger noted that the United States was completing the deployment of Pershing II intermediate-range ballistic missiles and ground-launched cruise missiles in Europe; modernizing two types of nuclear artillery shells; upgrading the Lance short-range ballistic missile; continuing production of the nuclear-armed version of the Tomahawk sea-launched cruise missile; and developing a new nuclear depth/strike bomb for U.S. naval forces. However, by the end of that decade, as the Warsaw Pact dissolved, the United States had canceled or scaled back all planned modernization programs. In 1987, it also signed the Intermediate-Range Nuclear Forces (INF) Treaty, which eliminated all U.S. and Soviet ground-launched shorter and intermediate-range ballistic and cruise missiles. During the Cold War, the Soviet Union also considered nuclear weapons to be instrumental to its military strategy. Although the Soviet Union had pledged that it would not be the first to use nuclear weapons, most Western observers doubted that it would actually observe this pledge in a conflict. Instead, analysts argue that the Soviet Union had integrated nuclear weapons into its warfighting plans to a much greater degree than the United States. Soviet analysts stressed that these weapons would be useful for both surprise attack and preemptive attack. According to one Russian analyst, the Soviet Union would have used nonstrategic nuclear weapons to conduct strategic operations in the theater of war and to reinforce conventional units in large scale land and sea operations. This would have helped the Soviet Union achieve success in these theaters of war and would have diverted forces of the enemy from Soviet territory. The Soviet Union reportedly began to reduce its emphasis on nuclear warfighting strategies in the mid-1980s, under Soviet President Mikhail Gorbachev. He reportedly believed that the use of nuclear weapons would be catastrophic. Nevertheless, they remained a key tool of deterring and fighting a large-scale conflict with the United States and NATO. The Soviet Union produced and deployed a wide range of delivery vehicles for nonstrategic nuclear weapons. At different times during the period, it deployed devices that were small enough to fit into a suitcase-sized container, nuclear mines, shells for artillery, short-, medium-, and intermediate-range ballistic missiles, short-range air-delivered missiles, and gravity bombs. The Soviet Union deployed these weapons at nearly 600 bases, with some located in Warsaw Pact nations in Eastern Europe, some in the non-Russian republics on the western and southern perimeter of the nation, and throughout Russia. Estimates vary, but many analysts believe that, in 1991, the Soviet Union had more than 20,000 of these weapons. The numbers may have been higher, in the range of 25,000 weapons in earlier years, before the collapse of the Warsaw Pact. In September and October 1991, U.S. President George H. W. Bush and Soviet President Mikhail Gorbachev sharply altered their nations' deployments of nonstrategic nuclear weapons. Each announced unilateral, but reciprocal initiatives that marked the end of many elements of their Cold War nuclear arsenals. On September 27, 1991, U.S. President George H. W. Bush announced that the United States would withdraw all land-based tactical nuclear weapons (those that could travel less than 300 miles) from overseas bases and all sea-based tactical nuclear weapons from U.S. surface ships, submarines, and naval aircraft. Under these measures the United States began dismantling approximately 2,150 warheads from the land-based delivery systems, including 850 warheads for Lance missiles and 1,300 artillery shells. It also withdrew about 500 weapons normally deployed aboard surface ships and submarines, and planned to eliminate around 900 B-57 depth bombs, which had been deployed on land and at sea, and the weapons for land-based naval aircraft. Furthermore, in late 1991, NATO decided to reduce by about half the number of weapons for nuclear-capable aircraft based in Europe, which led to the withdrawal of an additional 700 U.S. air-delivered nuclear weapons. The United States implemented these measures very quickly. Nonstrategic nuclear weapons were removed from bases around the world by mid-1992. The Navy had withdrawn nuclear weapons from its surface ships, submarines, and forward bases by mid-1992. The warhead dismantlement process has moved more slowly, taking most of the 1990s to complete for some weapons, but this was due to the limits on capacity at the Pantex Plant in Texas, where dismantlement occurs. The first Bush Administration decided to withdraw these weapons for several reasons. First, the threat the weapons were to deter—Soviet and Warsaw Pact attacks in Europe—had diminished with the collapse of the Warsaw Pact in 1989. Further, the military utility of the land-based weapons had declined as the Soviet Union pulled its forces eastward, beyond the range of these weapons. The utility of the sea-based weapons had also declined as a result of changes in U.S. warfighting concepts that accompanied the end of the Cold War. Moreover, the withdrawal of the sea-based weapons helped ease a source of tensions between the United States and some allies, such as New Zealand and Japan, who had been uncomfortable with the possible presence of nuclear weapons during port visits by U.S. naval forces. The President's announcement also responded to growing concerns among analysts about the safety and security of Soviet nonstrategic nuclear weapons. The Soviet Union had deployed thousands of these weapons at bases in remote areas of its territory and at bases outside Soviet territory in Eastern Europe. The demise of the Warsaw Pact and political upheaval in Eastern Europe generated concerns about the safety of these weapons. The abortive coup in Moscow in August 1991 had also caused alarms about the strength of central control over nuclear weapons inside the Soviet Union. The U.S. initiative was not contingent on a Soviet response, and the Bush Administration did not consult with Soviet leadership prior to its public announcement, but many hoped that the U.S. initiative would provide President Gorbachev with the incentive to take similar steps to withdraw and eliminate many of his nation's nonstrategic nuclear weapons. On October 5, 1991, Russia's President Gorbachev replied that he, too, would withdraw and eliminate nonstrategic nuclear weapons. He stated that the Soviet Union would destroy all nuclear artillery ammunition and warheads for tactical missiles; remove warheads for nuclear antiaircraft missiles and destroy some of them; destroy all nuclear land mines; and remove all naval nonstrategic weapons from submarines and surface ships and ground-based naval aviation, destroying some of them. Estimates of the numbers of nonstrategic nuclear weapons deployed by the Soviet Union varied, with a range as great as 15,000-21,700 nonstrategic nuclear weapons in the Soviet arsenal in 1991. Consequently, analysts expected these measures to affect several thousand weapons. Russia's President Boris Yeltsin pledged to continue implementing these measures after the Soviet Union collapsed at the end of 1991. He also stated that Russia would destroy many of the warheads removed from nonstrategic nuclear weapons. These included all warheads from short-range missiles, artillery, and atomic demolition devices; one-third of the warheads from sea-based nonstrategic weapons; half of the warheads from air-defense interceptors; and half of the warheads from the Air Force's nonstrategic nuclear weapons. Reports indicate that the Soviet Union had begun removing nonstrategic nuclear weapons from bases outside Soviet territory after the collapse of the Warsaw Pact, and they had probably all been removed from Eastern Europe and the Transcaucasus prior to the 1991 announcements. Nevertheless, President Gorbachev's pledge to withdraw and eliminate many of these weapons spurred their removal from other former Soviet states after the collapse of the Soviet Union. Reports indicate that they had all been removed from the Baltic States and Central Asian republics by the end of 1991, and from Ukraine and Belarus by mid-late spring 1992. The status of nonstrategic nuclear weapons deployed on Russian territory is far less certain. According to some estimates, the naval systems were removed from deployment by the end of 1993, but the Army and Air Force systems remained in the field until 1996 and 1997. Furthermore, Russia has been far slower to eliminate the warheads from these systems than has the United States. Some analysts and experts in the United States have expressed concerns about the slow pace of eliminations in Russia. They note that the continuing existence of these warheads, along with the increasing reliance on nuclear weapons in Russia's national security strategy, indicate that Russia may reverse its pledges and reintroduce nonstrategic nuclear weapons into its deployed forces. Others note that financial constraints could have slowed the elimination of these warheads, or that Russia decided to coordinate the elimination effort with the previously scheduled retirement of older weapons. In U.S. and NATO policy, nonstrategic nuclear weapons have served not only as a deterrent to a wide range of potential aggressors, but also as an important element in NATO's cohesion as an alliance. NATO reaffirmed the importance of nonstrategic nuclear weapons for deterrence and alliance cohesion several times during the 1990s. In the press communiqué released after their November 1995 meeting, the members of NATO's Defense Planning Committee and Nuclear Planning Group stated that \"Alliance Solidarity, common commitment, and strategic unity are demonstrated through the current basing of deployable sub-strategic [nuclear] forces in Europe.\" In 1997, in the Founding Act on Mutual Relations, Cooperation, and Security Between the Russian Federation and the North Atlantic Treaty Organization , NATO members assured Russia that it had \"no intention, no plan, and no reason to deploy nuclear weapons on the territory of new members.\" But NATO also stated that it had no need \"to change any aspect of NATO's nuclear policy—and do not foresee any future need to do so [emphasis added].\" Finally, the \"New Strategic Concept\" signed in April 1999 stated that \"to protect peace and to prevent war or any kind of coercion, the Alliance will maintain for the foreseeable future an appropriate mix of nuclear and conventional forces. Nuclear weapons make a unique contribution in rendering the risks of aggression against the Alliance incalculable and unacceptable.\" NATO completed the next review of its Strategic Concept in November 2010. In this document, the allies indicated that \"deterrence, based on an appropriate mix of nuclear and conventional capabilities, remains a core element of our overall strategy.\" The document went on to indicate that NATO would remain a nuclear alliance as long as nuclear weapons continued to exist. It also noted that the alliance would \"maintain an appropriate mix of nuclear and conventional forces\" to ensure that \"NATO has the full range of capabilities to deter and defend against any threat.\" However, the Strategic Concept did not refer, specifically, to the U.S. nuclear weapons based in Europe, as had the communiqué released in 1995. Instead, the Strategic Concept noted that the \"supreme guarantee of the security of the Allies is provided by the strategic nuclear forces of the Alliance, particularly those of the United States [emphasis added].\" It went on to indicate that \"the independent strategic nuclear forces of the United Kingdom and France, which have a deterrent role of their own, contribute to the overall deterrence and security of the Allies.\" Moreover, the 2010 Strategic Concept alluded to the possibility of further reductions in nuclear weapons, both within the alliance and globally, in the future. The document noted that the allies are \"resolved to seek a safer world for all and to create the conditions for a world without nuclear weapons in accordance with the goals of the Nuclear Non-Proliferation Treaty, in a way that promotes international stability, and is based on the principle of undiminished security for all.\" It also noted that the alliance had \"dramatically reduced the number of nuclear weapons stationed in Europe\" and had reduced the role of nuclear weapons in NATO strategy.\" The allies pledged to \"seek to create the conditions for further reductions in the future.\" The Strategic Concept indicated that the goal in these reductions should be to \"seek Russian agreement to increase transparency on its nuclear weapons in Europe and relocate these weapons away from the territory of NATO members.\" Moreover, the document noted that this arms control process \"must take into account the disparity with the greater Russian stockpiles of short-range nuclear weapons.\" Hence, even though NATO no longer viewed Russia as an adversary, the allies apparently agreed that the disparity in nonstrategic nuclear weapons could create security concerns for some members of the alliance. In recognition of different views about the role or nuclear weapons in alliance policy, the allies agreed that they would continue to review NATO's deterrence and defense posture in a study that would be completed in time for NATO's May 2012 summit in Chicago. They agreed that the Deterrence and Defense Posture Review (DDPR) would examine the full range of capabilities required, including nuclear weapons, missile defense, and other means of strategic deterrence and defense. However, the completed DDPR did not recommend any changes in NATO's nuclear posture. Instead, it noted that \"nuclear weapons are a core component of NATO's overall capabilities for deterrence and defence,\" and that \"the Alliance's nuclear force posture currently meets the criteria for an effective deterrence and defence posture.\" This force posture includes shared rights and responsibilities, with nuclear weapons stored at bases on the territories of five NATO nations, and all NATO nations (except France, which has chosen not to participate in nuclear decisionmaking or operations) participating in nuclear planning and policymaking. Specifically, NATO calls for \"the broadest possible participation of Allies in collective defence planning on nuclear roles, in peacetime basing of nuclear forces, and in command, control and consultation arrangements.\" The DDPR reiterated the alliance's interest in pursuing arms control measures with Russia to address concerns with these weapons. It noted that the allies \"look forward to continuing to develop and exchange transparency and confidence-building ideas with the Russian Federation in the NATO-Russia Council, with the goal of developing detailed proposals on and increasing mutual understanding of NATO's and Russia's non-strategic nuclear force postures in Europe.\" It also indicated that NATO would \"consider, in the context of the broader security environment, what [it] would expect to see in the way of reciprocal Russian actions to allow for significant reductions in forward-based non-strategic nuclear weapons assigned to NATO.\" In other words, any further changes in NATO's nuclear posture were linked to reciprocal changes in Russia's nonstrategic nuclear weapons posture. NATO has continued to review and revise its statements about nuclear weapons during its recent summits in Wales (2014), Warsaw (2016), and Brussels. These summits occurred after Russia's annexation of Crimea and in the shadow of Russia's continuing aggressive behavior in Europe. While most of the efforts announced after these summits sought to bolster NATO's conventional capabilities and demonstrate an enduring commitment to the defense of all NATO allies, some also addressed the role of nuclear weapons and arms control in NATO strategy. For example, Paragraph 51 of the Warsaw Summit Communique confirms that \"the greatest responsibility of the Alliance is to protect and defend our territory and our populations against attack ... \" and that \"no one should doubt NATO's resolve if the security of any of its members were to be threatened.\" As was noted above, the statement also reaffirmed the important role of nuclear deterrence in alliance security. It indicated that \"the strategic forces of the Alliance, particularly those of the United States, are the supreme guarantee of the security of the Allies\" and that \"the independent strategic nuclear forces of the United Kingdom and France have a deterrent role of their own and contribute to the overall security of the Alliance.\" Moreover, the allies reaffirmed that \"NATO's nuclear deterrence posture also relies, in part, on United States' nuclear weapons forward-deployed in Europe and on capabilities and infrastructure provided by Allies concerned.\" In addition, in response to concerns about Russian nuclear doctrine, the statement emphasized that \"any employment of nuclear weapons against NATO would fundamentally alter the nature of a conflict\" and, \"if the fundamental security of any of its members were to be threatened however, NATO has the capabilities and resolve to impose costs on an adversary that would be unacceptable and far outweigh the benefits that an adversary could hope to achieve.\" On the other hand, the Warsaw Summit Communique recognized the strains on the arms control relationship with Russia. Where the 2012 DDPR had called for discussions with Russia on transparency and confidence-building and indicated that NATO would consider negotiating reductions in forward-based forces, the 2016 Warsaw statement simply noted that \"arms control, disarmament, and non-proliferation continue to play an important role in the achievement of the Alliance's security objectives.\" It then stated that, \"in this context, it is of paramount importance that disarmament and non-proliferation commitments under existing treaties are honoured ... \" and called on \"Russia to preserve the viability of the INF Treaty through ensuring full and verifiable compliance.\" The communique released after the Brussels summit in July 2018 reiterated many of the points raised in previous communiques. In several places, the allies noted that the changing security environment necessitated efforts to bolster the deterrence \"as a core element\" of the alliance's collective defense and noted that credible deterrence \"will continue to be based on an appropriate mix of nuclear, conventional, and missile defence capabilities.\" It also stated that a \"robust deterrence and defence posture strengthens Alliance cohesion and provides an essential political and military transatlantic link, through an equitable and sustainable distribution of roles, responsibilities, and burdens.\" At the same time, the 2018 communique went further in highlighting the allies' concerns with Russia's violation of the INF Treaty. The communique noted that the INF Treaty \"has been crucial to Euro-Atlantic security\" and pointed out that \"full compliance with the INF Treaty is essential.\" It supported the U.S. position on Russian noncompliance, noting that the \"allies have identified a Russian missile system, the 9M729, which raises serious concerns\" and that \"a pattern of behaviour and information over many years has led to widespread doubts about Russian compliance.\" Recent discussions about the U.S. nuclear weapons policy have placed a renewed emphasis on the role of U.S. nonstrategic nuclear weapons in extended deterrence and assurance. Extended deterrence refers to the U.S. threat to use nuclear weapons in response to attacks, from Russia or other adversaries, against allies in NATO and some allies in Asia. Assurance refers to the U.S. promise, made to those same allies, to come to their defense and assistance if they are threatened or attacked. The weapons deployed in Europe are a visible reminder of that commitment; the sea-based nonstrategic nuclear weapons that were in storage that could have been deployed in the Pacific in a crisis served a similar purpose for U.S. allies in Asia. Recent debates, however, have focused on the question of whether a credible U.S. extended deterrent requires that the United States maintain weapons deployed in Europe, and the ability to deploy them in the Pacific, or whether other U.S. military capabilities, including strategic nuclear weapons and conventional forces, may be sufficient. In the 2010 Nuclear Posture Review, the Obama Administration stated that the United States \"will continue to assure our allies and partners of our commitment to their security and to demonstrate this commitment not only through words, but also through deeds.\" The NPR indicated that a wide range of U.S. military capabilities would support this goal, but also indicated that U.S. commitments would \"retain a nuclear dimension as long as nuclear threats to U.S. allies and partners remain.\" The Administration did not, however, specify that the nuclear dimension would be met with nonstrategic nuclear weapons; the full range of U.S. capabilities would likely be available to support and defend U.S. allies. In addition, the Administration announced that the United States would retire the nuclear-armed sea-launched cruise missiles that had helped provide assurances to U.S. allies in Asia. In essence, the Administration concluded that the United States could reassure U.S. allies in Asia, and deter threats to their security, without deploying sea-based cruise missiles to the region in a crisis. Moreover, the possible use of nuclear weapons, and extended nuclear deterrence, were a part of a broader concept that the Obama Administration referred to as \"regional security architectures.\" The 2010 NPR indicated that regional security architectures were a key part of \"the U.S. strategy for strengthening regional deterrence while reducing the role and numbers of nuclear weapons.\" As a result, these architectures would \"include effective missile defense, counter-WMD capabilities, conventional power-projection capabilities, and integrated command and control—all underwritten by strong political commitments.\" In other words, although the United States would continue to extend deterrence to its allies and seek to assure them of the U.S. commitment to their security, it would draw on political commitments and a range of military capabilities to achieve these goals. During the presidential campaign, President Trump questioned the value of U.S. alliance relationships in general and the relevance of NATO in particular. He argued that the United States was overextended around the world and that U.S. allies should contribute more toward their own defense or at least pay more for U.S. security guarantees. Moreover, he suggested that some U.S. allies would be better served if they acquired their own nuclear weapons rather than relying on U.S. nuclear weapons for their defense. These ideas did not translate into policy in the 2018 Nuclear Posture Review. To the contrary, the NPR asserts that the U.S. commitment to NATO and to allies and partners in the Asia-Pacific region \"is unwavering.\" Concerns about the regional threats to U.S. allies in Europe and Asia and about the credibility of U.S. assurances to these allies dominate the analysis in the NPR. However, while the 2010 NPR called for a strengthening of U.S. conventional capabilities and missile defenses as a part of its effort to strengthen extended deterrence, the 2018 NPR focuses almost exclusively on enhancements to U.S. nuclear capabilities. It does not completely dismiss the value of U.S. conventional capabilities, but asserts that \"conventional forces alone are inadequate to assure many allies who rightly place enormous value on U.S. extended nuclear deterrence for their security.\" According to the NPR, these concerns are central to the recommendation that the United States develop two new types of nonstrategic nuclear weapons. In the past, U.S. discussions about nonstrategic nuclear weapons have also addressed questions about the role they might play in deterring or responding to regional contingencies that involved threats from nations that may not be armed with their own nuclear weapons. For example, former Secretary of Defense Perry stated, during the Clinton Administration, that \"maintaining U.S. nuclear commitments with NATO, and retaining the ability to deploy nuclear capabilities to meet various regional contingencies , continues to be an important means for deterring aggression, protecting and promoting U.S. interests, reassuring allies and friends, and preventing proliferation (emphasis added).\" Specifically, both during the Cold War and after the demise of the Soviet Union, the United States maintained the option to use nuclear weapons in response to attacks with conventional, chemical, or biological weapons. For example, in 1999, Assistant Secretary of Defense Edward Warner testified that \"the U.S. capability to deliver an overwhelming, rapid, and devastating military response with the full range of military capabilities will remain the cornerstone of our strategy for deterring rogue nation ballistic missile and WMD proliferation threats. The very existence of U.S. strategic and theater nuclear forces, backed by highly capable conventional forces, should certainly give pause to any rogue leader contemplating the use of WMD against the United States, its overseas deployed forces, or its allies.\" These statements do not indicate whether nonstrategic nuclear weapons would be used to achieve battlefield or tactical objectives, or whether they would contribute to strategic missions, but it remained evident, throughout the 1990s, that the United States continued to view these weapons as a part of its national security strategy. The George W. Bush Administration also emphasized the possible use of nuclear weapons in regional contingencies in its 2001 Nuclear Posture Review. The Bush Administration appeared to shift toward a somewhat more explicit approach when acknowledging that the United States might use nuclear weapons in response to attacks by nations armed with chemical, biological, and conventional weapons, stating that the United States would develop and deploy those nuclear capabilities that it would need to defeat the capabilities of any potential adversary whether or not it possessed nuclear weapons. This does not, by itself, indicate that the United States would plan to use nonstrategic nuclear weapons. However, many analysts concluded from these and other comments by Bush Administration officials that the United States was planning for the tactical, first use of nuclear weapons. The Bush Administration never confirmed this view, and, instead, indicated that it would not use nuclear weapons in anything other than the most grave of circumstances. The Obama Administration, on the other hand, seemed to foreclose the option of using nuclear weapons in some regional contingencies. Specifically, it stated, in the 2010 NPR, that \"the United States will not use or threaten to use nuclear weapons against non-nuclear weapons states that are party to the Nuclear Non-Proliferation Treaty (NPT) and in compliance with their nuclear non-proliferation obligations.\" Specifically, if such a nation were to attack the United States with conventional, chemical, or biological weapons, the United States would respond with overwhelming conventional force, but it would not threaten to use nuclear weapons if the attacking nation was in compliance with its nuclear nonproliferation obligations and it did not have nuclear weapons of its own. At the same time, though, the NPR stated that any state that used chemical or biological weapons \"against the United States or its allies and partners would face the prospect of a devastating conventional military response—and that any individuals responsible for the attack, whether national leaders or military commanders, would be held fully accountable.\" The 2018 NPR echoes some of this policy from the Obama Administration, but alters it in ways that track more closely with the policy of the Bush Administration. First, the 2018 NPR repeats the paragraph from the 2010 NPR stating that \"the United States will not use or threaten to use nuclear weapons against non-nuclear weapons states that are party to the NPT and in compliance with their nuclear non-proliferation obligations.\" But it then states that \"the United States reserves the right to make any adjustment in the assurance that may be warranted by the evolution and proliferation of non-nuclear strategic attack technologies [emphasis added] and U.S. capabilities to counter that threat.\" Elsewhere in the document the NPR indicates that non-nuclear strategic attacks could include chemical, biological, cyber, and large-scale conventional aggression. Hence, where the Obama Administration left open the possibility of nuclear retaliation in response to biological attacks, but stated that other threats could be deterred by the prospect of a devastating conventional response, the Trump Administration includes a wider range of circumstances where the United States might retaliate with nuclear weapons after an attack. Through the late 1990s and early in George W. Bush Administration, the United States maintained approximately 1,100 nonstrategic nuclear weapons in its active stockpile. Unclassified reports indicate that, of this number, around 500 were air-delivered bombs deployed at bases in Europe. The remainder, including some additional air-delivered bombs and around 320 nuclear-armed sea-launched cruise missiles, were held in storage areas in the United States. After the Clinton Administration's 1994 Nuclear Posture Review, the United States eliminated its ability to return nuclear weapons to U.S. surface ships (it had retained this ability after removing the weapons under the 1991 PNI). It retained, however, its ability to restore cruise missiles to attack submarines, and it did not recommend any changes in the number of air-delivered weapons deployed in Europe. During this time, the United States also consolidated its weapons storage sites for nonstrategic nuclear weapons. It reportedly reduced the number of these facilities \"by over 75%\" between 1988 and 1994. It eliminated two of its four storage sites for sea-launched cruise missiles, retaining only one facility on each coast of the United States. It also reduced the number of bases in Europe that store nuclear weapons from over 125 bases in the mid-1980s to 10 bases, in seven countries, by 2000. The Bush Administration did not recommend any changes for U.S. nonstrategic nuclear weapons after completing its Nuclear Posture Review in 2001. Reports indicate that it decided to retain the capability to restore cruise missiles to attack submarines because of their ability to deploy, in secret, anywhere on the globe in time of crisis. The NPR also did not recommend any changes to the deployment of nonstrategic nuclear weapons in Europe, leaving decisions about their status to the members of the NATO alliance. Nevertheless, according to unclassified reports, the United States did reduce the number of nuclear weapons deployed in Europe and the number of facilities that house those weapons during the George W. Bush Administration. Some reports indicate that most of the weapons were withdrawn from Europe between 2001 and 2006. According to unclassified reports, some are stored at U.S. bases and would be delivered by U.S. aircraft; others are stored at bases operated by the \"host nation\" and would be delivered by that nation's aircraft if NATO decided to employ nuclear weapons. The Obama Administration did not announce any further reductions to U.S. nuclear weapons in Europe but it indicated that the United States would \"consult with our allies regarding the future basing of nuclear weapons in Europe.\" In the months prior to the completion of NATO's 2010 Strategic Concept, some politicians in some European nations did propose that the United States withdraw these weapons. For example, Guido Westerwelle, Germany's foreign minister, stated that he supported the withdrawal of U.S. nuclear weapons from Germany. As was noted above, NATO did not call for the removal of these weapons in its new Strategic Concept, but did indicate that it would be open to reducing them as a result of arms control negotiations with Russia. Moreover, in the 2010 NPR, the Obama Administration indicated that it would take the steps necessary to maintain the capability to deploy U.S. nuclear weapons in Europe. It indicated that the U.S. Air Force would retain the capability to deliver both nuclear and conventional weapons as it replaced aging F-16 aircraft with the new F-35 Joint Strike Fighter. The NPR also indicated that the United States would conduct a \"full scope\" life extension program for the B61 bomb, the weapon that is currently deployed in Europe, \"to ensure its functionality with the F-35.\" This life extension program will consolidate four versions of the B61 bomb, including the B61-3 and B61-4 that are currently deployed in Europe, into one version, the B61-12. Reports indicate that this new version will reuse the nuclear components of the older bombs, but will include enhanced safety and security features and a new \"tail kit\" that will increase the accuracy of the weapon. On the other hand, the 2010 NPR indicated that the U.S. Navy would retire its nuclear-armed, sea-launched cruise missiles (TLAM-N). It indicated that \"this system serves a redundant purpose in the U.S. nuclear stockpile\" because it is one of several weapons the United States could deploy forward. The NPR also noted that \"U.S. ICBMs and SLBMs are capable of striking any potential adversary.\" As a result, because \"the deterrence and assurance roles of TLAM-N can be adequately substituted by these other means,\" the United States could continue to extend deterrence and provide assurance to its allies in Asia without maintaining the capability to redeploy TLAM-N missiles. As was noted above, the Trump Administration's NPR reaffirms many of the policies and programs the United States has pursued in recent years. It does not announce any changes to the current basing of U.S. nuclear weapons in Europe, and reaffirms the U.S. commitment to upgrading U.S. dual-capable aircraft (DCA) with the nuclear-capable F-35 aircraft. It indicates that the United States will \"maintain, and enhance as necessary, the capability to forward deploy nuclear bombers and DCA around the world\" and will \"work with NATO to best ensure—and improve where needed—the readiness, survivability, and operational effectiveness of DCA based in Europe.\" The 2018 NPR also reinforces U.S. support for measures that NATO is taking to ensure that its \"overall deterrence and defense posture, including its nuclear forces, remain capable of addressing any potential adversary's doctrine and capabilities.\" These measures include, among other things, enhancing \"the readiness and survivability of NATO DCA\" and improving the \"capabilities required to increase their operational effectiveness\"; promoting \"the broadest possible participation of Allies in their agreed burden sharing arrangements\"; and enhancing \"the realism of training and exercise programs to ensure the Alliance can effectively integrate nuclear and non-nuclear operations.\" On the other hand, the 2018 NPR reverses the Obama Administration's decision to remove sea-launched cruise missiles from the U.S. force structure. Where the 2010 NPR asserted that the capabilities provided by a SLCM were redundant with those available on other forward-deployable systems, the 2018 NPR argues that the SLCM will provide the United States with \"a needed non-strategic regional presence\" that will address \"the increasing need for flexible and low-yield options.\" According to the NPR, this will strengthen deterrence of regional adversaries and assure allies of the U.S. commitment to their defense. The NPR also indicates that a new SLCM program could serve as a response to Russia's violation of the 1987 Intermediate-range Nuclear Forces (INF) Treaty and a \"necessary incentive for Russia to negotiate seriously a reduction of its non-strategic nuclear weapons.\" Russia has altered and adjusted the Soviet nuclear strategy to meet its new circumstances in a post-Cold War world. It explicitly rejected the Soviet Union's no-first-use pledge in 1993, indicating that it viewed nuclear weapons as a central feature in its military and security strategies. However, Russia did not maintain the Soviet Union's view of the need for nuclear weapons to conduct surprise attacks or preemptive attacks. Instead, it seems to view these weapons as more defensive in nature, as a deterrent to conventional or nuclear attack and as a means to retaliate and defend itself if an attack were to occur. Russia has revised its national security and military strategy several times in the past 20 years, with successive versions appearing to place a greater reliance on nuclear weapons. For example, the military doctrine issued in 1997 allowed for the use of nuclear weapons \"in case of a threat to the existence of the Russian Federation.\" The doctrine published in 2000 expanded the circumstances when Russia might use nuclear weapons to include attacks using weapons of mass destruction against Russia or its allies \"as well as in response to large-scale aggression utilizing conventional weapons in situations critical to the national security of the Russian Federation.\" In mid-2009, when discussing the revision of Russia's defense strategy that was expected late in 2009 or early 2010, Nikolai Patrushev, the head of Russia's Presidential Security Council, indicated that Russia would have the option to launch a \"preemptive nuclear strike\" against an aggressor \"using conventional weapons in an all-out, regional, or even local war.\" However, when Russia published the final draft of the doctrine, in early 2010, it did not specifically authorize the preemptive use of nuclear weapons. Instead, it stated that \"Russia reserves the right to use nuclear weapons in response to a use of nuclear or other weapons of mass destruction against her and (or) her allies, and in a case of an aggression against her with conventional weapons that would put in danger the very existence of the state.\" Instead of expanding the range of circumstances when Russia might use nuclear weapons, this actually seemed to narrow the range, from the 2000 version that allowed for nuclear use \"in situations critical to the national security of the Russian Federation\" to the current form that states they might be used in a case \"that would put in danger the very existence of the state.\" Hence, there is little indication that Russia plans to use nuclear weapons at the outset of a conflict, before it has engaged with conventional weapons, even though Russia could resort to the use of nuclear weapons first, during an ongoing conventional conflict. This is not new, and has been a part of Russian military doctrine for years. Analysts have identified several factors that have contributed to Russia's increasing dependence on nuclear weapons. First, with the demise of the Soviet Union and the economic upheavals of the 1990s, Russia no longer had the means to support a large and effective conventional army. The conflicts in Chechnya and Georgia highlighted seeming weaknesses in Russia's conventional military forces. Russian analysts also saw emerging threats in other former Soviet states along Russia's periphery. Many analysts believed that by threatening, even implicitly, that it might resort to nuclear weapons, Russia hoped it could enhance its ability to deter similar regional conflicts. Russia's sense of vulnerability, and its view that the threats to its security were increasing, also stemmed from the debates over NATO enlargement. Russia has feared the growing alliance would create a new challenge to Russia's security, particularly if NATO moved nuclear weapons closer to Russia's borders. These concerns contributed to the statement that Russia might use nuclear weapons if its national survival were threatened. For many in Russia, NATO's air campaign in Kosovo in 1999 underlined Russia's growing weakness and NATO's increasing willingness to threaten Russian interests. Its National Security Concept published in 2000 noted that the level and scope of the military threat to Russia was growing. It cited, specifically, as a fundamental threat to its security, \"the desire of some states and international associations to diminish the role of existing mechanisms for ensuring international security.\" There are also threats in the border sphere. \"A vital task of the Russian Federation is to exercise deterrence to prevent aggression on any scale and nuclear or otherwise, against Russia and its allies.\" Consequently, Russia concluded that it \"should possess nuclear forces that are capable of guaranteeing the infliction of the desired extent of damage against any aggressor state or coalition of states in any conditions and circumstances.\" The debate over the role of nuclear weapons in Russia's national security strategy in the late 1990s considered both strategic and nonstrategic nuclear weapons. With concerns focused on threats emerging around the borders of the former Soviet Union, analysts specifically considered whether nonstrategic nuclear weapons could substitute for conventional weaknesses in regional conflicts. The government appeared to resolve this debate in favor of the modernization and expansion of nonstrategic nuclear weapons in 1999, shortly after the conflict in Kosovo. During a meeting of the Kremlin Security Council, Russia's President Yeltsin and his security chiefs reportedly agreed \"that Moscow should develop and deploy tactical, as well as, strategic nuclear weapons.\" Vladimir Putin, who was then chairman of the Security Council, stated that President Yeltsin had endorsed \"a blueprint for the development and use of nonstrategic nuclear weapons.\" Many analysts in the United States interpreted this development, along with questions about Russia's implementation of its obligations under the 1991 PNI, to mean that Russia was \"walking back\" from its obligation to withdraw and eliminate nonstrategic nuclear weapons. Others drew a different conclusion. One Russian analyst has speculated that the documents approved in 1999 focused on the development of operations plans that would allow Russia to conduct \"limited nuclear war with strategic means in order to deter the enemy, requiring the infliction of pre-planned, but limited damage.\" Specifically, he argued that Russia planned to seek a new generation of nonstrategic, or low-yield, warheads that could be to be delivered by strategic launchers. Others believe Russia has also pursued the modernization of existing nonstrategic nuclear weapons and development of new nuclear warheads for shorter-range nuclear missiles. The potential threat from NATO remained a concern for Russia in its 2010 and 2014 military doctrines. The 2010 doctrine stated that the main external military dangers to Russia are \"the desire to endow the force potential of the North Atlantic Treaty Organization (NATO) with global functions carried out in violation of the norms of international law and to move the military infrastructure of NATO member countries closer to the borders of the Russian Federation, including by expanding the bloc.\" It also noted that Russia was threatened by \"the deployment of troop contingents of foreign states (groups of states) on the territories of states contiguous with the Russian Federation and its allies and also in adjacent waters.\" The 2014 doctrine repeated these concerns. Hence, Russia views NATO troops in nations near Russia's borders as a threat to Russian security. This concern extends to U.S. missile defense assets that may be deployed on land in Poland and Romania and at sea near Russian territory as a part of the European Phased Adaptive Approach (EPAA). In an environment where Russia also has doubts about the effectiveness of its conventional forces, its doctrine allows for the possible use of nonstrategic nuclear weapons during a local or regional conflict on its periphery. The doctrines do not say that Russia would use nuclear weapons to preempt such an attack, but it does reserve the right to use them in response. Although Russia does not use the phrase in any of these recent versions of its military doctrine, analysts both inside and outside the U.S. government often refer to this approach as the \"escalate to de-escalate\" doctrine. Russian statements, when combined with military exercises that simulate the use of nuclear weapons against NATO members, have led many to believe that Russia might threaten to use its nonstrategic nuclear weapons to coerce or intimidate its neighbors. These threats could occur prior to the start of a conflict, or within a conflict if Russia believed that the threat to use nuclear weapons might lead its adversaries (including the United States and its allies) to back down. This doctrine, when combined with recent Russian statements designed to remind others of the strength of Russia's nuclear deterrent, seems to indicate that Russia has increased the role of nuclear weapons in its military strategy and military planning. The 2018 Nuclear Posture Review adheres to the view that Russia has adopted such a strategy and asserts that Russia \"mistakenly assesses that the threat of nuclear escalation or actual first use of nuclear weapons would serve to 'de-escalate' a conflict on terms favorable to Russia.\" This view underlines the NPR's recommendations for the United States to develop new low-yield nonstrategic weapons that, it argues, would provide the United States with a credible response, thereby \"ensuring that the Russian leadership does not miscalculate regarding the consequences of limited nuclear first use.\" It is difficult to estimate the number of nonstrategic nuclear weapons remaining in the Russian arsenal. This uncertainty stems from several factors: uncertainty about the number of nonstrategic nuclear weapons that the Soviet Union had stored and deployed in 1991, when President Gorbachev announced his PNI; uncertainty about the pace of warhead elimination in Russia; and uncertainty about whether all warheads removed from deployment are still scheduled for elimination. Analysts estimate that the Soviet Union may have deployed 15,000-25,000 nonstrategic nuclear weapons, or more, in the late 1980s and early 1990s. During the 1990s, Russian officials stated publicly that they had completed the weapons withdrawals mandated by the PNIs and had proceeded to eliminate warheads at a rate of 2,000 per year. However, many experts doubt these statements, noting that Russia probably lacked the financial and technical means to proceed this quickly. In addition, Russian officials have offered a moving deadline for this process in their public statements. For example, at the Nuclear Nonproliferation Treaty review conference in 2000, Russian Foreign Minister Ivanov stated that Russia was about to finish implementing its PNIs. But, at a follow-up meeting two years later, Russian officials stated that the elimination process was continuing, and, with adequate funding, could be completed by the end of 2004. In 2007, an official from Russia's Ministry of Defense stated that Russia had completed the elimination of all of the warheads for its ground forces, 60% of its missile defense warheads, 50% of its air force warheads, and 30% of its naval warheads. In 2010, the Russian government revised this number and said it had reduced its nonstrategic nuclear weapons inventory by 75%. In 2003, General Yuri Baluyevsky, who was then the first deputy chief of staff of the Russian General Staff, stated that Russia would not destroy all of its tactical nuclear weapons and that it would, instead, \"hold on to its stockpiles\" in response to U.S. plans to develop new types of nuclear warheads. General Nikolai Makarov, head of the Russian General Staff, made a similar comment in 2008. He said that Russia would \"keep nonstrategic nuclear forces as long as Europe is unstable and packed with armaments.\" Russia has also reportedly reduced the number of military bases that could deploy nonstrategic nuclear weapons and has consolidated its storage areas for these weapons. According to unclassified estimates, the Soviet Union may have had 500-600 storage sites for nuclear warheads in 1991. By the end of the decade, this number may have declined to about 100. In the past 10 years, Russia may have further consolidated its storage sites for nuclear weapons, retaining around 50 in operation. With consideration for the uncertainties in estimates of Russian nonstrategic nuclear forces, some sources indicate Russia may still have up to 4,000 warheads for nonstrategic nuclear weapons. In its 2009 report, the congressionally mandated Strategic Posture Commission indicated that Russia may have around 3,800 operational nonstrategic nuclear weapons. This number may exclude warheads slated for retirement. A more recent estimate indicates that Russia may have \"nearly 2,000 nonstrategic nuclear warheads assigned for delivery by air, naval, and various defensive forces.\" The authors calculate that, within this total, Russia's navy maintains about 760 warheads for \"cruise missiles, antisubmarine rockets, antiaircraft missiles, torpedoes, and depth charges.\" The Air Force may have 570 nuclear warheads available for delivery by fighters and bombers. Some of Russia's nonstrategic nuclear warheads are also allocated to Russia's air and missile defense forces, with about 140 warheads retained for short-range ballistic missiles. Another source, using a different methodology, concluded that Russia may have half that amount, or only 1,000 operational warheads for nonstrategic nuclear weapons. This estimate concludes that Russia may retain up to 210 warheads for its ground forces, up to 166 warheads for its air and missile defense forces, 334 warheads for its air force, and 330 warheads for its naval forces. Where past studies calculated the number of operational warheads by combining estimates of reductions from Cold War levels with assessments of the number of nuclear-capable units and delivery systems remaining in Russia's force structure, this author focused on the number of operational units and the likely number of nuclear warheads needed to achieve their assigned missions. Russia is also modernizing and updating its nonstrategic nuclear forces. According to unclassified sources, this effort appears to \"involve phasing out Soviet-era weapons and replacing them with newer but fewer arms.\" Some argue that Russia will likely limit this modernization program and could retire more of these weapons than it acquires as it develops more capable advanced conventional weapons. Others, however, see Russia's modernization of its nonstrategic nuclear weapons as a partner to its \"escalate to de-escalate\" nuclear doctrine and argue that Russia will expand its nonstrategic nuclear forces as it raises their profile in its doctrine and war-fighting plans. The 2018 Nuclear Posture Review notes that Russia is \"building a large, diverse, and modern set of non-strategic systems that ... may be armed with nuclear or conventional weapons.\" The NPR argues that Russia is \"increasing the total number of such weapons in its arsenal, while significantly improving its delivery capabilities.\" The 2018 NPR also notes that one of Russia's new nonstrategic nuclear weapons is a ground-launched cruise missile with a range between 500 and 5,000 kilometers, which makes it a violation of the 1987 INF Treaty. The Obama Administration had first reported that Russia was in violation of INF in 2014, in the State Department's Report on Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments . According to the 2017 Report, Russia began deploying the missile, now known as the 9M729, in late 2016. The preceding sections of this report focus exclusively on U.S. and Soviet/Russian nonstrategic nuclear weapons. These weapons were an integral part of the Cold War standoff between the two nations. The strategy and doctrine that would have guided their use and the numbers of deployed weapons both figured into calculations about the possibility that a conflict between the two nations might escalate to a nuclear exchange. Other nations—including France, Great Britain, and China—also had nuclear weapons, but these did not affect the central conflict of the Cold War in the same way as U.S. and Soviet forces. The end of the Cold War, however, and the changing international security environment during the past 25 years has rendered incomplete any discussion of nonstrategic nuclear weapons that is limited to U.S. and Russian forces. Because both these nations maintain weapons and plans for their use, the relationship between the two nations could still affect the debate about these weapons. In addition, Russian officials have turned to these weapons as a part of their response to concerns about a range of U.S. and NATO policies. Nevertheless, both these nations have looked beyond their mutual relationship when considering possible threats and responses that might include the use of nonstrategic nuclear weapons. Both nations have highlighted the threat of the possible use of nuclear, chemical, or biological weapons by other potential adversaries or nonstate actors. Both have indicated that they might use nuclear weapons to deter or respond to threats from other nations. This theme is evident in the 2018 Nuclear Posture Review, which calls for the deployment of a new sea-launched cruise missile to address the threat, at least in part, to U.S. allies from the missile and nuclear programs in North Korea. In addition, many analysts believe that a debate about nonstrategic nuclear weapons can no longer focus exclusively on the U.S. and Russian arsenals. For example, India and Pakistan have joined the list of nations that may potentially resort to nuclear weapons in the event of a conflict. If measured by the range of delivery vehicles and the yield of the warheads, these nations' weapons could be considered to be nonstrategic. But each nation could plan to use these weapons in either strategic or nonstrategic roles. Both nations continue to review and revise their nuclear strategies, leaving many questions about the potential role for nuclear weapons in future conflicts. Pakistan, in particular, has considered deploying short-range tactical nuclear weapons with forward-deployed forces, with the intention of using them on the battlefield to blunt a possible Indian attack. China also has nuclear weapons with ranges and missions that could be considered nonstrategic. Many analysts have expressed concerns about the potential for the use of nuclear weapons in a conflict over Taiwan or other areas of China's interests. This report does not review the nuclear weapons programs in these nations. However, when reviewing the issues raised by, problems attributed to, and solutions proposed for nonstrategic nuclear weapons, the report acknowledges the role played by the weapons of these other nations. During the 2010 debate on the New START Treaty, many Senators expressed concerns about Russian nonstrategic nuclear weapons. They noted that these weapons were not covered by the new treaty, that Russia possessed a far greater number of these weapons than did the United States, and that Russia's nonstrategic nuclear weapons might be vulnerable to theft or sale to other nations seeking nuclear weapons. More recently, some Members have raised concerns about the possibility that Russia might deploy these weapons in Crimea, which Russia annexed in March 2014, bringing them closer to the borders of some NATO allies. Russia's Foreign Minister Sergei Lavrov ignited these concerns in December 2014, when he noted that Russia had a right to put nuclear weapons in Crimea because Crimea was now a part of Russia. Although he did not offer details of plans for such deployments, other reports have indicated that Russia might move missiles and bombers that could deliver either nuclear or conventional weapons into Crimea in the next few years. The 2018 Nuclear Posture Review continues to highlight concerns about Russia's nonstrategic nuclear weapons and links proposed changes in U.S. nuclear forces—including the development of a new low-yield warhead for submarine launched ballistic missiles and new sea-launched cruise missile—to Russia's apparent nuclear doctrine and the modernization of its nonstrategic nuclear forces. During the 2010 debates prior to the completion of NATO's new Strategic Concept, analysts and government officials also raised many issues about U.S. nonstrategic nuclear weapons. These debates focused on questions about whether NATO should continue to rely on nuclear weapons to ensure its security and whether the United States should continue to deploy nonstrategic nuclear weapons at bases in Europe. Many of the discussions that focused on Russian nonstrategic nuclear weapons and many of those that focused on U.S. nonstrategic nuclear weapons reached a similar conclusion—there was widespread agreement about the need for further cooperation between the United States and Russia in containing, controlling, and possibly reducing nonstrategic nuclear weapons. The 112 th Congress reiterated its support for this agenda, when in the FY2013 Defense Authorization Act ( H.R. 4310 , §1037) it indicated that \"the United States should pursue negotiations with the Russian Federation aimed at the reduction of Russian deployed and nondeployed nonstrategic nuclear forces.\" But the tone of the discussion has changed in recent years, following Russia's annexation of Crimea, its support for separatists in Ukraine, and its military maneuvers near NATO nations. There is little discussion of possible reductions in U.S. nuclear weapons in Europe and declining interest in pursuing transparency and confidence-building measures with Russia. Instead, while the prospects for cooperation with Russia seem limited, particularly in light of its reported violation of the INF Treaty, NATO has taken steps to bolster its nuclear capabilities and the United States is considering the deployment of new nonstrategic nuclear weapons. One potential risk from Russia's continued deployment of nonstrategic nuclear weapons stems from concerns about their safety and security in storage areas and a possible lack of central control over their use when deployed in the field. These weapons were deployed, and many remain in storage, at remote bases close to potential battlefields and far from the central command authority in Moscow. The economic chaos in Russia during the 1990s raised questions about the stability and reliability of the troops charged with monitoring and securing these weapons. At the time, some raised concerns about the possibility that the weapons might be lost, stolen, or sold to other nations or groups seeking nuclear weapons. Even though economic conditions in Russia have improved significantly, some analysts still view Russian nonstrategic nuclear weapons as a possible source of instability. Specifically, some have noted that \"the continuing existence of … tactical nuclear weapons … creates a risk of accidental, unauthorized or mistaken use. In addition, the risk of terrorist groups acquiring these weapons is high. Therefore, security vigilance is essential.\" Russian officials deny that they might lose control over their nonstrategic nuclear weapons and they contend that the problems of the 1990s were resolved as the weapons were withdrawn to central storage areas. Moreover, there is no public evidence from Western sources about any episodes of lost, sold, or stolen Russian nuclear weapons. Nevertheless, concerns remain that these weapons might find their way to officials in rogue nations or nonstate actors. For example, during comments made after a speech in October 2008, Secretary of Defense Robert Gates stated that he was worried that the Russians did not know the numbers or locations of \"old land mines, nuclear artillery shells, and so on\" that might be of interest to rogue states or terrorists. Russian officials noted, in response to this comment, that its stocks of nuclear weapons were secure and well-guarded and that Gates's concerns were not valid. As was noted above, many analysts argue that Russia's nonstrategic nuclear weapons pose a risk to the United States, its allies, and others because Russia has altered its national security concept and military strategies, increasing its reliance on nuclear weapons. Some fear that Russia might resort to the early use of nuclear weapons in a conflict along its periphery, which could lead to a wider conflict and the possible involvement of troops from NATO or other neighboring countries, possibly drawing in new NATO members. Some also believe that Russia could threaten NATO with its nonstrategic nuclear weapons because Russia sees NATO as a threat to its security. Russian analysts and officials have argued that NATO enlargement—with the possible deployment of nuclear weapons and missile defense capabilities on the territories of new NATO members close to Russia's borders—demonstrates how much NATO could threaten Russia. The congressionally mandated Strategic Posture Commission expressed a measure of concern about the military implications of Russia's nonstrategic nuclear forces. It noted that Russia \"stores thousands of these weapons in apparent support of possible military operations west of the Urals.\" It further noted that the current imbalance between U.S. and Russian nonstrategic nuclear warheads is \"worrisome to some U.S. allies in Central Europe.\" It argued that this imbalance, and the allies' worries, could become more pronounced in the future if the United States and Russia continue to reduce their numbers of deployed strategic nuclear weapons. Others have argued, however, that regardless of Russia's rhetoric, \"Russia's theater nuclear weapons are not ... destabilizing.\" Even if modernized, these weapons will not \"give Moscow the capability to alter the strategic landscape.\" Further, Russian weapons, even with its new military strategy, may not pose a threat to NATO or U.S. allies. Russia's doctrine indicates that it would use these weapons in response to a weak performance by its conventional forces in an ongoing conflict. Since it would be unlikely for NATO to be involved in a conventional conflict with Russia, it would also be unlikely for Russian weapons to find targets in NATO nations. This does not, however, preclude their use in other conflicts along Russia's periphery. As Russian documents indicate, Russia could use these weapons if its national survival were at stake. This view, however, has been tempered, in recent years, by both Russia's aggression in Ukraine and its frequent \"nuclear saber-rattling.\" Not only have Russian officials reminded others of the existence and relevance of Russian nuclear weapons, Russian military exercises, bomber flights, and cruise missile launches have seemed designed to demonstrate Russia's capabilities and, possibly, its willingness to challenge NATO's eastern members. These actions have raised concerns about the possibility that Russia might threaten to use nuclear weapons during a crisis with NATO, in line with its apparent \"escalate to de-escalate\" strategy, to force a withdrawal by NATO forces defending an exposed ally or to terminate a conflict on terms favorable to Russia. While some analysts dispute this interpretation of Russia's doctrine, most agree that nonstrategic nuclear weapons appear to play a significant role in Russia's doctrine and war plans. The Bush Administration argued, after the 2001 Nuclear Posture Review, that the United States had reduced its reliance on nuclear weapons by increasing the role of missile defenses and precision conventional weapons in the U.S. deterrent posture. At the same time, though, the Administration indicated that the United States would acquire and maintain those capabilities that it needed to deter and defeat any nation with the potential to threaten the United States, particularly if the potential adversary possessed weapons of mass destruction. It noted that these new, threatening capabilities could include hardened and deeply buried targets and, possibly, bunkers holding chemical or biological weapons. It indicated that the United States would seek to develop the capabilities to destroy these types of facilities. Using a similar construct, the Obama Administration, in the 2010 Nuclear Posture Review, also indicated that the United States would reduce the role of nuclear weapons in U.S. regional deterrence strategies by increasing its reliance on missile defenses and precision conventional weapons. Unlike the Bush Administration, however, the Obama Administration did not seek to acquire new nuclear weapons capabilities or to extend U.S. nuclear deterrence to threats from nations armed with chemical or biological weapons. It stated that it would not consider the use of nuclear weapons in response to conventional, chemical, or biological attack if the attacking nation were in compliance with its nuclear nonproliferation obligations. Instead, in such circumstances, the United States would deter and respond to attacks with missile defenses and advanced conventional weapons. In addition, the Administration announced that it planned to retire the Navy's nuclear-armed, sea-launched cruise missiles, which had been part of the U.S. extended deterrent to allies in Asia. Nevertheless, the Administration pledged to retain and modernize the B-61 warheads, carried by U.S. tactical fighters and bombers; these are also a part of the U.S. extended deterrent. Some questioned the wisdom of this change in policy. They recognized that the United States would only threaten the use of nuclear weapons in the most extreme circumstances, but they argued that, by taking these weapons \"off the table\" in some contingencies, the United States might allow some adversaries to conclude that they could threaten the United States without fear of an overwhelming response. The Obama Administration argued, however, that although it was taking the nuclear option off the table in some cases, this change would not undermine the U.S. ability to deter attacks from non-nuclear nations because the United States maintained the capability to respond to attacks from these nations with overwhelming conventional force. According to Under Secretary of State Ellen Tauscher, \"we retain the prospect of using devastating conventional force to deter and respond to any aggression, especially if they were to use chemical or biological weapons. No one should doubt our resolve to hold accountable those responsible for such aggression, whether those giving the orders or carrying them out. Deterrence depends on the credibility of response. A massive and potential conventional response to non-nuclear aggression is highly credible.\" Questions about the role of U.S. nuclear weapons in regional contingencies have resurfaced in recent years, as analysts have sought to understand how these weapons might affect a conflict with a regional ally armed with nuclear weapons. Some analysts doubt that U.S. nuclear weapons would play any role in such a contingency, unless used in retaliation after an adversary used a nuclear weapon against the United States or an ally, because U.S. conventional forces should be sufficient to achieve most conceivable military objectives. Others, however, argue that the United States might need to threaten the use of nuclear weapons, and possibly even employ those weapons, when facing an adversary seeking to use its own nuclear capabilities to intimidate the United States or coerce it to withdraw support for a regional ally. Some have suggested, specifically, that forward-deployed nuclear weapons with lower yields—in other words, nonstrategic nuclear weapons—might serve as a more credible deterrent threat in these circumstances. The 2018 Nuclear Posture Review adopts this perspective, and seems to discount the approach, taken in both the Bush and Obama NPRs, of reducing the role of nuclear weapons by expanding the role and options available with advanced conventional weapons. It does not completely dismiss the value of U.S. conventional capabilities, but asserts that \"conventional forces alone are inadequate to assure many allies who rightly place enormous value on U.S. extended nuclear deterrence for their security.\" These concerns are central to the NPR's recommendation that the United States develop two new types of nonstrategic nuclear weapons. Where the two previous NPRs sought to fill \"gaps\" in deterrence with ballistic missile defenses and advanced conventional weapons, the 2018 NPR asserts that new nuclear weapons are needed for this purpose. For years after the collapse of the Warsaw Pact and demise of the Soviet Union, analysts questioned whether the United States needed to continue to deploy nuclear weapons in Europe. During the Cold War, these weapons were a part of NATO's effort to offset the conventional superiority of the Soviet Union and its Warsaw Pact allies. Some argued that this role was no longer relevant following the collapse of the Soviet-era military and alliance structure. In addition, analysts argued that NATO conventional forces were far superior to those of Russia, and sufficient for NATO's defense. However, NATO policy still views nonstrategic nuclear weapons as a deterrent to any potential adversary, and they also serve as a link among the NATO nations, with bases in several nations and shared responsibility for nuclear policy planning and decisionmaking. They also still serve as a visible reminder of the U.S. extended deterrent and assurance of its commitment to the defense of its allies. The United States, its allies, and analysts outside government engaged in a heated debate over the role of and need for U.S. nonstrategic nuclear weapons deployed in Europe in the months leading up to the completion of NATO's Strategic Concept in November 2010. In early 2010, political leaders from several NATO nations—including Belgium, Germany, Luxembourg, the Netherlands, and Norway—called for the United States to remove these weapons from Europe. They argued that these weapons served no military purpose in Europe, and that their removal would demonstrate NATO's commitment to the vision of a world free of nuclear weapons, a vision supported by President Obama in a speech he delivered in April 2009. Those who sought the weapons' removal also argued that NATO could meet the political goals of shared nuclear responsibility in other ways, and that the United States could extend deterrence and ensure the security of its allies in Europe with conventional weapons, missile defenses, and longer-range strategic nuclear weapons. Moreover, some argue, because these weapons play no military or political role in Europe, they no longer serve as a symbol of alliance solidarity and cooperation. Others, however, including some officials in newer NATO nations, argued that U.S. nonstrategic nuclear weapons in Europe not only remained relevant militarily, in some circumstances, but that they were an essential indicator of the U.S. commitment to NATO security and solidarity. This argument has gained credence as some of the newer NATO allies, such as Poland and the Baltic states, feel threatened by Russia and its arsenal of nonstrategic nuclear weapons. They would view the withdrawal of U.S. nuclear weapons as a change in the U.S. and NATO commitment to their security. NATO foreign ministers addressed the issue of U.S. nonstrategic nuclear weapons during their meeting in Tallinn, Estonia, in April 2010. At this meeting, the allies sought to balance the views of those nations who sought NATO agreement on the removal of the weapons and those who argued that these weapons were still relevant to their security and to NATO's solidarity. At the conclusion of the meeting, Secretary of State Hillary Clinton said that the United States was not opposed to reductions in the number of U.S. nuclear weapons in Europe, but that the removal of these weapons should be linked to a reduction in the number of Russian nonstrategic nuclear weapons. Moreover, according to a NATO spokesman, the foreign ministers had agreed that no nuclear weapons would be removed from Europe unless all 28 member states of NATO agreed. Some also question whether the United States and NATO might benefit from the removal of these weapons from bases in Europe for safety and security reasons. An Air Force review of nuclear surety and security practices, released in early 2008, identified potential security concerns for U.S. weapons stored at some bases in Europe. The problems were evident at some of the national bases, where the United States stores nuclear weapons for use by the host nation's own aircraft, but not at U.S. air bases in Europe. The review noted that \"host nation security at nuclear-capable units varies from country to country\" and that most bases do not meet DOD's security requirements. As was noted earlier, some in Congress thought the United States should consider expanding its deployment of dual-capable aircraft and nuclear bombs into eastern NATO nations, in response to Russia's aggression in Ukraine. They argued that such moves would demonstrate that \"Russian actions will come at a price.\" Some have also suggested that the United States consider deploying new nuclear-armed missiles in Europe, in response to Russia's violation of the 1987 INF Treaty. There is little evidence that NATO has requested, or would welcome, such deployments, even though the United States has announced that it plans to withdraw from the INF Treaty. Some have argued that such steps could ignite a new arms race that could further undermine security in Europe. Others have noted that these weapons might be destabilizing if they were vulnerable to preemptive strikes. Moreover, NATO has adjusted its conventional force posture and operations in response to Russia's actions in Ukraine. According to NATO documents, these changes, when backed by the strategic nuclear forces of the United States and United Kingdom, should help assure the eastern allies of NATO's ability to defend them. The George W. Bush Administration stated that the U.S. nuclear posture adopted after the 2002 NPR, along with the research into the development of new types of nuclear warheads, would contribute to U.S. efforts to stem the proliferation of nuclear, chemical, and biological weapons. It argued that, by creating a more credible threat against the capabilities of nations that seek these weapons, the U.S. policy would deter their acquisition or deployment. It also reinforced the value of the U.S. extended deterrent to allies in Europe and Japan, thus discouraging them from acquiring their own nuclear weapons. Critics of the Bush Administration's policy questioned whether the United States needed new nuclear weapons to deter the acquisition or use of WMD by other nations; as noted above, they claim that U.S. conventional weapons can achieve this objective. Further, many analysts claimed that the U.S. policy would actually spur proliferation, encouraging other countries to acquire their own WMD. Specifically, they noted that U.S. plans and programs could reinforce the view that nuclear weapons have military utility. If the world's only conventional superpower needs more nuclear weapons to maintain its security, then it would be difficult for the United States to argue that other nations could not also benefit from these weapons. Such nations could also argue that nuclear weapons would serve their security interests. Consequently, according to the Bush Administration's critics, the United States might ignite a new arms race if it pursued new types of nuclear weapons to achieve newly defined battlefield objectives. The Bush Administration countered this argument by noting that few nations acquire nuclear weapons in response to U.S. nuclear programs. They do so either to address their own regional security challenges, or to counter U.S. conventional superiority. The Obama Administration, in the 2010 Nuclear Posture Review, set out a different relationship between U.S. nuclear weapons policy and nonproliferation policy. The Bush Administration had indicated that a policy where the United States argued that it might use nuclear weapons against non-nuclear nations would discourage these nations from acquiring or using weapons of mass destruction. In other words, they could be attacked with nuclear weapons whether or not they had nuclear weapons of their own. The Obama Administration, however, argued that its adjustment to the U.S. declaratory policy—where it indicated that it would not use U.S. nuclear weapons to threaten or attack nations who did not have nuclear weapons and were in compliance with their nonproliferation obligations—would discourage their acquisition of nuclear weapons. Nations that did not yet have nuclear weapons would know that they could be added to the U.S. nuclear target list if they acquired them. And others, like Iran and North Korea, who were already pursuing nuclear weapons, would know that, if they disbanded their programs, they could be removed from the U.S. nuclear target list. The 2018 Nuclear Posture Review, for example, explicitly states that \"credible U.S. extended nuclear deterrence will continue to be a cornerstone of U.S. non-proliferation efforts.\" Many analysts have argued that, if allies were not confident in the reliability and credibility of the U.S. nuclear arsenal, they may feel compelled to acquire their own nuclear weapons. Such calculations might be evident in Japan and South Korea, as they face threats or intimidation from nuclear-armed neighbors like China and North Korea. In recent years, some politicians in South Korea have called for the return of U.S. nonstrategic nuclear weapons to the peninsula, or even South Korea's development of its own nuclear capability, as a response to North Korea's development and testing of nuclear weapons. This view has not received the support of the current government in South Korea, but it does demonstrate that some may see U.S. security guarantees as fragile. Many analysts note, however, that extended deterrence rests on more than just U.S. nonstrategic nuclear weapons. For example, in recent years the United States and South Korea have participated in the U.S.-ROK (Republic of Korea) Extended Deterrence Policy Committee and the United States and Japan have pursued the U.S.-Japan Extended Deterrence Dialogue to discuss issues related to regional security and to bolster the allies' confidence in the U.S. commitment to their security. Moreover, the United States occasionally flies B-2 and B-52 bombers in joint exercises with South Korea to demonstrate its ability to project power, if needed, into a conflict in the area. Concerns about the disparity between the numbers of U.S. and Russian nonstrategic nuclear weapons have dominated discussions about possible arms control measures addressing nonstrategic nuclear weapons in recent years. The United States and Russia have never employed their nonstrategic nuclear weapons to counter, or balance, the nonstrategic nuclear weapons of the other side. For NATO during the Cold War and for Russia in more recent years, these weapons have served to counter perceived weaknesses and an imbalance in conventional forces. As a result, there has been little interest, until recently, in calculating or creating a balance in the numbers of nonstrategic nuclear weapons. Some who have expressed a concern about the numerical imbalance in nonstrategic nuclear weapons argue that this imbalance could become more important as the United States and Russia reduce their numbers of strategic nuclear weapons. They fear that NATO nations located near Russia's borders may feel threatened or intimidated by Russia's nonstrategic nuclear weapons. They assert that Russia's advantage in the numbers of these weapons, when combined with a reduction in U.S. strategic forces, could convince these nations that Russia was the rising power in the region, and that they should, therefore, accede to Russia's political or economic pressure. Others, however, have questioned this logic. They agree that Russia's ability to intimidate, and possibly attack, NATO nations on its periphery may be related to the capabilities of Russia's conventional forces and the existence of Russia's nuclear forces. But this ability would exist whether Russia had dozens or hundreds of nuclear weapons in the region. And NATO's ability to resist Russian pressure and support vulnerable allies would be related more to its political cohesion and overall military capabilities than to the precise number of nuclear weapons that were deployed on European territory. Moreover, some note that, in spite of Russia's advantage in the aggregate number on nonstrategic nuclear weapons, many of Russia's weapons may be deployed at bases closer to its border with China than its borders with NATO nations, so many of these weapons should not count in the balance at all. Many analysts have argued that the United States and Russia should, at a minimum, provide each other with information about their numbers of nonstrategic nuclear weapons and the status (i.e., deployed, stored, or awaiting dismantlement) of those weapons. According to one such article, \"a crucial first step ... would be to ... agree on total transparency, verification, and the right to monitor changes and movement of the arsenal.\" Such information might help each side to monitor the other's progress in complying with the PNIs; it could also help resolve questions and concerns that might come up about the status of these weapons or their vulnerability to theft or misuse. The United States and Russia have discussed transparency measures for nuclear weapons in the past, in a separate forum in the early 1990s, and as a part of their discussions of the framework for a START III Treaty in the late 1990s. They failed to reach agreement on either occasion. Russia, in particular, has seemed unwilling to provide even basic information about its stockpile of nonstrategic nuclear weapons. Some in the United States resisted as well, arguing that public discussions about the numbers and locations of U.S. nuclear weapons in Europe could increase pressure on the United States to withdraw these weapons. After NATO completed its new Strategic Concept in 2010 and Deterrence and Defense Posture Review in 2012, many experts recognized that NATO was unlikely to approve reductions in U.S. nonstrategic nuclear weapons in Europe unless Russia agreed to similar reductions. As a result, in recent years, some again argued that NATO and Russia should focus on transparency and confidence-building measures as a way to ease concerns and build cooperation, before they seek to negotiate actual limits or reductions in nonstrategic nuclear weapons. They could begin, for example, with discussions about which types of weapons to include in the negotiation and what type of data to exchange on these weapons. Some have suggested, in addition, that the two nations could exchange information on the locations of storage facilities that no longer house these weapons, as a way to begin the process of building confidence and understanding. Those who support this approach argue that it would serve well as a first step, and could eventually lead to limits or reductions. Others, however, believe these talks might serve as a distraction, and, if the United States and Russia get bogged down in these details, they may never negotiate limits or reductions. Moreover, Russian officials seem equally as uninterested in transparency negotiations as they are in reductions at this time. Over the years, some analysts have suggested that the United States and Russia negotiate a formal treaty to put limits and restrictions on each nation's nonstrategic nuclear weapons. This was a central theme in the debate over the New START Treaty in late 2010. Not only did Members of the Senate call on the Obama Administration to pursue such negotiations, Administration officials noted often that the New START Treaty was just a first step and that the United States and Russia would pursue limits on nonstrategic nuclear weapons in talks on a subsequent agreement. In April 2009, when Presidents Obama and Medvedev outlined their approach to nuclear arms control, they indicated that arms control would be a step-by-step process, with a replacement for the 1991 START Treaty coming first, but a more comprehensive treaty that might include deeper cuts in all types of warheads, including nonstrategic nuclear weapons, following in the future. Negotiations on a treaty to limit nonstrategic nuclear weapons could be complex, difficult, and very time-consuming. Given the large disparity in the numbers of U.S. and Russian nonstrategic nuclear weapons, and given the different roles these weapons play in U.S. and Russian security strategy, it may be difficult to craft an agreement that not only reduces the numbers of weapons in an equitable way but also addresses the security concerns addressed by the retention of these weapons. A treaty that imposed an equal ceiling on each sides' numbers of deployed nonstrategic weapons might appear equitable, but it would require sharp reductions in Russia's forces with little impact on U.S. forces. A treaty that required each side to reduce its forces by an equal percentage would have a similar result, requiring far deeper reductions on Russia's part. Even if the United States and Russia could agree on the depth of reductions to impose on these weapons, they may not be able to agree on which weapons would fall under the limit. For the United States, it may be relatively straightforward to identify the affected weapons—the limit could apply to the gravity bombs deployed in Europe and any spare weapons that may be stored in the United States. Russia, however, has many different types of nonstrategic nuclear weapons, including some that could be deployed on naval vessels, some that would be delivered by naval aircraft, and some that would be deployed with ground forces. Moreover, while many of these weapons might be deployed with units in western Russia, near Europe, others are located to the east, and would deploy with troops in a possible conflict with China. To address these problems, some analysts have suggested that the limits in the next arms control treaty cover all types of nuclear warheads—warheads deployed on strategic-range delivery vehicles, warheads deployed with tactical-range delivery vehicles, and nondeployed warheads held in storage. The Obama Administration reportedly considered this approach, and studied the contours of a treaty that would limit strategic, nonstrategic, and nondeployed nuclear warheads. This type of agreement would allow each side to determine, for itself, the size and mix of its forces, within the limits on total warheads. While this type of comprehensive agreement may seem to provide a solution to the imbalance between U.S. and Russian nonstrategic nuclear weapons, it is not clear that, once the parties move beyond limits on just their deployed strategic weapons, they will be able to limit the scope of the treaty in this way. Each side has its own list of weapons that it finds threatening; each may seek to include these in a more comprehensive agreement. For example, Russian officials, including the Foreign Minister, Sergei Lavrov, have stated that a future arms control agreement should also include limits on missile defenses, strategic-range weapons that carry conventional warheads, and possibly weapons in space. Minister Lavrov stated, specifically, that it is impossible to discuss only one aspect of the problem at strategic parity and stability negotiations held in the modern world. It is impossible to ignore such aspects as non-nuclear strategic armaments, on which the United States is actively working, plans to deploy armaments in space, which we oppose actively, the wish to build global missile defense systems, and the imbalance of conventional armaments. It is possible to hold further negotiations only with due account of all these factors….\" The United States has no interest in including these types of limits in the next agreement. Hence, it is not clear that the two sides would be able to agree on which issues and what weapons systems to include in a next round of arms control negotiations. Moreover, although President Medvedev agreed, in April 2009, that the United States and Russia should pursue more arms control reductions after completing New START, Russia may have little interest in limits on nonstrategic nuclear weapons. Russian officials have denied that their weapons pose a safety and security problem, and they still consider these weapons essential to Russian military strategy and national security. Most analysts agree that the United States and Russia are unlikely to make any progress on either limits or transparency measures related to nonstrategic nuclear weapons in the current environment. Russia's annexation of Crimea, aggression against Ukraine, and violation of the INF Treaty have altered the security atmosphere in Europe and quieted calls among officials in NATO nations for reductions in these weapons. According to Obama Administration officials, the U.S. offer for further negotiations remained on the table through the end of the Administration, but \"progress requires a willing partner and a conducive strategic environment.\" The Trump Administration reiterated this point in the 2018 Nuclear Posture Review, noting that \"progress in arms control is not an end in and of itself, and depends on the security environment and the participation of willing partners.\" It emphasized, further, that neither of these conditions exist today, in light of Russia's violation of numerous arms control agreements and its efforts to \"change borders and overturn existing norms\" in Crimea and eastern Ukraine. Nevertheless, the 2018 NPR suggests the contours of a possible future arms control agreement between the United States and Russia. When discussing the need for a new sea-launched cruise missile, the NPR notes that this missile would not only provide a \"non-strategic regional presence\" and \"an assured response capability\" to bolster the U.S. commitment to its allies' defense, but would also provide \"an INF-Treaty compliant response to Russia's continuing Treaty violation.\" Moreover, it seems to view the SLCM as a bargaining chip for a future negotiation: If Russia returns to compliance with its arms control obligations, reduces its non-strategic nuclear arsenal, and corrects its other destabilizing behaviors, the United States may reconsider the pursuit of a SLCM. Indeed, U.S. pursuit of a SLCM may provide the necessary incentive for Russia to negotiate seriously a reduction of its non-strategic nuclear weapons, just as the prior Western deployment of intermediate-range nuclear forces in Europe led to the 1987 INF Treaty. As then Secretary of State George P. Shultz stated, \"If the West did not deploy Pershing II and cruise missiles, there would be no incentive for the Soviets to negotiate seriously for nuclear weapons reductions. This last sentence is a reference to NATO's 1979 Dual Track decision, which paved the way for the negotiation of the INF Treaty. In the late 1970s, the Soviet Union began to deploy a new intermediate-range ballistic missile—known as the SS-20—that threatened to upset stability in Europe and raised questions about the cohesion of NATO. As a result, in December 1979, NATO adopted a \"dual-track\" decision that sought to link the modernization of U.S. nuclear weapons in Europe with an effort to spur the Soviets to negotiate reductions in INF systems. In the first track, the United States and its NATO partners agreed to replace aging medium-range Pershing I ballistic missiles with a more accurate and longer-range Pershing II (P-II) while adding new ground-launched cruise missiles. In the second track, NATO agreed that the United States should attempt to negotiate limits with the Soviet Union on intermediate-range nuclear systems. The allies recognized that the Soviet Union was unlikely to negotiate limits on its missiles unless it faced a similar threat from intermediate-range systems based in Western Europe. Initially, the United States sought an agreement that would impose equal limits on both sides' intermediate-range missiles, but after several years of negotiations and significant changes in the global security environment, both nations agreed to a global ban on all land-based intermediate-range ballistic and cruise missiles. This agreement serves as an imperfect model for the offer contained in the 2018 NPR. The \"dual-track\" decision envisioned limits on similar systems—U.S. and Soviet intermediate-range missiles. The NPR offers to forgo the new U.S. SLCM in exchange for a longer list of Russian weapons and behaviors—it indicates that the United States may reconsider the SLCM program if Russia \"returns to compliance with its arms control obligations, reduces its non-strategic nuclear arsenal, and corrects its other destabilizing behaviors.\" In addition, the 1979 dual track decision sought to deploy new U.S. missiles in Europe, to balance an emerging Soviet threat to Europe. A U.S. offer to forgo the SLCM in negotiations with Russia could be inconsistent with the NPR's insistence that this missile is critical to extended deterrence in Asia. Even if the United States sought to limit the agreement to missiles deployed in Europe, Russia might object by noting that the United States could easily move sea-launched cruise missiles deployed in Asia to locations closer to Russia (the INF Treaty addressed the problem of mobility by adopting a global ban on these missiles). Finally, as the United States and Soviet Union discovered when they negotiated the INF Treaty, the complexity of distinguishing between nuclear and conventional cruise missiles could necessitate a ban on all cruise missiles of a designated range. This would likely be inconsistent with the U.S. reliance on conventional SLCMs in conflicts around the world. Consequently, even with the potential opening for arms control in the 2018 NPR, it seems unlikely that the United States and Russia will pursue or conclude an agreement limiting nonstrategic nuclear weapons in the near future.", "summary": "Recent debates about U.S. nuclear weapons have questioned what role weapons with shorter ranges and lower yields can play in addressing emerging threats in Europe and Asia. These weapons, often referred to as nonstrategic nuclear weapons, have not been limited by past U.S.-Russian arms control agreements, although some analysts argue such limits would be of value, particularly in addressing Russia's greater numbers of these types of weapons. Others have argued that the United States should expand its deployments of these weapons, in both Europe and Asia, to address new risks of war conducted under a nuclear shadow. The Trump Administration addressed these questions in the Nuclear Posture Review released in February 2018, and determined that the United States should acquire two new types of nonstrategic nuclear weapons: a new low-yield warhead for submarine-launched ballistic missiles and a new sea-launched cruise missile. During the Cold War, the United States and Soviet Union both deployed nonstrategic nuclear weapons for use in the field during a conflict. While there are several ways to distinguish between strategic and nonstrategic nuclear weapons, most analysts consider nonstrategic weapons to be shorter-range delivery systems with lower-yield warheads that might be used to attack troops or facilities on the battlefield. They have included nuclear mines; artillery; short-, medium-, and long-range ballistic missiles; cruise missiles; and gravity bombs. In contrast with the longer-range \"strategic\" nuclear weapons, these weapons had a lower profile in policy debates and arms control negotiations, possibly because they did not pose a direct threat to the continental United States. At the end of the 1980s, each nation still had thousands of these weapons deployed with their troops in the field, aboard naval vessels, and on aircraft. In 1991, the United States and Soviet Union both withdrew from deployment most and eliminated from their arsenals many of their nonstrategic nuclear weapons. The United States now has approximately 500 nonstrategic nuclear weapons, with around 200 deployed with aircraft in Europe and the remaining stored in the United States. Estimates vary, but experts believe Russia still has between 1,000 and 6,000 warheads for nonstrategic nuclear weapons in its arsenal. The Bush Administration quietly redeployed some U.S. weapons deployed in Europe, while the Obama Administration retired older sea-launched cruise missiles. Russia, however seems to have increased its reliance on nuclear weapons in its national security concept. Analysts have identified a number of issues with the continued deployment of U.S. and Russian nonstrategic nuclear weapons. These include questions about the safety and security of Russia's weapons and the possibility that some might be lost, stolen, or sold to another nation or group; questions about the role of these weapons in U.S. and Russian security policy; questions about the role that these weapons play in NATO policy and whether there is a continuing need for the United States to deploy them at bases overseas; questions about the implications of the disparity in numbers between U.S. and Russian nonstrategic nuclear weapons; and questions about the relationship between nonstrategic nuclear weapons and U.S. nonproliferation policy. Some argue that these weapons do not create any problems and the United States should not alter its policy. Others argue that the United States should expand its deployments of these weapons in response to challenges from Russia, China, and North Korea. Some believe the United States should reduce its reliance on these weapons and encourage Russia to do the same. Many have suggested that the United States and Russia expand efforts to cooperate on ensuring the safe and secure storage and elimination of these weapons; others have suggested that they negotiate an arms control treaty that would limit these weapons and allow for increased transparency in monitoring their deployment and elimination. The 115th Congress may review some of these proposals.", "document_type": "crs"}
{"report": "Several federal laws address the services and protections received by students with disabilities. The application of these laws may change depending upon the student's situation, and most common ly at times of transition—whether the student moves to a new school district or state, or between preschool and kindergarten, elementary school and junior high, junior high and high school, or high school and postsecondary education. Often the biggest transition for students with disabilities and their families is from the supports and services provided in the preschool-12th grade (P-12) public education system to a college or university. At the P-12 level, three main federal laws impact students with disabilities: the Individuals with Disabilities Education Act (IDEA), Section 504 of the Rehabilitation Act of 1973 (Section 504), and the Americans with Disabilities Act (ADA). For students receiving special education under the IDEA or receiving accommodations and services under Section 504, transitioning from the P-12 public education system to an institution of higher education (IHE) may affect how the school assesses their disability, their eligibility for receiving accommodations or services, and the supports, services, and accommodations available to them. This report examines those laws' impact on students with disabilities in three key respects: how they define disability; how they determine eligibility for services and protections; and how they ensure students with disabilities receive the accommodations and services they need to participate in all levels of education. In 1973, following two major federal district court decisions concluding that children with disabilities have the same right of access to public education as other children, Congress enacted the first of a series of civil rights statutes protecting individuals with disabilities: Section 504 of the Rehabilitation Act of 1973. The Rehabilitation Act of 1973 provided a statutory basis for the Rehabilitation Services Administration and funding for projects and studies supporting the employment of people with disabilities. Section 504 was the last section of the Act and the only section concerned with the civil rights of people with disabilities. That provision accordingly provides broad antidiscrimination protections for the disabled, prohibiting any \"program or activity\" that receives federal financial assistance from excluding \"otherwise qualified individual[s] with a disability\" from participating in, or benefiting from, those programs. Given the reach of federal funding, Section 504's guarantee of nondiscrimination stretches quite far, covering not just the P-12 public schools but also postsecondary education, employment, and access to public facilities as well. And because of that breadth, the act remains a key legal protection for students with disabilities today. Students who receive accommodations under Section 504 in high school may have an easier time transitioning to a postsecondary educational environment because the basic protections under Section 504 remain the same regardless of the age or education level of the person with a disability. As explained later in this report, the U.S. Department of Education (ED) has developed separate Section 504 regulations covering these different levels of education, including Preschool, Elementary, and Secondary Education (Subpart D) and Postsecondary Education (Subpart E). ED's Office of Civil Rights (OCR) has a primary role in enforcing Section 504 in the education context, affecting a significant number of students. In the 2013-2014 school year (SY), OCR reported that nearly 1 million public school students received some sort of service under Section 504. And at the postsecondary level, where students with disabilities receive protection under both Section 504 and the ADA, in SY 2015-2016, approximately 19.5% of undergraduates and 12.0% of post-baccalaureate students reported having a disability. Two years after enactment of the Rehabilitation Act, Congress passed the Education for All Handicapped Children Act, later renamed the IDEA, which focused directly on children with disabilities' access to education. At the time of the IDEA's adoption, Congress found that more than half of all children with disabilities were not receiving appropriate educational services and that 1 million children with disabilities were excluded entirely from the public school system. Congress determined, in addition, that many children participating in public school programs had undiagnosed disabilities that harmed their educational progress. To address these findings, Congress laid down a clear mandate to any state seeking funds under the act: in order to receive those funds, the state must \"identify and evaluate\" all children with disabilities residing \"within [their] borders\" to ensure those children receive a free appropriate public education. The IDEA has been comprehensively reauthorized five times since its original enactment in 1975, most recently in 2004. ED's Office of Special Education Programs in the Office of Special Education and Rehabilitative Services administers the act, and it remains the main federal statute governing special education for children from birth through age 21. The IDEA does so by supplementing state and local funding to pay for some of the additional or excess costs of educating children with disabilities. Of particular importance is Part B of the act, which protects the right of individuals with disabilities, from age 3 through 21, to a \"free appropriate public education\" (FAPE). In SY2017-2018, approximately 7 million children ages 3 through 21 received special education and related services under Part B of the IDEA . Students served under Part B of the IDEA represent about 13.6% of all P-12 public school students. The ADA, as amended, has been described as \"the most sweeping anti-discrimination measure since the Civil Rights Act of 1964.\" Its purpose, as explained in the act itself, is \"to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities.\" The ADA therefore provides broad nondiscrimination protection for individuals with disabilities, applicable across many settings. Title II of the act, in particular, prohibits any \"public entity,\" such as a public school, from discriminating based on disability, while Title III similarly forbids discrimination by \"public accommodations,\" including nonparochial private schools. The ADA Amendments Act adopted in 2008 and made effective January 1, 2009, broadened the scope of the ADA's definition of disabilities, and, through conforming amendments, Section 504's definition as well. The ADA Amendments Act extends the ADA and Section 504 coverage to more clearly encompass all public, and some private, P-12 schools and nearly all postsecondary IHEs. According to the U.S. Census Bureau, 12.7% of the civilian noninstitutionalized population were reported to have a disability in 2017 (about 40.7 million people), including 4.2% of all children under age 18 (roughly 3.1 million) and 6.4% of all adults ages 18 to 34 (about 4.7 million). These individuals are covered by the broad protections of the ADA when accessing most services and facilities, including secondary and postsecondary educational institutions. The IDEA incorporates a categorical definition of \"disability,\" identifying a covered \"child with a disability\" as any \"child\" having at least one of 13 conditions specifically categorized in the act. Thus, to qualify for services under the IDEA a student of qualifying age must satisfy two requirements. First, the student must have a documented disability that falls in one of the categories enumerated in the IDEA, as further specified by ED's implementing regulation. And second, as a result of that disability the student must require \"special education and related services\" in order to benefit from public education. Only if the student meets both criteria will he or she be eligible to receive the principal benefit of the act: specially designed instruction or special education in which the content or the delivery of the instruction is adapted to the child's individual needs, detailed in a plan known as an individualized education program (IEP). Consequently, a child who has a disability not recognized under the act, or has a disability that may require related services but not special education, has no right under the IDEA to the special education and related services provided through an IEP. Each IDEA disability category is broadly defined in ED's regulations implementing the act. And that breadth has given states some room to adopt more specific requirements for these categories, so long as those further requirements do not exclude children otherwise eligible for services under the act. Thus, for example, while the IDEA expressly covers a child suffering from some \"other health impairments\" (OHI), the act itself does not specify the sort of disorders that might count as such. In its IDEA regulations, ED has provided a complex definition of that statutory OHI category, listing a series of examples of disorders that may qualify under it. And some states, in their own implementing regulations, have further elaborated on ED's definition, particularly its condition that, to qualify under the IDEA, an OHI must \"adversely affect[] a child's educational performance.\" Delaware, for instance, lists five broad requirements under \"Eligibility Criteria for Other Health Impairment,\" one of which specifically outlines criteria for determining whether children with attention deficit disorder (ADD) and attention deficit hyperactivity disorder (ADHD) have an OHI. When a child's eligibility under the IDEA is due to ADD or ADHD, Delaware's regulation requires evaluators to examine the child according to an additional six factors, and within those six factors 18 symptoms, to determine whether the child's ADD or ADHD qualifies as an OHI. Other states, meanwhile, impose no criteria beyond those found in ED's IDEA regulations for assessing whether a child has an OHI. Sections 504 and the ADA draw on a common definition of \"disability,\" one that is substantially broader than the categorical definition found in the IDEA. Under both laws, an \"individual with a disability\" includes \"any person who (i) has a physical or mental impairment which substantially limits one or more major life activities, (ii) has a record of such an impairment, or (iii) is regarded as having such an impairment.\" This definition, unlike the IDEA's, is not restricted to the educational context. And also unlike the definition used in IDEA, the definition found in Section 504 and the ADA is broadly functional, protecting individuals with any \"impairment\" affecting a bodily or intellectual function—like seeing, hearing, walking, or thinking. The conditions covered by Section 504 and the ADA are therefore not confined to a particular list of \"disability\" categories—\"autism,\" for example, or \"specific learning disability\"—as they are under the IDEA. As a result, an impairment qualifying as a \"disability\" under the IDEA will generally also be covered by Section 504 and the ADA, though not the reverse. Although the ADA Amendments Act maintains essentially the same statutory language as the original ADA, the subsequent act introduced several new \"rules of construction\" clarifying Congress's intent for the ADA's crucial term—\"disability\" —to be construed broadly. These rules of construction regarding the definition of disability—applicable to both the ADA and Section 504—provide that: the definition of disability shall be construed in favor of broad coverage to the maximum extent permitted by the terms of the act; the term \"substantially limits\" shall be interpreted consistently with the findings and purposes of the Amendments Act; an impairment that substantially limits one major life activity need not limit other major life activities to be considered a disability; an impairment that is episodic or in remission is a disability if it would have substantially limited a major life activity when active; and the determination of whether an impairment substantially limits a major life activity shall be made without regard to the ameliorative effects of mitigating measures, except that the ameliorative effects of ordinary eyeglasses or contact lenses shall be considered. The ADA Amendments Act also included a conforming amendment to the Rehabilitation Act of 1973, applying these more generous rules of construction to Section 504. ED's OCR consequently enforces the regulations implementing both Section 504 and Title II of the ADA consistently with the ADA Amendments Act. The IDEA covers all children with disabilities residing in states that receive financial assistance under the act. It does not extend, however, to students with disabilities in college or other postsecondary education and training programs. But Section 504 does, and ED has issued separate regulations specifically elaborating that provision's application to preschool, elementary, and secondary education, as well as to postsecondary education. The ADA also does not directly address the provisions of educational services; it instead prohibits discrimination against individuals with disabilities across many contexts, including by a \"public entity\" like a public school. The following sections of this report identify key provisions in the IDEA, Section 504, and the ADA, explain how they apply in particular situations, and analyze how they differ between students in P-12 and postsecondary education settings when more than one law applies. Table 1 also summarizes and compares key characteristics of the IDEA, Section 504, and the ADA. The IDEA requires each state that receives funds under the act to have in place policies and procedures to identify, locate, and evaluate all children residing in the state who may have a disability requiring special education and related services. These policies and procedures—known as \"Child Find\" —have broad application, covering all children ages 3 to 21 through their time in high school, including those who are homeless or wards of the state, attend private schools, or, according to IDEA's regulations, are highly mobile, like migrant children. The regulations implementing Section 504 contain similar provisions requiring recipients of federal money operating public elementary and secondary schools \"to identify and locate every qualified handicapped person residing in the recipient's jurisdiction who is not receiving a public education.\" Section 504's regulations also require LEAs to evaluate students individually before classifying them as having a disability or providing them with accommodations, special education, or related services. But these responsibilities apply only to students in public elementary or secondary schools. Students protected by Section 504 in colleges and universities are responsible for providing their IHEs with documentation of their disabilities and for working with the IHE's disability support services personnel to arrange any accommodations they may need. And the same is true under the ADA. A child who has been identified as having (or possibly having) a disability must be evaluated by his or her LEA before receiving special education and related services under the IDEA or Section 504. The ADA, by contrast, contains no such requirement. Under the IDEA, individuals may qualify for an IEP only if they have been determined to have a qualifying disability for which they need special education and/or related services to benefit from public education. But a child who has a disability that does not adversely affect his or her educational performance—as required to be eligible for an IEP under several IDEA disability categories —may still qualify for a plan under Section 504. Under the IDEA, either a child's parent or the LEA may request an initial evaluation. In general, the LEA must obtain informed consent from a child's parent before conducting an initial evaluation. That consent, however, does not transfer—parental consent to an evaluation, that is, does not imply consent to special education and related services. In addition, the initial evaluation must take place within 60 days of receiving parental consent or within an alternative time frame established by the state. Section 504, unlike the IDEA, does not explicitly call either for parental consent to an evaluation or for an evaluation to take place within a specific period after being requested. ED's OCR has nevertheless interpreted Section 504 to require LEAs to obtain parental consent to an initial evaluation. But under Section 504, like under the IDEA, a parent's refusal of an evaluation may not be the final word. OCR has construed Section 504 to allow an LEA, whenever it \"suspects a student needs or is believed to need special instruction and parental consent is withheld,\" to \"use due process hearing procedures to seek to override the parents' denial of consent for an initial evaluation.\" In conducting an initial evaluation of a child suspected of having a disability, both the IDEA and Section 504 regulations require LEAs to use valid and reliable assessment tools tailored to assess a child's specific areas of educational need. The IDEA emphasizes the importance of using multiple measures of assessing whether children are eligible for services under the statute, requiring LEAs to \"use a variety of assessment tools and strategies to gather relevant functional, developmental, and academic information, including information provided by the parent.\" The IDEA also requires that LEAs use multiple measures or assessments to determine whether a child is \"a child with a disability\" under the act, as well as to determine whether an educational program is appropriate. The Section 504 regulations, for their part, also require LEAs \"to draw upon information from a variety of sources\" when interpreting evaluation data, \"including aptitude and achievement tests, teacher recommendations, and adaptive behavior.\" And the Section 504 regulations likewise \"establish procedures to ensure that information obtained from all relevant sources is documented and carefully considered.\" Assessments and other evaluation materials used to assess a child under the IDEA must be selected and administered to avoid discriminating on a racial or cultural basis. They must also be provided and administered in the language and form most likely to yield accurate information about what the child knows and can do academically, developmentally, and functionally. Section 504's regulations do not address children's native language or the possibility of racially or culturally discriminatory evaluation materials. However, they do include \"social or cultural background\" information as one of several sources LEAs should draw upon in interpreting evaluation data and in making placement decisions. After completing an evaluation for an IEP under the IDEA, the LEA must determine whether the child is a \"child with a disability\" under the act, and, if so, what his or her educational needs are, including the participation of qualified professionals and the child's parents. Section 504, by contrast, does not expressly require that a child's parents participate in placement decisions. Section 504 regulations instead provide only that placement decisions be made \"by a group of persons, including those knowledgeable about the child, the meaning of the evaluation data, and the placement options.\" ED's regulations under Section 504 do mandate, however, that LEAs have in place \"a system of procedural safeguards that includes notice, an opportunity for the parents or guardian of the person to examine relevant records, an impartial hearing with opportunity for participation by the person's parents or guardian and representation by counsel, and a review procedure.\" Under IDEA regulation, reevaluations are required if a child's teacher or parent makes a request or if the LEA determines that a child's educational and service needs, or functional performance warrant reevaluation. For example, a reevaluation might be warranted if a child's performance in school significantly improves, suggesting that the child no longer requires special education and related services, or if a child is not making progress toward the goals in his or her IEP, suggesting that changes are needed in the special education or related services the LEA is providing. A reevaluation may not be done more than once a year unless the parents and LEA agree, and must be done at least once every three years unless the parent and the LEA agree that a reevaluation is unnecessary. In general, the child's parent(s) must consent to a reevaluation, as well as to the initial evaluation. Before any such reevaluation, an LEA may not change a child's eligibility for educational services under the IDEA, unless the child graduates from high school with a regular diploma or reaches the age at which state law no longer provides a FAPE. The briefer Section 504 regulations simply require LEAs to establish procedures for \"the periodic reevaluation of students who have been provided special education and related services.\" Reevaluation procedures consistent with the IDEA also satisfy this regulatory requirement. As noted, at the postsecondary level educational institutions have no responsibility for evaluating students for a disability. However, if a student requests modifications, accommodations, or auxiliary aids or services because of a disability, IHEs are allowed, though not required, to request that the student provide \"reasonable\" documentation of his or her disability and need for the requested accommodations or services. Before the ADA Amendments Act in 2008, which clarified Congress's intent that \"disability\" under the ADA and Section 504 be construed broadly, there had been significant confusion among IHEs about what a student could be required to use to document a disability. Different IHEs developed their own requirements for the evaluation/reevaluation materials students needed to submit to establish a disability warranting accommodations and services. Some universities required students to produce \"recent\" documentation of an evaluation or reevaluation for a disability, while other schools, looking to the IDEA as a guide, instead required comprehensive evaluations that were no more than three years old. Requirements for \"recent\" documentation may apply to returning postsecondary students; students who had been served under Section 504 in high school; students who attended private schools that did not require or provide evaluations to determine students' disability status; and any postsecondary student with a disability whose disability had last been comprehensively evaluated in the ninth grade or earlier. Such students would need to be reevaluated at their own expense to prove that they were still a student with a disability, if they wanted to receive accommodations or supports at the postsecondary level. Prior to the passage of the ADA Amendments Act, several courts struck down triennial evaluation requirements used by colleges and universities, as well as requirements that students be regularly reevaluated for the presence of a disability even when they were permanently disabled and had sufficient (but not recent) proof of their disability status. And the ADA Amendments Act only reinforced the breadth of the ADA's and Section 504's protection, with its implementing regulations explaining that: The primary purpose of the ADA Amendments Act is to make it easier for people with disabilities to obtain protection under the ADA. Consistent with the ADA Amendments Act's purpose of reinstating a broad scope of protection under the ADA, the definition of \"disability\" in this part shall be construed broadly in favor of expansive coverage to the maximum extent permitted by the terms of the ADA. The primary object of attention in cases brought under the ADA should be whether entities covered under the ADA have complied with their obligations and whether discrimination has occurred, not whether the individual meets the definition of \"disability.\" The question of whether an individual meets the definition of \"disability\" under this part should not demand extensive analysis. Also since the passage of the ADA Amendments Act, IHEs and professional organizations have prepared their own informal guidance for disability support services staff, professors, and anyone else responsible for confirming a student's disability and request for accommodations. Current guidance for IHEs tends to support the use of postsecondary students' past evaluations for special education services or accommodations under Section 504, or other information from external or third parties, as potentially useful supporting documentation but not necessarily required for determining a disability. Determining an appropriate public school placement for a child with a disability calls for similar considerations under both the IDEA and Section 504. However, as with many other aspects of P-12 education for children with disabilities discussed in this report, there are more specific provisions on placement decisions in the IDEA than in Section 504. For example, the IDEA requires that a placement decision for a child with a disability be determined at least annually; be based on the child's IEP; and be made by a group of people who are knowledgeable about the child, the meaning of the evaluation data, and the placement options, including the child's parents. In comparison, Section 504 does not require placement decisions to be determined at any particular time interval. Nor does it require those decisions to be based on a child's educational plan under Section 504 or include specific persons as a part of the deliberations—parents included. In other aspects of their placement provisions, the IDEA and Section 504 are more alike. For example, like the IDEA, Section 504 regulation requires that a child with a disability be placed in the regular educational environment to the maximum extent appropriate to the needs of the child. Under the IDEA and its implementing regulations, when determining a child's placement, states must have in effect policies and procedures to ensure that LEAs are providing a free appropriate public education in the least restrictive environment (LRE)—that children with disabilities, in other words, receive their education alongside children who do not have disabilities, to the maximum extent appropriate. Section 504's regulations do not use the same terminology as the IDEA—there is no express mention of an LRE, for instance—but both require, in academic and nonacademic settings (e.g., lunch, recess), that children with disabilities be educated with their nondisabled peers \"to the maximum extent appropriate to [their] needs.\" Under the IDEA, LEAs \"must ensure that a continuum of alternative placements [are] available to meet children's needs for special education and related services.\" This includes \"instruction in regular classes,\" with the provision of supplementary services when appropriate, as well as \"special classes, special schools, home instruction, and instruction in hospitals and institutions.\" In contrast to IDEA's focus on a continuum of services to enable an appropriate placement for each child with a disability, Section 504's main concern, as a civil-rights law, is to ensure that children with disabilities are not discriminated against in their placements, so that children with disabilities can participate whenever possible in academic and nonacademic activities alongside their peers without disabilities. In cases where a child with a disability does need to attend a facility specifically for children with disabilities, the LEA must ensure that the facility and the services and activities it provides are \"comparable to the LEA's other facilities, services, and activities.\" Unlike the IDEA, the Section 504 regulations do not mandate the use of an IEP, though an IEP that satisfies the IDEA will also satisfy Section 504. And the regulations implementing Section 504, unlike those under the IDEA, do not detail how a student's educational plan developed under Section 504—often called a \"504 plan\"—must be created. Thus, for example, while the IDEA specifies the members who must be invited to participate in a child's IEP team including the child's parents, no similar requirement appears in Section 504 or its regulations. In addition, any accommodations, special education, and related services described in a student's IEP or 504 plan must be implemented in all of the student's classes, whether they are special education classes, regular education classes, or accelerated classes. For example, ED has determined that denying students with disabilities access to accelerated programs such as Advanced Placement and International Baccalaureate classes violates Section 504 regulations as well as the regulations implementing the IDEA. Even though schools may have eligibility requirements for such courses, ED has concluded that both sets of regulations make it \"unlawful to deny a student with a disability admission to an accelerated class or program solely because of that student's need for special education or related aids and services.\" Because the IDEA is designed to improve the education of all children with qualifying disabilities, the act also provides benefits and services to eligible children enrolled by their parents in private school. As a result, the IDEA as well as ED's implementing regulations each have extensive provisions addressing children with disabilities who attend private schools. Those provisions range from funding conditions to LEAs' and State Education Agencies' (SEAs') responsibilities under Child Find to the procedural safeguards protecting families of children with disabilities in private schools. Most of the IDEA's provisions on private school placements, however, fall into two broad categories: those related to children placed in or referred to private schools by public agencies, and those related to children enrolled in private schools by their parents. Together, these provisions outline the various procedural, financial, and educational responsibilities of SEAs, LEAs, private schools, and parents of children with disabilities in private schools, depending on who decided to place the child in private school. In contrast, the Section 504 regulations addressing students with disabilities in private schools do not address SEAs, LEAs, or parents of children with disabilities. They instead outline general responsibilities toward students with disabilities that are incumbent on any private educational institution receiving federal financial assistance. Thus, under Section 504 regulations, a private elementary or secondary school that receives federal funds \"may not exclude a student with a disability if the student can, with minor adjustments, be provided an appropriate education within that institution's program or activity.\" Nor may a recipient of federal funds charge more to educate students with disabilities than those without disabilities, according to ED's Section 504 regulations, \"except to the extent that any additional charge is justified by a substantial increase in cost to the federal funding recipient.\" The IDEA requires IEP teams to include postsecondary transition goals and services in each student's IEP beginning no later than when students are 16 years old. Transition goals and services are individualized. For a student planning to pursue postsecondary education, transition services could include helping the student select colleges to apply to or complete applications; obtain accommodations, such as extended time on standardized college placement tests; practice self-advocacy skills; or any other services that the IEP team agrees would help the student prepare for postsecondary education. However, no matter what transition services students with disabilities receive in high school, those transition services will end once they exit the P-12 public school system and enter an IHE. At the postsecondary level, Section 504 and the ADA require IHEs to provide broad nondiscrimination protection to students who have a disability or who are regarded as having one. However, Section 504 and the ADA do not require IHEs to seek out students with disabilities to provide them with these protections, to evaluate students who are suspected of having a disability, or to arrange proactively for accommodations for students who had been evaluated and found eligible for services under IDEA, Section 504, or the ADA. At the postsecondary level, students must self-identify as having a disability, provide appropriate documentation of their disability, and arrange with campus disability support services for any accommodations and services to which they may be entitled. Section 504 and the ADA protect students applying for postsecondary education from discrimination in two basic ways: (1) in the eligibility requirements and admissions policies and procedures adopted by those institutions, and (2) following admission, in any activities, programs, aid, benefits, or services offered to students. ADA regulations also prohibit public accommodations, including IHEs, from imposing or applying eligibility criteria that screen out individuals with disabilities from fully and equally enjoying any goods, services, facilities, privileges, advantages, or accommodations they offer. Section 504 regulations likewise prohibit discrimination in admissions policies, including admissions testing. And the ADA regulations extend those prohibitions to private entities that \"offer[] examinations or courses related to applications, licensing, certification, or credentialing for secondary or postsecondary education, professional, or trade purposes,\" requiring them to provide those examinations or courses \"in a place and manner accessible to persons with disabilities or offer alternative accessible arrangements.\" At the P-12 level, the IDEA, Section 504, and the ADA all guarantee students with disabilities a free appropriate public education. Those provisions, while similar, are not identical. Their differences largely have to do with details, but they generally can be traced to a more basic difference in statutory design: \"the IDEA guarantees individually tailored educational services, while Title II [of the ADA] and [Section] 504 promise nondiscriminatory access to public institutions.\" The IDEA's provisions addressing a FAPE are consequently much more detailed than their counterparts in Section 504, the same that apply, according to ED, under Title II of the ADA. These differences among the three statutory schemes have also led to some judicial disagreement about how to relate their violations: specifically, whether denying an eligible child the IDEA's procedural or substantive guarantees also amounts to disability discrimination, in violation of Section 504 (and, by extension, Title II of the ADA). At least some of the lower courts have found these violations to overlap, so that a valid claim under the IDEA will \"almost always\" support one under Section 504. Other courts, however, have taken the opposite view: for them, \"something more than a mere failure to provide the 'free appropriate education' required by [IDEA] must be shown\" before those courts will draw the discriminatory inference required for a violation of Section 504. What that something is also appears to vary somewhat by court, but several have insisted on a showing of at least \"bad faith or gross misjudgment . . . before a [Section] 504 violation [will] be made out\" in this context. Whatever its differences with Section 504, Part B of the IDEA nevertheless mandates that every recipient state provide a FAPE to all disabled children between the ages of 3 and 21 residing \"within its borders.\" \"An eligible child [therefore] acquires a 'substantive right' to such an education once a State accepts the IDEA's financial assistance,\" and the state's denial of that education therefore entitles eligible students to legal relief, whether in the form of an injunction for the improperly denied services or money damages. What a FAPE entails, and what demands it puts on a school district, will therefore vary from student to student. At a minimum, however, a FAPE consists of \"special education and related services\"—\"specially designed instruction,\" in other words, that \"meets the unique needs of a child with a disability. And for that instruction to qualify as a FAPE, it must also be \"provided at public expense, under public supervision, and without charge; meet[] the standards of the [SEA];\" encompass preschool through secondary school; and conform to the student's IEP. A child's IEP accordingly \"serves as the 'primary vehicle' for providing [him or her] with the promised FAPE,\" by specifying the particular special education and related services that the LEA will provide to meet the child's needs. Apart from these procedural minimums, the substantive guarantee of a FAPE remains highly general. And that generality has provoked one of the most commonly litigated questions under the act: What does an \"appropriate\" public education require of an IEP? In an early decision under the act— Board of Education v. Rowley —the U.S. Supreme Court appeared to set the bar fairly low. There the Court concluded that a school district could satisfy its responsibility of providing a FAPE so long as it had met two basic conditions. The school district had to have observed all of the IDEA's procedural rules, and it had to have provided an IEP \"reasonably calculated\" to \"confer some educational benefit\" on the child. But that latter condition—requiring an IEP that conferred \"some educational benefit\"—did little to resolve the basic ambiguity in the IDEA's guarantee of a FAPE: How much benefit would make an IEP \"appropriate\"? The lower federal courts were therefore left to fashion for themselves a more concrete standard for deciding whether an IEP had provided an eligible child with enough of a benefit to satisfy Rowley . On this point some courts took a minimalist view, requiring an IEP to provide at least some educational benefit —a benefit, in other words, that is \"barely more than de minimis .\" Other courts, however, read Rowley as calling for much more, demanding evidence that an IEP had provided \"meaningful benefit to the child.\" Faced with this circuit split, in 2017, the Supreme Court took the opportunity in Endrew F. v. Douglas County School District to clarify just how much of a benefit an eligible child must receive through an IEP. The Court did so by returning to its Rowley standard: to provide an eligible child a FAPE under the IDEA, the Court explained, a school must \"offer an IEP reasonably calculated to enable a child to make progress appropriate in light of the child's circumstance.\"  Thus, \"for a child fully integrated in the regular classroom, an IEP typically should . . . be 'reasonably calculated to enable the child to achieve passing marks and advance from grade to grade.'\" The Court cautioned, however, that an appropriate measure of \"progress\" would depend on the child's circumstances—and especially on the child's integration into the regular classroom. For children with disabilities not integrated into the regular classroom, an \"appropriate\" IEP therefore \"need not aim for grade-level advancement.\" Endrew F. clearly rejected, then, the more minimalist view of a FAPE. \"[T]he IDEA demands more\" from an IEP than the \"barely more than de minimis progress\" that the lower court upheld there. A child's IEP must instead be \"appropriately ambitious in light of his circumstances,\" so that that child, like every other, \"ha[s] the chance to meet challenging objectives\" despite his differing goals. Although the Court did not explicitly compare its refined standard in Endrew F. with the view from the other side of the circuit split—that an appropriate IEP needed to confer a meaningful benefit on a child—several lower courts have taken Endrew F. to vindicate that meaningful-benefit standard nonetheless. As the U.S. Court of Appeals for the First Circuit explained, Endrew F. appears to call for an IEP of exactly the same quality that that circuit had expected all along under Rowley . Thus, \"[a]t a bare minimum,\" that standard demands an IEP that includes \"the child's present level of educational attainment, the short-and long-term goals for his or her education, objective criteria with which to measure progress toward these goals, and the specific services to be offered.\" Whether the other circuits will also agree on that \"bare minimum\" remains to be seen. The right of students with disabilities to a FAPE under the IDEA has a still more definite limit: it does not extend to students in colleges, universities, or any other postsecondary education or training programs. Instead, the IDEA requires only that LEAs provide qualifying students with disabilities a FAPE until they exit high school—whether by graduating, dropping out—or until they surpass the maximum age for IDEA services, 21 years old. Section 504 and the ADA, on the other hand, have no such limit. They instead protect students of all ages from discrimination based on their disability, both during the admissions process and while enrolled as a student. Like the IDEA, however, Section 504's regulations ensure a FAPE only to students in P-12 public schools, a guarantee that ED has read to be \"incorporated in the general nondiscrimination provisions of the Title II regulation\" under the ADA as well. To receive services under the IDEA, a child must be evaluated and found eligible for an IEP under one of the IDEA disability categories and must because of that disability require special education and related services to benefit from public education. In the IDEA, \"special education\" means instruction designed to meet the unique needs of a child with a disability, provided at no cost to the child's parents. It may include instruction conducted in both academic and nonacademic settings, including in the classroom, in the home, and in hospitals and institutions, as well as instruction in physical education. In comparison, \"related services\" are intended to assist a child with a disability to benefit from special education—such as nursing services during the school day for a student who relies on a ventilator. Among the related services provided by the IDEA are speech-language pathology and audiology services; interpreting services, psychological services; physical and occupational therapy; recreation, including therapeutic recreation; social work services; counseling services; and, certain medical and school nurse services. Besides special education and related services, under the IDEA and implementing regulations children with disabilities may receive supplementary aids and services and other supports in regular education classes, and in extracurricular and nonacademic settings, to enable them to be educated with nondisabled children to the maximum extent appropriate. The combination of special education, related services, and other supplementary aids and services a child receives is determined by the child's IEP team, taking into consideration the child's academic, developmental, and functional needs. As discussed, the IDEA defines a FAPE as special education and related services that are provided at public expense, meet the standards of the SEA, and conform to the student's IEP. As part of their right to a FAPE, each child receiving services under the IDEA must have an IEP stating the specific special education and related services the LEA will provide to meet his or her needs. Unlike the IDEA, an \"appropriate education\" under Section 504 regulation is defined as the provision of regular or special education and related aids and services designed to meet individual educational needs of children with disabilities as adequately as the needs of children without disabilities are met and that comply with procedural requirements. Note, however, that the IDEA specifically requires the provision of special education and related services, while Section 504 requires the provision of regular or special education and related aids and services. Thus, a child with a Section 504 plan may be served by a \"regular\" education with related aids and services, while under the IDEA a qualifying child must be provided \"special education.\" To receive accommodations or services under the ADA or Section 504 at the postsecondary level, students with disabilities must seek out the person or office at their IHEs responsible for arranging accommodations for students with disabilities, request the accommodations they need, and provide the documentation and/or personal history necessary to support their request. ED's regulations implementing Title II of the ADA include specific requirements to guide disability and accommodation services personnel at IHEs when considering such requests. Thus, for example, the regulations instruct IHEs, [w]hen considering requests for modifications, accommodations, or auxiliary aids or services, [to] give[] considerable weight to documentation of past modifications, accommodations, or auxiliary aids or services received in similar testing situations, as well as such modifications, accommodations, or related aids and services provided in response to an [IEP] provided under the [IDEA] or a . . . Section 504 Plan. Once students have provided adequate documentation of their disabilities to the appropriate person or office, Section 504 and Title II of the ADA protect them from discrimination based on their disabilities. Section 504's regulations on postsecondary education programs and activities elaborate on IHEs' responsibilities for adopting and maintaining nondiscriminatory practices toward students with disabilities, including through accommodations, modifications, or adaptations across many contexts, from course examinations to housing and counseling services to financial and employment assistance.", "summary": "The Individuals with Disabilities Education Act (IDEA), Section 504 of the Rehabilitation Act (Section 504), and the Americans with Disabilities Act (ADA) each play a significant part in federal efforts to support the education of individuals with disabilities. These statutory frameworks, while overlapping, differ in scope and in their application to students with disabilities. As a result, when students with disabilities transition between levels of schooling, the accommodations and services they must be provided under federal law may change. For example, while the IDEA, the ADA, and Section 504 potentially apply to children with disabilities from preschool through 12th grade (P-12), only the ADA and Section 504 apply to students in an institution of higher education. More generally, application of the IDEA, Section 504, and the ADA to students with disabilities is determined by (1) the definition of \"disability\" employed by each framework; (2) the mechanisms employed under each law to determine whether a student has a qualifying disability; and (3) the adaptations, accommodations, and services that must be provided to students with disabilities under each law. Individuals with Disabilities Education Act (IDEA) The IDEA, as amended, authorizes federal grants to states to support the education of children with disabilities. The act requires that states, as a condition for receiving funds, provide students with disabilities a range of substantive and procedural protections. For example, states and local education agencies (LEAs) must (1) identify, locate, and evaluate all children with disabilities residing in the state, regardless of the severity of their disability, to determine which children are eligible for special education and related services; (2) convene a team, which includes the parents of each eligible child with a disability, to develop an individual education program (IEP) spelling out the specific special education and related services to be provided to that child to ensure a \"free appropriate public education\" (FAPE); and (3) provide procedural safeguards to children with disabilities and their parents, including a right to an administrative hearing to challenge determinations and placements, with the ability to appeal the ruling to federal district court. Of the three legal frameworks discussed in this report, only the IDEA is focused squarely on educational matters, and its statutory provisions and implementing regulations specifically detail the rights of children with disabilities and their families in U.S. public schools. Of the three laws examined here, the IDEA is also the only one that fixes an age limit, with its substantive and procedural guarantees applying to persons with disabilities from birth until they reach 21 years or exit high school, if earlier. Section 504 of the Rehabilitation Act of 1973 Section 504 is an antidiscrimination provision within a broader federal law providing rehabilitation services to people with disabilities. Section 504 protects individuals from disability discrimination in programs and activities that receive federal financial assistance, including elementary and secondary schools, as well as many colleges and universities. While Section 504 is terse in describing covered entities' obligations, the statute's implementing regulations, including those promulgated by the U.S. Department of Education (ED) applicable in the educational context, are extensive. For example, Section 504 and its implementing regulations require all schools receiving federal funds to make their application forms and course materials accessible to people with disabilities. Americans with Disabilities Act of 1990 (ADA) Enacted in 1990, the ADA provides broad nondiscrimination protection for individuals with disabilities across a range of institutional contexts, both public and private, including employment, public services, transportation, telecommunications, public accommodations, and services operated by private entities. In an educational context, the ADA and implementing regulations effectively require both public schools and many P-12 private schools to ensure that students with disabilities are not excluded, denied services, segregated, or otherwise treated differently than other individuals because of their disability, unless the school can demonstrate that taking those steps would fundamentally alter the nature of the school's program or cause an undue financial burden. The ADA's statutory provisions and implementing regulations outline the types of modifications that must be made for individuals with disabilities, including the removal of barriers, alterations to new and existing buildings, accessible seating in assembly areas, and accessible examinations and course materials.", "document_type": "crs"}
{"report": "A plaintiff injured by a defendant's wrongful conduct may file a tort lawsuit to recover money from that defendant. To name an especially familiar example of a tort, \"a person who causes a crash by negligently driving a vehicle is generally liable to the victim of that crash.\" By forcing people who wrongfully injure others to pay money to their victims, the tort system serves at least two functions: (1) \"deter[ring] people from injuring others\" and (2) \"compensat[ing] those who are injured.\" Employees and officers of the federal government occasionally commit torts just like other members of the general public. Until the mid-20th century, however, the principle of \"sovereign immunity\"—a legal doctrine that bars private citizens from suing a sovereign government without its consent—prohibited plaintiffs from suing the United States for the tortious actions of federal officers and employees. Thus, for a substantial portion of this nation's history, persons injured by torts committed by the federal government's agents were generally unable to obtain financial compensation through the judicial system. Congress, deeming this state of affairs unacceptable, ultimately enacted the Federal Tort Claims Act (FTCA) in 1946. The FTCA allows plaintiffs to file and prosecute certain types of tort lawsuits against the United States and thereby potentially recover financial compensation from the federal government. Some FTCA lawsuits are relatively mundane; for instance, a civilian may sue the United States to obtain compensation for injuries sustained as a result of minor accidents on federal property. Other FTCA cases, however, involve grave allegations of government misfeasance. For example, after naval officers allegedly sexually assaulted several women at the infamous Tailhook Convention in 1991, those women invoked the FTCA in an attempt to hold the United States liable for those officers' attacks. Family members of persons killed in the 1993 fire at the Branch Davidian compound in Waco likewise sued the United States under the FTCA, asserting that federal law enforcement agents committed negligent acts that resulted in the deaths of their relatives. Additionally, the U.S. Court of Appeals for the First Circuit affirmed an award of over $100 million against the United States in an FTCA case alleging that the Federal Bureau of Investigation (FBI) committed \"egregious government misconduct\" resulting in the wrongful incarceration of several men who were falsely accused of participating in a grisly gangland slaying. Empowering plaintiffs to sue the United States can ensure that persons injured by federal employees receive compensation and justice. However, waiving the government's immunity from tort litigation comes at a significant cost: the U.S. Department of the Treasury's Bureau of the Fiscal Service (Bureau) reports that the United States spends hundreds of millions of dollars annually to pay tort claims under the FTCA, and the Department of Justice reports that it handles thousands of tort claims filed against the United States each year. Moreover, exposing the United States to tort liability arguably creates a risk that government officials may inappropriately base their decisions \"not on the relevant and applicable policy objectives that should be governing the execution of their authority,\" but rather on a desire to reduce the government's \"possible exposure to substantial civil liability.\" As explained in greater detail below, the FTCA attempts to balance these competing considerations by limiting the circumstances in which a plaintiff may successfully obtain a damages award against the United States. For example, the FTCA categorically bars plaintiffs from pursuing certain types of tort lawsuits against the United States. The FTCA also restricts the types and amount of monetary damages that a plaintiff may recover against the United States. Additionally, the FTCA requires plaintiffs to comply with an array of procedural requirements before filing suit. This report provides an overview of the FTCA. It first discusses the events and policy concerns that led Congress to enact the FTCA, including the background principle of sovereign immunity. The report then explains the effect, scope, and operation of the FTCA's waiver of the United States' immunity from certain types of tort claims. In doing so, the report describes categorical exceptions to the government's waiver of sovereign immunity, statutory limitations on a plaintiff's ability to recover monetary damages under the FTCA, and the procedures that govern tort claims against the United States. The report concludes by discussing various legislative proposals to amend the FTCA. A person injured by the tortious activity of a federal employee generally has two potential targets that he might name as a defendant in a tort lawsuit: (1) the federal employee who committed the tort and (2) the federal government itself. In many cases, however, suing the employee is not a viable option. For one, as explained in greater detail below, Congress has opted to shield federal officers and employees from personal liability for torts committed within the scope of their employment. Moreover, even if Congress had not decided to insulate federal employees from tort liability, suing an individual is typically an unattractive option for litigants, as individual defendants may lack the financial resources to satisfy an award of monetary damages. For many litigants, the legal and practical unavailability of tort claims against federal employees makes suing the United States a more attractive option. Whereas a private defendant may lack the financial resources to satisfy a judgment rendered against him, the United States possesses sufficient financial resources to pay virtually any judgment that a court might enter against it. A plaintiff suing the United States, however, may nonetheless encounter significant obstacles. In accordance with a long-standing legal doctrine known as \"sovereign immunity,\" a private plaintiff ordinarily may not file a lawsuit against a sovereign entity—including the federal government—unless that sovereign consents. For a substantial portion of this nation's history, the doctrine of sovereign immunity barred citizens injured by the torts of a federal officer or employee from initiating or prosecuting a lawsuit against the United States. Until 1946, \"the only practical recourse for citizens injured by the torts of federal employees was to ask Congress to enact private legislation affording them relief\" through \"private bills.\" Some, however, criticized the public bill system. Not only did private bills impose \"a substantial burden on the time and attention of Congress,\" some members of the public became increasingly concerned \"that the private bill system was unjust and wrought with political favoritism.\" Thus, in 1946, Congress enacted the FTCA, which effectuated \"a limited waiver of [the federal government's] sovereign immunity\" from certain common law tort claims . With certain exceptions and caveats discussed throughout this report, the FTCA authorizes plaintiffs to bring civil lawsuits 1. against the United States; 2. for money damages; 3. for injury to or loss of property, or personal injury or death; 4. caused by a federal employee's negligent or wrongful act or omission; 5. while acting within the scope of his office or employment; 6. under circumstances where the United States, if a private person, would be liable to the plaintiff in accordance with the law of the place where the act or omission occurred. Thus, not only does the FTCA \"free Congress from the burden of passing on petitions for private relief\" by \"transfer[ring] responsibility for deciding disputed tort claims from Congress to the courts,\" it also creates a mechanism to compensate victims of governmental wrongdoing. In addition to this compensatory purpose, the FTCA also aims to \"deter tortious conduct by federal personnel\" by rendering the United States liable for the torts of its agents, thereby incentivizing the government to carefully supervise its employees. Significantly, however, the FTCA does not itself create a new federal cause of action against the United States; rather, the FTCA waives the United States's sovereign immunity from certain types of claims that exist under state tort law . Thus, in most respects, \"the substantive law of the state where the tort occurred determines the liability of the United States\" in an FTCA case. In this way, the FTCA largely \"renders the Government liable in tort as a private individual would be under like circumstances.\" Critically, however, \"although the FTCA's waiver of sovereign immunity is significant and extensive, it is not complete.\" To address \"concerns . . . about the integrity and solvency of the public fisc and the impact that extensive litigation might have on the ability of government officials to focus on and perform their other duties,\" the FTCA affords the United States \"important protections and benefits . . . not enjoyed by other tort defendants\" that are explained extensively below. Moreover, to limit the fora in which a plaintiff may permissibly litigate a tort suit against the United States, Congress vested the federal district courts (as well as a small number of territorial courts) with exclusive jurisdiction over FTCA cases. Furthermore, because Congress believed \"that juries would have difficulty viewing the United States as a defendant without being influenced by the fact that it has a deeper pocket than any other defendant,\" FTCA cases that proceed to trial are generally \"tried by the court without a jury.\" Notably, the FTCA only authorizes tort lawsuits against the United States itself; it expressly shields individual federal employees from personal liability for torts that they commit within the scope of their employment. In other words, the FTCA \"makes the remedy against the United States under the FTCA exclusive\" of \"any other civil action or proceeding for money damages\" that might otherwise be available \"against the employee whose act or omission gave rise to the claim.\" Congress prohibited courts from holding federal employees personally liable for torts committed within the scope of their employment in order to avert what Congress perceived as \"an immediate crisis involving the prospect of personal liability and the threat of protracted personal tort litigation for the entire Federal workforce.\" Critically, the individual employee generally remains immune from tort liability for torts committed within the scope of his employment even if a provision of the FTCA forecloses the plaintiff from recovering monetary damages from the United States itself. As the following subsections of this report explain, determining whether the FTCA governs a particular tort case—and, thus, whether the FTCA shields the individual who committed the alleged tort from personal liability—requires the court to ask two threshold questions: (1) whether the individual who committed the tort was in fact a federal employee, and, if so, (2) whether that individual committed the tort within the scope of his office or employment. First, the FTCA only waives the United States's sovereign immunity as to torts committed by an \" employee of the Government.\" Thus, if a plaintiff attempts to sue the United States for a tort committed by someone who is not a federal employee, the plaintiff's claim against the government will necessarily fail. For the purposes of the FTCA, the term \"employee of the government\" includes officers or employees of any federal agency; members of the military or naval forces of the United States; members of the National Guard while engaged in training or duty under certain provisions of federal law; persons acting on behalf of a federal agency in an official capacity; and officers and employees of a federal public defender organization (except when such employees are performing professional services in the course of providing representation to clients). As a result of this relatively broad definition of \"employee,\" the FTCA effectively waives the government's immunity from torts committed by certain categories of persons who might not ordinarily be considered \"employees\" as a matter of common parlance. Because the FTCA applies only to torts committed by federal employees, the FTCA provision shielding federal employees from personal tort liability does not protect nonemployees. Thus, with certain caveats discussed below, a plaintiff injured by the tortious action of a nonemployee may potentially be able to sue that nonemployee individually under ordinary principles of state tort law, even though he could not sue the United States under the FTCA. Notably, the United States commonly hires independent contractors to carry out its governmental objectives. The FTCA, however, explicitly excludes independent contractors from the statutory definition of \"employee.\" As a result, \"the government cannot be held liable\" under the FTCA \"for torts committed by its independent contractors\"; the plaintiff must instead attempt to seek compensation from the contractor itself. Different courts consider different sets of factors when evaluating whether an alleged tortfeasor is an independent contractor as opposed to a government employee. Most courts, however, hold that \"the critical factor\" when assessing whether a defendant is an employee or an independent contractor for the purposes of the FTCA is whether the federal government possesses the authority \"to control the detailed physical performance of the contractor.\" \"[A] contractor can be said to be an employee or agent of the United States within the intendment of the [FTCA] only where the Government has the power under the contract to supervise a contractor's day-to-day operations and to control the detailed physical performance of the contractor.\" Thus, to illustrate, courts have typically determined that certified registered nurse anesthetists (CRNAs) working for federal hospitals qualify as employees under the FTCA. These courts have justified that conclusion on the ground that CRNAs do not ordinarily enjoy broad discretion to exercise their independent judgment when administering anesthesia, but instead operate pursuant to the direct supervision and control of an operating surgeon or anesthesiologist working for the federal government. By contrast, courts have generally held that because physicians who provide medical services at facilities operated by the United States often operate relatively independently of the federal government's control, such physicians ordinarily qualify as \"independent contractors, and not employees of the government for FTCA purposes.\" Because the FTCA's prohibition against suits by individual employees does not insulate independent contractors from liability, a plaintiff injured by the tortious action of an independent contractor working for the federal government may potentially be able to recover compensation directly from that contractor. Nevertheless, a plaintiff asserting a tort claim directly against a federal contractor may still encounter other obstacles to recovery. As the Supreme Court ruled in its 1988 decision in Boyle v. United Technologies Corp. , a plaintiff may not pursue state law tort claims against a government contractor if imposing such liability would either create \"a 'significant conflict'\" with \"an identifiable 'federal policy or interest'\" or \"'frustrate specific objectives' of federal legislation.\" Several courts have therefore rejected tort claims against defense contractors on the ground that allowing such suits to proceed could undesirably interfere with military objectives. Courts have been less willing to extend Boyle immunity to nonmilitary contractors, however. As noted above, the FTCA applies only to torts that a federal employee commits \"while acting within the scope of his office or employment.\" Thus, \"[i]f a government employee acts outside the scope of his employment when engaging in tortious conduct, an action against the United States under the FTCA will not lie.\" Instead, the plaintiff may potentially \"file a state-law tort action against the\" employee who committed the tort, as the aforementioned protections from liability apply only when employees are acting within the scope of their employment. Courts determine whether a federal employee was acting within the scope of his employment at the time he committed an alleged tort by applying the law the state in which the tort occurred. Although the legal principles that govern the scope of a tortfeasor's employment vary from state to state, many states consider whether the employer hired the employee to perform the act in question and whether the employee undertook the allegedly tortious activity to promote the employer's interests. Two cases involving vehicular mishaps illustrate how courts perform the scope of employment inquiry in practice. In Barry v. Stevenson , for instance, two soldiers—one driver and one passenger—were returning to their headquarters in a government-owned Humvee military truck after completing a work assignment on a military base. The truck hit a dip in the trail, injuring the passenger. Because the driver \"was engaged in annual Army National Guard training\" and \"driving a government vehicle . . . on government property\" at the time of the accident, the court concluded that the driver \"was acting within the course of his employment\" as a federal officer \"when the injury occurred.\" In Merlonghi v. United States , by contrast, a special agent employed by the Office of Export Enforcement (OEE) collided with a motorcyclist while driving home from work in a government vehicle. The agent and the motorcyclist had engaged in a verbal altercation and \"swerved their vehicles back and forth towards each other\" immediately prior to the collision. After brandishing a firearm at the motorcyclist, the agent sharply careened his vehicle into the motorcycle, throwing the motorcyclist to the ground and severely injuring him. The court determined that the agent \"was not acting within the scope of his employment\" at the time of the collision even though \"he was driving a government vehicle and was on call.\" The court first observed that \"engaging in a car chase while driving home from work [wa]s not the type of conduct that OEE hired [the agent] to perform.\" The court also emphasized that the agent \"was not at work, responding to an emergency, or driving to a work assignment\" at the time of the collision. The court further noted that the agent's actions were not \"motivated . . . by a purpose to serve the employer,\" as the agent's \"argument with [the motorcyclist] and the back-and-forth swerving leading to the altercation had nothing to do with an OEE assignment. His conduct related to personal travel and a personal confrontation.\" Because the agent \"was not acting within the scope of his employment when he crashed into\" the motorcyclist, the court ruled that the district court had correctly dismissed the motorcyclist's claims seeking compensation from the United States. Occasionally a plaintiff will file a tort suit against an individual without realizing that he is a federal employee. In such cases, the FTCA allows the Attorney General to certify \"that the defendant employee was acting within the scope of his office or employment at the time of the incident out of which the claim arose.\" If the Attorney General files such a certification, then the lawsuit is \"deemed an action against the United States\" under the FTCA; the employee is dismissed from the action, and the United States is substituted as defendant in the employee's place; and the case proceeds against the government in federal court. In such instances, the United States \"remain[s] the federal defendant in the action unless and until the [d]istrict [c]ourt determines that the employee . . . engaged in conduct beyond the scope of his employment.\" By creating a mechanism by which the United States may substitute itself as the defendant in the individual employee's place, the FTCA effectively \"immunize[s] covered federal employees not simply from liability, but from suit.\" In this way, the FTCA \"relieve[s] covered employees from the cost and effort of defending the lawsuit\" and instead places \"those burdens on the Government's shoulders.\" In some cases, the Attorney General's decision to substitute the United States in the officer's place may adversely affect the plaintiff's chances of prevailing on his claims. Generally speaking, once the Attorney General certifies that the federal employee was acting within the scope of his employment when he committed the allegedly tortious act, \"the FTCA's requirements, exceptions, and defenses apply to the suit.\" Depending on the circumstances, those requirements, exceptions, and defenses can \"absolutely bar [the] plaintiff's case\" against the United States, as explained in greater detail below. Moreover, the individual federal employee remains immune from liability even when the FTCA \"precludes recovery against the Government\" itself. Thus, under certain circumstances, the FTCA will shield both the United States and its employees from liability for its tortious actions, thereby effectively \"leav[ing] certain tort victims without any remedy.\" \"In such cases, to try to preserve their lawsuits\" against the federal employee, the plaintiff may attempt to \"contest the Attorney General's scope-of-employment certification.\" That is, the plaintiff may argue that the government employee defendant was not acting within the scope of his employment, such that the suit should therefore proceed against the government official in his personal capacity. If the court agrees that the employee was acting within the scope of employment at the time of the alleged tort, then \"the suit becomes an action against the United States that is governed by the FTCA.\" If, however, the court disagrees with the Attorney General's determination, the suit may proceed against the government employee in his personal capacity. A plaintiff may, however, prefer to litigate against the United States rather than against an individual government employee, especially if the employee does not have enough money to satisfy a judgment that the court might ultimately render in the plaintiff's favor. Because government employees may be \"under-insured or judgment proof,\" they may lack sufficient assets to \"satisfy judgments rendered against them\" in tort cases. Thus, oftentimes the plaintiff does not object when the Attorney General certifies that the named defendant was acting within the scope of his employment at the time of the alleged tort. If a plaintiff successfully obtains a judgment against the United States based on the tortious conduct of a federal employee, the government may not subsequently sue the culpable employee to recover the amount of money the government paid to the plaintiff. Consequently, if the government successfully substitutes itself for an individual defendant in an FTCA case, that substitution may effectively relieve the individual employee from all civil liability for his allegedly tortious action. Because this aspect of the FTCA is particularly favorable for government employees, if the Attorney General refuses to certify that an employee was acting within the scope of his employment, that employee may at any time before trial petition a federal district court for certification that he was acting within the scope of his employment for the purposes of the FTCA. If the court agrees that the employee was acting within the scope of his employment, then the case proceeds \"against the Government, just as if the Attorney General had filed a certification.\" If, however, the court instead finds that the government employee was not acting within the scope of employment, then the lawsuit may proceed against the government employee in his personal capacity. As mentioned above, the FTCA imposes significant substantive limitations on the types of tort lawsuits a plaintiff may permissibly pursue against the United States. The Congress that enacted the FTCA, concerned about \"unwarranted judicial intrusion[s] into areas of governmental operations and policymaking,\" opted to explicitly preserve the United States' sovereign immunity from more than a dozen categories of claims. Specifically, Section 2680 of the FTCA establishes the following exceptions preventing private litigants from pursuing the following categories of claims against the United States: \"Any claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation . . . or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty\"; \"Any claim arising out of the loss, miscarriage, or negligent transmission of letters or postal matter\"; certain claims arising from the actions of law enforcement officers administering customs and excise laws; certain admiralty claims against the United States for which federal law provides an alternative remedy; claims \"arising out of an act or omission of any employee of the Government in administering\" certain provisions of the Trading with the Enemy Act of 1917; \"Any claim for damages caused by the imposition or establishment of a quarantine by the United States\"; certain claims predicated upon intentional torts committed by federal employees; \"Any claim for damages caused by the fiscal operations of the Treasury or by the regulation of the monetary system\" ; \"Any claim arising out of the combatant activities of the military or naval forces, or the Coast Guard, during time of war\"; \"Any claim arising in a foreign country\"; \"Any claim arising from the activities of the Tennessee Valley Authority\"; \"Any claim arising from the activities of the Panama Canal Company\"; or \"Any claim arising from the activities of a Federal land bank, a Federal intermediate credit bank, or a bank for cooperatives.\" Some of these exceptions are more doctrinally significant than others. The following sections of this report therefore discuss the most frequently litigated exceptions to the United States' waiver of immunity from tort claims. First, Section 2680(a) —which is \"commonly called the discretionary function exception\" —\"preserves the federal government's immunity . . . when an employee's acts involve the exercise of judgment or choice.\" Along with being one of the most frequently litigated exceptions to the FTCA's waiver of sovereign immunity, the discretionary function exception is, according to at least one commentator, \"the broadest and most consequential.\" For example, the United States has successfully invoked the discretionary function exception to avoid tort liability in cases involving exposures to radiation, asbestos, Agent Orange, and the human immunodeficiency virus (HIV). The discretionary function exception serves at least two purposes. First, the exception \"prevent[s] judicial 'second-guessing' of legislative and administrative decisions grounded in social, economic, and political policy through the medium of an action in tort.\" According to one commentator, the Congress that enacted the FTCA viewed such second guessing to be \"inappropriate\" because (1) \"such judgments are more appropriately left to the political branches of our governmental system;\" and (2) \"courts, which specialize in the resolution of discrete factual and legal disputes,\" may not be \"equipped to make broad policy judgments.\" Second, the discretionary function exception is intended to \"protect the Government from liability that would seriously handicap efficient government operations.\" By insulating the government from liability for the discretionary actions of its employees, the discretionary function exception arguably decreases the likelihood that federal employees will shy away from making sound policy decisions based on a fear of increasing the government's exposure to tort liability. Relatedly, exposing the United States to liability for discretionary acts could cause government officials to \"spend an inordinate amount of their tax-payer compensated time responding to lawsuits\" rather than serving the \"greater good of the community.\" The discretionary function exception thus \"marks the boundary between Congress' willingness to impose tort liability upon the United States and its desire to protect certain governmental activities from exposure to suit by private individuals.\" As explained in greater detail in the following subsections, to determine whether the discretionary function exception bars a particular plaintiff's suit under the FTCA, courts examine whether the federal employee was engaged in conduct that was (1) discretionary and (2) policy-driven. \"If the challenged conduct is both discretionary and policy-driven,\" then the FTCA does not waive the government's sovereign immunity with respect to that conduct, and the plaintiff's FTCA claim must therefore fail. If, by contrast, an official's action either (1) \"does not involve any discretion\" or (2) \"involves discretion,\" but \"does not involve the kind of discretion—consideration of public policy—that the exception was designed to protect,\" then the discretionary function exception does not bar the plaintiff's claim. When first evaluating whether \"the conduct that is alleged to have caused the harm\" to the plaintiff \"can fairly be described as discretionary,\" a court must assess \"whether the conduct at issue involves 'an element of judgment or choice' by the employee.\" \"The conduct of federal employees is generally held to be discretionary unless 'a federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow.'\" If \"the employee has no rightful option but to adhere to the directive\" established by a federal statute, regulation, or policy, \"then there is no discretion in the conduct for the discretionary function exception to protect.\" Put another way, the discretionary function exception does not insulate the United States from liability when its employees \"act in violation of a statute or policy that specifically directs them to act otherwise.\" Even where a federal statute, regulation, or policy pertaining to the challenged action exists, however, the action may nonetheless qualify as discretionary if the law in question \"predominately uses permissive rather than mandatory language.\" In other words, where \"a government agent's performance of an obligation requires that agent to make judgment calls, the discretionary function exception\" may bar the plaintiff's claim under the FTCA. Notably, \"[t]he presence of a few, isolated provisions cast in mandatory language\" in a federal statute, regulation, or policy \"does not transform an otherwise suggestive set of guidelines into binding\" law that will defeat the discretionary function exception. \"Even when some provisions of a policy are mandatory, governmental action remains discretionary if all of the challenged decisions involved 'an element of judgment or choice.'\" The Fourth Circuit's decision in Rich v. United States exemplifies how courts evaluate whether a federal employee has engaged in discretionary conduct. The plaintiff in Rich —a federal inmate who was stabbed by members of a prison gang—attempted to file an FTCA suit alleging that the Bureau of Prisons (BOP) should have housed him separately from the gang members. Federal law permitted—but did not affirmatively require—BOP \"to separate certain inmates from others based on their past behavior.\" Because federal law empowered prison officials to \"consider several factors and exercise independent judgment in determining whether inmates may require separation,\" the Rich court held that BOP's decision whether or not to separate an inmate from others was discretionary in nature and therefore outside the scope of the FTCA. By contrast, in the Supreme Court case of Berkovitz ex rel. Berkovitz v. United States , the discretionary function exception did not shield the United States from liability. The plaintiff in Berkovitz alleged that the federal government issued a license to a vaccine manufacturer \"without first receiving data that the manufacturer must submit showing how the product . . . matched up against regulatory safety standards,\" as required by federal law. After the plaintiff allegedly contracted polio from a vaccine produced by that manufacturer, the plaintiff sued the United States under the FTCA. Because \"a specific statutory and regulatory directive\" divested the United States of any \"discretion to issue a license without first receiving the required test data,\" the Court held that \"the discretionary function exception impose[d] no bar\" to the plaintiff's claim. Courts have disagreed regarding whether the discretionary function exception shields tortious conduct that allegedly violates the U.S. Constitution, as contrasted with a federal statute, regulation, or policy. Most courts have held that \"the discretionary-function exception . . . does not shield decisions that exceed constitutional bounds, even if such decisions are imbued with policy considerations.\" These courts reason that \"[t]he government 'has no \"discretion\" to violate the Federal Constitution; its dictates are absolute and imperative.'\" By contrast, a minority of courts have instead concluded that the discretionary function exception shields actions \"based upon [the] exercise of discretion\" even if they are \"constitutionally repugnant.\" These courts base that conclusion on the fact that the text of 28 U.S.C. § 2680(a) purports to shield discretionary judgments even when a government employee abuses his discretion. Still other courts have declined to take a side on this issue. If the allegedly tortious conduct that injured the plaintiff was discretionary, the court must then evaluate \"whether the exercise or non-exercise of the granted discretion is actually or potentially influenced by policy considerations\" —that is, whether the challenged action \"implicate[s] social, economic, [or] policy judgments.\" As the Supreme Court has recognized, the discretionary function exception \"protects . . . only governmental actions and decisions based on considerations of public policy.\" For instance, if a given decision requires a federal employee to \"balance competing interests\" —such as weighing the benefits of a particular public safety measure against that measure's financial costs —then that decision is likely susceptible to policy analysis within the meaning of the discretionary function exception. When applying the second prong of the discretionary function exception, courts employ an objective rather than a subjective standard. Courts therefore \"do not examine . . . 'whether policy considerations were actually contemplated in making the decision'\" —that is, \"[t]he decision need not actually be grounded in policy considerations so long as it is, by its nature, susceptible to a policy analysis.\" Indeed, the discretionary function exception \"applies 'even if the discretion has been exercised erroneously' and is deemed to have frustrated the relevant policy purpose.\" For that reason, whether the employee committed negligence in exercising his discretion \"is irrelevant to the applicability of the discretionary function exception.\" Nor does it matter whether the allegedly tortious action was undertaken \"by low-level government officials [or] by high-level policymakers.\" The nature of the conduct challenged by the plaintiff—as opposed to the status of the actor—governs whether the discretionary function exception applies in a given case. As long as the challenged conduct involves the exercise of discretion in furtherance of some policy goal, the discretionary function exception forecloses claims under the FTCA. If the first element of the discretionary function exception is satisfied, then courts will generally presume that the second element is satisfied as well. The Supreme Court has held that when an \"established governmental policy, as expressed or implied by statute, regulation, or agency guidelines, allows a Government agent to exercise discretion, it must be presumed that the agent's acts are grounded in policy when exercising that discretion.\" Nevertheless, a plaintiff may rebut that presumption if \"the challenged actions are not the kind of conduct that can be said to be grounded in the policy of the regulatory regime\" at issue in the case. Courts assessing the applicability of the discretionary function exception utilize a \"case-by-case approach. \" Given the fact-intensive nature of the discretionary function inquiry, \"deciding whether a government agent's action is susceptible to policy analysis is often challenging.\" Nevertheless, examples from the case law help illustrate which sorts of governmental actions are susceptible to policy analysis. For instance, in the Rich case discussed above, the court held that \"prisoner placement and the handling of threats posed by inmates against one another are 'part and parcel of the inherently policy-laden endeavor of maintaining order and preserving security within our nation's prisons.'\" The court explained that \"factors such as available resources, proper classification of inmates, and appropriate security levels are 'inherently grounded in social, political, and economic policy.'\" Accordingly, the court held that BOP's decision to house the plaintiff with inmates who ultimately attacked him was susceptible to policy analysis, such that the discretionary function exception shielded the United States from liability. By contrast, courts have held that decisions motivated solely by laziness or careless inattention \"do not reflect the kind of considered judgment 'grounded in social, economic, and political policy'\" that the discretionary function exception is intended to shield from judicial second-guessing. For example, the discretionary function exception does not shield \"[a]n inspector's decision (motivated simply by laziness) to take a smoke break rather than inspect\" a machine that malfunctions and injures the plaintiff, as a mere decision to act carelessly or slothfully \"involves no element of choice or judgment grounded in policy considerations.\" Courts have similarly held that allowing toxic mold to grow on food served at the commissary on a naval base is not a decision influenced by \"social, economic, or political policy,\" and that, as a result, the discretionary function exception does not bar a plaintiff sickened by that mold from suing the United States. Another important exception to the FTCA's waiver of sovereign immunity is known as the \"intentional tort exception.\" An \"intentional tort,\" as the name suggests, occurs \"when the defendant acted with the intent to injure the plaintiff or with substantial certainty that his action would injure the plaintiff.\" A familiar example of an intentional tort is battery—that is, purposeful harmful or offensive physical contact with another person. Subject to a significant proviso discussed below, the intentional tort exception generally preserves the United States's immunity against claims arising out of assault; battery; false imprisonment; false arrest; malicious prosecution; abuse of process; libel; slander; misrepresentation; deceit; or interference with contract rights. As the Supreme Court has observed, however, this list \"does not remove from the FTCA's waiver all intentional torts;\" moreover, the list includes \"certain torts . . . that may arise out of negligent\"—and therefore unintentional—\"conduct.\" Thus, while the phrase \"intentional tort exception\" provides a suitable \"shorthand description\" of the exception's scope, that moniker is, according to the High Court, \"not entirely accurate.\" The FTCA's \"legislative history contains scant commentary\" discussing Congress's rationale for exempting these categories of torts from the FTCA's waiver of sovereign immunity. However, at least some Members of the Congress that first enacted the FTCA appeared to believe (1) that \"it would be 'unjust' to make the government liable\" for the intentional torts of its employees; and (2) that \"exposing the public fisc to potential liability for assault, battery, and other listed torts would be 'dangerous,' based on the notion that these torts are both easy for plaintiffs to exaggerate and difficult to defend against.\" The intentional tort exception has shielded the United States from liability for serious acts of misconduct allegedly committed by federal officers. In a particularly high-profile example, a group of women who were allegedly sexually assaulted by naval officers at the 1991 Tailhook Convention sued the United States under the FTCA \"for the sexual assaults and batteries allegedly perpetrated by Naval officers at the Convention social events.\" The court ultimately ruled that the intentional tort exception defeated the plaintiffs' claims against the United States, as the alleged sexual assaults constituted intentionally tortious acts. Critically, however, the intentional tort exception contains a carve-out known as the \"law enforcement proviso\" that renders the United States liable for certain intentional tort claims committed by \"investigative or law enforcement officers of the United States Government.\" Congress added this proviso \"in 1974 in response to widespread publicity over abuse of powers by federal law enforcement officers.\" Thus, although \"private citizens are barred from bringing suit against federal employees for many intentional torts, they may nonetheless bring suit\" against the United States for a subset of these torts \"if the alleged act was committed by an 'investigative or law enforcement officer.'\" Only the following torts fall within the law enforcement proviso's ambit: assault; battery; false imprisonment; false arrest; abuse of process; and malicious prosecution. The list of intentional torts that potentially qualify for the law enforcement proviso therefore contains \"only half\" of \"the torts listed in the intentional tort exception.\" The proviso thereby only \"waives immunity for the types of tort claims typically asserted against criminal law enforcement officers, while preserving immunity for other tort claims that are asserted more broadly against federal employees.\" To determine whether the proviso applies in any given case, the court must first assess whether the alleged tortfeasor qualifies as an \"investigative or law enforcement officer[].\" The FTCA defines that term to include \"any officer of the United States who is empowered by law to\" (1) \"execute searches,\" (2) \"seize evidence,\" or (3) \"make arrests for violations of Federal law.\" Some courts have therefore concluded that the law enforcement proviso waives the United States's immunity only against claims for intentional torts committed by \"criminal law enforcement officers,\" as contrasted with \"federal employees who conduct only administrative searches\" like Transportation Security Administration (TSA) screeners. Thus, as a general matter, the United States remains largely immune to claims arising from intentional torts committed by federal employees who are not criminal law enforcement officers. It is important to note that the law enforcement proviso waives the United States's immunity only for acts or omissions committed \"while the officer is 'acting within the scope of his office or employment.'\" The underlying tort need not arise while the officer is executing searches, seizing evidence, or making arrests; so long as the officer is \"act[ing] within the scope of his or her employment\" at the time the tort arises, \"the waiver of sovereign immunity holds.\" In other words, the waiver of sovereign immunity \"effected by the law enforcement proviso extends to acts or omissions of law enforcement officers that arise within the scope of their employment, regardless of whether the officers are engaged in investigative or law enforcement activity\" at the time they commit the allegedly tortious act. To illustrate, the Supreme Court has held that the intentional tort exception will not necessarily bar a federal prisoner's claim \"that correctional officers sexually assaulted . . . him while he was in their custody.\" Assuming that the correctional officers qualified as law enforcement officers within the meaning of the FTCA and were acting within the scope of their employment at the time of the alleged assault, the Court concluded that the law enforcement proviso rendered the intentional tort exception inapplicable even if the correctional officers were not specifically engaged in investigative or law enforcement activity during the assault itself. As the name suggests, the \"foreign country exception\" to the FTCA preserves the United States' sovereign immunity against \"any claim arising in a foreign country.\" The Supreme Court has interpreted this exception to \"bar[] all claims based on any injury suffered in a foreign country, regardless of where the tortious act or omission occurred .\" The exception therefore \"ensure[s] that the United States is not exposed to excessive liability under the laws of a foreign country over which it has no control,\" as could potentially occur if the United States made itself liable to the same extent as any private citizen who commits a tort in that country. The recent case of S.H. ex rel. Holt v. United States illustrates how courts apply the foreign country exception in practice. In that case, a family attempted to sue the United States pursuant to the FTCA, alleging that U.S. Air Force (USAF) officials in California \"negligently approved the family's request for command-sponsored travel to a [USAF] base in Spain\" with substandard medical facilities. When the mother ultimately gave birth prematurely in Spain, her daughter was injured during birth. After the family returned to the United States, American doctors diagnosed the daughter with cerebral palsy resulting from her premature birth. The court concluded that, because the daughter's \"cerebral palsy resulted from the brain injury she sustained in Spain,\" the foreign country exception barred the family's FTCA claim even though doctors did not diagnose the daughter with cerebral palsy until after the family returned the United States. To support its conclusion, the court reasoned that, for the purposes of the foreign country exception, \"an injury is suffered where the harm first 'impinge[s]' upon the body, even if it is later diagnosed elsewhere.\" Finally, two exceptions—one created by Congress, one created by the Supreme Court—preserve the federal government's immunity as to certain torts arising from the United States' military activities. The first such exception, codified at 28 U.S.C. § 2680(j), preserves the United States' immunity from \"[a]ny claim arising out of the combatant activities of the military or naval forces, or the Coast Guard, during time of war.\" Although the FTCA's legislative history casts little light on the purpose and intended scope of the combatant activities exception, courts have generally inferred that \"the policy embodied by the combatant activities exception is . . . to preempt state or foreign regulation of federal wartime conduct and to free military commanders from the doubts and uncertainty inherent in potential subjection to civil suit.\" The 1996 case of Clark v. United States illustrates how the combatant activities exception operates in practice. The plaintiff in Clark —a U.S. army sergeant who served in Saudi Arabia during Operation Desert Storm—conceived a child with his wife after he returned home to the United States. After the child manifested serious birth defects, the sergeant sued the United States, claiming that his \"exposure to the toxins he encountered while serving in Saudi Arabia\" during Operation Desert Storm \"combined with the medications and shots he received from the U.S. Army\" caused his child to be born with significant injuries. The court concluded that, because a state of war existed during Operation Desert Storm, the sergeant's claims arose \"out of wartime activities by the military\" and were therefore barred by the combatant activities exception. In addition to the exceptions to liability explicitly enumerated in Section 2680, the Supreme Court has also articulated an additional exception to the United States' waiver of sovereign immunity known as the Feres doctrine. That doctrine derives its name from the 1950 case Feres v. United States , in which several active duty servicemembers (or their executors) attempted to assert a variety of tort claims against the United States. The executor for one of the servicemembers who died in a fire at a military facility, for instance, claimed that the United States had negligently caused the servicemember's death by \"quartering him in barracks known or which should have been known to be unsafe because of a defective heating plant\" and by \"failing to maintain an adequate fire watch.\" The second plaintiff claimed that an Army surgeon negligently left a 30-by-18-inch towel in his stomach during an abdominal operation. The executor of a third servicemember alleged that army surgeons administered \"negligent and unskillful medical treatment\" that resulted in the servicemember's death. The Supreme Court dismissed all three claims, holding \"that the Government is not liable under the [FTCA] for injuries to [military] servicemen where the injuries arise out of or are in the course of activity incident to [military] service.\" The Feres doctrine thus \"applies broadly\" to render the United States immune from tort liability resulting from virtually \"all injuries suffered by military personnel that are even remotely related to the individual's status as a member of the military.\" For instance, courts have frequently barred active duty servicemembers from suing the United States for medical malpractice allegedly committed by military doctors. Notably, the Feres doctrine is not explicitly codified in the FTCA . Instead, courts have justified Feres on the ground that subjecting the United States to liability for tort claims arising out of military service could \"disrupt the unique hierarchical and disciplinary structure of the military.\" According to the Supreme Court, \"complex, subtle, and professional decisions as to the composition, training, and . . . control of a military force are essentially professional military judgments.\" In the Supreme Court's view, requiring federal courts to adjudicate \"suits brought by service members against the Government for injuries incurred incident to service\" would thereby embroil \"the judiciary in sensitive military affairs at the expense of military discipline and effectiveness.\" As discussed in greater detail below, the Feres doctrine has been the subject of significant debate. Nonetheless, the Supreme Court has reaffirmed or expanded Feres on several occasions despite opportunities and invitations to overturn or confine its holding. Most recently, on May 20, 2019, the Court denied a petition asking the court to overrule Feres with respect to certain types of medical malpractice claims. Although the Supreme Court has stated that Congress may abrogate or modify Feres by amending the FTCA if it so chooses, Congress has not yet opted to do so. Apart from the exceptions to the United States' waiver of sovereign immunity discussed above, the FTCA may also limit a plaintiff's ability to obtain compensation from the federal government in other ways. Although, as a general matter, the damages that a plaintiff may recover in an FTCA suit are typically determined by the law of the state in which the tort occurred, the FTCA imposes several restrictions on the types and amount of damages that a litigant may recover. With few exceptions, plaintiffs may not recover punitive damages or prejudgment interest against the United States. The FTCA likewise bars most awards of attorney's fees against the government. Furthermore, with limited exceptions, an FTCA plaintiff may not recover any damages that exceed the amount he initially requested when he submitted his claim to the applicable agency to satisfy the FTCA's exhaustion requirement, which this report discusses below. \"[T]he underlying purpose of\" requiring the plaintiff to specify the maximum amount of damages he seeks \"is to put the government on notice of its maximum potential exposure to liability\" and thereby \"make intelligent settlement decisions.\" Critically, however, a plaintiff can potentially recover damages in excess of the amount he initially requested if the plaintiff can demonstrate \"intervening facts\" or \"newly discovered evidence not reasonably discoverable at the time of presenting the claim to the federal agency\" that warrant a larger award. In addition to the aforementioned substantive limitations on a plaintiff's ability to pursue a tort lawsuit against the United States, Congress has also established an array of procedural requirements a plaintiff must satisfy in order to validly invoke the FTCA. Most significantly, the FTCA contains statute-of-limitations and exhaustion provisions that limit when a plaintiff may permissibly file a tort lawsuit against the United States. For one, with certain exceptions, a plaintiff may not institute an FTCA action against the United States unless (1) the plaintiff has first \"presented the claim to the appropriate Federal agency\" whose employees are responsible for the plaintiff's alleged injury, and (2) that agency has \"finally denied\" the plaintiff's claim. These administrative exhaustion requirements afford federal agencies an opportunity to settle disputes before engaging in formal litigation in the federal courts. \"[E]ncouraging settlement of tort claims within administrative agencies\" in this manner arguably \"reduce[s] court congestion and avoid[s] unnecessary litigation.\" Because litigation can be costly and time-consuming, \"the settlement of claims within administrative agencies\" arguably not only \"benefits FTCA claimants by permitting them to forego the expense of full-blown litigation,\" but also \"frees up limited [governmental] resources for more pressing matters.\" A claimant ordinarily has two years from the date of his injury to present a written notification of his FTCA claim \"to the Federal agency whose activities gave rise to the claim.\" This written notification must \"sufficiently describ[e] the injury to enable the agency to begin its own investigation.\" Once the agency receives such notice, it may either settle the claim or deny it. With limited exceptions, if the claimant fails to submit an administrative claim within the two-year time limit, then \"his 'tort claim against the United States shall be forever barred.'\" As a general rule, a plaintiff must \"exhaust his administrative remedies prior to filing suit\"; a plaintiff usually cannot file an FTCA lawsuit and then cure his failure to comply with the exhaustion requirement by belatedly submitting an administrative claim. If, after the claimant submits his claim to the relevant administrative agency, the claimant and the agency agree on a mutually acceptable settlement, no further litigation occurs. Statistics suggest that \"[t]he majority of FTCA . . . claims are resolved on the administrative level and do not go to litigation.\" If the agency does not agree to settle the claim, however, the agency may deny the claim by \"mailing, by certified or registered mail, . . . notice of final denial of the claim\" to the claimant. If no administrative settlement occurs, a claimant's right to a judicial determination \"is preserved and the claimant may file suit in federal court.\" The claimant typically has six months from the date the agency mails its denial to initiate an FTCA lawsuit against the United States in federal court if he so chooses. With limited exceptions, if the plaintiff does not file suit before this six-month deadline, his claim against the United States will be \"forever barred.\" If a federal agency does not promptly decide whether to settle or deny claims that claimants have presented to them, the FTCA establishes a mechanism for constructive exhaustion to prevent claims from being consigned to administrative limbo while the claimant awaits the agency's decision. Pursuant to Section 2675(a) of the FTCA, \"[t]he failure of an agency to make final disposition of a claim within six months after it is filed shall, at the option of the claimant any time thereafter, be deemed a final denial of the claim for purposes of\" the FTCA's exhaustion requirement. Thus, under these limited circumstances, Section 2675(a) authorizes a plaintiff to file an FTCA suit against the United States even before the agency has formally denied his administrative claim. Since Congress first enacted the FTCA in 1946, the federal courts have developed a robust body of judicial precedent interpreting the statute. In recent decades, however, the Supreme Court has rejected several invitations by litigants to modify its long-standing doctrines governing the FTCA's application. In doing so, the Court has expressed reluctance to revisit settled FTCA precedents in the absence of congressional action. Thus, if Congress disapproves of some or all of the legal principles that currently govern FTCA cases, legislative action may be necessary to change the governing standards. Some observers have advocated a variety of modifications to the FTCA. Recent legislative proposals to alter the FTCA have included, among other things, carving out certain categories of claims, cases, or plaintiffs to which the FTCA does not apply; expanding or narrowing the FTCA's definition of \"employee\" —which, as discussed above, is presently relatively broad, but does not include independent contractors; and amending 28 U.S.C. § 2680 to create new exceptions to the federal government's waiver of sovereign immunity—or, alternatively, to broaden, narrow, or eliminate existing exceptions. Proposals to change the FTCA's substantive standards implicate policy questions that Congress may wish to consider. On one hand, broadening the FTCA's waiver of sovereign immunity could enable a larger number of victims of government wrongdoing to obtain recourse through the federal courts, but could concomitantly increase the total amount of money the United States must pay to tort claimants each year and exacerbate \"concerns . . . about . . . the impact that extensive litigation might have on the ability of government officials to focus on and perform their other duties.\" Conversely, narrowing the FTCA's immunity waiver could result in a larger number of private individuals bearing the costs of government employee misfeasance, but could result in a cost savings to the United States and decrease the potential for judicial interference with federal operations. One particular proposal to amend the FTCA that has captured a relatively substantial amount of congressional attention is abrogating or narrowing the Feres doctrine. As discussed above, the Feres doctrine shields the federal government from liability \"for injuries to servicemen where the injuries arise out of or are in the course of activity incident to [military] service.\" Opponents of Feres argue that the doctrine inappropriately bars servicemembers from obtaining recourse for their injuries. Critics maintain that Feres 's bar on FTCA suits creates especially unjust results with respect to servicemembers who suffer injuries in military hospitals and servicemembers who are victims of sexual abuse, as those types of tortious actions are far removed from the core functions of the military. Some Members of Congress, judges, and legal commentators have therefore advocated eliminating or narrowing the Feres doctrine to allow servicemembers to pursue certain tort claims against the United States under the FTCA. Supporters of Feres , by contrast, have instead urged Congress to retain the Feres doctrine in its current form. These commentators contend \"that the abolition of the Feres doctrine would lead to intra-military lawsuits that would have a very adverse effect on military order, discipline and effectiveness.\" Supporters further maintain that entertaining tort suits by servicemembers against the United States would increase the government's exposure to monetary liability. Some who support the Feres doctrine argue that even though Feres bars servicemembers from suing the United States under the FTCA for injuries they sustain incident to military service, Feres does not necessarily leave servicemembers without any remedy whatsoever; depending on the circumstances, injured servicemembers may be entitled to certain benefits under other federal statutes. Congress has periodically held hearings to assess whether to retain, abrogate, or modify the Feres doctrine. The House Armed Services Committee's Subcommittee on Military Personnel conducted the most recent of those hearings on April 30, 2019. If Congress desires to authorize servicemembers to prosecute tort lawsuits against the United States, it has several options. For example, Congress could abolish Feres in its entirety and allow servicemembers to file tort suits against the United States subject to the same exceptions and prerequisites that govern FTCA lawsuits initiated by nonservicemembers. Alternatively, instead of abrogating Feres entirely, Congress could allow servicemembers to sue the United States for only certain injuries arising from military service, such as injuries resulting from medical malpractice. As an alternative to authorizing full-fledged litigation against the United States in federal court, Congress could also create alternative compensation mechanisms intended to provide relief to injured servicemembers whose claims would otherwise be barred by Feres . Such alternative compensation procedures could, for example, resemble the alternative compensation scheme Congress established for persons injured by vaccines. To that end, Congress has periodically introduced bills proposing to modify the Feres doctrine. Most recently, several Members of the 116th Congress cosponsored the Sfc. Richard Stayskal Military Medical Accountability Act of 2019 ( H.R. 2422 ), which would authorize \"member[s] of the Armed Forces of the United States\" to bring claims \"against the United States under [the FTCA] for damages . . . arising out of a negligent or wrongful act or omission in the performance of medical, dental, or related health care functions\" rendered at certain military medical treatment facilities under specified conditions. In addition to proposals to modify the FTCA itself, Congress retains the authority to enact private legislation to compensate individual tort victims who would otherwise be barred from obtaining recourse from the United States under the FTCA in its current form. Although, as explained above, Congress enacted the FTCA in part to eliminate the need to pass private bills in order to compensate persons injured by the federal government, Congress still retains some authority to pass private bills if it so desires. Thus, rather than amend the FTCA to expand the universe of circumstances in which the United States will be liable to tort claimants, some have suggested that Congress should pass individual private bills to compensate particular injured persons or groups of persons who might otherwise lack recourse under the FTCA. To that end, Congress has occasionally \"provided compensation [to plaintiffs] in situations where the courts have found that the FTCA waiver of immunity provides no relief.\"", "summary": "A plaintiff injured by a defendant's wrongful act may file a tort lawsuit to recover money from that defendant. To name a particularly familiar example, a person who negligently causes a vehicular collision may be liable to the victim of that crash. By forcing people who wrongfully injure others to pay money to their victims, the tort system serves at least two functions: (1) deterring people from injuring others and (2) compensating those who are injured. Employees and officers of the federal government occasionally commit torts just like other members of the general public. For a substantial portion of this nation's history, however, plaintiffs injured by the tortious acts of a federal officer or employee were barred from filing lawsuits against the United States by \"sovereign immunity\"—a legal doctrine that ordinarily prohibits private citizens from haling a sovereign state into court without its consent. Until the mid-20th century, a tort victim could obtain compensation from the United States only by persuading Congress to pass a private bill compensating him for his loss. Congress, deeming this state of affairs unacceptable, enacted the Federal Tort Claims Act (FTCA), which authorizes plaintiffs to obtain compensation from the United States for the torts of its employees. However, subjecting the federal government to tort liability not only creates a financial cost to the United States, it also creates a risk that government officials may inappropriately base their decisions not on socially desirable policy objectives, but rather on the desire to reduce the government's exposure to monetary damages. In an attempt to mitigate these potential negative effects of abrogating the government's immunity from liability and litigation, the FTCA limits the circumstances in which a plaintiff may pursue a tort lawsuit against the United States. For example, the FTCA contains several exceptions that categorically bar plaintiffs from recovering tort damages in certain categories of cases. Federal law also restricts the types and amount of damages a victorious plaintiff may recover in an FTCA suit. Additionally, a plaintiff may not initiate an FTCA lawsuit unless he has timely complied with a series of procedural requirements, such as providing the government an initial opportunity to evaluate the plaintiff's claim and decide whether to settle it before the case proceeds to federal court. Since Congress first enacted the FTCA, the federal courts have developed a robust body of judicial precedent interpreting the statute's contours. In recent years, however, the Supreme Court has expressed reluctance to reconsider its long-standing FTCA precedents, thereby leaving the task of further developing the FTCA to Congress. Some Members of Congress have accordingly proposed legislation to modify the FTCA in various respects, such as by broadening the circumstances in which a plaintiff may hold the United States liable for torts committed by government employees.", "document_type": "crs"}
{"report": "The Federal Communications Commission (FCC) is an independent federal agency, with its five members appointed by the President, subject to confirmation by the Senate. It was established by the Communications Act of 1934 (1934 Act, or \"Communications Act\") and is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. The mission of the FCC is to ensure that the American people have available, \"without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges.\" The 1934 Act is divided into titles and sections that describe various powers and concerns of the commission. Title I—FCC Administration and Powers. The 1934 Act originally called for a commission consisting of seven members, but that number was reduced to five in 1983. Commissioners are appointed by the President and approved by the Senate to serve five-year terms; the President designates one member to serve as chairman. Title II—Common carrier regulation, primarily telephone regulation, including circuit-switched telephone services offered by cable companies. Common carriers are communication companies that provide facilities for transmission but do not originate messages, such as telephone and microwave providers. The 1934 Act limits FCC regulation to interstate and international common carriers, although a joint federal-state board coordinates regulation between the FCC and state regulatory commissions. Title III—Broadcast station requirements. Much existing broadcast regulation was established prior to 1934 by the Federal Radio Commission, and most provisions of the Radio Act of 1927 were subsumed into Title III of the 1934 Act. Title IV—Procedural and administrative provisions, such as hearings, joint boards, judicial review of the FCC's orders, petitions, and inquiries. Title V—Penal provisions and forfeitures, such as violations of rules and regulations. Title VI—Cable communications, such as the use of cable channels and cable ownership restrictions, franchising, and video programming services provided by telephone companies. Title VII—Miscellaneous provisions and powers, such as war powers of the President, closed captioning of public service announcements, and telecommunications development fund. The FCC is directed by five commissioners appointed by the President and confirmed by the Senate for five-year terms (except when filling an unexpired term). The President designates one of the commissioners to serve as chairperson. Three commissioners may be members of the same political party as the President and none can have a financial interest in any commission-related business. Ajit Pai, Chair (originally sworn in on May 14, 2012; designated chairman by President Trump in January 2017 and confirmed by the Senate for a second term on October 2, 2017); Michael O'Rielly (sworn in for a second term on January 29, 2015); Brendan Carr (sworn in on August 11, 2017); Jessica Rosenworcel (sworn in on August 11, 2017); and Geoffrey Starks (sworn in on January 30, 2019). The day-to-day functions of the FCC are carried out by 7 bureaus and 10 offices. The current basic structure of the FCC was established in 2002 as part of the agency's effort to better reflect the industries it regulates. The seventh bureau, the Public Safety and Homeland Security Bureau, was established in 2006, largely in response to Hurricane Katrina. The bureaus process applications for licenses and other filings, analyze complaints, conduct investigations, develop and implement regulatory programs, and participate in hearings, among other things. The offices provide support services. Bureaus and offices often collaborate when addressing FCC issues. The bureaus hold the following responsibilities: Consumer and Governmental Affairs Bureau—Develops and implements consumer policies, including disability access and policies affecting Tribal nations. The Bureau serves as the public face of the Commission through outreach and education, as well as responding to consumer inquiries and informal complaints. The Bureau also maintains collaborative partnerships with state, local, and tribal governments in such critical areas as emergency preparedness and implementation of new technologies. In addition, the Bureau's Disability Rights Office provides expert policy and compliance advice on accessibility with respect to various forms of communications for persons with disabilities. Enforcement Bureau—Enforces the Communications Act and the FCC's rules. It protects consumers, ensures efficient use of spectrum, furthers public safety, promotes competition, resolves intercarrier disputes, and protects the integrity of FCC programs and activities from fraud, waste, and abuse. International Bureau—Administers the FCC's international telecommunications and satellite programs and policies, including licensing and regulatory functions. The Bureau promotes pro-competitive policies abroad, coordinating the FCC's global spectrum activities and advocating U.S. interests in international communications and competition. The Bureau works to promote high-quality, reliable, interconnected, and interoperable communications infrastructure on a global scale. Media Bureau—Recommends, develops, and administers the policy and licensing programs relating to electronic media, including broadcast, cable, and satellite television in the United States and its territories. Public Safety and Homeland Security Bureau—Develops and implements policies and programs to strengthen public safety communications, homeland security, national security, emergency management and preparedness, disaster management, and network reliability. These efforts include rulemaking proceedings that promote more efficient use of public safety spectrum, improve public alerting mechanisms, enhance the nation's 911 emergency calling system, and establish frameworks for communications prioritization during crisis. The Bureau also maintains 24/7 operations capability and promotes Commission preparedness to assist the public, first responders, the communications industry, and all levels of government in responding to emergencies and major disasters where reliable public safety communications are essential. Wireless Telecommunications Bureau—Responsible for wireless telecommunications programs and policies in the United States and its territories, including licensing and regulatory functions. Wireless communications services include cellular, paging, personal communications, mobile broadband, and other radio services used by businesses and private citizens. Wireline Competition Bureau—Develops, recommends, and implements policies and programs for wireline telecommunications, including fixed (as opposed to mobile) broadband and telephone landlines, striving to promote the widespread development and availability of these services. The Bureau has primary responsibility for the Universal Service Fund which helps connect all Americans to communications networks. The offices hold the following responsibilities: Administrative Law Judges—Composed of one judge (and associated staff) who presides over hearings and issues decisions on matters referred by the FCC. Communications Business Opportunities—Promotes competition and innovation in the provision and ownership of telecommunications services by supporting opportunities for small businesses as well as women and minority-owned communications businesses. Economics and Analytics—Responsible for expanding and deepening the use of economic analysis into Commission policymaking, for enhancing the development and use of auctions, and for implementing consistent and effective agency-wide data practices and policies. The Office also manages the FCC's auctions in support of and in coordination with the FCC's Bureaus and Offices. In January 2019, the FCC voted along party lines to eliminate the Office of Strategic Planning and Policy Analysis and replace it with the Office of Economics and Analytics. Engineering and Technology—Advises the FCC on technical and engineering matters. This Office develops and administers FCC decisions regarding spectrum allocations and grants equipment authorizations and experimental licenses. General Counsel—Serves as the FCC's chief legal advisor and representative. Inspector General—Conducts and supervises audits and investigations relating to FCC programs and operations. Legislative Affairs—Serves as the liaison between the FCC and Congress, as well as other federal agencies. Managing Director—Administers and manages the FCC. Media Relations—Informs the media of FCC decisions and serves as the FCC's main point of contact with the media. Workplace Diversity—Ensures that FCC provides employment opportunities for all persons regardless of race, color, sex, national origin, religion, age, disability, or sexual orientation. Additionally, an FCC Secretary serves to preserve the integrity of the FCC's records, oversee the receipt and distribution of documents filed by the public through electronic and paper filing systems, and give effective legal notice of FCC decisions by publishing them in the Federal Register and the FCC Record . The current FCC Strategic Plan covers the five-year period FY2018-FY2022. The plan outlines four goals: Closing the Digital Divide—Broadband is acknowledged as being critical to economic opportunity, but broadband is unavailable or unaffordable in many parts of the country. The FCC is to seek to help close the digital divide, bring down the cost of broadband deployment, and create incentives for providers to connect consumers in hard-to-serve areas. Promoting Innovation—Fostering a competitive, dynamic, and innovative market for communications services is a key priority for the FCC. The FCC plans to promote entrepreneurship, expand economic opportunity, and remove barriers to entry and investment. Protecting Consumers and Public Safety—Serving the broader public interest is the FCC's core mission. The FCC plans to work to combat unwanted and unlawful robocalls, make communications accessible for people with disabilities, and protect public safety (e.g., ensuring delivery of 9-1-1 calls, restoring communications after disasters). Reforming the FCC's Processes—One of the chairman's top priorities has been to implement process reforms to make the work of the FCC more transparent, open, and accountable to the public. The FCC plans to modernize and streamline its operations and programs to improve decisionmaking, build consensus, and reduce regulatory burdens. The FCC has identified performance objectives associated with each strategic goal. Commission management annually develops targets and measures related to each performance goal to provide direction toward accomplishing those goals. Targets and measures are published in the FCC's Performance Plan, and submitted with the commission's annual budget request to Congress. Results of the commission's efforts to meet its goals, targets, and measures are found in the FCC's Annual Performance Report published each February. The FCC also issues a Summary of Performance and Financial Results every February, providing a concise, citizen-focused review of the agency's accomplishments. Since the 110 th Congress, the FCC has been funded through the House and Senate Financial Services and General Government (FSGG) appropriations bill as a single line item. Previously, it was funded through what is now the Commerce, Justice, Science appropriations bill, also as a single line item. The FCC annually collects and retains regulatory fees to offset costs incurred by the agency and to carry out its functions. Since 2009 the FCC's budget has been derived from regulatory fees collected by the agency rather than through a direct appropriation. The fees, often referred to as \"Section (9) fees,\" are collected from license holders and certain other entities (e.g., cable television systems). The regulatory fees do not apply to governmental entities, amateur radio operator licensees, nonprofit entities, and certain other non-commercial entities. The FCC is authorized to review the regulatory fees each year and adjust them to reflect changes in its appropriation from year to year. The Commission originally implemented the Regulatory Fee Collection Program by rulemaking on July 18, 1994. The most recent regulatory fee order was released by the Commission on August 29, 2018. The FCC's budgets from FY2010 to FY2020 are in Figure 1 . On March 23, 2018, the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (the \"RAY BAUM'S Act\" or \"2018 Act\") became law as part of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). The 2018 Act requires the FCC to transfer all excess collections for FY2018 and prior years to the General Fund of the U.S. Treasury for the sole purpose of deficit reduction. The 2018 Act also requires the Commission to transfer any excess collections in FY2019 and in subsequent years to the General Fund of the U.S. Treasury for the sole purpose of deficit reduction. On October 1, 2018, the Commission transferred over $9 million in excess collections from FY2018 as well as approximately $112 million in excess collections from FY2017 and prior years to the General Fund of the U.S. Treasury. For FY2020, the FCC has requested $335,660,000 in budget authority from regulatory fee offsetting collections. This is $3,950,000 less than the authorization level of $339,610,000 included in the 2018 FCC Reauthorization in the Consolidated Appropriations Act, 2018. The FY2020 FCC request also represents a decrease of $3,340,000, or about 1.0%, from the FY2019 appropriated level of $339,000,000. The FCC requested $132,538,680 in budget authority for the spectrum auctions program. For FY2019, Congress appropriated a cap of $130,284,000 for the spectrum auctions program, which included additional funds to implement the requirements of the 2018 Act that mandated significant additional work for the FCC related to the TV Broadcaster Relocation Fund. The Commission's FY2020 budget request of $132,538,680 for this program would be an increase of $2,254,680, or 1.7%, over the FY2019 appropriation. This level of funding is intended to enable the Commission to continue its efforts to: reimburse full power and Class A stations, multichannel video programming distributors, Low Power TV, TV translator, and FM stations for reasonable costs incurred as a result of the Commission's incentive auction; make more spectrum available for 5G; and educate consumers affected by the reorganization of broadcast television spectrum. To date, the Commission's spectrum auctions program has generated over $114.6 billion for government use; at the same time, the total cost of the auctions program has been less than $2.0 billion, or less than 1.7% of the total auctions' revenue. Through the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), the FCC was reauthorized for the first time since 1990 (FCC Authorization Act of 1990, P.L. 101-396 ). The FCC publishes four periodic reports for Congress. Strategic Plan. The Strategic Plan is the framework around which the FCC develops its yearly Performance Plan and Performance Budget. The FCC submitted its current four-year Strategic Plan for 2018-2022 in February 2018, in accordance with the Government Performance and Results Modernization Act of 2010, P.L. 111-352 . Performance Budget. The annual Performance Budget includes performance targets based on the FCC's strategic goals and objectives, and serves as the guide for implementing the Strategic Plan. The Performance Budget becomes part of the President's annual budget request. Agency Financial Report. The annual Agency Financial Report contains financial and other information, such as a financial discussion and analysis of the agency's status, financial statements, and audit reports. Annual Performance Report. At the end of the fiscal year, the FCC publishes an Annual Performance Report that compares the agency's actual performance with its targets. All of these reports are available on the FCC website, https://www.fcc.gov/about/strategic-plans-budget . One FCC-related hearing has been held in the 116 th Congress. On April 3, 2019, the House Committee on Appropriations Subcommittee on Financial Services and General Government held a hearing on the FY2020 FCC budget. The hearing addressed issues including 5G deployment, federal preemption of state and local tower siting requirements, merger reviews, robocalls, and net neutrality. No bills that would affect the operation of the FCC have been introduced in the 116 th Congress. The FCC operates under a public interest mandate first laid out in the 1927 Radio Act (P.L. 632, 69 th Congress), but how this mandate is applied depends on which of two regulatory philosophies is relied upon to interpret it. The first seeks to protect and benefit the public at large through regulation, while the second seeks to achieve the same goals through the promotion of market efficiency. Additionally, Congress granted the FCC wide latitude and flexibility to revise its interpretation of the public interest standard to reflect changing circumstances, and the agency has not defined it in more concrete terms. These circumstances, paired with changes in FCC leadership, have led to significant changes over time in how the FCC regulates the broadcast and telecommunications industries. This evolution can be illustrated in changes to the agency's strategic goals under former Chairman Tom Wheeler to current Chairman Ajit Pai, which, in turn, led to the repeal in 2017 of the FCC's 2015 net neutrality rules and to changes in the agency's structure in 2019. The FCC's strategic goals are set forth in its quadrennial Strategic Plan. How these goals change from one plan to the next can illustrate how the priorities of the commission change over time, especially when there is a change in the political majority of the commission and therefore, the political party of the chairman. Table 1 outlines the strategic goals of Chairman Wheeler in the FY2015-FY2018 Strategic Plan compared to those of Chairman Pai in the FY2018-FY2022 Strategic Plan. Chairman Wheeler was a proponent of protecting and benefitting the public through regulation. His support of this regulatory philosophy can be seen in the language used in the strategic goals, such as the \"rights of users\" and the \"responsibilities of network providers.\" Another example can be seen in the following language: \"The FCC has a responsibility to promote the expansion of these networks and to ensure they have the incentive and the ability to compete fairly with one another in providing broadband services.\" On the other hand, Chairman Pai speaks about protecting and benefitting the public through the promotion of market incentives and efficiency. His support of this regulatory philosophy can be seen in the language used in the strategic goals, such as \"reducing regulatory burdens\" and ensuring that \"regulations reflect the realities of the current marketplace, promote entrepreneurship, expand economic opportunity, and remove barriers to entry and investment.\" The use of this particular language may seem somewhat vague, but within the context of the net neutrality debate, discussed below, and the replacement of the Office of Strategic Planning and Policy Analysis with the Office of Economics and Analytics, those words take on more specific meaning, each intending to support the policy agenda of the Chairman. Net neutrality is arguably the highest profile issue illustrating the two regulatory philosophies described above. Chairman Pai had long maintained that the FCC under Chairman Wheeler had overstepped its bounds, expressing confidence that the 2015 Wheeler-era net neutrality rules would be undone, calling them \"unnecessary regulations that hold back investment and innovation.\" Although the net neutrality debate originated in 2005, the 2015 Open Internet Order, implemented under the leadership of Chairman Wheeler, and the 2017 Order overturning those rules, promulgated under Chairman Pai, are the most recent. These two orders can be used to illustrate the contrast between the regulatory philosophies of the two chairmen: Some policymakers contend that more proscriptive regulations, such as those contained in the FCC's 2015 Open Internet Order (2015 Order), are necessary to protect the marketplace from potential abuses which could threaten the net neutrality concept. Others contend that existing laws and the current, less restrictive approach, contained in the FCC's 2017 Restoring Internet Freedom Order (2017 Order), provide a more suitable framework. Net neutrality continues to be a highly politicized issue, with most FCC action being approved along party lines. In January 2019, the FCC voted along party lines to eliminate the Office of Strategic Planning and Policy Analysis and replace it with a new Office of Economics and Analytics. The Office of Strategic Planning and Policy Analysis (OSP) was created in 2005, replacing the Office of Plans and Policy. OSP had been charged with \"providing advice to the chairman, commissioners, bureaus, and offices; developing strategic plans; identifying the agency's policy objectives; and providing research, advice, and analysis of advanced, novel, and nontraditional communications issues.\" It had also been the home of the Chief Economist and Chief Technologist. The new Office of Economics and Analytics is \"responsible for expanding and deepening the use of economic analysis into FCC policy making, for enhancing the development and use of auctions, and for implementing consistent and effective agency-wide data practices and policies.\" This new office reflects the goals in the current strategic plan: We will modernize and streamline the FCC's operations and programs to … reduce regulatory burdens…. A key priority [is to] … ensure that the FCC's actions and regulations reflect the realities of the current marketplace … and remove barriers to entry and investment. As the FCC continues to conduct its business into the future, the changing regulatory philosophies of the FCC chairmen may continue to drive how the FCC defines its long-term, strategic goals. This, in turn, may affect how the agency structures (and restructures) itself and how it decides regulatory questions, including a continued review of net neutrality. Congress may determine that the public interest standard should remain more static, rather than fluctuating dramatically depending on the regulatory philosophy of the chairman. No legislation on this topic has been introduced in Congress, signaling to some observers that it intends to continue allowing the FCC to define it. Table A-1 . Senate and House hearings in the 115 th Congress regarding the operation of the FCC are detailed in Table A-2 and Table A-3 , respectively. Links to individual hearing pages are included in these tables.", "summary": "The Federal Communications Commission (FCC) is an independent federal agency established by the Communications Act of 1934 (1934 Act, or \"Communications Act\"). The agency is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. The mission of the FCC is to make available for all people of the United States, \"without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges.\" The FCC operates under a public interest mandate first laid out in the 1927 Radio Act (P.L. 632, 69th Congress), but how this mandate is applied depends on how \"the public interest\" is interpreted. Some regulators seek to protect and benefit the public at large through regulation, while others seek to achieve the same goals through the promotion of market efficiency. Additionally, Congress granted the FCC wide latitude and flexibility to revise its interpretation of the public interest standard to reflect changing circumstances and the agency has not defined it in more concrete terms. These circumstances, paired with changes in FCC leadership, have led to significant changes over time in how the FCC regulates the broadcast and telecommunications industries. The FCC is directed by five commissioners appointed by the President and confirmed by the Senate for five-year terms. The President designates one of the commissioners as chairperson. Three commissioners may be members of the same political party of the President and none can have a financial interest in any commission-related business. The current commissioners are Ajit Pai (Chair), Michael O'Rielly, Brendan Carr, Jessica Rosenworcel, and Geoffrey Starks. The day-to-day functions of the FCC are carried out by 7 bureaus and 10 offices. The current basic structure of the FCC was established in 2002 as part of the agency's effort to better reflect the industries it regulates. The seventh bureau, the Public Safety and Homeland Security Bureau, was established in 2006. The bureaus process applications for licenses and other filings, manage non-federal spectrum, analyze complaints, conduct investigations, develop and implement regulatory programs, and participate in hearings, among other things. The offices provide support services. Bureaus and offices often collaborate when addressing FCC issues. Beginning in the 110th Congress, the FCC has been funded through the House and Senate Financial Services and General Government (FSGG) appropriations bill as a single line item. Previously, it was funded through what is now the Commerce, Justice, Science appropriations bill, also as a single line item. Since 2009 the FCC's budget has been derived from regulatory fees collected by the agency rather than through a direct appropriation. The fees, often referred to as \"Section (9) fees,\" are collected from license holders and certain other entities. The FCC is authorized to review the regulatory fees each year and adjust them to reflect changes in its appropriation from year to year. Most years, appropriations language prohibits the use by the commission of any excess collections received in the current fiscal year or any prior years. For FY2020, the FCC has requested $335,660,000 in budget authority from regulatory fee offsetting collections. The FCC also requested $132,538,680 in budget authority for the spectrum auctions program.", "document_type": "crs"}
{"report": "Congress appropriates foreign affairs funding primarily through annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations. Prior to FY2008, however, Congress provided funds for the Department of State and international broadcasting within the Commerce, Justice, and State, the Judiciary, and Related Agencies appropriations (CJS) and separately provided foreign aid funds within Foreign Operations, Export Financing, and Related Programs appropriations. The transition between the different alignments occurred in the 109 th Congress, with a change in appropriations subcommittee jurisdiction. For that Congress, the House of Representatives appropriated State Department funds separately from foreign aid, as in earlier Congresses, but the Senate differed by appropriating State and foreign aid funds within one bill—the Department of State, Foreign Operations, and Related Programs Appropriations. Both the House and Senate began jointly funding Department of State and foreign aid appropriations within the Department of State, Foreign Operations and Related Programs Appropriations in the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ). SFOPS appropriations currently include State Department Operations (including accounts for Embassy Security, Construction, and Maintenance, and Education and Cultural Affairs, among others); Foreign Operations (including USAID administration expenses, bilateral economic assistance, international security assistance, multilateral assistance, and export assistance); various international commissions; and International Broadcasting (including VOA, RFE/RL, Cuba Broadcasting, Radio Free Asia, and Middle East Broadcasting Networks). While the distribution varies slightly from year to year, Foreign Operations funding is typically about twice as much as State Operations funding. In addition to regular, enduring SFOPS appropriations, Congress has approved emergency supplemental funding requested by Administrations to address emergency or otherwise off-cycle budget needs. Since FY2012, Congress has also appropriated Overseas Contingency Operations (OCO) funding requested within the regular budget process for Department of State and USAID war-related expenses. This report lists the legislative and funding history of SFOPS appropriations and includes funding trends. Nearly all foreign affairs appropriations within the past 25 years were passed within omnibus, consolidated, or full-year continuing resolutions, rather than in stand-alone bills, and usually after the start of the new fiscal year. Many foreign policy experts contend that stand-alone appropriations legislation would allow for a more rigorous debate on specific foreign policy activities and improve the ability to introduce or fund new programs, or cancel and defund existing programs. Such experts assert that the frequent practice of passing continuing resolutions and delaying passage of appropriations well into the next fiscal year has hindered program planning (not just in foreign affairs) and has reduced the ability to fund programs that did not exist in the previous cycle. In addition to annual appropriations, several laws require Congress to authorize State and foreign operations funding prior to expenditure. Before 2003, Congress typically provided authorization in a biannual Foreign Relations Authorization bill. This practice not only authorized funding for obligation and expenditure, but also provided a forum for more rigorous debate on specific foreign affairs and foreign aid policies and a legislative vehicle for congressional direction. In recent years, the House and Senate have separately introduced or considered foreign relations and foreign aid authorization bills, but none have been enacted. Table 1 below provides a 25-year history of enacted foreign affairs appropriations laws (excluding short-term continuing resolutions and supplemental appropriations), including the dates they were sent to the President and signed into law. Some observations follow: Since FY1995, Congress appropriated foreign affairs funding in on-time, freestanding bills once—in 1994 for the FY1995 appropriations year. The last time Congress passed foreign affairs funding on time, but not in freestanding legislation, was for FY1997. Congress included foreign affairs funding within an omnibus, consolidated, or full-year continuing resolution 21 of the past 25 years. FY2006 was the last time Congress enacted freestanding State Department and foreign operations appropriations bills. Six times over the past 25 years, Congress sent the State and foreign operations appropriations to the President in March, April, or May—six to eight months into the fiscal year. Since realignment of the foreign affairs appropriations legislation in FY2008, SFOPS appropriations measures have included State Department Operations, Foreign Operations, various international commissions, and International Broadcasting. For a full list of the accounts included in the FY2019 SFOPS, see Table 2 . Table 3 and Figure 1 provide the funding levels for enduring funds and Supplemental/OCO funds in the Department of State, Foreign Operations and Related Programs for FY2001-2020 request (in current dollars). Although current funding for State-Foreign Operations generally has grown since FY2001, there was a spike in funding in FY2004 that can, in large part, be attributed to supplemental funding for the Iraq Relief and Reconstruction Fund, which provided additional funds in that year. The creation of the Millennium Challenge Corporation (MCC) and the President's Emergency Plan for AIDS Relief (PEPFAR) added to growing funding levels from FY2004-FY2009. OCO became a regular part of foreign affairs funding as of FY2012. Supplemental funding for Ebola in FY2015, Zika in FY2016, and OCO in FY2017 contributed to the rise in funding levels during those years (see Figure 2 ). The constant dollar trend line generally continues to increase, although at a slower pace than current dollars. FY2004 remains the peak year in constant dollars. The introduction of OCO funding in FY2012 briefly elevated SFOPS funding, but in the following years, funding levels off at nearly the same amount as the FY2012 level. After removing inflation, funding for FY2013 through the FY2020 request declines below that level, suggesting that the Budget Control Act of 2011 (BCA) has kept foreign affairs funding below the rate of inflation. The Administration distinguishes between enduring (also called base, regular, or ongoing), emergency supplemental, and Overseas Contingency Operations (OCO) funds. Funds designated as emergency or OCO are not subject to procedural limits on discretionary spending in congressional budget resolutions, or the statutory discretionary spending limits provided through the Budget Control Act of 2011 for FY2011-FY2021 (BCA, P.L. 112-25 ). Prior to FY2012, the President typically submitted to Congress additional funding requests (after the initial annual budget request), referred to as emergency supplementals. Supplemental funding packages have historically been approved to address emergency, war-related, or otherwise off-cycle budget needs. The Obama Administration requested emergency supplemental appropriations for urgent unexpected expenses, such as the U.S. international responses to Ebola, the Zika virus, and famine relief to Syria, Yemen, Somalia, and Northeast Nigeria. The Trump Administration has not requested supplemental funding for unexpected international crises. In contrast to emergency supplemental appropriations, the Obama Administration included within the regular budget request in FY2012 what it described as short-term, temporary, war-related funding for the frontline states of Iraq, Afghanistan, and Pakistan—designated as Overseas Contingency Operations funds, or OCO. Congress had used the OCO designation in earlier years for Department of Defense appropriations to distinguish between ongoing versus war-related expenditures. In response to the FY2012 SFOPS OCO request, Congress appropriated OCO funds for the Department of State and USAID activities beyond the requested level and for more than just activities in Iraq, Afghanistan, and Pakistan. In FY2012, Congress included OCO funds for the three frontline states as well as for Yemen, Somalia, Kenya, and the Philippines. The Obama Administration first requested OCO funds for a country other than the three frontline states in FY2015, when it requested OCO funds for Syria. In FY2018, the Trump Administration requested OCO funds for the Department of State and USAID activities in Iraq, Afghanistan, and Pakistan, as well as \"High Threat/High Risk\" areas. These included Syria, Yemen, Nigeria, Somalia, and South Sudan, among others. The Administration's initial FY2019 request included OCO funds for the Department of State and USAID, but after passage of the Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-123 ), the Administration requested that all previously requested SFOPS OCO funds be moved to enduring funds. For FY2020, the Trump Administration again requested no OCO funds for foreign affairs agencies. Since FY2012, OCO has ranged from a low of 14% of the total budget request in FY2014 to a high of 36% in FY2017, when the Bipartisan Budget Act of 2015 (BBA 2015, P.L. 114-74 ) set nonbinding OCO minimums for FY2016 and FY2017. The Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-123 ) raised discretionary spending limits for FY2018 and FY2019 and extended direct spending reductions through FY2027. With the raised spending limits, the Trump Administration's FY2019 budget request did not include the OCO designation for any foreign assistance funds. However, Congress has continued to appropriate OCO funds, including $8.0 billion in FY2019. The Administration's FY2020 budget request also does not request OCO funds for State-Foreign Operations appropriations. The BCA and BBAs have had an effect on foreign affairs funding levels and may have future implications. The Budget Control Act of 2011 sets limits on discretionary spending through FY2021 for defense and nondefense funding categories. Because OCO funds are not counted against the discretionary spending limits, the BCA has put downward pressure on SFOPS enduring/base funds, while OCO has increasingly funded other foreign affairs activities. In addition, the 2015 BBA significantly increased FY2016 and FY2017 OCO funding for foreign affairs over the requested funding levels in FY2015 and FY2016, further encouraging a migration of funds for ongoing activities into OCO-designated accounts. However, the 2018 BBA has had the opposite effect on foreign affairs OCO, allowing lawmakers to shift OCO funding back into enduring/base accounts. ", "summary": "Congress currently appropriates most foreign affairs funding through annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations. Prior to FY2008, however, Congress provided funding for the Department of State, international broadcasting, and related programs within the Commerce, Justice, State, the Judiciary, and Related Agencies appropriations. In those years, Congress separately appropriated funding for the U.S. Agency for International Development (USAID) and foreign aid within the Foreign Operations, Export Financing, and Related Programs appropriations. The 110th Congress aligned the two foreign affairs appropriations into the SFOPS legislation. SFOPS appropriations since FY2001 have included enduring appropriations (ongoing or base funding), emergency supplemental appropriations, and Overseas Contingency Operations (OCO) appropriations. Total SFOPS funding levels in both current and constant dollars show a general upward trend, with FY2004 as the peak largely as a result of emergency supplemental appropriations for Iraq Relief and Reconstruction Funds. When adjusted for inflation, annual foreign affairs appropriations have yet to surpass the FY2004 peak. The Budget Control Act (BCA) of 2011 and the Bipartisan Budget Acts (BBA) of 2015 and 2018 appear to have had an impact on both enduring and OCO funding levels. The legislative history of SFOPS appropriations shows that nearly all foreign affairs appropriations measures within the past 25 years were passed within omnibus, consolidated, or full-year continuing resolutions, rather than in stand-alone bills. Moreover, many appropriations were passed after the start of the new fiscal year, at times more than half way into the new fiscal year. In many fiscal years, SFOPS appropriations included emergency supplemental funding or, since FY2012, OCO funding.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers programs to support small businesses, including loan guaranty programs to encourage lenders to provide loans to small businesses \"that might not otherwise obtain financing on reasonable terms and conditions.\" The SBA's 7(a) loan guaranty program is considered the agency's flagship loan program. Its name is derived from Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorizes the SBA to provide and guarantee business loans to American small businesses. The SBA also administers several 7(a) subprograms that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress, Export Express, and Community Advantage Pilot programs (see the Appendix for additional details). Although these subprograms have their own distinguishing eligibility requirements, terms, and benefits, they operate under the 7(a) program's authorization. Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. Specific uses include to acquire land (by purchase or lease); improve a site (e.g., grading, streets, parking lots, and landscaping); purchase, convert, expand, or renovate one or more existing buildings; construct one or more new buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies, and raw materials; finance working capital; and refinance certain outstanding debts. In FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25.4 billion. The average approved 7(a) loan amount was $420,401. As will be discussed, the total number and amount of SBA 7(a) loans approved (and actually disbursed) declined in FY2008 and FY2009, increased during FY2010 and FY2011, declined somewhat in FY2012, and have increased since then. Historically, one of the justifications presented for funding the SBA's loan guaranty programs has been that small businesses can be at a disadvantage, compared with other businesses, when trying to obtain access to sufficient capital and credit. Congressional interest in the 7(a) loan program has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to grow and create jobs. Some Members of Congress have argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation. This report discusses the rationale provided for the 7(a) program; the program's borrower and lender eligibility standards and program requirements; and program statistics, including loan volume, loss rates, use of the proceeds, borrower satisfaction, and borrower demographics. It also examines issues raised concerning the SBA's administration of the 7(a) program, including the oversight of 7(a) lenders and the program's lack of outcome-based performance measures. This report also surveys congressional and presidential actions taken in recent years to help small businesses gain greater access to capital. For example, during the 111 th Congress P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided the SBA an additional $730 million, including $375 million to temporarily subsidize the 7(a) and 504/Certified Development Companies (504/CDC) loan guaranty programs' fees ($299 million) and to temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% ($76 million). P.L. 111-240 , the Small Business Jobs Act of 2010, provided $505 million (plus $5 million for administrative expenses) to extend the fee subsidies and 90% loan guaranty percentage through December 31, 2010; increased the 7(a) program's gross loan limit from $2 million to $5 million; and established an alternative size standard for the 7(a) and 504/CDC loan programs to enable more small businesses to qualify for assistance. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue the fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted (which occurred on January 3, 2011). During the 112 th Congress, several bills were introduced to expand the 7(a) program: S. 1828 , a bill to increase small business lending (and for other purposes), would have reinstated for one year following the date of its enactment the fee subsidies for the 7(a) and 504/CDC loan guaranty programs and the 90% loan guaranty percentage for the 7(a) program, which were originally authorized by ARRA. H.R. 2936 , the Small Business Administration Express Loan Extension Act of 2011, would have extended a one-year increase in the maximum loan amount for the SBAExpress program from $350,000 to $1 million for an additional year. That temporary increase was authorized by P.L. 111-240 and expired on September 27, 2011. S. 532 , the Patriot Express Authorization Act of 2011, would have provided statutory authorization for the Patriot Express Pilot Program and increased its loan guaranty percentages and its maximum loan amount from $500,000 to $1 million. The Patriot Express Pilot Program was subsequently discontinued by the SBA on December 31, 2013. During the 113 th Congress, the SBA waived the up-front, one-time loan guaranty fee and ongoing servicing fee for 7(a) loans of $150,000 or less approved in FY2014 and FY2015 as a means to encourage the demand for smaller 7(a) loans. H.R. 2462 , the Small Business Opportunity Acceleration Act of 2013, would have made the fee waiver for smaller 7(a) loans permanent. waived the up-front, one-time loan guaranty fee for a loan to a veteran or to a veteran's spouse under the SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015 (called the SBA Veterans Advantage Program). waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 up to and including $5 million in FY2015. In addition, P.L. 113-235 , the Consolidated and Further Continuing Appropriations Act, 2015, provided statutory authorization for the Veterans Advantage fee waiver in FY2015. During the 114 th Congress, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of $150,000 or less approved in FY2016 and FY2017 as a means to encourage the demand for smaller 7(a) loans. waived the annual service fee for 7(a) loans of $150,000 or less approved in FY2016 (increased to 0.546% in FY2017). waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 to $5 million in FY2016; and 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 to $500,000 in FY2017. In addition P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver under the SBAExpress program, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero. The SBA waived this fee in FY2016, FY2017, FY2018, and is waiving this fee in FY2019. The act also increased the 7(a) program's FY2015 authorization limit of $18.75 billion (on disbursements) to $23.5 billion. P.L. 114-113 , the Consolidated Appropriations Act, 2016, increased the 7(a) program's authorization limit to $26.5 billion in FY2016. P.L. 114-223 , the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, authorized the SBA to use funds from its business loan program account \"to accommodate increased demand for commitments for [7(a)] general business loans\" for the duration of the continuing resolution (initially December 9, 2016, later extended by P.L. 114-254 , the Further Continuing and Security Assistance Appropriations Act, 2017, to April 28, 2017). During the 115 th Congress, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of $125,000 or less approved in FY2018 as a means to encourage the demand for smaller 7(a) loans. waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $125,001 to $350,000 in FY2018. is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reducing the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019. In addition P.L. 115-31 , the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion in FY2017 and P.L. 115-141 , the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion in FY2018. P.L. 115-189 , the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit. The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year. P.L. 115-232 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019, included provisions originally in H.R. 5236 , the Main Street Employee Ownership Act of 2018, to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives. The act clarified that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership. The act also directs the SBA to create outreach programs and an interagency working group to promote lending to ESOPs and cooperatives. President Trump's FY2019 budget request included proposals to offset SBA business loan administrative costs by, among other provisions, (1) allowing the SBA to set the 7(a) program's annual servicing fee at rates below zero credit subsidy; (2) increasing the 7(a) loan program's FY2019 annual servicing fee's cap from 0.55% to 0.625%; and (3) increasing the FY2019 upfront loan guarantee fee on 7(a) loans over $1 million by 0.25%. The Trump Administration estimated that these changes would raise $93 million in additional revenue. The Trump Administration also requested that the 7(a) loan program's authorization limit be increased to $30.0 million in FY2019; that the SBA be allowed to further increase the 7(a) loan program's authorization amount in FY2019 by 15% under specified circumstances \"to better equip the SBA to meet peaks in demand while continuing to operate at zero subsidies\"; and that the SBAExpress program's loan limit be increased from $350,000 to $1 million. During the 116 th Congress P.L. 116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30.0 billion in FY2019. This report's Appendix provides a brief description of the 7(a) program's SBAExpress, Export Express, and Community Advantage programs. To be eligible for an SBA business loan, a small business applicant must be located in the United States; be a for-profit operating business (except for loans to eligible passive companies and businesses engaged in specified industries, such as insurance companies and financial institutions primarily engaged in lending); qualify as small under the SBA's size requirements; demonstrate a need for the desired credit; and be certified by a lender that the desired credit is unavailable to the applicant on reasonable terms and conditions from nonfederal sources without SBA assistance. To qualify for an SBA 7(a) loan, applicants must be creditworthy and able to reasonably assure repayment. SBA requires lenders to consider the strength of the business and the applicant's character, reputation, and credit history; experience and depth of management; past earnings, projected cash flow, and future prospects; ability to repay the loan with earnings from the business; sufficient invested equity to operate on a sound financial basis; potential for long-term success; nature and value of collateral (although inadequate collateral will not be the sole reason for denial of a loan request); and affiliates' effect on the applicant's repayment ability. Borrowers may use 7(a) loan proceeds to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. 7(a) loan proceeds may be used to acquire land (by purchase or lease); improve a site (e.g., grading, streets, parking lots, landscaping), including up to 5% for community improvements such as curbs and sidewalks; purchase one or more existing buildings; convert, expand, or renovate one or more existing buildings; construct one or more new buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies, and raw materials; finance working capital; and refinance certain outstanding debts. Borrowers are prohibited from using 7(a) loan proceeds to refinance existing debt where the lender is in a position to sustain a loss and the SBA would take over that loss through refinancing; effect a partial change of business ownership or a change that will not benefit the business; permit the reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business's continuance until the loan supported by the SBA is disbursed; repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow; or pay for a nonsound business purpose. As mentioned previously, P.L. 111-240 increased the 7(a) program's maximum gross loan amount for any one 7(a) loan from $2 million to $5 million (up to $3.75 million maximum guaranty). In FY2018, the average approved 7(a) loan amount was $420,401, and about 36% of all 7(a) loans exceeded $2 million. A 7(a) loan is required to have the shortest appropriate term, depending upon the borrower's ability to repay. The maximum term is 10 years, unless the loan finances or refinances real estate or equipment with a useful life exceeding 10 years. In that case, the loan term can be up to 25 years, including extensions. Lenders are allowed to charge borrowers \"a reasonable fixed interest rate\" or, with the SBA's approval, a variable interest rate. The SBA uses a multistep formula to determine the maximum allowable fixed interest rate for all 7(a) loans (with the exception of the Export Working Capital Program and Community Advantage loans) and periodically publishes that rate and the maximum allowable variable interest rate in the Federal Register . The maximum allowable fixed interest rates in February 2019 are 13.50% for 7(a) loans of $25,000 or less; 12.50% for loans over $25,000 but not exceeding $50,000; 11.50% for loans over $50,000 up to and including $250,000; and 10.50% loans greater than $250,000. The 7(a) program's maximum allowable variable interest rate may be pegged to the lowest prime rate (5.50% in February 2019), the 30-day LIBOR rate plus 300 basis points (5.51% in February 2019), or the SBA optional peg rate (3.13% in the second quarter of FY2019). The optional peg rate is a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan. For 7(a) loans of $25,000 or less, the SBA does not require lenders to take collateral. For 7(a) loans exceeding $25,000 to $350,000, the lender must follow the collateral policies and procedures that it has established and implemented for its similarly sized non-SBA-guaranteed commercial loans. However, the lender must, at a minimum, obtain a first lien on assets financed with loan proceeds, and a lien on all of the applicant's fixed assets, including real estate, up to the point that the loan is fully secured. For 7(a) loans exceeding $350,000, the SBA requires lenders to collateralize the loan to the maximum extent possible up to the loan amount. If business assets do not fully secure the loan, the lender must take available equity in the principal's personal real estate (residential and investment) as collateral. 7(a) loans are considered \"fully secured\" if the lender has taken security interests in all available fixed assets with a combined \"net book value\" up to the loan amount. The SBA directs lenders to not decline a loan solely on the basis of inadequate collateral because \"one of the primary reasons lenders use the SBA-guaranteed program is for those Applicants that demonstrate repayment ability but lack adequate collateral to repay the loan in full in the event of a default.\" Lenders must have a continuing ability to evaluate, process, close, disburse, service, and liquidate small business loans; be open to the public for the making of such loans (and not be a financing subsidiary, engaged primarily in financing the operations of an affiliate); have continuing good character and reputation; and be supervised and examined by a state or federal regulatory authority, satisfactory to the SBA. They must also maintain satisfactory performance, as determined by the SBA through on-site review/examination assessments, historical performance measures (such as default rate, purchase rate, and loss rate), and loan volume to the extent that it affects performance measures. In FY2017, 1,978 lenders provided 7(a) loans. The SBA started the Preferred Lenders Program (PLP) on March 1, 1983, initially on a pilot basis. It is designed to streamline the procedures necessary to provide financial assistance to small businesses by delegating the final credit decision and most servicing and liquidation authority and responsibility to carefully selected PLP lenders. PLP loan approvals are subject only to a brief eligibility review and the assignment of a loan number by SBA. PLP lenders draft the SBA Authorization (of loan guaranty approval) without the SBA's review, and execute it on behalf of the SBA. In FY2018, PLP lenders approved 26,497 7(a) loans (43.9% of all 7(a) loans), amounting to $18.8 billion (74.2% of the total amount approved). PLP lenders must comply with all of the SBA's business loan eligibility requirements, credit policies, and procedures. The PLP lender is required to stay informed on, and apply, all of the SBA's loan program requirements. They must also complete and retain in the lender's file all forms and documents required of standard 7(a) loan packages. Borrowers submit applications for a 7(a) business loan to private lenders. The lender reviews the application and decides if it merits a loan on its own or if it has some weaknesses which, in the lender's opinion, do not meet standard, conventional underwriting guidelines and require additional support in the form of an SBA guaranty. The SBA guaranty assures the lender that if the borrower does not repay the loan and the lender has adhered to all applicable regulations concerning the loan, the SBA will reimburse the lender for its loss, up to the percentage of the SBA's guaranty. The small business borrowing the money remains obligated for the full amount due. If the lender determines that it is willing to provide the loan, but only with an SBA guaranty, it submits the application for approval to the SBA's Loan Guaranty Processing Center (LGPC) through the SBA's E-Tran (Electronic Loan Processing/Servicing) website (which is available through SBA One, the SBA's automated lending platform) or, if attachments to the application are too large for E-Tran, by secured electronic file transfer. The LGPC has two physical locations: Citrus Heights, CA, and Hazard, KY. This center has responsibility for processing 7(a) loan guaranty applications for lenders who do not have delegated authority to make 7(a) loans without the SBA's final approval. The SBA has authorized PLP and express lenders to make credit decisions without SBA review prior to loan approval. However, the PLP and express lender's analysis is subject to the SBA's review and determination of adequacy when the lender requests the SBA to purchase its guaranty and when the SBA is conducting a review of the lender. As an additional safeguard against the potential for loan defaults, the SBA now requires all non-express 7(a) loans of $350,000 or less to be SBA credit scored through E-Tran prior to submission/approval. If the credit score is below the minimum set by the SBA (currently 140 for 7(a) loans of $350,000 or less, including Community Advantage loans), the loan must be submitted to the SBA for approval with a full credit write-up for consideration. The loan cannot be processed under delegated authority. If the credit score is acceptable to the SBA, the lender is a PLP lender, and the loan is eligible to be processed under the PLP lender's delegated authority, the lender will receive an SBA loan number indicating that the loan is approved. The PLP lender's documentation, including underwriting, closing, and servicing, must be maintained in their files, and can be reviewed by the SBA at any time. If the lender is not a PLP lender or if the loan is not eligible to be submitted under the PLP lender's delegated authority, the lender must refer the loan to the LGPC for review. The application materials required for a SBA guaranty vary depending on the size of the loan ($350,000 or less versus exceeding $350,000) and the method of processing used by the lender (standard versus expedited/express). The following SBA documentation is required for all 7(a) standard loans of $350,000 or less: Form 191 9: Borrower Information Form . SBA form 1919 provides information about the borrower (name, name of business, social security number, date and place of birth, gender, race, veteran, etc.); the loan request; any indebtedness; the principals and affiliates; current or previous government financing; the applicant's eligibility (e.g., criminal information, citizenship status); the loan's eligibility for delegated or expedited processing (e.g., the borrower is not more than 60 days delinquent in child support payments, not proposed or presently excluded from participation in this transaction by any federal department or agency, has no potential for a conflict of interest due to an owner being a current or former SBA employee, a Member of Congress, or a SCORE volunteer); and, among other disclosures, the firm's existing number of employees, the number of jobs to be created as a result of the loan, and the number of jobs that will be retained as a result of the loan that would have otherwise been lost. Form 912 : Statement of Personal History . SBA form 912 is required if the borrower reports on Form 1919 an arrest in the past six months for a criminal offense or had ever been convicted, plead guilty, plead nolo contendere, been placed on pretrial diversion, or been placed on any form of parole or probation (including probation before judgment) of any criminal offense. Form 912 requires the borrower to furnish details concerning his or her offense(s) and authorizes the SBA's Office of Inspector General to request criminal record information about the applicant from criminal justice agencies for determining program eligibility. It must be dated within 90 days of the application's submission to the SBA. Form 159 : Fee Disclosure and Compensation Agreement . SBA form 159 is required if the borrower reports on Form 1919 that he or she used (or intends to use) a packager, broker, accountant, lawyer, etc. to assist in preparing the loan application or any related materials. SBA form 159 is also required if the lender retains the services of a packager, broker, accountant, lawyer, etc. to assist in preparing the loan application or any related materials. Form 159 provides identifying information about the packager, broker, accountant, lawyer, etc. and the fees paid to any such person. Form 601 : Agreement of Compliance (prohibiting discrimination). SBA form 601 is required if the borrower reports on Form 1919 that more than $10,000 of the loan proceeds will be used for construction. Form 601 certifies that the borrower will cooperate actively in obtaining compliance with Executive Order 11246, which prohibits discrimination on the basis of race, color, religion, sex, or national origin and requires affirmative action to ensure equality of opportunity in all aspects of employment related to federally assisted construction projects in excess of $10,000. Form 1920 : Lenders Application for Guaranty for all 7(a) Programs . SBA form 1920 provides identifying information about the lender; the loan type (standard, SBAExpress, Export Express, etc.); loan terms; use of proceeds; the business's size and information about affiliates, if any; the applicant's character; if credit is reasonably available elsewhere; the type of business; potential conflicts of interest; and other information such the number of jobs created or retained. PLP lenders complete the form and retain it in the loan file. Other lenders must submit this form electronically to the LGPC. Verification of Alien Status . Documentation of the U.S. Citizenship and Immigration Services (USCIS) status of each alien is required prior to submission of the application to the SBA. Lender's Credit Memo randum . For loans up to and including $350,000, the Lender's Credit Memorandum includes a brief description of the history of the business and its management; the debt service coverage ratio (net operating income compared to total debt service must be at least 1:1); statement that the lender has reconciled financial data (including seller's financial data) against IRS transcripts; an owner/guarantor analysis (including personal financial condition); lender's discussion of life insurance requirements; explanation and justification for any refinancing; analysis of credit, including lender's rationale for recommending approval; for a change of ownership, discussion/analysis of business valuation and how the change benefits the business; discussion of any liens, judgments, or bankruptcy filings; and discussion of any other relevant information. For loans exceeding $350,000, the Lender's Credit Memorandum must also include an analysis of collateral and a financial analysis which includes an analysis of the historical financial statements; defining assumptions supporting projected cash flow; and, when used, spread of pro forma balance sheet, ratio calculations, and working capital analysis. Cash Flow Projections . A projection of the borrower's cash flow, month-by-month for one year, is required for all new businesses, and when otherwise applicable. The following forms and documentation are also required for 7(a) standard loans exceeding $350,000: Form 413 : Personal Financial Statement . SBA form 413 provides detailed information concerning the applicant's assets and liabilities and must be dated within 90 days of submission to the SBA, on all owners of 20% or more (including the assets of the owner's spouse and any minor children), and proposed guarantors. Lenders may substitute their own Personal Financial Statement form. Form 1846 : Statement Regarding Lobbying . SBA Form 1846 must be signed and dated by lender. It indicates that if any funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an officer or employee of a Member of Congress in connection with this commitment, the lender will complete and submit a Standard Form LLL \"Disclosure of Lobbying Activities.\" A copy of Internal Revenue Service (IRS) Form 4506-T, Request for Copy of Tax Return . Lenders must identify the date IRS Form 4506-T was sent to the IRS. For nondelegated lenders, verification of IRS Form 4506-T is required prior to submission of the application to the SBA. For PLP and express lenders, verification of IRS Form 4506-T is required prior the first disbursement. Business Financial Statements or tax returns dated within 180 days of the application's submission to the SBA, consisting of (1) year-end balance sheets for the last three years, (2) year-end profit and loss statements for the last three years, (3) reconciliation of net worth, (4) interim balance sheet, and (5) interim profit and loss statements. Affiliate and Subsidiary Financial Statements or tax returns dated within 180 days of the application's submission to the SBA, consisting of (1) year-end balance sheets for the last three years, (2) year-end profit and loss statements for the last three years, (3) reconciliation of net worth, (4) interim balance sheet, and (5) interim profit and loss statements. A copy of the Le ase Agreement , if applicable. A detailed Schedule of C ollateral . A detailed List of M&E (machinery and equipment) being purchased with SBA loan proceeds, including cost quotes. If real estate is to be purchased with the loan proceeds, a Real Estate Appraisal , Environmental Investigation Report questionnaire, a cost breakdown, and copy of any Real Estate Purchase Agreements . If purchasing an existing business with loan proceeds, a (1) copy of buy-sell agreement, (2) copy of business valuation, (3) pro forma balance sheet for the business being purchased as of the date of transfer, (4) copy of the seller's financial statements for the last three complete fiscal years or for the number of years in business if less than three years, (5) interim statements no older than 180 days from date of submission to the SBA, and (6) if the seller's financial statements are not available, the seller must provide an alternate source of verifying revenues. An explanation of the type and source of applicant's equity injection. Proper evidence of a borrower's equity injection may include the copy of a check together with proof it was processed, or a copy of an escrow settlement sheet with a bank account statement showing the injection into the business prior to disbursement. A promissory note, \"gift letter,\" or financial statement is generally not sufficient evidence. To offset its costs, the SBA is authorized to charge lenders an up-front, one-time guaranty fee and an annual, ongoing service fee for each 7(a) loan approved and disbursed. The SBA's fees vary depending on loan amount and loan maturity. The maximum guaranty fee for 7(a) loans with maturities exceeding 12 months is set by statute and varies depending on the loan amount. The fee is a percentage of the SBA guaranteed portion of the loan. On short-term loans (maturities of less than 12 months), the lender must pay the guaranty fee to the SBA electronically through www.pay.gov within 10 days from the date the SBA loan number is assigned. If the fee is not received within the specified time frame, the SBA will cancel the guaranty. On loans with maturities in excess of 12 months, the lender must pay the guaranty fee to the SBA within 90 days of the date of loan approval. For short-term loans, the lender may charge the guaranty fee to the borrower only after the lender has paid the guaranty fee. For loans with maturities in excess of 12 months, the lender may charge the guaranty fee to the borrower after initial disbursement. Lenders are permitted to retain 25% of the guaranty fee on loans with a gross amount of $150,000 or less. The annual service fee cannot exceed 0.55% of the outstanding balance of the SBA's share of the loan and is required to be no more than the \"rate necessary to reduce to zero the cost to the Administration\" of making guaranties. The lender's annual service fee to the SBA cannot be charged to the borrower. In an effort to assist small business owners, the SBA waived its annual service fee for all 7(a) loans of $150,000 or less approved from FY2014 through FY2016 (the annual service fee for other small businesses was 0.52% in FY2014, 0.519% in FY2015, and 0.473% in FY2016); is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone in FY2019 (the annual service fee for other small businesses is 0.55% in FY2019); waived the up-front, one-time guaranty fee for all 7(a) loans of $150,000 or less approved from FY2014 through FY2017; waived the up-front, one-time guaranty fee for all 7(a) loans of $125,000 or less approved in FY2018; and is reducing the up-front one-time guaranty fee for loans made small businesses located in a rural area or a HUBZone from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019. Table 1 shows the annual service fee and guaranty fee for 7(a) loans in FY2019. The annual service fee is a percentage of the outstanding balance of the SBA's share of the loan. The guaranty fee is a percentage of the SBA guaranteed portion of the loan. As mentioned previously, the SBA waived its up-front, one-time guaranty fee for all veteran loans under the 7(a) SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015. P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, made this fee waiver permanent, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero. The SBA waived this fee in FY2016, FY2017, and FY2018 and is waiving it in FY2019. The SBA also waived 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans of $150,001 to $5 million for veterans in FY2015 and FY2016; 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans of $150,001 to $500,000 for veterans in FY2017; and 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans of $125,001 to $350,000 for veterans in FY2018. The Obama Administration argued that fee waivers for 7(a) loans of $150,000 or less were necessary because the demand for smaller 7(a) loans had fallen and the waiver reduction \"can be achieved with zero credit subsidy appropriations\" because the \"annual fees for larger 7(a) loans will cover the cost for those smaller loans.\" The Administration also contended that waiving the fees on smaller SBA loans would \"promote lending to small businesses that face the most constraints on credit access.\" For context, 7(a) loans of $150,000 or less accounted for about 11.8% of the total amount of 7(a) loan approvals in FY2010 ($1.46 billion of $12.41 billion); 8.3% in FY2011 ($1.63 billion of $19.64 billion); 9.5% in FY2012 ($1.44 billion of $15.15 billion); 8.1% in FY2013 ($1.45 billion of $17.87 billion); 9.7% in FY2014 ($1.86 billion of $19.19 billion); 9.7% in FY2015 ($2.28 billion of $23.58 billion); 9.4% in FY2016 ($2.75 billion of $24.13 billion), and 9.2% in FY2017 ($2.33 billion of $25.45 billion). The SBA also announced that eliminating guaranty fees for 7(a) loans of $150,000 or less ($125,000 or less in FY2018) was part of its broader effort to \"reduce barriers, attract new lenders, grow loan volumes of existing lenders and improve access to capital for small businesses and entrepreneurs.\" Some in Congress questioned whether it is appropriate to require borrowers of larger 7(a) loans to, in effect, subsidize borrowers of smaller 7(a) loans, who might be direct competitors. They have suggested that it might be more appropriate to reduce fees across-the-board without regard to loan size. The lender may charge an applicant \"reasonable fees\" customary for similar lenders in the geographic area where the loan is being made for packaging and other services. The lender must advise the applicant in writing that the applicant is not required to obtain or pay for unwanted services. These fees are subject to SBA review at any time, and the lender must refund any such fee considered unreasonable by the SBA. The lender may also charge an applicant an additional fee if, subject to prior written SBA approval, all or part of a loan will have extraordinary servicing needs. The additional fee cannot exceed 2% per year on the outstanding balance of the part requiring special servicing (e.g., field inspections for construction projects). The lender may also collect from the applicant necessary out-of-pocket expenses, including filing or recording fees, photocopying, delivery charges, collateral appraisals, environmental impact reports that are obtained in compliance with SBA policy, and other direct charges related to loan closing. The lender is prohibited from requiring the borrower to pay any fees for goods and services, including insurance, as a condition for obtaining an SBA guaranteed loan, and from imposing on SBA loan applicants processing fees, origination fees, application fees, points, brokerage fees, bonus points, and referral or similar fees. The lender is also allowed to charge the borrower a late payment fee not to exceed 5% of the regular loan payment when the borrower is more than 10 days delinquent on its regularly scheduled payment. The lender may not charge a fee for full or partial prepayment of a loan. For loans with a maturity of 15 years or longer, the borrower must pay to the SBA a subsidy recoupment fee when the borrower voluntarily prepays 25% or more of its loan in any one year during the first three years after first disbursement. The fee is 5% of the prepayment amount during the first year, 3% in the second year, and 1% in the third year. As shown in Table 2 , the total number and amount of SBA 7(a) loans approved (before and after cancellations and modifications) declined in FY2008 and FY2009, increased during FY2010 and FY2011, declined somewhat in FY2012, and have increased since then. The number and amount of 7(a) loans approved annually is higher than the number and amount of loans disbursed because some borrowers decide not to accept the loan for a variety of reasons, such as financing was secured elsewhere, the funds are no longer needed, or there was a change in business ownership. The SBA attributed the decreased number and amount of 7(a) loans approved in FY2008 and FY2009 to a reduction in the demand for small business loans resulting from the economic uncertainty of the recession (December 2007-June 2009) and to tightened loan standards imposed by lenders concerned about the possibility of higher loan default rates resulting from the economic slowdown. The SBA attributed the increased number of loans approved in FY2010 and FY2011 to legislation that provided funding to temporarily reduce the 7(a) program's loan fees and temporarily increase the 7(a) program's loan guaranty percentage to 90% for all standard 7(a) loans from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000. The fee subsidies and 90% loan guaranty percentage were in place during most of FY2010 and the first quarter of FY2011. The increased number and amount of 7(a) loans approved since FY2012 are generally attributed to improving economic conditions. Table 2 also provides the 7(a) program's unpaid principal balance by fiscal year. Precise measurements of the small business credit market are not available. However, the SBA has estimated that the small business credit market (outstanding bank loans of $1 million or less, plus credit extended by finance companies and other sources) is roughly $1.2 trillion. The 7(a) program's unpaid principal balance of $92.41 billion at the end of FY2018 was about 7.7% of that amount. One of the SBA's goals is to achieve a zero subsidy rate for its loan guaranty programs. A zero subsidy rate occurs when the SBA's loan guaranty programs generate sufficient revenue through fee collections and recoveries of collateral on purchased (defaulted) loans to not require appropriations to issue new loan guarantees. From 2005 to 2009, the SBA did not request appropriations to subsidize the cost of any of its loan guaranty programs, including the 7(a) program. However, as indicated in Table 3 , loan guaranty fees and loan liquidation recoveries did not generate enough revenue to cover loan losses in the 7(a) loan guaranty program from FY2010 through FY2013 and in the 504/CDC loan guaranty program from FY2012 through FY2015. Appropriations were provided to address the shortfalls. Congress did not approve appropriations for 7(a) and 504/CDC loan guaranty program credit subsidies for FY2016 through FY2019 because the President's budget request indicated that those programs did not require appropriations for credit subsidies in those fiscal years. In FY2017, the SBA spent $82.2 million on the 7(a) program for administrative expenses, including $63.0 million for loan making, $4.1 million for loan servicing, and $15.1 million for loan liquidation. Also, the SBA spent $36.9 million on lender oversight, including oversight of 7(a) lenders. The SBA anticipated that 7(a) program administrative expenses will be about $82.2 million in FY2018 and $84.5 million in FY2019. In addition, the SBA anticipated that it will spend about $36.9 million in FY2018 and $36.6 million in FY2019 for lender oversight of the SBA's various lending programs. In FY2017, borrowers used 7(a) loan proceeds to purchase land or make land improvements (26.62%); purchase a business (17.06%); finance working capital (15.59%); pay off loans, accounts payable or notes payable (13.23%); construct new buildings (6.06%); purchase equipment (5.76%); make leasehold improvements (3.25%); expand or renovate current buildings (2.39%); refinance existing debt (1.40%); and cover other expenses (8.64%). In 2008, the Urban Institute released the results of an SBA-commissioned study of the SBA's loan guaranty programs. As part of its analysis, the Urban Institute surveyed a random sample of SBA loan guaranty borrowers. The survey indicated that most of the 7(a) borrowers responding to the survey rated their overall satisfaction with their 7(a) loan and loan terms as either excellent (18%) or good (50%). One out of every five 7(a) borrowers (20%) rated their overall satisfaction with their 7(a) loan and loan terms as fair, and 6% rated their overall satisfaction with their 7(a) loan and loan terms as poor (7% reported don't know or did not respond). In addition, 90% of the survey's respondents reported that the 7(a) loan was either very important (62%) or somewhat important (28%) to their business success (2% reported somewhat unimportant, 3% reported very unimportant, and 4% reported don't know or did not respond). The Urban Institute found that about 9.9% of conventional small business loans are issued to minority-owned small businesses, and about 16% of conventional small business loans are issued to women-owned businesses. In FY2018, 32.8% of 7(a) loan approvals ($8.32 billion of $25.37 billion) were to minority-owned businesses (23.0% Asian, 6.0% Hispanic, 3.1% African-American, and 0.7% American Indian) and 13.6% ($3.46 billion of $25.37 billion) were to women-owned businesses. From its comparative analysis of conventional small business loans and the SBA's loan guaranty programs, the Urban Institute concluded the following: SBA's loan programs are designed to enable private lenders to make loans to creditworthy borrowers who would otherwise not be able to qualify for a loan. As a result, there should be differences in the types of borrowers and loan terms associated with SBA-guaranteed and conventional small business loans. Our comparative analysis shows such differences. Overall, loans under the 7(a) and 504 programs were more likely to be made to minority-owned, women-owned, and start-up businesses (firms that have historically faced capital gaps) as compared to conventional small business loans. Moreover, the average amounts for loans made under the 7(a) and 504 programs to these types of firms were substantially greater than conventional small business loans to such firms. These findings suggest that the 7(a) and 504 programs are being used by lenders in a manner that is consistent with SBA's objective of making credit available to firms that face a capital opportunity gap. Congressional interest in the 7(a) loan program has increased in recent years largely because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery. During the 110 th and 111 th Congresses, several laws were enacted to increase the supply and demand for capital for both large and small businesses. For example, in 2008, Congress adopted P.L. 110-343 , the Emergency Economic Stabilization Act of 2008, which authorized the Troubled Asset Relief Program (TARP). Under TARP, the U.S. Department of the Treasury was authorized to purchase or insure up to $700 billion in troubled assets, including small business loans, from banks and other financial institutions. The law's intent was \"to restore liquidity and stability to the financial system of the United States.\" P.L. 111-203 , the Dodd-Frank Wall Street Reform and Consumer Protection Act, reduced total TARP purchase authority from $700 billion to $475 billion. The Department of the Treasury's authority to make new financial commitments under TARP ended on October 3, 2010. The Department of the Treasury has disbursed approximately $430 billion in TARP funds, including $370 million to purchase SBA 7(a) loan guaranty program securities. In addition, as mentioned previously, in 2009, ARRA provided an additional $730 million for SBA programs, including $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans. Congress subsequently provided another $265 million, and authorized the SBA to reprogram another $40 million, to extend the fee reductions and loan modification through May 31, 2010, and the Small Business Jobs Act of 2010 provided another $505 million (plus $5 million for administrative expenses) to extend the fee reductions and loan modification from September 27, 2010, through December 31, 2010. Also, P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the use of any funding remaining from the Small Business Jobs Act of 2010 to extend the fee subsidies and 90% maximum loan guaranty percentage through March 4, 2011, or until the available funding was exhausted. Funding for these purposes was exhausted on January 3, 2011. The Obama Administration argued that TARP and the additional funding for the SBA's loan guaranty programs helped to improve the small business lending environment and supported \"the retention and creation of hundreds of thousands of jobs.\" Critics argued that small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint are the best means to assist small business economic growth and job creation. Over the years, the SBA's Office of Inspector General (OIG) and the U.S. Government Accountability Office (GAO) have independently reviewed the SBA's administration of the SBA's loan guaranty programs. Although improvements have been noted, both agencies have reported deficiencies in the SBA's administration of its loan guaranty programs that they argue need to be addressed, including issues involving the oversight of 7(a) lenders and the lack of outcome-based performance measures. On December 1, 2000, the OIG released its FY2001 list of the most serious management challenges facing the SBA and included, for the first time, the oversight of SBA lenders. Since then, the OIG has determined that the SBA has made significant progress in improving its oversight of SBA lenders. For example The SBA established an Office of Lender Oversight (renamed the Office of Credit Risk Management in 2007), led by an Associate Administrator, which, in October 2000, drafted a strategic plan to serve as a basis for developing a Standard Operating Procedure (SOP) for lender oversight and, among other activities, initiated \"steps to develop and implement a comprehensive loan monitoring system to evaluate lender performance. The system will collect data on lenders such as delinquency default rates, liquidations, loan payments, and loan originations.\" In 2004, the SBA's National Guaranty Purchase Center developed a quality control plan \"to review the quality of the guaranty purchase process.\" In 2006, the SBA issued an SOP that established procedures for on-site, risk-based lender reviews and safety and soundness examinations for 7(a) lenders and Certified Development Companies (CDCs) participating the SBA's 504/CDC loan guaranty program. In 2007, the SBA completed the centralization of all 7(a) loan processing activities and, with very limited exception, ended loan making, servicing, liquidation, and guaranty purchase activity at district offices. In 2008, the SBA issued an SOP for 7(a) lender oversight which included uniform policies and procedures for the evaluation of lender performance and the SBA's Office of Financial Program Operations (OFPO) began designing \"a comprehensive quality control program across all of its centers.\" Previously, quality control was conducted within each loan center (Standard 7(a) Loan Guaranty Processing Center, Commercial Loan Service Center, and National Guaranty Purchase Center) \"at various levels of sophistication.\" The SBA issued an interim final rule in the Federal Register on December 1, 2008, incorporating the SBA's risk-based lender oversight program into the SBA's regulations. In 2010, the SBA's OFPO established its agency-wide quality control program, which is designed to improve service and \"reduce waste, fraud, and abuse\" by ensuring \"that centers accurately and consistently apply statutory, regulatory, and procedural loan program requirements.\" The SBA also developed a \"risk-based, off-site analysis of lending partners through its Loan/Lender Monitoring System (L/LMS), a state-of-the-art portfolio monitoring system that incorporates credit scoring metrics for portfolio management purposes.\" In 2012-2013, the SBA \"(1) developed risk profiles and lender performance thresholds, (2) developed a select analytical review process to allow for virtual risk-based reviews, (3) updated its lender risk rating model to better stratify and predict risk, and (4) conducted test reviews under the new risk-based review protocol.\" In 2013-2014, the SBA \"improved its monitoring and verification of corrective actions by lenders by: (1) developing corrective action assessment procedures, (2) finalizing a system to facilitate the corrective action process, and (3) populating the system with lender oversight results requiring corrective action.\" In 2015, the SBA's Office of Credit Risk Management (OCRM) \"engaged contractor support to expand on its corrective action follow-up process. Additionally, OCRM issued its FY2015 Risk Management Oversight Plan, which included plans to conduct 170 corrective action reviews between 7(a) and 504 lenders.\" In 2016, OCRM reported that it conducted 147 corrective action follow-up assessments, established performance measures and risk mitigation goals for the SBA's entire lending portfolio, and \"conducted portfolio analyses of problem lenders with heavy concentrations in SBA 7(a) lending and sales on the secondary market.\" Despite these improvements, the OIG continues to list lender oversight as one of the most serious management challenges facing the SBA because it argues that several issues that it has identified in audits have not been fully addressed. Specifically, the OIG reports that the SBA needs to show that the portfolio risk management program is used to support risk based decisions, implement additional controls to mitigate risks, develop an effective method for tracking loan agents, and update regulations on loan agents. GAO has argued that the 7(a) program's performance measures (e.g., number of loans approved, loans funded, and firms assisted across the subgroups of small businesses) provide limited information about the impact of the loans on participating small businesses: The program's performance measures focus on indicators that are primarily output measures–for instance, they report on the number of loans approved and funded. But none of the measures looks at how well firms do after receiving 7(a) loans, so no information is available on outcomes. As a result, the current measures do not indicate how well the agency is meeting its strategic goal of helping small businesses succeed. The SBA's OIG has made a similar argument concerning the SBA's Microloan program's performance measures. Because the SBA uses similar program performance measures for its Microloan and 7(a) programs, the OIG's recommendations could also be applied to the SBA's 7(a) program. Specifically, as part of its audit of the SBA Microloan program's use of ARRA funds, the OIG found that the SBA's performance measures for the Microloan program are based on the number of microloans funded, the number of small businesses assisted, and program's loan loss rate. It argued that these \"performance metrics ... do not ensure the ultimate program beneficiaries, the microloan borrowers, are truly assisted by the program\" and \"without appropriate metrics, SBA cannot ensure the Microloan program is meeting policy goals.\" It noted that the SBA does not track the number of microloan borrowers who remain in business after receiving a microloan to measure the extent to which the loans contributed to the success of borrowers and does not determine the effect that technical training assistance may have on the success of microloan borrowers and their ability to repay loans. It recommended that the SBA \"develop additional performance metrics to measure the program's achievement in assisting microloan borrowers in establishing and maintaining successful small businesses.\" In its response to GAO's recommendation to develop additional performance measures for the 7(a) program, the SBA formed, in July 2014, an impact evaluation working group to develop a methodology for conducting impact evaluations of the agency's programs using administrative data sources residing at the SBA and in other federal agencies, such as the U.S. Census Bureau and the Bureau of Labor Statistics. Numerous SBA program offices participated in this working group and each office developed its own program evaluation methodology or established program evaluation frameworks. More recently, the SBA indicated in its FY2017 congressional budget justification document that although it \"continues to face barriers gathering outcome rich evaluation data with current restrictions in collecting personal identification information (PII) and business identification information (BII)\" it \"plans to further develop its analytical capabilities, enhance collaboration across its programs, provide evaluation-specific trainings, and broaden use of impact evaluations to support senior leaders and institutionalize the evidence-based process across programs.\" To encourage evidence-based evaluations across its programs, the SBA has created an annual Enterprise Learning Agenda designed to \"help program managers continue to build and use evidence and to foster an environment of continuous learning.\" As part of this agenda building process, the SBA identifies programs for evidence-based evaluation and undertakes both internal evaluations using available data or contracts with third parties to conduct the evaluations. Congress authorized several changes to the 7(a) program during the 111 th Congress in an effort to increase the number and amount of 7(a) loans. During the 111 th Congress, the Obama Administration supported congressional efforts to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90%. Congress subsequently provided nearly $1.1 billion to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all standard 7(a) loans. The Obama Administration also proposed the following modifications to several SBA programs, including the 7(a) program: increase the maximum loan size for 7(a) loans from $2 million to $5 million; increase the maximum loan size for the 504/CDC program from $2 million to $5 million for regular projects and from $4 million to $5.5 million for manufacturing projects; increase the maximum loan size for microloans to small business concerns from $35,000 to $50,000; increase the maximum loan limits for lenders in their first year of participation in the Microloan program, from $750,000 to $1 million, and from $3.5 million to $5 million in the subsequent years; temporarily increase the cap on SBAExpress loans from $350,000 to $1 million; and temporarily allow in FY2010 and FY2011, with an option to extend into FY2012, the refinancing of loans for owner-occupied commercial real estate that are within one year of maturity under the SBA's 504/CDC program. The Obama Administration argued that increasing the maximum loan limits for the 7(a), 504/CDC, Microloan, and SBAExpress programs would allow the SBA to \"support larger projects,\" which would \"allow the SBA to help America's small businesses drive long-term economic growth and the creation of jobs in communities across the country.\" The Administration also argued that increasing the maximum loan limits for these programs would be \"budget neutral\" over the long run and \"help improve the availability of smaller loans.\" Critics of the Obama Administration's proposals to increase the SBA's maximum loan limits argued that higher loan limits might increase the risk of defaults, resulting in higher guaranty fees or the need to provide the SBA additional funding, especially for the SBAExpress program, which has experienced somewhat higher default rates than other SBA loan guaranty programs. Others advocated a more modest increase in the maximum loan limits to ensure that the 7(a) program \"remains focused on startup and early-stage small firms, businesses that have historically encountered the greatest difficulties in accessing credit,\" and \"avoids making small borrowers carry a disproportionate share of the risk associated with larger loans.\" Others argued that creating a small business direct lending program within the SBA would reduce paperwork requirements and be more efficient in providing small businesses access to capital than modifying existing SBA programs that rely on private lenders to determine if they will issue the loans. Also, as mentioned previously, others argued that providing additional resources to the SBA or modifying the SBA's loan programs as a means to augment small business access to capital is ill-advised. In their view, the SBA has limited impact on small businesses' access to capital. They argued that the best means to assist small business economic growth and job creation is to focus on small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint. As mentioned previously, in 2009, ARRA provided an additional $730 million for SBA programs, including $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs ($299 million) and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans ($76 million). P.L. 111-240 provided $505 million (plus $5 million for administrative expenses) to extend the 7(a) program's 90% maximum loan guaranty percentage and 7(a) and 504/CDC loan guaranty programs' fee subsidies through December 31, 2010 (later extended to March 4, 2011), or until available funding was exhausted (which occurred on January 3, 2011). The act also made the following changes to the SBA's programs: increased the maximum loan size for 7(a) loans from $2 million to $5 million; temporarily increased for one year (through September 27, 2011) the cap on SBAExpress loans from $350,000 to $1 million; increased the maximum loan size for the 504/CDC loans from $1.5 million to $5 million for regular projects, from $2 million to $5 million for projects meeting one of the program's specified public policy goals, and from $4 million to $5.5 million for manufacturers; increased the maximum loan size for the Microloan program from $35,000 to $50,000; authorized the SBA to establish an alternative size standard for the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards and established an interim size standard of a maximum tangible net worth of not more than $15 million and an average net income after federal taxes (excluding any carryover losses) for the preceding two fiscal years of not more than $5 million; and allowed 504/CDC loans to be used to refinance up to $7.5 billion in short-term commercial real estate debt each fiscal year for two years after enactment (through September 27, 2012) into long-term fixed rate loans. The act also authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks to provide small business loans ($4 billion was issued), a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, and about $12 billion in tax relief for small businesses. It also contained revenue raising provisions to offset the act's cost and authorized a number of changes to other SBA loan and contracting programs. Congress did not approve any changes to the 7(a) program during the 112 th Congress. However, several bills were introduced during the 112 th Congress that would have changed the program. S. 1828 , a bill to increase small business lending, and for other purposes, was introduced on November 8, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship. The bill would have reinstated for a year following the date of its enactment the temporary fee subsidies for the 7(a) and 504/CDC loan guaranty programs and the 90% loan guaranty for standard 7(a) loans, which were originally authorized by ARRA and later extended by several laws, including the Small Business Jobs Act of 2010. H.R. 2936 , the Small Business Administration Express Loan Extension Act of 2011, introduced on September 15, 2011, and referred to the House Committee on Small Business, would have extended a one-year increase in the maximum loan amount for the SBAExpress program from $350,000 to $1 million for an additional year. The temporary increase in that program's maximum loan amount was authorized by P.L. 111-240 , the Small Business Jobs Act of 2010, and expired on September 27, 2011 (see Appendix ). S. 532 , the Patriot Express Authorization Act of 2011, introduced on March 9, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship, would have provided statutory authorization for the Patriot Express Pilot Program. This program was subsequently discontinued by the SBA on December 31, 2013. The bill would have increased the program's maximum loan amount from $500,000 to $1 million, and it would have increased the guaranty percentages from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to up to 85% of loans of $500,000 or less and up to 80% of loans exceeding $500,000. H.R. 2451 , the Strengthening Entrepreneurs' Economic Development Act of 2013, was introduced on June 20, 2013, and referred to the House Committee on Small Business. It would have authorized the SBA to make direct loans of up to $150,000 to businesses with fewer than 20 employees. It would have also required the SBA to assess, collect, and retain a fee with respect to the outstanding balance of the deferred participation share of each 7(a) loan in excess of $2 million that is no more than is necessary to reduce to zero the SBA's cost of making the loan. H.R. 2461 , the SBA Loan Paperwork Reduction Act of 2013, was introduced on June 20, 2013, and referred to the House Committee on Small Business. It would have provided statutory authorization for the Small Loan Advantage (SLA) pilot program. The SBA started that program on February 15, 2011. It provided a streamlined application process for 7(a) loans of up to $350,000 if the loan received an acceptable credit score from the SBA prior to the loan being submitted for processing. The SBA adopted the SLA application process as the model for processing all non-express 7(a) loans of $350,000 or less, effective January 1, 2014. As mentioned previously, the Obama Administration waived the up-front, one time loan guaranty fee and ongoing servicing fee for 7(a) loans of $150,000 or less approved in FY2014 (and later extended the fee waiver in FY2015 and FY2016). H.R. 2462 , the Small Business Opportunity Acceleration Act of 2013, introduced on June 20, 2013, and referred to the House Committee on Small Business, would have made the fee waiver permanent. Also, the Obama Administration waived the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015 (called the Veterans Advantage Program). S. 2143 , the Veterans Entrepreneurship Act, would have authorized this fee waiver and made it permanent. Also, P.L. 113-235 provided statutory authorization to waive the 7(a) SBAExpress program's guarantee fee for veterans (and their spouse) in FY2015. P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made permanent the waiver of the up-front, one-time loan guaranty fee for veterans (and their spouse) in the SBAExpress program beginning on or after October 1, 2015, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero. The act also increased the 7(a) program's authorization limit from $18.75 billion in FY2015 to $23.5 billion. On June 25, 2015, the SBA informed Congress that the 7(a) program \"is on track to hit its authorization ceiling of $18.75 billion well before the end of FY2015.\" The SBA indicated that \"our activity and trend analysis reveal a strong uptick that, if sustained, would exceed our lending authority ceiling by late August.\" If that were to occur, and in the absence of statutory authority to do otherwise, the SBA reported that it would have to suspend 7(a) loan making for the remainder of the fiscal year. The SBA requested an increase in the 7(a) loan program's authorization limit to $22.5 billion in FY2015. On July 23, 2015, citing \"unprecedented demand,\" the SBA suspended 7(a) program lending. The SBA indicated that it would continue to process loan applications \"up to the point of approval\" and then place approved loans \"into a queue awaiting the availability of program authority.\" Loans would be released \"once program authority became available due to Congressional action or as a result of cancellations of loans previously approved this fiscal year.\" Applications would then \"be funded in the order they were approved by SBA, with the exception that requests for increases to previously approved loans will be funded before applications for new loans.\" The SBA resumed 7(a) lending on July 28, 2015, following P.L. 114-38 's enactment. In addition to increasing the 7(a) program's authorization limit for FY2015, the act added requirements designed to ensure that SBA loans do not displace private sector loans (e.g., the SBA Administrator may not guarantee a 7(a) loan if the lender determines that the borrower is unable to obtain credit elsewhere solely because the liquidity of the lender depends upon the guarantied portion of the loan being sold on the secondary market, or if the sole purpose for requesting the guarantee is to allow the lender to exceed the lender's legal lending limit), and requires the SBA to report, on a quarterly basis, specified 7(a) program statistics to the House and Senate Committees on Appropriations and Small Business. These required statistics are designed to inform the committees of the SBA's pace of 7(a) lending, provide estimates concerning the date on which the program's authorization limit may be reached, and present information concerning early defaults and actions taken by the SBA to combat early defaults. As mentioned previously, P.L. 114-113 increased the 7(a) program's authorization limit from $23.5 billion in FY2015 to $26.5 billion for FY2016. In addition, P.L. 114-223 , the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, authorized the SBA to use funds from its business loan program account \"to accommodate increased demand for commitments for [7(a)] general business loans\" for the duration of the continuing resolution (initially December 9, 2016, later extended by P.L. 114-254 , the Further Continuing and Security Assistance Appropriations Act, 2017, to April 28, 2017). In a related development, S. 2496 , the Help Small Businesses Access Affordable Credit Act, introduced on February 2, 2016, would have authorized the SBA Administrator, with prior approval of the House and Senate Committees on Appropriations, to make loans in an amount equal to not more than 110% of the 7(a) program's authorization limit if the demand for 7(a) loans should exceed that limit. The Obama Administration also requested authorization to allow the SBA Administrator to continue to issue loans should the demand for 7(a) loans exceed the program's authorization limit. Also. S. 2992 , the Small Business Lending Oversight Act of 2016, would have required the Director of the SBA's Office of Credit Risk Management (OCRM) to impose penalties on 7(a) lenders who \"knowingly and repeatedly\" undertake specified activities; required the SBA to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; redefined the credit elsewhere requirement; authorized fees to be used to support OCRM operations; required the SBA to identify potential loan risks by lenders participating in the Preferred Lenders Program by requiring the SBA, at the end of each year, to \"calculate the percentage of loans in a lender's portfolio made without a contribution of borrower equity when the loan's purpose was to establish a new small business concern, to effectuate a change of small business ownership, or to purchase real estate\"; and, among other provisions, prohibited the SBA from approving any loan if its financing is more than 100% of project costs. Legislation was also introduced ( S. 2125 , the Small Business Lending and Economic Inequality Reduction Act of 2015) to provide permanent, statutory authorization for the Community Advantage Pilot program (see Appendix ). The SBA announced on December 28, 2015, that it was extending the Community Advantage Pilot program through March 31, 2020. It had been set to expire on March 15, 2017. Recognizing that 7(a) loan approvals during the first half of FY2017 were about 9% higher than during the first half of FY2016, Congress included a provision in P.L. 115-31 , the Consolidated Appropriations Act, 2017, that increased the 7(a) program's authorization limit to $27.5 billion in FY2017 from $26.5 billion in FY2016. Congress also approved legislation ( P.L. 115-141 , the Consolidated Appropriations Act, 2018) that increased the 7(a) program's authorization limit to $29.0 billion in FY2018. In addition, as mentioned earlier, P.L. 115-189 , the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit. The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year. Also, P.L. 115-232 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019, included provisions to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives. The act authorizes the SBA to make \"back-to-back\" loans to ESOPs to better align with industry practices (the loan proceeds must only be used to make a loan to a qualified employee trust); clarifies that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership. The act also directs the SBA to create outreach programs with Small Business Investment Companies and Microloan intermediaries to make their lending programs more accessible to all eligible ESOPs and cooperatives, an interagency working group to promote lending to ESOPs and cooperatives, and a Small Business Employee Ownership and Cooperatives Promotion Program, administered by Small Business Development Centers, to offer technical assistance and training to small businesses on the transition to employee ownership through cooperatives and ESOPs. Congress did not focus much attention on the Trump Administration's proposal in its FY2019 budget request to \"introduce counter-cyclical policies in SBA's business guaranty loan programs and update certain fees structures to offset $155 million in business loan administration.\" As mentioned earlier, the proposal included raising $93 million in additional revenue by allowing the SBA to set the 7(a) program's annual servicing fee at rates below zero credit subsidy; increasing the 7(a) loan program's FY2019 annual servicing fee's cap from 0.55% to 0.625%; and increasing the FY2019 upfront loan guarantee fee on 7(a) loans over $1 million by 0.25%. The Administration also requested that the 7(a) loan program's authorization limit be increased to $30.0 million in FY2019; that the SBA be allowed to further increase the 7(a) loan program's authorization amount in FY2019 by 15% under specified circumstances \"to better equip the SBA to meet peaks in demand while continuing to operate at zero subsidies;\" that the SBA be allowed to impose an annual fee, not to exceed 0.05% per year, of the outstanding balance on 7(a) secondary market trust certificates to help offset administrative costs; and that the SBAExpress program's loan limit be increased from $350,000 to $1 million. P.L. 116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30.0 billion in FY2019. The congressional debate concerning the SBA's 7(a) program during the 111 th Congress was not whether the federal government should act, but which federal policies would most likely enhance small businesses' access to capital and result in job retention and creation. As a general proposition, some Members of Congress argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs. Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation. In terms of specific program changes, increasing the 7(a) program's loan limit, extending the 7(a) program's temporary fee subsidies and 90% maximum loan guaranty percentage, and establishing an alternative size standard for the 7(a) program were all designed to achieve the same goal: to enhance job creation by increasing the ability of 7(a) borrowers to access credit at affordable rates. However, determining how specific changes in federal policy are most likely to enhance job creation is a challenging task. For example, a 2008 Urban Institute study concluded that differences in the term, interest rate, and amount of SBA financing were \"not significantly associated with increasing sales or employment among firms receiving SBA financing.\" The study also reported that the analysis accounted for less than 10% of the variation in firm performance. The Urban Institute suggested that local economic conditions, local zoning regulations, state and local tax rates, state and local business assistance programs, and the business owner's charisma or business acumen also \"may play a role in determining how well a business performs after receipt of SBA financing.\" As the Urban Institute study suggests, because many factors influence business success, measuring the 7(a) program's effect on job retention and creation is complicated. That task is made even more challenging by the absence of performance-oriented measures that could serve as a guide. Both GAO and the SBA's OIG have recommended that the SBA adopt outcome performance-oriented measures for its loan guaranty programs, such as tracking the number of borrowers who remain in business after receiving a loan to measure the extent to which the program contributed to their ability to stay in business. Other performance-oriented measures that Congress might also consider include requiring the SBA to survey 7(a) borrowers to measure the difficulty they experienced in obtaining a loan from the private sector and the extent to which the 7(a) loan or technical assistance received contributed to their ability to create jobs or expand their scope of operations. The 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress, Export Express, and Community Advantage programs. Lenders must be approved by the SBA for participation in these programs. SBAExpress Program The SBAExpress program was established as a pilot program by the SBA on February 27, 1995, and made permanent through legislation, subject to reauthorization, in 2004 ( P.L. 108-447 , the Consolidated Appropriations Act, 2005). The program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guaranty on loans. It provides a 50% loan guaranty on loan amounts up to $350,000. As shown in Table A-1 , the SBA approved 27,794 SBAExpress loans (46.1% of total 7(a) program loan approvals), totaling $1.98 billion (7.8% of total 7(a) program amount approvals) in FY2018. The program's higher loan amount in FY2011 was due, at least in part, to a provision in P.L. 111-240 , the Small Business Jobs Act of 2010, which temporarily increased the SBAExpress program's loan limit to $1 million for one year following enactment (through September 27, 2011). During the 112 th Congress, H.R. 2936 , the Small Business Administration Express Loan Extension Act of 2011, would have extended the SBAExpress program's higher loan limit for an additional year (through September 27, 2012). SBAExpress loan proceeds can be used for the same purposes as those of the 7(a) program (expansion, renovation, new construction, the purchase of land or buildings, the purchase of equipment, fixtures, and lease-hold improvements, working capital, to refinance debt for compelling reasons, seasonal line of credit, and inventory); except that participant debt restructure cannot exceed 50% of the project and may be used for revolving credit. The program's loan terms are the same as those of the 7(a) program (the loan maturity for working capital, machinery, and equipment (not to exceed the life of the equipment) is typically 5 years to 10 years; and the loan maturity for real estate is up to 25 years, except that the term for a revolving line of credit cannot exceed 7 years. The SBAExpress loan's interest rates and fees are the same as those used for the 7(a) program. To account for the program's lower guaranty rate of 50%, lenders are allowed to perform their own loan analysis and procedures and receive SBA approval with a targeted 36-hour maximum turnaround time. Also, collateral is not required for loans of $25,000 or less. Lenders are allowed to use their own established collateral policy for loans over $25,000. As mentioned earlier, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of $125,000 or less approved in FY2018. The SBA also waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $125,001 to $350,000 in FY2018. In addition, P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver in the SBAExpress program, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero. The SBA waived this fee in FY2016, FY2017, and FY2018 and is waiving it in FY2019. The SBA indicated that its fee waivers for veterans are part \"of SBA's broader efforts to make sure that veterans have the tools they need to start and grow a business.\" In a related development, the SBA discontinued the Patriot Express Pilot Program on December 31, 2013. It provided loans of up to $500,000 (with a guaranty of up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000) to veterans and their spouses. It had been in operation since 2007, and, like the SBAExpress program, featured streamlined documentation requirements and expedited loan processing. Over its history, the Patriot Express Pilot Program disbursed 9,414 loans amounting to more than $791 million. Export Express The Export Express program was established as a subprogram of the SBAExpress program in 1998, and made a separate pilot program in 2000. It was made permanent through legislation, subject to reauthorization, in 2010 ( P.L. 111-240 , the Small Business Jobs Act of 2010). The Export Express program is designed to increase the availability of credit to current and prospective small business exporters that have been in business, though not necessarily in exporting, for at least 12 full months, particularly those small businesses needing revolving lines of credit. Export Express loans may not be used to finance overseas operations, except for the marketing or distribution of products or services exported from the United States. The program is generally subject to the same loan processing, making, closing, servicing, and liquidation requirements as well as the same maturity terms, interest rates, and applicable fees as the SBAExpress program. Two key differences between the two programs is that the Export Express program's maximum loan amount is up to $500,000, and its guaranty rate is 90% for loans of $350,000 or less, and 75% for loans exceeding $350,000. There were 215 lenders with approved SBA Export Express loan guaranties at the end of FY2017. These lenders are located in 46 states, Guam, and Puerto Rico. As shown in Table A-2 , the SBA approved 59 Export Express loans totaling $15.45 million in FY2018. Community Advantage 7(a) Loan Initiative The SBA's Community Advantage (CA) 7(a) loan initiative became operational on February 15, 2011. Originally announced as a three-year pilot program (through March 15, 2014), it subsequently was extended through March 15, 2017; March 31, 2020; and September 30, 2022. As of September 12, 2018, there were 113 approved CA lenders, 99 of which were actively making and servicing CA loans. The CA loan initiative is designed to increase lending to underserved low- and moderate-income communities. It, along with the now-discontinued Small Loan Advantage program, replaced the Community Express Pilot Program, which also was designed to increase lending to underserved communities. The CA loan initiative provides the same loan terms, guaranty fees, and guaranty as that of the 7(a) program on loan amounts up to $250,000 (85% for loans up to $150,000 and 75% for those greater than $150,000). Loan proceeds can be used for the same purposes as those of the 7(a) program. The loan's maximum interest rate is prime, plus 6%. The program has an expedited approval process, which includes a two-page application for borrowers and a goal of completing the approval process within 5 to 10 days. The CA loan initiative is designed to increase \"the number of SBA 7(a) lenders who reach underserved communities, targeting community-based, mission-focused financial institutions which were previously not able to offer SBA loans.\" These mission-focused financial institutions include the following: nonfederally regulated Community Development Financial Institutions certified by the U.S. Department of the Treasury, SBA's Certified Development Companies, SBA's nonprofit microlending intermediaries, and, added in December 2015, SBA's Intermediary Lending Pilot Program intermediaries. They are expected to maintain at least 60% of their SBA loan portfolio in underserved markets, including loans to small businesses in, or that have more than 50% of their full-time workforce residing in, low-to-moderate income (LMI) communities; Empowerment Zones and Enterprise Communities; HUBZones; start-ups (firms in business less than two years); businesses eligible for the SBA's Veterans Advantage program; Promise Zones (added in December 2015); and Opportunity Zones and Rural Areas (added in October 2018). The SBA placed a moratorium, effective October 1, 2018, on accepting new CA lender applications, primarily as a means to mitigate the risk of future loan defaults. The SBA also increased the minimum acceptable credit score for CA loans \"that satisfies the need to consider several required underwriting criteria\" from 120 to 140; increased the wait time for CA lenders ineligible for delegated lender status at the time of approval as a CA lender from 6 months to 12 months and increased the number of CA loans that must be initially dispersed before a CA lender may process applications under delegated authority from five to seven loans; increased the loan loss reserve requirement for CA loans sold in the secondary market from 3% to 5% of the outstanding amount of the guaranteed portion of each loan; modified requirements related to the refinancing of debts with a CA loan; limited fees that can be charged by a CA lender for assistance in obtaining a CA loan to no more than $2,500, with the exception of necessary out-of-pocket costs such as filing or recording fees; and as mentioned previously, added Opportunity Zones and Rural Areas to the list of economically distressed communities that are eligible for a CA loan. As shown in Table A-3 , the SBA approved 1,118 CA loans amounting to $157.5 million in FY2018 and 4,906 CA loans amounting to $643.72 million from the time the program became operational to the end of FY2018. As mentioned previously, legislation was introduced during the 114 th Congress ( S. 2125 , the Small Business Lending and Economic Inequality Reduction Act of 2015) to provide the Community Advantage Pilot program permanent, statutory authorization.", "summary": "The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs designed to encourage lenders to provide loans to small businesses \"that might not otherwise obtain financing on reasonable terms and conditions.\" The SBA's 7(a) loan guaranty program is considered the agency's flagship loan program. Its name is derived from Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorizes the SBA to provide business loans and loan guaranties to American small businesses. In FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25.4 billion. The average approved 7(a) loan amount was $420,401. Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. This report discusses the rationale provided for the 7(a) program; the program's borrower and lender eligibility standards and program requirements; and program statistics, including loan volume, loss rates, use of proceeds, borrower satisfaction, and borrower demographics. It also examines issues raised concerning the SBA's administration of the 7(a) program, including the oversight of 7(a) lenders and the program's lack of outcome-based performance measures. The report also surveys congressional and presidential actions taken in recent years to enhance small businesses' access to capital. For example, Congress approved legislation during the 111th Congress to provide more than $1.1 billion to temporarily subsidize the 7(a) and 504/Certified Development Companies (504/CDC) loan guaranty programs' fees and temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% (funding was exhausted on January 3, 2011); raise the 7(a) program's gross loan limit from $2 million to $5 million; and establish an alternative size standard for the 7(a) and 504/CDC loan programs. The SBA waived the up-front, one-time loan guaranty fee for smaller 7(a) loans from FY2014 through FY2018; and is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reducing the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019. The SBA has also waived the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress program (up to $350,000) since January 1, 2014; and reduced the up-front, one-time loan guaranty fee on non-SBAExpress 7(a) loans to veterans from FY2015 through FY2018. P.L. 114-38, the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver under the SBAExpress program, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero. Congress also approved legislation that increased the 7(a) program's authorization limit from $18.75 billion (on disbursements) in FY2014 to $23.5 billion in FY2015, $26.5 billion in FY2016, $27.5 billion in FY2017, $29.0 billion in FY2018, and $30 billion in FY2019. P.L. 115-189, the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator, starting in FY2019 and after providing at least 30 days' notice to specified congressional committees, to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit. The Appendix provides a brief description of the 7(a) program's SBAExpress, Export Express, and Community Advantage programs.", "document_type": "crs"}
{"report": "Timber harvesting on federal lands is a long-standing activity which sometimes generates controversy. Most timber harvesting on federal lands occurs on lands directed to provide a regular output of multiple uses under current law. Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies. Often at issue is the appropriate use of federal lands for timber harvesting under these policies, including what amount of timber harvesting should occur and what constitutes proper balance among timber harvesting and other uses. Congress has authorized timber harvesting on certain federal lands under specified circumstances. Most timber harvesting on federal lands occurs on two land systems. The majority of harvests occur on the National Forest System (NFS), which is managed by the Forest Service (FS) within the Department of Agriculture (USDA). Harvests also occur on the public lands managed by the Bureau of Land Management (BLM) within the Department of the Interior (DOI). The FS manages 144.9 million acres of forest, while the BLM manages 37.6 million acres of forest (see Figure 1 ). Together, FS and BLM forest comprises 76% of federal forest area and 23% of all forest in the United States. Within their respective forest, the FS has 96.1 million acres of timberlands, and the BLM has 6.1 million acres of timberlands. The United States has 765.5 million acres of forest, of which 514.4 million acres is timberland and 57% is private. The United States has 57.0 million acres of woodland. Timber harvesting is the physical cutting and removal of trees or parts of trees from a given forested site. Harvested timber , or cut and removed trees, is the raw material for items made of wood, such as lumber, plywood, paper, and other products. Timber harvesting may occur on private, federal, or non-federal publicly owned lands, and may be conducted by the landowner or by another entity they allow to do so. Most timber harvesting in the United States is conducted on private lands: in 2011, 88% of timber harvests were conducted on private lands, and in 2012, 90% of wood and paper products in the United States originated on private lands. FS and BLM conduct timber sales as the most general way to allow timber harvesting on their respective lands, although they may allow harvesting in other ways. A timber sale is a formal process whereby an entity may purchase a contract to cut and remove specified timber. FS and BLM receive revenue from the sale of the contract. Information on timber harvesting in this report, such as harvested volume, harvested value, and other statistics, derives from FS and BLM data and may include timber harvested through timber sales or other means. Both FS and BLM timber sale planning and implementation proceed under similar principles of achieving multiple use and sustained yield. Both agencies conduct timber harvesting for various purposes. Both plan long-term timber management by designating areas that can support sustainable timber harvest and calculating yields that can be taken without permanent impairment. In the short term, both agencies create plans for timber sales, determine the value of offered timber and specify what timber may be cut, and conduct sales in a competitive manner open to the public. Timber harvesting may also occur on two other federal land systems, the National Park System, managed by the National Park Service, and the National Wildlife Refuge System (NWRS), managed by the Fish and Wildlife Service (both agencies are within DOI). In the case of the National Park System, the Secretary may dispose of timber to control insects and diseases or to conserve natural or historic resources. In the case of the NWRS, the Secretary of the Interior may permit timber harvesting to achieve desired fish and wildlife habitat conditions. On both systems, timber harvesting is rare, and harvested volumes are small. This report provides an overview of timber harvesting on FS and BLM lands. The report describes general statutory authorities and regulations, planning activities, timber sales, and trends in the volume and value of timber harvested, first from FS lands, and then for BLM lands. It concludes with a discussion of issues Congress has debated concerning timber harvesting and federal lands. The National Forest System comprises nearly 193 million acres. It is made up of 154 national forests, national grasslands, and other units such as research and experimental areas. Approximately 75% of national forest acreage is located in 15 states. As discussed, the NFS contains 144.9 million acres of forest and woodland, of which 66% are considered timberland. Most of the lands contained in the modern Forest Service were reserved from the public lands in the late 19 th and early 20 th centuries, in what were first called \"forest reserves\". The forest reserves were initially managed by the DOI and later moved to the USDA and the Forest Service. Through the Organic Administration Act, Congress specified that the purpose of these forests was to \"improve and protect the forest within the reservation … and to furnish a continuous supply of timber for the use and necessities of the citizens of the United States,\" in addition to protecting water flows. The act authorized timber sales of \"dead, matured or large growth of trees\" and set out procedures for conducting them. Congress expanded the purposes for the national forests, and developed management goals to achieve those purposes, through the Multiple Use-Sustained Yield Act of 1960 (MUSYA). Congress added the provision of fish and wildlife habitat, recreation, energy and mineral development, and livestock grazing as official purposes of the national forests, in addition to timber harvesting and watershed protection. To supply these activities, management of the forests' resources is to be organized for multiple uses in a \"harmonious and coordinated\" manner that considers the combination of uses that best meets the needs of the American people, not that necessarily yields the largest dollar return or output. The act also directs a sustained yield of products and services, meaning high-level regular output in perpetuity without impairing the lands' productivity. Congress has directed FS to engage in long-term land use and resource management. Plans set the framework for land management, uses, and protection. They are developed through an interdisciplinary process with opportunities for public participation. FS uses these plans to guide implementation of site-specific activities. In the case of timber, plans describe where timber harvesting may occur and include measures of sustainable timber harvest levels, and are used to guide implementation of individual sales. These sales generate revenues. Congress has specified various uses for these revenues. Congress directed the Forest Service to conduct long-term planning and management through the passage of the National Forest Management Act of 1976 (NFMA). NFMA requires the FS to prepare a land and resource management plan—often called a \"forest plan\"—for each NFS unit. These plans are to be revised at least every 15 years. The FS has issued regulations to implement the planning requirement—often called \"planning rules\"—and to establish the procedures for developing, amending, and revising forest plans. The first planning rule was issued in 1979 and later revised; the current rule dates from 2012. Forest planning and implementation generally proceed as described below. Forest Service timber planning and administration proceed under general FS planning procedures. Forest plans guide management of the plan area by specifying objectives, standards, and guidelines for resources and activities. They contain certain components required by statute, such as components addressing provision of outdoor recreation, range, wildlife, fish, and timber. Among the most general required components addressing timber are requirements to identify areas and quantities for timber harvesting. The FS must identify lands that may be not suited for timber production . All other lands in the NFS unit are considered suitable for timber production. The plan must contain the allowable sale quantity, the measure of timber that can be removed annually without impairing future yield, although FS also considers other measures of sustainable yield in planning over various time horizons. The allowable sale quantity informs the amount of timber that can be removed annually over a ten-year plan period. Plans are required to be developed with public participation and in accordance with various other administrative and environmental statutes, such as the National Environmental Policy Act (NEPA). Forest plans may consider harvesting for various purposes—for example, to produce timber or to achieve and maintain desired resource conditions, such as habitat improvement, fire risk reduction, and sanitation. If the forest plan identifies lands as suitable for timber production, the plan must address timber harvesting on those lands. If the forest plan considers timber harvesting for purposes other than producing timber, it must delineate areas where such activities may occur. These areas may be identified by forest type, geographic area, or other criteria. FS conducts timber sales to achieve the objectives in the forest plan. FS establishes a sale schedule and timber sale project plan, which may include more than one timber sale. The plan estimates volume offered, acreage, and harvest methods for the relevant sales. Site-specific timber harvests must also comport with NEPA and relevant statutes, including any requirement for site-specific environmental analysis and review. Prior to an individual sale, FS marks and appraises the timber to be offered. FS may designate timber in one of three ways: physical marking, a written description of specific trees for harvest (called description ) , or a written description of desired post-harvest stand characteristics (called prescription ). FS creates a sale package, including a prospectus, sample contract, and other required documentation; some requirements are site-specific. FS advertises the package at an appraised starting price. Interested parties may bid on the package. A contract is awarded to the highest bidder provided legal conditions are met. The winning bidder conducts the timber harvest according to the terms—such as timeline, harvest method, and road construction conditions—specified in the contract. Timber harvests must generally be completed in 3 years, with a maximum term of 10 years. Timber sales generate revenue, and disposition of this revenue depends on several factors. Congress has established several funds for FS to retain and use timber sale receipts. Depending on the type of sale, among other factors, FS may be required to make certain deposits to these funds. If any portion of receipts are not required to be deposited, FS may distribute receipts among funds at their discretion, including depositing all revenue in a single fund. The money in these funds may be used by the FS for a variety of purposes, sometimes without further appropriation (i.e., as mandatory appropriations). See Table A-1 for a list of these funds. A more detailed discussion of revenue levels, expenditures, and issues related to FS timber revenue funds is outside the scope of this report. Timber harvesting is one of many authorized uses of the NFS. The amount of timber harvested from the NFS, and its relative proportion of total U.S. timber supply, has fluctuated over time. This section provides an overview of timber volume harvested from the NFS, and value of those harvests, along with some economic and historical factors which may have contributed to observed changes. The volume of timber harvested from the national forests (and their precursors, the forest reserves) increased slowly from 1898 until the 1940s. Most demand for wood was met by private timberlands; by 1940, for example, FS lands supplied 2% of U.S. timber supply. In the post-World War II era, timber harvest volume from the NFS grew (see Figure 2 ). The timber supply from private forestry was unable to keep pace with the increased demand, due in part to high harvest levels during WWII. In the 1950s, the FS began to raise harvest limits. Harvests rose from 1-3 billion board feet (abbreviated BBF) annually in the early 1940s to more than 10 BBF in some years of the 1960s and 1970s. According to historical data from one source, harvest from the NFS rose from 9% of total U.S. harvest in 1952 to 16% in 1962 and 1970, and 15% in 1976. Harvest volume declined from the mid-1970s to the early 1980s. Harvest on FS lands shifted to more marginal timberlands; in part, clear-cutting in the previous decades had reduced tree volume available for harvest in productive areas. This period also coincided with recessions in 1980 and 1982, which may have reduced demand. Timber harvests rose from the early 1980s to the early 1990s, sometimes reaching levels of over 12 BBF per year. These timber harvests coincided with the 1986 U.S. peak in per capita consumption of wood products, driven in part by an increase in housing starts following the 1982 recession. In 1986, timber harvests from the NFS were 13% of total U.S. timber harvests. In the early 1990s, harvested timber volume began a sustained decrease. In 1991, the NFS supplied 11% of total U.S. harvested timber, and in 1997, the NFS supplied 5% of total U.S. harvested timber. In 2011, NFS supplied 2% of U.S. wood and paper products. Numerous interrelated factors, including statutory, administrative, biological, and market influences, may have contributed to this decline. The effect of each individual factor is not settled, as is the effect of each factor over time. These factors occurred at varying points in time and may not coincide directly with observed harvest level changes. Some sources have noted that statutory changes added complexity to forest management and increasing litigation frequency, while also increasing transparency and public participation. Other sources have noted changing management priorities. Others have noted decreasing domestic demand, volatile prices, and the prevalence of less valuable timber due to high harvest levels in previous decades. The listing of the northern spotted owl ( Strix occidentalis caurina) under the Endangered Species Act in 1990 is often discussed in regard to declining timber harvest levels. Harvested volumes have consistently been between 2 BBF and 3 BBF annually from FY2004 onward. In FY2018, approximately 2.8 BBF were harvested from FS lands. Although the national timber market in the United States was affected by the 2008 housing market collapse and the subsequent decline in demand, timber volumes harvested from FS experienced relatively little change in volume, for unclear reasons. In FY2018 dollars, harvest values from approximately FY2000 onward are similar to harvest values in the early 1940s. Harvest values generally increased from the early 1940s to a peak of approximately $3.4 billion (FY2018 dollars) in FY1979, before a decline through FY1982. They rose again thereafter, reaching another peak of approximately $2.6 billion (FY2018 dollars) in FY1989, before again declining. Values from FY2001 onward have generally been between approximately $100 million and $300 million in FY2018 dollars. In FY2018, cut value was approximately $188.8 million. FS harvest value declined during the recession and housing collapse of 2008. Harvest value may vary due to quality, species, and age class of offered timber and timber market conditions, and is correlated with volume harvested. FS harvest volume differs by region; these differences mirror the major production regions in private forestry (see Figure 3 ). FS Region 6 (the Pacific Northwest), Region 8 (the Southeast), and Region 9 (the North), are the three largest producing regions in both private and public forestry. In general, harvest volume and value by region is a function of many complex factors, including the dominant timber type, age class, and condition; the suitability of FS sites for harvest operations; the legal limitations on land uses; and the status of the local forest products industry. The Bureau of Land Management (BLM) administers about 246 million surface acres of federal lands, almost entirely located in twelve western states. As noted, about 37.6 million acres of BLM lands are forest; of that, 16% is considered timberland. The Oregon and California (O&C) lands, which comprise approximately 2.6 million acres, contain 2.4 million acres of forest (see \" Statutory Authorities for Harvesting Timber ,\" below, for a description of the O&C lands). The transfer of the forest reserves to FS administration in the early 1900s reduced the amount of forest land and timberland under BLM management today. The modern BLM was formed in 1946 to manage the public domain lands. At its formation, BLM had no general authority to harvest timber on those lands. Congress authorized BLM to dispose of forest materials through the Materials Act of 1947. Congress later elaborated BLM's management responsibilities with the passage of the Federal Land Policy and Management Act of 1976 (FLPMA). Like the MUSYA's mandate for the FS, FLPMA requires BLM to manage the public lands for multiple use and sustained yield in a \"harmonious and coordinated\" manner that considers the combination of uses that best meets the needs of the American people, not necessarily yields the largest dollar return or output. The act directs a sustained yield of renewable resources, meaning high-level regular output in perpetuity without impairing the lands' productivity. The O&C lands are lands in western Oregon managed according to their own establishing statutes, mostly by BLM. FS manages 492 thousand acres of the O&C lands, or 18% of this total area. The lands consist of several areas, the Oregon and California lands and the Coos Bay Wagon Road (CBWR) lands, which were revested to the federal government following violation of grant terms. They are usually referred to collectively as \"O&C lands\" and often grouped for legislative purposes. BLM or FS's mandate to sell timber on the O&C lands derives directly from the O&C lands' establishing statute. The O&C Act directs that O&C lands be managed for sustained yield of permanent forest production, watershed protection, recreation, and contributing to the economic stability of local communities and industries. Congress has directed BLM to engage in long-term land use and resource management planning . Plans set the framework for land management, uses, and protection. They are developed through an interdisciplinary process with opportunit ies for public participation. BLM uses these plans to guide implementation of site-specific activities. In the case of timber, plans describe where timber harvesting may occur and include measures of sustainable timber harvest levels . They are used to guide execution of individual sales , which generate revenues. Congress has specified various uses for these revenues. BLM timber planning and administration follow general BLM land use planning procedures. Through FLPMA, Congress directs BLM to develop, maintain, and revise plans for managing public lands. BLM issued the first regulations to implement the planning requirement in 1979, and subsequently revised them; the current BLM planning rule dates from 2005. Plans must be developed with public participation and in accordance with various other administrative and environmental statutes (e.g., NEPA). Under BLM's planning rule, resource management plans remain in effect indefinitely. They are to include monitoring and evaluation standards, and are to be amended or revised when circumstances warrant. The planning rule directs BLM to identify indicators that describe the desired forest outcomes in the plan area. BLM is to identify a suite of management actions to achieve those outcomes, including identifying sustained yield areas, areas that could support long-term timber harvest. BLM personnel determine a harvest level for these areas that can be maintained without permanent impairment; this harvest level is known as the allowable sale quantity . Allowable sale quantity is measured for a ten-year period. In addition, BLM generally makes annual forest product sale plans. These plans contain estimates of sale volume, acreage, and permitted harvest methods for any sales proposed for the year. Site-specific timber harvests must comport with NEPA and relevant statutes, including any additional requirement for site-specific analysis and review. To conduct an individual sale within the plan, BLM designates the timber for sale and appraises the value of the timber. BLM timber may be designated by physical marking or by enclosing timber in a sale boundary. BLM prepares a sale contract, along with a prospectus describing the sale. The sale is advertised at an appraised starting price. Interested parties may bid on the contract. A contract is awarded to the highest bidder provided legal conditions are met. The winning bidder conducts the timber harvest according to the terms specified in the contract, such as timeline and harvest method. Timber harvests must generally be completed in three years, but may be extended under certain circumstances. Timber sales generate revenues, and disposition of these revenues depends on a number of factors. Congress has established several funds for timber sale revenues. Depending on the type of sale and the originating lands, BLM may be required to make certain deposits to these funds. If any portion of revenues are not required to be deposited, BLM may allocate those revenues among funds at its discretion, including depositing all revenues in a single account. Some funds are permanently appropriated to BLM and may be used without further congressional action (i.e. as mandatory appropriations). See Table A-2 for a list of these funds. A more detailed discussion of funding levels, expenditures, and issues related to BLM timber revenue funds is outside the scope of this report. Timber harvesting is one of many authorized uses of BLM lands. Long-term historical data regarding BLM timber harvesting is unavailable. Other data on past timber program activity show that BLM timber harvesting may have changed over time. This section provides data on timber offered for sale, timber sold, and timber harvested from BLM lands at various points in time, along with some economic and historical factors which may have contributed to observed changes. Data on cut timber volume from BLM lands is available from FY1994 onward (see Figure 4 ). While complete historical cut data is unavailable prior to FY1994, some data exists about past sales (see Table 1 ). The intermittent nature of this data challenges drawing conclusions about larger trends in these periods, especially in the missing decades. In addition, these data refer to either timber sold or timber offered for sale, which differs from volume of timber cut. However, as an approximate comparison, the data show that the volumes sold prior to FY1990 are large compared to recent volumes offered for sale. Observers confirmed a decline in public domain timber offered for sale beginning in 1991, though the investigation did not consider the O&C lands. Volumes harvested from BLM lands were between 100 and 260 MMBF from FY1995 to FY2000 and from FY2004 to FY2018 (see Figure 4 ). Harvests were lower in FY1994 and between FY2001 and FY2003. Harvested volumes have shown a generally increasing trend since FY2001, with the largest recently recorded harvest in FY2015 (about 258 MMBF). Like the NFS, harvests from BLM lands during the recession and housing market collapse of 2008 experienced relatively little change in volume, for unclear reasons. In FY2018, BLM harvested about 178 MMBF. Data on cut timber value from BLM lands is available from FY1996 onward (see Figure 4 ). Total value of harvests has declined since FY1996. Harvest values have generally increased since the low value of approximately $15.4 million in FY2001, and have been between $20 million and $50 million since FY2011 (FY2018 dollars). In FY2018, cut value was $41.3 million. Like the FS, BLM harvest value during the recession and housing market collapse of 2008 declined, but the relative change was small compared to the decreases of the late 1990s. Harvest value may vary due to the quality, species, and age class of offered timber as well as timber market conditions, and is correlated with harvested volume. BLM harvest values per unit of timber are higher than FS values per unit, due to the dominant timber type harvested from BLM lands, among other factors. Most timber harvests on BLM lands are conducted on the O&C lands. From FY2014 to FY2018, the average harvested volume from O&C lands was 93% of the average total volume. The large proportion of volume harvested from O&C lands reflects the forest cover and type, dominant use for forest production, and the size of the forest industry in the Pacific Northwest. As with the NFS, in general, BLM harvest volume and value is a function of many complex factors, including the dominant timber type, age class, and condition; the suitability of sites for harvest operations; legal limitations on land uses; and the status of the local forest products industry. Management of federal lands for multiple uses and sustained yield is challenging, including balancing timber harvesting with other uses. Timber production from federal lands is driven by a complex interaction of environmental factors, market forces, and land management policies. Under current law, efforts to change harvest levels must comport with the provision of a sustained yield of multiple uses. Congress has sometimes considered legislation to prioritize or exclude some uses in a limited manner—in certain geographic regions, for example—but has not changed these fundamental management concepts since their enactment in the 1960s and 1970s. The public often expresses preferences for uses of federal forests, including with respect to timber harvesting. Some may support timber harvesting generally, and believe the current levels of production are sufficient. Others may wish to see the levels of production increased or decreased, depending on their perspective. Those who support timber harvesting on federal lands may cite benefits to the local timber industry, a belief that harvesting is part of the core mission of federal forests, or a belief that timber harvesting is a tool for improving forest health conditions, among other reasons. Proponents of timber harvesting on federal lands may also emphasize the role of timber harvesting in some forest-adjacent rural economies. Others may oppose timber harvesting due to concerns about ecological or human impacts: for example, they may cite beliefs that timber sales have detrimental impacts on environmental quality, fish and wildlife habitat, forest character, recreation and tourism, or cultural and aesthetic values. Opponents may also contend that conducting timber sales favors the timber industry over other interests. In addition to the themes identified above, Congress may also debate other issues related to federal timber harvests that are not discussed in detail in this report. For example, these include issues related to the disposition and use of timber sale revenues; the relationship between timber harvest planning and statutes such as NEPA and the Endangered Species Act (ESA); and special harvest authorities, among others. The following tables list and describe the funds that receive timber sale revenues; the funds' statutory authority is also shown. A detailed discussion of funding levels, expenditures, and issues related to these funds is outside the scope of this report. ", "summary": "Congress has granted some federal land management agencies the authority to sell timber from federal lands. Two agencies, the Forest Service (FS) and the Bureau of Land Management (BLM), conduct timber sales as an authorized use. Together, the FS and the BLM manage 76% of federal forest area. FS manages 144.9 million acres, while BLM manages 37.6 million acres. The other major federal land management agencies, the National Park Service (NPS) and the Fish and Wildlife Service (FWS), rarely conduct timber sales. Lands managed by the FS, the National Forest System (NFS), are managed under a multiple use-sustained yield model pursuant to the Multiple Use-Sustained Yield Act of 1960 (MUSYA). This statute directs FS to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity. Congress, through the National Forest Management Act (NFMA), has directed FS to engage in long-term land use and resource management planning. Plans set the framework for land management, uses, and protection; they are developed through an interdisciplinary process with opportunities for public participation. In the case of timber, they describe where timber harvesting may occur and include measures of sustainable timber harvest levels. FS uses these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue. Timber harvest on FS lands has varied over time. FS harvest volumes in the 1940s were around 1-3 billion board feet per year. Annual harvest volumes rose from the 1950s through the 1980s, sometimes exceeding 10 billion board feet. Annual harvested volumes decreased in the early 1990s and have remained between 1.8 and 2.8 billion board feet since FY2003. The total dollar value of FS timber harvests generally rose from the early 1940s to over $3 billion in FY1979. Total value has been between $100 million and $300 million since FY2001. From FY2014 to FY2018, the greatest average annual harvest volume on FS lands was from Oregon and Washington. BLM lands are managed under a multiple use-sustained yield model pursuant to the Federal Land Policy and Management Act of 1976 (FLPMA). This statute directs BLM to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity. Congress has directed BLM to engage in long-term land use and resource management planning through FLPMA. Plans set the framework for land management, uses, and protection; they are developed made through an interdisciplinary process with opportunities for public participation. In the case of timber, they describe where timber harvesting may occur and contain measures of sustainable timber harvest levels. The FS and the BLM use these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue. Although trends in timber activities on BLM lands are challenging to infer from the available data, volumes sold in the past appear to be larger than recent volumes offered for sale. Harvested volumes for the BLM have been between 100 and 260 million board feet annually from FY1995 onward, except in FY1994 and between FY2001-FY2003. Total harvest values have declined since the mid-1990s, and have generally been between $20 million and $50 million annually since FY2011. From FY2014 to FY2018, the greatest average annual harvest volume from BLM lands was from Oregon and Washington. Congress has debated the appropriate balance of timber harvesting and other uses on federal lands. Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies. Preferences for certain balances of these uses often stem from values about federal forests' purposes, such as consideration of economic, environmental, or recreational values. Debate has also centered on the relationship of timber harvesting levels to forest health, including whether changing harvest levels is a desirable forest management tool. Congress has granted some federal land management agencies the authority to sell timber from federal lands. Two agencies, the Forest Service (FS) and the Bureau of Land Management (BLM), conduct timber sales as an authorized use. Together, the FS and the BLM manage 76% of federal forest area. FS manages 144.9 million acres, while BLM manages 37.6 million acres. The other major federal land management agencies, the National Park Service (NPS) and the Fish and Wildlife Service (FWS), rarely conduct timber sales. Lands managed by the FS, the National Forest System (NFS), are managed under a multiple use-sustained yield model pursuant to the Multiple Use-Sustained Yield Act of 1960 (MUSYA). This statute directs FS to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity. Congress, through the National Forest Management Act (NFMA), has directed FS to engage in long-term land use and resource management planning. Plans set the framework for land management, uses, and protection; they are developed through an interdisciplinary process with opportunities for public participation. In the case of timber, they describe where timber harvesting may occur and include measures of sustainable timber harvest levels. FS uses these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue. Timber harvest on FS lands has varied over time. FS harvest volumes in the 1940s were around 1-3 billion board feet per year. Annual harvest volumes rose from the 1950s through the 1980s, sometimes exceeding 10 billion board feet. Annual harvested volumes decreased in the early 1990s and have remained between 1.8 and 2.8 billion board feet since FY2003. The total dollar value of FS timber harvests generally rose from the early 1940s to over $3 billion in FY1979. Total value has been between $100 million and $300 million since FY2001. From FY2014 to FY2018, the greatest average annual harvest volume on FS lands was from Oregon and Washington. BLM lands are managed under a multiple use-sustained yield model pursuant to the Federal Land Policy and Management Act of 1976 (FLPMA). This statute directs BLM to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity. Congress has directed BLM to engage in long-term land use and resource management planning through FLPMA. Plans set the framework for land management, uses, and protection; they are developed made through an interdisciplinary process with opportunities for public participation. In the case of timber, they describe where timber harvesting may occur and contain measures of sustainable timber harvest levels. The FS and the BLM use these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue. Although trends in timber activities on BLM lands are challenging to infer from the available data, volumes sold in the past appear to be larger than recent volumes offered for sale. Harvested volumes for the BLM have been between 100 and 260 million board feet annually from FY1995 onward, except in FY1994 and between FY2001-FY2003. Total harvest values have declined since the mid-1990s, and have generally been between $20 million and $50 million annually since FY2011. From FY2014 to FY2018, the greatest average annual harvest volume from BLM lands was from Oregon and Washington. Congress has debated the appropriate balance of timber harvesting and other uses on federal lands. Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies. Preferences for certain balances of these uses often stem from values about federal forests' purposes, such as consideration of economic, environmental, or recreational values. Debate has also centered on the relationship of timber harvesting levels to forest health, including whether changing harvest levels is a desirable forest management tool.", "document_type": "crs"}
{"report": "Some time ago, a federal prosecutor referred to the mail and wire fraud statutes as \"our Stradivarius, our Colt 45, our Louisville Slugger … and our true love.\" Not everyone shared the prosecutor's delight. Commentators have argued that the statutes \"have long provided prosecutors with a means by which to salvage a modest, but dubious, victory from investigations that essentially proved unfruitful.\" Federal judges have also expressed concern from time to time, observing that the \"mail and wire fraud statutes have 'been invoked to impose criminal penalties upon a staggeringly broad swath of behavior,' creating uncertainty in business negotiations and challenges to due process and federalism.\" Nevertheless, mail and wire fraud prosecutions have brought to an end schemes that bilked victims of millions, and sometimes billions, of dollars. The federal mail and wire fraud statutes outlaw schemes to defraud that involve the use of mail or wire communications. Both condemn fraudulent conduct that may also come within the reach of other federal criminal statutes. Both may serve as racketeering and money laundering predicate offenses. Both are punishable by imprisonment for not more than 20 years; for not more than 30 years, if the victim is a financial institution or the offense is committed in the context of major disaster or emergency. Both entitle victims to restitution. Both may result in the forfeiture of property. The first of the two, the mail fraud statute, emerged in the late 19 th century as a means of preventing \"city slickers\" from using the mail to cheat guileless \"country folks.\" But for penalty increases and amendments calculated to confirm its breadth, the prohibition has come down to us essentially unchanged. Speaking in 1987, the Supreme Court noted that \"the last substantive amendment to the statute ... was the codification of the holding of Durland ... in 1909.\" Congress did amend it thereafter to confirm that the mail fraud statute and the wire fraud statute reached schemes to defraud another of the right to honest services and to encompass the use of commercial postal carriers. The wire fraud statute is of more recent vintage. Enacted as part of the Communications Act Amendments of 1952, it was always intended to mirror the provisions of the mail fraud statute. Since its inception, changes in the mail fraud statute have come with corresponding changes in the wire fraud statute in most instances. The mail and wire fraud statutes are essentially the same, except for the medium associated with the offense—the mail in the case of mail fraud and wire communication in the case of wire fraud. As a consequence, the interpretation of one is ordinarily considered to apply to the other. In construction of the terms within the two, the courts will frequently abbreviate or adjust their statement of the elements of a violation to focus on the questions at issue before them. As treatment of the individual elements makes clear, however, there seems little dispute that conviction requires the government to prove the use of either mail or wire communications in the foreseeable furtherance of a scheme and intent to defraud another of either property or honest services involving a material deception. The wire fraud statute applies to anyone who \"transmits or causes to be transmitted by wire, radio, or television communication in interstate or foreign commerce any writings ... for the purpose of executing [a] ... scheme or artifice.\" The mail fraud statute is similarly worded and applies to anyone who \"... for the purpose of executing [a] ... scheme or artifice ... places in any post office ... or causes to be delivered by mail ... any ... matter.\" The statutes require that a mailing or wire communication be in furtherance of a scheme to defraud. The mailing or communication need not be an essential element of the scheme, as long as it \"is incident to an essential element of the scheme.\" A qualifying mailing or communication, standing alone, may be routine, innocent or even self-defeating, because \"[t]he relevant question at all times is whether the mailing is part of the execution of the scheme as conceived by the perpetrator at the time, regardless of whether the mailing later, through hindsight, may prove to have been counterproductive.\" The element may be satisfied by mailings or communications \"designed to lull the victim into a false sense of security, postpone inquiries or complaints, or make the transaction less suspect.\" The element may also be satisfied by mailings or wire communications used to obtain the property which is the object of the fraud. A defendant need not personally have mailed or wired a communication; it is enough that he \"caused\" a mailing or transmission of a wire communication in the sense that the mailing or transmission was the reasonable foreseeable consequence of his intended scheme. The mail and wire fraud statutes \"both prohibit, in pertinent part, 'any scheme or artifice to defraud[,]' or to obtain money or property 'by means of false or fraudulent pretenses, representations, or promises,\" or deprive another of the right to honest services by such means. From the beginning, Congress intended to reach a wide range of schemes to defraud, and has expanded the concept whenever doubts arose. It added the second prong—obtaining money or property by false pretenses, representations, or promises—after defendants had suggested that the term \"scheme to defraud\" covered false pretenses concerning present conditions but not representations or promises of future conditions. More recently, it added 18 U.S.C. § 1346 to make it clear the term \"scheme to defraud\" encompassed schemes to defraud another of the right to honest services. Even before that adornment, the words were understood to \"refer 'to wronging one in his property rights by dishonest methods or schemes,' and 'usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'\" As a general rule, the crime is done when the scheme is hatched and an attendant mailing or interstate phone call or email has occurred. Thus, the statutes are said to condemn a scheme to defraud regardless of its success. It is not uncommon for the courts to declare that to demonstrate a scheme to defraud the government needs to show that the defendant's \"communications were reasonably calculated to deceive persons of ordinary prudence and comprehension.\" Even a casual reading, however, might suggest that the statutes also cover a scheme specifically designed to deceive a naïve victim. Nevertheless, the courts have long acknowledged the possibility of a \"puffing\" defense, and there may be some question whether the statutes reach those schemes designed to deceive the gullible though they could not ensnare the reasonably prudent. In any event, the question may be more clearly presented in the context of the defendant's intent and the materiality of the deception. The mail and wire fraud statutes speak of schemes to defraud or to obtain money or property by means of false or fraudulent pretenses. The Supreme Court has said that the phrase \"to defraud\" and the phrase \"to obtain money or property\" do not represent separate crimes, but instead the phrase \"obtain money or property\" describes what constitutes a scheme to defraud. In later look-alike offenses, Congress specifically numerated the two phrases. The bank fraud statute, for example, applies to \"whoever knowingly executes … a scheme or artifice — (1) to defraud a financial institution; or (2) to obtain any of the money, funds, credits, assets, securities, or other property owned by … a financial institution, by means of false or fraudulent pretenses …\" It left the mail and wire fraud statutes, however, unchanged. The mail and wire fraud statutes clearly protect against deprivations of tangible property. They also protect certain intangible property rights, but only those that have value in the hands of the victim of a scheme. \"To determine whether a particular interest is property for purposes of the fraud statutes, [courts] look to whether the law traditionally has recognized and enforced it as a property right.\" Neither the mail nor the wire fraud statute exhibits an explicit reference to materiality. Yet materiality is an element of each offense, because at the time of the statutes' enactment, the word \"defraud\" was understood to \"require[] a misrepresentation or concealment of [a] material fact.\" Thus, other than in an honest services context, a \"scheme to defraud\" for mail or wire fraud purposes must involve a material misrepresentation of some kind. \"A misrepresentation is material if it is capable of influencing the intended victim.\" Again, other than in the case of honest services, \"'intent to defraud' requires an intent to (1) deceive, and (2) cause some harm to result from the deceit. A defendant acts with the intent to deceive when he acts knowingly with the specific intent to deceive for the purpose of causing pecuniary loss to another or bringing about some financial gain to himself.\" A defendant has a complete defense if he believes the deceptive statements or promises to be true or otherwise acts under circumstances that belie an intent to defraud. Yet, a defendant has no defense if he blinds himself to the truth. Nor is it a defense if he intends to deceive but feels his victim will ultimately profit or be unharmed. The Supreme Court held in McNally v. United States that the protection of the mail fraud statute, and by implication the protection of the wire fraud statute, did not extend to \"the intangible right of the citizenry to good government.\" Soon after McNally , Congress enlarged the mail and wire fraud protection to include the intangible right to honest services, by defining the \"term 'scheme or artifice to defraud' [to] include[s] a scheme or artifice to deprive another of the intangible right to honest services.\" Lest the expanded definition be found unconstitutionally vague, the Court in Skilling v. United States limited its application to cases of bribery or kickbacks. The Court in Skilling supplied only a general description of the bribery and kickbacks condemned in the honest-services statute. Subsequent lower federal courts have often looked to the general federal law relating to bribery and kickbacks for the substantive elements of honest services bribery. In this context, bribery requires \"a quid pro quo—a specific intent to give … something of value in exchange for an official act.\" And an \"official act\" means no more than an officer's formal exercise of governmental power in the form of a \"decision or action on a 'question, matter, cause, suit, proceeding or controversy'\" before him. The definition of the word \"kickback\" quoted by the Court in Skilling has since been reassigned, and the courts have cited the dictionary definition on occasion. Except for the elements of a scheme to defraud in the form of a bribe and a kickback, honest services fraud, as an adjunct of the mail and wire fraud statutes, draws its elements and the sanctions that attend the offense from the mail and wire fraud statutes. Attempting or conspiring to commit mail or wire fraud or aiding and abetting the commission of those offenses carries the same penalties as the underlying offense. \"In order to aid and abet another to commit a crime it is necessary that a defendant in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed.\" \"Conspiracy to commit wire fraud under 18 U.S.C. § 1349 requires a jury to find that (1) two or more persons agreed to commit wire fraud and (2) the defendant willfully joined the conspiracy with the intent to further its unlawful purpose.\" As a general rule, a conspirator is liable for any other offenses that a co-conspirator commits in the foreseeable furtherance of the conspiracy. Such liability, however, extends only until the objectives of the conspiracy have been accomplished or the defendant has withdrawn from the conspiracy. Where attempt has been made a separate offense, as it has for mail and wire fraud, conviction ordinarily requires that the defendant commit a substantial step toward the completion of the underlying offense with the intent to commit it. It does not, however, require the attempt to have been successful. Unlike conspiracy, a defendant may not be convicted of both the substantive offense and the lesser included crime of attempt to commit it. A mail and wire fraud are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations), or fine of not more than $1 million and imprisonment for not more than 30 years if the victim is a financial institution or the offense was committed in relation to a natural disaster. It is also subject to a mandatory minimum two-year term of imprisonment if identify theft is used during and in furtherance of the fraud. Conviction may also result in probation, a term of supervised release, a special assessment, a restitution order, and/or a forfeiture order. Sentencing in federal court begins with the federal Sentencing Guidelines. The Guidelines are essentially a scorekeeping system. A defendant's ultimate sentence under the Guidelines is determined by reference first to a basic guideline, which sets a base \"offense level.\" Offense levels are then added or subtracted to reflect his prior criminal record as well as the aggravating and mitigating circumstances attending his offense. One of two basic guidelines applies to mail and wire fraud. Section 2C1.1 applies to mail or wire fraud convictions involving corruption of public officials. Section 2B1.1 applies to other mail or wire fraud convictions. Both sections include enhancements based on the amount of loss associated with the fraud. After all the calculations, the final offense level determines the Guidelines' recommendations concerning probation, imprisonment, and fines. The Guidelines convert final offense levels into 43 sentencing groups, which are in turn each divided into six sentencing ranges based on the defendant's criminal history. Thus, for instance, the recommended sentencing range for a first-time offender (i.e., one with a category I criminal history) with a final offense level of 15 is imprisonment for between 18 and 24 months. A defendant with the same offense level 15 but with a criminal record placing him in criminal history category VI, would face imprisonment from between 41 and 51 months. The Guidelines also provide offense-level-determined fine ranges for individuals and organizations. As a general rule, sentencing courts may place a defendant on probation for a term of from 1 to 5 years for any crime punishable by a maximum term of imprisonment of less than 25 years. The Guidelines, however, recommend \"pure\" probation, that is, probation without any term of incarceration, only with respect to defendants with an offense level of 8 or below, i.e., levels where the sentencing range is between zero and six months. Once a court has calculated the Guidelines' recommendations, it must weigh the other statutory factors found in 18 U.S.C. § 3553(a) before imposing a sentence. Appellate courts will uphold a sentence if the sentence is procedurally and substantively reasonable. A sentence is reasonable procedurally if it is free of procedural defects, such as a failure to accurately calculate the Guidelines' recommendations and to fully explain the reasons for the sentence selected. A sentence is reasonable substantively if it is reasonable in light of circumstances that a case presents. Supervised release is a form of parole-like supervision imposed after a term of imprisonment has been served. Although imposition of a term of supervised release is discretionary in mail and wire fraud cases, the Sentencing Guidelines recommend its imposition in all felony cases. The maximum supervised release term for wire and mail fraud generally is three years—five years when the defendant is convicted of the mail or wire fraud against a financial institution that carries a 30-year maximum term of imprisonment. Release will be subject to a number of conditions, violation of which may result in a return to prison for not more than two years (not more than three years if the original crime of conviction carried a 30-year maximum). There are three mandatory conditions: (1) commit no new crimes; (2) allow a DNA sample to be taken; and (3) submit to periodic drug testing. The court may suspend the drug testing condition, although it is under no obligation to do so even though the defendant has no history of drug abuse and drug abuse played no role in the offense. Most courts will impose a standard series of conditions in addition to the mandatory condition of supervised release. The Sentencing Guidelines recommend that these include the payment of any fines, restitution, and special assessments that remain unsatisfied. Defendants convicted of mail or wire fraud must pay a special assessment of $100. Restitution is ordinarily required of those convicted of mail or wire fraud. The victims entitled to restitution include those directly and proximately harmed by the defendant's crime of conviction, and \"in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity,\" like mail and wire fraud, \"any person directly harmed by the defendant's conduct in the course of the scheme, conspiracy, or pattern.\" Property that constitutes the proceeds of mail or wire fraud is subject to confiscation by the United States. It may be confiscated pursuant to either civil forfeiture or criminal forfeiture procedures. Civil forfeiture proceedings are conducted that treat the forfeitable property as the defendant. Criminal forfeiture proceedings are conducted as part of the criminal prosecution of the property owner. The mail and wire fraud statutes essentially outlaw dishonesty. Due to their breadth, misconduct that constitutes mail or wire fraud may constitute a violation of one or more other federal criminal statutes as well. This overlap occurs perhaps most often with respect to (1) crimes for which mail or wire fraud are elements (\"predicate offenses\") of another offense; (2) fraud proscribed under jurisdictional circumstances other than mail or wire use; and (3) honest services fraud in the form of bribery or kickbacks. Some federal crimes have as an element the commission of some other federal offense. The money laundering statute, for example, outlaws laundering the proceeds of various predicate offenses. The racketeering statute outlaws the patterned commission of a series of predicate offenses in order to operate a racketeering enterprise. Mail and wire fraud are racketeering and money laundering predicate offenses. The Racketeering Influenced and Corrupt Organization (RICO) provisions outlaw acquiring or conducting the affairs of an enterprise, engaged in or whose activities affect interstate commerce, through loan sharking or the patterned commission of various other predicate offenses. The racketeering-conduct and conspiracy-to-engage-in-racketeering-conduct appear to be the RICO offenses most often built on wire or mail fraud violations. The elements of the RICO conduct offense are (1) conducting the affairs; (2) of an enterprise; (3) engaged in activities in or that impact interstate or foreign commerce; (4) through a pattern; (5) of racketeering activity. To prove a RICO conspiracy, the government must prove: \"(1) that two or more persons agreed to conduct or to participate, directly or indirectly, in the conduct of an enterprise's affairs through a pattern of racketeering activity; (2) that the defendant was a party to or a member of that agreement; and (3) that the defendant joined the agreement or conspiracy knowing of its objective to conduct or participate, directly or indirectly, in the conduct of the enterprise's affairs through a pattern of racketeering activity.\" \"Racketeering activity\" means, among other things, any act that is indictable under either the mail or wire fraud statutes. As for pattern, a RICO pattern \"requires at least two acts of racketeering activity. The racketeering predicates may establish a pattern if they [were] related and … amounted to, or threatened the likelihood of, continued criminal activity.'\" The pattern of predicate offenses must be used by someone employed by or associated with a qualified enterprise to conduct or participate in its activities. \"Congress did not intend to extend RICO liability . . . beyond those who participated in the operation and management of an enterprise through a pattern of racketeering activity.\" Nevertheless, \"liability under § 1962(c) is not limited to upper management … An enterprise is operated not just by upper management but also by lower rung participants.\" The enterprise may be either any group of individuals, any legal entity, or any group \"associated in fact.\" \"Nevertheless, 'an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise and longevity sufficient to permit those associates to pursue the enterprise's purpose.'\" Moreover, qualified enterprises are only those that \"engaged in, or the activities of which affect, interstate or foreign commerce.\" RICO violations are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations). The crime is one for which restitution must be ordered when one of the predicate offenses is mail or wire fraud. RICO has one of the first contemporary forfeiture provisions, covering property and interests acquired through RICO violations. As noted earlier, any RICO predicate offense is by virtue of that fact a money laundering predicate. RICO violations create a cause of action for treble damages for the benefit of anyone injured in their business or property by the offense. Mail and wire fraud are both money laundering predicate offenses by virtue of their status as RICO predicates. The most commonly prosecuted federal money laundering statute, 18 U.S.C. § 1956, outlaws, among other things, knowingly engaging in a financial transaction involving the proceeds generated by a \"specified unlawful activity\" (a predicate offense) for the purpose (1) of laundering the proceeds (i.e., concealing their source or ownership), or (2) of promoting further predicating offenses. To establish the concealment offense, the government must establish that \"(1) [the] defendant conducted, or attempted to conduct a financial transaction which in any way or degree affected interstate commerce or foreign commerce; (2) the financial transaction involved proceeds of illegal activity; (3) [the] defendant knew the property represented proceeds of some form of unlawful activity, [such as mail or wire fraud]; and (4) [the] defendant conducted or attempted to conduct the financial transaction knowing the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds of specified unlawful activity.\" To prove the promotional offense, \"the Government must show that the defendant: (1) conducted or attempted to conduct a financial transaction; (2) which the defendant then knew involved the proceeds of unlawful activity; (3) with the intent to promote or further unlawful activity.\" Nothing in either provision suggests that the defendant must be shown to have committed the predicate offense. Moreover, simply establishing that the defendant spent or deposited the proceeds of the predicate offense is not enough without proof of an intent to promote or conceal. Either offense is punishable by imprisonment for not more than 20 years and a fine of not more than $500,000. Property involved in a transaction in violation of Section 1956 is subject to civil and criminal forfeiture. Merely depositing the proceeds of a money laundering predicate offense, like mail or wire fraud, does not alone constitute a violation of Section 1956. It is enough for a violation of 18 U.S.C. § 1957, however, if more than $10,000 is involved. Section 1957 uses Section 1956's definition of specified unlawful activities. Thus, mail and wire fraud violations may serve as the basis for the prosecution under Section 1957. \"Section 1957 differs from Section 1956 in two critical respects: It requires that the property have a value greater than $10,000, but it does not require that the defendant know of [the] design to conceal aspects of the transaction or that anyone have such a design.\" Violations are punishable by imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000) for organizations. The property involved in a violation is subject to forfeiture under either civil or criminal procedures. This category includes the offenses that were made federal crimes because they involve fraud against the United States, or because they are other frauds that share elements with the mail and wire fraud. The most prominent are the proscriptions against defrauding the United States by the submission of false claims, conspiracy to defraud the United States, and material false statements in matters within the jurisdiction of the United States. Bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting are mail and wire fraud look-alikes. Section 287 outlaws the knowing submission of a false claim against the United States. \"To prove a false claim, the government must prove that (1) [the defendant] 'made and presented' to the government a claim, (2) 'the claim was false, fictitious, or fraudulent,' (3) [the defendant] knew the claim was false, fictitious, or fraudulent, and (4) 'the claim was material' to the government.\" The offense carries a sentence of imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). The crime is one for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense, but either a private individual or the government may bring a civil action for treble damages under the False Claims Act. Section 287 offenses are neither RICO nor money laundering predicate offenses. Nevertheless, a defendant who presents his false claim by mail or email may find himself charged under both Section 287 and either the mail or wire fraud statutes. The general conspiracy statute has two parts. It outlaws conspiracies to violate the laws of the United States. More relevant here, it also outlaws conspiracies to defraud the United States. \"To convict on a charge under the 'defraud' clause, the government must show that the defendant (1) entered into an agreement (2) to obstruct a lawful government function (3) by deceitful or dishonest means and (4) committed at least one overt act in furtherance of the conspiracy.\" Thus, the \"fraud covered by the statute reaches any conspiracy for the purpose of impairing, obstructing or defeating the lawful functions of any department of the Government\" by \"deceit, craft or trickery, or at least by means that are dishonest.\" Unlike mail and wire fraud, the government need not show that the scheme was designed to deprive another of money, property, or honest services; it is enough to show that the scheme is designed to obstruct governmental functions. Conspiracy to defraud the United States is punishable by imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). It is neither a RICO nor a money laundering predicate offense. It is an offense for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense. Section 1001 outlaws knowingly and willfully making a material false statement on a matter within the jurisdiction of the executive, legislative, or judicial branch of the federal government. A matter is material for purposes of Section 1001 when \"it has a natural tendency to influence, or [is] capable of influencing, the decision of\" the individual or entity to whom it is addressed. A matter is within the jurisdiction of a federal entity \"when it has the power to exercise authority in a particular matter,\" and federal jurisdiction \"may exist when false statements [are] made to state or local government agencies receiving federal support or subject to federal regulation.\" A violation of Section 1001 is punishable by imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). It is neither a RICO nor a money laundering predicate offense. It is an offense for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense, unless the offense relates to the activities of various federal financial receivers and conservators. Moreover, in a situation where the offense involves the submission of a false claim, either a private individual or the government may bring a civil action for treble damages under the False Claims Act. Chapter 63 contains four other fraud proscriptions in addition to mail and wire fraud: bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting. Each relies on a jurisdictional base other than use of the mail or wire communications. The bank fraud statute outlaws (1) schemes to defraud a federally insured financial institution, and (2) schemes to falsely obtain property from such an institution. To establish the bank- property scheme to defraud offense, \"the Government must prove: (1) the defendant knowingly executed or attempted to execute a scheme or artifice to defraud a financial institution; (2) the defendant did so with the intent to defraud a financial institution; and (3) the financial institution was federally insured.\" As for the bank-custody offense, \"the government must prove (1) that a scheme existed to obtain moneys, funds, or credit in the custody of a federally-insured bank by fraud; (2) that the defendant participated in the scheme by means of material false pretenses, representations, or promises; and (3) that the defendant acted knowingly.\" Violation of either offense is punishable by imprisonment for not more than 30 years and a fine of not more than $1 million. Bank fraud is both a RICO and a money laundering predicate offense. Conviction also requires an order for victim restitution. Property constituting the proceeds of a violation is subject to forfeiture under either civil or criminal procedure. The health care fraud provision follows the pattern of other Chapter 63 offenses. It condemns schemes to defraud. The schemes it proscribes include honest services fraud in the form of bribery and kickbacks. Attempts and conspiracies to violate its prohibitions carry the same penalties as the complete offense it describes. It is often prosecuted along with other related offenses. Parsed to its elements, the section declares: [a] Whoever [b] knowingly and willfully [c] executes or attempts to execute [d] a scheme or artifice (1) to defraud any health care benefit program, or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property owned by, or under the custody or control of, any health care benefit program [e] in connection with the delivery of or payment for health care benefits, items, or services shall be … Section 1347's penalty structure is somewhat distinctive. General violations are punishable by imprisonment for not more than 10 years and fines of not more than $250,000. Should serious bodily injury result, however, the maximum penalty is increased to imprisonment for not more than 20 years; should death result, the maximum penalty is imprisonment for life or any term of years. Section 1347 offenses are neither money laundering nor RICO predicate offenses, and proceeds of a violation of Section 1347 are not subject to confiscation. Victims, however, are entitled to restitution. Section 1348, the securities and commodities fraud prohibition, continues the progression of separating its defrauding feature from its obtaining-property feature. The elements of defrauding offense \"are (1) fraudulent intent, (2) a scheme or artifice to defraud, and (3) a nexus with a security.\" To prove a violation of Section 1348(2), the government must establish that the defendant (1) executed, or attempted to execute, a scheme or artifice; (2) with fraudulent intent; (3) in order to obtain money or property; (4) by material false or fraudulent pretenses, representations, or promises. A conviction for mail fraud or wire fraud, or both, sometimes accompanies a conviction for securities fraud under Section 1348. Under either version of Section 1348, offenders face imprisonment for not more than 25 years and fines of not more than $250,000 (not more than $500,000 for organizations). The offense s are neither money laundering nor RICO predicate offense s . Victim restitution must be ordered upon conviction, but forfeiture is not authorized. \"The substantive offense of fraud in foreign labor contracting [under 18 U.S.C. § 1351] occurs when someone: (1) recruits, solicits, or hires a person outside the United States, or causes another person to do so, or attempts to do so; (2) does so by means of materially false or fraudulent pretenses, representations or promises regarding that employment; and (3) acts knowingly and with intent to defraud.\" The offense occurs outside the United States when related to a federal contract or U.S. presence abroad. The offense is a RICO predicate offense and consequently a money laundering predicate offense as well. A restitution order is required at sentencing, but forfeiture is not authorized. After the Supreme Court's 2010 decision in Skillin g v. United States , honest services mail and wire fraud consists of bribery and kickback schemes furthered by use of the mail or wire communications. Mail and wire fraud aside, the principal bribery and kickback statutes include 18 U.S.C. §§ 201(b)(1) (bribery of federal officials), 666 (bribery relating to federal programs), 1951 (extortion under color of official right); 15 U.S.C §§ 78dd-1 to 78dd-3 (foreign corrupt practices); and 42 U.S.C. § 1320a-7b (Medicare/Medicaid anti-kickback). Conviction for violation of Section 201(b)(1) \"requires a showing that something of value was corruptly ... offered or promised to a public official ... or corruptly ... sought ... or agreed to be received by a public official with intent ... to influence any official act ... or in return for 'being influenced in the performance of any official act.\" The hallmark of the offense is a corrupt quid pro quo, \"a specific intent to give or receive something of value in exchange for an official act.\" The public officials covered include federal officers and employees, those of the District of Columbia, and those who perform tasks for or on behalf of the United States or any of its departments or agencies. The official acts that constitute the objective of the corrupt bargain include any decision or action relating to any matter coming before an individual in his official capacity. Section 201 punishes bribery with imprisonment for up to 15 years, a fine of up to $250,000 (up to $500,000 for an organization), and disqualification from future federal office or employment. Section 201 is a RICO predicate offense and consequently also a money laundering predicate offense. The proceeds of a bribe in violation of Section 201 are subject to forfeiture under either civil or criminal procedure. Section 666 outlaws both (1) fraud and (2) bribery by the faithless agents of state, local, tribal, or private entities—that receive more than $10,000 in federal benefits—in relation to a transaction of $5,000 or more. \"A violation of Section 666(a)(1)(A) requires proof of five elements. The government must prove that: (1) a defendant was an agent of an organization, government, or agency; (2) in a one-year period that organization, government, or agency received federal benefits in excess of $10,000; (3) a defendant … obtained by fraud … ; (4) … property owned by, or in the care, custody, or control of, the organization, government, or entity; and (5) the value of that property was at least $5,000.\" \"A person is guilty under § 666[(a)(1)(B)] if he, being an agent of an organization, government, or governmental agency that receives federal-program funds, corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more.\" Agents are statutorily defined as \"person[s] authorized to act on behalf of another person or a government and, in the case of an organization or government, includes a servant or employee, and a partner, director, officer, manager, and representative.\" The circuits appear divided over whether the government must establish a quid pro quo as in a Section 201 bribery case. The government, however, need not establish that the tainted transaction involves federal funds. Violations of Section 666 are punishable by imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000 for organizations). Section 666 offenses are money laundering predicate offenses. Section 666 offenses are not among the RICO federal predicate offenses, although bribery in violation of state felony laws is a RICO predicate offense. The proceeds of a bribe in violation of Section 666 are subject to forfeiture under either civil or criminal procedure. The Hobbs Act, 18 U.S.C. § 1951, outlaws obtaining the property of another under \"color of official right,\" in a manner that has an effect on interstate commerce. Conviction requires the government to prove that the defendant \"(1) was a government official; (2) who accepted property to which she was not entitled; (3) knowing that she was not entitled to the property; and (4) knowing that the payment was given in return for officials acts: (5) which had at least a de minimis effect on commerce.\" Conviction does not require that the public official sought or induced payment: \"the government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts.\" Hobbs Act violations are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for an organization). Hobbs Act violations are RICO predicate offenses and thus money laundering predicates as well. The proceeds of a Hobbs Act violation are subject to forfeiture under either civil or criminal procedure. The bribery provisions of the Foreign Corrupt Practices Act (FCPA) are three: 15 U.S.C. §§ 78dd-1 (trade practices by issuers), 78dd-2 (trade practices by domestic concerns), and 78dd-3 (trade practices by others within the United States). Other than the class of potential defendants, the elements of the three are comparable. They make[] it a crime to: (1) willfully; (2) make use of the mail or any means or instrumentality of interstate commerce; (3) corruptly; (4) in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to; (5) any foreign official; (6) for purposes of [either] influencing any act or decision of such foreign official in his official capacity [or] inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official [or] securing any improper advantage; (7) in order to assist such [corporation] in obtaining or retaining business for or with, or directing business to, any person. None of the three proscriptions apply to payments \"to expedite or to secure the performance of a routine governmental action,\" and each affords defendants an affirmative defense for payments that are lawful under the applicable foreign law or regulation. Violations are punishable by imprisonment for not more than five years and by a fine of not more than $100,000 (not more than $2 million for organizations). Foreign Corrupt Practices Act violations are not RICO predicate offenses, but they are money laundering predicates. The proceeds of a violation are subject to forfeiture under either civil or criminal procedure. The Medicare/Medicaid kickback prohibition in 42 U.S.C. 1320a-7b(b) outlaws \"knowingly and willfully [offering or paying], soliciting [or] receiving, any remuneration (including any kickback) ... (A) to induce the referral of [, or (B) the purchase with respect to] Medicare [or] Medicaid beneficiaries ... any item or service for which payment may be made in whole or in part under the Medicare [or] Medicaid programs....\" Violations are punishable by imprisonment for not more than five years and by a fine of not more than $25,000. Section 1320a-7b kickback violations are money laundering, but not RICO, predicate offenses. The proceeds of a violation are subject to forfeiture under either civil or criminal procedure. Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( 42 U.S.C. 5122 )), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. For the purposes of this chapter, the term \"scheme or artifice to defraud\" includes a scheme or artifice to deprive another of the intangible right of honest services. Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.", "summary": "The mail and wire fraud statutes are exceptionally broad. Their scope has occasionally given the courts pause. Nevertheless, prosecutions in their name have brought to an end schemes that have bilked victims out of millions, and sometimes billions, of dollars. The statutes proscribe (1) causing the use of the mail or wire communications, including email; (2) in conjunction with a scheme to intentionally defraud another of money or property; (3) by means of a material deception. The offenses, along with attempts or conspiracies to commit them, carry a term of imprisonment of up to 30 years in some cases, followed by a term of supervised release. Offenders also face the prospect of fines, orders to make restitution, and forfeiture of their property. The mail and wire fraud statutes overlap with a surprising number of other federal criminal statutes. Conduct that supports a prosecution under the mail or wire fraud statutes will often support prosecution under one or more other criminal provision(s). These companion offenses include (1) those that use mail or wire fraud as an element of a separate offense, like racketeering or money laundering; (2) those that condemn fraud on some jurisdictional basis other than use of the mail or wire communications, like those that outlaw defrauding the federal government or federally insured banks; and (3) those that proscribe other deprivations of honest services (i.e., bribery and kickbacks), like the statutes that ban bribery of federal officials or in connection with federal programs. Among the crimes for which mail or wire fraud may serve as an element, RICO (Racketeer Influenced and Corrupt Organizations Act) outlaws employing the patterned commission of predicate offenses to conduct the affairs of an enterprise that impacts commerce. Money laundering consists of transactions involving the proceeds of a predicate offense in order to launder them or to promote further predicate offenses. The statutes that prohibit fraud in some form or another are the most diverse of the mail and wire fraud companions. Congress modeled some after the mail and wire fraud statutes, incorporating elements of a scheme to defraud or obtain property by false pretenses into statutes that outlaw bank fraud, health care fraud, securities fraud, and foreign labor contracting fraud. Congress designed others to protect the public fisc by proscribing false claims against the United States, conspiracies to defraud the United States by obstructing its functions, and false statements in matters within the jurisdiction of the United States and its departments and agencies. Federal bribery and kickback statutes populate the third class of wire and mail fraud companions. One provision bans offering or accepting a thing of value in exchange for the performance or forbearance of a federal official act. Another condemns bribery of faithless agents in connection with federally funded programs and activities. A third, the Hobbs Act, outlaws bribery as a form of extortion under the color of official right. The fines, prison sentences, and other consequences that follow conviction for wire and mail fraud companions vary considerably, with fines from not more than $25,000 to not more than $2 million and prison terms from not more than five years to life.", "document_type": "crs"}
{"report": "Congress passed the Community Reinvestment Act of 1977 (CRA; P.L. 95-128 , 12 U.S.C. §§2901-2908) in response to concerns that federally insured banking institutions were not making sufficient credit available in the local areas in which they were chartered and acquiring deposits. According to some in Con gress, the granting of a public bank charter should translate into a continuing obligation for that bank to serve the credit needs of the public where it was chartered. Consequently, the CRA was enacted to \"re-affirm the obligation of federally chartered or insured financial institutions to serve the convenience and needs of their service areas\" and \"to help meet the credit needs of the localities in which they are chartered, consistent with the prudent operation of the institution.\" The CRA requires federal banking regulators to conduct examinations to assess whether a bank is meeting local credit needs. The regulators issue CRA credits, or points, where banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit low- and moderate-income (LMI) areas and entities—that occur within assessment areas (where institutions have local deposit-taking operations). These credits are then used to issue each bank a performance rating from a four-tiered system of descriptive performance levels (Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance). The CRA requires federal banking regulators to take those ratings into account when institutions apply for charters, branches, mergers, and acquisitions, or seek to take other actions that require regulatory approval. Congress became concerned with the geographical mismatch of deposit-taking and lending activities for a variety of reasons. Deposits serve as a primary source of borrowed funds that banks may use to facilitate their lending. Hence, there was concern that banks were using deposits collected from local neighborhoods to fund out-of-state as well as various international lending activities at the expense of addressing the local area's housing, agricultural, and small business credit needs. Another motivation for congressional action was to discourage redlining practices. One type of redlining can be defined as the refusal of a bank to make credit available to all of the neighborhoods in its immediate locality, including LMI neighborhoods where the bank may have collected deposits. A second type of redlining is the practice of denying a creditworthy applicant a loan for housing located in a certain neighborhood even though the applicant may qualify for a similar loan in another neighborhood. This type of redlining pertains to circumstances in which a bank refuses to serve all of the residents in an area, perhaps due to discrimination. The CRA applies to banking institutions with deposits insured by the Federal Deposit Insurance Corporation (FDIC), such as national banks, savings associations, and state-chartered commercial and savings banks. The CRA does not apply to credit unions, insurance companies, securities companies, and other nonbank institutions because of the differences in their financial business models. The Office of the Comptroller of the Currency (OCC), the Federal Reserve System, and the FDIC administer the CRA, which is implemented via Regulation BB. The CRA requires federal banking regulatory agencies to evaluate the extent to which regulated institutions are effectively meeting the credit needs within their designated assessment areas, including LMI neighborhoods, in a manner consistent with the federal prudential regulations for safety and soundness . The CRA's impact on lending activity has been publicly debated. Some observers are concerned that the CRA may induce banks to forgo more profitable lending opportunities in nontargeted neighborhoods by encouraging a disproportionate amount of lending in LMI communities. Furthermore, some argue that the CRA compels banks to make loans to higher-risk borrowers that are more likely to have repayment problems, which may subsequently compromise the financial stability of the banking system. For example, some researchers have attributed the increase in risky lending prior to the 2007-2009 recession to banks attempting to comply with CRA objectives. Others are concerned that enforcement of CRA objectives has not been stringent enough to compel banks to increase financial services in LMI areas. Almost all banks receive Satisfactory or better performance ratings (discussed in more detail below) on their CRA examinations, which some may consider indicative of weak enforcement. This report informs the congressional debate concerning the CRA's effectiveness in incentivizing bank lending and investment activity to LMI customers. It begins with a description of bank CRA examinations, including how a bank delineates its assessment area; the activities that may qualify for points under the three tests (i.e., lending, investment, and service) that collectively make up the CRA examination; and how the composite CRA rating is calculated. Next, the report analyzes the difficulty in attributing bank lending decisions to CRA incentives. For example, the CRA does not specify the quality and quantity of CRA-qualifying activities, meaning that CRA compliance does not require adherence to lending quotas or benchmarks. Without explicit benchmarks, linking the composition of banks' loan portfolios to either too strong or too weak CRA enforcement is difficult. Banks are also unlikely to get CRA credit for all of the loans they make to LMI customers. Specifically, higher-risk loans that banking regulators explicitly discourage are unlikely to be eligible for CRA consideration. Furthermore, greater mobility of lending and deposit-taking activity across regional boundaries due to various financial market innovations has complicated the ability to geographically link various financial activities. Hence, many banks' financial activities occurring in a designated assessment area that are eligible for CRA consideration may simply be profitable, meaning they may have occurred without the CRA incentive. Finally, this report summarizes recent policy discussions regarding modernization of the CRA. As noted above, the federal banking regulators conduct regular examinations of banks to assess whether they meet local credit needs in designated assessment areas. The regulators issue CRA credits, or points, when banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities—that occur within assessment areas. Regulation BB provides the criteria that a bank's board of directors must use to determine the assessment area(s) in which its primary regulator will conduct its CRA examination. The assessment area typically has a geographical definition—the location of a bank's main office, branches, and deposit-taking automatic teller machines, as well as surrounding areas where the bank originates and purchases a substantial portion of loans. Assessment areas must generally include at least one metropolitan statistical area (MSA) or at least one contiguous political subdivision, such as a county, city, or town. Regulation BB also requires that assessment areas may not reflect illegal discrimination, arbitrarily exclude LMI geographies, and extend substantially beyond an MSA boundary or a state boundary (unless the assessment area is located in a multistate MSA). Banking regulators regularly review a bank's assessment area delineations for compliance with Regulation BB requirements as part of the CRA examination. Instead of a more conventionally delineated assessment area, certain banking firms may obtain permission to devise a strategic plan for compliance with Regulation BB requirements. For example, wholesale and limited purpose banks are specialized banks with nontraditional business models. Wholesale banks provide services to larger clients, such as large corporations and other financial institutions; they generally do not provide financial services to retail clients, such as individuals and small businesses. Limited purpose banks offer a narrow product line (e.g., concentration in credit card lending) rather than provide a wider range of financial products and services. These banking firms typically apply to their primary regulators to request designation as a wholesale or limited purpose bank and, for CRA examination purposes, are evaluated under strategic plan options that have been tailored for their distinctive capacities, business strategies, and expertise. The option to develop a strategic plan of pre-defined CRA performance goals is available to any bank subject to the CRA. The public is allowed time (e.g., 30 days) to provide input on the draft of a bank's strategic plan, after which the bank submits the plan to its primary regulator for approval (within 60 days after the application is received). Regulation BB does not impose lending quotas or benchmarks. Instead, Regulation BB provides banks with a wide variety of options to serve the needs of their assessment areas. Qualifying CRA activities include mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities. For example, banks may receive CRA credits for such activities as investing in special purpose community development entities (CDEs), which facilitate capital investments in LMI communities (discussed below); providing support (e.g., consulting, detailing an employee, processing transactions for free or at a discounted rate, and providing office facilities) to minority- and women-owned financial institutions and low-income credit unions (MWLIs), thereby enhancing their ability to serve LMI customers; serving as a joint lender for a loan originated by MWLIs; facilitating financial literacy education to LMI communities, including any support of efforts of MWLIs and CDEs to provide financial literacy education; opening or maintaining bank branches and other transactions facilities in LMI communities and designated disaster areas; providing low-cost education loans to low-income borrowers; and offering international remittance services in LMI communities. The examples listed above are not comprehensive, but they illustrate several activities banks may engage in to obtain consideration for CRA credits. The banking regulators will consider awarding CRA credits or points to a bank if its qualifying activities occur within an assigned assessment area. The points are then used to compute a bank's overall composite CRA rating. Regulators apply up to three tests, which are known as the lending , investment , and service tests, respectively, to determine whether a bank is meeting local credit need in designated assessment areas. The lending test evaluates the number, amount, and distribution across income and geographic classifications of a bank's mortgage, small business, small farm, and consumer loans. The investment test grades a bank's community development investments in the assessment area. The service test examines a bank's retail service delivery, such as the availability of branches and low-cost checking in the assessment area. The point system for bank performance under the lending, investment, and service tests is illustrated in Table 1 . The lending test is generally regarded as the most important of the three tests, awarding banks the most points (CRA credits) in all rating categories. As shown in Table 1 , banks receive fewer credits for making CRA-qualified investments than for providing direct loans to individuals under the lending test. In some instances, an activity may qualify for more than one of the performance tests. Federal banking regulators evaluate financial institutions based upon their capacity, constraints, and business strategies; demographic and economic data; lending, investment, and service opportunities; and benchmark against competitors and peers. Because these factors vary across banks, the CRA examination was customized in 1995 to account for differences in bank sizes and business models. In 2005, the bank size definitions were revised to include small , intermediate small , and large banks. The bank regulators also indexed the asset size thresholds—which are adjusted annually—to inflation using the Consumer Price Index. As of January 1, 2019, a small bank is defined as having less than $1.284 billion in assets as of December 31 of either of the prior two calendar years; an intermediate small bank has at least $321 million as of December 31 of both of the prior two calendar years but less than $1.284 billion as of December 31 of either of the prior two calendar years; and a large bank has $1.284 billion or more in assets. Small banks are typically evaluated under the lending test. Regulators review (1) loan-to-deposit ratios; (2) percentage of loans in an assessment area; (3) lending to borrowers of different incomes and in different amounts; (4) geographical distribution of loans; and (5) actions on complaints about performance. Intermediate small banks are subject to both the lending and investment tests. Large banks are subject to all three tests. As mentioned previously, direct lending to borrowers, taking place in what is referred to as primary lending markets , qualify for CRA credit under the lending test. Investments taking place in secondary lending markets , in which investors purchase loans that have already been originated (such that little or no direct interaction occurs between investors and borrowers), qualify for CRA credit under the investment test. Secondary market investors may assume the default risk associated with a loan if the entire loan is purchased. Alternatively, if a set of loans are pooled together, then numerous secondary investors may purchase financial securities in which the returns are generated by the principal and interest repayments from the underlying loan pool, thereby sharing the lending risk. Direct ownership of loans or purchases of smaller portions (debt securities) of a pool of loans, therefore, are simply alternative methods to facilitate lending. As shown in Table 1 above, a bank may receive CRA consideration under the lending test for making a loan to LMI individuals that is guaranteed by a federal agency, such as the Federal Home Administration (FHA). If, however, a bank purchases securities backed by pools of FHA-guaranteed mortgage originations, this activity receives credit under the investment test. Thus, the bank receives less CRA credit when the financial risk is shared with other lenders than it would for making a direct loan (and holding all of the lending risk) even though it would still facilitate lending to LMI borrowers. In 2005, the activities that qualify for CRA credit were expanded to encourage banks to make public welfare investments. More specifically, qualifying activities include a public welfare investment (PWI) that promotes the public welfare by providing housing, services, or jobs that primarily benefit LMI individuals; and a community development investment (CDI), economic development investment , or project that meets the PWI requirements. Examples of CDI activities include promoting affordable housing, financing small businesses and farms, and conducting activities that revitalize LMI areas. Banks may engage in certain activities that typically would not be permitted under other banking laws as long as these activities promote the public welfare and do not expose institutions to unlimited liability. For example, banks generally are not allowed to make direct purchases of the preferred or common equity shares of other banking firms; however, banks may purchase equity shares of institutions with a primary mission of community development (discussed in more detail in the Appendix ) up to an allowable CDI limit. The Financial Services Regulatory Relief Act of 2006 ( P.L. 109-351 ) increased the amount that national banking associations and state banks (that are members of the Federal Reserve System) may invest in a single institution from 10% to 15% of a bank's unimpaired capital and unimpaired surplus. CDIs that benefit a bank's designated assessment area may qualify for CRA credit. For CRA purposes, the definition of a CDI was expanded in 2005 to include \"underserved and distressed\" rural areas and \"designated disaster areas\" to aid the regional rebuilding from severe hurricanes, flooding, earthquakes, tornados, and other disasters. The disaster area provision allows banks anywhere in America to receive consideration for CRA credit if they facilitate making credit available to a distressed location or geographic area outside of their own assessment areas. Thus, the 2005 revisions to the PWI and CDI definitions made more banking activities eligible for CRA credits. The banking regulators would consider awarding full CRA credits under the lending test to banks that make CDI loans directly in their assessment areas. Under the investment test, however, the banking regulators may choose to prorate the credits awarded to indirect investments. The Appendix provides examples of CDI activities that would qualify for CRA consideration under the investment test. Any awarded CRA credits could be prorated given that investing banks typically would have less control over when and where the funds are loaned. The CRA was revised in 1989 to require descriptive CRA composite performance ratings that must be disclosed to the public. The composite ratings illustrated in Table 2 are tabulated using the points assigned from the individual tests (shown in Table 1 above). Grades of Outstanding and Satisfactory are acceptable; Satisfactory ratings in both community development and retail lending are necessary for a composite Satisfactory . Large banks must receive a sufficient amount of points from the investment and service tests to receive a composite Outstanding rating. Regulators include CRA ratings as a factor when lenders request permission to engage in certain activities, such as moving offices or buying another institution. Denying requests, particularly applications for mergers and acquisitions, is a mechanism that may be applied against banking organizations with ratings below Satisfactory . In 2005, the banking regulators also ruled that any evidence of discrimination or credit practices that violate an applicable law, rule, or regulation by any affiliate would adversely affect an agency's evaluation of a bank's CRA performance. Applicants with poor ratings may resubmit their applications after making the necessary improvements. Covered institutions must post a CRA notice in their main offices and make publicly available a record of their composite CRA performance. Given that the CRA is not a federal assistance program and that several regulators implement it separately, no single federal agency is responsible for evaluating its overall effectiveness. In 2000, Congress directed the Federal Reserve to study the CRA's effectiveness. The Federal Reserve's study reported that lending to LMI families had increased since the CRA's enactment but found it was not possible to directly attribute all of that increase to the CRA. For example, advancements in underwriting over the past several decades have enabled lenders to better predict and price borrower default risk, thus making credit available to borrowers that might have been rejected prior to such technological advances. This section examines the difficulty linking bank lending outcomes directly to the CRA, considering questions raised about the subjectivity of the CRA examination itself, whether prudential regulators use CRA to encourage banks to engage in high-risk lending, and whether the increased lending to LMI borrowers since CRA's enactment can be attributed to other profit-incentives that exist apart from the CRA. Questions have been raised as to whether the CRA examination itself is effective at measuring a bank's ability to meet local credit needs. For example, the CRA examinations have an element of subjectivity in terms of measuring both the quality and quantity of CRA compliance. In terms of quality, regulators determine the \"innovativeness or flexibility\" of qualified loan products; the \"innovativeness or complexity\" of qualified investments; or the \"innovativeness\" of ways banks service groups of customers previously not served. The number of points some CRA-qualifying investments receive relative to others is up to the regulator's judgment given that no formal definition of innovativeness has been established (although regulators provide a variety of examples as guidelines for banks to follow). In terms of quantity, there is no official quota indicating when banks have done enough CRA-qualified activities to receive a particular rating. Without specific definitions of the criteria or quotas, the CRA examination may be considered subjective. Almost all banks pass their CRA examinations. Figure 1 shows the average annual composite scores of banks that received CRA examinations as well as the annual number of bank examinations by size. In general, most banks receive a composite Satisfactory or better rating regardless of the number of banks examined in a year. For all years, approximately 97% or more of banks examined received ratings of Satisfactory or Outstanding . Whether the consistently high ratings reflect the CRA's influence on bank behavior or whether the CRA examination procedures need improvement is difficult to discern. Another issue raised is whether the CRA has resulted in banks making more high-risk loans given that it encourages banks to lend to LMI individuals (perhaps under the presumption that LMI individuals are less creditworthy relative to higher-income individuals). Since passage of the CRA, however, innovations have allowed lenders to better evaluate the creditworthiness of borrowers (e.g., credit scoring, the adoption of automated underwriting), thus enhancing credit availability to both high credit quality and credit-impaired individuals. Credit-impaired borrowers can be charged higher interest rates and fees than those with better credit histories to compensate lenders for taking on greater amounts of credit or default risk. Nontraditional loan products (e.g., interest-only, initially low interest rate) allow borrowers to obtain lower regular payments during the early stages of the loan, perhaps under the expectation that their financial circumstances may improve in the later stages as the loan payments adjust to reflect the true costs. The ability to charge higher prices or offer such nontraditional loan products may result in greater higher-risk lending. Because these technological developments in the financial industry occurred after enactment of the CRA, banks' willingness to enter into higher-risk lending markets arguably cannot be attributed solely to the CRA. Regulators arguably are more reluctant to award banks CRA credit for originating higher-risk loans given the scrutiny necessary to determine whether higher loan prices reflect elevated default risk levels or discriminatory or predatory lending practices. Primary bank regulators are concerned with both prudential regulation and consumer protection. It is difficult for regulators to monitor how well borrowers understood the disclosures regarding loan costs and features, or whether any discriminatory or predatory behavior occurred at the time of loan origination. Regulators use fair lending examinations to determine whether loan pricing practices have been applied fairly and consistently across applicants or if some steering to higher-priced loan products occurred. Nevertheless, although it is not impossible for banks to receive CRA credits for making some higher-priced loans, regulators are mindful of practices such as improper consumer disclosure, steering, or discrimination that inflate loan prices. Prudential regulators are also unlikely to encourage lending practices that might result in large concentrations of high-risk loans on bank balance sheets. Hence, certain lending activities—subprime mortgages and payday lending—have been explicitly discouraged by bank regulators, as discussed in more detail below. Although no consensus definition has emerged for subprime lending, this practice may generally be described as lending to borrowers with weak credit at higher costs relative to borrowers of higher credit quality. In September 2006, the banking regulatory agencies issued guidance on subprime lending that was restrictive in tone. The guidance warned banks of the risk posed by nontraditional mortgage loans, including interest-only and payment-option adjustable-rate mortgages. The agencies expressed concern about these loans because of the lack of principal amortization and the potential for negative amortization. Consequently, a study of 2006 Home Mortgage Disclosure Act data reported that banks subject to the CRA and their affiliates originated or purchased only 6% of the reported high-cost loans made to lower-income borrowers within their CRA assessment areas. Banks, therefore, received little or no CRA credit for subprime mortgage lending. Instead, federal regulators offered CRA consideration to banks that helped mitigate the effects of distressed subprime mortgages. On April 17, 2007, federal regulators provided examples of various arrangements that financial firms could provide to LMI borrowers to help them transition into affordable mortgages and avoid foreclosure. The various workout arrangements were eligible for favorable CRA consideration. Banks are unlikely to receive CRA consideration for originating subprime mortgages going forward. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203 ) requires lenders to consider consumers' ability to repay before extending them mortgage credit, and one way for lenders to comply is to originate qualified mortgages (QMs) that satisfy various underwriting and product-feature requirements. For example, QMs may not have any negative amortization features, interest-only payments, or points and fees that exceed specified caps of the total loan amount; in most cases, borrowers' debt-to-income ratios shall not exceed 43%. QM originations will give lenders legal protections if the required income verification and other proper underwriting procedures were followed. Given the legal protections afforded to QMs, some banks might show greater reluctance toward making non-QM loans. With this in mind, the federal banking regulators announced that banks choosing to make only or predominately QM loans should not expect to see an adverse effect on their CRA evaluations; however, the regulators did not indicate that CRA consideration would be given for non-QMs. Arguably, the federal banking regulators appear less inclined to use the CRA to encourage lending that could be subject to greater legal risks. Banks have demonstrated interest in providing financial services such as small dollar cash advances, which are similar to payday loans, in the form of subprime credit cards, overdraft protection services, and direct deposit advances. However, banks are discouraged from engaging in payday and similar forms of lending. Legislation, such as the Credit Card Accountability Responsibility and Disclosure Act of 2009 ( P.L. 111-24 ), placed restrictions on subprime credit card lending. In addition, federal banking regulators expressed concern when banks began offering deposit advance products due to the similarities to payday loans. Specifically, on April 25, 2013, the OCC, FDIC, and Federal Reserve expressed concerns that the high costs and repeated extensions of credit could add to borrower default risks and issued final supervisory guidance regarding the delivery of these products. Many banks subsequently discontinued offering deposit advances. In general, these legislative and regulatory efforts explicitly discourage banks from offering high-cost consumer financial products and thus such products are unlikely to receive CRA consideration. When various financial products are deemed unsound by bank regulators and not offered by banks, a possible consequence may be that some customers migrate to nonbank institutions willing to provide these higher-cost products. Accordingly, the effectiveness of the CRA diminishes if more individuals choose to seek financial products from nonbank institutions. In general, it can be difficult to determine the extent to which banks' financial decisions are motivated by CRA incentives, profit incentives, or both. Compliance with CRA does not require banks to make unprofitable, high-risk loans that would threaten the financial health of the bank. Instead, CRA loans have profit potential; and bank regulators require all loans, including CRA loans, to be prudently underwritten. As evidenced below, it may be difficult to determine whether banks have made particular financial decisions in response to profit or CRA incentives in cases where those incentives exist simultaneously. For example, banks increased their holdings of municipal bonds in 2009. Although banks may receive CRA consideration under the investment test for purchasing state and local municipal bonds that fund public and community development projects in their designated assessment areas, banks may choose this investment for reasons unrelated to CRA. During recessions, for example, banks may reduce direct (or primary market) lending activities and increase their holdings of securities in the wake of declining demand for and supply of direct loan originations that occur during economic slowdowns and early recovery periods. In addition, a provision of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided banks with a favorable tax incentive to invest in municipal bonds in the wake of the 2007-2009 recession. Hence, determining whether banks increased their municipal holdings because of a turn to securities markets for higher yields following a recession, a favorable tax incentive, or the CRA incentive is challenging. Similarly, banks increased their investments in Small Business Investment Corporations (SBICs, defined in the Appendix ) in 2010. Investments in SBICs allow banks to provide subordinate financing (rather than senior debt) to businesses. Senior lenders have first claims to the business's assets in case of failure; however, subordinate financiers provide funds in the form of mezzanine capital or equity, requiring a higher return because they are repaid after senior lenders. Banks generally are not allowed to act as subordinate financiers because they are not allowed to acquire ownership interests in private equity funds, unless such investments promote public welfare. Hence, attributing community development financing activities, such as SBIC investments, to CRA incentives may arguably be easier (relative to other financing activities) because the ability to engage in subordinate financing activities typically represents a CRA exemption from ordinary permissible banking activities. Following the 2007-2009 recession, however, U.S. interest rates dropped to historically low levels for an abnormally long period of time. Because low-yielding interest rate environments squeeze profits, banks were likely to search for higher-yielding and larger-sized lending opportunities, such as investments in SBICs. Hence, it remains difficult to determine whether a particular bank's decision to increase SBIC financing activities was driven by normal profit or CRA-related incentives. Between June 2016 and June 2017, more than 1700 U.S. bank branches were closed. Many branch closings occurred primarily in rural and low-income tract areas, raising concerns that banks would be able to circumvent their CRA obligation to lend and be evaluated in these areas. A traditional bank business model, however, relies primarily on having access to core deposits , a stable source of funds used to subsequently originate loans. Banks value geographic locations with greater potential to attract high core deposit volumes, which is also consistent with the CRA's requirement that assessment areas include at least one MSA or contiguous political subdivision (as previously discussed). Furthermore, using FDIC and U.S. Census Bureau data, the Federal Reserve noted that the number of branches per capita in 2017 was higher than two decades ago. Hence, determining whether branch closures reflect a bank's intentions to circumvent CRA compliance or to facilitate its ability to attract core deposits is challenging. On April 3, 2018, the U.S. Department of Treasury (Treasury) released recommendations to modernize CRA in a memorandum to the federal banking regulators (OCC, FCIC, and the Fed). Treasury highlighted four of its recommendations, summarized below. When the CRA was enacted in 1977, banks received deposits and made loans primarily through geographical branches. Assessment areas defined geographically arguably may not fully reflect the community served by a bank because of technology developments, such as the internet and mobile phone banking, prompting Treasury to call for revisiting the approach for determining banks' assessment areas. In 2016, the banking regulators issued Interagency Questions and Answers (Q&As) to provide banks guidance pertaining to CRA-eligible activities; however, Treasury noted that each regulator provides its examiners with additional guidance. Also, the Interagency Q&As illustrate past CRA-qualifying activities, but Treasury noted that no formal process currently exists to help determine whether potential (complex, innovative, or innovative) activities would qualify for CRA credit. Treasury recommends establishing clearer standards for CRA-qualifying activities and flexibility (expanding the types of loans, investments, and services that qualify for CRA credit), which may encourage banks to venture beyond activities that typically receive CRA credit. Treasury reports that each bank regulator follows a different examination schedule; the examinations are lengthy; and delays associated with the release of performance evaluations may limit the time banks can react to recommendations before their next CRA examination. Treasury recommends increasing the timeliness of the CRA examination process. Treasury recommends incorporating performance incentives that might result in more efficient lending activities. For example, CRA-qualifying loans may receive credit in the year of origination, but equity investments may receive credit each year that the investment is held. Treasury recommends consistent treatment of loans and investments, which may encourage banks to make more long-term loans (rather than sequences of short-term loans for the sake of being awarded CRA credits at each CRA examination). On August, 28, 2018, the OCC released an Advance Notice of Proposed Rulemaking (ANPR) to seek comments on ways to modernize the CRA framework. The ANPR solicited comments on the issues raised by Treasury among other things. The OCC's ANPR does not propose specific changes, but its content and the questions posed suggest that the OCC is exploring the possibility of adopting a quantitative metric-based approach to CRA performance evaluation, changing how assessment areas are defined, expanding CRA-qualifying activities, and reducing the complexity, ambiguity, and burden of the regulations on the bank industry. When the comment period closed on November 19, 2018, the OCC had received 1584 comments. The Federal Reserve and the FDIC did not join the OCC in releasing the ANPR. The Federal Reserve System, however, did host research symposiums around the country to gather comments pertaining to CRA reform. As reported by the Federal Reserve, some banking industry comments suggested, among other things, the need for consistency of the CRA examinations to facilitate CRA compliance. Yet some tailoring may still be necessary with respect to determining assessment areas that better reflect each bank's business models, particularly for models that use technology to deliver products and services. The regulators also heard from community and consumer groups. While expressing the need to retain focus on the historical context of the CRA, these groups highlighted the need to address issues pertaining to banking deserts in underserved communities. Community development investments (CDIs) that meet public welfare investment (PWI) requirements are those that promote the public welfare, primarily resulting in economic benefits for low- and moderate-income (LMI) individuals. This appendix provides examples of CDI activities that would qualify for consideration under the CRA investment test. In many cases, covered banks are more likely to take advantage of these optional vehicles to obtain CRA credits if they perceive the underlying investment opportunities to have profit potential. Loan Participations Banks and credit unions often use participation (syndicated) loans to jointly provide credit. When a financial firm (e.g., bank, credit union) originates a loan for a customer, it may decide to structure loan participation arrangements with other institutions. The loan originator often retains a larger portion of the loan and sells smaller portions to other financial institutions willing to participate. Suppose a financial firm originates a business or mortgage loan in a LMI neighborhood. A bank may receive CRA investment credit consideration by purchasing a participation, thus becoming a joint lender to the LMI borrower. An advantage of loan participations is that the default risk is divided and shared among the participating banks (as opposed to one financial firm retaining all of the risk). CRA consideration is possible if the activity occurs within the designated assessment area. For all participating banks to receive credit, some overlap in their designated assessment areas must exist. An exception is made for participations made to benefit designated disaster areas, in which all participating banks would receive CRA consideration regardless of location. State and Local Government Bonds State and local governments issue municipal bonds, and the proceeds are used to fund public projects, community development activities, and other qualifying activities. The interest that nonbank municipal bondholders receive is exempt from federal income taxes to encourage investment in hospitals, schools, infrastructure, and community development projects that require state and local funding. Legislative actions during the 1980s eliminated the tax-exempt status of interest earned from holdings of municipal bonds for banks. Although banks no longer have a tax incentive to purchase municipal bonds, they still consider the profitability of holding these loans, as they do with all lending opportunities. Furthermore, banks receive CRA investment consideration when purchasing state and local municipal bonds that fund public and community development projects in their designated assessment areas. CRA-Targeted Secondary Market Instruments Secondary market financial products have been developed to facilitate the ability of banks to participate in lending activities eligible for CRA consideration, such as purchasing mortgage-backed securities (MBSs) or shares of real estate investment trusts (REITs). A MBS is a pool of mortgage loans secured by residential properties; a multifamily MBS is a pool of mortgage loans secured by multifamily properties, consisting of structures designed for five or more residential units, such as apartment buildings, hospitals, nursing homes, and manufactured homes. CRA-MBSs are MBSs consisting of loans that originated in specific geographic assessment areas, thereby allowing bank purchases into these pools to be eligible for CRA consideration under the investment test. Similarly, REITs may also pool mortgages, mortgage MBSs, and real estate investments (e.g., real property, apartments, office buildings, shopping malls, hotels). Investors purchase shares in REIT pools and defer the taxes. Banks may only invest in mortgage REITs and MBS REITs. Similar to the CRA-MBSs, the REITs must consist of mortgages and MBSs that would be eligible for CRA consideration. The Community Development Trust REIT is an example of a REIT that serves as a CRA-qualified investment for banks. Community Development Financial Institutions and Equity Equivalent Investments The Community Development Financial Institutions (CDFI) Fund was created by the Riegle Community Development Regulatory Improvement Act of 1994 (the Riegle Act; P.L. 103-325 ). The CDFI Fund was established to promote economic development for distressed urban and rural communities. The CDFI Fund, currently located within the U.S. Department of the Treasury, is authorized to certify banks, credit unions, nonprofit loan funds, and (for-profit and nonprofit) venture capital funds as designated CDFIs. In other words, a bank may satisfy the requirements to become a CDFI, but not all CDFIs are banks. The primary focus of institutions with CDFI certification is to serve the financial needs of economically distressed people and places. The designation also makes these institutions eligible to receive financial awards and other assistance from the CDFI Fund. In contrast to non-CDFI banks, some CDFI banks have greater difficulty borrowing funds and then transforming them into loans for riskier, economically distressed consumers. The lack of loan level data for most CDFI banks causes creditors to hesitate in making low-cost, short-term loans to these institutions. Specifically, the lack of information on loan defaults and prepayment rates on CDFI banking assets is likely to result in limited ability to sell these loan originations to secondary loan markets. Consequently, the retention of higher-risk loans, combined with limited access to low-cost, short-term funding, makes CDFI banks more vulnerable to liquidity shortages. Hence, CDFIs rely primarily on funding their loans (assets) with net assets , which are proceeds analogous to the equity of a traditional bank or net worth of a credit union. CDFI net assets are often acquired in the form of awards or grants from the CDFI Fund or for-profit banks. Funding assets with net assets is less expensive for CDFIs than funding with longer-term borrowings. Banks may obtain CRA investment credit consideration by making investments to CDFIs, which provides CDFIs with net assets (equity). Under PWI authority, banks are allowed to make equity investments in specialized financial institutions, such as CDFIs, as long as they are considered by their safety and soundness regulator to be at least adequately capitalized . Furthermore, the final Basel III notification of proposed regulation (NPR) allows for preferential capital treatment for equity investments made under PWI authority, meaning equity investments to designated CDFIs may receive more favorable capital treatment. Consequently, banks often provide funds to CDFIs through equity equivalent investments (EQ2s), which are debt instruments issued by CDFIs with a continuous rolling (indeterminate) maturity. EQ2s, from a bank's perspective, are analogous to holding convertible preferred stock with a regularly scheduled repayment. Hence, banks may view EQ2s as a potentially profitable opportunity to invest in other specialized financial institutions and receive CRA consideration, particularly when the funds are subsequently used by CDFIs to originate loans in the banks' assessment areas. Small Business Investment Companies The Small Business Administration (SBA) was established in 1953 by the Small Business Act of 1953 (P.L. 83-163) to support small businesses' access to capital in a variety of ways. Although issuing loan guarantees for small businesses is a significant component of its operations, the SBA also has the authority to facilitate the equity financing of small business ventures through its Small Business Investment Company (SBIC) program, which was established by the Small Business Investment Act of 1958 (P.L. 85-699). SBICs that are licensed and regulated by the SBA may provide debt and equity financing and, although not a program requirement, educational (management consulting) resources for businesses that meet certain SBA size requirements. Banks may act as limited partners if they choose to provide funds to SBICs, which act as general partners. Banks may establish their own SBICs, jointly establish SBICs (with other banks), or provide funds to existing SBICs. SBICs subsequently use bank funding to invest in the long-term debt and equity securities of small, independent (SBA-eligible) businesses, and banks may receive CRA investment consideration if the activities benefit their assessment areas. Community banks invest in SBICs because of the profit potential as well as the opportunity to establish long-term relationships with business clients during their infancy stages. Banks that are considered by their regulators to be adequately capitalized are allowed to invest in these specialized financial institutions under PWI authority, but the investments still receive risk-based capital treatment. SBIC assets, similar to CDFIs, are illiquid given the difficulty to obtain credit ratings for SBIC investments; thus, they cannot be sold in secondary markets. Because banks risk losing the principal of their equity investments, they are required to perform the proper due diligence associated with prudent underwriting. Tax Credits The low-income housing tax credit (LIHTC) program was created by the Tax Reform Act of 1986 ( P.L. 99-514 ) to encourage the development and rehabilitation of affordable rental housing. Generally speaking, government (federal or state) issued tax credits may be bought and, in many cases, sold like any other financial asset (e.g., stocks and bonds). Owners of tax credits may reduce their tax liabilities either by the amount of the credits or by using the formulas specified on those credits, assuming the owners have participated in the specified activities that the government wants to encourage. For LIHTCs, banks may use a formula to reduce their federal tax liabilities when they provide either credit or equity contributions (grants) for the construction and rehabilitation of affordable housing. If a bank also owns a LIHTC, then a percentage of the equity grant may be tax deductible if the CDFI uses the funds from the grant to finance affordable rental housing. Furthermore, banks may receive consideration for CRA-qualified investment credits. After a domestic corporation or partnership receives designation as a Community Development Entity (CDE) from the CFDI Fund, it may apply for New Markets Tax Credits (NMTCs). Encouraging capital investments in LMI communities is the primary mission of CDEs, and CDFIs and SBICs automatically qualify as CDEs. Only CDEs are eligible to compete for NMTCs, which are allocated by the CDFI Fund via a competitive process. Once awarded an allocation of NMTCs, the CDE must obtain equity investments in exchange for the credits. Then, the equity proceeds raised must either be used to provide loans or technical assistance or deployed in eligible community investment activities. Only for-profit CDEs, however, may provide NMTCs to their investors in exchange for equity investments. Investors making for-profit CDE equity investments can use the NMTCs to reduce their tax liabilities by a certain amount over a period of years. As previously discussed, a bank may receive CRA credit for making equity investments in nonprofit CDEs and for-profit subsidiaries, particularly if the investment occurs within the bank's assessment area. Furthermore, banks may be able to reduce their tax liabilities if they can obtain NMTCs from the CDEs in which their investments were made.", "summary": "The Community Reinvestment Act (CRA; P.L. 95-128, 12 U.S.C. §§2901-2908) addresses how banking institutions meet the credit needs of the areas they serve, particularly in low- and moderate-income (LMI) neighborhoods. The federal banking regulatory agencies—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)—currently implement the CRA. The regulators issue CRA credits, or points, where banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities—that occur with a designated assessment area. These credits are then used to issue each bank a performance rating. The CRA requires these ratings be taken into account when banks apply for charters, branches, mergers, and acquisitions among other things. The CRA, which was enacted in 1977, was subsequently revised in 1989 to require public disclosure of bank CRA ratings to establish a four-tiered system of descriptive performance levels (i.e., Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance). In 1995, the CRA examination was customized to account for differences in bank sizes and business models. In 2005, the bank size definitions were revised and indexed to the Consumer Price Index. The 2005 amendments also expanded opportunities for banks to earn CRA credit for public welfare investments (such as providing housing, services, or jobs that primarily benefit LMI individuals). Qualifying activities under the CRA have evolved to include consumer and business lending, community investments, and low-cost services that would benefit LMI areas and entities. Congressional interest in the CRA stems from various perceptions of its effectiveness. Some have argued that, by encouraging lending in LMI neighborhoods, the CRA may also encourage the issuance of higher-risk loans to borrowers likely to have repayment problems (under the presumption that low-income is correlated with lower creditworthiness), which can translate into losses for lenders. Others are concerned that the CRA is not generating sufficient incentives to increase credit availability to qualified LMI borrowers, which may impede economic recovery for some, particularly following the 2007-2009 recession. This report informs the congressional debate concerning the CRA's effectiveness in incentivizing bank lending and investment activity to LMI borrowers. After a discussion of the CRA's origins, it presents the CRA's examination process and bank activities that are eligible for consideration of CRA credits. Next, it discusses the difficulty of determining the CRA's influence on bank behavior. For example, the CRA does not specify the quality and quantity of CRA-qualifying activities, meaning that compliance with the CRA does not require adherence to lending quotas or benchmarks. In the absence of benchmarks, determining the extent to which CRA incentives have influenced LMI credit availability relative to other factors is not straightforward. Banks also face a variety of financial incentives—for example, capital requirements, the prevailing interest rate environment, changes in tax laws, and technological innovations—that influence how much (or how little) they lend to LMI borrowers. Because multiple financial profit incentives and CRA incentives tend to exist simultaneously, it is difficult to determine the extent to which CRA incentives have influenced LMI credit availability relative to other factors.", "document_type": "crs"}
{"report": "In 1956, the Army began the development of a family of air-transportable, armored multi-purpose vehicles intended to provide a lightweight, amphibious armored personnel carrier for armor and mechanized infantry units. Known as the M-113, it entered production in 1960 and saw extensive wartime service in Vietnam. Considered a reliable and versatile vehicle, a number of different variations of the M-113 were produced to fulfill such roles as a command and control vehicle, mortar carrier, and armored ambulance, to name but a few. The Army began replacing the M-113 infantry carrier version in the early 1980s with the M-2 Bradley Infantry Fighting Vehicle, but many non-infantry carrier versions of the M-113 were retained in service. According to the Army The Armored Multi-Purpose Vehicle (AMPV) is the proposed United States Army program for replacement of the M-113 Family of Vehicles (FOV) to mitigate current and future capability gaps in force protection, mobility, reliability, and interoperability by mission role variant within the Heavy Brigade Combat Team (HBCT) [now known as the Armored Brigade Combat Team – ABCT]. The AMPV will have multiple variants tailored to specific mission roles within HBCT. Mission roles are as follows: General Purpose, Medical Evacuation, Medical Treatment, Mortar Carrier, and Mission Command. AMPV is a vehicle integration program. Regarding the decision to replace remaining M-113s, the Army notes the following: The M-113 lacks the force protection and mobility needed to operate as part of combined arms teams within complex operational environments. For example, \"commanders will not allow them to leave Forward Operating Bases (FOBs) or enter contested areas without extensive mission protection and route clearance.\" The use of other vehicles for M-113 mission sets (casualty evacuations, for example) reduces unit combat effectiveness. The majority of the Army's M-113s are found in Armored Brigade Combat Teams (ABCTs), where they comprise 32% of the tracked armored vehicles organic to that organization. The 114 M-113 variants in the ABCT are distributed as follows: In addition to the AMPV requirement in the ABCTs, the Army also planned to procure an additional 1,922 AMPVs to replace M-113s in Echelons Above Brigade (EAB). The Army notes that these AMPVs might have different requirements than the ABCT AMPVs. DOD estimates if the M-113s are replaced by AMPVs at EAB, total program costs could be increased by an additional $6.5 billion. According to the Government Accountability Office (GAO), in March 2012, the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD, AT&L) approved a materiel development decision for AMPV and authorized the Army's entry into the materiel solution analysis phase. The Army completed the AMPV analysis of alternatives (AoA) in July 2012 and proposed a nondevelopmental vehicle (the candidate vehicle will be either an existing vehicle or a modified existing vehicle—not a vehicle that is specially designed and not in current service). Because the AMPV is to be a nondevelopmental vehicle, DOD decided the program would start at Milestone B, Engineering and Manufacturing Development (EMD) Phase and skip the Milestone A, Technology Development Phase. The Army planned for a full and open competition and aimed to award one industry bidder a 42-month EMD contract to develop all five AMPV variants. A draft Request for Proposal (RFP) released in March 2013 stated the EMD contract would be worth $1.46 billion, including $388 million for 29 EMD prototypes for testing between 2014 and 2017 and $1.08 billion for 289 low-rate initial production (LRIP) models between 2018 and 2020. The Army had planned on releasing the formal RFP in June 2013 but instead slipped the date until mid-September 2013, citing a delayed Defense Acquisition Board review attributed in part to Department of Defense civilian furloughs. The EMD contract award was originally planned for late 2014. The Army planned for an average unit manufacturing cost (AUMC) of $1.8 million per vehicle. On November 26, 2013, DOD issued an Acquisition Decision Memorandum (ADM) officially approving the Army's entry into the Milestone B, Engineering and Manufacturing Development (EMD) Phase. The ADM directed the Army to impose an Average Procurement Unit Cost less than or equal to $3.2 million at a production rate of not less than 180 vehicles per year. In addition, operations and sustainment costs were to be less than or equal to $400,000 per vehicle per year. The Army was also directed to down select to a single prime contractor at the completion of Milestone B. Also on November 26, 2013, the Army issued a new draft Request for Proposal (RFP) for the AMPV. This RFP stipulated the Army planned to award a five-year EMD contract in May 2014 worth $458 million to a single contractor for 29 prototypes. While the March 2013 RFP established an Average Unit Manufacturing Cost Ceiling for each AMPV at $1.8 million, this was rescinded to permit vendors greater flexibility. The EMD phase was scheduled to run between FY2015 and FY2019, followed by three years of low-rate initial production (LRIP) starting in 2020. On December 23, 2014, the Army announced it had selected BAE Systems Land and Armaments L.P. as the winner of the EMD contract. The initial award was for 52 months valued at about $382 million. During this period of performance, BAE was to produce 29 vehicles, which would be put through \"rigorous developmental and operational testing.\" In addition, the award provided for an optional low-rate initial production (LRIP) phase award in the future. If this phase is awarded, BAE would produce an additional 289 vehicles for a total contract value of $1.2 billion. The Army, in its announcement, emphasized the BAE EMD contract did not pertain to the 1,922 EAB AMPVs. According to reports, the AMPV successfully completed its Critical Design Review (CDR) on June 23, 2016. Successful completion of a CDR demonstrates the AMPV's design is stable, can be expected to meet established performance standards, and the program can be accomplished within its established budget. On December 15, 2016, BAE delivered the first general purpose AMPV to the Army for testing. The Army plans for six months of contractor tests, followed by one year of government testing and then Limited User Testing. In April 2018, BAE reportedly delivered all 29 AMPVs to the Army for testing. In September 2017, the Army reportedly started reliability, availability, and maintainability (RAM) testing for the AMPV. DOD defines RAM as follows: Reliability is the probability of an item to perform a required function under stated conditions for a specified period of time. Reliability is further divided into mission reliability and logistics reliability. Availability is a measure of the degree to which an item is in an operable state and can be committed at the start of a mission when the mission is called for at an unknown (random) point in time. Availability as measured by the user is a function of how often failures occur and corrective maintenance is required, how often preventive maintenance is performed, how quickly indicated failures can be isolated and repaired, how quickly preventive maintenance tasks can be performed, and how long logistics support delays contribute to down time. Maintainability is the ability of an item to be retained in, or restored to, a specified condition when maintenance is performed by personnel having specified skill levels, using prescribed procedures and resources, at each prescribed level of maintenance and repair. Due to budgetary constraints, the Army reportedly planned to provide upgraded EAB M-113s to a small number of units outside the continental United States and in South Korea and Europe. In August 2017, Army officials reportedly noted \"that the amount of time and resources it would take to achieve a pure fleet solution for both ABCTs and EAB units would likely push fielding into FY 2040 and beyond, which is not a suitable course of action.\" Officials also suggested that upgrading M-113s for EAB use was \"an interim solution until we can get to the optimal solution.\" The Army had planned to issue a request for proposal (RFP) for upgraded M-113s in the summer of 2018. A number of vendors, including General Dynamics Land Systems (GDLS), BAE Systems, and Science Applications International Corporation (SAIC), reportedly planned to respond to the RFP. Reportedly, on May 21, 2018, the Army indefinitely postponed its plans to upgrade EAB M-113s and also put on hold plans to issue an RFP for upgraded M-113s. In October 2018, Army leadership reportedly made the AMPV part of the Army's NGCV program, which is to be overseen by the Army's Futures Command (AFC). Previously, AMPV was overseen by the Program Executive Officer (PEO) for Ground Combat Systems (GCS), but program authority is now shared with the AFC's NGCV Cross Functional Team (CFT). Reportedly, the PEO GCS will retain acquisition legal authorities, but the CFT is to have input on requirements and acquisition schedule. The CFT is also to help prioritize corrective actions needed to address deficiencies identified during testing, as well as identify the resources that will be required. In December 2018, the AMPV program received approval to move into the Production and Deployment phase of acquisition. BAE Systems is to start the production of the first batch of 551 of a total of 2,907 AMPVs, with initial vehicle delivery early in 2020. The Army is expected to field 258 vehicles as part of the European Deterrence Initiative (EDI) in FY2020 and two brigade sets' worth of AMPVs by the end of calendar year 2020. In January 2019, it was reported that the Army had decided to cancel M-113 replacement at echelons above brigade (EAB) and reprogram funding for higher priorities. At this point, it is not readily apparent how the Army plans to address its previous 1,922 EAB AMPV requirement. On March 13, 2019, Army leadership reportedly announced the Army had decided to cut funding over the next five years for 93 programs—including the AMPV—to increase available funding for its new modernization strategy. While the Army has yet to release its final five-year reduction plan, program officials reportedly stated that the AMPV's overall top-line requirement would likely remain unchanged, but the Army would likely slow the per-year procurement rate. An April 28, 2017, DOD IG report noted the Army has effectively managed the AMPV program, in particular keeping it within cost requirements and scheduled timeframes, but also expressed the following concerns: The program might not meet entry requirements for initial production and testing (Milestone C) because the Army has not fully resolved vehicle performance and design demonstration concerns. As a result of the aforementioned performance and design concerns, the AMPV could experience increased costs and schedule delays as a result of addressing the IG's concerns. Because the U.S. Army Deputy Chief of Staff, Programming (G-8) had not revised the procurement quantities to reflect changes to the Army's equipment and force structure requirements, the program's estimated total cost and Average Procurement Unit Cost is not accurate. An April 2018 GAO Weapon Systems Annual Assessment expressed the following concerns: The program has experienced development contract cost growth of over 20 percent above target cost due to continued challenges meeting logistics, performance, and production requirements. However, program officials noted that the government's official cost position for AMPV development—based on the independent cost estimate prepared by the Office of Cost Assessment and Program Evaluation—has not changed as it includes adequate margin to account for the cost growth to date. AMPV remains dependent on other programs—such as the Army's Handheld, Manpack, and Small Form Fit Radios—for its key communication and networking capabilities. However, these programs have experienced their own acquisition challenges delaying their availability for the AMPV program. The program is including a legacy radio platform in its production vehicle design configuration, which will, according to program officials, readily accommodate future networking capabilities provided by these other programs. Given the aforementioned 2017 DOD IG concerns and GAO's 2018 concerns regarding cost growth, difficulties meeting a variety of developmental requirements, and dependencies on other programs that are experiencing developmental challenges, the AMPV program will likely receive significant scrutiny and oversight to insure it remains a cost effective and viable program. DOT&E's FY2018 Annual Report noted the following: Preliminary observations of the Limited Users Test indicate the AMPV meets or exceeds its goal of replacing the M113 family of vehicles (FoV) with a more capable platform. The AMPV demonstrated superior power and mobility over the M113 FoV. The AMPV was able to maintain its position in the formation. The AMPV operational mission availability and reliability were far superior to the M113 FoV. The platform provides potential for growth for power demand. Having common parts among all the variants should improve overall availability. The Mission Command variant facilitates digital mission command. The Medical Treatment and Medical Evacuation variants provide improved patient care and treatment capability with a new capability of conducting treatment on the move. The following deﬁciencies, if uncorrected, could adversely aﬀect AMPV performance: The driver's and vehicle commander's displays would frequently lock up, and the reboots each took 10 minutes. Due to the physical size and location, the commander's weapons station degraded situational awareness of the vehicle commander. The Joint Battle Command Platform and radios in the Mission Command vehicle cannot be removed from their docking stations within the vehicle. This limits the ability of the command group to share a common operational picture when operating as a Tactical Operations Center. The capability to support analog operations is degraded without the stowage for mapboards and plotting boards. The Medical Evacuation vehicle seat stowage and litter lift are diﬃcult to use. (The program manager has identiﬁed a design change to correct this deﬁciency.) The Mortar Carrier's ammunition storage is not optimized to support the mortar system. There is water leakage from the hatch and the roof leaks, aﬀecting the electronics in all variants and patient care in the medical variants. The preliminary survivability assessment identified minor vehicle design vulnerabilities that the Program Office is addressing with the vendor in order to meet survivability and force protections requirements. The FY2020 budget request includes Research Development, Testing and Evaluation (RDT&E) and Procurement funding requests for the AMPV in both the Base and Overseas Contingency Operations (OCO) budgets, as well as FY2020 requested quantities. The Army notes that FY2020 OCO funding will procure 66 AMPVs to support U.S. European Command's (USEUCOM's) requirement for unit equipment sets to deter potential adversaries and support the European Deterrence Initiative (EDI). As previously noted, the Army's optimal solution would be to replace EAB M-113s with AMPVs, but the Army felt that given current and projected budgetary constraints, only selected EAB units outside the continental United States and in South Korea and Europe would receive AMPVs while the remainder would receive upgraded M-113s as an interim solution. Reportedly, on May 21, 2018, the Army indefinitely postponed its plans to upgrade EAB M-113s and also put on hold plans to issue an RFP for upgraded M-113s. Reportedly in January 2019, the Army decided to cancel M-113 at EAB replacement efforts. Given the frequently changing nature of the Army's plans for addressing the replacement of legacy M-113s at EAB and the decision to cancel M-113 EAB replacement, it is not unreasonable to question if the Army has a clearly defined \"way ahead\" for addressing M-113s at EAB. Will the Army simply \"leave\" M-113s at EAB and continue to maintain them, will they replaced by another vehicle, or is the Army still trying to decide on a course of action and a program strategy? DOD's April 2017 IG report, while acknowledging effective management of the AMPV program, also raised fundamental concerns about performance and design, as well as inaccurate procurement quantities, which could adversely impact program costs. GAO's 2018 concerns regarding cost growth, difficulties meeting a variety of developmental requirements, and dependencies on other programs that are experiencing developmental challenges suggest that programmatic issues continue. DOT&E's 2018 findings noted a number of performance concerns as well. Given these concerns, a more in-depth examination of identified AMPV program deficiencies might prove beneficial for DOD and policymakers alike. As previously noted, on March 13, 2019, Army leadership reportedly announced the Army had decided to cut funding over the next five years for 93 programs—including the AMPV—to increase available funding for its new modernization strategy. While the Army is not expected to change its overall AMPV top-line requirement, it could slow the per- year procurement rate. Once the Army has finalized its revised modernization plan, including program cuts, it could be beneficial to provide policymakers with a revised overall AMPV procurement plan, as well as a new fielding plan for units—both Active and Reserves—designated to receive AMPVs. ", "summary": "The Armored Multi-Purpose Vehicle (AMPV) is the Army's proposed replacement for the Vietnam-era M-113 personnel carriers, which are still in service in a variety of support capacities in Armored Brigade Combat Teams (ABCTs). While M-113s no longer serve as infantry fighting vehicles, five variants of the M-113 are used as command and control vehicles, general purpose vehicles, mortar carriers, and medical treatment and evacuation vehicles. The AMPV is intended to be a nondevelopmental program (candidate vehicles will be either existing vehicles or modified existing vehicles—not vehicles that are specially designed and not currently in service). Some suggest a nondevelopmental vehicle might make it easier for the Army to eventually field this system to the force, as most of the Army's past developmental programs, such as the Ground Combat Vehicle (GCV), the Future Combat System (FCS), the Crusader self-propelled artillery system, and the Comanche helicopter, were cancelled before they could be fully developed and fielded. On November 26, 2013, the Army issued a Request for Proposal (RFP) for the AMPV. This RFP stipulated the Army planned to award a five-year Engineering and Manufacturing Development (EMD) contract in May 2014 worth $458 million to a single contractor for 29 prototypes. While the March 2013 RFP established an Average Unit Manufacturing Cost Ceiling for each AMPV at $1.8 million, this was rescinded to permit vendors greater flexibility. The EMD phase was scheduled to run between FY2015 and FY2019, followed by three years of low-rate initial production (LRIP) starting in 2020. As of 2018, the Army planned to procure 2,936 AMPVs to replace M-113s in ABCTs. The Army also has plans to replace 1,922 M-113s at Echelons Above Brigade (EAB), and the Department of Defense (DOD) estimates that if the M-113s are replaced by AMPVs at EAB, total program costs could be increased by an additional $6.5 billion. While the Army would like a pure fleet of AMPVs, budgetary constraints could preclude this. On December 23, 2014, the Army announced it had selected BAE Systems Land and Armaments L.P. as the winner of the EMD contract. The initial award was for 52 months, valued at about $382 million. In addition, the award provided for an optional low-rate initial production (LRIP) phase. The EMD contract did not include EAB AMPV variants. The AMPV reportedly successfully completed its Critical Design Review (CDR) on June 23, 2016. On December 15, 2016, BAE delivered the first general purpose AMPV to the Army for testing. In September 2017, the Army began AMPV reliability, availability, and maintainability (RAM) testing. Also in 2017, based on budgetary constraints, the Army decided it would upgrade a number of EAB M-113s instead of replacing them with AMPVs. In May 2018, the Army decided to put the EAB M-113 upgrade effort on hold. On March 13, 2019, Army leadership reportedly announced the Army had decided to cut funding over the next five years for 93 programs—including the AMPV—to increase available funding for its new modernization strategy. This cut is not expected to affect the overall AMPV requirement but could slow the AMPV production rate. Other program issues include DOD Inspector General (IG) concerns regarding performance and design concerns, as well as inaccurate procurement quantities, which could result in inaccurate program costs. The Government Accountability Office (GAO) in 2018 expressed concerns regarding cost growth, difficulties meeting a variety of developmental requirements, and dependencies on other programs that are experiencing developmental challenges. Potential issues for Congress include a \"way ahead\" for upgraded M-113s at EAB, DOD Inspector General (IG) and GAO concerns, and the potential revised AMPV procurement rate.", "document_type": "crs"}
{"report": "F ederal law provides a variety of powers for the President to use in response to crisis, exigency, or emergency circumstances threatening the nation. They are not limited to military or war situations. Some of these authorities, deriving from the Constitution or statutory law, are continuously available to the President with little or no qualification. Others—statutory delegations from Congress—exist on a standby basis and remain dormant until the President formally declares a national emergency. Congress may modify, rescind, or render dormant such delegated emergency authority. Until the crisis of World War I, Presidents utilized emergency powers at their own discretion. Proclamations announced the exercise of exigency authority. During World War I and thereafter, Chief Executives had available to them a growing body of standby emergency authority that became operative upon the issuance of a proclamation declaring a condition of national emergency. Sometimes such proclamations confined the matter of crisis to a specific policy sphere, and sometimes they placed no limitation whatsoever on the pronouncement. These activations of standby emergency authority remained acceptable practice until the era of the Vietnam War. In 1976, Congress curtailed this practice with the passage of the National Emergencies Act. The exercise of emergency powers had long been a concern of the classical political theorists, including the 18 th -century English philosopher John Locke, who had a strong influence upon the Founding Fathers in the United States. A preeminent exponent of a government of laws and not of men, Locke argued that occasions may arise when the executive must exert a broad discretion in meeting special exigencies or \"emergencies\" for which the legislative power provided no relief or existing law granted no necessary remedy. He did not regard this prerogative as limited to wartime or even to situations of great urgency. It was sufficient if the \"public good\" might be advanced by its exercise. Emergency powers were first expressed prior to the actual founding of the Republic. Between 1775 and 1781, the Continental Congress passed a series of acts and resolves that count as the first expressions of emergency authority. These instruments dealt almost exclusively with the prosecution of the Revolutionary War. At the Constitutional Convention of 1787, emergency powers, as such, failed to attract much attention during the course of debate over the charter for the new government. It may be argued, however, that the granting of emergency powers by Congress is implicit in its Article I, Section 8, authority to \"provide for the common Defense and general Welfare;\" the commerce clause; its war, armed forces, and militia powers; and the \"necessary and proper\" clause empowering it to make such laws as are required to fulfill the executions of \"the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.\" There is a tradition of constitutional interpretation that has resulted in so-called implied powers, which may be invoked in order to respond to an emergency situation. Locke seems to have anticipated this practice. Furthermore, Presidents have occasionally taken an emergency action that they assumed to be constitutionally permissible. Thus, in the American governmental experience, the exercise of emergency powers has been somewhat dependent upon the Chief Executive's view of the presidential office. Perhaps the President who most clearly articulated a view of his office in conformity with the Lockean position was Theodore Roosevelt. Describing what came to be called the \"stewardship\" theory of the presidency, Roosevelt wrote of his \"insistence upon the theory that the executive power was limited only by specific restrictions and prohibitions appearing in the Constitution or imposed by the Congress under its constitutional powers.\" It was his view \"that every executive officer, and above all every executive officer in high position, was a steward of the people,\" and he \"declined to adopt the view that what was imperatively necessary for the Nation could not be done by the President unless he could find some specific authorization to do it.\" Indeed, it was Roosevelt's belief that, for the President, \"it was not only his right but his duty to do anything that the needs of the Nation demanded unless such action was forbidden by the Constitution or by the laws.\" Opposed to this view of the presidency was Roosevelt's former Secretary of War, William Howard Taft, his personal choice for and actual successor as Chief Executive. He viewed the presidential office in more limited terms, writing \"that the President can exercise no power which cannot be fairly and reasonably traced to some specific grant of power or justly implied and included within such express grant as proper and necessary to its exercise.\" In his view, such a \"specific grant must be either in the Federal Constitution or in an act of Congress passed in pursuance thereof. There is,\" Taft concluded, \"no undefined residuum of power which he can exercise because it seems to him to be in the public interest.\" Between these two views of the presidency lie various gradations of opinion, resulting in perhaps as many conceptions of the office as there have been holders. One authority has summed up the situation in the following words: Emergency powers are not solely derived from legal sources. The extent of their invocation and use is also contingent upon the personal conception which the incumbent of the Presidential office has of the Presidency and the premises upon which he interprets his legal powers. In the last analysis, the authority of a President is largely determined by the President himself. Apart from the Constitution, but resulting from its prescribed procedures, there are statutory grants of power for emergency conditions. The President is authorized by Congress to take some special or extraordinary action, ostensibly to meet the problems of governing effectively in times of exigency. Sometimes these laws are of only temporary duration. The Economic Stabilization Act of 1970, for example, allowed the President to impose certain wage and price controls for about three years before it expired automatically in 1974. The statute gave the President emergency authority to address a crisis in the nation's economy. Many of these laws are continuously maintained or permanently available for the President's ready use in responding to an emergency. The Defense Production Act, originally adopted in 1950 to prioritize and regulate the manufacture of military material, is an example of this type of statute. There are various standby laws that convey special emergency powers once the President formally declares a national emergency activating them. In 1973, a Senate special committee studying emergency powers published a compilation identifying some 470 provisions of federal law delegating to the executive extraordinary authority in time of national emergency. The vast majority of them are of the standby kind—dormant until activated by the President. However, formal procedures for invoking these authorities, accounting for their use, and regulating their activation and application were established by the National Emergencies Act of 1976. Relying upon constitutional authority or congressional delegations made at various times over the past 230 years, the President of the United States may exercise certain powers in the event that the continued existence of the nation is threatened by crisis, exigency, or emergency circumstances. What is a national emergency? In the simplest understanding of the term, the dictionary defines emergency as \"an unforeseen combination of circumstances or the resulting state that calls for immediate action.\" In the midst of the crisis of the Great Depression, a 1934 Supreme Court majority opinion characterized an emergency in terms of urgency and relative infrequency of occurrence as well as equivalence to a public calamity resulting from fire, flood, or like disaster not reasonably subject to anticipation. An eminent constitutional scholar, the late Edward S. Corwin, explained emergency conditions as being those that \"have not attained enough of stability or recurrency to admit of their being dealt with according to rule.\" During congressional committee hearings on emergency powers in 1973, a political scientist described an emergency in the following terms: \"It denotes the existence of conditions of varying nature, intensity and duration, which are perceived to threaten life or well-being beyond tolerable limits.\" Corwin also indicated it \"connotes the existence of conditions suddenly intensifying the degree of existing danger to life or well-being beyond that which is accepted as normal.\" There are at least four aspects of an emergency condition. The first is its temporal character: An emergency is sudden, unforeseen, and of unknown duration. The second is its potential gravity: An emergency is dangerous and threatening to life and well-being. The third, in terms of governmental role and authority, is the matter of perception: Who discerns this phenomenon? The Constitution may be guiding on this question, but it is not always conclusive. Fourth, there is the element of response: By definition, an emergency requires immediate action but is also unanticipated and, therefore, as Corwin notes, cannot always be \"dealt with according to rule.\" From these simple factors arise the dynamics of national emergency powers. These dynamics can be seen in the history of the exercise of emergency powers. In 1792, residents of western Pennsylvania, Virginia, and the Carolinas began forcefully opposing the collection of a federal excise tax on whiskey. Anticipating rebellious activity, Congress enacted legislation providing for the calling forth of the militia to suppress insurrections and repel invasions. Section 3 of this statute required that a presidential proclamation be issued to warn insurgents to cease their activity. If hostilities persisted, the militia could be dispatched. On August 17, 1794, President Washington issued such a proclamation. The insurgency continued. The President then took command of the forces organized to put down the rebellion. Here was the beginning of a pattern of policy expression and implementation regarding emergency powers. Congress legislated extraordinary or special authority for discretionary use by the President in a time of emergency. In issuing a proclamation, the Chief Executive notified Congress that he was making use of this power and also apprised other affected parties of his emergency action. Over the next 100 years, Congress enacted various permanent and standby laws for responding largely to military, economic, and labor emergencies. During this span of years, however, the exercise of emergency powers by President Abraham Lincoln brought the first great dispute over the authority and discretion of the Chief Executive to engage in emergency actions. By the time of Lincoln's inauguration (March 4, 1861), seven states of the lower South had announced their secession from the Union; the Confederate provisional government had been established (February 4, 1861); Jefferson Davis had been elected (February 9, 1861) and installed as president of the confederacy (February 18, 1861); and an army was being mobilized by the secessionists. Lincoln had a little over two months to consider his course of action. When the new President assumed office, Congress was not in session. For reasons of his own, Lincoln delayed calling a special meeting of the legislature but soon ventured into its constitutionally designated policy sphere. On April 19, he issued a proclamation establishing a blockade on the ports of the secessionist states, \"a measure hitherto regarded as contrary to both the Constitution and the law of nations except when the government was embroiled in a declared, foreign war.\" Congress had not been given an opportunity to consider a declaration of war. The next day, the President ordered the addition of 19 vessels to the navy \"for purposes of public defense.\" A short time later, the blockade was extended to the ports of Virginia and North Carolina. By a proclamation of May 3, Lincoln ordered that the regular army be enlarged by 22,714 men, that navy personnel be increased by 18,000, and that 42,032 volunteers be accommodated for three-year terms of service. The directive antagonized many Representatives and Senators, because Congress is specifically authorized by Article I, Section 8, of the Constitution \"to raise and support armies.\" In his July message to the newly assembled Congress, Lincoln suggested, \"These measures, whether strictly legal or not, were ventured upon under what appeared to be a popular and a public necessity, trusting then, as now, that Congress would readily ratify them. It is believed,\" he wrote, \"that nothing has been done beyond the constitutional competency of Congress.\" Congress subsequently did legislatively authorize, and thereby approve, the President's actions regarding his increasing armed forces personnel and would do the same later concerning some other questionable emergency actions. In the case of Lincoln, the opinion of scholars and experts is that \"neither Congress nor the Supreme Court exercised any effective restraint upon the President.\" The emergency actions of the Chief Executive were either unchallenged or approved by Congress and were either accepted or—because of almost no opportunity to render judgment—went largely without notice by the Supreme Court. The President made a quick response to the emergency at hand, a response that Congress or the courts might have rejected in law but, nonetheless, had been made in fact and with some degree of popular approval. Similar controversy would arise concerning the emergency actions of Presidents Woodrow Wilson and Franklin D. Roosevelt. Both men exercised extensive emergency powers with regard to world hostilities, and Roosevelt also used emergency authority to deal with the Great Depression. Their emergency actions, however, were largely supported by statutory delegations and a high degree of approval on the part of both Congress and the public. During the Wilson and Roosevelt presidencies, a major procedural development occurred in the exercise of emergency powers—use of a proclamation to declare a national emergency and thereby activate all standby statutory provisions delegating authority to the President during a national emergency. The first such national emergency proclamation was issued by President Wilson on February 5, 1917. Promulgated on the authority of a statute establishing the U.S. Shipping Board, the proclamation concerned water transportation policy. It was statutorily terminated, along with a variety of other wartime measures, on March 3, 1921. President Franklin D. Roosevelt issued the next national emergency proclamation some 48 hours after assuming office. Proclaimed March 6, 1933, on the somewhat questionable authority of the Trading with the Enemy Act of 1917, the proclamation declared a \"bank holiday\" and halted a major class of financial transactions by closing the banks. Congress subsequently gave specific statutory support for the Chief Executive's action with the passage of the Emergency Banking Act on March 9. Upon signing this legislation into law, the President issued a second banking proclamation, based upon the authority of the new law, continuing the bank holiday until it was determined that banking institutions were capable of conducting business in accordance with new banking policy. Next, on September 8, 1939, President Roosevelt promulgated a proclamation of \"limited\" national emergency, though the qualifying term had no meaningful legal significance. Almost two years later, on May 27, 1941, he issued a proclamation of \"unlimited\" national emergency. This action, however, did not actually make any important new powers available to the Chief Executive in addition to those activated by the 1939 proclamation. The President's purpose in making the second proclamation was largely to apprise the American people of the worsening conflict in Europe and growing tensions in Asia. These two war-related proclamations of a general condition of national emergency remained operative until 1947, when certain of the provisions of law they had activated were statutorily rescinded. Then, in 1951, Congress terminated the declaration of war against Germany. In the spring of the following year, the Senate ratified the treaty of peace with Japan. Because these actions marked the end of World War II for the United States, legislation was required to keep certain emergency provisions in effect. Initially, the Emergency Powers Interim Continuation Act temporarily maintained this emergency authority. It was subsequently supplanted by the Emergency Powers Continuation Act, which kept selected emergency delegations in force until August 1953. By proclamation in April 1952, President Harry S. Truman terminated the 1939 and 1941 national emergency declarations, leaving operative only those emergency authorities continued by statutory specification. President Truman's 1952 termination, however, specifically exempted a December 1950 proclamation of national emergency he had issued in response to hostilities in Korea. This condition of national emergency would remain in force and unimpaired well into the era of the Vietnam War. Two other proclamations of national emergency would also be promulgated before Congress once again turned its attention to these matters. Faced with a postal strike, President Richard Nixon declared a national emergency in March 1970, thereby gaining permission to use units of the Ready Reserve to assist in moving the mail. President Nixon proclaimed a second national emergency in August 1971 to control the balance of payments flow by terminating temporarily certain trade agreement provisos and imposing supplemental duties on some imported goods. In the years following the conclusion of U.S. armed forces involvement in active military conflict in Korea, occasional expressions of concern were heard in Congress regarding the continued existence of President Truman's 1950 national emergency proclamation long after the conditions prompting its issuance had disappeared. There was some annoyance that the President was retaining extraordinary powers intended only for a time of genuine emergency and a feeling that the Chief Executive was thwarting the legislative intent of Congress by continuously failing to terminate the declared national emergency. Growing public and congressional displeasure with the President's exercise of his war powers and deepening U.S. involvement in hostilities in Vietnam prompted interest in a variety of related matters. For Senator Charles Mathias, interest in the question of emergency powers developed out of U.S. involvement in Vietnam and the incursion into Cambodia. Together with Senator Frank Church, he sought to establish a Senate special committee to study the implications of terminating the 1950 proclamation of national emergency that was being used to prosecute the Vietnam War \"to consider problems which might arise as the result of the termination and to consider what administrative or legislative actions might be necessary.\" Such a panel was initially chartered by S.Res. 304 as the Special Committee on the Termination of the National Emergency in June 1972, but it did not begin operations before the end of the year. With the convening of the 93 rd Congress in 1973, the special committee was approved again with S.Res. 9 . Upon exploring the subject matter of national emergency powers, however, the mission of the special committee became more burdensome. There was not just one proclamation of national emergency in effect but four such instruments, issued in 1933, 1950, 1970, and 1971. The United States was in a condition of national emergency four times over, and with each proclamation, the whole collection of statutorily delegated emergency powers was activated. Consequently, in 1974, with S.Res. 242 , the study panel was rechartered as the Special Committee on National Emergencies and Delegated Emergency Powers to reflect its focus upon matters larger than the 1950 emergency proclamation. Its final mandate was provided by S.Res. 10 in the 94 th Congress, although its termination date was necessarily extended briefly in 1976 by S.Res. 370 . Senators Church and Mathias co-chaired the panel. The Special Committee on National Emergencies and Delegated Emergency Powers produced various studies during its existence. After scrutinizing the U . S . Code and uncodified statutory emergency powers, the panel identified 470 provisions of federal law that delegated extraordinary authority to the executive in time of national emergency. Not all of them required a declaration of national emergency to be operative, but they were, nevertheless, extraordinary grants. The special committee also found that no process existed for automatically terminating the four outstanding national emergency proclamations. Thus, the panel began developing legislation containing a formula for regulating emergency declarations in the future and otherwise adjusting the body of statutorily delegated emergency powers by abolishing some provisions, relegating others to permanent status, and continuing others in a standby capacity. The panel also began preparing a report offering its findings and recommendations regarding the state of national emergency powers in the nation. The special committee, in July 1974, unanimously recommended legislation establishing a procedure for the presidential declaration and congressional regulation of a national emergency. The proposal also modified various statutorily delegated emergency powers. In arriving at this reform measure, the panel consulted with various executive branch agencies regarding the significance of existing emergency statutes, recommendations for legislative action, and views as to the repeal of some provisions of emergency law. This recommended legislation was introduced by Senator Church for himself and others on August 22, 1974, and became S. 3957 . It was reported from the Senate Committee on Government Operations on September 30 without public hearings or amendment. The bill was subsequently discussed on the Senate floor on October 7, when it was amended and passed. Although a version of the reform legislation had been introduced in the House on September 16, becoming H.R. 16668 , the Committee on the Judiciary, to which the measure was referred, did not have an opportunity to consider either that bill or the Senate-adopted version due to the press of other business—chiefly the impeachment of President Nixon and the nomination of Nelson Rockefeller to be Vice President of the United States. Thus, the National Emergencies Act failed to be considered on the House floor before the final adjournment of the 93 rd Congress. With the convening of the next Congress, the proposal was introduced in the House on February 27, 1975, becoming H.R. 3884 , and in the Senate on March 6, becoming S. 977 . House hearings occurred in March and April before the Subcommittee on Administrative Law and Governmental Relations of the Committee on the Judiciary. The bill was subsequently marked up and, on April 15, was reported in amended form to the full committee on a 4-0 vote. On May 21, the Committee on the Judiciary, on a voice vote, reported the bill with technical amendments. During the course of House debate on September 4, there was agreement to both the committee amendments and a floor amendment providing that national emergencies end automatically one year after their declaration unless the President informs Congress and the public of a continuation. The bill was then passed on a 388-5 yea and nay vote and sent to the Senate, where it was referred to the Committee on Government Operations. The Senate Committee on Government Operations held a hearing on H.R. 3884 on February 25, 1976, the bill was subsequently reported on August 26 with one substantive and several technical amendments. The following day, the amended bill was passed and returned to the House. On August 31, the House agreed to the Senate amendments, clearing the proposal for President Gerald Ford's signature on September 14. In its final report, issued in May 1976, the special committee concluded \"by reemphasizing that emergency laws and procedures in the United States have been neglected for too long, and that Congress must pass the National Emergencies Act to end a potentially dangerous situation.\" Other issues identified by the special committee as deserving attention in the future, however, did not fare so well. The panel, for example, was hopeful that standing committees of both houses of Congress would review statutory emergency power provisions within their respective jurisdictions with a view to the continued need for, and possible adjustment of, such authority. Actions in this regard were probably not as ambitious as the special committee expected. A title of the Federal Civil Defense Act of 1950 granting the President or Congress power to declare a civil defense emergency in the event of an attack on the United States occurred or was anticipated expired in June 1974 after the House Committee on Rules failed to report a measure continuing the statute. A provision of emergency law was refined in May 1976. Legislation was enacted granting the President the authority to order certain selected members of an armed services reserve component to active duty without a declaration of war or national emergency. Previously, such an activation of military reserve personnel had been limited to a \"time of national emergency declared by the President\" or \"when otherwise authorized by law.\" Another refinement of emergency law occurred in 1977 when action was completed on the International Emergency Economic Powers Act (IEEPA). Reform legislation containing this statute modified a provision of the Trading with the Enemy Act of 1917, authorizing the President to regulate the nation's international and domestic finance during periods of declared war or national emergency. The enacted bill limited the President's Trading with the Enemy Act power to regulate the country's finances to times of declared war. In IEEPA, a provision conferred authority on the Chief Executive to exercise controls over international economic transactions in the future during a declared national emergency and established procedures governing the use of this power, including close consultation with Congress when declaring a national emergency to activate IEEPA. Such a declaration would be subject to congressional regulation under the procedures of the National Emergencies Act. Other matters identified in the final report of the special committee for congressional scrutiny included investigation of emergency preparedness efforts conducted by the executive branch, attention to congressional preparations for an emergency and continual review of emergency law, ending open-ended grants of authority to the executive, investigation and institution of stricter controls over delegated powers, and improving the accountability of executive decisionmaking. There is some public record indication that certain of these points, particularly the first and the last, have been addressed in the past two decades by congressional overseers. As enacted, the National Emergencies Act consisted of five titles. The first of these generally returned all standby statutory delegations of emergency power, activated by an outstanding declaration of national emergency, to a dormant state two years after the statute's approval. However, the act did not cancel the 1933, 1950, 1970, and 1971 national emergency proclamations, because the President issued them pursuant to his Article II constitutional authority. Nevertheless, it did render them ineffective by returning to dormancy the statutory authorities they had activated, thereby necessitating a new declaration to activate standby statutory emergency authorities. Title II provided a procedure for future declarations of national emergency by the President and prescribed arrangements for their congressional regulation. The statute established an exclusive means for declaring a national emergency. Emergency declarations were to terminate automatically after one year unless formally continued for another year by the President, but they could be terminated earlier by either the President or Congress. Originally, the prescribed method for congressional termination of a declared national emergency was a concurrent resolution adopted by both houses of Congress. This type of \"legislative veto\" was effectively invalidated by the Supreme Court in 1983. The National Emergencies Act was amended in 1985 to substitute a joint resolution as the vehicle for rescinding a national emergency declaration. When declaring a national emergency, the President must indicate, according to Title III, the powers and authorities being activated to respond to the exigency at hand. Certain presidential accountability and reporting requirements regarding national emergency declarations were specified in Title IV, and the repeal and continuation of various statutory provisions delegating emergency powers was accomplished in Title V. Since the 1976 enactment of the National Emergencies Act, various national emergencies have been declared pursuant to its provisions. Some were subsequently revoked, while others remain in effect. Table 1 displays the number of national emergencies in effect (some may refer to these as \"active\") and the number of national emergencies no longer in effect (some may refer to these as \"inactive\"), by President. Detailed information regarding the 31 national emergencies in effect may be found in Table 2 . Similar information regarding the 22 national emergencies no longer in may be found in Table 3 . The second column in Table 2 and Table 3 identifies the national emergency declaration, which is either an executive order (E.O.) or a presidential proclamation (Proc.). Table 3 includes declared national emergencies that are no longer in effect. The development, exercise, and regulation of emergency powers, from the days of the Continental Congress to the present, reflect at least one highly discernable trend: Those authorities available to the executive in time of national crisis or exigency have, since the time of the Lincoln Administration, come to be increasingly rooted in statutory law. The discretion available to a Civil War President in his exercise of emergency power has been harnessed, to a considerable extent, in the contemporary period. Due to greater reliance upon statutory expression, the range of this authority has come to be more circumscribed, and the options for its use have come to be regulated procedurally through the National Emergencies Act. Since its enactment the National Emergencies Act has not been revisited by congressional overseers. The 1976 report of the Senate Special Committee on National Emergencies suggested that the prospect remains that further improvements and reforms in this policy area might be pursued and perfected. An anomaly in the activation of emergency powers appears to have occurred on September 8, 2005, when President George W. Bush issued a proclamation suspending certain wage requirements of the Davis-Bacon Act in the course of the federal response to the Gulf Coast disaster resulting from Hurricane Katrina. Instead of following the historical pattern of declaring a national emergency to activate the suspension authority, the President set out the following rationale in the proclamation: \"I find that the conditions caused by Hurricane Katrina constitute a 'national emergency' within the meaning of section 3147 of title 40, United States Code.\" A more likely course of action would seemingly have been for the President to declare a national emergency pursuant to the National Emergencies Act and to specify that he was, accordingly, activating the suspension authority. Although the propriety of the President's action in this case might have been ultimately determined in the courts, the proclamation was revoked on November 3, 2005, by a proclamation in which the President cited the National Emergencies Act as authority, in part, for his action.", "summary": "The President of the United States has available certain powers that may be exercised in the event that the nation is threatened by crisis, exigency, or emergency circumstances (other than natural disasters, war, or near-war situations). Such powers may be stated explicitly or implied by the Constitution, assumed by the Chief Executive to be permissible constitutionally, or inferred from or specified by statute. Through legislation, Congress has made a great many delegations of authority in this regard over the past 230 years. There are, however, limits and restraints upon the President in his exercise of emergency powers. With the exception of the habeas corpus clause, the Constitution makes no allowance for the suspension of any of its provisions during a national emergency. Disputes over the constitutionality or legality of the exercise of emergency powers are judicially reviewable. Both the judiciary and Congress, as co-equal branches, can restrain the executive regarding emergency powers. So can public opinion. Since 1976, the President has been subject to certain procedural formalities in utilizing some statutorily delegated emergency authority. The National Emergencies Act (50 U.S.C. §§1601-1651) eliminated or modified some statutory grants of emergency authority, required the President to formally declare the existence of a national emergency and to specify what statutory authority activated by the declaration would be used, and provided Congress a means to countermand the President's declaration and the activated authority being sought. The development of this regulatory statute and subsequent declarations of national emergency are reviewed in this report.", "document_type": "crs"}
{"report": "Some time ago, a federal prosecutor referred to the mail and wire fraud statutes as \"our Stradivarius, our Colt 45, our Louisville Slugger … and our true love.\" Not everyone shares the prosecutor's delight. Commentators have argued that the statutes \"have long provided prosecutors with a means by which to salvage a modest, but dubious, victory from investigations that essentially proved unfruitful.\" Federal judges have also expressed concern from time to time, observing that the \"mail and wire fraud statutes have 'been invoked to impose criminal penalties upon a staggeringly broad swath of behavior,' creating uncertainty in business negotiations and challenges to due process and federalism.\" Nevertheless, mail and wire fraud prosecutions have brought to an end schemes that bilked victims of millions, and sometimes billions, of dollars. The federal mail and wire fraud statutes outlaw schemes to defraud that involve the use of mail or wire communications. Both condemn fraudulent conduct that may also come within the reach of other federal criminal statutes. Both may serve as racketeering and money laundering predicate offenses. Both are punishable by imprisonment for not more than 20 years; for not more than 30 years, if the victim is a financial institution or the offense is committed in the context of major disaster or emergency. Both entitle victims to restitution. Both may result in the forfeiture of property. The mail and wire fraud statutes are essentially the same, except for the medium associated with the offense—the mail in the case of mail fraud and wire communication in the case of wire fraud. As a consequence, the interpretation of one is ordinarily considered to apply to the other. In construction of the terms within the two, the courts will frequently abbreviate or adjust their statement of the elements of a violation to focus on the questions at issue before them. As treatment of the individual elements makes clear, however, there seems little dispute that conviction requires the government to prove (1) the use of either mail or wire communications in the foreseeable furtherance, (2) of a scheme and intent to defraud another of either property or honest services, (3) involving a material deception. The wire fraud statute applies to anyone who \"transmits or causes to be transmitted by wire, radio, or television communication in interstate or foreign commerce any writings ... for the purpose executing [a] ... scheme or artifice.\" The mail fraud statute is similarly worded and applies to anyone who \"... for the purpose of executing [a] ... scheme or artifice ... places in any post office ... or causes to be delivered by mail ... any ... matter.\" The statutes require that a mailing or wire communication be in furtherance of a scheme to defraud. The mailing or communication need not be an essential element of the scheme, as long as it \"is incident to an essential element of the scheme.\" A qualifying mailing or communication, standing alone, may be routine, innocent, or even self-defeating, because \"[t]he relevant question at all times is whether the mailing is part of the execution of the scheme as conceived by the perpetrator at the time, regardless of whether the mailing later, through hindsight, may prove to have been counterproductive.\" The element may be satisfied by mailings or communications \"designed to lull the victim into a false sense of security, postpone inquiries or complaints, or make the transaction less suspect.\" The element may also be satisfied by mailings or wire communications used to obtain the property that is the object of the fraud. A defendant need not personally have mailed or wired a communication; it is enough that he \"caused\" a mailing or transmission of a wire communication in the sense that the mailing or transmission was the reasonable foreseeable consequence of his intended scheme. The mail and wire fraud statutes \"both prohibit, in pertinent part, 'any scheme or artifice to defraud[,]' or to obtain money or property 'by means of false or fraudulent pretenses, representations, or promises,\" or to deprive another of the right to honest services by such means. From the beginning, Congress intended to reach a wide range of schemes to defraud, and has expanded the concept whenever doubts arose. It added the second prong—obtaining money or property by false pretenses, representations, or promises—after defendants had suggested that the term \"scheme to defraud\" covered false pretenses concerning present conditions but not representations or promises of future conditions. More recently, it added 18 U.S.C. § 1346 to make it clear the term \"scheme to defraud\" encompassed schemes to defraud another of the right to honest services. Even before that adornment, the words were understood to \"refer 'to wronging one in his property rights by dishonest methods or schemes,' and 'usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'\" As a general rule, the crime is done when the scheme is hatched and an attendant mailing or interstate phone call or email has occurred. Thus, the statutes are said to condemn a scheme to defraud regardless of its success. It is not uncommon for the courts to declare that to demonstrate a scheme to defraud the government needs to show that the defendant's \"communications were reasonably calculated to deceive persons of ordinary prudence and comprehension.\" Even a casual reading, however, might suggest that the statutes also cover a scheme specifically designed to deceive a naïve victim. Nevertheless, the courts have long acknowledged the possibility of a \"puffing\" defense, and there may be some question whether the statutes reach those schemes designed to deceive the gullible though they could not ensnare the reasonably prudent. In any event, the question may be more clearly presented in the context of the defendant's intent and the materiality of the deception, a focus on the scheme's creator rather than its victim. Defrauding or to Obtain Money or Property . The mail and wire fraud statutes speak of schemes to defraud or to obtain money or property by means of false or fraudulent pretenses. The Supreme Court has said that the phrase \"to defraud\" and the phrase \"to obtain money or property\" do not represent separate crimes, but instead the phrase \"obtain money or property\" describes what constitutes a scheme to defraud. In later look-alike offenses, Congress specifically numerated the two phrases. The bank fraud statute, for example, applies to \"whoever knowingly executes … a scheme or artifice – (1) to defraud a financial institution; or (2) to obtain any of the money, funds, credits, assets, securities, or other property owned by … a financial institution, by means of false or fraudulent pretenses …\" It left the mail and wire fraud statutes, however, unchanged. The mail and wire fraud statutes clearly protect against deprivations of tangible property. They also protect certain intangible property rights, but only those that have value in the hands of the victim of a scheme. \"To determine whether a particular interest is property for purposes of the fraud statutes, [courts] look to whether the law traditionally has recognized and enforced it as a property right.\" Neither the mail nor the wire fraud statute exhibits an explicit reference to materiality. Yet materiality is an element of each offense, because at the time of the statutes' enactment, the word \"defraud\" was understood to \"require[] a misrepresentation or concealment of [a] material fact.\" Thus, other than in an honest services context, a \"scheme to defraud\" for mail or wire fraud purposes must involve a material misrepresentation of some kind. \"A misrepresentation is material if it is capable of influencing the intended victim.\" Again, other than in the case of honest services, \"'intent to defraud' requires an intent to (1) deceive, and (2) cause some harm to result from the deceit. A defendant acts with the intent to deceive when he acts knowingly with the specific intent to deceive for the purpose of causing pecuniary loss to another or bringing about some financial gain to himself.\" A defendant has a complete defense if he believes the deceptive statements or promises to be true or otherwise acts under circumstances that belie an intent to defraud. Yet, a defendant has no defense if he blinds himself to the truth. Nor is it a defense if he intends to deceive but feels his victim will ultimately profit or be unharmed. Some time ago, the Supreme Court held in McNally v. United States that the protection of the mail fraud statute, and by implication the protection of the wire fraud statute, did not extend to \"the intangible right of the citizenry to good government.\" Soon after McNally , Congress enlarged the mail and wire fraud protection to include the intangible right to honest services, by defining the \"term 'scheme or artifice to defraud' [to] include[s] a scheme or artifice to deprive another of the intangible right to honest services.\" Lest the expanded definition be found unconstitutionally vague, the Court in Skilling v. United States limited its application to cases of bribery or kickbacks. The Court in Skilling supplied only a general description of the bribery and kickbacks condemned in the honest-services statute. Subsequent lower federal courts have often looked to the general federal law relating to bribery and kickbacks for the substantive elements of honest services bribery. In this context, bribery requires \"a quid pro quo—a specific intent to give … something of value in exchange for an official act.\" And an \"official act\" means no more than an officer's formal exercise of governmental power in the form of a \"decision or action on a 'question, matter, cause, suit, proceeding or controversy'\" before him. The definition of the word \"kickback\" quoted by the Court in Skilling has since been reassigned, and the courts have cited the dictionary definition on occasion. Except for the elements of a scheme to defraud in the form of a bribe and a kickback, honest services fraud, as an adjunct of the mail and wire fraud statutes, draws its elements and the sanctions that attend the offense from the mail and wire fraud statutes. Attempting or conspiring to commit mail or wire fraud or aiding and abetting the commission of those offenses carries the same penalties as the underlying offense. \"In order to aid and abet another to commit a crime it is necessary that a defendant in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed.\" \"Conspiracy to commit wire fraud under 18 U.S.C. § 1349 requires a jury to find that (1) two or more persons agreed to commit wire fraud and (2) the defendant willfully joined the conspiracy with the intent to further its unlawful purpose.\" As a general rule, a conspirator is liable for any other offenses that a co-conspirator commits in the foreseeable furtherance of the conspiracy. Such liability, however, extends only until the objectives of the conspiracy have been accomplished or the defendant has withdrawn from the conspiracy. Where attempt has been made a separate offense, as it has for mail and wire fraud, conviction ordinarily requires that the defendant commit a substantial step toward the completion of the underlying offense with the intent to commit it. It does not, however, require the attempt to have been successful. Unlike conspiracy, a defendant may not be convicted of both the substantive offense and the lesser included crime of attempt to commit it. Mail and wire fraud are each punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations), or fine of not more than $1 million and imprisonment for not more than 30 years if the victim is a financial institution or the offense was committed in relation to a natural disaster. It is also subject to a mandatory minimum two-year term of imprisonment if identify theft is used during and in furtherance of the fraud. Conviction may also result in (1) probation, (2) a term of supervised release, (3) a special assessment, (4) a restitution order, and/or (5) a forfeiture order. Supervised Release and Special Assessments . Supervised release is a form of parole-like supervision imposed after a term of imprisonment has been served. Although imposition of a term of supervised release is discretionary in mail and wire fraud cases, the Sentencing Guidelines recommend its imposition in all felony cases. The maximum supervised release term for wire and mail fraud generally is three years—five years when the defendant is convicted of the mail or wire fraud against a financial institution that carries a 30-year maximum term of imprisonment. Release will be subject to a number of conditions, violation of which may result in a return to prison for not more than two years (not more than three years if the original crime of conviction carried a 30-year maximum). There are three mandatory conditions: (1) commit no new crimes; (2) allow a DNA sample to be taken; and (3) submit to periodic drug testing. The court may suspend the drug testing condition, although it is under no obligation to do so even though the defendant has no history of drug abuse and drug abuse played no role in the offense. Most courts will impose a standard series of conditions in addition to the mandatory condition of supervised release. The Sentencing Guidelines recommend that these include the payment of any fines, restitution, and special assessments that remain unsatisfied. Defendants convicted of mail or wire fraud must pay a special assessment of $100. Restitution . Restitution is ordinarily required of those convicted of mail or wire fraud. The victims entitled to restitution include those directly and proximately harmed by the defendant's crime of conviction, and \"in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity,\" like mail and wire fraud, \"any person directly harmed by the defendant's conduct in the course of the scheme, conspiracy, or pattern.\" Forfeiture . Property that constitutes the proceeds of mail or wire fraud is subject to confiscation by the United States. It may be confiscated pursuant to either civil forfeiture or criminal forfeiture procedures. Civil forfeiture proceedings are conducted that treat the forfeitable property as the defendant. Criminal forfeiture proceedings are conducted as part of the criminal prosecution of the property owner. The mail and wire fraud statutes essentially outlaw dishonesty. Due to their breadth, misconduct that constitutes mail or wire fraud may constitute a violation of one or more other federal criminal statutes as well. This overlap occurs perhaps most often with respect to (1) crimes for which mail or wire fraud are elements (\"predicate offenses\") of another offense; (2) fraud proscribed under jurisdictional circumstances other than mail or wire use; and (3) honest services fraud in the form of bribery or kickbacks. Some federal crimes have as an element the commission of some other federal offense. The money laundering statute, for example, outlaws laundering the proceeds of various predicate offenses. The racketeering statute outlaws the commission of a pattern of predicate offenses to operate a racketeering enterprise. Mail and wire fraud are predicate racketeering and money laundering predicate offenses. RICO . The Racketeer Influenced and Corrupt Organizations (RICO) provisions outlaw acquiring or conducting the affairs of an enterprise, engaged in or whose activities affect interstate commerce, through loan sharking or the patterned commission of various other predicate offenses. The racketeering-conduct and conspiracy-to-engage-in-racketeering-conduct appear to be the RICO offenses most often built on wire or mail fraud violations. The elements of the RICO conduct offense are (1) conducting the affairs; (2) of an enterprise; (3) engaged in activities in or that impact interstate or foreign commerce; (4) through a pattern; (5) of racketeering activity. \"Racketeering activity\" means, among other things, any act that is indictable under either the mail or wire fraud statutes. As for pattern, a RICO pattern \"requires at least two acts of racketeering activity. The racketeering predicates may establish a pattern if they [were] related and … amounted to, or threatened the likelihood of, continued criminal activity.'\" The pattern of predicate offenses must be used by someone employed by or associated with a qualified enterprise to conduct or participate in its activities. \"Congress did not intend to extend RICO liability … beyond those who participated in the operation and management of an enterprise through a pattern of racketeering activity.\" Nevertheless, \"liability under § 1962(c) is not limited to upper management … An enterprise is operated not just by upper management but also by lower rung participants.\" The enterprise may be either any group of individuals, any legal entity, or any group \"associated in fact.\" \"Nevertheless, 'an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise and longevity sufficient to permit those associates to pursue the enterprise's purpose.'\" Moreover, qualified enterprises are only those that \"engaged in, or the activities of which affect, interstate or foreign commerce.\" Penalties : Imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations). Money Laundering . Mail and wire fraud are both money laundering predicate offenses by virtue of their status as RICO predicates. The most commonly prosecuted federal money laundering statute, 18 U.S.C. §1956, outlaws, among other things, knowingly engaging in a financial transaction involving the proceeds generated by a \"specified unlawful activity\" (a predicate offense) for the purpose (1) of laundering the proceeds (i.e., concealing their source or ownership), or (2) of promoting further predicating offenses. To establish the concealment offense, the government must establish that \"(1) [the] defendant conducted, or attempted to conduct a financial transaction which in any way or degree affected interstate commerce or foreign commerce; (2) the financial transaction involved proceeds of illegal activity; (3) [the] defendant knew the property represented proceeds of some form of unlawful activity, [such as mail or wire fraud]; and (4) [the] defendant conducted or attempted to conduct the financial transaction knowing the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds of specified unlawful activity.\" To prove the promotional offense, \"the Government must show that the defendant: (1) conducted or attempted to conduct a financial transaction; (2) which the defendant then knew involved the proceeds of unlawful activity; (3) with the intent to promote or further unlawful activity.\" Nothing in either provision suggests that the defendant must be shown to have committed the predicate offense. Moreover, simply establishing that the defendant spent or deposited the proceeds of the predicate offense is not enough without proof of an intent to promote or conceal. Penalties : Imprisonment for not more than 20 years and a fine of not more than $500,000. Merely depositing the proceeds of a money laundering predicate offense does not alone constitute a violation of Section 1956. It is enough for a violation of 18 U.S.C. § 1957, however, if more than $10,000 is involved. Section 1957 uses Section 1956's definition of specified unlawful activities. Thus, mail and wire fraud violations may serve as the basis for the prosecution under Section 1957. \"Section 1957 differs from Section 1956 in two critical respects: It requires that the property have a value greater than $10,000, but it does not require that the defendant know of [the] design to conceal [or promote] aspects of the transaction or that anyone have such a design.\" Penalties: Imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000) for organizations. This category includes the offenses that were made federal crimes because they involve fraud against the United States or because they are other frauds that share elements with the mail and wire fraud. The most prominent are the proscriptions against defrauding the United States by the submission of false claims, conspiracy to defraud the United States, and material false statements in matters within the jurisdiction of the United States. Bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting are all Chapter 63 companions of mail and wire fraud. Defrauding the United States — False Claims . Section 287 outlaws the knowing submission of a false claim against the United States. \"To prove a false claim, the government must prove that (1) [the defendant] 'made and presented' to the government a claim, (2) 'the claim was false, fictitious, or fraudulent,' (3) [the defendant] knew the claim was false, fictitious, or fraudulent, and (4) 'the claim was material' to the government.\" Penalti es : Imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). Conspiracy to Defraud the U nited S tates . The general conspiracy statute has two parts. It outlaws conspiracies to violate the laws of the United States. More relevant here, it also outlaws conspiracies to defraud the United States. \"To convict on a charge under the 'defraud' clause, the government must show that the defendant (1) entered into an agreement (2) to obstruct a lawful government function (3) by deceitful or dishonest means and (4) committed at least one overt act in furtherance of the conspiracy.\" Thus, the \"fraud covered by the statute reaches any conspiracy for the purpose of impairing, obstructing or defeating the lawful functions of any department of the Government\" by \"deceit, craft or trickery, or at least by means that are dishonest.\" Unlike mail and wire fraud, the government need not show that the scheme was designed to deprive another of money, property, or honest services; it is enough to show that the scheme is designed to obstruct governmental functions. Penalties : Imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). False Statements . Section 1001 outlaws knowingly and willfully making a material false statement on a matter within the jurisdiction of the executive, legislative, or judicial branch of the federal government. A matter is material for purposes of Section 1001 when \"it has a natural tendency to influence, or is capable of influencing, the decision of\" the individual or entity to whom it is addressed. A matter is within the jurisdiction of a federal entity \"when it has the power to exercise authority in a particular matter\" and federal jurisdiction \"may exist when false statements [are] made to state or local government agencies receiving federal support or subject to federal regulation.\" Penalties : Imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). Fraud Elsewhere in Chapter 63. Chapter 63 contains four other fraud proscriptions in addition to mail and wire fraud: bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting. Each relies on a jurisdictional base other than use of the mail or wire communications. Bank Fraud . The bank fraud statute outlaws (1) schemes to defraud a federally insured financial institution, and (2) schemes to falsely obtain property from such an institution. To establish the bank-property scheme to defraud offense, \"the Government must prove: (1) the defendant knowingly executed or attempted to execute a scheme or artifice to defraud a financial institution; (2) the defendant did so with the intent to defraud a financial institution; and (3) the financial institution was federally insured.\" As for the bank-custody offense, \"the government must prove (1) that a scheme existed to obtain moneys, funds, or credit in the custody of a federally-insured bank by fraud; (2) that the defendant participated in the scheme by means of material false pretenses, representations, or promises; and (3) that the defendant acted knowingly.\" Penalties : Imprisonment for not more than 30 years and a fine of not more than $1 million. Health Care Fraud . The health care fraud provision follows the pattern of other Chapter 63 offenses. It condemns schemes to defraud. The schemes it proscribes include honest services fraud in the form of bribery and kickbacks. Attempts and conspiracies to violate its prohibitions carry the same penalties as the complete offense it describes. It is often prosecuted along with other related offenses. Parsed to its elements, the section declares, \"[a] Whoever [b] knowingly and willfully [c] executes or attempts to execute [d] a scheme or artifice (1) to defraud any health care benefit program, or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property owned by, or under the custody or control of, any health care benefit program [e] in connection with the delivery of or payment for health care benefits, items, or services shall be …\" Penalties : A fine of not more than $250,000 (not more than $500,000 for organizations) and (1) if death results, imprisonment for life or any term of years; (2) if serious bodily injury results, imprisonment for 20 years; (3) otherwise, imprisonment for not more than 10 years. Securities and Commodities Fraud . Section 1348, the securities and commodities fraud prohibition, continues the progression of separating its defrauding feature from its obtaining-property feature. The elements of defrauding offense \"are (1) fraudulent intent, (2) a scheme or artifice to defraud, and (3) a nexus with a security.\" To prove a violation of Section 1348(2), the government must establish that the defendant (1) executed, or attempted to execute, a scheme or artifice; (2) with fraudulent intent; (3) in order to obtain money or property; (4) by material false or fraudulent pretenses, representations, or promises. Penalties : Imprisonment for not more than 25 years and fines of not more than $250,000 (not more than $500,000 for organizations). Fraud in Foreign Labor Contracting . \"The substantive offense of fraud in foreign labor contracting [under 18 U.S.C. § 1351] occurs when someone: (1) recruits, solicits, or hires a person outside the United States, or causes another person to do so, or attempts to do so; (2) does so by means of materially false or fraudulent pretenses, representations or promises regarding that employment; and (3) acts knowingly and with intent to defraud.\" The offense occurs outside the United States when related to a federal contract or U.S. presence abroad. Penalties : Imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for an organization). After the Supreme Court's 2010 decision in Skillin g v. United States , honest services mail and wire fraud consists of bribery and kickback schemes furthered by use of the mail or wire communications. Mail and wire fraud aside, the principal bribery and kickback statutes include 18 U.S.C. §§ 201(b)(1) (bribery of federal officials), 666 (bribery relating to federal programs), 1951 (extortion under color of official right); 15 U.S.C §§ 78dd-1 to 78dd-3 (foreign corrupt practices); and 42 U.S.C. § 1320a-7b (Medicare/Medicaid anti-kickback). Bribery of Federal Officials . Conviction for violation of Section 201(b)(1) \"requires a showing that something of value was corruptly ... offered or promised to a public official ... or corruptly ... sought ... or agreed to be received by a public official with intent ... to influence any official act ... or in return for 'being influenced in the performance of any official act.\" The hallmark of the offense is a corrupt quid pro quo, \"a specific intent to give or receive something of value in exchange for an official act.\" The public officials covered include federal officers and employees, those of the District of Columbia, and those who perform tasks for or on behalf of the United States or any of its departments or agencies. The official acts that constitute the objective of the corrupt bargain include any decision or action relating to any matter coming before an individual in his official capacity. Penalti es : Imprisonment for up to 15 years, a fine of up to $250,000 (up to $500,000 for an organization). Bribery and Fraud Related to Federal Programs . Section 666 outlaws both (1) fraud and (2) bribery by the faithless agents of state, local, tribal or private entities—that receive more than $10,000 in federal benefits—in relation to a transaction of $5,000 or more. \"A violation of Section 666(a)(1)(A) requires proof of five elements. The government must prove that: (1) a defendant was an agent of an organization, government, or agency; (2) in a one-year period that organization, government, or agency received federal benefits in excess of $10,000; (3) a defendant … obtained by fraud … ; (4) … property owned by, or in the care, custody, or control of, the organization, government, or entity; and (5) the value of that property was at least $5,000.\" \"A person is guilty under § 666[(a)(1)(B)] if he, being an agent of an organization, government, or governmental agency that receives federal-program funds, corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more.\" Penalties : Imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000 for organizations). Hobbs Act . The Hobbs Act, 18 U.S.C. § 1951, outlaws obtaining the property of another under \"color of official right,\" in a manner that has an effect on interstate commerce. Conviction requires the government to prove that the defendant \"(1) was a government official; (2) who accepted property to which she was not entitled; (3) knowing that she was not entitled to the property; and (4) knowing that the payment was given in return for officials acts: (5) which had at least a de minimis effect on commerce.\" Conviction does not require that the public official sought or induced payment: \"the government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts.\" Penalties : Imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for an organization). Foreign Corrupt Practices . The bribery provisions of the Foreign Corrupt Practices Act (FCPA) are three: 15 U.S.C. §§ 78dd-1(trade practices by issuers), 78dd-2 (trade practices by domestic concerns), and 78dd-3 (trade practices by others within the United States). Other than the class of potential defendants, the elements of the three are comparable. They \"make[] it a crime to: (1) willfully; (2) make use of the mail or any means or instrumentality of interstate commerce; (3) corruptly; (4) in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to; (5) any foreign official; (6) for purposes of [either] influencing any act or decision of such foreign official in his official capacity [or] inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official [or] securing any improper advantage; (7) in order to assist such [corporation] in obtaining or retaining business for or with, or directing business to, any person.\" None of the three proscriptions apply to payments \"to expedite or to secure the performance of a routine governmental action,\" and each affords defendants an affirmative defense for payments that are lawful under the applicable foreign law or regulation. Penalties : Imprisonment for not more than five years and a fine of not more than $100,000 (not more than $2 million for organizations). Medicare Kickbacks . The Medicare/Medicaid kickback prohibition in 42 U.S.C. 1320a-7b(b) outlaws \"knowingly and willfully [offering or paying], soliciting [or] receiving, any remuneration (including any kickback) ... (A) to induce the referral of [, or (B) the purchase with respect to] Medicare [or] Medicaid beneficiaries ... any item or service for which payment may be made in whole or in part under the Medicare [or] Medicaid programs....\" Penalties : Imprisonment for not more than five years and a fine of not more than $25,000.", "summary": "The mail and wire fraud statutes are exceptionally broad. Their scope has occasionally given the courts pause. Nevertheless, prosecutions in their name have brought to an end schemes that have bilked victims out of millions, and sometimes billions, of dollars. The statutes proscribe (1) causing the use of the mail or wire communications, including email; (2) in conjunction with a scheme to intentionally defraud another of money or property; (3) by means of a material deception. The offenses, along with attempts or conspiracies to commit them, carry a term of imprisonment of up to 30 years in some cases, followed by a term of supervised release. Offenders also face the prospect of fines, orders to make restitution, and forfeiture of their property. The mail and wire fraud statutes overlap with a surprising number of other federal criminal statutes. Conduct that supports a prosecution under the mail or wire fraud statutes will often support prosecution under one or more other criminal provision(s). These companion offenses include (1) those that use mail or wire fraud as an element of a separate offense, like racketeering or money laundering; (2) those that condemn fraud on some jurisdictional basis other than use of the mail or wire communications, like those that outlaw defrauding the federal government or federally insured banks; and (3) those that proscribe other deprivations of honest services (i.e., bribery and kickbacks), like the statutes that ban bribery of federal officials or in connection with federal programs. Among the crimes for which mail or wire fraud may serve as an element, RICO (Racketeer Influenced and Corrupt Organizations Act) outlaws employing the patterned commission of predicate offenses to conduct the affairs of an enterprise that impacts commerce. Money laundering consists of transactions involving the proceeds of a predicate offense in order to launder them or to promote further predicate offenses. The statutes that prohibit fraud in some form or another are the most diverse of the mail and wire fraud companions. Congress modeled some after the mail and wire fraud statutes, incorporating elements of a scheme to defraud or obtain property by false pretenses into statutes that outlaw bank fraud, health care fraud, securities fraud, and foreign labor contracting fraud. Congress designed others to protect the public fisc by proscribing false claims against the United States, conspiracies to defraud the United States by obstructing its functions, and false statements in matters within the jurisdiction of the United States and its departments and agencies. Federal bribery and kickback statutes populate the third class of wire and mail fraud companions. One provision bans offering or accepting a thing of value in exchange for the performance or forbearance of a federal official act. Another condemns bribery of faithless agents in connection with federally funded programs and activities. A third, the Hobbs Act, outlaws bribery as a form of extortion under the color of official right. The fines, prison sentences, and other consequences that follow conviction for wire and mail fraud companions vary considerably, with fines from not more than $25,000 to not more than $2 million and prison terms from not more than five years to life.", "document_type": "crs"}
{"report": "Since the late 1700s, Congress has expressed public gratitude to individuals and groups by awarding medals and other similar decorations. The first Congressional Gold Medals were issued by the Continental Congress. Since that time, Congress has awarded gold medals to express public gratitude for distinguished contributions, dramatize the virtues of patriotism, and perpetuate the remembrance of great events. This tradition of authorizing individually struck gold medals bearing the portraits or actions of honorees is rich with history. Although Congress has approved legislation stipulating specific requirements for numerous other awards and decorations, there are no permanent statutory provisions specifically relating to the creation of Congressional Gold Medals. When such an award has been deemed appropriate, Congress has, by special action, provided for the creation of a personalized medal to be given in its name. The first Congressional Gold Medals were issued by the Continental Congress. As initially conceived, Congressional Gold Medals were awards \"imbued with the conviction that only the very highest achievements [were] entitled to such a distinction, and that the value of a reward is enhanced by its rarity!\" At that time, the Continental Congress concluded there was no better way to honor \"and preserve the memory of illustrious characters and splendid events than medals—whether we take into consideration the imperishable nature of the substance whence they are formed, the facility of multiplying copies, or the practice of depositing them in the cabinets of the curious.\" The first gold medals were struck in Paris under the direction of Colonel David Humphrey. Following a long-standing historical practice, Congress commissioned gold medals as tributes for what were considered to be the most distinguished achievements. Silver and bronze medals, and ceremonial swords, were awarded for less eminent, but still notable, accomplishments. However, only the gold medal has been continuously awarded to the present day. The first Congressional Gold Medal was authorized on March 25, 1776, for George Washington, then commander of the Continental Army, for his \"wise and spirited conduct\" in bringing about British evacuation of Boston. During the next 12 years, the Continental Congress authorized an additional six gold medals for Revolutionary military leaders. Table 1 lists the Congressional Gold Medals issued by the Continental Congress, the year, the awardee, and the reason the medal was authorized. The gold medal conferred upon Major Henry \"Light Horse Harry\" Lee for his \"remarkable prudence\" and \"bravery\" during the surprise raid of Paulus Hook, NJ, was the first to be struck in the United States. Following the ratification of the Constitution, the first two Congressional Gold Medals were given in 1800 to Captain Thomas Truxtun for his gallant effort during the action between the U.S. frigate Constellation and the French ship La Vengeance and in 1805 to Commodore Edward Preble for gallantry and good conduct during the War with Tripoli. After those medals were awarded, Congress issued gold medals primarily for military achievements in the War of 1812 and the Mexican War. All told, 27 gold medals were awarded for the War of 1812, and a series of medals were awarded for expeditions led by Major General Zachary Taylor and Major General Winfield Scott in the Mexican War. General Taylor received three Congressional Gold Medals, while General Scott received one. In 1854, Congress began to broaden the scope of activities that merited a Congressional Gold Medal. This change was prompted by Commander Duncan N. Ingraham of the USS St. Louis 's rescue of Martin Koszta from illegal seizure and imprisonment about the Austrian war-brig Hussar . Subsequently, gold medals were issued to several individuals recognized for nonmilitary heroic activities or their work in specific fields. For example, in 1864 Cornelius Vanderbilt was honored for donating a steamship to the United States; in 1867 Cyrus W. Field was praised for his work in the laying of the transatlantic cable; and Private George F. Robinson was awarded for saving Secretary of State William H. Seward from an assassination attempt. At this time, Congress also established the Medal of Honor as a military award and increasingly focused the Congressional Gold Medal as an award for individuals and events. In the 20 th and 21 st centuries, Congress continued to broaden the scope of Congressional Gold Medals to include recognition of excellence in such varied fields as the arts, athletics, aviation, diplomacy, entertainment, exploration, medicine, politics, religion, and science. Several of the following individuals were the first in their specialties to be awarded gold medals: Composer George M. Cohan (1936) was the first entertainer to receive a gold medal, for his patriotic songs \"Over There\" and \"A Grand Old Flag.\" Wilbur and Orville Wright (1909) were the first aeronautical or space pioneers to receive a gold medal, for their achievements in demonstrating to the world the potential of aerial navigation. Lincoln Ellsworth (1926) was the first explorer honored, for his polar flight in 1925 and transpolar flight in 1926. Major Walter Reed and his associates (1928) were the first scientists honored, for discovering the cause and means of transmission of yellow fever in 1921. Vice President Alben W. Barkley (1949) was the first political honoree. In the late 20 th and early 21 st centuries, numerous other individuals have been honored for a variety of contributions including civil rights activism and humanitarian contributions. For a complete list of Congressional Gold Medal recipients since 1776, see the Appendix . Once a Congressional Gold Medal bill is introduced, it is typically referred to the House Committee on Financial Services or the Senate Committee on Banking, Housing, and Urban Affairs. The process for considering legislation varies between the House and Senate. In the House, there are currently no chamber or committee rules regarding the procedures for gold medal bills. In some past Congresses, the House Financial Services Committee had adopted a committee rule that prohibited its Domestic Monetary Policy and Technology Subcommittee from holding a hearing on commemorative medal legislation—including Congressional Gold Medals—\"unless the legislation is cosponsored by at least two-thirds of the members of the House.\" Informal practices regarding cosponosrship requirements, however, may still exist. In the Senate, the Banking, Housing, and Urban Affairs Committee in the 116 th Congress requires that at least 67 Senators cosponsor any Congressional Gold Medal bill before being considered by the committee. This committee rule presumably does not formally preclude committee consideration of a House bill referred to it. The committee rule also does not prevent the Senate from considering or passing gold medal legislation. Referred bills may be brought to the floor without committee consideration; in other cases, a bill may avoid being referred to committee at all. In current practice, many enacted gold medal bills receive no formal committee consideration. Rather, the Senate often discharges the committee of the bill by unanimous consent; however, it appears that this discharge practice only occurs after the requisite number of cosponsors sign on to a Senate bill. Although Congress has approved legislation stipulating requirements for numerous other awards and decorations, there are no permanent statutory provisions specifically relating to the creation of Congressional Gold Medals. When a Congressional Gold Medal has been deemed appropriate, Congress has, by legislative action, provided for the creation of a medal on an ad hoc basis. Additionally, there is no statutory limit on the number of Congressional Gold Medals that may be struck in a given year. Congressional Gold Medal legislation generally has certain features, including findings that summarize the subject's history and importance; specifications for awarding the medal; instructions, if any, for the medal's design and striking; permission to mint and sell duplicates; and certification that medals are minted pursuant to existing requirements for national medals (5 U.S.C. §5111). Congressional Gold Medal legislation typically includes a section of findings. These often include historical facts about the people or groups being awarded the medal. For example, the legislation to authorize the Congressional Gold Medal to the World War II members of the \"Doolittle Tokyo Raiders\" stated the following: Congressional Gold Medal legislation typically includes a section that provides details on the presentation, design, and striking of the medal. For example, the legislation to authorize the Congressional Gold Medal to the Foot Soldiers who participated in Bloody Sunday, Turnaround Tuesday, or the final Selma to Montgomery Voting Rights March in March of 1965 stated the following: Additionally, this section can contain specific instructions to the Smithsonian, when it is the recipient of the physical gold medal, on its display and availability to be loaned to other institutions. For example, the legislation authorizing the American Fighter Aces Congressional Gold Medal stated the following: Gold medal legislation also generally authorizes the Secretary of the Treasury to strike and sell duplicate medals in bronze. The duplicates are generally sold in two sizes: 1.5 inches and 3 inches. Duplicates are sold at a price which allows the U.S. Mint to cover the cost of striking the gold medal. For example, legislation authorizing the 65 th Infantry Regiment, known as the Borinqueneers, Congressional Gold Medal stated the following: Gold medal legislation generally contains a statement that these awards are considered as national medals for the purpose of the U.S. Mint's statutory requirements for producing medals. For example, legislation authorizing the Montford Point Marines Congressional Gold Medal stated the following: In some cases, authorizing legislation includes language authorizing appropriations for a Congressional Gold Medal. In these examples, Congress has authorized a specific sum from the United States Mint Public Enterprise Fund to pay for the cost of the medal. In cases where the authorization of appropriations is provided, a provision requiring that proceeds from the sale of duplicates be deposited in the same Fund is generally included. For example, legislation authorizing the Women Airforce Service Pilots Congressional Gold Medal stated the following: Congressional Gold Medal designs vary for each issuance. In general, the authorizing legislation provides that the Secretary of the Treasury \"shall strike a gold medal with suitable emblems, devices, and inscriptions, to be determined by the Secretary.\" When designing a Congressional Gold Medal, the Secretary consults with the Citizens Coinage Advisory Commission (CCAC) and the U.S. Commission of Fine Arts (CFA) before determining the final design. Established by P.L. 108-15 , the CCAC advises the Secretary of the Treasury on theme and design of all U.S. coins and medals. For Congressional Gold Medals, the CCAC advises the Secretary \"on any theme or design proposals relating to ... Congressional Gold Medals.\" The CCAC consists of 11 members appointed by the Secretary of the Treasury, with four persons appointed upon the recommendation of the congressional leadership (one each by the Speaker of the House, the House minority leader, the Senate majority leader, and the Senate minority leader). The CCAC meets several times each year to consider design suggestions for coins and medals. For each coin considered, the CCAC provides advice to the Secretary \"on thematic, technical, and design issues related to the production of coins.\" Recommendations are then published to the committee's website, at http://www.ccac.gov . In tandem with recommendations received from the CCAC, the U.S. Mint also seeks a recommendation from the U.S. Commission of Fine Arts. Established in 1910, the CFA advises \"upon the location of statues, fountains, and monuments in the public squares, streets, and parks in the District of Columbia; the selection of models for statues, fountains, and monuments erected under the authority of the Federal Government; the selection of artists; and questions of art generally when required to do so by the President or a committee of Congress.\" This includes review of commemorative coins when they are presented by the U.S. Mint and the issuance of recommendations for a coin's design. For example, in March 2014, the U.S. Mint presented several alternative designs for the First Special Service Force Congressional Gold Medal. In a letter to the U.S. Mint, the CFA provided recommendations on the design for the gold medal. CFA's letter stated the following: After receiving advice from the CCAC and the CFA, the Secretary of the Treasury, through the U.S. Mint, finalizes the coin's design and schedules it for production. Figure 1 shows the final design of two Congressional Gold Medals: the New Frontier Gold Medal for Neil Armstrong, Michael Collins, Buzz Aldrin, and John Glenn; and the Jack Nicklaus Gold Medal. As Members of Congress contemplate introducing legislation, and the House or the Senate potentially consider Congressional Gold Medal measures, there are several issues that could be considered. These can be divided into issues for individual Members of Congress with respect to individual Congressional Gold Medals, and issues for Congress as an institution. Individual issues include choices Members may make about which people or groups might be honored and whether specific design elements might be specified statutorily. Institutional issues might include committee or chamber rules on the consideration of Congressional Gold Medals and creating standards for the issuance of gold medals. Some Congressional Gold Medals have honored individuals (e.g., Arnold Palmer, Muhammad Yunus), some discrete groups of individuals (e.g., General of the Army George Catlett Marshall and Fleet Admiral Ernest Joseph King, Ruth and Billy Graham), and some larger groups (e.g., military units such as Women Airforce Service Pilots [\"WASP\"], Monuments Men). In choosing whom or what to recognize, Members of Congress generally evaluate whether they believe that the individual's or group's activities merit recognition by Congress. Congressional Gold Medals are \"the highest civilian honor award program ... [to] honor national achievement in patriotic, humanitarian, and artistic endeavors.\" There are no specific criteria to determine whether or not an individual or group meets those lofty goals. Instead, each individual or group is judged on their merits by Congress should the legislation be considered. Congressional Gold Medal authorizations generally do not specify design elements. Instead, they direct the Secretary of the Treasury to \"strike a gold medal with suitable emblems, devices, and inscriptions to be determined by the Secretary.\" Should Congress want to specify particular design elements, they might be included in the authorizing legislation. This would provide the Secretary of the Treasury with congressional intent on what should be incorporated into the gold medal design. Similar statutory specificity is sometimes included in commemorative coin legislation. Such specification, however, could serve to limit design choices for the gold medal and might alter the cost structure of striking the award, if the required element diverges from standard practices. Congressional Gold Medal legislation for groups generally provides that only a single gold medal is struck and specifies where it will be located after it is formally awarded. In many cases, the gold medal is given to the Smithsonian for appropriate display and where it can be made available for research. In other cases, the gold medal is provided to an organization that represents the honored group. Since most gold medal legislation contains a provision on the medal's location, a Member of Congress can help determine where the medal will be located. As discussed above under \" Authorizing Congressional Gold Medals ,\" neither the House nor Senate rules provide any restrictions specifically concerning consideration of Congressional Gold Medal legislation on the House or Senate floor. In the 116 th Congress, the Senate Committee on Banking, Housing, and Urban Affairs requires that at least 67 Senators must cosponsor any Senate Congressional Gold Medal bill before being considered by the committee. Currently, the House Financial Services Committee has not adopted any specific rules concerning committee consideration of Congressional Gold Medal legislation, although it has required a minimum number of cosponsors in past Congresses for committee consideration. As demonstrated by the discontinuation of the House Financial Services Committee rule requiring a minimum number of cosponsors for committee gold medal legislation, committee rules can be changed from Congress to Congress. Should the committee want to place requirements on its consideration of gold medal legislation, the Financial Services Committee could readopt its former rule, or something similar. Adopting committee rules to require a minimum number of cosponsors might encourage bill sponsors to build support among Representatives for gold medal bills. Such a minimum requirement, however, could potentially limit the number or type of gold medal bills the committee considers. Since only the Senate Committee on Banking, Housing, and Urban Affairs has a rule that imposes a formal qualification on the potential committee consideration of gold medal legislation, the possible path forward for a bill can be different within each chamber. Should the House, the Senate, or both want to adopt similar language for committee or chamber consideration of gold medal legislation, such language could be incorporated into future committee rules, into House and Senate Rules, or into law. Taking steps to formally codify the gold medal consideration process might provide sponsors with a single process for award consideration, which could make it easier for gold medal bills to meet minimum requirements for consideration across both the House and Senate. Such codification could also limit congressional flexibility and might result in fewer proposals or authorizations to comply with new standards. Currently, there is no statutory limit to the number of Congressional Gold Medals that can be authorized. Should Congress want to place a limit on the number of gold medals awarded, standards could be adopted to provide a maximum number of gold medals authorized in any year or Congress. Congress has previously adopted similar standards for commemorative coins—only two coins may be minted in any given calendar year. Legislation to place a limit on the number of gold medals authorized has previously been introduced and considered in the House. During the 109 th Congress (2005-2006), H.R. 54 passed the House and would have restricted the Secretary of the Treasury from striking \"more than 2 congressional gold medals for presentation ... in any calendar year.\" Introduced by Representative Michael Castle, the stated purpose of the legislation was to \"maintain the prestige of the medal by limiting the number that may be awarded each year,\" and to \"clarify that recipients are individuals and not groups.\" Passage of the measure, he argued, would \"ensure the future integrity and true honor of the award.\" H.R. 54 did not receive further consideration in the Senate. While proponents of a limit on the number of gold medals issued might make arguments similar to those made by Representative Castle, opponents believe that Congress should reserve the right to authorize as many gold medals as it deems necessary, without consideration of the number struck in any calendar year. Representative Joseph Crowley in opposing the legislation told his House colleagues, \"We are rushing to act on an issue that does not represent a problem.\" \"Who that received this medal in the past,\" he asked, \"was not worthy of it?\" Further, Crowley argued that \"there are occasions when more than one person is justified to receive the medal for their honorable actions in tandem with others.\" He continued by emphasizing that had this bill already been law, \"Congress would not have been able to issue\" a Congressional Gold Medal \"to the Little Rock Nine,\" to \"President and Mrs. Reagan,\" or to \"Martin Luther King and Coretta Scott King.\" Congressional Gold Medals have long been an important way for Congress to express public gratitude for important historical events and achievements. Congressional Gold Medals, which have been issued since the American Revolution, are \"the highest civilian honor award program ... [to] honor national achievement in patriotic, humanitarian, and artistic endeavors.\" In recent years, the number of gold medals awarded has \"soared from four or five per decade for most of its history to an average of almost twenty in the 1980s, 1990s, and 2000s.\" Each Congress, legislation to award Congressional Gold Medals is introduced. In the 113 th Congress (2013-2014), 52 bills were introduced, 34 in the House and 18 in the Senate, to award a gold medal. In the 114 th Congress (2015-2016), 52 bills were introduced, 38 in the House and 14 in the Senate. In the 115 th Congress (2017-2018), 55 bills were introduced, 33 in the House and 22 in the Senate. Based on the number of measures offered in both chambers, some Members of Congress clearly feel it is important to recognize individuals and groups for their patriotic, humanitarian, and artistic achievements. Several considerations appear important when Members decide to introduce gold medal legislation. These include who should be honored, how many medals should be awarded in a given Congress, and whether specific design elements should be prescribed for the medal design. As Congress continues to consider legislation to award future gold medals, these considerations and others will likely be important factors for issuing the award.", "summary": "Senators and Representatives are frequently asked to support or sponsor proposals recognizing historic events and outstanding achievements by individuals or institutions. Among the various forms of recognition that Congress bestows, the Congressional Gold Medal is often considered the most distinguished. Through this venerable tradition—the occasional commissioning of individually struck gold medals in its name—Congress has expressed public gratitude on behalf of the nation for distinguished contributions for more than two centuries. Since 1776, this award, which initially was bestowed on military leaders, has also been given to such diverse individuals as Sir Winston Churchill and Bob Hope, George Washington and Robert Frost, Joe Louis and Mother Teresa of Calcutta. Congressional gold medal legislation generally has a specific format. Once a gold medal is authorized, it follows a specific process for design, minting, and awarding. This process includes consultation and recommendations by the Citizens Coinage Advisory Commission (CCAC) and the U.S. Commission of Fine Arts (CFA), pursuant to any statutory instructions, before the Secretary of the Treasury makes the final decision on a gold medal's design. Once the medal has been struck, a ceremony will often be scheduled to formally award the medal to the recipient. In recent years, the number of gold medals awarded has increased, and some have expressed interest in examining the gold medal awarding process. Should Congress want to make such changes, several individual and institutional options might be available. The individual options include decisions made by Members of Congress as to what individual or groups might be honored; potential specification of gold medal design elements; and where gold medals for groups might be housed once the award is made. The institutional options could include House, Senate, or committee rules for the consideration of gold medal legislation and whether statutory standards on the number of gold medals issued per year or per Congress might be established for gold medals.", "document_type": "crs"}
{"report": "Congress appropriates approximately $23 million annually to maintain the Selective Service agency. The United States has not used conscription to fill manpower requirements for over four decades; however, the Selective Service System and the requirement for young men to register for the draft remain today. Men who fail to register are subject to penalties in the form of lost benefits and criminal action. Some have questioned the need to maintain this agency and the registration requirements. Others have questioned whether the current requirements for registration are fair and equitable. This report is intended to provide Congress with information about how the Military Selective Service Act (MSSA), the Selective Service System (SSS), and associated requirements for registration have evolved over time. It explains why the United States developed the SSS, what the system looks like today, how constituents are affected by the MSSA requirements, and what the options and considerations may be for the future of the Selective Service. The first section of the report provides background and history on the Military Selective Service Act, the Selective Service System, and the implementation of the draft in the United States. The second section discusses statutory registration requirements, processes for registering, and penalties for failing to register. The third section discusses the current organization, roles, and resourcing of the Selective Service System. The final section discusses policy options and consideration for Congress for the future of the MSSA and the Selective Service System. This report does not discuss the state of the all-volunteer force or whether it is adequate to meet our nation's current or future manpower needs. In addition, it will not provide an analysis of other options for military manpower resourcing such as universal military service or universal military training. It also does not discuss the history of the draft and draft planning for health service workers. Finally, this report does not evaluate whether the SSS, as currently structured, is adequately resourced and organized to perform its statutory mission. These questions and others will be reviewed by the National Commission on Military, National, and Public Service established by the National Defense Authorization Act (NDAA) for Fiscal Year 2017 ( P.L. 114-328 ). The United States has used federal conscription at various times since the Civil War era, primarily in times of war, but also during peacetime in the aftermath of World War II. When first adopted in 1863, national conscription was a marked departure from the traditional military policy of the United States, which from the founding era had relied on a small standing force that could be augmented by state militias in times of conflict. Conscription into the Armed Forces of the United States was used just prior to, during, and immediately after World War II (WWII). Reinstated on June 24, 1948, it remained in force until June 30, 1973. Following the adoption of the all-volunteer force (AVF) in 1973, authority to induct new draftees under the Military Selective Service Act ceased. Nevertheless, a standby draft mechanism still exists to furnish manpower above and beyond that provided by the active and reserve components of the Armed Forces in the case of a major military contingency. If the federal government were to reinstate the draft, draftees would likely be required to fill all authorized positions to include casualty replacements, billets in understrength units, and new military units activated to expand the wartime force. During the Civil War, due to high demand for military manpower, weaknesses in the system for calling up state militia units, and an insufficient number of volunteers for active federal service, President Abraham Lincoln signed the 1863 Enrollment Act. This marked the first instance of the federal government calling individuals into compulsory federal service through conscription. All male citizens between the ages of 20 and 45 who were capable of bearing arms were liable to be drafted. The law allowed exemptions for dependency and employment in official positions. The Enrollment Act also established a national Provost Marshal Bureau, led by a provost marshal general and was responsible for enforcing the draft. Under the act, the President had authority to establish enrollment districts and to appoint a provost marshal to each district to serve under the direction of the Secretary of War in a separate bureau under the War Department. The provost marshal general was responsible for establishing a district board for processing enrollments and was given authority under the law to make rules and regulations for the operation of the boards and to arrest draft dodgers and deserters. Government agents went door-to-door to enroll individuals, followed by a lottery in each congressional district based on district quotas. Some observers criticized the Enrollment Act as favoring the wealthiest citizens because it allowed for either the purchase of a substitute who would serve in the draftee's place or payment by the draftee of a fee up to $300. In addition, volunteers were offered bounties by both the federal government and some local communities. Under this system, fraud and desertions were common. Enforcement of the draft also incited rioting and violence in many cities across the United States, most famously in New York City. On July 13, 1863, the intended date of the second draft drawing in New York City, an angry mob attacked the assistant Ninth District provost marshal's office, smashing the lottery selection wheel and setting the building on fire. Several days of rioting and violence ensued until federal troops were called in to restore order. The draft call was suspended in New York City during the rioting and was not resumed until August 19, 1863. The total number of men that served in the Union forces during the course of the war was 2,690,401. The number drafted was 255,373. Of the total draftees, 86,724 avoided military service by the payment of commutation, and 117,986 furnished substitutes. Volunteerism during this war was likely driven in part by the bounty system. After the Civil War, the federal government did not use conscription again until World War I (WWI). By then a new concept for a draft system termed \"Selective Service\" had been developed that would apportion requirements for manpower to the states and through the states to individual counties. By 1915, Europe was in all-out war; however, the United States only had a small volunteer Army of approximately 100,000 men. On April 2, 1917, President Woodrow Wilson asked Congress for a declaration of war, and on May 18, 1917, he signed an act commonly known as the Selective Service Act of 1917 into law. This new law allowed the President to draft the National Guard into federal service and made all male citizens between the ages of 21 and 31 liable for the draft. On July 15, 1917, Congress enacted a provision that all conscripted persons would be released from compulsory service within four months of a presidential proclamation of peace. In 1918, Congress extended the eligible draft age to include all males between the ages of 18 and 45. World War I was the first instance of conscription of United States citizens for overseas service. A key aspect of the Selective Service Act of 1917 was that it allowed the federal government to select individuals from a pool of registrants for federal service. Unlike the Civil War, a shortage of volunteers was not the primary concern in enacting this leg islation. The selective aspects of the WWI draft law were driven by concerns that indiscriminate volunteerism could adversely affect the domestic economy and industrial base. In support of the selective service law, Senator William M. Calder of New York said, \"under a volunteer system, there is no way of preventing men from leaving industries and crippling resources that are just as important as the army itself.\" In contrast to the Civil War draft, the Selective Service Act of 1917 did not allow for the furnishing of substitutes or bounties for enlistment. It also provided for decentralized administration through local and district draft boards that were responsible for registering and classifying men, and calling registrants into service. The law specified that the President would appoint boards consisting of civilian members \"not connected with the Military Establishment.\" Over 4,600 such boards were established to hear and decide on claims for exemptions. The provost marshal general, at the time Major General Enoch Crowder, oversaw the operation of these boards. The first draft lottery was held on July 20, 1917. Out of the 24.2 million that registered for the draft in WWI, 2.8 million were eventually inducted. While the law did not prohibit volunteers, the implementation of the selective service system alongside a volunteer system became too complex and the Army discontinued accepting volunteer enlistees by December 15, 1917. By 1919, at the end of the war, the provost marshal general was relieved from his duties, all registration activities were terminated, and all local and district boards were closed. In 1936, the Secretaries of War and the Navy created the Joint Army-Navy Selective Service Committee (JANSSC) to manage emergency mobilization planning. The committee was headed by Army Major Lewis B. Hershey. Between WWI and WWII, the Armed Forces shrank in numbers due to both treaty commitments and public attitudes toward a large standing force. In the interwar period, two opposing movements emerged. Some were in support of legislative provisions that would empower the President to conscript men for military service upon a declaration of war, and some called for a universal draft, universal military training, or broader authorities to conscript civilian labor in times of both war and peace. Others proposed provisions that would require a national referendum on any future use of conscription, or would forbid conscripts from serving outside the territorial borders of the United States. In 1940, Europe was already at war, and despite the neutrality of the United States at the time, some in Congress argued that the United States could not continue with a peacetime force while other nations were mobilizing on a massive scale. In June of 1940, President Franklin D. Roosevelt announced that he would recommend a program of universal compulsory government service for American youth (men and women). A few days later a conscription bill, modeled on the Selective Service Act of 1917, was sponsored by Senator Edward Burke and Representative James Wadsworth in their respective chambers. The bill garnered support by senior Army leaders, who expressed concerns about the ability to recruit a sufficient number of volunteers necessary to fight a major war. Some in Congress opposed to the bill argued the following: Regimentation of American life as provided for by the Burke-Wadsworth bill in peacetime is abhorrent to the ideals of patriotic Americans and is utterly repugnant to American democracy and American traditions ... no proof or evidence was offered to indicate that the personnel needs of the Army and Navy cannot be obtained on a voluntary basis. The conscription bill became the Selective Training and Service Act, and was signed into law on September 16, 1940, by Franklin D. Roosevelt. The act was the first instance of peacetime conscription in the United States and required men between aged 21 through 35 to register with local draft boards. The law required a 12-month training period for those inducted, at which time the inductees would be transferred to a reserve component of the Armed Forces for 10 years. Criminal penalties for failing to comply with registration or other duties under this act included \"imprisonment of not more than five years or a fine of not more than $10,000, or by both such fine and imprisonment.\" The act also gave the President the authority to establish a Selective Service System, and to appoint a Director of the Selective Service with oversight of local civilian boards. Because the image of civilian leadership was deemed important during a time of peace, in 1940 the President initially appointed Dr. Clarence Dykstra as Director of the Selective Service while also retaining his position as president of the University of Wisconsin. Due to poor health Dykstra never took up his position as Director of Selective Service. In July of 1941, the JANSSC that had been established in the interwar period became the new Selective Service headquarters and Colonel Lewis B. Hershey was appointed as the Director, a position he held until 1970, retiring with the rank of Lieutenant General. In terms of the implementation of the Selective Service System, there was an emphasis on establishing an equitable lottery system administered by decentralized local draft boards as was deemed a successful approach during WWI: The Selective Training and Service Act of 1940 is based on the principle that the obligation and privileges of military training and service should be shared generally in accordance with a fair and just system of compulsory military training and service.... The public expected that the lottery under the new law would be conducted as the lottery of 1917-1918 was conducted, and those charged with the administration of the Selective Service felt likewise. The 6,442 district boards assigned a number from 1 to 7,836 to each registrant in their district. On October 29, 1940, the first draft lottery was held in a similar manner to the WWI draft lottery and draft inductions into the Army began on November 18, 1940. The lottery system was used for three groups of registrants, then abandoned in 1942 and not used again for the draft until 1969 during the Vietnam conflict. In the interim, draftees were inducted by local boards based on required quotas, classification, age (oldest first), and order of precedence as determined by contemporary policy. Although some complaints arose over inequalities and inconsistencies in the draft administration, a Gallup poll conducted in 1941 found that 93% of those polled thought the draft had been handled fairly in their community. Volunteers were allowed to serve; however, approximately 10 million of the 16 million servicemembers who served during WWII were draftees. Although the Selective Training and Service Act was set to expire in 1945, at the time of drafting, some felt that the emergency conscription program should evolve into a permanent system of universal military training. In testimony before the House Appropriations Committee on June 5, 1941, General Marshall stated I believe that Selective Service provides the only practical and economical method of maintaining the military force that we inevitably are going to be required to have in the future, and I think, with all my heart, that Selective Service is a necessity to the maintenance of a true democracy. These sentiments continued at the end of the WWII, and there was a push by some to maintain compulsory military training or another program of postwar conscription. In 1945, the congressional Committee on Postwar Military Policy held a series of open hearings on compulsory military training. Those in favor of maintaining some form of conscription argued that it would provide a deterrent to future \"Hitlers and Hirohitos\" as well as build the health and character of American youth. Those opposed contended that conscription was antithetical to democratic ideals, was an inefficient mechanism for building force structure, and led to war, international distrust, and profiteering. Congress extended the Selective Training and Service Act in 1945 and 1946. In 1947, Congress repealed the act and all functions and responsibilities of the Selective Service System were transferred to the Office of Selective Service Records. This office, by law, had a limited mandate for knowledge preservation, and maintenance and storage of individual records. This restructuring essentially put the Selective Service System into a deep standby mode. By 1948, the military had shrunk in size to less than 1.5 million from a peak of 12 million in 1945. Concerned about lagging recruiting efforts and the rising power of the Soviet Union, Congress authorized reinstatement of the draft in the Selective Service Act of 1948, which was signed into law by President Truman on June 24, 1948. The act was similar to previous acts authorizing the Selective Service System. It established registration requirements for males ages 19 to 26, and the same criminal penalties for fraudulent registration or evasion. It also dissolved the Office of Selective Service Records and transferred its responsibilities back to the newly established Selective Service System as an independent agency of the federal government. Under this act, the President had authority to appoint state directors of the Selective Service System. It also provided the authority to call National Guard and Reserve personnel into active duty to support the administration of state and national headquarters. The Selective Service Act of 1948 was set to expire on June 24, 1950. Due to budget constraints and absence of an immediate threat to national security, between 1948 and 1949 conscription was only used to fill recruiting shortfalls. On June 25, 1950, war broke out between North and South Korea. Although a bill to extend the Selective Service Act of 1948 was already in conference, the Senate rushed to approve the bill on June 28 and it was signed by the President on June 30, 1950. The following year, Congress renamed the act the Universal Military Training and Service Act of 1951. The act extended the draft until July 1, 1955, and also lowered the registration age to 18. As the new name suggested, the law also contained a clause that would have obligated all eligible males to perform 12 months of military service and training within a National Security Training Corps if amended by future legislation (it was never amended). The act did not alter the structure or functions of the SSS; however, it did require the Director to submit an annual report to Congress on the number of persons registered, the number of persons inducted, and the number of deferments granted and the basis for them. The United States inducted approximately 1.5 million men into the military (one-quarter of the total uniformed servicemembers) under this act in support of the Korean conflict. A draft lottery was not used in this era, rather, the Department of Defense issued draft calls, and quotas were issued to local boards. The local boards would then fill their quotas with those classified as \"1-A\", or \"eligible for military service\" by precedence as determined by policy. Public concerns with the draft at this time were equitable implementation of the draft due to the broad availability of deferments for what some saw as privileged groups. Others expressed concerns about the potential disruption of citizens' lives. Between 1950 and 1964 Congress repeatedly extended the Universal Military Training and Service Act in four-year periods with minor amendments. During this time, volunteers made up approximately two-thirds of the total military force with the remainder supplemented through inductions—with some limited exceptions, the Navy, Air Force, and Marines relied on volunteers almost entirely. For example, monthly draft calls in 1959 were for approximately 9,000 men out of an eligible population of about 2.2 million. In 1964, when America became involved militarily in Vietnam, conscription was again used to mobilize manpower and augment the volunteer force. Among the criticisms of the draft system during this period were that it was inequitable and discriminatory since the chance of being drafted varied by state, by local community, and by one's economic status. In the late 1960s, public acceptance of the draft began to erode for the following reasons, inter alia : Opposition to the war in Vietnam. The U.S. Army's desire for change due to discipline problems among some Vietnam draftees. Belief that the state did not have a right to impose military service on young men without consent. Belief that the draft was an unfair \"tax\" being imposed only on young men in their late teens and twenties. Perception of some observers that the draft placed an unfair burden on underprivileged members of society. Demographic change increasing the size of the eligible population for military service relative to the needs of the military. Estimations that an all-volunteer force could be fielded within acceptable budget levels. In response to some of these concerns and associated political pressures, President Lyndon B. Johnson issued Executive Order 11289 on July 2, 1966, establishing the National Advisory Commission on Selective Service headed by Burke Marshall. President Johnson instructed the commission to consider past, present, and prospective functioning of the Selective Service System and other systems of national service, taking into account the following factors: Fairness to all citizens, Military manpower requirements, Minimizing uncertainty and interference with individuals' careers and educations, National social, economic, and employment goals, and Budgetary and administrative considerations. The commission examined a number of potential options from requiring everyone to serve to elimination of all compulsory service. The commission's final report, In Pursuit of Equity: Who Serves When not all Serve? , was delivered to the President in February of 1967 at the time when the Selective Service law was up for renewal. The commission recommended continuing conscription but making significant changes to the Selective Service System to \"assure equal treatment for those in like circumstances.\" Among these recommended changes were (1) adopting an impartial and random selection process and order of call, (2) consolidating the local boards under centralized administration with uniform policies for classification, deferment, and exemptions, and (3) ensuring that composition of local boards was representative of the population that they served. In parallel with the Presidential Commission's review, the House Armed Services Committee chartered their own review with a civilian advisory panel chaired by retired Army General Mark Clark. The Clark panel also recommended against shifting to an all-volunteer force but disagreed on the establishment of a lottery. In 1967, Congress extended the SSS through July 1, 1971, under the renamed Military Selective Service Act of 1967 (henceforth MSSA). While the Administration had pushed for comprehensive draft reform based on the commission's recommendations, the bill contained few of President Lyndon Johnson's proposals. In particular, the bill, as enacted, prohibited the President from establishing a random system of selection (draft lottery) without congressional approval. In 1969, President Richard M. Nixon called on Congress to provide the authority to institute the draft lottery system. In response, Congress amended the 1967 law, repealing the prohibition on the President's authority. On the same day, President Nixon signed Executive Order 11497 establishing the order of call for the draft lottery for men aged 19 through 25 at the end of calendar year 1969. While the draft remained contentious, in 1971 the induction authority under the MSSA was again extended through 1973. In response to concerns regarding the composition of local boards, the bill stated, The President is requested to appoint the membership of each local board so that to the maximum extent practicable it is proportionately representative of the race and national origin of those registrants within its district. The bill also included a significant pay raise for military members as a first step toward building an all-volunteer force (AVF). Two months into President Nixon's first term, he launched the President's Commission on an All-Volunteer Force, which came to be known as the Gates Commission. In its 1970 report, the commission unanimously recommended that \"the nation's best interests will be better served by an all-volunteer force, supported by an effective standby draft, than by a mixed force of volunteers and conscripts.\" The Gates Commission also recommended maintaining a Selective Service System that would be responsible for a register of all males who might be conscripted when essential for national security, a system for selection of inductees, specific procedures for the notification, examination, and induction of those to be conscripted, an organization to maintain the register and administer the procedures for induction, and the provision that a standby draft system may be invoked only by resolution of Congress at the request of the President. The last draft calls were issued in December 1972 and the statutory authority to induct expired on June 30, 1973. On January 27, 1973, Secretary of Defense Melvin R. Laird announced the end of conscription. The last man to be inducted through the draft entered the Army on June 30, 1973. Table 1 shows the number of inductees and total participants for each major conflict in which the United S tates used the draft and for which data are available. More than half of the participants in WWI and nearly two-thirds of the WWII participants were draftees. About one-quarter of the participants in the Korean and Vietnam conflicts were draftees, however , it should be noted that the possibility of being drafted may have induced higher rates of volunteerism during these later conflicts. President Gerald Ford temporarily suspended the registration requirement through Proclamation 4360 (89 Stat. 1255) in April 1975. The MSSA was not repealed, however, and the requirement for the SSS to be ready to provide untrained manpower in a military emergency remained. This proclamation essentially put the SSS into deep standby mode. At the time there were approximately 98 full-time staff operating a pared-down field structure with a national headquarters and nine regional headquarters. In the late 1970s, some were concerned that this \"standby\" system did not have the resources or infrastructure to register, select, classify, and deliver the first inductees within 30 days from the start of an emergency mobilization. These concerns became even more salient when, in December 1979, the Soviet Union invaded Afghanistan. In his January 1980 State of the Union address, President Jimmy Carter announced his intention to resume draft registration requirements in the coming year. A Gallup Poll conducted in March 1980 found that 76% were in favor of a registration requirement for young men. Congress responded by providing $13.3 million in appropriations for the Selective Service System on June 25, 1980. President Carter signed Proclamation 4771 on July 2, 1980, reestablishing the requirement for all 18- to 25-year-old males to register for the Selective Service and setting out guidelines for registration. Penalties for failing to register were the same as those first established in the 1940 Selective Training and Service Act (a fine of up to $10,000 and/or a prison term of up to five years). However, unlike in previous draft registration regulations, there was no requirement for men to undergo evaluation and classification for fitness to serve. The new standby SSS had five key components that are still largely in place today: A registration process that is reliable and efficient. An automated data processing system that could handle pre- and postmobilization requirements. A system for promulgation and distribution of orders for induction. A claims process that can quickly insure all registrants' rights to due process are protected. A field structure that can support the claims process. Supporters of reestablishing the registration requirement for men argued that it would send a message to the Soviet Union that the United States was prepared to act to defend its interests and also that it would cut down the mobilization time in the event of a national emergency. Some argued that registration was not enough, and advocated for a return of peacetime conscription, universal military training, or compulsory national service. Organizations opposed to the reinstatement of registration requirements argued that registration forms were illegal because they required registrants to disclose their Social Security numbers. Others argued that the exemption of women in the draft law was unconstitutional. Carter's proposal to Congress included legislative language that would have given the President the authority to register women. As justification for this proposal, he stated, My decision to register women is a recognition of the reality that both women and men are working members of our society. It confirms what is already obvious throughout our society – that women are now providing all types of skills in every profession. The military should be no exception. […] There is no distinction possible, on the basis of ability or performance, that would allow me to exclude women from an obligation to register. Congress rejected the President's proposal to include women with an explanation under Title VIII of S. Rept. 96-826, [T]he starting point for any discussion of the appropriateness of registering women for the draft is the question of the proper role of women in combat. The principle that women should not intentionally and routinely engage in combat is fundamental, and enjoys wide support among our people. It is universally supported by military leaders who have testified before the committee, and forms the linchpin for any analysis of this problem. […] Current law and policy exclude women from being assigned to combat in our military forces, and the committee reaffirms this policy. The policy precluding the use of women in combat is, in the committee's view, the most important reason for not including women in a registration system. In 1981, the Supreme Court heard a challenge to the exception for women to register for Selective Service. In the Rostker v. Goldberg case, the Court held that the practice of only registering men for the draft was constitutional. In the majority opinion, Justice William Rehnquist wrote [t]he existence of the combat restrictions clearly indicates the basis for Congress' decision to exempt women from registration. The purpose of registration was to prepare for a draft of combat troops. Since women are excluded from combat, Congress concluded that they would not be needed in the event of a draft, and therefore decided not to register them. The first national registration after the reinstatement of the requirement was held in 1980 through registration at local U.S. Post Offices. The registration rate for the 1980 registration was 87% within the two-week registration period and 95% through the fourth month of registrations. In 1973, the registration rates were 77% within 30 days of one's 18 th birthday as required by statute, and 90% through the fourth month. The Government Accountability Office (GAO) estimated that, of the registrations submitted, there was a final accuracy level of 98%. Despite initial successes in registration, there was a push by many in Congress and the Administration to maintain public awareness of the requirements and to maintain high compliance rates. On January 21, 1982, President Ronald Reagan authorized a grace period until February 28, 1982, allowing those who had not registered to do so. In 1982, the Department of Justice began prosecution of those men who willfully refused to register for selective service. In the June 1983 SSS semiannual report to Congress, the agency reported that it had referred 341 persons to the Department of Justice for investigation. At the time of the report, there were 11 indictments and 2 convictions. In the same year, there was a movement in Congress to tie eligibility for federal benefits to registration requirements. National Defense Authorization bills for Fiscal Year 1983 were reported to the House and Senate floor without any proposed amendments to the MSSA. However, on May 12, 1982, the bill was amended by Senators Hayakawa and Mattingly on the Senate floor to prohibit young male adults from receiving any federal student assistance under Title IV of the Higher Education Act if they cannot certify they had registered with Selective Service. The Senate passed amendment as drafted by voice vote. Representative Jerry Solom introduced a similar amendment on the House floor. In conference committee, Members added language to direct the Secretary of Education and the Director of Selective Service to jointly develop methods for certifying registration. This provision amending the MSSA was signed into law as part of the FY1983 National Defense Authorization Act with an effective date of July 1, 1983. Representative Solomon also led the effort to attach similar language to the Job Training Partnership Act of 1982, which was passed on October 13, 1982. This law prohibited those who failed to register from receiving certain federal job training assistance. Congress repealed the Job Training and Partnership Act and replaced it with the Workforce Investment Act of 1998; however, the statutory language enforcing the MSSA was maintained in the new law. In 1985, Congress added a provision to the National Defense Authorization Act for Fiscal Year 1986 that made an individual ineligible for federal civil service appointments if he \"is not registered and knowingly and willfully did not so register before the requirement terminated or became inapplicable to the individual.\" Congress also expressed support for the peacetime registration program as a \"contribution to national security by reducing the time required for full defense mobilization,\" and as sending \"an important signal to our allies and to our potential adversaries of the United States defense commitment.\" On November 6, 1986, President Reagan signed into law the Immigration Reform and Control Act. This law required males between the ages of 18 and 26 who are applying for legalization under the act to register for the Selective Service if they have not already done so. In response, the Immigration and Naturalization Service (INS) and the SSS established procedures for registering young men as part of the immigration application process. Between 1980 and 2019, several Members of Congress proposed a number of legislative changes to the MSSA; however, none have been enacted. Typically, such proposed changes to the MSSA have included one or more of the following options: Repeal the entire MSSA. Terminate the registration requirement. Reinstate draft induction authority. Defund the Selective Service System. Require women to register for the draft. Other proposed changes would seek to modify SSS record management or registration processes. These options are discussed in more detail later in this report. In the FY2017 NDAA ( P.L. 114-328 ), Congress established a National Commission on Military, National, and Public Service to help consider some of the options for the future of the MSSA. The commission is tasked not only with a review of the military selective service process, but also with proposing \"methods to increase participation in military, national, and other public service, in order to address national security and other public service needs of the Nation.\" The statutory scope of the commission is to review (1) The need for a military selective service process, including the continuing need for a mechanism to draft large numbers of replacement combat troops; (2) means by which to foster a greater attitude and ethos of service among United States youth, including an increased propensity for military service; (3) the feasibility and advisability of modifying the military selective service process in order to obtain for military, national, and public service individuals with skills (such as medical, dental, and nursing skills, language skills, cyber skills, and science, technology, engineering, and mathematics (STEM) skills) for which the Nation has a critical need, without regard to age or sex; and (4) the feasibility and advisability of including in the military selective service process, as so modified, an eligibility or entitlement for the receipt of one or more Federal benefits (such as educational benefits, subsidized or secured student loans, grants or hiring preferences) specified by the Commission for purposes of the review. Section 552 of the FY2017 NDAA also required DOD to prepare a preliminary report on the purpose and utility of the SSS to support the commission's work, to include (1) A detailed analysis of the current benefits derived, both directly and indirectly, from the Military Selective Service System, including— (A) the extent to which mandatory registration benefits military recruiting; (B) the extent to which a national registration capability serves as a deterrent to potential enemies of the United States; and (C) the extent to which expanding registration to include women would impact these benefits. (2) An analysis of the functions currently performed by the Selective Service System that would be assumed by the Department of Defense in the absence of a national registration capability. (3) An analysis of the systems, manpower, and facilities that would be needed by the Department to physically mobilize inductees in the absence of the Selective Service System. (4) An analysis of the feasibility and utility of eliminating the current focus on mass mobilization of primarily combat troops in favor of a system that focuses on mobilization of all military occupational specialties, and the extent to which such a change would impact the need for both male and female inductees. (5) A detailed analysis of the Department's personnel needs in the event of an emergency requiring mass mobilization, including— (A) a detailed timeline, along with the factors considered in arriving at this timeline, of when the Department would require— (i) the first inductees to report for service; (ii) the first 100,000 inductees to report for service; and (iii) the first medical personnel to report for service; and (B) an analysis of any additional critical skills that would be needed in the event of a national emergency, and a timeline for when the Department would require the first inductees to report for service. (6) A list of the assumptions used by the Department when conducting its analysis in preparing the report. DOD submitted its congressionally mandated report in July 2017. The report noted that the department \"currently has no operational plans that envision mobilization at a level that would require conscription.\" Nevertheless, it acknowledges that, \"the readiness of the underlying systems, infrastructure, and processes to effect [a draft] – serve as a quiet but important hedge against an unknowable future.\" The GAO's report, released in January 2018, noted that DOD's requirements and timeline for mobilization of forces remain unchanged since 1994, despite changes to force structure, capability needs, national security environment, and strategic objectives. In particular, the report authors stated the following: DOD provided the personnel requirements and a timeline that was developed in 1994 and that have not been updated since. These requirements state that, in the event of a draft, the first inductees are to report to a Military Entrance Processing Station in 193 days and the first 100,000 inductees would report for service in 210 days. DOD's report states that the all-volunteer force is of adequate size and composition to meet DOD's personnel needs and it has no operational plans that envision mobilization at a level that would require a draft. Officials stated that the personnel requirements and timeline developed in 1994 are still considered realistic. Thus, they did not conduct any additional analysis to update the plans, personnel requirements, or timelines for responding to an emergency requiring mass mobilization. The authors stated that the GAO's 2012 recommendation that DOD \"establish a process of periodically reevaluating DOD's requirements for the Selective Service System in light of changing operating environments, threats, and strategic guidance\" remains valid. The National Commission on Military, National and Public Service released an interim report on their research findings on January 23, 2019. The report summarizes preliminary findings. With respect to the SSS, the commission is considering options that could expand the registration requirement to include women; identify individuals who possess critical skills the nation might need; call for volunteers during times of emergency using the existing system; and, incorporate reasonable changes to identify, evaluate, and protect those who object to military service, but are otherwise willing to serve. The commission is scheduled to continue its work through March 2020. Today, nearly all males residing in the United States—U.S. citizens and documented or undocumented immigrant men—are required to register with the Selective Service if they are at least 18 years old and are not yet 26 years old. Those who are required to register must do so within 30 days of their 18 th birthday unless exemptions apply as listed in Table 2 . Men born from March 29, 1957, to December 31, 1959, were never required to register because the registration program was not in effect at the time they turned 18. Individuals are not allowed to register beyond their 26 th birthday. Women are currently not required to register for the Selective Service. Federal regulations state, \" No person who is not required by selective service law or the Proclamation of the President to register shall be registered.\" All of those required to register would be considered \"available for service\" in the case of an emergency mobilization unless they were reclassified by the SSS. Almost all Selective Service registrations are completed electronically; however, registration can also be done at U.S. Post Offices and by submission of paper registrations. Most states, four territories, and the District of Columbia (D.C.) have driver's license legislation that provides for automatic Selective Service registration when obtaining a driver's license, driver's permit, or other form of identification from the Department of Motor Vehicles. In FY2017, 42% of all registrations, representing nearly 1 million young men, were conducted electronically through driver's license legislation (see Figure 1 ). The SSS also has interagency agreements for registration. In cooperation with U.S. Citizenship and Immigration Services, immigrant men ages 18 through 25 who are accepted for permanent U.S. residence are registered automatically. In addition, men of registration age who apply for an immigrant visa through the Department of State are also registered. The application form for federal student aid includes a \"register me\" checkbox for those who have not yet registered for the Selective Service, which authorizes the SSS to automatically register those individuals. The SSS reports that approximately 25% of their electronic registrant data come from the Department of Education as part of the student aid application process. The SSS also has existing data-sharing relationships with the DOD and the Department of Labor. In FY2017, the SSS reported a 73% compliance rate for the 18-year-old year of birth (YOB) group. Registration compliance rate for the 20 through 25 YOB group was 92% in calendar year 2016, a decrease of 2% from the previous year, but above the SSS goal of 90%. Reasons for noncompliance may include lack of awareness of requirements, or purposeful avoidance. Knowingly failing to register comes with certain penalties including the following: If indicted, imprisonment of not more than five years and/or fine of not more than $10,000 (increased to $250,000 in 1987 by 18 U.S.C. §3571(b)(3)). Ineligibility for federal student aid. Ineligibility for appointment to a position in an executive agency. Ineligibility for federal job training benefits. Potential ineligibility for citizenship (for certain immigrants to the United States). Possible inability to obtain a security clearance. In addition, a large number of state legislatures as well as county and city jurisdictions have conditioned eligibility for certain government programs and benefits on SSS registration. Failing to register for the Selective Service, or knowingly counseling, aiding, or abetting another to fail to comply with the MSSA, is considered a felony. Those who fail to register may have their names forwarded to the Department of Justice (DOJ). In FY2017, 184,051 names and addresses of suspected violators were provided to DOJ. In practice, there have been no criminal prosecutions for failing to register since January 1986. At that time the SSS reported a total of 20 indictments with 14 convictions. Other penalties adversely affect the population required to register. For example, California estimated that between 2007 and 2014, young men in that state who failed to register were denied access to more than $99 million in federal and state financial aid and job training benefits. There is some relief from penalties for those who fail to register. The MSSA establishes a statute of limitations on criminal prosecutions for evading registration to five years after a fraudulent registration or failure to register, whichever is first. Also, individuals may not be denied federal benefits for failing to register if the requirement to register has terminated or become inapplicable to the person; and the person shows by a preponderance of the evidence that the failure of the person to register was not a knowing and willful failure to register. Individuals who unknowingly fail to register may ask for reconsideration from the official handling their case and may be required to submit evidence that they were unaware of their requirement to register. The Selective Service System is an independent federal agency within the executive branch with headquarters located in Arlington, VA. The agency is currently maintained as an active standby organization. The statutory missions of the SSS are to maintain a complete registration and classification structure capable of immediate operation in the event of a national emergency (including a structure for registration and classification of persons qualified for practice or employment in a health care occupation essential to the maintenance of the Armed Forces), and personnel adequate to reinstitute immediately the full operation of the System, including military reservists who are trained to operate such System and who can be ordered to active duty for such purpose in the event of a national emergency. If the SSS were activated with the authority to induct individuals, the agency would be responsible for (1) holding a national draft lottery, (2) contacting registrants who are selected via the lottery, (3) arranging transportation for selectees to Military Entrance Processing Stations (MEPS) for testing and evaluation of fitness to serve, and (4) activating a classification structure that would include area offices, local offices, and appeal boards. Local boards would also evaluate claims for exemption, postponement, or deferments. Those classified as conscientious objectors would be required to serve in a noncombatant or nonmilitary capacity. For those permitted to serve in a nonmilitary capacity, the SSS would be responsible for placing these \"alternative service workers\" with alternate employers and tracking completion of 24 months of their required service. The agency's workforce is comprised of full-time career employees, part-time military and civilian personnel, and approximately 11,000 part-time civilian volunteers. In FY2017, the agency had 124 full-time equivalent civilian positions for administration and operations across agency headquarters, the Data Management Center, and three regional headquarters offices. Part-time employees include 56 State Directors representing the 50 states, four territories, the District of Columbia, and New York City. The median GS grade for the agency is GS-11. The SSS maintains a list of unpaid volunteers who serve as local, district, and national appeal board members who could be activated to help decide the classification status of men seeking exemptions or deferments in the case of a draft. The Selective Service System also has positions for 175 part-time Reserve Forces Officers (RFOs) representing all branches of the Armed Forces. RFO duties include interviewing Selective Service board member candidates, training board members, participating in readiness exercises, supporting the registration public awareness effort, and maintaining space, equipment, and supplies. Congress appropriates funds for the SSS through the Financial Services and General Government Appropriations Act. For FY2018, Congress appropriated $22.9 million, the same as the FY2017 appropriation. The budget request for FY2019 was $26.4 million, an increase of $3.5 million over the FY2018 appropriation. Funding decreased by 10% from FY2012 to FY2013, from just under $25 million to $22 million in FY2013. Since FY2013, funding has remained fairly stable in terms of current dollars, but has decreased in terms of inflation-adjusted (real) dollars. In current dollars, funding for the SSS has been about $25 million since 1980, when the requirement to register was reinstated. In FY1977-FY1979, while the SSS was in \"deep standby\" mode, funding for the agency was between $6 million and $8 million. About two-thirds of the agency's annual budget goes to personnel compensation and benefits, 11% of which is Reserve Force Officer training pay and allowances. Government and commercial agency contracts and services accounted for 11% ($42.4 million) of total spending. The SSS allocated approximately $1.4 million to postage and express courier services in FY2017, and spent nearly $2 million on software and data processing systems (see Figure 2 ). The agency maintains data for registrants until their 85 th birthday at the Data Management Center in Palatine, IL; the center is authorized 48 full-time employees. The purpose of retaining the data for this length of time is to enable SSS to verify eligibility for registered males who apply for certain government employment or benefits. The number of records in the database is approximately 78 million. According to the SSS, this database grows by 2 million to 2.5 million records per year. The information held in this database includes registrants' full name, date of birth, street address, city, state, zip code, and Social Security number. The SSS also maintains a \"Suspected Violator Inventory System,\" which includes data on nonregistrants that the SSS has received through data-sharing agreements. The SSS uses information on this list to reach out to individuals and remind them of their obligation to register. Most of the registration and data-sharing is automated. The SSS both provides data to and receives data from other government agencies, including the Department of Labor, the Department of Education, the Department of State, the United States Citizenship and Immigration Services, the Department of Defense, and the Alaska Permanent Fund. Information received from these agencies by the SSS is matched with existing data and if no record exists, one is created. On a monthly basis, SSS provides the Joint Advertising and Market Research Studies (JAMRS, part of DOD) new registrant names, addresses, and date of birth, and a file of individuals identified as deceased. These data are kept for three years by JAMRS and are used by DOD for recruiting purposes. Yearly, SSS provides the names, addresses, and Social Security numbers of individuals ages 18 through 25 to the U.S. Census Bureau for its intercensus estimate program. The Census Bureau keeps these data for two years. Annually, the SSS also sends the Department of Justice a list of individuals who are required to register, but have failed to do so. Men are required to update the Selective Service within 10 days when their address changes until January 1 of the year that they turn 26 years old. Those who register at 18 years old are likely to move at least once, if not a number of times, before their 26 th birthday. For example, a college-bound 18-year-old may move away from their parents' home to university housing, then into an off-campus apartment, and into a new home after graduation. The SSS updates addresses in its database using information from other agencies and self-reported information from individuals. Although Congress has amended the MSSA a number of times, some of its main tenets—the preservation of a peacetime selective service agency and a registration requirement—have remained much the same since the mid-20 th century. The future of the Selective Service System is a concern for many in Congress. The registration requirements and associated penalties affect young men in every congressional district. At the same time, some see the preservation of the SSS as an important component of national security and emergency preparedness. Others have suggested that the MSSA is no longer necessary and should be repealed. Still others have suggested amendments to the MSSA to address issues of equity, efficiency, and cost. Some form of selective service legislation has been in effect almost continuously since 1940. Repealing the MSSA and associated statute would dismantle the SSS agency infrastructure and would remove the registration requirement with its associated penalties. Efforts to repeal the Selective Service Act have been repeatedly introduced in Congress, and repeal is popular among many advocacy groups and defense scholars. Those who would like to disband the SSS question whether the agency is still necessary in the modern-day context. A return to the draft is unpopular with a majority of the American public. Some argue that there is a low likelihood of the draft ever being reinstated. Even in the face of nearly a decade of conflict in Iraq and Afghanistan, DOD has maintained its ability to recruit and retain a professional volunteer force without resorting to conscription. The nature of warfare has shifted in such a way that the United States would not likely need to mobilize manpower at the rates seen in the 20 th century. Even if such high mobilization rates were needed, some question whether the Armed Forces would have the capacity and infrastructure to rapidly absorb the large numbers of untrained personnel that a draft would provide. DOD has reported that the Military Entry Processing Command (MEPCOM) can process approximately 18,000 registrants per day. These new accessions would then be sent to training centers/duty stations as identified by the Office of the Secretary of Defense. Some analysts have suggested that a draft, if implemented, would be an inefficient use of labor, as it would \"indiscriminately compel employment in the military regardless of an individual's skills where that individual could have much greater value to our society elsewhere.\" In addition, when conscription has been used, it has generally provided a lower-quality force in comparison with today's all-volunteer force. Others, including civil rights advocacy groups, contend that the registration requirement and conscription are an invasion of civil liberty. Those who advocate for suspension of all SSS activity contend that the SSS infrastructure and registrant databases could be reconstructed in due time if the need arose. In the short term, additional manpower needs might be augmented by Delayed Entry Program (DEP) participants, nonprior reservists awaiting training, and other inactive reserve manpower. A reauthorization of the draft might also encourage volunteerism, as choosing a branch of service and occupational specialty might be more preferable to the possibility of being drafted into a less favorable branch and occupation. Proponents of maintaining the SSS and registration requirement often cite a few key arguments. First, at approximately $23 million per year, it provides a relatively low-cost \"insurance policy\" against potential future threats that may require national mobilization beyond what could be supported by the all-volunteer force. Second, adversaries of the United States could see the disbanding of the SSS as a potential weakness, thus emboldening existing or potential enemies. Third, the registration requirement is important to maintain connections between the all-volunteer force and civil society by creating an awareness of the military and duty to serve among the nation's youth. Finally, maintaining an all-volunteer force is costly, particularly in times of conflict. Sustaining the AVF over the past decade has stretched DOD's resources. If the United States were to become involved in a sustained large-scale conflict, the compensation and benefits required to incentivize voluntary military participation by a larger segment of the population could be substantial. Some of the options for amending the MSSA include the following: Repealing the registration requirement. Dissolving the SSS agency and transferring certain functions to an existing federal agency. Removing or modifying penalties for failure to register. Requiring women to register. Enhancing SSS data collection. Congress could repeal the registration requirement and terminate the existing penalties for failing to register. Removing the registration requirement and the need to verify registration would reduce the activities of the SSS. In this instance, the agency's functions would likely be limited to historical record preservation and maintenance of standby plans and volunteer rolls. Some have proposed that if registrant data were needed for a future draft, they might be acquired through existing federal or state government databases. The current SSS database relies heavily on information collected by other federal and state entities for initial inputs, updates, and verification of registrants' address information. However, this data sharing is enabled by existing statutes and agency agreements that if repealed or allowed to lapse might require time and effort to reconstitute. The use of existing government or even commercial databases to develop a list of draft-eligible youth also raises concerns about a fair and equitable draft, as these lists might also exclude some draft-eligible individuals. In the case of a national emergency, Congress could enact a new statutory requirement for draft registration, and reconstitute the SSS (if it had been dissolved). A 1997 GAO study found that the time needed to raise the necessary infrastructure might be insufficient to respond to urgent DOD requirements. There may be other challenges in enforcing a new registration requirement in a time of national need. Currently, compliance rates for registration are relatively high, but the probability of implementing a draft is considered to be very low. If the government tried to reintroduce a registration requirement during a time when conscription were more likely, compliance rates could fall and it might be more difficult to build up a database of eligible individuals. On the other hand, some point to the SSS experience in 1980, when the the SSS reported 95% compliance rates within four months of reinstatement of the registration requirement. Current law states, \"the Selective Service System should remain administratively independent of any other agency, including the Department of Defense.\" Nevertheless, Congress could amend the MSSA to transfer its functions to an existing federal agency. Such a transfer might take into account not only the SSS's value as a unique data center, but also the staff who comprise the agency at many levels, who would be needed in case of an actual draft. As described previously, this staffing includes regional directors and a pool of civilian volunteers that would serve on local draft boards. This responsibility for maintaining volunteer rolls and training could also be transferred to an existing federal agency, potentially the Department of Defense, and the capability could be augmented with military reserve manpower (as is currently done). The statutory independence of the SSS with respect to DOD and the presence of local civilian boards have historically been viewed as important to the public's perception of a fair and equitable draft. To address this concern, some have proposed that administrative responsibilities could be transferred to DOD while the draft is inactive with the option of transferring all functions back to an independent agency if draft authority were reinstated. Another option might be to transfer the agency and/or its functions to the Department of Homeland Security. There are potential synergies between the SSS and other DHS agencies that would play an active role in a time of national emergency. At least one agency under DHS (the U.S. Citizenship and Immigration Service) already has a role in data sharing with the SSS. Some suggest that suspension or transfer of SSS operations could deliver some federal budget savings. In 2012, as mandated by the National Defense Authorization Act for Fiscal Year 2012, the GAO compared the potential costs and savings of operating in a \"deep standby\" mode versus active registration. According to the report, the SSS estimated that operating in a deep standby mode would provide approximately $5 million in savings in the first year with recurring savings of $6.6 million annually. This would be a reduction of about 25% of the current budget. The transfer of SSS functions to an existing agency might have some initial implementation costs but could potentially reduce some of the overhead costs of maintaining an independent agency. Finally, some argue that Congress should amend the MSSA and associated statute to remove penalties for failing to register, particularly since only men are subject to the requirements. They argue that ineligibility for federal benefits is most harmful to those with fewer financial resources who also might be least aware of their obligation to register. Nevertheless, weakening or removing penalties could affect registration compliance rates. Alternatively, Congress could amend the penalties to limit the amount of time that one is ineligible for federal benefits following failure to register. For example, under current law, the statute of limitations for criminal penalties is five years following the individual's 26 th birthday or fraudulent registration. The MSSA could be amended to sunset ineligibility after a certain time period, or to reinstate eligibility for federal benefits through some other form of public service. Women in the United States have never been required to register for the draft; however, recent DOD policy changes that have opened all military occupational specialties (MOSs) including ground combat positions to women have called into question the Selective Service exemption for women. Although the Trump Administration has not announced a formal position, in 2016, several senior DOD leaders made personal statements in favor of registering women for the draft. Some military leaders have argued that in the case of national need, it would be unwise to exclude 50% of the population from draft eligibility. In a February 2019 decision, the U.S. District Court for the Southern District of Texas granted a summary judgement declaring the male-only registration requirement was unconstitutional; however, the court did not grant injunctive relief blocking the government's current male-only registration policy because the plaintiffs' summary judgment motion seeking declaratory relief failed to request it. As such, the male-only registration policy remains in place. The plaintiffs in this case, the National Coalition for Men and two men of registration age, argue that requiring only men to register constitutes sex discrimination in violation of the Fifth Amendment's equal protection clause. Some women have also pushed for female registration, arguing that women cannot be equal in society as long as they are barred from full participation in all levels of the national security system and thus should be allowed to register for Selective Service. Others believe that equal access to combat jobs should oblige women to take equal responsibility for registering for Selective Service and potential assignments to combat roles should the draft be reinstated. Still others suggest that women should be obliged to enroll in the selective service system but should not be forced into combat roles in the occasion of a draft. Any exemptions for women would raise fairness concerns for men, who would not have the same opportunities to opt out of combat assignments. Making the choice not to serve in combat available to both men and women might make it difficult for the services to function, especially in the event of war or national emergency. Those who are opposed to a requirement for women to register suggest that it is not fair and equitable for women to be placed in the same roles as men. They argue that the average woman does not have the same physical capabilities as the average man and thus would have higher rates of injury and a lower probability of survival if forced to serve in direct ground combat roles. Some have countered that the physical standards for assignment to these roles are unlikely to be lowered on the instance of draft mobilization, ensuring that the cadre of men and women would be assigned to those roles at rates proportional to their ability to meet those standards. This approach would prevent both women and men who were unable to meet physical standards for direct ground combat occupations from those assignments. Moreover, opponents of drafting women point out that it would be militarily inefficient to draft thousands of women when only a small percentage would be physically qualified to serve in direct ground combat roles. At the same time, future wars may have requirements for other skills in noncombat fields where the percentage of individuals qualified would not be as variable by gender. A requirement for young women to register may have some benefits for DOD in terms of military recruiting. The address data collected by the Selective Service System and shared with DOD currently enhances recruiters' ability to identify potential enlistees and distribute marketing materials to registered young men by mail. DOD estimates that marketing materials included with SSS registration confirmation mailing—or joint leads—generate between 75,000-80,000 male recruiting prospects annually. DOD, through JAMRS, purchases similar databases for information about enlistment-eligible women. Although most registrations are now completed automatically through other interactions with the federal or state government, some contend that the very act of registering would make young women more aware of their citizenship duties, thus broadening the percentage of qualified women considering a career in the military. From certain theological or moral perspectives, some say that it is wrong for women to serve in combat roles, and since a draft would most likely be used to fill positions for combat operations, women should be exempt from registering. These arguments resonate with a segment of the U.S. population, and polling data suggest that if women were required to register for the draft, it would significantly increase public opposition to reinstating the draft and could affect public support for engaging in any conflict that has the potential to escalate beyond the capability of the all-volunteer force. Including women in the registration process may require some additional budget resources for the SSS due to increased administrative processing and public awareness needs. Currently there are about 11 million women ages 18-26 who would be eligible to register under the statutory age requirement. In January of 2016, the SSS reported to the White House Office of Management and Budget that it would need about $8.5 million more for the first year of registering women and slightly less in the following several years. As previously discussed, some have suggested that the future threats that the United States may face may require rapid mobilization of those with specialized skills and experience (e.g., engineers, coders, truck drivers). Congress could expand the current SSS registration system to collect data on degrees, licenses, or other certifications. It could also be extended to include these types of experts outside of the 18- to 26-year-old age range. For example, Norway operates a peacetime conscription registration system in this fashion. All Norwegian citizens in a conscription cohort (men and women, age 17) are required to fill out an online questionnaire that helps to determine their relevant skills, eligibility for, and interest in military service. Based on the results of this questionnaire, the armed forces calls in about 22,000 individuals to \"Session Part 2\" to determine fitness for service through physical and psychological tests. Selection boards choose individuals for a mandatory 12-month service obligation based on the armed forces' needs for various skills. DOD has also pointed to the Health Care Professional Delivery System (HCPDS), currently a congressionally mandated standby plan , as a potential model for a registration/draft system by specialty. The HCPDS, if activated, would require registration of all health care workers between the ages of 20 and 45. DOD's 2017 report to Congress considered what a \"mobilization by military occupational specialty (MOS)\" might require. The benefit of establishing an enhanced registration system would be to allow rapid acquisition of personnel with necessary expertise through a targeted draft. This type of data collection could also support targeted recruiting. Should a draft ever be reinstated, available information on individual qualifications could also shorten the timeline needed to train personnel in certain specialties and could support more efficient alternative service matching with employers for those who are conscientious objectors. The challenges with pursuing this option for the SSS would be increased administration costs to maintain, update, and enforce reporting for such a database. In addition, some may oppose such a proposal due to privacy or civil liberty concerns.", "summary": "The Military Selective Service Act (MSSA), first enacted as the Selective Service Act of 1948, provides the statutory authority for the federal government to maintain a Selective Service System (SSS) as an independent federal agency responsible for delivering appropriately qualified civilian men for induction into the Armed Forces of the United States as authorized by Congress. The annual budget for the agency is just under $23 million. One of the SSS's main functions is to maintain a database of registrants in case of a draft. The agency stores approximately 78 million records in order to verify registration status and eligibility for certain benefits that require certification of registration for eligibility. The SSS has a staff of about 124 full-time employees, complemented by a corps of volunteers and military reservists. The MSSA requires most males between the ages of 18 and 26 who are citizens or residents of the United States to register with Selective Service. Women in the United States have never been required to register for the draft. Men who fail to register may be subject to criminal penalties, loss of eligibility for certain federal or state employment opportunities and education benefits, and denial of security clearances. Documented or undocumented immigrants who fail to register may not be able to obtain United States citizenship. Registration compliance rates were 92% in calendar year 2016. While individuals may still register at U.S. post offices, the SSS attributes high compliance rates to a system of automatic electronic registration supported by state legislation and interagency cooperation. The MSSA does not currently authorize the use of a draft for induction into the Armed Forces. When the draft has been implemented, it has met some public resistance. Such resistance to the draft drives much of the opposition toward maintaining the SSS and the registration requirement. Even some who are not opposed to the government's use of conscription in a time of national need are opposed to maintaining the current SSS agency infrastructure. They argue that a stand-alone agency is unnecessary and expensive and that there are a number of alternatives that could more effectively and efficiently enable the country to reestablish conscription, if necessary. Others counter that, at the cost of $23 million annually, maintaining the SSS is a relatively inexpensive insurance policy should the draft need to be quickly reinstated. They also argue that maintaining the SSS sends a signal to potential adversaries that the United States is willing to draw on its full national resources for armed conflict if necessary. Some are concerned that the registration requirements are inequitable, arguing that it is unfair to men that women can voluntarily serve in all military occupations but are exempt from the registration requirement and the prospect of being drafted. In addition, some have raised concerns about the statutory penalties for failing to register and whether these penalties are more likely to be levied on vulnerable groups. Some contend that Congress should amend MSSA and associated statute to remove penalties for failing to register. Others argue that weakening or removing penalties would cause registration compliance rates to fall to unacceptably low levels. In response to these issues, Congress has established a National Commission on Military, National, and Public Service to provide research support and recommendations on the future of the SSS.", "document_type": "crs"}
{"report": "Since the onset of the nation's civil war and ensuing military coup d'état in 1962, Burma's military, or Tatmadaw, and its associated security forces, such as the Border Guard Police and the Myanmar Police Force, have been repeatedly accused of committing murder, rape, and torture against the nation's various ethnic minorities. Between 1990 and 2008, Congress passed legislation imposing various sanctions on Burma in part due to the serious human rights violations committed by and/or authorized by the Tatmadaw. Such allegations of intentional, pervasive, and systematic abuses arose again following the forced displacement of over 700,000 Rohingya from Burma's Rakhine State in late 2017, as well as the Tatmadaw's renewed offensive against ethnic armed groups in Kachin, Karen, and Shan States (see map in the Appendix ). The Trump Administration has described that Tatmadaw's assault on the Rohingya as \"ethnic cleansing\" and has applied \"limited targeted sanctions\" on five Tatmadaw officers and two military units. On December 13, 2018, the House of Representatives passed H.Res. 1091 (116 th Congress) by a vote of 394-1, stating \"the atrocities committed against the Rohingya by the Burmese military and security forces since August 2017 constitute crimes against humanity and genocide\" and calling on the Secretary of State to \"determine, based on available evidence, whether the actions by the Burmese military in northern Rakhine State in 2017 constitute crimes against humanity, genocide, or other crimes under international law.\" Various organizations—including the United Nations Independent International Fact-Finding Mission in Myanmar (UNFFM), multiple human rights organizations, and the press—have conducted investigations into allegations that Burmese security forces committed serious human rights violations in Burma's seven ethnic states since the Tatmadaw transferred power to a mixed civilian/military government in 2011. These organizations have released at least 17 reports documenting evidence that appears to support some of these allegations, and implicates specific Burmese security personnel and units as being responsible for the abuses. In addition to concluding that Burmese security forces were responsible for serious human rights violations, at least two of these reports maintain that the violations were intentional, premeditated, and systemic. Certain Burmese officers and units also appear in more than one report, and in some cases, are identified as being responsible for human rights violations in more than one ethnic state and/or at different times. The reports vary in their conclusions on the severity of the abuses. Some conclude that certain violations may constitute genocide; in other cases, some describe possible war crimes or crimes against humanity. This report compiles a list—in tabular form—of the Burmese security personnel and units that have been identified as responsible for serious human rights violations by one or more the following reports: 1. Amnesty International, \"All the Civilians Suffer: Conflict, Displacement, and Abuse in Northern Myanmar,\" June 2017; 2. Amnesty International, \"We Will Destroy Everything: Military Responsibility for Crimes Against Humanity in Rakhine State, Myanmar,\" June 2018; 3. Fortify Rights, \"They Gave Them Long Swords: Preparations for Genocide and Crimes Against Humanity against Rohingya Muslims in Rakhine State, Myanmar,\" July 2018; 4. Human Rights Watch, \"All My Body Was Pain: Sexual Violence against Rohingya Women and Girls in Burma,\" November 2017; 5. Human Rights Watch, \"Massacre by the River: Burmese Army Crimes against Humanity in Tula Toli,\" December 2017; 6. Kachin Women's Association in Thailand, \"A Far Cry from Peace: Ongoing Burma Army Offensives and Abuses in Northern Burma under the NLD Government,\" November 2016; 7. Kachin Women's Association in Thailand, \"State Terror in the Kachin Hills: Burma Army Attacks against Civilians in Northern Burma,\" November 16, 2017; 8. Karen Human Rights Group, \"Ongoing Militarisation in Southeast Myanmar,\" October 2016; 9. Legal Aid Network and Kachin Women's Association in Thailand, \"Justice Delayed, Justice Denied: Seeking Truth about Sexual Violence and War Crime Case in Burma,\" January 2016; 10. Network for Human Rights Documentation—Burma, \"Report on the Human Rights Situation in Burma, January–December 2017,\" March 2018; 11. Physicians for Human Rights, \"Please Tell the World What They Have Done to Us: The Chut Pyin Massacre: Forensic Evidence of Violence against the Rohingya in Myanmar,\" July 2018; 12. Refugees International, \"Suffering in Shadows: Aid Restrictions and Reductions Endanger Displaced Persons in Northern Myanmar,\" December 2017; 13. Simon Lewis, Zeba Siddiqui, Clare Baldwin, and Andrew R.C. Marshall, \"Tip of the Spear,\" Reuters, June 26, 2018; 14. Ta'ang Women's Organization, \"Trained to Torture: Systematic War Crimes by the Burma Army in Ta'ang Areas of Northern Shan State (March 2011–March 2016),\" June 2016; 15. United Nations Fact-Finding Mission on Myanmar, \"Report of the Independent International Fact-Finding Mission on Myanmar\" (Advanced Unedited Version), August 24, 2018; 16. Women's League of Burma, \"If They Had Hope, They Would Speak: The On-going Use of State-Sponsored Sexual Violence in Burma's Ethnic Communities,\" November 2014; and 17. Women's League of Burma, \"Long Way to Go: Continuing Violations of Human Rights and Discrimination Against Ethnic Women in Burma,\" July 2016. CRS did not independently confirm the veracity of the findings in these reports. The UNFFM report recommends that the United Nations Security Council (UNSC) refer the human rights abuse allegations to the International Criminal Court (ICC) for investigation and possible prosecution. The report specifically identifies six Burmese military leaders—Commander-in-Chief Senior General Min Aung Hlaing; Deputy Commander-in-Chief Vice Senior General Soe Win; Commander, Bureau of Special Operations-3, Lieutenant General Aung Kyaw Zaw; Commander, Western Regional Military Command, Major General Maung Maung Soe; Commander, 33 rd Light Infantry Division, Brigadier General Aung Aung; and Commander, 99 th Light Infantry Division, Brigadier General Than Oo—as warranting investigation and possible prosecution by the ICC. The UNFFM also calls for the creation of an independent, impartial mechanism to collect, consolidate, preserve and analyse evidence of violations of international humanitarian law and human rights violations and abuses and to prepare files to facilitate and expedite fair and independent criminal proceedings in national, regional or international courts or tribunals. In addition, the UNFFM recommends the UNSC \"should adopt targeted individual sanctions, including travel bans and asset freezes, against those who appear most responsible for serious crimes under international law\" and impose an arms embargo on Burma. The Department of State has conducted a preliminary investigation into alleged human rights abuses in Rakhine State. According to an article in Politico , there was sharp disagreement within the State Department on whether to categorize the Tatmadaw's attacks on the Rohingya as genocide or crimes against humanity. On August 28, 2018, then-U.S. Ambassador to the United Nations Nikki Haley presented to the U.N Security Council some of the details of a then unreleased version of the State Department's report. She stated, \"The results are consistent with the recently-released UN independent international fact-finding mission on Burma.\" Among the details Haley mentioned were the following: The investigation involved interviews with 1,024 Rohingya refugees in camps in Bangladesh's Cox's Bazar region; 82% of the refugees witnessed the killing of a Rohingya; 51% witnessed sexual violence; and 20% witnessed violence against 100 or more people; and Burmese military and security forces were the perpetrators \"of the overwhelming majority of these crimes.\" On September 24, 2018, the State Department posted online a 20-page publication entitled Documentation of Atrocities in Northern Rakhine State . The State Department issued no press release or statement regarding the release of the summary. According to the publication's executive summary, \"the vast majority of Rohingya refugees experienced or directly witnessed extreme violence and the destruction of their homes.\" The summary also concluded \"that the recent violence in northern Rakhine State was extreme, large-scale, widespread, and seemingly geared toward both terrorizing the population and driving out the Rohingya residents.\" The publication is generally consistent with Ambassador Haley's statement before the UNSC, but did not indicate if the State Department considers the atrocities to be genocide, crimes against humanity, and/or war crimes. On July 30, 2018, President Win Myint appointed former Philippine Deputy Foreign Minister Rosario Manalo; former Japanese Ambassador to the U.N. Kenzo Oshima; the chief coordinator of the Union Enterprise for Humanitarian Assistance, Resettlement and Development in Rakhine, Aung Tun Thet; and the former chair of Myanmar's Constitutional Tribunal, Mya Thein, to head the Independent Commission of Enquiry (ICOE), which \"will investigate the allegations of human rights violations and related issues, following the terrorist attacks by ARSA.\" President Win Myint's announcement did not indicate any deadline for the commission to complete its investigation. Deputy Commander-in-Chief Vice Senior General Soe Win reportedly said, \"the military is on standby to offer full cooperation with the commission.\" The ICOE visited Rakhine State on December 21, 2018, as part of its investigation. Manalo reportedly stated during the visit, \"We are gathering the truth. Fake news should not be believed. Everything should be based on evidence.\" The ICOE also set a deadline of January 31, 2019, for people to submit evidence of the commission of human rights abuses. Since Burma's security forces began its \"clearance operations\" in August 2017, Commander-in-Chief Senior General Min Aung Hlaing has repeatedly denied that his troops committed human rights abuses in Rakhine State, or elsewhere in Burma. On February 15, 2019, Min Aung Hlaing told Asahi Shimbun that \"there is no certain proof that the national army was involved in the persecution\" of Rohingya.\" He also said that such accusations \"hurts the nation's dignity.\" Besides the United States, Australia, Canada, and the European Union have imposed sanctions on Burmese military or security officers responsible for human rights violations in Burma (see Table 1 ). The European Union placed sanctions on seven Burmese security officers on June 25, 2018, and another seven officers on December 21, 2018. On June 25, 2018, Canada placed sanctions on the same seven officers as the EU. On October 5, 2018, Australia placed financial sanctions of five Burmese security officers. Three people appear on all four lists—Lt. General Aung Kyaw Zaw, Major General Khin Maung Soe, and Major General Maung Maung Soe. Two officers, Brigadier General Aung Aung and Brigadier General Than Oo, have been sanctioned by Australia, Canada, and the EU, but not the United States. The following tables list the names of Burmese security force officers ( Table 2 ) and units ( Table 3 ) that have been identified in one or more of the reports mentioned above as being responsible for human rights violations in Burma since 2011. For purposes of this report, the \"types of responsibility\" include the following: Authorization —Authorized and/or ordered other security personnel to commit human rights abuses on Burmese civilians; Commission —Committed the human rights abuses and/or took no action to prevent the commission of human rights abuses; and Cover-up —Became aware of credible allegations that security personnel under their command had committed or were committing human rights violations, but took no action to stop the further commission of human rights violations; attempted to conceal alleged human rights violations by Burmese security personnel; and/or tried to prevent or undermine investigations or prosecutions of alleged human rights violations by Burmese personnel. With regard to the type of human rights violation committed, this report classifies them into six categories Arbit rary arrest —includes the arrest and/or detention of civilians without discernible evidence that the civilians had committed some crime; Attacks on civilians —includes intentional assaults of civilians and attacks conducted with a disregard for the potential of causing harm to civilians; Extrajudicial killing —includes the intentional killing of civilians and the killing of civilians during military attacks conducted with a disregard for the potential of causing harm to civilians; Forced labor —includes forcing civilians to carry military equipment or supplies, to serve as \"human shields\" for military units, and/or to use civilians as human \"landmine detectors\"; Sexual violence —includes rape, attempted rape, and other forms of sexual assault; and Torture —includes torture and/or the physical abuse of civilians. While the military personnel and units listed in the tables have not been proven to be responsible for human rights abuses, their identification in one or more of the reports listed above may indicate that there is reason for further investigation of the allegations. Information in the tables suggests certain patterns about the human rights abuse allegations, including the following: Pervasive and systemi c abuse by Tatmadaw — Table 3 includes more than 100 military units, including 3 Regional Operations Commands, 6 infantry divisions, and more than 90 infantry battalions, indicating that alleged human rights abuse is not limited to a few \"troubled\" units; Geographically pervasive —The reports link certain military units with similar human rights abuses in all of Burma's ethnic minority states—Chin, Kachin, Karen (Kayin), Karenni (Kayah), Mon, Rakhine, and Shan; \"Trouble d \" units —The reports repeatedly implicate certain units in abuses, including the following: Infantry Division 33 —This unit is identified in six reports, involving a variety of alleged abuses in the States of Kachin, Rakhine and Shan; Infantry Division 99 —This unit is also identified in six reports, involving a variety of alleged abuses in the States of Kachin, Rakhine, and Shan; and Infantry Battalions 324, 502, 503 and 567 —These units were identified in three different reports as committing a variety of human rights abuses. The extensive list of reports alleging that Burma's security forces have committed genocide, crimes against humanity, and/or war crimes has reinforced calls for some form of accountability mechanism to investigate and possibly prosecute the perpetrators of the alleged abuses. Many of the reports and various human rights organizations have proposed various accountability mechanisms, including referral to the International Criminal Court (ICC), the creation of an ad hoc international criminal tribunal, the imposition of U.N. sanctions, and the enactment of bilateral restrictions on relations with the Burmese government and/or the Burmese military. The Rome Statute of the International Criminal Court, which entered into force on July 1, 2002, established the procedures by which cases can be referred to the ICC's Prosecutor for investigation and possible prosecution. Bangladesh (see below) is a party to the Rome Statute; Burma is not. Article 13(b) states the ICC may exercise jurisdiction if \"one or more of such crimes appears to have been committed is referred to the Prosecutor by the Security Council acting under Chapter VII of the Charter of the United Nations.\" To date, the Security Council has referred one case under Article 13(b), that of the situation in Darfur, Sudan, in 2005. Under Article 27 of the U.N. Charter, nonprocedural decisions of the UNSC, including a referral of a case to the ICC, \"shall be made by an affirmative vote of nine members including the concurring votes of the permanent members.\" The five permanent members of the UNSC are China, France, Russia, the United Kingdom, and the United States; the current 10 nonpermanent members are Bolivia, Cote d'Ivoire, Equatorial Guinea, Ethiopia, Kazakhstan, Kuwait, the Netherlands, Peru, Poland, and Sweden. Many observers expect China, and possibly Russia, to veto any proposed referral to the ICC. When asked if the United Kingdom would support a referral to the ICC during his visit to Burma in late September 2018, the U.K.'s Foreign Secretary Jeremy Hunt indicated that his government was considering \"a number of different options.\" France has not issued any public statement on a possible UNSC resolution to refer the case to the ICC. The Trump Administration's position on the possible referral to the ICC is uncertain. In her August 25, 2018, statement to the UNSC, Ambassador Haley said, \"Here in the Security Council, we must hold those responsible for violence to account.\" She also commended Kuwait, the Netherlands, Peru, and the United Kingdom for working \"to keep the Security Council's focus on the atrocities in Burma.\" National Security Advisor John Bolton, however, gave a speech on September 10, 2018, stating the Administration's policy toward the ICC, in which he said, \"We will not cooperate with the ICC. We will provide no assistance to the ICC. We will not join the ICC. We will let the ICC die on its own. After all, for all intents and purposes, the ICC is already dead to us.\" Bolton did not make any reference the Burma situation. In April 2018, ICC Prosecutor Fatou Bensouda asked the ICC Pre-Trial Chamber to determine whether the Court may exercise jurisdiction over the forced deportation of Rohingya from Burma into Bangladesh, which the Prosecutor argued constituted a crime against humanity. The Prosecutor argued that because forced deportation of Rohingya occurred partially on the territory of Bangladesh (a state party to the Rome Statute), the Court may exercise jurisdiction over the crimes. On September 6, 2018, the Pre-Trial Chamber agreed, deciding that the ICC Prosecutor can begin a preliminary investigation into the situation in Bangladesh, opening the possibility of prosecuting Burmese officials. On September 18, 2018, ICC Prosecutor Bensouda announced that she was initiating the preliminary investigation, which will also take into account \"a number of alleged coercive acts\" that resulted in the forced displacement, including killings, sexual violence, enforced disappearances, and the destruction of property. Her office is to also consider if other crimes under Article 7 of the Rome Statute (\"Crimes Against Humanity\") may be applicable. A preliminary examination team from the ICC is scheduled to visit Bangladesh in March 2019. Bangladesh Prime Minister Sheikh Hasina has said that her government will cooperate with the ICC team. Burma rejected the Pre-Trial Chamber's decision, and has stated it will not assist the ICC investigation. A possible alternative to the ICC could be the creation of an ad hoc International Criminal Tribunal (ICT) to investigate and potentially prosecute perpetrators of human rights abuses in Burma. Such a tribunal was established by the UNSC on May 25, 1993, \"for the sole purpose of prosecuting persons responsible for serious violations of international humanitarian law committed in the territory of the former Yugoslavia between 1 January 1991 and a date to be determined by the Security Council upon the restoration of peace.\" The UNSC established another ICT on November 8, 1994, \"for the sole purpose of prosecuting persons responsible for genocide and other serious violations of international humanitarian law committed in the territory of Rwanda and Rwandan citizens responsible for genocide and other such violations committed in the territory of neighbouring States, between 1 January 1994 and 31 December 1994.\" In addition, the UNSC previously has established Special Courts in Cambodia, East Timor, Lebanon, and Sierra Leone to adjudicate cases of alleged human rights violations in those four nations. In general, the UNSC has stipulated the scope of the International Criminal Tribunal or Special Court, including the time period to be considered. The Special Courts were set up with the support of the government of the nation in question, whereas the two ICTs were created when the government of the nation in question was unable or unwilling to undertake the criminal proceedings. On September 28, 2018, the U.N. Human Rights Council (UNHRC) approved a resolution that establishes an \"ongoing independent mechanism to collect, consolidate, preserve and analyse evidence of the most serious international crimes and violations of international law committed in Myanmar since 2011\" by a vote of 35 in favor, 3 opposed, and 7 abstentions. The three nations voting against the proposal were Burundi, China, and the Philippines. Japan was one of the seven nations that abstained. The UNHRC resolution instructs the mechanism to Prepare files in order to facilitate and expedite fair and independent criminal proceedings, in accordance with international law standards, in national, regional or international courts or tribunals that have or may in the future have jurisdiction over these crimes, in accordance with international law. The mechanism also is to have access to the information collected by the UNFFM, be able to continue to collect evidence, and be provided the capacity to document and verify relevant information and evidence. The UNHRC requested that U.N. Secretary-General Antonio Guterres appoint \"the staff of the mechanism as expeditiously as possible\" and \"allocate the resources necessary for the implementation of the present resolution.\" The resolution also extended the mandate of the UNFFM \"until the new mechanism is operational.\" The UNFFM had recommended the creation of \"an independent, impartial mechanism to collect, consolidate, preserve and analyze evidence of violations of international humanitarian law and human rights violations and abuses and to prepare files to facilitate and expedite fair and independent criminal proceedings in national, regional or international courts or tribunals.\" It also stated the mechanism \"could resemble the 'International, Impartial and Independent Mechanism [IIIM] to Assist in the Investigation and Prosecution of Persons Responsible for the Most Serious Crimes under International Law Committed in the Syrian Arab Republic since March 2011,' created by United Nations General Assembly resolution 71/248,\" which was adopted in December 2016. Various human rights organizations have also expressed support for the creation of such a mechanism. In December 2018, the U.N. General Assembly approved $26.7 million to fund the \"independent, impartial mechanism.\" The Trump Administration has not indicated its position on the establishment of an \"independent, impartial mechanism\" for Rakhine State, but it has demonstrated its support for the IIIM. In February 2018, Ambassador Haley stated the following: The United States has also announced that we will contribute to the International, Impartial, and Independent Mechanism on international crimes committed in Syria—the IIIM. The United States strongly supports the IIIM as a valuable tool to hold the Assad regime accountable for its atrocities, including its repeated and ongoing use of chemical weapons. In FY2018, the United States provided nearly $350,000 in support of the IIIM. The 116 th Congress appropriated funds in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) for investigation and documentation of alleged human rights violations in Burma, but not explicitly for an \"independent, impartial mechanism.\" Section 7043(a) included the following provisions: Bilateral Economic Assistance.—… (B) USES.—Funds appropriated under title III of this Act for assistance for Burma—… (vi) shall be made available for programs to investigate and document allegations of ethnic cleansing and other gross violations of human rights committed against the Rohingya people in Rakhine state: Provided , That such funds shall be in addition to funds otherwise made available for such purposes; (vii) shall be made available for programs to investigate and document allegations of gross violations of human rights committed in Burma, particularly in areas of conflict. The House committee report that accompanied the act ( H.Rept. 116-9 ) allocated $3.0 million out of the $82.7 million Economic Support Fund for Burma for \"Documentation of human rights violations against Rohingya,\" and $0.75 million for \"Documentation of human rights violations in Burma.\" The report further stipulated that funds made available for programs to investigate and document allegations of ethnic cleansing and other gross violations of human rights committed against the Rohingya people in Rakhine state shall be made available for civil society organizations in Bangladesh and Burma. Prior to the obligation of any such funds, the Assistant Secretary for DRL shall ensure the establishment of a standard documentation format and documentation procedures for use by such organizations, and shall identify an appropriate repository for such information. It also specified that funds made available for programs to investigate and document allegations of gross violations of human rights committed in Burma shall be made available for civil society and international organizations, including those in countries bordering Burma. The UNFFM and various human rights organizations have recommended that the UNSC impose sanctions on Burma independent of any ICC or ad hoc international tribunal prosecution. Among the possible U.N. sanctions proposed are a global arms embargo; travel bans and the freezing of assets of senior Burmese government and military officials; and a prohibition of trade and/or investment with businesses owned or controlled by the Burmese military, its senior officers, or their families. The UNSC has imposed sanctions in response to human rights violations, among other factors, in other countries, including the Central African Republic, Haiti, Rwanda, South Africa, South Sudan, Sudan, and the former Yugoslavia. The UNSC sanctions have included, in some cases, arms embargoes, travel bans, and the freezing of assets. Another accountability option that has been suggested is for individual nations to impose appropriate sanctions on Burma. The United States currently has some restrictions on relations with Burma, and the Trump Administration has announced some additional restrictions in response to the alleged human rights abuses in Rakhine State, including the imposition of visa and economic restrictions on five Burmese military officers and two military units under the authority of the Global Magnitsky Act (see above). The Trump Administration could potentially sanction additional individuals and units it determines are responsible for serious human rights violations under the authority of the Global Magnitsky Act. If the Trump Administration were to determine that the alleged human rights abuses that occurred in Rakhine State or elsewhere in Burma constituted genocide, then the United States has the authority to prosecute alleged offenders under the provisions of the Human Rights Enforcement Act of 2009 ( P.L. 111-122 ; 18 U.S.C. 1091). The act criminalizes the act of genocide and subjects the offender to a possible death sentence, life in prison, and a fine of \"not more than $1,000,000.\" The act grants U.S. jurisdiction to the case under certain conditions, including if \"the alleged offender is present in the United States,\" regardless of where the offense was committed. The United States is a party to the Convention on the Prevention and Punishment of the Crime of Genocide. Article V of the convention states the following: The Contracting Parties undertake to enact, in accordance with their respective Constitutions, the necessary legislation to give effect to the provisions of the present Convention, and, in particular, to provide effective penalties for persons guilty of genocide or any of the other acts enumerated in article III. Article VII requires that \"(t)he Contracting Parties pledge themselves in such cases to grant extradition in accordance with their laws and treaties in force.\" Bangladesh, Burma, and the United States are parties to the Convention. Prior to the events in Rakhine State, the United States had maintained several types of restrictions on relations with Burma, including restrictions on the issuance of visas to Burmese government and military officials; limits on bilateral and multilateral economic assistance; and prohibition on the sale of U.S. military equipment. In addition, Section 7043(a)(1)(C) of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) stated that FY2019 bilateral economic assistance (i) may not be made available to any individual or organization if the Secretary of State has credible information that such individual or organization has committed a gross violation of human rights, including against Rohingya and other minority groups, or that advocates violence against ethnic or religious groups or individuals in Burma; and (ii) may not be made available to any organization or entity controlled by the armed forces of Burma. Other restrictions on relations are currently being waived under the authority of presidential executive orders or presidential determinations. These include a general ban on the import of goods from Burma; a ban on the import of Burmese jadeite and rubies, and products containing Burmese jadeite and rubies; a ban on the import of goods from certain Burmese companies; the \"freezing\" of the assets of certain Burmese nationals; a prohibition on providing financial services to certain Burmese nationals; restrictions on U.S. investments in Burma; restrictions on bilateral assistance to Burma; and restrictions on U.S. support for multilateral assistance to Burma. In addition, former President George H.W. Bush suspended Burma's benefits under the U.S. Generalized Systems of Preferences (GSP) program on April 13, 1989, as part of Presidential Proclamation 5955. Former President Obama restored Burma's GSP benefits on September 14, 2016, via Presidential Proclamation 9492. Any of these waived past restrictions, including the suspension of GSP benefits, could be reinstated by President Trump without the involvement of Congress. Congress has various options on how it may respond to the alleged human rights violations in Burma. Legislation has been introduced to modify U.S. policy in Burma, in part to address the alleged human rights abuses. Resolutions have also been introduced expressing congressional views on events in Burma, and calling for changes in U.S. policy. Over the last few years, Congress has also included Burma-related provisions in pending appropriation legislation to shape U.S. policy in Burma. Congress has also demonstrated its ongoing interest in Burma, and the importance of U.S. policy in Burma, by holding several hearings to learn more about developments in Burma and discuss policy options. Several congressional delegations have traveled to Bangladesh and Burma to directly investigate the situation and express to Burma's leaders the importance of the human rights violations allegations to Congress. Whatever additional actions or measures, if any, Congress takes to address the alleged human rights violations in Burma will likely be influenced by other elements of bilateral relations, as well as regional concerns such as China's growing influence in Southeast Asia. Some Members of Congress and the Trump Administration view Burma as undergoing a fragile and difficult transition from an oppressive military dictatorship to a potentially democratic, civilian-run federated state, and are concerned that imposing additional restrictions on relations with Burma could undermine that transition. Other Members of Congress and Administration officials see the human rights abuses in Kachin, Karen, Rakhine, and Shan States as proof that the Tatmadaw's leaders have no intention of permitting such a transition to occur. In the 115 th Congress, two bills were introduced pertaining to U.S. policy in Burma with provisions related to the alleged human rights violations—the Burma Unified through Rigorous Military Accountability (BURMA) Act of 2018 ( H.R. 5819 ) and the Burma Human Rights and Freedom Act of 2018 ( S. 2060 ). Both bills would have imposed a visa ban on senior military officers involved in human rights abuses in Burma, placed new restrictions on security assistance and military cooperation, and required U.S. opposition to international financial institution (IFI) loans to Burma if the project involves an enterprise owned or directly or indirectly controlled by the military of Burma. S. 2060 also would have required the President to review Burma's eligibility for the Generalized System of Preferences (GSP) program. The House Committee on Foreign Affairs, on May 17, 2018, ordered H.R. 5819 to be reported favorably out of committee, with an amendment in the nature of a substitute, and agreed to seek consideration under suspension of the rules. The Senate Committee on Foreign Relations reported S. 2060 favorably out of committee on February 12, 2018, with an amendment in the nature of a substitute, but the bill never received floor action by the Senate. Ten separate resolutions in the House or Senate pertaining to Burma were introduced during the 115 th Congress; one passed. In the 116 th Congress, one Burma-related resolution has been introduced, S.Res. 34 , that resolves that the Senate (among other things): condemns the violence and displacement inflicted on Burma's Rohingya and other ethnic minorities; and urges the Secretary of State to make a determination whether the actions by the Myanmar military constitute crimes against humanity or genocide and to work with interagency partners to impose targeted sanctions on Myanmar military officials, to include Senior General Min Aung Hlaing, responsible for these heinous acts through existing authorities. As previously described, the 116 th Congress included provisions in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) placing restrictions on the provision of bilateral economic assistance, international security assistance, and multilateral assistance to Burma. Similar provisions could be included in the appropriations legislation for the Department of Defense and the Department of State for FY2020. Since September 2017, Congress has held several hearings on Burma, including the following: A House Committee on Foreign Affairs hearing on September 26, 2018, entitled, \"Genocide Against the Burmese Rohingya.\" A House Committee on Foreign Affairs hearing on October 4, 2017, entitled, \"The Rohingya Crisis: U.S. Response to the Tragedy in Burma.\" A House Committee on Foreign Affairs Subcommittee on Asia and the Pacific hearing on September 27, 2017, entitled, \"Burma's Brutal Campaign Against the Rohingya.\" A Senate Committee on Foreign Relations hearing on October 24, 2017, entitled, \"Assessing U.S. Policy Towards Burma: Geopolitical, Economic, and Humanitarian Considerations.\" A Tom Lantos Human Rights Commission hearing on July 25, 2018, entitled, \"Victims' Rights in Burma.\" At all of these hearings, most of the Members of Congress present indicated that they view the acts of Burma's security forces in Rakhine State and elsewhere in Burma as either genocide or crimes against humanity. Many also stated that the Trump Administration's response to date has been inadequate given the severity of the human rights abuses. Congress may also consider sending congressional delegations and staff delegations to Bangladesh and Burma to investigate the alleged human rights violations and ascertain the views of the alleged victims on what forms of accountability should be pursued. These delegations could also meet with Burmese government officials and Burmese military leaders to hear their perspectives of the human rights allegations, and to express the delegation's opinion on what measures the Burmese government and military should make to investigate and possibly prosecute those individuals, military units, and organizations that have been accused of committing genocide, crimes against humanity, and war crimes in Burma. ", "summary": "At least 17 different reports by United Nations (U.N.) entities and independent human rights organizations have been released containing allegations that certain Burmese security force officers and units committed serious human rights violations dating back to 2011. These reports name nearly 40 individuals and over 100 security units as responsible for such gross human rights violations as murder, torture, rape and other forms of sexual violence, and forced labor. Some of these individuals, including Commander-in-Chief Senior General Min Aung Hlaing, were identified in four or more of the reports. Similarly, some of the security units, in particular Infantry Division 33 and Infantry Division 99, were cited by six or more of the reports. The reports suggest that the commission of human rights abuses by Burma's security forces is pervasive, systematic, and endemic. CRS did not independently verify the credibility of these reports. The Trump Administration has labeled the alleged human rights violations as \"ethnic cleansing\" and has imposed \"limited targeted sanctions\" on five Burmese military officers and two military units it considers responsible for serious human rights violations against the Rohingya in Burma's Rakhine State. In August 2018, the State Department released a report summarizing the results of a survey of Rohingya refugees in Bangladesh that concluded that \"the vast majority of Rohingya refugees experienced or directly witnessed extreme violence and the destruction of their homes.\" The report also stated \"that the recent violence in northern Rakhine State was extreme, large-scale, widespread, and seemingly geared toward both terrorizing the population and driving out the Rohingya residents.\" The report, however, did not indicate if the violence constituted genocide, crimes against humanity, and/or war crimes. Some Members of Congress and other observers view this response as too limited, and have called on the Trump Administration to take stronger action given the severity of the human rights abuses. The 116th Congress appropriated $3.75 million in the Consolidated Appropriations Act, 2019 (P.L. 116-6) for the documentation of human rights violations against Rohingya and others in Burma. Congress has also placed restrictions and requirements on relations with Burma in previous appropriations legislation to address human rights issues. Many of the reports advocate for some form of accountability for the reported human rights violations, including by calling for the U.N. Security Council to refer the alleged human rights violations in Burma to the International Criminal Court (ICC) or an ad hoc international criminal tribunal for investigation and possible prosecution. China and possibly Russia are likely to oppose an ICC referral, and recent statements by President Trump and National Security Advisor John Bolton suggest the United States may also oppose such a referral. The ICC's Pre-Trial Chamber had previously ruled that the ICC's Prosecutor can begin a preliminary investigation of the war crime of forced deportation of the country's Rohingya ethnic minority into neighboring Bangladesh. In the interim, the United Nations Independent International Fact-Finding Mission on Myanmar (UNFFM) has recommended that an independent international mechanism (IIM) be established to collect and preserve evidence of alleged acts of genocide, crimes against humanity, and war crimes committed in Burma since 2011. The U.N. Human Rights Council has approved the formation of an IIM, and has urged U.N. Secretary-General Antonio Guterres to appoint \"the staff of the mechanism as expeditiously as possible.\" In addition to these measures to support some form of future criminal action against the alleged perpetrators, the UNFFM and others have expressed support for U.N. sanctions against the Burmese military and others considered responsible for the abuses. Some of the reports also call on individual nations to impose sanctions on Burma's military and its government.", "document_type": "crs"}
{"report": "Federal land management decisions influence the U.S. economy, environment, and social welfare. These decisions determine how the nation's federal lands will be acquired or disposed of, developed, managed, and protected. Their impact may be local, regional, or national. This report discusses selected federal land policy issues that the 116 th Congress may consider through oversight, authorizations, or appropriations. The report also identifies CRS products that provide more detailed information. The federal government manages roughly 640 million acres of surface land, approximately 28% of the 2.27 billion acres of land in the United States. Four agencies (referred to in this report as the federal land management agencies, or FLMAs) administer a total of 608 million acres (~95%) of these federal lands: the Forest Service (FS) in the Department of Agriculture (USDA), and the Bureau of Land Management (BLM), U.S. Fish and Wildlife Service (FWS), and National Park Service (NPS), all in the Department of the Interior (DOI). Most of these lands are in the West and Alaska, where the percentage of federal ownership is significantly higher than elsewhere in the nation (see Figure 1 ). In addition, the Department of Defense administers approximately 11 million acres in military bases, training ranges, and more; and numerous other agencies administer the remaining federal acreage. The federal estate also extends to energy and mineral resources located below ground and offshore. BLM manages the federal onshore subsurface mineral estate. The Bureau of Ocean and Energy Management (BOEM), also in DOI, manages access to about 1.7 billion offshore acres located beyond state coastal waters, referred to as U.S. offshore areas or the outer continental shelf (OCS). Not all of these acres can be expected to contain extractable mineral and energy resources, however. Federal land policy and management issues generally fall into several broad thematic questions: Should federal land be managed to produce national or local benefits? How should current uses be balanced with future resources and opportunities? Should current uses, management, and protection programs be replaced with alternatives? Who decides how federal land resources should be managed, and how are the decisions made? Some stakeholders seek to maintain or enhance the federal estate, while others seek to divest the federal estate to state or private ownership. Some issues, such as forest management and fire protection, involve both federal and nonfederal (state, local, or privately owned) land. In many cases, policy positions on federal land issues do not divide along clear party lines. Instead, they may be split along the lines of rural-urban, eastern-western, and coastal-interior interests. Several committees in the House and Senate have jurisdiction over federal land issues. For example, issues involving the management of the national forests cross multiple committee jurisdictions, including the Committee on Agriculture and the Committee on Natural Resources in the House, and the Committee on Agriculture, Nutrition and Forestry and Committee on Energy and Natural Resources in the Senate. In addition, federal land issues are often addressed during consideration of annual appropriations for the FLMAs' programs and activities. These agencies and programs typically receive appropriations through annual Interior, Environment, and Related Agencies appropriations laws. This report introduces selected federal land issues, many of which are complex and interrelated. The discussions are broad and aim to introduce the range of issues regarding federal land management, while providing references to more detailed and specific CRS products. The issues are grouped into these broad categories Federal Estate Ownership, Funding Issues Related to Federal Lands, Climate Policy and Federal Land Management, Energy and Minerals Resources, Forest Management, Range Management, Recreation, Other Land Designations, Species Management, and Wildfire Management. This report generally contains the most recent available data and estimates. Federal land ownership began when the original 13 states ceded title of some of their land to the newly formed central government. The early federal policy was to dispose of federal land to generate revenue and encourage western settlement and development. However, Congress began to withdraw, reserve, and protect federal land through the creation of national parks and forest reserves starting in the late 1800s. This \"reservation era\" laid the foundation for the current federal agencies, whose primary purpose is to manage natural resources on federal lands. The four FLMAs and BOEM were created at different times, with different missions and purposes, as discussed below. The ownership and use of federal lands has generated controversy since the late 1800s. One key area of debate is the extent of the federal estate, or, in other words, how much land the federal government should own. This debate includes questions about whether some federal lands should be disposed to state or private ownership, or whether additional land should be acquired for recreation, conservation, open space, or other purposes. For lands retained in federal ownership, discussion has focused on whether to curtail or expand certain land designations (e.g., national monuments proclaimed by the President or wilderness areas designated by Congress) and whether current management procedures should be changed (e.g., to allow a greater role for state and local governments or to expand economic considerations in decisionmaking). A separate issue is how to ensure the security of international borders while protecting the federal lands and resources along the border, which are managed by multiple agencies with their own missions. In recent years, some states have initiated efforts to assume title to the federal lands within their borders, echoing efforts of the \"Sagebrush Rebellion\" during the 1980s. These efforts generally are in response to concerns about the amount of federal land within the state, as well as concerns about how the land is managed, fiscally and otherwise. Debates about federal land ownership—including efforts to divest federal lands—often hinge on constitutional principles such as the Property Clause and the Supremacy Clause. The Property Clause grants Congress authority over the lands, territories, or other property of the United States: \"the Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States.\" The Supremacy Clause establishes federal preemption over state law, meaning that where a state law conflicts with federal law, the federal law will prevail. Through these constitutional principles, the U.S. Supreme Court has described Congress's power over federal lands as \"without limitations.\" For instance, Congress could choose to transfer to states or other entities the ownership of areas of federal land, among other options. CRS Report R42346, Federal Land Ownership: Overview and Data , by Carol Hardy Vincent, Laura A. Hanson, and Carla N. Argueta. CRS Report R44267, State Management of Federal Lands: Frequently Asked Questions , by Carol Hardy Vincent. The four FLMAs and BOEM manage most federal lands (onshore and offshore, surface and subsurface) Forest Service (FS) , in the Department of Agriculture, manages the 193 million acre National Forest System under a multiple-use mission, including livestock grazing, energy and mineral development, recreation, timber production, watershed protection, and wildlife and fish habitat. Balancing the multiple uses across the national forest system has sometimes led to a lack of consensus regarding management decisions and practices. Bureau of Land Management (BLM) , in the Department of the Interior (DOI), manages 246 million acres of public lands, also under a multiple-use mission of livestock grazing, energy and mineral development, recreation, timber production, watershed protection, and wildlife and fish habitat. Differences of opinion sometimes arise among and between users and land managers as a result of the multiple use opportunities on BLM lands. U.S. Fish and Wildlife Service (FWS) , in DOI, manages 89 million acres as part of the National Wildlife Refuge System (NWRS) as well as additional surface, submerged, and offshore areas. FWS manages the NWRS through a dominant-use mission—to conserve plants and animals and associated habitats for the benefit of present and future generations. In addition, FWS administers each unit of the NWRS pursuant to any additional purposes specified for that unit. Other uses are permitted only to the extent that they are compatible with the conservation mission of the NWRS and any purposes identified for individual units. Determining compatibility can be challenging, but the FWS's stated mission generally has been seen to have helped reduce disagreements over refuge management and use. National Park Service (NPS) , in DOI, manages 80 million acres in the National Park System. The NPS has a dual mission—to preserve unique resources and to provide for their enjoyment by the public. NPS laws, regulations, and policies emphasize the conservation of park resources in conservation/use conflicts. Tension between providing recreation and preserving resources has produced management challenges for NPS. Bureau of Ocean Management (BOEM) , also in DOI, manages energy resources in areas of the outer continental shelf (OCS) covering approximately 1.7 billion acres located beyond state waters. These areas are defined in the Submerged Lands Act and the Outer Continental Shelf Lands Act (OCSLA). BOEM's mission is to balance energy independence, environmental protection, and economic development through responsible, science-based management of offshore conventional and renewable energy resources. BOEM schedules and conducts OCS oil and gas lease sales, administers existing oil and gas leases, and issues easements and leases for deploying renewable energy technologies, among other responsibilities. CRS In Focus IF10585, The Federal Land Management Agencies , by Katie Hoover. CRS Report R42656, Federal Land Management Agencies and Programs: CRS Experts , by R. Eliot Crafton. CRS Report R45340, Federal Land Designations: A Brief Guide , coordinated by Laura B. Comay. CRS In Focus IF10832, Federal and Indian Lands on the U.S.-Mexico Border , by Carol Hardy Vincent and James C. Uzel. CRS Report R45265, U.S. Fish and Wildlife Service: An Overview , by R. Eliot Crafton. CRS Report RS20158, National Park System: Establishing New Units , by Laura B. Comay. CRS Report R43872, National Forest System Management: Overview, Appropriations, and Issues for Congress , by Katie Hoover. Congress has granted the FLMAs various authorities to acquire and dispose of land. The extent of this authority differs considerably among the agencies. The BLM has relatively broad authority for both acquisitions and disposals under the Federal Land Policy and Management Act of 1976 (FLPMA). By contrast, NPS has no general authority to acquire land to create new park units or to dispose of park lands without congressional action. The FS authority to acquire lands is limited mostly to lands within or contiguous to the boundaries of a national forest, including the authority to acquire access corridors to national forests across nonfederal lands. The agency has various authorities to dispose of land, but they are relatively constrained and infrequently used. FWS has various authorities to acquire lands, but no general authority to dispose of its lands. For example, the Migratory Bird Conservation Act of 1929 grants FWS authority to acquire land for the National Wildlife Refuge System—using funds from sources that include the sale of hunting and conservation stamps—after state consultation and agreement. The current acquisition and disposal authorities form the backdrop for consideration of measures to establish, modify, or eliminate authorities, or to provide for the acquisition or disposal of particular lands. Congress also addresses acquisition and disposal policy in the context of debates on the role and goals of the federal government in owning and managing land generally. CRS Report RL34273, Federal Land Ownership: Acquisition and Disposal Authorities , by Carol Hardy Vincent et al. Funding for federal land and FLMA natural resource programs presents an array of issues for Congress. The FLMAs receive their discretionary appropriations through Interior, Environment, and Related Agencies appropriations laws. In addition to other questions related directly to appropriations, some funding questions relate to the Land and Water Conservation Fund (LWCF). Congress appropriates funds from the LWCF for land acquisition by federal agencies, outdoor recreation needs of states, and other purposes. Under debate are the levels, sources, and uses of funding and whether some funding should be continued as discretionary. A second set of questions relates to the compensation of states or counties for the presence of nontaxable federal lands and resources, including whether to revise or maintain existing payment programs. A third set of issues relates to the maintenance of assets by the agencies, particularly how to address their backlog of maintenance projects while achieving other government priorities. CRS Report R44934, Interior, Environment, and Related Agencies: Overview of FY2019 Appropriations , by Carol Hardy Vincent. CRS Report R43822, Federal Land Management Agencies: Appropriations and Revenues , coordinated by Carol Hardy Vincent. CRS In Focus IF10381, Bureau of Land Management: FY2019 Appropriations , by Carol Hardy Vincent. CRS In Focus IF10846, U.S. Fish and Wildlife Service: FY2019 Appropriations , by R. Eliot Crafton. CRS In Focus IF10900, National Park Service: FY2019 Appropriations , by Laura B. Comay. CRS In Focus IF11178, National Park Service: FY2020 Appropriations , by Laura B. Comay. CRS In Focus IF11169, Forest Service: FY2019 Appropriations and FY2020 Request , by Katie Hoover. The Land and Water Conservation Fund Act of 1965 was enacted to help preserve, develop, and assure access to outdoor recreation facilities to strengthen the health of U.S. citizens. The law created the Land and Water Conservation Fund in the U.S. Treasury as a funding source to implement its outdoor recreation purposes. The LWCF has been the principal source of monies for land acquisition for outdoor recreation by the four FLMAs. The LWCF also has funded a matching grant program to assist states with outdoor recreational needs and other federal programs with purposes related to lands and resources. The provisions of the LWCF Act that provide for $900 million in specified revenues to be deposited in the fund annually have been permanently extended. Nearly all of the revenues are derived from oil and gas leasing in the OCS. Congress determines the level of discretionary appropriations each year, and yearly appropriations have fluctuated widely since the origin of the program. In addition to any discretionary appropriations, the state grant program receives (mandatory) permanent appropriations. There is a difference of opinion as to how funds in the LWCF should be allocated. Current congressional issues include deciding the amount to appropriate for land acquisition, the state grant program, and other purposes. Several other issues have been under debate, including whether to provide the fund with additional permanent appropriations; direct revenues from other activities to the LWCF; limit the use of funds for particular purposes, such as federal land acquisition; and require some of the funds to be used for certain purposes, such as facility maintenance. Another area of focus is the state grant program, with issues including the impact of anticipated increases in mandatory funding, the way in which funds are apportioned among the states, and the extent to which the grants should be competitive. CRS In Focus IF10323, Land and Water Conservation Fund (LWCF): Frequently Asked Questions Related to Provisions Scheduled to Expire on September 30, 2018 , by Carol Hardy Vincent and Bill Heniff Jr. CRS Report RL33531, Land and Water Conservation Fund: Overview, Funding History, and Issues , by Carol Hardy Vincent. CRS Report R44121, Land and Water Conservation Fund: Appropriations for \"Other Purposes , \" by Carol Hardy Vincent. As a condition of statehood, most states forever waived the right to tax federal lands within their borders. However, some assert that states or counties should be compensated for services related to the presence of federal lands, such as fire protection, police cooperation, or longer roads to skirt the federal property. Under federal law, state and local governments receive payments through various programs due to the presence of federally owned land. Some of these programs are run by specific agencies and apply only to that agency's land. Many of the payment programs are based on revenue generated from specific land uses and activities, while other payment programs are based on acreage of federal land and other factors. The adequacy, coverage, equity, and sources of the payments for all of these programs are recurring issues for Congress. The most widely applicable onshore program, administered by DOI, applies to many types of federally owned land and is called Payments in Lieu of Taxes (PILT). Each eligible county's PILT payment is calculated using a complex formula based on five factors, including federal acreage and population. Most counties containing the lands administered by the four FLMAs are eligible for PILT payments. Counties with NPS lands receive payments primarily under PILT. Counties containing certain FWS lands are eligible to receive PILT payments, and FWS also has an additional payment program for certain refuge lands, known as the Refuge Revenue Sharing program. In addition to PILT payments, counties containing FS and BLM lands also receive payments based primarily on receipts from revenue-producing activities on their lands. Some of the payments from these other programs will be offset in the county's PILT payment in the following year. One program (Secure Rural Schools, or SRS) compensated counties with FS lands or certain BLM lands in Oregon for declining timber harvests. The authorization for the SRS program expired after FY2018, and the last authorized payments are to be disbursed in FY2019. The federal government shares the revenue from mineral and energy development, both onshore and offshore. Revenue collected (rents, bonuses, and royalties) from onshore mineral and energy development is shared 50% with the states, under the Mineral Leasing Act of 1920 (less administrative costs). Alaska, however, receives 90% of all revenues collected on federal onshore leases (less administrative costs). Revenue collected from offshore mineral and energy development on the outer continental shelf (OCS) is shared with the coastal states, albeit at a lower rate. The OCSLA allocates 27% of the revenue generated from certain federal offshore leases to the coastal states. Separately, the Gulf of Mexico Energy Security Act of 2006 (GOMESA; P.L. 109-432 ) provided for revenue sharing at a rate of 37.5% for four coastal states, up to a collective cap. Some coastal states have advocated for a greater share of the OCS revenues based on the impacts oil and gas projects have on coastal infrastructure and the environment, while other states and stakeholders have contended that more of the revenue should go to the general fund of the Treasury or to other federal programs. CRS Report RL31392, PILT (Payments in Lieu of Taxes): Somewhat Simplified , by Katie Hoover. CRS Report R41303, Reauthorizing the Secure Rural Schools and Community Self-Determination Act of 2000 , by Katie Hoover. CRS Report R42404, Fish and Wildlife Service: Compensation to Local Governments , by R. Eliot Crafton. CRS Report R42951, The Oregon and California Railroad Lands (O&C Lands): Issues for Congress , by Katie Hoover. CRS Report R43891, Mineral Royalties on Federal Lands: Issues for Congress , by Marc Humphries. CRS Report R42439, Compensating State and Local Governments for the Tax-Exempt Status of Federal Lands: What Is Fair and Consistent? , by Katie Hoover. The FLMAs have maintenance responsibility for their buildings, roads and trails, recreation sites, and other infrastructure. Congress continues to focus on the agencies' deferred maintenance and repairs , defined as \"maintenance and repairs that were not performed when they should have been or were scheduled to be and which are put off or delayed for a future period.\" The agencies assert that continuing to defer maintenance of facilities accelerates their rate of deterioration, increases their repair costs, and decreases their value and safety. Congressional and administrative attention has centered on the NPS backlog, which has continued to increase from an FY1999 estimate of $4.25 billion in nominal dollars. Currently, DOI estimates deferred maintenance for NPS for FY2017 at $11.2 billion. Nearly three-fifths of the backlogged maintenance is for roads, bridges, and trails. The other FLMAs also have maintenance backlogs. DOI estimates that deferred maintenance for FY2017 for FWS is $1.4 billion and the BLM backlog is $0.8 billion. FS estimated its backlog for FY2017 at $5.0 billion, with approximately 70% for roads, bridges, and trails. Thus, the four agencies together had a combined FY2017 backlog estimated at $18.5 billion. The backlogs have been attributed to decades of funding shortfalls to address capital improvement projects. However, it is not always clear how much total funding has been provided for deferred maintenance each year because some annual presidential budget requests and appropriations documents did not identify and aggregate all funds for deferred maintenance. Currently, there is debate over the appropriate level of funds to maintain infrastructure, whether to use funds from other discretionary or mandatory programs or sources, how to balance maintenance of the existing infrastructure with the acquisition of new assets, and the priority of maintaining infrastructure relative to other government functions. CRS Report R43997, Deferred Maintenance of Federal Land Management Agencies: FY2007-FY2016 Estimates and Issues , by Carol Hardy Vincent. CRS Report R44924, The National Park Service's Maintenance Backlog: Frequently Asked Questions , by Laura B. Comay. CRS In Focus IF10987, Legislative Proposals for a National Park Service Deferred Maintenance Fund , by Laura B. Comay. Scientific evidence shows that the United States' climate has been changing in recent decades. This poses several interrelated and complex issues for the management of federal lands and their resources, in terms of mitigation, adaptation, and resiliency. Overall, climate change is introducing uncertainty about conditions previously considered relatively stable and predictable. Given the diversity of federal land and resources, concerns are wide-ranging and include invasive species, sea-level rise, wildlife habitat changes, and increased vulnerability to extreme weather events, as well as uncertainty about the effects of these changes on tourism and recreation. Some specific observed effects of climate change include a fire season that begins earlier and lasts longer in some locations, warmer winter temperatures that allow for a longer tourism season but also for various insect and disease infestations to persist in some areas, and habitat shifts that affect the status of sensitive species but may also increase forest productivity. Another concern is how climate change may affect some iconic federal lands, such as the diminishing size of the glaciers at Glacier National Park in Montana and several parks in Alaska, or the flooding of some wildlife refuges. The role of the FLMAs in responding to climate change is an area under debate. Some stakeholders are concerned that a focus on climate change adaptation may divert resources and attention from other agency activities and near-term challenges. Others see future climate conditions as representing an increased risk to the effective performance of agency missions and roles. A related debate concerns the impact of energy production on federal lands. Both traditional sources of energy (nonrenewable fossil fuels such as oil, gas, and coal) and alternative sources of energy (renewable fuels such as solar, wind, and geothermal) are available on some federal lands. A 2018 report from the U.S. Geological Survey estimated that greenhouse gas emissions resulting from the extraction and use of fossil fuels produced on federal lands account for, on average, approximately 24% of national emissions for carbon dioxide, 7% for methane, and 1.5% for nitrous oxide. In addition, the report estimated that carbon sequestration on federal lands offset approximately 15% of those carbon dioxide emissions over the study period, 2005 through 2014. This, along with other factors, has contributed to questions among observers about the extent to which the agencies should provide access to and promote different sources of energy production on federal lands based on the effects on climate from that production. Since fossil fuel emissions contribute to climate change, some stakeholders concerned about climate change assert that the agencies should prioritize renewable energy production on federal lands over traditional energy sources. Others assert that, even with renewable energy growth, conventional sources will continue to be needed in the foreseeable future, and that the United States should pursue a robust traditional energy program to ensure U.S. energy security and remain competitive with other nations, including continuing to make fossil fuel production available on federal lands. Specific legislative issues for Congress may include the extent to which the FLMAs manage in furtherance of long-term climate policy goals, and proposals to restructure or improve collaboration among the FLMAs regarding climate change activities and reporting. CRS Report R43915, Climate Change Adaptation by Federal Agencies: An Analysis of Plans and Issues for Congress , coordinated by Jane A. Leggett. Much of the onshore federal estate is open to energy and mineral exploration and development, including BLM and many FS lands. However, many NPS lands and designated wilderness areas, as well as certain other federal lands, have been specifically withdrawn from exploration and development. Most offshore federal acres on the U.S. outer continental shelf are also available for exploration and development, although BOEM has not scheduled lease sales in all available areas. Energy production on federal lands contributes to total U.S. energy production. For example, in 2017, as a percentage of total U.S. production, approximately 24% of crude oil and 13% of natural gas production came from federal lands. Coal production from federal lands has consistently accounted for about 40% of annual U.S. coal production over the past decade. Federal lands also are available for renewable energy projects. Geothermal capacity on federal lands represents 40% of U.S. total geothermal electric generating capacity. Solar and wind energy potential on federal lands is growing and, based on BLM-approved projects, there is potential for 3,300 megawatts (MW) of wind and 6,300 MW of solar energy on federal lands. The first U.S. offshore wind farm began regular operations in 2016, and BOEM has issued 13 wind energy leases off the coasts of eight East Coast states. The 116 th Congress may continue debate over issues related to access to and availability of onshore and offshore federal lands for energy and mineral development. This discussion includes how to balance energy and mineral development with environmental protection, postproduction remediation, and other uses for those federal lands. Some would like to open more federal lands for energy development, whereas others have sought to retain or increase restrictions and withdrawals for certain areas they consider too sensitive or inappropriate for traditional and/or renewable energy development. Congress also continues to focus on the energy and mineral permitting processes, the timeline for energy and mineral development, and issues related to royalty collections. Other issues may include the federal management of split estates, which occur when the surface and subsurface rights are held by different entities. Onshore oil and natural gas produced on federal lands in 2017 accounted for 5% and 9% of total U.S. oil and gas production, respectively. Development of oil, gas, and coal on federal lands is governed primarily by the Mineral Leasing Act of 1920 (MLA). The MLA authorizes the Secretary of the Interior—through BLM—to lease the subsurface rights to most BLM and FS lands that contain fossil fuel deposits, with the federal government retaining title to the lands. Leases include an annual rental fee and a royalty payment generally determined by a percentage of the value or amount of the resource removed or sold from the federal land. Congress has at times debated raising the onshore royalty rate for federal oil and gas leases, which has remained at the statutory minimum of 12.5% since the enactment of the MLA in 1920. Access to federal lands for energy and mineral development has been controversial. The oil and gas industry contends that entry into currently unavailable areas is necessary to ensure future domestic oil and gas supplies. Opponents maintain that the restricted lands are unique or environmentally sensitive and that the United States could realize equivalent energy gains through conservation and increased exploration on current leases or elsewhere. Another controversial issue is the permitting process and timeline, which the Energy Policy Act of 2005 (EPAct05) revised for oil and gas permits. An additional contested issue has been whether to pursue oil and gas development in the Arctic National Wildlife Refuge in northeastern Alaska. P.L. 115-97 , enacted in December 2017, provided for the establishment of an oil and gas program in the refuge. CRS In Focus IF10127, Energy and Mineral Development on Federal Land , by Marc Humphries. CRS Report R42432, U.S. Crude Oil and Natural Gas Production in Federal and Nonfederal Areas , by Marc Humphries. CRS Report RL33872, Arctic National Wildlife Refuge (ANWR): An Overview , by Laura B. Comay, Michael Ratner, and R. Eliot Crafton. CRS Report R43891, Mineral Royalties on Federal Lands: Issues for Congress , by Marc Humphries. Congress debates several issues regarding coal production on federal lands, including how to balance coal production against other resource values and the potential effects of coal production on issues related to climate change. Other concerns include how to assess the value of the coal resource, what is the fair market value for the coal, and what should be the government's royalty. A 2013 GAO analysis found inconsistencies in how BLM evaluated and documented federal coal leases. In addition, a 2013 DOI Inspector General report found that BLM may have violated MLA provisions by accepting below-cost bids for federal coal leases. The Obama Administration issued a new rule for the valuation of coal, which reaffirmed that the value for royalty purposes is at or near the mine site and that gross proceeds from arm's-length contracts are the best indication of market value. This rule was repealed by the Trump Administration on August 7, 2017 (to comply with Executive Order (E.O.) 13783), returning to the previous valuation rules in place. E.O. 13783 also lifted \"any and all\" moratoria on federal coal leasing put in place by the Obama Administration. CRS Report R44922, The U.S. Coal Industry: Historical Trends and Recent Developments , by Marc Humphries. Both BLM and FS manage land that is considered suitable for renewable energy generation and as such have authorized projects for geothermal, wind, solar, and biomass energy production. BLM manages the solar and wind energy programs on about 20 million acres for each program and about 800 geothermal leases on federal lands. Interest in renewable energy production comes in part from concern over the impact of emissions from fossil fuel-fired power plants and the related adoption of statewide renewable portfolio standards that require electricity producers to supply a certain minimum share (which varies by state) of electricity from renewable sources. Congressional interest in renewable energy resources on onshore federal lands has focused on whether to expand the leasing program for wind and solar projects versus maintaining the current right-of-way authorization process, and how to balance environmental concerns with the development and production of these resources. Geothermal Energy . Geothermal energy is produced from heat stored under the surface of the earth. Geothermal leasing on federal lands is conducted under the authority of the Geothermal Steam Act of 1970, as amended, and is managed by BLM, in consultation with FS. Wind and Solar Energy . Development of solar and wind energy sources on BLM and FS lands is governed primarily by right-of-way authorities under Title V of FLPMA. The potential wildlife impacts from wind turbines and water supply requirements from some solar energy infrastructure remain controversial. Issues for Congress include how to manage the leasing process and whether or how to balance such projects against other land uses identified by statute. Woody Biomass. Removing woody biomass from federal lands for energy production has received special attention because of biomass's widespread availability. Proponents assert that removing biomass density on NFS and BLM lands also provides landscape benefits (e.g., improved forest resiliency, reduced risk of catastrophic wildfires). Opponents, however, identify that incentives to use wood and wood waste might increase land disturbances on federal lands, and they are concerned about related wildlife, landscape, and ecosystem impacts. Other issues include the role of the federal government in developing and supporting emerging markets for woody biomass energy production, and whether to include biomass removed from federal lands in the Renewable Fuel Standard. Locatable minerals include metallic minerals (e.g., gold, silver, copper), nonmetallic minerals (e.g., mica, gypsum), and other minerals generally found in the subsurface. Developing these minerals on federal lands is guided by the General Mining Law of 1872. The law, largely unchanged since enactment, grants free access to individuals and corporations to prospect for minerals in public domain lands, and allows them, upon making a discovery, to stake (or \"locate\") a claim on the deposit. A claim gives the holder the right to develop the minerals and apply for a patent to obtain full title of the land and minerals. Congress has imposed a moratorium on mining claim patents in the annual Interior appropriations laws since FY1995, but has not restricted the right to stake claims or extract minerals. The mining industry supports the claim-patent system, which offers the right to enter federal lands and prospect for and develop minerals. Critics consider the claim-patent system to not properly value publicly owned resources because royalty payments are not required and the amounts paid to maintain a claim and to obtain a patent are small. New mining claim location and annual claim maintenance fees are currently $37 and $155 per claim, respectively. The federal government is responsible for managing energy resources in approximately 1.7 billion acres of offshore areas belonging to the United States (see Figure 1 ). These offshore resources are governed by the Outer Continental Shelf Lands Act of 1953 (OCSLA), as amended, and management involves balancing domestic energy demands with protection of the environment and other factors. Policymakers have debated access to ocean areas for offshore drilling, weighing factors such as regional economic needs, U.S. energy security, the vulnerability of oceans and shoreline communities to oil-spill risks, and the contribution of oil and gas drilling to climate change. Some support banning drilling in certain regions or throughout the OCS, through congressional moratoria, presidential withdrawals, and other measures. Others contend that increasing offshore oil and gas development will strengthen and diversify the nation's domestic energy portfolio and that drilling can be done in a safe manner that protects marine and coastal areas. The Bureau of Ocean Energy Management administers approximately 2,600 active oil and gas leases on nearly 14 million acres on the OCS. Under the OCSLA, BOEM prepares forward-looking, five-year leasing programs to govern oil and gas lease sales. BOEM released its final leasing program for 2017-2022 in November 2016, under the Obama Administration. The program schedules 10 lease sales in the Gulf of Mexico region and 1 in the Alaska region, with no sales in the Atlantic or Pacific regions. In January 2018, under the Trump Administration, BOEM released a draft proposed program for 2019-2024, which would replace the final years of the Obama Administration program. The program proposes 12 lease sales in the Gulf of Mexico region, 19 sales in the Alaska region, 9 lease sales in the Atlantic region, and 7 lease sales in the Pacific region. The proposed sales would cover all U.S. offshore areas not prohibited from oil and gas development, including areas with both high and low levels of estimated resources. The draft proposal is the first of three program versions; under the OCSLA process, subsequent versions could remove proposed lease sales but could not add new sales. Under the OCSLA, the President may withdraw unleased lands on the OCS from leasing disposition. President Obama indefinitely withdrew from leasing disposition large portions of the Arctic OCS as well as certain areas in the Atlantic region, but these withdrawals were modified by President Trump. Congress also has established leasing moratoria; for example, the GOMESA established a moratorium on preleasing, leasing, and related activity in the eastern Gulf of Mexico through June 2022. The 116 th Congress may consider multiple issues related to offshore oil and gas exploration, including questions about allowing or prohibiting access to ocean areas and how such changes may impact domestic energy markets and affect the risk of oil spills. Other issues concern the use of OCS revenues and the extent to which they should be shared with coastal states (see \" Federal Payment and Revenue-Sharing Programs \" section). BOEM also is responsible for managing leases, easements, and rights-of-way to support development of energy from renewable ocean energy resources, including offshore wind, thermal power, and kinetic forces from ocean tides and waves. As of January 2019, BOEM had issued 13 offshore wind energy leases in areas off the coasts of Massachusetts, Rhode Island, Delaware, Maryland, Virginia, New York, New Jersey, and North Carolina. In December 2016, the first U.S. offshore wind farm, off the coast of Rhode Island, began regular operations. Issues for Congress include whether to take steps to facilitate the development of offshore wind and other renewables, such as through research and development, project loan guarantees, extension of federal tax credits for renewable energy production, or oversight of regulatory issues for these emerging industries. CRS Report R44504, The Bureau of Ocean Energy Management's Five-Year Program for Offshore Oil and Gas Leasing: History and Final Program for 2017-2022 , by Laura B. Comay, Marc Humphries, and Adam Vann. CRS Report R44692, Five-Year Program for Federal Offshore Oil and Gas Leasing: Status and Issues in Brief , by Laura B. Comay. CRS Report RL33404, Offshore Oil and Gas Development: Legal Framework , by Adam Vann. Management of federal forests presents several policy questions for Congress. For instance, there are questions about the appropriate level of timber harvesting on federal forest lands, particularly FS and BLM lands, and how to balance timber harvesting against the other statutory uses and values for these federal lands. Further, Congress may debate whether or how the agencies use timber harvesting or other active forest management techniques to achieve other resource-management objectives, such as improving wildlife habitat or improving a forest's resistance and resilience to disturbance events (e.g., wildfire, ice storm). FS manages 145 million acres of forests and woodlands in the National Forest System (NFS). In FY2018, approximately 2.8 billion board feet of timber and other forest products were harvested from NFS lands, at a value of $188.8 million. BLM manages approximately 38 million acres of forest and woodlands. The vast majority are public domain forests, managed under the principles of multiple use and sustained yield as established by FLPMA. The 2.6 million acres of Oregon & California (O&C) Railroad Lands in western Oregon, however, are managed under a statutory direction for permanent forest production, as well as watershed protection, recreation, and contributing to the economic stability of local communities and industries. In FY2018, approximately 177.8 million board feet of timber and other forest products were harvested from BLM lands, at a value of $41.3 million. The NPS and FWS have limited authorities to cut, sell, or dispose of timber from their lands and have established policies to do so only in certain cases, such as controlling for insect and disease outbreaks. In the past few years, the ecological condition of the federal forests has been one focus of discussion. Many believe that federal forests are ecologically degraded, contending that decades of wildfire suppression and other forest-management decisions have created overgrown forests overstocked with biomass (fuels) that are susceptible to insect and disease outbreaks and can serve to increase the spread or intensity of wildfires. These observers advocate rapid action to improve forest conditions, including activities such as prescribed burning, forest thinning, salvaging dead and dying trees, and increased commercial timber production. Critics counter that authorities to reduce fuel levels are adequate, treatments that remove commercial timber degrade other ecosystem conditions and waste taxpayer dollars, and expedited processes for treatments may reduce public oversight of commercial timber harvesting. The 115 th Congress enacted several provisions intended to expedite specific forest management projects on federal land and encourage forest restoration projects across larger areas, including projects which involve nonfederal landowners. CRS Report R45696, Forest Management Provisions Enacted in the 115th Congress , by Katie Hoover et al. CRS Report R45688, Timber Harvesting on Federal Lands , by Anne A. Riddle. CRS Report R43872, National Forest System Management: Overview, Appropriations, and Issues for Congress , by Katie Hoover. CRS Report R42951, The Oregon and California Railroad Lands (O&C Lands): Issues for Congress , by Katie Hoover. Management of federal rangelands, particularly by BLM and FS, presents an array of policy matters for Congress. Several issues pertain to livestock grazing. There is debate about the appropriate fee that should be charged for grazing private livestock on BLM and FS lands, including what criteria should prevail in setting the fee. Today, these federal agencies charge fees under a formula established by law in 1978, then continued indefinitely through an executive order issued by President Reagan in 1986. The BLM and FS are generally charging a 2019 grazing fee of $1.35 per animal unit month (AUM) for grazing on their lands. Conservation groups, among others, generally seek increased fees to recover program costs or approximate market value, whereas livestock producers who use federal lands want to keep fees low to sustain ranching and rural economies. The BLM and FS issue to ranchers permits and/or leases that specify the terms and conditions for grazing on agency lands. Permits and leases generally cover a 10-year period and may be renewed. Congress has considered whether to extend the permit/lease length (e.g., to 20 years) to strengthen the predictability and continuity of operations. Longer permit terms have been opposed because they potentially reduce the opportunities to analyze the impact of grazing on lands and resources. The effect of livestock grazing on rangelands has been part of an ongoing debate on the health and productivity of rangelands. Due to concerns about the impact of grazing on rangelands, some recent measures would restrict or eliminate grazing, for instance, through voluntary retirement of permits and leases and subsequent closure of the allotments to grazing. These efforts are opposed by those who assert that ranching can benefit rangelands and who support ranching on federal lands for not only environmental but lifestyle and economic reasons. Another focus of the discussion on range health and productivity is the spread of invasive and noxious weeds. (See \" Invasive Species \" section, below.) There is continued congressional interest in management of wild horses and burros, which are protected on BLM and FS lands under the Wild Free-Roaming Horses and Burros Act of 1971. Under the act, the agencies inventory horse and burro populations on their lands to determine appropriate management levels (AMLs). Most of the animals are on BLM lands, although both BLM and FS have populations exceeding their national AMLs. BLM estimates the maximum AML at 26,690 wild horses and burros, and it estimates population on the range at 81,951. Furthermore, off the range, BLM provides funds to care for 50,864 additional wild horses and burros in short-term corrals, long-term (pasture) holding facilities, and eco-sanctuaries. The Forest Service estimates population on lands managed by the agency at 9,300 wild horses and burros. The agencies are statutorily authorized to remove excess animals from the range and use a variety of methods to meet AML. This includes programs to adopt and sell animals, to care for animals off-range, to administer fertility control, and to establish ecosanctuaries. Questions for Congress include the sufficiency of these authorities and programs for managing wild horses and burros. Another controversial question is whether the agencies should humanely destroy excess animals, as required under the 1971 law, or whether Congress should continue to prohibit the BLM from using funds to slaughter healthy animals. Additional topics of discussion center on the costs of management, particularly the relatively high cost of caring for animals off-range. Other options focus on keeping animals on the range, such as by expanding areas for herds and/or changing the method for determining AML. CRS Report RS21232, Grazing Fees: Overview and Issues , by Carol Hardy Vincent. CRS In Focus IF11060, Wild Horse and Burro Management: Overview of Costs , by Carol Hardy Vincent. The abundance and diversity of recreational uses of federal lands and waters has increased the challenge of balancing different types of recreation with each other and with other land uses. One issue is how—or whether—fees should be collected for recreational activities on federal lands. The Federal Lands Recreation Enhancement Act (FLREA) established a recreation fee program for the four FLMAs and the Bureau of Reclamation. The authorization ends on September 30, 2020. FLREA authorizes the agencies to charge, collect, and spend fees for recreation on their lands, with most of the money remaining at the collecting site. The 116 th Congress faces issues including whether to let lapse, extend, make permanent, or amend the program. Current oversight issues for Congress relate to various aspects of agency implementation of the fee program, including the determination of fee changes, use of collected revenue, and pace of obligation of fee collections. Supporters of the program contend that it sets fair and similar fees among agencies and keeps most fees on-site for improvements that visitors desire. Some support new or increased fees or full extension of the program to other agencies, especially the U.S. Army Corps of Engineers. Among critics, some oppose recreation fees in general. Others assert that fees are appropriate for fewer agencies or types of lands, that the fee structure should be simplified, or that more of the fees should be used to reduce agency maintenance backlogs. Another contentious issue is the use of off-highway vehicles (OHVs)—all-terrain vehicles, snowmobiles, personal watercraft, and others—on federal lands and waters. OHV use is a popular recreational activity on BLM and FS land, while NPS and FWS have fewer lands allowing them. OHV supporters contend that the vehicles facilitate visitor access to hard-to-reach natural areas and bring economic benefits to communities serving riders. Critics raise concerns about disturbance of nonmotorized recreation and potential damage to wildlife habitat and ecosystems. Issues for Congress include broad questions of OHV access and management, as well as OHV use at individual parks, forests, conservation areas, and other federal sites. Access to opportunities on federal lands for hunting, fishing, and recreational shooting (e.g., at shooting ranges) is of perennial interest to Congress. Hunting and fishing are allowed on the majority of federal lands, but some contend they are unnecessarily restricted by protective designations, barriers to physical access, and agency planning processes. Others question whether opening more FLMA lands to hunting, fishing, and recreational shooting is fully consistent with good game management, public safety, other recreational uses, resource management, and the statutory purposes of the lands. Issues for Congress include questions of whether or how to balance hunting and fishing against other uses, as well as management of equipment used for hunting and fishing activities, including types of firearms and composition of ammunition and fishing tackle. CRS In Focus IF10151, Federal Lands Recreation Enhancement Act: Overview and Issues , by Carol Hardy Vincent. CRS Report R45103, Hunting and Fishing on Federal Lands and Waters: Overview and Issues for Congress , by R. Eliot Crafton. CRS In Focus IF10746, Hunting, Fishing, and Related Issues in the 115th Congress , by R. Eliot Crafton. Congress, the President, and some executive branch officials may establish individual designations on federal lands. Although many designations are unique, some have been more commonly applied, such as national recreation area, national scenic area, and national monument. Congress has conferred designations on some nonfederal lands, such as national heritage areas, to commemorate, conserve, and promote important natural, scenic, historical, cultural, and recreational resources. Congress and previous Administrations also have designated certain offshore areas as marine national monuments or sanctuaries. Controversial issues involve the types, locations, and management of such designations, and the extent to which some designations should be altered, expanded, or reduced. In addition, Congress has created three cross-cutting systems of federal land designations to preserve or emphasize particular values or resources, or to protect the natural conditions for biological, recreation, or scenic purposes. These systems are the National Wilderness Preservation System, the National Wild and Scenic Rivers System, and the National Trails System. The units of these systems can be on one or more agencies' lands, and the agencies manage them within parameters set in statute. CRS Report R45340, Federal Land Designations: A Brief Guide , coordinated by Laura B. Comay. CRS Report RL33462, Heritage Areas: Background, Proposals, and Current Issues , by Laura B. Comay and Carol Hardy Vincent. CRS Report R41285, Congressionally Designated Special Management Areas in the National Forest System , by Katie Hoover. The Antiquities Act of 1906 authorizes the President to proclaim national monuments on federal lands that contain historic landmarks, historic and prehistoric structures, or other objects of natural, historic, or scientific interest. The President is to reserve \"the smallest area compatible with the proper care and management of the objects to be protected.\" Seventeen of the 20 Presidents since 1906, including President Trump, have used this authority to establish, enlarge, diminish, or make other changes to proclaimed national monuments. Congress has modified many of these proclamations, abolished some monuments, and created monuments under its own authority. Since the enactment of the Antiquities Act, presidential establishment of monuments sometimes has been contentious. Most recently, the Trump Administration has reviewed and recommended changes to some proclaimed national monuments, and President Trump has modified and established some monuments. Congress continues to address the role of the President in proclaiming monuments. Some seek to impose restrictions on the President's authority to proclaim monuments. Among the bills considered in recent Congresses are those to block monuments from being declared in particular states; limit the size or duration of withdrawals; require the approval of Congress, the pertinent state legislature, or the pertinent governor before a monument could be proclaimed; or require the President to follow certain procedures prior to proclaiming a new monument. Others promote the President's authority to act promptly to protect valuable resources on federal lands that may be vulnerable, and they note that Presidents of both parties have used the authority for over a century. They favor the Antiquities Act in its present form, asserting that the courts have upheld monument designations and that large segments of the public support monument designations for the recreational, preservation, and economic benefits that such designations can bring. CRS Report R41330, National Monuments and the Antiquities Act , by Carol Hardy Vincent. CRS Report R44988, Executive Order for Review of National Monuments: Background and Data , by Carol Hardy Vincent and Laura A. Hanson. CRS Report R44886, Monument Proclamations Under Executive Order Review: Comparison of Selected Provisions , by Carol Hardy Vincent and Laura A. Hanson. In 1964, the Wilderness Act created the National Wilderness Preservation System, with statutory protections that emphasize preserving certain areas in their natural states. Units of the system can be designated only by Congress. Many bills to designate wilderness areas have been introduced in each Congress. As of March 1, 2019, there were 802 wilderness areas, totaling over 111 million acres in 44 states (and Puerto Rico) and managed by all four of the FLMAs. A wilderness designation generally prohibits commercial activities, motorized access, and human infrastructure from wilderness areas, subject to valid existing rights. Advocates propose wilderness designations to preserve the generally undeveloped conditions of the areas. Opponents see such designations as preventing certain uses and potential economic development in rural areas where such opportunities are relatively limited. Designation of new wilderness areas can be controversial, and questions persist over the management of areas being considered for wilderness designation. FS reviews the wilderness potential of NFS lands during the forest planning process and recommends any identified potential wilderness areas for congressional consideration. Management activities or uses that may reduce the wilderness potential of a recommended wilderness area may be restricted. Questions also persist over BLM wilderness study areas (WSAs). These WSAs are the areas BLM studied as potential wilderness and made subsequent recommendations to Congress regarding their suitability for designation as wilderness. BLM is required by FLPMA to protect the wilderness characteristics of WSAs, meaning that many uses in these areas are restricted or prohibited. Congress has designated some WSAs as wilderness, and has also included legislative language releasing BLM from the requirement to protect the wilderness characteristics of other WSAs. FS also manages approximately 58 million acres of lands identified as \"inventoried roadless areas.\" These lands are not part of the National Wilderness Preservation System, but certain activities—such as road construction or timber harvesting—are restricted on these lands, with some exceptions. The Clinton and George W. Bush Administrations each promulgated different roadless area regulations. Both were heavily litigated; however, the Clinton policy to prohibit many activities on roadless areas remains intact after the Supreme Court refused to review a lower court's 2012 decision striking down the Bush rule. In 2018, the Forest Service initiated a rulemaking process to develop a new roadless rule specific to the national forests in the state of Alaska. CRS Report RL31447, Wilderness: Overview, Management, and Statistics , by Katie Hoover. CRS Report R41610, Wilderness: Issues and Legislation , by Katie Hoover and Sandra L. Johnson. Congress established the National Wild and Scenic Rivers System with the passage of the Wild and Scenic Rivers Act of 1968. The act established a policy of preserving designated free-flowing rivers for the benefit and enjoyment of present and future generations. River units designated as part of the system are classified and administered as wild, scenic, or recreational rivers, based on the condition of the river, the amount of development in the river or on the shorelines, and the degree of accessibility by road or trail at the time of designation. The system contains both federal and nonfederal river segments. Typically, rivers are added to the system by an act of Congress, but may also be added by state nomination with the approval of the Secretary of the Interior. As of March 1, 2019, there are more than 200 river units with roughly 13,300 miles in 40 states and Puerto Rico, administered by all four FLMAs, or by state, local, or tribal governments. Designation and management of lands within river corridors has been controversial in some cases. Issues include concerns about private property rights and water rights within designated river corridors. Controversies have arisen over state or federal projects prohibited within a corridor, such as construction of major highway crossings, bridges, or other activities that may affect the flow or character of the designated river segment. The extent of local input in developing river management plans is another recurring issue. The National Trails System Act of 1968 authorized a national system of trails, across federal and nonfederal lands, to provide additional outdoor recreation opportunities and to promote access to the outdoor areas and historic resources of the nation. The system today consists of four types of trails and can be found in all 50 states, the District of Columbia, and Puerto Rico. This includes 11 national scenic trails and 19 national historic trails that covers roughly 55,000 miles. In addition, almost 1,300 national recreation trails and 7 connecting-and-side trails have been established administratively as part of the system. National trails are administered by NPS, FS, and BLM, in cooperation with appropriate state and local authorities. Most recreation uses are permitted, as are other uses or facilities that do not substantially interfere with the nature and purposes of the trail. However, motorized vehicles are prohibited on many trails. Ongoing issues for Congress include whether to designate additional trails, whether or how to balance trail designation with other potential land uses, what activities should be permitted on trails, and what portion of trail funding should be from federal versus nonfederal sources. Some Members have expressed interest in new types of trails for the system, such as \"national discovery trails,\" which would be interstate trails connecting representative examples of metropolitan, urban, rural, and backcountry regions. CRS Report R42614, The National Wild and Scenic Rivers System: A Brief Overview , by Sandra L. Johnson and Laura B. Comay. CRS Report R43868, The National Trails System: A Brief Overview , by Sandra L. Johnson and Laura B. Comay. The National Marine Sanctuaries Act (NMSA) authorizes the National Oceanic and Atmospheric Administration (NOAA) to designate specific areas for protection of their ecological, aesthetic, historical, cultural, scientific, or educational qualities. The NOAA Office of National Marine Sanctuaries serves as the trustee for the 13 national marine sanctuaries (NMSs) designated under NMSA. Sanctuaries are located in marine areas and waters under state or federal jurisdiction. Sites are designated for specific reasons, such as protecting cultural artifacts (e.g., sunken vessels), particular species (e.g., humpback whales), or unique areas and entire ecosystems (e.g., Monterey Bay). Two areas currently under consideration for designation are Mallows Bay, Potomac River, MD, and Lake Michigan, WI. The NMSA requires the development and implementation of management plans for each sanctuary, which provide the basis for managing or limiting incompatible activities. For most NMSs, questions related to developing or amending management plans have focused on identifying and limiting incompatible activities. Five large marine national monuments have been designated by the President under the Antiquities Act, the most recent being the Northeast Canyons and Seamounts Marine National Monument in 2016, the first designated in the Atlantic Ocean. Within the monuments, the removing, taking, harvesting, possessing, injuring, or damaging of monument resources is prohibited except as provided under regulated activities. For example, some exceptions have been provided for recreational fishing and subsistence use within certain marine national monuments. All five marine national monuments are managed cooperatively by the Department of the Interior (FWS) and Department of Commerce (NOAA). One of the main differences between national marine sanctuaries and marine national monuments is their designation process. While monuments are designated by presidential proclamation or through congressional legislation, the NMS designation process is an administrative action, requiring nomination, public scoping, public comment, and congressional and state review prior to the Secretary of Commerce's approval of the designation. Some stakeholders from extractive industries, such as the fishing industry, have voiced concerns that the national monument designation process does not provide opportunities to examine the tradeoffs between resource protection and resource use. On the other hand, some environmentalists have voiced concerns with the low number of NMS designations and what they see as inadequate protection of some sanctuary resources, such as fish populations. Some observers question whether the overriding purpose of the NMSA is to preserve and protect marine areas or to create multiple use management areas. Most agree that the designation and management of national marine sanctuaries and marine national monuments will continue to inspire debate over the role of marine protected areas. The Trump Administration has reviewed and recommended changes to the size and management of some marine national monuments. Each FLMA has a responsibility to manage the plant and animal resources under its purview. An agency's responsibilities may be based on widely applicable statutes or directives, including the Endangered Species Act, the Migratory Bird Treaty Act, the Fish and Wildlife Coordination Act, executive orders, and other regulations. Species management could also be based on authorities specific to each FLMA. In addition, each FLMA must work closely with state authorities to address species management issues. In the case of the National Wildlife Refuge System (administered by FWS), the conservation of plants and animals is the mission of the system, and other uses are allowed to the extent they are compatible with that mission and any specific purposes of an individual system unit. While most refuges are open for public enjoyment, some refuges or parts of refuges (such as island seabird colonies) might be closed to visitors to preserve natural resources. For the National Park System, resource conservation (including wildlife resources) is part of the National Park Service's dual mission, shared with the other goal of public enjoyment. The FS and BLM have multiple use missions, with species management being one of several agency responsibilities. The federal land management agencies do not exercise their wildlife authorities alone. Often, Congress has directed federal agencies to share management of their wildlife resources with state agencies. For example, where game species are found on federal land and hunting is generally allowed on that land, federal agencies work with states on wildlife censuses and require appropriate state licenses to hunt on the federal lands. In addition, federal agencies often cooperate with states to enhance wildlife habitat for the benefit of both jurisdictions. The four FLMAs do not each maintain specific data on how many acres of land are open to hunting, fishing, and recreational shooting. However, both BLM and FS are required to open lands under their administration to hunting, fishing, and recreational shooting, subject to any existing and applicable law, unless the respective Secretary specifically closes an area. Both agencies estimate that nearly all of their lands are open to these activities. FWS is required to report the number of refuges open to hunting and fishing as well as the acreage available for hunting on an annual basis. As of FY2017, there were 277 refuges open to fishing and 336 refuges open to hunting, providing access to 86 million acres for hunting. Congress frequently considers species management issues, such as balancing land and resources use, providing access to hunting and fishing on federal lands, and implementing endangered species protections. The protection of endangered and threatened species—under the 1973 Endangered Species Act (ESA) —can be controversial due to balancing the needs for natural resources use and development and species protection. Under the ESA, all federal agencies must \"utilize their authorities in furtherance of the purposes of this Act by carrying out programs for the conservation of endangered species and threatened species listed pursuant to ... this Act.\" As a result, the FLMAs consider species listed as threatened or endangered in their land management plans, timber sales, energy or mineral leasing plans, and all other relevant aspects of their activities that might affect listed species. They consult with FWS (or NMFS, for most marine species and for anadromous fish such as salmon) about those effects. The majority of these consultations result in little or no change in the actions of the land managers. Congress has considered altering ESA implementation in various ways. For example, bills were introduced in the 115 th Congress that would have redefined the process for listing a species, defined the types of data used to evaluate species, and changed the types of species that can be listed under ESA, among others. Debate has also centered on certain species, particularly where conservation of species generates conflict over resources in various habitats. Examples of these species include sage grouse (energy and other resources in sage brush habitat), grey wolves (ranching), and polar bears (energy development in northern Alaska), among others. Proposals resulting from issues regarding certain species include granting greater authority to states over whether a species may be listed, changing the listing status of a species, and creating special conditions for the treatment of a listed species. CRS Report RL31654, The Endangered Species Act: A Primer , by Pervaze A. Sheikh. CRS Report RL32992, The Endangered Species Act and \"Sound Science , \" by Pervaze A. Sheikh. CRS Report R40787, Endangered Species Act (ESA): The Exemption Process , by Pervaze A. Sheikh. While habitat loss is a major factor in the decline of species, invasive species have long been considered the second-most-important factor. Invasive species—nonnative or alien species that cause or are likely to cause harm to the environment, the economy, or human health upon introduction, establishment, and spread—have the potential to affect habitats and people across the United States and U.S. territories, including on federal lands and waters. For example, gypsy moths have been a pest in many eastern national forests as well as Shenandoah National Park. A fungus causing white-nose syndrome has caused widespread mortality in bat populations in the central and eastern states, including those in caves on national park and national forest lands. Burmese pythons prey on native species of birds, mammals, and reptiles in south Florida, including in the Everglades National Park. Many stakeholders believe the most effective way to deal with invasive species is to prevent their introduction and spread. For species already introduced, finding effective management approaches is important, though potentially difficult or controversial. Control efforts can be complex and expensive, and may require collaboration and coordination between multiple stakeholders. Addressing invasive species is a responsibility shared by several federal agencies, in addition to the FLMAs. These agencies are required to plan and carry out control activities and to develop strategic plans to implement such activities. Control activities are required to manage invasive populations, prevent or inhibit the introduction and spread invasive species, and to restore impacted areas. Further, agencies must consider both ecological and economic aspects in developing their strategic plans and implementing control activities, and they must coordinate with state, local, and tribal representatives. Legislation to address the introduction and spread of invasive species as well as the impacts that arise from these species is of perennial interest to Congress. CRS Report R43258, Invasive Species: Major Laws and the Role of Selected Federal Agencies , by Renée Johnson, R. Eliot Crafton, and Harold F. Upton. CRS In Focus IF11011, Invasive Species: A Brief Overview , by R. Eliot Crafton and Sahar Angadjivand. Wildfire is a concern because it can lead to loss of human life, damage communities and timber resources, and affect soils, watersheds, water quality, and wildlife. Management of wildfire—an unplanned and unwanted wildland fire—includes preparedness, suppression, fuel reduction, site rehabilitation, and more. A record-setting 10.1 million acres burned in 2015 due to wildfire, and 10.0 million acres burned two years later in 2017. In 2018, 8.8 million acres burned. The federal government is responsible for managing wildfires that begin on federal land. FS and DOI have overseen wildfire management, with FS receiving approximately two-thirds of federal funding. Wildfire management funding—including supplemental appropriations—has averaged $3.8 billion annually over the last 10 years (FY2009 through FY2018), ranging from a low of $2.7 billion in FY2012 to a high of $4.9 billion in both FY2016 and FY2018. Congressional activity regarding wildfire management typically peaks during the fire season, and during the early part of the budget process. Legislative issues for Congress include oversight of the agencies' fire management activities and other wildland management practices that have altered fuel loads over time, and consideration of programs and processes for reducing fuel loads. Funding also is a perennial concern, particularly for suppression purposes, an activity for which costs are generally rising but vary annually and are difficult to predict. The 115 th Congress enacted a new adjustment to the discretionary spending limits for wildfire suppression operations, starting in FY2020. This means that Congress can appropriate some wildfire suppression funds—subject to certain criteria—effectively outside of the discretionary spending limits. There is also congressional interest in the federal roles and responsibilities for wildfire protection, response, and damages, including activities such as air tanker readiness and efficacy and liability issues. Other issues include the use of new technologies for wildfire detection and response, such as unmanned aircrafts. Another issue is the impact of the expanding wildland-urban interface (WUI), which is the area where structures (usually homes) are intermingled with or adjacent to vegetated wildlands (forests or rangelands). The proximity to vegetated landscapes puts these areas at a potential risk of experiencing wildfires and associated damage. Approximately 10% of all land within the lower 48 states is classified as WUI. CRS In Focus IF10244, Wildfire Statistics , by Katie Hoover. CRS In Focus IF10732, Federal Assistance for Wildfire Response and Recovery , by Katie Hoover. CRS Report R44966, Wildfire Suppression Spending: Background, Issues, and Legislation in the 115th Congress , by Katie Hoover and Bruce R. Lindsay. CRS Report R45005, Wildfire Management Funding: Background, Issues, and FY2018 Appropriations , by Katie Hoover, Wildfire Management Funding: Background, Issues, and FY2018 Appropriations, by Katie Hoover.", "summary": "The Property Clause in the U.S. Constitution (Article IV, §3, clause 2) grants Congress the authority to acquire, dispose of, and manage federal property. The 116th Congress faces multiple policy issues related to federal lands and natural resources. These issues include how much and which land the government should own and how lands and resources should be used and managed. These issues affect local communities, industries, ecosystems, and the nation. There are approximately 640 million surface acres of federally owned land in the United States. Four agencies (referred to in this report as the federal land management agencies, or FLMAs) administer approximately 608 million surface acres (~95%) of federal lands: the Forest Service (FS) in the Department of Agriculture (USDA), and the Bureau of Land Management (BLM), U.S. Fish and Wildlife Service (FWS), and National Park Service (NPS), all in the Department of the Interior (DOI). The federal estate also extends to energy and mineral resources located below ground and offshore. BLM manages the onshore subsurface mineral estate and the Bureau of Ocean Energy Management, also in DOI, manages access to approximately 1.7 billion offshore acres in federal waters on the U.S. outer continental shelf. However, not all of these onshore or offshore acres can be expected to contain extractable mineral and energy resources. This report introduces some of the broad themes and issues Congress has considered when addressing federal land policy and resource management. These include questions about the extent and location of the federal estate. For example, typically Congress considers both measures to authorize and fund the acquisition of additional lands and measures to convey some land out of federal ownership or management. Other issues for Congress include whether certain lands or resources should have additional protections, for example, through designation as wilderness or national monuments, or protection of endangered species and their habitat. Other policy questions involve how federal land should be used. Certain federal lands are considered primary- or dominant-use lands as specified in statute by Congress. For example, the dominant-use mission of the National Wildlife Refuge System is the conservation of fish, wildlife, and plant resources and associated habitats for the benefit of current and future Americans, and the dual-use mission of the National Park System is to conserve unique resources and provide for their use and enjoyment by the public. BLM and FS lands, however, have a statutory mission to balance multiple uses: recreation, grazing, timber, habitat and watershed protection, and energy production, among others. Conflicts arise as users and land managers attempt to balance these uses. Congress often addresses bills to clarify, prioritize, and alter land uses, including timber harvesting, livestock grazing, and recreation (motorized and nonmotorized). With respect to energy uses, in addition to questions about balancing energy production against other uses, other questions include how to balance traditional and alternative energy production on federal lands. Additional issues of debate include whether or how to charge for access and use of federal resources and lands, how to use any funds collected, and whether or how to compensate local governments for the presence of untaxed federal lands within their borders. Congress also faces questions about wildfire management on both federal and nonfederal lands, including questions of risk management and funding suppression efforts.", "document_type": "crs"}
{"report": "On February 12, 2018, the Trump Administration submitted to Congress its FY2019 budget request, which included $41.86 billion of base (or enduring) funds for the Department of State, Foreign Operations, and Related Programs (SFOPS). Of that amount, $13.26 billion would have been for State operations, international broadcasting, and related agencies and $28.60 billion for foreign operations. Comparing the request with the FY2018 actual SFOPS funding levels, the FY2019 request represented a 23.3% decrease in SFOPS funding. The proposed State and related agency funding would have been 18.7% below FY2018 funding levels, and the foreign operations funding would have been reduced by 25.2%. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), signed into law on February 15, included a total of $54.377 billion for SFOPS accounts, a 0.3% decrease over the FY2018 funding level and about 30% more than the Administration's request. An account-by-account comparison of the SFOPS request with the FY2018 actual funding and FY2019 enacted appropriation is provided in Appendix A . International Affairs 150 function funding levels are detailed in Appendix B . A chart depicting the components of the SFOPS appropriations bill is in Appendix C . A glossary is provided in Appendix D . The appropriations process for FY2019 was shaped by the Bipartisan Budget Act of 2018 (BBA, H.R. 1892 , P.L. 115-123 ), which Congress passed on February 9, 2018. The act raised the overall revised discretionary spending limits set by the Budget Control Act of 2011 (BCA, P.L. 112-25 ) from $1.069 trillion for FY2017 to $1.208 trillion for FY2018 and to $1.244 trillion for FY2019. The BBA increased FY2019 defense funding levels by $85 billion, from $562 billion to $647 billion, and nondefense funding (including SFOPS) by $68 billion, from $529 billion to $597 billion. It also extended direct spending reductions from FY2021 in the original BCA through FY2027, as amended. Every year since FY2012, the Administration has distinguished SFOPS spending as either enduring (base) funds or those to support overseas contingency operations (OCO). The OCO designation gained increased significance with enactment of the BCA, which specified that emergency or OCO funds do not count toward the spending limits established by the act. In early years of requesting OCO funds, the Obama Administration described OCO requests for \"extraordinary, but temporary, costs of the Department of State and USAID in Iraq, Afghanistan, and Pakistan.\" Syria and other countries were added in later years, and the Trump Administration expanded OCO use in its first budget request in FY2018 to be available for longer-term, core activities and more countries. For FY2019, because the BBA raised spending limits, the Administration did not seek foreign affairs OCO funds, but requested the entire SFOPS budget within base funds. The final legislation, P.L. 116-6 , included $8.0 billion designated as OCO, or about 15% of enacted SFOPS funding. For funding trends, see Table 1 . House and Senate SFOPS Legislation . FY2019 SFOPS legislation was introduced and approved by the full appropriations committee in each chamber. The House legislation, H.R. 6385 , included total SFOPS funding of $54.18 billion, 0.6% lower than FY2018 funding and 29% more than requested. The Senate proposal, S. 3108 , would have provided $54.602 billion for SFOPS accounts, which is about 0.1% more than FY2018 funding and 30% more than requested. Neither bill received floor consideration in its respective chamber. Continuing Resolutions . On September 28, 2018, the President signed into law P.L. 115-245 , legislation which included the Continuing Appropriations Act, 2019 (CR) to continue funding for SFOPS accounts (among seven other appropriations that were not completed by the start of FY2019) at a prorated 2018 funding level through December 7, 2018. Funds designated as OCO in 2018 appropriations continued to be so designated for SFOPS in the CR. On December 3, 2018, Congress and the Administration extended funding through December 21, 2018 by enacting P.L. 115-298 . After December 21, funding lapsed and a partial shutdown of the government occurred. On January 25, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level ( P.L. 116-5 ). Enacted Legislation . On February 14 Congress passed, and the President later signed into law, a full year appropriation ( P.L. 116-6 , Division F) that included $54.38 billion in total SFOPS funding, a 0.3% decrease from the FY2018 funding level and about 30% more than the Administration's request. Of that total, $16.46 billion was for State Department operations and related agencies; $37.92 billion for foreign operations accounts. About 14.7%, or $8.0 billion, was designated as OCO. The State Department sought to cut funding for the Department of State and Related Agency category by 19% in FY2019 from FY2018 funding levels, to $13.26 billion. Conversely, both the House and Senate committee bills sought to maintain funding near previous fiscal year levels. The House committee bill would have increased funding in this category to $16.38 billion, or 0.4% above the FY2018 funding level. The Senate committee bill would have raised funding to $16.34 billion, around $40 million less than the House committee bill and approximately 0.1% more than the FY2018 funding level. Similar to the House and Senate committee bills, the FY2019 enacted appropriation ( P.L. 116-6 ) maintained funding for the State Department and Related Agency category slightly above FY2018 funding level. It provided $16.46 billion for this category, or 0.9% more than the F2018 level. The State Department's request sought to fund the entirety of this category through base (or enduring) funding. Following passage of the BBA and the resulting increase in discretionary spending cap levels for FY2018 and FY2019, the State Department moved the $3.69 billion request for Overseas Contingency Operations (OCO) in this category into the base budget request. Both the House and Senate committee bills sought to retain OCO funding within the Department of State and Related Agency category. The House committee bill would have provided $3.03 billion for OCO, or around 28% less than the FY2018 figure of $4.18 billion. The Senate committee bill would have provided $4.11 billion, which constituted about 2% less than FY2018 level. While the House committee bill would have afforded approximately $1.08 billion less for OCO than the Senate committee bill, the House committee bill provided around $1.12 billion more in enduring funding ($13.35 billion) than the Senate committee bill ($12.23 billion). As with the House and Senate committee bills, P.L. 116-6 retained OCO funding for the Department of State and Related Agency category. The law provided a total of $4.37 billion for OCO, or 4.5% more than the FY2018 funding level. While the law provided more for OCO than either the Senate or House committee bills, it provided less in enduring funding ($12.09 billion). Areas where the State Department's proposed cuts were focused included the diplomatic security accounts (the Worldwide Security Protection programmatic allocation within the Diplomatic Programs account and, separately, the Embassy Security, Construction, and Maintenance account), Contributions to International Organizations, and Contributions for International Peacekeeping Activities. In most cases, P.L. 116-6 , in a manner similar to the House and Senate committee bills, maintained annual budget authority for these accounts closer to the FY2018 funding levels than the Administration requested (see following sections for more detailed analysis). The State Department also requested $246.2 million to implement the Leadership and Modernization Impact Initiative, which serves as the implementation phase of the department's \"Redesign\" efforts. While neither the House nor the Senate committee bill directly addressed the Impact Initiative, both included provisions enabling Congress to conduct oversight of any broader reorganization efforts at the department. The enacted legislation, P.L. 116-6 , took the same approach. Table 3 provides an overview of proposed changes to selected accounts within the State Department and Related Agency category. Under the State Department's budget request, the Diplomatic Programs account, which is the State Department's principal operating appropriation, would have declined by 11% from the FY2018 funding level of $8.82 billion, to $7.81 billion. According to the State Department, this account provides funding for \"core people, infrastructure, security, and programs that facilitate productive and peaceful U.S. relations\" with foreign governments and international organizations. The House and Senate committee bills would have provided $8.80 billion and $8.92 billion, respectively, for Diplomatic Programs. For FY2019 enacted, P.L. 116-6 provided $9.17 billion, or 4% more than the FY2018 funding level and 17% more than the State Department's request. In Section 7081 of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), Congress authorized the establishment of a new \"Consular and Border Security Programs\" (CBSP) account into which consular fees shall be deposited for the purposes of administering consular and border security programs. As a result, consular fees retained by the State Department to fund consular services will be credited to this new account. The State Department thus requested that Congress rename the former Diplomatic and Consular Programs account \"Diplomatic Programs.\" However, because many consular fees are generated and retained by the State Department to administer consular programs, they do not comprise part of the department's annual appropriations and therefore do not count against overall funds appropriated annually for this account. The FY2019 enacted legislation, P.L. 116-6 , authorized the renaming of Diplomatic and Consular Programs to Diplomatic Programs, as did the House and Senate committee bills. The Diplomatic Programs account provides funds for a large share of U.S. direct hire positions, including but not limited to State Department Foreign Service and Civil Service officers. Although the Trump Administration lifted the federal hiring freeze upon issuance of OMB M-17-22 on April 12, 2017, the State Department elected to keep its own hiring freeze in place. The Department of State released guidance in May 2018 lifting the hiring freeze and allowing the department to increase staffing to December 31, 2017 levels. Some Members of Congress expressed concern with the hiring freeze and the continued impacts of perceived personnel shortages at the Department of State. Both the House and Senate committee bills, and the committee reports accompanying those bills, included oversight provisions pertaining to State Department personnel levels. In this vein, Section 7073 of P.L. 116-6 required that no appropriated funds may be used to expand or reduce the size of the State Department and USAID's Civil Service, Foreign Service, eligible family member, and locally employed staff workforce from the on-board levels as of December 31, 2017 without consultation with the Committees on Appropriations and Foreign Relations of the Senate and the Committees on Appropriations and Foreign Affairs of the House of Representatives. Section 7073 also required the Secretary of State to submit reports to Congress, beginning 60 days after enactment of the law, and every 60 days thereafter until September 30, 2020, regarding the State Department's on-board personnel levels, hiring, and attrition of the Civil Service, Foreign Service, eligible family member, and locally employed staff workforce. These reports were also required to include a hiring plan for maintaining Foreign Service and Civil Service personnel numbers at not less than December 31, 2017, levels through FY2019. Among other personnel-related provisions, the joint explanatory statement accompanying this law noted that keeping personnel at these levels reflected \"minimum necessary hiring\" and encouraged the Secretary of State to work with Congress to increase hiring above such levels as appropriate. The Human Resources funding category within Diplomatic Programs provides funding for the Charles B. Rangel International Affairs and Thomas R. Pickering Foreign Affairs fellowship programs to promote greater diversity in the Foreign Service, as authorized by Section 47 of the State Department Basic Authorities Act (P.L. 84-885). While Congress required the State Department to expand the number of fellows participating in the Rangel and Pickering programs by 10 apiece pursuant to Section 706 of the Department of State Authorities Act, 2017 ( P.L. 114-323 ), it has provided the department the discretion to fund these programs at levels it deems appropriate from monies appropriated for Human Resources. P.L. 116-6 , like the House and Senate committee bills, continued to provide such discretion to the State Department. In addition, the House committee report indicated support for department efforts to increase diversity in hiring, including through the Rangel and Pickering programs. It also encouraged the Secretary of State to explore more opportunities to further the goal of increasing workforce diversity. The Senate committee report recommended the continued expansion of the department's workforce diversity programs and directed that qualified graduates of the Rangel and Pickering programs shall be inducted into the Foreign Service. While neither P.L. 116-6 nor the accompanying joint explanatory statement addressed the Rangel and Pickering programs specifically or Foreign Service diversity more generally, the joint explanatory statement did not negate any of the language in the House and Senate committee reports. The Diplomatic Programs account also provides funding for a number of overseas programs. These include programs carried out by the Bureau of Conflict and Stabilization Operations and the department's regional bureaus. Activities of the department's Bureau of Medical Services, which is responsible for providing health care services to U.S. government employees and their families assigned to overseas posts, are also funded through this account. Public diplomacy programs are among the overseas programs funded through Diplomatic Programs, which include the Global Engagement Center's (GEC's) countering state disinformation (CSD) program. According to the State Department, planned CSD activities, for which $20 million was requested, included \"coordinating U.S. government efforts in specific sub-regions; enhancing the capacity of local actors to build resilience against disinformation, including thwarting attacks on their IT systems; providing attribution of adversarial disinformation; and convening anti-disinformation practitioners, journalists, and other influencers to exchange best practices, build networks, and generate support for U.S. efforts against disinformation.\" The House committee report registered concern regarding \"foreign propaganda and disinformation that threatens United States national security, especially as carried out by China, Russia, and extremists groups\" and asserted that the GEC \"is expected to use a wide range of technologies and techniques to counter these campaigns,\" consistent with its statutory mandate. The Senate committee report recommended up to $75.4 million for the GEC, including up to $40 million for countering foreign state propaganda and disinformation. The joint explanatory statement accompanying for the FY2019-enacted legislation ( P.L. 116-6 ) included up to $55.4 million for the GEC and up to $20 million for CSD, a funding level for CSD identical to the department's request. Section 1284 of the National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ) authorized the Department of Defense (DOD) to transfer not more than $60 million to the GEC for each of FY2019 and FY2020; DOD has previously transferred funds to the GEC under similar authorities. The State Department's FY2019 budget request sought to provide approximately $5.36 billion for the department's key embassy security accounts: $3.70 billion for the Worldwide Security Protection (WSP) programmatic allocation within the Diplomatic Programs account and $1.66 billion for the Embassy Security, Construction, and Maintenance (ESCM) account. The House committee bill would have provided $3.76 billion for WSP and $2.31 billion for ESCM, for a total funding level of $6.07 billion for these accounts. While the House bill would have funded the ESCM account exclusively through the base budget, it would have provided approximately $2.38 billion of overall funding for WSP through OCO. The Senate committee bill would have provided $3.82 billion for WSP and $1.92 billion for ESCM, for a total funding level of $5.74 billion. As with the House committee measure, the Senate committee bill would have funded the ESCM account with base budget funds only. For WSP, the Senate committee measure, like the House committee bill, would provide $2.38 billion of total account funds through OCO. The FY2019 enacted appropriations provided a total of $4.10 billion for WSP and $1.98 billion for ESCM, for a total funding level of $6.08 billion in budget authority for these accounts. Like the House and Senate committee bills, P.L. 116-6 funded ESCM exclusively through the base budget. Of the $4.10 billion provided for WSP in the law, $2.63 billion was done so through OCO. Had the Administration's request been enacted, it would have marked a decline of 2% for WSP and 28% for ESCM relative to the FY2018 figures of approximately $3.76 billion and $2.31 billion, respectively. The enacted legislation provided 9% more funding for WSP and 15% less for ESCM relative to FY2018 levels. Over the past several years, Congress has provided no-year appropriations for both WSP and ESCM, thereby authorizing the State Department to indefinitely retain appropriated funds beyond the fiscal year for which they were appropriated. As a result, the department has carried over large balances of unexpired, unobligated funds each year that it is authorized to obligate for programs within both accounts when it deems appropriate to do so. For example, for FY2018, the State Department carried over more than $7.6 billion in previously appropriated funds for ESCM. Both the House and Senate committee bills would have continued this practice with respect to WSP, and the Senate committee bill would have continued with respect to ESCM, as well. The House committee bill, if enacted, would have provided that all funds appropriated for ESCM remained available until September 30, 2023, rather than indefinitely. P.L. 116-6 provided no-year appropriations for WSP. For ESCM, the law stipulated that while funds for worldwide security upgrades and for purposes of acquisition and construction would remain available until expended, all other monies within this account (such as funds for preserving, maintaining, repairing, and planning for real property that State Department owns) would remain available only until September 30, 2023. The Worldwide Security Protection (WSP) allocation within the Diplomatic Programs account supports the Bureau of Diplomatic Security's (DS's) implementation of security programs located at over 275 overseas posts and 125 domestic offices of the State Department, including a worldwide guard force protecting overseas diplomatic posts, residences, and domestic offices. The State Department revisited previous assumptions for funding for the U.S. security presence, which prompted it to ask for a rescission of $301.20 million for WSP OCO funds provided through the Further Continuing and Security Assistance Appropriations Act, 2017 (SAAA) ( P.L. 114-254 ). State Department officials noted that this funding was \"intended to support diplomatic reengagements in Syria, Libya, and Yemen that were predicated on different security and political conditions.\" The department maintained that this proposed cancellation was based on evolving security and political conditions, and would not affect DS operations. While neither the House nor the Senate committee bill included a rescission, P.L. 116-6 provided for a rescission of $301.2 million of SAAA funds appropriated for Diplomatic Programs and designated them more generally for OCO. The Embassy Security, Construction, and Maintenance (ESCM) account funds the Bureau of Overseas Building Operations (OBO), which is responsible for providing U.S. diplomatic and consular missions overseas with secure, safe, and functional facilities. The State Department's request included $869.54 million to provide its share of what it maintains is the $2.20 billion in annual funding that the Benghazi Accountability Review Board (ARB) recommended for the Capital Security Cost Sharing (CSCS) and Maintenance Cost Sharing (MCS) programs (the remainder of the funding is provided through consular fee revenues and contributions from other agencies). These programs are used to fund the planning, design, and construction of new overseas posts and the maintenance of existing diplomatic facilities. The House committee report maintained that funds the House bill made available for ESCM would allow for the State Department's CSCS and MCS contributions, when combined with those from other agencies and consular fees, to exceed the ARB's annual recommended funding and support \" the accelerated multi-year program to construct new secure replacement facilities for the most vulnerable embassies and consulates.\" The Senate committee bill stipulated that of funds made available for ESCM by it and prior acts making appropriations for SFOPS, not less than $1.02 billion shall be made available for the department's FY2019 CSCS and MCS contributions; the joint explanatory statement accompanying P.L. 116-6 indicated that Congress provided the same amount for this purpose for FY2019. In FY2019, OBO intended to fund four CSCS projects and one MCS project (see Table 4 ). The House committee report noted concern with the cost of new embassy and consulate compound projects, including ongoing projects in Beirut, Lebanon; Mexico City, Mexico; New Delhi, India; Erbil, Iraq; and Jakarta, Indonesia. Like Section 7004(h) of the House bill, as noted in the joint explanatory statement accompanying P.L. 116-6 , Congress mandated that the State Department provide more detailed reports regarding the costs of these projects than previously required. The State Department maintained that the \"construction of a new U.S. Embassy facility in Jerusalem is a high priority for the Administration ... planning and interagency coordination for the Jerusalem Embassy move is ongoing and the department intends to realign CSCS project funding, as necessary, to execute this project.\" It later attached a timeframe to its intent, and the United States opened a new U.S. embassy in Jerusalem in May 2018. This new embassy is located in a building that housed consular operations of the former U.S. Consulate General in Jerusalem. The State Department has said that one of its next steps would be to construct an embassy annex to the current building, while also considering options for a permanent embassy over the long term. The department could choose to draw upon the unexpired, unobligated funds previously appropriated by Congress to the ESCM account for any construction expenses related to interim and permanent embassy facilities in Jerusalem. The Senate committee report requires the Secretary of State to \"regularly inform the Committee\" on the status of plans for a permanent New Embassy Compound in Jerusalem. Neither P.L. 116-6 nor its joint explanatory statement addresses this issue or negates the Senate committee report language. The State Department's FY2019 budget request included a combined request of $2.29 billion for the Contributions to International Organizations (CIO) and Contributions for International Peacekeeping Activities (CIPA) accounts, a 20% reduction from the FY2018 funding levels for these accounts. The CIO account is the source for funding for annual U.S. assessed contributions to 45 international organizations, including the United Nations and its affiliated organizations and other international organizations, including the North Atlantic Treaty Organization (NATO). The State Department's FY2019 request for CIO totaled approximately $1.10 billion. Following passage of the BBA, the department increased its request for CIO by approximately $100 million to fund a higher U.S. contribution to the U.N. regular budget at a rate of 20% of the overall U.N. budget (the U.S. assessment is 22%). According to the department, U.N. assessments of U.S. contributions to the United Nations and its affiliated agencies exceeded the request for funds to pay these contributions. Therefore, if the department's request was enacted, the United States may have accumulated arrears to some organizations. The Contributions for International Peacekeeping Activities (CIPA) account provides U.S. funding for U.N. peacekeeping missions around the world that the State Department says \"seek to maintain or restore international peace and security.\" The State Department's FY2019 request for CIPA totaled $1.20 billion. According to the department, this request \"reflects the Administration's commitment to seek reduced costs by reevaluating the mandates, design, and implementation of peacekeeping missions and sharing the funding burden more fairly among U.N. members.\" Under this request, no U.S. contribution would have exceeded 25% of all assessed contributions for a single operation, which is the cap established in Section 404(b) of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995 ( P.L. 103-236 ). The State Department maintained that it expected that the \"unfunded portion of U.S. assessed expenses will be met through a combination of a reduction in the U.S. assessed rate of contributions, reductions in the number of U.N. peacekeeping missions, and significant reductions in the budgets of peacekeeping missions across the board.\" The department also requested that Congress provide two-year funds for CIPA (in other words, that Congress make funds available for both the fiscal year for which the funds were appropriated and the subsequent fiscal year) \"due to the demonstrated unpredictability of the requirements in this account from year to year and the nature of multi-year operations that have mandates overlapping U.S. fiscal years.\" The House committee bill would have provided $1.36 billion for CIO and $1.59 billion for CIPA, for a combined total of $2.95 billion for these accounts, which was 29% higher than the department's request and 4% higher than the FY2018 funding levels. The Senate committee bill would have provided $1.44 billion for CIO and $1.68 billion for CIPA, for a combined total of $3.12 billion. This figure was 36% higher than the department's request and 9% higher than the FY2018 level. The Senate committee bill included a provision not present in recent appropriations laws mandating that funds appropriated for CIO \"are made available to pay not less than the full fiscal year 2019 United States assessment for each respective international organization.\" With regard to CIPA, both the House and Senate committee reports noted that appropriated monies were intended to support an assessed peacekeeping cost at the statutory level of 25% rather than the U.N. assessed rate for the United States of 28.4%. Both committee reports called on the department to review peacekeeping missions for cost savings and work to renegotiate rates of assessment. For FY2019, P.L. 116-6 provided $1.36 billion for CIO and $1.55 billion for CIPA, for a total of $2.91 billion—slightly less than both the House and Senate committee bills. This figure was still 2% higher than the FY2018 figure and 27% higher than the department's request. While the law did not include the aforementioned Senate committee bill provision regarding payment of full U.S. assessments for organizations funded through the CIO account, the law's joint explanatory statement noted that it assumed the payment of the full United States assessment for each relevant organization (with some exceptions, including organizations from which the United States has withdrawn) and required the Secretary of State to consult with the Committees on Appropriations with respect to any decision not to provide the full assessment for any such organization. With respect to CIPA, the joint explanatory statement noted that sufficient funds are provided for contributions to peacekeeping missions at the statutory level of 25%. The enacted legislation, like the House and Senate committee bills, provided a share of CIPA funds as two-year funds, as requested by the department. The State Department requested $246.2 million for FY2019 to implement the Leadership and Modernization Impact Initiative (hereinafter, the Impact Initiative). The Impact Initiative constitutes the implementation phase of the State Department's \"Redesign\" project. Former Secretary Tillerson initiated the redesign in 2017 to implement Executive Order 13781 and Office of Management and Budget (OMB) Memorandum M-17-22, which aim to \"improve the efficiency, effectiveness, and accountability of the executive branch.\" The Impact Initiative constitutes 16 keystone modernization projects in three focus areas: Modernizing Information Technology and Human Resources Operations; Modernizing Global Presence, and Creating and Implementing Policy; and Improving Operational Efficiencies (see Table 5 ). According to the State Department, these focus areas and modernization projects are derived from the results of the listening tour that former Secretary Tillerson launched in May 2017, which included interviews conducted with approximately 300 individuals that the department said comprised a representative cross-section of its broader workforce, and a survey completed by 35,000 department personnel that asked them to discuss the means they use to help complete the department's mission and obstacles they encounter in the process. Of the $246.2 million requested, $150.0 million was requested from the IT Central Fund (which is funded through funds appropriated by Congress to the Capital Investment Fund account and, separately, expedited passport fees) and $96.2 million from the D&CP account to implement modernization projects. Proceeds from the IT Central Fund were intended to implement projects focused on IT, including modernizing existing IT infrastructure, systems, and applications based on a roadmap to be created in FY2018 and centralizing management of all WiFi networks. Funds from the D&CP account were intended to implement modernization projects focusing on Human Resources issues, including leadership development, management services consolidation, data analytics, and workforce readiness initiatives. Like the House and the Senate committee bills and reports, neither P.L. 116-6 nor the joint explanatory statement accompanying the law specifically mentioned the Impact Initiative by name. However, both the law and the joint explanatory statement included provisions explicitly prohibiting the Department of State from using appropriated funds to implement a reorganization without prior consultation, notification, and reporting to Congress (for example, see Section 7073 of P.L. 116-6 ). Like the Senate committee bill, P.L. 116-6 stated that no funds appropriated for SFOPs may be used to \"downsize, downgrade, consolidate, close, move, or relocate\" the State Department's Bureau of Population, Refugees, and Migration. Foreign operations accounts, together with food aid appropriated through the Agriculture appropriations bill, constitute the foreign aid component of the international affairs budget. These accounts fund bilateral economic aid, humanitarian assistance, security assistance, multilateral aid, and export promotion programs. For FY2019, the Administration requested $28.60 billion for foreign aid programs within the international affairs (function 150) budget, about 28% less than the FY2018 actual funding level. None of the requested funds were designated as OCO. The FY2019 enacted appropriation provided $37.92 billion for foreign operations account, including $3.63 billion designated as OCO. Together with food aid accounts in the Agriculture appropriation, total enacted foreign aid within the international affairs budget was $39.85 billion, or 0.7% below the FY2018 actual funding level and 39% above the FY2019 request. Table 6 shows foreign aid funding by type for FY2017 and FY2018 actual, and the FY2019 request, committee-approved legislation, and enacted legislation. Account Mergers and Eliminations . The Administration aimed to simplify the foreign operations budget in part by channeling funds through fewer accounts and eliminating certain programs. These account mergers and eliminations were also proposed in the FY2018 budget request Under bilateral economic assistance, the Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia and Central Asia (AEECA) and Democracy Fund (DF) accounts were zero funded in the FY2019 request. Programs currently funded through these accounts would have been funded through a new Economic Support and Development Fund (ESDF) account. The proposed funding level for ESDF, $5.063 billion, was more than 36% below the FY2018 funding for the accounts it would have replaced. Fifteen countries that received DA, ESF, or AEECA in FY2017 would no longer have received funding from these accounts or from ESDF under the FY2019 request. Within multilateral assistance, the International Organizations & Programs (IO&P) account, which funds U.S. voluntary contributions to many U.N. entities, including UNICEF, U.N. Development Program, and UN Women, would also have been zeroed out. Budget documents suggested that some unspecified activities currently funded through IO&P could have received funding through the ESDF or other accounts. Related to humanitarian assistance, the P.L. 480 Title II food aid account in the Agriculture appropriation would have been zero-funded and all food assistance would have been funded through the International Disaster Assistance (IDA) account, which would have nevertheless declined by about 17% from FY2018 actual funding (see \" Humanitarian Assistance \" section below). The Emergency Refugee and Migration Assistance (ERMA) account would have been subsumed into the Migration and Refugee Assistance (MRA) account. Closeout of Inter-American Foundation and U.S.-Africa Development Foundation . The FY2019 request proposed to terminate the Inter-American Foundation (IAF) and the U.S.-Africa Development Foundation (ADF), independent entities that implement small U.S. assistance grants, often in remote communities. The Administration proposed to consolidate all small grant programs aimed at reaching the poor under USAID, as a means of improving their integration with larger development programs and U.S. foreign policy objectives, as well as improving efficiency. Funds were requested for IAF and ADF only for the purposes of an orderly closeout. Development Finance Institution . The Administration requested, for the first time in FY2019, the consolidation of the Overseas Private Investment Corporation (OPIC) and USAID's Development Credit Authority (DCA) into a new standalone Development Finance Institution (DFI). The request called for $96 million for administrative expenses and $38 million for credit subsidies for DFI, but assumed that these expenses would be more than offset by collections, resulting in a net income of $460 million (based on OPIC's projected offsetting collections). In addition, $56 million in ESDF funds would have been used to support DFI activities. The Administration sought congressional authority for the new standalone entity, which it described as a means of incentivizing private sector investment in development and improving the efficiency of U.S. development finance programs. Both the House and Senate committee bills, as well as the enacted FY2019 appropriation, rejected these account changes, with the exception of the elimination of the ERMA account, which the House bill eliminated and the Senate and final bill funded with $1 million. All the FY2019 SFOPS legislation, including P.L. 116-6 , used the same bilateral account structure used for FY2018, not a new ESDF, and funded IAF and ADF at the FY2018 levels. Prior to enactment of the final FY2019 SFOPS appropriation, Congress passed the BUILD Act ( P.L. 115-254 ), which authorized the establishment of a new International Development Finance Corporation (IDFC), consistent with the Administration's DFI proposal. The IDFC is expected to become operational near the end of FY2019, and P.L. 116-6 made FY2019 appropriations for OPIC and DCA using the same account structure as in prior years, but authorized $5 million in the OPIC noncredit account to be used for transition costs. Top Country Recipients . Under the FY2019 request, top foreign assistance recipients would not have changed significantly, continuing to include strategic allies in the Middle East (Israel, Egypt, Jordan) and major global health and development partners in Africa (see Table 7 ). Israel would have seen an increase of $200 million from FY2017, reflecting a new 10-year security assistance Memorandum of Understanding. Zambia and Uganda would both have seen an 11% increase. All other top recipients would have seen reduced aid in FY2019 compared with FY2017 (comprehensive FY2018 country allocations were not yet available), though unallocated global health and humanitarian funds (added to the request after passage of the Bipartisan Budget Act of 2018) may have changed these totals. Figure 1 and Table 7 show the requested FY2019 foreign operations budget allocations by region and country. Under the FY2019 request, foreign assistance for every region would have been reduced compared to FY2018 funding. The Middle East and North Africa (MENA) region and Sub-Saharan Africa would continue to be the top regional recipients, together comprising nearly 80% of aid allocated by region ( Figure 2 ). Proposed cuts ranged from 61% in Europe and Eurasia to 2% in the MENA. Aid to Sub-Saharan Africa would have declined by 31%, aid to East Asia and Pacific by approximately half (51%), aid to South and Central Asia by about 4%, and aid to Western Hemisphere by 35%. The House bill ( H.R. 6385 ) and accompanying report did not provide comprehensive country and regional allocations, but did specify aid levels for some countries and regional programs, including Israel ($3.300 billion), Egypt ($1.457 billion), Jordan ($1.525 billion), Ukraine ($441 million), the U.S. Strategy for Engagement in Central America ($595 million), and the Countering Russian Influence Funds ($250 million). The Senate bill ( S. 3108 ) and report specified aid allocations for several countries and regional programs, including Israel ($3.300 billion), Egypt ($1.082 billion), Jordan ($1.525 billion), Iraq ($429 million), West Bank & Gaza ($286 million), Afghanistan ($698 million), Pakistan ($271 million), Colombia ($391 million), Ukraine $426 million), U.S. Strategy for Engagement in Central America ($515 million) and the Countering Russian Influence Fund ($300 million). The enacted legislation, P.L. 116-6 , and the accompanying explanatory statement, specified FY2019 aid levels for several countries, including Israel ($3.300 billion), Egypt ($1.419 billion), Jordan ($1.525 billion), Iraq ($407 million), Colombia ($418 million), Mexico ($163 million), and Ukraine ($446 million), as well as for the U.S. Strategy for engagement in Central America ($528 million) and the Countering Russian Influence Fund ($275 million). The budget submission did not identify any new foreign assistance initiatives. The FY2019 request called for decreases in foreign aid funding generally while continuing to prioritize the aid sectors that have long made up the bulk of U.S. foreign assistance: global health, humanitarian, and security assistance. The Administration requested $6.70 billion for global health programs in FY2019. This was a 23% reduction from the FY2018 funding level, yet global health programs would have increased slightly as a proportion of the foreign aid budget, from 22% of total aid in FY2018 to 23% in the FY2019 request, due to deeper proposed cuts elsewhere. HIV/AIDS programs, for which funding would have been cut about 27% from FY2018 actual levels, would have continued to make up the bulk (69%) of global health funding, as they have since the creation of the President's Emergency Plan for AIDS Relief (PEPFAR) in 2004. Family planning and reproductive health services (for which the Administration proposed no funding for FY2018) would have received $302 million, a 42% reduction from FY2018 funding. Assistance levels would have been reduced for every health sector compared to FY2018, including maternal and child health (-25%), tuberculosis (-31%), malaria (-11%), neglected tropical diseases (-25%), global health security (-0.1%, funded through a proposed repurposing of FY2015 Ebola emergency funds), and nutrition (-37%). The House committee bill included $8.69 billion for global health programs, the same as FY2018 funding. While total funding would remain the same, the House proposal would have reduced funding for family planning and reproductive health by about 12% compared to FY2018, while slightly increasing funding for polio, nutrition, and maternal and child health, and more than doubling funding for global health security and emerging threats. The Senate committee bill would have funded global health programs $8.792 billion, 1.2% above the FY2018 level. No subsectors would have received reduced funding and allocations for tuberculosis, HIV/AIDS, family planning, nutrition, neglected tropical diseases and vulnerable children would all have increased slightly. While both bills included long-standing language preventing the use of appropriated funds to pay for abortions, the House bill, but not the Senate bill, also included a provision prohibiting aid to any foreign nongovernmental organizations that \"promotes or performs\" voluntary abortion, with some exceptions, regardless of the source of funding for such activities. P.L. 116-6 provides $8.84 billion for global health programs for FY2019, a 1.7% increase over FY2018 funding. Every health subsector was funded at the same or slightly higher level than in FY2018. The Trump Administration's FY2019 budget request for humanitarian assistance totaled $6.358 billion, which was roughly 32% less than FY2018 actual funding ($9.37 billion) and about 22% of the total FY2019 foreign aid request. The request included $2,800.4 million for the Migration and Refugee Assistance (MRA) account (-17% from FY2018) and $3,557.4 million for the International Disaster Assistance (IDA) account (-17%) ( Figure 2 ). As in its FY2018 request, the Administration proposed to eliminate the Food for Peace (P.L. 480, Title II) and Emergency Refugee and Migration Assistance (ERMA) accounts, asserting that the activities supported through these accounts can be more efficiently and effectively funded through the IDA and MRA accounts, respectively. (Congress did not adopt the proposed changes to Food for Peace for FY2018, appropriating $1.716 billion for the account through the Agriculture appropriation, but did appropriate only $1 million for ERMA, a 98% reduction from FY2017 funding.) The Administration also sought authority to transfer and merge IDA and MRA base funds (current authority only applies to OCO-designated funds). The Administration described its IDA request as focused \"on crises at the forefront of U.S. security interests, such as Syria, Iraq, Yemen, Nigeria, Somalia, and South Sudan.\" The MRA request focused on \"conflict displacement in Afghanistan, Burma, Iraq, Somalia, South Sudan, Syria and Yemen,\" as well as strengthening bilateral relationships with \"key refugee hosting countries such as Kenya, Turkey, Jordan, Ethiopia and Bangladesh.\" Consistent with last year, the request suggested that the proposed funding reduction assumes that other donors will shoulder an increased share of the overall humanitarian assistance burden worldwide. The House committee bills proposed $9.145 billion for humanitarian assistance accounts, about 2% less than FY2018 funding. The total included $1.5 billion for Food for Peace from the Agriculture appropriation but would not have funded the ERMA account. The Senate committee bills proposed $9.534 billion for humanitarian assistance, about 2% more than FY2018 funding. The total included $1.716 billion for Food for Peace and $1 million for the ERMA account. Neither bill included language authorizing broad transfers and mergers between the IDA and MRA base funding account, though both bills include provisions allowing for the transfer and merger of funds from several accounts, including IDA and MRA, as an extraordinary measure in response to a severe international infectious disease outbreak. As in FY2018, Congress did not adopt the significant humanitarian aid changes proposed by the Administration. P.L. 116-6 provided a total of $9.534 billion for humanitarian assistance in FY2019, almost level with FY2018 funding (-0.5%), of which about 21% was designated as OCO. This total included $3.434 billion in MRA funds, $1 million for ERMA, and $4.385 billion for IDA in the SFOPS division of the bill, as well as $1.716 billion for Food for Peace in the Agriculture division. The FY2019 security assistance request within foreign operations accounts totaled $7.304 billion, a 19% reduction from the FY2018 actual funding level and about 26% of the total foreign aid request. Consistent with recent years, 63% of the entire security assistance request was for FMF aid to Israel and Egypt. However, six countries were identified in the request as joint Department of Defense (DOD) and State Department security sector assistance priorities: Philippines, Vietnam, Ukraine, Lebanon, Tunisia, and Colombia. The International Narcotics Control and Law Enforcement (INCLE) account would have been reduced by about 36% from FY2018 actual levels, Nonproliferation, Antiterrorism, Demining and Related (NADR) by 21%, and International Military Education and Training (IMET) by about 14%. In each of these cases, the Administration described the proposed reductions as concentrating resources where they offer the most value and U.S. national security impact. As in the FY2018 request, the Peacekeeping Operations (PKO) account, which supports most non-U.N. multilateral peacekeeping and regional stability operations, including U.S. training and equipment for African militaries and funding for the U.N. Support Office in Somalia (UNSOS), would have seen the biggest reduction (-46%) under the FY2019 request. This is because Administrations generally request UNSOS funds through the CIPA account, while Congress usually funds the office through the PKO account. The Foreign Military Financing (FMF) account would have been reduced by 13% compared to FY2018, with specific allocations for 11 countries and a proposed $75 million Global Fund to be allocated flexibly. This was a notable change from the FY2018 FMF request, in which funds were allocated to four countries and a larger global fund, and from FY2018-enacted funding, for which allocations were specified for more than 20 countries. The House committee bill would have provided $9.274 billion for security assistance, a 3% increase over FY2018 funding, with funding increases proposed for the INCLE (+7%) and FMF (+4%) accounts and a reduction proposed for the PKO account (-9%). Consistent with the request, and in contrast to recent year appropriations, no security assistance funding in the House committee bill was designated as OCO. The Senate committee bill included $8.789 billion for security assistance programs, a 2.6% total decrease from FY2018 funding. The INCLE account would have increased by 2.6% while the FMF and PKO accounts would be reduced by 3% and 11%, respectively. About 16% of the security assistance funding in the Senate bill was designated as OCO. In the final FY2019 appropriation, P.L. 116-6 , security assistance funding totaled $9.153 billion, a 1.4% increase from FY2018. Of the total, $555 million within the PKO and FMF accounts (6% of total security funding) was designated as OCO. Funding provided for most accounts was similar to FY2018 levels, with the exception of INCLE, which increased by 9.4% in part to support increased efforts to address the flow of illegal opioids, and PKO, for which funding decreased by about 9.2%. Bilateral economic development assistance is the broad category that includes programs focused on education, agricultural development and food security, good governance and democracy promotion, microfinance, environmental management, and other sectors. While the majority of this aid is implemented by USAID, it also includes the programs carried out by the independent Millennium Challenge Corporation (MCC), Peace Corps, Inter-American Foundation and the U.S.-Africa Development Foundation. Excluding global health assistance, bilateral economic development assistance in the Administration's FY2019 request totaled $6.354 billion, a 33% reduction from FY2018 funding levels. Proposed FY2019 allocations for key sectors, compared with FY2018 levels prescribed in legislation, included the following: food security, $518 million (-48% from FY2018); democracy promotion programs, $1,235 million (-47% from FY2018); and education, $512 million (-51% from FY2018). The Administration requested $800 million for MCC and $396 million for Peace Corps, representing cuts of 12% and 3%, respectively. As discussed above, the budget request also proposed to merge I-AF and USADF into USAID, and requested only small amounts of funding to close out their independent activities. The House committee bill would have provided $9.383 billion for economic development assistance and specified allocations for several development sectors, including education ($1.035 billion), conservation programs ($360 million), food security and agricultural development ($1.001 million), microenterprise and microfinance ($265 million), water and sanitation ($400 million) and democracy programs ($2.4 billion). The Senate committee bill would have provided $9.764 billion for economic development activities and specifies allocations for education ($750 million), environment and renewable energy ($943 million), food security and agricultural development ($1.001 billion), small and micro credit ($265 million), water and sanitation ($435 million), and democracy programs ($2.4 billion), among others. Both the House and Senate bills would have funded the I-AF, USADF, Peace Corp, and MCC at the FY2018 funding level, and both bills explicitly rejected the Administration's proposal to merge I-AF and USADF into USAID. The enacted appropriation for FY2019, P.L. 116-6 , provided about $9.239 billion for nonhealth economic development aid. Minimum allocations specified for key sectors included $1.035 billion for education (basic and higher), $285 million for biodiversity conservation, $125 million for sustainable landscapes, $1.001 billion for food security and agricultural development, $265 million to support micro and small enterprises, $67 million to combat trafficking in persons, and $435 million for water and sanitation programs. The independent agencies were all funded at the same level as in FY2018. Appendix A. State Department, Foreign Operations, and Related Agencies Appropriations, by Account Appendix B. International Affairs Budget The International Affairs budget, or Function 150, includes funding that is not in the Department of State, Foreign Operations, and Related Programs appropriation: foreign food aid programs (P.L. 480 Title II Food for Peace and McGovern-Dole International Food for Education and Child Nutrition programs) are in the Agriculture Appropriations, and the Foreign Claim Settlement Commission and the International Trade Commission are in the Commerce, Justice, Science appropriations. In addition, the Department of State, Foreign Operations, and Related Programs appropriation measure includes funding for certain international commissions that are not part of the International Affairs Function 150 account. Appendix C. SFOPS Organizational Chart Appendix D. Glossary", "summary": "The Trump Administration submitted to Congress its FY2019 budget request on February 12, 2018. The proposal included $41.86 billion for the Department of State, Foreign Operations, and Related Programs (SFOPS). Of that amount, $13.26 billion was for State Department operations, international broadcasting, and related agencies, and $28.60 billion for foreign operations. With the enactment of the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123, February 9, 2018), which raised discretionary spending limits set by the Budget Control Act of 2011 (BCA; P.L. 112-25), the Administration's FY2019 foreign affairs funding request was entirely within enduring (base) funds; no Overseas Contingency Operations (OCO) funding was included the SFOPS request for the first time since FY2012. The FY2019 request would have represented a 23.3% decrease in SFOPS funding compared with FY2018 actual funding levels. The proposed State and related agency funding would have been 18.7% below FY2018 funding and the foreign operations funding would have been reduced by 25.2%. In the State and related programs budget, cuts were proposed for several accounts, including the diplomatic security accounts, contributions to international organizations, and contributions for international peacekeeping activities. In the foreign operations budget, cuts would have been applied across all accounts, with disproportionately large cuts proposed for humanitarian assistance, multilateral assistance, and funding for bilateral development programs focused on agriculture, education, and democracy promotion. Both the House and Senate appropriations committees approved FY2019 SFOPS bills that included funding at higher levels than the Administration requested and closer to FY2018 funding. H.R. 6385, approved by the House appropriations committee on June 20, 2018, would have funded SFOPS accounts at $54.177 billion. S. 3108, approved by the Senate appropriations committee on June 21, 2018, would have provided $54.602 billion for SFOPS accounts. FY2019 began with seven appropriations bills, including SFOPS, unfinished. Congress and the President approved continuing resolutions to fund the affected federal agencies through December 21, 2018 at the FY2018 level (P.L. 115-245, Division C and P.L. 115-298). After December 21, a partial shutdown of the government, including SFOPS funded agencies, occurred. On January 25, 2019, an agreement was reached to continue funding for SFOPS and other appropriations that had lapsed through February 15, at the FY2018 level (P.L. 116-5). On February 14, Congress passed, and the President later signed into law, a full year omnibus appropriation that included SFOPS funding (P.L. 116-6, Division F). P.L. 116-6 included a total of $54.377 billion for SFOPS accounts in FY2019, a 0.3% decrease from the FY2018 funding level and about 30% more than the Administration's request. Of that enacted total, $8.0 billion, or 14.7%, was designated as OCO. This report provides an account-by-account comparison of the FY2019 SFOPS request, House and Senate SFOPS legislation and the final FY2019 SFOPS appropriation to FY2018 funding in Appendix A. The International Affairs (function 150) budget in Appendix B provides a similar comparison. This report will not be further updated unless there is further congressional activity on FY2019 appropriations.", "document_type": "crs"}
{"report": "The combination of growing supplies of liquefied natural gas (LNG) and new requirements for less polluting fuels in the international maritime shipping industry has heightened interest in LNG as a maritime fuel. For decades, LNG tanker ships have been capable of burning boil-off gas from their LNG cargoes as a secondary fuel. However, using LNG as a primary fuel is a relatively new endeavor; the first LNG-powered vessel—a Norwegian ferry—began service in 2000. Several aspects of LNG use in shipping may be of congressional interest. LNG as an engine, or \"bunker,\" fuel potentially could help the United States reduce harmful air emissions, it could create a new market for domestic natural gas, and it could create economic opportunities in domestic shipbuilding. However, U.S. ports would need specialized vessels and land-based infrastructure for LNG \"bunkering\" (vessel refueling) as well as appropriate regulatory oversight of the associated shipping and fueling operations. The storage, delivery, and use of LNG in shipping also has safety implications. These and other aspects of LNG bunkering may become legislative or oversight issues for Congress. One bill in the 115 th Congress, the Waterway LNG Parity Act of 2017 ( S. 505 ), would have imposed excise taxes on LNG used by marine vessels on inland waterways. This report discusses impending International Maritime Organization (IMO) standards limiting the maximum sulfur content in shipping fuels, the market conditions in which LNG may compete to become a common bunker fuel for vessel operators, and the current status of LNG bunkering globally and in the United States. A broader discussion of oil market implications is outside the scope of this report. The IMO is the United Nations organization that negotiates standards for international shipping. Its standards limiting sulfur emissions from ships, adopted in 2008, have led vessel operators to consider alternatives to petroleum-based fuels to power their ships. In 1973, the IMO adopted the International Convention for the Prevention of Pollution from Ships (MARPOL). Annex VI of the convention, which came into force in 2005, deals with air pollution from ships. The annex established limits on nitrogen oxide (NO x ) emissions and set a 4.5% limit on the allowable sulfur content in vessel fuels. In 2008, the IMO announced a timeline to reduce the maximum sulfur content in vessel fuels from 4.5% to 0.5% by January 1, 2020. Annex VI requires vessel operators to either use fuels containing less than 0.5% sulfur or install exhaust gas-cleaning systems (\"scrubbers\") to limit a vessel's sulfur oxide (SO x ) emissions to a level equivalent to the required sulfur limit. MARPOL is implemented in the United States through the Act to Prevent Pollution from Ships (). The United States effectively ratified MARPOL Annex VI in 2008 when President Bush signed the Maritime Pollution Prevention Act ( P.L. 110-280 ). The act requires that the U.S. Coast Guard and the Environmental Protection Agency (EPA) jointly enforce the Annex VI emissions standards. MARPOL's Annex VI requirements are codified at 40 C.F.R. §1043. They apply to U.S.-flagged ships wherever located and to foreign-flagged ships operating in U.S. waters. In addition to its global sulfur standards, MARPOL Annex VI provides for the establishment of Emissions Control Areas (ECAs), which are waters close to coastlines where more stringent emissions controls may be imposed. The North American ECA limits the sulfur content of bunker fuel to 0.1% of total fuel weight, an even lower bar than that set by the IMO 2020 standards. This standard is enforced by Coast Guard and EPA in waters up to 200 miles from shore. Currently, most ships operating in the North American ECA meet the emissions requirements by switching to low-sulfur fuels once they enter ECA waters. The European Union also has an ECA with a 0.1% limit on sulfur in bunker fuels, and the Chinese government is considering putting the same standard in place. The IMO 2020 emissions requirement applies to vessels of 400 gross tons and over, which is estimated to cover about 110,000 vessels worldwide. However, analysts indicate that many of the smaller vessels in this group already burn low-sulfur fuel. Accounting for these smaller vessels, one estimate is that about 55,000 vessels currently burn high-sulfur fuel. Ship owners have two main options for meeting the emission requirements with existing engines: burn low-sulfur conventional fuel (or biofuels) or install scrubbers to clean their exhaust gases. Alternatively, ship owners may opt to install new LNG-fueled engines to comply with the IMO standard. The simplest option for vessel owners to comply with the IMO sulfur standards, and the one that appears most popular, is switching to low-sulfur fuel oils or distillate fuels. Although switching to low-sulfur fuels would increase fuel costs compared to conventional, high-sulfur fuels, it would require little or no upfront capital cost and would allow ocean carriers to use existing infrastructure to bunker ships at ports. Anticipating widespread adoption of this approach, many analysts predict that the implementation of the IMO 2020 regulations will drive up demand for low-sulfur fuel and, therefore, significantly increase its price above current levels. Such a trend could also reduce demand for high-sulfur fuels, increasing the price spread between low- and high-sulfur bunkers fuels. Switching to lower-sulfur fuel could increase fuel cost across the industry by up to $60 billion in 2020 for full compliance with the IMO standards. Moreover, while it may allow vessels to meet the existing IMO sulfur standards, low-sulfur fuel does not necessarily support compliance with potential future IMO emissions standards, especially with respect to greenhouse gases (GHGs) such as carbon dioxide (CO 2 ) discussed later in this report. Scrubbers are systems which remove sulfur from a vessel's engine exhaust emissions. A ship with a scrubber would be capable of meeting the IMO 2020 standard while using conventional high-sulfur fuel. Retrofitting a scrubber on an existing engine can cost several million dollars, however, before factoring in the lost revenue from taking the ship out of service for a month for the installation. Therefore, while using a scrubber will allow a ship to continue using (currently) cheaper high-sulfur fuel, it may take years to recover the initial investment. For example, one industry study estimates that, in the case of a typical tanker, a scrubber installation could cost $4.2 million with a payback time of approximately 4.8 years. Furthermore, scrubbers installed to capture sulfur emissions might have to be further refitted or replaced to comply with any future IMO standards for GHG emissions. The rate of scrubber adoption could affect the financial impacts of installing them in terms of fuel costs. Scrubbers ultimately offset some or all of their initial costs because they allow vessel operators to continue using relatively inexpensive high-sulfur fuel. However, the return on investment for scrubbers depends on the relative prices of high- and low-sulfur bunker fuels. The demand—and therefore, prices—for low-sulfur and high-sulfur fuels will be affected by how many vessels use the respective fuels under the IMO standards that take effect in 2020. For example, limited scrubber adoption could result in more vessels demanding more low-sulfur fuel oil, creating upward pressure on low-sulfur fuel prices. Under such a scenario, scrubbers would provide greater fuel cost savings for vessels that installed them. Alternatively, high-sulfur fuel could become more costly due to refinery production cutbacks (because shippers will not be allowed to burn it without scrubbers). In this case, the economic benefits of scrubbers would be diminished. Given the uncertain fuel supply and demand dynamics, it is difficult for vessel operators to know how big the market distortions from scrubber installation could be or how many other operators may choose to install scrubbers. As of September 2018, there were approximately 660 ships retrofitted with scrubbers and over 600 ships under construction with plans to install scrubbers. By 2020, projecting additional construction orders, some analysts predict about 2,000 vessels could have scrubbers installed. However, even with higher demand for the technology, the ability of vessel owners to install scrubbers is constrained; analysts estimate that current maximum capacity for installing scrubbers is be between 300 to 500 ships per year. Another option for ship owners to comply with the IMO 2020 sulfur standards is to switch to engines that burn LNG as a bunker fuel. LNG-fueled vessels emit only trace amounts of sulfur oxides in their exhaust gases—well below even the 0.1% fuel-equivalent threshold in some of the ECA zones—so they would be fully compliant with the IMO standards. As a secondary benefit, using LNG as an engine fuel also would reduce particulate matter (PM) emissions relative to both high- and low-sulfur marine fuel oils. Furthermore, LNG vessels have the potential to emit less CO 2 than vessels running on conventional, petroleum-based fuels. However, LNG vessels would have the potential to result in more fugitive emissions of methane, another GHG, because methane is the primary component of natural gas, further discussed below. Installing an LNG-fueled engine can add around $5 million to the cost of a new ship. Retrofitting existing ships appears to be less desirable because of the extra space required for the larger fuel tanks (new ships can be designed with the larger fuel tanks). The costs of retraining crews to work with LNG engines could also factor into a vessel operator's decision about switching to LNG. However, apart from their lower emissions, LNG-fueled engines may offset their capital costs with fuel cost advantages over engines burning petroleum-derived fuels. These savings would depend on the price spread between natural gas and fuel oil—which has been volatile in recent years. The likelihood that switching to LNG will produce long-term fuel costs savings relative to conventional fuels is, therefore, a critical consideration for many vessel owners. The 1920 Merchant Marine Act (known colloquially as the Jones Act) requires that vessels engaged in U.S. domestic transport be built domestically. Many newly built domestic ships receive a federal loan guarantee under the Maritime Administration's so-called \"Title XI\" program. In 2014, the program was modified to include the use of \"alternative energy technologies\" to power ships as part of the relevant criteria in evaluating a loan application. The Maritime Administration counts LNG-fueled engines as an \"alternative energy technology\" and may be more likely to approve loan applications for ships with LNG-capable engines. Since the North American ECA was established in 2015, Jones Act coastal ship operators have taken steps to transition their fleets to use cleaner burning fuels, including LNG. The three Jones Act operators that ship dry goods to Alaska, Hawaii, and Puerto Rico have taken delivery or have ordered LNG-fueled and LNG-capable vessels from U.S. shipyards in Philadelphia, PA, and Brownsville, TX. Harvey Gulf International has put into service five LNG-powered offshore supply vessels that service offshore oil rigs. Some Jones Act tanker operators that have recently built or ordered vessels have chosen to install LNG-ready engines while other operators have chosen to install scrubbers on their existing fleet. Ship engines and scrubbers for the Jones Act fleet do not have to be manufactured in the United States because they are not considered an integral part of the hull or superstructure of a ship. Seagoing barges, known as articulated tug barges, are also a significant portion of the domestic coastal fleet, especially for moving liquid cargoes. However, these vessels traditionally have burned lower-sulfur fuels and thus the ECA has not prompted fleet conversions. IMO fuel requirements do not apply to river barges operating on the nation's inland waterway system, although this fleet potentially could be a market for LNG as fuel. Bunkering vessels (small tankers with hoses for refueling ships) in U.S. waters must also be Jones Act compliant. Barges are the predominant method for bunkering ships in U.S. ports. An LNG bunkering vessel for the Port of Jacksonville—the first Jones Act-compliant LNG bunkering vessel to enter service in the United States—was built in 2017 by Conrad Shipyards in Orange, TX. Recent energy sector trends suggest that LNG may be cheaper in the long-run than petroleum-based, low-sulfur fuels. However, these price movements are correlated to some extent. Many existing long-term LNG contracts link LNG prices to oil prices (although such contract terms are on the decline), even in the spot market. Starting in 2008, the advent of shale natural gas production dramatically decreased natural gas prices in the United States. Natural gas spot prices in the United States at the Henry Hub—the largest U.S. trading hub for natural gas—averaged around $3/MMBtu (million British Thermal Units) in 2018, about a quarter of the peak in average price a decade before, just prior to the shale gas boom ( Figure 1 ). Liquefying natural gas into LNG adds around $2/MMBtu to the production cost. Including additional producer charges and service costs would bring the total cost of LNG available at a U.S. port (based on the 2018 average price in Figure 1 ) to approximately $6/MMBtu. Shipping of LNG from the United States to Asia or Europe adds from $1 to $2/MMBtu, so, based on the 2018 average cost in Figure 1 , LNG delivered to a port overseas would cost on the order of $7 to $8/MMbtu under long-term contracts, depending upon timing and location. Higher or lower prices could occur for specific long-term contracts and in the LNG spot market (i.e., for individual cargoes), based on the location and the supply and demand balance at the time. In general, the U.S. market will have the lowest-priced LNG. Northern Asia will have the highest LNG prices due to the region's comparative lack of pipeline gas supplies and its distance from LNG suppliers. Figure 2 compares LNG spot market prices in the Japan LNG market—the highest-priced LNG market—to spot prices for two common petroleum-based bunker fuels, low-sulfur gas oil and high-sulfur fuel oil. As the figure shows, over the last five years, Japan LNG generally has been cheaper than low-sulfur fuel and more expensive than high-sulfur fuel on an energy-equivalent basis (i.e., per MMbtu). However, Japan LNG and high-sulfur fuel prices converged in 2018. As the figure shows, spot prices for LNG deliveries to the Japan market fell below $6/MMBtu in 2016 from a high above $16/MMBtu in 2013. Likewise, low-sulfur gas oil prices have doubled, and high-sulfur fuel oil prices have tripled, since 2016. The volatility of the bunker fuel markets and the global LNG market lead to considerable unpredictability about the relative prices among fuels going forward. LNG may become increasingly price-competitive versus low-sulfur fuel as the 2020 IMO sulfur standards take effect. As discussed above, many analysts predict prices for low-sulfur gas oil, which are already higher than those for high-sulfur fuel oil, to increase significantly after 2020 due to a standards-driven rise in demand. Although fuel prices as shown in Figure 2 indicate favorable economics for LNG versus low-sulfur fuel, if prices for high-sulfur fuel oils collapse as some expect after the 2020 IMO regulations enter into force, it is possible that LNG could lose its price advantage over residual fuel oils. Likewise, the price spread between low-sulfur gasoil and high-sulfur fuel oil would increase, incentivizing more carriers to install scrubbers to capitalize on the savings in fuel costs by continuing to burn high-sulfur fuel. An additional complication is the variability of LNG prices by region. Many shipping lines are global operators seeking low-priced fuel worldwide, but unlike the global oil market, natural gas markets are regional. Because the price of LNG can vary significantly by region, the relative economics of LNG versus other bunker fuels would also vary by region. Another uncertainty in the market for LNG bunkering is the discrepancy between the spot price for traded LNG and the price for LNG sold as bunker fuel in ports. Added costs associated with marketing, storing and transporting LNG in bunkering operations (discussed below) would likely require ports to charge a rate for LNG bunker fuel above spot market prices. These additional overhead costs are likely to vary among ports. Before factoring in any effect of IMO standards on fuel prices, and assuming a favorable LNG-fuel oil price spread, it still could take years for the savings generated by using LNG to pay back the capital costs of switching fuels. Through May 2018, there were 122 LNG-powered vessels in operation and another 135 ordered or under construction. Many of the first LNG vessels delivered and ordered were Norwegian-flagged vessels, as the Norwegian government has subsidized LNG-fueled vessels with a \"NO x Fund.\" The fund provides LNG-operated ships with an exemption from the country's tax on NO x emissions. As an alternative to committing to LNG as a fuel, some vessel owners may hedge their bets by opting to install \"LNG-ready\" engines, which can burn low-sulfur fuel oil currently, but are designed to make future LNG conversion easier. The number of LNG ships that may be in operation by 2030 is difficult to predict. First, as noted above, growth in LNG powered vessels is likely to be driven primarily by new builds rather than retrofits. However, the shipping industry has experienced nearly a decade of vessel overcapacity and slow growth. Weak growth in the shipping industry could result in slower growth in vessel orders overall and, therefore, fewer orders for LNG-powered vessels. Of new vessels ordered, or set to be delivered, in 2018 or after, 13.5% (by tonnage) are LNG-fueled—up from 1.4% in 2010. If this trend continues, demand for LNG from the shipping industry could still be relatively high, even if overall growth in the shipping industry remains slow. Because LNG bunkering infrastructure among global ports is currently limited, vessels that use large amounts of fuel and travel predictable routes—along which LNG is available—are the most suitable for LNG fuel. For this reason, cruise ships, vehicle ferries, and container ships initially may be the most likely vessel types to adopt LNG as bunker fuel. Order books have reflected this assessment: one quarter of all cruise ships on order by tonnage at the end of 2017 were LNG-powered. Likewise, a major container ship line, CMA CGM, recently announced that it was ordering nine extra-large container ships powered by LNG. The carrier stated that the fuel tanks will displace space for \"just a few containers\" and said it intends to refuel these ships just once on their round trip voyages between Asia and Europe. Conversely, LNG fuel adoption may be less likely for oil tankers. Half the global oil tanker fleet operates on the shipping spot market (also known as the \"tramp\" market), meaning that ship owners enter into contracts with cargo owners only for a single voyage. In this kind of trade, many oil tankers lack a consistent route. Having to limit spot contracts only to ports that may bunker LNG could reduce the arbitrage opportunities of tankers. Dry bulk cargo vessels (carrying grain, coal, and other commodities) also typically operate in the tramp market. LNG-powered vessels have lower direct exhaust emissions than comparable vessels using petroleum-derived fuels. However, the lifecycle—or \"well-to-wake\"—GHG emissions (especially of methane) and of volatile organic compound emissions from natural gas production, transportation, and liquefaction complicates the comparison. One study in 2015 concluded, \"performing a ['well-to-wake'] GHG study on LNG used as a marine fuel is more complex than previously thought. Further studies are needed ... to investigate this subject.\" A 2016 study found that the relative GHG emissions benefits of LNG versus conventional fuel oil on a \"well-to-wake\" basis was highly dependent upon fugitive methane emissions in the LNG supply chain. A 2017 study funded by NGVA Europe, an association which promotes the use of natural gas in vehicles and ships, concluded that LNG as a bunker fuel provides a 21% well-to-wake reduction in GHG emissions compared to convention fuel oil. Evaluating such studies is beyond the scope of this report, although they indicate uncertainty about environmental benefits of LNG fuel, which may require further examination. Despite concerns over lifecycle emissions from the natural gas supply chain, in the short term, ships that pair LNG engines with newer vessel designs could reduce onboard GHG emissions. However, whether these GHG emission reductions would be sufficient to meet the future standards could become another issue for ship owners. The IMO has set a provisional goal of reducing GHG emissions from ships by 50% by 2050. Depending upon the state of engine technology, LNG-fueled ships might become less viable if GHG limits were to be established well before 2050. Concerns about such GHG limits might lead to a decrease in orders of LNG-powered ships over time. Commercial vessels have a typical lifespan of over 20 years, so firms ordering new ships have to take into account compliance with potential standards issued decades in the future. If renewable fuels, such as biodiesel, become more available and cheaper in the coming decades, renewable fuel-powered ships may take over part of the market that LNG-powered ships could occupy. A key requirement for ocean carriers to adopt LNG as an engine fuel is the availability of LNG bunkering facilities. Because LNG is extremely cold (-260 °F) and volatile, LNG bunkering requires specialized infrastructure for supply, storage, and fuel delivery to vessels. Depending upon the specific circumstances, LNG bunkering could require transporting LNG to a port from an offsite liquefaction facility for temporary storage at the port, or building an LNG liquefaction terminal on site. Alternatively, LNG could be delivered from offsite facilities directly to vessels in port via truck or supply vessel ( Figure 3 ). Truck-to-vessel LNG bunkering, in particular, provides some fueling capabilities without large upfront capital investments. LNG tanker trucks could also bring LNG to a storage tank built on site at the port, which could then bunker the LNG to arriving ships via pipeline. Supplying LNG using tanker trucks in this way may face capacity limitations due to truck size, road limitations, or other logistical constraints, but it has been demonstrated as a viable approach to LNG bunkering at smaller scales. The predominant method of bunkering today with high-sulfur fuel is vessel to vessel, either by a tank barge or smaller tanker. The type of infrastructure needed to temporarily store (if needed) and deliver LNG within a given port would depend on the size and location of the port, as well as the types of vessels expected to bunker LNG. Truck to ship bunkering is best suited for supporting smaller and mid-sized vessels, such as ferries or offshore supply vessels (OSVs) that support offshore oil platforms. Liquefaction facilities built on site can provide the greatest capacity of any LNG bunkering option, for example, to provide fuel for large vessels in transoceanic trade. However, constructing small-scale liquefaction facilities to produce and deliver LNG on site requires considerable planning and significant capital investment, in one case on the order of $70 million for a mid-sized port. Each LNG bunkering option in Figure 3 may be a viable means to begin LNG bunkering service in a given port. However, ports may face practical constraints as bunkering increases in scale. For example, a container port of significant size typically has multiple terminals, so even with an on-site liquefaction facility, it may need additional infrastructure or supply vessels for moving LNG to other port locations where a cargo ship might be berthed. There may also be port capacity and timing constraints upon the movement of LNG bunkering barges trying to refuel multiple large vessels in various locations around a crowded port. To date, the LNG bunkering operations already in place or in development are comparatively small, but scale constraints could become a factor as LNG bunkering grows and might require additional bunkering-related port investments. Early adoption of LNG bunkering occurred in Europe, where the first sulfur ECAs were created in 2006 and 2007. Through Directive 2014/94/EU, the European Union requires that a core network of marine ports be able to provide LNG bunkering by December 2025 and that a core network of inland ports provide LNG bunkering by 2030. This mandate has been promoted, in part, with European Commission funds to support LNG bunkering infrastructure development. In addition, the European Maritime Safety Agency published regulatory guidance for LNG bunkering in 2018. Over 40 European coastal ports have LNG bunkering capability currently in operation—primarily at locations on the North Sea and the Baltic Sea, and in Spain, France, and Turkey. These locations include major port cities such as Rotterdam, Barcelona, Marseilles, and London. Another 50 LNG bunkering facilities at European ports are in development. LNG bunkering is also advancing in Asia, led by Singapore, the world's largest bunkering port. Singapore has agreed to provide $4.5 million to subsidize the construction of two LNG bunkering vessels. The Port of Singapore plans to source imported LNG at the adjacent Jurong Island LNG terminal, loading it into the bunkering vessels for ship-to-ship fueling of vessels in port. Singapore also has signed a memorandum of understanding with 10 other partners—including a Japanese Ministry and the Chinese Port of Ningbo-Zhoushan—to create a focus group aimed at promoting the adoption of LNG bunkering at ports around the world. In Japan, one consortium is implementing plans to begin vessel-to-vessel LNG bunkering at the Port of Keihin in Tokyo Bay by 2020. Japan's NYK line, a large ship owner, recently announced that it had reached an agreement with three Japanese utilities to add LNG bunkering to ports in Western Japan. Asian countries, together with Australia and the United Arab Emirates, currently have around 10 coastal ports offering LNG bunkering, with another 15 projects in development. Some LNG bunkering operations in Europe and Asia are associated with existing LNG marine terminals, which already have LNG storage and port infrastructure in place. However, many smaller operations—including most of the projects in development—employ trucking, dedicated bunkering vessels, on-site liquefaction, and other means to extend LNG availability beyond the ports with major LNG terminals. LNG bunkering is not so advanced in South America, although with nine operating LNG marine terminals (one for export), and another six in development, South America also could support significant LNG bunkering operations in the near future. LNG bunkering in the United States currently takes place in two locations—Jacksonville, FL, and Port Fourchon, LA—with a third bunkering facility under development in Tacoma, WA. The LNG facilities in these ports serve the relatively small U.S.-flag domestic market. Bunkering of LNG-fueled cruise ships also is planned for Port Canaveral, FL. However, ports in North America have significant potential to expand the nation's LNG bunkering capability. Jacksonville is the largest LNG bunkering operation at a U.S. port. One bunkering facility at the port, developed by JAX LNG, initially began truck-to-ship refueling operations in 2016 for two LNG-capable container ships. (The LNG is sourced from a liquefaction plant in Macon, GA. ) In August 2018, upon delivery of the Clean Jacksonville bunker barge, the facility began to replace truck-to-ship bunkering with ship-to-ship bunkering. In the future, the barge plans to source LNG from a new, small-scale liquefaction plant which JAX LNG is currently constructing at the port. A second facility at Jacksonville's port, operated by Eagle LNG, provides LNG bunkering sourced from a liquefaction plant in West Jacksonville. Eagle LNG also is constructing an on-site liquefaction and vessel bunkering facility in another part of the port, expected to begin service in 2019. Taken together, the JAX LNG and Eagle LNG facilities is expected to establish Jacksonville as a significant LNG-bunkering location with the capability to serve not only the domestic fleet but larger international vessels as well. In 2015, Harvey Gulf International Marine (Harvey) began LNG bunkering operations in the Gulf of Mexico to fuel its small fleet of LNG-powered offshore supply vessels serving offshore oil rigs. Harvey has since constructed a $25 million facility at its existing terminal in Port Fourchon to store and bunker LNG sourced from liquefaction plants in Alabama and Texas. The facility can provide truck-to-ship bunkering services for LNG-fueled offshore supply vessels, tank barges, and other vessels. A Harvey subsidiary has ordered two LNG bunkering barges to enable ship-to-ship fueling in the future. Puget Sound Energy has proposed an LNG liquefaction and bunkering facility at the Port of Tacoma, WA. Vessels traveling between Washington and Alaska typically spend the entire journey within the 200-mile North America ECA. Consequently, vessel owners operating along these routes have been interested in LNG as bunker fuel. TOTE Maritime, for example, a ship owner involved in trade between Alaska and the lower 48 states, has begun the process of retrofitting the engines of two of its container ships to be LNG-compatible. The proposed Tacoma LNG facility would be capable of producing up to 500,000 gallons of LNG per day and would include an 8 million gallon storage tank. The facility would serve the dual purposes of providing fuel for LNG-powered vessels and providing peak-period natural gas supplies for the local gas utility system. Its total construction cost reportedly is expected to be $310 million. Community and environmental concerns have slowed the progress of the proposal, which is still under regulatory review. Puget Sound Energy originally planned to put the LNG facility into service in late 2019; however, permitting issues appear likely to delay its opening until 2020 or later—if it is eventually approved. Q-LNG Transport, a company 30% owned by Harvey, has placed orders for two LNG bunkering barges to provide ship-to-ship LNG fueling as well as \"ship-to-shore transfers to small scale marine distribution infrastructure in the U.S. Gulf of Mexico and abroad.\" Q-LNG's first barge initially is expected to provide fuel to new LNG-fueled cruise ships based in Port Canaveral (and, potentially, Miami), while service from its second barge is still uncommitted. Initial plans are for the LNG to be sourced from the Elba Island LNG import/export terminal near Savannah, GA—approximately 230 nautical miles away—although the company may seek to develop an on-site LNG storage facility in the future. As noted above, U.S. LNG bunkering activities thus far have been limited to a handful of vessels in domestic trade and tourism. LNG bunkering for the much larger fleet of foreign-flag ships carrying U.S. imports and exports is still to be developed. As in Europe and Asia, domestic ports located near major LNG import or export terminals may serve as anchors for expanded LNG bunkering operations. Figure 4 shows existing LNG import and export terminals in North America. LNG can be liquefied from pipeline natural gas (or imported natural gas) and stored in large quantities at these facilities. The LNG can then be bunkered on site or transported to bunkering facilities elsewhere in the region by truck, rail, or barge. As discussed above, the distance between Port Canaveral and Elba Island in Q-LNG's bunker sourcing plan is 230 nautical miles. Taking this distance as a measure of how far away LNG can be sourced and barged economically, it is possible to extrapolate which U.S. ports are within reach of a potential supply of LNG for vessel bunkering. Table 1 lists the top 20 U.S. container shipment ports in the United States and their proximity to existing LNG import/export terminals. Of these top 20 ports, 12 are less than 230 nautical miles from an operating LNG terminal. Distances between LNG terminals and the other East Coast ports are not much greater, suggesting that LNG for vessel bunkering could be within reach of every U.S. port along the Eastern Seaboard and in the Gulf of Mexico. On the West Coast, the ports of Los Angeles and Long Beach—the two largest U.S. ports—are relatively close to the Costa Azul LNG import terminal in Ensenada, MX. Seattle and Tacoma are far from Ensenada, but would be served by the proposed Tacoma LNG bunkering project, if constructed. LNG bunkering for Seattle and Tacoma alternatively could be sourced from an existing LNG port facility around 100 nautical miles north in Vancouver, BC, which is expanding to provide LNG bunkering services to international carriers. Alaska's existing LNG export terminal currently is inactive, but potentially could supply LNG bunker fuel in the Pacific Northwest as well. Although existing LNG import or export terminals in North America could supply LNG for regional bunkering operations, such activities would require additional investment for infrastructure such as LNG transfer facilities and bunker barges. CRS is not aware of any public announcements among the LNG terminals above to develop bunkering operations. However, at least one LNG terminal owner, Cheniere Energy, which operates LNG terminals in Louisiana and Texas, identifies vessel bunkering as one source of future LNG demand growth worldwide. The IMO adopted safety standards for ships using natural gas as a bunker fuel in 2015. The standards, which took effect in 2017, apply to all new ships and conversions of ships (except LNG tankers, which have their own standards). The IMO standards address engine design, LNG storage tanks, distribution systems, and electrical systems. They also establish new training requirements for crews handling LNG and other low flashpoint fuels. As is the case for the sulfur standards, the IMO LNG safety standards apply to all IMO member nations, including the United States. In addition, a number of U.S. federal agencies, especially the Coast Guard and the Federal Energy Regulatory Commission, have jurisdiction over specific aspects of domestic LNG storage infrastructure and bunkering operations. The Coast Guard has the most prominent role in LNG bunkering, given its general authority over port operations and waterborne shipping. In 2015, the Coast Guard issued two guidelines for the handling of LNG fuel and for waterfront facilities conducting bunkering operations. In 2017, the Coast Guard issued additional guidelines to Captains of the Port, the local Coast Guard officials responsible for port areas, for conducting safe LNG bunkering simultaneously with other port operations. The guidelines advise on quantitative risk assessment of facilities bunkering LNG, which allows Captains of the Port to assess the risks posed to crews and facilities. The Federal Energy Regulatory Commission (FERC) plays a role in LNG bunkering due to its jurisdiction over the siting of LNG import and export terminals under the Natural Gas Act of 1938. Specifically, FERC asserts approval authority over the place of entry and exit, siting, construction, and operation of new LNG terminals as well as modifications or extensions of existing LNG terminals. Notwithstanding this siting authority, FERC reportedly does not intend to assert jurisdiction over the permitting of LNG bunkering facilities, but it may require amendment of permits it has issued for LNG import or export terminals to account for bunkering operations added afterwards. In addition to the Coast Guard and FERC, other federal agencies may have jurisdiction over specific aspects of LNG bunkering operations in U.S. ports under a range of statutory authorities. For example, the Pipeline and Hazardous Materials Safety Administration within the Department of Transportation regulates the safety of natural gas pipelines and certain associated LNG storage facilities (e.g., peak-shaving plants). LNG facilities also may need to comply with the Occupational Safety and Health Administration's regulations for Process Safety Management of Highly Hazardous Chemicals. Other federal agencies, including the Environmental Protection Agency, the U.S. Army Corps of Engineers, and the Transportation Security Administration, may regulate other aspects of LNG bunkering projects. CRS is not aware of new regulations to date among these agencies specifically addressing LNG bunkering. World production of LNG has been rising rapidly over the last few years, driven by growth in the natural gas sector in new regions—especially Australia and the United States. According to one industry analysis ( Figure 5 ), global LNG supply is expected to increase from 300 to 400 million metric tons per annum (MMtpa) from 2017 to 2021 based on new LNG liquefaction projects already operating or under development. An additional 150 MMtpa appears likely to come online after that. Collectively, LNG supply from these new liquefaction projects could exceed projections of demand, which would put downward pressure on LNG prices. While increases in the global supply of LNG do not necessarily translate directly into an increase in LNG available for bunkering, such increases could provide options for LNG bunkering in more ports. Estimating potential demand for LNG in the maritime sector is complicated and uncertain. One study of future LNG demand for bunkering, specifically, projects that LNG-powered vessels in operation and under construction as of June 2018 will require between 1.2 and 3.0 MMt of LNG per year. The study's review of several LNG consumption forecasts in the maritime sector shows a consensus projection between 20 to 30 MMt per year by 2030. This level of demand growth implies an increase in LNG-powered vessel construction from the current rate of around 120 ships per year to between 400 and 600 new builds per year. If these levels were reached, they could create a significant new market for LNG suppliers. Assuming a Henry Hub spot market price of $4/MMBtu in 2030, the annual market for LNG in shipping could be worth $2.9 billion to $5.8 billion, before accounting for liquefaction and transportation charges. Some studies have projected the LNG bunkering market to be even larger and to grow more quickly. However, key variables—such as the prices of Henry Hub natural gas and crude oil, the number of new vessel orders, and the future costs of emissions technology—are notoriously hard to predict with accuracy. Thus, it is not assured that natural gas consumption in the maritime sector will absorb more than a small amount of the global liquefaction capacity in development. The IMO sulfur standards apply to ship owners globally, as does the development of new LNG supply and bunkering infrastructure. In addition to these factors, domestic LNG bunkering also may be influenced by considerations more specific to the United States. These considerations include growth of the U.S. natural gas supply, domestic shipbuilding opportunities, and LNG safety and security. Because of its leading role in global natural gas production, the United States has a particular interest in any new source of natural gas demand. According to the Energy Information Administration, the United States has been the world's top producer of natural gas since 2009, when it surpassed Russia. In 2017, increases in production outstripped increases in domestic gas consumption, leading to the United States becoming a net exporter of natural gas for the first time in nearly 60 years. As discussed above, North America (primarily the United States) is expected to add the most new LNG production capacity through 2030 when including projects that are operating, under construction, and likely (according to investment analysts). Past increases in U.S. LNG exports were driven by greater throughput at the Sabine Pass LNG export terminal—the only operating U.S. LNG export terminal in 2017. In March 2018, the Cove Point terminal in Maryland became the second operating U.S. LNG export terminal. Four additional projects under construction or commissioning are set to nearly triple U.S. liquefaction by the end of 2019. This increase in liquefaction capacity likely will motivate LNG producers to secure new buyers. Figure 6 shows estimated LNG prices for various locations around the world as of October 2018. As the figure shows, LNG prices are substantially lower in North America than in Asia, Europe, and South America. Even after adding $1.00 to $2.00/MMBtu to transport the LNG to overseas ports, LNG produced in the United States is globally competitive at these prices. If LNG from the new liquefaction capacity coming online can be produced and delivered with similar economics, the cost advantage may create an opportunity for U.S. LNG in bunker supply. There are over 400 petroleum fuel bunkering ports in the world, but 60% of bunkering in recent years has happened in six countries: Singapore, the United States, China, the United Arab Emirates, South Korea, and the Netherlands. Of these countries, only the United States is a significant LNG producer. Therefore, the United States could be a favorable source of LNG for domestic bunkering and for bunkering at the other major ports. While the LNG industry historically has had a good safety record, there are unique safety risks associated with LNG in vessel operations. Leakage of LNG during LNG shipping or bunkering can pose several hazards. LNG is stored at temperatures below -162 °C (-260 °F), far below the -20°C at which the carbon steels typically used in shipbuilding become brittle. Consequently, extreme care must be taken to ensure that LNG does not drip or spill onto ship hulls or decking because it could lead to brittle fracture, seriously damaging a ship or bunkering barge. LNG spilled onto water can pose a more serious hazard as it will rapidly and continuously vaporize into natural gas, which could ignite. The resulting \"pool fire\" would spread as the LNG spill expands away from its source and continues evaporating. A pool fire is intense, far hotter and burning far more rapidly than oil or gasoline fires, and it cannot be extinguished; all the LNG must be consumed before it goes out. Because an LNG pool fire is so hot, its thermal radiation may injure people and damage vessels or property a considerable distance from the fire itself. Many experts agree that a large pool fire, especially on water, is the most serious LNG hazard. Leaks of boil-off gas (the small amount of LNG that vaporizes in storage) can also release natural gas into a port area and cause fires or explosions. Major releases of LNG from large LNG carriers would be most dangerous within 500 meters of the spill and would pose some risk at distances up to 1,600 meters from the spill. While a bunkering barge or a vessel using LNG for fuel contains far less LNG than large LNG carriers, LNG spills in bunkering operations could still be a significant concern. Risks associated with bunkering LNG are complicated in ports seeking to engage in \"simultaneous operations\" during the bunkering process. Simultaneous operations entail loading and unloading cargo and personnel from a ship, maintenance, and other logistical operations performed while a ship is bunkering. Accidents that occur during such operations (for example, the operation of heavy machinery near pipes transporting LNG) can result in a spill of LNG which can threaten workers positioned near the site of operations. LNG tankers, bunkering vessels, and land-based facilities could be vulnerable to terrorism. Bunkering tanks or vessels might be physically attacked to destroy the LNG they hold—and vessels might be commandeered for use as weapons against port or coastal targets. Potential terrorist attacks on LNG terminals or tankers in the United States have long been a key concern of the public and policymakers in the context of large scale LNG imports or exports because such attacks could cause catastrophic fires in ports and nearby populated areas. For example, a 2007 report by the Government Accountability Office stated that, \"the ship-based supply chain for energy commodities,\" specifically including LNG, \"remains threatened and vulnerable, and appropriate security throughout the chain is essential to ensure safe and efficient delivery.\" Affected communities and federal officials continue to express concern about the security risks of LNG. The potential risks from terrorism to LNG bunkering infrastructure may be different than those of larger LNG import or export operations due to smaller quantities of LNG involved, but the risks may become more widespread if LNG bunkering operations are established in more locations. The Maritime Transportation Security Act (MTSA, P.L. 107-295 ) and the International Ship and Port Facility Security Code give the Coast Guard far-ranging authority over the security of hazardous materials in maritime shipping. The Coast Guard has developed port security plans addressing how to deploy federal, state, and local resources to prevent terrorist attacks. Under the MTSA, the Coast Guard has assessed the overall vulnerability of marine vessels, their potential to transport terrorists or terror materials, and their use as potential weapons. The Coast Guard has employed these assessments to augment port security as necessary and to develop maritime security standards for LNG port facilities. The IMO's overall framework for controlling vessels emissions (MARPOL Annex VI) has been in place since 2005. While the United States, as an IMO member, is subject to the IMO's 2020 sulfur standards, the international standards apply equally to all parties and all vessels. The impacts of sulfur standards on bunker fuel have been an important consideration, but IMO member nations have agreed to the standards independent of any particular energy policies. Moreover, MARPOL Annex VI preceded the U.S. shale gas boom, so commitment to that initial IMO framework could not have anticipated United States' current role as a dominant energy producer. Any changes within the international shipping fleet to install sulfur scrubbers, fuel engines with LNG, or switch to other low sulfur fuels, are being driven primarily by market forces in fuel supply, shipbuilding, and shipping—not by any particular push to favor one fuel over another. Nonetheless, given its particular status, the question arises whether the standards may create an economic opportunity for the United States, in energy or otherwise. More specifically, could international adoption of LNG as a bunker fuel create an important new market for U.S. natural gas producers, shipbuilders, or infrastructure developers? As discussed above, depending upon the adoption of LNG bunkering in the global fleet, the LNG bunker fuel market could grow to several billion dollars by 2030. If U.S. LNG producers were to supply a significant share of this market—on the strength of comparatively low LNG production costs—LNG bunkering could increase demand for U.S. natural gas production, transportation, and liquefaction. Opportunities in LNG-related shipbuilding might be more limited, as most of this occurs overseas, with the exception of Jones Act vessels. In the latter case, demand for domestically-constructed LNG bunkering barges could be one significant area of economic growth. Engineering and construction firms could benefit from new opportunities to develop new port infrastructure for LNG storage and transfer. While likely limited in number, such port facilities could be complex, high value projects costing tens or hundreds of millions of dollars to complete. Such projects could create jobs in engineering, construction, and operation, which could be important to local communities. Although LNG bunkering could present the United States with new economic opportunities, it may pose challenges as well. Rising demand for LNG in the maritime sector could increase natural gas prices for domestic consumers. In addition to being the world's largest natural gas producer, as of 2018, the United States is also the world's largest producer of crude oil and the second largest bunkering hub. Consequently, while vessel conversion to LNG bunkering may increase demand for U.S.-produced natural gas, it could be partially offset by reduced demand for U.S.-produced crude oil or refined products. Exactly how changing demand in one sector could affect the other is unclear. Furthermore, while LNG can reduce pollutant emissions from vessels, emissions and environmental impacts from increased natural gas production and transportation could increase overall emissions. Much of the net environmental impact depends upon practices in the natural gas industry, which are the subject of ongoing study and debate. Although new LNG bunkering infrastructure can create jobs, as the Tacoma LNG projects shows, the construction of such port facilities can be controversial for reasons of safety, security, and environmental impact. Overarching the considerations above is uncertainty about how the global shipping fleet will adapt to the IMO sulfur standards over time. This uncertainty complicates decisions related to both private investment and public policy. LNG-fueled ships still account for only a fraction of the U.S. and global fleets, and it may take several decades for significant benefits of LNG-powered vessels to be realized. It is also possible that alternative ship fuels, including biofuels, electric engines, and hybrid engines, will become more economically viable in coming years. Given the uncertainty surrounding the future of LNG as a ship fuel, it is hard to predict the potential benefits or costs that LNG bunkering may provide to the United States. Until now, the private sector has added LNG-fueled vessels to fleets in the United States in a piecemeal manner under existing federal statutes and regulation. Congress could encourage the growth of LNG bunkering by various means, such as providing tax incentives to support the construction of LNG bunkering facilities and vessels, addressing any statutory or regulatory barriers to bunkering facility siting or operations, and providing funding for technical support to domestic carriers seeking to adopt LNG technology. Alternatively, Congress could seek to encourage competing bunker fuel options, such as biofuels, by incentivizing them in similar ways. In addition, Congress could also affect growth in LNG bunkering through policies affecting the LNG industry or domestic shipping industry as a whole. Changes in federal regulation related to natural gas production, or changes to the Jones Act, for example, while not directed at LNG bunkering, could nonetheless affect its economics. Therefore, evaluating the potential implications on LNG bunkering of broader energy, environmental, or economic objectives may become an additional consideration in congressional oversight and legislative initiatives. If LNG bunkering expands significantly in U.S. ports, Congress also may examine the adequacy of existing measures to ensure the safety and security of LNG vessels, storage, and related facilities.", "summary": "The combination of growing liquefied natural gas (LNG) supplies and new requirements for less polluting fuels in the maritime shipping industry has heightened interest in LNG as a maritime fuel. The use of LNG as an engine (\"bunker\") fuel in shipping is also drawing attention from federal agencies and is beginning to emerge as an issue of interest in Congress. In 2008, the International Maritime Organization (IMO) announced a timeline to reduce the maximum sulfur content in vessel fuels to 0.5% by January 1, 2020. Annex VI of the International Convention for the Prevention of Pollution from Ships requires vessels to either use fuels containing less than 0.5% sulfur or install exhaust-cleaning systems (\"scrubbers\") to limit a vessel's airborne emissions of sulfur oxides to an equivalent level. An option for vessel operators to meet the IMO 2020 standards is to install LNG-fueled engines, which emit only trace amounts of sulfur. Adopting LNG engines requires more investment than installing scrubbers, but LNG-fueled engines may offset their capital costs with operating cost advantages over conventional fuels. Savings would depend on the price spread between LNG and fuel oil. Recent trends suggest that LNG may be cheaper in the long run than conventional fuels. LNG bunkering requires specialized infrastructure for supply, storage, and delivery to vessels. To date, the number of ports worldwide that have developed such infrastructure is limited, although growth in this area has accelerated. Early adoption of LNG bunkering is occurring in Europe where the European Union requires a core network of ports to provide LNG bunkering by 2030. LNG bunkering is also advancing in Asia, led by Singapore, the world's largest bunkering port. Asian countries, together with Australia and the United Arab Emirates, have about 10 coastal ports offering LNG bunkering, with another 15 projects in development. LNG bunkering in the United States currently takes place in Jacksonville, FL, and Port Fourchon, LA—with a third facility under development in Tacoma, WA. Bunkering of LNG-fueled cruise ships using barges also is planned for Port Canaveral, FL. The relative locations of other U.S. ports and operating LNG terminals suggest that LNG bunkering could be within reach of every port along the Eastern Seaboard and in the Gulf of Mexico. On the West Coast, the ports of Los Angeles and Long Beach, CA, are near the Costa Azul LNG terminal in Ensenada, MX. Seattle and Tacoma are adjacent to the proposed Tacoma LNG project. Since 2015, Jones Act coastal ship operators have taken steps to transition their fleets to use cleaner burning fuels, including LNG. Shippers of dry goods to Alaska, Hawaii, and Puerto Rico have taken delivery or have ordered LNG-fueled and LNG-capable vessels from U.S. shipyards in Philadelphia, PA, and Brownsville, TX. Another company operates five LNG-powered offshore supply vessels built in Gulfport, MS. Depending upon LNG conversions, the global LNG bunker fuel market could grow to several billion dollars by 2030. If U.S. LNG producers were to supply a significant share of this market—on the strength of comparatively low LNG production costs—LNG bunkering could increase demand for U.S. natural gas production, transportation, and liquefaction. Opportunities in LNG-related shipbuilding might be more limited, as most shipbuilding occurs overseas, although domestically-constructed LNG bunkering barges could be one area of economic growth. Finally, engineering and construction firms could benefit from new opportunities to develop port infrastructure for LNG storage and transfer. However, while vessel conversion to LNG fuel may increase demand for U.S.-produced natural gas, it partially could be offset by reduced demand for U.S.-produced crude oil or refined products. Furthermore, while LNG can reduce direct emissions from vessels, fugitive emissions and environmental impacts from natural gas production and transportation could reduce overall emissions benefits. While the LNG industry has experienced few accidents, the Coast Guard has been developing new standards to address unique safety and security risks associated with LNG in vessel operations. The overarching consideration about LNG bunkering in the United States is uncertainty about how the global shipping fleet will adapt to the IMO sulfur standards over time. This uncertainty complicates decisions related to both private investment and public policy. Although Congress has limited ability to influence global shipping, it could influence the growth of LNG bunkering through the tax code and regulation, or through policies affecting the LNG industry or domestic shipping industry as a whole. Evaluating the potential implications of LNG bunkering within the context of broader energy and environmental policies may become an additional consideration for Congress. If LNG bunkering expands significantly, Congress also may examine the adequacy of existing measures to ensure the safety and security of LNG vessels, storage, and related facilities.", "document_type": "crs"}
{"report": "The Constitution grants Congress the power to borrow money on the credit of the United States—one part of its power of the purs e—and thus mandates that Congress exercise control over federal debt. Control of debt policy provides Congress with one means of expressing views on appropriate fiscal policies. Before 1917 Congress typically controlled individual issues of debt. In September 1917, while raising funds for the United States' entry into World War I, Congress also imposed an aggregate limit on federal debt in addition to individual issuance limits. Over time, Congress granted Treasury Secretaries more leeway in debt management. In 1939, Congress agreed to impose an aggregate limit that gave the U.S. Treasury authority to manage the structure of federal debt. The statutory debt limit applies to almost all federal debt. The limit applies to federal debt held by the public (that is, debt held outside the federal government itself) and to federal debt held by the government's own accounts. Federal trust funds, such as Social Security, Medicare, Transportation, and Civil Service Retirement accounts, hold most of this internally held debt. For most federal trust funds, net inflows by law must be invested in special federal government securities. When holdings of those trust funds increase, federal debt subject to limit will therefore increase as well. The government's on-budget fiscal balance, which excludes the net surplus or deficit of the U.S. Postal Service and the Social Security program, does not directly affect debt held in government accounts. The change in debt held by the public is mostly determined by the government's surpluses or deficits. The net expansion of the federal government's balance sheet through loan programs also increases the government's borrowing requirements. Under federal budgetary rules, however, only the net subsidy cost of those loans is included in the calculation of deficits. The most recent suspension of the debt limit lapsed after March 1, 2019. The limit was then reset at $21.988 trillion, a level that accommodates federal obligations incurred during the suspension period. On March 4, 2019, the first business day after the debt limit suspension had lapsed, U.S. Treasury Secretary Steven Mnuchin invoked extraordinary authorities. Those extraordinary measures (described below in more detail), along with cash balances and incoming revenues, can be used to meet federal obligations in coming months. In anticipation of the lapse of the debt limit suspension, the U.S. Treasury had announced it would stop issuing state and local government securities (SLGs) on March 1, 2019. SLGs are used by state and local governments as one way of complying with IRS anti-arbitrage rules. Issuance of SLGs is expected to resume once the current debt limit episode is resolved. CBO estimates that Treasury could meet federal obligations until just before or just after October 1, 2019. One estimate suggested those resources would suffice to cover federal payments until August, if not later. Another estimate of an informed Treasury market observer suggests federal payments could be made until \"just before Labor Day,\" albeit while noting substantial uncertainties. The current size of federal deficits, which are now higher than those in previous years, or economic uncertainty could affect that timing. Changes in the federal tax system and Internal Revenue Service (IRS) operations could also add uncertainties to projections of Treasury cash flows. In late 2017 and early 2018 the debt limit issue was tied to consideration of funding measures for FY2018. On September 8, 2017, enactment of a continuing resolution (Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017; P.L. 115-56 ) suspended the debt limit through December 8, 2018. Once that suspension lapsed, extraordinary measures were used to meet federal obligations. The Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), enacted on February 9, 2018, included a provision (Section 30301) that suspended the debt limit through March 1, 2019. A section near the end of this report summarizes recent debt limit activity in more detail. In January 2019, the House adopted Rule XXVIII that when the House approves a budget resolution, a measure to suspend the debt limit for the remainder of the fiscal year would be automatically engrossed and transmitted to the Senate. In recent years, Congress has chosen to suspend the debt limit for a set amount of time instead of raising the debt limit by a fixed dollar amount. When a suspension ends, the debt limit is reestablished at a level that accommodates federal spending during the suspension period. The U.S. Treasury is thus left with minimal headroom under the debt limit after a suspension ends, leaving only a cash balance similar to that when the suspension began. Therefore, the Treasury Secretary typically invokes a set of extraordinary measures, which are described below. Congress has authorized the Treasury Secretary to invoke a \"debt issuance suspension period,\" which triggers the availability of extraordinary measures, which are special strategies to handle cash and debt management. Actions taken in the past include suspending sales of nonmarketable debt, postponing or downsizing marketable debt auctions, and withholding receipts that would be transferred to certain government trust funds. In particular, extraordinary strategies include suspending investments in Civil Service Retirement and Disability Fund (CSRDF) and the G-Fund of the Federal Employees' Retirement System (FERS), as well as redeeming a limited amount of CSRDF securities. The Treasury Secretary is also mandated to make those funds whole after the resolution of a debt limit episode. The amount of time that extraordinary measures allow the U.S. Treasury to extend its borrowing capacity depends on the pace of deficit spending, the timing of cash receipts and outlays, and other technical factors. Tax deadlines and processing dates for some federal disbursements are scheduled, but amounts of collections and outlays depend on decisions and actions of private entities and other federal agencies, which are more difficult to predict. The effects of recent tax changes ( P.L. 115-97 ) and the possibility that further changes could occur in the 116 th Congress could also affect revenue projections. Treasury cash flow projections are therefore subject to uncertainty, which complicates attempts to estimate how long extraordinary measures would enable the federal government to meet its financial obligations. Estimates calculated by others of when Treasury would reach the debt limit and how long extraordinary measures would extend federal borrowing capacity have typically been close to Treasury's estimates. The U.S. Treasury Inspector General reported in 2012 that \"the margin of error in these estimates at a 98 percent confidence level is plus or minus $18 billion for one week into the future and plus or minus $30 billion for two weeks into the future.\" An impending debt ceiling constraint presents more than one deadline. A first deadline is the exhaustion of borrowing capacity. The U.S. Treasury, however, could continue to meet obligations using available cash balances. As cash balances run down, however, other complications could emerge and Treasury's cash resources could fall below levels deemed prudent by outside advisors well before extraordinary measures were exhausted. Low cash balances could complicate federal debt management and Treasury auctions. The Government Accountability Office (GAO) has also noted that debt limit episodes generate severe strains for Treasury staff, especially when its room for maneuver is severely restricted. Finally, if the U.S. Treasury were to run out of cash, the Treasury Secretary would face difficult choices in how to comply simultaneously with the debt limit and the mandate to pay federal obligations in a timely fashion. Severe financial dislocation could result if the U.S. Treasury were unable to make timely payments. For example, repo lending arrangements, which rely heavily on Treasury securities for collateral, could become more expensive or could be disrupted. \"Repo\" is short for repurchase agreement, which provides a common means of secured lending among financial institutions. Repo lending rates rose sharply in early August 2011 during the 2011 debt limit episode, but fell to previous levels once that episode was resolved. The Federal Reserve Open Market Committee indicated in an October 16, 2013, discussion that \"in the event of delayed payments on Treasury securities,\" discount window and other operations would proceed \"under the usual terms.\" That statement has been taken to imply that the Federal Reserve would be \"prepared to backstop the Treasury market in the event of a political deadlock.\" In addition, the Federal Reserve Bank of New York issued a description of contingency plans in December 2013 in the event of Treasury payment delays, but warned that such measures \"only modestly reduce, not eliminate, the operational difficulties posed by a delayed payment on Treasury debt. Indeed, even with these limited contingency practices, a temporary delayed payment on Treasury debt could cause significant damage to, and undermine confidence in, the markets for Treasury securities and other assets.\" Table 1 presents debt limit changes over the past two decades. The debt limit was modified six times from 1993 through 1997. Two of those modifications were enacted to prevent the debt limit restriction from delaying payment of Social Security benefits in March 1996 before a broader increase in the debt was passed at the end of that month. After 1997, debt limit increases were unnecessary due to the appearance of federal surpluses that ran from FY1998 through FY2001. Since FY2002 the federal government has run persistent deficits, which have been ascribed to major tax cuts enacted in 2001 and 2003 and higher spending. Those deficits required a series of increases in the debt limit. Starting with passage of the BCA in August 2011, Congress has employed measures that have led to debt limit increases that occur some time after a law is enacted. Dates in the first column of Table 1 in general refer to dates of enactment, which do not match dates when debt limit increases have occurred. For instance, the debt limit was suspended when P.L. 113-83 was enacted on February 12, 2014, and was reestablished on March 16, 2015, when that suspension lapsed. One result of suspending the debt limit, as has been the practice in recent years, is that no fixed number appears in legislation and that a new debt limit level is set only when the suspension lapses. The 2011 debt limit episode attracted far more attention than other recent debt limit episodes. In mid-2011 several credit ratings agencies and investment banks expressed concerns about the consequences to the financial system and the economy if the U.S. Treasury were unable to fund federal obligations. Many economists and financial institutions stated that if the market associated Treasury securities with default risks, the effects on global capital markets could be significant. Debate during the 2011 debt limit episode reflected a growing concern with the fiscal sustainability of the federal government. While projections issued in 2011 indicated that federal deficits would shrink over the next half decade, deficits later in the decade were expected to rise. Without major changes in federal policies, the amount of federal debt would increase substantially. CBO has repeatedly warned that the current trajectory of federal borrowing is unsustainable and could lead to slower economic growth in the long run as debt rises as a percentage of GDP. Unless federal policies change, Congress would repeatedly face demands to raise the debt limit to accommodate the growing federal debt in order to provide the government with the means to meet its financial obligations. The next section provides a brief chronology of events from the 2011 debt limit episode. On May 16, 2011, U.S. Treasury Secretary Timothy Geithner announced that the federal debt had reached its statutory limit and declared a debt issuance suspension period, which would allow certain extraordinary measures to extend Treasury's borrowing capacity until about August 2, 2011. Had the U.S. Treasury exhausted its borrowing authority, it could have used cash balances to meet obligations for some period of time. Over the course of the 2011 debt limit episode Treasury estimates of when the debt limit would begin to bind and how long extraordinary measures would suffice to meet federal obligations shifted. For instance, in April 2011 the U.S. Treasury had projected that its borrowing capacity, even using extraordinary measures, would be exhausted by about July 8, 2011. The Treasury Secretary, in a letter to Congress dated May 2, 2011, had indicated that he would declare a debt issuance suspension period on May 16, unless Congress acted beforehand, which would allow certain extraordinary measures to extend Treasury's borrowing capacity until early August 2011. On July 1, 2011, the U.S. Treasury confirmed its view that its borrowing authority would be exhausted on August 2, the date cited in Treasury Secretary Geithner's May 16, 2011, letter that invoked the debt issuance suspension period. A bill ( H.R. 1954 ) to raise the debt limit to $16,700 billion was introduced on May 24 and was defeated in a May 31, 2011, House vote of 97 to 318. The House passed the Cut, Cap, and Balance Act of 2011 ( H.R. 2560 ; 234-190 vote) on July 19, 2011. The measure would have increased the statutory limit on federal debt from $14,294 billion to $16,700 billion once a proposal for a constitutional amendment requiring a balanced federal budget was transmitted to the states. On July 22, the Senate tabled the bill on a 51-46 vote. Some commentators in early 2011 suggested that cutting federal spending could slow the growth in federal debt enough to avoid an increase in the debt limit. The scale of required spending reductions, as of the middle of FY2011, would have been large. For example, at the start of the third quarter of FY2011 on April 1, 2011, federal debt was within $95 billion of its limit. According to CBO baseline estimates issued at the time, the expected deficit for the remainder of FY2011 would be about $570 billion. Reaching the end of FY2011 on September 30, 2011, without an increase in the debt limit or the use of extraordinary measures would have thus required a spending reduction of at least $570 billion, or about 85% of discretionary spending for the rest of that fiscal year. Some have suggested that the Fourteenth Amendment (Section 4), which states that \"(t)he validity of the public debt of the United States ... shall not be questioned,\" could provide the President with authority to ignore the statutory debt limit. President Obama rejected such claims, as did most legal analysts. On July 25, 2011, the Budget Control Act of 2011 was introduced in different forms by both House Speaker Boehner (House Substitute Amendment to S. 627 ) and Majority Leader Reid ( S.Amdt. 581 to S. 1323 ). Subsequently, on August 2, 2011, President Obama signed into law a substantially revised compromise measure (Budget Control Act, BCA; P.L. 112-25 ), following House approval by a vote of 269-161 on August 1, 2011, and Senate approval by a vote of 74-26 on August 2, 2011. This measure included numerous provisions aimed at deficit reduction, and would allow a series of increases in the debt limit of up to $2,400 billion ($2.4 trillion) subject to certain conditions. These provisions eliminated the need for further increases in the debt limit until early 2013. In particular, the BCA included major provisions that imposed discretionary spending caps, enforced by automatic spending reductions, referred to as a \"sequester\"; established a Joint Select Committee on Deficit Reduction, whose recommendations would be eligible for expedited consideration; required a vote on a joint resolution on a proposed constitutional amendment to mandate a balanced federal budget; and instituted a mechanism allowing for the President and Treasury Secretary to raise the debt ceiling, subject to congressional disapproval. The legislation provides a three-step procedure by which the debt limit can be increased. First, the debt limit was raised by $400 billion, to $14,694 billion on August 2, 2011, following a certification of the President that the debt was within $100 billion of its legal limit. A second increase of $500 billion occurred on September 22, 2011, which was also triggered by the President's certification of August 2. The second increase, scheduled for 50 days after that certification, was subject to a joint resolution of disapproval. Because such a resolution could be vetoed, blocking a debt limit increase would be challenging. The Senate rejected a disapproval measure ( S.J.Res. 25 ) on September 8, 2011, on a 45-52 vote. The House passed a disapproval measure ( H.J.Res. 77 ) on a 232-186 vote, although the Senate declined to act on that measure. The resulting increase brought the debt limit to $15,194 billion. In late December 2011, the debt limit came within $100 billion of its statutory limit, which triggered a provision allowing the President to issue a certification that would lead to a third increase of $1,200 billion. By design, that increase matched budget reductions slated to be made through sequestration and related mechanisms over the FY2013-FY2021 period. That increase was also subject to a joint resolution of disapproval. The President reportedly delayed that request to allow Congress to consider a disapproval measure. On January 18, 2012, the House passed such a measure ( H.J.Res. 98 ) on a 239-176 vote. The Senate declined to take up a companion measure ( S.J.Res. 34 ) and on January 26, 2012, voted down a motion to proceed (44-52) on the House-passed measure ( H.J.Res. 98 ), thus clearing the way for the increase, resulting in a debt limit of $16,394 billion. The third increase could also have been triggered in two other ways. A debt limit increase of $1,500 billion would have been permitted if the states had received a balanced budget amendment for ratification. A measure ( H.J.Res. 2 ) to accomplish that, however, failed to reach the constitutionally mandated two-thirds threshold in the House in a 261–165 vote held on November 18, 2011. The debt limit could also have been increased by between $1,200 billion and $1,500 billion had recommendations from the Joint Select Committee on Deficit Reduction, popularly known as the Super Committee, been reported to and passed by each chamber. If those recommendations had been estimated to achieve an amount between $1,200 billion and $1,500 billion, the debt limit increase would be matched to that figure. The Joint Select Committee, however, was unable to agree on a set of recommendations. On December 26, 2012, the U.S. Treasury stated that the debt would reach its limit on December 31 and that the Treasury Secretary would declare a debt issuance suspension period to authorize extraordinary measures (noted above, described below) that could be used to meet federal payments for approximately two months. As predicted, federal debt did reach its limit on December 31, when large biannual interest payments, in the form of Treasury securities, were made to certain trust funds. The U.S. Treasury stressed that these extraordinary measures would be exhausted more quickly than in recent debt limit episodes for various technical reasons. A January 14, 2013, letter from Treasury Secretary Geithner also estimated that extraordinary measures would be exhausted sometime between mid-February or early March 2013. CBO had previously estimated that federal debt would reach its limit near the end of December 2012, and that the extraordinary measures could be used to fund government activities until mid-February or early March 2013. During the 112 th Congress, Speaker John Boehner had stated that a future debt limit increase should be linked to spending cuts of at least the same magnitude, a position that reflects the structure of the Budget Control Act. House Republicans decided on January 18, 2013, to propose a three-month suspension of the debt limit tied to a provision that would delay Members' salaries in the event that their chamber of Congress had not agreed to a budget resolution. H.R. 325 , according to its sponsor, would allow Treasury to pay bills coming due before May 18, 2013. A new debt limit would then be set on May 19. The measure would also cause salaries of Members of Congress to be held in escrow \"(i)f by April 15, 2013, a House of Congress had not agreed to\" a budget resolution. Such a provision, however, could raise constitutional issues under the Twenty-Seventh Amendment. On January 23, 2013, the House passed H.R. 325 , which suspended the debt limit until May 19, 2013, on a 285-144 vote. The Senate passed the measure on January 31 on a 64-34 vote; it was then signed into law ( P.L. 113-3 ) on February 4. Once H.R. 325 was signed into law on February 4, the U.S. Treasury replenished funds that had been used to meet federal payments, thus resetting its ability to use extraordinary measures. As of February 1, 2013, the U.S. Treasury had used about $31 billion in extraordinary measures. Statutory language that grants the Treasury Secretary the authority to declare a \"debt issuance suspension period\" (DISP), which permits certain extraordinary measures, also requires that \"the Secretary of the Treasury shall immediately issue\" amounts to replenish those funds once a debt issuance suspension period (DISP) is over. A DISP extends through \"any period for which the Secretary of the Treasury determines for purposes of this subsection that the issuance of obligations of the United States may not be made without exceeding the public debt limit.\" Shortly after the declaration of a new debt issuance suspension period in February 2013, Jacob Lew was confirmed as Treasury Secretary, replacing Timothy Geithner. Once the debt limit suspension lapsed after May 18, 2013, the U.S. Treasury reset the debt limit at $16,699 billion, or $305 billion above the previous statutory limit. On May 20, 2013, the first business day after the expiration of the suspension, debt subject to limit was just $25 million below the limit. Some Members, as noted above, stated that H.R. 325 ( P.L. 113-3 ) was intended to prevent the U.S. Treasury from accumulating cash balances. The U.S. Treasury's operating cash balances at the start of May 20, 2013 ($34 billion), were well below balances ($60 billion) at the close of February 4, 2013, when H.R. 325 was enacted. Some experienced analysts had stated that the exact method by which the debt limit would be computed according to the provisions of P.L. 113-3 was not fully clear. The U.S. Treasury has not provided details of how it computed the debt limit after the suspension lapsed. Treasury Secretary Jacob Lew notified Congress on May 20, 2013, that he had declared a new debt issuance suspension period (DISP), triggering authorities that allow the Treasury Secretary to use extraordinary measures to meet federal obligations until August 2. On August 2, 2013, Secretary Lew notified Congress that the DISP would be extended to October 11, 2013. In those notifications, as well in other communications, Secretary Lew urged Congress to raise the debt limit in a \"timely fashion.\" How long the U.S. Treasury could have continued to pay federal obligations absent an increase in the debt limit depended on economic conditions, which affect tax receipts and spending on some automatic stabilizer programs, and the pace of federal spending. Stronger federal revenue collections and a slower pace of federal outlays in 2013 reduced the FY2013 deficit compared to previous years. CBO estimates for July 2013 put the total federal deficit at $606 billion in FY2013, well below the FY2012 deficit of $1,087 billion, implying a slower overall pace of borrowing. Special dividends from mortgage giants Fannie Mae and Freddie Mac also extended the U.S. Treasury's ability to meet federal obligations. In May 2013, the investment bank Goldman Sachs projected that, with the addition of the Fannie Mae dividend and an estimated postsuspension $16.70 trillion limit, federal borrowing capacity would be exhausted in early October. Estimates of Treasury cash flows are subject to substantial uncertainty. The U.S. Treasury Inspector General reported in 2012 that \"the margin of error in these estimates at a 98 percent confidence level is plus or minus $18 billion for one week into the future and plus or minus $30 billion for two weeks into the future.\" In September 2008, Fannie Mae and Freddie Mac entered voluntary conservatorship. As part of their separate conservatorship agreements, Treasury agreed to support Fannie Mae and Freddie Mac in return for senior preferred stock that would pay dividends. Losses for Fannie Mae and Freddie Mac while in conservatorship have totaled $123 billion, although each has been profitable since the start of 2012. For a profitable firm, some past losses can offset future tax liabilities and would be recognized on its balance sheet as a \"deferred tax asset\" under standard accounting practices. Fannie Mae and Freddie Mac wrote down the value of their tax assets because their return to profitability was viewed as unlikely. The return of Fannie Mae and Freddie Mac to profitability opened the possibility for a reversal of those writedowns. On May 9, 2013, Fannie Mae announced that it would reverse the writedown of its deferred tax assets. The Treasury agreements, as amended, set the dividend payments to a sweep (i.e., an automatic transfer at the end of a quarter) of Fannie Mae's and Freddie Mac's net worth. Thus a reversal of that writedown of the deferred tax assets triggered a payment of about $60 billion from Fannie Mae to the U.S. Treasury on June 28, 2013. The U.S. Treasury received $66.3 billion from Fannie Mae and Freddie Mac on that date. Fannie Mae stated that it would pay an additional $10.2 billion in September 2013. On August 7, 2013, Freddie Mac announced that it had not yet decided to write down its deferred tax assets of $28.6 billion. In May 2013, Secretary Lew had notified Congress that he expects the U.S. Treasury will be able to meet federal obligations until at least Labor Day. Some private estimates suggest that the U.S. Treasury, with the assistance of extraordinary measures, would probably be able to meet federal obligations until mid-October or November 2013. By comparison, in 2011, Treasury Secretary Geithner invoked authority to use extraordinary measures on May 16, 2011, which helped fund payments until the debt ceiling was raised on August 2, 2011. On August 26, 2013, Treasury Secretary Lew notified congressional leaders that the government would exhaust its ability to borrow in mid-October according to U.S. Treasury projections. At that point, the U.S. Treasury would have only an estimated $50 billion in cash to meet federal obligations. With that cash and incoming receipts, the U.S. Treasury would be able to meet obligations for some weeks after mid-October according to independent analysts, although projecting when cash balances would be exhausted is difficult. On September 25, 2013, Secretary Lew sent another letter to Congress with updated forecasts of the U.S. Treasury's fiscal situation. According to those forecasts, the U.S. Treasury would exhaust its borrowing capacity no later than October 17. At that point, the U.S. Treasury would have about $30 billion in cash balances on hand to meet federal obligations. At the close of business on October 8, 2013, the U.S. Treasury had an operating cash balance of $35 billion. On October 3, 2013, the U.S. Treasury issued a brief outlining potential macroeconomic effects of the prospect that the federal government would be unable to pay its obligations in a timely fashion. The brief provided data on how various measures of economic confidence, asset prices, and market volatility responded to the debt limit episode in the summer of 2011. In the absence of a debt limit increase, the cash balances on hand when the U.S. Treasury's borrowing capacity ran out would then dwindle. At the close of business on October 11, 2013, the U.S. Treasury's cash balance was $35 billion. Those low cash balances, however, could raise two complications even before that point. First, low cash balances could have complicated federal debt management and Treasury auctions in late October or early November. Yields for Treasury bills maturing after the October 17 date mentioned in Secretary Lew's September 25 letter have increased relative to other yields on other Treasury securities. This appeared to signal reluctance among some investors to hold Treasury securities that might be affected by debt limit complications. Second, repo lending, which relies heavily on Treasury securities for collateral, could become more expensive or could be disrupted. Repo lending rates rose sharply in early August 2011 during the 2011 debt limit episode, but fell to previous levels once that episode was resolved. In the past, some financial markets have reacted to impending debt limit deadlines, signaling concerns about the federal government's ability to meet obligations in a timely manner. In early October 2013, the U.S. Treasury issued a brief that outlined how various measures of economic confidence, asset prices, and market volatility responded to the debt limit episode in the summer of 2011, and the prospect that the federal government might not have been able to pay its obligations in a timely fashion. Some investors expressed reluctance to hold Treasury securities that might be affected by debt limit complications. Fidelity Investments, J.P. Morgan Investment Management Inc., and certain other funds stated in October 2013 that they had sold holdings of Treasury securities scheduled to mature or to have coupon payments between October 16 and November 6, 2013. In October 2013, yields for Treasury bills maturing in the weeks after October 17—when the U.S. Treasury's borrowing capacity was projected to be exhausted—rose sharply relative to yields on Treasury securities maturing in 2014. Figure 1 shows secondary market yields on Treasury bills set to mature after the projected date when the Treasury's borrowing capacity would be exhausted. The horizontal axis shows days before the end of the DISP, and the vertical scale shows basis points (bps). For instance, the yield for the Treasury bill maturing October 24, 2013, rose from close to zero to 46 bps on October 15, 2013. Those yields are about 10 times larger than for similar bills that mature in calendar year 2014. A four-week Treasury bill auctioned on October 8, 2013, sold with a yield of 35 bps. By contrast, a four-week bill sold on September 4, 2013, sold with a yield of 2 bps. After enactment of a debt limit measure ( H.R. 2775 ; P.L. 113-46 ) on October 16, 2013, however, those yields returned to their previous levels. Congressional consideration of federal debt policy raised several policy issues that were explored in hearings and in broader policy discussions. On January 22, 2013, the House Ways and Means Committee held hearings on the history of the debt limit and how past Congresses and Presidents have negotiated changes in the debt limit. On April 10, 2013, the House Ways and Means Subcommittee on Oversight held hearings on federal debt and fiscal management when the debt limit binds. The Joint Economic Committee held hearings on the economic costs of uncertainty linked to the debt limit on September 18, 2013. On October 10, 2013, the Senate Finance Committee held hearings on the debt limit and heard testimony from Treasury Secretary Jacob Lew. On the same morning, the Senate Banking Committee held hearings on the effects of a possible federal default on financial stability and economic growth, and heard testimony from heads of financial industry trade associations. On April 30, 2013, the House Ways and Means Committee reported H.R. 807 , which would grant the Treasury Secretary the authority to borrow to fund principal and interest payments on debt held by the public and the Social Security trust funds if the debt limit were reached. The Treasury Secretary would also have had to submit weekly reports to Congress after that authority were exercised. On May 9, 2013, the House passed and amended version of H.R. 807 . The House also passed a version of H.J.Res. 59 that incorporated the text of H.R. 807 on September 20. On September 27, the Senate passed an amended version of the measure that did not contain provisions from H.R. 807 . The Obama Administration indicated that it would veto H.R. 807 or H.J.Res. 59 containing similar provisions, were either to be approved by Congress. The October 2013 debt limit measure ( H.R. 2775 ; P.L. 113-46 ) contained no payment prioritization provisions. H.R. 807 would have affected one aspect of the U.S. Treasury's financial management of the Social Security program, but would not alter other aspects. If the debt limit were reached, the U.S. Treasury could still face constraints that could raise challenges in financial management. The U.S. Treasury is responsible for (1) making Social Security beneficiary payments; (2) reinvesting Social Security payroll taxes and retirement contributions in special Treasury securities held by the Social Security trust fund; and (3) paying interest to the Social Security trust funds, in the form of special Treasury securities, at the end of June and December. Those special Treasury securities, either funded via Social Security payroll receipts or biannual interest payments, are subject to the debt limit. Thus, sufficient headroom under the debt limit is needed to issue those special Treasury securities. If the debt limit were reached and extraordinary measures were exhausted, the Treasury Secretary's legal requirement to reinvest Social Security receipts by issuing special Treasury securities could at times be difficult to reconcile with his legal requirement not to exceed the statutory debt limit. On September 25, Treasury Secretary Lew notified Congress that the government would exhaust its borrowing capacity around October 17 according to updated estimates. At that point, the U.S. Treasury would have had a projected cash balance of only $30 billion to meet federal obligations. On October 16, 2013, Congress passed a continuing resolution (Continuing Appropriations Act, 2014; H.R. 2775 ; P.L. 113-46 ) that included a provision to allow a suspension of the debt limit. That measure passed the Senate on an 81-18 vote. The House then passed the measure on a 285-144 vote. The President signed the bill ( P.L. 113-46 ) early the next morning. The measure suspended the debt limit until February 8, 2014, once the President certified that the U.S. Treasury would be unable to meet existing commitments without issuing debt. The President sent congressional leaders a certification on October 17, 2013, to trigger a suspension of the debt limit through February 7, 2014. That suspension, however, was subject to a congressional resolution of disapproval. If a resolution of disapproval had been enacted, the debt limit suspension would end on that date. Specific expedited procedures in each chamber governed the consideration of the resolution of disapproval. The resolution, if passed, was subject to veto. A resolution of disapproval ( H.J.Res. 99 ) was passed in the House on October 20, 2013, on a 222-191 vote. A similar measure, S.J.Res. 26 , was not approved by the Senate, so the debt limit increase was not blocked. The debt limit suspension ended on February 7, and a limit was set to reflect the amount of debt necessary to fund government operations before the end of the suspension. The U.S. Treasury was precluded in P.L. 113-46 from accumulating excess cash reserves that might have allowed an extension of extraordinary measures. The debt limit provisions enacted in October 2013 resemble provisions enacted in 2011 and earlier in 2013. For example, the Budget Control Act of 2011 ( P.L. 112-25 ) also provided for a congressional resolution of disapproval of a debt limit increase. The suspension of the debt limit in H.R. 2775 resembles the suspension enacted in February 2013 ( H.R. 325 ; P.L. 113-3 ). Passage of the Continuing Appropriations Act, 2014 was preceded by other proposals to modify the debt limit. On October 8, 2013, Senate Majority Leader Reid introduced S. 1569 , a measure intended to ensure complete and timely payment of federal obligations. The measure would have extended the suspension of the debt limit enacted in February 2013 ( P.L. 113-3 ). On October 15, 2013, an announcement of a hearing on a proposal to amend the Senate amendment to H.J.Res. 59 appeared on the House Rules Committee website. That hearing, according to a subsequent announcement, was postponed that evening. The measure would extend the debt limit through February 15, 2014, and restrict the Treasury Secretary's ability to employ extraordinary measures through April 15, 2014. The measure would also extend discretionary funding at \"sequester levels\" through December 15, 2013. The resolution of the debt limit episode and the ending of the federal shutdown in October 2013 set up a subsequent episode in early 2014. In late November 2013, CBO issued an analysis of Treasury cash flows and available extraordinary measures. Treasury, according to those estimates, might exhaust its ability to meet federal obligations in March. Because Treasury cash flows can be highly uncertain during tax refund season, CBO stated that that date could arrive as soon as February 2014 or as late as early June. Goldman Sachs had estimated that Treasury would probably exhaust its headroom—the sum of projected cash balances and remaining borrowing authority under the debt limit—in mid to late March, but might in fortuitous circumstances be able to meet its obligations until June. While Goldman Sachs and other independent forecasters noted that that the U.S. Treasury might possibly avoid running out of headroom in late March or early April, waiting until mid-March to address the debt limit could have raised serious risks for the U.S. government's financial situation. As the end of the debt limit suspension neared, the U.S. Treasury continued to warn Congress of the consequences on not raising the debt limit. While the Treasury could again employ extraordinary measures after the suspension ended after February 7, 2014, its ability to continue meeting federal obligations would be limited by large outflows of cash resulting from individual income tax refunds. In December 2013, the U.S. Treasury had notified congressional leaders that according to its estimates, extraordinary measures would extend its borrowing authority \"only until late February or early March 2014.\" On January 22, 2014, Secretary Lew called for an increase in the debt limit before the end of debt limit suspension on February 7, 2014, or the end of February. In the first week of February 2014, Secretary Lew stated that the U.S. Treasury could not be certain that extraordinary measures would last beyond February 27, 2014. On February 7, 2014, the debt limit suspension ended and the U.S. Treasury reset the debt limit to $17,212 billion. On the same day, the U.S. Treasury also suspended sales of State and Local Government Series (SLGS), the first of its extraordinary measures. On February 10, Secretary Lew notified Congress that he had declared a debt issuance suspension period (DISP) that authorizes use of other extraordinary measures. In particular, during a DISP the Treasury Secretary is authorized to suspend investments in the Civil Service and Retirement and Disability Fund and the G Fund of the Federal Employees' Retirement System. The DISP was scheduled to last until February 27. Following the lapse of the debt limit suspension, Congress moved quickly to address the debt limit issue. On February 10, 2014, the House Rules Committee posted an amended version of S. 540 that would suspend the debt limit through March 15, 2015. The debt limit would be raised the following day by an amount tied to the amount of borrowing required by federal obligations during the suspension period. The U.S. Treasury would also be prohibited from creating a cash reserve above that level. The measure also would have reversed a 1% reduction in the cost-of-living adjustment for certain working-age military retirees that had been included in the Bipartisan Budget Act of 2013 (BBA; P.L. 113-67 ). In addition, sequestration of nonexempt mandatory spending would be extended from FY2023 to FY2024. CBO issued a cost estimate of the measure on February 11, 2014. On February 11, 2014, the House voted 221-201 to suspend the debt limit ( S. 540 ) through March 15, 2015. The amended measure included restrictions on Treasury debt management in the version reported by the Rules Committee, but omitted provisions to reverse reductions in cost-of-living adjustments to working-age military retiree pensions and an extension of nondefense mandatory sequestration. The Senate voted to concur in the House amendment the following day on a 55-43 vote. The President signed the measure ( P.L. 113-83 ) on February 15, 2014. Unlike previous measures that suspended the debt limit, a presidential certification was not required. A separate measure was also signed into law on the same day ( P.L. 113-82 ) to reverse reductions in cost-of-living adjustments to working-age military retiree pensions for those who entered the military before the beginning of 2014. The debt limit, which had been suspended through March 15, 2015, was reestablished the following day at $18,113 billion. The debt limit was raised, in essence, by the sum of payments made during the suspension period to meet federal obligations. Treasury Secretary Lew sent congressional leaders a letter on March 6, 2015, stating that Treasury would suspend issuance of State and Local Government Series (SLGS) bonds on March 13, 2015, the last business day during the current debt limit suspension. SLGS are used by state and local governments to manage certain intergovernmental funds in a way that complies with federal tax laws. Once the most recent debt limit suspension lapsed, Treasury Secretary Lew declared a Debt Issuance Suspension Period (DISP) on March 16, 2015, which empowered him to use extraordinary measures to meet federal fiscal obligations until July 30, 2015. On July 30, 2015, Treasury Secretary Lew sent congressional leaders a letter to invoke extraordinary powers again until the end of October. Secretary Lew indicated in a separate letter, sent the previous day, that those extraordinary measures would enable the U.S. Treasury to meet federal financial obligations \"for at least a brief additional period of time\" after the end of October. Secretary Lew sent another letter on September 10, 2015, that reiterated those points. In May 2015, the U.S. Treasury changed its cash management policy to adopt recommendations of the Treasury Borrowing Advisory Committee and an internal review. The new policy is intended to ensure that the U.S. Treasury could continue to meet federal obligations even if its market access were disrupted for a week or so. Treasury Secretary Lew noted that an event of the scale such as \"Hurricane Sandy, September 11, or a potential cyber-attack disruption\" might cause a lapse in market access. The new cash management policy does not affect the date when the debt limit might constrain the U.S. Treasury's ability to meet federal obligations. The U.S. Treasury's headroom under the debt limit consists of remaining amounts of funds available for extraordinary measures and available cash reserves. When federal receipts exceed federal outlays, that headroom expands, except for those receipts or outlays that are linked to intragovernmental accounts such as Social Security. The headroom gained by those receipts is exactly offset because Treasury must issue special securities to the appropriate intragovernmental trust fund, and those securities are subject to the debt limit. Conversely, when outlays are funded by such intragovernmental accounts, the increase in Treasury's headroom due to redemption of special securities is offset by Treasury's need to provide funding for that redemption either by drawing down cash balances or additional borrowing. On October 15, 2015, Secretary Lew stated that extraordinary measures would have been exhausted \"no later than\" November 3, 2015, although a relatively small cash reserve—projected at less than $30 billion—would be on hand. Secretary Lew had previously stated that extraordinary measures would be exhausted about November 5, 2015. Independent forecasts of when extraordinary measures would be exhausted were close to the date estimated by the U.S. Treasury. One private forecast estimated Treasury's headroom under the debt limit at $38 billion on November 5, 2015. CBO, according to an October 14, 2015, report, projected that \"Treasury will begin running a very low cash balance in early November, and the extraordinary measures will be exhausted and the cash balance entirely depleted sometime during the first half of November.\" Figure 2 shows one recent independent estimate of Treasury's headroom that shows Treasury's available resources falling below $50 billion after the first few days of November 2015. Previous independent estimates of when Treasury's borrowing capacity would be exhausted suggested that leaving the debt limit at its present level would suffice until the end of November or even early December. For example, CBO's August 2015 projections had put the estimated date of exhaustion somewhere between mid-November and early December 2015. Lower than expected tax receipts during the fall of 2015 and higher than expected federal trust fund investments pushed the date back from what outside forecasters had expected earlier in the year. For example, net issuance of Government Account Series securities—which includes special Treasury securities held by federal trust funds—was about $10 billion higher on the first day of FY2016 as compared to the first day of FY2015. On October 9, 2015, the U.S. Treasury issued a summary of debt balances that provided a more detailed view of its headroom under the debt limit. According to that summary, Treasury had used $355 billion of its available $369 billion in extraordinary measures as of October 7, 2015, leaving $14 billion to meet forthcoming obligations. Secretary Lew noted in previous correspondence with Congress that projections of Treasury's ability to meet federal obligations were subject to significant uncertainty due to the variability of federal tax collections and expenditure patterns. While the U.S. Treasury's payment calendar, tax due dates, and securities auction schedule are generally regular and predictable, the amounts paid or received on a given day can fluctuate substantially. Late on the night of October 26, 2015, text of the Bipartisan Budget Agreement of 2015 was issued. The proposal included a provision to suspend the debt limit until March 15, 2017. The debt limit would then come back into effect on the following day at a level reflecting the payment of federal obligations incurred during the suspension period. As with previous debt limit suspensions, the measure prohibits the U.S. Treasury from creating a cash reserve beyond amounts necessary to meet federal obligations during the suspension period. The Bipartisan Budget Act of 2015 would also increase statutory caps on discretionary spending for FY2016 and FY2017, along with measures aimed at offsetting those increases. On October 27, 2015, the House Rules Committee provided a summary of its provisions and put forth an amendment aimed at addressing certain scoring issues. The following day, the House concurred with a modified version of the Senate amendments to H.R. 1314 on a 266-167 vote. The Senate concurred with that version on October 30, 2015, on a 64-35 vote, sending the measure to the President, who signed it ( P.L. 114-74 ) on November 2, 2015. Enactment of the measure thus resolved the 2015 debt limit episode by suspending the debt limit until March 15, 2017. On September 10, 2015, the House Ways and Means Committee reported H.R. 692 , which would grant the Treasury Secretary the authority to borrow to fund principal and interest payments on debt held by the public. The measure resembles H.R. 807 , which was considered in 2013 and is discussed above. The House passed H.R. 692 on October 21, 2015, by a 235-194 vote. The House Ways and Means Committee also reported H.R. 3442 on the same date, which would require the Treasury Secretary to appear before the House Committee on Ways and Means and the Senate Committee on Finance during a debt limit episode and to submit a report on the federal debt. The U.S. Treasury submitted two reports to Congress on extraordinary measures used during the 2015 debt limit episode. The first described actions affecting the G Fund and the second described actions taken affecting the Civil Service Retirement and Disability Fund. In May 2015, Treasury officials announced a policy shift to maintain a larger cash balance—not less than approximately $150 billion in normal circumstances—that would suffice to meet federal obligations in the event of a week-long disruption of access to capital markets. During a November 2, 2016, meeting between Treasury officials and a panel of financiers, concerns were raised that the interaction of debt limit constraints in 2017 with changes in the structure of money market funds (MMFs) that have increased demand for Treasury bills could risk disruption of short-term funding markets. On March 7, 2017, CBO issued estimates that extraordinary measures could suffice to meet federal obligations until sometime in the fall of 2017. Such estimates are subject to substantial uncertainty due to changes in economic conditions, federal revenue flows, changes in the amounts and timing of federal payments, and other factors. On March 8, 2017, Treasury Secretary Mnuchin notified Congress that he would invoke authorities to use extraordinary measures after March 15, 2017, to ensure continued payment of federal obligations. On March 16, 2017, Secretary Mnuchin notified congressional leaders that he had indeed exercised those authorities. The debt limit on that date was reset at $19,809 billion. In testimony before Congress on May 24, 2017, Administration officials urged Congress to raise the debt limit before its summer recess. Office of Management and Budget (OMB) Director Mick Mulvaney stated that the federal receipts were coming in more slowly than projected, which could imply that Treasury's capacity to meet federal obligations could be exhausted sooner than previously projected. A Goldman Sachs analysis found, however, that some major categories of tax receipts had shown stronger growth. On July 28, 2017, Treasury Secretary Mnuchin sent a letter to Congress stating that extraordinary measures would be used until September 29, 2017. Secretary Mnuchin's letter did not state that Treasury's cash reserves or borrowing capacity would be exhausted on that date, but he did describe the need for legislative action by that date as \"critical.\" Others had estimated that the U.S. Treasury would likely be able to meet federal obligations until sometime in early October 2017. Treasury cash balances and borrowing capacity in mid-September, however, were projected to fall well below levels the U.S. Treasury has considered prudent to maintain operations in the face of significant adverse events. On September 3, 2017, Secretary Mnuchin argued that a debt limit measure should be tied to legislation responding to Hurricane Harvey, which caused extensive damage in southeast Texas. On September 6, 2017, outlines of an agreement on the debt limit and a continuing resolution were announced between President Trump and congressional leaders. The following day, the Senate, by an 80-17 vote, passed an amended version of H.R. 601 , which included an amendment ( S.Amdt. 808 ) to suspend the debt limit and provide funding for government operations through December 8, 2017, as well as supplemental appropriations for disaster relief. On September 8, 2017, the House agreed on a 316-90 vote to the amended measure, which the President signed the same day (Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017; P.L. 115-56 ). Treasury Secretary Mnuchin invoked authorities to use extraordinary measures once that debt limit suspension lapsed after December 8, 2017. He extended those authorities on January 30, 2018, through the end of February and urged congressional leaders to act on the debt limit before that time. Secretary Mnuchin did not indicate that the U.S. Treasury would exhaust its borrowing capacity or cash reserves by that date. CBO estimates and independent analysts had suggested that those extraordinary measures would have lasted until sometime in early March. In July 2018, Secretary Mnuchin issued a report to Congress detailing its use of extraordinary measures. On February 9, 2018, enactment of the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ) resolved the debt limit issue until 2019. BBA 2018 employed a legislative vehicle, H.R. 1892 , which had passed in both the House and Senate in different forms in 2017. On February 9, 2018, differences in the amended measure were resolved by a vote of 71 to 28 in the Senate and a vote of 240 to 186 in the House. BBA 2018 also increased statutory caps on discretionary spending, extended funding of the government until March 23, 2018 (Section 20101), and funded certain disaster assistance programs, among other provisions. Section 30301 of BBA 2018 suspended the debt limit through March 1, 2019, as noted above. The limit was reset on March 2, 2019, at $21.988 trillion, a level that accommodates federal obligations during the suspension period. On the following Monday—March 4, 2019—Treasury Secretary Steven Mnuchin invoked extraordinary authorities by declaring a debt issuance suspension period, during which the U.S. Treasury will then use its cash balances, incoming revenues, and extraordinary measures to meet federal obligations. CBO estimated that Treasury would have financial resources to meet federal obligations until just before or just after October 1, 2019. Some private forecasts have estimated Treasury's resources would be exhausted around August 2019.", "summary": "The Constitution grants Congress the power to borrow money on the credit of the United States—one part of its power of the purse—and thus mandates that Congress exercise control over federal debt. Control of debt policy has at times provided Congress with a means of raising concerns regarding fiscal policies. Debates over federal fiscal policy have been especially animated in the past decade, in part because of the accumulation of federal debt in the wake of the 2007-2008 financial crisis and subsequent recession. Rising debt levels, along with continued differences in views of fiscal policy, led to a series of contentious debt limit episodes in recent years. The most recent suspension of the debt limit lapsed after March 1, 2019. The limit was then reset at $21.988 trillion, a level that accommodates federal obligations incurred during the suspension period. U.S. Treasury Secretary Steven Mnuchin invoked extraordinary authorities on March 4, 2019. CBO estimates that Treasury could meet federal obligations until just before or just after October 1, 2019. One private estimate suggests Treasury could cover federal payments until mid-August, if not later. Such estimates are subject to considerable uncertainty. The 2011 debt limit episode was resolved on August 2, 2011, when President Obama signed the Budget Control Act of 2011 (BCA; S. 365; P.L. 112-25). The BCA included provisions aimed at deficit reduction and allowing the debt limit to rise in three stages, the latter two subject to congressional disapproval. Once the BCA was enacted, a presidential certification triggered a $400 billion increase. A second certification led to a $500 billion increase on September 22, 2011, and a third, $1,200 billion increase took place on January 28, 2012. Federal debt again reached its limit on December 31, 2012. Extraordinary measures were again used to allow payment of government obligations until February 4, 2013, when H.R. 325, which suspended the debt limit until May 19, 2013, was signed into law (P.L. 113-3), which reset extraordinary measures. On October 16, 2013, enactment of a continuing resolution (H.R. 2775; P.L. 113-46) resolved a funding lapse and suspended the debt limit through February 7, 2014. On February 15, 2014, a measure to suspend the debt limit (S. 540; P.L. 113-83) through March 15, 2015, was enacted. On November 2, 2015, the Bipartisan Budget Act of 2015 (BBA2015; H.R. 1314; P.L. 114-74) was enacted, which suspended the debt limit through March 15, 2017, and relaxed some discretionary spending limits. On March 16, 2017, the debt limit was reset at $19,809 billion, and Treasury Secretary Mnuchin notified Congress that he had invoked authorities to use extraordinary measures. On September 6, 2017, an agreement on the debt limit and a continuing resolution was announced between President Trump and congressional leaders. Two days later a measure (P.L. 115-56) was enacted to implement that agreement, which included a suspension of the debt limit through December 8, 2017. Once that suspension lapsed—with a new debt limit set at $20,456 billion—Treasury Secretary Mnuchin invoked authorities to employ extraordinary measures, which estimates had suggested would last until early March. The debt limit issue was addressed when the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123) was enacted on February 9, 2018. Section 30301 of the BBA 2018 suspended the debt limit through March 1, 2019. Total federal debt increases when the government sells debt to the public to finance budget deficits, which adds to debt held by the public, or when the federal government issues debt to certain government accounts, such as the Social Security, Medicare, and Transportation trust funds, in exchange for their reported surpluses—which adds to debt held by government accounts; or when new federal loans outpace loan repayments. The sum of debt held by the public and debt held by government accounts is the total federal debt. Surpluses reduce debt held by the public, while deficits raise it.", "document_type": "crs"}
{"report": "Established in 1953, the Small Business Administration's (SBA's) origins can be traced to the Great Depression of the 1930s and World War II, when concerns about unemployment and war production were paramount. The SBA assumed some of the functions of the Reconstruction Finance Corporation (RFC), which had been created by the federal government in 1932 to provide funding for businesses of all sizes during the Depression and later financed war production. During the early 1950s, the RFC was disbanded following charges of political favoritism in the granting of loans and contracts. In 1953, Congress passed the Small Business Act (P.L. 83-163), which authorized the SBA. The act specifies that the SBA's mission is to promote the interests of small businesses to enhance competition in the private marketplace: It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation. The SBA currently administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in these programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs. This report provides an overview of the SBA's programs and funding. It also references other CRS reports that examine the SBA's programs in greater detail. The SBA's FY2020 congressional budget justification document includes funding and program costs for the following programs and offices: 1. entrepreneurial development programs (including Small Business Development Centers, Women's Business Centers, SCORE, Entrepreneurial Education, Native American Outreach, PRIME, the State Trade Expansion Program, and veterans' programs); 2. disaster assistance; 3. capital access programs (including the 7(a) loan guaranty program, the 504/Certified Development Company [CDC] loan guaranty program, the Microloan program, International Trade and Export Promotion programs, and lender oversight); 4. contracting programs (including the 7(j) Management and Technical Assistance program, the 8(a) Minority Small Business and Capital Ownership Development program, the Historically Underutilized Business Zones [HUBZones] program, the Prime Contract Assistance program, the Women's Business program, the Subcontracting program, and the Surety Bond Guarantee program); 5. regional and district offices (counseling, training, and outreach services); 6. the Office of Inspector General (OIG); 7. capital investment programs (including the Small Business Investment Company [SBIC] program, the New Market Venture Capital program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators); 8. the Office of Advocacy; and 9. executive direction programs (the National Women's Business Council, Office of Ombudsman, and Faith-Based Initiatives). Table 1 shows the SBA's estimated costs in FY2019 for these program areas. Program costs often differ from new budget authority provided in annual appropriations acts because the SBA has specified authority to carry over appropriations from previous fiscal years. The SBA also has limited, specified authority to shift appropriations among various programs. SBA disaster assistance is provided in the form of loans, not grants, which must be repaid to the federal government. The SBA's disaster loans are unique in two respects: they are the only loans made by the SBA that (1) go directly to the ultimate borrower and (2) are not limited to small businesses. SBA disaster loans are available to individuals, businesses, and nonprofit organizations in declared disaster areas. About 80% of the SBA's direct disaster loans are issued to individuals and households (renters and property owners) to repair and replace homes and personal property. In recent years, the SBA Disaster Loan Program has been the subject of regular congressional and media attention because of concerns expressed about the time it takes the SBA to process disaster loan applications. The SBA disbursed $401 million in disaster loans in FY2016, $889 million in FY2017, and $3.59 billion in FY2018. The SBA Disaster Loan Program includes the following categories of loans for disaster-related losses: home disaster loans, business physical disaster loans, and economic injury disaster loans. Homeowners, renters, and personal property owners located in a declared disaster area (and in contiguous counties) may apply to the SBA for loans to help recover losses from a declared disaster. Only victims located in a declared disaster area (and contiguous counties) are eligible to apply for disaster loans. Disaster declarations are \"official notices recognizing that specific geographic areas have been damaged by floods and other acts of nature, riots, civil disorders, or industrial accidents such as oil spills.\" Five categories of declarations put the SBA Disaster Loan Program into effect. These include two types of presidential major disaster declarations as authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) and three types of SBA declarations. The SBA's Home Disaster Loan Program falls into two categories: personal property loans and real property loans. These loans are limited to uninsured losses. The maximum term for SBA disaster loans is 30 years, but the law restricts businesses with credit available elsewhere to a maximum 7-year term. The SBA sets the installment payment amount and corresponding maturity based upon each borrower's ability to repay. A personal property loan provides a creditworthy homeowner or renter with up to $40,000 to repair or replace personal property items, such as furniture, clothing, or automobiles, damaged or lost in a disaster. These loans cover only uninsured or underinsured property and primary residences and cannot be used to replace extraordinarily expensive or irreplaceable items, such as antiques or recreational vehicles. Interest rates vary depending on whether applicants are able to obtain credit elsewhere. For applicants who can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants who cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year. A creditworthy homeowner may apply for a real property loan of up to $200,000 to repair or restore his or her primary residence to its predisaster condition. The loans may not be used to upgrade homes or build additions, unless upgrades or changes are required by city or county building codes. The interest rate for real property loans is determined in the same way as it is determined for personal property loans. Several types of loans, discussed below, are available to businesses and nonprofit organizations located in counties covered by a presidential disaster declaration. In certain circumstances, the SBA will also make these loans available when a governor, the Secretary of Agriculture, or the Secretary of Commerce makes a disaster declaration. Physical disaster loans are available to almost any nonprofit organization or business. Other business disaster loans are limited to small businesses. Any business or nonprofit organization, regardless of size, can apply for a physical disaster business loan of up to $2 million for repairs and replacements to real property, machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. Physical disaster loans for businesses may use up to 20% of the verified loss amount for mitigation measures in an effort to prevent loss from a similar disaster in the future. Nonprofit organizations that are rejected or approved by the SBA for less than the requested amount for a physical disaster loan are, in some circumstances, eligible for grants from the Federal Emergency Management Agency (FEMA). For applicants that can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants that cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year. Economic injury disaster loans (EIDLs) are limited to small businesses as defined by the SBA's size regulations, which vary from industry to industry. If the Secretary of Agriculture designates an agriculture production disaster, small farms and small cooperatives are eligible. EIDLs are available in the counties included in a presidential disaster declaration and contiguous counties. The loans are designed to provide small businesses with operating funds until those businesses recover. The maximum loan is $2 million, and the terms are the same as personal and physical disaster business loans. The loan can have a maturity of up to 30 years and has an interest rate of 4% or less. The SBA's entrepreneurial development (ED) noncredit programs provide a variety of management and training services to small businesses. Initially, the SBA provided its own management and technical assistance training programs. Over time, the SBA has come to rely increasingly on third parties to provide that training. The SBA receives appropriations for seven ED programs and two ED initiatives: Small Business Development Centers (SBDCs); the Microloan Technical Assistance Program; Women Business Centers (WBCs); SCORE; the Program for Investment in Microentrepreneurs (PRIME); Veterans Programs (including Veterans Business Outreach Centers, Boots to Business, Veteran Women Igniting the Spirit of Entrepreneurship [VWISE], Entrepreneurship Bootcamp for Veterans with Disabilities, and Boots to Business: Reboot); the Native American Outreach Program (NAO); the Entrepreneurial Development Initiative (Regional Innovation Clusters); and the Entrepreneurship Education Initiative. FY2019 appropriations for these programs are $131 million for SBDCs, $31 million for the Microloan Technical Assistance Program, $18.5 million for WBCs, $11.7 million for SCORE, $5 million for PRIME, $12.7 million for Veterans Programs, $2 million for NAO, $5 million for the Entrepreneurial Development Initiative (Regional Innovation Clusters), and $3.5 million for the Entrepreneurship Education Initiative. Four additional programs are provided recommended funding in appropriations acts under ED programs, but are discussed in other sections of this report because of the nature of their assistance: (1) the SBA's Growth Accelerators Initiative ($2 million in FY2019) is a capital investment program and is discussed in the capital access programs section; (2) the SBA's 7(j) Technical Assistance Program ($2.8 million in FY2019) provides contacting assistance and is discussed in the contracting programs section; (3) the National Women's Business Council ($1.5 million in FY2019) is a bipartisan federal advisory council and is discussed in the executive direction programs section; and (4) the State Trade Expansion Program (STEP, $18 million in FY2019) provides grants to states to support export programs that assist small business concerns. STEP is discussed in the capital access programs' international trade and export promotion programs subsection. The SBA reports that over 1 million aspiring entrepreneurs and small business owners receive training from an SBA-supported resource partner each year. Some of this training is free, and some is offered at low cost. SBDCs provide free or low-cost assistance to small businesses using programs customized to local conditions. SBDCs support small business in marketing and business strategy, finance, technology transfer, government contracting, management, manufacturing, engineering, sales, accounting, exporting, and other topics. SBDCs are funded by grants from the SBA and matching funds. There are 63 lead SBDC service centers, one located in each state (four in Texas and six in California), the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and American Samoa. These lead SBDC service centers manage more than 900 SBDC outreach locations. The SBA's Microloan Technical Assistance program is part of the SBA's Microloan program but receives a separate appropriation. It provides grants to Microloan intermediaries to offer management and technical training assistance to Microloan program borrowers and prospective borrowers. There are currently 147 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico. WBCs are similar to SBDCs, except they concentrate on assisting women entrepreneurs. There are currently 121 WBCs, with at least one WBC in most states and territories. SCORE was established on October 5, 1964, by then-SBA Administrator Eugene P. Foley as a national, volunteer organization, uniting more than 50 independent nonprofit organizations into a single, national nonprofit organization. SCORE's 320 chapters and more than 800 branch offices are located throughout the United States and partner with more than 11,000 volunteer counselors, who are working or retired business owners, executives, and corporate leaders, to provide management and training assistance to small businesses. PRIME provides SBA grants to nonprofit microenterprise development organizations or programs that have \"a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; an intermediary; a microenterprise development organization or program that is accountable to a local community, working in conjunction with a state or local government or Indian tribe; or an Indian tribe acting on its own, if the Indian tribe can certify that no private organization or program referred to in this paragraph exists within its jurisdiction.\" The SBA's Office of Veterans Business Development (OVBD) administers several management and training programs to assist veteran-owned businesses, including 22 Veterans Business Outreach Centers which provide \"entrepreneurial development services such as business training, counseling and resource partner referrals to transitioning service members, veterans, National Guard & Reserve members and military spouses interested in starting or growing a small business.\" The SBA's Office of Native American Affairs provides management and technical educational assistance to Native Americans (American Indians, Alaska natives, native Hawaiians, and the indigenous people of Guam and American Samoa) to start and expand small businesses. The SBA reports that \"regional innovation clusters are on-the-ground collaborations between business, research, education, financing and government institutions that work to develop and grow the supply chain of a particular industry or related set of industries in a geographic region.\" The SBA has supported the Entrepreneurial Development Initiative (Regional Innovation Clusters) since FY2009, and the initiative has received recommended appropriations from Congress since FY2010. The SBA's Entrepreneurship Education initiative provides assistance to high-growth small businesses in underserved communities through the Emerging Leaders initiative and the SBA Learning Center. The Emerging Leaders initiative is a seven‐month executive leader education series consisting of \"more than 100 hours of specialized training, technical support, access to a professional network, and other resources to strengthen their businesses and promote economic development.\" At the conclusion of the training, \"participants produce a three‐year strategic growth action plan with benchmarks and performance targets that help them access the necessary support and resources to move forward for the next stage of business growth.\" The Learning Center is the SBA's primary online training service, which offers free online courses on business planning, marketing, government contracting, accounting, and social media, providing learners an \"opportunity to access entrepreneurship education resources through toolkits, fact sheets, infographic tip sheets, instructor guides, and audio content.\" The SBA has authority to make direct loans but, with the exception of disaster loans and loans to Microloan program intermediaries, has not exercised that authority since 1998. The SBA indicated that it stopped issuing direct business loans primarily because the subsidy rate was \"10 to 15 times higher\" than the subsidy rate for its loan guaranty programs. Instead of making direct loans, the SBA guarantees loans issued by approved lenders to encourage those lenders to provide loans to small businesses \"that might not otherwise obtain financing on reasonable terms and conditions.\" With few exceptions, to qualify for SBA assistance, an organization must be both a business and small. To participate in any of the SBA programs, a business must meet the Small Business Act's definition of small business . This is a business that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; is not dominant in its field on a national basis; and does not exceed size standards established, and updated periodically, by the SBA. The business may be a sole proprietorship, partnership, corporation, or any other legal form. The SBA uses two measures to determine if a business is small: SBA-derived industry specific size standards or a combination of the business's net worth and net income. For example, businesses participating in the SBA's 7(a) loan guaranty program are deemed small if they either meet the SBA's industry-specific size standards for firms in 1,047 industrial classifications in 18 subindustry activities described in the North American Industry Classification System (NAICS) or do not have more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carryover losses) for the two full fiscal years before the date of the application. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. The SBA's industry size standards vary by industry, and they are based on one of the following four measures: the firm's (1) average annual receipts in the previous three years, (2) number of employees, (3) asset size, or (4) for refineries, a combination of number of employees and barrel per day refining capacity. Historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small and average annual receipts for most other industries. The SBA's size standards are designed to encourage competition within each industry; they are derived through an assessment of the following four economic factors: \"average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms.\" The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors \"as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses.\" The SBA provides loan guarantees for small businesses that cannot obtain credit elsewhere. Its largest loan guaranty programs are the 7(a) loan guaranty program, the 504/CDC loan guaranty program, international trade and export promotion programs, and the Microloan program. The SBA's loan guaranty programs require personal guarantees from borrowers and share the risk of default with lenders by making the guaranty less than 100%. In the event of a default, the borrower owes the amount contracted less the value of any collateral liquidated. The SBA can attempt to recover the unpaid debt through administrative offset, salary offset, or IRS tax refund offset. Most types of businesses are eligible for loan guarantees, but a few are not. A list of ineligible businesses (such as insurance companies, real estate investment firms, firms involved in financial speculation or pyramid sales, and businesses involved in illegal activities) is contained in 13 C.F.R. Section 120.110. With one exception, nonprofit and charitable organizations are also ineligible. As shown in the following tables, most of these programs charge fees to help offset program costs, including costs related to loan defaults. In most instances, the fees are set in statute. For example, for 7(a) loans with a maturity exceeding 12 months, the SBA is authorized to charge lenders an up-front guaranty fee of up to 2% for the SBA guaranteed portion of loans of $150,000 or less, up to 3% for the SBA guaranteed portion of loans exceeding $150,000 but not more than $700,000, and up to 3.5% for the SBA guaranteed portion of loans exceeding $700,000. Lenders with a 7(a) loan that has a SBA guaranteed portion in excess of $1 million can be charged an additional fee not to exceed 0.25% of the guaranteed amount in excess of $1 million. 7(a) loans are also subject to an ongoing servicing fee not to exceed 0.55% of the outstanding balance of the guaranteed portion of the loan. In addition, lenders are authorized to collect fees from borrowers to offset their administrative expenses. In an effort to assist small business owners, in FY2019, the SBA is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reducing the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019; and pursuant to P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program (up to and including $350,000). The SBA's goal is to achieve a zero subsidy rate, meaning that the appropriation of budget authority for new loan guaranties is not required. As shown in Table 2 , the SBA's fees and proceeds from loan liquidations do not always generate sufficient revenue to cover loan losses, resulting in the need for additional appropriations to account for the shortfall. However, \"due to the continued improvement in performance in the loan portfolio,\" the SBA did not request funding for credit subsidies for the 7(a) and 504/CDC loan guaranty programs in FY2016-FY2019. The 7(a) loan guaranty program is named after the section of the Small Business Act that authorizes it. These are loans made by SBA lending partners (mostly banks but also some other financial institutions) and partially guaranteed by the SBA. In FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25.4 billion. In FY2018, there were 1,810 active lending partners providing 7(a) loans. The 7(a) program's current guaranty rate is 85% for loans of $150,000 or less and 75% for loans greater than $150,000 (up to a maximum guaranty of $3.75 million—75% of $5 million). Although the SBA's offer to guarantee a loan provides an incentive for lenders to make the loan, lenders are not required to do so. Lenders are permitted to charge borrowers fees to recoup specified expenses and are allowed to charge borrowers \"a reasonable fixed interest rate\" or, with the SBA's approval, a variable interest rate. The SBA uses a multistep formula to determine the maximum allowable fixed interest rate for all 7(a) loans (with the exception of the Export Working Capital Program and Community Advantage loans) and periodically publishes that rate and the maximum allowable variable interest rate in the Federal Register . Maximum interest rates allowed on variable-rate 7(a) loans are pegged to either the prime rate, the 30-day London Interbank Offered Rate (LIBOR) plus 3%, or the SBA optional peg rate, which is a weighted average of rates that the federal government pays for loans with maturities similar to the guaranteed loan. The allowed spread over the prime rate, LIBOR base rate, or SBA optional peg rate depends on the loan amount and the loan's maturity (under seven years or seven years or more). The adjustment period can be no more than monthly and cannot change over the life of the loan. Table 3 provides information on the 7(a) program's key features, including its eligible uses, maximum loan amount, loan maturity, fixed interest rates, and guarantee fees. The 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress program (for loans of $350,000 or less), the Export Express program (for loans of up to $500,000 for entering or expanding an existing export market), and the Community Advantage pilot program (for loans of $250,000 or less). The SBA also has a Small Loan Advantage program (for loans of $350,000 or less), but it is currently being used as the 7(a) program's model for processing loans of $350,000 or less and exists as a separate, specialized program in name only. The SBAExpress program was established as a pilot program by the SBA on February 27, 1995, and made permanent through legislation, subject to reauthorization, in 2004 ( P.L. 108-447 , the Consolidated Appropriations Act, 2005). The program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guarantee on loans. It provides a 50% loan guarantee on loan amounts of $350,000 or less. The loan proceeds can be used for the same purposes as the 7(a) program, except participant debt restructuring cannot exceed 50% of the project and may be used for revolving credit. The program's fees and loan terms are the same as the 7(a) program, except the term for a revolving line of credit cannot exceed seven years. The Community Advantage pilot program began operations on February 15, 2011, and is limited to mission-focused lenders targeting underserved markets. Originally scheduled to cease operations on March 15, 2014, the program has been extended several times and is currently scheduled to operate through September 30, 2022. As of September 12, 2018, there were 113 approved CA lenders, 99 of which were actively making and servicing CA loans. The SBA placed a moratorium, effective October 1, 2018, on accepting new CA lender applications, primarily as a means to mitigate the risk of future loan defaults. Lenders must receive SBA approval to participate in these 7(a) specialized programs. In addition to the 7(a) loan guaranty program, the SBA has special purpose loan guaranty programs for small businesses adjusting to the North American Free Trade Agreement (NAFTA), to support Employee Stock Ownership Program trusts, pollution control facilities, and working capital. Community Adjustment and Investment Program. The Community Adjustment and Investment Program (CAIP) uses federal funds to pay the fees on 7(a) and 504/CDC loans to businesses located in communities that have been adversely affected by NAFTA. Employee Trusts. The SBA will guarantee loans to Employee Stock Ownership Plans (ESOPs) that are used either to lend money to the employer or to purchase control from the owner. ESOPs must meet regulations established by the IRS, Department of the Treasury, and Department of Labor. These are 7(a) loans. Pollution Control. In 1976, the SBA was provided authorization to guarantee the payment of rentals or other amounts due under qualified contracts for pollution control facilities. P.L. 100-590 , the Small Business Reauthorization and Amendment Act of 1988, eliminated the revolving fund for pollution control guaranteed loans and transferred its remaining funds to the SBA's business loan and investment revolving fund. Since 1989, loans for pollution control have been guaranteed under the 7(a) loan guaranty program. CAPLines. CAPLines are five special 7(a) loan guaranty programs designed to meet the requirements of small businesses for short-term or cyclical working capital. The maximum term is five years. The 504/CDC loan guaranty program uses Certified Development Companies (CDCs), which are private, nonprofit corporations established to contribute to economic development within their communities. Each CDC has its own geographic territory. The program provides long-term, fixed-rate loans for major fixed assets such as land, structures, machinery, and equipment. Program loans cannot be used for working capital, inventory, or repaying debt. A commercial lender provides up to 50% of the financing package, which is secured by a senior lien. The CDC's loan of up to 40% is secured by a junior lien. The SBA backs the CDC with a guaranteed debenture. The small business must contribute at least 10% as equity. To participate in the program, small businesses cannot exceed $15 million in tangible net worth and cannot have average net income of more than $5 million for two full fiscal years before the date of application. Also, CDCs must intend to create or retain one job for every $75,000 of the debenture ($120,000 for small manufacturers) or meet an alternative job creation standard if they meet any one of 15 community or public policy goals. In FY2018, the SBA approved 5,874 504/CDC loans totaling nearly $4.8 billion. Table 4 summarizes the 504/CDC loan guaranty program's key features. Although any of SBA's loan guaranty programs can be used by firms looking to begin exporting or expanding their current exporting operations, the SBA has three loan programs that specifically focus on trade and export promotion: 1. Export Express loan program provides working capital or fixed asset financing for firms that will begin or expand exporting. It offers a 90% guaranty on loans of $350,000 or less and a 75% guaranty on loans of $350,001 to $500,000. 2. Export Working Capital loan program provides financing to support export orders or the export transaction cycle, from purchase order to final payment. It offers a 90% guaranty of loans up to $5 million. 3. International Trade loan program provides long-term financing to support firms that are expanding because of growing export sales or have been adversely affected by imports and need to modernize to meet foreign competition. It offers a 90% guaranty on loans up to $5 million. In many ways, the SBA's trade and export promotion loan programs share similar characteristics with other SBA loan guaranty programs. For example, the Export Express program resembles the SBAExpress program. The SBAExpress program shares several characteristics with the standard 7(a) loan guarantee program except that the SBAExpress program has an expedited approval process, a lower maximum loan amount, and a smaller percentage of the loan guaranteed. Similarly, the Export Express program shares several of the characteristics of the standard International Trade loan program, such as an expedited approval process in exchange for a lower maximum loan amount ($500,000 compared with $5 million) and a lower percentage of guaranty. In addition, the SBA administers grants through the State Trade Expansion Program (STEP), which are awarded to states to execute export programs that assist small business concerns (such as a trade show exhibition, training workshops, or a foreign trade mission). Initially, the STEP program was authorized for three years and appropriated $30 million annually in FY2011 and FY2012. Congress approved $8 million in appropriations for STEP in FY2014, $17.4 million in FY2015, and $18 million annually since FY2016. The Microloan program provides direct loans to qualified nonprofit intermediary Microloan lenders that, in turn, provide \"microloans\" of up to $50,000 to small businesses and nonprofit child care centers. Microloan lenders also provide marketing, management, and technical assistance to Microloan borrowers and potential borrowers. The program was authorized in 1991 as a five-year demonstration project and became operational in 1992. It was made permanent, subject to reauthorization, by P.L. 105-135 , the Small Business Reauthorization Act of 1997. Although the program is open to all small businesses, it targets new and early stage businesses in underserved markets, including borrowers with little to no credit history, low-income borrowers, and women and minority entrepreneurs in both rural and urban areas who generally do not qualify for conventional loans or other, larger SBA guaranteed loans. In FY2018, 5,459 small businesses received a Microloan, totaling $76.8 million. The average Microloan was $14,071 and the average interest rate was 7.6%. Table 5 summarizes the Microloan program's key features. Several SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts. These include various prime contracting programs; subcontracting programs; and other assistance (e.g., contracting technical training assistance, the federal goaling program, federal Offices of Small and Disadvantaged Business Utilization, and the Surety Bond Guarantee program). Several contracting programs allow small businesses to compete only with similar firms for government contracts or receive sole-source awards in circumstances in which such awards could not be made to other firms. These programs, which give small businesses a chance to win government contracts without having to compete against larger and more experienced companies, include the following: 8(a) Program. The 8(a) Minority Small Business and Capital Ownership Development Program (named for the section of the Small Business Act from which it derives its authority) is for businesses owned by persons who are socially and economically disadvantaged. In addition, an individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter. A firm certified by the SBA as an 8(a) firm is eligible for set-aside and sole-source contracts. The SBA also provides technical assistance and training to 8(a) firms. Firms may participate in the 8(a) Program for no more than nine years. In FY2017, the federal government awarded $27.2 billion to 8(a) firms. About $16.4 billion of that amount was awarded with an 8(a) preference ($8 billion through an 8(a) set-aside and $8.4 billion through an 8(a) sole-source award). About $4.8 billion was awarded to an 8(a) firm in open competition with other firms. The remaining $6 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, women-owned small businesses, and service-disabled veteran-owned small businesses). Historically Underutilized Business Zone Program. This program assists small businesses located in Historically Underutilized Business Zones (HUBZones) through set-asides, sole-s ource awards, and price evaluation preferences in full and open competitions. The determination of whether an area is a HUBZone is based upon criteria specified in 13 C.F.R. Section 126.103. To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone. In FY2017, the federal government awarded $7.53 billion to HUBZone-certified small businesses. About $1.90 billion of that amount was awarded with a HUBZone preference ($1.49 billion through a HUBZone set-aside, $65.3 million through a HUBZone sole-source award, and $346.9 million through a HUBZone price-evaluation preference). About $1.53 billion was awarded to HUBZone-certified small businesses in open competition with other firms. The remaining $4.10 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses). Service-Disabled Veteran-Owned Small Business Program. This program assists service-disabled veteran-owned small businesses through set-asides and sole-source awards. For purposes of this program, veterans and service-related disabilities are defined as they are under the statutes governing veterans affairs. In FY2017, the federal government awarded $18.2 billion to service-disabled veteran-owned small businesses. About $6.8 billion of that amount was awarded through a service-disabled veteran-owned small business set aside award. About $4.3 billion of that amount was awarded to a service-disabled veteran-owned small business in open competition with other firms. The remaining $7.1 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, 8(a) firms, and women-owned small businesses). Women-Owned Small Business Program. Under this program, contracts may be set aside for economically disadvantaged women-owned small businesses in industries in which women are underrepresented and women-owned small businesses in industries in which women are substantially underrepresented. Also, federal agencies may award sole-source contracts to women-owned small businesses so long as the award can be made at a fair and reasonable price, and the anticipated value of the contract is below $4 million ($6.5 million for manufacturing contracts). In FY2017, the federal government awarded $21.3 billion to women owned small businesses. About $648.9 million of that amount was awarded with a women owned small business preference ($580.5 million through a women owned small business set-aside and $68.4 million through a women owned small business sole-source award). About $7.0 billion of that amount was awarded to a women owned small business in open competition with other firms. The remaining $13.7 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, 8(a) firms, and service-disabled veteran-owned small businesses). Other small businesses. Agencies may also set aside contracts or make sole-source awards to small businesses not participating in any other program under certain conditions. Other federal programs promote subcontracting with small disadvantaged businesses (SDBs). SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups. Individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence). Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do. Federal agencies must negotiate \"subcontracting plans\" with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs \"have an equitable opportunity to compete for subcontracts.\" Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract or give contractors \"monetary incentives\" to subcontract with SDBs. As of March 25, 2019, the SBA's Dynamic Small Business Search database included 2,338 SBA-certified SDBs and 122,281 self-certified SDBs. The SBA's 7(j) Management and Technical Assistance program provides \"a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities.\" Eligible individuals and businesses include \"8(a) certified firms, small disadvantaged businesses, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals.\" In FY2018, the 7(j) Management and Technical Assistance program assisted 6,483 small businesses. The SBA's Surety Bond Guarantee program is designed to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. The program guarantees individual contracts of up to $6.5 million and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee ranges from not to exceed 80% to not to exceed 90% of the surety's loss if a default occurs. In FY2018, the SBA guaranteed 10,800 bid and final surety bonds with a total contract value of nearly $6.5 billion. A surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. The surety bond reduces the risk associated with contracting. Surety bonds are viewed as a means to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and are considered to be at greater risk of failing to comply with the contract's terms and conditions. Since 1978, federal agency heads have been required to establish federal procurement contracting goals, in consultation with the SBA, \"that realistically reflect the potential of small business concerns\" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting these goals to the SBA. In 1988, Congress authorized the President to annually establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. Congress required the government-wide minimum participation goal for small businesses to be \"not less than 20% of the total value of all prime contract awards for each fiscal year\" and \"not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year\" for small businesses owned and controlled by socially and economically disadvantaged individuals. Each federal agency was also directed to \"have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency.\" The SBA was required to report to the President annually on the attainment of these goals and to include this information in an annual report to Congress. The SBA negotiates the goals with each federal agency and establishes a \"small business eligible\" baseline for evaluating the agency's performance. The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., nonappropriated funds), contracts not covered by Federal Acquisition Regulations, acquisitions on behalf of foreign governments, and contracts not reported in the Federal Procurement Data System (such as contracts valued below $10,000 and government procurement card purchases). These exclusions typically account for 18% to 20% of all federal prime contracts each year. The SBA then evaluates the agencies' performance against their negotiated goals annually, using data from the Federal Procurement Data System—Next Generation, managed by the U.S. General Services Administration, to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually. Over the years, federal government-wide procurement contracting goals have been established for small businesses generally ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, and P.L. 105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997), small businesses owned and controlled by socially and economically disadvantaged individuals ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988), women ( P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994), small businesses located within a HUBZone ( P.L. 105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997), and small businesses owned and controlled by a service disabled veteran ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999). The current federal small business contracting goals are at least 23% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses, 3% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses, and 3% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses. Although there are no punitive consequences for not meeting the small business procurement goals, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings. As shown in Table 6 , the FY201 7 Small Business Goaling Report , using data in the Federal Procurement Data System, indicates that federal agencies met the federal contracting goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017. Federal agencies awarded 23.88% of the value of their small business eligible contracts ($442.5 billion) to small businesses ($105.7 billion), 9.10% to small disadvantaged businesses ($40.2 billion), 4.71% to women-owned small businesses ($20.8 billion), 1.65% to HUBZone small businesses ($7.3 billion), and 4.05% to service-disabled veteran-owned small businesses ($17.9 billion). The percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017 is also provided in the table for comparative purposes. Government agencies with procurement authority have an Office of Small and Disadvantaged Business Utilization (OSDBU) to advocate within the agency for small businesses, as well as assist small businesses in their dealings with federal agencies (e.g., obtaining payment). As mentioned previously, the SBA provides funding to third parties, such as SBDCs, to provide management and training services to small business owners and aspiring entrepreneurs. The SBA also provides management, training, and outreach services to small business owners and aspiring entrepreneurs through its 68 district offices. These offices are overseen by the SBA Office of Field Operations and 10 regional offices. SBA district offices conduct more than 20,000 outreach events annually with stakeholders and resource partners that include \"lender training, government contracting, marketing events in emerging areas, and events targeted to high-growth entrepreneurial markets, such as exporting.\" SBA district offices focus \"on core SBA programs concerning contracting, capital, technical assistance, and exporting.\" They also perform annual program eligibility and compliance reviews on 100% of the 8(a) business development firms in the SBA's portfolio and each year conduct on-site examinations of about 10% of all HUBZone certified firms (529 in FY2018) to validate compliance with the HUBZone program's geographic requirement for principal offices. The Office of Inspector General's (OIG's) mission is \"to improve SBA management and effectiveness, and to detect and deter fraud in the Agency's programs.\" It serves as \"an independent and objective oversight office created within the SBA by the Inspector General Act of 1978 [P.L. 95-452], as amended.\" The Inspector General, who is nominated by the President and confirmed by the Senate, directs the office. The Inspector General Act provides the OIG with the following responsibilities: \"promote economy, efficiency, and effectiveness in the management of SBA programs and supporting operations; conduct and supervise audits, investigations, and reviews relating to the SBA's programs and support operations; detect and prevent fraud, waste and abuse; review existing and proposed legislation and regulations and make appropriate recommendations; maintain effective working relationships with other Federal, State and local governmental agencies, and nongovernmental entities, regarding the mandated duties of the Inspector General; keep the SBA Administrator and Congress informed of serious problems and recommend corrective actions and implementation measures; comply with the audit standards of the Comptroller General; avoid duplication of Government Accountability Office (GAO) activities; and report violations of Federal criminal law to the Attorney General.\" The SBA has several programs to improve small business access to capital markets, including the Small Business Investment Company program, the New Market Venture Capital Program (now inactive), two special high technology contracting programs (the Small Business Innovative Research and Small Business Technology Transfer programs), and the growth accelerators initiative. The Small Business Investment Company (SBIC) program enhances small business access to venture capital by stimulating and supplementing \"the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply.\" The SBA works with 305 privately owned and managed SBICs licensed by the SBA to provide financing to small businesses with private capital the SBIC has raised and with funds the SBIC borrows at favorable rates because the SBA guarantees the debenture (loan obligation). SBICs provide equity capital to small businesses in various ways, including by purchasing small business equity securities (e.g., stock, stock options, warrants, limited partnership interests, membership interests in a limited liability company, or joint venture interests); making loans to small businesses, either independently or in cooperation with other private or public lenders, that have a maturity of no more than 20 years; purchasing debt securities from small businesses, which may be convertible into, or have rights to purchase, equity in the small business; and subject to limitations, providing small businesses a guarantee of their monetary obligations to creditors not associated with the SBIC. The SBIC program currently has invested or committed about $30.1 billion in small businesses, with the SBA's share of capital at risk about $14.3 billion. In FY2018, the SBA committed to guarantee $2.52 billion in SBIC small business investments. SBICs invested another $2.98 billion from private capital for a total of $5.50 billion in financing for 1,151 small businesses. The now inactive New Market Venture Capital (NMVC) program encourages equity investments in small businesses in low-income areas that meet specific statistical criteria established by regulation. The program operates through public-private partnerships between the SBA and newly formed NMVC investment companies and existing Specialized Small Business Investment Companies (SSBICs) that operate under the Small Business Investment Company program. The NMVC program's objective is to serve the unmet equity needs of local entrepreneurs in low-income areas by providing developmental venture capital investments and technical assistance, helping to create quality employment opportunities for low-income area residents, and building wealth within those areas. The SBA's role is essentially the same as with the SBIC program. The SBA selects participants for the NMVC program, provides funding for their investments and operational assistance activities, and regulates their operations to ensure public policy objectives are being met. The SBA requires the companies to provide regular performance reports and have annual financial examinations by the SBA. The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance (which is composed of the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' active unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. The Small Business Innovation Research (SBIR) program is designed to increase the participation of small, high technology firms in federal research and development (R&D) endeavors, provide additional opportunities for the involvement of minority and disadvantaged individuals in the R&D process, and result in the expanded commercialization of the results of federally funded R&D. Current law requires that every federal department with an R&D budget of $100 million or more establish and operate a SBIR program. Currently, 11 federal agencies participate in the SBIR program. A set percentage of that agency's applicable extramural R&D budget—originally set at not less than 0.2% in FY1983 and currently not less than 3.2%—is to be used to support mission-related work in small businesses. Agency SBIR efforts involve a three-phase process. During Phase I, awards of up to $163,952 for six months are made to evaluate a concept's scientific or technical merit and feasibility. The project must be of interest to and coincide with the mission of the supporting organization. Projects that demonstrate potential after the initial endeavor may compete for Phase II awards of up to $1.09 million, lasting one to two years. Phase II awards are for the performance of the principal R&D by the small business. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. Federal dollars may be used if the government perceives that the final technology or technique will meet public needs. Eight departments and three other federal agencies currently have SBIR programs, including the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, and Transportation; the Environmental Protection Agency; the National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF). Each agency's SBIR activity reflects that organization's management style. Individual departments select R&D interests, administer program operations, and control financial support. Funding can be disbursed in the form of contracts, grants, or cooperative agreements. Separate agency solicitations are issued at established times. The SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their SBIR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities. The Small Business Technology Transfer program (STTR) provides funding for research proposals that are developed and executed cooperatively between a small firm and a scientist in a nonprofit research organization and meet the mission requirements of the federal funding agency. Up to $163,952 in Phase I financing is available for approximately one year to fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology. Phase II awards of up to $1.09 million may be made for two years, during which time the developer performs R&D work and begins to consider commercial potential. Agencies may issue an award exceeding these award guidelines by no more than 50%. Only Phase I award winners are considered for Phase II. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. The small business must find funding in the private sector or other non-STTR federal agency. The STTR program is funded by a set-aside, initially set at not less than 0.05% in FY1994 and now at not less than 0.45%, of the extramural R&D budget of departments that spend more than $1 billion per year on this effort. The Departments of Energy, Defense, and Health and Human Services participate in the STTR program, as do NASA and NSF. The SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their STTR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities. The SBA describes growth accelerators as \"organizations that help entrepreneurs start and scale their businesses.\" Growth accelerators are typically run by experienced entrepreneurs and help small businesses access seed capital and mentors. The SBA claims that growth accelerators \"help accelerate a startup company's path towards success with targeted advice on revenue growth, job, and sourcing outside funding.\" The SBA's Growth Accelerator Initiative began in FY2014 when Congress recommended in its appropriations report that the initiative be provided $2.5 million. Congress subsequently recommended that it receive $4 million in FY2015, $1 million in FY2016, FY2017, and FY2018, and $2 million in FY2019. The Growth Accelerator Initiative provides $50,000 matching grants each year to universities and private sector accelerators \"to support the development of accelerators and their support of startups in parts of the country where there are fewer conventional sources of access to capital (i.e., venture capital and other investors).\" The SBA's Office of Advocacy is \"an independent voice for small business within the federal government.\" The Chief Counsel for Advocacy, who is nominated by the President and confirmed by the Senate, directs the office. The Office of Advocacy's mission is to \"encourage policies that support the development and growth of American small businesses\" by intervening early in federal agencies' regulatory development process on proposals that affect small businesses and providing Regulatory Flexibility Act compliance training to federal agency policymakers and regulatory development officials; producing research to inform policymakers and other stakeholders on the impact of federal regulatory burdens on small businesses, to document the vital role of small businesses in the economy, and to explore and explain the wide variety of issues of concern to the small business community; and fostering a two-way communication between federal agencies and the small business community. The SBA's executive direction programs consist of the National Women's Business Council, the Office of Ombudsman, and Faith-Based Initiatives. The National Women's Business Council is a bipartisan federal advisory council created to serve as an independent source of advice and counsel to the President, Congress, and the SBA on economic issues of importance to women business owners. The council's mission \"is to promote bold initiatives, policies, and programs designed to support women's business enterprises at all stages of development in the public and private sector marketplaces—from start-up to success to significance.\" The National Ombudsman's mission \"is to assist small businesses when they experience excessive or unfair federal regulatory enforcement actions, such as repetitive audits or investigations, excessive fines, penalties, threats, retaliation or other unfair enforcement action by a federal agency.\" The Office of Ombudsman works with federal agencies that have regulatory authority over small businesses to provide a means for entrepreneurs to comment about enforcement activities and encourage agencies to address those concerns promptly. It also receives comments from small businesses about unfair federal compliance or enforcement activities and refers those comments to the Inspector General of the affected agency in appropriate circumstances. In addition, the National Ombudsman files an annual report with Congress and affected federal agencies that rates federal agencies based on substantiated comments received from small business owners. Affected agencies are provided an opportunity to comment on the draft version of the annual report to Congress before it is submitted. The SBA sponsors several faith-based initiatives For example, the SBA, in cooperation with the National Association of Government Guaranteed Lenders (NAGGL), created the Business Smart Toolkit, \"a ready-to-use workshop toolkit that equips faith-based and community organizations to help new and aspiring entrepreneurs launch and build businesses that are credit ready.\" During the 111 th Congress P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA) provided the SBA an additional $730 million in temporary funding, including $375 million to subsidize fees for the SBA's 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all regular 7(a) loans through September 30, 2010, or when appropriated funding for the subsidies and loan modification was exhausted. P.L. 111-240 , the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks with less than $10 billion in assets to increase their lending to small businesses (about $4.0 billion was issued) and a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs. The act also provided the SBA an additional $697.5 million; including $510 million to continue the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. During the 112 th Congress, the SBA's statutory authorization expired (on July 31, 2011). Since then, the SBA has been operating under authority provided by annual appropriations acts. Prior to July 31, 2011, the SBA's authorization had been temporarily extended 15 times since 2006. P.L. 112-239 , the National Defense Authorization Act for Fiscal Year 2013, increased the SBA's surety bond limit from $2 million to $6.5 million (and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary); required the SBA to oversee and establish standards for most federal mentor-protégé programs and establish a mentor-protégé program for all small business concerns; required the SBA's Chief Counsel for Advocacy to enter into a contract with an appropriate entity to conduct an independent assessment of the small business procurement goals, including an assessment of which contracts should be subject to the goals; and addressed the SBA's recent practice of combining size standards within industrial groups as a means to reduce the complexity of its size standards by requiring the SBA to make available a justification when establishing or approving a size standard that the size standard is appropriate for each individual industry classification. During the 113 th Congress, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased the SBA's SBIC program's annual authorization amount to $4 billion from $3 billion. During the 114 th Congress P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made permanent the SBA's administrative decision to waive the SBAExpress loan program's one time, up-front loan guaranty fee for veterans (and their spouse). The act also increased the 7(a) loan program's FY2015 authorization limit from $18.75 billion to $23.5 billion (later increased to $26.5 billion). P.L. 114-88 , the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE After Disaster Act of 2015), includes several provisions designed to assist individuals and small businesses affected by Hurricane Sandy in 2012, and, among other things, authorizes the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area; authorizes SBDCs to provide assistance to small businesses outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is in a presidentially declared major disaster area; and temporarily increases, for three years, the minimum disaster loan amount for which the SBA may require collateral, from $14,000 to $25,000 (or, as under existing law, any higher amount the SBA determines appropriate in the event of a disaster). P.L. 114-92 , the National Defense Authorization Act for Fiscal Year 2016, includes a provision that expands the definition of a Base Realignment and Closure Act (BRAC) military base closure area under the HUBZone program to include the lands within the external boundaries of the closed base and the census tract or nonmetropolitan county in which the lands of the closed base are wholly contained, intersect it, or are contiguous to it. This change is designed to make it easier for businesses located in those areas to meet the HUBZone program's requirement that at least 35% of its employees reside in a HUBZone area. The act also extends BRAC base closure area HUBZone eligibility from five years to not less than eight years, provides HUBZone eligibility to qualified disaster areas, and adds Native Hawaiian Organizations to the list of HUBZone eligible small business concerns. Starting one year from enactment (effective November 25, 2016), the act also adds requirements concerning the pledge of assets by individual sureties participating in the SBA's Surety Bond Guarantee Program and increases the guaranty rate from not less than 70% to not less than 90% for preferred sureties participating in that program. P.L. 114-113 , the Consolidated Appropriations Act, 2016, expands the projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs, generally limits refinancing under this provision to no more than 50% of the dollars loaned under the 504/CDC program during the previous fiscal year, and increases the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million. The act also provided the 7(a) loan program a FY2016 authorization limit of $26.5 billion. P.L. 114-125 , the Trade Facilitation and Trade Enforcement Act of 2015, renamed the \"State Trade and Export Promotion\" grant initiative to the \"State Trade Expansion Program.\" P.L. 114-125 also reformed some of the program's procedures and provided $30 million in annual authorization for STEP grants from FY2016 through FY2020. In terms of program administration, P.L. 114-125 allows the SBA's Associate Administrator (AA) for International Trade to give priority to STEP proposals from states that have a relatively small share of small businesses that export or would assist rural, women-owned, and socially and economically disadvantaged small businesses and small business concerns. P.L. 114-328 , the National Defense Authorization Act for Fiscal Year 2017, authorizes the SBA to establish different size standards for various types of agricultural enterprises (previously statutorily set at not more than $750,000 in annual receipts), standardizes definitions used by the SBA and the Department of Veterans Affairs concerning service-disabled veteran owned small businesses, requires the SBA to track companies that outgrow or no longer qualify for SBA assistance due to the receipt of a federal contract or being purchased by another entity after an initial federal contract is awarded, and, among other provisions, clarifies the duties of the Offices of Small and Disadvantaged Utilization within federal agencies. During the 115 th Congress P.L. 115-31 , the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion in FY2017 from $26.5 billion in FY2016. P.L. 115-56 , the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017, provided the SBA an additional $450 million for disaster assistance. P.L. 115-123 , the Bipartisan Budget Act of 2018, provided the SBA an additional $1.652 billion for disaster assistance and $7.0 million to the SBA's OIG for disaster assistance oversight. P.L. 115-141 , the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion in FY2018. The act also relaxed requirements on Microloan intermediaries that prohibited them from spending more than 25% of their technical assistance grant funds on prospective borrowers and more than 25% of those grant funds on contracts with third parties to provide that technical assistance by increasing those percentages to 50%. P.L. 115-189 , the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit. The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year. P.L. 115-232 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019, included provisions originally in H.R. 5236 , the Main Street Employee Ownership Act of 2018, to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives. The act clarifies that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership. The act also directs the SBA to create outreach programs and an interagency working group to promote lending to ESOPs and cooperatives. During the 116 th Congress P.L. 116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30.0 billion in FY2019. The SBA's received an appropriation of $887.604 million for FY2015, $871.042 million for FY2016, $1.337 billion for FY2017, $2.360 billion for FY2018, and $715.370 million for FY2019. As shown in Table 8 , the SBA's FY2019 appropriation of $715.37 million includes $267.50 million for salaries and expenses, $247.70 million for entrepreneurial development and noncredit programs, $155.15 million for business loan administration, $4.0 million for business loan credit subsidies (for the Microloan program), $21.9 million for Office of Inspector General, $9.12 million for the Office of Advocacy, and $10.0 million for disaster assistance.", "summary": "The Small Business Administration (SBA) administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in the SBA's loan, venture capital, training, and contracting programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs. This report provides an overview of the SBA's programs, including entrepreneurial development programs (including Small Business Development Centers, Women's Business Centers, SCORE, and Microloan Technical Assistance); disaster assistance; capital access programs (including the 7(a) loan guaranty program, the 504/Certified Development Company loan guaranty program, the Microloan program, International Trade and Export Promotion programs, and lender oversight); contracting programs (including the 8(a) Minority Small Business and Capital Ownership Development Program, the Historically Underutilized Business Zones [HUBZones] program, the Service-Disabled Veteran-Owned Small Business Program, the Women-Owned Small Business [WOSB] Federal Contract Program, and the Surety Bond Guarantee Program); SBA regional and district offices; the Office of Inspector General; the Office of Advocacy; and capital investment programs (including the Small Business Investment Company program, the New Markets Venture Capital program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators). The report also discusses recent programmatic changes resulting from the enactment of legislation (such as P.L. 111-5, the American Recovery and Reinvestment Act of 2009, P.L. 111-240, the Small Business Jobs Act of 2010, P.L. 114-38, the Veterans Entrepreneurship Act of 2015, P.L. 114-88, the Recovery Improvements for Small Entities After Disaster Act of 2015 [RISE After Disaster Act of 2015], P.L. 115-123, the Bipartisan Budget Act of 2018, and P.L. 115-189, the Small Business 7(a) Lending Oversight Reform Act of 2018). In addition, it provides an overview of the SBA's budget and references other CRS reports that examine these programs in greater detail.", "document_type": "crs"}
{"report": "The Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , hereinafter the Stafford Act) authorizes the President to issue a major disaster declaration in response to natural or man-made incidents that overwhelm state, local, or tribal capacities. The declaration makes a wide range of federal activities available to support state and local efforts to respond and recover from the incident. Major disaster declarations also authorize the Federal Emergency Management Agency (FEMA) to provide grant assistance to state, local, and tribal governments, residences, and certain private nonprofit (PNP) facilities that provide critical services. Businesses that suffer uninsured loss as a result of a major disaster declaration are not eligible for FEMA grant assistance, and grant assistance from other federal sources is limited. On some occasions, Congress has provided assistance to businesses through the Community Development Block Grant (CDBG) program. The CDBG program provides loans and grants to eligible businesses to help them recover from disasters as well as grants intended to attract new businesses to the disaster-stricken area. In a few cases, CDBG has also been used to compensate businesses and workers for lost wages or revenues. CDBG assistance, however, is not available for all major disasters. Rather, it is used by Congress on a case-by-case basis in response to large-scale disasters. The United States Department of Agriculture and the Department of Commerce are also authorized to provide assistance to certain types of businesses such as agricultural producers or fisheries. While these programs are important sources of assistance following a disaster, they are generally limited in scope (available for only certain types of businesses) or provide limited grant amounts. Most businesses will need to apply for a Small Business Administration (SBA) disaster loan if they want assistance from the federal government for uninsured loss resulting from a disaster. SBA is authorized to provide grants to SBA resource partners, including Small Business Development Centers, Women's Business Centers, and SCORE (formerly the Service Corps of Retired Executives), to provide training and other technical assistance to small businesses affected by a disaster, but is not authorized to provide direct grant assistance to businesses. As indicated above, federal assistance to businesses that suffer uninsured loss as a result of a disaster is mainly limited to SBA disaster loans. Disaster loans address certain types of loss and fall into two categories: (1) Business Physical Disaster Loans, and (2) Economic Injury Disaster Loans (EIDL). If Congress were to replace SBA business disaster loans with a grant program, it might consider providing grants for similar types of loss. Alternatively, Congress might implement a small business disaster grant program and continue to provide loan assistance through the SBA. If that is the case, it might consider how the small business disaster grant program would complement the existing loan program. The following sections describe SBA business disaster loans in more detail. Business Physical Disaster Loans are available to almost any business located in a declared disaster area. Business Physical Disaster Loans provide businesses up to $2 million to repair or replace damaged physical property including machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. Damaged vehicles normally used for recreational purposes may be repaired or replaced with SBA loan proceeds if the borrower can submit evidence that the vehicles were used for business purposes. Businesses may also apply up to 20% of the verified loss amount for mitigation measures (e.g., grading or contouring of land, relocating or elevating utilities or mechanical equipment, building retaining walls, safe rooms or similar structures designed to protect occupants from natural disasters, or installing sewer backflow valves) in an effort to prevent loss should a similar disaster occur in the future. Interest rates for Business Physical Disaster Loans cannot exceed 8% per annum or 4% per annum if the business cannot obtain credit elsewhere. Borrowers generally pay equal monthly installments of principal and interest starting five months from the date of the loan. Business Physical Disaster Loans can have maturities up to 30 years. EIDLs are available to businesses located in a declared disaster area, that have suffered substantial economic injury, are unable to obtain credit elsewhere, and are defined as small by SBA size regulations. Size standards vary according to many factors including industry type, average firm size, and start-up costs and entry barriers. Small agricultural cooperatives and most private and nonprofit organizations that have suffered substantial economic injury as the result of a declared disaster are also eligible for EIDLs. Businesses can secure both an EIDL and a Business Physical Disaster loan to rebuild, repair, and recover from economic loss. The combined loan amount cannot exceed $2 million. Interest rate ceilings are statutorily set at 4% per annum or less and loans can have maturities up to 30 years. The following sections outline some of the arguments for and against implementing a business disaster grant program including the rationale for keeping the current federal business disaster policy the same. Throughout the years, Congress has expressed interest and concern for businesses recovering from disasters. More recently, Congress has contemplated whether grants should be made available to small businesses after major disasters. Advocates of a small business disaster grant program might argue that providing grants would address three areas of congressional concern: (1) equity, (2) small business vulnerability to disasters, and (3) protecting the economy. Over the years some have questioned why residences, nonprofit groups, and state and local governments are eligible for disaster grants but not small businesses. Some view the policy as being unfair to businesses. Providing disaster grants to businesses, they argue, would remove this disparity and make federal disaster policy more equitable and uniform across all sectors. Opponents of providing small business disaster grants might object to the equity argument by pointing out that businesses benefit indirectly from grants provided to state, local, and tribal governments. For instance, repairing and replacing damaged roads and bridges, debris removal, and utility restoration are commonly needed for successful business operations. It is notable too that FEMA reimburses state and local governments for debris removal—even on commercial property. Small business disaster grant advocates could also argue that studies suggest that small businesses are particularly vulnerable to disasters and many fail to fully recover. While reports vary on the number of small businesses that fail after a disaster, even the low estimates could be considered significant. According to FEMA, \"roughly 40-60% of small businesses fail to reopen following a disaster.\" The Institute for Business and Home Safety found that 25% of businesses that close following a disaster never reopen. Businesses that do recover often take a long time to resume operations. A study on businesses in New Orleans recovering from Hurricane Katrina found that 12% of businesses remained closed 26 months after the storm. The same study indicated that smaller businesses had lower reopening probabilities than larger ones. And while SBA provides low-interest disaster loans with loan maturities up to 30 years for uninsured loss, some see a 30-year loan as an additional burden to full recovery. Finally, proponents argue that the need to recover and reopen quickly is not only important to small businesses—it is also important to local governments because they rely on these businesses for tax revenue. Congress could use small business disaster grants to help vulnerable businesses recover and rebuild following a disaster. Advocates could also argue that grant assistance could help counteract negative economic outcomes associated with disasters by helping businesses keep people employed and recover from economic loss. When major disasters take place, they not only cause immense damage to public infrastructure, they also severely damage the stock of private capital and disrupt economic activity. The typical economic pattern following large-scale disasters consists of large immediate losses of output, income, and employment. Small businesses play a significant role in the national economy. For example, in 2013, small businesses employed 56.8 million people (48% of the private workforce) in the United States. These small firms accounted for 33.6% of the nation's total known export value and produced roughly 46% of the nation's nonfarm gross domestic product (GDP). Opponents of a small business disaster grant program could point out, however, that studies suggest that market mechanisms may restore economic order without grant assistance. According to these studies, the long-term economic benefits of rebuilding from a major disaster can offset their initial economic disruption. For example, research on Hurricane Sandy recovery found that the storm initially resulted in net negative effects on state GDP, employment, income, and tax revenues. According to the study, spending on large-scale cleanup and repair efforts not only offset, but exceeded the initial economic negative effects. Opponents would argue there are three main reasons why disaster grants should not be provided to small businesses: (1) it might encourage businesses to become underinsured for disasters, (2) it would be costly, and (3) the Stafford Act is an inappropriate means to provide disaster grants to businesses. Opponents could argue that small businesses are responsible for obtaining adequate insurance coverage to recover from a disaster. To them, providing grants to small businesses could create an incentive for them to be underinsured (or not obtain insurance) to cut costs. Advocates for small business disaster grants might counter argue that other sectors are also responsible for insurance coverage yet are still eligible for grant assistance. Opponents could also argue that providing disaster grants to small businesses could be very expensive. SBA disaster loans are designed to be repaid, and though the interest rates are relatively low and some of these loans are not repaid due to defaults, the cost to the federal government for providing loans is much less than the cost of providing grants. Grants are not repaid to the federal government. As discussed later in this report, opponents might consider the Stafford Act to be an inappropriate vehicle for providing disaster assistance to businesses. To support this argument, they would point out that Section 101(b) of the Stafford Act states that it \"is the intent of the Congress, by this Act, to provide an orderly and continuing means of assistance by the federal government to state and local governments in carrying out their responsibilities to alleviate the suffering and damage which result from such disasters....\" They may therefore conclude that if the federal government were to provide disaster grants to businesses, those grants should be provided under the Small Business Act or some other authorization statute. Elements of the arguments for and against small business disaster grants outlined above will be explored in greater detail in \" Policy Considerations and Options for Congress .\" Some question why the federal government provides grant assistance to individuals and households, state, local, and tribal governments, and nonprofit organizations, among others, but not to businesses. A review of congressional hearings, bill reports, agency reports, academic journals, and other authoritative sources did not identify specific language explaining why Congress distinguishes between the types of disaster assistance that should be provided to businesses while not applying the same restrictions to other sectors. It appears that current federal policy on business disaster assistance first emerged in the 1930s. At that time, the United States had no overarching federal disaster policy or permanent program in place to respond to major disasters. Response, repair, and recovery activities were generally organized and carried out under local auspices and financial assistance was typically provided by states, municipalities, churches, and other nonprofit organizations such as the American Red Cross and the Salvation Army. When Congress did provide financial assistance, it was generally on an ad hoc basis. Further, Congress wanted the measures limited to relieving \"human distress and for such things as food, clothing, shelter, medicine and hospitalization\" rather the reconstruction of buildings, businesses, or anything else. The Great Depression also heightened concerns about federal costs. Thus, Congress sought to keep federal costs to a minimum by limiting assistance to individuals and households, and, to the extent possible, returning the federal expenditures back to the Treasury. For example, in 1933, Congress debated whether to provide funding to the American Red Cross (the main source of disaster assistance at that time) in response to an earthquake in Long Beach California. The Red Cross sought the funding because it could not meet assistance needs through its traditional fundraising efforts. Businesses, which were already struggling because of the Great Depression, suffered a great deal of damage as a result of the incident. While sympathetic to struggling businesses, Congress was resolute that federal assistance for the earthquake be limited to immediate needs such as food and clothing. During a hearing before the Subcommittee of House Committee on Appropriations, the Vice Chairman in charge of Domestic Operations for the American Red Cross clarified that Red Cross did not have a role in business recovery: There will always arise the question as to business rehabilitation, businesses and factories that have been affected. Then, there is the question of the solvency or insolvency of public corporations, schools, school boards, and so forth, and the replacement of their losses. For that reason I made the statement at the outset delimiting the scope of Red Cross work to family problems as against those of business and government. Congress decided that it would make disaster loans available to nonprofit organizations with loan maturities not to exceed 10 years through the Reconstruction Finance Corporation (RFC). The restriction that limited loans to nonprofit organizations was removed in 1936, and RFC was \"authorized to make disaster loans to corporations, partnerships, individuals, and municipalities or other political subdivisions of states and territories.\" The RFC continued to make disaster loans available until Congress dissolved the RFC and transferred its disaster loan authority to SBA in 1953 (P.L. 83-163). Around the same time, Congress passed the Federal Disaster Relief Act of 1950 (P.L. 81-875). The Disaster Relief Act established a permanent authority that committed the federal government to provide specific types of assistance to states and localities (but not businesses) following a major disaster declaration. It appears that the creation of a separate authority to provide assistance to states and localities may have placed them on a separate policy trajectory from businesses. Though interlaced to a degree, assistance to businesses remained in the form of loans, while the scope and nature of federal assistance to other entities expanded as the Disaster Relief Act was amended in the 1960s, 1970s, and replaced in the 1980s by the Stafford Act. The long-standing policy of providing disaster loans for businesses instead of grants has been reexamined by Congress in the last decade. In recent Congresses, legislation has been introduced that would establish business disaster grant programs. These legislative attempts include: (1) the Small Business Owner Disaster Relief Act of 2008 (H.R. 6641) in the 110 th Congress, and (2) the Hurricane Harvey Small Business Recovery Grants Act (H.R. 3930) in the 115 th Congress. H.R. 6641 would have amended Section 406(a) of the Stafford Act to allow businesses with 25 or fewer employees to receive grants to repair, restore, or replace damaged facilities. The assistance was limited to $28,000—the maximum amount of assistance a family could receive at that time under Section 408 of the Stafford Act (FEMA's Individuals and Households program). H.R. 6641 was referred to the Committee on Transportation and Infrastructure, Subcommittee on Economic Development, Public Buildings and Emergency Management on July 30, 2008. A hearing on H.R. 6641 provided an opportunity for some to voice their concern over the perceived disparity in disaster assistance. For example, in his testimony before the Subcommittee, Representative Steve King of Iowa stated that \"we have structured ... federal government relief in grant form for every sector of our economy ... except for private enterprise, and the ones that are the most vulnerable are small businesses.\" Later in the hearing, Chairwoman Eleanor Holmes Norton of Washington, DC, asked: \"how are we to convince for the first time since the Stafford Act was passed ... [that] Congress faced with an extraordinary deficit that this is the time to start giving what amounts to money to private enterprises?\" To which Representative King stated: \"we have justified providing relief for not-for-profits, even some churches who qualify ... and every political subdivision—city, county, state, and of course federal.\" In addition to voicing concerns about the equity of disaster assistance, the hearing also highlighted some of the challenges businesses face when recovering from a disaster, including a lack of capital, revenue gaps, and a weakened ability to generate revenue. It is possible that some of the programmatic concerns would have been addressed had the bill continued to advance in the legislative process, but the measure saw no further legislative action. H.R. 3930 in the 115 th Congress would have established a temporary \"Office of Hurricane Harvey Small Business Grants\" in the SBA to provide grants to businesses that suffered substantial economic injury as a result of Hurricane Harvey. H.R. 3930 would have authorized grants up to $100,000; the SBA Administrator, however, could increase that amount to $250,000 if deemed appropriate. Businesses could use the grants for a wide-range of recovery activities including uninsured property loss, damages or destruction of physical infrastructure, overhead costs, employee wages for unperformed work, temporary relocation, and debris removal. The grants could also be used for insurance deductibles, but not to repay government loans. H.R. 3930 was introduced in the House of Representatives, but saw no further legislative action. Implementing a small business disaster grant program may address congressional concerns about disaster relief equity, protecting the economy and vulnerable businesses. A business grant program, however, could have some unintended policy consequences. Some of the considerations Congress may contemplate for a potential small business disaster grant program include: (1) preventing the duplication of administrative functions and benefits; (2) the selection of the authorization statute; (3) whether (and what type of) declarations and designations will put the disaster grant program into effect; (4) what size businesses should be eligible for disaster grant assistance; and (5) the types of activities eligible for grant assistance. In addition, Congress could explore alternative options to a small business disaster grant program that could also address business disaster recovery concerns including (1) loan forgiveness; (2) reduced interest rates; and (3) measures that could help small (and large) businesses develop continuity and disaster recovery plans to help them prepare for and recover from disasters. Preventing duplication of administrative functions and benefits would likely be of concern if Congress authorized a small business disaster grant program. Duplication of administrative functions occurs when an office or staff at two or more federal entities performs the same types of operations. This type of duplication might be addressed through program consolidation. In the context of disaster assistance, duplication of benefits occurs when compensation from multiple sources exceeds the need for a particular recovery purpose. To prevent duplication of administrative functions Congress could opt to authorize the implementation of a new small business disaster grant program by either SBA or FEMA, but not both. The selection and authorization debate could, to some extent, resemble policy discussions Congress had during FEMA's formation. In 1978, President Jimmy Carter signed Executive Order 12127 which merged many disaster-related responsibilities of separate federal agencies into FEMA. Congress determined that SBA would continue to provide disaster loans through the Disaster Loan Program rather than transfer that function to FEMA. At the 1978 hearing before a subcommittee of the Committee on Government Operations, Chairman Jack Brooks questioned the rationale for keeping the loan program outside of FEMA. According to James T. McIntyre, Director, Office of Management and Budget (OMB), the rationale was as follows: [O]ne of the fundamental principles underlying this proposal is that whenever possible emergency responsibilities should be an extension of the regular missions of federal agencies. I believe the Congress also subscribed to this principle in considering disaster legislation in the past. The Disaster Relief Act of 1974 provides for the direction and coordination, in disaster situations, of agencies which have programs which can be applied to meeting disaster needs. It does not provide that the coordinating agency should exercise direct operational control.... [I]f the programs ... were incorporated in the new agency we would be required to create duplicate sets of skills and resources.... [S]ince the Small Business Administration administers loan programs other than those just for disaster victims, both the SBA and the new agency [FEMA] would have to maintain separate staffs of loan officers and portfolio managers if the disaster loan function were transferred to the new Agency.... [O]ne of our basic purposes for reorganization ... would be thwarted if we were to have to maintain a duplicate staff function in two or more agencies. Similarly, Congress may consider whether issuing small business disaster grants either through FEMA or SBA would duplicate skills and resources in one or the other agency. Congress could examine existing administrative functions at each agency and determine which most closely aligns with a potential small business disaster grant program. In addition to duplication of administrative functions, duplication of benefits is more likely to occur as more recovery resources become available. The range of resources can include insurance payouts, state and local government assistance, charitable donations from private institutions and individuals, as well as certain forms of federal assistance. While SBA disaster loans must be repaid, they are still considered a benefit. Duplication of benefits sometimes happens at the individual and household level wherein a range of resources become available to assist in the response, recovery, and rebuilding process. It could be inferred that providing businesses with disaster loans and grants could lead to the same outcome. Instances of duplication could increase if businesses become eligible for loans and grants. Section 312 of the Stafford Act requires that disaster assistance is distinct and not duplicative. Under Section 312 The President, in consultation with the head of each Federal agency administering any program providing financial assistance to persons, business concerns, or other entities suffering losses as a result of a major disaster or emergency, shall assure that no such person, business concern, or other entity will receive such assistance with respect to any part of such loss as to which he has received financial assistance under any other program or from insurance or any other source. FEMA and SBA use a computer matching agreement (CMA) in the application process to share real-time disaster assistance to prevent duplication of benefits. Despite the use of such mechanisms, duplication can still occur. Under 44 C.F.R. §206.191, a federal agency providing disaster assistance is responsible for identifying and rectifying instances of duplicative assistance. If identified, the recipient is required to repay the duplicated assistance. In some cases the federal government does not identify instances of duplication, and the improper payments are never recovered. In others cases, it may take a prolonged period of time to identify the duplication and the repayment notification may come as a surprise to disaster victims who did not realize they have to repay their assistance if that assistance is found to be duplicative. The payment may be an additional financial and emotional burden if the grantee has spent all of their assistance proceeds on recovery needs. If Congress authorizes a small business disaster grant program, it may consider conducting investigations and holding hearings to help determine which authorization statute would be best at reducing duplication of administrative functions and benefits. Congress would need to identify an authorizing statute should it create a disaster grant program for businesses. Congress could decide to authorize a small business disaster grant program under the Stafford Act (as was proposed by H.R. 6641 ), the Small Business Act, or other statute. FEMA would most likely be solely responsible for administering a small business disaster grant program if it were authorized under the Stafford Act. Having FEMA administer the program may have a number benefits. First, FEMA already has grant processing operations in place. It might be relatively easier to expand the operations to include small businesses disaster grants rather than establishing new grant-making operations within SBA. Second, having FEMA administer the small business disaster grant program may help limit duplication of administrative functions between FEMA and SBA. Third, FEMA has an existing account called the Disaster Relief Fund (DRF) that receives annual and supplemental appropriations to fund its disaster assistance programs. DRF appropriations could be increased to pay for small business disaster grants. In contrast, Congress would likely need to make statutory changes to SBA's existing disaster loan account, or authorize a new account, if a small business disaster grant program was administered by SBA. SBA would probably administer a small business disaster grant program if it were authorized under the Small Business Act. As mentioned previously, SBA currently has authority under the Small Business Act to provide grants to SBA resource partners to provide training and other technical assistance to small businesses affected by a disaster, but it does not have specific authority to provide disaster grants to businesses or individuals. Congress could decide to have SBA administer the program because it already has a framework in place to evaluate business disaster needs and disaster loan eligibility. Congress may need to make statutory changes to SBA's disaster loan account or authorize a new account to receive appropriations for disaster grants. Another legislative approach Congress could consider is allowing SBA to draw funds from FEMA's DRF to pay for small business disaster grants. Some may question this funding approach because it would allow SBA to draw funds from another agency's account. The funding arrangement could also be problematic if DRF became low on funds and there are competing priorities for scarce resources. Under current laws, FEMA grants and SBA disaster loans are triggered by a \"declaration\" under the Stafford Act, an SBA declaration, or both. The type (or category) of declaration determines what types of federal assistance are made available. Declarations are a necessary, but not sufficient condition for federal disaster assistance to businesses. The types of assistance made available are further influenced by the \"designations\" contained within the declaration. Declarations and designations may have a similar influence on a small business disaster grant program. The following describes the nexus between federal disaster assistance and declarations in more detail. If the current declaration framework were applied to a small business disaster grant program, relatively fewer businesses may be eligible for grant assistance if authorized under the Stafford Act compared to the Small Business Act. This is because the thresholds and criteria used to make Stafford Act declaration determinations are relatively higher than the ones used to provide disaster assistance under the Small Business Act. The Stafford Act authorizes the President to issue major disaster declarations that provide states, tribes, and localities with a range of federal assistance in response to natural and human-caused incidents. Each presidential major disaster declaration includes a designation. The designation determines what FEMA grants are available for the incident. It also designates which counties are eligible for the grants. The potential types of FEMA grant assistance include (1) Public Assistance (PA) for infrastructure repair; (2) Hazard Mitigation Grant Program (HMGP) grants to lessen the effects of future disaster incidents; and (3) Individual Assistance (IA) for aid to individuals and households. Under FEMA regulations: The Assistant Administrator for the Disaster Assistance Directorate has been delegated authority to determine and designate the types of assistance to be made available. The initial designations will usually be announced in the declaration. Determinations by the Assistant Administrator for the Disaster Assistance Directorate of the types and extent of FEMA disaster assistance to be provided are based upon findings whether the damage involved and its effects are of such severity and magnitude as to be beyond the response capabilities of the state, the affected local governments, and other potential recipients of supplementary federal assistance. The Assistant Administrator for the Disaster Assistance Directorate may authorize all, or only particular types of, supplementary federal assistance requested by the governor. The \"findings\" referenced above are known as \"factors\" that are used by FEMA to evaluate a governor's or chief executive's request for a major disaster declaration and make IA and PA recommendations to the President (a full description of the factors can be located in the Appendix ). While all major disaster declarations have HMGP designations, not all declarations designate IA and PA. In rare cases, only IA and HMGP are designated. More commonly, PA and HMGP are designated (these are sometimes referred to as \"PA-only\" major disaster declarations). This is because major disasters often cause greater damage to public infrastructure relative to damaged households. Stafford Act declarations also trigger the SBA Disaster Loan Program and the types of loans are determined by the designation. If IA is designated, then all SBA disaster loans types are made available to eligible businesses. If PA is designated, then only private nonprofit organizations are eligible for disaster loans (see Figure 1 ). In other words, most private businesses would not be able to obtain a disaster loan under a PA-only major disaster declaration. If the existing declaration framework is applied to a small business disaster grant program, then small businesses would generally be eligible for disaster grants for Stafford Act major disaster declarations that included an IA designation. By comparison, disaster loans would likely only be made available to private nonprofit organizations under a PA-only declaration. Some might be concerned that too few businesses would be eligible for disaster grants if the existing declaration and designation framework were applied to a small business disaster grant program. They may also question the relevance of the IA designation because the factors used to determine IA do not evaluate business damages or economic loss. For example, it is conceivable that an incident could cause significant damage to public infrastructure and businesses but not to households. Consequently, businesses could be denied assistance because it was determined that damages to residences did not warrant assistance to individuals and households. There are, however, at least four reasons why some might argue that the existing declaration and designation framework should be applied to a small business disaster grant program: 1. It could help ensure that small business disaster grants were only provided for large-scale incidents. 2. It could help limit grant costs because not all declarations would trigger small business disaster grants. 3. Applying the declaration and designation framework uniformly to the grant and loan programs would align the two programs and reduce the potential for administrative confusion or duplication. 4. Conversely, using different designations could create a perceived disparity between the loan and grant programs because some business owners may question why grants are available for some major disasters (because they are designated IA and PA), but not others (because they have PA-only designations). If Congress authorized a small business disaster grant program under the Stafford Act, it could consider using the existing declaration and IA designation framework used to trigger eligibility for the SBA Disaster Loan Program. This would align the implementation of the two programs and potentially smooth administrative processes and potentially limit costs. An alternative policy option Congress might consider is a \"business designation\" rather than existing designations to determine whether the incident warrants a grant, a loan, or both. The business designation could use a separate set of factors or criteria similar to the ones FEMA currently uses to evaluate declaration requests and make IA and PA recommendations. This could align the designation with damages that are specific to small businesses. Congress could consider using SBA declarations to provide disaster grants to small businesses rather than Stafford Act declarations. The following describes how SBA declarations are used to make disaster loans available and examines the potential policy implications of using the same structure to provide disaster grants to small businesses. The SBA Administrator has authority under the Small Business Act to make two types of disaster declarations: (1) a physical disaster declaration (commonly referred to as an \"SBA declaration\"), and (2) an Economic Injury Disaster Loan (EIDL) declaration (see Figure 1 ). Each declaration could make certain forms of assistance available if SBA disaster declarations were to be applied to a small business disaster grant program: 1. The SBA Administrator may issue a physical disaster declaration in response to a gubernatorial request for assistance. This type of declaration is often made for relatively smaller incidents. The criterion used to determine whether to issue this type of declaration is generally the presence of at least 25 homes or businesses (or some combination of the two) that have sustained uninsured losses of 40% or more in any county or other smaller political subdivision of a state or U.S. possession. When the SBA Administrator issues a physical disaster declaration, both SBA disaster loan types become available to eligible homeowners, renters, businesses of all sizes, and nonprofit organizations within the disaster area or contiguous counties and other political subdivisions (see Figure 1 ). If SBA physical disaster declarations were to be applied to a small business disaster grant program, the grants could be made available to small businesses for incidents that do not meet the damage threshold of a major disaster declaration under the Stafford Act. 2. The SBA Administrator may make an EIDL declaration when SBA receives a certification from a state governor that at least five small businesses have suffered substantial economic injury as a result of a disaster. Alternatively, the SBA Administrator may issue an EIDL declaration based on the determination of a natural disaster by the Secretary of Agriculture. The SBA Administrator may also issue an EIDL declaration based on the determination of the Secretary of Commerce that a fishery resource disaster or commercial fishery failure has occurred. Only EIDLs are available under this type of declaration (see Figure 1 ). EIDL assistance helps businesses meet financial obligations and operating expenses that could have been met had the disaster not occurred. Loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. The assistance is designed to help businesses that did not suffer direct damages, but rather businesses that have suffered economic loss as a result of an incident. For example, disasters such as hurricanes can disrupt tourism. In such cases, there may have been some businesses that did not suffer direct damages, but still lost tourism revenue as a result of the hurricane. If EIDL declarations were to be applied to a small business disaster grant program, the grants could be used to provide similar economic assistance to businesses suffering from economic loss as a result of a disaster. A comparison of Stafford Act declarations (including designations) and SBA declarations from 2008 to 2017 provides context to the SBA declarations outlined above. As shown in Figure 2 and Table 1 , during this period, 2,869 declarations were issued under the Stafford Act and the Small Business Act. A total of 791 declarations were issued under the Stafford Act. Of these, 194 (6.8% of total declarations) included IA and PA assistance, while 597 (20.8% of total declarations) were PA-only. In contrast, during the same period, a total of 2,078 (72.4%) declarations were issued under the Small Business Act. Of these, 512 (17.8% of total declarations) were SBA physical disaster declarations, 97 (3.4%) were EIDL declarations, and 1,469 (51.2%) were EIDL declarations based on the determination of a natural disaster by the Secretary of Agriculture. There were no declarations issued during the 10-year period based on the determination of the Secretary of Commerce that a fishery resource disaster or commercial fishery failure had occurred. The following applies various types of declarations and designations to a potential small business disaster grant program to the above data to draw some inferences on how many businesses might get grants in certain situations. If the small business disaster grant program is only triggered by Stafford Act declarations that designate IA and PA, then roughly 6.8% of the declarations (194) issued in Figure 2 and Table 1 would have made disaster grants available to small businesses. That could be a concern for those who want to provide small business grants for incidents that are too small to qualify for assistance under the Stafford Act. As mentioned previously, SBA declarations often provide assistance to incidents that impact a locality or a region but do not cause enough state-wide damage to warrant a major disaster declaration under the Stafford Act. If the small business disaster grant program is triggered by the SBA Administrator issuing a physical disaster declaration, then roughly 17% of the declarations (512) issued in Figure 2 and Table 1 would have made disaster grants available to small businesses. This type of declaration could arguably make more incidents eligible for grant assistance because the 512 incidents in Figure 2 and Table 1 were presumably issued for incidents that did not meet the per capita threshold for a major disaster declaration under the Stafford Act. It should be noted, however, that the number of grants made available under an SBA Administrator physical disaster declaration would likely depend on whether the grants would only provide assistance for repairing and rebuilding damaged structure or if they would also provide assistance for economic loss. Policymakers could consider making the grants available through either an SBA Administrator physical declaration or an EIDL declaration so that the grants could be used for repairs and rebuilding or for economic loss. If so, then 2,078 declarations during the time period could have made the small business disaster grants available. It could be argued that the greatest number of businesses would benefit from small business disaster grants by applying the existing declaration framework under the combined authorities and making the grants available for either physical damages or economic loss. In other words, the same conditions under which SBA disaster loans are made available. Doing so would make small business disaster grants available in all of the declarations in Figure 2 and Table 1 with the exception of the PA-only Stafford Act declarations, under which only private nonprofit organizations are eligible (see Figure 1 ). While some may favor making small business disaster grants available for a wide-range of incidents others may want to limit their use. For example, those concerned about the cost implications of a small business disaster grant program may prefer Stafford Act declarations over SBA declarations. As mentioned previously, the thresholds used to determine SBA declarations are lower and generally based on (1) at least 25 homes or businesses (or some combination of the two) sustaining uninsured losses of 40% or more in any county or other smaller political subdivision of a state or U.S. possession; or (2) at least three businesses in the disaster area sustaining uninsured losses of 40% or more of the estimated fair replacement value of the damaged property (whichever is lower). The lower thresholds help provide disaster loans for incidents that are locally damaging, but do not cause enough widespread damage to warrant a major disaster declaration. In contrast, the threshold used by FEMA under the Stafford Act to a recommend major disaster declaration is significantly higher. In general, public infrastructure damages must meet or exceed $1.43 per capita (based on the most recent census figures) to be recommended for major disaster assistance. Applying the per capita threshold to a small business disaster grant program could help ensure that grants are only provided in cases of large-scale disasters. SBA declaration thresholds might be lower than FEMA thresholds because federal costs associated with loans (which are supposed to be repaid) are less than grants. If costs are a concern, policymakers might consider using criteria similar to FEMA's per capita threshold used for major disaster declarations to issue small business disaster grants. Finally, another factor to consider is whether the declaration is properly aligned with the agency administering the small business disaster grant program. For example, it could be problematic if small business disaster grants are triggered by SBA declarations but administered by FEMA. SBA would essentially be putting another agency's program into effect. Consequently, it could be argued that a small business disaster grant program should be administered by FEMA if Stafford Act declarations are used to trigger the program, or administered by SBA if SBA declarations are used to put the program into effect. The small business disaster grant program proposed by H.R. 6641 would have provided grants to \"private business damaged or destroyed by a major disaster for the repair, restoration, reconstruction, or replacement of the facility and for the associated expenses incurred by the person.\" Congress could consider similar legislative language if it authorized a small business disaster grant program, or it may wish to develop a detailed list of what damage types and economic loss amounts would be eligible for grant assistance. Similarly, Congress could also consider whether grants could be used for economic loss and/or mitigation measures. As mentioned previously, in some cases a disaster can disrupt services and create economic hardship for businesses without causing structural damages. SBA EIDL provides businesses with up to $2 million in loans to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. These loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. Loan amounts for EIDLs are based on actual economic injury and financial needs, regardless of whether the business suffered any property damage. Some may suggest that small business disaster grants should be limited to small businesses that need assistance to repair and rebuild their business. Others may think that grants should also be provided for economic loss. For example, as mentioned previously H.R. 3930 authorized grants for business interruption, overhead costs, and employee wages as well as for rebuilding and repairs. If Congress were to authorize a small business disaster grant program, it may also consider whether the grants should be available for economic loss or limit them to specific types of damage. Businesses obtaining an SBA physical disaster loan may use up to 20% of the verified loss amount for mitigation measures (e.g., grading or contouring of land; relocating or elevating utilities or mechanical equipment; building retaining walls, safe rooms, or similar structures designed to protect occupants from natural disasters; or installing sewer backflow valves) in an effort to prevent loss should a similar disaster occur in the future. If Congress decided to allow small businesses that receive a disaster grant to use the funds for mitigation purposes, it could limit those expenditures to a percentage of the total grant amount, or it could allow the entire grant to be used for mitigation measures. In addition, if Congress decided to allow disaster grants to be used for mitigation, Congress could consider whether to provide the grant prior to a disaster or without a declaration. For example, Congress could model small business mitigation grants on the Pre-Disaster Mitigation pilot program. P.L. 106-24 amended Section 7(b)(1) of the Small Business Act to include a Pre-Disaster Mitigation pilot program administered by SBA during fiscal years 2000 through 2004. The program allowed SBA to make low-interest (4% or less) fixed-rate loans of no more than $50,000 per year to small businesses to implement mitigation measures (such as relocating utilities, grading, and building retaining or sea walls) designed to protect the small business from future disaster-related damage. Congress may consider business size as a criterion for receiving small business disaster grants as a means to target the assistance to businesses of specific sizes. One option could be using SBA's size standards. The SBA uses two measures to determine if a business qualifies as small for its loan guaranty and venture capital programs: industry specific size standards or a combination of the business's net worth and net income. For example, the SBA's Small Business Investment Company (SBIC) program allows businesses to qualify as small if they meet the SBA's size standard for the industry in which the applicant is primarily engaged, or a maximum tangible net worth of not more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5 million. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. For contracting purposes, firms are considered small if they meet the SBA's industry specific size standards. Overall, the SBA currently classifies about 97% of all employer firms as small. These firms represent about 30% of industry receipts. The SBA's industry size standards vary by industry, and are based on one of the following four measures: the firm's (1) average annual receipts in the previous three years, (2) number of employees, (3) asset size, or (4) for refineries, a combination of number of employees and barrel per day refining capacity. Historically, the SBA has used the number of employees (ranging from 50 or fewer to no more than 1,500 employees) to determine if manufacturing and mining companies are small and average annual receipts (ranging from no more than $5.5 million per year to no more than $38.5 million per year) for most other industries. Congress, however, may want to limit disaster grant assistance to small businesses that have fewer employees that are particularly vulnerable to disaster. For example, it could consider providing grants only to businesses of 10 or fewer employees to target \"mom and pop shops.\" As mentioned previously, H.R. 6641 (the Small Business Owner Disaster Relief Act of 2008) would have allowed businesses with 25 or fewer employees to receive grants to repair, restore, or replace damage facilities. Based on data compiled by SBA on business disaster loan applications from FY2013 to FY2017, Figure 3 provides a rough estimate of how many businesses over a five-year period could potentially receive a small business disaster grant under several different size standards. Based on the FY2013 through FY2017 SBA data, if small business disaster grants were limited to businesses of 10 employees or fewer, roughly 10,000 businesses over a five-year period could be eligible for a small business disaster grant. Over that same time period, nearly 11,000 small businesses could be eligible if the cap were 25 employees or fewer employees. That number would not change substantially if the cap were 50, 75, or 100 or fewer employees (see Figure 3 ). Finally, SBA applications for disaster loans currently rely on self-reporting of their number of employees. Congress may consider whether this data should be verified by SBA, or if doing so might inappropriately delay the receipt of the grant. H.R. 6641 would have capped small business disaster grants at the maximum amount of assistance a family could receive from FEMA's Individuals and Households program (currently $34,900). Error! Reference source not found. and Table 2 provide cost estimates based on businesses of 25 or fewer employees that applied for disaster loans from FY2013 to FY2017. Based on the data, if disaster grants were capped at $35,000, and all of the businesses that received a loan received a grant instead, the grants would have totaled roughly $384 million. If capped at $25,000, the grants would have totaled roughly $274 million. Finally, if capped at $10,000, the grants would have totaled roughly $110 million. If Congress authorizes a small business disaster grant program, it could consider capping the amount based on Section 408 of the Stafford Act, or some other amount. Congress may also decide to examine business recovery costs to ensure grant amounts are appropriate for business recovery needs. One potential approach Congress could consider is creating a pilot program which could be used to evaluate the program's effectiveness and costs. This information could be used to help determine if the program should be made permanent. For example, Congress established a Pre-Disaster Mitigation pilot program to be administered by SBA during fiscal years 2000 through 2004 ( P.L. 106-24 ). The program authorized SBA to issue low-interest (4% or less) fixed-rate loans of no more than $50,000 per year to small businesses to implement mitigation measures (such as relocating utilities, grading, and building retaining or sea walls) designed to protect the small business from future disaster-related damage. Congress could consider implementing a similar pilot program that would provide disaster grants to small businesses over a specified period of time. To some, a pilot program would be a more cautious approach to implementing a small business disaster grant program. If Congress determined that the grant program was too costly or ineffective, it could decide not to reauthorize the program. Some may suggest that rather than providing small businesses with disaster grants, Congress could explore alternative methods for helping small businesses recover from a disaster. Some alternative methods include loan forgiveness, decreased disaster loan interest rates, and providing assistance to help businesses develop continuity and disaster response plans. Congress could consider authorizing loan forgiveness to businesses under certain circumstances. Loan forgiveness is rare, but has been used in the past to help businesses that were having difficulty repaying their loans. For example, loan forgiveness was granted after Hurricane Betsy, when President Lyndon B. Johnson signed the Southeast Hurricane Disaster Relief Act of 1965. Section 3 of the act authorized the SBA Administrator to grant disaster loan forgiveness or issue waivers for property lost or damaged in Florida, Louisiana, and Mississippi as a result of the hurricane. The act stated that to the extent such loss or damage is not compensated for by insurance or otherwise, (1) shall at the borrower's option on that part of any loan in excess of $500, (A) cancel up to $1,800 of the loan, or (B) waive interest due on the loan in a total amount of not more than $1,800 over a period not to exceed three years; and (2) may lend to a privately owned school, college, or university without regard to whether the required financial assistance is otherwise available from private sources, and may waive interest payments and defer principal payments on such a loan for the first three years of the term of the loan. Congress could also consider reducing interest rates for businesses under specific circumstances or for specific types of disasters. Interest rate ceilings for business physical disaster loans are statutorily set at 8% per annum or 4% per annum if the applicant is unable to obtain credit elsewhere. The interest rate ceiling for EIDL is 4% per annum. Interest floors have not been established in statute. Providing relief to businesses through the use of reduced interest rates or loan forgiveness as opposed to grants may have the following advantages: (1) they could provide Congress with a flexible method to provide assistance to struggling businesses that can be applied on a case-by-case basis; (2) they would likely be less expensive than grants; and (3) they may reduce the possibility of duplication of benefits between grants and loans. On the other hand, it could be argued that providing relief to businesses through reduced interest rates or loan forgiveness as opposed to grants may not provide timely assistance because providing relief on a case-by-case basis would require Congress to debate and pass legislation before the relief could be provided. There may also be concern this approach could be applied too arbitrarily. Research indicates that many businesses do not have contingency or disaster recovery plans. For example, a survey of Certified Public Accounting (CPA) firms located on Staten Island, NY, indicated that only 7% of the respondents had a formal continuity or disaster recovery plan in place prior to Hurricane Sandy and nearly 42% of those firms that had a formal continuity or disaster recovery plan admitted that they never tested their plan. Approximately 40% had an informal plan that had been discussed but not documented. More than half of the responding firms did not have a contingency or disaster recovery plan. Of those that did not have any type of a plan, 60% thought the plans were unnecessary and 20% said that establishing a plan was too time-consuming. Congress could investigate methods that would incentivize businesses to develop contingency and disaster recovery plans. This could be done through new programs or through existing ones such as FEMA's Ready Business Program which is designed to help businesses plan and prepare for disasters by providing businesses various online toolkits that can help them identify their risks and develop a plan to address those risks. Congress could also investigate the extent to which the Ready Business Program is collaborating with SBA's efforts to help businesses with emergency preparedness. Similarly, Congress could consider the pros and cons of providing grants to businesses to help them plan and prepare for disasters. For example, providing grants for this purpose could be more expensive than mitigation loans, but cost less than a small business disaster grant program designed to assist businesses following a disaster. Advocates for mitigation grants could further argue that providing grants for mitigation rewards businesses that take the initiative to plan ahead for potential disasters and could reduce, as least to some extent, future costs. Opponents, on the other hand, might believe that existing mitigation programs are sufficient. Congress has contemplated how to help businesses rebuild and recover from disasters for nearly a century. Historically, the federal policy for providing disaster assistance to businesses has primarily been limited to low-interest loans. While disaster loans have been instrumental in helping business recover from incidents, over the years Congress has considered whether grant assistance might be needed in addition to, or instead of business disaster loans. Changing the federal government's disaster policy approach to businesses could be complex and require careful decisionmaking. Steps would need to be taken to avoid and remedy potential grant and loan duplication. Congress would also have to determine under what circumstances and situations the grant program would be put into effect. Eligibility requirements would need to be developed to determine under what situations and circumstances grants would be provided as well as what types of business should be eligible to receive grants. Similarly, Congress might consider whether grants could be used for rebuilding, mitigation, or economic loss, in addition to other recovery activities. In addition to these concerns and others, Congress may want to investigate the potential cost implications of a small business disaster grant program. Alternatively, Congress could leave the current policy in place. Those advocating no change are generally supportive of the view that federal disaster assistance should be supplemental in nature and that private insurance and access to low-interest loans should remain the primary means of helping small businesses recover after a disaster. Public Assistance Factors Estimated Cost of the Assistance Estimated cost of assistance is perhaps the most important factor FEMA considers when evaluating whether a governor's or chief executive's request warrants PA because it is a strong indicator of whether 'the situation is of such severity and magnitude that an effective response is beyond the capacities of the State and affected local governments.\" FEMA generally relies on two thresholds to evaluate whether to recommend PA. The first threshold is $1 million in public infrastructure damages. This threshold is set \"in the belief that even the lowest population states can cover this level of public assistance damages.\" The second threshold used by FEMA is determined by multiplying the state's population (according to the most recent census) by a specified statewide per capita impact indicator—currently $1.43. In general, FEMA will recommend a major disaster declaration that includes PA if public infrastructure damages exceed $1 million and meet or exceed $1.43 per capita. The underlying rationale for using a per capita threshold is that tax revenues that support a state's disaster response capacity should be sufficient if damages and costs fall under the per capita amount. Localized Impacts FEMA also considers impacts to localities (e.g., counties, parishes, boroughs). While capacity to respond to, and recover from, an incident are evaluated on the state level, PA and IA are provided only to the specific counties designated in a declaration. As specified in FEMA regulations The Assistant Administrator for the Disaster Assistance Directorate also has been delegated authority to designate the affected areas eligible for supplementary federal assistance under the Stafford Act. These designations shall be published in the Federal Register. An affected area designated by the Assistant Administrator for the Disaster Assistance Directorate includes all local government jurisdictions within its boundaries. To this end, FEMA uses a countywide per capita impact indicator of $3.61 per capita in infrastructure damage to assess localized impacts. In general, it is expected that a locality that meets or exceeds the $3.61 per capita threshold will be designated by FEMA for PA funding. Insurance Coverage Insurance coverage is considered in PA determinations when reviewing a governor's or tribal chief executive's request for major disaster assistance. As part of the assessment of disaster related damage, FEMA subtracts the amount of insurance coverage that is in force or that should have been in force as required by law and regulation at the time of the disaster from the total estimated eligible cost of PA for units of government and certain private nonprofit organizations. Hazard Mitigation FEMA encourages hazard mitigation efforts by considering how previous measures may have decreased the overall damages and costs following an incident. This could include rewarding states that have a statewide building code. If the requesting state can prove, by way of cost-benefit analyses or other related estimates, that its per capita amount of infrastructure damage falls short of the statewide per capita impact threshold due to mitigation efforts, FEMA will consider that favorably in its recommendation to the President. In these instances, FEMA may also consider whether the mitigation work has been principally financed with previous FEMA disaster assistance funding through the Hazard Mitigation Grant Program (HMGP), through the Pre-Disaster Mitigation (PDM) program, or by state or local resources. Recent Multiple Disasters If a state or tribal nation has suffered multiple disasters—whether declared or not—in the previous 12 months, FEMA considers the financial and human toll of those recent incidents in its consideration of whether to recommend PA. For example, if a state has responded on its own to a series of tornadoes, FEMA may consider a request for a declaration more favorably than they would have otherwise. Programs of Other Federal Assistance FEMA also considers whether other federal disaster assistance is available when reviewing a major disaster request. In some cases, other federal programs are arguably more suitable for addressing the types of damage caused by an incident. For example, damage to federal-aid roads and bridges are eligible for assistance under the Emergency Relief Program of the Federal Highway Administration (FHWA). Other federal programs may have more specific authority to respond to certain types of disasters, such as damage to agricultural areas. Assistance may also be provided under authorities separate from the Stafford Act with or without a Stafford Act declaration. For example, assistance for droughts is frequently provided through authorities of the U.S. Department of Agriculture (USDA) and the Secretary of Health and Human Services (HHS) can provide assistance to states in response to a public health threat without the President's involvement via Stafford Act authorities. Individual Assistance Factors Concentration of Damages According to FEMA regulations, highly concentrated damages \"generally indicate a greater need for federal assistance than widespread and scattered damages throughout a state.\" The assumption that underlies this regulation is that the local support networks available to recover from an incident are increasingly undermined as more members of those local support networks become survivors of the incident. The dispersion of damage, however, is not necessarily an indication of total individual and household needs. Rural incidents, in particular, can be more difficult to assess because damages tend to be geographically less concentrated. As mentioned under the factors considered for PA, Congress has sought to address the challenges posed by rural incidents in receiving major disaster declarations and assistance packages. Trauma FEMA regulations cite three conditions that indicate a high degree of trauma to a community: (1) large numbers of injuries and deaths; (2) large-scale disruption of normal community functions and services; and (3) emergency needs such as extended or widespread loss of power or water. FEMA considers the trauma caused by injuries and loss of life in determining whether IA, or specific programs under IA, is warranted in an affected area. For IA-eligible medical and funeral expenses under Section 408 of the Stafford Act, this factor can carry some weight in making a determination. Large-scale disruption of normal community functions and emergency needs such as extended or widespread loss of power or water are also indicative of trauma and are considered when evaluating a governor's or chief executive's request. Assessing these indicators can be problematic because they are not currently defined in law or regulation. Consequently, discretionary judgments are significant aspects of the evaluation of IA needs for large-scale disruptions of normal community functions and extended or widespread emergency needs. Special Populations FEMA considers the unique needs of certain demographic groups within an affected area when evaluating an IA request. These \"special populations\" include low-income and elderly populations, and American Indian and Alaskan Native tribal populations. Although special populations are a distinct factor in the consideration of a governor's or chief executive's request, special populations may also contribute to the overall number of IA-eligible households in an affected area. Voluntary Agency Assistance As with PA, FEMA considers whether state, local, or tribal governments \"can meet the needs of disaster victims\" prior to offering supplemental assistance through IA. Additionally for IA, FEMA considers the extent to which voluntary agency assistance can meet those needs. Insurance Similar to insurance coverage of public and certain private, nonprofit facilities for PA, insurance coverage of private residences is an important consideration for IA. Per FEMA regulation, \"by law, federal disaster assistance cannot duplicate insurance coverage .\" Therefore, the calculation of IA-eligible losses must deduct those losses covered by insurance. FEMA assumes owner-occupied homes with a mortgage are insured against many natural disasters under their homeowner insurance policies. Under that assumption, FEMA uses census data to determine homeowner insurance penetration. Further, if the home is located in a flood - prone area then purchasing insurance for those disasters is often a legal requirement if the owner h as a federally-backed mortgage. FEMA administers the N ational F lood I nsurance P rogram (NFIP) which allows officials to more directly determine the status of flood insurance in communities and the number of policies in place in an affected area. Average Amount of Individual Assistance by State FEMA compares the total IA cost estimate from the Preliminary Damage Assessment (PDA) to the average amount of individual assistance by state. More specifically, regulations published in 1999 include a table of the average amount of IA per disaster, by state population, from July 1994 to July 1999 (reproduced as Table A-1 ). FEMA stresses that these averages are not to be used as thresholds but rather as a guide that \"may prove useful to states and voluntary agencies as they develop plans and programs to meet the needs of disaster victims.\" It should be noted that some have questioned the relevance of this factor given the amounts have not been updated since 1999 and are based on 1990 census data.", "summary": "Throughout the years, Congress has expressed interest and concern for businesses recovering from disasters. For nearly a century, the federal government's policy for providing disaster assistance to businesses has been limited primarily to low interest loans rather than grant assistance. More recently, Congress has contemplated whether grants should be made available to small businesses after a major disaster. During this debate, some have questioned why small businesses are not eligible for disaster grants when residences, nonprofit groups, and state and local governments are eligible. In addition to concerns about equity, proponents of small business disaster grants argue that small businesses should be eligible for grant assistance because of the important role they play in the national economy. Major disasters can severely disrupt economic activity by causing immediate losses of output, income, and employment. While reports vary on the number of small businesses that fail after a disaster, even the low estimates could be considered significant. The Institute for Business and Home Safety found that 25% of businesses that close following a disaster fail to reopen, and a study on businesses in New Orleans recovering from Hurricane Katrina found that 12% of businesses remained closed 26 months after the storm. The number of failing businesses after a disaster reported by Federal Emergency Management Agency (FEMA) are higher. According to FEMA, \"roughly 40%-60% of small businesses never reopen their doors following a disaster.\" To some, these findings suggest that the federal government should play a greater role in business disaster recovery. As part of this expanded role, Congress could consider providing grants to businesses to help them rebuild and recover from disasters. Changing the federal government's approach to business disaster policy, however, could be complex and require some careful decisionmaking. Steps would need to be taken to avoid and remedy potential grant and loan duplication. Congress would also have to determine under what circumstances and situations the grant program would be put into effect. Eligibility requirements would need to be developed to determine under what situations and circumstances grants would be provided as well as what types of businesses should be eligible to receive grants. Similarly, Congress might consider whether grants could be used for rebuilding, mitigation, or economic loss, in addition to other recovery activities. In addition to these concerns and others, Congress may want to investigate the potential cost implications of a small business disaster grant program. This report examines the historical development of federal disaster assistance to help explain possible reasons why businesses are currently provided disaster loans rather than grants. This is followed by a discussion of policy considerations and options related to a potential disaster grant program for small businesses, including how to minimize duplication of operations and benefits; whether to authorize the program in the Small Business Act, the Stafford Act, or other statute; the potential cost implications of a small business disaster grant program; and eligibility requirements (such as business size standards, eligible activities, and grant award amounts). Alternatively, Congress could explore other policy options to support small businesses struggling to recover from a disaster, including loan forgiveness; decreased interest rates; and establishing programs to help small (and large) businesses develop disaster and business continuity plans.", "document_type": "crs"}
{"report": "T he farm bill is an omnibus, multiyear law that governs an array of agricultural and food programs. It provides an opportunity for Congress to choose how much support to provide for agriculture and nutrition and how to allocate it among competing constituencies. The farm bill has typically undergone reauthorization about every five years. The current farm bill—the Agriculture Improvement Act of 2018 ( P.L. 115-334 , H.R. 2 ), often called the \"2018 farm bill\"—was enacted in December 2018 and expires in 2023. From its beginning in the 1930s, farm bills have focused primarily on farm commodity programs to support a handful of staple commodities—corn, soybeans, wheat, cotton, rice, dairy, and sugar. In recent decades, farm bills have expanded in scope to include a Nutrition title since 1973 and since then Conservation, Horticulture, Bioenergy, Credit, Research, and Rural Development titles. Budget matters increasingly influence the development of the farm bill. While other reports discuss policy issues, this report focuses on the budgetary effects across the whole farm bill. One way to compare the activities covered by a farm bill is by the allocation of federal spending and, more specifically, by how much is spent in total and how a new law changes allocations or policy. Congressional Budget Office (CBO) estimates are the official measures when bills are considered and are grounded in long-standing budget laws and rules. Recent farm bills have faced various budget situations, including spending more under a budget surplus, cutting spending for deficit reduction, and remaining budget neutral. For example The 2002 farm bill (the Farm Security and Rural Investment Act of 2002, P.L. 107-171 ) was enacted under a budget surplus that allowed it to make changes that were projected to increase spending by $73 billion, or 22%, over a 10-year budget window—more than half of which was for the farm commodity programs. The 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ) was officially budget neutral, though it included $10 billion of offsets over 10 years from tax-related and other provisions that allowed it to increase spending on the Nutrition, Conservation, and Disaster titles. The 2014 farm bill (the Agricultural Act of 2014, P.L. 113-79 ) was enacted under deficit reduction and budget sequestration that influenced its legislative development. It made changes that projected a net reduction of $17 billion, or 1.7%, over 10 years ($23 billion including sequestration). The 2018 farm bill (the Agriculture Improvement Act of 2018, P.L. 115-334 ) was held to a budget-neutral position over its 10-year budget window. Some budget amounts were reallocated across programs within issue areas and across titles of the farm bill, as discussed throughout this report. Generally, farm bills authorize spending in two categories: mandatory and discretionary. From a budgetary perspective, many of the larger programs are assumed to continue beyond the end of a farm bill, even though their authorizations to operate may expire. That projection for mandatory programs, as explained below, provides funding to reauthorize programs, reallocate funding to other programs, or take offsets for deficit reduction. For other programs, funding must come by other means. This includes new programs, those without baseline, or discretionary programs. The Supplemental Nutrition Assistance Program (SNAP) and crop insurance have their own mandatory spending sources, but most other mandatory outlays are paid through the U.S. Department of Agriculture's (USDA) Commodity Credit Corporation (CCC). Discretionary spending is authorized throughout the farm bill, including most rural development, credit, and research programs, among others. Some smaller research, bioenergy, and rural development programs are authorized to receive both mandatory and discretionary funding. Most agency operations (salaries and expenses) are financed with discretionary funds. Discretionary appropriations are made separately through an annual agriculture appropriations act. While both types of programs are significant, mandatory programs often dominate the farm bill debate. Therefore, the majority of this report focuses on mandatory spending Figure 1 illustrates the distribution of the $428 billion five-year total of projected mandatory outlays at enactment for the life of the 2018 farm bill (FY2019-FY2023). Figure 2 shows program-level detail for agriculture-specific programs, particularly the Farm Commodity and Conservation titles. Table 1 presents these outlays (the fifth and 10 th columns), and how budgetary resources were reallocated across titles of the farm bill, for both the five- and 10-year budget windows. The terms baseline and score are explained in later sections of this report. Mandatory spending is authorized throughout the farm bill, but four titles presently account for about 99% of the mandatory farm bill spending: Commodities (7.3%), Nutrition (76%), Crop Insurance (8.9%), and Conservation (6.8%). The Congressional Budget Office (CBO) baseline is a projection at a particular point in time of future federal spending on mandatory programs under current law. The baseline is the benchmark against which proposed changes in law are measured. The CBO develops the budget baseline under various laws and follows the supervision of the House and Senate Budget Committees. When a new bill is proposed that would affect mandatory spending, the score (cost impact) is measured in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Having a baseline essentially gives programs built-in future funding if policymakers decide that the programs should continue—that is, straightforward reauthorization would not have a scoring effect (budget neutral). Once a new law is passed, the projected outlays at enactment equal the baseline plus the score . This sum becomes the budget foundation of the new law. CBO periodically projects future government spending via its budget baselines, and evaluates proposed bills via scoring estimates. The baseline incorporates domestic and international economic conditions at the time the baseline is projected. Generally, a program with estimated mandatory spending in the last year of its authorization may be assumed to continue in the baseline as if there were no change in policy and it did not expire. This is the situation for most of the major, long-standing farm bill provisions such as the farm commodity programs or supplemental nutrition assistance. However, some programs do not continue in the baseline beyond the end of a farm bill because they are either programs with estimated mandatory spending less than a minimum $50 million scoring threshold in the last year of the farm bill, or new programs established after 1997 for which the Budget Committees have determined that mandatory spending shall not extend beyond expiration. This decision may have been made in consultation with the Agriculture Committees for a number of reasons, such as to reduce the program's 10-year cost when a farm bill is written or to prevent the program from having a continuing baseline. The 2014 farm bill had 39 programs without baseline beyond FY2018 that received $2.824 billion in mandatory funding over five years. The CBO baseline that was used to develop the 2018 farm bill was released in April 2018 (the first and sixth data columns in Table 1 ). It projected that if the 2014 farm bill were extended, as amended as of April 2018, farm bill programs would cost $426 billion over the next five years (FY2019-FY2023) and $867 billion over the next 10 years (FY2019-2028). Most of the 10-year amount, 77%, was in the Nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining 23%, $203 billion baseline, was for agricultural programs, mostly in crop insurance, farm commodity programs, and conservation. Other titles of the farm bill contributed about 1% of the baseline, some of which are funded primarily with discretionary spending. Table 2 presents the April 2018 baseline by farm bill title with some program-level details for select titles. The CBO score measures the budgetary impact of changes made by the 2018 farm bill. It is measured relative to its benchmark—the CBO baseline. Budget enforcement procedures follow an array of federal budget rules, such as \"PayGo,\" which required budgetary offsets to balance new spending to avoid increasing the federal deficit. Although the farm bill is a five-year authorization—the 2018 farm bill covers FY2019-FY2023—budget rules required it to be scored over a 10-year budget window. Thus, when the farm bill is discussed during legislative development, it may be more often presented by its effect over the 10-year budget window than the five-year duration of the law. Separately, statements about the total cost of the farm bill may be in terms of its five-year outlays (i.e., projected spending over the five-year life of the farm bill). Both can be accurate measures of the farm bill budget depending on the context. CBO released several interim scores of the 2018 farm bill during the various stages of its development. These include scores of the effects of the House-introduced bill ( H.R. 2 ), House-reported bill ( H.R. 2 ), Senate-reported bill ( S. 3042 ), House-passed bill ( H.R. 2 ) and the Senate-passed Amendment to H.R. 2 (the second, third, seventh and eighth columns in Table 1 ; see also the more detailed section-level scores in Appendix A ), Conference agreement for H.R. 2 (the fourth and ninth columns in Table 1 ; see also the more detailed section-level scores in Table 3 ). Subsequent to the House-passed score, CBO released a more detailed assessment of the farm commodity program payment limit provisions in the House-passed bill. This score did not change the amounts but explained background for the score of those provisions in greater detail. Figure 3 shows the distribution of the title-level changes (scores) in the 2018 farm bill conference agreement and the House- and Senate-passed bills that preceded it. Relative to the baseline, the overall score of the 2018 farm bill is budget neutral over a 10-year period. The House-passed bill would have decreased 10-year outlays by $1.8 billion, and the Senate-passed bill was budget neutral. The overall relatively small or budget-neutral net scores are the result of sometimes relatively larger increases and reductions across titles. Generally, the enacted farm bill follows the scoring approach of the Senate bill more closely than the House bill. In the new law, as in the Senate-passed bill, most of the reductions are from the Rural Development title. Six titles in the law have increased outlays over the 10-year period, including Commodities, Trade, Research, Energy, Horticulture, and Miscellaneous. The House-passed bill would have made 10-year reductions in outlays in the Conservation, Nutrition, Energy, and Crop Insurance titles that the conference agreement did not adopt. When separated into the five- and 10-year budget windows, each version of the 2018 farm bill shows a similar pattern of changes in projected outlays. Figure 4 show the scores for the first five years, the second five years, and the 10-year total for the enacted conference agreement. The enacted farm bill increases net outlays in the first five years by $1.8 billion, which is offset by the same amount of net reductions in outlays during the second five years. Therefore, the 10-year net score is budget neutral. In the enacted law, the Conservation and Nutrition titles—which have increases in outlays over the first five years—have decreases during the second five years. Both titles are budget-neutral over the 10-year period. This may occur because of the time needed to implement changes or to make provisions more appealing in the early years despite having less baseline for a future farm bill. A similar pattern held for the House-passed bill ( Figure 5 ) and the Senate-passed bill ( Figure 6 ). In both of those versions, the Conservation and Nutrition titles had increases in the first five years followed by decreases in the second five years. The House-passed bill had reductions in the Nutrition title that were not retained in the conference agreement. The Senate-passed bill would have reduced baseline for the Commodities title, whereas the conference agreement is projected to increase it. Some of the net scores for single titles presented above are the net result of increases and decreases by provisions within the same title. Sometimes, these increases or decreases are relatively large compared to the net title-level effect. These budget effects may reflect policy proposals that may not be apparent in the net title-level scores that are shown in the previous figures. For example In the enacted law, the Conservation title has one section with a $12.4 billion reduction over 10 years (reducing the Conservation Stewardship Program) and seven sections that add to $12.4 billion in increased spending ( Figure 7 ). In the House-passed bill, the Nutrition title had six sections that summed to a $22.0 billion reduction over 10 years (including those for work requirements) and 18 sections that added to $20.6 billion in increased spending. Similarly, the Conservation title had two sections that summed to a $12.6 billion reduction and eight sections that added to $11.8 billion in increased spending ( Figure 8 ). In the Senate-passed bill, none of the titles' section-by-section scores were as large as for the Nutrition and Conservation titles in the House bill. Nonetheless, the section-by-section scores of the Senate-passed bill showed both increases and decreases in the Conservation, Nutrition, Commodities and Miscellaneous titles ( Figure 9 ). For 23 of the 39 of the \"programs without baseline\" from the 2014 farm bill, the 2018 farm bill provides continuing funding and, in some cases, permanent baseline for future farm bills (see the footnotes in Table 3 ). Fourteen of the programs without baseline received mandatory funding during FY2019-FY2023 but no baseline beyond the end of the farm bill. Nine of the programs without baseline received mandatory funding and permanent baseline beyond the end of the farm bill. Three of these programs were combined with six others into six provisions in the 2018 farm bill. In addition, five provisions in the 2018 farm bill created new programs without baseline for the next farm bill. When a new law is passed, the projected cost at enactment equals the baseline plus the score . This sum becomes the foundation of the new law and may be compared to future CBO baselines as an indicator of how actual costs develop as the law is implemented and conditions change. Table 4 shows the result of this calculation by updating the farm bill baseline ( Table 2 ) by adding the score for programs that were changed by the farm bill ( Table 3 ). The $428 billion projected five-year total for the life of the 2018 farm bill (FY2019-FY2023) is illustrated in Figure 1 . Agriculture program-level detail is illustrated in Figure 2 . Table 1 summarizes these amounts by title for the five- and 10-year budget windows (the fifth and 10 th columns). SNAP accounts for 76% of the $428 billion five-year total. The remaining 24%, $102 billion of projected outlays, is for agricultural programs, mostly in crop insurance (8.9%), farm commodity programs (7.3%), and conservation (6.8%). Relative to historical farm bill spending, Figure 10 shows mandatory outlays for the four largest titles—Nutrition, Crop Insurance, Farm Commodity Programs, and Conservation—that account for 99% of projected spending in the 2018 farm bill. The figure shows the following trends: SNAP outlays, which compose most of the Nutrition title, increased markedly after the recession in 2009 and have been gradually decreasing since 2012. Crop insurance outlays increased steadily over the period, especially as higher market prices and program participation over the past decade have raised the value of insurable commodities. Farm commodity programs outlays generally rise and fall inversely with commodity markets. They were high after losses in the early 2000s, generally trended lower under the direct payment program, and tended to increase after a return to counter-cyclical programs in the 2014 farm bill. Conservation program outlays have grown steadily but have leveled off in recent years. Appendix A. Scores of House-Passed and Senate-Passed Versions of H.R. 2 Appendix B. Discretionary Authorizations In addition to providing mandatory spending, various sections of the farm bill authorize appropriations that may be provided in future discretionary appropriations acts. Such \"authorizations for appropriation\" are not actual funding but are essentially an indication from the authorizing committees to the appropriations committees about funding intentions. They are subject to budget enforcement via future appropriations bills. Although the score of the farm bill is primarily about mandatory spending, some CBO scoring documents include an estimate of the discretionary spending that would be needed to implement provisions that have authorizations of appropriations. The CBO score of the conference agreement did not address discretionary authorizations. However, earlier CBO scores of the House- and Senate-passed bills did summarize the authorizations for appropriation. Overall, the similarity between the scores of these bills may be an indicator of the authorization levels in the enacted farm bill. For the House-passed version of the farm bill, CBO estimated that implementing the provisions of H.R. 2 that specified authorizations of appropriations would cost $24.5 billion over the five-year period FY2019-FY2023, assuming appropriation of the specified amounts. For the Senate-passed version, the amount was slightly smaller at $23.7 billion. These projections were for the whole bill and not by title. However, the earlier committee-reported scores did estimate the authorizations by title, as shown in Table B-1 . Because the totals of the chamber-passed versions remain nearly the same as the committee-reported totals, the earlier title-level estimates may be indicative of the conference agreement. Three titles account for about 85% of the discretionary authorizations for appropriation in the House and Senate committee-reported farm bill scores: Trade, Research, and Rural Development ( Table B-1 ). Actual funding in annual Agriculture appropriations acts does not necessarily correlate to the authorization for appropriation in the farm bill. The annual authorization for appropriation provided in the 2018 farm bill is between $2 billion and $6 billion ( Table B-1 ), which for this comparison is broadly similar to nearly $7 billion in authorizations for appropriation that were in the 2014 farm bill. However, actual discretionary funding in recent Agricultural appropriations acts total in excess of $20 billion. The difference is because not all of the actual appropriations have their authorization in each farm bill. For example, the Agriculture appropriations act includes funding for salaries and expenses of USDA agencies that may be permanently authorized or is not necessarily reauthorized in the farm bill. Also, jurisdiction for appropriations acts may include agencies or programs that are not in the jurisdiction of the farm bill authorizing committees (such as the roughly $6 billion appropriation for the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children that is not in House Agriculture Committee jurisdiction).", "summary": "The farm bill is an omnibus, multiyear law that governs an array of agricultural and food programs. The farm bill has typically undergone reauthorization about every five years. The current farm bill—the Agriculture Improvement Act of 2018 (P.L. 115-334), often called the \"2018 farm bill\"—was enacted in December 2018 and expires in 2023. The farm bill provides an opportunity for Congress to choose how much support, if any, to provide for various agriculture and nutrition programs and how to allocate it among competing constituencies. Under congressional budgeting rules, many programs are assumed to continue beyond the end of a farm bill. From a budgetary perspective, this provides a baseline for comparing future spending reauthorizations, reallocations to other programs, and reductions to projected spending. Since 2000, congressional goals for the farm bill's budget have varied: The 2002 farm bill increased spending over 10 years, the 2008 farm bill was essentially budget neutral, the 2014 farm bill reduced spending, and the 2018 farm bill is budget neutral, according to the Congressional Budget Office (CBO). The farm bill authorizes programs in two spending categories: mandatory spending and discretionary spending. Mandatory spending is not only authorized but also actually provided via budget enforcement rules. Discretionary spending may be authorized in a farm bill but is not actually provided until budget decisions are made in a future annual appropriations act. The CBO baseline is a projection at a particular point in time of future federal spending on mandatory programs under current law. When a new bill is proposed that would affect mandatory spending, the cost impact (score) is measured in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Federal budget rules such as \"PayGo\" may require budgetary offsets to balance new spending so that there is no increase in the federal deficit. The April 2018 CBO baseline was the official benchmark to measure changes made by the 2018 farm bill. The five-year baseline was $426 billion over FY2019-FY2023 (what the 2014 farm bill would have spent had it been continued). The budgetary impact of the 2018 farm bill is measured relative to that baseline. Among its impacts are these four points: 1. The enacted farm bill increases net outlays in the first five years by $1.8 billion, which is offset by the same amount of net reductions in outlays during the second five years. Therefore, over 10 years, the net impact is budget neutral. 2. Eight titles in the enacted law have increased outlays over the five-year period, including Farm Commodities, Conservation, Trade, Nutrition, Research, Energy, Horticulture, and Miscellaneous. Two of those titles—Conservation and Nutrition—have reductions in the second five years of the budget window that make them budget neutral over 10 years. 3. Most of the budget reductions at the title level that provide offsets for the increases above, especially in the 10-year budget window, are from changes in the rural development title. 4. The 2018 farm bill provides continuing funding and, in some cases, permanent baseline, for 23 of the 39 so-called programs without baseline from the 2014 farm bill. Projected outlays for the 2018 farm bill at enactment are $428 billion over the FY2019-FY2023 five-year life of the act. The Nutrition title and its largest program, the Supplemental Nutrition Assistance Program (SNAP), account for $326 billion (76%) of those projected outlays. The remaining 24%, $102 billion, is for agricultural programs, mostly in crop insurance (8.9%), farm commodity programs (7.3%), and conservation (6.8%). Other titles of the farm bill account for 1% of the mandatory spending, some of which are funded primarily with discretionary spending. Historical trends in farm bill spending show increased SNAP outlays after the 2009 recession, increased crop insurance outlays based on insurable coverage, farm commodity programs outlays that vary inversely with markets, and steadily increasing conservation program outlays that have leveled off in recent years.", "document_type": "crs"}
{"report": "T he federal government collects various fees and other charges from businesses and households. Choosing to raise public funds via user fees, as opposed to other means such as taxes, has important administrative and economic consequences. Many fees stem from \"business-like activities,\" in which the government provides a service or benefit in return for payment. For example, many n ational p arks charge entry fees , which then help fund maintenance projects. Some fees are closely tied to regulatory or judicial activities, such as filing or inspection fees, which stem from the federal government's sovereign powers. Other federal fees or charges are intragovernmental transactions that do not involve the public. For example, the Office of Personnel Management (OPM) charges other federal agencies fees to cover the cost of background investigations. For many federal agencies, fees or user charges amount to a minimal portion of budgetary resources. Other regulatory agencies, such as the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC), the Patent and Trademark Office (PTO), and the Federal Trade Commission (FTC), are wholly or partially funded by user fees and other nontax receipts. User fees from the public accounted for $331 billion in FY2017, about a tenth of total federal receipts ( $3.32 trillion ). Fees and charges generally result from voluntary choices, such as entering a national park. By contrast, the collection of taxes ultimately relies on the government's sovereign power to compel payments. Fees may not be compulsory, but not paying them may make it impossible to carry out many activities legally. For instance, without paying passport application fees and obtaining a passport, people cannot fly to other countries. Nor can businesses issue securities without paying federal filing fees. The statutory basis for each particular fee or user charge varies in specificity and in the degree of discretion granted to the executive branch. For example, authorizing legislation might specify in detail how certain fees are imposed and how proceeds are used. In other cases, federal agencies rely on broader authorities to impose user fees. User fees have several advantages as a means of financing public activities. They are voluntary, they connect the burden of financing activities to those who directly benefit from them, and they can help decentralize decisionmaking by bypassing centralized allocation of resources. At times, proposals to raise fees may encounter less political resistance than proposals to raise an equivalent sum via taxes. On the other hand, the flow of user fees and charges may reflect fluctuations in economic conditions, which may complicate the financing of government operations. Some are also concerned that funding arrangements may bypass regular congressional scrutiny and dilute Congress's power of the purse. The Government Accountability Office (GAO) defines a user fee as a fee assessed to users for goods or services provided by the federal government. User fees generally apply to federal programs or activities that provide special benefits to identifiable recipients above and beyond what is normally available to the public. The Office of Management and Budget (OMB) defines the term user charge to include transactions not normally considered fees, such as land or asset sales. OMB's budget preparation documents state that user charges include not only proceeds from selling postage stamps, electricity, and Medicare Part B premiums, but also sales of assets and natural resources, among other categories. The federal government, which operates on a modified cash accounting basis, does not recognize in its budgetary accounts the loss of asset values when it sells assets or natural resources, as a private firm would using typical business accounting methods. For instance, if the government were to sell oil at a price of $60 per barrel that it bought at $120 per barrel, only the current revenues would be reflected in budget accounts. A private firm would normally adjust its balance sheet to reflect a loss. OMB designates whether each account receives collections associated with user charges, and that information is contained within OMB's MAX budget data system. OMB has not released data on those designations. The Budget Appendix that OMB issues annually, while not including information on that designation, does present detailed subaccount-level data that often indicate whether a federal program's budgetary resources rely on fee income. The format of the Budget Appendix, however, makes it an impractical source of data for government-wide research. As far as CRS can determine, a comprehensive and authoritative list of federal fees is not publicly available. Budget and financial documents from OMB and the U.S. Treasury, however, do provide detailed information on offsetting collections and offsetting receipts—the budget categories that typically contain user fees and other charges—as well as information on budgetary accounts. In some cases, account descriptions clearly indicate an association with one or more fees. In other cases, however, whether or not an account receives fees is unclear. For example, an account might be labeled as miscellaneous receipts, or as fines, fees, and penalties. User fees classified as offsetting collections, which go into expenditure accounts, generally can be used without further congressional action. Offsetting collections, as the term suggests, typically count as offsets to spending when accounts are scored to check compliance with various budgetary controls. Scorekeeping is the process of measuring the budgetary effects of legislation. For example, the Budget Control Act of 2011 ( P.L. 112-25 ) imposed caps on specified categories of discretionary budget authority. When evaluating compliance with those caps, scorekeepers (CBO, OMB, and the b udget c ommittees) subtract offsetting collections from budget authority totals. User fees or charges are collected into the U.S. Treasury General Fund or into special fund accounts. Offsetting receipts, which go into receipt accounts, typically require approval through appropriations acts. User fees can be classified as discretionary or mandatory spending, depending on how those fees are authorized. Some payments to the federal government, such as electromagnetic spectrum auction proceeds or offshore continental shelf oil and gas leases that are classified as undistributed offsetting receipts, do not offset spending of any agency, but are recorded as reducing the federal deficit. OMB provides a discussion of budget concepts related to offsetting receipts and offsetting collections, which include the bulk of user fees and charges in terms of dollar amounts, in the President's annual budget submission. More detailed supplementary tables that summarize collections of offsetting receipts and offsetting collections are also provided online. The U.S. Treasury's Bureau of the Fiscal Service issues its annual Combined Statement that reports budget data for all federal agencies at an account level as well as detailed summaries of receipts, including user fees. The Monthly Treasury Statement and a quarterly statement of offsetting receipts provide data on an ongoing basis. As the Treasury's role and responsibilities differ from those of OMB, totals from Treasury sources may not coincide with data issued by OMB due to various budgetary reporting adjustments. GAO has analyzed the administration of various user fees and has set out some principles for the design of those fees . User fees, as noted above, can tie benefits enjoyed by households or firms—such as passports, access to national parks, or approvals to raise investment funds from the public—to payments that can help defray public costs of providing them. An economist's rule of thumb known as the benefit principle, which suggests linking the fiscal burden of publicly provided benefits to those who enjoy those benefits, can promote fairness and efficiency. For example, many would contend that those with the opportunity to travel abroad should shoulder more of the costs of reviewing passport applications and issuing documents than those who do not. Moreover, if fees are set at levels that match the incremental cost of providing benefits, then when an agency is called to expand its work—such as an uptick in demand for passports, park visits, or company registrations—then those fees could fund the needed extra resources. Matching fees to incremental costs, however, is difficult where demand is irregular or unpredictable. OMB guidelines on user fees outline aims similar to the benefit principle, mandating that federal agencies ensure that each service, sale, or use of Government goods or resources provided by an agency to specific recipients be self-sustaining; promote efficient allocation of the Nation's resources by establishing charges for special benefits provided to the recipient that are at least as great as costs to the Government of providing the special benefits; and allow the private sector to compete with the Government without disadvantage in supplying comparable services, resources, or goods where appropriate. OMB mandates that agencies review user fees every other year. OMB also encourages agencies seeking new authority to assess fees to \"seek to remove restraints on user charges.\" In some cases, federal agencies and regulated industries negotiate over user fee levels and the improvements in federal regulatory operations supported in large part by those fees. For instance, pharmaceutical companies negotiate with the Food and Drug Administration (FDA) over fees charged to review drug applications. Over time, the scope of FDA activities supported in part by fees has expanded. Some contend that the FDA's increasing reliance on user fees has tilted the agency's priorities toward industry interests and away from consumer protection responsibilities. One 2005 analysis of the FDA drug review process found that approval times decreased after legislation expanded the agency's reliance on user fees, while it found no statistically significant evidence of a decrease in one proxy measure of drug safety. Federal agencies such as the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) are largely supported from amounts paid by covered industries. The costs and benefits associated with many goods and services mainly involve buyers and sellers. For example, buying a stamp allows a correspondent to mail a letter, which leads the postal service to incur roughly similar costs. Others—at least to a first approximation—are not affected. For other goods, market or market-like transactions may impose costs or convey benefits on third parties. When prices paid by buyers or received by sellers do not reflect spillover costs or benefits to others, economic theory suggests levels of transactions will be inefficient, in the sense that alternative economic arrangements could make all participants—at least potentially—better off. The benefit principle is in some ways similar to the concept of Pigou taxation—that taxing goods linked to negative spillovers, such as pollution, can enhance economic efficiency by diminishing those spillovers. More generally, spillovers are costs borne or benefits enjoyed by one party due to activities of another party where no voluntary exchange or market transaction occurs. Conversely, subsidizing goods or services that provide beneficial spillovers can also increase economic efficiency. For instance, some justify federal tax subsidies to home ownership on the grounds that homeowners generate positive spillovers in their neighborhoods. Charges aimed at limiting negative spillovers are known as Pigou taxes, after the English economist who first articulated the concept. Pigou taxation provides a more narrowly based efficiency rationale for user fees that would limit negative spillovers. Moreover, administering an excise tax imposed on Pigou tax grounds—which would involve a private vendor collecting and remitting tax revenues—differs from user fees and charges collected directly by a government. Nonetheless, the same logic that raising the end-user price of goods linked to negative spillovers can enhance economic efficiency can be applied to the design of user fees. For instance, federal policymakers might choose to charge pharmaceutical companies application fees lower than the full cost of associated approval processes because introducing new drugs onto the market may have wider positive social benefits. The economic suitability of the benefit principle depends on whether the publicly provided benefit has meaningful spillover effects. For example, benefits generated by governments such as national defense or support for basic research are widely shared and thus, arguably, are appropriately supported by general taxation. By contrast, while the broader economy benefits from the ability of firms to raise capital in transparent and competitive markets, the chief beneficiary of having a security offering approved is the issuing firm. Similarly, a family visiting a federal park presumably benefits more than another family that stayed at home. Financing more of park maintenance through general taxation would thus involve an implicit subsidy from nonusers to users, something that reliance on user fees would mitigate. In other cases, the linkage between fees and benefits is not apparent. For example, a 2009 law ( Travel Promotion Act of 2009 , TPA; P.L. 111-145 ) imposed a $10 fee on most international air travelers from visa-waiver countries to fund tourism marketing initiatives . An exact match between the level of user fees and publicly provided benefits may be hard or impossible to determine in many situations. While public corporations operating on a largely commercial basis, such as the Tennessee Valley Authority, may set prices and fees much as a private firm would, many of the federal government's activities are within the public sector because past policymakers considered them to be closely associated with inherently governmental functions—such as providing security—or as services that the private sector would have had trouble providing, such as basic research. The U.S. Postal Service sets rates to cover nearly all of its costs according to a 2006 statutory framework . Subsidized rates for certain classes of mail users, such as the blind, reflect adaptation of pricing schemes to broader social priorities. The proper boundaries between public, private, and nonprofit sectors, of course, is an ongoing concern of policymakers. In many cases, it is difficult to design fees, charges, or taxes that directly influence activities generating negative spillovers. For instance, cars and trucks generate air pollution as well as wear and tear on roadways. Excise taxes on gasoline and other fuels—if set at levels that approximate the costs of pollution and road wear—can motivate drivers to use roads less often when the total costs of driving, including pollution, road wear, and other costs, exceed the benefits of driving. Thus, excise taxes can be a way of using the price mechanism to induce individuals to make decisions that lead to more economically efficient outcomes. Setting excise taxes at levels that reflect all costs to third parties may involve complex estimates. For instance, while higher fuel usage implies greater use of roads and more production of air pollutants, several other factors complicate that linkage. Heavier vehicles may cause disproportionate damage to roads. Vehicles vary widely in fuel efficiency and in the volume of pollutants generated. In addition, driving also imposes congestion costs on other drivers, and those costs vary by location and time of day. One recent analysis estimated that fuel excise taxes addressed less than a third of the air-pollution-related efficiency losses. While excise taxes are a public finance instrument that is distinct from user fees and charges, similar complications may be encountered. In some cases, adopting new fiscal instruments—such as using road charges or tolls—may prove more effective tools in increasing efficiency. In the case of transportation policy, increased economic efficiency, depending on how consumers and policymakers respond, might manifest itself in some combination of higher after-tax incomes, greater provision of publicly provided goods, cleaner air, and less-congested highways. Changes in the design of some user fees or charges might also yield analogous efficiency improvements. Some observers have raised concerns that federal agencies that rely more heavily on user fees may put greater weight on the interests of those paying fees rather than the broader public interest. For instance, the U.S. Patent and Trademark Office charges application and examination fees to those seeking to obtain a patent. Certainly, the applicant would be a central beneficiary of a patent, if granted, although many others—including other inventors, business competitors, and consumers—might also be significantly harmed or benefited. Some contend that the Patent Office's reliance on fees motivates it to approve invalid patents . Tying patent fees narrowly to the benefits obtained by the applicant, while overlooking wider spillover effects, might then result in poor decisions. Of course, nonfinancial policy instruments, such as applicable laws, regulations, or congressional oversight, may affect outcomes more directly. Administrative concerns may also play a role. In some cases, where the costs of collecting fees are high relative to the costs of providing public services, imposing user fees may be a suboptimal choice of funding. For instance, federal courts collect more in PACER fees (which provide access to court documents ) than is needed to maintain the underlying computer system , with excess fees being earmarked for other court improvements. Some argue that funding that system and other court improvements with general revenues would allow broader access to court filings and related public documents, which one proposal ( H.R. 6714 introduced in the 115 th Congress ) would have implemented. Charging access fees above incremental costs—which for electronic documents may be minimal—can limit access to public information. Eliminating PACER user fees , however, may require Congress to shift that fiscal burden elsewhere. Other policy concerns also may play a role. Ability to pay among households varies widely; a national park entrance fee that one family regarded as trivial might deter another family. Policymakers may also wish to express preferences for identifiable groups, such as the elderly, children, or veterans. The classification of fees, charges, taxes, and even negative loan subsidy amounts hinges on budget concepts outlined above along with scorekeeping rules and precedents. In some cases, the distinctions made to categorize a given receipt might seem arbitrary to some. For example, the Travel Promotion Act fees imposed on most international air travelers convey n o special benefit on them, but are not categorized a s tax es . Refundable biofuel tax credits are counted as negative taxes in budget documents rather than as subsidy outlays. Those distinctions, however, can affect the tax treatment of those receipts. For instance, a firm can generally deduct an excise tax from its gross revenues, but typically cannot deduct a fee. Some governments have instituted user fees to fill shortfalls in tax revenues. The economic burden of higher fees or charges might be less obvious and therefore subject to less resistance than broad-based taxes. For example, policymakers in several states have sought to avoid increases in general taxes by increasing fee revenues. That strategy may have two downsides. First, more narrowly focused fees set at higher levels could cause greater economic distortions than smaller taxes applied to a broader base. Second, more narrowly based fees might be less stable in economic downturns. To the extent that fees diverge from the incremental costs of publicly provided services, sudden fiscal adjustments might be required. If benefits from federal operations are distributed narrowly enough to justify financing them via user fees or charges, one might ask whether those activities should be carried out by the private sector. State and local governments and the federal government have privatized many services previously provided by government. Foreign governments have also privatized provision of goods and services once delivered by the public sector. Some activities, however, may involve inherently governmental responsibilities that would be difficult to devolve to the private sector. A 1997 GAO report noted that rigorous evaluations of cost savings of privatization initiatives at the state and local government level were not common. GAO also noted that privatization increased the need for oversight and evaluation, although some local officials deemed that the \"weakest link\" in privatization initiatives. Others note that while privatization may yield efficiency gains, it may also lead to policy or operational failure. Conflicts between executive branch agencies, which often have sought greater flexibility to use funds to respond to public priorities as they see them, and Congress, which has sought to defend its fiscal prerogatives and ability to set federal policy priorities, are long-standing. In 1849, Congress sought to bolster its powers of the purse by passing the Miscellaneous Receipts Act , which required all government revenues, aside from postal sales, to be deposited into the U.S. Treasury \"at as early a day as practicable, without any abatement or deduction on account of salary, fees, costs, charges, expenses, or claim of any description whatever…\" Over time, Congress set out exceptions to the modern version of the Miscellaneous Receipts Act that let agencies charge user fees, accept gifts, and collect and retain fines and penalties within specified limits or as detailed in appropriations laws. Some legislative proposals, such as H.R. 850 (115 th Congress) , would eliminate most exceptions and require most fees and charges to be deposited in the U.S. Treasury General Fund. Congress could fund agencies and activities directly through annual appropriations. Funding through lump-sum appropriations, as opposed to via user fees, however, might change incentives facing decisionmakers and could affect federal operations and programmatic outcomes. Congress could constrain agency discretion by requiring more user fee proceeds be either subject to annual appropriations or deposited in the U.S. Treasury General Fund, although that may limit agencies' capacity to respond to new public demands and other changing conditions, as the Government Accountability Office (GAO) has noted . Some inspectors general and congressional committees have also called for tighter, more efficient, and more consistent financial management of user fee funds. During the mid-1980s, Congress, with GAO support, conducted a comprehensive review of so-called \"backdoor spending\"—an informal term for budget authority provided in laws other than appropriations acts—including spending supported by user fees, which was updated in 1996 . A narrower follow-up in 2017 covering five agencies concluded that \"all entities GAO examined have policies and procedures to manage and report on their permanent funding authorities,\" but that \"some, however, could improve practices to manage funds and report information that facilitates oversight.\" Sweeping changes to the budgetary treatment of user fees, however, could add new pressures on the congressional appropriations process. Proposals to require that most fees be collected into the Treasury General Fund and that activities previously supported by those fees be funded by annual appropriations could create new demands on appropriations committees. Such proposals could also affect the division of responsibilities among authorizing committees and appropriations committees. Statutory texts governing many fees, including those noted above, have evolved over many years and involve substantive policy decisions, often related to industry or programmatic concerns. Congress may also enhance its oversight of agencies reliant on user fees by requiring more timely and detailed financial reports as well as more precise and systematic explanations of linkages between those fees and associated programs. OMB and Treasury issue extensive information on user fees and charges. Nonetheless, the format and level of detail of published data make it difficult to address some government-wide policy questions regarding user fees and charges. Congress could modify laws governing the President's budget submission (31 U.S.C. 1105) to require OMB to release data that it collects on which budget accounts receive material amounts of user fee and user charge revenues. That could allow Congress to track and analyze user fees and charges more easily. In particular, it would also provide a means to distinguish discretionary and mandatory fees and charges, which could be useful in understanding the effects or constraints imposed by budget enforcement measures. That might provide Congress with a clearer view of its fiscal options when considering budgetary measures. Mandating that OMB or other agencies provide more data would probably require additional budgetary resources to cover costs of new personnel and capabilities. Congress can promote economic efficiency and an equitable sharing of public burdens by choosing appropriate means of financing federal operations. User fees and charges, as noted above, can help tie the costs of supporting specific federal operations with those who benefit from them. Even if closely regulated industries may find federal requirements, inspections, or approval processes burdensome, they also presumably benefit from the increased demand for their products that carry the imprimatur of explicit or implicit federal approval. Federal regulation and inspection operations, however, also serve broader interests of consumers, taxpayers, and related industries. To the extent that inherently governmental responsibilities motivate federal operations, the argument for using general revenues may be stronger. If benefits of federal actions are more narrowly distributed, the case for financing operations with user fees or charges may become stronger. Of course, the structure and administration of federal inspection and regulation plays a central role in enhancing efficiency and minimizing burdens borne relative to benefits enjoyed.", "summary": "The federal government collects various fees from businesses and households. Choosing to raise public funds via user fees, as opposed to other means such as taxes, has important administrative and economic consequences. Many fees stem from \"business-like activities,\" in which the government provides a service or benefit in return for payment. For example, many national parks charge entry fees, which then help fund maintenance projects. Such fees and charges that result from voluntary choices, such as entering a national park, are distinguished from taxes—which stem from the government's sovereign power to compel payments. The Government Accountability Office (GAO) defines a user fee as a \"fee assessed to users for goods or services provided by the federal government. User fees generally apply to federal programs or activities that provide special benefits to identifiable recipients above and beyond what is normally available to the public.\" User fees and charges have several advantages as a means of financing public activities. They are voluntary, they connect the burden of financing activities to those who directly benefit from them, and can help decentralize decisionmaking by bypassing centralized allocation of resources. Some have expressed concerns that user fee arrangements may bypass regular congressional scrutiny and dilute Congress's power of the purse. Collections of fees and charges may also be more sensitive to economic fluctuations, which could complicate financing of programs dependent on those revenue streams. Many user fees or charges are classified as offsetting collections, which are deposited into expenditure accounts. Offsetting collections can be used to offset agency spending and typically require no further congressional approval to use. Other fees and charges are classified as offsetting receipts, which are collected into revenue accounts and typically require congressional authorization to be spent. User fees and charges can be classified as discretionary or mandatory spending, depending on how they are legally authorized. The levels and administration of some fees are specified in detailed statutory text, while other fees are created under broader agency authorities. Certain agencies, such as the Food and Drug Administration (FDA), have increased their reliance on user fees in past decades. Some critics have raised concerns that increased reliance on user fees could shift incentives facing those agencies. Some legislative proposals, such as H.R. 850 introduced in the 115th Congress, would limit or eliminate most exceptions and require most fees and charges to be deposited in the U.S. Treasury General Fund. Congress could fund agencies and activities now funded in whole or in part via user fees directly through the annual appropriations process. Such proposals would mark a departure from past practice. Statutory text governing many fees has evolved over many years and involves substantive policy decisions, often related to the industry or programmatic concerns. A general change in funding from user fees and charges to annual appropriations would likely shift the division of responsibilities between authorizing committees and appropriations committees. Congress may also enhance its oversight of agencies reliant on user fees by requiring more timely and detailed financial reports as well as more precise and systematic explanations of linkages between those fees and associated programs. Congress could also ask for greater transparency in fiscal data. While the Office of Management and Budget (OMB) and the U.S. Treasury Bureau of the Fiscal Service provide extensive data on user fees and charges, it is difficult to conduct governmentwide analyses using publicly available sources. Congress could mandate more detailed and more easily accessed data on user fees and charges. Additional funding may be needed to develop the capacity to issue those data.", "document_type": "crs"}
{"report": "The U.S. government administers multiple international food assistance programs that aim to alleviate hunger and improve food security in other countries. Some of these programs provide emergency assistance to people affected by conflict or natural disaster. Other programs provide nonemergency assistance to address chronic poverty and hunger, such as providing food to people during a seasonal food shortage or training parents and community health workers in nutrition. Current international food assistance programs originated in 1954 with the passage of the Food for Peace Act (P.L. 83-480), also referred to as P.L. 480 . Historically, the United States has provided international food assistance primarily through in-kind a id , which ships U.S. commodities to countries in need. Congress funds in-kind food aid programs through the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act—known as the Agriculture appropriations bill. In 2010, Congress established the Emergency Food Security Program (EFSP), which provides primarily cash-based food assistance. Cash-based assistance provides recipients with the means to acquire food, including through cash transfers, vouchers, or locally and regionally procured food —food purchased in the country or region where it is to be distributed rather than from the United States. Congress funds EFSP through the International Disaster Assistance (IDA) account in the State, Foreign Operations, and Related Programs (SFOPS) appropriations bill. The IDA account also funds nonfood emergency humanitarian assistance, such as provision of shelter and health services. This report provides a brief overview of the international food aid-related provisions in the FY2018 and FY2019 enacted Agriculture Appropriations Acts—Division A of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) and Division B of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). It does not cover programs funded through the SFOPS appropriations bill. Congress funds most U.S. international food aid programs with discretionary funding provided through annual appropriations bills. Some international food aid programs receive mandatory funding financed through USDA's Commodity Credit Corporation (CCC) and do not require a separate appropriation. Congress authorizes discretionary and mandatory funding levels for international food aid programs in periodic farm bills, most recently the Agriculture Improvement Act of 2018 ( P.L. 115-334 ). Table 1 lists each international food aid program that receives funding through agriculture appropriations. The Food for Peace Act of 1954 (P.L. 83-480), as amended, authorizes four international food assistance programs. The Agriculture appropriations bill provides discretionary funding for three Food for Peace (FFP) programs—FFP Title I, FFP Title II, and FFP Title V—which are discussed below. 1. FFP Title I provides concessional sales —sales on credit terms below market rates—of U.S. commodities to governments of developing countries and private entities. USDA administers FFP Title I. Congress has not appropriated funds for new FFP Title I sales since FY2006 but continues to appropriate funds to administer the FFP Title I loans provided before FY2006. The appropriation for FFP Title I administrative expenses also funds administrative expenses for the Food for Progress Program, which supports economic development projects. 2. FFP Title II is a donation program under which U.S. agricultural commodities are distributed to recipients in foreign countries. The U.S. Agency for International Development (USAID) administers FFP Title II. Since the mid-1980s, FFP Title II has received the majority of funds appropriated to international food aid in the Agriculture appropriations bill. 3. FFP Title V, also known as the Farmer-to-Farmer Program, finances short-term placements for U.S. volunteers to provide technical assistance to farmers in developing countries. USAID administers the Farmer-to-Farmer Program. The program does not receive direct appropriations, but receives a portion of the total funds appropriated for FFP programs. Statute requires that the program receive the greater of $15 million or 0.6% of the funds annually appropriated for FFP programs. The Agriculture appropriations bill also provides funding for the McGovern-Dole International Food for Education and Child Nutrition Program. This program donates U.S. agricultural commodities to school feeding programs and pregnant or nursing mothers in qualifying countries. Congress has authorized certain U.S. international food aid programs to receive mandatory funding. The Food for Progress Program donates U.S. agricultural commodities to governments or organizations to be monetized —sold on local markets in recipient countries to generate proceeds for economic development projects. Congress has authorized Food for Progress to receive both mandatory and discretionary funding. The program receives discretionary funding for administrative expenses through the appropriation for FFP Title I administrative expenses. The Bill Emerson Humanitarian Trust (BEHT) is a reserve of funds or commodities held by the CCC. USDA can use BEHT funds or commodities to supplement FFP Title II activities, especially when FFP Title II funds alone cannot meet international emergency food needs. If USDA provides aid through BEHT, Congress may appropriate funds to the CCC in a subsequent fiscal year to reimburse the CCC for the value of the released funds or commodities. USDA did not release funds or commodities from BEHT in FY2017 or FY2018, and Congress did not appropriate any BEHT reimbursement funds to the CCC in FY2018 or FY2019. The Trump Administration's FY2018 budget request proposed eliminating McGovern-Dole and FFP Title II and moving funding for international food aid to the IDA account within the SFOPS appropriations bill. The FY2019 budget request repeated the proposed eliminations and reorganization from the FY2018 request. It also contained a new proposal to eliminate Food for Progress. Congress did not adopt the Administration's FY2018 or FY2019 proposals to eliminate FFP Title II, McGovern-Dole, or Food for Progress. This section summarizes the FY2018 and FY2019 Administration's budget requests for U.S. international food aid programs. For FY2018, the Trump Administration requested discretionary funding for one international food aid program account. The Administration requested $149,000 for administrative expenses to carry out Food for Progress projects and existing FFP Title I loans. This amount would have been equal to the FY2017 enacted amount for administrative expenses. The FY2018 request proposed eliminating McGovern-Dole \"as part of the Administration's effort to reprioritize Federal spending.\" The Administration stated that \"in the most recent report in 2011, the [Government Accountability Office (GAO)] found weaknesses in performance monitoring, program evaluations, and prompt closeout of agreements.\" According to the GAO's Recommendations Database, USDA has taken actions to satisfy the three recommendations made in the 2011 audit, and these recommendations have been closed as of July 2015. The Administration also proposed eliminating FFP Title II. The Administration stated: \"There is no funding request for [FFP] Title II, as part of an Administration effort to streamline foreign assistance funding, prioritize funding, and use funding as effectively and efficiently as possible. The 2018 request includes funding for emergency food needs within the International Disaster Assistance account.\" Eliminating FFP Title II would fund the majority of U.S. international food assistance through the IDA account in the SFOPS appropriations rather than shared between IDA and the FFP Title II account in the Agriculture appropriations bill. The IDA account provides funding for EFSP. FFP Title II and EFSP account for the majority of U.S. international food assistance funding, representing 87% of total international food assistance outlays in FY2016. Combined FY2016 outlays for FFP Title II and EFSP totaled $2.730 billion. The Administration's FY2018 SFOPS budget request proposed that $1.511 billion of IDA funds be directed to international food assistance. This amount would have been 45% less than combined FY2016 outlays for FFP Title II and EFSP. In its FY2019 request, the Trump Administration repeated many of its proposals from FY2018, including eliminating McGovern-Dole and FFP Title II. The Administration's FY2019 SFOPS budget request proposed $1.554 billion of IDA funds be used for emergency food assistance. This amount would be 43% less than the combined FY2016 outlays for FFP Title II and EFSP, which totaled $2.730 billion. The Administration also proposed eliminating Food for Progress, a change from its FY2018 budget request. The Administration requested $142,000 for administrative expenses to carry out existing Food for Progress projects and existing FFP Title I loans. This amount is 4.7% less than the $149,000 that Congress enacted for administrative expenses in FY2018. Moving funding from FFP Title II to IDA could potentially change how the United States delivers food aid to recipient countries. Statute requires that nearly all aid distributed under FFP Title II be in-kind aid. EFSP, which Congress funds through the IDA account, does not have a statutory requirement to provide a portion of assistance as in-kind aid. EFSP can provide in-kind aid or cash-based assistance, such as direct cash transfers, vouchers, or locally and regionally procured food. Shifting international food aid funding from FFP Title II to IDA could increase the portion of food assistance provided as cash-based assistance rather than in-kind aid. Proposals to shift U.S. international food assistance funding from in-kind food aid to cash-based food assistance are not new. Both the Obama and George W. Bush Administrations proposed increasing the portion of U.S. international food aid delivered as cash-based assistance. Some proponents of increasing the use of cash-based assistance argue that it could improve program efficiency. However, some interested parties assert that the Trump Administration's proposed decrease in overall funding for international food assistance could result in fewer people receiving assistance and therefore counteract potential efficiency gains. Some opponents of increasing the share of food assistance that is cash-based rather than in-kind maintain that in-kind aid ensures that the United States provides high-quality food to recipients. Some opponents also assert that increasing the use of cash-based assistance could diminish support for international food aid programs among certain stakeholders, such as selected agricultural commodity groups, and potentially some lawmakers. Both the FY2018 and FY2019 Agriculture Appropriations Acts provided funding for U.S. international food aid programs in the Foreign Assistance and Related Programs (Title V) and General Provisions (Title VII) titles. This included funding for FFP Title II and McGovern-Dole. The acts also provided funding for administrative expenses to manage existing FFP Title I loans that originated while the FFP Title I program was active. The FY2019 act also provided funding for the Food for Progress program, which typically receives only mandatory funding. Figure 1 shows funding trends for international food aid programs funded through Agriculture appropriations bills for FY2013-FY2019. The FY2018 Agriculture Appropriations Act (Division A of P.L. 115-141 ) provided $1.924 billion for international food aid programs, a 7% increase from the FY2017 enacted total of $1.802 billion ( Table 2 ). The FY2018 total was also an increase from the FY2018 Senate-passed ($1.807 billion) and House-passed ($1.602 billion) Agriculture appropriations bills. Congress did not adopt the Administration's FY2018 proposals to eliminate FFP Title II or McGovern-Dole. The FY2018 act provided $1.716 billion for FFP Title II, a 7% increase from the $1.6 billion provided in FY2017 Agriculture appropriations. In FY2017, Congress directed $300 million of IDA funds in SFOPS appropriations be transferred to the FFP Title II account in Agriculture appropriations ( P.L. 115-31 , Division J, §8005(a)(1)(A)). When including this transfer of funds, FFP Title II received a total of $1.9 billion in funding in FY2017. Total FFP Title II funding of $1.716 in FY2018 would represent a 10% decrease from the FY2017 total of $1.9 billion. FY2018 enacted funding of $1.716 billion for FFP Title II includes $1.6 billion provided in the Foreign Assistance title and $116 million provided in the General Provisions title of the Agriculture Appropriations Act. The funding Congress provides in the Foreign Assistance title is a base amount that is often compared across fiscal years to determine whether program funding has increased or decreased. Providing additional FFP Title II funding in the General Provisions title effectively increases funding available for FFP Title II in a given fiscal year without increasing base funding in the Foreign Assistance title. The FY2018 act also provided $207.6 million for McGovern-Dole, a 3% increase from the $201.6 million that Congress provided in FY2017. Congress directed that $10 million of McGovern-Dole funding be made available for local and regional procurement (LRP), a $5 million increase from the $5 million set-aside for LRP in FY2017. The FY2018 act also provided $149,000 for FFP Title I and Food for Progress administrative expenses, which was unchanged from the amount enacted for FY2017. The FY2019 Agriculture Appropriations Act (Division B of P.L. 116-6 ) provides $1.942 billion in total funding for international food aid programs, a 1% increase from the FY2018 enacted amount of $1.924 billion. The enacted total for FY2019 is also an increase from the FY2019 Senate-passed ($1.926 billion) and House-reported ($1.743 billion) Agriculture appropriations bills. Congress did not adopt the Administration's FY2019 proposals to eliminate FFP Title II, McGovern-Dole, or Food for Progress. The FY2019 act provides $1.716 billion for FFP Title II, equal to the FY2018 enacted amount. This includes $1.5 billion in the Foreign Assistance title and an additional $216 million in the General Provisions title. The act also provides $210.3 million for McGovern-Dole, a 1% increase from the $207.6 million provided in FY2018. The FY2019 act also directs $15 million of McGovern-Dole funding be made available for LRP, a $5 million increase from the $10 million set-aside for LRP in FY2018. The FY2019 act provides $142,000 for FFP Title I and Food for Progress administrative expenses, a 5% decrease from the FY2018 enacted amount of $149,000. The act also provides $16 million for Food for Progress in the General Provisions title, including $6 million in discretionary appropriations and a $10 million Change in Mandatory Program Spending (CHIMP) increase. The FY2019 conference report states that \"this increase is a restoration of funding from reductions occurring in prior years and does not indicate support for expanding or continuing the practice of monetization in food aid programs.\" The FY2019 House-reported bill would have provided $35 million for Food for Progress. Neither the FY2018 act, the FY2019 Administration's budget request, nor the FY2019 Senate-passed bill included discretionary funding for Food for Progress. Food for Progress has not typically received discretionary appropriations; rather it has relied entirely on mandatory funding delivered through the CCC. Table 2 details appropriations for international food aid programs for FY2017-FY2019, including proposed funding levels in the Administration's FY2018 and FY2019 budget requests and in the House and Senate Agriculture appropriations bills for FY2018 and FY2019. In addition to providing funding, the agriculture appropriations bill may contain policy-related provisions that direct how the executive branch should spend certain funds. Provisions included in appropriations bill text have the force of law but generally only for the duration of the fiscal year for which the bill provides appropriations. Policy-related provisions generally do not amend the U.S. Code . Table 3 compares select policy-related provisions pertaining to U.S. international food aid programs from the Foreign Assistance and Related Programs (Title V) and General Provisions (Title VII) titles of the FY2018 and FY2019 Agriculture Appropriations Acts. The explanatory statement that accompanies the appropriations act, as well as the committee reports that accompany the House and Senate committee-reported bills, can provide statements of support for certain programs or directions to federal agencies on how to spend certain funding provided in the appropriations bill. While these documents do not have the force of law, they can express congressional intent. The committee reports and explanatory statement may need to be read together to capture all of the congressional intent for a given fiscal year. Table 4 compares selected policy-related provisions pertaining to U.S. international food aid programs from the FY2018 and FY2019 House and Senate committee reports and explanatory statement for the FY2019 Agriculture Appropriations Act. The FY2018 column includes references to the House (H) and Senate (S) committee reports to allow for consideration of congressional intent. The explanatory statement for the FY2018 Agriculture Appropriations Act did not contain policy-related provisions pertaining to U.S. international food aid programs.", "summary": "The Agriculture appropriations bill—formally known as the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act—funds the U.S. Department of Agriculture (USDA) except for the Forest Service. This includes funding for certain U.S. international food aid programs. In March 2018, President Trump signed the Consolidated Appropriations Act, 2018 (P.L. 115-141), an omnibus appropriations act for FY2018, into law. In February 2019, President Trump signed the Consolidated Appropriations Act, 2019 (P.L. 116-6), an omnibus appropriations act for FY2019, into law. The FY2018 and FY2019 Agriculture Appropriations Acts—Division A of P.L. 115-141 and Division B of P.L. 116-6, respectively—include funding for certain U.S. international food aid programs, such as the Food for Peace (FFP) Title II Program and the McGovern-Dole International Food for Education and Child Nutrition Program. Other international food aid programs receive mandatory funding and do not rely on discretionary funding provided through annual appropriations. Congress authorizes discretionary and mandatory funding levels for international food aid programs in periodic farm bills, most recently the Agriculture Improvement Act of 2018 (P.L. 115-334). This analysis covers appropriations for U.S. international food aid programs that Congress funds through agriculture appropriations bills. It does not cover appropriations for international food assistance or agricultural development programs that Congress funds in State, Foreign Operations, and Related Programs (SFOPS) appropriations bills, such as the Emergency Food Security Program (EFSP) or the Feed the Future Program. In FY2018, Congress provided a total of $1.924 billion in funding for U.S. international food aid programs, a 7% increase from the $1.802 billion provided in FY2017. In FY2019, Congress provided $1.942 billion in funding for U.S. international food aid programs, a 1% increase from FY2018 enacted levels. In addition to providing funding for U.S. international food aid programs, agriculture appropriations bills may also include policy-related provisions that direct how the executive branch should carry out certain appropriations. The FY2018 and FY2019 Agriculture Appropriations Acts, as well as House and Senate Agriculture appropriations bills for those fiscal years, include policy provisions related to international food aid programs. For example, one provision directs that a certain amount of the funds appropriated for the McGovern-Dole Program be used to provide locally and regionally procured food assistance—food assistance purchased in the country or region where it is to be distributed rather than in the United States.", "document_type": "crs"}
{"report": "The 116 th Congress may consider a variety of housing-related issues. These may involve assisted housing programs, such as those administered by the Department of Housing and Urban Development (HUD), and issues related to housing finance, among other things. Specific topics of interest may include ongoing issues such as interest in reforming the nation's housing finance system, how to prioritize appropriations for federal housing programs in a limited funding environment, oversight of the implementation of changes to certain housing programs that were enacted in prior Congresses, and the possibility of extending certain temporary housing-related tax provisions. Additional issues may emerge as the Congress progresses. This report provides a high-level overview of the most prominent housing-related issues that may be of interest during the 116 th . It is meant to provide a broad overview of major issues and is not intended to provide detailed information or analysis. However, it includes references to more in-depth CRS reports on these issues where possible. This section provides background on housing and mortgage market conditions to provide context for the housing policy issues discussed in the remainder of the report. This discussion of market conditions is at the national level. However, it is important to be aware that local housing market conditions can vary dramatically, and national housing market trends may not reflect the conditions in a specific area. Nevertheless, national housing market indicators can provide an overall sense of general trends in housing. In general, rising home prices, relatively low interest rates, and rising rental costs have been prominent features of housing and mortgage markets in recent years. Although interest rates have remained low, rising house prices and rental costs that in many cases have outpaced income growth have led to increased concerns about housing affordability for both prospective homebuyers and renters. Most homebuyers take out a mortgage to purchase a home. Therefore, owner-occupied housing markets and the mortgage market are closely linked, although they are not the same. The ability of prospective homebuyers to obtain mortgages, and the costs of those mortgages, impact housing demand and affordability. The following subsections show current trends in selected owner-occupied housing and mortgage market indicators. As shown in Figure 1 , nationally, nominal house prices have been increasing on a year-over-year basis in each quarter since the beginning of 2012, with year-over-year increases exceeding 5% for much of that time period and exceeding 6% for most quarters since mid-2016. These increases follow almost five years of house price declines in the years during and surrounding the economic recession of 2007-2009 and associated housing market turmoil. House price increases slowed somewhat during 2018, but year-over-year house prices still increased by nearly 6% during the fourth quarter of 2018. House prices, and changes in house prices, vary greatly across local housing markets. Some areas of the country are experiencing rapid increases in house prices, while other areas are experiencing slower or stagnating house price growth. Similarly, prices have fully regained or even exceeded their pre-recession levels in nominal terms in many parts of the country, but in other areas prices remain below those levels. House price increases affect participants in the housing market differently. Rising prices reduce affordability for prospective homebuyers, but they are generally beneficial for current homeowners due to the increased home equity that accompanies them (although rising house prices also have the potential to negatively impact affordability for current homeowners through increased property taxes). For several years, mortgage interest rates have been low by historical standards. Lower interest rates increase mortgage affordability and make it easier for some households to purchase homes or refinance their existing mortgages. As shown in Figure 2 , average mortgage interest rates have been consistently below 5% since May 2010 and have been below 4% for several stretches during that time. After starting to increase somewhat in late 2017 and much of 2018, mortgage interest rates showed declines at the end of 2018 into early 2019. The average mortgage interest rate for February 2019 was 4.37%, compared to 4.46% in the previous month and 4.33% a year earlier. House prices have been rising for several years on a national basis, and mortgage interest rates, while still low by historical standards, have also risen for certain stretches. While incomes have also been rising in recent years, helping to mitigate some affordability pressures, on the whole house price increases have outpaced income increases. These trends have led to increased concerns about the affordability of owner-occupied housing. Despite rising house prices, many metrics of housing affordability suggest that owner-occupied housing is currently relatively affordable. These metrics generally measure the share of income that a median-income family would need to qualify for a mortgage to purchase a median-priced home, subject to certain assumptions. Therefore, rising incomes and, especially, interest rates that are still low by historical standards contribute to monthly mortgage payments being considered affordable under these measures despite recent house price increases. However, some factors that affect housing affordability may not be captured by these metrics. For example, several of the metrics are based on certain assumptions (such as a borrower making a 20% down payment) that may not apply to many households. Furthermore, because they typically measure the affordability of monthly mortgage payments, they often do not take into account other affordability challenges that homebuyers may face, such as affording a down payment and other upfront costs of purchasing a home (costs that generally increase as home prices rise). Other factors—such as the ability to qualify for a mortgage, the availability of homes on the market, and regional differences in house prices and income—may also make homeownership less attainable for some households.  Some of these factors may have a bigger impact on affordability for specific demographic groups, as income trends and housing preferences are not uniform across all segments of the population. Given that house price increases are showing some signs of slowing and interest rates have remained low, the affordability of owner-occupied homes may hold steady or improve. Such trends could potentially impact housing market activity, including home sales. In general, annual home sales have been increasing since 2014 and have improved from their levels during the housing market turmoil of the late 2000s, although in 2018 the overall number of home sales declined from the previous year. While home sales have been improving somewhat in recent years (prior to falling in 2018), the supply of homes on the market has generally not been keeping pace with the demand for homes, thereby limiting home sales activity and contributing to house price increases. Home sales include sales of both existing and newly built homes. Existing home sales generally number in the millions each year, while new home sales are usually in the hundreds of thousands.  Figure 3 shows the annual number of existing and new home sales for each year from 1995 through 2018. Existing home sales numbered about 5.3 million in 2018, a decline from 5.5 million in 2017 (existing home sales in 2017 were the highest level since 2006). New home sales numbered about 622,000 in 2018, an increase from 614,000 in 2017 and the highest level since 2007. However, the number of new home sales remains appreciably lower than in the late 1990s and early 2000s, when they tended to be between 800,000 and 1 million per year. The number and types of homes on the market affect home sales and home prices. On a national basis, the supply of homes on the market has been relatively low in recent years, and in general new construction has not been creating enough new homes to meet demand. However, as noted previously, national housing market indicators are not necessarily indicative of local conditions. While many areas of the country are experiencing low levels of housing inventory that contribute to higher home prices, other areas, particularly those experiencing population declines, face a different set of housing challenges, including surplus housing inventory and higher levels of vacant homes. On a national basis, the inventory of homes on the market has been below historical averages in recent years, though the inventory, of new homes in particular, has begun to increase somewhat of late. Homes come onto the market through the construction of new homes and when current homeowners decide to sell their existing homes. Existing homeowners' decisions to sell their homes can be influenced by expectations about housing inventory and affordability. For example, current homeowners may choose not to sell if they are uncertain about finding new homes that meet their needs, or if their interest rates on new mortgages would be substantially higher than the interest rates on their current mortgages. New construction activity is influenced by a variety of factors including labor, materials, and other costs as well as the expected demand for new homes. One measure of the amount of new construction is housing starts. Housing starts are the number of new housing units on which construction is started in a given period and are typically reported monthly as a \"seasonally adjusted annual rate.\" This means that the number of housing starts reported for a given month (1) has been adjusted to account for seasonal factors and (2) has been multiplied by 12 to reflect what the annual number of housing starts would be if the current month's pace continued for an entire year. Figure 4 shows the seasonally adjusted rate of starts on one-unit homes for each month from January 1995 through December 2018. Housing starts for single-family homes fell during the housing market turmoil, reflecting decreased home purchase demand. In recent years, levels of new construction have remained relatively low by historical standards, reflecting a variety of considerations including labor shortages and the cost of building. Housing starts have generally been increasing since about 2012, but remain well below their levels from the late 1990s through the mid-2000s. For 2018, the seasonally adjusted annual rate of housing starts averaged about 868,000. In comparison, the seasonally adjusted annual rate of housing starts exceeded 1 million from the late 1990s through the mid-2000s. Furthermore, high housing construction costs have led to a greater share of new housing being built at the more expensive end of the market. To the extent that new homes are concentrated at higher price points, supply and price pressures may be exacerbated for lower-priced homes. When a lender originates a mortgage, it can choose to hold that mortgage in its own portfolio, sell it to a private company, or sell it to Fannie Mae or Freddie Mac, two congressionally chartered government-sponsored enterprises (GSEs). Fannie Mae and Freddie Mac bundle mortgages into securities and guarantee investors' payments on those securities. Furthermore, a mortgage might be insured by a federal government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Most FHA-insured or VA-guaranteed mortgages are included in mortgage-backed securities that are guaranteed by Ginnie Mae, another government agency. The shares of mortgages that are provided through each of these channels may be relevant to policymakers because of their implications for mortgage access and affordability as well as the federal government's exposure to risk. As shown in Figure 5 , during the first three quarters of 2018, about two-thirds of the total dollar volume of mortgages originated was either backed by Fannie Mae or Freddie Mac (45%) or guaranteed by a federal agency such as FHA or VA (22%). Nearly one-third of the dollar volume of mortgages originated was held in bank portfolios, while close to 2% was included in a private-label security without government backing. The shares of mortgage originations backed by Fannie Mae and Freddie Mac and held in bank portfolios are roughly similar to their respective shares in the early 2000s. The share of private-label securitization has been, and continues to be, very small since the housing market turmoil of the late 2000s, while the FHA/VA share is higher than it was in the early and mid-2000s. The share of mortgages insured by FHA or guaranteed by VA was low by historical standards during that time period as many households opted for other types of mortgages, including subprime mortgages. As has been the case in owner-occupied housing markets, affordability has been a prominent concern in rental markets in recent years. In the years since the housing market turmoil of the late 2000s, the number and share of renter households has increased, leading to lower rental vacancy rates and higher rents in many markets. The housing and mortgage market turmoil of the late 2000s led to a substantial decrease in the homeownership rate and a corresponding increase in the share of households who rent their homes. As shown in Figure 6 , the share of renters increased from about 31% in 2005 and 2006 to a high of about 36.6% in 2016, before decreasing slightly to 36.1% in 2017 and continuing to decline to 35.6% in 2018. The homeownership rate correspondingly fell from a high of 69% in the mid-2000s to 63.4% in 2016, before rising to 63.9% in 2017 and continuing to rise to 64.4% in 2018. The overall number of occupied housing units also increased over this time period, from nearly 110 million in 2006 to 121 million in 2018; most of this increase has been in renter-occupied units. The number of renter-occupied units increased from about 34 million in 2006 to about 43 million in 2018. The number of owner-occupied housing units fell from about 75 million units in 2006 to about 74 million in 2014, but has since increased to about 78 million units in 2018. The higher number and share of renter households has had implications for rental vacancy rates and rental housing costs. More renter households increases competition for rental housing, which may in turn drive up rents if there is not enough new rental housing created (whether through new construction or conversion of owner-occupied units to rental units) to meet the increased demand. As shown in Figure 7 , the rental vacancy rate has generally declined in recent years and was under 7% at the end of 2018. Rental housing affordability is impacted by a variety of factors, including the supply of rental housing units available, the characteristics of those units (e.g., age and amenities), and the demand for available units. New housing units have been added to the rental stock in recent years through both construction of new rental units and conversions of existing owner-occupied units to rental housing. However, the supply of rental housing has not necessarily kept pace with the demand, particularly among lower-cost rental units, and low vacancy rates have been especially pronounced in less-expensive units. The increased demand for rental housing, as well as the concentration of new rental construction in higher-cost units, has led to increases in rents in recent years. Median renter incomes have also been increasing for the last several years, at times outpacing increases in rents. However, over the longer term, median rents have increased faster than renter incomes, reducing rental affordability. Rising rental costs and renter incomes that are not keeping up with rent increases over the long term can contribute to housing affordability problems, particularly for households with lower incomes. Under one common definition, housing is considered to be affordable if a household is paying no more than 30% of its income in housing costs. Under this definition, households that pay more than 30% are considered to be cost-burdened, and those that pay more than 50% are considered to be severely cost-burdened. The overall number of cost-burdened renter households has increased from 14.8 million in 2001 to 20.5 million in 2017, although the 20.5 million in 2017 represented a decrease from 20.8 million in 2016 and over 21 million in 2014 and 2015. (Over this time period, the overall number of renter households has increased as well.) While housing cost burdens can affect households of all income levels, they are most prevalent among the lowest-income households. In 2017, 83% of renter households with incomes below $15,000 experienced housing cost burdens, and 72% experienced severe cost burdens. A shortage of lower-cost rental units that are both available and affordable to extremely low-income renter households (households that earn no more than 30% of area median income), in particular, contributes to these cost burdens. A variety of housing-related issues may be of interest to the 116 th Congress, including housing finance, housing assistance programs, and housing-related tax provisions, among other things. Many of these are ongoing or perennial housing-related issues, though additional issues may emerge as the Congress progresses. Two major players in the U.S. housing finance system are Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) that were created by Congress to provide liquidity to the mortgage market. By law, Fannie Mae and Freddie Mac cannot make mortgages; rather, they are restricted to purchasing mortgages that meet certain requirements from lenders. Once the GSEs purchase a mortgage, they either package it with others into a mortgage-backed security (MBS), which they guarantee and sell to institutional investors (which can be the mortgage originator), or retain it as a portfolio investment. Fannie Mae and Freddie Mac are involved in both single-family and multifamily housing, though their single-family businesses are much larger. In 2008, in the midst of housing and mortgage market turmoil, Fannie Mae and Freddie Mac experienced financial trouble and entered voluntary conservatorship overseen by their regulator, the Federal Housing Finance Agency (FHFA). As part of the legal arrangements of this conservatorship, the Department of the Treasury contracted to purchase a maximum of $200 billion of new senior preferred stock from each of the GSEs; in return for this support, Fannie Mae and Freddie Mac pay dividends on this stock to Treasury. These funds become general revenues. Several issues related to Fannie Mae and Freddie Mac could be of interest to the 116 th Congress. These include the potential for legislative housing finance reform, new leadership at FHFA and the potential for administrative changes to Fannie Mae and Freddie Mac, and certain issues that could affect Fannie Mae's and Freddie Mac's finances and mortgage standards, respectively. For more information on Fannie Mae and Freddie Mac, see CRS Report R44525, Fannie Mae and Freddie Mac in Conservatorship: Frequently Asked Questions . Since Fannie Mae and Freddie Mac entered conservatorship in 2008, policymakers have largely agreed on the need for comprehensive housing finance reform legislation that would resolve the conservatorships of these GSEs and address the underlying issues that are perceived to have led to their financial trouble and conservatorships. Such legislation could eliminate Fannie Mae and Freddie Mac, possibly replacing them with other entities; retain the companies but transform their role in the housing finance system; or return them to their previous status with certain changes. In addition to addressing the role of Fannie Mae and Freddie Mac, housing finance reform legislation could potentially involve changes to the Federal Housing Administration (FHA) or other federal programs that support the mortgage market. While there is generally broad agreement on certain principles of housing finance reform—such as increasing the private sector's role in the mortgage market, reducing government risk, and maintaining access to affordable mortgages for creditworthy households—there is disagreement over how best to achieve these objectives and over the technical details of how a restructured housing finance system should operate. Since 2008, a variety of housing finance reform proposals have been put forward by Members of Congress, think tanks, and industry groups. Proposals differ on structural questions as well as on specific implementation issues, such as whether, and how, certain affordable housing requirements that currently apply to Fannie Mae and Freddie Mac would be included in a new system. Previous Congresses have considered housing finance reform legislation in varying degrees. In the 113 th Congress, the House Committee on Financial Services and Senate Committee on Banking, Housing, and Urban Affairs considered different versions of comprehensive housing finance reform legislation, but none were ultimately enacted. The 114 th  Congress considered a number of more-targeted reforms to Fannie Mae and Freddie Mac, but did not actively consider comprehensive housing finance reform legislation. At the end of the 115 th Congress, the House Committee on Financial Services held a hearing on a draft housing finance reform bill released by then-Chairman Jeb Hensarling and then-Representative John Delaney, but no further action was taken on it. In the 116 th Congress, Senate Committee on Banking, Housing, and Urban Affairs Chairman Mike Crapo has released an outline for potential housing finance reform legislation. The committee held hearings on March 26 and March 27, 2019 on the outline. FHFA, an independent agency, is the regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System as well as the conservator for Fannie Mae and Freddie Mac. The director of FHFA is appointed by the President, subject to Senate confirmation, for a five-year term. The term of FHFA Director Mel Watt expired in January 2019. President Trump nominated Mark Calabria to be the next FHFA director. The Senate confirmed the nomination on April 4, 2019, and Dr. Calabria was sworn in on April 15, 2019. FHFA has relatively wide latitude to make many changes to Fannie Mae's and Freddie Mac's operations without congressional approval, though it is subject to certain statutory constraints. In recent years, for example, FHFA has directed Fannie Mae and Freddie Mac to engage in risk-sharing transactions, develop a common securitization platform for issuing mortgage-backed securities, and undertake certain pilot programs. The prospect of new leadership at FHFA led many to speculate about possible administrative changes that FHFA could make to Fannie Mae and Freddie Mac going forward. Any such changes could potentially lead to congressional interest and oversight. FHFA could make many changes to Fannie Mae and Freddie Mac, including changes to the pricing of mortgages they purchase, to their underwriting standards, or to certain product offerings. It could also make changes to pilot programs, start laying the groundwork for a post-conservatorship housing finance system, or take a different implementation approach to certain affordable housing initiatives required by statute, such as Duty to Serve requirements. Because the new FHFA director has been critical of certain aspects of Fannie Mae and Freddie Mac in the past, some have expressed concerns that the new leadership could result in the agency taking steps to reduce Fannie Mae's and Freddie Mac's role in the mortgage market. In March 2019, nearly 30 industry groups sent a letter to Acting Director Otting urging that FHFA proceed cautiously with any administrative changes to ensure that they do not disrupt the mortgage market. That same month, President Trump issued a memorandum directing the Secretary of the Treasury to work with other executive branch agencies to develop a plan to end the GSEs' conservatorship, among other goals. Certain other issues related to Fannie Mae and Freddie Mac may be of interest during the 116 th Congress. A new accounting standard (current expected credit loss, or CECL) that could require the GSEs to increase their loan loss reserves goes into effect in 2020. CECL could result in Fannie Mae and Freddie Mac needing to draw on their support agreements with Treasury. The Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ) requires mortgage lenders to document and verify a borrower's ability to repay (ATR). If a mortgage lacks certain risky features and a lender complies with the ATR regulations, the mortgage is considered to be a qualified mortgage (QM), which provides the lender certain protections against lawsuits claiming that the ATR requirements were not met. Mortgages purchased by Fannie Mae or Freddie Mac currently have an exemption (known as the QM Patch) from the debt-to-income ratio ATR rule. This exemption expires in early 2021 (or earlier if Fannie Mae and Freddie Mac exit conservatorship before that date). For several years, concern in Congress about federal budget deficits has led to increased interest in reducing the amount of discretionary funding provided each year through the annual appropriations process. This interest manifested most prominently in the enactment of the Budget Control Act of 2011( P.L. 112-25 ), which set enforceable limits for both mandatory and discretionary spending. The limits on discretionary spending, which have been amended and adjusted since they were first enacted, have implications for HUD's budget, the largest source of funding for direct housing assistance, because it is made up almost entirely of discretionary appropriations. In FY2020, the discretionary spending limits are slated to decrease, after having been increased in FY2018 and FY2019 by the Bipartisan Budget Act of FY2018 (BBA; P.L. 115-123 ). The nondefense discretionary cap (the one relevant for housing programs and activities) will decline by more than 9% in FY2020, absent any additional legislative changes. More than three-quarters of HUD's appropriations are devoted to three rental assistance programs serving more than 4 million families: the Section 8 Housing Choice Voucher (HCV) program, Section 8 project-based rental assistance, and the public housing program. Funding for the HCV program and project-based rental assistance has been increasing in recent years, largely because of the increased costs of maintaining assistance for households that are currently served by the programs. Public housing has, arguably, been underfunded (based on studies undertaken by HUD of what it should cost to operate and maintain it) for many years. Despite the large share of total HUD funding these rental assistance programs command, their combined funding levels only permit them to serve an estimated one in four eligible families, which creates long waiting lists for assistance in most communities. A similar dynamic plays out in the U.S. Department of Agriculture's Rural Housing Service budget. Demand for housing assistance exceeds the supply of subsidies, yet the vast majority of the RHS budget is devoted to maintaining assistance for current residents. In a budget environment with limits on discretionary spending, the pressure to provide increased funding to maintain current services for existing rental assistance programs must be balanced against the pressure from states, localities, and advocates to maintain or increase funding for other popular programs, such as HUD's Community Development Block Grant (CDBG) program, grants for homelessness assistance, and funding for Native American housing. The Trump Administration's budget request for FY2020 proposes an 18% decrease in funding for HUD's programs and activities as compared to the prior year. It proposes to eliminate funding for several programs, including multiple HUD grant programs (CDBG, the HOME Investment Partnerships Program, and the Self-Help and Assisted Homeownership Opportunity Program (SHOP)), and to decrease funding for most other HUD programs. In proposing to eliminate the grant programs, the Administration cites budget constraints and proposes that state and local governments take on more of a role in the housing and community development activities funded by these programs. Additionally, the budget references policy changes designed to reduce the cost of federal rental assistance programs, including the Making Affordable Housing Work Act of 2018 (MAHWA) legislative proposal, released by HUD in April 2018. If enacted, the proposal would make a number of changes to the way tenant rents are calculated in HUD rental assistance programs, resulting in rent increases for assisted housing recipients, and corresponding decreases in the cost of federal subsidies. Further, it would permit local program administrators or property owners to institute work requirements for recipients. In announcing the proposal, HUD described it as setting the programs on \"a more fiscally sustainable path,\" creating administrative efficiency, and promoting self-sufficiency. Low-income housing advocates have been critical of it, particularly the effect increased rent payments may have on families. Beyond HUD, the Administration's FY2020 budget request for USDA's Rural Housing Service would eliminate funding for most rural housing programs, except for several loan guarantee programs. It would continue to provide funding to renew existing rental assistance, but also proposes a new minimum rent policy for tenants designed to help reduce federal subsidy costs. For more on HUD appropriations trends in general, see CRS Report R42542, Department of Housing and Urban Development (HUD): Funding Trends Since FY2002 . For more on the FY2020 budget environment, including discretionary spending caps, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions . Several pieces of assisted housing legislation that were enacted in prior Congresses are expected to be implemented during the 116 th Congress. In the FY2016 HUD appropriations law, Congress mandated that HUD expand the Moving to Work (MTW) demonstration by 100 public housing authorities (PHAs). MTW is a waiver program that allows a limited number of participating PHAs to receive exceptions from HUD for most of the rules and regulations governing the public housing and voucher programs. MTW has been controversial for many years, with PHAs supporting the flexibility it provides (e.g., allowing PHAs to move funding between programs), and low-income housing advocates criticizing some of the policies being adopted by PHAs (e.g., work requirements and time limits). Most recently, GAO issued a report raising concerns about HUD's oversight of MTW, including the lack of monitoring of the effects of policy changes under MTW on tenants. HUD was required to phase in the FY2016 expansion and evaluate any new policies adopted by participating PHAs. Following a series of listening sessions and advisory committee meetings, and several solicitations for comment, HUD issued a solicitation of interest for the first two expansion cohorts in December 2018. As of the date of this report, no selections had yet been made for those cohorts. The Rental Assistance Demonstration (RAD) was an Obama Administration initiative initially designed to test the feasibility of addressing the estimated $25.6 billion backlog in unmet capital needs in the public housing program by allowing local PHAs to convert their public housing properties to either Section 8 Housing Choice Vouchers or Section 8 project-based rental assistance. PHAs are limited in their ability to mortgage, and thus raise private capital for, their public housing properties because of a federal deed restriction placed on the properties as a condition of federal assistance. When public housing properties are converted under RAD, that deed restriction is removed. As currently authorized, RAD conversions must be cost-neutral, meaning that the Section 8 rents the converted properties may receive must not result in higher subsidies than would have been received under the public housing program. Given this restriction, and without additional subsidy, not all public housing properties can use a conversion to raise private capital, potentially limiting the usefulness of a conversion for some properties. While RAD conversions have been popular with PHAs, and HUD's initial evaluations of the program have been favorable, a recent GAO study has raised questions about HUD's oversight of RAD, and about how much private funding is actually being raised for public housing through the conversions. RAD, as first authorized by Congress in the FY2012 HUD appropriations law, was originally limited to 60,000 units of public housing (out of roughly 1 million units). However, Congress has since expanded the demonstration. Most recently, in FY2018, Congress raised the cap so that up to 455,000 units of public housing will be permitted to convert to Section 8 under RAD, and it further expanded the program so that Section 202 Housing for the Elderly units can also convert. Not only is HUD currently implementing the FY2018 expansion, but the President's FY2020 budget request to Congress requests that the cap on public housing RAD conversions be eliminated completely. Several major disasters that have recently affected the United States have led to congressional activity related to disaster response and recovery programs. When such incidents occur, the President may authorize an emergency or major disaster declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act; P.L. 93-288 , as amended), making various housing assistance programs, including programs provided by the Federal Emergency Management Agency (FEMA) , available to disaster survivors. FEMA-provided housing assistance may include short-term, emergency sheltering accommodations under Section 403—Essential Assistance—of the Stafford Act (e.g., the Transitional Sheltering Assistance (TSA) program, which is intended to provide short-term hotel/motel accommodations). Interim housing needs may be met through the Individuals and Households Program (IHP) under Section 408—Federal Assistance to Individuals and Households—of the Stafford Act. IHP assistance may include financial (e.g., assistance to rent alternate housing accommodations ) and/or direct assistance (e.g., multi family lease and repair , Transportable Temporary Housing Units , or direct lease ) to eligible individuals and households who, as a result of an emergency or disaster, have uninsured or under-insured necessary expenses and serious needs that cannot be met through other means or forms of assistance. IHP assistance is intended to be temporary and is generally limited to a period of 18 months following the date of the declaration , but it may be extended by FEMA. The Disaster Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254 ), which became law on October 5, 2018, is the most comprehensive reform of FEMA's disaster assistance programs since the passage of the Sandy Recovery Improvement Act of 2013 (SRIA, Division B of P.L. 113-2 ) and, prior to that, the Post-Katrina Emergency Management Reform Act of 2006 (PKEMRA, P.L. 109-295 ). The DRRA legislation focuses on improving pre-disaster planning and mitigation, response, and recovery, and increasing FEMA accountability. As such, it amends many sections of the Stafford Act. In addition to those amendments, DRRA includes new standalone authorities and requires reports to Congress, rulemaking, and other actions. The 116 th Congress has expressed interest in the oversight of DRRA's implementation, including sections that amend FEMA's temporary housing assistance programs under the Stafford Act. These sections include the following: DRRA Section 1211—State Administration of Assistance for Direct Temporary Housing and Permanent Housing Construction—amends Stafford Act Section 408(f)—Federal Assistance to Individuals and Households, State Role—to allow state, territorial, or tribal governments to administer Direct Temporary Housing Assistance and Permanent Housing Construction, in addition to Other Needs Assistance (ONA). It also provides a mechanism for state and local units of government to be reimbursed for locally implemented housing solutions. This provision may allow states to customize disaster housing solutions and expedite disaster recovery; however, FEMA may need to provide guidance to clarify the requirements of the application and approval process for the state, territorial, or tribal government that seeks to administer these programs. DRRA Section 1212—Assistance to Individuals and Households—amends Stafford Act Section 408(h)—Federal Assistance to Individuals and Households, Maximum Amount of Assistance—to separate the cap on the maximum amount of financial assistance eligible individuals and households may receive for housing assistance and ONA. The provision also removes financial assistance to rent alternate housing accommodations from the cap, and creates an exception for accessibility-related costs. This may better enable FEMA's disaster assistance programs to meet the recovery-related needs of individuals, including those with disabilities and others with access and functional needs, and households who experience significant damage to their primary residence and personal property as a result of an emergency or major disaster. However, there is also the potential that this change may disincentivize sufficient insurance coverage because of the new ability for eligible individuals and households to receive separate and increased housing and ONA awards that more comprehensively cover disaster-related real and personal property losses. DRRA Section 1213—Multifamily Lease and Repair Assistance—amends Stafford Act Section 408(c)(1)(B)—Federal Assistance to Individuals and Households, Direct Assistance—to expand the eligible areas for multifamily lease and repair, and remove the requirement that the value of the improvements or repairs not exceed the value of the lease agreement. This may increase housing options for disaster survivors. The Inspector General of the Department of Homeland Security must assess the use of FEMA's direct assistance authority to justify this alternative to other temporary housing options, and submit a report to Congress. For more information on DRRA, see CRS Insight IN11055, The Disaster Recovery Reform Act: Homeland Security Issues in the 116th Congress . Additionally, tables of deadlines associated with the implementation actions and requirements of DRRA are available upon request. Native Americans living in tribal areas experience a variety of housing challenges. Housing conditions in tribal areas are generally worse than those for the United States as a whole, and factors such as the legal status of trust lands present additional complications for housing. In light of these challenges, and the federal government's long-standing trust relationship with tribes, certain federal housing programs provide funding specifically for housing in tribal areas. The Tribal HUD-Veterans Affairs Supportive Housing (Tribal HUD-VASH) program provides rental assistance and supportive services to Native American veterans who are homeless or at risk of homelessness. Tribal HUD-VASH is modeled on the broader HUD-Veterans Affairs Supportive Housing (HUD-VASH) program, which provides rental assistance and supportive services for homeless veterans. Tribal HUD-VASH was initially created and funded through the FY2015 HUD appropriations act ( P.L. 113-235 ), and funds to renew rental assistance have been provided in subsequent appropriations acts. However, no separate authorizing legislation for Tribal HUD-VASH currently exists. In the 116 th Congress, a bill to codify the Tribal HUD-VASH program ( S. 257 ) was ordered to be reported favorably by the Senate Committee on Indian Affairs in February 2019. A substantively identical bill passed the Senate during the 115 th Congress ( S. 1333 ), but the House ultimately did not consider it. For more information on HUD-VASH and Tribal HUD-VASH, see CRS Report RL34024, Veterans and Homelessness . The main federal program that provides housing assistance to Native American tribes and Alaska Native villages is the Native American Housing Block Grant (NAHBG), which was authorized by the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA,  P.L. 104-330 ). NAHASDA reorganized the federal system of housing assistance for tribes while recognizing the rights of tribal self-governance and self-determination. The NAHBG provides formula funding to tribes that can be used for a range of affordable housing activities that benefit primarily low-income Native Americans or Alaska Natives living in tribal areas. A separate block grant program authorized by NAHASDA, the Native Hawaiian Housing Block Grant (NHHBG), provides funding for affordable housing activities that benefit Native Hawaiians eligible to reside on the Hawaiian Home Lands. NAHASDA also authorizes a loan guarantee program, the Title VI Loan Guarantee, for tribes to carry out eligible affordable housing activities. The most recent authorization for most NAHASDA programs expired at the end of FY2013, although NAHASDA programs have generally continued to be funded in annual appropriations laws. (The NHHBG has not been reauthorized since its original authorization expired in FY2005, though it has continued to receive funding in most years. ) NAHASDA reauthorization legislation has been considered in varying degrees in the 113 th , 114 th , and 115 th Congresses but none was ultimately enacted. The 116 th Congress may again consider legislation to reauthorize NAHASDA. In general, tribes and Congress have been supportive of NAHASDA, though there has been some disagreement over specific provisions or policy proposals that have been included in reauthorization bills. Some of these disagreements involve debates over specific program changes that have been proposed. Others involve debate over broader issues, such as the appropriateness of providing federal funding for programs specifically for Native Hawaiians and whether such funding could be construed to provide benefits based on race. For more information on NAHASDA, see CRS Report R43307, The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA): Background and Funding . In the past, Congress has regularly extended a number of temporary tax provisions that address a variety of policy issues, including certain provisions related to housing. This set of temporary provisions is commonly referred to as \"tax extenders.\" Two housing-related provisions that have been included in tax extenders packages recently are (1) the exclusion for canceled mortgage debt, and (2) the deduction for mortgage insurance premiums, each of which is discussed further below. The most recently enacted tax extenders legislation was the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) in the 115 th Congress. That law extended the exclusion for canceled mortgage debt and the ability to deduct mortgage insurance premiums through the end of 2017 (each had previously expired at the end of 2016). As of the date of this report, these provisions had not been extended beyond 2017. In the 116 th Congress, S. 617 , the Tax Extender and Disaster Relief Act of 2019, would extend each of these provisions through calendar year 2019. For more information on tax extenders in general, see CRS Report R45347, Tax Provisions That Expired in 2017 (\"Tax Extenders\") . Historically, when all or part of a taxpayer's mortgage debt has been forgiven, the forgiven amount has been included in the taxpayer's gross income for tax purposes. This income is typically referred to as canceled mortgage debt income. During the housing market turmoil of the late 2000s, some efforts to help troubled borrowers avoid foreclosure resulted in canceled mortgage debt. The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ), signed into law in December 2007, temporarily excluded qualified canceled mortgage debt income associated with a primary residence from taxation. The provision was originally effective for debt discharged before January 1, 2010, and was subsequently extended several times. Rationales put forth when the provision was originally enacted included minimizing hardship for distressed households, lessening the risk that nontax homeownership retention efforts would be thwarted by tax policy, and assisting in the recoveries of the housing market and overall economy. Arguments against the exclusion at the time included concerns that it makes debt forgiveness more attractive for homeowners, which could encourage homeowners to be less responsible about fulfilling debt obligations, and concerns about fairness given that the ability to realize the benefits depends on a variety of factors. More recently, because the economy, housing market, and foreclosure rates have improved significantly since the height of the housing and mortgage market turmoil, the exclusion may no longer be warranted. For more information on the exclusion for canceled mortgage debt, see CRS Report RL34212, Analysis of the Tax Exclusion for Canceled Mortgage Debt Income . Traditionally, homeowners have been able to deduct the interest paid on their mortgage, as well as property taxes they pay, as long as they itemize their tax deductions. Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a result of the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). Specifically, homeowners could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making the premiums deductible if homeowners itemized and their adjusted gross incomes were below a specified threshold ($55,000 for single, $110,000 for married filing jointly). Originally, the deduction was to be available only for 2007, but it was subsequently extended several times. Two possible rationales for allowing the deduction of mortgage insurance premiums are that it assisted in the recovery of the housing market, and that it promotes homeownership. The housing market, however, has largely recovered from the market turmoil of the late 2000s, and it is not clear that the deduction has an effect on the homeownership rate. Furthermore, to the degree that owner-occupied housing is over subsidized, extending the deduction could lead to a greater misallocation of the resources that are directed toward the housing industry. In the past, Congress has regularly extended a number of temporary tax provisions that address a variety of policy issues, including certain provisions related to housing. This set of temporary provisions is commonly referred to as \"tax extenders.\" Two housing-related provisions that have been included in tax extenders packages recently are (1) the exclusion for canceled mortgage debt, and (2) the deduction for mortgage insurance premiums, each of which is discussed further below. The most recently enacted tax extenders legislation was the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) in the 115 th Congress. That law extended the exclusion for canceled mortgage debt and the ability to deduct mortgage insurance premiums through the end of 2017 (each had previously expired at the end of 2016). As of the date of this report, these provisions had not been extended beyond 2017. In the 116 th Congress, S. 617 , the Tax Extender and Disaster Relief Act of 2019, would extend each of these provisions through calendar year 2019. For more information on tax extenders in general, see CRS Report R45347, Tax Provisions That Expired in 2017 (\"Tax Extenders\") . Historically, when all or part of a taxpayer's mortgage debt has been forgiven, the forgiven amount has been included in the taxpayer's gross income for tax purposes. This income is typically referred to as canceled mortgage debt income. During the housing market turmoil of the late 2000s, some efforts to help troubled borrowers avoid foreclosure resulted in canceled mortgage debt. The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ), signed into law in December 2007, temporarily excluded qualified canceled mortgage debt income associated with a primary residence from taxation. The provision was originally effective for debt discharged before January 1, 2010, and was subsequently extended several times. Rationales put forth when the provision was originally enacted included minimizing hardship for distressed households, lessening the risk that nontax homeownership retention efforts would be thwarted by tax policy, and assisting in the recoveries of the housing market and overall economy. Arguments against the exclusion at the time included concerns that it makes debt forgiveness more attractive for homeowners, which could encourage homeowners to be less responsible about fulfilling debt obligations, and concerns about fairness given that the ability to realize the benefits depends on a variety of factors. More recently, because the economy, housing market, and foreclosure rates have improved significantly since the height of the housing and mortgage market turmoil, the exclusion may no longer be warranted. For more information on the exclusion for canceled mortgage debt, see CRS Report RL34212, Analysis of the Tax Exclusion for Canceled Mortgage Debt Income . Traditionally, homeowners have been able to deduct the interest paid on their mortgage, as well as property taxes they pay, as long as they itemize their tax deductions. Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a result of the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). Specifically, homeowners could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making the premiums deductible if homeowners itemized and their adjusted gross incomes were below a specified threshold ($55,000 for single, $110,000 for married filing jointly). Originally, the deduction was to be available only for 2007, but it was subsequently extended several times. Two possible rationales for allowing the deduction of mortgage insurance premiums are that it assisted in the recovery of the housing market, and that it promotes homeownership. The housing market, however, has largely recovered from the market turmoil of the late 2000s, and it is not clear that the deduction has an effect on the homeownership rate. Furthermore, to the degree that owner-occupied housing is over subsidized, extending the deduction could lead to a greater misallocation of the resources that are directed toward the housing industry. ", "summary": "The 116th Congress may consider a variety of housing-related issues. These could include topics related to housing finance, federal housing assistance programs, and housing-related tax provisions, among other things. Particular issues that may be of interest during the Congress include the following: The status of Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that have been in conservatorship since 2008. Congress might consider comprehensive housing finance reform legislation to resolve the status of Fannie Mae and Freddie Mac. Furthermore, a new director for the Federal Housing Finance Agency (FHFA), Fannie Mae's and Freddie Mac's regulator and conservator, was sworn in on April 15, 2019. Congress may take an interest in any administrative changes that FHFA might make to Fannie Mae and Freddie Mac under new leadership. Appropriations for federal housing programs, including programs at the Department of Housing and Urban Development (HUD) and rural housing programs administered by the U.S. Department of Agriculture (USDA), particularly in light of discretionary budget caps that are currently scheduled to decrease for FY2020. Oversight of the implementation of certain changes to federal assisted housing programs that were enacted in prior Congresses, such as expansions of HUD's Moving to Work (MTW) program and Rental Assistance Demonstration (RAD) program. Considerations related to housing and the federal response to major disasters, including oversight of the implementation of certain changes related to Federal Emergency Management Agency (FEMA) assistance that were enacted in the previous Congress. Consideration of legislation related to certain federal housing programs that provide assistance to Native Americans living in tribal areas. Consideration of legislation to extend certain temporary tax provisions that are currently expired, including housing-related provisions that provide a tax exclusion for canceled mortgage debt and allow for the deductibility of mortgage insurance premiums, respectively. Housing and mortgage market conditions provide context for these and other issues that Congress may consider, although housing markets are local in nature and national housing market indicators do not necessarily accurately reflect conditions in specific communities. On a national basis, some key characteristics of owner-occupied housing markets and the mortgage market in recent years include increasing housing prices, low mortgage interest rates, and home sales that have been increasing but constrained by a limited inventory of homes on the market. Key characteristics of rental housing markets include an increasing number of renters, low rental vacancy rates, and increasing rents. Rising home prices and rents that have outpaced income growth in recent years have led to policymakers and others increasingly raising concerns about the affordability of both owner-occupied and rental housing. Affordability challenges are most prominent among the lowest-income renter households, reflecting a shortage of rental housing units that are both affordable and available to this population.", "document_type": "crs"}
{"report": "Disclosure provisions that require commercial actors to convey specified information to consumers occupy an uneasy and shifting space in First Amendment jurisprudence. The First Amendment's Free Speech Clause protects the right to speak as well as the right not to speak, and at least outside the context of commercial speech, courts generally disfavor any government action that compels speech. Indeed, the Supreme Court in 1943 described the First Amendment's protection against compelled speech as a \"fixed star in our constitutional constellation.\" Accordingly, government actions mandating speech are generally subject to strict scrutiny by courts, and will be upheld \"only if the government proves that they are narrowly tailored to serve compelling state interests.\" However, the Court has also long accepted a variety of laws that require commercial actors to make certain disclosures to consumers, confirming that Congress can compel certain disclosures, even those involving protected speech, without running afoul of the First Amendment. Commercial disclosure requirements have largely withstood constitutional scrutiny in part because, historically, commercial speech has received less protection under the First Amendment than other speech. The government's ability to more freely regulate commercial speech has been linked to its general authority \"to regulate commercial transactions.\" Thus, notwithstanding the fact that commercial disclosure requirements compel speech, courts generally have not analyzed such provisions under the strict scrutiny standard. Instead, courts have often employed less rigorous standards to evaluate such provisions. The precise nature of a court's First Amendment analysis, however, will depend on the character of the disclosure requirement at issue. In a recent decision, the Supreme Court distilled and explained its prior cases on this subject. First, the Court said that it has upheld some commercial disclosure requirements that target conduct and only incidentally burden speech. This rubric likely only applies if the disclosure provision is part of a larger scheme regulating commercial conduct. If the disclosure provision instead regulates \"speech as speech,\" it might be subject either to intermediate scrutiny, as a government regulation of commercial speech, or to something closer to rational basis review, if the disclosure provision qualifies for review under the Supreme Court's decision in Zauderer v. Office of Disciplinary Counsel . Some of the Court's recent cases, however, have suggested that in certain circumstances, disclosure requirements may be subject to heightened scrutiny. This report begins with a short background on how courts generally view commercial speech under the First Amendment, then reviews in more detail the possible legal frameworks for analyzing the constitutionality of commercial disclosure requirements. Supreme Court precedent explaining the application of the First Amendment to commercial disclosure requirements is relatively recent. The Court did not squarely hold that purely commercial speech was entitled to any protection under the First Amendment until 1976 in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council . The Court has defined commercial speech alternately as speech that \"does 'no more than propose a commercial transaction'\" and as \"expression related solely to the economic interests of the speaker and its audience.\" In Virginia Board of Pharmacy , the Court said that commercial speech was protected, but it also emphasized that the First Amendment did not prohibit all regulations of such speech. In particular, the Court said that it foresaw \"no obstacle\" to government regulation of \"false\" speech, or even of commercial speech that is only \"deceptive or misleading.\" In subsequent cases, the Court has explained why \"regulation to assure truthfulness\" is more readily allowed in the context of commercial speech, as compared with other types of speech. While the First Amendment usually protects even untruthful speech, in order to better encourage uninhibited and robust debate, the Court has recognized that regulating \"for truthfulness\" in the commercial arena is unlikely to \"undesirably inhibit spontaneity\" because commercial speech is generally less likely to be spontaneous. Instead, it is more calculated, motivated by a \"commercial interest.\" In particular, if a particular advertisement concerns a subject in which \"the public lacks sophistication\" and cannot verify the claims, the Court has suggested that the government may have a freer hand to address such concerns. Four years after Virginia Board of Pharmacy , in 1980, the Supreme Court set out the standard that generally governs a court's analysis of government restrictions on commercial speech in Central Hudson Gas & Electric Corp. v. Public Service Commission . The Court first explained that commercial speech enjoys \"lesser protection\" than \"other constitutionally guaranteed expression.\" After emphasizing that First Amendment protection for commercial speech \"is based on the informational function of advertising,\" the Court said that \"there can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity.\" Accordingly, the Court held that the government may prohibit \"forms of communication more likely to deceive the public than to inform it\" as well as \"commercial speech related to illegal activity.\" But if the regulated \"communication is neither misleading nor related to unlawful activity,\" the government's action is subject to intermediate scrutiny. Under Central Hudson 's intermediate standard, the government must prove that the government's interest is \"substantial,\" and that the regulation \"directly advances\" that interest and is \"not more extensive than is necessary to serve that interest.\" The Central Hudson test continues to govern the constitutional analysis of government acts that infringe on commercial speech. However, in certain circumstances, commercial speech may lose its commercial character if \"it is inextricably intertwined with otherwise fully protected speech.\" And more generally, some members of the Supreme Court have questioned whether commercial speech should categorically receive less protection under the First Amendment, suggesting that in at least some circumstances, infringements on commercial speech should instead be subject to strict scrutiny. Commentators have pointed out that, as a practical matter, Supreme Court decisions have increasingly struck down, rather than upheld, restrictions on commercial speech. Also relevant to the discussion of disclosure requirements, judges and legal scholars have noted that the Court may be adjusting the role of the content neutrality doctrine with respect to commercial speech. As a general matter, if a law is \"content-based,\" in the sense that it \"target[s] speech based on its communicative content,\" it will be subject to strict scrutiny. The Supreme Court stated in Reed v. Town of Gilbert that a regulation is content-based if it \"applies to particular speech because of the topic discussed or the idea or message expressed,\" if it \"cannot be 'justified without reference to the content of the regulated speech,'\" or if it was \"adopted by the government 'because of disagreement with the message [the speech] conveys.'\" Disclosure requirements are generally considered content-based, given that they require regulated parties to speak a certain message, and outside the commercial context, ordinarily trigger the application of strict scrutiny. In Central Hudson , however, the Supreme Court explained that in the context of commercial speech, \"regulation of its content\" is permissible. And, as commentators have pointed out, \"the very category of commercial speech is a content-based category.\" Nonetheless, the Court has struck down certain regulations that prohibit commercial speech solely because its content is commercial, suggesting that content neutrality might be relevant in the commercial sphere. In its 2011 decision in Sorrell v. IMS Health, Inc. , the Supreme Court considered the constitutionality of a state law prohibiting pharmacies from disclosing certain pharmacy records for marketing purposes. After observing that the law included \"content- and speaker-based restrictions on the sale, disclosure, and use of\" covered information, the Court concluded that the law was \"designed to impose a specific, content-based burden on protected expression\" because it applied specifically to marketing, a particular type of speech. Consequently, the law was subject to \"heightened judicial scrutiny,\" notwithstanding the fact that the \"burdened speech result[ed] from an economic motive\" and was therefore commercial. Ultimately, however, the Court declined to say definitively whether Central Hudson or \"a stricter form of judicial scrutiny\" should apply because, in the Court's view, the law failed to pass constitutional muster even under Central Hudson . As discussed in more detail below, the shifting role of content neutrality in commercial speech doctrine holds special significance for commercial disclosure requirements: these requirements are content-based because they \"compel[] individuals to speak a particular message.\" At least one legal scholar has suggested that lower courts have read Sorrell as an expression of the Supreme Court's increasing skepticism toward restrictions on commercial speech and, since that decision, have been more likely to strike down commercial disclosure requirements. However, the Court did not expressly limit the reach of Central Hudson in Sorrell or in subsequent cases, suggesting that, at least for now, Central Hudson 's standard of review applies even when a challenged action would otherwise trigger strict scrutiny as a content-based regulation of speech. Indeed, lower courts analyzing commercial disclosure requirements usually ask whether Zauderer or Central Hudson supplies the appropriate standard of review, contemplating at most only intermediate scrutiny —even in cases decided after Sorrell . In its First Amendment jurisprudence, the Supreme Court has generally distinguished between laws that regulate conduct and laws that regulate speech. The Court has held that conduct-focused regulations will not violate the First Amendment by merely incidentally burdening speech. For instance, while the government may regulate prices, attempts to regulate \"the communication of prices\" implicate the First Amendment. To take another example, the Court has noted that pursuant to \"a ban on race-based hiring,\" a regulation \"directed at commerce or conduct,\" the government \"may require employers to remove 'White Applicants Only' signs.\" To differentiate a regulation targeting conduct from one targeting speech, the Court generally looks to the purpose of the law, asking whether the law appears to target certain content or certain speakers. As part of this inquiry, the Court may also ask whether a regulation applies because of the communicative content of the regulated party's actions. This distinction between speech and conduct is especially significant in the context of commercial speech, given that such speech \"occurs in an area traditionally subject to government regulation.\" Thus, in 1978, the Supreme Court said: \"[I]t has never been deemed an abridgment of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either spoken, written, or printed.\" Numerous examples could be cited of communications that are regulated without offending the First Amendment, such as the exchange of information about securities, corporate proxy statements, the exchange of price and production information among competitors, and employers' threats of retaliation for the labor activities of employees. Each of these examples illustrates that the State does not lose its power to regulate commercial activity deemed harmful to the public whenever speech is a component of that activity. The Court has previously \"upheld regulations of professional conduct that incidentally burden speech.\" For example, the Court upheld an informed consent requirement in Planned Parenthood of S outheastern Pennsylvania v. Casey . The Casey challengers argued that a law requiring doctors to inform patients seeking abortions about \"the nature of the procedure, the health risks of the abortion and of childbirth, and the probable gestational age of the unborn child\" compelled doctors to speak in violation of the First Amendment. The Court rejected that argument, concluding that while \"the physician's First Amendment rights not to speak are implicated,\" this was \"only as part of the practice of medicine, subject to reasonable licensing and regulation by the State.\" In National Institute of Family and Life Advocates (NIFLA) v. Becerra , the Supreme Court emphasized that the informed consent requirement upheld in Casey was part of the broader regulation of professional conduct: specifically, the practice of medicine. By contrast, the Court held that the disclosure requirement at issue in NIFLA , which required certain health facilities to provide clients with information about state-sponsored services, could not be upheld as \"an informed-consent requirement or any other regulation of professional conduct\" because it was not tied to any medical procedure. Instead, in the Court's view, the requirement \"regulate[d] speech as speech,\" as opposed to regulating speech only incidentally. While the Court has made clear that the First Amendment does not prohibit such incidental regulation of commercial speech, it has not articulated one overarching standard for evaluating whether such provisions are constitutionally permissible. Its decisions in this area have considered a wide variety of government actions incidentally burdening speech, and it may be that the standard varies according to the nature of the particular speech restriction evaluated. In some cases, the Court has suggested that \"the First Amendment is not implicated by the enforcement\" of a broader regulatory scheme where the regulated conduct does not have \"a significant expressive element\" or the statute does not inevitably single out \"those engaged in expressive activity.\" In other cases where the Court has upheld a regulation that it characterized as focused on conduct rather than speech, the Court investigated the strength of the government's interest and asked whether the regulation advances that interest, suggesting that the Court subjected the regulation to some First Amendment scrutiny—albeit using a relatively relaxed standard. The Court has never explicitly held that a commercial disclosure requirement qualifies as a constitutionally permissible incidental restriction on commercial speech. While Planned Parenthood of Southeastern Pennsylvania v. Casey did involve a disclosure requirement, the Court did not address whether the informed consent requirement involved commercial or noncommercial speech either in Casey or when discussing that requirement in NIFLA . In NIFLA , the Court held that a state law imposing disclosure requirements on clinics providing pregnancy-related services could not be characterized as a regulation that only incidentally burdened speech because the requirement was not tied to any specific medical procedures. However, the Court never expressly stated whether it considered the disclosures to consist of commercial or noncommercial speech. Similarly, in Expressions Hair Design v. Schneiderman , the Court rejected the application of this doctrine without expressly characterizing the government action as a commercial disclosure requirement. In that case, the Court considered the constitutionality of a state law prohibiting sellers from imposing surcharges on customers who use credit cards. The Supreme Court rejected the argument that this law primarily \"regulated conduct, not speech,\" concluding that the law did not merely regulate pricing, but regulated the communication of prices by prohibiting merchants from posting a cash price and an additional credit card surcharge. The Court then remanded the case to the lower courts to consider the First Amendment challenges in the first instance, leaving open the question of whether the provision could be characterized as a requirement for sellers to disclose an item's credit card price, rather than as a prohibition of certain speech. As these cases suggest, the Court has seemed reluctant in recent years to uphold government actions as conduct-focused regulations that merely incidentally burden speech, especially in the context of compelled disclosure requirements. Instead, the Court has distinguished the few cases upholding government acts as incidental restrictions and subjected disclosure requirements to further scrutiny. Nonetheless, the Court has left open the possibility that commercial disclosure requirements might, in the future, qualify as permissible incidental speech regulation, if they are part of a broader regulatory scheme. If the government regulates \"speech as speech,\" its actions will implicate the First Amendment's protections for freedom of speech and may trigger heightened standards of scrutiny. However, the First Amendment does not prescribe a single analysis for all government actions that potentially infringe on free speech protections. Instead, a court's review will depend on the nature of both the government action and the speech itself. This section first introduces the three possible levels of scrutiny a court might use to analyze a speech regulation and then explains their application to compelled commercial disclosures in more detail. In the context of commercial disclosure requirements, there are three primary categories of First Amendment analysis that may be relevant. First, as a general rule, government actions that compel speech are usually subject to strict scrutiny. To survive strict scrutiny, the government must show that the challenged action is \"narrowly tailored to serve compelling state interests.\" Laws are unlikely to meet this \"stringent standard.\" Second, as discussed above, government actions regulating commercial speech generally receive only intermediate scrutiny. The intermediate scrutiny standard, pursuant to Central Hudson , requires a \"substantial\" state interest and requires the government to prove that the law \"directly advances\" that interest and \"is not more extensive than is necessary to serve that interest.\" This standard is less demanding than strict scrutiny, but laws may still be struck down under this test. The final and most lenient category—one specific to commercial disclosure requirements—comes from a 1985 case, Zauderer v. Office of Disciplinary Counsel . In that case, the Supreme Court considered the constitutionality of state disciplinary rules regulating attorney advertising. As relevant here, the rules required advertisements referring to contingent-fee rates to disclose how the fee would be calculated. An attorney who had been disciplined by the state for violating these provisions argued that this disclosure requirement was unconstitutional because the state failed to meet the standards set out in Central Hudson . The Court acknowledged that it had previously held that prohibitions on commercial speech were subject to heightened scrutiny under Central Hudson , and that it had \"held that in some instances compulsion to speak may be as violative of the First Amendment as prohibitions on speech.\" \"But,\" the Court said, \"[t]he interests at stake in this case are not of the same order as those\" implicated in cases involving the compulsion of noncommercial speech. Instead, the Court noted that the state's provision only involved \"commercial advertising, and its prescription has taken the form of a requirement that appellant include in his advertising purely factual and uncontroversial information about the terms under which his services will be available.\" In this commercial context, the Court said that the attorney's \"constitutionally protected interest in not providing any particular factual information in his advertising is minimal,\" noting that in previous cases it had stated that states might \"appropriately require[]\" warnings or disclaimers \"in order to dissipate the possibility of consumer confusion or deception.\" Rather than applying heightened scrutiny, the Court held that under these circumstances, \"an advertiser's rights are adequately protected as long as disclosure requirements are reasonably related to the State's interest in preventing deception of consumers.\" The Zauderer Court did warn, however, that commercial disclosure requirements raise First Amendment concerns, observing that \"unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech.\" But the Court rejected the contention that the disclosure requirement before it was unduly burdensome. Instead, the Court concluded that \"[t]he State's position that it is deceptive to employ advertising that refers to contingent-fee arrangements without mentioning the client's liability for costs is reasonable enough to support a requirement that information regarding the client's liability for costs be disclosed.\" Although the state had not submitted evidence that clients were in fact being misled, the Court stated that \"the possibility of deception\" was \"self-evident,\" making the state's \"assumption that substantial numbers of potential clients would be . . . misled\" regarding the terms of payment reasonable. Zauderer sets out the most lenient of the three standards of review discussed above, and, as a result, a commercial disclosure requirement is most likely to be upheld if it is reviewed under the rubric of that case. However, the Zauderer standard of review has been interpreted to apply only to certain types of disclosure requirements. As described by the Court and discussed above, the state regulation upheld in Zauderer required \"purely factual and uncontroversial information about the terms under which [attorneys'] services [would] be available,\" and the provision was \"reasonably related to the State's interest in preventing deception of consumers.\" Subsequent cases in both the Supreme Court and the lower courts have tested the extent to which this reasonableness review applies outside of the specific factual circumstances presented in Zauderer . The Supreme Court has decided whether to apply Zauderer review to government acts compelling commercial speech in three significant cases. First, in United States v. United Foods , decided in 2001, the Court invalidated a federal statute that compelled \"handlers of fresh mushrooms to fund advertising for the product.\" United Foods thus involved a compelled subsidy, rather than a compelled disclosure. The Court concluded that these statutorily compelled subsidies for government-favored speech implicated the First Amendment and that \"mandat[ing] support\" from objecting parties was \"contrary to . . . First Amendment principles.\" The Court held that Zauderer was inapplicable, noting that in the case before it, there was \"no suggestion . . . that the mandatory assessments . . . are somehow necessary to make voluntary advertisements nonmisleading for consumers.\" By contrast, the Court applied Zauderer in a 2010 decision, Milavetz, Gallop & Milavetz, P.A. v. United States , another case concerning attorney advertising. In that case, the Court considered an attorney's First Amendment challenges to a federal statute that required \"debt relief agencies\" to \"make certain disclosures in their advertisements.\" \"Debt relief agencies\" was a statutorily defined term covering some attorneys who provided clients with bankruptcy assistance. Among other things, agencies advertising \"bankruptcy assistance services or . . . the benefits of bankruptcy\" were required to disclose that they were \"a debt relief agency\" that \"help[ed] people file for bankruptcy relief under the Bankruptcy Code.\" Rejecting the challenger's contention that Central Hudson 's intermediate scrutiny governed the disclosure requirement, the Court held instead that \"the less exacting scrutiny described in Zauderer \" governed its review. The Court concluded that the provision \"share[d] the essential features of the rule at issue in Zauderer .\" The disclosure requirement was \"intended to combat the problem of inherently misleading commercial advertisements—specifically, the promise of debt relief without any reference to the possibility of filing for bankruptcy, which has inherent costs.\" Further, the law required the covered entities to provide \"only an accurate statement identifying the advertiser's legal status and the character of the assistance provided.\" As in Zauderer , where the \"possibility of deception\" was \"self-evident,\" the Court was not troubled by the lack of evidence that current advertisements were misleading. Instead, \"evidence in the congressional record demonstrating a pattern of advertisements that hold out the promise of debt relief without alerting consumers to its potential cost\" was \"adequate.\" The Court ultimately upheld the disclosure requirement as \"reasonably related to the [Government's] interest in preventing deception of consumers.\" Most recently, in 2018, the Court considered the application of Zauderer in NIFLA . That case involved two distinct disclosure requirements imposed by California's Reproductive Freedom, Accountability, Comprehensive Care, and Transparency Act (FACT Act), which regulated crisis pregnancy centers. First, the FACT Act required any \" licensed covered facility\" to notify clients that \"California has public programs that provide immediate free or low-cost access to comprehensive family planning services (including all FDA-approved methods of contraception), prenatal care, and abortion for eligible women,\" and give the telephone number of the local social services office. Second, any \" unlicensed covered facility\" had to provide notice that the \"facility is not licensed as a medical facility by the State of California and has no licensed medical provider who provides or directly supervises the provision of services.\" The Court first held that Zauderer 's reasonableness review did not apply to the licensed notice. In the Court's view, the notice was \"not limited to 'purely factual and uncontroversial information about the terms under which . . . services will be available.'\" The Court explained that the disclosure requirement \"in no way relate[d] to the services that licensed clinics provide.\" The Court said that instead, the law \"require[d] these clinics to disclose information about state -sponsored services—including abortion, anything but an 'uncontroversial' topic.\" The Court ultimately held that the licensed notice could not \"survive even intermediate scrutiny.\" Turning to the unlicensed notice, the Court determined that it did not need to \"decide whether the Zauderer standard applies to the unlicensed notice\" because the disclosure requirement failed scrutiny even under Zauderer . The Court said that \"under Zauderer , a disclosure requirement cannot be 'unjustified or unduly burdensome.'\" The Court interpreted this statement to require that the government prove it was seeking \"to remedy a harm that is 'potentially real, not purely hypothetical.'\" Based on the record on appeal, the Court found that California's stated interest in \"ensuring that pregnant women in California know when they are getting medical care from licensed professionals\" was \"purely hypothetical.\" Further, the Court held in the alternative that \"[e]ven if California had presented a nonhypothetical justification for the unlicensed notice, the FACT Act unduly burden[ed] protected speech\" by requiring a government statement to be placed in all advertisements, regardless of an advertisement's length or content. The Court also expressed concern that the unlicensed notice \"target[ed]\" certain speakers in imposing those burdens by focusing on \"facilities that primarily provide 'pregnancy-related' services.\" While the Supreme Court has emphasized that Zauderer 's reasonableness review is available only for certain types of compelled commercial disclosures, lower courts have disagreed on the precise circumstances required to apply Zauderer . A few requirements have emerged in the case law. First, courts agree that to qualify for review under Zauderer , a commercial disclosure requirement must compel speech that is \"factual and uncontroversial.\" Next, the disclosure must be related to the goods or services the speaker provides. Finally, courts have disagreed on the type of government interest that may be asserted to justify a Zauderer -eligible regulation: while Zauderer itself approved of the challenged disclosure requirement after concluding that the state was permissibly seeking to \"prevent[] deception of consumers,\" lower courts have sometimes applied Zauderer review even where the regulation is not specifically intended to prevent deception. Before discussing the particulars of these requirements, it is worth noting that these elements are related to the Court's overarching justifications for affording the government more leeway to regulate commercial speech. The seminal Supreme Court case establishing that commercial speech is protected by the First Amendment, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council , tied commercial speech's value to its ability to inform consumers. Critically, the Court said that governments could continue to ban false or misleading commercial speech , noting in another case that \"the public and private benefits from commercial speech derive from confidence in its accuracy and reliability.\" It was against this background that the Court in Zauderer concluded that the provision requiring the disclosure of factual information about contingent fee arrangements did not involve First Amendment interests \"of the same order as those\" involved in other cases involving the compulsion of noncommercial speech. Accordingly, the state acted reasonably by prescribing that attorneys had to include in their advertising \"purely factual and uncontroversial information about the terms under which [their] services [would] be available.\" The first element for a commercial disclosure requirement to be eligible for Zauderer review is that the government regulation must require the disclosure of \"factual and uncontroversial\" information. The two parts of Zauderer's initial requirement are often evaluated as one, although courts have sometimes pointed out that \"factual\" and \"uncontroversial,\" logically, connote two different things. Viewing the two words together, some have characterized the \"factual and uncontroversial\" requirement as distinguishing regulations that compel the disclosure of facts from those that compel individuals to state opinions or ideologies. As discussed, the Supreme Court has said that the value of commercial speech largely lies in its ability to inform consumers. And in Zauderer , the Court emphasized that because protection for commercial speech is justified by its informational value, the attorney challenging the disclosure requirement had a \"minimal\" First Amendment interest \"in not providing any particular factual information in his advertising.\" As the Second Circuit has explained: Commercial disclosure requirements are treated differently from restrictions on commercial speech because mandated disclosure of accurate, factual, commercial information does not offend the core First Amendment values of promoting efficient exchange of information or protecting individual liberty interests. Such disclosure furthers, rather than hinders, the First Amendment goal of the discovery of truth and contributes to the efficiency of the \"marketplace of ideas.\" Protection of the robust and free flow of accurate information is the principal First Amendment justification for protecting commercial speech, and requiring disclosure of truthful information promotes that goal. In such a case, then, less exacting scrutiny is required than where truthful, nonmisleading commercial speech is restricted. In this vein, the Supreme Court upheld disclosure requirements regarding the nature of contingent fee arrangements in Zauderer and statements clarifying the nature of the bankruptcy-related assistance provided by debt relief agencies in Milavetz . Lower courts have approved as \"factual and uncontroversial\" within the meaning of Zauderer a variety of other commercial disclosure requirements, including regulations requiring the disclosure of: country-of-origin information for meat; calorie information at restaurants; the fact that products contain mercury; and textual and graphic warnings about the health risks of tobacco products. By contrast, in a 2015 opinion, the D.C. Circuit concluded that a federal regulation requiring firms to disclose whether their products used \"conflict minerals\" that originated \"in the Democratic Republic of the Congo or an adjoining country\" could not be characterized as factual and uncontroversial. The court said that \"[t]he label '[not] conflict free' is a metaphor that conveys moral responsibility for the Congo war. . . . An issuer, including an issuer who condemns the atrocities of the Congo war in the strongest terms, may disagree with that assessment of its moral responsibility. . . . By compelling an issuer to confess blood on its hands, the statute interferes with that exercise of the freedom of speech under the First Amendment.\" Similarly, the Seventh Circuit, in a 2006 opinion, held that disclosure requirements in a state law regulating sexually explicit video games were not \"factual and uncontroversial\" as required for Zauderer to apply. In relevant part, the law required \"video game retailers to place a four square-inch label with the numerals '18' on any 'sexually explicit' video game,\" and to post signs and provide brochures \"explaining the video game rating system.\" The court held first that the sticker \"ultimately communicates a subjective and highly controversial message—that the game's content is sexually explicit.\" Similarly, the panel concluded that \"the message\" communicated by the signs and brochures was \"neither purely factual nor uncontroversial\" because it was \"intended to communicate that any video games in the store can be properly judged pursuant to the standards described in the . . . ratings.\" As mentioned above, some courts have treated \"factual\" and \"uncontroversial\" as two distinct requirements. But at times, courts have struggled to define \"controversial,\" standing alone. The D.C. Circuit has suggested that controversial must mean that a disclosure \"communicates a message that is controversial for some reason other than dispute about simple factual accuracy.\" One trial court interpreting a decision of the Second Circuit suggested that \"it is the nature of the regulation of compelled speech that controls, not the nature of the legislative debate that gave rise to its enactment.\" That court then noted that other courts had equated controversial messages with disclosures that are \"opinion-based.\" Courts have disagreed about whether a disclosure may be characterized as \"controversial\" because it is \"inflammatory\" or \"evoke[s] an emotional response.\" In NIFLA , the Supreme Court struck down the licensed notice after noting that the required disclosures related to \"abortion, anything but an 'uncontroversial' topic,\" although it did not further explain when a topic is \"uncontroversial\" for purposes of Zauderer. Second, to be eligible for review under Zauderer , a commercial disclosure requirement must be related to the services provided by the speaker. In Zauderer itself, the Court had noted that the disputed disclosure required the attorney to provide information in his advertising \"about the terms under which his services will be available.\" By and large, lower courts, at least prior to NIFLA, had not treated this relationship to the speaker's services as a distinct requirement. The Court in NIFLA , however, said that this was a necessary prerequisite for Zauderer review and held in that case that the notice requirement for licensed clinics at issue was not \"relate[d] to the services that licensed clinics provide\" because it instead provided information \"about state -sponsored services.\" Judges have disagreed on whether there exists a third requirement for Zauderer review. In Zauderer itself, the Supreme Court noted that the disclosure requirements at issue in that case were intended to \"prevent[] deception of customers.\" Further, when applying Zauderer review to the bankruptcy-related disclosures at issue in Milavetz , the Court stated that the disclosures were \"intended to combat the problem of inherently misleading commercial advertisements.\" Perhaps most notably, in United Foods , the Court explained its decision not to apply Zauderer by noting that there was \"no suggestion\" that the compelled subsidies at issue in that case were \"somehow necessary to make voluntary advertisements nonmisleading for consumers.\" The Supreme Court's decisions applying Zauderer have thus suggested that one factor in deciding whether to apply this \"reasonably related\" review is whether the targeted commercial speech is misleading, or whether the state's interest in requiring the disclosure is to prevent \"consumer confusion or deception.\" Nonetheless, the Court has not squarely held that this is a necessary condition for Zauderer review, and several lower courts have rejected this position. The D.C. Circuit concluded that Zauderer 's justification characterizing \"the speaker's interest in opposing forced disclosure of such information as 'minimal' seems inherently applicable beyond\" the state's \"interest in remedying deception.\" The Second Circuit has also held that Zauderer review applies more broadly. In rejecting a litigant's argument that the Supreme Court's decision in United Foods limited Zauderer only to laws intended to prevent consumer deception, the Second Circuit said that United Foods \"simply distinguishes Zauderer on the basis that the compelled speech in Zauderer was necessary to prevent deception of consumers; it does not provide that all other disclosure requirements are subject to heightened scrutiny.\" If a commercial disclosure requirement involves only \"purely factual and uncontroversial information\" about the goods or services being sold, and is therefore eligible for review under Zauderer , then it will be constitutional so long as the disclosure requirement is \"reasonably related\" to the government's interest. This reasonableness review is relatively lenient, especially as compared with the standards that would otherwise apply to compelled speech. But, as emphasized in NIFLA , even under Zauderer , \"unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech.\" Lower courts had previously come to different conclusions regarding whether \"unjustified or unduly burdensome\" presented an additional inquiry, to be conducted separately from the reasonableness inquiry otherwise prescribed by Zauderer , or whether instead this inquiry was subsumed by the \"reasonably related\" inquiry. NIFLA did not entirely resolve this issue, although it did frame its analysis using the \"unjustified or unduly burdensome\" language rather than the language of rational basis review. In Zauderer , the Supreme Court upheld the contingent fee disclosure after concluding that the requirement was \"reasonably related to the State's interest in preventing deception of consumers.\" But as noted above, lower courts have largely concluded that Zauderer 's reasonableness review may govern the analysis even when the government asserts an interest other than preventing consumer deception. The D.C. Circuit has, so far, largely declined to articulate a clear standard for \"what type of interest might suffice.\" That court did conclude in one case that where the government's interest was \"substantial under Central Hudson 's standard,\" that would qualify as a sufficient interest under Zauderer . Perhaps taking a different approach, in a case upholding a disclosure requirement under Zauderer , the Second Circuit described the state's interest as \"legitimate and significant.\" Other than \"the interest in correcting misleading or confusing commercial speech,\" the federal courts of appeals have upheld commercial disclosure requirements where the government asserted interests in food safety, preventing obesity, \"protecting human health and the environment from mercury poisoning,\" and in protecting health benefit providers \"from questionable . . . business practices.\" By contrast, the Second Circuit held in International Dairy Foods Association v. Amestoy that \"consumer curiosity alone is not a strong enough state interest to sustain the compulsion of even an accurate, factual statement.\" In NIFLA , the Supreme Court indicated that under Zauderer , the government must assert an interest that is \"more than 'purely hypothetical.'\" As discussed above, the State of California's justification for the notice requiring unlicensed clinics to disclose that they were unlicensed was to \"ensur[e] that pregnant women in California know when they are getting medical care from licensed professionals.\" The Court concluded that the state had \"point[ed] to nothing suggesting that pregnant women do not already know that the covered facilities are staffed by unlicensed medical professionals.\" NIFLA 's requirement that the government provide evidence supporting an asserted interest differs from the Court's approach in Zauderer itself and in Milavetz . In both Zauderer and Milavetz , the Court rejected arguments that the government had failed to present sufficient evidence to support its interest in the disclosure requirement, concluding that in both of those cases, \"the possibility of deception\" in the regulated advertisements was \"self-evident.\" Although the standard is not entirely clear, it is possible that in future cases the Court could conclude again that a particular advertisement is so obviously deceptive that the government does not need to submit significant evidence proving that the advertisements are misleading. If the government has asserted a sufficient interest, then under Zauderer , it needs to show only that the disputed disclosure requirement is \"reasonably related\" to that interest. Describing the Supreme Court's decision in Zauderer , the D.C. Circuit has said that the \"evidentiary parsing\" required by more rigorous First Amendment tests \"is hardly necessary when the government uses a disclosure mandate to achieve a goal of informing consumers about a particular product trait, assuming of course that the reason for informing consumers qualifies as an adequate interest.\" That court further elaborated that \"[t]he self-evident tendency of a disclosure mandate to assure that recipients get the mandated information may in part explain why, where that is the goal, many such mandates have persisted for decades without anyone questioning their constitutionality.\" Similarly, the Second Circuit has observed in one case that \"while the First Amendment precludes the government from restricting commercial speech without showing that 'the harms it recites are real and that its restriction will in fact alleviate them to a material degree,'\" the First Amendment \"does not demand 'evidence or empirical data' to demonstrate the rationality of mandated disclosures in the commercial context.\" Notwithstanding the suggestion that little evidence is required to show that a disclosure requirement is reasonably related to an appropriate government interest, lower courts have often relied on the government's evidence supporting the disputed requirement when they uphold the provision. This showing may be easiest where the government asserts an interest in preventing misleading speech, given \"the self-evident tendency of a disclosure mandate to assure that recipients get the mandated information.\" Additionally, courts have sometimes held that commercial disclosure requirements fail even this lenient test for rationality, particularly where the government has asserted an interest other than preventing consumer confusion. For example, in National Association of Manufacturers v. SEC , the D.C. Circuit held that a provision requiring companies to disclose whether their products were \"conflict free\" violated the First Amendment. In defending this rule, the government asserted an interest in \"ameliorat[ing] the humanitarian crisis in the [Democratic Republic of the Congo (DRC)].\" In the court's view, however, the government had failed to demonstrate that its measure would achieve this interest. The D.C. Circuit observed that the government had \"offered little substance beyond\" statements by political officials to support \"the effectiveness of the measure.\" The court assumed that the government's theory \"must be that the forced disclosure regime will [lead to boycotts that] decrease the revenue of armed groups in the DRC and their loss of revenue will end or at least diminish the humanitarian crisis there.\" But in the view of the court, this theory could not justify the regulation, as the idea was \"entirely unproven and rest[ed] on pure speculation.\" To take another example, the Third Circuit struck down a commercial disclosure requirement concerning attorney advertising in Dwyer v. Cappell . In that case, an attorney challenged a state regulation that prohibited attorneys from using quotations from judicial opinions in their advertising unless they presented \"the full text\" of those opinions. The state argued that such quotations were \"inherently misleading because laypersons . . . would understand them to be judicial endorsements.\" The court, however, said that even assuming \"that excerpts of judicial opinions are potentially misleading to some persons,\" the state had failed \"to explain how [an attorney's] providing a complete judicial opinion somehow dispels this assumed threat of deception.\" The court reasoned that \"providing a full judicial opinion does not reveal to a potential client that an excerpt of the same opinion is not an endorsement.\" Additionally, the court held that the disputed requirement was \"unduly burdensome,\" as it \"effectively rules out the possibility that [an attorney] can advertise with even an accurately quoted excerpt of a judicial statement about his abilities.\" And in the view of the Third Circuit, \"that type of restriction—an outright ban on advertising with judicial excerpts—would properly be analyzed under the heightened Central Hudson standard of scrutiny.\" As Dwyer suggests, courts may strike down disclosure requirements under Zauderer if the requirement is \"unduly burdensome.\" In NIFLA , the Supreme Court held that the unlicensed notice was likely unconstitutional because it \"unduly burden[ed] protected speech,\" noting that it applied to all advertisements for these licensed facilities, regardless of their content. In particular, the majority opinion highlighted one hypothetical discussed at oral argument, noting that \"a billboard for an unlicensed facility that says 'Choose Life' would have to surround that two-word statement with a 29-word statement from the government, in as many as 13 different languages.\" In this instance, the Court said, the notice would \"drown[] out the facility's own message,\" and therefore be unduly burdensome. If a commercial disclosure requirement is not a factual and uncontroversial disclosure related to the speaker's goods or services under Zauderer , courts will likely apply a heightened standard of review. Under prevailing Supreme Court precedent, if a provision does not qualify for Zauderer 's reasonableness review, a court may review the challenged regulation under Central Hudson . As discussed above, Central Hudson established the general standard of review for government restrictions on commercial speech. The Supreme Court described \"a four-part analysis:\" At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest. The Court has described the Central Hudson test as \"intermediate\" scrutiny. If a disclosure requirement affects commercial speech but does not qualify for Zauderer review, courts have generally held that Central Hudson 's intermediate scrutiny applies. However, courts have sometimes suggested that some higher standard of review, more stringent than Central Hudson 's intermediate scrutiny, should apply to commercial disclosure requirements that do not qualify for review under Zauderer . Some lower court judges have concluded that because such disclosures compel particular speech and are by definition not content-neutral, they should be evaluated under strict scrutiny. In contrast to Central Hudson review, which requires the government to show that a law is \"not more extensive than is necessary to serve\" a \"substantial\" interest, strict scrutiny \"requires the Government to prove that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest.\" The Supreme Court has suggested—but not squarely held—that at least some types of commercial disclosure requirements might be subject to some form of scrutiny more strict than Central Hudson . In NIFLA , the Supreme Court considered the constitutionality of state provisions requiring crisis pregnancy centers to make certain disclosures to clients and in their advertising. The Court suggested that the provision requiring licensed facilities to disseminate notices about state-provided services might be subject to strict scrutiny as a content-based regulation of speech, but concluded that it did not need to resolve that question because the notice could not \"survive even intermediate scrutiny.\" Significantly, however, the NIFLA Court never described the licensed notice as involving commercial speech. In the decision below, the Ninth Circuit had held that the notice should not be subject to strict scrutiny because it regulated \"professional speech.\" That court, like other federal courts of appeals, had recognized \"speech that occurs between professionals and their clients in the context of their professional relationship\" \"as a separate category of speech that is subject to different rules.\" The Ninth Circuit had concluded that speech that was part of the practice of a profession could be regulated by the state, subject only to intermediate scrutiny. The Court rejected this idea, saying that the First Amendment does not encompass a tradition of lower scrutiny \"for a category called 'professional speech.'\" Ultimately, the Court said that it saw no \"persuasive reason\" to treat \"professional speech as a unique category that is exempt from ordinary First Amendment principles.\" To the extent that \"professional speech\" could be seen to overlap with commercial speech, this sentence could be read to suggest that commercial speech should also be subject to \"ordinary First Amendment principles.\" This suggestion would seem to conflict with prior cases saying that commercial speech occupies a \"subordinate position in the scale of First Amendment values.\" Although the NIFLA Court implicitly suggested that disclosure requirements for professionals might constitute commercial speech by evaluating the FACT Act's requirements under Zauderer and Central Hudson , it never expressly clarified whether \"professional speech\" overlaps with commercial speech. Because the FACT Act's requirements applied outside of the advertising context, it may be open to some debate whether these licensed notices involved commercial speech. The unlicensed notice challenged in NIFLA was required to be included in advertising, and advertisements are \"classic examples of commercial speech.\" But the unlicensed notice was also required to be posted on-site, and the state required licensed facilities to post disclosures on-site or to otherwise distribute the notice to clients directly. Further, in a similar context, at least one federal court of appeals concluded that a Baltimore ordinance requiring certain pregnancy centers to make specified disclosures regulated noncommercial speech. That court said the pregnancy centers were not motivated by economic interest or proposing a commercial transaction, but were instead \"provid[ing] free information about pregnancy, abortion, and birth control as informed by a religious and political belief.\" If the licensed disclosures in NIFLA did not regulate commercial speech, then it would be unsurprising that the Court would consider applying strict scrutiny rather than Central Hudson . Others, however, have pointed out that crisis pregnancy centers, even if they do not charge fees, operate \"in a marketplace where other providers generally charge fees,\" and argued that these centers \"are engaged in commercial activity by providing physical and mental health services to pregnant women.\" And more generally, some have pointed out the similarities between \"professional\" and commercial speech. The fact that the NIFLA Court did not directly address the relationship between professional and commercial speech may suggest that heightened scrutiny may be necessary with respect to some commercial disclosure requirements. Specifically, the Court did not cite the commercial speech doctrine as \"a persuasive reason for treating professional speech as a unique category that is exempt from ordinary First Amendment principles.\" At least one commentator has argued that the Court's failure to mention Central Hudson —\"not even to dismiss it as . . . another inapposite exception to Reed 's general rule [of strict scrutiny]\"—may suggest that the Court is seeking to limit Central Hudson 's holding that commercial speech may be more freely regulated than other speech under the First Amendment. Although NIFLA may not have expressly altered the framework used to evaluate commercial disclosure requirements, it may nonetheless signal that the Supreme Court will view them with more skepticism in the future. The majority opinion, authored by Justice Thomas, emphasized that \"[t]he dangers associated with content-based regulations of speech are also present in the context of professional speech.\" Even if \"professional speech\" is not coterminous with \"commercial speech,\" this statement does seem to suggest that the Court believes content neutrality principles are relevant in the commercial sphere. In dissent, Justice Breyer, viewing the majority opinion as adopting such a view, argued that the majority's approach, \"if taken literally, could radically change prior law, perhaps placing much securities law or consumer protection law at constitutional risk.\" He pointed out that \"[v]irtually every disclosure law could be considered 'content based,' for virtually every disclosure law requires individuals 'to speak a particular message.'\" In response to Justice Breyer, the NIFLA majority stated that it did not \"question the legality of health and safety warnings long considered permissible, or purely factual and uncontroversial disclosures about commercial products.\" This view echoed the Court's prior statement that \"[p]urely commercial speech is more susceptible to compelled disclosure requirements.\" Following the Court's 2010 decision in Reed , in which the Court articulated a more \"precise test to determine whether speech regulations are content based,\" many lower courts had rejected the idea that content-based requirements affecting only commercial speech should be subject to strict scrutiny, even if they otherwise discriminated based on content under Reed . But because NIFLA appeared to suggest that content neutrality is relevant in the commercial sphere, it seems reasonable to think that lower courts may now be more likely to conclude that strict scrutiny could apply to content-based commercial disclosure requirements. This would be consistent with what some commentators have described as the Court's increasingly heightened scrutiny of restrictions on commercial speech. For now, though, Central Hudson generally continues to govern the analysis of government actions affecting lawful, non-misleading commercial speech, including commercial disclosure requirements that do not qualify for Zauderer review. As discussed, Central Hudson requires that the government prove that its interest is \"substantial,\" and that the regulation \"directly advances\" that interest and is \"not more extensive than is necessary to serve that interest.\" Government regulations are more likely to fail this more rigorous standard than the Zauderer reasonableness standard, often because a court believes there is some less restrictive means available for the government to achieve its goals. Courts will require more \"evidence of a measure's effectiveness\" under Central Hudson , as compared to Zauderer . However, Central Hudson is more forgiving than strict scrutiny, and courts do uphold government actions infringing on commercial speech under Central Hudson . For example, in Spirit Airlines v. Department of Transportation , the D.C. Circuit concluded that a federal regulation governing the way that airlines must display flight prices \"satisfie[d] . . . the Central Hudson test.\" In the court's view, \"[t]he government interest—ensuring the accuracy of commercial information in the marketplace—[was] clearly and directly advanced by a regulation requiring that the total, final price be the most prominent\" price displayed. And the regulation was \"reasonably tailored to accomplish that end\" because the rule \"simply regulate[d] the manner of disclosure.\" Government actions are unlikely to be upheld if a court applies strict scrutiny. Nonetheless, some scholars have argued that many disclosure requirements might survive strict scrutiny, and the Supreme Court has, in rare instances, said that the government may \"directly regulate speech to address extraordinary problems, where its regulations are appropriately tailored to resolve those problems without imposing an unnecessarily great restriction on speech.\" It is possible that a court could hold that the government has a compelling interest in protecting consumers, for example, and that particular disclosures are narrowly tailored to meet that interest. The Supreme Court has long emphasized that the government can regulate commercial activity \"deemed harmful to the public.\" But a court would likely require more proof from the government under strict scrutiny and likely would not simply accept the government's allegations as \"self-evident\" under such review. Congress has enacted a wide variety of disclosure requirements, many of which arguably compel commercial speech. For example, the Securities and Exchange Act of 1934 sets out disclosure requirements for registering securities. Federal law, among a host of other food labeling requirements, requires \"bioengineered food\" to bear a label disclosing that the food is bioengineered. Direct-to-consumer advertisements for prescription drugs must contain a series of disclosures, including the drug's name and side effects. Certain appliances must contain labels disclosing information about their energy efficiency. Bills in the 115 th and 116 th Congresses have proposed additional disclosure requirements, including a bill that would require large online platforms to disclose any studies conducted on users for the purposes of promoting engagement, and a bill that would require public companies to disclose climate-related risks. Recent Supreme Court precedent suggests that the Court is more closely reviewing commercial disclosure requirements, perhaps moving away from a more deferential treatment of such provisions. In NIFLA , the Court held that a disclosure requirement was likely unconstitutional under Zauderer because the government had not presented sufficient evidence to justify the measure —even though in other cases, the Court had rejected similar challenges to commercial disclosure requirements, saying that the government did not need to present more evidence because the harm it sought to remedy was \"self-evident.\" Further, the Court has recently suggested that if a law regulating commercial speech discriminates on the basis of content—as all disclosure requirements seemingly do —then this content discrimination might subject the law to heightened scrutiny. If the Court further embraces this view, it could be a marked departure from its opinions holding that commercial speech could be regulated on the basis of its content, so long as the government's justification for the content discrimination were sufficiently related to its legitimate interests in regulating the speech. In concurring and dissenting opinions that have been joined by other Justices, Justice Breyer has argued that insofar as the Court's recent decisions suggest that commercial disclosure requirements should be subject to heightened scrutiny, they are inconsistent with prior case law and are not a proper application of the First Amendment. The Supreme Court said in NIFLA that it was \"not question[ing] the legality of health and safety warnings long considered permissible, or purely factual and uncontroversial disclosures about commercial products.\" And lower courts have frequently upheld commercial disclosure requirements, perhaps suggesting that disclosures of the kind cited by Justice Breyer are not in danger of wholesale invalidation under the First Amendment. However, the majority opinion in NIFLA did not clarify what kind of disclosures it would consider permissible, and its opinion made clear that disclosure requirements should be scrutinized in light of the speakers they cover and the burdens they pose. Moreover, although the NIFLA Court said that it was not questioning these disclosures' \"legality,\" it left open the possibility that these disclosure should nonetheless be subject to heightened scrutiny. This statement may mean only that the Court believes that many commercial disclosure requirements would meet a higher standard of scrutiny. At least one federal appellate court seems to have taken NIFLA as a signal that lower courts should more closely scrutinize commercial disclosure requirements. In American Beverage Association v. City & County of San Francisco , the Ninth Circuit, sitting en banc , relied on NIFLA to reverse a prior decision that had upheld an ordinance requiring \"health warnings on advertisements for certain sugar-sweetened beverages.\" While a panel of judges had previously concluded that the disclosure requirement was constitutional under Zauderer , the full Ninth Circuit, reviewing that decision, said: \" NIFLA requires us to reexamine how we approach a First Amendment claim concerning compelled speech.\" Namely, the court held that, in light of NIFLA , the health warnings were likely unjustified and unduly burdensome under Zauderer , noting that the regulation required the warnings to \"occupy at least 20% of those products' labels or advertisements\"—but that the record showed that \"a smaller warning—half the size—would accomplish [the government's] stated goals.\" As such, the court held that the warnings violated the First Amendment \"by chilling protected speech.\" Accordingly, when Congress and federal agencies consider adopting new commercial disclosure requirements, or reauthorizing old ones, it may be wise to develop a record with more evidence demonstrating a need for the regulation. Under any level of scrutiny, courts will examine the government's asserted purpose for the legislation, as well as how closely tailored the disclosure requirement is to achieve that purpose. Under Zauderer , particularly in light of NIFLA , courts may ask for evidence to support the government's claim that the regulated speech is misleading or that the government has some other interest in regulating that speech, and will likely scrutinize the disclosure requirement to make sure it is not unduly burdensome. Under intermediate scrutiny or strict scrutiny, a court may also ask whether the government considered alternative policies that would be less restrictive of speech, examining more closely the government's justifications for choosing a disclosure requirement.", "summary": "Federal law contains a wide variety of disclosure requirements, including food labels, securities registrations, and disclosures about prescription drugs in direct-to-consumer advertising. These disclosure provisions require commercial actors to make statements that they otherwise might not, compelling speech and implicating the Free Speech Clause of the First Amendment. Nonetheless, while commercial disclosure requirements may regulate protected speech, that fact in and of itself does not render such provisions unconstitutional. The Supreme Court has historically allowed greater regulation of commercial speech than of other types of speech. Since at least the mid-1970s, however, the Supreme Court has been increasingly protective of commercial speech. This trend, along with other developments in First Amendment law, has led some commentators to question whether the Supreme Court might apply a stricter test in assessing commercial disclosure requirements in the near future. Nonetheless, governing Supreme Court precedent provides that disclosure requirements generally receive lesser judicial scrutiny when they compel only commercial speech, as opposed to noncommercial speech. In National Institute of Family and Life Advocates v. Becerra, a decision released in June 2018, the Supreme Court explained that it has applied a lower level of scrutiny to compelled disclosures under two circumstances. First, the Supreme Court has sometimes upheld laws that regulate commercial speech if the speech regulation is part of a larger regulatory scheme that is focused on conduct and only incidentally burdens speech. If a law is properly characterized as a regulation of conduct, rather than speech, then it may be subject to rational basis review, a deferential standard that asks only whether the regulation is a rational way to address the problem. However, it can be difficult to distinguish speech from conduct, and the Supreme Court has not frequently invoked this doctrine to uphold laws against First Amendment challenges. Second, the Supreme Court has sometimes applied a lower level of scrutiny to certain commercial disclosure requirements under the authority of a 1985 case, Zauderer v. Office of Disciplinary Counsel. In Zauderer, the Court upheld a disclosure requirement after noting that the challenged provision compelled only \"factual and uncontroversial information about the terms under which . . . services will be available.\" The Court said that under the circumstances, the service provider's First Amendment rights were sufficiently protected because the disclosure requirement was \"reasonably related\" to the government's interest \"in preventing deception of consumers.\" Lower courts have generally interpreted Zauderer to mean that if a commercial disclosure provision requires only \"factual and uncontroversial information\" about the goods or services being offered, it should be analyzed under rational basis review. If a commercial disclosure requirement does not qualify for review under Zauderer, then it will most likely be analyzed under the intermediate standard that generally applies to government actions that regulate commercial speech. Some legal scholars have argued that recent Supreme Court case law suggests the Court may subject commercial disclosure provisions to stricter scrutiny in the future, either by limiting the factual circumstances under which these two doctrines apply or by creating express exceptions to these doctrines. If a court applies a heightened level of scrutiny, it may require the government to present more evidence of the problem it is seeking to remedy and stronger justifications for choosing a disclosure requirement to achieve its purposes.", "document_type": "crs"}
{"report": "After over 15 years characterized by conflict, violence, and zero-sum political competition, Iraqis are working to open a new chapter in their country's development and are debating the future of their relationship with the United States. The Iraqi government declared military victory against the Islamic State organization in December 2017, but insurgent attacks by remaining IS fighters continue to threaten Iraqis in some areas. Iraq's security forces are rebuilding after years of intense fighting. Notwithstanding significant U.S. and international assistance, Iraq's security forces still lack some operational, intelligence, logistical, and management capabilities needed to protect their country. More than 4 million internally displaced Iraqis have returned home, but extensive stabilization and reconstruction are needed in liberated areas. An estimated 1.7 million Iraqis remain as internally displaced persons (IDPs), and Iraqi authorities have identified $88 billion in reconstruction needs over the next decade. U.S. and other foreign troops remain in Iraq at the invitation of the Iraqi government and provide advisory and training support to the Iraqi Security Forces (ISF), including peshmerga forces associated with the Kurdistan Regional Government (KRG). However, some Iraqi political groups—including some with ties to Iran—are pushing for U.S. and other foreign troops to depart; they may force formal consideration of a resolution to that effect in the Iraqi parliament. Such a resolution would likely be nonbinding (if adopted), but nevertheless could create significant political and diplomatic complications for U.S. and Iraqi leaders, and might prompt more fundamental policy reconsiderations on both sides. The Iranian government has viewed instability in neighboring Iraq as a threat and an opportunity since 2003, and works to influence the security sector decisions of Iraqi leaders. It also maintains ties to some armed groups in Iraq, including some units of the Popular Mobilization Forces (PMF)—volunteer militias recruited to fight the Islamic State. The PMF have been recognized as an enduring component of Iraq's national security establishment pursuant to a 2016 law that calls for their integration under existing command structures and administration. U.S. officials have recognized the contributions that PMF volunteers have made to Iraq's fight against the Islamic State; they also remain wary of the potential for Iran-linked elements of the PMF to evolve into permanent proxy forces, whether they remain tied to the Iraqi state or work outside formal Iraqi government and military control. U.S. policy seeks to support the long-term development of Iraq's military, counterterrorism, and police services as alternatives to the continued use of PMF units to secure Iraq's borders, communities, and territory recaptured from the Islamic State. U.S. concerns about Iranian government policies have intensified in recent years, and Iraq has become a venue for U.S.-Iranian competition. Iran's government supported insurgent attacks on U.S. forces during the U.S. presence from 2003 to 2011. Since then, U.S.-Iranian competition has remained contained and nonviolent, but there is no certainty it will remain so, as demonstrated by indirect fire attacks in 2018 on U.S. diplomatic facilities, attacks attributed by U.S. officials to Iranian proxy groups. Iraqi leaders are trying to prevent their country from being used as a battleground for regional and international rivalries and seek to build positive, nonexclusive ties to their neighbors and global powers. Broad U.S. efforts to put pressure on Iran extend to the Iraqi energy sector, where years of sanctions, conflict, neglect, and mismanagement have left Iraq dependent on purchases of natural gas and electricity from its Iranian neighbors. Since 2018, Iraqi leaders have sought relief from U.S. sanctions on related transactions with Iran. The Trump Administration has granted temporary permissions, and current U.S. initiatives encourage Iraq to diversify its energy relationships with its neighbors and develop more independence for its energy sector. U.S. officials promote U.S. companies as potential partners for Iraq through the expansion of domestic electricity generation capacity and the introduction of technology to capture the large amounts of natural gas that are currently flared (burned at wellheads). Oil production and exports are the lifeblood of Iraq's public finances and economy and have reached all-time highs. Oil export revenues provide Iraq's government with significant financial resources, but oil proceeds also have contributed to the creation of a state-centric economic model in which public sector employment and contracting have crowded out private sector activity. Public investment and reconstruction spending is financed through deficit spending, borrowing, and international aid, and Iraq's finances remain vulnerable to price changes in global oil markets. While Iraq's young, growing population and geographic location ( Table 1 ) make it an attractive market for foreign investment, bureaucratic constraints, service interruptions, corruption, and security and political concerns continue to deter some investors. The U.S. government supports Iraq's compliance with reform targets pursuant to IMF agreements and promotes an expansion of U.S.-Iraqi trade and investment ties. However, future U.S. investment prospects in Iraq may be contingent on the broader political and security relationship. Overall, the United States faces complicated choices in Iraq. The 2003 invasion unseated an adversarial regime, but unleashed more than a decade of violent insurgency and terrorism that divided Iraqis, while creating opportunities for Iran to strengthen its influence in Iraq and across the region. Since 2003, the United States has invested both militarily and financially in stabilizing Iraq. Since 2014, U.S. policy toward Iraq has focused on ensuring the defeat of the Islamic State as a transnational insurgent and terrorist threat. The Islamic State threat has been reduced, but Iraqi security needs remain considerable and both countries are examining the impetus and terms for continued U.S. investment in Iraq. Successive U.S. Administrations have sought to keep U.S. involvement and investment minimal relative to the 2003-2011 era, pursuing U.S. interests through partnership with various entities in Iraq and the development of those partners' capabilities, rather than through extensive U.S. military deployments. U.S. economic assistance bolsters Iraq's ability to attract lending support and is aimed at improving the government's effectiveness and public financial management. The United States is the leading provider of humanitarian assistance to Iraq and also supports post-IS stabilization activities across the country through grants to United Nations agencies and other entities. The Trump Administration has sustained a cooperative relationship with the Iraqi government and has requested funding for FY2020 to support Iraq's stabilization and continue security training for Iraqi security forces. The size and mission of the U.S. military presence in Iraq have evolved as conditions on the ground have changed since 2017; they could change further if Iraqi officials revise their current requests for continued U.S. and international security assistance. The 116 th Congress has appropriated funds to provide security assistance, humanitarian relief, and foreign aid for Iraq ( P.L. 116-6 ), and is considering appropriations and authorization requests for FY2020 that would largely continue U.S. policies and programs on current terms. It remains to be seen whether Iraq and the United States will be able to pursue opportunities to build a bilateral relationship that is less defined by conflict and its aftermath. To do so, leaders on both sides will likely have to continue creatively managing unusually complex political and security challenges. Since the U.S.-led ouster of Saddam Hussein in 2003, Iraq's Shia Arab majority has exercised greater national power both in concert and in competition with the country's Sunni Arab and Kurdish minorities. While intercommunal identities and rivalries remain politically relevant, competition among Shia movements and coalition building across communal groups are now major factors in Iraqi politics. Notwithstanding their ethnic and religious diversity and political differences, many Iraqis advance similar demands for improved security, government effectiveness, and economic opportunity. Some Iraqi politicians have broadened their political and economic narratives in an attempt to appeal to disaffected citizens across the country. Years of conflict, poor service delivery, corruption, and sacrifice have strained the population's patience with the status quo, adding to the pressures that leaders face from the country's uncertain domestic and regional security environment. Although the Islamic State's exclusive control over distinct territories in Iraq has now ended, the U.S. intelligence community assessed in 2018 that the Islamic State \"has started—and probably will maintain—a robust insurgency in Iraq and Syria as part of a long-term strategy to ultimately enable the reemergence of its so-called caliphate.\" In January 2019, Director of National Intelligence Dan Coats told Congress that the Islamic State \"remains a terrorist and insurgent threat and will seek to exploit Sunni grievances with Baghdad and societal instability to eventually regain Iraqi territory against Iraqi security forces that are stretched thin.\" The legacy of the war with the Islamic State strains security in Iraq in two other important ways. First, the Popular Mobilization Committee (PMC) and its militias—the mostly Shia Popular Mobilization Forces (PMF) recruited to fight the Islamic State—have been recognized as enduring components of Iraq's national security establishment. This is the case even as many PMF units continue to operate outside the bounds of their authorizing legislation and the control of the Prime Minister. The U.S. intelligence community considers Iran-linked Shia elements of the PMF to be the \"the primary threat to U.S. personnel\" in Iraq. Second, national and KRG forces remain deployed across from each other along contested lines of control while their respective leaders are engaged in negotiations over a host of sensitive issues. Following a Kurdish referendum on independence in 2017, the Iraqi government expelled Kurdish peshmerga from some disputed territories they had secured from the Islamic State, and IS fighters now appear to be exploiting gaps in ISF and Kurdish security to survive. PMF units remain active throughout the territories in dispute between the Iraqi national government and the federally recognized Kurdistan Region of northern Iraq, with local populations in some areas opposed to the PMF presence. Amid unrest in southern Iraq during late summer 2018, the State Department directed the temporary evacuation of U.S. personnel and temporary closure of the U.S. Consulate in Basra after indirect fire attacks on the consulate and the U.S. Embassy compound in Baghdad. U.S. officials attributed the attacks to Iran-backed forces and said that the United States would hold Iran accountable and would respond directly to attacks on U.S. facilities or personnel by Iran-backed entities. The incidents highlight the potential for U.S.-Iran tensions to escalate in Iraq. Iraqis held national legislative elections in May 2018, electing members for four-year terms in the 329 seat Council of Representatives (COR), Iraq's unicameral legislature. Turnout was lower in the 2018 COR election than in past national elections, and reported irregularities led to a months-long recount effort that delayed certification of the results until August. Political factions spent the summer months negotiating in a bid to identify the largest bloc within the COR—the parliamentary bloc charged with proposing a prime minister and new Iraqi cabinet ( Figure 2 ). The distribution of seats and alignment of actors precluded the emergence of a dominant coalition. The Sa'irun (On the March) coalition led by populist Shia cleric and longtime U.S. antagonist Muqtada al Sadr's Istiqama (Integrity) list placed first in the election (54 seats), followed by the predominantly Shia Fatah (Conquest) coalition led by Hadi al Ameri of the Badr Organization (48 seats). Fatah includes several individuals formerly associated with the Popular Mobilization Committee (PMC) and its militias—the mostly Shia Popular Mobilization Forces (PMF), which were recruited to fight the Islamic State. Those elected include some figures with ties to Iran (see \" The Future of the Popular Mobilization Forces \" and Figure 5 below). Former Prime Minister Haider al Abadi's Nasr (Victory) coalition underperformed expectations to place third (42 seats), while former Prime Minister Nouri al Maliki's State of Law coalition, Ammar al Hakim's Hikma (Wisdom) list, and Iyad Allawi's Wataniya (National) list also won significant blocs of seats. Among Kurdish parties, the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK) won the most seats, and smaller Kurdish opposition lists protested alleged irregularities. As negotiations continued, Nasr and Sa'irun members joined with others to form the Islah (Reform) bloc in the COR, while Fatah and State of Law formed the core of a rival Bin'a (Reconstruction) bloc. Under an informal agreement developed through the formation of successive governments, Iraq's Prime Minister has been a Shia Arab, the President has been a Kurd, and the COR Speaker has been a Sunni Arab. In September, the first session of the newly elected COR was held, and members elected Mohammed al Halbousi, the Sunni Arab governor of Anbar, as COR Speaker. Hassan al Kaabi of the Sa'irun list and Bashir Hajji Haddad of the KDP were elected as First and Second Deputy Speaker, respectively. In October, the COR met to elect Iraq's President, with rival Kurdish parties nominating competing candidates. COR members chose the PUK candidate–former KRG Prime Minister and former Iraqi Deputy Prime Minister Barham Salih—in the second round of voting. Salih, in turn, named former Oil Minister Adel Abd al Mahdi as Prime Minister-designate and directed him to assemble a slate of cabinet officials for COR approval. Abd al Mahdi is a consensus Shia Arab leader acceptable to the rival Shia groups in the Islah and Bina blocs, but he does not lead a party or parliamentary group of his own. Some observers of Iraqi politics assess Abd al Mahdi as generally pliable and unable to assert himself relative to others who have large followings or command armed factions. COR members have confirmed most of Abd al Mahdi's cabinet nominees, but the main political blocs remain at an impasse over the Ministries of Interior, Defense, and Justice. As government formation talks proceeded during the summer of 2018, large protests and violence in southern Iraq highlighted some citizens' outrage with electricity and water shortages, lack of economic opportunity, and corruption. Unrest appeared to be amplified in some instances by citizens' anger about heavy-handed responses by security forces and militia groups. Dissatisfaction exploded in the southern province of Basra during August and September, culminating in several days and nights of mass demonstrations and the burning by protestors of the Iranian consulate in Basra and the offices of many leading political groups and militia movements. Arguably, the Abd al Mahdi government's success or failure in demonstrating progress on the issues that sparked the protests will be an important factor in determining its viability and longevity. As of March 2019, Iraqi security operations against IS fighters are ongoing in governorates in which the group formerly controlled territory or operated—Anbar, Ninewa, Salah al Din, Kirkuk, and Diyala. These operations are intended to disrupt IS fighters' efforts to reestablish themselves as an organized threat and keep them separated from population centers. Press accounts and U.S. government reports describe continuing IS attacks on Iraqi Security Forces and Popular Mobilization Forces, particularly in rural areas. Independent analysts describe dynamics in parts of these governorates in which IS fighters threaten, intimidate, and kill citizens in areas at night or where Iraq's national security forces are absent. In some areas, new displacement has occurred as civilians have fled IS attacks. Overall, however violence against civilians has dropped considerably from its 2014 highs ( Figure 3 ). In cities like Mosul and Baghdad residents and visitors have enjoyed increased freedom of movement and security, although IS activity is reported in Mosul and fatal security incidents have occurred in areas near Baghdad and several other locations since January 2019 ( Figure 4 ). Iraq's Popular Mobilization Committee (PMC) and its associated militias—the Popular Mobilization Forces (PMF)—were founded in 2014 and have contributed to Iraq's fight against the Islamic State, but they have come to present an implicit challenge to the authority of the state. The PMF are largely but not solely drawn from Iraq's Shia Arab majority: Sunni, Turkmen, and Christian PMF militia also remain active. Despite expressing appreciation for PMF contributions to the fight against IS, some Iraqis and outsiders have raised concerns about the future of the PMC/PMF and some of its members' ties to Iran. At issue has been the unwillingness of some PMC/PMF entities to subordinate themselves to the command of Iraq's elected government and the ongoing participation in PMC/PMF operations of groups reported to receive direct Iranian support. As noted above, the U.S. intelligence community has described Iran-linked Shia militia—whether PMF or not—as the \"primary threat\" to U.S. personnel in Iraq, and has suggested that the threat posed by Iran-linked groups will grow as they press for the United States to withdraw its forces from Iraq. Many PMF-associated groups and figures participated in the May 2018 national elections under the auspices of the Fatah coalition headed by Badr Organization leader Hadi al Ameri. Ameri and other prominent PMF-linked figures such as Asa'ib Ahl al Haq (League of the Righteous) leader Qa'is al Khazali nominally disassociated themselves from the PMC/PMF in late 2017, in line with legal prohibitions on the participation of PMC/PMF officials in politics. Nevertheless, their movements' supporters and associated units remain integral to some ongoing PMF operations, and the Fatah coalition's campaign arguably benefited from its PMF association. During the election and in its aftermath, the key unresolved issue with regard to the PMC/PMF has remained the incomplete implementation of a 2016 law calling for the PMF to be incorporated as a permanent part of Iraq's national security establishment. In addition to outlining salary and benefit arrangements important to individual PMF volunteers, the law calls for all PMF units to be placed fully under the authority of the commander-in-chief (Prime Minister) and to be subject to military discipline and organization. Through early 2019, U.S. government reporting states that while some PMF units are being administered in accordance with the law, most remain outside the law's prescribed structure. This includes some units associated with Shia groups identified by U.S. government reports as receiving or as having received Iranian support. In January 2019, the U.S. intelligence community assessed that the PMC/PMF \"plan to use newfound political power gained through positions in the new government to reduce or remove the U.S. military presence while competing with the Iraqi security forces for state resources.\" In general, the popularity of the PMF and broadly expressed popular respect for the sacrifices made by individual volunteers in the fight against the Islamic State create complicated political questions for Iraqi leaders. Iraqi law does not call for or foresee the dismantling of the PMC/PMF structure, and proposals to the contrary appear to be politically untenable at present. Given the ongoing role PMF units are playing in security operations against remnants of the Islamic State in some areas, rapid, wholesale redeployments of PMF units might create new opportunities for IS fighters to exploit in areas where replacement forces are not immediately available. That said, U.S. military officials report that \"competition over areas to operate and influence between the PMF and the ISF will likely result in violence, abuse, and tension in areas where both entities operate.\" The Kurdistan Region of northern Iraq (KRI) enjoys considerable administrative autonomy under the terms of Iraq's 2005 federal constitution, but issues concerning territory, security, energy, and revenue sharing continue to strain ties between the Kurdistan Regional Government (KRG) and the national government in Baghdad. In September 2017, the KRG held a controversial advisory referendum on independence, amplifying political tensions with the national government (see textbox below). The referendum was followed by a security crisis as Iraqi Security Forces and PMF fighters reentered some disputed territories that had been held by KRG peshmerga forces. P eshmerga fighters also withdrew from the city of Kirkuk and much of the governorate. Baghdad and the KRG have since agreed on a number of issues, including border and customs controls, the export of oil from some KRG-controlled fields, and the transfer of funds to pay the salaries of some KRG civil servants. As talks continue, the ISF and peshmerga remain deployed across from each other at various fronts throughout the disputed territories ( Figure 6 ). The KRG delayed overdue legislative elections for the Kurdistan National Assembly in the wake of the referendum crisis and held them on September 30, 2018. Kurdish leaders have since been engaged in regional government formation talks while also participating in cabinet formation and budget negotiations at the national level. The KDP won a plurality (45) of the 111 KNA seats in the September 2018 election, with the Patriotic Union of Kurdistan (PUK) and smaller opposition and Islamist parties splitting the balance. With longtime KDP leader Masoud Barzani's term as president having expired in 2015, his nephew, KRG Prime Minister Nechirvan Barzani, appears set to succeed him. Masoud Barzani's son, security official Masrour Barzani, seems set to assume the KRG prime ministership. Since the election, factions within the PUK have appeared to have differences of opinion over KRG cabinet formation, while KDP and PUK differences have been apparent at the national level. During government formation talks in Baghdad, the KDP sought to name the Kurdish candidate for the Iraqi national presidency, but a majority of COR members instead chose Barham Salih, a PUK member. In March 2019, KDP and PUK leaders announced a four-year political agreement that reportedly includes joint commitments on the formation of the new KRG government and candidates for the Iraqi national Minister of Justice position and governorship of Kirkuk. U.S. officials have encouraged Kurds and other Iraqis to engage on issues of dispute and to avoid unilateral military actions. U.S. officials encourage improved security cooperation between the KRG and Baghdad, especially since IS remnants appear to be exploiting gaps created by the standoff in the disputed territories. KRG officials continue to express concern about the potential for an IS resurgence and chafe at operations by some PMF units in areas adjacent to the KRI. U.N. officials report several issues of ongoing humanitarian and protection concerns for displaced and returning populations and the host communities assisting them. With a range of needs and vulnerabilities, these populations require different forms of support, from immediate humanitarian assistance to resources for early recovery. Protection is a key priority in areas of displacement, where for example, harassment of displaced persons by armed actors and threats of forced return have occurred, as well as in areas of return. By December 2017, more Iraqis had returned to their home areas than those who had remained as internally displaced persons (IDPs) or who were becoming newly displaced. Nevertheless, humanitarian conditions remain difficult in many conflict-affected areas of Iraq. As of February 28, 2019, more than 4.2 million Iraqis displaced after 2014 had returned to their districts, while more than 1.7 million individuals remained as displaced persons (IDPs). Ninewa governorate hosts the most IDPs of any single governorate (nearly one-third of the total), reflecting the lingering effects of the intense military operations against the Islamic State in Mosul and other areas during 2017 ( Table 2 ). Estimates suggest thousands of civilians were killed or wounded during the Mosul battle, which displaced more than 1 million people. The Kurdistan Region of Iraq (KRI) hosts nearly 700,000 IDPs (approximately 40% of the 1.7 million remaining IDPs nationwide). IDP numbers in the KRI have declined since 2017, though not as rapidly as in some other governorates. According to IOM, conditions for IDPs in Dohuk governorate remain the most challenging in the KRI, where most IDPs live in camps or critical shelters (makeshift tents/abandoned buildings/informal settlements), according to International Organization for Migration surveys. The U.N. Office for the Coordination of Humanitarian Affairs (UNOCHA) 2019 funding appeal, the Iraq Humanitarian Response Plan (HRP), anticipates that as many as 6.7 million Iraqis will require some form of humanitarian assistance in 2019 and seeks $701 million for 1.75 million of the most vulnerable Iraqis. As of March 2019, the appeal had received $6.5 million (1%). The United States was the top donor to the 2018 Iraq HRP. Since 2014, the United States has contributed nearly $2.5 billion to humanitarian relief efforts in Iraq, including more than $498 million in humanitarian support in FY2018. U.S. stabilization assistance to areas of Iraq that have been liberated from the Islamic State is directed through the United Nations Development Program (UNDP)-administered Funding Facility for Stabilization (FFS) and through other channels. According to UNDP data, the FFS has received more than $830 million in resources since its inception in mid-2015, with 1,388 projects reported completed and a further 978 projects underway or planned with the support of UNDP-managed funding. In January 2019, UNDP identified $426 million in stabilization program funding shortfalls in five priority areas in Ninewa, Anbar, and Salah al Din governorates \"deemed to be the most at risk to future conflict\" and \"integral for the broader stabilization of Iraq.\" The UNDP points to unexploded ordnance, customs clearance delays, and the growth in volume and scope of FFS projects as challenges to its ongoing work. At a February 2018 reconstruction conference in Kuwait, Iraqi authorities described more than $88 billion in short- and medium-term reconstruction needs, spanning various sectors and different areas of the country. Countries participating in the conference offered approximately $30 billion worth of loans, investment pledges, export credit arrangements, and grants in response. The Trump Administration actively supported the participation of U.S. companies in the conference and announced its intent to pursue $3 billion in Export-Import Bank support for Iraq. Iraqi leaders hope to attract considerable private sector investment to help finance Iraq's reconstruction needs and underwrite a new economic chapter for the country. The size of Iraq's internal market and its advantages as a low-cost energy producer with identified infrastructure investment needs help make it attractive to investors. Overcoming persistent concerns about security, service reliability, and corruption, however, may prove challenging. The formation of the new Iraqi government and its success or failure in pursuing reforms may provide key signals to parties exploring investment opportunities. The public finances of the national government and the KRG remain strained, amplifying the pressure on leaders working to address the country's security and service-provision challenges. The combined effects of lower global oil prices from 2014 through mid-2017, expansive public-sector liabilities, and the costs of the military campaign against the Islamic State have exacerbated national budget deficits. The IMF estimated Iraq's 2017-2018 financing needs at 19% of GDP. Oil exports provide nearly 90% of public-sector revenue in Iraq, while non-oil sector growth has been hindered over time by insecurity, weak service delivery, and corruption. The 2019 budget expands public salaries and investments. Iraq's oil production and exports have increased since 2016, but fluctuations in oil prices undermined revenue gains until the latter half of 2017. Revenues have since improved, and Iraq has agreed to manage its overall oil production in line with mutually agreed Organization of the Petroleum Exporting Countries (OPEC) output limits. In February 2019, Iraq exported an average of nearly 4 million barrels per day (mbd, including KRG-administered oil exports), above the March 2019 budget's 3.9 mbd export assumption and at prices above the budget's $56 per barrel benchmark. The IMF projects modest GDP growth over the next five years and expects growth to be stronger in the non-oil sector if Iraq's implementation of agreed measures continues as oil output and exports plateau. Fiscal pressures are more acute in the Kurdistan region, where the fallout from the national government's response to the September 2017 referendum further strained the KRG's already weakened ability to pay salaries to its public-sector employees and security forces. The KRG's loss of control over significant oil resources in Kirkuk governorate, coupled with changes implemented by national government authorities over shipments of oil from those fields via the KRG-controlled export pipeline to Turkey, contributed to a sharp decline in revenue for the KRG during 2018. The resumption of exports from Kirkuk in late 2018, and an agreement between the KRG and Baghdad providing for the payment of some public sector salaries in exchange for KRG oil export proceed deposits in national accounts, has improved the situation as of March 2019. Related issues shaped consideration of the 2018 and 2019 budgets in the COR, with Kurdish representatives criticizing the government's budget proposals to allocate the KRG a smaller percentage of funds to the KRI than the 17% benchmark reflected in previous budgets. National government officials argue that KRG resources should be based on a revised population estimate, and agreements reached for the national government to pay KRG civil service and peshmerga salaries in the 2019 budget are linked to the KRG placing 250,000 barrels per day of oil exports under federal control in exchange for financial all ocations for verified expenses. KRG oil contracts may limit the region's ability to meet this target, but the transfer of national funds to the KRG appears likely to ease fiscal pressures that had required payment limits that fueled protests. Iraqi military and counterterrorism operations against remnants of the Islamic State group are ongoing, and the United States military and its coalition partners continue to provide support to those efforts at the request of the Iraqi government. U.S. and coalition training efforts for various Iraqi security forces are ongoing at different locations, including in the Kurdistan region, with U.S. activities carried out pursuant to the authorities granted by Congress for the Iraq Train and Equip Program and the Office of Security Cooperation at the U.S. Embassy in Baghdad (OSC-I). From FY2015 through FY2019, Congress authorized and appropriated more than $5.8 billion for train and equip assistance in Iraq ( Table 3 ). The Trump Administration is requesting an additional $745 million in FY2020 defense funding for Iraq programs under the Counter-ISIS Train and Equip Fund. The request proposes continued support to the Iraqi Counterterrorism Service (CTS), Army, Federal Police, Border Guards, Emergency Response Battalions, Energy Police, Special Forces ( Qwat Khasah ), and KRG Ministry of Peshmerga forces (see below). The request seeks $45 million for OSC-I. The Trump Administration, like the Obama Administration, has cited the 2001 Authorization for Use of Military Force (AUMF, P.L. 107-40 ) as the domestic legal authorization for U.S. military operations against the Islamic State in Iraq and has notified Congress of operations against the Islamic State in periodic reports on the 2002 Iraq AUMF ( P.L. 107-243 ). The U.S. government has referred to both collective and individual self-defense provisions of the U.N. Charter as the relevant international legal justifications for ongoing U.S. operations in Iraq and Syria. The U.S. military presence in Iraq is governed by an exchange of diplomatic notes that reference the security provisions of the 2008 bilateral Strategic Framework Agreement. To date, this arrangement has not required the approval of a separate security agreement by Iraq's Council of Representatives. U.S. military officials stopped officially reporting the size of the U.S. force in Iraq in 2017, but have confirmed that there has been a reduction in the number of U.S. military personnel and changes in U.S. capabilities in Iraq since that time. U.S. military sources have stated that the \"continued coalition presence in Iraq will be conditions-based, proportional to the need, and in coordination with the government of Iraq.\" As of March 2019, 71 U.S. troops have been killed or have died as part of Operation Inherent Resolve (OIR), and 77 have been wounded. Through September 2018, OIR operations since August 2014 had cost $28.5 billion. As of March 2019, U.S. and coalition forces have trained more than 190,000 Iraqi security personnel since 2014, including more than 30,000 Kurdish peshmerga . Notwithstanding these results, in September 2018, Department of Defense (DOD) officials told the DOD Inspector General that there remains \"a significant shortfall in Coalition trainers\" and confirmed that coalition forces are working to develop more capable and numerous Iraqi trainers to meet identified needs. In 2018, NATO leaders agreed to launch NATO Mission Iraq (NMI) to support Iraqi security sector reform and military professional development. Overall, DOD reports indicate that Iraq's security forces continue to exhibit \"systemic weaknesses\" including poor intelligence gathering and fusion, operational insecurity, ongoing corruption, reliance on coalition aircraft for air support, and overly centralized leadership, among other problems. U.S. and coalition plans for 2019 include a more intense focus on developing the capacity of various Iraqi police, border, and energy forces to hold recaptured territory. Through 2018, coalition advisers prioritized assistance to Iraqi forces conducting offensive operations against the Islamic State. In November 2018, the Lead Inspector General for Overseas Contingency Operations (LIG-OCO) questioned whether the coalition \"has sufficient advisors to support both ongoing offensive operations and to help hold forces secure areas cleared.\" U.S. arms transfers and security assistance to Iraq are provided with the understanding that U.S. equipment will be responsibly used by its intended recipients, and the 115 th Congress was informed about the unintended or inappropriate use of U.S.-origin defense equipment, including a now-resolved case involving the possession and use of U.S.-origin tanks by elements of the Popular Mobilization Forces. Since 2014, the U.S. government has provided Iraq with State Department- and USAID-administered assistance to support a range of security and economic objectives (in addition to the humanitarian assistance mentioned above). U.S. Foreign Military Financing (FMF) funds have supported the costs of continued loan-funded purchases of U.S. defense equipment and have helped fund Iraqi defense institution-building efforts. U.S. loan guarantees also have supported well-subscribed Iraqi bond issues to help Baghdad cover its fiscal deficits. Since 2014, the United States also has contributed nearly $2.5 billion to humanitarian relief efforts in Iraq, including more than $498 million in humanitarian support in FY2018. The Trump Administration also has directed additional support since 2017 to persecuted religious minority groups in Iraq, negotiating with UNDP to direct U.S. contributions to the UNDP Funding Facility for Stabilization (FFS) to the Ninewa Plains and other minority populated areas of northern Iraq (see \" Stabilization and Issues Affecting Religious and Ethnic Minorities \" below). The FY2019 foreign operations appropriations act ( H.J.Res. 31 , P.L. 116-6 ) appropriates $150 million in Economic Support Fund (ESF) aid, along with $250 million in FMF and other security assistance funds. Of the ESF funds, $50 million is to be made available for stabilization purposes, according to the act's explanatory statement. The act also directs funds to support transitional justice programs and accountability for genocide, crimes against humanity, and war crimes in Iraq. The Administration's FY2020 request for bilateral assistance seeks more than $165 million to continue stabilization and other nonmilitary assistance programs in Iraq ( Table 4 ). The United States also contributes to Iraqi programs to stabilize the Mosul Dam on the Tigris River, which remains at risk of collapse due to structural flaws, overlooked maintenance, and its compromised underlying geology. Collapse of the dam could cause deadly, catastrophic damage downstream. In September 2018, the State Department noted that Iraq is working to stabilize the dam, but judged that \"it is impossible to accurately predict the likelihood of the dam's failing.\" State Department reports on human rights conditions and religious freedom in Iraq have documented the difficulties faced by religious and ethnic minorities in the country for years. In some cases, these difficulties and security risks have driven members of minority groups to flee Iraq or to take shelter in different areas of the country, whether with fellow group members or in new communities. Minority groups that live in areas subject to long-running territorial disputes between Iraq's national government and the KRG face additional interference and exploitation by larger groups for political, economic, or security reasons. Members of diverse minority communities express a variety of territorial claims and administrative preferences, both among and within their own groups. While much attention is focused on potential intimidation or coercion of minorities by majority groups, disputes within and among minority communities also have the potential to generate tension and violence. In October 2017, Vice President Mike Pence said in a speech that the U.S. government would direct more support to persecuted religious minority groups in the Middle East, including in Iraq. As part of this initiative, the Trump Administration has negotiated with UNDP to direct U.S. contributions to the UNDP Funding Facility for Stabilization (FFS) to the Ninewa Plains and other minority-populated areas of northern Iraq. In October 2017, USAID solicited proposals in a Broad Agency Announcement for cooperative programs \"to facilitate the safe and voluntary return of Internally Displaced Persons (IDPs) to their homes in the Ninewa plains and western Ninewa of Iraq and to encourage those who already are in their communities to remain there.\" In parallel, USAID notified Congress of its intent to obligate $14 million in FY2017 ESF-OCO for stabilization programs. In January 2018, USAID officials released to UNDP a $75 million first tranche of stabilization assistance from an overall pledge of $150 million that had been announced in July 2017 and notified for planned obligation to Congress in April 2017. According to the January 2018 announcement, USAID \"renegotiated\" the contribution agreement with UNDP so that $55 million of the $75 million payment \"will address the needs of vulnerable religious and ethnic minority communities in Ninewa Province, especially those who have been victims of atrocities by ISIS\" with a focus on \"restoring services such as water, electricity, sewage, health, and education.\" USAID Administrator Mark Green visited Iraq in June 2018 and engaged with ethnic and religious minority groups in Ninewa. He also announced $10 million in awards under USAID's October 2017 proposal solicitation. At the end of the third quarter of 2018, UNDP reported that 259 projects in minority communities were complete out of 486 overall projects completed, planned, or under way in the Ninewa Plains. Inclusive of the January announcement, the United States has provided $216.8 million to support the FFS—which remains the main international conduit for post-IS stabilization assistance in liberated areas of Iraq. According to UNDP, overall stabilization priorities for the FFS program are set by a steering committee chaired by the government of Iraq, with governorate-level Iraqi authorities directly responsible for implementation. UNDP officials report that earmarking of funding by donors \"can result in funding being directed away from areas highlighted by the Iraqi authorities as being in great need.\" In January 2019, UNDP identified $426 million in stabilization program funding shortfalls in five priority areas \"deemed to be the most at risk to future conflict\" and \"integral for the broader stabilization of Iraq.\" Trump Administration requests to Congress for FY2018-FY2020 monies for Iraq programs included proposals to fund continued U.S. contributions to post-IS stabilization. Additional funds notified to Congress for U.N.-managed stabilization programs in Iraq were obligated during 2018. U.S. officials are currently seeking greater Iraqi and international contributions to stabilization efforts in Iraq and Syria. The Trump Administration seeks more proactively to challenge, contain, and roll back Iran's regional influence, while it attempts to solidify a long-term partnership with the government of Iraq and to support Iraq's sovereignty, unity, security, and economic stability. These parallel (and sometimes competing) goals may raise several policy questions for U.S. officials and Members of Congress, including the makeup and viability of the Iraqi government; Iraqi leaders' approaches to Iran-backed groups and the future of militia forces mobilized to fight the Islamic State; Iraq's compliance with U.S. sanctions on Iran; the future extent and roles of the U.S. military presence in Iraq; the terms and conditions associated with U.S. security assistance to Iraqi forces; U.S. relations with Iraqi constituent groups such as the Kurds; and potential responses to U.S. efforts to contain or confront Iran-aligned entities in Iraq or elsewhere in the region. Iran-linked groups in Iraq have directly targeted U.S. forces in the past; some of them may be able and willing to do so again under certain circumstances. U.S. officials blamed these groups for apparent indirect attacks on U.S. diplomatic facilities in Basra and Baghdad in 2018. These attacks followed reports that Iran had transferred short-range ballistic missiles to Iran-backed militias in Iraq, reportedly including Kata'ib Hezbollah. The 115 th Congress considered proposals directing the Administration to impose U.S. sanctions on some Iran-aligned Iraqi groups, and enacted legislation containing reporting requirements focused on Iranian support to nonstate actors in Iraq and other countries. Iran has sometimes intervened in Iraq directly, including by conducting air strikes against Islamic State forces advancing on the border with Iran in 2014 and by launching missiles against Iranian Kurdish groups encamped in parts of northern Iraq in 2018. New or existing efforts to sideline Iran-backed groups, via sanctions or other means, might challenge Iran's influence in Iraq in ways that could serve stated U.S. government goals. The United States government has placed sanctions on some Iran-linked groups and individuals for threatening Iraq's stability and for involvement in terrorism. Some analysts have argued \"the timing and sequencing\" of sanctions \"is critical to maximizing desired effects and minimizing Tehran's ability to exploit Iraqi blowback.\" U.S. efforts to counter Iranian activities in Iraq and elsewhere in the region also have the potential to complicate the pursuit of other U.S. interests in Iraq, including U.S. counter-IS operations and training. When President Trump in a February 2019 interview referred to the U.S. presence in Iraq as a tool to monitor Iranian activity, several Iraqi leaders raised concerns. Iran-aligned Iraqi groups since have referred to President Trump's statements in their political campaign to force a U.S. withdrawal. More broadly, U.S. confrontation with Iran and its allies in Iraq could disrupt relations among parties to the consensus government in Baghdad, or even precipitate civil conflict, undermining the U.S. goal of ensuring the stability and authority of the Iraqi government. While a wide range of Iraqi actors have ties to Iran, the nature of those ties differs, and treating these diverse groups uniformly risks ostracizing potential U.S. partners or neglecting opportunities to create divisions between these groups and Iran. Just as the Administration has used sanctions to curb Iranian influence in Iraq, it also has used U.S. foreign assistance as leverage to limit Iranian involvement in Iraqi governance. As Iraqis debated government formation in 2018, the Trump Administration signaled that decisions about future U.S. assistance efforts would be shaped by the outcome of Iraqi negotiations. Specifically, the Administration stated that the assumption of authority in the new government by Iraqis perceived to be close to or controlled by Iran would prompt the United States to reconsider U.S. support. In the end, Iraqis excluded figures with close ties to Iran from cabinet positions. U.S. officials have argued that the United States does not seek to sever Iraq's relationships with neighboring Iran, but striking a balance in competing with Iran-linked groups and respecting Iraq's independence may continue to pose challenges. Iraq's relations with the Arab Gulf states also may shape the balance of Iranian and U.S. interests. U.S. officials have praised Saudi efforts since 2015 to reengage with the Iraqi government and support normalization of ties between the countries. In December 2015, Saudi officials reopened the kingdom's diplomatic offices in Iraq after a 25-year absence, and border crossings between the two countries have been reopened. Saudi Arabia and the other GCC states have not offered major new economic or security assistance or new debt relief initiatives to help stabilize Iraq, but actively engaged in and supported the February 2018 reconstruction conference held by Iraq in Kuwait. Saudi and other GCC state officials generally view the empowerment of Iran-linked Shia militia groups in Iraq with suspicion and, like the United States, seek to limit Iran's ability to influence political and security developments in Iraq. Negotiations among Iraqi factions following the May 2018 election have not fully resolved all questions about Iraq's future approach to U.S.-Iraqi relations. Former Prime Minister Abadi, with whom the U.S. government worked closely, could not translate his list's third-place finish into a mandate for a second term. His successor, Prime Minister Adel Abd al Mahdi, served in Abadi's government; U.S. officials have worked positively with him in the past. Nevertheless, the nature and durability of the political coalition arrangements supporting his leadership are unclear, and he lacks a strong personal electoral mandate. Similarly, Iraqi President Barham Salih is familiar to U.S. officials as a leading and friendly figure among Iraqi Kurds, but he serves at a time of significant political differences among Kurds, and amid strained relations between Kurds and the national government. Salih has supported continued U.S.-Iraqi cooperation but also has rebuked some statements by U.S. officials. While Baghdad-KRG ties have improved relative to their post-2017 referendum low point, it remains possible that the national government could more strictly assert its sovereign prerogatives with regard to foreign assistance to substate entities, and/or that KRG representatives could seek expanded aid or more direct foreign support. As negotiations over cabinet positions conclude in Baghdad, Iraq's government is expected to debate the implementation of the national budget, reform of the water and electricity sectors, employment and anticorruption initiatives, and various national security issues. Among the latter may be proposals from some factions calling for the reduction or expulsion of U.S. and other foreign military forces from Iraq. Some Iraqi groups remain vocally critical of the remaining U.S. and coalition military presence in the country and argue that the defeat of the Islamic State's main forces means that U.S. and other foreign forces should depart. These groups also accuse the United States of seeking to undermine the Popular Mobilization Forces or to otherwise subordinate Iraq to U.S. preferences. Most mainstream Iraqi political movements or leaders did not use the U.S. military presence as a major wedge issue in the run-up to or aftermath of the May 2018 election, and U.S. officials express confidence that many Iraqi military leaders and key political figures do not want to end Iraq's security partnership with the United States. Nevertheless, Members of Congress and U.S. officials face difficulties in developing policy options that can secure U.S. interests on specific issues without provoking major opposition from Iraqi constituencies. At the same time, Iraqi leaders may wonder whether the 2019 U.S. drawdown from Syria might augur a similar U.S. drawdown in Iraq. If Iraqi leaders seek to develop alternative sources of support should the United States decide to leave Iraq, then such sources could include Iran. Debates over U.S. military support to Iraqi national forces and substate actors in the fight against the Islamic State illustrated this dynamic, with some U.S. proposals for the provision of aid to all capable Iraqi forces facing criticism from Iraqi groups that may harbor suspicions of U.S. intentions or fear that U.S. assistance could empower their domestic rivals. To date, U.S. aid to the Kurds has been provided with the approval of the Baghdad government, though some Members of Congress have advocated for assistance to be provided directly to the KRG. U.S. concern about the unwillingness of some PMF units and armed groups to subordinate themselves to the national command authority of Iraq's elected government is another example. The strained relationship between national government and Kurdish forces along the disputed territories and the future of the Popular Mobilization Forces are issues that will doubtless recur in debates over the continuation of prevailing patterns of U.S. assistance. Oversight reporting to Congress suggests that DOD estimates the Iraq Security Forces are \"years, if not decades\" away from ending their \"reliance on Coalition assistance,\" and DOD expects \"a generation of Iraqi officers with continuous exposure to Coalition advisers\" would be required to establish a self-reliant Iraqi fighting force. According to the Lead Inspector General for Overseas Contingency Operations (LIG-OCO), these conditions raise \"questions about the duration of the OIR mission since the goal of that mission is defined as the 'enduring defeat' of ISIS.\" To achieve that goal, DOD may seek the continuation of U.S. and coalition training and advisory relationships with Iraq over a long, but as yet unspecified, period of time and on a consistent if as yet undefined scale. This may present questions to Congress about whether or how best to authorize and fund future U.S. security assistance to Iraq, and whether current bilateral agreements with the government of Iraq are sufficient and viable. The financial structure of U.S. security support efforts also could evolve. In the past, some in Congress have called for U.S. military training or other aid to Iraq to be provided on a reimbursement or loan basis, while with other major oil exporters like Saudi Arabia, long-term training activities have been funded by the recipient country through Foreign Military Sales. Iraq is already a significant FMS customer. It seems reasonable to expect that Iraqis will continue to assess and respond to U.S. initiatives (and those of other outsiders) primarily through the lenses of their own domestic political rivalries, anxieties, hopes, and agendas. Reconciling U.S. preferences and interests with Iraq's evolving politics and security conditions may thus require continued creativity, flexibility, and patience. H.R. 571 . A bill to impose sanctions with respect to Iranian persons that threaten the peace or stability of Iraq or the Government of Iraq. Subject to national security waiver, the bill would direct the President to impose sanctions on \"any foreign person that the President determines knowingly commits a significant act of violence that has the direct purpose or effect of—(1) threatening the peace or stability of Iraq or the Government of Iraq; (2) undermining the democratic process in Iraq; or (3) undermining significantly efforts to promote economic reconstruction and political reform in Iraq or to provide humanitarian assistance to the Iraqi people.\" The bill would further require the Secretary of State to submit a determination as to whether Asa'ib Ahl al Haq, Harakat Hizballah al Nujaba, or affiliated persons and entities meet terrorist designation criteria or the sanctions criteria of the bill. The bill also would direct the Secretary of State to prepare, maintain, and publish a \"a list of armed groups, militias, or proxy forces in Iraq receiving logistical, military, or financial assistance from Iran's Revolutionary Guard Corps or over which Iran's Revolutionary Guard Corps exerts any form of control or influence.\" The U.S. government designated Harakat Hizballah al Nujaba pursuant to Executive Order 13224 on terrorism in March 2019. A similar bill would direct the President to impose sanctions on select groups without a national security waiver ( H.R. 361 ). The bill reflects amendments reported to Congress by the House Foreign Affairs Committee and endorsed by the House during the 115 th Congress ( H.R. 4591 ). S.J.Res. 13 . A joint resolution to repeal the authorizations for use of military force against Iraq, and for other purposes. The joint resolution would repeal the Authorization for Use of Military Force against Iraq Resolution ( P.L. 102-1 ; 105 Stat. 3; 50 U.S.C. 1541 note) of January 14, 1991, and the Authorization for Use of Military Force against Iraq Resolution of 2002 ( P.L. 107-243 ; 116 Stat. 1498; 50 U.S.C. 1541 note) of October 16, 2002.", "summary": "Iraq's government declared military victory against the Islamic State organization (IS, also ISIS/ISIL) in December 2017, but insurgent attacks by remaining IS fighters continue to threaten Iraqis as they shift their attention toward recovery and the country's political future. Approximately 5,000 U.S. troops remain in Iraq at the invitation of the Iraqi government and provide advisory and training support to Iraqi security forces. However, some Iraqi political groups are calling for U.S. and other foreign troops to depart, and they may seek to force Iraqi government action on this question during 2019. Elections and Politics. Iraqis held national elections in May 2018, electing members to Iraq's unicameral legislature, the 329-seat Council of Representatives (COR). Political factions spent months negotiating in a bid to identify a majority bloc of legislators to form the next government, but the distribution of seats and alignment of actors precluded the emergence of a dominant coalition. Meanwhile, protests and violence in southern Iraq highlighted some citizens' outrage with poor service delivery, lack of economic opportunity, and corruption. In October, the COR chose former Kurdistan Regional Government (KRG) Prime Minister and former Iraqi Deputy Prime Minister Barham Salih as Iraq's President. Salih, in turn, named former Oil Minister Adel Abd al Mahdi as Prime Minister-designate and directed him to assemble a slate of cabinet officials for COR approval. Abd al Mahdi is a consensus figure acceptable to rival factions, but he does not lead a party or parliamentary group of his own. COR members have confirmed most of Abd al Mahdi's cabinet nominees, but key political groups are at an impasse over certain ministries, including the Ministry of Interior and the Ministry of Defense. Iraqi politicians have increasingly reached across sectarian political and economic lines in recent years in an attempt to appeal to disaffected citizens, but ethnic and religious politics remain relevant and Iraqi citizens remain frustrated with government performance. Iraq's neighbors and other outsiders, including the United States, are pursuing their respective interests in Iraq, and their competition creates additional challenges for Iraqi leaders. Paramilitary forces have grown stronger and more numerous in Iraq since 2014, and have yet to be fully integrated into national security institutions. Some figures associated with the volunteer Popular Mobilization Forces (PMF) that were organized to fight the Islamic State participated in the 2018 election and won COR seats, including critics of U.S. policy who have ties to Iran and are demanding the United States withdraw its military forces. The Kurdistan Region. The Kurdistan Region of northern Iraq (KRI) enjoys considerable administrative autonomy under the terms of Iraq's 2005 constitution, and the KRG held legislative elections on September 30, 2018. The KRG had held a controversial advisory referendum on independence in September 2017, amplifying political tensions with the national government, which then moved to reassert security control of disputed areas that had been secured by Kurdish forces after the Islamic State's mid-2014 advance. National government security forces and Kurdish peshmerga are deployed along contested lines of control, as leaders negotiate a host of sensitive issues. Stabilization and Reconstruction. Daunting resettlement, stabilization, and reconstruction needs face Iraqi citizens and leaders as they look to the future. More than 4 million Iraqis uprooted during the war with the Islamic State group have returned to their home communities, but many of the estimated 1.7 million Iraqis who remain internally displaced face significant political, economic, and security barriers to safe and voluntary return. Stabilization efforts in areas recaptured from the Islamic State are underway with United Nations and other international support, but many immediate post-IS stabilization priorities and projects are underfunded. Iraqi authorities have identified $88 billion in broader reconstruction needs to be met over the next decade. U.S. Policy and Issues for Congress. In general, U.S. engagement in Iraq since 2011 has sought to reinforce unifying trends and avoid divisive outcomes. The Trump Administration seeks to continue to train and support Iraqi security forces, while hoping to limit negative Iranian influence. The 116th Congress is considering Administration requests for funding to provide security assistance, humanitarian relief, and foreign aid in Iraq and may debate authorities for and provide oversight of the U.S. military presence in Iraq and security cooperation and aid programs. For background, see CRS Report R45025, Iraq: Background and U.S. Policy.", "document_type": "crs"}
{"report": "Science and technology (S&T) play an important role in our society. Advances in science and technology can help drive economic growth and meet national priorities in public health, environmental protection, agricultural productivity, defense, and many other areas. Federal policies affect scientific and technological advancement on several levels. The federal government directly funds research and development (R&D) activities to achieve national goals or support national priorities, such as funding basic life science research through the National Institutes of Health (NIH) or developing new weapons systems in the Department of Defense (DOD). The federal government also establishes and maintains the legal and regulatory framework that affects S&T activities in the private sector. In addition, federal tax, trade, and education policies can have effects on private sector S&T activity. This report serves as a brief introduction to many of the science and technology policy issues that may come before the 116 th Congress. Each issue section provides background information and outlines selected policy issues that may be considered. Each issue includes a heading entitled \"For Further Information\" that provides the author's name and the titles of relevant CRS reports containing more detailed policy analysis and information. Cited reports are current as of their individual publication dates, but may not reflect developments that have occurred since their publication. Several issues of potential congressional interest apply to federal science and technology policy in general. This section begins with a brief introduction to the roles each branch of the federal government plays in S&T policymaking, then discusses overall federal funding of research and development. Additional sections address issues related to the emergence of disruptive technologies; the America COMPETES Act; oversight of federally supported academic research; technology transfer; the adequacy of the science and engineering workforce; science, technology, engineering, and mathematics (STEM) education; and innovation-related tax policy. The federal S&T policymaking enterprise is composed of an extensive and diverse array of stakeholders in the executive, legislative, and judicial branches. The enterprise fosters, among other things, the advancement of scientific and technical knowledge; STEM education; the application of S&T to achieve economic, national security, and other societal benefits; and the use of S&T to improve federal decisionmaking. Federal responsibilities for S&T policymaking are highly decentralized. In addition to appropriating funding for S&T programs, Congress enacts laws to establish, refine, and eliminate programs, policies, regulations, regulatory agencies, and regulatory processes that rely on S&T data and analysis. However, congressional authorities related to S&T policymaking are diffuse. Many House and Senate committees have jurisdiction over important elements of S&T policy. In addition, there are dozens of informal congressional caucuses in areas of S&T policy such as research and development, specific S&T disciplines, and STEM education. The President formulates annual budgets, policies, and programs for consideration by Congress; issues executive orders and directives; and directs the executive branch departments and agencies responsible for implementing S&T policies and programs. The Office of Science and Technology Policy, in the Executive Office of the President, advises the President and other Administration officials on S&T issues. Executive agency responsibilities for S&T policymaking are also diffuse. Some agencies have broad S&T responsibilities (e.g., the National Science Foundation). Others use S&T to meet a specific federal mission (e.g., defense, energy, health, space). Regulatory agencies have S&T responsibilities in areas such as nuclear energy, food and drug safety, and environmental protection. Federal court cases and decisions often affect U.S. S&T policy. Decisions can have an impact on the development of S&T (e.g., decisions regarding the U.S. patent system); S&T-intensive industries (e.g., the break-up of AT&T in the 1980s); and the admissibility of S&T-related evidence (e.g., DNA samples). For Further Information John F. Sargent Jr., Specialist in Science and Technology Policy CRS Report R43935, Office of Science and Technology Policy (OSTP): History and Overview , by John F. Sargent Jr. and Dana A. Shea The federal government has long supported the advancement of scientific knowledge and technological development through investments in R&D. Federal R&D funding seeks to address a broad range of national interests, including national defense, health, safety, the environment, and energy security; advance knowledge generally; develop the scientific and engineering workforce; and strengthen U.S. innovation and competitiveness. The federal government has played an important role in supporting R&D efforts which have led to scientific breakthroughs and new technologies, from jet aircraft and the internet to communications satellites and defenses against disease. Between FY2008 and FY2013, federal R&D funding fell from $140.1 billion to $130.9 billion, a reduction of $9.3 billion (6.6% in current dollars, 13.4% in constant dollars). The decline was a reversal of sustained growth in federal R&D funding for more than half a century, and stirred debate about the potential long-term effects on U.S. technological leadership, innovation, competitiveness, economic growth, and job creation. From FY2013 to FY2017, federal funding grew, rising to an all-time current dollar high of $155.0 billion in FY2017, the most recent annual aggregate number available. However, in constant dollars, the FY2017 level was $9.6 billion (5.6%) below its high of $169.7 billion in 2010. Concerns by some about reductions in federal R&D funding have been exacerbated by increases in the R&D investments of other nations (China, in particular); globalization of R&D and manufacturing activities; and trade deficits in advanced technology products, an area in which the United States previously ran trade surpluses (most recently in 2001). At the same time, some Members of Congress express concerns about the level of federal funding in light of the current federal fiscal condition. In addition, R&D funding decisions may be affected by differing perspectives on the appropriate role of the federal government in advancing science and technology. As the 116 th Congress undertakes the appropriations process it faces two overarching issues: (1) the direction in which the federal R&D investment will move in the context of increased pressure to limit discretionary spending and (2) how available funding will be prioritized and allocated. Low or negative growth in the federal government's overall R&D investment may require movement of resources across disciplines, programs, or agencies to address priorities. Congress continues to play a central role in defining the nation's R&D priorities as it makes decisions with respect to the size and distribution of aggregate, agency, and programmatic R&D funding. For Further Information John F. Sargent Jr., Specialist in Science and Technology Policy CRS Report R45150, Federal Research and Development (R&D) Funding: FY2019 , coordinated by John F. Sargent Jr. CRS Report R44888, Federal Research and Development Funding: FY2018 , coordinated by John F. Sargent Jr. The rapid pace of technology innovation and application is substantially affecting both the global economy and human behavior. A disruptive technology can be thought of as a rapidly evolving set of innovations in any technology space that has potentially broad economic and social impacts. Two or more different technologies may be integrated to create a new, convergent technology that may also be disruptive. Consider the smartphone, perhaps the best-known example of a technology that is both disruptive and convergent. It combines a telephone, a computer, a camera, and a geolocation application into a single device. It has become so popular over the last decade that, according to some estimates, more than half of the world's population uses one. Those users average more than four hours daily on the device, predominantly for activities other than voice phone calls. The emergence of such technologies has the potential to create large-scale economic and social disruptions. Smartphones and other forms of mobile computing, for example, have had large economic effects on the telecommunications sector, as well as large social impacts. Among other technologies associated with major disruptions are social media, cloud computing, and data analytics (\"big data\"). Additional examples include artificial intelligence (AI), autonomous vehicles, blockchain, energy storage, gene editing, and the internet of things. The economic and social impacts of such technologies are difficult to predict and present complex facets to Congress as it responds to the opportunities and challenges those technologies pose. Not only are the paths of their development and implementation uncertain, but systematic data collection on them is sparse. The complexity and pace of advancement of such technologies create policy issues and challenges of potential interest to the 116 th Congress. Questions disruptive technologies may raise include the following: If Congress seeks to facilitate the growth of such technologies, what options might it consider? For example, how might Congress decide which technologies to prioritize for investment? How would congressional support for research and development affect growth? What kinds of incentives might Congress consider providing? What issues do such technologies raise for international economic competition, and what are the options for congressional response? For example, if other countries are investing heavily in some potentially disruptive technologies, how might Congress balance the benefits and disadvantages to the nation of investing in the same technologies or different ones? What are the potential negative impacts of such technologies on societal goals and values, and what steps might Congress consider for prevention and mitigation? For example, how might Congress respond to public concerns about privacy and security? How might such technologies affect the U.S. workforce and economic opportunity, and what are the potential responses? For Further Information Eric A. Fischer, Senior Specialist in Science and Technology The America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science (COMPETES) Act ( P.L. 110-69 ) was enacted in 2007. The act, a response to concerns about U.S. competitiveness, authorized certain federal research, education, and innovation-related activities. In 2010, Congress passed the America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ), extending and modifying certain provisions of the 2007 law, as well as establishing new provisions. Congressional appropriations have generally been below authorized levels, and the specific authorizations of appropriations in the 2010 act have expired. Following previous reauthorization efforts that inspired debate about such topics as the scientific peer review process, certain provisions of these acts were reauthorized and modified as part of the American Innovation and Competitiveness Act (AICA, P.L. 114-329 ), enacted at the end of the 114 th Congress. The 116 th Congress may consider additional provisions from the COMPETES acts that were not addressed through the AICA, such as expired authorizations of appropriations for the National Science Foundation (NSF) and the National Institute of Standards and Technology (NIST). The COMPETES acts were originally enacted to address concerns that the United States could lose its advantage in scientific and technological innovation. Economists have asserted that economic, security, and social benefits accrue preferentially to nations that lead in scientific and technological advancement and commercialization. Some analysts have suggested that historical U.S. leadership in these areas is slipping. In particular, some stakeholders have questioned the adequacy of federal funding for physical sciences and engineering research and the domestic production of scientists and engineers. The COMPETES acts were designed to respond, in part, to these challenges by authorizing increased funding for the NIST, NSF, and Department of Energy's Office of Science. Together, the acts also authorized certain federal STEM education activities, the Advanced Research Projects Agency-Energy (ARPA-E), and prize competitions at federal agencies, among other provisions. Those who have expressed opposition to aspects of the COMPETES acts have done so from several perspectives. Some critics question the existence of a STEM labor shortage and thus the need for programs aimed at increasing the number of STEM workers. Other critics agree with the assertion of a shortage, but question whether the federal government should address it, believing that the market will make the necessary corrections to meet the demand. With respect to U.S. competitiveness, some analysts prefer alternative approaches to those proposed in the COMPETES acts, such as research tax credits or reducing regulatory costs. Other analysts object to the financial cost associated with the COMPETES acts, given concern about the federal budget deficit and debt. For Further Information Laurie A. Harris, Analyst in Science and Technology Policy John F. Sargent Jr., Specialist in Science and Technology Policy CRS Insight IN11001, Revisiting the Doubling Effort: Trends in Federal Funding for Basic Research in the Physical Sciences and Engineering , by John F. Sargent Jr. CRS Report R44345, Efforts to Reauthorize the America COMPETES Act: In Brief , by John F. Sargent Jr. Every year, approximately one-third of the federal government's research and development spending is obligated to federal laboratories, including federally funded research and development centers, in support of agency mission requirements. The technology and expertise generated by federal laboratories may have applications beyond the immediate goals or intent of the original R&D. Over the years, Congress has established various mechanisms—primarily through the Stevenson-Wydler Technology Innovation Act of 1980 ( P.L. 96-480 ) and subsequent legislation—to facilitate the transfer of technology and research generated from federal laboratories to the private sector where it can be further developed and commercialized. Congressional interest in promoting the transfer of technology from federal laboratories is largely based on meeting social needs and promoting economic growth to enhance the nation's welfare and security. Technology transfer from federal laboratories can occur in many forms. In some instances, it can occur through formal partnerships and joint research activities between federal laboratories and private firms, including through cooperative research and development agreements or CRADAs. In other cases, it can occur when the legal rights to government-owned patents are licensed to a private firm. Despite previous efforts to increase the effectiveness of technology transfer from federal laboratories to the private sector, the transfer of federal technologies remains restrained. Critics of current mechanisms argue that working with federal laboratories continues to be difficult and time-consuming. Proponents assert that federal laboratories are open and receptive to partnering with private firms, but it remains up to them to take advantage of federal laboratory technologies and capabilities. At issue is whether additional legislative initiatives and federal incentives are needed to encourage increased technology transfer from federal laboratories, or if the available resources are sufficient. In December 2018, the National Institute of Standards and Technology released \"Return on Investment Initiative for Unleashing American Innovation,\" a draft paper proposing various strategies and actions to accelerate and improve the transfer of technology to the private sector, including building a more entrepreneurial R&D workforce and increasing engagement with private sector technology development experts and investors. Several of the proposed actions may require congressional approval and additional legislative authority to implement. Further Information Marcy E. Gallo, Analyst in Science and Technology Policy CRS Report R44629, Federally Funded Research and Development Centers (FFRDCs): Background and Issues for Congress , by Marcy E. Gallo The adequacy of the U.S. science and engineering (S&E) workforce has been an ongoing concern of Congress for more than 60 years. Scientists and engineers are widely believed to be essential to U.S. technological leadership, innovation, manufacturing, and services, and thus vital to U.S. economic strength, national defense, and other societal needs. Congress has enacted many programs to support the education and development of scientists and engineers. Congress has also undertaken broad efforts to improve science, technology, engineering, and math skills to prepare a greater number of students to pursue S&E degrees. In addition, some policymakers have sought to increase the number of foreign scientists and engineers working in the United States through changes in visa and immigration policies. Most experts agree that there is no authoritative definition of which occupations comprise the S&E workforce. Rather, the selection of occupations included in any particular analysis of the S&E workforce may vary depending on the objective of the analysis. The policy debate about the adequacy of the U.S. S&E workforce has focused largely on professional-level computer occupations, mathematical occupations, engineers, and physical scientists. Accordingly, much of the analytical focus has been on these occupations. However, some analyses may use a definition that includes some or all of these occupations, as well as life scientists, S&E managers, S&E technicians, social scientists, and related occupations. Many policymakers, business leaders, academicians, S&E professional society analysts, economists, and others hold differing views with respect to the adequacy of the S&E workforce and related policy issues. These issues include the question of the existence of a shortage of scientists and engineers in the United States, what the nature of any such shortage might be (e.g., too few people with S&E degrees, mismatches between skills and needs), and whether the federal government should undertake policy interventions or rely upon market forces to resolve any shortages in this labor market. Among the key indicators used by labor economists to assess the existence of occupational labor shortages are employment growth, wage growth, and unemployment rates. For Further Information John F. Sargent Jr., Specialist in Science and Technology Policy CRS Report R43061, The U.S. Science and Engineering Workforce: Recent, Current, and Projected Employment, Wages, and Unemployment , by John F. Sargent Jr. The term \"STEM education\" refers to teaching and learning in the fields of science, technology, engineering, and mathematics. Policymakers have had an enduring interest in STEM education. Popular opinion generally holds that U.S. students perform poorly in STEM subjects—especially when compared to students in certain foreign education systems—but the data paint a complicated picture. Over time, U.S. students appear to have made gains in some areas but may be perceived as falling behind in others. Various attempts to assess the federal STEM education effort have produced different estimates of its scope and scale. These efforts have identified between 105 and 254 STEM education programs and activities across 13 to 15 federal agencies. Annual federal appropriations for STEM education are typically estimated to be in the range of $2.8 billion to $3.4 billion. The national conversation about STEM education frequently develops from concerns about the U.S. science and engineering workforce. As discussed in the previous section, some observers assert that the United States faces a shortage of STEM workers; others dispute this claim. Many proponents argue that a general increase in STEM abilities among the U.S. workforce could benefit the nation in any case. On the other hand, some scholars oppose the use of education policy to increase the supply of STEM workers, either because they perceive such policies as overemphasizing the economic outcomes of education at the expense of other values (e.g., personal development or citizenship) or because they perceive the labor market as the more efficient mechanism for dealing with these issues. Opinions differ as well on the appropriate scope, scale, and emphasis of federal STEM education policy. Some observers prefer policies aimed at lifting the STEM achievement of all students—such as teacher or faculty professional development; or changes in curriculum, standards, or pedagogy. Others emphasize policies designed to meet specific needs—such as scholarships for the \"best and brightest,\" federal workforce training in areas of high demand (e.g., information technology and cybersecurity), efforts to close academic achievement gaps between various demographic groups, or programs to increase the participation of traditionally underrepresented groups in STEM fields. For Further I nformation Boris Granovskiy, Analyst in Education Policy CRS Report R45223, Science, Technology, Engineering, and Mathematics (STEM) Education: An Overview , by Boris Granovskiy CRS In Focus IF10654, Challenges in Cybersecurity Education and Workforce Development , by Boris Granovskiy The 116 th Congress may consider new federal policies to promote technological innovation, which involves the creation, development, and use of new technologies. Among the concerns fueling such an interest is what many view as inadequate growth in domestic high-paying jobs in a range of industries in recent years. Among the pathways to accelerating growth in these jobs are (1) faster rates of entrepreneurial business formation, (2) increased business investment in domestic research and development (R&D), (3) greater domestic production of products and services derived from that research, and (4) increased employer spending on training workers to acquire the skills needed to earn higher-paying jobs. The technical skills required to perform such jobs can be thought of as a critical component of the domestic climate for investment in innovation. Congress can directly influence the rate of high-wage job creation through adopting tax incentives for investment in R&D, worker training, and higher education. Under current federal tax law, three provisions directly affect entrepreneurial business formation and business investment in R&D: (1) an expensing allowance for research expenditures under Section 174 of the tax code (which is scheduled to switch to a five-year amortization period for that spending starting in 2022), (2) a nonrefundable tax credit for increases in research expenditures above a base amount under Section 41, and (3) a full exclusion for capital gains from the sale or exchange of qualified small business stock held by the original investor for five or more years under Section 1202. There is no federal tax incentive under current law for employer investment in worker training. The 2017 tax revision ( P.L. 115-97 ) substantially cut income tax rates for corporate and noncorporate business income, beginning in 2018. The new law also modified or repealed a number of tax provisions affecting business after-tax profits. Some argue that the tax cuts alone should be sufficient to increase the number of high-paying domestic jobs in a range of industries. Others are skeptical that many large U.S. employers will invest the windfall gains from the tax cuts in expanding domestic production and boosting worker wages, training, and education. In their view, many such companies (including U.S. multinational corporations) are more likely to use much of their tax savings to buy back stock, raise dividends, or acquire competing firms. One previously proposed option for increasing the number of high-paying domestic jobs that the 116 th Congress may examine is the creation of a tax incentive known as a patent or innovation box. Such an incentive lowers the tax burden on income earned from the commercial use of qualified intellectual property, such as trademarks or patents. Depending on its design, a patent box could give U.S. and foreign companies investing in innovation a stronger incentive to expand their investment in U.S. R&D and production activities. Potential drawbacks to such a subsidy include its budgetary cost and the lack of a sound economic justification for a tax subsidy that benefits only companies that develop or purchase successful patented innovations, not companies that develop profitable new technologies that never are patented. A second option for spurring faster growth in domestic high-paying jobs is a tax incentive for employers to invest in worker training and education. Several bills were introduced in the 115 th Congress to promote employer investment in training programs such as apprenticeships and collaboration with community colleges to design courses of study targeted at the skill needs of employers. The U.S. economy benefits from an expansion in high-paying jobs only if there are enough workers to fill them. Potential drawbacks to such a tax subsidy include the likelihood it would reward employers for doing what they would do without a tax subsidy and a lack of evidence that employers systematically underinvest in worker training and education. For Further Information Gary Guenther, Analyst in Public Finance CRS Report RL31181, Research Tax Credit: Current Law and Policy Issues for the 114th Congress , by Gary Guenther CRS Report R44829, Patent Boxes: A Primer , by Gary Guenther The federal government supports billions of dollars of agricultural research annually. The 116 th Congress is likely to face issues related to funding this research, a proposed relocation of the Department of Agriculture's science and economic analysis agencies, and issues arising from advances in agricultural biotechnology, including the development of cell-cultured meat. The U.S. Department of Agriculture's (USDA's) Research, Education, and Economics (REE) mission area has the primary federal responsibility of advancing scientific knowledge for agriculture. USDA-funded research spans the biological, physical, and social sciences related broadly to agriculture, food, and natural resources. USDA conducts its own research and administers federal funding to states and local partners primarily through formula funds and competitive grants. The outcomes are delivered through academic and applied research findings, statistical publications, cooperative extension, and higher education. USDA's research program is funded with nearly $2.9 billion per year of discretionary funding and about $120 million of mandatory funding. The most recent farm bill (P.L. 115-661, Agriculture Improvement Act of 2018), enacted in December 2018, governs agricultural research programs through FY2023. In keeping with past farm bills, this farm bill reauthorizes a wide range of existing research and education provisions (e.g., funding of land grant university research) and also authorizes several new research provisions. One provision that is likely to be closely watched is the Agriculture Advanced Research and Development Authority (AGARDA) pilot program. Modeled on the Defense Advanced Research Projects Agency, AGARDA will operate under the Office of Chief Scientist to address long-term and high-risk research challenges in the agriculture and food sectors. For Further Information Tadlock Cowan, Analyst in Natural Resources and Rural Development CRS Report R40819, Agricultural Research: Background and Issues , by Jim Monke CRS Report R45197, The House Agriculture Committee's 2018 Farm Bill (H.R. 2): A Side-by-Side Comparison with Current Law , coordinated by Mark A. McMinimy CRS In Focus IF10187, Farm Bill Primer: What Is the Farm Bill? , by Renée Johnson and Jim Monke In August 2018, the Secretary of Agriculture announced a reorganization of the department that included relocating the National Institute of Food and Agriculture (NIFA) and Economic Research Service (ERS) outside the National Capital Region. The Secretary has stated that he would like to complete the relocation in 2019. As two of the department's science and agricultural economic analysis agencies, such a move has prompted significant commentary within Congress and by other Washington-based scientific organizations. While nearly 135 cities have announced their interest in hosting the relocated agencies, an ongoing USDA Inspector General (IG) study is examining the department's legal and budgetary authority to execute the moves. As this IG study is completed, Congress may choose to exercise its authority to ensure that the proposed move is in accordance with federal laws and regulations. For Further Information Tadlock Cowan, Analyst in Natural Resources and Rural Development The 116 th Congress may provide oversight of issues regarding bioengineered foods labeling, or foods containing bioengineered ingredients, proposed regulatory changes governing the introduction of genetically engineered (GE) plants and animals into the environment, and recent technical innovations in gene editing that could raise new regulatory issues for agricultural biotechnology. The 114 th Congress passed a bill signed into law in July 2016 ( P.L. 114-216 ) to establish a \"national bioengineered food disclosure standard.\" The final rule was published in late December 2018. Food manufacturers can adopt either text, a symbol, or an electronic/digital link for identifying bioengineered foods. The disclosure act is to cover foods made through conventional genetic engineering technology, and as well as newer techniques in the definition of bioengineered foods. P.L. 114-216 also required USDA to conduct a study that identifies potential technological factors that could affect consumer access to bioengineered food disclosure through electronic or digital methods such as codes on food products read by smart phones. Observers are concerned that such digital methods of disclosure could have differential impacts on those without cell phones (e.g., the elderly, low-income families) and those without access to high-speed broadband. The congressionally required study, completed in July 2017, specifically addresses the availability of wireless or cellular networks, availability of landline telephones in stores, and particular factors that might affect small retailers and rural retailers as well as consumers. With the final rule now published, the disclosure law is to be implemented by USDA's Agricultural Marketing Service. The 116 th Congress may begin to address various public issues that arise from implementing the new disclosure rule. The development over the past several years of new technologies to genetically engineer plants, in particular through novel gene-editing technologies such as CRISPR-Cas9, has raised new regulatory issues. USDA currently regulates GE plants under the Plant Protection Act (PPA; 7 U.S.C. §770). However, USDA has stated that newer technologies may fall outside the purview of the PPA, and thus the department might have no regulatory jurisdiction over plants genetically engineered using these new technologies. For example, USDA's Animal and Plant Health Inspection Service (APHIS) asserted in April 2016 that the agency had no regulatory authority under the PPA and, by default, approved a mushroom variety and a waxy corn variety created through the CRISPR-Cas9 gene editing technology. The Department of Agriculture then announced in March 2018 that they had no plans to regulate plants that could otherwise have been developed through traditional breeding techniques, which characterizes some gene editing techniques. This decision raises important questions about how such genetically engineered plants are to be regulated as they are introduced. As genetically engineered plant varieties created by these newer techniques become more common, and as the public becomes more aware that these varieties are not regulated under the PPA, Congress could revisit the 1986 framework that governs U.S. biotechnology regulation. For Further Information Tadlock Cowan, Analyst in Natural Resources and Rural Development CRS In Focus IF10376, Labeling Genetically Engineered Foods: Current Legislation , by Tadlock Cowan CRS Report R43518, Genetically Engineered Salmon , by Harold F. Upton and Tadlock Cowan CRS Report RL32809, Agricultural Biotechnology: Background, Regulation, and Policy Issues , by Tadlock Cowan CRS Report RL33334, Biotechnology in Animal Agriculture: Status and Current Issues , by Tadlock Cowan CRS Report R43100, Unapproved Genetically Modified Wheat Discovered in Oregon and Montana: Status and Implications , by Tadlock Cowan Cell-cultured meat (also referred to as cell-based meat, lab-grown meat, and clean meat) is grown in laboratories from animal cell-cultures. First developed in the early 2000s, improved technological efficiencies and reduced production costs have allowed cell-cultured meat companies, including cell-cultures from cattle, hogs, poultry, and fish, to scale up and, in some instances, move closer to commercial viability. Some cell-cultured meat innovators believe their products could be sold within a few years in certain markets and become widely available in 10 years. A debate about which federal agency—the Department of Health and Human Services' (HHS) Food and Drug Administration (FDA) or the U.S. Department of Agriculture's (USDA) Food Safety and Inspection Service (FSIS)—has regulatory jurisdiction over cell-cultured meat surfaced in early 2018. Currently, FSIS regulates meat and poultry, catfish, and egg products. FDA regulates game-meat, fish and seafood, processed meat products (containing 2%-3% meat), and shell eggs. FDA and FSIS often share overlapping responsibilities for some food products and have developed \"memoranda of understanding\" (MOU) to facilitate communication and division of responsibilities between the two agencies. In February 2018, the U.S. Cattlemen's Association petitioned USDA to have FSIS establish meat labeling requirements that exclude cell-cultured products. The petition requested that only meat derived directly from animals raised and slaughtered be labeled \"beef\" and \"meat.\" Congress took up cell-cultured meat in April 2018 when USDA Secretary Perdue testified before the House Committee on Appropriations, stating that meat grown in laboratories would be under the sole purview of USDA, and any product labeled as meat would be under USDA jurisdiction. In May 2018, the House-reported agricultural appropriations bill ( H.R. 5961 ) included a general provision that would have required USDA \"for fiscal year 2018 and hereafter\" to regulate cell-cultured products made from cells of amenable species of livestock and poultry, as defined in the Federal Meat Inspection Act and Poultry Products Inspection Act. In June 2018, FDA stated that under the Federal Food, Drug, and Cosmetic Act, FDA has jurisdiction over \"food,\" which includes \"articles used for food\" and \"articles used for components of any such article.\" Thus, according to FDA, both of the substances used in the manufacture of cell-cultured products, and the final products that will be used for food, are subject to the FDA's jurisdiction. Any substance that is intentionally added to food is considered a food additive and is subject to premarket review and approval by FDA. An exception to this requirement is when there is a consensus, among qualified experts that the substance is \"generally recognized as safe\" (GRAS) for its intended use. In November 2018, a joint statement from USDA and FDA announced that both agencies \"should jointly oversee the production of cell-cultured food products derived from livestock and poultry.\" The statement further clarified that FDA would oversee cell collection, cell banks, cell growth, and the process of differentiation. USDA is to oversee the production and labeling of food products derived from the cells. This statement initiates the process of developing the regulatory framework for cell-culture meat and poultry; however, other key aspects of the regulations have yet to be announced. For example, fish, for which cell-cultured technology is being developed, is regulated by FDA, but was not mentioned in the statement. In addition, there are still questions on how to obtain premarket approval and how inspection of cell-cultured meat facilities will be conducted. Finally, the statement did not resolve the contentious issue of cell-cultured meat labeling terminology. Cell-cultured meat regulation decisions may be further clarified in the near future—perhaps through a MOU between FDA and USDA. For Further Information Sahar Angadjivand, Analyst in Agricultural Policy Joel L. Greene, Analyst in Agricultural Policy CRS In Focus IF10947, Regulation of Cell-Cultured Meat , by Joel L. Greene and Sahar Angadjivand Advances in science and technology related to biomedical research and development underpin improvements in medications and treatments. Some of the biomedical R&D issues that the 116 th Congress may face include those related to the budget and oversight of the National Institutes of Health, the role the Food and Drug Administration in approving new medicines and laboratory tests, and issues related to stem cell-based medicine and genomic editing. The National Institutes of Health is the lead federal agency conducting and supporting biomedical research. Congress provided the agency with $39 billion in funding for FY2019 for basic, clinical, and translational research in NIH's laboratories as well as in research institutions nationwide. The extramural research program (more than 80% of the NIH budget) provides grants, contracts, and training awards to support over 30,000 individuals at more than 2,500 universities, academic health centers, and research facilities across the nation. NIH represents about one fifth of total federal research and development spending, and half of non-Department of Defense research and development funding. NIH is a large and complex organization made up of 27 institutes and centers (ICs). Each IC sets its own research priorities and manages its research programs in coordination with the Office of the Director (OD). The individual ICs may focus on particular diseases (e.g., The National Cancer Institute), areas of human health and development (e.g., The National Institute on Aging), scientific fields (e.g., National Institute for Environmental Health Sciences), or biomedical professions and technology (e.g., National Institute of Biomedical Imaging and Bioengineering). Congress provides separate appropriations to 24 of the 27 ICs, to OD, and to a buildings and facilities account. The 21 st Century Cures Act ( P.L. 114-255 ) authorized four major Innovation Projects at NIH, some conducted in partnership with other federal agencies such as the Food and Drug Administration (FDA) or Department of Defense (DOD) the Precision Medicine Initiative (PMI; $1.5 billion for FY2017 through FY2026), the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative ($1.5 billion for FY2017 through FY2026), cancer research ($1.8 billion for FY2017 through FY2023), and regenerative medicine ($30 million for FY2017 through FY2020). The 116 th Congress may continue previous congressional interest and oversight of the implementation and progress of the Innovation Projects authorized by the 21 st Century Cures Act. For Further Information Kavya Sekar, Analyst in Health Policy Judith A. Johnson, Specialist in Biomedical Policy CRS Report R41705, The National Institutes of Health (NIH): Background and Congressional Issues , by Judith A. Johnson CRS Report R43341, NIH Funding: FY1994-FY2019 , by Judith A. Johnson and Kavya Sekar CRS Report R44720, The 21st Century Cures Act (Division A of P.L. 114-255) , coordinated by Amanda K. Sarata CRS Report R44916, Public Health Service Agencies: Overview and Funding (FY2016-FY2018) , coordinated by C. Stephen Redhead and Agata Dabrowska The Food and Drug Administration (FDA) regulates the safety of foods, cosmetics, and radiation-emitting products; the safety and effectiveness of drugs, biologics, and medical devices; as well as public health aspects of tobacco products. To keep pace with changes in science and emerging safety and security issues, FDA's regulations have been subject to various modifications through legislation and administrative action. The 21 st Century Cures Act ( P.L. 114-255 ), for example, modified FDA drug and device regulatory pathways to support innovation. Administratively, FDA has issued a series of gene therapy draft guidance documents, concomitant with NIH stepping down oversight of gene therapy human clinical trials. Innovation in this area includes gene editing-based products (e.g., CRISPR) as well as cell-based gene therapies (e.g., CAR-T therapies). Pursuant to the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act ( P.L. 115-271 ), FDA must meet with stakeholders and issue guidance to address the challenges of developing nonaddictive medical products for treatment of pain or addiction through regulatory mechanisms established in the 21 st Century Cures Act (e.g., application of novel clinical trial designs). Additionally, the agency launched an Innovation Challenge to incentivize the development of medical devices to detect, treat and prevent addiction and pain. Medical devices are increasingly connected to the internet, hospital networks, and other medical devices, which can increase the risk of cybersecurity threats. Currently, FDA does not have explicit statutory authority pertaining to medical device cybersecurity. However, manufacturers are required to comply with Quality Systems Regulations (QSRs), which are good manufacturing practices for medical devices. QSRs may address, among other things, risk analysis, including cybersecurity risk. In October 2018, FDA entered into a Memorandum of Agreement with the Department of Homeland Security, to implement a framework for greater coordination and information sharing between the two agencies about medical device cybersecurity threats and vulnerabilities. For Further Information Agata Dabrowska, Analyst in Health Policy Victoria Green, Analyst in Health Policy Amanda Sarata, Specialist in Health Policy CRS Report R44576, The Food and Drug Administration (FDA) Budget: Fact Sheet , by Agata Dabrowska and Victoria R. Green CRS Report R44720, The 21st Century Cures Act (Division A of P.L. 114-255) , coordinated by Amanda K. Sarata CRS Report R45405, The SUPPORT for Patients and Communities Act (P.L. 115-271): Food and Drug Administration and Controlled Substance Provisions , coordinated by Agata Dabrowska CRS Report R44824, Advanced Gene Editing: CRISPR-Cas9 , by Marcy E. Gallo et al. In vitro diagnostics (IVD) are devices that provide information used by clinicians and patients to make health care decisions. IVDs are used in laboratory analysis of human samples and include commercial test products and instruments used in testing, among other things. Laboratory-developed tests (LDTs) are a class of IVD that is manufactured and offered within a single laboratory. Genetic tests are a type of diagnostic test that analyzes various aspects of an individual's genetic material (DNA, RNA, chromosomes, and genes). Most genetic tests are LDTs. The regulation of LDTs has been the subject of debate over the past 15 years. The FDA has exercised enforcement discretion over LDT regulation, meaning that most LDTs and genetic tests have not undergone FDA premarket review nor received FDA clearance or approval for marketing. Given the growing use and complexity of LDTs and genetic tests, the FDA has revisited how LDTs should be regulated. In October 2014, FDA published draft guidance on the regulation of LDTs in the Federal Register . The agency summarized the public comments it received on the guidance documents in its January 2017 discussion paper on LDTs. This discussion draft included an outline of a possible approach to LDT oversight. The agency also noted in this discussion paper that it would not issue final guidance to allow for further discussion and to \"give our congressional authorizing committees the opportunity to develop a legislative solution.\" Recently, various legislative approaches have been under discussion. A discussion draft bill circulated in early 2017, the \"Diagnostic Accuracy and Innovation Act (DAIA),\" was crafted with industry and other stakeholder input. It outlined a regulatory approach for IVD tests that was risk-based and flexible. FDA responded to this draft in August 2018 with a novel regulatory approach for these tests, including a mechanism for pre-certifying certain related tests to streamline premarket requirements, among other things. In December 2018, a new draft bill based on DAIA and incorporating FDA's feedback was released entitled the \"Verifying Accurate, Leading-edge, IVCT Development (VALID) Act.\" For Further Information Amanda Sarata, Specialist in Health Policy Judith Johnson, Specialist in Biomedical Policy CRS Report R43438, Regulation of Clinical Tests: In Vitro Diagnostic (IVD) Devices, Laboratory Developed Tests (LDTs), and Genetic Tests , by Amanda K. Sarata and Judith A. Johnson CRS Report RL33832, Genetic Testing: Background and Policy Issues , by Amanda K. Sarata Stem cells have the unique ability to become many types of cells in the body. Scientists are exploring ways of using stem cells to create regenerative medicine therapies that repair damaged or diseased organs and restore them to normal functioning. Stem cells may either be pluripotent or multipotent. Pluripotent stem cells include embryonic stem cells or reprogrammed adult cells that have the ability to become any of the more than 200 cell types in the adult body. Multipotent stem cells have the capacity to become multiple (but not all) types of cells, usually within a particular organ system such as the blood or nervous system. Most adult stem cells are multipotent stem cells. Recently, Congress has taken action to boost research and development of clinical applications for stem cells, both pluripotent and multipotent. For instance, the 21 st Century Cures Act ( P.L. 114-255 ) authorized to be appropriated $30 million for FY2017 through FY2020 for regenerative medicine research and a new designation at FDA for certain regenerative medicine therapies, eligible for expedited review. The term \"regenerative medicine therapy\" includes cell therapy, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or product. Clinical trials are underway for stem cell therapies to treat eye diseases, amyotrophic lateral sclerosis (ALS), Parkinson's disease, traumatic brain injury, and others. However, some therapies have shown safety concerns, including potential cancer risks. There has also been a rise in the number of stem cell clinics offering unapproved and potentially unsafe treatments to consumers. In response, FDA has issued guidance on the regulation of therapies using human cells. FDA has also issued warning letters and taken enforcement actions against certain stem cell clinics offering unapproved treatments. Similarly, the Federal Trade Commission has filed complaints against marketing claims made by stem cell clinics. The 116 th Congress may consider actions to boost research and clinical development of stem cell therapies, while ensuring the safety of such treatments. Policymakers may also consider addressing the rising use of unapproved stem cell treatments. For Further Information Kavya Sekar, Analyst in Health Policy Agata Dabrowska, Analyst in Health Policy Judith A. Johnson, Specialist in Biomedical Policy Amanda Sarata, Specialist in Health Policy CRS Report R44720, The 21st Century Cures Act (Division A of P.L. 114-255) , coordinated by Amanda K. Sarata CRS Report RL33540, Stem Cell Research: Science, Federal Research Funding, and Regulatory Oversight , by Judith A. Johnson and Edward C. Liu Researchers have long been searching for a reliable and simple way to make targeted changes to the genetic material of humans, animals, plants, and microorganisms. Scientists have developed a gene editing tool known as CRISPR—clustered regularly interspaced short palindromic repeated DNA sequences—that offers the potential for substantial improvement over previous technologies. The characteristics of CRISPR—easier to use, more precise, and less costly—have led many in the scientific and business communities to assert that CRISPR could lead to significant advances across a broad range of areas—from medicine and public health to agriculture and the environment. Over the next 5 to 10 years, the National Academy of Sciences (NAS) projects a rapid increase in the number and type of biotechnology products, many enabled by CRISPR. CRISPR has increased both the pace of development and the variety of crops being genetically modified. Scientists are also beginning to use CRISPR in human clinical trials for a variety of cancers, among other conditions. While CRISPR offers a number of potential benefits it may also pose new risks and raise ethical concerns. For example, in 2018 a Chinese scientist claimed that he used CRISPR to modify human embryos creating twin girls who may be more resistant to HIV. These claims have not been published in the scientific literature and therefore have not been verified. The announcement, however, has renewed debate regarding the ethics of genetic engineering. It has also prompted discussion about how existing law and regulation in the United States apply to the conduct of this type of research, its clinical testing in humans, and specifically its potential applications in human embryos. Currently, federal funds cannot be used for research involving human embryos. Additionally, the FDA is prohibited from using federal funds to review clinical research involving the gene editing of human embryos. CRISPR-related approaches are also being considered by some researchers to reduce or eliminate mosquito populations that serve as the primary vector for the transmission of malaria—potentially saving lives and substantially reducing medical costs. A 2016 report from NAS indicates that existing mechanisms may be inadequate to assess the potential immediate and long-term environmental and public health consequences associated with this use of the technology. In the 116 th Congress, policymakers might examine the potential benefits and risks associated with the use of CRISPR gene editing, including the ethical and social implications of CRISPR-related biotechnology products. Congress might also consider whether and how to address CRISPR gene editing and future biotechnology products with respect to regulation, research and development, and economic competitiveness, including ways to harmonize CRISPR-related policies of the United States with those of other countries. For Further Information Marcy E. Gallo, Analyst in Science and Technology Policy John F. Sargent Jr., Specialist in Science and Technology Policy Amanda K. Sarata, Specialist in Health Policy Tadlock Cowan, Analyst in Natural Resources and Rural Development CRS Report R44824, Advanced Gene Editing: CRISPR-Cas9 , by Marcy E. Gallo et al. The 116 th Congress may consider whether and how the federal government might address climate change and issues related to water resources. Science and technology considerations permeate these deliberations and may be grouped into six interrelated topics: federal expenditures; climate change science; greenhouse gas (GHG)-related technology development and deployment; investment in infrastructure; anticipating, adapting to, and increasing resilience to the impacts of climate changes; and carbon sequestration technology. Additionally, Congress may face several issues related to ensuring reliable water quality and quantity. Federal funding and tax incentives for climate-related S&T reached almost $17 billion in FY2016, the last year reported to Congress by the Office of Management and Budget in response to annual appropriations directives. The funding was spread across 16 reporting agencies, though some related expenditures may not be included. Of the S&T total, approximately $6.7 billion, about 42%, were tax incentives for technology deployment. Another 45% funded \"clean energy technology,\" the large majority at the Department of Energy for R&D and deployment programs. Approximately 15% funded climate change-related science, most of which supported satellites and computing infrastructure. Congress has not thus far reduced appropriations for most climate change-related S&T programs as proposed by the President's budgets for FY2018 and FY2019. The 116 th Congress will again consider appropriations for climate change-related programs and incentives. For Further Information Jane A. Leggett, Specialist in Energy and Environmental Policy CRS Report R43227, Federal Climate Change Funding from FY2008 to FY2014 , by Jane A. Leggett, Richard K. Lattanzio, and Emily Bruner CRS Report R45258, Energy and Water Development: FY2019 Appropriations , by Mark Holt and Corrie E. Clark CRS Report RS22858, Renewable Energy R&D Funding History: A Comparison with Funding for Nuclear Energy, Fossil Energy, Energy Efficiency, and Electric Systems R&D , by Corrie E. Clark CRS In Focus IF10589, FY2019 Funding for CCS and Other DOE Fossil Energy R&D , by Peter Folger CRS In Focus IF10225, Coastal Flood Resilience: Policy, Roles, and Funds , by Nicole T. Carter, Harold F. Upton, and Francis X. McCarthy Congress may scrutinize several recent scientific assessments—domestic and international—that strengthened previous assessments: Human-related emissions of greenhouse gases (GHG) are accumulating in the atmosphere, intensifying the natural greenhouse gas effect, and increasing acidity of the oceans. The latest major U.S. assessment, the Climate Science Special Report (CSSR), released in October 2017 by the U.S. Global Change Research Program (USGCRP), concluded that the increase in GHG is driving global land and ocean warming and other climate changes that are now unprecedented in the history of modern civilization. It also stated, [B]ased on extensive evidence, that it is extremely likely [>95% likelihood] that human activities, especially emissions of greenhouse gases [GHG] , are the dominant cause of the observed warming since the mid-20 th century . For the warming over the last century, there is no convincing alternative explanation supported by the extent of the observational evidence. The USGCRP's November 2018 Fourth National Climate Assessment (NCA4) concluded, inter alia , that human-induced climate change is affecting U.S. communities across the country through extreme weather events and generally warmer temperatures, more variable precipitation, and other observed trends. The NCA4 anticipates continued and increasing disruption to infrastructure, economic, and social systems, including economic disparities. Such impacts would not be distributed evenly across the United States and globally. According to its assessment, projected climate change impacts are affecting, and are virtually certain to increasingly affect, the U.S. economy, trade, and other essential U.S. interests. Some stakeholders, including some Members of Congress, consider that the resulting impacts of climate change in the United States and abroad are and would be modest and manageable. The assessments above, and much of the observations and research on which they are founded, have resulted from decades of federal (and nonfederal) investment, amounting to tens of billions of dollars, in global change science. The USGCRP is an interagency mechanism, required by the Global Change Research Act of 1990 ( P.L. 101-606 ), that coordinates and integrates global change research across 13 government agencies. The 116 th Congress may seek to understand the scientific foundations for recent U.S. and international assessments, including the data and methods that increasingly support attribution of many observed changes and extreme weather events to human-related GHG emissions. Congress may also express priorities for further scientific research. In light of the state of climate science, Congress may consider the level of appropriations for its priorities and the distribution among federal climate-related science programs. For example, deliberations may concern the balance between observations and analysis, between science to increase knowledge and to support private and public decisionmaking, and between physical and social sciences, as well as public accessibility to federally supported information. For Further Information Jane A. Leggett, Specialist in Energy and Environmental Policy CRS Report R45086, Evolving Assessments of Human and Natural Contributions to Climate Change , by Jane A. Leggett A large majority of federal climate change-related expenditures is aimed at advancing \"clean energy.\" Most human-related GHG emissions come from production, distribution, and combustion of fossil fuels, particularly for electricity generation and transportation, and are primarily emitted as carbon dioxide (CO 2 ) and methane (CH 4 ). Scientists agree that halting GHG-induced climate change would require eventually reducing net GHG emissions to near zero; the total amount of change would depend in large part on the cumulative emissions on that pathway. Many analysts see a decades-long path to stabilizing climate change as involving greater advance and deployment of efficiency improvements, decarbonization, and electrification of the world's economies, along with additional options in multiple sectors. Many options could potentially provide additional security and health benefits, while their costs may depend on public and private investments in research, development, demonstration, and deployment (RDD&D), as well as efforts to facilitate transitions in businesses, employment, and communities. Some see potential carbon capture, utilization, and sequestration (CCUS) technologies as key to preventing CO 2 emissions while preserving a large place for coal and other fossil fuels in the energy economy. Still others advocate for developing CO 2 removal or geoengineering technologies, along with international governance regimes, to intentionally and directly modify the climate, particularly should the climate change rapidly and adversely. The capacity to reduce GHG emissions to near zero at affordable costs, while maintaining U.S. economic growth and security, would depend on deployment of existing and demonstrated technologies supplemented by technological breakthroughs. Members may deliberate on the appropriate degree and means of federal support for advancing and deploying new technologies. Choices the 116 th Congress may address include: whether any policies should be neutral or favor selected technologies (or fuels); where federal intervention in the technology pipeline, through RDD&D, can be most cost efficient; whether policies are most effective when aimed at pushing the supply of selected technologies or incentivizing demand for low- or no-GHG technologies, or in combination; and how best to engage with the private sector and research institutions in partnerships on RDD&D. RDD&D funding has not been evenly distributed across technology types. Research has been intended to advance fossil fuel combustion, renewable energy (including biofuels), efficiency, storage, vehicles and their fuels, nuclear energy, and the electricity grid. Some incentives focus on \"supply-push\" of technologies (e.g., R&D funding), while others emphasize \"demand-pull\" (e.g., tax incentives for purchasers), with numerous examples suggesting that coordinated use of both could be most effective. Cleaner energy technologies can produce public health benefits in addition to climate benefits, while shifts in the energy economy can pose transitional challenges to workers and communities. The magnitude of federal expenditures for climate change technologies, the performance of federally supported programs, and priorities for policy tools and technologies may be topics for Congress, particularly in light of budget objectives. For Further Information Jane A. Leggett, Specialist in Energy and Environmental Policy CRS Report RS22858, Renewable Energy R&D Funding History: A Comparison with Funding for Nuclear Energy, Fossil Energy, Energy Efficiency, and Electric Systems R&D , by Corrie E. Clark CRS Report R45204, Vehicle Fuel Economy and Greenhouse Gas Standards: Frequently Asked Questions , by Richard K. Lattanzio, Linda Tsang, and Bill Canis CRS Report R42566, Alternative Fuel and Advanced Vehicle Technology Incentives: A Summary of Federal Programs , by Lynn J. Cunningham et al. CRS Report R45010, Public-Private Partnerships (P3s) in Transportation , by William J. Mallett CRS In Focus IF10979, Greenhouse Gas Emissions and Sinks in U.S. Agriculture , by Renée Johnson Leaders in both chambers of Congress, as well as President Trump, are interested in federal investment in the nation's infrastructure. In evaluating options for infrastructure, two types of linkages with climate change may be important to consider simultaneously (along with numerous other factors) to optimize investments: infrastructure effects on long-term GHG emissions and potential effects of climate change on long-term infrastructure-related costs and public health and safety. For example, decisions regarding modernization of the electric grid may take account both of possible future policies to reduce GHG emissions and effects on electricity reliability in the context of more extreme weather events and an average increase in summer cooling demand. The first linkage between climate change and infrastructure investment arises from the foundation that infrastructure sets for certain technological choices, and consequently, levels of future U.S. GHG emissions (and the costs of reducing them). Long-lived infrastructure may exert influence on emissions for decades into the future; Infrastructure can \"lock in\" or support flexibility for certain technological options. Infrastructure choices could make adaption to new science, technological advances, and policy priorities more or less expensive. Infrastructure influence on GHG emissions is particularly strong for energy supply, transportation, industry, buildings, and communities. For example, pipeline infrastructure would be critical for deployment of CCUS technologies, particularly for industrial applications. In transportation, choices among transportation modes, and choices between energy types (e.g., gasoline or biofuels or electricity) would depend in part on the availability of the refueling or charging infrastructure. Similarly, land use decisions—generally made by local governments and maybe influenced by federal funding—affect transportation options, which can have long-term impacts on fossil fuel consumption. For example, land use development patterns designed for private automobiles are often not readily adaptable for installation of mass transit. A second linkage between climate change and infrastructure investment is the ability of infrastructure to avoid damages and offer resilience to climate changes, including extreme weather events that scientists expect to increase in frequency and strength. Because much infrastructure is intended to last for decades, projected climate changes in 2030 or 2050 that seem far off for current decisionmaking may have importance for future adequacy, safety, operating costs, and maintenance of investments. Some federal (including military) infrastructure has been severely damaged in recent extreme weather events, while nonfederal water, energy, transportation, urban, and other systems have been disrupted or experienced sustained damage. Congress may consider the merits of technical specifications or incentives to harden or increase the resiliency of long-lived infrastructure funded by the federal government, potentially providing model code or demonstrations to other decisionmakers. Policy choices could, on the one hand, increase near-term costs of building infrastructure; on the other hand, climate-related benefits could include avoiding future losses to life, damages to human health (including mental health), and higher federal outlays that could occur with projected climate change. For Further Information Jane A. Leggett, Specialist in Energy and Environmental Policy CRS Report R45156, The Smart Grid: Status and Outlook , by Richard J. Campbell CRS Report R45105, Potential Options for Electric Power Resiliency in the U.S. Virgin Islands , by Corrie E. Clark, Richard J. Campbell, and D. Andrew Austin CRS Report R44911, The Energy Savings and Industrial Competitiveness Act: S. 385 and H.R. 1443 , by Corrie E. Clark CRS Report R45350, Funding and Financing Highways and Public Transportation , by Robert S. Kirk and William J. Mallett CRS In Focus IF10702, Drought Response and Preparedness: Policy and Legislation , by Nicole T. Carter and Charles V. Stern CRS Report R40147, Infrastructure: Green Building Overview and Issues , by Eric A. Fischer and Danielle A. Arostegui CRS Report R43415, Keystone XL: Greenhouse Gas Emissions Assessments in the Final Environmental Impact Statement , by Richard K. Lattanzio In light of recent scientific assessments and federal outlays for relief and recovery following extreme weather events, some of which have been statistically linked to GHG-induced climate change, Congress may review federal programs for S&T to support adaptation or resilience to projected climate change. Some issues related to infrastructure technology are discussed above, and there are additional science and technology issues associated with adaptation and resilience. For example, technological R&D needs may include new crop seed varieties suited to emerging climate conditions, better means to manage floodwaters, advanced air conditioning technologies for buildings, wildfire management techniques, and others. Further advances in climate forecasting, particularly at the local scale, could assist assessment of vulnerabilities and preparation for opportunities and risks. Improved understanding of human behavior could assist adaptation and resilience. Congress may address the federal role in supporting S&T that can facilitate effective state, local, and private decisionmaking on adaptation and resilience to climate change. Federal roles may include easing access to scientific research, climate and seasonal projections, impact assessments, and adaptation decision tools. One question would be the degree to which federal financial support encourages or discourages consideration of vulnerabilities and adaptation in private, state, and local decisionmaking, as regarding flood risk mitigation or agricultural risks. Congress may also review efforts already begun to incorporate climate change projections into federal agency management of federal personnel, infrastructure, and operations. Effective agency decisions would all depend on the adequacy and appropriate use of scientific information and available technologies. For Further Information Jane A. Leggett, Specialist in Energy and Environmental Policy CRS Report R43915, Climate Change Adaptation by Federal Agencies: An Analysis of Plans and Issues for Congress , coordinated by Jane A. Leggett CRS Report R45017, Flood Resilience and Risk Reduction: Federal Assistance and Programs , by Nicole T. Carter et al. CRS Report R43407, Drought in the United States: Causes and Current Understanding , by Peter Folger CRS Report R43199, Energy-Water Nexus: The Energy Sector's Water Use , by Nicole T. Carter CRS Report R44632, Sea-Level Rise and U.S. Coasts: Science and Policy Considerations , by Peter Folger and Nicole T. Carter CRS In Focus IF10728, After the Storm: Highway Reconstruction and Resilience , by Robert S. Kirk Carbon capture and sequestration (or storage)—known as CCS—involves capturing carbon dioxide (CO 2 ) at its source, storing it underground, or utilizing it for another purpose or product. (As noted earlier, CCS is sometimes referred to as CCUS—carbon capture, utilization , and storage.) CCS could reduce the amount of CO 2 emitted from the burning of fossil fuels at large stationary sources. Carbon utilization recently has gained interest within Congress as a means for capturing CO 2 and converting it into potentially commercially viable products, such as chemicals, fuels, cements, and plastics. Direct air capture (DAC) is also an emerging technology. DAC would remove atmospheric CO 2 directly from the atmosphere. CCS includes three main steps: (1) capturing CO 2 ; (2) transporting CO 2 ; and (3) injecting it into the subsurface. Following injection, the CO 2 would be monitored to verify that it remains underground. Capturing CO 2 is the most costly and energy-intensive step in the process (this is sometimes referred to as the energy penalty or the parasitic load ). Emerging technologies for carbon utilization and DAC have energized some CCS advocates. A challenge for utilization is whether the market for products and uses is large enough so that the amount of carbon captured or removed has a measurable effect mitigating climate change. The challenge for DAC is fairly straightforward—how to reduce the cost per ton of CO 2 removed. Since FY2010, Congress has provided more than $5 billion total in annual appropriations for CCS activities at DOE, primarily for research and development within DOE's Office of Fossil Energy (FE). Congress provided nearly $727 million to FE R&D in FY2018 and $740 million for FY2019. The Trump Administration's FY2019 budget request would have shifted away from CCS R&D to fund other priorities. Globally, two fossil-fueled power plants currently generate electricity and capture CO 2 in large quantities: the Boundary Dam plant in Canada and the Petra Nova plant in Texas. Both plants offset some of the capture costs by selling the captured CO 2 for purposes of enhanced oil recovery. The 115 th Congress enacted a tax provision (Title II, Section 41119 of P.L. 115-123 , which amended Internal Revenue Code, Section 45Q). The amendment increases the tax credit for CCS. Some stakeholders suggest that the changes to Section 45Q could be a \"game changer\" for CCS development in the United States. The 116 th Congress may explore how the 45Q tax credit is being implemented, and whether further legislative changes to the provision might be needed to accelerate deployment of CCS. For Further Information Peter Folger, Specialist in Energy and Natural Resources Policy CRS Report R44902, Carbon Capture and Sequestration (CCS) in the United States , by Peter Folger CRS Report R41325, Carbon Capture: A Technology Assessment , by Peter Folger Reliable water quantity and quality supports the U.S. population and economy, including public and ecosystem health, agriculture, and industry (e.g., energy production, fisheries, navigation, and manufacturing). Research related to developing, using, and protecting water supplies and aquatic ecosystems is diverse. Because of this diversity, federal research activities and facilities span numerous departments, agencies, and laboratories. The federal government also funds water research through grants to universities and other researchers. In recent years, federal agencies have sponsored various prize competitions for water data, science, and technologies and developed cooperative arrangement with various entities. Drinking water contamination and recent droughts, floods, and storms also have increased interest in innovative technologies and practices (including approaches that mimic nature, often referred to as green infrastructure or nature-based infrastructure). The 116 th Congress may consider water research and technology topics which can be broadly divided into water and aquatic ecosystem information, water infrastructure and use, and water quality. Information on water and aquatic ecosystem information includes observations, forecasts, and associated modeling. Science and research agencies collect data remotely and in situ ; they use a wide variety of traditional and new technologies and techniques that inform water-related decisions for infrastructure, agriculture, and drinking water and wastewater services. Some of the water and ecosystem information research topics that may be before the 116 th Congress include the following: water monitoring infrastructure and science programs, including, water quality monitoring, stream gauges, buoys, and groundwater assessments; water-related weather, climate, and earth system science including storm surge, hurricane, rainfall, and drought forecasts and associated remote sensing investments (see \" Earth-Observing Satellites \"); water conditions in rivers and along coasts (e.g., relative sea-level rise rates); altering the operation of existing reservoirs (e.g., using seasonal forecasts for forecast-informed operations); monitoring and management of invasive species and harmful algal blooms; access to and use of water data (e.g., the Open Water Data Initiative); and coordination of the federal water science and research portfolio, including partnerships with academic and private entities. Water infrastructure research encompasses how to prolong and improve the performance of existing coastal and inland water infrastructure as well as the development of next-generation infrastructure technologies. Some infrastructure and water use research topics include: water augmentation technologies and science to support their adoption, including stormwater capture, water reuse, brackish and seawater desalination, as well as groundwater recharge, storage, and recovery; technologies and materials for monitoring and rehabilitating aging infrastructure, such as materials selection, construction and repair techniques, and detection technologies (e.g., structural health monitors and leak detection); water efficiency technologies and practices; and technologies to enhance infrastructure resilience to droughts, floods, hurricanes, and other natural hazards. The quality of drinking water, surface water, and groundwater is important for public health, environmental protection, food security, and other purposes. Technologies for preventing contamination and for identifying and treating existing contamination is an ongoing research topic for the federal government. Some research topics include: analytical methods and treatment technologies to detect and manage emerging contaminants (e.g., cyanotoxins associated with harmful algal blooms and perfluoroalkyl substances [PFASs]); technologies to prevent and manage contamination at drinking water treatment plants and in distribution systems (e.g., real-time monitoring, treatment to minimize disinfection byproducts, and lead pipe corrosion control); and innovative technologies and practices to protect water quality, including methods for increasing resilience of drinking water systems against natural disasters, protecting drinking water sources for public water system from contamination (e.g., nature-based stormwater management, watershed management approaches, and nonpoint source pollution management). For Further Information Nicole T. Carter, Specialist in Natural Resources Policy Peter Folger, Specialist in Energy and Natural Resources Policy Elena H. Humphreys, Analyst in Environmental Policy Eva Lipiec, Analyst in Natural Resources Policy Anna E. Normand, Analyst in Natural Resources Policy Pervaze A. Sheikh, Specialist in Natural Resources Policy CRS Report R43777, U.S. Geological Survey: Background, Appropriations, and Issues for Congress , by Pervaze A. Sheikh and Peter Folger CRS Report R43407, Drought in the United States: Causes and Current Understanding , by Peter Folger CRS Report R44632, Sea-Level Rise and U.S. Coasts: Science and Policy Considerations , by Peter Folger and Nicole T. Carter CRS Report R44871, Freshwater Harmful Algal Blooms: Causes, Challenges, and Policy Considerations , by Laura Gatz CRS Report R45259, The Federal Role in Groundwater Supply: Overview and Legislation in the 115th Congress , by Peter Folger et al. CRS In Focus IF10719, Forecasting Hurricanes: Role of the National Hurricane Center , by Peter Folger Science and technology play an important role in national defense. The Department of Defense (DOD) relies on a robust research and development effort to develop new military systems and improve existing systems. Issues that may come before the 116 th Congress regarding the DOD's S&T activities include budgetary concerns and the effectiveness of programs to transition R&D results into fielded products. The Department of Defense spends more than $90 billion per year on research, development, testing, and evaluation (RDT&E). Roughly 80%-85% of this is spent on the design, development, and testing of specific military systems. Examples of such systems include large integrated combat platforms such as aircraft carriers, fighter jets, and tanks, among others. They also include much smaller systems such as blast gauge sensors worn by individual soldiers. The other 15%-20% of the RDT&E funding is spent on what is referred to as DOD's Science and Technology Program. The S&T Program includes activities ranging from basic science to demonstrations of new technologies in the field. The goal of DOD's RDT&E spending is to provide the knowledge and technological advances necessary to maintain U.S. military superiority. DOD's RDT&E budget contains hundreds of individual line items. Congress provides oversight of the program, making adjustments to the amount of funding requested for any number of line items. These changes are based on considerations such as whether the department has adequately justified the expenditure or the need to accommodate larger budgetary adjustments. RDT&E priorities and focus, including those of the S&T portion, do not change radically from year to year, though a few fundamental policy-related issues regularly attract congressional attention. These include ensuring that S&T, particularly basic research, receives sufficient funding to support next generation capabilities; seeking ways to speed the transition of technology from the laboratory to the field; and ensuring an adequate supply of S&T personnel. Additionally, the impact of budgetary constraints, including continuing resolutions, on RDT&E may be of interest to the 116 th Congress. Specifically, senior DOD officials have been describing the need to develop and implement a strategy aimed at identifying new and innovative ways to maintain the dominance of U.S. military capabilities into the future, which may require increased investment in RDT&E. In addition, as federal defense-related R&D funding's share of global R&D funding has fallen from about 36% in 1960 to about 4% in 2016, some have become concerned about the ability of DOD to direct the development of leading technologies and to control which countries have access to it. Today, commercial companies in the United States and elsewhere in the world are leading development of groundbreaking technologies in fields such as artificial intelligence, autonomous vehicles and systems, and advanced robotics. DOD has sought to build institutional mechanisms (e.g., the Defense Innovation Unit) and a culture for accessing technologies from nontraditional defense contractors. DOD's ability to maintain a technology edge for U.S. forces may depend increasingly upon these external sources of innovation for its weapons and other systems. For Further Information John F. Sargent Jr., Specialist in Science and Technology Policy Marcy E. Gallo, Analyst in Science and Technology Policy CRS Report R45403, The Global Research and Development Landscape and Implications for the Department of Defense , by John F. Sargent Jr., Marcy E. Gallo, and Moshe Schwartz CRS Report R44711, Department of Defense Research, Development, Test, and Evaluation (RDT&E): Appropriations Structure , by John F. Sargent Jr. CRS Report R45110, Defense Science and Technology Funding , by John F. Sargent Jr. CRS Report R45150, Federal Research and Development (R&D) Funding: FY2019 , coordinated by John F. Sargent Jr. Energy-related science and technology issues that may come before the 116 th Congress include those related to reprocessing spent nuclear fuel, advances in nuclear energy technology, the development of biofuels and ocean energy technology, and international fusion research. Spent fuel from commercial nuclear reactors contains most of the original uranium that was used to make the fuel, along with plutonium and highly radioactive lighter isotopes produced during reactor operations. A fundamental issue in nuclear policy is whether spent fuel should be \"reprocessed\" or \"recycled\" to extract plutonium and uranium for new reactor fuel, or directly disposed of without reprocessing. Proponents of nuclear power point out that spent fuel still contains substantial energy that reprocessing could recover, and that reprocessing could reduce the long-term hazard of radioactive waste. However, reprocessed plutonium can also be used in nuclear weapons, so critics of reprocessing contend that federal support for the technology could undermine U.S. nuclear weapons nonproliferation policies. The potential commercial viability of reprocessing or recycling is also an issue. In the 1950s and 1960s, the federal government expected that all commercial spent fuel would be reprocessed to make fuel for \"breeder reactors\" that would convert uranium into enough plutonium to fuel additional commercial breeder reactors. Increased concern about weapons proliferation in the 1970s and the slower-than-projected growth of nuclear power prompted President Carter to halt commercial reprocessing efforts in 1977, along with a federal demonstration breeder project. During the Reagan Administration, Congress provided funding to restart the breeder demonstration project, but then halted project funding in 1983 while continuing to fund breeder-related research and development by the Department of Energy (DOE). During the Clinton Administration, research on producing nuclear energy through reprocessing was largely halted, although some work on the technology continued for waste management purposes. During the George W. Bush Administration, there was renewed federal support for reprocessing, with a proposal to complete a pilot plant by the early 2020s. During the Obama Administration, plans for the pilot plant were halted and DOE's Fuel Cycle Research and Development Program was redirected toward development of technology options for a wide range of nuclear fuel cycle approaches, including direct disposal of spent fuel (the \"once through\" cycle), deep borehole disposal, and partial and full recycling. The Trump Administration proposed deep reductions in Fuel Cycle R&D in FY2018 and FY2019. However, the Consolidated Appropriations Act for 2018 ( P.L. 115-141 ) increased the program's funding from $208 million in FY2017 to $260 million in FY2018—a 26% boost. Funding was increased slightly further, to $264 million, by the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). The level of funding for nuclear fuel cycle and waste disposal R&D may be a continuing issue in the 116 th Congress. Another DOE project related to reprocessing policy is the uncompleted Mixed Oxide Fuel Fabrication Facility (MFFF) at the Department's Savannah River Site in South Carolina. MFFF would produce fuel for commercial nuclear reactors using surplus nuclear weapons plutonium, as part of an agreement with Russia to reduce nuclear weapons material. Critics of the project contend that MFFF would subvert U.S. nonproliferation efforts by encouraging the use of plutonium fuel. Because of rising costs, the Obama Administration proposed to halt the MFFF project in FY2017 and pursue alternative plutonium disposition options. The Trump Administration's FY2018 budget request also called for terminating MFFF. The FY2018 National Defense Authorization Act ( P.L. 115-91 ) authorized DOE to pursue an alternative disposal option if its total costs were found to be less than half of those for completing and operating MFFF. The Consolidated Appropriations Act for 2018 conformed to the NDAA authorizing language. Energy Secretary Rick Perry certified in May 2018 that the cost saving requirement for terminating MFFF would be met. For FY2019, P.L. 115-244 appropriated $220 million, the same as the request, to begin shutting down the project. Termination of MFFF could shift the debate on plutonium disposition policy toward other options, such as dilution and disposal in a deep repository. R&D funding for such alternatives could be an issue for the 116 th Congress. For Further Information Mark Holt, Specialist in Energy Policy CRS Report R42853, Nuclear Energy: Overview of Congressional Issues , by Mark Holt CRS Report RL34234, Managing the Nuclear Fuel Cycle: Policy Implications of Expanding Global Access to Nuclear Power , coordinated by Mary Beth D. Nikitin CRS Report R43125, Mixed-Oxide Fuel Fabrication Plant and Plutonium Disposition: Management and Policy Issues , by Mark Holt and Mary Beth D. Nikitin All currently operating commercial nuclear power plants in the United States are based on light water reactor (LWR) technology, in which ordinary water cools the reactor and acts as a neutron moderator to help sustain the nuclear chain reaction. DOE has long conducted research and development work on other, non-LWR nuclear technologies that could have advantages in safety, waste management, and cost. A growing number of private-sector firms are pursuing commercialization of advanced nuclear technologies as well. Advanced nuclear energy technologies include high-temperature gas-cooled reactors, liquid metal-cooled reactors, and molten salt reactors (in which the nuclear fuel is dissolved in the coolant), among a wide range of other concepts. Many of these concepts would involve nuclear chain reactions using fast neutrons, which are not slowed by a moderator. Research on advanced reactor coolants, materials, controls, and safety is carried out by DOE's Advanced Reactor Technologies program. The program received $111.5 million for FY2019 ( P.L. 115-244 ), 51% above the Administration request. The appropriation includes $20 million for research and development on microreactors—reactors with electric generating capacity of only a few megawatts, a tiny fraction of the capacity of existing commercial reactors. Private-sector nuclear technology companies contend that a major obstacle to commercializing advanced reactors is that the Nuclear Regulatory Commission's (NRC's) licensing process is based on existing LWR technology. They have urged NRC to develop a licensing and regulatory framework that could apply to all nuclear concepts. They also have recommended a \"staged review process\" to provide conditional NRC approval for advanced reactor designs at key milestones toward the issuance of an operating license. NRC and DOE are currently implementing the Joint Advanced Non-Light Water Reactors Licensing Initiative to adapt existing general design criteria for LWRs for use by advanced reactor license applications. Under that initiative, NRC issued \"Guidance for Developing Principal Design Criteria for Non-Light Water Reactors\" on April 9, 2018. NRC is also supporting industry efforts to develop guidance for technology-neutral reactor licensing. Legislation to promote advanced nuclear power technologies, the Nuclear Energy Innovation Capabilities Act of 2017 ( P.L. 115-248 ), was signed by President Trump on September 28, 2018. A major provision of the bill would authorize DOE national laboratories or other DOE-owned sites to host reactor demonstration projects sponsored fully or partly by the private sector. It would also require DOE to determine the need for a fast-neutron \"versatile\" test reactor and authorize grants to help pay for NRC licensing of advanced reactor designs. Related legislation, the Nuclear Energy Innovation and Modernization Act ( P.L. 115-439 ), was signed into law January 14, 2019. Among other provisions, it would require NRC to develop a regulatory framework that would encourage commercialization of advanced nuclear technology. Some public-private R&D on advanced nuclear technology is already being conducted at national labs under DOE's Gateway for Accelerated Innovation in Nuclear (GAIN) initiative. Congress appropriated $65 million ( P.L. 115-244 ) for early-stage development of a versatile advanced test reactor in FY2019. The 116 th Congress may consider additional legislation on advanced reactors, including funding for R&D, licensing, and demonstration. For Further Information Mark Holt, Specialist in Energy Policy CRS Insight IN10765, Small Modular Nuclear Reactors: Status and Issues , by Mark Holt CRS Report R42853, Nuclear Energy: Overview of Congressional Issues , by Mark Holt Biofuels—liquid transportation fuels produced from biomass feedstock—are often described as an alternative to conventional fuels. Some see promise in producing liquid fuels from a domestic feedstock that may reduce dependence on foreign sources of oil, contribute to improving rural economies, and lower greenhouse gas emissions. Others regard biofuels as potentially causing more harm to the environment (e.g., air and water quality concerns), encouraging landowners to put more land into production, and being prohibitively expensive to produce. The debate about the feasibility of biofuels is complex, as policymakers consider a multitude of factors (e.g., feedstock costs, timeframe to reach substantial commercial-scale advanced biofuel production, environmental impact of biofuels). The debate can be even more complicated when considering that biofuels may be produced using numerous biomass feedstocks and conversion technologies. Congress has expressed interest in biofuels for decades, with most of its attention on the production of \"first-generation\" biofuels (e.g., cornstarch ethanol). Farm bills have had a significant effect on biofuel research and development. Starting in 2002, the farm bills have contained an energy title with several programs focused on assisting biofuel production. In addition, the DOE Office of Energy Efficiency and Renewable Energy (EERE) supports research and development for domestic biofuel production. Congress and the Administration have debated the amount of funding both USDA and DOE should receive for biofuel initiatives. While commercial-scale production of \"first-generation\" biofuels is well established, commercial-scale production for some advanced biofuels (e.g., cellulosic ethanol) is in its infancy. In 2007, Congress expanded one policy that has supported an increase in advanced biofuel production—the Renewable Fuel Standard (RFS). The RFS requires U.S. transportation fuel to contain a minimum volume of biofuel, a growing percentage of which is to come from advanced biofuels. The RFS is under scrutiny for various reasons, including the Environmental Protection Agency (EPA) exercising its regulatory authority to issue a waiver and reduce the total renewable fuel volume below what was required by statute and concerns about RFS compliance. This creates significant uncertainty for certain stakeholders, with the result that some of the advanced biofuel targets are not being met. An overarching issue is that the statute may require more biofuel to be produced than can be used given the existing motor fuel distribution infrastructure and the limited fleet of passenger vehicles that are built to run on higher percentage blends of biofuels. The 116 th Congress may consider whether to modify various biofuel promotional efforts, or to maintain the status quo. For Further Information Kelsi Bracmort, Specialist in Natural Resources and Energy Policy CRS Report R43325, The Renewable Fuel Standard (RFS): An Overview , by Kelsi Bracmort CRS In Focus IF10842, The Renewable Fuel Standard: Is Legislative Reform Needed? , by Kelsi Bracmort CRS In Focus IF10639, Farm Bill Primer: Energy Title , by Kelsi Bracmort CRS In Focus IF10661, DOE Office of Energy Efficiency and Renewable Energy: FY2017 Appropriations and the FY2018 Budget Request , by Kelsi Bracmort and Corrie E. Clark Technological innovations are key drivers of U.S. ocean energy development. They may facilitate exploration of previously inaccessible resources, provide cost efficiencies in a low-oil-price environment, address safety and environmental concerns, and enable advances in emerging sectors such as U.S. offshore wind. Private industry, universities, and government are all involved in ocean energy R&D. At the federal level, the Department of Energy and the Department of the Interior (DOI) both support ocean energy research. One area of policymaker interest involves deepwater oil and gas operations. Industry interest in expanding deepwater activities, improving efficiency, and reducing costs has prompted improvements in drilling technologies and steps toward automated monitoring and maintenance. The oil and gas industry and federal regulators also have focused on safety improvements to reduce the likelihood of catastrophic oil spills in deep water. In 2016, DOI promulgated safety regulations that tighten requirements for offshore blowout preventer systems and other well control equipment. In April 2018, DOI published proposed revisions to the rule, including several changes that could reduce the cost to industry and time involved in meeting certain technological requirements. For both the original rule and the proposed revisions, stakeholders have debated the potential costs of compliance and whether the technological requirements are unnecessarily prescriptive or, conversely, not prescriptive enough to achieve safety aims. Congress may also consider technology issues related to offshore drilling in the Arctic, where sea ice and infrastructure gaps pose challenges for the economic viability and safety of mineral exploration. A focus of industry R&D is on technology to extend the Arctic drilling season beyond the periods where sea ice is absent—for example, by developing ice-capable mobile offshore drilling units (MODUs). DOI finalized safety regulations for Arctic exploratory drilling in 2016. President Trump's Executive Order 13795 ordered DOI to review these regulations and DOI's Fall 2018 Regulatory Agenda includes an anticipated rule revision. Some have argued that the regulations are too costly for industry and give inadequate weight to available technologies (such as those for well capping) that could reduce safety costs. Others question whether any rules or technologies can adequately ensure drilling safety in the Arctic given the environmental risks. Among renewable ocean energy sources, only wind energy is poised for commercial application in U.S. waters. In December 2016, the first U.S. offshore wind farm, off of Rhode Island, began regular operations. A focus of R&D is technology to increase offshore turbine efficiency and reduce costs, including floating turbines for deep waters, where resources may be more abundant and user conflicts fewer. Other research explores improvements to electrical infrastructure, such as integrating transmission networks for multiple projects. A potential issue for Congress is whether and how to support or incentivize offshore wind development and other ocean renewables. For Further Information Laura Comay, Specialist in Natural Resources Policy CRS Report R44692, Five-Year Program for Federal Offshore Oil and Gas Leasing: Status and Issues in Brief , by Laura B. Comay CRS Report R42942, Deepwater Horizon Oil Spill: Recent Activities and Ongoing Developments , by Jonathan L. Ramseur CRS Report R41153, Changes in the Arctic: Background and Issues for Congress , coordinated by Ronald O'Rourke ITER (formerly known as the International Thermonuclear Experimental Reactor) is an international fusion energy research facility currently under construction in Cadarache, France. When completed, ITER is to be the world's largest fusion reactor and the first capable of producing more energy than it consumes. Although the energy output from ITER will not be harnessed to produce electricity, fusion researchers see ITER as the next step toward implementation of fusion energy as a power source. ITER is an international collaboration. Along with the United States, the partners are the European Union, China, India, Japan, Russia, and South Korea. The United States withdrew from the initial design phase of ITER in 1998 at congressional direction, largely because of concerns about cost and scope. The project was restructured, and the United States rejoined in 2003. The formal international agreement to build the facility was approved in 2006. The European Union, as host, is responsible for 45% of the construction cost, while the United States and the other participating countries are responsible for 9% each. Most of the U.S. share (which is $132 million in FY2019) is being contributed in kind, in the form of components and equipment sourced mostly from U.S. companies, universities, and national laboratories. The construction phase of ITER is planned for completion in 2027. Once operational, the facility is expected to have a lifespan of 15-25 years. During the operation phase, and during subsequent deactivation and decommissioning, the agreed U.S. cost share is 13%. In recent years, ITER management issues, schedule delays, and cost growth have sometimes led to proposals in Congress to terminate U.S. participation. A central issue is that U.S. funding for ITER may be crowding out funding for domestic fusion energy research. DOE budget documents show the cost of U.S. participation in ITER in FY2020 and beyond as \"to be determined\" once the Administration decides whether to continue participating in the project. In 2018, at DOE's request, the National Academies of Science, Engineering, and Medicine issued a strategic plan for fusion energy research. It recommended, first, that \"the United States should remain an ITER partner as the most cost-effective way to gain experience with a burning plasma at the scale of a power plant.\" Second, looking beyond ITER, it recommended that \"the United States should start a national program of accompanying research and technology leading to the construction of a compact pilot plant that produces electricity from fusion at the lowest possible capital cost.\" The DOE Fusion Energy Sciences Advisory Committee has also embarked on a strategic planning effort, encompassing both ITER and domestic research, with a final report anticipated in late 2020. The 116 th Congress may continue oversight of ITER's scientific progress, cost, and schedule, and may revisit the debate about whether to continue U.S. participation. For More Information Daniel Morgan, Specialist in Science and Technology Policy The federal government spends billions of dollars supporting research and development to protect the homeland. Some of the issues that the 116 th Congress may consider include how the Department of Homeland Security performs research and development; federal efforts to develop and procure new medical countermeasures against chemical, biological, radiological, and nuclear agents; and federal efforts to ensure the safety and security of laboratories working with dangerous pathogens. The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development can contribute to all these goals. The Directorate of Science and Technology has primary responsibility for establishing, administering, and coordinating DHS R&D activities. The Domestic Nuclear Detection Office (DNDO) is responsible for R&D relating to nuclear and radiological threats. Several other DHS components, including the Coast Guard, also fund R&D and R&D-related activities related to their missions. Coordination of DHS R&D is a long-standing congressional interest. In 2012, the Government Accountability Office (GAO) concluded that because so many components of the department are involved, it is difficult for DHS to oversee R&D department-wide. In January 2014, the joint explanatory statement for the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) directed DHS to implement and report on new policies for R&D prioritization. It also directed DHS to review and implement policies and guidance for defining and overseeing R&D department-wide. In July 2014, GAO reported that DHS had updated its guidance to include a definition of R&D and was conducting R&D portfolio reviews across the department, but that it had not yet developed policy guidance for DHS-wide R&D oversight, coordination, and tracking. In December 2015, the explanatory statement for the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) stated that DHS \"lacks a mechanism for capturing and understanding research and development (R&D) activities conducted across DHS, as well as coordinating R&D to reflect departmental priorities.\" The Common Appropriations Structure that DHS introduced in February 2016 in its FY2017 budget request includes an account titled Research and Development for each DHS component. It remains to be seen whether this change will help to address congressional concerns about DHS-wide R&D coordination. DHS has reorganized its R&D-related activities several times. In December 2017, it established a new Countering Weapons of Mass Destruction Office (CWMDO), consisting of DNDO, most functions of the Office of Health Affairs (OHA), and some other elements. DNDO and OHA were themselves both created, more than a decade ago, largely by reorganizing elements of the S&T Directorate. The Countering Weapons of Mass Destruction Act of 2018 ( P.L. 115-387 ) expressly authorized the establishment and activities of CWMDO. The 116 th Congress may examine the implementation of that act. For Further Information Daniel Morgan, Specialist in Science and Technology Policy The anthrax attacks of 2001 highlighted the nation's vulnerability to biological terrorism. The federal government responded to these attacks by increasing efforts to protect civilians against chemical, biological, radiological, and nuclear (CBRN) terrorism. Effective medical countermeasures, such as drugs or vaccines, could reduce the impact of a CBRN attack. Policymakers identified a lack of such countermeasures as a challenge to responding to the CBRN threat. To address this gap, the federal government created several programs to encourage private sector development of new CBRN medical countermeasures. Despite these efforts, the federal government still lacks medical countermeasures for many CBRN threats, including Ebola. The Biomedical Advanced Research and Development Authority (BARDA) and Project BioShield are two key pieces of the federal efforts supporting the development and procurement of new CBRN medical countermeasures. BARDA directly funds the advanced development of countermeasures through contracts with private sector developers. Project BioShield provides a procurement mechanism to remove market uncertainty for countermeasure developers. It allows the federal government to agree to buy a countermeasure up to 10 years before the product is likely to finish development. Congress has modified these and related programs to improve their performance, efficiency, and transparency to oversight. However, some key issues remain unresolved, including those related to appropriations, interagency coordination, countermeasure prioritization and implementation of the 2018 National Biodef e nse Strategy . In addition to questions regarding the amount of funding, Congress may consider whether the appropriations are efficiently balanced throughout the research and development pipeline. Policymakers may consider whether the congressionally-mandated planning and transparency requirements have sufficiently enhanced coordination of the multiagency countermeasure development enterprise. Additionally, Congress may consider whether the countermeasure prioritization process appropriately balances the need to address traditional threats such as anthrax and smallpox with the threat posed by emerging infectious diseases such as Ebola. Finally, Congress may consider the administration's progress implementing the new National Biodefense Strategy and how it affects the medical countermeasure research and development enterprise. For Further Information Frank Gottron, Specialist in Science and Technology Policy In addition to its general oversight of workplace safety, the federal government addresses the safety of laboratory personnel who work with infectious microorganisms through guidance such as Biosafety in Microbiological and Biomedical Laboratories (BMBL), published by the Department of Health and Human Services (HHS) Centers for Disease Control and Prevention (CDC) and National Institutes of Health (NIH). BMBL sets \"Biosafety Levels\" for work with the highest-risk pathogens. BMBL guidance is often adopted as a requirement; for example, compliance is required of federal grant recipients. Biosecurity requirements, to protect the public from intentional and unintentional releases of pathogens, were first mandated by Congress in 1996, and expanded through subsequent reauthorizations. The Federal Select Agent Program (FSAP), administered jointly by CDC and the U.S. Department of Agriculture (USDA) Animal and Plant Health Inspection Service (APHIS), oversees the possession of \"select agents,\" certain biological pathogens and toxins with the potential to cause serious harm to public, animal, or plant health. All U.S. laboratory facilities—including those at government agencies, universities, research institutions, and commercial entities—that possess, use, or transfer select agents must register with the program and adhere to specified best practices. All persons given access to select agents must undergo background investigations conducted by the Federal Bureau of Investigation (FBI). Several incidents involving the mishandling of select agents in federal laboratories have occurred in recent years. For example, samples of decades-old but viable smallpox virus were found in an FDA laboratory on an NIH campus. Laboratories at CDC, one of the select agent regulatory agencies, had incidents involving the anthrax agent, a virulent avian influenza virus, and Ebola virus. Each incident was attributed, at least in part, to lapses in protocol or some other form of human error. Several incident reports have recommended improvements in the \"culture of safety\" in laboratories, standardized microbial handling practices, and better incident reporting, among other measures. Additional entities, including the House Committee on Energy and Commerce, the Comptroller General, and the HHS Inspector General have also investigated these lapses and made similar recommendations. The FSAP is designed to ensure the secure handling of designated pathogens while allowing important research on these pathogens to proceed. The 2018 Farm Bill amended the authority to regulate animal and plant pathogens, requiring the Secretary of Agriculture, when determining which agents to list, to consider the potential effects of such listing on animal and plant disease research. The HHS Secretary is not required to make a similar consideration when determining the list of agents that may pose a threat to public health. The 116 th Congress may choose to continue FSAP program oversight, including through committee investigations, since program reports show that occupational exposures persist in regulated facilities. Congress may also review and revise the authorities for the public health and agriculture arms of the program. The authorizations of appropriations for each expired in 2007.  For Further Information Sarah A. Lister, Specialist in Public Health and Epidemiology The rapid pace of advancements in information technology presents several issues for congressional policymakers, including those related to cybersecurity, artificial intelligence, broadband deployment, access to broadband networks and net neutrality, public safety networks, emergency alerting, 5G networks, the Internet of Things, federal networking R&D, and quantum information science. The federal policy framework for cybersecurity is complex, including more than 50 statutes as well as presidential directives and related authorities. The 116 th Congress may face a number of significant issues related to cybersecurity, in addition to the oversight of enacted laws. Among those issues are the following: Cybersecurity for critical infrastructure , given that most of the nation's critical infrastructure is not owned by the federal government and regulatory cybersecurity requirements vary substantially among the sectors; Prevention of and response to cybercrime , especially given its substantially international character; The relationship between cyberspace and national security , including information operations aimed at election infrastructure and political campaigns; and Federal R&D and other investments to protect information systems and networks. In addition to such short- and medium-term issues, Congress may consider responses to a number of long-term challenges, including the following: Design— the degree to which information systems can be designed with security built in, in the face of economic obstacles and the other challenges; Incentives— ways to correct an economic incentive structure for cybersecurity that has often been called distorted or even perverse, with cybercrime widely regarded as cheap, profitable, and comparatively safe for the criminals, while cybersecurity is often considered expensive and imperfect, with uncertain economic returns; Consensus— finding consensus on a consistent and effective model for approaching cybersecurity, given stakeholders from different sectors and different work subcultures with varying needs, goals, and perspectives ; and Environment— a rapidly evolving cyberspace environment that both complicates the threat environment and may pose opportunities for shaping the direction of that evolution toward greater security, including, for example, the growth and influence of disruptive technologies (see \" Disruptive and Convergent Technology \"). For Further Information Eric A. Fischer, Senior Specialist in Science and Technology Chris Jaikaran, Analyst in Cybersecurity Policy CRS In Focus IF10559, Cybersecurity: An Introduction , by Chris Jaikaran CRS Report R45127, Cybersecurity: Selected Issues for the 115th Congress , coordinated by Chris Jaikaran CRS Report R45142, Information Warfare: Issues for Congress , by Catherine A. Theohary CRS In Focus IF10602, Cybersecurity: Federal Agency Roles , by Eric A. Fischer CRS In Focus IF10677, The Designation of Election Systems as Critical Infrastructure , by Eric A. Fischer CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon The rapid development and growing use of artificial intelligence (AI) technologies has been of increasing interest to policymakers. Congressional activities on AI in the 115 th Congress included multiple committee hearings in both the House of Representatives and the Senate, the introduction of numerous AI-focused bills, the passage of AI provisions in legislation, and a variety of congressional briefings. Activity related to AI may continue in the 116 th Congress. Generally, AI is considered to be computerized systems that work and react in ways commonly thought to require intelligence, encompassing many methodologies and applications. Common examples include machine learning, computer vision, natural language processing, and applications in such areas as robotics and autonomous vehicles. In addition to transportation, AI is already being employed across a variety of sectors, including health care, agriculture, manufacturing, and finance. Current AI technologies fall into a category called \"narrow AI,\" meaning that they are highly tailored to particular tasks. In contrast, potential future AI systems that exhibit adaptable intelligence across a range of cognitive tasks, often referred to as \"general AI,\" are unlikely to be developed for at least decades, if ever, according to most researchers. Potential policy considerations for AI span cross-sector and sector-specific topics, in both the defense and nondefense spaces. For example, broad concerns have focused on workforce impacts from the implementation of AI and AI-driven automation, including potential job losses and the need for worker retraining; the balance of federal and private sector funding for AI; international competition in AI research and development (R&D) and deployment, particularly with China and Russia; the development of standards and testing for AI systems; the need for and effectiveness of federal coordination efforts in AI; and incorporation of privacy, security, transparency, and accountability considerations in AI systems. Particular considerations for AI in the defense space have included the balance of human and automated decisionmaking in military operations; how the Department of Defense engages with the private sector for defense adaptation of commercially developed AI systems and access to AI expertise; and private sector concerns about the use of AI R&D in combat situations. For Further Information Laurie A. Harris, Analyst in Science and Technology Policy CRS In Focus IF10608, Overview of Artificial Intelligence , by Laurie A. Harris CRS In Focus IF10937, Artificial Intelligence (AI) and Education , by Joyce J. Lu and Laurie A. Harris CRS Report R45392, U.S. Ground Forces Robotics and Autonomous Systems (RAS) and Artificial Intelligence (AI): Considerations for Congress , coordinated by Andrew Feickert Broadband—whether delivered via fiber, cable modem, copper wire, satellite, or wirelessly—is increasingly the technology underlying telecommunications services such as voice, video, and data. Since the initial deployment of broadband in the late 1990s, Congress has viewed broadband infrastructure deployment as a means towards improving regional economic development, and in the long term, to create jobs. According to the Federal Communications Commission's (FCC's) National Broadband Plan, the lack of adequate broadband availability is most pressing in rural America, where the costs of serving large geographical areas, coupled with low population densities, often reduce economic incentives for telecommunications providers to invest in and maintain broadband infrastructure and service. Broadband adoption also continues to be a problem, with a significant number of Americans having broadband available, but not subscribing. Populations lagging behind in broadband adoption include people with low incomes, seniors, minorities, the less-educated, nonfamily households, and the nonemployed. The 116 th Congress may face a range of broadband-related issues. These may include the continued transition of the telephone-era Universal Service Fund from a voice to a broadband-based focus, funding for broadband programs in the Rural Utilities Service, infrastructure legislation that may include funding and incentives for broadband buildout, the adequacy of broadband deployment data and mapping, the development of new wireless spectrum policies, and to what extent, if any, regulation is necessary to ensure an open internet. Additionally, the 116 th Congress may choose to examine the existing regulatory structure and consider possible revision of the 1996 Telecommunications Act and its underlying statute, the Communications Act of 1934. Both the convergence of telecommunications providers and markets and the transition to an Internet Protocol (IP) based network have, according to a growing number of policymakers, made it necessary to consider revising the current regulatory framework. How a possible revision might create additional incentives for investment in, deployment of, and subscribership to, our broadband infrastructure is likely to be just one of many issues under consideration. To the extent that Congress may consider various options for further enhancing broadband deployment, a key issue is how to develop and implement federal policies intended to increase the nation's broadband availability and adoption, while at the same time minimizing any deleterious effects that government intervention in the marketplace may have on competition and private sector investment. For Further Information Lennard G. Kruger, Specialist in Science and Technology Policy Angele A. Gilroy, Specialist in Telecommunications Policy CRS Report RL30719, Broadband Internet Access and the Digital Divide: Federal Assistance Programs , by Lennard G. Kruger and Angele A. Gilroy CRS Report RL33816, Broadband Loan and Grant Programs in the USDA's Rural Utilities Service , by Lennard G. Kruger Determining the appropriate framework to ensure an open internet is central to the debate over broadband access. A focal point in the policy debate centers on what, if any, steps are necessary to ensure unfettered internet access to content, services, and applications providers, as well as consumers. The move to place restrictions on the owners of the networks that compose and provide access to the internet, to ensure equal access and nondiscriminatory treatment, is referred to as \"net neutrality.\" While there is no single accepted definition of \"net neutrality,\" most agree that any such definition should include the general principles that owners of the networks that compose and provide access to the internet (i.e., broadband access providers) should not control how consumers lawfully use that network, and should not be able to discriminate against content provider access to that network. Some policymakers contend that more specific regulatory guidelines are necessary to protect the marketplace from potential abuses which could threaten the net neutrality concept. Others contend that existing laws and policies are sufficient to deal with potential anti-competitive behavior and that additional regulations would have negative effects on the expansion and future development of the internet. Broadband regulation and the Federal Communications Commission's (FCC's) authority to implement such regulations is an issue of growing importance in the wide ranging policy debate over broadband access. What, if any, action should be taken to ensure net neutrality is part of the overall discussion. The FCC, in 2015, adopted rules (2015 Order) that established a comprehensive regulatory framework to address the regulation of broadband internet access providers. The 2015 Order contained among its provisions those that reclassified such services as a telecommunications service and established conduct rules for providers. However, the FCC, in December 2017, adopted new rules (2017 Order) that largely reverse the 2015 regulatory framework and shift much of the oversight from the FCC to the Federal Trade Commission and the Department of Justice. The FCC's move to adopt the 2017 Order has reopened the debate over what the appropriate framework is to ensure an open internet and whether Congress should enact legislation to establish this framework. A consensus on what that framework should entail remains elusive. Some Members of Congress support the less regulatory approach contained in the 2017 Order, which, they argue, will stimulate broadband investment, deployment, and innovation. Others support the regulatory framework adopted in the 2015 Order, which provides for a more stringent regulatory framework, and is needed, they state, to protect content, services, and applications providers, as well as consumers, from potential discriminatory behaviors which conflict with net neutrality principles. Still others, while supporting a framework containing specific behavioral rules to address potential anticompetitive practices, do not support the telecommunications services classification. Whether Congress will take action to amend existing law to provide guidance and more stability to FCC authority remains to be seen. For Further Information Angele A. Gilroy, Specialist in Telecommunications Policy CRS In Focus IF10955, Access to Broadband Networks: Net Neutrality , by Angele A. Gilroy CRS Report R40616, The Net Neutrality Debate: Access to Broadband Networks , by Angele A. Gilroy The Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ) authorized the Federal Communications Commission (FCC) to allocate spectrum to public safety use. The act also created the First Responder Network Authority (FirstNet), authorized FirstNet to establish a new, nationwide broadband network for public safety, and provided $7 billion in funding for the project. The network is intended to address the communication problems first responders experienced during September 11, 2001, whereby public safety systems were not interoperable, and responders could not communicate or coordinate an effective response. Congress authorized FirstNet to enter into a public-private partnership to deploy the network. In March 2017, FirstNet selected AT&T, through a competitive bidding process, as its partner. AT&T has been deploying the network as specified in its agreement with FirstNet and state-specific plans, and public safety agencies are subscribing to FirstNet. A concern for policymakers is that the FirstNet/AT&T contract and state plans contain detailed information on deployment; however both are deemed proprietary and not available for public review. Without details on how the network is being deployed in each state, and how federal resources are being used, it may be difficult for Congress to ensure the requirements of the law are being met. Given the federal investment in the project ($6.5 billion and 20 MHz of valuable broadband spectrum), and the importance of the FirstNet network to the life of safety of first responders and citizens, the 116 th Congress may consider continuing its oversight of this project. For Further Information Jill Gallagher, Analyst in Telecommunications Policy CRS Report R45179, The First Responder Network (FirstNet) and Next-Generation Communications for Public Safety: Issues for Congress , by Jill C. Gallagher Local officials are responsible for issuing emergency alerts. Some localities use commercial alerting systems to send electronic alerts (e.g., cell phone alerts, email alerts). Others rely on the federal alerting system—the Integrated Public Alert and Warning System (IPAWS), which allows local officials to send alerts across many media outlets (e.g., cell phone, television, radio). Many localities use both systems to ensure alerts are received. The false alert of an incoming ballistic missile to Hawaii on January 13, 2018, raised questions about alerting roles and responsibilities. While the national alerting system—IPAWS—worked as intended, the roles and responsibilities for issuing alerts of incoming missiles was debated in Congress. The 2017 and 2018 wildfires in California raised additional alerting issues. Several counties in California used a commercial alerting system that reached only those residents who signed up for the service (whereas IPAWS would have sent an alert to all devices in the affected area). Local officials were concerned that cell phone alerts issued through IPAWS could not be narrowly targeted, and would result in over-alerting, mass evacuation, and overcrowding on evacuation routes, which could put people and first responders in danger. In January 2018, the Federal Communications Commission adopted rules requiring carriers to improve geo-targeting of wireless emergency alerts (WEA)—alerts to cell phones issued through IPAWS. Carriers must comply with these rules by November 30, 2019. The 116 th Congress may examine roles and responsibilities for issuing different alerts, and consider policies that clarify alerting procedures. Congress may also consider investments in activities (e.g., best practices) to improve local alerting capabilities, and programs that educate individuals on the appropriate response to alerts. Lastly, Congress may examine state and local back-up alerting capabilities in the event communication systems fail, and wireless alerts cannot be delivered. For Further Information Jill Gallagher, Analyst in Telecommunications Policy CRS In Focus IF10816, Emergency Alerting—False Alarm in Hawaii , by Jill C. Gallagher As more people are using more data on more devices, demand for mobile data is rising. Current telecommunication networks cannot always meet consumer demands for data. Telecommunication companies are continually deploying new technologies to offer better coverage, faster speeds, more data, and new services to customers. The newest technologies are called fifth-generation (5G) technologies, as they succeed 2G, 3G, and 4G systems. 5G technologies offer vastly improved speeds and greater bandwidth to meet demands for mobile data. 5G technologies enable providers to expand services to consumers (e.g., video streaming, virtual reality applications) and support new systems for industrial users (e.g., medical monitoring, industrial control systems). When fully deployed, 5G is expected to power the Internet of Things—systems of interconnected devices (e.g., smart homes), and emerging technologies (e.g., autonomous vehicles). 5G is expected to drive the development of new technologies, support new uses by consumers and industry, and create new markets, new revenues, and new jobs. Since companies that are first to market with new technologies often capture the bulk of the new revenues, companies around the world are racing to develop and deploy 5G technologies. Recognizing the potential for economic gain, countries (i.e., central governments) are supporting the development and deployment of 5G technologies. In the United States, the federal government has allocated spectrum for 5G and streamlined cell siting regulations to speed deployment. The 116 th Congress may continue to monitor U.S. competitiveness in the global 5G market, and consider policies (e.g., spectrum allocation policies) and programs that could expedite 5G deployment. In developing 5G policies, Congress may consider concerns of some local governments and individuals related to 5G deployment, including local authority over 5G cell sites, deployment of 5G to rural areas, and privacy and security of data transmitted over 5G devices and systems. For Further Information Jill Gallagher, Analyst in Telecommunications Policy The Internet of Things (IoT) may continue to be a focal point of far-reaching debates during the 116 th Congress. The term refers to networks of objects with two features—a unique identifier and internet connectivity. Such \"smart\" objects can form systems that communicate among themselves, usually in concert with computers, allowing automated and remote control of many independent processes and potentially transforming them into integrated systems. Such objects may include vehicles, appliances, medical devices, electric grids, transportation infrastructure, manufacturing equipment, building systems, and so forth. The IoT is increasingly impacting homes and communities, factories and cities, and nearly every sector of the economy, both domestically and globally, among them agriculture (precision farming), health (medical devices), and transportation (self-driving automobiles and unmanned aerial vehicles). An increasing number of these systems require access to radio frequency spectrum in order to connect to the internet or other networks. The development of 5G wireless technologies is likely to develop in tandem with the IoT, potentially expanding substantially the opportunities for growth in use of IoT devices. Although the full extent and nature of impacts of the IoT remain uncertain, some economic analyses predict that it will contribute trillions of dollars to economic growth over the next decade. The IoT, for example, may be able to facilitate more integrated and functional infrastructure, especially in \"smart cities,\" through improvements in transportation, utilities, and other municipal services. Sectors that may be particularly affected are agriculture, energy, government, health care, manufacturing, and transportation. The federal government may play an important role in enabling the development and deployment of the IoT, including R&D, standards, regulation, and support for testbeds and demonstration projects. No single federal agency has overall responsibility for the IoT. Various agencies have relevant regulatory, sector-specific, and other mission-related responsibilities, such as the Departments of Commerce, Health, Energy, Transportation, and Defense, the National Science Foundation, the Federal Communications Commission, and the Federal Trade Commission. The range of issues that might be the subject of congressional activity includes the following: security of objects and the systems and networks to which they are connected, given especially that many IoT devices are operational technology, the compromise of which can have physical impacts (see also \" Cybersecurity \"); privacy of the information gathered and transmitted by objects; standards for the IoT, especially with respect to connectivity; transition to a new Internet Protocol (IPv6) that can handle the anticipated exponential increase in the number of IP addresses required by the IoT, along with the growth of 5G wireless; methods for updating the software used by IoT objects in response to security and other needs; energy management for IoT objects, especially those not connected to the electric grid; and the role of the federal government in development and deployment, standards, regulation, and communications, including the impact of federal rules regarding \"net neutrality.\" The Internet of Things represents more than devices connected through networks, and more than internet or radio frequency spectrum policy. Its growth will likely require significant changes in—and coordination among—many government departments and agencies. For Further Information Eric A. Fischer, Senior Specialist in Science and Technology CRS Report R44227, The Internet of Things: Frequently Asked Questions , by Eric A. Fischer The rise of e-commerce, social media, and big data analytics have allowed new business models to emerge as part of the \"digital economy.\" In the realm of international tax policy, though, certain types of activities and markets in the digital economy have been singled out for \"digital services taxes\" (DSTs) by some jurisdictions—primarily in Europe. For example, Spain is set to implement a DST of 3% on the gross revenue derived from certain digital services (e.g., online advertising, online marketplaces, and user data tracking services) derived from users within Spain beginning in 2019. Similarly, the United Kingdom (UK) intends to implement a 2% DST on revenues from social media platforms, online marketplaces, and search engines derived from UK user activity in 2020. Both DSTs have minimum thresholds based on global total revenue and revenue from covered business activities to local users that effectively target the largest global digital economy companies. The EU is also actively considering a digital tax across all member states. This issue may be of interest to Congress because the taxes appear to primarily target U.S. corporations, such as Facebook, Google, and Amazon. As such, there is opposition to unilateral efforts by foreign countries to tax the digital economy. DSTs also raise potential issues for U.S. foreign tax credit treatment under bilateral tax treaties, which are considered and ratified by the Senate. Additionally, some Members of Congress may support one of the purported justifications for DSTs (a perceived \"unfairness\" arising from the relatively low rate of tax paid by some firms in the digital economy), but would prefer alternative remedies to raise taxes or reduce tax preferences on these corporations. For example, the 2017 tax revision ( P.L. 115-97 ) enacted a new tax on global intangible low-taxed income (\"GILTI\"), which is designed to be a minimum tax on foreign-source income earned from intangible assets (e.g., patents, trade secrets). In the 115 th Congress, the \"No Tax Break for Outsourcing Act\" (H.R. 5108; S. 2459 ) would have increased the GILTI tax rate to 21% (the same as the top statutory corporate income tax rate), among other changes. For Further Information Sean Lowry, Analyst in Public Finance CRS Report R45186, Issues in International Corporate Taxation: The 2017 Revision (P.L. 115-97) , by Jane G. Gravelle and Donald J. Marples Changing technology presents opportunities and challenges for U.S. law enforcement. Some technological advances (e.g., social media) have arguably provided a wealth of information for investigators and analysts. Others have presented unique hurdles. While some feel that law enforcement now has more information available to them than ever before, others contend that law enforcement is \"going dark\" as some of their investigative capabilities are outpaced by the speed of technological change. These hurdles for law enforcement include strong, end-to-end (or what law enforcement has sometimes called \"warrant-proof\") encryption; provider limits on data retention; bounds on companies' technological capabilities to provide specific data points to law enforcement; tools facilitating anonymity online; and a landscape of mixed wireless, cellular, and other networks through which individuals and information are constantly passing. As such, law enforcement may have trouble accessing certain information they otherwise may be authorized to obtain. The tension between law enforcement capabilities and technological change—including sometimes competing pressures for technology companies to provide data to law enforcement as well as to secure customer privacy—has received congressional attention for several decades. For instance, in the 1990s the \"crypto wars\" pitted the government against technology companies, and this strain was underscored by proposals to build in vulnerabilities, or \"back doors,\" to certain encrypted communications devices as well as to restrict the export of strong encryption code. In addition, Congress passed the Communications Assistance for Law Enforcement Act (CALEA; P.L. 103-414 ) in 1994 to help law enforcement maintain their ability to execute authorized electronic surveillance as telecommunications providers turned to digital and wireless technology. More recently, there have been questions about whether CALEA should be amended to apply to a broader range of entities that provide communications services. The \"going dark\" debate originally focused on data in motion, or law enforcement's ability to intercept real-time communications. However, more recent technology changes have impacted law enforcement's capacity to access not only communications but stored content, or data at rest. Some officials have urged the technology community to develop a means to assist law enforcement in accessing certain data. At the same time, law enforcement entities have taken steps to bolster their technology capabilities. In addition, policymakers have been evaluating whether legislation may be an appropriate response to current law enforcement concerns involving access to communications and data. For Further Information Kristin Finklea, Specialist in Domestic Security CRS Report R44481, Encryption and the \"Going Dark\" Debate , by Kristin Finklea CRS Report R44827, Law Enforcement Using and Disclosing Technology Vulnerabilities , by Kristin Finklea The Networking and Information Technology Research and Development (NITRD) Program is the United States' primary source of federally-funded information technology (IT) research and development in the fields of computing, networking, and software. The program evolved from the High-Performance Computing and Communications (HPCC) Program, which originated with the HPCC Program Act of 1991 ( P.L. 102-194 ); it coordinates the activities of multiple agencies conducting multi-disciplinary, multi-technology, and multi-sector R&D needs. The 21 NITRD member agencies invest approximately $5 billion annually in basic and applied R&D programs. Proponents of federal support of IT R&D assert that it has produced positive outcomes for the country and played a crucial role in supporting long-term research into fundamental aspects of computing. Such fundamentals may provide broad practical benefits, but generally take years to realize. Additionally, the unanticipated results of research are often as important as the anticipated results. Another aspect of government-funded IT research is that it often leads to open standards, something that many perceive as beneficial, encouraging deployment and further investment. Industry, on the other hand, is more inclined to invest in proprietary products and will diverge from a common standard when there is a potential competitive or financial advantage to do so. Supporters believe that the outcomes achieved through the various funding programs create a synergistic environment in which both fundamental and application-driven research are conducted, benefitting government, industry, academia, and the public. Critics, however, assert that the government, through its funding mechanisms, may be picking \"winners and losers\" in technological development, a role more properly residing with the market. For example, the size of the NITRD Program could encourage industry to follow the government's lead on research directions rather than selecting those directions itself. The NITRD Program is funded through appropriations to its individual agencies; therefore, it will be part of the continuing federal budget debate in the 116 th Congress. For Further Information Patricia Moloney Figliola, Specialist in Internet and Telecommunications Policy CRS Report RL33586, The Federal Networking and Information Technology Research and Development Program: Background, Funding, and Activities , by Patricia Moloney Figliola Quantum information science (QIS), which combines elements of mathematics, computer science, engineering, and physical sciences, has the potential to provide capabilities far beyond what is possible with the most advanced technologies available today. Although much of the press coverage of QIS has been devoted to quantum computing, there is more to QIS. Many experts divide QIS technologies into three application areas: sensing and metrology, communications, and computing and simulation. The government's interest in QIS dates back at least to the mid-1990s, when the National Institute of Standards and Technology and the DOD held their first QIS workshops. QIS is first mentioned in the FY2008 budget of what is now the Networking and Information Technology Research and Development Program and has been a component of the program since then. Today, QIS is a component of the National Strategic Computing Initiative (Executive Order 13702), which was established in 2015. More recently, in September 2018, the National Science and Technology Council (NSTC) issued the National Strategic Overview for Quantum Information Science. The policy opportunities identified in this strategic overview include— choosing a science-first approach to QIS, creating a \"quantum-smart\" workforce, deepening engagement with the quantum industry, providing critical infrastructure, maintaining national security and economic growth, and advancing international cooperation. The United States is not alone in its increasing investment in QIS R&D. QIS research is also being pursued at major research centers worldwide, with China and the European Union having the largest foreign QIS programs. Further, even without explicit QIS initiatives, many other countries, including Russia, Germany, and Austria, are making strides in QIS R&D. In a July 2016 report, the NSTC stated that creating a cohesive and effective U.S. QIS R&D policy would require a collaborative effort in five policy areas: institutional boundaries; education and workforce training; technology and knowledge transfer; materials and fabrication; and the level and stability of funding. These areas continue to be salient in 2019 and may provide context for developing legislation in the 116 th Congress. For Further Information Patricia Moloney Figliola, Specialist in Internet and Telecommunications Policy CRS Report R45409, Quantum Information Science: Applications, Global Research and Development, and Policy Considerations , by Patricia Moloney Figliola Some of the policy issues in the physical and material sciences that the 116 th Congress may address include funding and oversight of the National Science Foundation and the multiagency initiative supporting research and development in the emerging field of nanotechnology. The National Science Foundation supports basic research and education in the nonmedical sciences and engineering and is a primary source of federal support for U.S. university research. It is also responsible for the primary share of the federal STEM education effort, both by number of programs and total investment. Enacted funding for NSF in FY2018 was $7.77 billion. Congress has a long-standing interest in NSF's funding levels and the prioritization and direction of such funding. At various points in NSF's history, some policymakers have pursued a policy of authorizing large increases in the NSF budget over a defined period of time (e.g., a 100% increase over seven years, sometimes referred to as a \"doubling path policy\"). Actual appropriations have rarely reached authorized levels, however, and growth in NSF's budget has slowed in recent years. Advocates of large funding increases assert that steep and fast increases in NSF funding are necessary to ensure U.S. competitiveness. Other analysts argue that steady, reliable funding increases over longer periods of time would be less disruptive to the U.S. scientific and technological enterprise. Alternatively, some policymakers seek no additional increases in NSF funding in light of the federal deficit and spending caps. Additionally, some policymakers prefer to direct federal funding to research with a more applied or mission-oriented focus than that which is typically funded at NSF. In terms of congressional direction of funding, analysts and legislators have periodically debated questions about prioritizing NSF funding for the physical sciences and engineering over funding for the social, behavioral, and economic sciences, as well as expanding support for multidisciplinary funding. Policy issues that the 116 th Congress may continue to address include the selection, funding, and management of large-scale construction projects, scientific instruments, and facilities, including the use of management fees; increased support for mid-scale research infrastructure; research reproducibility and replicability; and the effectiveness and costs of NSF's use of nonfederal personnel—through the Intergovernmental Personnel Act program—often called \"rotators.\" Other lasting federal policy issues for the NSF focus on the balance between scientific independence and accountability to taxpayers; the geographic distribution of grants; NSF's role in broadening participation in STEM fields; support for various STEM education programs; and the production of data about the U.S. scientific and technological enterprise. For Further Information Laurie A. Harris, Analyst in Science and Technology Policy CRS Report R45009, The National Science Foundation: FY2018 Appropriations and Funding History , by Laurie A. Harris Nanoscale science, engineering, and technology—commonly referred to collectively as nanotechnology—is believed by many to offer extraordinary economic and societal benefits. Nanotechnology R&D is directed toward the understanding and control of matter at dimensions of roughly 1 to 100 nanometers (a nanometer is one-billionth of a meter). At this size, the properties of matter can differ in fundamental and potentially useful ways from the properties of individual atoms and molecules and of bulk matter. Many current applications of nanotechnology are evolutionary in nature, offering incremental improvements in existing products and generally modest economic and societal benefits. For example, nanotechnology is being used in automobile bumpers, cargo beds, and step-assists to reduce weight, increase resistance to dents and scratches, and eliminate rust; in clothes to increase stain- and wrinkle-resistance; and in sporting goods to improve performance. Other nanotechnology innovations play a central role in current applications with substantial economic value. For example, nanotechnology is a fundamental enabling technology in nearly all semiconductors and is key to improvements in chip speed, size, weight, and energy use. Similarly, nanotechnology has substantially increased the storage density of nonvolatile flash memory and computer hard drives. In the longer term, some believe that nanotechnology may deliver revolutionary advances with profound economic and societal implications, such as detection and treatment of cancer and other diseases; clean, inexpensive, renewable power through energy transformation, storage, and transmission technologies; affordable, scalable, and portable water filtration systems; self-healing materials; and high-density memory devices. The development of this emerging field has been fostered by sustained public investments in nanotechnology R&D. In 2001, President Clinton launched the multi-agency National Nanotechnology Initiative (NNI) to accelerate and focus nanotechnology R&D to achieve scientific breakthroughs and to enable the development of new materials, tools, and products. More than 60 nations subsequently established programs similar to the NNI. Cumulatively through FY2018, Congress appropriated approximately $24.0 billion for nanotechnology R&D; for FY2019, President Trump requested $1.4 billion in funding. In 2003, Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ), providing a legislative foundation for some of the activities of the NNI, establishing programs, assigning agency responsibilities, and setting authorization levels through FY2008. Legislation was introduced in the 114 th and 115 th Congress to amend and reauthorize the act though none has been enacted into law. The 116 th Congress may continue to direct its attention primarily to three topics that may affect the realization of nanotechnology's hoped-for potential: R&D funding; U.S. competitiveness; and environmental, health, and safety concerns. For Further Information John F. Sargent Jr., Specialist in Science and Technology Policy CRS Report RL34511, Nanotechnology: A Policy Primer , by John F. Sargent Jr. CRS Report RL34401, The National Nanotechnology Initiative: Overview, Reauthorization, and Appropriations Issues , by John F. Sargent Jr. CRS Report RL34614, Nanotechnology and Environmental, Health, and Safety: Issues for Consideration , by John F. Sargent Jr. Congress has historically had a strong interest in space policy issues. Space topics that may come before the 116 th Congress include the funding and oversight of the National Aeronautics and Space Administration (NASA) and issues related to the commercialization of space and to Earth-observing satellites. Spaceflight has attracted strong congressional interest since the establishment of NASA in 1958. Issues include the goals and strategy of NASA's human spaceflight program, the impact of constrained budgets on NASA's other missions, and the future of NASA's Earth Science program. The 116 th Congress may address these and other issues through NASA reauthorization legislation. With the end of the space shuttle program in July 2011, the United States lost the capability to launch astronauts into space. Since that time, NASA has relied on Russian spacecraft for crew transport to the International Space Station (ISS). For ISS cargo transport, NASA-contracted U.S. commercial flights have been delivering payloads of supplies and equipment since October 2012. As directed by the NASA Authorization Act of 2010 ( P.L. 111-267 ), NASA is pursuing a two-track strategy for human spaceflight. First, for transport to low Earth orbit, including the ISS, NASA is supporting commercial development of a crew transport capability like the commercial cargo capability achieved in 2012. Commercial crew transportation services are expected to become operational in late 2019 or 2020. Second, for human exploration beyond Earth orbit, NASA is developing a new crew capsule called Orion and a new heavy-lift rocket called the Space Launch System (SLS). The first crewed test flight of Orion and the SLS is scheduled for 2023. Most details of the subsequent exploration missions of Orion and the SLS remain to be determined. In February 2018, NASA announced plans for a Lunar Orbital Platform–Gateway (LOP-G) in lunar orbit, to be accessed via Orion and the SLS, that would serve as a platform for deep-space human exploration. Rapid developments in the commercial space sector may change the relationship between NASA and industry. For example, SpaceX has announced plans for commercial flights carrying passengers around the Moon and back as well as, in the longer term, to Mars. Some observers see this sort of development as potentially competing with NASA's human spaceflight plans. More broadly, the emergence of new commercial capabilities in space may present NASA with new opportunities for public-private partnerships or may shift its R&D priorities. For example, NASA has announced plans to end direct funding for the International Space Station by 2025, instead relying on a combination of public-private partnerships and commercial service contracts. The 2010 authorization act authorized funding increases for NASA that were not subsequently appropriated. In considering reauthorization, the 116 th Congress may examine whether reduced budget expectations require corresponding changes to planned programs. One common concern is that the cost of planned human spaceflight activities may mean less funding for other NASA missions, such as unmanned science satellites, aeronautics research, and space technology development. NASA's Earth Science program, in which climate research is a major focus, is of particular congressional interest. Some in Congress have argued that other NASA activities should have higher priority or that some or all of NASA's Earth Science responsibilities should be transferred to other agencies. Supporters counter that space-based Earth observations are an integral part of NASA's science mission. For Further Information Daniel Morgan, Specialist in Science and Technology Policy CRS Report R43419, NASA Appropriations and Authorizations: A Fact Sheet , by Daniel Morgan CRS In Focus IF10828, The International Space Station (ISS) and the Administration's Proposal to End Direct NASA Funding by 2025 , by Daniel Morgan CRS In Focus IF10940, The James Webb Space Telescope , by Daniel Morgan Since the earliest days of spaceflight, U.S. companies have been involved as contractors to government agencies. Increasingly, though, space is becoming commercial. A majority of U.S. satellites are now commercially owned, providing commercial services, and launched by commercial launch providers. Congressional and public interest in space is also becoming more focused on commercial activities, such as companies developing reusable rockets or collecting business data with fleets of small Earth-imaging satellites. Some observers have identified a distinct \"new space\" sector of relatively new companies focused on private spaceflight at low cost. One factor driving this trend is NASA's reliance on commercial providers for access to the ISS, but \"new space\" companies are also focused on other markets. These include the launch of national security satellites for the Department of Defense, the launch of commercial satellites for U.S. and foreign companies, the provision of commercial services such as Earth imaging and satellite communications, and even space tourism. Multiple federal agencies regulate the commercial space industry, based on statutory authorities that were enacted separately and have evolved over time. The Federal Aviation Administration licenses commercial launch and reentry vehicles (i.e., rockets and spaceplanes) as well as commercial spaceports. The National Oceanic and Atmospheric Administration (NOAA) licenses commercial Earth remote sensing satellites. The Federal Communications Commission licenses commercial satellite communications. The Departments of Commerce and State license exports of space technology. The 115 th Congress considered, but did not enact, legislation to simplify and reform this regulatory framework. In addition, in May 2018, the Administration called for changes to the regulation of commercial space in Space Policy Directive–2, Streamlining Regulations on Commercial Use of Space . The 116 th Congress may continue this focus on regulatory reforms. How the federal government makes use of commercial space capabilities is also evolving. NASA used to own and operate the space shuttles that contractors built for it, but since 2012 it has contracted with commercial service providers to deliver cargo into orbit using their own spacecraft. DOD has its own satellite communications capabilities, but it also procures communications bandwidth from commercial satellite companies. Agencies are considering a host of new opportunities, including acquisition of weather data from commercial satellites, acquisition of science data from commercial lunar landers, and expanded commercial utilization of the ISS. The 116 th Congress may address these developments primarily through oversight of agency programs and decisions on agency budgets. For More Information Daniel Morgan, Specialist in Science and Technology Policy CRS Report R45416, Commercial Space: Federal Regulation, Oversight, and Utilization , by Daniel Morgan CRS Report R44708, Commercial Space Industry Launches a New Phase , by Bill Canis The constellation of Earth-observing satellites launched and operated by the U.S. government performs a wide range of observational and data collecting activities. These activities include measuring the change in mass of polar ice sheets, wind speeds over the oceans, land cover change, as well as the more familiar daily measurements of key atmospheric parameters that enable modern weather forecasts and storm prediction. Satellite observations of the Earth's oceans and land surface help with short-term seasonal forecasts of El Niño and La Niña conditions, which are valuable to U.S. agriculture and commodity interests; identification of the location and size of wildfires, which can assist firefighting crews and mitigation activities; as well as long-term observational data of the global climate, which are used in predictive models that help assess the degree and magnitude of current and future climate change. Congress continues to be interested in the performance of NASA, NOAA, and the U.S. Geological Survey in building and operating U.S. Earth-observing satellites. Congress is particularly interested in the agencies meeting budgets and time schedules so that critical space-based observations are not missed due to delays and cost overruns. Concerns have been raised in the past by some in Congress about the possibility of a \"data gap\" in the polar-orbiting weather satellite coverage. The successful launch of the first Joint Polar Satellite System satellite JPSS-1 (now NOAA-20) on November 18, 2017, has alleviated those concerns for the near-term. Congress provided full funding, $776 million for the second polar-orbiting satellite, JPSS-2, in the FY2018 enacted appropriations. On November 19, 2016, the Geostationary Operational Environmental Satellite-R (GOES-R) weather satellite launched and was placed into orbit. Renamed GOES-16, it is an advanced weather satellite with sensors that should help improve hurricane tracking and intensity forecasts, prediction and warning of severe weather events, and rainfall estimates that will lead to better flood warnings. GOES-16 also carries the first operational lightning mapper in geostationary orbit, and will better monitor space weather—perturbations to the Earth's magnetic field caused by intense bursts of energy from the sun. On March 1, 2017, GOES-S successfully launched carrying the same suite of instruments as its predecessor. The satellite is in its final stage of calibration before transitioning to operation status in January 2019. Renamed GOES-17, the satellite experienced a problem with one of its key imaging instruments after launch, the Advanced Baseline Imager (ABI), which impairs its functionality. NASA has stated that despite the ABI problem, GOES-17 will provide more and better data than currently available. Both satellites represent the first two in a series of four Earth-orbiting weather satellites planned by NOAA through 2036. The 116 th Congress may continue to scrutinize budget and time schedules for polar-orbiting and geostationary satellites, as well as consider how the private sector could provide Earth-observing satellite data to supplement the current NASA NOAA, and USGS-operated satellite systems. For Further Information Peter Folger, Specialist in Energy and Natural Resources Policy CRS Report R44335, Minding the Data Gap: NOAA's Polar-Orbiting Weather Satellites and Strategies for Data Continuity , by Peter Folger ", "summary": "Science and technology (S&T) have a pervasive influence over a wide range of issues confronting the nation. Public and private research and development spur scientific and technological advancement. Such advances can drive economic growth, help address national priorities, and improve health and quality of life. The ubiquity and constantly changing nature of science and technology frequently create public policy issues of congressional interest. The federal government supports scientific and technological advancement directly by funding and performing research and development and indirectly by creating and maintaining policies that encourage private sector efforts. Additionally, the federal government regulates many aspects of S&T activities. This report briefly outlines a key set of science and technology policy issues that may come before the 116th Congress. This set is not exhaustive, however. Given the rapid pace of S&T advancement and its importance in many diverse public policy contexts, other S&T-related issues not discussed in this report may come before the 116th Congress. The selected issues are grouped into 10 categories Overarching S&T Policy Issues, Agriculture, Biomedical Research and Development, Climate Change Science and Water, Defense, Energy, Homeland Security, Information Technology, Physical and Material Sciences, and Space. Each of these categories includes concise analysis of multiple policy issues. The material presented in this report should be viewed as illustrative rather than comprehensive. Each section identifies CRS reports, when available, and the appropriate CRS experts to contact for further information and analysis.", "document_type": "crs"}
{"report": "President Jimmy Morales, then a relative political newcomer, ran in 2015 on a platform of governing transparently and continuing to root out corruption. He is now being investigated for corruption himself. During the election campaign, as mass protests calling for then-President Pérez Molina's resignation and an end to corruption and impunity grew, so did Morales's popular appeal. Morales framed his lack of political experience as an asset. His campaign slogan was \"Neither corrupt nor a thief.\" He won Guatemala's 2015 presidential election by a landslide with 67% of the vote. Morales initially supported the International Commission against Impunity in Guatemala (CICIG), which Guatemala asked the United Nations (U.N.) to form in 2007 to help the government combat corruption, human rights violations, and other crimes. After he became a target of investigations, he said he would not renew their mandate, which ends in September 2019. The President tried to terminate CICIG early unilaterally. Many observers are concerned that Morales's efforts could undermine ongoing investigations by the Guatemalan attorney general's office and judicial proceedings, make political reform more difficult, and heighten instability in Guatemala. The Guatemalan Congress is also moving legislation that, if passed, would reverse progress made in holding government officials and others accountable for corruption and crimes against humanity. Guatemala faces many political and social challenges in addition to widespread corruption and impunity. Guatemala has some of the highest levels of violence, inequality, and poverty in the region, as well as the largest population. Indigenous people, about half of the population, experience higher rates of economic and social marginalization than nonindigenous citizens, and have for centuries. Almost half of the country's children are chronically malnourished. Guatemala's homicide rate decreased to 26.1 per 100,000 in 2017, which nonetheless remains one of the highest rates in the region. Guatemala has a long history of internal conflict and violence, including a 36-year civil war (1960-1996). For most of that time, the Guatemalan military held power and violently repressed and violated the human rights of its citizens, especially its majority indigenous population. Reports estimate that more than 200,000 people were killed or disappeared during the conflict, with the state bearing responsibility for 93% of human rights violations. More than 83% of the victims were identified as Mayan. In 1986, Guatemala established a civilian democratic government, but military repression and human rights violations continued. Peace accords signed in 1996 ended the conflict. The United States maintained close relations with most Guatemalan governments, including the military governments, before, during, and after the civil war. Since the late 1980s, Guatemala has sought to consolidate its transition from military and autocratic rule to a democracy. Democratically elected civilian governments have governed for over 30 years, but democratic institutions remain fragile due to high levels of corruption, impunity, drug trafficking, and inequitable distribution of resources. Although state institutions have investigated and arrested high-level officials, including a sitting president, for corruption, high levels of impunity in many cases continue due to intimidation of judicial officials, deliberate delays in judicial proceedings, and widespread corruption. The Supreme Electoral Tribunal (TSE) investigated multiple political parties for violations of election campaign finance laws in 2014 and 2015, as part of its auditing process. As a result, the TSE dissolved two major parties, the Partido Patriota—former President Pérez Molina's party—and LIDER. These investigations are ongoing and may affect the 2019 elections. President Morales presented his General Government Policy for 2016-2020 in February 2016. The five pillars of this plan are zero tolerance for corruption, and modernization of the state; improvement in food security and nutrition; improvement in overall health and quality education; promotion of micro, small, and medium enterprises, and tourism and housing construction; and protection of the environment and natural resources. Halfway into his four-year term (2016-2020), however, Morales was being investigated for corruption and criticized for seemingly backing off his pledge of zero tolerance for corruption. In 2017, the president's brother and son were arrested on corruption charges. In August and September 2017, Guatemala's attorney general and CICIG announced they were seeking to lift the president's immunity from prosecution as they investigated alleged violations of campaign finance laws and bonuses paid to him by the military. Shortly thereafter, the president tried unsuccessfully to expel the head of CICIG, Commissioner Ivan Velásquez. In 2018, his third year in office, he prevented Velásquez from reentering the country. In January 2019 Morales tried unilaterally to terminate CICIG's mandate. The Constitutional Court ruled that he lacks the authority to do so. (See \" Efforts to Combat Impunity and Corruption ,\" below.) Various observers see Morales's moves against CICIG as part of an effort to impede anticorruption investigations against him, his relatives and associates. Morales will lose his immunity from prosecution when his term ends in January 2020. A recent opinion poll found that more than 72% of the population has little or no trust in the police, and about 65% has little to no trust in the government. Conversely, 83% of the population said they supported CICIG and the Public Ministry—which is headed by the attorney general—making them Guatemala's most trusted institutions. So far, the judicial process, protests, and mass mobilizations in the wake of high-level government corruption scandals have remained peaceful. Nonetheless, tensions have heightened as President Morales's efforts to impede CICIG have escalated, and the Guatemalan Congress has tried to reduce criminal penalties for corruption and human rights violations. In January 2019, thousands of Guatemalans joined renewed public protests supporting CICIG and calling for the resignations of President Morales and members of Congress seen as protecting corrupt practices. (See \" Tension ,\" below.) Continued impunity, coupled with the state's failure to provide basic public services to large parts of the population and limited advances in reducing Guatemala's high poverty levels, could prolong tensions. Military-criminal enterprises and other powerful interests that have benefited from corruption and the status quo have fought against anticorruption and anti-impunity work since it began. They have threatened public prosecutors, the attorney general, and members of the judiciary. The promote legislation that would protect them from prosecution. Continued prosecution of corruption could provoke increasingly violent responses from those whose wealth or power are threatened. Powerful interests also use more subtle methods to try to weaken CICIG, the Public Ministry, and groups pushing for political reform. These include tactics such as discrediting the reputations of officials, activists, and their organizations; delays or cuts in the judicial system's budget; spurious legal actions that delay trials and drain fiscal and human resources; and attempts to change CICIG's mandate or terms. A 2016 International Commission of Jurists report maintains that the Guatemalan state has responded passively to defamation campaigns and attacks on judicial independence. The report suggests that criminal allegations are fabricated against judges, community leaders, human rights defenders, and others to demobilize their anticorruption activities and silence them. Since mid-2017, those opposed to anticorruption efforts have escalated many of these tactics. Guatemala is scheduled to hold national elections for president, the entire 158-seat Congress, 340 mayors, and other local posts on June 16, 2019. President Morales will not be running for reelection, since the Guatemalan constitution limits presidents to one term. If no presidential candidate wins the first round with more than 50% of the vote, the top two candidates will compete in a second round on August 11. Only a few of Guatemala's 27 parties have named a presidential candidate so far; a final list is supposed to be published on March 17. As in the last elections, corruption is a major theme for voters this year. In response to public outcry over past illegal campaign financing and other electoral crimes, Guatemala adopted electoral law reforms in 2016. Eleven of the 27 parties face charges of illicit or unreported campaign financing, and several candidates face judicial proceedings. Registered candidates have immunity from prosecution. Former Attorney General Thelma Aldana (2014-2018) is the presidential candidate for the new Seed Movement party. Aldana has been internationally recognized for her anticorruption and judicial reform work. She, along with CICIG Commissioner Ivan Velasquez, was awarded the 2018 Right Livelihood Award, known as the \"Alternative Nobel Prize,\" for their \"innovative work in exposing abuse of power and prosecuting corruption, thus rebuilding people's trust in public institutions.\" The U.S. Departme nt of State awarded her its International Women of Courage Award in 2016. Aldana has reportedly said she is on the right wing politically, although more recently indicated that she would be interested in an \"inclusive platform that was open to people from the left and the right, to women, to immigrants, to young people, to indigenous people, to the private sector.\" The day that Aldana announced her candidacy, a Guatemalan judge ordered her arrest on charges including embezzlement. Aldana has denied wrongdoing, and said that many people in Guatemala are afraid of her continuing fight against corruption. Sandra Torres, a 2015 presidential candidate and former first lady, is again running for president with the National Unity of Hope (UNE) party. Public prosecutors sought to lift Torres's immunity as a presidential candidate on February 6, over $2.5 million in illicit campaign financing in 2015. Torres said, without offering evidence, that the request was a move to benefit Aldana's campaign. As mentioned above, the TSE has been investigating illegal campaign financing of the 2015 election process since 2014, and several parties have been dissolved as a result of illegal activities. Zury Rios, whose father was the late Guatemalan military dictator Efrain Rios Montt, intends to run for president. Officials initially said she would not be allowed to run, and then a legal judgment ruled in her favor. Some observers have expressed concern that President Morales's efforts to hinder CICIG before the elections could strengthen parties involved in corruption. CICIG helps Guatemalan institutions enforce campaign finance laws. Weakening these efforts could facilitate continued financing of politicians by drug cartels and other criminal organizations. President Morales's administration achieved a few significant reforms in the first year and a half. For example, the administration developed tax reform policies covering tax collection, the tax authority administration, and the customs office structure. Since Morales and some of his inner circle became the targets of investigations, however, he has tried to terminate CICIG and fired some of his more reformist Cabinet ministers and other officials who worked closely with CICIG and the attorney general's office, replacing them with closer allies. This has raised concerns both domestically and internationally that Morales is trying to protect himself and others from corruption charges and appears to be reversing reformist policies. The tax administration (SAT), under the leadership of Juan Francisco Solórzano for the first two years of the Morales administration, used judicial measures and intervention to increase recovery of unpaid taxes and substantially increased tax collection. Solórzano, a former head of the criminal investigation unit at the attorney general's office, had the endorsement of CICIG as well as the Inter-American Development Bank, World Bank, and International Monetary Fund. Under his leadership, the SAT collected $297 million in recovered taxes in 2016 compared to $5 million in 2015. Following austerity measures in 2016 that limited government spending and decreased the deficit, the Guatemalan Congress passed an expansionary budget for 2017. This was possible in part because of increased state revenues from improved tax collection. Solórzano also played a key role in prominent anticorruption cases. President Morales fired Solórzano in January 2018. The interior ministry, which includes Guatemala's National Civil Police (PNC) force, oversaw a drop in the homicide rate from 27.3 homicides per 100,000 people in 2016 to 26.1 per 100,000 in 2017, the lowest rate in nine years. In February 2018, the Morales administration dismissed the three senior officials of the national police, saying it sought \"to generate more positive results to benefit citizen security and the fight against organized crime.\" A wide range of people, including human rights activists and business leaders, expressed concern at their dismissal. The country's Human Rights Ombudsman, Jordán Rodas, said Guatemalans must be \"very alert\" to any movement that represents \"regression.\" A prominent trade association known by its acronym CACIF criticized the ouster, saying that outgoing police Director Nery Ramos had reduced crime. The U.S. Embassy in Guatemala congratulated Ramos just a few weeks before his dismissal for his team's work in reducing homicides by 10% compared to January 2017 and for the PNC's \"fight against corruption and to improve security throughout Guatemala.\" In response to the high level of violence over many years, a number of municipalities asked for military troops to augment their ineffective police forces; the Guatemalan government has been using a constitutional clause to have the army \"temporarily\" support the police in combating crime. Despite efforts to develop a comprehensive, whole-of-government approach to security, the previous five administrations' actions often have been reactive and dependent on the military. The Morales administration announced a two-phase plan to remove the military from citizen security operations by the end of 2017. The new plan includes shuffling military currently involved in citizen security efforts to the country's borders to control land routes used by traffickers and gangs. This would be a significant effort to comply with provisions of the 1996 peace accord calling on the army to focus solely on external threats. The interior minister who initiated the plan, Francisco Rivas, was fired by the president in January 2018. Morales said that the plan would continue, however, and military troops would be withdrawn from the streets by March 2018. Morales's current Minister of the Interior, Enrique Degenhart Asturias, indicated a shift in priorities away from fighting corruption to fighting gangs. One of his first actions was to ask the Guatemalan Congress to designate criminal gangs as \"terrorist organizations.\" On August 30, 2018, the Constitutional Court ruled that the government must justify the appointment of Degenhart, and his Vice Minister, Kamilo Rivera, in response to a complaint that their actions had put the security of Guatemalans at risk. Morales had already faced criticism for not acting forcefully enough on his pledge to crack down on corruption, and for his links to family and friends under investigation, before he tried to expel Commissioner Velásquez. Then-Attorney General Aldana worked closely with the commissioner of CICIG to prosecute high-level corruption and human rights violation cases. Both said that the president initially had not interfered directly in corruption cases—even those involving his family. But both also expressed disappointment that he had not spoken out in support of them and their anticorruption efforts when attacked by antireform elements. They also voiced concern that Morales has publicly portrayed himself and his family as victims of the judicial system, potentially biasing the judicial process. Initially, President Morales's political power was limited as a result of his own inexperience and his party's weak position in the legislature. Morales's small party, the right-wing National Convergence Front-Nation (FCN-Nación), won 11 of 158 seats in the legislature. The Guatemalan Congress elected an opposition member to be president of the unicameral chamber. At the beginning of Morales's term, deputies defected from other parties, bringing the FCN-Nación's seat total to 37. People criticized Morales for allowing the deputies to join his party just before the Congress outlawed the practice. The public prosecutor received complaints alleging that bribery motivated some defections to the FCN-Nación. Morales has since formed an alliance able to pass legislation, however, and consolidated his support in the Congress. In 2017, the legislature twice voted against prosecutors' requests to lift the president's immunity for violations of campaign finance laws and bonuses paid to him by the military, blocking further investigations into the president's role in the scandals. The Congress tried to weaken anticorruption laws with a measure to reduce penalties for illegal campaign financing that the public dubbed the \"Pact of the Corrupt.\" Public outcry was so strong that Congress repealed the law two days after passing it. Nonetheless, the Congress elected a new leadership in February 2018, all of whom, according to the State Department, voted for that pact. In August 2018, the newly appointed Attorney General, Maria Consuelo Porras, submitted a third request to lift the President's immunity. The Guatemalan Congress voted again to maintain the President's immunity from prosecution. Almost half of the deputies in Congress are under investigation or have legal processes pending against them for corruption or other crimes. Morales has also come under fire for two contracts with an Indiana lobbying firm that reportedly has ties to U.S. Vice President Mike Pence. The firm was hired to improve relations between the U.S. and Guatemalan governments outside of normal diplomatic channels. Guatemalan politicians without the authority to act in foreign affairs signed the contracts. Morales denies knowing about the contract, though one was signed on his behalf, and only he and the foreign ministry are authorized to intervene in foreign affairs. Furthermore, observers criticize his reclusiveness with the press: he has removed journalists' access to the presidential palace, and rarely holds press conferences. Morales's administration and the secretariat for Social Welfare came under scrutiny after a fire killed 41 girls in a state-run home in March 2017. The director of the shelter, the minister of Social Welfare, and his deputy were dismissed after the fire. Later that year a judge charged the former minister, his deputy, and five additional people (two police officers with abuse, and three senior members of social and child protection agencies with manslaughter or negligence). Trials against public officials charged in the case began in February 2019. Before the current controversy between Morales and CICIG, human rights and other observers expressed concern that Morales's party's ties to former military officers might put pressure on Morales's support of CICIG, as well as limit his government's investigation of military corruption and human rights violations. Before the new government was sworn in, then-Attorney General Aldana requested legal action against retired army colonel Edgar Ovalle, a key advisor to Morales and a legislator-elect with the FCN-Nación, for alleged civil war-era (1960-1996) human rights violations. After declining the request in 2016, Guatemala's Supreme Court lifted Ovalle's immunity in 2017. Ovalle fled, his whereabouts unknown since March 2017. Over a dozen other military officers have been arrested on similar charges. Many of them support the FCN-Nación and belong to a military veterans' association, Avemilgua, which Ovalle helped found. Avemilgua members created the FCN-Nación in 2004, and testified in court in defense of former dictator Efrain Rios Montt in 2013. Rios Montt, found guilty in 2013 of committing genocide and crimes against humanity during the civil war, had his conviction effectively vacated a short time later. In 2016, a retrial began. In 2017, a judge ordered Rios Montt to stand trial in a different case for the massacre of 201 people between 1982 and 1983 in Dos Erres. Rios Montt died in 2018 before the trials concluded. Morales reportedly said he did not believe genocide had been committed during the war, but that crimes against humanity had. The Defense Ministry said in 2017 that it had been paying President Morales a substantial salary bonus since December 2016 (see \" Tension \" below). Two former presidents, Alfonso Portillo and Alvaro Colom, reportedly said they received no such bonus. Morales's former defense minister has been arrested in the case. In what many observers see as a step forward in Guatemala's democratic development, the Public Ministry's corruption and human rights abuse investigations in recent years have led to the arrest and trial of high-level government, judicial, and military officials. They have also led to a backlash against those reform efforts, threats against the attorneys general and the head of an international commission, and a political crisis involving current President Jimmy Morales. The Public Ministry, which is headed by the Attorney General, is responsible for public prosecution and law enforcement, and has worked in conjunction with CICIG to strengthen rule of law in Guatemala. President Morales appointed a new attorney general, Maria Consuelo Porras, in May 2018, when Aldana's term expired. Since 2007, CICIG has worked with the Public Ministry and the attorney general's office to reduce the country's rampant criminal impunity by strengthening Guatemala's capacity to investigate and prosecute crime. The government invited CICIG to assist with constitutional reforms and restructuring the judicial system. As a result of collaboration with CICIG, prosecutors have increased conviction rates in murder trials, and targeted corruption and organized crime linked to drug trafficking. The Guatemalan public widely supports CICIG. The United States, other governments, and international institutions have expressed broad support for the work of both the attorney general's office and CICIG over the years, and offered praise for their accomplishments. A 2018 U.S. State Department report highlights these accomplishments: CICIG's hundreds of investigations have resulted in charges against more than 200 current and former government officials—including two recent presidents and several ministers, police chiefs, military officers, and judges. CICIG Commissioner Ivan Velasquez and [then-] AG [Thelma] Aldana forged a strong cooperative alliance to pursue many high-profile corruption cases. CICIG also builds the capacity of prosecutors, judges, and investigators working on high-profile and corruption-related cases. A January 2019 CICIG statement reports that the commission has supported the Public Ministry in more than 100 cases, including against former President Otto Pérez Molina and Vice President Roxana Baldetti, both of whom subsequently resigned. It also has promoted more than 34 legal reforms to strengthen transparency and judicial independence, helped identify over 60 criminal structures, and secured more than 300 convictions. A recent International Crisis Group study estimated that CICIG-backed justice reforms contributed to a 5% average annual decrease in murder rates in Guatemala from 2007 to 2017, in contrast to a 1% average annual increase in the murder rates among other countries in the region. The president-elect of El Salvador has called for a similar commission to be established in his country. Public Ministry investigations, coupled with mass public protests, forced the resignations of the sitting president and vice president in 2015. Then-Attorney General Aldana and CICIG exposed an extensive customs fraud network, now known as the \"La Linea\" case, at the national tax agency (SAT), leading to the arrest of dozens of people, including the previous and then-directors of the SAT. After the Guatemalan Congress lifted then-President Otto Pérez Molina's immunity so he could be investigated, the attorney general's office indicted him, Vice President Roxana Baldetti, and other officials, who then resigned. The country proceeded lawfully and peacefully to form an interim government, hold scheduled lawful elections, and elect a new president, Jimmy Morales, who took office in January 2016. The related corruption case implicated dozens of high-level government officials and private-sector individuals as well. The Attorney General at the time asserted that the \"La Linea\" case represented \"just a sliver of a sprawling criminal enterprise run by the state,\" which widely tolerated corruption, leading to impunity and the strengthening of criminal structures within the government. The attorney general and other observers have raised concerns about unnecessary delays in the sentencing process due to appeals and other litigation by defense teams. Pérez Molina remains in prison as his case proceeds. Baldetti was found guilty and is serving a 15½-year sentence in another case of embezzling millions of dollars from a fund for decontaminating a lake. Following the historic \"La Linea\" case, more former and current high-level officials in the executive branch, the legislature, and the judicial system have been implicated in corruption cases. Three justices of the Supreme Court of Justice (CSJ) had their immunity removed to face charges of corruption and influence trafficking. In late March 2017, authorities arrested various congressional representatives for corruption. According to Transparency International, Guatemala ranked 143 rd out of 180 countries on the organization's Corruption Perceptions Index for 2017, the second-worst score in Central America, behind Nicaragua. Guatemalan police arrested another former president, Alvaro Colom, in February 2018. Colom was arrested along with nine former members of his cabinet, including former Finance Minister Juan Fuentes Knight, who has chaired Oxfam International since 2015. The group faces charges related to a $35 million fraud case involving a new bus system in the capital. Colom is free on bail while under investigation. He denies the charges. Early in his term, President Morales had reached out to policy experts and international donors for advice on fighting corruption. In April 2016, President Morales praised CICIG and formally requested its extension until 2019—which the U.N. granted. Morales said previously that before he left office, he would extend CICIG's term again, until 2021. In August 2017, two days after the attorney general and CICIG announced they were seeking to lift President Morales's immunity from prosecution, however, Morales declared the head of CICIG, Iván Velásquez, persona non grata and ordered him expelled from the country. One of Morales's ministers resigned rather than carry out the order, and the constitutional court—Guatemala's highest court—blocked the order. A Guatemalan congressional committee recommended that the president lose his immunity. Two-thirds of the 158-member legislature, or 105 deputies, are needed to remove an official's immunity. On September 11, 2017, though, the Guatemalan Congress as a whole voted to protect the president from further investigation; only 25 deputies voted to remove his immunity. About 20% of the legislators are also under investigation, with more likely to become so. The legislature fell one vote short of shelving the request permanently, however, so a member of the Congress could reintroduce the question of lifting President Morales's immunity at a later date. On September 13, the Guatemalan Congress passed a \"national emergency\" bill to reduce penalties for violations of campaign finance laws, and make party accountants—rather than party leaders—responsible for such violations. Public outcry was such that the Congress repealed the bill two days later. Thousands of protesters demanded the resignation not only of Morales, but also of the 107 legislators who voted to weaken anticorruption laws. On September 21, the Guatemalan Congress again defeated a vote to lift the president's immunity. This time, however, the number voting to rescind his immunity had risen to 70. In 2015, public protests contributed to the legislature reversing itself and rescinding the previous president's immunity. Also in September 2017, Guatemala's federal auditor's office said that it was investigating a substantial salary bonus that the Defense Ministry acknowledged paying to the president since December 2016. The monthly bonus increased Morales's salary by more than a third, reportedly making him one of the most highly paid leaders in Latin America. The Attorney General again asked that Morales's immunity be lifted, this time so that her office could investigate his bonus from the army. The Congress again voted against lifting Morales's immunity from prosecution. Morales was losing support within his own government. Several officials were fired or resigned rather than carry out his order to expel Commissioner Velasquez. Three Cabinet ministers resigned, saying that as a result of the political crisis, \"spaces of opportunity to carry out our work programmes have rapidly closed down.\" Initially, Morales persuaded some of those officials to stay, but in January 2018 he fired several of them and replaced them with people he considered stronger allies. A new civic organization was launched in February 2018, the Citizens' Front against Corruption. This group of prominent businesspeople, indigenous leaders, academics, activists, and others expressed public support for both the Attorney General and CICIG Commissioner Velásquez. In 2018 the President reversed on his earlier pledge, and said he would not renew CICIG's term. Morales made the announcement on August 13, flanked by members of the military. In what was widely seen as an act of intimidation, Guatemalan police deployed armored vehicles outside CICIG headquarters and embassies of the United States and other CICIG donors. The United States had provided the vehicles to the Guatemalan police for counternarcotics and border enforcement operations. Some Members of the U.S. Congress demanded Guatemala return the jeeps. Morales then barred CICIG Commissioner Velásquez from reentering the country, in defiance of two Constitutional Court rulings that he lacks the authority to do so. In January 2019, Morales unilaterally tried to end CICIG's mandate, and gave CICIG staff 24 hours to leave the country. The U.N., European Union, advocates for government transparency and human rights, and others expressed concerns over Morales's decision, and thousands of Guatemalan citizens protested the decision and again called on Morales to resign. The Morales administration is trying to impeach members of the Constitutional Court who have ruled in favor of CICIG. CICIG continued its work in compliance with the judicial finding from abroad, and in February most staff returned to Guatemala under contingency safety plans. Velásquez and 11 investigators whose visas were revoked have not returned. The Trump Administration expressed support for CICIG and for Commissioner Velásquez in 2017. In 2018, however, the Administration did not join other donors in doing so again. (See \" U.S.-Guatemalan Relations \" below.) Despite some differences of opinion over CICIG's efforts, many in Congress are concerned that Morales's efforts to hinder or oust CICIG could undermine objectives of the U.S. Strategy for Engagement in Central America, by undermining efforts to strengthen the rule of law and heightening instability in Guatemala. Some Members support Morales's claims that CICIG has violated Guatemala's sovereignty and maintain that the United States should end its financial support of CICIG. Other Members of Congress are calling for punitive measures against the Morales administration, including suspending foreign aid and imposing Global Magnitsky sanctions on corrupt individuals. As noted above, the Guatemalan Truth Commission found that more than 200,000 people were killed or disappeared during the country's internal conflict. It also concluded that state forces and related paramilitary forces were responsible for 93% of documented human rights violations, and that the vast majority of victims were noncombatant civilians and Mayan. Guatemala was the first country to convict a former leader of genocide, when ex-dictator Rios Montt was found guilty in 2013, during the term of former Attorney General Claudia Paz y Paz. (His conviction was overturned, and he died before a retrial was concluded.) Then-Attorney General Aldana and CICIG made progress in pursuing justice for human rights violations that occurred during the civil war. In March 2016 they tried a historic case known as the \"Creompaz case\"—the first prosecution for sexual violence committed during the civil war. A Guatemalan high-risk court convicted two former military commanders at the Sepur Zarco military base of murder, sexual violence, sexual and domestic slavery, and enforced disappearances. In March 2017, a judge sent to trial a former military chief of staff and four other high-ranking military officials accused of crimes against humanity, aggravated assault, sexual violence, and forced disappearance. Also in March, the Supreme Court ruled to remove immunity from FCN-Nación deputy Edgar Ovalle for his alleged involvement in the case. As noted previously, Ovalle, a key advisor to President Morales, has since disappeared. Another case dealing with forced disappearances allegedly committed by the Guatemalan military during the civil war took a dramatic turn in March 2016 when a judge seized and made public previously unknown documents detailing information about military counterinsurgency objectives, operations, and campaigns from 1983 to 1990. Since the Peace Accords were signed in 1996, the Guatemalan army had repeatedly denied such documents existed. Observers have expressed concern that Morales has failed to protect human rights. During his election campaign, U.S. embassy officials expressed concern that Morales's campaign team refused to cooperate with certain elements of Guatemalan civil society, particularly human rights advocates working on the protection of children and trafficking victims, and LGBTI (lesbian, gay, bisexual, transgender, intersex) issues. Human Rights Ombudsman Rodas recently said that the Morales administration refused to meet with indigenous leaders to discuss a surge in violence against indigenous people. The Guatemalan Union of Human Rights Defenders has reportedly documented over 200 attacks against human rights defenders in Guatemala in 2018. Twenty-six indigenous people were killed in 2018, many of them activists defending indigenous rights in land and mineral conflicts. Proposed amnesty for crimes against humanity and reforms to penal code . Guatemalan legislators are moving a bill through their Congress that would grant amnesty to perpetrators of crimes against humanity. The bill would amend the National Reconciliation Law, which was passed after the peace accords that ended the civil war. While the original law includes amnesty for some crimes, it does not include amnesty for torture, forced disappearance, and crimes against humanity. The proposed amendment would order the release within 24 hours of people serving prison time for those crimes, including more than 30 former military officials. It would also end all current and future criminal investigations into rights abuses committed during the civil conflict. Passage of the amendment requires three separate votes on the bill; the legislature passed the first vote in January 2019, the second in February. The third vote was suspended on March 13, when some members of the Congress walked out and left the session without a quorum, in the face of protests from human rights advocates, victims' groups, international organizations, and foreign governments. The G13 group of donors to Central America, including the United States, issued a statement saying that providing amnesty \"would contravene Guatemala's international obligations; would harm reconciliation efforts; and could seriously erode faith in the rule of law in Guatemala.\" The Inter-American Court of Human Rights ordered Guatemala to cease discussion of the amnesty bill and to permanently shelve it. Advocates of the bill reportedly dismissed such admonitions as interference in Guatemala's internal affairs. Because the vote was suspended, amnesty proponents can still schedule the bill for a third and final vote, and say they will do so. The legislature is also moving forward amendments to the penal code that could accomplish some of the same objectives of the amnesty. The bill would prevent the imprisonment of people older than 70, and limit pretrial detention to one year. Final passage of the bill, which has already passed two of the three required readings, would free many former military officers convicted of crimes against humanity, and prevent the imprisonment of others. It would also free many people convicted or charged for corruption. Various Guatemalan and international organizations consider judicial reforms necessary to solidify progress against widespread corruption and to strengthen the judicial branch so it can continue consolidating the rule of law in Guatemala. Nonetheless, forces opposed to the reforms have emerged as well. As anticorruption efforts prove successful, the circle of those feeling threatened by investigations broadens, and attacks against CICIG and the judicial system have intensified. The U.N. Office of the High Commissioner for Human Rights (OHCHR) issued a report in March 2017 saying it was \"seriously concerned\" about threats and attacks against various judicial authorities, including both Aldana and Judge Miguel Angel Galvez. The International Commission of Jurists noted concern about efforts to criminalize lawyers, as well as community leaders, human rights defenders, and public employees, such as Supreme Court justices. Civil society groups and elements of the government have called for further reforms to combat impunity. An April 2017 report from the International Commission of Jurists found that despite tackling historic cases, Guatemalan courts still show signs of irregularity and impunity, such as many judges' failure to condemn litigation that results in delays of trials. Many of the accused in the La Linea case still await sentencing three years after the scandal broke in late 2015, in part because of litigation filed by their own lawyers in what are widely seen as delaying tactics. According to CICIG head Iván Velásquez, the work of CICIG and the attorneys general has resulted in more than 300 people either in prison, facing trial, or being charged. These include high-level officials, such as the former president and vice president, five former Cabinet ministers, three former presidents of Congress and various deputies, two former CSJ magistrates, the former president of the Instituto Guatemalteco de Seguridad Social (IGSS), two former banking superintendents, and a director of the prison service, among others. President Morales spoke before the U.N. General Assembly in September 2017. He pledged to strengthen and support CICIG, but he also said Guatemala was revising the interpretation and application of its agreement with CICIG and no institution should interfere in Guatemala's administration of justice. On the same day, three of Morales's Cabinet members resigned over the political crisis instigated by the president's effort to expel CICIG's commissioner. In February 2018, Morales sent a representative to the U.N. to express his administration's concerns about CICIG. Many in the U.S. Congress expressed concern over President Morales's effort to expel CICIG's commissioner. The House Foreign Affairs Committee chairman at the time issued a statement reading, \"The U.S. Congress has spoken with one voice in support of the International Commission against Impunity in Guatemala. We will continue to stand with the Guatemalan people, and especially those in poverty, who are hurt most by corruption.\" The Guatemalan Congress approved changes concerning judge and magistrate selection and requirements. A recent International Commission of Jurists (ICJ) report concluded that reforming the selection process of judges and separating judicial processes from administrative processes could strengthen Guatemala's judicial system. CICIG and others launched a judicial observatory of criminal justice to analyze judiciary rulings and make recommendations to improve the justice system in other ways as well. The ICJ found that the Guatemalan state has responded passively to defamation campaigns, attacks on judicial independence, and other forces trying to influence judges, prosecutors, and investigators. According to the director of the Guatemalan Institute of Comparative Studies in Criminal Sciences, the groups seeking to stop the reforms are the same elements that launched defamation campaigns on social media against CICIG head Iván Velásquez in early 2017. Shortly after then-President Perez Molina was forced to resign and was arrested on corruption charges in 2015, the Guatemalan legislature took some actions to advance various types of reform. The Guatemalan Congress passed two major reform packages in 2016, for example, that were designed to streamline legislative procedures and make political and electoral system procedures more transparent and equitable. In late 2017, the legislature passed two laws intended to improve the judicial process. One created a Judicial Career Council to relieve the Supreme Court of having to address internal human resources administrative matters, and the other created a National Bank of Genetic Data to be used in judicial processes as well as a Register of Sexual Aggressors. Other of its actions, however, reflect an effort to reverse or stall reform efforts. A lengthy national process produced 60 proposed amendments to the constitution and other laws to promote judicial reform. Congress did not pass an initial package of the reforms in 2016 and has not brought it up again. The most divisive proposed change was a stronger recognition and use of the indigenous justice system. Some observers express concern that the current Congress does not wish to pass the reforms due to their links to people under investigation for corruption, or because they themselves are under investigation. This latter view was reinforced by congressional actions in September 2017 preserving the president's immunity and trying to reduce penalties for violations of campaign finance laws. The bill amending the penal code mentioned in the previous section would free many former government officials and businesspeople facing charges for corruption, including former President Perez Molina. Many of those people were placed in pretrial detention over concerns they would flee the country. Some of their trials have not proceeded, as noted above, in part because of motions filed by their own lawyers, in what are widely viewed as delaying tactics. Guatemala enjoyed relatively stable economic growth in recent decades, and the World Bank named it a top performer in Latin America. As economic growth rates have slowed in more recent years, however, Guatemala has struggled to address its high poverty rates. The country has the largest economy in Central America, with a gross domestic product (GDP) of $75.62 billion and a per-capita income of $4,060 in 2017. The World Bank characterizes Guatemala as a lower-middle-income country, and it ranks 127 th out of 189 on the 2018 Human Development Index. Guatemala's stable growth rates have not been enough to decrease some of the highest levels of economic inequality and poverty in the region. Instead, Guatemala has backtracked. After decreasing the overall poverty rate from 56% to 51% between 2000 and 2006, the rate increased to 59% in 2014, with a rate just over 79% for indigenous people, according to a national survey. Some elements of Guatemalan society and government have tried to bring about equitable development, yet its rural and indigenous populations remain socially and economically marginalized. For rural municipalities, which constitute 44% of the country, almost 8 out of 10 people live in poverty. Demonstrating the difference in economic and social conditions, literacy rates for the nonindigenous population were 88.9% for men and 83.7% for women, but rates decreased to 77.7% for indigenous men and 57.6% for indigenous women 15 years and older. The International Monetary Fund (IMF) concluded that Guatemala lags behind similar countries in terms of development outcomes. While the government has incorporated global Sustainable Development Goals into their national strategy, the IMF reports that the steps necessary to implement those policies \"remain largely unaddressed.\" Furthermore, extreme poverty increased and school enrollment decreased. Nonindigenous children average twice as many years of schooling as indigenous children. To improve social conditions, the World Bank calls for rapid economic growth coupled with increased public investment and pro-poor policies. According to the Economist Intelligence Unit (EIU), Guatemala's economic growth rate is expected to average out at 2.9% in 2019. EIU projects average growth from 2019 to 2023 at 3% but with a dip to 2.4% for 2020. The IMF concludes that slowed economic growth and rapid population growth will keep per-capita income growth too low to reduce poverty. A recent major economic analysis found that economic growth in Guatemala is \"largely a result of the strong inflow of family remittances from abroad.\" Factors that impede economic growth and development include corruption, limited government revenues, weak institutions, and weak transportation and energy infrastructure. A recent economic analysis concluded that corruption has a negative impact on economic activity across Central America. It also concluded that ... anti-corruption measures, such as those launched by the MP and CICIG help create a favorable environment for increasing economic growth in Guatemala because they reduce the avenue for corruption and strengthen the government's effectiveness as a provider of wellbeing. Guatemala's persistent failure to deliver services and improve the quality of education and health care contribute to a low-skilled workforce, which also limits growth. According to the U.N. Educational, Scientific, and Cultural Organization (UNESCO), Guatemalan adults had only 3.6 years of education, on average, in 2005, and \"if Guatemala had matched the regional average, it could have more than doubled [emphasis in original] its average annual [economic] growth rate between 2005 and 2010.\" Current mean years of education is 6.4 for men and for women. Guatemala has the lowest tax-to-GDP ratio in the region at 12.6%, compared to 22.7% for Latin America in 2016. This is due in part to the high rate of employment in the informal economy—the Instituto Nacional de Estadística found that 71% of the population held informal employment in 2018. The percentages were even higher for women, people aged 15-24, and rural and indigenous segments of the population. Another contributing factor includes the business and elite sectors' historical resistance to paying taxes. While the tax administration improved tax collection in 2016-2017 (see \" President Jimmy Morales's Administration \"), an IMF report on Guatemala cautions that maintaining an improved rate \"will require strong and sustained political commitment,\" which previous efforts have lacked. Tax reforms in 2012, for example, gave the government tools to increase revenues through taxes, but, the same report notes, weak implementation left Guatemala \"with virtually unchanged tax-to-GDP ratio [several years] after the reform.\" The IMF has called for a tax revenue rate increase to at least 15% of GDP in order to address social, security, and infrastructure needs. Land conflicts, especially those involving mining, are contentious, and often violent, in Guatemala and elsewhere throughout the region. Governments often see mines as a source of revenue, potentially for poverty reduction and social programs. Indigenous populations often object to mining under current conditions, however, because they say it violates their ancestral land rights, removes them from and/or damages their source of livelihood, and/or excludes them from the decisionmaking process as to how mine profits should be spent. Guatemala is a signatory to the Indigenous and Tribal Peoples Convention, 1989, also known as the International Labour Organization's (ILO's) Convention 169. The treaty calls on governments to consult indigenous peoples before permitting exploitation of natural resources on their land. According to a recent report by the ILO, the Guatemalan government granted 367 mining licenses between its ratification of the convention in 1996 and 2014, and held only 60 community consultations, all of which had expressed opposition to the projects. The report found that Guatemala's Constitutional Court had found such consultations nonbinding. Guatemala has not developed regulations to govern prior consultations. Ongoing conflicts around land use are likely to continue to delay such projects. Other types of land conflicts and evictions are related to biofuels, dams, ranching, and drug trafficking; these are also frequently violent. Coffee is one of Guatemala's key exports. Yet several obstacles are driving coffee farmers from the market: coffee leaf rust (a deadly fungus), extremely low coffee prices, and a drought, which has triggered increases in food prices. Smallholder farmers, with less than 7.5 acres of land, produce 80% of Central America's coffee. According to a recent NPR report, \"Some 70 percent of the farms have been affected [by the rust], and over 1.7 million coffee workers have lost their jobs. Many are leaving the coffee lands to find work elsewhere.\" Remittances from Guatemalans abroad boost the Guatemalan economy as they constitute over 10% of the GDP, and this percentage is forecast to grow to an average of 13.8% through 2023. Private consumption accounts for 85% of GDP. Traditionally, the United States and Guatemala have had close relations, with friction at times over human rights and civil/military issues. According to the State Department, current U.S. policy objectives in Guatemala include addressing the underlying drivers of illegal migration; supporting the institutionalization of democracy; encouraging respect for human rights and rule of law, and the efficient functioning of CICIG; supporting broad-based economic growth and sustainable development and maintaining mutually beneficial trade and commercial relations, including ensuring that benefits of CAFTA-DR reach all sectors of Guatemalan society; cooperating to fight money laundering, corruption, narcotics trafficking, alien smuggling, trafficking in persons, and other transnational crimes; supporting Central American integration through support for resolution of border and territorial disputes; reinforcing the government's economic development and political reform plan in the Alliance for Prosperity to be self-reliant in addressing drivers of migration and illicit trafficking of goods and people; and improving Guatemala's business climate. In 2017, the Trump Administration expressed support for CICIG and for Commissioner Velásquez. In February, then-Homeland Security Secretary John Kelly met with President Morales and Commissioner Velásquez in Guatemala, and reiterated U.S. support for the Public Ministry's and CICIG's fight against corruption. On the same day, a U.S. court indicted former Guatemalan Vice President Roxana Baldetti and former Interior Minister Mauricio Lopez Bonilla on criminal drug trafficking charges. A Guatemalan court approved a U.S. request for Baldetti's extradition in June 2017, but first she will face prosecution on four charges of corruption in Guatemalan courts. She was convicted and is serving time for one case of embezzlement there. Lopez Bonilla must first face three counts of corruption in Guatemalan courts. The United States arrested former Guatemalan presidential candidate Manuél Baldizón as he entered the country in January 2018. The U.S. Embassy in Guatemala said the United States would \"return Mr. Baldizón to Guatemala to face justice\"; he faces charges of bribery, conspiracy and money-laundering related to helping the Odebrecht company win construction contracts in Guatemala. The Odebrecht scandal is enveloping politicians across Latin America. Baldizón requested asylum in the United States. U.S. Vice President Mike Pence, then-Secretary of State Rex Tillerson, Secretary of Commerce Wilbur Ross, then-Secretary of Homeland Security Kelly, and Secretary of the Treasury Steven Mnuchin attended meetings with President Morales, as well as his Honduran counterpart and the Salvadoran vice president, in June 2017 at the Conference on Prosperity and Security in Central America in Florida. Pence said that addressing migration to the United States requires strengthening the sending countries' economies, including through foreign assistance. Nonetheless, the Trump Administration has proposed significantly cutting aid to the region and emphasizing security over development in its budget requests. The President has sometimes threatened to cut off aid to Guatemala and the other northern triangle counties. Congress has rejected most of the Administration's proposed cuts. President Morales followed President Trump's lead in December 2017 in announcing his country would move its embassy in Israel to Jerusalem from Tel Aviv. The change has been widely criticized internationally. A nonbinding U.N. General Assembly resolution called for the United States to shelve its recognition of Jerusalem. Trump threatened to cut off aid to countries that supported the resolution. In February 2018, Trump met with Morales in Washington, thanking him for his support on Israel. According to the White House, Trump \"also underscored the importance of stopping illegal immigration to the United States from Guatemala and addressing Guatemala's underlying challenges to security and prosperity.\" In 2018, the Trump Administration did not join other commission donor countries in stating support of CICIG and the Commissioner. Secretary Pompeo spoke with President Morales on September 6, 2018, expressing continued support for \"a reformed CICIG,\" but did not report mentioning either the termination of CICIG's mandate or the barring of Velásquez. In March 2019 the Administration joined other donor countries in speaking out against Guatemala's proposed amnesty bill, and suspended military aid to Guatemala over the misuse of jeeps that had been provided by the Department of Defense. The United States has been providing assistance to Guatemala through regional initiatives: the Central American Regional Security Initiative (CARSI), for combating narcotics trafficking and preventing transnational crime; the President's Emergency Plan for AIDS Relief (PEPFAR); and Food for Peace. Currently, U.S. assistance to Guatemala is guided by the U.S. Strategy for Engagement in Central America. The various programs are integrated for a greater impact in the Western Highlands region of the country, which has the highest rates of poverty, chronic malnutrition, and out-migration in Guatemala, and in high-crime areas. According to the State Department, \"The overall objective of U.S. assistance efforts is to create effective structures and organizations sustainable by the Guatemalan government.\" While some structures, such as the attorney general's office, have greatly improved their effectiveness with U.S. and other support, other institutions remain weak. U.S. bilateral assistance to Guatemala complements CARSI programs and the regional Alliance for Prosperity Plan (see \" The Alliance for Prosperity and Other Regional Initiatives \" below). Economic Support and Development assistance aims to expand economic opportunities; improve governance, accountability, and transparency; strengthen the juvenile justice system; and improve living conditions in Guatemala. In 2014, the Obama Administration launched the U.S. Strategy for Engagement in Central America (the Strategy), a whole-of-government approach aimed at addressing the root causes of illegal immigration from the region by improving prosperity, regional economic integration, security, and governance. The Strategy complements the Plan of the Alliance for Prosperity (AFP) in the northern triangle proposed by the presidents of El Salvador, Guatemala, and Honduras (see \" The Alliance for Prosperity and Other Regional Initiatives \" below). Congress has appropriated $2.1 billion for the Strategy for FY2016-FY2018. Congress placed numerous conditions on aid for Guatemala (and El Salvador and Honduras) in each of the foreign aid appropriations measures enacted since FY2016. Through the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), Congress withheld 25% of aid to the three central governments until the Secretary of State certified that conditions relating to limiting irregular migration were met. Congress conditioned another 50% of aid until the governments addressed another 12 concerns, including combating corruption; countering gangs and organized crime; increasing government revenues; supporting programs to reduce poverty and promote equitable growth; and protecting the rights of journalists, political opposition parties, and human rights defenders to operate without interference. The State Department certified that the three northern triangle governments met Congress's conditions in FY2016 and FY2017. The department certified that the three countries had met the first set of conditions in FY2018, but not the second set. The 2019 Consolidated Appropriations Act ( P.L. 116-6 ) maintained the legislative conditions enacted in prior years but combined them into a single certification requirement for 50% of assistance to the central government. The Trump Administration has proposed cutting aid to Guatemala by 36% for FY2020 compared to FY2018 and emphasizing security over development. The budget request for Central America would also reduce aid, and tip the balance toward security and away from traditional development goals—such as good governance, economic growth, and social welfare. The Administration's proposed budget would also eliminate traditional food aid (P.L. 480, Title II), and food aid would be provided only through the International Disaster Assistance account. Some critics are concerned that reducing nonemergency food aid could increase the already high levels of malnutrition and stunting in Guatemala. In addition, a recent study by several major international organizations found that \"there is clearly a link between food insecurity and emigration from [Guatemala, El Salvador and Honduras].\" The Trump Administration proposes closing down the Inter-American Foundation (IAF), an independent U.S. agency that supports grassroots development throughout Latin America, including in all three northern triangle countries, and merging it into USAID. Many IAF programs in Guatemala are in areas that have high levels of emigration to the United States; these programs aim to improve agricultural and food production; improve the livelihoods of youth, women, and indigenous people, and increase their participation in civil society and community development; and ease the transition of migrants who return to Guatemala. Congress rejected most of the cuts for aid to Central America proposed by the Trump Administration in its previous budgets. The FY2017 Consolidated Appropriations Act ( H.R. 244 , P.L. 115-31 ) provided just under $126 million for Guatemala as part of the $655 million for the continued implementation of the Strategy. The FY2018 Consolidated Appropriations Act ( H.R. 1625 , P.L. 115-141 ) provided less than $120 million for Guatemala as part of the $615 million for the Strategy. The 116 th Congress remains invested in the U.S. Strategy for Engagement in Central America. In February 2019, it passed the FY2019 Consolidated Appropriations Act ( H.J.Res. 31 , P.L. 116-6 ), including $528 million for Central America. The act did not provide specific funding amounts for individual countries, but instead gave the Department of State the authority to allocate funding among the Central American nations. The act's conference report, however, did specify $13 million in Global Health Program aid for Guatemala and $6 million for CICIG. The 116 th Congress has introduced other bills that touch on perennial concerns involving Guatemala, such as immigration, border security, and governance issues. For example, H.Res. 18 , introduced in January, would express the sense of the House that the President should redirect and target foreign assistance provided to Guatemala, El Salvador, and Honduras in a manner that addresses the driving causes of illegal immigration into the United States. S. 716 and H.R. 1630 , introduced in March 2019, would impose targeted sanctions under the Global Magnitsky Human Rights Accountability Act against Guatemalan nationals found responsible for, or complicit in, acts of corruption, laundering money, or violating human rights. In March 2019 the Department of Defense announced it was suspending military aid to Guatemala's Ministry of the Interior, which it said had repeatedly used armored jeeps provided by the United States \"in an incorrect way\" since August 2018, when they were deployed outside CICIG and donor embassies when Morales announced he was not renewing CICIG's mandate. In response to increased Central American immigration in 2014, the Obama Administration and some Members pressed the northern triangle governments (Guatemala, Honduras, and El Salvador) to invest more heavily in their own development and security. Later that year, the Guatemalan, Salvadoran, and Honduran governments proposed the Plan of the Alliance for Prosperity in the northern triangle with the help of the Inter-American Development Bank. The five-year, $22 billion initiative seeks to (1) stimulate the productive sector to create economic opportunities; (2) develop human capital through improved education, job training, and social protections (health care, nutrition); (3) improve public safety and access to the legal system; and (4) strengthen institutions and improve transparency to increase public trust in the state. Some observers, including some U.S. officials, criticized the initial plan for not focusing on development and poverty-reduction efforts in the poorest regions, from which the highest numbers of people emigrate. The Guatemalan Embassy says that the government has since shifted some of its programs toward those regions. Guatemala, Honduras, and El Salvador launched a trinational task force to address the region's security issues in November 2016. The task force focuses on greater border protection, undertaking operations to dismantle gangs and criminal structures, taking action against human trafficking, cracking down on terrestrial drug trafficking across borders, and stopping the flow of contraband products through the northern triangle. The initiative includes increased information sharing and cooperation among the three countries' governments, as well as law enforcement and investigative agencies. The governments of El Salvador, Guatemala, Honduras, and Mexico agreed on a Comprehensive Development Plan in December 2018, and met in January 2019 to begin its design. They say they intend to be the first region in the world to implement the Global Compact for Migration, which seeks to improve cooperation between countries and regions to facilitate safe, orderly, and regular international migration. Honduran Foreign Minister Maria Dolores Agüero stated that \"[r]especting the dignity of migrant persons will be prioritized in line with international law and with special emphasis on a child's best interest and the protection of human rights, regardless of migratory status.\" Mexican Secretary of Foreign Affairs Marcelo Ebrard said the group wished to demonstrate that addressing the causes of migration is more effective than exclusion and containment measures. Guatemala and the United States have significant trade relations, and are part of the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), implemented in 2006. Supporters of CAFTA-DR point to reforms it spurred in transparency, customs administration, intellectual property rights, and government regulation. Critics note that the commercial balance between the two countries previously favored Guatemala, and that Guatemala already had duty-free access under the Caribbean Basin Initiative. Since CAFTA-DR, the balance has shifted in favor of the United States. The U.S. goods trade surplus with Guatemala reached $2.9 billion in 2017, a 16% increase from 2016. From 2005 (pre-CAFTA-DR) to 2017, U.S. exports to Guatemala increased by 143%, whereas Guatemalan exports to the United States increased by only 28% during the same period. President Trump has ordered reviews of U.S. trade agreements. Total U.S.-Guatemala trade in goods and services for 2017 reached $13.5 billion, and U.S. exports to Guatemala amounted to $8.5 billion. Mineral fuels, articles donated for relief, machinery, electrical machinery, and cereals accounted for the majority of U.S. exports. U.S. agricultural exports include corn, soybean meal, wheat, poultry, and cotton. U.S. imports from Guatemala amounted to about $4 billion, with bananas, plantains, knit apparel, woven apparel, coffee, silver, and gold accounting for the majority. Guatemala was the United States' 43 rd -largest trading partner in 2017. The U.S. Labor Department initiated a dispute settlement process alleging that the Guatemalan government violated its CAFTA-DR labor commitments, the first labor rights complaint lodged under a U.S. free trade agreement. In 2011, the U.S. Trade Representative officially requested an arbitral panel. In 2017, the panel concluded that although it agreed that Guatemala had failed to enforce its labor laws effectively in certain cases, the United States had failed to prove that the lack of enforcement negatively affected trade, as required under CAFTA-DR. Some observers say the finding brings into question the effectiveness of labor regulations in U.S. free trade agreements. The Trump Administration may consider renegotiating CAFTA-DR. Guatemala remains a major transit country for illicit drugs, particularly cocaine, trafficked from South America to the United States. Guatemala's porous borders and lack of law enforcement presence in many areas enables minor poppy and opium production, as well as smuggling of precursor chemicals, narcotrafficking, and trafficking of weapons, people, and other contraband. Unlike former President Pérez Molina, current President Morales opposes legalization of illicit drugs. According to the State Department, in 2017 Guatemala recorded record drug seizures and arrested 106 high-profile drug traffickers. In response to increased drug consumption, Guatemala doubled its budget for domestic reduction activities. The United States provides assistance in the areas of vetted units, and a range of training, with the goal of improving the professional capabilities and integrity of Guatemala's police forces and judicial institutions. The 2018 International Narcotics Control Strategy Report (INCSR) highlighted the above improvements in Guatemala's drug control and border security, but noted the following: Corruption levels remain high and public confidence in government institutions is low. Limited budget resources hinder the government's effectiveness. Despite Guatemala's many successes in 2017, the government needs to take additional steps to further build sustainable drug control mechanisms, including support for anti-corruption efforts, accelerated judicial processes, improved interagency cooperation, and adequate financial resources for relevant agencies and government ministries. Corruption within the Guatemalan government has enabled illicit drug trafficking. The U.S. Department of Justice requested the extradition of former Interior Minister Lopez Bonilla, who oversaw the Guatemalan police and prisons under the Perez Molina administration. The Justice Department reportedly said that Lopez Bonilla received money from various drug cartels, including the notorious Los Zetas, in exchange for allowing them to operate freely across Guatemala. A U.S. court also indicted former Guatemalan Vice President Roxana Baldetti on criminal drug trafficking charges. In 2017 a Guatemalan court approved their extradition to the United States, but first they must face prosecution on multiple charges of corruption in Guatemalan courts. Baldetti was convicted and is serving time for one case in Guatemala. The Trump Administration suspended military aid to Guatemala intended for police counternarcotics and border security operations task forces In March 2019. The Department of Defense announced it was ending the \"transfer of equipment and training to the task forces\" because the Interior Ministry, which oversees the police, had repeatedly misused armored jeeps provided by the United States since August 2018. (See \" Tensions over President Morales's Dispute with CICIG \" above.) Approximately 1.5 million U.S. residents claim Guatemalan ethnicity, and there were over 950,000 foreign-born persons from Guatemala living in the U.S. in 2017. The Pew Research Center estimates that in 2016, 575,000 of the Guatemalan foreign-born population were unauthorized (about 60%). From the 1970s to 1990s, the civil war fueled some migration. During the 2000s, migration became motivated by socioeconomic opportunities, natural disasters, social violence, and family reunification. Unlike their neighbors in the region, Honduras and El Salvador, Guatemalans have not received Temporary Protected Status (TPS), which offers immigration relief from removal under specific circumstances. Some Guatemalans benefit from the Deferred Action for Child Arrivals (DACA) program, which allows people without lawful immigration status who came to the United States as children and meet certain requirements to request protection from removal for two years, subject to renewal. On September 5, 2017, the Trump Administration announced plans to phase out the DACA program. President Trump later tweeted that if Congress did not pass DACA-like legislation by early 2018, he would \"revisit\" the issue. As of the date of this report, no such legislation has been passed. Due to federal court orders, DACA renewals are once again being accepted; new applications for DACA, however, are not. From FY2009 to FY2014, the number of unaccompanied migrant children (sometimes referred to as Unaccompanied Alien Children, or UAC) from Guatemala apprehended at the U.S. border rose from 1,115 to 17,057, causing concern among Congress and the executive branch. In the years since, the trend has fluctuated, as the number of unaccompanied Guatemalan minors apprehended at the border decreased to 13,589 in 2015; rose to 18,913 in FY2016; fell to 14,827 in FY2017; and rose to 22,327 in FY2018. To offer a safer alternative to travelling to the United States to request asylum, the U.S. government launched the Central American Minors (CAM) Refugee/Parole program in December 2014. The program allowed children living in El Salvador, Guatemala, and Honduras, whose parents reside legally in the United States, to apply for legal entry to the United States. In July 2016, the U.S. government expanded the CAM program to include additional family members. According to State Department data, 45 Guatemalans left for the United States under refugee status and 31 as parolees between the program's start in December 2014 and September 2017. The Trump Administration ended the CAM program in November 2017. According to the U.N. High Commissioner for Refugees, 62% of unaccompanied migrant children interviewed in 2013 did not mention serious harm as a reason for leaving Guatemala, and 84% cited hopes for family reunification, increased work or study opportunities, or helping their families as motivation for coming to the United States. Two Guatemalan children, 7 and 8 years old, died while in U.S. Customs and Border Protection (CBP) custody in December 2018. CBP Commissioner Kevin McAleenan subsequently issued guidelines for the agency to conduct health inspections on all children in custody, and said he was looking for ways to reduce congestion in government holding facilities, including having nongovernment organizations provide short-term housing for immigrants seeking asylum. McAleenan also said that holding facilities had been built for single adult males, not for family groups with children, and that a different approach was needed. \"We need help from Congress. We need to budget for medical care and mental health care for children in our facilities,\" he said. The U.S. Strategy for Engagement in Central America and the Central American Plan of the Alliance for Prosperity in the northern triangle were developed in large part as a response to the surge in immigration in 2014. They represent efforts to spur development and reduce illegal emigration to the United States. The Trump administration's proposed budgets have emphasized security over development, and substantial cuts in assistance to the region. U.S. laws and policies concerning intercountry adoption are designed to ensure that all children put up for adoption are truly orphans, and have not been bought, kidnapped, or subjected to human trafficking, smuggling, or other illegal activities. Similarly, the goals of the Hague Convention on Protection of Children and Cooperation in Respect of Intercountry Adoption are to ensure transparency in adoptions to prevent human trafficking, child stealing, or child selling, and to eliminate confusion and delays caused by differences among the laws and practices of different countries. Both the United States and Guatemala are party to the convention. Because Guatemala has not yet established regulations and procedures that meet convention standards, the convention has not entered into force there. In FY2007, U.S. citizens adopted 4,726 children from Guatemala, more than from any other country except China (5,453 adoptions). When the convention went into effect in the United States in 2008, adoptions from Guatemala were suspended because Guatemala was not in compliance with the convention's standards. Since then, the only cases of adoptions by U.S. citizens of Guatemalan children that have been permitted are those that were already in-process on December 31, 2007. There were about 3,000 such adoption cases pending at the time. As of 2016, all but 3 cases had been resolved. According to the U.S. State Department, the Guatemalan government's priority is to continue developing its domestic adoption processes, but it is receptive to ongoing discussions. The State Department says it continues efforts to work with Guatemala to establish intercountry adoption procedures. ", "summary": "Guatemala, the most populous Central American country, with a population of 16.3 million, has been consolidating its transition to democracy since the 1980s. Guatemala has a long history of internal conflict, including a 36-year civil war (1960-1996) during which the Guatemalan military held power and over 200,000 people were killed or disappeared. A democratic constitution was adopted in 1985, and a democratically elected government was inaugurated in 1986. President Jimmy Morales is being investigated for corruption and has survived three efforts to remove his immunity from prosecution. Morales took office in January 2016, having campaigned on an anticorruption platform. The previous president and vice president had resigned and been arrested after being implicated in a large-scale corruption scandal. In what many observers see as a step forward in Guatemala's democratic development, the Public Ministry's corruption and human rights abuse investigations in recent years have led to the arrest and trial of high-level government, judicial, and military officials. The Public Ministry is responsible for public prosecution and law enforcement, and works in conjunction with the United Nations-backed International Commission against Impunity in Guatemala (CICIG) to strengthen rule of law in Guatemala. As their anticorruption efforts prove effective, the circle of those feeling threatened by investigations broadens, and attacks against CICIG and the judicial system it supports broaden and intensify as well. Since Morales and some of his inner circle became the targets of investigations, he has ended CICIG's mandate, tried to terminate it early, and fired some of his more reformist officials. The Guatemalan Congress is moving legislation forward that would give amnesty to perpetrators of crimes against humanity, free some high-profile prisoners held for corruption, and limit the work of nongovernment organizations. Observers within Guatemala and abroad worry that Morales and the Congress are trying to protect themselves and others from corruption and other charges, and threatening the rule of law in doing so. Guatemala continues to face many other challenges, including insecurity, high rates of violence, and increasing rates of poverty and malnourishment. Guatemala remains a major transit country for cocaine and heroin trafficked from South America to the United States. Although Guatemala recorded record drug seizures in 2017, the lack of law enforcement and the collusion between corrupt officials and organized crime in many areas enable trafficking of illicit drugs, precursor chemicals, weapons, people, and other contraband. During Morales's first year, his administration improved tax collection, and the interior ministry reported a 5% drop in homicide rates. Morales has since fired many of the officials responsible for those advances and other reforms. Guatemala has the largest economy in Central America and in recent decades has had relatively stable economic growth. Despite that economic growth, Guatemala's economic inequality and poverty have increased, especially among the rural indigenous population. The Economist Intelligence Unit projects that the country's economic growth rate will likely peak in 2018-2019 at 3.2%, followed by a decrease until 2022. The World Bank calls for rapid economic growth coupled with increased public investment and pro-poor policies to improve social conditions. Traditionally, the United States and Guatemala have had close relations, with friction at times over human rights and civil/military issues. Guatemala and the United States have significant trade and are part of the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Top priorities for U.S. bilateral assistance to Guatemala include improving security, governance, and justice for citizens; improving economic growth and food security; providing access to health services; promoting better educational outcomes; and providing opportunities for out-of-school youth to reduce their desire to migrate. The U.S. Strategy for Engagement in Central America is meant to spur development and reduce illegal emigration to the United States. The Trump Administration has proposed substantially cutting funds for Guatemala, and eliminating traditional food aid and the Inter-American Foundation in its FY2018-FY2020 budget requests. Congress rejected much of those cuts in the reports to and language in the Consolidated Appropriations Acts of 2018 (P.L. 115-141), and 2019 (P.L. 116-6). Tensions between Guatemala and much of the international community have arisen over Guatemalan efforts to oust CICIG and to grant amnesty for human rights violations. The Trump Administration suspended military aid to Guatemala in March 2019 over its misuse of armored vehicles provided by the Department of Defense to combat drug trafficking. Bills introduced in the 116th Congress regarding Guatemala address immigration, order security, corruption and other governance issues, and include H.Res. 18, H.R. 1630, and S. 716.", "document_type": "crs"}
{"report": "With its adoption as part of the Civil Rights Act of 1964, Title VI invested the federal government with a uniquely powerful role in addressing race and national origin discrimination. Like other statutory provisions in the Civil Rights Act, Title VI seeks to end race discrimination among institutions and programs whose doors were otherwise open to the public—especially public schools. But unlike the Civil Rights Act's better known and more heavily litigated provisions, Title VI is concerned specifically with the use of \"public funds,\" designed to ensure that federal dollars not be \"spent in any fashion which encourages, entrenches, subsidizes, or results in racial discrimination.\" And to fulfill that broad mandate, Title VI takes a distinctive approach to policing discrimination by making the promise of nondiscrimination a condition of the federal government's financial support. Title VI consequently prohibits all federally funded programs, activities, and institutions from discriminating based on race, color, or national origin. Although that prohibition accompanies nearly all grants and contracts awarded by the federal government, much of Title VI's doctrine has been shaped by its use in the public schools. That doctrinal story has accordingly centered on one agency in particular: the Office for Civil Rights (OCR) in the U.S. Department of Education (ED). As this report explains, Title VI continues to play a central part in OCR's mission of protecting civil rights on campuses at all educational levels, and in institutions both public and private. This report begins by briefly tracing Title VI to its historical and conceptual roots in the federal spending power, and explains how the early understanding of that power shaped the various legislative proposals that ultimately became Title VI. The report then examines the central doctrinal question behind the statute: what exactly Title VI outlawed by prohibiting \"discrimination\" among federally funded programs, and what agencies are therefore allowed to do in order to enforce that prohibition. The report then turns to ED's OCR, briefly reviewing how that agency goes about the day-to-day work of enforcing Title VI in schools, and concludes by surveying two recent developments related to Title VI, along with some considerations should Congress wish to revisit this landmark civil rights law. Because this report focuses specifically on how OCR has come to understand and enforce Title VI, it does not directly discuss litigation under the statute, whether filed by a private party or by the U.S. Department of Justice following a referral from OCR, though many of the substantive legal standards overlap. By the time Title VI was being seriously debated in 1964, its basic premise—that federal dollars should not go to support programs or institutions that discriminate based on race—was already familiar. In 1947, nearly a decade before the Supreme Court declared an end to the de jure segregation of the public schools in Brown v. Board of Education , President Truman's Committee on Civil Rights had already sketched out the basic pattern for Title VI, calling for \"establishment by act of Congress or executive order\" of a federal office to review \"the expenditures of all government funds,\" so that none would go to subsidize discrimination based on race, color, creed, or national origin. Several years later, in 1953, President Eisenhower was also expressing dismay at the \"discrimination in expenditure of [federal] funds as among our citizens.\" And Brown , decided the next year, put even more pressure on the federal government to begin leveraging its funds to combat discrimination —first in the public schools, but possibly also on a wider scale. The early years of the Kennedy Administration saw some of the first steps in that direction. Early on in his tenure, for example, Abraham Ribicoff, then the Secretary of Health, Education, and Welfare (HEW), refused to locate the department's summer teacher-training institutes at \"any college or university that declined to operate such institutes without discrimination.\" In a related decision, HEW later moved to withdraw support from segregated schooling on military bases as well. Those steps led others in the Administration, like then-Attorney General Robert Kennedy, to publicly suggest that the federal funds might be used on a wider scale, \"to persuade southern states to alter their racial practices\" more generally. These early uses of the federal spending power to redress race discrimination had their limits, however. After leaving HEW for the U.S. Senate, Ribicoff explained during the floor debate over Title VI that, while at HEW, he had frequently \"found [his] authority to act was questionable, and in some instances ... limited by the explicit wording of congressional enactments.\" A number of Kennedy Administration officials evidently shared that view, with some publicly questioning whether the executive branch had authority to withhold money appropriated by Congress or condition disbursement on terms not found in underlying funding authorities. This view \"did not go unchallenged,\" as civil rights leaders made clear during the House hearings on the bill; nor has it received a definitive judicial ruling since. But with the risk of a bruising, possibly fatal, legal challenge looming over unilateral executive action, it \"became clear\" to Administration officials \"that administrative action alone could not solve the entire problem.\" Congressional action, by contrast, seemed to face far fewer legal constraints. In several earlier decisions the Supreme Court had established that Congress unambiguously had the right under the Spending Clause to condition the receipt of appropriated funds on the terms of its choosing, even in areas traditionally left to the regulation of the states. Congress was therefore free to do by legislation what the executive branch could only questionably have done on its own: make nondiscrimination a condition for receiving federal financial support. The final legislative resolution, reached after a period of protracted debate, was Title VI. The legislation went through a number of significant alterations from the measure originally proposed by the Kennedy Administration, many of which sought to address fears of potential administrative abuse by layering agencies' enforcement power with procedural protections for funding recipients. But the basic pattern suggested by the Committee on Civil Rights some 20 years earlier—making nondiscrimination a condition for federal financial support—remained the same. In its final form, largely unchanged since its adoption, Title VI incorporates five basic features relevant to this report: 1. Nondiscrimination Mandate . Title VI bars any federally funded \"program or activity\" from discriminating against a \"person in the United States\" based on his or her \"race, color, or national origin.\" 2. Imp lementing Rules , Regulations , and Orders . All federal funding agencies are \"authorized and directed\" to promulgate rules, regulations, or orders of general applicability \"effectuat[ing]\" that nondiscrimination mandate. 3. Approval of Implementing Rules, Regulations, and Orders . Any rule, regulation, or order issued under Title VI was made subject to presidential approval, an authority since delegated to the Attorney General by executive order. 4. Agency Enforcement . To enforce Title VI an agency could resort to either of two measures: (1) the termination or refusal to provide federal financial assistance to an institution or program seeking it; or (2) \"any other means authorized by law,\" now understood to be a lawsuit brought by the Attorney General seeking a recipient's compliance with Title VI. 5. Procedural Requirements Related to Agency Enforcement . Though an agency's withdrawal of federal funds was envisioned as the primary mechanism for enforcing Title VI, that authority was hedged with a range of procedural requirements designed to spur agencies into seeking consensual resolutions with recipients. Each of these statutory features is explained below, including how they have come to be understood since Title VI's passage and the role they play in addressing racial discrimination at school. Title VI revolves around a single sentence-long prohibition, found in Section 601 of the law, providing that \"[n]o person in the United States\" may be \"subjected to discrimination\" by a \"program or activity\" that receives federal financial assistance based on his or her \"race, color, or national origin.\" Plainly that prohibition outlaws racial \"discrimination\" in all federally funded programs. It does not define, however, the sorts of practices Title VI thereby excludes. And with the legislative history on this point inconclusive at best , the task of providing a workable definition has been left to the agencies charged with enforcing Title VI and, ultimately, to the courts. As explained below, however, with its 2001 decision in Alexander v. Sandoval , the Supreme Court appears to have put the basic interpretive question to rest: Section 601 directly prohibits only intentional discrimination . Despite Title VI's basic ambiguity, the courts have long agreed that, at a minimum, Section 601 bars federally funded programs from intentionally singling out individuals for adverse treatment because of their race. This sort of intentional discrimination is commonly known as disparate or different treatment . And it can be proved in either of two ways: (1) directly, by pointing to a policy or decision that expressly singles out individuals by race, or (2) indirectly, by providing circumstantial evidence that a discriminatory motive was likelier than not responsible for the alleged mistreatment. Perhaps the clearest way a program may discriminate along racial lines is by expressly singling out individuals by race for adverse treatment. Thus, for example, a school that explicitly excludes students from an assembly by race will clearly have discriminated in this intentional sense. And because the \"discrimination\" involved appears on the face of the policy or decision itself, proving a violation of Title VI becomes that much more straightforward: to prevail, the aggrieved party generally need only establish that the discriminatory policy existed and was used against him. Although still litigated, over the years such facially discriminatory policies and decisions have grown less common—a shift widely attributed to laws like the 1964 Civil Rights Act. As a result, the more usual case today instead involves allegations of racially motivated mistreatment under a policy or decision that, at least on its face, is race-neutral. Thus, for example, an African American student might still plausibly allege that a school official discriminated against him based on his race by disciplining him more severely than his white classmates for substantially the same misconduct, even though neither the discipline policy nor the disciplining official made any mention of his race. In such cases, the \" form of the governmental action\"—the literal wording of the policy used or the decisionmaker's explanation—is not at issue. What matters is why the individuals alleging mistreatment received the treatment they did; whether, that is, a discriminatory intent shaped the allegedly discriminatory decision. Where the surrounding circumstances suggest that some such racial animus was likelier than not what motivated the adverse treatment, that treatment will amount to intentional discrimination, presumptively violating Title VI. Title VI has long been understood to bar federally funded programs from intentionally discriminating based on race. At least for the first few decades following its adoption, however, there was considerably more debate about whether Section 601 might also forbid policies that, while not purposefully discriminatory, nonetheless had a disparate effect on persons of different races. And in its first case involving Title VI— Lau v. Nichols —the Supreme Court seemed to say exactly that. In its most recent encounter with disparate impact under Title VI, however, in Alexander v Sandoval , the Court squarely rejected Lau 's ruling on that point. Today, as a result, the only discrimination Title VI directly prohibits is intentional . Lau was the Court's first encounter with Title VI, and it set the stage for much of the uncertainty about the statute that has followed. In Lau, non-English-speaking Chinese students had sued San Francisco's school system alleging that its policy of refusing bilingual or remedial English instruction effectively denied them the educational opportunities provided non-Chinese students, in violation of Title VI as well as the Equal Protection Clause of the Fourteenth Amendment. And in an unexpectedly unanimous ruling, the Court agreed—albeit along two different lines of reasoning. Relying \"solely\" on Section 601, five of the Justices, led by Justice Douglas, concluded that Section 601 barred discrimination \"which has [a discriminatory] effect even though no purposeful design is present.\" In that case the effect was clear: \"the Chinese-speaking minority receive[d] fewer benefits than the English-speaking majority\" from the city's schools. As recipients of federal educational dollars subject to Title VI, the school system had \"contractually\" obligated itself to reform its instructional policies to ensure the Chinese-speaking minority the same educational benefits as the English-speaking majority. Lau therefore seemed to imply that Section 601 directly outlawed policies with discriminatory effects , irrespective of their motivating intent—a form of discrimination now commonly known as disparate impact . But the Court also mixed some uncertainty into that message. Immediately after saying that they were \"rely[ing] solely on [Section] 601\" in siding with the student plaintiffs, the majority in Lau turned to recite a regulation issued by HEW, specifically addressing what recipient school districts had to do under Title VI to ensure students with \"linguistic deficiencies\" had the same \"opportunity to obtain the education generally obtained by other students in the system.\" That discussion drew a contrasting concurrence from three other Justices, all of whom agreed that the student should prevail under a disparate impact theory, but believed that the proper basis for that theory—and the result in favor of the students—was HEW's regulation implementing Title VI, not Section 601 itself. In all, though, eight Justices in Lau put down a marker in favor of disparate impact under Title VI, five seemingly under Section 601. And so, whatever the vagaries in its rationale, Lau 's basic message seemed clear: Title VI barred not just intentional discrimination, but policies with a disparate impact as well. Only a few years after handing down Lau , in its landmark ruling in Regents of the University of California v. Bakke , the Court appeared to reverse course. Bakke involved a white applicant's challenge to the affirmative action admissions policy then in use at the University of California at Davis's medical school. And like the Chinese students in Lau , Bakke objected to that policy on both constitutional and statutory grounds. To dispose of his challenge the Justices therefore had to confront the question they effectively avoided in Lau : how does Section 601's nondiscrimination mandate relate to the Fourteenth Amendment's Equal Protection Clause? None of the opinions in Bakke commanded a clear majority, but in separate opinions, five of the Justices, separately sifting through the legislative record, arrived at the same answer: Title VI's drafters intended Section 601 to \"enact[] constitutional principles,\" and nothing more. Title VI, in their view, therefore \"proscribe[d] only those racial classifications that would violate the Equal Protection Clause\" —policies that the Court had already said must involve more than just a racially disparate impact, but a provable discriminatory intent as well. In the decades since Bakke , the Court continued to divide over the basic ambiguity in Title VI—over exactly what sort of \"discrimination\" Section 601 outlawed. By the time Title VI returned to the Court in 2001, however, with Alexander v. Sandoval , a unified five-Justice majority appeared to settle on a more definite view. As Justice Scalia explained for the Sandoval majority, despite the lingering \"uncertainty regarding [Title VI's] commands,\" it seemed \"beyond dispute\" at that point that a policy with only a disparate impact did not violate Section 601. Tallying the votes in Bakke seemed to make that clear enough: on that statutory point, five Justices in Bakke explicitly agreed that Title VI should be read coextensively with the Equal Protection Clause. And as claims under that constitutional provision had already been limited to cases of provable discriminatory intent, the Sandoval majority thought it stood to reason that claims under Title VI had to be so limited as well. The difficulty, however, was Lau . There, after all, the Court seemed to say that Section 601 did prohibit policies with a racially disparate impact, irrespective of whether those effects were intentional. But as the Sandoval majority saw it, Bakke had effectively resolved that difficulty as well: to the extent Lau rested on Section 601 directly—rather than HEW's regulations —the majority in Lau had simply misread Title VI. The only discrimination Title VI directly outlawed, according to the votes in Bakke , was intentional. As far as the Sandoval Court was concerned, to the extent Lau disagreed with Bakke , Lau had already been \"rejected.\" In Sandoval the Court appeared to resolve the basic ambiguity in Title VI: the statute's central nondiscrimination mandate—Section 601—outlaws only intentional discrimination. But saying that much, the Sandoval majority also acknowledged, did not speak to whether policies with a disparate impact might still be barred by regulations issued under the rulemaking grant found in Section 602 of Title VI . Section 602, as noted, directs agencies to promulgate regulations \"to effectuate\" the antidiscrimination prohibition of Section 601 \"consistent with achievement of the objectives of the statute.\" And pursuant to that directive, all Cabinet-level federal funding agencies, along with many smaller agencies, have since issued rules and guidance under Title VI outlawing disparate impact discrimination. As this section explains, however, Sandoval seems to have placed narrower limits on what funding agencies may redress through regulations under Section 602, arguably constraining them to redress in their rulemakings the same forms of intentional discrimination outlawed by Section 601. In the courts, and especially the Supreme Court, much of the fight over Title VI has focused on definitions—what in general terms will count as unlawful \"discrimination\" under Section 601. But for the agencies charged with actually enforcing that mandate the primary concerns have tended to be more operational and programmatic: how to go about the business of reviewing and assessing particular practices under Title VI. To address those concerns, funding agencies have therefore had to look beyond the bare substantive standard in Section 601 to their rulemaking authority under Section 602. Section 602 is at once a source of authority and a command, \"authoriz[ing] and direct[ing]\" every federal funding agency to \"effectuate\" Section 601's nondiscrimination mandate \"by issuing rules, regulations, or orders of general applicability consistent with\" the \"objectives\" of its underlying funding authority. Every Cabinet-level department, among many other smaller agencies, has since done so. And given DOJ's unique coordinating authority over Title VI, those funding agencies have generally followed the rules DOJ developed for HEW in 1964, including its regulation outlawing disparate impact discrimination . Like the nondiscrimination provision in Section 601, the rulemaking authority provided by Section 602 was made deliberately broad. That breadth has produced a further point of uncertainty about the statute: what limits are there to agencies' rulemaking authority under Section 602? The Supreme Court, for its part, has never squarely addressed that question, nor the validity of the disparate-impact regulations in particular. And as explained below, the resulting ambiguity has yielded two contrasting views of what Section 602 will allow an agency to outlaw as unlawful \"discrimination\" under Title VI: (1) a largely deferential view that would give agencies broad leeway to issue \"broad prophylactic rules\" reaching conduct beyond intentional discrimination; and (2) a more exacting view under which agencies would be limited to redressing provable cases of intentional discrimination. The earliest view of Title VI's rulemaking authority was also the most expansive. In his concurring opinion in Lau , Justice Stewart set out the basic theory: because Section 602 allows agencies to promulgate rules \"effectuat[ing]\" Section 601, HEW had the authority to enact any rule that broadly furthered the purpose of deterring \"discrimination\" in federally funded programs. All the courts would require, as a formal matter, is that any rules issued under Section 602 be \"reasonably related\" to the antidiscriminatory ambitions of the statute. Only two other Justices signed on to Justice Stewart's view in Lau , and it has never been adopted by a majority of the Court. But it also has never been squarely rejected by the Court either. This more expansive view of Section 602 appears nevertheless to rest on two arguable bases. The first comes down to basic principles of administrative law. As Justice Stewart noted in Lau , the Court has generally accorded considerable latitude to agencies authoring rules pursuant to generic rulemaking provisions, on the assumption that Congress intended to defer more particular legislative decisions to their expert judgment. And thus, when presented with such broad delegations—permitting an agency, for example, to make \"such rules and regulations as may be necessary to carry out\" another statutory mandate —the courts have traditionally been inclined to defer \"to the informed experience and judgment of the agency to whom Congress delegated appropriate authority.\" Given its similarly expansive wording, Section 602 could be seen to embody much the same sort of broad rulemaking authority. In such cases, as Justice Stewart argued, and as some Justices later agreed, the test should be correspondingly lenient, asking only whether the agency's rule bears some reasonable relationship \"to the purposes of the enabling legislation.\" That leniency would arguably authorize an agency to issue \"broad prophylactic rules\" so long as they \"realiz[e] the vision laid out in\" Section 601—as arguably would a rule outlawing policies with racially disparate impacts. Apart from principles of administrative law, this more expansive view of Section 602 might also find support in a constitutional analogy, based on two of the Reconstruction Amendments. As Justice Stevens pointed out in his dissent in Guardians Association v. Civil Service Commission , the Court had at one time indicated—in a decision dating to \"the dawn of [the last] century\"—that \"an administrative regulation's conformity to statutory authority was to be measured by the same standard as a statute's conformity to constitutional authority.\" And as it happened, only a few years before Guardians , the Court had read the Fifteenth Amendment, despite \"only prohibit[ing] purposeful racial discrimination in voting,\" to allow \"Congress [to] implement that prohibition by banning voting practices that are discriminatory in effect.\" Congress could do that, according to Justice Stevens, because the Fifteenth Amendment—much like Title VI—supplements its prohibition against racially discriminatory voting policies with a provision empowering Congress \"to enforce\" that prohibition \"by appropriate legislation.\" Given the structural similarity between the amendment and Title VI, Justice Stevens saw no reason why Section 602 should give federal agencies any less authority than the Fifteenth Amendment offers Congress—including authority to outlaw policies with discriminatory effects. Justice Steven's view in Guardians , like Justice Stewart's in Lau , has never commanded a majority from the Court. That analogy may also have lost some force more recently, following the Court's arguably more restrictive decisions under the Fifteenth Amendment. But the Court has also never expressly ruled out the analogy, and it appears to be at least consistent with the way the federal courts have read another of the Reconstruction Amendments—the Thirteenth, outlawing slavery and involuntary servitude. Whether that analogy would find favor among the Justices today seems at best uncertain, however, partly for the reasons discussed below. In opposition to the early expansive reading of Section 602, a number of other Justices—and arguably a majority in Sandoval —have suggested that regulations under Section 602 must instead fit more closely with the particular purpose of Section 601: ridding federally funded programs of intentional discrimination. Sandoval , given its posture, did not squarely address disparate impact rules under Title VI; that case concerned the right of private parties to sue under a Title VI disparate impact regulation, not the validity of the underlying regulation itself. But in a suggestive footnote in his opinion for the majority, Justice Scalia expressed some doubt that those regulations could be squared with the majority's view that Section 601 bars only intentional discrimination. The majority's concern fastened less on the breadth of Section 602 than on the narrowness of Section 601. It seemed \"strange,\" Justice Scalia explained, that a rule prohibiting disparate impact could \"effectuate\" the purpose of Section 601 when that provision \"permits the very behavior that the regulations forbid.\" Or as Justice O'Connor had put the same point in her concurrence in Guardians , also involving a disparate impact claim under Title VI, it was \"difficult to fathom how the Court could uphold\" regulations outlawing discriminatory effects when, to do so, they would have to \"go well beyond \" Title VI's purpose of proscribing intentional discrimination. The majority in Sandoval , like Justice O'Connor in Guardians , seemed to signal their dissatisfaction with the \"reasonably related\" test endorsed by Justice Stewart's concurrence in Lau . Neither, however, proposed a test to replace it. To do so, however, they may well have turned to a constitutional analogy of their own —based not on the Fifteenth Amendment but the Fourteenth. Under the Fourteenth Amendment, the Court has held that Congress may legislatively enforce that amendment's guarantees of equal protection and due process of law but in doing so may not redefine what would count as violating either . By that analogy, an agency could then clearly seek to enforce Section 601's bar against intentional discrimination by enacting prophylactic regulation \"congruent and proportional\" to redressing instances of different treatment . But the agency could not substantively amplify that prohibition by adding to the types of discrimination outlawed by Section 601—as a disparate impact rule arguably would, given the Court's view in Sandoval that Section 601 does not bar a policy simply for having discriminatory effects. The Court has yet to squarely resolve which of these views of agencies' rulemaking authority under Section 602 is the right one. Regardless of which they choose, however, an agency arguably may still be able to defend its Title VI disparate impact regulations, depending on how it styles its enforcement under that regulation. Even if Section 602 is construed narrowly to permit only regulations that address intentional discrimination, it might still be argued that Title VI allows agencies to promulgate regulations addressing disparate impact in at least some circumstances. As Justice Stevens pointed out dissenting in Sandoval , one way of looking at Title VI's disparate impact regulations is as an indirect rule against intentional discrimination—only intentional discrimination in a \"more subtle form[],\" masked by an \"ostensibly race-neutral\" policy but with \"the predictable and perhaps intended consequence of materially benefitting some races at the expense of others.\" Styled that way, an agency might be able to defend its disparate impact rules as a means of \"counteract[ing] unconscious prejudices and disguised animus that escape easy classification as disparate treatment.\" In that sense, those rules would still be directed at \"uncovering discriminatory intent,\" even if only in subtler forms, such as \"covert and illicit stereotyping.\" And, for that reason, those rules would arguably also comply with Sandoval 's more exacting standard for Section 602 regulations, despite their formal focus on racial disparities. Even if styled in this way, however, a disparate impact rule under Title VI would likely face further constraints. As the Court recently explained in the context of the Fair Housing Act, an agency relying on a disparate impact theory will still need to \"point to a defendant's policy or policies causing\" the \"statistical disparity\" at issue—that the policy actually had racially discriminatory effects . And to make that showing, the agency may also need to satisfy a \"robust causality requirement,\" to \"ensure[] that [r]acial imbalance [] does not, without more, establish a prima facie case of disparate impact,\" protecting \"defendants from being held liable for racial disparities they did not create.\" What such a causality requirement might entail as a practical matter seems unclear at this point. Nevertheless, recasting the argument over Section 602 in these terms might help sharpen some of the debate around Title VI, by redirecting the discussion away from the abstract concerns about rulemaking authority to the more basic and concrete issue of what disparate impact liability may—or may not—involve. Although Title VI applies to funds distributed by every federal agency, much of the doctrine under the statute has been shaped by its use in the public schools. That doctrinal story has accordingly centered on one agency in particular: the Office for Civil Rights (OCR), originally housed in HEW but today located in the U.S. Department of Education (ED). As the agency primarily responsible for enforcing Title VI in the public schools, as well as nearly all colleges and universities, OCR handles every year a large volume and variety of claims alleging race and national origin discrimination. Some of the most common types of those claims are discussed below, beginning first with a brief overview of how ED, as a matter of policy, processes the complaints it receives under Title VI. OCR primarily enforces Title VI through its investigation and resolution of complaints. To guide its review of those complaints, OCR has published a detailed manual of procedures—known as the Case Processing Manual (CPM)—by which it receives, analyzes, and disposes of allegations under Title VI, among other statutes within its jurisdiction. That guidance document, described below, divides OCR's enforcement into five distinct phases: Jurisdictional Evaluation. At the first phase of its review, OCR evaluates an allegation for its basic sufficiency—conducting an essentially jurisdictional analysis. As a part of that evaluation, OCR first examines whether an allegation has enough information in it, of the right kind. If so, OCR has to establish jurisdiction over both the subject matter of the complaint as well as the entity complained of. Thus, the allegation must state enough facts from which to infer race or national origin discrimination (subject matter jurisdiction), and the complainant must allege discrimination by a program or activity that receives ED's financial assistance (personal jurisdiction). And the allegation must also be timely: a complaint under Title VI generally must be filed with OCR within 180 calendar days of the date when the discrimination allegedly occurred. Insufficiency on any of these points may result in an allegation's dismissal without OCR's further investigation or review. After determining that it has jurisdiction over an allegation and finds it otherwise suitable for review, OCR will formally open its investigation, beginning with the issuance of informational letters to both the complainant and recipient. Those letters primarily serve to notify the parties of the allegations OCR intends to investigate and the basis for its jurisdiction, including appropriate statutory and regulatory authority. The letters also apprise the parties of OCR's role in the investigation—as a \"neutral fact-finder\"—as well as the complainant's right to bring suit in federal court regardless of how OCR administratively resolves the complaint. Facilitated Resolution. As a part of its opening letter, OCR will also inform the parties of its voluntary resolution process, called a \"Facilitated Resolution Between the Parties.\" Under that process, OCR may offer to serve as \"an impartial, confidential facilitator between the parties,\" to assist them in informally resolving the allegations before OCR formally makes any findings of its own. During those discussions OCR may accordingly suspend its investigation for up to 30 calendar days to allow negotiations to proceed in good faith; it will reinstate its investigation, however, should the parties fail to reach an agreement within that time. In no case, though, will OCR approve or otherwise endorse an agreement reached under this process, nor monitor a recipient's compliance with it. Investigation. If the parties cannot voluntarily resolve the complaint through facilitated negotiation, OCR will proceed to investigate. At any time during that investigation—which may involve OCR's review of school data, interviews with students and staff, or other measures—the recipient may still choose to negotiate a voluntary resolution with OCR, and recent resolutions suggest that this is relatively common. In such cases, OCR will issue a resolution letter memorializing the allegations and its investigation, along with the agreement resolving them. In these cases, however, OCR will generally not make any findings on the underlying allegations. In the event the recipient declines to negotiate a voluntary resolution, at the completion of its investigation OCR will issue findings on each allegation, resolving them by a preponderance of the evidence. In each case OCR will therefore explain why the evidence likelier than not supports the finding of a violation (\"non-compliance determination\") or else explain why it does not (\"insufficient evidence\"). In cases of non-compliance OCR will also propose a resolution agreement, outlining the steps for the recipient to take to resolve the allegations in question and ensure its future compliance with Title VI. A recipient generally has 90 days in which to consider and negotiate the terms of a final agreement with OCR. If the recipient and OCR fail to reach an agreement within that period, OCR will advise the recipient, by \"Letter of Impending Enforcement Action,\" that it intends to proceed to enforcement should the parties fail to reach an agreement in short order. Monitoring. Once the sides have reached an acceptable resolution agreement, OCR will monitor, on an ongoing basis, the recipient's compliance with its terms. To do so, recipients generally must agree to certain reporting requirements, ensuring OCR access to \"data and other information in a timely manner\" by which it can assure the recipient's compliance. OCR also reserves the right to \"visit the recipient, interview staff and students, and request such additional reports or data as are necessary for OCR to determine whether the recipient has fulfilled the terms and obligations of the resolution agreement.\" In some instances OCR may also choose to amend or altogether end a resolution agreement \"when it learns that circumstances have arisen that substantially change, fully resolve, or render moot, some or all of the compliance concerns that were addressed by the resolution agreement.\" Enforcement Action. Where OCR cannot negotiate or secure compliance with an acceptable resolution agreement, it may resort to either of the two enforcement mechanisms allowed by Title VI: (1) an administrative proceeding resulting in the termination or refusal of federal funds; or (2) the referral of a complaint to DOJ for litigation. Fund termination, as noted, was envisioned as the primary mechanism for enforcing Title VI, and was once aggressively used by OCR to enforce the desegregation of southern schools. Over the past several Administrations its use appears to have waned significantly, perhaps owing to an increased reliance on resolution agreements, voluntary or otherwise, to achieve compliance. OCR's administrative docket for Title VI is considerable, covering a wide variety of allegations involving race and national origin discrimination. Among the issues raised in those complaints, three appear especially common: different treatment, retaliation, and racial harassment. In 2016, for instance, OCR reported receiving some 2,400 total complaints raising issues under 17 general categories of Title VI violations. Of those, 976 alleged some form of different treatment, while another 569 complaints alleged race-based retaliation and a further 548 made claims of racial harassment. In 2015, OCR reported largely similar figures as well. The next section examines two recent examples of how OCR reviews complaints under Title VI, one involving a more typical allegation of indirect \"disparate treatment,\" and another posing a less typical allegation of direct discrimination. The single largest category of complaints OCR receives involves allegations of \"disparate treatment.\" That category covers a wide variety of conduct, covering any complaint that a recipient has singled out an individual or individuals by race for adverse treatment. Of those complaints two types are especially common: \"intentionally disciplining students differently based on race\" or else excluding them in some way. As noted, OCR will seek to confirm those allegations in either of two ways: either directly, by looking to evidence of overt discriminatory intent, or else indirectly, by establishing that any \"apparent differences in the treatment of similarly-situated students of different races\" have no legitimate, nondiscriminatory basis. And because Title VI has been read to overlap with the Equal Protection Clause, even where OCR believes a recipient has treated individuals differently by race, it still has to assess whether that treatment was a \"narrowly tailored\" means of \"meet[ing] a compelling governmental interest.\" In one recent example, OCR received a complaint from an African American student, identified only as \"Student A,\" alleging that he had been disciplined more severely than his white classmates, in violation of Title VI. As in many disciplinary cases, the student did not produce direct evidence of discrimination. And so OCR instead looked to whether there were any \"apparent differences\" in the way the school treated Student A from the way it handled \"similarly-situated students of different races,\" and if so, whether those differences had a legitimate, nondiscriminatory basis. In the course of its investigation, OCR uncovered what it believed were four apparent differences in the way the school treated Student A. First, the school had repeatedly recorded disciplinary warnings it gave Student A, but \"did not consistently record warnings given to similarly situated white students.\" Second, even though \"the Principal employed an informal progressive discipline policy\" that was applied to Student A, \"increasing the severity of the disciplinary consequence after each incident,\" a \"similarly situated white student who had a more extensive disciplinary history, did not face increasingly severe disciplinary consequences.\" Third, the evidence suggested that the school's principal \"responded more favorably\" to allegations made by a white student's mother than Student A's mother \"that other students were teasing him to entice him to engage in misconduct.\" And, finally, Student A had pointed to a specific case where a white male student had been treated more leniently for assaulting another student. The school, for its part, sought to defend some of those decisions by pointing to differences in the students' misconduct. OCR, however, disagreed: according to its investigators, the students' files bore out no meaningful differences besides the students' race. Nor did OCR accept the school's admission that in the other cases it had simply made a mistake: the quantity, frequency, and variety of those mistakes, OCR found, \"established a pattern of unjustified, discriminatory treatment on the basis of race in the discipline administered to Student A.\" That was enough, OCR concluded, to violate Title VI and its implementing regulations. Another recent case, also involving an allegation of disparate treatment, illustrates how OCR reads Title VI against the backdrop of the Equal Protection Clause. That case arose in the wake of events in Ferguson, MO, in 2014, following the fatal police shooting of an 18-year-old African American that provoked widespread protests in Ferguson and elsewhere. In response to the events there, an Illinois public school had decided to convene a special \"Black Lives Matter\" assembly, so that \"black students [could] express their frustrations\" in \"a comfortable forum.\" To do that, however, the school chose to \"limit the assembly to participation by students who self-identified as black.\" That decision, as the school district later admitted, clearly amounted to different treatment—excluding some students while admitting others solely based on whether they identified as African American. That finding alone, though, did not decide the school's liability under Title VI. Instead, OCR had to go on to examine whether the school's decision would satisfy constitutional requirements—whether the school had an \"interest in holding a racially exclusive assembly [that] was compelling and that the means [it] used [would] survive strict scrutiny.\" Looking to relevant constitutional precedent, OCR ultimately sided with the complainant: even though the school did have a compelling interest in holding a racially exclusive assembly, it had nevertheless failed \"to assess fully whether there were workable race-neutral alternatives\" or to \"conduct a flexible and individualized review of potential participants.\" The school had therefore violated Title VI, according to OCR. And to resume compliance, the school district agreed not to allow similarly exclusive assemblies again. Title VI has gone largely unchanged in the 50 years since it became law. As this report has explained, the debates over the statute have therefore centered on how the courts have read its two central provisions—Sections 601 and 602—and how federal agencies have gone about enforcing them. But Congress has the ultimate say over how Title VI works—rooted not only in its legislative power but in its authority to oversee the statute's use by federal agencies. As this section explains, recently two issues over the statute have drawn particular congressional interest: the viability of disparate impact regulations under Section 602, and the inclusion of new protected classes in Section 601. As explained earlier, with its 2001 decision in Alexander v. Sandoval , the Court seemed to cast doubt on the future of all disparate impact liability under Title VI as currently written, even when liability was premised on regulations issued under Section 602. In the last several months, following the release of a widely remarked report on school safety, the Trump Administration signaled that it may be rethinking altogether Title VI regulations that reach beyond intentional discrimination to address policies with a racially disparate impact. Given the continuing debate about the relation of Title VI's central provisions, Congress could opt to put down its own marker, by definitively clarifying Title VI's scope in either of two ways. On the one hand, Congress could make clear that Section 601 indeed prohibits only intentional discrimination, and that any rules under Section 602 may not find a recipient liable for discrimination absent proof of discriminatory intent. Congress, on the other hand, could expressly endorse disparate impact under Title VI by, for example, grafting that standard onto Section 601, as it has done in Title VII of the 1964 Civil Rights Act. That addition would unambiguously allow funding agencies to investigate policies and practices under Title VI based on their discriminatory effects, regardless of the underlying intent. In addition to clarifying the types of discrimination Title VI outlaws, Congress could also choose to revise the classes of individuals who come within its protection. One recent proposal, for example, would amend Section 601 to include \"sex (including sexual orientation and gender identity)\" along with race, color, and national origin among its protected classes. Although that or a similar amendment would clearly expand Title VI's coverage, its effects will likely hinge on how the courts choose to interpret Section 601 in light of such additions. Though a complete analysis lies beyond the scope of this report, at least two readings seem arguable. On the one hand, the courts could continue to read Section 601 to \"enact[] constitutional principles,\" in which case they would presumably review claims based on sex discrimination under a heightened standard of review, while in the case of gender identity, possibly only for basic rationality. On the other hand, to the extent that an amendment introduces a statutory protection for a class of individuals not currently recognized by the Court as a constitutionally \"suspect classification,\" that addition, especially if buttressed by supporting legislative history, could suggest that Congress had decided to amend the reach of Title VI altogether, to \"independently proscribe conduct that the Constitution does not.\" In the 50 years since becoming law Title VI has played a central role in addressing racial discrimination in the nation's schools. Title VI provides that protection in a unique way: by making the promise of nondiscrimination a condition for any program or institution that receives federal financial support. For much of its history, the debates over Title VI have fastened on two basic ambiguities in the statute: the kind of \"discrimination\" Title VI was meant to outlaw and the types of rules a funding agency could issue to effectuate that prohibition. The Supreme Court appears to have definitively resolved the first of those ambiguities: because Title VI simply \"enacts constitutional principles,\" as currently written, it prohibits only intentional discrimination. And on that basis the Court has suggested, but not definitively ruled on, how it might resolve the second ambiguity as well: to effectuate Title VI's purpose, an agency may outlaw only policies resulting from a provable discriminatory intent, not simply having a racially discriminatory effect. Whether the Court will turn that suggestion into a holding remains to be seen. Until then, however, federal agencies like OCR will likely continue to enforce Title VI consistent with constitutional standards that the Court has since read into the statute. In OCR's case, that enforcement work is already considerable, involving thousands of complaints every year culminating in significant resolutions across a wide range of schools and institutions of higher education. And in the background remains ED's ultimate authority under Title VI—to withdraw its financial support from any program or institution that refuses to comply with the statute's command that all individuals be treated equally, regardless of their race.", "summary": "Title VI of the Civil Rights Act of 1964 prohibits federally funded programs, activities, and institutions from discriminating based on race, color, or national origin. In its current form, largely unchanged since its adoption, Title VI incorporates a number of unique features. Besides barring federally funded programs from discriminating based on race, Title VI also authorizes and directs all federal funding agencies to promulgate rules effectuating that nondiscrimination mandate. Those rules were also made subject to presidential approval, an authority since delegated to the Attorney General by executive order. To enforce Title VI, agencies also have at their disposal a uniquely powerful tool: the termination or refusal to provide federal financial support to an institution or program seeking it. Although this power to withdraw federal funds was envisioned as the primary mechanism for enforcing Title VI, that authority was also hedged with a range of procedural requirements designed to spur agencies to resolve complaints against recipients through voluntary agreements. In the 50 years since Title VI became law much of the debate over the statute has centered on how the courts have read its two central provisions—Sections 601 and 602—and how federal agencies have gone about enforcing them. In the courts those debates have especially focused on what counts as unlawful \"discrimination\" under Section 601. The courts have long agreed that Title VI bars federally funded programs from intentionally singling out individuals by race for adverse treatment. In its first case involving Title VI the Supreme Court suggested that Section 601 might also reach beyond intentional discrimination to bar the use of policies with a disparate impact—policies that, irrespective of the intent, impose a discriminatory effect on different racial groups. With its 2001 ruling in Alexander v Sandoval, the Court appeared to put that interpretive question to rest: Title VI directly prohibits only intentional discrimination. For the agencies charged with enforcing Title VI, the primary concerns have tended to be more operational and programmatic—how to go about the business of reviewing and assessing particular practices under Section 602 of the statute. Section 602 authorizes and directs agencies to issue regulations \"effectuat[ing]\" Section 601. The breadth of that authority has produced a further point of uncertainty about the statute: what limits are there to funding agencies' rulemaking authority under Title VI? So far, two divergent views have emerged from the Court's decisions: (1) a largely deferential view that would give agencies leeway to issue prophylactic rules reaching conduct beyond intentional discrimination, and (2) a more exacting view under which agencies may redress only provable cases of intentional discrimination. Although Title VI's nondiscrimination prohibition accompanies nearly all awards of federal financial support, much of the statute's doctrine has been shaped by its use in the public schools. That doctrinal history has centered on one agency in particular: the Office for Civil Rights (OCR) in the U.S. Department of Education (ED). Title VI continues to play a central part in OCR's mission of protecting civil rights on campuses at all educational levels, and in institutions both public and private. OCR handles a large volume and variety of claims alleging race and national origin discrimination, which it administratively resolves through a series of investigative procedures laid out in its Case Processing Manual. Although the types of allegations OCR investigates vary, three major categories of complaint occupy much of its docket: disparate treatment, retaliation, and racial harassment. Congress has the ultimate say over how Title VI works—rooted not only in its legislative power but in its authority to oversee the statute's enforcement. In recent years two questions surrounding Title VI have drawn particular congressional interest: the viability of disparate impact regulations under Section 602 and the possible inclusion of new protected classes in Section 601. No matter how Congress may choose to address those subjects, however, they are likely only to raise further questions about the future of this landmark civil rights law.", "document_type": "crs"}
{"report": "Kuwait's optimism after the 2003 fall of its nemesis, Saddam Hussein, soured after the January 15, 2006, death of Amir (ruler) Jabir Ahmad al-Jabir Al Sabah. From then until 2013, Kuwait underwent repeated political crises that produced economic stagnation. Under Kuwait's 1962 constitution, an Amir (Arabic word for prince, but which is also taken as \"ruler\") is the head of state and ruler of Kuwait. He is Commander-in-Chief of the Armed Forces, appoints all judges, and can suspend the National Assembly. The Amir appoints a Prime Minister as head of government, who in turn appoints a cabinet. The Prime Minister has always been a member of the Sabah family, and until 2003 the Prime Minister and Crown Prince/heir apparent posts were held by a single person. It is typical of Kuwaiti cabinets that most of the key ministries (defense, foreign policy, and finance) are led by Sabah family members. At the time of Amir Jabir's death, his designated successor, Shaykh Sa'ad bin Abdullah Al Sabah, was infirm. A brief succession dispute among rival branches of the ruling Al Sabah family was resolved with then-Prime Minister Shaykh Sabah al-Ahmad al-Jabir Al Sabah, the younger brother of the late Amir, becoming Amir on January 29, 2006, although the long-standing tacit agreement to alternate succession between the Jabir and Salem branches of the family was suspended. Amir Sabah appointed two members of his Jabir branch as Crown Prince/heir apparent and as prime minister (Shaykh Nawwaf al-Ahmad Al Sabah and Shaykh Nasser al Muhammad al-Ahmad Al Sabah respectively). The succession dispute was unprecedented for the involvement of an elected legislature in replacing a Kuwait leader. Amir Sabah tends to be more directly involved in governance than was his predecessor. He is 87 years old, but remains actively engaged in governing. Still, there reportedly is growing discussion within Al Sabah circles about the succession. The current Prime Minister, Shaykh Jabir al-Mubarak Al Sabah, has been in office since December 2011. The National Assembly, established by Kuwait's November 1962 constitution, is the longest-serving all-elected body among the Gulf monarchies. Fifty seats are elected, and up to 15 members of the cabinet serve in the Assembly ex-officio . The government has expanded the electorate gradually: in the 1990s, the government extended the vote to sons of naturalized Kuwaitis and Kuwaitis naturalized for at least 20 (as opposed to 30) years. Kuwaiti women obtained suffrage rights when the National Assembly passed a government bill to that effect in May 2005. In recent elections, about 400,000 Kuwaitis have been eligible to vote. Kuwait's National Assembly has more scope of authority than any legislative or consultative body in the GCC states. It can draft legislation, rather than merely act on legislation introduced by the government. The Assembly does not confirm cabinet nominees (individually or en bloc), but it frequently questions ministers (\"grilling\"). It can, by simple majority, remove ministers in a vote of \"no confidence,\" and can oust a prime minister by voting \"inability to cooperate with the government.\" The Assembly reviews government decrees issued during periods of Assembly suspension. Kuwait's leaders have, on nine occasions (1976-1981, 1986-1992, 2003, 2006, 2008, 2009, 2011, 2012, and 2016), used their constitutional authority to dissolve the Assembly. Suspension mandates new elections within 60 days. Some oppositionists seek a constitutional monarchy in which an elected Assembly majority would name a Prime Minister, who would form a cabinet. Political parties are not permitted, and factions compete in Assembly elections as \"currents,\" \"trends,\" or \"political societies.\" These factions also organize at a parallel traditional Kuwaiti forum called the diwaniyya —informal evening social gatherings, hosted by elites of all ideologies. Factions in Kuwait generally group as follows. \" T ribalists .\" Generally less educated but who dominate two out of the five electoral districts. At times, some tribalists in the Assembly have grouped into a faction widely referred to as \"service deputies\"—members primarily focused on steering government largesse and patronage to their constituents. Shia s. Most Shias in the Assembly are Islamists, organized in a bloc called the National Islamic Alliance. These deputies tend to side with the government, perhaps out of concern about Sunni Islamists. Women . Elected women deputies have tended to align with the government. \"Liberals. \" Highly educated and mostly secular elites, many of whom supported Arab nationalist movements in the 1960s and 1970s. In prior years adherents of this view banded together in the \"Kuwait Democratic Forum\" political society. Sunni Islamists . There are two major Sunni Islamist tendencies in Kuwait: supporters of the Muslim Brotherhood, and harder-line \"Salafists.\" Muslim Brotherhood supporters operate in Kuwait under a banner called the Islamic Constitutional Movement (ICM), with no record of violence. However, the government has sought to disband the Brotherhood's Kuwait charity arm, Islah . Youths . Since 2008, Kuwaiti youth groups have organized to support \"liberal\" deputies, using such names as the \"Orange Movement\" or \"Fifth Fence.\" These groups participated in street protests in Kuwait during the 2011 Arab uprisings. Disputes between the Al Sabah and oppositionists in the Assembly after Amir Jabir's death in 2006 manifested as repeated Assembly suspensions and elections, none of which has resolved differences over the power balance between the executive and the Assembly. June 29, 2006, E lection . Five months after taking power, Amir Sabah suspended the Assembly in May 2006 to prevent oppositionists from questioning the Prime Minister over the government's refusal to reduce the number of electoral districts to 5 (from 25). The proposal sought to reduce \"vote buying\" and the effects of intratribal politics. In elections set for June 29, 2006, the opposition, backed by youths supporting the \"Orange\" banner, won 34 out of the 50 seats. Women were allowed to vote and run for the first time, but none of the 27 women won. After the election, the government reduced the number of electoral districts to 5. May 17, 2008 , Election . In March 2008, amid Assembly demands for government employee pay raises, the Amir dissolved the Assembly and set new elections for May 17, 2008. Sunni Islamists and conservative tribal leaders won 24 seats, and \"liberals\" won seven. Progovernment and other independent tribalists and Shias held the remaining 19 seats. No woman was elected. May 16, 2009 , Election . Amid an Assembly demand to question the Prime Minister for alleged misuse of public funds, the Amir suspended the Assembly and set elections for May 16, 2009. More than 20 new parliamentarians were elected, including 4 women (the first ever elected). Two votes of no confidence in the Prime Minister (in December 2009 and January 2011) failed, although the second vote was narrow (22 of the 50 Assembly deputies voted no confidence). The Arab uprisings that began in early 2011 broadened Kuwait's opposition. In January 2011, opposition deputies, supported by youths using names such as the \"Fifth Fence,\" forced the Interior Minister to resign for failing to prevent the torture to death of a man in custody. In March 2011, a Shia parliamentarian's request to \"grill\" the Foreign Minister about Kuwait's sending of naval forces to support Bahrain's Sunni minority government against a Shia-led uprising prompted a cabinet resignation and reshuffling. Following reports that two Kuwaiti banks had deposited $92 million into the accounts of several parliamentarians, thousands protested in September 2011, compelling the cabinet to adopt an anticorruption law. On November 16, 2011, oppositionists in and outside the Assembly stormed the Assembly building, demanding the Prime Minister's resignation. On November 28, 2011, he did so, and the Amir appointed another royal family member, then-Defense Minister Shaykh Jabir al-Mubarak Al Sabah. He was sworn in without first naming a new cabinet, a technical constitutional breach. February 2, 2012, Election . On December 6, 2011, Amir Sabah dissolved the National Assembly and set new elections for February 2, 2012 (within the mandated 60 days). About 20 opposition deputies competed as one \"Opposition Bloc,\" supported by youth leaders, advocating a fully elected government and legalization of political parties. Opposition candidates won 32 of the 50 seats, but none of the 19 woman candidates was elected. Turnout was about 62%. A leading opposition figure, Ahmad al-Sadun, returned to the Speaker post he held during 1985-1999, replacing the progovernment Jassim Al-Khurafi. The Prime Minister appointed four oppositionists to the cabinet. In June 2012, when the Assembly requested to grill the Interior Minister, the Amir exercised his authority, under Article 106 of the constitution, to suspend the Assembly for one month (renewable for two months, with the concurrence of the Assembly). December 2012 Election Triggered by Court Decision . On June 20, 2012, the constitutional court voided the December 2011 Assembly suspension on technical grounds and reinstated the May 2009 Assembly. The Amir set new elections for December 1, 2012, and decreed that each voter would cast a ballot for one candidate (per district), rather than four. In October 2012, an estimated 50,000-150,000 protesters called the decree an effort to complicate opposition efforts to forge alliances. The government responded by banning large public gatherings. A boycott by Sunni Islamist factions lowered turnout to 40% and produced a \"progovernment\" Assembly, including an unprecedented number of Shias (17). Three women were elected, as were some independent Sunni Islamists. Another Court-Triggered Election . On June 16, 2013, the Constitutional Court upheld the Amir's decree that each person would vote for only one candidate per district (see above), but dissolved the Assembly on the basis of improper technicalities in the Amir's election decree. New elections—the sixth in five years—were held on July 27, 2013, and eight women ran (out of 418 candidates registered). Several opposition groups, including the ICM, boycotted again, producing another progovernment Assembly that included nine Shias and several tribalists. Two women initially won seats, but a miscount deprived one of them of her seat, and the other resigned in 2014. Shaykh Jabir continued as Prime Minister, and his cabinet included one Shia and four Salafists. November 2016 Election . Public demonstrations generally subsided after 2013, and oppositionists indicated they would participate in the next Assembly elections. Citing \"circumstances in the region\" (an apparent reference to the Islamic State challenge and conflicts in Syria and Yemen), the Amir suspended the National Assembly and set new elections for November 26, 2016—earlier than planned. Of the 454 candidates, 15 were women. The main opposition political societies participated, and the vote produced an Assembly roughly split between progovernment and opposition deputies. The State Department called the elections \"generally free and fair.\" Reflecting its altered balance of factions, the Assembly \"grilled\" the Prime Minister in 2017 for \"administrative regularities.\" To forestall further Assembly challenges, the Amir dissolved the cabinet in October 2017. A new government was appointed on December 11, 2017, with a policy outlook similar to that of the previous cabinet. The Amir's son was appointed First Deputy Prime Minister and Defense Minister. Two of the appointees were women—the Minister of Social and Labor Affairs, and the Minister of State for Housing and for Services Affairs. The next National Assembly elections are due to be held in 2020. Elections for vacant seats are held periodically, including by-elections for two vacant seats to be held in March 2019. On broad human rights issues, the State Department identifies the principal human rights problems in Kuwait as allegations of torture of detainees; political prisoners; restrictions on freedom of speech, including criminalization of criticism of government officials and defamation of religion; limited rights for a stateless population referred to as Bidoon s ; trafficking in persons; criminalization of male same-sex sexual activity; and reports of forced labor, especially among foreign workers. Since 2011, Kuwait's government has increasingly imprisoned and revoked the citizenship of social media critics for \"insulting the Amir,\" tarnishing Kuwait's reputation for political tolerance. In 2017, Kuwait also revived, after a four-year hiatus, the practice of executions by executing seven prisoners—one of which was a member of the ruling family—for capital offenses. Most were expatriates. Of the 140 Gulf-based activists identified in November 2016 by Human Rights Watch as struggling against government repression, 44 are from Kuwait. Two of the most prominent independent human rights organizations in Kuwait are the Kuwait Society for Human Rights and the Kuwait Association for the Basic Evaluation of Human Rights, both of which have been allowed access to Kuwait's prisons. U.S. democracy programs in Kuwait funds discussions with Kuwaiti leaders, public diplomacy, training civil society activists, enhancing the capabilities of independent Kuwaiti media, promoting women's rights, and providing a broad spectrum of educational opportunities. However, published readouts of most high-level U.S.-Kuwait meetings indicate that U.S.-Kuwait discussions focus mostly on security and regional issues. The National Endowment for Democracy, which obtains funds from the State Department, has in recent years given grants to Kuwaiti groups that promote civil society, human rights, women's rights, and the rights of noncitizens in Kuwait. Women enjoy substantial, but not equal, rights in Kuwait. Women serve in national appointed positions and, since 2006, have been able to run and vote in National Assembly elections. Women in Kuwait can drive, and many women own businesses. An estimated 16% of the oil sector workforce is female. Women run several nongovernmental organizations, such as the Kuwait Women's Cultural and Social Society, dedicated to improving rights for women. Still, Kuwait remains a traditional society and Islamists who want to limit women's rights have substantial influence. The law does not specifically prohibit domestic violence, although courts try such cases as assault. Kuwaiti women who marry non-Kuwaiti men cannot give their spouses or children Kuwaiti citizenship. Numerous international reports assert that violence, particularly against expatriate domestic workers, is frequent. Female police officers in public places combat sexual harassment. For eight years ending in 2015, Kuwait was designated by the State Department's Trafficking in Persons report as \"Tier Three\" (worst level). Kuwait's rating was assessed in the 2016, 2017, and 2018 reports as \"Tier 2: Watch List,\" on the grounds that it is making significant efforts to meet minimum standards for the elimination of trafficking in persons. The 2018 report credited Kuwait for implementing a labor law that prohibits employers from confiscating domestic workers' passports, increases penalties for employers who engage in unscrupulous recruiting practices, makes more aggressive efforts to investigate and prosecute traffickers, and funds a five-year national strategy to combat trafficking in persons. Over many years, there have been repeated reports of beatings and rapes of domestic workers by their Kuwaiti employers, occasionally causing diplomatic difficulties for Kuwait. In July 2016, Kuwait set a minimum monthly wage for maids working in Kuwait, almost all of whom are expatriate women. In February 2018, following reports that a Filipina maid had been found dead in an apartment freezer in Kuwait, Philippines President Rodrigo Duterte barred travel by Philippines citizens to Kuwait. In April 2018, Kuwait expelled the Philippines' ambassador and recalled its ambassador from Manila. Kuwait's labor laws protect the right of workers to form and join unions, conduct legal strikes, and bargain collectively, but contain significant restrictions. The government allows one trade union per occupation, but the only legal trade federation is the Kuwait Trade Union Federation (KTUF). Foreign workers, with the exception of domestic workers, are allowed to join unions. Since 2011, strikes have taken place among customs officers and employees of Kuwait Airways, and oil workers conducted a three-day strike in April 2016. In 2014, the government prevented a strike by Kuwait Petroleum Company employees by threatening to imprison strikers. Non-Gulf Arabs, Asians, and stateless residents continue to face discrimination largely because of the perception that they are seeking to take advantage of generous Kuwaiti social benefits. The legal status of the approximately 100,000 stateless persons (\"bidoons,\" the Arabic word for \"without\"), who have no proof of citizenship but claim that they have lived in Kuwait for many generations, has vexed Kuwait for decades. The U.N. High Commission on Refugees (UNHCR) estimates that about 43,000 of the bidoons have a legitimate claim to citizenship. In March 2011, the government set a deadline of 2017 to resolve the status of the bidoons. That deadline was not met, although over the past few years, the government has been giving citizenship to small numbers of bidoons who were children of soldiers killed resisting the 1990 Iraqi invasion of Kuwait. In 2017, the government opened a hospital closed to noncitizens. Successive State Department human rights reports have asserted that the government does not always respect constitutional provisions for freedom of speech and the press. Governmental press censorship ended in 1992, fostering the growth of a vibrant press, but the Press and Publications Law establishes topics that are off limits for publication and discussion. Publishers and bloggers must be licensed by the Ministry of Information. Kuwait (and other GCC states) has increasingly used and enacted laws against the use of social media to criticize the government. Kuwait's penal code (Article 25) provides for up to five years in jail for \"objecting to the rights and authorities of the Amir or faulting him.\" In July 2015, Kuwait enacted a cybercrimes law that punishes insulting religious figures, criticizing the Amir, or harming Kuwait's relations with other countries. Since 2014, the government has revoked the citizenship of some naturalized Kuwaitis for criticizing the government, but Kuwait-born citizens cannot legally have their citizenship revoked. Recent State Department religious freedom reports have noted little change in Kuwait's respect for religious freedoms. Of the 30% of Kuwait's population that are Shia Muslims, about half are Arabs originally from Saudi Arabia, and half are of Persian origin. Kuwaiti Shias are well represented in the rank and file of the military and security apparatus as well as government institutions, and are able to select their own clerics without government interference. A national unity law prohibits \"stirring sectarian strife,\" and the government continues to prosecute Sunnis for alleged violations. However, Kuwaiti Shias continue to report official discrimination, including limited access to religious education and places of worship. In contrast to some of the other Gulf states, there is no registration requirement for religious groups, but all non-Muslim religious groups must obtain a license to establish an official place of worship. Religious groups are generally able to worship without interference. Members of these groups report difficulties obtaining permission to construct new facilities. Despite opposition from Kuwaiti Islamists, the government has licensed seven Christian churches to serve the approximately 750,000 Christians in Kuwait (almost all are expatriates): Protestant, Roman Catholic, Greek Catholic (Melkite), Coptic Orthodox, Armenian Orthodox, Greek Orthodox, and Anglican. Members of religions not sanctioned in the Quran—including about 400 Baha'i's, 100,000 Buddhists, 100,000 Hindus, and 10,000 Sikhs—are mostly noncitizens working in Kuwait. In addition to a few hundred Christians, there are some Baha'i citizens. Kuwait was not strategically or politically close to the United States until the Iran-Iraq War (1980-1988), when Kuwait—a backer of Iraq—sought U.S. help against Iranian attacks. A U.S. consulate opened in Kuwait in October 1951 and was elevated to an embassy upon Kuwait's independence from Britain in 1961. Kuwait was the first Gulf state to establish relations with the Soviet Union in the 1960s, perhaps reflecting the political strength in Kuwait of relatively left-wing figures. Lawrence Robert Silverman is U.S. Ambassador to Kuwait. Iraq's invasion of Kuwait in August 1990, and the U.S. role in ending the Iraqi occupation, deepened the U.S.-Kuwait defense relationship. A formal bilateral Defense Cooperation Agreement (DCA) was signed on September 19, 1991, seven months after the U.S.-led expulsion of Iraqi forces from Kuwait in the 1991 Operation Desert Storm. The DCA had an initial duration of 10 years, but remains in effect. The text is classified, but reportedly provides for mutual discussions in the event of a crisis; joint military exercises; U.S. evaluation of, advice to, and training of Kuwaiti forces; U.S. arms sales; prepositioning of U.S. military equipment; and U.S. access to a range of Kuwaiti facilities. The DCA includes a Status of Forces Agreement (SOFA) that provides that U.S. forces in Kuwait be subject to U.S. rather than Kuwaiti law—a common feature of such accords. The visit of Amir Sabah to Washington, DC, on September 8, 2017, included convening of the second U.S.-Kuwait \"Strategic Dialogue,\" which reaffirmed the U.S. commitment to enhance Kuwait's military capabilities. During a December 3-5, 2017, visit to Kuwait, then-Defense Secretary James Mattis said that the U.S.-Kuwait military relationship is \"very close.\" The Amir has met with President Trump on three occasions, most recently September 5, 2018, focusing on regional issues including the U.S. concept of an anti-Iran Middle East Strategic Alliance (MESA). Another U.S.-Kuwait Strategic Dialogue meeting was to be held during Secretary of State Michael Pompeo's trip to the Gulf states in January 2019, but the Secretary was compelled to return to the United States before reaching Kuwait due to a death in his family. Kuwait's military has regained its pre-Iraq invasion strength of 17,000. U.S. officials say that the U.S. training and mentorship has improved the quality of the Kuwaiti military, particularly the Air Force. Since the U.S. withdrawal from Iraq in 2011, there have been about 13,500 U.S. troops in Kuwait under the DCA —constituting more than one-third of the 35,000 total U.S. forces in the Gulf. Defense Secretary Mattis noted during his December 2017 visit to Kuwait that only Germany, Japan, and South Korea host more U.S. forces than Kuwait does. The U.S. force includes Army combat troops, not purely support forces, giving the United States the capability to project ground force power in the region. Each spring, these forces participate in an annual three-week \"Eagle Resolve\" military exercise with forces from Kuwait and other GCC states. As discussed below, Kuwait hosts the headquarters for the U.S.-led operations against the Islamic State (Operation Inherent Resolve) and has made its military facilities available to coalition partners in that military campaign. U.S. forces in Kuwait are stationed at several facilities that include Camp Arifjan (the main U.S. headquarters in Kuwait, 40 miles south of Kuwait City); a desert training base and firing range called Camp Buehring (near the border with Saudi Arabia); Ali al-Salem Air Base; Shaykh Ahmad al-Jabir Air Base; and a naval facility called Camp Patriot. Under the DCA, the United States maintains 2,200 Mine Resistant Ambush Protected (MRAP) vehicles in Kuwait. U.S. armor prepositioned in Kuwait was used for the 2003 invasion of Iraq. (In December 2005, U.S. forces vacated Camp Doha, the headquarters for U.S. forces in Kuwait during the 1990s.) Recognizing Kuwait's consistent and multifaceted cooperation with the United States, on April 1, 2004, the Bush Administration designated Kuwait as a \"major non-NATO ally (MNNA),\" a designation held by only one other Gulf state (Bahrain). The designation opens Kuwait to increased defense-related research and development cooperation with the United States, but does not expedite U.S. executive branch approval of arms sales to Kuwait. The following sections discuss U.S.-Kuwait defense cooperation in recent regional conflicts. Iran-Iraq War . During the Iran-Iraq War, Iran had sought to compel Kuwait to end its financial and logistical support for Iraq by striking Kuwaiti oil facilities, such as the Al Ahmadi terminal, with cruise missiles. In 1987-1988, the United States established a U.S. naval escort and tanker reflagging program to protect Kuwaiti and international shipping from Iranian naval attacks (Operation Earnest Will). As part of the skirmishes between the United States and Iran in the course of that operation, Iran attacked a Kuwaiti oil installation (Sea Island terminal). Operation Desert Storm . Asserting that Kuwait was one of Iraq's key financiers during its fight against Iran in the Iran-Iraq War, Kuwait's leaders were shaken by the August 2, 1990, Iraqi invasion of Kuwait. Most experts believe that the invasion was a result of Saddam Hussein's intent to dominate the Persian Gulf. Iraq's occupation lasted until U.S.-led coalition forces of nearly 500,000 expelled Iraqi forces from Kuwait in \"Operation Desert Storm\" (January 16, 1991-February 28, 1991). Kuwait's leaders, who spent the occupation period in Saudi Arabia, were restored to power. Kuwait paid $16.059 billion to offset the U.S. incremental war costs. Iraq Containment Operations ( 199 1-2003 ) . After the 1991 war, about 4,000 U.S. military personnel—and enough prepositioned U.S. armor to outfit two combat brigades—were stationed at Kuwaiti facilities to contain Iraq. The 1992-2003 enforcement of a \"no fly zone\" over southern Iraq (Operation Southern Watch, OSW) involved 1,000 U.S. Air Force personnel deployed at Kuwaiti air bases. Kuwait contributed about $200 million per year for U.S. costs of these operations, and two-thirds of the $51 million per year U.N. budget for the 1991-2003 Iraq-Kuwait Observer Mission (UNIKOM) that monitored the Iraq-Kuwait border. Kuwait also hosted U.S. forces en route to participate in Operation Enduring Freedom in Afghanistan. Operation Iraqi Freedom (OIF) and Post-Saddam Iraq . Kuwait supported the U.S. decision to militarily overthrow Saddam Hussein by hosting the bulk of the U.S. OIF force of about 250,000, as well as the other coalition troops that entered Iraq in March 2003. Kuwait closed off its entire northern half for weeks before the invasion; allowed U.S. use of two air bases, its international airport, and sea ports; and provided $266 million to support the combat. Kuwaiti forces did not enter Iraq. During 2003-2011, there were about 25,000 U.S. troops based in Kuwait, not including those deploying to Iraq, and Kuwait was the gateway for U.S. troops deploying to that war zone. According to Defense Department budget documents, Kuwait contributed about $210 million per year in similar in-kind support to help defray the costs incurred by the U.S. military personnel that rotated through Kuwait into or out of Iraq during 2003-2011. Kuwait has supported efforts to promote greater military coordination among the GCC countries, including the GCC decision in 2013 to form a joint military command. Kuwait has also sought cooperation with other non-Arab U.S. partners. In December 2011, NATO and Kuwait began discussing opening a NATO center in Kuwait City as part of the Istanbul Cooperation Initiative (ICI) initiated in 2004. Kuwait joined the ICI in December 2004. The NATO center, formally titled the NATO-ICI Regional Center, opened on January 24, 2017, in a formal ceremony attended by NATO Secretary-General Jens Stoltenberg. On October 1, 2018, the NATO-ICI Regional Center held its first annual meeting to review the center's performance, discussing programs including maritime security, cybersecurity, and protection against the use of weapons of mass destruction. On November 26, 2018, Kuwait opened a diplomatic office at NATO. In late November 2017, Kuwait signed an agreement with France to strengthen their defense cooperation. In November 2018, the two countries held ground forces exercises in Kuwait. As do the other manpower-short GCC states, Kuwait has enlisted some military help from Pakistan; in April 2014, Kuwait set up an office in Pakistan to recruit Pakistani trainers for Kuwaiti soldiers. U.S. arms sales to Kuwait are intended, at least in part, to promote interoperability with U.S. forces. Kuwait is considered a wealthy state that can fund its own purchases. Kuwait has, in some years, received small amounts of U.S. assistance in order to qualify Kuwait for a discount to send its officers for training in the United States. As part of the U.S. effort to promote U.S. defense relations with the GCC as a whole, rather than individually, a December 16, 2013, Presidential Determination authorized U.S. defense sales to the GCC. U.S. arms sales have sought to enhance Kuwait's capability and the interoperability of its military with U.S. forces. Because of its ample financial resources, Kuwait is not eligible to receive U.S. excess defense articles. Major U.S. Foreign Military Sales (FMS) include the following: Missile Defense System s . In 1992, Kuwait bought five Patriot antimissile fire units, which were delivered by 1998. The system intercepted Iraqi missiles during the 2003 Iraq War. In July 2012, the Administration notified a sale of 60 Patriot Advanced Capability (\"PAC-3\") missiles and 20 Patriot launching stations, plus associated equipment, valued at $4.2 billion. Kuwait has not announced whether it will buy the more sophisticated Theater High Altitude Air Defense (THAAD) missile defense system that the United States has offered to the Gulf states. The United States also has deployed four U.S.-owned Patriot systems in Kuwait since the 1991 Gulf War, but the United States announced on September 26, 2018, that it was redeploying that system, as well as U.S. Patriots in Bahrain and Jordan, to areas pertinent to U.S. strategic competition with Russia and China. Combat Aircraft /F-18s . The core of Kuwait's fleet of combat aircraft is 40 F/A-18 combat aircraft Kuwait bought in 1992. In mid-2015, Kuwait asked to buy up to 40 additional F/A-18s, and the following year expressed frustration at delays in the DOD approval process, threatening to buy 28 Eurofighters instead. The Obama Administration notified to Congress on November 17, 2016, the potential sale of up to 32 F-18s to Kuwait along with support, equipment, and training. On November 28, 2016, U.S. officials stated that Kuwait had proceeded to order 28 of the jets—an agreement with a value of $5 billion. Tanks . In 1993, Kuwait bought 218 M1A2 tanks at a value of $1.9 billion. Delivery was completed in 1998. On October 16, 2017, the Defense Security Cooperation Agency notified Congress of a determination to sell Kuwait new tank hulls, armament, and engines for its U.S.-made tank force, at an estimated sale value of $29 million. Apache Helicopters . In September 2002, Kuwait ordered 16 AH-64 (Apache) helicopters equipped with the Longbow fire-control system, valued at about $940 million. Kuwait reportedly is seeking to buy additional Apaches. Tactical Missiles . In 2008, Kuwait bought 120 AIM-120C-7 Advanced Medium Range Air-to-Air Missiles (AMRAAM), along with equipment and services, with a total value of $178 million. In February 2012, the Administration notified Congress of a sale of 80 AIM-9X-2 SIDEWINDER missiles and associated parts and support, with an estimated value of $105 million. On July 30, 3018, DSCA notified Congress of a potential sale to Kuwait of 300 Hellfire air-to-ground missiles, with an estimated value of $30.4 million. Kuwait already has Hellfires in its inventory, according to DSCA. DSCA announced in June 2014, that Kuwait would fund $1.7 billion for the U.S. Army Corps of Engineers to build a Kuwait Armed Forces Hospital. In December 2015 Kuwait's government asked the National Assembly to approve $20 billion in additional funds for arms purchases. The funds will presumably pay for the F-18s Kuwait has ordered, as well as for additional U.S. Apache helicopters, French naval vessels and light armored vehicles, and Russian-made missile systems and heavy artillery. In some past years, Kuwait received very small amounts of funding under the International Military Education and Training (IMET) program—for the primary purpose of earning Kuwait discounts on the training it pays for its officers to undergo in the United States. It received $19,000 in IMET in FY2007, $14,000 in FY2008, and $10,000 in FY2010. Approximately 200 Kuwaiti military personnel study intelligence, pilot training, and other disciplines at various U.S. military institutions. Kuwait spends a total of about $10 million per year on this program. After the United States, Kuwait's most important alliances are with the other GCC states. Kuwait has tended to act within a GCC consensus and to try to preserve GCC unity. Kuwaiti leaders argue for GCC unity as the optimal means for dealing with regional threats. Amir Sabah has been the key Gulf mediator of the intra-GCC rift that erupted in June 2017 when Saudi Arabia, UAE, and Bahrain—asserting that Qatar implements policies fundamentally at odds with other GCC states—broke relations with Qatar and denied it land, air, and sea access to their territories. Then-Secretary of State Rex Tillerson conducted unsuccessful \"shuttle diplomacy\" on the issue from Kuwait in July 2017. After Amir Sabah's meeting with President Trump in September 2017, President Trump brokered brief direct talks between Qatar's Amir and Saudi Arabia's heir apparent, Crown Prince Mohammad bin Salman Al Saud. Kuwait convened the annual GCC summit on December 4, 2017), but Amir Sabah adjourned it after a few hours. The rift reportedly was a focus of Amir Sabah's meeting with President Trump on September 5, 2018, but, with no apparent imminent resolution of the rift, the Administration has repeatedly postponed a U.S.-GCC summit planned first planned for early 2018. Kuwait's reluctance to adopt the Saudi/UAE/Bahrain hard-line position on Qatar reportedly caused the abbreviation of the visit of Saudi Crown Prince Mohammad bin Salman Al Saud to Kuwait on September 30, 2018—his first visit to a Gulf state since becoming Crown Prince. In support of a resolution of the rift, Kuwait hosted the military chiefs of staff of the GCC, Egypt, and Jordan, as well as the commander of U.S. Central Command, on September 12, 2018. Kuwait did not join Saudi Arabia, Bahrain, and UAE in withdrawing their ambassadors from Qatar for several months in 2014 over similar issues. Kuwait has sometimes acted militarily to defend GCC leaderships. Kuwait sent a naval unit to support the March 14, 2011, intervention of the GCC's \"Peninsula Shield\" unit to assist Bahraini security forces, but did not send ground troops into Bahrain. The Kuwaiti naval unit departed in July 2011. Kuwait's involvement came despite opposition from some Kuwaiti Shias. Kuwait has built political ties to the Shia-dominated government in Iraq in order to move beyond the legacy of the Saddam era invasion of Kuwait and to prevent any Iraqi Shia-led violence in Kuwait such as occurred in the 1980s. On July 18, 2008, Kuwait named its first ambassador to Iraq since the 1990 Iraqi invasion. On January 12, 2011, then-Prime Minister Nasser became the first Kuwait Prime Minister to visit Iraq since the 1990 invasion. Then-Iraqi Prime Minister Nuri al-Maliki visited Kuwait in 2011 and 2012, paving the way for Amir Sabah's attendance at the March 27-29, 2012, Arab League summit in Baghdad that marked Iraq's return to the Arab fold. The speaker of Kuwait's National Assembly visited Iraq on February 28, 2019, to mark the anniversary of the liberation from the Iraqi invasion. As part of its outreach to post-Saddam Iraq, Kuwait ran a humanitarian operation center (HOC) that gave over $550 million in assistance to Iraqis from 2003 to 2011. In 2008, Kuwait hosted a regional conference on Iraq's stability attended by the United States and Iran. In 2018, Kuwait held a conference that raised $30 billion for Iraq reconstruction to help it recover from the Islamic State challenge. Some residual issues from the Iraqi invasion remain. In August 2012, the Iraqi government vowed to \"end all pending issues with Kuwait before the start of [2013]\"—a statement that furthered Iraq's argument that the U.N. Security Council should remove any remaining \"Chapter 7\" (of the U.N. Charter) mandates on Iraq stemming from the invasion. During a visit to Iraq by Kuwait's Prime Minister on June 12, 2013, the two countries agreed to take the issues of still-missing Kuwaitis and Kuwaiti property out of the Chapter 7 supervision of the United Nations and replace them with alternative mechanisms, as discussed below. On December 15, 2010, the U.N. Security Council passed three resolutions—1956, 1957, and 1958. These resolutions ended Saddam-era sanctions against Iraq, but did not end the \"Chapter 7\" U.N. mandate on Iraq and continued the 5% automatic revenue deductions for reparations payments, discussed below. Reparations Payments . Until 2014, 5% of Iraq's oil revenues were devoted to funding a U.N. escrow account that, since 1991, has been compensating the victims of the Iraqi invasion of Kuwait. The U.N. Compensation Commission (UNCC), created by the post-Desert Storm U.N. resolutions, paid out about $52 billion awarded to over 100 governments and 1.5 million individual claimants by the time it ended in April 2015. As of that time, the process had paid $48 billion of that amount, leaving only about $4.6 billion left to be paid—the last remaining amount due from the $14.7 billion awarded for damage to Kuwaiti oilfields during the Iraqi occupation. In 2014, the UNCC, accounting for Iraqi budget shortfalls, extended the deadline for Iraq to make the final payments to early 2016. In 2015, Kuwait extended that deadline until 2018, and Iraq paid Kuwait $90 million in April 2018. The two countries agreed to retire the remaining balance through the payment of 1.5% of Iraq's oil revenues in 2019, and 3% in each of 2020 and 2021. However, budgetary difficulties in Iraq have caused Iraq's new government to request in November 2018 that Kuwait agree to another suspension of the payments. Missing Kuwaitis and Kuwaiti National Archives . The U.N. resolutions adopted in December 2010 also continued the effort, required under post-1991 war U.N. Security Council resolutions (primarily 687), to resolve the fate of the 605 Kuwaitis and third party nationals missing and presumed dead from the 1991 war, as well as that of the missing Kuwaiti national archives. A special U.N. envoy, Gennady Tarasov, was U.N. High-Level Coordinator for these issues. In September 2011 and in June 2012, Iraq called for an end to the mandate of that post and for Iraq and Kuwait to pursue the issue bilaterally. The June 16, 2013, visit of the Kuwaiti Prime Minister to Iraq—which followed progress on border demarcations issues—resulted in an Iraq-Kuwait joint recommendation to remove these issues of missing property and persons from the Chapter 7 U.N. mandate. That recommendation was endorsed in the U.N. Secretary-General's report of June 17, 2013. U.N. Security Council Resolution 2107 of June 27, 2013, abolished the High-Level Coordinator mandate and transferred the supervision of these issues to the U.N. Assistance Mission—Iraq (UNAMI)—under Chapter VI of the U.N. Charter. The search process has resulted in finding the remains of 236 Kuwaitis, to date. The cases of 369 Kuwaitis remain unresolved. Kuwait has been a donor to the Iraqi Ministry of Human Rights, which is the lead Iraqi agency trying to determine the fate of the Kuwaitis. More than 10,000 trenches have been dug to search for remains, and former members of Saddam's regime have been interviewed. In February 2019, a U.N. Security Council presidential statement urged reinvigoration of the process of determining the fate of the Kuwaiti missing, noting that no human remains had been exhumed since 2004. As far as the Kuwaiti National Archives, U.N. reports on December 14, 2012, and June 17, 2013, say there has been no progress locating the archives. However, Annex I to the June 17, 2013, report (U.N. document S/2013/357) contains a list of all the Kuwaiti property returned to Kuwait by Iraq since 2002. In June 2012, Iraq returned to Kuwait numerous boxes of tapes from Kuwait's state radio, books belonging to Kuwait University, and keys to Kuwait's Central Bank. In November 2018, visiting Iraqi President Barham Salih brought with him to Kuwait some Kuwaiti archival material that had been found. Kuwait-Iraq Border. Disputes over the Iraq-Kuwait border, some of which apparently were a factor in Iraq's 1990 invasion of Kuwait, have been mostly resolved. Under post-1991 Gulf War U.N. Security Council Resolution 833, the Council accepted the U.N.-demarcated border between them. Kuwait insisted that post-Saddam Iraqi governments formally acknowledge Iraq's commitments under that resolution to pay some of the costs of border markings and signs. As a consequence of the March 2012 Maliki visit to Kuwait, Iraq agreed to pay its portion of the costs of maintaining the border markings, and sea border markings and related issues were resolved in 2013. In 2017, Iraq ceded to Kuwait greater access to the shared Khor Abdullah waterway. Other Outstanding Bilateral Disputes /Iraqi Airways . Kuwait has not forgiven about $25 billion in Saddam-era debt, but Kuwait does not appear to be pressing the Iraqi government for payment. The March 2012 Maliki visit resolved Kuwait Airways' assertion that Iraq owed Kuwait $1.2 billion for planes and parts stolen during the Iraqi invasion with agreement for Iraq to pay Kuwait $300 million in compensation, and to invest $200 million in an Iraq-Kuwait joint airline venture. Subsequent to the visit, Iraq-Kuwait direct flights resumed. Threat from Iraqi Extremist Groups . Kuwait remains wary of pro-Iranian Shia militia groups operating in Iraq, most of which grew out of pro-Iranian anti-Saddam elements. The December 1983 bombings of the U.S. and French embassies in Kuwait and an attempted assassination of the Amir in May 1985 were attributed to the Iran-inspired Iraqi Da'wa (Islamic Call) Party, composed of Shias. Seventeen Da'wa activists were arrested for those attacks, and Da'wa activists hijacked a Kuwait Airlines plane in 1987. Da'wa is the party that two of Iraq's previous prime ministers headed, although the party disbanded its militia wing long ago. In July 2011, the Iran-supported militia of Shia cleric Moqtada Al Sadr rocketed Kuwait's embassy in Iraq. Kuwait has undertaken consistent high-level engagement with Iran, reflecting a legacy of Kuwait's perception of Iran as a counterweight to Saddam Hussein's Iraq. After 1991, Kuwait often hosted pro-Iranian anti-Saddam Iraqi Shia oppositionists for talks, even though some of these same groups had conducted attacks in Kuwait in the 1980s. Amir Sabah visited Iran in June 2014, including meetings with Iran's Supreme Leader, Ayatollah Ali Khamene'i. Iran's President Hassan Rouhani visited Kuwait and Oman in February 2017, in conjunction with Kuwait's role as a mediator in an unsuccessful attempt to establish a broader Iran-GCC dialogue. Like the other GCC states, and despite engaging Iranian leaders, Kuwaiti leaders support U.S. efforts to reduce Iran's efforts to expand its influence in the region, while supporting continued implementation of the 2015 Iran nuclear agreement (Joint Comprehensive Plan of Action, JCPOA) to curb Iran's nuclear program. Kuwait has also purchased missile defense equipment that supports U.S. efforts to forge a joint GCC missile defense network against Iran, and it participates in all U.S.-led military exercises in the Persian Gulf. Kuwait enforces all U.S. sanctions against Iran, and it has not pursued a long-discussed plan to import Iranian natural gas. In January 2016, Kuwait downgraded relations with Iran over the sacking of Saudi diplomatic facilities in Tehran and Mashhad by demonstrators protesting the Saudi execution of dissident Saudi Shia cleric Nimr al Baqr Al Nimr. Kuwait recalled its Ambassador from Iran but it did not follow Saudi Arabia and Bahrain in breaking relations. In September 2018, Kuwait rebuffed Iranian entreaties to return its ambassador to Tehran. Amir Sabah represented Kuwait at the May 13-14, 2015, and April 21, 2016, U.S.-GCC summits in Camp David and in Riyadh respectively, during which then-President Obama reassured the GCC states of the U.S. commitment to Gulf security. Kuwait's Foreign Ministry reacted to the Trump Administration's May 8, 2018, announcement of its exit from the JCPOA by expressing \"understanding\" that U.S. suggestions for improving the accord were not adopted. Kuwaiti officials have indicated the country will join the U.S.-backed Middle East Strategic Alliance to counter Iran, if such a bloc is formed. Kuwait has been vigilant in preventing Iran from undermining security inside Kuwait. In 2010, Kuwait arrested some Kuwaiti civil servants and stateless residents for allegedly helping the Qods Force of the Islamic Revolutionary Guard Corps (IRGC-QF) of Iran (the IRGC unit that supports pro-Iranian movements in the region) plot to blow up Kuwaiti energy facilities. In September 2015, Kuwait arrested 25 Kuwaiti Shias and 1 Iranian who had reportedly hidden explosives near the border with Iraq. In January 2016, a criminal court sentenced 2 of the defendants, including the Iranian (in absentia), to death, and 12 to prison terms. Another 12 were acquitted. Kuwait joined the U.S.-led coalition against the Islamic State, along with the other GCC states, in September 2014. It has hosted the operational headquarters for Operation Inherent Resolve (OIR). \"ARCENT\"—the U.S. Army component of U.S. Central Command—is based in Kuwait, and the ARCENT commander serves as overall U.S. commander of OIR. Kuwait also has allowed Canada and Italy to base reconnaissance and combat aircraft in Kuwait for their participation in OIR. Unlike some of the other GCC states, Kuwait did not conduct any air operations against Islamic State forces in Syria. No GCC state deployed ground forces to Syria or Iraq, and Kuwaiti officials say the government does not fund or arm any rebel groups fighting in Syria. Kuwait's leaders asserted that Syrian President Bashar Al Asad should leave office and, along with the other GCC states, Kuwait closed its embassy in Damascus in 2012. In December 2014, Kuwait allowed Syria to reopen its embassy in Kuwait to perform consular services for the approximately 140,000 Syrians living there. Kuwait has focused on helping civilian victims of the conflicts in Syria and Iraq, including hosting several major donors' conferences for victims of the Syria and cochairing a donors' conference for victims of the conflict, held on April 4-5, 2017, in Brussels. It has provided over $9 billion in humanitarian support for this purpose, making Kuwait the largest single country donor to these efforts after the United States. All of Kuwait's donations have been composed mostly of donations to nine U.N. agencies and to the International Committee of the Red Cross (ICRC). Kuwait hosts about 145,000 Syrians who fled that conflict. In October 2018, Kuwait joined Saudi Arabia and the UAE in finalizing a $2.5 billion donation to Jordan to help it cope with the financial burdens of hosting Syrian and Iraqi refugees. The refugees are an economic burden that likely contributed to protests in Jordan over unemployment, rising prices, and the imposition of additional income taxes. After an Arab Spring-related uprising in Yemen in 2011, Kuwait and its GCC allies brokered a transition that led to the departure of longtime President Ali Abdullah Saleh in January 2012. However, the elected government of Abdu Rabbu Mansour Al Hadi fled in January 2015 under pressure from Iran-backed Zaydi Shia Houthi rebels. In 2015, Kuwait joined the Saudi-led combat against the Houthis to try to restore the Hadi government. In part because of its willingness to engage diplomatically with Iran, the key backer of the Houthis, and its membership in the GCC, since 2016 Kuwait has hosted U.N.-mediated talks between the warring sides. In July 2016, Kuwait issued an ultimatum to the two warring sides in the Yemen conflict to negotiate a resolution to the conflict by the conflict by the following month, but the maneuver was unsuccessful. Rouhani's visit to Kuwait in February 2017 was intended, at least in part, to explore potential cooperation between Iran and the GCC to resolve the Yemen conflict. Kuwait has generally acted in concert with—although not always as assertively as—other GCC states on regional issues that have stemmed from post-2011 unrest in the region. Kuwait adopted a position on Egypt's internal struggles that was similar to that of Saudi Arabia and UAE, but at odds with Qatar, which was a major benefactor of Egypt during the presidency of Muslim Brotherhood senior figure Mohammad Morsi. Kuwaiti leaders, as do those of Saudi Arabia and the UAE, assert that the Brotherhood in Egypt supports Brotherhood-linked oppositionists in the GCC. Since Morsi was deposed by the Egyptian military in July 2013, Kuwait has given at least $8 billion to Egypt in grant, loans, and investments, and has arrested and deported some Egyptians in Kuwait for conducting (pro-Muslim Brotherhood) political activities. Still, Kuwaiti leaders assert that differences over the Brotherhood do not justify the Saudi-led ostracism of Qatar. For many years after the 1990 Iraqi invasion, Kuwait was at odds with then-Palestinian leader Yasir Arafat for opposing war to liberate Kuwait. Kuwait sought to punish the Palestinian leadership by expelling about 450,000 Palestinian workers from Kuwait and building ties to Hamas, a rival to Arafat's Palestine Liberation Organization (PLO). That tilt was demonstrated again in June 2018 when Kuwait circulated a draft U.N. Security Council resolution calling for an international force at the Gaza border to protect pro-Hamas demonstrators who confronted Israeli forces at the border in March 2018. However, Kuwait remains staunchly critical of Israel. in line with the positions of the other GCC and Arab states, Kuwait has supported U.N. recognition of a Palestinian State and opposed the Trump Administration's recognition that Israel's capital is in Jerusalem. Kuwait's Foreign Ministers attended the U.S.-sponsored Middle East conference in Warsaw, Poland during February 13-14, 2019, during which the Arab states attending held discussions on regional topics, particularly Iran, alongside Israeli Prime Minister Benjamin Netanyahu. However, Kuwaiti officials denied that their participation indicated that they would follow the lead of Oman, UAE, and Saudi Arabia in building increasingly public ties to Israel's government. Kuwait's foreign minister visited the Old City of Jerusalem in September 2014, but the Kuwaiti government asserted it did not coordinate the visit with Israeli officials and that the Old City represents a part of Palestine that is occupied. In 2018, Kuwait used its seat on the U.N. Security Council to block U.S.-backed efforts to censure PA President Mahmoud Abbas for an anti-Semitic speech, and it blocked U.S. condemnation of Hamas attacks on Israel. In 2018, Kuwait pledged $50 million for the United Nations Relief and Works Agency (UNRWA) in part to compensate the agency for reduced U.S. donations. As part of U.S.-led Israeli-Palestinian peace process negotiations, during 1992 to 1997, Kuwait attended—but did not host—multilateral working group talks with Israel on arms control, water resources, refugees, and other issues. In 1994, Kuwait helped persuade the other Gulf monarchies to cease enforcement of the secondary (trade with firms that deal with Israel) and tertiary (trade with firms that do business with blacklisted firms) Arab boycotts of Israel. However, Kuwait did not, as did Qatar and Oman, subsequently exchange trade offices with Israel, and it retained the Arab League boycott on trade with Israel (\"primary boycott\"). As do several other GCC states, Kuwait has had a significant number of North Korean laborers working in Kuwait (about 3,000), whose earnings are mostly remitted to the North Korean government. In concert with increased U.S. pressure on North Korea in 2017 for its missile and nuclear tests, Kuwait curtailed its relationship with North Korea. On September 17, 2017, after a meeting between the Amir and President Trump, Kuwait gave North Korea's ambassador (the only North Korean ambassador in the Gulf) and four other North Korean diplomats 30 days to leave Kuwait. North Korea's embassy in Kuwait City subsequently remains open but with only four staff persons, including a charge d'affaires. Kuwait also ceased renewing visas for North Korean workers, causing them to start leaving, and it halted trade ties and direct flights between Kuwait and North Korea. Kuwait has prevented most, but not all, terrorist attacks by the Islamic State and other groups, since an attack on a mosque in Kuwait City on June 26, 2015, killed 27 persons. A local branch of the Islamic State claimed responsibility. In July 2016, Kuwait said its security forces thwarted three planned Islamic State terrorist attacks in Kuwait, including a plot to blow up a Shia mosque. On October 10, 2016, an Islamic State-inspired individual of Egyptian origin drove a truck into a vehicle carrying U.S. military personnel, but no U.S. personnel were injured or killed. In April 2017, a suspected mid-ranking leader of the Islamic State was extradited from the Philippines to Kuwait for involvement in operational planning to attack Kuwait. U.S. agencies help Kuwait's counterterrorism efforts, border control, and export controls. Recent State Department fact sheets on security cooperation with Kuwait, referenced earlier, state that Kuwait's Ministry of Interior and National Guard participate in U.S. programs to work with local counterterrorism units via training and bilateral exercises. At the September 8, 2017, U.S.-Kuwait Strategic Dialogue meeting in Washington, DC, Kuwait's Ministry of Interior signed a counterterrorism information sharing arrangement with the U.S. Federal Bureau of Investigation (FBI). And, the U.S. Customs and Border Control signed an agreement to share customs information with Kuwait's director general of customs. Kuwait also has ratified a Saudi-led GCC \"Internal Security Pact\" to enhance regional counterterrorism cooperation. In April 2011, Kuwait introduced biometric fingerprinting at Kuwait International Airport and has since extended that system to land and sea entry points. Kuwait long sought the return of two prisoners held at the U.S. facility in Guantanamo Bay, Cuba, under accusation of belonging to Al Qaeda. Both were returned to Kuwait by January 2016. Kuwait built a rehabilitation center to reintegrate them into society after their return. The State Department report on international terrorism for 2017, cited above, contains praise for recent Kuwait government steps to counter the financing of terrorism. The report praises Kuwait's October 2017 announcement, with the GCC and the United States, of 13 terrorist designations of individuals associated with the Islam State-Yemen and Al Qaeda in the Arabian Peninsula (AQAP). The report also cites the Central Bank of Kuwait for implementing a \"same business-day\" turnaround policy for imposing U.N. terrorist financing-related sanctions, requiring Kuwaiti banks to monitor U.N. sanctions lists proactively. Kuwait is a member of the Middle East North Africa Financial Action Task Force (MENAFATF), and many of the steps that Kuwait has taken to address the criticism were the product of an action plan Kuwait developed with the broader FATF to address Kuwait's weaknesses on anti-money laundering and counterterrorism financing (AML/CTF). A law Kuwait enacted in 2013 provided a legal basis to prosecute terrorism-related crimes and freeze terrorist assets. In May 2014, the Ministry of Social Affairs warned Kuwaiti citizens that the fundraising campaigns for Syrian factions were a violation of Kuwait law that requires that financial donations only go to authorized charity organizations. As of mid-2014, Kuwait has been no longer deemed deficient on AML/CFT by the FATF. In June 2015, the National Assembly passed a law that criminalized online fundraising for terrorist purposes. In 2017, Kuwait joined two counter terrorism-financing conventions, the Egmont Group and the U.S.-GCC \"Terrorist Financing Targeting Center.\" Still, Kuwait's record on this issue has been mixed. Kuwaiti donors have been able, in recent years, to raise funds for various regional armed factions, including the Al Qaeda affiliate Al Nusra Front operating in Syria (which publicly severed its connection to Al Qaeda and changed its name in August 2016). The then-Under Secretary for Terrorism and Financial Intelligence of the Department of the Treasury said on March 4, 2014, that the appointment of a leading Kuwaiti donor to Al Nusra, Nayef al-Ajmi, as Minister of Justice and Minister of Islamic Endowments (Awqaf), was \"a step in the wrong direction.\" Subsequently, Ajmi resigned his government posts. On August 6, 2014, the Treasury Department imposed sanctions on two Ajmi tribe members and one other Kuwaiti under Executive Order 13224 sanctioning support for international terrorism. Two Kuwaitis were sanctioned by the United Nations Security Council for allegedly providing financial support to Al Nusra Front, and the Treasury Department sanctioned a Kuwaiti person in March 2017 under E.O 13324 for providing support to Al Nusrah Front and Al Qaeda. Earlier, in June 2008, the Department of the Treasury froze the assets of a Kuwait-based charity—the Islamic Heritage Restoration Society—for alleged links to Al Qaeda, under E.O. 13224. The United States has, at times, provided very small amounts of aid to help Kuwait counter terrorism financing. In FY2013, about $83,000 was provided to training Kuwaiti authorities on methods to counter terrorism financing. In FY2015, about $100,000 was provided for similar purposes. Countering Violent Extremism . State Department terrorism reports also praise Kuwait's programs to encourage moderation in Islam in Kuwait. The government supports a number of local counter-messaging campaigns on radio, television, and billboards. In late 2015, the government moved a \"Center for Counseling and Rehabilitation\" from Central Prison to a new facility with an expanded faculty and broadened mandate. In July 2017, the government established a new Directorate for Cybersecurity within the Higher Authority for Communication to \"fight violent extremism.\" Political infighting and the drop in oil prices since 2014 have affected Kuwait's economy, but the country is taking steps to try to reduce its economic vulnerability. Hydrocarbons sales still represent about 90% of government export revenues and about 60% of its gross domestic product (GDP). Because Kuwait requires that crude oil sell for about nearly $75 per barrel to balance its budget—well above prices for most of the time since 2014—Kuwait has run budget deficits of about $15 billion per year since 2015. Kuwait deferred capital infrastructure investment and reduced public sector salaries and subsidies, according to the IMF and other observers. Subsidy reductions were contemplated even before the decline in oil prices: in October 2013, Prime Minister Jabir said the subsidies system—which cost the government about $17.7 billion annually—had produced a \"welfare state\" and was \"unsustainable\" and must be reduced. On the other hand, Kuwait still has a large sovereign wealth fund, managed by the Kuwait Investment Authority, with holdings estimated at nearly $600 billion. Kuwait, which produces about 3 million barrels per day of crude oil, agreed to slightly reduce its crude oil production (by 130,000 barrels per day) as part of a November 2016 OPEC production cut agreement that remains in effect. Kuwait and Saudi Arabia, including during a September 30, 2018, visit to Kuwait by Saudi Crown Prince Mohammad bin Salman Al Saud, discussed jointly increasing production by 500,000 barrels per day by reactivating two closed fields in their joint \"neutral zone.\" The Khafji field closed in October 2014 due to environmental concerns and the Wafra field closed in May 2015 over technical issues. However, the Crown Prince's visit did not result in any announced agreement to resume production at the two fields. Using National Assembly legislation that took effect in 2010, the government has moved forward with long-standing plans to privatize some state-owned industries. However, the privatization of Kuwait Airways was cancelled, despite the passage of legislation in January 2014 authorizing that privatization, in part because of opposition from the airline's workforce. Political disputes also delayed movement on several major potential drivers of future growth, most notably opening Kuwait's northern oil fields to foreign investment to generate about 500,000 barrels per day of extra production. The Assembly blocked the $8.5 billion project for over 15 years because of concerns about Kuwait's sovereignty. However, a fourth oil refinery, estimated to cost $8 billion, is under construction and is scheduled to open in 2019. At an investment forum in March 2018, Kuwait announced a vision to attract foreign direct investment through development of a large \"Northern Gateway\" economic opportunity zone encompassing five natural islands in northern Kuwait. That project has since been retitled \"Silk City,\" after attracting investment from China as part of that country's region-wide Belt and Road Initiative (BRI). The project, which might involve almost $90 billion in total investment, will encompass a new airport, railways, and port facilities. Kuwait and China have formed a $10 billion \"Kuwait-China Silk Road Fund\" to finance initial stages of the expansion. The development of the northern reaches of Kuwait is part of the country's overall \"New Kuwait 2035\" economic strategy. Nuclear Power. Like other Gulf states, Kuwait sees peaceful uses of nuclear energy as important to its economy, although doing so always raises fears among some in the United States, Israel, and elsewhere about the ultimate intentions of developing a nuclear program. In 2012, Kuwait formally abandoned plans announced in 2011 to build up to four nuclear power reactors. The government delegated any continuing nuclear power research to its Kuwait Institute for Scientific Research (KISR). Kuwait is cooperating with the International Atomic Energy Agency (IAEA) to ensure international oversight of any nuclear work in Kuwait. In FY2015, the United States provided about $38,000 to help train Kuwaiti personnel in nuclear security issues, and about $58,000 was provided in FY2016 for this purpose. In 1994, Kuwait became a founding member of the World Trade Organization (WTO). In February 2004, the United States and Kuwait signed a Trade and Investment Framework Agreement (TIFA), often viewed as a prelude to a free trade agreement (FTA), which Kuwait has said it seeks. In the course of the September 8, 2017, U.S.-Kuwait Strategic Dialogue, the U.S. Department of Commerce finalized a memorandum of understanding with Kuwait's Direct Investment Promotion Authority to encourage additional investments in both countries. Kuwait gave $500 million worth of oil to U.S. states affected by Hurricane Katrina. The United States' imports of oil from Kuwait have been declining as U.S. oil imports have declined generally. The United States imports about 100,000 barrels per day of crude oil from Kuwait, as of mid-2018. Total U.S. exports to Kuwait were about $5.1 billion in 2017, and total U.S. imports from Kuwait in 2017 were about $3 billion. Based on figures through November 2018, U.S. exports to Kuwait in 2018 were only about half of what they were the prior year, and imports from Kuwait fell by about 25% in that time period. U.S. exports to Kuwait consist mostly of automobiles, industrial equipment, and foodstuffs. Following his meeting with Amir Sabah on September 7, 2017, President Trump stated that Kuwait had taken delivery of 10 U.S.-made Boeing 777 commercial passenger aircraft in 2017, which might account for the spike in U.S. export figures to Kuwait in 2017. Because Kuwait's per capita GDP is very high, Kuwait receives negligible amounts of U.S. foreign assistance. The assistance Kuwait does receive is targeted to achieve selected objectives that benefit U.S. national security, including promoting civil society, and training on nuclear security and counterterrorism financing. In FY2016, about $3,000 was provided for counternarcotics programs in Kuwait. ", "summary": "Kuwait has been pivotal to the decades-long U.S. effort to secure the Persian Gulf region because of its consistent cooperation with U.S. military operations in the region and its key location in the northern Gulf. Kuwait and the United States have a formal Defense Cooperation Agreement (DCA), under which the United States maintains over 13,000 military personnel in country and prepositioned military equipment in Kuwait to project power in the region. Only Germany, Japan, and South Korea host more U.S. troops than does Kuwait, which hosts the operational command center for U.S.-led Operation Inherent Resolve (OIR) that has combatted the Islamic State. Kuwait usually acts in concert not only with the United States but also with allies in the Gulf Cooperation Council (GCC: Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain, and Oman). Kuwait is participating militarily in the Saudi-led coalition that is trying to defeat the Shia \"Houthi\" rebel movement in Yemen, but Kuwait tends to favor mediation of regional issues over the use of military force. Kuwait is trying to mediate a resolution of the intra-GCC rift that erupted in June 2017 when Saudi Arabia and the UAE moved to isolate Qatar. Kuwait has refrained from intervening in Syria's civil war, instead hosting donor conferences for victims of the Syrian civil conflict, Iraq's recovery from the Islamic State challenge, and the effects of regional conflict on Jordan's economy. Kuwait generally supports U.S. efforts to counter Iran and has periodically arrested Kuwaiti Shias that the government says are spying for Iran, but it also engages Iran at high levels. U.S. government reports have praised recent steps by Kuwait to counter the financing of terrorism, but reports persist that wealthy Kuwaitis are still able to donate to extreme Islamist factions in the region. Kuwait has consistently engaged the post-Saddam governments in Baghdad in part to prevent any repeat of the 1990 Iraqi invasion of Kuwait. Experts have long assessed Kuwait's political system as a potential regional model for its successful incorporation of secular and Islamist political factions, both Shia and Sunni. However, this assessment has evolved since 2011 because Kuwait has followed other GCC states in incarcerating and revoking the citizenship of social media and other critics. Kuwait's political stability has not been in question but long-standing parliamentary opposition to the ruling Sabah family's political dominance has broadened in recent years to visible public pressure for political and economic reform. Parliamentary elections in July 2013 produced a National Assembly amenable to working with the ruling family, but the subsequent elections held in November 2016 returned to the body Islamist and liberal opponents of the Sabah family who held sway in earlier assemblies. Assembly oppositionist challenges to government policy led to a cabinet resignation in early November 2017, although the current cabinet does not differ much from the previous cabinet on key policy questions. Kuwait has increased its efforts to curb trafficking in persons over the past few years. Years of political paralysis contributed to economic stagnation relative to Kuwait's more economically vibrant Gulf neighbors such as Qatar and the United Arab Emirates (UAE). Like the other GCC states, Kuwait has struggled with reduced income from oil exports during 2014-2018. Kuwait receives negligible amounts of U.S. foreign assistance, and has offset some of the costs of U.S. operations in the region since Iraq's 1990 invasion of Kuwait.", "document_type": "crs"}
{"report": "Colombia, one of the oldest democracies in the Western Hemisphere and the third most populous Latin American country, has endured a multisided civil conflict for more than five decades until President Juan Ma nuel Santos declared the conflict over in August 2017 at the end of a U.N.-monitored disarmament. According to the National Center for Historical Memory 2013 report, presented to the Colombian government as part of the peace process to end the fighting, some 220,000 Colombians died in the armed conflict through 2012, 81% of them civilians. The report also provided statistics quantifying the scale of the conflict, which has taken a huge toll on Colombian society: more than 23,000 selective assassinations between 1981 and 2012; internal displacement of more than 5 million Colombians due to land seizure and violence; 27,000 kidnappings between 1970 and 2010; and 11,000 deaths or amputees from anti-personnel land mines laid primarily by Colombia's main insurgent guerrilla group, the Revolutionary Armed Forces of Colombia (FARC). To date, more than 8 million Colombians, or roughly 15% of the population, have registered as conflict victims. Although the violence has scarred Colombia, the country has achieved a significant turnaround. Once considered a likely candidate to become a failed state, Colombia, over the past two decades, has overcome much of the violence that had clouded its future. For example, between 2000 and 2016, Colombia saw a 94% decrease in kidnappings and a 53% reduction in homicides (below 25 per 100,000 in 2016). Coupled with success in lowering violence, Colombia has opened its economy and promoted trade, investment, and growth. Colombia has become one of Latin America's most attractive locations for foreign direct investment. Yet, after steady growth over several years, Colombia's economy slowed to 3.1% growth in 2015 and declined to 1.7% in 2017. Many analysts identified Colombia's dependence on oil and other commodity exports as the primary cause. Between 2012 and 2016, the Colombian government held formal peace talks with the FARC, Colombia's largest guerrilla organization. Upon taking office for a second term in August 2014, President Santos declared peace, equality, and education as his top priorities, although achieving the peace agreement remained his major focus. In August 2016, the government and FARC negotiators announced they had concluded their talks and achieved a 300-page peace agreement. The accord was subsequently narrowly defeated in a popular referendum held in early October 2016, but was revised by the Santos government and agreed to by the FARC and then ratified by the Colombian Congress at the end of November 2016. The Colombian conflict predates the formal founding of the FARC in 1964, as the FARC had its beginnings in the peasant self-defense groups of the 1940s and 1950s. Colombian political life has long suffered from polarization and violence based on the significant disparities and inequalities suffered by landless peasants in the country's peripheral regions. In the late 19 th century and a large part of the 20 th century, the elite Liberal and Conservative parties dominated Colombian political life. Violence and competition between the parties erupted in a period of extreme violence in Colombia, known as La Violencia , set off in 1948 by the assassination of Liberal presidential candidate Jorge Gaitán. The violence continued for the next decade. After a brief military rule (1953-1958), the Liberal and Conservative parties agreed to a form of coalition governance, known as the National Front. Under the arrangement, the presidency of the country alternated between Conservatives and Liberals, each holding office in turn for four-year intervals. This form of government continued for 16 years (1958-1974). The power-sharing formula did not resolve the tension between the two historic parties, and many leftist, Marxist-inspired insurgencies took root in Colombia, including the FARC, launched in 1964, and the smaller National Liberation Army (ELN), which formed the following year. The FARC and ELN conducted kidnappings, committed serious human rights violations, and carried out a campaign of terrorist activities to pursue their goal of unseating the central government in Bogotá. Rightist paramilitary groups formed in the 1980s when wealthy ranchers and farmers, including drug traffickers, hired armed groups to protect them from the kidnapping and extortion plots of the FARC and ELN. In the 1990s, most of the paramilitary groups formed an umbrella organization, the United-Self Defense Forces of Colombia (AUC). The AUC massacred and assassinated suspected supporters of the insurgents and directly engaged the FARC and ELN in military battles. The Colombian military has long been accused of close collaboration with the AUC, accusations ranging from ignoring their activities to actively supporting them. Over time, the AUC became increasingly engaged in drug trafficking, and other illicit businesses. In the late 1990s and early 2000s, the U.S. government designated the FARC, ELN, and AUC as Foreign Terrorist Organizations (FTOs). The AUC was formally dissolved in a collective demobilization between 2003 and 2006 after many of its leaders stepped down. However, former paramilitaries joined armed groups (called criminal bands, or Bacrim, by the Colombian government) who continued to participate in the lucrative drug trade and commit other crimes and human rights abuses. When the FARC demobilized in 2017, other illegally armed groups began aggressive efforts to take control of former FARC territory and its criminal enterprises as FARC forces withdrew. (For more, see \" The Current Security Environment ,\" below.) The inability of Colombia's two dominant parties to address the root causes of violence in the country led to the election of an independent, Álvaro Uribe, in the presidential contest of 2002. Uribe, who served two terms, came to office with promises to take on the violent leftist guerrillas, address the paramilitary problem, and combat illegal drug trafficking. During the 1990s, Colombia had become the region's—and the world's—largest producer of cocaine. Peace negotiations with the FARC under the prior administration of President Andrés Pastrana (1998-2002) had ended in failure; the FARC used a large demilitarized zone located in the central Meta department (see map, Figure 1 ) to regroup and strengthen itself. The central Colombian government granted the FARC this demilitarized zone, a traditional practice in Colombian peace negotiations, but the FARC used it to launch terror attacks, conduct operations, and increase the cultivation of coca and its processing, while failing to negotiate seriously. Many analysts, noting the FARC's strength throughout the country, feared that the Colombian state might fail and some Colombian citizens thought the FARC might at some point successfully take power. The FARC was then reportedly at the apogee of its strength, numbering an estimated 16,000 to 20,000 fighters under arms. This turmoil opened the way for the aggressive strategy advocated by Uribe. At President Uribe's August 2002 inauguration, the FARC showered the event with mortar fire, signaling the group's displeasure at the election of a hardliner, who believed a military victory over the Marxist rebels was possible. In his first term (2002-2006), President Uribe sought to shore up and expand the country's military, seeking to reverse the armed forces' losses by aggressively combating the FARC. He entered into peace negotiations with the AUC. President Pastrana had refused to negotiate with the rightist AUC, but Uribe promoted the process and urged the country to back a controversial Justice and Peace Law that went into effect in July 2005 and provided a framework for the AUC demobilization. By mid-2006, some 31,000 AUC paramilitary forces had demobilized. The AUC demobilization, combined with the stepped-up counternarcotics efforts of the Uribe administration and increased military victories against the FARC's irregular forces, helped to bring down violence, although a high level of human rights violations still plagued the country. Uribe became widely popular for the effectiveness of his security policies, a strategy he called \"Democratic Security.\" Uribe's popular support was evident when Colombian voters approved a referendum to amend their constitution in 2005 to permit Uribe to run for a second term. Following his reelection in 2006, President Uribe continued to aggressively combat the FARC. For Uribe, 2008 was a critical year. In March 2008, the Colombian military bombed the camp of FARC's second-in-command, Raul Reyes (located inside Ecuador a short distance from the border), killing him and 25 others. Also in March, another of FARC's ruling seven-member secretariat was murdered by his security guard. In May, the FARC announced that their supreme leader and founder, Manuel Marulanda, had died of a heart attack. The near-simultaneous deaths of three of the seven most important FARC leaders were a significant blow to the organization. In July 2008, the Colombian government dramatically rescued 15 long-time FARC hostages, including three U.S. defense contractors who had been held captive since 2003 and Colombian senator and former presidential candidate Ingrid Bentancourt. The widely acclaimed, bloodless rescue further undermined FARC morale. Uribe's success and reputation, however, were marred by several scandals. They included the \"parapolitics\" scandal in 2006 that exposed links between illegal paramilitaries and politicians, especially prominent members of the national legislature. Subsequent scandals that came to light during Uribe's tenure included the \"false positive\" murders allegedly carried out by the military (primarily the Colombian Army) in which innocent civilians were executed and then dressed to look like guerilla fighters to increase the military's rebel body count. In 2009, the media revealed another scandal of illegal wiretapping and other surveillance by the government intelligence agency, the Department of Administrative Security (DAS), to discredit journalists, members of the judiciary, and political opponents of the Uribe government. (In early 2012, the tarnished national intelligence agency was replaced by Uribe's successor, Juan Manuel Santos.) Despite the controversies, President Uribe remained popular and his supporters urged him to run for a third term in 2010. Another referendum was proposed to alter the constitution to allow a third term; however, it was turned down by Colombia's Constitutional Court. Once it became clear that President Uribe was constitutionally ineligible to run again, Juan Manuel Santos of the pro-Uribe National Unity party (or Party of the U) quickly consolidated his preeminence in the 2010 presidential campaign. Santos, a centrist, who came from an elite family that once owned the country's largest newspaper, had served as Uribe's defense minister through 2009. In 2010, Santos campaigned on a continuation of the Uribe government's approach to security and its role encouraging free markets and economic opening, calling his reform policy \"Democratic Prosperity.\" In the May 2010 presidential race, Santos took almost twice as many votes as his nearest competitor, Antanas Mockus of the centrist Green Party, but he did not win a majority. Santos won the June runoff with 69% of the vote. Santos's \"national unity\" ruling coalition formed during his campaign included the center-right National Unity and Conservative parties, the centrist Radical Change Party, and the center-left Liberal party. On August 7, 2010, President Santos said in his first inauguration speech that he planned to follow in the path of President Uribe, but that \"the door to [peace] talks [with armed rebels] is not locked.\" The Santos government was determined to improve relations with Ecuador and Venezuela, which had become strained under Uribe. Santos sought to increase cooperation on cross-border coordination and counternarcotics. He attempted to reduce tensions with Venezuela that had become fraught under Uribe, who claimed that Venezuelan President Hugo Chávez had long harbored FARC and ELN forces. During his first two years in office, President Santos reorganized the executive branch and built on the market opening strategies of the Uribe administration and secured a free-trade agreement with the United States, Colombia's largest trade partner, which went into effect in May 2012. To address U.S. congressional concerns about labor relations in Colombia, including the issue of violence against labor union members, the United States and Colombia agreed to an \"Action Plan Related to Labor Rights\" (Labor Action Plan) in April 2011. Many of the steps prescribed by the plan were completed in 2011 while the U.S. Congress was considering the free trade agreement. Significantly, the Santos government maintained a vigorous security strategy and struck hard at the FARC's top leadership. In September 2010, the Colombian military killed the FARC's top military commander, Victor Julio Suárez (known as \"Mono Jojoy\"), in a bombing raid. In November 2011, the FARC's supreme leader, Guillermo Leon Saenz (aka \"Alfonso Cano\") was assassinated. He was replaced by Rodrigo Londoño Echeverri (known as \"Timoleón Jiménez\" or \"Timochenko\"), the group's current leader. While continuing the security strategy, the Santos administration began to re-orient the Colombian government's stance toward the internal armed conflict through a series of reforms. The first legislative reform that moved this new vision along, signed by President Santos in June 2011, was the Victims' and Land Restitution Law (Victims' Law), to provide comprehensive reparations to an estimated (at the time) 4 million to 5 million victims of the conflict. Reparations under the Victims' Law included monetary compensation, psycho-social support and other aid for victims, and the return of millions of hectares of stolen land to those displaced. The law was intended to process an estimated 360,000 land restitution cases. The government's implementation of this complex law began in early 2012. Between 2011 and 2016, there were more than 100,000 applications for restitution and 5,000 properties, or about 5%, were resolved by judges. The Victims' Law, while not a land reform measure, tackled issues of land distribution including the restitution of stolen property to displaced victims. Given the centrality of land issues to the rural peasant-based FARC, passage of the Victims' Law was a strong indicator that the Santos government shared its interest in addressing land and agrarian concerns. In June 2012, another government initiative—the Peace Framework Law, also known as the Legal Framework for Peace—was approved by the Colombian Congress, which signaled that congressional support for a peace process was growing. In August 2012, President Santos announced he had opened exploratory peace talks with the FARC and was ready to launch formal talks. The countries of Norway, Cuba, Venezuela, and Chile each held an international support role, with Norway and Cuba serving as peace talk hosts and \"guarantors.\" Following the formal start in Norway, the actual negotiations began a month later in mid-November 2012 in Cuba, where the FARC-government talks continued until their conclusion in August 2016. In the midst of extended peace negotiations, Colombia's 2014 national elections presented a unique juncture for the country. During the elections, the opposition Centro Democrático (CD) party gained 20 seats in the Senate and 19 in the less powerful Chamber of Representatives, and its leader, former President Uribe, became a popular senator. His presence in the Senate challenged the new ruling coalition that backed President Santos. During his second-term inaugural address in August 2014, President Santos declared three pillars—peace, equality, and education—as his focus, yet his top priority was to conclude the peace negotiations with the FARC. In February 2015, the Obama Administration provided support to the peace talks by naming Bernard Aronson, a former U.S. assistant secretary of state for Inter-American Affairs, as the U.S. Special Envoy to the Colombian peace talks. Talks with the FARC concluded in August 2016. In early October, to the surprise of many, approval of the accord was narrowly defeated in a national plebiscite by less than a half percentage point of the votes cast, indicating a polarized electorate. Regardless, President Santos was awarded the Nobel Peace Prize in December 2016, in part demonstrating strong international support for the peace agreement. In response to the voters' criticisms, the Santos government and the FARC crafted a modified agreement, which they signed on November 24, 2016. Rather than presenting this agreement to a plebiscite, President Santos sent it directly to the Colombian Congress, where it was ratified on November 30, 2016. Although both chambers of Colombia's Congress approved the agreement unanimously, members of the opposition CD party criticized various provisions in the accord that they deemed inadequate and boycotted the vote. The peace process was recognized as the most significant achievement of the Santos presidency and lauded outside of Colombia and throughout the region. Over the course of two terms, the President's approval ratings rose and fell rather significantly. His crowning achievement, the accord negotiated over 50 rounds of talks, covered five substantive topics: rural development and agricultural reform; political participation by the FARC; an end to the conflict, including demobilization, disarmament and reintegration; a solution to illegal drug trafficking; and justice for victims. A sixth topic provided for mechanisms to implement and monitor the peace agreement. Colombians elected a new congress in March 2018 and a new president in June 2018. Because no presidential candidate won more than 50% of the vote on May 27, 2018, as required for a victory in the first round, a second-round runoff was held June 17 between the rightist candidate Iván Duque and the leftist candidate Gustavo Petro (see results for presidential contest, Figure 3 ). Duque was carried to victory with almost 54% of the vote. Runner-up Petro, a former mayor of Bogotá, a former Colombian Senator, and once a member of the M-19 guerilla insurgency, nevertheless did better than any leftist candidate in a presidential race in the past century; he won 8 million votes and nearly 42% of the votes cast. Around 4.2% were protest votes, signifying Colombian voters who cast blank ballots. Through alliance building, Duque achieved a functional majority or a \"unity\" government, which involved the Conservative Party, Santos's prior National Unity or Party of the U, joining the CD, although compromise was required to keep the two centrist parties in sync with the more conservative CD. In the new Congress, two extra seats, for the presidential and vice presidential runners up, became automatic seats in the Colombian Senate and House, due to a constitutional change in 2015, allowing presidential runner up Gustavo Petro to return to the Senate. The CD party, which gained seats in both houses in the March vote, won the majority in the Colombian Senate (see Figure 2 for seat breakouts by party). Duque, who was inaugurated on August 7, 2018, at the age of 42, was the youngest Colombian president elected in a century. He possessed limited experience in Colombian politics. Duque was partially educated in the United States and worked for at decade at the Inter-American Development Bank in Washington, DC. He was the handpicked candidate of former president Uribe, who vocally opposed many of Santos's policies. Disgruntled Colombians perceived Santos as an aloof president whose energy and political capital were expended accommodating an often-despised criminal group, the FARC. President Duque appeared to be technically oriented and interested in economic reform, presenting himself as a modernizer. During his campaign, Duque called for economic renewal and lower taxes, fighting crime, and building renewed confidence in the country's institutions through some reforms. On September 26, 2018, in a speech before the U.N. General Assembly, the new president outlined his policy objectives . Duque called for increasing legality, entrepreneurship, and fairness by (1) promoting peace; (2) combating drug trafficking and recognizing it as a global menace, and (3) fighting corruption, which he characterized as a threat to democracy. He also maintained that the humanitarian crisis in neighboring Venezuela, resulting in more than 1 million migrants fleeing to Colombia, was an emergency that threatened to destabilize the region. Duque proposed a leadership role for Colombia in denouncing the authoritarian government of President Nicolás Maduro and containing his government's damage. By late November 2018, 1.2 million Venezuelans already present in Colombia were putting increasing pressure on the government's finances, generating a burden estimated at nearly 0.5% of the country's gross domestic product (GDP). President Duque, along with his vice president, Marta Lucía Ramírez, who initially ran as the Conservative Party candidate in the first round, recommended that drug policy shift back to a stricter counterdrug approach rather than a model endorsed in the peace accord, which focuses on voluntary eradication and economic support to peasant farmers to transition away from illicit drug crops. Duque campaigned on returning to spraying coca crops with the herbicide glyphosate. This would reverse Colombia's decision in mid-2015 to end aerial spraying, which had been a central—albeit controversial—feature of U.S.-Colombian counter-drug cooperation for two decades. Colombians' concerns with corruption became particularly acute during the 2018 elections, as major scandals were revealed. Similar to many countries in the region, government officials, including Santos during his 2014 campaign for reelection and the opposition candidate during that campaign were accused of taking payoffs (bribes) from the Odebrecht firm, the Brazilian construction company that became embroiled in a region-wide corruption scandal. In December 2018, presidential runner up Gustavo Petro was accused of taking political contributions from Odebrecht in a video released by a CD senator, indicating that both the left and the right of the Colombian political spectrum has been tainted by corruption allegations. In June 2017, the U.S. Drug Enforcement Administration arrested Colombia's top anti-corruption official, Gustavo Moreno. In mid-September 2017, the former chief justice of Colombia's Supreme Court was arrested for his alleged role in a corruption scandal that involved other justices accused of taking bribes from Colombian congressmen, some with ties to illegal paramilitary groups. The series of corruption charges made against members of Colombia's judicial branch, politicians, and other officials made the issue a prominent one in Colombian politics and was the focus of a left-centrist candidate's campaign in the presidential contest. In late August 2018, an anti-corruption referendum was defeated by narrowly missing a high vote threshold by less than a half percentage point, although the actual vote favored all seven proposed changes on the ballot. President Duque endorsed the referendum and maintains he will seek to curb many of the abuses identified in the referendum through legislation that his administration will propose. The Duque Administration's first budget for 2019 presented in late October 2018 was linked to an unpopular tax reform that would expand a value-added tax to cover basic food and agricultural commodities (some 36 items in the basic basket of goods, such as eggs and rice, previously exempted). The 2019 budget totals $89.7 billion, providing the education, military and police, and health sectors with the biggest increases, and reducing funding for peace accord implementation. Duque's own Democratic Center party split with him on the value-added tax, which quickly sank his approval ratings from 53% in early September 2018 to a low of 27% in November 2018, among the lowest levels in the early part of a presidential mandate in recent Colombian history. Colombia's economy is the fourth largest in Latin America after Brazil, Mexico, and Argentina. The World Bank characterizes Colombia as an upper middle-income country, although its commodities-dependent economy has been hit by oil price declines and peso devaluation related to the erosion of fiscal revenue. Between 2010 and 2014, Colombia's economy grew at an average of more than 4%, but slowed to 3.1% GDP growth in 2015. In 2017, Colombia's GDP growth slowed further to 1.7%. Despite its relative economic stability, high poverty rates and inequality have contributed to social upheaval in Colombia for decades. The poverty rate in 2005 was slightly above 45%, but declined to below 27% in 2016. The issues of limited land ownership and high rural poverty rates remain a problem. According to a United Nations study published in 2011, 1.2% of the population owned 52% of the land, and data revealed in 2016 that about 49% of Colombians continued to work in the informal economy. Colombia is often described as a country bifurcated between metropolitan areas with a developed, middle-income economy, and some rural areas that are poor, conflict-ridden, and weakly governed. The fruits of the growing economy have not been shared equally with this ungoverned, largely rural periphery. Frequently these more remote areas are inhabited by ethnic minorities or other disadvantaged groups, such as Afro-Colombians, indigenous populations, or landless peasants and subsistence farmers, who are vulnerable to illicit economies due to few connections to the formal economy. The United States is Colombia's leading trade partner. Colombia accounts for a small percentage of U.S. trade (approximately 1%), ranking 22 nd among U.S. export markets and 27 th among foreign exporters to the United States in 2017. Colombia has secured free trade agreements with the European Union, Canada, and the United States, and with most nations in Latin America. Colombian officials have worked over the past decade to increase the attractiveness of investing in Colombia, and foreign direct investment (FDI) grew by 16% between 2015 and 2016. This investment increase came not only from the extractive industries, such as petroleum and mining, but also from such areas as agricultural products, transportation, and financial services. Promoting more equitable growth and ending the internal conflict were twin goals of the two-term Santos administration. Unemployment, which historically has been high at over 10%, fell below that double-digit mark during Santos's first term and remained at 9.2% in 2016 but rose slightly to an estimated 9.6% in 2018. Although Colombia is ranked highly for business-friendly practices and has a favorable regulatory environment that encourages trade across borders, it is still plagued by persistent corruption and an inability to effectively implement institutional reforms it has undertaken, particularly in regions where government presence is weak. According to the U.S. State Department in its analysis of national investment climates, Colombia has demonstrated a political commitment to create jobs, develop sound capital markets, and achieve a legal and regulatory system that meets international norms for transparency and consistency. Despite its macroeconomic stability, several issues remain, such as a still-complicated tax system, a high corporate tax burden, and continuing piracy and counterfeiting issues. Colombia's rural-sector protestors formed strikes and blockades beginning in 2013 with demands for long-term and integrated-agricultural reform in a country with one of the most unequal patterns of land ownership. In October and November 2018, Colombian secondary and university students protested in high numbers during six large mobilizations, taking place over 60 days, to demand more funding for education. The four-year peace talks between the FARC and the Santos administration started in Norway and moved to Cuba where negotiators worked through a six-point agenda during more than 50 rounds of talks that produced agreements on six major topics. The final topic—verification to enact the programs outlined in the final accord—all parties knew would be the most challenging, especially with a polarized public and many Colombians skeptical of whether the FARC would be held accountable for its violence and crimes during the years of conflict. Some analysts have estimated that to implement the programs required by the commitments in the accord to ensure stable post-conflict development may require 15 years and cost from $30 billion to $45 billion. The country faces steep challenges to underwrite the post-accord peace programs in an era of declining revenues. While progress has been uneven, some programs (those related to drug trafficking) had external pressure to move forward quickly and some considered urgent received \"fast track\" treatment to expedite their regulation by Congress. The revised peace accord that was approved by the Colombian Congress in late 2016 was granted fast track implementation by the Colombian Constitutional Court in a ruling on December 13, 2016, particularly applied to the FARC's disarmament and demobilization. However, in May 2017, a new ruling by the high court determined that all legislation related to the implementation of the accord needed to be fully debated rather than passed in an expedited fashion, which some analysts maintain started to slow the process of implementing the accord significantly. The Kroc Institute for International Peace Studies at the University of Notre Dame is responsible for monitoring and implementing the agreement. It issued two interim reports in November 2017 and August 2018. At the end of the last reporting period (June 2018), the Kroc Institute estimated that 63% of the 578 peace accord commitments have begun implementation. In relation to other peace accords it had studied, the Kroc Institute found that the implementation of Colombia's accord was on course as about average, although that progress took place prior to President Duque's election. The first provision undertaken was the demobilization of the FARC, monitored by a U.N. mission that was approved by the U.N. Security Council to verify implementation of the accords. U.N. monitors also emptied large arm caches identified by FARC leaders, seizing the contents of more than 750 of the reported nearly 1,000 caches by the middle of 2017. With the final disarmament, President Santos declared the conflict over in mid-August 2017. The U.S. State Department reported in its Country Reports on Terrorism 201 , that by September 25, 2017, the United Nations had verified the collection of 8,994 arms, 1.7 million rounds, and more than 40 tons of explosives. The report states that the Colombian government had accredited \"roughly 11,000 ex-combatants for transition to civilian life.\" The FARC also revealed its hidden assets in September 2017, listing more than $330 million in mostly real estate investments. This announcement drew criticism from several analysts who note that the FARC assets are likely much greater. In July 2017, the U.N. Security Council voted to expand its mandate and launch a second mission for three years to verify the reintegration of FARC guerrillas into civil society beginning September 20, 2017. One of Colombia's greatest challenges continues to be ensuring security for ex-combatants and demobilized FARC. The FARC's reintegration into civil society is a charged topic because the FARC's efforts in the 1980s to start a political party, known as the Patriotic Union, or the UP by its Spanish acronym, resulted in more than 3,000 party members being killed by rightwing paramilitaries and others. As of the end of 2018, reportedly 85 FARC members and their close relatives had been killed. In addition to unmet government guarantees of security, the FARC also has criticized the government for not adequately preparing for the group's demobilization. According to observers, the government failed to provide basic resources to FARC gathered throughout the country in specially designated zones for disarmament and demobilization (later renamed reintegration zones). The demobilization areas or cantonments had been so little prepared in early 2017 that the FARC had in many cases to construct their own housing and locate food and other provisions. Reintegration of former combatants has proceeded slowly. The Constitutional Court's May 2017 ruling to restrict fast track, and controversy about the new court to try war crimes and other serious violations, the \"Special Jurisdiction of Peace\" led to further delays. Peace process advocates have cited limited attention to include ethnic Colombians, such as Afro-Colombian leaders and indigenous communities, into the accord's implementation, as required by the \"ethnic chapter\" of the peace accord. A U.N. deputy human rights official warned in October 2017 that after a successful demobilization it would be dangerous not to reintegrate FARC former combatants by providing them realistic options for income and delaying effective reintegration could undermine peace going forward. Under the peace accord, Territorially Focused Development Programs (PDETs in Spanish) are a tool for planning and managing a broad rural development process, with the aim of transforming170 municipalities (covering 16 subregions) most affected by the armed conflict. PDETs target those municipalities in Colombia with the highest number of displacements and those that have experienced the most killings, massacres, and forced disappearances. These marginal areas generally have experienced chronic poverty, high inequality, the presence of illicit crops such as coca, and low levels of local government institutional performance. Violence and forced displacements in some of the PDET municipalities increased in the last half of 2018. Colombia's Constitutional Court determined in October 2017 that over the next three presidential terms (until 2030), Colombia must follow the peace accord commitments negotiated by the Santos administration and approved by the Colombian Congress in 2016. The Special Jurisdiction of Peace, set up to adjudicate the most heinous crimes of Colombia's decades-long armed conflict, began to hear cases in July 2018. However, Colombians remain skeptical of its capacity. A key challenge is the case of a FARC leader and lead negotiator in the peace process, Jesús Santrich, alleged to have committed drug trafficking crimes in 2017 after the accord was ratified, who has been jailed. Colombia has confronted a complex security environment of armed groups: two violent leftist insurgencies, the FARC and the ELN, and groups that succeeded the AUC following its demobilization during the Uribe administration. The FARC, whittled down by the government's military campaign against it, continued to conduct a campaign of terrorist activities during peace negotiations with the government through mid-2015, but it imposed successive temporary unilateral cease-fires that significantly reduced violence levels. In August 2016, the FARC and the government concluded negotiations on a peace accord that was subsequently approved by Congress with modifications in November 2016. Authorities and some analysts maintain that since the peace accord was ratified, 5% to 10% of the FARC have become dissidents who reject the peace settlement, although other estimates suggest a higher percentage. These armed individuals remain a threat. As agreed in the peace accord, the demobilized rebels transitioned to a political party that became known as the Common Alternative Revolutionary Force (retaining the acronym FARC) in September 2017. On November 1, 2017, the FARC announced their party's presidential ticket: current FARC leader Rodrigo Londoño (aka Timochenko) for president and Imelda Daza for vice president. The FARC Party ran several candidates in congressional races but failed to win any additional congressional race for which it competed in the March 2018 legislative elections, so the automatic seats in Congress were the only ones that it filled. The ELN, like the FARC, became deeply involved in the drug trade and used extortion, kidnapping, and other criminal activities to fund itself. The ELN, with diminished resources and reduced offensive capability, according to government estimates, declined to fewer than 2,000 fighters, although some analysts maintain in 2018 the forces grew as high as 3,400, including former FARC who were recruited to join the ELN as the larger rebel group demobilized. In 2015, ELN leadership began exploratory peace talks with the Santos government in Ecuador, although the ELN continued to attack oil and transportation infrastructures and conduct kidnappings and extortions, at least periodically. Formal talks with the ELN finally opened in February 2017 in Quito, Ecuador. After the talks moved to Cuba in May 2018, at the request of Ecuador's President Lenín Moreno, several negotiating sessions took place. The ELN's central leadership, including Nicolás Rodríguez Bautista (aka \"Gabino\"), arrived in Cuba to continue the talks. However, President Duque in September 2018 suspended the talks and recalled the government negotiating team. The ELN is far more regionally oriented, decentralized, and nonhierarchical in its decisionmaking than the FARC. Late in 2018, a Colombian political online magazine claimed a meeting had been held two months earlier between FARC dissident groups and the ELN in Venezuela in which the parties discussed how to increase their coordination. On January 17, 2019, a car bomb attack at a National Police academy in southern Bogotá shattered illusions that Colombia's long internal conflict with insurgents was coming to an end. The bombing, allegedly carried out by an experienced ELN bomb maker, killed 20 police cadets and the bomber and injured more than 65 others. The ELN took responsibility for the attack in a statement published on January 21. Large demonstrations took place in Bogotá protesting the return of violence to Colombia's capital city. The Duque government ended peace talks with the ELN, which had been ongoing sporadically since 2017. The Duque government then requested extradition of the ELN's delegation of negotiators to the peace talks in Cuba on terrorism charges. The Cuban government, which condemned the bombing, responded that the protocols for the peace talks required that the negotiators be returned to Colombia without arrest. The Duque government has persisted in requesting the negotiators to be extradited. The AUC, the loosely affiliated national umbrella organization of paramilitaries, officially disbanded a decade ago. The organization was removed from the State Department's Foreign Terrorist Organizations list in July 2014. More than 31,000 AUC members demobilized between 2003 and 2006, and many AUC leaders stepped down. However, as noted, many former AUC paramilitaries continued their illicit activities or re-armed and joined criminal groups—known as Bacrim . Many observers view the Bacrim as successors to the paramilitaries, and the Colombian government has characterized these groups as the biggest threat to Colombia's security since 2011. The Bacrim do not appear to be motivated by the dream of defeating the national government, but they seek territorial control and appear to provide rudimentary justice in ungoverned parts of the country. In 2013, the criminal group Los Urabeños, launched in 2006, emerged as the dominant Bacrim. Over its lifetime, the group has been referred to as the Gaitanistas, the Clan Úsuga, and most recently El Clan del Golfo, growing to about 3,000 members by 2015. The Urabeños organization is heavily involved in cocaine trafficking as well as arms trafficking, money laundering, extortion, gold mining, human trafficking, and prostitution. Early leaders of the group, such as founder Daniel Rendón Herrera (alias \"Don Mario\") and his brother Feddy Rendón Herrera were designated drug kingpins under the U.S. Kingpin Act in 2009 and 2010, respectively. However, because these men had been part of the AUC peace process, they could not be extradited to the United States until they had served time and paid reparations. In June 2015, the Justice Department unsealed indictments against 17 alleged Urabeños members. The Colombian government's efforts to dismantle the Urabeños and interrupt its operations began to result in the capture of top leaders and gradually to disrupt its illicit activities. The Urabeños faced an intense enforcement campaign by the Colombian police and military, especially after the Urabeños reportedly advertised and paid rewards to its subcontracted assassins to murder Colombian police. In September 2017, the Urabeños top leader, Dairo Antonio Úsuga (alias \"Otoniel\"), requested terms of surrender from the Santos government after the arrest of his wife and the killing or arrest of siblings and co-leaders, but this offer was never formalized. Colombia captured a vast amount of cocaine, approximately 12 metric tons, linked to the the Urabeños in November 2017. Splinter groups of the large Colombian drug cartels of the 1980s and 1990s, such as the Medellin Cartel and Cali Cartel, have come and gone in Colombia, including the powerful transnational criminal organizations (TCOs) the Norte del Valle Cartel and Los Rastrajos. The U.S. Drug Enforcement Administration's 2018 National Drug Threat Assessment maintains \"large-scale Colombian TCOs\" work closely with Mexican and Central American TCOs to export large quantities of cocaine out of Colombia every year. Traditionally, the FARC and ELN had cooperated with Bacrim and other Colombian crime groups in defense of drug trafficking and other illicit activities despite the groups' ideological differences. Venezuela is a major transit corridor for Colombian cocaine. According to the State Department's 2018 International Narcotics Control Strategy Report , Venezuela's porous western border with Colombia, current economic crisis, weak judicial system, sporadic international drug control cooperation, and a permissive and corrupt environment make it a preferred trafficking route for illicit drugs. A May 2018 report by Insight Crime identified more than 120 high-level Venezuelan officials who have engaged in criminal activity. The report analyzes how the Venezuelan military, particularly the National Guard, has been involved in the drug trade since 2002 and colluded with other illegally armed groups. Another Bacrim, Los Rastrojos, reportedly controls important gasoline smuggling routes between Venezuela and Colombia in 2018. Similarly, in the past year, ELN guerrillas reportedly have moved from seeking safe haven in Venezuela to taking control of illicit gold mining areas near Venezuela's border with Guyana. Both the ELN, which is still engaged in armed conflict with the Colombian government, and its rival, the Popular Liberation Army (EPL), reportedly recruit Venezuelans to cultivate coca in Colombia. Human trafficking and sexual exploitation of Venezuelan migrants throughout Colombia is prevalent. Dissident FARC guerrillas are using border areas and other remote areas in the countryside to regroup and could eventually seek to consolidate into a more unified organization or coordinate with other criminal groups sheltering in Venezuela. The State Department's 2017 terrorism report published in April 2018 maintained that the number of terrorist incidents in Colombia—carried out by the FARC and ELN—decreased significantly, by 40%, over the already much-diminished level of 2016. ELN aggression included high-impact attacks, such as launching mortars at police stations and bombing pipelines, although the report also states that ELN demobilizations and surrenders have increased. The humanitarian crisis in Venezuela has set in motion a mass exodus of desperate migrants, who have come temporarily (or for extended stays) to Colombia. Although Venezuela has experienced hyperinflation (the highest in the world), a rapid contraction of its economy, and severe shortages of food and medicine, as of November 2018 Venezuelan President Nicolás Maduro has refused most international humanitarian assistance. Based on estimates from the U.N. High Commissioner for Refugees (UNHCR), as of November 2018, more than 3 million Venezuelans were living outside Venezuela; of these, an estimated 2.3 million left after 2015. As conditions in Venezuela have continued to deteriorate, increasing numbers of Venezuelans have left the country. Neighboring countries, particularly Colombia, are straining to absorb a migrant population that is often malnourished and in poor health. The spread of previously eradicated diseases, such as measles, is also a major regional concern. In January 2019, the Trump Administration announced backing for the president of the Venezuelan National Assembly, Juan Guaidó, as interim president of Venezuela. The Trump Administration has called for Maduro's departure, and Colombia joined many other countries in Latin America and Europe to recognize Guaidó. U.S. Secretary of State Michael Pompeo announced that the United States was prepared to provide $20 million in humanitarian assistance to the people of Venezuela. Colombia joined 11 countries in the Lima Group that declared on February 4, 2019, their desire to hasten a return to democracy in Venezuela by working with Guaidó for a peaceful transition without the use of force. Colombia's multisided internal conflict over the last half century generated a lengthy record of human rights abuses. Although it is widely recognized that Colombia's efforts to reduce violence, combat drug trafficking and terrorism, and strengthen the economy have met with success, many nongovernmental organizations (NGOs) and human rights groups continue to report significant human rights violations, including violence targeting noncombatants, that involves killings, torture, kidnappings, disappearances, forced displacements, forced recruitments, massacres, and sexual attacks. The Center for Historical Memory report issued to the Colombian government in July 2013 traces those responsible for human rights violations to the guerrillas (the FARC and ELN), the AUC paramilitaries and successor paramilitary groups, and the Colombian security forces. In analyzing nearly 2,000 massacres between 1980 and 2012 documented in the center's database, the report maintains that 58.9% were committed by paramilitaries, 17.3% by guerrillas, and 7.9% by public security forces. According to the U.S. State Department's annual report on human rights covering 2017, Colombia's most serious human rights abuses centered on extrajudicial and unlawful killings; torture and detentions; rape and sexual crimes. In addition to the State Department, numerous sources report regularly on human rights conditions in Colombia. (See Appendix .) Colombia continues to experience murders and threats of violence against journalists, human rights defenders, labor union members, social activists such as land rights leaders, and others. Crimes of violence against women, children, Afro-Colombian and indigenous leaders, and other vulnerable groups continue at high rates. In December 2018, the U.N. special rapporteur on human rights defenders came out with strong criticism of heightened murders of human rights defenders, which he maintained were committed by hitmen paid no more than $100 per murder, according to reports he heard from activists and other community members whom he met with during a trip to Colombia. These ongoing issues reflect constraints of the Colombian judicial system to effectively prosecute crimes and overcome impunity. For many years, human rights organizations have raised concerns about extrajudicial executions committed by Colombian security forces, particularly the military. In 2008, it was revealed that several young men from the impoverished community of Soacha—who had been lured allegedly by military personnel from their homes to another part of the country with the promise of employment—had been executed. When discovered, the Soacha murder victims had been disguised as guerrilla fighters to inflate military claims of enemy body counts, resulting in the term false positives . Following an investigation into the Soacha murders, the military quickly fired 27 soldiers and officers, including three generals, and the army's commander resigned. The Colombian prosecutor general's criminal investigations of soldiers and officers who allegedly participated in the Soacha executions have proceeded quite slowly. Some 48 of the military members eventually charged with involvement in the Soacha cases were released due to the expiration of the statute of limitations. Whereas some soldiers have received long sentences, few sergeants or colonels have been successfully prosecuted. In 2009, the false positive phenomenon was investigated by the U.N.'s Special Rapporteur on Extrajudicial Executions, who issued a report that concluded with no finding that such killings were a result of an official government policy. However, the Special Rapporteur did find, \"the sheer number of cases, their geographic spread, and the diversity of military units implicated, indicate that these killings were carried out in a more or less systematic fashion by significant elements within the military.\" The majority of the cases took place between 2004 and 2008, when U.S. assistance to Colombia peaked. In recent years, the number of new alleged false positive cases declined steeply, but human rights NGOs still reported a few cases in 2012 through 2015. To address the military's human rights violations, the Santos administration proposed a change to policy that did not prevail. This reform was a constitutional change to expand the jurisdiction of military courts and, it was approved by the Colombian Congress in late December 2012 by a wide margin despite controversy. Human rights groups criticized the legislation's shift in the jurisdiction over serious human rights crimes allegedly committed by Colombia's public security forces from the civilian to the military justice system. In its review of the constitutional amendment, the Colombian Constitutional Court struck down the law over procedural issues in October 2013. Human Rights Watch in a 2015 report on the false positive cases noted that prosecutors in the Human Rights Unit of the Prosecutor General's Office conducted investigations into more than 3,000 false positive homicide cases allegedly committed by army personnel that resulted in about 800 convictions, mostly of lower-ranking soldiers. Only a few of those convictions involved former commanders of battalions or other tactical units, and none of the investigations of 16 active and retired army generals had produced charges. In 2016, the prosecutions against generals accused of responsibility for false positives continued, although a few were closed and 12 remained under investigation at year's end. Additionally, in October 2016, the Colombian prosecutor general indicted Santiago Uribe, the brother of former President Uribe, on charges of murder and association to commit crimes for his alleged role in the paramilitary group \"The 12 Apostols\" in the 1990s. The State Department human rights report covering 2017, maintains that during the year through July, four new cases involving \"aggravated homicide\" committed by security forces and 11 new convictions were reached for \"simple homicide\" by security force members. Although estimates diverge, the number of human rights defenders murdered in 2016 totaled 80 and another 51 in the first half of 2017, according to Somos Defensores (\"We are Defenders\"), a Colombian NGO that tracks violence against defenders and is cited by the State Department. Some groups, such as the Colombian think tank, Indepaz, say the numbers are higher, up to 117 murders in 2016. In the two years since the approval of the 2016 peace accord, social leaders, ethnic community leaders, and human rights defenders have suffered from continued high levels of violence. Human rights organizations cite the murders of more than 100 activists in 2017 and in 2018. Of the 109 human rights and civil society activists killed in 2018 through November, some were leaders of efforts to implement the 2016 peace accord. For instance, 13 social leaders were assassinated in the southwest department of Cauca in the first six months of the year, a department in Colombia with the fourth largest area devoted to coca cultivation in the country and host to several peace accord programs associated with rural development, including voluntary eradication of drug crops. Few, if any, of those accused of making threats and ordering or carrying out assassinations have been prosecuted. According to these activists, perpetrators still have little to fear of legal consequences. Since early 2012, violence against land rights activists has risen sharply with the start of implementation of the Victims' Law that authorized the return of stolen land. A September 2013 report by Human Rights Watch pointing to the rise in violence against land activists and claimants maintained that the environment had turned so threatening that claimants who had received land judgments were too frightened to return, and the government had received more than 500 serious threats against claimants in less than 18 months. According to Human Rights Watch, many of the threats and killings have been conducted by paramilitary-influenced Bacrim, although they may be operating at the behest of third-party \"landowners,\" who are trying to protect their land from seizure. For more than a decade, the Colombian government tried to suppress violence against groups facing extraordinary risk through the National Protection Unit (UPN) programs. Colombia's UPN provides protection measures, such as body guards and protective gear, to individuals in at-risk groups, including human rights defenders, journalists, trade unionists, and others. However, according to international and Colombian human rights groups, the UPN has been plagued by corruption issues and has inadequately supported the prosecution of those responsible for attacks. According to the State Department's Report on Human Rights Practices covering 2017, the UPN protected roughly 6,067 at-risk individuals, including 575 human rights activists, with a budget of $150 million. Journalists, a group that has traditionally received protection measures from the UPN, continue to operate in a dangerous environment in Colombia. According to the Committee to Protect Journalists (CPJ), 47 journalists have been killed in work-related circumstances since 1992. Three Ecuadorian journalists were killed by a FARC dissident group close to the border of Ecuador in 2018, leading to the end of the Colombian government's peace talks with the ELN in Ecuador and their subsequent move to Cuba. To help monitor and verify that human rights were respected throughout implementation of the peace accord, the government formally renewed the mandate of the U.N.'s High Commissioner of Human Rights in 2016 for three years. The issue of violence against the labor movement in Colombia has sparked controversy and debate for years. Many human rights groups and labor advocates have maintained that Colombia's poor record on protecting its trade union members and leaders from violence is one reason to avoid closer trade relations with Colombia. The U.S.-Colombia Free Trade Agreement (also known as the U.S.-Colombia Trade Promotion Agreement) could not be enacted without addressing the deep concern of many Members of Congress that Colombia must enforce basic labor standards and especially measures to mitigate the alleged violence against trade union members and bring perpetrators of such violence to justice. In April 2011, the United States and Colombia agreed to an \"Action Plan Related to Labor Rights\" (the Labor Action Plan, LAP), which contained 37 measures that Colombia would implement to address violence, impunity, and workers' rights protection. Before the U.S.-Colombia Free Trade Agreement entered into force in April 2012, the U.S. Trade Representative determined that Colombia had met all the important milestones in the LAP to date. Despite the programs launched and measures taken to implement the LAP, human rights and labor organizations claim that violence targeting labor union members continues. (Some analysts continue to debate whether labor activists are being targeted because of their union activities or for other reasons.) The Colombian government has acknowledged that violence and threats continue, but points to success in reducing violence generally and the number of homicides of labor unionists specifically. Violence levels in general are high in Colombia, but have steadily been decreasing. According to the data reported by the U.N. Office on Drugs and Crime (UNODC) in its annual homicide report, rates have decreased dramatically since 2002, when the homicide rate was at 68.9 per 100,000. The Colombian Ministry of Defense reported in 2016 that the homicide rate had declined to 24.4 per 100,000. In this context of an overall steady decline in homicides, the number of labor union killings has also declined. For many years, the government and the leading NGO source that tabulates these crimes did not agree on the number of labor union murders because they used different methodologies. Both sources recorded a decline, but the government generally saw a steeper decline. According to the Colombian labor rights NGO and think tank, the National Labor School ( Escuela Nacional Sindical , ENS), there has been a significant decline from 191 labor union murders in 2001 to 20 reported in 2012. In 2017, through the month of August the ENS reported 14 labor murders. Of the cases covering homicides between January 2011 and August 2017, 162 homicide cases in which victims were labor union members, were 409 convictions, 31 for cases after 2011 and 378 for cases before 2011. In addition, labor advocates note that tracking homicides does not capture the climate of intimidation that Colombian labor unions face. In addition to lethal attacks, trade union members encounter increased death threats, arbitrary detention, and other types of harassment. Measures to strengthen the judicial system to combat impunity for such crimes are also part of the Labor Action Plan. Nevertheless, many analysts maintain there remains a large backlog of cases yet to be investigated involving violent crimes against union members. The internal conflict has been the major cause of a massive displacement of the civilian population that has many societal consequences, including implications for Colombia's poverty levels and stability. Colombia has one of the largest populations of internally displaced persons (IDPs) in the world. Most estimates place the total at more than 7 million IDPs, or more than 10% of Colombia's estimated population of 49 million. This number of Colombians, forcibly displaced and impoverished as a result of the armed conflict, continues to grow and has been described by many observers as a humanitarian crisis. Indigenous and Afro-Colombian people make up an estimated 15%-22% of the Colombian population. They are, however, disproportionately represented among those displaced. The leading Colombian NGO that monitors displacement, Consultancy for Human Rights and Displacement (CODHES), reports that 36% of the victims of forced displacement nationwide in 2012 came from the country's Pacific region where Afro-Colombian and indigenous people predominate. The Pacific region has marginal economic development as a result of weak central government presence and societal discrimination. (Some 84% of the land in the Pacific region is subject to collective-title rights granted to Afro-Colombian and indigenous communities. ) Illegal armed groups are active in usurping land in this region, which is valued for its proximity to a major port and drug trafficking routes, and the Afro- and indigenous communities are also caught in the middle of skirmishes between illegal groups and Colombian security forces. IDPs suffer stigma and poverty and are often subject to abuse and exploitation. In addition to the disproportionate representation of Colombia's ethnic communities among the displaced, other vulnerable populations, including women and children, have been disproportionally affected. Women, who make up more than half of the displaced population in Colombia, can become targets for sexual harassment, violence, and human trafficking. Displacement is driven by a number of factors, most frequently in more remote regions of the country where armed groups compete and seek to control territory or where they confront Colombian security forces. Violence that uproots people includes threatened or actual child recruitment or other forced recruitment by illegal armed groups, as well as physical, psychological, and sexual violence. Other contributing factors reported by NGOs include counternarcotics measures such as aerial spraying, illegal mining, and large-scale economic projects in rural areas. Inter-urban displacement is a growing phenomenon in cities such as Buenaventura and Medellin, which often results from violence and threats by organized crime groups. The Victims' Law of 2011, which began to be implemented in 2012, is the major piece of legislation to redress Colombian displacement victims with the return of their stolen land. The historic law provides restitution of land to those IDPs who were displaced since January 1, 1991. The law aims to return land to as many as 360,000 families (impacting up to 1.5 million people) who had their land stolen. The government notes that some 50% of the land to be restituted has the presence of land mines and that the presence of illegally armed groups in areas where victims have presented their applications for land restitution has slowed implementation of the law. Between 2011 and 2016, 100,000 applications for land restitution were filed and approximately 5,000 properties (roughly 5% of applications) were successfully returned following judgements on the cases. With the international support from U.S. Agency for International Development (USAID) and other donors, a Victims Unit was established to coordinate the range of services for victims, including financial compensation and psychosocial services, provided by a host of government agencies. The 2011 Victims' Law is considered a model and particularly the implementation of a Victims' registry, which was supported by USAID. Through its Victims Unit, the Colombian government had provided financial reparations to over 800,000 victims and psychosocial support to 700,000 as of October 2018. The Global Report on Internal Displacement from the Internal Displacement Monitoring Centre (IDMC) reported, however, displacement inside Colombia continued with more than 171,000 internally displaced in 2016. As the political crisis in Venezuela has grown, a wave of refugees and migrants have come across the border into Colombia reversing an earlier trend. Venezuelans were fleeing political instability and economic turmoil in Colombia's once-wealthy neighboring nation. Venezuela's economic crisis worsened throughout 2018, prompting a sharp increase in migrants seeking to escape into Colombia. In response to the growing flood of Venezuelans, former President Santos initially announced that he would impose stricter migratory controls and deploy thousands of new security personnel along the frontier. Nevertheless, he acknowledged that Venezuela had once served as a vital escape valve for Colombian refugees fleeing their half century internal conflict, for which he was grateful. Colombia shares long borders with neighboring countries, and some of these border areas have been described as porous to illegal armed groups that threaten regional security. Colombia has a 1,370-mile border with Venezuela, approximately 1,000-mile borders with both Peru and Brazil, and shorter borders with Ecuador and Panama. Much of the territory is remote and rugged and suffers from inconsistent state presence. Although all of Colombia's borders have been problematic and subject to spillover effects from Colombia's armed conflict, the most affected are Venezuela, Ecuador, and Panama. Over the years, Colombia's relations with Venezuela and Ecuador have been strained by Colombia's counterinsurgency operations, including cross-border military activity. The FARC and ELN insurgents have been present in shared-border regions and in some cases the insurgent groups used the neighboring countries to rest, resupply, and shelter. Former President Uribe accused the former Venezuelan government of Hugo Chávez of harboring the FARC and ELN and maintained that he had evidence of FARC financing the 2006 political campaign of Ecuador's leftist President Rafael Correa. Relations between Ecuador and Colombia remained tense following the Colombian military bombardment of a FARC camp inside Ecuador in March 2008. Ecuador severed diplomatic relations with Colombia for 33 months. Also in 2008, Ecuador filed a suit against Colombia in the International Court of Justice (ICJ), claiming damages to Ecuadorian residents affected by spray drift from Colombia's aerial eradication of drug crops. In September 2013, Colombia reached an out-of-court settlement awarding Ecuador $15 million. Once in office, President Santos reestablished diplomatic ties with both countries and in his first term (2010-2014) cooperation greatly increased between Colombia and Venezuela on border and security issues and with Ecuador's Correa. However, concerns about Venezuelan links to the FARC and the continued use of Venezuela by the FARC and ELN as a safe haven to make incursions into Colombia remained an irritant in Colombian-Venezuelan relations. Nevertheless, the Venezuelan and Colombian governments committed to jointly combat narcotics trafficking and illegal armed group activities along the porous Venezuelan-Colombian border and Venezuela remained a supporting government of the FARC-government peace talks (along with Chile, Norway, and Cuba) through 2016, even after former President Chávez died in office in March 2013. Ecuador's government hosted exploratory talks between the ELN and the Santos government beginning in 2015, which became formal talks hosted in Quito in February 2017, although Ecuador's president requested that the talks move to Cuba in May 2018, due to a spate of border violence that could have been related to the ELN. For many years, the region in Panama that borders Colombia, the Darien, was host to a permanent presence of FARC soldiers who used the remote area for rest and resupply as well to transit drugs north. By 2015, according to the State Department, the FARC was no longer maintaining a permanent militarized presence in Panamanian territory, in part due to effective approaches taken by Panama's National Border Service in coordination with Colombia. Nevertheless, the remote Darien region still faces challenges from smaller drug trafficking organizations and criminal groups such as Bacrim and experiences problems with human smuggling with counterterrorism implications. When Colombia hosted the Sixth Summit of the Americas in April 2012, President Obama and President Santos announced a new joint endeavor, the Action Plan on Regional Security Cooperation. This joint effort, built on ongoing security cooperation, addresses hemispheric challenges, such as combating transnational organized crime, bolstering counternarcotics, strengthening institutions, and fostering resilient communities. The Action Plan focuses on capacity building for security personnel in Central America and the Caribbean by Colombian security forces (both Colombian military and police). To implement the plan, Colombia undertook several hundred activities in cooperation with Panama, Costa Rica, El Salvador, Honduras, Guatemala and the Dominican Republic, and between 2013 and 2017 trained almost 17,000 individuals (see Figure 4 ). The Colombian government notes that this program grew dramatically from 34 executed activities in 2013 to 441 activities planned for 2018. Colombia has increasingly trained military and police from other countries both under this partnership and other arrangements, including countries across the globe. According to the Colombian Ministry of Defense, around 80% of those trained were from Mexico, Central America, and the Caribbean. U.S. and Colombian officials maintain that the broader effort is designed to export Colombian expertise in combating crime and terrorism while promoting the rule of law and greater bilateral and multilateral law enforcement cooperation. Critics of the effort to \"export Colombian security successes\" maintain that human rights concerns have not been adequately addressed. Some observers question the portion of these activities that are funded by the U.S. government and want to see more transparency. In one analysis of the training, a majority of the training was provided by Colombian National Police rather than the Colombian Army, in such areas as ground, air, maritime, and river interdiction; police testimony; explosives; intelligence operations; psychological operations; and Comando JUNGLA, Colombia's elite counternarcotics police program. Other analysts praise the Colombian training and maintain that U.S. assistance provided in this way has helped to improve, professionalize, and expand the Colombian military, making it the region's second largest. As that highly trained military shifts from combating the insurgency and the Colombian National Police take the dominant role in guaranteeing domestic security, Colombia may play a greater role in regional security and even in coalition efforts internationally. In September 2017, President Trump announced that he had considered designating Colombia in noncompliance with U.S. counternarcotics requirements, but noted that he had not proceeded with the step in part because of Colombian training efforts to assist others in the region with combating narcotics and related crime. Colombia is a key U.S. ally in the region. With diplomatic relations that began in the 19 th century following Colombia's independence from Spain, the countries have enjoyed close and strong ties. Because of Colombia's prominence in the production of illegal drugs, the United States and Colombia forged a close partnership over the past 16 years. Focused initially on counternarcotics, and later counterterrorism, a program called Plan Colombia laid the foundation for a strategic partnership that has broadened to include sustainable development, human rights, trade, regional security, and many other areas of cooperation. Between FY2000 and FY2016, the U.S. Congress appropriated more than $10 billion in assistance from U.S. State Department and Department of Defense (DOD) accounts to carry out Plan Colombia and its follow-on strategies. During this time, Colombia made notable progress combating drug trafficking and terrorist activities and reestablishing government control over much of its territory. Its economic and social policies have reduced the poverty rate and its security policies have lowered the homicide rate. Counternarcotics policy has been the defining issue in U.S.-Colombian relations since the 1980s because of Colombia's preeminence as a source country for illicit drugs. Peru and Bolivia were the main global producers of cocaine in the 1980s and early 1990s. However, successful efforts there in reducing supply pushed cocaine production from those countries to Colombia, which soon surpassed both its Andean neighbors. The FARC and other armed groups in the country financed themselves primarily through narcotics trafficking, and that lucrative illicit trade provided the gasoline for the decades-long internal armed conflict at least since the 1990s. Colombia emerged to dominate the cocaine trade by the late 1990s. National concern about the crack cocaine epidemic and extensive drug use in the United States led to greater concern with Colombia as a source. As Colombia became the largest producer of coca leaf and the largest exporter of finished cocaine, heroin produced from Colombian-grown poppies was supplying a growing proportion of the U.S. market. Alarm over the volumes of heroin and cocaine being exported to the United States was a driving force behind U.S. support for Plan Colombia at its inception. The evolution of Plan Colombia took place under changing leadership and changing conditions in both the United States and Colombia. Plan Colombia was followed by successor strategies such as the National Consolidation Plan, described below, and U.S.-Colombia policy has reached a new phase anticipating post-conflict Colombia. Announced in 1999, Plan Colombia originally was a six-year strategy to end the country's decades-long armed conflict, eliminate drug trafficking, and promote development. The counternarcotics and security strategy was developed by the government of President Andrés Pastrana in consultation with U.S. officials. Colombia and its allies in the United States realized that for the nation to gain control of drug trafficking required a stronger security presence, the rebuilding of institutions, and extending state presence where it was weak or nonexistent. Initially, the U.S. policy focus was on programs to reduce the production of illicit drugs. U.S. support to Plan Colombia consisted of training and equipping counternarcotics battalions in the Colombian Army and specialized units of the Colombian National Police, drug eradication programs, alternative development, and other supply reduction programs. The original 1999 plan had a goal to reduce \"the cultivation, processing, and distribution of narcotics by 50%\" over the plan's six-year timeframe. The means to achieve this ambitious goal were a special focus on eradication and alternative development; strengthening, equipping, and professionalizing the Colombian Armed Forces and the police; strengthening the judiciary; and fighting corruption. Other objectives were to protect citizens from violence, promote human rights, bolster the economy, and improve governance. U.S. officials expressed their support for the program by emphasizing its counterdrug elements (including interdiction). The focus on counternarcotics was the basis for building bipartisan support to fund the program in the U.S. Congress because some Members of Congress were leery of involvement in fighting a counterinsurgency, which they likened to the \"slippery slope\" of the war in Vietnam. President George W. Bush came to office in 2001 and oversaw some changes to Plan Colombia. The primary vehicle for providing U.S. support to Plan Colombia was the Andean Counterdrug Initiative, which was included in foreign operations appropriations. The Bush Administration requested new flexibility so that U.S.-provided assistance would back a \"unified campaign against narcotics trafficking, terrorist activities, and other threats to [Colombia's] national security\" due to the breakdown of peace talks between the FARC and the Pastrana government in February 2002. Congress granted this request for a unified campaign to fight drug trafficking and terrorist organizations as Members of Congress came to realize how deeply intertwined the activities of Colombia's terrorist groups were with the illicit drug trade that funded them. However, Congress prohibited U.S. personnel from directly participating in combat missions. Congress placed a legislative cap on the number of U.S. military and civilian contractor personnel who could be stationed in Colombia, although the cap was adjusted to meet needs over time. The current limit (first specified in the FY2015 National Defense Authorization Act, as amended) caps total military personnel at 800 and civilian contractors at 600, although numbers deployed have been far below the 1,400-person cap for years and now total fewer than 200. President Uribe (2002-2010) embraced Plan Colombia with an aggressive strategy toward the insurgent forces that prioritized citizen security. His Democratic Security Policy, implemented first in a military campaign called Plan Patriota, relied on the military to push FARC forces away from the major cities to remote rural areas and the borderlands. Like his predecessor, President Pastrana, Uribe continued to expand the Colombian military and police. He enhanced the intelligence capacity, professionalization, and coordination of the forces, in part with training provided by U.S. forces. His strategy resulted in expanded state control over national territory and a significant reduction in kidnappings, terrorist attacks, and homicides. In 2007, the Uribe administration announced a shift to a \"Policy of Consolidation of Democratic Security.\" The new doctrine was based on a \"whole-of-government\" approach to consolidate state presence in marginal areas that were historically neglected—vulnerable to drug crop cultivation, violence, and control by illegal armed groups. Called a strategic leap forward by then-Defense Minister Juan Manuel Santos, in 2009 the new strategy came to be called the National Consolidation Plan (see below). Colombian support for Plan Colombia and for the nation's security program grew under Uribe's leadership. President Uribe levied a \"wealth tax\" to fund Colombia's security efforts, taxing the wealthiest taxpayers to fund growing defense and security expenditures. Overall U.S. expenditures on Plan Colombia were only a modest portion of what Colombians spent on their own security. By one 2009 estimate, U.S. expenditures were not more than 10% of what Colombians invested in their total security costs. In 2000, Colombia devoted less than 2% of its GDP to military and police expenditures and in 2010 that investment had grown to more than 4% of GDP. One assessment notes \"in the end there is no substitute for host country dedication and funding\" to turn around a security crisis such as Colombia faced at the beginning of the millennium. In 2008, congressional support for Plan Colombia and its successor programs also shifted. Some Members of Congress believed that the balance of programming was too heavily weighted toward security. Prior to 2008, the emphasis had been on \"hard side\" security assistance (to the military and police) compared with \"soft side\" traditional development and rule of law programs. Members debated if the roughly 75%/25% mix should be realigned. Since FY2008, Congress has reduced the proportion of assistance for security-related programs and increased the proportion for economic and social aid. As Colombia's security situation improved and Colombia's economy recovered, the United States also began turning over to Colombians operational and financial responsibility for efforts formerly funded by the U.S. government. The Colombian government \"nationalized\" the training, equipping, and support for Colombian military programs, such as the counterdrug brigade, Colombian Army aviation, and the air bridge denial program. U.S. funding overall began to decline. The nationalization efforts were not intended to end U.S. assistance, but rather to gradually reduce it to pre-Plan Colombia levels, adjusted for inflation. A key goal of Plan Colombia was to reduce the supply of illegal drugs produced and exported by Colombia but the goals became broader over time. Bipartisan support for the policy existed through three U.S. Administrations—President Bill Clinton, President George W. Bush, and President Barack Obama. Plan Colombia came to be viewed by some analysts as one of the most enduring and effective U.S. policy initiatives in the Western Hemisphere. Some have lauded the strategy as a model. In 2009, William Brownfield, then-U.S. Ambassador to Colombia, described Plan Colombia as \"the most successful nation-building exercise that the United States has associated itself with perhaps in the last 25-30 years.\" Other observers, however, were critical of the policy as it unfolded. Many in the NGO and human rights community maintained the strategy, with its emphasis on militarization and security, was inadequate for solving Colombia's persistent, underlying problems of rural violence, poverty, neglect and institutional weakness. Nevertheless, it appears that improvements in security conditions have been accompanied by substantial economic growth and a reduction in poverty levels over time. The National Consolidation Plan first launched during the Uribe Administration, (renamed the National Plan for Consolidation and Territorial Reconstruction), was designed to coordinate government efforts in regions where marginalization, drug trafficking, and violence converge. The whole-of-government consolidation was to integrate security, development, and counternarcotics to achieve a permanent state presence in vulnerable areas. Once security forces took control of a contested area, government agencies in housing, education, and development would regularize the presence of the state and reintegrate the municipalities of these marginalized zones into Colombia. The plan had been restructured several times by the Santos government. The United States supported the Colombian government's consolidation strategy through an inter-agency program called the Colombia Strategic Development Initiative (CSDI). CSDI provided U.S. assistance to \"fill gaps\" in Colombian government programming. At the U.S. Embassy in Colombia, CSDI coordinated efforts of the U.S. Agency for International Development (USAID), the State Department's Narcotics Affairs Section, the U.S. Military Group, and the Department of Justice to assist Colombia in carrying out the consolidation plan by expanding state presence and promoting economic opportunities in priority zones. It combined traditional counternarcotics assistance for eradication, interdiction, alternative development, and capacity building for the police, military, and justice sector institutions with other economic and social development initiatives. As the peace agreement between the FARC and the government moved forward into implementation, the focus of U.S. assistance to Colombia has shifted again. With a foundation of the work done to advance consolidation, U.S. assistance has begun to aid in post-conflict planning and support Colombia's transition to peace by building up democratic institutions, protecting human rights and racial and ethnic minorities, and promoting economic opportunity. USAID's country cooperation strategy for 2014-2018 anticipated the Colombian government reaching a negotiated agreement with the FARC, but remained flexible if an agreement was not signed. It recognized early implementation efforts, especially in the first 24 months after signature, would be critical to demonstrate or model effective practices. In the next five years, it envisioned Colombia evolving from aid recipient to provider of technical assistance to neighbors in the region. Consolidating state authority and presence in the rural areas with weak institutions remains a significant challenge following the FARC's disarmament in the summer of 2017. Reintegration of the FARC and possibly other insurgent forces, such as the ELN, will be expensive and delicate. In particular, critics of the consolidation efforts of the Colombian government maintain that the Santos administration often lacked the commitment to hand off targeted areas from the military to civilian-led development and achieve locally led democratic governance. Consolidation efforts suffered from low political support, disorganization at the top levels of government, and failure to administer national budgets effectively in more remote areas, among other challenges. In August 2018, shortly after President Duque took office, USAID announced a framework of priorities for U.S. economic development assistance to Colombia. Some of these priorities include promoting and supporting a whole-of-government strategy to include the dismantling of organized crime; increasing the effectiveness of Colombia's security and criminal justice institutions; promoting enhanced prosperity and job creation through trade; improving the investment climate for U.S. companies; and advancing Colombia's capacity to strengthen governance and transition to sustainable peace, including reconciliation among victims, ex-combatants, and other citizens. The U.S. Congress initially approved legislation in support of Plan Colombia in 2000, as part of the Military Construction Appropriations Act of 2001 ( P.L. 106-246 ). Plan Colombia was never authorized by Congress, but it was funded annually through appropriations. From FY2000 through FY2016, U.S. funding for Plan Colombia and its follow-on strategies exceeded $10 billion in State Department and Defense Department programs. From FY2000 to FY2009, the United States provided foreign operations assistance to Colombia through the Andean Counterdrug Program (ACP) account, formerly known as the Andean Counterdrug Initiative, and other aid accounts. In FY2008, Congress continued to fund eradication and interdiction programs through the ACP account, but funded alternative development and institution building programs through the Economic Support Fund (ESF) account. In the FY2010 request, the Obama Administration shifted ACP funds into the International Narcotics Control and Law Enforcement (INCLE) account. Since FY2008, U.S. assistance has gradually declined because of tighter foreign aid budgets and nationalized Plan Colombia-related programs. In FY2014, in line with other foreign assistance reductions, funds appropriated to Colombia from State Department accounts declined to slightly below $325 million. In FY2015, Congress appropriated $300 million for bilateral assistance to Colombia in foreign operation. The FY2016 Omnibus Appropriations bill ( P.L. 114-113 ) provided Colombia from U.S. State Department and U.S. Agency for International Development accounts, slightly under $300 million, nearly identical to that appropriated in FY2015 (without P.L. 480, the Food for Peace account, the total for FY2016 was $293 million as shown in Table 1 ). In FY2017, Congress funded a program the Obama Administration had proposed called \"Peace Colombia\" to re-balance U.S. assistance to support the peace process and implementation of the accord. In May 2017, Congress approved a FY2017 omnibus appropriations measure, the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which funded the various programs of Peace Colombia at $391.3 million. In the FY2017 legislation, Congress appropriated the following: The ESF account increased to $187 million (from $134 million in FY2016) to build government presence, encourage crop substitution to replace drug crops, and provide other assistance to conflict victims, including Afro-Colombian and indigenous communities. However, only $180 million was subsequently allocated. INCLE funding increased to $143 million with a focus on manual eradication of coca crops, support for the Colombian National Police, and judicial reform efforts. INCLE funding also included $10 million for Colombian forces' training to counterparts in other countries. $38.5 million in Foreign Military Financing (FMF); and $21 million in Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR), which was a relatively large increase from under $4 million in FY2016 to focus on the demining effort. How the Trump Administration will engage with the issues of supporting post-conflict stability in Colombia has not been clearly defined by either the State Department or other executive departments. For example, the Trump Administration's proposed foreign aid budget for FY2018 would have reduced assistance to Colombia to $251 million. However, the FY2018 omnibus appropriations measure, approved by Congress in March 2018 ( P.L. 115-114 ), again included $391.3 million to support Colombia's transition to peace. The Trump Administration's FY2019 budget request for Colombia is $265 million, approximately a 32% reduction from the $391.3 million appropriated by Congress in FY2018. However, the House and Senate appropriations bills, H.R. 6385 and S. 3108 , again would support the funding level of $391.3 million. The FY2019 Administration request would reduce post-conflict recovery programs and place greater emphasis on counternarcotics and security. Below, Table 1 provides account data from the annual international affairs congressional budget justification documents. The information about DOD-funded programs was provided to the Congressional Research Service by DOD analysts in December 2015 and October 2017 (and has not been updated). The breakout of DOD assistance to Colombia is shown in Table 2 . . Colombia also has received additional U.S. humanitarian funding to help it cope with more than 1 million Venezuelan migrants. As of September 30, 2018, U.S. government humanitarian funding for the Venezuela response totaled approximately $96.5 million for both FY2017 and FY2018 combined, of which $54.8 million was for Colombia. (Humanitarian funding is drawn primarily from the global humanitarian accounts in annual Department of State/Foreign Operations appropriations acts.) In addition, the U.S. Navy hospital ship USNS Comfort is on an 11-week medical support mission deployed through the end of 2018 to work with government partners, in part to assist with arrivals from Venezuela. In Colombia, the U.S. response aims to help the Venezuelan arrivals as well as the local Colombian communities that are hosting them. In addition to humanitarian assistance, the United States is providing $37 million in bilateral assistance to support medium- and longer-term efforts by Colombia. Some Members of Congress have been deeply concerned about human rights violations in Colombia—especially those perpetrated by any recipients or potential recipients of U.S. assistance. In Colombia's multisided, 50-year conflict, the FARC and ELN, the paramilitaries and their successors, and Colombia's security forces have all committed serious violations. Colombians have endured generations of noncombatant killings, massacres, kidnappings, forced displacements, forced disappearances, land mine casualties, and acts of violence that violate international humanitarian law. The extent of the crimes and the backlog of human rights cases to be prosecuted have overwhelmed the Colombian judiciary, which some describe as \"inefficient\" and overburdened. The United Nations and many human rights groups maintain that although some prosecutions have gone forward, most remain unresolved and the backlog of cases has been reduced slowly. In addition to the problem of impunity for such serious crimes, continued violations remain an issue. Since 2002, Congress has required in the annual foreign operations appropriations legislation that the Secretary of State certify annually to Congress that the Colombian military is severing ties to paramilitaries and that the government is investigating complaints of human rights abuses and meeting other human rights statutory criteria. (The certification criteria have evolved over time. ) For several years, certification was required before 30% of funds to the Colombian military could be released. The FY2014 appropriations legislation requires that 25% of funding under the Foreign Military Financing (FMF) program be held back pending certification by the Secretary of State. Some human rights groups have criticized the regular certification of Colombia, maintaining that evidence they have presented to the State Department has contradicted U.S. findings. However, even some critics have acknowledged the human rights conditions on military assistance to Colombia to be \"a flawed but useful tool\" because the certification process requires that the U.S. government regularly consult with Colombian and international human rights groups. Critics acknowledge that over time, conditionality can improve human rights compliance. Additional tools for monitoring human rights compliance by Colombian security forces receiving U.S. assistance are the so-called \"Leahy Law\" restrictions, which Congress first passed in the late 1990s prior to the outset of Plan Colombia. First introduced by Senator Patrick Leahy, these provisions deny U.S. assistance to a foreign country's security forces if the U.S. Secretary of State has credible information that such units have committed \"a gross violation of human rights.\" The provisions apply to security assistance provided by the State Department and DOD. The Leahy Law under the State Department is authorized by the Foreign Assistance Act (FAA) of 1961, as amended, and is codified at 22 U.S.C. 2378d (§520M of the FAA). The DOD Leahy provisions, which for years applied just to DOD training, now include a broader range of assistance, as modified in the FY2014 appropriations legislation. The provision related to the Leahy Laws for DOD assistance is codified at 10 U.S.C. 362, and prohibits \"any training, equipment, or other assistance,\" to a foreign security force unit if there is credible information that the unit has committed a gross violation of human rights. Both the State Department and DOD Leahy provisions require the State Department to review and clear—or vet—foreign security forces to determine if any individual or unit is credibly believed to be guilty of a gross human rights violation. Leahy vetting is typically conducted by U.S. embassies and State Department headquarters. Reportedly on an annual basis about 1% of foreign security forces are disqualified from receiving assistance under the Leahy provisions, although many more are affected by administrative issues and are denied assistance until those conditions are resolved. Tainted security force units that are denied assistance may be remediated or cleared, but the procedures for remediation differ slightly between the DOD and State (or FAA) provisions. Because of the large amount of security assistance provided to Colombian forces (including the military and police), the State Department reportedly vets more candidates for assistance in Colombia than in any other country. In the late 1990s, poor human rights conditions in Colombia were a driving concern for developing the Leahy Law provisions. The U.S. Embassy in Bogotá, with nearly two decades of experience in its vetting operations, has been cited as a source of best practices for other embassies seeking to bring their operations into compliance or enhance their performance. State Department officials have cited Colombia as a model operation that has helped Colombia to improve its human rights compliance. However, some human rights organizations are critical of the Leahy vetting process in Colombia, and cite the prevalence of extrajudicial executions allegedly committed by Colombian military units as evidence that these restrictions on U.S. assistance have failed to remove human rights violators from the Colombian military. A human rights nongovernmental organization, Fellowship of Reconciliation, has published reports alleging an association between false positive killings and Colombian military units vetted by the State Department to receive U.S. assistance. However, some have questioned the group's methodology. Some human rights organizations contend that the U.S. government has tolerated abusive behavior by Colombian security forces without taking action or withholding assistance. Measured exclusively in counternarcotics terms, Plan Colombia has been a mixed success. Colombia remains the dominant producer of cocaine and in the DEA's National Drug Threat Assessment for 2017 continued to be the source for 95% of cocaine seized in the United States. Enforcement, eradication, and improved security squeezed production in Colombia, so that in 2012, Peru reemerged as the global leader in cocaine production, surpassing Colombia, for a year or so. In the early 2000s, given Colombia's predominance as the source of cocaine destined for U.S. markets and its status as the second-largest producer of heroin consumed in the United States, eradication of coca bush and opium poppy (from which heroin is derived) was an urgent priority and became the preferred tool for controlling the production of these drugs. Another critical component of the drug supply reduction effort was alternative development programs funded by the U.S. Agency for International Development (USAID) to assist illicit crop cultivators with transitioning to licit crop production and livelihoods. Analysts have long debated how effective Plan Colombia and its follow-on strategies were in combating illegal drugs. Although Plan Colombia failed to meet its goal of reducing the cultivation, processing, and distribution of illicit drugs by 50% in its original six-year time frame, Colombia has sustained significant reductions in coca cultivation in recent years. According to U.S. estimates, cultivation of coca declined from 167,000 hectares in 2007 to 78,000 hectares in 2012. (Poppy cultivation declined by more than 90% between 2000 and 2009.) According to U.S. government estimates, Colombia's potential production of pure cocaine fell to 170 metric tons in 2012, the lowest level in two decades. However, it started to rise slightly in 2013, and more dramatically in 2014 through 2016. In those years, cultivation of coca and production of cocaine grew significantly in part due to ending the aerial eradication of coca crops. In 2015, following a U.N. agency determination that the herbicide used to spray coca crops was probably carcinogenic, Colombia's minister of health determined that aerial eradication of coca was not consistent with requirements of Colombia's Constitutional Court. In 2016, as noted above, the U.S. DEA reported that 95% of cocaine seized in the United States originated in Colombia. According to U.S. Office of National Drug Control Policy, Colombia in 2017 cultivated an unprecedented 209,000 hectares of coca, from which cocaine is derived, capable of generating 921 metric tons of cocaine. The United Nations estimates for 2017, which typically differ in quantity but follow the same trends as U.S. estimates, maintained that Colombia's potential production of cocaine reached nearly 1,370 metric tons, 31% above its 2016 estimate. Even with Colombia's economic stability and improving security, cocaine exports (primarily to the U.S. market) remain a major concern for U.S. lawmakers. However, in drug interdiction, Colombia has set records for many years and is considered a strong and reliable U.S. partner. The United Nations Office on Drugs and Crime ( Table 4 ), shows Colombia cultivating 146,000 hectares of coca in 2016, a 52% increase over 2015 and another increase to 171,000 hectares, a 17% increase, in 2017. Although cocaine seizures were quite high in both years, the interdiction of cocaine was insufficient to counter the large increases in production. Both manual eradication and aerial eradication were central components of Plan Colombia to reduce coca and poppy cultivation. Manual eradication is conducted by teams, usually security personnel, who uproot and kill the plant. Aerial eradication involves spraying the plants from aircraft with an herbicide mixture to destroy the drug crop, but it may not kill the plants. In the context of Colombia's continuing internal conflict, manual eradication was far more dangerous than aerial spraying. U.S. and Colombian policymakers recognized the dangers of manual eradication and, therefore, employed large-scale aerial spray campaigns to reduce coca crop yields, especially from large coca plantations. Colombia is the only country globally that aerially sprayed its illicit crops, and the practice has been controversial for health and environmental reasons, resulting in a Colombian decision to end aerial eradication in 2015. Since 2002, as a condition of fully funding the spraying program, Congress has regularly directed the State Department, after study and consultation with the U.S. Environmental Protection Agency and other relevant agencies, to certify that the spraying did not \"pose unreasonable risks or adverse effects to humans or the environment.\" This certification requirement was included most years in the annual foreign operations appropriations legislation. Some analysts have also raised questions about the monetary and collateral costs of aerial eradication compared with other drug supply control strategies, its effectiveness, and its limited effect on the U.S. retail price of cocaine. U.S. State Department officials attribute Colombia's decline in coca cultivation after 2007 and prior to 2013 to the persistent aerial eradication of drug crops in tandem with manual eradication where viable. Between 2009 and 2013, Colombia aerially sprayed roughly 100,000 hectares annually. In 2013, however, eradication efforts declined. Colombia aerially eradicated roughly 47,000 hectares. It manually eradicated 22,120 hectares, short of the goal of 38,500 hectares. This reduction had a number of causes: the U.S.-supported spray program was suspended in October 2013 after two U.S. contract pilots were shot down, rural protests in Colombia hindered manual and aerial eradication efforts, and security challenges limited manual eradicators working in border areas. In late 2013, Ecuador won an out-of-court settlement in a case filed in 2008 before the International Court of Justice in The Hague for the negative effects of spray drift over its border with Colombia. In negotiations with the FARC, the government and the FARC provisionally agreed in May 2014 that voluntary manual eradication would be prioritized over forced eradication. Aerial eradication remained a viable tool in the government's drug control strategy, according to the agreement, but would be permitted only if voluntary and manual eradication could not be conducted safely. In April 2015, the Santos administration determined that glyphosate, a broad-spectrum, nonselective herbicide used commercially, but in Colombia sprayed on coca plants to eradicate them, was \"probably carcinogenic\" to humans in a review published by a World Health Organization (WHO) affiliate. In October 2015, the government ended spraying operations and began to implement a new public health approach toward illicit drugs, one that proponents suggested would reduce human rights violations. On the supply side, Colombia's new drug policy gives significant attention to expanding alternative development and licit crop substitution while intensifying interdiction efforts. The State Department in its 2015 International Narcotics Control Strategy Report (INCSR), however, warned that illicit cultivation was expanding in areas long off-limits to aerial spraying, including national parks, a buffer zone with Ecuador where aerial eradication has been restricted, and in indigenous or protected Afro-Colombian territories. Colombian interdiction practices are deemed some of the most effective in the world. The Colombian government reported seizing more than 207 metric tons (mt) of cocaine base in 2014 and that seizure total doubled by 2017 with capture of 442 mt of cocaine. According to the U.S. State Department's 2018 INCSR , Colombia also seized 197 mt of marijuana, 348 kilograms of heroin, and destroyed more than 3,400 cocaine base and hydrochloride labs. USAID funds and runs alternative development programs in Colombia to assist communities with transitioning from a dependency on illicit crops to licit employment and livelihoods. Alternative development was once focused narrowly on crop substitution and assistance with infrastructure and marketing. Since the Colombian government's shift to a consolidation strategy, USAID has supported \"consolidation and livelihoods\" programming in 40 of the 58 strategically located, conflict-affected municipalities targeted by the government's National Consolidation Plan. To facilitate economic development, USAID funds initiatives that assist farmers and others with shifting from coca growing to licit economic opportunities. These programs are designed to strengthen small farmer producer organizations, improve their productivity, and connect them to markets. Some observers maintain that poor and unsustainable outcomes from alternative development programs while the Colombian conflict was still under way resulted from ongoing insecurity and lack of timeliness or sequencing of program elements. The renewed commitment to alternative development and crop substitution in the 2016 peace accord with the FARC may be similarly challenged. Formal implementation of the peace accord on drug eradication and crop substitution began in late May 2017 with collective agreements committing communities to replace their coca crops with licit crops. In some regions, the program is extended to families who cultivate coca and also to producers of legal crops and landless harvesters. The Colombian government also committed to a combined approach of both voluntary and forced manual eradication. The government's goal set for 2017 was eradicating 100,000 hectares of coca, 50,000 through forced manual eradication and 50,000 through \"crop substitution\" accords reached with coca farming households who would voluntary eradicate. At the U.S.-Colombia High Level Dialogue held in Bogotá in March 2018, a renewed commitment to the enduring partnership between the United States and Colombia was announced. A major outcome was a U.S.-Colombia pledge to reduce illegal narcotics trafficking through expanded counternarcotics cooperation. The new goal set was to reduce Colombia's estimated cocaine production and coca cultivation to 50% of current levels by 2023. In addition, a memorandum of understanding was signed to combat the illegal gold mining that funds transnational criminal organizations. Although President Duque appears determined to pursue a more aggressive approach to drug policy, he has not clearly stated how his approach to counternarcotics will differ from that of his predecessor. The government may restart aerial eradication, a strategy that ended in 2015 due to the Colombian Health Ministry's concerns over cancer-causing potential of the herbicide glyphosate, but no precise plans for restarting the program have been announced in the Duque Administration's first three months in office. Experimentation with delivering glyphosate by drones (rather than planes) began in June 2018 under the Santos Administration and is continuing under the Duque government. On October 1, 2018, President Duque authorized police to confiscate and destroy any quantity of drugs found on persons in possession of them, resulting in the seizure of more than 7 metric tons of drugs in less than two weeks. This enforcement measure may violate a 1994 Colombian Constitutional Court ruling, however, in which Colombians may carry small doses of drugs for personal use, including marijuana, hashish, and cocaine. Several court challenges have been filed that seek to nullify the Duque decree on constitutional grounds of protected personal use. Drug trafficking continues to trigger conflict over land in Colombia while affecting the most vulnerable groups, including Afro-Colombian, peasant, and indigenous populations. Some analysts warn that national and international pressure for drug eradication could also lead to increased human rights violations, including health consequences by reviving aerial spraying of drug crops and government actions to forcibly break up demonstrations by coca producers who resist eradication. Some analysts have advocated that investments to lower drug supply need to go beyond eradication, which has not been a lasting approach to reducing drug crop cultivation. For instance, the government could provide economic and education opportunities to at-risk youth to enhance their role in peace building and to prevent their recruitment into the drug trade and other illegal activity. Economic relations between Colombia and the United States have deepened. The U.S.-Colombia Free Trade Agreement (FTA) entered into force in May 2012. By 2020, it will phase out all tariffs and other barriers to bilateral trade between Colombia and the United States, its largest trade partner. Since the U.S.-Colombia FTA went into force, the stock of U.S. investment in Colombia surpassed $7 billion in 2014 but dropped to $6.2 billion in 2016 (on a historical cost basis), concentrated mostly in mining and manufacturing. According to the U.S. Department of Commerce, U.S. exports to Colombia exceeded $26.8 billion in 2016 and Colombia was the 22 nd -largest market for U.S. exports; however, U.S. imports from Colombia declined between 2015 and 2016. Major U.S. exports to Colombia include oil (noncrude oil products including gasoline), machinery, cereals, organic chemicals, and plastic. Because 65% of U.S. imports from Colombia are crude oil imports, much of the decline in value was caused by the sharp fall in oil prices that began in 2014. Major U.S. imports beside crude oil, include gold, coffee, cut flowers, and fruits. Congressional interest in Colombia now extends far beyond security and counternarcotics and has grown in the area of bilateral trade following implementation of the U.S.-Colombia FTA, (also known at the U.S.-Colombia Trade Promotion Agreement). Colombia is a founding member of the Pacific Alliance, along with Chile, Mexico, and Peru, and has sought to deepen trade integration and cross-border investment with its partners in the alliance while reducing trade barriers. The Pacific Alliance aims to go further by creating a common stock market, allowing for the eventual free movement of businesses and persons, and serving as an export platform to the Asia-Pacific region. Colombia's leadership role in the Pacific Alliance and Colombia's accession to the Organization for Economic Cooperation and Development (OECD) in May 2018, following a review of the country's macroeconomic policies and changes, are major new developments. The accession to the OECD was approved by Colombia's lower house in October 2018 and the Senate in November 2018, but it remained under final review by Colombia's Constitutional Court in early February 2019. The Santos administration pushed to meet the criteria required for OECD membership because it maintained that such recognition signified Colombia's attainment of world-class development standards and policies. Colombia has made progress on trade issues such as copyright, pharmaceuticals, fuel and trucking regulations, and labor concerns (including subcontracting methods and progress on resolving cases of violence against union activists). Congress remains interested in Colombia's future because the country has become one of the United States' closest allies. With 17 years of investment in Colombia's security and stability, some maintain that there has already been a strong return on U.S. investment. Plan Colombia and its successor strategies broadened from counternarcotics to include humanitarian concerns, efforts to bolster democratic development and human rights protections, and trade and investment to spark growth. The record expansion of Colombia's coca crop and increasing cocaine exports to the United States, however, may significantly hinder the effort to consolidate peace in Colombia and could potentially increase corruption and extortion. A significant portion of the Colombian public remains skeptical of the peace process and the FARC's role in Colombia's democracy. Other Colombians maintain that support for peace programs in Colombia is important not only to benefit former FARC or other demobilized combatants but also to fulfill promises the government made in the peace accords to the country's 8.6 million victims of the five-decade conflict. As President Duque concluded his first 100 days in office, his government faced overlapping challenges: (1) an upsurge in illicit drug crops, which had set records in 2016 and 2017; (2) implementation of provisions of the peace accord negotiated by former president Santos but marred by slow implementation, attacks on land and human rights activists, and projected budgetary shortfalls; (3) renewed violent competition among criminal groups in rural areas, some of which reportedly are sheltering in Venezuela; and (4) Venezuela's humanitarian crisis, which resulted in a surge of migrants fleeing to or through Colombia. The annual level of foreign assistance provided by the U.S. Congress for Colombia began to decline in FY2008 and then gradually increased in FY2017 and FY2018 to support peace and implementation of the FARC-government peace accord. Some Members of Congress may want to build on cooperation with Colombian partners to continue to train Central Americans and other third-country nationals in counternarcotics and security, including programs in citizen security, crime prevention and monitoring, military and police capacity building, and hostage negotiation and cybersecurity. Congress may continue to closely monitor Colombia's domestic security situation. It also may continue to oversee issues such as drug trafficking; Colombia's effort to combat other illegal armed groups such as Bacrim; the status of human rights protections; and the expansion of health, economic, environmental, energy, and educational cooperation. Congress may seek to foster Colombian leadership in the region to counter growing political instability in Venezuela. The U.S. Congress has been interested in expanding investment and trade opportunities both bilaterally with Colombia and within regional groupings, such as the Pacific Alliance. Some analysts contend that U.S.-Colombian trade improvements rest on the strength of the overall relationship between Colombia and the United States. ", "summary": "A key U.S. ally in the Latin American region, Colombia endured an internal armed conflict for half a century. Drug trafficking fueled the violence by funding both left-wing and right-wing armed groups. Some analysts feared Colombia would become a failed state in the late 1990s, but the Colombian government devised a new security strategy, known as Plan Colombia, to counter the insurgencies. Originally designed as a 6-year program, Plan Colombia ultimately became a 17-year U.S.-Colombian bilateral effort. The partnership focused initially on counternarcotics and later on counterterrorism; it then broadened to include sustainable development, human rights, trade, regional security, and many other areas of cooperation. Between FY2000 and FY2016, the U.S. Congress appropriated more than $10 billion to help fund Plan Colombia and its follow-on programs. For FY2018, Congress appropriated $391.3 million in foreign aid for Colombia, including assistance to promote peace and end the conflict. President Juan Manuel Santos (2010-2018) made concluding a peace accord with the Revolutionary Armed Forces of Colombia (FARC)—the country's largest leftist guerrilla organization—his government's primary focus. Following four years of formal peace negotiations, Colombia's Congress ratified the FARC-government peace accord in November 2016. During a U.N.-monitored demobilization effort in 2017, approximately 11,000 FARC disarmed and demobilized. This figure included FARC who had been held in prison for crimes of rebellion and those making up FARC militias, who were accredited by the Colombian government as eligible to demobilize. On August 7, 2018, Iván Duque, a senator from the conservative Democratic Center party, was inaugurated to a four-year presidential term. Duque, who also worked at the Inter-American Development Bank in Washington, DC, and is Colombia's youngest president in a century, campaigned as a critic of the peace accord with the FARC. His party objected to specific measures concerning justice and political representation. Some observers maintain that his election has generated uncertainty for implementation of the accord. Shortly after taking office, Duque suspended peace talks with the National Liberation Army (ELN), the country's second-largest rebel group, which had begun under President Santos. Since the ratification of the peace accord, Colombia's long-term strategy has evolved from defeating insurgents to post-conflict stabilization. Many considered Plan Colombia and its successor strategies a remarkable advance, given the country's improvements in security and economic stability. Nevertheless, recent developments have called into question Colombia's progress. The FARC's demobilization has triggered open conflict among armed actors (including FARC dissidents and transnational criminal groups), which seek to control drug cultivation and trafficking, illegal mining, and other illicit businesses that the demobilized FARC abandoned. The ongoing lack of governance in remote rural areas recalls the conditions that originally gave rise to the FARC and other armed groups. Many observers continue to raise concerns about the country's human-rights conditions, sharp increases in coca cultivation and cocaine production, and problems stemming from the failing authoritarian government of neighboring Venezuela, which shares a nearly 1,400-mile border with Colombia. Venezuela's humanitarian crisis has set in motion an exodus of migrants, many of whom have sought temporary residence (or extended stays) in Colombia. Political upheaval has added yet more uncertainty after the United States and many other Western Hemisphere and European nations, including Colombia, called for a democratic transition in Venezuela and recognized the president of the Venezuelan National Assembly, Juan Guaidó, as the country's interim president in January 2019. The U.S.-Colombia Trade Promotion Agreement went into force in May 2012. The United States remains Colombia's top trade partner. After several years of annual growth exceeding 4%, one of the steadiest expansion rates in the region, Colombia grew by an estimated 2.7% in 2018. The FARC-government peace accord is projected to cost more than $40 billion to implement over 15 years, adding to the polarization over the controversial peace process. For additional background, see CRS In Focus IF10817, Colombia's 2018 Elections, CRS Report R44779, Colombia's Changing Approach to Drug Policy, CRS Report R42982, Colombia's Peace Process Through 2016, and CRS Report RL34470, The U.S.-Colombia Free Trade Agreement: Background and Issues.", "document_type": "crs"}
{"report": "In analyzing the effects of U.S. individual income tax rates, it is important to be clear about which rates are being discussed. Among tax analysts, the three most widely used measures are statutory rates (STRs), marginal effective rates (MERs), and average effective rates (AERs). Each has its own applications. Those interested in how individual income taxes affect the economic behavior of households should have a clear understanding of the ways in which the three rates differ and the implications of these differences for the economic analysis of income taxes. STRs are the rates prescribed by law that apply to specified ranges of taxable income. For any individual, the applicable rate depends on her/his taxable income. Since the federal income tax is progressive in nature, taxpayers with relatively low taxable incomes face lower STRs than do taxpayers with relatively high taxable incomes. Effective rates, by contrast, whether marginal or average, measure how STRs are affected by tax provisions that modify someone's taxable income or tax liability. A taxpayer's MER shows the percentage of an additional dollar of income that is taxed, while her/his AER indicates how much of her/his total income is taxed. In general, someone's average tax rate is lower than her/his marginal tax rate. Still, for many individuals, the interaction between special provisions in the tax code and their specific financial circumstances leads to differences between their effective and statutory rates. Among the provisions that can drive a wedge between the two rates are the earned income tax credit (EITC), the alternative minimum tax (AMT), and personal exemptions and deductions. Personal circumstances that can cause MERs to diverge from STRs include the sources of income, itemized deductions, the number of children (if any) eligible for the child tax credit and the EITC, and filing status. Most economists believe that taxpayers change their economic behavior in response to MERs, not to statutory rates. Drawing on a standard model of consumer behavior, they argue that a person's MER influences important decisions concerning whether and how much to work, how much to spend, and how much to save. For example, someone's MER may help determine whether he takes on an overtime shift, bargains for wages and benefits, takes a second job, or even enters the labor force. The idea that MERs help shape an individual's economic behavior can be extended to an entire tax system, including federal payroll and excise taxes and state and local taxes. A broader analysis along these lines, however, goes beyond the scope of this report. The current income tax is largely a product of the Tax Reform Act of 1986 (TRA86; P.L. 99-514 ). Among other things, the act reduced the individual tax rate structure to two statutory rates: 15% and 28%. TRA86 also imposed a 5% surcharge on the taxable income of certain upper-income households, effectively adding a third marginal tax rate of 33%. Since the enactment of TRA86, several other major changes in the federal individual income tax rate structure have been made. The Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ) eliminated the 5% surcharge and replaced it with a statutory rate of 31%. In addition, OBRA90 imposed a limit on the amount of itemized deductions upper-income households could claim and accelerated the phaseout of personal exemptions for upper-income households. These provisions had the effect of raising effective tax rates above statutory tax rates for affected taxpayers. The Omnibus Budget Reconciliation Act of 1993 (OBRA93; P.L. 103-66 ) added two new statutory rates at the upper end of the income scale: 36% and 39.6%. It also delayed the indexation of the two new tax brackets for one year and permanently extended the limitation on itemized deductions and the accelerated phaseout of the personal exemption from OBRA90. Eight years later, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) added a new 10% statutory rate. It also included a phased-in reduction in the top four statutory rates to 25%, 28%, 33%, and 35%. Several other provisions of the act modified the tax brackets and limitations on personal exemptions and deductions for higher-income taxpayers. The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27 ), the Working Families Tax Relief Act of 2004 (WFTRA; P.L. 108-311 ), and the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA; P.L. 109-222 ) collectively accelerated and extended the tax rate reductions enacted under EGTRRA through 2010. Under a last-minute agreement between President Obama and congressional leaders from both parties, Congress extended the Bush-era individual income tax cuts through 2012 under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUC; P.L. 111-312 ). Facing the unwanted prospect of an across-the-board increase in all STRs, the 112 th Congress permanently extended (through the American Taxpayer Relief Act of 2012 [ATRA; P.L. 112-240 ]) each of the Bush-era STRs, with one exception: the top rate increased from 35% to 39.6%. Six years passed before Congress made another significant change in individual income tax rates. Through P.L. 115-97 , often referred to as the Tax Cuts and Jobs Act, Congress temporarily reduced five of the seven individual income tax rates under prior law. For tax years beginning after December 31, 2017, and before January 1, 2026, individual income tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%; they are set to return to the levels that applied in 2017, for tax years beginning on or after January 1, 2026. Each act is described in greater detail below. Among its many changes, TRA86 simplified the individual income tax rate structure for tax years after 1987 by replacing the 14 nonzero statutory rates that applied to the 1985 and 1986 tax years with two such rates: 15% and 28%. Table 3 shows the key elements of the 1988 tax rate structure. These rates applied to capital income as well as to labor income. Although TRA86 established only two statutory individual marginal income tax rates, it included a 5% surcharge on the taxable income of certain upper-income households. This surcharge effectively created a third statutory tax rate of 33% (a 28% statutory tax rate plus a 5% surcharge). Because the surcharge phased in over a certain range of income and then phased out as income increased, statutory tax rates rose to 33% but then fell back to 28%, producing what was known as an income tax rate \"bubble.\" The intent of the surcharge was two-fold: (1) to prevent TRA86 from changing the distribution of the income tax burden among income groups, relative to the distribution under pre-1986 tax law, and (2) to meet specific revenue targets. More specifically, the surcharge was designed to eliminate the tax benefits of both the 15% tax bracket and the personal exemption for upper-income households. For joint returns in 1988, the phaseout of the 15% tax rate started when taxable income exceeded $71,900 and ended when it reached $149,250. For single returns, the 15% tax bracket phased out when taxable income was between $47,050 and $97,620. For heads of households, the phaseout occurred when taxable income fell in the range of $67,200 to $134,930. The phaseout of the personal exemption started immediately after the phaseout of the 15% tax bracket and occurred sequentially for each exemption. This meant that the taxable income range over which the 5% surcharge offset personal exemptions depended on the number of personal exemptions claimed on the tax return. For example, on a joint return claiming two personal exemptions, the 5% surcharge would apply to taxable income between $149,250 and $171,090 ($149,250 plus two times $10,920). On a joint return with four personal exemptions, the 5% surcharge would apply to taxable income between $149,250 and $192,930 ($149,250 plus four times $10,920). To demonstrate how the 5% surcharge worked to \"phase out\" the tax benefits of the 15% tax bracket, consider the following example based on joint returns for 1988. The difference between taxing the first $29,750 of taxable income at 28% instead of 15% was $3,867.50 (obtained as $29,750 multiplied by 13%, the difference between 28% and 15%). Five percent of the difference between the upper and lower phaseout limits also equaled $3,867.50 ($149,250 less $71,900 multiplied by 5%). Hence, assessing the 5% surcharge on taxable income between $78,400 and $162,770 was equivalent to taxing the first $32,450 of taxable income at 28% rather than 15%. OBRA90 created a three-tiered statutory marginal income tax rate structure. The rates were 15%, 28%, and 31% and applied to tax years beginning in 1991 and thereafter (see Table 5 ). OBRA90 eliminated the tax rate bubble created by TRA86, and replaced it with a limitation on itemized deductions and a new approach to phasing out the tax benefits of the personal exemption for upper-income households. OBRA90 also reintroduced a tax-rate differential for capital gains income. The act limited the tax on capital gains income to a maximum of 28%, starting in 1991. Under TRA86, capital gains was treated as ordinary income and taxed at regular rates that peaked at 33%. OBRA90's limitation on itemized deductions was based on a taxpayer's adjusted gross income (AGI). For tax years starting in 1991 to 1995, allowable deductions were reduced by 3% of the amount by which a taxpayer's AGI exceeded $100,000 (or $50,000 in the case of married couples filing separate returns). For example, if a taxpayer's AGI in 1991 was $110,000, then his itemized deductions would have been reduced by $300 ($110,000 less $100,000 multiplied by .03). This provision effectively raised the marginal income tax rate of affected taxpayers by approximately one percentage point. A dollar of income in excess of $100,000 was taxed as if it were $1.03, since in addition to the tax on an extra dollar of income, the taxpayer lost a tax deduction by giving up $0.03 of itemized deductions. This limitation was scheduled to expire after tax year 1995 under OBRA90, but was later extended. Allowable deductions for medical expenses, casualty and theft losses, and investment interest were not subject to this limitation. For tax years after 1991, the $100,000 threshold was indexed for inflation. OBRA90 phased out the tax benefits of the personal exemption for higher-income households. Each personal exemption was phased out by a factor of 2% for each $2,500 (or fraction thereof) by which a taxpayer's AGI exceeded a given threshold amount. In 1991, the threshold amounts were $150,000 for a joint return, $100,000 for a single return, and $125,000 for a head-of- household return. Starting in 1992, these amounts were indexed for inflation. The phaseout provision was scheduled to expire at the end of 1995. A simple example illustrated how the personal exemption phaseout increased the tax burden on affected taxpayers. In 1991, a joint household whose AGI was $183,000 would have lost 28% of their total personal exemptions. The AGI amount in excess of the threshold in this instance would have been $33,000, or $183,000 AGI minus the $150,000 threshold limit. The $33,000 excess divided by $2,500 would produce a factor of 13.2, which when rounded up would equal 14. This figure is multiplied by 2% to arrive at the final disallowance amount of 28%. Hence, if the family had claimed two personal exemptions, which at $2,150 each would have totaled $4,300, they would have been allowed to deduct $3,096 ($4,300 total personal exemptions less the $1,204 disallowance, which is 28% of the total). OBRA93 made several changes in the individual marginal income tax rate structure. First, it added two new marginal tax rates, 36% and 39.6%, at the upper end of the income spectrum. The 39.6% tax bracket was the result of adding a 10% surtax to the 36% rate for taxpayers with taxable incomes over $250,000 in 1993. Although OBRA93 was enacted in August 1993, the increase in the top marginal tax rates was made effective retroactively to January 1, 1993. Affected taxpayers, however, were not assessed penalties for underpayment of 1993 taxes resulting from the tax rate increase. Taxpayers were also allowed to pay any additional 1993 taxes in three equal installments over a two-year period. Second, OBRA93 delayed indexation of the new top marginal income tax brackets for one year. Hence, the nominal dollar tax brackets for the 36% and 39.6% marginal tax rates remained at the same level for both tax years 1993 and 1994. Finally, OBRA93 made permanent both the itemized deduction limitation and the phaseout of the tax benefits from personal exemptions. EGTRRA made several major changes to the marginal tax rate structure. Many of the act's provisions were set to phase in over a period of time, but subsequent legislation, described in the next section, overrode the schedule originally set by EGTRRA. All of the EGTRRA provisions, as amended, were set to expire at the end of 2010. First, the 2001 act created a new 10% bracket. It applied, beginning in tax year 2002, to the first $12,000 of taxable income for married couples filing jointly, the first $10,000 of taxable income for heads of households, and the first $6,000 of taxable income for single individuals. For tax year 2001, the act created a \"rate reduction tax credit,\" mimicking the effects of the 10% tax rate bracket for most taxpayers. EGTRRA gradually phased in and expanded the bracket over several years, but in 2003-2007, these provisions of EGTRRA were accelerated by subsequent legislation. In 2008, EGTRRA became effective again, setting the 10% marginal tax rate bracket at $7,000 for single filers and $14,000 for joint filers. Starting with tax year 2009, these bracket amounts were indexed for inflation. Second, the 2001 act gradually reduced the top four marginal income tax rates. Under prior income tax law, the top four marginal tax rates were 28%, 31%, 36%, and 39.6%. When fully phased in, the 2001 act reduced the top four marginal income tax rates to 25%, 28%, 33%, and 35%. Once again, under EGTRRA the reductions were scheduled to take place in 2001 through 2006, but subsequent legislation accelerated the EGTRRA phase-in schedule. Third, EGTRRA also repealed the limitation on itemized deductions and personal exemptions for high-income taxpayers. The repeal was phased in between 2006 and 2009. The limitation was completely repealed for 2010, but it was scheduled to reappear again in 2011, once the EGTRRA's tax cuts expire. Fourth, some of the act's measures designed to reduce the marriage penalty affected the rate bracket structure. The act increased the income range of the 15% tax bracket for married couples filing joint returns to twice the income range of the 15% tax bracket for single returns. Under EGTRRA, this provision was scheduled to phase in from 2005 to 2008, but subsequent legislation accelerated the phase-in. Under EGTRRA, the upper dollar limit of the 15% tax bracket for joint returns was set at 180% of the upper dollar limit of the 15% tax bracket for single returns in 2005, 187% of that limit in 2006, 193% of that limit in 2007, and 200% of that limit in 2008 and subsequent years. Finally, the 2001 act increased the standard deduction for joint returns to twice the size of the standard deduction for single returns. The change was scheduled to be phased in over a five-year period, 2005 to 2009, but it was accelerated by the subsequent bills as well. This had the effect of raising the lower income threshold of the lowest tax bracket for married taxpayers. JGTRRA accelerated several changes to the individual income tax rate structure that were first enacted under EGTRRA. It moved forward to 2003 the tax rate reductions, the expansion of the 10% tax bracket, and the widening of the 15% tax bracket for joint returns to make it double the width of the 15% tax bracket for single returns. Under EGTRRA, some of these changes would not have been fully phased in until 2009. JGTRRA also lowered the tax rates for long-term capital gains and dividends. It reduced the top rate to 15%, and allowed a rate of 0% for certain low-income taxpayers. WFTRA extended several tax provisions of JGTRRA that were scheduled to expire at the end of 2004. It extended the expansion of the 10% income tax bracket through 2007, at which point EGTRRA's relevant provisions would be fully phased in, maintaining a constant amount of tax relief. WFTRA also extended marriage penalty relief under EGTRRA from 2005 to 2008. The standard deduction for a married couple filing jointly was set to be equal to double the standard deduction for an unmarried single filer over that period. In addition, the act made the size of the 15% tax bracket for joint filers double that of the tax bracket for single filers from 2005 to 2007. As a result, in both cases, the marriage penalty relief extended from 2005 to 2010, before ending under the EGTRRA sunset provision. The reductions in tax rates for long-term capital gains and dividends under JGTRRA were set to expire at the end of 2008; TIPRA extended them through the end of 2010. A last-minute agreement in 2010 between President Obama and congressional leaders of both parties cleared the way for an extension of all the Bush-era individual tax cuts through the end of 2012. TRUC served as the legislative vehicle for the extension. Facing a reversion of each statutory individual income tax rate to its level before the enactment of EGTRRA starting January 1, 2013, Congress and President Obama agreed on legislation (ATRA) to extend permanently each of the Bush-era rates and restore the top marginal tax rate to its pre-EGTRRA level of 39.6%. The act also permanently extended the repeal of the phaseout of the personal exemption included in EGTRRA, but it restricted the repeal of the phaseout to taxpayers with AGIs of $250,000 or less for single filers and $300,000 or less for married couples filing jointly. Taxpayers with AGIs above these inflation-adjusted amounts were subject to the phaseout. The same rule applied to the repeal under EGTRRA of the Pease limitation on the amount of itemized deductions an upper-income taxpayer could take. Individual marginal income tax rates did not change after ATRA until the enactment of P.L. 115-97 in December 2017. The act made significant changes to a number of individual income tax provisions, including individual tax rates and the standard deduction. For tax years beginning in 2018 and ending before 2027, the individual income tax rate structure consists of seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. (The rates are scheduled to revert to their levels in 2017 starting in 2026.) For individuals receiving income from passthrough businesses (i.e., partnerships, S corporations, and sole proprietorships), the current rates can be adjusted downward as a result of a new deduction under Section 199A; the deduction is equal to up to 20% of a noncorporate business owner's qualified income from a qualified trade or business. The 2017 tax revision also made the following changes in these key elements of the individual income tax for the 2018 to 2025 tax years: It terminated the personal exemption (which was $4,050 in 2017). It increased the standard deduction (which is indexed for inflation using the chained consumer price index for urban consumers) for nonitemizers to $24,000 for joint filers and $18,000 for head-of-household filers, and $12,000 for single filers, from 2018 to 2025. It eliminated the deduction for miscellaneous expenses from 2018 through 2025. It suspended the overall limit on itemized deductions for certain high-income taxpayers. During periods of relatively high inflation, a progressive income tax based on tax brackets set in nominal dollars can lead to automatic tax increases, and these increases can lead to unintended changes in the overall distribution of the tax burden by income class. This is because nominal incomes rise faster than real incomes, all other things being equal. As a result, tax burdens for taxpayers become larger than what lawmakers had intended when they established existing statutory tax rates. In the absence of indexation of the elements of the tax code determining the tax burdens of individuals, an increasing share of taxpayers will face growing tax liabilities because their nominal incomes are rising, irrespective of what happens to their real incomes. The effects of inflation on income tax liabilities can be substantial, even in periods of low inflation, such as the last two decades. According to the Bureau of Labor Statistics, $1,000 in November 1988 had the buying power of $2,095.08 in November 2018. Year-to-year changes can be negligible, but over a decade or so, those changes can add up to make a substantial difference through the power of compounding. A simplified hypothetical example illustrates the impact that a lack of indexation can have over time for the tax burdens (as measured by the average income tax rate) of individual taxpayers. The results are summarized in Table 1 . Assume that the individual income tax structure from 1988 applied without indexation (or any other changes) in 2017. Also assume that a household with a husband, wife, and two children had an adjusted gross income (AGI) of $35,000 in 1988, was eligible for no tax credits, and filed a joint tax return. If the family took the standard deduction, then its taxable income would have been $22,200 ($35,000 minus the standard deduction of $5,000 and four personal exemptions at $1,950 apiece), and its tax liability would have been $3,330. As a result, the household's average tax rate was 9.5% ($3,330 divided by $35,000 income) in 1988. Next consider what would happen to the household's tax burden in 2017 if the family's income had kept up with inflation but the 1988 tax structure had remained in place, with no indexation for inflation. The family's AGI would have been $71,766: $35,000 x 2.05 (the rise in the general price level as measured by the Consumer Price Index for all Urban Consumers (CPI-U) from 1988 to 2017). Its taxable income would have been $58,966; its tax liability would have totaled $12,643; and its average tax rate would have reached 17.6%. So in the absence of the indexation of the key income tax elements when the family's AGI rose in step with the rate of consumer inflation, keeping the buying power of its income constant, the family's income tax burden increased by 85% from 1988 to 2017. This difference exemplifies what is known as \"bracket creep,\" an effect that is accelerated during periods of high inflation. Under an indexed individual income tax, however, the household would have experienced no change in their tax burden. With an inflation adjustment equal to the rise in the CPI-U, the value of the standard deduction for a joint return would have increased from $5,000 in 1988 to $10,252 in 2017, and the personal exemption for each family member would have increased from $1,950 to $3,998. Under these circumstances, the family's 2017 taxable income would have been $45,522 ($71,766 in income less the inflation-adjusted standard deduction and four personal exemptions). Tax brackets would have adjusted as well. Based on this taxable income and the adjusted brackets, their income tax liability would have been $6,828, yielding an average tax rate of 9.5%, the same as in 1988. While the nominal household's amount of income and tax owed rose, the value of both in 1988 dollars stayed approximately the same. Congress added indexation to the individual income tax as a part of the package of statutory tax rate reductions included in the Economic Recovery Tax Act of 1981. The U.S. rate of inflation was exceptionally high at the time, and this condition influenced congressional deliberations on the benefits of tax indexation. As the Joint Committee on Taxation noted in its explanation of the act: The Congress believed that \"automatic\" tax increases resulting from the effects of inflation were unfair to taxpayers, since their tax burden as a percentage of income could increase during intervals between tax reduction legislation, with an adverse effect on incentives to work and invest. In addition, the Federal Government was provided with an automatic increase in its aggregate revenue, which in turn created pressure for further spending. Since 1981, the list of indexed elements has gradually expanded and now includes more than three dozen tax items. TRA86 extended indexation to some newly created tax provisions, including the standard deductions for the elderly and the blind and the EITC. EGTRRA indexed the phaseout amounts for the EITC, starting in 2008. Table 2 lists the major indexed tax items and notes the first year of the adjustment. Indexing may compound the complexity of the individual income tax, but, given its benefits to taxpayers over time, this effect is arguably a minor matter. The year-to-year changes in dollar amounts are usually small, so taxpayers seldom, if ever, face unexpected changes that might materially affect them. On the revenue side, of course, indexing results in lower government receipts. But some key elements of the tax remain unadjusted for inflation. One such element is the child tax credit. Under current law, the amount of the credit itself and the phaseout thresholds for higher-income taxpayers are not adjusted for inflation. But the earned income threshold used in calculating the credit's refundable amount has been adjusted for inflation since 2001. Consequently, under current law, inflation erodes the value of the credit and reduces the number of eligible taxpayers over time. Another element not indexed for inflation is the threshold amounts for determining who pays the 3.8% tax on net investment income that was added in 2013. Most elements are indexed using the technical calculation described below. In some instances, the calculation methodology differs somewhat. Examples include the EITC or transportation benefits. The variations are insignificant, as long as they do not lead to systematic deviations from the actual rate of inflation. The adjustment for tax years before 2019 was based on the percentage by which the average Consumer Price Index for All Urban Consumers (CPI-U) in the 12 months ending on August 31 of the preceding year exceeded the average CPI-U during a 12-month base period. Not all indexed tax elements used the same base period, as shown in Table 2 . With the exception of the EITC, inflation adjustments were rounded down to the nearest multiple of $50. Although rounding down affected the accuracy of any given year's inflation adjustment, the effect was not cumulative since each year's adjustment reflected the total inflation that occurred between the adjustment year and the base period. For example, the adjustment factor for the personal exemption in 2017 was calculated as follows. By law, the base period for this factor was September 1987 through August 1988, when the average CPI-U was 116.6. The average CPI-U for September 2015 through August 2016, on which the 2017 value is based, was 238.6. Thus, the inflation adjustment factor in 2017 was 2.05 (238.6/116.6). This factor was then applied to $2,000, the value of the exemption in 1989, resulting in a personal exemption of $4,080 for the 2017 tax year. Rounding this number down to the nearest multiple of $50 produced the final value of the exemption in 2017: $4,050. For tax years beginning after December 31, 2018, a different consumer price index will be used to adjust the values of income tax elements subject to indexation. Under a provision of P.L. 115-97 , the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) replaces the CPI-U for this purpose. Both indices were designed by the Bureau of Labor Statistics (BLS) to measure price changes faced by the average urban consumer. Each of them tracks the prices of about 80,000 goods and services each month in cities throughout the United States. The BLS bases the indices on a fixed basket of goods and services obtained from a survey of the spending patterns of 7,000 American families. The survey determines which goods and services go into the basket and how much weight should be assigned to each item in calculating the overall change in prices. The market basket for the CPI-U is revised every two years. Many analysts have argued that the CPI-U overstates rises in the cost of living because it does not fully account for the changes consumers make in their buying patterns when the price of one item in the market basket goes up or the price of another goes down. When this tendency to substitute lower-priced items for other items whose prices have increased is ignored, the impact on consumers of inflation is overstated. The chained CPI-U is better at capturing changes in consumer spending patterns tied to price increases or decreases. This is because it compares details about what a consumer buys in the period before a price change with details about what he/she buys in the period after the change. In essence, the BLS calculates one measure of inflation for the first-period basket and a second measure of inflation for the second-period basket and then takes the average. The basket after the price change may contain different amounts of some items, as consumers respond to increases or decreases in the prices of other items in the same categories. For instance, the second-period basket may include more chicken than the first-period basket did when the price of beef increases while the price of chicken remains unchanged. This substitution softens the impact of the price rise for beef on the overall measure of inflation. The chained CPI-U does this every month, creating an index that links these changes from month to month. As a result, the index reflects shifts in consumer buying patterns between months and between basket items. It also leads to lower estimates of the rate of increase in the cost of living over time, since the chained CPI-U is built around the tendency of consumers in general to purchase lower-priced items that can be substituted for items whose prices have risen. From 2000 to 2012, the annual average for the chained CPI-U rose by 29.4%. In the same period, the CPI-U's annual average increased by 33.3%. Many analysts have noted that using the chained CPI-U to adjust the amount of individual income tax elements for inflation has one significant drawback: the index is revised several times, while the CPI-U is never revised. A final reading for the chained CPI-U is released between 10 and 16 months after its initial release. Consequently, starting in 2018, tax elements that are adjusted for inflation are indexed to a preliminary estimate that could be significantly revised. Switching to the chained CPI-U to adjust key tax elements for inflation is likely to result in more bracket creep than would occur if the elements were still adjusted for inflation using the CPI-U. Since the chained CPI-U increases more slowly than the CPI-U, tax bracket thresholds are likely to rise by smaller amounts from one year to the next. More individual taxpayers will be pushed into higher tax brackets than they would be if the CPI-U were still used for inflation adjustment. One significant result is an increase in federal tax revenue over time. The Joint Committee on Taxation has estimated that the revenue gain from switching to the chained CPI-U will total $134 billion from FY2018 to FY2027. Since the onset of the Great Recession in late 2007, the annual U.S. inflation rate has fluctuated between -0.4% and 3.2%, as measured by the CPI-U. Negative inflation, or deflation, occurred in 2009 relative to 2008. Deflation denotes a decrease in the general price level. As a result, the inflation adjustments in 2010 were very small or nonexistent. Several other federal programs experienced similar situations, even though they do not use the same indexing methodology. For example, there was no cost-of-living adjustment for Social Security benefits in 2010. If the United States were to experience a period of sustained deflation, the income tax elements could decline in constant dollars. By law, however, the elements cannot fall below their base-year values. Since their current values are much higher than their base values, which were established years ago in some cases, and the near-term outlook for inflation is projecting rates below 3%, this limitation is unlikely to come into play anytime soon for most indexed elements. The following tables present the personal exemption amounts, standard deductions, and statutory marginal tax rates schedules for each tax year from 1988 through 2019.", "summary": "Statutory individual income tax rates are the tax rates that apply by law to various amounts of taxable income. Statutory rates form the basis of marginal effective and average effective tax rates, which most economists believe have a greater impact on the economic behavior of companies and individuals than do statutory rates. Marginal effective rates capture the net effect of special tax provisions on statutory rates. They differ from average effective rates, which measure someone's overall income tax burden. Current statutory and effective individual tax rates are the result of the Tax Reform Act of 1986 (TRA86; P.L. 99-514) and several tax laws that have been enacted since then. Of particular importance among the latter are the Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508), the Omnibus Budget Reconciliation Act of 1993 (OBRA93; P.L. 103-66), the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16), the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUC; P.L. 111-312), the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240), and the tax rate changes contained in the 2017 tax revision (P.L. 115-97). TRA86 altered the income tax rate structure. EGTRRA established what are referred to as the Bush-era tax cuts for individuals. TRUC extended those cuts for another two years, through 2012. ATRA permanently extended the Bush-era tax rates for taxpayers with taxable incomes below $400,000 for single filers and $450,000 for joint filers but reinstated the 39.6% top rate established by OBRA93 for taxpayers with taxable incomes equal to or above those amounts. And P.L. 115-97 lowered individual tax rates for all income groups except those subject to the 10% and 35% brackets under previous law. Ordinary income is taxed at seven statutory individual income tax rates, from 2018 to 2026: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. (Starting in 2026, these rates will revert to their levels in 2017.) Income from long-term capital gains and dividends is taxed at 0% for single filers with capital gains below $39,375 (below $78,750 for joint filers), 15% for single filers with capital gains between $39,375 and $434,550 (between $78,750 and $488,850 for joint filers), and 20% for single filers with capital gains above $434,550 (above $488,850 for joint filers). Since 2013, a 3.8% tax has been imposed on the lesser of net investment income received by individuals, estates, or trusts, or the amount of their modified adjusted gross incomes above $250,000 for joint filers and $125,000 for single filers. In addition, the individual alternative minimum tax (AMT), which functions like a separate income tax in that its rate structure is narrower and tax base broader than those of the regular income tax, applies to income above exemption amounts in 2019 of $111,700 for joint filers and $71,700 for single filers; the AMT taxes income at two rates: 26% and 28%. Tax rates and the income brackets to which they apply are not the only elements of the individual income tax that determine the tax liabilities of taxpayers. Personal exemptions, exclusions, deductions, credits, and certain other elements have an effect as well. Some of these elements are indexed for inflation. Congress added annual indexation to the individual income tax in 1981, using the Consumer Price Index for All Urban Consumers. Such a mechanism helps prevent tax increases and unintended shifts in the distribution of the tax burden that are driven by inflation alone. The indexed elements are tax rate brackets, personal exemptions and their phaseout threshold, standard deductions, the itemized deduction limitation threshold, and the exemption amounts for the AMT. Starting in 2018, these items are indexed for inflation with the Chained Consumer Price Index for All Urban Consumers. This report summarizes the tax brackets and other key elements of the individual income tax that help determine taxpayers' marginal and average effective tax rates going back to 1988. It will be updated to reflect indexation adjustments and changes in the taxation of individual income.", "document_type": "crs"}
{"report": "T he Senior Community Service Employment Program (SCSEP) authorizes the Department of Labor (DOL) to make grants to support part-time community service employment opportunities for eligible individuals who are age 55 or over and have limited employment prospects. Participation in the program is temporary, with the goal of transitioning participants to unsubsidized employment. In FY2019, appropriations for the SCSEP program were $400 million and supported approximately 41,000 positions. SCSEP appropriations accounted for approximately 20% of total Older Americans Act funding in FY2019. SCSEP is authorized by Title V of the Older Americans Act of 1965, as amended (OAA; 42 U.S.C. 3056 et seq.) Since enactment of the OAA, Congress has reauthorized and amended the act numerous times. Most recently, the Older Americans Act Reauthorization Act of 2016 ( P.L. 114-144 ) authorized appropriations for OAA programs for FY2017 through FY2019, and made other changes to the act. Prior to the 2016 OAA reauthorization, the OAA Amendments of 2006 ( P.L. 109-365 ) reauthorized all programs under the act through FY2011. Although the authorizations of appropriations under the OAA expired at the end of FY2011, Congress continued to appropriate funding for OAA-authorized activities through FY2016. Grants under the program are administered by the Employment and Training Administration (ETA) at the Department of Labor (DOL). (References to the Secretary in this report refer to the Secretary of Labor, unless otherwise specified.) SCSEP is the only OAA program administered by DOL. Other OAA programs are administered by the Administration for Community Living (ACL) at the Department of Health and Human Services (HHS). SCSEP is supported by discretionary appropriations under the DOL-HHS appropriations bill. SCSEP programs operate on DOL's program year (PY), which operates nine months behind the fiscal year. Activities in a given program year are supported by funding from the corresponding fiscal year. For example, PY2017 ran from July 1, 2017, through June 30, 2018, and was supported by FY2017 appropriations. Programs administered under Title V of the OAA may also be referred to as the Community Service Employment for Older Americans (CSEOA) programs. DOL uses the CSEOA and SCSEP terminology interchangeably. From its total appropriation, the OAA establishes three reservations: (1) up to 1.5% for DOL-selected pilots, demonstration, and evaluation projects; (2) a fixed percentage of 0.75% for the territories of Guam, American Samoa, the U.S. Virgin Islands, and the Northern Mariana Islands; and (3) a portion determined by the Secretary for activities that support eligible individuals who are American Indian and Pacific Islander/Asian American. The remaining funds are allocated to formula grants. Title V supports formula grants to both national organizations (\"national grantees\") and state agencies (\"state grantees\"). National grantees are typically nonprofit organizations that operate in more than one state. State grantees are state government agencies. State grantee agencies are typically housed in a state's workforce unit or aging unit. In PY2018, approximately 78% of funds for formula grants ($298 million) were distributed among national grantees. There are about 15-20 national grantee organizations, including AARP and the National Council on Aging. About 22% of PY2018 funds for grants ($84 million) were allocated to state agencies. Both national grantees and state grantees subgrant funds to partner organizations that work with host agencies that provide the actual employment (see Figure 1 ). The OAA specifies that in years where funds available for formula grants exceed the \"funds necessary to maintain the fiscal year 2000 level of activities supported by grantees,\" the excess funds are allotted using a series of formulas that are directly correlated to the number of persons age 55 and over in the state and inversely correlated to the per capita income of the state. Thus, the formulas favor states with larger populations of persons age 55 or over and states with lower per capita incomes. The law contains hold harmless provisions that specify that in years where funds are less than their FY2000 level, funds are awarded proportionately \"to maintain their fiscal year 2000 level of activities.\" The last year in which funds were allocated using the formula was PY2010. Since then, funding for grants has consistently been below the FY2000 level (see Table 1 ). As such, specific grant levels have varied but each state's relative share of grants funds has been proportionate to its FY2000 levels and a consistent share of the funding has been allocated to national grantees in each state as well as each state agency. The OAA defines a state's allotment (and corresponding hold harmless share of funding) as the sum of the allotment for national grants in the state and the grant to the state agency. The proportion of each state's total funding that comes from grants to national organizations versus grants to the state agency varies somewhat. As a condition of receiving SCSEP funds, each state's governor must develop and submit a state plan to DOL. The plan can be an independent document or part of a combined plan with the state's activities under the Workforce Innovation and Opportunity Act (WIOA), the primary federal workforce development legislation authorizing workforce services for the broader population. Whether the SCSEP plan is independent or part of a combined plan, it must provide information on individuals in the state who will be eligible for the program as well as the localities most in need of services. The plan must be developed in consultation with the state WIOA agency, national grantees operating in the state, and other stakeholders. The state plan must describe how the activities under SCSEP will be coordinated with activities under WIOA and how the state will minimize duplication between Title V and WIOA. Grantees that receive funds directly from DOL typically allocate funds to subgrantees and/or host agencies that provide the actual work site placements and part-time community service employment. Host agencies are responsible for recruiting program participants. To be eligible for the program, a prospective participant must be age 55 or older, unemployed, and a member of a family with income of not more than 125% of the poverty level ($15,613 for a family size of one in 2019). Statute specifies that priority will be given to prospective participants who demonstrate additional barriers to employment. Specifically, an individual may receive priority if the individual is 65 years of age or older; has a disability; has limited English proficiency or low literacy skills; resides in a rural area; is a veteran; has low employment prospects; has failed to find employment after utilizing services provided under Title I of the Workforce Innovation and Opportunity Act; or is homeless or at risk for homelessness. As is the case with other DOL programs, eligible veterans receive priority of service in the SCSEP program. The OAA allows host agencies to employ program participants part-time in a variety of community service activities, including (but not limited to) social, health, welfare, and educational services as well as conservation and community beautification activities. Some participants may be employed at senior centers and other facets of the Aging Network established by the OAA, such as an Area Agency on Aging. Program participants are paid by the host agency. Participants must earn the highest of (1) the federal minimum wage, (2) the prevailing minimum wage in the state or locality in which the participant works, or (3) the prevailing rate for individuals employed in similar occupations by the same employer. Title V of the OAA does not establish a definition for \"part-time\" and federal policy does not limit the number of hours participants can work. In establishing the cost per authorized position, however, Title V establishes a formula that includes the federal minimum wage \"multiplied by the number of hours equal to the product of 21 hours and 52 weeks.\" As part of program orientation, the subgrantee or host agency is responsible for assessing the participant, including the participant's skills, interests, needs, and potential for unsubsidized employment. Using information from this assessment, the grantee works with the participant to develop an individual employment plan (IEP) that includes a post-service objective (including employment, if appropriate) and the timeline for achievement of that objective. In addition to employment, grantee organizations may also provide training and supportive services. These services can include (but are not limited to) costs of transportation, health and medical services, special job-related or personal counseling, and work-related incidentals such as eyeglasses or work shoes. Individual participants are typically limited to an aggregate maximum of 48 months of participation in the program. Grantees are required to manage programs such that the average duration of participation for all participants does not exceed 27 months. This cap may be increased to an average of 36 months in certain circumstances such as high unemployment in the service area. SCSEP participants are not federal employees. Regulations specify that grantees are responsible for determining whether or not a participant qualifies as an employee of the grantee, subgrantee, or host agency under applicable laws. Grantees must match SCSEP grants such that federal funds account for no more than 90% of the project cost. DOL may waive match requirements in cases of emergency or disaster projects or projects in economically depressed areas. At least 75% of federal grants must be used to pay wages and legally required benefits for program participants. In limited cases, this requirement may be reduced to 65% if the program allocates a certain portion of funds to training and supportive services. In most circumstances, grantees may not use more than 13.5% of their federal grant for administrative expenses. Federal law establishes six core indicators for CSEOA grantees. Three of the six CSEOA indicators focus on unsubsidized employment and earnings after participation in the program. The performance indicators are 1. hours (in the aggregate) of community service employment; 2. the percentage of project participants who are in unsubsidized employment during the second quarter after exit from the project; 3. the percentage of project participants who are in unsubsidized employment during the fourth quarter after exit from the project; 4. the median earnings of project participants who are in unsubsidized employment during the second quarter after exit from the project; 5. indicators of effectiveness in serving employers, host agencies, and project participants; and 6. the number of eligible individuals served, including the number of participating individuals with demonstrated barriers to employment. Indicators 2-4 are largely based on the performance accountability indicators for the general workforce programs under WIOA. Indicators 1, 5, and 6 do not have direct analogues in the WIOA performance accountability system. The current performance accountability measures were established by the Older Americans Act Reauthorization Act of 2016 ( P.L. 114-144 ). Grantees started reporting performance under these metrics beginning in PY2018, starting July 1, 2018. Grantees negotiate expected performance levels with DOL. Negotiating performance levels at the grantee level allows the expected performance levels to reflect the types of participants a particular grantee serves or the environment in which it operates (e.g., the grantee serves a disproportionate number of high-need participants or operates in an area with a high rate of unemployment.) Performance accountability is assessed at the level of the grantee (i.e., the entity that receives funding directly from DOL). Grantees are responsible for oversight of subgrantees and host agencies. Regulations establish that performance is measured as a percentage of the negotiated level of performance. For example, if a grantee negotiates a performance rate of 50% of participants in unsubsidized employment in the second quarter after exit and 48% of the program participants subsequently meet that standard, the grantee has reached 96% of its agreed-upon level of performance. Performance in the range of 80% to 100% constitutes meeting the core level of performance. If a national or state grantee fails to meets its negotiated level of performance, the grantee must receive technical assistance from DOL and submit a corrective action plan. If a national grantee fails to meet expected levels of performance for four consecutive years, the grantee may not compete in the subsequent grant competition. If a state grantee fails to meet the expected levels of performance for three consecutive program years, the state must conduct a competition to award its formula funds to a new grantee. DOL makes available several reports with SCSEP participation data. Data are reported by program year. Reports currently made available by DOL include the following: Aggregate and Individual Performance Reports . These reports include the performance of each national grantee and state agency relative to the negotiated levels of performance. Nationwide Quarterly Progress . These reports include total participation as well as data on demographics and participants' demonstrated barriers to employment. Service to Minority Individuals . These reports include information on the participation and outcomes of minorities for each grantee. The reports are required under Section 515 of the OAA. ", "summary": "The Senior Community Service Employment Program (SCSEP) authorizes the Department of Labor (DOL) to make grants to support part-time community service employment opportunities for eligible individuals age 55 or over. In FY2019, appropriations for SCSEP programs were $400 million and supported approximately 41,000 positions. DOL may also refer to the SCSEP program as Community Service Employment for Older Americans (CSEOA) SCSEP is authorized by Title V of the Older Americans Act (OAA). The Older Americans Act Reauthorization Act of 2016 (P.L. 114-144) authorized appropriations for OAA programs for FY2017 through FY2019. In FY2019, SCSEP appropriations accounted for about 20% of the funding under the OAA. The bulk of SCSEP appropriations support two primary grant streams: one to national nonprofit organizations and one to state agencies. In the most recent program year, approximately 78% of formula grant funds were allocated to national grantees and about 22% were allocated to state grantees. Both the national organizations and state grantees subgrant funds to host agencies that provide the actual community service employment opportunities to participants. Host agencies are responsible for recruiting eligible participants. To be eligible for the program, prospective participants must be at least age 55, low-income, and unemployed. Federal law requires host agencies to give preference to prospective participants who demonstrate additional barriers to employment such as having a disability or being at risk of homelessness. Program participants work part-time in community service jobs, including employment at schools, libraries, social service organizations, or senior-serving organizations. Program participants earn the higher of minimum wage or the typical wage for the job in which they are employed. An individual may typically participate in the program for a cumulative total of no more than 48 months. During orientation, participants receive an assessment of their skills, interests, capabilities, and needs. This assessment informs the development of an individual employment plan (IEP). A participant's IEP is updated throughout their participation in the program. Grantees are subject to a performance accountability system. Performance metrics generally relate to participants' unsubsidized employment and earnings after exiting the program. In addition to outcome-based metrics, grantees are also assessed on participants' total number of hours of service and whether the grantee served participants with barriers to employment. Grantees that do not meet negotiated levels of performance may become ineligible for subsequent grants.", "document_type": "crs"}
{"report": "The United States restricts the export of defense articles; dual-use goods and technology; certain nuclear materials and technology; and items that would assist in the development of nuclear, chemical, and biological weapons or the missile technology used to deliver them. A defense item is defined by regulation as one that \"[m]eets the criteria of a defense article or defense service on the U.S. Munitions List\" or \"[p]rovides the equivalent performance capabilities of a defense article\" on that list. Dual-use goods are commodities, software, or technologies that have both civilian and military applications. The United States also controls certain exports in adherence to several multilateral nonproliferation control regimes. In addition, U.S. export controls are used to restrict exports to certain countries on which the United States imposes economic sanctions, such as Cuba, Iran, and Syria. Through the Export Controls Act of 2018 (ECA), the Arms Export Control Act (AECA), the International Emergency Economic Powers Act (IEEPA), and other authorities, Congress has delegated, in the context of broad statutory power, to the executive branch its express constitutional authority to regulate foreign commerce by controlling exports. Various aspects of the U.S. export control system have long been criticized by exporters, nonproliferation advocates, allies, and other stakeholders as being too restrictive, insufficiently restrictive, cumbersome, obsolete, inefficient, or any combination of these descriptions. Some contend that such controls overly restrict U.S. exports and make firms less competitive. Others argue that U.S. defense and foreign policy considerations should trump commercial concerns. In January 2007, the Government Accountability Office (GAO) designated government programs designed to protect critical technologies, including the U.S. export control system, as a \"high-risk\" area warranting a \"strategic reexamination of existing programs to identify needed changes.\" GAO's report named poor coordination among export control agencies, disagreements over commodity jurisdiction between the Departments of State and Commerce, unnecessary delays and inefficiencies in the license application process, and a lack of systematic evaluative mechanisms to determine the effectiveness of export controls. A 2017 GAO report cited \"progress\" with regard to improving the export control system, but added that government-wide challenges remain, including the need to adopt a more consistent leadership approach, improve coordination among programs, address weaknesses in individual programs, and implement export control reform . The 2019 version of the GAO report noted improvements in the export control system, but still cited the need for further action. On August 13, 2009, President Barack Obama announced the launch of a comprehensive review of the U.S. export control system; then-Secretary of Defense Robert M. Gates announced key elements of the Administration's agenda for reform in an April 2010 speech, with additional elaborations in subsequent months. Former Secretary Gates proposed a four-pronged approach that would establish a single export control licensing agency for both dual-use, munitions and exports licensed to embargoed destinations; a unified control list; a single enforcement coordination agency; and a single integrated information technology system, which would include a single database of sanctioned and denied parties. This section describes the characteristics of the dual-use, munitions, and nuclear controls. The information contained in this section also appears in chart form in Appendix A . The Export Controls Act of 2018 (ECA; P.L. 115-232 , Subtitle B, Part I), which became law on August 13, 2018, provides broad, detailed legislative authority for the President to implement dual-use export controls. The law repeals the Export Administration Act EAA of 1979 (EAA; P.L. 96-72 ), which was the underlying statutory authority for dual-use export controls until it expired in 2001. After the EAA's expiration, the export control system created pursuant to that law was continued by a presidential declaration of a national emergency and the invocation of the International Emergency Economic Powers Act (IEEPA; P.L. 95-223 ). The ECA directs the President to implement the EAA nonproliferation sanctions provisions pursuant to IEEPA. The ECA, which has no expiration date, requires the President to control \"the export, reexport, and in-country transfer of items subject to the jurisdiction of the United States, whether by United States persons or by foreign persons,\" as well as the activities of United States persons, wherever located, relating to specific (A) nuclear explosive devices; (B) missiles; (C) chemical or biological weapons; (D) whole plants for chemical weapons precursors; (E) foreign maritime nuclear projects; and (F) foreign military intelligence services. The ECA requires the Secretary of Commerce to \"establish and maintain a list\" of controlled items and \"foreign persons and end-uses that are determined to be a threat to the national security and foreign policy of the United States\"; require export licenses; \"prohibit unauthorized exports, reexports, and in-country transfers of controlled items\"; and \"monitor shipments and other means of transfer.\" The Bureau of Industry and Security (BIS) in the Department of Commerce administers the export licensing and enforcement functions of the dual-use export control system. The Ronald Reagan Administration detached those functions from the International Trade Administration (ITA) in 1985 in order to separate them from the export promotion functions of that agency within the Department of Commerce. BIS also enforces U.S. antiboycott regulations concerning the Arab League boycott against Israel. The ECA is implemented by the Export Administration Regulations (EAR; 15 C.F.R. 730 et seq). As noted above, the EAR were continued under IEEPA's authority when the EAA was expired. The EAR set forth licensing policy for goods and destinations, the applications process used by exporters, and the CCL, which is the list of specific commodities, technologies, and software controlled by the EAR. The CCL has 10 categories nuclear materials, facilities, and equipment; materials, organisms, microorganisms, and toxins; materials processing; electronics; computers; telecommunications and information security; lasers and sensors; navigation and avionics; marine; and propulsion systems, space vehicles, and related equipment. Each of these categories is further divided into functional groups: equipment, assemblies, and components; test, inspection, and production equipment; materials; software; and technology. Each controlled item has an export control classification number (ECCN) based on the above categories and functional groups. Each ECCN is accompanied by a description of the item and the reason for control. In addition to discrete items on the CCL, nearly all U.S.-origin items are \"subject to the EAR\"; such items may be restricted to a destination based on the end-use or end-user of the product. For example, a commodity that is not on the CCL may be denied if the good is destined for a military end-use or an entity known to be engaged in weapons proliferation. The EAR set out the licensing policy for dual-use and certain military items; the regulations control items for reasons of national security, foreign policy, or short supply. National security controls are based on a common multilateral control list; however, the designation of countries to which those controls are applied is based on U.S. policy. Foreign policy controls may be unilateral or multilateral in nature. The EAR unilaterally control items for antiterrorism, regional stability, or crime control purposes. Antiterrorism controls proscribe nearly all exports to North Korea and the four countries designated as state sponsors of terrorism by the Secretary of State—Cuba, Iran, Sudan, and Syria. These regulations also impose foreign policy controls on encryption items and on hot section technology, which is \"for the development, production, or overhaul of commercial aircraft engines, components, and systems.\" The EAR include \"enhanced controls\" on hot section technology and require a license \"for exports and reexports to all destinations, except Canada.\" The U.S. government reviews license applications for such technology \"on a case-by-case basis to determine whether the proposed export or reexport is consistent with U.S. national security and foreign policy interests.\" Foreign policy-based controls are also based on adherence to multilateral nonproliferation control regimes, such as the Nuclear Suppliers' Group, the Australia Group (chemical and biological precursors), and the Missile Technology Control Regime (MTCR). The EAR set out timelines for the consideration of dual-use licenses and the process for resolving interagency disputes. Within nine days of receipt, Commerce must refer the license to other agencies (State, Defense, and Energy, as appropriate), grant the license, deny it, seek additional information, or return it to the applicant. If Commerce refers the license to other agencies, the agency to which it is referred must recommend that the application be approved or denied within 30 days. The EAR provide a dispute resolution process for a dissenting agency to appeal an adverse decision. The entire licensing process, to include the dispute resolution process, is designed to be completed within 90 days. This process is depicted graphically in Appendix B . BIS noted in its Fiscal Year 2017 Budget Submission that its increased responsibility for exports as a result of export control reform has increased the burden on the bureau's licensing and enforcement functions. For criminal penalties, the ECA sanctions individuals up to $1 million or up to 20 years imprisonment, or both, per violation. This law also provides for civil penalties; for each violation, individuals may be fined up $300,000 \"or an amount that is twice the value of the transaction that is the basis of the violation with respect to which the penalty is imposed, whichever is greater.\" Such penalties may also include revocation of export licenses and prohibitions on the offender's ability to export. Enforcement is carried out by the Office of Export Enforcement (OEE) at BIS. OEE's headquarters is in Washington, DC, and the office has 10 offices outside of Washington, DC. U.S. field offices, as well as export control officers in seven foreign countries. OEE is authorized to carry out investigations domestically and works with DHS to conduct investigations overseas. The office, along with in-country U.S. embassy officials overseas, also conducts prelicense checks and postshipment verifications. The AECA of 1976 (P.L. 90-629) provides the President with the statutory authority to control the export of defense articles and services. The AECA also contains the statutory authority for the Foreign Military Sales (FMS) program, under which the U.S. government sells U.S. defense equipment, services, and training on a government-to-government basis. The law also specifies criteria for Direct Commercial Sales (DCS), whereby eligible foreign governments and international organizations purchase some defense articles and services directly from U.S. firms. The AECA sets out foreign and national policy objectives for international defense cooperation and military export controls. Section 3(a) of the AECA specifies the general criteria for countries or international organizations to be eligible to receive U.S. defense articles and defense services provided under the act. The law also sets express conditions on the uses to which these defense articles may be put. Section 4 of the AECA states that U.S. defense articles and defense services shall be sold to friendly countries \"solely\" for use in \"internal security\"; for use in \"legitimate self-defense\"; to enable the recipient to participate in \"regional or collective arrangements or measures consistent with the Charter of the United Nations\"; to enable the recipient to participate in \"collective measures requested by the United Nations for the purpose of maintaining or restoring international peace and security\"; and to enable the foreign military forces \"in less developed countries to construct public works and to engage in other activities helpful to the economic and social development of such friendly countries.\" A prominent feature of the AECA is the requirement for congressional consideration of certain foreign defense sales proposed by the President. This procedure includes consideration of proposals to sell major defense equipment and services, or to retransfer such military items to other countries. The procedure is triggered by a formal report to Congress under Section 36 of the AECA. In general, the executive branch, after complying with the terms of the applicable section of U.S. law (usually those contained in the AECA), is free to proceed with the sale unless Congress passes legislation prohibiting or modifying the proposed sale. Under Section 36(b) of the ACEA, Congress must be formally notified 30 calendar days before the Administration can take the final steps to conclude a government-to-government foreign military sale or issue an export license for commercial sales of major defense equipment valued at $14 million or more, defense articles or services valued at $50 million or more, or design and construction services valued at $200 million or more. In the case of such sales to NATO member states Japan, Australia, or New Zealand, Congress must be formally notified 15 calendar days before the Administration can proceed with the sale. However, the prior notice thresholds are higher for Japan, Australia, and New Zealand. These higher thresholds are $25 million for the sale, enhancement, or upgrading of major defense equipment; $100 million for the sale, enhancement, or upgrading of defense articles and defense services; and $300 million for the sale, enhancement, or upgrading of design and construction services, so long as such sales to these countries do not include or involve sales to a country outside of this group of nations. The International Traffic in Arms Regulations (ITAR) set out licensing policy for exports (and temporary imports) of U.S. Munitions List (USML) items. A license is required for the export of nearly all items on the USML. There is a limited license exemption for USML items for Canada because the United States considers Canada to be part of the U.S. defense industrial base. In addition, the United States has treaties with the United Kingdom and Australia to exempt certain defense articles from licensing obligations to approved end-users in those countries; the Senate gave its advice and consent to ratification of these treaties in 2010. Unlike some Commerce Department dual-use controls, licensing requirements are based on the nature of the article and not the end-use or end-user of the item. The United States implements a range of prohibitions on munitions exports to countries unilaterally or based on adherence to United Nations (U.N.) arms embargoes. In addition, any firm engaged in manufacturing, exporting, or brokering any item on the USML must register with the Directorate of Defense Trade Controls (DDTC) at the State Department and pay a yearly fee whether or not the firm seeks to export during the year. Exports of defense goods and services are administered by DDTC, which is a component of the Department of State's Bureau of Political-Military Affairs and consists of four offices: Management, Policy, Licensing, and Compliance. DDTC also processes commodity jurisdiction requests, which determine the regulatory regime to which an item is subject. Critics of the defense trade system had previously decried the delays and backlogs in processing license applications at DDTC. A National Security Presidential Directive (NSPD-56), signed by President Bush on January 22, 2008, directed that the review and adjudication of defense trade licenses submitted under ITAR are to be completed within 60 days, except where six \"national security exceptions apply.\" Previously, except for the congressional notification procedures discussed above, DDTC had no defined timeline for the application process. The AECA provides for criminal penalties of up to $1 million or 20 years of imprisonment, or both, for each violation. The AECA also authorizes civil penalties of up to $500,000 and debarment from future exports. Civil penalties increase annually pursuant to Section 701 of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 ( P.L. 114-74 ). DDTC has an enforcement staff and works with the Defense Security Service and the Customs and Border Protection and Immigration and Customs Enforcement (ICE) units at the Department of Homeland Security (DHS). In addition to adjudicating civil cases, DDTC assists DHS and the Department of Justice (DOJ) in pursuing criminal investigations and prosecutions. DDTC also coordinates the Blue Lantern end-use monitoring program, in which in-country U.S. embassy officials conduct prelicense checks and postshipment verifications of items transferred via DCS. The Department of Defense's Defense Security Cooperation Agency manages the department's Golden Sentry program, which performs an analogous function for FMS transfers. A subset of the above-mentioned dual-use and military controls are controls on nuclear items and technology. Controls on nuclear goods and technology are derived from the Atomic Energy Act of 1954 (P.L. 83-703), as amended, as well as from the ECA and the AECA. Controls on nuclear exports are divided among several agencies, based on the product or service being exported. The Nuclear Regulatory Commission (NRC) regulates exports of nuclear facilities and material. The NRC licensing policy and control list are located at 10 C.F.R. 110. BIS licenses \"outside the core\" civilian power plant equipment and maintains the Nuclear Referral List as part of the CCL. The Department of Energy authorizes the export of nuclear technology. DDTC exercises licensing authority over nuclear items in defense articles under the ITAR. A Department of Defense (DOD) Field Activity under the Under Secretary of Defense for Policy, DTSA coordinates the technical and national security review of direct commercial sales export licenses and commodity jurisdiction requests received from the Departments of Commerce and State. It develops the recommendation of DOD on these referred export licenses or commodity jurisdictions based on input provided by the various DOD departments and agencies and represents DOD in the interagency dispute resolution process. Not all licenses from DDTC or BIS are referred to DTSA; memorandums of understanding govern the types of licenses referred from each agency. DTSA coordinates the DOD position with regard to proposed changes to the ITAR and the EAR. It also represents DOD in the interagency process responsible for compliance with multinational export control regimes. Enforcement of the U.S. export control system is undertaken by the agencies responsible for export licensing, the Department of Homeland Security (DHS), the Department of Justice (DOJ) (National Security Division and the Federal Bureau of Investigation [FBI]), and the Defense Criminal Investigative Service (DCIS). Their activities can be summarized as follows: Offi ce of Export Enforcement (OEE) of the Bureau of Industry and Security (BIS) , Department of Commerce . OEE investigates criminal and administrative violations of the dual-use export control regime. OEE is authorized to conduct domestic investigations and works with ICE on investigations of export control violations overseas. OEE refers civil violations to the Office of Chief Counsel of BIS and criminal violations to DOJ. Office of Defense Trade Compliance (ODTC) in DDTC , Department of State . ODTC primarily administers civil enforcement actions, including charging letters and consent agreements, policies of denial, debarments, transaction exceptions, and reinstatements. ODTC provides agency support to investigations and criminal enforcement actions primarily conducted by ICE and the FBI. Office of Enforcement, Nuclear Regulatory Commission (NRC) . Investigates export control violations of nuclear facilities and material licensed by the NRC's Office of International Programs. The Office of Enforcement refers criminal violations to DOJ. ICE , Department of Homeland Security . As with its predecessor at the U.S. Customs Service, ICE has been the lead agency for criminal export enforcement activities. The Counter-Proliferation Investigations Unit investigates violations of dual-use and munitions export controls, exports to sanctioned countries, and violations of economic embargoes. ICE supplements and provides enforcement capacity to the export licensing agencies (BIS and DDTC) and undertakes investigations based on its own and other agency intelligence. In addition, export controls are enforced at the port of departure by DHS Customs and Border Protection. National Security Division of DOJ . The counterespionage section of this division undertakes criminal prosecutions resulting from investigations conducted by the licensing agencies, ICE, and the FBI. An October 2007 DOJ National Export Enforcement Initiative established task forces between the licensing and enforcement agencies and U.S. Attorney's Offices in 20 cities to coordinate export control prosecutions and has facilitated new counterproliferation coordination among law enforcement agencies, export licensing agencies, and the intelligence community. FBI . The FBI's Weapons of Mass Destruction Directorate receives and analyzes intelligence regarding proliferation networks, provides specialized training on counterproliferation for the National Export Enforcement Initiative, and cooperates with above-mentioned investigative partners and export licensing agencies. DCIS , Department of Defense . DCIS is the criminal investigative arm of the Inspector General of DOD. Among its varied activities, DCIS investigates the transfer of sensitive defense technologies to proscribed nations and criminal elements. In addition to U.S. controls, internationally there are four major multilateral control regimes: the Australia Group, the Missile Technology Control Regime (MTCR), the Nuclear Suppliers Group (NSG), and the Wassenaar Arrangement. The Commerce Department observed on December 9, 2010, that \"[m]ost items on the CCL are controlled in accordance with the United States' commitments\" to four major multilateral export control regimes. In addition to the controls described in the box below, all of these regimes have catch-all controls, which allow for the control of nonlisted items if they are to be used for a military or proliferation-related purpose. The Arms Export Control Act requires the Secretary of State to maintain, as part of the USML, \"a list of all items on the MTCR Annex\" that are not controlled as a dual-use item. The AECA requires the executive branch to control nuclear-related items, but the law does not explicitly require that these items be the same as those controlled by the NSG. On August 13, 2009, President Obama announced the launch of a comprehensive review of the U.S. export control system. Then-Defense Secretary Robert M. Gates announced key elements of the Administration's agenda for reform in a speech on April 20, 2010, with additional elaborations in subsequent months. Former Secretary Gates proposed a four-pronged approach that would create a single primary export control licensing agency for both dual-use and munitions exports; adopt a unified control list; establish a single enforcement coordination agency; and create a single integrated information technology system, which would include a single database of sanctioned and denied parties. The Administration's blueprint envisioned that these changes would be implemented in three phases, with the final phase requiring legislative action. Phase I would undertake preparatory work to harmonize the Commerce Control List (CCL) with the U.S. Munitions List (USML). This phase would also develop standardized licensing processes among the control agencies; it would also create an \"Enforcement Fusion Center\" to synchronize enforcement, along with a single electronic gateway to access the licensing system. Phase II would implement a harmonized licensing system with two identically-structured tiered control lists, potentially allowing for a reduction in the amount of licenses required by the system. This phase would include moving certain items from the USML to the CCL, for which congressional notification would be required; examining unilateral controls on certain items; and undertaking consultations with multilateral control regime partners to add or remove multilateral controls on certain items. Under the proposal, the new export control system would debut in Phase III, which would establish a single licensing agency; merge the two harmonized, tiered control lists, with mechanisms for review and updating; merge the two primary export control enforcement agencies, OEE and ICE; and operationalize a single IT system for licensing and enforcement. Changes in agency structure would require legislation. In a February 2011 speech, then-BIS Assistant Secretary Kevin Wolf elucidated seven principles driving the Administration's export control reform efforts Controls should focus on a small core set of key items that can pose a serious national security or intelligence threat to the United States and its interests; Controls should be fully coordinated with the multilateral export control regimes in order to be effective; Unilateral controls must address an existing legal or foreign policy objective; Control lists must clearly identify which items are controlled and be easily updated as technology emerges, matures, or becomes widely available; Licensing processes must be predictable and timely; Enforcement capabilities must be enhanced to address noncompliance and increase capacity to interdict unapproved transfers; and Controls must address counterterrorism policy and the need to export items that support homeland security priorities. In his speech introducing the Administration's reform efforts, then-Secretary Gates described the bureaucratic structure of the U.S. export control system as a \"byzantine amalgam of authorities, roles, and missions scattered around different parts of the federal government.\" As noted above, licensing is divided among the Department of Commerce for dual-use and certain military items, the Department of State for munitions, the Department of the Treasury for certain sanctions, and the Nuclear Regulatory Commission and Department of Energy for certain nuclear materials and technologies. These entities operate under different statutory authorities and enforce different regulations. While there are mechanisms in place for license referrals and to address licensing disagreements, critics have long maintained that the multi-agency structure contributes to institutional disputes among the different agencies responsible for export control licensing. Having one licensing system would also end disputes about commodity jurisdiction over a given item. On June 30, 2010, then-National Security Adviser General Jim Jones announced that the Obama Administration intended to create an independent licensing agency with Cabinet members from existing control agencies serving as a board of directors. While that Administration did not provide specific details, this new agency is expected to take over the licensing functions of BIS, DDTC, and OFAC; this agency would likely house the civil and administrative enforcement functions of BIS and DDTC. The Obama Administration did not propose moving licensing procedures of the NRC for nuclear materials and of the Department of Energy for nuclear-related technology; an Obama Administration official attributed this decision to the relatively small volume of licensing undertaken by these agencies as well as by the small universe of exporters. General Jones argued that a unified licensing structure would end the situation in which no agency knew the total of export licenses granted or denied by the U.S. government. Under current referral processes, dual-use and certain military items licenses are referred by BIS to the Department of Defense, the Department of State (Economic Energy and Business Bureau [EEB], International Security and Non-Proliferation Bureau, and the regional bureaus), and the Department of Energy for review. However, BIS licenses are not referred to DDTC. DDTC refers munitions licenses to DOD and to the above-mentioned bureaus at State, and in some instances to Energy, but not to BIS. Some OFAC licenses are referred only to State's EEB. As a result, situations have arisen whereby licenses requested by the same exporter to the same destination have been approved by one license agency and denied by another. Brian Nilsson, then-Deputy Assistant Secretary of State for Defense Trade Controls, indicated during a February 2016 hearing that that the single information technology system in use by the Departments of Commerce, Energy, and State (see below) has begun to address the lack of agencies' visibility regarding license information. Yet, interagency policy differences may continue to exist because agencies would continue to refer licenses to ensure continued checks and balances. An issue concerning dual-nationals may provide an example of the effort that will be necessary to create a unified export control system. The White House announced on March 11, 2010, that it would take action to eliminate \"obstacles to exporting to companies employing dual nationals.\" Specifically, the Obama Administration announced that it would \"begin to harmonize\" conflicting standards used by the Departments of Commerce and State to determine a foreign person's nationality—a step that these departments must take in order to make certain export control decisions. The Commerce Department, according to a 2010 Government Accountability Office (GAO) report, determines \"nationality for release of technology to a foreign national\" based on that person's \"most recent citizenship or permanent residence.\" The State Department, however, considered not only a foreign national's current citizenship status, but also their country of birth if it differs from the person's country of citizenship or permanent residency. Even if a foreign entity is approved for a manufacturing license agreement or a technical assistance agreement with a U.S. firm, the State Department must approve the transfer of technical data, defense services, and defense articles to dual nationals and third-party nationals employed by the foreign entity. \"If a person's country of birth is prohibited from receiving U.S. arms, as are China, Iran, and North Korea, State [collected] additional information to confirm that the individual has no significant ties to his or her country of birth,\" according to the GAO. However, the State Department stopped using \"country of birth\" as of 2015, although the department does \"consider all current and former citizenships, in addition to current permanent residency.\" Both the State Department and private-sector experts argue that these requirements are contentious because, in addition to being administratively burdensome, they are a potential employment discrimination issue in other countries; in order to comply with the regulations, non-U.S. employers may need to limit employment opportunities in potential violation of their countries' employment laws. After publishing a proposed rule on August 11, 2010, the State Department published a final rule on May 16, 2011, amending the ITAR to allow the transfer of defense articles and technical data to dual or third-party nationals who are \"bona fide, regular employees, directly employed by the foreign consignee or end-user.\" Such transfers must take place completely within the physical territory of the country where the end-user is located, where the governmental entity or international organization conducts official business, or where the consignee operates, and be within the scope of an approved export license, other export authorization, or license exemption. The end user or consignee must take a variety of measures designed to prevent the diversion of any exports; the final rule includes a requirement for the end user to screen employees for \"substantive contacts with restricted or prohibited countries\" listed in the ITAR. The rule, which became effective on August 15, 2011, also explains that, although \"nationality does not, in and of itself, prohibit access to defense articles or defense services, an employee that has substantive contacts\" with persons from prohibited countries \"shall be presumed to raise a risk of diversion,\" unless the State Department determines otherwise. It is worth noting that, according to the State Department, \"most diversions of U.S. Munitions List ... items appear to occur outside the scope of approved licenses, not within foreign companies or organizations providing access to properly screened dual national or third country national employees.\" The Obama Administration concentrated on rationalizing the control lists to form the basis from which other reforms will flow. The Administration first worked to transform the current USML from a \"negative list\" characterized by general descriptions of articles and design-intent-based criteria to one resembling the current CCL, a \"positive\" list of dual-use items that are controlled according to objective criteria or parameters. This is being done through the \"bright line\" process to determine which items should be controlled as dual-use goods and which should be controlled as munitions. The bright line is being determined at the commodity level, based on technical specification and military needs, and is not an overarching concept or framework. The Obama Administration argued that the bright line is necessary, in part, because of the USML's current reliance on design intent (i.e., whether an item was \"specifically designed, modified, or adapted\" for military use) and its catch-all controls of parts and components of these items. While the CCL is described as more \"positive,\" it too contains entries containing the term \"specially designed\" for a specific purpose that may need to be modified to conform to bright line standards. Each category of the USML has been screened by an interagency team led by DOD; proposed rewrites to each USML category, including certain items proposed to be moved to the CCL, have been published as proposed rulemakings. Originally, each of the items on the resulting USML list was to have been assigned to a tier to determine its level of control. The Obama Administration created three tiers applicable to both the CCL and the USML to categorize a different level of control. However, the Administration postponed this process, reportedly because it would have been necessary to decide on the tiers for all USML items prior to publishing any revised USML categories. Deputy Assistant Secretary Nilsson testified that the Obama Administration prioritized revising the categories which have the greatest effect on U.S. military interoperability with allied governments. To date, the executive branch has completed transferring items in the following categories from the USML to the CCL: Category IV (launch vehicles, missiles, rockets, torpedoes, bombs, mines, and other military explosive devices; Category V (explosives and energetic materials, propellants, incendiary agents and their constituents); Category VI (vessels of war and naval equipment); Category VII (tanks and military vehicles); Category VIII (aircraft and associated equipment); Category IX (military training equipment); Category X (protective personal equipment and shelters); Category XI (military electronics); Category XII (fire control, range finder, optical and guidance and control equipment); Category XIII (auxiliary military equipment); Category XIV (toxicological agents, including chemical agents, biological agents, and associated equipment); Category XV(spacecraft and related articles); Category XVI (nuclear weapons related articles); Category XVIII (directed energy weapons); and Category XX (submersible vessels and oceanic equipment). The State Department also created a new USML Category XIX (gas turbine engines). Then-Deputy Assistant Secretary Nilsson stated in September 2017 that items would not be moved from USML Categories I-III (firearms, close assault weapons and combat shotguns, guns and armament, ammunition/ordnance) to the CCL until 2018. The executive branch posted proposed rules concerning movement of items from these categories on May 14, 2018. On February 8, 2019, Representative Norma Torres introduced H.R. 1134 , the Prevent Crime and Terrorism Act of 2019, which would prohibit the President from removing \"any item\" from \"category I, II, or III\" of the USML. Similarly, on February 12, 2019, Senator Robert Menendez introduced S. 459 , the Stopping the Traffic in Overseas Proliferation of Ghost Guns Act, which states that \"the President may not remove any firearm, or technical information relating to such firearm\" from the USML. A final rule on a new \"0Y521\" classification series became effective on April 12, 2013. This series is used for items that are neither identified under an existing ECCN nor controlled under an existing U.S. or multilateral export control regime, but warrant control for foreign policy reasons or because they could provide a significant military or intelligence advantage. According to the EAR, such items \"are typically emerging technologies.\" BIS has subsequently added new items to this series. Items so classified \"must be re-classified under another ECCN within one calendar year from the date they are listed\" in the relevant part of the EAR. If they are not reclassified, the items \"are designated as EAR99 items unless either the CCL is amended to impose a control on such items under another ECCN or the ECCN 0Y521 classification is extended.\" BIS may extend this classification \"for two one-year periods, provided that the U.S. Government has submitted a proposal to the relevant multilateral regime(s) to obtain multilateral controls over the item.\" BIS may further extend the classification \"only if the Under Secretary for Industry and Security makes a determination that such extension is in the national security or foreign policy interests of the United States.\" According to the Obama Administration, the USML would contain \"only those items that provide at least a significant military or intelligence applicability that warrant the controls the AECA requires.\" The reconstituted Munitions List may then be aligned with the CCL by adopting its A-E commodity organization structure and adding two additional categories: F and G for ITAR specific controls. As a result of this alignment, each USML category will be divided into seven groups: A—equipment, assemblies, and components; B—test, inspection, and production equipment; C—materials; D—software; E—technology; F—defense services; and G—manufacturing and production authorizations. As a result of the bright line process, the Obama Administration moved some USML items to the CCL. Under Section 38(f) of the AECA, the President may not remove any article from the USML until 30 days after providing notice to the House Foreign Affairs Committee, and the Senate Foreign Relations Committee, including a description of the nature of any subsequent controls on the item. Section 38(f)(6) of the AECA requires that \"any major defense equipment\" on the 600 series \"shall continue to be subject to\" several \"notification and reporting requirements\" of the AECA and the Foreign Assistance Act of 1961 (P.L. 87-195). In order to comply with Section 38(f), the manner in which USML items transferred to the CCL are to be controlled is described in a proposed rulemaking on July 15, 2011, and is part of the \"mega rule\" issued on April 16, 2013. It involves the creation of a \"600 Series\" subcategory of Export Control Classification Numbers (ECCNs) for each category on the CCL. This new series is populated by items that are judged not to need the relatively-stricter controls mandated under the USML. Items moved to the CCL in this manner require a license to all destinations except Canada. All items controlled pursuant to multilateral control regimes retain their existing controls. In addition, \"600 Series\" items will be subject to a general policy of denial to countries subject to a U.S. or U.N. arms embargo. Such items are also subject to the prohibition on Defense Department procurement of \"goods and services\" on the USML \"from any Communist Chinese military company\" mandated by the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ). The rule also places restrictions on the extent to which certain license exceptions can be applied. End-use items transferred to the 600 Series would be eligible for the recently announced Strategic Trade Authorization (STA) license exception (described below) only after a determination is jointly made by the State, Defense, and Commerce Departments that such an exception should be made available for the item in question. Most parts, components, and accessories transferred under this process would be automatically eligible for an STA license exception for exports to the governments of STA-eligible countries. Items expressly defined as \"less significant\" would be eligible for a license exception for destinations other than those controlled for antiterrorism reasons. \"600 Series\" items would also be eligible for other preexisting license exceptions. The U.S. control status of parts and components also is addressed by the 600 Series. Under the EAR, the license requirement is based on the finished product, generally without regard to its parts and components. However, a foreign product containing more than 25% controlled U.S. content (10% controlled U.S. content in the case of a transaction to a country identified as a state sponsor of terrorism) may require a reexport license from the United States. However, for ITAR-controlled items, DDTC has employed a jurisdictional interpretation known as a \"see-through\" rule, which subjects to ITAR control U.S.-origin parts and components incorporated into end products manufactured overseas. For items migrating to the 600 Series, a 25% rule applies, but no de minimus amount would apply to embargoed destinations. To facilitate the transfer of items from the USML to the CCL, the Obama Administration proposed a new definition of \"specially designed.\" As noted above, the Administration sought to move away from the design-intent standard of the USML and the use of the catch-all phrase \"specifically designed\" for military use to subject parts and components to ITAR jurisdiction. The Obama Administration argued that new definition was necessary because \"specifically designed\" in the USML did not have the same meaning as the term \"specially designed\" which appears in the CCL and also in various multilateral control lists. The Administration also argued that removing the term(s) entirely by enumerating each part and component being moved from the USML to the CCL was infeasible. The Obama Administration published its final rule on the definition of \"specially designed\" on April 16, 2013. Some have dubbed the two-part definition as a \"catch and release\" approach because the first part may capture an item as specially designed for military use and the second part may release the item from control under the definition if it does not qualify under certain parameters. Under the first part of the regulation, an item qualifies as specially designed if (1) As a result of \"development\" has properties peculiarly responsible for achieving or exceeding the performance levels, characteristics, or functions in the relevant ECCN or U.S. Munitions List (USML) paragraph; or (2) Is a \"part,\" \"component,\" \"accessory,\" \"attachment,\" or \"software\" for use in or with a commodity or defense article 'enumerated' or otherwise described on the CCL or the USML. Under the regulation, if neither of these criteria apply to an item, then the item is not specially designed. If one or more of these criteria describes an item, the item is potentially qualified as specially designed and is subject to the following six exclusions. The item is excluded from being specially designed if it (1) Has been identified to be in an ECCN paragraph that does not contain \"specially designed\" as a control parameter or as an EAR99 item in a commodity jurisdiction (CJ) determination or interagency-cleared commodity classification (CCATS); (2) Is, regardless of 'form' or 'fit,' a fastener ( e.g. , screw, bolt, nut, nut plate, stud, insert, clip, rivet, pin), washer, spacer, insulator, grommet, bushing, spring, wire, solder; (3) Has the same function, performance capabilities, and the same or 'equivalent' form and fit, as a commodity or software used in or with an item that: (i) Is or was in \"production\" ( i.e. , not in \"development\"); and (ii) Is either not 'enumerated' on the CCL or USML, or is described in an ECCN controlled only for Anti-Terrorism (AT) reasons; (4) Was or is being developed with \"knowledge\" that it would be for use in or with commodities or software (i) described in an ECCN and (ii) also commodities or software either not 'enumerated' on the CCL or the USML (e.g., EAR99 commodities or software) or commodities or software described in an ECCN controlled only for Anti-Terrorism (AT) reasons; (5) Was or is being developed as a general purpose commodity or software, i.e., with no \"knowledge\" for use in or with a particular commodity (e.g., an F/A-18 or HMMWV) or type of commodity (e.g., an aircraft or machine tool); or (6) Was or is being developed with \"knowledge\" that it would be for use in or with commodities or software described (i) in an ECCN controlled for AT-only reasons and also EAR99 commodities or software; or (ii) exclusively for use in or with EAR99 commodities or software.\" Under this decision approach, the item is potentially \"caught\" as specially designed by the first two criteria, but it may be \"released\" from that definition if any of the six subsequent qualifiers apply. The Commerce regulations apply to the \"600 series\" of items moved from the USML. The proposed regulation to define specially designed in the ITAR as a replacement for the currently utilized \"specifically designed\" is similar in nature. In a speech on July 17, 2012, then-BIS Assistant Secretary Kevin Wolf acknowledged that the specially designed concept is \"inherently difficult to apply in reality,\" and that it is \"not consistent with the \"ultimate goal of creating a truly positive, objective list of controlled items.\" However, he noted that, concurrent with this approach, BIS also published an advanced notice of proposed rulemaking in June 2012 seeking comments on the feasibility of enumerating or positively identifying each item determined classified as specially designed on the CCL. In 2011, the Obama Administration devised a new license exception known as the Strategic Trade Authorization (STA), which was designed to facilitate transfers to low-risk countries and to promote interoperability to allies in the field. To be eligible, exporters must provide notification to BIS of the transaction and a destination control statement notifying the foreign consignee of the exception's safeguard requirements; exporters must also obtain from the foreign consignee a statement acknowledging the consignee's understanding and willingness to comply with the requirements of the license exception. STA-eligible recipients of U.S. munitions items contained on the CCL are not allowed to reexport such items without a license. Such recipients are also prohibited from reexporting \"STA-eligible items to any destination outside the STA-eligible countries.\" Under the final rulemaking, STA is available to 2 groups consisting of 44 countries. To a group of 36 countries made up of NATO partners and members of all 4 multilateral nonproliferation control regimes, dual-use items controlled for national security (NS), chemical or biological weapons, nuclear nonproliferation, regional stability, crime control, or significant items (hot section jet technology) are eligible for an STA. This includes almost all items on the CCL that are not controlled for statutory reasons. An additional eight countries are eligible for exports, reexports, or transfers controlled for NS-only and that are not designated as STA-excluded. The United States-Israel Strategic Partnership Act of 2014 ( P.L. 113-296 ) requires the President, \"consistent with the commitments of the United States under international arrangements,\" to \"take steps\" to move Israel from the second list of countries to the first list of countries. However, Israel's STA status does not appear to have changed. An August 3, 2018, Commerce Department rule moved India from the second list of countries to the first list of countries. Dual-use items controlled for missile technology, chemical weapons, short supply, or surreptitious listening are not be eligible for export under an STA. Certain implements of execution and torture, pathogens and toxins, software and technology for \"hot-sections\" of aero gas-turbine engines, and encryption have also been excluded from the STA. The third singularity involves the creation of a streamlined export enforcement system. Under Phase I of the new approach, a single export \"fusion center\" would be created to \"coordinate and de-conflict investigations, serve as a central point of contact for coordinating export control enforcement with Intelligence Community activities, and synchronize overlapping outreach programs.\" On November 9, 2010, the Obama Administration issued Executive Order 13558, which created the Export Enforcement Coordination Center (EECC). The center officially opened in March 2012 within the Department of Homeland Security and replaced and expanded on the functions of the existing National Export Enforcement Coordination Network in ICE. It consists of a director from the Department of Homeland Security and two deputies appointed from the Departments of Commerce and Justice, with an intelligence community liaison designated by the Director of National Intelligence. The center functions as the primary forum to coordinate export control enforcement efforts among the Departments of State, the Treasury, Commerce, Defense, Justice, Energy, and Homeland Security and the Director of National Intelligence and to resolve potential conflicts in criminal and administrative export control enforcement. The center is also able to screen all license applications. Previously, the OEE at BIS was the only entity that could screen dual-use licenses, whereas ICE could screen licenses from DDTC and OFAC. The unit will also establish government-wide statistical tracking capabilities for criminal and administrative enforcement activities. Also in March 2012, an Information Triage Unit was established in the Department of Commerce to serve as an information gathering and screening unit among law enforcement agencies, the intelligence community, and the export licensing agencies. The unit is designed to serve as a central point to disseminate relevant information for each license application prior to decisionmaking. There may be weaknesses in the EECC's mission execution. \"[P]rocedures for coordination between the investigative export control enforcement agencies and the intelligence community have not been finalized,\" according to a March 2019 GAO report, which adds that the center's \"lack of formal coordination\" limits its effectiveness and has stalled \"its efforts to develop standard operating procedures.\" Absent such coordination, the center \"is limited in its ability to realize its full potential to facilitate enhanced coordination and intelligence sharing.\" The EECC is not to be confused with the National Export Control Coordinator, housed in the Justice Department, which is \"responsible for ensuring full coordination between the Justice Department and the many other US law enforcement, licensing, and intelligence agencies that play a role in export enforcement.\" The role of the coordinator has been described as the chief prosecutor of export control enforcement with the authority to determine which cases to bring for criminal prosecution. The Donald Trump Administration may request the movement of the BIS Office of Export Enforcement to ICE. Currently, ICE conducts investigations and criminal enforcement for DDTC and OFAC, and by virtue of its authority under the IEEPA, it shares dual-use investigations with OEE. Removal of OEE to ICE will end this overlap of authority. The Obama Administration envisioned that a consolidated licensing agency would continue to have authority over administrative enforcement actions. The fourth singularity is the creation of a single information technology system for administering the export control system. The Departments of Commerce, State, and Defense have begun using the USXPORTS database, originally used by the Department of Defense to track referred license applications. The reform effort envisions that USEXPORTS will become the platform for a proposed single export license application form to be used by State, Commerce, and the Treasury's Office of Foreign Assets Control. The Department of Energy, Immigration and Customs Enforcement, and the Export Coordination Enforcement Center are also to use the database. The Obama Administration's plan called for the adoption of USXPORTS first for internal communications such as license referrals, while exporters would continue to use the existing SNAP-R and D-Trade electronic license filing portals. The Obama Administration indicated that eventually it wanted to facilitate interoperability between the license portals, the internal system, and Customs' Automated Export System (AES), the information system that tracks actual movement of goods. In conjunction with the single IT system, the Obama Administration developed a single license application form. To make this possible, the Administration standardized certain definitions between the different regulations, such as the use of the term \"technology\" in the EAR as opposed to the term \"technical data\" used in the ITAR. To assist in compliance with U.S. export regulations, the Obama Administration also compiled a consolidated screening list of over 24,000 entities from existing Commerce, Treasury, and State Department screening lists. The list consolidates the BIS Denied Person List, Unverified List, and Entity List; the Department of State's Nonproliferation Sanctions List; the Directorate of Defense Trade Controls Debarred List; and the Office of Foreign Assets Control Specially Designated Nationals List. While not announced as part of the four singularities, the Obama Administration proposed reforming encryption controls as one of the first deliverables in the export control reform process. The Administration announced on March 11, 2010, that it would change a filing requirement for exporters of products with encryption capabilities. At the time, exporters of such products were required to file for a technical review by the Commerce Department, a process that, according to the White House announcement, could take \"between 30-60 days.\" The announcement advocated replacing this process with \"a more efficient one-time notification-and-ship process,\" which would ensure that the \"U.S. government still receives information it needs for its national security requirements while facilitating U.S. exports and innovation for new products and new technologies.\" The Commerce Department announced on June 25, 2010, that it was amending the Export Administration Regulations (EAR) as \"the first step in the President's effort to reform U.S. encryption export controls.\" As described by the Commerce Department's Bureau of Industry and Security, the amendment to the EAR includes replacing, for encryption products \"of lesser national security concern,\" the \"30-day waiting requirement for a technical review\" with a \"provision that allows immediate authorization to export and reexport these products\" after the exporter submits an electronic encryption registration to BIS; similarly replacing the 30-day requirement for most mass-market encryption products; an \"overarching note to exclude particular products that use cryptography from being controlled as 'information security' items\"—a measure that implements changes approved by the Wassenaar Arrangement members in December 2009; this regulatory change eliminates controls under the CCL on \"[m]any items in which the use of encryption is ancillary to the primary function of the item\"; and a provision that makes most encryption technology eligible for export and reexport to nongovernmental end-users in countries other than those of \"greater national security concern.\" According to the June 2010 announcement of the EAR amendment, the United States \"will also review other issues related to encryption controls.\" Decontrolling additional items would require approval by the members of the Wassenaar Arrangement. Appendix A. Basic Export Control Characteristics Appendix B. Dual-Use Export Licensing Process Appendix C. List of Acronyms AECA—Arms Export Control Act AES—Automated Export System BIS—Bureau of Industry and Security, Department of Commerce CBP—Customs and Border Protection, Department of Homeland Security CCL—Commerce Control List CML—Commerce Munitions List CPI—Counter-Proliferation Investigations DCIS—Defense Criminal Investigation Service DDTC—Directorate of Defense Trade Controls, Department of State DHS—Department of Homeland Security DOJ—Department of Justice DTSA—Defense Technology Security Administration EAA—Export Administration Act EAR—Export Administration Regulations ECCN—Export Control Classification Number EECC—Export Enforcement Coordination Center EEB—Economic, Energy, and Business Bureau, Department of State FP—Foreign Policy Controls GAO—Governmental Accountability Office IEEPA—International Emergency Economic Powers Act ICE—Immigration and Customs Enforcement Agency, Department of Homeland Security ISN—International Security and Nonproliferation Bureau, Department of State ITA—International Trade Administration, Department of Commerce ITAR—International Traffic in Arms Regulations MTCR—Missile Technology Control Regime NRC—Nuclear Regulatory Commission NS—National Security Controls NSG—Nuclear Suppliers Group OEE—Office of Export Enforcement ODTC—Office of Defense Trade Compliance, DDTC OFAC—Office of Foreign Assets Control, Department of the Treasury SI—Significant Items Controls SL—Surreptitious Listening Controls SS—Short Supply Controls STA—Strategic Trade Authorization USML—U.S. Munitions List ", "summary": "Difficulty with striking an appropriate balance between national security and export competitiveness has made the subject of export controls controversial for decades. Through the Arms Export Control Act (AECA), the International Emergency Economic Powers Act (IEEPA), the Export Controls Act of 2018 (ECA), and other authorities, the United States restricts the export of defense articles; dual-use goods and technology; certain nuclear materials and technology; and items that would assist in the proliferation of nuclear, chemical, and biological weapons or the missile technology used to deliver them. U.S. export controls are also used to restrict exports to certain countries on which the United States imposes economic sanctions. The ECA legislates dual-use controls. The U.S. export control system is diffused among several different licensing and enforcement agencies. Exports of dual-use goods and technologies—as well as some military items—are licensed by the Department of Commerce, munitions are licensed by the Department of State, and restrictions on exports based on U.S. sanctions are administered by the U.S. Department of the Treasury. Administrative enforcement of export controls is conducted by these agencies, while criminal penalties are issued by units of the Department of Homeland Security and the Department of Justice. Aspects of the U.S. export control system have long been criticized by exporters, nonproliferation advocates, allies, and other stakeholders as being too rigorous, insufficiently rigorous, cumbersome, obsolete, inefficient, or combinations of these descriptions. In August 2009, the Barack Obama Administration launched a comprehensive review of the U.S. export control system. In April 2010, then-Defense Secretary Robert M. Gates proposed an outline of a new system based on four singularities a single export control licensing agency for dual-use, munitions exports, and Treasury-administered embargoes, a unified control list, a single primary enforcement coordination agency, and a single integrated information technology (IT) system. The rationalization of the two control lists was the Obama Administration's focus. The Administration made no specific proposals concerning the single licensing agency, although the Administration implemented some elements of a future single system, such as a consolidated screening list and harmonization of certain licensing policies.", "document_type": "crs"}
{"report": "The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the general minimum wage that must be paid to all covered workers. The FLSA mandates broad minimum wage coverage. It also specifies certain categories of workers who are not covered by general FLSA wage standards, such as workers with disabilities or certain youth workers. In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically to expand coverage or raise the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times. The most recent change was enacted through P.L. 110-28 in 2007, which increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps (the final step occurring in 2009). States generally have three options in setting their minimum wage policies: (1) they can set their own minimum wage provisions that differ from those in the FLSA, (2) they can explicitly tie their minimum wage provisions to the FLSA, or (3) they can include no specific minimum wage provisions in state law. This report begins with a brief discussion of FLSA minimum wage coverage. It then provides a summary of state minimum wage laws, followed by an examination of rates and mechanisms of adjustments in states with minimum wage levels above the FLSA rate ( Table 1 provides summary data). Next, the report discusses the interaction of federal and state minimum wages over time, and finally, the Appendix provides detailed information on the major components of minimum wage policies in all 50 states and the District of Columbia. The state policies covered in this report include currently effective policies and policies enacted with an effective date at some point in 2019. While most states' scheduled state minimum wage rate changes (due to inflation adjustments or statutorily scheduled changes) occurred on January 1 of each year, a few states have rate increases scheduled for later in the year. Effective dates of rate increases are noted in Table 1 and in the Appendix . The FLSA extends two types of minimum wage coverage to individuals: \"enterprise coverage\" and \"individual coverage.\" An individual is covered if they meet the criteria for either category. To be covered by the FLSA at the enterprise or business level, an enterprise must have at least two employees and annual sales or \"business done\" of at least $500,000. Annual sales or business done includes all business activities that can be measured in dollars. Thus, for example, retailers are covered by the FLSA if their annual sales are at least $500,000. In non-sales cases, a measure other than sales must be used to determine business done. For example, for enterprises engaged in leasing property, gross amounts paid by tenants for property rental will be considered business done for purposes of determining enterprise coverage. In addition, regardless of the dollar volume of business, the FLSA applies to hospitals or other institutions primarily providing medical or nursing care for residents; schools (preschool through institutions of higher education); and federal, state, and local governments. Thus, regardless of how enterprise coverage is determined (by business done or by specified institutional type), all employees of a covered enterprise are considered to be covered by the FLSA. Although an enterprise may not be subject to minimum wage requirements if it has less than $500,000 in annual sales or business done, employees of the enterprise may be covered if they are individually engaged in interstate commerce or in the production of goods for interstate commerce. To be engaged in interstate commerce—the definition of which is fairly broad—employees must produce goods (or have indirect input to the production of those goods) that will be shipped out of the state of production, travel to other states for work, make phone calls or send emails to persons in other states, handle records that are involved in interstate transactions, or provide services to buildings (e.g., janitorial work) in which goods are produced for shipment outside of the state. While individual coverage is broad under the FLSA, there are also specific exemptions from the federal rate, including individuals with disabilities; youth workers; tipped workers; and executive, administrative, and professional workers, among others. In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times. The most recent change was enacted in 2007 ( P.L. 110-28 ), which increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps. Figure 1 shows the nominal and real (inflation-adjusted) value of the federal minimum wage from its enactment in 1938 through 2018. The real value of the minimum wage generally rose from 1938 to 1968, after which it has generally fallen in real terms, with some brief increases in value following periodic statutory rate changes. From an initial rate of $0.25 per hour in 1938 ($4.43 in inflation-adjusted terms), the minimum wage increased to $1.60 per hour in 1968 ($11.50 in inflation-adjusted terms, a peak value to date). The real value of the minimum wage has fallen by $1.20 since it was increased to $7.25 in 2009. State policymakers may also choose to set labor standards that are different from federal statutes. The FLSA establishes that if a state enacts minimum wage, overtime, or child labor laws more protective of employees than those provided in the FLSA, then state law applies. In the case of minimum wages, this means FLSA-covered workers are entitled to the higher state minimum wage in those states with rates above the federal minimum. On the other hand, FLSA-covered workers would receive the FLSA minimum wage in states that have set minimum wages lower than the federal rate. Given the generally broad minimum wage coverage of the FLSA, it is likely that most workers in states with minimum wages below the federal rate are covered by the FLSA rate. In 2019, the range of state minimum wage rates is as follows: 29 states and the District of Columbia have enacted minimum wage rates above the federal rate of $7.25 per hour; 2 states have minimum wage rates below the federal rate; 5 states have no state minimum wage requirement; and the remaining 14 states have minimum wage rates equal to the federal rate. In the states with no minimum wage requirements or wages lower than the federal minimum wage, only individuals who are not covered by the FLSA are subject to those lower rates. The Appendix provides detailed information on state minimum wage policy in all 50 states and the District of Columbia, including the legislation authorizing the state minimum wage and the relevant legislative language regarding the rate and mechanism of adjustment. The remainder of this report focuses on states with minimum wages above the federal rate. In states with minimum wage rates above the federal rate, variation occurs mainly across two dimensions: the rate and the mechanism of adjustment to the rate. This section (including data in Table 1 ) summarizes these two dimensions for the states with rates currently above the federal minimum. State rates range from $0.25 to $6.75 above the federal rate, with a majority of these states using some sort of inflation measure to index the state minimum wage. In the 29 states and the District of Columbia with minimum wage rates above the federal rate in 2019, minimum hourly rates range from $7.50 per hour in New Mexico to $12.00 per hour in Massachusetts and Washington and $14.00 in the District of Columbia. Of the states with minimum wage rates above $7.25: 3 states have minimum wages within $1 of the federal rate of $7.25 per hour; 10 states have rates between $1.00 and $2.00 per hour above the federal rate; and 16 states and the District of Columbia have rates greater than $2.00 per hour above the federal rate (i.e., $9.26 or higher). Figure 2 shows the geographic and rate dispersion of state minimum wages. In terms of coverage, a majority of the civilian labor force is in states with a minimum wage rate above the federal rate of $7.25. Specifically, the 29 states and the District of Columbia with minimum wage rates above $7.25 represent about 61% of the total civilian labor force, which means the federal rate is the wage floor in states representing 39% of the labor force. In any given year, the exact number of states with a minimum wage rate above the federal rate may vary, depending on what mechanism is in place to adjust the state minimum wage. Some states specifically set rates above the federal rate. Other states have rates above the federal minimum wage because the state minimum wage rate is indexed to a measure of inflation or is increased in legislatively scheduled increments, and thus the state rate changes even if the federal minimum wage stays unchanged. Below are the two main approaches to regulating the adjustment of state minimum wage rates in states with rates above the federal minimum: legislatively scheduled increases and indexing to inflation. In this section, states are counted by the primary method of adjustment. While most states use only one of these methods, some states combine a series of scheduled increases followed by indexing the state rate to a measure of inflation. In these cases, states are counted as \"indexing to inflation,\" as that is the long-term mechanism of adjustment in place. If a state adopts a minimum wage higher than the federal rate, the state legislature may specify a single rate in the enacting legislation and then choose not to address future rates. In these cases, the only mechanism for future rate changes is future legislative action. Alternatively, a state may specify future rates in legislation through a given date. Rhode Island in 2017, for example, set a rate of $10.10 per hour beginning January 1, 2018, and $10.50 beginning January 1, 2019. After the final increase, the rate will remain at $10.50 per hour until further legislative action. This is the same approach taken in the most recent federal minimum wage increase ( P.L. 110-28 ), which increased the minimum wage from $5.15 an hour in 2007 to $7.25 per hour in 2009 in three phases. Of the 29 states and the District of Columbia with minimum wage rates above the federal rate, 9 currently have no scheduled increases beyond 2019, while Arkansas, Massachusetts, and Michigan have legislatively scheduled rate increases after 2019. If a minimum wage rate is established as a fixed amount and not increased, its value will erode over time due to inflation. For this reason, several states have attempted to maintain the value of the minimum wage over time by indexing the rate to some measure of inflation. This mechanism provides for automatic changes in the minimum wage over time and does not require legislative action to make annual adjustments. Currently, nine states index state minimum wages to a measure of inflation. In addition, another eight states and the District of Columbia are scheduled in a future year to index state minimum wage rates to a measure of inflation. Thus, of the total of 17 states and the District of Columbia that currently or are scheduled to index minimum wage rates, seven states—Arizona, Montana, Nevada, New York, Oregon, South Dakota, and Vermont—index the state minimum wage to the national Consumer Price Index for All Urban Consumers (CPI-U); five states—California, Missouri, New Jersey, Ohio, and Washington—index the state minimum wage to the national Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W); two states—Alaska and Colorado—and the District of Columbia use a subnational version of the CPI-U to index the state minimum wage; two states—Florida and Maine—use a regional version of the CPI-W to index the minimum wage; and one state (Minnesota) uses the implicit price deflator for personal consumption expenditures (PCE) to index the minimum wage. While scheduled increases and indexation are the two main ways that states adjust their minimum wage rates, a few states also add a reference to the federal minimum wage rate as a possible mechanism of adjustment. Thus any time the federal rate changes, the state rate may change. Currently, Alaska, Connecticut, the District of Columbia, and Massachusetts use this federal reference to supplement their primary mechanisms of adjusting state minimum wage rates. In Alaska, the state minimum wage rate is indexed to the CPI-U for Anchorage Metropolitan Statistical Area. However, Alaska state law requires that the state minimum wage must be at least $1.00 per hour higher than the federal rate. So it is possible that a federal wage increase could trigger an increase in the Alaska minimum wage, but the main mechanism is indexation to inflation. Although Connecticut does not currently include scheduled rate increases in the minimum wage, Connecticut state law requires that the state rate must exceed the federal minimum wage rate by 0.5% if the federal rate becomes greater than or equal to the state rate. The District of Columbia's minimum wage rate is the higher of the level required by the District of Columbia statute or the federal rate plus $1.00. Starting in 2021, the District of Columbia minimum wage will be indexed to inflation and the reference to the federal rate will no longer be in effect. While Massachusetts law includes scheduled rate increases in the minimum wage through 2023, the law also requires that the state rate must be at least $0.50 above federal minimum wage rate. Because federal and state minimum wages do not change in regular intervals or by regular increments, the number of states and the share of the labor force covered by higher minimum wages changes annually. In general, during periods in which the federal minimum wage remains constant, more states enact higher minimum wages and the share of the workforce for which the federal rate serves as the floor likewise decreases. When the federal rate increases, some state rates become equal to or less than the federal rate. Table 1 presents a snapshot of minimum wage rates in the 29 states and the District of Columbia with minimum wages above the federal rate from 2018 through 2024, while Figure 3 shows the changes in the coverage of the federal minimum wage. Specifically, Figure 3 plots the percentage of the civilian labor force residing in states in which the federal wage serves as the floor. If no state had a minimum wage above the federal rate, then the federal minimum wage would be the floor for states in which 100% of the labor force resides. Similarly, if every state had a minimum wage above the current rate of $7.25, then the federal rate would not be binding for the labor force. Instead the interaction of federal and state rates has led to the federal minimum wage playing a fluctuating, but generally decreasing, role in establishing a wage floor for the civilian labor force, particularly during periods in which the federal rate is not increased. Examining the specific time periods around changes in the federal minimum wage (see Figure 1 for the history of federal minimum wage rate changes), data in Figure 3 show a general trend toward a lower share of the labor force being covered by the federal minimum wage only. Federal rate increases in 2007 through 2009 mitigated this reduction, as did earlier changes in the federal rate. In the period from 1983 through 1989, the federal minimum wage remained constant at $3.35 per hour. Prior to the federal increases in 1990 and 1991, the number of states with higher minimum wages rose from 3 in 1984 to 16 in 1989 and the share of the U.S. civilian labor force in states for which the federal rate was the floor fell from 98% to 70%. Following a two-step federal increase in 1990 and 1991 from $3.35 to $4.25 per hour, the number of states with higher minimum wages fell to 8 in 1992, which meant that the federal rate was the floor for states comprising 92% of the civilian labor force. The next federal minimum wage increase occurred in two steps in 1996 and 1997, increasing from $4.25 to $5.15 per hour. Prior to that increase, in 1995, there were 10 states, representing 10% of the civilian labor force, with minimum wages above the federal rate. After the second increase in 1997, the number of states with higher minimum wages dropped to 8, but the share of the labor force in states for which the federal rate served as a floor decreased to 82%. The federal minimum wage did not increase after 1997 until 2007. During much of that period the number of states with higher minimum wages stayed somewhat steady, increasing from 8 (comprising 18% of the civilian labor force) in 1998 to 12 (comprising 21% of the civilian labor force) in 2003. However, by 2006, 22 states representing 50% of the civilian labor force had minimum wage rates above the federal rate. This increase was due in part to a few populous states, such as Florida, Michigan, and New York, adopting minimum wage rates above the federal rate in this period. Following the three-step increase in the federal minimum wage from $5.15 to the current $7.25 (2007-2009), 15 states, comprising 33% of the civilian labor force, had rates above the federal minimum wage in 2010. By 2019, this rose to 29 states and the District of Columbia, which means that the federal rate is the wage floor in states representing 39% of the civilian labor force. For the 29 states and the District of Columbia with state minimum wage rates above the federal rate as of 2019, Table 1 and much of the text above summarizes information on those states' minimum wage policies, highlighting minimum wage rates and mechanisms used to establish and adjust wage rates. As discussed previously, for those states with current or scheduled minimum wages above the federal rate, three main mechanisms are in place to adjust future rates: (1) scheduled increases, (2) indexation to inflation, or (3) reference to the federal rate plus an add-on (i.e., a state minimum wage is a percentage or dollar amount above the federal rate). For the 21 states with minimum wage rates equal to or below the federal rate, however, there are no mechanisms in place to move rates above the federal rate. Thus, the main difference within this group of states is the relationship of the state rate, if any, to the federal rate. For those 21 states with minimum wages equal to or below the federal rate, the state rate may be set in four ways: No state minimum wage provisions: In five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—there are no provisions for state minimum wage rates. In practice, this means that most workers in these states are covered by the FLSA minimum wage provisions since coverage is generally broad. State minimum wage provisions with no reference to the FLSA: Five states have state minimum wage rates but do not reference the FLSA. Two of these states—Georgia and Wyoming—have state rates below $7.25, while three of these states—Kansas, North Dakota, and Wisconsin—have rates equal to $7.25. However, because there is no reference to the FLSA rate or other provision for adjustment in any of these states, the state rate does not change unless the state policy is changed. State minimum wage equals the FLSA rate: Six states—Idaho, Indiana, New Hampshire, Oklahoma, Texas, and Virginia—set the state rate equal to the FLSA rate. Thus, when the FLSA rate changes, the state rates in these six states change to equal the FLSA rate. State minimum wage equals FLSA rate if FLSA is greater: In four states—Iowa, Kentucky, North Carolina, and Pennsylvania—the state rate is specified separately but includes a provision to equal the FLSA rate if the latter is above the state specified rate. Table A-1 provides detailed information about minimum wage policies in the 50 states and the District of Columbia, including those summarized in a more concise manner in Table 1 . ", "summary": "The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the general minimum wage that must be paid to all covered workers. While the FLSA mandates broad minimum wage coverage, states have the option of establishing minimum wage rates that are different from those set in it. Under the provisions of the FLSA, an individual is generally covered by the higher of the state or federal minimum wage. As of 2019, minimum wage rates are above the federal rate of $7.25 per hour in 29 states and the District of Columbia, ranging from $0.25 to $6.75 above the federal rate. Another 14 states have minimum wage rates equal to the federal rate. The remaining 7 states have minimum wage rates below the federal rate or do not have a state minimum wage requirement. In the states with no minimum wage requirements or wages lower than the federal minimum wage, only individuals who are not covered by the FLSA are subject to those lower rates. In any given year, the exact number of states with a minimum wage rate above the federal rate may vary, depending on the interaction between the federal rate and the mechanisms in place to adjust the state minimum wage. Adjusting minimum wage rates is typically done in one of two ways: (1) legislatively scheduled rate increases that may include one or several increments; (2) a measure of inflation to index the value of the minimum wage to the general change in prices. Of the 29 states and the District of Columbia with minimum wage rates above the federal rate, 9 currently have no scheduled increases beyond 2019, 3 states have legislatively scheduled rate increases after 2019, and 17 states and the District of Columbia have scheduled increases through a combination of planned increases and current- or future-year indexation of state minimum wage rates to a measure of inflation. Because the federal and state minimum wage rates change at various times and in various increments, the share of the labor force for which the federal rate is the binding wage floor has changed over time. Since 1981, there have been three series of increases in the federal minimum wage rate—1990-1991, 1996-1997, and 2007-2009. During that same period, there have been numerous changes in state minimum wage policies. As a result of those interactions, the share of the U.S. civilian labor force living in states in which the federal minimum wage is the floor has fluctuated but generally declined, and is about 39% as of 2018.", "document_type": "crs"}
{"report": "One of the most common methods for redistributing spending priorities in appropriations bills on the House floor is through offset amendments. House offset amendments generally change spending priorities in a pending appropriations measure by increasing spending for certain activities (or creating spending for new activities not previously included in the bill) and offsetting the increase(s) by decreasing or striking funding for other activities in the bill. For example, an amendment increasing funding for one agency funded in the bill by $3 million and decreasing funding for another agency by the same amount in the same bill would be an offset amendment. These amendments may transfer funds between two activities or among several activities. In addition, certain offset amendments may reduce funding with across-the-board spending reductions. Representatives use offset amendments for a variety of reasons, including to (1) ensure that proposals increasing funding for certain activities in any appropriations measure do not violate parliamentary rules enforcing certain spending ceilings; (2) comply with the prohibition against increasing total spending in a general appropriations bill; (3) garner support for efforts to reduce funding for certain activities by transferring those funds to popular programs; and (4) provide a focal point for discussion of a particular issue. This report is an introduction to selected House rules and practices governing the consideration of offset amendments to appropriations measures considered in the Committee of the Whole House on the State of the Union (or Committee of the Whole). It analyzes the parliamentary context providing the need for offset amendments; the two types of offset amendments, clause 2(f) and reachback (or fetchback) offset amendments, including procedural factors regarding each; and the mechanisms for waiving House rules. The report concludes with highlights on the procedural advantages of each offset amendment type. This report is not an official statement of House procedures. The House Parliamentarian advises the presiding officer on procedural issues regarding offset amendments and other matters. Although this report provides useful background information, it should not be considered a substitute for consultation with the Parliamentarian on specific procedural problems and opportunities. Offset amendments are needed to ensure amendments increasing funding for certain activities in a regular appropriations bill, supplemental appropriations bill, or continuing resolution do not also cause spending ceilings associated with the annual budget resolution to be exceeded. Additionally, a separate order of the House prohibits amendments increasing the total spending level in a general appropriations bill. Under the Congressional Budget Act of 1974, as amended, Congress typically considers an annual budget resolution each spring. These measures are under the jurisdiction of the House and Senate Budget Committees. Each budget resolution establishes, in part, total new budget authority and outlay ceilings for federal government activities for the upcoming fiscal year. Once these figures are finalized, under Section 302(a) of the Congressional Budget Act, the new budget authority and outlays are required to be allocated among the House committees with jurisdiction over spending, and each committee is given specific spending ceilings (referred to as the 302(a) allocations ). The House Appropriations Committee receives separate allocations for discretionary and direct spending and, in turn, is required under Section 302(b) to subdivide its 302(a) allocations among its 12 appropriations subcommittees, providing each subcommittee with its spending ceiling ( 302(b) subdivisions ). In the case of the Appropriations Committee, these allocations are only established for the upcoming fiscal year because appropriations measures are annual. Two Congressional Budget Act points of order, under Sections 302(f) and 311(a), enforce selected spending ceilings. The 302(f) point of order prohibits, in part, floor consideration of any committee-reported appropriations measure and related amendments providing new budget authority for the upcoming fiscal year that would cause the applicable 302(a) or 302(b) allocations of new budget authority for that fiscal year to be exceeded. In effect, the application of this point of order on appropriations legislation is generally limited to discretionary spending. If, for example, the 302(b) subdivision in new discretionary budget authority for a fiscal year is $24 billion and the reported bill would provide the same amount for the same fiscal year, any amendment proposing an increase in new discretionary budget authority for activities in the bill (or creating new discretionary budget authority) would cause the 302(b) limit for that bill to be exceeded, triggering the 302(f) point of order. An offset amendment, however, that also includes a commensurate decrease in new discretionary budget authority for activities in the bill would not prevent a violation of the rule. The second rule, the 311(a) point of order, prohibits, in part, floor consideration of any committee-reported appropriations measure and related amendments providing new budget authority for the upcoming fiscal year that would cause the applicable total budget authority and outlay ceilings in the budget resolution for that fiscal year to be exceeded. As the amounts of all the spending measures considered in the House accumulate, they could potentially reach or exceed these ceilings. This point of order would typically affect the last spending bills to be considered, such as supplemental appropriations measures or the last regular appropriations bills. If a Representative raises a point of order that an amendment violates either rule and the presiding officer sustains the point of order, the amendment falls. Appropriations measures considered on the House floor are typically at or just below the level of the subcommittee's 302(b) subdivision and, in some cases, the committee's 302(a) allocation and the total spending ceiling as well. The structure of appropriations measures has a direct impact on the form of offset amendments. Because regular appropriations bills and supplementals generally include several lump-sum and line-item appropriations, adding a new appropriation or increasing funding for an appropriation in the bill typically requires an offset. The procedural necessity of an offset for a funding set-aside within a lump-sum appropriation is dependent on the structure of the appropriation in the bill. Regular appropriations bills and supplemental appropriations measures generally contain numerous unnumbered paragraphs. Most paragraphs provide a lump-sum amount (usually an appropriation) for similar programs, projects, or activities. Such paragraphs are referred to as lump-sum appropriations . A few paragraphs may provide an appropriation for a single program or project, referred to as a line-item appropriation . Most appropriations paragraphs correspond to a unique budget account. The total net spending levels provided in an appropriations bill include all lump-sum and line-item appropriations, rescissions, and other provisions affecting spending. An amendment increasing a lump-sum or line-item appropriation as well as adding a new appropriation to a general appropriations bill would violate Section 3(d)(3) unless it was accompanied by a commensurate offset regardless of the level of spending in the measure. In addition, appropriations bills initially considered on the House floor are typically near or at the level of the subcommittee's 302(b) subdivision and, in some cases (particularly supplementals), the committee's 302(a) allocation and the total spending ceilings as well. An amendment increasing a lump-sum or line-item appropriation, therefore, could increase the amount of funding in the bill, causing it to exceed these ceilings. As a result, such an amendment typically requires an offset for it to be in order. Within a lump-sum appropriation, separate amounts are sometimes included in the bill that set aside spending for specified programs, projects, or activities (for purposes of this report, they are referred to as funding set-asides ). An amendment proposing to increase (or create) a funding set-aside in a lump-sum appropriation that has been entirely set aside in the bill would procedurally require a commensurate offset. In the example below, the three set-asides total $200 million, which is the total lump-sum amount. An amendment proposing an increase in any of the three set-asides that does not include an offset in one of the other set-asides would require an increase of the lump-sum amount. For necessary expenses, including salaries and related expenses, of the Executive Office for YYY, to implement program activities, $200,000,000, of which $100,000,000 is for the yellow program, $50,000,000 for the green program, and $50,000,000 for the blue program. By contrast, certain set-aside amendments would not increase lump-sum amounts. If a bill contains a lump-sum amount with no set-asides, for example, an amendment designating part (or all) of the funds for a particular purpose would not increase spending. In cases in which the lump-sum appropriation includes a set-aside(s) that does not affect the entire amount, an amendment setting aside only the remaining funds or a portion of those funds would also not increase spending. If enacted, the effect of either case would be reductions in funding for activities that were not set aside to accommodate funding in the bill that was specified as set-asides. To avoid such reductions, amendments may include offsets from other appropriations in the bill. There are two types of offset amendments, clause 2(f) and reachback (or fetchback) amendments, available during consideration of regular and supplemental appropriations bills in the Committee of the Whole. Clause 2(f) refers to clause 2(f) of House Rule XXI, which establishes some of the parliamentary procedures governing the consideration of such amendments. Clause 2(f) offset amendments consist of two or more amendments considered together (or en bloc) that would change amounts by directly adding text or changing text in the body of the bill. Reachback offset amendments , by contrast, are generally offered at the end of the bill, that change funding amounts by reference. The clause 2(f) offset amendment transfers appropriations among objects in the pending bill and, taken as a whole, does not cause the bill to exceed the total new budget authority or outlay levels already provided in the bill. An example of a clause 2(f) offset amendment follows. This amendment would have decreased the lump-sum appropriation for the Bureau of the Census, Periodic Censuses and Programs account by $10 million; increased the lump-sum appropriation for the Office of Justice Programs, State and Local Law Enforcement Assistance account by $10 million; and increased a set-aside within the latter appropriation for the Southwest Border Prosecutor Initiative by the same amount. Page 6, line 23, after t he dollar amount insert \"(reduced by $10,000,000).\" Page 42, line 8, after the dollar amount insert \"(increased by $10,000,000).\" Page 43, line 8, after the dollar amount insert \"(increased by $10,000,000).\" These offset amendments typically change a spending level by inserting after the amount a parenthetic increase or decrease (see example above). Under House rules, an amendment generally cannot amend previously amended text. Changing a monetary figure by a parenthetic increase or decrease placed after the amount text, rather than changing the amount in the text, however, is allowed. Under House rules, clause 2(f) offset amendments must be offered when the first portion of the bill to be amended is pending. In practice, however, they may be offered at other times if no Member objects. In the Committee of the Whole, appropriations bills are generally read for amendment sequentially by paragraph. After the reading clerk reads or designates a paragraph, the presiding officer entertains any points of order against that paragraph, and then Members may propose amendments to it. After the clerk has designated or begun reading the next paragraph, amendments to the former paragraph are not in order. Prior to consideration of a proposed clause 2(f) offset amendment, the presiding officer asks if any Member wants to raise a point of order against any provision the en bloc amendment would change. If a point of order against such a provision is sustained, the provision is stricken from the bill and is no longer amendable. Therefore, the offset amendment would fall as well, unless appropriately modified or amended by unanimous consent. There are four additional procedural implications regarding clause 2(f) offset amendments. These amendments (1) must offset any increase in both budget authority and outlays, (2) can only include language transferring appropriations, (3) may contain certain unauthorized appropriations, and (4) are exempt from a \"demand for a division of the question.\" Under clause 2(f) of House Rule XXI, any spending increases in a clause 2(f) offset amendment must be offset by commensurate reductions in both new budget authority and outlays. The 302(f) point of order enforcing 302(a) and 302(b) allocations and Section 3(d)(3) only apply to budget authority. The spending increases and decreases contained in an offset amendment must be provided in the same fiscal year, the year of the pending appropriations bill. Offset amendments providing equal increases and decreases in new budget authority might not produce equal amounts of outlays in the same fiscal year. The amount of resulting outlays may vary among different accounts because the length of time needed to complete the activities funded may differ. It takes less time to purchase office supplies than to complete construction of an aircraft carrier. For example, in Table 1 , the distribution of outlays from $20 million in new budget authority varies between two accounts. Based on historical spending practices, the Congressional Budget Office (CBO) each year estimates the speed at which outlays from each appropriation will occur, referred to as the spendout rates (or outlay rates ). A spendout rate is the rate at which budget authority is expected to be spent (outlays) in a fiscal year. In the example in Table 1 , the FY2017 spending rate for the operating expenses account is 90%, whereas the rate for the construction account is 10%. The varying spendout rates of appropriations sometimes complicate efforts to increase budget authority. In the example in Table 2 , increasing FY2017 budget authority for an operating expenses account by $20 million produces $18 million in outlays. Decreasing a construction account by the same amount in budget authority, however, produces only $2 million in outlays. Under this scenario, reductions in three accounts produce the $18 million in outlays needed to fund the $20 million budget authority increase in operating expenses. By contrast, increasing the construction account by $20 million in budget authority would be easier because only $2 million in outlays would be required. Representatives (or their staff) routinely ask CBO to estimate the budgetary effects of their clause 2(f) offset amendments for informational purposes. If a point of order is raised under clause 2(f), the chair relies on determinations made by the House Appropriations Committee as to the budgetary effects of the amendment. Clause 2(f) offset amendments are, in part, amendments \"proposing only to transfer appropriations among objects in the bill\" by directly changing dollar amounts. Provisions that would not be considered \"transferring appropriations\" include adding a new lump-sum appropriation or spending set-aside, changing the amount of a rescission, providing an across-the-board spending reduction, or reaching back to provisions in the bill the House has already considered. Clause 2(a) of House Rule XXI generally prohibits unauthorized appropriations in certain committee-reported appropriations bills and amendments to such bills. Certain amendments, such as clause 2(f) offset amendments, however, may increase the level of funding for certain unauthorized appropriations already in the bill. Under clause 2(a), appropriations must generally be for purposes authorized by prior enactment of legislation concerning a program (or an agency, account, project, or activity). An \"[a]uthorization for a program may be derived from a specific law providing authority for that particular program or from a more general existing law—'organic law'—authorizing appropriations for such programs.\" Authorizations of subsequent appropriations may be permanent or they may be multi-year or annual, expiring at the end of a specific time period. The rule prohibits floor consideration of appropriations for a purpose or program whose authorization has expired or whose budget authority exceeds the ceiling authorized, if any. Appropriations violating these restrictions are unauthorized appropriations . Appropriations bills frequently include unauthorized appropriations. Such appropriations are allowed to remain in an appropriations bill when the House adopts a special rule waiving points of order against the appropriation or, less frequently, when no one raises a point of order against it. Under House precedents, a germane amendment that merely perfects an unauthorized appropriation permitted to remain in the bill is allowed. An example would be an amendment that would only increase the unauthorized amount and would do so by either amending the amount text or by inserting a parenthetical increase after the amount (such as an en bloc clause 2(f) offset amendment). One scenario for providing such funding would follow the following steps: 1. An authorization act provided an authorization of appropriations of $2 million for program yellow through FY2016; as of the close of FY2016, the entire amount of the authorization had expired. 2. Subsequently, an FY2017 regular appropriations bill provides an unauthorized appropriation of $2 million for program yellow. 3. The House adopts a special rule waiving clause 2(a) of House Rule XXI against all provisions in the bill, allowing the above appropriation to remain. 4. A clause 2(f) offset amendment parenthetically increasing the unauthorized appropriation by $1 million for program yellow is allowed. Although clause 2(f) offset amendments may increase an unauthorized appropriation, they remain subject to budget authority and the outlay offset requirements of clause 2(f) of House Rule XXI. A clause 2(f) amendment may not propose to increase an \"authorized appropriation\" in an appropriations bill beyond the authorized level. For example, if an authorization act included a $2 million authorization for FY2017 and the regular appropriations bill provided that amount, an offset amendment increasing the amount above that level would be prohibited. Under clause 2(f) of House Rule XXI, these amendments are not subject to a \"demand for a division of the question in the House or in the Committee of the Whole.\" That is, a Member cannot demand separate consideration of two or more provisions in such en bloc amendments. Instead. the House must consider the amendment as a whole. Reachback (or fetchback ) offset amendments add a new section (or title), typically at the end of an appropriations measure, that reaches back to change amounts previously considered by reference. For example, the following amendment inserted a new section at the end of the committee-reported FY2008 Labor, Health and Human Services, and Education regular appropriations bill ( H.R. 3043 , 110 th Congress): Title VI—Additional General Provisions Sec. 601. The amounts otherwise provided by this Act are revised by reducing the amount made available for the \"Department of Labor, Employment and Training Administration, Training and Employment Services\", by increasing the amount made available for the \"National Institutes of Health, National Cancer Institute\", and by increasing the amount made available for the \"National Institutes of Health, National Institute of Neurological Disorders and Stroke\" by $49,000,000, $10,000,000, and $10,000,000, respectively. Prior to adoption of Section 3(d)(3) of H.Res. 5 (112 th Congress), reachback amendments to general appropriations bills could have been offered that increased spending provided in the bill as long as they did not violate the 302(f) and 311(a) points of order. Reachback amendments must offset budget authority, but not necessarily outlays; may add new lump-sum appropriations and set-asides, subject to certain restrictions; may not include unauthorized appropriations; must be drafted to avoid a demand for a division of the question; and may provide across-the-board spending reductions as offsets. Under the 3(d)(3) and 302(f) points of order, only budget authority offsets are needed; but the 311(a) point of order applies to both new budget authority and outlays. Generally, the most restrictive points of order are those under 3(d)(3) and 302(f) enforcing the 302(b) subdivisions, which both enforce only budget authority. Furthermore, only the last spending measures considered for a fiscal year, such as supplementals or the last regular bills, are likely to breach the overall spending limit and violate the 311(a) point of order. For reachback amendments, budget authority offsets are generally the primary procedural concern. Opponents of a reachback amendment may, however, raise the lack of outlay offsets as a concern for policy reasons. They may also argue that the resulting outlay increases might present a procedural problem for the bill in the Senate or in conference. In the case of reachback amendments that also provide sufficient new budget authority reductions to offset any outlay increases, Representatives (or their staff) routinely ask CBO to estimate the outlay effect of their amendments. The spending increases and decreases contained in an offset amendment must be provided in the same fiscal year, the year of the pending appropriations bill. Reachback amendments may contain new appropriations and set-asides for certain activities not already included in the bill. Such new appropriations and set-asides must be germane to the bill. Under clause 7 of House Rule XVI, all amendments must be germane to the pending bill. That is, they may not add new subject matter to the bill. Reachback amendments offered at the end of the bill must be germane to the bill, and those offered at the end of a title must be germane to the title. Regular appropriations measures generally have broad subject matter, which may provide flexibility for reachback amendments. Set-asides may not, however, violate a House rule prohibiting legislation on a general appropriations bill (or legislation). Clause 2(b) of House Rule XXI prohibits legislation in committee-reported general appropriations bills, and clause 2(c) prohibits legislation in amendments to those measures. For purposes of this rule, legislation refers to any provision in a general appropriations bill or related amendment that changes existing law, such as proposals amending or repealing existing law or creating new law. The following are examples of legislative language: abolishing a department, agency, or program; providing, changing, limiting, or waiving an authorization; or proposing new rescissions in the appropriations bill. One of the guiding principles in interpreting this prohibition is that an amendment designating funds may not interfere with an executive branch official's statutory authority. For example, such amendments may not significantly alter the official's discretion. Language doing so changes existing law and is therefore prohibited. For example, if an authorization law provides an agency head with the authority to make decisions allocating funds within a particular lump-sum appropriation, an amendment proposing a new set-aside would alter the agency head's authority and would thus be out of order. In cases where a new set-aside would violate the rules, an amendment sponsor frequently does not include the set-aside in the amendment; instead, the sponsor merely discusses that set-aside in terms of intent and expectation during debate on the amendment. This approach is used to avoid the point of order against the amendment. The amendment's sponsor may also urge conferees to include the set-aside in any subsequent conference report. Recent House practice has also included amendments for which both the increase and the offset apply to the same provision in an appropriation bill. These amendments use the form of en bloc offset amendments in order to allow Members the opportunity to discuss a new set aside or other agency guidance without changing the overall level of funding provided in the bill. At the end of consideration, such amendments are withdrawn by unanimous consent. Under clause 2(a) of House Rule XXI, new appropriations and set-asides included in amendments must be proposed for authorized purposes. All new set-asides must also be proposed to authorized lump-sum appropriations. In contrast to clause 2(f) offset amendments, reachback amendments may not increase unauthorized appropriations permitted to remain in the bill because they do not change the text of the bill. The section added by a reachback amendment is considered adding a further unauthorized appropriation, as opposed to merely perfecting the text. Under clause 5 of House Rule XVI, a Member may demand separate consideration of two or more individual portions of an amendment if each portion identified, when standing alone, is a separate, substantive proposition and is grammatically separate \"so that if one proposition is rejected a separate proposition will logically remain.\" Because reachback amendments are potentially subject to a demand for a division of the question, if the presiding officer rules that an amendment is divisible, each divided portion of the amendment will be considered separately and subject to separate debate and amendment, as well as a separate vote. Members often demand a division of the question on an amendment to more easily defeat one or more of the portions of that amendment separately. For example, a majority of Members might be opposed to the portion of an offset amendment that decreases funds for a particular program. One of them might demand a division of the question that, if granted, would allow a separate vote on the funding decrease portion of the amendment. Even if the amendment as a whole was not subject to a point of order, once one portion is defeated the remainder may be subject to the Section 3(d)(3) or Congressional Budget Act points of order. Reachback amendments may include as an offset across-the-board spending cuts. Clause 2(f) amendments may only directly change amounts in the bill. Parliamentary rules may be suspended or waived to consider offset amendments that violate these rules, typically by House adoption of a special rule. However, this approach has been used infrequently. There are certain procedural advantages of clause 2(f) amendments over reachback amendments and vice versa. There are generally three limited opportunities to suspend or waive the rules governing consideration of an offset amendment: (1) if no one raises a point of order; (2) if the House adopts a special rule explicitly waiving points of order against the amendment; or (3) if the House agrees by unanimous consent to waive the rules. Otherwise, if the presiding officer sustains a point of order against an amendment for violating the parliamentary rules previously discussed, the amendment falls. First, House rules are not generally self-enforcing. A Representative must raise a point of order that an amendment violates a specific rule. If no one opposes an amendment, a point of order does not have to be raised. Second, under current practice, the House Rules Committee usually reports a special rule setting additional procedural parameters for the consideration of appropriations measures. The House typically adopts the special rule and then considers the particular appropriations measure pursuant to it. If an offset amendment would violate one or more parliamentary rules, the sponsor may ask the Rules Committee to include a waiver protecting the amendment from the point(s) of order. Special rules generally do not provide special protection for offset amendments to appropriations bills. Third, a Member might ask to consider an amendment violating the rules by unanimous consent. A single Member, however, can prevent such consideration by simply objecting to the unanimous consent request. To attain their policy objectives, sponsors of offset amendments generally select either a clause 2(f) or reachback amendment and work within the rules governing their consideration. Appropriations bills typically include some unauthorized appropriations. Generally, the House Rules Committee reports a special rule adopted by the House, waiving the prohibition against unauthorized appropriations for most or all unauthorized appropriations in a reported bill. Clause 2(f) amendments can increase those unauthorized appropriations allowed to remain. Reachback amendments, however, can only increase authorized appropriations in the bill to their authorized level (if there is one). In some cases, entire bills or significant portions of bills have consisted of unauthorized appropriations. As a result, reachback amendments could not increase those amounts. For example, many of the lump-sum appropriations provided in the committee-reported regular defense appropriations bills have typically been unauthorized because of the timing of consideration of the annual defense authorization bill. The House has adopted special rules regarding each bill waiving the application of clause 2 of House Rule XXI. As a result, clause 2(f) amendments to those bills were in order, but reachback amendments were limited to the few, if any, authorized appropriations. The timing of clause 2(f) amendments is sometimes an advantage over reachback amendments because clause 2(f) amendments are offered earlier in a bill's consideration. By the time reachback amendments are considered, there may be fewer politically appealing offset options available. Amendments, including clause 2(f) amendments, may have already been adopted that reduced the account a reachback amendment sponsor selected for offsets. The account might be reduced to a point where there is no support for further reductions. Reachback amendments may add new lump-sum appropriations and set-asides within certain restrictions. Clause 2(f) amendments, by contrast, are limited to transferring appropriations among objects already in the bill. Reachback amendments may include as an offset an across-the-board spending cut, but clause 2(f) amendments may only directly change amounts in the bill. Another limited advantage of reachback amendments is that for most appropriations bills, reachback amendments must offset only new budget authority. Clause 2(f) amendments must offset both new budget authority and outlays. In practice, however, this advantage of reachback amendments over clause 2(f) amendments is limited because sponsors sometimes provide offsets in both budget authority and outlays to garner political support for reachback amendments.", "summary": "One of the most common methods for changing spending priorities in appropriations bills on the House floor is through offset amendments. House offset amendments may generally change spending priorities in a pending appropriations measure by increasing spending for certain activities (or creating spending for new activities not previously included in the bill) and offsetting the increase with funding decreases in other activities in the bill. Offset amendments are needed to avoid points of order under Sections 302(f) and 311(a) of the Congressional Budget Act, enforcing certain spending ceilings affecting regular appropriations bills, continuing resolutions (CRs), and supplemental appropriations measures (supplementals). In addition, amendments to general appropriations bills that would increase total spending provided in the bill must be entirely offset. Two types of House offset amendments are considered in the Committee of the Whole House on the State of the Union (Committee of the Whole): clause 2(f) and reachback (or fetchback) amendments. As provided under House Rule XXI, clause 2(f) offset amendments consist of two or more amendments considered together (or en bloc) that would change amounts by directly adding text or changing text in the body of the bill. Taken as a whole, the amendment does not increase the amount of funding in the pending bill. Such amendments (1) must provide offsets in both new budget authority and outlays, (2) can only include language transferring appropriations in the bill, and (3) may contain certain unauthorized appropriations. Reachback offset amendments are generally offered at the end of the bill and change funding amounts in the pending bill by reference. These amendments (1) must provide offsets in new budget authority, but not necessarily outlays; (2) may add new appropriations (and spending set-asides within certain restrictions); (3) cannot include unauthorized appropriations; and (4) may provide across-the-board spending reductions as offsets. Parliamentary rules governing consideration of offset amendments may be suspended or waived, typically by House adoption of a special rule but also by unanimous consent. The advantages of clause 2(f) amendments over reachback amendments are that clause 2(f) amendments may contain certain unauthorized appropriations and are typically considered before reachback amendments, sometimes limiting offset opportunities for reachback amendments. The main advantages of reachback amendments are that they may not have to offset outlays, may add new appropriations, and may include across-the-board spending reductions.", "document_type": "crs"}
{"report": "From its headwaters in Colorado and Wyoming to its terminus in the Gulf of California, the Colorado River Basin covers more than 246,000 square miles. The river runs through seven U.S. states (Wyoming, Colorado, Utah, New Mexico, Arizona, Nevada, and California) and Mexico. Pursuant to federal law, the Bureau of Reclamation (Reclamation, part of the Department of the Interior [DOI]) plays a prominent role in the management of the basin's waters. In the Lower Basin (i.e., Arizona, Nevada, and California), Reclamation also serves as water master on behalf of the Secretary of the Interior, a role that elevates the status of the federal government in basin water management. The federal role in the management of Colorado River water is magnified by the multiple federally owned and operated water storage and conveyance facilities in the basin, which provide low-cost water and hydropower supplies to water users. Colorado River water is used primarily for agricultural irrigation and municipal and industrial (M&I) purposes. The river's flow and stored water also are important for power production, fish and wildlife, and recreation, among other uses. A majority (70%) of basin water supplies are used to irrigate 5.5 million acres of land; basin waters also provide M&I water supplies to nearly 40 million people. Much of the area that depends on the river for water supplies is outside of the drainage area for the Colorado River Basin. Storage and conveyance facilities on the Colorado River provide trans-basin diversions that serve areas such as Cheyenne, WY; multiple cities in Colorado's Front Range (e.g., Fort Collins, Denver, Boulder, and Colorado Springs, CO); Provo, UT; Albuquerque and Santa Fe, NM; and Los Angeles, San Diego, and the Imperial Valley in Southern California ( Figure 1 ). Colorado River hydropower facilities can provide up to 42 gigawatts of electrical power per year. The river also provides habitat for a wide range of species, including several federally endangered species. It flows through 7 national wildlife refuges and 11 National Park Service (NPS) units; these and other areas of the river support important recreational opportunities. Precipitation and runoff in the basin are highly variable. Water conditions on the river depend largely on snowmelt in the basin's northern areas. Observed data (1906-2018) show that natural flows in the Colorado River Basin in the 20 th century averaged about 14.8 million acre-feet (MAF) annually. Flows have dipped significantly during the current drought, which dates to 2000; natural flows from 2000 to 2018 averaged approximately 12.4 MAF per year . In 2018, Reclamation estimated that the 19-year period from 2000 to 2018 was the driest period in more than 100 years of record keeping. The dry conditions are consistent with prior droughts in the basin that were identified through tree ring studies; some of these droughts lasted for decades. Climate change impacts, including warmer temperatures and altered precipitation patterns, may further increase the likelihood of prolonged drought in the basin. Pursuant to the multiple compacts, federal laws, court decisions and decrees, contracts, and regulatory guidelines governing Colorado River operations (collectively known as the Law of the River ), Congress and the federal government play a prominent role in the management of the Colorado River. Specifically, Congress funds and oversees Reclamation's management of Colorado River Basin facilities, including facility operations and programs to protect and restore endangered species. Congress has also approved and continues to actively consider Indian water rights settlements involving Colorado River waters, and development of new and expanded water storage in the basin. In addition, Congress has approved funding to mitigate drought and stretch basin water supplies and has considered new authorities for Reclamation to combat drought and enter into agreements with states and Colorado River contractors. This report provides background on management of the Colorado River, including a discussion of trends and agreements since 2000. It also discusses the congressional role in the management of basin waters. In the latter part of the 19 th century, interested parties in the Colorado River Basin began to recognize that local interests alone could not solve the challenges associated with development of the Colorado River. Plans conceived by parties in California's Imperial Valley to divert water from the mainstream of the Colorado River were thwarted because these proposals were subject to the sovereignty of both the United States and Mexico. The river also presented engineering challenges, such as deep canyons and erratic water flows, and economic hurdles that prevented local or state groups from building the necessary storage facilities and canals to provide an adequate water supply. Because local or state groups could not resolve these \"national problems,\" Congress considered ideas to control the Colorado River and resolve potential conflicts between the states. Thus, in an effort to resolve these conflicts and prevent litigation, Congress gave its consent for the states and Reclamation to enter into an agreement to apportion Colorado River water supplies in 1921. The below sections discuss the resulting agreement, the Colorado River Compact, and other documents and agreements that form the basis of the Law of the River, which governs Colorado River operations. The Colorado River Compact of 1922, negotiated by the seven basin states and the federal government, was signed by all but one basin state (Arizona). Under the compact, the states established a framework to apportion the water supplies between the Upper Basin and the Lower Basin, with the dividing line between the two basins at Lee Ferry, AZ, near the Utah border. Each basin was apportioned 7.5 MAF annually for beneficial consumptive use, and the Lower Basin was given the right to increase its beneficial consumptive use by an additional 1 MAF annually. The agreement also required Upper Basin states to deliver to the Lower Basin a total of 75 MAF over each 10-year period, thus allowing for averaging over time to make up for low-flow years. The compact did not address inter- or intrastate allocations of water (which it left to future agreements and legislation), nor did it address water to be made available to Mexico, the river's natural terminus; this matter was addressed in subsequent international agreements. The compact was not to become binding until it had been approved by the legislatures of each of the signatory states and by Congress. Congress approved and modified the Colorado River Compact in the Boulder Canyon Project Act (BCPA) of 1928. The act ratified the 1922 compact, authorized the construction of a federal facility to impound water in the Lower Basin (Boulder Dam, later renamed Hoover Dam) and related facilities to deliver water in Southern California (e.g., the All-American Canal, which delivers Colorado River water to California's Imperial Valley), and apportioned the Lower Basin's 7.5 MAF per year among the three Lower Basin states. It provided 4.4 MAF per year to California, 2.8 MAF to Arizona, and 300,000 acre-feet (AF) to Nevada, with the states to divide any surplus waters among them. It also directed the Secretary of the Interior to serve as the sole contracting authority for Colorado River water use in the Lower Basin and authorized several storage projects for study in the Upper Basin. Congress's approval of the compact in the BCPA was conditioned on a number of factors, including ratification by California and five other states (thereby allowing the compact to become effective without Arizona's concurrence), and California agreeing by act of its legislature to limit its water use to 4.4 MAF per year and not more than half of any surplus waters. California met this requirement by passing the California Limitation Act of March 4, 1929. Arizona did not ratify the Colorado River Compact until 1944, at which time the state began to pursue a federal project to bring Colorado River water to its primary population centers in Phoenix and Tucson. California opposed the project, arguing that under the doctrine of prior appropriation, California's historical use of the river trumped Arizona's rights to the Arizona allotment. California also argued that Colorado River apportionments under the BCPA included water developed on Colorado River tributaries, whereas Arizona claimed, among other things, that these apportionments included the river's mainstream waters only. In 1952, Arizona filed suit in the U.S. Supreme Court to settle the issue. Eleven years later, in the 1963 Arizona v. California decision, the Supreme Court ruled in favor of Arizona, finding that Congress had intended to apportion the mainstream of the Colorado River and that California and Arizona each would receive one-half of surplus flows. The same Supreme Court decision held that Section 5 of the BCPA controlled the apportionment of waters among Lower Basin States, and that the BCPA (and not the law of prior appropriation) controlled the apportionment of water among Lower Basin states. The ruling was notable for its directive to forgo traditional Reclamation deference to state law under the Reclamation Act of 1902, and formed the basis for the Secretary of the Interior's unique role as water master for the Lower Basin. The decision also held that Native American reservations on the Colorado River were entitled to priority under the BCPA. Later decrees by the Supreme Court in 1964 and 1979 supplemented the 1963 decision. Following the Arizona v. California decision, Congress eventually authorized Arizona's conveyance project for Colorado River water, the Central Arizona Project (CAP), in the Colorado River Basin Project Act of 1968 (CRBPA). As a condition for California's support of the project, Arizona agreed that, in the event of shortage conditions, California's 4.4 MAF has priority over CAP water supplies. In 1944, the United States signed a water treaty with Mexico (1944 U.S.-Mexico Water Treaty) to guide how the two countries share the waters of the Colorado River and the Rio Grande. The treaty established water allocations for the two countries and created a governance framework (the International Boundary and Water Commission) to resolve disputes arising from the treaty's execution. The treaty requires the United States to provide Mexico with 1.5 MAF of water annually, plus an additional 200,000 AF when a surplus is declared. During drought, the United States may reduce deliveries to Mexico in similar proportion to reductions of U.S. consumptive uses. The treaty has been supplemented by additional agreements between the United States and Mexico, known as m inutes . Projects originally authorized for study in the Upper Basin under BCPA were not allowed to move forward until the Upper Basin states determined their individual water allocations, which they did under the Upper Colorado River Basin Compact of 1948. The Upper Basin Compact established Colorado (where the largest share of runoff to the river originates) as the largest entitlement holder in the Upper Basin, with rights to 51.75% of any Upper Basin flows after Colorado River Compact obligations to the Lower Basin have been met. Other states also received percentage-based allocations, including Wyoming (14%), New Mexico (11.25%), and Utah (23%). Arizona was allocated 50,000 AF in addition to its Lower Basin apportionment, in recognition of the small portion of the state in the Upper Basin. Basin allocations by state following approval of the Upper Basin Compact (i.e., the allocations that generally guide current water deliveries) are shown below in Figure 2 . The Upper Basin Compact also established the Upper Colorado River Commission, which coordinates operations and positions among Upper Basin states. Subsequent federal legislation paved the way for development of Upper Basin allocations. The Colorado River Storage Project (CRSP) Act of 1956 authorized storage reservoirs and dams in the Upper Basin, including the Glen Canyon, Flaming Gorge, Navajo, and Curecanti Dams. The act also established the Upper Colorado River Basin Fund, which receives revenues collected in connection with the projects, to be made available for defraying the project's costs of operation, maintenance, and emergency expenditures. In addition to the aforementioned authorization of CAP in Arizona, the 1968 CRBPA amended CRSP to authorize several additional Upper Basin projects (e.g., the Animas La Plata and Central Utah projects) as CRSP participating projects. It also directed that the Secretary of the Interior propose operational criteria for Colorado River Storage Project units (including the releases of water from Lake Powell) that prioritize (1) Treaty Obligations to Mexico, (2) the Colorado River Compact requirement for the Upper Basin to deliver 75 MAF to Lower Basin states over any 10-year period, and (3) carryover storage to meet these needs. The CRBPA also established the Upper Colorado River Basin Fund and the Lower Colorado River Basin Development Fund, both of which were authorized to utilize revenues from power generation from relevant Upper and Lower Basin facilities to fund certain expenses in the sub-basins. Due to the basin's large water storage projects, basin water users are able to store as much as 60 MAF, or about four times the Colorado River's annual flows. Thus, storage and operations in the basin receive considerable attention, particularly at the basin's two largest dams and their storage reservoirs: Glen Canyon Dam/Lake Powell in the Upper Basin (26.2 MAF of storage capacity) and Hoover Dam/Lake Mead in the Lower Basin (26.1 MAF). The status of these projects is of interest to basin stakeholders and observers and is monitored closely by Reclamation. Glen Canyon Dam, completed in 1963, provides the linchpin for Upper Basin storage and regulates flows from the Upper Basin to the Lower Basin, pursuant to the Colorado River Compact. It also generates approximately 5 billion kilowatt hours (KWh) of electricity per year, which the Western Area Power Administration (WAPA) supplies to 5.8 million customers in Upper Basin States. Other significant storage in the Upper Basin includes the initial \"units\" of the CRSP: the Aspinall Unit in Colorado (including Blue Mesa, Crystal, and Morrow Point dams on the Gunnison River, with combined storage capacity of more than 1 MAF), the Flaming Gorge Unit in Utah (including Flaming Gorge Dam on the Green River, with a capacity of 3.78 MAF), and the Navajo Unit in New Mexico (including Navajo Dam on the San Juan River, with a capacity of 1 MAF). The Upper Basin is also home to 16 \"participating\" projects which are authorized to use water for irrigation, municipal and industrial uses, and other purposes. In the Lower Basin, Hoover Dam, completed in 1936, provides the majority of the Lower Basin's storage and generates about 4.2 billion KWh of electricity per year for customers in California, Arizona, and Nevada. Also important for Lower Basin Operations are Davis Dam/Lake Mohave, which regulates flows to Mexico under the 1944 Treaty, and Parker Dam/Lake Havasu, which impounds water for diversion into the Colorado River Aqueduct (thereby allowing for deliveries to urban areas in southern California) and CAP (allowing for diversion to users in Arizona). Further downstream on the Arizona/California border, Imperial Dam (a diversion dam) diverts Colorado River water to the All-American Canal for use in California's Imperial and Coachella Valleys. Reclamation monitors Colorado River reservoir levels and projects them 24 months into the future in monthly studies (called 24-month studies ). The studies take into account forecasted hydrology, reservoir operations, and diversion and consumptive use schedules to model a single scenario of reservoir conditions. The studies inform operating decisions by Reclamation looking one to two years into the future. They express water storage conditions at Lake Mead and Lake Powell in terms of elevation, as feet above mean sea level (ft). In addition to the 24-month studies, the CRBPA requires the Secretary to transmit to Congress and the governors of the basin states, by January 1 of each year, a report describing the actual operation for the preceding water year and the projected operation for the coming year. This report is commonly referred to as the annual operating plan (AOP). The AOP's projected January 1 water conditions for the upcoming calendar year establish a baseline for future annual operations. Since the adoption of guidelines by Reclamation and basin states in 2007 (see below section, \" 2007 Interim Guidelines \"), operations of the Hoover and Glen Canyon Dams have been tied to specific pool elevations at Lake Mead and Lake Powell. For Lake Mead, the first level of shortage (1 st Tier Shortage Condition), under which Arizona and Nevada's allocations would be decreased, would be triggered if Lake Mead falls below 1,075 ft. For Lake Powell, releases under tiered operations are based on storage levels in both Lake Powell and Lake Mead (specific delivery curtailments based on lake levels similar to Lake Mead have not been adopted). As of January 2019, Reclamation predicted that Lake Mead's 2019 elevation would remain above 1,075 ft (approximately 9.6 MAF of storage) and that Lake Powell would remain at its prior year level (i.e., the Upper Elevation Balancing Tier) during 2019. However, Reclamation also projected that there was a 69% chance of a 1 st Tier Shortage Condition at Lake Mead beginning in January 2020. Reclamation predicted a small (3%) chance of Lake Powell dropping to 3,490 feet, or minimum power pool (i.e., a level beyond which hydropower could not be generated) by 2020; the chance of this occurring by 2022 was greater (15%). Improved hydrology for 2019 may decrease the likelihood of shortage in the immediate future. Construction of most of the Colorado River's water supply infrastructure predated major federal environmental protection statutes, such as the National Environmental Policy Act (NEPA; 42 U.S.C. §§4321 et seq. ) and the Endangered Species Act (ESA; 87 Stat. 884, 16 U.S.C. §§1531-1544). Thus, many of the environmental impacts associated with the development of basin resources were not originally taken into account. Over time, multiple efforts have been initiated to mitigate these effects. Some of the highest-profile efforts have been associated with water quality (in particular, salinity control) and the effects of facility operations on endangered species. Salinity and water quality are long-standing issues in the Colorado River Basin. Parts of the Upper Basin are covered by salt-bearing shale (which increases salt content in water inflows), and salinity content increases as the river flows downstream due to both natural leaching and return flows from agricultural irrigation. The 1944 U.S.-Mexico Water Treaty did not set water quality or salinity standards in the Colorado River Basin. However, after years of dispute between the United States and Mexico regarding the salinity of the water reaching Mexico's border, the two countries reached an agreement on August 30, 1973, with the signing of Minute 242 of the International Boundary and Water Commission. The agreement guarantees Mexico that the average salinity of its treaty deliveries will be no more than 115 parts per million higher than the salt content of the water diverted to the All-American Canal at Imperial Dam in Southern California. To control the salinity of Colorado River water in accordance with this agreement, Congress passed the Colorado River Basin Salinity Control Act of 1974 ( P.L. 93-320 ), which authorized desalting and salinity control facilities to improve Colorado River water quality. The most prominent of these facilities is the Yuma Desalting Plant, which was largely completed in 1992 but has never operated at capacity. In 1974, the seven basin states also established water quality standards for salinity through the Colorado River Basin Salinity Control Forum. Congress enacted the ESA in 1973. As basin species became listed in accordance with the act, federal agencies and nonfederal stakeholders consulted with the U.S. Fish and Wildlife Service (FWS) to address the conservation of the listed species. As a result of these consultations, several major programs have been developed to protect and restore fish species on the Colorado River and its tributaries. Summaries of some of the key programs are below. The Upper Colorado Endangered Fish Recovery Program was established in 1988 to assist in the recovery of four species of endangered fish in the Upper Colorado River Basin. Congress authorized this program in P.L. 106-392 . The program is implemented through several stakeholders under a cooperative agreement signed by the governors of Colorado, Utah, and Wyoming; DOI; and the Administrator of WAPA. The recovery goals of the program are to reduce threats to species and improve their status so they are eventually delisted from the ESA. Some of the actions taken in the past include providing adequate instream flows for fish and their habitat, restoring habitat, reducing nonnative fish, augmenting fish populations with stocked fish, and conducting research and monitoring. Reclamation is the lead federal agency for the program and provides the majority of federal funds for implementation. It is also funded through a portion of Upper Basin hydropower revenues from WAPA; FWS; the states of Colorado, Wyoming, and Utah; and water users, among others. The San Juan River Basin Recovery Implementation Program was established in 1992 to assist in the recovery of ESA-listed fish species on the San Juan River, the Colorado's largest tributary. The program is concerned with the recovery of the Razorback sucker ( Xyrauchen texanus ) and Colorado pikeminnow ( Ptychocheilus Lucius ). Congress authorized this program in P.L. 106-392 with the aim to protect the genetic integrity and population of listed species, conserve and restore habitat (including water quality), reduce nonnative species, and monitor species. The Recovery Program is coordinated by FWS. Reclamation is responsible for operating the Animas-La Plata Project and Navajo Dam on the San Juan River in a way that reduces effects on the fish populations. The program is funded by a portion of revenues from power generation, Reclamation, participating states, and the Bureau of Indian Affairs. Recovery efforts for listed fish are coordinated with the Upper Colorado River Program discussed above. The Glen Canyon Dam Adaptive Management Program was established in 1997 in response to a directive from Congress under the Grand Canyon Protection Act of 1992 ( P.L. 102-575 ) to operate Glen Canyon Dam \"in such a manner as to protect, mitigate adverse impacts to, and improve the values for which Grand Canyon National Park and Glen Canyon National Recreation Area were established.\" This program uses experiments to determine how water flows affect natural resources south of the dam. Reclamation is in charge of modifying flows for experiments, and the U.S. Geological Survey conducts monitoring and other studies to evaluate the effects of the flows. The results are expected to better inform managers how to provide water deliveries and conserve species. The majority of program funding comes from hydropower revenues generated at Glen Canyon Dam. The MSCP is a multistakeholder initiative to conserve 27 species (8 listed under ESA) along the Lower Colorado River while maintaining water and power supplies for farmers, tribes, industries, and urban residents. The MSCP began in 2005 and is planned to last for at least 50 years. The MSCP was created through consultation under ESA. To achieve compliance under ESA, federal entities involved in managing water supplies in the Lower Colorado River met with resource agencies from Arizona, California, and Nevada; Native American Tribes; environmental groups; and recreation interests to develop a program to conserve species along a portion of the Colorado River. A biological opinion (BiOp) issued by the FWS in 1997 served as a basis for the program. Modifications to the 1997 BiOp were made in 2002, and in 2005, the BiOp was renewed for 50 years. Nonfederal entities received an incidental take permit under Section 10(a) of the ESA for their activities in 2005 and shortly thereafter implemented a habitat conservation plan. The objective of the MSCP is to create habitat for listed species, augment the populations of species listed under ESA, maintain current and future water diversions and power production, and abide by the incidental take authorizations for listed species under the ESA. The estimated total cost of the program over its lifetime is approximately $626 million in 2003 dollars ($882 million in 2018 dollars) and is to be split evenly between Reclamation (50%) and the states of California, Nevada, and Arizona (who collectively fund the remaining 50%). The management and implementation of the MSCP is the responsibility of Reclamation, in consultation with a steering committee of stakeholders. Twenty-two federally recognized tribes in the Colorado River Basin have quantified water diversion rights that have been confirmed by court decree or final settlement. These tribes collectively possess rights to 2.9 MAF per year of Colorado River water. However, as of 2015, these tribes typically were using just over half of their quantified rights. Additionally, 13 other basin tribes have reserved water rights claims that have yet to be resolved. Increased water use by tribes with existing water rights, and/or future settlement of claims and additional consumptive use of basin waters by other tribes, is likely to exacerbate the competition for basin water resources. The potential for increased use of tribal water rights (which, once ratified, are counted toward state-specific allocations where the tribal reservation is located) has been studied in recent years. In 2014, Reclamation, working with a group of 10 tribes with significant reserved water rights claims on the Colorado River, initiated a study known as the 10 Tribes Study . The study, published in 2018, estimated that, cumulatively, the 10 tribes could have reserved water rights (including unresolved claims) to divert nearly 2.8 MAF per year. Of these water rights, approximately 2 MAF per year were decreed and an additional 785,273 AF (mostly in the Upper Basin) remained unresolved. The report estimated that, overall, the 10 tribes are diverting (i.e., making use of) almost 1.5 MAF of their 2.8 MAF in resolved and unresolved claims. Table 1 shows these figures at the basin and sub-basin levels. According to the study, the majority of unresolved claims in the Upper Basin are associated with the Ute Tribe in Utah (370,370 AF per year), the Navajo Nation in Utah (314,926 AF), and the Navajo Nation in the Upper Basin in Arizona (77,049 AF). When the Colorado River Compact was originally approved, it was assumed based on the historical record that average annual flows on the river were 16.4 MAF per year. According to Reclamation data, from 1906 to 2018, observed natural flows on the river at Lee Ferry, AZ—the common point of measurement for observed basin flows—averaged 14.8 MAF annually. Natural flows from 2000 to 2018 (i.e., during the ongoing drought) averaged considerably less than that—12.4 MAF annually. While natural flows have trended down, consumptive use in the basin has grown and has regularly exceeded natural flows since 2000. From 1971 to 2015, average total consumptive use grew from 13 MAF to over 15 MAF annually. Combined, the two trends have caused a significant drawdown of basin storage levels ( Figure 3 ). From 2009 to 2015, the largest consumptive water use occurred in the Lower Basin (7.5 MAF per year), while Upper Basin consumptive use averaged about 3.8 MAF annually. Use of Treaty water by Mexico (1.5 MAF per year) and evaporative loss from reservoirs (approximately 2 MAF per year) in both basins also factored significantly into total basin consumptive use. Notably, consumptive use in the Lower Basin, combined with mandatory releases to Mexico, regularly exceeds the mandatory 8.23 MAF per year that must be released from the Upper Basin to the Lower Basin and Mexico pursuant to Reclamation requirements. This imbalance between Lower Basin inflows and use, known as the structural deficit , causes additional stress on basin storage. The current drought in the basin has included some of the lowest flows on record. According to Reclamation, the 19-year period from 2000 to 2018 was the driest period in more than 100 years of record keeping. Observers have pointed out that flows in some recent years have been lower than would be expected given the amount of precipitation that has occurred, and have noted that warmer temperatures appear to be a significant contributor to these diminished flows. Based on these and other observations, some have argued that Colorado River flows are unlikely to return to 20 th century averages, and that future water supply risk is high. A 2012 study by Reclamation projected a long-term imbalance in supply and demand in the Colorado River Basin. In the study, Reclamation noted that the basin had thus far avoided serious impacts on water supplies due to the significant storage within the system, coupled with the fact that some Upper Basin states have yet to fully develop the use of their allocations. However, Reclamation projected that in the coming half century, flows would decrease by an average of 9% at Lee Ferry and drought would increase in frequency and duration. At the same time, Reclamation projected that demand for basin water supplies would increase, with annual consumptive use projected to rise from 15 MAF to 18.1-20.4 MAF by 2050, depending on population growth. A range of 64%-76% of the growth in demand was expected to come from increased M&I demand. Reclamation's 2012 study also posited several potential ways to alleviate future shortages in the basin, such as alternative water supplies, demand management, drought action plans, water banking, and water transfer/markets. Some of these options already are being pursued. In particular, some states have become increasingly active in banking unused Colorado River surface water supplies, including through groundwater banks or storage of unused surface waters in Lake Mead (see below section, \" 2007 Interim Guidelines \"). Drought conditions throughout the basin have raised concerns about potential negative impacts on water supplies. Concerns center on uncertainty that might result if the Secretary of the Interior were to determine that a shortage condition exists in the Lower Basin, and that related curtailments were warranted. Some in Upper Basin States are also concerned about the potential for a c ompact call of Lower Basin states on Upper Basin states. Drought and other uncertainties related to water rights priorities (e.g., potential tribal water rights claims) spurred the development of several efforts that generally attempted to relieve pressure on basin water supplies, stabilize storage levels, and provide assurances of available water supplies. Some of the most prominent developments since the year 2000 (i.e., the beginning of the current drought) are discussed below. Prior to the 2003 QSA, California had been using approximately 5.2 MAF of Colorado River on average each year (with most of its excess water use attributed to urban areas). Under the QSA, an agreement between several California water districts and DOI, California agreed to reduce its use to the required 4.4 MAF under the Law of the River. It sought to accomplish this aim by quantifying Colorado River entitlement levels of several water contractors; authorizing efforts to conserve additional water supplies (e.g., the lining of the All-American Canal); and providing for several large-scale, long-term agriculture-to-urban water transfers. The QSA also committed the state to a path for restoration and mitigation related to the Salton Sea, a water body in Southern California that was historically sustained by Colorado River irrigation runoff from the Imperial and Coachella Valleys. A related agreement between Reclamation and the Lower Basin states, the Inadvertent Overrun and Payback Policy (IOPP), went into effect concurrently with the QSA in 2004. IOPP is an administrative mechanism that provides an accounting of inadvertent overruns in consumptive use compared to the annual entitlements of water users in the Lower Basin. These overruns must be \"paid back\" in the calendar year following the overruns, and the paybacks must be made only from \"extraordinary conservation measures\" above and beyond normal consumptive use. The 2004 Arizona Water Settlements Act ( P.L. 108-451 , AWSA) significantly altered the allocation of CAP water in Arizona and set the stage for some of the cutbacks in the state that are currently under discussion. It ratified three water rights settlements (one in each title) between the federal government and the State of Arizona, the Gila River Indian Community (GRIC), and the Tohono O'odham Nation, respectively. For the state and its CAP water users, the settlement resolved a final repayment cost for CAP by reducing the water users' reimbursable repayment obligation from about $2.3 billion to $1.65 billion. Additionally, Arizona agreed to new tribal and non-tribal allocations of CAP water so that approximately half of CAP's annual allotment would be available to Indian tribes in Arizona, at a higher priority than most other uses. The tribal communities were authorized to lease the water so long as the water remains within the state via the state's water banking authority. The act also authorized funds to cover the cost of infrastructure required to deliver the water to the Indian communities, much of it derived from power receipts accruing to the Lower Colorado River Basin Development Fund. Another significant development in the basin was the 2007 adoption of the Colorado River Interim Guidelines for Lower Basin Shortages and the Coordinated Operations for Lake Powell and Lake Mead (2007 Interim Guidelines). Development of the agreement began in 2005, when, in response to drought in the Southwest and the decline in basin water storage (and a record low point in Lake Powell of 33% active capacity), the Secretary of the Interior instructed Reclamation to develop coordinated strategies for Colorado River reservoir operations during drought or shortages. The resulting guidelines included criteria for releases from Lakes Mead and Powell determined by \"trigger levels\" in both reservoirs, as well as a schedule of Lower Basin curtailments at different operational tiers ( Table 2 ). Under the guidelines, Arizona and Nevada, which have junior rights to California, would face reduced allocations if Lake Mead elevations dropped below 1,075 ft. At the time, it was thought that the 2007 Guidelines would significantly reduce the risk of Lake Mead falling to 1,025 feet. The guidelines are considered \"interim\" because they were scheduled to expire in 20 years (i.e., at the end of 2026). The 2007 agreement also included for the first time a mechanism by which parties in the Lower Basin were able to store conserved water in Lake Mead, known as Intentionally Created Surplus (ICS). Reclamation accounts for this water annually, and the users storing the water may access the surplus in future years, in accordance with the Law of the River. From 2013 to 2017, the portion of Lake Mead water in storage that was classified as ICS ranged from a low of 711,864 AF in 2015 to a high of 1.261 MAF in 2017 ( Figure 4 ). In 2014, Reclamation and several major basin water supply agencies (Central Arizona Water Conservation District, Southern Nevada Water Authority, Metropolitan Water District of Southern California, and Denver Water) executed a memorandum of understanding to provide funding for voluntary conservation projects and reductions of water use. These activities had the goal of developing new system water , to be applied toward storage in Lake Mead, by the end of 2019. Congress formally authorized federal participation in these efforts in the Energy and Water Development and Related Agencies Appropriations Act, 2015 ( P.L. 113-235 , Division D ), with an initial sunset date for the authority at the end of FY2018. The Energy and Water Development and Related Agencies Appropriations Act, 2019 ( P.L. 115-244 , Division A ) extended the authority through the end of FY2022, with the stipulation that Upper Basin agreements could not proceed without the participation of the Upper Basin states through the Upper Colorado River Commission. As of mid-2018, Reclamation estimated that the program had resulted in a total of 194,000 AF of system water conserved. These savings were carried out through 64 projects conserving 47,000 AF in the Upper Basin and 11 projects conserving 147,000 AF in the Lower Basin. In 2017, the United States and Mexico signed Minute 323, which extended and replaced elements of a previous agreement, Minute 319, signed in 2012. Minute 323 included, among other things, options for Mexico to hold water in reserve in U.S. reservoirs for emergencies and water conservation efforts, as well as U.S. commitments for flows to support the ecological health of the Colorado River Delta. It also extended initial Mexican cutback commitments made under Minute 319 (which were similar in structure to the 2007 cutbacks negotiated for Lower Basin states) and established a Binational Water Scarcity Contingency Plan that included additional cutbacks that would be triggered if drought contingency plans (DCPs) are approved by U.S. basin states (see following section, \" 2019 Drought Contingency Plans \"). Ongoing drought conditions and the potential for water supply shortages prompted discussions and negotiations focused on how to conserve additional basin water supplies. After several years of negotiations, on March 19, 2019, Reclamation and the Colorado River Basin states finalized DCPs for both the Upper Basin and the Lower Basin. These plans required final authorization by Congress to be implemented. Following House and Senate hearings on the DCPs in early April, on April 16, 2019, Congress authorized the DCP agreements in the Colorado River Drought Contingency Plan Authorization Act ( P.L. 116-14 ). Each of the basin-level DCPs is discussed below in more detail. The Upper Basin DCP aims to protect against Lake Powell reaching critically low elevations; it also authorizes storage of conserved water in the Upper Basin that could help establish the foundation for a water use reduction effort (i.e., a \"Demand Management Program\") that may be developed in the future. Under the Upper Basin DCP, the Upper Basin states agree to operate system units to keep the surface of Lake Powell above 3,525 ft, which is 35 ft above the minimum elevation needed to run the dam's hydroelectric plant. Other large Upper Basin reservoirs (e.g., Navajo Reservoir, Blue Mesa Reservoir, and Flaming Gorge Reservoir) would be operated to protect the targeted Lake Powell elevation, potentially through drawdown of their own storage. If established by the states, an Upper Basin DCP Demand Management Program would likely entail willing seller/buyer agreements allowing for temporary paid reductions in water use that would provide for more storage volume in Lake Powell. Reclamation and other observers have stated their belief that these efforts will significantly decrease the risk of Lake Powell's elevation falling below 3,490 ft, an elevation at which significantly reduced hydropower generation is possible. The Lower Basin DCP is designed to require Arizona, California, and Nevada to curtail use and thereby contribute additional water to Lake Mead storage at predetermined \"trigger\" elevations, while also creating additional flexibility to incentivize voluntary conservation of water to be stored in Lake Mead, thereby increasing lake levels. Under the DCP, Nevada and Arizona (which were already set to have their supplies curtailed beginning at 1,075 ft under the 2007 Interim Guidelines) are to contribute additional supplies to maintain higher lake levels (i.e., beyond previous commitments). The reductions of supply would reach their maximums when reservoir levels drop below 1,045 ft. At the same time, the Lower Basin DCP would, for the first time, include commitments for delivery cutbacks by California. These cutbacks would begin with 200,000 AF (4.5%) in reductions at Lake Mead elevations of 1,040-1,045 ft, and would increase to as much as 350,000 AF (7.9%) at elevations of 1,025 ft or lower. The curtailments in the Lower Basin DCP are in addition to those agreed to under the 2007 Interim Guidelines and under Minute 323 with Mexico. Specific and cumulative reductions are shown in Table 2 . In addition to the state-level reductions, under the Lower Basin DCP, Reclamation also would agree to pursue efforts to add 100,000 AF or more of system water within the basin. Some of the largest and most controversial reductions under the Lower Basin DCP would occur in Arizona, where pursuant to previous changes under the 2004 AWSA, a large group of agricultural users would face major cutbacks to their CAP water supplies. Reclamation has noted that the Lower Basin DCP significantly decreases the chance of Lake Mead elevations falling below 1,020 ft, which would be a critically low level. Some parties have pointed out that although the DCP is unlikely to prevent a shortage from being declared at 1,075 ft, it would slow the rate at which the lake recedes thereafter. Combined with the commitments from Mexico, total planned cutbacks under shortage scenarios (i.e., all commitments to date, combined) would reduce Lower Basin consumptive use by 241,000 AF to 1.375 MAF per year, depending on Lake Mead's elevation. Although the DCPs and the related negotiations were widely praised, some expressed concerns related to the implementation of the DCPs as they relate to federal and state environmental laws. Most Colorado River contractors supported the agreements, but one major basin contractor, Imperial Irrigation District (IID, a major holder of Colorado River water rights in Southern California), did not approve the DCPs. IID has argued that the DCPs will further degrade the Salton Sea, a shrinking and ecologically degraded water body in southern California that relies on drainage flows from lands irrigated using Colorado River water. Following enactment of the DCPs, IID filed suit in state court alleging that state approval of the DCPs violated the California Environmental Quality Act. Others have questioned whether federal implementation of the DCPs without a new or supplemental Environmental Impact Statement might violate federal law, such as NEPA. The principal role of Congress as it relates to storage facilities on the Colorado River is funding and oversight of facility operations, construction, and programs to protect and restore endangered species (e.g., Glen Canyon Dam Adaptive Management Program and the Upper Colorado River Endangered Fish Program). In the Upper Basin, Colorado River facilities include the 17 active participating units in the Colorado River Storage Projects, as well as the Navajo-Gallup Water Supply Project. In the Lower Basin, major facilities include the Salt River Project and Theodore Roosevelt Dam, Hoover Dam and All-American Canal, Yuma and Gila Projects, Parker-Davis Project, Central Arizona Project, and Robert B. Griffith Project (now Southern Nevada Water System). Congressional appropriations in support of Colorado River projects and programs typically account for a portion of overall project budgets. For example, the Lower Colorado Region's FY2017 operating budget was $517 million; $119.8 million of this total was provided by discretionary appropriations, and the remainder of funding came from power revenues (which are made available without further appropriation) and nonfederal partners. In recent years, Congress has also authorized and appropriated funding that has targeted the Colorado River Basin in general (i.e., the Pilot System Conservation Plan). Congress may choose to extend or amend these and other authorities specific to the basin. While discretionary appropriations for the Colorado River are of regular interest to Congress, Congress may also be asked to weigh in on Colorado River funding that is not subject to regular appropriations. For instance, in the coming years, the Lower Colorado River Basin Development Fund is projected to face a decrease in revenues and may thus have less funding available for congressionally established funding priorities for the Development Fund. Congress has previously approved Indian water rights settlements associated with more than 2 MAF of tribal diversion rights on the Colorado River. Only a portion of this water has been developed. Congress likely will face the decision of whether to fund development of previously authorized infrastructure associated with Indian water rights settlements in the Colorado River Basin. For example, the ongoing Navajo-Gallup Water Supply Project is being built to serve the Jicarilla Apache Nation, the Navajo Nation, and the City of Gallup, New Mexico. Congress may also be asked to consider new settlements that may result in tribal rights to more Colorado River water. For example, in the 116 th Congress, H.R. 244 would authorize the Navajo Nation Water Settlement in Utah. In addition to development of new tribal water supplies, some states in the Upper Basin have indicated their intent to further develop their Colorado River water entitlements. For example, in the 115 th Congress, Section 4310 of America's Water Infrastructure Act ( P.L. 115-270 ) authorized the Secretary of the Interior to enter into an agreement with the State of Wyoming whereby the state would fund a project to add erosion control to Fontenelle Reservoir in the Upper Basin. The project would allow the state to potentially utilize an additional 80,000 acre-feet of water storage on the Green River, a tributary of the Colorado River. Congress may remain interested in implementation of the DCPs, including their success or failure at stemming further Colorado River cutbacks and the extent to which the plans comply with federal environmental laws such as NEPA. Similarly, Congress may be interested in the overall hydrologic status of the Colorado River Basin, as well as future efforts to plan for increased demand in the basin and stretch limited basin water supplies.", "summary": "The Colorado River Basin covers more than 246,000 square miles in seven U.S. states (Wyoming, Colorado, Utah, New Mexico, Arizona, Nevada, and California) and Mexico. Pursuant to federal law, the Bureau of Reclamation (part of the Department of the Interior) manages much of the basin's water supplies. Colorado River water is used primarily for agricultural irrigation and municipal and industrial (M&I) uses, but it also is important for power production, fish and wildlife, and recreational uses. In recent years, consumptive uses of Colorado River water have exceeded natural flows. This causes an imbalance in the basin's available supplies and competing demands. A drought in the basin dating to 2000 has raised the prospect of water delivery curtailments and decreased hydropower production, among other things. In the future, observers expect that increasing demand for supplies, coupled with the effects of climate change, will further increase the strain on the basin's limited water supplies. River Management The Law of the River is the commonly used shorthand for the multiple laws, court decisions, and other documents governing Colorado River operations. The foundational document of the Law of the River is the Colorado River Compact of 1922. Pursuant to the compact, the basin states established a framework to apportion the water supplies between the Upper and Lower Basins of the Colorado River, with the dividing line between the two basins at Lee Ferry, AZ (near the Utah border). The Upper and Lower Basins each were allocated 7.5 million acre-feet (MAF) annually under the Colorado River Compact; an additional 1.5 MAF in annual flows was made available to Mexico under a 1944 treaty. Future agreements and court decisions addressed numerous other issues (including intrastate allocations of flows), and subsequent federal legislation provided authority and funding for federal facilities that allowed users to develop their allocations. A Supreme Court ruling also confirmed that Congress designated the Secretary of the Interior as the water master for the Lower Basin, a role in which the federal government manages the delivery of all water below Hoover Dam. Reclamation and basin stakeholders closely track the status of two large reservoirs—Lake Powell in the Upper Basin and Lake Mead in the Lower Basin—as an indicator of basin storage conditions. Under recent guidelines, dam releases from these facilities are tied to specific water storage levels. For Lake Mead, the first tier of \"shortage,\" under which Arizona's and Nevada's allocations would be decreased, would be triggered if Lake Mead's January 1 elevation is expected to fall below 1,075 feet above mean sea level. As of early 2019, Reclamation projected that there was a 69% chance of a shortage condition at Lake Mead in 2020; there was also a lesser chance of Lake Powell reaching critically low levels. Improved hydrology in early 2019 may decrease the chances of shortage in the immediate future. Drought Contingency Plans Despite previous efforts to alleviate future shortages, the basin's hydrological outlook has generally worsened in recent years. After several years of negotiations, in early 2019 Reclamation and the basin states transmitted to Congress additional plans to alleviate stress on basin water supplies. These plans, known as the drought contingency plans (DCPs) for the Upper and Lower Basins, were authorized by Congress in April 2019 in the Colorado River Drought Contingency Plan Authorization Act (P.L. 116-14). The DCPs among other things obligate Lower Basin states to additional water supply cutbacks at specified storage levels (i.e., cutbacks beyond previous curtailment plans), commit Reclamation to additional water conservation efforts, and coordinate Upper Basin operations to protect Lake Powell storage levels and hydropower generation. Congressional Role Congress plays a multifaceted role in federal management of the Colorado River basin. Congress funds and oversees management of basin facilities, including operations and programs to protect and restore endangered species. It has also enacted and continues to consider Indian water rights settlements involving Colorado River waters and development of new water storage facilities in the basin. In addition, Congress has approved funding to mitigate water shortages and conserve basin water supplies and has enacted new authorities to combat drought and its effects on basin water users (i.e., the DCPs and other related efforts).", "document_type": "crs"}
{"report": "Congress has long deliberated on drinking water quality and infrastructure, which have been brought to the forefront of national attention by several events. Such events include the detection of elevated lead levels in tap water in Flint, MI, and other cities; hurricanes and other natural disasters that damaged or destroyed community drinking water infrastructure; and local source water contamination events (e.g., chemical spills and algal blooms). Representatives of state drinking water agencies, private sector engineers, and others report that much of the nation's drinking water infrastructure is deteriorating, threatening public health, and increasing operations and maintenance costs. In 2012, the American Water Works Association (AWWA) reported that much of the drinking water infrastructure (more than 1 million miles of buried pipe) was constructed in the 19 th and 20 th centuries and is nearing the end of its useful life. While disagreement exists over the scope and costs of improvement and replacements, estimates of the funding needs are substantial. In March 2018, the U.S. Environmental Protection Agency (EPA) issued its sixth Drinking Water Infrastructure Needs Survey and Assessment. In this survey, EPA estimated that public water systems would need to invest $472.60 billion for drinking water capital improvements over the next 20 years to achieve compliance and ensure the provision of safe drinking water. Although all projects identified in the needs survey would promote health objectives, EPA reported that 12% of the 20-year estimated need was directly attributed to statutory compliance. The majority (88%) of needs are for ongoing investments, such as repair of aging drinking water infrastructure. In 2012, AWWA conducted a broader drinking water infrastructure survey that reported that the costs to replace aging drinking water infrastructure and expand water service to growing populations will increase to more than $1 trillion over the next 25 years. Communities nationwide may face financial challenges as they manage the need to repair or replace aging drinking water infrastructure. As of early 2019, EPA's database indicated that some 50,000 public water systems in the United States regularly serve 25 or more of the same individuals. About 80% of these community water systems are relatively small, serving 3,300 or fewer people. These small systems have a narrow rate base from which to finance drinking water infrastructure improvements. In addition, older cities may face declining populations and declining utility revenues from which utilities can finance drinking water infrastructure repairs. In 2012, AWWA estimated that the costs to address aging drinking water infrastructure may as much as triple household water bills. Due to these financing concerns, communities may be challenged to protect water supplies, respond to contamination incidents, and afford projects to repair or replace aging drinking water infrastructure. Congress deliberated on several of these drinking water infrastructure issues while developing America's Water Infrastructure Act of 2018 (AWIA; P.L. 115-270 ), enacted on October 23, 2018. Title I of the act, \"The Water Resource Development Act of 2018,\" authorizes a wide variety of water resource and infrastructure policies, programs, and projects for the U.S. Army Corps of Engineers (USACE). Water Resource Development Act bills are often considered on a biennial schedule and have primarily addressed USACE projects. Title III of AWIA primarily addresses hydropower activities of the Federal Energy Regulatory Commission. Title II and IV of the act include provisions that address EPA water infrastructure programs and other authorities. This report analyzes the drinking water provisions of Title II and IV rather than providing a comprehensive summary of AWIA. Title II constitutes the most comprehensive reauthorization of the Safe Drinking Water Act (SDWA) since 1996. It amends SDWA to promote compliance with SDWA requirements, reauthorize appropriations for the Drinking Water State Revolving Fund (DWSRF) program, expand program eligibilities, increase emphasis on assisting disadvantaged communities, make SDWA compliance more affordable, and improve consumer confidence in public water supplies. Title II also authorizes new grant programs to reduce lead contamination in school drinking water, assist small and disadvantaged communities, and develop public water system resilience, among other purposes. Title IV addresses several other water quality and infrastructure issues by authorizing and revising activities and programs for EPA, the Bureau of Reclamation within the Department of the Interior, and other federal agencies. Title IV of AWIA extends, authorizes, and amends drinking-water-related activities and provisions administered by EPA. Specifically, these provisions authorize a water efficiency program and activities and revise the Water Infrastructure Finance Innovation Act (WIFIA) program, which provides credit assistance for water infrastructure projects. Title IV of AWIA also includes several amendments to the Clean Water Act to address stormwater by expanding a municipal sewer overflow grant programs to include stormwater management projects, reauthorizing appropriations for said municipal sewer overflow grant program, and directing EPA to establish a task force for stormwater management. The first section of this report provides select legislative background on AWIA. The second section describes the reauthorizations, revisions, and additions to SDWA. The third section discusses a provision in AWIA that addresses requirements that apply to federal financial assistance for drinking water improvements. The fourth section describes a provision in AWIA that addresses assistance for drinking water repairs in disaster areas. The fifth section includes the revisions in AWIA to federal water infrastructure financial assistance programs. The final section provides a discussion of the provisions of AWIA that address water efficiency. In addition, the appendices contain tables of plans, reports, and regulations required by AWIA; cross-references of the AWIA provisions, provisions in SDWA, and the U.S. Code citations; and summaries of the other EPA-related provisions of AWIA that are not discussed in this report, such as the stormwater provisions in Title IV. Drinking water infrastructure and related topics received congressional attention during the 115 th Congress. AWIA combines provisions from several bills that the 115 th Congress considered. Numerous bills were introduced to amend SDWA to address drinking water regulation and infrastructures issues, with particular focus on the technical, managerial, and financial challenges facing small and disadvantaged communities. AWIA Title II, entitled Drinking Water System Improvement, broadly parallels the Drinking Water System Improvement Act of 2017 ( H.R. 3387 ; H.Rept. 115-380 ). This SDWA reauthorization bill would have authorized activities and revised existing law to improve water systems' technical, managerial, financial capacity, and consumer confidence and facilitate communities' access to financial assistance for drinking water infrastructure improvements. In addition, this bill would have reauthorized appropriations for a key drinking water infrastructure financial assistance program and revised that program to help communities access assistance. Congress also considered the USACE-focused Water Resources Development Act of 2018 ( H.R. 8 ) in the House and, in the Senate, America's Water Infrastructure Act ( S. 2800 ), a broader water resources infrastructure bill that included revisions to water infrastructure programs administered by EPA. Both bills contained provisions that would have authorized USACE projects and studies for water resource development, including flood control, navigation improvements, and aquatic ecosystem restoration activities. The House incorporated selected provisions of H.R. 3387 , H.R. 8 , and S. 2800 into S. 3021 . S. 3021 , as amended and renamed, passed the House on September 13, 2018. The Senate agreed to the House amendments to S. 3021 and passed the bill on October 10, 2018. The President signed the bill on October 23, 2018, and it became P.L. 115-270 . Table 1 identifies the amounts authorized to be appropriated in the drinking-water-related provisions of AWIA. For a summary of deadlines for reports, regulations, and other activities related to drinking water as provided for in AWIA, see Appendix A . Several provisions of AWIA Title II, \"Drinking Water System Improvement,\" amend SDWA to revise existing drinking water programs, reauthorize appropriations, and establish new drinking water infrastructure grant programs. SDWA authorizes the regulation of contaminants in public water systems. Enacted in 1974, the act was last broadly amended in 1996. The act is implemented through programs that (1) establish national primary drinking water regulations and monitoring and reporting requirements for contaminants present in water delivered by public water systems, (2) promote water system compliance through technical and financial assistance and capacity development programs, and (3) address public water systems' preparedness for emergencies. The act established a federal-state partnership in which states, tribes, and territories may be delegated primary implementation and enforcement authority (i.e., primacy) for the drinking water program. One key component of SDWA is the requirement that EPA establish national primary drinking water regulations for contaminants that may adversely affect human health and are likely to be present in public water supplies. EPA has issued regulations for more than 90 contaminants. These include numerical standards or treatment techniques for drinking water disinfectants and their byproducts, microorganisms, radionuclides, organic chemicals, and inorganic chemicals. The SDWA Amendments of 1996 ( P.L. 104-182 ) reauthorized appropriations for most SDWA programs through FY2003. Although the authority has expired for most appropriations, Congress has continued to appropriate funds for the ongoing SDWA programs. Even though the authorization of appropriations may expire, program authority (i.e., an agency's \"enabling\" authority) does not expire unless there is a \"sunset\" date for that authority or if Congress repeals it through subsequent laws. Authorized in 1996, the DWSRF program provides federal financial assistance to communities to finance drinking water infrastructure improvements. SDWA Section 1452 authorizes EPA to make annual grants to states to capitalize their state revolving loan fund. The statute requires states to provide a 20% match. States may use DWSRF financing for public water system projects needed to comply with federal drinking water standards and address risks to human health. The primary type of DWSRF financial assistance are low interest rate loans. SDWA Section 1452 authorizes states to provide additional subsidization (including forgiveness of principal) to disadvantaged communities. The federal capitalization grants together with state funds (e.g., state match, loan repayments, leveraged bonds, and other state sources) are intended to build a sustainable source of drinking water infrastructure funding for the state. The authorization of appropriation for DWSRF expired in FY2003. Congress has continued to provide funds for the DWSRF program through annual appropriations. From FY1997 through FY2018, Congress appropriated over $23.33 billion for the DWSRF program. The appropriation for DWSRF program generally ranged between $820.0 million in FY2000 and $1.39 billion in FY2010. Table 2 includes historical appropriations for the DWSRF program. AWIA makes the most substantial revisions to the DWSRF provisions of SDWA since the program was authorized in 1996. These revisions expand the eligible uses of DWSRF financial assistance, provide states with additional flexibility to administer the DWSRF program, and include provisions intended to make DWSRF assistance more accessible to public water systems. AWIA Section 2015(a) amends SDWA to expressly state that DWSRF funds can be used for projects to replace or rehabilitate aging treatment, storage, or distribution systems. Under EPA guidance, these replacement and rehabilitation projects have been eligible for financial assistance from the DWSRF if needed to protect public health. According to EPA's needs survey, this category of projects accounts for 66.1% of the estimated drinking water infrastructure need. Prior to AWIA, these activities were not previously explicitly identified in statute. Section 2015 also revises existing DWSRF provisions that address financial assistance for disadvantaged communities. These amendments increase the portion of a state's capitalization grant that states may dedicate to additional subsidization and extend the amortization period for loans made to disadvantaged communities. Before AWIA, states could use 30% of their annual capitalization grants to subsidize loans for disadvantaged communities. Section 2015(c) of AWIA increases that proportion to 35% while conditionally requiring states to use at least 6% of their capitalization grant for these subsidies. The section also amends the SDWA DWSRF provisions to extend the amortization period for loans made to disadvantaged communities from 30 to 40 years. Section 2015(d) of AWIA also extends the repayment and amortization period for all projects financed by the DWSRF. Previously, SDWA required DWSRF financing recipients to pay the initial principal and interest payments within one year of project completion. This amendment extends the date of that initial payment to 18 months after project completion. This section also authorizes the extension of the amortization period for projects that receive DWSRF assistance from 20 to 30 years. Section 2015(e) requires EPA to evaluate and include the cost to replace lead service lines in the drinking water infrastructure needs survey, which EPA completes every four years. EPA uses the needs survey to allot the DWSRF appropriation among the states. In conducting the needs survey, EPA has not previously requested that public water systems report the cost to replace these lines. AWIA specifies that the cost to replace lead lines must be included in the needs survey (to the extent practicable), which may potentially affect some states' allotments of DWSRF capitalization grants. Section 2015(g) of AWIA requires EPA to gather specified information on DWSRF administration from state drinking water administrators and report to Congress on best practices for implementing the DWSRF to facilitate the application process and to improve DWSRF financial management and sustainability. In 1996, Congress added source water assessment provisions to SDWA to encourage protection of drinking water sources. Section 1453 required states to develop source water assessment programs that delineate areas from which public water systems receive water and identify the origins of regulated contaminants to determine threats to water systems. States were authorized to fund these activities from 10% of their DWSRF capitalization grant for FY1996 and FY1997. Section 2015(f) of AWIA removes this fiscal year limitation and accordingly authorizes states to use a portion of their capitalization grant to fund these source water assessments or update an existing source water assessment. The 1996 SDWA amendments required states to conduct source water assessments as a condition of adopting modified monitoring requirements. However, the 1996 amendments did not authorize states to fund implementation of source water protection plans from their DWSRF capitalization grants. AWIA Section 2002 authorizes states to fund implementation of surface drinking water sources protection efforts and activities from the 10% set-aside of a state's annual DWSRF capitalization grant. Source water protection is also addressed in the \" Protecting Source Water \" section of this report. Recipients of DWSRF financial assistance must comply with cross-cutting requirements, which are other federal laws or executive orders that apply to certain federal financial assistance programs. Examples of federal cross-cutting requirements include environmental laws such as the National Environmental Policy Act and Endangered Species Act, executive orders on equal employment opportunities, and the National Historic Preservation Act. AWIA specifies two such requirements for DWSRF-financed projects: the use of American iron and steel and compliance with Davis-Bacon prevailing wage law. Section 2022 of AWIA renews the requirement to use American iron and steel products in DWSRF-financed projects for FY2019-FY2023. Previously, Congress has required American iron and steel for DWSRF-financed projects for specified fiscal years. The Water Infrastructure Innovation for the Nation (WIIN) Act ( P.L. 114-322 ) amended SDWA to require the use of American iron and steel for FY2017. In the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), Congress provided supplemental appropriations for the DWSRF and first required the use of \"Buy American\" iron and steel in projects financed from that supplemental appropriation. Since FY2014, Congress has regularly required the use of American iron and steel for DWSRF-financed projects through appropriations acts. AWIA Section 2015(b) amends SDWA to add Davis-Bacon prevailing wage requirements for projects that receive DWSRF assistance. Since 2009, Congress has often applied Davis-Bacon prevailing wage requirements to funds for DWSRF-financed projects through annual appropriations acts. AWIA Section 2023 amends SDWA to reauthorize DWSRF capitalization grants for FY2019-FY2021. The authorization of appropriations for the DWSRF are approximately $1.17 billion in FY2019, $1.30 billion in FY2020, and $1.95 billion in FY2021. Appropriations for the DWSRF capitalization grants were $863.2 million for each of FY2016 and FY2017 and $1.16 billion for FY2018. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), included $1.16 billion for DWSRF capitalization grants in FY2019. For a summary of historical DWSRF appropriation levels, see Table 2 . AWIA addresses several drinking water infrastructure issues by revising an existing grant program and authorizing additional grant programs. These grant programs are intended to (1) reduce lead in school drinking water, (2) support state responses to contamination or threats of contamination of drinking water supplies that may pose substantial endangerment to underserved communities, (3) assist disadvantaged communities in improving drinking water infrastructure resilience to natural hazards, and (4) improve drinking water systems serving Indian tribes in specified areas. Section 2006 of AWIA revises an existing grant program to address the sources of lead contamination in drinking water at schools. The 2016 WIIN Act repealed and replaced SDWA Section 1464(d) to direct EPA to establish the Voluntary School and Child Care Program Lead Testing Grant Program. This grant program provides funds to test for lead in drinking water at schools and child care programs through local education agencies (LEAs). The WIIN act authorized annual appropriations of $20.0 million for FY2017 through FY2021 for this grant program. The 115 th Congress appropriated $20.0 million for this grant program for FY2018 in the Consolidated Appropriations Act, 2018 (Section 430 of Title IV of P.L. 115-141 ). Section 2006(a) of AWIA authorizes a $5.0 million increase (from $20.0 million to $25.0 million) in the amount authorized to be appropriated for the existing Voluntary School and Child Care Program Lead Testing Grant Program in FY2020 and FY2021. The Consolidated Appropriations Act, 2019, included a FY2019 appropriation of $25 million to support this grant program. Section 2006 also amends SDWA Section 1464(d) and directs EPA to give grant priority to LEAs in low-income areas. This provision requires EPA to provide technical assistance to lead testing grant recipients. The technical assistance may help identify opportunities to remediate lead contamination if found during the lead testing. Specifically, Section 2006(a) states that the technical assistance may include identification of (1) the source of lead contamination at the school or child care program, (2) state and federal grant programs to eliminate the source of lead contamination, (3) financing options for eliminating the source of lead contamination, and (4) nonprofit and other organizations to help the grantee eliminate the source of lead contamination. Section 2006(b) of AWIA establishes the Drinking Water Fountain Replacement for Schools program. This section requires EPA to implement a drinking water fountain replacement grant program for water fountains manufactured prior to 1988. EPA must prioritize grants based on LEAs' economic needs. This section authorizes the annual appropriation of $5.0 million for this grant program for FY2019-FY2021. AWIA Section 2005 amends SDWA Section 1459A to authorize EPA to establish the Drinking Water System Infrastructure Resilience and Sustainability Program, which is a new grant program for small and disadvantaged public water systems. This section authorizes EPA to award grant funds to eligible public water systems for projects that increase resilience to natural hazards, including hydrologic changes. Eligible projects include those that increase water use efficiency, enhance water supply through watershed management or desalination, and increase energy efficiency in the conveyance or treatment of drinking water. This section authorizes appropriations of $4.0 million for each of FY2019 and FY2020 for this program. Section 2005 also revises SDWA Section 1459A to add an EPA-administered grant program to help states assist underserved communities to respond to imminent and substantial contamination. This section authorizes EPA to make grants to requesting states to assist communities when contaminants are present in and pose an imminent and substantial threat to their public water system or underground drinking water sources and when EPA or a court of competent jurisdiction determines that the appropriate authorities have not responded in a sufficient manner. This section also authorizes EPA to recover funds from grant recipients who are found to have caused or contributed to the contamination addressed by the grant program. SDWA Section 1459A authorizes appropriations of $60.0 million to support this and other grant programs for small and disadvantaged communities authorized therein. Section 2001 of AWIA authorizes a new grant program at EPA for public water systems that serve federally recognized Indian tribes. Section 2001 directs EPA—subject to appropriations—to establish a drinking water infrastructure grant program for 20 eligible projects (10 projects in the Upper Missouri River Basin and 10 projects in the Upper Rio Grande River Basin) to improve water quality, water pressure, or water services. One of the 10 projects in the Upper Missouri River Basin must serve two or more tribes. To be eligible, the public water system must either be on a reservation or serve a federally recognized Indian tribe. Section 2001 authorizes an appropriation $20.0 million annually from FY2019 to FY2022 to support this program. SDWA authorizes EPA to make grants to primacy states and territories to implement the public water system supervision program (PWSS). Although the authorization of appropriation for PWSS grants expired in FY2003, Congress has continued to appropriate funds for this program. While the appropriation amount has changed over time, since FY2014, Congress appropriated about $101 million annually for grants to states to support the PWSS program. States also use set-asides from the DWSRF capitalization grants and other state resources (e.g., state general funds and/or state-established fee programs) to support the PWSS program. In 2013, state drinking water administrators estimated that the states would require an additional $308.0 million per year to support the PWSS program. They attribute this funding gap to increased workload for water system supervision for an increased number of regulated contaminants. Section 2014 of AWIA reauthorizes appropriations for the PWSS program for FY2020 and FY2021, increasing the authorized appropriation from $100.0 million to $125.0 million for these two fiscal years. Several provisions of AWIA amend SDWA to address consumer access to compliance data and the transparency of drinking water quality information. These provisions seek to increase the understandability of drinking water quality information provided to consumers, notify consumers more frequently about their drinking water quality, and expand existing monitoring requirements to gather additional data on occurrence of unregulated contaminants. Prior to AWIA, SDWA required public water systems to provide their customers with an annual consumer confidence report on their drinking water quality and SDWA compliance. Section 1414(c) of SDWA required public water system operators in the consumer confidence reports to include the level of regulated contaminants and their associated maximum contaminant level or action level. Section 2008 of AWIA revises the requirements for data included in the consumer confidence report. AWIA directs public water system operators to also report exceedances resulting in a treatment technique, other occurrences that required corrective action, corrosion control efforts, and any violations of SDWA that occurred during the monitoring period. The collection of this additional information expands the information captured in the consumer confidence report to include lead exceedances and associated lead treatment techniques. AWIA Section 2008 also increases the frequency that operators of large public water systems (serving more than 10,000 consumers) produce and distribute consumer confidence reports from annually to biannually. This section also expressly authorizes public water system operators to transmit the consumer confidence report electronically. Section 2011 of AWIA requires EPA to develop a strategic plan to improve the accuracy and availability of monitoring data shared between public water systems, the primacy states, and EPA. The strategic plan must identify barriers to (1) ensuring the accuracy of reported data, (2) submitting data electronically, and (3) retrieving reported data. The plan must also recommend economically feasible and practical ways to transmit monitoring data. The 1996 amendments authorized a monitoring program for unregulated contaminants in public water supplies. The act requires EPA, every five years, to promulgate a rule requiring certain public water systems to monitor for up to 30 unregulated contaminants. Unregulated Contaminant Monitoring Rules (UCMRs) are used to gather national occurrence data to inform EPA's review of contaminants that may warrant regulation. For example, a 2012 UCMR (UCMR 3) required systems to test their water for the presence of six poly- and perfluoroalkyl substances, including perfluorooctanoic acid and perfluorooctanesulfonic acid. Prior to enactment of AWIA, SDWA required monitoring by all large public water systems (serving more than 10,000 consumers) and a representative sample of small public water systems (serving 10,000 consumers or fewer). For the 800 small public water systems sampled in UCMR 3, EPA funded the monitoring costs. AWIA Section 2021(b) reauthorized $10.0 million to be appropriated for each year for FY2019-FY2021 for this program. The authority to appropriate funds for the unregulated contaminant monitoring program expired in FY2003, although Congress has continued to appropriate funds for the program. Section 2021(a) of AWIA expands unregulated contaminant monitoring requirements to include public water systems serving 3,300-10,000 individuals—subject to the availability of appropriations for this purpose and lab capacity. This requirement enters into effect three years after the enactment date of AWIA (i.e., October 23, 2021). This section authorizes $15.0 million to be appropriated for each year from FY2019 through FY2021 to support the expanded monitoring. Requiring monitoring by a larger number of public water systems for unregulated contaminants is intended to provide a more comprehensive assessment of the occurrence of unregulated contaminants in public water supplies. As of December 2018, EPA's database indicated that more than 5,000 public water systems serve from 3,301 to 10,000 individuals. This subset of systems serves more than 30 million individuals in total. The monitoring by these additional systems would provide more occurrence data to inform EPA's determination of whether a particular contaminant warrants a nationwide regulation. The 1996 SDWA amendments authorized programs to assist public water systems with SDWA compliance. Technical assistance, operator certification, and other programs seek to improve the technical, managerial, and financial capacity of public water systems to achieve and maintain compliance with drinking water regulations. Other provisions authorize incentives for SDWA compliance by encouraging consolidation of public water systems. AWIA authorizes new programs and revises authorities to further support and enhance public water system capacity to comply with SDWA. AWIA Section 2012 amends SDWA capacity development provisions (SDWA §1420). This provision directs states to revise their capacity development strategies to include a description of how they will encourage public water systems to develop asset management plans. Asset management is a budgetary and planning process that public water systems may undertake to evaluate their capital assets and plan the maintenance of their infrastructure (e.g., pumps, motors, and piping) to ensure that the water system can fund the costs. Some urban water utilities and other stakeholders argue that asset management can help lower the overall operation and maintenance costs, as it may lead to fewer infrastructure failure incidents (e.g., pipe ruptures). Asset management is not statutorily required. EPA has issued educational materials and provided training for water systems that choose to develop an asset management plan. EPA and the U.S. Department of Agriculture (USDA) have also provided support to assist small water utilities with asset management. This section further amends SDWA Section 1420 to require states to demonstrate their progress in encouraging public water systems to develop asset management plans. Every five years, EPA must review and update (if necessary) the asset management materials that EPA makes available. According to the House Energy and Commerce Committee Report ( H.Rept. 115-380 ), such asset management technical assistance will improve the economic sustainability of public water systems. Some public water systems may lack the technical, managerial, and financial capacity to meet regulatory standards, fund drinking water repairs or upgrades, identify or access source water, and manage budgetary constraints. Among other strategies, such systems may address these challenges by consolidating with or transferring ownership to another water system where feasible. EPA states that this type of restructuring can be effective in returning noncompliant public water systems to SDWA compliance or building technical, managerial, and financial capacity. The SDWA amendments of 1996 amended SDWA enforcement provisions to authorize limited enforcement relief as an incentive for noncompliant public water systems to consolidate with other systems. If a system faces a particular compliance violation, SDWA Section 1414(h) authorizes public water systems to submit a plan to primacy states or EPA for the physical consolidation or the consolidation of management and administrative functions with another public water system or the transfer of ownership of a public water system. If the plan to consolidate or transfer ownership is approved by a primacy state or EPA, enforcement action against that public water system for the specified violation would not be taken for two years. Section 2009 of AWIA provides that, in addition to the physical or management consolidation or transfer of ownership, a public water system may also submit a plan to execute a contractual agreement with another public water system to manage the noncompliant public water system. Section 2010 of AWIA authorizes primacy states or EPA to require, under certain circumstances, public water systems to assess options for consolidation or transfer of ownership. This section specifies that the required assessments be proportionate to the size of public water system. Therefore, a small public water system would complete an assessment that is less complex than a larger system. Any public water systems that consolidate, as a result of an assessment, are eligible for financial assistance from the DWSRF. This section also provides limited liability protection for the owner or operator who has a state-approved consolidation plan. In the consolidation plan, the owner or operator of public water system must identify any potential or existing liabilities from specific violations and their available assets. This section limits the liability of a consolidating system to the amount of its assets and to the liabilities identified in the plan. This section also requires EPA to promulgate regulations to implement these provisions. Section 2003 of AWIA defines intractable water system as a public water system serving fewer than 1,000 individuals that the owner or operator effectively abandoned for a range of reasons, including financial default, significant noncompliance with SDWA, or failure to maintain facilities. Section 2003 directs EPA, in collaboration with the USDA and the U.S. Department of Health and Human Services, to conduct a study on these systems to gather more information about intractable water systems and barriers to deliver potable water. Section 4304 of AWIA seeks to address concerns about the rate for replacing workers by establishing a water-specific workforce development competitive grant program. While estimates vary, the increasing rate of retirement among water sector employees has generated interest in water sector workforce development. A 2010 report from AWWA and the Water Research Foundation estimated that 30%-50% of water sector employees will retire over the following 10 years. Similarly, the Department of Labor's Bureau of Labor Statistics projected that annually 8.2% of water operators will need to be replaced between 2016 and 2026. In 2018, the U.S. Government Accountability Office (GAO) also concluded that EPA could take additional steps to address water sector workforce development and succession planning. Section 4304 directs EPA, in consultation with USDA, to establish the Innovative Water Infrastructure Workforce Development program. It authorizes EPA to award grants to institutions of higher education, nonprofit organizations, or labor organizations for a wide range of activities including bridge programs for water utilities, educational programs to increase public awareness of career opportunities in the water sector, and leadership development. This section authorizes appropriations of $1.0 million annually for FY2019 and FY2020 to support this grant program. As noted in the \" Source Water Assessment and Protection \" section of this report, AWIA makes other amendments to the DWSRF provisions related to source water. It authorizes the use of DWSRF set-asides for source water assessment and protection activities. In addition, AWIA reauthorizes appropriations to a source water program and revises certain notification requirements to better enable public water systems to know of and respond to contamination. Section 2016 of AWIA reauthorizes $5.0 million in annual appropriations for FY2020 and FY2021 to support the source water protection partnership petition program (SDWA §1454). SDWA Section 1454 authorized states to establish this program, in which public water system operators and the community members request state assistance to form a voluntary partnership to prevent source water degradation. The authorization of appropriation for this program had expired in FY2003. AWIA Section 2018 amends the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA; P.L. 99-499 ) to enhance awareness among community water system operators of a hazardous substance or an extremely hazardous substance released into the drinking water source of the water system and a broader group of hazardous chemicals stored at facilities located near their water system to help facilitate emergency preparedness in the event of a release. EPCRA Section 312 is intended to enhance emergency preparedness in an event of a chemical release. This provision requires a facility operator or owner to report hazardous chemicals present at their site in excess of certain thresholds to the State Emergency Response Commission (SERC), relevant Local Emergency Planning Committee (LEPC), and the local fire department with jurisdiction over the facility. Section 312(e) authorizes any person to request specified information about chemicals stored at a specified facility from that SERC or LEPC. Section 304 of EPCRA addresses notification when a release occurs. This provision requires a facility operator or owner to notify the SERC and the relevant LEPC of releases of a smaller subset of hazardous chemicals, specifically hazardous substances and other extremely hazardous substances. EPCRA Section 325 authorizes EPA to fine facility owners or operators if they do not comply with these emergency planning and release notification requirements, in addition to other requirements in EPCRA. Section 2018 of AWIA amends EPCRA Section 304 to require the SERC to notify the state drinking water agency of releases of hazardous substances and other extremely hazardous substances. This provision requires the state drinking water agency in turn to forward the notice to community water systems with source waters that are affected by the release. In states where EPA retains SDWA primacy, AWIA Section 2018 requires the SERC to provide notice to community water systems with source waters affected by the release of hazardous substances and extremely hazardous substances as defined by EPCRA. The EPCRA provisions added by AWIA would not change a facility owner or operator's reporting requirements, and EPCRA enforcement provisions apply only to facility owners or operators. In addition, Section 2018 amends EPCRA Section 312 to expressly authorize community water systems operators to request information on hazardous chemicals at facilities from SERC or LEPC. Access to this information existed in EPCRA prior to this amendment, but AWIA Section 2018 amends EPCRA to expressly include community water systems. AWIA Section 2013 amends SDWA to address the resilience and sustainability of water systems to both natural and intentional threats. This provision replaces SDWA Section 1433, which was added by the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 ; Title IV). Prior to AWIA, SDWA Section 1433 required water systems to assess their vulnerabilities to terrorist or other intentional acts and, based on the assessment, prepare emergency response plans. The statute required public water system operators to certify their assessments by a specified deadline but did not require public water systems to update their risk assessments or emergency response plans. Extreme weather events, such as hurricanes and wildfires, may require an emergency response to repair drinking water quality and supply. Accordingly, some stakeholders have testified that drinking water systems should address the risks of weather events and other natural hazards in their assessment and planning deliberations. EPA, with water partners, has developed tools and provided training and technical assistance to water utilities to increase their resilience to extreme weather events. AWIA Section 2013 expands the risk types addressed in a public water system's assessment to include risks of natural hazards and malevolent acts. In addition, community water systems are required to evaluate the resilience of their current physical infrastructure and their management practices, including financial capacity to respond to these risks. Based on the assessment, public water systems must also develop emergency response plans that address the risks and resilience issues that systems may face. Public water systems serving 3,300 or more persons must review their assessments every five years and update them if needed. This provision requires public water systems to coordinate with the relevant LEPC when preparing or revising a risk assessment or emergency response plan. The assessments and response plans are voluntary for public water systems serving fewer than 3,300 people. These public water systems must certify their assessments and submit the certifications to EPA by deadlines specific to the communities' size. To facilitate compliance with this section, Section 2013 authorized public water systems to use technical standards developed by third-party organizations to structure the assessment and plans. Federal agencies were first authorized to use technical standards developed by third-party organizations, when appropriate, in 1995. Some argue that this alternative route to compliance may help minimize federal administrative burdens while recognizing the efforts of third-party organizations in developing assessment and planning standards. Section 2013 authorized $25.0 million to be appropriated each year for FY2020 and FY2021 for EPA to make grants to public water systems to plan or implement projects to address their system's resiliency. AWIA Section 2013 requires EPA to issue guidance and provide technical assistance on conducting assessments and preparing emergency response plans for public water systems serving fewer than 3,300 individuals. Section 2013 authorizes appropriations of $10.0 million for grants to public water systems serving fewer than 3,300 people and grants to nonprofit organizations to support these activities. Section 2017 of AWIA adds SDWA Section 1459D to require EPA to review approaches or technologies that help ensure physical integrity of drinking water systems, address contamination, develop alternative water sources, and facilitate source water protection. In conducting this review, EPA is required to evaluate equipment and technologies for their cost, efficacy, and availability. The review of technologies explicitly includes approaches related to distribution systems (e.g., leak prevention, corrosion control, metering), intelligent systems that address the distribution systems, point-of-entry or point-of-use devices, real-time contaminant monitoring, and non-traditional sources of water. This section authorizes appropriation of $10.0 million in FY2019 for this purpose. AWIA Section 2019 requires GAO to report to Congress on any duplicative or substantially similar requirements of state and local environmental law to federal cross-cutting requirements. In 2015, GAO concluded that the existing federal financing mechanisms to rehabilitate or replace aging water infrastructure are complex and that small water systems lack the technical expertise to apply for federal financial assistance. Regarding federal cross-cutting requirements, GAO reported that water systems often face duplicative state requirements when applying for financial assistance for drinking water infrastructure. Representatives of public water systems have testified that compliance with federal cross-cutting requirements is burdensome, as DWSRF projects must often comply with similar state and local requirements. Section 2020 of AWIA authorizes the appropriation of $100.0 million, available for 24 months, for grants to certain public water systems in specified disaster areas. Section 2020 of AWIA allows additional subsidization (e.g., grants, forgiveness of loan principal, negative interest rate loans, or zero-interest rate loans) for eligible public water systems regardless of whether they meet the statutory designation of disadvantaged. Section 2020(a)(3) defines eligible public water system as a water system that (1) serves an area for which the President declared a major disaster (after January 1, 2017) and provided disaster assistance or (2) is capable of extending drinking water services to underserved areas. Projects eligible for these subsidies are those that restore or increase compliance with national drinking water standards, including expanding drinking water service to underserved areas. To access this subsidization, this section requires states to submit a supplemental intended use plan with relevant information on the public water system project, the intended use of the funds, estimated cost, and projected start date. This section also exempts Puerto Rico from the 20% state-match for any funds received under this section, which is generally required by SDWA Section 1452(e). The Water Resources Reform and Development Act of 2014 ( P.L. 113-121 ) included WIFIA, which authorized both EPA and USACE to administer a five-year pilot program to help finance a broad range of water infrastructure projects. The EPA-administered WIFIA program provides credit assistance (e.g., direct loans) to eligible entities for different types of drinking water and wastewater infrastructure projects (e.g., desalination or water recharge). Eligible projects for EPA-administered assistance from WIFIA include projects that are eligible for the Clean Water State Revolving Fund (CWSRF) and the DWSRF. However unlike the DWSRF, WIFIA-financed projects generally need not be associated with SDWA compliance or public health goals. Qualifying projects for WIFIA assistance must generally cost $20.0 million or more. In an effort to encourage nonfederal and private sector financing, WIFIA assistance generally cannot exceed 49% of project costs. In FY2017, Congress appropriated $25.0 million to cover EPA's subsidy costs of WIFIA loans and $5.0 million for administrative purposes. For FY2018, Congress provided $63.0 million for the EPA-administered WIFIA program in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). Of this amount, Congress directed $55.0 million for WIFIA projects, which EPA estimated would be leveraged into $5.50 billion of credit assistance. EPA began issuing loans in 2018. The Consolidated Appropriations Act, 2019, included $60.0 million to cover EPA's subsidy costs of WIFIA loans and $8.0 million to support program administration. These appropriations are available until expended. Section 4201 of AWIA amends WIFIA provisions to remove the pilot designation from the program, reauthorizes appropriations, and revises provisions related to program administration. Section 4201 authorizes appropriations of $50.0 million each year for FY2020 and FY2021 for EPA. This section increases the amount of appropriations that EPA can use for administrative purposes, including technical assistance for projects, from $2.2 million to $5 million. AWIA prohibits repayment of WIFIA assistance from the federal grants that fund the CWSRF and the DWSRF. Several revisions to the WIFIA program address state finance authorities' use of WIFIA financial assistance. AWIA authorizes an additional $5 million to be appropriated (under certain conditions, discussed below) for WIFIA to provide credit assistance to state finance authorities to support combined projects eligible for assistance from the CWSRF and DWSRF. When this additional appropriation is made, Section 4201(b) of AWIA authorizes state financing authorities to use WIFIA financial assistance to cover 100% of project costs. As discussed earlier, WIFIA financing generally supports up to 49% of project costs. The additional $5.0 million appropriation is available only to the extent that both the CWSRF and the DWSRF are funded at FY2018 levels or 105% or more of the previous year's funding, whichever is greater, and when EPA receives at least $50.0 million in WIFIA appropriations. Section 4201(b)(2) of AWIA clarifies that state finance authorities cannot pass WIFIA application fees on to parties that utilize the credit assistance. Prior to AWIA, WIFIA projects required two letters of credit from rating agencies. Section 4201(a)(2) of AWIA authorizes projects from state finance authorities to supply one letter of credit. In addition, AWIA requires EPA to review and approve or provide guidance on WIFIA projects submitted by state finance authorities within 180 days of submittal. AWIA Section 4201authorizes EPA to enter into agreements with other relevant agencies authorized to provide WIFIA assistance to allow EPA to administer the WIFIA program for another authorized agency. Relatedly, Section 4301 of AWIA specifically directs EPA and the commissioner of the Bureau of Reclamation to enter into such an agreement. Such agreements may help prevent the duplication of WIFIA-related administrative functions across federal agencies. AWIA also requires GAO to report to Congress within three years of enactment on all projects that receive WIFIA assistance. Initiated by EPA in 2006, WaterSense is a voluntary labeling program that identifies and promotes water-efficient products, buildings, and services. Prior to the enactment of AWIA, WaterSense was not explicitly authorized in law. It is similar to the Department of Energy's (DOE) EnergyStar voluntary labeling program to promote energy efficiency. Section 4306 of AWIA amends the Energy Policy Act of 2005 ( P.L. 109-58 ) to establish the WaterSense program at EPA. Section 4306 authorizes EPA to establish specifications that products and services must meet to earn a WaterSense label, some of which differ from the original program. AWIA stipulates that products and services earning the WaterSense label must reduce water use, decrease strain on water systems, conserve energy, and preserve water resources. Section 4306 requires EPA to set detailed performance criteria for water efficiency. Every six years, EPA must review the water efficiency criteria and update them as necessary. AWIA authorizes EPA to establish the WaterSense performance criteria based on technical specifications and testing protocols of relevant voluntary consensus standards organizations. It also requires EPA to consider reviewing and revising WaterSense performance criteria established prior to January 1, 2012, by December 31, 2019. Section 4306 establishes EPA's oversight responsibilities for the WaterSense program. These responsibilities include auditing the use of the WaterSense label, testing protocols, and managing the accreditation process for WaterSense certification bodies. This section directs EPA and DOE to coordinate to prevent duplicative or conflicting requirements in the WaterSense and EnergyStar programs. AWIA explicitly requires the inclusion of certain products and services in the WaterSense program. These include irrigation technologies and services, point-of-use water treatment devices, plumbing products, water reuse and recycling technologies, various landscaping and gardening products and services, whole house humidifiers, and water-efficient buildings. Section 2007 of AWIA directs EPA to administer a competitive grant program to accelerate the development of innovative water technology that addresses drinking water supply, quality, treatment or security. Among the selection criteria for grants, EPA must prioritize projects that provide additional drinking water supplies with minimal environmental impact. Eligible grant recipients include research institutions, regional water organizations, nonprofit organizations, and institutions of higher education, which can partner with private entities. The maximum single grant award for any one recipient is $5.0 million. Grant recipients may use these grants for developing, testing, or deploying water technologies or providing technical assistance to deploy existing innovative water technologies. EPA must submit a report to Congress that details advancements in water technology associated with this grant program. This section authorizes $10.0 million to be appropriated each year for FY2019 and FY2020 to support this grant program. With AWIA, the 115 th Congress passed an omnibus water infrastructure and project authorization bill that affects several federal agencies. The act includes the most comprehensive amendments to the Safe Drinking Water Act since 1996, with overarching themes involving drinking water infrastructure affordability and water system compliance capacity and sustainability. The amendments authorize new competitive grant programs and activities that are broadly intended to help communities afford drinking water infrastructure improvements needed to achieve compliance with federal drinking water standards and protect public health. Other new SDWA programs authorize grants for projects and activities that (1) improve drinking water system sustainability and resiliency, (2) develop water system capacity to respond to contamination or other events, and (3) address lead in school drinking water. AWIA's DWSRF provisions constitute the first major revision of the program since its establishment in 1996. As with the competitive grant programs, these revisions are intended to facilitate communities' access to DWSRF financial assistance. Among other purposes, AWIA's DWSRF revisions authorize the use of DWSRF funds for (1) source water protection activities, (2) providing additional financing flexibility for public water systems, (3) replacing and repairing aging infrastructure, and (4) increasing subsidies for disadvantaged communities. AWIA authorizes additional water infrastructure assistance with revisions to the WIFIA program. In addition to making the program permanent, AWIA authorizes an additional appropriation for WIFIA assistance under certain conditions. These revisions further authorize EPA to partner with Bureau of Reclamation and other relevant agencies to allow for implementation of WIFIA credit assistance for a broader range of eligible water infrastructure projects. Appendix A. Reports, Plans, and Regulations in AWIA ( P.L. 115-270 ) Appendix B. Cross Reference: AWIA, SDWA, and U.S. Code Sections Appendix C. Other EPA-Related Provisions of AWIA", "summary": "Congress has long deliberated on the condition of drinking water infrastructure and drinking water quality as well as the financial and technical challenges some public water systems face in ensuring the delivery of safe and adequate water supplies. Several events and circumstances—including source water contamination incidents; water infrastructure damage from natural disasters, such as hurricanes; detection of elevated lead levels in tap water in various cities and schools; and the nationwide need to repair or replace aging drinking water infrastructure—have increased national attention to these issues. America's Water Infrastructure Act of 2018 (AWIA; P.L. 115-270), enacted on October 23, 2018, contains provisions that seek to address these and other water infrastructure concerns. Overall, AWIA authorizes various water infrastructure projects and activities for several federal agencies. Title I of AWIA, \"Water Resources Development Act of 2018,\" authorizes water resource development activities for the U.S. Army Corps of Engineers (USACE). Title II of AWIA constitutes the most comprehensive amendments to the Safe Drinking Water Act (SDWA) since 1996. Title III primarily includes provisions that address hydropower-related activities of the Federal Energy Regulatory Commission. Among its provisions, Title IV amends U.S. Environmental Protection Agency (EPA)-administered water infrastructure programs and several Clean Water Act authorities. This report focuses on the drinking water provisions of Title II and Title IV of AWIA, which authorize appropriations for several drinking water and wastewater infrastructure programs for projects that promote compliance, address aging drinking water infrastructure and lead in school drinking water, and increase drinking water infrastructure resilience to natural hazards. Title II amends SDWA to help communities achieve SDWA compliance, revise the Drinking Water State Revolving Fund (DWSRF) program, reauthorize appropriations for the DWSRF program, and increase emphasis on assisting disadvantaged communities. Provisions in Title II also revise emergency notification and planning requirements; authorize the use of DWSRF funds for the assessment and protection of drinking water sources; identify options intended to develop public water systems' technical, managerial, and financial capacity; and improve consumer confidence in public drinking water supplies. Title II authorizes a supplemental DWSRF appropriation for disaster assistance for public water systems in certain areas under certain conditions. Other provisions authorize new grant programs to reduce lead contamination in school drinking water, improve drinking water infrastructure for specified Indian tribes, respond to contamination of small and disadvantaged communities' drinking water sources, and improve the sustainability and resilience of small and disadvantaged communities' drinking water systems. Title IV addresses several other water quality and infrastructure issues by authorizing and revising activities and programs for the EPA and other federal agencies. Title IV extends, authorizes, and amends drinking-water-related activities and programs administered by EPA. Specifically, these provisions authorize WaterSense, an EPA-initiated voluntary water efficiency labeling program, and revise the Water Instructure Finance and Innovation Act (WIFIA) financial assistance program. The WIFIA program provides credit assistance for water infrastructure projects. Other provisions authorize grant programs for innovative water technology and for water sector workforce development. Title IV also amends the Clean Water Act to expand a municipal sewer overflow grant program to include stormwater management projects, reauthorize appropriations for that program, and direct EPA to establish a task force for stormwater management. With AWIA, the 115th Congress passed an omnibus water infrastructure and project authorization bill that affects several federal agencies. The act includes several provisions related to drinking water, with overarching themes involving drinking water infrastructure affordability and water system compliance capacity and sustainability.", "document_type": "crs"}
{"report": "Including the first woman to serve in 1917, a total of 365 women have been elected or appointed to serve in the U.S. Congress. That first woman was Jeannette Rankin (R-MT), who was elected on November 9, 1916, to the 65 th Congress (1917-March 4, 1919). Table 1 details this service by women in the House, Senate, and both chambers. The 116 th Congress began with 131 women. Table 2 shows that women account for 23.7% of voting Members in the House and Senate (127 of 535); 24.2% of total Members in the House and Senate (131 of 541, including the Delegates and Resident Commissioner); 23.4% of voting Representatives in the House (102 of 435); 24.0% of total Members in the House (106 of 441, including the Delegates and Resident Commissioner); and 25.0% of the Senate. This report includes historical information, including the (1) number and percentage of women in Congress over time; (2) means of entry to Congress; (3) comparisons to international and state legislatures; (4) records for tenure; (5) firsts for women in Congress; (6) African American, Asian Pacific, Hispanic American, and American Indian women in Congress; and (7) women in leadership. It also provides a brief overview of research questions related to the role and impact of women in Congress. For additional biographical information—including the names, committee assignments, dates of service, listings by Congress and state, and (for Representatives) congressional districts of the women who have served in Congress—see CRS Report RL30261, Women in Congress, 1917-2019: Service Dates and Committee Assignments by Member, and Lists by State and Congress , by Jennifer E. Manning and Ida A. Brudnick. Since the 65 th Congress (1917-1918), the number of women serving in Congress generally increased incrementally, and on a few occasions, decreased. In an exception to these incremental changes, the elections in 1992, which came to be known popularly as the \"Year of the Woman,\" represented a jump in the number of women in Congress. As a result of this 1992 election, whereas the 102 nd Congress (1991-1992) concluded with 34 women, on the first day of the 103 rd Congress (1993-1994), the number of women in Congress increased 58.8%, to 54 women. More recently, the 115 th Congress concluded with 115 women, and on the first day of the 116 th Congress, the number of women in Congress increased 13.9%, to 131 women. Figure 1 shows the changes in the number of women serving in each Congress. For a table listing the total number of women who have served in each Congress, including information on turnover within a Congress, please see Table A-2 in the Appendix . Figure 2 shows division of men and women in Congress historically and in the 116 th Congress. As seen in Figure 3 , 49 states (all except Vermont), 4 territories (American Samoa, Guam, Puerto Rico, and the U.S. Virgin Islands), and the District of Columbia have been represented by a woman in Congress at some time since 1917. Four states (Alaska, Mississippi, North Dakota, and Vermont) have never elected a woman to the House. Eighteen states have never been represented by a female Senator. Fourteen states have been represented by one female Senator, 12 have sent two, and 6 states have sent three. Pursuant to Article I, Section 2, clause 4 of the U.S. Constitution, all Representatives enter office through election, even those who enter after a seat becomes open during a Congress. By contrast, the Seventeenth Amendment to the Constitution, which was ratified on April 8, 1913, gives state legislatures the option to empower governors to fill Senate vacancies by temporary appointment. The 56 women who have served in the Senate entered initially through three different routes: 34 entered through regularly scheduled elections, 17 were appointed to unexpired terms, and 5 were elected by special election. As Figure 4 shows, approximately 70% (39) of all women who have served in the Senate initially entered Senate service by winning an election (regular or special). Approximately 30% of women Senators entered the Senate initially through an appointment. Of the 17 women who entered by appointment, 10 served less than one year. Since the ratification of the Seventeenth Amendment to the Constitution in 1913, nine years prior to the first appointment of a woman to fill a Senate vacancy, 200 Senators have been appointed. Of these appointees, 91.5% (183) have been men, and 8.5% (17) were women. The current total percentage of voting female representation in Congress (23.7%) is slightly lower than averages of female representation in other countries. According to the Inter-Parliamentary Union (IPU), as of January 1, 2019, women represented 24.3% of national legislative seats (both houses) across the entire world. In the IPU database of worldwide female representation, the United States ties for 78 th worldwide for women in the lower chamber. The Nordic countries (Sweden, Iceland, Finland, Denmark, and Norway) lead the world regionally with 42.3% female representation in national legislatures. The percentage of women in Congress also is lower than the percentage of women holding seats in state legislatures. According to the Center for American Women and Politics, in 2019, \"2,117, or 28.7% of the 7,383 state legislators in the United States are women. Women currently hold 504, or 25.6%, of the 1,972 state senate seats and 1,613, or 29.8%, of the 5,411 state house or assembly seats.\" Across the 50 states, the total seats held by women range from 13.8% in Mississippi to 50.8% in Nevada. Since the beginning of the 92 nd Congress (1971-1972), the first Congress for which comparative state legislature data are available, the total percentage of women in state legislatures has eclipsed the percentage of women in Congress (see Figure 5 ). The greatest disparity between the percentages of female voting representation in state legislatures as compared with Congress occurred in the early 1990s, when women comprised 6.0% of the total Congress in the 102 nd Congress (1991-1992), but 18.3% of state legislatures in 1991. The gap has since narrowed. First woman elected to Congress. Representative Jeannette Rankin (R-MT, 1917-1919, 1941-1943). First woman to serve in the Senate. Rebecca Latimer Felton (D-GA) was appointed in 1922 to fill the unexpired term of a Senator who had died in office. In addition to being the first female Senator, Mrs. Felton holds two other Senate records. Her tenure in the Senate remains the shortest ever (one day), and, at the age of 87, she is the oldest person ever to begin Senate service. First woman to succeed her spouse in the Senate and also the first female initially elected to a full six-year term. Hattie Caraway (D-AR, 1931-1945) was first appointed in 1931 to fill the vacancy caused by the death of her husband, Thaddeus H. Caraway (D-AR, House, 1913-1921; Senate, 1921-1931), and then was subsequently elected to two six-year terms. First woman elected to the Senate without having first been appointed to serve in that body and first woman to serve in both houses of Congress . Margaret Chase Smith (R-ME) was elected to the Senate and served from January 3, 1949, until January 3, 1973. She had previously served in the House (June 3, 1940, to January 3, 1949). First woman elected to the Senate without first having been elected to the House or having been elected or appointed to fill an unexpired Senate term. Nancy Landon Kassebaum (R-KS, 1979-1997). First woman elected Speaker of the House. As Speaker of the House in the 110 th and 111 th Congresses (2007-2010), Nancy Pelosi held the highest position of leadership ever by a woman in the U.S. government. She was elected Speaker again at the beginning of the 116 th Congress. Longest total length of service by a woman in Congress. Senator Barbara Mikulski (D-MD), who served from January 3, 1977, to January 3, 2017, holds this record (40 years, 10 of which were spent in the House). On March 17, 2012, Senator Mikulski surpassed the record previously held by Edith Nourse Rogers (R-MA). Longest length of service by a woman in the House. On March 18, 2018, currently serving Representative Marcy Kaptur (D-OH) surpassed the record previously held by Representative Rogers. Representative Kaptur has been serving in the House since January 3, 1983 (36 years). Representative Rogers served in the House for 35 years, from June 25, 1925, until her death on September 10, 1960. Longest length of service by a woman in the Senate. Senator Mikulski also holds the record for length of Senate service by a woman (30 years). In January 2011, she broke the service record previously held by Senator Margaret Chase Smith (R-ME), who served 24 years in the Senate and 8.6 years in the House. Sixteen women have served in both the House of Representatives and the Senate. Margaret Chase Smith (R-ME) was the first such woman, as well as the first woman elected to the Senate without first having been elected or appointed to fill a vacant Senate seat. She was first elected to the House to fill the vacancy caused by the death of her husband (Clyde Smith, R-ME, 1937-1940), and she served from June 10, 1940, until January 3, 1949, when she began her Senate service. She served in the Senate until January 3, 1973. Twenty-five African American women serve in the 116 th Congress, including 2 Delegates, a record number. The previous record number was 21, including 2 Delegates, serving at the end of the 115 th Congress. A total of 47 African American women have served in Congress. The first was Representative Shirley Chisholm (D-NY, 1969-1983). Senator Carol Moseley-Braun (D-IL, 1993-1999) was the first African American woman to have served in the Senate. The African American women Members of the 116 th Congress are listed in Table 3 . Ten Asian Pacific American women serve in the 116 th Congress. Patsy Mink (D-HI), who served in the House from 1965-1977 and again from 1990-2002, was the first of 13 Asian Pacific American women to serve in Congress. Mazie Hirono (D-HI) is the first Asian Pacific American woman to serve in both the House and Senate. Twenty Hispanic or Latino women have served in Congress, all but one in the House, and 15 of them, a record number, serve in the 116 th Congress. Representative Ileana Ros-Lehtinen (R-FL, 1989-2018) is the first Hispanic woman to serve in Congress, and Catherine Cortez Masto (D-NV, 2017-present) is the first Hispanic woman Senator. Representatives Sharice Davids (D-KS) and Deb Haaland (D-NM), both first elected to the 116 th Congress, are the first female enrolled members of federally recognized tribes to serve in Congress. A number of women in Congress, listed in Table 6 , have held positions in their party's leadership. House Speaker Nancy Pelosi (D-CA) holds the highest position of leadership in the U.S. government ever held by a woman. As Speaker of the House in the 116 th Congress, she is second in the line of succession for the presidency. She also served as Speaker in the 110 th and 111 th Congresses. In the 108 th , 109 th , and 112 th -115 th Congresses, she was elected the House Democratic leader. Previously, Representative Pelosi was elected House Democratic whip, in the 107 th Congress, on October 10, 2001, effective January 15, 2002. She was also the first woman nominated to be Speaker of the House. Senator Margaret Chase Smith (R-ME), chair of the Senate Republican Conference from 1967 to 1972, holds the Senate record for the highest, as well as first, leadership position held by a female Senator. The first woman Member to be elected to any party leadership position was Chase Going Woodhouse (D-CT), who served as House Democratic Caucus Secretary in the 81 st Congress (1949-1950). As chair of the House Expenditures in the Post Office Department Committee (67 th -68 th Congresses), Mae Ella Nolan was the first woman to chair any congressional committee. As chair of the Senate Enrolled Bills Committee (73 rd -78 th Congresses), Hattie Caraway was the first woman to chair a Senate committee. In total, 26 women have chaired a House committee (including select committees); 14 women have chaired a Senate committee (including select committees); 1 female Senator has chaired two joint committees (related to her service on a standing committee); and 2 female Representatives have chaired a joint committee. In the 116 th Congress, there are currently nine committees led by women: five standing committees in the House, one standing committee in the Senate, one select committee in the House, one select committee in the Senate, and one joint committee. As the number of women in Congress has increased in recent decades, and following the large increase in women following the 1992 elections in particular, numerous studies of Congress have examined the role and impact of these women. Central to these studies have been questions about the following: The legislative behavior of women in Congress, including whether the legislative behavior of female Members differs from their male counterparts. For example, what has the increase in women in Congress meant for descriptive representation (i.e., when representatives and those represented share demographic characteristics, such as representation of women by women) and substantive representation (i.e., representation of policy preferences and a linkage to policy outcomes)? This also includes examinations of whether women Members sponsor more \"women's issues bills\" or speak more frequently on the House floor about women. These examinations also include questions regarding whether there are any differences in roll call voting behavior between men and women Members of Congress, with a focus on successive Members in the same district, in the same party, or in the chamber overall. The \"effectiveness\" of female legislators, particularly in comparison to male legislators. These studies have examined bill sponsorship and cosponsorship; women's success in shepherding sponsored bills or amendments into law; committee work; success in securing federal funds; consensus building activities and efforts to form coalitions; effectiveness while in the majority and minority; and their impact on the institution overall. The path that leads women to run for office, comparative success rates of female compared with male candidates, and career trajectory once in Congress. This includes professional backgrounds and experience, barriers to entry, and fundraising; the so-called widow effect, in which many women first secured entry to Congress following the death of a spouse; and reelection efforts and influences on decisions regarding voluntary retirement or pursuing other office.", "summary": "A record 131 women currently serve in the 116th Congress. There are 106 women serving in the House (including Delegates and the Resident Commissioner), 91 Democrats and 15 Republicans. There are 25 women in the Senate, 17 Democrats and 8 Republicans. These 131 women surpass the previous record of 115 women at the close of the 115th Congress. The numbers of women serving fluctuated during the 115th Congress; there were 109 women initially sworn in, 5 women subsequently elected to the House, 2 appointed to the Senate, and 1 woman in the House who died in office. The very first woman elected to Congress was Representative Jeannette Rankin (R-MT, served 1917-1919 and 1941-1943). The first woman to serve in the Senate was Rebecca Latimer Felton (D-GA). She was appointed in 1922 and served for only one day. Hattie Caraway (D-AR, served 1931-1945) was the first Senator to succeed her husband and the first woman elected to a six-year Senate term. A total of 365 women have ever been elected or appointed to Congress, including 247 Democrats and 118 Republicans. These figures include six nonvoting Delegates (one each from Guam, Hawaii, the District of Columbia, and American Samoa, and two from the U.S. Virgin Islands), as well as one Resident Commissioner from Puerto Rico. Of these, 309 (211 Democrats, 98 Republicans) women have been elected only to the House of Representatives; 40 (25 Democrats, 15 Republicans) women have been elected or appointed only to the Senate; 16 (11 Democrats, 5 Republicans) women have served in both houses; 47 African American women have served in Congress (2 in the Senate, 45 in the House), including 25 serving in the 116th Congress; 13 Asian Pacific American women have served in Congress (10 in the House, 1 in the Senate, and 2 in both the House and Senate), including 10 in the 116th Congress; 20 Hispanic women have served in Congress (including 1 in the Senate), including 15 in the 116th Congress; and 2 American Indian women, both currently serving in the House, have served in Congress. In the 116th Congress, eight women serve as committee chairs (six in the House, two in the Senate). This report includes historical information, including the number of women in Congress over time; means of entry to Congress; comparisons to international and state legislatures; records for tenure; firsts for women in Congress; women in leadership; African American, Asian Pacific American, Hispanic, and American Indian women in Congress; as well as a brief overview of research questions related to the role and impact of women in Congress. The Appendix provides details on the total number of women who have served in each Congress, including information on changes within a Congress. The numbers in the report may be affected by the time periods used when tallying any particular number. The text and notes throughout the report provide details on time periods used for the tallies and the currency of the information. For additional biographical information—including the committee assignments, dates of service, listings by Congress and state, and (for Representatives) congressional districts of the 365 women who have been elected or appointed to Congress—see CRS Report RL30261, Women in Congress, 1917-2019: Service Dates and Committee Assignments by Member, and Lists by State and Congress, by Jennifer E. Manning and Ida A. Brudnick.", "document_type": "crs"}
{"report": "The Office of Advocacy (Advocacy) is an \"independent\" office within the U.S. Small Business Administration (SBA) that is responsible for advancing \"the views and concerns of small businesses before Congress, the White House, federal agencies, the federal courts, and state and local policymakers as appropriate.\" The Chief Counsel for Advocacy (Chief Counsel) directs the office and is appointed by the President from civilian life with the advice and consent of the Senate. The Chief Counsel and Advocacy support the development and growth of American small businesses by \"intervening early in federal agencies' regulatory development processes on proposals that affect small entities and providing Regulatory Flexibility Act compliance training to federal agency policymakers and regulatory development officials; producing research to inform policymakers and other stakeholders on the impact of federal regulatory burdens on small businesses, to document the vital role of small businesses in the economy, and to explore and explain the wide variety of issues of concern to the small business community; and fostering a two-way communication between federal agencies and the small business community.\" Advocacy has 55 staff members and received an appropriation of $9.120 million for FY2019. Advocacy's responsibilities have expanded over time, and legislation has been introduced in recent Congresses to increase its authority still further. For example, during the 115 th Congress, the House passed H.R. 5 , the Regulatory Accountability Act of 2017 (Title III, Small Business Regulatory Flexibility Improvements Act), by a vote of 238-183. The bill would have, among other provisions, revised and enhanced requirements for federal agency notification of the Chief Counsel prior to the publication of any proposed rule; expanded the required use of small business advocacy review panels from three federal agencies to all federal agencies, including independent regulatory agencies; empowered the Chief Counsel to issue rules governing federal agency compliance with the RFA; specifically authorized the Chief Counsel to file comments on any notice of proposed rulemaking, not just when the RFA is concerned; and transferred size standard determinations for purposes other than the Small Business Act and the Small Business Investment Act of 1958 from the SBA's Administrator to the Chief Counsel. During the 113 th Congress, these provisions were included in H.R. 2542 , the Regulatory Flexibility Improvements Act of 2013, and were later included in H.R. 2804 , the Achieving Less Excess in Regulation and Requiring Transparency Act of 2014 (ALERRT Act of 2014), which the House passed on February 27, 2014, and in H.R. 4 , the Jobs for America Act (of 2014), which the House passed on September 18, 2014. During the 114 th Congress, these provisions were included in H.R. 527 , the Small Business Regulatory Flexibility Improvements Act of 2015, which was passed by the House on February 5, 2015. More recently, S. 83 , the Advocacy Empowerment Act of 2019, would empower the Chief Counsel to issue rules governing federal agency compliance with the RFA. In addition, during the 114 th Congress, S. 2847 , the Prove It Act of 2016, which was reported by the Senate Committee on Small Business and Entrepreneurship, would have authorized the Chief Counsel to request the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA) to review any federal agency certification that a proposed rule, if promulgated, will not have a significant economic impact on a substantial number of small entities and, as a result, is not required to submit a regulatory flexibility analysis of the rule. If it is determined that the proposed rule would, if promulgated, have a significant economic impact on a substantial number of small entities, the federal agency would then be required to perform both an initial and a final regulatory flexibility analysis for the rule. The bill was reintroduced during the 115 th Congress ( S. 2014 , the Prove It Act of 2017). This report examines Advocacy's origins and the expansion of its responsibilities over time; describes its organizational structure, funding, functions, and current activities; and discusses recent legislative efforts to further enhance its authority. The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA and directed the agency to \"aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns.\" The SBA provided this advocacy function primarily through its administration of small business loan guaranty programs, contracting assistance programs, and management and training programs. The SBA Administrator serves as the lead advocate for small businesses within the federal government. During the early 1970s, several small business organizations indicated at congressional hearings that they were not wholly satisfied with the SBA's advocacy efforts, especially in achieving regulatory relief for small businesses. Congress responded to these concerns by approving legislation ( P.L. 93-386 , the Small Business Amendments of 1974) authorizing the SBA Administrator to create an Office of Chief Counsel for Advocacy and to appoint a Chief Counsel for Advocacy. The Chief Counsel was to serve as a focal point for the agency's advocacy efforts. P.L. 93-386 provided the Chief Counsel five duties: 1. serve as a focal point for the receipt of complaints, criticisms, and suggestions concerning the policies and activities of the Administration and any other federal agency that affects small businesses; 2. counsel small businesses on how to resolve questions and problems concerning the relationship of the small business to the federal government; 3. develop proposals for changes in the policies and activities of any agency of the federal government that will better fulfill the purposes of the Small Business Act and communicate such proposals to the appropriate federal agencies; 4. represent the views and interests of small businesses before other federal agencies whose policies and activities may affect small businesses; and 5. enlist the cooperation and assistance of public and private agencies, businesses, and other organizations in disseminating information about the programs and services provided by the federal government, which are of benefit to small businesses, and information on how small businesses can participate in or make use of such programs and services. The SBA created the Office of Chief Counsel for Advocacy in October 1974, and designated each of the SBA's regional, district, and branch office directors as the advocacy director for their area. The Office of Chief Counsel was placed under the Office of Advocacy, Planning and Research, which was headed by an Assistant Administrator. Anthony Stasio, a long-time, career manager within the SBA, was named the first Chief Counsel. Three deputy advocate positions were subsequently created and staffed: deputy advocate for Advisory Councils, deputy advocate for Government Relations, and deputy advocate for Small Business Organizations. The SBA's Office of Chief Counsel for Advocacy was fully operational as of March 1, 1975. As the Office of Advocacy began operations, several small business organizations lobbied Congress to provide the Chief Counsel greater independence from the SBA's Administrator. They argued that the SBA's Administrator reports to the White House and is subject to the OMB Director's influence. In their view, OMB, at that time, was more attuned to promoting the interests of large businesses than it was to promoting the interests of small businesses. Congress responded to these concerns by passing P.L. 94-305 , to amend the Small Business Act and Small Business Investment Act of 1958. Enacted on June 4, 1976, Title II of the act enhanced the Chief Counsel's authority by requiring the Office of Advocacy to be established as a separate, stand-alone office within the SBA and by requiring the Chief Counsel to be appointed from civilian life by the President, by and with the advice and consent of the Senate. P.L. 94-305 also retained Advocacy's five duties as identified in P.L. 93-386 ; specified that one of Advocacy's primary functions was to examine the role of small business in the American economy and the problems faced by small businesses and to recommend specific measures to address those problems; empowered the Chief Counsel, after consultation with and subject to the approval of the SBA Administrator, to employ and fix the compensation of necessary staff, without going through the normal competitive procedures directed by federal law and the Office of Personnel Management; specified that the Chief Counsel could obtain expert advice and other services, and hold hearings; directed each federal department, agency, and instrumentality to furnish the Chief Counsel with reports and information deemed by the Chief Counsel as necessary to carry out his or her functions; ordered the Chief Counsel to provide Congress, the President, and the SBA with information concerning his or her activities; and authorized to be appropriated $1 million for Advocacy, with any appropriated funds remaining available until expended. It was at this time that the word independent began to be used to describe the Chief Counsel and the Office of Advocacy. However, Advocacy remained a part of the SBA and subject to the sitting Administration's influence. For example, at that time, Advocacy's budget was provided through the SBA's salaries and expenses account, which was approved by the SBA Administrator; Advocacy's annual staffing allotment was subject to the SBA Administrator's approval; and some senior staff within Advocacy were vetted by the White House personnel office prior to hiring. Advocacy's duties were further expanded following enactment of P.L. 96-354 , the Regulatory Flexibility Act of 1980 (RFA, as amended). The RFA establishes in law the principle that government agencies must analyze the effects of their regulatory actions on small entities−small businesses, small nonprofits, and small governments−and consider alternatives that would be effective in achieving their regulatory objectives without unduly burdening these small entities. Advocacy has the responsibility of overseeing and facilitating federal agency compliance. The RFA's sponsors argued that federal agencies should be required to examine the impact of regulations on small businesses because federal regulations tend to be \"uniform in design, permit little discretion in their implementation, and place a disproportionate burden upon small businesses, small organizations and small governmental bodies.\" As Alfred Dougherty Jr., director of the Federal Trade Commission's Bureau of Competition, testified at a congressional hearing: First, even if actual regulatory costs are equal between competing large and small firms, small firms have fewer units of output over which to spread such costs and must include in the price of each unit a larger component of regulatory cost. Second, where small firms have smaller actual regulatory costs than large firms (as is generally the case), small firms remain at a competitive disadvantage because they are unable to take advantage of the \"economies of scale\" of regulatory compliance. Large firms generally already have extensive \"in-house\" data compilation and reporting systems and specialized staff accountants, lawyers and managers whose primary function is regulatory compliance. Small firms, by comparison, must either hire additional personnel or purchase expensive consulting services in order to acquire the necessary regulatory expertise. Economist Milton Kafoglis, a member of the President Jimmy Carter's Council on Wage and Price Stability, testified that There seem to be clear economies of scale imposed by most regulatory endeavors. Uniform application of regulatory requirements thus seems to increase the size [of the] firm that can effectively compete. The cost curve of the firm is shifted upward … [with] the small firms' cost curve shifting more than that of the dominant firms [thus] the share of the dominant firm will increase while that of small firms will decrease. As a result, industrial concentration will have increased. This … suggests that the \"small business\" [regulatory] problem goes beyond mere sympathy for the small businessman, but strikes at the heart of the established national policy of maintaining competition and mitigating monopoly. As discussed below, the RFA requires federal agencies to assess the impact of their forthcoming regulations on s mall entities , which the act defines as small businesses, small governmental jurisdictions, and certain small not-for-profit organizations. The Chief Counsel is responsible for monitoring and reporting agencies' compliance with the act's provisions. The Chief Counsel also reviews and comments on proposed regulations and may appear as amicus curiae (i.e., friend of the court) in any court action to review a rule. P.L. 111-240 , the Small Business Jobs Act of 2010, further enhanced Advocacy's independence by ending the practice of including Advocacy's budget in the SBA's Salaries and Expenses' Executive Direction account. Instead, the President is required to provide a separate statement of the amount of appropriations requested for Advocacy, \"which shall be designated in a separate account in the General Fund of the Treasury.\" The Small Business Jobs Act also requires the SBA Administrator to provide Advocacy with \"appropriate and adequate office space at central and field office locations, together with such equipment, operating budget, and communications facilities and services as may be necessary, and shall provide necessary maintenance services for such offices and the equipment and facilities located in such offices.\" In recognition of its enhanced independence and separate appropriations account, Advocacy, for the first time, issued its own congressional budget justification document and annual performance report as part of the Obama Administration's FY2013 budget request. That document was presented in a new appendix accompanying the SBA's congressional budget justification document and annual performance report. Advocacy has continued to issue its own budget justification document in each of the Administration's subsequent budget requests. As mentioned previously, Advocacy currently has 55 staff members: 4, including the Chief Counsel, in the Office of the Chief Counsel; 16 in the Office of Interagency Affairs (regulatory staff); 9 in the Office of Economic Research; 6 in the Office of Information; 13 in the Office of Regional Affairs (regional advocates); and 7 in the Administrative Support Branch. The Office of Advocacy's organizational chart is presented below, with its anticipated staffing level. Advocacy received an appropriation of $9.120 million for FY2019. Staff salaries and benefits account for about 95% of Advocacy's budget, with the remainder used for economic research grants and direct expenses, such as subscriptions, travel, training, and office supplies. Advocacy is responsible for monitoring and reporting on federal agency compliance with the RFA (5 U.S.C. §§601-612) and Executive Order 13272, Proper Consideration of Small Entities in Agency Rulemaking (August 13, 2002). Advocacy also comments on proposed rules and participates in small business advocacy review panels, among other activities. As mentioned previously, the RFA (as amended) requires federal agencies to assess the impact of their forthcoming regulations on small entities, which the act defines as including small businesses, small governmental jurisdictions, and certain small not-for-profit organizations. According to Advocacy, the RFA does not seek preferential treatment for small entities, require agencies to adopt regulations that impose the least burden on small entities, or mandate exemptions for small entities. Rather, it requires agencies to examine public policy issues using an analytical process that identifies, among other things, barriers to small business competitiveness and seeks a level playing field for small entities, not an unfair advantage. Under the RFA, Cabinet departments and independent agencies as well as independent regulatory agencies must prepare a regulatory flexibility analysis at the time certain proposed and final rules are issued. The analysis must describe, among other things, (1) the reasons why the regulatory action is being considered; (2) the small entities to which the proposed rule will apply and, where feasible, an estimate of their number; (3) the projected reporting, recordkeeping, and other compliance requirements of the proposed rule; and (4) any significant alternatives to the rule that would accomplish the statutory objectives while minimizing the impact on small entities. However, these analytical requirements are not triggered if the head of the issuing agency certifies that the proposed rule would not have a \"significant economic impact on a substantial number of small entities.\" The RFA does not define significant economic impact or substantial number of small entities . As a result, federal agencies have substantial discretion regarding when the act's analytical requirements are initiated. In addition, the RFA's analytical requirements do not apply to final rules for which the agency does not publish a proposed rule. The RFA also requires federal agencies to publish a \"regulatory flexibility agenda\" each April and October in the Federal Registe r , listing regulations that the agency expects to propose or promulgate which are likely to have a significant economic impact on a substantial number of small entities; provide their regulatory flexibility agenda to the Chief Counsel and to small businesses or their representatives; retrospectively review rules that have or will have a significant impact within 10 years of their promulgation to determine whether they should be continued without change or should be amended or rescinded to minimize their impact on small entities; and ensure that small entities have an opportunity to participate in the rulemaking process. In addition, the Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), and the Consumer Financial Protection Bureau (CFPB) are required to convene a small business advocacy review panel (sometimes referred to as SBREFA panels) whenever they are developing a rule that is anticipated to have a significant economic impact on a substantial number of small entities. These panels consist of a representative or representatives from the rulemaking agency, OMB's Office of Information and Regulatory Affairs (OIRA), and the Chief Counsel. Information and advice from small entity representatives are solicited to assist the panel in understanding the ramifications of the proposed rule. The panel must be convened and complete its report, with recommendations, within a 60-day period. Finally, the RFA encourages the issuing agency to modify the proposed rule or initial regulatory flexibility analysis as appropriate, based on the information received from the panel. The RFA also requires the Chief Counsel to monitor and report at least annually on agencies' compliance with the act. The Chief Counsel accomplishes this primarily by reviewing and commenting on proposed regulations and by participating in small business advocacy review panels. In addition, the Chief Counsel may appear as amicus curiae (i.e., friend of the court) in any court action to review a rule. Executive Order 13272, Proper Consideration of Small Entities in Agency Rulemaking (August 13, 2002), requires federal agencies to make information publicly available concerning how they will comply with the RFA's statutory mandates. It also requires federal agencies to send to Advocacy copies of any draft regulations that may have an impact on a substantial number of small entities. Agencies must send these draft regulations to Advocacy at the same time the draft rules are sent to OIRA for review, or at a reasonable time prior to their publication in the Federal Register . Agencies must consider Advocacy's comments on the proposed rule and must address these comments in the final rule published in the Federal Register . Executive Order 13272 requires Advocacy to notify federal agencies concerning how to comply with the RFA, which is accomplished primarily through Advocacy's periodic publication of A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act and through Advocacy's compliance training program; report annually on federal agency compliance with the executive order, which is accomplished primarily through Advocacy's annual publication of Report on the Regulatory Flexibility Act ; and train federal regulatory agencies in how to comply with the RFA, which is accomplished through Advocacy's compliance training program. Advocacy provided 17 official public comment letters to 20 federal agencies on a variety of proposed rules in FY2018. It also hosted 23 roundtable discussions in 16 states on proposed rules and regulatory topics. These roundtable discussions provided stakeholders an opportunity to share their views concerning the impact of proposed rules. Advocacy also provided training on RFA compliance to 132 federal officials at 6 rule-writing agencies. Each year, Advocacy provides an estimate of the regulatory cost savings its activities provide to small businesses in the form \"of foregone capital or annual compliance costs that otherwise would have been required in the first year of a rule's implementation.\" These estimates are based primarily on estimates from the federal agencies promulgating the rules, and, in some instances, from industry estimates. Estimating the costs and benefits of federal regulations is methodologically challenging. For example, researchers must determine the baseline for measurement (i.e., what effects would have occurred in the absence of the regulation) and many regulatory cost estimates are based on aggregating the results of regulatory studies conducted years earlier. These studies often use different methods and vary in quality, making conclusions drawn from them problematic. Some observers, including OMB, doubt whether an accurate measure of total regulatory costs and benefits is possible. Moreover, in the case of Advocacy, estimating regulatory cost savings from its activities is even more challenging because it is nearly impossible to determine what changes to these regulations would have been made during the review and comment period if Advocacy did not exist. Advocacy reported that its intervention in rules that were made final resulted in regulatory cost savings on behalf of small businesses of $255.3 million in FY2018. Advocacy's Office of Economic Research \"assembles and uses data and other information from many different sources to develop data products that are as timely and actionable as possible.\" These products typically relate \"to the role that small businesses play in the nation's economy, including the availability of credit, the effects of regulations and taxation, the role of firms owned by women, minority and veteran entrepreneurs, factors that influence entrepreneurship, innovation and other issues of concern to small businesses.\" In addition to sponsoring and conducting research on small business, Advocacy maintains web pages with links to state economic profiles, which are compiled annually by Office of Advocacy staff and provide information concerning small businesses in the state, such as number of small businesses in the state, the number of people employed by those small businesses in the state, and various demographic information concerning the small business owners in the state; firm size economic data, which are compiled by Advocacy staff from the U.S. Bureau of the Census and the U.S. Bureau of Labor Statistics and provide information concerning various owner and business characteristics, such as the number of firms, number of establishments, employment, and annual payroll by the employment size of the business and by location and industry; quarterly economic bulletins, which are authored by Advocacy staff to examine trends in small business employment and lending; research projects which have been authored by Office of Advocacy staff, either by choice or by congressional mandate, and by others sponsored by Advocacy; fact sheets, which are authored by Office of Advocacy staff, covering various topics, such as gender differences in financing, the availability of health insurance among small businesses, and credit card financing; issue briefs, which are authored by Advocacy staff, covering various topics, such as veteran business owners and access to capital for women- and minority-owned businesses; and major sources of data collected by the federal government concerning small business. Advocacy also provides funding to the Census Bureau to support the generation of business data by firm size; publishes \"The Small Business Advocate,\" a newsletter summarizing Advocacy's research endeavors, which has more than 36,000 online subscribers; and publishes \"The Small Business Economy,\" an annual report on the status of small businesses and their role in the national economy. Advocacy published 20 contract and internal research and data reports in FY2018. These reports covered a variety of issues, including crowdfunding, the regulatory development process, nonemployer businesses, and state rankings by small business economic indicators. In addition, Advocacy's economic research staff sponsored six \"Small Business Economic Research Forums.\" These forums provide economists and researchers an opportunity \"to discuss a key economic topic\" and help \"to keep Advocacy's staff up-to-date on the latest data and research from other agencies and researchers.\" As mentioned previously, Advocacy engages in outreach activities related to its role with the RFA. For example, in FY2016, Advocacy participated in seven small business advocacy review panels (one with the Occupational Safety and Health Administration, two with the Consumer Financial Protection Bureau, and four with the Environmental Protection Agency) and one in FY2018 (with the Occupational Safety and Health Administration). In each case, Advocacy provided outreach to small business owners interested in sharing their views concerning the agency's proposed rule. Advocacy also regularly sponsors roundtable discussions, conferences, and symposia to provide small business owners an opportunity to share their views on issues of concerns to them. For example, Advocacy's regional advocates regularly \"interact directly with small businesses, small business trade associations, governors and state legislatures to educate them about the benefits of regulatory flexibility and testify at state-level legislation hearings on small business issues when requested to do so.\" Regional advocates also \"work closely with the ten Regional Fairness Boards in their respective regions to develop information for the SBA's National Ombudsman, as provided for by the Small Business Regulatory Enforcement Fairness Act and alert businesses in their respective regions about regulatory proposals that could affect them.\" The Chief Counsel also meets regularly with business organizations and trade associations, and participates in Advocacy roundtable discussions, conferences, and symposia. Advocacy's economists provide economic presentations at academic conferences, trade association meetings, think tank events, and other government-sponsored events. Advocacy's regional advocates participated in 523 outreach events in FY2018. Advocacy's economists also made 18 presentations to academic, media, or other small business policy-related audiences. As has been discussed, Advocacy's responsibilities have expanded over time. During the 115 th Congress, H.R. 5 , the Regulatory Accountability Act of 2017 (Title III, Small Business Regulatory Flexibility Improvements Act) was passed by the House. The bill would have increased Advocacy's authority still further. Specifically, H.R. 5 would have revised and enhanced requirements for federal agency notification of the Chief Counsel prior to the publication of any proposed rule; expanded the required use of small business advocacy review panels from three federal agencies to all federal agencies, including independent regulatory agencies; empowered the Chief Counsel to issue rules governing federal agency compliance with the RFA; specifically authorized the Chief Counsel to file comments on any notice of proposed rulemaking, not just when the RFA is concerned; and transferred size standard determinations for purposes other than the Small Business Act and the Small Business Investment Act of 1958 from the SBA's Administrator to the Chief Counsel. Advocates of expanding Advocacy's authority and role under the RFA argue that legislation is necessary to \"close loopholes [in the RFA] and more effectively reduce the disproportionate burden that over-regulation places on small entities, thereby enhancing job creation and hastening economic recovery.\" They argue that recent regulatory expansions and the future threat of further excessive federal regulation—such as under the waves of regulation occurring to implement the Patient Protection and Affordable Care Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act—have created immense regulatory burdens and uncertainty for the economy, chilling job creation, investment and economic growth and suppressing America's economic freedom and standing among the world's economies. These effects are particularly burdensome on small businesses—and since start-up firms are the source of net job creation in the U.S. economy it is only logical that the impact of these effects on small businesses contributes substantially to the economy's inability to create sufficient levels of new jobs. Advocates of expanding the Office of Advocacy's authority also note that the Government Accountability Office (GAO) has found that the lack of a uniform definition for the terms significant economic impact , and substantial number of small entities contributes to inconsistent compliance with the RFA across federal agencies. They argue that GAO's findings are further evidence that the RFA needs to be amended. Opponents of expanding Advocacy's authority and role under the RFA argue that the provisions being advocated are part of an \"ongoing attack on federal regulation,\" presented under the guise of \"pro-small business rhetoric, which will erect significant barriers to rulemaking that will hinder the promulgation of critical public health and safety protections.\" They argue that these provisions are (1) based on the false premise that regulatory costs stifle economic growth and job creation; (2) threatens public health and safety by severely undermining federal agency rulemaking; (3) imposes additional duties on agencies while failing to provide for any additional resources to meet such burdens, and (4) allows more opportunities for industry to delay or defeat proposed rulemakings. Opponents also argue that these provisions do nothing to alleviate the purported burden on small entities of complying with federal regulations. In fact, it includes no provision that offers assistance to small entities, whether through subsidies, government guaranteed loans, preferential tax treatment for small firms, or fully funded compliance assistance offices. Instead, the bill merely aggrandizes the power of the SBA's Office of Advocacy and of the professional lobbying class in Washington. The SBA's Office of Advocacy is a relatively small office with a relatively large mandate—to represent the interests of small business in the regulatory process, produce and promote small business economic research, and facilitate small business outreach across the federal government. It faces several challenges. First, Advocacy is generally recognized as being an independent office, but it is housed within the SBA and remains subject to its influence through (1) its proximity to the agency and its organizational culture; (2) the budgetary process, which provides the SBA Administrator a role, albeit recently reduced, in determining Advocacy's budget; and (3) the sheer size of the SBA (more than 5,000 employees and an annual budget exceeding $700 million) relative to Advocacy which, given their statutorily overlapping missions as advocates for small businesses, makes it more difficult than would otherwise be the case for stakeholders to recognize Advocacy as the definitive voice for small businesses. Second, Chief Counsels tend to have relatively short tenures (three years, eight years, one year, seven years, six years, four years, and one year). When they leave office, there have often been delays in naming a successor, creating continuity problems for Advocacy. For example, the position was filled on an interim basis by Claudia Rodgers, a long-time Advocacy senior staff member, from January 2015 (following Winslow Sargeant's departure) until Darryl L. DePriest's Senate confirmation on December 10, 2015. DePriest left office in January 2017. Major L. Clark, III, previously Assistant Chief Counsel for Procurement Policy for Advocacy, is currently filling the Chief Counsel's position on an interim basis. Chief Counsels leave office for various reasons, such as a change in Administration or for more lucrative positions in the private sector. Third, one of Advocacy's primary functions is to monitor and report on federal agency compliance with the RFA, provide comments on proposed rules, and train federal regulatory officials to assist them in complying with the RFA's provisions. However, as GAO has noted, the RFA does not define significant economic impact or substantial number of small entities , two key terms for triggering Advocacy's role under the RFA. The lack of clarity concerning these key terms makes it difficult for Advocacy to objectively determine agency compliance with the RFA and also makes it more difficult for Advocacy to train federal regulatory officials in how to come into compliance with the act. GAO and others have recommended that Congress clarify the meaning of these terms. However, the RFA's original authors purposely decided not to provide a precise definition for these terms. They argued that the varying missions and constituencies served by federal agencies necessitated the provision of discretion to allow federal agencies to \"determine what is significant to their programs and particular constituencies.\" Fourth, Advocacy is subject to criticism from those who believe that it should be more aggressive in preventing federal regulations (i.e., from those who generally oppose federal regulations, especially regulations related to environmental issues and health care reform) and from those who believe that it should be less aggressive in this regard (i.e., from those who generally view federal regulations favorably, especially in addressing environmental and workplace safety issues). Thus, Advocacy often finds itself involved in ideological and partisan disputes concerning the outcome of federal regulatory policies for which it does not have the final say. Finally, Advocacy's relatively limited budget restricts its ability to produce and promote economic research on small businesses and to engage in outreach activities, particularly outreach activities not directly related to its RFA role. It could be argued that Advocacy does not need additional resources for these endeavors because the SBA engages in these same activities. Once again, this reflects the challenges the Office of Advocacy faces as an independent office operating within a much larger federal agency with an overlapping mission.", "summary": "The Office of Advocacy (Advocacy) is an \"independent\" office within the U.S. Small Business Administration (SBA) that advances \"the views and concerns of small businesses before Congress, the White House, federal agencies, the federal courts, and state and local policymakers as appropriate.\" The Chief Counsel for Advocacy (Chief Counsel) directs the office and is appointed by the President from civilian life with the advice and consent of the Senate. Advocacy is a relatively small office with a relatively large mandate—to represent the interests of small business in the regulatory process, provide Regulatory Flexibility Act (RFA) compliance training to federal regulatory officials, produce and promote small business economic research to inform policymakers and other stakeholders concerning the impact of federal regulatory burdens on small businesses and the role of small businesses in the economy, and facilitate small business outreach across the federal government. This report examines Advocacy's origins and the expansion of its responsibilities over time; describes its organizational structure, funding, functions, and current activities; and discusses recent legislative efforts to further enhance its authority. For example, during the 115th Congress, the House passed H.R. 5, the Regulatory Accountability Act of 2017 (Title III, Small Business Regulatory Flexibility Improvements Act), which would have expanded Advocacy's responsibilities. It would have revised and enhanced requirements for federal agency notification of the Chief Counsel prior to the publication of any proposed rule; expanded the required use of small business advocacy review panels from three federal agencies to all federal agencies, including independent regulatory agencies; empowered the Chief Counsel to issue rules governing federal agency compliance with the RFA; specifically authorized the Chief Counsel to file comments on any notice of proposed rulemaking, not just when the RFA is concerned; and transferred size standard determinations for purposes other than the Small Business Act and the Small Business Investment Act of 1958 from the SBA's Administrator to the Chief Counsel. The House passed similar legislation during the 114th Congress (H.R. 527). The analysis suggests that Advocacy faces several challenges. Advocacy, generally recognized as being an independent office, is housed within the much larger SBA which, given their statutorily overlapping missions as advocates for small businesses, makes it more difficult for stakeholders to recognize Advocacy as the definitive voice for small businesses. Chief Counsels tend to have relatively short tenures, creating continuity problems for Advocacy. The RFA does not define significant economic impact or substantial number of small entities, two key terms for triggering Advocacy's role under the RFA. The lack of clarity concerning these key terms makes it difficult for Advocacy to objectively determine agency compliance with the RFA and to train federal regulatory officials in how to come into compliance with the act. Advocacy often finds itself involved in ideological and partisan disputes concerning the outcome of federal regulatory policies for which it does not have the final say. Advocacy's ability to produce and promote economic research on small businesses and to engage in outreach activities, particularly outreach activities not directly related to its RFA role, is constrained by its relatively limited budgetary resources.", "document_type": "crs"}
{"report": "Election administration attracted significant attention in 2000, when issues with the vote count delayed the results of the presidential race. Administrative issues have also been reported in subsequent election cycles. For example, issues with voter registration were reported in multiple states in 2016 and 2018. Some responses to such reports focus on the rules of elections. The Help America Vote Act of 2002 (HAVA; P.L. 107-252 ; 116 Stat. 1666), for example, requires states to establish a uniform standard of what counts as a vote for each voting system they use (52 U.S.C. §21081(a)(6)), and bills have been introduced in recent Congresses to change how voter registration is handled. Other responses focus on the systems that apply election rules. In the United States, that typically means state and local systems. The administration of elections in the United States is highly decentralized. Elections are primarily administered by thousands of state and local systems rather than a single, unified national system. Understanding how those state and local systems work may be relevant to Congress for at least two reasons. First, the way state and local election systems work can affect how well federal action on election administration serves its intended purposes. Most federal action on election administration is carried out by state and local election systems. Interactions between the workings of those systems and federal actions can help determine how effective the federal actions are at achieving their objectives. Second, Congress can require or encourage changes to the way state and local election systems work. Congress has a number of tools for influencing election administration policy. The use of these tools can—either intentionally or unintentionally—affect the workings of the state and local systems that administer federal elections. This report is intended to help Congress understand how state and local election systems work and how their workings might relate to federal activity on election administration. It starts by describing the distribution of election administration duties at the state and local levels and the structures of the state and local systems that conduct elections. It then uses examples from past federal action on election administration to illustrate some of the ways the duties and structures of state and local election systems interact with federal activity. It closes by introducing some considerations that may be relevant to Members interested in election administration. This report focuses on the administration of federal elections in the states by executive and legislative branches of state and local government. Much of the discussion applies to nonfederal as well as federal elections, but the report is intended explicitly to address only federal elections. The report also does not cover the federal role in administering federal elections, election administration in the U.S. territories, the role of law enforcement and the courts in election administration, or issues of constitutional or legal interpretation. The typical federal election process has three main parts: voter registration, vote casting, and vote counting. This report focuses on those three parts of the process rather than on other aspects of campaigns and elections, such as campaign finance and redistricting. Finally, the way federal elections are administered varies between and within states. A full accounting of the variations is beyond the scope of this report. Instead, the report describes general patterns and illustrates them with examples. Examples appear in text boxes like the box below, which describes the role the text boxes play in the report in more detail. Election administration involves making decisions about the rules of elections, such as whether voters should be able to register online, whether they should be required to show photo identification at the polls, and whether election results should be audited. It also involves conducting elections in accordance with those decisions and paying for the activities and resources required to conduct them. These three election administration duties can be described as policymaking, implementation, and funding. This section describes some common patterns in the distribution of these duties at the state and local levels. In the U.S. system, states generally play the primary decisionmaking role in election administration. State legislatures, with input from their governors, can make state laws about the administration of elections and make or initiate election administration amendments to their state constitutions. State laws and constitutions can also delegate or defer responsibility for decisions about the administration of elections to other state or local officials and to voters. The U.S. Constitution also provides for a federal role with respect to decisionmaking about elections, and Congress has exercised such powers in a number of instances. For more information about federal laws governing the state and local conduct of federal elections, see the Appendix . Box 1 uses examples from voter registration to illustrate a number of these approaches to policymaking. It starts with a discussion of a registration policy enacted by the federal government and then describes an adjustment to the policy made, respectively, by a state legislature on the recommendation of a state executive branch official, by state executive branch officials, and by voters. State and local officials may be granted decisionmaking authority explicitly by a variety of constitutional provisions, laws, charters, ordinances, and regulations at multiple levels of government. They may also be left discretion over policy details that are not specified in legislative or regulatory text. For example, states may set out general guidelines for voting technology and ballot design but leave decisions about exactly which machines to buy or how to lay out ballots to local officials. Voters have a say in election administration measures that are referred to the ballot by their state legislatures. Some states also offer citizen initiatives or popular referendums, which voters can use to propose their own state election administration statutes or state constitutional amendments or to repeal or affirm election administration laws adopted by their state legislatures. Table 1 lists the citizen initiative and popular referendum options available to voters in states that offer such mechanisms, as presented by the Initiative & Referendum Institute at the University of Southern California in January 2019. Box 2 uses examples from the November 2018 election to illustrate how states and voters have used ballot measures to make election administration policy. It describes a statewide proposal to enact automatic voter registration in Nevada that was initiated by citizens, and a statewide proposal to enact a voter ID requirement in North Carolina that was referred to the ballot by the state legislature. Early U.S. elections were conducted almost entirely locally. Some states have departed from that tradition. For example, in Alaska, the state conducts elections above the borough level, and, in Delaware, all elections are conducted by the state. Congress has also shifted some responsibility for conducting elections to the state level. For example, the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA; P.L. 99-410 ; 100 Stat. 924) requires states to designate a single state office to provide absent uniformed services and overseas voters with information about voter registration and absentee voting (52 U.S.C. §20302(b)). The NVRA requires states to designate a chief state election official to coordinate state responsibilities under the act (52 U.S.C. §20509), and HAVA requires chief state election officials to implement statewide voter registration lists and oversee development of plans for use of federal election administration funding (52 U.S.C. §21083(a)(1)(A); 52 U.S.C. §21005(a)). However, the day-to-day implementation of election administration policy is still mostly handled by localities. For example, localities typically add eligible voters to the voter rolls; design and print ballots; recruit and train poll workers; select and prepare polling places; store and transport voting equipment; and count, canvass, and report election results. The level of locality primarily responsible for conducting elections is typically the county, but there are some exceptions. The New England states, which have a strong tradition of township government, tend to assign primary responsibility to municipalities. Some states also split implementation duties between counties and municipalities. Responsibility for implementing election administration policy may also be divided between offices or agencies at the same level of local government. For example, according to one scholarly source, as of 2015, localities in about one-third of states split responsibility for conducting elections between two or more offices or agencies. Table 2 lists the states identified by those scholars. Election administration involves both intermittent and ongoing costs. Intermittent costs include irregular expenses like the costs of acquiring voting equipment. Ongoing costs include expenses that are linked to and recur with each individual election, such as the costs of printing ballots, paying poll workers, and transporting voting equipment to polling places, as well as expenses that are incurred whether or not there is an election, such as the costs of training election officials, maintaining voter registration lists, and providing IT support for online voter registration systems. The federal government does not supply ongoing funding to states and localities to conduct elections. To date, Congress has authorized significant federal funding for state and local election administration in one bill: HAVA. HAVA authorized $3.65 billion for three main types of formula-based payments to states as well as additional funding for a number of smaller grant and payment programs (52 U.S.C. §§20901-20906; 52 U.S.C. §§21001-21072). Congress appropriated most of the $3.65 billion for the three types of formula-based payments between FY2003 and FY2010 and appropriated an additional $380 million in March 2018. That means states and localities are responsible for most of the costs of conducting federal elections. Localities typically assume primary responsibility for those costs, with states contributing to varying degrees. All states have supplied or committed to supplying matching funds as required to receive federal HAVA funds (52 U.S.C. §21003(b)(5)(a)). All states but North Dakota, which does not have voter registration, have also contributed to establishing and maintaining the statewide voter registration lists required by HAVA (52 U.S.C. §21083(a)). State contributions to other costs vary. Many states used HAVA funding to help replace or update voting technology, and some have put additional money from state coffers toward those expenses. Table 3 lists state contributions to the costs of acquiring voting equipment, as reported by the U.S. Government Accountability Office (GAO) in 2018. Table 4 provides information from the same report about states' contributions to the costs of maintaining and operating voting equipment. As GAO uses the terms in the survey, operation costs \"include things such as poll worker labor to set up equipment, postage for mailing absentee or vote-by-mail ballots, paper and printing supplies for paper ballots or voter-verified paper trails, and electricity to operate equipment during elections.\" Maintenance costs \"include things such as labor to conduct maintenance between elections of any equipment hardware and software as well as any required parts.\" Some states cover or contribute to the costs of training local election officials, and some share election-specific costs, such as printing ballots and transporting voting equipment. Box 3 uses five examples of cost-sharing arrangements for election-specific costs of federal elections to illustrate the range of approaches states have taken to such arrangements. The structures of the state and local systems that conduct federal elections vary both between and within states. Common variations include differences related to the leadership of the election system; relationship between local election officials and the state; and population size and density of the jurisdiction served by the system. This section describes these structural variations. The state and local election systems that conduct federal elections may be led by an individual, such as the state secretary of state or a town or county clerk; a group, such as a state elections commission or a county board of elections; or a combination of individuals or groups, such as a state secretary of state and state board of elections, or a city clerk and city registrar of voters. Election system leadership may be chosen by voters or appointed by an authority such as the governor or state legislature. The selection method—and the leaders themselves—may be partisan, bipartisan, or nonpartisan. Federal law requires states to designate a chief election official to carry out certain tasks. Table 5 lists the titles of chief state election officials, as reported to CRS by the EAC, and the methods of selecting them, as listed by the National Association of Secretaries of State (NASS) and the National Association of State Legislatures (NCSL). The leadership types and selection methods of local election systems may vary within a state. Box 4 uses examples from Florida and Wisconsin to illustrate such variations. It describes the different causes of variation in the two states and a recent change in Florida to a more uniform selection process. The leadership structures of both state and local systems can also change over time. Box 5 uses the two states from Box 4 to illustrate the types of changes states might make, how they might make them, and how frequently they might make them. It describes one change that was approved by voters as a ballot measure and a number of others that were enacted legislatively. Another way in which the structures of election systems can vary is in the relationship between local election officials and the state. Some local election officials operate largely independently, whereas others rely on state officials or resources for some, most, or all basic functions. For example, as noted in \" Funding ,\" states may provide some or all of the training for local election officials. As described in more detail in \" Jurisdiction Size and Density ,\" local election officials who serve smaller or more rural jurisdictions may also depend on their states to provide specialized expertise, such as legal or technical know-how. States also have varying types and degrees of influence over local election officials. Choices about other structural features, such as the method used to select the leadership of local election systems, can shape this aspect of the state-local relationship. For example, in some states, state officials appoint and can remove local election officials. State officials in other states may have other options for influencing local officials. For example, state officials may have the power to initiate legal action against local officials, to provide or withhold funding for local election administration, or to certify and decertify voting systems. However, they tend to have less control over how local officials perform their election administration duties than state officials with appointment and removal authority. As described in more detail in \" Compliance with Federal Requirements ,\" this dynamic may be especially pronounced for local officials who are popularly elected. Such officials are accountable primarily to voters rather than to the state. Other structural variations between election systems derive from differences in the population size and density of the jurisdictions they serve. Some election jurisdictions reported serving fewer than 100 eligible registered voters in the 2016 election, for example, whereas Los Angeles County reported serving 6.8 million. The eligible registered voters in that county alone reportedly outnumbered the eligible registrants in each of 40 other states. Election jurisdictions also differ in population density. For example, Los Angeles County is an urban center, and many small jurisdictions are rural. Jurisdictions with different population sizes and densities have different election administration advantages and face different administrative challenges. For example, voter registration list maintenance is typically more straightforward in small jurisdictions because their lists are shorter and election officials are more likely to know registrants personally. Meanwhile, large jurisdictions tend to have larger tax bases and more resources. Those differences between jurisdictions may be reflected in the internal structures of the election systems that serve them. One example of such a structural difference is the size and specialization of the system's staff. Larger jurisdictions, which typically have more personnel, may have much of the specialized expertise they need in-house. Smaller jurisdictions, which may have only one part-time employee dedicated to election administration, are more likely to rely on outside expertise. For example, according to law professors Steven F. Huefner, Daniel P. Tokaji, and Edward B. Foley, smaller jurisdictions in Illinois have looked to state attorneys for election law expertise and to voting equipment vendors for technical support. Another type of difference related to jurisdiction size and density is variation in the allocation of system resources. A study prepared for the U.S. Election Assistance Commission in 2013 found that election officials in rural jurisdictions were more likely than their urban counterparts to use paid print advertising for voter outreach. Election officials in urban jurisdictions were more likely to use websites and social media. Small jurisdictions may also allocate a larger share of their resources to meeting state and federal requirements than larger jurisdictions because there are often fixed start-up costs to required changes, and smaller jurisdictions may be less equipped to capitalize on economies of scale. For example, political scientists Heather M. Creek and Kimberly A. Karnes report, \"There is a minimum cost to the acquisition and maintenance of voting technology that applies whether the district is purchasing 5 or 500 machines.\" The duties and structures of state and local election systems can affect the implementation of federal election administration laws. Perhaps as a result, Congress has specified how states and localities should distribute certain election administration duties and structure certain elements of their election systems. Changes to the duties and structures of state and local election systems have sometimes also been side effects of other federal activity on election administration. This section provides examples of ways in which the distribution of election administration duties at the state and local levels and the structures of state and local election systems can affect the implementation of federal election administration law. These examples include federal efforts to affect the administration of elections through (1) requirements, (2) funding, and (3) information sharing. Congress can use requirements to regulate how states and localities administer certain aspects of federal elections. How well such requirements serve their intended purposes depends in part on how closely states and localities comply with them. How closely states and localities comply with federal requirements may, in turn, be affected by the duties and structures of the state and local election systems that implement them. For example, UOCAVA assigns responsibility for complying with some of its requirements to the states (52 U.S.C. §20302), but the tasks required for compliance are often handled by local officials. One scholar, law professor Justin Weinstein-Tull, indicates that this means that the officials who are held liable for compliance with UOCAVA requirements may differ from the officials who take or fail to take the actions needed to comply. Box 6 provides an illustration of this phenomenon as reported by state officials in Alabama. The federal government can provide funding for state and local election administration, which may be conditional on the adoption of certain election administration policies or practices. How well such funding serves its intended purposes may depend in part on how timely it is and how well-tailored it is to its objectives. Duties and structures of state and local election systems may affect how quickly federal funding is claimed and used and how well the uses to which it is put serve federal objectives. For example, HAVA has authorized payments to states to meet its requirements (52 U.S.C. §21007). It has directed those payments to be disbursed to states (52 U.S.C. §21001(a)) and charged chief state election officials with overseeing decisions about how to spend them (52 U.S.C. §21005(a)). State election officials run federal elections in some states, but those states are the exception. As noted in \" Implementation \" and \" Funding ,\" most states assign election administration implementation and funding duties to local officials. That means that the officials who receive HAVA funding and are charged with overseeing decisions about how to use it often differ from the officials who conduct and pay for the activities and resources it is intended to fund. That has had at least two reported consequences. First, in some cases, it has reportedly delayed access to or use of some HAVA funds. Directing HAVA funding to states introduces opportunities for state-level delays, such as decisions by state officials to wait to claim the funds or requirements in state law to obtain approval to do so. Second, some local officials have stated the view that their states' shares of HAVA funding were not put to what they considered the areas of greatest need. Box 7 provides examples of such consequences as described by state and local officials in Nevada, Minnesota, and Virginia. Congress can require or facilitate information sharing with states and localities by federal agencies. As with funding, the effectiveness of federal information sharing may depend in part on how timely it is. How quickly federal agencies share information with the appropriate state and local officials may be affected by the distribution of election administration duties at the state and federal levels. Box 8 provides an example of such an effect reported by NASS. Past federal action has resulted in both intentional and unintentional changes to state and local election systems. Some federal laws include provisions that are specifically designed to establish certain responsibilities for election administration at the state level. For example, the NVRA requires states to designate chief state election officials to coordinate state responsibilities under the act (52 U.S.C. §20509), and HAVA charges chief state election officials with implementing a statewide voter registration system (52 U.S.C. §21083(a)(1)(A)). Federal regulation has reportedly also had the side effect of shifting the distribution of other election administration duties. For example, the agency-based registration requirements in the NVRA divide voter registration responsibilities between traditional election offices and offices that had not historically been involved in election administration, such as motor vehicle and public assistance agencies (52 U.S.C. §20504; 52 U.S.C. §20506). According to Hale, Montjoy, and Brown, \"the need to pass implementing legislation and the complexity of legal and technical requirements\" in federal laws such as HAVA and the NVRA has also \"led many states to grant new or additional rule-making power\" to their chief state election officials. Congress has considered legislation—some of which has been enacted and some of which has not—that would change election rules or the state and local systems that implement them. The interactions between the duties and structures of state and local election systems and past federal actions suggest some considerations that may be relevant to future congressional consideration of proposals that would affect the administration of federal elections. The following questions may be of interest to Members as they consider making changes to election administration or maintaining current rules and structures: How would any proposed change interact with the duties and structures of state and local election systems? Would the duties and structures of state and local election systems make a proposed change difficult to implement? Would the design of a proposed change need to be adjusted to accommodate variations between or within states? Which of the policy tools available to Congress is best suited to achieving the purpose of a proposed change? For example, would it be more effective to advance a proposed change with a federal requirement, or incentivize it via federal funding? How might the nature of the state and local system inform a proposed change? For example, if it is a federal requirement, who is charged with compliance; who is responsible for the tasks required for compliance; and what is the relationship between the two? If it is federal funding, to whom should it be distributed, and who should be involved in making decisions about how to use it? Would a proposed change have the effect, either intentionally or unintentionally, of altering the duties or structures of state or local election systems? If so, what are the advantages and disadvantages of such changes? Are there complications with a proposed change that are not specifically related to election administration? For example, could there be federalism-related issues with intervening in the relationships between states and their political subdivisions? ", "summary": "The administration of elections in the United States is highly decentralized. Elections are primarily administered by thousands of state and local systems rather than a single, unified national system. States and localities share responsibility for most election administration duties. Exactly how responsibilities are assigned at the state and local levels varies both between and within states, but there are some general patterns in the distribution of duties. States typically have primary responsibility for making decisions about the rules of elections (policymaking). Localities typically have primary responsibility for conducting elections in accordance with those rules (implementation). Localities, with varying contributions from states, typically also have primary responsibility for paying for the activities and resources required to conduct elections (funding). The structures of the state and local systems that conduct elections also vary between and within states. Common variations include differences related to the leadership of the system, the relationship between local election officials and the state, and the population size and density of the jurisdiction the system serves. The leadership of a state or local election system may be elected or appointed, and both the leaders and the methods used to select them may be partisan, bipartisan, or nonpartisan. State officials may have more or less direct influence over local election officials, and the extent of their influence may be affected by other structural features of the state's election systems, such as the methods used to select local officials. Finally, larger election jurisdictions have different administrative advantages and challenges than smaller ones, and more urban jurisdictions have different advantages and challenges than more rural ones. These differences between jurisdictions may be reflected in structural features of the election systems that serve them, such as how the systems allocate resources and where they find specialized expertise. Understanding the duties and structures of state and local election systems may be relevant to Congress for at least two reasons. First, the way state and local election systems work can affect how well federal action on election administration serves its intended purposes. The effectiveness of federal action depends in part on how it is implemented. How it is implemented can depend, in turn, on how the state and local election systems that implement it work. Second, Congress can make or incentivize changes to the way state and local election systems work. Congress has a number of policy tools it can use to affect the administration of federal elections. The use of these tools can—either intentionally or unintentionally—affect the state and local election systems that administer federal elections.", "document_type": "crs"}
{"report": "Iran ratified the nuclear Nonproliferation Treaty (NPT) in 1970. Article III of the treaty requires non-nuclear-weapon states-parties to accept comprehensive International Atomic Energy Agency (IAEA) safeguards; Tehran concluded a comprehensive safeguards agreement with the IAEA in 1974. In 2002, the agency began investigating allegations that Iran had conducted clandestine nuclear activities; the IAEA ultimately reported that some of these activities had violated Tehran's safeguards agreement. Following more than three years of investigation, the IAEA Board of Governors referred the matter to the U.N. Security Council in February 2006. Since then, the council adopted six resolutions requiring Iran to take steps to alleviate international concerns about its nuclear program. This report provides a brief overview of Iran's nuclear program and describes the legal basis for the actions taken by the IAEA board and the Security Council. For more detailed information about Iran's nuclear program, see CRS Report RL34544, Iran's Nuclear Program: Status , by Paul K. Kerr. For more information about the July 2015 Joint Comprehensive Plan of Action (JCPOA) concerning Iran's nuclear program, see CRS Report R43333, Iran Nuclear Agreement , by Kenneth Katzman and Paul K. Kerr. Iran's nuclear program has generated widespread concern that Tehran is pursuing nuclear weapons. Tehran's construction of gas centrifuge uranium enrichment facilities has been the main source of proliferation concern. Gas centrifuges enrich uranium by spinning uranium hexafluoride gas at high speeds to increase the concentration of the uranium-235 isotope. Such centrifuges can produce both low-enriched uranium (LEU), which can be used in nuclear power reactors, and highly enriched uranium (HEU), which is one of the two types of fissile material used in nuclear weapons. HEU can also be used as fuel in certain types of nuclear reactors. Iran also has a uranium conversion facility, which converts uranium oxide into several compounds, including uranium hexafluoride. Tehran claims that it wants to produce LEU for its current and future power reactors. Iran's construction of a reactor moderated by heavy water has also been a source of concern. Although Tehran says that the reactor, which Iran is building at Arak, is intended for the production of medical isotopes, it was a proliferation concern because the reactor's spent fuel would have contained plutonium well-suited for use in nuclear weapons. In order to be used in nuclear weapons, however, plutonium must be separated from the spent fuel—a procedure called \"reprocessing.\" Iran has said that it will not engage in reprocessing. Pursuant to the Joint Comprehensive Plan of Action (JCPOA), which Iran concluded in July 2015 with China, France, Germany, Russia, the United Kingdom, and the United States (collectively known as the \"P5+1\"), Tehran has rendered the Arak reactor's original core inoperable. Iran has also begun to fulfill a JCPOA requirement to redesign and rebuild the Arak reactor based on a design agreed to by the P5+1 so that it will not produce weapons-grade plutonium. The agreement also requires Iran to export the spent fuel from this reactor and all other nuclear reactors. Iran and the IAEA agreed in August 2007 on a work plan to clarify the outstanding questions regarding Tehran's nuclear program. Most of these questions, which had contributed to suspicions that Iran had been pursuing a nuclear weapons program, were subsequently resolved. Then-IAEA Director General Mohamed ElBaradei, however, told the IAEA board June 2, 2008, that there was \"one remaining major [unresolved] issue,\" which concerns questions regarding \"possible military dimensions to Iran's nuclear programme.\" The IAEA agency did not make any substantive progress on these matters for some time. Tehran has questioned the authenticity of some of the evidence underlying the agency's concerns and maintains that it has not done any work on nuclear weapons. Iran also expressed concern to the IAEA that resolving some of these issues would require agency inspectors to have \"access to sensitive information related to its conventional military and missile related activities.\" The IAEA, according to a September 2008 report from ElBaradei, stated its willingness to discuss with Iran modalities that could enable Iran to demonstrate credibly that the activities referred to in the documentation are not nuclear related, as Iran asserts, while protecting sensitive information related to its conventional military activities. Indeed, the agency made several specific proposals, but Tehran did not provide the requested information. The IAEA Board of Governors adopted a resolution on November 18, 2011, stating that \"it is essential\" for Iran and the IAEA \"to intensify their dialogue aiming at the urgent resolution of all outstanding substantive issues.\" IAEA and Iranian officials met 10 times between January 2012 and May 2013 to discuss what the agency termed a \"structured approach to the clarification of all outstanding issues related to Iran's nuclear programme.\" However, during an October 2013 meeting, IAEA officials and their Iranian counterparts decided to adopt a \"new approach\" to resolving these issues. Iran signed a joint statement with the IAEA on November 11, 2013, describing a \"Framework for Cooperation.\" According to the statement, Iran and the IAEA agreed to \"strengthen their cooperation and dialogue aimed at ensuring the exclusively peaceful nature of Iran's nuclear programme through the resolution of all outstanding issues that have not already been resolved by the IAEA.\" Iran subsequently provided the agency with information about several of the outstanding issues. Iran later agreed in May 2014 to provide information to the IAEA by August 25, 2014, about five additional issues, including alleged Iranian research on high explosives and \"studies made and/or papers published in Iran in relation to neutron transport and associated modelling and calculations and their alleged application to compressed materials.\" Iran subsequently provided information about four of these issues. According to the JCPOA, Iran was to \"complete\" a series of steps set out in an Iran-IAEA \"Roadmap for Clarification of Past and Present Outstanding Issues.\" According to IAEA Director General Yukiya Amano, this road map set out \"a process\" under a November 24, 2013, Joint Plan of Action between Iran and the P5+1, \"to enable the Agency, with the cooperation of Iran, to make an assessment of issues relating to possible military dimensions to Iran's nuclear programme.\" According to a December 2, 2015, report from Amano to the IAEA Board of Governors, \"[a]ll the activities contained in the road-map were implemented in accordance with the agreed schedule.\" The road map required Amano to present this report, which contains the agency's \"final assessment on the resolution\" of the aforementioned outstanding issues. In response, the board adopted a resolution on December 15, 2015, that notes Iran's cooperation with the road map and \"further notes that this closes the Board's consideration\" of the \"outstanding issues regarding Iran's nuclear programme.\" Since the IAEA has verified that Iran has taken the steps required for Implementation Day to take effect, the board is no longer focused on Iran's compliance with past Security Council resolutions and past issues concerning Iran's safeguards agreement. Instead, the board is focused on monitoring and verifying Iran's JCPOA implementation \"in light of\" United Nations Security Council Resolution 2231, which the Council adopted on July 20, 2015. This latter resolution requests the IAEA Director General \"to undertake the necessary verification and monitoring of Iran's nuclear-related commitments for the full duration of those commitments under the JCPOA.\" The December 2015 IAEA resolution requests the Director General to issue quarterly reports to the board regarding Iran's \"implementation of its relevant commitments under the JCPOA for the full duration of those commitments.\" The Director General is also to report to the Board of Governors and the Security Council \"at any time if the Director General has reasonable grounds to believe there is an issue of concern\" regarding Tehran's compliance with its JCPOA or safeguards obligations. The JCPOA and Resolution 2231 also contain a variety of reporting provisions for the IAEA. For example, the resolution requests the agency's Director General to provide regular updates to the IAEA Board of Governors and, as appropriate, in parallel to the Security Council on Iran's implementation of its commitments under the JCPOA and also to report to the IAEA Board of Governors and in parallel to the Security Council at any time if the Director General has reasonable grounds to believe there is an issue of concern directly affecting fulfilment of JCPOA commitments. Several U.N. Security Council Resolutions required Iran to cooperate fully with the IAEA's investigation of its nuclear activities, suspend its uranium enrichment program, suspend its construction of a heavy-water reactor and related projects, and ratify the Additional Protocol to its IAEA safeguards agreement. Tehran has signed, but not ratified, its Additional Protocol. Resolution 1929, which the council adopted in June 2010, contains these requirements and also required Tehran to refrain from \"any activity related to ballistic missiles capable of delivering nuclear weapons.\" Iran has also continued its extensive ballistic missile program. Resolution 1929 also required Iran to comply with the modified Code 3.1 of its subsidiary arrangements. (See \" Potential Noncompliance Since September 2005 .\") Iran did not take any of these steps prior to concluding the JCPOA, but did limit and reverse some aspects of its nuclear program since the government began implementing the November 2013 Joint Plan of Action. Moreover, pursuant to the Joint Plan of Action and its November 2013 agreement with the IAEA, Iran provided some information to the agency required by the modified Code 3.1. Pursuant to the JCPOA, Tehran has since implemented additional restrictions on its uranium enrichment program and heavy-water reactor program, as well as begun implementing its additional protocol and the modified Code 3.1. On the JCPOA's Implementation Day, which took place on January 16, 2016, all of the previous Security Council resolutions' requirements were terminated pursuant to U.N. Security Council Resolution 2231, which along with the NPT, composes the current legal framework governing Iran's nuclear program. Although the IAEA reports findings of its inspection and monitoring activities and the JCPOA-established Joint Commission monitors the parties' implementation of the agreement, compliance determinations are national decisions. \"Iran continued to adhere\" to its JCPOA commitments during 2017, according to an April 2018 State Department report covering that period. All official reports and statements from the United Nations, European Union, the IAEA, and the non-U.S. participating governments also indicate that Iran has complied with the JCPOA and related Resolution 2231 requirements. The most recent report from IAEA Director General Amano states that the IAEA has continued verification and monitoring of the restrictions described in Section T of the JCPOA, which prohibits a number of nuclear weapons-related activities. The agreement, as noted, describes arrangements for agency inspectors to gain access to Iranian sites, including military sites, other than those that Tehran has declared to the agency, \"if the IAEA has concerns regarding undeclared nuclear materials or activities, or activities inconsistent with\" the JCPOA. The agreement also provides for alternative means to clarify the matter. The IAEA has not reported whether it has requested access to any Iranian military facilities, but the agency has a number of methods other than inspections, such as analyzing open-source information and receiving intelligence briefings from governments, to monitor Iranian compliance with these and other JCPOA commitments. According to the April 2018 State Department report [t]he IAEA continues to exercise its full authorities in pursuing any new safeguards-relevant or JCPOA-related information in Iran, including any new concerns regarding weaponization should they arise, through implementation of Iran's Safeguards Agreement, Additional Protocol, and the enhanced transparency and verification measures contained in the JCPOA. There are no apparent disputes between Iran and the IAEA with respect to Iranian cooperation with the agency. Amano noted in an October 2, 2018, statement that the IAEA has been able to access \"all the sites and locations in Iran which\" agency inspectors \"needed to visit.\" Similarly, a February 2019 report from Amano states that the IAEA \"has conducted complementary accesses under the Additional Protocol to all the sites and locations in Iran which it needed to visit.\" As noted, Iran is a party to the NPT and has concluded a comprehensive safeguards agreement with the agency. Such agreements are designed to enable the IAEA to detect the diversion of nuclear material from peaceful purposes to nuclear weapons uses, as well as to detect undeclared nuclear activities and material. Safeguards include agency inspections and monitoring of declared nuclear facilities. Although comprehensive safeguards agreements give the IAEA the authority \"to verify the absence of undeclared nuclear material and activities, the tools available to it to do so, under such agreements, are limited,\" according to the agency. As a practical matter, the IAEA's ability to inspect and monitor nuclear facilities, as well as obtain information, in a particular country pursuant to that government's comprehensive safeguards agreement is limited to facilities and activities that have been declared by the government. Additional Protocols to IAEA comprehensive safeguards agreements increase the agency's ability to investigate undeclared nuclear facilities and activities by increasing the IAEA's authority to inspect certain nuclear-related facilities and demand information from member states. Iran signed such a protocol in December 2003 and agreed to implement the agreement pending ratification. Tehran stopped adhering to its Additional Protocol in 2006. The IAEA's authority to investigate nuclear-weapons-related activity is limited. Then Director General ElBaradei explained in a 2005 interview that the IAEA does not have \"an all-encompassing mandate to look for every computer study on weaponization. Our mandate is to make sure that all nuclear materials in a country are declared to us.\" Similarly, a February 2006 report from ElBaradei to the IAEA board stated that \"absent some nexus to nuclear material the agency's legal authority to pursue the verification of possible nuclear weapons related activity is limited.\" There is no requirement that there be any nexus to nuclear material in order for the IAEA to request access to a facility, but there are disagreements among IAEA member states regarding the extent of the agency's rights to access locations where there is no reason to suspect the presence of nuclear material. Such disagreements could play a role if the IAEA Board is required to consider a request for special inspections in Iran or another country (see Appendix B ). Therefore, the closer the connection between nuclear material and the location in question, the more likely the Board would be to approve such an inspection. The current public controversy over Iran's nuclear program began in August 2002, when the National Council of Resistance on Iran (NCRI), an Iranian exile group, revealed information during a press conference (some of which later proved to be accurate) that Tehran had built nuclear-related facilities that it had not revealed to the IAEA. The United States had been aware of at least some of these activities, according to knowledgeable former officials. Prior to the NCRI's revelations, the IAEA had expressed concerns that Iran had not been providing the agency with all relevant information about its nuclear programs, but had never found Tehran in violation of its safeguards agreement. In fall 2002, the IAEA began to investigate Iran's nuclear activities at the sites named by the NCRI; inspectors visited the sites the following February. Adopting its first resolution on the matter in September 2003, the IAEA board called on Tehran to increase its cooperation with the agency's investigation, suspend its uranium enrichment activities, and \"unconditionally sign, ratify and fully implement\" an Additional Protocol. In October 2003, Iran concluded a voluntary agreement with France, Germany, and the United Kingdom, collectively known as the \"E3,\" to suspend its enrichment activities, sign and implement an Additional Protocol to its IAEA safeguards agreement, and comply fully with the IAEA's investigation. As a result, the agency's board decided to refrain from referring the matter to the U.N. Security Council. As noted, Tehran signed this Additional Protocol in December 2003, but has never ratified it. Ultimately, the IAEA's investigation, as well as information Iran provided after the October 2003 agreement, revealed that Iran had engaged in a variety of clandestine nuclear-related activities, some of which violated the country's safeguards agreement (see Appendix A ). After October 2003, Iran continued some of its enrichment-related activities, but Tehran and the E3 agreed in November 2004 to a more detailed suspension agreement. However, Iran resumed uranium conversion in August 2005 under the leadership of then-President Mahmoud Ahmadinejad, who had been elected two months earlier. On September 24, 2005, the IAEA Board of Governors adopted a resolution (GOV/2005/77) that, for the first time, found Iran to be in noncompliance with its IAEA safeguards agreement. The board, however, did not refer Iran to the Security Council, choosing instead to give Tehran additional time to comply with the board's demands. The resolution urged Iran to implement transparency measures including access to individuals, documentation relating to procurement, dual use equipment, certain military owned workshops, and research and development locations; to reestablish full and sustained suspension of all enrichment-related activity; to reconsider the construction of the research reactor moderated by heavy water; to ratify promptly and implement in full the Additional Protocol; and to continue to act in accordance with the provisions of the Additional Protocol. No international legal obligations required Tehran to take these steps. But ElBaradei's September 2008 report asserted that, without Iranian implementation of such \"transparency measures,\" the IAEA would \"not be in a position to progress in its verification of the absence of undeclared nuclear material and activities in Iran.\" Iran announced in January 2006 that it would resume research and development on its centrifuges at Natanz. The next month, the IAEA Board of Governors referred Iran's case to the U.N. Security Council. Tehran announced shortly after that it would stop implementing its Additional Protocol. (For details, see \" Iran and the U.N. Security Council \" below.) Iran further scaled back its cooperation with the IAEA in March 2007, when the government told the agency that it would stop complying with a portion of the subsidiary arrangements for its IAEA safeguards agreement. That provision (called the modified code 3.1), to which Iran agreed in February 2003, requires Tehran to provide design information for new nuclear facilities \"as soon as the decision to construct, or to authorize construction, of such a facility has been taken, whichever is earlier.\" Beginning in March 2007, Iran argued that it was only obligated to adhere to the previous notification provisions of its subsidiary arrangements, which required Tehran to provide design information for a new facility 180 days before introducing nuclear material into it. This decision constituted the basis for Iran's stated rationale for its subsequent refusal to provide the IAEA with some information concerning its nuclear program. For example, Tehran had refused to provide updated design information for the heavy-water reactor under construction at Arak. As part of the November 2013 Joint Plan of Action, Iran submitted this information to the IAEA on February 12, 2014. Similarly, Tehran had refused to provide the IAEA with design information for a reactor that Iran intends to construct at Darkhovin. Although Iran provided the agency with preliminary design information about the Darkhovin reactor in a September 22, 2009, letter, the IAEA requested Tehran to \"provide additional clarifications\" of the information, according to a November 2009 report. Amano reported in September 2010 that Iran had \"provided only limited design information with respect to\" the reactor. IAEA reports since 2012 do not appear to address this issue. Tehran also argued, based on its March 2007 decision, that its failure to notify the IAEA before September 2009 that it has been constructing a gas-centrifuge uranium enrichment facility, called the Fordow facility, near the city of Qom was consistent with the government's safeguards obligations. Exactly when Iran decided to construct the facility is unclear. Amano reported in May 2012 that the IAEA has requested information from Iran regarding the Fordow construction decision. But Tehran, according to Amano's November 2015 report, has not yet provided all of this information. Subsequent reports from Amano have not addressed the issue. Both the 2007 decision, which the IAEA asked Iran to \"reconsider,\" and Tehran's refusal to provide the design information appear to be inconsistent with the government's safeguards obligations. Although Article 39 of Iran's safeguards agreement states that the subsidiary arrangements \"may be extended or changed by agreement between\" Iran and the IAEA, the agreement does not provide for a unilateral modification or suspension of any portion of those arrangements. Moreover, the IAEA legal adviser explained in a March 2009 statement that Tehran's failure to provide design information for the reactors is \"inconsistent with\" Iran's obligations under its subsidiary arrangements. The adviser, however, added that \"it is difficult to conclude that\" Tehran's refusal to provide the information \"in itself constitutes noncompliance with, or a breach of\" Iran's safeguards agreement. Nevertheless, a November 2009 report from ElBaradei described Tehran's failures both to notify the agency of the decision to begin constructing the Fordow facility, as well as to provide the relevant design information in a timely fashion, as \"inconsistent with\" Iran's safeguards obligations. The report similarly described Iran's delay in providing design information for the Darkhovin reactor. Iran may also have violated its safeguards agreement if it decided to construct other new nuclear facilities without informing the IAEA. The agency has investigated whether Iran has made such decisions. For example, the IAEA has asked the government for information about Iranian statements that the government is planning to construct new uranium enrichment facilities, is designing a nuclear reactor similar to a research reactor located in Tehran, is producing fuel for four new research reactors, and is planning to construct additional nuclear power reactors. Pursuant to its November 2013 agreement with the IAEA, Iran has provided at least some of this information to the agency. Iran's March 2007 decision regarding the provision of information to the IAEA also formed the basis for Tehran's refusal until August 2009 to allow agency inspectors to verify design information for the Arak reactor. This action also appeared to be inconsistent with Tehran's safeguards agreement. Article 48 of that agreement states that the IAEA \"may send inspectors to facilities to verify the design information provided to the Agency\"; in fact, the agency has a \"continuing right\" to do so, according to a November 2008 report from ElBaradei. Moreover, the legal adviser's statement characterized Iran's refusal to allow IAEA inspectors to verify the Arak reactor's design information as \"inconsistent with\" Tehran's obligations under its safeguards agreement. IAEA inspectors visited the reactor facility in August 2009 to verify design information, according to a report ElBaradei issued the same month. Inspectors have visited the facility several more times, according to reports from Amano. In addition to the lapses described above, Iran's failure to notify the IAEA of its decision to produce enriched uranium containing a maximum of 20% uranium-235 in time for agency inspectors to adjust their safeguards procedures may, according to a February 2010 report from Amano, have violated Iran's IAEA safeguards agreement. Article 45 of that agreement requires that Tehran notify the IAEA \"with design information in respect of a modification relevant for safeguards purposes sufficiently in advance for the safeguards procedures to be adjusted when necessary,\" according to Amano's report, which describes Iran's enrichment decision as \"clearly relevant for safeguards purposes.\" The IAEA board has neither formally found that any of the Iranian actions described above are in noncompliance with Tehran's safeguards agreement, nor referred these issues to the U.N. Security Council. The IAEA board adopted a resolution on November 27, 2009, that described Iran's failure to notify the agency of the Fordow facility as \"inconsistent with\" the subsidiary arrangements under Iran's safeguards agreement, but this statement did not constitute a formal finding of noncompliance. A September 13, 2012, IAEA board resolution expressed \"serious concern\" that Tehran has not complied with the obligations described in IAEA Board of Governors and U.N. Security Council resolutions, but the September resolution did not contain a formal finding of noncompliance. As noted, Iran announced in January 2006 that it would resume research and development on its centrifuges at Natanz. In response, the IAEA board adopted a resolution (GOV/2006/14) on February 4, 2006, referring the matter to the Security Council and reiterating its call for Iran to take the measures specified in the September resolution. Two days later, Tehran announced that it would stop implementing its Additional Protocol. On March 29, 2006, the U.N. Security Council President issued a statement, which was not legally binding, that called on Iran to \"take the steps required\" by the February IAEA board resolution. The council subsequently adopted six resolutions concerning Iran's nuclear program: 1696 (July 2006), 1737 (December 2006), 1747 (March 2007), 1803 (March 2008), 1835 (September 2008), and 1929 (June 2010). The second, third, fourth, and sixth resolutions imposed a variety of restrictions on Iran. Resolution 1696 was the first to place legally binding Security Council requirements on Iran with respect to its nuclear program. That resolution made mandatory the IAEA-demanded suspension and called on Tehran to implement the transparency measures called for by the IAEA board's February 2006 resolution. Resolution 1737 reiterated these requirements but expanded the suspension's scope to include \"work on all heavy water-related projects.\" It is worth noting that the Security Council has acknowledged (in Resolution 1803, for example) Iran's rights under Article IV of the NPT, which states that parties to the treaty have \"the inalienable right ... to develop research, production and use of nuclear energy for peaceful Purposes.\" As noted, Resolution 1929 also required Tehran to refrain from \"any activity related to ballistic missiles capable of delivering nuclear weapons\" and to comply with the modified Code 3.1 of its subsidiary arrangement. Resolution 2231, which the U.N. Security Council adopted on July 20, 2015, states that all of the previous resolutions' requirements would be terminated when the council receives a report from the IAEA stating that Iran has implemented the nuclear-related measures by Implementation Day, as described by the July 2015 Joint Comprehensive Plan of Action. As noted, Implementation Day took place on January 16, 2016. Resolution 2231 also \"reaffirms that Iran shall cooperate fully as the IAEA requests to be able to resolve all outstanding issues, as identified in IAEA reports.\" The IAEA Board of Governors' December 2015 resolution noted that the board had closed its consideration of the \"outstanding issues regarding Iran's nuclear programme.\" The JCPOA spells out a process for Iran or the P5+1 to resolve disputes over alleged breaches of their JCPOA commitments pursuant to the agreement. Both the JCPOA and Resolution 2231 contain a \"snap back\" mechanism to reimpose sanctions should Iran fail to resolve satisfactorily a P5+1 claim regarding Iranian JCPOA noncompliance. This mechanism provides that any permanent UN Security Council member would be able to veto a Security Council resolution that would preserve U.N. sanctions relief in the event of Iranian noncompliance. The JCPOA specifies that, in such a case, \"the provisions of the old U.N. Security Council resolutions would be re-imposed, unless the U.N. Security Council decides otherwise.\" The other P5+1 states are able to invoke this mechanism, but whether the United States may do so is unclear because Resolution 2231 provides that only a \"JCPOA participant state\" may bring a noncompliance finding to the Security Council; U.S. officials have stated that the United States is no longer participating in the agreement. The legal authority for the actions taken by the IAEA Board of Governors and the U.N. Security Council is found in both the IAEA Statute and the U.N. Charter. The following sections discuss the relevant portions of those documents. Two sections of the IAEA Statute explain what the agency should do if an IAEA member state is found to be in noncompliance with its safeguards agreement. Article III B. 4. of the statute states that the IAEA is to submit annual reports to the U.N. General Assembly and, \"when appropriate,\" to the U.N. Security Council. If \"there should arise questions that are within the competence of the Security Council,\" the article adds, the IAEA \"shall notify the Security Council, as the organ bearing the main responsibility for the maintenance of international peace and security.\" Additionally, Article XII C. states that IAEA inspectors are to report noncompliance issues to the agency's Director General, who is to report the matter to the IAEA Board of Governors. The board is then to \"call upon the recipient State or States to remedy forthwith any non-compliance which it finds to have occurred,\" as well as \"report the non-compliance to all members and to the Security Council and General Assembly of the United Nations.\" In the case of Iran, the September 24, 2005, IAEA board resolution (GOV/2005/77) stated that the board found that Iran's many failures and breaches of its obligations to comply with its NPT Safeguards Agreement, as detailed in GOV/2003/75 [a November 2003 report from then-Director General ElBaradei], constitute non compliance in the context of Article XII.C of the Agency's Statute; According to the resolution, the board also found that the history of concealment of Iran's nuclear activities referred to in the Director General's report [GOV/2003/75], the nature of these activities, issues brought to light in the course of the Agency's verification of declarations made by Iran since September 2002 and the resulting absence of confidence that Iran's nuclear programme is exclusively for peaceful purposes have given rise to questions that are within the competence of the Security Council, as the organ bearing the main responsibility for the maintenance of international peace and security. ElBaradei issued the report cited by the resolution, GOV/2003/75, in November 2003. It described a variety of Iranian nuclear activities, which are detailed in Appendix A , that violated Tehran's safeguards agreement. ElBaradei subsequently reported that Iran has taken corrective measures to address these safeguards breaches. As noted above, the 2005 resolution called on Iran to take a variety of actions that Tehran was not legally required to implement. Several articles of the U.N. Charter, which is a treaty, describe the Security Council's authority to impose requirements and sanctions on Iran. Article 24 confers on the council \"primary responsibility for the maintenance of international peace and security.\" The article also states that the \"specific powers granted to the Security Council for the discharge of these duties are laid down\" in several chapters of the charter, including Chapter VII, which describes the actions that the council may take in response to \"threats to the peace, breaches of the peace, and acts of aggression.\" Chapter VII of the charter contains three articles relevant to the Iran case. Security Council resolutions that made mandatory the IAEA's demands concerning Iran's nuclear program invoked Chapter VII. Article 39 of that chapter states that the council shall determine the existence of any threat to the peace, breach of the peace, or act of aggression and shall make recommendations, or decide what measures shall be taken in accordance with Articles 41 and 42, to maintain or restore international peace and security. Resolution 1696 invoked Article 40 of Chapter VII \"in order to make mandatory the suspension required by the IAEA.\" As noted, that resolution did not impose any sanctions on Iran. Article 40 states that the Security Council may, before making the recommendations or deciding upon the measures provided for in Article 39 [of Chapter VII], call upon the parties concerned to comply with such provisional measures as it deems necessary or desirable. Resolutions 1737, 1747, 1803, and 1929, which did impose sanctions, invoked Article 41 of Chapter VII. According to Article 41, the Security Council may decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. These may include complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations. As noted, Security Council resolution 1835 did not impose new sanctions, but reaffirmed the previous resolutions and called on Iran to comply with them. It is worth noting that Article 25 of the U.N. Charter obligates U.N. members \"to accept and carry out the decisions of the Security Council.\" Moreover, Article 103 of the Charter states that [i]n the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail. The IAEA also has an obligation to cooperate with the Security Council, \"[b]y virtue of its Relationship Agreement with the United Nations.\" As noted, Security Council Resolution 2231 requests the IAEA Director General \"to undertake the necessary verification and monitoring of Iran's nuclear-related commitments for the full duration of those commitments under the JCPOA.\" Whether Iran has violated the NPT is unclear. The treaty does not contain a mechanism for determining that a state-party has violated its obligations. Moreover, there does not appear to be a formal procedure for determining such violations. An NPT Review Conference would, however, be one venue for NPT states-parties to make such a determination. The U.N. Security Council has never declared Iran to be in violation of the NPT; neither the council nor the U.N. General Assembly has a responsibility to adjudicate treaty violations. However, the lack of a ruling by the council on Iran's compliance with the NPT has apparently had little practical effect because, as noted, the council has taken action in response to the IAEA Board of Governors' determination that Iran has violated its safeguards agreement. Iran's violations of its safeguards agreement appear to constitute violations of Article III, which requires NPT non-nuclear-weapon states-parties to accept IAEA safeguards, in accordance with the agency's statue, \"for the exclusive purpose of verification of the fulfillment of its obligations assumed under this Treaty with a view to preventing diversion of nuclear energy from peaceful uses to nuclear weapons or other nuclear explosive devices.\" Tehran may also have violated provisions of Article II which state that non-nuclear-weapon states-parties shall not \"manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices\" or \"seek or receive any assistance in the manufacture of nuclear weapons or other nuclear explosive devices.\" As noted, the IAEA investigated evidence of what then-IAEA Director General Mohamed ElBaradei described in June 2008 as \"possible military dimensions to Iran's nuclear programme.\" Such activities may indicate that Tehran has violated both Article II provisions described above. Moreover, a November 2007 National Intelligence Estimate (NIE) stated that \"until fall 2003, Iranian military entities were working under government direction to develop nuclear weapons.\" This past program could be a violation of Article II, although the estimate does not provide any detail about the program. Nevertheless, the IAEA has never reported that Iran has attempted to develop nuclear weapons. Despite the lack of such an IAEA conclusion, a 2005 State Department report regarding states' compliance with nonproliferation agreements argued that the country had violated Article II of the NPT: The breadth of Iran's nuclear development efforts, the secrecy and deceptions with which they have been conducted for nearly 20 years, its redundant and surreptitious procurement channels, Iran's persistent failure to comply with its obligations to report to the IAEA and to apply safeguards to such activities, and the lack of a reasonable economic justification for this program leads us to conclude that Iran is pursuing an effort to manufacture nuclear weapons, and has sought and received assistance in this effort in violation of Article II of the NPT. The report also stated that Iran's \"weapons program combines elements\" of Tehran's declared nuclear activities, as well as suspected \"undeclared fuel cycle and other activities that may exist, including those that may be run solely by the military.\" The State Department's 2005 reasoning appears to be based on an interpretation of the NPT which holds that a wide scope of nuclear activities could constitute violations of Article II. The 2005 report states that assessments regarding Article II compliance \"must look at the totality of the facts, including judgments as to\" a state-party's \"purpose in undertaking the nuclear activities in question.\" The report also includes a list of activities which could constitute such noncompliance. The 2005 State Department report cites testimony from then-Arms Control and Disarmament Agency Director William Foster during a 1968 Senate Foreign Relations Committee hearing. Foster stated that \"facts indicating that the purpose of a particular activity was the acquisition of a nuclear explosive device would tend to show non-compliance\" with Article II. He gave two examples: \"the construction of an experimental or prototype nuclear explosive device\" and \"the production of components which could only have relevance\" to such a device. However, Foster also noted that a variety of other activities could also violate Article II, adding that the United States believed it impossible \"to formulate a comprehensive definition or interpretation.\" It is worth noting that the 2005 State Department report's arguments appear to rely heavily on the notion that a state's apparent intentions underlying certain nuclear-related activities can be used to determine violations of Article II. This interpretation is not shared by all experts. The 2005 report \"primarily reflected activities from January 2002 through December 2003.\" Whether the State Department assesses that Iran has violated Article II since then is unclear. A version of the report released in 2010, which primarily reflected activities from January 1, 2004, through December 31, 2008, states that \"the issues underlying\" the 2005 report's conclusion regarding Iran's Article II compliance \"remain unresolved.\" Subsequent versions of the report reiterated the 2010 report's assessment until 2016, when the State Department assessed that \"previous issues leading to NPT noncompliance findings [regarding Iran] had been resolved.\" As noted, the 2007 NIE assessed that Iran halted its nuclear weapons program in 2003; subsequent U.S. official statements have consistently reiterated that Tehran has not yet decided to build nuclear weapons. The United Kingdom's then-Foreign Secretary William Hague would not say whether Iran had violated Article II when asked by a Member of Parliament in March 2012. Appendix A. Iranian Noncompliance with Its IAEA Safeguards Agreement The November 2003 report (GOV/2003/75) from IAEA Director General ElBaradei to the agency's Board of Governors details what the September 2005 board resolution described as \"Iran's many failures and breaches of its obligations to comply with its safeguards agreement.\" The report stated that Iran has failed in a number of instances over an extended period of time to meet its obligations under its Safeguards Agreement with respect to the reporting of nuclear material and its processing and use, as well as the declaration of facilities where such material has been processed and stored. The report detailed some of these failures and referenced other failures described in two earlier reports (GOV/2003/40 and GOV/2003/63) from ElBaradei to the IAEA board. According to GOV/2003/40, Iran failed to declare the following activities to the agency: The importation of natural uranium, and its subsequent transfer for further processing. The processing and use of the imported natural uranium, including the production and loss of nuclear material, and the production and transfer of resulting waste. Additionally, Iran failed to declare the facilities where nuclear material (including the waste) was received, stored, and processed; provide in a timely manner updated design information for a research reactor located in Tehran; as well as provide in a timely manner information on two waste storage sites. GOV/2003/63 stated that Iran failed to report uranium conversion experiments to the IAEA. According to GOV/2003/75, Iran failed to report the following activities to the IAEA: The use of imported natural uranium hexafluoride for the testing of centrifuges, as well as the subsequent production of enriched and depleted uranium. The importation of natural uranium metal and its subsequent transfer for use in laser enrichment experiments, including the production of enriched uranium, the loss of nuclear material during these operations, and the production and transfer of resulting waste. The production of a variety of nuclear compounds from several different imported nuclear materials, and the production and transfer of resulting wastes. The production of uranium targets and their irradiation in the Tehran Research Reactor, the subsequent processing of those targets (including the separation of plutonium), the production and transfer of resulting waste, and the storage of unprocessed irradiated targets. Iran also failed to provide the agency with design information for a variety of nuclear-related facilities, according to the report. These included the following: A centrifuge testing facility. Two laser laboratories and locations where resulting wastes were processed. Facilities involved in the production of a variety of nuclear compounds. The Tehran Research Reactor (with respect to the irradiation of uranium targets), the hot cell facility where the plutonium separation took place, as well as the relevant waste handling facility. Additionally, the report cited Iran's \"failure on many occasions to co-operate to facilitate the implementation of safeguards, through concealment\" of its nuclear activities. Appendix B. IAEA Special Inspections As noted, Iran's obligations under its Additional Protocol to provide access to certain locations are unclear; Tehran may refuse to grant the IAEA access to certain facilities. In such a case, the IAEA Director General could call for a special inspection; the inspection could require approval from the IAEA Board of Governors. According to the IAEA, an inspection is deemed to be special when it is in addition to IAEA routine inspections or \"involves access to information or locations\" that have not been identified to the IAEA as part of the agency's implementation of safeguards in that country. Such inspections \"are foreseen in all Agency safeguards agreements, principally as a means for the Agency to resolve unforeseen verification problems,\" according to a 1991 IAEA document. Paragraph 73 of the model safeguards agreement, INFCIRC 153, states that comprehensive safeguards agreements should provide for the IAEA's ability to \"make special inspections,\" subject to certain procedures, if the agency considers that information made available by the State, including explanations from the State and information obtained from routine inspections, is not adequate for the Agency to fulfill its responsibilities under the Agreement. According to the 1991 document, a special inspection could be triggered by the IAEA's receipt of \"plausible information, which is not adequately explained by the State or otherwise resolved\" by other IAEA inspections that the country has \"nuclear material in a nuclear activity\" outside of IAEA safeguards, or that the state has an undeclared nuclear facility that it had been required to report to the agency. The IAEA Director General \"has the authority ... to determine the need for, and to direct the carrying out of, special inspections,\" according to another 1991 IAEA paper. In the event that the IAEA argues for a special inspection in a country, the agency and the government \"must hold immediate consultations,\" according to the 1991 paper. Any dispute regarding the inspection request must be resolved according to dispute settlement provisions described in INFCIRC 153. However, paragraph 18 of INFCIRC 153 states that if the Board, upon report of the Director General, decides that an action by the State is essential and urgent in order to ensure verification that nuclear material subject to safeguards under the Agreement is not diverted to nuclear weapons or other nuclear explosive devices the Board shall be able to call upon the State to take the required action without delay, irrespective of whether procedures for the settlement of a dispute have been invoked. If the state refuses the inspection, the IAEA Board of Governors can take action according to paragraph 19 of INFCIRC 153, including reporting the matter to the U.N. Security Council. Appendix C. Extended Remarks by William Foster Regarding Possible NPT Article II Violations On July 10, 1968, then-Arms Control and Disarmament Agency Director William Foster testified before the Senate Foreign Relations Committee about the NPT. In response to a question regarding the type of nuclear activities prohibited by Article II of the treaty, Foster supplied the following statement: Extension of Remarks by Mr. Foster in Response to Question Regarding Nuclear Explosive Devices The treaty articles in question are Article II, in which non-nuclear-weapon parties undertake \"not to manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices,\" and Article IV, which provides that nothing in the Treaty is to be interpreted as affecting the right of all Parties to the Treaty \"to develop research, production and use of nuclear energy for peaceful purposes…in conformity with Articles I and II of this Treaty.\" In the course of the negotiation of the Treaty, United States representatives were asked their views on what would constitute the \"manufacture\" of a nuclear weapon or other nuclear explosive device under Article II of the draft treaty. Our reply was as follows: \"While the general intent of this provision seems clear, and its application to cases such as those discussed below should present little difficulty, the United States believe [sic] it is not possible at this time to formulate a comprehensive definition or interpretation. There are many hypothetical situations which might be imagined and it is doubtful that any general definition or interpretation, unrelated to specific fact situations could satisfactorily deal with all such situations. \"Some general observations can be made with respect to the question of whether or not a specific activity constitutes prohibited manufacture under the proposed treaty. For example, facts indicating that the purpose of a particular activity was the acquisition of a nuclear explosive device would tend to show non-compliance. (Thus, the construction of an experimental or prototype nuclear explosive device would be covered by the term 'manufacture' as would be the production of components which could only have relevance to a nuclear explosive device.) Again, while the placing of a particular activity under safeguards would not, in and of itself, settle the question of whether that activity was in compliance with the treaty, it would of course be helpful in allaying any suspicion of non-compliance. \"It may be useful to point out, for illustrative purposes, several activities which the United States would not consider per se to be violations of the prohibitions in Article II. Neither uranium enrichment nor the stockpiling of fissionable material in connection with a peaceful program would violate Article II so long as these activities were safeguarded under Article III. Also clearly permitted would be the development, under safeguards, of plutonium fueled power reactors, including research on the properties of metallic plutonium, nor would Article II interfere with the development or use of fast breeder reactors under safeguards.\"", "summary": "Several U.N. Security Council resolutions adopted between 2006 and 2010 required Iran to cooperate fully with the International Atomic Energy Agency's (IAEA's) investigation of its nuclear activities, suspend its uranium enrichment program, suspend its construction of a heavy-water reactor and related projects, and ratify the Additional Protocol to its IAEA safeguards agreement. However, Tehran has implemented various restrictions on, and provided the IAEA with additional information about, its nuclear program pursuant to the July 2015 Joint Comprehensive Plan of Action (JCPOA), which Tehran concluded with China, France, Germany, Russia, the United Kingdom, and the United States. On the JCPOA's Implementation Day, which took place on January 16, 2016, all of the previous resolutions' requirements were terminated. The nuclear Nonproliferation Treaty (NPT) and U.N. Security Council Resolution 2231, which the Council adopted on July 20, 2015, compose the current legal framework governing Iran's nuclear program. Iran has complied with the JCPOA and resolution. Iran and the IAEA agreed in August 2007 on a work plan to clarify outstanding questions regarding Tehran's nuclear program. The IAEA had essentially resolved most of these issues, but for several years the agency still had questions concerning \"possible military dimensions to Iran's nuclear programme.\" A December 2, 2015, report to the IAEA Board of Governors from agency Director General Yukiya Amano contains the IAEA's \"final assessment on the resolution\" of the outstanding issues. This report provides a brief overview of Iran's nuclear program and describes the legal basis for the actions taken by the IAEA board and the Security Council. It will be updated as events warrant.", "document_type": "crs"}
{"report": "On February 9, 2018, President Trump signed the Bipartisan Budget Act of 2018 into law ( P.L. 115-123 ). Subtitle B of Title IV provided for the creation of a Joint Select Committee on Budget and Appropriations Process Reform. The creation of this committee echoed a number of special panels created by Congress in the past in order to study and make recommendations on various issues unconstrained by existing committee jurisdictions. Prior examples include committees tasked with studying a wide spectrum of issues, including both budget process—such as the Joint Committee to Study Budget Control (created by P.L. 92-599)—and other topics, such as the Senate Select Committee to Study Governmental Operations with Respect to Intelligence Activities (also known as the Church Committee after its chairman, Senator Frank Church, created by S.Res. 2 , 94 th Congress). The act directed the joint select committee to \"provide recommendations and legislative language that will significantly reform the budget and appropriations process.\" The act required that the committee be composed of 16 members, with 4 members appointed by each of the Speaker of the House, the minority leader of the House, the majority leader of the Senate, and the minority leader of the Senate. Members were appointed to serve for the life of the committee, with any vacancy to be filled within 14 calendar days. The act further stated that the committee would be led by cochairs. One cochair was to be appointed jointly by the Speaker of the House and the majority leader of the Senate, with the other cochair to be appointed jointly by the House and Senate minority leaders. The four members of the joint select committee appointed by then-Speaker Paul Ryan were House Budget Committee Chairman Steve Womack (who served as committee cochair), House Rules Committee Chairman Pete Sessions, and Representatives Rob Woodall and Jodey Arrington. The four members appointed by then-House Minority Leader Nancy Pelosi were House Appropriations Committee ranking member Nita M. Lowey (who served as committee cochair), House Budget Committee ranking member John Yarmuth, and Representatives Lucille Roybal-Allard and Derek Kilmer. The four members appointed by Senate Majority Leader Mitch McConnell were Senators Roy Blunt, David Perdue, James Lankford, and Joni Ernst. The four members appointed by Senate Minority Leader Charles Schumer were Senators Sheldon Whitehouse, Michael Bennet, Brian Schatz, and Mazie Hirono. Under the act, the joint select committee terminated on December 31, 2018. Federal agencies (including legislative branch agencies) were tasked with providing technical assistance to the committee if requested in writing by the cochairs, and employees of the legislative branch could be detailed to the committee on a nonreimbursable basis consistent with the rules and regulations of the Senate. The act provided an authorization for use of not more than $500,000 from the appropriations account for ''Expenses of Inquiries and Investigations'' of the Senate with such sums to be disbursed by the Secretary of the Senate, in accordance with Senate rules and procedures, upon vouchers signed by the joint panel's cochairs. The committee was required to hold its first meeting not later than 30 calendar days after the date of enactment, with the cochairs of the committee required to provide an agenda to committee members at least 48 hours in advance of any meeting. The initial organizing meeting was held on March 7, 2018, with additional working group meetings held on August 22, September 13, and September 26, 2018, and a markup held on November 15, 27, and 29, 2018. The committee was also authorized and expected to hold hearings and take testimony from witnesses. Each cochair was entitled to select an equal number of witnesses for each hearing. Witnesses appearing before the committee were required to file a written statement of proposed testimony at least two calendar days before his or her appearance. The law specified that nine members of the committee would constitute a quorum for purposes of voting and meeting, and five members of the committee would constitute a quorum for holding hearings. The act stated that the committee provide recommendations and legislative language to significantly reform the budget and appropriations process. The committee was required to vote by November 30, 2018, on (1) a report containing a detailed statement of the findings, conclusions, and recommendations of the committee and (2) proposed legislative language to carry out those recommendations. The text of any report and proposed legislative language were required to be made publicly available in electronic form at least 24 hours prior to its consideration by the joint select committee. The act required the report and the proposed legislative language to be approved by a majority of each of (1) the committee members appointed by the Speaker of the House and the majority leader of the Senate and (2) the committee members appointed by the House and Senate minority leaders. The law specified that nine members of the committee would constitute a quorum for purposes of voting, with no proxy voting permitted. If the committee voted to report recommendations and legislative language, members were to be allowed the opportunity to file supplemental, minority, or additional views to be included in a committee report. Under the act, if the committee had approved a report and legislative language, it would have been required to make them available to the public \"promptly\" and submit them to the President, the Vice President, the Speaker of the House, and the majority and minority leaders of each chamber within 15 calendar days of approval. Upon receipt of proposed legislative language, the Senate majority leader (or his designee) was required to introduce it in the Senate (by request) on the next day on which the Senate was in session. There were no provisions in the law concerning the introduction of the recommendations of the joint select committee in the House. The Bipartisan Budget Act established certain unique procedures for Senate consideration of any legislative language reported by the joint select committee. These procedures were intended to allow the Senate to reach a timely vote on the question of whether or not to consider legislation embodying the recommendations of the joint select committee, but the act did not specify any procedures governing consideration of the bill once the Senate agreed to take it up. There were no provisions in the act concerning the consideration of the recommendations of the joint select committee in the House. There were also no provisions concerning resolving any differences between the House and Senate or the consideration of a veto message from the President. Such actions would have occurred under the regular procedures of each chamber. Once any recommendations of the joint select committee were introduced in the Senate, the bill would be referred to the Senate Committee on the Budget, which was required to report the bill favorably, unfavorably, or without recommendation within seven session days—but without any revisions. If the Budget Committee failed to report the bill within that period, it would be automatically discharged from consideration of the bill, and the bill would be placed on the Senate Calendar of Business. Not later than two days of Senate session after a joint committee bill was reported or discharged from the Budget Committee, the majority leader (or his designee) could move to proceed to consider it. Should the majority leader (or his designee) not make such a motion within two session days, any Senator could do so. The motion to consider a joint committee bill—and all debatable motions and appeals in connection with the motion—would be considered for a maximum of 10 hours, evenly divided between the majority leader and the minority leader (or their designees). A nondebatable motion to further limit debate would be in order and would require a vote of three-fifths of all Senators—60 votes if there is not more than one vacancy—to pass. In order for the recommendations of the joint select committee to be considered by the full Senate, the act required that the motion to proceed be agreed to by a vote of three-fifths of all Senators—60 votes if there is not more than one vacancy. The act further specified that all points of order against the motion to proceed are waived and that a motion to postpone the motion to proceed or a motion to reconsider a vote on it are not in order. Finally, the act directed that not later than the last day of the 115 th Congress (2017-2018), the Senate must vote on a motion to proceed to a bill containing recommendations of the joint select committee. If the Senate approved the motion to proceed, the joint committee bill could then be considered under the regular rules of the Senate, meaning that it would be fully debatable and fully amendable (possibly including by nongermane amendments) and that cloture might need to be invoked on one or more questions (requiring the support of three-fifths of all Senators) in order to reach a final vote. The joint select committee held five days of public hearings. April 17: current challenges facing the budget and appropriations process in Congress and possibilities for improvement; May 9: challenges of the current procedural framework, particularly as it relates to the ability of Members to work effectively and in a bipartisan manner regardless of political dynamics; May 24: the role of the budget resolution and possible options to bolster its impact and influence on subsequent budgetary actions; June 27: testimony heard from 27 Members of the House and Senate (and written statements received from 5 others), including Speaker of the House Paul Ryan and Hou se Minority Leader, Nancy Pelosi; July 17: former Members' historical perspective on enacting budgetary legislation in the context of the challenges presented by both the politics and the framework of the budget and appropriations process. The committee held multiple meetings, both formal and informal, to provide its members a forum to discuss reforms to the budget and appropriations process. These meetings—including working sessions on August 22, September 13, and September 26, 2018—provided the basis for the recommendations that were subsequently incorporated into draft legislation to be considered by the committee as the cochair's mark. The cochair's mark included a recommendation that the budget resolution be adopted for a two-year cycle rather than the current annual cycle. The draft also addressed a number of related concerns, such as allowing reconciliation instructions for both years of a biennium, providing for a revision of the budget resolution in the second session of a Congress to update it for scoring purposes, and revising the requirements concerning the submission and content of the President's budget in the second year of a biennium. The recommendations also provided for a change in the membership of the Senate Budget Committee to be comprised of eight members from the majority and seven members from the minority, including the chairs and ranking members from the Appropriations and Finance Committees, and for the House and Senate Budget Committees to hold a joint hearing on the fiscal state of the nation. On November 15, 2018, the committee began marking up the draft legislation. In that markup, the committee agreed by unanimous consent to apply a voting rule for the adoption of amendments consistent with the rule required by the act for final adoption of any recommendations. This agreement required separate majorities of the appointees from each party. The markup continued on November 27 and 29. The final vote on reporting the draft bill, as amended, was not agreed to by a roll-call vote of one aye and seven noes of the Members appointed by the Speaker of the House and the Senate majority leader and seven ayes and zero noes of the Members appointed by the House minority leader and the Senate minority leader.", "summary": "The Bipartisan Budget Act of 2018 (P.L. 115-123), signed into law on February 9, 2018, created a joint select committee of the House and Senate. The Joint Select Committee on Budget and Appropriations Process Reform was to be made up of 16 Members from the House and Senate—4 chosen by each of the chambers' party leaders. The act charged the joint select committee with formulating recommendations and legislative language to \"significantly reform the budget and appropriations process.\" The law directed the committee to make a report no later than November 30, 2018, to be submitted, along with legislative language, to the President, the Speaker of the House, and the majority and minority leaders of the House and Senate. The act included procedures intended to allow the Senate to reach a timely vote on the question of whether or not to consider any legislation embodying the recommendations of the joint select committee. Under the terms of the act, the Senate would be able to vote on a motion to proceed to consider any reported joint committee bill before the conclusion of the 115th Congress (2017-2018). Consideration of the motion to proceed (and all debatable motions and appeals in connection therewith) was to be limited to 10 hours, equally divided and controlled by the majority and minority leaders (or their designees) with support of at least three-fifths of the Senate (60 votes if there is no more than one vacancy) necessary to approve the motion. The act did not specify any procedures governing consideration of the bill once the Senate had agreed to take it up. There were also no provisions in the act concerning the consideration of the recommendations of the joint select committee in the House nor any provisions concerning resolving any differences between the House and Senate. Such actions would have occurred under the regular procedures of each chamber. During its lifespan, the joint select committee held five days of hearings, taking testimony from 12 outside witnesses and 27 Members, including then-Speaker of the House Paul Ryan and then-House Minority Leader Nancy Pelosi. Formal and informal discussions among committee members resulted in draft legislation to be considered in a markup that concluded on November 29, 2018. The chief recommendation in the draft provided for the budget resolution to be adopted for a two-year cycle rather than the current annual cycle. By unanimous consent, the committee members applied a voting rule for the adoption of amendments consistent with the rule required by the act for final adoption of any recommendations requiring separate majorities of the appointees from each party. The final vote on reporting the bill as amended was not agreed to by a roll-call vote of one aye and seven noes of the Members appointed by the Speaker of the House and the Senate majority leader and seven ayes and zero noes of the Members appointed by the House minority leader and the Senate minority leader.", "document_type": "crs"}
{"report": "This report provides responses to frequently asked questions about the Temporary Assistance for Needy Families (TANF) block grant. It is intended to serve as a quick reference to provide easy access to information and data. Appendix B presents a series of tables with state-level data. This report does not provide information on TANF program rules (for a discussion of TANF rules, see CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements , by Gene Falk). On January 24, 2019, the President signed legislation ( P.L. 116-4 ) that funds TANF and related programs through June 30, 2019. The legislation permits states to receive their quarterly TANF grants for the 2 nd quarter (January through March) and 3 rd quarter (April through June) of FY2019. Additional legislation would be required to pay TANF grants in the final quarter (July through September) of FY2019. TANF programs are funded through a combination of federal and state funds. In FY2018, TANF has two federal grants to states. The bulk of the TANF funding is in a basic block grant to the states, totaling $16.5 billion for the 50 states, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, and American Indian tribes. There is also a contingency fund available that provides extra federal funds to states that meet certain conditions. Additionally, states are required to expend a minimum amount of their own funds for TANF and TANF-related activities under what is known as the maintenance of effort (MOE) requirement. States are required to spend at least 75% of what they spent in FY1994 on TANF's predecessor programs. The minimum MOE amount, in total, is $10.3 billion per year for the 50 states, the District of Columbia, and the territories. TANF was created in the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P.L. 104-193 ). A TANF basic block grant amount—both nationally and for each state—was established in the 1996 welfare reform law. The amount established in that law for the 50 states, District of Columbia, territories, and tribes was $16.6 billion in total. From FY1997 through FY2016, that amount remained the same. It was not adjusted for changes that occur over time, such as inflation, the size of the TANF assistance caseload, or changes in the poverty population. During this period, the real (inflation-adjusted) value of the block grant declined by one-third (33.1%). Beginning with FY2017, the state family assistance grant was reduced by 0.33% from its historical levels to finance TANF-related research and technical assistance. The reduced block grant amount is $16.5 billion. Table 1 shows the state family assistance grant, in both nominal (actual) and real (inflation-adjusted) dollars for each year, FY1997 through FY2018. In real (inflation-adjusted) terms, the FY2018 block grant was 36% below its value in FY1997. Figure 1 shows the uses of federal TANF grants to states and state MOE funds in FY2017. In FY2017, a total of $31.1 billion of both federal TANF and state MOE expenditures were either expended or transferred to other block grant programs. Basic assistance—ongoing benefits to families to meet basic needs—represented 23% ($7.1 billion) of total FY2017 TANF and MOE dollars. TANF is a major contributor of child care funding. In FY2017, $5 billion (16% of all TANF and MOE funds) were either expended on child care or transferred to the child care block grant (the Child Care and Development Fund, or CCDF). TANF work-related activities (including education and training) were the third-largest TANF and MOE spending category at $3.3 billion, or 11% of total TANF and MOE funds. TANF also helps low-wage parents by helping to finance state refundable tax credits, such as state add-ons to the Earned Income Tax Credit (EITC). TANF and MOE expenditures on refundable tax credits in FY2017 totaled $2.8 billion, or 9% of total TANF and MOE spending. TANF is also a major contributor to the child welfare system, which provides foster care, adoption assistance, and services to families with children who either have experienced or are at risk of experiencing child abuse or neglect, spending about $2.2 billion on such activities. TANF and MOE funds also help fund state prekindergarten (pre-K) programs, with total FY2017 expenditures for that category also at $2.5 billion. TANF and MOE funds are also used for short-term and emergency benefits and a wide range of other social services. For state-specific information on the use of TANF funds, see Table B-1 and Table B-2 . TANF law permits states to \"reserve\" unused funds without time limit. This permits flexibility in timing of the use of TANF funds, including the ability to \"save\" funds for unexpected occurrences that might increase costs (such as recessions or natural disasters). At the end of FY2017 (September 30, 2017, the most recent data currently available), a total of $5.1 billion of federal TANF funding remained neither transferred nor spent. However, some of these unspent funds represent monies that states had already committed to spend later. At the end of FY2017, states had made such commitments to spend—that is, had obligated—a total of $1.8 billion. At the end of FY2017, states had $3.3 billion of \"unobligated balances.\" These funds are available to states to make new spending commitments. Table B-3 shows unspent TANF funds by state. This number is not known. Federal TANF reporting requirements focus on families receiving only ongoing assistance . There is no complete reporting on families receiving other TANF benefits and services. Assistance is defined as benefits provided to families to meet ongoing, basic needs. It is most often paid in cash. However, some states use TANF or MOE funds to provide an \"earnings supplement\" to working parents added to monthly Supplemental Nutrition Assistance Program (SNAP) allotments. These \"earnings supplements\" are paid separately from the regular TANF cash assistance program. Additionally, TANF MOE dollars are used to fund food assistance for immigrants barred from regular SNAP benefits in certain states. These forms of nutrition aid meet an ongoing need, and thus are considered TANF assistance. As discussed in a previous section of this report, TANF basic assistance accounts for about 24% of all TANF expenditures. Therefore, the federal reporting requirements that pertain to families receiving \"assistance\" are likely to undercount the number of families receiving any TANF-funded benefit or service. Table 2 provides assistance caseload information. A total of 1.2 million families, composed of 3.1 million recipients, received TANF- or MOE-funded assistance in September 2018. The bulk of the \"recipients\" were children—2.3 million in that month. For state-by-state assistance caseloads, see Table B-4 . Figure 2 provides a long-term historical perspective on the number of families receiving assistance from TANF or its predecessor program, from July 1959 to September 2017. The shaded areas of the figure represent months when the national economy was in recession. Though the health of the national economy has affected the trend in the cash assistance caseload, the long-term trend in receipt of cash assistance does not follow a classic countercyclical pattern. Such a pattern would have the caseload rise during economic slumps, and then fall again during periods of economic growth. Factors other than the health of the economy (demographic trends, policy changes) also have influenced the caseload trend. The figure shows two periods of sustained caseload increases: the period from the mid-1960s to the mid-1970s and a second period from 1988 to 1994. The number of families receiving assistance peaked in March 1994 at 5.1 million families. The assistance caseload fell rapidly in the late 1990s (after the 1996 welfare reform law) before leveling off in 2001. In 2004, the caseload began another decline, albeit at a slower pace than in the late 1990s. During the recent 2007-2009 recession and its aftermath, the caseload began to rise from 1.7 million families in August 2008, peaking in December 2010 at close to 2.0 million families. By September 2018, the assistance caseload had declined to 1.2 million families. Table B-5 shows recent trends in the number of cash assistance families by state. Before PRWORA, the \"typical\" family receiving assistance has been headed by a single parent (usually the mother) with one or two children. That single parent has also typically been unemployed. However, over the past 20 years the assistance caseload decline has occurred together with a major shift in the composition of the rolls. Figure 3 shows the change in the size and composition of the assistance caseload under both AFDC (1988 and 1994) and TANF. In FY1988, an estimated 84% of AFDC families were headed by an unemployed adult recipient. In FY2016, families with an unemployed adult recipient represented 32% of all cash assistance families. This decline occurred, in large part, as the number of families headed by unemployed adult recipients declined more rapidly than other components of the assistance caseload. In FY1994, a monthly average of 3.8 million families per month who received AFDC cash assistance had adult recipients who were not working. In FY2016, a monthly average of 485,000 families per month had adult recipients or work-eligible individuals, with no adult recipient or work-eligible individual working. With the decline in families headed by unemployed adults, the share of the caseload represented by families with employed adults and \"child only\" families has increased. In FY2017, families with all adult recipients unemployed and families with employed adult recipients each represented 31% of all assistance families. The latter category includes families in \"earnings supplement\" programs separate from the regular TANF cash assistance program. \"Child-only\" families are those where no adult recipient receives benefits in their own right; the family receives benefits on behalf of its children. The share of the caseload that was child-only in FY2017 was 38%. In FY2017, families with a nonrecipient, nonparent relative (grandparents, aunts, uncles) represented 14% of all assistance families. Families with ineligible, noncitizen adults or adults who have not reported their citizenship status made up 9% of the assistance caseload in that year. Families where the parent received Supplemental Security Income (SSI) and the children received TANF made up 9% of all assistance families in FY2017. There are no federal rules that help determine the amount of TANF cash benefits paid to a family. (There are also no federal rules that require states to use TANF to pay cash benefits, though all states do so.) Benefit amounts are determined solely by the states. Most states base TANF cash benefit amounts on family size, paying larger cash benefits to larger families on the presumption that they have greater financial needs. The maximum monthly cash benefit is usually paid to a family that receives no other income (e.g., no earned or unearned income) and complies with program rules. Families with income other than TANF often are paid a reduced benefit. Moreover, some families are financially sanctioned for not meeting a program requirement (e.g., a work requirement), and are also paid a lower benefit. Figure 4 shows the maximum monthly TANF cash benefit by state for a single mother caring for two children (family of three) in July 2016. The benefit amounts shown are those for a single-parent family with two children. For a family of three, the maximum TANF benefit paid in July 2017 varied from $170 per month in Mississippi to $1,201 per month in New Hampshire. The map shows a regional pattern to the maximum monthly benefit paid, with lower benefit amounts in the South than in other regions. Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income. TANF's main federal work requirement is actually a performance measure that applies to the states, rather than individual recipients. States determine the work rules that apply to individual recipients. The TANF statute requires states to have 50% of their caseload meet standards of participation in work or activities—that is, a family member must be in specified activities for a minimum number of hours. There is a separate participation standard that applies to the two-parent portion of a state's caseload, requiring 90% of the state's two-parent caseload to meet participation standards. However, the statutory work participation standards are reduced by a \"caseload reduction credit.\" The caseload reduction credit reduces the participation standard one percentage point for each percentage point decline in a state's caseload. Additionally, under a regulatory provision, a state may get \"extra\" credit for caseload reduction if it spends more than required under the TANF MOE. Therefore, the effective standards states face are often less than the 50% and 90% targets, and vary by state and by year. States that do not meet the TANF work participation standard are at risk of being penalized through a reduction in their block grant. However, penalties can be forgiven if a state claims, and the Secretary of HHS finds, that it had \"reasonable cause\" for not meeting the standard. Penalties can also be forgiven for states that enter into \"corrective compliance plans,\" and subsequently meet the work standard. The 50% and 90% target standards that states face, as well as the caseload reduction credit, date back to the 1996 welfare reform law. However, the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) made several changes to the work participation rules effective in FY2007 The caseload reduction credit was changed to measure caseload reduction from FY2005, rather than the original law's FY1995. The work participation standards were broadened to include families receiving cash aid in \"separate state programs.\" Separate state programs are programs run with state funds, distinct from a state's \"TANF program,\" but with expenditures countable toward the TANF MOE. HHS was instructed to provide definition to the allowable TANF work activities listed in law. HHS was also required to define what is meant by a \"work-eligible\" individual, expanding the number of families that are included in the work participation calculation. States were required to develop plans and procedures to verify work activities. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), a law enacted in response to the sharp economic downturn of 2007-2009, held states \"harmless\" for caseload increases affecting the work participation standards for FY2009 through FY2011. It did so by allowing states to \"freeze\" caseload reduction credits at pre-recession levels through the FY2011 standards. HHS computes two work participation rates for each state that are then compared with the effective (after-credit) standard to determine if it has met the TANF work standard. An \"all-families\" work participation rate is computed and compared with the all-families effective standard (50% minus the state's caseload reduction credit). HHS also computes a two-parent work participation rate that is compared with the two-parent effective standard (90% minus the state's caseload reduction credit). Figure 5 shows the national average all-families work participation rate for FY2002 through FY2017. For the period FY2002 through FY2011, states achieved an average all-families work participation rate hovering around 30%. The work participation rate increased since then. In FY2016, it exceeded 50% for the first time since TANF was established. However, it is important to note that the increase in the work participation rate has not come from an increase in the number of recipients in regular TANF assistance programs who are either working or in job preparation activities. This increase stems mostly from states creating new \"earnings supplement\" programs that use TANF funds to aid working parents in the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) or who have left the regular TANF assistance programs for work. Figure 6 shows which states did not meet the TANF all-families work participation standards from FY2006 through FY2017. Before FY2007, the first year that DRA was effective, only a few jurisdictions did not meet TANF all-families work participation standards. However, in FY2007, 15 jurisdictions did not meet the all-families standard. This number declined to 9 in FY2008 and 8 in FY2009. In FY2012, despite the uptick in the national average work participation rate, 16 states did not meet the all-family standard, the largest number of states that did not meet their participation standards in any one year since the enactment of TANF. FY2012 was the year that ARRA's \"freeze\" of the caseload reduction credit expired, and states were generally required to meet higher standards than in previous years. The number of jurisdictions that did not meet the all-families standard declined over the FY2012 to FY2017 period. In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam. In addition to meeting a work standard for all families, TANF also imposes a second standard—90%—for the two-parent portion of its cash assistance caseload. This standard can also be lowered by caseload reduction. Figure 7 shows whether each state met its two-parent work participation standard for FY2006 through FY2017. However, the display on the table is more complex than that for reporting whether a state met or did not meet its \"all family\" rate. A substantial number of states have reported no two-parent families subject to the work participation standard. These states are denoted on the table with an \"NA,\" indicating that the two-parent standard was not applicable to the state in that year. Before the changes made by the DRA were effective, a number of states had their two-parent families in separate state programs that were not included in the work participation calculation. When DRA brought families receiving assistance in separate state programs into the work participation rate calculations, a number of states moved these families into solely state-funded programs. These are state-funded programs with expenditures not countable toward the TANF maintenance of effort requirement, and hence are outside of TANF's rules. For states with two-parent families in their caseloads, the table reports \"Yes\" for states that met the two-parent standard, and \"No\" for states that did not meet the two-parent standard. Of the 28 jurisdictions that had two-parent families in their FY2017 TANF work participation calculation, 19 met the standard and 9 did not. Appendix A. Supplementary Tables Appendix B. State Tables", "summary": "The Temporary Assistance for Needy Families (TANF) block grant funds a wide range of benefits and services for low-income families with children. TANF was created in the 1996 welfare reform law (P.L. 104-193). This report responds to some frequently asked questions about TANF; it does not describe TANF rules (see, instead, CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements, by Gene Falk). TANF Funding and Expenditures. TANF provides fixed funding for the 50 states, the District of Columbia, the territories, and American Indian tribes. The basic block grant totals $16.5 billion per year. States are also required in total to contribute, from their own funds, at least $10.3 billion annually under a maintenance-of-effort (MOE) requirement. Though TANF is best known for funding cash assistance payments for needy families with children, the block grant and MOE funds are used for a wide variety of benefits and activities. In FY2017, expenditures on basic assistance totaled $7.1 billion—23% of total federal TANF and MOE dollars. Basic assistance is often—but not exclusively—paid as cash. In addition to funding basic assistance, TANF also contributes funds for child care and services for children who have been, or are at risk of being, abused and neglected. Some states also count expenditures in prekindergarten programs toward the MOE requirement. The TANF Assistance Caseload. A total of 1.2 million families, composed of 3.1 million recipients, received TANF- or MOE-funded assistance in September 2018. The bulk of the \"recipients\" were children—2.3 million in that month. The assistance caseload is heterogeneous. The type of family once thought of as the \"typical\" assistance family—one with an unemployed adult recipient—accounted for 32% of all families on the rolls in FY2016. Additionally, 31% of cash assistance families had an employed adult, while 38% of all TANF families were \"child-only\" and had no adult recipient. Child-only families include those with disabled adults receiving Supplemental Security Income (SSI), adults who are nonparents (e.g., grandparents, aunts, uncles) caring for children, and families consisting of citizen children and ineligible noncitizen parents. Cash Assistance Benefits. TANF cash benefit amounts are set by states. In July 2017, the maximum monthly benefit for a family of three ranged from $1,021 in New Hampshire to $170 in Mississippi. Only New Hampshire (at 60% of the federal poverty guidelines) had a maximum TANF cash assistance amount for this sized family in excess of 50% of poverty-level income. Work Requirements. TANF's main federal work requirement is actually a performance measure that applies to the states. States determine the work rules that apply to individual recipients. TANF law requires states to engage 50% of all families and 90% of two-parent families with work-eligible individuals in work activities, though these standards can be reduced by \"credits.\" Therefore, the effective standards states face are often less than the 50% or 90% targets, and vary by state. In FY2017, states achieved, on average, an all-family participation rate of 53.0% and a two-parent rate of 69.5%. In FY2017, two jurisdictions did not meet the all-family participation standard: Nevada and Guam. This is a reduction from FY2012, when 16 states did not meet that standard. In FY2017, nine jurisdictions did not meet the two-parent standard. States that do not meet work standards are at risk of being penalized by a reduction in their block grant.", "document_type": "crs"}
{"report": "Budget justifications are detailed written materials, data, and supporting documents provided by federal agencies that expand upon and support the President's yearly budget submission to Congress. In form and content, the justifications may vary by agency. The Office of Management and Budget (OMB) provides yearly instructions to agencies for producing materials to be included in the President's budget submission and agency budget justifications. Each summer, OMB issues these instructions as part of a document entitled, Circular No. A-11: Preparation, Submission, and Execution of the Budget . The release of budget justifications occurs soon after the release of the President's annual budget submission and in advance of congressional hearings on agency budget requests. Agencies submit budget justifications to the appropriations subcommittees to support agency testimony and inform congressional deliberations. Beginning with the FY2008 executive budget cycle, agencies have also been required to post their congressional budget justification materials on the internet within two weeks of transmittal to Congress. Website links to FY2020 budget justification documents for each of the 15 executive departments and 9 selected independent agencies are provided below. The organization of the materials on agency websites can vary, therefore brief guidance for navigating to FY2020-specific materials is provided below the links as appropriate. In addition, links to historical information from prior fiscal years may also appear or be available through the cited websites. Department of Agriculture https://www.obpa.usda.gov/explan_notes.html Th e webs ite i ncludes links to historical budget justification materials back to FY2008. Department of Commerce https://www.commerce.gov/about/budget-and-performance/FY-2020-congressional-bureau-justification Historical Department of Commerce budget justification materials back to FY2009 and Budget in Brief documents . http://www.osec.doc.gov/bmi/budget/default.htm Department of Defense http://comptroller.defense.gov/Budget-Materials/ Th e webs ite includes an index of links to historical Department of Defense budget justification materials back to FY1998 in the banner section at the top of the site . Department of Education https://www2.ed.gov/about/overview/budget/budget20/index.html Historical Department of Education budget justifica tion materials back to FY2011 . https://www2.ed.gov/about/overview/budget/news.html?src=rt Department of Energy https://www.energy.gov/cfo/downloads/fy-2020-budget-justification Historical Department of Energy budget justifica tion materials back to FY2005 ; scroll to the bottom of the website . https://www.energy.gov/cfo/listings/budget-justification-supporting-documents Department of Health and Human Services https://www.hhs.gov/about/budget/index.html Historical Department of Health and Human Services budget justification materials back to FY2009 are available toward the bottom of the website. Department of Homeland Security https://www.dhs.gov/dhs-budget Historical Department of Homeland Security budget justification materials back to FY2010 and budget-related materials back to FY2003 are available toward the bottom of the website. Department of Housing and Urban Development https://www.hud.gov/program_offices/cfo/reports/fy20_CJ Historical Department of Housing and Urban Development budget justification materials back to FY1998. https://www.hud.gov/program_offices/cfo/budget . Department of the Interior https://www.doi.gov/budget/appropriations/2020 Historical Department of the Interior budget justifica tion materials back to FY2001 . https://www.doi.gov/budget/appropriations/ . Department of Justice https://www.justice.gov/doj/fy-2020-congressional-budget-submission Historical Department of Justice budget justification materials back to FY2015. http://www.justice.gov/doj/budget-and-performance . Department of Labor https://www.dol.gov/general/budget Historical DOL budget justification materials back to FY2008; under \"Past Budgets\" heading. https://www.dol.gov/general/aboutdol Department of State https://www.state.gov/s/d/rm/rls/ebs/index.htm Historical Department of State budget justifica tion materials back to FY2015 are available on the same site . Department of Transportation https://www.transportation.gov/budget Historical Department of Transportation budget justification materials back to FY2009; under \"Budget Estimates\" heading. https://www.transportation.gov/mission/budget/dot-budget-and-performance-documents Department of the Treasury https://www.treasury.gov/about/budget-performance/Pages/cj-index.aspx Historical Department of the Treasury budget justification materials back to FY2007 and budget-related materials back to FY2007 are available by scrolling down on the website. Department of Veterans Affairs https://www.va.gov/budget/products.asp Historical Department of Veterans Affairs budget justification materials back to FY2008 are available toward the bottom of the website. Environmental Protection Agency https://www.epa.gov/planandbudget/fy-2020-justification-appropriation-estimates-committee-appropriations FY2019 EPA (prior year) budget justification materials. https://www.epa.gov/planandbudget/fy-2019-justification-appropriation-estimates-committee-appropriations Other historical EPA budget justification materials back to FY2011; toward the bottom of the website under \"Justification of Appropriations for Committee on Appropriations\" heading. https://www.epa.gov/planandbudget/archive National Aeronautics and Space Administration https://www.nasa.gov/news/budget/index.html Historical NASA budget justification materials back to FY2004 and selected materials back to FY1997 are available toward the bottom of the website under \"Previous Years' Budget Requests\" heading. Agency for International Development https://www.usaid.gov/results-and-data/budget-spending/cong r essional-budget-justification/fy2020 Historical AID budget justification materials back to FY2001. https://www.usaid.gov/results-and-data/budget-spending/congressional-budget-justification General Services Administration https://www.gsa.gov/reference/reports/budget-performance/annual-budget-requests Previous GSA budget justification materials back to FY2006 are also available on the website. National Science Foundation https://www.nsf.gov/about/budget/fy2020/index.jsp Historical NSF budget justification materials back to FY1996. https://www.nsf.gov/about/budget/ Nuclear Regulatory Commission https://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr1100/v35/ Historical NRC budget justification materials back to FY2011. https://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr1100/ Office of Personnel Management https://www.opm.gov/about-us/budget-pe r formance/budgets/#url=Congressional-Budget-Justification Historical budget justification materials back to FY2007 are also available on th e website. Small Business Administration https://www.sba.gov/document/report—congressional-budget-justification-annual-performance-report This site also has links by fiscal year to annual budget justification and performance report materials back to FY2010 . Social Security Administration https://www.ssa.gov/budget/ Historical budget justification materials back to FY20 08 are available via the tabs at the top of th e website. Policy analysis for each of the 12 regular appropriations bills is available via the Congressional Research Service (CRS) Appropriations Status Table by clicking on the corresponding CRS report for each bill at http://www.crs.gov/AppropriationsStatusTable/Index . Additional budget submissions to Congress for subagencies or quasi-government agencies may also be available online. A more extensive listing of federal agencies and offices is available in the current U.S. Government Manual at https://www.govinfo.gov/content/pkg/GOVMAN-2018-12-03/pdf/GOVMAN-2018-12-03.pdf .", "summary": "This report provides a convenient listing of online FY2020 agency budget justification submissions for all 15 executive branch departments and 9 selected independent agencies. In most cases, budget justifications contain more detailed descriptions of the proposals and programs that are provided in the President's budget submissions. This report will be updated to reflect the current budget justifications submissions for the forthcoming fiscal year.", "document_type": "crs"}
{"report": "Under the Appointments Clause of the Constitution, the President and the Senate share responsibility for making appointments to the Supreme Court, as well as to various lower courts of the federal judiciary. While the President nominates persons to fill federal judgeships, the appointment of each nominee also requires Senate confirmation. Historically, the vast majority of appointments to federal judgeships (other than to the Supreme Court) have typically not involved much public disagreement between the President and the Senate or between the parties within the Senate. Debate in the Senate over particular lower court nominees, or over the lower court appointment process itself, was uncommon. Typically, such nominations were both reported out of the Judiciary Committee and confirmed by the Senate without any recorded opposition. In recent decades, however, appointments to two kinds of lower federal courts—the U.S. circuit courts of appeals and the U.S. district courts—have often been the focus of heightened Senate interest and debate, as has the process itself for appointing judges to these courts. Given congressional interest in the subject, this report provides statistics and analysis related to the nomination and confirmation of U.S. circuit and district court judges from 1977 (the beginning of the Carter presidency) through 2018 (the second year of the Trump presidency). The report's exclusive focus are the U.S. circuit courts of appeals and U.S. district courts. Excluded from the scope of the report are the U.S. Supreme Court; the U.S. Court of International Trade; the U.S. Court of Federal Claims; and territorial district courts (e.g., the District Court of Guam). The U.S. courts of appeals, or circuit courts, take appeals from federal district court decisions and are also empowered to review the decisions of many administrative agencies. Cases presented to the courts of appeals are generally considered by judges sitting in three-member panels. Courts within the courts of appeals system are often called \"circuit courts\" (e.g., the First Circuit Court of Appeals is also referred to as the \"First Circuit\"), because the nation is divided into 12 geographic circuits, each with a U.S. court of appeals. One additional nationwide circuit, the U.S. Court of Appeals for the Federal Circuit, has specialized subject matter jurisdiction. Altogether, 179 judgeships for these 13 courts of appeals are currently authorized by law (167 for the 12 regional U.S. courts of appeals and 12 for the U.S. Court of Appeals for the Federal Circuit). The First Circuit (comprising Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico) has the fewest number of authorized appellate court judgeships, 6, while the Ninth Circuit (comprising Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) has the most, 29. U.S. district courts are the federal trial courts of general jurisdiction. There are 91 Article III district courts: 89 in the 50 states, plus 1 in the District of Columbia and 1 more in Puerto Rico. Each state has at least one U.S. district court, while some states (specifically California, New York, and Texas) have as many as four. Altogether, 673 Article III U.S. district court judgeships are currently authorized by law. Congress has authorized between 1 and 28 judgeships for each district court. The Eastern District of Oklahoma (Muskogee) has 1 authorized judgeship, the smallest number among Article III district courts, while the Southern District of New York (Manhattan) and the Central District of California (Los Angeles) each have 28 judgeships, the most among Article III district courts. Opportunities for a President to make circuit and district court appointments arise when judgeships are vacant or are scheduled to become vacant. Various factors influence the number of such opportunities a President will have during his tenure in office, including the frequency with which judicial departures occur; whether any new judgeships are statutorily created by Congress (which consequently provide a President with the opportunity to nominate individuals to the new judgeships); the number of judicial nominations submitted by a President; and the speed by which the Senate considers such nominations. Table 1 reports the percentage of U.S. circuit and district court judgeships that were vacant on January 1 immediately prior to the beginning of each new Congress and four-year presidential term from 1977 through 2017. Overall, during this period, the median percentage of circuit court judgeships that were vacant immediately prior to the start of a new Congress was 8.9%. The median percentage of district court judgeships that were vacant immediately prior to the start of a new Congress was 7.2%. As shown by the table, the percentage of U.S. circuit judgeships that were vacant was highest at the beginning of the 96 th Congress, 28.8%, and lowest at the beginning of the 98 th Congress, 3.5%. The percentage of U.S. district court judgeships that were vacant was also highest at the beginning of the 96 th Congress, 24.7%, and lowest at the beginning of the 109 th Congress, 3.1%. The percentage of judgeships that are vacant at the beginning of a presidency is influenced, in part, by the extent to which the preceding President's nominees were approved by the Senate during the final year or two of his term. For example, most recently, at the beginning of the Trump presidency, the percentage of U.S. district court judgeships that were vacant was 12.8%. This was due, in part, to the comparatively small number of district court nominations confirmed by the Senate during the final two years of the Obama presidency. Various factors influence the number and percentage of judicial nominees confirmed during any given presidency or Congress. These factors include, but are not limited to, the frequency with which judges depart the bench; the speed with which a presidential Administration vets and selects nominees for vacant judgeships; whether a President is of the same political party as the majority party in the Senate; whether a congressional session coincides with a presidential election year; and the point in a congressional session when nominations arrive in the Senate. As shown by Table 2 , the number of U.S. circuit court nominees confirmed during a completed presidency ranged from a high of 83 during the Reagan presidency to a low of 42 during the single four-year term of George H. W. Bush. Of two-term Presidents, the high ranged from a high of 83 (Reagan) to a low of 55 during the Obama presidency. In terms of the percentage of circuit court nominees confirmed during a completed presidency, which takes into account the number of circuit court nominations submitted to the Senate, the greatest percentage of nominees were confirmed during the Carter presidency (93.3%), and the smallest percentage were confirmed during the George W. Bush presidency (71.8%). Of two-term Presidents, the high ranged from 88.3% during the Reagan presidency to a low of 71.8% (George W. Bush). The number of U.S. district court nominees confirmed during a completed presidency ranged from a high of 305 during the Clinton presidency to a low of 148 during the single four-year term of George H. W. Bush. Of two-term Presidents, the high ranged from a high of 305 (Clinton) to a low of 261 during the George W. Bush presidency. In terms of the percentage of district court nominees confirmed during a completed presidency, which takes into account the number of district court nominations submitted to the Senate, the greatest percentage of nominees were confirmed during the Reagan presidency (94.8%), and the smallest percentage were confirmed during the George H. W. Bush presidency (77.1%). Of two-term Presidents, the high ranged from 94.8% (Reagan) to a low of 83.2% during the Obama presidency. The median number of U.S. circuit court nominees confirmed during a Congress, from the 95 th through the 115 th , was 17 (while the median number of circuit court nominations submitted to the Senate was 26). And as shown by Table 3 , the number of U.S. circuit court nominees confirmed during this same period ranged from a low of 2 (during the 114 th Congress, 2015-2016) to a high of 44 (during the 96 th Congress, 1979-1980). The median percentage of circuit court nominees confirmed during a Congress, from the 95 th through the 115 th , was 65.4%. The smallest percentage of circuit court nominees, 22.2%, were confirmed during the 114 th Congress (2015-2016). All (100%) of the circuit court nominations submitted to the Senate during the 95 th and 99 th Congresses (1977-1978 and 1985-1986, respectively) were confirmed by the Senate. The median number of U.S. district court nominees confirmed during a Congress, from the 95 th through the 115 th , was 66 (while the median number of district court nominations submitted to the Senate was 85). The number of nominees confirmed ranged from a low of 18 (during the 114 th Congress, 2015-2016) to a high of 154 (during the 96 th Congress, 1979-1980). The median percentage of district court nominees confirmed during a Congress, from the 95 th through the 115 th , was 84.0%. The smallest percentage confirmed during this period was 29.5% (during the 114 th Congress, 2015-2016) and the greatest percentage confirmed was 98.6% (during the 97 th Congress, 1981-1982). In general, both a greater number and percentage of circuit and district court nominees were confirmed during Congresses in which the party of the President was the same as the majority party in the Senate. During Congresses in which there was unified party control (i.e., the party of the President and the majority party in the Senate were the same), the median number of circuit court nominees confirmed was approximately 18, and the median percentage of nominees confirmed was 80.0%. In contrast, during Congresses in which there was divided party control (i.e., the party of the President was different than the majority party in the Senate), the median number of circuit court nominees confirmed was 16, and the median percentage of nominees confirmed was 59.7%. During Congresses in which there was unified party control, the median number of district court nominees confirmed was approximately 76, and the median percentage of nominees confirmed was 89.5%. In contrast, during Congresses in which there was divided party control, the median number of district court nominees confirmed was 60, and the median percentage of nominees confirmed was 73.1%. Over the last several presidencies, it has become increasingly common for a President to nominate an individual two or more times to a U.S. circuit or district court judgeship prior to final action on the nomination by the Senate (irrespective of whether the Senate ultimately approved the nomination). Consequently, the percentage of nominees confirmed during a presidency who were nominated two or more times prior to being approved by the Senate has also increased in recent years. As shown by Table 4 , the total number of circuit court nominees who were nominated two or more times prior to final action, whether confirmed or not, ranged from a low of 1 (during the Carter and George H. W. Bush presidencies) to a high of 39 (during the George W. Bush presidency). The number of circuit court nominees who were nominated more than once and ultimately confirmed by the Senate ranged from a low of 0 (during the George H. W. Bush presidency) to a high of 28 (during the George W. Bush presidency). And the number of nominees who were nominated more than once but not confirmed by the Senate ranged from a low of 0 (during the Carter presidency) to a high of 11 (during the George W. Bush presidency). Overall, of the six presidencies listed in Table 4 , President George W. Bush had the greatest percentage of confirmed circuit court nominees who were nominated more than once prior to being confirmed by the Senate (45.9%). Most recently, during the Obama presidency, the percentage of confirmed circuit court nominees who were nominated more than once prior to being approved by the Senate declined to 36.4% (representing the second-highest percentage of circuit court nominees nominated more than once prior to Senate approval). As shown by Table 5 , the total number of district court nominees who were nominated two or more times prior to final action ranged from a low of 3 (during the George H. W. Bush presidency) to a high of 111 (during the Obama presidency). The number of district court nominees who were nominated more than once and ultimately confirmed by the Senate ranged from a low of 2 (during the George H. W. Bush presidency) to a high of 104 (during the Obama presidency). And the number of nominees who were nominated more than once but not confirmed by the Senate ranged from a low of 1 (during the Carter and George H. W. Bush presidencies) to a high of 9 (during the Clinton presidency). Overall, of the six presidencies listed in Table 5 , President Obama had the greatest percentage of confirmed district court nominees who were nominated more than once prior to being confirmed by the Senate (38.8%). This was an increase from the George W. Bush presidency, when 23.8% of district court nominees were nominated more than once prior to being confirmed (which represents the second-highest percentage of district court nominees nominated more than once prior to Senate approval). Table 6 provides data related to the number of U.S. circuit and district court nominees whose nominations were returned by the Senate to the President at the end of each Congress, from the 95 th through the 115 th . The table also indicates how many of these nominees had been given a hearing (or not) by the Judiciary Committee as well as how many had their nominations reported by the committee and pending on the Executive Calendar prior to being returned to the President. For a Congress that did not coincide with the last two years of a presidency, it was not uncommon for a nominee whose nomination was returned at the end of it to be resubmitted during a subsequent Congress and eventually be approved by the Senate. For a Congress, however, that did coincide with the last two years of a presidency, a nominee whose nomination was returned at the end of it was not confirmed by the Senate. The median number of U.S. circuit court nominees whose nominations were returned to a President at the end of a Congress during this period was 8, while the median number of district court nominees whose nominations were returned at the end of a Congress was 13. For the 13 most recent Congr esses (corresponding to Congresses during the Clinton, George W. Bush, Obama, and Trump presidencies), the median number of circuit court nominees whose nominations were returned to a President at the end of a Congress was 9, while the median number of district court nominations returned was 20. No circuit court nominees had nominations returned at the end of the 95 th Congress (during the Carter presidency) or during the 99 th Congress (during the Reagan presidency). The 106 th Congress, during the Clinton presidency, had the greatest number of circuit court nominees whose nominations were returned at the end of a Congress (17)—followed by the 107 th and 108 th Congresses, both during the George W. Bush presidency, when 15 circuit court nominations were returned at the end of each Congress. The greatest percentage of circuit court nominees who had nominations returned, as a percentage of all nominees who were nominated during a Congress, occurred at the end of the 114 th Congress during the Obama presidency (seven of nine nominations, or 77.8%, were returned). A single district court nominee had a nomination returned at the end of each of the 95 th and 97 th Congresses during the Carter and Reagan presidencies, respectively. The 115 th Congress had the greatest number of district court nominees whose nominations were returned at the end of a Congress (56). The smallest percentage of district court nominees who had nominations returned, as a percentage of all nominees who were nominated during a Congress, occurred at the end of the 97 th Congress, 1981-1982, during the Reagan presidency (1 of 69, or 1.4%, were returned). The greatest percentage of district court nominees who had nominations returned, as a percentage of all nominees who were nominated during a Congress, occurred at the end of the 114 th Congress, 2015-2016, during the Obama presidency (43 of 61 nominations, or 70.5%, were returned). Table 6 does not indicate when, during a Congress, a President submitted nominations to the Senate. If nominations are submitted for the first time relatively late in a Congress, it may not give the Senate adequate time to act on them prior to adjournment. This section provides, for nominees confirmed by the Senate from 1977 through 2018, the median number of days from nomination to confirmation by presidency and by Congress. In general, the length of time from when a President nominates an individual to a vacant circuit or district court judgeship to when the Senate approves that nomination has steadily increased, for most nominees, since 1977. In addition to the general increase in the length of time of the confirmation process itself, an individual nominee might experience a relatively longer period of time from nomination to confirmation due to opposition to the nomination by the nonpresidential party in the Senate; committee and floor scheduling decisions unrelated to partisan opposition to the nomination; and delays in receiving requested background information from the nominee. As shown by Table 7 , the median number of days from nomination to confirmation for U.S. circuit court nominees for completed presidencies ranged from a low of 45.0 days during the Reagan presidency to a high of 229.0 days during the Obama presidency. Following the Reagan presidency, the median number of days from nomination to confirmation increased during each successive completed presidency (increasing to 83.0 days during the George H. W. Bush presidency, 139.0 days during the Clinton presidency, 216.0 days during the George W. Bush presidency, and 229.0 days during the Obama presidency). The first two years of the Trump presidency, with a median of 140.5 days, represent a decline in this trend. If the average, rather than the median, is used to measure the length of time a President's circuit court nominees waited from nomination to confirmation, the average number of days from nomination to confirmation for completed presidencies ranged from a low of 68.7 days during the Reagan presidency to a high of 350.6 days during the George W. Bush presidency. For completed presidencies, the median number of days from nomination to confirmation for U.S. district court nominees ranged from a low of 41.0 days during the Reagan presidency to a high of 215.0 days during the Obama presidency. Following the Reagan presidency, the median number of days from nomination to confirmation increased during each successive completed presidency (increasing to 93.0 days during the George H. W. Bush presidency, 99.0 days during the Clinton presidency, 141.0 days during the George W. Bush presidency, and to 215.0 days during the Obama presidency). The first two years of the Trump presidency, with a median of 235.0 days, represented a continuation of this upward trend. Figure 1 shows, for each U.S. circuit court nominee who was confirmed from 1977 through 2018, the number of days from when that individual was first nominated to when he or she was confirmed by the Senate. The particular circuit court nominee who waited the longest period of time from nomination to confirmation is also labeled for each presidency. As shown by the figure, there was a notable increase after the George H. W. Bush presidency in the number of nominees who waited one year or more from nomination to confirmation. During the Carter, Reagan, and George H. W. Bush presidencies, no circuit court nominees waited 365 days or more to be confirmed. During the Clinton presidency, there were 12 circuit court nominees who waited one year or more to be confirmed. The number of circuit court nominees who waited at least 365 days to be confirmed increased further, to a high of 18, during the George W. Bush presidency. During the Obama presidency, there were 8 circuit court nominees who waited at least one year to be confirmed. During the first two years of the Trump presidency, none of the 30 circuit court nominees whose nominations were confirmed by the Senate waited at least 365 days to be confirmed. Overall, 18% of President Clinton's circuit court nominees waited at least 365 days to be confirmed, 30% of President George W. Bush's nominees waited at least this long (the highest among the six completed presidencies), and 15% of President Obama's nominees waited at least 365 days. During the Carter and Reagan presidencies, 47 and 63 circuit court nominees, respectively, waited 90 or fewer days from nomination to confirmation. During the George H. W. Bush presidency, 24 circuit court nominees waited 90 or fewer days to confirmation. President Clinton had 18 circuit court nominees confirmed within 90 days (i.e., within approximately three months) of being nominated, while President George W. Bush had 11 such nominees. President Obama had 2 circuit court nominees confirmed within three months of being nominated (the lowest number among the completed presidencies). During the first two years of the Trump presidency, eight circuit court nominees were confirmed within 90 or fewer days of being nominated. Overall, 84% of President Carter's circuit court nominees were confirmed within 90 days of being nominated. During the Reagan presidency, 76% of circuit court nominees were confirmed within 90 days of nomination, while during the George H. W. Bush presidency 57% of circuit court nominees were confirmed within this time frame. During the Clinton presidency, the percentage of circuit court nominees approved by the Senate within 90 days fell below half of all circuit court nominees confirmed (to 26%). The percentage of nominees confirmed in 90 or fewer days decreased further during both the George W. Bush presidency (to 16%) and the Obama presidency (to 4%, the lowest percentage among the six completed presidencies). During the first two years of the Trump presidency, 27% of circuit court nominees were confirmed within 90 days of being nominated. Figure 2 shows, for each U.S. district court nominee who was confirmed from 1977 through 2018, the number of days from when that individual was first nominated to when he or she was confirmed by the Senate. The particular district court nominee who waited the longest period of time from nomination to confirmation is also labeled for each presidency. As shown by the figure, there was a notable increase after the George H. W. Bush presidency in the number of nominees who waited one year or more from nomination to confirmation. During the Carter and Reagan presidencies, a combined total of five district court nominees waited 365 days or more to be confirmed. No district court nominees during the George H. W. Bush presidency waited 365 or more days from nomination to confirmation. During the Clinton presidency, there were 14 district court nominees who waited one year or more to be confirmed. The number of district court nominees who waited at least 365 days to be confirmed increased further, to a high of 17, during the George W. Bush presidency. During the Obama presidency, there were 16 district court nominees who waited at least 365 days to be confirmed (which was the second highest among the completed presidencies). During the first two years of the Trump presidency, there were six district court nominees who waited at least 365 days from nomination to confirmation. Overall, 5% of President Clinton's district court nominees waited at least 365 days to be confirmed, 7% of President George W. Bush's nominees waited at least this long, and 6% of President Obama's nominees waited at least 365 days. During the first two years of the Trump presidency, 11% of district court nominees waited at least 365 days from nomination to confirmation. During the Carter and Reagan presidencies, 157 and 234 district court nominees, respectively, waited 90 or fewer days from nomination to confirmation. During the George H. W. Bush presidency, 72 district court nominees waited 90 or fewer days to confirmation. President Clinton had 129 district court nominees confirmed within 90 days (i.e., within approximately three months) of being nominated, while President George W. Bush had 41 such nominees. President Obama had five district court nominees, the fewest of any completed presidency, confirmed within three months of being nominated. During the first two years of the Trump presidency, two district court nominees were confirmed within 90 or fewer days of being nominated. Overall, 78% of President Carter's district court nominees were confirmed within 90 days of being nominated. During the Reagan presidency, 81% of district court nominees were confirmed within 90 days of nomination, while during the George H. W. Bush presidency 49% of district nominees were confirmed within this time frame. During the Clinton and George W. Bush presidencies, the percentage of district court nominees approved by the Senate within 90 days declined further to 42% and 16%, respectively. During the Obama presidency, the percentage of nominees confirmed in 90 or fewer days was 2% (the lowest percentage of the completed presidencies). During the first two years of the Trump presidency, 4% of district court nominees were confirmed within 90 days of being nominated. Table 8 reports the median number of days from nomination to confirmation for U.S. circuit and district court nominees whose nominations were approved by the Senate from the 95 th Congress through the 115 th Congress. For circuit court nominees, the median number of days from nomination to confirmation ranged from a low of 28.0 days during the 97 th Congress (1981-1982) to a high of 331.0 days during the 114 th Congress (2015-2016). The second-shortest median number of days from nomination to confirmation was 29.0 days during the 95 th Congress (1977-1978), while the second-highest median number of days was 281.5 days during the 109 th Congress (2005-2006). The median number of days from nomination to confirmation for U.S. circuit court nominees stayed above 200 days from the 106 th through 114 th Congresses. In contrast, for the 115 th Congress, the median number of days from nomination to confirmation (140.5 days, or 4.6 months) declined to its lowest point since the 103 rd Congress. If the average, rather than the median, is used to measure the length of time circuit court nominees waited from nomination to confirmation, the average number of days from nomination to confirmation ranged from a low of 32.6 days during the 95 th Congress to a high of 562.9 days during the 109 th Congress. Additionally, the average time from nomination to confirmation for U.S. circuit court nominees increases by more than 30 days, relative to the median, for the 106 th Congress (to 373.9 days); 105 th Congress (303.1 days); 108 th Congress (287.2 days); 113 th Congress (281.2 days); and 110 th Congress (268.8 days). For U.S. district court nominees, the median number of days from nomination to confirmation ranged from a low of 26.0 days during the 98 th Congress (1983-1984) to a high of 299.5 days during the 114 th Congress (2015-2016). The second-shortest median was 30.0 days during the 97 th Congress (1981-1982), while the second-longest median was 235.0 days during the 115 th Congress (2017-2018). The median number of days from nomination to confirmation during the 115 th Congress was the fourth consecutive Congress for which the median wait time from nomination to confirmation for district court nominees was greater than 200 days. The first Congress during which the median wait time for district court nominees exceeded 200 days was the 112 th Congress (2011-2012). Figure 3 displays the overall trends in the median number of days from nomination to confirmation for U.S. circuit and district court nominees who were confirmed from the 95 th Congress through the 115 th Congress (and also indicates the corresponding presidency for each Congress during this period). For circuit court nominees, the five greatest increases in the number of median days from nomination to confirmation occurred during the 114 th Congress (an increase of 102.0 days from the 113 th Congress); the 109 th Congress (an increase of 80.5 days from the 108 th Congress); 100 th Congress (an increase of 73.0 days from the 99 th Congress); 104 th Congress (an increase of 68.0 days from the 103 rd Congress); and the 107 th Congress (an increase of 52.0 days from the 106 th Congress). Most recently, from the 114 th to 115 th Congress, the median number of days from nomination to confirmation for U.S. circuit court nominees declined from 331.0 to 140.5 days. For district court nominees, the five greatest increases in the number of median days from nomination to confirmation occurred during the 114 th Congress (an increase of 96.5 days from the 113 th Congress); 112 th Congress (an increase of 85.0 days from the 111 th Congress); 110 th Congress (an increase of 67.0 days from the 109 th Congress); 100 th Congress (an increase of 57.0 days from the 99 th Congress); and the 102 nd Congress (an increase of 45.5 days from the 101 st Congress). Most recently, from the 114 th to 115 th Congress, the median number of days from nomination to confirmation for U.S. district court nominees declined from 299.5 to 235.0 days. The President customarily transmits a circuit or district court nomination to the Senate in the form of a written nomination message. Once received, the nomination is numbered by the Senate executive clerk, read on the floor, and then immediately referred to the Judiciary Committee. The Judiciary Committee's processing of the nomination typically consists of three phases—a prehearing phase, the holding of a hearing on the nomination, and voting on whether to report the nomination to the Senate. During a hearing on the nomination, lower court nominees engage in a question-and-answer session with members of the Senate Judiciary Committee. The hearing typically is held for more than one judicial nominee at a time. From 1977 through 2018, the median length of time from when an individual was first nominated to a circuit court judgeship to when he or she received a hearing by the Judiciary Committee was 63.0 days (or 2.1 months). During this same period, the median length of time from when an individual was nominated to a district court judgeship to when he or she received a hearing was also 63.0 days. As shown in Table 9 , the median length of time from nomination to committee hearing for circuit and district court nominees has, however, varied across presidencies. For individuals nominated during more recent presidencies, the length of time from nomination to committee hearing has been relatively longer than the median for all nominees from 1977 through 2018. The median number of days from nomination to committee hearing for U.S. circuit court nominees ranged from a low of 23.0 days (during the Reagan presidency) to a high of 154.0 days (during the George W. Bush presidency). For the first two years of the Trump presidency, the median number of days from nomination to hearing for U.S. circuit court nominees was 69.0 days. The median number of days from nomination to committee hearing for U.S. district court nominees ranged from a low of 22.0 days (during the Reagan presidency) to a high of 87.5 days (during the George W. Bush presidency). For the first two years of the Trump presidency, the median number of days from nomination to hearing for U.S. district court nominees was 77.0 days. After a nominee receives a hearing by the Judiciary Committee, she awaits a vote by the committee on whether her nomination will be reported to the Senate as a whole. If the nomination is not put to the committee for a vote, or if the committee votes against reporting it (i.e., rejects the nomination), the nomination will not move forward, ultimately failing to receive Senate confirmation. The committee, in reporting a nomination to the Senate as a whole, has three options—to report a nomination favorably, unfavorably, or without recommendation. Almost always, when the committee votes on a nomination, it votes to report favorably. The committee, however, may vote (as it has done in the past, but only on rare occasions) to report unfavorably or without recommendation. Such a vote advances the nomination for Senate consideration despite the lack of majority support for it in committee. After it is reported by the Judiciary Committee, a circuit or district court nomination is listed on the Executive Calendar and is eligible for floor consideration. The nominees who are included in this part of the analysis all had their nominations reported by the Judiciary Committee (i.e., their nominations advanced to the full Senate for consideration) and were confirmed by the Senate. From 1977 through 2018, the median length of time from when an individual who was nominated to a circuit court judgeship had his nomination reported by the Judiciary Committee to when he was confirmed by the Senate was 9.0 days. During this same period, the median length of time from when a district court nominee had his nomination reported to when he was confirmed was 8.0 days. There was, however, variation during this period across presidencies in how long circuit and district court nominees waited to be confirmed once their nominations were reported by the Judiciary Committee—with nominees during more recent presidencies waiting longer to be confirmed once their nominations were reported by the committee. As shown by Table 10 , for completed presidencies, the median number of days from committee report to confirmation for U.S. circuit court nominees ranged from a low of 1.0 day (during the George H. W. Bush presidency) to a high of 98.0 days (during the Obama presidency). For the first two years of the Trump presidency, the median number of days from committee report to confirmation was 26.0 days. For completed presidencies, the median number of days from committee report to confirmation for U.S. district court nominees ranged from a low of 1.0 day (during the George H. W. Bush presidency) to a high of 84.0 days (during the Obama presidency). For the first two years of the Trump presidency, the median number of days from committee report to confirmation for U.S. district court nominees was 133.0 days. Since 1953, every presidential Administration, except those of George W. Bush and Donald Trump, has sought prenomination evaluations of its candidates for district and circuit court judgeships by the American Bar Association (ABA). The committee that performs this evaluation, the ABA's Standing Committee on the Federal Judiciary, is made up of 15 lawyers with various professional experiences. The stated objective of the committee is to assist the White House in assessing whether prospective judicial nominees should be nominated. It seeks to do so by providing what it describes as an \"impartial peer-review evaluation\" of each candidate's professional qualifications. This evaluation, according to the committee, focuses strictly on a candidate's \"integrity, professional competence and judicial temperament\" and does not take into account the candidate's \"philosophy, political affiliation or ideology.\" In evaluating professional competence, the committee assesses the prospective nominee's \"intellectual capacity, judgment, writing and analytical abilities, knowledge of the law, and breadth of professional experience.\" Following the multistep evaluation process by the committee, a nominee is given an official rating of \"well qualified,\" \"qualified,\" or \"not qualified.\" A rating is provided strictly on an advisory basis; it is solely in the President's discretion as to how much weight to place on a judicial candidate's ABA rating in deciding whether to nominate him or her. As shown by Table 11 , there is some variation across presidencies in the percentage of confirmed U.S. circuit and district court nominees who received a particular rating by the ABA. For U.S. circuit court nominees for completed presidencies, the percentage who received a well qualified rating ranged from a low of 56.6% during the Reagan presidency to a high of 80.0% during the Obama presidency. During the first two years of the Trump presidency, 80.0% of confirmed circuit court nominees also received a well qualified rating. None of the completed presidencies listed in the table had any confirmed circuit court nominees who were rated as not qualified by the ABA. During the first two years of the Trump presidency, two circuit court nominees were rated as not qualified (comprising 6.7% of the circuit court nominees confirmed during this period). For confirmed U.S. district court nominees, the percentage who received a well qualified rating ranged from a low of 51.0% during the Carter presidency to a high of 69.3% during the George W. Bush presidency. During the first two years of the Trump presidency, 62.3% of confirmed district court nominees received a well qualified rating. For completed presidencies during which at least one confirmed district court nominee was rated as not qualified, the percentage of nominees who received such a rating ranged from a high of 1.5% of all confirmed nominees during the Carter and George W. Bush presidencies to a low of 1.3% of such nominees during the Clinton presidency. During the first two years of the Trump presidency, 3.8% of confirmed district court nominees received a rating of not qualified. The Senate may confirm nominations by unanimous consent, voice vote, or by recorded roll call vote. When the question of whether to confirm a nomination is put to the Senate, a roll call vote will be taken on the nomination if the Senate has ordered \"the yeas and nays.\" The support of 11 Senators is necessary to order the roll call. Historically, the Senate confirmed most U.S. circuit and district court nominations by unanimous consent or by voice vote. As shown by Figure 4 , however, using roll call votes to confirm nominees has become much more common during recent presidencies. A relatively small percentage of circuit court nominees were confirmed by roll call vote during the Carter, Reagan, and George H. W. Bush presidencies. Specifically, 7.1%, 6.0%, and 2.4% of circuit court nominees were confirmed by roll call during each of these three presidencies, respectively. Additionally, only one district court nominee was confirmed by roll call vote during each of the Carter and Reagan presidencies, and no district court nominees were confirmed by roll call vote during George H. W. Bush's presidency. Confirmation by roll call vote became more common during the Clinton presidency, with nearly one-quarter, 24.6%, of circuit court nominees and 10.5% of district court nominees receiving roll call votes at the time of Senate confirmation. It was not, however, until the George W. Bush presidency that a majority of lower court nominees were approved using roll call votes, with 80.3% of circuit court nominees and 54.0% of district court nominees confirmed in this way. This trend continued under President Obama, with 89.1% of circuit court nominees and 64.6% of district court nominees being confirmed by roll call vote. During the first two years of the Trump presidency, all U.S. circuit court nominees were confirmed using roll call votes, representing an increase from recent years in the frequency of using roll call votes to confirm circuit court nominees. In contrast, 50.9% of district court nominees were confirmed by roll call vote, representing a decrease from recent years in the frequency of using roll call votes to confirm district court nominees. The increased frequency with which roll call votes have been used to confirm U.S. circuit and district court nominations has not always been correlated with Senators using roll call votes to express opposition to a nominee by voting against his or her nomination. As shown by Figure 5 , there is notable variation in the number of nay votes received by circuit and district court nominations when they have been confirmed by roll call vote. The figure shows the number of nominations that received zero nay votes at the time of confirmation. For nominations that received at least one nay vote, the roll call data are presented using five ranges to reflect the number of nay votes received by a President's nominees: (1) 1 to 10 nay votes; (2) 11 to 20 nay votes; (3) 21 to 30 nay votes; (4) 31 to 40 nay votes; and (5) more than 40 nay votes. During the Clinton presidency, 12 (75.0%) of 16 circuit court nominees who were confirmed by roll call vote received at least one nay vote (with 9, or 56.2%, receiving more than 20 nay votes). Of the 32 district court nominees who were confirmed by roll call vote, 18 (56.2%) received at least one nay vote. In contrast to the Clinton presidency, a majority of the circuit and district court nominees approved by roll call vote during the George W. Bush and Obama presidencies were confirmed after having received zero nay votes. During the Bush presidency, 30 (61.2%) of 49 circuit court nominees confirmed by roll call votes received zero nay votes. For the 141 district court nominees confirmed by roll call vote, 136 (96.4%) received zero nay votes. During the Obama presidency, 26 (53.1%) of 49 circuit court nominees confirmed by roll call vote received zero nay votes. For the 173 district court nominees confirmed by roll call vote, 95 (54.9%) received zero nay votes. During the first two years of the Trump presidency, 18 (60.0%) of 30 circuit court nominees approved by roll call vote were confirmed with more than 40 nay votes. In contrast, 2 (6.7%) were confirmed with zero nay votes. For district court nominees, 17 (63.0%) of 27 confirmed by roll call vote received at least one nay vote (while 10, or 37.0%, received zero nay votes). Of the 17 who received at least one nay vote, a plurality (5, or 29.4%) received more than 40 nay votes. This section provides data related to the gender and race of U.S. circuit and district court nominees confirmed by the Senate during each presidency since the Carter Administration. These particular demographic characteristics of judicial nominees are of ongoing interest to Congress. Such interest is demonstrated especially at the time circuit and district court nominations are considered by the Senate. For example, floor statements by Senators in support of circuit or district court nominees frequently emphasize the particular demographic characteristics of nominees who would enhance the diversity of the federal judiciary. As shown by Figure 6 , for completed presidencies, the percentage of confirmed U.S. circuit court nominees who were women ranged from a low of 7.2% during the Reagan presidency to a high of 43.6% during the Obama presidency. For district court nominees, the percentage of confirmed nominees who were women ranged from a low of 8.3% during the Reagan presidency to a high of 41.0% during the Obama presidency. During the first two years of the Trump presidency, 20.0% of confirmed U.S. circuit court nominees were women, while 26.4% of confirmed district court nominees were women. Figure 7 shows the percentage of each President's confirmed U.S. circuit and district court nominees who were African American, Asian American, Hispanic, and white. For completed presidencies, the percentage of confirmed U.S. circuit court nominees who were African American ranged from a low of 1.2% during the Reagan presidency to a high of 16.4% during the Obama presidency. During the first two years of the Trump presidency, no confirmed circuit court nominees were African American. For completed presidencies, the percentage of confirmed U.S. district court nominees who were African American ranged from a low of 2.1% during the Reagan presidency to a high of 18.7% during the Obama presidency. During the first two years of the Trump presidency, 1.9% of confirmed district court nominees were African American. For completed presidencies, there were no Asian American circuit court judges appointed during the Reagan, George H. W. Bush, or George W. Bush presidencies. The greatest percentage was appointed during the Obama presidency (7.3%). During the first two years of the Trump presidency, 10.0% of confirmed circuit court nominees were Asian American. For past presidencies, there were no Asian American district court judges appointed during the George H. W. Bush presidency. The greatest percentage was appointed during the Obama presidency (5.2%). During the first two years of the Trump presidency, 3.8% of confirmed district court nominees were Asian American. For completed presidencies, the percentage of confirmed U.S. circuit court nominees who were Hispanic ranged from a low of 1.2% during the Reagan presidency to a high of 10.9% during the Obama presidency. During the first two years of the Trump presidency, no confirmed circuit court nominees were Hispanic. For completed presidencies, the percentage of confirmed U.S. district court nominees who were Hispanic ranged from a low of 4.1% during the George H. W. Bush presidency to a high of 10.3% during the George W. Bush presidency. During the first two years of the Trump presidency, 1.9% of confirmed district court nominees were Hispanic.", "summary": "In recent decades, the process for appointing judges to the U.S. circuit courts of appeals and the U.S. district courts has been of continuing Senate interest. The President and the Senate share responsibility for making these appointments. Pursuant to the Constitution's Appointments Clause, the President nominates persons to fill federal judgeships, with the appointment of each nominee also requiring Senate confirmation. Although not mentioned in the Constitution, an important role is also played midway in the appointment process by the Senate Judiciary Committee. The statistics presented in this report reflect congressional interest in issues related to the confirmation process for lower federal court nominees. Statistics are provided for each stage of the nomination and confirmation process—from the frequency of judicial vacancies that require a presidential nomination for a judgeship to be filled to the frequency of roll call votes (rather than the use of unanimous consent or voice votes) to confirm judicial nominees. Statistics are also provided related to the length of the confirmation process itself. Additional statistics provided relate to the demographic characteristics of circuit and district court nominees confirmed by the Senate. The period covered by the report, 1977 through 2018, includes every Administration from the Carter presidency to the first two years of the Trump presidency. This period also includes every Congress from the 95th (1977-1978) through the 115th (2017-2018). Because the statistics presented for the Trump presidency are for the first two years of his Administration (while statistics for other presidencies reflect each President's entire Administration, whether four or eight years), the statistics presented for the Trump presidency may be different at the conclusion of his Administration. This report will be next updated by CRS at the conclusion of the 116th Congress.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on multiyear procurement (MYP) and block buy contracting (BBC), which are special contracting mechanisms that Congress permits the Department of Defense (DOD) to use for a limited number of defense acquisition programs. Compared to the standard or default approach of annual contracting, MYP and BBC have the potential for reducing weapon procurement costs by a few or several percent. Potential issues for Congress concerning MYP and BBC include whether to use MYP and BBC in the future more frequently, less frequently, or about as frequently as they are currently used; whether to create a permanent statute to govern the use of BBC, analogous to the permanent statute that governs the use of MYP; and whether the Coast Guard should begin making use of MYP and BBC. Congress's decisions on these issues could affect defense acquisition practices, defense funding requirements, and the defense industrial base. A contract that the Air Force has for the procurement of Evolved Expendable Launch Vehicle (EELV) Launch Services (ELS) has sometimes been referred to as a block buy, but it is not an example of block buy contracting as discussed in this report. The Air Force in this instance is using the term block buy to mean something different. This report does not discuss the ELS contract. (For additional discussion, see \" Terminology Alert: Block Buy Contracting vs. Block Buys \" below.) In discussing MYP, BBC, and incremental funding, it can be helpful to distinguish contracting mechanisms from funding approaches. The two are often mixed together in discussions of DOD acquisition, sometimes leading to confusion. Stated briefly Funding approaches are ways that Congress can appropriate funding for weapon procurement programs, so that DOD can then put them under contract. Examples of funding approaches include traditional full funding (the standard or default approach), incremental funding, and advance appropriations. Any of these funding approaches might make use of advance procurement (AP) funding. Contracting mechanisms are ways for DOD to contract for the procurement of weapons systems, once funding for those systems has been appropriated by Congress. Examples of contracting mechanisms include annual contracting (the standard or default DOD approach), MYP, and BBC. Contracting mechanisms can materially change the total procurement cost of a ship. The use of a particular funding approach in a defense acquisition program does not dictate the use of a particular contracting mechanism. Defense acquisition programs consequently can be implemented using various combinations of funding approaches and contracting mechanisms. Most DOD weapon acquisition programs use a combination of traditional full funding and annual contracting. A few programs, particularly certain Navy shipbuilding programs, use incremental funding as their funding approach. A limited number of DOD programs use MYP as their contracting approach, and to date three Navy shipbuilding programs have used BBC as their contracting approach. The situation is summarized in Table 1 . This report focuses on the contracting approaches of MYP and BBC and how they compare to annual contracting. Other CRS reports discuss the funding approaches of traditional full funding, incremental funding, and advance appropriations. What is MYP, and how does it differ from annual contracting? MYP, also known as multiyear contracting, is an alternative to the standard or default DOD approach of annual contracting. Under annual contracting, DOD uses one or more contracts for each year's worth of procurement of a given kind of item. Under MYP, DOD instead uses a single contract for two to five years' worth of procurement of a given kind of item, without having to exercise a contract option for each year after the first year. DOD needs congressional approval for each use of MYP. To illustrate the basic difference between MYP and annual contracting, consider a hypothetical DOD program to procure 20 single-engine aircraft of a certain kind over the 5-year period FY2018-FY2022, at a rate of 4 aircraft per year: Under annual contracting , DOD would issue one or more contracts for each year's procurement of four aircraft. After Congress funds the procurement of the first four aircraft in FY2018, DOD would issue one or more contracts (or exercise a contract option) for those four aircraft. The next year, after Congress funds the procurement of the next four aircraft in FY2019, DOD would issue one or more contracts (or exercise a contract option) for those four aircraft, and so on. Under MYP , DOD would issue one contract covering all 20 aircraft to be procured during the 5-year period FY2018-FY2022. DOD would award this contract in FY2018, at the beginning of the five-year period, following congressional approval to use MYP for the program, and congressional appropriation of the FY2018 funding for the program. To continue the implementation of the contract over the next four years, DOD would request the FY2019 funding for the program as part of DOD's proposed FY2019 budget, the FY2020 funding as part of DOD's proposed FY2020 budget, and so on. How much can MYP save? Compared with estimated costs under annual contracting, estimated savings for programs being proposed for MYP have ranged from less than 5% to more than 15%, depending on the particulars of the program in question, with many estimates falling in the range of 5% to 10%. In practice, actual savings from using MYP rather than annual contracting can be difficult to observe or verify because of cost growth during the execution of the contract that was caused by developments independent of the use of MYP rather than annual contracting. A February 2012 briefing by the Cost Assessment and Program Evaluation (CAPE) office within the Office of the Secretary of Defense (OSD) states that \"MYP savings analysis is difficult due to the lack of actual costs on the alternative acquisition path, i.e., the path not taken.\" The briefing states that CAPE up to that point had assessed MYP savings for four aircraft procurement programs—F/A-18E/F strike fighters, H-60 helicopters, V-22 tilt-rotor aircraft, and CH-47F helicopters—and that CAPE's assessed savings ranged from 2% to 8%. A 2008 Government Accountability Office (GAO) report stated that DOD does not have a formal mechanism for tracking multiyear results against original expectations and makes few efforts to validate whether actual savings were achieved by multiyear procurement. It does not maintain comprehensive central records and historical information that could be used to enhance oversight and knowledge about multiyear performance to inform and improve future multiyear procurement (MYP) candidates. DOD and defense research centers officials said it is difficult to assess results because of the lack of historical information on multiyear contracts, comparable annual costs, and the dynamic acquisition environment. How does MYP potentially save money? Compared to annual contracting, using MYP can in principle reduce the cost of the weapons being procured in two primary ways: Contractor optimization of workforce and production facilities . An MYP contract gives the contractor (e.g., an airplane manufacturer or shipbuilder) confidence that a multiyear stream of business of a known volume will very likely materialize. This confidence can permit the contractor to make investments in the firm's workforce and production facilities that are intended to optimize the facility for the production of the items being procured under the contract. Such investments can include payments for retaining or training workers, or for building, expanding, or modernizing production facilities. Under annual contracting, the manufacturer might not have enough confidence about its future stream of business to make these kinds of investments, or might be unable to convince its parent firm to finance them. E conomic order quan tity (EOQ) purchases of selected long-leadtime components. Under an MYP contract, DOD is permitted to bring forward selected key components of the items to be procured under the contract and to purchase the components in batch form during the first year or two of the contract. In the hypothetical example introduced earlier, using MYP could permit DOD to purchase, say, the 20 engines for the 20 aircraft in the first year or two of the 5-year contract. Procuring selected components in this manner under an MYP contract is called an economic order quantity (EOQ) purchase. EOQ purchases can reduce the procurement cost of the weapons being procured under the MYP contract by allowing the manufacturers of components to take maximum advantage of production economies of scale that are possible with batch orders. What gives the contractor confidence that the multiyear stream of business will materialize? At least two things give the contractor confidence that DOD will not terminate an MYP contract and that the multiyear stream of business consequently will materialize: For a program to qualify for MYP, DOD must certify, among other things, that the minimum need for the items to be purchased is expected to remain substantially unchanged during the contract in terms of production rate, procurement rate, and total quantities. Perhaps more important to the contractor, MYP contracts include a cancellation penalty intended to reimburse a contractor for costs that the contractor has incurred (i.e., investments the contractor has made) in anticipation of the work covered under the MYP contract. The undesirability of paying a cancellation penalty acts as a disincentive for the government against canceling the contract. (And if the contract is canceled, the cancellation penalty helps to make the contractor whole.) Is there a permanent statute governing MYP contracting? There is a permanent statute governing MYP contracting—10 U.S.C. 2306b. The statute was created by Section 909 of the FY1982 Department of Defense Authorization Act ( S. 815 / P.L. 97-86 of December 1, 1981), revised and reorganized by Section 1022 of the Federal Acquisition Streamlining Act of 1994 ( S. 1587 / P.L. 103-355 of October 13, 1994), and further amended on several occasions since. For the text of 10 U.S.C. 2306b, see Appendix A . DOD's use of MYP contracting is further governed by DOD acquisition regulations. Under this statute, what criteria must a program meet to qualify for MYP? 10 U.S.C. 2306b(a) states that to qualify for MYP, a program must meet several criteria, including the following: Significant savings. DOD must estimate that using an MYP contract would result in \"significant savings\" compared with using annual contracting. Realistic cost estimates . DOD's estimates of the cost of the MYP contract and the anticipated savings must be realistic. Stable need for the items. DOD must expect that its minimum need for the items will remain substantially unchanged during the contract in terms of production rate, procurement rate, and total quantities. Stable design for the items . The design for the items to be acquired must be stable, and the technical risks associated with the items must not be excessive. 10 U.S.C. includes provisions requiring the Secretary of Defense or certain other DOD officials to find, determine, or certify that these and other statutory requirements for using MYP contracts have been met, and provisions requiring the heads of DOD agencies to provide written notifications of certain things to the congressional defense committees 30 days before awarding or initiating an MYP contract, or 10 days before terminating one. 10 U.S.C. 2306b also requires DOD MYP contracts to be fixed-price type contracts. What is meant by \" significant savings\"? The amount of savings required under 10 U.S.C. 2306b to qualify for using an MYP contract has changed over time; the requirement was changed from \"substantial savings\" to \"significant savings\" by Section 811 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015). The joint explanatory statement for the FY2016 National Defense Authorization Act states the following regarding Section 811: Amendment relating to multiyear contract authority for acquisition of property (sec. 811) The House bill contained a provision (sec. 806) that would strike the existing requirement that the head of an agency must determine that substantial savings would be achieved before entering into a multiyear contract. The Senate amendment contained no similar provision. The Senate recedes with an amendment that would require that significant savings would be achieved before entering into a multiyear contract. The conferees agree that the government should seek to maximize savings whenever it pursues multiyear procurement. However, the conferees also agree that significant savings (estimated to be greater than $250.0 million), and other benefits, may be achieved even if it does not equate to a minimum of 10 percent savings over the cost of an annual contract. The conferees expect a request for authority to enter into a multiyear contract will include (1) the estimated cost savings, (2) the minimum quantity needed, (3) confirmation that the design is stable and the technical risks are not excessive, and (4) any other rationale for entering into such a contract. In addition, 10 U.S.C. 2306b states the following: If for any fiscal year a multiyear contract to be entered into under this section is authorized by law for a particular procurement program and that authorization is subject to certain conditions established by law (including a condition as to cost savings to be achieved under the multiyear contract in comparison to specified other contracts) and if it appears (after negotiations with contractors) that such savings cannot be achieved, but that significant savings could nevertheless be achieved through the use of a multiyear contract rather than specified other contracts, the President may submit to Congress a request for relief from the specified cost savings that must be achieved through multiyear contracting for that program. Any such request by the President shall include details about the request for a multiyear contract, including details about the negotiated contract terms and conditions. What is meant by \"stable design\"? The term \"stable design\" is generally understood to mean that the design for the items to be procured is not expected to change substantially during the period of the contract. Having a stable design is generally demonstrated by having already built at least a few items to that design (or in the case of a shipbuilding program, at least one ship to that design) and concluding, through testing and operation of those items, that the design does not require any substantial changes during the period of the contract. What happens if Congress does not provide the annual funding requested by DOD to continue the implementation of the contract? If Congress does not provide the funding requested by DOD to continue the implementation of an MYP contract, DOD would be required to renegotiate, suspend, or terminate the contract. Terminating the contract could require the government to pay a cancellation penalty to the contractor. Renegotiating or suspending the contract could also have a financial impact. What effect does using MYP have on flexibility for making procurement changes? A principal potential disadvantage of using MYP is that it can reduce Congress's and DOD's flexibility for making changes (especially reductions) in procurement programs in future years in response to changing strategic or budgetary circumstances, at least without incurring cancellation penalties. In general, the greater the portion of DOD's procurement account that is executed under MYP contracts, the greater the potential loss of flexibility. The use of MYP for executing some portion of the DOD procurement account means that if policymakers in future years decide to reduce procurement spending below previously planned levels, the spending reduction might fall more heavily on procurement programs that do not use MYP, which in turn might result in a less-than-optimally balanced DOD procurement effort. How does Congress approve the use of MYP? Congress approves the use of MYP on a case-by-case basis, typically in response to requests by DOD. Congressional approval for DOD MYP contracts with a value of more than $500 million must occur in two places: an annual DOD appropriations act and an act other than the annual DOD appropriations act. In annual DOD appropriations acts, the provision permitting the use of MYP for one or more defense acquisition programs is typically included in the title containing general provisions, which typically is Title VIII. As shown in Table B-2 , since FY2011, it has been Section 8010. An annual national defense authorization act (NDAA) is usually the act other than an appropriations act in which provisions granting authority for using MYP contracting on individual defense acquisition programs are included. Such provisions typically occur in Title I of the NDAA, the title covering procurement programs. Provisions in which Congress approves the use of MYP for a particular defense acquisition program may include specific conditions for that program in addition to the requirements and conditions of 10 U.S.C. 2306b. How often is MYP used? MYP is used for a limited number of DOD acquisition programs. As shown in the Appendix B , annual DOD appropriations acts since FY1990 typically have approved the use of MYP for zero to a few DOD programs each year. An August 28, 2017, press report states the following: The Pentagon's portfolio of active multiyear procurement contracts is on track to taper from $10.7 billion in fiscal year 2017—or more than 8 percent of DOD procurement spending—to $1.2 billion by FY-19, according to data recently compiled by the Pentagon comptroller for lawmakers. However, there are potential new block-buy deals in the works, including several large Navy deals. According to the Multiyear Procurement Contracts Report for FY-17, which includes data current as of June 27, seven major defense acquisition programs are being purchased through multiyear procurement contracts, collectively obligating the U.S. government to spend $16 billion across the five-year spending plan with $14.5 billion of the commitments lashed to FY-17 and FY-18. In an interview published on January 13, 2014, Sean Stackley, the Assistant Secretary of the Navy for Research, Development, and Acquisition (i.e., the Navy's acquisition executive), stated the following: What the industrial base clamors for is stability, so they can plan, invest, train their work force. It gives them the ability in working with say, the Street [Wall Street], to better predict their own performance, then meet expectations in the same fashion we try to meet our expectations with the Hill. It's emblematic of stability that we've got more multiyear programs in the Department of the Navy than the rest of the Department of Defense combined. We've been able to harvest from that significant savings, and that has been key to solving some of our budget problems. It's allowed us in certain cases to put the savings right back into other programs tied to requirements. A February 2012 briefing by the Cost Assessment and Program Evaluation (CAPE) office within the Office of the Secretary of Defense (OSD) shows that the total dollar value of DOD MYP contracts has remained more or less stable between FY2000 and FY2012 at roughly $7 billion to $13 billion per year. The briefing shows that since the total size of DOD's procurement budget has increased during this period, the portion of DOD's total procurement budget accounted for by programs using MYP contracts has declined from about 17% in FY2000 to less than 8% in FY2012. The briefing also shows that the Navy makes more use of MYP contracts than does the Army or Air Force, and that the Air Force made very little use of MYP in FY2010-FY2012. A 2008 Government Accountability Office (GAO) report stated the following: Although DOD had been entering into multiyear contracts on a limited basis prior to the 1980s, the Department of Defense Authorization Act, [for fiscal year] 1982, codified the authority for DOD to procure on a multiyear basis major weapon systems that meet certain criteria. Since that time, DOD has annually submitted various weapon systems as multiyear procurement candidates for congressional authorization. Over the past 25 years, Congress has authorized the use of multiyear procurement for approximately 140 acquisition programs, including some systems approved more than once. What is BBC, and how does it compare to MYP? BBC is similar to MYP in that it permits DOD to use a single contract for more than one year's worth of procurement of a given kind of item without having to exercise a contract option for each year after the first year. BBC is also similar to MYP in that DOD needs congressional approval for each use of BBC. BBC differs from MYP in the following ways: There is no permanent statute governing the use of BBC. There is no requirement that BBC be approved in both a DOD appropriations act and an act other than a DOD appropriations act. Programs being considered for BBC do not need to meet any legal criteria to qualify for BBC because there is no permanent statute governing the use of BBC that establishes such criteria. A BBC contract can cover more than five years of planned procurements. The BBC contracts that were used by the Navy for procuring Littoral Combat Ships (LCSs), for example, covered a period of seven years (FY2010-FY2016). Economic order quantity (EOQ) authority does not come automatically as part of BBC authority because there is no permanent statute governing the use of BBC that includes EOQ authority as an automatic feature. To provide EOQ authority as part of a BBC contract, the provision granting authority for using BBC in a program may need to state explicitly that the authority to use BBC includes the authority to use EOQ. BBC contracts are less likely to include cancellation penalties. Given the one key similarity between BBC and MYP (the use of a single contract for more than one year's worth of procurement), and the various differences between BBC and MYP, BBC might be thought of as a less formal stepchild of MYP. When and why was BBC invented? BBC was invented by Section 121(b) of the FY1998 National Defense Authorization Act ( H.R. 1119 / P.L. 105-85 of November 18, 1997), which granted the Navy the authority to use a single contract for the procurement of the first four Virginia (SSN-774) class attack submarines. The 4 boats were scheduled to be procured during the 5-year period FY1998-FY2002 in annual quantities of 1-1-0-1-1. Congress provided the authority granted in Section 121(b) at least in part to reduce the combined procurement cost of the four submarines. Using MYP was not an option for the Virginia-class program at that time because the Navy had not even begun, let alone finished, construction of the first Virginia-class submarine, and consequently could not demonstrate that it had a stable design for the program. When Section 121(b) was enacted, there was no name for the contracting authority it provided. The term block buy contracting came into use later, when observers needed a term to refer to the kind of contracting authority that Congress authorized in Section 121(b). As discussed in the next section, this can cause confusion, because the term block buy was already being used in discussions of DOD acquisition to refer to something else. What's the difference between block buy cont r acting and block buys? In discussions of defense procurement, the term \"block buy\" by itself (without \"contracting\" at the end) is sometimes used to refer to something quite different from block buy contracting—namely, the simple act of funding the procurement of more than one copy of an item in a single year, particularly when no more than one item of that kind might normally be funded in a single year. For example, when Congress funded the procurement of two aircraft carriers in FY1983, and another two in FY1988, these acts were each referred to as block buys, because aircraft carriers are normally procured one at a time, several years apart from one another. This alternate meaning of the term block buy predates by many years the emergence of the term block buy contracting. The term block buy is still used in this alternate manner, which can lead to confusion in discussions of defense procurement. For example, for FY2017, the Air Force requested funding for procuring five Evolved Expendable Launch Vehicles (EELVs) for its EELV Launch Services (ELS) program. At the same time, Navy officials sometimes refer to the use of block buy contracts for the first four Virginia-class submarines, and in the LCS program, as block buys, when they might be more specifically referred to as instances of block buy contract ing . How much can BBC save, compared with MYP? BBC can reduce the unit procurement costs of ships by amounts less than or perhaps comparable to those of MYP, if the authority granted for using BBC explicitly includes authority for making economic order quantity (EOQ) purchases of components. If the authority granted for using BBC does not explicitly include authority for making EOQ purchases, then the savings from BBC will be less. Potential savings under BBC might also be less than those under MYP if the BBC contract does not include a cancellation penalty, or includes one that is more limited than typically found in an MYP contract, because this might give the contractor less confidence than would be the case under an MYP contract that the future stream of business will materialize as planned, which in turn might reduce the amount of money the contractor invests to optimize its workforce and production facilities for producing the items to be procured under the contract. How frequently has BBC been used? Since its use at the start of the Virginia-class program, BBC has been used very rarely. The Navy did not use it again in a shipbuilding program until December 2010, when it awarded two block buy contracts, each covering 10 LCSs to be procured over the six-year period FY2010-FY2015, to the two LCS builders. (Each contract was later amended to include an 11 th ship in FY2016, making for a total of 22 ships under the two contracts.) A third example is the John Lewis (TAO-205) class oiler program, in which the Navy is using a block buy contract to procure the first six ships in the program. A fourth example, arguably, is the Air Force's KC-46 aerial refueling tanker program, which is employing a fixed price incentive fee (FPIF) development contract that includes a \"back end\" commitment to procure certain minimum numbers of KC-46s in certain fiscal years. When might BBC be suitable as an alternative to MYP? BBC might be particularly suitable as an alternative to MYP in cases where using a multiyear contract can reduce costs, but the program in question cannot meet all the statutory criteria needed to qualify for MYP. As shown in the case of the first four Virginia-class boats, this can occur at or near the start of a procurement program, when design stability has not been demonstrated through the production of at least a few of the items to be procured (or, for a shipbuilding program, at least one ship). What i s the difference between an MYP or block buy contract and a contract with options? The military services sometimes use contracts with options to procure multiple copies of an item that are procured over a period of several years. The Navy, for example, used a contract with options to procure Lewis and Clark (TAKE-1) class dry cargo ships that were procured over a period of several years. A contract with options can be viewed as somewhat similar to an MYP or block buy contract in that a single contract is used to procure several years' worth of procurement of a given kind of item. There is, however, a key difference between an MYP or block buy contract and a contract with options: In a contract with options, the service is under no obligation to exercise any of the options, and a service can choose to not exercise an option without having to make a penalty payment to the contractor. In contrast, in an MYP or block buy contract, the service is under an obligation to continue implementing the contract beyond the first year, provided that Congress appropriates the necessary funds. If the service chooses to terminate an MYP or block buy contract, and does so as a termination for government convenience rather than as a termination for contractor default, then the contractor can, under the contract's termination for convenience clause, seek a payment from the government for cost incurred for work that is complete or in process at the time of termination, and may include the cost of some of the investments made in anticipation of the MYP or block buy contract being fully implemented. The contractor can do this even if the MYP or block buy contract does not elsewhere include a provision for a cancellation penalty. As a result of this key difference, although a contract with options looks like a multiyear contract, it operates more like a series of annual contracts, and it cannot achieve the kinds of savings that are possible under MYP and BBC. Potential issues for Congress concerning MYP and BBC include whether to use MYP and BBC in the future more frequently, less frequently, or about as frequently as they are currently used; and whether to create a permanent statute to govern the use of BBC, analogous to the permanent statute that governs the use of MYP. Should MYP and BBC in the future be used more frequently, less frequently, or about as frequently as they are currently used? Supporters of using MYP and BBC more frequently in the future might argue the following: Since MYP and BBC can reduce procurement costs, making greater use of MYP and BBC can help DOD get more value out of its available procurement funding. This can be particularly important if DOD's budget in real (i.e., inflation-adjusted) terms remains flat or declines in coming years, as many observers anticipate. The risks of using MYP have been reduced by Section 811 of the FY2008 National Defense Authorization Act ( H.R. 4986 / P.L. 110-181 of January 28, 2008), which amended 10 U.S.C. 2306b to strengthen the process for ensuring that programs proposed for MYP meet certain criteria (see \" Permanent Statute Governing MYP \"). Since the value of MYP contracts equated to less than 8% of DOD's procurement budget in FY2012, compared to about 17% of DOD's procurement budget in FY2000, MYP likely could be used more frequently without exceeding past experience regarding the share of DOD's procurement budget accounted for by MYP contracts. Supporters of using MYP and BBC less frequently in the future, or at least no more frequently than now, might argue the following: Using MYP and BBC more frequently would further reduce Congress's and DOD's flexibility for making changes in DOD procurement programs in future years in response to changing strategic or budgetary circumstances. The risks of reducing flexibility in this regard are increased now because of uncertainties in the current strategic environment and because efforts to reduce federal budget deficits could include reducing DOD spending, which could lead to a reassessment of U.S. defense strategy and associated DOD acquisition programs. Since actual savings from using MYP and BBC rather than annual contracting can be difficult to observe or verify, it is not clear that the financial benefits of using MYP or BBC more frequently in the future would be worth the resulting further reduction in Congress's and DOD's flexibility for making changes in procurement programs in future years in response to changing strategic or budgetary circumstances. Should Congress create a permanent statute to govern the use of BBC, analogous to the permanent statute (10 U.S.C. 2306b) that governs the use of MYP? Supporters of creating a permanent statute to govern the use of BBC might argue the following: Such a statute could encourage greater use of BBC, and thereby increase savings in DOD procurement programs by giving BBC contracting a formal legal standing and by establishing a clear process for DOD program managers to use in assessing whether their programs might be considered suitable for BBC. Such a statute could make BBC more advantageous by including a provision that automatically grants EOQ authority to programs using BBC, as well as provisions establishing qualifying criteria and other conditions intended to reduce the risks of using BBC. Opponents of creating a permanent statute to govern the use of BBC might argue the following: A key advantage of BBC is that it is not governed by a permanent statute. The lack of such a statute gives DOD and Congress full flexibility in determining when and how to use BBC for programs that may not qualify for MYP, but for which a multiyear contract of some kind might produce substantial savings. Such a statute could encourage DOD program managers to pursue their programs using BBC rather than MYP. This could reduce discipline in DOD multiyear contracting if the qualifying criteria in the BBC statute are less demanding than the qualifying criteria in 10 U.S.C. 2306b. Should the Coast Guard should begin making use of MYP and BBC? Although the Coast Guard is part of the Department of Homeland Security (DHS), the Coast Guard is a military service and a branch of the U.S. Armed Forces at all times (14 U.S.C. 1), and 10 U.S.C. 2306b provides authority for using MYP not only to DOD, but also to the Coast Guard (and the National Aeronautics and Space Administration as well). In addition, Section 311 of the Frank LoBiondo Coast Guard Authorization Act of 2018 ( S. 140 / P.L. 115-282 of December 4, 2018) provides permanent authority for the Coast Guard to use block buy contracting with EOQ purchases of components in its major acquisition programs. The authority is now codified at 14 U.S.C. 1137. As discussed earlier in this report, the Navy in recent years has made extensive use of MYP and BBC in its ship and aircraft acquisition programs, reducing the collective costs of those programs, the Navy estimates, by billions of dollars. The Coast Guard, like the Navy, procures ships and aircraft. In contrast to the Navy, however, the Coast Guard has never used MYP or BBC in its ship or aircraft acquisition programs. Instead, the Coast has tended to use contracts with options. As discussed earlier, although a contract with options looks like a multiyear contract, it operates more like a series of annual contracts, and it cannot achieve the kinds of savings that are possible under MYP and BBC. CRS in recent years has testified and reported on the possibility of using BBC or MYP in Coast Guard ship acquisition programs, particularly the Coast Guard's 25-ship Offshore Patrol Cutter (OPC) program and the Coast Guard's three-ship polar icebreaker program. CRS estimates that using multiyear contracting rather than contracts with options for the entire 25-ship OPC program could reduce the cost of the OPC program by about $1 billion. The OPC program is the Coast Guard's top-priority acquisition program, and it represents a once-in-a-generation opportunity to reduce the acquisition cost of a Coast Guard acquisition program by an estimated $1 billion. CRS also estimates that using BBC for a three-ship polar icebreaker program could reduce the cost of that program by upwards of $150 million. The Coast Guard has expressed some interest in using BBC in the polar icebreaker program, but its baseline acquisition strategy for that program, like its current acquisition strategy for the OPC program, is to use a contract with options. As part of its FY2020 budget submission, the Department of Defense is proposing continued funding for implementing several MYP contracts initiated in fiscal years prior to FY2020, but it has not highlighted any requests for authority for new MYP or block buy contracts for major acquisition programs that would begin in FY2020. Appendix A. Text of 10 U.S.C. 2306b The text of 10 U.S.C. 2306b as of April 29, 2019, is as follows: §2306b. Multiyear contracts: acquisition of property (a) In General.-To the extent that funds are otherwise available for obligation, the head of an agency may enter into multiyear contracts for the purchase of property whenever the head of that agency finds each of the following: (1) That the use of such a contract will result in significant savings of the total anticipated costs of carrying out the program through annual contracts. (2) That the minimum need for the property to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of production rate, procurement rate, and total quantities. (3) That there is a reasonable expectation that throughout the contemplated contract period the head of the agency will request funding for the contract at the level required to avoid contract cancellation. (4) That there is a stable design for the property to be acquired and that the technical risks associated with such property are not excessive. (5) That the estimates of both the cost of the contract and the anticipated cost avoidance through the use of a multiyear contract are realistic. (6) In the case of a purchase by the Department of Defense, that the use of such a contract will promote the national security of the United States. (7) In the case of a contract in an amount equal to or greater than $500,000,000, that the conditions required by subparagraphs (C) through (F) of subsection (i)(3) will be met, in accordance with the Secretary's certification and determination under such subsection, by such contract. (b) Regulations.-(1) Each official named in paragraph (2) shall prescribe acquisition regulations for the agency or agencies under the jurisdiction of such official to promote the use of multiyear contracting as authorized by subsection (a) in a manner that will allow the most efficient use of multiyear contracting. (2)(A) The Secretary of Defense shall prescribe the regulations applicable to the Department of Defense. (B) The Secretary of Homeland Security shall prescribe the regulations applicable to the Coast Guard, except that the regulations prescribed by the Secretary of Defense shall apply to the Coast Guard when it is operating as a service in the Navy. (C) The Administrator of the National Aeronautics and Space Administration shall prescribe the regulations applicable to the National Aeronautics and Space Administration. (c) Contract Cancellations.-The regulations may provide for cancellation provisions in multiyear contracts to the extent that such provisions are necessary and in the best interests of the United States. The cancellation provisions may include consideration of both recurring and nonrecurring costs of the contractor associated with the production of the items to be delivered under the contract. (d) Participation by Subcontractors, Vendors, and Suppliers.-In order to broaden the defense industrial base, the regulations shall provide that, to the extent practicable- (1) multiyear contracting under subsection (a) shall be used in such a manner as to seek, retain, and promote the use under such contracts of companies that are subcontractors, vendors, or suppliers; and (2) upon accrual of any payment or other benefit under such a multiyear contract to any subcontractor, vendor, or supplier company participating in such contract, such payment or benefit shall be delivered to such company in the most expeditious manner practicable. (e) Protection of Existing Authority.-The regulations shall provide that, to the extent practicable, the administration of this section, and of the regulations prescribed under this section, shall not be carried out in a manner to preclude or curtail the existing ability of an agency- (1) to provide for competition in the production of items to be delivered under such a contract; or (2) to provide for termination of a prime contract the performance of which is deficient with respect to cost, quality, or schedule. (f) Cancellation or Termination for Insufficient Funding.-In the event funds are not made available for the continuation of a contract made under this section into a subsequent fiscal year, the contract shall be canceled or terminated. The costs of cancellation or termination may be paid from- (1) appropriations originally available for the performance of the contract concerned; (2) appropriations currently available for procurement of the type of property concerned, and not otherwise obligated; or (3) funds appropriated for those payments. (g) Contract Cancellation Ceilings Exceeding $100,000,000.-(1) Before any contract described in subsection (a) that contains a clause setting forth a cancellation ceiling in excess of $100,000,000 may be awarded, the head of the agency concerned shall give written notification of the proposed contract and of the proposed cancellation ceiling for that contract to the congressional defense committees, and such contract may not then be awarded until the end of a period of 30 days beginning on the date of such notification. (2) In the case of a contract described in subsection (a) with a cancellation ceiling described in paragraph (1), if the budget for the contract does not include proposed funding for the costs of contract cancellation up to the cancellation ceiling established in the contract, the head of the agency concerned shall, as part of the certification required by subsection (i)(1)(A),1 give written notification to the congressional defense committees of- (A) the cancellation ceiling amounts planned for each program year in the proposed multiyear procurement contract, together with the reasons for the amounts planned; (B) the extent to which costs of contract cancellation are not included in the budget for the contract; and (C) a financial risk assessment of not including budgeting for costs of contract cancellation. (h) Defense Acquisitions of Weapon Systems.-In the case of the Department of Defense, the authority under subsection (a) includes authority to enter into the following multiyear contracts in accordance with this section: (1) A multiyear contract for the purchase of a weapon system, items and services associated with a weapon system, and logistics support for a weapon system. (2) A multiyear contract for advance procurement of components, parts, and materials necessary to the manufacture of a weapon system, including a multiyear contract for such advance procurement that is entered into in order to achieve economic-lot purchases and more efficient production rates. (i) Defense Acquisitions Specifically Authorized by Law.-(1) In the case of the Department of Defense, a multiyear contract in an amount equal to or greater than $500,000,000 may not be entered into under this section unless the contract is specifically authorized by law in an Act other than an appropriations Act. (2) In submitting a request for a specific authorization by law to carry out a defense acquisition program using multiyear contract authority under this section, the Secretary of Defense shall include in the request the following: (A) A report containing preliminary findings of the agency head required in paragraphs (1) through (6) of subsection (a), together with the basis for such findings. (B) Confirmation that the preliminary findings of the agency head under subparagraph (A) were supported by a preliminary cost analysis performed by the Director of Cost Assessment and Program Evaluation. (3) A multiyear contract may not be entered into under this section for a defense acquisition program that has been specifically authorized by law to be carried out using multiyear contract authority unless the Secretary of Defense certifies in writing, not later than 30 days before entry into the contract, that each of the following conditions is satisfied: (A) The Secretary has determined that each of the requirements in paragraphs (1) through (6) of subsection (a) will be met by such contract and has provided the basis for such determination to the congressional defense committees. (B) The Secretary's determination under subparagraph (A) was made after completion of a cost analysis conducted on the basis of section 2334(e)(2) 1 of this title, and the analysis supports the determination. (C) The system being acquired pursuant to such contract has not been determined to have experienced cost growth in excess of the critical cost growth threshold pursuant to section 2433(d) of this title within 5 years prior to the date the Secretary anticipates such contract (or a contract for advance procurement entered into consistent with the authorization for such contract) will be awarded. (D) A sufficient number of end items of the system being acquired under such contract have been delivered at or within the most current estimates of the program acquisition unit cost or procurement unit cost for such system to determine that current estimates of such unit costs are realistic. (E) During the fiscal year in which such contract is to be awarded, sufficient funds will be available to perform the contract in such fiscal year, and the future-years defense program for such fiscal year will include the funding required to execute the program without cancellation. (F) The contract is a fixed price type contract. (G) The proposed multiyear contract provides for production at not less than minimum economic rates given the existing tooling and facilities. (4) If for any fiscal year a multiyear contract to be entered into under this section is authorized by law for a particular procurement program and that authorization is subject to certain conditions established by law (including a condition as to cost savings to be achieved under the multiyear contract in comparison to specified other contracts) and if it appears (after negotiations with contractors) that such savings cannot be achieved, but that significant savings could nevertheless be achieved through the use of a multiyear contract rather than specified other contracts, the President may submit to Congress a request for relief from the specified cost savings that must be achieved through multiyear contracting for that program. Any such request by the President shall include details about the request for a multiyear contract, including details about the negotiated contract terms and conditions. (5)(A) The Secretary may obligate funds for procurement of an end item under a multiyear contract for the purchase of property only for procurement of a complete and usable end item. (B) The Secretary may obligate funds appropriated for any fiscal year for advance procurement under a contract for the purchase of property only for the procurement of those long-lead items necessary in order to meet a planned delivery schedule for complete major end items that are programmed under the contract to be acquired with funds appropriated for a subsequent fiscal year (including an economic order quantity of such long-lead items when authorized by law). (6) The Secretary may make the certification under paragraph (3) notwithstanding the fact that one or more of the conditions of such certification are not met, if the Secretary determines that, due to exceptional circumstances, proceeding with a multiyear contract under this section is in the best interest of the Department of Defense and the Secretary provides the basis for such determination with the certification. (7) The Secretary may not delegate the authority to make the certification under paragraph (3) or the determination under paragraph (6) to an official below the level of Under Secretary of Defense for Acquisition, Technology, and Logistics. (j) Defense Contract Options for Varying Quantities.-The Secretary of Defense may instruct the Secretary of the military department concerned to incorporate into a proposed multiyear contract negotiated priced options for varying the quantities of end items to be procured over the period of the contract. (k) Multiyear Contract Defined.-For the purposes of this section, a multiyear contract is a contract for the purchase of property for more than one, but not more than five, program years. Such a contract may provide that performance under the contract during the second and subsequent years of the contract is contingent upon the appropriation of funds and (if it does so provide) may provide for a cancellation payment to be made to the contractor if such appropriations are not made. (l) Various Additional Requirements With Respect to Multiyear Defense Contracts.-(1)(A) The head of an agency may not initiate a contract described in subparagraph (B) unless the congressional defense committees are notified of the proposed contract at least 30 days in advance of the award of the proposed contract. (B) Subparagraph (A) applies to the following contracts: (i) A multiyear contract- (I) that employs economic order quantity procurement in excess of $20,000,000 in any one year of the contract; or (II) that includes an unfunded contingent liability in excess of $20,000,000. (ii) Any contract for advance procurement leading to a multiyear contract that employs economic order quantity procurement in excess of $20,000,000 in any one year. (2) The head of an agency may not initiate a multiyear contract for which the economic order quantity advance procurement is not funded at least to the limits of the Government's liability. (3) The head of an agency may not initiate a multiyear procurement contract for any system (or component thereof) if the value of the multiyear contract would exceed $500,000,000 unless authority for the contract is specifically provided in an appropriations Act. (4) Each report required by paragraph (5) with respect to a contract (or contract extension) shall contain the following: (A) The amount of total obligational authority under the contract (or contract extension) and the percentage that such amount represents of- (i) the applicable procurement account; and (ii) the agency procurement total. (B) The amount of total obligational authority under all multiyear procurements of the agency concerned (determined without regard to the amount of the multiyear contract (or contract extension)) under multiyear contracts in effect at the time the report is submitted and the percentage that such amount represents of- (i) the applicable procurement account; and (ii) the agency procurement total. (C) The amount equal to the sum of the amounts under subparagraphs (A) and (B), and the percentage that such amount represents of- (i) the applicable procurement account; and (ii) the agency procurement total. (D) The amount of total obligational authority under all Department of Defense multiyear procurements (determined without regard to the amount of the multiyear contract (or contract extension)), including any multiyear contract (or contract extension) that has been authorized by the Congress but not yet entered into, and the percentage that such amount represents of the procurement accounts of the Department of Defense treated in the aggregate. (5) The head of an agency may not enter into a multiyear contract (or extend an existing multiyear contract), the value of which would exceed $500,000,000 (when entered into or when extended, as the case may be), until the Secretary of Defense submits to the congressional defense committees a report containing the information described in paragraph (4) with respect to the contract (or contract extension). (6) The head of an agency may not terminate a multiyear procurement contract until 10 days after the date on which notice of the proposed termination is provided to the congressional defense committees. (7) The execution of multiyear contracting authority shall require the use of a present value analysis to determine lowest cost compared to an annual procurement. (8) This subsection does not apply to the National Aeronautics and Space Administration or to the Coast Guard. (9) In this subsection: (A) The term \"applicable procurement account\" means, with respect to a multiyear procurement contract (or contract extension), the appropriation account from which payments to execute the contract will be made. (B) The term \"agency procurement total\" means the procurement accounts of the agency entering into a multiyear procurement contract (or contract extension) treated in the aggregate. (m) Increased Funding and Reprogramming Requests.-Any request for increased funding for the procurement of a major system under a multiyear contract authorized under this section shall be accompanied by an explanation of how the request for increased funding affects the determinations made by the Secretary under subsection (i). Appendix B. Programs Approved for MYP in Annual DOD Appropriations Acts Since FY1990 This appendix presents, in two tables, programs approved for MYP in annual DOD appropriations acts since FY1990. Table B-1 covers FY2011 to the present, and Table B-2 covers FY1990 through FY2010.", "summary": "Multiyear procurement (MYP) and block buy contracting (BBC) are special contracting mechanisms that Congress permits the Department of Defense (DOD) to use for a limited number of defense acquisition programs. Compared to the standard or default approach of annual contracting, MYP and BBC have the potential for reducing weapon procurement costs by a few or several percent. Under annual contracting, DOD uses one or more contracts for each year's worth of procurement of a given kind of item. Under MYP, DOD instead uses a single contract for two to five years' worth of procurement of a given kind of item without having to exercise a contract option for each year after the first year. DOD needs congressional approval for each use of MYP. There is a permanent statute governing MYP contracting—10 U.S.C. 2306b. Under this statute, a program must meet several criteria to qualify for MYP. Compared with estimated costs under annual contracting, estimated savings for programs being proposed for MYP have ranged from less than 5% to more than 15%, depending on the particulars of the program in question, with many estimates falling in the range of 5% to 10%. In practice, actual savings from using MYP rather than annual contracting can be difficult to observe or verify because of cost growth during the execution of the contract due to changes in the program independent of the use of MYP rather than annual contracting. BBC is similar to MYP in that it permits DOD to use a single contract for more than one year's worth of procurement of a given kind of item without having to exercise a contract option for each year after the first year. BBC is also similar to MYP in that DOD needs congressional approval for each use of BBC. BBC differs from MYP in the following ways: There is no permanent statute governing the use of BBC. There is no requirement that BBC be approved in both a DOD appropriations act and an act other than a DOD appropriations act. Programs being considered for BBC do not need to meet any legal criteria to qualify for BBC, because there is no permanent statute governing the use of BBC that establishes such criteria. A BBC contract can cover more than five years of planned procurements. Economic order quantity (EOQ) authority—the authority to bring forward selected key components of the items to be procured under the contract and purchase the components in batch form during the first year or two of the contract—does not come automatically as part of BBC authority because there is no permanent statute governing the use of BBC that includes EOQ authority as an automatic feature. BBC contracts are less likely to include cancellation penalties. Potential issues for Congress concerning MYP and BBC include whether to use MYP and BBC in the future more frequently, less frequently, or about as frequently as they are currently used; whether to create a permanent statute to govern the use of BBC, analogous to the permanent statute that governs the use of MYP; and whether the Coast Guard should begin making use of MYP and BBC.", "document_type": "crs"}
{"report": "The U.S. energy pipeline network is integral to the nation's energy supply and provides vital links to other critical infrastructure, such as power plants, airports, and military bases. These pipelines are geographically widespread, running alternately through remote and densely populated regions—from Arctic Alaska to the Gulf of Mexico and nearly everywhere in between. Because these pipelines carry volatile, flammable, or toxic materials, they have the potential to injure the public, destroy pr operty, and damage the environment. Although they are generally an efficient and comparatively safe means of transport, pipeline systems are nonetheless vulnerable to accidents, operational failure, and malicious attacks. A series of accidents in California, Pennsylvania, and Massachusetts, among other places, have demonstrated this vulnerability and have heightened congressional concern about U.S. pipeline safety. The Department of Energy's first Quadrennial Energy Review (QER), released in 2015, also highlighted pipeline safety as a growing concern for the nation's energy infrastructure. The federal pipeline safety program resides primarily within the Department of Transportation's (DOT's) Pipeline and Hazardous Materials Safety Administration (PHMSA), although its inspection and enforcement activities rely heavily upon partnerships with the states. Together, the federal and state pipeline safety agencies administer a comprehensive set of regulatory authorities which has changed significantly over the last decade and continues to do so. The federal pipeline safety program is authorized through the fiscal year ending September 30, 2019, under the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act; P.L. 114-183 ) signed by President Obama on June 22, 2016. This report reviews the history of federal programs for pipeline safety, discusses significant safety concerns, and summarizes recent developments focusing on key policy issues. It discusses the roles of other federal agencies involved in pipeline safety and security, including their relationship with PHMSA. Although pipeline security is not mainly under PHMSA's jurisdiction, the report examines the agency's past role in pipeline security and its recent activities working on security-related issues with other agencies. The U.S. energy pipeline network is composed of approximately 3 million miles of pipeline transporting natural gas, oil, and hazardous liquids ( Table 1 ). Of the nation's approximately half million miles of long-distance transmission pipeline, roughly 215,000 miles carry hazardous liquids—over two thirds of the nation's crude oil and refined petroleum products, along with other products. The U.S. natural gas pipeline network consists of around 300,000 miles of inter state and intra state transmission. It also contains some 240,000 miles of field and gathering pipeline, which connect gas extraction wells to processing facilities. However, with 7% of gathering lines currently under federal regulation (discussed later in this report), the total mileage of U.S. gathering lines is not known more precisely. Few state agencies collect this information. The natural gas transmission pipelines feed around 2.2 million miles of regional pipelines in some 1,500 local distribution networks serving over 69 million customers. Natural gas pipelines also connect to 152 active liquefied natural gas (LNG) storage sites, as well as underground storage facilities, both of which can augment pipeline gas supplies during peak demand periods. Uncontrolled pipeline releases can result from a variety of causes, including third-party excavation, corrosion, mechanical failure, control system failure, operator error, and malicious acts. Natural forces, such as floods and earthquakes, can also damage pipelines. Taken as a whole, releases from pipelines cause few annual injuries or fatalities compared to other product transportation modes. According to PHMSA statistics, there were, on average, 12 deaths and 66 injuries annually caused by 32 pipeline incidents in all U.S. pipeline systems from 2009 through 2018. After steady decline between 2009 and 2013, the average incident count increased and recently shows no clear trend ( Figure 1 ). A total of 40 serious pipeline incidents was reported for 2018. Apart from injury to people, some accidents may cause environmental damage or other physical impacts, which may be significant, particularly in the case of oil spills or fires. PHMSA requires the reporting of such incidents involving $50,000 or more in total costs, measured in 1984 dollars, highly volatile liquid releases of 5 barrels or more or other liquid releases of 50 barrels or more, or liquid releases resulting in an unintentional fire or explosion. On average there were 260 such \"significant\" incidents (not involving injury or fatality) per year from 2009 through 2018. As with serious incidents, there is no clear trend for pipeline incidents affecting only the environment or property over the last five years ( Figure 2 ). It should be noted that federally regulated pipeline mileage overall rose approximately 7% over this period; neither the annual statistics for injury nor environmental incidents are adjusted on a per-mile basis. Although pipeline releases have caused relatively few fatalities in absolute numbers, a single pipeline accident can be catastrophic in terms of public safety and environmental damage. Notable pipeline and pipeline-related incidents over the last decade include the following: 2010 ―A pipeline spill in Marshall, MI, released 19,500 barrels of crude oil into a tributary of the Kalamazoo River. 2010 —An explosion caused by a natural gas pipeline in San Bruno, CA, killed 8 people, injured 60 others, and destroyed 37 homes. 2011― An explosion caused by a natural gas pipeline in Allentown, PA, killed 5 people, damaged 50 buildings, and caused 500 people to be evacuated. 2011 ―A pipeline spill near Laurel, MT, released an estimated 1,000 barrels of crude oil into the Yellowstone River. 2012 —An explosion caused by a natural gas pipeline in Springfield, MA, injured 21 people and damaged over a dozen buildings. 2013 —An oil pipeline spill in Mayflower, AK, spilled 5,000 barrels of crude oil in a residential community causing 22 homes to be evacuated. 2014 —An explosion caused by a natural gas distribution pipeline in New York City killed 8 people, injured 50 others, and destroyed two 5-story buildings. 2015 —A pipeline in Santa Barbara County, CA, spilled 3,400 barrels of crude oil, including 500 barrels reaching Refugio State Beach on the Pacific Ocean. 2015 — The Aliso Canyon underground natural gas storage facility in Los Angeles County, CA, released 5.4 billion cubic feet of gas, causing the temporary relocation of over 2,000 households and two schools in Porter Ranch. 2016 —An explosion caused by a natural gas distribution pipeline in Canton, OH, killed one person, injured 11 others, and damaged over 50 buildings. 201 8 —Explosions and fires caused by natural gas distribution pipelines in the Merrimack Valley, MA, killed one person, injured 21 others, damaged 131 structures, and required 30,000 residents to evacuate. Such incidents have generated persistent scrutiny of pipeline regulation and have increased state and community activity related to pipeline safety. Three federal agencies play the most significant roles in the formulation, administration, and oversight of pipeline safety regulations in the United States. As stated above, PHMSA has the primary responsibility for the promulgation and enforcement of federal pipeline safety standards. The Federal Energy Regulatory Commission (FERC) is not operationally involved in pipeline safety but examines safety issues under its siting authority for interstate natural gas pipelines. The National Transportation Safety Board (NTSB) investigates transportation accidents—including pipeline accidents—and issues associated safety recommendations. These agency roles are discussed in the following sections. The Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481) and the Hazardous Liquid Pipeline Act of 1979 ( P.L. 96-129 ) are two of the principal early acts establishing the federal role in pipeline safety. Under both statutes, the Transportation Secretary is given primary authority to regulate key aspects of interstate pipeline safety: design, construction, operation and maintenance, and spill response planning. Pipeline safety regulations are covered in Title 49 of the Code of Federal Regulations . As of March 8, 2019, PHMSA employed 290 full-time equivalent (FTE) staff in its Office of Pipeline Safety (OPS)—including 145 regional inspectors—and in DOT offices outside of OPS that also support pipeline safety functions. Those staff include attorneys, data analysts, information technology specialists, and regulatory specialists required for certain enforcement actions, promulgating regulations, issuing pipeline safety grants, and issuing agreements for pipeline safety research and development. In addition to federal staff, PHMSA's enabling legislation allows the agency to delegate authority to intra state pipeline safety offices, and allows state offices to act as \"agents\" administering inter state pipeline safety programs (excluding enforcement) for those sections of inter state pipelines within their boundaries. According to the DOT, \"PHMSA leans heavily on state inspectors for the vast network of intrastate lines.\" A few states serve as agents for inspection of interstate pipelines as well. There were approximately 380 state pipeline safety inspectors in 2018. PHMSA's pipeline safety program is funded primarily by user fees assessed on a per-mile basis on each regulated pipeline operator. The agency's total annual budget authority has grown fairly steadily since 2001, with the largest increase in FY2015 ( Figure 3 ). For FY2019, PHMSA's estimated budget authority is approximately $164 million—more than double the agency's budget authority in FY2008 (not adjusted for inflation). The Trump Administration's requested budget authority for PHMSA is approximately $151 million for FY2020, roughly 8% less than the FY2019 budget authority, with proposed reductions primarily in contract programs, research and development, and grants to states. PHMSA uses a variety of strategies to promote compliance with its safety standards. The agency conducts programmatic inspections of management systems, procedures, and processes; conducts physical inspections of facilities and construction projects; investigates safety incidents; and maintains a dialogue with pipeline operators. The agency clarifies its regulatory expectations through published protocols and regulatory orders, guidance manuals, and public meetings. PHMSA relies upon a range of enforcement actions, including administrative actions such as corrective action orders (CAOs) and civil penalties, to ensure that operators correct safety violations and take measures to preclude future safety problems. From 2014 through 2018, PHMSA initiated 943 enforcement actions against pipeline operators. Of these cases, 348 resulted in safety orders to operators. Civil penalties proposed by PHMSA for safety violations during this period totaled approximately $24.2 million. PHMSA also conducts accident investigations and system-wide reviews focusing on high-risk operational or procedural problems and areas of the pipeline near sensitive environmental areas, high-density populations, or navigable waters. Since 1997, PHMSA has increasingly required industry's implementation of \"integrity management\" programs on pipeline segments near \"high consequence areas.\" Integrity management provides for continual evaluation of pipeline condition; assessment of risks to the pipeline; inspection or testing; data analysis; and follow-up repair; as well as preventive or mitigative actions. High consequence areas (HCAs) include population centers, commercially navigable waters, and environmentally sensitive areas, such as drinking water supplies or ecological reserves. The integrity management approach prioritizes resources to locations of highest consequence rather than applying uniform treatment to the entire pipeline network. PHMSA made integrity management programs mandatory for most oil pipeline operators with 500 or more miles of regulated pipeline as of March 31, 2001 (49 C.F.R. §195). Congress subsequently mandated the expansion of integrity management to natural gas pipelines, along with other significant changes to federal pipeline safety requirements, through a series of agency budget reauthorizations as discussed below. The PIPES Act of 2016 was preceded by a series of periodic pipeline safety statutes, each of which reauthorized funding for PHMSA's pipeline safety program and included other provisions related to PHMSA's authorities, administration, or regulatory activities. On December 12, 2002, President George W. Bush signed into law the Pipeline Safety Improvement Act of 2002 ( P.L. 107-355 ). The act strengthened federal pipeline safety programs, state oversight of pipeline operators, and public education regarding pipeline safety. Among other provisions, P.L. 107-355 required operators of regulated natural gas pipelines in high-consequence areas to conduct risk analysis and implement integrity management programs similar to those required for oil pipelines. The act authorized DOT to order safety actions for pipelines with potential safety problems and increased violation penalties. The act streamlined the permitting process for emergency pipeline restoration by establishing an interagency committee, including the DOT, the Environmental Protection Agency, the Bureau of Land Management, the Federal Energy Regulatory Commission, and other agencies, to ensure coordinated review and permitting of pipeline repairs. The act required DOT to study ways to limit pipeline safety risks from population encroachment and ways to preserve environmental resources in pipeline rights-of-way. P.L. 107-355 also included provisions for public education, grants for community pipeline safety studies, \"whistle blower\" and other employee protection, employee qualification programs, and mapping data submission. On December 29, 2006, President Bush signed into law the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 ( P.L. 109-468 ). The main provisions of the act address pipeline damage prevention, integrity management, corrosion control, and enforcement transparency. The act created a national focus on pipeline damage prevention through grants to states for improving damage prevention programs, establishing 811 as the national \"call before you dig\" one-call telephone number, and giving PHMSA limited \"backstop\" authority to conduct civil enforcement against one-call violators in states that have failed to conduct such enforcement. The act mandated the promulgation by PHMSA of minimum standards for integrity management programs for natural gas distribution pipelines. It also mandated a review of the adequacy of federal pipeline safety regulations related to internal corrosion control, and required PHMSA to increase the transparency of enforcement actions by issuing monthly summaries, including violation and penalty information, and a mechanism for pipeline operators to make response information available to the public. On January 3, 2012, President Obama signed the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (Pipeline Safety Act, P.L. 112-90 ). The act contains a broad range of provisions addressing pipeline safety. Among the most significant are provisions to increase the number of federal pipeline safety inspectors, require automatic shutoff valves for transmission pipelines, mandate verification of maximum allowable operating pressure for gas transmission pipelines, increase civil penalties for pipeline safety violations, and mandate reviews of diluted bitumen pipeline regulation. Altogether, the act imposed 42 mandates on PHMSA regarding studies, rules, maps, and other elements of the federal pipeline safety program. P.L. 112-90 authorized the federal pipeline safety program through the fiscal year ending September 30, 2015. On June 22, 2016, President Obama signed the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act, P.L. 114-183 ). As noted earlier, the act authorizes the federal pipeline safety program through FY2019. Among its other provisions, the act requires PHMSA to promulgate federal safety standards for underground natural gas storage facilities and grants PHMSA emergency order authority to address urgent \"industry-wide safety conditions\" without prior notice. The act also requires PHMSA to report regularly on the progress of outstanding statutory mandates, which are discussed later in this report. One area related to pipeline safety not under PHMSA's primary jurisdiction is the siting approval of interstate natural gas pipelines, which is the responsibility of the Federal Energy Regulatory Commission (FERC). Companies building interstate natural gas pipelines must first obtain from FERC certificates of public convenience and necessity. (FERC does not oversee oil pipeline construction.) FERC must also approve the abandonment of gas facility use and services. These approvals may include safety provisions with respect to pipeline routing, safety standards, and other factors. In particular, pipeline and aboveground facilities associated with a proposed pipeline project must be designed in accordance with PHMSA's safety standards regarding material selection and qualification, design requirements, and protection from corrosion. FERC and PHMSA cooperate on pipeline safety-related matters according to a Memorandum of Understanding (MOU) signed in 1993. According to the MOU, PHMSA agrees to promptly alert FERC when safety activities may impact commission responsibilities, notify FERC of major accidents or significant enforcement actions involving pipelines under FERC's jurisdiction, refer to FERC complaints and inquiries by state and local governments and the public about environmental or certificate matters related to FERC-jurisdictional pipelines, and when requested by FERC, review draft mitigation conditions considered by the commission for potential conflicts with PHMSA's regulations. Under the MOU, FERC agrees to promptly alert PHMSA when the commission learns of an existing or potential safety problem involving natural gas transmission facilities, notify PHMSA of future pipeline construction, periodically provide PHMSA with updates to the environmental compliance inspection schedule, and coordinate site inspections, upon request, with PHMSA officials, notify PHMSA when significant safety issues have been raised during the preparation of environmental assessments or environmental impact statements for pipeline projects, and refer to PHMSA complaints and inquiries made by state and local governments and the public involving safety matters related to FERC-jurisdictional pipelines. FERC may also serve as a member of PHMSA's Technical Pipeline Safety Standards Committee which determines whether proposed safety regulations are technically feasible, reasonable, cost-effective, and practicable. In April 2015, FERC issued a policy statement to provide \"greater certainty regarding the ability of interstate natural gas pipelines to recover the costs of modernizing their facilities and infrastructure to enhance the efficient and safe operation of their systems.\" FERC's policy statement was motivated by the commission's expectation that governmental safety and environmental initiatives could soon cause greater safety and reliability costs for interstate gas pipeline systems. The National Transportation Safety Board (NTSB) is an independent federal agency charged with determining the probable cause of transportation incidents—including pipeline releases—and promoting transportation safety. The board's experts investigate significant incidents, develop factual records, and issue safety recommendations to prevent similar events from reoccurring. The NTSB has no statutory authority to regulate transportation, however, and it does not perform cost-benefit analyses of regulatory changes; its safety recommendations to industry or government agencies are not mandatory. Nonetheless, because of the board's strong reputation for thoroughness and objectivity, over 82% of the NTSB's safety recommendations have been implemented across all transportation modes. In the pipeline sector, specifically, the NTSB's safety recommendations have led to changes in pipeline safety regulation regarding one-call systems before excavation (\"Call Before You Dig\"), use of pipeline internal inspection devices, facility response plan effectiveness, hydrostatic pressure testing of older pipelines, and other pipeline safety improvements. In August 2011, the NTSB issued preliminary findings and recommendations from its investigation of the San Bruno Pipeline incident. The investigation included testimony from pipeline company officials, government agency officials (PHMSA, state, and local), as well as testimony from other pipeline experts and stakeholders. The investigation determined that the pipeline ruptured due to a faulty weld in a pipeline section constructed in 1956. In addition to specifics about the San Bruno incident, the hearing addressed more general pipeline issues, including public awareness initiatives, pipeline technology, and oversight of pipeline safety by federal and state regulators. The NTSB's findings were highly critical of the pipeline operator (Pacific Gas and Electric, PG&E) as well as both the state and federal pipeline safety regulators. The board concluded that \"the multiple and recurring deficiencies in PG&E operational practices indicate a systemic problem\" with respect to its pipeline safety program. The board further concluded that the pipeline safety regulator within the state of California, failed to detect the inadequacies in PG&E's integrity management program and that the Pipeline and Hazardous Materials Safety Administration integrity management inspection protocols need improvement. Because the Pipeline and Hazardous Materials Safety Administration has not incorporated the use of effective and meaningful metrics as part of its guidance for performance-based management pipeline safety programs, its oversight of state public utility commissions regulating gas transmission and hazardous liquid pipelines could be improved. In an opening statement about the San Bruno incident report, the NTSB chairman summarized the board's findings as \"troubling revelations … about a company that exploited weaknesses in a lax system of oversight and government agencies that placed a blind trust in operators to the detriment of public safety.\" The NTSB's final incident report concluded \"that PHMSA's enforcement program and its monitoring of state oversight programs have been weak and have resulted in the lack of effective Federal oversight and state oversight.\" The NTSB issued 39 recommendations stemming from its San Bruno incident investigation, including 20 recommendations to the Secretary of Transportation and PHMSA. These recommendations included the following: conducting audits to assess the effectiveness of PHMSA's oversight of performance-based pipeline safety programs and state pipeline safety program certification, requiring pipeline operators to provide system-specific information to the emergency response agencies of the communities in which pipelines are located, requiring that automatic shutoff valves or remote control valves be installed in high consequence areas and in class 3 and 4 locations, requiring that all natural gas transmission pipelines constructed before 1970 be subjected to a hydrostatic pressure test that incorporates a pressure spike test, requiring that all natural gas transmission pipelines be configured so as to accommodate internal inspection tools, with priority given to older pipelines, and revising PHMSA's integrity management protocol to incorporate meaningful metrics, set performance goals for pipeline operators, and require operators to regularly assess the effectiveness of their programs using meaningful metrics. In July 2012, the NTSB issued the final report of its investigation of the Marshall, MI, oil pipeline spill. In addition to finding management and operation failures by the pipeline operator, the report was critical of PHMSA for inadequate regulatory requirements and oversight of crack defects in pipelines, inadequate regulatory requirements for emergency response plans, generally, and inadequate review and approval of the response plan for this particular pipeline. The NTSB issued eight recommendations to the Secretary of Transportation and PHMSA, including auditing the business practices of PHMSA's onshore pipeline facility response plan programs, including reviews of response plans and drill programs, to correct deficiencies, allocating sufficient resources to ensure that PHMSA's facility response plan program meets all of the requirements of the Oil Pollution Act of 1990, clarifying and strengthening federal regulation related to the identification and repair of pipeline crack defects, issuing advisory bulletins to all hazardous liquid and natural gas pipeline operators describing the circumstances of the accident in Marshall, asking them to take appropriate action to eliminate similar deficiencies, to identify deficiencies in facility response plans, and to update these plans as necessary, developing requirements for team training of control center staff involved in pipeline operations similar to those used in other transportation modes, strengthening operator qualification requirements, and harmonizing onshore oil pipeline response planning requirements with those of the U.S. Coast Guard and the U.S. Environmental Protection Agency for oil and petroleum products facilities to ensure that operators have adequate resources for worst-case discharges. In October 2018, the NTSB issued a preliminary report of its investigation into the Merrimack Valley natural gas fires and explosions, which affected the communities of Lawrence, Andover, and North Andover, MA. The report concluded, based on an initial investigation, that the natural gas releases were caused by excessive pressure in a local distribution main during a cast iron pipeline replacement project. Due to an erroneous work order, pipeline workers improperly bypassed critical pipeline pressure-sensing lines. Without an accurate sensor signal from the bypassed pipeline segment, the pipeline pressure regulators allowed high-pressure gas into the distribution lines supplying homes and businesses—many of which failed and released natural gas as a result. The NTSB's formal incident investigation continues, so the agency has not yet released a final accident report. However, in response to its initial findings, the NTSB made a preliminary recommendation to the Commonwealth of Massachusetts to eliminate its professional engineer license exemption for public utility work and to require a professional engineer's seal on public utility engineering drawings. The NTSB also made recommendations to the natural gas distribution utility regarding its design and operating practices. It made no recommendations to PHMSA. The NTSB has made recommendations to PHMSA as a result of other pipeline incident investigations. Detailed discussion of NTSB findings and recommendations, including those described above, are publicly available in the NTSB's docket management system. In addition, in January 2015, the NTSB released a safety study examining integrity management of natural gas transmission pipelines in high consequence areas. The study identified several areas of potential safety improvement among such facilities expanding and improving PHMSA guidance to both operators and inspectors for the development, implementation, and inspection of operators' integrity management programs, expanding the use of in-line inspection, especially for intrastate pipelines, eliminating the use of direct assessment as the sole integrity assessment method, evaluating the effectiveness of the approved risk assessment approaches, strengthening aspects of inspector training, developing minimum professional qualification criteria for all personnel involved in integrity management programs, and improving data collection and reporting, including geospatial data. PHMSA maintains a list of NTSB's pipeline safety recommendations directed at the agency which are currently open. As of September 11, 2018, there were 25 open recommendations dating back to 2011. In many cases, NTSB has classified these recommendations as \"Open—Acceptable Response\" because they are being incorporated satisfactorily in ongoing PHMSA rulemakings, further discussed below. However, a few recommendations are classified as \"Open—Unacceptable response,\" because NTSB is not satisfied with PHMSA's actions to implement them. Pipeline safety and security are distinct issues involving different threats, statutory authorities, and regulatory frameworks. Nonetheless, pipeline safety and security are intertwined in some respects—and PHMSA is involved in both. The Department of Transportation played the leading role in pipeline security through the late 1990s. Presidential Decision Directive 63 (PDD-63), issued during the Clinton Administration, assigned lead responsibility for pipeline security to DOT. These responsibilities fell to the Office of Pipeline Safety, at that time a part of DOT's Research and Special Programs Administration, because the agency was already addressing some elements of pipeline security in its role as safety regulator. The DOT's pipeline (and LNG) safety regulations already included provisions related to physical security, such as requirements to protect surface facilities (e.g., pumping stations) from vandalism and unauthorized entry. Other regulations required continuing surveillance, patrolling pipeline rights-of-way, damage prevention, and emergency procedures. In the early 2000s, OPS conducted a vulnerability assessment to identify critical pipeline facilities and worked with industry groups and state pipeline safety organizations \"to assess the industry's readiness to prepare for, withstand and respond to a terrorist attack.... \" Together with DOE and state pipeline agencies, OPS promoted the development of consensus standards for security measures tiered to correspond with the five levels of threat warnings issued by the Office of Homeland Security. OPS also developed protocols for inspections of critical facilities to ensure that operators implemented appropriate security practices. To convey emergency information and warnings, OPS established a variety of communication links to key staff at the most critical pipeline facilities throughout the country. OPS also began identifying near-term technology to enhance deterrence, detection, response, and recovery, and began seeking to advance public and private sector planning for response and recovery. On September 5, 2002, OPS circulated formal guidance developed in cooperation with the pipeline industry associations defining the agency's security program recommendations and implementation expectations. This guidance recommended that operators identify critical facilities, develop security plans consistent with prior trade association security guidance, implement these plans, and review them annually. While the guidance was voluntary, OPS expected compliance and informed operators of its intent to begin reviewing security programs and to test their effectiveness. In November 2001, President Bush signed the Aviation and Transportation Security Act ( P.L. 107-71 ) establishing the Transportation Security Administration (TSA) within DOT. According to TSA, the act placed DOT's pipeline security authority (under PDD-63) within TSA. The act specified for TSA a range of duties and powers related to general transportation security, such as intelligence management, threat assessment, mitigation, security measure oversight, and enforcement. On November 25, 2002, President Bush signed the Homeland Security Act of 2002 ( P.L. 107-296 ) creating the Department of Homeland Security (DHS). Among other provisions, the act transferred the Transportation Security Administration from DOT to DHS (§403). On December 17, 2003, President Bush issued Homeland Security Presidential Directive 7 (HSPD-7), clarifying executive agency responsibilities for identifying, prioritizing, and protecting critical infrastructure. HSPD-7 maintained DHS as the lead agency for pipeline security (paragraph 15), and instructed DOT to \"collaborate in regulating the transportation of hazardous materials by all modes (including pipelines)\" (paragraph 22h). In 2004, the DOT and DHS entered into a memorandum of understanding concerning their respective security roles in all modes of transportation. The MOU notes that DHS has the primary responsibility for transportation security with support from the DOT, and establishes a general framework for cooperation and coordination. The MOU states that \"specific tasks and areas of responsibility that are appropriate for cooperation will be documented in annexes ... individually approved and signed by appropriate representatives of DHS and DOT.\" On August 9, 2006, the departments signed an annex \"to delineate clear lines of authority and responsibility and promote communications, efficiency, and nonduplication of effort through cooperation and collaboration between the parties in the area of transportation security.\" In January 2007, the PHMSA Administrator testified before Congress that the agency had established a joint working group with TSA \"to improve interagency coordination on transportation security and safety matters, and to develop and advance plans for improving transportation security,\" presumably including pipeline security. According to TSA, the working group developed a multiyear action plan specifically delineating roles, responsibilities, resources and actions to execute 11 program elements: identification of critical infrastructure/key resources, and risk assessments; strategic planning; developing regulations and guidelines; conducting inspections and enforcement; providing technical support; sharing information during emergencies; communications; stakeholder relations; research and development; legislative matters; and budgeting. P.L. 109-468 required the DOT Inspector General (IG) to assess the pipeline security actions taken by the DOT in implementing its 2004 MOU with the DHS (§23). The Inspector General published this assessment in May 2008. The IG report stated, PHMSA and TSA have taken initial steps toward formulating an action plan to implement the provisions of the pipeline security annex.... However, further actions need to be taken with a sense of urgency because the current situation is far from an \"end state\" for enhancing the security of the Nation's pipelines. The report recommended that PHMSA and TSA finalize and execute their security annex action plan, clarify their respective roles, and jointly develop a pipeline security strategy that maximizes the effectiveness of their respective capabilities and efforts. According to TSA, working with PHMSA \"improved drastically\" after the release of the IG report; the two agencies began to maintain daily contact, share information in a timely manner, and collaborate on security guidelines and incident response planning. Consistent with this assertion, in March 2010, TSA published a Pipeline Security and Incident Recovery Protocol Plan which lays out in detail the separate and cooperative responsibilities of the two agencies with respect to a pipeline security incident. Among other notes, the plan states, DOT has statutory tools that may be useful during a security incident, such as special permits, safety orders, and corrective action orders. DOT/PHMSA also has access to the Regional Emergency Transportation Coordinator (RETCO) Program…. Each RETCO manages regional DOT emergency preparedness and response activities in the assigned region on behalf of the Secretary of Transportation. The plan also refers to the establishment of an Interagency Threat Coordination Committee established by TSA and PHMSA to organize and communicate developing threat information among federal agencies that may have responsibility for pipeline incident response. DOT has continued to cooperate with TSA on pipeline security in recent years. For example, TSA coordinated with DOT and other agencies to address ongoing vandalism and sabotage against critical pipelines by environmental activists in 2016. In April 2016, the Director of TSA's Surface Division testified about her agency's relationship with DOT: TSA and DOT co-chair the Pipeline Government Coordinating Council to facilitate information sharing and coordinate on activities including security assessments, training, and exercises. TSA and DOT's Pipeline and Hazardous Materials Safety Administration (PHMSA) work together to integrate pipeline safety and security priorities, as measures installed by pipeline owners and operators often benefit both safety and security. In December 2016, PHMSA issued an Advisory Bulletin \"in coordination with\" TSA regarding cybersecurity threats to pipeline Supervisory Control and Data Acquisition (SCADA) systems. In July 2017, the two agencies collaborated on a web-based portal to facilitate sharing sensitive but unclassified incident information among federal agencies with pipeline responsibilities. In February 2018, the Director of TSA's Surface Division again testified about cooperation with PHMSA, stating \"TSA works closely with [PHMSA] for incident response and monitoring of pipeline systems,\" although she did not provide specific examples. The 116 th Congress may focus on several key issues in its continuing oversight of federal pipeline safety and as it considers PHMSA's reauthorization, including incomplete statutory mandates, adequacy of PHMSA staffing, state program oversight, aging pipeline infrastructure, and PHMSA's role in pipeline security. These issues are discussed in the following sections. Congress has used reauthorizations to impose on PHMSA various mandates regarding standards, studies, and other elements of pipeline safety regulation—usually in response to major pipeline accidents. The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 ( P.L. 112-90 ) and the PIPES Act of 2016 ( P.L. 114-183 ) together included 61 such mandates. As of March 5, 2019, according to PHMSA, the agency had completed 34 of 42 mandates under P.L. 112-90 and 16 of 19 mandates under P.L. 114-183 . Some Members of Congress are concerned that major mandates remain unfulfilled years beyond the deadlines specified in statute. They have expressed frustration with PHMSA's failure to fulfill its statutory obligations, arguing that it delays important new regulations, undermines public confidence in pipeline safety, and does not allow Congress to evaluate the effectiveness of prior mandates as it considers PHMSA's next reauthorization. Among the overdue mandates, Congress has focused on several key regulations (rules) with potentially significant impacts on pipeline operations nationwide. This rulemaking would require operators to (1) reconfirm pipeline maximum allowable operating pressure and (2) test the material strength of previously untested gas transmission pipelines in high-consequence areas ( P.L. 112-90 §23(c-d)). The statutory deadline for PHMSA to finalize these two rules was July 3, 2013. The rulemaking also would address the expansion of \"integrity management\" programs for gas transmission pipelines beyond high-consequence areas ( P.L. 112-90 §5(f)). Integrity management provides for continual evaluation of pipeline condition; assessment of risks; inspection or testing; data analysis; and follow-up repair; as well as preventive or mitigative actions. The deadline for PHMSA to finalize the integrity management provisions was January 3, 2015. The rulemaking also would address the application of existing regulations to currently unregulated gathering lines ( P.L. 112-90 §21(c)). PHMSA issued a Notice of Proposed R ule making incorporating the above provisions, and other requirements, on June 7, 2016. However, PHMSA subsequently decided to split its efforts into three separate rulemakings to facilitate completion. PHMSA anticipates publication of a final rule for the maximum allowable operating pressure and material testing provisions in July 2019. PHMSA anticipates publication of separate final rules for the integrity management provisions and for the gathering line provisions in December 2019. Among other requirements, this rulemaking would require leak detection systems, where practicable, for hazardous liquids (i.e., oil and refined fuel) pipelines and would set standards for leak detection capability ( P.L. 112-90 §8(b)). It also would address the expansion of integrity management for liquids pipelines beyond high-consequence areas ( P.L. 112-90 §5(f)). The deadlines for PHMSA to finalize these rules were, respectively, January 3, 2014, and January 3, 2015. The rulemaking also would require additional integrity assessment measures for certain underwater onshore liquids pipelines ( P.L. 114-183 §25). PHMSA issued a prepublication final rule on January 13, 2017, but withdrew it on January 24, 2017, for further review in compliance with the \"Memorandum for the Heads of Executive Departments and Agencies\" issued by the White House. PHMSA anticipates publication of a final rule in May 2019 . This rulemaking, which refers to Title 49 of the Code of Federal Regulations, involves requirements for pipeline valve installation and minimum rupture detection standards. These measures are intended to enhance the ability of pipeline operators to quickly stop the flow of a commodity (e.g., oil) in case of an unintended release by installing automatic or remote-controlled valves ( P.L. 112-90 §4). The rulemaking also would outline performance standards for pipeline rupture detection ( P.L. 112-90 §8(b)). The deadline for PHMSA to finalize these rules was January 3, 2014. PHMSA anticipates issuing a proposed rule in August 2019. This rulemaking would set minimum federal safety standards for underground natural gas storage facilities ( P.L. 114-183 §12). The deadline for PHMSA to finalize this rule was June 22, 2018. PHMSA issued an interim final rule on December 19, 2016. However, the agency temporarily suspended certain enforcement actions on June 20, 2017, and re opened the rule to public comment until November 20, 2017. DOT anticipates publishing the final rule in August 2019 . This rulemaking would implement PHMSA's new authority to issue emergency orders, which would apply to all operators and/or pipeline systems to abate an imminent hazard ( P.L. 114-183 §16). The deadline for PHMSA to finalize this rule was March 22, 2017. The agency issued an interim final rule on October 14, 2016. PHMSA anticipates publication of a final rule in March 2019. In response to questions during a 2015 hearing about overdue statutory mandates, a PHMSA official testified that rulemaking delays at that time did not reflect a lack of commitment but rather their complexity, the agency's rulemaking process, and limited staff resources. A 2016 audit report by the DOT Inspector General concluded that PHMSA lacked \"sufficient processes, guidance, and oversight for implementing mandates\" in a timely manner. On June 21, 2018, the current PHMSA administrator testified that the agency had adequate staffing and funding for its rulemaking activities and was working to streamline the agency's rulemaking process to accelerate finalization of the overdue rules. He stated that PHMSA would prioritize rulemaking in three areas: the safety of hazardous liquid pipelines, the safety of gas transmission and gathering pipelines, and pipeline rupture detection and automatic shutoff valves. The U.S. pipeline safety program employs a combination of federal and state staff to implement and enforce federal pipeline safety regulations. To date, PHMSA has relied heavily on state agencies for pipeline inspections, with over 70% of inspectors being state employees. As the PHMSA administrator remarked in 2018, PHMSA faces a manpower issue. It is obvious that an agency that employs about 536 people cannot oversee 2.7 million miles of pipeline all by itself. In fact, PHMSA makes no attempt to do so. Most actual safety inspections are performed by our state partners. Nonetheless, some in Congress have criticized inspector staffing at PHMSA for being insufficient to cover pipelines under the agency's jurisdiction. In considering PHMSA staff levels, issues of interest have been the number of federal inspectors and the agency's historical use of staff funding. In FY2019, PHMSA is funded for 308 full-time equivalent (FTE) employees in pipeline safety. As noted earlier, PHMSA employed 290 full-time equivalent staff in pipeline safety, including 145 inspectors, as of March 8, 2019. According to PHMSA officials, the agency continues hiring and anticipates employing additional staff in the second half of the fiscal year. While t he President's request ed budget authority for PHMSA's pipeline safety program in FY2020 is less than the FY2019 budget authority , it projects only a small reduction in funded staff . The budget includes an estimate of 306 FTEs for FY2020 , two fewer FTEs than the prior year . According to PHMSA, these two positions , which support pipeline safety data anal ysis and information technology, are to be transferred to DOT's Office of the Chief Information Officer as part of a centralization of all systems and technology within that office. If PHMSA's pipeline safety staffing were to be funded at the level of the President's FY2020 budget request, it would maintain the significant increase in PHMSA staff funding (mostly for inspectors) appropriated since FY2014 ( Figure 4 ). However, to the extent it reduces funding for grants available to the states, it potentially could reduce the number of staff in state pipeline safety agencies. It would also be a step back, in terms of funding, from the long-term expansion of PHMSA's pipeline safety program begun over 20 years ago in response to a series of pipeline accidents, the terrorist attacks of 9/11, implementation of PHMSA's integrity management regulations, and the boom in U.S. shale gas and oil production. PHMSA officials have offered a number of reasons for the persistent shortfall in inspector staffing. These reasons include a scarcity of qualified inspector job applicants, delays in the federal hiring process during which applicants accept other job offers, and PHMSA inspector turnover—especially to pipeline companies, which often hire away PHMSA inspectors for their corporate safety programs. Because PHMSA pipeline inspectors are extensively trained by the agency (typically for two years before being allowed to operate independently), they are highly valued by pipeline operators seeking to comply with federal safety regulations. The agency has stated that it is challenged by industry recruitment of the same candidates it is recruiting, especially with the rapid development of unconventional oil and gas shales, for which the skill sets PHMSA seeks (primarily engineers) have been in high demand. A 2017 DOT Inspector General (IG) report supported PHMSA's assertions about industry-specific hiring challenges and confirmed \"a significant gap between private industry and Federal salaries for the types of engineers PHMSA hires.\" To overcome its pipeline inspector hiring challenges, PHMSA has implemented a \"robust recruitment and outreach strategy\" that includes certain noncompetitive hiring authorities (e.g., Veterans Employment Opportunities Act) and a fellows program. The agency also has offered recruitment, relocation and retention incentives, and a student loan repayment program. In addition to posting vacancy announcements on USAJOBS, PHMSA has posted job announcements using social media (Twitter and LinkedIn), has conducted outreach to professional organizations and veterans groups, and has attended career fairs and on-campus hiring events. PHMSA states that it has been \"working hard to hire and retain inspector staff\" but continues to experience staff losses due to an aging workforce and continued difficulty hiring and retaining engineers and technical staff because of competition from the oil and natural gas industry. Although PHMSA has taken concrete actions in recent years to shore up its workforce, there may still be room for improvement. Notably, the IG report concluded in 2017 that PHMSA did \"not have a current workforce management plan or fully use retention tools,\" although the agency had improved how it integrates new employees in the agency. According to the IG, PHMSA concurred with the report's workforce management recommendations and proposed appropriate action plans. On a related issue, a 2018 study by the Government Accountability Office (GAO) reports that \"PHMSA has not planned for future workforce needs for interstate pipeline inspections,\" and, in particular, has not assessed the resources and benefits available from its state partners. The GAO concluded that without this type of forward-looking analysis, \"PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective oversight of interstate pipelines.\" According to GAO, PHMSA has concurred with its recommendation to develop a workforce plan for interstate pipeline inspections. What impact PHMSA's subsequent actions may have on its staff recruitment, retention, and deployment is an open question. One specific remedy PHMSA has pursued in its efforts to recruit pipeline inspectors is to seek direct-hire authority (DHA) from the Office of Personnel Management (OPM). This authority can expedite hiring, for example, by eliminating competitive rating and ranking, or not requiring veterans' preference. OPM can grant DHA to federal agencies in cases of critical hiring need or a severe shortage of candidates. In its 2013 appropriations report, the House Appropriations Committee stated The Committee is aware of several challenges PHMSA faces in hiring pipeline safety inspectors. One such challenge is the delay caused by the federal hiring process, which is compounded by other market dynamics. The Committee encourages the Office of Personnel Management to give strong consideration to PHMSA's request for direct-hire authority for its pipeline safety inspection and enforcement personnel. Such authority may enable PHMSA to increase its personnel to authorized levels and thereby demonstrate the need for additional resources. The same language appears in the committee's 2014 appropriations report. Consistent with the committee's recommendations, PHMSA applied to the OPM for direct-hire authority in April 2015 but was denied. According to PHMSA, the OPM informed agency officials of the denial verbally, but did not provide a formal, written explanation for the denial at the time. In 2016, the PHMSA administrator reiterated the agency's desire for DHA, stating that it \"would complement our recruitment efforts by reducing the agency's time to hire from more than 100 days to less than 30 days.\" P.L. 114-183 did not grant PHMSA direct-hire authority, but did allow the agency to apply to the OPM for it upon identification of a period of macroeconomic and pipeline industry conditions creating difficulty in filling pipeline safety job vacancies (§9b). However, the aforementioned IG report concluded that direct hire authority might not provide PHMSA with the needed tools to recruit staff more effectively. According to the IG, while this authority might speed hiring of new employees, \"it is not clear how it alone would resolve long-standing staffing challenges such as competing with a well-paying industry over a limited talent pool.\" In the wake of several major safety incidents involving facilities under the jurisdiction of state pipeline safety regulators, some state programs have come under scrutiny regarding their overall effectiveness. After the San Bruno pipeline incident, the California state pipeline safety program—which had regulatory responsibility for the pipeline that ruptured—was criticized by the NTSB for its failure to detect the pipeline's problems. The NTSB was also critical of PHMSA's oversight of the state because the agency had not \"incorporated the use of effective and meaningful metrics as part of its guidance for performance-based management\" of state pipeline safety programs. A 2014 investigation by the DOT Office of Inspector General assessed the effectiveness of PHMSA's state program oversight as recommended by the NTSB. The IG report stated PHMSA's oversight of State pipeline safety programs is not sufficient to ensure States comply with program evaluation requirements and properly use suspension grant funds. Lapses in oversight have resulted in undisclosed safety weaknesses in State programs. The IG report recommended that PHMSA \"take actions to further refine its policies and procedures for managing the program, including its guidelines to the States and improve its oversight to ensure States fulfill their role in pipeline safety.\" The report made seven specific programmatic recommendations to achieve these goals. In its response to a draft version of the IG report, PHMSA officials concurred or partially concurred with all of the IG reports' recommendations, describing actions it had taken to address the IG's concerns. The IG report therefore considered all but two of its recommendations resolved, but urged PHMSA to reconsider and clarify its response to the remaining two recommendations. These recommendations pertained to PHMSA's staffing formula and its annual evaluations of inspection procedures among the states. The Aliso Canyon and Merrimack Valley incidents again focused attention on the oversight and effectiveness of state pipeline safety programs. For example, during the Aliso Canyon incident, PHMSA expressed concern to state regulators about aspects of the state's safety oversight, including its review of historical well records showing facility anomalies and requirements for safety contingency plans to protect workers, the public, and property. A subsequent federal interagency task force concluded that \"the practices for monitoring and assessing leaks and leak potential at the Aliso Canyon facility were inadequate to maintain safe operations.\" In the Merrimack Valley case, state legislators reportedly criticized Massachusetts' pipeline safety regulators for insufficient staffing and inadequate oversight of pipeline facilities. However, PHMSA's annual evaluation of the state's pipeline safety program—conducted the month before the natural gas releases—gave the state program a rating of 97.4 out of 100 maximum points. PHMSA's evaluation did note a shortfall in inspector staffing, which could impact the agency's inspection schedule, and that the state agency was working to hire additional inspectors. In light of these incidents, and the IG's prior recommendations, Congress may reexamine the adequacy of PHMSA's oversight of its state pipeline safety partners. The NTSB listed the safe shipment of hazardous materials by pipeline among its 2019-2020 Most Wanted List of Transportation Safety Improvements , stating \"as infrastructure ages, the risk to the public from pipeline ruptures also grows.\" Likewise, Congress has ongoing concern about the safety of older transmission pipelines—a key factor in San Bruno—and in the replacement of leaky and deteriorating cast iron pipe in natural gas distribution systems—a key factor in Merrimack Valley. The construction work in Merrimack Valley, which led to the natural gas release, was part of a cast iron pipe replacement project. (Age was also a factor in the failure of the well casing which led to the uncontrolled natural gas release at the Aliso Canyon facility.) According to the American Gas Association and other stakeholders, antiquated cast iron pipes in natural gas distribution systems, many over 50 years old, \"have long been recognized as warranting attention in terms of management, replacement and/or reconditioning.\" Old distribution pipes have also been identified as a significant source of methane leakage, which poses safety risks and contributes to U.S. greenhouse gas emissions. In April 2015, then-Secretary of Energy Ernest Moniz reportedly stated that safety and environmental risks from old, leaky distribution lines were \"a big issue.\" Natural gas distribution system operators all have ongoing programs for the replacement of antiquated pipes in their systems, although some are constrained by state regulators who face challenges considering significant rate increases to pay for these upgrades. According to the Department of Energy, the total cost of replacing cast iron and bare steel distribution pipes is approximately $270 billion. Practical barriers, such as urban excavation and disruption of gas supplies, also limit annual replacement. Although the federal role in natural gas distribution systems is limited, because they are under state jurisdiction, there have been prior proposals in Congress and in the QER to provide federal support for the management and replacement of old cast iron pipe. The Pipeline Safety Act mandated a survey (with follow-up every two years thereafter) of pipeline operator progress in adopting and implementing plans for the management and replacement of cast iron pipes (§7(a)). The Merrimack Valley incident may refocus attention on PHMSA's regulation of pipe replacement (currently voluntary), pipeline modernization projects and work packages, older pipeline records, safety management systems, and other issues related to aging pipelines. Congress also may examine the industry's overall progress in addressing the safety of antiquated distribution lines and opportunities for federal support of those efforts. Ongoing physical and cyber threats against the nation's pipelines since passage of the PIPES Act have heightened concerns about the security risks to these pipelines. In a December 2018 study , GAO stated that since the terrorist attacks of September 11, 2001, \"new threats to the nation's pipeline systems have evolved to include sabotage by environmental activists and cyber attack or intrusion by nations.\" Recent oversight of federal pipeline security activities has included discussion of PHMSA's role in pipeline security. While PHMSA reports cooperation with TSA in pipeline security under the terms of the pipeline security annex and subsequent collaboration, questions remain regarding exactly what this cooperation entails and the ongoing roles of the two agencies. Congress has considered in the past whether the TSA-PHMSA pipeline security annex optimally aligns staff resources and capabilities across both agencies to fulfill the nation's overall pipeline safety and security missions. More recently, some in the pipeline industry have questioned PHMSA's focus on, and ongoing commitment to, pipeline security issues, especially in cybersecurity. In the 116 th Congress, the Pipeline and LNG Facility Cybersecurity Preparedness Act ( H.R. 370 , S. 300 ) would require the Secretary of Energy to enhance coordination among \"appropriate Federal agencies,\" state government agencies, and the energy sector in pipeline security; coordinate incident response and recovery; support the development of pipeline cybersecurity applications, technologies, demonstration projects, and training curricula; and provide technical tools for pipeline security. What role PHMSA might play in any future pipeline security initiatives, and what resources it might require to perform that role, may be a consideration for Congress. Both government and industry have taken numerous steps to improve pipeline safety over the last 10 years. In 2016, the Association of Oil Pipe Lines stated that \"the oil and natural gas industry is committed to achieving zero incidents throughout our operations.\" Likewise, the American Gas Association, which represents investor-owned natural gas distribution companies, recently stated that \"safety is the core value for America's natural gas utilities.\" Nonetheless, major oil and natural gas pipeline accidents continue to occur. Both Congress and the NTSB have called for additional regulatory measures to reduce the likelihood of future pipeline accidents. Past PHMSA reauthorizations included expansive pipeline safety mandates, such as requirements for the agency to impose integrity management programs, significantly increase inspector staffing, or regulate underground natural storage. In light of the most recent pipeline accidents or security incidents, Congress may consider new regulatory mandates on PHMSA or may impose new requirements directly on the pipeline industry. However, a number of broad pipeline safety rulemakings and many NTSB recommendations remain outstanding, and others have not been in place for long, so their effectiveness in improving pipeline safety have yet to be determined. As Congress continues its oversight of the federal pipeline safety program, an important focus may be the practical effects of the many changes being made to particular aspects of PHMSA's pipeline safety regulations. In addition to the specific issues highlighted in this report, Congress may assess how the various elements of U.S. pipeline safety activity fit together in the nation's overall strategy to protect the public and the environment. Pipeline safety necessarily involves various groups: federal and state agencies, pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an overarching concern for Congress.", "summary": "The U.S. energy pipeline network is composed of approximately 3 million miles of pipeline transporting natural gas, oil, and other hazardous liquids. Recent incidents in California, Pennsylvania, Massachusetts, and other states have drawn criticism from stakeholders and have raised concerns in Congress about pipeline safety. The Department of Energy's (DOE's) 2015 Quadrennial Energy Review also highlighted pipeline safety as an issue for the nation's energy infrastructure. Recent incident statistics suggest there is opportunity for safety improvement. The federal pipeline safety program is administered by the Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA), which relies heavily on state partnerships for inspection and enforcement of its regulations. PHMSA's pipeline safety program is authorized through FY2019. For FY2019, PHMSA's estimated budget authority is approximately $164 million—more than double the agency's budget authority in FY2008 (not adjusted for inflation). Much of PHMSA's funding is for inspectors. However, due to private sector competition, the agency faces persistent challenges recruiting and retaining the staff for which it is funded. The Trump Administration's requested budget authority for PHMSA is approximately $151 million for FY2020, roughly 8% less than the FY2019 amount. The request would only slightly reduce PHMSA staffing but proposes cuts in state grants that could impact staffing at state pipeline safety agencies. In the wake of major incidents involving facilities under state jurisdiction, some state programs have come under scrutiny regarding their effectiveness and oversight by PHMSA. Congress has used past reauthorizations to impose various mandates on PHMSA regarding standards, studies, and other elements of pipeline safety regulation. The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (P.L. 112-90) and the PIPES Act of 2016 (P.L. 114-183) together included 61 such mandates. As of March 5, 2019, according to PHMSA, the agency had completed 34 of 42 mandates under P.L. 112-90 and 16 of 19 mandates under P.L. 114-183. PHMSA also has not satisfied a number of safety recommendations from the National Transportation Safety Board (NTSB). Some in Congress are concerned that major mandates and NTSB recommendations remain unfulfilled. The NTSB highlighted aging pipelines as a particular concern in its 2019-2020 Most Wanted List of Transportation Safety Improvements. Likewise, Congress has ongoing interest in the safety of older transmission pipelines and in the replacement of leaky and deteriorating cast iron pipe in natural gas distribution systems. Recent accidents involving older pipelines and related infrastructure may refocus attention on PHMSA's regulation of pipe replacement (currently voluntary), pipeline modernization projects and work packages, older pipeline records, safety management systems, and other issues related to aging pipelines. Ongoing physical and cyber threats against the nation's pipelines since passage of the PIPES Act have heightened concerns about pipeline security risks. Although the Transportation Security Administration (TSA) has the primary statutory authority over pipeline security, pipeline safety and security are intertwined—and PHMSA is involved in both. Under the terms of a 2006 agreement, PHMSA and TSA are directed to work together \"to delineate clear lines of authority … in the area of transportation security.\" While PHMSA reports ongoing cooperation with TSA, questions remain about what this cooperation entails and the ongoing roles of the two agencies. In addition to these specific issues, Congress may assess how the various elements of U.S. pipeline safety and security fit together in the nation's overall approach to protect the public and the environment. This approach involves federal and state agencies, pipeline associations, large and small pipeline operators, and local communities. Reviewing how these various groups work together to achieve common goals could be an overarching consideration for Congress.", "document_type": "crs"}
{"report": "A basic understanding of legislative procedure and processes is essential for congressional staff. Gaining familiarity with the key publications and websites listed in this report will assist congressional staff in obtaining this understanding, as well as providing a bibliography of sources to which staff ma y refer as questions arise in their work Congressional staff can find official overviews and explanatory information on the House's \"Legislative Process\" website at http://clerk.house.gov/legislative/legprocess.aspx and on the Senate's \"Legislative Process\" website at http://www.senate.gov/pagelayout/legislative/d_three_sections_with_teasers/process.htm . Reference sources on the rules and procedure of the House and Senate are listed below. Constitution, Jefferson's Manual, and Rules of the House of Representatives . Washington: GPO, 2017. https://www.govinfo.gov/app/collection/hman This publication, often referred to as House Rules and Manual , is prepared for each Congress by the House Parliamentarian and is issued as a House document, most recently for the 115 th Congress as H.Doc. 114-192. It includes the text of the Constitution; the rules of the House and currently relevant portions of Jefferson's Manual of Parliamentary Practice ; a portion of the Congressional Budget Act; and other statutory provisions that operate as procedural rules. Copies are distributed to House offices and are also available from the House Legislative Resource Center. House Practice: A Guide to the Rules, Precedents, and Procedures of the House . Washington: GPO, 2017. https://www.govinfo.gov/content/pkg/GPO-HPRACTICE-115/pdf/GPO-HPRACTICE-115.pdf This one-volume publication prepared by William Holmes Brown and updated by Charles W. Johnson, John V. Sullivan, and Thomas J. Wickham, Jr., all former House Parliamentarians, provides more current summary information on House rules and selected precedents than Procedure in the U.S. House of Representatives (see next entry). Organized alphabetically by topic, it reflects changes in the House rules and procedure adopted as of the 115 th Congress. This publication is sometimes referred to as Brown's. The Office of the House Parliamentarian has a limited number of copies to distribute to House offices upon request. Procedure in the U.S. House of Representatives, 97 th Congress: A Summary of the Modern Precedents and Practices of the House, 86 th Congress-97 th Congress . Washington: GPO, 1982. Frequently referred to as Deschler's Procedure , after a former Parliamentarian of the House, this one-volume work summarizes House procedure and provides a cumulated, condensed version of House precedents from 1959 to 1980. A 1986 supplement, Procedure in the United States House of Representatives: Annotations of the Precedents of the House for the 97 th , 98 th , and 99 th Congresses , covers 1981 through 1986. Both publications are out of print. These one-volume publications are not available on the Internet, but the full text of several related multivolume sets of House precedents— Deschler's Precedents of the U.S. House of Representatives , Cannon's Precedents , and Hinds' Precedents —are all available in the \"Precedents of the U.S. House of Representatives\" section of the Government Publishing Office's (GPO's) website at https://www.govinfo.gov/collection/precedents-of-the-house?path=/GPO/Precedents%20of%20the%20U.S.%20House%20of%20Representatives . Senate Manual . Washington: GPO, 2014. https://www.govinfo.gov/app/collection/sman This manual, prepared periodically by the Senate Committee on Rules and Administration, contains the standing rules, orders, laws, and resolutions affecting the Senate, as well as copies of historical U.S. documents and selected statistics on the Senate and other government entities. Issued as S.Doc. 1, copies are distributed to Senate offices and are available from the Senate document room. A current edition of just the Standing Rules of the Senate is available on the committee's website at https://www.rules.senate.gov/rules-of-the-senate . Riddick, Floyd M. and Alan S. Frumin. Riddick's Senate Procedure: Precedents and Practices . Washington: GPO, 1992. https://www.govinfo.gov/collection/riddicks-senate-procedure?path=/GPO/Riddick%2527s%20Senate%20Procedure This publication was revised and updated in 1992 by Floyd M. Riddick, who was then the Parliamentarian of the Senate, and published as S.Doc. 101-28. Organized alphabetically by topic, it contains currently applicable rulings by the presiding officer and practices related to Senate procedure. An appendix has suggested forms for various procedures, for example, offering motions or filing conference reports. Some of the most frequently used chapters of Riddick's Senate Procedure are available in an expanded format in the \"Electronic Senate Precedents\" section of the Senate's WEBSTER intranet site at http://webster.senate.gov/precedents . Senate Cloture Rule . Washington: GPO, 2011. https://www.govinfo.gov/content/pkg/CPRT-112SPRT66046/pdf/CPRT-112SPRT66046.pdf This committee print (S.Prt. 112-31) was prepared for the Senate Committee on Rules and Administration by the Congressional Research Service (CRS). It includes lists of selected filibusters, tables of cloture votes, a legislative history of the cloture rule, and a bibliography. CRS has a limited number of copies available for distribution to offices upon request. Lists of cloture motions and votes from the 65 th Congress (1917-1918) forward are also available on the Senate website at http://www.senate.gov/pagelayout/reference/cloture_motions/clotureCounts.htm . Our American Government . Washington: GPO, 2003. (H.Doc. 108-94) https://www.govinfo.gov/content/pkg/CDOC-108hdoc94/pdf/CDOC-108hdoc94.pdf This revised version of the popular introductory guide is written in a question-and-answer format that covers a broad range of topics dealing with the legislative, executive, and judicial branches of our government. The appendixes contain a glossary of legislative terms and a selective bibliography. Copies of each new edition are distributed to congressional offices. Members of Congress can also obtain printed copies of the current edition from the House Legislative Resource Center and the Senate Document Room. The Constitution of the United States of America As Amended: Unratified Amendments: Analytical Index . Washington: GPO, 2007. (H.Doc. 110-50) https://www.govinfo.gov/content/pkg/CDOC-110hdoc50/pdf/CDOC-110hdoc50.pdf This document contains the text of the Constitution, its amendments, and a useful index to the Constitution and amendments. The Constitution of the United States of America: Analysis and Interpretation . Washington: GPO, 2017. (H.Doc. 112-9) https://www.govinfo.gov/collection/constitution-annotated?path=/GPO/Constitution%20of%20the%20United%20States%20of%20America%253A%20Analysis%20and%20Interpretation . Popularly known as the Constitution Annotated , this document contains legal analysis and interpretation of each section of the U.S. Constitution and is updated regularly by CRS. It is available to congressional staff on the CRS website at http://www.crs.gov/conan/constitutionannotated , and to the public through GPO (see link above). For the public version, the most recent edition is listed at the top of the webpage. Dove, Robert B. Enactment of a Law: Procedural Steps in the Legislative Process. Washington: GPO, 1982. https://www.congress.gov/resources/display/content/Enactment+of+a+Law+-+Learn+About+the+Legislative+Process http://www.senate.gov/legislative/common/briefing/Enactment_law.htm Prepared by Robert B. Dove in 1982, who was then the Senate Parliamentarian, this primer on the legislative process traces procedures used in the Senate and the House of Representatives. No printed copies are available, but it was updated online in 1997. It is available on Congress.gov and on the Senate website. Sullivan, John V. How Our Laws Are Made . Washington: GPO, 2007. (H.Doc. 110-49) https://www.congress.gov/resources/display/content/How+Our+Laws+Are+Made+-+Learn+About+the+Legislative+Process https://www.govinfo.gov/content/pkg/CDOC-110hdoc49/pdf/CDOC-110hdoc49.pdf This pamphlet outlines stages in the legislative process and explains the uses of various publications, which track that process. It is prepared by the Parliamentarian of the House in consultation with the Parliamentarian of the Senate. This guide is updated periodically. Copies of new editions are distributed to congressional offices and can also be obtained from the House Legislative Resource Center and the Senate Document Room. CRS has a variety of resources and services on legislative procedure available to Members of Congress and their staff. The CRS website is available at http://www.crs.gov . Congressional staff may obtain useful CRS materials on the \"Legislative Reference Sources\" page at http://www.crs.gov/resources/Pages/LegReference-Committees.aspx and legislative procedure from the \"Congressional Process, Administration, & Elections\" page at http://www.crs.gov/iap/congressional-process-administration-and-elections . The latter page includes short fact sheets on House and Senate procedure as well as materials on the budget process and on congressional oversight. CRS Report 98-812, Amendments Between the Houses: A Brief Overview , by Elizabeth Rybicki and James V. Saturno. CRS Report 98-728, Bills, Resolutions, Nominations, and Treaties: Characteristics, Requirements, and Uses , by Richard S. Beth. CRS Report 98-242, Committee Jurisdiction and Referral in the Senate , by Judy Schneider. CRS Report RS20147, Committee of the Whole: An Introduction , by Judy Schneider. CRS Report RS20794, The Committee System in the U.S. Congress , by Judy Schneider. CRS Report 98-736, Floor Consideration of Conference Reports in the House , by James V. Saturno. CRS Report RS20200, General Debate in Committee of the Whole , by Judy Schneider. CRS Report RL30945, House and Senate Rules of Procedure: A Comparison , by Judy Schneider. CRS Report 98-339, House Committee Hearings: Scheduling and Notification , by Christopher M. Davis. CRS Report 98-175, House Committee Jurisdiction and Referral: Rules and Practice , by Judy Schneider. CRS Report RS20308, House Committee Markups: Commonly Used Motions and Requests , by Judy Schneider. CRS Report 98-309, House Legislative Procedures: Published Sources of Information , by Megan S. Lynch. CRS Report R44001, Introducing a House Bill or Resolution , by Mark J. Oleszek. CRS Report R44195, Introducing a Senate Bill or Resolution , by Mark J. Oleszek. CRS Report 98-721, Introduction to the Federal Budget Process , coordinated by James V. Saturno. CRS Report R42843, Introduction to the Legislative Process in the U.S. Congress , by Valerie Heitshusen. CRS Report 98-425, Invoking Cloture in the Senate , by Christopher M. Davis. CRS Report 95-563, The Legislative Process on the House Floor: An Introduction , by Christopher M. Davis. CRS Report 96-548, The Legislative Process on the Senate Floor: An Introduction , by Valerie Heitshusen. CRS Report RL30787, Parliamentary Reference Sources: House of Representatives , by Richard S. Beth and Megan S. Lynch. CRS Report RL30788, Parliamentary Reference Sources: Senate , by Megan S. Lynch and Richard S. Beth. CRS Report 98-143, Procedural Distinctions Between the House and the Committee of the Whole , by Judy Schneider. CRS Report 98-337, Senate Committee Hearings: Scheduling and Notification , by Valerie Heitshusen. CRS Report 98-308, Senate Legislative Procedures: Published Sources of Information , by Christopher M. Davis. CRS Report 98-612, Special Rules and Options for Regulating the Amending Process , by Megan S. Lynch. CRS Report RS22477, Sponsorship and Cosponsorship of House Bills , by Mark J. Oleszek. CRS Report 98-279, Sponsorship and Cosponsorship of Senate Bills , by Mark J. Oleszek. In addition to legislative procedure material, CRS offers several programs on legislative procedure for congressional staff. Legislative staff can attend Congress: An Introduction to Process and Resources , an introductory CRS program designed for and offered only to permanent, professional congressional staff who seek a foundation for understanding the legislative process and the resources available to monitor it. This CRS program is offered 10 or more times a year and is the prerequisite for the Advanced Legislative Process Institute . More information is available on the CRS website at http://www.crs.gov/Events/TrainingPrograms or by telephone at [phone number scrubbed]. CRS also offers a monthly introductory class, Legislative Concept s , to House staff and interns. Information is available on HouseNet ( http://housenet.house.gov ) under \"Campus\", then under \"Congressional Staff Academy.\" Legislative staff members are also invited to attend the CRS Budget Process Institutes. The introductory Overview of the Federal Budget Process is offered several times each year and provides an introduction to federal budgeting procedures, particularly procedures used in Congress. The following six advanced institutes are offered during the year at times when they are most relevant to congressional staff: Budget Resolutions and Budget Enforcement Appropriations Process Consideration of Appropriations Bills in the House Consideration of Appropriation Bills in the Senate President and the Budget, and Continuing Resolutions Event dates and registration forms for CRS programs and institutes can be found on the CRS website at http://www.crs.gov/programs/Pages/eventscal.aspx . Congress A to Z. 6 th ed. Washington: CQ Press, 2014. Congress.gov Legislative Glossary. Written by CRS analysts and available to the public at https://www.congress.gov/help/legislative-glossary . Davidson, Roger H., Frances E. Lee, and Walter J. Oleszek. Congress and Its Members . 16 th ed. Washington: CQ Press, 2017. Congressional Quarterly's Guide to Congress. 7 th ed. Washington: CQ Press, 2012. Koempel, Michael L., and Judy Schneider. Congressional Deskbook: the Practical and Comprehensive Guide to Congress. Alexandria, VA: TheCapitol.Net, 2012. Kravitz, Walter. Congressional Quarterly's American Congressional Dictionary. 3 rd ed. Washington, CQ Press, 2001. Available to congressional offices in an updated and expanded edition on the CRS website at https://www.govinfo.gov/app/collection/sman . Oleszek, Walter J., Mark J. Oleszek, Elizabeth Rybicki, and Bill Heniff, Jr. Congressional Procedures and the Policy Process. 10 th ed. Washington: CQ Press, 2016. Tiefer, Charles. Congressional Practice and Procedure: A Reference, Research, and Legislative Guide . New York: Greenwood Publishing Group, 1989. United States Senate Glossary , at https://www.senate.gov/reference/glossary.htm . CRS Video WVB00003, An Act of Congress , by Walter J. Oleszek. A 58 minute video about the enactment of legislation, available at http://www.crs.gov/video/detail/WVB00003 . The Legislative Process video series on Congress.gov. Nine brief video clips explaining the legislative process, written by CRS analysts and available to the public at https://www.congress.gov/legislative-process . Some of the works on legislative procedure listed in this report are produced by GPO and may be obtained through its Congressional Liaison Office at http://www.gpo.gov/congressional/ . Other publications are only available from congressional sources, such as the House and Senate Parliamentarians, for congressional office use, and those listed in the \" Supplementary Materials \" section may be purchased from bookstores or publishers.", "summary": "Written for congressional staff, this report identifies and provides details on how to obtain information on legislative procedures and process in the House and Senate. It provides references to selected CRS products and offers information on the CRS legislative institutes. A listing of selected supplementary materials is also provided. This report will be updated as new information is available.", "document_type": "crs"}
{"report": "South Africa is a majority black, multiracial country of nearly 58 million people. South African President Cyril Ramaphosa was elected by the parliament in February 2018 after his predecessor, Jacob Zuma, resigned. Zuma did so under the threat of a parliamentary no confidence vote after defying a decision by leaders of his African National Congress (ANC) removing him as its national presidential nominee. The ANC, the majority party in parliament, replaced Zuma with then-Vice President Ramaphosa, whom the ANC elected as its leader in late 2017. Zuma had faced intense pressure to step down after years of weak economic growth and multiple corruption scandals under his tenure. Ramaphosa is leading a reform agenda to address these challenges. He is serving out the rest of Zuma's term, which ends in May 2019, and is eligible to run for two additional five-year terms of his own. Local and international expectations of him are high, but he faces diverse fiscal, structural, and political challenges. U.S.-South Africa ties are cordial, based in part on shared democratic values and broad bilateral accord on regional development goals, and the State Department describes South Africa as a strategic U.S partner. U.S. high-level bilateral engagement with South Africa is not, however, as frequent or as multifaceted as that with some other U.S. strategic country partners. South Africa has also not been the focus of substantial congressional legislative attention in recent years. In general, as set out below, South Africa-related congressional activity has mainly focused on U.S. healthcare assistance, trade issues, and consultations during periodic congressional travel to the country. Given South Africa's economic and political influence in Africa and on African and developing country positions in multilateral contexts—which often do not align with those of the United States—some Members of Congress may see a scope for increased congressional and other U.S. engagement with South Africa. There is a large U.S. diplomatic presence in South Africa, which has periodically hosted high-level U.S. leadership visits, including two presidential visits by former President Barack Obama. South Africa has been a top African recipient of U.S. assistance for years. For over a decade, such assistance has centered primarily on healthcare, notably HIV/AIDS-related programs implemented under the U.S. President's Emergency Plan for AIDS Relief (PEPFAR), announced by President George W. Bush in 2003. The United States has also supported South African-implemented development and crisis response activities in other African countries. In 2010, the Obama Administration and the South African government initiated a U.S.-South African Strategic Partnership. While it remains in effect, a biennial dialogue that accompanied the partnership was last held in 2015. The partnership has focused on cooperation in such areas as health, education, food security, law enforcement, trade, investment, and energy, all long-standing U.S. priorities. Since 2014, South Africa has been the largest U.S. trade partner in Africa. South Africa is also a key regional export and investment destination for U.S. firms. South Africa has long enjoyed a significant trade surplus in goods with the United States, but there is a substantial U.S. surplus in trade in services. In general, while U.S.-South African economic ties are positive, trade has been a source of occasional friction. Differences over foreign policy issues also periodically roil ties. South African officials are critical of Israel's policies toward the Palestinians, for instance, and South Africa maintains cordial relations with Iran, a key U.S. adversary. There have also been divergences on other issues, as illustrated by a lack of congruence between South African and U.S. votes in the United Nations, and regarding responses to the crisis in Venezuela. South Africa also opposed the Trump Administration's decision to withdraw the United States from the U.N. Framework Convention on Climate Change, a shift from the general bilateral policy congruence that prevailed on this issue during the Obama Administration. South African officials have periodically made remarks suggesting anti-U.S. biases. Anti-U.S. rhetoric, when it occurs, may be influenced by historic grievances over U.S. policy toward the ANC during the era of apartheid—a codified, state-enforced system of racial segregation and socioeconomic and legal discrimination favoring the white minority that was operational until the early 1990s. During the anti-apartheid struggle, the Reagan Administration categorized the ANC as a terrorist organization and President Reagan vetoed the Comprehensive Anti-Apartheid Act of 1986 ( P.L. 99-440 ). The Reagan Administration had sought to promote change within the apartheid regime—with which it shared anti-communist goals—by engaging it in a dialogue-based approach dubbed \"constructive engagement.\" The Trump Administration has not pursued any major changes in bilateral ties, but in late 2018, President Trump acted to fill the post of U.S. ambassador to South Africa, vacant since late 2016, by nominating South African-born luxury handbag designer Lana Marks to the position. The Senate did not act on her nomination by the end of the 115 th Congress; she was renominated in early 2019. In early 2017, President Trump spoke to President Zuma by telephone on \"ways to expand\" trade and advance bilateral cooperation in other areas, including counter-terrorism and, according to the South African government, multilateral and African peace and stability issues. No notable new engagement has since occurred, but in August 2018, President Trump sparked controversy in South Africa and among some U.S. observers after posting a tweet on land reform. It stated that the South African Government was \"seizing land from white farmers\" and referred to \"farm seizures and expropriations and the large scale killing of farmers.\" His comments drew criticism and were questioned on factual and other grounds by U.S. and South African commentators and by the South African government. While the South African government is pursuing efforts to change the constitution to allow for the uncompensated expropriation of land, such expropriation was not underway in 2018. Congress has long played an active role in U.S.-South African relations. This was particularly true during the struggle against apartheid, from the late 1960s until the first universal franchise vote in 1994. Starting in the 1960s, Congress sought to induce democratic change by repeatedly imposing conditions and restrictions on U.S. relations with the apartheid regime. These actions culminated in Congress's passage of the sanctions-focused Comprehensive Anti-Apartheid Act of 1986 ( P.L. 99-440 )—an action that overrode President Reagan's veto. Congressional attention toward South Africa remained strong during its continuing transition over the following decade. In recent years, congressional engagement with South Africa has mainly focused on oversight of foreign aid program—particularly South Africa's relative progress in building its capacity to address its HIV/AIDS crisis and gradually assuming greater responsibility for HIV program financing and implementation, key goals under PEPFAR. Efforts to bolster trade and investment ties with South Africa, as with Africa generally, have also drawn attention in recent congresses. In 2015 and 2016, congressional action, including Congress's mandating of a special review of South Africa's eligibility for U.S. trade benefits, helped to resolve a poultry and meat-related trade dispute. Several Members also sought to reverse the Trump Administration's 2018 application of steel and aluminum tariffs to South Africa, which had raised concerns in the country. No South Africa-centered bills have been introduced in the 116 th Congress, and none were introduced in the 115 th Congress, apart from three commemorative resolutions. Members periodically travel to South Africa to foster such aims as improved bilateral and U.S.-Africa ties and enhanced trade and investment relations. According to the State Department's FY2019 foreign aid budget request, South Africa is a key player for U.S. engagement in Africa and a critical partner to boost U.S. trade and economic growth, improve regional security, and mitigate public health crises. South Africa is the economic and security anchor of the region but grapples with political and socioeconomic challenges, including high-level corruption and poor accountability, a slowing economy, high youth unemployment, critical levels of violent crime, a weak education system, a high rate of HIV/AIDS, water scarcity, and wildlife trafficking. South Africa continues to work with the United States to address the region's social and economic challenges […]. The Trump Administration requested $172.1 million for South Africa for FY2020, a 70.7% decrease relative to the actual FY2018 total of $586.6 million, and a 66.3% decrease relative to the FY2019 requested level of $510.5 million. Aid trends are shown in Figure 1 and Table 1 . Since 1994, South Africa has been a top African recipient of U.S. State Department and U.S. Agency for International Development (USAID) aid, the vast majority devoted to PEPFAR and other health programs, including responses to the tuberculosis epidemic and efforts to end child and maternal deaths. After the enactment of the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 )—which authorized PEPFAR programs and funding—aid rose to nearly $580 million in FY2010. Aid levels then declined to a low of $286 million in FY2014 before rising again, to a peak of nearly $587 million in FY2018. Cumulative FY2004 through FY2018 PEPFAR funding in South Africa totaled $6.26 billion. The Trump Administration proposed to use the bulk of $500 million in requested Global Health Program PEPFAR funds in FY2019 to maintain current levels of HIV/AIDS antiretroviral drug treatment access through support for direct service delivery and treatment services. The State Department has proposed to cut PEPFAR funding by 67.6% in FY2020, to $161.8 million, after issuing sharp criticism of the PEPFAR in South Africa in its FY2019 PEPFAR Country Operational Plan \"Planning Level Letter.\" While praising a number of successes under the U.S. PEPFAR partnership with the South African government and commending efforts to improve the program, the letter, by U.S. Global AIDS Coordinator and U.S. Special Representative for Global Health Diplomacy Deborah L. Birx, took note of \"several fundamental problems in PEPFAR's core treatment program in South Africa.\" The letter stated Despite a significant infusion of resources by the U.S. government especially over the last three years, progress has been grossly sub-optimal and insufficient to reach epidemic control, including the targets of the Surge Plan [an effort to accelerate HIV testing, treatment, and retention]. The PEPFAR program has demonstrated extremely poor performance in ensuring every person who is started on treatment is retained, particularly from FY 2017 to FY 2018 where results have been relatively stagnant at 479,912 to 481,014 respectively, despite an increase in resources. In fact, the PEPFAR program lost more people on treatment than it gained in FY 2018. Across PEPFAR/South Africa programming, FY 2018 overspending and underperformance at the partner level is a program management and oversight issue. [..] The full expenditure of PEPFAR resources without improvement of results is unacceptable. This represents a serious, continued problem and program failure–linkage and retention must improve in South Africa now in COP 2018 implementation. Other recent-year U.S. development aid for South Africa has supported programs focusing on basic education; civil society capacity-building aimed at fostering accountable and responsive governance and public service delivery advocacy, and support for the office of the Public Protector [a public ombudsman; see below]; business-government cooperation in support of development; and support for sexual assault and gender-based-violence victims. The USAID-led, South Africa-based Power Africa initiative also supports energy projects in South Africa and USAID provides indirect credit for small enterprise activity. Through its Africa Private Capital Group, USAID also facilitates development-focused financing, including though efforts to foster local municipal bond and pension fund investment in public goods and services. It has also provided support for development-centered policymaking. USAID also administers the Trilateral Assistance Program (discussed below), under which the United States supports South African foreign aid efforts in Africa. South Africa has served as a \"Strategic Partner\" under the Feed the Future U.S. global food security and agricultural development initiative by providing agricultural technical assistance to other African countries. South Africa also participates in the joint State Department/USAID Young African Leaders Initiative, which helps develop the leadership skills of young business, civic, and public sector professionals. Most U.S. development assistance programs in South Africa are administered by the State Department or USAID. These agencies sometimes collaborate with and transfer funds to other, technically specialized U.S. agencies, notably the U.S. Centers for Disease Control and Prevention (CDC), which plays a key technical role in PEPFAR implementation. U.S. export promotion agencies also periodically provide loans, credit guarantees, or other financial services to U.S. firms aimed at boosting U.S. exports and fostering development and economic growth. There is a Peace Corps program in South Africa and the small U.S. African Development Agency (USADF) provides a few grants in South Africa. Some project-centered grant aid is also provided to civil society entities, and South Africa periodically benefits from U.S. regional programs focused on such issues as environmental management and trade capacity-building. U.S. trade and export promotion agencies are also active in South Africa. Security cooperation efforts are diverse but are funded at far lower levels than development programs. In FY2017 and prior years, International Narcotics Control and Law Enforcement (INCLE) funds were used for law enforcement and criminal justice technical support. Except in FY2018, Nonproliferation, Antiterrorism, Demining and Related Programs (NADR)-Export Control and Related Border Security (EXBS) funds have supported technical training relating to trade and border control, with a focus on controlling trade in military and dual-use technologies. The International Military Education and Training (IMET) program is long-standing, and in past years Foreign Military Financing (FMF) aid has supported the South African military's capacity to respond to regional crises and participate in peacekeeping. This has included past-year funding technical support and training for U.S.-sourced South African military C-130 aircraft. Since 2005, South Africa has received peacekeeping training under the U.S. Africa Contingency Operations Training and Assistance program (ACOTA), a component of the Global Peace Operations Initiative (GPOI, a multi-country State Department training program) and other U.S. military professionalization programs. South African troops also regularly join their U.S counterparts in military training exercises. There is a South Africa-New York National Guard State Partnership Program, and the U.S. Department of Defense also regularly supports South Africa's biennial African Aerospace Defense Exhibition. South Africa is influential on the African continent due to its investment and political engagement in many African countries and its active role and leadership within the inter-governmental African Union (AU). It also has one of the largest, most diverse and developed economies, and has made substantial progress in spurring post-apartheid socioeconomic transformation. For summary data on the country, see Figure 2 . Many negative socioeconomic effects of apartheid persist, however. Apartheid ended after a tumultuous negotiated transition, between 1990 and 1994, when South Africa introduced a system of universal suffrage and multi-party democracy—after a decades-long struggle by the ANC and other anti-apartheid groups. Following the release of long-imprisoned ANC leader Nelson Mandela and the ANC's legalization in 1990, political dialogue led to an interim constitution in 1993 and elections in 1994, in which Mandela was elected president. Further post-electoral negotiations led to the adoption in 1996 of a new constitution and the creation of the Truth and Reconciliation Commission (TRC, in operation until 2002). The TRC documented crimes and human rights abuses by the apartheid regime and anti-apartheid forces from 1960 until 1994, and oversaw processes of restorative justice, accountability, and assistance for victims of such abuses. It has since served as a model for similar efforts around the world. Mandela died in 2013. The ANC currently holds 249 of 400 National Assembly seats. It has held a parliamentary majority since the first post-apartheid elections in 1994 and, since the National Assembly elects the president, also controlled the executive branch. Successive ANC-led governments have sought to redress the effects of apartheid, notably through efforts to improve the social welfare of the black majority and by promoting a pan-racial, multiethnic national identity. While racial relations have improved, divisions remain; references to race in politics and social media sometimes spur heated debate, and racially motivated criminal acts periodically occur. Despite diverse investments and policies aimed at overcoming the negative effects of apartheid, many of its most damaging socioeconomic effects endure, posing persistent, profound challenges for development and governance. Among these are high levels of poverty, social inequality, and unemployment, as well as unequal access to education, municipal services, and other resources. Such problems disproportionately affect the black population. Racial disparities have gradually declined, but most black South Africans live in poverty and their average per capita incomes are roughly one-sixth as large as those of the historically privileged white minority. Income and consumption distribution are notably unequal. Recent measures suggest the wealthiest top 10% and top 20% in South Africa enjoy the highest share of income of any country. South Africa's GINI coefficient—a measure of income or consumption inequality—is consistently among the highest globally, and is often the highest. There are also significant regional, rural-urban, and intra-racial socioeconomic disparities. Large segments of the poor majority lack access to decent housing and adequate infrastructure services (e.g., electricity and water), especially in rural areas and in the vast, high-density informal settlements surrounding most cities. Known as townships, such settlements are populated mostly by poor black and mixed race \"coloured\" inhabitants. Lack of legal property ownership sometimes subjects township dwellers to municipal squatter eviction and slum clearance operations. There is also extreme racial disparity in access to land, despite implementation of land redistribution and restitution initiatives since 1994. Under such programs, the state has purchased large amounts of land intended to be transferred to populations that had limited or no ability to own land under the apartheid system—primarily those of black, \"coloured\" or Indian descent. While, black ownership and other access to land has risen markedly in some provinces since 1994, redistribution and restitution processes have been slow and resulted in les extensive transfers than initially projected. As a result, the small minority white population continues to own over 70% of land nationally. This has spurred growing demands for uncompensated state expropriation of private land and pushed the ANC to pursue an ongoing effort to amend the constitution to permit such expropriation. South Africa also faces a range of other socioeconomic challenges. Labor strikes and unrest are common, particularly in the mining sector. Rates of violent crime—notably murder and rape, along with gender violence more broadly, and gun crime—are high. The causes are diverse. South Africa also faces criminal justice system capacity challenges. Although the country has a relatively well-resourced national police force, there are periodic reports of vigilante mob justice, and police sometimes use heavy-handed, abusive tactics to respond to crime and public unrest. Several police leaders have been implicated in professional misconduct inquiries or corruption. South Africa also faces broad challenges to social cohesion linked to grievances and fractures stemming from socioeconomic inequality and marginalization, social biases, and criminal activity. Examples include periodic xenophobic mob attacks on African immigrants and their businesses, crime-motivated attacks on white farmers, and frequent de facto residential racial and socioeconomic segregation. While many of the poor live in townships, the wealthy, including many whites, often live in gated, highly secured communities. Another key challenge is South Africa's high HIV prevalence. Statistics South Africa, a state agency, estimates that 18.99% of adults were HIV-positive in 2018, up from 2017 (18.88%). Despite this moderate increase, which is partially attributable to increased survival rates due to improved access to anti-retroviral treatment, there has been a steady decline in the annual growth rate of HIV prevalence (total cases) and incidence (new infections). National efforts to counter HIV have received considerable international support, notably under U.S. PEPFAR programs. Citizens' expectations and their demands for rapid socioeconomic transformation have exceeded what the South African state has been able to provide, due to fiscal, technical, and governance shortfalls. Despite large investments in housing, services, infrastructure, and state technical capacities, public goods and services delivery rates and quality have often been inadequate. This has spurred frequent, sometimes violent demonstrations. While known as service protests, they center on many issues, including local public corruption and cronyism, and can have political repercussions. In April 2018, President Ramaphosa cut short an overseas trip to address a spate of interrelated unrest that featured service delivery protests, attacks on foreigners, anger over alleged corruption by the affected province's then-Premier (governor), and clashes between local rival ANC members. In 2015 and 2016, South Africa also experienced mass student protests, some violent, over university education costs and alleged institutional racism in higher education. The current government is implementing a pledge, made just before the end of the Zuma administration, to fund free higher education for the poor and freeze certain other fees. Despite such challenges, and indications of an increased politicization of the state bureaucracy under Zuma, many national state agencies (e.g., the central bank, the statistical agency, the courts, some ministries, and the treasury) possess substantial institutional and technical capacity. South Africa ranked second globally on the International Budget Partnership's 2017 Open Budget Index , a measure of public budget transparency. While some state-owned enterprises (SOE) are struggling to recover from reported mismanagement and malfeasance under Zuma, these entities manage large, sophisticated national transport, telecommunication, energy, and other infrastructure systems. The state also administers a large welfare system that supported about 17.6 million grants as of September 2018 and had a 2017/2018 annual budget of about $10.5 billion. It is viewed by many observers as a key anti-poverty tool, albeit a costly one that is expected to grow in size and expense. Despite its role in helping to reduce extreme poverty, the system's administration has been the subject of considerable controversy in recent years. The ANC party is ideologically leftist, but in practice it has melded pragmatic support for private sector-led growth with state-centric economic planning under what it terms the \"developmental state\" model. The ANC's political credibility is largely founded on its leading role in the anti-apartheid struggle and its efforts to end South Africa's deep-rooted, enduring social inequalities. It has struggled to build on this legacy, however, amid the country's persistent challenges. Increasingly, voters appear to be judging the ANC on its current performance, and it faces a growing number of opposition parties. Nevertheless, notwithstanding a marginal loss of electoral strength in recent elections, it has maintained its parliamentary dominance. Rivalry within the ANC at the provincial and local levels—often regarding appointments to local state bodies and the selection of slates of delegates to national party decision-making bodies—is often fierce, and numerous cases has led to political assassinations. National Assembly elections take place under a party-list proportional representation system, in which voters select a party and each party allocates its share of elected seats according to an internal party list. As a result, internal ANC politics and leadership selections play a key role in national politics. The most important ANC post is that of party president, since the ANC usually nominates its party leader to serve as national president. The Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP) also exert influence within the ANC. They do so through a compact called the Tripartite Alliance, under which the ANC appoints top members of COSATU and the SACP to party leadership and state posts, and the latter organizations do not independently contest elections. The Alliance weakened during Zuma's tenure due to SACP and COSATU criticism of Zuma, intra-COSATU splits linked to the emergence of new unions, and discontent within the ANC's labor constituency. The Democratic Alliance (DA) is the second-largest party in parliament, with 89 of 400 National Assembly seats. The DA has its origins in various historical liberal-leaning party coalitions. For many years, its leaders were predominantly white, but it has built an increasingly strong base among blacks. Now led by a charismatic young black leader, Mmusi Maimane, the DA has often confronted the ANC in parliament, at times in league with the Economic Freedom Fighters (EFF), a populist hard-left party centered on black empowerment. The EFF was formed in 2013 by a former dissident ANC Youth League leader, Julius Malema, and won 25 seats in the 2014 elections, becoming the third-largest party. Malema, a political firebrand, is a former key Zuma supporter who later broke with Zuma. The ANC expelled him in 2012, and he became one of Zuma's most vocal critics, notably regarding corruption—though he and his EFF co-founder have themselves faced corruption allegations. The EFF styles itself as a workers' party and draws its support from socioeconomically marginalized groups (e.g., jobless youth, low-wage workers, and poor communities). The EFF operates as a disruptive force, both in its radical policy proposals and through its often-boisterous obstruction of parliamentary proceedings. The Inkatha Freedom Party, with origins in Zulu-dominated KwaZulu-Natal province, was a fierce ANC rival during the end of the anti-apartheid period. It is now a self-described centrist party and holds 10 seats, making it South Africa's fourth largest political party. The remaining 27 seats are distributed among nine small parties. A key target campaign demographic for all parties is the \"Born Free\" generation, those born in 1994 or later, who make up roughly 47% of the population and about 14% of the eligible electorate. They share discontent over corruption, public services, and poverty with their older counterparts, and suffer even higher unemployment rates, but they are reportedly less engaged in formal politics and vote at lower rates than older citizens. During Zuma's presidency, both the DA and the EFF, as well as private foundations and NGOs, sought to use the courts as a check on executive power by regularly suing state officials, including Zuma. These suits, relating to alleged executive branch overreach, agency malfeasance, and illicit actions, were often successful. In March 2016, for instance, the Constitutional Court ruled that Zuma had failed to uphold the constitution by defying a binding recommendation by the Public Protector that he partially reimburse the state for the cost of a state-funded upgrade to his private compound, a matter of long-standing controversy. The ruling was used as the basis for a DA impeachment motion against Zuma that failed but was seen as a political blow against Zuma. In a separate case, also brought by the DA, a High Court panel ordered in April 2016 that the National Prosecuting Authority (NPA) review its 2009 decision to dismiss a 1990s arms purchasing corruption case against Zuma (see below). The Zuma administration faced a third legal setback in March 2016, when the Supreme Court of Appeal ruled that the government had unlawfully ignored a court order—and violated local and international law obligations—by not detaining then-Sudanese President Omar Al Bashir when he attended a mid-2015 African Union (AU) summit in South Africa. Bashir faces an International Criminal Court (ICC) arrest warrant. The government subsequently initiated an effort to formally withdraw South Africa as a party to the ICC. This spurred further litigation. In early 2017, a court determined that the withdrawal was unconstitutional. Former Public Protector Thuli Madonsela also repeatedly issued reports that documented alleged acts of malfeasance, non-compliance with laws and regulations, corruption, and operational shortcomings by the executive branch and state agencies under its purview. Her reports also ordered corrective actions. Most notably, in late 2016, she issued State of Capture , a highly critical report centering on Zuma and the Guptas, a family of business owners that reportedly maintained very close and allegedly often corrupt relations with Zuma and a network of his political and business associates (see below). The report alleged that these actors had engaged in extensive high-level state malfeasance, and mandated the establishment of the now-ongoing judicial commission of inquiry. Zuma fought an unsuccessful legal battle to prevent the report's release, claiming that Madonsela had violated his due process rights. The clash was closely watched, as it was seen as a test of Madonsela's transformation of her office into a key independent institutional check on executive power. The parliament elected Ramaphosa national president a day after Zuma's February 2018 resignation. Ramaphosa—an ex-labor leader turned corporate leader, anti-apartheid activist, and former close associate of Nelson Mandela—assumed the post after also narrowly winning a highly contentious late 2017 ANC party leadership election based largely on his pledge to fight corruption and heal the economy. His victory resulted in the defeat of the influential ANC faction linked to Zuma and its favored candidate, Nkosazana Dlamini-Zuma (Zuma's ex-wife and a former government minister and African Union Commission chair). Analysts speculated that if she had been elected, she might have enabled Zuma to remain national president until general elections in 2019 and potentially helped to avert his prosecution for corruption. President Ramaphosa's priorities are to reverse what many observers contend was a marked, extensive deterioration in governance under Zuma and to enhance state agency operational efficacy, especially with regard to state-owned enterprises (SOEs). Another key goal is to spur faster, more inclusive economic growth by stimulating public and private investment in order to create jobs, enhance social services and infrastructure, and expand gross domestic product (GDP). Particular emphases include \"transformation\" efforts aimed at expanding and equalizing access to economic opportunities, particularly for the black population. Efforts in this vein include small business promotion, preferential state procurement, and actions to boost industrial growth. Additional priorities are reform and growth in mining and trade, along with efforts to attract local and international investment, spur digital sector growth, and expand agricultural production. The Ramaphosa administration backs a proposed constitutional amendment to permit the expropriation of private land without compensation for redistribution to victims of apartheid-era discrimination and land seizures. In early 2018, the parliament provisionally endorsed this goal, which the ANC had adopted as a party policy in late 2017. In late 2018, after holding nationwide hearings, a parliamentary constitutional review committee formally recommended the adoption of this change. Parliament endorsed the recommendation and appointed a committee to craft and introduce the amendment. This effort is highly controversial. It has raised fears that such seizures would primarily target white minority farmers, who own most farmland, and sparked concern that it might cause international investors to question the security of private property ownership in South Africa. Ramaphosa, seeking to dampen such fears, has contended that expropriation would apply mainly in cases involving \"unused land, derelict buildings, purely speculative land holdings, or… where occupiers have strong historical rights and title holders do not occupy or use their land, such as labour tenancy, informal settlements and abandoned inner-city buildings.\" Public Enterprises Minister Pravin Gordhan—who twice served as finance minister under Zuma but clashed fiercely with him—is spearheading efforts to strengthen State-owned enterprise (SOE) governance and efficacy. President Ramaphosa is directly involved in these efforts; in April 2018, he ordered probes into irregularities and mismanagement at two major SOEs: Eskom, the national power utility, and Transnet, a transport and logistics firm. His administration also replaced these SOEs' boards, along with that of Denel, an important but ailing defense sector SOE. In late 2018, Ramaphosa also fired the head of the tax service—a key Zuma ally and Gordhan foe—after earlier suspending him and appointing a commission of inquiry into alleged malfeasance at the agency. A separate parliamentary commission also probed systematic irregularities at Eskom. Broader state investigations into and accountability for an allegedly widespread, deep-seated pattern of alleged corruption and influence peddling under Zuma, known locally as \"state capture,\" also continue to roil politics and draw intense public attention. State capture refers, in particular, to the activities of a network of Zuma-allied ANC and business associates, notably the Guptas, an Indian émigré family that accumulated a range of business holdings after arriving in South Africa in the 1990s. This network allegedly participated in corrupt high-level state-business collusion to influence and even control state enterprises and other agency decisions, contracts, regulatory processes, and fiscal assets to advance their financial and political interests. Ongoing, high-profile hearings by a judicial commission of inquiry into state capture are a key component of such investigations. Several separate commissions of inquiry have also examined or are probing alleged malfeasance at several state agencies and the politicization of state security agencies. Zuma established the judicial commission in early 2018, as ordered by a court, after he had earlier resisted doing so. While its proceedings center on developments during his administration, the matters under consideration remain key issues of current policymaking concern. Witnesses have implicated the Guptas in efforts to influence state agency decisions and top official appointments under Zuma, which the Guptas have denied. The inquiry has revealed evidence of systematic corruption by other actors, notably Bosasa, a public and prison services provider. Its contracts were cancelled and its leaders arrested after hearings in early 2019. To supplement the work of the various commissions of inquiry, in February 2019, President Ramaphosa appointed a special tribunal to fast-track recovery of public assets lost to graft. The hearings could reveal evidence leading to new charges against Zuma and the Guptas, who reportedly fled to Dubai, from where the government tried to extradite them. They could also bring renewed negative attention to the ANC ahead of the 2019 election. The proceedings could also shape the current political environment and undermine Ramaphosa's standing, should members of his administration be implicated in malfeasance. Finance Minister Nhlanhla Nene, a once-reputed anti-Zuma reformer, resigned after testifying to having links to the Guptas. His successor is Tito Mboweni, a business executive and former head of the central bank, whose appointment drew business support. In late 2018, Minister of Home Affairs Malusi Gigaba—a close Zuma ally who was popular within the ANC and whom Ramaphosa had retained—resigned over a perjury accusation and a sex tape scandal. Meanwhile, Zuma is being tried on 16 charges of fraud, corruption, racketeering, and money laundering in a long-running corruption case centering on a 1990s-era state arms deal scandal. Zuma fended off the case for years, allegedly aided by the National Prosecuting Authority (NPA). In March 2018, however, the NPA was forced to reinstate the charges after an appeals court upheld a 2016 High Court ruling that the NPA's dismissal in 2009 of the case against Zuma had been \"irrational\" and made under political pressure. The trial is likely to proceed for months, including during elections in 2019, with possible implications for the ANC's prospects. The NPA's alleged improper favoritism toward Zuma drew substantial attention, notably under its former Director, Shaun Abrahams, but also under several of his Zuma-appointed predecessors. In August 2018, a court voided Abrahams's appointment in a case linked to litigation over his predecessors' appointments. In late 2018, Ramaphosa appointed Shamila Batohi, a career prosecutor and former International Criminal Court legal adviser, to head the NPA. She is expected to actively pursue state capture and public agency malfeasance cases. Hours prior to Batohi's appointment, the NPA provisionally withdrew a key criminal case against the Guptas. President Ramaphosa took power slightly more than a year prior to South Africa's forthcoming May 2019 elections, which present him with both challenges and opportunities. If his administration can show significant economic and governance improvements, he may be able to consolidate his power within the ANC and unify the now-splintered party. He may also be able to sideline the opposition, as he has arguably already done by appropriating one of their key political themes: fighting corruption within the ANC. Ramaphosa's ability to pursue his agenda, however, may be constrained by divisions within the top tiers of the ANC and a need to cooperate with powerful state and party allies of Zuma, some of whom face corruption allegations. Some of these actors have sought to obstruct his reform efforts and blunt his political prospects. Public anger over poor public services and continuing economic malaise also pose challenges for Ramaphosa. Nevertheless, although some press reports caution that he faces substantial political headwinds, opinion polls and many press accounts suggest that he enjoys substantial popularity. South Africa has the most diversified, industrialized economy in Africa. It also has one of the top-five-highest GDPs per capita ($6,560 in 2018) in sub-Saharan Africa, and is one of very few upper-middle-income countries in the region. As earlier noted, however, income distribution is highly unequal. South Africa is a top producer of mined raw and processed commodities (e.g., platinum, steel, gold, diamonds, and coal). Other major industries include automobile, chemical, textile, and food manufacturing. These sectors, part of an overall industrial base that contributed just under 26% of GDP in 2017, are important sources of jobs. There are also well-developed tourism, financial, energy, legal, communications, and transport sectors, which are part of an overall services sector that contributed nearly 62% of GDP in 2017. Recent GDP trends are provided in Table 2 . South Africa regularly hosts large global development and business events, and South African firms are active across Africa, particularly in the mobile phone, retail, and financial sectors. Some also operate internationally, and the Johannesburg Stock Exchange is among the 20 largest global bourses. South Africa is also a famed wine producer and exports diverse agricultural products, but only about 10% of its land is arable and agriculture makes up less than 3% of GDP. Despite its substantial economic strength, South Africa's annual GDP growth, which stood in the 5% range in the mid-2000s, has slowed. It dropped from almost 2.5% in 2013 to under 0.6% in 2016. Despite a rise to 1.3% in 2017, the International Monetary Fund (IMF) projects a decline to 0.8% in 2018. While the nominal value of GDP has slowly risen in constant local Rand terms since 2010, exchange rate volatility has caused the value of GDP in dollars to fluctuate greatly, which has major implications for the country's terms of trade, international debt servicing, and integration into global manufacturing chains. In dollar terms, GDP fell from a peak of $417 billion in 2011 to $296 billion in 2016, as the Rand weakened sharply against the dollar, before rising to $349 billion in 2017, as the Rand appreciated. Global factors contributing to low growth in recent years have included weak investor confidence—attributed to uncertain economic policy trends and alleged poor governance under Zuma—and periods of weak prices and sluggish global demand for key commodity exports, especially to China. While weak commodity prices may hurt South African export earnings, they can also reduce the cost of raw material imports used by many local producers, including exporters. South Africa has a generally open foreign direct investment (FDI) regime, although investors face high taxes, currency exchange volatility, substantial regulatory burdens, large locally entrenched firms, and Black Economic Empowerment policy compliance costs (see below). Moreover, some foreign investors have expressed discontent over the enactment in late 2015 of a law known as the Protection of Investment Act, which removed most special FDI rights and requires foreign investors to settle most disputes through the South African legal system. This has raised concern about potentially unequal treatment under the law and the possibility of expropriation, which South African law permits in some narrow instances. FDI flows into South Africa have dropped sharply in recent years. They totaled $1.3 billion in 2017, down from $8.3 billion in 2013 and a peak of $9.2 billion in 2008. Meanwhile, outward flows have risen sharply, and were valued at more than five times the worth of inflows in 2017. See Table 3 for information on summary trade and FDI trends. The auto industry has been an important source of job-intensive FDI; South Africa has long hosted Ford plants, and other automakers (e.g., Toyota, BMW, and Nissan) have announced significant manufacturing capacity investments in recent years. Rail locomotive manufacturing has also attracted FDI. The World Economic Forum (WEF) ranked South Africa as the second most competitive economy in 2018 in sub-Saharan Africa (after Mauritius), but assesses it as 67 th globally. The WEF cites as economic strengths South Africa's large market size, relatively good infrastructure, advanced financial system, and innovation capability, but views its research and development capacities as inadequate. The country's World Bank Doing Business 2018 rankings (82 nd globally and fourth in Africa) are middling, and its ranking has dropped over the past decade. The survey also suggests that ease of doing business varies within sub-regions of the country, and that national improvements are possible. South Africa's private sector is relatively dynamic, although firms face a highly unionized labor force, rigid labor laws and, in some industries, sector-wide wage and working condition agreements negotiated between large firms and unions. Such factors arguably tend to protect incumbent jobholders, reduce labor market flexibility, and limit formal sector economic opportunities for the unemployed and poor—thus contributing to the country's chronically high unemployment rates. South Africa has long had a minimum wage in select sectors, but has only recently enacted a general minimum wage law. Sectoral labor agreements have mixed outcomes. They can help firms and industry groups to maintain predictable and stable labor costs and work rules, but often favor the incumbent firms and unions who negotiate them. Oligopolies in some sectors also hinder competition and spur high prices for some locally produced goods. There are also skill and geographical mismatches between labor demand and supplies, and low skill levels in some segments of the labor force. This is, in part, an enduring legacy of population and economic controls and discriminatory education and training patterns under apartheid. Chronically high unemployment may also suggest that the labor pool is under-utilized, whether due to skills deficits or a lack of jobs, which may undercut income earning, spending, demand, and other economic growth potentials. Information and communication (ICT) adoption rates are low and uneven, and education quality ranks poorly in international comparisons, despite large investments in the sector, which has negative impacts on workforce capabilities. Key tools for reversing structural racial disparities are Black Economic Empowerment (BEE) policies, which seek to promote racial equality and economic inclusion using market-based incentives. As a condition of obtaining public contracts, private firms must also comply with BEE requirements, in particular a scorecard-based system ranking firms by factors such as racial inclusiveness in ownership and management, investment in skills development for historically disadvantage persons, and prioritization of commercial ties with other BEE-compliant firms. BEE policies can impose compliance costs on firms and limit hiring choices, and have been criticized in some instances for favoring the interests of middle- and upper-income blacks. The private sector also faces state competition, as state-owned firms enjoy regulatory preferences in some sectors, even though their performance has often been poor. According to the IMF, SOEs play a major role, often with limited competition, in providing key products/services, such as power, telecommunications, and transportation (e.g., ports, airways). Their performance thus affects not only the public finances and the borrowing costs of the whole economy, but also economic growth and job creation through the cost of important inputs for a wide range of businesses and households. […G]enerally, there is a need to allow private firms to compete on a more equal footing with large SOEs. South Africa's sovereign credit ratings are low and have fallen sharply in recent years. Rising public deficits and debt are also a challenge. Other domestic factors hindering growth include social service delivery challenges and unmet infrastructure needs, which undercut productivity potentials and hurt South Africa's attractiveness as an investment destination. Electricity generation deficits and plant maintenance delays have led to periodic rolling power blackouts (see below). The country also has faced several recent droughts, including one that resulted in extreme water shortages in Cape Town, a global tourist destination with a population of 3.7 million people. Continuing water shortage challenges are likely. Ramaphosa has been spearheading an initiative to attract $100 billion worth of new investment over five years. As of October 2018, the government had solicited $55 billion in FDI commitments. Local and foreign firms reportedly pledged $20 billion worth of cross-sectoral investments during the government-led South Africa Investment Conference in late October 2018. This augmented more than $35 billion in prior investment commitments, mostly from China, Saudi Arabia, the UK, and the United Arab Emirates. The government is also continuing a range of efforts to reduce unemployment, poverty, and socioeconomic inequality, to improve education and healthcare, and to unite a geographically and racially divided society. Such actions are guided by the 20-year National Development Plan (NDP). Crafted by a Ramaphosa-headed commission and issued under Zuma, it is supplemented by multiple shorter-term, sector-specific plans. The NDP emphasizes investments in social services and state operational capacities. It fosters efforts to boost employment and incomes, including labor-intensive growth strategies and state investment in large-scale infrastructure, especially in the transport, communications, and power sectors. NDP implementation has been hampered by the poor governance and policy inconsistency under Zuma, the intractability and extensive scope of the country's challenges, and financing limitations. Energy issues—particularly electrical power sector challenges—are a sensitive political topic, as they have the potential to influence the economy and political prospects for the ANC and have in some cases been tied to state capture allegations. Power Sector . Periodic rolling electricity blackouts caused by power generation shortages due to plant maintenance shortfalls and breakdowns are a key energy challenge. They are attributable to multiple factors, including years-long delays and overspending on the construction of two massive new coal-fired plants. Other factors include poor performance by the state-owned national power utility, Eskom. It suffers from massive debt, low credit ratings, and chronic liquidity problems, and has been plagued by reported mismanagement and malfeasance, including in relation to questionable Gupta-related coal and uranium supply deals. This has spurred substantial public and opposition party ire and government criticism, especially when Eskom has requested power rate hikes. Eskom has also drawn criticism for continuing to rely heavily on coal, despite pledging to expand renewable power generation, a government-supported goal. Eskom's generation shortfalls are a key policy challenge because they affect economy-wide productivity, and its $30 billion in state-backed debt hurts the country's sovereign debt rating and ability to borrow. Amidst worsening power shortages, the government plans to fund a three-year, $4.9 billion restructuring of Eskom that is to split it into three state-owned entities focused on generation, transmission and distribution respectively. Eskom had sought the transfer of some Eskom debt to the general public debt ledger, and recently won part of a requested 15% rate increase, despite mining industry opposition. Nuclear Power Generation. South Africa is the only African country with a commercial nuclear power plant. The Zuma administration planned to increase the county's 51,309 MW of power generation capacity by 9,600 megawatts (MW) by 2030 by constructing six to eight new nuclear power plants. It pursued pre-bid negotiations with firms from Russia, France, China, the United States, and South Korea, all countries that had signed bilateral commercial nuclear cooperation agreements with South Africa. The project's estimated cost ranged widely, between $30 billion and $100 billion. Cost and environmental concerns spurred substantial opposition to the plan, as did opacity surrounding pre-bid negotiations with Russia. Due to the lack of concrete cost estimates, the Treasury refused to authorize the release of a formal vendor request for proposals. Leaked details regarding accords with Russia and its Rosatom SOE suggested that a deal would have strongly favored Russian SOE financial interests. Broader concern grew after reports that Shiva Uranium—a firm controversially acquired by the Guptas—was in the running to produce fuel for the plants, amid indications of possible initial procurement irregularities. In April 2017, the High Court invalidated the nascent procurement process on procedural grounds. It also voided bilateral pre-procurement agreements with Russia and broad nuclear technical cooperation agreements with the United States (signed in 1995) and South Korea (signed in 2010). The court's ruling essentially required the government to begin its procurement effort anew. The Ramaphosa administration, while remaining open to a mix of energy source options, has not expressed support for an expansion of nuclear power in South Africa. Russia, however, is actively pressing for a new nuclear power deal with South Africa. Natural Gas. The prospect of significant domestic natural gas production from hydraulic fracturing of natural gas-rich shale (\"fracking\") is also hotly debated. Supporters see natural gas as a less polluting alternative to coal, South Africa's main electricity generation fuel, and local gas production as a way to reduce reliance on energy imports and generate jobs. Opponents, especially farmers, have cited possible contamination and overuse of water resources, notably in the environmentally sensitive semi-desert Karoo region, where most of an estimated 390 trillion cubic feet of recoverable shale gas reserves are located. Such concerns spurred a 2011 moratorium on exploration. It was later lifted, but a 2017 High Court ruling invalidated national fracking regulations. The Ramaphosa administration has pledged to fast-track applications and regulatory requirements to enable new exploration. Mining. Mining sector reform is another focus of debate. In 2017, the Zuma administration issued a draft mining charter—a document setting out industry-wide policy requirements with the aim of increasing black economic participation and benefit. It drew widespread industry concern. The charter would have required renewed compliance with a black mine ownership share quota of 30% if current black owners sold or transferred their shares in a mining asset. It would also have required firms to give partial in-kind ownership rights to mine workers and nearby community groups, and pay them dividends. The Ramaphosa administration revised and later adopted a new charter that allows firms to remain compliant with black ownership requirements once they are met—even if black ownership shares fall below the 30% threshold. It also permits firms to make payment in place of worker and community shares and recover the value of such shares, eliminates dividends for such owners, and requires compliance with BEE regulations for mining firms involved in public procurement transactions. South Africa has been the largest U.S. trade partner in Africa since 2014, though its global significance is relatively moderate. In 2017, it was the 35 th -largest source of U.S. imports and the 43 rd -largest U.S. export destination globally. Bilateral trade in goods in 2017 totaled $13 billion ($5 billion in U.S. exports and $8 billion in U.S. imports), down from a peak of $16.7 billion in 2011, while trade in services in 2017 totaled $4.8 billion ($2.9 billion in U.S. exports and $1.9 billion in U.S. imports). In 2017, the stock of U.S. FDI in South Africa stood at $7.34 billion, and centered on manufacturing (51%), notably of chemicals and food, professional and technical services (9.6%), and wholesale trade (8%). South African FDI stock in the United States totaled $4.1 billion. A U.S.-South Africa Trade and Investment Framework Agreement (TIFA) signed in 2012 facilitates bilateral trade and investment dialogues, and there is a bilateral tax enforcement and cooperation treaty, and a double taxation treaty. South Africa also is eligible for duty-free benefits under the African Growth and Opportunity Act (AGOA, P.L. 106-200 , Title I, reauthorized in 2015 for 10 years under P.L. 114-27 ), but not for special AGOA apparel benefits. Its $2.9 billion in AGOA exports to the United States in 2017 (21% of all such exports) made it the largest non-oil-focused AGOA beneficiary and the second largest overall, although the value of its exports under AGOA has fallen since peaking at $3.6 billion in 2013. An April 2018 U.S. International Trade Commission study, U.S. Trade and Investment with Sub-Saharan Africa: Recent Developments , found potential for significantly greater bilateral trade in a range of goods. During the 2015 AGOA reauthorization debate, various stakeholders raised questions about South Africa's continued AGOA eligibility. Two issues drew particular attention. The first was concern over South Africa's reciprocal trade agreements with other advanced economies, in particular the European Union (EU). Some in the U.S. private sector argued that the agreement places them at a competitive disadvantage vis-à-vis EU firms, as it gives the latter preferential tariff treatment in South Africa. (In contrast, AGOA gives South African firms preferential access to U.S. markets, but does not give U.S. firms reciprocal access to South African markets.) AGOA eligibility criteria include rules on reciprocal third-party agreements, but no country has lost its eligibility under these criteria. The second issue was concern over the large size and advanced character of South Africa's economy—particularly relative to its African peers—which some have argued make it a U.S. competitor in some sectors. South Africa is the only country to make significant use of AGOA in the export of advanced manufactured products, in particular motor vehicles and related parts. In 2017, South Africa's auto exports under AGOA were worth $1.2 billion and comprised over a fourth of all African non-oil exports under the program. Some stakeholders cited these two issues to argue that stricter income requirements were needed to ensure that AGOA benefits target the least-developed countries in Africa, and to encourage South Africa to negotiate a reciprocal U.S. trade agreement. Others contended, conversely, that South Africa's exports of high-value items show that AGOA preferences were working as intended, by helping to improve South Africa's economic development. They also asserted that removing South Africa from AGOA might undermine intra-regional trade, since South Africa is a key trade partner of many other African countries, which AGOA is designed to encourage. While no significant changes were made affecting South Africa's AGOA eligibility, these issues may continue to draw congressional scrutiny. South African import restrictions on certain agriculture products also temporarily threatened its AGOA eligibility—both before and after the 2015 AGOA reauthorization—and led to a bilateral trade dispute. It focused on South African anti-dumping duties and other restrictions on imports of certain U.S. poultry, pork, and beef products. The dispute was resolved in 2016, when South Africa lifted these restrictions following intensive bilateral engagement initiated under an out-of-cycle 2015 review of South Africa's eligibility. The Trump Administration's use of Section 232 of the Trade Expansion Act of 1962 (P.L. 87-794, as amended) to impose tariffs have roiled bilateral trade ties. In March 2018, the Trump Administration imposed additional U.S. tariffs on steel (25%) and aluminum (10%) under Section 232. In 2017, U.S. imports from South Africa of affected steel and aluminum products were worth $279 million and $340 million, respectively. In September, several Members of Congress requested an exemption from these tariffs for South Africa, which had unsuccessfully sought their removal. In October, the South African government reported that the Trump Administration had granted Section 232 duty exclusions for U.S. imports of 161 aluminum and 36 steel products, largely allaying South African concerns. The action came in response to U.S. firms' requests for these exclusions, which are for products not produced in the United States in sufficient amounts or of satisfactory quality, according to the Commerce Department. An additional U.S. Section 232 investigation on autos and auto parts could result in the imposition of additional U.S. tariffs on such products—reportedly up to 25%—including from South Africa. In July 2018, a South African government representative argued against such tariffs on a variety of grounds at a U.S. Commerce Department hearing on the matter. On February 17, 2019, the Commerce Department submitted a report on its investigation to President Trump. He has 90 days to act on recommendations in the report, which were not publicly disclosed. Other issues with implications for South Africa's AGOA participation include intellectual property concerns set out by the U.S.-based International Intellectual Property Alliance (IIPA), regarding South Africa's 2017 Copyright Amendment Bill. The IIPA testified at an August 2018 U.S. Trade Representative annual AGOA eligibility review hearing that the bill would weaken IPR holders' rights, make South Africa noncompliant with AGOA and other international IPR agreements, impose burdens on IPR holders, and disincentivize intellectual property development. South Africa's government, academics, and the U.S. and Europe-based Computer and Communications Industry Association disputed such claims. The National Assembly passed the bill in late 2018 and it now must be considered by the upper house. South Africa's move to expropriate land without compensation could also potentially affect South Africa's AGOA eligibility, although there are no overt signs of such a shift. A range of other issues with implications for U.S. investment in South Africa are addressed in the State Department's annual Investment Climate Statements publication. U.S.-South Africa bilateral relations are generally friendly, although there are periodic differences over foreign policy issues. While there is often broad U.S.-South African accord on selected multilateral issues (e.g., nuclear proliferation), African regional development goals and, in some cases, responses to political or military crises in the region, in multilateral fora, South Africa backs developing country positions that are at times inconsistent with stated U.S. interests. South Africa has also criticized some U.S.-backed international interventions (e.g., in Iraq and Libya) and taken stances toward Cuba, the Palestinian cause, and Iran that are at odds with U.S. positions. It has also forged increasingly close economic ties with China. Such ties may be viewed negatively by the Trump Administration; it has alleged that Chinese activities in Africa are \"corrupting elites, dominating extractive industries, and locking countries into unsustainable and opaque debts and commitments.\" Sub-Saharan Africa is a key focus of South African foreign policy. Its regional activities are multifaceted, but focus on investment; peacekeeping, stabilization, and conflict mediation; and the economic and other development priorities of the African Union (AU) and other sub-regional organizations (e.g., the Southern African Development Community or SADC). It also often helps coordinate or represent African views in multilateral fora on such issues as climate change, African peace and security issues, U.N.-African cooperation, and developing country priorities. South Africa is serving as a non-permanent member of the U.N. Security Council during 2019 and 2020; some analysts see this as affording South Africa with an opportunity to revitalize its international role following what some see as a period of foreign policy drift under Zuma. Regional Efforts. South Africa played key roles in the formation of the African Union (AU) and the establishment of the New Partnership for Africa's Development (NEPAD), the AU's strategic socioeconomic development policy framework. It hosts the NEPAD Planning and Coordinating Agency, now being transformed into the permanent AU Development Agency. In late 2018, South Africa ratified the AU-backed African Continental Free Trade Area (AfCFTA), an emergent free trade area intended to increase intra-African trade among as many as 49 AU member states by sharply reducing tariffs. Former South African Foreign Affairs Minister Nkosazana Dlamini-Zuma served as Chair of the African Union Commission from 2012 to 2017, although her tenure received mixed reviews. President Ramaphosa is currently the First Vice Chairperson of the AU, which he is slated to chair in 2020. Migration, Conflict Resolution, and Peacekeeping . South Africa hosts roughly 273,000 refugees, asylum-seekers, stateless persons, and other populations of international humanitarian concern, as well as many economic migrants. Most of these populations are from Africa. South Africa has repeatedly sought to resolve the political crises and halt or mitigate armed conflicts that contribute to these and other population flows and humanitarian emergencies across the African continent. It has been particularly active in this respect in southern Africa, on behalf of SADC—as in Zimbabwe, after violent, internationally questioned elections in 2008, and in Lesotho, in response to repeated periods of political instability. Since 2009, former South African President Thabo Mbeki has chaired the African Union High Level Implementation Panel on Sudan and South Sudan (AUHIP). South Africa has also played mediating roles in conflicts in Cote d'Ivoire, the Democratic Republic of the Congo (DRC), Burundi, and elsewhere. South Africa has also long deployed uniformed personnel to U.N. peacekeeping operations and contributed troops to periodic AU military interventions. As of January 2019, there were 1,171 South African troops, police, and experts serving with U.N. peacekeeping missions in South Sudan, Darfur, Sudan, and DRC. In DRC, South Africa helped spearhead the formation of the Force Intervention Brigade, a special U.N. peacekeeping unit authorized to carry out contingent offensive operations in coordination with the DRC military to counter armed groups in DRC's highly unstable east. South Africa's Foreign A id and U.S. Cooperation . To advance its policy goals across the continent, South Africa is endeavoring to establish a foreign aid agency, the South African Development Partnership Agency (SADPA), but progress has been slow and limited since the plan was announced in 2009. SADPA is intended to coordinate South Africa's foreign aid, with a focus on other African countries regarding democracy and good governance, conflict prevention, development, and other ends. These are all priorities of South Africa's current foreign aid mechanism, the African Renaissance Fund (ARF), which the Department of International Relations and Co-operation administers, along with multilateral agency and initiative funding. SADPA and a SADPA Fund would replace the ARF. Multiple other state agencies also administer foreign aid programs, although reporting on aid levels and program activities is fragmentary. Since 2005, the United States has partnered with South Africa under the USAID-administered Trilateral Assistance Program (TAP). TAP seeks to promote U.S. regional goals by leveraging South Africa's \"democratic systems, regulatory practices, and innovative scientific research\" to tackle development, natural disaster, and security challenges in Africa. It provides training, exchange programs, and funding to support South Africa's provision of technical development assistance to other African countries. TAP projects have addressed such issues as constitution-making in South Sudan, food security in Mozambique, adjudication of gender-based violence in Malawi and Angola, and climate change responses and water conservation in southern Africa. South Africa established diplomatic relations with China in 1998, after severing ties with Taiwan, and the two countries maintain close political, trade, and investment ties. China is South Africa's largest trade partner. Bilateral relations take place under a 2010 comprehensive strategic partnership pact and a host of subsidiary cooperation agreements. The most recent such agreements were signed in September 2018 during a heads of state summit of the Forum on China-Africa Cooperation (FOCAC). Held in Beijing, it was co-hosted by China and South Africa, which hosted the prior FOCAC summit in 2015. The 2018 summit followed the 10 th summit of the Brazil, Russia, India, China, and South Africa (BRICS) cooperation group, hosted by South Africa July 2018. In 2014, the BRICS established the New Development Bank (NDB) to finance infrastructure and sustainable development efforts, which include ongoing South African projects worth $680 million, focusing on clean energy development, transport infrastructure, and renewable energy transmission. During a state visit to China by President Ramaphosa alongside the FOCAC 2018 summit, China reportedly agreed to provide $10 billion in financing for South Africa, adding to $14.7 billion in investments pledged by China during the BRICS summit. This financing is to fund a South African state economic stimulus package and infrastructure and industrial development projects. The government has not made public the terms and conditions of the deal; the opposition Democratic Alliance (DA) has pledged to request these details. In October 2018, the DA also threatened to sue for the details of a separate R33 billion ($2.2 billion) China Development Bank (CDB) loan to the state utility, ESKOM. The DA fears that these loans will increase South Africa's indebtedness to China. The transparency of Chinese loans has also drawn concern. Other notable China-South African business transactions include a May 2018 commitment by nine large Chinese firms, including SOE affiliates, to invest $10 billion in a South African special economic zone, and a possible $900 million purchase of Chevron's South Africa and Botswana assets by Sinopec, a Chinese oil and gas SOE. In 2016, Chinese auto SOE Beijing Automotive International Corp. invested $759 million in a vehicle-production facility. As of late 2017, Chinese investment stock in South Africa reportedly exceeded $25 billion. South Africa maintains cordial relations with multiple Middle East countries, including Iran, Saudi Arabia, and the United Arab Emirates (UAE). These ties have recently attracted attention in light of reported pledges by the latter two countries to invest $10 billion each in South Africa, and because South Africa's Denel arms manufacturing SOE could be the target of these investments. South Africa has exported arms to Saudi Arabia and the UAE in recent years, and the Saudi military has reportedly used those arms in attacks in the ongoing war in Yemen. Such attacks have killed or injured thousands of Yemeni civilians, and analysts have suggested that these exports may violate South African human-rights-related controls on arms sales. Closer relations with Riyadh have the potential to affect long-standing South African relations with Iran—which take place through a bilateral Joint Commission of Cooperation created in 1995 and multiple cooperative agreements—as well as South Africa's reported role as a back-channel intermediary between Iran and Saudi Arabia regarding the war in Yemen. South Africa experienced a rise in alleged corruption and deterioration in economic performance during the Zuma administration. Since taking office in early 2018, President Ramaphosa has taken steps to reverse these trends. Multiple inquiries into public sector corruption and malfeasance are under way, along with efforts to reform SOEs. The ultimate success of these efforts will depend on the degree to which public sector agency performance improves, guilty parties are successfully prosecuted, and management and regulatory reforms are implemented. Such efforts are likely to be politically challenging for Ramaphosa, since they may threaten the influence of some top ANC party members and state office holders with ties to former president Zuma, who retains clout within the ANC. Ramaphosa also faces pressure from the political left on issues such as land reform and planned expropriation of land. He will have to balance such pressures with the demands of private property owners and investors. His relative power to pursue policy and institutional reforms will also depend, in part, on the success of the ANC in the May 2019 elections and his degree of influence within the party. Reversing a long-anemic pattern of growth will also likely prove challenging. Ramaphosa has made some progress, eliciting substantial investment pledges, initiating a youth employment scheme, and pushing reforms that may allow SOEs to contribute substantially more to economic growth. Many of the reasons for the weak growth, however, are structural, long-term phenomena that are not amenable to quick fixes. Nevertheless, South Africa's economy is large and diversified, and may have the capacity to expand moderately in the coming years, notably if the large pool of unemployed can be better integrated into the economy. If South Africa can make positive economic progress, there is potential for increased international trade, including trade with the United States—although additional U.S. trade restrictions, particularly potential Section 232 tariffs on autos and parts, could hinder trade growth. Because of its market size and economic position, South Africa is well placed to grow as a key U.S. investment and export destination in Africa. This may also be aided by ongoing U.S. government and private sector efforts to expand trade and investment ties—including by tapping opportunities created by South Africa's long-term infrastructure investment efforts. There is also possible scope for greater U.S.-African cooperation regarding development in South Africa and the sub-continent more broadly, as demonstrated by South Africa's role as a strategic partner under the Feed the Future and TAP programs. USAID's Power Africa program is based in South Africa and could potentially play a role in helping South Africa to address its electrical sector challenges. South Africa could also provide a source of partnership and potential investment targets for the emergent U.S. International Development Finance Corporation. While there have been occasional strains in U.S.-South African relations on some international issues, South Africa's two-year membership on the U.N. Security Council could also provide a springboard for greater bilateral cooperation on international matters of interest to both countries.", "summary": "South Africa is a majority black, multiracial country of nearly 58 million people. It has cordial relations with the United States, notwithstanding some occasional strains, and is the largest U.S. trade partner in Africa. South African President Cyril Ramaphosa is spearheading efforts to address years of weak economic growth and multiple corruption scandals under his predecessor, Jacob Zuma. These issues helped spur Zuma's resignation in early 2018—prior to a likely vote of no confidence by parliament—and led to the election of Ramaphosa, who was selected to lead the African National Congress (ANC) party in late 2017. If the ANC wins a majority in forthcoming elections in May 2019, as polls suggest is probable, he will likely remain president. Corruption linked to Zuma and a network of business and political associates was reportedly so systematic that it was dubbed \"state capture.\" Multiple efforts to address this problem are underway, including a high-profile commission of judicial inquiry. Zuma is also being tried on charges linked to a 1990s-era arms procurement scandal. Broader challenges include high levels of poverty, social inequality, and unemployment, and unequal access to public services. Such problems disproportionately affect the generally poor black majority, the main victims of apartheid—a codified system of racial bias that ended in 1994, when the first universal suffrage elections were held. Unequal access to land is a particularly sensitive issue. State land redistribution efforts have sought to ensure greater access to land by blacks and other historically disadvantaged groups, but progress has been slow. In 2018, pressure to speed this process prompted the government to launch an ongoing effort to amend the constitution to permit uncompensated land expropriation. South Africa also struggles with violent crime, labor unrest, and protests over public service delivery and corruption. South Africa has the most diversified and industrialized economy in Africa, but has suffered years of anemic growth attributable to a range of international and domestic factors. The Ramaphosa administration has made economic growth a priority, and is pursuing a range of efforts to reduce unemployment, poverty, and socioeconomic inequality; improve education and healthcare; and unite a socioeconomically, geographically, and racially divided society. It is also seeking to attract $100 billion in new investment over five years and has elicited at least $55 billion to date. Congress played a leading international role in efforts to end apartheid, although some South African decisionmakers appear to harbor abiding resentments toward the United States as a result of the Reagan Administration's approach to achieving this goal and its posture toward the ANC. Contemporary U.S.-South African ties are cordial, based on shared democratic values and often-concordant views on regional development goals. The two countries maintain a bilateral strategic dialogue, and the United States provides substantial aid to South Africa, primarily to combat the country's HIV/AIDS epidemic. U.S.-South African views regularly diverge, however, on international policy matters (e.g., Palestinian statehood, and responses to Iran and Venezuela). There have also been periodic trade frictions; in 2015-2016 the two countries had a poultry and meat trade dispute and in 2018 the Trump Administration imposed tariffs on U.S. imports of steel and aluminum, including from South Africa. South Africa was later exempted from many of these tariffs, but prospective U.S. tariffs on autos and auto parts could spur renewed strains. The Trump Administration has not otherwise pursued any major changes in the bilateral relationship. An August 2018 tweet by President Trump alleging that South Africa's government was seizing white-owned farmland and that large numbers of farmers were being killed, however, drew criticism from the South African government. U.S.-South African relations arguably have the potential to deepen, although such an outcome might require dedicated efforts by the two sides. If President Ramaphosa demonstrates concrete progress in reasserting the rule of law and turning around the ailing economy, following substantial deterioration in these areas under former President Zuma, the country may become more attractive as a U.S. partner. Greater cooperation and collaboration can be envisioned regarding bilateral trade and investment, responses to political-military and development challenges in Africa, educational and cultural exchange, and technical cooperation in multiple areas. In recent years, South Africa-related congressional activity has mainly focused on U.S. healthcare assistance, trade issues, and consultations during periodic congressional travel to the country. Given South Africa's economic and political influence with in Africa and on African and developing country positions in multilateral contexts—which do not always dovetail with those of the United States—some Members of Congress may see a need to expand the scope and broaden the focus of congressional and other U.S. engagement with South Africa.", "document_type": "crs"}
{"report": "Congress enacted the Coastal Zone Management Act (CZMA; P.L. 92-583 , 16 U.S.C. §§1451-1466) in 1972 and has amended the act 11 times, most recently in 2009. Congress deliberated and passed the act at a time when concern about environmental degradation spurred passage of many of the nation's environmental statutes. CZMA sets up a national framework for states and territories to consider and manage coastal resources. If a state or territory chooses to develop a coastal management program and the program is approved, the state or territory (1) becomes eligible for several federal grants and (2) can perform reviews of federal agency actions in coastal areas (known as federal consistency determination reviews ). Since 1972, many of the trends that called congressional attention to coastal management have continued. Over a third of the U.S. population lived in shoreline counties in 2010, with more expected by 2020 as people continue to migrate to coastal areas to take advantage of economic opportunities, retire, and pursue recreational interests. Coastal areas are also home to economic sectors such as fishing, transportation, defense, offshore energy, and tourism and to natural resources such as estuaries, beach systems, and wetlands. The shoreline likely will continue to be affected by pressures to develop and preserve areas, large-scale events (e.g., hurricanes and tsunamis), and long-term changes (e.g., relative sea level, changes in rainfall, wetland loss, and increased temperatures). In addition to responding to these pressures, Congress may continue to consider whether CZMA is being effectively implemented and whether changes should be made to CZMA grant programs. This report provides a review of CZMA with a specific focus on the National Coastal Zone Management Program (NCZMP). The report discusses how and why states and territories may choose to participate in the national program (namely to access federal grant programs and undertake federal consistency determination reviews) and recent issues for Congress. The appendixes include information about amendments to CZMA over time and section-by-section summaries of current CZMA provisions. Congress enacted CZMA \"to establish a national policy and develop a national program for the management, beneficial use, protection, and development of the land and water resources of the nation's coastal zones.\" Although CZMA has been amended 11 times ( Appendix A ), the national policies as declared by Congress have stayed relatively consistent over time. They currently include the following six policies: 1. to preserve, protect, develop, and, if possible, restore or enhance coastal resources; 2. to encourage and assist states and territories to effectively exercise their development and management responsibilities in the coastal zone, giving full consideration to ecological, cultural, historic, and aesthetic values as well as the needs for compatible economic development; 3. to encourage the preparation of special area management plans to protect significant natural resources, support reasonable coastal-dependent economic growth, and improve protection of life and property; 4. to encourage the participation and cooperation of the public, state and local governments, interstate and other regional agencies, and federal agencies to carry out CZMA; 5. to encourage coordination and cooperation with and among appropriate federal, state, and local agencies, and international organizations, in collection, analysis, and dissemination of coastal management information and research; and 6. to respond to changing circumstances affecting the coastal environment and resources and their management by encouraging states and territories to consider ocean uses that may affect the coastal zone. Under CZMA, each level of government plays a role in coastal management. At the federal level, the National Oceanic and Atmospheric Administration's (NOAA's) Office for Coastal Management (OCM) in the Department of Commerce (DOC) implements CZMA's national policies and provisions. To participate in the NCZMP, states must adhere to guidelines as set in statute and related regulations. States and territories, however, determine the details of their coastal management programs (CMPs), including the boundaries of their coastal zones, issues of most interest to the state, and policies to address these issues, among other factors. Local governments implement the approved CMPs, often through land use regulations. OCM administers CZMA provisions under four national programs: NCZMP, National Estuarine Research Reserve System (NERRS), and Digital Coast. This report focuses on the NCZMP. The NCZMP encourages interested coastal states and territories (hereinafter referred to as states ) to work with NOAA to develop and implement coastal zone management programs. To join, states must develop CMPs pursuant to CZMA and federal regulations. States that join the NCZMP are eligible for several federal grants and have the right to review federal actions for consistency with state coastal policies. If a state chooses to become part of the NCZMP, it must develop a CMP pursuant CZMA Section 306 and NOAA regulations. CMPs must contain \"a broad class of policies for ... resource protection, management of coastal development, and simplification of governmental processes.\" The Secretary of Commerce (the Secretary) must conclude that the state has completed certain tasks (e.g., included required program elements and coordinated with local and regional agencies) to approve the CMP. Once the Secretary approves the state's CMP, the state is eligible to receive the NCZMP's benefits and is referred to as a participant of the national program. The Secretary is expected to evaluate participants at least once every three years to determine whether they are working toward their stated plans. Thirty-five states and territories (including states surrounding the Great Lakes, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands) are eligible to participate. Although all 35 eligible states and territories have at some point chosen to participate, 34 are currently part of the NCZMP. Participation in the NCZMP provides various benefits to participants, including access to several federal grant programs and the right to review federal actions for consistency with state coastal policies. These provisions have been mainstays of CZMA since its development and enactment. Coastal states or territories with approved CMPs are eligible to apply for federal grants for coastal zone management. Grant programs have changed over time to reflect congressional priorities and have included grants for program development, coastal energy impacts, and research and technical assistance. Currently, CZMA authorizes the Secretary of Commerce to provide grants related to program administration (Section 306), coastal resource improvement (Section 306A), coastal and estuarine land conservation (Section 307A), coastal enhancement objectives (Section 309), technical assistance (Section 310), and coastal nonpoint pollution control (Section 6217) ( Table 1 ). Since 1972, NOAA has allocated over $2 billion in coastal zone management-related grants to eligible coastal states and territories ( Figure 1 ). NOAA disbursed the majority of the funds under Sections 306 and 306A grant programs. All 35 coastal states and territories received a portion of the funds since 1972, including Alaska, which is not currently a part of the NCZMP. States have received amounts ranging from $13 million to over $106 million in grant funding, depending on factors such as how long the state has been a part of the NCZMP, the state's size and population, and the extent of its success in competitive grant programs. In FY2017, Congress appropriated $85 million to NOAA for coastal management grants. Of that total, NOAA allocated nearly $58 million for Section 306 grants, with smaller amounts awarded for Sections 306A, 309, and 310 grants or withdrawn via government-wide rescissions and Department of Commerce NOAA assessments. The current CZMA grant program authorizations of appropriations have expired, but Congress has continued to fund the programs (see \" Authorization of Appropriations for CZMA Grant Programs \" for a longer discussion of the topic). CZMA Section 307 requires federal actions that have reasonably foreseeable effects on coastal uses or resources to be consistent with the enforceable policies of a participant's approved CMP. These actions may occur in the state's approved coastal zone or in federal or out-of-state waters (which may cause interstate coastal effects). Federal agencies or applicants proposing to perform these federal actions must submit a consistency determination to the potentially affected participant to consider whether the actions are consistent with state coastal policies. Legislation and NOAA regulation have defined several terms related to consistency review, including the following: Coastal zone is defined as the coastal waters and adjacent shorelands, strongly influenced by each other, and includes islands, transitional and intertidal areas, salt marshes, wetlands, and beaches. The zone extends in Great Lakes waters to the international boundary and in other areas seaward to the outer limit of the state title and ownership under various acts, such as the Submerged Lands Act. The zone extends inland from the shorelines only to the extent necessary to control shorelands and to control those geographical areas that are likely to be affected by or vulnerable to sea level rise. Identification of the coastal zone boundaries is a required part of an approved CMP. Effect on coastal use or resource refers to \"any reasonable foreseeable effect on any coastal use or resource resulting from a federal agency activity or federal license or permit activity,\" including federal assistance to state and local governments. Effects may be environmental or impact coastal use; may be direct or secondary; and may result from the incremental impact of past, current, or future actions. The determination of whether the action will have a reasonably foreseeable effect is also known as the effects test. Enforceable policies are \"state policies which are legally binding through constitutional provisions, laws, regulations, land use plans, ordinances, or judicial or administrative decisions, by which a state exerts control over private and public land and water uses and natural resources of the coastal zone.\" Federal actions include federal agency activities, federal license or permit activities, outer continental shelf plans, and federal assistance to state and local governments. NOAA requires participants to submit lists of federal actions that are subject to consistency determination reviews and their general geographic areas. Interstate coastal effect refers to any reasonably foreseeable effect resulting from a federal action occurring in one state on any coastal use or resource of another state that has an approved CMP. Effects may be environmental or impact coastal use; may be direct or secondary; and may result from the incremental impact of past, current, or future actions. A state must identify a list of federal actions in other states for approval by NOAA to perform interstate consistency determination reviews. Participant reviews of federal actions are context-specific and depend on the location and action in question, with different rights and responsibilities assigned to the federal agency, applicants, and participants involved. Details of the action—such as which party determines the foreseeable effects, the length of the participant review period, the effect of a participant's objection to the action, and the available conflict resolution or appeals options—depend on the federal action in question ( Table 2 ). Resolutions to participant objections to consistency determinations depend on the federal action in question, as follows: Federal agency activities and development projects: If a participant objects to a federal agency's consistency determination, the participant may request mediation from the Secretary of Commerce or OCM. Regardless of the mediation outcomes, the federal agency may proceed with its activities or development projects if the agency provides a legal basis for being consistent to the maximum extent practicable , or the agency has concluded that its proposed action is fully consistent with the participant's enforceable policies. Federal license or permit activities, outer continental shelf plans, and federal assistance to state and local governments: If the participant objects to the consistency certification, the federal agency cannot authorize the action unless the Secretary of Commerce overrides the objection. The applicant may appeal to the Secretary, who then will review the administrative record and may override a participant's objection if he or she finds that the action is consistent with the objectives of CZMA or is necessary for national security. For example, in 2008, the Secretary of Commerce overrode Maryland's objection to an applicant's consistency determination, finding that \"the project [was] consistent with the objectives of CZMA.\" According to NOAA, participants review thousands of federal consistency determination each year, with more than half of the reviews being for federal license or permit activities. Remaining reviews are, in descending order, federal agency activities and development projects, federal financial assistance activities, and outer continental shelf plans. Over time, participants have concurred with 93% to 95% of the federal consistency determinations they have reviewed. The high concurrence rate may indicate that participants, federal agencies, and applicants often have negotiated project modifications or alternatives before the formal review process. Since the first CMP was approved in 1978, 45 consistency decisions have been subject to secretarial appeals, most recently in 2014 ( Figure 2 ). Of the 45 appeals, the Secretary overrode participant objections in 14 cases and agreed with the participant in the other 31 cases. An additional 65 appeals have been settled or withdrawn after they reached the secretarial level but before a determination was made, and 33 additional requests for appeals were dismissed or overridden on procedural grounds. As of April 2018, there were no appeals pending before the Secretary of Commerce. Congress may continue to consider the effects of natural and man-made changes on the coast, the effectiveness of CZMA implementation, and the expired CZMA grant program authorizations of appropriations. These concerns have been considered in previous Congresses and/or have been recently raised by government agencies and various coastal stakeholders. Congress may continue to examine CZMA in light of continued population and infrastructure growth along the coast, as well as coastal hazards such as flooding and erosion. According to the 2010 census, coastal shoreline counties were home to over 123 million people (39% of the U.S. population), and were expected to grow by another 10 million people by 2020. The ocean and Great Lakes economy accounted for 2.3% of total employment and contributed $320 billion to the total U.S. gross domestic product in 2015. Much of the population and infrastructure growth has occurred in shoreline communities amid ecosystems such as beaches, reefs, sea grasses, wetlands, estuaries, and deltas. The combination of built and natural systems has been and likely will continue to be affected by changes in sea level (and its impacts, such as higher tides, greater storm surge, saltwater intrusion, erosion, etc.), local rainfall, increasing water and air temperatures, and ocean acidification, among other factors. Several bills to amend CZMA would have addressed some of these changes. In the 115 th Congress, Members proposed bills focused on climate change preparedness or adaptation (e.g., H.R. 3533 and H.R. 4426 ) and \"working waterfronts\" (e.g., H.R. 1176 ). Other proposals would have expanded CZMA grant programs to locations (the District of Columbia, e.g., S. 3146 and H.R. 2540 ) and groups (Indian tribes, e.g., H.R. 2607 ) currently not eligible to apply to the grant programs. In previous Congresses, other bills proposed additional grant programs related to offshore activities, such as renewable energy siting surveys (e.g., H.R. 1690 , 111 th Congress), responses to oil spills and other disasters related to outer continental shelf energy activity (e.g., H.R. 3757 , 112 th Congress), aquaculture siting (e.g., H.R. 2046 , 104 th Congress), harmful algal blooms (e.g., H.R. 4235 , 105 th Congress), and Great Lakes restoration (e.g., S. 2337 , 108 th Congress). Some scholars have argued for substantial revision or improvements to CZMA to account for changes along the coast. Congress may examine how NOAA has implemented CZMA and whether changes to the agency, the law, or the law's implementation are necessary. The effectiveness of CZMA implementation, specifically the NCZMP, has been evaluated since the law's enactment by a variety of entities, including the Department of Commerce inspector general, the Office of Management and Budget, the Government Accountability Office (GAO), and scholars. Evaluations have noted a range of issues, from monitoring and measuring the success of the program as a whole to issues concerning specific grant programs. GAO reported several issues with NOAA's implementation of CZMA and program evaluation in a 2014 report, including limitations to the coastal zone management performance measurement system, weaknesses in NOAA's method for selecting stakeholders for state program evaluations, and the agency's limited use of collected performance data. NOAA agreed with the recommendations. It is unclear whether NOAA has completed changes to address GAO's recommendations fully. In a separate 2016 study, GAO surveyed state coastal zone managers about the actions NOAA was taking under CZMA to support state efforts to make marine coastal ecosystems more resilient to climate change. GAO found that state coastal zone managers \"generally had positive views of the actions NOAA [was] taking.\" Some have argued that the implementation of some CZMA programs has been inadequate. For example, some have questioned whether Section 6217 provisions have been properly implemented. Section 6217 of the Coastal Zone Reauthorization Amendments Act ( P.L. 101-508 ) amended CZMA to establish the Coastal Nonpoint Pollution Control Program (CNPCP). The CNPCP requires coastal states with approved CMPs to reduce polluted runoff to coastal waters through coastal nonpoint pollution control programs that include specific land-based measures. NOAA and the Environmental Protection Agency (EPA) jointly administer the CNPCP. Under Section 6217(c)(3), participants that fail to submit \"approvable programs\" lose a portion of their allotted funding under CZMA Section 306. Most participants received conditional approval between 1997 and 1998, and the majority have since received final approval. Several states have yet to receive final approval, including Alabama, Hawaii, Illinois, Indiana, Louisiana, Michigan, Mississippi, Ohio, Oregon, Texas, and Washington. In 2009 and 2016, a private organization sued NOAA and EPA for continuing to grant funds to Oregon and Washington, respectively. According to NOAA, the agency and EPA currently are working with the conditionally approved states to address the programs' remaining conditions. Although Congress has continued to appropriate funding for CZMA grant programs, the program's authorizations of appropriations have expired. Current CZMA coastal zone management grant programs were last authorized for appropriations in the following years: Section 306 (Administrative Grants): FY1999; Section 306A (Coastal Resource Improvement Grants): FY1999; Section 307A (Coastal and Estuarine Land Conservation Program): FY2013; Section 309 (Coastal Zone Enhancement Grants): FY1999; and Section 6217 (Coastal Nonpoint Pollution Control Program): FY1995. Since 1995, two pieces of legislation have been enacted to reauthorize appropriations for a CZMA grant program ( P.L. 104-150 in 1996, which reauthorized appropriations for Sections 306, 306A, and 309 grant programs, and P.L. 111-11 in 2009, which established and authorized appropriations for the Section 307A grant program). Introduced pieces of legislation have proposed to reauthorize and increase appropriations for Sections 306, 306A, and 309 grant programs (e.g., S. 1142 in the 104 th Congress and S. 3038 in the 114 th Congress) or add additional authorizations for new grant programs (e.g., H.R. 3533 in the 115 th Congress and H.R. 1690 in the 111 th Congress). Congress appropriated $75 million to the NCZMP for \"coastal zone management grants\" in FY2018, despite the expired authorizations of appropriations. In FY2019, as in FY2018, NOAA has proposed to eliminate all coastal management grants. According to the FY2019 budget proposal, NOAA would \"continue to support states' participation in the National CZM program by reviewing and supporting implementation of states' management plans, supporting Federal consistency reviews, and providing technical assistance services.\" Some stakeholders have contended that financial assistance to states from the NCZMP is important and more funding is necessary. For example, in a 2016 GAO survey, state coastal zone managers stated that \"financial assistance provided by NOAA [was] critical\" and that \"the amount of financial assistance available [was] insufficient to address states' needs in implementing projects.\" NOAA officials also have stated that financial assistance for coastal zone management is in high demand. For example, the NOAA Regional Coastal Resilience grant program, administered under Section 310, received 132 applications requesting $105 million in FY2015; $4.5 million was available for grants. Others argue that funding should not be appropriated to the grant programs, as noted above, making the authorizations for appropriations no longer necessary. Appendix A. Coastal Zone Management Act of 1972 (CZMA) and Its Amendments Appendix B. Section-by-Section Summaries", "summary": "Congress enacted the Coastal Zone Management Act (CZMA; P.L. 92-583, 16 U.S.C. §§1451-1466) in 1972 and has amended the act 11 times, most recently in 2009. CZMA sets up a national framework for states and territories to consider and manage coastal resources. If a state or territory chooses to develop a coastal zone management program and the program is approved, the state or territory (1) becomes eligible for several federal grants and (2) can perform reviews of federal agency actions in coastal areas (known as federal consistency determination reviews). Each level of government plays a role in coastal management under CZMA. At the federal level, the National Oceanic and Atmospheric Administration's (NOAA's) Office for Coastal Management (OCM) in the Department of Commerce implements CZMA's national policies and provisions. OCM administers CZMA under several national programs; the National Coastal Zone Management Program (NCZMP) is the focus of this report. To participate in the NCZMP, states and territories (hereinafter referred to as states) must adhere to guidelines set out in CZMA and related regulations. States determine the details of their coastal management programs (CMPs), including the boundaries of their coastal zones, issues of most interest to the state, and policies to address these issues, among other factors. Local governments then implement the approved CMPs, often through land use regulations. The Secretary of Commerce must approve state CMPs. Once the Secretary approves a state's CMP, the state is eligible to receive the NCZMP's benefits and is referred to as a participant in the program (16 U.S.C. §1455). Participation in the NCZMP provides several advantages to participants, including eligibility for federal grant programs and the right to review federal actions for consistency with state coastal policies. Thirty-five states and territories (including states surrounding the Great Lakes, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands) are eligible to participate. Although all 35 eligible states have at some point chosen to participate, 34 are currently part of the NCZMP. Since 1972, NOAA has allocated over $2 billion in coastal zone management-related grants to eligible coastal states. States have received amounts ranging from $13 million to over $106 million in grant funding, depending on factors such as how long the state has been a part of the NCZMP, the state's size and population, and extent of the state's applications to grant programs. CZMA consistency provisions (Section 307) require federal actions that have reasonably foreseeable effects on coastal uses or resources to be consistent with the enforceable policies of a participant's approved CMP. These actions may occur in the state's approved coastal zone or in federal or out-of-state waters (which may cause interstate coastal effects). Federal agencies or applicants proposing to perform these federal actions must submit a consistency determination to the potentially affected participant, certifying that the actions are consistent with state coastal policies and providing participants the opportunity to review their determinations (16 U.S.C. §1456). The 116th Congress may consider changes to CZMA. These changes may address issues such as growing population and infrastructure needs and changing environmental conditions along the coast, questions about the effectiveness of CZMA implementation, and expired authorization of appropriations for CZMA grant programs. Some of these concerns were addressed in proposed legislation in the 115th Congress, such as legislation to expand grant programs to cover more topics and affected groups, and may be addressed in the 116th Congress.", "document_type": "crs"}
{"report": "The Federal Housing Administration (FHA) is an agency of the Department of Housing and Urban Development (HUD) that insures private mortgage lenders against the possibility of borrowers defaulting on certain mortgage loans. If a mortgage borrower defaults on a mortgage—that is, does not repay the mortgage as promised—and the home goes to foreclosure, FHA is to pay the lender the remaining amount that the borrower owes. FHA insurance protects the lender, rather than the borrower, in the event of borrower default; a borrower who defaults on an FHA-insured mortgage will still experience the consequences of foreclosure. To be eligible for FHA insurance, the mortgage must be originated by a lender that has been approved by FHA, and the mortgage and the borrower must meet certain criteria. FHA is one of three government agencies that provide insurance or guarantees on certain home mortgages made by private lenders, along with the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA). Of these federal mortgage insurance programs, FHA is the most broadly targeted. Unlike VA- and USDA-insured mortgages, the availability of FHA-insured mortgages is not limited by factors such as veteran status, income, or whether the property is located in a rural area. However, the availability or attractiveness of FHA-insured mortgages may be limited by other factors, such as the maximum mortgage amount that FHA will insure, the fees that it charges for insurance, and its eligibility standards. This report provides background on FHA's history and market role and an overview of the basic eligibility and underwriting criteria for FHA-insured home loans. It also provides data on the number and dollar volume of mortgages that FHA insures, along with data on FHA's market share in recent years. It does not go into detail on the financial status of the FHA mortgage insurance fund. For information on FHA's financial position, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund) . The Federal Housing Administration was created by the National Housing Act of 1934, during the Great Depression, to encourage lending for housing and to stimulate the construction industry. Prior to the creation of FHA, few mortgages exceeded 50% of the property's value and most mortgages were written for terms of five years or less. Furthermore, mortgages were typically not structured to be fully repaid by the end of the loan term; rather, at the end of the five-year term, the remaining loan balance had to be paid in a lump sum or the mortgage had to be renegotiated. During the Great Depression, lenders were unable or unwilling to refinance many of the loans that became due. Thus, many borrowers lost their homes through foreclosure, and lenders lost money because property values were falling. Lenders became wary of the mortgage market. FHA institutionalized a new idea: 20-year mortgages on which the loan would be completely repaid at the end of the loan term. If borrowers defaulted, FHA insured that the lender would be fully repaid. By standardizing mortgage instruments and setting certain standards for mortgages, the creation of FHA was meant to instill confidence in the mortgage market and, in turn, help to stimulate investment in housing and the overall economy. Eventually, lenders began to make long-term mortgages without FHA insurance if borrowers made significant down payments. Over time, 15- and 30-year mortgages have become standard mortgage products. When the Department of Housing and Urban Development (HUD) was created in 1965, FHA became part of HUD. Today, FHA is intended to facilitate access to affordable mortgages for some households who otherwise might not be well-served by the private market. Furthermore, it facilitates access to mortgages during economic or mortgage market downturns by continuing to insure mortgages when the availability of mortgage credit has otherwise tightened. For this reason, it is said to play a \"countercyclical\" role in the mortgage market—that is, it tends to insure more mortgages when the mortgage market or overall economy is weak, and fewer mortgages when the economy is strong and other types of mortgages are more readily available. Some prospective homebuyers may have the income to sustain monthly mortgage payments but lack the funds to make a large down payment or otherwise have difficulty obtaining a mortgage. Borrowers with small down payments, weaker credit histories, or other characteristics that increase their credit risk might find it difficult to obtain a mortgage at an affordable interest rate or to qualify for a mortgage at all. This has raised a policy concern that some borrowers with the income to repay a mortgage might be unable to obtain affordable mortgages. FHA mortgage insurance is intended to make lenders more willing to offer affordable mortgages to these borrowers by insuring the lender against the possibility of borrower default. FHA-insured loans have lower down payment requirements than most conventional mortgages. (Conventional mortgages are mortgages that are not insured by FHA or guaranteed by another government agency, such as VA or USDA. ) Because saving for a down payment is often the biggest barrier to homeownership for first-time homebuyers and lower- or moderate-income homebuyers, the smaller down payment requirement for FHA-insured loans may allow some households to obtain a mortgage earlier than they otherwise could. (Borrowers with down payments of less than 20% could also obtain non-FHA mortgages with private mortgage insurance. See the nearby text box on \"FHA and Private Mortgage Insurance.\") FHA-insured mortgages also have less stringent requirements related to credit history than many conventional loans. This might make FHA-insured mortgages attractive to borrowers without traditional credit histories or with weaker credit histories, who would either find it difficult to take out a mortgage absent FHA insurance or may find it more expensive to do so. FHA-insured mortgages play a particularly large role for first-time homebuyers, low- and moderate-income households, and minorities. For example, 83% of FHA-insured mortgages made to purchase a home (rather than to refinance an existing mortgage) in FY2018 were obtained by first-time homebuyers. Over one-third of all FHA loans (both purchase and refinance loans) were obtained by minority households, and FHA-insured mortgages accounted for about 57% of all forward mortgages made to low- or moderate-income borrowers during the year. Since FHA-insured mortgages are often obtained by borrowers who cannot make large down payments or those with weaker credit histories, some have questioned whether FHA-insured mortgages are similar to subprime mortgages. Like subprime mortgages, FHA-insured mortgages are often obtained by borrowers with lower credit scores, though some borrowers with higher credit scores also obtain FHA-insured mortgages. However, FHA-insured mortgages are prohibited from carrying the full range of features that many subprime mortgages could carry. For example, FHA-insured loans must be fully documented, and they cannot include features such as negative amortization. (FHA mortgages can include adjustable interest rates.) Some of these types of features appear to have contributed to high default and foreclosure rates on subprime mortgages. Nevertheless, some have suggested that FHA-insured mortgages are too risky, and that they can harm borrowers by providing mortgages that often have a higher likelihood of default than other mortgages due to combinations of risk factors such as low down payments and lower credit scores. Traditionally, FHA plays a countercyclical role in the mortgage market, meaning that it tends to insure more mortgages when mortgage credit markets are tight and fewer mortgages when mortgage credit is more widely available. A major reason for this is that FHA continues to insure mortgages that meet its standards even during market downturns or in regions experiencing economic turmoil. When the economy is weak and lenders and private mortgage insurers tighten credit standards and reduce lending activity, FHA-insured mortgages may be the only mortgages available to some borrowers, or may have more favorable terms than mortgages that lenders are willing to make without FHA insurance. When the economy is strong and mortgage credit is more widely available, many borrowers may find it easier to qualify for affordable conventional mortgages. This section briefly describes some of the major features of FHA-insured mortgages for purchasing or refinancing a single-family home. Single-family homes are defined as properties with one to four separate dwelling units. FHA-insured loans are available to borrowers who intend to be owner-occupants and who can demonstrate the ability to repay the loan according to the terms of the contract. FHA-insured loans must be underwritten in accordance with accepted practices of prudent lending institutions and FHA requirements. Lenders must examine factors such as the applicant's credit, financial status, monthly shelter expenses, funds required for closing expenses, effective monthly income, and debts and obligations. In general, individuals who have previously been subject to a mortgage foreclosure are not eligible for FHA-insured loans for at least three years after the foreclosure. As a general rule, the applicant's prospective mortgage payment should not exceed 31% of gross effective monthly income. The applicant's total obligations, including the proposed housing expenses, should not exceed 43% of gross effective monthly income. If these ratios are not met, the borrower may be able to present the presence of certain compensating factors, such as cash reserves, in order to qualify for an FHA-insured loan. Since October 4, 2010, FHA has required a minimum credit score of 500, and has required higher down payments from borrowers with credit scores below 580 than from borrowers with credit scores above that threshold. See the \" Down Payment \" section for more information on down payment requirements for FHA-insured loans. In general, borrowers must intend to occupy the property as a principal residence. FHA-insured loans may be used to purchase one-family detached homes, townhomes, rowhouses, two- to four-unit buildings, manufactured homes and lots, and condominiums in developments approved by FHA. FHA-insured loans may also be obtained to build a home; to repair, alter, or improve a home; to refinance an existing home loan; to simultaneously purchase and improve a home; or to make certain energy efficiency or weatherization improvements in conjunction with a home purchase or mortgage refinance. FHA-insured mortgages may be obtained with loan terms of up to 30 years. The interest rate on an FHA-insured loan is negotiated between the borrower and lender. The borrower has the option of selecting a loan with an interest rate that is fixed for the life of the loan or one on which the rate may be adjusted annually. FHA requires a lower down payment than many other types of mortgages. Under changes made by the Housing and Economic Recovery Act of 2008 (HERA, P.L. 110-289 ), borrowers are required to contribute at least 3.5% in cash or its equivalent to the cost of acquiring a property with an FHA-insured mortgage. (Prior law had required borrowers to contribute at least 3% in cash or its equivalent.) Prohibited sources of the required funds include the home seller, any entity that financially benefits from the transaction, and any third party that is directly or indirectly reimbursed by the seller or by anyone that would financially benefit from the transaction. HUD has interpreted the 3.5% cash contribution as a down payment requirement and has specified that contributions toward closing costs cannot be counted toward it. Since October 4, 2010, FHA has required a 10% down payment from borrowers with credit scores between 500 and 579, while borrowers with credit scores of 580 or above are still required to make a down payment of at least 3.5%. FHA no longer insures loans made to borrowers with credit scores below 500. There is no income limit for borrowers seeking FHA-insured loans. However, FHA-insured mortgages cannot exceed a maximum mortgage amount set by law. The maximum mortgage amounts allowed for FHA-insured loans vary by area, based on a percentage of area median home prices. Different limits are in effect for one-unit, two-unit, three-unit, and four-unit properties. The limits are subject to a statutory floor and ceiling; that is, the maximum mortgage amount that FHA will insure in a given area cannot be lower than the floor, nor can it be higher than the ceiling. In 2008, Congress temporarily increased the maximum mortgage amounts in response to turmoil in the housing and mortgage markets, with the intention of allowing more households to qualify for FHA-insured mortgages during a period of tighter credit availability. New permanent maximum mortgage amounts were later established by the Housing and Economic Recovery Act of 2008. The maximum mortgage amounts established by HERA were higher than the previous permanent limits, but in many cases lower than the temporarily increased limits. However, the higher temporary limits were extended for several years, until they expired at the end of calendar year 2013. Since January 1, 2014, the maximum mortgage amounts have been set at the permanent HERA levels. For a one-unit home, HERA established the maximum mortgage amounts at 115% of area median home prices, with a floor set at 65% of the Freddie Mac conforming loan limit and a ceiling set at 150% of the Freddie Mac conforming loan limit. For calendar year 2019, the floor is $314,827 and the ceiling is $726,525. (That is, FHA will insure mortgages with principal balances up to $314,827 in all areas of the country. In higher-cost areas, it will insure mortgages with principal balances up to 115% of the area median home price, up to a cap of $726,525 in the highest-cost areas.) These maximum mortgage amounts, and the maximum mortgage amounts for 2-4 unit homes, are shown in Table 1 . Borrowers of FHA-insured loans pay an up-front mortgage insurance premium (MIP) and annual mortgage insurance premiums in exchange for FHA insurance. These premiums are set as a percentage of the loan amount. The maximum amounts that FHA is allowed to charge for the annual and the upfront premiums are set in statute. However, since these are maximum amounts, HUD has the discretion to set the premiums at lower levels. The maximum up-front premium that FHA may charge is 3% of the mortgage amount, or 2.75% of the mortgage amount for a first-time homebuyer who has received homeownership counseling. Currently, FHA is charging the same up-front premiums to first-time homebuyers who receive homeownership counseling and all other borrowers. Since April 9, 2012, HUD has set the up-front premium at 1.75% of the loan amount, whether or not the borrower is a first-time homebuyer who received homeownership counseling. This premium applies to most single-family mortgages. The amount of the maximum annual premium varies based on the loan's initial loan-to-value ratio. For most loans, (1) if the loan-to-value ratio is above 95%, the maximum annual premium is 1.55% of the loan balance, and (2) if the loan-to-value ratio is 95% or below, the maximum annual premium is 1.5% of the loan balance. FHA increased the actual annual premiums that it charges several times in recent years in order to bring more money into the FHA insurance fund and ensure that it has sufficient funds to pay for defaulted loans. However, in January 2015, FHA announced a decrease in the annual premium for most single-family loans. For most FHA case numbers assigned on or after January 26, 2015, the annual premiums are 0.85% of the outstanding loan balance if the initial loan-to-value ratio is above 95% and 0.80% of the outstanding loan balance if the initial loan-to-value ratio is 95% or below. This is a decrease from 1.35% and 1.30%, respectively, which is what FHA had been charging from April 1, 2013, until January 26, 2015. These premiums apply to most single-family mortgages; FHA charges different annual premiums in certain circumstances, including for loans with shorter loan terms or higher principal balances. Table 2 shows the up-front and annual mortgage insurance premiums that have been in effect for most loans since January 26, 2015. In the past, if borrowers prepaid their loans, they may have been due refunds of part of the up-front insurance premium that was not \"earned\" by FHA. The refund amount depended on when the mortgage closed and declined as the loan matured. The Consolidated Appropriations Act 2005 ( P.L. 108-447 ) amended the National Housing Act to provide that, for mortgages insured on or after December 8, 2004, borrowers are not eligible for refunds of up-front mortgage insurance premiums except when borrowers are refinancing existing FHA-insured loans with new FHA-insured loans. After three years, the entire up-front insurance premium paid by borrowers who refinance existing FHA-insured loans with new FHA-insured loans is considered \"earned\" by FHA, and these borrowers are not eligible for any refunds. The annual mortgage insurance premiums are not refundable. However, beginning with loans closed on or after January 1, 2001, FHA had followed a policy of automatically cancelling the annual mortgage insurance premium when, based on the initial amortization schedule, the loan balance reached 78% of the initial property value. However, for loans with FHA case numbers assigned on or after June 3, 2013, FHA will continue to charge the annual mortgage insurance premium for the life of the loan for most mortgages. This change responded to concerns about the financial status of the FHA insurance fund. FHA has stated that, since it continues to insure the entire remaining mortgage amount for the life of the loan, and since premiums were cancelled on the basis of the loan amortizing to a percentage of the initial property value rather than the current value of the home, FHA has at times had to pay insurance claims on defaulted mortgages where the borrowers were no longer paying annual mortgage insurance premiums. An FHA-insured mortgage is considered delinquent any time a payment is due and not paid. Once the borrower is 30 days late in making a payment, the mortgage is considered to be in default. In general, mortgage servicers may initiate foreclosure on an FHA-insured loan when three monthly installments are due and unpaid, and they must initiate foreclosure when six monthly installments are due and unpaid, except when prohibited by law. A program of loss mitigation strategies was authorized by Congress in 1996 to minimize the number of FHA loans entering foreclosure, and has since been revised and expanded to include additional loss mitigation options. Prior to initiating foreclosure, mortgage servicers must attempt to make contact with borrowers and evaluate whether they qualify for any of these loss mitigation options. The options must be considered in a specific order, and specific eligibility criteria apply to each option. Some loss mitigation options, referred to as home retention options, are intended to help borrowers remain in their homes. Other loss mitigation options, referred to as home disposition options, will result in the borrower losing his or her home, but avoiding some of the costs of foreclosure. The loss mitigation options that servicers are instructed to pursue on FHA-insured loans are summarized in Table 3 . Additional loss mitigation options are available for certain populations of borrowers. For example, defaulted borrowers in military service may be eligible to suspend the principal portion of monthly payments and pay only interest for the period of military service, plus three months. On resumption of payment, loan payments are adjusted so that the loan will be paid in full according to the original amortization. Certain loss mitigation options are also available in areas affected by presidentially declared major disasters. FHA's single-family mortgage insurance program is funded through FHA's Mutual Mortgage Insurance Fund (MMI Fund). Cash flows into the MMI Fund primarily from insurance premiums and proceeds from the sale of foreclosed homes. Cash flows out of the MMI Fund primarily to pay claims to lenders for mortgages that have defaulted. This section provides a brief overview of (1) how the FHA-insured mortgages insured under the MMI Fund are accounted for in the federal budget and (2) the MMI Fund's compliance with a statutory capital ratio requirement. For more detailed information on the financial status of the MMI Fund, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund) . The Federal Credit Reform Act of 1990 (FCRA) specifies the way in which the costs of federal loan guarantees, including FHA-insured loans, are recorded in the federal budget. The FCRA requires that the estimated lifetime cost of guaranteed loans (in net present value terms) be recorded in the federal budget in the year that the loans are insured. When the present value of the lifetime cash flows associated with the guaranteed loans is expected to result in more money coming into the account than flowing out of it, the program is said to generate negative credit subsidy. When the present value of the lifetime cash flows associated with the guaranteed loans is expected to result in less money coming into the account than flowing out of it, the program is said to generate positive credit subsidy. Programs that generate negative credit subsidy result in offsetting receipts for the federal government, while programs that generate positive credit subsidy require an appropriation to cover the cost of new loan guarantees. The MMI Fund has historically been estimated to generate negative credit subsidy in the year that the loans are insured and therefore has not required appropriations to cover the expected costs of loans to be insured. The MMI Fund does receive appropriations to cover salaries and administrative contract expenses. The amount of money that loans insured in a given year actually earn for or cost the government over the course of their lifetime is likely to be different from the original credit subsidy estimates. Therefore, each year as part of the annual budget process, each prior year's credit subsidy rates are re-estimated based on the actual performance of the loans and other factors, such as updated economic projections. These re-estimates affect the way in which funds are held in the MMI Fund's two primary accounts: the Financing Account and the Capital Reserve Account. The Financing Account holds funds to cover  expected  future costs of FHA-insured loans. The Capital Reserve Account holds additional funds to cover any additional unexpected future costs. Funds are transferred between the two accounts each year on the basis of the re-estimated credit subsidy rates to ensure that enough is held in the Financing Account to cover updated projections of expected costs of insured loans.  If FHA ever needs to transfer more funds to the Financing Account than it has in the Capital Reserve Account, it can receive funds from Treasury to make this transfer under existing authority and without any additional congressional action. This occurred for the first time at the end of FY2013, when FHA received $1.7 billion from Treasury to make a required transfer of funds between the accounts. The funds that FHA received from Treasury did not need to be spent immediately, but were to be held in the Financing Account and used to pay insurance claims, if necessary, only after the remaining funds in the Financing Account were spent. The MMI Fund has not needed any additional funds from Treasury to make required transfers of funds between the two accounts since that time. The MMI Fund is also required by statute to maintain a capital ratio of at least 2%, which is intended to ensure that the fund is able to withstand some increases in the costs of loans guaranteed under the insurance fund. The capital ratio measures the amount of funds that the MMI Fund currently has on hand, plus the net present value of the expected future cash flows associated with the mortgages that FHA currently insures (e.g., the amounts it expects to earn through premiums and lose through claims paid). It then expresses this amount as a percentage of the total dollar volume of mortgages that FHA currently insures. In other words, the capital ratio is a measure of the amount of funds that would remain in the MMI Fund after all expected future cash flows on the loans that it currently insures have been realized, assuming that FHA did not insure any more loans going forward. Beginning in FY2009, and for several years thereafter, the capital ratio was estimated to be below this mandated 2% level. The capital ratio again exceeded the 2% threshold in FY2015, when it was estimated to be 2.07%. This represented an improvement from an estimated capital ratio of 0.41% at the end of FY2014, and from negative estimated capital ratios at the ends of FY2013 and FY2012. The capital ratio has remained above 2% since that time, and was estimated to be 2.76% in FY2018. A low or negative capital ratio does not in itself trigger any special assistance from Treasury, but it raises concerns that FHA could need assistance in order to continue to hold enough funds in the Financing Account to cover expected future losses. In the years since the housing market turmoil that began around 2007, FHA has taken a number of steps designed to strengthen the insurance fund. These steps have included increasing the mortgage insurance premiums charged to borrowers; strengthening underwriting requirements, such as by instituting higher down payment requirements for borrowers with the lowest credit scores; and increasing oversight of FHA-approved lenders. The number of new mortgages insured by FHA in a given year depends on a variety of factors. In general, the number of new mortgages insured by FHA increased during the housing market turmoil (and resulting contraction of mortgage credit) that began around 2007, reaching a peak of 1.8 million mortgages in FY2009 before beginning to decrease somewhat. FY2014 was the only year since FY2007 that FHA insured fewer than 1 million new mortgages. As shown in Table 4 , FHA insured just over 1 million new single-family purchase and refinance mortgages in FY2018. Together, these mortgages had an initial loan balance of $209 billion. About 77% (776,284) of the mortgages were for home purchases, while about 23% (238,325) were for refinancing an existing mortgage. The overall number of mortgages insured by FHA in FY2018 represented a decrease from FY2017, when it insured 1.25 million mortgages. Many FHA-insured mortgages are obtained by first-time homebuyers, lower-and moderate-income homebuyers, and minority homebuyers. Of the home purchase mortgages insured by FHA in FY2018, about 83% were made to first-time homebuyers. Over a third of all mortgages (both for home purchases and refinances) insured by FHA in FY2018 were made to minority borrowers. As shown in Table 5 , at the end of FY2018 FHA was insuring a total of over 8 million single-family loans that together had an outstanding balance of nearly $1.2 trillion. Since it was first established in 1934, FHA has insured a total of over 47.5 million home loans. FHA's share of the mortgage market is the amount of mortgages that are insured by FHA compared to the total amount of mortgages originated or outstanding in a given time period. FHA's market share can be measured in a number of different ways. Therefore, when evaluating FHA's market share, it is important to recognize which of several different figures is being reported. First, FHA's share of the mortgage market can be computed as the number of FHA-insured mortgages divided by the total number of mortgages, or as the dollar volume of FHA-insured mortgages divided by the total dollar volume of mortgages. Furthermore, FHA's market share is sometimes reported as a share of all mortgages , and sometimes only as a share of home purchase mortgages (as opposed to both mortgages made to purchase a home and mortgages made to refinance an existing mortgage). A market share figure can be reported as a share of all mortgages originated within a specific time period , such as a given year, or as a share of all mortgages outstanding at a point in time , regardless of when they were originated. Finally, FHA's market share is sometimes also reported as a share of the total number of mortgages that have some kind of mortgage insurance (including mortgages with private mortgage insurance and mortgages insured by another government agency) rather than as a share of all mortgages regardless of whether or not they have mortgage insurance. FHA's market share tends to fluctuate in response to economic conditions and other factors. Between calendar years 1996 and 2002, FHA's market share averaged about 14% of the home purchase mortgage market and about 11% of the overall mortgage market (both home purchase mortgages and refinance mortgages), as measured by number of mortgages. However, by 2005 FHA's market share had fallen to less than 5% of home-purchase mortgages and about 3% of the overall mortgage market. Subsequently, as economic conditions worsened and mortgage credit tightened in response to housing market turmoil that began around 2007, FHA's market share rose sharply, peaking at over 30% of home-purchase mortgages in 2009 and 2010, and over 20% of all mortgages (including both home purchases and refinances) in 2009. In 2017, FHA insured 19.5% of new home purchase mortgages and about 16.7% of new mortgages overall, a small decrease compared to its market share in 2016. Figure 1 shows FHA's market share as a percentage of the total number of new mortgages originated for each calendar year between 1996 and 2017. As described, FHA's market share can be measured in a number of different ways. The figure shows FHA's share of (1) all newly originated mortgages, (2) just newly originated purchase mortgages, and (3) just newly originated refinance mortgages. FHA's share of home purchase mortgages tends to be the highest, largely because borrowers who refinance are more likely to have built up a greater amount of equity in their homes and, therefore, might be more likely to obtain conventional mortgages. For the number of mortgages insured by FHA in each year calendar since 1996, see the Appendix . The increase in FHA's market share after 2007 was due to a variety of factors related to the housing market turmoil and broader economic instability that was taking place at the time. Housing and economic conditions led many banks to limit their lending activities, including lending for mortgages. Similarly, private mortgage insurance companies, facing steep losses from past mortgages, began tightening the underwriting criteria for mortgages that they would insure. Furthermore, in 2008 Congress increased the maximum mortgage amounts that FHA can insure, which may have made FHA-insured mortgages a more viable option for some borrowers in certain areas. More recently, FHA's market share has decreased somewhat from its peak during the housing market turmoil, although it generally remains somewhat higher than it was in the late 1990s and early 2000s. A number of factors may have contributed to this decrease, including lower loan limits in some high-cost areas, higher mortgage insurance premiums, and greater availability of non-FHA-insured mortgages. While not the focus of this report, the appropriate market share for FHA has been a subject of ongoing debate among policymakers. It is likely to continue to be a topic of debate, both in the context of policies specifically related to FHA as well as part of broader debate about the future of the U.S. housing finance system. Table A-1 provides data on the number of mortgages insured by FHA in each calendar year since 1996, along with FHA's overall market share in each calendar year.", "summary": "The Federal Housing Administration (FHA), an agency of the Department of Housing and Urban Development (HUD), was created by the National Housing Act of 1934. FHA insures private lenders against the possibility of borrowers defaulting on mortgages that meet certain criteria, thereby expanding the availability of mortgage credit beyond what may be available otherwise. If the borrower defaults on the mortgage, FHA is to repay the lender the remaining amount owed. A household that obtains an FHA-insured mortgage must meet FHA's eligibility and underwriting standards, including showing that it has sufficient income to repay a mortgage. FHA requires a minimum down payment of 3.5% from most borrowers, which is lower than the down payment required for many other types of mortgages. FHA-insured mortgages cannot exceed a statutory maximum mortgage amount, which varies by area and is based on area median house prices but cannot exceed a specified ceiling in high-cost areas. (The ceiling is set at $726,525 in high-cost areas in calendar year 2019.) Borrowers are charged fees, called mortgage insurance premiums, in exchange for the insurance. In FY2018, FHA insured over 1 million new mortgages (including both home purchase and refinance mortgages) with a combined principal balance of $209 billion. FHA's share of the mortgage market tends to vary with economic conditions and other factors. In the aftermath of the housing market turmoil that began around 2007 and a related contraction of mortgage lending, FHA insured a larger share of mortgages than it had in the preceding years. Its overall share of the mortgage market increased from about 3% in calendar year 2005 to a peak of 21% in 2009. Since that time, FHA's share of the mortgage market has decreased somewhat, though it remains higher than it was in the early 2000s. In calendar year 2017, FHA's overall share of the mortgage market was about 17%. FHA-insured mortgages, like all mortgages, experienced increased default rates during the housing downturn that began around 2007, leading to concerns about the stability of the FHA insurance fund for single-family mortgages, the Mutual Mortgage Insurance Fund (MMI Fund). In response to these concerns, FHA adopted a number of policy changes in an attempt to limit risk to the MMI Fund. These changes have included raising the fees that it charges and making changes to certain eligibility criteria for FHA-insured loans.", "document_type": "crs"}
{"report": "The 116 th Congress continues its interest in U.S. research and development (R&D) and in evaluating support for federal R&D activities. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the internet to communications satellites, shale gas extraction, and defenses against disease. In recent years, widespread concerns about the federal debt, recent and projected federal budget deficits, and federal budget caps have driven difficult decisions about the prioritization of R&D, both in the context of the entire federal budget and among competing needs within the federal R&D portfolio. Increases in the budget caps for FY2018 and FY2019 reduced some of the pressure affecting these decisions, but the concerns remain and the caps for FY2020 have not been increased. The U.S. government supports a broad range of scientific and engineering R&D. Its purposes include specific concerns such as addressing national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness in the global economy. Most of the R&D funded by the federal government is performed in support of the unique missions of individual funding agencies. The federal R&D budget is an aggregation of the R&D activities of these agencies. There is no single, centralized source of R&D funds. Agency R&D budgets are developed internally as part of each agency's overall budget development process. R&D funding may be included either in accounts that are entirely devoted to R&D or in accounts that include funding for non-R&D activities. Agency budgets are subjected to review, revision, and approval by the Office of Management and Budget (OMB) and become part of the President's annual budget submission to Congress. The federal R&D budget is then calculated by aggregating the R&D activities of each federal agency. Congress plays a central role in defining the nation's R&D priorities as it makes decisions about the level and allocation of R&D funding—overall, within agencies, and for specific programs. In recent years, some Members of Congress have expressed concerns about the level of federal spending (for R&D and for other purposes) in light of the federal deficit and debt. Other Members of Congress have expressed support for increased federal spending for R&D as an investment in the nation's future competitiveness. As Congress acts to complete the FY2020 appropriations process, it faces two overarching issues: the amount of the federal budget to be spent on federal R&D and the prioritization and allocation of the available funding. This report begins with a discussion of the overall level of R&D in President Trump's FY2020 budget request, followed by analyses of R&D funding in the request from a variety of perspectives and for selected multiagency R&D initiatives. The remainder of the report discusses and analyzes the R&D budget requests of selected federal departments and agencies that, collectively, account for approximately 99% of total federal R&D funding. Selected terms associated with federal R&D funding are defined in the text box on the next page. Appendix A provides a list of acronyms and abbreviations. On March 11, 2019, President Trump released his proposed FY2020 budget. He provided additional details the following week. Completion of the FY2019 budget process on February 15, 2019, more than four months after the start of FY2019, as well as a government shutdown, led to both a delay in the scheduled release of the President's FY2020 budget request, and the use by the Office of Management and Budget of a mix of estimated continuing appropriations act FY2019 funding levels (generally, for agencies whose FY2019 appropriations were enacted after the start of FY2019) and enacted FY2019 funding levels (generally, for agencies whose appropriations were enacted prior to the start of FY2019). As a result, the aggregate (total) FY2019 R&D funding levels for all agencies in the Analytical Perspectives addendum to the President's FY2020 budget are estimated \"using FY 2019 enacted appropriations where available and annualized Continuing Resolution [levels] for agencies without enacted appropriations prior to Feb. 15, 2019.\" With enactment of the remaining FY2019 appropriations acts in the Consolidated Appropriations Act, 2019 (P.L. 116-6), the Administration's estimated aggregate R&D funding level no longer accurately reflects total enacted FY2019 R&D funding. OMB has not issued a document with comprehensive R&D figures for each agency or in aggregate. Therefore, the analysis of government-wide R&D funding in this report, as well as of some of the individual agency analyses, compares the President's request for FY2020 to the FY2018 actual level. As information about the agencies' FY2019 R&D levels becomes available, the agency sections of this report will be updated to reflect that information and to make comparisons to the President's FY2020 request. President Trump is proposing approximately $134.1 billion for R&D for FY2020, a decrease of $1.7 billion (1.2%) below the FY2018 level of $135.8 billion. Adjusted for inflation, the President's FY2020 R&D request represents a constant-dollar decrease of 5.2% from the FY2018 actual level. The President's request includes continued R&D funding for existing single-agency and multiagency programs and activities, as well as new initiatives. This report provides government-wide, multiagency, and individual agency analyses of the President's FY2020 request as it relates to R&D and related activities. Additional information and analysis will be included as the House and Senate act on the President's budget request through appropriations bills. Federal R&D funding can be analyzed from a variety of perspectives that provide different insights. The following sections examine the data by agency, by the character of the work supported, and by a combination of these two perspectives. Congress makes decisions about R&D funding through the authorization and appropriations processes primarily from the perspective of individual agencies and programs. Table 1 provides data on R&D funding by agency for FY2018 (actual), FY2019 (enacted, for selected agencies), and FY2020 (request). Enacted data for FY2019 is provided only for agencies whose FY2019 appropriations process was completed before the FY2020 budget request was finalized. Under the request, eight federal agencies would receive more than 97% of total federal R&D funding in FY2020: the Department of Defense, 44.3%; Department of Health and Human Services (HHS), primarily the National Institutes of Health (NIH), 25.1%; Department of Energy (DOE), 11.0%; National Aeronautics and Space Administration, 8.4%; National Science Foundation (NSF), 4.3%; Department of Agriculture (USDA), 1.8%; Department of Commerce (DOC), 1.3%; and Department of Veterans Affairs (VA), 1.0%. This report provides an analysis of the R&D budget requests for these agencies, as well as for the Department of Homeland Security (DHS), Department of the Interior (DOI), Department of Transportation (DOT), and Environmental Protection Agency (EPA). All but three federal agencies would see their R&D funding decrease under the President's FY2020 request compared to FY2018. The only agencies with increased R&D funding in FY2020 relative to the FY2018 level would be DOD (up $7.077 billion, 13.5%), VA (up $39 million, 3.0%), and DOT (up $33 million, 3.2%). The agencies with largest R&D funding declines in the FY2020 request compared to FY2018 (as measured in dollars) would occur in the budgets of HHS (down $3.249 billion, 8.8%), DOE (down $2.764 billion, 15.8%), NSF (down $567 million, 29.7%), and NASA (down $475 million, 4.0%). Among agencies for which FY2019 enacted funding is shown in the President's budget, FY2020 R&D funding would increase only for DOD (up $3.631 billion, 6.5%). HHS R&D funding would decline by $4.954 billion (12.8%). DOE R&D funding would decline by $3.075 billion (17.3%). VA R&D funding would decline by $17 million (1.3%). Department of Education R&D funding would decline by $34 million (13.2%). See Table 1 . Federal R&D funding can also be examined by the character of work it supports—basic research, applied research, or development—and by funding provided for construction of R&D facilities and acquisition of major R&D equipment. (See Table 2 .) President Trump's FY2020 request includes $35.164 billion for basic research, down $1.452 billion (4.0%) from FY2018; $40.707 billion for applied research, down $4.264 billion (10.5%); $59.108 billion for development, up $4.543 billion (8.3%); and $3.382 billion for facilities and equipment, down $495 million (12.8%). A primary policy justification for public investments in basic research and for incentives (e.g., tax credits) for the private sector to conduct research is the view, widely held by economists, that the private sector will, left on its own, underinvest in basic research from a societal perspective. The usual argument for this view is that the social returns (i.e., the benefits to society at large) exceed the private returns (i.e., the benefits accruing to the private investor, such as increased revenues or higher stock value). Other factors that may inhibit corporate investment in basic research include long time horizons for achieving commercial applications (diminishing the potential returns due to the time value of money), high levels of technical risk/uncertainty, shareholder demands for shorter-term returns, and asymmetric and imperfect information. The federal government is the nation's largest supporter of basic research, funding 42% of U.S. basic research in 2017. Business funded 30% of U.S. basic research in 2017, with state governments, universities, and other nonprofit organizations funding the remaining 29%. For U.S. applied research, business is the primary funder, accounting for an estimated 55% in 2017, while the federal government accounted for an estimated 33%. State governments, universities, and other nonprofit organizations funded the remaining 12%. Business also provides the vast majority of U.S. funding for development. Business accounted for 85% of development funding in 2017, while the federal government provided 13%. State governments, universities, and other nonprofit organizations funded the remaining 2% (see Figure 1 ). Federal R&D funding can also be viewed from the combined perspective of each agency's contribution to basic research, applied research, development, and facilities and equipment. Table 3 lists the three agencies with the most funding in each of these categories as proposed in the President's FY2020 budget. The overall federal R&D budget reflects a wide range of national priorities, including supporting advances in spaceflight, developing new and affordable sources of energy, and understanding and deterring terrorist groups. These priorities and the mission of each individual agency contribute to the composition of that agency's R&D spending (i.e., the allocation among basic research, applied research, development, and facilities and equipment). In the President's FY2020 budget request, the Department of Health and Human Services, primarily NIH, would account for nearly half (47.7%) of all federal funding for basic research. HHS would also be the largest federal funder of applied research, accounting for about 45.6% of all federally funded applied research in the President's FY2020 budget request. DOD would be the primary federal funder of development, accounting for 87.4% of total federal development funding in the President's FY2020 budget request. DOE would be the primary federal funder of facilities and equipment, accounting for 50.5% of total federal facilities and equipment funding in the President's FY2020 budget request. For many years, presidential budgets have reported on multiagency R&D initiatives. Often, they have also provided details of agency funding for these initiatives. Some of these efforts have a statutory basis—for example, the Networking and Information Technology Research and Development (NITRD) program, the National Nanotechnology Initiative (NNI), and the U.S. Global Change Research Program (USGCRP). These programs generally produce annual budget supplements identifying objectives, activities, funding levels, and other information, usually published shortly after the presidential budget release. Other multiagency R&D initiatives have operated at the discretion of the President without such a basis and may be eliminated at the discretion of the President. President Trump's FY2020 budget is largely silent on funding levels for these efforts and whether any or all of the nonstatutory initiatives will continue. Some activities related to these initiatives are discussed in agency budget justifications and may be addressed in the agency analyses later in this report. This section provides available multiagency information on these initiatives and will be updated as additional information becomes available. Established by the High-Performance Computing Act of 1991 ( P.L. 102-194 ), the Networking and Information Technology Research and Development program is the primary mechanism by which the federal government coordinates its unclassified networking and information technology R&D investments in areas such as supercomputing, high-speed networking, cybersecurity, software engineering, and information management. In FY2019, 21 agencies are NITRD members; nonmember agencies also participate in NITRD activities. NITRD efforts are coordinated by the National Science and Technology Council (NSTC) Subcommittee on Networking and Information Technology Research and Development. P.L. 102-194 , as reauthorized by the American Innovation and Competitiveness Act of 2017 ( P.L. 114-329 ), requires the director of NITRD to prepare an annual report to be delivered to Congress along with the President's budget request. This annual report is to include, among other things, detailed information on the program's budget for the current and previous fiscal years, and the proposed budget for the next fiscal year. The latest annual report was published in August 2018 and related to the FY2019 budget request. President Trump requested $5,277.6 million for NITRD research in FY2019. In FY2017, NITRD funding was $5,126.4 million. The President's FY2020 budget does not identify aggregate funding levels for NITRD for FY2018 (actual), FY2019 (estimate), or FY2020 (request). The FY2020 NSF budget request includes $1.20 billion in NITRD funding for FY2020, a decrease of $98.2 million (7.6%) from FY2018 (actual). For additional information on the NITRD program, see CRS Report RL33586, The Federal Networking and Information Technology Research and Development Program: Background, Funding, and Activities , by Patricia Moloney Figliola. Additional NITRD information also can be obtained at https://www.nitrd.gov . The U.S. Global Change Research Program coordinates and integrates federal research and applications to understand, assess, predict, and respond to human-induced and natural processes of global change. The program seeks to advance global climate change science and to \"build a knowledge base that informs human responses to climate and global change through coordinated and integrated Federal programs of research, education, communication, and decision support.\" In FY2018, 13 departments and agencies participated in the USGCRP. USGCRP efforts are coordinated by the NSTC Subcommittee on Global Change Research. Each agency develops and carries out its activities as its contribution to the USGCRP, and funds are appropriated to each agency for those activities; those activities may or may not be identified as associated with the USGCRP in the President's annual budget proposal or each agency's budget justification to Congress. The Global Change Research Act of 1990 (GCRA) (P.L. 101-606) requires each federal agency or department involved in global change research to report annually to Congress on each element of its proposed global change research activities, as well as the portion of its budget request allocated to each element of the program. The President is also required to identify those activities and the annual global change research budget in the President's annual budget request to Congress. Some, but not all, participating agencies provide the required information in their budget justifications. In addition, in almost each of the past 17 years, language in appropriations laws has required the President to submit a comprehensive report to the appropriations committees \"describing in detail all Federal agency funding, domestic and international, for climate change programs, projects, and activities … including an accounting of funding by agency….\" The President's most recent report was submitted in January 2017 for the FY2017 request. This section will be updated when the USGCRP updates its budget information. The President's FY2020 budget does not identify aggregate funding levels for USGCRP for FY2018 (actual), FY2019 (estimate), or the FY2020 (request). Without budget reports pursuant to the GCRP Act or appropriations laws, the budget authority or expenditures publicly reported by agencies is generally insufficient to independently build a complete and consistent estimate of funding for the USGCRP. Below are results of CRS research for selected agencies, which incompletely represent federal funding in recent years thats support the USGCRP. The President's FY2020 budget does not identify aggregate funding levels for USGCRP for FY2018 (actual), FY2019 (estimate), or the FY2020 (request). Without budget reports pursuant to the GCRP Act or appropriations laws, the budget authority or expenditures publicly reported by agencies is generally insufficient to independently build a complete and consistent estimate of funding for the USGCRP. Table 5 presents results of CRS research for selected agencies, which incompletely represent federal funding in recent years that supports the USGCRP. For additional information on the USGCRP, see CRS Report R43227, Federal Climate Change Funding from FY2008 to FY2014 , by Jane A. Leggett, Richard K. Lattanzio, and Emily Bruner. Additional USGCRP information also can be obtained at http://www.globalchange.gov . Launched in FY2001, the National Nanotechnology Initiative is a multiagency R&D initiative to advance understanding and control of matter at the nanoscale, where the physical, chemical, and biological properties of materials differ in fundamental and useful ways from the properties of individual atoms or bulk matter. In 2003, Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ), providing a legislative foundation for some of the activities of the NNI. NNI efforts are coordinated by the NSTC Subcommittee on Nanoscale Science, Engineering, and Technology (NSET). In FY2019, the President's request included NNI funding for 16 federal departments and independent agencies and commissions with budgets dedicated to nanotechnology R&D. The NSET includes other federal departments and independent agencies and commissions with responsibilities for health, safety, and environmental regulation; trade; education; intellectual property; international relations; and other areas that might affect or be affected by nanotechnology. P.L. 108-153 requires the NSTC to prepare an annual report to be delivered to Congress at the time the President's budget request is sent to Congress. This annual report is to include detailed information on the program's budget for the current fiscal year and the program's proposed budget for the next fiscal year, as well as additional information and data related to the performance of the program. The latest annual report was published in August 2018. President Trump requested $1,395.6 million for NNI research in FY2019. In FY2017, NNI funding was $1,552.3 million. The President's FY2020 budget does not identify aggregate funding levels for NNI for FY2018 (actual), FY2019 (enacted), or FY2020 (request). The NSF budget request includes $389 million in NNI funding for FY2020, $179 million (31.4%) less than in FY2018. For additional information on the NNI, see CRS Report RL34401, The National Nanotechnology Initiative: Overview, Reauthorization, and Appropriations Issues , by John F. Sargent Jr. Additional NNI information also can be obtained at http://www.nano.gov . In February 2019, President Trump signed Executive Order 13859 establishing an American Artificial Intelligence Initiative to accelerate national leadership in artificial intelligence (AI). Among other things, the EO directs the heads of implementing agencies that perform or fund R&D to consider AI as an agency R&D priority, in accordance with their missions and consistent with applicable law. In particular, the EO directs the Secretaries of Defense, Commerce, Health and Human Services, and Energy, the Administrator of the National Aeronautics and Space Administration, and the Director of the National Science Foundation to prioritize the allocation of high-performance computing resources for AI-related applications through increased assignment of discretionary funding and any other appropriate mechanisms. According to Analytical Perspectives, the President's FY2020 budget would provide approximately $850 million for this initiative to the Department of Energy, National Institutes of Health, National Institute of Standards and Technology, and National Science Foundation. In December 2018, President Trump signed the National Quantum Initiative Act (P.L. 115-368) establishing a National Quantum Initiative with the stated purpose of ensuring \"the continued leadership of the United States in quantum information science [QIS] and its technology applications.\" The act requires the establishment of a 10-year plan to accelerate the development of QIS and technology applications. According to Analytical Perspectives , the President's FY2020 budget includes approximately $430 million for this initiative at DOD, DOE, NIST, and NSF. A number of presidential initiatives without statutory foundations were in operation at the end of the Obama Administration, but have not been addressed explicitly in President Trump's FY2018, FY2019, or FY2020 budgets. Two of these are part of the Advanced Manufacturing Partnership (AMP): the National Robotics Initiative (NRI) and Manufacturing USA (formerly known as the National Network for Manufacturing Innovation or NNMI). According to Analytical Perspectives , the President's FY2020 budget prioritizes R&D aimed at advances in manufacturing and the integration of those advances into the domestic supply chain to reduce U.S. reliance on foreign sources of critical products. Budget priorities include intelligent manufacturing systems, materials and processing technologies, advances in semiconductor design and fabrication, and innovations in food and agricultural manufacturing. Other initiatives include the Cancer Moonshot, the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative, the Precision Medicine Initiative (PMI), the Materials Genome Initiative (MGI), and an effort to double federal funding for clean energy R&D. Some of the activities of these initiatives are discussed in agency budget justifications and the agency analyses later in this report. The remainder of this report provides a more in-depth analysis of R&D in 12 federal departments and agencies that, in aggregate, receive nearly 99% of total federal R&D funding. Agencies are presented in order of the size of their FY2020 R&D budget requests, with the largest presented first. Annual appropriations for these agencies are provided through 9 of the 12 regular appropriations bills. For each agency covered in this report, Table 7 shows the corresponding regular appropriations bill that provides primary funding for the agency, including its R&D activities. Because of the way that agencies report budget data to Congress, it can be difficult to identify the portion that is R&D. Consequently, R&D data presented in the agency analyses in this report may differ from R&D data in the President's budget or otherwise provided by OMB. Funding for R&D is often included in appropriations line items that also include non-R&D activities; therefore, in such cases, it may not be possible to identify precisely how much of the funding provided in appropriations laws is allocated to R&D specifically. In general, R&D funding levels are known only after departments and agencies allocate their appropriations to specific activities and report those figures. As of the date of this report, the House had completed action on none of the 12 regular appropriations bills for FY2020; the Senate had completed action on none of the bills. None of the 12 had been enacted as law. This report will be updated as Congress takes additional actions to complete the FY2020 appropriations process. In addition to this report, CRS produces individual reports on each of the appropriations bills. These reports can be accessed via the CRS website at http://www.crs.gov/iap/appropriations . Also, the status of each appropriations bill is available on the CRS web page, Status Table of Appropriations , available at http://www.crs.gov/AppropriationsStatusTable/Index . The mission of the Department of Defense is to provide \"the military forces needed to deter war and ensure our nation's security.\" Congress supports research and development activities at DOD primarily through the department's Research, Development, Test, and Evaluation (RDT&E) funding. These funds support the development of the nation's future military hardware and software and the science and technology base upon which those products rely. Most of what DOD spends on RDT&E is appropriated in Title IV of the annual defense appropriations bill. (See Table 8 .) However, RDT&E funds are also appropriated in other parts of the bill. For example, RDT&E funds are appropriated as part of the Defense Health Program, the Chemical Agents and Munitions Destruction Program, and the National Defense Sealift Fund. The Defense Health Program (DHP) supports the delivery of health care to DOD personnel and their families. DHP funds (including the RDT&E funds) are requested through the Defense-wide Operations and Maintenance appropriations request. The program's RDT&E funds support congressionally directed research on breast, prostate, and ovarian cancer; traumatic brain injuries; orthotics and prosthetics; and other medical conditions. Congress appropriates funds for this program in Title VI (Other Department of Defense Programs) of the defense appropriations bill. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program are requested through the Defense-wide Procurement appropriations request. Congress appropriates funds for this program also in Title VI. The National Defense Sealift Fund supports the procurement, operation and maintenance, and research and development associated with the nation's naval reserve fleet and supports a U.S. flagged merchant fleet that can serve in time of need. In some fiscal years, RDT&E funding for this effort is requested in the Navy's Procurement request and appropriated in Title V (Revolving and Management Funds) of the appropriations bill. RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support efforts in what the George W. Bush Administration termed the Global War on Terror (GWOT) and what the Obama and Trump Administrations have referred to as Overseas Contingency Operations (OCO). In appropriations bills, the term Overseas Contingency Operations/Global War on Terror (OCO/GWOT) has been used; President Trump's FY2020 budget uses the term Overseas Contingency Operations. Typically, the RDT&E funds appropriated for OCO activities go to specified Program Elements (PEs) in Title IV. According to the Comptroller of the Department of Defense, the FY2020 OCO request is divided into three requirement categories—direct war, enduring, and OCO for base. For purposes of this report, these categories of OCO funding requests will be reported collectively. In addition, OCO/GWOT-related requests/appropriations have included money for a number of transfer funds. In the past, these have included the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund, the Afghanistan Security Forces Fund, and the Pakistan Counterinsurgency Capability Fund. Congress typically has made a single appropriation into each such fund and authorized the Secretary to make transfers to other accounts, including RDT&E, at his discretion. These transfers are eventually reflected in Title IV prior-year funding figures. For FY2020, the Trump Administration is requesting $104.294 billion for DOD's Title IV RDT&E PEs (base plus OCO), $8.334 billion (8.7%) above the enacted FY2019 level. (See Table 8 .) In addition, the request includes $732.3 million in RDT&E through the Defense Health Program (DHP; down $1.447 billion, 66.4% from FY2019), $875.9 million in RDT&E through the Chemical Agents and Munitions Destruction program (down $10.8 million, 1.2% from FY2019), and $3.0 million for the Inspector General for RDT&E-related activities (down $1.0 million, 25.4% from FY2019). The FY2020 budget included no RDT&E funding via the National Defense Sealift Fund, the same as the FY2019 enacted level. RDT&E funding can be analyzed in different ways. RDT&E funding can be characterized organizationally. Each of military department requests and receives its own RDT&E funding. So, too, do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), collectively aggregated within the Defense-Wide account. RDT&E funding also can be characterized by budget activity (i.e., the type of RDT&E supported). Those budget activities designated as 6.1, 6.2, and 6.3 (basic research, applied research, and advanced technology development, respectively) constitute what is called DOD's Science and Technology program (S&T) and represent the more research-oriented part of the RDT&E program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components for which an operational need has been determined and an acquisition program established. Budget activity 6.6 provides management support, including support for test and evaluation facilities. Budget activity 6.7 supports the development of system improvements in existing operational systems. Many congressional policymakers are particularly interested in DOD S&T program funding since these funds support the development of new technologies and the underlying science. Some in the defense community see ensuring adequate support for S&T activities as imperative to maintaining U.S. military superiority into the future. The knowledge generated at this stage of development may also contribute to advances in commercial technologies. The FY2020 request for Title IV S&T funding (base plus OCO) is $14.135 billion, $1.524 billion (9.7%) below the FY2019 enacted level. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research when compared to NIH or NSF. However, over half of DOD's basic research budget is spent at universities. The Trump Administration is requesting $2.320 billion for DOD basic research for FY2020, $208.4 million (8.2%) below the FY2019 enacted level. DOD is a substantial source of federal funds for university R&D in certain fields, such as aerospace, aeronautical, and astronautical engineering (40%); electrical, electronic, and communications engineering (39%); mechanical engineering (28%); computer and information sciences (28%); and materials science (25%). The mission of the Department of Health and Human Services (HHS) is \"to enhance and protect the health and well-being of all Americans ... by providing for effective health and human services and fostering advances in medicine, public health, and social services.\" This section focuses on HHS research and development funded through the National Institutes of Health, an HHS agency that accounts for nearly 97% of total HHS R&D funding. Other HHS agencies that provide funding for R&D include the Centers for Disease Control and Prevention (CDC), Centers for Medicare and Medicaid Services (CMS), Food and Drug Administration (FDA), Agency for Healthcare Research and Quality (AHRQ), Health Resources and Services Administration (HRSA), and Administration for Children and Families (ACF); additional R&D funding is attributed to departmental management. NIH is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. It also has major roles in training biomedical researchers and disseminating health information. The NIH mission is \"to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability.\" The agency consists of the NIH Office of the Director (OD) and 27 institutes and centers (ICs). The OD sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The ICs focus on particular diseases (e.g., National Cancer Institute), areas of human health and development (e.g., National Institute on Aging), or scientific research fields or support (e.g., National Center for Advancing Translational Sciences). Each IC plans and manages its own research programs in coordination with OD. As shown in Table 9 , separate appropriations are provided to 24 of the 27 ICs, as well as to OD, the Innovation Account (established by the 21 st Century Cures Act, P.L. 114-255), and an intramural Buildings and Facilities account. The other three centers, which perform centralized support services, are funded through the other ICs. NIH supports and conducts a wide range of basic and clinical research, research training, and health information dissemination across all fields of biomedical and behavioral sciences. According to NIH, about 10% of the NIH budget supports intramural research projects conducted by the nearly 6,000 NIH federal scientists, most of whom are located on the NIH campus in Bethesda, MD. More than 80% of NIH's budget goes to the extramural research community in the form of grants, contracts, and other awards. This funding supports research performed by more than 300,000 nonfederal scientists and technical personnel who work at more than 2,500 universities, hospitals, medical schools, and other research institutions. Funding for NIH comes primarily from the annual Labor, HHS, and Education (LHHS) appropriations act, with an additional amount for Superfund-related activities from the Interior/Environment appropriations act. Those two appropriations acts provide NIH's discretionary budget authority. In addition, NIH has received mandatory funding of $150 million annually provided in the Public Health Service Act (PHSA), Section 330B, for a special program on type 1 diabetes research. Some funding is also transferred to NIH pursuant to the \"PHS Evaluation Tap\" Transfer authority. The total funding available for NIH activities, taking account of add-ons and PHS tap transfers, is known as the NIH program level. President Trump's FY2020 budget request would provide NIH a total program level of $34.368 billion, a decrease of $4.941 billion (12.6%) compared with FY2019 enacted levels. The proposed FY2020 program level total would include $33.410 billion provided through LHHS appropriations (including the full amount authorized by the 21 st Century Cures Act); $741 million from the PHS evaluation transfer; $66.581 million provided through Interior/Environment appropriations for Superfund-related activities; and $150 million in proposed funding for the mandatory type 1 diabetes program. Under the FY2020 budget proposal, all existing ICs and budget activity lines, except for Buildings and Facilities, would receive a decrease compared to FY2019 enacted levels (see Table 9 ). The Buildings and Facilities appropriation of $200 million would not change from FY2019 to FY2020. Additionally, the FY2020 Budget Request proposes consolidating the Agency for Healthcare Research and Quality into NIH, forming a 28 th IC—the National Institute for Research on Safety and Quality (NIRSQ). The creation of a new NIH institute would require an amendment to PHSA Section 401(d), which specifies that \"[i]n the National Institutes of Health, the number of national research institutes and national centers may not exceed a total of 27.\" Under the request, NISRQ would receive $256 million in funding for FY2020. The main funding mechanism NIH uses to support extramural research is research project grants (RPGs), which are competitive, peer-reviewed, and largely investigator-initiated. Historically, over 50% of the NIH budget is used to support RPGs, which include salaries for investigators and research staff. The FY2020 budget proposes to reduce the average cost of RPGs by capping the percentage of an investigator's salary that can be paid with grant funds to 90%. The FY2020 Trump budget proposal includes $150 million in mandatory funding for research on type 1 diabetes authorized under the PHS Act Section 330B within the budget of the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). For this proposal, Congress and the President would need to enact legislation to extend the special diabetes program funding, because under current law, no new funding will be available for this program after September 30, 2019. Additionally, the FY2020 program level request includes $741 million in funding transferred to NIH by the PHS evaluation tap. Discretionary funding for certain programs at NIH and other HHS agencies that are authorized under the PHS Act can be subject to an assessment under Section 241 of the PHS Act (42 U.S.C. §238j). This provision authorizes the Secretary to use a portion of eligible appropriations to study the effectiveness of federal health programs and to identify improvements. Although the PHS Act limits the tap to no more than 1% of eligible appropriations, in recent years, annual LHHS appropriations acts have specified a higher amount (2.5% in FY2019) and have also typically directed specific amounts of funding from the tap for transfer to a number of HHS programs. The assessment has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. NIH, with the largest budget among the PHS agencies, has historically been the largest \"donor\" of program evaluation funds; until recently, it had been a relatively minor recipient. Provisions in recent LHHS appropriations acts have directed specific tap transfers to NIH, making NIH a net recipient of tap funds. The FY2020 NIH budget request also includes $492 million made available through the 21 st Century Cures Act (see text box below; hereinafter referred to as \"The Cures Act\"). The Cures Act ( P.L. 114-255 ) specifies that $149 million is for the Precision Medicine Initiative, $140 million is for the BRAIN Initiative, $195 million is for cancer research, and $8 million is for research on regenerative medicine for FY2020. The President's FY2020 budget identifies several research priorities for NIH in the coming year. The overview below outlines some of these priority themes in the budget request. 1. Confronting the Opioids Crisis The request includes $1.3 billion designated for opioids and pain research across NIH, with $500 million of the total for the Helping to End Addiction Long-Term (HEAL) initiative. The HEAL Initiative, launched in April 2018, aims to accelerate the development of new medications and devices to treat opioid addiction. In addition, NIH plans to support research on neonatal abstinence syndrome, chronic pain, and other opioids-related issues. 2. Pediatric Research The FY2020 request proposes $50 million in designated funding for a pediatric cancer initiative. The initiative, designed to complement existing pediatric cancer research, would aggregate data on pediatric cancer cases and coordinate existing datasets to create a \"comprehensive, shared resource to support research on childhood cancer in all its forms.\" The request also designates $15 million for the Institutional Development Award (IDeA) States Pediatric Clinical Trials Network to support pediatric clinical studies, such as on the \"dosing, safety, and efficacy of drugs that are commonly prescribed to children.\" 3. Supporting the Next Generation of Researchers The request would provide $100 million in dedicated funding for the Next Generation Researchers Initiative, which aims to support new and early stage scientists in attaining their first NIH grants. Through the program, NIH ICs are to create funding pathways and other strategies targeted at new and early-stage scientists, and would be required to collect data and evaluate their outcomes. 4. Ending the HIV Epidemic As a part of a proposed HHS wide plan, \"Ending the HIV Epidemic: A Plan for America,\" the FY2020 request designates $6 million in funding to Centers for AIDS Research to collect data and inform HHS on best practices for the initiative. The goal for the plan is to reduce new infections by 75% in the next 5 years, and by 90% in the next 10 years. 5. New Technologies and Biomedical Research NIH plans to continue to support biomedical innovations using new technologies, including for diagnosis, monitoring, and treatment. An example includes a smartphone-based system for people with diabetes to monitor blood glucose levels. NIH also aims to accelerate scientific discovery through new data science methods. In June 2018, NIH released a Strategic Plan for Data Science, with an agency-wide plan for increasing and improving its use of large biomedical datasets. In addition, NIH plans to convene a new working group on artificial intelligence, machine learning, and biomedical research. Along with the above priorities, the President's budget request identifies ongoing support related to precision medicine, universal flu vaccine, and NIH buildings and facilities. The Department of Energy (DOE) was established in 1977 by the Department of Energy Organization Act ( P.L. 95-91 ), which combined energy-related programs from a variety of agencies with defense-related nuclear programs that dated back to the Manhattan Project. Today, DOE conducts basic scientific research in fields ranging from nuclear physics to the biological and environmental sciences; basic and applied R&D relating to energy production and use; and R&D on nuclear weapons, nuclear nonproliferation, and defense nuclear reactors. The department has a system of 17 national laboratories around the country, mostly operated by contractors, that together account for about 40% of all DOE expenditures. The Administration's FY2020 budget request for DOE includes about $12.783 billion for R&D and related activities, including programs in three broad categories: science, national security, and energy. This request is 18.6% less than the enacted FY2019 amount of $15.712 billion. (See Table 10 for details.) The request for the DOE Office of Science is $5.546 billion, a decrease of 15.8% from the FY2019 appropriation of $6.585 billion. Funding would decrease for each of the office's six major research programs. In Basic Energy Sciences, almost half the proposed decrease would result from the approaching end of construction on the Linac Coherent Light Source II (no funding requested for FY2020, down from $129 million in FY2019). Funding for Biological and Environmental Research would decrease by $211 million (29.9%), with reductions concentrated in the Earth and Environmental Systems Sciences subprogram. In Advanced Scientific Computing Research, the Office of Science Exascale Computing Project would receive $189 million, down 18.9% from $233 million in FY2019. Funding for Fusion Energy Sciences would decrease by $161 million (28.6%), including a $25 million (18.9%) decrease in the U.S. contribution to construction of the International Thermonuclear Experimental Reactor (ITER), a fusion energy demonstration and research facility in France. The request for DOE national security R&D is $4.925 billion, an increase of 11.8% from $4.406 billion in FY2019. Funding for Weapons Activities RDT&E would increase 37.9%, including an increase of $123 million for Advanced Simulation and Computing and an increase of $95 million (190.3%) for Enhanced Capabilities for Subcritical Experiments. In Defense Nuclear Nonproliferation R&D, reactor conversion activities would transfer to a non-R&D account; excluding this accounting change, funding for the remaining program would increase by 3.8%. Funding for the Naval Reactors program would decrease by 7.8% overall, with increases for operations, infrastructure, and technology development offset by previously planned decreases in funding for construction and two major multiyear projects. The request for DOE energy R&D is $2.313 billion, a decrease of 51.0% from $4.721 billion in FY2019. Many of the proposed reductions in this category are similar to the Administration's FY2019 budget proposals. Funding for energy efficiency and renewable energy R&D would decrease by 66.3%, with reductions in all major research areas and a shift in emphasis toward early-stage R&D rather than later-stage development and deployment. Funding for fossil energy R&D would decrease by 24.1%, with reductions focused particularly on coal carbon capture and storage ($69 million, down from $199 million in FY2019) and natural gas technologies ($11 million, down from $51 million in FY2019). The request for fuel cycle R&D is $90 million (down from $264 million in FY2019), and nuclear energy would decrease by 37.9%, with no funding requested for the Integrated University Program ($5 million in FY2019) or the Supercritical Transformational Electric Power (STEP) R&D initiative ($5 million in FY2019). The Advanced Research Projects Agency-Energy (ARPA-E), which is intended to advance high-impact energy technologies that have too much technical and financial uncertainty to attract near-term private-sector investment, would be terminated. The National Aeronautics and Space Administration (NASA) was created in 1958 by the National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. NASA has research programs in planetary science, Earth science, heliophysics, astrophysics, and aeronautics, as well as development programs for future human spacecraft and for multipurpose space technology such as advanced propulsion systems. In addition, NASA operates the International Space Station (ISS) as a facility for R&D and other purposes. The Administration is requesting about $17.845 billion for NASA R&D in FY2020. This is 0.1% less than FY2019 funding of about $17.865 billion. For a breakdown of these amounts, see Table 11 . NASA R&D funding comes through five accounts: Science; Aeronautics; Space Technology (called Exploration Technology in the Administration's budget request); Exploration (Deep Space Exploration Systems in the request); and the ISS, Commercial Crew, and Commercial Low Earth Orbit (LEO) Development portions of Space Operations (called LEO and Spaceflight Operations in the request). The FY2020 request for Science is $6.304 billion, a decrease of 8.7% from FY2019. Within this total, funding for Earth Science would decrease by $151 million (7.8%); funding for Planetary Science would decrease by $136 million (4.9%); and funding for Astrophysics would decrease by $347 million (29.1%). The request for Earth Science includes no funding for the Pre-Aerosol, Clouds, and Ocean Ecosystem (PACE) mission or the Climate Absolute Radiance and Refractivity Observatory (CLARREO) Pathfinder mission. PACE and CLARREO Pathfinder were also proposed for termination in the FY2018 and FY2019 budgets but were funded by Congress. The request for Planetary Science includes $593 million for a mission to Jupiter's moon Europa, but in contrast to prior congressional direction, the mission would launch on a commercial rocket and would not include a lander. The Planetary Science request also includes $210 million for the Lunar Discovery and Exploration program, initiated in FY2019, to fund public-private partnerships for research using commercial lunar landers. The request for Astrophysics does not include funding for the Wide Field Infrared Space Telescope (WFIRST, $312 million in FY2019). The proposed increase of $48 million for the James Webb Space Telescope (JWST) would provide $155 million more for JWST in FY2020 than was projected in the FY2019 budget; this change reflects previously announced cost increases and schedule delays. The FY2020 request for Aeronautics is $667 million, a decrease of 8.0% from FY2019. The request includes $104 million for the Low Boom Flight Demonstrator program, intended to demonstrate quiet supersonic flight. The FY2020 request for Exploration Technology (currently Space Technology) is $1.014 billion, an increase of 9.4% from FY2019. The request proposes $119 million for a mostly new Lunar Surface Innovation Initiative. It proposes $45 million for a restructured In-Space Robotic Servicing program, down from $180 million for the RESTORE-L robotic servicing mission in FY2019. The FY2020 request for Deep Space Exploration Systems (currently Exploration) is $5.022 billion, a decrease of 0.6% from FY2019. This account funds development of the Orion Multipurpose Crew Vehicle and the Space Launch System (SLS) heavy-lift rocket, the capsule and launch vehicle mandated by the NASA Authorization Act of 2010 for future human exploration beyond Earth orbit. The first test flight of SLS carrying Orion but no crew (known as EM-1) is now expected no earlier than June 2020. The first flight of Orion and the SLS with a crew on board (known as EM-2) is expected by April 2023. Funding for Orion, the SLS, and related ground systems (collectively known as Exploration Systems Development) would decrease by $651 million (15.9%). The account also funds Exploration R&D, which would increase by $622 million (64.9%). The request for Exploration R&D includes $821 million for a platform in lunar orbit (known as the Gateway) to serve as a test bed for deep space human exploration capabilities. In the LEO and Spaceflight Operations account (currently Space Operations), the request for Commercial Crew is $102 million, a decrease of 41.1% from FY2019; the request for the ISS is $1.458 billion; and the request for Commercial LEO Development, a new program in FY2019, is $150 million (an increase of 275.0%). The reduction in Commercial Crew funding reflects the expected transition of commercial crew activities from development to operations: the first post-certification crewed flight to the ISS is planned for late FY2019. The Commercial LEO Development program is intended to stimulate a commercial space economy in low Earth orbit, including the commercial provision of NASA's requirements for research and technology demonstration after the proposed end of direct ISS funding in 2025. The National Science Foundation supports basic research and education in the nonmedical sciences and engineering. Congress established the foundation as an independent federal agency in 1950 and directed it to \"promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes.\" The NSF is a primary source of federal support for U.S. university research, especially in mathematics and computer science. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. NSF has six appropriations accounts: Research and Related Activities (RRA, the main research account), Education and Human Resources (EHR, the main education account), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), the National Science Board (NSB), and the Office of Inspector General (OIG). Appropriations are generally provided at the account level, while program-specific direction may be included in appropriations acts, or accompanying conference reports or explanatory statements. Because final FY2019 funding was not available at the time the FY2020 budget request was prepared, requested R&D funding is compared to the FY2018 actual funding. FY2019 funding levels, enacted February 15, 2019, are included for reference. These amounts are available only at the account level; FY2019 R&D breakouts and subaccount funding amounts are not yet available for comparison. Funding for R&D is included in the RRA, EHR, and MREFC accounts. (The RRA and EHR accounts also include non-R&D funding.) Together, these three accounts comprise 95% of the total requested funding for NSF. Actual R&D obligations for each account are known after NSF allocates funding appropriations to specific activities and reports those figures. The budget request specifies R&D funding for the conduct of research, including basic and applied research, and for physical assets, including R&D facilities and major equipment. Funding amounts for FY2018 actual and FY2020 requested levels are reported by account, including amounts for R&D conduct and physical assets where applicable, in Table 12 . Overall . The Administration is requesting $7.07 billion for the NSF in FY2020, $1.01 billion (12.5%) less than the FY2019 enacted amount, and $752 million (9.6%) less than the FY2018 actual amount. The request would decrease budget authority in three accounts relative to the FY2018 enacted level: RRA by $717.4 million (11.2%), EHR by $80.4 million (8.9%), and NSB by $200,000 (4.7%). The request would increase budget authority for the MREFC account by $36.9 million (19.8%) and provide slight increases to the AOAM (2.6%, $8.4 million) and OIG (1.7%, $260,000) accounts. Overall, NSF estimates that, under the FY2020 request, agency-wide funding rates (i.e., the percentage of submitted proposals that are successfully awarded funding) would decrease slightly from 24% to 23%, with 1,317 fewer new competitive awards, compared to FY2018. As a proportion of NSF's total funding, R&D activities account for approximately 81%. For FY2020, $5.72 billion is requested for R&D activities, a 10% decrease from FY2018 actual funding for R&D of $6.36 billion. The total request includes $5.22 billion (91%) for the conduct of R&D, and $506 million (9%) for R&D facilities and major equipment. Of funding requested for the conduct of R&D, 87% is requested for basic research, and 13% for applied research. Overall funding for R&D facilities and major equipment supports not only the construction and acquisition phases, funded through MREFC ($223 million requested), but also the planning, design, and postconstruction operations and maintenance, funded through RRA ($282 million requested). Research . The Administration seeks $5.66 billion for RRA in FY2020, an $857 million (13.1%) decrease compared to the FY2019 enacted funding, and a $717 million (11.2%) decrease compared to FY2018 actual funding. Compared to the FY2018 actual levels, the FY2020 request includes decreases for 8 of the 10 RRA subaccounts. The largest percentage decrease would go to the Office of Polar Programs (19.6%, $98.3 million decrease). The largest percentage increase would go to the U.S. Arctic Research Commission account (6.3%, $90,000 increase). The FY2020 request also includes $151 million for the RRA Established Program to Stimulate Competitive Research (EPSCoR) program, a $19.4 million (11.3%) decrease compared to FY2018 actual funding. Within the RRA account, the FY2020 request includes $5.08 billion for R&D, a decrease of $634 million (11.1%) compared to the FY2018 actual amount. Of this amount, the majority ($4.80 billion, 94%) is requested for the conduct of research, including $4.38 billion for basic research and $417 million for applied research. Education . The FY2020 request for the EHR account is $86.5 million (9.5%) less than the FY2019 enacted amount and $80.4 million (8.9%) less than the FY2018 actual level. By program division, the Division of Human Resource Development would receive an increase of $15.6 million (9.6%) over the FY2018 actual level. The divisions of research on learning in formal and informal settings, graduate education, and undergraduate education would receive decreases of 20.4% ($182 million requested), 5.5% ($244 million requested), and 13.8% ($219 million requested), respectively. EHR programs of particular interest to congressional policymakers include the Graduate Research Fellowship Program (GRFP) and National Research Traineeship (NRT) programs. The FY2020 request for GRFP is $257 million, a reduction of $27.9 million (9.8%) from the FY2018 actual level. The FY2020 request for NRT is $49.5 million, a $4.3 million (8.0%) decrease from FY2018. Within EHR, requested funding for R&D is $420 million, which is $37.7 million (8.2%) less than the FY2018 actual funding amount and accounts for approximately 7.3% of the agency's total R&D request. All of the requested funding would support the conduct of R&D, including $150 million for basic research and $270 million for applied research. Construction . The MREFC account supports large construction projects and scientific instruments, with all of the funding supporting R&D facilities. The Administration is seeking $223 million for MREFC in FY2020, $36.9 million (19.8%) more than the FY2018 enacted amount, and $72.5 million (24.5%) less than the FY2018 actual amount. Requested MREFC funding would support continued construction of the Large Synoptic Survey Telescope (LSST, $46.3 million requested, 5.1% decrease from FY2019 enacted) and Antarctic Infrastructure Modernization for Science (AIMS, $97.9 million requested, 5.6% decrease from FY2019 enacted). The request includes $33.0 million for upgrades to the Large Hadron Collider in Switzerland, which would represent the first year of a five-year project. Additionally, $45.0 million is requested for Mid-scale Research Infrastructure projects in the $20 million to $70 million range; this is a new funding line-item in the MREFC account meant to manage support for upgrades to major facilities and stand-alone projects in this range as a portfolio. Other initiatives . The FY2019 NSF budget request includes funding for three multiagency initiatives. This funding is included in multiple NSF appropriations accounts, and R&D amounts are not separately provided. The National Nanotechnology Initiative would receive $389 million, $179 million (31.4%) less than in FY2018. The Networking and Information Technology Research and Development program would receive $1.20 billion, a decrease of $98.2 million (7.6%). The U.S. Global Change Research Program would receive $224 million, $30.0 million (11.8%) less than in FY2018. The U.S. Department of Agriculture (USDA) was created in 1862, in part to support agricultural research in an expanding, agriculturally dependent country. Today, USDA conducts intramural research at federal facilities with federally employed scientists and supports external research at universities and other facilities through competitive grants and formula-based funding. The breadth of contemporary USDA research spans traditional agricultural production techniques, organic and sustainable agriculture, bioenergy, nutrition needs and food composition, food safety, animal and plant health, pest and disease management, economic decisionmaking, and other social sciences affecting consumers, farmers, and rural communities. Four agencies carry out USDA's intramural research and education activities, grouped together into the Research, Education, and Economics (REE) mission area. The agencies involved are the Agricultural Research Service (ARS), National Institute of Food and Agriculture (NIFA), National Agricultural Statistics Service (NASS), and Economic Research Service (ERS). The FY2019 enacted appropriation ( P.L. 116-6 ) provides a total of $3,424.1 million in discretionary spending for the four agencies. The Administration is requesting a total of $2,868.7 million for the four agencies in FY2020, a 16.2% reduction ($555.4 million). Most of that year-over-year reduction (78%) is attributable to the reduced request for ARS salaries and expenses and the ARS buildings and facilities account (see Table 13 ). The remainder of the year-over-year reduction comes from decreases in certain research and education, extension, and integrated activities in NIFA, as well as in NASS and ERS. In addition to discretionary appropriations, agricultural research is funded by state matching contributions and private donations or grants, as well as certain mandatory funding authorized by the farm bill. USDA's FY2019 enacted discretionary appropriations and the Administration's FY2020 request for the four research agencies are discussed below. The Agricultural Research Service is USDA's in-house basic and applied research agency. It operates approximately 90 laboratories nationwide with about 6,600 employees. ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective controls for pest management, and support of USDA regulatory and technical assistance programs. ARS also operates the National Agricultural Library, one of the department's primary information repositories for food, agriculture, and natural resource sciences. For FY2019, P.L. 116-6 provides $1,303.3 billion for ARS salaries and expenses and $381.2 million for buildings and facilities. The Administration is requesting $1,203.5 billion for ARS salaries and expenses for FY2020, a decrease of $99.8 million (7.6%) from the FY2019 appropriation. For FY2020, the request for the buildings and facilities account is $50.0 million ( Table 13 ). ARS will assume ownership of the National Bio and Agro-Defense Facility (NBAF) in FY2019 from the Department of Homeland Security (DHS). The FY2019 enacted bill provides $10.6 million to address one-time costs associated with the transfer of the science program from the Plum Island Animal Disease Center to NBAF, and $42.0 million to address stand-up activities and other initial costs to operate and maintain the new facility. NBAF is expected to be fully operational by December 31, 2022. From the total salaries and expenses appropriation for FY2020, the Administration is requesting $13.1 million for NBAF. The FY2019 enacted bill provides an additional $5.0 million for ARS to increase research efforts on foreign animal diseases, and an additional $2.0 million to expand research on resilient dryland farming. FY2019 conference report language ( H.Rept. 116-9 ) criticized ARS for not reporting a single specific negative finding by Animal and Plant Health Inspection Service (APHIS) inspections of ARS research facilities that use animals as research subjects. The report noted that numerous violations had been found involving death and serious health issues of animal subjects, and directed ARS to submit a report within 60 days of enactment covering all violations found by APHIS and the actions taken to prevent them from recurring. P.L. 116-9 does not support the Administration's request to terminate or redirect various ARS research programs, or the closure of ARS research locations. The National Institute of Food and Agriculture (NIFA) provides federal funding for research, education, and extension projects conducted in partnership with State Agricultural Experiment Stations, the State Cooperative Extension System, land grant universities, colleges, and other research and education institutions, as well as individual researchers. These partnerships include the 1862 land-grant institutions, 1890 historically black colleges and universities (HBCUs) established by the Morrill Acts, the 1994 tribal land-grant colleges, and Hispanic-serving institutions. Federal funds enhance research capacity at universities and institutions through statutory formula funding, competitive awards, and grants. For FY2019, P.L. 116-6 provides $1,471.3 billion in discretionary spending for NIFA activities. The Administration's FY2020 request for NIFA is $1,391.7 billion, a reduction of $79.6 million (5.4%) from FY2019 ( Table 13 ). The enacted bill provides $259.0 million to support Hatch Act formula funding for 1862 land grant university research and education activities. For FY2020, the Administration is requesting $243.2 million for Hatch Act funding, a 6.1% reduction. For Evans-Allen formula funding to the 19 HBCUs, the FY2019 bill provides $58.0 million for research and $19.3 million for education grants. The Administration requests $53.8 million in Evans-Allen funding for FY2020 (7.2% reduction from FY2019), and $18.7 million for education grants. For research grants to the 1994 Tribal institutions, and for education grants to Alaska Native and Native Hawaiian-Serving institutions, the FY2019 appropriation provides $3.8 and $3.2 million, respectively. For FY2020, the Administration requests $3.4 million for the 1994 Tribal institutions, and $0 for education grants to the Alaska Native and Native Hawaiian-Serving institutions. For McIntire-Stennis cooperative forestry research support, P.L. 116-6 provides $36.0 million for FY2019. The Administration is requesting $28.9 million for FY2020, approximately 20% less than FY2019. The FY2019 appropriation also provides $37.0 million for the Sustainable Agriculture Research and Education program. The Administration requests a reduction of $18.0 million (48.6%) for the program in FY2020. The FY2019 enacted bill provides $415.0 million for the Agriculture and Food Research Initiative (AFRI)—USDA's flagship competitive research grants program. The Administration is requesting $500.0 million for the program in FY2020, a 20.5% increase over FY2019. This budget item currently represents about 30% of the total NIFA discretionary budget. For Cooperative Extension support at 1862 land grant universities under the Smith-Lever Act, Sections (b) and (c) formula funding for FY2019, the enacted appropriation provides a total of $315.0 million for these extension activities. The Administration requests $299.4 million for these programs in FY2020. The Smith-Lever Sections (b) and (c) programs include extension services at the HBCUs and the 1994 Tribal colleges, faculty improvement grants to HBCUs, and women and minorities in STEM fields, among other programs. P.L. 116-6 provides $86.6 million for Smith-Lever 3(d) activities, including food and nutrition education, new technologies for agricultural extension, and children, youth, and families at risk. For FY2020, the Administration is requesting $58.1 million for Smith-Lever Section 3(d) funding, $55.1 million of which would support the Expanded Food and Nutrition Education Program, and $3.0 million would support Federally-Recognized Tribes Extension Program for programs on American Indian Reservations and Tribal jurisdictions. The Administration is requesting $0 funding in FY2020 for other Smith-Lever Section 3(d) programs. The National Agricultural Statistics Service conducts the quinquennial Census of Agriculture and provides official statistics on agricultural production and indicators of the economic and environmental status of the farm sector. For FY2019, P.L. 116-6 provides $174.5 million to NASS, of which up to $45.3 million is reserved to support the 2017 Census of Agriculture. The enacted bill also provides $600,000 for the Geospatial Improvement Initiative and an increase of $500,000 for the Floriculture Crops Report. The Administration is requesting $163.0 million for NASS in FY2020, and up to $45.3 million to support the 2017 Census. Results of the 2017 Census of Agriculture were released on April 11, 2019. The Economic Research Service supports economic and social science analysis about agriculture, rural development, food, commodity markets, and the environment. It also collects and disseminates data concerning USDA programs and policies. ERS is one of 13 \"principal statistical agencies\" of the Federal Statistical System of the United States. For FY2019, P.L. 116-6 provides $86.8 million for ERS activities. The Administration has requested $60.5 million for ERS in FY2020, a 30.3% decrease. Two agencies of the Department of Commerce have major R&D programs: the National Institute of Standards and Technology (NIST) and the National Oceanic and Atmospheric Administration (NOAA). The mission of the National Institute of Standards and Technology is \"to promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life.\" NIST research provides measurement, calibration, and quality assurance methods and techniques that support U.S. commerce, technological progress, product reliability, manufacturing processes, and public safety. NIST's responsibilities include the development, maintenance, and custodial retention of the national standards of measurement; providing the means and methods for making measurements consistent with those standards; and ensuring the compatibility of U.S. national measurement standards with those of other nations. The President is requesting $686.8 million for NIST in FY2020, a decrease of $298.7 million (30.3%) from the FY2019 enacted appropriation of $985.5 million. (See Table 14 .) NIST discretionary funding is provided through three accounts: Scientific and Technical Research and Services (STRS), Industrial Technology Services (ITS), and Construction of Research Facilities (CRF). The President's FY2020 request includes $611.7 million for R&D, standards coordination, and related services in the STRS account, a decrease of $112.8 million (15.6%) from the FY2019 level. The FY2020 request would provide $15.2 million for the ITS account, down $139.8 million (90.2%) from FY2019. Within the ITS account, the request would provide no funding for the Manufacturing Extension Partnership (MEP) program, a reduction of $140.0 million from FY2019; MEP centers in each state would be required to become entirely self-supporting. In his FY2019 request, President Trump proposed ending federal funding for MEP; in his FY2018 request, the President sought $6.0 million \"for an orderly shutdown of the program.\" The request provides $15.2 million provided for Manufacturing USA (also referred to as the National Network for Manufacturing Innovation or NNMI), slightly higher than the FY2019 level of $15.0 million. Of these funds, approximately $10 million would be for continued support of the NIST-sponsored National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL), with the balance (approximately $5 million) to be used for coordination of the Manufacturing USA network. The President is requesting $59.9 million for the NIST CRF account for FY2020, down $46.1 million (43.5%) from the FY2019 enacted level. The National Oceanic and Atmospheric Administration (NOAA) conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; collects and provides data on the oceans and atmosphere; and manages coastal and marine organisms and environments. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization was intended to unify elements of the nation's environmental programs and to provide a systematic approach for monitoring, analyzing, and protecting the environment. NOAA's administrative structure is organized by six line offices that reflect its diverse mission: the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); National Environmental Satellite, Data, and Information Service (NESDIS); National Weather Service (NWS); Office of Oceanic and Atmospheric Research (OAR); and the Office of Marine and Aviation Operations (OMAO). The line offices are supported by an additional office, Mission Support, which provides cross-cutting administrative functions related to planning, information technology, human resources, and infrastructure. Congress provides most of the discretionary funding for the line offices and Mission Support through two accounts: (1) Operations, Research, and Facilities, and (2) Procurement, Acquisition, and Construction. In 2010, NOAA published its Next Generation Strategic Plan . The strategic plan is organized into four categories of long-term goals including (1) climate adaptation and mitigation, (2) a weather-ready nation, (3) healthy oceans, and (4) resilient coastal communities and economies. The strategic plan also lists three groups of enterprise objectives related to (1) stakeholder engagement, (2) data and observations, and (3) integrated environmental modeling. The strategic plan serves as a guide for NOAA's five-year R&D plan. The most recent five-year R&D plan was published in 2013, and includes R&D objectives to reach strategic plan goals and objectives and targets to track progress toward R&D objectives over time. One of the main challenges identified in the NOAA R&D plan is the need to integrate the diverse perspectives and professional expertise required by the agency's mission. The plan states that \"holistically understanding the earth system is not only understanding its individual components, but understanding and interpreting the way each of the components interact and behave as an integrated composite that is more than the sum of its parts.\" For FY2020, President Trump requested $651.1 million in R&D funding for NOAA, a decrease of $286.9 million (30.6%) below the FY2019 enacted level of $938.0 million. For FY2019, Congress enacted $540.3 million for research (57.6% of total R&D funding), $162.5 million for development (17.3%), and $235.2 million for R&D equipment (25.1%). The enacted FY2019 total R&D amount was 17.0% of NOAA's total discretionary budget authority of $5.509 billion. In FY2020, the President is requesting $352.3 million for research (54.1% of total R&D funding), $106.3 million for development (16.3%), and $192.6 million for R&D equipment (29.6%). The President's request for total R&D is 14.1% of NOAA's total discretionary budget authority request of $4.622 billion. Table 15 provides R&D funding levels for FY2019 enacted and the Administration's FY2020 request for each NOAA office. OAR accounts for the majority of R&D in most years. The President is requesting $335.1 million for OAR R&D in FY2020, a decrease of $196.2 million (36.9%) below the FY2019 enacted funding level of $531.4 million. OAR conducts research in three major areas: (1) weather and air chemistry; (2) climate; and (3) oceans, coasts, and the Great Lakes. A significant portion of these efforts is implemented through NOAA laboratories and cooperative research institutes. NOAA supports 16 cooperative research institutes and 10 NOAA laboratories in OAR's three research areas. The President's FY2020 request would fund the cooperative institutes and laboratories at $169.6 million, $13.1 million (7.2%) less than the FY2019 enacted funding level of $182.8 million. Among other R&D activities, the President's FY2019 request would also reduce funding to the National Sea Grant College Program. The National Sea Grant College Program is composed of 33 university-based state programs and supports scientific research and stakeholder engagement to identify and solve problems faced by coastal communities. The President's FY2020 request would terminate federal support of the National Sea Grant College Program and its related Marine Aquaculture Research program. In FY2019, Congress appropriated $68.0 million to the National Sea Grant College Program and $12.0 million to the Marine Aquaculture Research program. The Department of the Interior (DOI) was created to conserve and manage the nation's natural resources and cultural heritage, to provide scientific and other information about those resources, and to uphold \"the nation's trust responsibilities or special commitments to American Indians, Alaska Natives, and affiliated island communities to help them prosper.\" DOI has a wide range of responsibilities including, among other things, mapping, geological, hydrological, and biological science; migratory bird, wildlife, and endangered species conservation; surface-mined lands protection and restoration; and historic preservation. Because final FY2019 funding was not available at the time the FY2020 budget was prepared, requested R&D funding is compared to the FY2018 actual funding. The Administration is requesting $12.6 billion in net discretionary funding for DOI in FY2020. Of that amount, $757 million is requested for R&D funding, $148 million (16.3%) below the FY2018 actual level of $905 million. Of the President's FY2020 DOI R&D funding request, 8.9% is for basic research, 73.3% is for applied research, and 17.8% is for development. The U.S. Geological Survey (USGS) is the only DOI component that conducts basic research. Funding for DOI R&D is generally included in appropriations line items that also include non-R&D activities. How much of the funding provided in appropriations legislation is allocated to R&D specifically is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOI components allocate their appropriations to specific activities and report those figures. The USGS accounts for approximately two-thirds of all DOI R&D funding. A single appropriations account, Surveys, Investigations, and Research (SIR), provides all USGS funding. USGS R&D is conducted under seven SIR activity/program areas: Ecosystems; Land Resources; Energy, Minerals, and Environmental Health; Natural Hazards; Water Resources; Core Science Systems; and Science Support. The President's total FY2020 budget request for USGS is $984 million. Of this amount, $481 million would be for R&D, a decrease of $119 million (19.8%) from the FY2018 enacted level of $600 million. The President's FY2020 request also includes R&D funding for the following DOI components: Bureau of Reclamation (BOR): $84.0 million in applied research and development funding for FY2020, down $26.4 million (23.9%) from FY2018. Bureau of Ocean Energy Management (BOEM): $100.4 million in applied research and development funding for FY2020, up $22.1 million (28.2%) from FY2018—the only component that would receive an increase in R&D funding. Fish and Wildlife Service (FWS): $15.5 million in applied research for FY2020, down $17.2 million (52.5%) from FY2018. National Park Service (NPS): $25.9 million in applied research and development for FY2020, down $1.1 million (4.2%) from FY2018. Bureau of Safety and Environmental Enforcement (BSEE): $24.5 million in applied research for FY2020, down $2.2 million (8.2%) from FY2018. Bureau of Land Management (BLM): $19.0 million in applied research and development for FY2020, down $1.9 million (9.0%) from FY2018. Bureau of Indian Affairs (BIA): $5.0 million in applied research for FY2020, equal to the actual amount from FY2018. Wildland Fire Management (WFM): No funding requested for R&D for FY2020, down $3.0 million (100.0%) from FY2018. Office of Surface Mining Reclamation and Enforcement (OSMRE): $1.5 million in applied research for FY2020, up $970,000 (190%) from FY2018. Table 16 summarizes FY2018 actual R&D funding and the President's FY2020 R&D funding request for DOI components. The Department of Veterans Affairs (VA) operates and maintains a national health care delivery system to provide eligible veterans with medical care, benefits, and social support. As part of the agency's mission, it seeks to advance medical R&D in areas most relevant to the diseases and conditions that affect the health care needs of veterans. The President is proposing $1.4 billion for VA R&D in FY2020, an increase of $12 million (1%) from FY2019. (See Table 17 .) VA R&D is funded through two accounts—the Medical and Prosthetic Research account and the Medical Care Support account. The Medical Care Support account also includes non-R&D funding, and the amount of funding that will be allocated to support R&D through appropriations legislation is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels from the Medical Care Support account are only known after the VA allocates its appropriations to specific activities and reports those figures. The Medical Care Support account provides administrative and other support for VA researchers and R&D projects, including infrastructure maintenance. The FY2020 request includes $762 million for VA's Medical and Prosthetic Research account, a decrease of $17 million (2%), and $648 million in funding for research supported by the agency's Medical Care Support account, an increase of $29 million (5%). According to the President's request, FY2020 strategic priorities for VA R&D include increasing the access of veterans to clinical trials; increasing the transfer and translation of VA R&D; and \"transforming VA data into a national resource\" by reducing the time and effort needed to appropriately access, properly understand, and effectively use VA data for research. Clinical priorities for VA R&D in FY2020 include efforts to treat veterans at risk of suicide and research to address chronic pain and opioid addiction, posttraumatic stress disorder, traumatic brain injury, and Gulf War illness. The Medical and Prosthetics R&D program is an intramural program managed by the Veteran Health Administration's Office of Research and Development (ORD) and conducted at VA Medical Centers and VA-approved sites nationwide. According to ORD, the mission of VA R&D is \"to improve Veterans' health and well-being via basic, translational, clinical, health services, and rehabilitative research and to apply scientific knowledge to develop effective individualized care solutions for Veterans.\" ORD consists of four main research services each headed by a director: Biomedical Laboratory R&D conducts preclinical research to understand life processes at the molecular, genomic, and physiological levels. Clinical Science R&D supports clinical trials and other human subjects research to determine the feasibility and effectiveness of new treatments such as drugs, therapies, or devices, compare existing therapies, and improve clinical care and practice. Health Services R&D conducts studies to identify and promote effective and efficient strategies to improve the quality and accessibility of the VA health system and patient outcomes, and to minimize health care costs. Rehabilitation R&D conducts research and develops novel approaches to improving the quality of life of impaired and disabled veterans. In addition to intramural support, VA researchers are eligible to obtain funding for their research from extramural sources, including other federal agencies, private foundations and health organizations, and commercial entities. According to the President's FY2020 budget request, these additional R&D resources are estimated at $570 million in FY2020. However, unlike other federal agencies, such as the National Institutes of Health and the Department of Defense, VA does not have the authority to support extramural R&D by providing research grants to colleges, universities, or other non-VA entities. Table 17 summarizes R&D program funding for VA in the Medical and Prosthetic Research and the Medical Care Support accounts. Table 18 details amounts to be spent in Designated Research Areas (DRAs), which VA describes as \"areas of importance to our veteran patient population.\" Funding for research projects that span multiple areas may be included in several DRAs; thus, the amounts in Table 18 total to more than the appropriation or request for VA R&D. The Department of Transportation (DOT) was established by the Department of Transportation Act (P.L. 89-670) on October 15, 1966. The primary purposes of DOT research and development activities as defined by Section 6019 of the Fixing America's Surface Transportation Act ( P.L. 114-94 ) are improving mobility of people and goods; reducing congestion; promoting safety; improving the durability and extending the life of transportation infrastructure; preserving the environment; and preserving the existing transportation system. Funding for DOT R&D is generally included in appropriations line items that also include non-R&D activities. The amount of the funding provided by appropriations legislation that is allocated to R&D is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOT agencies allocate their final appropriations to specific activities and report those figures. The Administration is requesting $1.089 billion for DOT R&D activities and facilities in FY2020, a decrease of $5.8 million (0.5%) from FY2019. (See Table 19 .) Three DOT agencies—the Federal Aviation Administration (FAA), the Federal Highway Administration (FHWA), and the National Highway Traffic Safety Administration (NHTSA)—would account for over 90% of DOT R&D under the FY2020 request. The President's FY2020 request of $512.3 million for R&D activities and facilities at FAA would be an increase of $10.4 million (2.1%) from FY2019. The request includes $120 million for the agency's Research, Engineering, and Development (RE&D) account, a reduction of $71.1 million (37.2%) from FY2019. Funding within the RE&D account seeks to improve aircraft safety through research in fields such as fire safety, advanced materials, propulsion systems, aircraft icing, and continued airworthiness, in addition to safety research related to unmanned aircraft systems and the integration of commercial space operations into the national airspace. According to the President's budget request FHWA's contributions to researching and implementing transformative innovations and technologies are changing the way roads, bridges, and other facilities are planned, designed, built, managed, and maintained across the country to be more responsive to current and future needs. The President's request of $420 million for R&D activities and facilities at FHWA would be an increase of $39 million (10.2%) from FY2019. The request includes $125 million for FHWA's Highway Research and Development program, which seeks to improve safety, enhance the design and construction of transportation infrastructure, provide data and analysis for decision-making, and reduce congestion. The program supports highway research in such areas as the impact of automated driving systems, infrastructure durability, resilience, and environmental sustainability, and the factors that contribute to death and injury related to roadway design, construction, and maintenance. The request also includes $100 million for research to facilitate the development of a connected, integrated, and automated transportation system under the agency's Intelligent Transportation Systems program. The President is requesting $62.1 million in R&D and R&D facilities funding in FY2020 for NHTSA, $13.8 million (18.2%) below FY2019. NHTSA R&D focuses on automation and the study of human machine interfaces, advanced vehicle safety technology, ways of improving vehicle crashworthiness and crash avoidance, reducing unsafe driving behaviors, and alternative fuels vehicle safety. R&D activities are also supported by several other DOT components or agencies (see Table 19 ). The President's FY2020 request includes DOT R&D and R&D facilities funding for the Federal Railroad Administration (FRA), totaling $23.1 million, $21.6 million (48.3%) below the FY2019 level of $44.6 million; the Federal Transit Administration (FTA), totaling $28 million, $2 million (6.7%) below the FY2019 level of $30 million; the Pipeline and Hazardous Materials Safety Administration (PHMSA), totaling $21.5 million, $3 million (12.1%) below the FY2019 level of $24.5 million; the Office of the Secretary (OST), totaling $13.1 million, $14.8 million (53.2%) below the FY2019 level of $27.9 million; and the Federal Motor Carrier Safety Administration (FMCSA), totaling $9.1 million, the same amount as FY2019. The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development can contribute to achieving all these goals. The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. Other components, such as the Countering Weapons of Mass Destruction Office, the U.S. Coast Guard, and the Transportation Security Administration, conduct R&D relating to their specific missions. The President's FY2020 budget request for DHS includes $438 million for activities identified as R&D. This would be a reduction of 31.6% from $640 million in FY2019. The total includes $303 million for the S&T Directorate and smaller amounts for six other DHS components. See Table 20 . The S&T Directorate performs R&D in several laboratories of its own and funds R&D performed by the DOE national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components. The Administration's FY2020 request of $303 million for the S&T Directorate R&D account is a decrease of 40.7% from $511 million in FY2019. The request includes no funding for cybersecurity R&D ($89.1 million in FY2019), which would instead be conducted in the Cybersecurity Infrastructure Security Agency ($31 million for R&D in the FY2020 request, up from $13 million in FY2019). The remaining thrust areas in the S&T Directorate's Research, Development, and Innovation budget line would all decrease, by amounts ranging from 12.1% (Counter Terrorist) to 40.4% (Border Security). Funding for University Centers of Excellence would decrease from $37 million in FY2019 to $18 million in FY2020. In addition to its R&D account, the S&T Directorate receives funding for laboratory facilities and other R&D-related expenses through its Operations and Support account (not shown in the table). In this account, the FY2020 request for Laboratory Facilities is $116 million, down 4.9% from $122 million in FY2019. The Laboratory Facilities request includes no funding for the National Urban Security Technology Laboratory, which the Administration proposes to close, or for the National Bio and Agro-Defense Facility (NBAF), which the S&T Directorate is building using previously appropriated funds but will transfer to the USDA once it becomes operational. Requested funding in Laboratory Facilities for the National Biodefense Analysis and Countermeasures Center (NBACC) is $29 million, the same as in FY2019. The request for R&D in the Countering Weapons of Mass Destruction Office is $68 million, down from $83 million in FY2019. The U.S. Environmental Protection Agency (EPA), the federal regulatory agency responsible for administering a number of environmental pollution control laws, funds a broad range of R&D activities to provide scientific tools and knowledge that support decisions relating to preventing, regulating, and abating environmental pollution. Since FY2006, Congress has funded EPA through the Interior, Environment, and Related Agencies appropriations acts. Appropriations for EPA R&D are generally included in line-items that also include non-R&D activities. Annual appropriations bills and the accompanying committee reports do not identify precisely how much funding provided in appropriations bills is allocated to EPA R&D alone. EPA determines its R&D funding levels in operation through allocating its appropriations to specific activities and reporting those amounts. The agency's Science and Technology (S&T) appropriations account funds much of EPA's scientific research activities, which include R&D conducted by the agency at its own laboratories and facilities, and R&D and related scientific research conducted by universities, foundations, and other nonfederal entities that receive EPA grants. The S&T account receives a base appropriation and a transfer from the Hazardous Substance Superfund (Superfund) account for research on more effective methods remediating contaminated sites. EPA's Office of Research and Development (ORD) is the primary manager of R&D at EPA headquarters and laboratories around the country, as well as external R&D. A large portion of the S&T account funds EPA R&D activities managed by ORD, including research grants. Programs implemented by other offices within EPA also may have a research component, but the research component is not necessarily the primary focus of the program. As with the President's FY2019 budget request, the FY2020 request proposes reductions and eliminations of funding for FY2020 across a number of EPA programs and activities. The President's FY2020 request includes a total of $6.07 billion for EPA, $2.78 billion (31%) less than the total $8.85 billion FY2019 enacted appropriations for EPA (after rescissions) provided in Titles II and IV of Division E of the Consolidated Appropriations Act, FY2019 ( P.L. 116-6 ), and $123.4 million (2%) less than the FY2019 request of $6.19 billion for EPA. The reductions proposed in the FY2020 request are distributed across EPA operational functions and activities as well as grants for states, tribes, and local governments. With the exception of the Building and Facilities account, the President's FY2020 request proposes funding reductions below FY2019 enacted levels for the nine other EPA appropriations accounts, although funding for some program areas within the accounts would remain constant or increase. Some Members of Congress expressed concerns regarding proposed reductions of funding for EPA scientific research programs during hearings on the President's FY2020 budget request. Including a $17.8 million transfer from the Superfund account, the President's FY2020 budget request proposes $480.8 million for EPA's S&T account, $241.1 million (33.4%) less than the FY2019 enacted $722.0 million which includes a $15.5 million transfer and $11.3 million account specific rescissions. The FY2020 request would provide an increase (3.1%) compared to the FY2019 request of $466.4 million, which includes a $17.4 million transfer. The President's FY2020 request proposes a rescission for EPA but does not specify a rescission within the S&T or other appropriations accounts. This accounting difference does not allow for direct comparisons of funding within EPA's S&T account including specific rescissions. Table 21 at the end of this section includes the President's FY2020 request for program areas and activities within EPA's S&T account as presented in EPA's FY20 20 Congressional Budget Justification compared to the FY2019 enacted appropriations as reported in the Conference Report ( H.Rept. 116-9 ) accompanying the FY2019 consolidated appropriations that includes the Department of Interior, Environment, and Related Agencies appropriations. Consistent with other recent House and Senate Appropriations Committee reports and explanatory statements, the conference report H.Rept. 116-9 accompanying the FY2019 enacted appropriations did not specify funding for all subprogram areas reported in EPA's budget justification. S&T subprogram areas not reported in congressional reports and statements are noted in the Table 21 as \"NR\" (not reported). Additionally, the President's FY2018, FY2019, and FY2020 requests and EPA's congressional budget justifications have modified the titles for some of the program areas relative to previous Administrations' budget requests and congressional committee reports' presentations. The House and Senate Appropriations Committees have generally adopted the modified program area titles as presented in the recent budget requests. During House and Senate Committee hearings regarding the President's FY2020 budget request for EPA, Members generally did not support a number of the proposed reductions and eliminations of funding for EPA, including proposed reductions in funding for scientific research programs. Reductions proposed in the FY2020 budget request below the FY2019 enacted levels were distributed across EPA operational functions and activities as well as grants for states, tribes, and local governments. As shown in Table 21 , with few exceptions the requested FY2020 amount for the S&T account for individual EPA program area and activity line items would be less than the FY2019 enacted appropriations. The FY2020 request did not propose to completely eliminate funding for the broader program areas; however, eliminations (no funding is requested for FY2020) are proposed for line-item activities below the program areas as indicated in Table 21 . These program areas include Atmospheric Protection Program (formerly GHG [greenhouse gas] Reporting Program and Climate Protection Program), Indoor Air Radon Program, and Reduce Risks from Indoor Air. For other program areas, proposed reductions in funding included eliminations of certain programs. For example, the proposed reduction in funding for Research: Air and Energy, Research: Safe and Sustainable Water Resources, Research: Sustainable and Healthy Communities, and Research: Chemical Safety and Sustainability program areas for FY2020 included the proposed elimination of funding for the Science to Achieve Results (STAR) program. P.L. 116-6 included $5.0 million for Research: National Priorities within the S&T account for FY2019, an increase compared to $4.1 million included for FY2018. As in the previous Administration's fiscal year requests, the President's FY2020 budget request did not include funding for Research: National Priorities. In addition to clarifying certain funding allocations within the S&T account and consistent with the prior fiscal year appropriations committee reports and explanatory statements, H.Rept. 116-9 provided additional guidance for certain program areas and activities within the S&T account for FY2019. Topics expressly referenced included Alternative Testing; Computational Toxicology; Enhanced Aquifer Use; Integrated Risk Information System (IRIS); Nanomaterials Research; Innovative Research Partnerships; Intramural Animal Testing; Science to Achieve Results (STAR) Grants; Harmful Algal Blooms; Water Distribution Systems; and Water Security Test Beds. The size and structure of the agency's workforce, as was the case during consideration for the FY2018 and FY2019 appropriations, has been a topic of debate during congressional committee hearings regarding EPA's FY2020 appropriations. Workforce reshaping was introduced in the FY2018 request and described as agency-wide organizational restructuring, \"reprioritization of agency activities,\" and reallocation of resources. The FY2020 request for the Operations and Administration program area within the S&T account includes $6.0 million for agency workforce reshaping and efforts to improve the management of EPA's laboratories. As with the FY2018 enacted appropriations, P.L. 116-6 did not fund the President's FY2019 request for EPA workforce reshaping for FY2019. EPA's reported proposed reorganizing strategies, potentially impacting certain aspects of EPA's Office of Research Development (ORD) and the operations of the EPA Office of the Science Advisor (OSA), as well as current EPA laboratories including the National Exposure Research Laboratory (NERL), the National Health and Environmental Effects Research Laboratory (NHEERL), and the National Risk Management Research Laboratory (NRMRL), have also been of interest to some Members of Congress. Appendix A. Acronyms and Abbreviations Appendix B. CRS Contacts for Agency R&D The following table lists the primary CRS experts on R&D funding for the agencies covered in this report.", "summary": "President Trump's budget request for FY2020 includes approximately $134.1 billion for research and development (R&D). Several FY2019 appropriations bills had not been enacted at the time the President's FY2020 budget was prepared; therefore, the President's budget included the FY2018 actual funding levels, 2019 annualized continuing resolution (CR) levels, and the FY2020 request levels. On February 15, 2019, Congress enacted the Consolidated Appropriations Act, 2019 (P.L. 116-6). This act included each of the remaining appropriations acts, completing the FY2019 appropriations process. The act also rendered the CR levels identified in the budget no longer relevant, though for some agencies the exact amount of R&D funding in the act remained uncertain. The analysis of government-wide R&D funding in this report compares the President's request for FY2020 to the FY2018 level. For agencies for which the FY2019 R&D funding levels are known, individual agency analyses in this report compare the FY2020 request to FY2019 enacted levels. For agencies for which the FY2019 R&D funding levels remain unknown, individual agency analyses in this report compare the FY2020 request to FY2018 actual levels; when the FY2019 levels become available, these sections will be updated to compare the FY2020 request to FY2019 enacted amounts. As of the date of this report, the House had not completed action on any of the 12 regular appropriations bills for FY2020; nor had the Senate. In FY2018, OMB adopted a change to the definition of development, applying a more narrow treatment it describes as \"experimental development.\" This change was intended to harmonize the reporting of U.S. R&D funding data with the approach used by other nations. The new definition is used in this report. Under the new definition of R&D (applied to both FY2018 and FY2020 figures), President Trump is requesting approximately $134.1 billion for R&D for FY2020, a decrease of $1.7 billion (1.2%) from the FY2018 level. Adjusted for inflation, the President's FY2020 R&D request represents a decrease of 5.1% below the FY2018 level. Funding for R&D is concentrated in a few departments and agencies. In FY2018, eight federal agencies received 96.3% of total federal R&D funding, with the Department of Defense (DOD, 38.6%) and the Department of Health and Human Services (HHS, 27.2%) combined accounting for nearly two-thirds of all federal R&D funding. The same eight agencies account for 97.2% of the FY2020 request, with DOD accounting for 44.3% and HHS for 25.1% Under the President's FY2020 budget request, most federal agencies would see their R&D funding decline. The primary exception is the Department of Defense. DOD's requested R&D funding for FY2020 is $7.1 billion (13.5%) above the FY2018 level. The Departments of Transportation and Veterans Affairs would see small increases in R&D funding. Among the agencies with the largest proposed reductions in R&D funding in the FY2020 budget compared to the FY2018 actual levels are the Department of Energy ($2.8 billion, 15.8%), the National Science Foundation ($567 million, 9.0%), and National Aeronautics and Space Administration ($475 million, 4.0%). The President's FY2020 budget request would reduce funding for basic research by $1.5 billion (4.0%), applied research by $4.3 billion (10.5%), and facilities and equipment by $0.5 billion (12.8%), while increasing funding for development by $4.5 billion (8.3%). President Trump's FY2020 budget is largely silent on funding levels for multiagency R&D initiatives. However, some activities supporting these initiatives are discussed in agency budget justifications and are reported in the agency analyses in this report. The request represents the President's R&D priorities. Congress may opt to agree with none, part, or all of the request, and it may express different priorities through the appropriations process. In recent years, Congress has completed the annual appropriations process after the start of the fiscal year. Completing the process after the start of the fiscal year and the accompanying use of continuing resolutions can affect agencies' execution of their R&D budgets, including the delay or cancellation of planned R&D activities and the acquisition of R&D-related equipment.", "document_type": "crs"}
{"report": "Both the Capitol Rotunda and the Capitol Grounds have been used as the setting for a variety of events, ranging from memorial ceremonies and the reception of foreign dignitaries to the presentation of awards and the hosting of public competitions. This report identifies and categorizes uses of the Capitol Rotunda and Capitol Grounds authorized by concurrent resolutions since the 101 st Congress. In most cases, use of the Capitol Rotunda requires a concurrent resolution agreed to by both the House and Senate. A concurrent resolution for the use of the Rotunda typically identifies the event and date for which use is authorized. Often, the resolution also directs physical preparations to be carried out \"in accordance with such conditions as the Architect of the Capitol may provide.\" Use of the Capitol Grounds requires either the passage of a concurrent resolution or permit approval from the Capitol Police. Events that entail the use of the West Front Steps of the Capitol, electricity on the Lower West Terrace of the Capitol, require more than 24 hours from setup to cleanup, require vehicles on Capitol Grounds for setup, or will have a large number of Members in attendance typically require a concurrent resolution. All other events can typically be issued permits by the U.S. Capitol Police. Upon the completion and opening of the Capitol Visitor Center (CVC) during the 110 th Congress, Emancipation Hall of the CVC became available for use in the same manner as the Rotunda and Capitol Grounds. Use of Emancipation Hall requires the passage of a resolution agreed to by both houses of Congress authorizing its use. Additionally, Congress has provided an ongoing authorization for holiday concerts on Capitol Grounds. Held on Memorial Day, the Fourth of July, and Labor Day, these concerts feature the National Symphony Orchestra and are free and open to the public. A database search was conducted using Congress.gov for the 101 st through the 115 th Congresses (1989-2018). The search was conducted by running a query across all agreed-to concurrent resolutions using the subject term \"rotunda.\" The results of the search were then examined individually to differentiate resolutions for the use of the Rotunda from references to it in otherwise unrelated legislation. The search identified a total of 99 concurrent resolutions that were agreed to by the House and Senate. Between the 101 st Congress and the 115 th Congress, the House and Senate agreed to between one and nine concurrent resolutions per Congress that authorized the use of the Rotunda. Table 1 reports the total number of resolutions agreed to in each Congress. Appendix A , which lists the results of the database search, provides the following information for each concurrent resolution: the Congress in which the resolution was introduced, the resolution number, and the subject of the resolution. Concurrent resolutions authorizing the use of the Rotunda can be divided into seven categories: (1) commemoration ceremonies; (2) Congressional Gold Medal ceremonies; (3) artwork unveilings; (4) presidential inauguration activities; (5) receptions or ceremonies honoring living people; (6) persons lying in state or honor; and (7) prayer vigils. The following sections provide a brief explanation of each category and examples of activities. Table 2 contains the number of concurrent resolutions agreed to by Congress since 1989, by category. The largest percentage of concurrent resolutions (34.3%) authorized the use of the Rotunda for a commemoration ceremony, often of an historical event. For example, concurrent resolutions authorizing the use of the Rotunda for a ceremony as part of the commemoration of the days of remembrance of victims of the Holocaust were passed during each Congress. In recent Congresses, resolutions were also agreed to for Rotunda ceremonies to commemorate the 60 th anniversary of the integration of the U.S. Armed Forces, the 200 th birthday of Constantino Brumidi, the 50 th anniversary of President John F. Kennedy's inauguration, and the 50 th anniversary of the Civil Rights Act of 1964. Ceremonies to award Congressional Gold Medals account for 24.2% of the concurrent resolutions for the use of the Rotunda agreed to since the 101 st Congress. These award ceremonies include presentations of Congressional Gold Medals to Rosa Parks, cartoonist Charles M. Schulz, the Tuskegee Airmen, and other recipients. Since the 101 st Congress, 15.2% of concurrent resolutions have been agreed to for the use of the Rotunda for ceremonies to unveil artwork. These have included unveiling ceremonies for portrait busts of former Vice Presidents, as well as presentation ceremonies of statues prior to placement in Statuary Hall. In preparation for the quadrennial Presidential inauguration activities that take place at the Capitol, concurrent resolutions were passed during the 102 nd , 104 th , 106 th , 108 th , 110 th , 112 th , 113 th , and 115 th Congresses. These resolutions have authorized the Joint Congressional Committee on Inaugural Ceremonies to use the Rotunda \"in connection with the proceedings and ceremonies conducted for the inauguration of the President-elect and the Vice President-elect of the United States.\" Since the 101 st Congress, 10.1% of concurrent resolutions have authorized the use of the Rotunda for inaugural activities. Since the 101 st Congress, 6.1% of concurrent resolutions have authorized the use of the Rotunda for the purposes of receiving foreign dignitaries or honoring a living person. For example, during the 102 nd Congress, use of the Rotunda was authorized for a ceremony and reception for the Dalai Lama. During the 105 th Congress, use of the Rotunda was authorized for a ceremony honoring Mother Teresa. During the 114 th Congress, the use of the Rotunda was authorized for events surrounding the visit by His Holiness Pope Francis to address a joint session of Congress. Use of the Rotunda for individuals to lie in state or honor accounted for 8.1% of Rotunda events authorized by concurrent resolution. These events have included President Reagan, Senator Claude Pepper, and Senator Daniel K. Inouye lying in state; Rosa Parks lying in honor; and the memorial service for Detective John Michael Gibson and Private First Class Jacob Joseph Chestnut of the U.S. Capitol Police. In the 115 th Congress, one individual—Reverend Billy Graham—lay in honor, while two—Senator John McCain and President George H.W. Bush—lay in state. On two occasions during the 107 th Congress (2.0%), concurrent resolutions were agreed to for the use of the Rotunda for prayer vigils. H.Con.Res. 233 authorized the use of the Rotunda for a prayer vigil in memory of those who lost their lives on September 11, 2001. S.Con.Res. 83 authorized the use of the Rotunda for a ceremony as part of a National Day of Reconciliation. A database search was conducted using Congress.gov for the 101 st to the 115 th Congresses (1989-2019). The search was conducted by running a query using the subject term \"Capitol Grounds.\" The results of the search were then examined individually to differentiate resolutions for the use of the Capitol Grounds from references to it in otherwise unrelated legislation. The uses of the Capitol Grounds identified here are restricted to those authorized by concurrent resolution of the House and Senate. The search identified a total 112 concurrent resolutions that were agreed to by the House and Senate. Between the 101 st Congress and the 115 th Congress, the House and Senate agreed to between 3 and 14 concurrent resolutions per Congress that authorized the use of the Capitol Grounds. Table 3 reports the total number of resolutions agreed to in each Congress. Appendix B , which lists the results of the database search, provides the following information for each concurrent resolution: the Congress in which the resolution was introduced, the resolution number, and the subject of the resolution. Concurrent resolutions authorizing the use of the Capitol Grounds can be divided into one of four categories: (1) events sponsored by nonfederal-government groups; (2) memorial services; (3) events sponsored by the federal government; and (4) award and dedication ceremonies. The following sections provide a brief explanation of each category with examples of the types of activities concurrent resolutions provided for on the Capitol Grounds. Table 4 contains the number of concurrent resolutions agreed to by Congress since 1989 by category. The largest percentage of concurrent resolutions agreed to (65.5%) authorized events that are sponsored by nonfederal-government entities. For example, concurrent resolutions authorizing the use of the Capitol Grounds for the Greater Washington Soap Box Derby and the District of Columbia Special Olympics Law Enforcement Torch Relay are typically agreed to each Congress. Memorial services held on the Capitol Grounds account for 23% of the concurrent resolutions passed since the 101 st Congress. Each year since 1989, the House and Senate have agreed to a concurrent resolution allowing the National Peace Officers' Memorial Service to be conducted on Capitol Grounds. The ceremony honors law enforcement officers who gave their lives in the line of duty during the previous year. Events sponsored by the federal government compose 8.8% of events on the Capitol Grounds authorized by concurrent resolution. These events have included authorizing the John F. Kennedy Center for the Performing Arts to hold performances on the East Front of the Capitol, allowing the National Book Festival to run programs on the Capitol Grounds, and authorizing a celebration for the Library of Congress's 200 th birthday. Award and dedication ceremonies account for 2.7% of events authorized by concurrent resolution for the Capitol Grounds. Since 1989, three award and dedication ceremonies have been authorized through concurrent resolution. In the 106 th Congress (1999-2001), Congress authorized the use of the Capitol Grounds for the dedication of the Japanese-American Memorial to Patriotism; in the 108 th Congress (2003-2005), the dedication ceremony for the National World War II Memorial was authorized for the Capitol Grounds; and in the 110 th Congress (2007-2009), the presentation ceremony for the Congressional Gold Medal awarded to Tenzin Gyatso, the Fourteenth Dalai Lama, took place on the Capitol Grounds. Upon the completion and opening of the Capitol Visitor Center (CVC) during the 110 th Congress, Emancipation Hall of the CVC became available for use in the same manner as the Rotunda and Capitol Grounds. Use of Emancipation Hall requires the passage of a resolution agreed to by both houses of Congress authorizing its use. The first concurrent resolution authorizing the use of Emancipation Hall was agreed to during the 110 th Congress. It provided for the use of the Hall in connection with \"ceremonies and activities held in connection with the opening of the Capitol Visitor Center to the public.\" Consistent with previous resolutions authorizing the use of the Rotunda, the concurrent resolution for the use of Emancipation Hall directed that physical preparations be carried out \"in accordance with such conditions as the Architect of the Capitol may provide.\" A database search was conducted using Congress.gov for the 110 th through the 115 th Congresses (2007-2017). The search was conducted by running a query using the subject term \"Emancipation Hall.\" The uses of Emancipation Hall identified here are restricted to those authorized by concurrent resolution of the House and Senate. The search identified a total 43 concurrent resolutions that were agreed to by the House and Senate. Between the 110 th Congress and the 115 th Congress, the House and Senate agreed to between 1 and 15 concurrent resolutions per Congress that authorized the use of Emancipation Hall. Table 5 reports the total number of resolutions agreed to in each Congress. Appendix C , which lists the results of the database search, provides the following information for each concurrent resolution: the Congress in which the resolution was introduced, the resolution number, and the subject of the resolution. Concurrent resolutions authorizing the use of Emancipation Hall can be divided into one of four categories: (1) commemoration ceremonies, (2) congressional gold medal ceremonies, (3) artwork unveilings, and (4) presidential inauguration activities. The following sections provide a brief explanation of each category with examples of the types of activities concurrent resolutions provided for on Emancipation Hall. Table 6 contains the number of concurrent resolution agreed to by Congress since 2007 by category. The largest percentage of concurrent resolutions agreed to (46.5%) authorized the use of Emancipation Hall for commemoration ceremonies. For example, concurrent resolutions authorizing the use of Emancipation Hall are agreed to annually to celebrate the birthday of King Kamehameha. Ceremonies to award Congressional Gold Medals account for 32.6% of the concurrent resolutions for the use of Emancipation Hall agreed to since the 110 th Congress. These award ceremonies include presentations of Congressional Gold Medals to Women Air Force Service Pilots, the Montford Point Marines, and Native American Code Talkers. Since the 110 th Congress, 11.6% of concurrent resolutions have been agreed to for the use of Emancipation Hall for ceremonies to unveil artwork. These have included unveiling ceremonies for a bust of Sojourner Truth, a marker acknowledging the role of slaves in building the Capitol, a statue of Frederick Douglass, and the American Prisoners of War/Missing in Action (POW/MIA) Chair of Honor. Since Emancipation Hall opened in the middle of the 110 th Congress, Congress has also utilized the space for inaugural activities. Just like the resolutions authorizing the use of the Rotunda for inaugural activities, these resolutions have authorized the Joint Congressional Committee on Inaugural Ceremonies to use Emancipation Hall \"in connection with the proceedings and ceremonies conducted for the inauguration of the President-elect and the Vice President-elect of the United States.\" Since the 110 th Congress, 9.3% of concurrent resolutions have authorized the use of the Rotunda for inaugural activities. Appendix A. Concurrent Resolutions for the Use of the Capitol Rotunda Appendix B. Concurrent Resolutions for the Use of the Capitol Grounds Appendix C. Concurrent Resolutions Agreed to for the Use of Emancipation Hall", "summary": "The Capitol Rotunda and the Capitol Grounds have been used as the setting for a variety of events, ranging from memorial ceremonies and the reception of foreign dignitaries to the presentation of awards and the hosting of public competitions. This report identifies and categorizes uses of the Capitol Rotunda and Capitol Grounds authorized by concurrent resolutions since the 101st Congress. In most cases, use of the Capitol Rotunda requires a concurrent resolution agreed to by both the House and Senate. A concurrent resolution for the use of the Rotunda typically identifies the event and date for which use is authorized. Often, the resolution also directs physical preparations to be carried out under the supervision of the Architect of the Capitol. Ninety-nine concurrent resolutions were agreed to by the House and the Senate authorizing the use of the Rotunda between the 101st and the 115th Congresses. These resolutions can be divided into seven categories: (1) commemoration ceremonies; (2) Congressional Gold Medal ceremonies; (3) artwork unveilings; (4) presidential inauguration activities; (5) receptions or ceremonies honoring living people; (6) persons lying in state or honor; and (7) prayer vigils. Use of the Capitol Grounds can be authorized either by the passage of a concurrent resolution or through an application process with the Capitol Police. A concurrent resolution is typically needed for events longer than 24 hours in duration, for events that require vehicles on the Capitol Grounds for setup, for events requiring electronics on the Lower West Terrace of the Capitol, and for events where a large number of Members will be in attendance. The Capitol Police's special events office handles permits and approval for all other events. One hundred twelve concurrent resolutions were agreed to by the House and the Senate authorizing the use of the Capitol Grounds between the 101st and the 115th Congresses. These resolutions can be divided into four categories: (1) events sponsored by nonfederal-government groups; (2) memorial services; (3) events sponsored by the federal government; and (4) award and dedication ceremonies. Upon the completion and opening of the Capitol Visitor Center (CVC) during the 110th Congress, Emancipation Hall of the CVC became available for use in the same manner as the Rotunda and Capitol Grounds. Use of Emancipation Hall requires the passage of a resolution agreed to by both houses of Congress authorizing its use. These resolutions can be divided into four categories: (1) commemoration ceremonies, (2) congressional gold medal ceremonies, (3) artwork unveilings, and (4) presidential inauguration activities. As of the date of this report, 43 concurrent resolutions authorizing the use of Emancipation Hall have been agreed to. This report will be updated at the end of each session of Congress.", "document_type": "crs"}
{"report": "The United Arab Emirates (UAE) is a federation of seven emirates (principalities): Abu Dhabi, the oil-rich federation capital; Dubai, a large commercial hub; and the five smaller and less wealthy emirates of Sharjah, Ajman, Fujayrah, Umm al-Qaywayn, and Ras al-Khaymah. Sharjah and Ras al-Khaymah have a common ruling family—leaders of the Al Qawasim tribe. After Britain announced in 1968 that it would no longer ensure security in the Gulf, six \"Trucial States\" formed the UAE federation in December 1971; Ras al-Khaymah joined in 1972. The federation's last major leadership transition occurred in November 2004, upon the death of the first UAE president and ruler of Abu Dhabi, Shaykh Zayid bin Sultan Al Nuhayyan. Shaykh Zayid's eldest son, Shaykh Khalifa bin Zayid al-Nuhayyan, born in 1948, was elevated from Crown Prince to ruler of Abu Dhabi upon Zayid's death. In keeping with a long-standing agreement among the seven emirates, Khalifa was subsequently selected as UAE president by the leaders of all the emirates, who collectively comprise the \"Federal Supreme Council.\" The ruler of Dubai traditionally serves concurrently as Vice President and Prime Minister of the UAE; that position has been held by Shaykh Mohammad bin Rashid Al Maktum, architect of Dubai's modernization drive, since the death of his elder brother Shaykh Maktum bin Rashid Al Maktum in January 2006. The Federal Supreme Council meets four times per year to establish general policy guidelines, although the leaders of the emirates consult frequently with each other. UAE leadership posts almost always change only in the event of death of an incumbent. The leadership of the UAE was put into doubt by Shaykh Khalifa's stroke on January 24, 2014. He has not appeared publicly since and reportedly is incapacitated, but, in order not to cause turmoil within ruling circles, there is unlikely to be a formal succession as long as he remains alive. His younger brother and the third son of Shaykh Zayid, Crown Prince Shaykh Mohammad bin Zayid al-Nuhayyan (born in 1961), is almost certain to succeed him in all posts. Shaykh Mohammad had been assuming day-to-day governing responsibilities prior to Khalifa's stroke and has been de facto leader since. He and Shaykh Mohammad bin Rashid of Dubai have long been considered the key strategists of UAE foreign and defense policy. Several senior UAE officials are also brothers of Shaykh Mohammad bin Zayid, including Foreign Minister Abdullah bin Zayid, deputy Prime Minister Mansur bin Zayid, deputy Prime Minister and Minister of Interior Sayf bin Zayid, and National Security Advisor Shaykh Tahnoun bin Zayid. In 2017, Shaykh Mohammad appointed his son, Khalid bin Mohammad, as deputy National Security Adviser. As shown in the table above, each emirate has its own leader. The five smaller emirates, often called the \"northern emirates,\" tend to be more politically and religiously conservative and homogenous than are Abu Dhabi and Dubai, which are urban amalgams populated by many Arab, South Asian, and European expatriates. UAE leaders argue that the country's social tolerance and distribution of national wealth have rendered the bulk of the population satisfied with the political system, and that Emiratis are able to express their concerns directly to the country's leaders through traditional consultative mechanisms. Most prominent among these channels are the open majlis (councils) held by many UAE leaders. UAE officials maintain that Western-style political parties and elections for a legislature or other representative body would aggravate schisms among tribes and clans, cause Islamist factions to become radical, and open UAE politics to regional influence. UAE officials have stated that the UAE's end goal is not to form a multiparty system, arguing that this model does not correspond with UAE cultural or historical development. Such assertions appear, at least in part, to signal that the country will work to prohibit the development of factions linked to regional Islamist movements or to regimes in the region. UAE law prohibits political parties. The UAE has provided for some formal popular representation through a 40-seat Federal National Council (FNC)—a body that can review and recommend, but not enact or veto, legislation. The FNC can question, but not remove, ministers and it conducts such questionings regularly. Its sessions are open to the public. The seat distribution of the FNC is weighted in favor of Abu Dhabi and Dubai, which each hold eight seats. Sharjah and Ras al-Khaymah have six each, and the others each have four. The government has not implemented calls, such as were expressed in a March 2011 petition signed by 160 UAE intellectuals, to transform the FNC into an all-elected body with full legislative powers. Each emirate also has its own appointed consultative council. First FNC Vote s . In 2006, the UAE leadership apparently assessed that it had fallen too far behind its Gulf neighbors on political reform and relented to the suggestion to make at least part of the FNC seats elective. In December 2006, the government instituted a limited election process for half of the FNC seats, with the other 20 FNC seats remaining appointed. The Election Commission approved a small \"electorate\" of about 6,600 persons, of which about 20% were women. Out of the 452 candidates for the 20 elected seats, there were 65 female candidates. Only one woman was elected (from Abu Dhabi), but another seven were given appointed seats. The September 24, 2011, FNC election was held in the context of the \"Arab spring\" uprisings, with an expanded electorate (129,000), nearly half of which were female. There were 468 candidates for the 20 seats, including 85 women. However, there was little campaigning, and turnout was about 25%, which UAE officials called disappointing. Of the 20 winners, only one was female. Other winners were elected largely along tribal lines. Of the 20 appointed seats, 6 were women. The government selected a woman, Amal al-Qubaisi, to be deputy speaker—the first woman to hold as high a position in a GCC representative body. The 2015 elections were again for half the FNC, but the electorate was expanded to 225,000 voters, about double that in 2011. The 2015 process included \"early voting\" and out of country voting, culminating on \"election day\" of October 3, 2015. There were 330 candidates (somewhat lower than in 2011), including 74 women (almost as many as in 2011). Turnout was 35%, which government officials stated was a more satisfactory turnout than in 2011. One woman was elected, as happened in 2011. Of the 20 appointed seats, eight were women. Of those, Abu Dhabi representative Ms. Amal al-Qubaisi, was promoted to speaker. The next FNC elections are to be held in the fall of 2019. UAE officials assert that there are plans to eventually make all 40 seats elected, but likely not in the 2019 vote. In December 2018, the UAE leadership decreed that, as of the 2019 election, half of the FNC members will be women – a quota presumably be achieved by appointing enough women to constitute half of the body, after accounting for those elected. A National Election Committee has been meeting to review procedures, particularly the use of technology for voter screening, for the upcoming election. There has been little evident clamor for major political reform, but some UAE intellectuals, businessmen, students, and others have agitated for greater political space. During the 2011 \"Arab Spring\" uprisings, some UAE youth tried unsuccessfully to use social media to organize a public protest in March 2011. Five high-profile activists—the so-called \"UAE-5\"—were put on trial in November 2011. They were convicted and their sentences were commuted. The government has particularly targeted for arrest Islamists linked to the Muslim Brotherhood organization, which UAE leaders named in 2014 as one of 85 \"terrorist organizations\"(a list that included Al Qaeda and the Islamic State). The UAE affiliate of the Brotherhood is the Islah (Reform) organization, which emerged in 1974 as an offshoot of the Muslim Brotherhood and attracts followers mostly from the less wealthy and more religiously conservative northern emirates. UAE officials accuse Islah of being funded by the main Brotherhood chapter in Egypt. The government stepped up its crackdown on Islah in 2012, the year that Muslim Brotherhood figure Mohammad Morsi was elected president of Egypt. UAE authorities arrested and revoked the citizenship of several senior Islah members, including a member of the Ras al-Khaymah ruling family. In July 2013, the UAE State Security Court convicted and sentenced 69 out of 94 UAE nationals (\"UAE-94\")—Islamists arrested during 2011-2013—for trying to overthrow the UAE government. In June 2014, 30 persons, of which 20 are Egyptian nationals, were convicted for connections to the Muslim Brotherhood organization in Egypt. A Saudi-UAE list of \"persons to be isolated,\" released in connection with the June 2017 intra-GCC dispute, included Muslim Brotherhood-linked Egyptian cleric Yusuf Qaradawi, who resides in Qatar. The disagreements between Qatar and the UAE and other GCC states over the Muslim Brotherhood and other political Islamist movements are discussed further in the section on foreign policy. The government has also addressed domestic opposition with reforms and economic incentives. In 2011, the government invested $1.5 billion in utilities infrastructure of the poorer, northern emirates; raised military pensions; and began subsidizing some foods. In 2013, a \"new look\" cabinet included several young figures. Cabinet reshuffles in February 2016 and October 2017 added more young ministers, many of them female, and established minister of state positions for \"tolerance,\" \"happiness,\" artificial intelligence, and food security. Other reforms included formation of an Emirates Foundation for Schools, run by an independent board of directors; limiting the mandate of the Ministry of Health to a focus on disease prevention; and creating a science council with a mandate to promote a new generation of Emirati scientists. Human rights observers assert that U.S. officials downplay criticism of the UAE's human rights record because of the U.S.-UAE strategic alliance. U.S. officials assert that they continue to promote democracy, rule of law, independent media, and civil society in the UAE through State Department programs that are tolerated by the UAE government. Such programs have included the broader Middle East Partnership Initiative (MEPI), which has its headquarters for the Gulf region located at the U.S. Embassy in Abu Dhabi. On the other hand, the UAE government has expelled some U.S. and European-sponsored democracy promotion efforts that the government asserted were too intrusive into UAE politics. In 2012, the government ordered closed the offices in the UAE of the National Democratic Institute (NDI) and the Germany-based Konrad Adenauer Foundation. No U.S. funding for democracy promotion in UAE has been provided in recent years. Recent State Department human rights reports and reports by independent groups such as Human Rights Watch assert that there are a variety of human rights problems in the UAE including: unverified reports of torture, government restrictions of freedoms of speech and assembly, and lack of judicial independence. UAE organizations that monitor the government's human rights performance include the Jurists' Association's Human Rights Committee, the Emirates Human Rights Association (EHRA), and the Emirates Center for Human Rights (ECHR), but their degree of independence is uncertain. In a January 2018 U.N. Human Rights Council Universal Periodic Review, UAE officials highlighted that they had formed a new human rights commission under international standards known as the \"Paris Principles\"—a response to reports that British police were investigating UAE officials suspected of torturing Qatari nationals. According to the State Department, there are an estimated 20,000 to 100,000 stateless persons in the UAE (\"Bidoon\"). Most Bidoon lacked citizenship because they did not have the preferred tribal affiliation when the country was founded. They lack accepted forms of identification and their movements within the UAE or internationally are restricted. The UAE government has increased restrictions on media usage, particularly social media, since the 2011 Arab uprisings, tempering its former commitment to free and open media. A 2012 \"cybercrimes decree\" (Federal Legal Decree No. 5/2012) established a legal basis to prosecute and jail people who use information technology to promote dissent. It provides for imprisonment for using information technology to \"incite actions that endanger state security or infringe on the public order,\" and for life imprisonment for anyone using such technology to advocate the overthrow of the government. In May 2015, the government enacted an Anti-Discrimination Law, which criminalizes the publication of \"provocative\" political or religious material. Several activists have been jailed for violating the decree, including Ahmed Mansoor, who was arrested in 2018 for \"defaming\" the country on social media. On December 31, 2018, a UAE court upheld his 10-year prison sentence and fine of $272,000. A \"National Media Council\" (NMC) directly oversees all media content, and provisions governing media licensing do not clearly articulate government standards in evaluating license applications. Restrictions do not apply to the \"Free Zones\" in UAE in which foreign media operate. However, some media organizations report that the government has banned some journalists from entering the country, and prohibited distribution of books and articles that highlight human rights abuses. The country has also become less welcoming of research institutes, several of which had opened in UAE in the 1990s. The government applied increasingly strict criteria to renewing the licenses of some research institutes and some left the UAE as a result. In November 2012, the UAE ordered out the Rand Corporation, and UAE officials have denied entry to some academics and human rights organizations representatives who have been critical of the UAE's human rights record. On the other hand, some new UAE-run think tanks have opened or become increasingly active in recent years, including the Emirates Policy Center and the TRENDS Institute. The UAE constitution provides for an independent judiciary, but court decisions are subject to review and overrule by political leaders. UAE judicial institutions include Sharia (Islamic law) courts that adjudicate criminal and family law matters, and civil courts that adjudicate civil matters. The civil court system, based on French and Egyptian legal systems, was established in 1973 when a Federal Supreme Court was inaugurated. This court, which consists of a president and a five judges appointed by the UAE leadership, adjudicates disputes between emirates or between an emirate and the UAE federal government; the constitutionality of federal and other laws; conflicts of jurisdiction between the federal and local judicial authorities; and crimes affecting the UAE federation. It also interprets the provisions of the constitution and questions ministers and senior federal officials for official misconduct. A 2012 amendment to the UAE constitution set up a \"Federal Judicial Council\" chaired by the UAE president, which human rights groups asserted reflected increased political influence over the judiciary. Foreign nationals hold positions in the judiciary, making them subject to being threatened with deportation for judgments against Emiratis. In 2010, a UAE court acquitted the UAE president's brother of torturing an Afghan merchant, ruling that he was not liable because he was affected by prescription drugs. The UAE justice system has often come under criticism in cases involving expatriates. Western expatriates have sometimes been arrested for sexual activity on beaches. In 2007, human rights groups criticized the conservative-dominated justice system for threatening to prosecute a 15-year-old French expatriate for homosexuality, a crime in UAE, when he was raped by two UAE men; the UAE men were later sentenced for sexual assault and kidnapping. In August 2012, a 78-year-old pediatrician from South Africa was imprisoned for two months for alleged issues of malpractice related to his six-week service as a doctor in Abu Dhabi in 2002 and he was prevented from leaving the UAE until June 2013. In May 2018, UAE authorities detained a British academic, Matthew Hedges, on charges of \"spying for a foreign state.\" He was sentenced to life imprisonment in November but shortly thereafter, following expressions of outrage from British and other world leaders, was pardoned by the leadership. Women's political rights have expanded steadily. As of December 2011, UAE women are allowed to pass on their citizenship to their children—the first GCC state to allow this. However, UAE women are still at a legal disadvantage relative to men, for example in divorce cases and other family law issues. The penal code allows men to use physical means, including violence, against female family members. Many domestic service jobs are performed by migrant women, and they are denied basic legal protections such as limits to work hours. Recent cabinet reshuffles have greatly increased the number of female ministers. Seven women are in the FNC, one is now its speaker, and, as noted, the FNC will have women as half its members after the 2019 vote. About 10% of the UAE diplomatic corps is female, whereas there were no female diplomats prior to 2001. The UAE Air Force has several female fighter pilots. The UAE constitution provides for freedom of religion but also declares Islam as the official religion. The death penalty for conversion from Islam remains in law, but is not known to be enforced. In practice, non-Muslims in UAE are free to practice their religion. UAE officials boast of the country's religious tolerance by citing the 40 churches in the UAE, of a variety of denominations. In 2016 the government donated additional lands for the building of more churches, as well as some new Hindu and Sikh temples. In January 2017, the Ministry hosted an event for 30 Christian leaders from nine denominations located throughout the Gulf; the event took place at the site of an early Christian monastery on Sir Bani Yas Island in Abu Dhabi. In November 2017, the Abu Dhabi Department of Justice signed an agreement with Christian leadership to allow churches to handle non-Islamic marriages and divorces. In September 2016, Shaykh Mohammad bin Zayid met with Pope Francis in the Vatican and invited him to visit. The visit took place during February 3-5, 2019, and enabled the UAE—at a time of widespread criticism of its intervention in Yemen—to showcase its commitment to religious tolerance, and the Pope to advocate for the creation of more churches in the UAE to better accommodate the approximately 1 million Christians in the country, almost all of whom are expatriates. The papal visit was the first such trip to the Gulf region. There are no Jewish synagogues or Buddhist temples. The Shia Muslim minority, which is about 15% of the citizen population and is concentrated largely in Dubai emirate, is free to worship and maintain its own mosques. However, Shia mosques receive no government funds and there are no Shias in top federal posts. At times, the government has acted against non-UAE Shia Muslims because of their perceived support for Iran and Iran's regional allies. The government has at times closed Shia schools and prohibited the holding of conferences for international Shias. The government has deported some foreign Shias in recent years. UAE law prohibits all forms of compulsory labor, but enforcement is inconsistent. On several occasions, foreign laborers working on large construction projects have conducted strikes to protest poor working conditions and nonpayment of wages. There have been numerous and persistent allegations that foreign workers are housed in cramped \"labor camp\" conditions, have their passports held, are denied wages or paid late, are forced to work long hours, are deported for lodging complaints, and are subjected to many other abuses. In May 2014, the government arrested foreign laborers striking to protest many of the conditions discussed above in the course of building a facility for New York University's (NYU's) branch in Abu Dhabi. NYU apologized to the workers for being excluded from a labor \"code of conduct\" that covers migrant workers in the UAE and compensated several hundred of them. The government has put in place a \"Wages Protection System,\" an electronic salary payments system that requires companies with more than 100 workers to pay workers via approved banks and other financial institutions, thereby facilitating timely payment of agreed wages. The Ministry of Human Resources and Emiratization (MOHRE, formerly the Labor Ministry) has addressed problems such as those above by penalizing employers and requiring that workers' salaries be deposited directly in banks. In 2011 the UAE reformed its \"kafala\" system to allow migrant workers to more easily switch employers, producing higher earnings by immigrant laborers in the country. The UAE is considered a \"destination country\" for women trafficked from Asia and the former Soviet Union. The Trafficking in Persons report for 2018, for the eighth year in a row, rated the UAE as \"Tier 2.\" The rating is based on the assessment that the UAE does not meet the minimum standards for eliminating human trafficking, but is taking significant efforts to do so. The 2018 State Department report credits the UAE with implementing reforms that reduce forced labor among foreign workers in the private sector, instituting direct governmental oversight of domestic laborers, increasing the number of labor trafficking prosecutions, and funding and implementing a national action plan to combat trafficking in persons. UAE authorities continue to prosecute and punish sex trafficking offenders. In March 2015, the government put into effect amendments to victim protection clauses of Federal Law 51 of 2006 on Combating Human Trafficking Crimes. Since 2013, the UAE government, through its \"National Committee to Combat Human Trafficking,\" has assisted human trafficking victims, including through shelters in several UAE emirates. The government opened its first shelter for male sexual trafficking victims in 2013. The government assists victims of human trafficking through a human rights office at Dubai International Airport. An issue in previous years was trafficking of young boys as camel jockeys, a concern alleviated with repatriation of many of those trafficked and the use of robot jockeys. Despite its small population and territorial size, the UAE is increasingly attempting to influence regional outcomes. Its assertiveness has been enhanced by the training, arms, and advice the country has received from its close security partnership with the United States, forged during the 1980-1988 Iran-Iraq war and strengthened after the 1990 Iraqi invasion of Kuwait. The UAE and the five other members of the Gulf Cooperation Council (GCC: Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman) also have close defense ties to the United States. The alliance was formed in late 1981 in response to the Iran-Iraq war, during which the GCC states gave extensive financial and political backing to Iraq. The UAE and Saudi Arabia are closely aligned, particularly in their assertion that Islamist movements including the Muslim Brotherhood pose a significant threat. UAE leaders have publicly defended Saudi Crown Prince Mohammad bin Salman Al Saud against criticism caused by the Saudi killing of U.S.-based Saudi journalist Jamal Kashoggi at the Saudi consulate in Istanbul on October 2, 2018. The Saudi-UAE alliance has contributed to a fracturing of the GCC since the June 5, 2017, move by the two, joined by Bahrain, Egypt, and a few other Muslim states, to isolate Qatar by denying it land, sea, and air access to their territories. The UAE and Saudi Arabia asserted that Qatar supports Iran and Muslim Brotherhood-related movements, although many experts assert that Saudi Arabia and the UAE sought primarily to limit Qatar's foreign policy independence. The rift has, to date, defied mediation efforts by U.S. officials and caused repeated postponements of a U.S.-GCC summit—first planned for May 2018—that is to formally unveil a U.S.-led \"Middle East Strategic Alliance\" (MESA) to counter Iran. Some press accounts refer to the MESA as an \"Arab NATO,\" which was to consist of the GCC states, Jordan, and Egypt. However, the plan suffered a setback in April 2019 when Egypt said it would not join a MESA, possibly as a protest of the Administration's strong support for Israeli Prime Minister Benjamin Netanyahu. Among other consequences of the intra-GCC rift, in December 2017, Saudi Arabia and the UAE announced the formation of a \"joint cooperation committee\" as a subgroup of the GCC. The rift has scuttled long-standing GCC plans to establish a joint military command and joint naval force to be based in Bahrain, supported by an Abu Dhabi-based \"Gulf Academy for Strategic and Security Studies.\" Saudi Arabia, possibly as an overture, formally invited the Amir of Qatar to the GCC summit of December 7-9, 2018, but the Amir did not attend. Yet, the UAE and Saudi Arabia have allowed Qatari commanders to participate in joint GCC security meetings, suggesting that the UAE and Saudi Arabia do not want the Trump Administration to assess them as harming U.S. security interests in the Gulf. The broader issues dividing Qatar and some of its neighbors had caused rifts in the past, although not as extended as the current crisis. In March 2014, the UAE, Saudi Arabia, and Bahrain recalled their ambassadors from Qatar, but that dispute was resolved in November 2014 following an agreement that the GCC countries will not undermine each other's interests. Despite its strategic alliance with Saudi Arabia, the UAE has had border disputes and other disagreements with the Kingdom. A 1974 \"Treaty of Jeddah\" with Saudi Arabia formalized Saudi access to the Persian Gulf via a corridor running through UAE, in return for UAE gaining formal control of villages in the Buraymi oasis area. In March 2011, the UAE contributed 500 police officers to a Saudi-led GCC military intervention in Bahrain to support the Al Khalifa regime against a Shia-led uprising. At least some of the UAE force remained after that time, and one UAE police officer was killed in a bombing in Manama in March 2014. UAE leaders assert that Iran is a threat to the UAE and the region and must be countered assertively. UAE leaders publicly backed the July 2015 Iran nuclear agreement (Joint Comprehensive Plan of Action, JCPOA), while simultaneously expressing reservations that the pact would reduce the U.S. interest in countering Iran's regional activities. UAE leaders strongly support the Trump Administration's characterization of Iran as a major U.S. adversary, its May 2018 withdrawal from the JCPOA, and its reimposition of all U.S. sanctions on Iran. UAE officials have committed, along with Saudi leaders and others, to ensure that the global oil market remains well supplied to support the April 2019 U.S. decision to sanction countries that continue to import Iranian oil. UAE leaders have explained the UAE intervention in Yemen, discussed further below, primarily as an effort to counter Iran's regional ambitions. In January 2016, the UAE withdrew its ambassador from Iran in solidarity with Saudi Arabia's breaking relations with Iran over issues related to the Saudi execution of a dissident Shia cleric. Because of Hezbollah's affiliation with Iran, in February 2016, the UAE barred its nationals from travelling to Lebanon, downgraded its diplomatic relations with Lebanon, and joined the other GCC states in a declaration that Hezbollah is a terrorist organization. UAE policy in east Africa, Yemen, Syria, and elsewhere is driven largely by the UAE objective of weakening Iran. Some UAE officials assert that the large Iranian-origin community in Dubai emirate (estimated at 400,000 persons) could pose a \"fifth column\" threat to UAE stability. Dubai leaders express less concern about Iranian-origin residents, asserting that this population is a product of long-standing UAE-Iran commercial ties. The extensive Iranian commercial presence in the UAE also gives the United States ample opportunity to enlist the UAE in sanctioning Iran. In 2010, when international sanctions on Iran tightened dramatically, the UAE government directed its banks to limit transactions with Iran, even though a decline in UAE-Iran trade harmed the powerful UAE trading community. An additional complication in UAE-Iran relations is a dispute over several Persian Gulf islands. In 1971, Iran, then ruled by the U.S.-backed Shah, seized the Greater and Lesser Tunb islands from the emirate of Ras al-Khaymah, and intimidated the emirate of Sharjah to reach an agreement for shared control of another island, Abu Musa. In April 1992, Iran asserted complete control of Abu Musa. The UAE has called for peaceful resolution of the issue through direct negotiations, referral to the International Court of Justice, or through another agreed forum. The United States takes no position on the sovereignty of the islands, and supports the UAE's call to negotiate the dispute. In October 2008—after the UAE protested Iran's opening in August 2008 of administrative and maritime security offices on Abu Musa—the UAE and Iran established a joint commission to resolve the dispute. The dispute flared again in 2012, when then-President Ahmadinejad visited Abu Musa and spoke to the inhabitants there, an action that UAE officials said undermined diplomacy on the issue, including the appointment of negotiators. Iran incurred further UAE criticism with a May 2012 visit to Abu Musa by then-Islamic Revolutionary Guard Corps (IRGC) Commander-in-Chief Mohammad Ali Jafari. In 2014, the two countries discussed a possible solution under which Iran might cede control of the disputed islands in exchange for rights to the seabed around them. Iran reduced its presence on Abu Musa as a confidence-building measure. No discussions have been reported in recent years. Since the 2011 Arab uprisings, the UAE has become more active in the region, including through the use of its own military forces and its development of regional military facilities from which to project power. The UAE's capabilities have been enhanced by the many years of defense cooperation with the United States. The UAE's opposition to the Muslim Brotherhood generally drives its policies toward countries where Brotherhood-linked groups are prominent. In line with opposition to the Muslim Brotherhood, the UAE supported the Egyptian military's 2013 toppling of Muslim Brotherhood figure Mohammad Morsi, who was elected president in 2012. The UAE has given Egypt over $20 billion in assistance (including loans, grants, and investments) since the ouster of Morsi. UAE officials denied that they had blocked a potential competitor to President Sisi in March 2018 elections from leaving UAE to return to Egypt. Intra-GCC differences—as well as differences between the UAE and U.S. policy—have manifested in post-Qadhafi Libya. In 2011, several GCC states, including the UAE, conducted air strikes and armed some Libyan rebels to help overthrow then-Libyan leader Muammar Qadhafi. In post-Qadhafi Libya, the UAE and Qatar support rival groups in the highly fractured country. The UAE, possibly in violation of U.N. Security Council resolutions on Libya, reportedly provides arms in support of Field Marshal Khalifa Hafter and his Libyan National Army (LNA) movement and reportedly continues to support operations at an airbase in eastern Libya from which pro-LNA forces fly air strikes. Hafter, a former commander in the Libyan armed forces, has refused to recognize the authority of the U.N.-backed Government of National Accord (GNA) and leads a coalition of military personnel and militias that has fought Islamist groups and some GNA-aligned forces. In July 2018, press reports claimed that UAE-based entities had signed agreements with Hafter-aligned oil authorities in eastern Libya to export Libyan oil in violation of U.N. Security Council resolutions. Other outside actors, including Russia, have given Hafter some backing as well. These actors have backed Hafter's April 2019 advance on Tripoli as an attempt to unify Libya and counter Islamist militia groups that back the GNA. In August 2014, the UAE and Egypt carried out an air strike in Libya against a Muslim Brotherhood-linked Islamist militia that reportedly enjoyed support from Qatar. The United States criticized the strike as detracting from Libyan stability. The UAE is a member of the U.S.-led coalition against the Islamic State organization. During 2014-2015, it conducted more strikes in Syria against Islamic State positions than any country except the United States, and was the only Arab state that the United States permitted to command strikes there. The UAE also hosted other forces participating in the anti-Islamic State effort, including French jets stationed at Al Dhafra Air Base and 600 forces from Australia. The GCC states, including the UAE, at first sought to help oust Assad in part to strategically weaken Assad's ally, Iran. The UAE contributed to a multilateral pool of funds to buy arms for approved rebel groups in Syria. After Russia's intervention in Syria in 2015, the UAE accepted Assad's eventual victory. In recognition of Russia's predominant position in Syria, and its growing involvement in the region more generally, de facto UAE leader Mohammad bin Zayid has engaged Russian leaders with increasing frequency. On December 27, 2018, and in the wake of President Trump's announcement that a substantial portion of the 2,000 U.S. troops in Syria would be withdrawn, the UAE reopened its embassy in Damascus. UAE officials explained the move as an effort to reassert Arab influence in counter to Iran's presence in Syria. It is unclear whether the UAE will invest in any reconstruction in Syria. The UAE has also sought to alleviate suffering from the Syria crisis through donations to Syrian refugees and grants to Jordan to help it cope with the Syrian refugees that have fled there. In 2018, the UAE, Saudi Arabia, and Kuwait provided $2.5 billion to help stabilize Jordan's finances. The UAE portion was about $833 million. UAE forces also have participated in annual military exercises in Jordan intended to help protect Jordan from Syria conflict spillover. The GCC states all supported Iraq against Iran in the 1980-1988 Iran-Iraq war, and all broke relations with Iraq after it invaded Kuwait in 1990s. No Arab state, including the UAE, participated in the U.S.-led invasion that overthrew Saddam Hussein in 2003. In 2008, the UAE posted an ambassador to Iraq, wrote off $7 billion in Iraqi debt, and Shaykh Mohammad bin Zayid visited the country. It opened a consulate in the Kurdish region of Iraq in 2012. However, the relationship deteriorated as the Shia-dominated government of former Prime Minister Nuri al-Maliki (2006-2014) marginalized Sunnis. UAE officials welcomed the change of leadership in Iraq to Prime Minster Haydar Al Abadi in August 2014 and hosted him in December 2014. Still, the UAE and other GCC states did not conduct anti-Islamic State air operations in Iraq, possibly because of the Iraqi government's close relations with Tehran. Since mid-2017, Saudi Arabia and the UAE have improved ties to Iraq's Shia leaders to dilute Iranian influence there. The UAE and Germany jointly run a fund to pay for coalition efforts to reconstruct and stabilize areas of Iraq liberated from the Islamic State. The UAE donated $50 million to the fund in late 2016, and UAE companies have separately invested in housing and other projects in Iraq. The UAE-Germany cooperation reprises their joint cooperation in Iraq during 2003-2011, in which the UAE provided facilities for Germany to train Iraqi police and the UAE provided over $200 million for Iraq reconstruction, including for hospitals and medical treatment in the UAE for Iraqi children. In Yemen, another state roiled by the 2011 Arab uprisings, the UAE has intervened militarily since early 2015 with military personnel, armor, and airstrikes, in close partnership with Saudi Arabia, against the Zaydi Shia \"Houthi\" faction. The Saudi-led coalition asserts that the intervention was required to roll back the regional influence of Iran, which has supplied the Houthis with arms, including short-range ballistic and cruise missiles the Houthis have fired on the UAE and Saudi Arabia and their ships in the vital Bab el Mandeb Strait. In October 2016, the Houthis used anti-ship cruise missiles to damage a UAE Navy logistics ship in the Bab el Mandeb Strait. Since the UAE intervened, nearly 150 UAE soldiers have died. The Saudi and UAE-led intervention in Yemen has precipitated widespread international criticism of the two countries over the humanitarian effects of the war and other alleged abuses. In June 2017, UAE officials denied allegations by human rights organizations that UAE forces were maintaining a secret network of prisons in Yemen in which detainees were being severely abused. In early 2019, press investigations indicated that the UAE was arming some anti-Houthi militia commanders that were, and may still be, linked to Al Qaeda and/or the Islamic State. Some of these reports also indicate that some U.S. armor supplied to the UAE might have fallen into the hands of the Houthis. In an attempt to address critics, the UAE has highlighted the country's humanitarian aid to the people of Yemen in the context of the conflict. The UAE has provided $4 billion to Yemen, of which about $1.25 billion was provided in 2018, according to official UAE media. However, some of the total aid figure represents infrastructure investments, not grant aid. Criticism of the Arab coalition war effort has produced increasing congressional opposition to the U.S. logistical support provided to the effort, which included intelligence and aerial refueling under a cross-servicing agreement, as well as related arms sales and some direct U.S. military action to prevent Iranian weapons flows to the Houthis. In November 2018, the United States ended the refueling for coalition aircraft. But, fallout from the Kashoggi killing propelled additional congressional efforts to cease U.S. support for the coalition Yemen effort. For information on Congressional initiatives on the Yemen issues, see: CRS Report R45046, Congress and the War in Yemen: Oversight and Legislation 2015-2019 , by Jeremy M. Sharp and Christopher M. Blanchard. Separately, the UAE works closely with U.S. forces and with local Yemeni communities to counter the local faction of Al Qaeda—Al Qaeda in the Arabian Peninsula (AQAP). U.S. Special Operations Forces in Yemen reportedly worked with the UAE to defeat AQAP fighters at the port of Mukalla in April 2016, in the process killing the leader of the Yemeni branch of the Muslim Brotherhood. In January 2017, the Trump Administration authorized a raid in concert with some UAE special forces on allies of AQAP, an operation in which one U.S. soldier was killed. In August 2017, UAE and U.S. forces reportedly advised about 2,000 Yemen government forces conducting an operation against AQAP sanctuaries in Shabwa Province. Some experts assert that the UAE is promoting separatism in south Yemen and exercises significant control over governance in areas where UAE forces operate. In early March 2019, a UAE led operation, assisted by the United States, rescued an American hostage in Yemen, Danny Lavone Burch, who had been held by a gang with some ties to Al Qaeda. Congressional criticism of UAE operations in Yemen has not extended to the anti-AQAP mission. The UAE has been using its financial and military assets to be able to project power into Yemen as well as to counter Iranian influence more broadly. Another pillar of the UAE's effort to counter Iran has been to establish military bases and support friendly leaders and factions in several East African countries. During 2015, UAE forces deployed to Djibouti to support the intervention in Yemen, but in mid-2015 a UAE-Djibouti dispute over funding arrangements caused UAE (and Saudi) forces to begin using facilities in Eritrea to stage and to train pro-government Yemeni forces—a relationship that might violate a U.N. embargo on Eritrea. Perhaps to solidify its relations with Eritrea, the UAE helped broker a rapprochement between Eritrea and Ethiopia, which culminated in a trilateral (Ethiopia-Eritrea-UAE) summit in Abu Dhabi on July 24, 2018. The summit came one month after the UAE pledged to give Ethiopia $3 billion in investments. Yet, during a visit to the United States in late July 2018, the Prime Minister of Ethiopia, Abiy Ahmed, said he had rejected a UAE offer to build an Islamic center in Ethiopia and downplayed the UAE role in brokering the rapprochement. The UAE reportedly will be investing in energy infrastructure linking the two countries. Also in 2015, the UAE expanded its partnership with the fragile government in Somalia to open a new center at which a few hundred UAE special forces trained Somali commandos to counter terrorist groups, particularly Al Shabab. The UAE also established a base at the port of Berbera, in the breakaway region of Somaliland, triggering a legal complaint from the government of Somalia in February 2017. The 30-year basing agreement reportedly includes UAE training for Somaliland military and police forces. However, the rift with the government in Mogadishu led to a termination of the UAE training mission in Somalia in early 2018. In early July 2018, the European Union accused the UAE of \"destabilizing\" Somalia, referring to UAE pressure on Somalia to join the boycott of Qatar. The UAE has cooperated with the Saudi-led effort to persuade Sudan's leaders to realign with the GCC countries and forgo its erstwhile alliance with Iran. Sudanese troops have joined the Arab coalition effort in Yemen and Sudan's then-leader, Omar Hassan al-Bashir, visited the UAE in February 2017. In April 2019, Bashir was ousted by military colleagues in response to a popular uprising. In late April 2019, the UAE and Saudi Arabia pledged $3 billion in aid to Sudan, although the two were criticized for supplying funds to Sudan even though the military has said it will not transfer authority to civilian rule for two years. The UAE has assisted the U.S.-led mission to stabilize Afghanistan by allowing the use of its military facilities for U.S. operations there and by deploying a 250-person contingent of Presidential Guard forces, since 2003, in the restive south. During 2012-2014, the UAE deployed six F-16s for close air support missions there. The UAE also has donated several hundred million dollars of humanitarian and development aid to Afghanistan since the fall of the Taliban regime. The risks of the involvement were evident in January 2017 when five UAE diplomats were killed by a bomb during their visit to the governor's compound in Qandahar. The UAE Ambassador survived. In mid-December 2018, the UAE hosted meetings between Taliban representatives, U.S. officials, and officials from several regional stakeholder countries to discuss a possible political settlement in Afghanistan. Before the September 11, 2001, attacks on the United States, the UAE apparently did not perceive the Taliban movement as a major threat. The UAE was one of only three countries (Pakistan and Saudi Arabia were the others) that recognized the Taliban during 1996-2001 as the government of Afghanistan, even though the Taliban regime was harboring Al Qaeda leaders. The UAE has no formal diplomatic relations with Israel, but UAE troops did not participate militarily in any major Arab-Israeli war (two of which - 1948 and 1967 - occurred before the UAE was formed). Unlike Qatar and Oman, the UAE did not host multilateral Arab-Israeli working groups on regional issues during 1994-1998. In 2007, the UAE joined Saudi Arabia, Egypt, and Jordan in a \"quartet\" of Arab states to assist U.S. diplomacy on Israeli-Palestinian issues, and it attended the Annapolis summit on the issue that year. In recent years, Israel and the UAE have informally aligned against Iran and there are consistent reports of quiet diplomatic cooperation and security cooperation, including reported 2018 visits to Tel Aviv by UAE security officials. Israeli diplomats have attended multilateral meetings in the UAE, such as the January 2014 conference of the 144-country International Renewable Energy Agency (IRENA), attended by Israel's Minister of National Infrastructure, Energy, and Water. In November 2015, the UAE gave Israel permission to establish a diplomatic office in Abu Dhabi to facilitate Israel's participation in IRENA. The interactions indicate that the UAE has set aside its recriminations over an Israeli assassination of Hamas figure Mahmoud al-Mabhouh at a hotel in Dubai in 2010. There apparently are unspecified levels of Israel-UAE bilateral trade, even though the UAE formally claims it is enforcing the Arab League primary boycott of Israel. In 1994, the UAE joined with the other Gulf monarchies in ending enforcement of the Arab League's secondary and tertiary boycotts (boycotts of companies doing business with Israel and on companies that deal with companies that do business with Israel). In August 2018, the head of state-owned Dubai Ports World, which has ties with Israeli shipping company Zim Integrated Shipping Services Ltd. and other Israeli firms, visited Israel. The UAE has deferred to Saudi Arabia in formulating Arab or GCC proposals to resolve the Israeli-Palestinian dispute. And the UAE position on that issue aligns with other Arab states, for example in support of the Palestinian Authority (PA) bid for statehood recognition and opposition to the Trump Administration's 2018 recognition that Israel's capital is in Jerusalem and 2019 recognition of Israeli sovereignty on the Golan Heights. Yet, the government reportedly is poised to support a Trump Administration Israel-Palestinian peace plan that purportedly is far less favorable toward the Palestinians than were previous peace proposals. In line with UAE animosity toward Muslim Brotherhood-related movements, the UAE does not support Hamas but rather its rival, the Fatah faction of the Palestine Liberation Organization, which runs the West Palestinian Authority (PA) based on the West Bank. In June 2015, the UAE donated $12 million to help the Gaza victims of war with Israel, channeling the funds through Fatah, not Hamas. The UAE also hosts and financially backs senior PLO official Mohammad Dahlan, hoping to propel him to succeed PA President Mahmoud Abbas. According to the UAE government, the UAE has provided over $500 million to humanitarian projects for Palestinian refugees in the Palestinian territories and in Syria, sending the funds through the U.N. Relief and Works Agency (UNRWA). In April 2018, the UAE contributed $50 million to UNRWA to help it compensate for a shortfall in its operating funds caused by the Trump Administration cessation of funding to the agency. The UAE in the past funded a housing project in Rafah, in the Gaza Strip, called \"Shaykh Khalifa City.\" The UAE asserts that it has provided billions of dollars in international aid through its government and through funds controlled by royal family members and other elites. Among initiatives outside the Near East and South Asia region are the following: The Abu Dhabi Fund for Development (ADFD), established in 1971, has distributed over $4 billion for more than 200 projects spanning 53 countries. The UAE provided $100 million for victims of the December 2004 tsunami in the Indian Ocean. During 2011-2012, UAE foundations responded to U.N. appeals for aid to the victims of a drought in East Africa and provided about $2 million for victims of conflict in Somalia. In October 2013, the UAE reopened a UAE embassy in Mogadishu, in part to facilitate the delivery of relief to Somalis. The UAE has donated for disaster relief and for health care facilities in the United States, including: $100 million to assist New Orleans after Hurricane Katrina; $150 million to Children's National Medical Center in Washington, DC; $5 million to the reconstruction of the new pediatric health care wing at St. John's Mercy Hospital in Joplin, MO, in the wake of the May 2011 tornado there; and $10 million to assist with the reconstruction and recovery efforts of communities affected by Hurricane Sandy in 2013. In 2012, Johns Hopkins officials unveiled the Sheikh Zayid Cardiovascular and Critical Care Tower, funded by a UAE donation. In December 2018, the UAE announced it would increase its contribution to the U.N. Central Emergency Relief Fund to $5 million in 2019, from $1.75 million provided in 2018. The UAE's ability to project power in the region is a product of many years of U.S.-UAE defense cooperation that includes U.S. arms sales and training, strategic planning, and joint exercises and operations. The UAE's armed forces are small—approximately 50,000 personnel—but they have participated in several U.S.-led military operations, including Somalia (1992), the Balkans (late 1990s), Afghanistan (since 2003), Libya (2011), and Syria (2014-2015). Some experts say the UAE has joined U.S.-led operations to further invest the United States in UAE security and increase UAE influence over U.S. policy. The UAE reportedly has also augmented its manpower by recruiting foreign nationals and hiring U.S. and other security experts to build militias and mercenary forces that supplement UAE national forces. The United States and UAE have established a \"Defense Cooperation Framework\" to develop joint strategic approaches to regional disputes and conflicts and to better integrate U.S. capabilities with those of the UAE. The Framework includes UAE development of a defense plan that will facilitate joint U.S.-UAE planning in case of attack on the UAE. In accordance with the Framework, the two countries have established a \"Joint Military Dialogue\" (JMD) to identify shared security objectives and consult on a wide range of strategic issues. The fourth U.S.-UAE JMD was help on April 11, 2019. The Framework builds on the July 25, 1994, bilateral Defense Cooperation Agreement (DCA), the text of which is classified. The DCA was accompanied by a separate \"Status of Forces Agreement\" (SOFA) giving U.S. military personnel in UAE certain legal immunities, but several incidents reportedly caused the UAE to void the SOFA and to agree with the United States to handle legal incidents on a \"case-by-case basis.\" On May 15, 2017, Secretary of Defense James Mattis and Shaykh Mohammad bin Zayid confirmed that the United States and the UAE had concluded a new DCA with a 15-year duration. In accordance with the DCA The United States stations about 5,000 U.S. military personnel at several UAE facilities including Jebel Ali port (between Dubai and Abu Dhabi), Al Dhafra Air Base (near Abu Dhabi), and naval facilities at Fujairah. Jebel Ali, capable of handling aircraft carriers, is the U.S. Navy's busiest port of call. The U.S. forces in UAE support U.S. operations in Afghanistan, combat the Islamic State, deter Iran, try to intercept terrorists, and combat smuggling and illicit shipments of weaponry or proliferation-related equipment. The number of U.S. forces currently in UAE is much higher than the 800 U.S. personnel there prior to the 2003 U.S. intervention in Iraq. The United States stations combat and other aircraft. About 3,500 of the U.S. contingent are Air Force personnel deployed at Al Dhafra air base. The facility at first only hosted U.S. surveillance aircraft such as the U-2 and the KC-10 refueling aircraft, but the UAE later permitted the stationing of F-15s; the \"Stealth\" F-22 Raptor; and the Global Hawk and the AWACS (Airborne Warning and Control System). Dhafra is the only overseas base for F-22s. In April 2019, the United States deployed the F-35 combat aircraft to Al Dhafra – the first such U.S. deployment of that aircraft in the Middle East region. The United States trains UAE forces. About 600-800 UAE military personnel study and train in the United States each year, mostly through the Foreign Military Sales program, through which the UAE buys most of its U.S.-made arms. The quality of the UAE force has, by all accounts, benefitted substantially from the U.S. training. U.S. military officers say that UAE fighter pilots, operators of HAWK surface-to-air missile batteries, and special operations forces are highly proficient and have demonstrated their effectiveness in recent combat missions, particularly against AQAP in Yemen. Since 2000, the UAE has hosted a \"Joint Air Warfare Center\" (AWC) where UAE and U.S. forces conduct joint exercises on early warning, air and missile defense, and logistics. Since 2009, UAE Air Force personnel have participated in yearly Desert Falcon exercises at Nellis Air Force Base in Nevada. Within a broader GCC context, joint statements issued after a 2015 and a 2016 U.S.-GCC summit at Camp David announced a new U.S.-GCC strategic partnership in which the United States pledged to (1) facilitate U.S. arms transfers to the GCC states; (2) increase U.S.-GCC cooperation on maritime security, cybersecurity, and counterterrorism; (3) organize additional large-scale joint military exercises and U.S. training; (4) help realize a long-discussed concept of a Gulf-wide ballistic missile defense capability; and (5) U.S.-GCC military exercises and U.S. training for GCC special forces. U.S. officials assert that arms sales to the UAE enhance U.S. security by building up indigenous GCC capabilities and promoting interoperability. UAE representatives assert that the country would like to work out a mechanism with the United States under which requests for munitions and arms purchases could receive expedited U.S. consideration. Some options might include designating the UAE as a \"Major Non-NATO Ally\" (MNNA), or a mechanism UAE officials say they prefer: legislation that would declare the UAE a key U.S. defense partner. Two Gulf states—Kuwait and Bahrain—are designated as MNNAs. Yet, the United States' preference to work with the GCC as a bloc rather than country-by-country was enshrined in a December 16, 2013, Presidential Determination to allow defense sales to the GCC as a bloc. Some defense sales to the UAE might be contingent on the UAE's joining the Missile Technology Control Regime (MTCR), which UAE officials say they are considering trying to do. The UAE does not receive U.S. aid to purchase U.S. weaponry. On the other hand, congressional opposition to further U.S. support for UAE operations in Yemen could mean that U.S. arms sales to the UAE will halt or slow. Among major FMS programs with or potential sales to the UAE F-16 Program . In 2000, the UAE purchased 80 U.S. F-16 aircraft, equipped with the Advanced Medium Range Air to Air Missile (AMRAAM) and the High Speed Anti-Radiation Missile (HARM), at a value of about $8 billion. Congress did not block the sale, although some Members questioned the AMRAAM as an introduction of the weapon into the Gulf. In April 2013, the United States sold the UAE an additional 30 F-16s and associated \"standoff\" air-to-ground munitions, in conjunction with similar weapons sales to Israel and Saudi Arabia, which U.S. officials indicated were intended to signal resolve to Iran. The UAE also has about 60 French-made Mirage 2000 warplanes, and is reportedly considering buying French-made Rafales and the Boeing F/A-18. F-35 . UAE officials and industry sources say the country wants to buy two dozen of the advanced F-35 \"Joint Strike Fighter,\" asserting that possessing the most sophisticated U.S. aircraft enhances interoperability with U.S. air operations. Even though Israel and the UAE are aligned on many regional policies, U.S. officials have said that the United States would not sell the aircraft to the UAE before Israel receives the weapon; delivery to Israel is expected to begin in late 2016. That apparently is an effort to enforce U.S. law that requires maintaining Israel's \"Qualitative Military Edge\" (QME) in the region. However, it was reported in November 2017 that the Trump Administration agreed to preliminary talks on future UAE procurement of the F-35. JDAMs and other Precision-Guided Munitions . The United States has sold the UAE precision-guided missiles for the F-16s, including 20 of the advanced ATM-84 SLAM-ER Telemetry missile and 5,000 GBU-39/B \"bunker buster\" bombs. (The sale of the SLAM-ER to UAE was the first sale of that weapon to a Gulf state.) In 2008, the United States sold the UAE an unspecified number of Join Direct Attack Munitions (JDAM) kits (which convert gravity bombs to precision-guided bombs) worth about $326 million. In 2011, the United States sold the UAE an additional 4,900 JDAM kits at an estimated value of $304 million. On several occasions in 2015, the United States sold the UAE precision-guided munitions (Guided Bomb Units—GBU-31s and GBU-12s) and resupplied it with JDAMs for use against the Islamic State and the Houthi rebellion in Yemen. However, some recent sales of such munitions have been held up by Congress in 2018 and 2019 over concerns about the humanitarian effects of the Yemen war. Apache Helicopters . On November 4, 2010, the Defense Security Cooperation Agency (DSCA) notified Congress of two potential sales, including a $5 billion sale of AH-64 Apache helicopters (30 helicopters, remanufactured to Block III configuration). Missiles. The UAE reportedly possesses a small number (six) of Scud -B ballistic missiles obtained from a non-U.S. suppliers . The United States does not supply or assist the UAE with ballistic missile technology, in part because the country is not an adherent of the Missile Technology Control Regime (MTCR). UAE officials say the country is considering trying to join that convention. Drone s. At a UAE defense show in 2013, the UAE agreed to a commercial sale, worth about $200 million, for Predator X-P unmanned aerial vehicles (UAVs), although they are unarmed and for surveillance only. The system arrived in 2017. Were the UAE to join the MTCR, it might be eligible to buy a U.S.-made armed drone, such as the \"Guardian,\" the sale of which to non-MTCR countries is precluded because it is an MTCR \"Category One\" system. The UAE also reportedly has some Chinese-made UAVs. High Mobility Artillery Rocket System (HIMARS) . In September 2006, the United States sold UAE High Mobility Artillery Rocket Systems (HIMARS) and Army Tactical Missile Systems (ATACMs), valued at about $750 million. Tanks . UAE forces still use primarily 380 French-made Leclerc tanks. A long-standing U.S. objective—and a driving force behind the formation of the \"U.S.-GCC Strategic Cooperation Forum\" formed in March 2012—has been to organize a coordinated Gulf-wide ballistic missile defense (BMD) network. This objective has taken on greater urgency in the United States and in the Gulf as Iran's missile capability has advanced and Iran has supplied short-range missiles to the Houthis and other allies. The UAE hosts an Integrated Air and Missile Defense (IAMD) Center—a training facility to enhance intra-GCC and U.S.-GCC missile defense cooperation. A U.S. sale to the UAE of the Patriot Advanced Capability 3 (PAC-3) missile defense system, with an estimated value of $9 billion value, was announced in December 2007. In 2008, the United States sold the UAE vehicle-mounted \"Stinger\" antiaircraft systems with an estimated value of $737 million. In 2016, the Administration notified Congress of a potential sale of \"Large Aircraft Infrared Countermeasures\" to protect UAE head of state aircraft against missile threats. On May 11, 2017, the Administration notified a potential sale to the UAE of 60 PAC-3 and 100 Patriot Guidance Enhanced Missile-Tactical (GEM-T) missiles, with a total estimated value of about $2 billion. Because these are defensive systems, the sale was not affected by the June 26, 2017, commitment (rescinded in early 2018) by then-Senate Foreign Relations Committee Chairman Senator Bob Corker to withhold informal clearances on sales of \"lethal military equipment\" to the GCC states until there is a path to the resolution of the intra-GCC dispute. THAAD. The UAE was the first GCC state to order the Terminal High Altitude Air Defense System (THAAD), the first sale ever of that sophisticated missile defense system, with an estimated value of about $7 billion. The delivery and training process for the UAE's THAAD system took place in late 2015. Despite expressing no concerns about any interruption or diminution of its defense ties to the United States, the UAE has sought to diversify its defense partnerships. In 2004, the UAE joined NATO's \"Istanbul Cooperation Initiative,\" later gaining \"observer\" status in NATO. In 2011, the UAE sent an Ambassador to NATO under that organization's revised alliance policy. In 2017, NATO established a liaison office in Abu Dhabi under the auspices of the embassy of Denmark. Since well before the formation of the anti-Islamic State coalition, the UAE has been hosting other countries' forces. In January 2008 the UAE and France signed an agreement to allow a French military presence in UAE. The facilities used—collectively termed Camp De La Paix (\"Peace Camp\")—were inaugurated during a French presidential visit in May 2009. It includes a 900-foot section of the Zayid Port for use by the French navy; an installation at Dhafra Air Base used by France's air force; and a barracks at an Abu Dhabi military camp that houses about 400 French military personnel. India's Prime Minister, Narendra Modi, visited the UAE in August 2015, the first such visit by an Indian leader since 1981. The visit included a strategic component in light of India's naval exercises with GCC countries in recent years. Crown Prince Mohammad bin Zayid made a reciprocal visit to India in January 2017, during which the two countries signed a \"Comprehensive Strategic Partnership Agreement.\" The UAE relationship with Russia has attracted significant attention. In February 2017, press reports indicated that the UAE and Russia might jointly develop a combat aircraft based on the Soviet-era MiG-29. The collaboration—with a partner that is acting against the UAE's interests in Syria and other parts of the region—appeared as an acknowledgment by the UAE of Russia's growing role in the region. The UAE might also be attempting to engage Russia in defense cooperation in order to perhaps try to steer Russian policy in Syria or enlist Russian cooperation in settling regional conflicts. Significant differences between the UAE and United States emerged in 2015 over apparent purchases of weapons by the UAE's Al Mutlaq Technology Company of weapons from North Korea. The North Korean supplier is said to be Korea Mining Development Trading Corporation (Komid), which has been sanctioned by the United States for its involvement in North Korean strategic programs. The UAE cooperates with U.S. counterterrorism and counterproliferation policies in the region, not only through operations against terrorist groups but also in seeking to preventing the movement of terrorists, pirates, human traffickers, and proliferation-related technology through UAE borders and waters. U.S. programs, which have sometimes included providing small amounts of counterterrorism assistance, have helped build the UAE's capacity to enforce its borders and financial controls. In FY2015, about $400,000 in DOD funds were provided to the UAE to assist its counternarcotics capability, and about $300,000 in similar funding was provided in FY2016. In FY2015, about $260,000 in State Department funds were provided to the UAE to build its capacity to counter terrorism financing (see below). About $310,000 in such funding was provided in FY2016. During the mid-1990s, some Al Qaeda activists reportedly were able to move through the UAE, and two of the September 11, 2001, hijackers were UAE nationals who reportedly used UAE-based financial networks. Since then, State Department reports on terrorism have credited the UAE with making significant efforts against terrorism and terrorism financing, and with continuing to foil potential terrorist attacks within the UAE. UAE authorities have arrested and prosecuted Al Qaeda and Islamic State operatives; denounced terror attacks; improved border security; instituted programs to counter violent extremism; instituted laws to block suspect financial transactions; criminalized use of the internet by terrorist groups; and strengthened its bureaucracy and legal framework to combat terrorism. Human rights groups allege that UAE counterterrorism law is often used against domestic political dissidents. In 2014, the government, with FNC concurrence, enacted a revised counterterrorism law that makes it easier to prosecute, and increases penalties for, planning acts of terrorism, and authorizes the UAE cabinet to set up lists of designated terrorist organizations and persons. The UAE cochairs the anti-Islamic State-related \"Coalition Communications Working Group\" along with the United States and Britain. At the December 2014 GCC summit, the leaders announced the creation of a regional police force to be headquartered in Abu Dhabi. The UAE has also joined the Saudi-initiated GCC \"Security Pact\" that requires increased information-sharing and cooperation among the GCC states on internal security threats. Among notable UAE counterterrorism actions, in October 2010, UAE authorities assisted in foiling an Al Qaeda in the Arabian Peninsula plot to send bombs to the United States. In December 2012, the UAE, working with Saudi Arabia, arrested members of an alleged terrorist cell plotting attacks in the United States. In April 2013, UAE authorities arrested seven non-UAE Arab nationals allegedly affiliated with Al Qaeda. In 2014, the UAE tried nine people on charges of supporting the Al Nusrah Front (renamed Front for the Conquest of Syria), an Al Qaeda-linked faction of Syrian rebels that is named by the United States as a Foreign Terrorist Organization (FTO). UAE authorities failed to prevent a December 1, 2014, killing of an American teacher by a 38-year-old Emirati woman who allegedly had visited extremist websites, although they defused a bomb she planted outside the home of an American doctor. In 2015, the UAE arrested and prosecuted, or deported, numerous individuals who allegedly planned to join the Islamic State or commit terrorism in the UAE. In March 2016, UAE courts convicted 30 out of 41 individuals (38 of whom were UAE citizens) belonging to a group called Shabab al Manara of plotting terrorist attacks in the UAE. Facilities and assets of the group were closed or seized. Yet, the United States and the UAE sometimes differ on whether some groups are terrorist organizations. For example, the 85 groups that the UAE government designates as terrorist organizations include some U.S.- and Europe-based groups that represent Muslims in those societies and which neither the United States nor any European government accuses of terrorism. These groups include the U.S.-based Muslim American Society and Council on American-Islamic Relations (CAIR); the Muslim Association of Sweden; the Federation of Islamic Organizations in Europe; and the U.K.-based Islamic Relief. The United States Embassy in Abu Dhabi questioned the UAE government about why it designated these groups. The UAE also identifies as terrorist groups several organizations that the United States has not designated as terrorist groups, including the Houthis in Yemen and the Afghan Taliban. The UAE, as noted above, also considers the Muslim Brotherhood as a terrorist group; the Trump Administration reportedly considered designating it as a foreign terrorist organization (FTO). Antit errorism Financing and Money Laundering (A ML/CFT ) . The UAE Central Bank's Financial Intelligence Unit is credited in State Department terrorism reports with providing training programs to UAE financial institutions on money laundering and terrorism financing, and making mandatory the registration of informal financial transmittal networks ( hawala s ). In September 2012, the FBI Legal Attache established a suboffice at the U.S. consulate in Dubai to assist with joint efforts against terrorism and terrorism financing. In June 2014 the UAE set up a financial task force to better prevent use of UAE financial institutions by terrorist organizations. In October 2014, the country adopted a law (Federal Law No. 9) to strengthen a 2002 anti-money-laundering law. On October 29, 2018, the government announced it replaced a 2002 anti-money-laundering law with a new law that raises the country's anti-money-laundering and counter-terrorism financing rules to international standards. The country is a member of the Middle East and North Africa Financial Actions Task Force (MENAFATF), a FATF-style regional body, and it chairs the MENAFATF's Training and Typologies Working Group. The UAE is a participant in the Counter-Islamic State Finance Group chaired by Italy, Saudi Arabia, and the United States. In May 2017, the UAE joined the U.S.-GCC Terrorist Financing Targeting Center based in Riyadh. In October 2017, the members of the center designated as terrorists several AQAP and Islamic State-Yemen individuals and entities. Countering Violent Extremism . In 2011, the UAE founded the Global Counterterrorism Forum (GCTF) along with the United States and Turkey. In December 2012, during a meeting of the GCTF, the UAE-based \"International Center of Excellence for Countering Violent Extremism,\" known as Hedayah (\"guidance\"), was inaugurated. The government partners with the U.S. government to run the Sawab Center, an online counter-Islamic State messaging hub. The center, which has an annual budget of about $6 million and a staff of 14, is an institution for training, dialogue, collaboration, and research to counter violent extremism. Its priority is to work to prevent educational institutions from becoming breeding grounds for violent extremism. It also promotes information sharing so that police organizations around the world can receive information from family members who report on relatives who have become radicalized. Several UAE-based think tanks, including the Emirates Center for Strategic Studies and Research (ECSSR), the Emirates Policy Center, the TRENDS Institute, the Tabah Foundation, and the Future Institute for Advanced Research and Statuies, also conducted seminars on confronting terrorism and violent extremism. Transfers from Guantanamo . The UAE has cooperated with U.S. efforts to reduce the detainee population at the U.S. prison facility in Guantanamo Bay, Cuba. In November 2015, the Department of Defense transferred five Yemeni detainees from the facility to the UAE. In August 2016, another 15 Guantanamo detainees (12 Yemenis and 3 Afghans) were transferred to the UAE, the biggest single Guantanamo transfer to date. The day before it left office in January 2017, the Obama Administration transferred another three to the UAE. The UAE has signed on to several U.S. efforts to prevent proliferation and terrorism. These include the Container Security Initiative, aimed at screening U.S.-bound containerized cargo transiting Dubai ports, and the UAE has cooperated with all U.S. measures designed to protect aircraft bound for the United States. Several U.S. Customs and Border Protection officers, colocated with the Dubai Customs Intelligence Unit at Port Rashid in Dubai, inspect U.S.-bound containers, many of them apparently originating in Iran. The UAE is also a party to the Proliferation Security Initiative, the Megaports Initiative designed to prevent terrorists from using major ports to ship illicit material, and the Customs-Trade Partnership against Terrorism. In 2013, a \"preclearance facility\" was established at the Abu Dhabi International Airport for travelers boarding direct flights to the United States. The UAE government supports the Department of Homeland Security's programs to secure any UAE-to-U.S. flights, including collecting passenger information and employing retina-screening systems. The UAE effort to prevent the reexport of advanced technology, particularly to Iran, has improved considerably since 2010. As a GCC member, the UAE participates in the U.S.-GCC Counter-proliferation Workshop. Taking advantage of geographic proximity and the presence of many Iranian firms in Dubai emirate, numerous Iranian entities involved in Iran's weapons and technology programs maintained offices in Dubai. In connection with revelations of illicit sales of nuclear technology to Iran, Libya, and North Korea by Pakistan's nuclear scientist A.Q. Khan, Dubai was named as a key transfer point for Khan's shipments of nuclear components. Two Dubai-based companies, SMB Computers and Gulf Technical Industries, were apparently involved in transshipping components. In 2004, the United States sanctioned a UAE firm, Elmstone Service and Trading FZE, for selling weapons-related technology to Iran, under the Iran-Syria Non-Proliferation Act ( P.L. 106-178 ). In 2006, the Commerce Department's Bureau of Industry and Security (BIS) imposed a licensing requirement on U.S. exports to Mayrow General Trading Company and related UAE-based companies after Mayrow allegedly transshipped devices used to make improvised explosive devices (IED) in Iraq and Afghanistan. In February 2007 the Bush Administration threatened to characterize the UAE as a \"Destination of Diversion Control\" and to restrict the export of certain technologies to it. A June 2010 Iran sanctions law, the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA, P.L. 111-195 ), formally authorizes countries to be designated as Destinations of Diversion Control and subject to U.S. sanctions. The UAE avoided any such designation by strengthening its export control regime, including a September 2007 law, enacted with FNC concurrence, that tightened export controls. UAE authorities used that law to shut down 40 foreign and UAE firms allegedly involved in dual use exports to Iran and other countries. In September 2012 the UAE (and Bahrain) impounded shipments to Iran of items that Iran could use for its nuclear program. The issue of leakage of technology has sometimes caused U.S. criticism or questioning of UAE investment deals. In December 2008, some Members of Congress called for a review by the interagency Committee on Foreign Investment in the United States (CFIUS) of a proposed joint venture between Advanced Micro Devices and Advanced Technology Investment Co. of Abu Dhabi for the potential for technology transfers. In February 2006, CFIUS approved the takeover by the Dubai-owned Dubai Ports World company of a British firm that manages six U.S. port facilities. Congress, concerned that the takeover might weaken U.S. port security, opposed it in P.L. 109-234 , causing the company to divest assets involved in U.S. port operations. The UAE announced in 2008 that it would acquire its first nuclear power reactors to satisfy projected increases in domestic electricity demand. As a condition of receiving U.S. nuclear technology, the United States and the UAE reached an agreement that commits the UAE officials to strict standards that ensure that its nuclear program can only be used for peaceful purposes. Among those commitments is to refrain from domestic uranium enrichment or reprocessing spent nuclear reactor fuel—both processes could produce fissile material for nuclear weapons. The Obama Administration signed an agreement for the United States to assist the program, subject to conditions specified in Section 123 of the Atomic Energy Act of 1954 [42 U.S.C. 2153(b)], on May 21, 2009 (and submitted to Congress that day). Some in Congress expressed concerns about the potential for leakage of technology to Iran as well as the potential for regional proliferation of nuclear technology, but several congressional resolutions approving the agreement ( S.J.Res. 18 and H.J.Res. 60 ) were introduced, as was one disapproving ( H.J.Res. 55 ). No measure blocking the agreement was enacted within 90 days of the submission of the agreement to Congress, and the \"1-2-3 Agreement\" entered into force on December 17, 2009. The International Atomic Energy Agency announced in December 2011 that a group of experts that reviewed the UAE's regulatory framework for the program found \"noted good practices\" and provided suggestions to the Federal Authority for Nuclear Regulation, the UAE's nuclear regulatory authority. Still, reflecting the fact that a Saudi nuclear program might not be bound by the same restrictions that the UAE committed to, UAE officials reportedly told U.S. officials in October 2015 that they no longer consider themselves bound by the pledge that the country would not enrich uranium. A number of U.S. and European firms have secured administrative and financial advisory contracts with the program. In January 2010, the Emirates Nuclear Energy Corporation (ENEC), the institution that is administering the program, announced that it had chosen the Korea Electric Power Corporation (KEPCO of South Korea) to construct the first of four APR1400 nuclear reactors that would sell electricity to the Abu Dhabi Water and Electricity Authority. The first plant is undergoing preoperational testing. The other three are to be operational by 2020. The United States gives the UAE small amounts of assistance to help safeguard its nuclear program and prevent illicit exports of technology from it. For FY2015, the Department of Energy provided the country with about $370,000 for such purposes, and for FY2016, about $220,000 was provided for those programs. On other technology issues, in July 2014 the UAE announced it will form a \"UAE Space Agency\" that, by 2021, is to launch an unmanned spaceship that will probe Mars. The government plans to send its first astronaut to the International Space Station in April 2019. The UAE, a member of the World Trade Organization (WTO), has developed a free market economy, but its financial institutions are weakly regulated. As have the other GCC states that have long depended on exports of hydrocarbons, the UAE has announced plans and policies (\"Vision 2021\") to try to further diversify its economy to a \"post-oil\" era. Dubai emirate, in particular, has long pursued an economic strategy based on attracting investors to construct luxurious and sometimes futuristic projects that provide jobs and attract tourism and publicity. The country is also accepting investment by China under that country's \"Belt and Road Initiative\" (BRI) intended to better connect China economically to other parts of Asia, Central Asia, the Middle East, and Africa.in April 2019, the UAE and China signed deals worth $3.4 billion, most of which will be invested to store and ship Chinese products from the UAE port of Jebel Ali. To help it weather the effect of the sharp drop in oil prices since mid-2014, the government cut some subsidies and raised capital on international markets, including an April 2016 bond offering of $5 billion and an October 2017 bond offering of about $10 billion. The government budget was only slightly in deficit 2017 and 2018, and, coupled with the bond offerings, the UAE has been able to avoid drawing down its $600 billion in various sovereign wealth funds overseen by the Emirates Investment Authority (EIA). The key factor in the UAE's wealth is that it exports large amounts of crude oil while having a small population that receives benefits and services. The UAE exports nearly as much oil as Iraq, while its citizen population is a small fraction of that of Iraq. Abu Dhabi has 80% of the federation's proven oil reserves of about 100 billion barrels, enough for over 100 years of exports at the current production rate of about 2.9 million barrels per day (mbd). Of that, over 2.2 mbd are exported, and the UAE has as much as 500,000 bpd of spare capacity. UAE representatives indicated in late October 2018 that they might increase production to over 3 mbd, but the subsequent sharp drop in world oil prices and OPEC agreement in November 2018 to cut production has likely forestalled any UAE production increase. The United States imports negligible amounts of UAE crude oil; the largest share of UAE oil goes to Japan and China. The UAE has vast quantities of natural gas but consumes more than it produces. It has entered into an arrangement (Dolphin Energy) with neighboring countries under which a pipeline carries natural gas from the large gas exporter, Qatar, to the UAE and on to Oman. However, the political differences with Qatar have contributed to UAE evaluation of renewable and other alternatives to relying on Qatar-supplied natural gas. The UAE is trying to secure its oil export routes against any threat by Iran to close the strategic Strait of Hormuz, through which the UAE and other major oil exporters transport their oil exports. In July 2012, the UAE loaded its first tanker of oil following completion of the Abu Dhabi Crude Oil Pipeline (ADCOP) which terminates in the emirate of Fujairah, on the Gulf of Oman. The line, which cost $3 billion, can transport 1.5 million barrels per day of crude oil—about half of UAE production. The UAE is planning a large refinery near that terminal, and possibly a second oil pipeline, to secure its oil exports and value-added petroleum products. The UAE government is also attempting to plan for a time when the developed world is no longer reliant on oil imports. The government has set a target of using 21% renewable energy sources by 2021. It has funded \"Masdar City\"—a planned city, the first phase of which was completed in 2015, that relies only on renewable energy sources and features driverless taxis. U.S. trade with the UAE is a significant issue because the UAE is the largest market for U.S. exports to the Middle East. Over 1,000 U.S. companies have offices there and there are over 60,000 Americans working in UAE. U.S. exports to the UAE in 2017 totaled about $20 billion, about 10% less than in 2016. U.S. imports from UAE for 2017 totaled about $4.3 billion, about 20% higher than in 2016. U.S. exports to the UAE were roughly the same as for 2017 (about $20 billion), but imports were somewhat higher ($5 billion, as compared to $4.2 billion in 2017). Goods sold to UAE are mostly commercial aircraft, industrial machinery and materials, and other high-value items. On November 15, 2004, the Bush Administration notified Congress it had begun negotiating a free trade agreement (FTA) with the UAE. Several rounds of talks were held prior to the June 2007 expiration of Administration \"trade promotion authority.\" The FTA talks were later replaced by a U.S.-UAE \"Economic Policy Dialogue,\" between major U.S. and UAE economic agencies. The dialogue, consisting of two meetings per year, began in late 2011 and also included discussion of reform of UAE export controls. In addition, as part of the GCC, the UAE negotiated with the United States a September 2012 \"GCC-U.S. Framework Agreement on Trade, Economic, Investment, and Technical Cooperation\"—a GCC-wide trade and investment framework agreement (TIFA). The agreement was negotiated by the U.S. Trade Representative (USTR). As noted, because of the UAE's relative wealth, it receives only very small amounts of U.S. foreign assistance. Amounts provided for counternarcotics, counterterrorism financing, and nuclear security are broken down in the sections above. For FY2016, total U.S. aid to the UAE was about $1.15 million. For FY2015, U.S. assistance to the UAE totaled about $840,000. In 2015, several U.S. airlines asserted that two UAE airlines, Emirates Air (Dubai-based) and Etihad Air (Abu Dhabi-based), as well as Qatar Airways, had an unfair competitive advantage because of alleged receipt of subsidies from their respective governments. The U.S. airlines asserted that the \"Open Skies Agreement\" that the UAE and Qatar have with the United States should be renegotiated so as to limit the access of the three Gulf-based airlines to U.S. routes. The airlines assert they are not subsidized and instead create substantial numbers of jobs for American workers building and serving their aircraft and operations in the United States. UAE officials assert that the country will not agree to renegotiate the Open Skies Agreement. The Obama Administration declined to renegotiate the agreement and President Trump, following a February 2017 meeting with U.S. airline executives, did not indicate any change to that stance. ", "summary": "The United Arab Emirates (UAE) is a significant U.S. partner in Gulf security, helping to address multiple regional threats by hosting about 5,000 U.S. military personnel at UAE military facilities under a bilateral defense cooperation agreement (DCA). The UAE is a significant buyer of U.S. military equipment, including sophisticated missile defenses, and it reportedly wants to buy the F-35 combat aircraft. The alliance is expected to continue after UAE President Shaykh Khalifa bin Zayid Al Nuhayyan, who suffered an incapacitating stroke in January 2014, is succeeded by his younger brother and de-facto UAE leader Shaykh Muhammad bin Zayid Al Nuhayyan. Advised and armed by the United States, the UAE military has become sufficiently capable that the country is able to, and is, asserting itself in the region, including militarily. The UAE is part of a Saudi-led military effort to pressure the Iran-backed Zaidi Shia Houthi rebels in Yemen, an effort to which the United States provides logistical support but which has produced criticism over the effects of the war on Yemen's civilians. UAE forces, alongside U.S. special operations forces, also are combatting Al Qaeda's affiliate in that country. UAE forces have built up several bases in East African countries to train allied forces and facilitate UAE operations in Yemen. The UAE is supporting an anti-Islamist commander based in eastern Libya, Khalifa Hafter, who in April 2019 launched an assault to capture Tripoli from a U.N.-backed government based there. The UAE has sought to counteract criticism by expanding its long-standing donations of assistance to regional and international organizations and economically strapped countries. The UAE's opposition to Muslim Brotherhood-linked regional organizations as regional and domestic threats has driven UAE policy toward Egypt, Syria, the Palestinian territories, and other countries. The UAE's stance has contributed to a major rift with Qatar, another member of the Gulf Cooperation Council alliance (GCC: Saudi Arabia, Kuwait, UAE, Bahrain, Qatar, and Oman), but which supports Brotherhood-related groups as Islamists willing to work within established political processes. In June 2017, the UAE joined Saudi Arabia in isolating Qatar until it adopts policies closer to those of the three GCC states on the Brotherhood and other issues, including on Iran, where the UAE and the Trump Administration share a policy of strongly pressuring Iran economically and politically. U.S. mediation efforts have failed to resolve the intra-GCC rift, to date. The October 2018 killing by Saudi agents of a U.S.-based Saudi journalist at the Saudi consulate in Istanbul has added to criticism of UAE leaders for their close strategic alliance with Saudi Arabia's Crown Prince Mohammad bin Salman Al Saud. The UAE's relatively open borders and economy have won praise from advocates of expanded freedoms in the Middle East. The UAE is considered among the wealthiest countries in the world, in part because of the small population that requires services, and the wealth has helped the government maintain popular support. In 2006, the government established a limited voting process for half of the 40 seats in its quasi-legislative body, the Federal National Council (FNC). The most recent such vote was held in October 2015, and resulted in the selection of a woman as speaker of the FNC. However, the country remains under the control of a small circle of leaders. And, since the Arab Spring uprisings, the government has become more wary of the potential for regional conflicts to affect domestic stability and has suppressed domestic opponents. The country sought to showcase its continued commitment to pluralism by hosting a visit by Pope Francis in February 2019. In part to cope with the effects of reduced prices for crude oil during 2014-2018, the government has created new ministries tasked with formulating economic and social strategies that, among other objectives, can attract the support of the country's youth. Any U.S. assistance to the UAE has been very small in dollar amounts and intended mainly to qualify the UAE for inclusion in training and other programs that benefit UAE security.", "document_type": "crs"}
{"report": "A growing number of Americans report that they use marijuana. As more states decriminalize the use of marijuana, the question of what impact marijuana usage has on the risk of a driver being involved in a motor vehicle crash has become more pertinent. In a survey, the majority of state highway safety offices rated drugged driving an issue at least as important as driving while impaired by alcohol. When faced with the issue of driver impairment due to marijuana, some stakeholders tend to approach the issue using the analogy of driver impairment due to alcohol. However, there are important differences between the two substances. The fact that alcohol reduces a user's ability to think clearly and to perform physical tasks has been known for decades. Extensive research has established correlations between the extent of alcohol consumption and impairment, including drivers' reaction times. Much less research has been done on marijuana. Marijuana is a more complex substance than alcohol. It is absorbed in the body differently from alcohol; it affects the body in different ways from alcohol; tests for its presence in the body produce more complicated results than tests for the presence of alcohol; and correlating its effects with its levels in the body is much more complicated than for alcohol. That marijuana usage increases a driver's risk of crashing is not clearly established. Studies of marijuana's impact on a driver's performance have thus far found that, while marijuana usage can measurably affect a driver's performance in a laboratory setting, that effect may not translate into an increased likelihood of the driver being involved in a motor vehicle crash in a real-world setting, where many other variables affect the risk of a crash. Some studies of actual crashes have estimated a small increase in the risk of crash involvement as a result of marijuana usage, while others have estimated little or no increase in the likelihood of a crash from using marijuana. This CRS report addresses various aspects of the issue of marijuana-impaired driving, including patterns of marijuana use, the relationship and detection of marijuana use and driver impairment, and related state law and law enforcement challenges. The report also references the congressionally required July 2017 report by the Department of Transportation's National Highway Traffic Safety Administration (NHTSA), Marijuana-Impaired Driving: A Report to Congress (hereinafter referred to as NHTSA's 2017 Marijuana-Impaired Driving Report to Congress), as well as other studies and research. Marijuana is a variety of the Cannabis sativa plant, and contains hundreds of chemical compounds. Two significant compounds found in marijuana are tetrahydrocannabinol (THC), the primary psychoactive compound, and cannabidiol (CBD); CBD is being tested for medicinal purposes, and is not itself psychoactive. Marijuana use has been recorded for millennia. In the 20 th century, the sale, possession, and use of marijuana were made illegal in most countries, including the United States. In recent years, however, the trend appears to be moving toward acceptance of marijuana usage. In public opinion polls, the percentage of Americans favoring legalization of marijuana has increased significantly. As of May 2019 33 states and the District of Columbia have enacted laws legalizing marijuana use under certain conditions, generally for medicinal purposes. Since Colorado and Washington State legalized recreational marijuana in 2012, the number of states in which recreational use of marijuana is permitted has grown to 10, plus the District of Columbia. These jurisdictions are home to one-quarter of the U.S. population. In addition to states that have legalized recreational marijuana use, another 23 states and Puerto Rico allow marijuana to be used for treating medical conditions (\"medical marijuana\"). Several other states are considering legalizing recreational use of marijuana. Since 2002, the Substance Abuse and Mental Health Services Administration in the U.S. Department of Health and Human Services has conducted an annual, nationally representative survey of substance use among individuals ages 12 and older. The percentage of individuals age 18 and older who self-report marijuana use in the previous month has grown slowly but steadily since 2008. Self-reported use is highest among young adults (ages 18-25) compared to all other age groups; it rose from 16.6% to 22.1% between 2008 and 2017. Self-reported use among adults age 26 and older rose from 4.2% to 7.9% over the same period. This study does not break out usage patterns by state, but other studies have found that reported usage has increased in virtually all states, both in those that have loosened restrictions on marijuana usage and those that have not. Thus, the impact of a state's treatment of marijuana on the extent of marijuana usage is not clear. Some observers have speculated that states' loosening of restrictions on marijuana usage might lead to increased usage. But the fact that usage by adults appears to be increasing in both states that have and those that have not loosened restrictions suggests that other factors may also be involved. NHTSA has sponsored a periodic roadside survey of alcohol use among drivers for decades. The last two surveys (2007 and 2013-2014) also looked at drug use. In the 2013-2014 survey, 12.7% of drivers in the nighttime sample tested positive for THC, up from 8.7% in the 2007 survey. NHTSA did not report concentrations of THC and did not attempt to evaluate impairment. The data do not permit state-level comparisons. Driving is among the most dangerous activities the average person engages in. It involves piloting a multiton vehicle at relatively high speeds, usually surrounded by many other such vehicles, and often bicyclists and pedestrians as well. A moment's inattention can, but usually does not, result in a crash. Crashes are usually not serious: the vast majority of crashes result only in damage to the vehicles involved. But in a significant percentage of crashes, one or more people are injured (29.3%), and in a fraction of crashes, people die (0.5%). Because of the potential danger to the public posed by drivers, all 50 states, the District of Columbia, and Puerto Rico have laws barring driving while impaired. Impairment involves driving performance that is degraded from its \"normal\" level by some cause. Many things can impair a driver's performance including alcohol, other drugs, fatigue, distraction, and emotional states such as fear or anger. Some state laws against impaired driving require that the state prove that a driver's impairment was caused by the substance or behavior at issue. Other state laws, known as per se laws, provide that a driver is automatically guilty of driving while impaired if specified levels of a potentially impairing substance are found in his or her body (e.g., blood alcohol content (BAC) of .08% or higher, or, in some states, THC in the blood; see Table 1 ). Currently, detecting marijuana impairment through a standardized test is more complicated than detecting alcohol impairment. Evaluating impairment due to alcohol is relatively straightforward. Alcohol is a central nervous system depressant, the effects of which have been extensively observed and studied for a century. It is a liquid that enters the bloodstream quickly and is metabolized (converted into other substances) by the body fairly quickly. Alcohol in the body can be measured in a person's breath, blood, or urine. A person's BAC peaks within an hour after drinking, and declines gradually and linearly after that. The degree of impairment at various BAC levels is fairly well-established, and many studies have established that a driver's risk of being involved in a crash increases as the driver's BAC level increases. In the United States, congressional encouragement has led every state to legislate that a driver whose BAC is .08% or higher is too impaired to drive legally. However, studies indicate there is some degree of impairment at far lower levels of BAC. In several European countries, driving with a BAC of .05% or higher is prohibited, and the State of Utah recently lowered its per se impaired BAC level to .05%. In the United States, commercial truck drivers are barred from performing safety-sensitive functions (such as driving) at a BAC of .04%. Relatively simple tests, such as breath analysis conducted by a police officer at the roadside or analysis of blood or urine samples taken in a clinic, can determine whether an individual's BAC exceeds the legal threshold. Since every state has a law prohibiting driving with a specific BAC level, such tests can be presented as evidence of impairment in court. Detecting impairment due to use of marijuana is more difficult. The body metabolizes marijuana differently from alcohol. The level of THC (the psychoactive ingredient of marijuana) in the body drops quickly within an hour after usage, yet traces of THC (nonpsychoactive metabolites) can still be found in the body weeks after usage of marijuana. There is as yet no scientifically demonstrated correlation between levels of THC and degrees of impairment of driver performance, and epidemiological studies disagree as to whether marijuana use by a driver results in increased crash risk. Relatively few studies have been done of the effect of marijuana use on driver performance. This is due, in part, to the requirements that must be met to use marijuana in studies due to its status as a controlled substance under federal law and many state laws. Another factor complicating studies of marijuana's effects on drivers is that the potency of THC in marijuana (i.e., the concentration of THC) can vary from one plant to another. The marijuana produced by the only approved source of marijuana for federally funded research is considered by some researchers to be low quality (potency). Also, the way in which marijuana is processed can affect the potency of the product, and the way the user chooses to ingest marijuana may affect the level of THC in the body. The lack of correlation between both marijuana consumption and the level of THC in a person's system and THC levels and driver impairment reduces the usefulness of rule-of-thumb guides of impairment. In contrast, many drivers use rules-of-thumb to guide their alcohol consumption. While emphasizing that even low levels of alcohol consumption can cause drivers to be impaired, tables published on the internet suggest that two drinks may place a 120-pound female in breach of the 0.08% BAC threshold and leave a 160-pound male with \"driving skills significantly affected.\" The National Transportation Safety Board has advised that \"about 2 alcoholic drinks\" within an hour will cause a 160-pound male to experience decline in visual functions and in the ability to perform two tasks at the same time. Based on current knowledge and enforcement capabilities, it is not possible to articulate a similarly simple level or rate of marijuana consumption and a corresponding effect on driving ability. To date, results from studies that have examined the association between marijuana use and crash risk have been inconsistent. As described in the 2017 NHTSA report to Congress, one study estimated the increased crash risk from marijuana usage at 1.83 times that of an unimpaired driver, while another study found no association between risk of being involved in a crash and marijuana use. Other studies have estimated the increased crash risk for drivers testing positive for marijuana at between zero and three times that for unimpaired drivers, roughly comparable to the increased crash risk of having a blood alcohol content of between .01% and .05%, well below the legal per se impaired level of .08 BAC. For purposes of comparison, a driver with a BAC of .08% is considered to be five to 20 times more likely to be involved in a crash than an unimpaired driver. In NHTSA's 2017 Marijuana-Impaired Driving Report to Congress, NHTSA's survey of the research literature found differences between driving by subjects dosed with alcohol and subjects dosed with marijuana. Marijuana-dosed subjects driving in a simulator or in an instrumented vehicle on a closed course tended to drive below the speed limit, to allow a greater distance between themselves and vehicles ahead of them, and to take fewer risks than when they were not under the influence of marijuana. The study authors hypothesized that the subjects felt effects of the marijuana and were consciously altering their driving behavior to compensate. By contrast, subjects who were dosed with alcohol tended to drive faster than the speed limit, to follow leading cars more closely, and to generally drive in a riskier fashion than when they were not under the influence of alcohol. The NHTSA report includes the caveat that impacts on driving performance that can be measured under controlled conditions may or may not be significant under real-world conditions. NHTSA states that while laboratory studies are useful in identifying how substances affect the performance of driving tasks, only epidemiological studies (i.e., studies that look at actual crashes and the factors involved) are useful in predicting their impact on real-world crash risk. Relatively few epidemiological studies of marijuana usage and crash risk have been conducted, and the few that have been conducted have generally found low or no increased risk of crashes from marijuana use. In reports examining many aspects of marijuana use and its effects, the National Academy of Sciences (NAS) in a 2017 report and the National Institutes of Health in a 2018 report reference various studies on the impact of marijuana consumption on driver performance to state that cannabis use prior to driving increases the risk of being involved in a motor vehicle accident. For example, the NAS committee that produced the 2017 report looked at systematic reviews of driving under the influence of marijuana and at recently published primary literature. The NAS committee's report concluded, \"There is substantial evidence of a statistical association between cannabis use and increased risk of motor vehicle crashes.\" Several factors complicate the effort to determine what, if any, impact marijuana usage has on the likelihood of being involved in a crash. Chief among these factors is the distinction between correlation (things that occur together) and causation (one thing that causes another thing). A driver who has been involved in a crash may have used marijuana shortly before the crash; that correlation (marijuana usage and crash involvement) does not alone prove causation (that the marijuana usage was the cause of the driver being involved in a crash). For example, in the United States the population group with the highest rate of motor vehicle crashes, by far, is young male drivers (generally defined as those between the ages of 16 and 19). Young males are also the population group with the highest prevalence of marijuana use. When a young male driver is involved in a motor vehicle crash, and has recently used marijuana, it is difficult to separate the role, if any, of the effects of marijuana usage from the other factors that may contribute to the exceptionally high rate of crash involvement of young male drivers. An impaired driving arrest typically begins with a law enforcement officer stopping a driver for a traffic violation or observing a driver at a crash scene or a checkpoint. If the officer suspects that the driver is impaired by alcohol, based on the driver's behavior and signs such as the odor of alcohol or other evidence of its presence, the officer may administer a field sobriety test or preliminary breath test to check for alcohol impairment. Training for the Standard Field Sobriety Test for alcohol impairment is usually included in basic police academy courses. The test includes 1) a driver heel-to-toe walk and turn test, and 2) a driver one-leg standing test. Law enforcement officers often are not trained in recognizing impairment from marijuana or other drugs. NHTSA, with input from law enforcement organizations, has developed two training programs for law enforcement officers to recognize drug impairment in drivers during roadside stops. Advanced Roadside Impaired Driving Enforcement (ARIDE) is a 16-hour course providing basic information on drug impairment, including indications of impairment from both marijuana and other opioids. From 2009 through 2015, around 8% of the nation's patrol officers received ARIDE training. Drug Recognition Experts (DRE) are trained not only to identify impairment by drugs but also to differentiate between categories of drugs. DRE training consists of 72 hours of classroom training and 40 to 60 hours of fieldwork. This represents a considerable investment of resources on the part of the trainee's organization, since it takes the officer away from regular duties for three to four weeks. As of 2016, around 1% of the nation's patrol officers were active DREs. In evaluating drivers suspected of impairment, DREs administer a 12-step evaluation lasting around 90 minutes. This is not a roadside test; the DRE testing protocol calls for the testing to be done in a controlled environment. Adherence to the protocol is important for the validity of the results. Urine, hair follicles, blood, and saliva can be tested for evidence of THC and its metabolites. At present THC cannot be measured accurately in a person's breath. Blood tests are considered the gold standard in establishing the presence of marijuana for impaired driving cases. To conduct a blood test of a driver suspected of driving under the influence of marijuana, police typically must obtain a search warrant and have the blood drawn by a nurse or person licensed to draw blood (phlebotomist). Testing of oral fluid can readily detect the presence of marijuana or its metabolites, and such testing is less complicated than blood testing. It may require a search warrant. Devices that can not only collect but also test oral fluids at the point of arrest (i.e., in the field) are available, but their accuracy and reliability have been questioned. Marijuana can be found in oral fluids as a result of environmental exposure. Hair testing is of little reliability for drug-impaired driving enforcement, as THC can be found in hair months after usage, so a positive result cannot be used to establish usage around the time of driving. THC in hair follicles can result from environmental exposure to second-hand smoke rather than direct consumption of marijuana. Also, the use of hair products can affect test results. Urine testing cannot be reliably used to establish drug use around the time of driving, as THC and its metabolites can be detected in urine for days, or even weeks, after usage. The decision as to whether a driver who tests positive for marijuana should be arrested or charged with driving while impaired is not straightforward, because tests for the presence of marijuana in a driver's body are inadequate to determine impairment. The value of testing a person for the presence of alcohol lies largely in the well-established link between levels of alcohol in a person's blood and impairing effects associated with that blood alcohol content. Similar links between levels of THC in a person's body and levels of impairment have not been established. The concentration of THC in a person's blood rises rapidly after consumption, then drops rapidly, within an hour or two. Impairing effects appear rapidly, but may remain for some time. Consequently, tests that show the amount of THC in the subject's body are poor indicators of impairment, how recently a person has used marijuana, or whether the person used marijuana or was simply exposed to second-hand smoke. Moreover, tests can show the presence of metabolites of THC, which themselves are not impairing, for weeks after consumption. Also, studies indicate that individuals can adapt to the impairing effects of marijuana, such that a level of THC that could indicate impairment in an occasional marijuana user may not have the same impairment effect on an experienced user. Some states have \" per se \" (\"in itself\") laws that make it illegal for a driver to have more than a certain concentration of THC in his or her system. In some other states, it is illegal for a person to drive with any trace of marijuana (\"zero tolerance\") in his or her system (see Table 1 ). Drivers have challenged convictions under per se marijuana impairment laws, with differing results. Some courts, acknowledging the testimony of experts that there is, at present, no reliable test to indicate impairment from marijuana, have nevertheless supported a state's per se standard as a reasonable effort to combat impaired driving in the absence of effective measurements of impairment. Other courts have overturned per se convictions on various grounds (e.g., that while the state legislation included all metabolites of marijuana, it was not reasonable to convict a driver of impairment when the driver tested positive for a metabolite that does not have an impairing effect). Marijuana possession and usage remain illegal under federal law. In addition, people holding certain jobs, including federal employees and transportation workers in safety-sensitive positions (such as airline pilots, aircraft maintenance personnel, railroad engineers, ship captains, commercial truck drivers, and bus drivers), are prohibited from consuming any amount of marijuana, regardless of state laws. Federal regulations require that transportation workers in safety-sensitive positions be tested for alcohol and certain drugs before beginning work for a new employer, if they are involved in a serious crash, and also at random. Safety-sensitive workers who appear to be under the influence of drugs or alcohol while at work can be tested immediately. Those who test positive must be evaluated by a substance abuse professional, complete counseling or treatment as prescribed by the evaluator, undergo a follow-up evaluation, and be tested again before returning to their safety-sensitive work. Those who return to safety-sensitive work after a positive test must be tested at least six times with no advance notice in the following 12 months. The follow-up period of intensive testing can be extended an additional four years. Approximately 12 million transportation workers are subject to these rules. In 2009, the U.S. Department of Transportation stated that it is \"unacceptable for any safety-sensitive employee subject to drug testing under the Department of Transportation's drug testing regulations to use marijuana.\" Regardless of many states having legalized more uses of marijuana, safety-sensitive employees remain subject to drug testing and may lose their jobs for marijuana use that is legal under state law. There are several subjects on which better information may aid policymaking around the issue of marijuana and impairment. These include continued research into whether a quantitative standard can be established that correlates the level of THC in a person's body and the level of impairment, and better data on the prevalence of marijuana use by drivers, especially among drivers involved in crashes and drivers arrested for impaired driving. Currently, most states do not distinguish in their records whether drivers arrested for impaired driving are impaired by alcohol or other substances. Substance-specific impaired driving data could be of particular use in analyzing prelegalization and post-legalization data within a state and differences across states with different legal treatment of marijuana use. Given that currently the most reliable means of detecting impairment among drivers who have used marijuana is by observation of physiological, cognitive, and psychomotor indicators by law enforcement officers, another policy option is additional support for training of law enforcement officers in detecting impairment. To improve the handling of drug-impaired driving cases, the Governors Highway Safety Association has recommended that prosecutors and judges assigned to drug-impaired driving cases receive training in the issue. Among the roughly 12 million transportation workers whose safety-sensitive status subjects them to federally mandated drug testing, federal regulations provide no opportunity for legal use of marijuana, regardless of the status of marijuana under state law. As previously discussed, regulations that apply to safety-sensitive employees do provide an avenue for an employee who has tested positive to regain a safety-sensitive position. CRS could not identify any data on how many safety-sensitive transportation employees have lost their jobs as a result of positive tests for marijuana use. Considering the length of time that marijuana is detectable in the body after usage, and the uncertainty about the impairing effect of marijuana on driving performance, Congress and other federal policymakers may elect to reexamine the rationale for testing all safety-sensitive transportation workers for marijuana usage. Alternatively, Congress and federal policymakers may opt to maintain the status quo until more research results become available.", "summary": "A growing number of Americans report that they use marijuana. Most states now allow the use of marijuana for treatment of medical conditions. Ten states and the District of Columbia, representing a quarter of the U.S. population, have decriminalized the recreational use of marijuana, and other states are considering following suit. As the opportunity for legal use of marijuana grows, there is concern about the impact of marijuana usage on highway safety. In a 2018 survey, the majority of state highway safety officers considered drugged driving an issue at least as important as driving while impaired by alcohol (which is associated with over 10,000 highway deaths each year). As of May 2019, 18 states have enacted laws declaring that a specified concentration of THC in a driver's body constitutes evidence of impairment and is inherently illegal (referred to as per se laws), similar to the .08% blood alcohol content (BAC) standard of alcohol impairment. Advocates of loosening restrictions on marijuana often compare marijuana usage to drinking alcohol, which may contribute to some stakeholders viewing marijuana use and driving as similar to alcohol's impairment of driving. Research studies indicate that marijuana's effects on drivers' performance may vary from the effects of alcohol, in ways that challenge dealing with marijuana impairment and driving similarly to alcohol-impaired driving. Alcohol is a nervous system depressant that is absorbed into the blood and metabolized by the body fairly quickly, such that there is little trace of alcohol after 24 hours. Its impairing effects have been extensively studied over many decades, and the association between levels of alcohol consumption and degrees of impairment is well-established. By contrast, marijuana is a nervous system stimulant. It contains over 500 chemical compounds, only one of which, tetrahydrocannabinol (THC), is significantly psychoactive. Its effects are felt quickly after smoking, but more slowly when consumed in other forms (e.g., in food). It is metabolized quickly, but the body can store THC in fat cells, so that traces of THC can be found up to several weeks after consumption. Its impairing effects have been the subject of limited study, due in part to its status as a controlled substance under federal law. Although laboratory studies have shown that marijuana consumption can affect a person's response times and motor performance, studies of the impact of marijuana consumption on a driver's risk of being involved in a crash have produced conflicting results, with some studies finding little or no increased risk of a crash from marijuana usage. Levels of impairment that can be identified in laboratory settings may not have a significant impact in real world settings, where many variables affect the likelihood of a crash occurring. Research studies have been unable to consistently correlate levels of marijuana consumption, or THC in a person's body, and levels of impairment. Thus some researchers, and the National Highway Traffic Safety Administration, have observed that using a measure of THC as evidence of a driver's impairment is not supported by scientific evidence to date. Congress, state legislatures, and other decisionmakers may address the topic of marijuana use and driver impairment through various policy options, including whether or not to support additional research on the impact of marijuana on driver performance and on measurement techniques for marijuana impairment, as well as training for law enforcement on identifying marijuana impairment. Other deliberations may address federal regulations on marijuana use and testing for transportation safety-sensitive employees.", "document_type": "crs"}
{"report": "Firefighting activities are traditionally the responsibility of states and local communities. As such, funding for firefighters is provided mostly by state and local governments. During the 1990s, shortfalls in state and local budgets, coupled with increased responsibilities of local fire departments, led many in the fire community to call for additional financial support from the federal government. Although federally funded training programs existed (and continue to exist) through the National Fire Academy, and although federal money was available to first responders for counterterrorism tra ining and equipment through the Department of Justice, there did not exist a dedicated program, exclusively for firefighters, which provided federal money directly to local fire departments to help address a wide variety of equipment, training, and other firefighter-related needs. During the 106 th Congress, many in the fire community asserted that local fire departments require and deserve greater support from the federal government. The Assistance to Firefighters Grant Program (AFG), also known as fire grants or the FIRE Act grant program, was established by Title XVII of the FY2001 Floyd D. Spence National Defense Authorization Act ( P.L. 106-398 ). Currently administered by the Federal Emergency Management Agency (FEMA) in the Department of Homeland Security (DHS), the program provides federal grants directly to local fire departments and unaffiliated Emergency Medical Services (EMS) organizations to help address a variety of equipment, training, and other firefighter-related and EMS needs. AFG also supports fire prevention projects and firefighter health and safety research and development through the Firefighter Prevention and Safety (FP&S) grant program, which is funded at not less than 10% of the annual appropriation for AFG. Since its establishment, the Assistance to Firefighters Grant program has been reauthorized three times. The first reauthorization was Title XXXVI of the FY2005 Ronald W. Reagan National Defense Authorization Act ( P.L. 108-375 ), which authorized the program through FY2009. The second reauthorization was Title XVIII, Subtitle A of the FY2013 National Defense Authorization Act ( P.L. 112-239 ), which authorized the program through FY2017 and modified program rules for disbursing grant money. The third and current reauthorization is the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 ( P.L. 115-98 ), which authorizes the program through FY2023. On January 2, 2013, President Obama signed P.L. 112-239 , the FY2013 National Defense Authorization Act. Title XVIII, Subtitle A is the Fire Grants Reauthorization Act of 2012, which authorized the fire grant program through FY2017 and made significant changes in how grant money would be disbursed. Table 1 provides a summary of key provisions of the 2012 reauthorization, and provides a comparison with the previously existing statute. With the authorizations of both the AFG and SAFER programs expiring on September 30, 2017, and with sunset dates for both programs of January 2, 2018, the 115 th Congress considered reauthorization legislation. On April 5, 2017, S. 829 , the AFG and SAFER Program Reauthorization Act of 2017 was introduced by Senator McCain and referred to the Committee on Homeland Security and Governmental Affairs. On May 17, 2017, the committee ordered S. 829 to be reported ( S.Rept. 115-128 ) with an amendment in the nature of a substitute. On August 2, 2017, the Senate passed S. 829 by unanimous consent. On July 12, 2017, the House Subcommittee on Research and Technology, Committee on Science, Space and Technology, held a hearing entitled U.S. Fire Administration and Fire Grant Programs Reauthorization: Examining Effectiveness and Priorities . Testimony was heard from the USFA acting administrator and from fire service organizations. On December 15, 2017, H.R. 4661 , the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017, was introduced by Representative Comstock. H.R. 4661 was identical to the Senate-passed S. 829 , except that while S. 829 repealed the sunset provisions for AFG and SAFER, H.R. 4661 extended the sunset dates to September 30, 2024. Additionally, H.R. 4661 reauthorized the USFA through FY2023. On December 18, 2017, the House passed H.R. 4661 by voice vote under suspension of the rules. On December 21, 2017, the Senate passed H.R. 4661 without amendment by unanimous consent. Other legislation related to the fire act reauthorization included H.R. 3881 , the AFG and SAFER Program Reauthorization Act of 2017, introduced by Representative Pascrell, which was identical to S. 829 as passed by the Senate; and H.R. 1571 , the Fire Department Proper Response and Equipment Prioritization Act, which was introduced by Representative Herrera-Beutler and would amend the FIRE Act statute to direct FEMA to give high-priority consideration to grants providing for planning, training, and equipment to firefighters for crude oil-by-rail and ethanol-by-rail derailment and incident response. On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 ( P.L. 115-98 ). P.L. 115-98 extends the AFG and SAFER authorizations through FY2023; extends the sunset provisions for AFG and SAFER through September 30, 2024; extends the USFA authorization through FY2023; provides that the U.S. Fire Administration in FEMA may develop and make widely available an online training course on AFG and SAFER grant administration; expands SAFER hiring grant eligibility to cover the conversion of part-time or paid-on-call firefighters to full-time firefighters; directs FEMA, acting through the Administrator of USFA, to develop and implement a grant monitoring and oversight framework to mitigate and minimize risks of fraud, waste, abuse, and mismanagement related to the AFG and SAFER grant programs; and makes various technical corrections to the AFG and SAFER statute. From FY2001 through FY2003, the Assistance to Firefighters Grant (AFG) Program (as part of USFA/FEMA) received its primary appropriation through the VA-HUD-Independent Agencies Appropriation Act. In FY2004, the Assistance to Firefighters Program began to receive its annual appropriation through the House and Senate Appropriations Subcommittees on Homeland Security. The fire grant program is in its 19 th year. Table 2 shows the appropriations history for firefighter assistance, including AFG, SAFER, and the Fire Station Construction Grants (SCG) provided in the American Recovery and Reinvestment Act of 2009 (ARRA). Table 3 shows recent and proposed appropriated funding for the AFG and SAFER grant programs. For FY2017, the Obama Administration requested $335 million for AFG and $335 million for SAFER, a reduction of $10 million for each program from the FY2016 enacted level. The budget justification stated that the proposed reduction in AFG and SAFER \"reflects FEMA's successful investments in prior year grants awarded.\" Under the proposed budget, the AFG and SAFER grant accounts would be transferred to the Preparedness and Protection activity under FEMA's broader \"Federal Assistance\" account. According to the budget request, Federal Assistance programs will \"assist Federal agencies, States, Local, Tribal, and Territorial jurisdictions to mitigate, prepare for and recover from terrorism and natural disasters.\" On May 26, 2016, the Senate Appropriations Committee approved S. 3001 , the Department of Homeland Security Act, 2017. The Senate bill would provide $680 million for firefighter assistance, including $340 million for AFG and $340 million for SAFER. The committee maintained a separate budget account for Firefighter Assistance and did not transfer that budget account to the Federal Assistance account as proposed in the Administration budget request. In the accompanying report ( S.Rept. 114-68 ), the committee directed DHS to continue the present practice of funding applications according to local priorities and those established by the USFA, and to continue direct funding to fire departments and the peer review process. The committee stated its expectation that funding for rural fire departments remain consistent with their previous five-year history, and directed FEMA to brief the committee if there is a fluctuation. On June 22, 2016, the House Appropriations Committee approved its version of the Department of Homeland Security Appropriations Act, 2017. Unlike the Senate, the House Committee did transfer the Firefighter Assistance budget account into a broader Federal Assistance account in FEMA. The bill provided $690 million for firefighter assistance, including $345 million for AFG and $345 million for SAFER. In the committee report, the committee directed FEMA to continue administering the fire grants programs as directed in prior year committee reports, and encouraged FEMA to ensure that the formulas used for equipment accurately reflect current costs. The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provided $690 million for firefighter assistance in FY2017, including $345 million for AFG and $345 million for SAFER. Money is to remain available through September 30, FY2018. The firefighter assistance account was transferred to FEMA's broader Federal Assistance account. For FY2018, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for AFG and $344.344 million for SAFER, slightly below the FY2017 level. AFG and SAFER are under Grants in the Federal Assistance budget account. On July 18, 2017, the House Appropriations Committee approved the Department of Homeland Security Appropriations Act, 2018 ( H.R. 3355 ; H.Rept. 115-239 ). The bill provided $690 million for firefighter assistance under the Federal Assistance budget account, including $345 million for AFG and $345 million for SAFER. In the bill report, the committee encouraged FEMA to give high-priority consideration to grants providing for planning, training, and equipment to firefighters for crude oil-by-rail and ethanol-by-rail derailment and incident response. On September 14, 2017, the House passed H.R. 3354 , a FY2018 omnibus appropriations bill that includes funding for AFG and SAFER. During floor consideration, the House adopted an amendment offered by Representative Kildee that added $20 million to SAFER; thus H.R. 3354 would provide $345 million for AFG and $365 million for SAFER. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided $700 million for firefighter assistance in FY2018, including $350 million for AFG and $350 million for SAFER. Money is to remain available through September 30, 2019. For FY2019, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for AFG and $344.344 million for SAFER. On June 21, 2018, the Senate Appropriations Committee approved S. 3109 , the Department of Homeland Security Act, 2019 ( S.Rept. 115-283 ). The Senate bill would have provided $700 million for firefighter assistance, including $350 million for AFG and $350 million for SAFER. On July 25, 2018, the House Appropriations Committee approved its version of the FY2019 Homeland Security appropriations bill ( H.R. 6776 ; H.Rept. 115-948 ). The House bill would also have provided $700 million for firefighter assistance, including $350 million for AFG and $350 million for SAFER. In the bill report, the committee encouraged FEMA to give high priority consideration to grants providing for planning, training, and equipment to firefighters for crude oil-by-rail and ethanol-by-rail derailment and incident response. The committee also encouraged FEMA to \"provide technical assistance, and work more closely with those communities that are underserved or underrepresented,\" and to rate Source Capture Exhaust Extraction Systems as \"high priority\" under the AFG program. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $700 million for firefighter assistance in FY2019, including $350 million for AFG and $350 million for SAFER, with funds to remain available through September 30, 2020. For FY2020, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for AFG and $344.344 million for SAFER. This is the same amount the Administration requested in its FY2019 budget proposal and a 1.6% reduction from the FY2019 appropriation. Since its inception, the traditional fire grant program has provided money specifically for health- and safety-related modifications of fire stations, but has not funded major upgrades, renovations, or construction. The American Recovery and Reinvestment Act (ARRA) of 2009 ( P.L. 111-5 ) provided an additional $210 million in firefighter assistance grants for modifying, upgrading, or constructing state and local nonfederal fire stations, provided that 5% be set aside for program administration, and provided that no grant shall exceed $15 million. The conference report ( H.Rept. 111-16 ) cited DHS estimates that this spending would create 2,000 jobs. The ARRA also included a provision (§603) that waived the matching requirement for SAFER grants funded by appropriations in FY2009 and FY2010. The application period for ARRA Assistance to Firefighters Fire Station Construction Grants (SCG) opened on June 11 and closed on July 10, 2009. There is no cost share requirement for SCG grants. Eligible applicants are nonfederal fire departments that provide fire protection services to local communities. Ineligible applicants include federal fire departments, EMS or rescue organizations, airport fire departments, for-profit fire departments, fire training centers, emergency communications centers, auxiliaries and fire service organizations or associations, and search and rescue teams or similar organizations without fire suppression responsibilities. DHS/FEMA received 6,025 SCG applications for $9.9 billion in federal funds. As of October 1, 2010, 119 SCG grants were awarded, totaling $207.461 million to fire departments within the United States. A complete list of SCG awards is available at http://www.fema.gov/rules-tools/assistance-firefighters-station-construction-grants . In response to concerns over the adequacy of firefighter staffing, the 108 th Congress enacted the Staffing for Adequate Fire and Emergency Response (SAFER) Act as Section 1057 of the FY2004 National Defense Authorization Act ( P.L. 108-136 ; signed into law November 24, 2003). The SAFER grant program is codified as Section 34 of the Federal Fire Prevention and Control Act of 1974 (15 U.S.C. 2229a). The SAFER Act authorizes grants to career, volunteer, and combination fire departments for the purpose of increasing the number of firefighters to help communities meet industry minimum standards and attain 24-hour staffing to provide adequate protection from fire and fire-related hazards. Also authorized are grants to volunteer fire departments for activities related to the recruitment and retention of volunteers. For more information on the SAFER program, see CRS Report RL33375, Staffing for Adequate Fire and Emergency Response: The SAFER Grant Program , by Lennard G. Kruger. On May 13, 2003, the U.S. Fire Administration (USFA) released the first independent evaluation of the Assistance to Firefighters Program. Conducted by the U.S. Department of Agriculture's Leadership Development Academy Executive Potential Program, the survey study presented a number of recommendations and concluded overall that the program was \"highly effective in improving the readiness and capabilities of firefighters across the nation.\" Another evaluation of the fire grant program was released by the DHS Office of Inspector General in September 2003. The report concluded that the program \"succeeded in achieving a balanced distribution of funding through a competitive grant process,\" and made a number of specific recommendations for improving the program. At the request of DHS, the National Academy of Public Administration conducted a study to help identify potential new strategic directions for the Assistance to Firefighters Grant program and to provide advice on how to effectively plan, manage, and measure program accomplishments. Released in April 2007, the report recommended consideration of new strategic directions related to national preparedness, prevention vs. response, social equity, regional cooperation, and emergency medical response. According to the report, the \"challenge for the AFG program will be to support a gradual shift in direction without losing major strengths of its current management approach—including industry driven priority setting and its well-respected peer review process.\" The Consolidated Appropriations Act of 2008 ( P.L. 110-161 ), in the accompanying Joint Explanatory Statement, directed the Government Accountability Office (GAO) to review the application and award process for fire and SAFER grants. Additionally, FEMA was directed to peer review grant applications that best address the program's priorities and criteria as established by FEMA and the fire service. Those criteria necessary for peer-review must be included in the grant application package. Applicants whose grant applications are not reviewed must receive an official notification detailing why the application did not meet the criteria for review. Applications must be rank-ordered, and funded following the rank order. In October 2009, GAO sent a report to Congress finding that FEMA has met most statutory requirements for awarding fire grants. GAO recommended that FEMA establish a procedure to track EMS awards, ensure that grant priorities are better aligned with application questions and scoring values, and provide specific feedback to rejected applicants. During 2014 and 2015, the DHS Office of the Inspector General (OIG) conducted an audit of AFG grants for fiscal years 2010 through 2012. On June 9, 2016, the DHS OIG released its report finding that 64% of AFG grant recipients over that period did not comply with grant guidance and requirements to prevent waste, fraud, and abuse of grant funds. The report recommended that FEMA's Grant Programs Directorate develop and implement an organizational framework to manage the risk of fraud, waste, abuse, and mismanagement. According to the report, FEMA has concurred with the OIG findings and has taken corrective actions to resolve the recommendations. Meanwhile, the Fire Grants Reauthorization Act of 2012 ( P.L. 112-239 ) directed GAO to prepare a report to Congress that includes an assessment of the effect of the changes made by P.L. 112-239 on the effectiveness, relative allocation, accountability, and administration of the fire grants. GAO was also directed to evaluate the extent to which those changes have enabled grant recipients to mitigate fire and fire-related and other hazards more effectively. In September 2016, GAO released its report, entitled Fire Grants: FEMA Could Enhance Program Administration and Performance Assessment. The report concluded that FEMA's fire grant policies and the awards made in FY2013 and FY2014 generally reflected the changes to the fire grant statute made by P.L. 112-239 , and that FEMA enhanced its assessment of program performance by establishing and reporting on measures of effectiveness of the grants. However, GAO also concluded that those performance measures do not include measurable performance targets linked to AFG and SAFER program goals, and that \"aligning the fire grants programs' use of data on, and definitions of, critical infrastructure to award fire grants and assess program performance with the more objective, quantitative approach used by DHS and GPD [the Grants Program Directorate] for other programs and nonfire preparedness grants could enhance GPD's efforts to integrate the fire grants program into larger national preparedness efforts and more objectively assess the impact of fire grants.\" In November 2016, the National Fire Protection Association (NFPA) released its Fourth Needs Assessment of the U.S. Fire Service , which seeks to identify gaps and needs in the fire service, and assesses the extent to which fire grants target those gaps and needs. According to the study: For respondent departments, fire service needs are extensive across the board, and in nearly every area of need, the smaller the community protected, the greater the need. While some needs have declined, many others have been constant or have shown an increase. Gaps remain across the board in staffing, training, facilities, apparatus, personal protective equipment, and health and wellness. Evidence of the need for staffing engines; training for structural firefighting, Hazmat and wildland firefighting; and updated SCBA and personal protective clothing is concerning. Roles and responsibilities of the fire service are expanding apparently at the same time appears that resources are being cut. EMS and Hazmat are now common responsibilities while active shooter response, enhanced technical rescue and wildland-urban interface firefighting are up and coming challenges for many departments. AFG and SAFER grant funds are targeted towards areas of need. As other resources are cut back, more departments turn towards these grants for support. If anything, these grant programs should grow in order to address the considerable multifaceted need that continues in the fire service. The AFG statute prescribes different purposes for which fire grant money may be used. These are training firefighting personnel; creating rapid intervention teams; certifying fire inspectors and building inspectors whose responsibilities include fire safety inspections and who are associated with a fire department; establishing wellness and fitness programs, including mental health programs; funding emergency medical services (EMS) provided by fire departments and nonaffiliated EMS organizations; acquiring firefighting vehicles; acquiring firefighting equipment; acquiring personal protective equipment; modifying fire stations, fire training facilities, and other facilities for health and safety; educating the public about arson prevention and detection; providing incentives for the recruitment and retention of volunteer firefighters; and supporting other activities as FEMA determines appropriate. FEMA has the discretion to decide which of those purposes will be funded for a given grant year. This decision is based on a Criteria Development Panel, composed of fire service and EMS representatives, which annually recommends criteria for awarding grants. Since the program commenced in FY2001, the majority of fire grant funding has been used by fire departments to purchase firefighting equipment, personal protective equipment, and firefighting vehicles. Eligible applicants are limited primarily to fire departments (defined as an agency or organization that has a formally recognized arrangement with a state, local, or tribal authority to provide fire suppression, fire prevention, and rescue services to a population within a fixed geographical area). Emergency Medical Services (EMS) activities (at least 3.5% of annual AFG funding) are eligible for fire grants, including a limited number (no more than 2%) to nonfire department EMS organizations not affiliated with hospitals. Additionally, a separate competition is held for fire prevention and firefighter safety research and development grants, which are available to fire departments; national, state, local, tribal, or nonprofit organizations recognized for their fire safety or prevention expertise; and to institutions of higher education, national fire service organizations, or national fire safety organizations to establish and operate fire safety research centers. For official program and application guidelines, frequently asked questions, the latest awards announcements, and other information, see the Assistance to Firefighters Grant program web page at http://www.fema.gov/welcome-assistance-firefighters-grant-program . The FIRE Act statute provides overall guidelines on how fire grant money will be distributed. Previously, the law directed that volunteer and combination departments receive a proportion of the total grant funding that is not less than the proportion of the U.S. population that those departments protect (34% for combination, 21% for all-volunteer). Reflecting concerns that career fire departments (which are primarily in urban and suburban areas) were not receiving adequate levels of funding, the Fire Grants Authorization Act of 2012 altered the distribution formula, directing that not less than 25% of annual AFG funding go to career fire departments, not less than 25% to volunteer fire departments, not less than 25% to combination and paid-on-call fire departments, and not less than 10% for open competition among career, volunteer, combination, and paid-on-call fire departments. Additionally, P.L. 112-239 raised award caps (up to $9 million) and lowered matching requirements for fire departments serving higher population areas. There is no set geographical formula for the distribution of fire grants—fire departments throughout the nation apply, and award decisions are made by a peer panel based on the merits of the application and the needs of the community. However, in evaluating applications, FEMA may take into consideration the type of department (paid, volunteer, or combination), geographic location, and type of community served (e.g., urban, suburban, or rural). In an effort to maximize the diversity of awardees, the geographic location of an applicant (using states as the basic geographic unit) is used as a deciding factor in cases where applicants have similar qualifications. Table 4 shows a state-by-state breakdown of fire grant funding for FY2001 through FY2017, while Table 5 shows a state-by-state breakdown of SAFER grant funding for FY2005 through FY2017. Table 6 shows the percentage distribution of AFG grant funds by type of department (career, combination, volunteer, paid-on-call) for FY2009 through FY2014, while Table 7 shows the percentage distribution of AFG grant funds by community service area (urban, suburban, rural) for FY2009 through FY2014. Firefighter assistance grants were impacted by the partial government shutdown. FEMA personnel who administer the grants were furloughed. For all three grant programs (AFG, SAFER, and FP&S) the application and awards process was delayed. For the 2018 awards round, the application windows for AFG and FP&S closed in October and December 2018, respectively, but the processing of those applications could not move forward. The opening of the 2018 round application window for SAFER grants was also delayed. For grants already awarded (in the 2017 and previous rounds), grant recipients periodically draw down funds, either to reimburse expenditures already incurred, or in immediate advance of those expenditures. Grant recipients were unable to draw down funds during the shutdown, which may have disrupted the ability of the grantees to continue grant-funded activities, including personnel costs covered by SAFER grant awards, which extend for three years. This disruption may continue after the government shutdown has resolved due to a backlog of payment requests that need to be processed once furloughed FEMA grant personnel return to work. AFG assistance is distributed to career, volunteer, combination, and paid-on-call fire departments serving urban, suburban, and rural areas. A continuing issue is how equitably and effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. Another issue for Congress is whether AFG should be expanded to allow additional eligible uses of AFG grants. For example, H.R. 1823 , the Help Ensure Responders Overdosing Emerge Safely Act of 2019, would amend the Federal Fire Prevention and Control Act of 1974 to include as an eligible use of AFG grants, \"to provide opioid receptor antagonists, including naloxone, to firefighters, paramedics, emergency medical service workers, and other first responders for personal use.\" Finally, a continuing issue is budget appropriations for AFG and SAFER. As is the case with many federal programs, concerns over the federal budget deficit could impact budget levels for AFG and SAFER. At the same time, firefighter assistance budgets will likely receive heightened scrutiny from the fire service community, given the local budgetary shortfalls that many fire departments may face. ", "summary": "The Assistance to Firefighters Grant (AFG) Program, also known as fire grants or the FIRE Act grant program, was established by Title XVII of the FY2001 National Defense Authorization Act (P.L. 106-398). Currently administered by the Federal Emergency Management Agency (FEMA), Department of Homeland Security (DHS), the program provides federal grants directly to local fire departments and unaffiliated Emergency Medical Services (EMS) organizations to help address a variety of equipment, training, and other firefighter-related and EMS needs. AFG also supports fire prevention projects and firefighter health and safety research and development through the Firefighter Prevention and Safety (FP&S) grant program. A related program is the Staffing for Adequate Fire and Emergency Response Firefighters (SAFER) program, which provides grants for hiring, recruiting, and retaining firefighters. The fire grant program is now in its 19th year. AFG assistance is distributed to career, volunteer, combination, and paid-on-call fire departments serving urban, suburban, and rural areas. There is no set geographical formula for the distribution of fire grants—fire departments throughout the nation apply, and award decisions are made by a peer panel based on the merits of the application and the needs of the community. On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 (P.L. 115-98). P.L. 115-98 extends the AFG and SAFER authorizations through FY2023; extends the sunset provisions for AFG and SAFER through September 30, 2024; provides that the U.S. Fire Administration (USFA) may develop and make widely available an online training course on AFG and SAFER grant administration; expands SAFER hiring grant eligibility to cover the conversion of part-time or paid-on-call firefighters to full-time firefighters; directs FEMA, acting through the Administrator of USFA, to develop and implement a grant monitoring and oversight framework to mitigate and minimize risks of fraud, waste, abuse, and mismanagement related to the AFG and SAFER grant programs; and makes various technical corrections to the AFG and SAFER statute. The Consolidated Appropriations Act, 2019 (P.L. 116-6) provided $700 million for firefighter assistance in FY2019, including $350 million for AFG and $350 million for SAFER. For FY2020, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for AFG and $344.344 million for SAFER. This is the same amount the Administration requested in its FY2019 budget proposal and a 1.6% reduction from the FY2019 appropriation. A continuing issue for the 116th Congress is how equitably and effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. Another continuing issue is budget appropriations for AFG and SAFER. As is the case with many federal programs, concerns over the federal budget deficit could impact budget levels for AFG and SAFER. At the same time, firefighter assistance budgets will likely receive heightened scrutiny from the fire service community, given the local budgetary shortfalls that many fire departments may face.", "document_type": "crs"}
{"report": "R ecent high-profile data breaches and privacy violations have raised national concerns over the legal protections that apply to Americans' electronic data. While some concern over data protection stems from how the government might utilize such data, mounting worries have centered on how the private sector controls digital information, the focus of this report. Inadequate corporate privacy practices and intentional intrusions into private computer networks have exposed the personal information of millions of Americans. At the same time, internet connectivity has increased and varied in form in recent years, expanding from personal computers and mobile phones to everyday objects such as home appliances, \"smart\" speakers, vehicles, and other internet-connected devices. Americans now transmit their personal data on the internet at an exponentially higher rate than the past. Along with the increased connectivity, a growing number of \"consumer facing\" actors (such as websites) and \"behind the scenes\" actors (such as data brokers and advertising companies) collect, maintain, and use consumers' information. While this data collection can benefit consumers—for instance, by allowing companies to offer them more tailored products—it also raises privacy concerns, as consumers often cannot control how these entities use their data. As a consequence, the protection of personal data has emerged as a major issue for congressional consideration. Despite the increased interest in data protection, the legal paradigms governing the security and privacy of personal data are complex and technical, and lack uniformity at the federal level. The Supreme Court has recognized that the Constitution provides various rights protecting individual privacy, but these rights generally guard only against government intrusions and do little to prevent private actors from abusing personal data online. At the federal statutory level, while there are a number of data protection statutes, they primarily regulate certain industries and subcategories of data. The Federal Trade Commission (FTC) fills in some of the statutory gaps by enforcing the federal prohibition against unfair and deceptive data protection practices. But no single federal law comprehensively regulates the collection and use of personal data. In contrast to the \"patchwork\" nature of federal law, some state and foreign governments have enacted more comprehensive data protection legislation. Some analysts suggest these laws, which include the European Union's (EU's) General Data Protection Regulation (GDPR) and state laws such as the California Consumer Privacy Act (CCPA), will create increasingly overlapping and uneven data protection regimes. This fragmented legal landscape coupled with concerns that existing federal laws are inadequate has led many stakeholders to argue that the federal government should assume a larger role in data protection policy. However, at present, there is no consensus as to what, if any, role the federal government should play, and any legislative efforts at data protection are likely to implicate unique legal concerns such as preemption, standing, and First Amendment rights, among other issues. This report examines the current U.S. legal landscape governing data protection, contrasting the current patchwork of federal data protection laws with the more comprehensive regulatory models in the CCPA and GDPR. The report also examines potential legal considerations for the 116th Congress should it consider crafting more comprehensive federal data protection legislation. The report lastly contains an Appendix , which contains a table summarizing the federal data protection laws discussed in the report. Historically, the common law in the United States had little need to protect privacy—as one commentator has observed, \"[s]olitude was readily available in colonial America.\" Although common law had long protected against eavesdropping and trespass, these protections said little to nothing about individual rights to privacy, per se. Over time, gradual changes in the technological and social environment caused a shift in the law. In 1890, Louis Brandeis and Samuel Warren published a groundbreaking article in the Harvard Law Review entitled The Right to Privacy . Reacting to the proliferation of the press and advancements in technology such as more advanced cameras, the article argued that the law should protect individuals' \"right to privacy\" and shield them from intrusion from other individuals. The authors defined this emergent right as the \"right to be let alone.\" Scholars have argued that this article created a \"revolution\" in the development of the common law. In the century that followed Brandeis's and Warren's seminal article, most states recognized the so-called \"privacy torts\"—intrusion upon seclusion, public disclosure of private facts, false light or \"publicity,\" and appropriation. These torts revolve around the central idea that individuals should be able to lead, \"to some reasonable extent, a secluded and private life.\" The Supreme Court described this evolution of privacy tort law as part of a \"strong tide\" in the twentieth century toward the \"so-called right of privacy\" in the states. Despite this \"strong tide,\" some scholars have argued that these torts, which were developed largely in the mid-twentieth century, are inadequate to face the privacy and data protection problems of today. Furthermore, some states do not accept all four of these torts or have narrowed and limited the applicability of the torts so as to reduce their effectiveness. As discussed in greater detail below, state common law provides some other remedies and protections relevant to data protection, via tort and contract law. However, while all of this state common law may have some influence on data protection, the impact of this judge-made doctrine is unlikely to be uniform, as courts' application of these laws will likely vary based on the particular facts of the cases in which they are applied and the precedents established in the various states. As reflected in the common law's limited remedies, at the time of the founding, concerns about privacy focused mainly on protecting private individuals from government intrusion rather than on protecting private individuals from intrusion by others. Accordingly, the Constitution's Bill of Rights protects individual privacy from government intrusion in a handful of ways and does little to protect from non-governmental actors. Some provisions protect privacy in a relatively narrow sphere, such as the Third Amendment's protection against the quartering of soldiers in private homes or the Fifth Amendment's protection against self-incrimination. The most general and direct protection of individual privacy is contained in the Fourth Amendment, which states that \"[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated . . .\" For more than 100 years, the Fourth Amendment was generally read to prohibit only entry into private places rather than to provide general right to privacy. However, alongside the developments in the common law, constitutional law evolved over time to place a greater emphasis on protecting an individual's personal privacy. In particular, in 1967, the Supreme Court in Katz v. United States explained that the Fourth Amendment, while not creating a general \"right to privacy,\" nonetheless protected \"people, not places,\" and guarded individual privacy against certain types of governmental intrusion. This principle has continued to evolve over time, and has come to protect, to some extent, individuals' interest in their digital privacy. For example, in the 2018 case of Carpenter v. United States , the Supreme Court concluded that the Fourth Amendment's protection of privacy extended to protecting some information from government intrusion even where that information was shared with a third party. In Carpenter , the Court concluded that individuals maintain an expectation of privacy, protected by the Fourth Amendment, in the record of their movements as recorded by their cellular provider. Carpenter distinguished earlier cases which had relied upon the principle that information shared with third parties was generally not subject to Fourth Amendment scrutiny, concluding that \"an individual maintains a legitimate expectation of privacy in the record of his physical movements as captured through [his cellular phone].\" The Court's holding means that, in the future, the government must obtain a warrant supported by probable cause to obtain this information. The Fourth Amendment thus provides a limited bulwark against government intrusion into digital privacy. In addition to the protection provided by the Fourth Amendment, in the 1960s and 1970s, the Court concluded that the Fourteenth Amendment's guarantee of \"liberty\" implied the existence of a more general right of privacy, protecting individuals from government intrusion even outside the \"search and seizure\" context. In the 1977 case Whalen v. Roe , the Supreme Court explained that this constitutional right of privacy \"in fact involve[s] at least two different kinds of interests. One is the individual interest in avoiding disclosure of personal matters, and another is the interest in independence in making certain kinds of important decisions.\" The second of these interests relates primarily to individual rights concerning the \"intimacies of [persons'] physical relationship,\" as well as the right to abortion, and has little connection to data protection. However, the first of the interests listed in Whalen could potentially relate to data protection. This interest, the right to avoid certain disclosures, has come to be known as the right to \"informational privacy.\" Despite its broad expression in Whalen , every Supreme Court case to consider the informational privacy right has rejected the constitutional claim and upheld the government program alleged to have infringed on the right. In Whalen itself, physicians and patients challenged a New York law that required the recording of the names and addresses of all persons who had obtained certain drugs for which there was both a lawful and unlawful market. Although the Court acknowledged that the statute \"threaten[ed] to impair . . . [the plaintiffs'] interest in the nondisclosure of private information,\" the Court observed that the disclosures were an \"essential part of modern medical practice\" and the New York law had protections in place against unwarranted disclosure that showed a \"proper concern\" for the protection of privacy. Together, the Court found these factors sufficient to uphold the law. In the wake of Whalen and Nixon v. Administrator of General Services —a case decided the same year as Whalen that also considered the right to informational privacy—courts have struggled to articulate the precise contours of the right. The most recent Supreme Court case to consider the right to informational privacy, NASA v. Nelson , went so far as to suggest that the right might not exist, \"assuming without deciding\" that the right existed in the course of rejecting the constitutional claim challenge to a government background check program for hiring. Despite the Supreme Court's lack of clarity about the right to informational privacy, \"most federal circuit courts\" recognize the right to various extents. All of the constitutional rights involving privacy, like the common law privacy torts, focus on public disclosure of private facts. This focus limits their potential influence on modern data privacy debates, which extends beyond the disclosure issue to more broadly concern how data is collected, protected, and used. Perhaps more importantly, whatever the reach of the constitutional right to privacy, the \"state action doctrine\" prevents it from being influential outside the realm of government action. Under this doctrine, only government action is subject to scrutiny under the Constitution, but purely private conduct is not proscribed, \"no matter how unfair that conduct may be.\" As a result, neither the common nor constitutional law provides a complete framework for considering many of the potential threats to digital privacy and consumer data. Rather, the most important data protection standards come from statutory law. Given the inherent limitations in common law and constitutional protections, Congress has enacted a number of federal laws designed to provide statutory protections of individuals' personal information. In contrast with the scheme prevalent in Europe and some other countries, rather than a single comprehensive law, the United States has a \"patchwork\" of federal laws that govern companies' data protection practices. These laws vary considerably in their purpose and scope. Most impose data protection obligations on specific industry participants—such as financial institutions, health care entities, and communications common carriers—or specific types of data, such as children's data. Other laws, however, supplement the Constitution's limited privacy protections and apply similar principles to private entities. The Stored Communications Act (SCA), for instance, generally prohibits the unauthorized access or disclosure of certain electronic communications stored by internet service providers. Lastly, some laws prohibit broad categories of conduct that, while not confined to data protection, limit how companies may handle personal data. Most notably, the Federal Trade Commission Act (FTC Act) prohibits \"unfair or deceptive acts or practices.\" As some scholars have pointed out, the FTC has used its authority under the FTC Act to develop norms and principles that effectively fill in the gaps left by other privacy statutes. These laws are organized below, beginning with those most narrowly focused on discrete industries and moving toward more generally applicable laws. In light of its gap-filling function, this section lastly discusses the FTC Act—along with the Consumer Financial Protection Act (CFPA), which covers similar types of conduct. The Appendix to this report contains a table summarizing the federal data protection laws discussed. The Gramm-Leach-Bliley Act (GLBA) imposes several data protection obligations on financial institutions. These obligations are centered on a category of data called \"consumer\" \"nonpublic personal information\" (NPI), and generally relate to: (1) sharing NPI with third parties, (2) providing privacy notices to consumers, and (3) securing NPI from unauthorized access. First, unless an exception applies, GLBA and its implementing regulations prohibit financial institutions from sharing NPI with non-affiliated third parties unless they first provide the consumers with notice and an opportunity to \"opt-out.\" Furthermore, financial institutions are prohibited altogether from sharing account numbers or credit card numbers to third parties for use in direct marketing. Second, financial institutions must provide \"clear and conspicuous\" initial and annual notices to customers describing their privacy \"policies and practices.\" These notices must include, among other things, the categories of NPI collected and disclosed, the categories of third parties with which the financial institution shares NPI, and policies and practices with respect to protecting the confidentiality and security of NPI. Third, GLBA and its implementing regulations (often referred to as the \"Safeguards Rule\" ) require financial institutions to maintain \"administrative, technical, and physical safeguards\" to \"insure the security and confidentiality\" of \"customer\" (as opposed to \"consumer\") NPI, and to protect against \"any anticipated threats or hazards\" or \"unauthorized access\" to such information. Financial institutions regulated by federal banking agencies are further required to implement a program for responding to the unauthorized access of customer NPI. The Consumer Financial Protection Bureau (CFPB), FTC, and federal banking agencies share civil enforcement authority for GLBA's privacy provisions. However, the CFPB has no enforcement authority over GLBA's data security provisions. Under the data security provisions, federal banking regulators have exclusive enforcement authority for depository institutions, and the FTC has exclusive enforcement authority for all non-depository institutions. GLBA does not specify any civil remedies for violations of the Act, but agencies can seek remedies based on the authorities provided in their enabling statutes, as discussed below. GLBA also imposes criminal liability on those who \"knowingly and intentionally\" obtain or disclose \"customer information\" through false or fraudulent statements or representations. Criminal liability can result in fines and up to five years' imprisonment. GLBA does not contain a private right of action that would allow affected individuals to sue violators. Under the Health Insurance Portability and Accountability Act (HIPAA), the Department of Health and Human Services (HHS) has enacted regulations protecting a category of medical information called \"protected health information\" (PHI). These regulations apply to health care providers, health plans, and health care clearinghouses (covered entities), as well as certain \"business associates\" of such entities. The HIPAA regulations generally speak to covered entities': (1) use or sharing of PHI, (2) disclosure of information to consumers, (3) safeguards for securing PHI, and (4) notification of consumers following a breach of PHI. First, with respect to sharing, HIPAA's privacy regulations generally prohibit covered entities from using PHI or sharing it with third parties without patient consent, unless such information is being used or shared for treatment, payment, or \"health care operations\" purposes, or unless another exception applies. Covered entities generally may not make treatment or services conditional on an individual providing consent. Second, with respect to consumer disclosures, covered entities must provide individuals with \"adequate notice of the uses and disclosures of [PHI] that may be made by the covered entity, and of the individual's rights and the covered entity's legal duties with respect to [PHI].\" These notices must be provided upon consumer request, and covered entities maintaining websites discussing their services or benefits must \"prominently post\" the notices on their websites. Furthermore, an individual has the right to request that a covered entity provide him with a copy of his PHI that is maintained by the covered entity. In some cases, an individual may also request that the covered entity provide information regarding specific disclosures of the individual's PHI, including the dates, recipients, and purposes of the disclosures. Third, with respect to data security, covered entities must maintain safeguards to prevent threats or hazards to the security of electronic PHI. Lastly, HIPAA regulations contain a data breach notification requirement, requiring covered entities to, among other things, notify the affected individuals within 60 calendar days after discovering a breach of \"unsecured\" PHI. Violations of HIPAA's privacy requirements can result in criminal or civil enforcement. HHS possesses civil enforcement authority and may impose civil penalties, with the amount varying based on the level of culpability. The Department of Justice has criminal enforcement authority and may seek fines or imprisonment against a person who, in violation of HIPAA's privacy requirements, \"knowingly\" obtains or discloses \"individually identifiable health information\" or \"uses or causes to be used a unique health identifier.\" HIPAA does not, however, contain a private right of action that would allow aggrieved individuals to sue alleged violators. The Fair Credit Reporting Act (FCRA) covers the collection and use of information bearing on a consumer's creditworthiness. FCRA and its implementing regulations govern the activities of three categories of entities: (1) credit reporting agencies (CRAs), (2) entities furnishing information to CRAs (furnishers), and (3) individuals who use credit reports issued by CRAs (users). In contrast to HIPAA or GLBA, there are no privacy provisions in FCRA requiring entities to provide notice to a consumer or to obtain his opt-in or opt-out consent before collecting or disclosing the consumer's data to third parties. FCRA further has no data security provisions requiring entities to maintain safeguards to protect consumer information from unauthorized access. Rather, FCRA's requirements generally focus on ensuring that the consumer information reported by CRAs and furnishers is accurate and that it is used only for certain permissible purposes. With respect to accuracy, CRAs must maintain reasonable procedures to ensure the accuracy of information used in \"consumer reports.\" CRAs must further exclude adverse information, such as \"accounts placed in collection\" or civil judgements, from consumer reports after a certain amount of time has elapsed. Furnishers must similarly establish reasonable policies and procedures to ensure the accuracy of the information reported to CRAs and may not furnish to a CRA any consumer information if they have reasonable cause to believe that information is inaccurate. Consumers also have the right to review the information CRAs have collected on them to ensure such information is accurate. CRAs must disclose information contained in a consumer's file upon the consumer's request, as well as the sources of the information and the identity of those who have recently procured consumer reports on the consumer. Should a consumer dispute the accuracy of any information in his file, CRAs and furnishers must reinvestigate the accuracy of the contested information. In addition to the accuracy requirements, under FCRA consumer reports may be used only for certain permissible purposes such as credit transactions. Accordingly, a CRA may generally furnish consumer reports to a user only if it \"has a reason to believe\" the user intends to use it for a permissible purpose. Likewise, users may \"use or obtain a consumer report\" only for a permissible purpose. Along with the permissible purpose requirement, users must further notify consumers of any \"adverse action\" taken against the consumer based on the report. Adverse actions include refusing to grant credit on substantially the terms requested, reducing insurance coverage, and denying employment. The FTC and the CFPB share civil enforcement authority over FCRA, with each agency possessing enforcement authority over entities subject to their respective jurisdictions. In addition to government enforcement, FCRA provides a private right of action for consumers injured by willful or negligent violations of the Act. Consumers bringing such actions for negligent violations of the Act may recover actual damages, attorney's fees, and other litigation costs. For willful violations, consumers may recover either actual damages or statutory damages ranging from $100 to $1,000, attorney's fees, other litigation costs, and \"such amount of punitive damages as the court may allow.\" FCRA also imposes criminal liability on any individual who knowingly and willfully obtains consumer information from a CRA under false pretenses and on any officer or employee of a CRA who knowingly and willfully provides consumer information to a person not authorized to receive that information. The Communications Act of 1934 (Communications Act or Act), as amended, established the Federal Communications Commission (FCC) and provides a \"comprehensive scheme\" for the regulation of interstate communication. Most relevant to this report, the Communications Act includes data protection provisions applicable to common carriers, cable operators, and satellite carriers. The Telecommunications Act of 1996 amended the Communications Act to impose data privacy and data security requirements on entities acting as common carriers. Generally, common carrier activities include telephone and telegraph services but exclude radio broadcasting, television broadcasting, provision of cable television, and provision of broadband internet. The privacy and security requirements imposed on entities acting as common carriers are primarily centered on a category of information referred to as \"customer proprietary network information (CPNI).\" CPNI is defined as information relating to the \"quantity, technical configuration, type, destination, location, and amount of use of a telecommunications service subscribed to by any customer of a telecommunications carrier,\" and is \"made available to the carrier by the customer solely by virtue of the carrier-customer relationship.\" Section 222(c) of the Communications Act and the FCC's implementing regulations set forth carriers' obligations regarding CPNI. These provisions cover three main issues. First, carriers must comply with certain use and disclosure rules. Section 222(c) imposes a general rule that carriers may not \"use, disclose, or permit access to\" \"individually identifiable\" CPNI without customer approval, unless a particular exception applies. Before a carrier may solicit a customer for approval to use or disclose their CPNI, it must notify customers of their legal rights regarding CPNI and provide information regarding the carrier's use and disclosure of CPNI. Second, carriers must implement certain safeguards to ensure the proper use and disclosure of CPNI. These safeguards must include, among other things, a system by which the \"status of a customer's CPNI approval can be clearly established\" prior to its use, employee training on the authorized use of CPNI, and \"reasonable measures\" to discover and protect against attempts to gain unauthorized access to CPNI.\" Lastly, carriers must comply with data breach requirements. Following a \"breach\" of customers' CPNI, a carrier must disclose such a breach to law enforcement authorities no later than seven days following a \"reasonable determination of the breach.\" After it has \"completed the process of notifying law enforcement,\" it must notify customers whose CPNI has been breached. In addition to the CPNI requirements, the Communications Act contains three other potentially relevant data privacy and security provisions pertaining to common carriers. First, Section 222(a) of the Act states that carriers must \"protect the confidentiality of proprietary information\" of \"customers.\" Second, Section 201(b) of the Act declares unlawful \"any charge, practice, classification, and regulation\" in connection with a carrier's communication service that is \"unjust or unreasonable.\" Lastly, Section 202(a) provides that it shall \"be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classification, regulations, facilities, or services . . . .\" In a 2016 rule, which was subsequently overturned pursuant to the Congressional Review Act, the FCC attempted to rely on these three provisions to regulate a broad category of data called \"customer proprietary information\" (customer PI). While customer PI is not defined in the statute, the FCC's 2016 rule defined it broadly to include CPNI, as well as other \"personally identifiable information\" and the \"content of communications.\" The FCC reasoned that Section 222(a) imposes a general duty, independent from Section 222(c), on carriers to protect the confidentiality of customer PI. It further maintained that Sections 201(b) and 202(a) provide independent \"backstop authority\" to ensure that no gaps are formed in commercial data privacy and security practices, similar to the FTC's authority under the FTC Act. However, given that Congress overturned the 2016 rule, the FCC may be prohibited under the CRA from relying on these three provisions to regulate data privacy and security. Under the CRA, the FCC may not reissue the rule in \"substantially the same form\" or issue a \"new rule that is substantially the same\" as the overturned rule \"unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.\" The FCC is empowered to enforce civil violations of the Communications Act's provisions, including its common carrier provisions. The FCC may impose a \"forfeiture penalty\" against any person who \"willfully or repeatedly\" violates the Act or the FCC's implementing regulations. The Communications Act further imposes criminal penalties on those who \"willfully and knowingly\" violate the statute or the FCC's implementing regulations. Along with its general civil and criminal provisions, the Communications Act provides a private right of action for those aggrieved by violations of its common carrier provisions; in such actions, plaintiffs may seek actual damages and reasonable attorney's fees. In addition to common carriers, the Communications Act imposes a number of data privacy and security requirements on how \"cable operators\" and \"satellite carriers\" (i.e., covered entities) treat their subscribers' \"personally identifiable information\" (PII). These requirements relate to: (1) data collection and disclosure; (2) subscribers' access to, and correction of, their data; (3) data destruction; (4) privacy policy notification; and (5) data security. First, covered entities must obtain the \"prior written or electronic consent\" of a subscriber before collecting the subscriber's PII or disclosing it to third parties. There are several exceptions to this consent requirement. Among other things, covered entities may collect a subscriber's PII in order to obtain information necessary to render service to the subscriber, and they may disclose a subscriber's PII if the disclosure is necessary to \"render or conduct a legitimate business activity\" related to the service they provide. Second, covered entities must provide subscribers, at \"reasonable times and a convenient place,\" with access to all of their PII \"collected and maintained,\" and they must further provide subscribers a reasonable opportunity to correct any error in such information. Third, covered entities are obligated to destroy PII if it is \"no longer necessary for the purpose for which it is was collected\" and there are \"no pending requests or orders for access to such information.\" Fourth, covered entities must provide subscribers with a privacy policy notice at the \"time of entering into an agreement\" for services and \"at least once a year thereafter.\" These notices must describe, among other things: (1) the nature of the subscriber's PII that has been, or will be, collected, (2) the nature, frequency, and purpose of any disclosure of such information and the types of persons to whom the disclosure is made, and (3) the times and place at which the subscriber may have access to such information. Lastly, the Communications Act imposes a general data security requirement on covered entities; they must \"take such actions as are necessary to prevent unauthorized access to [PII] by a person other than the subscriber\" or the covered entity. The Communications Act provides a private right of action for \"[a]ny person aggrieved by any act\" of a covered entity in violation of these requirements. In such actions, a court may award actual damages, punitive damages, and reasonable attorneys' fees and other litigation costs. Additionally, covered entities violating these provisions may be subject to FCC civil enforcement and criminal penalties that, as previously noted, are generally applicable to violations of the Communications Act. The Video Privacy Protection Act (VPPA) was enacted in 1988 in order to \"preserve personal privacy with respect to the rental, purchase, or delivery of video tapes or similar audio visual materials.\" The VPPA does not have any data security provisions requiring entities to maintain safeguards to protect consumer information from unauthorized access. However, it does have privacy provisions restricting when covered entities can share certain consumer information. Specifically, the VPPA prohibits \"video tape service providers\" —a term that includes both digital video streaming services and brick-and-mortar video rental stores —from knowingly disclosing PII concerning any \"consumer\" without that consumer's opt-in consent. The VPPA provides several exceptions to this general rule. In particular, video tape service providers may disclose PII to \"any person if the disclosure is incident to the ordinary course of business.\" Providers may also disclose PII if the disclosure solely includes a consumer's name and address and does not identify the \"title, description, or subject matter of any video tapes or other audio visual material,\" and the consumer has been provided with an opportunity to opt out of such disclosure. The VPPA does not empower any federal agency to enforce violations of the Act and there are no criminal penalties for violations, but it does provide for a private right of action for persons aggrieved by the Act. In such actions, courts may award actual damages, punitive damages, preliminary and equitable relief, and reasonable attorneys' fees and other litigation costs. The Family Educational Rights and Privacy Act of 1974 (FERPA) creates privacy protections for student education records. \"Education records\" are defined broadly to generally include any \"materials which contain information directly related to a student\" and are \"maintained by an educational agency or institution.\" FERPA defines an \"educational agency or institution\" to include \"any public or private agency or institution which is the recipient of funds under any applicable program.\" FERPA generally requires that any \"educational agency or institution\" (i.e., covered entities) give parents or, depending on their age, the student (1) control over the disclosure of the student's educational records, (2) an opportunity to review those records, and (3) an opportunity to challenge them as inaccurate. First, with respect to disclosure, covered entities must not have a \"policy or practice\" of permitting the release of education records or \"personally identifiable information contained therein\" without the consent of the parent or the adult student. This consent requirement is subject to certain exceptions. Among other things, covered entities may disclose educational records to (1) certain \"authorized representatives,\" (2) school officials with a \"legitimate educational interest,\" or (3) \"organizations conducting studies\" for covered entities \"for the purpose of developing, validating, or administering predictive tests, administering student aid programs, and improving instructions.\" Covered entities may also disclose the information without consent if it constitutes \"directory information\" and the entity has given notice and a \"reasonable period of time\" to opt out of the disclosure. Second, in addition to the disclosure obligations, covered entities must not have a \"policy of denying\" or \"effectively prevent[ing]\" parents or an adult student from inspecting and reviewing the underlying educational records. Covered entities must further \"establish appropriate procedures\" to grant parents' review requests \"within a reasonable period of time, but in no case more than forty-five days after the request has been made.\" Lastly, covered entities must provide an \"opportunity for a hearing\" to challenge the contents of the student's education records as \"inaccurate, misleading, or otherwise in violation of the privacy rights of students.\" Covered entities must further \"provide an opportunity for the correction or deletion of any such inaccurate, misleading or otherwise inappropriate data contained therein and to insert into such records a written explanation of the parents respecting the content of such records.\" Parents or adult students who believe that their rights under FERPA have been violated may file a complaint with the Department of Education. FERPA authorizes the Secretary of Education to \"take appropriate actions,\" which may include withholding federal education funds, issuing a \"cease and desist order,\" or terminating eligibility to receive any federal education funding. FERPA does not, however, contain any criminal provisions or a private right of action. While federal securities statutes and regulations do not explicitly address data protection, two requirements under these laws have implications for how companies prevent and respond to data breaches. First, federal securities laws may require companies to adopt controls designed to protect against data breaches. Under Section 13(b)(2)(B) of the Securities and Exchange Act of 1934 (Exchange Act), public companies and certain other companies are required to \"devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances\" that \"transactions are executed in accordance with management's general or specific authorization,\" and that \"access to assets is permitted only in accordance with management's general or specific authorization.\" In a recent report, the Securities and Exchange Commission (SEC) suggested that, in order to comply with this requirement, companies should consider \"cyber-related threats\" when formulating accounting controls. The report discussed the SEC's investigation of companies that wrongly transferred millions of dollars in response to fraudulent emails, generally noting that \"companies should pay particular attention to the obligations imposed by Section 13(b)(2)(B)\" in light of the \"risks associated with today's ever expanding digital interconnectedness.\" Second, federal securities laws may require companies to discuss data breaches when making required disclosures under securities laws. The Exchange Act, Securities Act of 1933 (Securities Act), and their implementing regulations require certain companies to file a number of disclosures with the SEC. Specifically, the Securities Act requires companies issuing securities in a public offering to file detailed statements registering the offering (registration statements), and the Exchange Act requires public companies to file periodic reports on an annual, quarterly, and ongoing basis. These filings must contain certain categories of information, such as a description of the most significant factors that make investing in the company speculative or risky (known as \"risk factors\") and a description of any \"events, trends, or uncertainties that are reasonably likely to have a material effect on its results of operations, liquidity, or financial condition . . . .\" Further, when making these filings, or any other statements in connection with the purchase or sale of a security, companies are required to include any \"material\" information necessary to make the statements made therein \"not misleading.\" In interpretive guidance issued in February 2018, the SEC indicated that, pursuant to these obligations, companies may be required to disclose in their filings cyber incidents such as data breaches. The SEC can enforce violations of the Securities Act and the Exchange Act, including the accounting controls requirement and the disclosure requirements, through civil actions filed in court or administrative \"cease and desist\" proceedings. The SEC may seek civil penalties, disgorgement, and injunctive relief (in civil actions) or a cease and desist order (in administrative proceedings). Furthermore, under both the Exchange Act and the Securities Act, individuals aggrieved by a company's misrepresentation or omission of a material fact in connection with the purchase or sale of a security may sue the company for actual damages incurred by the individual. There is not, however, a private right of action for violations of the Exchange Act's accounting controls requirement. Lastly, in addition to civil enforcement, both the Securities Act and the Exchange Act impose criminal liability; any person who \"willfully\" violates the acts or their implementing regulations may be subject to fines and imprisonment. The Children's Online Privacy Protection Act (COPPA) and the FTC's implementing regulations regulate the online collection and use of children's information. Specifically, COPPA's requirements apply to: (1) any \"operator\" of a website or online service that is \"directed to children,\" or (2) any operator that has any \"actual knowledge that it is collecting personal information from a child\" (i.e., covered operators). Covered operators must comply with various requirements regarding data collection and use, privacy policy notifications, and data security. First, COPPA and the FTC's implementing regulations prohibit covered operators from collecting or using \"personal information\" from children under the age of thirteen without first obtaining parental consent. Such consent must be \"verifiable\" and must occur before the information is collected. Second, covered operators must provide parents with direct notice of their privacy policies, describing their data collection and sharing policies. Covered operators must further post a \"prominent and clearly labeled link\" to an online notice of its privacy policies at the home page of its website and at each area of the website in which it collects personal information from children. Lastly, covered operators that have collected information from children must establish and maintain \"reasonable procedures\" to protect the \"confidentiality, security, and integrity\" of the information, including ensuring that the information is provided only to third parties that will similarly protect the information. They must also comply with certain data retention and deletion requirements. Under COPPA's safe harbor provisions, covered operators will be deemed to have satisfied these requirements if they follow self-regulatory guidelines the FTC has approved. COPPA provides that violations of the FTC's implementing regulations will be treated as \"a violation of a rule defining an unfair or deceptive act or practice\" under the FTC Act. Under the FTC Act, as discussed in more detail below, the FTC has authority to enforce violations of such rules by seeking penalties or equitable relief. COPPA also authorizes state attorneys general to enforce violations affecting residents of their states. COPPA does not contain any criminal penalties or any provision expressly providing a private right of action. The Electronic Communications Privacy Act (ECPA) was enacted in 1986, and is composed of three acts: the Wiretap Act, the Stored Communications Act (SCA), and the Pen Register Act. Much of ECPA is directed at law enforcement, providing \"Fourth Amendment like privacy protections\" to electronic communications. However, ECPA's three acts also contain privacy obligations relevant to non-governmental actors. ECPA is perhaps the most comprehensive federal law on electronic privacy, as it is not sector-specific, and many of its provisions apply to a wide range of private and public actors. Nevertheless, its impact on online privacy practices has been limited. As some commentators have observed, ECPA \"was designed to regulate wiretapping and electronic snooping rather than commercial data gathering,\" and litigants attempting to apply ECPA to online data collection have generally been unsuccessful. The Wiretap Act applies to the interception of a communication in transit. A person violates the Act if, among other acts, he \"intentionally intercepts . . . any wire, oral, or electronic communication.\" The Wiretap Act defines an \"electronic communication\" broadly, and courts have held that the term includes information conveyed over the internet. Several thresholds must be met for an act to qualify as an unlawful \"interception.\" Of particular relevance are three threshold issues. First, the communication must be acquired contemporaneously with the transmission of the communication. Consequently, there is no \"interception\" where the communication in question is in storage. Furthermore, the acquired information must relate to the \"contents\" of the communication, defined as information concerning the \"substance, purport, or meaning of that communication.\" As a result, while the Act applies to information like the header or body of an email, the Act does not apply to non-substantive information automatically generated about the characteristics of the communication, such as IP addresses. Third, individuals do not violate the Wiretap Act if they are a \"party to the communication\" or received \"prior consent\" from one of the parties to the communication. The party-to-the-communication and consent exceptions have been subject to significant litigation; in particular, courts have often relied on the exceptions to dismiss suits alleging Wiretap Act violations due to online tracking, holding that websites or third-party advertisers who tracked users' online activity were either parties to the communication or received consent from a party to the communication. The SCA prohibits the improper access or disclosure of certain electronic communications in storage. With respect to improper access, a person violates the SCA if he obtains an \"electronic communication\" in \"electronic storage\" from \"a facility through which an electronic communication service is provided\" by either: (1) \"intentionally access[ing] [the facility] without authorization\" or (2) \"intentionally exceed[ing] an authorization.\" Although the statute does not define the term \"facility,\" most courts have held that the term is limited to a location where network service providers store communications. However, courts have differed over whether a personal computer is a \"facility.\" Most courts have excluded personal computers from the reach of the SCA, but some have disagreed. With respect to improper disclosure, the SCA generally prohibits entities providing \"electronic communication services\" or \"remote computing services\" from knowingly divulging the contents of a communication while holding the communication in electronic storage. Similar to the Wiretap Act, the SCA's access and disclosure prohibitions are subject to certain exceptions. In particular, individuals do not violate the SCA if they are the sender or intended recipient of the communication or when a party to the communication consents to the access or disclosure. As with the Wiretap Act, courts have relied on these two exceptions to dismiss suits under the SCA related to online tracking. The Pen Register Act prohibits the installation of a \"pen register\" or \"trap and trace device\" without a court order. A pen register is a \"device or process\" that \"records or decodes\" outgoing \"dialing, routing, addressing, or signaling information,\" and a trap and trace device is a \"device or process\" that \"captures the incoming . . . dialing, routing, addressing, and signaling information.\" In contrast to the Wiretap Act, the Pen Register Act applies to the capture of non-content information, as the definitions of pen registers and trap and trace devices both exclude any device or process that captures the \"contents of any communication.\" Furthermore, the Pen Register Act prohibits only the use of a pen register or trap and trace device and does not separately prohibit the disclosure of non-content information obtained through such use. The statute does, however, have several exceptions similar to those contained in the Wiretap Act and SCA. Among other things, providers of an electronic or wire communication service will not violate the Act when they use a pen register or trap and trace device in order to \"protect their rights or property\" or \"where the consent of the user of that service has been obtained.\" The Wiretap Act and the SCA both provide for private rights of action. Persons aggrieved by violations of either act may bring a civil action for damages, equitable relief, and reasonable attorney's fees. For actions under the Wiretap Act, damages are the greater of: (1) actual damages suffered by the plaintiff, or (2) \"statutory damages of whichever is the greater of $100 a day for each day of violation or $10,000.\" For actions under the SCA, damages are \"the sum of the actual damages suffered by the plaintiff and the profits made by the violator,\" provided that all successful plaintiffs are entitled to receive at least $1,000. Violations of the Wiretap Act and SCA are also subject to criminal prosecution and can result in fines and imprisonment. In contrast, the Pen Register Act does not provide for a private right of action, but knowing violations can result in criminal fines and imprisonment. The Computer Fraud and Abuse Act (CFAA) was originally intended as a computer hacking statute and is centrally concerned with prohibiting unauthorized intrusions into computers, rather than addressing other data protection issues such as the collection or use of data. Specifically, the CFAA imposes liability when a person \"intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains . . . information from any protected computer.\" A \"protected computer\" is broadly defined as any computer used in or affecting interstate commerce or communications, functionally allowing the statute to apply to any computer that is connected to the internet. Violations of the CFAA are subject to criminal prosecution and can result in fines and imprisonment. The CFAA also allows for a private right of action, allowing aggrieved individuals to seek actual damages and equitable relief, such as an injunction against the defendant. As with ECPA, internet users have attempted to use this private right of action to sue companies tracking their online activity, arguing that companies' use of tracking devices constitutes an unauthorized access of their computers. In this vein, CFAA is theoretically a more generous statute than ECPA for such claims because it requires authorization from the owner of the computer (i.e., the user), rather than allowing any party to a communication (i.e., either the user or the website visited by the user) to give consent to the access. In practice, however, such claims have typically been dismissed due to plaintiffs' failure to meet CFAA's damages threshold. Specifically, as a threshold to bring a private right of action, a plaintiff must show damages in excess of $5,000 or another specific type of damages such as physical injury or impairment to medical care. The FTC Act has emerged as a critical law relevant to data privacy and security. As some commentators have noted, the FTC has used its authority under the Act to become the \"go-to agency for privacy,\" effectively filling in gaps left by the aforementioned federal statutes. While the FTC Act was originally enacted in 1914 to strengthen competition law, the 1938 Wheeler-Lea amendment revised Section 5 of the Act to prohibit a broad range of unscrupulous or misleading practices harmful to consumers. The Act gives the FTC jurisdiction over most individuals and entities, although there are several exemptions. For instance, the FTC Act exempts common carriers, nonprofits, and financial institutions such as banks, savings and loan institutions, and federal credit unions. The key provision of the FTC Act, Section 5, declares unlawful \"unfair or deceptive acts or practices\" (UDAP) \"in or affecting commerce.\" The statute provides that an act or practice is \"unfair\" only if it \"causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.\" While the statute does not define \"deceptive,\" the FTC has clarified in guidance that an act or practice is to be considered deceptive if it involves a material \"representation, omission, or practice that is likely to mislead [a] consumer\" who is \"acting reasonably in the circumstances.\" Under the FTC Act, the agency may enact rules defining specific acts or practices as UDAPs, often referred to as \"trade regulation rules\" (TRRs) or \"Magnuson-Moss\" rulemaking. However, to enact TRRs the FTC must comply with several procedures that are not required under the notice-and-comment rulemaking procedures set forth in Section 553 of the Administrative Procedure Act (APA), which are the default rulemaking procedures for federal agencies. Among other things, these additional procedures require the FTC to publish an advance notice of proposed rulemaking (ANPRM), give interested persons an opportunity for an informal hearing, and issue a statement accompanying the rule regarding the \"prevalence of the acts or practices treated by the rule.\" Consequently, the FTC rarely uses its TRR rulemaking authority and has not enacted any TRRs regarding data protection. Rather, as discussed further below, the agency largely uses enforcement actions to signal the types of acts and practices it considers to be impermissible UDAPs. The FTC has brought hundreds of enforcement actions against companies alleging deceptive or unfair data protection practices. Most of these actions result in companies entering into consent decrees requiring the companies to take certain measures to prevent any further violations. While these consent decrees are not legally binding on those who are not a party to them, they are significant because they reflect the type of practices that the FTC views as \"unfair\" or \"deceptive.\" Indeed, some scholars view the principles arising from them as a type of \"common law of privacy.\" Given the uniquely important role FTC enforcement plays in the U.S. data protection landscape, it is worth noting the types of data protection practices the FTC has viewed as \"unfair\" or \"deceptive.\" Perhaps the most settled principle of the FTC's \"common law of privacy\" is that companies are bound by their data privacy and data security promises. The FTC has taken the position that companies act deceptively when they gather, use, or disclose personal information in a way that contradicts their posted privacy policy or other statements, or when they fail to adequately protect personal information from unauthorized access despite promises that that they would do so. In addition to broken promises, the FTC has alleged that companies act deceptively when they make false representations in order to induce disclosure of personal information. For example, in FTC v. Sun Spectrum Commc'ns Org., Inc. , the FTC alleged that several telemarketers acted \"deceptively\" by misrepresenting themselves as a credit card company and requesting personal information from individuals, ostensibly for the purpose of providing non-existent credit cards to the individuals. The FTC has further maintained that companies act deceptively when their privacy policies or other statements provide insufficient notice of their privacy practices. For instance, in In the Matter of Sears Holdings Management Co. , the FTC alleged that Sears acted deceptively by failing to disclose the extent to which downloadable software would monitor users' internet activity, merely telling users that it would track their \"online browsing.\" Along with \"deceptive claims,\" the FTC has also alleged that certain data privacy or data security practices may be \"unfair.\" Specifically, the FTC has maintained that it is unfair for a company to retroactively apply a materially revised privacy policy to personal data that it collected under a previous policy. The FTC has also taken the position that certain default privacy settings are unfair. In the case FTC v. Frostwire , for example, the FTC alleged that a peer-to-peer file sharing application had unfair privacy settings because, immediately upon installation, the application would share the personal files stored on users' devices unless the users went through a burdensome process of unchecking many pre-checked boxes. With respect to data security, the FTC has more recently maintained that a company's failure to safeguard personal data may be \"unfair,\" even if the company did not contradict its privacy policy or other statements. While at least one court has agreed that such conduct may be \"unfair\" under the FTC Act, a recent U.S. Court of Appeals for the Eleventh Circuit case, LabMD v. FTC , suggests that any FTC cease and desist order based on a company's \"unfair\" data security measures must allege specific data failures and specific remedies. In LabMD , the court noted that the FTC's order \"contain[ed] no prohibitions\" but \"command[ed] [the company] to overhaul and replace its data-security program to meet an indeterminable standard of reasonableness.\" The court concluded that such an order was unenforceable, reasoning that the order \"effectually charge[d] the district court [enforcing the order] with managing the overhaul.\" The court further suggested that penalizing a company for failing to comply with an imprecise standard \"may constitute a denial of due process\" because it would not give the company fair notice of the prohibited conduct. Ultimately, while LabMD did not decide whether inadequate data security measures may be \"unfair\" under the FTC Act, the decision is nevertheless a potentially significant limitation on the FTC's ability to remedy such violations of the statute. LabMD is also a notable case because it adds to the relatively sparse case law on the FTC Act's \"unfair or deceptive\" prohibition. As mentioned, the large majority of the FTC enforcement actions are settled, with parties entering into consent decrees. To the extent FTC allegations are contested, the FTC may either commence administrative enforcement proceedings or civil litigation against alleged violators. In an administrative enforcement proceeding, an Administrative Law Judge (ALJ) hears the FTC's complaint and may issue a cease and desist order prohibiting the respondent from engaging in wrongful conduct. In civil litigation, the FTC may seek equitable relief, such as injunctions or disgorgement, when a party \"is violating, or is about to violate,\" the FTC Act. The FTC may only seek civil penalties, however, if the party has violated a cease and desist order, consent decree, or a TRR. The FTC Act does not provide a private right of action, and it does not impose any criminal penalties for violations of Section 5. Similar to the FTC Act, the CFPA prohibits covered entities from engaging in certain unfair, deceptive, or abusive acts. Enacted in 2010 as Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPA created the Consumer Financial Protection Bureau (CFPB) as an independent agency within the Federal Reserve System. The Act gives the CFPB certain \"organic\" authorities, including the authority to take any action to prevent any \"covered person\" from \"committing or engaging in an unfair, deceptive, or abusive act or practice\" (UDAAP) in connection with offering or providing a \"consumer financial product or service.\" The CFPB's UDAAP authority under the CFPA is very similar to the FTC's UDAP authority under the FTC Act; indeed, the CFPA contains the same definition of \"unfair\" as in the FTC Act, and the CFPB has adopted the FTC's definition of \"deceptive\" acts or practices. However, there are several important differences. First, the CFPA's UDAAP prohibition includes \"abusive\" practices, as well as unfair or deceptive ones. An act or practice is abusive if it either (1) \"materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service\" or (2) \"takes unreasonable advantage of\" a consumer's (a) lack of understanding, (b) inability to protect her own interest in selecting or using a consumer financial product or service, or (c) reasonable reliance on a covered person to act in her interest. While abusive conduct may also be unfair or deceptive, abusiveness is a separate standard that may cover additional conduct. Second, the CFPA prohibits UDAAPs only in connection with offering or providing a \"consumer financial product or service.\" A product or service meets this standard if it is one of the specific financial product or services listed in the CFPA and is offered or provided to consumers primarily for personal, family, or household purposes. Lastly, the CFPA applies only to \"covered persons\" or \"service providers.\" The statute defines \"covered persons\" as persons who offer or provide a consumer financial product or service, and it defines \"service providers\" as those who provide a \"material service\" to a \"covered person\" in connection with offering or providing a consumer financial product or service. As some commentators have noted, the CFPB could follow in the FTC's footsteps and use its UDAAP authority to regulate data protection. However, the CFPB has generally been inactive in the data privacy and security space. Indeed, to date, it has brought only one such enforcement action, which involved allegations that an online payment platform, Dwolla, Inc., made deceptive statements regarding its data security practices and the safety of its online payments system. To the extent it does use its authority, the CFPB has some powerful procedural advantages in comparison with the FTC. In particular, the CFPB can enact rules identifying and prohibiting particular UDAAP violations through the standard APA rulemaking process, whereas the FTC must follow the more burdensome Magnuson-Moss rulemaking procedures. Regarding enforcement, the CFPA authorizes the CFPB to bring civil or administrative enforcement actions against entities engaging in UDAAPs. Unlike the FTC, the CFPB can seek civil penalties in all such enforcement actions, as well as equitable relief such as disgorgement or injunctions. However, as with the FTC Act, the CFPA does not provide a private right of action that would allow adversely affected individuals to sue companies violating the Act. The statute also does not impose any criminal penalties for UDAAP violations. Adding to the complex federal patchwork of data protection statutes are the laws of the fifty states. First and foremost, major regulators of privacy and data protection in the states include the courts, via tort and contract law. With respect to tort law, in addition to the \"privacy\" causes of action that developed at the state level during the early 20th century (discussed above), negligence and other state tort law claims serve as a means to regulate businesses that are injured from data security issues or otherwise fail to protect their customers from foreseeable harm. Contracts, implied contracts, and other commercial causes of action can also form important bulwarks for privacy. The common law, however, is not perfect: it is subject to variability from state to state, and within states, from judge to judge and jury to jury. In addition to the common law, most states have their own statutory framework which may affect data protection and the use of data by private entities. For example, many states have a consumer protection law, sometimes prohibiting unfair or deceptive practices, often referred to as \"little FTC Acts.\" These laws, like the FTC Act, are increasingly being used to address privacy matters. In addition, each state has passed a data breach response law, requiring some form of response or imposing liability on companies in the event of a breach of their data security. While an examination of every state data security law is beyond the scope of this report, at least one state has undertaken a general and ambitious effort to regulate data security. Specifically, the California Consumer Privacy Act (CCPA), enacted in 2018, has captured significant attention. Unlike the federal patchwork provisions, neither the method of data collection nor the industry that the business operates in limits the potential application of the CCPA. Instead, the CCPA applies to any company that collects the personal information of Californians, is for-profit, does business in California, and satisfies a basic set of thresholds. Analysts have suggested that these thresholds are low enough that the law could reach a considerable number of even \"relatively small\" businesses with websites accessible in California. The CCPA also does not distinguish between the sources of the data that comes within its scope. Rather, the CCPA regulates all \"personal information,\" which, by the CCPA's definition, covers nearly any information a business would collect from a consumer. The law does not require the presence of any individual identifier, such as a name or address, for data to fall within the meaning of personal information. Rather, the CCPA broadly defines personal information as \"information that identifies, relates to, describes, or is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household.\" Following this definition, the CCPA provides some telling illustrations of what constitutes personal information, including any \"electronic network activity [such as] browsing history, search history, and information regarding a consumer's interaction with an Internet Web site, application, or advertisement\" and \"inferences drawn from any of\" this information. The CCPA provides consumers with three main \"rights.\" The first of these is a \" right to know \" the information that businesses have collected or sold about them. This right requires that businesses must, in advance of any collection, \"inform [by mail or electronically] consumers as to the categories of personal information to be collected and the purposes\" to which the information will be put. Second, the CCPA provides consumers with the \" right to opt out \" of the sale of a consumer's information. Under the new law, businesses must inform consumers of this right, and if a consumer so affirmatively opts out, the business cannot again sell the consumer's information unless the consumer subsequently provides the business express authorization. Finally, the CCPA gives consumers the right, in certain circumstances, to request that a business delete any information collected about the consumer (i.e., \" right to delete \"). Under the law, a business that receives such a request must delete the information collected and direct its \"service providers\" to do the same. The primary means to enforce the CCPA are actions brought by the California Attorney General. According to the statute, businesses that fail to provide the protections required by the CCPA and fail to cure those violations within 30 days are liable for civil penalties of up to $7,500 per violation. Penalties or settlements collected under the CCPA are to be deposited with the newly created Consumer Privacy Fund, the funds for which are used only to offset costs incurred in connection with the administration of the CCPA. While the CCPA provides for a private cause of action, allowing for individual and class action lawsuits against businesses, this cause of action is only available in the case of a consumer whose \"nonencrypted or nonredacted personal information\" is subject to \"unauthorized access and exfiltration, theft, or disclosure\" as a result of a failure to \"implement and maintain reasonable security procedures.\" Further, such actions can be brought only if a consumer provides a business with 30 days' written notice and provides the business with opportunity to cure the violation, unless the consumer suffered actual pecuniary damages. The statute does not specify how a business could \"cure\" a violation of this type. Consumers may obtain damages under this section of no less than $100 and no more than $750 \"per incident,\" or actual damages, whichever is greater, as well as injunctive relief. Statements by some Members of Congress during Congressional hearings have already noted the CCPA's likely importance to future federal legislative efforts. Further, some outside commentators have argued explicitly that the CCPA should be preempted by a future federal law. These statements may be motivated by the likely fact that, if left intact, the California law could shape industry and consumer concerns both inside and outside California. First, the law is likely to be the \"first in a long line of similar pieces of legislation,\" all of which may model themselves after the CCPA, or will have to respond to its impact. Second, even though the statute is the product of a single state, its broad jurisdictional reach would bring companies throughout the United States and from around the world into its sweep. These factors combined are likely to make the CCPA important to federal legislators. Furthermore, some of the provisions of the California law could form a model for future federal regulation—although along those lines, another potential model it has to compete with is Europe's GDPR. In addition to U.S. states like California, some foreign nations have enacted comprehensive data protection legislation. The EU, in particular, has long applied a more wide-ranging data protection regulatory scheme. Whereas privacy principles in the U.S. Constitution focus on government intrusions into private life and U.S. data privacy statutes generally are sector-specific, European privacy regulations have generally concerned any entity's accumulation of large amounts of data. As a result, foundational EU treaties provide individuals with a general right to \"protection of personal data\" from all potential interferences. The objective of the EU's most recent data privacy legislation—the GDPR—is to safeguard this right to personal data protection, while ensuring that data moves freely within the EU. Beginning in the 1970s, individual European countries began enacting broad, omnibus national statutes concerning data protection, privacy, and information practices. Although these domestic laws shared certain features, their differing data privacy and protection standards occasionally impeded the free flow of information between European countries. As a consequence, the EU attempted to harmonize its various national privacy laws by adopting an EU-wide data privacy and protection initiative—the 1995 Directive on the Protection of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Data (Data Protection Directive). While the Data Protection Directive applied on an EU-wide basis, EU law authorized each member-nation to implement the directive's requirements into the country's national law. By 2012, the European Commission—the executive body of the EU —came to view differing implementations of the Data Protection Directive at the national level as problematic. The Commission concluded that a single regulation should be developed in order to eliminate the fragmentation and administrative burdens created by the directive-based system. The Commission also sought to bring EU law up to date with developments in technology and globalization that changed the way data is collected, accessed, and used. In pursuit of these goals, the EU developed and adopted the GDPR, which replaced the 1995 Data Protection Directive and went into effect on May 25, 2018. The GDPR regulates the processing of personal data that meet its territoriality requirements, discussed below. Processing includes collection, use, storage, organization, disclosure or any other operation or set of operations performed on personal data, unless an exception applies. Personal data is defined as any information relating to an identified or identifiable person, and it can include names, identification numbers, location data, IP addresses, cookies, and any other information through which an individual can be directly or indirectly identified. The GDPR applies different requirements for controllers and processors of personal data. In general, a controller determines the purposes and means of processing personal data, and a processor is responsible for processing data on behalf of a controller. From a territorial perspective, the GDPR applies to organizations that have an \"establishment\" in the EU and that process personal data in the context of the activities of that establishment. The GDPR does not define \"establishment,\" but states that it \"implies the effective and real exercise of activity through stable arrangements.\" In a pre-GDPR case, the Court of Justice of the European Union stated that the concept of establishment under the 1995 Data Protection Directive extended \"to any real and effective activity—even a minimal one—exercised through stable arrangements.\" Entities that meet the establishment requirement are subject to the GDPR even if their data processing activities take place outside the EU. The GDPR also applies to non-EU-established entities that offer goods or services to individuals in the EU or monitor individuals' behavior in the EU. Because many businesses with an online presence offer goods and services to EU individuals, the GDPR applies to many businesses outside the EU. The GDPR lays out seven guiding principles for the processing of personal data. While these principles are not \"hard and fast rules\" themselves, they inform the interpretation of the GDPR and its more concrete requirements, discussed below. The GDPR requires data controllers and processors to have a lawful basis to process personal data. The regulation delineates six possible legal bases: (1) consent; (2) performance of contract; (3) compliance with a legal obligations; (4) protection of the \"vital interests\" (i.e., the life) of the data subject or another individual; (5) tasks carried out in the public interest (e.g., by a government entity); and (6) the \"legitimate interests\" of the controller or a third party, unless the fundamental rights and freedom of the data subject override those interests. Commentators describe the \"legitimate interests\" category as the most flexible and as the potential basis for a host of common activities, such as processing carried out in the normal course of business, provided that the processing is not unethical, unlawful, or otherwise illegitimate. When data processing is premised on consent, the consent must be freely given, specific, informed, and unambiguous, and it can be withdrawn at any time. Additional consent requirements and restrictions apply to especially sensitive data, such as children's information and data that reveals ethnic origins, political opinions, religious beliefs, union status, sexual orientation, health information, and criminal histories. The GDPR provides a series of rights to individuals and corresponding obligations for data controllers, unless an exception applies. The GDPR requires organizations to implement a range of measures designed to ensure and demonstrate that they are in compliance with the regulation. When proportionate in relation to the processing activities, such measures may include adopting and implementing data protection policies and taking a \"data protection by design and default\" approach whereby the organization implements compliance measures into all stages of data processing. Measures may also include the following: establishing GDPR-conforming contracts with data processors; maintaining records of processing activities; conducting impact assessments on personal data use that is likely to risk individual rights and freedoms; appointing a data protection officer; and adhering to relevant codes of conduct and compliance certification schemes. The GDPR also requires controllers and processors to implement technical and organizational measures to ensure a level of data security that is \"appropriate to the risk\" presented by the data processing. In implementing data security measures, organizations must consider the \"state of the art, the costs of implementation,\" the nature, scope, and context, and purposes of processing, and the likelihood and potential severity of an infringement on individual rights if data security were to be violated. The GDPR does not impose a \"one-size-fits-all\" requirement for data security, and security measures that are \"appropriate\" (and therefore mandatory) will depend on the specific circumstances and risks. For example, a company with an extensive network system that holds a large amount of sensitive or confidential information presents greater risk, and therefore must install more rigorous data security protections than an entity that holds less data. When appropriate, organizations should consider encryption and pseudonymization —the processing of personal data such that the data can no longer be attributed to a specific individual. Security measures should ensure the confidentiality, integrity, and resilience of processing systems; be able to restore access to personal data in the event of an incident; and include a process for testing security effectiveness. In the event of a personal data breach, the GDPR requires controllers to notify the designated EU government authority \"without undue delay\" and no later than 72 hours after learning of the breach, unless the breach is \"unlikely to result in a risk to the rights and freedoms of natural persons.\" For example, whereas a company must report the theft of a customer database that contains information that could be used for future identity fraud given the high level of risk to individuals, it may not need to report the loss of more innocuous data, such as a directory of staff office phone numbers. When notification to the government is required, the notification must describe the nature and likely consequences of the breach, identify measures to address the breach, and identify the employee responding to the incident. When data processors experience a breach, they must notify the controller without undue delay. In addition to governmental notification, controllers must notify the individuals whose data has been compromised if the breach is likely to result in a \"high risk to the rights and freedoms\" of individuals. The \"high risk\" threshold is higher than the threshold for notifying the government authority, but it could met in circumstances when individuals may need to take steps to protect themselves from the effects of a data breach. According to the United Kingdom's data protection regulatory authority, for example, a hospital that disclosed patient medical records as a result of a data breach may present a \"high risk\" to individuals, but a university that accidentally deleted, but was able to re-create, an alumni contact information database may not meet the mandatory individual reporting threshold. Notification to the individual must describe the breach in clear and plain language and contain at least the same information as provided in the governmental notifications. Notification to the individual is not required in the following cases: the controller implemented appropriate technical and organizational protection measures, such as encryption, that will render the data unintelligible; the controller took subsequent measures that will ensure that the high risk to individual rights and freedom are no longer likely to materialize; or individual notifications would involve disproportionate efforts, in which case the controller must provide public notice of the breach. Regardless of whether notification is required, controllers must document all data breaches so that government supervisory authorities can verify compliance at a later date. The EU has long regulated the transfer of data from EU member states to foreign countries, and the GDPR continues to restrict such international data transfers. Like the 1995 Data Protection Directive, the GDPR authorizes data transfer from within the EU to a non-EU country if the receiving country ensures an adequate level of protection for personal data. To meet this requirement, the non-EU country must offer a level of protection that is \"essentially equivalent to that ensured\" by the GDPR. If the European Commission previously made an adequacy decision under the Data Protection Directive's legal framework, that decision remains in force under the GDPR. U.S. and EU officials previously developed a legal framework—the U.S.-EU Privacy Shield—for protecting transatlantic data flow into the United States. Under the Privacy Shield framework, U.S.-based organizations self-certify to the International Trade Administration in the Department of Commerce that they will comply with the framework's requirements for protecting personal data by complying with, among other provisions, notice requirements, data retention limits, security requirements, and data processing purpose principles. In 2016, the European Commission concluded that the Privacy Shield framework provided adequate protections under the Data Protection Directive. That adequacy determination continues to apply under the GDPR, although the European Commission annually reviews whether the Privacy Shield framework continues to provide an adequate level of protection. In the absence of an adequacy decision from the European Commission, the GDPR permits data transfers outside the EU when (1) the recipient of the data has itself established appropriate safeguards , and (2) effective legal remedies exist for individuals to enforce their data privacy and protection rights. Appropriate safeguards include: a legally binding agreement between public authorities or bodies; binding corporate rules; standard contract clauses adopted by the European Commission; and approved codes of conduct and certification mechanisms. U.S. companies that do not participate in Privacy Shield often must rely on standard contract clauses to be able to receive data from the EU. The GDPR also identifies a list of circumstances in which data may be transferred outside the EU even without appropriate safeguards or an adequacy decision. These circumstances include, among other reasons, when: an individual has provided informed consent; transfer is necessary for the performance of certain contracts involving the data subject; or the transfer is necessary for important reasons of public interests. One of the most commented-upon aspects of the GDPR is its high ceiling for administrative fines. For the most serious infractions of the GDPR, regulatory bodies within individual EU countries may impose fines up to 20 million euro (approximately $22 million) or 4% of global revenue, whichever is higher, for certain violations of the GDPR. The GDPR also provides tools for individuals to enforce compliance with its terms. Individuals whose personal data is processed in a way that does not comport with the GDPR may lodge a complaint with regulatory authorities. Individuals also have the right to an \"effective judicial remedy\" (i.e., to pursue a lawsuit) against the responsible data processor or controller, and individuals may obtain compensation for their damages from data processors or controllers. The GDPR may be relevant to the 116th Congress' consideration of data protection initiatives in several ways. Because the GDPR applies to U.S. companies that offer goods and services to individuals in the EU, many U.S. companies have developed new data protection practices in an effort to comply with its requirements. Other businesses reported that they withdrew from the European market rather than attempt to obtain compliance GDPR. For those companies that remained in the European market, some have stated that they will apply their GDPR-compliant practices on a company-wide basis rather than changing their model only when doing business in the EU. Consequently, the GDPR already directly impacts the data protection practices of some U.S. companies. The GDPR also has served as a prototype for comprehensive data protection legislation in other governments. For example, commentators have described China's Personal Information Security Specification, which defines technical standards related to the collection, storage, use, transfer, and disclosure of personal information, as modeled on the GDPR. And the CCPA includes elements similar to the GDPR, such as an enumeration of individual rights related to data privacy. If this trend continues, GDPR-like data protection laws may become more commonplace internationally. Finally, some argue that Congress should consider enacting comprehensive federal data protection legislation similar to the GDPR. As discussed below, however, other observers and some officials in the Trump Administration have criticized the GDPR, describing the regulation as overly prescriptive and likely to result in negative unintended consequences. Regardless of the merits of these positions, the GDPR may remain a focal point of discussion in the debate over whether the United States should develop a more comprehensive data protection policy. Although some commentators argue that the federal government should supplement the current patchwork of federal data protection laws with more comprehensive legislation modeled on the CCPA or GDPR, some Trump Administration officials have criticized these legislative approaches and questioned whether they will improve data privacy outcomes. The Administration has argued that many comprehensive data privacy models have resulted in \"long, legal, regulator-focused privacy policies and check boxes, which only help a very small number of users[.]\" Rather than pursuing a prescriptive model in which the government defines (or prescribes) data protection rules, the Trump Administration advocates for what it describes as an outcome-based approach whereby the government focuses on the \"outcomes of organizational practices, rather than on dictating what those practices should be.\" In September 2018, the National Telecommunications and Information Administration (NTIA) in the Department of Commerce issued a request for public comments on the Trump Administration's efforts to develop an outcome-based approach to advancing consumer privacy that also protects prosperity and innovation. According to NTIA, changes in technology have led consumers to conclude that they are losing control over their personal information, while at the same time that foreign and state privacy laws have led to a fragmented regulatory landscape that disincentives innovation. Accordingly, NTIA is attempting to develop a set of \"user-centric\" privacy outcomes and goals that would underpin the protections that should be produced by any federal actions related to consumer privacy. NTIA's proposed policy focuses on a set of outcomes that the Trump Administration seeks to achieve: In addition to identifying desired outcomes, NTIA's request for public comments states that the Trump Administration is in the process of developing \"high-level goals for Federal action\" related to data privacy. NTIA's proposed privacy framework shares certain elements of prescriptive legal regimes like the GDPR and CCPA. Common features include a right to withdraw consent to certain uses of personal data; accountability for third-party vendors and servicers; and a right to access, amend, complete, correct, or delete personal data. But NTIA's request for public comments does not specifically describe how the Trump Administration intends to accomplish its outcomes and goals. Instead, it states that NTIA \"understand[s] that there is considerable work to be done to achieve\" the identified objectives. The comment period closed on November 9, 2018, and NTIA received input from more than 200 individuals and entities. The debate over whether Congress should consider federal legislation regulating data protection implicates numerous legal variables and options. \"Data protection\" itself is an expansive concept that melds the fields of data privacy (i.e., how to control the collection, use, and dissemination of personal information) and data security (i.e., how to protect personal information from unauthorized access or use and respond to such unauthorized access or use). There is no single model for data protection legislation in existing federal, state, or foreign law. For example, some state laws focus solely on data security or address a particular security concern, such as data breach notifications. Other state laws isolate a single privacy-related issue, such as the transparency of data brokers—companies that aggregate and sell consumers' information, but that often do not have a direct commercial relationship with consumers. Recent data protection laws such as the CCPA and GDPR appear to indicate a trend toward combining data privacy and security into unified legislative initiatives. These unified data protection paradigms typically are structured on two related features: (1) an enumeration of statutory rights given to individuals related to their personal information and (2) the creation of legal duties imposed on the private entities that possess personal information. The specific list and nature of rights and duties differ depending on the legislation, and some have proposed to define new rights in federal legislation that do not have a clear analog in existing state or foreign law. Consequently, at present, there is no agreed-upon menu of data protection rights and obligations that could be included in federal legislation. Although data protection laws and proposals are constantly evolving, some frequently discussed legal rights include: the right to know what personal data is being collected, used, and disseminated, and how those activities are occurring; the right to control the use and dissemination of personal data, which may include the right to opt out or withhold consent to the collection or sharing of such data; the right to review personal data that has been collected and to delete or correct inaccurate information; the right to obtain a portable copy of personal data; the right to object to improper activities related to personal data; and the right to learn when a data breach occurs; Commonly discussed obligations for companies that collect, use, and disseminate personal data include rules defining: how data is collected from individuals; how companies use data internally; how data is disseminated or disclosed to third parties; what information companies must give individuals related to their data; how data is kept secure; when breaches of security must be reported; the accuracy of data; and reporting requirements to ensure accountability and compliance. Whether to enact federal data protection legislation that includes one or more of these rights and obligations has been the subject of a complex policy debate and multiple hearings in recent Congresses. Part of the legislative debate concerns how to enforce such rights and obligation and raises questions over the role of federal agencies, state attorneys general, and private citizen suits. In addition, some elements of the data protection proposals and models could implicate legal concerns and constitutional limitations. While the policy debate is outside the scope of this report, the following sections discuss legal considerations relevant to federal data protection proposals that the 116th Congress may choose to consider. These sections begin by analyzing legal issues related to the internal structure and definition of data protection-related rights and obligations and then move outward toward an examination of external legal constraints. A primary conceptual point of debate concerning data protection legislation is whether to utilize the so-called \"prescriptive\" method or an \"outcome-based\" approach to achieve a particular law's objectives. Under the prescriptive approach, the government defines data protection rules and requires regulated individuals and entities to comply with those rules. Both the GDPR and CCPA use a prescriptive approach, and some legislation proposed in the 116th Congress would use this method by delineating certain data protection requirements. The Trump Administration, however, has argued that a prescriptive approach can stymie innovation and result in compliance checklists without providing measurable privacy benefits. As an alternative methodology, the Administration advocated for what it described as an outcome-based approach whereby the government focuses on the outcomes of organizational practices, rather than defining the practices themselves. Some federal information technology laws, such as the Federal Information Security Management Act (FISMA), use an outcome-oriented approach to achieve federal objectives, although agency implementation of such laws may become prescriptive in nature. The Administration has not specified how it intends to achieve its desired data protection goals without prescribing data protection rules, but additional direction appears to be forthcoming, according to the NTIA's request for public comment. Another issue that may be considered in crafting federal data protection policy is how to define the contours of the data that the federal government proposes to protect or the specific entities or industries that it proposes to regulate. The patchwork of existing data protection statutes define protected information in a variety of ways, many of which depend on the context of the law. For example, HIPAA is limited to \"protected health information\" and GLBA governs \"financial information\" that is personally identifiable but not publicly available. By contrast, GDPR and CCPA regulate all \"personal\" information—a term defined in both laws as information that is associated with a particular individual or is capable of being associated with an individual. Some federal data proposals would apply a similar scope to those of the GDPR and CCPA. If enacted, such broad data protection laws have the potential to create multiple layers of federal data protection requirements: (1) general data protection requirements for \"personal\" information and (2) sector-specific requirements for data regulated by the existing \"patchwork\" of data protection laws. Other legislative proposals have sought to avoid dual layers of regulations by stating that the proposed data protection requirements would not apply to individuals or entities covered by certain existing federal privacy laws. Agency enforcement is another key issue to consider when crafting any future federal data protection legislation. As discussed, under the current patchwork of federal data protection laws, there are multiple federal agencies responsible for enforcing the myriad federal statutory protections, such as the FTC, CFPB, FCC, and HHS. Of these agencies, the FTC is often viewed—by industry representatives, privacy advocates, and FTC commissioners themselves —as the appropriate primary enforcer of any future national data protection legislation, given its significant privacy experience. There are, however, several relevant legal constraints on the FTC's enforcement authority. First, the FTC generally lacks the ability to issue fines for first-time offenses. In UDAP enforcement actions, the FTC may issue civil penalties only in certain limited circumstances, such as when a person violates a consent decree or a cease and desist order. Consequently, the FTC often enters into consent decrees addressing a broad range of conduct, such as a company's data security practices, seeking penalties for violations of those decrees. However, as the LabMD case discussed earlier in this report suggests, if the FTC imposes penalties based on imprecise legal standards provided in a rule or order, the Due Process Clause of the Fifth Amendment may constrain the agency's authority. Second, the plain text of the FTC Act deprives the FTC of jurisdiction over several categories of entities, including banks, common carriers, and nonprofits. Third, the FTC generally lacks authority to issue rules under the APA's notice-and-comment process that is typically used by agencies to issue regulations. Rather, the FTC must use a more burdensome—and, consequently, rarely used—process under the Magnuson-Moss Warranty Act. As some FTC Commissioners and commentators have noted, these legal limitations may be significant in determining the appropriate federal enforcement provisions in any national data security legislation. While Congress may not be able to legislate around constitutional constraints, future legislation could address some of these limitations—for instance, by allowing the FTC to seek penalties for first-time violations of rules, expanding its jurisdictions to include currently excluded entities, or providing the FTC notice-and-comment rulemaking authority under the APA. These current legal constraints on FTC authority may also be relevant in determining whether national legislation should allow private causes of action or enforcement authority for state attorneys general, as some commentators have suggested that private causes of action and enforcement by state attorneys general are essential supplements to FTC enforcement. Legislation involving privacy may propose to allow individuals to seek private remedy for violations in the courts. Congress may seek to establish a private right of action allowing a private plaintiff to bring an action against a third party based directly on that party's violation of a public statute. As it has done with many sector-specific privacy laws, Congress, in a data protection statute, could provide not only for this right, but also for specific remedies beyond compensatory damages, such as statutory damages or even treble damages for injured individuals. However, it may be very difficult to prove that someone has been harmed in a clear way by many of the violations that might occur under a hypothetical data protection and privacy regime. Victims of data breaches and other privacy violations, generally speaking, do not experience clear and immediate pecuniary or reputational harm. This obstacle might threaten not only a consumer's ability to obtain monetary relief, but also could run up against the limits of the federal courts' \"judicial power\" under Article III of the U.S. Constitution. Article III extends the judicial power of the federal courts to only \"cases\" and \"controversies.\" As part of that limitation, the Supreme Court has stated that courts may adjudicate a case only where a litigant possesses Article III standing. A party seeking relief from a federal court must establish standing. Specifically, the party must show that he has a genuine stake in the relief sought because he has personally suffered (or will suffer): (1) a concrete, particularized and actual or imminent injury; (2) that is traceable to the allegedly unlawful actions of the opposing party; and (3) that is redressable by a favorable judicial decision. These requirements, particularly the requirement of \"imminence,\" form significant barriers for lawsuits based on data protection. Imminence, according to the Supreme Court in Clapper v. Amnesty International , requires that alleged injury be \" certainly impending \" to constitute injury-in-fact. Speculation and assumptions cannot be the basis of standing. This reasoning has caused courts to dismiss data breach claims where plaintiffs cannot show actual misuse of data, but can only speculate that future thieves may someday cause them direct harm. These requirements are constitutional in nature and apply regardless of whether a statute purports to give a party a right to sue. This constitutional requirement limits Congress' ability to use private rights of action as an enforcement mechanism for federal rights, as the recent Supreme Court case Spokeo, Inc. v. Robins illustrates. Spokeo involved a Federal Credit Reporting Act (FCRA) lawsuit brought by Thomas Robins against a website operator that allowed users to search for particular individuals and obtain personal information harvested from a variety of databases. Robins alleged that Spokeo's information about him was incorrect, in violation of the FCRA requirement that consumer reporting agencies \"follow reasonable procedures to assure maximum possible accuracy\" of consumer reports. As discussed earlier in this report, FCRA provides for a private right of action making any person who willfully fails to comply with its requirements liable to individuals for, among other remedies, statutory damages. The lower court understood that Robins did not specifically allege any actual damages he had suffered, such as the loss of money resulting from Spokeo's actions. Nonetheless, the court concluded that the plaintiff had standing to seek statutory damages because his injury was sufficiently particular to him—FCRA had created a statutory right for Robins and his personal interest was sufficient for standing. The Supreme Court disagreed with the lower court, however, explaining that the lower court had erred by eliding the difference between Article III's \"concreteness\" and \"particularization\" requirements. Specifically, the Court concluded that a plaintiff must demonstrate a concrete injury separate from a particularized injury, meaning that plaintiffs must show that their injury \"actually exist[s].\" While tangible injuries, like monetary loss, are typically concrete, a plaintiff with an \"intangible injury\" must show that it is \"real\" and not \"abstract\" in order to demonstrate concreteness. For example, the Spokeo Court suggested that the mere publication of an incorrect zip code, although it could violate FCRA, would not be a sufficiently concrete injury for standing purposes. As a result, the Court remanded the case to the lower court to determine if the injury alleged in the case was both particularized and concrete. Spokeo does not eliminate Congress' role in creating standing where it might not otherwise exist. The Supreme Court explained that the concreteness requirement is \"grounded in historical practice\" and, as a result, Congress' judgment on whether an intangible harm is sufficiently concrete can be \"instructive.\" However, as Spokeo explained, Congress cannot elevate every privacy violation to the status of a concrete injury. Both before and after Spokeo , the lower courts have resolved standing disputes in lawsuits involving privacy and data protection, where parties argue about whether particular injuries are sufficiently concrete for purpose of Article III. Congress can possibly resolve some of these disputes by elevating some otherwise intangible injuries to concrete status. But Spokeo illustrates that there may be a residuum of harmless privacy violations for which Congress cannot provide a judicial remedy. Another legal issue Congress may need to consider with respect to any federal program involving data protection and privacy is how to structure the federal-state regime—that is, how to balance whatever federal program is enacted with the programs and policies in the states. Federal law, under the Supremacy Clause, has the power to preempt or displace state law. As discussed above, there are a host of different state privacy laws, and some states have begun to legislate aggressively in this area. The CCPA in particular represents a state law that is likely to have a national effect. Ultimately, unless Congress chooses to occupy the entire field of data protection law, it is likely that the state laws will end up continuing to have a role in this area. Further, given that the states are likely to continue to experiment with legislation, the CCPA being a prime example, it is likely that preemption will be a highly significant issue in the debate over future federal privacy legislation. As the Supreme Court has recently explained, preemption can take three forms: \"conflict,\" \"express,\" and \"field.\" Conflict preemption requires any state laws that conflict with a valid federal law to be without effect. Conflict preemption can occur when it is impossible for a private party to simultaneously comply with both federal and state requirements, or when state law amounts to an obstacle to the accomplishment of the full purposes of Congress. Express preemption occurs when Congress expresses its intent in the text of the statute as to which state laws are displaced under the federal scheme. Finally, field preemption occurs when federal law occupies a 'field' of regulation \"so comprehensively that it has left no room for supplementary state legislation.\" Ultimately, the preemptive scope of any federal data protection legislation will turn on the \"purpose\" of Congress and the specific language used to effectuate that purpose. If Congress seeks to adopt a relatively comprehensive system for data protection, perhaps the most obvious means to preempt a broad swath of state regulation would be to do so \"expressly\" within the text of the statute by including a specific preemption provision in the law. For example, several existing federal statutes expressly preempt all state law that \"relate to\" a particular subject matter. The Supreme Court has held that this \"related to\" language encompasses any state law with a \"connection with, or reference to\" the subject matter referenced. Similar language can be used to displace all state laws in the digital data privacy sphere to promote a more uniform scheme. Congress could alternatively take a more modest approach to state law. For example, Congress could enact a data protection framework that expressly preserves state laws in some ways and preempts them in others. A number of federal statutes preempt state laws that impose standards \"different from\" or \"in addition to\" federal standards, or allow the regulator in charge of the federal scheme some authority to approve certain state regulations. These approaches would generally leave intact state schemes parallel to or narrower than the federal scheme. For example, a statute could permit a state to provide for additional liability or different remedies for violation of a federal standard. Congress could do the same with federal data protection legislation, using statutory language to try to ensure the protection of the provisions of state law that it sought to preserve. Although legislation on data protection could take many forms, several approaches that would seek to regulate the collection, use, and dissemination of personal information online may have to confront possible limitations imposed by the First Amendment of the U.S. Constitution. The First Amendment guarantees, among other rights, \"freedom of speech.\" Scholars have split on how the First Amendment should be applied to proposed regulation in the data protection sphere. In one line of thinking, data constitutes speech, and regulation of this speech, even in the commercial context, should be viewed skeptically. Other scholars have argued that an expansive approach would limit the government's ability to regulate ordinary commercial activity, expanding the First Amendment beyond its proper role. This scholarly debate informs the discussion, but does not provide clear guidance on how to consider any particular proposed regulation. The Supreme Court has never interpreted the First Amendment as prohibiting all regulation of communication. Instead, when confronting a First Amendment challenge to a regulation, a court asks a series of questions in order to determine whether a particular law or rule runs afoul of the complicated thicket of case law that has developed in this area. The first question courts face when considering a First Amendment challenge is whether the challenged regulation involves speech or mere non-expressive conduct. As the Supreme Court has explained, simply because regulated activity involves \"communication\" does not mean that it comes within the ambit of the First Amendment. Where speech is merely a \"component\" of regulated activity, the government generally can regulate that activity without inviting First Amendment scrutiny. For example, \"a law against treason…is violated by telling the enemy the Nation's defense secrets,\" but that does not bring the law within the ambit of First Amendment scrutiny. Assuming the regulation implicates speech rather than conduct, it typically must pass First Amendment scrutiny. However, not all regulations are subject to the same level of scrutiny. Rather, the Court has applied different tiers of scrutiny to different types of regulations. For example, the Court has long considered political and ideological speech at the \"core\" of the First Amendment—as a result, laws which implicate such speech generally are subject to strict scrutiny. Pursuant to this standard, the government must show that such laws are narrowly tailored to serve a compelling state interest. By contrast, the Court has historically applied less rigorous scrutiny to laws regulating \"commercial speech.\" Commercial speech is subject to a lower level of scrutiny known as the Central Hudson test, which generally requires the government to show only that its interest is \"substantial\" and that the regulation \"directly advances the governmental interest asserted\" without being \"more extensive than necessary to serve that interest.\" These principles have provided general guidance to lower courts in deciding cases that intersect with data protection, but implicit disagreements between these courts have repeatedly demonstrated the difficulty in striking the balance between First Amendment interests and data-protection regulation. For example, in 2001 in Trans Union Corp. v. FTC , the D.C. Circuit upheld an FTC order that prohibited Trans Union from selling marketing lists containing the names and addresses of individuals. The court assumed that disclosing or using the marketing lists was speech, not conduct, but concluded that the FTC's restrictions on the sale of the marketing lists generally concerned \"no public issue,\" and, as such, was subject to \"reduced constitutional protection.\" The court derived its \"no public issue\" rule from the Supreme Court's case law on defamation, which generally views speech that is solely in the private interest of the speaker as being subject to lower First Amendment protection from defamation suits than speech regarding matters of a public concern. Applying this \"reduced constitutional protection\" to the context of Trans Union's marketing lists, the court determined that the regulations were appropriately tailored. While the Trans Union court did not cite to Central Hudson , other courts have gone on to apply similar reasoning to uphold data protection laws from constitutional challenge under the ambit of Central Hudson 's commercial speech test. In contrast with the relatively lenient approach applied to a privacy regulation in Trans Union , in U.S. West v. FCC , the Tenth Circuit struck down FCC regulations on the use and disclosure of Consumer Proprietary Network Information (CPNI). The regulations stated that telecommunications carriers could use or disclose CPNI only for the purpose of marketing products to customers if the customer opted in to this use. The court determined that these provisions regulated commercial speech because they limited the ability of carriers to engage in consumer marketing. Applying Central Hudson , the court held that although the government alleged a general interest in protecting consumer privacy, this interest was insufficient to justify the regulations. The panel ruled that the regulations did not materially advance a substantial state interest because the government failed to tie the regulations to specific and real harm, supported by evidence. The court also concluded that a narrower regulation, such as a consumer opt-out, could have served the same general purpose. After the Tenth Circuit's decision in U.S. West , the FCC responded by making minor changes to its regulations, maintaining some elements of the opt-in procedure for the use of CPNI and reissuing them with a new record. After this reissuance, the D.C. Circuit considered these modified-but-similar regulations in a 2009 case. In that case, the D.C. Circuit upheld the regulations without attaching much significance to the FCC's changes, and apparently implicitly disagreeing with the Tenth Circuit about both the importance of the privacy interest at stake and whether the opt-in procedure was proportional to that interest. The Supreme Court's first major examination of the First Amendment in this context came in 2011. That year, the Court decided Sorrell v. IMS Health, Inc. , a case that is likely to be critical to understanding the limits of any future data protection legislation. In Sorrell , the Court considered the constitutionality of a Vermont law that restricted certain sales, disclosures, and uses of pharmacy records. Pharmaceutical manufacturers and data miners challenged this statute on the grounds that it prohibited them from using these records in marketing, thereby imposing what they viewed to be an unconstitutional restriction on their protected expression. Vermont first argued that its law should be upheld because the \"sales, transfer, and use of prescriber-identifying information\" was mere conduct and not speech. The Court explained that, as a general matter, \"the creation and dissemination of information are speech within the meaning of the First Amendment,\" and thus there was \"a strong argument that prescriber identifying information is speech for First Amendment purposes.\" Ultimately, however, the Court stopped short of fully embracing this conclusion, merely explaining that it did not matter whether the actual transfer of prescriber-identifying information was speech because the law nonetheless impermissibly sought to regulate the content of speech—the marketing that used that data, as well as the identities of speakers—by regulating an input to that speech. As the Court explained, the Vermont law was like \"a law prohibiting trade magazines from purchasing or using ink.\" Second, Vermont argued that, even if it was regulating speech, its regulations passed the lower level of scrutiny applicable to commercial speech. The Court disagreed. The Court explained that the Vermont law enacted \"content- and speaker-based restrictions on the sale, disclosure and use of prescriber identifying information\" because it specifically targeted pharmaceutical manufacturers and prohibited certain types of pharmaceutical marketing. As the Court stated in a previous case, \"[c]ontent-based regulations are presumptively invalid\" because they \"raise[] the specter that the Government may effectively drive certain ideas or viewpoints from the marketplace.\" Further, the Sorrell Court observed that the legislature's stated purpose was to diminish the effectiveness of marketing by certain drug manufacturers, in particular those that promoted brand-name drugs, suggesting to the Court that the Vermont law went \"beyond mere content discrimination, to actual viewpoint discrimination.\" As a result, the Court concluded that some form of \"heightened scrutiny\" applied. Nevertheless, the Court reasoned that, even if Central Hudson 's less rigorous standard of scrutiny applied, the law failed to meet that standard because its justification in protecting physician privacy was not supported by the law's reach in allowing prescriber-identifying information's use \"for any reason save\" marketing purposes. Most of the lower courts outside the data protection and privacy context that have considered Sorrell have held that Sorrell 's reference to \"heightened scrutiny\" did not override the Central Hudson test in commercial speech cases, even where those cases include content- or speaker- based restrictions. Others, however, have held that content- and speaker-based restrictions must comport with something more rigorous than the traditional Central Hudson test, but it is not clear what this new standard requires or where it leads to a different outcome than Central Hudson . As a result, while Sorrell 's impact on privacy and data protection regulation has been considered by a few courts, no consensus exists on the impact it will have. However, a few commentators have observed that the case will likely have an important effect on the future of privacy regulation, if nothing else, by having all but concluded that First Amendment principles apply to the regulation of the collection, disclosure, and use of personally identifiable information as speech, not conduct. With respect to such future regulation, policymakers will likely want, at the minimum, to meet the Central Hudson requirement of ensuring that any restrictions on the creation, disclosure or use of information are justified by a substantial interest and that the regulations are no more extensive than necessary to further that interest. To illustrate, the Court in Sorrell identified HIPAA as a permissible \"privacy\" regulation because it allowed \"the information's sale or disclosure in only a few narrow and well-justified circumstances.\" This dictum suggests that Congress is able to regulate in the data protection sphere as long as it avoids the pitfalls of the law in Sorrell . However, it may not always be easy to determine whether any given law involves speaker or content discrimination. In Sorrell itself, for instance, three dissenting Justices argued that the content and speaker discrimination that took place under the Vermont law was inevitable in any economic regulation. As a result, resolving these issues as data privacy legislation becomes more complex is likely to create new challenges for legislators. The current legal landscape governing data protection in the United States is complex and highly technical, but so too are the legal issues implicated by proposals to create unified federal data protection policy. Except in extreme incidents and cases of government access to personal data, the \"right to privacy\" that developed in the common law and constitutional doctrine provide few safeguards for the average internet user. Although Congress has enacted a number of laws designed to augment individual's data protection rights, the current patchwork of federal law generally is limited to specific industry participants, specific types of data, or data practices that are unfair or deceptive. This patchwork approach also extends to certain state laws. Seeking a more comprehensive data protection system, some governments—such as California and the EU—have enacted wide-ranging laws regulating many forms of personal data. Some argue that Congress should consider creating similar protections in federal law, but others have criticized the EU's and California's approach to data protection. Should the 116th Congress consider a comprehensive federal data protection program, its legislative proposals may involve numerous decision points and legal considerations. An initial decision point is the scope and nature of any legislative proposal. There are numerous data protection issues that could be addressed in any future legislation, and different possible approaches for addressing those issues (such as using a \"prescriptive\" or \"outcome-based\" approach). Other decision points may include defining the scope of any protected information and determining the extent to which any future legislation should be enforced by a federal agency. Further, to the extent Congress wants to allow individuals to enforce data protection laws and seek remedies for the violations of such laws in court, it must account for Article III's standing requirements. Under the Supreme Court's 2016 Spokeo Inc. v. Robins decision, plaintiffs must experience more than a \"bare procedural violation\" of a federal privacy law to satisfy Article III and to sue to rectify a violation of that law. Federal preemption also raises complex legal questions—not only of whether to preempt state law, but what form of preemption Congress should employ. Finally, from a First Amendment perspective, Supreme Court jurisprudence suggests that while some \"privacy\" regulations are permissible, any federal law that restricts protected speech, particularly if it targets specific speakers or content, may be subject to more stringent review by a reviewing court.", "summary": "Recent high-profile data breaches and other concerns about how third parties protect the privacy of individuals in the digital age have raised national concerns over legal protections of Americans' electronic data. Intentional intrusions into government and private computer networks and inadequate corporate privacy and cybersecurity practices have exposed the personal information of millions of Americans to unwanted recipients. At the same time, internet connectivity has increased and varied in form in recent years. Americans now transmit their personal data on the internet at an exponentially higher rate than in the past, and their data are collected, cultivated, and maintained by a growing number of both \"consumer facing\" and \"behind the scenes\" actors such as data brokers. As a consequence, the privacy, cybersecurity and protection of personal data have emerged as a major issue for congressional consideration. Despite the rise in interest in data protection, the legislative paradigms governing cybersecurity and data privacy are complex and technical, and lack uniformity at the federal level. The constitutional \"right to privacy\" developed over the course of the 20th century, but this right generally guards only against government intrusions and does little to shield the average internet user from private actors. At the federal statutory level, there are a number of statutes that protect individuals' personal data or concern cybersecurity, including the Gramm-Leach-Bliley Act, Health Insurance Portability and Accountability Act, Children's Online Privacy Protection Act, and others. And a number of different agencies, including the Federal Trade Commission (FTC), the Consumer Finance Protection Bureau (CFPB), and the Department of Health and Human Services (HHS), enforce these laws. But these statutes primarily regulate certain industries and subcategories of data. The FTC fills in some of the statutory gaps by enforcing a broad prohibition against unfair and deceptive data protection practices. But no single federal law comprehensively regulates the collection and use of consumers' personal data. Seeking a more fulsome data protection system, some governments—such as California and the European Union (EU)—have recently enacted privacy laws regulating nearly all forms of personal data within their jurisdictional reach. Some argue that Congress should consider creating similar protections in federal law, but others have criticized the EU and California approaches as being overly prescriptive and burdensome. Should the 116th Congress consider a comprehensive federal data protection law, its legislative proposals may involve numerous decision points and legal considerations. Points of consideration may include the conceptual framework of the law (i.e., whether it is prescriptive or outcome-based), the scope of the law and its definition of protected information, and the role of the FTC or other federal enforcement agency. Further, if Congress wants to allow individuals to enforce data protection laws and seek remedies for the violations of such laws in court, it must account for standing requirements in Article III, Section 2 of the Constitution. Federal preemption also raises complex legal questions—not only of whether to preempt state law, but what form of preemption Congress should employ. Finally, from a First Amendment perspective, Supreme Court jurisprudence suggests that while some privacy, cybersecurity, or data security regulations are permissible, any federal law that restricts protected speech, particularly if it targets specific speakers or content, may be subject to more stringent review by a reviewing court.", "document_type": "crs"}
{"report": "Review of Clean Air Act regulations issued under the Obama Administration, with the possibility of their modification or repeal, has been a major focus of the Trump Administration since it took office in 2017. The U.S. Environmental Protection Agency (EPA) has conducted these reviews as part of the Trump Administration's \"regulatory reform\" initiative under which the Administration has directed federal agencies to evaluate existing regulations and identify those that should be considered for replacement, repeal, or modification. In addition, Executive Order (E.O.) 13783 has directed EPA and other federal agencies to review existing regulations and policies that \"potentially burden the development or use of domestically produced energy resources\" for consistency with policies that the E.O. enumerates, and as soon as practicable, to \"suspend, revise, or rescind the guidance, or publish for notice and comment proposed rules suspending, revising, or rescinding those rules.\" EPA rules to regulate greenhouse gas (GHG) emissions from power plants, cars and trucks, and the oil and gas sector have been of particular interest. EPAs regulatory actions to limit GHG emissions have relied on authority that Congress granted the agency in the Clean Air Act (CAA) Amendments of 1970. Since 2007, the Supreme Court has ruled on two separate occasions that the CAA, as amended, authorizes EPA to set standards for GHG emissions. In the first case, Massachusetts v. EPA , the Court held that GHGs are air pollutants within the CAA's definition of that term and that EPA must regulate their emissions from motor vehicles if the agency finds that such emissions cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare. Following the Court's decision, in 2009, the agency made an endangerment finding. In the second case, American Electric Power, Inc. v. Connecticut , the Court held that corporations cannot be sued for GHG emissions under federal common law, because the CAA delegates the management of carbon dioxide and other GHG emissions to EPA: \"... Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants; the delegation is what displaces federal common law.\" EPA's GHG regulations have focused on six gases or groups of gases that multiple scientific studies have linked to climate change. Of the six gases, carbon dioxide (CO 2 ), which is produced by combustion of fossil fuels and is the most prevalent, accounts for about 80% of annual emissions of the combined group when measured as CO 2 equivalents. Of the GHG emission standards promulgated by EPA, four sets of standards, which have had the broadest impacts, are discussed below: those for power plants, the oil and gas industry, trucks, and light-duty vehicles (the latter two topics are combined under the heading \" Standards for Motor Vehicles \"). EPA finalized GHG standards for power plants in August 2015; set GHG emission standards for oil and gas industry sources in June 2016; finalized a second round of GHG standards for trucks in August 2016; and completed a Mid-Term Evaluation (MTE) of the already promulgated GHG standards for model years 2022-2025 light-duty vehicles (cars and light trucks) in January 2017. Most of these rules are under review at EPA; the agency has proposed repeal or modification in several cases. The electricity sector has historically accounted for the largest percentage of anthropogenic U.S. CO 2 emissions, though transportation activities have more recently accounted for a slightly larger share. In 2017, the electricity sector accounted for 27.5% of total U.S. GHG emissions and transportation activities accounted for 28.9%. EPA finalized GHG (CO 2 ) emission standards under CAA Section 111 for new, existing, and modified fossil-fueled power plants in August 2015. The standards would primarily affect coal-fired units, which emit twice the amount of CO 2 that would be emitted by an equivalent natural gas combined cycle (NGCC) electric generating unit. The final rules were controversial: EPA received more than 4 million public comments as it considered the proposed standards for existing units, by far the most comments on a rulemaking in the agency's 48-year history. The Clean Power Plan (CPP), which is the rule for existing units, would set state-specific goals for CO 2 emissions or emission rates from existing fossil-fueled power plants. EPA established different goals for each state based on three \"building blocks\": improved efficiency at coal-fired power plants; substitution of NGCC generation for coal-fired power; and zero-emission power generation from increased renewable energy, such as wind or solar. The goals would be phased in, beginning in 2022, with final average emission rates for each state to be reached by 2030. Independently of the CPP, the period since its proposal in 2014 has seen rapid changes in the electric power industry. Coal-fired power plants have been retired in record numbers and cleaner sources of electric power (both renewable and natural-gas-fired) have taken their place. Coal, which accounted for 39% of electric power generation in 2014, declined to 28% of the total in 2018; natural gas generation rose from 28% to 35% of the total, and wind and solar from 7% to 11% in the same period. As a result of this shift in power sources, emissions of CO 2 from the electric power sector have declined faster than would have been required by the CPP. Cheap and abundant natural gas, state and federal incentives to develop wind and solar power, and tighter EPA standards for non-CO 2 emissions from coal-fired power plants have all played a role in this transition. New Source Performance Standards (NSPS) for new and modified power plants, promulgated at the same time as the CPP, would affect fewer plants, but they too are controversial, because of the technology the rule assumed could be used to reduce emissions at new coal-fired units. As promulgated in 2015, the NSPS would have relied in part on carbon capture and sequestration (CCS) technology to reduce emissions by about 20% compared to the emissions of a state-of-the-art coal-fired plant without CCS. Critics stated that CCS is a costly and unproven technology, and because of this, the NSPS would effectively have prohibited the construction of new coal-fired plants. No operating commercial U.S. power plant was capturing and storing CO 2 as of the date the rule was promulgated. (The first commercial CCS facility in the United States, the Petra Nova project at the W.A. Parish Generating Station in Texas, came on line in 2016.) For additional information on the Clean Power Plan and the 2015 NSPS, see CRS Report R44744, Clean Air Act Issues in the 115th Congress: In Brief . Implementation of the CPP has been stayed by the Supreme Court since February 2016, pending the completion of judicial review. Prior to the stay, challenges to the rule were filed with the U.S. Court of Appeals for the D.C. Circuit by more than 100 parties, including 27 states. These challenges were consolidated into a single case, West Virginia v. EPA . The D.C. Circuit heard oral argument in the case in September 2016; as of this writing, the court has not issued a decision. (For a discussion of the legal issues, see CRS Report R44480, Clean Power Plan: Legal Background and Pending Litigation in West Virginia v. EPA .) The NSPS have also been challenged ( North Dakota v. EPA ). EPA requested (and the court granted) a pause in that litigation to give EPA time to conduct a review. Under the Trump Administration, EPA has reviewed both the CPP and the NSPS. This review concluded, among other things, that the CPP exceeded EPA's statutory authority by using measures that applied to the power sector as a whole rather than measures carried out within an individual facility. The agency therefore proposed repeal of the CPP on October 16, 2017, and a rule to replace it (the Affordable Clean Energy (ACE) rule) on August 21, 2018. The ACE rule would apply a narrower interpretation than the CPP of the best system of emission reduction (BSER), defining it as on-site heat rate improvements for existing coal-fired units. The rule would not establish a numeric performance standard for existing coal-fired units. Instead, EPA proposed a list of candidate technologies that would constitute the BSER. The ACE rule does not establish BSER for other types of existing power plants, such as natural gas single cycle or combined cycle plants or petroleum-fired plants. EPA proposed two additional actions in ACE—one to revise regulations that implement CAA Section 111(d) and another to modify an applicability determination for a CAA preconstruction permitting program for new and modified stationary sources, known as New Source Review (NSR). The former seeks to codify EPA's current legal interpretation that states have broad discretion to establish emission standards consistent with BSER. The latter would revise the NSR applicability test for certain power plants and, according to EPA, prevent NSR from discouraging the installation of energy-efficiency measures. (For more information about the ACE proposal, see CRS Report R45393, EPA's Affordable Clean Energy Proposal .) The agency also proposed to revise the NSPS on December 6, 2018. In the December 2018 proposal, EPA determined that the BSER for newly constructed coal-fired units would be the most efficient demonstrated steam cycle in combination with the best operating practices. This proposed BSER would replace the determination from the 2015 rule, which identified the BSER as partial carbon capture and storage. According to the agency, \"the primary reason for this proposed revision is the high costs and limited geographic availability of CCS.\" Another issue of interest to Congress relates to the agency's legal basis for the 2015 NSPS, including EPA's conclusion in 2015 that power plants emit a significant amount of CO 2 . Prior to the power sector GHG rules, EPA made two findings under CAA Section 202: (1) that GHGs currently in the atmosphere potentially endanger public health and welfare and (2) that new motor vehicle emissions cause or contribute to that pollution. These findings are collectively referred to as the endangerment finding. The endangerment finding triggered EPA's duty under CAA Section 202(a) to promulgate emission standards for new motor vehicles. In the 2015 NSPS rule, EPA concluded that it did not need to make a separate endangerment finding under Section 111, which directs EPA to list categories of stationary sources that cause or contribute significantly to \"air pollution which may reasonably be anticipated to endanger public health or welfare.\" EPA reasoned that because power plants had been listed previously under Section 111, it was unnecessary to make an additional endangerment finding for a new pollutant emitted by a listed source category. The agency also argued that, even if it were required to make a finding, electric generating units (EGUs) would meet that endangerment requirement given the significant amount of CO 2 emitted from the source category. While neither ACE nor the 2018 NSPS rule proposes to reconsider the endangerment finding or the conclusions related to the endangerment finding in the 2015 NSPS, the 2018 NSPS requested comments on these issues, \"either as a general matter or specifically applied to GHG emissions.\" For example, EPA noted that power sector GHG emissions are declining and requested comment on whether EPA has \"a rational basis for regulating CO 2 emissions from new coal-fired\" units. EPA also requested comment on whether the CAA requires the agency to make an endangerment finding once for a source category or if the act requires EPA to make a new endangerment finding each time it regulates an additional pollutant from a listed source category. The NSPS revision and repeal and replacement of the CPP are still at the proposal stage. Revising, repealing, or replacing a promulgated rule require the agency to follow the administrative steps involved in proposing and promulgating a new rule, including allowing public comment, and responding to significant comments upon promulgation of a final rule. Following promulgation, the repeal action, revisions, and replacement rules are subject to judicial review. A large group of stakeholders, including some states, are seen as likely to oppose the changes associated with repealing the CPP and replacing it with ACE. The EPA and judicial processes could be short-circuited by Congress, through legislation overturning, modifying, or affirming the CPP or NSPS. Congressional action is considered unlikely, however, as the threat of a filibuster, requiring 60 votes to proceed, could prevent Senate action. The new House majority has expressed a strong interest in addressing climate change. As a result, oversight hearings are considered likely as EPA finalizes actions on the ACE rule and NSPS. On June 3, 2016, EPA promulgated a suite of New Source Performance Standards (NSPS) under CAA Section 111 to set controls for the first time on methane emissions from sources in the crude oil and natural gas production sector and the natural gas transmission and storage sector. The rule builds on the agency's 2012 NSPS for volatile organic compound (VOC) emissions and would extend controls for methane and VOC emissions beyond the existing requirements to include new or modified hydraulically fractured oil wells, pneumatic pumps, compressor stations, and leak detection and repair at well sites, gathering and boosting stations, and processing plants. The Obama Administration stated that the rule was a key component under the \"Climate Action Plan,\" and that the plan's Strategy to Reduce Methane Emissions was needed to set the United States on track to achieve the Administration's goal to cut methane emissions from the oil and gas sector by 40%-45% from 2012 levels by 2025, and to reduce all domestic GHG emissions by 26%-28% from 2005 levels by 2025. Methane—the key constituent of natural gas—is a potent greenhouse gas with a global warming potential (GWP) more than 25 times greater than that of carbon dioxide (CO 2 ). According to EPA's Inventory of U.S. Greenhouse Gas Emissions and Sinks , methane is the second most prevalent GHG emitted in the United States from human activities, and over 25% of those emissions come from oil production and the production, transmission, and distribution of natural gas. EPA projected that the standards for new, reconstructed, and modified sources would reduce methane emissions by 510,000 tons in 2025, the equivalent of reducing 11 million metric tons of CO 2 . In conjunction with the proposal, EPA conducted a Regulatory Impact Analysis (RIA) that looked at the illustrative benefits and costs of the proposed NSPS: in 2025, EPA estimated the rule will have costs of $530 million and climate benefits of $690 million (in constant 2012 dollars). The rule would also reduce emissions of VOCs and hazardous air pollutants (HAPs). EPA was not able to quantify the benefits of the VOC/HAP reductions. The methane rule is among the rules subject to review under E.O. 13783, signed by President Trump on March 28, 2017. Section 7 of the E.O. directed EPA to review the rule for consistency with policies that the E.O. enumerates, and, if appropriate, as soon as practicable, to \"suspend, revise, or rescind the guidance, or publish for notice and comment proposed rules suspending, revising, or rescinding those rules.\" On March 12, 2018, EPA published a final rule to make two \"narrow\" revisions to the 2016 NSPS. The rule removes the requirement that leaking components be repaired during unplanned or emergency shutdowns and provides separate monitoring requirements for well sites located on the Alaskan North Slope. On October 15, 2018, EPA proposed a larger set of amendments to the 2016 NSPS. The proposed changes would decrease the frequency for monitoring fugitive emissions at well sites and compressor stations; decrease the schedule for making repairs; expand the technical infeasibility provision for pneumatic pumps to all well sites; and amend the professional engineer certification requirements to allow for in-house engineers. Upon the proposal's release, the agency stated that it \"continues to consider broad policy issues in the 2016 rule, including the regulation of greenhouse gases in the oil and natural gas sector,\" and that \"these issues will be addressed in a separate proposal at a later date.\" The comment period for the proposed amendments closed on December 17, 2018. (For more discussion, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas Systems , by Richard K. Lattanzio.) Controversy regarding GHG standards promulgated by the Obama EPA for new motor vehicles has surfaced under the Trump Administration. In May 2009, President Obama reached agreement with major U.S. and foreign auto manufacturers, the state of California (which has separate authority to set motor vehicle emission standards, if EPA grants a waiver), and other stakeholders regarding the substance of GHG emission and related fuel economy standards. A second round of standards for cars and light trucks, promulgated in October 2012, was also preceded by an agreement with the auto industry and key stakeholders. Under the agreements, EPA, the U.S. Department of Transportation (DOT, which has authority to set fuel economy standards), and California would establish \"One National Program\" for GHG emissions and fuel economy. The auto industry supported national standards, in part, to avoid having to meet standards on a state-by-state basis. The second round of GHG standards for cars and light trucks is being phased in over model years (MY) 2017-2025. It would reduce GHG emissions from new light-duty vehicles (i.e., cars, SUVs, crossovers, minivans, and most pickup trucks) by about 50% compared to 2010 levels, and average fuel economy will rise to nearly 50 miles per gallon (mpg) when fully phased in, in 2025. As part of the rulemaking, EPA made a commitment to conduct a Mid-Term Evaluation (MTE) for the MY2022-2025 standards by April 2018. The agency deemed an MTE appropriate given the long time frame at issue, with the final standards taking effect as long as 12 years after promulgation. Through the MTE, EPA was to determine whether the standards for MYs 2022-2025 were still appropriate given the latest available data and information, with the option of strengthening, weakening, or retaining the standards as promulgated. On November 30, 2016, EPA released a proposed determination under the MTE stating that the MY2022-2025 standards remained appropriate and that a rulemaking to change them was not warranted. EPA based its findings on a Technical Support Document, a previously released Draft Technical Assessment Report (which was issued jointly by EPA, DOT, and the California Air Resources Board [CARB]), and input from the auto industry and other stakeholders. The proposed determination opened a public comment period that ran through December 30, 2016. On January 12, 2017, the EPA Administrator made a final determination to retain the MY2022-2025 standards as originally promulgated. The final action arguably accelerated the timeline for the MTE (which called for a final determination by April 2018), and EPA announced it separately from any DOT or California announcement. EPA noted its \"discretion\" in issuing a final determination, saying that the agency \"recognizes that long-term regulatory certainty and stability are important for the automotive industry and will contribute to the continued success of the national program.\" Some auto manufacturer associations and other industry groups criticized the results of EPA's review and reportedly vowed to work with the Trump Administration to revisit EPA's determination. These groups sought actions such as easing the MY2022-2025 requirements or better aligning DOT's and EPA's standards. The Trump Administration reopened the MTE in mid-March 2017. On April 2, 2018, EPA released a revised final determination, stating that the MY2022-2025 standards are \"not appropriate in light of the record before EPA and, therefore, should be revised.\" The notice stated that the January 2017 final determination was based on \"outdated information, and that more recent information suggests that the current standards may be too stringent.\" Following the revised final determination, on August 24, 2018, EPA and DOT proposed amendments to the existing fuel economy and GHG emission standards. The proposal offers eight alternatives. The agencies' preferred alternative, if finalized, is to retain the existing standards through MY2020 and then to freeze the standards at this level for both programs through MY2026. The preferred alternative also removes the current CO 2 equivalent air conditioning refrigerant leakage, nitrous oxide, and methane requirements after MY2020. The proposed standards would lead to an estimated average fuel economy of 37 mpg for MY2020-2026 vehicles, causing a projected increase in fuel consumption of about 0.5 million barrels per day (equivalent to about 186,000 metric tons of carbon dioxide per day), according to EPA and DOT. The agencies project a net benefit from revising the standards, relying on new estimates of compliance costs, fatalities, and injuries. The proposed standards were subject to public comment for 60 days following their publication in the Federal Register . Until the new rulemaking is completed, the standards promulgated in 2012 remain in effect. (For additional information, see CRS Report R45204, Vehicle Fuel Economy and Greenhouse Gas Standards: Frequently Asked Questions , by Richard K. Lattanzio, Linda Tsang, and Bill Canis.) Further, under the proposal, EPA aims to withdraw California's CAA preemption waiver for its vehicle GHG standards applicable to MYs 2021-2025. DOT contends that the Energy Policy and Conservation Act of 1975 (EPCA), which authorizes the department's fuel economy standards, preempts California's GHG emission standards. DOT argues that state laws regulating or prohibiting tailpipe CO 2 emissions are related to fuel economy and can therefore be preempted under EPCA. The agencies accepted comments on the proposal through October 26, 2018. EPA and DOT have also promulgated joint GHG emission and fuel economy standards for medium- and heavy-duty trucks, which have generally been supported by the trucking industry and truck and engine manufacturers. This rule was finalized on August 16, 2016. The new standards cover MYs 2018-2027 for certain trailers and MYs 2021-2027 for semi-trucks, large pickup trucks, vans, and all types and sizes of buses and work trucks. According to EPA, The Phase 2 standards are expected to lower CO 2 emissions by approximately 1.1 billion metric tons, save vehicle owners fuel costs of about $170 billion, and reduce oil consumption by up to 2 billion barrels over the lifetime of the vehicles sold under the program. In the Regulatory Impact Analysis accompanying the rule's promulgation, EPA projected the total cost of the Phase 2 standards at $29-$31 billion over the lifetime of MY2018-2029 trucks. The standards would increase the cost of a long haul tractor-trailer by as much as $13,500 in MY2027, according to the agency; but the buyer would recoup the investment in fuel-efficient technology in less than two years through fuel savings. In EPA's analysis, fuel consumption of 2027 model tractor-trailers will decline by 34% as a result of the rule. In general, the truck standards have been well received. The American Trucking Associations, for example, described themselves as \"cautiously optimistic\" that the rule would achieve its targets: \"We are pleased that our concerns such as adequate lead-time for technology development, national harmonization of standards, and flexibility for manufacturers have been heard and included in the final rule.\" The Truck and Engine Manufacturers Association highlighted its work providing input to assure that EPA and DOT established a single national program, and concluded: \"A vitally important outcome is that EPA and DOT have collaborated to issue a single final rule that includes a harmonized approach to greenhouse gas reductions and fuel efficiency improvements.\" Neither group filed a petition for judicial review of the rule. The only challengers were the Truck Trailer Manufacturers Association and the Racing Enthusiasts and Suppliers Coalition. In April 2017, EPA took steps to review the rule, asking the D.C. Circuit Court of Appeals to hold the legal challenge ( Truck Trailer Manufacturers Association v. EPA ) in abeyance while EPA conducts a review of the standards. The court granted EPA's request on May 8, 2017. On October 27, 2017, the D.C. Circuit Court granted the Truck Trailer Manufacturers Association's request to stay certain requirements for trailers pending the judicial review of the medium- and heavy-duty vehicles rule. The rest of the rule remains in effect. (For additional information, see CRS In Focus IF10927, Phase 2 Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles , by Richard K. Lattanzio.) The truck rule also established emission standards for vehicles manufactured from \"glider kits\" (truck bodies produced without a new engine, transmission, or rear axle). On November 16, 2017, EPA proposed a repeal of the emission standards and other requirements on heavy-duty glider vehicles, glider engines, and glider kits based on a proposed interpretation of the CAA. EPA's proposed repeal has not been finalized, and efforts to expedite the proposal or provide regulatory relief to the industry have been met with resistance from a number of states, environmental groups, and stakeholders in the trucking sector. EPA's fall 2018 regulatory agenda characterizes its glider rulemaking as a \"long-term action,\" which is defined as a measure for which the agency \"does not expect to have a regulatory action within\" a year of publishing the agenda. (For additional information, see CRS Report R45286, Glider Kit, Engine, and Vehicle Regulations , by Richard K. Lattanzio and Sean Lowry.) Air quality has improved substantially since the passage of the CAA in 1970. Annual emissions of the six air pollutants for which EPA has set national ambient air quality standards (NAAQS)—ozone, particulate matter, sulfur dioxide, carbon monoxide, nitrogen dioxide, and lead—have declined by more than 70%, despite major increases in population, motor vehicle miles traveled, and economic activity. Nevertheless, the goal of clean air continues to elude many areas, in part because evolving scientific understanding of the health effects of air pollution has caused EPA to tighten standards for most of these pollutants. Congress anticipated that the understanding of air pollution's effects on public health and welfare would change with time, and it required, in Section 109(d) of the act, that EPA review the NAAQS at five-year intervals and revise them, as appropriate. The most widespread air quality problems involve ozone and fine particles (often referred to as \"smog\" and \"soot,\" respectively). A 2013 study by researchers at the Massachusetts Institute of Technology concluded that emissions of particulate matter (PM) and ozone caused 210,000 premature deaths in the United States in 2005. Many other studies have found links between air pollution, illness, and premature mortality, as well. EPA summarizes these studies in what are called Integrated Science Assessments (ISAs) and Risk Analyses when it reviews a NAAQS. The most recent ISA for particulate matter—a draft version that EPA published as part of the PM NAAQS review currently underway—concludes that there is a \"causal relationship\" between total mortality and both short-term and long-term exposure to PM. The most recent ozone ISA states that there is \"likely to be a causal relationship\" between short-term exposures to ozone and total mortality. With input from the states, EPA identifies areas where concentrations of pollution exceed the NAAQS following its promulgation. As of March 31, 2019, 124 million people lived in areas classified as \"nonattainment\" for the current ozone NAAQS; 23 million lived in areas that were nonattainment for the current fine particulate matter (PM 2.5 ) NAAQS. Figure 1 identifies areas that had not attained one or more of the NAAQS as of March 31, 2019. EPA's statutorily mandated reviews of the ozone and particulate matter NAAQS are underway and may be more contentious than usual. The CAA has minimal requirements for how the agency is to conduct NAAQS reviews, leaving the details to the EPA Administrator. Congress may undertake oversight, as EPA moves forward with these reviews. EPA also intends to streamline NAAQS reviews and obtain Clean Air Scientific Advisory Committee (CASAC) advice regarding background pollution and potential adverse effects from NAAQS compliance strategies. In October 2018, EPA made an unprecedented change and eliminated the pollutant-specific scientific review panels, which have historically helped agency staff conduct the five-year reviews. Specifically, EPA disbanded the Particulate Matter Review Panel, which was appointed in 2015, and stated that it would not form an Ozone Review Panel. Instead, the seven-member CASAC is to lead \"the review of science for any necessary changes\" to the ozone or particulate matter NAAQS. Since then, however, some members of CASAC have raised concerns about this approach. In April 2019, the CASAC recommended that EPA either \"reappoint the previous CASAC [particulate matter] panel or appoint a panel with similar expertise.\" Others, including former members of CASAC and previous ozone review panels, stated that the current CASAC lacks the depth and breadth of expertise required for the ozone review. Additional stakeholder views—in particular, those that may support this particular change—are not readily available. Since 2008, review of the NAAQS for ozone has sparked recurrent controversy. In 2008, EPA promulgated a more stringent ozone NAAQS, and for the first time ever, the Administrator chose a health-based standard outside the range recommended by the independent scientific review committee established by the CAA. In 2015, EPA strengthened the ozone NAAQS again. The final ozone standards were released on October 1, 2015, and appeared in the Federal Register , October 26, 2015. Areas of the United States exceeding the new NAAQS were identified on May 1 and July 17, 2018. The standards have been challenged in court; the D.C. Circuit Court of Appeals heard oral argument in the case on December 18, 2018. The 2015 revision sets more stringent standards than the 2008 ozone NAAQS, lowering both the primary (health-based) and secondary (welfare-based) standards from 75 parts per billion (ppb)—the level set in 2008—to 70 ppb. EPA has identified 52 nonattainment areas with a combined population of 124 million, where air quality exceeds the 2015 NAAQS: 201 counties or partial counties in 22 states, the District of Columbia, and 2 tribal areas. EPA's analysis of the rule's potential effects—undertaken when the rule was promulgated—showed all but 14 of the nonattainment counties could reach attainment with a 70 ppb ozone NAAQS by 2025 as a result of already promulgated standards for power plants, motor vehicles, gasoline, and other emission sources. EPA estimated the cost of meeting a 70 ppb ozone standard in all states except California at $1.4 billion annually in 2025. Because most areas in California would have until the 2030s to reach attainment, EPA provided separate cost estimates for California ($0.8 billion in 2038). These cost estimates are substantially less than widely circulated estimates from the National Association of Manufacturers (NAM) and other industry sources. (For a discussion of the differences, see CRS Report R43092, Implementing EPA's 2015 Ozone Air Quality Standards .) EPA faces a statutory deadline of October 2020 to complete a review of the ozone NAAQS and decide whether to modify or retain it. As previously noted, the agency announced plans to speed up the review process and declined to convene a scientific review panel specific to ozone. EPA is expected to grapple with issues raised during the 2015 ozone review, such as background ozone. In addition, EPA stated that it intends to seek CASAC advice regarding potential adverse effects from NAAQS compliance strategies. EPA completed its most recent review of the particulate matter NAAQS in late 2012 and promulgated revisions to strengthen the standards. During the 2012 particulate matter review, congressional deliberations focused on the regulatory costs associated with implementing more stringent standards as well as the potential impacts on economic growth, employment, and consumers. Some Members of Congress also raised concerns about potential impacts that more stringent particulate matter standards may have on industry and agricultural operations. For more information about the 2012 revision and related congressional deliberations, see CRS Report R42934, Air Quality: EPA's 2013 Changes to the Particulate Matter (PM) Standard . EPA initiated the current particulate matter review in 2014. In October 2018, EPA released a draft version of its ISA for Particulate Matter to CASAC for review and public comment. The ISA, which summarizes the scientific literature published since the last NAAQS review, serves as the scientific basis for reviewing the NAAQS. The CASAC's review of the particulate matter ISA is ongoing. In April 2019, CASAC found that EPA's Draft ISA did \"not provide a sufficiently comprehensive, systematic assessment of the available science relevant to understanding the health impacts of exposure to particulate matter,\" and recommended \"substantial revisions\" to the Draft ISA. As previously noted, the CASAC also recommended that EPA reconvene a particulate matter review panel. EPA's response to these recommendations is not yet available. EPA stated that it intends to complete the particulate matter NAAQS review by December 2020. Other issues are likely to arise as EPA continues to review CAA regulations. The agency is reviewing additional regulations, among them air toxics rules applicable to power plants, brick and ceramic kilns, and industrial sources of ethylene oxide as well as NSPS rules applicable to particulate matter from wood heaters. In addition, the Renewable Fuel Standard program may be of interest to Congress, in particular Renewable Fuel Standard management, the potential impacts such management could have on the associated stakeholders, and related biofuel matters. The CAA directs EPA to promulgate emission standards for sources of the 187 hazardous air pollutants, informally referred as \"air toxics,\" that are listed in Section 112(b). In general, these standards, known as National Emission Standards for Hazardous Air Pollutants (NESHAPs), require major sources to meet numeric emission limits that have been achieved in practice by the best performing similar sources. These standards are generally referred to as Maximum Achievable Control Technology (MACT) standards. EPA is to \"review, and revise as necessary\" the emission standards promulgated under Section 112(d) at least every eight years. The remainder of this section highlights some of the air toxic standards that have garnered interest in the 116 th Congress. EPA promulgated MACT standards for brick, structural clay, and ceramic clay kilns in 2015 that may garner interest in the 116 th Congress. The 2015 rulemaking established emission standards for mercury, particulate matter, acid gases, dioxins, and furans. EPA estimated the cost of the rule at $25 million annually, with monetized co-benefits three to eight times the cost. The Brick Industry Association called the proposal \"a much more reasonable rule than the one EPA first envisioned several years ago,\" but they and others have continued to express concerns regarding the cost and achievability of the standards. Environmental groups and an association of state air pollution officials are concerned for different reasons: in their view, EPA improperly set standards under a section of the CAA that allows an alternative to the MACT requirement that generally applies to hazardous air pollutant standards. After reviewing petitions filed by industry groups and environmental groups, the D.C. Circuit in 2018 ordered EPA to revise the 2015 standards but did not vacate them. EPA's most recent National Air Toxics Assessment (NATA)—published in August 2018—concluded that ethylene oxide is carcinogenic to humans and that it \"significantly contributes to potential elevated cancer risks\" in some areas of the country. EPA subsequently announced it is \"addressing ethylene oxide\" based on the NATA results. EPA has begun to review the NESHAP for miscellaneous organic chemical manufacturing (\"MON\"), an industrial source category that includes facilities emitting ethylene oxide. EPA is under a court order to complete the MON NESHAP review by March 2020. Additional NESHAP regulations apply to sources of ethylene oxide. EPA has stated that it will \"take a closer look\" at these NEHSAPs, starting with the commercial sterilizers source category.\" EPA reported that it anticipates proposing any necessary revisions for the commercial sterilizer NESHAP in mid-2019 and that it will publish schedules for other rules as they are determined. Regardless of the NATA findings on ethylene oxide, the CAA requires EPA to \"review, and revise as necessary\" the NESHAPs promulgated under CAA 112(d) at least every eight years. EPA has not met the statutory deadline for periodic reviews of various NESHAPs, including the MON NESHAP and the commercial sterilization NESHAP, which were both due in 2014. Legislative proposals introduced in the 116 th Congress would require EPA to update NESHAPs applicable to ethylene oxide. For example, S. 458 would, among other things, direct EPA to update the MON and commercial sterilization NESHAPs within 180 days. Similarly, H.R. 1152 would, among other things, require EPA to revise the MON and commercial sterilization NESHAPs within 180 days, and to base the revision on an EPA report, \"Evaluation of the Inhalation Carcinogenicity of Ethylene Oxide.\" EPA is reviewing the benefit-cost analysis it prepared in 2011 for the Mercury and Air Toxics (MATS) rule, raising questions about whether the agency will take additional action on the rulemaking in 2019. Promulgated in February 2012, the MATS rule established MACT standards under Section 112 of the CAA to reduce mercury and acid gases from most existing coal- and oil-fired power plants. EPA's 2011 analysis estimated that the annual benefits of the MATS rule, including the avoidance of up to 11,000 premature deaths annually, would be between $37 billion and $90 billion. Virtually all of the avoided deaths and monetized benefits come from the rule's effect on emissions of particulates, rather than from identified effects of reducing mercury and air toxics exposure. Numerous parties petitioned the courts for review of the rule, contending in part that EPA had failed to conduct a benefit-cost analysis in its initial determination that control of air toxics from electric power plants was \"appropriate and necessary.\" In June 2015, the Supreme Court agreed with the petitioners, remanding the rule to the D.C. Circuit for further consideration. EPA prepared a supplemental \"appropriate and necessary\" finding based on the agency's review of the 2012 rule's estimated costs in 2016. The 2016 supplemental finding concluded that it is appropriate and necessary to regulate air toxics, including mercury, from power plants after including a consideration of the costs. As of this writing, the MATS rule remains in effect and litigation remains on hold, at the agency's request. In late 2018, however, EPA proposed to reverse the 2016 finding that it is appropriate and necessary to regulate air toxics under Section 112 (\"2018 A&N proposal\"). The proposal, even when finalized, would not revoke the mercury and acid gas emissions limits established in the 2012 MATS rule. That would require a separate regulatory action, which EPA has not proposed. Some Members of Congress and various stakeholder groups have raised concerns about the 2018 A&N proposal and advised against further actions that would revoke the MATS standards. For example, a bipartisan group of U.S. Senators wrote to EPA to \"strongly oppose any action that could lead to the undoing\" of the 2012 MATS rule and requested the agency withdraw the 2018 A&N proposal. A group of power sector trade organizations—representing all U.S. investor-owned electric companies, over 2,000 community-owned, not-for-profit electric utilities, over 900 not-for-profit electric utilities, and others—wrote to \"urge that EPA leave the underlying MATS rule in place and effective\" and \"take no action that would jeopardize\" the industry's estimated $18 billion investment in the MATS rule. Not all stakeholders have disagreed with the 2018 A&N proposal, however. Murray Energy Corporation, which describes itself as the largest privately owned U.S. coal company, testified that \"MATS should never have been adopted\" and \"urge[d] EPA to take the only reasonable action flowing from its repudiation of the legal basis for MATS, and rescind the [2012 MATS] rule immediately.\" While it is unclear whether EPA will take additional action on the MATS standards, the 2018 A&N proposal reveals changes in EPA's interpretation of the CAA and use of benefit-cost analysis. EPA's analysis for the 2018 A&N proposal excludes co-benefits—the human health benefits from reductions in pollutants not targeted by MATS—from its consideration of whether MATS is \"appropriate and necessary\" under CAA Section 112(n). With this exclusion, the 2018 analysis finds that monetized costs outweigh monetized benefit estimates by several orders of magnitude. (For additional discussion, see CRS In Focus IF11078, EPA Reconsiders Basis for Mercury and Air Toxics Standards , by Kate C. Shouse.) In 2015, EPA published final emission standards for new residential wood heaters, including wood stoves, pellet stoves, hydronic heaters, and forced air furnaces. The 2015 wood heater regulations generated a substantial amount of interest, particularly in areas where wood is used as a heating fuel. House and Senate hearings in the 115 th Congress highlighted concerns about inadequate time to demonstrate compliance with emission standards by the 2020 deadline. Others have expressed concerns about the air quality impacts of delaying the 2020 deadline. On March 7, 2018, the House passed H.R. 1917 , which would have delayed implementation of the standards for three years. More recently, EPA proposed to add a two-year \"sell-through\" period for new hydronic heaters and forced-air furnaces. Specifically, EPA's proposal would allow all affected new hydronic heaters and forced-air furnaces that are manufactured or imported before the May 2020 deadline to be sold at retail through May 2022. In addition, EPA published an advance notice of proposed rulemaking (ANPR) in late 2018 on new residential wood heaters, new residential hydronic heaters, and new residential air furnaces. The 2018 ANPR does not propose specific changes to the standards, but it requests comments on various regulatory issues \"in order to inform future rulemaking to improve these standards and related test methods.\" Citing stakeholder feedback about ways to improve implementation of the 2015 NSPS, EPA requested comment on 10 topics, including the cost and feasibility of meeting the emission limits that become effective in 2020, the timing of the 2020 compliance date, and test methods used for certification. (For additional information on the wood heater rule, see CRS Report R43489, EPA's Wood Stove / Wood Heater Regulations: Frequently Asked Questions , by James E. McCarthy and Kate C. Shouse.) The Renewable Fuel Standard (RFS) is a mandate that requires U.S. transportation fuel to contain a minimum volume of renewable fuel. The RFS is an amendment of the CAA, having been established by the Energy Policy Act of 2005 ( P.L. 109-58 ; EPAct05) and expanded in 2007 by the Energy Independence and Security Act ( P.L. 110-140 ; EISA). It is a volume mandate that increases annually, starting with 4 billion gallons in 2006 and ascending to 36 billion gallons in 2022, with the EPA determining the volume amounts post-2022. Renewable fuels that may be applied toward the mandate include transportation fuel, jet fuel, and heating oil. To be eligible as a renewable fuel under the RFS, fuels must meet certain environmental and biomass feedstock criteria. Thus far, the predominant fuel used to meet the mandate has been corn starch ethanol. At issue for Congress are RFS management, the potential impacts such management could have on the associated stakeholders, and related biofuel matters. The topics of interest include small refinery exemptions under the RFS, the year-round sale of E15, RFS compliance and compliance costs, the RFS \"reset,\" and approval of advanced biofuel pathways for the RFS (e.g., renewable electricity). The associated stakeholders include renewable fuel producers, agricultural producers, the petroleum industry, and environmental organizations, among others. One legislative proposal specific to the RFS has been introduced in the 116 th Congress— H.R. 104 , the Leave Ethanol Volumes at Existing Levels Act or LEVEL Act—which would decrease the amount of biofuel that must be contained in gasoline and would eliminate the advanced biofuel portion of the mandate. Other legislation was introduced in the 115 th Congress and may be reintroduced in the 116 th Congress. (For further information, contact Kelsi Bracmort, Specialist in Natural Resources and Energy Policy, and see CRS Report R43325, The Renewable Fuel Standard (RFS): An Overview , by Kelsi Bracmort.)", "summary": "Review and rollback of Clean Air Act rules to regulate greenhouse gas (GHG) emissions from power plants, cars and trucks, and the oil and gas sector has been a major focus of the Trump Administration since it took office in 2017. On March 28, 2017, President Trump signed Executive Order 13783, to require the review of regulations and policies that \"burden the development or use of domestically produced energy resources.\" The E.O. directed the U.S. Environmental Protection Agency (EPA) to review the Clean Power Plan (CPP), which set limits on GHG emissions from existing power plants, and several other regulations for consistency with policies that the E.O. enumerates, and as soon as practicable, to \"suspend, revise, or rescind the guidance, or publish for notice and comment proposed rules suspending, revising, or rescinding those rules.\" GHG rules for new power plants, for cars and trucks, and for methane emissions from the oil and gas industry, in addition to the CPP, are subject to the executive order and are under review at EPA, as well as being challenged in the courts. The CPP, which was promulgated by the Obama Administration's EPA in 2015 and would limit GHG emissions from existing fossil-fueled power plants, has been one focus of debate. The Trump Administration's EPA has proposed to repeal the CPP and replace it with the Affordable Clean Energy rule (ACE), a rule that defines the \"best system of emission reduction\" for coal-fired power plant GHGs as efficiency improvement technologies. As proposed, the CPP repeal and ACE rules would remove federal numerical carbon dioxide (CO2) emission limits for existing coal- and natural gas-fired power plants, eliminating one backstop on power plant GHG emissions. Final agency action on ACE is expected later this year. Some Members of Congress have submitted comments to EPA on the ACE proposal. Congress may be interested in conducting oversight of the ACE rule. Clean Air Act GHG standards for cars and light trucks are the subject of another EPA review. An August 2018 proposal would freeze EPA's GHG standards for new cars and light trucks at the level required in model year (MY) 2020. Current regulations, promulgated in 2012 and reaffirmed in January 2017, set increasingly stringent emission standards through MY2025. The EPA proposal would cause a projected increase in vehicle fuel consumption of about a half million barrels of gasoline per day (equivalent to about 186,000 metric tons of carbon dioxide per day) when fully implemented, according to EPA and the Department of Transportation. The proposal would also withdraw California's Clean Air Act waiver for new vehicle GHG standards applicable to MY2021-MY2025. The California standards have been adopted by 12 other states and cover about 35% of the new vehicle market. Following promulgation of these or other Clean Air Act regulations, Congress could address the issues through legislation affirming, modifying, or overturning them. The threat of a filibuster, requiring 60 votes to proceed, however, has generally prevented Senate action. In the 116th Congress, the new majority in the House has indicated a greater interest in addressing climate change issues rather than rolling back regulations. One result may be a new focus on oversight of agency actions to address climate change and its impacts. The 116th Congress may also be interested in issues related to EPA air quality standards for what are called \"conventional\" or \"criteria\" pollutants. EPA faces statutory deadlines to complete reviews of the National Ambient Air Quality Standards (NAAQS) for the two most widespread of this group: ozone and particulate matter (PM). The agency has proposed to speed up the review process, while simultaneously eliminating the scientific review panels that have historically assisted agency staff in conducting the reviews. The Clean Air Act has minimal requirements for how the agency is to conduct NAAQS reviews, leaving the details to the EPA Administrator. Nevertheless, congressional oversight is considered possible as EPA moves forward with the ozone and PM reviews. Other issues Congress might consider include air toxics regulations (e.g., the Mercury and Air Toxics rule for power plants), standards for new residential wood heaters, and the Renewable Fuel Standard.", "document_type": "crs"}
{"report": "The routine activities of most federal agencies are funded annually by one or more of the regular appropriations acts. When action on the regular appropriations acts is delayed, a continuing appropriations act, also sometimes referred to as a continuing resolution or CR, may be used to provide interim budget authority. Since the federal fiscal year was shifted to October 1-September 30 beginning with FY1977, all of the regular appropriations acts have been enacted by the beginning of the fiscal year in only four instances (FY1977, FY1989, FY1995, and FY1997), although CRs were not needed for interim funding in one of these fiscal years. CRs were enacted for FY1977 but only to fund certain unauthorized programs whose funding had been excluded from the regular appropriations acts. The Antideficiency Act (31 U.S.C. 1341-1342, 1511-1519) generally bars the obligation or expenditure of federal funds in the absence of appropriations. The interval during a fiscal year when appropriations for a particular project or activity are not enacted into law, either in the form of a regular appropriations act or a CR, is referred to as a funding gap or funding lapse . Although funding gaps may occur at the start of the fiscal year, they may also occur any time a CR expires and another CR (or the relevant regular appropriations bill) is not enacted immediately thereafter. Multiple funding gaps may occur within a fiscal year. In 1980 and early 1981, then-Attorney General Benjamin Civiletti issued opinions in two letters to the President that have been put into effect through guidance provided to federal agencies under various Office of Management and Budget (OMB) circulars clarifying the limits of federal government activities upon the occurrence of a funding gap. The Civiletti letters state that, in general, the Antideficiency Act requires that if Congress has enacted no appropriation beyond a specified period, the agency may make no contracts and obligate no further funds except as \"authorized by law.\" In addition, because no statute generally permits federal agencies to incur obligations without appropriations for the pay of employees, the Antideficiency Act does not, in general, authorize agencies to employ the services of their employees upon a lapse in appropriations, but it does permit agencies to fulfill certain legal obligations connected with the orderly termination of agency operations. The second letter, from January 1981, discusses the more complex problem of interpretation presented with respect to obligational authorities that are \"authorized by law\" but not manifested in appropriations acts. In a few cases, Congress has expressly authorized agencies to incur obligations without regard to available appropriations. More often, it is necessary to inquire under what circumstances statutes that vest particular functions in government agencies imply authority to create obligations for the accomplishment of those functions despite a lack of current appropriations. It is under this guidance that exceptions may be made for activities involving \"the safety of human life or the protection of property.\" As a consequence of these guidelines, when a funding gap occurs, executive agencies begin a shutdown of the affected projects and activities, including the furlough of non-excepted personnel. The general practice of the federal government after the shutdown has ended has been to retroactively pay furloughed employees for the time they missed, as well as employees who were required to come to work. Under current practice, although a shutdown may be the result of a funding gap, the two events should be distinguished. This is because a funding gap may result in a shutdown of all affected projects or activities in some instances but not in others. For example, when a funding gap is of a short duration, agencies may not have enough time to complete a shutdown of affected projects and activities before funding is restored. In addition, the Office of Management and Budget has previously indicated that a shutdown of agency operations within the first day of a funding gap may be postponed if it appears that an additional CR or regular appropriations act is likely to be enacted that same day. To avoid funding gaps, proposals have previously been offered to establish an \"automatic continuing resolution\" (ACR) that would provide a fallback source of funding authority for activities, at a specified formula or level, in the event that timely enactment of appropriations is disrupted. Funding would become available automatically and remain available as long as needed so that a funding gap would not occur. Although the House and Senate have considered ACR proposals in the past, none has been enacted into law on a permanent basis. As illustrated in Table 1 , there have been 20 funding gaps since FY1977. The enactment of a CR on the day after the budget authority in the previous CR expired, which has occurred in several instances, is not counted in this report as involving a funding gap because there was no full day for which there was no available budget authority. For example, between FY2000 and FY2018, \"next-day\" CRs were enacted on 21 occasions. A majority of the funding gaps occurred between FY1977 and FY1995. During this period of 19 fiscal years, 15 funding gaps occurred. Multiple funding gaps have occurred during a single fiscal year in four instances: (1) three gaps covering a total of 28 days in FY1978, (2) two gaps covering a total of four days in FY1983, (3) two gaps covering a total of three days in FY1985, and (4) two gaps covering a total of 26 days in FY1996. Seven of the funding gaps commenced with the beginning of the fiscal year on October 1. The remaining 13 funding gaps occurred at least more than one day after the fiscal year had begun. Ten of the funding gaps ended in October, four ended in November, three ended in December, and three ended in January. Funding gaps have ranged in duration from 1 to 34 full days. Six of the 8 lengthiest funding gaps, lasting between 8 days and 17 days, occurred between FY1977 and FY1980—before the Civiletti opinions were issued and for which there was no government shutdown. Between 1980 and 1990, the duration of funding gaps was generally shorter, typically ranging from one day to three days. In most cases these occurred over a weekend with only limited impact in the form of government shutdown activities. Notably, many of the funding gaps that have occurred since FY1977 do not appear to have resulted in a \"shutdown.\" Prior to the issuance of the Civiletti opinions, the expectation was that agencies would not shut down during a funding gap. Continuing resolutions typically included language ratifying obligations incurred prior to the resolution's enactment. For example, the first CR for FY1980 provided All obligations incurred in anticipation of the appropriations and authority provided in this joint resolution are hereby ratified and confirmed if otherwise in accordance with the provisions of the joint resolution. Thus, while agencies tended to curtail some operations in response to a funding gap, they often \"continued to operate during periods of expired funding.\" In addition, some of the funding gaps after the Civiletti opinions did not result in a completion of shutdown operations due to both a funding gap's short duration and an expectation that appropriations would soon be enacted. For example, during the three-day FY1984 funding gap, \"no disruption to government services\" reportedly occurred, due to both the three-day holiday weekend and the expectation that the President would soon sign into law appropriations passed by the House and Senate during that weekend. Some of the funding gaps during this period, however, did have a broader impact on affected government operations, even if only for a matter of hours. For example, in response to the one-day funding gap that occurred on October 4, 1984, a furlough of non-excepted personnel for part of that day was reportedly implemented. It should be noted that when most of these funding gaps occurred, one or more regular appropriations measures had been enacted, so any effects were not felt government-wide. For example, the three funding gaps in FY1978 were limited to activities funded in the Departments of Labor and Health, Education, and Welfare Appropriations Act. Similarly, 8 of 13 regular appropriations acts had been enacted prior to the three-day funding gap in FY1984. The most recent funding gaps—two in FY1996, one in FY2014, one in FY2018, and one in FY2019—all resulted in widespread cessation of non-excepted activities and furlough of associated personnel. The legislative history of these funding gaps are summarized below. The two FY1996 funding gaps occurred between November 13 and 19, 1995, and December 15, 1995, through January 6, 1996. The chronology of regular and continuing appropriations enacted during that fiscal year is illustrated in Figure 1 . In the lead-up to the first funding gap, only 3 out of the 13 regular appropriations acts had been signed into law, and budget authority, which had been provided by a CR since the start of the fiscal year, expired at the end of the day on November 13. On this same day, President Clinton vetoed a CR that would have extended budget authority through December 1, 1995, because of the Medicare premium increases contained within the measure. The ensuing funding gap reportedly resulted in the furlough of an estimated 800,000 federal workers. After five days, a deal was reached to end the shutdown and extend funding through December 15. Agencies that had been zeroed out in pending appropriations bills were funded at a rate of 75% of FY1995 budget authority. All other agencies were funded at the lower of the House- or Senate-passed level of funding contained in the FY1996 full-year appropriations bills. The CR also included an agreement between President Clinton and Congress regarding future negotiations to lower the budget deficit within seven years. During the first FY1996 funding gap and prior to the second one, an additional four regular appropriations measures were enacted, and three others were vetoed. The negotiations on the six remaining bills were unsuccessful before the budget authority provided in the CR expired at the end of the day on December 15, 1995. Reportedly, about 280,000 executive branch employees were furloughed during the funding gap between December 15, 1995, and January 6, 1996. A CR to provide benefits for veterans and welfare recipients and to keep the District of Columbia government operating was passed and signed into law on December 22, 1995. The shutdown officially ended on January 6, 1996, when the first of a series of CRs to reopen affected agencies and provide budget authority through January 26, 1996, was enacted. This funding gap commenced at the beginning of FY2014 on October 1, 2013. None of the 12 regular appropriations bills for FY2014 was enacted prior to the beginning of the funding gap. Nor had a CR to provide budget authority for the projects and activities covered by those 12 bills been enacted. On September 30, however, an ACR was enacted to cover FY2014 pay and allowances for (1) certain members of the Armed Forces, (2) certain Department of Defense (DOD) civilian personnel, and (3) other specified DOD and Department of Homeland Security contractors ( H.R. 3210 ; P.L. 113-39 , 113 th Congress). At the beginning of this 16-day funding gap, more than 800,000 executive branch employees were reportedly furloughed. This number was reduced during the course of the funding gap due to the implementation of P.L. 113-39 and other redeterminations of whether certain employees were excepted from furlough. Prior to the resolution of the funding gap, congressional action on appropriations was generally limited to a number of narrow CRs to provide funding for certain programs or classes of individuals. Of these, only the Department of Defense Survivor Benefits Continuing Appropriations Resolution of 2014 ( H.J.Res. 91 ; P.L. 113-44 ) was enacted into law. On October 16, 2013, the Senate passed H.R. 2775 , which had been previously passed by the House on September 12, with an amendment. This amendment, in part, provided interim continuing appropriations for the previous year's programs and activities through January 15, 2014. Later that same day, the House agreed to the Senate amendment to H.R. 2775 . The CR was signed into law on October 17, 2013 ( P.L. 113-46 ), thus ending the funding gap. At the beginning of FY2018, none of the 12 regular appropriations bills had been enacted, so the federal government operated under a series of CRs. The first, P.L. 115-56 , provided government-wide funding through December 8, 2017. The second, P.L. 115-90 , extended funding through December 22, and the third, P.L. 115-96 , extended it through January 19, 2018. In the absence of agreement on legislation that would further extend the period of these CRs, however, a funding gap began with the expiration of P.L. 115-96 at midnight on January 19. A furlough of federal personnel began over the weekend and continued through Monday of the next week, ending with enactment of a fourth CR, P.L. 115-120 , on January 22. At the beginning of FY2019, 5 of the 12 regular appropriations bills had been enacted in two consolidated appropriations bills. The remaining seven regular appropriations bills were funded under two CRs. The first CR, P.L. 115-245 , provided funding through December 7, 2018. The second CR, P.L. 115-298 , extended funding through December 21, 2018. When no agreement was reached on legislation to further extend the period of these CRs, a funding gap began with the expiration of P.L. 115-298 at midnight on December 21, 2018. Because of this funding gap, federal agencies and activities funded in these seven regular appropriations bills were required to shut down. The funding gap ended when a CR, P.L. 116-5 , was signed into law on January 25, 2019, which ended the partial government shutdown and allowed government departments and agencies to reopen. The funding gap lasted 34 full days.", "summary": "The Antideficiency Act (31 U.S.C. 1341-1342, 1511-1519) generally bars the obligation of funds in the absence of appropriations. Exceptions are made under the act, including for activities involving \"the safety of human life or the protection of property.\" The interval during the fiscal year when appropriations for a particular project or activity are not enacted into law, either in the form of a regular appropriations act or a continuing resolution (CR), is referred to as a funding gap or funding lapse. Although funding gaps may occur at the start of the fiscal year, they may also occur any time a CR expires and another CR (or the regular appropriations bill) is not enacted immediately thereafter. Multiple funding gaps may occur within a fiscal year. When a funding gap occurs, federal agencies are generally required to begin a shutdown of the affected projects and activities, which includes the prompt furlough of non-excepted personnel. The general practice of the federal government after the shutdown has ended has been to retroactively pay furloughed employees for the time they missed, as well as employees who were required to come to work. Although a shutdown may be the result of a funding gap, the two events should be distinguished. This is because a funding gap may result in a total shutdown of all affected projects or activities in some instances but not others. For example, when funding gaps are of a short duration, agencies may not have enough time to complete a shutdown of affected projects and activities before funding is restored. In addition, the Office of Management and Budget has previously indicated that a shutdown of agency operations within the first day of the funding gap may be postponed if a resolution appears to be imminent. Since FY1977, 20 funding gaps occurred, ranging in duration from 1 day to 34 full days. These funding gaps are listed in Table 1. About half of these funding gaps were brief (i.e., three days or less in duration). Notably, many of the funding gaps do not appear to have resulted in a \"shutdown.\" Prior to the issuance of the opinions in 1980 and early 1981 by then-Attorney General Benjamin Civiletti, while agencies tended to curtail some operations in response to a funding gap, they often \"continued to operate during periods of expired funding.\" In addition, some of the funding gaps after the Civiletti opinions did not result in a completion of shutdown operations due to both the funding gap's short duration and an expectation that appropriations would soon be enacted. Some of the funding gaps during this period, however, did have a broader impact on affected government operations, even if only for a matter of hours. Two funding gaps occurred in FY1996, amounting to 5 days and 21 days. The chronology of regular and continuing appropriations enacted during FY1996 is illustrated in Figure 1. At the beginning of FY2014 (October 1, 2013), none of the regular appropriations bills had been enacted, so a government-wide funding gap occurred. It concluded on October 17, 2013, after lasting 16 full days. During FY2018, there was a funding gap when a CR covering all of the regular appropriations bills expired on January 19, 2018. It concluded on January 22, 2018, after lasting two full days. The most recent funding gap occurred during FY2019, when a CR covering federal agencies and activities funded in 7 of the 12 regular appropriations bills expired on December 21, 2018. It concluded on January 25, 2019, after lasting 34 full days. For a general discussion of federal government shutdowns, see CRS Report RL34680, Shutdown of the Federal Government: Causes, Processes, and Effects, coordinated by Clinton T. Brass.", "document_type": "crs"}
{"report": "Since assuming the throne from his late father on February 7, 1999, Jordan's 57-year-old monarch King Abdullah II bin Al Hussein (hereinafter King Abdullah II) has maintained Jordan's stability and strong ties to the United States. Although commentators frequently caution that Jordan's stability is fragile, the monarchy has remained resilient owing to a number of factors. These include a strong sense of social cohesion, strong support for the government from both Western powers and the Gulf Arab monarchies, and an internal security apparatus that is highly capable and, according to human rights groups, uses vague and broad criminal provisions in the legal system to dissuade dissent. Despite this resilience, Jordanians are becoming increasingly restless over economic conditions, corruption, and lack of political reform. In 2018, real GDP growth was 2.8%, while unemployment stood at 18.5%, and was likely much higher among young workers. Publicized allegations of high-level corruption include cases against several private- and public-sector elites for conspiring to illegally manufacture cigarettes. Weekly protests have been recurring in Amman, though they have not been as large as summer 2018 protests over tax hikes. Additionally, many Jordanians have turned to social media to express their dissatisfaction with the status quo; the kingdom has one of the highest worldwide rates of social media usage among emerging economies. According to one former high-ranking Jordanian official, \"Loyalty is overwhelming in Jordan but that doesn't mean there are no pockets here and there that are against even the monarchy. And they are negligible, yes, but through social media they will have a ... big voice.\" King Abdullah II and his government have developed a multifaceted approach for responding to public discontent. In recent months, the king has made several public appearances without a security detail, probably in an effort to increase his visibility and interaction with the population. After prominent people criticized the response to corruption concerns, Jordan decided to televise the trial of those accused in the cigarette scandal mentioned above—a rarity in Jordan's justice system. The government also has withdrawn controversial amendments to the 2015 cybercrime law. According to Jordanian activists and international nongovernmental organizations, the amendments would have seriously curtailed freedom of expression online. Jordan may be addressing public discontent and bolstering nationalist sentiment at home by stoking tensions with Israel in support of the Palestinian cause. In late 2018, the king announced (via Twitter) that his government would not renew a provision in its 1994 peace treaty with Israel that allowed Israel access to the Jordanian territories of Baqoura and Al Ghumar, which are agricultural areas in northern and southern Jordan, respectively. According to one Jordanian commentator, \"Domestically, the King's decision is a much-needed shot in the arm for the government at a time when it is facing public pressure over its unpopular economic policies.\" Several months later, Jordan expanded the membership of the Islamic Waqf Council (Islamic custodial trust), which Jordan appoints to oversee the administration of Jerusalem's Temple Mount (known by Muslims as the Haram al Sharif or Noble Sanctuary) and its holy sites. The Islamic Waqf Council, which had been made up of 11 individuals with close ties to the monarchy, was expanded to 18, including several officials from the Palestinian Authority. The newly expanded council immediately defied a 16-year Israeli ban on Muslim worship at the Bab al Rahma building on the Temple Mount. Israel responded by arresting worshippers and activists while also temporarily banning several leaders of the council from accessing the Temple Mount. In March 2019, King Abdullah II spoke in the industrial city of Zarqa, where he stated, \"To me, Jerusalem is a red line, and all my people are with me.... No one can pressure Jordan on this matter, and the answer will be no. All Jordanians stand with me on Jerusalem.\" These types of steps for appeasing an increasingly restive public arguably are vital for the government of Jordan, which has limited financial options for addressing discontent. Although the government has continued to work with the International Monetary Fund (IMF) on fiscal reforms, public debt has ballooned to 95% of Gross Domestic Product (GDP), and most of the government's budget is dedicated to salaries, pensions, and debt servicing, leaving few additional options to fund public sector job programs. King Abdullah II recently traveled to the United Kingdom, where UK officials pledged to partially guarantee a $1.9 billion World Bank loan to Jordan. In summer 2018, Gulf countries pledged $2.5 billion to Jordan in combined grants and loans. Although the United States and Jordan have never been linked by a formal treaty, they have cooperated on a number of regional and international issues for decades. Jordan's small size and lack of major economic resources have made it dependent on aid from Western and various Arab sources. U.S. support, in particular, has helped Jordan deal with serious vulnerabilities, both internal and external. Jordan's geographic position, wedged between Israel, Syria, Iraq, and Saudi Arabia, has made it vulnerable to the strategic designs of its powerful neighbors, but has also given Jordan an important role as a buffer between these countries in their largely adversarial relations with one another. Jordan, created by colonial powers after World War I, initially consisted of desert or semidesert territory east of the Jordan River, inhabited largely by people of Bedouin tribal background. The establishment of the state of Israel in 1948 brought large numbers of Palestinian refugees to Jordan, which subsequently unilaterally annexed a Palestinian enclave west of the Jordan River known as the West Bank. The original \"East Bank\" Jordanians, though probably no longer a majority in Jordan, remain predominant in the country's political and military establishments and form the bedrock of support for the Jordanian monarchy. Jordanians of Palestinian origin comprise an estimated 55% to 70% of the population and generally tend to gravitate toward the private sector due to their alleged general exclusion from certain public-sector and military positions. Jordan is a hereditary constitutional monarchy under the prestigious Hashemite family, which claims descent from the Prophet Muhammad. King Abdullah II (age 57) has ruled the country since 1999, when he succeeded to the throne upon the death of his father, the late King Hussein, after a 47-year reign. Educated largely in Britain and the United States, King Abdullah II had earlier pursued a military career, ultimately serving as commander of Jordan's Special Operations Forces with the rank of major general. The king's son, Prince Hussein bin Abdullah (born in 1994), is the designated crown prince. The king appoints a prime minister to head the government and the Council of Ministers (cabinet). On average, Jordanian governments last no more than 15 months before they are dissolved by royal decree. The king also appoints all judges and is commander of the armed forces. The Jordanian constitution, most recently amended in 2016, gives the king broad executive powers. The king appoints the prime minister and may dismiss him or accept his resignation. He also has the sole power to appoint the crown prince, senior military leaders, justices of the constitutional court, and all 75 members of the senate, as well as cabinet ministers. The constitution enables the king to dissolve both houses of parliament and postpone lower house elections for two years. The king can circumvent parliament through a constitutional mechanism that allows provisional legislation to be issued by the cabinet when parliament is not sitting or has been dissolved. The king also must approve laws before they can take effect, although a two-thirds majority of both houses of parliament can modify legislation. The king also can issue royal decrees, which are not subject to parliamentary scrutiny. The king commands the armed forces, declares war, and ratifies treaties. Finally, Article 195 of the Jordanian Penal Code prohibits insulting the dignity of the king (lèse-majesté), with criminal penalties of one to three years in prison. Jordan's constitution provides for an independent judiciary. According to Article 97, \"Judges are independent, and in the exercise of their judicial functions they are subject to no authority other than that of the law.\" Jordan has three main types of courts: civil courts, special courts (some of which are military/state security courts), and religious courts. In Jordan, state security courts administered by military (and civilian) judges handle criminal cases involving espionage, bribery of public officials, trafficking in narcotics or weapons, black marketeering, and \"security offenses.\" The king may appoint and dismiss judges by decree, though in practice a palace-appointed Higher Judicial Council manages court appointments, promotions, transfers, and retirements. Although King Abdullah II in 2013 laid out a vision of Jordan's gradual transition from a constitutional monarchy into a full-fledged parliamentary democracy, in reality, successive Jordanian parliaments have mostly complied with the policies laid out by the Royal Court. The legislative branch's independence has been curtailed not only by a legal system that rests authority largely in the hands of the monarch, but also by electoral laws designed to produce propalace majorities with each new election. Due to frequent gerrymandering in which electoral districts arguably are drawn to favor more rural progovernment constituencies over densely populated urban areas, parliamentary elections have produced large progovernment majorities dominated by representatives of prominent tribal families. In addition, voter turnout tends to be much higher in progovernment areas since many East Bank Jordanians depend on family/tribal connections as a means to access patronage jobs. With few natural resources and a small industrial base, Jordan has an economy that depends heavily on external aid, tourism, expatriate worker remittances, and the service sector. Among the long-standing problems Jordan faces are poverty, corruption, slow economic growth, and high levels of unemployment. The government is by far the largest employer, with between one-third and two-thirds of all workers on the state's payroll. These public sector jobs, along with government-subsidized food and fuel, have long been part of the Jordanian government's \"social contract\" with its citizens. In the past decade, this arrangement between state and citizen has become more strained. When oil prices skyrocketed between 2007 and 2008, the government had to increase its borrowing in order to continue fuel subsidies. The 2008 global financial crisis was another shock to Jordan's economic system, as it depressed worker remittances from expatriates. The unrest that spread across the region in 2011 further exacerbated Jordan's economic woes, as the influx of hundreds of thousands of Syrian refugees increased demand for state services and resources. Moreover, tourist activity, trade, and foreign investment decreased in Jordan after 2011 due to regional instability. Finally, Jordan, like many other countries, has experienced uneven economic growth, with higher growth in the urban core of the capital Amman and stagnation in the historically poorer and more rural areas of southern Jordan. According to the Economist Intelligence Unit , Amman is the most expensive Arab city and the 25 th -most expensive city to live in globally. Popular economic grievances have spurred the most vociferous protests in Jordan. Youth unemployment is high, as it is elsewhere in the Middle East, and providing better economic opportunities for young Jordanians outside of Amman is a major challenge. Large-scale agriculture is not sustainable because of water shortages, so government officials are generally left providing young workers with low-wage, relatively unproductive civil service jobs. How the Jordanian education system and economy can respond to the needs of its youth has been and will continue to be one of the defining domestic challenges for the kingdom in the years ahead. Over the past year, Jordan's efforts to cut spending and raise revenue have faced significant public resistance. In 2016, the IMF and Jordan reached a three-year, $723 million extended fund facility (EFF) agreement that commits Jordan to improving the business environment for the private sector, reducing budget expenditures, and reforming the tax code. As a result, in 2017 Jordan enacted a Value Added Tax (VAT) on common goods to raise revenue in line with IMF-mandated reforms. To comply further with IMF-mandated reforms, the Jordanian government drafted a new tax bill to increase personal income taxes and thus raise government revenue and ease the public debt burden. The draft tax bill would have lowered the minimum taxable income level in order to expand the tax base from 4.5% of workers to 10%. It also would have raised corporate taxes on banks and reclassified tax evasion as a felony rather than a misdemeanor. In late May 2018, as the bill drew closer to passage and after an IMF team visited Jordan to review its economic reform plan, demonstrations began across the country. On May 30, Jordanian unions and professional associations held a massive general strike against the tax bill and were joined by many younger protesters who denounced recent price hikes on fuel and electricity. Days later, King Abdullah II ordered the government to freeze a 5.5% increase in the price of fuel and a 19% increase in electricity prices. For days, protests continued throughout the country, with some protesters calling for parliament to be dissolved and the political system to be reformed. On June 4, Prime Minister Hani Mulki resigned, and King Abdullah II appointed Education Minister and former World Bank economist Omar Razzaz as prime minister. A change in prime minister is considered fairly routine in Jordanian politics, and protesters decried it as an insufficient response to their demands. Large-scale demonstrations continued for two more days, and on June 7 the government announced that it was withdrawing the bill from immediate consideration and sending it back to parliament for revision. On June 11, Kuwait, the United Arab Emirates, and Saudi Arabia held a summit in Mecca, Saudi Arabia, where they collectively pledged $2.5 billion for Jordan. The aid included a $1 billion deposit at the Central Bank of Jordan. The IMF supported the Jordanian government's decision to revise the tax bill, noting that fiscal reforms should not come at the expense of political stability. This was not the first time that the Jordanian monarchy backtracked on reforms in the face of public pressure. In 1989, 1996, and 2012, Jordanian monarchs responded to mass demonstrations with limited political reforms (new elections and electoral laws, constitutional amendments, anticorruption measures) that did not fundamentally alter the political system. In times of crisis, the government often appeals for Jordanian unity, while calling the opposition divisive or even disloyal. King Abdullah II's turn toward the Gulf for a financial bailout also has precedents. In 2012, at the height of unrest in the Middle East, the Gulf Cooperation Council countries pledged $5 billion to Jordan. In fall 2018, the Jordanian government proposed a new draft tax bill which raises personal and family exemptions for the poorest citizens. The Gulf monarchies also followed through with their $2.5 billion pledge to Jordan, providing (as mentioned above) $1 billion in central bank deposits, $600 million in loan guarantees, $750 million in direct budgetary support (spread over five years), and $150 million for school construction. In December 2018, parliament approved final modifications to the law, and personal income tax rates were adjusted to ensure that the poorest taxpayers were not adversely affected. Beyond the Gulf Arab monarchies, the international community also has increased efforts to boost economic growth in Jordan. In February 2019, the United Kingdom hosted an international donor's conference for Jordan, referred to as The London Initiative 2019. At the conference, donors (UK, France, Japan, and the European Investment Bank) pledged $2.6 billion to Jordan spread over several years. At the conference, the World Bank also announced that pending final approval, it intended to provide $1.9 billion in concessional loans to Jordan over the next two years. Since 2011, the influx of Syrian refugees has placed tremendous strain on Jordan's government and local economies, especially in the northern governorates of Mafraq, Irbid, Ar Ramtha, and Zarqa. Due to Jordan's low population, it has one of the highest per capita refugee rates in the world. As of March 2019, the United Nations High Commissioner for Refugees (UNHCR) estimates that there are 670,238 registered Syrian refugees in Jordan; 83% of all Syrian refugees live in urban areas, while the remaining 17% live in three camps—Azraq, Zaatari, and the Emirati Jordanian Camp (Mrajeeb al Fhood). Another 41,000 refugees are stranded in the desert along the northeastern Jordanian area bordering Syria and Iraq, known as Rukban. Though most of the refugees stranded at Rukban are women and children, a June 2016 IS terrorist attack near the border led Jordanian authorities to close the area, and access to Rukban is sporadic. In 2018, Syrian government forces reestablished control of southern Syria and often have prevented U.N. food shipments from reaching Rukban. Rukban is located within a 35-mile, U.S.-established \"de-confliction zone\" surrounding U.S. forces based at the At Tanf garrison near the Syrian-Iraqi-Jordanian triborder area. In recent months, Syrian and Russian reports have accused the United States of using refugees stranded at Rukban as \"human shields\" to protect the U.S. garrison at At Tanf from being attacked. In response, the U.S. Department of Defense issued a statement in March 2019, saying \"Despite Syrian and Russian propaganda to the contrary, the United States is not restricting the movement of IDPs into or out of the camp at Rukban. The United States fully supports a process to allow IDPs freedom of movement that is free from coercion and allows for safe, voluntary, and dignified departures for those wishing to leave Rukban.\" According to the United Nations: Discussions are ongoing with the main parties involved, including the Government of Syria, the Russian Federation, the United States and the Government of Jordan to further clarify the process and to address the concerns that have been raised by people in Rukban. The United Nations continues to reiterate the importance of a carefully planned, principled approach that ensures respect for core protection standards and does not expose vulnerable, and in many cases traumatized, displaced people to additional harm. All movements must be voluntary, safe, well-informed and dignified, with humanitarian access assured throughout. In parallel, the United Nations also continues to strongly advocate for additional humanitarian assistance for those who remain in Rukban. Jordan is among the most water-poor nations in the world and ranks among the 10 countries with the lowest rate of renewable fresh water per capita. According to the Jordan Water Project at Stanford University, Jordan's increase in water scarcity over the last 60 years is attributable to an approximate 5.5-fold population increase since 1962, a decrease in the flow of the Yarmouk River due to the building of dams upstream in Syria, gradual declines in rainfall by an average of 0.4 mm/year since 1995, and depleting groundwater resources due to overuse. The illegal construction of thousands of private wells also has led to unsustainable groundwater extraction. The large influx of Syrian refugees has heightened water demand in the north and, according to USAID, \"many communities in Jordan have long experienced tensions over water scarcity even before the arrival of 657,433 registered Syrian refugees in the last five years.\" To secure new sources of fresh water, Jordan has pursued water cooperative projects with its neighbors. On December 9, 2013, Israel, Jordan, and the Palestinian Authority signed a regional water agreement (officially known as the Memorandum of Understanding on the Red-Dead Sea Conveyance Project, see Figure 5 ) to pave the way for the Red-Dead Canal, a multibillion-dollar project to address declining water levels in the Dead Sea. The agreement was essentially a commitment to a water swap, whereby half of the water pumped from the Red Sea is to be desalinated in a plant to be constructed in Aqaba, Jordan. Some of this water is to then be used in southern Jordan. The rest is to be sold to Israel for use in the Negev Desert. In return, Israel is to sell fresh water from the Sea of Galilee to northern Jordan and sell the Palestinian Authority discounted fresh water produced by existing Israeli desalination plants on the Mediterranean. The other half of the water pumped from the Red Sea (or possibly the leftover brine from desalination) is to be channeled to the Dead Sea. The exact allocations of swapped water were not part of the 2013 MOU and were left to future negotiations. In 2017, with Trump Administration officials seemingly committed to reviving the moribund Israeli-Palestinian peace process, U.S. officials focused on finalizing the terms of the 2013 MOU. In July 2017, the White House announced that U.S. Special Representative for International Negotiations Jason Greenblatt had \"successfully supported the Israeli and Palestinian efforts to bridge the gaps and reach an agreement,\" with the Israeli government agreeing to sell the Palestinian Authority (PA) 32 million cubic meters (MCM) of fresh water. However, one 2018 report indicated that some Israeli officials may have had misgivings about the project and were seeking to pull out of the deal. According to one unnamed U.S. official cited by the report, \"The United States told Israel that the U.S. supports the project and expects Israel to live up to its obligations under the Red-Dead agreement or find a suitable alternative that is acceptable to Israel and Jordan.\" In January 2019, Israel's Minister for Regional Cooperation Tzachi Hanegbi told Bloomberg News that he expects the Israeli cabinet to approve the Red Sea-Dead Sea project and that Israel and Jordan will each pledge $40 million per year to the project for 25 years. Congress has supported the Red-Dead Sea Conveyance Project. P.L. 114-113 , the FY2016 Omnibus Appropriations Act, specifies that $100 million in Economic Support Funds (ESF) be set aside for water sector support for Jordan, to support the Red Sea-Dead Sea water project. In September 2016, USAID notified Congress that it intended to spend $100 million in FY2016 ESF-Overseas Contingency Operations (OCO) assistance on Phase One of the project. U.S. officials frequently express their support for Jordan. President Trump has acknowledged Jordan's role as a key U.S. partner in countering the Islamic State, as many U.S. policymakers advocate for continued robust U.S. assistance to the kingdom. Annual aid to Jordan has nearly quadrupled in historical terms over the last 15 years. Jordan also hosts U.S. troops. According to President Trump's December 2018 War Powers Resolution Report to Congress, \"At the request of the Government of Jordan, approximately 2,795 United States military personnel are deployed to Jordan to support Defeat-ISIS operations, enhance Jordan's security, and promote regional stability.\" The Trump Administration has enacted changes to long-standing U.S. policies on Israel and the Palestinians, which Palestinians have criticized as unfairly punitive and biased toward Israel, and Jordan has found itself in a difficult political position. While King Abdullah II seeks to maintain strong relations with the United States, the issue of Palestinian rights resonates with much of the Jordanian population; more than half of all Jordanian citizens originate from either the West Bank or the area now comprising the state of Israel. In trying to balance U.S.-Jordanian relations with concern for Palestinian rights, King Abdullah II has refrained from directly criticizing the Trump Administration, while urging the international community to return to the goal of a two-state solution that would ultimately lead to an independent Palestinian state with East Jerusalem as its capital. The United States has provided economic and military aid to Jordan since 1951 and 1957, respectively. Total bilateral U.S. aid (overseen by the Departments of State and Defense) to Jordan through FY2017 amounted to approximately $20.4 billion. Jordan also has received hundreds of millions in additional military aid since FY2014 channeled through the Defense Department's various security assistance accounts. Currently, Jordan is the third-largest recipient of annual U.S. foreign aid globally, after Afghanistan and Israel. On February 14, 2018, the United States and Jordan signed a new Memorandum of Understanding (or MOU) on U.S. foreign assistance to Jordan. The MOU, the third such agreement between the United and Jordan, commits the United States to provide $1.275 billion per year in bilateral foreign assistance over a five-year period for a total of $6.375 billion (FY2018-FY2022). This latest MOU represents a 27% increase in the U.S. commitment to Jordan above the previous iteration and is the first five-year MOU with the kingdom. The previous two MOU agreements had been in effect for three years. The United States provides economic aid to Jordan for (1) budgetary support (cash transfer), (2) USAID programs in Jordan, and (3) loan guarantees. The cash transfer portion of U.S. economic assistance to Jordan is the largest amount of budget support given to any U.S. foreign aid recipient worldwide. In November 2018, USAID notified Congress that it intended to obligate a record $745 million in FY2018 ESF (base and OCO) for a cash transfer to Jordan. U.S. cash assistance is provided in order to help the kingdom with foreign debt payments, Syrian refugee support, and fuel import costs (Jordan is almost entirely reliant on imports for its domestic energy needs). According to USAID, ESF cash transfer funds are deposited in a single tranche into a U.S.-domiciled interest-bearing account and are not commingled with other funds. USAID programs in Jordan focus on a variety of sectors including democracy assistance, water conservation, and education (particularly building and renovating public schools). In the democracy sector, U.S. assistance has supported capacity-building programs for the parliament's support offices, the Jordanian Judicial Council, the Judicial Institute, and the Ministry of Justice. The International Republican Institute and the National Democratic Institute also have received U.S. grants to train, among other groups, the Jordanian Independent Election Commission (IEC), Jordanian political parties, and members of parliament. In the water sector, the bulk of U.S. economic assistance is devoted to optimizing the management of scarce water resources. As mentioned above, Jordan is one of the most water-deprived countries in the world. USAID subsidizes several waste treatment and water distribution projects in the Jordanian cities of Amman, Mafraq, Aqaba, and Irbid. U.S. Sovereign Loan Guarantees (or LGs) allow recipient governments (in this case Jordan) to issue debt securities that are fully guaranteed by the United States government in capital markets, effectively subsidizing the cost for governments of accessing financing. Since 2013, Congress has authorized LGs for Jordan and appropriated $413 million in ESF (the \"subsidy cost\") to support three separate tranches, enabling Jordan to borrow a total of $3.75 billion at concessional lending rates. The U.S. State Department estimates that, since large-scale U.S. aid to Syrian refugees began in FY2012, it has allocated more than $1.3 billion in humanitarian assistance from global accounts for programs in Jordan to meet the needs of Syrian refugees and, indirectly, to ease the burden on Jordan. According to the State Department, U.S. humanitarian assistance is provided both as cash assistance to refugees and through programs to meet their basic needs, such as child health care, education, water, and sanitation. According to USAID, U.S. humanitarian assistance funds are enabling UNICEF to provide health assistance for around 40,000 Syrians sheltering at the informal Rukban and Hadalat settlements along the Syria-Jordan border berm, including water trucking, the rehabilitation of a water borehole, and installation of a water treatment unit in Hadalat. U.S.-Jordanian military cooperation is a key component in bilateral relations. U.S. military assistance is primarily directed toward enabling the Jordanian military to procure and maintain U.S.-origin conventional weapons systems. According to the State Department, Jordan receives one of the largest allocations of International Military Education and Training (IMET) funding worldwide, and IMET graduates in Jordan include \"King Abdullah II, the Chairman of the Joint Chiefs of Staff, the Vice Chairman, the Air Force commander, the Special Forces commander, and numerous other commanders.\" FMF overseen by the State Department is designed to support the Jordanian armed forces' multiyear (usually five-year) procurement plans, while DOD-administered security assistance supports ad hoc defense systems to respond to immediate threats and other contingencies. FMF may be used to purchase new equipment (e.g., precision-guided munitions, night vision) or to sustain previous acquisitions (e.g., Blackhawk helicopters, AT-802 fixed-wing aircraft). FMF grants have enabled the Royal Jordanian Air Force to procure munitions for its F-16 fighter aircraft and a fleet of 28 UH-60 Blackhawk helicopters. As a result of the Syrian civil war and U.S. Operation Inherent Resolve against the Islamic State, the United States has increased military aid to Jordan and channeled these increases through DOD-managed accounts. Although Jordan still receives the bulk of U.S. military aid through the FMF account, Congress has authorized defense appropriations to strengthen Jordan's border security. Since FY2015, total DOD security cooperation funding for Jordan has amounted to $887.7 million. In 1996, the United States granted Jordan Major Non-NATO Ally (MNNA) status, a designation that, among other things, makes Jordan eligible to receive excess U.S. defense articles, training, and loans of equipment for cooperative research and development. In the last five years, excess U.S. defense articles provided to Jordan include two C-130 aircraft, HAWK MEI-23E missiles, and cargo trucks.", "summary": "The Hashemite Kingdom of Jordan is considered a key U.S. partner in the Middle East. Although the United States and Jordan have never been linked by a formal treaty, they have cooperated on a number of regional and international issues over the years. Jordan's strategic importance to the United States is evident given ongoing instability in neighboring Syria and Iraq, Jordan's 1994 peace treaty with Israel, and uncertainty over the trajectory of Palestinian politics. Jordan also is a longtime U.S. partner in global counterterrorism operations. U.S.-Jordanian military, intelligence, and diplomatic cooperation seeks to empower political moderates, reduce sectarian conflict, and eliminate terrorist threats. U.S. officials frequently express their support for Jordan. U.S. support, in particular, has helped Jordan address serious vulnerabilities, both internal and external. Jordan's small size and lack of major economic resources have made it dependent on aid from Western and various Arab sources. President Trump has acknowledged Jordan's role as a key U.S. partner in countering the Islamic State, as many U.S. policymakers advocate for continued robust U.S. assistance to the kingdom. Annual aid to Jordan has nearly quadrupled in historical terms over the last 15 years. The United States has provided economic and military aid to Jordan since 1951 and 1957, respectively. Total bilateral U.S. aid (overseen by the Departments of State and Defense) to Jordan through FY2017 amounted to approximately $20.4 billion. Jordan also hosts over 2,000 U.S. troops. Public dissatisfaction with the economy is a pressing concern for the monarchy. In 2018, widespread protests erupted throughout the kingdom in opposition to a draft tax bill and price hikes on fuel and electricity. Though peaceful, the protests drew immediate international attention because of their scale. Since then, the government has frozen or softened the proposed fiscal measures, but also has continued to work with the International Monetary Fund (IMF) on fiscal reforms to address a public debt that has ballooned to 96.4% of Gross Domestic Product (GDP). As the Trump Administration has enacted changes to long-standing U.S. policies on Israel and the Palestinians, which the Palestinians have criticized as unfairly punitive and biased toward Israel, Jordan has found itself in a difficult political position. While King Abdullah II seeks to maintain strong relations with the United States, he rules over a country where the issue of Palestinian rights resonates with much of the population; more than half of all Jordanian citizens originate from either the West Bank or the area now comprising the state of Israel. In trying to balance U.S.-Jordanian relations with Palestinian concerns, King Abdullah II has refrained from directly criticizing the Trump Administration on its recent moves, while urging the international community to return to the goal of a two-state solution that would ultimately lead to an independent Palestinian state with East Jerusalem as its capital. The 116th Congress may consider legislation pertaining to U.S. relations with Jordan. On February 18, 2016, President Obama signed the United States-Jordan Defense Cooperation Act of 2015 (P.L. 114-123), which authorizes expedited review and an increased value threshold for proposed arms sales to Jordan for a period of three years. It amended the Arms Export Control Act to give Jordan temporarily the same preferential treatment U.S. law bestows upon NATO members and Australia, Israel, Japan, New Zealand, and South Korea. S. 28, the United States-Jordan Defense Cooperation Extension Act, would reauthorize the United States-Jordan Defense Cooperation Act (22 U.S.C. 275) through December 31, 2022.", "document_type": "crs"}
{"report": "The U.S. and Afghan governments, along with partner countries, remain engaged in combat with a robust Taliban-led insurgency. W hile U.S. military officials maintain that Afghan forces are \"resilient\" against the Taliban, by some measures insurgents are in control of or contesting more territory today than at any point since 2001. The conflict also involves an array of other armed groups, including active affiliates of both Al Qaeda (AQ) and the Islamic State (IS, also known as ISIS, ISIL, or by the Arabic acronym Da'esh ). Since early 2015, the NATO-led mission in Afghanistan, known as \"Resolute Support Mission\" (RSM), has focused on training, advising, and assisting Afghan government forces; combat operations by U.S. counterterrorism forces, along with some partner forces, also continue. These two \"complementary missions\" make up Operation Freedom's Sentinel (OFS). Simultaneously, the United States is engaged in an aggressive diplomatic effort to end the war, most notably through direct talks with Taliban representatives (a dramatic reversal of U.S. policy). A draft framework, in which the Taliban would prohibit terrorist groups from operating on Afghan soil in return for the eventual withdrawal of U.S. forces, was reached between U.S. and Taliban negotiators in January 2019, though lead U.S. negotiator Zalmay Khalilzad insists that \"nothing is agreed until everything is agreed.\" Negotiations do not, as of May 2019, directly involve representatives of the Afghan government, leading some to worry that the United States will prioritize a military withdrawal over a complex political settlement that preserves some of the social, political, and humanitarian gains made since 2001. Underlying the negotiations is the unsettled state of Afghan politics, which is a major complicating factor: Afghanistan held inconclusive parliamentary elections in October 2018 and the all-important presidential election, originally scheduled for April 2019, has now been postponed twice until September 2019. The Afghan government has made some progress in reducing corruption and implementing its budgetary commitments, but faces domestic criticism for its failure to guarantee security and prevent insurgent gains. The United States has contributed approximately $133 billion in various forms of aid to Afghanistan over the past decade and a half, from building up and sustaining the Afghan National Defense and Security Forces (ANDSF) to economic development. This assistance has increased Afghan government capacity, but prospects for stability in Afghanistan appear distant. Some U.S. policymakers still hope that the country's largely underdeveloped natural resources and/or geographic position at the crossroads of future global trade routes might improve the economic life of the country, and, by extension, its social and political dynamics as well. Nevertheless, Afghanistan's economic and political outlook remains uncertain, if not negative, in light of ongoing hostilities. In August 2017, President Trump announced what he termed a new South Asia strategy in a nationally-televised address. Many Afghan and U.S. observers interpreted the speech and the policies it promised (expanded targeting authorities for U.S. forces, greater pressure on Pakistan, a modest increase in the number of U.S. and international troops) as a sign of renewed U.S. commitment. However, after less than a year of continued military stalemate, the Trump Administration in July 2018 reportedly ordered the start of direct talks with the Taliban that did not include the Afghan government. This represented a dramatic reversal of U.S. policy, which had previously been to support an \"Afghan-led, Afghan-owned\" peace process. In September 2018, Secretary of State Mike Pompeo appointed former U.S. Ambassador to Afghanistan Zalmay Khalilzad to the newly-created post of Special Representative for Afghanistan Reconciliation; Khalilzad has since met several times with Taliban representatives in Doha, Qatar (where the group maintains a political office). He has also had consultations with the Afghan, Pakistani, and other regional governments. After a six-day series of negotiations in Doha in late January 2019, Khalilzad stated that, \"The Taliban have committed, to our satisfaction, to do what is necessary that would prevent Afghanistan from ever becoming a platform for international terrorist groups or individuals,\" in return for which U.S. forces would eventually fully withdraw from the country. Khalilzad later cautioned that \"we made significant progress on two vital issues: counter terrorism and troop withdrawal. That doesn't mean we're done. We're not even finished with these issues yet, and there is still work to be done on other vital issues like intra-Afghan dialogue and a complete ceasefire.\" After a longer series of talks that ended on March 12, 2019, Khalilzad announced that an agreement \"in draft\" had been reached on counterterrorism assurances and U.S. troop withdrawal. He noted that after the agreement is finalized, \"the Taliban and other Afghans, including the government, will begin intra-Afghan negotiations on a political settlement and comprehensive ceasefire.\" The Taliban have long refused to negotiate with representatives of the Afghan government, which they characterize as a corrupt and illegitimate puppet of foreign powers, and Kabul is not directly involved in the ongoing U.S.-Taliban negotiations. Some observers have criticized that arrangement; former U.S. Ambassador to Afghanistan Ryan Crocker argued that by not insisting on the inclusion of the Afghan government in these negotiations \"we have ourselves delegitimized the government we claim to support,\" and advocated that the U.S. halt talks until the Taliban agree to include the Afghan government. Afghan President Ashraf Ghani has promised that his government will not accept any settlement that limits Afghans' rights. In a January 2019 televised address, he further warned that any agreement to withdraw U.S. forces that did not include Kabul's participation could lead to \"catastrophe,\" pointing to the 1990s-era civil strife following the fall of the Soviet-backed government that led to the rise of the Taliban. President Ghani's concern about being excluded from the talks surfaced in mid-March when his national security advisor accused Khalilzad of \"delegitimizing the Afghan government and weakening it,\" and harboring political ambitions within Afghanistan, leading to a shark rebuke from the State Department. According to a former State Department official, \"The real issue is not the personality of an American diplomat; the real issue is a policy divergence.\" It remains unclear what kind of political arrangement could satisfy both Kabul and the Taliban to the extent that the latter fully abandons armed struggle in pursuit of its goals. The Taliban have recently given some more conciliatory signs, with one spokesman saying the group is \"not seeking a monopoly on power.\" Still, many Afghans, especially women, who remember Taliban rule and oppose the group's tactics and beliefs, remain wary. The unsettled state of Afghan politics is a major complicating factor for current negotiations. The leadership partnership (referred to as the national unity government) between President Ashraf Ghani and Chief Executive Officer (CEO) Abdullah Abdullah, which was brokered by the United States in the wake of the disputed 2014 election, has encountered challenges but remains intact. However, a trend in Afghan society and governance that worries some observers is increasing political fragmentation along ethnic lines. Such fractures have long existed in Afghanistan but were relatively muted during Hamid Karzai's presidency. These divisions are sometimes seen as a driving force behind some of the political upheavals that have challenged Ghani's government. Afghanistan held parliamentary elections in October 2018 that were marred by logistical, administrative, and security problems; results are still, as of May 2019, incomplete, though the new parliament was inaugurated in April 2019. The all-important presidential election, originally scheduled for April 2019, has now been postponed twice, until September 2019. It is unclear to what extent, if any, those delays are related to ongoing U.S.-Taliban talks. U.S. officials have denied that the establishment of an interim government is part of their negotiations with the Taliban, but some observers speculate that such an arrangement (which Ghani has rejected) might be necessary to accommodate the reentry of Taliban figures into public life and facilitate the establishment of a new political system, which a putative settlement might require. Since early 2015, the NATO-led mission in Afghanistan of 17,000 troops, known as \"Resolute Support Mission\" (RSM), has focused on training, advising, and assisting Afghan government forces. Combat operations by U.S. forces also continue and have increased in number since 2017. These two \"complementary missions\" comprise Operation Freedom's Sentinel (OFS). There are around 14,000 U.S. troops in Afghanistan, of which approximately 8,500 are part of RSM. The remaining 8,400 troops of RSM come from 38 partner countries. Since at least early 2017, U.S. military officials have publicly stated that the conflict is \"largely stalemated.\" Arguably complicating that assessment, the extent of territory controlled or contested by the Taliban has steadily grown in recent years by most measures (see Figure 1 ). In its January 30, 2019, report, the Special Inspector General for Afghanistan Reconstruction (SIGAR) reported that the share of districts under government control or influence fell to 53.8%, as of October 2018. This figure, which marks a slight decline from previous reports, is the lowest recorded by SIGAR since tracking began in November 2015; 12% of districts are under insurgent control or influence, with the remaining 34% contested. According to SIGAR's April 30, 2019, quarterly report, the U.S. military is \"no longer producing its district-level stability assessments of Afghan government and insurgent control and influence.\" This information, which was in every previous SIGAR quarterly report going back to January 2016, estimated the extent of Taliban control and influence in terms of both territory and population, and was accompanied by charts portraying those trends over time along with a color-coded map of control/influence by district (see Figure 2 ). SIGAR reports that it was told by the U.S. military that the assessment is no longer being produced because it \"was of limited decision-making value to the [U.S.] Commander.\" While the Taliban retain the ability to conduct high-profile urban attacks, they also demonstrate considerable tactical capabilities. Reports indicate that ANDSF fatalities have averaged 30-40 a day in recent months, and President Ghani stated in January 2019 that over 45,000 security personnel had paid \"the ultimate sacrifice\" since he took office in September 2014. Insider attacks on U.S. and coalition forces by Afghan nationals are a sporadic, but persistent, problem—several U.S. servicemen died in such attacks in 2018, as did 85 Afghan soldiers. In October 2018, General Miller was present at an attack inside the Kandahar governor's compound by a Taliban infiltrator who killed a number of provincial officials, including the powerful police chief Abdul Raziq; Miller was unhurt but another U.S. general was wounded. Beyond the Taliban, a significant share of U.S. operations are aimed at the local Islamic State affiliate, known as Islamic State-Khorasan Province (ISKP, also known as ISIS-K), although there is debate over the degree of threat the group poses. ISKP and Taliban forces have sometimes fought over control of territory or because of political or other differences. U.S. officials are reportedly tracking attempts by IS fighters fleeing Iraq and Syria to enter Afghanistan, which may represent a more permissive operating environment. ISKP also has claimed responsibility for a number of large-scale attacks, many targeting Afghanistan's Shia minority. The UN reports that Al Qaeda, while degraded in Afghanistan and facing competition from ISKP, \"remains a longer-term threat.\" The effectiveness of the ANDSF is key to the security of Afghanistan. As of March 2019, SIGAR reports that Congress has appropriated at least $83.3 billion for Afghan security since 2002. Since 2014, the United States generally has provided around 75% of the estimated $5-6 billion a year to fund the ANDSF, with the balance coming from U.S. partners ($1 billion annually) and the Afghan government ($500 million). Concerns about the ANDSF raised by SIGAR, the Department of Defense, and others include absenteeism, the fact that about 35% of the force does not reenlist each year, and the potential for rapid recruitment to dilute the force's quality; widespread illiteracy within the force; credible allegations of child sexual abuse and other potential human rights abuses; and casualty rates often described as unsustainable. Key metrics related to ANDSF performance, including casualties, attrition rates, and personnel strength, were classified by U.S. Forces-Afghanistan (USFOR-A) starting with the October 2017 SIGAR quarterly report, citing a request from the Afghan government. Although SIGAR had previously published those metrics as part of its quarterly reports, they remain withheld. In both legislation and public statements, some Members have expressed concern over the decline in the types and amount of information provided by the executive branch. At a February 2017 Senate Armed Services Committee hearing, then-mission commander of Resolute Support Mission General Nicholson indicated that the United States had a \"shortfall of a few thousand\" troops that, if filled, could help break the \"stalemate.\" In June 2017, President Trump delegated to then-Secretary Mattis the authority to set force levels, reportedly limited to around 3,500 additional troops, in June 2017; Secretary Mattis signed orders to deploy them in September 2017. Those additional forces put the total number of U.S. troops in the country at around 14,000. Some reports in late 2018 and early 2019 indicate that President Trump may be contemplating ordering the withdrawal of some U.S. forces from Afghanistan. Still, U.S. officials maintain that no policy decision has been made to reduce U.S. force levels. During a visit to Kabul on February 11, 2019, Acting Secretary of Defense Patrick Shanahan stated \"I have not been directed to step down our forces in Afghanistan.\" Also in February 2019, the Senate passed S. 1 , which includes language (Section 408) warning against a \"precipitous withdrawal\" of U.S. forces from Afghanistan and Syria. Additionally, U.S. forces now have broader authority to operate independently of Afghan forces and \"attack the enemy across the breadth and depth of the battle space,\" expanding the list of targets to include those related to \"revenue streams, support infrastructure, training bases, infiltration lanes.\" This was demonstrated in a series of operations, beginning in the fall of 2017, against Taliban drug labs. These operations, often highlighted by U.S. officials, sought to degrade what is widely viewed as one of the Taliban's most important sources of revenue, namely the cultivation, production, and trafficking of narcotics. Some have questioned the impact of that campaign, which came to an end in late 2018. In November 2018, the United Nations reported that the total area used for poppy cultivation in 2018 was 263,000 hectares, the second-highest level recorded since monitoring began in 1994. Regional dynamics, and the involvement of outside powers, are central to the conflict in Afghanistan. The neighboring state widely considered most important in this regard is Pakistan, which has played an active, and by many accounts negative, role in Afghan affairs for decades. President Trump has directly accused Pakistan of \"housing the very terrorists that we are fighting.\" Afghan leaders, along with U.S. military commanders, attribute much of the insurgency's power and longevity either directly or indirectly to Pakistan. Experts debate the extent to which Pakistan is committed to Afghan stability or is attempting to exert control in Afghanistan through ties to insurgent groups, most notably the Haqqani Network, a U.S.-designated Foreign Terrorist Organization (FTO) that has become an official, semiautonomous component of the Taliban. U.S. officials have repeatedly identified militant safe havens in Pakistan as a threat to security in Afghanistan, though some observers question the validity of that charge in light of the Taliban's increased territorial control within Afghanistan itself. Pakistan may view a weak and destabilized Afghanistan as preferable to a strong, unified Afghan state (particularly one led by a Pashtun-dominated government in Kabul; Pakistan has a large and restive Pashtun minority). However, at least some Pakistani leaders have stated that instability in Afghanistan could rebound to Pakistan's detriment; Pakistan has struggled with indigenous Islamist militants of its own. Afghanistan-Pakistan relations are further complicated by the large Afghan refugee population in Pakistan and a long-standing border dispute over which violence has broken out on several occasions. Pakistan sees Afghanistan as potentially providing strategic depth against India, but may also anticipate that improved relations with Afghanistan's leadership could limit India's influence in Afghanistan. Indian interest in Afghanistan stems largely from India's broader regional rivalry with Pakistan, which impedes Indian efforts to establish stronger and more direct commercial and political relations with Central Asia. In his August 2017 speech, President Trump announced what he characterized as a new approach to Pakistan, saying, \"We can no longer be silent about Pakistan's safe havens for terrorist organizations, the Taliban, and other groups that pose a threat to the region and beyond.\" He also, however, praised Pakistan as a \"valued partner,\" citing the close U.S.-Pakistani military relationship. In January 2018, the Trump Administration announced plans to suspend security assistance to Pakistan, a decision that has affected billions of dollars in aid. In February 2019, CENTCOM Commander General Joseph Votel stated, \"Pakistan has not taken concrete actions against the safe havens of violent extremist organizations inside its borders,\" but praised Pakistan for some \"positive steps\" in assisting Special Representative Khalilzad's reconciliation efforts. Afghanistan largely maintains cordial ties with its other neighbors, including the post-Soviet states of Central Asia, though some warn that rising instability in Afghanistan may complicate those relations. In the past two years, multiple U.S. commanders have warned of increased levels of assistance, and perhaps even material support, for the Taliban from Russia and Iran, both of which cite IS presence in Afghanistan to justify their activities.  Both nations were opposed to the Taliban government of the late 1990s, but reportedly see the Taliban as a useful point of leverage vis-a-vis the United States. Afghanistan may also represent a growing priority for China in the context of broader Chinese aspirations in Asia and globally. President Trump mentioned neither Iran nor Russia in his August 2017 speech, and it is unclear how, if at all, the U.S. approach to them might have changed as part of the new strategy. Afghanistan may also represent a growing priority for China in the context of broader Chinese aspirations in Asia and globally. In his speech, President Trump did encourage India to play a greater role in Afghan economic development; this, along with other Administration messaging, has compounded Pakistani concerns over Indian activity in Afghanistan. India has been the largest regional contributor to Afghan reconstruction, but New Delhi has not shown an inclination to pursue a deeper defense relationship with Kabul. Economic development is pivotal to Afghanistan's long-term stability, though indicators of future growth are mixed. Decades of war have stunted the development of most domestic industries, including mining. The economy has also been hurt by a steep decrease in the amount of aid provided by international donors. Afghanistan's Gross Domestic Product (GDP) has grown an average of 7% per year since 2003, but growth slowed to 2% in 2013 due to aid cutbacks and political uncertainty about the post-2014 security situation. Since 2015, Afghanistan has experienced a \"slight recovery\" with growth of between 2% and 3% in 2016 and 2017, though the increase in the poverty rate (55% living below the national poverty line in 2016-2017 compared to 38% in 2012-2013) complicates that picture. A severe drought affecting northern and western Afghanistan has compounded economic and humanitarian challenges. Social conditions in Afghanistan remain equally mixed. On issues ranging from human trafficking to religious freedom to women's rights, Afghanistan has, by all accounts, made significant progress since 2001, but future prospects in these areas remain uncertain. Congress has appropriated more than $132 billion in aid for Afghanistan since FY2002, with about 63% for security and 28% for development (and the remainder for civilian operations and humanitarian aid). The Administration's FY2020 budget requests $4.8 billion for the ANDSF, $400 million in Economic Support Funds, and smaller amounts to help the Afghan government with tasks like combating narcotics trafficking. This is down slightly from both the FY2019 request as well as the FY2018 enacted level of about $5.5 billion in total funding for Afghanistan (down from nearly $17 billion in FY2010). These figures do not include the cost of U.S. combat operations (including related regional support activities), which was estimated at a total of $745 billion since FY2001 as of December 2018, according to the DOD's quarterly Cost of War report, with approximately $45 billion requested for each of FY2018 and FY2019. In its FY2020 budget request, the Pentagon identified $18.6 billion in direct war costs in Afghanistan and $35.3 billion in \"enduring theater requirements and related missions,\" though it is unclear how much of this latter figure is for Afghanistan versus other theaters. Insurgent and terrorist groups have demonstrated considerable capabilities in 2018 and 2019, throwing into sharp relief the daunting security challenges that the Afghan government and its U.S. and international partners face. At the same time, hopes for a negotiated settlement have risen, inspired by developments such as the June 2018 nationwide cease-fire and, more importantly, direct U.S.-Taliban talks, though the prospects for such negotiations to deliver a settlement are uncertain. U.S. policy has sought to force the Taliban to negotiate with the Afghan government by compelling the group to conclude that continued military struggle is futile in light of combined U.S., NATO, and ANDSF capabilities. It is still unclear, however, how the Taliban perceives its fortunes; given the group's recent battlefield gains, one observer has said that \"the group has little reason to commit to a peace process: it is on a winning streak.\" Observers differ on whether the Taliban pose an existential threat to the Afghan government, given the current military balance. That dynamic could change if the United States alters the level or nature of its troop deployments in Afghanistan or funding for the ANDSF. President Ghani has said, \"[W]e will not be able to support our army for six months without U.S. [financial] support.\" Notwithstanding direct U.S. support, Afghan political dynamics, particularly the willingness of political actors to directly challenge the legitimacy and authority of the central government, even by extralegal means, may pose a serious threat to Afghan stability in 2019 and beyond, regardless of Taliban military capabilities. A potential collapse of the Afghan military and/or the government that commands it could have significant implications for the United States, particularly given the nature of negotiated security arrangements. Regardless of how likely the Taliban would be to gain full control over all, or even most, of the country, the breakdown of social order and the fracturing of the country into fiefdoms controlled by paramilitary commanders and their respective militias may be plausible, even probable. Afghanistan experienced a similar situation nearly thirty years ago. Though Soviet troops withdrew from Afghanistan by February 1989, Soviet aid continued, sustaining the communist government in Kabul for nearly three years. However, the dissolution of the Soviet Union in December 1991 ended that aid, and a coalition of mujahedin forces overturned the government in April 1992. Almost immediately, mujahedin commanders turned against each other, leading to a complex civil war during which the Taliban was founded, grew, and took control of most of the country, eventually offering sanctuary to Al Qaeda. While the Taliban and Al Qaeda are still \"closely allied\" according to the UN, Taliban forces have clashed repeatedly with the Afghan Islamic State affiliate. Under a more unstable future scenario, alliances and relationships among extremist groups could evolve or security conditions could change, offering new opportunities to transnational terrorist groups whether directly or by default. After more than 17 years of war, Members of Congress and other U.S. policymakers may reassess notions of what \"victory\" in Afghanistan looks like, examining the array of potential outcomes, how these outcomes might harm or benefit U.S. interests, and the relative levels of U.S. engagement and investment required to attain them. The present condition, which is essentially a stalemate that has existed for several years, could persist; some argue that the United States \"has the capacity to sustain its commitment to Afghanistan for some time to come\" at current levels. Others counter that \"the threat in Afghanistan doesn't warrant a continued U.S. military presence and the associated costs—which are not inconsequential.\" The Trump Administration has described U.S. policy in Afghanistan as \"grounded in the fundamental objective of preventing any further attacks on the United States by terrorists enjoying safe haven or support in Afghanistan.\" For years, some analysts have challenged that line of reasoning, describing it as a strategic \"myth\" and arguing that \"the safe haven fallacy is an argument for endless war based on unwarranted worst-case scenario assumptions.\" Some of these analysts and others dismiss what they see as a disproportionate focus on the military effort, citing evidence that \"the terror threat to Americans remains low\" to argue that \"a strategy that emphasizes military power will continue to fail.\" As many have observed, increased political instability, fueled by questions about the central government's authority and competence and rising ethnic tensions, may pose as serious a threat to Afghanistan as the Taliban does. In light of these internal political dynamics, Members of Congress may examine how the United States can leverage its assets, influence, and experience in Afghanistan, as well as those of Afghanistan's neighbors and international organizations, to encourage more equal, inclusive, and effective governance. Congress could also seek to help shape the U.S. approach to potential negotiations around amending the constitution or otherwise altering the highly centralized Afghan political system, e.g., through legislation and public statements. Core issues for Congress include its role in authorizing, appropriating funds for, and overseeing U.S. military activities, aid, and regional policy implementation.", "summary": "Afghanistan has been a central U.S. foreign policy concern since 2001, when the United States, in response to the terrorist attacks of September 11, 2001, led a military campaign against Al Qaeda and the Taliban government that harbored and supported it. In the intervening 17 years, the United States has suffered around 2,400 fatalities in Afghanistan (including seven in 2019 to date) and Congress has appropriated approximately $133 billion for reconstruction there. In that time, an elected Afghan government has replaced the Taliban, and nearly every measure of human development has improved, although future prospects of those measures remain mixed. The fundamental objective of U.S. efforts in Afghanistan is \"preventing any further attacks on the United States by terrorists enjoying safe haven or support in Afghanistan.\" In early 2019, U.S. military engagement in Afghanistan appears closer to ending than perhaps ever before as U.S. officials negotiate directly with Taliban interlocutors on the issues of counterterrorism and the presence of U.S. troops. However, U.S. negotiators caution that talks are still at a preliminary stage, and Afghan government representatives have not been directly involved. Lead U.S. negotiator Zalmay Khalilzad insists that the United States seeks a comprehensive peace agreement but some worry that the United States will prioritize a military withdrawal over a complex political settlement that preserves some of the social, political, and humanitarian gains made since 2001. It remains unclear what kind of political arrangement could satisfy both Kabul and the Taliban to the extent that the latter fully abandons armed struggle. Press reports in December 2018 and early 2019 indicate that the Trump Administration may be considering withdrawing some U.S. forces, though U.S. officials maintain that no policy decision has been made to reduce U.S. force levels. Many observers assess that a full-scale U.S. withdrawal would lead to the collapse of the Afghan government and perhaps even the reestablishment of Taliban control. By many measures, the Taliban are in a stronger military position now than at any point since 2001, though at least some once-public metrics related to the conduct of the war have been classified or are no longer produced (including district-level territorial and population control assessments, as of the April 30, 2019, quarterly report from the Special Inspector General for Afghanistan Reconstruction). Underlying the negotiations is the unsettled state of Afghan politics, which is a major complicating factor: Afghanistan held inconclusive parliamentary elections in October 2018 and the all-important presidential election, originally slated for April 2019, has been postponed twice and is now scheduled for September 2019. For background information and analysis on the history of congressional engagement with Afghanistan and U.S. policy there, as well as a summary of recent Afghanistan-related legislative proposals, see CRS Report R45329, Afghanistan: Legislation in the 115th Congress, by Clayton Thomas.", "document_type": "crs"}
{"report": "The Republic of Cyprus gained its independence from Great Britain in 1960. At the time, the population living on the island was approximately 77% Greek ethnic origin and roughly 18% Turkish ethnic origin. (This figure has changed over the years, as an influx of mainland Turks have settled in the north.) Maronite Christians, Armenians, and others constituted the remainder. At independence, the republic's constitution defined elaborate power-sharing arrangements between the two main Cypriot groups. It required a Greek Cypriot president and a Turkish Cypriot vice president, each elected by his own community. Simultaneously, a Treaty of Guarantee signed by Britain, Greece, and Turkey ensured the new republic's territorial integrity, and a Treaty of Alliance between the republic, Greece, and Turkey provided for Greek and Turkish soldiers to help defend the island. However, at that time, the two major communities aspired to different futures for Cyprus: most Greek Cypriots favored union of the entire island with Greece ( enosis ), whereas Turkish Cypriots preferred to partition the island ( taksim ) and possibly unite the Turkish Cypriot zone with Turkey. Cyprus's success as a new, stable republic lasted from 1960 to 1963. In 1963, after President (and Greek Orthodox Archbishop) Makarios III proposed constitutional modifications that favored the majority Greek Cypriot community, relations between the two communities deteriorated, with Turkish Cypriots increasingly consolidating into enclaves in larger towns, mostly in the north of the island, for safety. In 1964, Turkish Cypriots withdrew from most national institutions and began to administer their own affairs. Intercommunal violence began to increase between 1963 and 1964 and continued to escalate in the ensuing years. Outside mediation and pressure, including by the United States, appeared to prevent Turkey from intervening militarily on behalf of the Turkish Cypriots. On March 4, 1964, the United Nations Security Council authorized the establishment of the United Nations Peacekeeping Force in Cyprus (UNFICYP) to control the violence and act as a buffer between the two communities. UNFICYP became operational on March 27, 1964, and still carries out its mission today. In 1974, a military junta in power in Athens supported a coup against President Makarios, replacing him with a more hard-line supporter of enosis . In July 1974, Turkey, citing the 1960 Treaty of Guarantee as a legal basis for its move to defend the Turkish Cypriots, deployed military forces to the island in two separate actions. By August 25, 1974, Turkey had taken control of more than one-third of the island. This military intervention had many ramifications. Foremost was the physical separation of the island; widespread dislocation of both the Greek and the Turkish Cypriot populations and related governance, refugee, and property problems; and what the Greek Cypriots refer to as the continued occupation of the island. After the conflict subsided and a fragile peace took root, Turkish Cypriots pursued a solution to the conflict that would keep the two communities separate in two states under the government of either a confederation or a stronger central federal government. In February 1975, the Turkish Cypriots declared their government the Turkish Federated State of Cyprus (TFSC). In 1983, Turkish Cypriot leader Rauf Denktash declared the Turkish Republic of Northern Cyprus (TRNC)—a move considered by some to be a unilateral declaration of independence. At the time, Denktash argued that creation of an independent state was a necessary precondition for a federation with the Greek Cypriots. However, he ruled out a merger with Turkey and pledged cooperation with U.N.-brokered settlement efforts. Thirty-five years later, only Turkey has recognized the TRNC. Between 1974 and 2002, there were numerous, unsuccessful rounds of U.N.-sponsored direct and indirect negotiations to achieve a settlement. Negotiations focused on reconciling the two sides' interests and reestablishing a central government. They foundered on definitions of goals and ways to implement a federal solution. Turkish Cypriots emphasized bizonality and the political equality of the two communities, preferring two nearly autonomous societies with limited contact. Greek Cypriots emphasized the freedoms of movement, property, and settlement throughout the island. The two parties also differed on the means of achieving a federation: Greek Cypriots wanted their internationally recognized national government to devolve power to the Turkish Cypriots, who would then rejoin a Cypriot republic. For the Turkish Cypriots, two entities would join, for the first time, in a new federation. These differences in views also affected the resolution of issues such as property claims, citizenship of mainland Turks who had settled on the island, and other legal issues. These differences in views continue to plague the negotiations today. Negotiations for a final solution to the Cyprus issue appeared to take a dramatic and positive step forward when on November 11, 2002, then-U.N. Secretary-General Kofi Annan presented a draft of \"The Basis for Agreement on a Comprehensive Settlement of the Cyprus Problem,\" commonly referred to as the Annan Plan. The plan called for, among many provisions, a \"common state\" government with a single international legal personality that would participate in foreign and European Union relations. Two politically equal component states would address much of the daily responsibilities of government in their respective communities. The Annan Plan was a comprehensive approach and, of necessity, addressed highly controversial issues for both sides. Over the course of the following 16 months, difficult negotiations ensued. Turkish Cypriot leader Denktash was replaced as chief negotiator by a more prosettlement figure, newly elected \"prime minister\" Mehmet Ali Talat. Republic of Cyprus President Glafkos Clerides was replaced through an election with, according to some observers, a more skeptical president, Tassos Papadopoulos. The Annan Plan itself was revised several times in an attempt to reach compromises demanded by both sides. Complicating the matter even more, on April 16, 2003, the Republic of Cyprus signed an accession treaty with the European Union (EU) to become a member of the EU on May 1, 2004, whether or not there was a settlement and a reunited Cyprus. Finally, after numerous meetings and negotiations, and despite a lack of a firm agreement but sensing that further negotiations would produce little else, on March 29, 2004, Secretary-General Annan released his \"final revised plan\" and announced that the plan would be put to referenda simultaneously in both north and south Cyprus on April 24, 2004. The Turkish Cypriot leadership split, with Denktash urging rejection and Talat urging support. Greek Cypriot President Papadopoulos, to the dismay of the U.N., EU, and United States, but for reasons he argued were legitimate concerns of the Greek Cypriot community, urged the Greek Cypriots to reject the referenda. On April 24, what remaining hope existed for a solution to the crisis on Cyprus was dashed as 76% of Greek Cypriot voters rejected the plan, while 65% of Turkish Cypriot voters accepted it. In his May 28, 2004, report following the vote, Annan said that \"the Greek Cypriots' vote must be respected, but they need to demonstrate willingness to resolve the Cyprus problem through a bicommunal, bizonal federation and to articulate their concerns about security and implementation of the Plan with 'clarity and finality.'\" As early as 2004, Talat, as Turkish Cypriot \"prime minister,\" was credited with helping convince the Turkish Cypriots to support the Annan Plan and had been seen as perhaps the one Turkish Cypriot leader who could move the Greek Cypriots toward a more acceptable solution for both sides. For his efforts at the time, Talat, on April 17, 2005, was elected \"president\" of the unrecognized TRNC over the National Unity Party's (UBP) candidate, Dr. Dervis Eroglu, receiving 55.6% of the vote in a field of nine. For roughly the next four years, to little avail, Cyprus muddled through a series of offers and counteroffers to restart serious negotiations even as the Greek Cypriots solidified their new status as a member of the EU, a status not extended to the Turkish Cypriots despite an EU pledge to try to help end the isolation of the north. On February 24, 2008, Demetris Christofias of the Progressive Party of Working People (AKEL) was elected to a five-year term as president of the Republic of Cyprus. Christofias was educated in the Soviet Union and was a fluent Russian speaker. He joined the communist-rooted AKEL party at the age of 14 and rose through its ranks to become leader in 1988. Christofias was elected president of the Cypriot House of Representatives in 2001 and won reelection in 2006. Christofias's election had the backing of the Democratic (DIKO) Party and the Socialist (EDEK) Party. Christofias, in part, tailored his campaign to opposing what he believed was an uncompromising approach toward the Turkish Cypriots by his opponent, incumbent President Papadopoulos, and the stagnation in the attempt to reach a just settlement of the Cyprus problem. Although serious differences existed between the Greek Cypriot and Turkish Cypriot sides over a final settlement, Christofias took the outcome of the vote as a sign that Greek Cypriots wanted to try once again for an end to the division of the island. In his inaugural address, President Christofias expressed the hope of achieving a \"just, viable, and functional solution\" to the Cyprus problem. He said that he sought to restore the unity of the island as a federal, bizonal, bicommunal republic; to exclude any rights of military intervention; and to provide for the withdrawal of Turkish troops and, ultimately, the demilitarization of the island. Christofias also reaffirmed that the 2004 Annan Plan, which he himself opposed at the time, was null and void and could not be the basis for a future settlement. After Christofias's election, Turkish Cypriot leader Talat, a long-time acquaintance of Christofias, declared that \"a solution in Cyprus is possible by the end of 2008.\" He also declared that \"the goal was to establish a new partnership state in Cyprus, based on the political equality of the two peoples and the equal status of two constituent states.\" While the negotiations between Christofias and Talat appeared to get off to a fast start, the differences in positions quickly became apparent, and the talks, although held on a regular basis, soon began to bog down. Talat wanted to pursue negotiations on the basis of the provisions of the old Annan Plan, while Christofias, mindful of the Greek Cypriot rejection of that plan, was keen to avoid references to it. Old differences quickly resurfaced. As the negotiations dragged on well into 2009, it appeared that impatience, frustration, and uncertainty were beginning to mount against both Christofias in the south and Talat in the north. By the end of 2009, perspectives on both sides of the island began to change. Some suggested that the Greek Cypriots sensed that the talks would not produce a desired outcome before the April 2010 elections in the north, in which Talat, running for reelection, was trailing in the polls to Eroglu. If Talat lost, it was argued, the negotiations were likely to have to begin anew with an entirely different Turkish Cypriot leadership. Under that scenario, many Greek Cypriots, including members within the political parties of the governing coalition, seemed leery of weakening their hand by offering further concessions. Some Turkish Cypriots, on the other hand, appeared to think that the Greek Cypriot side would not offer Talat a negotiated settlement, betting from the opinion polls in the north that Eroglu would win the April elections and would pull back from serious negotiations, at least for a while as he consolidated his new government and reordered Turkish Cypriot strategy. The Greek Cypriots could then blame the anticipated hard-liners in the north and their presumed patrons in Ankara if the talks collapsed. As the negotiations entered 2010, it appeared that the window of opportunity to reach a final settlement, at least between Christofias and Talat, was closing fast. Despite the fact that the two sides had been in negotiations for almost 18 months and in close to 60 meetings, they appeared to have had very little to show for their efforts. In his New Year message to the Greek Cypriots, Christofias suggested that while some progress had been made in a few areas, the two sides were not close to a settlement. The intensive dialogue between Christofias and Talat resumed on January 11, 2010, but after three sessions the talks seemed to have reached a standstill, with the gap between the respective positions of President Christofias and Talat on many of the tougher issues seeming to be insurmountable. The last formal negotiating session between Christofias and Talat concluded on March 30, 2010, with no new developments. In the run-up to the final session there was some speculation that both sides would issue a joint statement assessing the negotiations up to that point and perhaps even announcing some of the areas in which convergences between Christofias and Talat had been achieved. Speculation was that Talat had wanted something positive to take into the final days of the election campaign and had presented Christofias a report summarizing what the Turkish Cypriots understood to have been achieved. Christofias, however, was already under pressure from his coalition partner, DIKO, and former coalition partner, EDEK, not to issue such a statement, which could have been interpreted as an interim agreement. On March 30, 2010, Christofias and Talat issued a short statement suggesting that they had indeed made some progress in governance and power sharing, EU matters, and the economy, but they did not go beyond that. On April 1, Talat, feeling he needed to say more to his Turkish Cypriot constituents about the negotiations, held a press conference at which he outlined his understandings of what he and Christofias had achieved to that point. Christofias would neither confirm nor deny what Talat had presented. On April 18, 2010, Talat lost his reelection bid to his rival Dervis Eroglu of the UBP. Observers believe Talat's defeat was due to a combination of his failure to secure a settlement of the Cyprus problem after almost two years and his inability to convince the EU and others to help end what the Turkish Cypriots believed was the economic isolation of the north. Some observers also noted that an overwhelming number of mainland Turks who had settled in the north and who continued to identify more with mainland Turkey had little interest in unification with Greek Cyprus and supported Eroglu because they believed his views were consistent with theirs. Eroglu, then a 72-year-old physician and long-time politician, won the election with just over 50% of the vote. Eroglu was seen as having a combative style and hard-line views similar to former Turkish Cypriot leader Rauf Denktash, particularly in seeking more autonomy for each community. Eroglu also headed a party in which some of its followers had advocated a permanently divided island and international recognition for the TRNC. It was reported that during the campaign Eroglu may have suggested that perhaps Cyprus should consider a kind of \"soft divorce\" similar to what the Slovaks and Czechs did when they separated. During the campaign, Eroglu also criticized Talat for what he thought were too many concessions to the Greek Cypriot side, including the agreement that a reunited Cyprus would hold a single sovereignty through which both sides would reunite. Nevertheless, even while criticizing Talat's positions, Eroglu insisted that negotiations would continue under his presidency. Upon assuming his new office, Eroglu wrote a letter to U.N. Secretary-General Ban Ki-moon expressing his willingness to resume the negotiations under the good offices of the U.N. and at the point where the negotiations between Talat and Christofias had left off. Despite Eroglu's position regarding the resumption of talks, most political elements on the Greek Cypriot side saw Eroglu's election as a negative development and expressed their skepticism as to what the future would hold. On May 26, 2010, President Christofias and Turkish Cypriot leader Eroglu held their first formal negotiating session. The meeting was held under the auspices of the U.N. Secretary-General's special adviser on Cyprus, Alexander Downer. Almost immediately, a controversy arose when it was reported that Downer read a statement from U.N. Secretary-General Ban congratulating the parties for starting the talks again from where they left off (including the confirmation of existing convergences agreed to by Christofias and Talat), for agreeing to abide by U.N. Security Council resolutions on Cyprus, and for suggesting that a final agreement could be reached in the coming months. Downer's statement immediately drew criticism from several of the Greek Cypriot political parties that were concerned that the references to the convergences arrived at by Christofias and Talat were being considered as agreements by the U.N., a position not shared by the Greek Cypriots. On the other hand, apparently after the May 26 meeting, Eroglu made a statement that the Turkish Cypriots would not be bound by the statement of the U.N. Secretary-General, especially with regard to previous U.N. Security Council resolutions, some of which did include calls for Turkey to withdraw its troops from Cyprus. While Eroglu was trying to clarify that he accepted U.N. resolutions on the parameters of the negotiations, some in the Greek Cypriot leadership seem to question whether Eroglu was trying to redefine the basis under which he would proceed with the negotiations. When the talks resumed in May 2010, Christofias and Eroglu, along with several technical committees and working groups with representatives from both sides, met regularly but made no apparent progress. In September, in an interview with Greek Cypriot press, Eroglu expressed his frustration with the process and accused the Greek Cypriots of treating Turkish Cypriot positions with contempt. He apparently suggested that Christofias needed to inform the Greek Cypriot people that any final solution would involve pain on both sides but also had to minimize social upheaval, especially among the Turkish Cypriot community. When asked what pain Eroglu was prepared to accept, however, he stated that it would not include giving up the Turkish Republic of Northern Cyprus or its flag or sending mainland Turks who settled in the north back to Turkey. In October 2010, Turkish press reported that Eroglu appeared so frustrated with the negotiations that he suggested that Turkish Cypriots had become fed up and no longer believed in the possibility of a mutually agreeable settlement. \"As time passes,\" he said, \"the willingness of the two communities to live together is diminishing.\" For his part, Christofias told the U.N. Secretary-General in September 2010 that both sides were not coming closer to a settlement and that Turkey, given its own domestic and regional problems, \"was not ready to solve the Cyprus problem.\" Although assessments of the negotiations appeared to grow more pessimistic, additional sessions were held through the end of December. Talks were then suspended while Eroglu tended to medical problems. While both sides continued to talk and continued to pledge to seek a solution, neither side had indicated whether progress was being made or that any compromises were possible. On January 1, 2011, Christofias declared his disappointment over the passing of another year without a settlement and accused Turkey of not making any effort to promote a solution to the Cyprus issue. In mid-April 2011, the Republic of Cyprus entered into a parliamentary election period that concluded on May 22. The outcome of the elections did not seem to suggest that the negotiating position of Christofias would require changes. Although opposition to what was perceived to be Christofias's concessions to the north was voiced during the campaign, none of the three parties with the most hard-line views—EDEK, the pro-Europe EVROKO party, and DIKO—increased its vote share. The impact of the elections would later prove problematic for the negotiations. Similarly, in national elections held in Turkey in June, Cyprus was barely an issue among the competing parties. After the election there was some speculation that then-Turkish Prime Minister Recep Tayyip Erdogan, having won another five-year term, might have been prepared to inject some positive new energy into the Cyprus negotiations in order to help Turkey's flagging accession negotiations with the EU. Later this seemed to have been a misreading of the prime minister's intentions. Throughout 2011, Christofias and Eroglu continued their futile negotiations, which also included two meetings with U.N. Secretary-General Ban in another attempt by the U.N. to boost momentum for the talks. Ban insisted that the negotiations be stepped up and that the three would meet on October 30 to assess what progress had been achieved. The U.N. would then be prepared to organize an international conference to discuss security-related issues as Turkey suggested. This would be followed by plans to hold referenda on a final solution in both the north and south by the spring of 2012. The hope among some was that by intensifying the negotiations and reaching a solution by the end of 2011, a potentially reunified Cyprus would be prepared to assume the rotating presidency of the EU on July 1, 2012. By the fall of 2011, both sides seemed to have lost a clear urgency to achieve a final solution. Trying to reach a negotiated settlement by the end of October became impractical. As 2011 ended, pessimism abounded, with many feeling that what had not been accomplished in the previous two years could become very difficult to achieve in 2012 as the Republic of Cyprus entered into full preparation for its EU presidency. Many felt that unless there was a major breakthrough in the negotiations by early 2012, the talks would become even more stalemated and could culminate in a potential dramatic turn of events by the summer. Doubts about the prospects of a solution acceptable to both sides were also raised with the release of a public opinion poll that apparently found a growing negative climate and public discontent on the island, an increased ambivalence on the part of Turkish Cypriots, and a possible shift toward a no vote for reunification among Greek Cypriots. The poll also found that society on both sides needed to begin a very public discussion of the parameters of the negotiations and that confidence-building measures were needed to be implemented to increase the levels of trust in the peace process. As 2012 began, both sides were again preparing to travel to New York for a fifth meeting with Ban to assess the progress of the negotiations. Ban had asked both Christofias and Eroglu to come to New York on January 22-24 with significant offers in the areas of governance, economy, and EU affairs so that the \"Greentree 2\" meeting could facilitate a final deal that would allow the U.N. to convene an international conference in the spring to resolve security-related issues and allow referenda on a final agreement in both the north and south by early summer of 2012. It appeared, however, that even before arriving in New York, neither Christofias nor Eroglu was willing or able to make necessary concessions on the difficult issues of property rights, security, territory, mainland Turks who had \"settled\" in the north, or citizenship—areas where both sides had long-held and very different positions. The uncertainty of what could be achieved prompted Christofias to question whether the meeting should take place at all. The lack of any progress to that point led some in the Greek Cypriot opposition to suggest the meeting be cancelled and warned Christofias not to accept any deadlines or U.N. arbitration or agree to an international conference without explicit agreements on internal issues. Nevertheless, Greentree 2 took place, and it was reported that both sides had submitted to Ban extensive proposals that each felt could provide the basis for a solution. The Greentree meetings concluded without any new agreement to end the stalemate and led an apparently frustrated Ban to say that he would wait until he received a progress report from his special adviser at the end of March 2012 before deciding whether to convene an international conference, despite Christofias's opposition to any such decision. Christofias and Eroglu resumed their direct negotiations in mid-February, but it appeared unlikely that the stalemate could be broken at that point and that the potential for any agreement looked to be delayed—not only until after the EU presidency in the latter half of 2012, but also until after the February 2013 national elections in the republic. In early April, it was reported that the Turkish Cypriot side had suggested that the U.N.-sponsored talks be terminated once the republic assumed the EU presidency on July 1, 2012. This prompted President Christofias to respond that Turkish Cypriots were no longer interested in a solution, even though, as Christofias suggested, the talks could continue during the EU presidency, as the two issues were not related. In May 2012, and with the EU presidency fast approaching, Christofias understood that the talks could not have achieved anything positive, and although he insisted that the negotiations could have continued during the EU presidency, the U.N. did not. U.N. special envoy Alexander Downer then announced that Ban had decided not to call for an international conference on Cyprus due to the lack of agreement on core domestic issues and further stated that the U.N. would no longer host the leaders' \"unproductive\" talks. Downer said that the U.N. would reconvene the meetings \"when there was a clear indication that both sides had something substantial to conclude.\" By mid-2012, the convergence of several factors led to the suspension of the talks. One factor was Christofias's intent to make the republic's presidency of the EU a success. Christofias clearly did not want a divisive debate over what would have probably been an unpopular agreement—even if he and Eroglu could have negotiated a settlement—to detract from or ultimately overshadow the Cyprus EU presidency. Eroglu's pronouncement that he would not meet directly with President Christofias during the six-month EU presidency, despite the fact that the settlement negotiations were not part of the presidency's mandate, was also a factor. The emergence of the fiscal and budget crisis in Cyprus brought on in the aftermath of the larger Eurozone crisis also contributed to the demise of the negotiations. Christofias realized that managing a serious fiscal crisis and the presidency of the EU simultaneously would leave, in reality, little time for him to continue any regular negotiations with Eroglu. On May 14, 2012, recognizing his own internal political realities and reverting back to an earlier statement that he would not seek reelection if he was not able to resolve the Cyprus problem, President Christofias announced that he would not seek reelection in 2013, stating that \"there are no reasonable hopes for a solution to the Cyprus problem or for substantial further progress in the remaining months of our presidency.\" By the end of May 2012, the U.N.-sponsored talks, having essentially reached a stalemate, were formally suspended. Neither Christofias nor Eroglu strongly objected to the U.N. decision. While both sides blamed the other for a lack of progress on an agreement, the reaction to the downgrading of the talks appeared to be muted among both the political leaders and the general publics in both communities. In early June, Kudret Ozersay, then the chief adviser to Eroglu for the negotiations, resigned, further signaling that the talks, even at the technical level, would not continue at the same pace. However, Ozersay was soon replaced by Osman Ertuğ as chief negotiator. In January 2013, the Republic of Cyprus entered a period of national elections. With Christofias out of the picture, Nicos Anastasiades of the center-right, democratic DISY party, with the backing of the conservative DIKO and EVROKO parties, emerged as the leader in early public opinion polls. DIKO had been part of the previous Christofias-led government but withdrew from the coalition in disagreement over some of the positions Christofias took in the negotiations with the Turkish Cypriots. Anastasiades's closest challenge came from the AKEL party itself, led by Stavros Malas. Although Anastasiades took the largest number of first round votes, he was forced into a runoff with Malas but eventually emerged victorious. During the campaign, neither candidate offered many concrete proposals regarding the negotiations with the Turkish Cypriots, as the fiscal and budget crisis took center stage. Anastasiades, who had backed the 2004 Annan Plan for a Cyprus settlement, appeared cautious about his intentions other than calling for a settlement, perhaps not wanting to cause a public rift with his DIKO and EVROKO allies, who had opposed the Annan Plan. While foreclosing new discussions based on the old Annan Plan, Anastasiades had suggested that the basis of future talks would have to be broad understandings reached in 1977 and 1979 between the Greek and Turkish Cypriot leadership at the time as well as a 2006 set of principles agreed to by former Cypriot leaders. He also suggested that as president he would not be directly involved in the day-to-day negotiations but would, in time, appoint someone as his representative and principal negotiator. Upon being sworn in as president, Anastasiades did reach out to the Turkish Cypriots, referring to them as citizens of Cyprus but not giving any clear signal as to his timetable for restarting the negotiations. On the other hand, Yiannakis Omirou, then-leader of the parliament, stated that a new national policy was necessary: \"We need to denounce the Turkish stance to the international and European community and redefine the Cyprus problem as a problem of invasion, occupation and violation of international law.\" The new policy, Omirou went on, \"must set out the framework for a Cyprus solution and use Cyprus's EU membership and Turkey's EU prospects to exert pressure on Ankara to terminate the island's occupation and accept a solution, in accordance with international and European law.\" Initially, the Turkish Cypriots appeared cautious about which negotiating partner they expected to see across the table if and when the talks resumed. Would it be Anastasiades, who earlier was sympathetic to many of the provisions of the Annan Plan, or a different negotiator, who was critical of the previous government's negotiating positions and had teamed with what the Turkish Cypriots believed to be hard-line partners who either withdrew from the previous government coalition in part because of the reported \"concessions\" being offered by Christofias or were consistently critical of the previous government's approach? The Turkish Cypriots had also seemed to set a new standard regarding their own status as a prelude for resuming the talks. Eroglu had stated that the talks could not resume automatically from where they left off and had begun referring to the two \"states,\" a \"new dynamic,\" a \"new negotiating table,\" and a timetable for concluding whatever talks did resume. Even as Anastasiades was being inaugurated, he had to turn his attention to the serious domestic banking and fiscal crises facing the republic. At the same time, Turkish Cypriot and Turkish leadership began to publicly pressure Anastasiades to restart the settlement talks as soon as possible, although it appeared that the Turkish Cypriot side was not proposing any significant compromises or new ideas that would move the talks forward. This prompted Anastasiades to respond that he would not be forced to the bargaining table during this period of economic turmoil and was committed to first addressing the government's fiscal crisis. In mid-May, Foreign Minister Ioannis Kasoulides traveled to New York and Washington to assure everyone that the leadership of the republic was indeed interested in resuming the negotiations but that they needed time to get a handle on the economic crisis on the island. He also made it clear that the Anastasiades administration would not be bound by any previous convergences discussed between his predecessor Christofias and Eroglu and would not agree to any definitive timetable to conclude the talks. Kasoulides also floated the old idea, previously rejected by the Turkish Cypriots (and opposed by some Greek Cypriots who wanted a comprehensive agreement), that as a confidence-building measure on the part of Turkey, the abandoned town of Verosha should be returned to \"its rightful owners.\" In exchange, the Turkish Cypriots could be permitted to use the port of Famagusta for direct trade with Europe under the supervision of the EU. Turkish Cypriots also traveled to Washington with a more upbeat message that 2014 would be a good year to reach an agreement. The Turkish Cypriots, however, rejected the return of Verosha and began speaking more publicly and more often of \"the realities on the island,\" referring to two separate coequal states as well as timetables for concluding the talks. Eroglu had stated that \"while there is a Greek Cypriot administration in the South, there is the TRNC state in the North.\" Ankara, for its part, had already suggested that while it was ready to say \"yes\" to a negotiated solution, a two-state option was viable if talks could not restart and produce a solution in a timely fashion. Eroglu stated in December 2012 that \"the Cyprus problem cannot be solved under existing conditions\" and that \"a possible settlement of the Cyprus issue could be viable only if it is based on the existing realities on the island,\" which acknowledges that \"there were two different people having two separate languages, religions, nationality and origin and two different states\" and that \"certainly it was possible to find a solution to make these two people live together, however people should bear in mind, it is [not] realistic to establish one state from two separate states.\" In late May 2013, Anastasiades and Eroglu finally met, and Anastasiades restated his support for the resumption of the talks but again indicated that the talks could not restart until perhaps October 2013. In July, the Greek Cypriot National Council took the day-to-day responsibility for the negotiations out of the hands of the president, as had been the practice since 2008, and appointed Ambassador Andreas Mavroyiannis of the Foreign Ministry as the Greek Cypriot negotiator. This action increased speculation that the Greek Cypriots were close to proposing that preliminary discussions begin with the goal of resuming the formal negotiations. Throughout the remainder of 2013 and into the beginning of 2014, both sides repeatedly argued over how to restart the talks despite repeated assurances from both sides that they remained committed to restarting the negotiations. Through that period, neither side had been willing to reach agreement on the language of what the Greek Cypriots insisted should be a \"joint statement\" redefining a set of negotiating goals or outcomes that both sides would strive to achieve. The Turkish Cypriots initially rejected the idea that such an opening statement was necessary but then decided to negotiate language they could be comfortable with. Negotiations between Mavroyiannis and Osman Ertuğ took almost six months to conclude. On February 8, 2014, after what appeared to be a significant intervention by the United States, the Cyprus press reported that an agreement on the language of a \"joint declaration\" had been reached and that Anastasiades and Eroglu would meet right away to relaunch the negotiations. This was further confirmed when the \"joint statement\" was released to the public a few days later. The Declaration, which to some became the most comprehensive agreed document on the Cyprus question since the High Level Agreements of 1977 and 1979 or the Annan Plan of 2004, now serves as the basis of the current negotiations. The agreement on the language of the joint statement, however, did not come without a political price for Anastasiades. On February 27, the leader of the government's coalition partner, DIKO, Nicolas Papadopoulos, announced that it was leaving the government in disagreement over the way President Anastasiades was handling the negotiations, much as they did when they quit the Christofias government. It appeared that Papadopoulos—whose father, former President Tassos Papadopoulos, had opposed the Annan Plan—was concerned that Anastasiades had tacitly accepted some of the past convergences that DIKO had opposed. The fact that the joint statement referred only to a \"united\" Cyprus and not the Republic of Cyprus may have again suggested to DIKO that Anastasiades had come too close to accepting an autonomous Turkish Cypriot state over which the Greek Cypriots would have little or no authority or jurisdiction. Curiously, Ertuğ left his post as negotiator after the Declaration was announced but continued to serve as Eroğlu's spokesperson. The Turkish Cypriots then reappointed former negotiator Kudret Ozersay, one seen as more willing to seek accommodation, as their representative to the talks. Negotiations resumed between Mavroyiannis and Ozersay, with Anastasiades and Eroglu meeting periodically. It remained unclear exactly where the starting point for each of the \"chapters\" of issues to be negotiated had been set. Both sides had earlier insisted that they would not be bound by past convergences thought to have been achieved in previous negotiations. However, the February joint statement referred to the fact that only \"unresolved\" issues would be on the table, suggesting that perhaps some previous agreements had, in fact, been accepted. Such a long disagreement first over the need for, and then the language of, the joint statement indicated to many observers that it would continue to be difficult to reach a final solution, particularly in 2014, which marked the 40 th anniversary of the 1974 deployment of Turkish military forces to the island and the 10 th anniversary of the Greek Cypriot vote against the Annan Plan, events that would be observed in very different ways on each side of the island. The pessimism surrounding the potential continuation of the stalemate prompted one well-respected Washington think tank to suggest that a permanent separation of the two sides might become inevitable and that serious consideration should be given to such a possible outcome. The talks did resume in 2014, with Anastasiades and Eroglu meeting several times. In early July, Eroglu was said to have submitted a \"roadmap\" toward a settlement, which included a national referendum to be held by the end of 2014. This was apparently rejected by Anastasiades. Later in July it was reported that the Greek Cypriots had tabled a 17-point plan addressing their positions on issues for a future agreement while the Turkish Cypriots submitted a 15-point counterproposal. Both proposals were apparently rejected. Not only was there disagreement on how to go forward, but there had been reports that both sides had actually backtracked on several issues (see below). These and other reported roadblocks to the negotiations prompted Greek Prime Minister Antonis Samaras to say in July that no \"significant progress\" had been made and the Turkish Cypriot official for foreign affairs, Ozdil Nami, to suggest \"the peace talks were finished.\" The last meeting between Anastasiades and Eroglu before a break for the summer was held on July 26 and was reportedly a somewhat tense session, with Anastasiades expressing his frustration with the Turkish Cypriot side. In late August, the United Nations named Norwegian diplomat Espen Barth Eide as the Secretary-General's new special adviser on Cyprus. The talks, hosted by Eide, resumed in September, and when Anastasiades and Eroglu renewed their meetings on September 21, Turkish Cypriot negotiator Kudret Ozersay stated that he felt that \"real negotiations are starting now.\" Unfortunately, Ozersay's optimism did not last very long. Near the end of September, Turkey, sensing an increased interaction among the Republic of Cyprus, Greece, Israel, and Egypt over energy resources in the Eastern Mediterranean, decided, in what was seen as a provocative act, to move its own seismic exploration vessel into the Republic of Cyprus's exclusive economic zone (EEZ) off the southern coast of the island. Turkey then issued what was referred to as a \"navigational telex\" (NAVTEX) stating that the seismic operations could last until April 2015 unless the Turkish Cypriots were given more of a role in decisions regarding the island's natural resources, specifically energy. Reacting to Turkey's decision to establish a presence in the Cypriot EEZ, President Anastasiades announced in October that he was withdrawing from the settlement negotiations and declared that the talks would not resume until the Turkish seismic vessel was withdrawn from Cyprus's EEZ and the NAVTEX was rescinded. By March 2015, the seismic ship had moved to the port of Famagusta, but the NAVTEX had not been withdrawn. Although the Greek Cypriots insisted that all of the island would eventually benefit from any resources exploited in the waters off the coast, they pointed out that energy, under the provisions of the joint statement agreed to earlier, would be considered a \"federal-level\" issue and would become part of the dialogue once an agreement was reached. The Turkish Cypriots, for their part, demanded that energy issues become part of the formal settlement negotiations once they resumed. In late October 2014, with the negotiations suspended, Turkish Cypriot negotiator Ozersay was replaced by Ergun Olgun. The suspension of the talks, precipitated for some by an unnecessary action and a possible overreaction, again raised serious doubts regarding the commitment of both sides to achieve a solution that left one former British foreign secretary stating that \"the international community should accept the reality that there is division and that you have partition.\" Through the first four months of 2015, the talks remained in suspension with Anastasiades continuing to hold that Turkey would have to withdraw its seismic ship, rescind the NAVTEX issued in January, and stop threatening existing energy exploration activities off the southern coast of Cyprus. Some believed that political pressure from what would be his normal domestic political allies had forced Anastasiades into a corner, preventing him from backing down from this demand despite some domestic and international pressure to do so. Others believed he was under pressure to hold off on the talks until the national elections in the north, scheduled for April 19, were concluded. By mid-April 2015, Turkey had removed its seismic vessel from Cyprus and did not renew the NAVTEX. However, the election campaign in the north had begun, and both sides accepted the fact that the negotiations would not resume until after the elections. On April 19, Turkish Cypriots went to the polls to elect a new \"president.\" Seven candidates were on the ballot. The incumbent, Dervis Ergolu, emerged with a thin margin of votes over the runner up, Mustafa Akinci, but did not win enough to avoid a second round of voting. On April 26, in the second round of voting, Mustafa Akinci of the small, center-left, Communal Democratic Party (TDA) won the election to become the new leader of the Turkish Cypriots, defeating Eroglu with 60% of the votes. Akinci, a three-time \"mayor\" of the Turkish Cypriot-administered half of Nicosia, immediately announced that the negotiations would resume as soon as possible in May and that it was his intention to conclude a settlement agreement by the end of 2015. In congratulating Akinci on his election, Anastasiades confirmed that he, too, looked forward to restarting the negotiations as soon as possible. Akinci leads a small political party that played little, if any, role in previous governments or the past negotiation process. His candidacy initially was criticized by some who claimed he was inexperienced. For others, Akinci entered the negotiations unencumbered with any preconditions for the talks or for a settlement. However, while Akinci controlled the \"presidency,\" his party did not control the government. Akinci also did not initially meet with all of the other Turkish Cypriot political parties, and he seemed determined to rely on the business and nongovernmental organization (NGO) communities to help develop and articulate his negotiating positions. It did not take long for the two sides to meet. On May 11, 2015, the U.N. Special Envoy hosted a dinner for the two leaders in what was described as a relaxed and positive setting. Akinci quickly named Ozdil Nami, the former \"foreign minister\" in the Eroglu government, as the new negotiator for the Turkish Cypriot side. On May 17, 2015, Anastasiades and Akinci held their first formal negotiating session. On May 23, the two leaders took the unprecedented step of walking together down Ledra Street, the symbolic dividing line of the island, in a show of solidarity and hope that this time things would be different. This was the first time that a president of the republic stepped onto territory normally referred to as \"occupied\" land. Since then, the two leaders have met regularly, including an intensified series of meetings in August and September 2016. The reaction to Akinci among some, although not all, Greek Cypriots appeared to be positive but restrained, with a somewhat upbeat \"wait-and-see\" attitude prevailing. Many appeared to be relieved that Eroglu and his hard-line approach to the negotiations were gone. With little in the way of determined political opponents acting as a restraint on his negotiating strategy, some felt that Akinci would be more willing to compromise on some of the issues Eroglu would not budge on. On the other hand, not knowing where Akinci's support for a final deal would actually come from, some were not sure exactly what Akinci could compromise on. In August 2015, Akinci held a round of visits and discussions with the political parties, NGOs, and the business community apparently to assess exactly how much leeway he had for compromise. Turkey was another factor for Akinci. Akinci was not seen as a favorite of Ankara during the elections, and Ankara was likely surprised with the margin of his victory. The government in Ankara offered the obligatory congratulations to Akinci, and Turkey's President Erdogan visited the island to meet with the new leader. In fact, it was reported in the Turkish press that Akinci and Turkish President Erdogan had exchanged some unpleasant words immediately after the election. In his victory statement, Akinci reiterated his campaign position that the status of the relationship between Turkey and Turkish Cyprus should change. \"It should be a relationship of brothers/sisters, not a relationship of a motherland and her child,\" he had said. This provoked a somewhat angry response from Erdogan and led the Turkish press to question the future of Turkey's support for the negotiations. In an editorial in the April 28, 2015, edition of the Hurriyet Daily News , the author suggested that Akıncı has been away from active politics for more than a decade. His team is mostly composed of young people unaware of the delicacies and history of the Cyprus problem. Anastasiades might try to score an easy victory. If the Cyprus talks between the \"novice\" Akıncı team and a ravenous Anastasiades team somehow agree on a deal that favored the demands of the Greek Cypriots, Akinci could dangerously risk fundamental demands of the Turkish Cypriots, forcing the whole process to be derailed in a manner very difficult to revive with extreme effort. In an August 2015 interview, Emine Colak, the former Turkish Cypriot \"foreign minister,\" indicated that Turkey was not trying to manipulate the peace talks and seemed, for the moment, content to let the Turkish Cypriots negotiate their own agreement. Some observers attributed this \"hands-off\" approach by Turkey as a reason why a positive atmosphere had surrounded the talks and why some concrete progress seemed to have been made. Over the summer and fall of 2015, as the negotiations continued on a regular pace, several new \"confidence-building\" measures were initiated. The two leaders agreed on the opening of a new border crossing at Deryneia, and for the first time in 40 years, electricity connections between the two sides were reestablished. Returning Verosha to the Greek Cypriots continued to be a confidence-building measure that Anastasiades endorsed, but that issue was mostly deferred by Akinci. Despite the positive atmosphere surrounding the talks, there were words of caution, particularly from Greek Cypriots, who reminded everyone that there was still a lot of ground to cover. For instance, in early September 2015 several Greek Cypriot political parties officially rejected the notion of a bizonal, bicommunal federation as a part of the solution to the Cyprus problem and criticized reported convergences on population size in the north, the rotating presidency, and particularly Turkey's security role. The concerns expressed by the Greek Cypriot opposition were not just reserved for Anastasiades. In late December 2015, Akinci, in an interview on Turkish television, seemed to outline some very basic bottom lines, referred to as his \"wish list,\" on the issues under negotiation. The reaction to Akinci's comments drew swift and negative reaction from several Greek Cypriot political leaders, suggesting that trouble for the talks was brewing just below the surface. Former House Speaker Yiannakis Omirou described Akinci's remarks as \"highly indicative of the Turkish side's intentions,\" and said \"Turkey effectively seeks to legalize the results of its 1974 invasion. He [Akinci] continues to support the preservation of Turkey's role as a guarantor, and insists on unacceptable views on political equality and rotating presidency.\" For some in the opposition, this was a warning to Anastasiades that he should seriously rethink his views if he had made any concessions on those issues. During 2016, the road to a settlement remained difficult and, beyond the negotiators themselves, became somewhat more complicated. Internally, in the north, disputes among the political parties in early 2016 forced the more \"friendly-to-Akinci\" government coalition to collapse. A new, more conservative Turkish Cypriot coalition government formed that did not include representatives from Akinci's party or parties from the previous coalition. The government was led by \"Prime Minister\" Huseyin Ozgurgun, whose support for the negotiations went from lukewarm to marked by serious doubts. Ozgurgun became more critical of the talks and spoke out forcefully in favor of retaining Turkish security guarantees. In an August 2016 interview, Ozgurgun reminded observers that Akinci's negotiating team did not include any representatives from the government, suggesting that the government and the negotiators were \"disconnected.\" The government also included \"Deputy Prime Minister\" Serdar Denktash, the son of the former icon of the Turkish Cypriots. Some believed that he retained his father's hard-line skepticism of any deal and had suggested that if an agreement was not reached by the end of 2016, a referendum should be held in the north to determine whether the Turkish Cypriots wanted the negotiations to continue in 2017. Such a referendum idea was dropped as the negotiations entered 2017. Then-\"Foreign Minister\" Tashsin Ertugruloglu, who opposed the Annan Plan, also had become more public in expressing the view that no agreement could be achieved. These three influential figures eventually became a political problem for Akinci as negotiations toward a tentative agreement were pursued. In the south, elections were held in spring 2016 for the Greek Cypriot House of Representatives. The two largest parties, the governing DISY party and the pro-settlement AKEL, lost some ground, and for the first time a nationalist/populist party (ELAM) entered the House. This party was seen by some as an offshoot of the radical right Golden Dawn in Greece. Although small in number, like several of the other parties, ELAM is skeptical of any power-sharing arrangement with the Turkish Cypriots. In addition to ELAM, in September 2016, the DIKO and Green parties suggested that the parliament pass a resolution stating that no agreement could include \"foreign guarantees\" and \"foreign troops.\" DIKO's chairman reportedly stated that there no longer was confidence in the president. Despite the internal political developments, both sides proceeded with the negotiations through 2016. The mood appeared to be as positive and constructive as it had ever been, at least among the negotiators, with more frequent references to being farther along on the road to a settlement than in the past. There were also more positive stories in the international press and significant expressions of support for the negotiations from many world capitals, indicating perhaps that progress was actually being achieved. Despite the level of optimism displayed by the leaders of the two sides, many recalled a similarly hopeful atmosphere in early 2008, after Christofias was elected president on a campaign filled with commitments of a quick conclusion to the negotiations. At that time, Turkish Cypriot leader Ali Talat declared that because he and Christofias shared the same vision of a future for Cyprus, the two could overcome years of disagreement and mistrust and that the negotiations could conclude within six months. Akinci's declarations regarding a quick settlement by the end of 2015 raised expectations, but that deadline, never accepted by Anastasiades, was missed—as, subsequently, was the end of 2016 target. To most observers, the two leaders seemed to have come closer to reaching a settlement than at any time since 2004, when the Annan Plan for a settlement and unification of the island was actually voted on (and ultimately rejected by the Greek Cypriots). However, the normal frustrations that inevitably appear in these negotiations again mounted over the two sides' inability to establish an end point at which time an agreement—not perfect, but acceptable to both sides—would be reached. Some Turkish Cypriot leaders, including Akinci, had begun to suggest that the round of talks in 2016 could be the last if an agreement was not reached. By the beginning of August 2016, both sides had insisted that significant convergences acceptable to both leaders had been reached on many issues. At this point, the leaders again raised the possibility of reaching an agreement by the end of 2016. Such a timetable would have allowed them to hold referenda in both communities by spring 2017, possibly before the next presidential election cycle began in the republic. Having agreed to try to reach a settlement by the end of 2016, Anastasiades and Akinci accelerated their negotiations after a short early August recess. In late August and early September, eight intense sessions were held in advance of the U.N. General Assembly's annual meeting in mid-September. The idea was to achieve enough progress by then on many of the basic issues that both sides would then ask the U.N. Secretary-General to convene a five-party conference (with the two Cypriot communities and the security guarantee countries, Greece, Turkey, and the UK) in December to discuss the issue of security guarantees and finalize an agreement. Although no five-party conference was announced at the U.N. meeting, the two leaders returned to Cyprus and agreed to another series of accelerated sessions in October and November, to further address the issue of territory and to move to a multiparty conference on security guarantees with the intention of finalizing an agreement. Despite the progress in areas such as economic affairs, EU affairs, citizenship, and governance structures, serious differences on a rotating presidency, territory, and the sensitive chapter on security guarantees—the first time these issues had been formally discussed since the 2004 Annan Plan—remained wide enough to prevent an actual agreement from being achieved during those sessions. In November 2016, both sides agreed to travel to Mont Pelerin, Switzerland, to further address the more difficult issue of territory and to move to an agreement on holding a five-party conference on security guarantees. During the first week of the Mont Pelerin talks, which began on November 8, progress was reported on several issues and maps depicting what both sides thought should be the new boundaries of the new constituent states were discussed. Disagreement over the amount of territory both sides would eventually claim and the number of displaced persons (mostly Greek Cypriots) who would be allowed to return to the new territories brought the talks to a standstill. The Greek Cypriots demanded that some 90,000 displaced Greek Cypriots be returned to new territory that would come under Greek Cypriot administration. The Turkish Cypriots insisted that the number be closer to 65,000. Faced with the loss of territory and a potential influx of Greek Cypriots into areas once controlled by the Turkish Cypriots, Akinci suggested that no deal on territorial adjustment could be made without a discussion and agreement on security guarantees. President Anatasiades rejected the security-guarantee demand, noting that the Mont Pelerin sessions were only intended to reach an agreement on territorial adjustment and, if accomplished, a discussion of the security issues would be held. Amid this disagreement, the meetings were suspended for one week while both sides consulted with their advisers. Apparently, during this time, Ankara reiterated that the Turkish Cypriots should not agree to any territorial concessions without security guarantees, which could only be agreed to in a five-party or a multiparty conference to include Turkey. When the talks reconvened on November 20 and 21, 2016, no agreement could be reached, as the Turkish Cypriots insisted on a date for a five-party conference and maintained that both territory and security be included in those talks. The Greek Cypriots refused to agree to set a date for the five-party conference, and the talks ended. Both sides returned to Cyprus to reflect on the negotiations and to decide how to proceed. The Greek Cypriots wanted the resumption of the talks to begin where the Mont Pelerin talks on territory ended, including the presentation of maps defining new territorial boundaries. The Turkish Cypriots insisted that the talks could only restart if the Greek Cypriots agreed to a formal date for a five-party conference on territory and guarantees. Not wanting to lose the momentum achieved at that point or to have the talks end, Anastasiades and Akinci on December 1, 2016, after a dinner hosted by U.N. Special Adviser on Cyprus Espen Barth Eide, agreed to meet as necessary in December 2016 and early January 2017. The goal was to bridge the gaps and resolve the disagreements that existed on most issues. In agreeing to the additional meetings, both sides set a timetable that included the following: After the additional meetings, the leaders would meet in Geneva on January 9, 2017, to discuss and wrap up all pending issues, outside of territory and security. On January 11, 2017, the two sides would present their respective proposed maps for a territorial adjustment. A five-party conference with the participation of the guarantor powers would be convened on January 12, 2017, to discuss and settle both the territory issue and the future of security guarantees, paving the way for a final agreement. These new developments again reinforced the observation that Anastasiades and Akinci still felt that a final agreement looked to be achievable. Both leaders subsequently instructed their negotiators to meet regularly and agreed to meet with each other as necessary until January 9, 2017, when the negotiations would reconvene in Geneva. After the missed opportunity at Mont Pelerin, Anastasiades's decision to resume the talks was not without additional controversy. In December 2016, after the announcement that the talks would resume, the leaders of DIKO, EDEK, the Citizens Alliance, and the Greens criticized Anastasiades's decision to accept an international conference on guarantees before resolving the other issues, as he had promised. Anastasiades reportedly was accused of giving in to Akinci's demand for a five-party conference on security without having achieved any territorial adjustments. The Citizens Alliance leader, Lillikas, supposedly asked for Anastasiades's resignation. On January 9, 2017, Anastasiades and Akinci, accompanied by their negotiating teams, leaders of the major political parties, and EU representation, convened in Geneva, Switzerland, to begin what was hoped to be the final phase of the negotiations. The meeting also ushered in a new, historic element of the talks in that the guarantor nations, including Turkey, would be present at the negotiating table. For some, it was curious that Turkey agreed to go to Geneva while Ankara worked through a controversial constitutional referendum at home. Ankara had to be aware that any security concessions in which Turkey was required to withdraw its military forces or forego its right to defend northern Cyprus, at the demand of the Greek Cypriots or Greece, could have been interpreted as weakness, even as Ankara was trying to keep Iran's influence at bay and to negotiate with Moscow over Syria and with the United States over the Kurds. However, once Turkey agreed to attend the Geneva conference, the Greek Cypriots could have used any Turkish refusal to offer meaningful compromises on security and guarantees to prove that Turkey was not interested in seeking a fair solution. Ankara's decision led some to wonder if its presence at Geneva was merely intended to reinforce Akinci's earlier demands that Anastasiades agree to such a conference or to demonstrate that Turkey, despite Greek Cypriot claims that Ankara was not interested in a solution, was indeed willing to continue negotiations. However, Turkey's apparent opposition to certain territorial concessions that Akinci may have offered seemed to complicate the negotiations at a critical time. It is conceivable that Ankara's strategy to inject new complications at Geneva could have been Turkey's attempt to stall the negotiations and build international pressure on the Greek Cypriots to compromise, even on an interim basis, on Turkish troops and guarantees, which would have allowed Turkey's military a face-saving exit from Cyprus and would have reassured the Turkish Cypriots that they would still be protected. The Geneva meetings apparently began on a positive note with what was reported to be a convergence on the sticking point of a rotating presidency and even more public references to a \"United Federal Cyprus.\" Nevertheless, on January 11, 2017, when both sides presented their proposed maps for territorial adjustment to the U.N., the negotiations appeared to veer off course. Although the differences in the amount of territory each side demanded came within approximately 1% of each other, the symbolism of the differences was notable. Each side found the other's demands to be unacceptable. For instance, the Greek Cypriot map included the return of Morphou, whereas the Turkish Cypriot map did not. After failing to accept each other's territorial demands, the negotiations ran into additional problems on January 12, 2017, when the five-party negotiations convened. Ankara rejected the Greek Cypriot territorial demand and insisted that Turkey's security role in the north be preserved; Greece insisted that Turkey's security role end. Other issues, including political equity concerns expressed by the Turkish Cypriots and Turkey's curious demand that the EU's four freedoms (movement of people, goods, services, and property rights), implied in any solution, also be applied to Turkish citizens living in the north, became sticking points. Apparently realizing that the security-guarantee issue and Turkey's future role in the north would not be resolved, and with Anastasiades's rejection of the introduction of the four freedoms proposal, Turkish Foreign Minister Mevlut Cavusoglu departed Geneva. The conference ended, with some questioning why Turkey even attended the meeting. Both sides returned to Cyprus empty-handed and disappointed. Although the Geneva talks came to a surprising and disappointing end, with each side blaming the other, Anastasiades and Akinci would not let the failure to make any significant progress end the momentum for which they had been praised earlier in the conference. The leaders agreed to establish a working group of technical experts to continue ironing out differences and prepare for new meetings later in January or February 2017. That working group returned to Mont Pelerin for two days of what Greek Cypriot negotiator Mavroyiannis described as very positive discussions. Once again, Anastasiades and Akinci were unable to overcome some of the barriers that have blocked their ability to secure a final agreement. In addition, the strong statements voiced by both Greece and Turkey regarding security guarantees raised concern among some that the negotiations had, in part, been taken out of Cypriots' hands and put into the Turkey-Greece relationship. Equally important to the two sides' inability to overcome long-standing differences was the fact that political opposition to the two leaders' negotiating positions had begun to increase. Some in the opposition feared that Anastasiades had come under pressure from the international community to accept only a reduced Turkish military presence in the north and some form of right of intervention. Some complained that U.N. Adviser Eide was favoring the Turkish Cypriot view of \"reduce but not remove\" Turkish troops or security guarantees. Although opponents of the talks on both sides were invited to Geneva, four of the five major Greek Cypriot political parties took issue with Anastasiades over his positions. Akinci fared no better, with leaders of the Turkish Cypriot government apparently objecting to the map he presented. The opposition forces were so effective at making their views known that Anastasiades had to ask his detractors to calm down and Akinci asked his people to have patience. The two sides' inability to make discernable progress toward a final solution at both Mont Pelerin and Geneva underscored the difficulties of reaching agreement on both territorial adjustments and security guarantees. Turkey's injection of the four freedoms issue could have been an attempt by Ankara to stall the negotiations until after the April referendum in Turkey, while Akinci still wanted Anastasiades to step back from his reported comments that the Turkish Cypriots had to face the fact of a minority status on the island. Nevertheless, as was the case after the failure of Mont Pelerin, both sides anticipated that the two leaders' good relationship would allow negotiations to resume, at least between the Cypriots, after a short time of reflection. The talks did resume on January 27, 2017, and two additional sessions were held in the beginning of February. During that time, the discussions focused on the four freedoms issue and on how and when a possible second Geneva conference could be convened. Anastasiades continued to refuse to discuss the four freedoms and called on the EU to support his position that only the EU could make that decision once an agreement was reached and the north entered the EU. Akinci, for his part, suggested that a new Geneva conference could be held by the end of March 2017, although many thought that unlikely given the mid-April referendum in Turkey. On February 13, however, the negotiations hit a wall. That day, the Greek Cypriot parliament approved a proposal submitted by the right-wing ELAM political party to introduce an annual event in the form of a reading and discussion in public schools to mark the January 1950 referendum on enosis (the union of Cyprus with Greece). Nineteen members of parliament from five parties voted in favor of the proposal, 16 AKEL MPs voted against, and DISY MPs abstained. Akinci was livid that Anastasiades's party did not oppose the legislation and demanded that Anastasiades take action to retract the resolution. Akinci notified the Greek Cypriots that the meeting of the technical negotiators scheduled for the next day would be canceled. When the two leaders met for their regularly scheduled meeting on February 16, 2017, Akinci insisted that Anastasiades reverse the parliament's decision on a commemoration of the 1950 referendum, claiming the enosis issue underscored Turkish Cypriot concerns for their safety and security after a settlement and reinforced the argument for why Turkish troops should remain in the north. When Anastasiades reacted by trying to downplay the legislation's significance, a debate ensued. Reportedly, Anastasiades left the room for a break and, when he returned, found that Akinci had left the meeting. Both sides blamed each other for walking out of the meeting. Over the next eight weeks, no meetings were held between Anastasiades and Akinci despite efforts by U.N. Special Adviser Eide and others to jumpstart the talks. Akinci stated that he would not return to the table until the enosis issue was retracted. In an interview with Anastasiades, the president said he hoped the Turkish Cypriot side and Turkey would reconsider the suspension and return to the negotiating table but he did not expect this to happen before the April referendum in Turkey. While the talks were suspended, each side continued to blame the other for ending the negotiations, and each claimed that it was ready to resume discussions. Although Akinci and other Turkish Cypriot leaders were clearly angry over the enosis issue, some believe Akinci also was stalling on behalf of Turkey, since Ankara could not negotiate on security guarantees and troop deployments until after the vote on the constitutional referendum in Turkey. Eventually, the Greek Cypriot parliament took action to partially reverse the enosis requirement by turning the decisions over how the Greek Cypriot school system would address the historical event to the Education Ministry. Although some in the north complained that this was not enough, and many in the south complained that the government had capitulated to the Turkish Cypriots, Akinci felt Anastasiades had made the effort to diffuse the tension and agreed to return to the talks. On April 11, 2017, after eight weeks of suspended negotiations, both sides agreed to resume the talks and scheduled additional meetings throughout May. Although it is unclear whether any additional progress was made during the renewed negotiations, both sides did eventually begin to discuss the possible need for a new conference on Cyprus in Geneva that would again include the guarantor powers. However, there was prolonged disagreement over the conditions and issues to be addressed at a second conference. The Turkish Cypriots argued that Anastasiades placed preconditions on the meeting and that all outstanding issues should be tackled simultaneously. The Greek Cypriots appeared to want Geneva II to reverse the order of issues to be discussed, with negotiations on territory and security guarantees held first; if those negotiations were successful, the remaining issues in all negotiating chapters would then subsequently be resolved. Both sides agreed that a Geneva II conference would continue until all issues were resolved or until it was agreed that no solution was possible. When the talk of a \"Geneva II\" conference began to run into trouble as both sides debated whether either side was setting preconditions that had to be met before any session could be convened, U.N. Secretary-General Antonio Guterres invited both Anastasiades and Akinci to New York for a June 4 dinner discussion on the viability of a second U.N.-hosted session in Geneva. After the dinner, both sides announced that a new conference would take place beginning June 28 at Crans Montana, just outside Geneva, with the purpose of finalizing an agreement, including on security guarantees and territory. Guterres also announced that U.N. Special Adviser Eide would prepare a common document to guide the discussions on security and guarantees, after consulting with the two Cypriot sides and the guarantor nations. After leaving New York, Anastasiades traveled to Washington, DC, to meet with Vice President Pence and others to discuss expectations of the upcoming Crans Montana conference. He also appeared to be interested in seeking a U.S. commitment to speak to Ankara in support of finding the necessary compromises needed to secure an agreement. Speaking to a group at the German Marshall Fund, Anastasiades again raised the idea of creating an international police force that would provide the necessary security guarantees sought by the Turkish Cypriots until the provisions of any final agreement were fully implemented and the north was fully integrated into the EU structures. When he earlier offered this proposal, Anastasiades indicated that Greek, Turkish, or UK forces could be part of the multinational force. However, some had suggested that a possible compromise on the concept of a multinational security force could allow Turkish military police or other security forces to be part of such a force but perhaps only if those forces remained in the north and would be under operational command of a third party, such as the U.N., the United States or NATO. Following the announcement of the new conference in Crans Montana, U.N. Special Adviser Eide contacted officials of Greece, Turkey, the UK, and the two Cypriot parties to collect the \"bottom line\" positions of all sides on the security guarantee and troop level issues. Eide suggested he would discuss the outline of his findings with Anastasiades and Akinci, as well as the level of compromise each side may have been willing to entertain to reach an agreement. Eide hoped to present his document not as an official U.N. document but as a \"working roadmap\" to what the five parties would negotiate at Geneva. Presumably, Eide considered including other options for providing security, such as a multinational security force. Simultaneously, the other unresolved \"domestic\" issues would be discussed. Observers of the negotiations were relieved that both sides, along with the three guarantor parties, particularly Turkey, were willing to resume at Crans Montana what had begun at Geneva in January. Others, however, remained skeptical of what actually could be accomplished, as there appeared to be little or no change in the positions on security guarantees and troops on either side. In addition, both Cypriot sides seemed to have changed their strategies for this new conference. It seemed clear at the outset that Anastasiades wanted to reach an agreement on the elimination of Turkish security guarantees and the removal of Turkish troops first; otherwise it would likely provide little political advantage for him to reach agreement on any other issues. For Akinci, it appeared that if he could win enough concessions on issues such as political equality and a rotating presidency, and could be comfortable as a coequal partner in the future of Cyprus, he might have been able to help Turkey make the necessary concessions on security that Ankara may not have been willing to accept otherwise. In the election-charged atmosphere in Greek Cyprus, not everyone was pleased with the outcome. Anastasiades's political opponents accused him of abandoning all the preconditions he set for convening a new conference, including the debate on security and territory as a matter of priority. They also accused him of delegating to the U.N. the role of preparing a document on security, therefore giving up the Cypriot ownership of the process and placing the most crucial issue in the hands of Special Adviser Eide, who many felt had a biased attitude favoring Turkey. Before the opening session of the Crans Montana conference, controversy arose over the security-related \"roadmap\" U.N. Special Adviser Eide was preparing. In one report, Anastasiades apparently objected to some of the provisions, suggesting they were not points put forward by the Greek Cypriots and that he would not discuss the document in its current form. Eide apparently then abandoned the idea of tabling the discussion paper. On June 28, 2017, the Crans Montana conference opened, with both sides putting forward their long-held positions on security and their differences on the domestic issues. Almost immediately, and predictably, the talks became deadlocked over the security issues. The original plan for the conference called for U.N. Secretary-General Guterres to arrive in Crans Montana on June 30 to review the progress and hold additional meetings with the leaders. After arriving in Crans Montana and facing a deadlocked conference, Guterres apparently issued what was referred to as a \"non-paper\" addressing six points that he felt needed to be resolved and instructed the two sides to develop a package of proposals in response to his \"framework\" over the July 1-2 weekend. Guterres said he would return to Crans Montana if the proposals appeared to generate positive movement in the negotiations. On July 3, 2017, both sides presented their counterproposals, which they claimed represented concessions from their previous positions. Turkey insisted that security guarantees under the existing treaties be retained but appeared to offer a proposal that included the withdrawal of most Turkish military forces. A small contingent of both Greek and Turkish forces would remain and their continued deployment would be reviewed in 15 years. The Greek Cypriots insisted that the Treaty of Guarantee be abolished, that most Turkish forces be withdrawn immediately, and—although a small contingent (less than 1,000 each) of Greek and Turkish forces could initially be deployed—that there had to be a clear, short sunset date for those forces to leave. Turkish Foreign Minister Cavusoglu stated that Turkey could not accept a \"zero guarantees, zero troops\" option and apparently warned that this would be the final conference and that a settlement had to be reached. After several days of talks, little movement was achieved. It was reported that positions may have even hardened between July 3 and July 7, with Turkey insisting on a larger force to remain permanently and the Greek Cypriots withdrawing their proposal for a limited contingency force. Apparently there were also disagreements on several of the governance issues, such as the rotating presidency, the return of the town of Morphu to Greek Cypriot administration, and the rights of former and current owners of property located in the north. On July 7, 2017, U.N. Secretary-General Guterres acknowledged the failure of the negotiations to reach an agreement and announced that the conference would be closed. Guterres indicated that Special Adviser Eide would present a summary report to the Secretary-General and that the Secretary-General would issue a final assessment later in the year. Secretary-General Guterres's proposed \"framework\" set out six points for discussion. On security , the Guterres paper seemed to suggest that both sides \"must begin to recognize that in Cyprus a new security system was needed and not a continuation of the existing one.\" On t roops , Guterres suggested \"that there should be a rapid reduction from the first day, gradually decreasing within an agreed timetable to numbers that would be in line with the old Treaty of Alliance: 950 Greek officers, non-commissioned officers and men, and 650 Turkish officers, non-commissioned officers and men.\" On territory , Guterres's document says the Turkish Cypriot side needs to adjust the map to address some concerns of the Greek side. On equality , the framework seems to suggest that Turkish nationals living on Cyprus should have a quota that is equitable and that a further discussion is needed on what \"equitable\" means. On property , the framework suggests that in areas that would be returned to Greek Cypriot administration, the rightful owner would have preferential treatment, but not 100%. In areas that would remain under Turkish Cypriot administration, preferential treatment would be given to current users, but not 100%. And finally, on p ower sharing , Guterres suggested that the issue needed to be discussed further, particularly on the issue of the rotating presidency. On September 28, 2017, Guterres issued his report. While offering a fairly positive assessment of the level of \"convergences\" both sides had made on each of the six negotiating chapters, his assessment seemed to indicate that only the economic chapter may have been ready to be closed, while the others still had issues to be worked out. In his conclusion, Guterres stated, \"I am convinced that the prospects of finally pushing this process 'over the finishing line' will remain elusive without the strongest of political will, courage and determination, mutual trust and a readiness on the part of all parties to take calculated risks in the last and most difficult mile of the negotiations.\" In the end, he said a \"historic opportunity was missed.\" Guterres, however, reiterated that the U.N. would be available to continue to host future discussions, if and when both sides were ready. In stating their assessments of the conference, both Cypriot sides blamed each other for refusing to make concessions. The Greek Cypriots and Greece also placed blame on Ankara. President Anastasiades indicated that he was ready to resume the negotiations, and, despite Guterres's assertion that this was not the end of the road, several news outlets reported that comments by Turkish Foreign Minister Cavusoglu suggested a Turkish decision to abandon the U.N. framework (bizonal, bicommunal federation) as a solution to the Cyprus problem and to move on to a \"Plan B.\" Several in the Turkish Cypriot government also echoed the theme that negotiations under the current U.N. structure were over. Others pointed out that Akinci may have suggested that the solution of a federation was not possible and that the Turkish Cypriot community would continue to improve its international relations with Turkey's assistance.  On August 5, 2017, it was reported that in a speech, Akinci suggested that the only solution now may be for two separate states to exist as neighbors, both in the EU. In a late September meeting at the International Republican Institute in Washington, then-Turkish Cypriot \"foreign minister\" Tashsin Ertugruloglu stated that the Turkish Cypriots have moved on to a new view that any future negotiations must be based on two states, and that a solution could only include a confederation. More interesting for some at the meeting was Ertugruloglu's suggestion that he could envision establishing an autonomous republic where the Turkish Cypriots would leave authority on foreign affairs and defense to Turkey while the Turkish Cypriots would self-govern internally. Ertugruloglu's comments were met with a good deal of opposition in Cyprus, including from some Turkish Cypriots. The suspension of the negotiations in July 2017 carried over into 2018 (referred to as a period of reflection) as both sides prepared to hold national elections. The 2017 introduction in the Greek Cypriot parliament of the controversial proposal to recognize the 1950 enosis referendum by several opposition political parties posed a serious challenge to Anastasiades and the negotiations. When the election campaign began, some observers felt Anastasiades could again come under a good deal of pressure from his presidential opponents for his failure to gain an acceptable outcome at Crans Montana and his role in squelching the enosis effort. Some believed that entire episode raised the issue of trust with Akinci. During the election campaign, negative views about the negotiation framework were expressed by several Greek Cypriot presidential candidates who questioned the continuation of the goal of a bizonal, bicommunal, federal solution. Many in the north who once looked favorably on Anastasiades's efforts to seek a solution began to feel that the election campaign would leave Anastasiades little room to argue for a settlement if he were reelected. Anastasiades was reelected president after a second round of voting. Unlike when Anastasiades was first elected as a pro-Annan Plan leader, however, this time many Turkish Cypriots, including Akinci, apparently did not anticipate much of a change in the positions Anastasiades had taken during the negotiations. Akinci then stated that the negotiations could not resume under the same U.N. parameters that existed before the collapse of the talks, which he believed had yielded little return. Akinci raised the issue of political equality and demanded a deadline as preconditions for the resumption of talks. Most observers believed the bizonal, bicommunal approach was still valid, but it was unclear whether the new framework raised by Akinci meant a simple review and public agreement on how both sides defined a bizonal, bicommunal federal solution or whether Akinci had begun to shift to a looser \"confederation\" approach with two separate states. It also was unclear how existing U.N. parameters could be changed. Immediately after the elections in the south, parliamentary elections took place in February 2018 in the north. The election outcome resulted in a new four-party coalition government that some believed would likely be more supportive of Akinci's efforts to renegotiate a new approach to a solution with Anastasiades than the previous government, which was led by those opposed to an agreement or skeptical that an acceptable agreement could be achieved. The new government included two former Turkish Cypriot negotiators, Ozdil Nami (the most recent negotiator) and Kudret Ozersay. The negotiations, however, did not resume immediately after the elections. Anastasiades restated his readiness to restart negotiations and invited Akinci to meet with him informally to discuss the road ahead. Akinci signaled his intention to meet with Anastasiades but only to try to determine exactly what Anastasiades wanted to negotiate and how long it might take. Akinici reiterated his view that the framework of the negotiations had to change. In the interim, tensions over the issue of energy resources spiked, forcing both sides to delay any new meeting. During March and early April 2018, as both sides struggled over the issue of resuming negotiations, they seemed to consider the idea that any new negotiations should begin with the governance issues. In an April 2018 interview in Politis , Greek Cypriot negotiator Mavroyiannis admitted there were differences in every negotiating chapter but that the Greek Cypriot side had accepted the effective participation of the Turkish Cypriots in a council of ministers, the parliament, an equally divided senate, and the judiciary. Mavroyiannis also suggested the Greek Cypriots could accept a rotating presidency, but only with a single ticket and weighted voting. Akinci suggested that the issue of a rotating presidency, among others, had not been resolved. On April 16, 2018, the two leaders sat down over the course of three hours of meetings and dinner, hosted by the U.N., to discuss the road ahead for the negotiations. Expectations were low, and after the meeting both sides acknowledged that no progress had been made with respect to changes in positions or if and when the negotiations would resume. Each side suggested the other needed a change in attitude for any new negotiations to be successful. In May 2018, Akinci, despite his earlier comments regarding a new format for the talks, suggested negotiations could possibly resume from where they left off at Crans Montana if both sides agreed to adopt as a strategic agreement the six-point framework presented by U.N. Secretary-General Guterres on June 30, 2017. Anastasiades rejected a strategic agreement approach, and both sides broke into an extended disagreement over which Guterres document of July the other side was referring to as the framework to be used. Some observers, however, believed that if resuming the talks where they left off at Crans Montana meant starting with the security issues, then the talks were unlikely to resume. Other issues also complicated the talks' resumption. In April 2018, Turkish Foreign Minister Cavusoglu visited the north and suggested the Turkish Cypriots consider negotiating for a \"confederation\" of two equal states instead of a federation. In May, Cavusoglu again stated that the talks should shift to a confederation or even a \"two-state\" approach. Akinci apparently did not embrace this approach, and the Greek Cypriots rejected it outright, arguing that it did not fall within the agreed framework of a bizonal, bicommunal federation. In an attempt to assess the two sides' interest in resuming the negotiations and break the stalemate, U.N. Secretary-General Antonio Guterres in July 2018 appointed Jane Holl Lute as his new special adviser to Cyprus. Lute's mission was to consult not only with the two Cypriot leaders but also with Athens, Ankara, and London to assess their perspectives on the future of the Cyprus problem and to determine if sufficient conditions existed for the negotiations to resume. It was unclear why U.N. Representative Elizabeth Spehar's earlier meetings with both leaders could not have helped the Secretary-General make a determination on both sides' political will to restart the negotiations. Nevertheless, Lute conducted a first round of consultations and presented her report to the Secretary-General in September 2018. Lute apparently found some positive aspects but no clear indication that the two sides were ready to resume the negotiations. At the U.N. General Assembly session in September, Guterres met with both Cypriot leaders but apparently found no changes in what Lute had reported. Guterres then submitted a report of Lute's findings to the Security Council. The Secretary-General's report did not break any new ground and essentially restated the option that his July 2017 six-point \"framework\" presented at Crans Montana should be used as the starting point. The Security Council recommended that the U.N. not abandon the negotiations, if possible. At the time, observers, despite what they may have believed were less-than-optimal conditions for resuming the negotiations, likely assumed that neither Cypriot leader was willing to walk away from the negotiations or that the Secretary-General had not foreseen any potential new hurdles to the eventual resumption of talks. With no apparent progress and little leverage, Guterres suggested that both sides, despite the most recent one-year \"period of reflection,\" take another time-out to consider a comprehensive negotiating plan and be ready to negotiate a solution when the U.N. felt the time was ripe to host the talks once again. In mid-October 2018, Anastasiades and Akinci agreed to meet informally to discuss the possible road ahead. Although they could not find common ground on which to restart the talks, Secretary-General Guterres saw a new opportunity to move the process. He ordered Lute to follow up on the Anastasiades/Akinci meeting and conduct yet another round of consultations with the two Cypriot leaders and the three guarantor countries. This time, however, the Secretary-General tasked Lute to determine during her consultations whether there were grounds for the two leaders to accept what Guterres referred to as a \"terms of reference\" document that would include his original 2017 six-point framework, those issues on which both sides previously agreed \"convergences\" had been reached, and a road map for when and how new negotiations would be launched. Lute was given until the end of December 2018 to meet with the principals and construct the terms of reference document. Some thought Lute's deadline was too ambitious, as it was unclear, despite having the Guterres framework for over a year, whether either side would agree to the provisions of the six-point framework (both had expressed objections to parts of it in the past) or whether both sides, despite years of negotiation, could agree on what constituted previous convergences. Observers noted that it took Anastasiades and Eroglu almost nine months in 2013-2014 to reach an agreement on a simple joint statement defining a set of negotiating goals or outcomes that both sides would strive to achieve once they restarted the talks. Some observers also suggested that both Cypriot leaders may have been wary of agreeing to the Guterres terms of reference process, as any agreed document could be interpreted by some as coming close to an interim agreement. Thus, from the beginning, finding agreement as to what would constitute the document was to be a major challenge for Lute. At the same time, and for reasons that remain unclear, in fall 2018 Anastasiades surprised many by publicly suggesting consideration of an undefined, \"loose,\" or \"decentralized\" federation in which the two constituent states that would emerge under such a federation would have more powers than what had been discussed previously. Anastasiades also has suggested holding a conference in Cyprus to discuss the various parameters of his idea of a decentralized federation. In addition, some reports indicated he was not ruling out discussion of a confederation, which led several of Anastasiades's political opponents to suggest he was even considering a two-state solution. Some Turkish Cypriots expressed skepticism of Anastasiades's suggestion of a decentralized federation, seeing it as either a delaying tactic or a way to reach a settlement without giving the Turkish Cypriots the political equality they sought at any federal level. After Lute concluded her second round of consultations with all parties in mid-December, it apparently had become clear, once again, just how difficult this approach had become. Lute concluded she would have to return to the island in early January 2019 for further consultations. Lute's plan upon returning to Cyprus was to ask the two leaders to review her proposed ideas for a terms of reference document and agree to these terms as the basis upon which new negotiations would begin. It was clear that such an agreement would be difficult to achieve, and in fact Lute's return in early January was short-lived, as no agreement was reached. In April, Lute once again travelled to the island to gauge whether her consultations should continue and to determine the possibility of restarting the negotiations. When she arrived on April 7 she found an adamant Akinci insisting that restarting the formal negotiations could not happen until Turkish Cypriots achieved political equality, demanding that on all issues addressed at the federal level, at least one positive Turkish Cypriot vote would be necessary for the issue to go forward. Anastasiades rejected the idea that a positive Turkish Cypriot voted would be needed for all issues, claiming such a requirement could result in gridlock, but apparently did concede that on certain issues, he was willing to consider such a requirement. For his part, Anastasiades resurrected an older concept of creating a mixed presidential/parliamentary system of government at the federal level that would include a president, who would be a Greek Cypriot, and a prime minister that would rotate between the two communities. Akinci rejected that proposal and criticized Anastasiades for backtracking on agreed \"convergences\" by dropping the idea of a rotating president, and for his unwillingness to accept the Turkish Cypriots as coequal partners in government. Other Turkish Cypriot political leaders criticized the proposal as creating a Greek Cypriot state. For Lute, four failed attempts to have both sides agree to a terms of reference document that she could present to Secretary-General Guterres as a starting point for resuming the negotiations lead some to note that resuming the negotiations was apparently no closer to being achieved than it was in June 2018. Throughout much of the recent history of the Cyprus negotiations, both sides have periodically reported that various levels of convergences had been reached, mostly on the issues of EU affairs, governance, economics, citizenship, and how to resolve and compensate for disputed property. As intensely as the Cyprus negotiations have been followed in the press and by outside observers, it has always been difficult to determine with any specificity exactly what either side means by the term convergences when referring to agreements on the issues under negotiation. The negotiations are conducted under the principle that \"nothing is agreed until everything is agreed\"; thus, the term convergences has been used to describe likely agreement without admitting that agreements have actually been reached until all issues have been resolved. In his April 1, 2010, press conference, former Turkish Cypriot leader Talat stated that 31 \"joint documents\" had been prepared addressing a range of issues. It appeared that both sides agreed in principle that the new federal government would have powers over external relations, EU policies, citizenship, budget matters, and economic coordination. Within these, for instance, was apparently an understanding that one side would hold the portfolio of the foreign minister and the other side would hold the EU portfolio. Still another point had the equal constituent states covering most of the remainder of the governance issues. These convergences seemed to have been written into the later 2014 joint statement between Anastasiades and Akinci. It also appeared that the two sides had agreed on a Senate, equally represented, and a House proportionally represented based on population. There was also reportedly a convergence on a new judicial court that would have equal Turkish and Greek Cypriot representation and an agreement that Cyprus would be represented in the European Parliament by four Greek and two Turkish Cypriot members of parliament. A federal supreme court also was identified in the joint statement. Apparently, on April 15, 2018, in an interview in the Greek Cypriot Politis , Greek Cypriot negotiator Mavroyiannis confirmed that many of these convergences had been reached. When Anastasiades and Akinci began their negotiations, it was not clear specifically what the starting point of the negotiations had been beyond the joint statement issued in 2014. Eroglu apparently drew some pretty strong red lines around some issues, and Akinci initially had not appeared, at least publically, to have adopted or refuted any particular positions advocated by Eroglu, although many expected that to happen on some issues. Although reports out of Cyprus by the end of 2016 suggested that more than 90% of the governance, power sharing, economy, and European Union issues had fallen under the term convergences, other reports indicated that many technical issues remained unresolved. In his September 2017 report on his mission of good offices in Cyprus, U.N. Secretary-General Guterres appeared to reaffirm that these convergences had been reached. One issue both sides continued to differ over was how a new, united Cyprus would be created. The Greek Cypriots assumed that the new unified state would evolve from the existing Republic of Cyprus. The Turkish Cypriots wanted the new state to be based on two equal \"founding states.\" Eroglu had reiterated that he was not prepared to give up the TRNC. The Turkish Cypriots also wanted the new entity referred to as something other than the \"Republic of Cyprus.\" The joint statement agreed to by Anastasiades and Eroglu in 2014 simply referred to a \"united\" Cyprus, not a united \"Republic of Cyprus.\" The Anastasiades/Akinci talks initially seemed to suggest that the new entity could be referred to as something such as the \"Federal or United Republic of Cyprus,\" but it was unclear how the two sides would get there. In mid-December 2015, Anastasiades stated that \"no one was aiming to abolish the Republic of Cyprus,\" rather \"what we are pursuing is the evolution of the Republic of Cyprus into a bizonal, bicommunal federation.\" In public statements, including in Washington in summer 2016, then-Turkish Cypriot \"foreign minister\" Ertugruloglu and others suggested that no agreement could be signed between the leadership of a \"Republic of Cyprus\" and the leader of the Turkish Cypriot \"community.\" For Ertugruloglu, it appeared that sovereign equality was not the same as political equality, suggesting that the Turkish Cypriots could not accept an agreement unless it was signed by two equal sovereign leaders, implying that recognition of the Turkish Republic of Northern Cyprus was a requirement for a final agreement. In response, then-Greek Cypriot government spokesman Nicos Christodoulides said under no circumstances can \"the regime in the occupied areas be upgraded since it is the product of an illegal action.\" In late 2016, as both sides talked about convening a five-party conference to settle the issue of security and to sign a new agreement, controversy erupted over whether the Greek Cypriots would be represented as the republic. Anastasiades stated that the Republic of Cyprus, as a signatory to the Treaty of Guarantee, had to be represented at the conference. During the Geneva talks in January 2017, the term \"United Federal Cyprus\" appeared in numerous references to the federal entity that would be created by an agreement. In addition, the Turkish Cypriots apparently also raised the idea that political equality had to include equality for Turkish Cypriots in the new federal entity and that they could not accept a \"minority\" status or representation in any new federal entity. More recently, the Turkish Cypriots championed the concept of \"effective participation,\" meaning that on any decision taken at the new federal level, there would have to be at least one positive Turkish Cypriot vote in favor of the decision for that decision to take effect. Anastasiades suggested this would effectively give the Turkish Cypriots a veto over every decision that its representatives did not agree with. When the Crans Montana conference began, it appeared that Anastasiades and Akinci may have worked out an understanding on both the issues of political equality and effective participation, but such a convergence was not made public. In April 2018, Anastasiades appeared to have suggested that codecision could not be accepted. Since then, Akinci has continuously demanded agreement on political equality for the Turkish Cypriots, suggesting this issue remains unresolved. One highly sensitive issue under the governance chapter involves that of a rotating president and vice president for an elected term. The Greek Cypriots reportedly had proposed the direct election of a president and vice president on the same ticket with weighted cross-community voting for a six-year term. The president would be a Greek Cypriot for four years, and the vice president would be a Turkish Cypriot; they would then rotate offices, with the Turkish Cypriot becoming president for two years. Turkish Cypriots initially proposed that the executive have two alternating presidents elected by the Senate. Turkish Cypriots were opposed to a single list of Greek Cypriot and Turkish Cypriot candidates to be elected by all of the people of Cyprus principally because Greek Cypriots, by virtue of their majority, could in effect elect the Turkish Cypriot candidate of their preference. At some point, former Turkish Cypriot leader Talat seemed to have made a significant concession in agreeing to accept the Greek position for the election of a president and vice president but only with a weighted cross-community system to address the Turkish Cypriot concerns over the power of the Greek Cypriot majority to elect the Turkish Cypriot candidate, even though he continued to have doubts about direct popular voting. Although the idea of a rotating presidency was not new, opposition to the proposal was, and continues to be, vocal on the Greek Cypriot side, as many Greek Cypriots apparently could not accept the idea of being governed by a representative what many believe is still the Turkish Cypriot minority. It had been reported that in July 2014, Anastasiades retreated on the notion of a rotating presidency, proposing the old idea that future presidents be Greek Cypriots and future vice presidents be Turkish Cypriots elected directly by all voters. The Turkish Cypriots rejected the proposal. Akinci, in early August 2016 and subsequently on numerous times, suggested that a rotating presidency elected with weighted voting was a must in order to have political equality. Although a rotating presidency would apply only to the federal entity and would have limited authority over the daily lives of most citizens in either community, several Greek Cypriot political parties continue to oppose the concept. Greek Cypriot Archbishop Chrysostomos stated his opposition to a rotating presidency, saying that no population of only 18% should be permitted to elect the president. During the Geneva conference, it was reported that a five-year rotating presidency would be created with the Greek Cypriots holding the office for approximately a little over three years and a Turkish Cypriot for just under two years. However, other iterations of the convergence also had arisen. It was reported that at Crans Montana, Anastasiades had held out a concession on the rotating president in return for a Turkish concession on security guarantees. In April 2018, Akinci reiterated that the issue of a rotating presidency had not been resolved and was an absolute requirement on a 2:1 basis. Akinci stated that Anastasiades had not reconciled this matter with the Greek Cypriots. The presidency, however, was only one of several sticking points. For instance, the question of which community would hold the portfolio of foreign minister and how external policy would be made also was controversial, as both sides hold different views on, for instance, Turkey. It also was unclear how a new Turkish Cypriot state could maintain traditional ties to Ankara or the Greek Cypriot state could maintain ties to Athens in light of long-held hostility toward both Greece and Turkey. The thorny and emotional issue of property had been the focus of a significant debate between by Anastasiades and Akinci. As a result of the ethnic strife of the 1960s and the deployment of Turkish military forces on the island in 1974, it was estimated that over 150,000 Greek Cypriots living in the north were forced south and close to 50,000 Turkish Cypriots living in the south fled to the north, with both communities leaving behind large amounts of vacated property, especially in the north. Greek Cypriots had long insisted that the original and legal owners who lost properties in the north must have the right to decide how to deal with their property, whether through recovery, exchange, or compensation. Turkish Cypriots believe that the current inhabitant of a property must have priority and that the issue should be resolved through compensation, exchange of alternate property, or restitution. To try to help resolve some of the property issues, the Turkish Cypriots established the Immovable Property Commission (IPC) to hear cases related to Greek Cypriot property claims in the north. The Greek Cypriots initially rejected the IPC. Only a few private Greek property owners have filed claims for compensation with the IPC, and funding for the IPC has become controversial in the north. Although the gap in the respective Cypriot positions on property had been wide, it appeared that positive movement had been achieved by 2017. In July 2015, Anastasiades and Akinci seemed to agree that former property owners would be offered various choices regarding their claims that would allow all involved to be fairly compensated. For the Turkish Cypriots, however, only a limited number of Greek Cypriots would be permitted to return to or take actual ownership of their properties. However, it appeared that any settlement might involve between €25 billion and €30 billion, a price tag the new \"federal\" entity might not be able to afford. At Crans Montana, U.N. Secretary-General Guterres's six-point framework proposed that in areas that would be returned to Greek Cypriot administration, the rightful owner would have preferential treatment. In areas that would remain under Turkish Cypriot administration, current users would have preferential treatment. The question of overall territory that would come under the jurisdiction of the two equal states remains in dispute. The Turkish Cypriot side of the \"green line\" currently includes approximately 37% of the island and includes several areas that had been inhabited almost entirely by Greek Cypriots before the 1974 division, such as Varosha, Morphou, and Karpas. Greek Cypriots have long wanted all of that territory returned, which would leave the Turkish Cypriot side controlling about 28% of the territory. At the time, Christofias resurrected an older proposal that would have the Turkish side return the uninhabited city of Varosha to Greek Cyprus in exchange for opening the seaport of Famagusta for use by the Turkish Cypriots to conduct international trade. The port would be operated by the EU and a joint Greek/Turkish Cypriot administration, thus allowing direct trade between northern Cyprus and the EU. The European Parliament declined to consider an EU Commission initiative to permit direct trade on technical grounds, but its 2011 report on Turkey's EU accession progress (introduced in parliament in 2012) called for that very trade-off offered by Christofias. After the 2013 Greek Cypriot elections, President Anastasiades resurrected the proposal in the form of a \"confidence-building\" measure to test the sincerity of the Turkish Cypriots and Turkey to move forward in the negotiations. In early August 2014, it was reported that Anastasiades had upped the ante by suggesting that no agreement could be reached unless the town of Morphou was also returned to the republic. The Turkish Cypriots quickly rejected the idea, saying the town would not be returned. After Turkish Cypriot leader Akinci took office, Anastasiades again included the Varosha/Famagusta option as a confidence-building measure. As in the past, Akinci rejected the return of Morphou as part of a final settlement. Understanding the sensitivity of this issue for both leaders, Akinci had suggested that the discussions of territorial adjustments be held off the island and away from potential leaks that could set off a firestorm of protests from either side. At the November 2016 meetings at Mont Pelerin, Switzerland, the two sides agreed to discuss three issues regarding territory: percentage of land to be administered by each constituent state, the number of Greek Cypriots who would be allowed to return to the new territories given back to the Greek Cypriots, and the shoreline. Following Mont Pelerin, both sides, in agreeing to meet in Geneva in January 2017, agreed to present maps indicating their proposals for a territorial adjustment. As noted, the Turkish Cypriots administer approximately 37% of the island. At Geneva, the Greek Cypriots proposed long-standing views that the boundaries be redrawn such that the Turkish Cypriots would control approximately 28.2% of the island and that some 90,000 displaced Greek Cypriots could return to those areas gained back by the Greek Cypriots. Some of the territory—such as the cities of Verosha, parts of Famagusta, and Morphou—would come under direct control of the Greek Cypriots whereas other areas that once had large Greek Cypriot populations would either come under control of the Greek Cypriots or become \"enclaves\" under the administration of the new federal government. The Greek Cypriots also wanted additional shoreline along the east coast of the island, including part of Karpas. The Turkish Cypriots insisted on controlling at least 29.2% of the island, with as straight of a border between the two constituent states as possible; no enclaves; and only 65,000-72,000 returning Greek Cypriots. The Turkish Cypriots also expressed a willingness to meet the Greek Cypriot demand for more shoreline, but only if the new shoreline territory was made into state parks so that no new Greek Cypriot communities could settle in those areas. On all three points, the leaders failed to reach an agreement at Mont Pelerin and again in Geneva in January 2017. For the first time at Geneva, both sides had presented maps outlining the territorial concessions they were prepared to make. However, when the Turkish Cypriot representatives rejected the return of Morphou, which was included in the Greek Cypriot map, and insisted that additional territory, including the area of Kokkina, be added to Morphou and remain under Turkish Cypriot jurisdiction in exchange for Verosha and parts of Famagusta, the discussions broke down. Both sides apparently withdrew their maps. At Crans Montana, it was reported that Akinci appeared willing to return part but not all of the town of Morphu to the Greek Cypriots but that Akinci wanted to retain additional territory that the Greek Cypriots had requested be returned. In July 2010, President Christofias, seeking to unlock the stalemate on territory, tabled a citizenship proposal that would have linked property, territory, and the number of citizens permitted to reside in the north into one agreement. The offer included an agreement to allow 50,000 mainland Turks who had settled in the north to remain in the north. Eroglu had indicated that any final solution could not result in significant social upheaval in north Cyprus, meaning that significant numbers of citizens of the north, whether from the mainland or not, could not be forced to leave, and only a small number of Greek Cypriots would be permitted to return to property in the north. Eroglu rejected the offer from Christofias, stating that \"no one on Cyprus is any longer a refugee\" and that sending mainland Turkish settlers back to Turkey was not something he could agree to. Eroglu had also reiterated in his talks with Anastasiades that the number of mainland Turks who had settled in the north and who would be allowed to remain on the island would have to be higher than previously discussed. After the joint statement was agreed to in February 2014, Turkish Cypriot representatives were reported to have stated that no citizens of the north would be required to leave the country. In a talk given at the Woodrow Wilson Center in Washington, DC, on February 28, 2014, the then-Cyprus ambassador to the United States speculated that a resolution of the Cyprus problem could conceivably allow for mainland Turks, who came to the island as long ago as 40 years and had established clear roots in the north, to remain on the island. Akinci, perhaps not wishing to antagonize what had become a majority of the population in the north, initially stayed away from this issue. However, apparently through the negotiations he and Anastasiades may have agreed to at least set population sizes in both of the \"constituent\" states that would emerge as part of an agreement. The population for the Turkish Cypriots was apparently set at 220,000, although Akinci seemed to want another 50,000, while the Greek Cypriot population would be approximately 802,000. This ratio, while including a sizable number of mainland Turks who have since become citizens in the north, would be close to the ratio of the island's population in 1960. Nevertheless, several of the Greek Cypriot political parties appear to remain opposed to any agreement that would allow a large number of \"settlers\" to remain on the island. In the summer of 2016, there were reports that Ankara had wanted the Turkish Cypriot government to speed up the process of \"citizenship\" for more of the mainland Turks living in the north. In August, some news accounts in the media claimed that the Ozgurgun government was trying to rush citizenship for around 26,000 additional mainland Turks before a final agreement was reached. Greek Cypriot political parties jumped on the news and claimed Ozgurgun was trying to sabotage the negotiations. In January 2017, it was reported that Turkish Deputy Prime Minister Turkes stated that there were some 300,000 Turkish Cypriots in the north so the population sizes of the two constituent states would have to be adjusted. In May 2017, Anastasiades reportedly told a meeting of the Greek Cypriot National Council that Akinci had retreated from previous convergences, including accepting a 4:1 ratio of populations. In his September 2017 report to the Security Council, Secretary-General Guterres stated that the \"sensitive issue of citizenship, with its links to other key aspects, including the exercise of civil and political rights in the future united Cyprus, was almost completely concluded, with only certain details left to be agreed.\" Next to the property and territory issues, the issues of security guarantees and Turkish troop deployments continue to be the most difficult bridges to cross. These issues became real stumbling blocks as the two sides met in Geneva in January 2017 and at Crans Montana in July 2017, and they resulted in the collapse of both meetings. The Greek Cypriots long have argued that all Turkish military forces would have to leave the island, beginning immediately after an agreement was adopted. They argue that the U.N. or the EU can offer security guarantees to all citizens in the two member states. Therefore, once the entire island became part of the EU, the Greek Cypriots see no reason for guarantees from third countries, such as Turkey, Greece, or the United Kingdom. By contrast, Turkish Cypriots and Turkey long had maintained that the 1960 Treaties of Guarantee and Alliance must be retained in some form in any settlement, because, without guarantees, the Turkish Cypriots would feel insecure based on their history with ethnic violence on the island in the 1960s. They continuously point out that the U.N. had forces on the island even before the 1974 violence that were unable to prevent the military coup against the Makarios government or to protect the Turkish Cypriot population. They argue that the Greek Cypriots maintain a 12,000-man, fully armed National Guard, while the Turkish Cypriot security forces are smaller and less well equipped and have to rely on the presence of the Turkish military for security. Eroglu had stated on several past occasions that \"the security guarantees with Motherland Turkey could not be changed.\" After the February 2014 joint statement was agreed to, it was reported that Eroglu had again stated that Turkish troops would not leave the island. It remained unclear for a while whether Akinci held the traditional Turkish hard line. He clearly did not want to antagonize Ankara over this issue by going too far into the negotiating process without including Turkey, but he also appeared to have not gone out of his way to focus on the issue. Some suggested that Akinci, while not wanting to abandon the Treaty of Guarantee altogether, may have been willing to adjust the provisions regarding when or under what pretext Turkey could intervene in northern Cyprus in the future and to include the gradual withdrawal of most Turkish military forces, leaving only a small garrison on the island. In one August 2016 news article, it was suggested that Anastasiades had put forward the option that a multinational police force, made up of U.N. or EU personnel with some Turkish police, could be created to support the new federal entity. The Turkish Cypriots and Turkey rejected the idea. In the lead-up to the Mont Pelerin and Geneva conferences, most of the public demands for continued Turkish security guarantees and military presence in the north came from former \"foreign minister\" Ozgurgun and others in the Turkish Cypriot government who had stated that no agreement could be accepted without the guarantees. Ozgurgun reportedly stated that in conversations with Akinci, he was assured that Turkey must continue to play a role in the security of the north. Nevertheless, as the negotiators at Geneva opened the security guarantees \"chapter,\" the rhetoric increased. Greek Cypriots, and Greece, continued to insist that no guarantees were necessary and, on their part, no agreement could be accepted that would allow Turkey to intervene on the island or to retain a military presence there. In April 2016, the Greek foreign minister reportedly suggested that no final agreement on Cyprus could be achieved until all Turkish military forces agreed to leave the island. With the two sides dug in, compromise seemed unrealistic. Once formal talks on security were begun in late fall 2016, both Cypriot sides appeared to soften their positions. In November 2016, Athens and Ankara agreed to begin bilateral discussions over the future of the guarantees in advance of a meeting between the respective prime ministers and any five-party conference on the issue. According to some sources, although Turkey appeared willing to discuss a revised agreement on security, Ankara initially did not want to discuss the abolition of the guarantees or the complete withdrawal of the Turkish troops from Cyprus. Ankara apparently raised the idea of the establishment of a military base in the north and suggested that the timetable for the reduction of the Turkish military on the island could be 10-15 years. The Greek Cypriots would not accept such provisions but reportedly may have proposed that a small contingent of Turkish troops could remain, but only for a short period of time. At Geneva, Turkey, clearly keeping in mind the fate of its own constitutional reform referendum in April, took a hard line on the issues of continued Turkish security guarantees and troops on the island. The Greek Cypriots and Greece took a similar hard line in opposition to Turkey's continued presence. Apparently, at Geneva, Anastasiades reoffered his proposal for an international police force, this time, however, noting that Greek, Turkish, or UK forces would not be part of that multinational force. Turkey and the Turkish Cypriots rejected the idea again. Russia and others also suggested that the U.N. Security Council could serve as the initial guarantors of security, but that too was brushed aside. At Geneva, the EU was fully represented by the Commission President and the High Representative for Foreign and Security Policy, with each offering assurances that any solution could be adequately implemented and enforced by the EU. Nevertheless, the EU was not able to convince either Ankara or the Turkish Cypriots that it could guarantee the security and fair treatment of the Turkish Cypriot community, even though the north would become fully integrated into the united Cyprus under EU law. The lack of any appreciable progress on the security issue, in part, resulted in the January 12, 2017, session in Geneva being cut short without a resolution. The February 2017 dispute over the introduction of the enosis legislation in the Greek Cypriot Assembly (see above) led Akinci to complain that the enosis issue underscored Turkish Cypriot concerns for their safety and security after a settlement and reinforced the argument for why some level of Turkish troops should remain in the north as well as the need for some type of guarantees for Turkey to assist the Turkish Cypriots, if conditions changed on the island.  During the suspension of the talks between February and April 2017, U.N. Special Adviser Eide was reported to have been working out the details of some kind of bridging compromise between the two positions on security as a way to move the talks forward until after a solution was agreed and implementation begun. When the two sides announced that a new conference would be held in late June 2017 at Crans Montana, it was also revealed that Eide would prepare a security \"roadmap\" from which all five parties could negotiate. The Eide proposal would not be issued as a formal U.N. proposal but as a working paper that would outline the various positions each side had taken on the issue of security guarantees and the possible compromises that could be accepted. Although Eide consulted with the guarantor parties and the two Cypriot leaders, Anastasiades apparently objected to parts of the Eide document and the paper was not presented. At Crans Montana, the same security issues quickly forced the negotiations into deadlock. Although Turkey appeared ready to discuss the removal of most of its troops after an agreement was reached, Ankara rejected any \"zero troops, zero guarantees\" option and insisted on maintaining a small contingent of forces on the island for at least 15 years, when the issue would be revisited. Turkey refused to agree to any changes to its right to intervene in the north, although the Turkish Cypriots appeared to indicate some flexibility by Ankara on this as the presence of a contingent of Turkish military forces on the island could be used to respond to any problems incurred by the Turkish Cypriots during the implementation of an agreement. The Greek Cypriots and Greece held to their positions that the Treaty of Guarantee be abolished, although Greece suggested a new \"treaty of Friendship\" between Greece, Turkey, and Cyprus, which apparently would allow for consultations on complaints that implementation of the agreement was not being fulfilled from either Cypriot side. Greece and the Greek Cypriots again insisted that all Turkish troops be withdrawn from the island, although Anastasiades may have appeared ready to accept a small contingent of Turkish troops to remain on the island but only if that provision included a date for the final withdrawal of the remaining Turkish troops. The Crans Montana talks clearly proved that the differences between the two sides on these two security issues had become too high a barrier to be the starting point, or focus, for any new round of negotiations. For many, these issues should be reserved until all the outstanding governance issues have been resolved and an international conference on security can be established again. By July 2018, it appeared that both sides had set the need for concessions regarding the security-related issues as a precondition for resuming the talks. The Greek Cypriots once again insisted that Turkey change its position on retaining troops and security guarantees, and the Turkish Cypriots and Ankara have argued that Anastasiades drop his \"zero troops, zero guarantees\" position. In mid-December 2018, when U.N. Special Adviser Jane Holl Lute met with Turkish Foreign Minister Mevlut Cavusoglu, he reportedly said that those who dream of zero guarantees and zero troops should let it go, as such a thing will never happen. The introduction of the issue of energy resources resulted in yet another complication in the talks and has stalled the negotiations at times. The energy dispute has led to accusations, threats, and further distrust between the republic, the Turkish Cypriots, and Ankara. Initially, some observers thought the energy issue could have become a rallying point for stepped-up and hopefully successful negotiations in which both sides would enjoy the economic benefits of the newly found resources. However, the atmosphere quickly became poisoned. For some, the energy issue has become not only another lost opportunity but also the issue that has doomed the talks altogether. For the Greek Cypriots, exploiting energy resources offered a potential financial windfall that could help the Cypriot economy and establish Cyprus as an important energy hub for Europe. The Turkish Cypriots, arguing that the energy resources belonged to all of Cyprus, feared the loss of significant revenue to their economy as long as the Greek Cypriots refused to include them until a solution to the division of Cyprus was concluded. For Ankara, insisting that the Turkish Cypriots be involved in the decisionmaking process may have been seen as the only practical way to preserve Turkey's position as a main supplier of non-Russian gas to Europe. Ankara supported the conclusions of some in the industry that the fastest and least expensive route to transport Israeli and Cypriot gas to Europe was via a pipeline through Turkey. For Eroglu, the energy issue had to be a part of the negotiations. The Greek Cypriots rejected such a proposal, stating that energy issues would be dealt with under any new \"federal\" system agreed to in the negotiations. Akinci, at first, seemed reluctant to press this issue, apparently accepting Anastasiades's promises that energy wealth would be shared by both sides and how that would be accomplished would be left to another time once a settlement was agreed. However, in July 2016, after the republic announced that it would proceed with the issuance of new licenses for additional gas exploration in the Cyprus EEZ, and in August 2016 when it was announced that the republic and Egypt would sign an agreement that could allow Cypriot gas to be shipped to Egypt in the future, both Turkey and the Turkish Cypriots raised objections, with some claiming these actions would harm the settlement negotiations. At Geneva, and despite the news that the French energy corporation, Total, would begin additional exploration in summer 2017 and that Cyprus, Greece, Israel, and Italy would renew discussions of a possible gas pipeline to Europe via Greece, the issue did not seem to impede discussions of the other, more immediate issues. After the Geneva conference, Energy Ministers from the Republic of Cyprus, Israel, Greece, and Italy unveiled plans for an East Mediterranean pipeline running all the way from Israel to the coast of Greece and on to Italy. Total also announced that it would begin a new round of exploration in Cypriot waters during the first few weeks of July 2017. As expected, Turkey and the Turkish Cypriots reacted negatively, with Ankara threatening to take actions if the drilling commenced before an agreement on the Cyprus issue was achieved. As the Crans Montana talks approached, the energy issue again came into play . In May 2017, Akinci stated that the next several months would be crucial in part because of the expected launch of new hydrocarbon exploration activities off the coast of south Cyprus. Turkey stated that it would begin its own exploration in two areas in Cypriot waters that Turkey claims are part of its EEZ and announced that a series of military exercises in the region had been scheduled for July. Some observers believed that Turkey's actions and Akinci's comments were an attempt to pressure Anastasiades to delay the exploration, particularly if the Crans Montana negotiations showed some promise. Others felt this move could set the stage for another confrontation between Turkey and the Republic of Cyprus. When the Crans Montana conference collapsed, French energy firm Total moved its drilling platform, the West Capella, to its drilling site and commenced drilling in mid-July 2017. Ankara reiterated its objections, and Turkey issued a new NAVTEX reserving an area southwest of Cyprus for naval exercises with live ammunition. In the end, Total completed its drilling without incident. This new round of exploration apparently resulted in negligible findings. The Greek Cypriots had also approved additional drilling in 2018 by Total and Italy's ENI as well as by Exxon/Qatar. The ENI group began new drilling on December 31, 2017, in a new area. In February 2018, ENI announced that the drilling had produced a significant find of gas. ENI then announced it would move its drilling platform, Saipem 12000, to another area that is also claimed by Turkey. On February 11, Turkish warships appeared in the waters off the southern coast of Cyprus and attempted to impede the movement of Saipem 12000 to the disputed area. The Greek Cypriots, supported by the EU and others, reacted negatively to Turkey's activity. Over the course of February and March, both Akinci and Ankara restated that the resources around the island belonged to all Cypriots and that the republic should halt further exploration and drilling unless the Turkish Cypriots were included in the planning and decisionmaking, a demand again rejected by Anastasiades. Turkey stepped up its military threats and indicated it would begin its own drilling inside one or two of the disputed blocks in the Cypriot EEZ. Some believe Turkey was concerned that the new gas finds could be significant enough to encourage the Greek Cypriots and others to move forward with various shipping and pipeline options that would exclude the possibility that the gas could eventually be piped across Turkey to Europe. Others felt the Greek Cypriots were trying to apply maximum pressure on the Turkish Cypriots to agree to compromise on several issues demanded by the Greek Cypriots as part of an eventual solution. The United States and the EU both intervened, restating the republic's right to explore for natural resources in its EEZ but asking both the Greek and Turkish Cypriots to tone down the rhetoric and for Turkey not to provoke additional tensions over the energy issue. In a March 15, 2018, press conference welcoming the visit to Cyprus of U.S. Assistant Secretary of State for Europe and Eurasia Wess Mitchell, U.S. Ambassador Cathleen Doherty stated that while the United States supported the republic's right to exploratory activities in its EEZ, the island's energy resources should be fairly shared between both communities in the context of an overall settlement. The Ambassador said that even if the drilling located additional gas deposits, it may not be possible or feasible to commercialize those deposits right away, as costs associated with extraction and transportation may not make the resources viable. She noted that it could take several years, even decades, before all the conditions were right for revenues to begin flowing. In the interim, Ambassador Doherty intimated that the two sides and Turkey should stop the feuding and focus on a solution to the island's division. Assistant Secretary Mitchell, in a summer 2018 speech at the Heritage Foundation, reiterated the U.S. position and stated that Turkey should tone down its provocations in the waters south of Cyprus. He restated that view one week later at a hearing before the Senate Foreign Relations Committee. In November 2018, the energy partnership of Exxon-Mobil/Qatar Petroleum began gas exploration in block 10 of the Cypriot EEZ. Turkey revived its warnings about unilateral exploitation of the resources and announced its intentions to begin drilling in waters that both Ankara and Cyprus claim are part of their respective EEZs. In early 2019, Exxon-Mobile announced that it had found significant gas deposits and would continue to explore the feasibility of extraction. Up until the end of 2018, tensions between the United States and Turkey had threatened to play out over the drilling issue. A slight thaw in U.S.-Turkish relations restrained Turkey from taking any negative actions against Exxon-Mobile's early exploration. However, as Turkey deploys two drilling platforms in the same commercial blocks, tensions could spike again. When Mustafa Akinci was elected as leader of the Turkish Cypriots in 2015, many believed the window of opportunity for a permanent settlement of the Cyprus problem, for all intents closed by Ergolu, had been reopened. As \"mayor\" of the Turkish Cypriot portion of Nicosia, Akinci had been praised for working cooperatively with his Greek Cypriot counterparts on a number of infrastructure projects, leading some to take a positive view of the possibilities of a settlement between Anastasiades and Akinci. While the political environment on both sides of the island immediately after the election of Akinci had taken on a positive air, with predictions that the negotiations could conclude quickly, the scene reminded Cyprus observers of the 2008 election of Christofias and the almost giddy atmosphere that arose over a possible quick solution to the division of the island with Turkish Cypriot leader Talat. Akinci, much as Talat had with Christofias, declared that he and Anastasiades were of the same generation and could relate more easily to each other and better understand the measures that both sides would have to take to achieve a solution. Negotiations between Anastasiades and Akinci, once begun, got off to a fast start. For many, the first 20 months of the Anastasiades/Akinci era went well. Both leaders seemed to enjoy meeting with each other and doing public events together in a show of solidarity. The positive atmosphere of the negotiations raised hope among some that these two leaders might just reach a settlement. And, although the issues that have separated the two communities and prevented a solution for more than 44 years have long been clearly defined and repeatedly presented and debated by both sides, the chemistry between Anastasiades and Akinci, seen by many as an improvement over the Anastasiades/Eroglu relationship, seemed to allow the leaders to overcome some of the traditional barriers to a settlement more effectively than previous attempts by Cypriot leaders. However, as the talks progressed, with more references to agreed convergences , both Anastasiades and Akinci, as those before them had experienced, began to hear public controversy and criticism of the negotiations emerge from the skeptics and opponents of an agreement. Despite the inevitable level of domestic opposition in both communities and the inability to reach concrete agreements on several governance issues, as well as the security and guarantees issues, Anastasiades and Akinci, at least publicly, seemed determined to continue to seek a solution. The intensity of the negotiations beginning in fall 2016 and continuing through Mont Pelerin and Geneva in 2017 earned both leaders international praise for their commitment and persistence. To most observers, the fact that Anastasiades and Akinci appeared to have come closer to reaching a settlement by early 2017 than at any time since 2004, and that both sides, plus Greece and Turkey, were willing, after the failure at Geneva, to come together again at Crans Montana for another attempt to resolve their differences, seemed to support the growing optimism. Indeed, although a solution for that final settlement remained elusive, the negotiators maintained a level of optimism that a breakthrough was possible. The failure of the Crans Montana conference, despite the framework presented by U.N. Secretary-General Guterres, appeared to be directly related to the disagreement over security issues. Ankara appeared unwilling to accept the replacement of Turkish security guarantees with guarantees from the EU or an interim international security force, despite the fact that some Turkish troops that might have remained under a compromise could have provided security to the Turkish Cypriots during the time the agreement was being implemented. It also appeared Ankara was not willing to forego its geostrategic interests and influence over the island by accepting a longer-term \"zero guarantees, zero troops\" option. Ankara insisted that some level of troops would remain on the island either permanently or at least for several years, a condition that they knew Anastasiades would continue to reject. Ankara's determination to build a permanent naval base in North Cyprus, raised again in December 2018, seemed to affirm this view. By summer 2018, however, Akinci indicated that he and Anastasiades no longer shared the same vision of what constituted a bizonal, bicommunal federation or whether such a form of government was even desirable at this point. Reports suggested that several governance issues long thought to have been part of the oft referred convergences , such as the rotating presidency, Turkish Cypriot codecision power, political equality, and the population mix in the north, not only appeared to remain unresolved but also may have been pulled back from the status of convergences. Some observers believed that if the two sides could not find common agreement on the governance issues, then arguing over troops and security, as seen at Geneva and Crans Montana, was a futile exercise. In appointing Jane Holl Lute as his new adviser in July 2018, it appeared that Secretary-General Guterres specifically intended to challenge the sincerity of both sides to return to the negotiations. Guterres also appeared to have adopted Akinci's demand for a results-oriented negotiation, first by making it clear that both sides would have to agree to a \"terms of reference\" document that Lute would draft and then by not letting the talks become open-ended by allowing the terms of reference document, once presented, to be renegotiated. The approach initially seemed to work: Anastasiades reportedly believed the terms of reference could reinforce his position that Turkish military forces would have to withdraw from the island and future security guarantees for the island would have to take another form. Akinci apparently saw some support for his demand for political equality for Turkish Cypriots. Nevertheless, acceptance of the terms of reference would require the restoration of trust between the two leaders, between the Greek Cypriots and Ankara, and perhaps between Ankara and Akinci. As Lute started on her mission, it was unclear whether such trust could be restored. Akinci indicated he was no longer sure what type of solution Anastasiades was looking for and made it clear again that he could not accept changes to the security issues. Anastasiades apparently could not agree to how the Turkish Cypriots defined political equality. Further complicating Lute's task was the fact that the political mindset surrounding the talks began to change, actually pointing both sides in opposite directions. In mid-fall 2018, Anastasiades surprised many by suggesting that both sides might consider some form of a \"decentralized\" federation. His proposal seemed to suggest that the two constituent states that would emerge under such a working agreement would have more powers than what had been discussed previously, even though he was slow in defining what those additional powers might be. It also was reported that Anastasiades suggested holding a conference in Cyprus to discuss the various parameters of either a decentralized federation or perhaps even a confederation. This proposal resulted in the atmosphere becoming muddled. Some thought that after meeting with Turkish Foreign Minister Cavusoglu at the U.N. in New York, Anastasiades may have become convinced that Ankara would no longer accept a federal solution and that Anastasiades was looking for an acceptable middle ground. Some others assumed that Anastasiades was trying to buy time in the hope that the gas exploration being conducted by Exxon-Mobile and others would produce positive results, thus putting more pressure on the Turkish Cypriots to cut a deal in time to guarantee they would share in the potential revenues generated by the additional gas finds. Akinci expressed skepticism of Anastasiades's proposal, seeing it as undermining his support for a federal solution and a way to try to reach a settlement without giving the Turkish Cypriots the political equality they sought at any federal level. Anastasiades also came under heavy criticism from his political opponents, particularly the leadership of the AKEL party, for what they claimed was an abandonment of the goal of a federal solution. More importantly, when some Turkish and Turkish Cypriot government officials who had begun to sour on a federal solution, particularly Foreign Minister Ozersay, insisted the government should have a say in the negotiations, Akinci saw a growing challenge to his position. Ersin Tatar, the newly elected head of the opposition National Unity Party (UBP), indicated his party would not support a federal solution and would not be bound by Akinci's decisions. Tatar apparently threw his support behind a \"two-state\" solution. Some also pointed out that the decision by several of the original pro-federal solution political parties not to publicly defend Akinci had left him isolated. Some suggested that Akinci and Ankara were no longer on the same page. By contrast, observers who saw Ankara attempting to sideline Akinci and move beyond a federal solution saw the infighting as a ploy to buy more time for Turkey to get through local elections in March and perhaps even the May European Parliament elections. In this strategy, the resumption of negotiations would not even be considered until at least June 2019. When the apparent rift between Akinci, Ozersay, and others became increasingly public, threatening Turkish Cypriot unity, Turkish Foreign Minister Cavasoglu traveled to Cyprus in late January 2019, apparently to bring all sides together and to try to end the public squabbling. Cavasoglu reiterated that Ankara wanted a permanent solution, no matter what it was, but that the Greek Cypriots had to determine what outcome they were willing to negotiate to achieve. At the same time, some observers questioned whether special adviser Lute's mission could actually succeed, as it appeared that disagreement on several issues would not likely help achieve agreement on her eventual terms of reference document. For instance, Anastasiades did not accept a definition of political equality for the Turkish Cypriots favored by Akinci. Nor would he reverse his long-held position and accept a target deadline to conclude the talks. Cavasoglu's December 2018 comment that those who dream of an option with zero guarantees and zero troops should let it go, as such a thing will never happen, suggested that the Guterres framework, in which Turkish troops would begin to leave the island after an agreement is reached, could jeopardize the entire terms of reference from the start. These questions resulted Lute's inability to craft a terms of reference document by the end of 2018, and she stated she would have to return to the island for another round of consultations in early 2019. When she returned in early 2019, the rift between Anastasiades and Akinci centered on the issue of Turkish Cypriot political equality. Akinci demanded his proposal be accepted as a condition for resuming the negotiations. The idea was again rejected by Anastasiades. Subsequently, Lute found little basis for continuing her consultations and decided to meet with the guarantor powers. Although the Greek and Turkish foreign ministers agreed to hold their own consultations on security, Lute saw no likely breakthrough between Anastasiades and Akinci. Nevertheless, Lute agreed to return to the island on April 7 for yet another round of consultations with the two leaders. When Lute returned, she apparently found both sides seemingly farther apart. Aside from the long-standing disagreements between the two Cypriot sides, particularly on security and troops, a big sticking point was Akinci's insistence that the Turkish Cypriots have political equality in the new federal government rather than holding a minority status. Akinci repeated his demand that if a solution would result in two equal constituent states, under a federal structure, then the Turkish Cypriots should hold equal power on issues taken up at the federal level that would involve both constituent states. He proposed that on all issues there must be a positive Turkish Cypriot vote. Anastasiades again rejected that approach, claiming it would give the Turkish Cypriots an absolute veto over all policy issues and would subject Cyprus to the demands of Ankara, potentially resulting in gridlock. Anastasiades, however, apparently did express a willingness to discuss Akinci's proposal, but only for some issues. At the same time, Anastasiades resurrected an old proposal that the new government be a cross between a presidential system, in which the president would be a Greek Cypriot, and a parliamentary system in which a prime minister would rotate between the two communities. Akinci rejected this proposal, arguing that it reinforced his view that the Greek Cypriots will always see the Turkish Cypriots as a minority and not a coequal partner. Other Turkish Cypriot officials claimed this was an attempt by Anastasiades to establish a Greek Cypriot state on the island. Lute's fourth return to Cyprus again failed to achieve an agreement between the two Cypriot leaders on a \"terms of reference\" document that would become the basis for restarting the negotiations and suggested that negotiations were unlikely to resume anytime soon. Secretary-General Guterres will now have to decide how to proceed. Continuing with the Lute mission without a chance of being successful may seem fruitless. Even if Anastasiades and Akinci could compromise on some form of an agreement on the definition of political equality for the Turkish Cypriots, questions still remain on what type of final governmental structure would be addressed, specifically, is the long-sought bizonal, bicommunal, federal solution for the island still attainable? The Guterres framework suggests that a new security framework was needed, particularly one that does not envision Turkey's automatic right to unilaterally intervene on the island. Would Ankara eventually accept that concept? Could Akinci argue successfully to his citizens that the new federal structure, loose or otherwise, with some version of political equality for the Turkish Cypriotst, the guarantees of EU law, and a more robust U.N. peacekeeping force in place, might be enough to argue for a new security arrangement regarding Turkish troops or Turkish security guarantees? Could either side accept a future NATO-led peacekeeping force, in which Turkish and Greek troops could participate as a reassurance to both sides? History might indicate a continued \"no\" to these questions. At the same time, relations between Turkey and the Greek Cypriots have become so tense over the energy exploration issue that neither side appears capable of backing down from its security demands, leaving little room for optimism that any kind of a solution can be achieved. Many also wonder whether either leader could sell any agreement to his community at this point. Some longtime observers of the negotiations in the international community expressed deep concern for the direction the dispute has taken since Crans Montana. For instance, in late 2017, the Business Monitor Internatio nal, part of the Fitch Group, downgraded its assessment of a new unification deal from slim to extremely remote. Its 2018 forecast likely will not have changed. Former British Foreign Secretary Jack Straw in 2017 restated a previous assessment that \"from the Greek Cypriot point of view, conceding political equality with the Turkish Cypriots means giving power away. But absent a real incentive for both sides\" to actually reach an agreement, \"the reality is that no Greek Cypriot leader will ever be able to get their electorate behind a deal. The status quo for the south is simply too comfortable.\" At this point, and despite the effort being put forward by U.N. Secretary-General Guterres to restart the negotiations, a final settlement for Cyprus remains elusive.", "summary": "Four months into 2019, unification talks intended to end the division of Cyprus after 55 years as a politically separated nation and 45 years as a physically divided country have remained suspended since July 2017. Attempts by the United Nations to find common ground between the two Cypriot communities to resume the negotiations have not been successful. The talks have fallen victim to the realities of five decades of separation and both sides' inability to make the necessary concessions to reach a final settlement. As a result, the long-sought bizonal, bicommunal, federal solution for the island has remained elusive and may no longer be attainable. Cyprus negotiations typically exhibit periodic levels of optimism, quickly tempered by the political reality that difficult times between Greek and Turkish Cypriots always lay ahead. In June 2018, in an attempt to jump-start the talks, U.N. Secretary-General Antonio Guterres appointed Jane Holl Lute as his new adviser for Cyprus. Her mission was to consult with the two Cypriot leaders, Nicos Anastasiades and Mustafa Akinci, and the three guarantor parties (Greece, Turkey, and Great Britain) to determine if sufficient conditions existed to resume U.N.-hosted negotiations and, if so, to prepare a comprehensive \"terms of reference\" document by the end of 2018. This document was supposed to include a version of a 2017 \"framework\" proposed by Guterres, previous \"convergences\" both sides had reportedly reached on many issues, and a proposed road map for how the negotiations would proceed. Lute conducted her first consultations in September 2018 and a second round in October. Although the talks reportedly were \"productive,\" they did not result in an agreement to resume the talks and Lute announced she would have to return to the island in early 2019, reaffirming the difficulty many thought she would encounter in trying to reach agreement on the provisions of the \"terms of reference.\" Lute's initial return in January 2019 was short and inconclusive. Subsequently, Lute returned to meet with Anastasiades and Akinci on April 7. What Lute apparently found was that both sides were seemingly farther apart. Aside from the long-standing disagreement on security guarantees, a big sticking point was Akinci's insistence that the Turkish Cypriots have political equality, demanding that on all issues taken up at any new federal level, a positive Turkish Cypriot vote would be necessary. Anastasiades expressed a willingness to discuss Akinci's proposal for some issues but rejected the demand claiming, it would give the Turkish Cypriots an absolute veto over all policy issues, potentially resulting in gridlock. At the same time, Anastasiades resurrected an old proposal that the new government be a cross between a presidential system, in which the president would be a Greek Cypriot, and a parliamentary system in which a prime minister would rotate between the two communities. Akinci rejected this proposal, claiming it reinforced his view that the Greek Cypriots will always see the Turkish Cypriots as a minority and not a coequal partner. Lute's fourth attempt failed to achieve an agreement between the two Cypriot leaders on how to restart the talks and suggested that negotiations were likely to remain suspended indefinitely. The United States historically has held an \"honest broker\" approach to achieving a just, equitable, and lasting settlement of the Cyprus issue. However, some observers have seen recent actions within Congress and the Administration in support of Cyprus's unfettered energy development in the Eastern Mediterranean and lifting of restrictions on arms sales to Cyprus as an admission by the United States that an equitable solution has become more difficult. These policy directions also suggest that U.S. interests in the Eastern Mediterranean have moved on to security and energy concerns for which closer relations with the Republic of Cyprus have become a higher priority. This report provides an overview of the negotiations' history and a description of some of the issues involved in those talks.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on the Navy's Littoral Combat Ship (LCS) program. A total of 35 LCSs have been procured through FY2019. The Navy wants FY2019 to be the final year of LCS procurement, and it has not requested the procurement of any additional LCSs in its FY2020 budget submission. The Navy wants to shift procurement of small surface combatants in FY2020 from the LCS to a new frigate called the FFG(X). The Navy's proposed FY2020 budget requests funding for the procurement of the first FFG(X). The FFG(X) program is covered in detail in CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. A current issue for Congress regarding the LCS program is whether to procure any additional LCSs in FY2020, and if so, how many. Another issue for Congress concerns future workloads and employment levels at the two LCS shipyards if one or both of these yards are not involved in building FFG(X)s. Congress's decisions on the LCS program will affect Navy capabilities and funding requirements, and the shipbuilding industrial base. For an overview of the strategic and budgetary context in which the LCS program and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. In discussing its force-level goals and 30-year shipbuilding plans, the Navy organizes its surface combatants into large surface combatants (LSCs), meaning the Navy's cruisers and destroyers, and small surface combatants (SSCs), meaning the Navy's frigates, LCSs, mine warfare ships, and patrol craft. SSCs are smaller, less capable in some respects, and individually less expensive to procure, operate, and support than LSCs. SSCs can operate in conjunction with LSCs and other Navy ships, particularly in higher-threat operating environments, or independently, particularly in lower-threat operating environments. In December 2016, the Navy released a goal to achieve and maintain a Navy of 355 ships, including 52 SSCs, of which 32 are to be LCSs and 20 are to be FFG(X)s. Although patrol craft are SSCs, they do not count toward the 52-ship SSC force-level goal, because patrol craft are not considered battle force ships, which are the kind of ships that count toward the quoted size of the Navy and the Navy's force-level goal. At the end of FY2018, the Navy's force of SSCs totaled 27 battle force ships, including 0 frigates, 16 LCSs, and 11 mine warfare ships. Under the Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan, the SSC force is to grow to 52 ships (34 LCSs and 18 FFG[X]s) in FY2034, reach a peak of 62 ships (30 LCSs, 20 FFG[X]s, and 12 SSCs of a future design) in FY2040, and then decline to 50 ships (20 FFG[X]s and 30 SSCs of a future design) in FY2049. The LCS is a relatively inexpensive Navy surface combatant that is to be equipped with modular \"plug-and-fight\" mission packages, including unmanned vehicles (UVs). The Navy announced the start of the LCS program on November 1, 2001. The first LCS was procured in FY2005, and a total of 35 have been procured through FY2018, including three in FY2019. As noted above, of the 35 that have been procured through FY2019, 16 had entered service as of the end of FY2018. The LCS was designed to operate in contested littoral waters in conjunction with other Navy forces. The LCS's primary missions are antisubmarine warfare (ASW), mine countermeasures (MCM), and surface warfare (SUW) against small boats (including so-called \"swarm boats\"), particularly in littoral (i.e., near-shore) waters. The LCS program includes the development and procurement of ASW, MCM, and SUW modular mission packages. Additional potential missions for LCSs include peacetime engagement and partnership-building operations; intelligence, surveillance, and reconnaissance (ISR) operations; maritime security and intercept operations (including anti-piracy operations); support of Marines or special operations forces; and homeland defense operations. An LCS might perform these missions at any time, regardless of its installed mission package, although an installed mission package might enhance an LCS's ability to perform some of these missions. The LCS program has been controversial over the years due to past cost growth, design and construction issues with the first LCSs, concerns over the survivability of LCSs (i.e., their ability to withstand battle damage), concerns over whether LCSs are sufficiently armed and would be able to perform their stated missions effectively, and concerns over the development and testing of the modular mission packages for LCSs. The LCS program has been modified or restructured several times over the years, in part to address these issues. The Navy's execution of the program has been a matter of congressional oversight attention for several years, particularly for a period of about 10 years starting around 2007, when significant cost growth in the program came to light. Table 1 shows past annual procurement quantities for LCSs. The Navy wants FY2019 to be the final year of LCS procurement, and it has not requested the procurement of any additional LCSs in its FY2020 budget submission. The LCS program includes two very different LCS designs (see Figure 1 ). One, called the LCS-1 or Freedom-class design, was developed by an industry team led by Lockheed. The other, called the LCS-2 or Independence-class design, was developed by an industry team that was then led by General Dynamics. The LCS-1 design is based on a steel semi-planing monohull (with an aluminum superstructure), while the LCS-2 design is based on an all-aluminum trimaran hull. The two LCS designs also use different built-in combat systems (i.e., different collections of built-in sensors, computers, software, and tactical displays) that were designed by each industry team. The Navy states that both LCS designs meet the Key Performance Parameters (KPPs) for the LCS program. LCS procurement has been divided more or less evenly between the two designs. The LCS-1 design is built at the Fincantieri/Marinette Marine shipyard at Marinette, WI, with Lockheed as the prime contractor; these ships are designated LCS-1, LCS-3, LCS-5, and so on. The LCS-2 design is built at the Austal USA shipyard at Mobile, AL, with Austal USA as the prime contractor; these ships are designated LCS-2, LCS-4, LCS-6, and so on. Ships 1 through 4 in the program were procured with single-ship contracts. The next 22 ships in the program (ships 5 through 26) were procured under two 10-ship block buy contracts that the Navy awarded to the two LCS builders in December 2010, and which were later extended in each case to include an 11 th ship. The Navy sought and received legislative authority from Congress in 2010 to award these block buy contracts. Current Navy plans call for procuring a total of 44 LCS mission packages (10 ASW, 24 MCM, and 10 SUW). The Navy has not announced whether the figure of 44 mission packages will be adjusted upward to account for the procurement of a total of 35 rather than 32 LCSs. LCS mission packages have been under development since the early days of the LCS program. The Navy's plan is to develop and deploy initial versions of these packages, followed by development and procurement of more capable versions. The development, testing, and certification of LCS mission packages has been a significant and continuing oversight issue for Congress for the LCS program. The Navy states that The Navy achieved Initial Operating Capability (IOC) of the final component of the SUW Mission Package (MP), the Surface to Surface Missile module. The Navy worked with the Director, Operational Test and Evaluation to improve the test design, employ best practices, and make data driven decisions. The team jointly delivered a fully compliant test outcome, while simultaneously reducing the number of developmental test and operational test raid events. As a result, the Department reduced costs while completing operational tests of the SUW MP two months early. The ASW Mission Package Pre-Production Test Article was delivered in November 2018 and ASW MP conducted end-to-end testing at the Navy's Atlantic Undersea Test and Evaluation Center in January 2019. All of the MCM Mission Package aviation systems have reached IOC and are being delivered to the Fleet. The modular nature of the Mission Packages enables the Navy to deliver these capabilities now, while continuing to mature the remainder of the systems. Additionally, the Navy continues to evaluate employment of the MCM Mission Package off of Vessels of Opportunity. The LCS employs automation to achieve a reduced-sized crew. An LCS with an embarked MCM mission package and an aviation detachment to operate the ship's embarked aircraft might total about 88 sailors, compared to more than 200 for a Navy frigate and more than 300 for a Navy cruiser or destroyer. In general, most LCSs are to be operated with alternating dual crews so as to increase the percentage of time they can be deployed. For additional information on the manning and deployment of LCSs, see Appendix A . Industry has marketed various modified versions of the LCS to potential foreign buyers. Saudi Arabia has purchased four modified LCSs. The Navy wants FY2019 to be the final year of LCS procurement, and it has not requested any finding for the procurement of additional LCSs in its FY2020 budget submission. The Navy's proposed FY2020 does request $14 million in procurement funding to cover cost growth on LCSs procured in prior fiscal years. And as shown in Table 2 in the \" Legislative Activity for FY2020 \" section of this report, the Navy's proposed FY2020 budget requests funding for the procurement of LCS mission packages. The Navy's FY2020 budget submission estimates the combined procurement cost of the three LCSs procured in FY2019 at $1,571.2 million, or an average of about $523.7 million each. One issue for Congress is whether to procure any LCSs in FY2020, and if so, how many. As noted above, the Navy wants FY2019 to be the final year of LCS procurement, and it has not requested the procurement of any additional LCSs in its FY2020 budget submission. Opponents of procuring one or more LCSs in FY2020 could argue that the total number of LCSs procured in prior years exceeds the Navy's stated requirement, and that adding funding to the Navy's FY2020 shipbuilding account for procuring one or more additional LCSs could reduce FY2020 funding for other Navy programs. Supporters of procuring one or more LCSs could argue that it could provide a hedge against delays in the FFG(X) program and help the Navy achieve its small surface combatant force-level goal more quickly. Another issue for Congress concerns future workloads and employment levels at the two LCS shipyards if one or both of these yards are not involved in building FFG(X)s. As noted earlier, the Navy wants to shift procurement of small surface combatants in FY2020 to a new frigate called the FFG(X). The Navy's proposed FY2020 budget requests funding for the procurement of the first FFG(X). Five industry teams are currently competing for the FFG(X) program. Two of these teams are offering designs for the FFG(X) that are modified versions of the two LCS designs that the Navy has procured in prior years. The other three industry teams are offering designs for the FFG(X) that are based on other existing ship designs. One of these three other industry teams is proposing to build its design at the LCS-1 shipyard. The Navy plans to announce the outcome of the FFG(X) competition in the fourth quarter of FY2020. The FFG(X) program is covered in detail in CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. If a design proposed for construction at one of the LCS shipyards is chosen as the winner of the FFG(X) competition, then other things held equal (e.g., without the addition of new work other than building LCSs), workloads and employment levels at the other LCS shipyard (the one not chosen for the FFG(X) program), as well as supplier firms associated with that other LCS shipyard, would decline over time as the other LCS shipyard's backlog of prior-year-funded LCSs is completed and not replaced with new FFG(X) work. If no design proposed for construction at an LCS shipyard is chosen as the FFG(X)—that is, if the winner of the FFG(X) competition is a design to be built at a shipyard other than the two LCS shipyards—then other things held equal, employment levels at both LCS shipyards and their supplier firms would decline over time as their backlogs of prior-year-funded LCSs are completed and not replaced with FFG(X) work. The Navy's current baseline plan for the FFG(X) program is to build FFG(X)s at a single shipyard. One possible alternative would be to build FFG(X)s at two or three shipyards, including one or both of the LCS shipyards. One possible approach for doing this, for example, would be to select a winner in the FFG(X) competition and begin procuring that design in FY2020, as the Navy currently plans, but also build FFG(X)s at one or both of the LCS yards. Supporters of this option might argue that it could boost FFG(X) production from the currently planned two ships per year to as many as many as four to six ships per year, substantially accelerating the date for attaining the Navy's small surface combatant force-level goal; permit the Navy to use competition (either competition for quantity at the margin, or competition for profit [i.e., Profit Related to Offers, or PRO, bidding]) to help restrain FFG(X) prices and ensure production quality and on-time deliveries; and complicate adversary defense planning by presenting potential adversaries with multiple FFG(X) designs, each with its own specific operating characteristics. Opponents of this plan might argue that it could weaken the FFG(X) competition by offering the winner a smaller prospective number of FFG(X)s and essentially guaranteeing the LCSs yard that they will build some number of FFG(X)s; substantially increase annual FFG(X) procurement funding requirements so as to procure as many as four to six FFG(X)s per year rather than two per year, which in a situation of finite Department of Defense (DOD) funding could require offsetting reductions in other Navy or DOD programs; and reduce production economies of scale in the FFG(X) program by dividing FFG(X) among two or three designs, and increase downstream Navy FFG(X) operation and support (O&S) costs by requiring the Navy to maintain two or three FFG(X) logistics support systems. Another possible alternative to the Navy's plan to end LCS procurement in FY2019 and shift to FFG(X) procurement starting in FY2020 would be would be to select a winner in the FFG(X) competition and begin procuring that design in FY2020, as the Navy currently plans, but shift Navy shipbuilding work at one of the LCS yards (if the other wins the FFG(X) competition) or at both of the LCS yards (if neither wins the FFG(X) competition) to the production of sections of larger Navy ships (such as DDG-51 destroyers or amphibious ships) that undergo final assembly at other shipyards. Under this option, in other words, one or both of the LCS yards would be converted into feeder yards supporting the production of larger Navy ships that undergo final assembly at other shipyards. This option might help maintain workloads and employment levels at one or both of the LCS yards, and might alleviate capacity constraints at other shipyards, permitting certain parts of the Navy's 355-ship force-level objective to be achieved sooner. The concept of feeder yards in naval shipbuilding was examined at length in a 2011 RAND report. Another issue for Congress concerns the Navy's plans for retrofitting LCSs with additional weapons, so as to give them capabilities more like those of the FFG(X). The Navy states that it \"is beginning to retrofit an Over the Horizon Weapon System (OTH WS) on all LCS for increased lethality. The award in May 2018 of the Naval Strike Missile contract for OTH WS brings a technologically mature weapons system and extends the offensive capability of the ship.\" A broad oversight area for Congress for the LCS program for the past several years concerns survivability, lethality, technical risk, and test and evaluation issues relating to LCSs and their mission packages. Over the years, the annual report from DOD's Director, Operational Test and Evaluation (DOT&E) has contained extensive comments, many of them very critical, regarding numerous aspects of LCSs and LCS mission packages. DOT&E's January 2018 report for FY2017 contains such comments. Similarly, over the years, GAO has provided numerous reports and testimony about the LCS program that have raised a variety of issues with the program. GAO also provides a summary assessment of risk in the LCS mission packages in an annual report it publishes that surveys selected DOD weapon acquisition programs. A July 25, 2018, DOD Inspector General (IG) report on LCS MCM mission package systems stated that \"the Navy declared IOC [initial operational capability] for the three MCM mission package systems reviewed prior to demonstrating that the systems were effective and suitable for their intended operational uses.\" Table 2 summarizes congressional action on the Navy's FY2020 procurement funding request for the LCS program. Appendix A. Manning and Deployment of LCSs This appendix provides additional background information on the manning and deployment of LCSs. The Navy originally planned to maintain three crews for each two LCSs, and to keep one of those two LCSs forward deployed—an approach Navy officials referred to as the 3-2-1 plan. Under this plan, LCSs were to be deployed at forward station (such as Singapore) for 16 months at a time, and crews were to rotate on and off deployed ships at 4- to 6-month intervals. The 3-2-1 plan was intended to permit the Navy to maintain 50% of the LCS force in deployed status at any given time—a greater percentage than would be possible under the traditional approach of maintaining one crew for each LCS and deploying LCSs for seven months at a time. The Navy planned to forward-station three LCSs in Singapore and additional LCSs at another Western Pacific location, such as Sasebo, Japan, and at Bahrain. In September 2016, the Navy announced a new plan for crewing and operating the first 28 LCSs. Key elements of the new plan include the following: the first four LCSs (LCSs 1 through 4) will each by operated by a single crew and be dedicated to testing and evaluating LCS mission packages (though they could be deployed as fleet assets if needed on a limited basis); the other 24 LCSs (LCSs 5 through 28) will be divided into six divisions (i.e., groups) of four ships each; three of the divisions (i.e., 12 of the 24 ships), all of them built to the LCS-1 design, will be homeported at Mayport, FL; the other three divisions (i.e., the remaining 12 ships), all of them built to the LCS-2 design, will be homeported at San Diego, CA; among the three divisions on each coast, one division will focus on MCM, one will focus on ASW, and one will focus on SUW; in each of the six divisions, one ship will be a designated training ship, and will focus on training and certifying the crews of the other three ships in the division; the other three ships in each division will each be operated by dual crews (i.e., Blue and Gold crews), like the Navy's ballistic missile submarines; the crews for the 24 ships in the six divisions will be permanently fused with their associated mission package crews—the distinction between core crew and mission package crew will be eliminated; the 24 ships in the six divisions will experience changes in their mission packages (and thus in their mission orientations) infrequently, if at all; and at program maturity (i.e., by about FY2023), 13 of the 24 ships in the six divisions (i.e., more than 50%) are to be forward stationed at any given point for periods of 24 months, with 3 at Singapore, 3 at another Western Pacific location, such as Sasebo, Japan, and 7 at Bahrain. The Navy states that this crewing and operating plan is intended to reduce disruptions to the deployment cycles of the 24 LCSs in the six divisions that under the 3-2-1 plan would have been caused by the need to test and evaluate LCS mission packages; improve training and proficiency of LCS crews; enhance each LCS crew's sense of ownership of (and thus responsibility for taking good care of) the ship on which it operates; and achieve a percentage of LCSs in deployed status, and numbers of forward-stationed LCSs, similar to or greater than what the Navy aimed to achieve under the 3-2-1 plan. The Navy further states that as the fleet continues to accumulate experience in operating and maintaining LCSs, elements of this new plan might be modified. Appendix B. Defense-Acquisition Policy Lessons In reviewing the LCS program, one possible question concerns what defense-acquisition policy lessons, if any, the program may offer to policymakers, particularly in terms of the rapid acquisition strategy that the Navy pursued for the LCS program, which aimed at reducing acquisition cycle time (i.e., the amount of time between starting the program and getting the first ship into service). One possible perspective is that the LCS program demonstrated that reducing acquisition cycle time can be done. Supporters of this perspective might argue that under a traditional Navy ship acquisition approach, the Navy might have spent five or six years developing a design for a new frigate or corvette, and perhaps another five years building the lead ship, for a total acquisition cycle time of perhaps 10 to 11 years. For a program announced in November 2001, this would have resulted in the first ship entering service in between late 2011 and late 2012. In contrast, supporters of this perspective might argue, LCS-1 entered service on November 8, 2008, about seven years after the program was announced, and LCS-2 entered service on January 16, 2010, a little more than eight years after the program announced. Supporters of this perspective might argue that this reduction in acquisition cycle time was accomplished even though the LCS incorporates major innovations compared to previous larger Navy surface combatants in terms of reduced crew size, \"plug-and fight\" mission package modularity, high-speed propulsion, and (in the case of LCS-2) hull form and hull materials. Another possible perspective is that the LCS program demonstrated the risks or consequences of attempting to reduce acquisition cycle time. Supporters of this perspective might argue that the program's rapid acquisition strategy resulted in design-construction concurrency (i.e., building the lead ships before their designs were fully developed), a practice long known to increase risks in defense acquisition programs. Supporters of this perspective might argue that the cost growth, design issues, and construction-quality issues experienced by the first LCSs were due in substantial part to design-construction concurrency, and that these problems embarrassed the Navy and reduced the Navy's credibility in defending other acquisition programs. They might argue that the challenges the Navy faces today in terms of developing an LCS concept of operations (CONOPS), LCS manning and training policies, and LCS maintenance and logistics plans were increased by the rapid acquisition strategy, because these matters were partly deferred to later years (i.e., to today) while the Navy moved to put LCSs into production. Supporters of this perspective might argue that the costs of the rapid acquisition strategy are not offset by very much in terms of a true reduction in acquisition cycle time, because the first LCS to be equipped with a mission package that had reached IOC (initial operational capability) did not occur until late FY2014—almost 13 years after the LCS program was announced. Supporters of this perspective could argue that the Navy could have avoided many of the program's early problems and current challenges—and could have had a fully equipped first ship enter service in 2011 or 2012—if it had instead pursued a traditional acquisition approach for a new frigate or corvette. They could argue that the LCS program validated, for defense acquisition, the guideline from the world of business management that if an effort aims at obtaining something fast, cheap, and good, it will succeed in getting no more than two of these things, or, more simply, that the LCS program validated the general saying that haste makes waste. A third possible perspective is that the LCS program offers few if any defense-acquisition policy lessons because the LCS differs so much from other Navy ships and the Navy (and DOD generally) consequently is unlikely to attempt a program like the LCS in the future. Supporters of this perspective might argue that the risks of design-construction concurrency have long been known, and that the experience of the LCS program did not provide a new lesson in this regard so much as a reminder of an old one. They might argue that the cost growth and construction delays experienced by LCS-1 were caused not simply by the program's rapid acquisition strategy, but by a variety of factors, including an incorrectly made reduction gear from a supplier firm that forced the shipbuilder to build the lead ship in a significantly revised and suboptimal construction sequence.", "summary": "The Navy began procuring a small surface combatant called the Littoral Combat Ship (LCS) in FY2005, and a total of 35 LCSs have been procured through FY2019, including three in FY2019. The total of 35 LCSs is three more than the 32 the Navy says are required under its 355-ship force-level goal. The Navy wants FY2019 to be the final year of LCS procurement, and it has not requested the procurement of any additional LCSs in its FY2020 budget submission. The Navy wants to shift procurement of small surface combatants in FY2020 to a new frigate called the FFG(X). The Navy's proposed FY2020 budget requests funding for the procurement of the first FFG(X). Five industry teams are currently competing for the FFG(X) program. Two of these teams are offering designs for the FFG(X) that are modified versions of the two LCS designs that the Navy has procured in prior years. The other three industry teams are offering designs for the FFG(X) that are based on other existing ship designs. One of these three other industry teams is proposing to build its design at one of the LCS shipyards. The Navy plans to announce the outcome of the FFG(X) competition in the fourth quarter of FY2020. The FFG(X) program is covered in detail in another CRS report. The Navy's 355-ship force-level goal is the result of a Force Structure Analysis (FSA) that the Navy conducted in 2016. The 2016 FSA established a force-level goal for a 355-ship Navy with 52 small surface combatants, including 32 LCSs and 20 frigates. The Navy conducts a new or updated FSA every few years, and is currently conducting a new FSA that is scheduled to be completed by the end of 2019. Navy officials have stated that this new FSA will likely not reduce the required number of small surface combatants, and might increase it. Navy officials have also suggested that the Navy in coming years may shift to a new fleet architecture that will include, among other thing, a larger proportion of small surface combatants. The LCS is a relatively inexpensive surface combatant equipped with modular mission packages. The LCS program includes two very different LCS designs. One, called the LCS-1 or Freedom-class design, was developed by an industry team led by Lockheed. The other, called the LCS-2 or Independence-class design, was developed by an industry team that was then led by General Dynamics. LCS procurement has been divided more or less evenly between the two designs. The LCS-1 design is built at the Marinette Marine shipyard at Marinette, WI, with Lockheed as the prime contractor. The LCS-2 design is built at the Austal USA shipyard at Mobile, AL, with Austal USA as the prime contractor. The LCS program has been controversial over the years due to past cost growth, design and construction issues with the first LCSs, concerns over the survivability of LCSs (i.e., their ability to withstand battle damage), concerns over whether LCSs are sufficiently armed and would be able to perform their stated missions effectively, and concerns over the development and testing of the modular mission packages for LCSs. The Navy's execution of the program has been a matter of congressional oversight attention for several years. A current issue for Congress is whether to procure any LCSs in FY2020, and if so, how many. Opponents could argue that the total number of LCSs procured in prior years exceeds the Navy's stated requirement, and that adding funding to the Navy's FY2020 shipbuilding account for procuring one or more additional LCSs could reduce FY2020 funding for other Navy programs. Supporters could argue that procuring additional LCSs in FY2020 could provide a hedge against delays in the FFG(X) program and help the Navy achieve its small surface combatant force-level goal more quickly. Another issue for Congress concerns future workloads and employment levels at the two LCS shipyards if one or both of these yards are not involved in building FFG(X)s.", "document_type": "crs"}
{"report": "Streamgages measure water level and related streamflow at streams, rivers, lakes, and reservoirs across the country. Streamgages provide foundational information for diverse applications that affect a variety of constituents. Congress has supported a national streamgage program for 130 years. These streamgages operate in every state, the District of Columbia, and the territories of Puerto Rico and Guam; therefore, national streamgage operations garner interest from many Members of Congress. Data fro m streamgages informs real-time decisionmaking and long-term planning on issues such as hazard preparations and response, infrastructure design, water use allocations, ecosystem management, and recreation. Direct users of streamgage data include a variety of agencies from all levels of government, utility companies, consulting firms, scientific institutions, and recreationists. Streamgages are operated across the globe with national programs in North America, Europe, Australia, and Brazil, among others. In the United States, the U.S. Geological Survey (USGS), the Department of the Interior's (DOI's) lead scientific agency, manages the USGS Streamgaging Network ( Figure 1 ). The network encompasses 10,300 streamgages that record water height or streamflow for at least a portion of the year. Approximately 8,200 of these streamgages measure streamflow year-round and are part of the National Streamflow Network. This subnetwork includes 3,640 Federal Priority Streamgages (FPSs), which Congress and the USGS designated as national priorities (see section on \" Federal Priority Streamgages \"). Some entities, such as state governments, operate their own streamgages separate from the USGS Streamgaging Network. Congressional appropriations and agreements with approximately 1,400 nonfederal partners funded the USGS Streamgaging Network at $189.5 million in FY2018. Some streamgages are funded solely through congressional appropriations for the USGS and other federal agencies, such as the U.S. Army Corps of Engineers (USACE), Bureau of Reclamation (Reclamation), and Department of Defense (DOD). Much of the USGS Streamgaging Network is funded cooperatively. Interested parties sign funding agreements with the USGS to share the cost of streamgages and data collection. The USGS Cooperative Matching Funds Program (CMF) provides up to a 50% match with tribal, regional, state, and local partners (see section on \" Cooperative Matching Funds Program \"). Other federal agencies, nonfederal governments, and nongovernmental entities may provide reimbursable funding for streamgages in the USGS Streamgaging Network without contributed funds from the USGS. Evolving federal policies and user needs from diverse stakeholders have shaped the size, organization, and function of the USGS streamgage program. This report provides an overview of federal streamgages by describing the function of a streamgage, the data available from streamgage measurements, and the uses of streamgage information. The report also outlines the structure and funding of the USGS Streamgaging Network and discusses potential issues for Congress, such as funding priorities and the future structure of the nation's streamgage network. A streamgage's primary purpose is to collect data on water levels and streamflow (the amount of water flowing through a river or stream over time). Streamgages estimate streamflow based on (1) continuous measurements of stage height (the height of the water surface) and (2) periodic measurements of streamflow, or discharge, in the channel and floodplains. USGS measurements are used to create rating curves, in order to convert continuously measured stage heights into estimates of streamflow. Selected streamgages may provide additional measurements, such as measurements of water quality (see box on \"Supergages\"). Streamgages house instruments to measure, store, and transmit stream stage height ( Figure 2 ). Stage height is usually transmitted every hour, or more frequently at 5 to 15 minute intervals for emergency or priority streamgages. Most streamgages transmit data by satellite to USGS computers; the data then are provided online to the public. Numerous streamgages also have cameras that capture and transmit photos of streamflow conditions. Periodic streamflow measurements require USGS personnel to measure discharge at various sections across the stream. Streamflow measurements are made every six to eight weeks to capture a range of stage heights and streamflows, especially at high and low stage heights. Repeated measurements allow scientists to capture changes to the channel from vegetation growth, sedimentation, or erosion, which can affect the relationship between stage height and streamflow. The USGS National Water Information System (NWIS) receives and converts all stream height data from USGS streamgages into streamflow estimates. An example of streamgage data from NWIS is shown in Figure 3 for a site capturing peak streamflow during a hurricane event. The free and publicly accessible data are frequently accessed online or by request to users. For example, the agency responded to over 670 million requests for streamflow and water level information in 2018. The NWIS website is the main repository for current and historical streamflow data, in addition to other water information. Tools such as WaterWatch summarize the current conditions of the nation's streams and watersheds through maps, graphs, and tables by comparing real-time streamflow conditions to historic streamflow from streamgages with records of 30 years or more. The USGS Streamgaging Network provides streamflow information to assist during natural and man-made disasters, such as flooding and drought, and to inform economic and statutory water management decisions, such as the allocation of water supplies for irrigation. Individual streamgages in the network also can serve multiple uses. For example, a streamgage intentionally established for the purpose of reservoir management may provide data to inform water quality standards, habitat assessments, and recreational activities. Additionally, the value of a single streamgage is enhanced by the operation of the entire network, particularly for research, modeling, and forecasting. Streamgages were first established in the United States to inform water use and infrastructure planning—applications that benefit from continuous, long-term hydrologic records (see box on \"Evolution of Streamgage Uses\"). Long and continuous periods of data are used to construct baselines for water conditions and to identify deviations in the amount and timing of streamflow caused by changes in land use, water use, and climate. Some stakeholders contend that the value of streamflow records increases over time, with at least 20 years of continuous coverage needed for many applications. Technological advances allowing access to streamflow information in real time have expanded the uses of streamgages. Real-time forecasting and operational decisionmaking are used in many applications of streamflow data. Web and phone applications also have facilitated increased public use of water information. Streamgage data is used for a wide range of applications, including supporting activities of federal agencies. There are also a variety of streamgages tailored for specific purposes. The following is a noncomprehensive selection of streamgage uses to illustrate the scope of applications. W ater M anagement and Energy D evelopment . USACE, Reclamation, and various state and local water management agencies use streamgages to inform the design and operation of thousands of water management projects across the nation. Timely streamflow information helps water managers make daily operational decisions as they balance water requirements for municipal, industrial, and agricultural uses. Energy production and mineral extraction operations also rely on continuous streamflow measurements to comply with environmental, water quality, or temperature requirements. For example, the Federal Energy Regulatory Commission (FERC) requires hydropower companies to support USGS streamflow and water-level monitoring as part of their FERC licensing process. Infrastructure Design . Transportation agencies use streamflow data to develop regional flow frequency curves for the design of bridges and culverts, stream stability measures, and analysis of bridge scour—the leading cause of bridge failure. Without adequate information, some observers contend that engineers may overdesign structures, resulting in greater costs, or may not make proper allowances for floods, compromising public safety. Interstate and International Water Rights . Federal streamgages are used to collect streamflow information at U.S. borders and between states. Streamgage data informs interstate compacts, Supreme Court decrees, and international treaties (e.g., under the purview of the International Boundary and Water Commission and the International Joint Commission). Water Science Research . Many federal agencies depend on consistent, long-term data from streamgages to conduct water research and modeling (e.g., USACE, National Oceanic and Atmospheric Administration [NOAA], Environmental Protection Agency [EPA], DOI, U.S. Department of Agriculture [USDA], and National Aeronautic and Space Administration [NASA]). To monitor climate trends and ecological patterns, the USGS distinguishes a subset of streamgages that are largely unaffected by development to serve as benchmarks for natural conditions. Flood Mapping . The Federal Emergency Management Agency (FEMA) uses floodplain maps to establish flood risk zones and requires flood insurance through the National Flood Insurance Program (NFIP) for properties with a 1% annual chance of flooding. Long-term streamflow records are used to determine 1% annual chance flood flows and to develop water surface profiles to map areas at risk of flooding. The USGS often works with FEMA to produce new inundation maps after streamgages record new streamflow peaks from weather events such as hurricanes. Emergency F orecasting and Response. Streamgages inform flood forecasting and emergency response to protect lives and property. Real-time data from more than 3,600 streamgages allow NOAA's National Weather Service (NWS) river forecasters to model watershed response, project future streamflows, forecast monthly to seasonal water availability, and issue appropriate flood watches and warnings (see box on \"National Water Model\"). Flood warnings provide lead time for emergency response agencies, such as FEMA, to take effective action in advance of rising waters. In addition, the USDA National Resource Conservation Service (NRCS) uses streamgages to forecast flows for water supply, drought management and response, hydroelectric production, irrigation, and navigation in western states. Water Q uality . Streamflow data is important for measuring water quality and developing water quality standards for sediments, pathogens, metals, nutrients (e.g., nitrogen and phosphorus), and organic compounds (e.g., pesticides). At select streamgages, the USGS also operates instruments recording water quality data (see box on \"Supergages\"). Section 303(d) of the Clean Water Act requires states to develop total maximum daily load (TMDL) management plans for water bodies determined to be water quality impaired by one or more pollutants. When determining TMDL levels for specific pollutants, agencies may consider historic streamflow data, along with other factors, in their evaluations. Agencies may use current flow conditions when determining the proper release of wastewater to ensure compliance with TMDL standards and National Discharge Elimination System permitting. Ecosystem Management and Species . Some water users and resource agencies use streamflow data to meet the flow requirements needed to protect endangered or threatened fish and wildlife under the Endangered Species Act (16 U.S.C. §1531 et seq.). Natural resource agencies, such as the U.S. Fish and Wildlife Service (FWS), collect streamflow data to understand how threatened and endangered species respond to flow variations. The USGS operates streamgages to monitor ecosystem restoration progress, such as restoration of the Chesapeake Bay watershed. Recreation . Real-time streamgage data can help individuals and tourism businesses assess stream conditions for recreational outings. USGS data can be used to decide if conditions are suitable for recreational activities such as fishing, boating, and rafting. The USGS also partners with the National Park Service (NPS) to provide water science and data to help manage parks and to enhance interpretive programs. The USGS Streamgaging Network is part of the Groundwater and Streamflow Information Program under the USGS Water Resources mission area. The President's budget request for FY2020 proposes a restructuring of the mission area to create a Water Observing Systems Program that would combine the USGS Streamgaging Network and other water observation programs. The primary operators of streamgages are the regional and state USGS Water Science Centers, which maintain hydrologic data collection and conduct water research in the region. Approximately 8,200 of the 10,300 USGS streamgages measure year-round streamflow (National Streamflow Network; see Figure 4 ), with the rest only measuring stage height or measuring streamflow on a seasonal basis. USGS streamgages are also differentiated based on cooperative funding (CMF) and federal interest (FPSs). Much of the streamgaging program has been cooperative in nature as interested parties sign funding agreements to share the cost of streamgages and data collection. Through CMF, the USGS funds up to a 50% match with tribal, regional, state, and local partners. In 2018, CMF supported 5,345 streamgages (52% of the USGS Streamgaging Network). The first cooperative agreement began in 1895 with the Kansas Board of Irrigation Survey and Experiment (now known as the Division of Water Resources of the Kansas Department of Agriculture). Funds from cooperative entities steadily increased in the early 20 th century. Congress passed legislation in 1928 stipulating that the USGS can share up to 50% of the costs for water resources investigations carried out in cooperation with tribes, states, and municipalities (see Figure 5 ). In 2016, this Federal-State Cooperative Water Program was renamed the Cooperative Matching Funds Program (CMF), which provides cooperative funding for programs across the USGS Water Mission Area. To participate in the CMF, potential partners approach the USGS to discuss the need for a specific streamgage. The USGS determines its feasibility based on available funds and program priorities. If the USGS deems establishing the streamgage is feasible, the USGS and cooperator sign a joint funding agreement (JFA), which is a standard agreement that specifies how much each party will contribute to funding the streamgage and the payment schedule for the cooperator. These agreements span five years or less. During the agreement, the cost-share generally remains the same, but there is flexibility to alter the cost-share on an annual basis for multi-year agreements. Once a streamgage is operating, if a partner can no longer contribute funds, the USGS seeks to work with other partners that use the streamgage to augment funding. The USGS provides a website identifying streamgages that are in danger of being discontinued or converted to a reduced level of service due to lack of funding. The website also identifies streamgages that have been discontinued or are being supported by a new funding source. Approximately 3,700 of the 10,300 USGS streamgages (36%) are funded by nonfederal and federal partners without matching funds from the USGS (i.e., not with CMF). Nonfederal partners sign JFAs, and federal partners share interagency agreements with the USGS (except USACE which uses a military interdepartmental purchase request). These gages are part of the USGS Streamgaging Network and are operated in accordance with the quality control and public access standards created by the USGS, with the agency assuming liability responsibility for the streamgages. Public and private entities may also elect to own and operate streamgages tailored to their specific needs and not affiliated with the USGS. These independent streamgages may differ in various ways compared to streamgages in the USGS Streamgaging Network (e.g., capital and operating costs, operating periods, measurement capabilities, and data standards and platforms). The SECURE Water Act of 2009 (Title IX, Subtitle F of P.L. 111-11 ) directs the USGS to operate a reliable set of federally funded streamgages. The law requires the USGS to fund no fewer than 4,700 sites complete with flood-hardened infrastructure, water quality sensors, and modernized telemetry by FY2019. Originally titled the National Streamflow Information Program (NSIP), the USGS now designates these streamgages as FPSs. Out of the 4,760 FPS locations identified by the USGS, 3,640 sites were operational in 2018. In FY2018, the USGS share of funding was $24.7 million for FPSs. The idea of a federally sustained set of streamgages arose in the late 20 th century when audits revealed the number of streamgages declining after peaking in the 1970s (see decrease in Figure 5 ). In a 1998 report to Congress, the USGS stated that the streamgage program was in decline because of an absolute loss of streamgages, especially those with a long record, and asserted that the loss was due to partners discontinuing funding. Partners also had developed different needs for streamflow information. The USGS proposed the creation of an entirely federally funded NSIP to ensure a stable \"backbone\" network of streamgages to meet national needs. The USGS used five national needs to determine the number and location of these streamgage sites: 1. Meeting legal and treaty obligations on interstate and international waters. 2. Forecasting flow for NWS and NRCS. 3. Measuring river basin outflows to calculate regional water balances. 4. Monitoring benchmark watersheds for long-term trends in natural flows. 5. Measuring flow for water quality needs. The original design included 4,300 active, previously discontinued, or proposed streamgage locations. The proposed program was to be fully federally funded, conduct intense data collection during floods and droughts, provide regional and national assessments of streamflow characteristics, enhance information delivery, and conduct methods development and research. The SECURE Water Act of 2009 authorized the NSIP to conform to the USGS plan as reviewed by the National Research Council. The law required the program to fund no fewer than 4,700 sites by FY2019. The law also directed the program to determine the relationship between long-term streamflow dynamics and climate change, to incorporate principals of adaptive management to assess program objectives, and to integrate data collection activities of other federal agencies (i.e., NOAA's National Drought Information System) and appropriate state water resource agencies. In FY2018, congressional appropriations and nonfederal partners provided $189.5 million for the USGS Streamgaging Network ( Figure 6 ). The USGS share included $24.7 million for FPSs and $29.8 million for CMF. Other federal agencies provided $40.7 million ( Table 1 ). Nonfederal partners, mostly affiliated with the CMF program, provided $94.3 million. The appropriations bill for the Interior, Environment, and Related Agencies funds the USGS share of the USGS Streamgaging Network. Funding for streamgages is included in the Groundwater and Streamflow Information Program under the USGS Water Resources Mission Area. The line item includes funding for the streamgage network and groundwater monitoring activities, as well as other activities. Congress provided $74.2 million in FY2018 and $82.7 million in FY2019 for the Groundwater and Streamflow Information Program. While maintaining level funding for FPS and CMF streamgages in FY2019, Congress directed increased funding of $8.5 million for the deployment and operation of NextGen water observing equipment. The President's budget request for FY2020 proposes creating a new Water Observing Systems Program combining the Groundwater and Streamflow Information Program and elements of the National Water Quality program focused on observations of surface water and groundwater. The President's FY2020 budget requests $105.1 million for the proposed program, a decrease of $7.5 million compared to $112.5 million of FY2018 funding for a similar structure. The budget request would maintain funding for active FPS locations and provide no funding for the NextGen system. For CMF, the request proposes a decrease of $500,000 for Tribal Water, which would result in a loss of $250,000 for CMF streamgages, and a decrease of $717,000 for Urban Waters Federal Partnership, which would reduce water quality monitoring at select streamgages. Other federal agencies contribute to whole or partial funding of streamgages for agency purposes ( Table 1 ). Since FY2012, funding from other federal agencies has doubled from $19.9 million to $40.7 million in nominal dollars. This increase may be due to meeting inflation and other streamgage cost increases; to new needs for monitoring data with existing cooperators (e.g., USACE in the Savannah and Jacksonville Harbor expansion projects); and to the introduction of additional funding partners (e.g., the EPA) that are supporting new streamgages. Nonfederal partners funded approximately half the costs of the USGS Streamgaging Network from FY2012 to FY2018. Cooperative partners include tribal, regional, state, and local agencies related to natural resources, water management, environmental quality, transportation, and regional and city planning. Irrigation districts, riverkeeper partnerships, and utility agencies and companies also fund the program. Contributions by nongovernmental partners to streamgages are very limited (1% in FY2018) and are not eligible for cost-sharing through the USGS CMF program. From FY2003 to FY2019, USGS funding for FPS streamgages increased from $11.7 million to $24.7 million (in 2018 dollars; Figure 7 ). However, USGS funding has not met the SECURE Water Act of 2009 mandate for an entirely federally funded suite of not fewer than 4,700 streamgage sites. In FY2018, 35% of FPSs were funded solely by the USGS FPS program funds. The USGS must rely on other federal agencies or nonfederal partners to fund the rest of the FPSs: 27% were funded by a combination of USGS CMF and partner funds, 24% were funded by a combination of other federal agencies and nonfederal partners, and 14% were funded solely by other federal agencies (not the USGS). USGS funding for CMF has remained relatively level, ranging from $27.5 million to $30.7 million (in 2018 dollars) over 15 years, aside from a drop in FY2007 ( Figure 7 ). For the entire USGS Streamgaging Network, the nonfederal cost-share contribution has increased from near 50% in the early 1990s to an average of about 63% in FY2018. With CMF appropriations remaining level, and demand for streamgages from stakeholders rising, the USGS cost-share available has declined. Cost-share commitments for long-term streamgages are generally renewed at consistent percentages, but JFAs for newer streamgages may include less contribution from the USGS. Increasingly, the USGS may opt to only provide matching funds for installation and operation in the first year, with the agreement that the partner provides full funding in subsequent years. Congress may consider funding levels and policy priorities for the USGS Streamgaging Network. Congressional appropriations may affect the size of the network and the design of streamgages. Congress may provide direction regarding the policy priorities when considering the mandates of the SECURE Water Act of 2009 and initiating the NextGen system. Congress determines the amount of federal funding for the USGS Streamgaging Network and may direct its allocation to FPS, CMF, and other initiatives. The USGS and numerous stakeholders have raised funding considerations including user needs, priorities of partners, federal coverage, infrastructure repair, disaster response, inflation, and technological advances. Congress may consider whether to maintain, decrease, or expand the network, and whether to invest in streamgage restoration and modernization. The USGS uses appropriated funding to develop and maintain the USGS Streamgaging Network. While some stakeholders advocate for maintaining or expanding the network, others may argue that Congress should consider reducing the network in order to prioritize other activities. Congress may provide funding to maintain existing streamgages. The Administration continues to request funding for the Groundwater and Streamflow Information Program, which funds the USGS Streamgaging Network. The FY2020 budget request states that \"one of the highest goals of the USGS is to maintain long-term stability of a 'Federal needs backbone network' for long-term tracking and forecasting/modeling of streamflow conditions.\" Some stakeholders may advocate to maintain the current network as it provides hydrologic information for diverse applications (see section on \" Streamgage Uses \"). The FY2020 budget requests FPS funding at FY2019 enacted levels. If inflation increases costs, level funding may not fully maintain the current operations of FPSs. In addition, 71% of the network, including some FPSs, are funded by other federal and nonfederal partners, which makes those streamgages potentially vulnerable for discontinuation. According to the Government Accountability Office, maintaining streamgages through partners can be a challenge due to both the changing priorities and financial limitations of the partners. Congress may consider reducing the network, either for FPSs, cooperative streamgages, or both. The USGS has discontinued some streamgages because of other funding priorities or because cooperators decided to no longer fund them and alternative funding was not available for the operating costs. Closures may affect individual streamgages or a collection of streamgages. The Administration requested reductions for the Groundwater and Streamflow Information Program in FY2018, FY2019, and FY2020 compared to previous congressional appropriations. For FY2018, the Administration requested a decrease of $742,000 for the Groundwater and Streamflow Information Program, which the budget justification said would diminish the USGS's ability to execute its core activities including strengthening the national streamgaging and groundwater monitoring networks. For FY2019, the proposed reduction included a decrease of $160,000 for U.S.-Canada Transboundary Streamgages. The FY2019 and FY2020 requests proposed a decrease for Tribal Water CMF, which would result in a loss of CMF funding for select streamgages. Congress did not make these cuts in FY2018 and FY2019, and is considering appropriations for FY2020. Reducing the USGS Streamgaging Network could alleviate federal spending on streamgages and allow other entities to operate streamgages tailored to their needs. On the other hand, discontinuing currently operational streamgages may result loss of data acquisition, discontinuation of long-term datasets, and decreased coverage in some basins. Some stakeholders have proposed that entities with specific needs build and operate their own streamgages separate from the USGS network. Some states, such as California and Oregon, already operate their own streamgaging networks. This approach may contain some challenges (e.g., the data may be of higher or lower quality, the data be restricted for public use, or the host may use different standards). However, if individual streamgages were operated at the same level of quality as USGS streamgages, the USGS could incorporate such data into the NWIS network. Some also argue that disparate data sets could be available on a shared platform with USGS streamgages; such a platform could include information on methods of collection, quality, and accuracy. Congress may increase funding to expand the network, which could include establishing the remaining locations for FPS, providing more funds for cooperative streamgages, or pursuing new initiatives like the NextGen system. Congress mandated completion of a national network of no less than 4,700 streamgages in the SECURE Water Act of 2009. At the close of FY2018, 3,640 of the 4,760 FPSs designated by the USGS were operational, with 52% of their funding coming from the USGS. The USGS estimates that $125 million in additional funding each year would be needed to complete the network; however, an average of only about $25 million (in 2018 dollars) was appropriated annually for FPSs between FY2014 and FY2019. While some stakeholders have advocated for Congress to provide full appropriations for FPSs to meet the mandate based on network needs, Congress may consider other funding priorities (e.g., the NextGen system). Congress may also consider if other federal agencies and nonfederal cooperative partners could provide more funding for FPSs. These entities may not be interested in financing some of the designated streamgages in the FPS network, particularly those in isolated river basins with little anthropogenic activity. Some stakeholders advocate for more federal funding to expand the cooperative part of the network, which addresses more localized needs. Some may argue against more federal funding for cooperative streamgages as it lacks a direct statutory mandate (unlike FPSs). Others have proposed increasing nontraditional funding sources for streamgages. They suggest that businesses, homeowner associations, non-for-profit organizations, academic institutions, and other nontraditional entities could provide funding for streamgaging; therefore, increasing the amount of nonfederal investment. Contributions by nongovernmental partners to streamgages are currently relatively limited (1% in FY2018) and are not eligible for federal matching funds. Congress could potentially encourage wider participation by nontraditional partners through such means as authorizing cooperative matching opportunities for public-private partnerships. Traditional stakeholders may oppose making matching funds available to entities not currently eligible, which could result in more competition for limited funds. Congress increased the Groundwater and Streamflow Information Program appropriations by $1.5 million in FY2018 and $8.5 million in FY2019. These increases were directed to streamgages for the NextGen system (see section on \" NextGen System \"). Congress may consider expanding the network through the NextGen system based on results from the pilot project. Increases solely directed to the NextGen system may intensify funding constraints for FPSs and CMF streamgages. Streamgages are vulnerable to hazards if not properly hardened. The SECURE Water Act directed the USGS to ensure all FPSs were flood hardened by FY2019. According to the USGS, structural restoration is usually funded because of emergencies; for example, disaster supplemental appropriations may provide funds for hardening streamgages, or funds are diverted from operational budgets to repair affected streamgages. The 2017 hurricane season resulted in damage to more than 100 streamgages. In response, Congress provided $4.6 million in the Bipartisan Budget Act of 2018 to repair, replace, and restore these streamgages and recover their data, and for hydrologists to reconstruct stream channel measurements. When the USGS does not receive disaster supplemental funding from Congress, the agency is not reimbursed for funding it redirects in order to provide around-the-clock monitoring during the events and equipment repair during and after the events. Some stakeholders have advocated for Congress to provide funds specifically for strengthening and restoring infrastructure, especially to withstand natural disasters. These stakeholders estimate that $238 million is needed to update half of the streamgages in the network to enable them to withstand major flood events and to meet new data transmitting requirements. Under budget constraints, increases in congressional appropriations are often prioritized to maintain or expand the network instead of restoration. Congress might consider investments in new technologies for the USGS Streamgaging Network. While regarded as reliable, many of the current streamgage operations are based on labor-intensive and more expensive techniques. Some stakeholders suggest that investing in modern technological and computational capabilities could provide enhanced streamflow information with reduced costs. Others raise that these approaches may not provide the quality and consistency of data expected of USGS streamgages and may reduce funds available for existing operations. The SECURE Water Act of 2009 directed the USGS to equip all FPSs with modernized telemetry systems by FY2019. According to stakeholders, the current U.S. streamgage telemetry and information infrastructure may be vulnerable to failure, and the existing data collection platforms and computer networks might eventually be inefficient for real-time and detailed data. In September 2018, an error in telemetry equipment resulted in an outage of 11% of the network. The USGS stated that redundancy in telemetry using cellular signals or camera streaming could have alleviated the problem, which affected the network for weeks. The IMAGES Act of 2018 ( H.R. 4905 ) introduced in the 115 th Congress would have directed FEMA to work with USGS to modernize hardware and increase the speed of data transmittal, but the legislation did not specify funding amounts. Some stakeholders have suggested a figure of $112 million as the amount needed to upgrade the enterprise data management systems, information technology infrastructure, and real-time data delivery capabilities. Past increases of appropriations for streamgages have prioritized continued operation and network expansion over technological improvements. To mitigate costs for such upgrades, federal science agencies are considering cloud computing that could also benefit cloud providers if other users develop applications on the cloud network using the data already hosted there. The FY2020 budget request for the USGS outlines enhancement and modernization of NWIS with a centralized platform meeting the Federal Cloud First Computing Strategy. Some argue that Congress should fund alternative data infrastructure to ensure capacity and reliability of increased data while reducing the cost, though others may argue these strategies are not ready for full implementation. The USGS suggests that modern models and computational methods to estimate streamflow in ungaged or sparsely gaged basins may provide an alternative approach to conventional streamgaging. These methods require more observational data, particularly for reference river basins, than that provided by the current streamgage network. In an effort to assess this approach, the USGS initiated a NextGen system pilot project in the Delaware River Basin with $1.5 million in FY2018 ( Figure 8 ), and the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $8.5 million for the NextGen system. Reports accompanying FY2019 Interior appropriations bills by the House and Senate in the 115 th Congress addressed the NextGen system. The Senate committee report encouraged the USGS to have a cost-effective strategy for the NextGen system ( S.Rept. 115-276 ), and the House committee report directed the USGS to provide the committee with a report on the NextGen system, explaining the limitations of the current water monitoring system, the enhancements and modernization needed, and costs to implement the system over a 10-year period and operate and maintain the system ( H.Rept. 115-765 ). The USGS says the funding will allow further the NextGen system implementation in the Delaware River Basin; continued progress in modernizing USGS data infrastructure; and the selection of the next basin. Advances by the NextGen system to estimate streamflow at ungagged locations based on modeling of highly measured reference basins could also result in reduced need for streamgages, lower costs, and expansion of coverage of streamflow data. Others may suggest that modeling streamflow may not provide adequate data as physical measurements, and initiating the NextGen system may result in decreased funding available for traditional operations. Congress may also consider directing the USGS to pursue innovative observation technologies: satellite-based or airborne platforms, ultrasound sensors for river stage-height measurement, radar technology for stream velocity, and autonomous vehicles for Light Detection and Ranging (LIDAR) and other types of remote sensing. The USGS is currently evaluating combining cameras and radars with advanced imagery analysis and installing these combined technologies on drone platforms to collect streamflow in difficult or inaccessible areas. Data coverage could also potentially increase with high-density sensing and sensor networks that use miniaturization, artificial intelligence, and economy of scale. Statistical advances to estimate streamflow at locations without streamgages could also result in reduced need for streamgages. Some suggest that such technologies may eventually satisfy streamflow information needs at lower cost, while others caution that advanced technologies may not provide as robust and reliable data as traditional methods. Congress may consider outlining the future direction for the USGS Streamgaging Network through oversight or legislation. At the close of FY2018, 3,640 of the 4,760 FPS locations designated by the USGS were operational, with 52% of their funding coming from the USGS. As the USGS faces a deadline by the SECURE Water Act of 2009 to operate no less than 4,700 FPSs by FY2019, Congress directed the USGS through appropriations legislation to invest in the NextGen system. Congress may consider pursuing both the FPS mandate and the NextGen system, amending the SECURE Water Act of 2009 to facilitate completion of FPSs, or replacing the FPS mandate with the Next Gen system. Congress may consider pursuing both FPS coverage and the NextGen system. This approach could allow the USGS to meet the SECURE Water Act mandate while fully exploring new methods to obtain streamflow information. Financial constraints may limit this approach and pursuing both initiatives simultaneously may result in duplication of resources and coverage. Congress may consider revising the SECURE Water Act of 2009 to facilitate completion of FPSs (i.e., extending the deadline for FPSs, reassessing the program goals, and changing the number of FPSs). Extending the mandate may provide more time to complete the FPS network. Some suggest that the national interests have evolved and the national goals and FPS locations should be reassessed. For example, monitoring streamflow for ecological purposes was not considered in the original design but has become an increased priority. The SECURE Water Act of 2009 directed the USGS to incorporate principles of adaptive management by conducting period reviews of the FPSs to assess whether the law's objectives were being adequately addressed. An analysis of the network could reveal whether some currently funded FPS sites are no longer in the national interest and funding could be reallocated to complete other sites. Changes in the national goals may also result in the discontinuation of long-term streamgages or the need for new streamgages, and coverage may increase or decrease in various river basins. Congress may consider replacing FPSs with the NextGen system by authorizing the NextGen system as a pilot program or broader program. For example, the Weather Research and Forecasting Innovation Act of 2017 ( P.L. 115-25 ) required NOAA to conduct a pilot program for commercial weather data. The act stipulated program criteria, authorization of appropriations, reporting requirements, and future directs for NOAA based on the success of the pilot program. Congress could provide similar mandates in legislation including which basins are chosen for NextGen system improvements and whether the basins are determined by an external study, the Administration, or Congress. While some acknowledge new streamgaging approaches are forthcoming, others may suggest that modeling streamflow may not provide as adequate data compared to traditional streamgages and altering the network design may result in loss of coverage at specific sites or across basins.", "summary": "Streamgages are fixed structures at streams, rivers, lakes, and reservoirs that measure water level and related streamflow—the amount of water flowing through a water body over time. The U.S. Geological Survey (USGS) in the Department of the Interior operates streamgages in every state, the District of Columbia, and the territories of Puerto Rico and Guam. The USGS Streamgaging Network encompasses 10,300 streamgages, which record water levels or streamflow for at least a portion of the year. Approximately 8,200 of these streamgages measure streamflow year round as part of the National Streamflow Network. The USGS also deploys temporary rapid deployment gages to measure water levels during storm events, and select streamgages measure water quality. Streamgages provide foundational information for diverse applications that affect a variety of constituents. The USGS disseminates streamgage data free to the public and responds to over 670 million requests annually. Direct users of streamgage data include a variety of agencies at all levels of government, private companies, scientific institutions, and recreationists. Data from streamgages inform real-time decisionmaking and long-term planning on issues such as water management and energy development, infrastructure design, water compacts, water science research, flood mapping and forecasting, water quality, ecosystem management, and recreational safety. Congress has provided the USGS with authority and appropriations to conduct surveys of streamflow since establishing the first hydrological survey in 1889. Many streamgages are operated cooperatively with nonfederal partners, who approach the USGS and sign joint-funding agreements to share the cost of streamgages and data collection. The USGS Cooperative Matching Funds (CMF) Program provides up to a 50% match with tribal, regional, state, and local partners, as authorized by 43 U.S.C. §50. The average nonfederal cost-share contribution has increased from 50% in the early 1990s to 63% in FY2018. In the early 2000s, the USGS designated federal priority streamgage (FPS) locations based on five identified national needs. The SECURE Water Act of 2009 (Title IX, Subtitle F, of P.L. 111-11) directed the USGS to operate by FY2019 no less than 4,700 federally funded streamgages. In FY2018, 3,640 of the 4,760 FPSs designated by the USGS were operational, with 52% of their funding from the USGS. Congressional appropriations and agreements with 1,400 nonfederal partners funded USGS streamgages at $189.5 million in FY2018. The USGS share included $24.7 million for FPSs and $29.8 million for cooperative streamgages through CMF. A dozen other federal agencies provided $40.7 million. Nonfederal partners, mostly affiliated with CMF, provided $94.3 million. In FY2019, Congress appropriated level funding for FPS and CMF streamgages. Congress directed an additional $8.5 million to pilot a Next Generation Integrated Water Observing System (NextGen), establishing dense networks of streamgages in representative watersheds in order to model streamflow in analogous watersheds. The President's budget request for FY2020 does not include NextGen system funding and would reduce CMF for streamgages by $250,000. The USGS uses appropriated funding to develop and maintain the USGS Streamgaging Network. The USGS and numerous stakeholders have raised funding considerations including user needs, priorities of partners, federal coverage, infrastructure repair, disaster response, inflation, and technological advances. Some stakeholders advocate for maintaining or expanding the network. Others may argue that Congress should consider reducing the network in order to prioritize other activities and that other entities operate streamgages tailored to localized needs. Congress might also consider whether to invest in streamgage restoration and new technologies. Congress may consider outlining the future direction for the USGS Streamgaging Network through oversight or legislation. As the USGS faces a deadline by the SECURE Water Act of 2009 to operate no less than 4,700 FPSs by FY2019, Congress directed the USGS through appropriations legislation to invest in the NextGen system. Congress may consider such policy options as pursuing both the FPS mandate and the NextGen system simultaneously, amending the SECURE Water Act of 2009, and the relative emphasis of the NextGen system.", "document_type": "crs"}
{"report": "The U.S. Department of Agriculture (USDA), under the authority of Congress as enunciated in periodic farm legislation, provides support to the U.S. farm economy through a variety of federal farm programs. Direct support can often involve the transfer of billions of dollars each year. For example, USDA's Commodity Credit Corporation (CCC) outlays on farm support programs have averaged $13.7 billion per year from 1996 through 2017. Program payments vary across commodities and regions as well as by size of farm operations. This variation has generated considerable interest—by both the general public and Congress—in who is eligible to participate in farm programs and, thus, may receive payments. The concern over program eligibility also derives, in part, from instances where farm payments have accrued to individuals who have never engaged in farming. Program eligibility requirements and payment limits are central to how many U.S. farm programs operate and how support dollars are distributed across the nation. In particular, eligibility requirements and payment limits determine who receives federal farm program payments and how much they receive. A number of statutory and regulatory requirements govern federal farm program eligibility for benefits under various programs. A key aspect of eligibility for major farm revenue support programs is the requirement that a person be \"actively engaged in farming\" (AEF)—that is, that a person contribute either labor or management time (or both) to the farm's operation. Not all farm programs are subject to the same AEF criteria, and the criteria often apply differently based on the type of legal entity owning the farm operation. This is the first of two reports on the subject of program eligibility and payment limits. This report focuses on current requirements to successfully be determined as AEF and thus eligible for certain farm program payments. Another report (CRS Report R44739, U.S. Farm Program Eligibility and Payment Limits ) focuses on farm program payment limits, conservation compliance, and adjusted gross income (AGI) restrictions. This report begins by briefly discussing the historical development of congressional efforts to define and tighten eligibility criteria for farm program payments. This is followed by a description of all of the key terms and concepts involved in defining a farm business and farm program payment recipient, including the three major types of farm business organizations (sole proprietorship, partnership, and corporation). Then the report discusses current requirements used to define a person or entity as being \"actively engaged in farming\" (AEF) by type of legal entity. This is followed by a description of a 2015 USDA rule—released subsequent to the 2014 farm bill ( P.L. 113-79 )—that clarifies what constitutes AEF for nonfamily members of a farming operation, how more than one nonfamily person may qualify as an active farm manager (subject to a limit of three farm managers), and the recordkeeping requirements necessary to meet this new criteria. Finally, the report discusses several issues that may be of potential interest to Congress concerning regulations governing the implementation and monitoring of AEF criteria. A 2014 discussion of farm program payment limit and eligibility issues by farmdoc daily states: Payment limits are a technical and legal issue. Any decision on the number of entities receiving payments should be made with due diligence, including careful consideration of the business and legal implications, and should be discussed with both the Farm Service Agency (FSA) and a lawyer who is an expert on payment limits. This report is not a legal brief, nor does it represent a CRS legal analysis. Nor does this report intend to discuss the merits, or lack thereof, of federal farm program payments. Given its complexities, a review of U.S. farm program eligibility and annual payment limit policy can facilitate a conceptual understanding of issues of potential interest to Congress. The initial attempt to restrict payments to actual farmers was in 1987, when Congress enacted what is commonly known as the Farm Program Payments Integrity Act (Omnibus Budget Reconciliation Act of 1987, P.L. 100-203 , §§1301-1307). According to the Government Accountability Office (GAO), Congress was motivated to pass the Farm Program Payments Integrity Act after hearing several concerns about farm payments going to individuals not involved in farming. This law required that an individual or entity meet AEF criteria to receive farm commodity payments. Since their establishment, AEF criteria have been a requirement for payment eligibility for most farm revenue support programs. Since 1996, an average of about $9 billion per year in farm support program payments have been subject to the AEF criteria. Thus, significant taxpayer resources are at stake. However, designing a transparent and comprehensive definition of what it means to be AEF has proven difficult. In 2004, GAO contended that USDA regulations failed to specify a measurable standard for what constituted \"a significant contribution of active personal management.\" Furthermore, GAO argued that, by not specifying such a measurable standard, USDA allowed individuals with little or no involvement in a farming operation to qualify for payments. As a consequence of such criticism, the definition of AEF has evolved over the years as Congress and USDA—via its regulatory powers—have attempted to tighten payment eligibility criteria. For example, the 2008 farm bill ( P.L. 110-246 ) added more specificity to the definition of person and legal entity . It limited qualifying payments via direct attribution to persons or legal entities with ownership interests in joint ventures that pooled the resources of multiple payment recipients. It also expanded a separate payment limit to the spouses of qualifying farm payment recipients. Yet GAO continued to argue that further specificity was needed for AEF criteria. The 2014 farm bill ( P.L. 113-79 , §1604) required USDA, in new regulations, to add more specificity to the role that a nonfamily producer who is a member of a legal entity—primarily a partnership or joint venture—must have to qualify for farm program benefits. In general, family farms receive special treatment in which every adult family member 18 years or older who receives income based on the farm's operating results is deemed to meet the AEF requirements. Prior to the 2018 farm bill, family membership was based on lineal ascendants or descendants but was also extended to siblings and spouses. The 2018 farm bill (§1703) further extended the definition of family member to include first cousins, nieces, and nephews. As a result, the current set of laws and rules governing farm program eligibility—particularly for family members of a farm operation—remain subject to considerable scrutiny and criticism from both rural and farm advocacy groups as well as certain Members of Congress. Critics contend that current USDA eligibility criteria—especially for providing active personal management—remain broad and subjective and may represent a low threshold to qualify for payments, thus facilitating the creation of partnership members to increase the farm business's payment limit and expand its farm payment receipts. Many types of farm business entities own and operate some sort of agricultural production activity. For purposes of determining the extent to which the participants of a farm operation qualify as potential farm program participants, three major categories are considered ( Table 1 ). 1. Sole proprietorship or family farm . The farm business is run by a single operator or multiple adult family members—the linkage being common family lineage—where each qualifying member is subject to an individual payment limit. Thus, a family farm potentially qualifies for an additional payment limit for each family member (18 years or older) associated with the principal operator who participates in the farming operation. Family farm or sole proprietorships comprised nearly 87% of U.S. farm operations in 2012. 2. Joint operation . Each member is treated separately and individually for purposes of determining eligibility and payment limits. Thus, a partnership's potential payment limit is equal to the number of qualifying members (plus any special exemptions such as spouses) times the individual payment limit. 3. Corporation. A legally defined association of joint owners or shareholders that is treated as a single person for purposes of determining eligibility and payment limits. This includes corporations, limited liability companies, and similar entities. Most incorporated farm operations are family held. These three categories represent over 98% of U.S. farm operations ( Table 1 ). Special rules exist for evaluating both the eligibility of and relevant payment limits for institutional and other exceptional types of potential legal entities. However, because of their small number (less than 2% of U.S. farm operations) and unique nature, they are not discussed further in this report. Generally, program eligibility begins with identification of participants. Identifying who or what is participating and therefore how payments may be attributed is the cornerstone to most farm program eligibility. To be eligible to receive any farm program payment, every person or legal entity—including both U.S. and non-U.S. citizens—must provide a name and address, and have either a social security number (SSN) in the case of a person, or a Taxpayer Identification Number (TIN) or Employee Identification Number (EIN) in the case of a legal entity with multiple persons having ownership interests. In this latter situation, each person with an interest must have a TIN or EIN and must declare an interest share in the joint entity using the requisite USDA forms. All participants in programs subject to payment eligibility and payment limitation requirements must submit to USDA two completed forms. The first, CCC-901 (Members' Information), identifies the participating persons and/or entities (through four levels of attribution if needed) and their interest share in the operation. The second form, CCC-902 (Farm Operating Plan), identifies the nature of each person's or entity's stake—that is, capital, land, equipment, active personal labor, or active personal management—in the operation. These forms need be submitted only once (not annually) but must be kept current in regard to any change in the farming operation. Critical changes to a farming operation might include adding a new family member, changing the land rental status from cash basis to share basis, purchasing additional base acres equivalent to at least 20% of the previous base, or substantially altering the interest share of capital or equipment contributed to the farm operation. This information is critical in determining the extent to which each person is actively engaged in the farming operation as described below. AEF criteria are a required component of eligibility for payments under the principal revenue support programs of the 2018 farm bill, including the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs and benefits under the Marketing Assistance Loan (MAL) program. In addition, two direct payment programs established by the Secretary of Agriculture under the authority of the Commodity Credit Corporation Charter Act require that payment recipients meet all AEF criteria—the Cotton Ginning Cost-Share program and the Market Facilitation Program. Finally, benefits under the Trade Adjustment Assistance for Farmers also require that participants meet AEF requirements. To be eligible for payments under any of these programs, participants—individuals as well as other types of legal entities—must meet specific requirements concerning their \"active participation\" in the farming operation. In contrast, AEF criteria are not applicable for other farm programs including crop insurance and conservation programs ( Table 4 ). The AEF requirements apply equally to U.S. citizens, resident aliens, and foreign entities. This section briefly reviews the specific requirements for each type of legal entity to qualify as AEF. To understand what it means to be AEF, consider first the case of a single producer. The 2014 farm bill (§1111) defined a producer as an owner, operator, landlord, tenant, or sharecropper that shares in the risk of producing a crop and is entitled to a share of the crop that is produced on the farm. The 2018 farm bill retained this definition of a producer. A person, as an individual producer, must meet the following three AEF criteria: P1. The person, independently and separately from other individuals with an interest in the farm business, makes a significant contribution to the operation of: a. capital, equipment, or land; and b. active personal labor, active personal management, or a combination of personal labor and active personal management; P2. The person's share of profits or losses is commensurate with his/her contribution to the farming operation; and P3. The person shares in the risk of loss from the farming operation. However, with respect to the latter two criteria (P2 and P3), USDA has generally interpreted them as having been met if a person or entity participating in a farm program receives income based on the farm's operating results and, thus shares in the profits and losses from the crop. The criteria for meeting ownership or rental control of farm assets (P1.a.) are straightforward. The active personal labor and/or management requirement (P1.b.) are described in more detail below. \"Active personal labor\" means personally providing physical activities necessary in a farming operation, including activities involved in land preparation, planting, cultivating, harvesting, and marketing of agricultural commodities in the farming operation. Other physical activities include those required to establish and maintain conserving cover crops on Conservation Reserve Program acreages and those physical activities necessary in livestock operations. The personal labor contribution by an individual must be at least the smaller of 1,000 hours annually or 50% of the total hours needed to conduct a farming operation comparable in size to the individual's ownership interest in the operation. The requirement for active personal management is less specific. For an individual it means personally providing and participating in management activities \"critical to the profitability of the farming operation.\" Such management activities may be performed under one or more of the following categories: Capital (which includes arranging financing and managing capital), acquiring equipment, acquiring land and negotiating leases, managing insurance, and managing participation in USDA programs; Labor (which includes hiring and managing of hired labor); and Agronomics and marketing (which includes selecting crops and making planting decisions), acquiring and purchasing crop inputs, managing crops and making harvest decisions, and pricing and marketing of crop production. The GAO, in a 2013 report to Congress, pointed out that this broad definition of active personal management made it very difficult for USDA to determine whether individual contributions are significant. Furthermore, GAO suggested that, under this broad definition, management responsibilities could be distributed among farm operation members so as to increase the number of individuals who can claim eligibility for payments based on management contributions. In terms of evaluating an individual's eligibility for program payments, the \"active\" personal labor requirement clearly implies that a person must be routinely \"on site\" to undertake physical activities in support of the farming operation. The \"active\" personal management requirement is less clear on physical location and potentially allows a person to make significant contributions of active personal management without physically visiting the farming operation. Current law allows for special treatment of a spouse. If one spouse is determined to be actively engaged in farming, then the other spouse shall also be determined to have met the requirement. Thus, a married farmer and spouse qualify for a doubling of the individual payment limit. Family membership in a farm business is defined by being a sibling, spouse, lineal ancestor (e.g., great-grandparent, grandparent, or parent), lineal descendant (e.g., son, daughter, grandchild, or great-grandchild), niece, nephew, or cousin of the principal operator. Every adult family member 18 years or older who receives income based on the farm's operating results is deemed to meet the AEF requirements. An exception is also made for landowners who may forgo the AEF labor and management requirement and still be deemed in compliance with all AEF requirements if the landowner receives income based on the farm's operating results and, thus, shares in the risk of profits (P2) and losses (P3) from the crop. Any person or legal entity that does not satisfy the AEF requirements will not be eligible for farm program benefits under relevant programs. For example, a landowner who rents farmland to another farming operation for a fixed rental rate (i.e., under a fixed cash-rental arrangement) would bear no risk nor be subject to any potential loss from the farming operation. In other words, the landowner would fail to meet AEF criteria P2 and P3 described earlier. In such cases, the landowner would not be eligible for the relevant farm program benefits. Similarly, a landlord who rents land to a farming operation for a share of the crop that is guaranteed in volume or value independent of the actual harvest results would also not bear any risk and, thus, not be eligible for farm program benefits. In the case of a joint operation, the amount of farm payments that can be earned in a year depends on the number of qualifying members and their ownership share. Each partner or member must separately meet all of the AEF criteria required for a person. In particular, each partner or member with an ownership interest must contribute active personal labor and/or active personal management to the farming operation (but subject to certain exemptions, such as the spousal and landlord exceptions listed above). The contribution must be identifiable and documentable, separate and distinct from the contributions made by any other partner or member, and critical to the profitability of the farming operation. Since a partnership's potential payment limit is equal to the number of qualifying members (plus qualifying exemptions) times the individual payment limit, the partnership's total limit could be expanded by the addition of each new qualifying member. Similarly, the partnership's total limit could be reduced by one individual payment limit for each member that fails to meet the AEF requirements and any other eligibility criteria. There is an exception to the AEF criteria for certain partnerships. When a partnership owns all of the land it uses for farming (i.e., no land is rented), then its members are automatically deemed to be actively engaged in farming, provided that the partners receive income based on the farm's operating results and, thus, share in the risk of profits and losses from the crop. In the case of a nonfamily member of a joint venture seeking to satisfy AEF criteria, his or her individual labor and management contributions must be recorded in a special log to verify that a \"significant contribution\" has been achieved. This is described later in this report in the section entitled \" Recordkeeping Requirement of Personal Hours Worked .\" In the case of a corporation or similar entity with multiple owners (or shareholders), the entity is essentially treated as a single individual. It is considered as \"actively engaged in farming\" with respect to a farming operation if: C1.The corporation makes a significant contribution of capital, equipment, or land (or a combination thereof); C2.Each member with an ownership interest in the corporate entity makes a significant contribution of personal labor or active personal management—whether compensated or not—to the operation that are: a. performed on a regular basis; b. identifiable and documentable; and c. separate and distinct from such contributions of other members; C3.The collective contribution of corporate members is significant and commensurate with contributions to the farming operation; and C4.The corporation also meets the AEF criteria cited above for a person of (P2) sharing commensurate profits or losses, and (P3) bearing commensurate risk. If any member of the corporation fails to meet the labor and management requirements of C2 above, then any program payment or benefit to the corporation will be reduced by an amount commensurate with the ownership share held by that member. An exception to this requirement applies if (a) at least 50% of the entity's stock is held by members that are \"actively engaged in providing labor or management,\" and (b) the total annual farm program payments received collectively by the stockholders or members of the entity is less than one payment limitation. There is an additional exception to the AEF criteria for certain corporate entities. When a corporation owns all of the land it uses for farming (i.e., no land is rented), then the corporation is automatically deemed to meet the AEF criteria provided the corporation receives income based on the farm's operating results and, thus, shares in the risk of profits and losses from the crop. When considering institutional recipients of farm payments subject to AEF criteria (i.e., ignoring family and individual payment recipients and recipients of farm payments not subject to AEF criteria), USDA data for 2015 suggests that there were 95,417 qualifying institutional arrangements ( Table 2 ). A nonfamily member of a farming operation is, by default, anyone who fails to meet the criteria of family membership. The 2014 farm bill (§1604) required USDA to add more specificity to the role that a nonfamily producer who is a member of a legal entity—primarily a partnership or joint venture—must play to qualify for farm program benefits. In the rule, USDA was directed to explicitly 1. Define what constitutes a \" significant contribution of active personal management \" for the purpose of payment eligibility. 2. Consider limits on the number of persons per farming operation who may be considered actively engaged in farming based on a significant contribution of active personal management . Such consideration should take into account: the size, nature, and management requirements of a farming operation; the changing nature of active personal management due to advancements of farming operations; and the degree to which these new regulations will adversely impact the long-term viability of the farming operation. 3. Exclude operations comprised solely of family members from these provisions. 4. Include a plan for monitoring the status of compliance reviews. The resulting USDA rule, published on December 16, 2015, specifies how legal entities comprised, either entirely or in part, of nonfamily members may be determined eligible for payments, based on a contribution of active personal management. The provisions of this rule do not apply to persons or entities comprised entirely of family members. It is noteworthy that, based on 2012 evidence in Table 1 , nonfamily farm operations comprise a relatively small share (less than 9%) of total farm operations. USDA estimated that the rule's limit on the number of farm managers could affect around 1,400 general partnerships and joint ventures, reducing USDA outlays (and benefits to producers) by about $50 million total for crop years 2016 through 2018, with an annual impact of $4 million to $38 million. As a result of the rule, several additional requirements now apply to nonfamily farming operations seeking to qualify more than one farm manager. Specifically, in addition to the existing AEF requirements, a limit is placed on the number of nonfamily members of a farming operation that can be qualified as a farm manager. Also, an additional recordkeeping requirement now applies for each member of such farming operations contributing any active personal management. This rule restricts the number of nonfamily farm managers per farming operation to o ne f arm m anager , with the following exceptions: Two f arm m anagers permissible . If one person of the farming operation meets the AEF requirements by making a contribution of active personal management, and that farming operation seeks to qualify a second farm manager, the farming operation must also meet the requirement that it is either a large operation or a complex operation. T hree f arm m anagers permissible . To qualify a total of three farm managers, the operation is required to meet the requirements for both size and complexity. No m ore t han t hree f arm m anagers . Under no circumstances is a nonfamily farming operation allowed to qualify more than three persons as farm managers. If a farming operation (comprised, in part, of nonfamily members) seeks to qualify one or more nonfamily farm managers as actively engaged in farming, then all persons that provide any management to the farming operation are required to maintain contemporaneous records or activity logs of their management activities, including the management activities that may not qualify as active personal management under this rule. Specifically, activity logs must include information about the location of where the management activity was performed (either on-site or remote) and the time expended or duration of the management and/or labor (see below) performed for the farming operation. In addition, a person's contributions must be identifiable and documentable, separate and distinct from the contributions of other members of the farm operation, and critical to the profitability of the farming operation. The new definition for a significant contribution of active personal management (for nonfamily members only) requires an annual contribution of 500 hours of management or at least 25% of the total management required for that operation. Eligible management activities must be performed under one or more of the management categories listed earlier in the report section entitled \" Active Personal Management .\" The final rule also takes into consideration all of the actions of the farming operation associated with the financing. Passive management activities such as attendance at board meetings or on conference calls, or watching commodity markets or input markets (without making trades), are not considered as making a significant contribution of active personal management. The final rule, in response to public comment on the difficulty in discriminating between management and labor for farming operations, expanded the measurable standard of what constitutes a significant contribution to include a potential combination of both active personal labor and active personal management. A minimum hourly requirement for a significant contribution of active personal labor of 1,000 hours was established and joined with the hourly standard of 500 hours adopted for defining a significant contribution of active personal management. USDA published a table showing the qualifying minimum combinations of hours contributed to management and labor activities. The table includes five minimum thresholds of combined hours, ranging from 550 hours with predominantly management-identified hours to 950 hours with predominantly labor-identified hours. Since 1987, when Congress first introduced the term \"actively engaged in farming\" and required that an individual or entity meet AEF criteria to receive farm program payments, U.S. legislators have continued their efforts to limit payments to those who are actual farmers. However, long-standing concerns remain that some farm operations are organized to overcome program payment limits and maximize the amount of their farm program payments. In particular, some advocacy groups suggest that USDA's new rule did not go far enough in tightening AEF criteria and that it continues to allow for a high number of farm managers and associated payment limits for both family and nonfamily farm operations. These concerns include the lack of specificity in eligibility criteria that continues to allow for as many as three nonfamily farm managers (each, plus their spouses, qualifying for a full payment limit) and no limit on the number of potential farm managers from family-held farm operations. This is noteworthy because family-operated farm businesses represent over 91% of all farm operations. As an example of the lack of specificity, critics point out that the 2014 farm bill provision (§1604) permits exceptions under the rationale of \"concern for the long-term viability\" of the farming operation. Furthermore, critics contend that, under the current monitoring system, it can be difficult for USDA to verify the management claims of farm operation partners. Several of these concerns are briefly described here. GAO has undertaken several studies of program eligibility and of USDA efforts to monitor and enforce program payment limits. GAO has cited three principal hindrances to USDA oversight and enforcement of AEF regulations for members—both family and nonfamily alike—of a farming operation that claim AEF compliance by providing active personal management: (1) the definition of active personal management is broad and can be interpreted to include many potential activities, (2) requirements of what constitutes significant contributions of management are subjective, and (3) it is difficult to verify individuals' evidence of claimed contributions of active personal management and personal labor—often depending on interviews with individual payment recipients. GAO has said that the three concerns cited above prevent USDA from rigorously enforcing payment eligibility criteria. As a result, large farm operations can distribute various management activities among a partnership's members so as to increase the number of individuals who can claim eligibility for payments based on different types of management contributions. Furthermore, broad regulations allow members to claim that they are making a significant management contribution without physically visiting the farming operation. Thus, the federal government risks distributing payments to individuals who may have little actual involvement in farming operations. In a 2010 regulation, USDA recognized that it has the regulatory authority to tighten eligibility criteria but that it is unlikely to use that authority unless explicitly directed to do so by Congress: The definition of what constitutes a significant contribution is provided by regulation, not by statute and could be changed. We recognize the difficulty in determining the significance of a management contribution under the current definition and the desirability of a measurable, quantifiable standard. However, unlike labor, the significance of a management contribution is not appropriately measured by the amount of time a person spends doing the claimed contribution. The current regulatory definition of a significant contribution of active personal management has been in effect for over 20 years; Congress has not mandated a more restrictive definition during that time, including in the 2008 Farm Bill. As a result, GAO stated that \"it appears unlikely that FSA will change its regulatory definition of active personal management in view of its 2010 statements in the Federal Register .\" USDA data from 2015 ( Table 3 ) demonstrated that partnerships and joint ventures with larger numbers of members relied more heavily on active personal management criteria to meet AEF qualifications. Congress—in the 2014 farm bill (§1604)—explicitly directed USDA to design new regulations for AEF criteria but only for nonfamily members of farming operations. Furthermore, Congress directed that the new AEF criteria avoid any new regulatory obligations that would add to any paperwork or management burden of family farm operations. USDA released the rule in 2015. Under the 2014 farm bill and 2015 USDA rule, a farm operation—operated primarily by nonfamily members—that meets both the size and complexity criteria discussed above could qualify three farm managers (and potentially their spouses) in addition to those persons qualifying under the personal labor criteria. Thus, a large nonfamily farming operation could have a payment limit that is over $1 million per year. Family-managed farm operations have no limit on the number of potential qualifying members and, thus, on the overall payment limit. Members of Congress may be interested in reviewing the number of farm managers allowed, possibly by establishing an explicit limit on the number a farming operation could claim. For example, everyone on a farm operation who qualifies as a working farmer (i.e., provides land, capital, or equipment and meets the personal labor requirement) could remain eligible to participate in farm programs and receive program payments. However, a restriction could be developed whereby only a single farm manager would be eligible to qualify without providing any farm labor. The spouses of the qualifying persons—both workers and manager—could continue to qualify for payments. The 2014 farm bill (§1604(b)(3)) instructed USDA to consider the extent to which new regulations would \"adversely impact\" the long-term viability of the farming operation. The basis for determining whether a \"significant contribution\" of managerial activity has occurred is a subjective assessment. Some wonder whether it might negate any farm manager limit—even on nonfamily farm operations—since one could argue that all farm managers are critical for a farm's long-term viability. The farm manager restrictions related to the 2015 USDA regulation are relevant only for nonfamily members of a farming operation. The 2014 farm bill (§1604(c)) explicitly directs USDA to not apply any new restrictions to farm operations comprised solely of family members. An adult family member is considered actively engaged in farming if he or she receives income based on the farm's operating results. It is assumed that such a family member meets any input or labor requirements, and no recordkeeping is required to verify that sufficient labor hours have been worked on the farm operation or that sufficient managerial time has been made. Various Members of Congress will likely be interested in monitoring the success of USDA's efforts to impose new payment disciplines on nonfamily participants while preventing new management burdens on family farms. Furthermore, they will likely be interested in the extent, if any, to which large farm operations are able to avoid eligibility and payment requirements. ", "summary": "In 1987, Congress enacted what is commonly known as the Farm Program Payments Integrity Act (Omnibus Budget Reconciliation Act of 1987, P.L. 100-203, §§1301-1307), which requires that an individual or legal entity be \"actively engaged in farming\" (AEF) to be eligible for federal commodity revenue support programs. AEF requirements apply equally to U.S. citizens, resident aliens, and foreign entities. Designing a transparent and comprehensive AEF definition has proven difficult and has evolved over the years. The current set of laws and rules governing farm program eligibility—for both family and nonfamily members on farm operations—remain subject to considerable scrutiny and criticism from both rural and farm advocacy groups as well as certain Members of Congress. In particular, critics contend that current U.S. Department of Agriculture (USDA) eligibility criteria—especially for providing active personal management—remain broad and subjective and may represent a low threshold to qualify for payments, thus facilitating the creation of new farm operation members simply to expand an operation's farm payment receipts. Three major categories of legal entities are subject to AEF requirement for program payment eligibility: an individual, a partnership, and a corporation. An individual must meet three specific AEF criteria. First, independently and separately from other individuals with an interest in the farm business, the person makes a significant contribution to the operation of: (a) capital, equipment, or land; and (b) active personal labor and/or active personal management. Second, the person's share of profits or losses is commensurate with his/her contribution to the farming operation. Third, the person shares in the risk of loss from the farming operation. An individual that meets the AEF criteria is eligible for farm program payments but subject to annual payment limits. If a married person meets the AEF requirements, any spouse will also be considered to have met the AEF requirements, thus effectively doubling the individual payment limit. Also, every family member 18 years or older who receives income based on the farm's operating results is deemed to meet the AEF requirements and is eligible for a separate payment limit. Another exception to AEF requirements is made for landowners provided they receive income based on the farm's operating results. A general partnership is an association of multiple persons whereby each member is treated separately and individually for purposes of determining eligibility and payment limits. A partnership's potential payment limit is equal to the limit for a single person times the number of persons or legal entities that comprise the operation's ownership and meet the AEF requirements. Thus, adding a new member can potentially provide an additional payment limit. A corporation is an association of joint owners that is treated as a single person for purposes of determining eligibility and payment limits, provided that the entity meets the AEF and other eligibility criteria. Adding a new member generally does not affect a corporation's payment limit but only increases the number of members that can share a single payment limit. In accordance with a provision in the 2014 farm bill (P.L. 113-79; §1604), USDA added more specificity to the role that a nonfamily member of a partnership or joint venture must play to qualify for farm program benefits. However, considerable issues remain that may be of interest to Congress. Long-standing concerns remain that some farm operations are organized to overcome program payment limits and maximize the amount of their farm program payments. In particular, some advocacy groups suggest that USDA's new rule did not go far enough in tightening AEF criteria and that it continues to allow for a high number of farm managers and associated payment limits for both family and nonfamily farm operations.", "document_type": "crs"}
{"report": "Central governance in Yemen, embodied by the decades-long rule of former President Ali Abdullah Saleh, began to unravel in 2011, when political unrest broke out throughout the Arab world. Popular youth protests in Yemen were gradually supplanted by political elites jockeying to replace then-President Saleh. Ultimately, infighting among various centers of Yemeni political power broke out in the capital, and government authority throughout the country eroded. Soon, militias associated with Al Qaeda in the Arabian Peninsula (AQAP) seized territory in one southern province. Concerned that the political unrest and resulting security vacuum were strengthening terrorist elements, the United States, Saudi Arabia, and other members of the international community attempted to broker a political compromise. A transition plan was brokered, and in 2012 former Vice President Abdu Rabbu Mansour Hadi became president. With the support of the United States, Saudi Arabia, and the United Nations Security Council, President Hadi attempted to reform Yemen's political system. Throughout 2013, key players convened a National Dialogue Conference aimed at reaching broad national consensus on a new political order. However, in January 2014 it ended without agreement. One antigovernment group in particular, the northern Yemeni Houthi movement, sought to use military force to reshape the political order. Within weeks of the National Dialogue Conference concluding, it launched a military offensive against various tribal allies of President Hadi. The Houthi were joined by the forces still loyal to former President Saleh, creating an alliance of convenience that was a formidable opponent to President Hadi and his allies. In 2014, Houthi militants took over the capital of Sanaa (also spelled Sana'a) and violated several power-sharing arrangements. In 2015, Houthi forces advanced southward from the capital all the way to Aden on the Arabian Sea. In March 2015, after President Hadi, who had fled to Saudi Arabia, appealed for international intervention, Saudi Arabia and a hastily assembled international coalition launched a military offensive aimed at restoring Hadi's rule and evicting Houthi fighters from the capital and other major cities. In April 2015, the United Nations Security Council passed Resolution (UNSCR) 2216 demanding that Houthi-Saleh forces end their use of violence and that all Yemeni parties avoid \"further unilateral actions that could undermine the political transition in Yemen.\" The United States agreed to provide limited assistance to the coalition military operations, assistance which has evolved over time in response to conditions in the conflict and in light of congressional scrutiny. In early December 2017, the Houthi-Saleh alliance unraveled, culminating in the killing of former President Saleh on December 4, 2017. Since Saleh's death, the coalition has made military gains, advancing northward along the Red Sea coast toward the port of Hudaydah (also spelled Hodeidah, Hudayda). Nevertheless, Houthi forces remain ensconced in northern Yemen and remain in control of the capital. The war has exacerbated a humanitarian crisis in Yemen that began in 2011; as of January 2019, over half of the population required emergency food assistance. Access restrictions to certain areas of Yemen make it problematic for governments and aid agencies to count the war's casualties. One U.S. and European-funded organization, the Armed Conflict Location & Event Data Project (ACLED), estimates that 60,000 Yemenis have been killed since January 2016. UNHCR estimates that 3.9 million Yemenis were displaced internally as of January 2019. In January 2019, the United Nations Panel of Experts on Yemen released their annual report covering 2018. This report noted that Yemen continues to \"slide towards humanitarian and economic catastrophe.\" Though the actual ground war remains confined to \"relatively small areas,\" the effect of the conflict on the economy, as well as the growing presence of armed groups and deep-rooted corruption, has impacted ordinary Yemenis within both Houthi-held areas and liberated areas. On December 6, 2018, the warring parties to the conflict in Yemen convened in Sweden under the auspices of the United Nations to discuss various de-escalation proposals and a possible road map to a comprehensive peace settlement. The talks were the first formal negotiations since 2016. After a week of negotiations, all sides agreed to the Stockholm Agreement, which consists of three components: a cease-fire around the port city of Hudaydah, a prisoner swap, and a statement of understanding that all sides would form a committee to discuss the war-torn city Taiz. Though fighting continues along several fronts, on December 13, 2018, Special Envoy of the United Nations Secretary-General for Yemen Martin Griffiths brokered a cease-fire centered on the besieged Red Sea port city of Hudaydah, Yemen's largest port. As part of the deal, the coalition and the Houthis agreed to redeploy their forces outside Hudaydah city and port. The United Nations agreed to chair a Redeployment Coordination Committee (RCC) to monitor the cease-fire and redeployment. On January 16, the United Nations Security Council (UNSCR) passed UNSCR 2452, which authorized (for a 6-month period) the creation of the United Nations Mission to support the Hudaydah Agreement (UNMHA), of which the RCC was a significant component. For nearly two months, implementation of the Stockholm Agreement stalled. According to U.N. Special Envoy Griffiths, \"The initial timelines were rather ambitious….We are dealing with a complex situation on the ground.\" The Stockholm Agreement did not specify which local actors were to assume responsibility for security in Hudaydah after both parties redeployed. On February 17, the United Nations announced that \"The parties reached an agreement on Phase 1 of the mutual redeployment of forces\" whereby the Houthis would withdraw from Hudaydah port and the Saudi-led coalition would move out of the eastern outskirts of Hudaydah city. Still, the warring parties have yet to agree on the identities of local police forces to take over security in Hudaydah. As of March 2019, the parties had made \"significant progress towards an agreement to implement phase one of the redeployments of the Hudayda agreement.\" Until a final redeployment is reached, the Houthis remain ensconced in Hudaydah, with barricades, trenches and roadblocks still present throughout the city. The Houthis want local coast guard units to assume control. The coalition claims, however, that the leaders of the local coast guards are loyal to the Houthis, and U.N. observers may have difficulty in verifying the neutrality of security personnel in Hudaydah. U.N. officials have reported to the Security Council that the Houthis fear that a withdrawal from Hudaydah will make their forces vulnerable to attack by the coalition. Meanwhile, in Jordan, several meetings between the Houthis and the Hadi government have taken place over a planned prisoner exchange as called for in the Stockholm Agreement. Although some exchanges of wounded personnel and prisoners have taken place, the talks have not produced a comprehensive agreement to date. Overall, many observers remain skeptical that the cease-fire reflects a broader impulse to end the war, seeing it instead as a means of easing international pressure on the coalition. Since the signing of the Stockholm Agreement, the Saudi-led coalition has conducted airstrikes in Sanaa in retaliation for a Houthi drone attack against a Yemeni military parade. In late January, artillery fire struck a camp for internally displaced people in Yemen's northwestern Hajjah province, killing eight civilians and wounding 30 others. According to reporting by the United Nations, implementation of the Stockholm Agreement has been hindered by an overall lack of trust and a reluctance to make operational concessions outside of a comprehensive political agreement. In 2019, the Trump Administration has continued to support United Nations-led efforts in addressing the humanitarian situation and working toward a comprehensive peace in Yemen. At the same time, the United States has continued to cooperate with Saudi Arabia and the UAE in countering terrorism and attempting to limit Iran's influence in Yemen. For the Trump Administration, U.S. officials have supported the continued defense of Saudi Arabia against Houthi missile and rocket strikes, while also openly calling on coalition members to use air power judiciously to minimize civilian casualties. After ending U.S. refueling support at the coalition's request in November 2018, the Administration has argued against congressional attempts to block arms sales or to end or condition U.S. assistance, arguing that continued U.S. assistance is more likely to achieve the objectives of limiting civilian casualties and maintaining strategic ties to Gulf partners than a punitive approach. To address congressional concerns over errant coalition airstrikes against Yemeni civilians, on November 11, 2018, the United States halted in-flight refueling support for coalition aircraft at the request of the coalition. A month later, then-U.S. Ambassador-designate to Yemen Christopher Henzel noted in his Senate confirmation hearing that \"At our urging, the Saudi-led coalition has incorporated the no-strike list into its target development procedures, stopped the use of cluster munitions, changed its rules of engagement to incorporate U.S. recommendations, and established the Joint Incident Assessment team. The United States will continue to press the coalition and the Republic of Yemen government to minimize civilian casualties and expand urgent humanitarian efforts throughout the country.\" In early February 2019, CENTCOM Commander General Joseph Votel testified before the Senate Armed Services Committee regarding the U.S. role in assisting Saudi Arabia. General Votel remarked that: The United States will continue to support our regional partners developing processes and procedures to counter ballistic missiles (CBM) and counter unmanned armed aerial systems (C-UAS) to help mitigate threats to civilian populations and critical infrastructure…. We continue to share our own experiences and processes in an effort to improve Saudi Arabia's operational performance and reduce civilian casualties. CENTCOM's security cooperation with Saudi Arabia remains a critical link in our efforts to strengthen partners in the region and meet current and future challenges. The work of U.S. advisors is essential to the success of our mission, and Saudi Arabia underwrites the lion's share of their presence. In February 2019, CNN reported that Saudi Arabia and the UAE had provided U.S. military equipment (armored vehicles) to local Yemeni units fighting the Houthis in possible violation of end-user foreign military sale or direct commercial sale agreements. The coalition has denied these charges, while the U.S. State Department has said that it is \"seeking additional information\" on the issue. At the February 2019 Ministerial to Promote a Future of Peace and Security in the Middle East in Warsaw, Poland, members of the self-described \"quad\" (United States, United Kingdom, Saudi Arabia, and the United Arab Emirates) met to coordinate their policy toward the Yemen conflict. The quad emphasized the importance of implementing the Stockholm Agreement, the problematic role Iran plays in arming and financing the Houthis, and the need for additional humanitarian assistance. The foreign ministers comprising the quad also \"expressed full support for Saudi Arabia and its legitimate national security concerns and called for an immediate end to such attacks by Houthi forces and their allies.\" On February 13, 2019, the House passed (248-177) H.J.Res. 37 , a joint resolution \"Directing the removal of United States Armed Forces from hostilities in the Republic of Yemen that have not been authorized by Congress.\" Prior to its passage by the House, the White House issued a Statement of Administration Policy in which the Administration argued that \"the premise of the joint resolution is flawed\" because the United States has provided only \"limited support to member countries of the Saudi-led coalition\" and U.S. forces providing such intelligence and logistics support are not engaged in hostilities. As amended and passed by the House, Section 4 of H.J.Res. 37 includes a rule of construction stating that \"Nothing in this joint resolution may be construed to influence or disrupt any intelligence, counterintelligence, or investigative activities conducted by, or in conjunction with, the United States Government…\" The Senate companion resolution, S.J.Res. 7 , was introduced on January 30, 2019 and passed by the Senate (54-46) on March 13, 2019. As amended, S.J.Res. 7 includes rules of construction stating that \"nothing in this joint resolution may be construed to influence or disrupt any intelligence, counterintelligence or investigative activities relating to threats in or emanating from Yemen conducted by, or in conjunction with, the United States Government…\" (Section 4) and that \"nothing in this joint resolution may be construed as authorizing the use of military force\" (Section 7). On February 7, 2019, Ranking Member on the Senate Foreign Relations Committee Senator Robert Menendez introduced S. 398 , the Saudi Arabia Accountability and Yemen Act of 2019. This bill, which was originally introduced in the 115 th Congress, would, among other things, require the end of in-flight refueling for Saudi-led coalition operations in Yemen, suspend certain arms sales to the kingdom, sanction persons blocking humanitarian access in Yemen, and sanction persons supporting the Houthis in Yemen. Although Houthi militia forces most likely do not depend on Iran for all of their armaments, financing, and manpower, many observers agree that Iran and its Lebanese ally Hezbollah have aided Houthi forces with advice, training, and arms shipments. In 2016, one unnamed Hezbollah commander interviewed about his group's support for the Houthis remarked \"After we are done with Syria, we will start with Yemen, Hezbollah is already there.... Who do you think fires Tochka missiles into Saudi Arabia? It's not the Houthis in their sandals, it's us.\" In repeated public statements by high-level Saudi officials, Saudi Arabia has cited Iran's illicit support for the Houthis as proof that Iran is to blame for the Yemen conflict. Reports and allegations of Iranian involvement in Yemen have become more frequent as the war has continued, and from Iran's perspective, aiding the Houthis would seem to be a relatively low-cost way of keeping Saudi Arabia mired in the Yemen conflict. However, Iran had few institutionalized links to the Houthis before the civil conflict broke out in 2015, and questions remain about the degree to which Iran and its allies can control or influence Houthi behavior. At present, Iranian aid to the Houthis does not appear to match the scale of its commitments to proxies in other parts of the Middle East, such as in Syria, Lebanon, and Iraq. Prior to the 2015 conflict, the central government in Yemen had acquired variants of Scud-B missiles from the Soviet Union and North Korea. The Houthis took control of these missiles as part of their seizure of the capital. Since 2016, the Houthis have been firing what they call the \"Burkan\" short-range ballistic missile (claimed range of 500-620 miles) into Saudi Arabia (the latest version is the Burkan-2H). In November 2017, after the Houthis fired a Burkan-2H deep into Saudi Arabian territory, the Saudi-led coalition and U.S. officials said that the Burkan-2H is an Iran-manufactured Qaim missile. In January 2018, the United Nations Panel of Experts on Yemen concluded that Iran was in noncompliance with UNSCR 2216 for failing to prevent the transfer to Houthi forces of Iranian-made short-range ballistic missiles. On February 26, 2018, Russia vetoed a draft U.N. Security Council resolution that would have expressed U.N. concern that Iran is in noncompliance with the international arms embargo created by UNSCR 2216. In summer 2018, the United Nations Panel of Experts on Yemen provided a confidential report to the United Nations Security Council suggesting that Iran may be continuing to violate the international arms embargo by supplying the Houthis with advanced weaponry. After the U.N. experts visited Saudi Arabia and inspected debris from missiles fired by the Houthis, their report noted that these weapons showed \"characteristics similar to weapons systems known to be produced in the Islamic Republic of Iran\" and that there was a \"high probability\" that the missiles were manufactured outside of Yemen, shipped in sections to the country, and reassembled by the Houthis. In May 2018, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated five Iranian individuals who have \"provided ballistic missile-related technical expertise to Yemen's Houthis, and who have transferred weapons not seen in Yemen prior to the current conflict, on behalf of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).\" In testimony to the Senate Select Committee on Intelligence in January 2019, Director of National Intelligence Daniel Coats stated: In Yemen, Iran's support to the Huthis, including supplying ballistic missiles, risks escalating the conflict and poses a serious threat to US partners and interests in the region. Iran continues to provide support that enables Huthi attacks against shipping near the Bab el Mandeb Strait and land-based targets deep inside Saudi Arabia and the UAE, using ballistic missiles and UAVs. The U.N. Panel of Experts on Yemen reported in January 2019 that the panel \"has traced the supply to the Houthis of unmanned aerial vehicles and a mixing machine for rocket fuel and found that individuals and entities of Iranian origin have funded the purchase.\" For Saudi Arabia, according to one prominent analyst, the Houthis embody what Iran seeks to achieve across the Arab world: that is, the cultivation of an armed nonstate, non-Sunni actor who can pressure Iran's adversaries both politically and militarily (akin to Hezbollah in Lebanon). A decade before the current conflict began in 2015, Saudi Arabia supported the central government of Yemen in various military campaigns against a Houthi insurgency which began in 2004. In 2014, when Houthi militants took over the capital and violated several power-sharing arrangements, Saudi leaders expressed increasing alarm about Houthi advances. In March 2015, after President Hadi, who had fled to Saudi Arabia, appealed for international intervention, Saudi Arabia quickly assembled an international coalition and launched a military offensive aimed at restoring Hadi's rule and evicting Houthi fighters from the capital and other major cities. Saudi-led coalition forces began conducting air strikes against Houthi-Saleh forces and imposed strict limits on sea and air traffic to Yemen. From the outset, Saudi leaders sought material and military support from the United States for the campaign. In March 2015, President Obama authorized \"the provision of logistical and intelligence support to GCC-led military operations,\" and the Obama Administration announced that the United States would establish \"a Joint Planning Cell with Saudi Arabia to coordinate U.S. military and intelligence support.\" U.S. CENTCOM personnel were deployed to provide related support, and U.S. mid-air refueling of coalition aircraft began in April 2015 and ended in November 2018. In the years since, the Saudi military and its coalition partners have provided advice and military support to a range of pro-Hadi forces inside Yemen, while waging a persistent air campaign against the Houthis and their allies. Saudi ground forces and Special Forces have conducted limited cross-border operations, and Saudi naval forces limit the entry and exit of vessels from Yemen's ports. Separately, a United Nations Verification and Inspection Mechanism (UNVIM) has operated since May 2016 to assist in validating commercial sea and air traffic in support of the arms embargo imposed by Resolution 2216. According to President Trump's December 2018 letter to Congress consistent with the War Powers Resolution, U.S. Armed Forces, \"in a non-combat role,\" continued to provide military advice and limited information, logistics, and other support to regional forces combatting the Houthi insurgency in Yemen; however, aerial refueling of regional forces' aircraft ended in November 2018. United States forces are present in Saudi Arabia for this purpose. Such support does not involve United States Armed Forces in hostilities with the Houthis for the purposes of the War Powers Resolution. As the Saudi-led coalition's campaign against the Houthis continues and Yemen fragments, the United States has sustained counterterrorism operations against Al Qaeda in the Arabian Peninsula (AQAP) and various affiliates of the Islamic State. In total, CENTCOM conducted 36 air strikes in Yemen in 2018. According to President Trump's December 2018 letter to Congress consistent with the War Powers Resolution, \"a small number of United States military personnel are deployed to Yemen to conduct operations against al-Qa'ida in the Arabian Peninsula (AQAP) and ISIS‑Yemen.\" In December 2018, General Frank McKenzie testified before the Senate Armed Services Committee stating that \"they [AQAP] have an aspiration to attack the United States. They are prevented from generating that only because of the direct pressure that remains on them. So that is a clear, unequivocal national interest of the United States.\" Some observers contend that AQAP's power inside Yemen has diminished considerably as a result of losses sustained from U.S. counterterrorism operations and of competing Yemeni factions vying for supremacy. According to Gregory D. Johnsen, resident scholar at the Arabia Foundation, \"AQAP is weaker now than it has been at any point since it was formed in 2009.\" In August 2018, U.S. officials claimed that one of the most high-value targets in the AQAP organization, bomb maker Ibrahim al Asiri, had been killed in a U.S. air strike last year. Asiri was a Saudi national who was believed to have created the explosive devices used in the 2009 Christmas Day attempted bombing of Northwest Airlines Flight 253, in a 2009 attack against former Saudi Arabian intelligence chief Mohammed bin Nayef, and in the October 2010 air cargo packages destined for Jewish sites in Chicago. In January 2019, U.S. officials confirmed that Jamal al-Badawi, an al Qaeda operative involved in the October 2000 bombing of the USS Cole in Aden, was killed in a precision strike in Marib governorate on January 1. Al-Badawi had been indicted by a federal grand jury in 2003 for the murder of U.S. nationals and U.S. military personnel. To date, two American soldiers have died in the ongoing U.S. counterterrorism campaign against AQAP and other terrorists inside Yemen. In January 2017, Ryan Owens, a Navy SEAL, died during a counterterrorism raid in which between 4 and 12 Yemeni civilians also were killed, including several children, one of whom was a U.S. citizen. The raid was the Trump Administration's first acknowledged counterterror operation. In August 2017, Emil Rivera-Lopez, a member of the elite 160th Special Operation Aviation Regiment, died when his Black Hawk helicopter crashed off the coast of Yemen during a training exercise. According to the United Nations, Yemen's humanitarian crisis is the worst in the world, with close to 80% of Yemen's population of nearly 30 million needing some form of assistance. The U.N.Office for the Coordination of Humanitarian Affairs (OCHA) estimates that two-thirds of the population is food insecure, one-third are suffering from extreme levels of hunger, and 230 out of Yemen's 333 districts were at risk of famine as of January 2019. In sum, the United Nations notes that humanitarian assistance is \"increasingly becoming the only lifeline for millions of Yemenis.\" As noted above, on February 17, the parties to the conflict began to implement the Stockholm Agreement. The deal calls for main roads to reopen from Hudaydah to Sanaa and Taiz and humanitarian access to the Red Sea Mills grain storage facility, which holds enough grain to provide food for 3.7 million Yemenis for a month. Access to the Mills has been cut off since September 2018. On February 26 in Geneva, the United Nations and the Governments of Sweden and Switzerland hosted the third annual pledging conference for the crisis in Yemen. Saudi Arabia and the UAE each pledged $750 million. For 2019, the United Nations is seeking $4 billion from donors for programs in Yemen. The 2018 humanitarian appeal sought a little over $3 billion, of which donors have provided $2.58 billion to date. The United States, Saudi Arabia, the United Arab Emirates, and Kuwait combined accounted for 66.8% of all contributions to the 2018 appeal. Between FY2018 and FY2019, the United States has provided $720.8 million in emergency humanitarian aid for Yemen. Most of these funds ($498 million) are provided through USAID's Office of Food for Peace to support the World Food Programme in Yemen. Since March 2015, the United States has been the largest contributor of humanitarian aid to Yemen, with more than $1.71 billion in U.S. funding provided since FY2015. The United States provided a total of $566.2 million in humanitarian assistance in FY2018. Funds were provided to international aid organizations from USAID's Office of Foreign Disaster Assistance (OFDA), USAID's Food for Peace (FFP), and the U.S. Department of State's Bureau of Population, Refugees, and Migration (State/PRM). Humanitarian conditions continue to be undermined both by economic disruptions caused by the fracturing of the country's financial system and by access constraints imposed by parties to the conflict. Remote regions of northern Yemen deep in Houthi territory are often the most challenging areas in which to deliver food aid. In most other parts of the country, food is available for purchase in the marketplace but prices are unaffordable for wide swaths of the population. According to the Food and Agriculture Organization of the United Nations, \"The average cost of the minimum survival food basket—comprised of the minimum items required for a household to survive for one month—remains more than 110 percent higher than prior to the conflict's escalation in March 2015.\" One cause of inflationary prices is the depreciation of the national currency (rial). Yemen has two competing central banks, one in Sanaa (run by the Houthis) and one in Aden (run by the Hadi government). The Houthis in Sanaa have depleted the original central bank's foreign currency reserves and have been unable to pay public sector salaries. The central bank in Aden has liberally printed money, which has driven down the value of the rial. According to the Economist Intelligence Unit's outlook for 2019, \"rapid currency depreciation for most of 2018 significantly increased the price of imports [most Yemeni food is imported], and, despite a rally in the rial in late 2018, is a trend that is likely to continue throughout the forecast period as the Aden-based authorities continue to print money...\" In 2018, Saudi Arabia agreed to lend $2 billion with the central bank in Aden to help the Hadi government finance food imports. However, according to one report, as of November 2018, \"only a little over $170 million had been authorized for payment.\" One of the key aspects of the 2015 United Nations Security Council Resolution (UNSCR) 2216 is that it authorizes member states to prevent the transfer or sale of arms to the Houthis and also allows Yemen's neighbors to inspect cargo suspected of carrying arms to Houthi fighters. In March 2015, the Saudi-led coalition imposed a naval and aerial blockade on Yemen, and ships seeking entry to Yemeni ports required coalition inspection, leading to delays in the off-loading of goods and increased insurance and related shipping costs. Since Yemen relies on foreign imports for as much as 90% of its food supply, disruptions to the importation of food exacerbate already strained humanitarian conditions resulting from war. To expedite the importation of goods while adhering to the arms embargo, the European Union, Netherlands, New Zealand, the United Kingdom, and the United States formed the U.N. Verification and Inspection Mechanism (UNVIM), a U.N.-led operation designed to inspect incoming sea cargo to Yemen for illicit weapons. UNVIM, which began operating in February 2016, can inspect cargo while also ensuring that humanitarian aid is delivered in a timely manner. However, Saudi officials argue that coalition-imposed restrictions and strict inspections of goods and vessels bound for Yemen are still required because of Iranian weapons smuggling to Houthi forces. Saudi officials similarly argue that the delivery of goods to ports and territory under Houthi control creates opportunities for Houthi forces to redirect or otherwise exploit shipments for their material or financial benefit. According to the latest reporting from United Nations Office for the Coordination of Humanitarian Affairs (U.N.OCHA), over the last several months, the volume of cargo discharged at Hudaydah and Saleef ports dropped, and now is 20% less than when the conflict began in 2015. Yemen is experiencing the world's largest ongoing cholera outbreak. Since late 2016, there have been more than 1.3 million suspected cholera cases and nearly 2,800 associated deaths. Cholera is a diarrheal infection that is contracted by ingesting food or water contaminated with the bacterium Vibrio cholerae . Yemen's water and sanitation infrastructure have been devastated by the war. Basic municipal services such as garbage collection have deteriorated and, as a result, waste has gone uncollected in many areas, polluting water supplies and contributing to the cholera outbreak. In addition, international human rights organizations have accused the Saudi-led coalition of conducting air strikes that have unlawfully targeted civilian infrastructure, such as water wells, bottling facilities, health facilities, and water treatment plants. Humanitarian organizations working in the WASH sector have improved cholera prevention and reduced the frequency of new cases, but have not eliminated the crisis. According to U.N.OCHA's 2019 Yemen Humanitarian Needs Overview, \"Public water and sanitation systems require increased support to provide minimum services and avoid collapse. Some 22 per cent of rural and 46 per cent of urban populations are connected to partially functioning public water networks, and lack of electricity or public revenue creates significant reliance on humanitarian support.\" As of January 2019, 17.8 million people in Yemen are living without access to safe water and sanitation, and 19.7 million lack access to adequate health care. While the Stockholm Agreement has the potential to lead to a broader, nation-wide cease-fire, the longer it takes to implement, the greater risk of the agreement's collapse and the prospect for renewed conflict in Hudaydah. Although fighting has continued along several fronts since December 2018, the Stockholm Agreement has provided the Saudi-led coalition with the possibility of gradually extricating itself its intervention in Yemen. If the cease-fire collapses, then the coalition would have to weigh the benefits of trying to evict the Houthis from Hudaydah militarily with the humanitarian costs to the Yemeni people and the reputational damage it would incur within the international community. Even if the United Nations is able to make progress toward a comprehensive peace agreement, Yemen is still beset by multiple political conflicts and violence. In the south, regional secessionists are at odds with what remains of President Hadi's internationally recognized government. In the partially Houthi-besieged city of Taiz, Yemen's third-largest city, rival militias backed by the coalition have engaged in internecine warfare and have been accused by human rights groups of committing war crimes. Many key questions about the future of Yemen remain unanswered. In the context of the current Houthi-Saudi-led coalition conflict, few observers have insight into whether or under what conditions the Houthis might be willing to relinquish their heavy or advanced weaponry used to threaten Saudi Arabia, the United Arab Emirates, and maritime shipping. Iran, now involved in Yemen in new ways, may prove unwilling to sever ties that vex its Saudi adversaries. Political and military compromise between the coalition and the Houthis could bring fighting to an end, but might also entrench an anti-U.S. and anti-Saudi Houthi movement as a leading force in a new order in Yemen. The complexity of Yemen's internal politics and the short-term need to resolve the current conflict have overshadowed domestic and international consideration of what the future of Yemeni governance may be. Overall, the prospects for returning to a unified Yemen appear dim. According to the United Nations Panel of Experts on Yemen, \"The authority of the legitimate Government of Yemen has now eroded to the point that it is doubtful whether it will ever be able to reunite Yemen as a single country.\" While the country's unity is a relatively recent historical phenomenon (dating to 1990), the international community had widely supported the reform of Yemen's political system under a unified government just a few years ago. In 2013, Yemenis from across the political spectrum convened a National Dialogue Conference aimed at reaching broad national consensus on a new political order. However, in January 2014 it ended without agreement, and the Houthis launched a war. The failure of the 2013 National Dialogue Conference aimed at reaching broad national consensus on a new political order continues to violently reverberate throughout Yemen. If some semblance of normalcy is to return to the country, local players will have to return to addressing key issues, such as the power of a central government, the devolution of power to regional authorities, and the composition of national security forces. The longer these issues remain unresolved, the greater the prospect for Yemen's dissolution into competing self-declared autonomous regions.", "summary": "This report provides information on the ongoing crisis in Yemen. Now in its fifth year, the war in Yemen shows no signs of abating. The war has killed thousands of Yemenis, including combatants as well as civilians, and has significantly damaged the country's infrastructure. The difficulty of accessing certain areas of Yemen has made it problematic for governments and aid agencies to count the war's casualties. One U.S. and European-funded organization, the Armed Conflict Location & Event Data Project (ACLED), estimates that 60,000 Yemenis have been killed since January 2016. Though fighting continues along several fronts, on December 13, 2018, Special Envoy of the United Nations Secretary-General for Yemen Martin Griffiths brokered a cease-fire centered on the besieged Red Sea port city of Hudaydah, Yemen's largest port. As part of the deal, the coalition and the Houthis agreed to redeploy their forces outside Hudaydah city and port. The United Nations agreed to chair a Redeployment Coordination Committee (RCC) to monitor the cease-fire and redeployment. On January 16, the United Nations Security Council (UNSCR) passed UNSCR 2452, which authorized (for a six-month period) the creation of the United Nations Mission to support the Hudaydah Agreement (UNMHA), of which the RCC is a significant component. As of late March 2019, the Stockholm Agreement remains unfulfilled, although U.N. officials claim that the parties have made \"significant progress towards an agreement to implement phase one of the redeployments of the Hudayda agreement.\" Although both the Obama and Trump Administrations have called for a political solution to the conflict, the two sides in Yemen appear to fundamentally disagree over the framework for a potential political solution. The Saudi-led coalition demands that the Houthi militia disarm, relinquish its heavy weaponry (ballistic missiles and rockets), and return control of the capital, Sanaa, to the internationally recognized government of President Abdu Rabbu Mansour Hadi, who is in exile in Saudi Arabia. The coalition asserts that there remains international consensus for these demands, insisting that the conditions laid out in United Nations Security Council Resolution (UNSCR) 2216 (April 2015) should form the basis for a solution to the conflict. The Houthis reject UNSCR 2216 and seem determined to outlast their opponents while consolidating their control over northern Yemen. Since the December 2017 Houthi killing of former President Ali Abdullah Saleh, a former Houthi ally, there is no apparent single Yemeni rival to challenge Houthi rule in northern Yemen. Armed groups, including Islamist extremists, operate in other parts of the country, and rival political movements and trends advance competing visions for the long-term reestablishment of national governance in the country. The reconciliation of Yemeni factions and the redefinition of the country's political system, security sector, and social contract will likely require years of additional diplomatic engagement. According to the United Nations, Yemen's humanitarian crisis is the worst in the world, with close to 80% of Yemen's population of nearly 30 million needing some form of assistance. Two-thirds of the population is considered food insecure; one-third is suffering from extreme levels of hunger; and the United Nations estimates that 230 out of Yemen's 333 districts are at risk of famine. In sum, the United Nations notes that humanitarian assistance is \"increasingly becoming the only lifeline for millions of Yemenis.\" For additional information on Yemen, including a summary of relevant legislation, please see CRS Report R45046, Congress and the War in Yemen: Oversight and Legislation 2015-2019, by Jeremy M. Sharp and Christopher M. Blanchard.", "document_type": "crs"}
{"report": "This report provides background information and potential oversight issues for Congress on war-related and other international emergency or contingency-designated funding since FY2001. Since the terrorist attacks of September 11, 2001, Congress has appropriated approximately $2 trillion in discretionary budget authority designated for emergencies or OCO/GWOT in support of the broad U.S. government response to the 9/11 attacks and for other related international affairs activities. This figure includes $1.8 trillion for the Department of Defense (DOD), $154 billion for the Department of State and U.S. Agency for International Development (USAID), and $3 billion for the Department of Homeland Security (DHS) and Coast Guard (see Figure 1 ). This CRS report is meant to serve as a reference on certain funding designated as emergency requirement s or for Overseas Contingency Ope rations/Global War on Terrorism (OCO/GWOT), as well as related budgetary and policy issues. It does not provide an estimate of war costs within the OCO/GWOT account (all of which may not be for activities associated with war or defense) or such costs in the DOD base budget or other agency funding (which may be related to war activities, such as the cost of health care for combat veterans). For additional information on the FY2019 budget and related issues, see CRS Report R45202, The Federal Budget: Overview and Issues for FY2019 and Beyond , by [author name scrubbed]; CRS In Focus IF10942, FY2019 National Defense Authorization Act: An Overview of H.R. 5515 , by [author name scrubbed] and [author name scrubbed]; and CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. For additional information on the Budget Control Act as amended, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions , by [author name scrubbed] and [author name scrubbed], and CRS Report R44039, The Defense Budget and the Budget Control Act: Frequently Asked Questions , by [author name scrubbed]. For additional information on U.S. policy in Afghanistan and the Middle East, see CRS Report R45122, Afghanistan: Background and U.S. Policy , by [author name scrubbed], CRS Report R45096, Iraq: Issues in the 115th Congress , by [author name scrubbed], and CRS Report RL33487, Armed Conflict in Syria: Overview and U.S. Response , coordinated by [author name scrubbed]. Congress may consider one or more supplemental appropriations bills (colloquially called supplementals) for a fiscal year to provide funding for unforeseen needs (such as a response to a national security threat or a natural disaster), or to increase appropriations for other activities that have already been funded. Supplemental appropriations measures generally provide additional funding for selected activities over and above the amount provided through annual or continuing appropriations. Throughout the 20 th century, Congress relied on supplemental appropriations to fund war-related activities, particularly in the period immediately following the start of hostilities. For example, in 1951, a year after the start of the Korean War, Congress approved DOD supplemental appropriations totaling $32.8 billion ($268 billion in constant FY2019 dollars). In 1952, DOD supplemental appropriations totaled just $1.4 billion ($11 billion in constant FY2019), as the base budget incorporated costs related to the war effort. A similar pattern occurred, to varying degrees, during the Vietnam War and 1990-1991 Gulf War. During the post-9/11 conflicts, primarily conducted in Afghanistan and Iraq but also in other countries, Congress has, for an extended period and to a much greater degree than in previous conflicts in the 20 th century, appropriated supplemental and specially designated funding over and above the base DOD budget—that is, funding for planned or regularly occurring costs to man, train, and equip the military force. Since FY2001, DOD funding designated for OCO/GWOT has averaged 17% of the department's total budget authority (see Figure 2 ). By comparison, during the conflict in Vietnam—the only other to last more than a decade—DOD funding designated for non-base activities averaged 6% of the department's total budget authority. Supplemental appropriations can provide flexibility for policymakers to address demands that arise after funding has been appropriated. However, that flexibility has caused some to question whether supplementals should only be used to respond to unforeseen events, or whether they should also provide funding for activities that could reasonably be covered in regular appropriations acts. Congress used supplemental appropriations to provide funds for defense and foreign affairs activities related to operations in Afghanistan and Iraq following 9/11, and each subsequent fiscal year through FY2010. Initially understood as reflecting needs that were not anticipated during the regular appropriations cycle, supplemental appropriations were generally enacted as requested, and almost always designated as emergency requirements. Beginning in FY2004, DOD received some of its war-related funding in its regular annual appropriations; these funds were designated as emergency. When funding needs for war and non-war-related activities were higher than anticipated, the Bush Administration submitted supplemental requests. In the FY2011 appropriations cycle, the Obama Administration moved away from submitting supplemental appropriations requests to Congress for war-related activities and used the regular budget and appropriation process to fund operations. This approach implied that while the funds might be war-related, they largely supported predictable ongoing activities rather than unanticipated needs. In concert with this change in budgetary approach, the Obama Administration began formally using the term Overseas Contingency Op erations in place of the Bush Administration's term Global War on Terror . Both the Obama and Trump Administrations requested that OCO funding be designated in a manner that would effectively exempt such funding from the BCA limits on discretionary defense spending. Currently, there is no overall procedural or statutory limit on the amount of emergency or OCO/GWOT-designated spending that may be appropriated on an annual basis. Both Congress and the President have roles in determining how much emergency or OCO/GWOT spending is provided to federal agencies each fiscal year. Such spending must be designated as such within the President's budget request for congressional consideration. The President must separately designate the spending after Congress enacts appropriations for it to be available for expenditure. The emergency funding designation predated the OCO/GWOT designation. Through definitions statutorily established by the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177 ), spending designated as emergency requirements is for \"unanticipated\" purposes, such as those that are \"sudden ... urgent ... unforeseen ... and temporary.\" The BBEDCA does not further specify the types of activities that are eligible for that designation. Thus, any discretionary funding designated by Congress and the President as being for an emergency is effectively exempted from certain statutory and procedural budget enforcement mechanisms, such as the BCA limits on discretionary spending. Debate of what should constitute OCO/GWOT or emergency activities and expenses has shifted over time, reflecting differing viewpoints about the extent, nature, and duration of U.S. military operations in Afghanistan, Iraq, Syria, and elsewhere. Over the years, both Congress and the President have at times adopted more, and at times less, expansive definitions of such designations to accommodate the strategic, budgetary, and political needs of the moment. Prior to February 2009, U.S. operations in response to the 9/11 attacks were collectively referred to as the Global War on Terror , or GWOT. Between September 2001 and February 2009, there was no separate budgetary designation for GWOT funds—instead, funding associated with those operations was designated as an emergency requirement. The term OCO was not applied to the post-9/11 military operations in Iraq and Afghanistan until 2009. In February 2009, the Obama Administration released A New Era of Responsibili ty: Renewing America's Promise , a presidential fiscal policy document. That document did not mention or reference GWOT; instead, it used the term OCO in reference to ongoing military operations in Iraq and Afghanistan. The first request for emergency funding for OCO—not GWOT—was delivered to Congress in April 2009. Since the FY2010 budget cycle, DOD has requested both base budget and OCO funding as part of its annual budget submission to Congress. Beginning with the National Defense Authorization Act for Fiscal Year 2010 (NDAA; P.L. 111-84 ), the annual defense authorization bills have referenced the authorization of additional appropriations for OCO rather than the names of U.S. military operations conducted primarily in Afghanistan and Iraq. In 2011, the BCA ( P.L. 112-125 ) amended the BBEDCA to create the Overseas Contingency Ope rations/Global War on Terrorism designation, which provided Congress and the President with an alternate way to exempt funding from the BCA caps without using the emergency designation. Beginning with the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), annual appropriations bills have referenced the OCO/GWOT designation. The foreign affairs agencies began formally requesting OCO/GWOT funding in FY2012, distinguishing between what is referred to as enduring, ongoing or base costs versus any extraordinary, temporary costs of the State Department and USAID in supporting ongoing U.S. operations and policies in Iraq, Afghanistan, and Pakistan. Congress, having used OCO/GWOT exemption for DOD, adopted this approach for foreign affairs, though its uses for State, Foreign Operations, and Related Programs (SFOPS) activities have never been permanently defined in statute. For the first foreign affairs OCO/GWOT appropriation, in FY2012, funds were provided for a wide range of recipient countries beyond the countries in the President's request, including Yemen, Somalia, Kenya, and the Philippines. In addition to country-specific uses, OCO/GWOT-designated funds were also appropriated for the Global Security Contingency Fund. All budgetary legislation is subject to a set of enforcement procedures associated with the Congressional Budget Act of 1974 ( P.L. 93-344 ), as well as other rules, such as those imposed by the Budget Control Act of 2011 ( P.L. 112-125 ) as amended. Those rules provide mechanisms to enforce both procedural and statutory limits on discretionary spending. Enacted on August 2, 2011, the BCA as amended sets limits on defense and nondefense spending. As part of an agreement to increase the statutory limit on public debt, the BCA aimed to reduce annual federal budget deficits by a total of at least $2.1 trillion from FY2012 through FY2021, with approximately half of the savings to come from defense. The spending limits (or caps ) apply separately to defense and nondefense discretionary budget authority. The caps are enforced by a mechanism called sequestration . Sequestration automatically cancels previously enacted appropriations (a form of budget authority) by an amount necessary to reach prespecified levels. The BCA effectively exempted certain types of discretionary spending from the statutory limits, including funding designated for OCO/GWOT. As a result, Congress and the President have designated funding for OCO to support activities that, in previous times, had been funded within the base budget. This was done, in part, as a response to the discretionary spending limits enacted by the BCA. By designating funding for OCO for certain activities not directly related to contingency operations, Congress and the President can effectively continue to increase topline defense, foreign affairs, and other related discretionary spending without triggering sequestration. Congress has repeatedly amended the legislation to raise the spending limits (thus lowering its deficit-reduction effect by corresponding amounts). Congress has passed four bills that revised the automatic spending caps initially established by the BCA, including the following: American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ); Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67 ); Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74 ); and Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ). On February 9, 2018, three days before President Donald Trump submitted his FY2019 budget request, Congress passed the Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-123 ). The act raised the discretionary spending limits set by the BCA from $1.069 trillion for FY2017 to $1.208 trillion for FY2018 and to $1.244 trillion for FY2019. The BBA 2018 increased FY2019 discretionary defense funding levels (excluding OCO) by the largest amounts to date—$85 billion, from $562 billion to $647 billion, and nondefense funding (including SFOPS) by $68 billion, from $529 billion to $597 billion. It did not change discretionary spending limits for FY2020 and FY2021. DOD documents indicate the department in recent years has used OCO funding for activities viewed as unrelated to war. For example, the department's FY2019 budget request estimates $358 billion in OCO funding from FY2015 through FY2019. Of that amount, DOD categorizes $68 billion (19%) for activities unrelated to operations in Afghanistan, Iraq, and Syria. These activities are described as \"EDI/Non-War,\" referring in part to the European Deterrence Initiative, and \"Base-to-OCO,\" referring to OCO funding used for base-budget requirements. Similarly, a DOD Cost of War report from June 2018 shows $1.8 trillion in war-related appropriations from FY2001 through FY2018 for operations primarily conducted in Afghanistan, Iraq, and Syria. Of that total, DOD categorizes $219 billion (12%) as other than \"war funds.\" These funds are described as \"Classified,\" \"Modularity,\" \"Fuel (non-war),\" \"Noble Eagle (Base),\" and \"Non-War.\" International affairs agencies also began increasing the share of their budgets designated for OCO, and applying the designation to an increasing range of activities apparently unrelated to conflicts. OCO as a share of the international affairs budget grew from about 21% in FY2012 to nearly 35% in FY2017. Unlike DOD, however, the State Department and USAID have not specified whether any OCO-designated funds are considered part of the agencies' base budgets. According to a DOD budget document from FY2016, the Obama Administration planned to \"transition all enduring costs currently funded in the OCO budget to the base budget beginning in 2017 and ending by 2020.\" The plan was to describe \"which OCO costs should endure as the United States shifts from major combat operations, how the Administration will budget for the uncertainty surrounding unforeseen future crises, and the implications for the base budgets of DOD, the Intelligence Community, and State/OIP. This transition will not be possible if the sequester-level discretionary spending caps remain in place.\" The BCA remained in effect and OCO funding was used for base-budget requirements. Some defense officials and policymakers say OCO funding enables a flexible and timely response to an emergency or contingency and provides a political and fiscal safety valve to the BCA caps and threat of sequestration. They say if OCO funding were not used in such a manner and discretionary spending limits remained in place, DOD and other federal agencies would be forced to cut base budgets and revise strategic priorities. For example, former Defense Secretary Jim Mattis has said if Congress allows the FY2020 and FY2021 defense spending caps to take effect, the 2018 National Defense Strategy, which calls for the United States to bolster its military advantage against potential competitors such as Russia and China, \"is not sustainable.\" Critics, including Acting White House Chief of Staff Mick Mulvaney, have described the OCO account as a \"slush fund\" for military and foreign affairs spending unrelated to contingency operations. Mulvaney, former director of the White House Office of Management and Budget (OMB), has described the use of OCO funding for base budget requirements as \"budget gimmicks.\" Critics argue what was once generally restricted to a fund for replacing combat losses of equipment, resupplying expended munitions, transporting troops to and through war zones, and distributing foreign aid to frontline states has \"ballooned into an ambiguous part of the budget to which government financiers increasingly turn to pay for other, at times unrelated, costs.\" OMB criteria for OCO funding include the combat losses of ground vehicles, aircraft, and other equipment; replenishment of munitions expended in combat operations; facilities and infrastructure in the theater of operations; transport of personnel, equipment, and supplies to and from the theater; among other items and activities. Determining which activities are directly related, tangentially related, or unrelated to war operations is often a point of debate. Some have questioned the use of OCO funding to purchase F-35 fighter jets: \"It is jumping the shark.... There's no pretense that it has anything to do with the region.\" Others have argued it makes sense for the military to use OCO funding to purchase new aircraft to replace planes used in current conflicts and no longer in production: \"What are the conditions that are making the combatant commanders and those with train/equip authority to say, 'We need more of this?'\" Congress has appropriated approximately $2 trillion in discretionary budget authority for war-related and other international emergency or contingency-designated activities since 9/11. This figure is a CRS estimate of funding designated for emergencies or OCO/GWOT in support of the broad U.S. government response to the 9/11 attacks, as well as other foreign affairs activities, from FY2001 through FY2019. This includes $1.8 trillion for DOD, $154 billion for the Department of State and USAID, and $3 billion for DHS and the Coast Guard (see Table 1 ). These figures do not include emergency-designated funding appropriated in this period for domestic programs, such as disaster response. From FY2001 through FY2009, DOD received $1.8 trillion in appropriations for OCO/GWOT, or approximately 17% of the department's total discretionary budget authority of $10.8 trillion during the period. The department's OCO/GWOT funding peaked in FY2008 both in terms of nominal dollars, at $186.9 billion, and as a share of its discretionary budget, at 28.1% (see Figure 3 ), after the Bush Administration surged additional U.S. military personnel to Iraq. The department's OCO funding also increased as a share of its discretionary spending from FY2009 to FY2010 following the Obama Administration's deployment of more U.S. military personnel to Afghanistan, and again in FY2017 following enactment of legislation in response to the Trump Administration's request for additional appropriations. In FY2019, the department's OCO/GWOT funding totaled $68.8 billion, or 10% of its discretionary spending. In terms of appropriations titles, more than two-thirds of OCO/GWOT funding since FY2001 has been for Operation and Maintenance (O&M)—nearly double the percentage of base budget funding for O&M over the same period (see Figure 4 ). O&M funds pay for the operating costs of the military such as fuel, maintenance to repair facilities and equipment, and the mobilization of forces. DOD describes \"war-related operational costs\" as operations, training, overseas facilities and base support, equipment maintenance, communications, and replacement of combat losses and enhancements. In terms of the military services, more than half (55%) of OCO/GWOT funding since FY2001 has gone to the Army—more than double the percentage of base budget funding for the service during this period (see Figure 5 ). Emergency appropriations were initially provided as general \"defense-wide\" appropriations. Beginning in FY2003, as operations evolved and planning developed, allocations increased and were specifically provided for the services. OCO funding for DOD has not decreased at the same rate as the number of U.S. troops in Afghanistan, Iraq, and Syria has decreased. For example, the number of U.S. military personnel in Afghanistan, Iraq, and Syria decreased from a peak of 187,000 personnel in FY2008 (including 148,000 in Iraq and 39,000 in Afghanistan) to an assumed level of nearly 18,000 personnel in FY2019 (including 11,958 personnel in Afghanistan and 5,765 personnel in Iraq and Syria)—a decline of approximately 169,000 personnel (90%). Meanwhile, OCO funding decreased from a peak of $187 billion in FY2008 to $69 billion in FY2019—a decline of approximately $118 billion (63%). While the number of U.S. forces in Afghanistan, Iraq, and Syria has decreased since FY2009, the number of U.S. troops deployed or stationed elsewhere to support those personnel has fallen by a lesser degree and, in recent years, remained relatively steady. For example, the number of support forces—that is, personnel from units and forces operating outside of Afghanistan, Iraq, Syria, and other countries (including those stationed in the continental United States or otherwise mobilized) decreased from 112,000 personnel in FY2009 to an assumed level of 76,073 personnel in FY2019—a decline of 35,927 personnel (32%). In addition, when these support forces are combined with in-country force levels, the total force level decreases by a percentage more similar to the OCO budget, from 297,000 personnel in FY2009 to an assumed level of 93,796 personnel in FY2019—a decline of 203,204 personnel (68%) (see Figure 6 ). Some of these support forces serve in U.S. Central Command's area of responsibility, which includes 20 countries in West Asia, North Africa, and Central Asia, and whose forward headquarters is based in Al Udeid Air Base in Qatar. According to DOD, the reason OCO funding has not fallen in proportion to the number of U.S. troops in Afghanistan, Iraq, and Syria is \"due to the fixed, and often inelastic, costs of infrastructure, support requirements, and in-theater presence to support contingency operations.\" For example, in FY2019, the department requested $20 billion in OCO funding for \"in-theater support\"—nearly 30% of the OCO request and more than any other functional category. However, some analysts have noted the U.S. military's fixed costs in Afghanistan remained relatively stable at roughly $7 billion a year from FY2005 through FY2013 until after the BCA went into effect—and have since increased to roughly $32 billion a year, suggesting \"that roughly $25 billion in 'enduring' or base budget costs migrated into the Afghanistan budget, effectively circumventing the budget caps. The actual funding needed for operations in Afghanistan is roughly $20 billion in FY2019.\" Title 10, Section 101, of the United States Code, defines a contingency operation as any Secretary of Defense-designated military operation \"in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force.\" Since the 1990s NATO intervention in the Balkans, DOD Financial Management Regulations (FMR) have defined contingency operations costs as those expenses necessary to cover incremental costs \"that would not have been incurred had the contingency operation not been supported.\" Such incremental costs would not include, for example, base pay for troops or planned equipment modernization, as those expenditures are normal peacetime needs of the DOD. In September 2010, the Office of Management and Budget (OMB), in collaboration with DOD, issued criteria for the department to use in making war/overseas contingency operations funding requests (see Appendix A ). In January 2017, the Government Accountability Office (GAO) concluded the criteria for deciding whether items belong in the base budget or OCO funding \"are outdated and do not address the full scope of activities\" in the budget request. \"For example, they do not address geographic areas such as Syria and Libya, where DOD has begun military operations; DOD's deterrence and counterterrorism initiatives; or requests for OCO funding to support requirements not related to ongoing contingency operations\" it states. Section 1524 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ), directed the Secretary of Defense to \"update the guidelines regarding the budget items that may be covered by overseas contingency operations accounts.\" Congress has enacted legislation directing DOD to compile reports on the costs of certain contingency operations. Section 1266 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ) directs the Secretary of Defense to submit the Department of Defense Supplemental and Cost of War Execution report, known as the Cost of War report, on a quarterly basis to the congressional defense committees and the GAO: \"Not later than 45 days after the end of each fiscal year quarter, the Secretary of Defense shall submit to the congressional defense committees and the Comptroller General of the United States the Department of Defense Supplemental and Cost of War Execution report for such fiscal year quarter.\" The conference report accompanying the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 ( P.L. 115-245 ) requires DOD to report incremental costs for operations in Afghanistan, Iraq, and other countries in the U.S. Central Command area of responsibility and directs: the Secretary of Defense to continue to report incremental costs for all named operations in the Central Command Area of Responsibility on a quarterly basis and to submit, also on a quarterly basis, commitment, obligation, and expenditure data for the Afghanistan Security Forces Fund, the Counter-Islamic State of Iraq and Syria Train and Equip Fund, and for all security cooperation programs funded under the Defense Security Cooperation Agency in the Operation and Maintenance, Defense-Wide Account. DOD's June 2018 Cost of War report to Congress details $1.5 trillion in obligations associated with certain contingency operations from FY2001 through FY2018. That figure includes $757.1 billion for those conducted primarily in Iraq—Operation Iraqi Freedom (OIF), Operation New Dawn (OND), and Operation Inherent Resolve (OIR); $727.7 billion for those conducted primarily in Afghanistan—Operation Enduring Freedom (OEF) and Operation Freedom's Sentinel (OFS); and $27.8 billion for those conducted primarily in the United States (see Table 2 and Figure 7 ). DOD's quarterly Cost of War reports are intended to provide Congress, GAO, and other stakeholders insight into the how the department obligates war-related appropriations. The reports include base and OCO obligations related to war activities, as well as obligation data broken down by certain major operations, service, component, agency, and appropriation. However, as GAO has noted, \"the proportion of OCO appropriations not associated with specific operations identified in the statutory Cost of War reporting requirement has trended upward\" in part because the criteria DOD uses for making OCO funding requests is outdated and not always used. More recently, the June 2018 Cost of War report does not appear to reference three recently classified overseas contingency operations targeting militants affiliated with al-Qaeda and the Islamic State of Iraq and Syria (ISIS): Operation Yukon Journey in the Middle East, Northwest Africa Counterterrorism, and East Africa Counterterrorism. Some observers have noted other limitations to Cost of War reports, such as incomplete accounting of costs, limited distribution of the documents and underlying data, and formatting that makes it difficult to reconcile the data with information contained in budget justification documents. Between FY2001 and FY2018, Congress appropriated a total of $154 billion in OCO funds for State Department and USAID. For FY2018 (the most recent full-year appropriations for foreign affairs agencies), OCO funding amounted to 22% of the total appropriations for State Department, Foreign Operations and Related Programs appropriation. The Obama Administration's FY2012 International Affairs budget request was the first to include a request for OCO funds for \"extraordinary and temporary costs of operations in Iraq, Afghanistan, and Pakistan.\" At the time, the Administration indicated that the use of this designation was intended to provide a transparent, whole-of-government approach to the exceptional war-related costs incurred in those three countries, thus better aligning the associated military and civilian costs. This first foreign affairs OCO request identified the significant resource demands placed on the State Department as a result of the transitions from military-led to civilian-led missions in Iraq and Afghanistan, as well as the importance of a stable Pakistan for the U.S. effort in Afghanistan. The FY2012 foreign affairs OCO request included: for Iraq, funding for the U.S. Embassy in Baghdad, consulates throughout Iraq, security costs in light of the then-planned U.S. military withdrawal, a then-planned civilian-led Police Development and Criminal Justice Program, military and development assistance in Iraq, and oversight of U.S. foreign assistance through the Special Inspector General for Iraq Reconstruction; for Afghanistan, funding to strengthen the Afghan government and build institutional capacity, support State/USAID and other U.S. government agency civilians deployed in Afghanistan, provide short-term economic assistance to address counterinsurgency and stabilization efforts, and provide oversight of U.S. foreign assistance programs in Afghanistan through the Office of the Special Inspector General for Afghanistan Reconstruction; and for Pakistan, funding to support U.S. diplomatic presence and diplomatic security in Pakistan, provide Pakistan Counterinsurgency Capability Funds (PCCF) to train and equip Pakistani forces to eliminate insurgent sanctuaries and promote stability and security in neighboring Afghanistan and the region. In subsequent years, the Administration designated certain State Department activities in Syria and other peacekeeping activities as OCO, and Congress accepted and broadened this expanded use of OCO in annual appropriations. In the FY2017 budget request, the Administration further broadened its use of State OCO funds, applying the designation to funds for countering Russian aggression, counterterrorism, humanitarian assistance, and aid to Africa. In addition to OCO funds requested through the normal appropriations process, the Administration in recent years requested emergency supplemental funding (designated as OCO) to support State/USAID efforts in countering the Islamic State and to respond to global health threats such as the Ebola and Zika viruses. For FY2019, the Trump Administration requested no OCO/GWOT funding for the Department of State and USAID, although the FY2019 House and Senate SFOPS bills ( H.R. 6385 and S. 3108 , 115 th Congress) would have appropriated approximately $8 billion in OCO-designated funding for various priorities. The estimated $154.1 billion in emergency and OCO/GWOT appropriations enacted to date for State/USAID includes major non-war-related programs, such as aid for the 2004 tsunami along Indian Ocean coasts, 2010 earthquake in Haiti, 2013 Ebola outbreak in West Africa, and 2015 worldwide outbreak of the Zika virus; as well as diplomatic operations (e.g., paying staff, providing security, and building and maintaining embassies). OCO/GWOT has also funded a variety of foreign aid programs, ranging from the Economic Support Fund to counter-narcotics in Afghanistan, Pakistan, and Iraq, among other activities in other countries. Figure 8 depicts the emergency or OCO appropriations for foreign affairs activities. Since 2012, when the OCO designation was first used for foreign affairs, more OCO funds have been appropriated than were requested each year, and those have also been authorized to be used in additional countries. Since January 2002, approximately $3 billion of post-9/11 emergency and OCO-designated funding has been provided to the U.S. Coast Guard (USCG) for its traditional homeland security missions and for USCG operations in support of U.S. Navy activities. This funding has been provided at various times as either an appropriation to the Coast Guard's operating expenses accounts, or as a transfer from Navy accounts to the Coast Guard. Open-source information on the use of those funds has varied. One FY2009 supplemental appropriations request included funding as a transfer, with the intent of funding \"Coast Guard operations in support of OIF and OEF, as well as other classified activities.\" The FY2017 OCO request for annual appropriations for Navy Operations and Maintenance included $163 million for Coast Guard operational support for the deployment of patrol boats to the Northern Arabian Gulf and a port security unit to Guantanamo Bay, among other pay and equipment expenses. The Trump Administration initially requested a total of $89 billion in OCO funding for FY2019. All the funding was requested by DOD. In an amendment to the budget after Congress raised the BCA spending caps as part of the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), the Administration removed the OCO designation from $20 billion of the funding, in effect, shifting that amount into the DOD base budget request. In a statement on the budget amendment, Mulvaney said the request fixes \"long-time budget gimmicks\" in which OCO funding has been used for base budget requirements. Beginning in FY2020, \"the Administration proposes returning to OCO's original purpose by shifting certain costs funded in OCO to the base budget where they belong,\" he wrote. Of the revised amount of $69 billion requested for DOD OCO funding in FY2019: $46.3 billion (67%) was for Operation Freedom's Sentinel (OFS) in Afghanistan and related missions; $13 billion (22%) for Operation Inherent Resolve (OIR) in Iraq and Syria and related missions; $4.8 billion (9%) for the European Deterrence Initiative (EDI) to boost the U.S. military presence in eastern Europe to deter Russian military aggression; and $0.9 billion (1%) for security cooperation (see Figure 9 ). The FY2019 OCO budget assumes a total force level (average annual troop strength) of 93,796 personnel. That figure includes: 11,958 primarily in Afghanistan (OFS); 5,765 primarily in Iraq and Syria (OIR); 59,463 for in-theater support; and 16,610 primarily in the continental United States (CONUS) or otherwise mobilized (see Figure 10 ). The number of personnel actually in-country or in-theater at any given time may exceed or fall below those assumed levels. The FY2019 force level assumes an increase of 3,153 personnel (3.5%) from the FY2018 assumed level, all of which is assumed for in-theater support. (For analysis of troop level and budget trends, see the section, \" Trends in OCO Funding and Troop Levels ,\" earlier in this report.) As previously discussed, DOD acknowledges \"OCO funding has not declined at the same rate as the in-country troop strength … due to the fixed, and often inelastic, costs of infrastructure, support requirements, and in-theater presence to support contingency operations.\" The departments lists the following as OCO cost drivers: In-theater support, including infrastructure costs like command, control, communications, computers, and intelligence (C4I) and base operations for U.S. Central Command (CENTCOM) locations; Persistent demand for combat support such as intelligence, surveillance, and reconnaissance (ISR) assets used to enhance force protection; Equipment reset, which lags troop level changes and procurement of contingency-focused assets like munitions, unmanned aerial vehicles and force protection capabilities that may not be linked directly to in-country operations; and International programs and deterrence activities, which are linked to U.S. engagement in contingency operations and support U.S. interests but are not directly proportional to U.S. troop presence. DOD also breaks down the FY2019 OCO budget request by functional category (see Table 3 ). By this measure, the largest portion of OCO funding was $20 billion for in-theater support, followed by operations and force protection (including the incremental cost of military operations in Afghanistan, Iraq, Syria, and other countries), at $14.7 billion; and unspecified classified programs, at $9.9 billion. According to the Congressional Budget Office (CBO), approximately $47 billion (68%) of the FY2019 OCO budget request consists of enduring activities—that is, \"those that would probably continue in the absence of overseas conflicts\"—that could be funded in the DOD base budget. CBO associates enduring activities with the following DOD functional categories: in-theater support, classified programs, equipment reset and readiness, European Deterrence Initiative, security cooperation, and joint improvised-threat defeat. Executive Branch budget documents for FY2019 show differing projections for how much OCO would be apportioned over the Future Years Defense Program (also known as the FYDP, pronounced \"fiddip,\" the five-year period from FY2019 through FY2023). For example, Table 1-11 in DOD's National Defense Budget Estimates for FY2019, citing OMB data, projects five-year OCO funding at $359 billion. However, Table 1-9 of the same document puts the figure at $149 billion after assuming a higher amount of OCO funding shifting into the base budget. According to OMB, the President's initial FY2019 budget request projected increasing caps on defense discretionary base budget authority by $84 billion (15%) to $660 billion in FY2020 and by $87 billion (15%) to $677 billion in FY2021. It also projected defense funding for Overseas Contingency Operations (OCO) totaling $73 billion in FY2020 and $66 billion in FY2021. Thus, projected defense discretionary funding would total $733 billion in FY2020 and $743 billion in FY2021. FY2019 DOD budget documents show the same defense discretionary topline for FY2020 and FY2021. But they list an \"Outyears Placeholder for OCO\" of $20 billion in fiscal years FY2020-FY2023, and an \"OCO to Base\" amount of $53 billion in FY2020 and $45.8 billion in each year from FY2021-FY2023. The documents do not break down what accounts or activities are included in these amounts. The emergence of any new contingencies or conflicts would likely change DOD assumptions about OCO needs. Congress has appropriated a total of $68.8 billion for DOD OCO funding in FY2019, including the following amounts: $67.9 billion in defense funds provided in the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 ( P.L. 115-245 ), which Congress passed on September 26, 2018; and $921 million in defense funds provided in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ), which Congress passed on September, 21, 2018. For the Department of State and USAID, as well as the Department of Homeland Security and U.S. Coast Guard, FY2019 OCO levels have not yet been determined. They remain at prorated FY2018 levels because of continuing resolutions (CR) to fund certain agencies through December 21, 2018. The FY2019 House and Senate SFOPS bills ( H.R. 6385 and S. 3108 , 115 th Congress) would have appropriated approximately $8 billion in OCO-designated funding for various priorities. The House committee-reported version of the Homeland Security appropriations bill ( H.R. 6776 , 115 th Congress) would not have appropriated any OCO/GWOT funding for the Coast Guard, while the Senate committee-reported version of the bill ( S. 3109 , 115 th Congress) would have appropriated $165 million for OCO/GWOT funding for the Coast Guard. Any decision by the 116 th Congress to change discretionary defense and nondefense spending limits that remain in effect for FY2020 and FY2021 under the Budget Control Act (BCA; P.L. 112-25 ) could impact future OCO funding levels. Lawmakers may consider the following questions: Will Congress keep the BCA as is and rely on OCO funding that is not subject to the caps to meet agency requirements? Will Congress repeal the BCA and use less OCO funding? Will Congress amend the BCA limits for future years and continue to use OCO funding, as it has in the past? Will Congress significantly reduce DOD and international affairs funding to stay within the BCA caps and not use OCO funding? In a November 2018 report, the National Defense Strategy Commission, a bipartisan panel created by Congress, issued recommendations related to OCO and the BCA. Recommendation No. 24 states, \"Congress should eliminate the final two years of caps under the BCA.\" Recommendation 29 states, \"To better prepare for major-power competition, Congress should gradually integrate OCO spending back into the base Pentagon budget. This also requires a dollar-for-dollar increase in the BCA spending caps, should they remain in force, so that this transfer does not result in an overall spending cut.\" Both House and Senate FY2019 committee-reported appropriations bills from the 115 th Congress included about $8 billion in OCO funding for State/USAID. It remains to be seen if the 116 th Congress will pass this OCO level as requested or extend the continuing resolution. Congress could enact legislation to authorize and appropriate a level of base and OCO spending to meet current or revised discretionary defense spending caps in any number of ways. In FY2019 budget documents from OMB and DOD, the Trump Administration projected increasing defense spending in FY2020 and FY2021 beyond the statutory limits of the Budget Control Act of 2011 ( P.L. 112-25 ), but by differing amounts based on differing OCO projections. These figures serve as possible scenarios or options for Congress to consider. According to OMB budget documents, the President's initial FY2019 budget request projected $733 billion in defense discretionary spending in FY2020, including a base budget of $660 billion (which assumes an $84 billion, or 15%, increase in the BCA defense cap—or repeal of the legislation altogether) and an OCO defense budget of $73 billion (see Figure 11 ). According to DOD budget documents, the President's revised FY2019 budget request projected $733 billion in defense discretionary spending in FY2020, including a base budget of $713 billion (which assumes a $137 billion, or 24%, increase in the BCA defense cap—what would be the largest increase to the BCA defense caps yet—or repeal of the legislation altogether) and an OCO budget of $20 billion. Alternatively, assuming no change in the cap and congressional support for the Administration's projected $733 billion topline in FY2020, Congress could keep the BCA defense cap unchanged at $576 billion and designate an additional $157 billion for OCO. According to OMB budget documents, the President's initial FY2019 budget request projected $743 billion in defense discretionary spending in FY2021, including a base budget of $677 billion (which assumes an $87 billion, or 15%, increase in the BCA defense cap—or repeal of the legislation altogether) and an OCO budget of $66 billion (see Figure 11 ). According to DOD budget documents, the President's revised FY2019 budget request projected $743 billion in defense discretionary spending in FY2021, including a base budget of $723 billion (which assumes a $133 billion, or 23%, increase in the BCA defense cap—or repeal of the legislation altogether) and an OCO budget of $20 billion. Alternatively, assuming no change in the cap and congressional support for the Administration's projected $743 billion topline in FY2020, Congress could keep the BCA defense cap unchanged at $590 billion and designate an additional $153 billion for OCO. As previously discussed, these figures would change with different toplines for the national defense budget function (050). Former Defense Secretary Jim Mattis and the National Defense Strategy Commission have recommended that Congress increase the defense budget between 3% and 5% a year above inflation (\"real growth\") to meet U.S. strategic goals. President Donald Trump has said the discretionary defense spending request would total $700 billion in FY2020, a decrease of 2% in nominal terms from FY2019. Trump said, \"We know what the budget—the new budget is for the Defense Department. It will probably be $700 billion.\" However, some media outlets have since reported that the President intends to request a discretionary defense budget of $750 billion in FY2020. Senator James Inhofe, chairman of the Senate Armed Services Committee, and Representative Mac Thornberry, ranking member of the House Armed Services Committees in the 116 th Congress, have argued, \"Any cut in the defense budget would be a senseless step backward.\" Thornberry has also said transferring recurring OCO costs into the regular budget \"makes sense … it makes for more predictable budgeting, but it's all about what happens on the topline.\" Representative Adam Smith, chairman of the House Armed Services Committee in the 116 th Congress, has said of the defense budget: \"I think the number is too high, and it's certainly not going to be there in the future … We've got a debt, we've got a deficit, we've got infrastructure problems, we've got healthcare, education—there's a whole lot that is necessary to make our country safe, secure, and prosperous.\" Acting Defense Secretary Patrick Shanahan has talked about a flat topline for national defense: \"When you look at the $700 billion, it's not just for one year drop down, [or] a phase, it's a drop and then held constant\" over the FYDP. Under Secretary of Defense (Comptroller)/Chief Financial Officer David Norquist, who is also performing the duties of the Deputy Secretary of Defense, at one time was reportedly preparing two budgets for FY2020—one assuming $733 billion for national defense and another assuming $700 billion. An analyst has noted \"returning enduring OCO costs to the base budget, particularly a vast majority of those enduring costs over a short period as DOD has outlined, could significantly complicate an agreement between congressional Democrats and Republicans to increase both the defense and nondefense BCA budget caps for FY2020 and FY2021.\" As analyst noted, \"OCO has become an even less-defined pot of money … Congress needs to properly question the DOD budget planners on the future of OCO.\" In a January 2017 report, GAO concluded, \"Without a reliable estimate of DOD's enduring OCO costs, decision makers will not have a complete picture of the department's future funding needs or be able to make informed choices and trade-offs in budget formulation and decision making.\" The department states it has not fully estimated those costs in part because of the BCA. In a response to GAO, DOD wrote, \"Developing reliable estimates of enduring OCO costs is an important first step to any future effort to transition enduring OCO costs to the base budget. In the context of such an effort, the Department would consider developing and reporting formal estimates of those costs. However, until there is sufficient relief from the budgetary caps established in the Budget Control Act of 2011, the Department will need OCO to finance counterterrorism operations, in particular [OFS] and [OIR].\" In an October 2018 report, the Congressional Budget Office estimated OCO funding for DOD enduring activities—that is, those that would probably continue in the absence of overseas conflicts—totaled more than $50 billion a year (in 2019 dollars) from 2006 to 2018—and are projected to total about $47 billion a year starting in FY2020. This figure appears to be consistent with projections published by DOD. According to the department's FY2019 budget documents, DOD projected $53 billion for \"OCO to Base\" in FY2020 and $45.8 billion for \"OCO to Base\" for FY2021 through FY2023. Some analysts have concluded: Uncertainty created by current reliance on OCO, particularly to fund base budget needs, could be detrimental to national security on three levels: (a) by undermining budget controls and contributing thereby to larger deficits, (b) by generating insecurity in the defense workforce and in defense suppliers, and (c) by creating long-term uncertainty in defense planning. The alternative, transitioning longer-term OCO expenses to the base budget, could be achieved through a combination of increased budget caps, targeted cuts in inefficient Defense programs, and increased revenues. For example, a potential enduring activity in the OCO budget is the European Deterrence Initiative (EDI). It was previously known as the European Reassurance Initiative (ERI), an effort that began in June 2014 to increase the number of U.S. military personnel and prepositioned equipment in Central and Eastern Europe intended in part to reassure NATO allies after Russia's military seized Crimea. As some analysts have noted, \"Because it is in the OCO part of the budget request, EDI funding does not include a projection for how much funding will be allocated in future years, which can create uncertainty in the minds of allies and adversaries alike about the U.S. military's commitment to the program.\" On the other hand, some contend that it is precisely EDI's flexibility that allows the commander of European Command to quickly respond to changing security and posture needs in Europe, and ensure that monies intended for European deterrence will not be redirected to other DOD priorities. In its November 2018 report, the National Defense Strategy Commission quoted the late military strategist Bernard Brodie, who wrote \"strategy wears a dollar sign.\" The panel concluded that relying on OCO funding to increase the defense budget \"is not the way to provide adequate and stable resources\" for the type of great power competition outlined in the Secretary of Defense's 2018 National Defense Strategy (NDS), which calls for the United States to bolster its competitive military advantage relative to threats posed by China and Russia: Because of budgetary constraints imposed by the BCA, lawmakers and the Department of Defense have increasingly relied upon the overseas contingency operations (OCO) fund to pay for warfighting operations in the greater Middle East, as well as other activities and initiatives. Yet this approach to resourcing has produced problems and distortions of its own. For one thing, the amount of money devoted to OCO since the BCA was enacted no longer corresponds to warfighting operations in the greater Middle East. Furthermore, such operations are no longer a top priority as articulated in the NDS. Finally, reorienting the military toward high-end competition and conflict will require new capabilities beyond the current program of record. OCO is not the way to provide adequate and stable resources for such a long-term endeavor, given its lack of predictability and the limitations on what OCO funds can be used to buy.\" Appendix A. Statutes, Guidance, and Regulations The designation of funding as emergency requirements or for Overseas Contingency Operations/Global War on Terrorism (OCO/GWOT) is governed by several statues as well as Office of Management and Budget (OMB) guidance and the Department of Defense (DOD) Financial Management Regulation (FMR). The Balanced Budget and Emergency Deficit Control Act (BBEDCA) of 1985 BBEDCA, as amended, includes the statutory definitions of emergency and unanticipated as they relate to budget enforcement through sequestration. The act also allows for appropriations to be designated by Congress and the President as emergency requirements or for Overseas Contingency Operations/Global War on Terrorism . Such appropriations are effectively exempt from the statutory discretionary spending limits. Title 10, United States Code—Armed Forces 10 U.S.C. 101—Definitions Section 101 provides definitions of terms applicable to Title 10. While it does not define overseas contingency operations, it does include a definition of a contingency operations . Administration and Internal Guidance In addition to statutory requirements, the DOD and the Department of State are subject to guidance on OCO spending from the Administration. In October 2006 , under the Bush Administration, then-Deputy Secretary of Defense Gordon England directed the services to break with long-standing DOD regulatory policies and expand their request for supplemental funding to reflect incremental costs related to the \"longer war on terror.\" There was no specific definition for the \"longer war on terror,\" now one of the core missions of the DOD. In February 2009, at the beginning of the Obama Administration, the Office of Management and Budget (OMB) issued updated budget guidance that required DOD to move some OCO costs back into the base budget. However, within six months of issuing the new criteria, officials waived restrictions related to pay and that would have prohibited end-strength growth. In a letter from OMB to the then-Under Secretary of Defense (Comptroller) Robert Hale, the agency characterized its 2009 criteria as \"very successful\" for delineating base and OCO spending but stated, \"This update clarifies language, eliminates areas of confusion and provides guidance for areas previously unanticipated.\" GAO subsequently reported that the revised guidance significantly changed the criteria used to build the fiscal year 2010 OCO funding request by: specifying stricter definitions for repair and procurement of equipment; limiting applicability of OCO funds for RDT&E; excluding pay and allowances for end-strength above the level requested in the budget; excluding enduring family support initiatives; and excluding base realignment and closures (BRAC) amounts. OMB again revised its guidance in September 2010 following a number of GAO reports that had concluded DOD reporting on OCO costs was of \"questionable reliability,\" due in part to imprecisely defined financial management regulations related to OCO spending. (as of September 9, 2010) Source: Letter from Steven M. Kosiak, Associate Director for Defense and Foreign Affairs, OMB, to Robert Hale, Under Secretary of Defense, Comptroller, \"Revised War Funding Criteria,\" September 9, 2010. DOD Financial Management Regulations DOD incorporated the September 2010 OMB criteria for war costs into the Financial Management Regulation. Table 1 includes the general cost categories DOD uses in accounting for costs of contingency operations. Appendix B. Transfer Authorities, Special Purpose Accounts In addition to the supplemental appropriations and emergency or OCO/GWOT designation, the Department of Defense and the Department of State also have the authority to shift funds from one budget account to another in response to operational needs. For DOD, these transfers (sometimes called reprogramings ) are statutorily authorized by 10 U.S.C. 2214—Transfer of funds: procedures and limitations. This authority allows the Secretary of Defense to reallocate funds for higher priority items, based on unforeseen military requirements, after receiving written approval from the four congressional defense committees. DOD may also reprogram funds within an account from one activity to another, as long as the general purpose for the use of those funds remains unchanged. Specific limits to transfer or reprogramming authorities have also been added to these general authorities through provisions in annual defense authorization and appropriation acts. The FY2019 defense appropriations bill sets the base budget transfer cap at $4 billion and the OCO transfer cap at $2 billion. The Department of State's OCO transfer authority has been provided in appropriations acts and has specifically authorized the Administration to transfer OCO funds only to other OCO funds within Title VIII SFOPS appropriations, not between OCO and base accounts. The transfer authority is capped, specified by account, and requires regular congressional notification procedures. Overseas Contingency Operations Transfer Fund (OCOTF) The OCOTF was established for DOD in FY1997 as a no year transfer account (meaning amounts are available until expended) in order to provide additional flexibility to meet operational requirements. Transfers from the OCOTF are processed using existing reprogramming procedures. A quarterly report is submitted to the congressional oversight committees, documenting all transfers from the OCOTF to DOD components base budget accounts. Beginning in FY2002, funds to support Southwest Asia, Kosovo, and Bosnia contingency requirements were appropriated directly to DOD components' Operation and Maintenance (O&M) and Military Personnel accounts rather than to the OCOTF for later disbursement. FY2014 was the last year the Administration requested a direct appropriation to the OCOTF. Contingency Operations Funded in the DOD Base Budget As first mandated by section 8091 of the Department of Defense Appropriations Act, 2008 ( P.L. 110-116 ), Congress has required DOD to provide separate annual budget justification documents detailing the costs of U.S. armed forces' participation in all named contingency operations where the total cost of the operation exceeds $100 million or is staffed by more than 1,000 U.S. military personnel. Funding for certain DOD contingency operations has been moved to the base budget request, and is no longer designated as emergency or OCO/GWOT requirements. This movement of funding from the OCO request to the base budget request typically occurs as the operational activities of an enduring contingency operation evolve over time and DOD determines that certain elements of the associated military operations have become stable enough to be planned, financed, and executed within the base budget. For example, funding for Operation Noble Eagle, which provides fighter aircraft on 24/7 alert at several U.S. military bases, was moved from the GWOT request to the base budget request in 2005. Contingency operations and other activities funded wholly or in part through DOD's base budget have included: NATO Operations in the Balkans . The U.S. Army and U.S. Air Force provide support to the North Atlantic Treaty Organization-led operations in the Balkans region. Most U.S. forces are deployed to Kosovo in support of the NATO-led Kosovo Force (KFOR). A small number of U.S. personnel are deployed to the NATO headquarters in Sarajevo in Bosnia and Herzegovina; Joint Task Force - Bravo . U.S. forces support this task force, which operates from Soto Cano Air Base in Honduras and supports joint, combined, and interagency exercises and operations in Central America to counter the influence of transnational organized crime; carry out humanitarian assistance and disaster relief; and build military capacity with regional partners and allied nations to promote regional cooperation and security; Operation Juniper Shield. Previously known as Operation Enduring Freedom-Trans Sahara (OEF-TS), this operation supports efforts to defeat violent extremist organizations in East Africa. This operation also provides military-to-military engagement with partner African countries, as well as readiness for crisis response and evacuation of U.S. military, diplomatic, and civilian personnel; Operation Noble Eagle . This operation funds the continuing efforts to defend the United States from airborne attacks, maintain the sovereignty of the United States airspace, and defend critical U.S. facilities from potentially hostile threats or unconventional attacks; Operation Enduring Freedom- Horn of Africa . This operation was established to support efforts to defeat violent extremist organizations in East Africa; provide military-to-military engagement with partner African countries, as well as readiness for crisis response and evacuation of U.S. military, diplomatic, and civilian personnel throughout East Africa; Operation Enduring Freedom- Caribbean and Central America . A U.S. regional military operation initiated in 2008, under the operational control of Special Operations Command-South, this operation was established to focus on counterterrorism to support DOD's overall military objectives and the larger fight against terrorism. Operation Observant Compass . This operation was established to support the deployment of approximately 100 U.S. military personnel assisting the Ugandan People's Defense Force and neighboring partner African countries in countering the Lord's Resistance Army operations. Operation Spartan Shield. This operation was established to support ongoing U.S. Central Command missions. Other Congressionally Authorized Funds or Programs Through the OCO authorization and appropriation process, Congress has created numerous funds and programs that are designed to finance specific overseas contingency operations-related activities that do not fit into traditional budgetary accounts. Many of these funds and programs are supplied with amounts that are available until expended—however, authorization for the specified fund or program has an expiration date, thereby requiring further congressional action for reauthorization of affected funds or programs. Congress has also provided increased transfer authority to provide greater flexibility for U.S. government activities in situations that are typically unpredictable. Examples of these types of congressionally authorized OCO programs or funds have included: Afghan istan Security Forces Fund (ASFF) and Counter-ISIS Train and Equip Fund (CTEF) . These funds were established to provide funding and support for the training, equipping, and expansion of selected military and security forces in support of U.S. objectives; Counterterrorism Partnership s Fund . This fund was established to provide funding and support to partner nations engaged in counterterrorism and crisis response activities; Command er's Emergency Response Program. This program was established to support infrastructure improvements, such as road repair and construction and enable military commanders on the ground to respond to urgent humanitarian relief and reconstruction needs by undertaking activities that will immediately aid local populations and assist U.S. forces in maintaining security gains; Joint Improvised Explosive Device (IEDs) Defeat Fund . This fund was established to coordinate and focus all counter-IED efforts, including ongoing research and development, throughout DOD. Due to the enduring nature of the threat, DOD began moving associated funding to the base budget in FY2010; Mine Resistant Ambush Protected Vehicle (MRAP) Fund . This fund was intended to expedite the procurement and deployment of MRAPs to Iraq and Afghanistan; European Deterrence Initiative (EDI) . Initially the European Reassurance Initiative (ERI), this effort was established to provide funding and support to NATO allies and partners to \"reassure allies of the U.S. commitment to their security and territorial integrity as members of the NATO Alliance, provide near-term flexibility and responsiveness to the evolving concerns of our allies and partners in Europe, especially Central and Eastern Europe, and help increase the capability and readiness of U.S. allies and partners;\" Global Security Contingency Fund . This fund was established to provide funding for the Department of State and the Department of Defense \"to facilitate an interagency approach to confronting security challenges;\" Complex Crise s Fund . This fund was established to provide funding through the State Department and USAID \"to help prevent crises and promote recovery in post-conflict situations during unforeseen political, social, or economic challenges that threaten regional security;\" Migration and Refugee Assistance Fund . This fund was established to provide funding to respond to refugee crises in Africa, the Near East, South and Central Asia, and Europe and Eurasia; and Ukraine Security Assistance Initiative . This initiative was established to provide assistance, including training, equipment, lethal weapons, of a defensive nature; logistics support; supplies and services; sustainment; and intelligence support to the military and national security forces of Ukraine. This is an update to a report originally co-authored by [author name scrubbed], former CRS Specialist in Defense Readiness and Infrastructure. It references research previously compiled by [author name scrubbed], former CRS Specialist in U.S. Defense Policy and Budget; Christopher Mann, Analyst in Defense Policy and Trade; [author name scrubbed], Analyst in U.S. Defense Acquisition Policy; [author name scrubbed], CRS Specialist on Congress and the Legislative Process; and [author name scrubbed], CRS Analyst in Public Finance. [author name scrubbed], Research Assistant, helped compile the graphics.", "summary": "Congressional interest in Overseas Contingency Operation (OCO) funding has continued as Members debate ways of funding priorities without breaching discretionary spending limits set in law. Since the terrorist attacks of September 11, 2001, Congress has appropriated approximately $2 trillion in discretionary budget authority designated as emergency requirements or for Overseas Contingency Operations/Global War on Terrorism (OCO/GWOT) in support of the broad U.S. government response to the 9/11 attacks and for other related international affairs activities. This figure amounts to approximately 9.4% of total discretionary spending during this period. Congress has used supplemental appropriation acts or designated funding for emergency requirements or OCO/GWOT—or both—in statute. These funds are not subject to limits on discretionary spending in congressional budget resolutions or to the statutory discretionary spending limits established by the Budget Control Act of 2011 (BCA; P.L. 112-125). The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177) allows emergency funding to be excluded from budget control limits. The BCA added the OCO/GWOT designation to the BBEDCA exemption, thereby providing Congress and the President with an alternate way to exclude funding from the BCA spending limits. While there is no overall statutory limit on the amount of emergency or OCO/GWOT spending, both Congress and the President have fundamental roles in determining how much of the spending to provide each fiscal year. Congress must designate any such funding in statute on an account-by-account basis. The President is also required to designate it as such after it is appropriated to be available for expenditure. Debate over what should constitute OCO/GWOT or emergency activities and expenses has shifted over time, reflecting differing viewpoints about the extent, nature, and duration of U.S. military operations in Afghanistan, Iraq, Syria, and elsewhere. Funding designated for OCO/GWOT has also been used to fund base-budget requirements of the DOD and State Department and to prevent or respond to crises abroad, including armed conflict, as well as human-caused and natural disasters. Some defense officials and policymakers argue OCO funding allows for flexible response to contingencies, and provides a \"safety valve\" to the spending caps and threat of sequestration—the automatic cancellation of budget authority largely through across-the-board reductions of nonexempt programs and activities—under the BCA. Critics, however, have described OCO/GWOT as a loophole or \"gimmick\"—morphing from an account for replacing combat losses of equipment, resupplying expended munitions, and transporting troops through war zones, to a \"slush fund\" for activities unrelated to contingency operations. Congress appropriated approximately $103 billion for OCO in FY2017 (8.5% of all discretionary appropriations), $78 billion for OCO in FY2018 (5.5% of all discretionary appropriations), and $68.8 billion for OCO so far in FY2019. Discretionary appropriations for FY2019 are not yet final; a continuing resolution expired December 21, 2018. Following passage of the Bipartisan Budget Act of 2018 (P.L. 115-123), which raised discretionary budget caps for defense and foreign affairs agencies in FY2018 and FY2019, the Administration proposed shifting some OCO funding into the base, or regular, budget. Although Congress has generally not followed Administration requests for reduced funding for foreign affairs and domestic activities and has increased funding for defense, the President has asked cabinet secretaries to propose spending cuts of 5% in FY2020. Such proposals, if requested in a budget submission, may create difficult choices for Congress in FY2020 and FY2021—the final two years of the BCA discretionary spending limits. Congress's decisions on OCO/GWOT designations will affect how much agency funding is available for military operations and foreign affairs activities overseas, how much is subject to the BCA caps, and how much is incorporated into regular budgets and long-term budget projections.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers several programs to support small business owners and prospective entrepreneurs. For example, it provides education programs to assist with business formation and expansion; loan guaranty programs to enhance small business owners' access to capital; and programs to increase small business opportunities in federal contracting, including oversight of the service-disabled veteran-owned small business federal procurement goaling program. The SBA also provides direct loans for owners of businesses of all sizes, homeowners, and renters to assist their recovery from natural disasters. The Military Reservist Economic Injury Disaster Loan (MREIDL) program is also of interest to veterans. It provides direct loans of up to $2 million to small business owners who are not able to obtain credit elsewhere meet ordinary and necessary operating expenses that they could have met but are not able to because an essential employee has been called up to active duty in his or her role as a military reservist or member of the National Guard due to a period of military conflict. The SBA provides management and technical assistance to more than 100,000 veterans each year through its various training partners (e.g., Small Business Development Centers, Women's Business Centers, SCORE [formerly the Service Corps of Retired Executives], and Veterans Business Outreach Centers [VBOCs]). In addition, the SBA's Office of Veterans Business Development (OVBD) administers several programs to assist veteran-owned small businesses. The SBA's OVBD received an appropriation of $12.7 million for FY2018. The SBA has always assisted veteran small business owners and aspiring veteran entrepreneurs. In recent years, they have focused increased attention on assisting veterans transition from the military to the civilian labor force. For example, the SBA's OVBD, in partnership with Syracuse University, launched the Operation Boots to Business: From Service to Startup initiative for transitioning servicemembers in July 2012. The program consists of a two-day introductory course on entrepreneurship followed by an eight-week, online course to prepare servicemenmbers and military spouses \"for post-service career success as business owners.\" Congress provided the SBA's OVBD an additional $7 million in FY2014 to expand the Boots to Business initiative \"nationwide to the 250,000 yearly transitioning servicemembers in all branches of the military.\" The initiative's two-day Introduction to Entrepreneurship course is currently offered at 213 military institutions worldwide and is \"a standard portion of the curricula offered at the revised Transition Assistance Program (TAP) to servicemembers.\" TAP is administered by the Department of Defense (DOD) in cooperation with the Department of Labor (DOL), Department of Veterans Affairs (VA), Department of Education (DOE), Department of Homeland Security (DHS), Office of Personnel Management (OPM), and the SBA. Congress has approved additional appropriations to continue the initiative, and it was expanded in 2014 to include veterans of all eras, active duty servicemembers (including National Guard and Reserves), and their partner or spouse via the Boots to Business: Reboot initiative. In FY2017, 17,320 servicemembers participated in the Boots to Business program. During the 114 th Congress, legislation was introduced and reported favorably by the Senate Committee on Small Business and Entrepreneurship to provide the Boots to Business initiative statutory authorization ( S. 1866 , the Veterans Small Business Ownership Improvements Act of 2015). Similar legislation was introduced during the 115 th Congress ( S. 121 , the Veterans Small Business Ownership Improvements Act, and H.R. 5193 , the Veteran Entrepreneurship Training Act of 2018). To date, nearly 70,000 servicemembers have participated in the initiative. The expansion of federal employment training programs targeted at specific populations, such as women and veterans, has led some Members and organizations to ask if these programs should be consolidated. In their view, eliminating program duplication among federal business assistance programs across federal agencies, and within the SBA, would lower costs and improve services. Others argue that keeping these business assistance programs separate enables them to offer services that match the unique needs of underserved populations, such as veterans. Instead of consolidating these programs, their focus is on improving communication and cooperation among the federal agencies providing assistance to entrepreneurs. This report examines the economic circumstances of veteran-owned businesses drawn from the Bureau of the Census's 2012 Survey of Business Owners (SBO). It also provides a brief overview of veterans' employment experiences, comparing unemployment and labor force participation rates for veterans, veterans who have left the military since September 2001, and nonveterans. The report also describes employment assistance programs offered by several federal agencies to assist veterans transitioning from the military to the civilian labor force and examines, in greater detail, the SBA's veteran business development programs, the SBA's efforts to enhance veterans' access to capital, and the SBA's veteran contracting programs. It also discusses the SBA's Military Reservist Economic Injury Disaster Loan program and P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, which authorized and made permanent the SBA's recent practice of waiving the SBAExpress loan program's one time, up-front loan guarantee fee for veterans (and their spouse). From 1972 to 2012, the U.S. Bureau of the Census's SBO was sent every five years, for years ending in \"2\" and \"7,\" to a stratified random sample of nonfarm businesses in the United States that file Internal Revenue Service tax forms as individual proprietorships, partnerships, or any type of corporation, and with receipts of $1,000 or more. It asked for information about the cha racteristics of the businesses and their owners. About 66% of the 1.75 million businesses that received the 2012 SBO responded. The SBO provided \"the only comprehensive, regularly collected source of information on selected economic and demographic characteristics for businesses and business owners by gender, ethnicity, race, and veteran status.\" The SBO provided estimates of the number of employer and nonemployer firms and their sales and receipts, annual payroll, and employment. Data aggregates were provided by gender, ethnicity, race, and veteran status for the United States by North American Industry Classification System (NAICS) classification; the kind of business; and state, metropolitan and micropolitan statistical area, and county. This information was combined with data collected through the Census Bureau's main economic census and administrative records to provide a variety of searchable data products on Census's website, https://www.census.gov/programs-surveys/sbo.html , including the most detailed economic information available on veterans and veteran-owned firms. The Census Bureau has discontinued the SBO and is currently collecting data on business receipts, payroll, and employment by demographic characteristics, such as gender, ethnicity, race, and veteran status through its new, annual American Business Survey (ABS). The first set of data from the ABS is scheduled to be released in December 2019. Although now somewhat dated, the 2012 SBO provides the most detailed economic information available on veterans and veteran-owned firms. The Bureau of the Census estimates that in 2012 about 9.2% of nonfarm firms in the United States (2.54 million of 27.62 million) were owned by veterans. Four states had more than 100,000 veteran-owned firms: California (254,873), Texas (215,217), Florida (187,074), and New York (138,670). Of the 2.54 million veteran-owned, nonfarm firms in 2012, 82.3% (2.09 million) had no paid employees and 17.7% (450,807) had paid employees. This ratio is similar to comparable national figures of 80.4% (22.20 million) with no paid employees and 19.6% (5.42 million) with paid employees. 84.3% (2.14 million) were owned by a male, 15.1% were owned by a female (384,549), and 0.6% (14,035) were owned equally by a male and a female. Veteran-owned firms were more likely than other firms in 2012 to be owned by a male. The comparable national figures are 54.3% (14.99 million) were owned by a male, 36.0% (9.93 million) were owned by a female, and 9.0% (2.50 million) were owned equally by a male and a female. 85.1% (2.16 million) were owned by a Caucasian, 10.7% (270,702) were owned by an African American, 2.1% (52,933) were owned by an Asian, 1.3% (34,174) were owned by an American Indian or Alaska Indian, 0.3% (7,011) were owned by a native Hawaiian or other Pacific Islander, and 2.2% (56,091) were owned by \"some other race.\" Veteran-owned firms were somewhat more likely than other firms in 2012 to be owned by a Caucasian and somewhat less likely to be owned by an Asian. The comparable national figures for 2012 are 78.7% (21.74 million) were owned by a Caucasian, 9.4% (2.59 million) were owned by an African American, 7.0% (1.94 million) were owned by an Asian, 1.0% (274,238) were owned by an American Indian or Alaska Indian, 0.2% (55,077) were owned by a native Hawaiian or other Pacific Islander, and 4.3% (1.18 million) were owned by \"some other race.\" 3.3% (76,250 of the 2,299,501 reporting) were owned by an individual under the age of 35, 22.6% (520,472) were owned by an individual aged 35 to 54, and 74.5% (1,712,779) were owned by an individual aged 55 or older. Veteran-owned firms were more likely than other firms in 2012 to be owned by an individual aged 55 or older. The comparable national figures (minus veterans) for 2012 are 14.7% (2,943,446 of the 19,990,309 reporting) of nonfarm firms were owned by an individual under the age of 35; 48.1% (9,613,854) were owned by an individual aged 35 to 54; and 37.2% (7,433,009) were owned by an individual aged 55 or older. 7.3% (167,052 of the 2,292,035 reporting) were owned by an individual who reported that he or she had a service-connected disability. In addition, 99.8% of veteran-owned employer firms (441,799) had fewer than 500 employees and 0.2% (686) had at least 500 employees. This ratio is similar to comparable national figures for 2012, according to which 99.7% (5.41 million) had fewer than 500 employees and 0.3% (17,724) had at least 500 employees. In 2012, veteran-owned firms employed more than 5.5 million persons, reported a total payroll of $220.8 billion, and generated more than $1.47 trillion in total sales/receipts. Veteran-owned employer firms employed 5.5 million persons (about 4.8% of total U.S. employment); reported a total payroll of $220.8 billion (about 4.2% of total U.S. payroll); generated $1.375 trillion in total sales/receipts (about 4.2% of total U.S. receipts); and had average sales/receipts of $3.1 million. Veteran-owned nonemployer firms generated 6.4% ($94.5 billion) of the total sales/receipts generated by veteran-owned firms; and had average sales/receipts of $45,198. The comparable national figures for sales/receipts in 2012 were $6.0 million for employer firms and $47,679 for nonemployer firms. As shown in Table 1 , in 2012, veterans most frequently used personal or family savings to start or acquire a business (886,471 veterans, or 59.4% of respondents), followed by a personal or business credit card (148,856 veterans, or 10.0% of respondents), a business loan from a bank or financial institution (116,045 veterans, or 7.8% of respondents), and personal or family assets other than the owner's savings (92,748 veterans, or 6.2% of respondents). As shown in Table 2 , the source of capital most frequently used by veterans to expand or make capital improvements to an existing business in 2012 was personal or family savings (313,296 veterans, or 20.8% of respondents). The next most frequently used source of capital to expand or make capital improvements to an existing business was a personal or business credit card (114,815 veterans, or 7.6% of respondents), followed by business profits or assets (82,182 veterans, or 5.5% of respondents), and a government-guaranteed business loan from a bank or financial institution (64,499 veterans, or 4.3% of respondents). The Department of Labor's Bureau of Labor Statistics (BLS) provides monthly updates of the employment status of the nation's veterans. The BLS reports that as of January 2019, there were about 19.0 million veterans. There were 9.4 million veterans in the civilian labor force (i.e., they were either employed or unemployed and available for work, except for temporary illness, and had made specific efforts to find employment sometime during the four-week period ending with the reference week). Of those veterans in the civilian labor force, about 9.0 million were employed and about 344,000 were unemployed. In recent years, the unemployment rate among veterans as a whole has generally been lower than the unemployment rate for nonveterans 18 years and older. However, veterans who have left the military since September 2001 have experienced higher unemployment than other veterans and, in some years, higher than nonveterans as well. In January 2019, the unemployment rate for nonveterans 18 years and older was 4.3%, which was higher than for veterans as a whole (3.7%), for veterans who left the military prior to September 2001 (3.3%), and for veterans who left the military since September 2001 (4.2%). Veterans who have left the military since September 2001 also have a higher labor force participation rate (78.0%) than other veterans (40.0%) and nonveterans aged 18 and older (62.7%). The higher labor force participation rate for veterans who left the military since September 2001 was not wholly unexpected. They entered the civilian workforce more recently and have had less time to develop a reason (e.g., health issue, family responsibility, discouragement, retirement) to withdraw from the civilian workforce than other veterans and nonveterans aged 18 and older. The lower labor force participation rate for other veterans was also not wholly unexpected. They entered the civilian workforce earlier and have had more time to develop a reason to withdraw from the civilian workforce than veterans who left the military since September 2001 and nonveterans aged 18 and older. Several federal agencies, including the SBA, sponsor employment and business development programs to assist veterans in their transition from the military into the civilian labor force. As discussed, the expansion of federal employment and business development training programs targeted at specific populations, such as women and veterans, has led some Members and organizations to ask if these programs should be consolidated. Others question if the level of communication and coordination among federal agencies administering these programs has been sufficient to ensure the programs are being administered in the most efficient and effective manner. In an effort to assist veteran entrepreneurs, the SBA has either provided or supported management and technical assistance training for veteran-owned small businesses since its formation as an agency. The SBA provides management and technical assistance to more than 100,000 veterans each year through its various training partners (e.g., Small Business Development Centers, Women's Business Centers, SCORE [formerly the Service Corps of Retired Executives], and Veterans Business Outreach Centers [VBOCs]). In addition, the SBA's OVBD administers several programs to assist veteran-owned businesses, including the Entrepreneurship Bootcamp for Veterans with Disabilities Consortium of Universities, which provides \"experiential training in entrepreneurship and small business management to post-9/11 veterans with disabilities\" at eight universities; the Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE) program, administered through a cooperative agreement with Syracuse University, which offers women veterans a 15-day, online course focused on entrepreneurship skills and the \"language of business,\" followed by a 3-day conference (offered twice a year at varying locations) in which participants \"are exposed to successful entrepreneurs and CEOs of Fortune 500 companies and leaders in government\" and participate in courses on business planning, marketing, accounting and finance, operations and production, human resources, and work-life balance; the Operation Endure and Grow Program, administered through a cooperative agreement with Syracuse University, which offers an eight-week online training program \"focused on the fundamentals of launching and/or growing a small business\" and is available to National Guard members and reservists and their family members; the Boots to Business initiative, which is \"an elective track within the Department of Defense's revised Training Assistance Program called Transition Goals, Plans, Success (Transition GPS) and has three parts: the Entrepreneurship Track Overview —a 10-minute introductory video shown during the mandatory five-day Transition GPS course which introduces entrepreneurship as a post-service career option; Introduction to Entrepreneurship —a two-day classroom course on entrepreneurship and business fundamentals offered as one of the three Transition GPS elective tracks; and Foundations of Entrepreneurship —an eight-week, instructor-led online course that offers in-depth instruction on the elements of a business plan and tips and techniques for starting a business\"; the Boots to Business: Reboot initiative, which expanded the Boots to Business initiative in 2014 to include veterans of all eras, active duty servicemembers (including National Guard and Reserves), and their partner/spouse; the Veterans Institute for Procurement (VIP) program, which is designed to increase the ability of veteran-owned businesses to win government contracts by providing \"an accelerator-like, in-residence educational training program for owners, principals, and executives of veteran-owned businesses, consisting of a three-day comprehensive certification program instructed by professional service experts, government officials, and agency representatives\"; and the VBOC program, which provides veterans and their spouse management and technical assistance training at 22 locations, including assistance with the Boots to Business initiatives, the development and maintenance of a five-year business plan, and referrals to other SBA resource partners when appropriate for additional training or mentoring services. The SBA also continues to work closely with the Interagency Task Force for Veterans Small Business Development, which was established by executive order on April 26, 2010, held its first public meeting on October 15, 2010, and issued its first report on November 1, 2011, to identify \"gaps in ensuring that transitioning military members who are interested in owning a small business get needed assistance and training.\" The task force's second report, issued on November 29, 2012, focused on progress made since the initial report. The task force continues to meet on a quarterly basis to foster communication and monitor agency progress in assisting transitioning servicemembers. The SBA's OVBD, which serves as the SBA's focal point for its veteran assistance programs, was created by P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999. The act addressed congressional concerns that the United States generally, and the SBA in particular, was not, at that time, doing enough to meet the needs of veteran entrepreneurs, especially service-disabled veteran entrepreneurs. At that time, several Members of Congress argued that \"the needs of veterans have been diminished systematically at the SBA\" as evidenced by the agency's elimination of direct loans, including direct loans to veterans, in 1995; and a decline in the SBA's \"training and counseling for veterans … from 38,775 total counseling sessions for veterans in 1993 to 29,821 sessions in 1998.\" To address these concerns, the act authorized the establishment of the federally chartered National Veterans Business Development Corporation (known as the Veterans Corporation and reconstituted, without a federal charter, in 2012 as Veteranscorp.org). Its mission is to (1) expand the provision of and improve access to technical assistance regarding entrepreneurship for the Nation's veterans; and (2) to assist veterans, including service-disabled veterans, with the formation and expansion of small business concerns by working with and organizing public and private resources, including those of the Small Business Administration, the Department of Veterans Affairs, the Department of Labor, the Department of Commerce, the Department of Defense, the Service Corps of Retired Executives…, the Small Business Development Centers…, and the business development staffs of each department and agency of the United States. P.L. 106-50 reemphasized the SBA's responsibility \"to reach out to and include veterans in its programs providing financial and technical assistance.\" It included veterans as a target group for the SBA's 7(a), 504 Certified Development Company (504/CDC), and Microloan lending programs. It also required the SBA to enter into a memorandum of understanding with SCORE to, among other things, establish \"a program to coordinate counseling and training regarding entrepreneurship to veterans through the chapters of SCORE throughout the United States.\" In addition, it directed the SBA to enter into a memorandum of understanding with small business development centers, the VA, and the National Veterans Business Development Corporation \"with respect to entrepreneurial assistance to veterans, including service-disabled veterans.\" The act specified that the following services were to be provided: (1) Conducting of studies and research, and the distribution of information generated by such studies and research, on the formation, management, financing, marketing, and operation of small business concerns by veterans. (2) Provision of training and counseling to veterans concerning the formation, management, financing, marketing, and operation of small business concerns. (3) Provision of management and technical assistance to the owners and operators of small business concerns regarding international markets, the promotion of exports, and the transfer of technology. (4) Provision of assistance and information to veterans regarding procurement opportunities with Federal, State, and local agencies, especially such agencies funded in whole or in part with Federal funds. (5) Establishment of an information clearinghouse to collect and distribute information, including by electronic means, on the assistance programs of Federal, State, and local governments, and of the private sector, including information on office locations, key personnel, telephone numbers, mail and electronic addresses, and contracting and subcontracting opportunities. (6) Provision of Internet or other distance learning academic instruction for veterans in business subjects, including accounting, marketing, and business fundamentals. (7) Compilation of a list of small business concerns owned and controlled by service-disabled veterans that provide products or services that could be procured by the United States and delivery of such list to each department and agency of the United States. Such list shall be delivered in hard copy and electronic form and shall include the name and address of each such small business concern and the products or services that it provides. The SBA's OVBD was established to address these statutory requirements by promoting \"veterans' small business ownership by conducting comprehensive outreach, through program and policy development and implementation, ombudsman support, coordinated agency initiatives, and direct assistance to veterans, service-disabled veterans, reserve and National Guard members, and discharging active duty service members and their families.\" As mentioned previously, the OVBD provides, or supports third parties to provide, management and technical assistance training services to more than 100,000 veterans each year. These services are provided through funded SBA district office outreach; OVBD-developed and distributed materials; websites; partnering with DOD [Department of Defense], DOL [Department of Labor] and universities; agreements with regional veterans business outreach centers; direct guidance, training and assistance to Agency veteran customers; and through enhancements to intra-agency programs used by the military and veteran communities. The expansion of the SBA's veteran outreach efforts has led some Members and organizations to ask if the nation's veterans might be better served if some of the veteran employment and business development programs offered by federal agencies were consolidated. For example, as mentioned previously, DOD, in cooperation with several federal agencies, operates the recently revised Transition Assistance Program, Transition GPS, which provides employment information and training to exiting servicemembers to assist them in transitioning from the military into the civilian labor force. In addition, DOL's Jobs for Veterans State Grants program provides states funding for Disabled Veterans' Outreach Program specialists and Local Veterans' Employment Representatives to provide outreach and assistance to veterans, and their spouses, seeking employment. DOL also administers the Veterans Workforce Investment Program, which provides grants to fund programs operated by eligible state and local government workforce investment boards, state and local government agencies, and private nonprofit organizations to provide various services designed to assist veterans' transitions into the civilian labor force. The DOL-administered Homeless Veterans Reintegration Program provides grants to fund programs operated by eligible state and local government workforce investment boards, state and local government agencies, and private nonprofit organizations that provide various services designed to assist homeless veterans achieve meaningful employment and to aid in the development of a service delivery system to address problems facing homeless veterans. Advocates of consolidating veteran employment and business development programs argue that eliminating program duplication among federal agencies would result in lower costs and improved services. For example, H.R. 4072 , the Consolidating Veteran Employment Services for Improved Performance Act of 2012, which was introduced during the 112 th Congress and ordered to be reported by the House Committee on Veterans' Affairs on April 27, 2012, would have transferred several veteran employment training programs from the DOL to the VA. In addition, in 2011, 2012, 2013, 2014, and 2015, the House Committee on Small Business, in its \"Views and Estimates\" letter to the House Committee on the Budget, recommended that funding for the SBA's VBOCs be either eliminated or transferred to the Department of Veterans Affairs because, as it stated in 2012, \"the SBA already provides significant assistance to veterans who are seeking to start or already operate small businesses. The VBOCs duplicate services already available from the SBA, other entrepreneurial development partners and programs available from the Department of Veterans Affairs.\" In 2014, the House Committee on Small Business also recommended that if additional funds were to be provided to VBOCs, those funds should come from the SBA's Boots to Business initiative. Advocates of consolidating federal veteran employment and business development programs cite U.S. Government Accountability Office (GAO) reports that have characterized the broader category of federal support for entrepreneurs, including veteran entrepreneurs, as fragmented and having overlapping missions. For example, in 2012, GAO identified 53 programs within the SBA and the Departments of Commerce, Housing and Urban Development, and Agriculture designed to support entrepreneurs, including 36 programs that provide entrepreneurs technical assistance, such as business training, counseling, and research and development support. GAO found that \"the overlap among these programs raise[s] questions about whether a fragmented system is the most effective way to support entrepreneurs\" and suggested agencies should \"determine whether there are more efficient ways to continue to serve the unique needs of entrepreneurs, including consolidating programs.\" Instead of consolidating programs, some argue that improved communication and cooperation among the federal agencies providing entrepreneur support programs, and among the SBA's management and technical assistance training resource partners, would enhance program efficiencies while preserving the ability of these programs to offer services that match the unique needs of various underserved populations, such as veterans. For example, during the 111 th Congress, the House passed H.R. 2352 , the Job Creation Through Entrepreneurship Act of 2009, on May 20, 2009, by a vote of 406-15. The Senate did not take action on the bill. In its committee report accompanying the bill, the House Committee on Small Business concluded at that time that each ED [Entrepreneurial Development] program has a unique mandate and service delivery approach that is customized to its particular clients. However, as a network, the programs have established local connections and resources that benefit entrepreneurs within a region. Enhanced coordination among this network is critical to make the most of scarce resources available for small firms. It can also ensure that best practices are shared amongst providers that have similar goals but work within different contexts. The bill was designed to enhance oversight and coordination of the SBA's management and technical assistance training programs by requiring the SBA to coordinate these programs \"with State and local economic development agencies and other federal agencies as appropriate\" and to \"report annually to Congress, in consultation with other federal departments and agencies as appropriate, on opportunities to foster coordination, limit duplication, and improve program delivery for federal entrepreneurial development activities.\" In a related development, as mentioned previously, the Obama Administration formed the Interagency Task Force for Veterans Small Business Development by executive order on April 26, 2010. The SBA's representative chairs the task force, which is composed of senior representatives from seven federal agencies and four representatives from veterans' organizations. One of the task force's goals is to improve \"collaboration, integration and focus across federal agencies, key programs (e.g., the Transition Assistance Program), veterans' service organizations, states, and academia.\" On November 1, 2011, the task force issued 18 recommendations, including recommendations designed to increase and augment federal entrepreneurial training and technical assistance programs offered to veterans. For example, it recommended the development of a \"standardized, national entrepreneurship training program specifically for veterans\" that \"could utilize expert local instructors, including academics and successful small business owners, to provide training in skills used to create and grow entrepreneurial ventures and small business. The national program could provide engaging training modules and workshops dedicated to the basics of launching a business.\" The task force also recommended the development of a web portal \"that allows veterans to access entrepreneurship resources from across the government.\" Since then, the task force has met quarterly and its annual reports document its efforts to address the 18 recommendations. The SBA administers several loan guaranty programs, including the 7(a) and the 504/CDC programs, to encourage lenders to provide loans to small businesses \"that might not otherwise obtain financing on reasonable terms and conditions.\" The SBA's 7(a) loan guaranty program is considered the agency's flagship loan guaranty program. Its name is derived from Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorizes the SBA to provide business loans to American small businesses. The 7(a) program provides SBA-approved lenders a guaranty of up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000, up to the program's maximum gross loan amount of $5 million (up to $3.75 million maximum guaranty). In FY2018, the average approved 7(a) loan amount was $420,401. Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. Specific uses include to acquire land (by purchase or lease); improve a site (e.g., grading, streets, parking lots, and landscaping); purchase, convert, expand, or renovate one or more existing buildings; construct one or more new buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies, and raw materials; finance working capital; and refinance certain outstanding debts. The 7(a) program's loan maturity for working capital, machinery, and equipment (not to exceed the life of the equipment) is typically 5 years to 10 years, and the loan maturity for real estate is up to 25 years. Interest rates are negotiated between the borrower and lender but are subject to maximum rates. As shown in Table 3 , the number and amount of veteran 7(a) loan approvals have generally increased since FY2012. In FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25.4 billion, including 3,084 loans to veterans (5.3%) totaling $969 million (3.8%). In FY2018, the average approved veteran 7(a) loan amount was $314,360. The SBA's 504/CDC loan guaranty program is administered through nonprofit certified development companies (CDCs). It provides long-term fixed rate financing for major fixed assets, such as land, buildings, equipment, and machinery. Of the total project costs, a third-party lender must provide at least 50% of the financing, the CDC provides up to 40% of the financing through a 100% SBA-guaranteed debenture, and the applicant provides at least 10% of the financing. The 504/CDC program's name is derived from Section 504 of the Small Business Investment Act of 1958 (P.L. 85-699, as amended), which provides the most recent authorization for the sale of 504/CDC debentures. In FY2018, the average approved 504/CDC loan amount was $806,324. As shown in Table 4 , in recent years, the amount of veteran 504/CDC loan approvals peaked in FY2012, declined in FY2013 and FY2014, increased in FY2015, FY2016, and FY2017, and declined somewhat in FY2018. In FY2018, the SBA approved 5,874 504/CDC loans totaling $4.75 billion, including 158 loans to veterans (2.7%) totaling $95 million (2.0%). In FY2018, the average approved veteran 504/CDC loan amount was $601,202. The SBA administers several 7(a) loan guaranty subprograms that offer streamlined and expedited loan procedures to encourage lenders to provide loans to specific groups of borrowers identified by the SBA as having difficulty accessing capital. In the past, the Patriot Express program (2007-2013) encouraged lenders to provide loans to veterans and their spouses. It provided loans of up to $500,000 (with a guaranty of up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000). The SBA considered the Patriot Express program a success, but some veterans' organizations expressed concern that many veterans, especially during and immediately following the Great Recession (December 2007 to June 2009), experienced difficulty finding lenders willing to provide them Patriot Express loans. In addition, GAO reported in September 2013 that with the exception of loans approved in 2007, Patriot Express loans defaulted at a higher rate than regular 7(a) loans and loans made under the SBAExpress program (a 7(a) loan guaranty subprogram offering streamlined borrower application and lender approval procedures). Over its history, the Patriot Express program disbursed 9,414 loans totaling more than $791 million. On January 1, 2014, the SBA implemented a new, streamlined application process for 7(a) loans of $350,000 or less. As part of an overall effort to streamline and simplify its loan application process, the SBA also eliminated several 7(a) subprograms, including the Patriot Express program. In anticipation of ending the Patriot Express program, the SBA announced on November 8, 2013, that it would waive the up-front, one-time loan guaranty fee for loans to a veteran or veteran's spouse under the SBAExpress program from January 1, 2014, through the end of FY2014 (called the Veterans Advantage Program). The SBA announced that this fee waiver was part \"of SBA's broader efforts to make sure that veterans have the tools they need to start and grow a business.\" The Obama Administration continued this fee waiver for veterans through the end of FY2015. During the 113 th Congress, S. 2143 , the Veterans Entrepreneurship Act, would have authorized and made the Veterans Advantage Program's fee waiver permanent. P.L. 113-235 , the Consolidated and Further Continuing Appropriations Act, 2015, provided statutory authorization for the fee waiver for FY2015. During the 114 th Congress, P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made the SBA's practice of waiving the SBAExpress loan program's one time, up-front guaranty fee for veterans (and their spouse) permanent beginning on or after October 1, 2015, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero. The SBA has waived this fee every year since then. The SBAExpress program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guaranty on loans. It provides a 50% loan guaranty on loan amounts up to $350,000. In FY2018, the SBA approved 27,794 SBAExpress loans (46.1% of total 7(a) program loan approvals) totaling $1.98 billion (7.8% of total 7(a) program amount approvals). The SBA also waived the up-front, one-time loan guaranty fee for smaller 7(a) loans (including those to veterans) in FY2014, FY2015, FY2016, FY2017, and FY2018; and is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reduce the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019. In FY2015 and FY2016, the SBA also waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans exceeding $150,000. In FY2017, the SBA waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 to $500,000. In FY2018, the SBA waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 to $350,000. As mentioned previously, the SBA has indicated in both testimony at congressional hearings and in press releases that it viewed the Patriot Express program and its own overall effort to enhance veterans' access to capital as a success. For example, when the SBA announced its veterans' fee waiver for the SBAExpress program, it also announced that its lending to veteran-owned small businesses had nearly doubled since 2009 and that \"in FY2013, SBA supported $1.86 billion in loans for 3,094 veteran-owned small businesses.\" Congressional testimony provided by various veteran service organizations provides a somewhat different perspective. The SBA's self-evaluation of its success in assisting veterans access capital has focused primarily on the agency's efforts to streamline the loan application approval process (e.g., minimizing paperwork requirements and reducing the time necessary for the SBA to review and approve applications submitted by local lenders) and aggregate lending amounts (e.g., the number and amount of loans approved). In contrast, veteran service organizations focus primarily on program outcomes, especially the likelihood of a veteran being approved for a SBA loan by a local lender. For example, a representative of the American Legion testified at a congressional hearing in 2010 that, at that time, being turned down for a SBA Patriot Express loan by a private lender \"is probably the largest, most frequent complaint that we receive from our business owners.\" At that same congressional hearing, a representative of the Vietnam Veterans of America testified in response to that statement that \"I would have to concur … in talking with some of the veterans with regard to the Patriot Express Loan, they are having difficulties also to acquire that capital. The rationale seems to be … the banks in general seem to be tightening the credit, their lending practices, so that is … what we are hearing.\" More recently, GAO reported in 2013 that \"selected loan recipients, lenders, and veteran service organizations said that a low awareness of the Patriot Express program among the military community was among the most frequently cited challenges.\" No empirical assessments of veterans' experiences with either the SBA's Patriot Express or SBAExpress loan programs exist that would be useful for determining the relative ease or difficulty for veteran-owned small business owners of accessing capital through the SBA's loan programs. Since 2010, many lenders report that they have eased their credit standards, at least somewhat, for small business loans, suggesting the experiences of veterans seeking a SBA loan guaranty today may be improved compared with their experiences in 2010. However, GAO found in 2013 that many veterans were not fully aware of the SBA's Patriot Express program and that \"over half of the Patriot Express loan recipients, six of the eight lenders, and two veteran service organizations … said that [the] SBA could do more to increase outreach to veteran entrepreneurs and better market the program to the military community.\" GAO reported that low awareness of the SBA's Patriot Express program and the SBA's participating lenders were a continuing challenge for the SBA. One option to provide additional information concerning veterans' experiences with the SBA's lenders would be to survey veterans who have received a SBA guaranteed loan. The survey could include questions concerning these veterans' views of the programs, including the application process. However, obtaining a comprehensive list of veterans to survey who have been turned down for a SBA guaranteed loan by a private lender would be difficult given privacy concerns. In a related development concerning veterans' access to capital, legislation was introduced during the 114 th Congress ( S. 1870 , the Veterans Entrepreneurial Transition Act of 2015, and its House companion bill, H.R. 3248 ) to authorize a three-year pilot program, administered by the SBA, to provide grants to no more than 250 GI-Bill benefit-eligible veterans to start or acquire a qualifying business. The grant amount would have been calculated according to a formula related to the unused portion of the recipient's GI-Bill benefits. Recipients would have been required to complete specified training and meet other program requirements, such as having an approved business plan. S. 1870 was ordered to be reported with an amendment in the nature of a substitute by the Senate Committee on Small Business and Entrepreneurship on July 29, 2015. In addition, H.R. 5698 , the Strengthening Technical Assistance, Resources, and Training to Unleash the Potential of Veterans Act of 2016 (STARTUP Vets Act of 2016), and its companion bill in the Senate, S. 2273 , would have authorized the SBA to provide up to $1.5 million in grants annually \"from amounts made available to the Office of Veterans Business Development\" to organizations to create and operate business incubators and accelerators that provide technical assistance and training to veterans (including their spouse and dependents) to enable them \"to effectively transfer relevant skills to launch and accelerate small business concerns owned and controlled by covered individuals; and to create an avenue for high-performing covered individuals to meet and collaborate on business ideas.\" During the 115 th Congress, S. 1056 , the Veteran Small Business Export Promotion Act, and H.R. 2835 , To amend the Small Business Act, would have permanently waived \"the guarantee fee for loans of not more than $150,000 provided to veterans and spouses of veterans under the [SBA's] Export Working Capital, International Trade, and Export Express programs.\" Since 1978, federal agency heads have been required to establish federal procurement contracting goals, in consultation with the SBA, \"that realistically reflect the potential of small business concerns\" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting the goals to the SBA. The SBA negotiates the goals with each federal agency and establishes a small business eligible baseline for evaluating the agency's performance. The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement, such as contracts awarded to mandatory and directed sources, awarded and performed overseas, funded predominately from agency-generated sources, not covered by Federal Acquisition Regulations, and not reported in the Federal Procurement Data System (e.g., contracts or government procurement card purchases valued less than $3,000). These exclusions typically account for 18% to 20% of all federal prime contracts each year. The SBA then evaluates the agencies' performance against their negotiated goals annually, using data from the Federal Procurement Data System–Next Generation, managed by the U.S. General Services Administration, to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually. Over the years, federal government-wide procurement contracting goals have been established for small businesses generally ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, and P.L. 105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997); small businesses owned and controlled by socially and economically disadvantaged individuals ( P.L. 100-656 ); women ( P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994); small businesses located within a Historically Underutilized Business Zone, or HUBZone ( P.L. 105-135 ); and small businesses owned and controlled by a service-disabled veteran ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999). The current federal small business contracting goals are at least 23% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year; 5% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses for each fiscal year; 5% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses; 3% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses; and 3% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses. There are no punitive consequences for not meeting the small business procurement goals. However, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and heightens public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's report is often cited by Members during their questioning of federal agency witnesses in congressional hearings. As shown in Table 5 , the FY2017 Small Business Goaling Report , using data in the Federal Procurement Data System, indicates that federal agencies met the federal contracting goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017. Federal agencies awarded 23.88% of the value of their small business eligible contracts ($442.5 billion) to small businesses ($105.7 billion), 9.10% to small disadvantaged businesses ($40.2 billion), 4.71% to women-owned small businesses ($20.8 billion), 1.65% to HUBZone small businesses ($7.3 billion), and 4.05% to service-disabled veteran-owned small businesses ($17.9 billion). The percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017 is also provided in the table for comparative purposes. In a related development, on November 17, 2015, the House passed H.R. 1694 , the Fairness to Veterans for Infrastructure Investment Act of 2015. The bill would have revised the requirement that 10% of the award of contracts for federal-aid highway, federal public transportation, and highway safety research and development programs be set-aside for small businesses owned and controlled by socially and economically disadvantaged individuals. The bill would have required the set-aside to include veteran-owned small businesses. In another related development, the U.S. Supreme Court's decision in Kingdomware Technologies, Inc. v. United States (decided on June 16, 2016) requiring the VA to grant VOSBs certain preferences when awarding procurement contracts could result in the VA awarding additional contracts to VOSBs. In addition, the prevention of fraud in federal small business contracting programs, and in the SBA's loan programs as well, has been a priority for both Congress and the SBA for many years, primarily because reports of fraud in these programs emerge with some regularity. Of particular interest to veterans, GAO has found that \"the lack of an effective government-wide fraud-prevention program\" has left the service-disabled veteran-owned small business program \"vulnerable to fraud and abuse.\" Under the Small Business Act, a small business owned and controlled by a service-disabled veteran can qualify for a federal government procurement set-aside (a procurement in which only certain businesses may compete) or a sole-source award (awards proposed or made after soliciting and negotiating with only one source) if the small business is at least 51% unconditionally and directly owned and controlled by one or more service-disabled veteran. A veteran is defined as a person who has served \"in the active military, naval, or air service, and who was discharged or released under conditions other than dishonorable.\" A disability is service related when it \"was incurred or aggravated ... in [the] line of duty in the active military, naval, or air service.\" Federal agencies may set aside procurements for service-disabled veteran-owned small businesses only if the contracting officer reasonably expects that offers will be received from at least two responsible small businesses and the award will be made at a fair market price (commonly known as the \"rule of two\" because of the focus on there being at least two small businesses involved). Federal agencies may award sole contracts to service-disabled veteran-owned small businesses when (1) the contracting officer does not reasonably expect that two or more service-disabled veteran-owned small businesses will submit offers; (2) the anticipated award will not exceed $4.0 million ($6.5 million for manufacturing contracts); and (3) the award can be made at a fair and reasonable price. Otherwise, sole-source awards may only be made to service-disabled veteran-owned small businesses under other authority, such as the Competition in Contracting Act. Service-disabled veteran-owned small businesses are not eligible for price evaluation preferences in unrestricted competitions. The VA is statutorily required to establish annual goals for the awarding of VA contracts to both service-disabled veteran-owned small businesses and small businesses owned by other veterans. The VA is authorized to use \"other than competitive procedures\" in meeting these goals. For example, it may award any contract whose value is below the simplified acquisition threshold (generally $250,000 ) to a veteran-owned business on a sole-source basis, and it may also make sole-source awards of contracts whose value (including options) is between $250,000 and $5 million, provided that certain conditions are met. When these conditions are not met, the VA is generally required to set aside the contract for service-disabled or other veteran-owned small businesses. Service-disabled veteran-owned small businesses can generally self-certify as to their eligibility for contracting preferences available under the Small Business Act. However, in an effort to address fraud in VA contracting, veteran-owned and service-disabled veteran-owned small businesses must be listed in the VA's VetBiz database and have their eligibility verified by the VA to be eligible for preferences in certain VA contracts. Firms that fraudulently misrepresent their size or status have long been subject to civil and criminal penalties under Section 16 of the Small Business Act; SBA regulations implementing Section 16; and other provisions of law, such as the False Claims Act, Fraud and False Statements Act, Program Fraud Civil Remedies Act, and Contract Disputes Act. Several bills were introduced during the 112 th Congress to address fraud in small business contracting programs in various ways. Of particular interest to veterans, S. 3572 , the Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012, and S. 633 , the Small Business Contracting Fraud Prevention Act of 2011, would have, among other changes, amended Section 16 of the Small Business Act to expressly include service-disabled veteran-owned small businesses among the types of small businesses subject to penalties for fraud under that section . The bills would also have required service-disabled veteran-owned small businesses to register in the VA's VetBiz database, or any successor database, and have their status verified by the VA to be eligible for contracting preferences for service-disabled veteran-owned small businesses under the Small Business Act. In addition, during the 113 th Congress, S. 2334 , the Improving Opportunities for Service-Disabled Veteran-Owned Small Businesses Act of 2013, and its companion bill in the House, H.R. 2882 , and H.R. 4435 , the Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015, which was passed by the House on May 22, 2014, included a provision that would have authorized the transfer of the VetBiz database's administration and the verification of service-disabled veteran owned small businesses from the VA to the SBA. Advocates of requiring service-disabled veteran-owned small businesses to register in the VetBiz database and have their status verified by the VA (or the SBA) to be eligible for contracting preferences under the Small Business Act argue that doing so would reduce fraud. As then-Senator Snowe stated on the Senate floor when she introduced S. 633 , \"Our legislation attempts to remedy the spate of illegitimate firms siphoning away contracts from the rightful businesses trying to compete within the SBA's contracting programs.\" Others worry that requiring service-disabled veteran-owned small businesses to register in the VetBiz database and have their status verified by the VA (or the SBA) to be eligible for contracting preferences under the Small Business Act may add to the paperwork burdens of small businesses. They seek alternative ways to address the need to reduce fraud in federal small business procurement programs that do not increase the paperwork requirements of small businesses. Still others note that the effectiveness of any change to prevent fraud in veteran-owned and service-disabled veteran-owned small business procurement programs largely depends upon how the change is implemented. For example, in July 2011, the VA's Office of Inspector General concluded that the VA's implementation of its veteran-owned and service-disabled veteran-owned small business procurement fraud prevention programs needed improvement: We project that VA awarded ineligible businesses at least 1,400 VOSB [Veteran Owned Small Business] and SDVOSB [Service-Disabled Veteran Owned Small Business] contracts valued at $500 million annually and that it will award about $2.5 billion in VOSB and SDVOSB contracts to ineligible businesses over the next 5 years if it does not strengthen oversight and verification procedures. VA and the Office of Small and Disadvantaged Business Utilization (OSDBU) need to improve contracting officer oversight, document reviews, completion of site visits for \"high-risk\" businesses, and the accuracy of VetBiz Vendor Information Pages information. P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999, signed into law on August 17, 1999, authorized the SBA's Military Reservist Economic Injury Disaster Loan (MREIDL) program. The SBA published the final rule establishing the program in the Federal Register on July 25, 2001, with an effective date of August 24, 2001. The Senate Committee on Small Business provided, in its committee report on the Veterans Entrepreneurship and Small Business Development Act of 1999, the following reasons for supporting the authorization of the MREIDL Program: During and after the Persian Gulf War in the early 1990's, the Committee heard from reservists whose businesses were harmed, severely crippled, or even lost, by their absence. Problems faced by reservists called to active duty and their small businesses were of a varied nature and included cash-flow problems, difficulties with training an appropriate alternate manager on very short notice to run the business during the period of service, lost clientele upon return, and on occasion, bankruptcy. These hardships can occur during a period of national emergency or during a period of contingency operation when troops are deployed overseas. To help such reservists and their small businesses, the Committee seeks to provide credit and management assistance to small businesses when an essential employee (i.e., an owner, manager or vital member of the business' staff) is a reservist called to active duty. The Committee believes that financial assistance in the form of loans, loan deferrals and managerial guidance are effective ways to minimize the adverse financial demands of the call to active duty. They not only ameliorate financial difficulties but also strengthen small businesses. The House Committee on Small Business also supported the program's authorization, indicating in its committee report that the program will also fulfill a long unmet need to assist our military reservists who are small business owners. Often these individuals, called to service at short notice, come back from fighting to protect our freedoms only to find their businesses in shambles. H.R. 1568 will establish loan deferrals, technical and managerial assistance, and loan programs for these citizen soldiers so that while they risk their lives they need not risk their livelihoods. As mentioned previously, the SBA provides direct loans for owners of businesses of all sizes, homeowners, and renters to assist their recovery from natural disasters. The SBA's MREIDL program provides disaster assistance in the form of direct loans of up to $2 million to help small business owners who are not able to obtain credit elsewhere to (1) meet ordinary and necessary operating expenses that they could have met but are not able to meet; or (2) enable them to market, produce, or provide products or services ordinarily marketed, produced, or provided by the business that cannot be done because an essential employee has been called up to active duty in his or her role as a military reservist or member of the National Guard due to a period of military conflict. Under specified circumstances, the SBA may waive the $2 million limit (e.g., the small business is in immediate danger of going out of business, is a major source of employment, employs 10% or more of the workforce within the commuting area in which the business is located). P.L. 106-50 defines an essential employee as \"an individual who is employed by a small business concern and whose managerial or technical expertise is critical to the successful day-to-day operations of that small business concern.\" The act defines a military conflict as (1) a period of war declared by Congress; or (2) a period of national emergency declared by Congress or the President; or (3) a period of contingency operation. A contingency operation is designated by the Secretary of Defense as an operation in which our military may become involved in military actions, operations, or hostilities (peacekeeping operations). The SBA is authorized to make such disaster loans either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis. The loan term may be up to a maximum of 30 years and is determined by the SBA in accordance with the borrower's ability to repay the loan. The loan's interest rate is the SBA's published interest rate for an Economic Injury Disaster Loan at the time the application for assistance is approved by the SBA. Economic Injury Disaster Loan interest rates may not exceed 4%. The SBA is not required by law to require collateral on disaster loans. However, the SBA has established collateral requirements for disaster loans based on \"a balance between protection of the Agency's interest as a creditor and as a provider of disaster assistance.\" The SBA generally does not require collateral to secure a MREIDL loan of $50,000 or less. Larger loan amounts require collateral, but the SBA will not decline a request for a MREIDL loan for a lack of collateral if the SBA is reasonably certain the borrower can repay the loan. The SBA disbursed one MREIDL loan in FY2014, none in FY2015, three in FY2016, and three in FY2017. Since the MREIDL's inception through December 31, 2017, the SBA has disbursed 352 MREIDL loans amounting to $32.97 million. Of these 352 loans, 85 loans (24.2% of the total number of MREIDL loans disbursed), amounting to $7.8 million (23.8% of the total amount of MREIDL loans disbursed), have been charged off (a declaration that the debt is unlikely to be collected) by the SBA. Because the MREIDL program is relatively small and noncontroversial, this report does not present a discussion of the congressional issues affecting the program. Congress has demonstrated a continuing interest in federal programs designed to assist veterans transition from military to civilian life. For example, the SBA's veteran business development programs, loan guaranty programs, and federal procurement programs for small businesses generally, including service-disabled veteran-owned small businesses, have all been subject to congressional hearings during the past several Congresses. Also, as has been discussed, several bills have been introduced in recent Congresses to address the SBA's management of these programs and fraud. Given the many factors that influence business success, measuring the effectiveness of the SBA's veteran assistance programs, especially the programs' effect on veteran job retention and creation, is both complicated and challenging. For example, it is difficult to determine with any degree of precision or certainty the extent to which any changes in the success of a small business result primarily from that business's participation in the SBA's programs or from changes in the broader economy. That task is made even more challenging by the absence of performance outcome measures that could serve as a guide. In most instances, the SBA uses program performance measures that focus on indicators that are primarily output related, such as the number and amount of loans approved for veteran-owned small businesses and the number and amount of federal contracts awarded to service-disabled veteran-owned small businesses. Both GAO and the SBA's Office of Inspector General have recommended that the SBA adopt more outcome-related performance measures for the SBA's loan guaranty programs, such as tracking the number of borrowers that remain in business after receiving a SBA guaranteed loan to measure the extent to which the SBA contributed to their ability to stay in business. Other performance-oriented measures that Congress might also consider include requiring the SBA to survey veterans who participate in its business development programs or who have received a SBA guaranteed loan. This survey could provide information related to the difficulty the veterans experienced in obtaining a loan from the private sector, their experiences with the SBA's loan application process, and the role the SBA loan had in creating or retaining jobs. The SBA could also survey service-disabled veteran-owned small businesses that were awarded a federal contract to determine the extent to which the SBA was instrumental in their receiving the award and the extent to which the award contributed to their ability to create jobs or expand their scope of operations.", "summary": "Several federal agencies, including the Small Business Administration (SBA), provide training and other assistance to veterans seeking civilian employment. For example, the Department of Defense (DOD), in cooperation with the SBA, Department of Labor, Department of Veterans Affairs, and several other federal agencies, operates the Transition Goals Plans Success program (Transition GPS), which provides employment information and entrepreneurship training to exiting military servicemembers to assist them in transitioning from the military to the civilian labor force. In recent years, the unemployment rate among veterans as a whole has generally been similar to or lower than the unemployment rate for nonveterans 18 years and older. However, veterans who have left the military since September 2001 have experienced higher unemployment than other veterans and, in some years, higher unemployment than nonveterans. As a result, Congress has focused much of its attention on finding ways to assist veterans who have left the military since September 2001. The SBA provides management and technical assistance services to more than 100,000 veterans each year through its various management and technical assistance training partners (e.g., Small Business Development Centers, Women's Business Centers [WBCs], Service Corps of Retired Executives [SCORE], and Veterans Business Outreach Centers [VBOCs]). The SBA's Office of Veterans Business Development (OVBD) also administers several programs to assist veterans, including the Operation Boots to Business: From Service to Startup initiative, which is part of DOD's Transition GPS program. The expansion of federal employment training programs targeted at specific populations, such as women and veterans, has led some Members and organizations to ask if these programs should be consolidated. In their view, eliminating program duplication among federal business assistance programs across federal agencies, and within the SBA, would result in lower costs and improved services. Others argue that keeping these business assistance programs separate enables them to offer services that match the unique needs of various underserved populations, such as veterans. In their view, instead of considering program consolidation as a policy option, the focus should be on improving communication and cooperation among the federal agencies providing assistance to entrepreneurs. This report opens with an examination of the economic circumstances of veteran-owned businesses drawn from the Bureau of the Census's 2012 Survey of Business Owners (SBO). It then provides a brief overview of veterans' employment experiences, comparing unemployment and labor force participation rates for veterans, veterans who have left the military since September 2001, and nonveterans. The report also describes employment assistance programs offered by several federal agencies to assist veterans in their transition from the military to the civilian labor force and examines, in greater detail, the SBA's veteran business development programs, the SBA's efforts to assist veterans' access to capital, and the SBA's veteran contracting programs. It also discusses the SBA's Military Reservist Economic Injury Disaster Loan program and P.L. 114-38, the Veterans Entrepreneurship Act of 2015, which authorized and made permanent the SBA's recent practice of waiving the SBAExpress loan program's one time, up-front loan guarantee fee for veterans (and their spouse).", "document_type": "crs"}
{"report": "The federal child nutrition programs provide assistance to schools and other institutions in the form of cash, commodity food, and administrative support (such as technical assistance and administrative funding) based on the provision of meals and snacks to children. In general, these programs were created (and amended over time) to both improve children's nutrition and provide support to the agriculture economy. Today, the child nutrition programs refer primarily to the following meal, snack, and milk reimbursement programs (these and other acronyms are listed in Appendix A ): National School Lunch Program (NSLP) (Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.)); School Breakfast Program (SBP) (Child Nutrition Act, Section 4 (42 U.S.C. 1773)); Child and Adult Care Food Program (CACFP) (Richard B. Russell National School Lunch Act, Section 17 (42 U.S.C. 1766)); Summer Food Service Program (SFSP) (Richard B. Russell National School Lunch Act, Section 13 (42 U.S.C. 1761)); and Special Milk Program (SMP) (Child Nutrition Act, Section 3 (42 U.S.C. 1772)). The programs provide financial support and/or foods to the institutions that prepare meals and snacks served outside of the home (unlike other food assistance programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) where benefits are used to purchase food for home consumption). Though exact eligibility rules and pricing vary by program, in general the amount of federal reimbursement is greater for meals served to qualifying low-income individuals or at qualifying institutions, although most programs provide some subsidy for all food served. Participating children receive subsidized meals and snacks, which may be free or at reduced price. Forthcoming sections discuss how program-specific eligibility rules and funding operate. This report describes how each program operates under current law, focusing on eligibility rules, participation, and funding. This introductory section describes some of the background and principles that generally apply to all of the programs; subsequent sections go into further detail on the workings of each. Unless stated otherwise, participation and funding data come from USDA-FNS's \"Keydata Reports.\" The child nutrition programs are most often dated back to the 1946 enactment of the National School Lunch Act, which created the National School Lunch Program, albeit in a different form than it operates today. Most of the child nutrition programs do not date back to 1946; they were added and amended in the decades to follow as policymakers expanded child nutrition programs' institutional settings and meals provided: The Special Milk Program was created in 1954, regularly extended, and made permanent in 1970. The School Breakfast Program was piloted in 1966, regularly extended, and eventually made permanent in 1975. A program for child care settings and summer programs was piloted in 1968, with separate programs authorized in 1975 and then made permanent in 1978. These are now the Child and Adult Care Food Program and Summer Food Service Program. The Fresh Fruit and Vegetable Program began as a pilot in 2002, was made permanent in 2004, and was expanded nationwide in 2008. The programs are now authorized under three major federal statutes: the Richard B. Russell National School Lunch Act (originally enacted as the National School Lunch Act in 1946), the Child Nutrition Act (originally enacted in 1966), and Section 32 of the act of August 24, 1935 (7 U.S.C. 612c). Congressional jurisdiction over the underlying three laws has typically been exercised by the Senate Agriculture, Nutrition, and Forestry Committee; the House Education and the Workforce Committee; and, to a limited extent (relating to commodity food assistance and Section 32 issues), the House Agriculture Committee. Congress periodically reviews and reauthorizes expiring authorities under these laws. The child nutrition programs were most recently reauthorized in 2010 through the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ); some of the authorities created or extended in that law expired on September 30, 2015. WIC (the Special Supplemental Nutrition Program for Women, Infants, and Children) is also typically reauthorized with the child nutrition programs. WIC is not one of the child nutrition programs and is not discussed in this report. The 114 th Congress began but did not complete a 2016 child nutrition reauthorization (see CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview ). There was no significant legislative activity with regard to reauthorization in the 115 th Congress. The U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) administers the programs at the federal level. The programs are operated by a wide variety of local public and private providers and the degree of direct state involvement differs by program and state. At the state level, education, health, social services, and agriculture departments all have roles; at a minimum, they are responsible for approving and overseeing local providers such as schools, summer program sponsors, and child care centers and day care homes, as well as making sure they receive the federal support they are due. At the local level, program benefits are provided to millions of children (e.g., there were 30.0 million in the National School Lunch Program, the largest of the programs, in FY2017), through some 100,000 public and private schools and residential child care institutions, nearly 170,000 child care centers and family day care homes, and just over 50,000 summer program sites. All programs are available in the 50 states and the District of Columbia. Virtually all operate in Puerto Rico, Guam, and the Virgin Islands (and, in differing versions, in the Northern Marianas and American Samoa). This section summarizes the nature and extent to which the programs' funding is mandatory and discretionary, including a discussion of appropriated entitlement status. Table 3 lists child nutrition program and related expenditures. Most spending for child nutrition programs is provided in annual appropriations acts to fulfill the legal financial obligation established by the authorizing laws. That is, the level of spending for such programs, referred to as appropriated mandatory spending, is not controlled through the annual appropriations process, but instead is derived from the benefit and eligibility criteria specified in the authorizing laws. The appropriated mandatory funding is treated as mandatory spending. Further, if Congress does not appropriate the funds necessary to fund the program, eligible entities may have legal recourse. Congress typically considers the Administration's forecast for program needs in its appropriations decisions. For the majority of funding discussed in this report, the formula that controls the funding is not capped and fluctuates based on the reimbursement rates and the number of meals/snacks served in the programs. In the meal service programs, such as the National School Lunch Program, School Breakfast Program, summer programs, and assistance for child care centers and day care homes, federal aid is provided in the form of statutorily set subsidies (reimbursements) paid for each meal/snack served that meets federal nutrition guidelines. Although all (including full-price) meals/snacks served by participating providers are subsidized, those served free or at a reduced price to lower-income children are supported at higher rates. All federal meal/snack subsidy rates are indexed annually (each July) for inflation, as are the income eligibility thresholds for free and reduced-price meals/snacks. Subsequent sections discuss how a specific program's eligibility and reimbursements work. Most subsidies are cash payments to schools or other providers, but a smaller portion of aid is provided in the form of USDA-purchased commodity foods . Laws for three child nutrition programs (NSLP, CACFP, and SFSP) require the provision of commodity foods (or in some cases allow cash in lieu of commodity foods). Meal and snack service entails nonfood costs. Federal child nutrition per-meal/snack subsidies may be used to cover local providers' administrative and operating costs. However, the separate direct federal payments for administrative/operating costs (\"State Administrative Expenses,\" discussed in the \" Related Programs, Initiatives, and Support Activities \" section) are limited. In addition to the open-ended, appropriated entitlement funds summarized above, the child nutrition programs' funding also includes certain other mandatory funding and a limited amount of discretionary funding. Some of the activities discussed in \" Related Programs, Initiatives, and Support Activities ,\" such as Team Nutrition, are provided for with discretionary funding. Aside from the annually appropriated funding, the child nutrition programs are also supported by certain permanent appropriations and transfers. Notably, funding for the Fresh Fruit and Vegetable Program is funded by a transfer from USDA's Section 32 program, a permanent appropriation of 30% of the previous year's customs receipts. Federal subsidies do not necessarily cover the full cost of the meals and snacks offered by providers. States and localities help cover program costs, as do children's families by paying charges for nonfree or reduced-price meals/snacks. There is a nonfederal cost-sharing requirement for the school meals programs (discussed below), and some states supplement school funding through additional state per-meal reimbursements or other prescribed financing arrangements. Subsequent sections of this report delve into the details of how each of the child nutrition programs support the service of meals and snacks in institutional settings; first, it is useful to take a broader perspective of primary program elements. Table 1 is a top-level look at the different programs that displays distinguishing characteristics (what meals are provided, in what settings, to what ages) and recent program spending. Other relevant CRS reports in this area include CRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R45486, Child Nutrition Programs: Current Issues CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 (summarizes the Healthy, Hunger-Free Kids Act of 2010) CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview CRS Report R44588, Agriculture and Related Agencies: FY2017 Appropriations CRS Report RL34081, Farm and Food Support Under USDA's Section 32 Program Other relevant resources include USDA-FNS's website, https://www.fns.usda.gov/school-meals/child-nutrition-programs USDA-FNS's Healthy, Hunger-Free Kids Act page, http://www.fns.usda.gov/school-meals/healthy-hunger-free-kids-act The FNS page of the Federal Register , https://www.federalregister.gov/agencies/food-and-nutrition-service This section discusses the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). Principles and concepts common to both programs are discussed first; subsections then discuss features and data unique to the NSLP and SBP, respectively. The federal school meals programs provide federal support in the form of cash assistance and USDA commodity foods; both are provided according to statutory formulas based on the number of reimbursable meals served in schools. The subsidized meals are served by both public and private nonprofit elementary and secondary schools and residential child care institutions (RCCIs) that opt to enroll and guarantee to offer free or reduced-price meals to eligible low-income children. Both cash and commodity support to participating schools are calculated based on the number and price of meals served (e.g., lunch or breakfast, free or full price), but once the aid is received by the school it is used to support the overall school meal service budget, as determined by the school. This report focuses on the federal reimbursements and funding, but it should be noted that some states have provided state financing through additional state-specific funding. Federal law does not require schools to participate in the school meals programs. However, some states have mandated that schools provide lunch and/or breakfast, and some of these states require that their schools do so through NSLP and/or SBP. The program is open to public and private schools. A reimbursable meal requires compliance with federal school nutrition standards, which have changed throughout the history of the program based on nutritional science and children's nutritional needs. Food items not served as a complete meal meeting nutrition standards (e.g., a la carte offerings) are not reimbursable meals, and therefore are not eligible for federal per-meal, per-snack reimbursements. Following rulemaking to implement provisions in the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ), USDA updated the nutrition standards for reimbursable meals in January 2012 (see \" Nutrition Standards \" for more information). Schools serving meals that meet the updated nutrition standards are eligible for an increased reimbursement of 6 cents per lunch. USDA-FNS administers the school meals programs federally, and state agencies (typically state departments of education) oversee and transmit reimbursements through agreements with school food authorities (SFAs) (typically local educational agencies (LEAs); usually these are school districts). Figure 1 provides an overview of the roles and relationships between these levels of government. There is a cost-sharing requirement for the programs, which amounts to a contribution of approximately $200 million from the states. There also are states that choose to supplement federal reimbursements with their own state reimbursements. The school meals programs and related funding do not serve only low-income children. All students can receive a meal at a NSLP- or SBP-participating school, but how much the child pays for the meal and/or how much of a federal reimbursement the state receives will depend largely on whether the child qualifies for a \"free,\" \"reduced-price,\" or \"paid\" (i.e., advertised price) meal. Both NSLP and SBP use the same household income eligibility criteria and categorical eligibility rules. States and schools receive the largest reimbursements for free meals, smaller reimbursements for reduced-price meals, and the smallest (but still some federal financial support) for the full-price meals. There are three pathways through which a child can become certified to receive a free or reduced-price meal: 1. Household income eligibility for free and reduced-price meals (information typically collected via household application), 2. Categorical (or automatic) eligibility for free meals (information collected via household application or a direct certification process), and 3. School-wide free meals under the Community Eligibility Provision (CEP) , an option for eligible schools that is based on the share of students identified as eligible for free meals. Each of these pathways is discussed in more detail below. The income eligibility thresholds (shown in Table 2 ) are based on multipliers of the federal poverty guidelines. As the poverty guidelines are updated every year, so are the eligibility thresholds for NSLP and SBP. Free Meals: Children receive free meals if they have household income at or below 130% of the federal poverty guidelines; these meals receive the highest subsidy rate. (Reimbursements are approximately $3.30 per lunch served, less for breakfast.) Reduced-Price Meals: Children may receive reduced-price meals (charges of no more than 40 cents for a lunch or 30 cents for a breakfast) if their household income is above 130% and less than or equal to 185% of the federal poverty guidelines; these meals receive a subsidy rate that is 40 cents (NSLP) or 30 cents (SBP) below the free meal rate. (Reimbursements are approximately $2.90 per lunch served.) Paid Meals: A comparatively small per-meal reimbursement is provided for full-price or paid meals served to children whose families do not apply for assistance or whose family income does not qualify them for free or reduced-price meals. The paid meal price is set by the school but must comply with federal regulations. (Reimbursements are approximately 30 cents per lunch served.) The above reimbursement rates are approximate; exact current-year federal reimbursement rates for NSLP and SBP are listed in Table B -1 and Table B -3 , respectively. Households complete paper or online applications that collect relevant income and household size data, so that the school district can determine if children in the household are eligible for free meals, reduced-price meals, or neither. Though these income guidelines primarily influence funding and administration of NSLP and SBP, they also affect the eligibility rules for the SFSP, CACFP, and SMP (described further in subsequent sections). In addition to the eligibility thresholds listed above, the school meals programs also convey eligibility for free meals based on household participation in certain other need-tested programs or children's specified vulnerabilities (e.g., foster children). Per Section 12 of the National School Lunch Act, \"a child shall be considered automatically eligible for a free lunch and breakfast ... without further application or eligibility determination, if the child is\" in a household receiving benefits through SNAP (Supplemental Nutrition Assistance Program); FDPIR (Food Distribution Program on Indian Reservations, a program that operates in lieu of SNAP on some Indian reservations) benefits; or TANF (Temporary Assistance for Needy Families) cash assistance; enrolled in Head Start; in foster care; a migrant; a runaway; or homeless. For meals served to students certified in the above categories, the state/school receive a reimbursement at the free meal amount and children receive a free meal. (See Table B -1 and Table B -3 for school year 2018-2019 rates.) Some school districts collect information for these categorical eligibility rules via paper application. Others conduct a process called direct certification —a proactive process where government agencies typically cross-check their program rolls and certify a household's children for free school meals without the household having to complete a school meals application. Prior to 2004, states had the option to conduct direct certification of SNAP (then, the Food Stamp Program), TANF, and FDPIR participants. In the 2004 child nutrition reauthorization ( P.L. 108-265 ), states were required under federal law to conduct direct certification for SNAP participants, with nationwide implementation taking effect in school year 2008-2009. Conducting direct certification for TANF and FDPIR remains at the state's discretion. The Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) made further policy changes to expand direct certification (discussed further in the next section). One of those changes was the initiation of a demonstration project to look at expanding categorical eligibility and direct certification to some Medicaid households. The law also funded performance incentive grants for high-performing states and authorized correcting action planning for low-performing states in direct certification activities. Under SNAP direct certification rules generally, schools enter into agreements with SNAP agencies to certify children in SNAP households as eligible for free school meals without requiring a separate application from the family. Direct certification systems match student enrollment lists against SNAP agency records, eliminating the need for action by the child's parents or guardians. Direct certification allows schools to make use of SNAP's more in-depth eligibility certification process; this can reduce errors that may occur in school lunch application eligibility procedures that are otherwise used. From a program access perspective, direct certification also reduces the number of applications a household must complete. Figure 2 , created by GAO and published in a May 2014 report, provides an overview of how school districts certify students for free and reduced-price meals under the income-based and category-based rules, via applications and direct certification. A USDA-FNS study of school year 2014-2015 estimates that 11.1 million students receiving free meals were directly certified—68% of all categorically eligible students receiving free meals. HHFKA also authorized the school meals Community Eligibility Provision (CEP), an option in NSLP and SBP law that allows eligible schools and school districts to offer free meals to all enrolled students based on the percentage of their students who are identified as automatically eligible from nonhousehold application sources (primarily direct certification through other programs). Based on the statutory parameters, USDA-FNS piloted CEP in various states over three school years and it expanded nationwide in school year 2014-2015. Eligible LEAs have until June 30 of each year to notify USDA-FNS if they will participate in CEP. According to a database maintained by the Food Research and Action Center, just over 20,700 schools in more than 3,500 school districts (LEAs) participated in CEP in SY2016-2017, an increase of approximately 2,500 schools compared to SY2015-2016. For a school (or school district, or group of schools within a district) to provide free meals to all children the school(s) must be eligible for CEP based on the share (40% or greater) of enrolled children that can be identified as categorically (or automatically) eligible for free meals, and the school must opt-in to CEP. Though CEP schools serve free meals to all students, they are not reimbursed at the \"free meal\" rate for every meal. Instead, the law provides a funding formula: the percentage of students identified as automatically eligible (the \"identified student percentage\" or ISP) is multiplied by a factor of 1.6 to estimate the proportion of students who would be eligible for free or reduced-price meals had they been certified via application. The result is the percentage of meals served that will be reimbursed at the free meal rate, with the remainder reimbursed at the far lower paid meal rate. For example, if a CEP school identifies that 40% of students are eligible for free meals, then 64% of the meals served will be reimbursed at the free meal rate and 36% at the paid meal rate. Schools that identify 62.5% or more students as eligible for free meals receive the free meal reimbursement for all meals served. Some of the considerations that may impact a school's decision to participate in CEP include whether the new funding formula would be beneficial for their school meal budget; an interest in reducing paperwork for families and schools; and an interest in providing more free meals, including meals to students who have not participated in the program before. The Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) set in motion changes to the nutrition standards for school meals, requiring USDA to update the standards within a certain timeframe. The law required that the revised standards be based on recommendations from the Institute of Medicine (IOM) (now the Health and Medicine Division) at the National Academy of Sciences. The law also provided increased federal subsidies (6 cents per lunch) for schools meeting the new requirements and funding for technical assistance related to implementation. USDA published the final regulations in January 2012. The final rule sought to align school meal patterns with the 2010 Dietary Guidelines for Americans, and, generally consistent with IOM's recommendations, increased the amount of fruits, vegetables, whole grains, and low-fat or fat-free milk in school meals. The regulations also included calorie maximums and sodium limits to phase in over time, among other requirements. The nutrition standards largely took effect in SY2012-2013 for lunches and in SY2013-2014 for breakfasts. A few other requirements were scheduled to phase in over multiple school years. Some schools experienced difficulty implementing the new guidelines, and Congress and USDA have made changes to the 2012 final rule's whole grain, sodium, and milk requirements. For SY2019-2020 and onwards, schools are operating under a final rule published December 12, 2018. The HHFKA also gave USDA the authority to regulate other foods in the school nutrition environment. Sometimes called \"competitive foods,\" these include foods and drinks sold in a la carte lines, vending machines, snack bars and concession stands, and fundraisers. Relying on recommendations made by a 2007 IOM report, USDA-FNS promulgated a proposed rule and then an interim final rule in June 2013, which went into effect for SY2014-2015. The interim final rule created nutrition guidelines for all non-meal foods and beverages that are sold during the school day (defined as midnight until 30 minutes after dismissal). The final rule, published on July 29, 2016, maintained the interim final rules with minor modifications. Under the final standards, these foods must meet whole-grain requirements; have certain primary ingredients; and meet calorie, sodium, and fat limits, among other requirements. Schools are limited to a list of no- and low-calorie beverages they may sell (with larger portion sizes and caffeine allowed in high schools). There are no limits on fundraisers selling foods that meet the interim final rule's guidelines. Fundraisers outside of the school day are not subject to the guidelines. HHFKA and the interim final rule provide states with discretion to exempt infrequent fundraisers selling foods or beverages that do not meet the nutrition standards. The rule does not limit foods brought from home, only foods sold at school during the school day. The federal standards are minimum standards; states and school districts are permitted to issue more stringent policies. In FY2017, NSLP subsidized 4.9 billion lunches to children in close to 96,000 schools and 3,200 residential child care institutions (RCCIs). Average daily participation was 30.0 million students (58% of children enrolled in participating schools and RCCIs). Of the participating students, 66.7% (20.0 million) received free lunches and 6.5% (2.0 million) received reduced-price lunches. The remainder were served full-price meals, though schools still receive a reimbursement for these meals. Figure 3 shows FY2017 participation data. FY2017 federal school lunch costs totaled approximately $13.6 billion (see Table 3 for the various components of this total). The vast majority of this funding is for per-meal reimbursements for free and reduced-price lunches. The HHFKA also provided an additional 6-cent per-lunch reimbursement to schools that provide meals that meet the updated nutritional guidelines requirements. This bonus is not provided for breakfast, but funds may be used to support schools' breakfast programs. NSLP lunch reimbursement rates are listed in Table B -1 . In addition to federal cash subsidies, schools participating in NSLP receive USDA-acquired commodity food s . Schools are entitled to a specific, inflation-indexed value of USDA commodity foods for each lunch they serve. Also, schools may receive donations of bonus commodities acquired by USDA in support of the farm economy. In FY2017, the value of federal commodity food aid to schools totaled nearly $1.4 billion. The per-meal rate for commodity food assistance is included in Table B-4 . While the vast majority of NSLP funding is for lunches served during the school day, NSLP may also be used to support snack service during the school year and to serve meals during the summer. These features are discussed in subsequent sections, \" Summer Meals \" and \" After-School Meals and Snacks: CACFP, NSLP Options .\" Reimbursement rates for snacks are listed in Table B -2 . The School Breakfast Program (SBP) provides per-meal cash subsidies for breakfasts served in schools. Participating schools receive subsidies based on their status as a severe need or nonsevere need institution. Schools can qualify as a severe need school if 40% or more of their lunches are served free or at reduced prices. See Table B -3 for SBP reimbursement rates. Figure 4 displays SBP participation data for FY2017. In that year, SBP subsidized over 2.4 billion breakfasts in over 88,000 schools and nearly 3,200 RCCIs. Average daily participation was 14.7 million children (30.1% of the students enrolled in participating schools and RCCIs). The majority of meals served through SBP are free or reduced-price. Of the participating students, 79.1% (11.6 million) received free meals and 5.7% (835,000) purchased reduced-price meals. Federal school breakfast costs for the fiscal year totaled approximately $4.3 billion (see Table 3 for the various components of this total). Significantly fewer schools and students participate in SBP than in NSLP. Participation in SBP tends to be lower for several reasons, including the traditionally required early arrival by students in order to receive a meal and eat before school starts. Some schools offer (and anti-hunger groups have encouraged) models of breakfast service that can result in greater SBP participation, such as Breakfast in the Classroom, where meals are delivered in the classroom; \"grab and go\" carts, where students receive a bagged breakfast that they bring to class, or serving breakfast later in the day in middle and high schools. Unlike NSLP, commodity food assistance is not a formal part of SBP funding; however, commodities provided through NSLP may be used for school breakfasts as well. In addition to the school meals programs discussed above, other federal child nutrition programs provide federal subsidies and commodity food assistance for schools and other institutions that offer meals and snacks to children in early childhood, summer, and after-school settings. This assistance is provided to (1) schools and other governmental institutions, (2) private for-profit and nonprofit child care centers, (3) family/group day care homes, and (4) nongovernmental institutions/organizations that offer outside-of-school programs for children. (Although this report focuses on the programs that serve children, one child nutrition program (CACFP) also serves day care centers for chronically impaired adults and elderly persons under the same general per-meal/snack subsidy terms.) The programs in the sections to follow serve comparatively fewer children and spend comparatively fewer federal funds than the school meal programs. CACFP subsidizes meals and snacks served in early childhood, day care, and after-school settings. CACFP provides subsidies for meals and snacks served at participating nonresidential child care centers, family day care homes, and (to a lesser extent) adult day care centers. The program also provides assistance for meals served at after-school programs. CACFP reimbursements are available for meals and snacks served to children age 12 or under, migrant children age 15 or under, children with disabilities of any age, and, in the case of adult care centers, chronically impaired and elderly adults. Children in early childhood settings are the overwhelming majority of those served by the program. CACFP provides federal reimbursements for breakfasts, lunches, suppers, and snacks served in participating centers (facilities or institutions) or day care homes (private homes). The eligibility and funding rules for CACFP meals and snacks depend first on whether the participating institution is a center or a day care home (the next two sections discuss the rules specific to centers and day care homes). According to FY2017 CACFP data, child care centers have an average daily attendance of about 56 children per center, day care homes have an average daily attendance of approximately 7 children per home, and adult day care centers typically care for an average of 48 chronically ill or elderly adults per center. Providers must demonstrate that they comply with government-established standards for other child care programs. Like in school meals, federal assistance is made up overwhelmingly of cash reimbursements calculated based on the number of meals/snacks served and federal per-meal/snack reimbursements rates, but a far smaller share of federal aid (4.3% in FY2017) is in the form of federal USDA commodity foods (or cash in lieu of foods). Federal CACFP reimbursements flow to individual providers either directly from the administering state agency (this is the case with many child/adult care centers able to handle their own CACFP administrative functions) or through \"sponsors\" who oversee and provide administrative support for a number of local providers (this is the case with some child/adult care centers and with all day care homes). In FY2017, total CACFP spending was over $3.5 billion, including cash reimbursement, commodity food assistance, and costs for sponsor audits. (See Table 3 for a further breakdown of CACFP costs.) This total also includes the after-school meals and snacks provided through CACFP's \"at-risk after-school\" pathway; this aspect of the program is discussed later in \" After-School Meals and Snacks: CACFP, NSLP Options .\" As with school foods, the HHFKA required USDA to update CACFP's meal patterns. USDA's final rule revised the meal patterns for both meals served in child care centers and day care homes, as well as preschool meals served through the NSLP and SBP, effective October 1, 2017. For infants (under 12 months of age), the new meal patterns eliminated juice, supported breastfeeding, and set guidelines for the introduction of solid foods, among other changes. For children ages one and older, the new meal patterns increased whole grains, fruits and vegetables, and low-fat and fat-free milk; limited sugar in cereals and yogurts; and prohibited frying, among other requirements. Child care centers in CACFP can be (1) public or private nonprofit centers, (2) Head Start centers, (3) for-profit proprietary centers (if they meet certain requirements as to the proportion of low-income children they enroll), and (4) shelters for homeless families. Adult day care centers include public or private nonprofit centers and for-profit proprietary centers (if they meet minimum requirements related to serving low-income disabled and elderly adults). In FY2017, over 65,000 child care centers with an average daily attendance of over 3.6 million children participated in CACFP. Over 2,700 adult care centers served nearly 132,000 adults through CACFP. Participating centers may receive daily reimbursements for up to either two meals and one snack or one meal and two snacks for each participant, so long as the meals and snacks meet federal nutrition standards. The eligibility rules for CACFP centers largely track those of NSLP: children in households at or below 130% of the current poverty line qualify for free meals/snacks while those between 130% and 185% of poverty qualify for reduced-price meals/snacks (see Table 2 ). In addition, participation in the same categorical eligibility programs as NSLP as well as foster child status convey eligibility for free meals in CACFP. Like school meals, eligibility is determined through paper applications or direct certification processes. Like school meals, all meals and snacks served in the centers are federally subsidized to some degree, even those that are paid. Different reimbursement amounts are provided for breakfasts, lunches/suppers, and snacks, and reimbursement rates are set in law and indexed for inflation annually. The largest subsidies are paid for meals and snacks served to participants with family income below 130% of the federal poverty income guidelines (the income limit for free school meals), and the smallest to those who have not met a means test. See Table B -5 for current CACFP center reimbursement rates. Unlike school meals, CACFP institutions are less likely to collect per-meal payments. Although federal assistance for day care centers differentiates by household income, centers have discretion on their pricing of meals. Centers may adjust their regular fees (tuition) to account for federal payments, but CACFP itself does not regulate these fees. In addition, centers can charge families separately for meals/snacks, so long as there are no charges for children meeting free-meal/snack income tests and limited charges for those meeting reduced-price income tests. Independent centers are those without sponsors handling administrative responsibilities. These centers must pay for administrative costs associated with CACFP out of nonfederal funds or a portion of their meal subsidy payments. For centers with sponsors, the sponsors may retain a proportion of the meal reimbursement payments they receive on behalf of their centers to cover such costs. CACFP-supported day care homes serve a smaller number of children than CACFP-supported centers , both in terms of the total number of children served and the average number of children per facility. Roughly 17% of children in CACFP (approximately 757,000 in FY2017 average daily attendance) are served through day care homes. In FY2017, approximately 103,000 homes (with just over 700 sponsors) received CACFP support. As with centers, payments to day care homes are provided for up to either two meals and one snack or one meal and two snacks a day for each child. Unlike centers, day care homes must participate under the auspices of a public or, more often, private nonprofit sponsor that typically has 100 or more homes under its supervision. CACFP day care home sponsors receive monthly administrative payments based on the number of homes for which they are responsible. Federal reimbursements for family day care homes differ by the home's status as \"Tier I\" or \"Tier II.\" Unlike centers, day care homes receive cash reimbursements (but not commodity foods) that generally are not based on the child participants' household income. Instead, there are two distinct, annually indexed reimbursement rates that are based on area or operator eligibility criteria Tier I homes are located in low-income areas (defined as areas in which at least 50% of school-age and enrolled children qualify for free or reduced-price meals) or operated by low-income providers whose household income meets the free or reduced-price income standards. They receive higher subsidies for each meal/snack they serve. Tier II (lower) rates are by default those for homes that do not qualify for Tier I rates; however, Tier II providers may seek the higher Tier I subsidy rates for individual low-income children for whom financial information is collected and verified. (See Table B-6 for current Tier I and Tier II reimbursement rates.) Additionally, HHFKA introduced a number of additional ways (as compared to prior law) by which family day care homes can qualify as low-income and get Tier I rates for the entire home or for individual children. As with centers, there is no requirement that meals/snacks specifically identified as free or reduced-price be offered; however, unlike centers, federal rules prohibit any separate meal charges. Current law SFSP and the NSLP/SBP Seamless Summer Option provide meals in congregate settings nationwide; the related Summer Electronic Benefits Transfer (SEBTC or Summer EBT) demonstration project is an alternative to congregate settings. SFSP supports meals for children during the summer months. The program provides assistance to local public institutions and private nonprofit service institutions running summer youth/recreation programs, summer feeding projects, and camps. Assistance is primarily in the form of cash reimbursements for each meal or snack served; however, federally donated commodity foods are also offered. Participating service institutions are often entities that provide ongoing year-round service to the community including schools, local governments, camps, colleges and universities in the National Youth Sports program, and private nonprofit organizations like churches. Similar to the CACFP model, sponsors are institutions that manage the food preparation, financial, and administrative responsibilities of SFSP. Sites are the places where food is served and eaten. At times, a sponsor may also be a site. State agencies authorize sponsors, monitor and inspect sponsors and sites, and implement USDA policy. Unlike CACFP, sponsors are required for an institution's participation in SFSP as a site. In FY2017, nearly 5,500 sponsors with 50,000 food service sites participated in the SFSP and served an average of approximately 2.7 million children daily (according to July data). Participation of sites and children in SFSP has increased in recent years. Program costs for FY2017 totaled over $485 million, including cash assistance, commodity foods, administrative cost assistance, and health inspection costs. There are several options for eligibility and meal/snack service for SFSP sponsors (and their sites) Open sites provide summer food to all children in the community. These sites are certified based on area eligibility measures, where 50% or more of area children have family income that would make them eligible for free or reduced-price school meals (see Table 2 ). Closed or Enrolled sites provide summer meals/snacks free to all children enrolled at the site. The eligibility test for these sites is that 50% or more of the children enrolled in the sponsor's program must be eligible for free or reduced-price school meals based on household income. Closed/enrolled sites may also become eligible based on area eligibility measures noted above. Summer camps (that are not enrolled sites) receive subsidies only for those children with household eligibility for free or reduced-price school meals. Other programs specified in law , such as the National Youth Sports Program and centers for homeless or migrant children. Summer sponsors get operating cost (food, storage, labor) subsidies for all meals/snacks they serve—up to one meal and one snack, or two meals per child per day. In addition, sponsors receive payments for administrative costs, and states are provided with subsidies for administrative costs and health and meal-quality inspections. See Table B -7 for current SFSP reimbursement rates. Actual payments vary slightly (e.g., by about 5 cents for lunches) depending on the location of the site (e.g., rural vs. urban) and whether meals are prepared on-site or by a vendor. Although SFSP is the child nutrition program most associated with providing meals during summer months, it is not the only program option for providing these meals and snacks. The Seamless Summer Option, run through NSLP or SBP programs, is also a means through which food can be provided to students during summer months. Much like SFSP, Seamless Summer operates in summer sites (summer camps, sports programs, churches, private nonprofit organizations, etc.) and for a similar duration of time. Unlike SFSP, schools are the only eligible sponsors , although schools may operate the program at other sites. Reimbursement rates for Seamless Summer meals are the same as current NSLP/SBP rates. Beginning in summer 2011 and (as of the date of this report) each summer since, USDA-FNS has operated Summer Electronic Benefit Transfer for Children (SEBTC or \"Summer EBT\") demonstration projects in a limited number of states and Indian Tribal Organizations (ITOs). These Summer EBT projects provide electronic food benefits over summer months to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided, through a WIC or SNAP EBT card model. In the demonstration projects, these benefits were provided as a supplement to the Summer Food Service Program (SFSP) meals available in congregate settings. Summer EBT and other alternatives to congregate meals through SFSP were first authorized and funded by the FY2010 appropriations law ( P.L. 111-80 ). Although a number of alternatives were tested and evaluated, findings from Summer EBT were among the most promising, and Congress provided subsequent funding. Summer EBT evaluations showed significant impacts on reducing child food insecurity and improving nutritional intake.  Summer EBT was funded by P.L. 111-80 in the summers from 2011 to 2014. Projects have continued to operate and were annually funded by FY2015-FY2018 appropriations; most recently, the FY2018 appropriations law ( P.L. 115-141 ) provided $28 million. According to USDA-FNS, in summer 2016 Summer EBT served over 209,000 children in nine states and two tribal nations—an increase from the 11,400 children served when the demonstration began in summer 2011. Schools (and institutions like summer camps and child care facilities) that are not already participating in the other child nutrition programs can participate in the Special Milk Program. Schools may also administer SMP for their part-day sessions for kindergartners or pre-kindergartners. Under SMP, participating institutions provide milk to children for free and/or at a subsidized paid price, depending on how the enrolled institution opts to administer the program (see Table B -8 for current Special Milk reimbursement rates for each of these options) An institution that only sells milk will receive the same per-half pint federal reimbursement for each milk sold (approximately 20 cents). An institution that sells milk and provides free milk to eligible children (income eligibility is the same as free school meals, see Table 2 ), receives a reimbursement for the milk sold (approximately 20 cents) and a higher reimbursement for the free milks. An institution that does not sell milk provides milk free to all children and receives the same reimbursement for all milk (approximately 20 cents). This option is sometimes called nonpricing. In FY2017, over 41 million half-pints were subsidized, 9.5% of which were served free. Federal expenditures for this program were approximately $8.3 million in FY2017. States receive formula grants through the Fresh Fruit and Vegetable Program, under which state-selected schools receive funds to purchase and distribute fresh fruit and vegetable snacks to all children in attendance (regardless of family income). Money is distributed by a formula under which about half the funding is distributed equally to each state and the remainder is allocated by state population. States select participating schools (with an emphasis on those with a higher proportion of low-income children) and set annual per-student grant amounts (between $50 and $75). Funding is set by law at $150 million for school year 2011-2012 and inflation-indexed for every year after. In FY2017, states used approximately $184 million in FFVP funds. FFVP is funded by a mandatory transfer of funds from USDA's Section 32 program—a permanent appropriation of 30% of the previous year's customs receipts. This transfer is required by FFVP's authorizing laws (Section 19 of the Richard B. Russell National School Lunch Act and Section 4304 of P.L. 110-246 ). Up until FY2018's law, annual appropriations laws delayed a portion of the funds to the next fiscal year. After a pilot period, the Child Nutrition and WIC Reauthorization Act of 2004 ( P.L. 108-265 ) permanently authorized and funded FFVP for a limited number of states and Indian reservations. In recent years, FFVP has been amended by omnibus farm bill laws rather than through child nutrition reauthorizations. The 2008 farm bill ( P.L. 110-246 ) expanded FFVP's mandatory funding, specifically providing funds through Section 32, and enabled all states to participate in the program. The 2014 farm bill ( P.L. 113-79 ) essentially made no changes to this program but did include, and fund at $5 million in FY2014, a pilot project that requires USDA to test offering frozen, dried, and canned fruits and vegetables and publish an evaluation of the pilot. Four states (Alaska, Delaware, Kansas, and Maine) participated in the pilot in SY2014-2015 and the evaluation was published in 2017. Other proposals to expand fruits and vegetables offered in FFVP have been introduced in both the 114 th and 115 th Congress. Two of the child nutrition programs discussed in previous sections, the National School Lunch Program (NSLP) and Child and Adult Care Food Program (CACFP), provide federal support for snacks and meals served during after-school programs. NSLP provides reimbursements for after-school snacks; however, this option is open only to schools that already participate in NSLP. These schools may operate after-school snack-only programs during the school year, and can do so in two ways: (1) if low-income area eligibility criteria are met, provide free snacks in lower-income areas; or (2) if area eligibility criteria are not met, offer free, reduced-price, or fully paid-for snacks, based on household income eligibility (like lunches in NSLP). The vast majority of snacks provided through this program are through the first option. Through this program, approximately 206 million snacks were served in FY2017 (a daily average of nearly 1.3 million). This compares with nearly 4.9 billion lunches served (a daily average of 27.8 million). CACFP provides assistance for after-school food in two ways. First, centers and homes that participate in CACFP and provide after-school care may participate in traditional CACFP (the eligibility and administration described earlier). Second, centers in areas where at least half the children in the community are eligible for free or reduced-price school meals can opt to participate in the CACFP At-Risk Afterschool program, which provides free snacks and suppers. Expansion of the At-Risk After-School meals program was a major policy change included in HHFKA. Prior to the law, 13 states were permitted to offer CACFP At-Risk After-School meals (instead of just a snack); the law allowed all CACFP state agencies to offer such meals. In FY2017, the At-Risk Afterschool program served a total of approximately 242.6 million free meals and snacks to a daily average of more than 1.7 million children. Federal child nutrition laws authorize and program funding supports a range of additional programs, initiatives, and activities. Through State Administrative Expenses funding, states are entitled to federal grants to help cover administrative and oversight/monitoring costs associated with child nutrition programs. The national amount each year is equal to about 2% of child nutrition reimbursements. The majority of this money is allocated to states based on their share of spending on the covered programs; about 15% is allocated under a discretionary formula granting each state additional amounts for CACFP, commodity distribution, and Administrative Review efforts. In addition, states receive payments for their role in overseeing summer programs (about 2.5% of their summer program aid). States are free to apportion their federal administrative expense payments among child nutrition initiatives (including commodity distribution activities) as they see fit, and appropriated funding is available to states for two years. State Administrative Expense spending in FY2017 totaled approximately $279 million. Team Nutrition is a USDA-FNS program that includes a variety of school meals initiatives around nutrition education and the nutritional content of the foods children eat in schools. This includes Team Nutrition Training Grants, which provide funding to state agencies for training and technical assistance, such as help implementing USDA's nutrition requirements and the Dietary Guidelines for Americans. From 2004 to 2018, Team Nutrition also included the HealthierUS Schools Challenge (HUSSC), which originated in the 2004 reauthorization of the Child Nutrition Act. HUSSC was a voluntary certification initiative designed to recognize schools that have created a healthy school environment through the promotion of nutrition and physical activity. Farm-to-school programs broadly refer to \"efforts that bring regionally and locally produced foods into school cafeterias,\" with a focus on enhancing child nutrition. The goals of these efforts include increasing fruit and vegetable consumption among students, supporting local farmers and rural communities, and providing nutrition and agriculture education to school districts and farmers. HHFKA amended existing child nutrition programs to establish mandatory funding of $5 million per year for competitive farm-to-school grants that support schools and nonprofit entities in establishing farm-to-school programs that improve a school's access to locally produced foods. The FY2018 appropriations law provided an additional $5 million in discretionary funding to remain available until expended. Grants may be used for training, supporting operations, planning, purchasing equipment, developing school gardens, developing partnerships, and implementing farm-to-school programs. USDA's Office of Community Food Systems provides additional resources on farm-to-school issues. Through an Administrative Review process (formerly referred to as Coordinated Review Effort (CRE)), USDA-FNS, in cooperation with state agencies, conducts periodic on-site NSLP school compliance and accountability evaluations to improve management and identify administrative, subsidy claim, and meal quality problems. State agencies are required to conduct administrative reviews of all school food authorities (SFAs) that operate the NSLP under their jurisdiction at least once during a three-year review cycle. Federal Administrative Review expenditures were approximately $9.9 million in FY2017. USDA-FNS and state agencies conduct many other child nutrition program support activities for which dedicated funding is provided. Among other examples, there is the Institute of Child Nutrition (ICN), which provides technical assistance, instruction, and materials related to nutrition and food service management; it receives $5 million a year in mandatory funding appropriated in statute. ICN is located at the University of Mississippi. USDA-FNS provides training on food safety education. Funding is also provided for USDA-FNS to conduct studies, provide training and technical assistance, and oversee payment accuracy. Appendix A. Acronyms Used in This Report Appendix B. Per-meal or Per-snack Reimbursement Rates for Child Nutrition Programs This appendix lists the specific reimbursement rates discussed in the earlier sections of the report. Reimbursement rates are adjusted for inflation for each school or calendar year according to terms laid out in the programs' authorizing laws. Each year, the new rates are announced in the Federal Register . ", "summary": "The \"child nutrition programs\" refer to the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) programs that provide food for children in school or institutional settings. The best known programs, which serve the largest number of children, are the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). The child nutrition programs also include the Child and Adult Care Food Program (CACFP), which provides meals and snacks in day care and after school settings; the Summer Food Service Program (SFSP), which provides food during the summer months; the Special Milk Program (SMP), which supports milk for schools that do not participate in NSLP or SBP; and the Fresh Fruit and Vegetable Program (FFVP), which funds fruit and vegetable snacks in select elementary schools. Funding: The vast majority of the child nutrition programs account is considered mandatory spending, with trace amounts of discretionary funding for certain related activities. Referred to as open-ended, \"appropriated entitlements,\" funding is provided through the annual appropriations process; however, the level of spending is controlled by benefit and eligibility criteria in federal law and dependent on the resulting levels of participation. Federal cash funding (in the form of per-meal reimbursements) and USDA commodity food support is guaranteed to schools and other providers based on the number of meals or snacks served and participant category (e.g., free meals for poor children get higher subsidies). Participation: The child nutrition programs serve children of varying ages and in different institutional settings. The NSLP and SBP have the broadest reach, serving qualifying children of all ages in school settings. Other child nutrition programs serve more-narrow populations. CACFP, for example, provides meals and snacks to children in early childhood and after-school settings among other venues. Programs generally provide some subsidy for all food served but a larger federal reimbursement for food served to children from low-income households. Administration: Responsibility for child nutrition programs is divided between the federal government, states, and localities. The state agency and type of local provider differs by program. In the NSLP and SBP, schools and school districts (\"school food authorities\") administer the program. Meanwhile, SFSP (and sometimes CACFP) uses a model in which sponsor organizations handle administrative responsibilities for a number of sites that serve meals. Reauthorization: The underlying laws covering the child nutrition programs were last reauthorized in the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296, enacted December 13, 2010). This law made significant changes to child nutrition programs, including increasing federal financing for school lunches, expanding access to community eligibility and direct certification options for schools, and expanding eligibility options for home child care providers. The law also required an update to school meal nutrition guidelines as well as new guidelines for food served outside the meal programs (e.g., snacks sold in vending machines and cafeteria a la carte lines). Current Issues: The 114th Congress began but did not complete a 2016 child nutrition reauthorization, and there was no significant legislative activity with regard to reauthorization in the 115th Congress. However, the vast majority of operations and activities continue with funding provided by appropriations laws. Current issues in the child nutrition programs are discussed in CRS Report R45486, Child Nutrition Programs: Current Issues.", "document_type": "crs"}
{"report": "The international oil market has influenced U.S. domestic and foreign policy decisions for decades. The United States plays a significant role in the world oil market, not only as the top consumer of crude oil and petroleum products, but also as the largest producer. The U.S. Energy Information Administration (EIA) estimated that the United States surpassed Russia and Saudi Arabia as the world's number one crude oil producer in 2018. U.S. production is at an all-time high as a result of technological advancements and policy. Despite the recent surge in U.S. oil production, the United States remained a net importer of oil in 2018. Oil availability associates with energy independence and energy security more than any other fuel. Supply, demand, the strength of currencies, and other factors link crude oil to the world market to determine the price. Because the United States is a top consumer and producer of oil, it has the ability to influence this world market. Trade agreements, regulation, sanctions, and unpredictable events all contribute to the flow of oil in the world market. Congress may consider policies that affect the world oil market, including sanctions, alternative fuel standards, emission controls, use of electric vehicles, and protection of international trade routes. This report provides an introduction to the U.S. and world oil markets, with an overview of supply and demand, price considerations, and trade flows. The report also includes analysis on selected examples of international conditions that in the past have affected policy decisions in the United States. This report does not focus on trade associated with the entire crude oil and petroleum product value chain, the history of imports and exports, or provide an in-depth country trade balance analysis. The potential impacts of the world oil market on the climate and the environment are not within the scope of this report. The United States has abundant reserves of various natural resources, including crude oil in both conventional and unconventional deposits, such as shale. Technological advancements and new policies have changed the outlook for oil production in the United States from perceived scarcity to abundance. The United States, both the top oil producer and the world's greatest consumer of crude oil and petroleum products (e.g., gasoline), remains a net oil importer. The availability of the crude oil resource and more specifically the \"proved\" reserves limits the economic production, or supply. Proved reserves are identified, undeveloped resources in the ground that are both technically and economically recoverable under existing economic and operating conditions. This measurement can fluctuate depending on a number of factors such as technology costs, new discoveries, and local and international oil prices. By the end of 2017, the United States had 39.2 billion barrels of proved reserves of oil, according to the U.S. Energy Information Administration (EIA). U.S. oil production has seen steady growth through the deployment of new oil extraction technologies. Production nearly doubled from around 5 million barrels per day (Mb/d) in 2008 to just over 10 Mb/d in 2018. In a world context, in September 2018, the EIA estimated that the United States surpassed Russia and Saudi Arabia as the number one crude oil producer. In 2018, nearly 3 Mb/d of U.S. crude oil production came from shale formations within the Permian basin, located in west Texas and southeastern New Mexico. The United States produces primarily light, sweet crude oil. In 2017, light, sweet crude oil accounted for over half of all U.S. production, primarily from the Bakken shale formation in North Dakota and Montana and the Permian Basin. Hydraulic fracturing and horizontal drilling technologies largely drove the production growth of the past decade. Hydraulic fracturing allows crude oil trapped inside \"tight\" rock formations to be released. Fluid forced under high pressure into the formation fractures it, creating fissures through which the oil can flow. Horizontal drilling requires a single vertical wellbore at the surface and then drills out horizontally underground across numerous points of extraction. The use of these technologies has raised environmental concerns, particularly involving possible ground water contamination and earthquakes. The United States is the number one consumer of crude oil and refined petroleum products such as gasoline, diesel fuel, and aviation fuel. As Table 1 indicates, crude oil is both a raw ingredient for transportation fuels and a petrochemical feedstock to produce heating oil, lubricants, and other products. Due to this versatility, the price and supply of crude oil can directly affect other industries. Figure 1 shows that U.S. crude oil and petroleum product supplied in 2017 was on average 19.96 Mb/d—which was 20% of total world consumption. According to EIA, consumption is inferred from measurements of products supplied. Domestic crude oil production in 2017 was 9.35 Mb/d. While the United States is at record levels of production, current U.S. production is not meeting U.S. consumption. This supply/demand gap is filled by imports (a constant, but sometimes not dependable source), natural gas liquids, and, if necessary, drawing down commercial crude oil stockpiles or from the Strategic Petroleum Reserve. The demand for crude oil and petroleum products links closely to economic conditions. Consumers use petroleum products for everyday needs, such as driving, making crude oil and petroleum products relatively inelastic. While the economy is often a reliable driver of petroleum product consumption, so too is policy. In 2007, Congress passed the Energy Independence and Security Act ( P.L. 110-140 ), which directed the National Highway Traffic Safety Administration to promulgate new fuel economy standards to increase vehicle fleet efficiency. These standards demonstrate how federal policy choices can influence crude oil consumption in transportation. Several different characteristics of oil determine the price of crude oil. Crude oil quality is one factor that determines a price. Lighter, sweeter crude oil prices, for example, are generally higher than heavy, sour crudes oils, because refineries (see textbox about refineries above) use lighter, sweeter crude oils to produce higher-value petroleum products, such as gasoline and diesel fuel. The spot price and future price are other ways to measure the price of crude oils. The spot market (i.e., where assets are traded for immediate delivery) has a benchmark representing trade of that crude oil. In the United States, the most commonly referenced benchmark is known as West Texas Intermediate or WTI. This benchmark is the price at which oil is traded on the spot market in Cushing, OK. Several world crude oils serve as price benchmarks for other crude oils. Other world reference price benchmarks for crude oil include Brent (Europe) and Dubai Crude. These price benchmarks often differ from one another (known as a spread) and reflect the varying type and quality of the oil, regional market conditions, infrastructure limitations, and transportation costs. Crude oil prices commonly reported in newspapers are those of crude oil futures tied to a benchmark. Futures deal in the trade using contracts for the future delivery of oil, known as the futures market. The oil futures market provides customers the opportunity to hedge risk from price volatility, by contracting a price for production in the future. The pricing of crude oil contributes to the price consumers pay for petroleum products in the United States. Gasoline, for example, closely follows the trends in WTI and Brent. As illustrated by Figure 2 , with the costs of refining, distribution, and taxes relatively stable, changes in crude price drive changes in gasoline price. The Permian Basin produces a significant amount of light, sweet crude at relatively low cost, because of its unique geologic structure. At the Permian Basin, according to the EIA, \"operators can continue to drill through several tight oil layers and increase production even with sustained West Texas Intermediate (WTI) crude oil prices below $50 per barrel (bbl).\" While also cost competitive, production from the Bakken and Eagle Ford (south Texas) formations may be more economic with sustained prices above $50/bbl (at 2018 infrastructure, market, technology, and cost conditions). In 2017, WTI crude oil averaged $50.80/bbl, down from an average of $99.67/bbl in 2008. The 1970s began the era of limited oil availability and rising oil prices. Following the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) oil embargo, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163 ). The EPCA, among many other things, restricted U.S. produced crude oil exports. Since its passage, crude oil exports occurred only in certain circumstances. For example, in 1985, President Reagan found it in the national interest to lift export restrictions on U.S. produced crude oil to Canada, following Canada's decision to remove price and volume controls on exports to the United States. The oil sector in the United States has gone through several transformations since the 1970s. Trade policy with respect to oil has undergone significant changes in recent years to accommodate technological and world developments. U.S. crude oil and petroleum product gross imports have declined from average all-time highs of over 13 Mb/d in 2005 to 10 Mb/d average in 2017 ( Figure 3 ). As the U.S. oil market moved toward higher production levels, policies that were put in place during a time of rapidly rising prices and perceived resource scarcity came into question. Consequently, in December 2015, Congress passed the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), which repealed Section 103 of the EPCA ( P.L. 94-163 ), removing any restrictions to crude oil exports. Crude oil and petroleum product imports from Canada have steadily increased since the 1980s. The United States, in 2017, imported roughly 4 Mb/d (or 40% of all U.S. crude oil and petroleum product imports) on average from Canada. In 2013, Canada surpassed the Organization of the Petroleum Exporting Countries (OPEC) as the number one supplier to the United States (see Figure 3 ). Much of Canada's crude oil exports go to the United States. If imports from Canada continue to grow, infrastructure demands will increase. According to the EIA, over half of Canada's production comes from oil sands (a gritty, semisolid form of petroleum) that, once separated from the sand and clay, is a heavy, viscous crude oil. A majority of Canada's crude oils usually end up in the Midwest due to pipeline capacity limitations to the Gulf of Mexico. As mentioned above, not all crude oils are the same and refineries generally process different types of crude oil. In the United States, over half of all crude oil produced is light and sweet, while much of the U.S. refinery capacity processes heavy, sour crude oil grades. Prior to 2015, light, sweet crude oils were discounted domestically, sometimes by as much as $30/bbl, because of infrastructure constraints. With export restrictions removed, producers are now able to sell crude oil to the world market, not eliminating the discount, but lowering it. While U.S crude oil and petroleum product imports are declining, exports are breaking records. The EIA estimates that the United States exported around 7 Mb/d of crude oil and products combined in 2018 ( Figure 4 ). EIA further projects that, in most modeling cases, the United States will become a net petroleum exporter around 2030. As Figure 4 indicates, from 2017 to 2018, gross imports remained constant while exports increased, reducing net imports. Top destinations for U.S. crude oil and petroleum product exports include Mexico, Canada, China, Brazil, and Japan. According to EIA data, these five countries received about half of all U.S. oil exports in 2017. On average, Mexico imported 1 Mb/d of U.S. crude oil and petroleum products in 2017 (nearly double from 2013 levels), due to Mexico's decreased production coupled with rising demand. Mexico has not kept up refining to meet domestic demand. In 2016, Mexico became a net oil importer from the United States for the first time. U.S. gasoline exports in 2018 were more than half of Mexico's gasoline consumption. In general, the world oil market determines the price and supply of oil and petroleum products for U.S. consumers, which may impact policy decisions by Congress. In January 2019, the World Bank projected world gross domestic product growth of 2.9% in 2019 and 2.8% in 2020-2021. As developing economies grow, so too does their demand for fuel and consumer goods, including paints, lubricants, and plastics—many dependent on crude oil. Meanwhile, many countries are also trying to reduce greenhouse gas emissions, diversify their fuel mix, and enhance energy security and independence. The world oil market historically follows the world economy as it grows or declines. Supply generally does not follow demand smoothly, and this results in price volatility. For example, supply bottlenecks can constrain open trade, which can conflate prices and access. The Government of Alberta instituted a crude oil curtailment policy in January 2019, as crude producers faced export infrastructure bottlenecks. The inability to export excess production had caused storage to increase to 35 million barrels of crude oil (nearly double the historical amount) for the Canadian province. Further, prices declined during this period of overproduction to $11.43/bbl from $58.49. In addition to economic growth or decline, the world oil supply is influenced by a number of drivers, including project investments, the price of oil, demand forecasts, and geopolitics. Oil producers attempt to match world demand projections by making new production investments and replacing exhausted or uncompetitive production sites. The EIA estimated the world's proved reserves in 2017 at approximately 1,645 billion barrels of oil. The world supplied approximately 98 Mb/d of petroleum and other liquids; this equates to roughly 50 years of production at 2017 levels. As noted above, proved reserves incorporates crude oil prices, domestic fiscal conditions, geology, and the technology available to economically produce from the reserve base. Often suppliers make decisions to maximize revenue without causing a corresponding decrease in demand. Similarly, volatility in oil prices can create swings in revenue that can disrupt or enable development plans among producers. Venezuela, according to EIA, holds the world's largest proved reserves at 301 billion barrels of oil in 2017, followed by Saudi Arabia (266 billion barrels) and Canada (170 billion barrels). Proved reserves do not necessarily correlate with production levels. Venezuela, for example, has significantly decreased its crude oil production (due in part to a lack of investment and other contributing factors) while the United States has become the number one producer. The EIA estimated that the United States surpassed Russia and Saudi Arabia as the world's number one crude oil producer in 2018. National oil companies (NOCs) dominate Russian and Saudi Arabian oil production. NOCs operate under government ownership or are companies under influence by national governments. In contrast, oil companies in the U.S. private sector operate autonomously. Saudi Arabia, historically the world's leading oil producer and a member of OPEC, has held enough spare capacity to influence the market when it has deemed it necessary. In September 2018, Saudi Arabia held an estimated 1.5 Mb/d of crude oil spare capacity, or 72% of world spare capacity. Spare capacity allows for swift adjustments to crude oil output that can affect the world oil market. OPEC, through crude oil policy decisions, can influence the world's oil supply and as a result crude oil prices. OPEC is an organization of oil-producing nations that together represent nearly 40% of world oil production (see Figure 5 ). Saudi Arabia, a founding member of OPEC, holds the largest share of OPEC production. Although not an OPEC member, Russia recently has coordinated with OPEC on oil supply decisions, which can have a profound effect on the world market. For example, Russia is a participating country to the Declaration of Cooperation, an agreement between OPEC and non-OPEC countries to adjust world oil market production. OPEC countries, particularly Saudi Arabia, often maintain varying levels of spare oil capacity. Those with the greatest spare capacity may be referred to as \"swing producers,\" as they may have the ability to more easily influence the oil market. Swing producers may use their spare capacity to bring balance to an often unstable market, but also may have the power to manipulate the price of oil by either flooding the market (causing downward pressure on price) or by reducing supply (resulting in an increase in price). While OPEC dominates oil production, other non-OPEC countries will gain market share contributing to world supply growth through 2023. The International Energy Agency (IEA) estimates that the United States, Brazil, and Canada will provide the majority of world supply growth. Iraq, Iran, Norway, the United Arab Emirates, and Libya also are expected to contribute to oil supply growth through 2023, but to a smaller degree. Total non-OPEC supply growth is expected to increase by 5.2 Mb/d by 2023, accounting for 81% of 6.4 Mb/d of total world oil capacity growth during this period. While the EIA projects the United States, Brazil, and Canada to drive supply growth through 2023, a number of other countries may experience production declines. China, Mexico, and Venezuela have seen comparatively lower production for the past three years as a result of lower investments and other contributing factors. Venezuelan crude oil production has trended downward since 1998 from approximately 3.4 Mb/d to 2 Mb/d in 2018, with IEA forecasting continued declines to as low as 1 Mb/d through 2023. The IEA reports that globally new oil discoveries fell to a record low in 2017 with 4 billion barrels of new crude oil reserves discovered. Producers consider world demand growth forecasts when making investment decisions. If the prospects for increasing oil consumption appear minimal or if the price outlook looks uneconomical, then producers may be more hesitant to invest in new fields. Producers, however, are looking at ways to make existing mature fields more productive, as well as increasing production of alternatives to crude oil, such as biofuels. Mature fields with production that is declining or nearing retirement may not necessarily be fully exhausted, but rather, oil extraction costs may be at a point that is no longer profitable in the world market. In 2018, world oil product demand was 99.2 Mb/d, and IEA projects that this will increase to 104.7 Mb/d by 2023. Countries seeing the strongest gains economically may also see growth in their demand for oil. The IEA projects China and India to contribute to a large portion of oil demand growth, representing around 20% of total world demand. IEA projects China's oil demand to grow from 12.5 Mb/d in 2017 to 14.4 Mb/d in 2023. India's demand projection is to grow by about 0.2 Mb/d annually to total demand of 5.9 Mb/d in 2023. As demonstrated by Figure 6 , IEA projects relatively flat demand growth for the United States through 2023. Several forecasts estimate that the transportation sector will continue to dominate oil demand. For example, British Petroleum (BP) estimates that transportation will comprise over half of world oil demand through 2040. IEA projects transportation sectors will represent 6.4 Mb/d of the 9.6 Mb/d total oil demand growth from 2017 through 2030. In addition to transportation, the IEA projects petrochemicals (e.g., a chemical product derived from petroleum refining) to contribute to nearly one-third of that total demand growth, at 3.2 Mb/d. Oil demand forecasting for the transportation sector is subject to policy, regulation, and technological development (e.g., electric vehicles). Some countries or international organizations may enact regulations to increase efficiency or to diversify the fuel mix. For example, the International Maritime Organization has set a new world limit of sulfur content in fuel oil used in ships (0.5% down from 3.5%) beginning in 2020. It remains to be seen whether this limit will impact the overall oil market, but crude oils already low in sulfur content may be in higher demand. The shipping industry may even look toward alternative fuels, such as biofuels or liquefied natural gas (LNG, which has negligible sulfur emissions), depending on price and availability. Shippers could also install \"scrubbers\" (e.g., exhaust cleaning systems) onboard to reduce the sulfur emissions and avoid switching fuels. Petrochemicals contribute to the manufacture of many everyday household items (e.g., paints, lubricants, cars, and plastics). The increase in availability of lighter crude oils in the United States (along with natural gas production in the form of natural gas liquids) contributes to this production industry. Crude oils of this quality can more easily produce ethane, a feedstock once processed becomes ethylene, most commonly used in the making of plastics. Efficiency gains and environmental policy considerations may affect forecasted petrochemical demand growth. Forecast models predicting world oil demand rely on assumptions and can provide divergent results. Projections are highly dependent on their methodologies, assumptions, and available data. For instance, the IEA has multiple scenarios for forecasting (e.g., \"Sustainable Development,\" \"Current Policies,\" and \"New Policies\"), and each scenario results in different forecasts of future oil demand. In the Sustainable Development scenario, oil demand peaks (i.e., reaches its highest point) around 2020 and begins to decline through 2040, whereas the Current Policies scenario sees strong oil demand growth through 2040. Fuel efficiency standards, alternative fuels, and other policies can all contribute to varying oil demand forecasts across all sectors. These different forecast scenarios illustrate the complexity of oil demand, as well as the effect policy can have on it. Oil prices in the world market are determined fundamentally by supply and demand, which in turn depend on a number of other factors, such as currency exchange rates, the condition of the world economy, investments, and political environments. The market fluctuates over time with numerous often unforeseen circumstances, but responds to decisions and events occurring today. As mentioned above, various hubs price and trade oil in different regions all over the world. These hubs, despite location, trade oil in the U.S. dollar (as is the case with many other commodities), as it serves as a reserve currency for the world economy. As a result, the U.S. dollar and the price of oil have had an inverse relationship, in which a weak dollar has made oil more attractive for purchase to buyers holding other currencies. However, in March 2018, China launched its first crude oil futures contract in Shanghai pegged to the Chinese yuan. As a recent development, it remains to be seen how this will impact oil trade. In the first six months of the Shanghai futures, trade volumes have surpassed the Dubai Mercantile Exchange's oil contract. As Figure 7 demonstrates, several events have correlated to drastic changes in the oil sector. In late 2014, the price of oil decreased from a period of high prices (around $100/bbl in real 2010 dollars) to an annual average low (under $40/bbl in real 2010 dollars), causing producers to reconsider investments in new locations with higher production costs. The price decline was in part due to an oversupplied market, furthered by an OPEC decision to maintain production levels in November 2014, in part to defend market share. OPEC decisions, political destabilization, financial crisis, and war are some of the world events that can affect the supply and price of oil. Geopolitical events resulted in changes to the price of oil, just as the price of oil elicited changes in foreign policy. The IEA Oil 2018 report forecasts an almost near parity between domestic production and consumption in the Americas (down to -0.5 Mb/d) in 2023, while Asia's oil trade deficit (led by China's imports) may increase to about -25.3 Mb/d in 2023 ( Figure 8 ). Middle Eastern (ME), Former Soviet Union (FSU), and European crude oil balances, according to IEA projections, will see only marginal changes—a slight increase in exports for ME and FSU, a slight decrease in imports for Europe ( Figure 8 ). Furthermore, the IEA projects that Latin America may see a slight drop in exports as Venezuela continues to decline in production. In Africa, Nigeria and Egypt may increase domestic consumption, while Angola continues to decline. The IEA also forecasts countries in the Organisation for Economic Co-operation and Development (OECD) on average to trend toward import reduction, as a result of efficiency gains, emissions policies, and fuel diversification (e.g., natural gas in power generation in place of diesel). According to IEA, Asia will increase imports 3.7 Mb/d by 2023. China's projection alone sees an increase in net imports of crude oil from just over 8 Mb/d in 2017 to 10 Mb/d in 2023. China's imports are likely to continue coming from current trading partners, but at higher volumes, with Russia being the top exporter to China. Largely due to an extensive pipeline infrastructure network, Russia exports oil directly to China. Two recently completed Russian pipelines now have a total capacity of 0.6 Mb/d to China. The IEA projects the United States, Norway, Brazil, and Canada to provide the largest new non-OPEC crude exports to the world market. The IEA projects Europe to reduce oil imports and diversify its imports away from reliance on Russia, bringing more imports of crude oil from the United States. According to the IEA, Brazil may increase exports by about 1 Mb/d and offset some of the reduction from Venezuela. Meanwhile, the IEA estimates that Canadian producers may be able to increase exports, but face transportation bottlenecks, limiting their export capacity. The largest outlet for Canadian crude is the United States, either via pipeline or rail. Should the United States reach capacity limits, Canadian producers may have to consider new opportunities. The United States, however, may continue to import Canadian heavy crude oil and export U.S. light crude oil. Canadian producers are attempting to bring oil via pipeline to its west coast for marine export to meet the growing demand in Asia. However, Canadian producers face opposition from environmental groups and from the provincial and local government, resulting in challenges for pipeline approvals. While the oil market directly affects the economy, oil-related policy has the power to influence geopolitics and can be utilized as a tool to influence other countries. Oil policy can be influential in a number of ways, for instance as a response to or in anticipation of undesirable international behavior or as a means to bring balance and stability to an otherwise volatile market. Decisions about energy conservation, environmental protection, and protection of strategic resources can also affect a country's oil supply and demand. The United States plays a multifaceted role in the world oil market, which may affect Congress's policy decisions. As noted, individual countries or events may be able to affect the oil market. OPEC, especially in conjunction with other major producers (e.g., Russia), can exert a greater influence. OPEC produces 40% of world crude oil and maintains enough spare capacity to affect the market. In November 2016, OPEC, Russia, and other non-OPEC members committed to reduce the supply of oil in the world market due to low prices. Since the production cuts began prices increased from around $45/bbl in January 2015 to $84/bbl in October of 2018. Overall, OPEC has exceeded the original production cuts of 1.2 Mb/d agreed to in November 2016, reaching 147% compliance in May 2018. Since 2017, the schedule and quota for production cuts has shifted, as the non-OPEC group has not been in full compliance, while other OPEC members have reached targets and even in some cases have exceeded them. In June 2018, recognizing this overcompliance and rising oil prices, OPEC and Russia agreed to increase production back to 100% group-level compliance with the November 2016 target. Prices have since declined to around $50/bbl in early January 2019. OPEC's coordinated effort to adjust the world supply of oil has an effect on price. OPEC's spare capacity and willingness to adjust production levels gives the organization the ability to exert such influence. Several bills introduced in the 115 th Congress addressed the U.S. relationship with OPEC, including the United States Commission on the Organization of Petroleum Exporting Countries Act of 2017 ( H.R. 545 ); the OPEC Accountability Act of 2018 ( S. 2929 ); and the No Oil Producing and Exporting Cartels (NOPEC) Act of 2018 ( H.R. 5904 and S. 3214 ). Both the House and the Senate NOPEC bills would have amended antitrust law, known as the Sherman Act, to make oil cartels illegal and prosecutable by the U.S. Department of Justice. NOPEC would have revoked the sovereign immunity historically applied to OPEC members, allowing the United States to sue for collusion. It would have made production and price manipulation illegal. Similar bills have been introduced in other Congresses, but were not enacted. Some private sector entities expressed opposition to H.R. 5904 and S. 3214 . For instance, on August 22, 2018, the American Petroleum Institute (API) issued a letter to Congress opposing NOPEC. It stated the legislation may have unintended consequences for the U.S. oil and gas sectors and expressed concerns for U.S. diplomatic and military interests, reciprocal action by OPEC countries. Low oil prices are not necessarily ideal for all U.S. stakeholders throughout the oil supply chain. For example, refiners prefer lower oil prices since they are buying crude oil; however, U.S. producers (depending on their costs of extraction, transportation, etc.) may find extraction of crude oil uneconomic below a certain price. The pressure from these various stakeholders and their effect on government policy is an important factor in the oil market. Members of Congress and Presidents have sought to use oil policy as a foreign policy tool. Historically, Congress and the executive branch have placed sanctions on crude oil, the banking and the financial sectors, and other oil-related sectors in order to communicate favor or disfavor to the governments of certain countries. Often, oil-targeted sanctions have been on selected countries with NOCs, which finance and support government operations. Congress also has used sanctions against individuals, entities, and governments as a response to undesirable international behavior. For example, the 115 th Congress passed the Countering America's Adversaries through Sanctions Act of 2017 ( P.L. 115-44 ), which established requirements for, and granted the President authority to impose, sanctions on Iran, Russia, and North Korea. In 2014, in response to Russia's invasion and annexation of Ukraine's Crimea region and Russia's subsequent support of separatists in eastern Ukraine, the United States imposed sanctions on over 600 individuals, entities, and vessels. President Barack Obama, in initiating economic sanctions on Russian individuals, declared that these activities in Ukraine \"threaten its peace, security, stability, sovereignty, and territorial integrity\" and constitute a threat to U.S. national security. The United States worked with the European Union to amplify the effect of sanctions on Russia and since 2014 has widened their scope in response to election interference, illegal trade with North Korea, and other activities. The Russia sanctions target several different sectors, including energy, and specifically oil production. Known as \"sectoral sanctions,\" they include restrictions on (1) financing to specific oil companies, and (2) engagement (trade, technology, support, etc.) in certain kinds of oil projects (shale, Arctic offshore, deepwater, etc.) under the directive of Executive Order 13662 and the Ukraine Freedom Support Act of 2014 ( P.L. 113-272 ), as amended. Since 2014, the success of these sectoral sanctions has been difficult to ascertain, as the price of oil sharply declined during the same time period. Furthermore, Russia enacted changes in its tax system and devalued the ruble. Russian economic growth correlates with oil prices. The price collapse likely had an effect on Russia, as economic growth slowed and even contracted by 2.5% in 2015. With the price of oil strengthening, so too did Russia's economy, which grew by 1.5% in 2017. However, the technology-related sanctions aim to have a longer-term effect on Russian oil production by limiting access to U.S. and EU technology. The overall effect of these technological sanctions on Russian oil production may take years to come to fruition. The United States has been utilizing sanctions on Iran for decades as part of an ongoing policy strategy to compel Iran to cease supporting terrorism, to provide transparency of Iran's nuclear program, and to limit strategic power in the Middle East. Starting midyear 2012, the United States and the European Union together enforced sanctions on Iran. These hindered Iran's economy and cut crude production by around 1 Mb/d through 2015, according to EIA ( Figure 9 ). In 2016, these sanctions were lifted, and Iran increased its crude production back to presanctions levels of just under 4 Mb/d. In May 2018, the Trump Administration announced its intention to withdraw from the Joint Comprehensive Plan of Action (which relieved Iran of the 2012-2015 sanctions). In August 2018, the Administration announced that sanctions would be resumed. Overall, these reinstated sanctions, although not adopted worldwide, have had an effect on the Iranian economy, as companies have moved to comply to avoid U.S. penalties for dealing with Iran. Iran's crude oil exports fell to their lowest in 2.5 years in September 2018 to 1.72 Mb/d. On November 5, 2018, China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey were issued waivers to the Iranian oil sanctions with an expiration date set for May 2, 2019. The Trump Administration announced on April 23, 2019, that waivers would no longer be issued or extended beyond May 2. Secretary of State Mike Pompeo stated in a press release that this is to \"apply maximum pressure on the Iranian regime until its leaders change their destructive behavior, respect the rights of the Iranian people, and return to the negotiating table.\" Iran's exports fell to just around 1 Mb/d in April 2019. Venezuela has experienced production declines for many reasons, including sanctions. For years, the Venezuelan government has used revenues from the NOC Petróleos de Venezuela, S.A (PdVSA) to pay for social services and support government spending. When the price of oil collapsed, Venezuela's lack of investment, corruption, and a lack of technical expertise led to oil production declines from roughly 2.5 Mb/d in 2015 to IEA estimates of around 1.5 Mb/d in 2018. For over a decade the United States has imposed a range of sanctions on the Venezuelan government. The Trump Administration imposed sanctions restricting Venezuela's access to U.S. financial markets in August 2017, increasing fiscal pressure on the government. On March 21, 2018, through E.O. 13827, \"Taking Additional Steps to Address the Situation in Venezuela,\" the Administration expanded on 2017 sanctions. Furthermore, on January 25, 2019, the Administration updated the executive orders by broadening \"the definition of the term 'Government of Venezuela' to include persons that have acted, or have purported to act, on behalf of the Government of Venezuela.\" Under these updates, U.S. consumers can continue to purchase Venezuelan crude oil until April 28, 2019, but the payments will be held in blocked accounts. A prohibition on U.S. crude oil imports from Venezuela could result in a shock to the world oil market and a constraint in the world oil supply system, resulting in U.S. Gulf Coast refineries experiencing higher oil prices. However, this initial shock may be short term, as the market would eventually find alternative sources. While the oil market has changed in the past 40 years, physical threats to oil supply still exist, particularly along certain trade routes. Bottlenecks or disruptions along routes can affect the supply of oil and ultimately the price consumers pay. This section will highlight some examples. A key waterway for the transit of oil and natural gas is the Strait of Hormuz in the Persian Gulf. This juncture is the only passage in the Persian Gulf with access to the open ocean and is surrounded by some of the world's largest oil-producing countries. Roughly 24% of the world oil market, almost 22 Mb/d of crude oil and petroleum products, transited the Strait of Hormuz in the first half of 2018. Saudi Arabia has other outlets for oil exports, including the Red Sea; however, the Bab al-Mandeb Strait (where the Red Sea and the Gulf of Aden meet just along the shores of Djibouti, across from Yemen) is another choke point. Saudi Arabia in the summer of 2018 temporarily announced a suspension of oil shipments (roughly 500,000-700,000 barrels per day) through the Bab al-Mandeb Strait after two ships were attacked by Yemen's Houthis. As introduced in the House, a previous version of the National Defense Authorization Act (NDAA) for Fiscal Year 2018 ( P.L. 115-91 ) included language specific to defending critical choke points of interest to national security in the Persian Gulf. While P.L. 115-91 as enacted did not include this language, the House Committee on Armed Services, in H.Rept. 115-200 , stressed that the U.S. military should maintain capabilities to \"ensure freedom of navigation at the Bab al Mandab Strait and the Strait of Hormuz.\" The political relationships of the United States with Iran, Saudi Arabia, other members of OPEC, and China have been strategically important when considering legislation that may affect the security of supply along major oil trade routes. Though most of the oil that flows through the Strait of Hormuz goes to Asia, the world oil market is integrated, so a disruption anywhere can contribute to higher oil prices everywhere. If a major disruption were to occur, depending on the size and cause, the supply shock to the international oil market would likely put upward pressure on oil prices. Some possible examples include escalating war in Yemen; armed confrontation with Iran; and increased tensions over Chinese control in South China Sea. The impact of oil price increases on other economic sectors is difficult to ascertain and challenging to predict, given the pervasive role of oil and oil-based products in the world economy. Despite a new era of abundance for the United States, a massive disruption to world supply along trade routes could permeate into geopolitical relationships, secondary industries (e.g., petrochemicals, agriculture), and the economy at large. Congress over many years has enacted several laws intended to secure the nation's oil supply. The 1970s was an especially busy time for Congress in this area. Largely in response to the OAPEC oil embargo and exhausted U.S. spare capacity, Congress considered security-of-supply policy options. This time period initiated the perception of energy scarcity in the United States. Since then, Congress has continuously demonstrated interest in the oil market. This section identifies some of the ways in which Congress has addressed oil consumption and security. In response to the 1973 OAPEC oil embargo, the United States entered into the International Energy Program in 1974, an agreement that requires all members to hold a 90-day supply of petroleum (based on the previous year's net imports) for emergency use. The following year, Congress passed the EPCA of 1975 ( P.L. 94-163 ), which authorized the creation of the SPR to address emergency supply shortages. The SPR originally was an up to 1 billion barrel petroleum reserve (a combination of crude oil, home heating oil, and gasoline), located around the Gulf of Mexico and in the Northeast. Congress, in 1990, amended the EPCA ( P.L. 101-383 ) to authorize the President to initiate SPR drawdowns during times of economic stress, not necessarily considered an emergency. Congress has also authorized sales form the SPR for various purposes. Its current inventory is around 650 million barrels. Today the SPR's role has expanded to ensure ready oil supplies during natural disasters and to help stabilize the oil market. The EPCA of 1975 also established Corporate Average Fuel Economy (CAFE) standards that began in model year (MY) 1978 for passenger cars and for light trucks in MY 1979. CAFE standards require auto manufacturers to meet miles-per-gallon fuel economy targets for passenger vehicles and light trucks sold in the United States. If a manufacturer fails to do so, it is subject to financial penalties. Vehicle miles per gallon have increased significantly since the institution of CAFE standards. For example, according to the Department of Energy's 2018 Transportation Energy Data Book, starting in 1978, passenger vehicle fuel use dropped from around 80 billion gallons of gasoline to just above 69 billion in 1982. Conversely, the number of registered vehicles increased from 116 million to 123 million during the same time period. While the number of registered passenger vehicles increased, the number of miles driven per vehicle stayed relatively flat (around 9,000 miles per vehicle) throughout the time period. In August 2018, the Environmental Protection Agency and the National Highway Traffic Safety Administration proposed amendments to CAFE standards. These proposed amendments offer eight alternatives for MY 2021-2026. The agencies' preferred alternative is to retain the existing standards through MY 2020 and then to freeze the standards at this level for both programs through MY 2026. Congress has passed several laws establishing tax credits for plug-in electric vehicles (EVs). The Energy Improvement and Extension Act of 2008, enacted as Division B of P.L. 110-343 , established the credit for plug-in EVs. As first enacted, the credit phased out once 250,000 credit-eligible vehicles were sold. The plug-in EV phaseout threshold changed from a 250,000-vehicle limit to a 200,000-vehicle per manufacturer limit in the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). EVs may play an important role in the future of oil as the transportation sector diversifies fuel sources. In the United States, EVs had less than 4% market share in 2017. Competitive gasoline prices and the often higher cost of initial purchase for EVs may be factors contributing to the relatively slow growth in market share for EVs. In the 115 th Congress, there were proposals to extend, as well as proposals to repeal, the plug-in EV tax credit. In 2005, Congress established the Renewable Fuel Standard (RFS) with the passage of the Energy Policy Act ( P.L. 109-58 ), and expanded it in 2007 with the Energy Independence and Security Act ( P.L. 110-140 ). The RFS requires transportation fuel to contain an increasing amount of renewable fuels, including conventional biofuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. At the time, transportation sector fuel diversity was negligible; the stronger the reliance of an economic sector on one fuel source, the more at risk it is to fuel supply disruptions. The RFS, in concept, intends to provide some diversification to transportation fuels away from a strong reliance on traditional gasoline or diesel derived from crude oil. Additionally, the focus on agriculture-derived fuels would support the U.S. biofuel industry and could reduce greenhouse gas emissions compared to traditional gasoline and diesel. Implementing the RFS has been challenging due to a number of factors (e.g., infrastructure, technology, and limited federal assistance). Some Members of Congress have expressed concerns about whether or not to amend or repeal the RFS. This report has reviewed select policy issues from the full suite of legislative measures that may influence the world oil market. Domestically, for example, Congress could enact legislation to increase or reduce production by opening areas or restricting certain technologies. Furthermore, emissions controls and emissions-related policies could play a pivotal role in the world oil market. For instance, the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) expanded the 45Q tax credit from $10 to $35 per ton of carbon dioxide (CO 2 ) for use in enhanced oil recovery. The 45Q tax credit demonstrated an interest in utilizing CO 2 emissions, while at the same time expanding oil production in the United States. Furthermore, oil tends to affect many other sectors of the economy and vice versa. Policy changes in one sector could have intended or unintended consequences for the oil market. For instance, tariffs on steel could affect production transportation costs. Other major policy considerations could include international trade policies, infrastructure, diversification of transportation fuels, and funding in research and development. ", "summary": "The United States, as the largest consumer and producer of oil, plays a major role in the world market. Policy decisions can affect the price of oil and petroleum products (e.g., gasoline) for U.S. consumers and companies operating in U.S. oil production, transportation, and refining sectors. Congress considers policies that can affect the world oil market, including trade, sanctions, protection of trade routes, the Strategic Petroleum Reserve (SPR), and alternative fuel standards. Technological advancements, supportive policies, and other aspects of the U.S. oil industry have reversed a multidecade downward trend in U.S. oil production. In 2018, U.S. oil production nearly doubled compared to 2008. The United States is also the number one consumer of crude oil and refined petroleum products in the world. The pricing of crude oil contributes to the price consumers pay for petroleum products in the United States. Congress has maintained an interest in oil policy. Following the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) oil embargo, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163). In response to rapid price escalation and perceived scarcity, the EPCA, among many other things, restricted U.S. produced crude oil exports. As the oil sector evolved, Congress has amended the EPCA. The Consolidated Appropriations Act, 2016 (P.L. 114-113) repealed Section 103 of the EPCA removing any restrictions to crude oil exports. Supply, demand, price, and other factors all combine and interact with one another to create the world oil market. Saudi Arabia, historically, has been the world's leading oil producer and along with the Organization of the Petroleum Exporting Counties (OPEC) has held enough spare capacity to influence global oil supply and prices. World oil demand typically follows world economic conditions. Oil prices are set in the world market and are primarily a function of supply and demand fundamentals, but also a number of other factors, such as quality, location, and transport infrastructure availability (e.g., pipelines). While the world oil market historically follows the world economy, supply generally does not follow demand smoothly and this results in price volatility. As economies grow, so too does the demand for crude oil and petroleum products, including fuels, paints, lubricants, and plastics. China and India are forecasted by the International Energy Agency (IEA) to contribute a large portion of oil demand growth, representing around 20% of total world demand by 2023. Asia, by IEA's forecast, will remain a net importer of crude oil through 2023. Oil policy can be influential as a response to or in anticipation of undesirable international behavior or as a means to bring balance and stability to an otherwise volatile market. OPEC, especially in conjunction with other major producers (e.g., Russia), can exert influence on the oil market. Several bills introduced in the 115th Congress addressed the U.S. relationship with OPEC, such as the No Oil Producing and Exporting Cartels (NOPEC) Act of 2018 (H.R. 5904 and S. 3214). The United States has utilized the oil market as a political tool. National oil companies (NOCs) operate under government ownership or are companies under influence by national governments. The United States, by placing sanctions on crude oil and crude oil-related industries, can send a message to those governments (e.g., Iran). Physical threats to oil supply still exist, particularly along certain trade routes. For instance, roughly 24% of the world oil market transited the Strait of Hormuz in the first half of 2018. A disruption to world supply along trade routes could permeate into geopolitical relationships, secondary industries (e.g., petrochemicals, agriculture), and the economy at large. The United States plays a multifaceted role in the world oil market, which may affect policy decisions for Congress. Congress has in the past enacted legislation to promote a stable, reliable supply of oil. For example, the EPCA created the SPR and established the Corporate Average Fuel Economy (CAFE) standard for vehicles, in part, as strategies to reduce U.S. exposure to future supply disruptions. Additionally, Congress has enacted legislation to diversify transportation fuels, including tax credits for electric vehicles and the Renewable Fuel Standard. As the oil market continues to evolve, Congress may want to consider these and other major policy options that could include international trade policies, infrastructure, diversification of transportation fuels, and funding in research and development.", "document_type": "crs"}
{"report": "This report provides an overview of the federal response to domestic violence—defined broadly to include acts of physical and nonphysical violence against spouses and other intimate partners—through the Family Violence Prevention and Services Act (FVPSA). FVPSA programs are carried out by the U.S. Department of Health and Human Services' (HHS's) Administration for Children and Families (ACF) and the Centers for Disease Control and Prevention (CDC). ACF administers most FVPSA programming, including grants to states, territories, and Indian tribes to support local organizations that provide immediate shelter and related assistance for victims of domestic violence and their children. ACF also provides funding for a national domestic violence hotline that responds to calls, texts, and web-based chats from individuals seeking assistance. The funding for ACF also supports state domestic violence coalitions that provide training for and advocacy on behalf of domestic violence providers within each state, as well as multiple resource centers that provide training and technical assistance on various domestic violence issues for a variety of stakeholders. The CDC funds efforts to prevent domestic violence through a program known as Domestic Violence Prevention Enhancement and Leadership Through Allies (DELTA). The House Committee on Education and Labor and the Senate Health, Education, Labor and Pension (HELP) Committee have exercised jurisdiction over FVPSA. The report begins with background on the definitions of domestic violence and related terms. This background section also describes the risk factors for domestic violence and estimates of the number of victims. The next section of the report addresses the history leading up to the enactment of FVPSA, and the major components of the act: a national domestic violence hotline, support for domestic violence shelters and nonresidential services, and community-based responses to prevent domestic violence. The report then discusses efforts under FVPSA to assist children and youth exposed to domestic violence, including teen dating violence. Finally, the report provides an overview of FVPSA's interaction with other federal laws, including the Child Abuse Prevention and Treatment Act (CAPTA) and the Violence Against Women Act of 1994 (VAWA, P.L. 103-322 ). FVPSA was the first federal law to address domestic violence, with a focus on providing shelter and services for survivors; however, since the enactment of VAWA in 1994, the federal response to domestic violence has expanded to involve multiple departments and activities that include investigating and prosecuting crimes and providing additional services to victims and abusers. FVPSA also includes provisions that encourage or require program administrators to coordinate FVPSA programs with related programs and research carried out by other federal agencies. The appendices provide further detail about FVPSA-related definitions and funding, and statistics related to domestic violence victimization. The FVPSA statute focuses on \"family violence,\" which can involve many types of family relationships and forms of violence. FVPSA defines the term as acts of violence or threatened acts of violence, including forced detention, that result in physical injury against individuals (including elderly individuals) who are legally related by blood or marriage and/or live in the same household. This definition focuses on physical forms of violence and is limited to abusers and victims who live together or are related by blood or marriage; however, researchers and others generally agree that family violence is broad enough to include nonphysical violence and physical violence that occurs outside of an intimate relationship. Such a definition can encompass a range of scenarios—rape and other forms of sexual violence committed by a current or former spouse or intimate partner who may or may not live in the same household; stalking by a current or former spouse or partner; abuse and neglect of elderly family members and children; and psychologically tormenting and controlling a spouse, intimate partner, or other member of the household. While family violence can encompass child abuse and elder abuse, FVPSA programs focus on individuals abused by their spouses and other intimate partners. Further, FVPSA references the terms \"domestic violence\" and \"dating violence\" as they are defined under VAWA, and discusses these terms alongside family violence. (The FVPSA regulations also define these terms as generally consistent with VAWA, but recognize that the term \"dating violence\" encompasses additional acts.) The VAWA definition of \"domestic violence\" encompasses forms of intimate partner violence—involving current and former spouses or individuals who are similarly situated to a spouse, cohabiting individuals, and parents of children in common—that are outlawed under state or local laws. VAWA defines \"dating violence\" as violence committed by a person who has been in a social relationship of a romantic or intimate nature with the victim; and where the existence of such a relationship is determined based on consideration of the length of the relationship, the type of relationship, and the frequency of interaction between the individuals involved. ( Appendix A provides a summary of these and related terms as they are defined in statute.) The federal government responds to child abuse and elder abuse through a variety of separate programs. Federal law authorizes and funds a range of activities to prevent and respond to child abuse and neglect under Titles IV-B and IV-E of the Social Security Act and CAPTA. Separately, the Older Americans Act (OAA), the major federal vehicle for the delivery of social and nutrition services for older persons, has authorized projects to address elder abuse. In addition, the OAA authorizes, and the federal government funds, the National Center on Elder Abuse . The center provides information to the public and professionals regarding elder abuse prevention activities, and provides training and technical assistance to state elder abuse agencies and to community-based organizations. The Social Services Block Grant, as amended, also includes elder justice provisions, including several grant programs and other activities to promote the safety and well-being of older Americans. The evidence base on domestic violence does not point strongly to any one reason that it is perpetrated, in part because of the difficulty in measuring social conditions (e.g., status of women, gender norms, and socioeconomic status, among others) that can influence this violence. Still, the research literature has identified two underlying influences: the unequal position of women and the normalization of violence, both in society and some relationships. Certain risk variables are often associated with—but not necessarily the causes—of domestic violence. Such factors include a pattern of problem drinking, poverty and economic conditions, and early parenthood. For example, substance abuse often precedes incidents of domestic violence. A U.S. Department of Justice (DOJ) study found that substance abuse tracked closely with homicide, attempted homicide, or the most severe violent incidents of abuse perpetrated against an intimate partner. Among men who killed or attempted to kill their intimate partners, over 80% were problem drinkers in the year preceding the incident. Estimating the number of individuals involved in domestic violence is complicated by the varying definitions of the term and methodologies for collecting data. For example, some research counts a boyfriend or girlfriend as a family relationship while other research does not; still other surveys are limited to specific types of violence and whether violence is reported to police. Certain studies focus more broadly on various types of violence or more narrowly on violence committed among intimate partners. In addition, domestic violence is generally believed to be underreported. Survivors may be reluctant to disclose their victimization because of shame, embarrassment, fear, or belief that they may not receive support from law enforcement. Overall, two studies—the National Intimate Partner and Sexual Violence Survey (NISVS) and the National Crime Victimization Survey (NCVS)—show that violence involving intimate partners is not uncommon, and that both women and men are victimized sexually, physically, and psychologically. Women tend to first be victimized at a younger age than men. Further, minority women and men tend to be victimized at higher rates than their white counterparts. NISVS provides information on the prevalence of domestic violence among individuals during their lifetimes and in the past 12 months prior to the survey. The CDC conducted the study annually in each of 2010-2012 and in 2015. The survey examines multiple aspects of intimate partner violence—including contact sexual violence, which encompasses rape and other acts; physical violence, including slapping, kicking, and more severe acts like being burned; and stalking, which is a pattern of harassing or threatening tactics. Select findings from the study are summarized in Table B-1 . Generally, the 2015 survey found that women and men were victimized at about the same rate over their lifetime. Over one-third (36%) of women and more than one-third (34%) of men in the United States reported that they experienced sexual violence, physical violence, and/or stalking by an intimate partner in their lifetimes. However, women were more likely than men to experience certain types of intimate partner violence, including contact sexual violence (18% vs. 8%), stalking (10% vs. 2%), and severe physical violence (21% vs. 15%). Women were also much more likely than men to report an impact related to partner violence over their lifetimes (25% vs 11%). Such impacts included having injuries, being fearful, being concerned for their safety, missing work or school, needing medical care, or needing help from law enforcement. Women and men of color, particularly individuals who are multiracial, tended to experience domestic violence at higher lifetime rates. As reported in the 2010 NISVS, women who are multiracial (57%) were most likely to report contact sexual violence, physical violence, and/or stalking by an intimate partner, followed by American Indian or Alaska Native women (48%), black women (45%), white women (37%), Hispanic women of any race (34%), and Asian or Pacific Islander women (18%). Among men, those who were black (40%) and multiracial (39%) were more likely to experience intimate partner violence than white (32%) and Hispanic (29%) men; estimates were not reported for American Indian or Alaska Native or Asian or Pacific Islander males because the data were unreliable. The 2010 NISVS examined the prevalence of this violence based on how adult respondents identified their sexual orientation (heterosexual or straight, gay or lesbian, or bisexual). The study found that overall, bisexual women had significantly higher lifetime prevalence of sexual violence, physical violence, and stalking by an intimate partner when compared to both lesbian and heterosexual women. The 2010 NISVS also surveyed women on active duty in the military and the wives of active duty men. These women were asked to respond to whether they experienced intimate partner violence over their lifetime and during the four years prior to the survey. The study found that the majority of women affiliated with the military were significantly less likely to be victims of intimate partner violence compared to women in the general population. However, active duty women who were deployed during the three years prior to the survey were significantly more likely to have experienced intimate partner violence during this period and over their lifetime compared to active duty women who were not deployed. Among those who deployed, 12% had been victims of physical violence, rape, or stalking by an intimate partner during the past three years and 35% had experienced victimization over their lifetime. This is compared to 10% (during the past three years) and 28% (lifetime prevalence) of women who had not deployed. The National Crime Victimization Survey is a survey coordinated by DOJ's Bureau of Justice Statistics within the Office of Justice Programs. NCVS surveys a nationally representative sample of households. It is the primary source of information on the characteristics of criminal nonfatal victimization and on the number and types of crimes that may or may not be reported to law enforcement authorities. NCVS surveyed respondents about whether they have been victims of a violent crime, including rape/sexual assault, robbery, aggravated assault, and simple assault; and for victims, the relationship to the perpetrator. The survey reports the share of crimes that are committed by an intimate partner (current or former spouses, boyfriends, or girlfriends), other family members, friends/acquaintances, or strangers. The survey found that nearly 600,000 individuals were victims of intimate partner violence in 2016. An earlier NCVS study examined changes in the rate of intimate partner violence over time. The study found that the number of female victims of domestic violence declined from 1.8 million in 1994 to about 621,000 in 2011. Over this period, the rate of serious intimate partner violence—rape or sexual assault, robbery, and aggravated assault—declined by 72% for females and 64% for males. Approximately 4% of females and 8% of males who were victimized by intimate partners were shot at, stabbed, or hit with a weapon over the period from 2002 through 2011. Domestic violence is associated with multiple negative outcomes for victims, including mental and emotional distress and health effects. The 2015 NISVS study found that these effects appeared to be greater for women. About 1 in 4 women (25.1%) and 1 in 10 men (10.9%) who experienced sexual violence, physical violence, and/or stalking by an intimate partner in their lifetime reported at least one impact as a result of this violence, including being fearful; being concerned for their safety or having an injury or need for medical care; needing help from law enforcement; missing at least one day of work; or missing at least one day of school. Early marriage laws in the United States permitted men to hit their wives, and throughout much of the 20 th century family violence remained a hidden problem. Victims, mostly women, often endured physical and emotional abuse in silence. These victims were hesitant to seek help because of fear of retaliation by their spouses/partners and concerns about leaving their homes, children, and neighborhoods behind. Women were worried that they would be perceived as deviant or mentally unstable or would be unable to get by financially. In addition, victims were often blamed for their abuse, based on stereotypical notions of women (e.g., demanding, aggressive, and frigid, among other characteristics). In the 1960s, shelters and services for victims of domestic violence became available on a limited basis; however, these services were not always targeted specifically to victims per se. Social service and religious organizations provided temporary housing for displaced persons generally, which could include homeless and abused women. In addition, a small number of organizations provided services to abused women who were married to alcoholic men. Beginning in the 1970s, the \"battered women's movement\" began to emerge; it sought to heighten awareness of women who were abused by spouses and partners. The movement developed from influences both abroad and within the United States. In England, the first battered women's shelter, Chiswick Women's Aid, galvanized support to establish similar types of services. In addition, the feminist movement in the United States increasingly brought greater national attention to the issue. As part of the battered women's movement, former battered women, civic organizations, and professionals opened shelters and began to provide services to victims, primarily abused women and their children. Shelters were most often located in old homes, at Young Women's Christian Association (YWCA) centers, or housed in institutional settings, such as motels or abandoned orphanages. In addition to providing shelter, groups in the battered women's movement organized coalitions to combine resources for public education on the issue, support groups for victims, and services that were lacking. For example, the YWCA and Women in Crisis Can Act formed a hotline for abused women in Chicago. These and other groups convened the Chicago Abused Women's Coalition to address concerns about services for battered women. The coalition spoke to hundreds of community groups and professional agencies about battered women's stories, explained the significance of violence, detailed how violence becomes sanctioned, dispelled common myths, and challenged community members to provide funding and other support to assist abused women. The coalition mobilized around passage of a state law to protect women and require police training on domestic violence, among other accomplishments. Based on a survey in the late 1970s, 111 shelters were believed to be operating across all states and in urban, suburban, and rural communities. These shelters generally reported that they provided a safe and secure environment for abused women and their children, emotional support and counseling for abused women, and information on legal rights and assistance with housing, among other supports. Approximately 90 of these shelters fielded over 110,000 calls for assistance in a given year. Around this same time, the public became increasingly aware of domestic violence. In 1983, Time magazine published an article, \"Wife Beating: The Silent Crime,\" as part of a series of articles on violence in the United States. The article stated: \"There is nothing new about wife beating…. What is new is that in the U.S. wife beating is no longer widely accepted as an inevitable and private matter. The change in attitude, while far from complete, has come about in the past 10 to 15 years as part of the profound transformation of ideas about the roles and rights of women in society.\" In 1984, then-U.S. Attorney General Benjamin Civiletti established the Department of Justice Task Force on Family Violence, which issued a report examining the scope and impact of domestic violence in America. The report also provided recommendations to improve the nation's law enforcement, criminal justice, and community response to offenses that were previously considered \"family matters.\" Largely as a result of efforts by advocates and the Justice Department, Congress began to take an interest in domestic violence issues. The House Select Committee on Children, Youth, and Families conducted a series of hearings in 1983 and 1984 on child abuse and family violence throughout the country, to understand the scope of family violence better and explore possible federal responses to the problem. The committee heard from victims, domestic violence service providers, researchers, law enforcement officials, and other stakeholders about the possible number of victims and the need for additional victim services. In 1984, the Family Violence Prevention and Services Act (FVPSA) was enacted as Title III of the Child Abuse Amendments of 1984 ( P.L. 98-457 ). Title I of that law amended the Child Abuse Prevention and Treatment Act (CAPTA), and most of the seven subsequent reauthorizations of FVPSA have occurred as part of legislation that reauthorized CAPTA. This includes the most recent reauthorization ( P.L. 111-320 ), which extended funding authority for FVPSA through FY2015. As discussed later in this report, Congress subsequently broadened the federal response to domestic violence with the enactment of the Violence Against Women Act of 1994. As originally enacted, FVPSA included both a social service and law enforcement response to preventing and responding to domestic violence. Grants were authorized for states, territories, and Indian tribes to establish and expand programs to prevent domestic violence and provide shelter for victims. In addition, the law authorized grants to provide training and technical assistance to law enforcement personnel, and this funding was ultimately used to train law enforcement personnel throughout the country. From FY1986 through FY1994, funding for these grants was transferred from HHS to DOJ, which carried out the grants under the Office for Victims of Crime (OVC). DOJ funded 23 projects to train law enforcement officers on domestic violence policies and response procedures, with approximately 16,000 law enforcement officers and other justice system personnel from 25 states receiving this training. The training emphasized officers as participants working with other agencies, victims, and community groups in a coordinated response to domestic violence. Over time, FVPSA was expanded to include support of other activities, including state domestic violence coalitions and grants that focus on prevention activities; however, authorization of funding for FVPSA law enforcement training grants was discontinued in 1992, just before the Violence Against Women Act of 1994 authorized a similar purpose. Specifically, VAWA authorizes training and support of law enforcement officials under the Services, Training, Officers, and Prosecutors (STOP) Grant program. As outlined in Figure 1 , FVPSA currently authorizes three major activities: domestic violence prevention activities under a program known as DELTA; the national domestic violence hotline; and domestic violence shelters, services, and program support. The CDC administers the DELTA program. The Family and Youth Services Bureau (FYSB) in HHS/ACF administers funding for the hotline and the domestic violence shelters and support. Authorization of funding under FVPSA has been extended multiple times, most recently through FY2015 by the CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ). Congress has appropriated funding in subsequent years. Table 1 includes actual funding from FY1993 to FY2018, which includes reductions in some years, and appropriated funding for FY2019 for the three major FVPSA activities. Congress appropriated just over $180 million for FY2019, the highest total to date. Since 1994, FVPSA has authorized the HHS Secretary to award cooperative agreements to state domestic violence coalitions that coordinate local community projects to prevent domestic violence, including such violence involving youth. Congress first awarded funding for prevention activities in FY1996 under a pilot program carried out by the Centers for Disease Control and Prevention. The pilot program was formalized in 2002 under a program now known as the Domestic Violence Prevention Enhancement and Leadership Through Alliances (DELTA) program. The focus of DELTA is preventing domestic violence before it occurs, rather than responding once it happens or working to prevent its recurrence. The program has had four iterations: DELTA, which was funded from FY1996 through FY2012 and involved 14 states; DELTA Prep, which extended from FY2008 through FY2012 and involved 19 states that had not received the initial DELTA funds; DELTA FOCUS, which extended from FY2013 through FY2017 and involved 10 states, all of which had previously received funding under DELTA or DELTA Prep; and DELTA Impact, which began with FY2018 and involves 10 states, all of which except one has previously received DELTA funding. As originally implemented, the program provided funding and technical assistance to 14 state domestic violence coalitions to support local efforts to carry out prevention strategies and work at the state level to oversee these strategies. Local prevention efforts were referred to as coordinated community responses (CCRs). The CCRs were led by domestic violence organizations and other stakeholders across multiple sectors, including law enforcement, public health, and faith-based organizations. For example, the Michigan Coalition Against Domestic and Sexual Violence supported two CCRs—the Arab Community Center for Economic and Social Services and the Lakeshore Alliance Against Domestic and Sexual Violence—that focused on faith-based initiatives. Both CCRs held forums that provided resources and information about the roles of faith leaders in preventing the first-time occurrence of domestic violence. The 14 state domestic violence coalitions developed five- to eight-year domestic violence prevention plans known as Intimate Partner Violence Prevention Plans. These plans were developed with multiple stakeholders, and they discuss the strategies needed to prevent first-time perpetration or victimization and to build the capacity to implement these strategies. The CDC issued a brief that summarizes the plans and identifies the successes and challenges for state domestic violence coalitions in supporting and enhancing intimate partner violence prevention efforts. Overall, the report found that states improved their capacity to respond to intimate partner violence through evidence-based planning and implementation strategies. DELTA Prep was a project that extended from FY2008 through FY2012, and was a collaborative effort among the CDC, the CDC Foundation, and the Robert Wood Johnson Foundation. Through DELTA Prep, the CDC extended the DELTA Program to 19 states that did not receive the initial DELTA funds. State and community leaders in these other states received training and assistance in building prevention strategies, based on the work of the 14 state domestic violence coalitions that received DELTA funds. DELTA Prep states integrated primary prevention strategies into their work and the work of their partners, and built leadership for domestic violence prevention in their states. DELTA FOCUS (Focusing on Outcomes for Communities United within States) continued earlier DELTA work. From FY2013 through FY2017, DELTA FOCUS funded 10 state domestic violence coalition grantees to implement and evaluate strategies to prevent domestic violence. Funding was provided by the coalitions to 18 community response teams that engaged in carrying out these strategies. DELTA FOCUS differed from DELTA and DELTA Prep by placing greater emphasis on implementing prevention strategies rather than building capacity for prevention. DELTA FOCUS also put more emphasis on evaluating the program to help build evidence about effective interventions. DELTA Impact, which began in FY2018, provides funding to 10 state domestic violence coalitions. This grant supports community response teams in decreasing domestic violence risk factors and increasing protective factors by implementing prevention activities that are based on the best available evidence. Grantees are implementing and evaluating policy efforts under three broad strategies to address domestic violence prevention: (1) engaging influential adults and peers, including by engaging men and boys as allies in prevention; (2) creating protective environments, such as improving school climates and safety; and (3) strengthening economic supports for families. As amended by the Violence Against Women Act (VAWA) of 1994, FVPSA directs the HHS Secretary to award a grant to one or more private entities to operate a 24-hour, national, toll-free hotline for domestic violence. Since 1996, HHS has competitively awarded a cooperative agreement to the National Council on Family Violence in Texas to operate the National Domestic Violence Hotline (hereinafter, hotline). The agreement was most recently awarded for a five-year period that extends through the end of FY2020. FVPSA requires that the hotline provide information and assistance to adult and youth victims of domestic violence, family and household members of victims of such violence, and \"persons affected by victimization.\" This includes support related to domestic violence, children exposed to domestic violence, sexual assault, intervention programs for abusive partners, and related issues. As required under FVPSA, the hotline carries out multiple activities: It employs, trains, and supervises personnel to answer incoming calls; provides counseling and referral services; and directly connects callers to service providers. In FY2018, the hotline received about 23,000 calls each month and responded to 74% of all calls. It also had an average of nearly 4,000 online chats on a monthly basis. HHS reported that some calls were missed due to increased media coverage of domestic violence, increased Spanish chat services, and forwarding of calls from local domestic violence hotlines due to severe weather. It maintains a database of domestic violence services for victims throughout the United States, including information on the availability of shelter and services. It provides assistance to meet the needs of special populations, including underserved populations, individuals with disabilities, and youth victims of domestic violence and dating violence. The hotline provides access to personnel for callers with limited English proficiency and persons who are deaf and hard of hearing. Since 2007, the hotline has operated a separate helpline for youth victims of domestic violence, the National Dating Abuse Helpline (known as loveisrespect.org), which is funded through the appropriation for the hotline. This helpline offers real-time support primarily from peer advocates trained to provide support, information, and advocacy to those involved in abusive dating relationships, as well as others who support victims. In FY2018, the helpline received a monthly average of about 2,400 calls; 4,000 online chats; and nearly 1,300 texts. A 2019 study of these two lines examined a number of their features, including who contacts the lines, the study needs and demographic characteristics of those contacts, how contacts reach the lines, and the type of support they receive. The study found that nearly half (48%) the contacts were victims/survivors and another 39% did not identify themselves. The remaining contacts were from family/friends, abusers, and service providers. According to the study, the service most commonly provided to contactors was emotional support and contactors valued this support highly. The National Domestic Violence Hotline has collaborated with the National Indigenous Women's Resource Center to develop and fund the StrongHearts Native Helpline for Native American survivors of domestic abuse. The helpline uses the technology and infrastructure of the hotline, and draws from the National Indigenous Women's Resource Center to provide Native-centered, culturally appropriate services for survivors and others. Funding for shelter, support services, and program support (hereinafter, shelter and services) encompasses multiple activities: formula grants to states and territories; grants to tribes; state domestic violence coalitions; national and special issue resource centers, including those that provide technical assistance; specialized services for abused parents and children exposed to domestic violence; and program support and administration. Figure 2 shows FY2018 allocations for activities included as part of shelter, support services, and program support. The following sections of the report provide further information about grants to states, territories, and tribes; and state domestic violence coalitions. In addition, the report provides information about national and special issue resource centers. The section of the report on services for children and youth exposed to domestic violence includes information about FY2018 and earlier support for specialized services for abused parents and children exposed to domestic violence. No less than 70% of FVPSA appropriations for shelter and services must be awarded to states and territories through a formula grant. The formula grant supports the establishment, maintenance, and expansion of programs and projects to prevent incidents of domestic violence and to provide shelter and supportive services to victims of domestic violence. Each of the territories—Guam, American Samoa, U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands—receives no less than one-eighth of 1% of the appropriation, or, in combination, about one-half of 1% of the total amount appropriated. Of the remaining funds, states (including the District of Columbia and Puerto Rico) receive a base allotment of $600,000 and additional funding based on their relative share of the U.S. population. Appendix C provides formula funding for FY2018 and FY2019 by state and territory. In addition, no less than 10% of FVPSA appropriations for shelter and services are awarded to Indian tribes. Indian tribes have the option to authorize a tribal organization or a nonprofit private organization to submit an application for and to administer FVPSA funds. In applying for grant funding, states and territories (hereinafter, states) must make certain assurances pertaining to the use and distribution of funds and to victims. Nearly all of the same requirements that pertain to states and territories also pertain to tribes. States may use up to 5% of their grant funding for state administrative costs. The remainder of the funds are used to make subgrants to eligible entities for community-based projects (hereinafter, subgrantees) that meet the goals of the grant program. No less than 70% of subgrant funding is to be used to provide temporary shelter and related supportive services, which include the physical space in which victims reside as well as the expenses of running shelter facilities. No less than 25% of subgrant funding is to be used for the following supportive services and prevention services: assisting in the development of safety plans, and supporting efforts of victims to make decisions about their ongoing safety and well-being; providing individual and group counseling, peer support groups, and referrals to community-based services to assist victims and their dependents in recovering from the effects of domestic violence; providing services, training, technical assistance, and outreach to increase awareness of domestic violence and increase the accessibility of these services; providing culturally and linguistically appropriate services; providing services for children exposed to domestic violence, including age-appropriate counseling, supportive services, and services for the nonabusing parent that support that parent's role as caregiver (which may include services that work with the nonabusing parent and child together); providing advocacy, case management services, and information and referral services concerning issues related to domestic violence intervention and prevention, including providing assistance in accessing federal and state financial assistance programs; legal advocacy; medical advocacy, including provision of referrals for appropriate health care services (but not reimbursement for any health care services); assistance in locating and securing safe and affordable permanent housing and homelessness prevention services; and transportation, child care, respite care, job training and employment services, financial literacy services and education, financial planning, and related economic empowerment services; providing parenting and other educational services for victims and their dependents; and providing prevention services, including outreach to underserved populations. States must also provide assurances that they will consult with and facilitate the participation of state domestic violence coalitions in planning and monitoring the distribution of grants and administering the grants (the role of state domestic violence coalitions is subsequently discussed further). States must describe how they will involve community-based organizations, whose primary purpose is to provide culturally appropriate services to underserved populations, including how such organizations can assist states in meeting the needs of these populations. States must further provide assurances that they have laws or procedures in place to bar an abuser from a shared household or a household of the abused persons, which may include eviction laws or procedures, where appropriate. Such laws or procedures are generally enforced by civil protection orders, or restraining orders to limit the perpetrators' physical proximity to the victim. In funding subgrantees, states must \"give special emphasis\" to supporting community-based projects of \"demonstrated effectiveness\" carried out by nonprofit organizations that operate shelters for victims of domestic violence and their dependents; or that provide counseling, advocacy, and self-help services to victims. States have discretion in how they allocate their funding, so long as they provide assurances that grant funding will be distributed equitably within the state and between urban and rural areas of the state. Subgrantees that receive funding must provide a nonfederal match—of not less than $1 for every $5 of federal funding—directly from the state or through donations from public or private entities. The matching funds can be in cash or in kind. Further, federal funds made available to a state must supplement, and not supplant, other federal, state, and local public funds expended on services for victims of domestic violence. States have two years to spend funds. For example, funds allotted for FY2019 may be spent in FY2019 or FY2020. The HHS Secretary is authorized to reallocate the funds of a state, by the end of the sixth month of a fiscal year that funds are appropriated, if the state fails to meet the requirements of the grant. The Secretary must notify the state if its application for funds has not met these requirements. State domestic violence coalitions are permitted to help determine whether states are in compliance with these provisions. States are allowed six months to correct any deficiencies in their application. In FY2017, programs funded by grants for states and tribes supported over 240,000 clients in residential settings and more than 1 million clients in nonresidential settings. Nearly 93% of clients reported that they had improved knowledge of planning for their safety. Also in FY2017, programs were not able to meet 226,000 requests for shelter. The grant for states addresses the individual characteristics and privacy of participants and shelters. Both states and subgrantees funded under FVPSA may not deny individuals from participating in support programs on the basis of disability, sex, race, color, national origin, or religion (this also applies to FPVSA-funded activities generally). In addition, states and subgrantees may not impose income eligibility requirements on individuals participating in these programs. Further, states and subgrantees must protect the confidentiality and privacy of victims and their families to help ensure their safety. These entities are prohibited from disclosing any personally identifying information collected about services requested, and from revealing personally identifying information without the consent of the individual, as specified in the law. If disclosing the identity of the individual is compelled by statutory or court mandate, states and subgrantees must make reasonable attempts to notify victims, and they must take steps to protect the privacy and safety of the individual. States and subgrantees may share information that has been aggregated and does not identify individuals, and information that has been generated by law enforcement and/or prosecutors and courts pertaining to protective orders or law enforcement and prosecutorial purposes. In addition, the location of confidential shelters may not be made public, except with written authorization of the person(s) operating the shelter. Subgrantees may not provide direct payment to any victim of domestic violence or the dependent(s) of the victim. Further, victims must be provided shelter and services on a voluntary basis. In other words, providers cannot compel or force individuals to come to a shelter, participate in counseling, etc. Since 1992, FVPSA has authorized funding for state domestic violence coalitions (SDVCs). A SDVC is defined under the act as a statewide nongovernmental, nonprofit private domestic violence organization that (1) has a membership that includes a majority of the primary-purpose domestic violence service providers in the state; (2) has board membership that is representative of domestic violence service providers, and that may include representatives of the communities in which the services are being provided; (3) has as its purpose to provide education, support, and technical assistance to such service providers so they can maintain shelter and supportive services for victims of domestic violence and their dependents; and (4) serves as an information clearinghouse and resource center on domestic violence for the state and supports the development of policies, protocols, and procedures to enhance domestic violence intervention and prevention in the state. Funding for SDVCs is available for each of the 50 states, the District of Columbia, Puerto Rico, and four territories (American Samoa, Guam, Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands). Each jurisdiction has one SDVC, and these coalitions are designated by HHS. Funding is divided evenly among these 56 jurisdictions. SDVCs must use FVPSA funding for specific activities, as follows: working with local domestic violence service programs and providers of direct services to encourage appropriate and comprehensive responses to domestic violence against adults or youth within the state, including providing training and technical assistance and conducting needs assessments; participating in planning and monitoring the distribution of subgrants and subgrant funds within the state under the grant program for states and territories; working in collaboration with service providers and community-based organizations to address the needs of domestic violence victims and their dependents who are members of racial and ethnic minority populations and underserved populations; collaborating with and providing information to entities in such fields as housing, health care, mental health, social welfare, or business to support the development and implementation of effective policies, protocols, and programs that address the safety and support needs of adult and youth victims of domestic violence; encouraging appropriate responses to cases of domestic violence against adult and youth victims, including by working with judicial and law enforcement agencies; working with family law judges, criminal court judges, child protective service agencies, and children's advocates to develop appropriate responses to child custody and visitation issues in cases of children exposed to domestic violence, and in cases where this violence is concurrent with child abuse; providing information to the public about prevention of domestic violence and dating violence, including information targeted to underserved populations; and collaborating with Indian tribes and tribal organizations (and Native Hawaiian groups or communities) to address the needs of Indian (including Alaska Native) and Native Hawaiian victims of domestic dating violence, as applicable in the state. As originally enacted, FVPSA authorized a national information and research clearinghouse on the prevention of domestic violence. As part of the act's reauthorization in 1992, the language about the clearinghouse was struck and replaced with authorization for resource centers on domestic violence, including special issue resource centers to address key areas of domestic violence. Reauthorization of FVPSA in 2010 added authorization for a national resource center on American Indian women and three culturally specific resources, which had previously been funded through discretionary funds. The 2010 law also authorized special issue resource centers that provide training and technical assistance on domestic violence intervention and prevention topics and state resource centers to address disparities in domestic violence in states with high proportions of Indian (including Alaska Native) or Native Hawaiian populations. In total, HHS administers grants for 14 training and technical assistance centers that are funded by the FVPSA appropriation for shelter, services, and support. The purpose of these resource centers is to provide information, training, and technical assistance on domestic violence issues. This assistance is provided by nonprofit organizations and other entities to multiple stakeholders—individuals, organizations, governmental entities, and communities—so that they can improve their capacity for preventing and responding to domestic violence. Teenagers may be exposed to violence in their dating relationships. The CDC reports that on an annual basis, 1 in 9 female teens and 1 in 13 male teens experienced physical dating violence involving a person who hurts or tries to hurt a partner by hitting, kicking, or using another type of physical force. Further, over 1 in 7 female teens and nearly 1 in 19 male teens reported experiencing sexual dating violence in the last year, which includes forcing or attempting to force a partner to take part in a sexual act, sexual touching, or a nonphysical sexual event (e.g., sexting) when the partner does not or cannot consent. The FVPSA statute references dating violence throughout and uses the definition of \"dating violence\" that is in VAWA. The term is defined as violence committed by a person who is or has been in a social relationship of a romantic or intimate nature with the victim, and where the existence of the relationship is determined based on the length, type, and frequency of interaction between the persons in it. Domestic violence shelters and supportive services funded by FVPSA are intended for adult victims and their children if they accompany the adult into shelter. The law does not explicitly authorize supports for youth victims of dating violence who are unaccompanied by their parents; however, the law does not limit eligibility for shelter and services based on age. Access to domestic violence shelters and supports for teen victims, including protective orders against abusers, varies by state. The primary source of support for teen victims under FVPSA is provided via the National Domestic Violence Hotline. The hotline includes the loveisrespect helpline and related online resources. Youth victims can call, chat, or text with peer advocates for support. The loveisrespect website includes a variety of materials that address signs of abuse and resources for getting help. FVPSA references children exposed to domestic violence, but does not define related terminology. According to the research literature, this exposure can include children who see and/or hear violent acts, are present for the aftermath (e.g., seeing bruises on a mother's body, moving to a shelter), or live in a house where domestic violence occurs, regardless of whether they see and/or hear the violence. A frequently cited estimate is that between 10% and 20% of children (approximately 7 million to 10 million children) are exposed to adult domestic violence each year. The literature about the impact of domestic violence is evolving. The effects of domestic violence on children can range from little or no effect to severe psychological harm and physical effects, depending on the type and severity of abuse and protective factors, among other variables. Multiple FVPSA activities address children exposed to domestic and related violence: One of the purposes of the formula grant program for states is to provide specialized services (e.g., counseling, advocacy, and other assistance) for these children. The National Resource Center on Domestic Violence is directed to offer domestic violence programs and research that include both victims and their children exposed to domestic violence. The national resource center that addresses mental health and trauma issues is required to address victims of domestic violence and their children who are exposed to this violence. State domestic violence coalitions must, among other activities, work with the legal system, child protective services, and children's advocates to develop appropriate responses to child custody and visitation issues in cases involving children exposed to domestic violence. In addition to these provisions, the FVPSA statute authorizes funding for specialized services for abused parents and their children. FVPSA activities for children exposed to domestic violence have also been funded through discretionary funding and funding leveraged through a semipostal stamp. Since 2003, FVPSA has specified that funding must be set aside for activities to address children exposed to domestic violence if the appropriation for shelter, victim services, and program support exceeds $130 million. Under current law, if funding is triggered, HHS must first reserve not less than 25% of funding above $130 million to make grants to a local agency, nonprofit organization, or tribal organization with a demonstrated record of serving victims of domestic violence and their children. These funds are intended to expand the capacity of service programs and community-based programs to prevent future domestic violence by addressing the needs of children exposed to domestic violence. Funding has exceeded $130 million in FY2010 and FY2014 through FY2019. In FY2010, funding for shelter and services was just over $130 million. HHS reserved the excess funding as well as FVPSA discretionary funding (under shelter, victim services, and program support) to fund specialized services for children through an initiative known as Expanding Services for Children and Youth Exposed to Domestic Violence. HHS also used discretionary money to fund the initiative in FY2011 and FY2012. Total funding for the initiative was $2.5 million. This funding was awarded to five grantees—four state domestic violence coalitions and one national technical assistance provider—to expand supports to children, youth, and parents exposed to domestic violence and build strategies for serving this population. For example, the Alaska Network on Domestic Violence and Sexual Assault, the state domestic violence coalition for Alaska, used the funding to improve coordination between domestic violence agencies and the child welfare system. Their work involved developing an integrated training curriculum and policies, and creation of a multidisciplinary team of child welfare and domestic violence stakeholders in four communities. Funding again exceeded $130 million in each of FY2014 through FY2019, thereby triggering the set-aside. In FY2014 and FY2015, HHS directed the extra funding for shelter, services, and support. In FY2016 through FY2018, HHS provided funding for specialized services for abused parents and their children and expects to continue such funding for FY2019. Of the approximately $20 million in excess funding for each of these three years, approximately $5.0 million to $5.6 million was allocated in each year for these services. This recent funding has been allocated to 12 grantees to provide direct services under the grant, Specialized Services for Abused Parents and their Children (SSPAC). Grantees include domestic violence coalitions and other entities. They are working to alleviate trauma experienced by children who are exposed to domestic violence, support enhanced relationships between these children and their parents, and improve systemic responses to such families. A separate grant of $500,000 annually—known as Expanding Services to Children, Youth, and Abused Parents (ESCYAP)—has been awarded to the nonprofit organization Futures Without Violence to provide training and technical assistance to the 12 grantees and facilitate coordination among them. In addition to the Child Abuse Prevention and Treatment Act (CAPTA), FVPSA has been reauthorized by VAWA and shares some of that law's purposes. In addition, FVPSA interacts with the Victims of Crime Act (VOCA) because some FVPSA-funded programs receive VOCA funding to provide legal and other assistance to victims. Further, FVPSA includes provisions that encourage or require HHS to coordinate FVPSA programs with related programs and research carried out by other federal agencies. FVPSA does not focus on child abuse per se; however, in enacting FVPSA as part of the 1984 amendments to CAPTA, some Members of Congress and other stakeholders noted that child abuse and neglect and intimate partner violence are not isolated problems, and can arise simultaneously. The research literature has focused on this association. In a national study of children in families who come into contact with a public child welfare agency through an investigation of child abuse and neglect, investigative caseworkers identified 28% of the children's households as having a history of domestic violence against the caregiver and 12% of those caregivers as being in active domestic violence situations. Further, about 1 out of 10 of the child cases of maltreatment reported included domestic violence. CAPTA provides funding to states to improve their child protective services (CPS) systems. It requires states, as a condition of receiving certain CAPTA funds, to describe their policies to enhance and promote collaboration between child protective service and domestic violence agencies, among other social service providers. Other federal efforts also address the association between domestic violence and child abuse. For example, the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program supports efforts to improve the outcomes of young children living in communities with concentrations of domestic violence or child maltreatment, among other factors. The program provides grants to states, territories, and tribes for the support of evidence-based early childhood home visiting programs that provide in-home visits by health or social service professionals with at-risk families. Separately, the Family Connection Grants program, authorized under Title IV-B of the Social Security Act, provided funding from FY2009 through FY2014 to public child welfare agencies and nonprofit private organizations to help children—whether they are in foster care or at risk of entering foster care—connect (or reconnect) with birth parents or other extended kin. The funds were used to establish or support certain activities, including family group decisionmaking meetings that enable families to develop plans that nurture children and protect them from abuse and neglect, and, when appropriate, to safely facilitate connecting children exposed to domestic violence to relevant services and reconnecting them with the abused parent. In addition, HHS and the Department of Justice supported the Greenbook Initiative in the early 2000s. The Greenbook was developed from the efforts of the National Council of Juvenile and Family Court Judges, which convened family court judges and experts on child maltreatment and domestic violence. In 1999, this group developed guidelines for child welfare agencies, domestic violence providers, and dependency courts in responding to domestic violence and child abuse in a publication that came to be known as the Greenbook. Soon after, HHS and DOJ funded efforts in six communities to address domestic violence and child maltreatment by implementing guidelines from the Greenbook. The HHS-led Federal Interagency Working Group on Child Abuse and Neglect includes a Domestic Violence Subcommittee. The committee focuses on interagency initiatives that address children exposed to domestic violence and promoting information exchange and joint planning among federal agencies. FVPSA has twice been amended by VAWA. Both FVPSA and VAWA are the primary vehicles for federal support to prevent and respond to domestic violence, including children and youth who are exposed to this violence; however, FVPSA has a more singular focus on prevention and services for victims, while VAWA's unique contributions are more focused on law enforcement and legal response to domestic violence. VAWA was enacted in 1994 after Congress held a series of hearings on the causes and effects of domestic and other forms of violence against women. Some Members of Congress and others asserted that communities needed a more comprehensive response to violence against women generally—not just against intimate partners—and that perpetrators should face harsher penalties. The shortfalls of legal response and the need for a change in attitudes toward violence against women were reasons cited for the passage of the law. Since VAWA's enactment, the federal response to domestic violence has expanded to involve multiple departments and activities that include investigating and prosecuting crimes, providing additional services to victims and abusers, and educating the criminal justice system and other stakeholders about violence against women. Although VAWA also addresses other forms of violence against women and provides a broader response to domestic violence, some VAWA programs have a similar purpose to those carried out under FVPSA. Congress currently funds VAWA grant programs that address the needs of victims of domestic violence. These programs also provide support to victims of sexual assault, dating violence, and stalking. For example, like the FVPSA grant program for states, territories, and tribes, VAWA's STOP (Services, Training, Officers, Prosecutors) Violence Against Women Formula Grant program provides services to victims of domestic and dating violence (and sexual assault and stalking) that include victim advocacy designed to help victims obtain needed resources or services, crisis intervention, and advocacy in navigating the criminal and/or civil legal system. Of STOP funds appropriated, 30% must be allocated to victim services. STOP grants also support activities that are not funded under FVPSA, including for law enforcement, courts, and prosecution efforts. Another VAWA program, Transitional Housing Assistance Grants for Victims of Domestic Violence, provides transitional housing services for victims, with the goal of moving them into permanent housing. Through the grant program to states, territories, and tribes, FVPSA provides immediate and short-term shelter to victims of domestic violence and authorizes service providers to assist with locating and securing safe and affordable permanent housing and homelessness prevention services. FVPSA requires that entities receiving funds under the grant programs for states, territories, and tribes use a certain share of funding for selected activities, including assistance in accessing other federal and state financial assistance programs. One source of federal finance assistance for victims of domestic violence is the Crime Victims Fund (CVF), authorized under the Victims of Crime Act (VOCA) and administered by the Department of Justice's Office of Victims of Crime (OVC). Within the CVF, funds are available for victims of domestic violence through the Victim Compensation Formula Grants program and Victims Assistance Formula Grants program. The Victims Compensation Grants may be used to reimburse victims of crime for out-of-pocket expenses such as medical and mental health counseling expenses, lost wages, funeral and burial costs, and other costs (except property loss) authorized in a state's compensation statute. In recent years, approximately 40% of all claims filed were for victims of domestic violence. The Victims Assistance Formula Grants may be used to provide grants to state crime victim assistance programs to administer funds for state and community-based victim service program operations. The grants support direct services to victims of crime including information and referral services, crisis counseling, temporary housing, criminal justice advocacy support, and other assistance needs. In recent years, approximately 50% of victims served by these grants were victims of domestic violence. Both FVPSA, which is administered within HHS, and VAWA, which is largely administered within DOJ, require federal agencies to coordinate their efforts to respond to domestic violence. For example, FVPSA authorizes the HHS Secretary to coordinate programs within HHS and to \"seek to coordinate\" those programs \"with programs administered by other federal agencies, that involve or affect efforts to prevent family violence, domestic violence, and dating violence or the provision of assistance for adults and youth victims of family violence, domestic violence, or dating violence.\" In addition, FVPSA directs HHS to assign employees to coordinate research efforts on family and related violence within HHS and research carried out by other federal agencies. Similarly, VAWA requires the Attorney General to consult with stakeholders in establishing a task force—comprised of representatives from relevant federal agencies—to coordinate research on domestic violence and to report to Congress on any overlapping or duplication of efforts on domestic violence issues. In 1995, HHS and DOJ convened the first meeting of the National Advisory Council on Violence Against Women. The purpose of the council was to promote greater awareness of violence against women and to advise the federal government on domestic violence issues. Since that time, the two departments have convened subsequent committees to carry out similar work. In 2010, then-Attorney General Eric Holder rechartered the National Advisory Committee on Violence Against Women, which had previously been established in 2006 under his predecessor. As stated in the charter, the committee is intended to provide the Attorney General and the HHS Secretary with policy advice on improving the nation's response to violence against women and coordinating stakeholders at the federal, state, and local levels in this response, with a focus on identifying and implementing successful interventions for children and teens who witness and/or are victimized by intimate partner and sexual violence. Separately, the director for FVPSA programs and the deputy director of HHS's Office on Women's Health provide leadership to the HHS Steering Committee on Violence Against Women. This committee supports collaborative efforts to address violence against women and their children, and includes representatives from the CDC and other HHS agencies. The members of the committee have established links with professional societies in the health and social service fields to increase attention on women's health and violence issues. In addition to these collaborative activities, multiple federal agencies participate in the Federal Interagency Workgroup on Teen Dating Violence, which was convened in 2006 to share information and coordinate teen dating violence program, policy, and research activities to combat teen dating violence from a public health perspective. The workgroup has funded a project to incorporate adolescents in the process for developing a research agenda to address teen dating violence. Finally, the Office of the Vice President (under Joe Biden) coordinated federal efforts to end violence against women, including by convening Cabinet-level officials to address issues concerning domestic and other forms of violence against women. Appendix A. Definitions Appendix B. Prevalence and Effects of Domestic Violence Appendix C. State and Territory Funding for Selected FVPSA Services", "summary": "Family violence broadly refers to acts of physical and sexual violence perpetrated by individuals against family members. The federal government has responded to various forms of family violence, including violence involving spouses and other intimate partners, children, and the elderly. The focus of this report is on the federal response to domestic violence under the Family Violence Prevention and Services Act (FVPSA). \"Domestic violence\" is used in the report to describe violence among intimate partners, including those involved in dating relationships. Generally speaking, victims tend to be women, although a sizable share of men are also victimized. A 2015 survey conducted by the Centers for Disease Control and Prevention (CDC) found that approximately one-third of women and men had experienced sexual violence, physical violence, and/or stalking in their lifetimes. It showed that women were more likely than men to have experienced contact sexual violence (18% vs. 8%), stalking (10% vs. 2%), and severe physical violence (21% vs. 15%). Women were also more likely than men to report an impact related to partner violence over their lifetimes (25% vs 11%). Such impacts included having injuries, being fearful, being concerned for their safety, missing work or school, needing medical care, or needing help from law enforcement. Throughout much of the 20th century, domestic violence remained a hidden problem. Victims, or survivors, of this abuse often endured physical and emotional abuse in silence out of fear of retaliation by their spouses or partners. In the 1970s, former battered women, civic organizations, and professionals began to open shelters and provide services to abused women and their children. As a result of these efforts and greater national attention to domestic violence, Congress conducted a series of hearings in the early 1980s to understand the scope of domestic violence and explore possible responses. FVPSA was enacted in 1984 (Title III of P.L. 98-457), and has been reauthorized seven times, most recently by the CAPTA Reauthorization Act of 2010 (P.L. 111-320). FVPSA authorizes three primary sets of activities, all of which are administered by the U.S. Department of Health and Human Services (HHS). These activities are authorized through FY2015, per P.L. 113-320, and funds have continually been appropriated in each subsequent year. FY2019 funding is $180 million. First, a national domestic violence hotline receives calls for assistance related to this violence. The hotline provides crisis intervention and counseling, maintains a database of service providers throughout the United States and the territories, and provides referrals for victims and others affected by domestic violence. Second, FVPSA funds efforts to prevent domestic violence through a program known as Domestic Violence Prevention Enhancement and Leadership Through Allies (DELTA). The program supports efforts in selected communities to prevent domestic violence. Third, FVPSA supports direct services for victims and their families, including victims in underserved and minority communities and children exposed to domestic violence. Most of this funding is awarded via grants to states, territories, and tribes, which then distribute the funds to local domestic violence service organizations. These organizations provide shelter and a number of services—counseling, referrals, development of safety plans, advocacy, legal advocacy, and other services. This funding also supports state domestic violence coalitions that provide training and support for service providers, and national resource centers that provide training and technical assistance on various domestic violence issues for a variety of stakeholders. FVPSA was the first federal law to address domestic violence. Since the law was enacted, it has continued to have a primary focus on providing shelter and services for survivors and has increasingly provided support to children exposed to domestic violence and teen dating violence. With the enactment of the Violence Against Women Act of 1994 (VAWA, P.L. 103-322), the federal response to domestic violence has expanded to include investigating and prosecuting crimes and providing additional services to victims and abusers. VAWA activities are administered by multiple federal agencies.", "document_type": "crs"}
{"report": "Unemployment Compensation (UC) is a joint federal-state program financed by federal payroll taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under State Unemployment Tax Acts (SUTA). These revenues are deposited into the appropriate account within the federal Unemployment Trust Fund (UTF). Originally, the intent of the UC program, among other goals, was to help counter economic fluctuations such as recessions. This intent is reflected in the current UC program's funding and benefit structure. When the economy grows, UC program revenue rises through increased tax revenues. At the same time, UC program spending falls because fewer workers are unemployed. The effect of collecting more taxes while decreasing spending on benefits dampens demand in the economy. It also creates a surplus of funds, or a reserve fund , for the UC program to draw upon during a recession. These reserve balances are credited in the state's account within the UTF. During an economic slowdown or recession, UC tax revenue falls and UC program spending rises as more workers lose their jobs and receive UC benefits. The increased amount of UC payments to unemployed workers dampens the economic effect of lost earnings by injecting additional funds into the economy. States levy their own payroll taxes (SUTA) on employers to fund regular UC benefits and the state share (50%) of the Extended Benefit (EB) program. Federal laws and regulations provide broad guidelines for these state taxes. Each state deposits its SUTA revenue into its account within the UTF. SUTA revenue finances UC benefits. Generally, when economic activity is robust and increasing, SUTA revenue is greater than a state's UC expenditures. As a result, the state's reserves within the UTF grow. This trend is reversed during economic recessions and during the early economic recovery period, when the state's reserves are drawn down and new SUTA revenue does not always make up the shortfall. If the recession is deep enough and if SUTA revenue is inadequate for long periods of time, states may have insufficient funds to pay for UC benefits. Federal law, which requires states to pay these benefits, provides a loan mechanism within the UTF framework that an insolvent state may opt to use to meet its UC benefit payment obligations. States must pay back these loans. If the loans are not paid back quickly (depending on the timing of the beginning of the loan period), states may face interest charges and the states' employers may face increased net FUTA rates until the loans are repaid. In the years immediately following the most recent recession, many states had insufficient SUTA revenue and UTF account balances to pay UC benefits. All FUTA revenue is deposited into the Employment Security Administration Account (ESAA) within the UTF. Federal unemployment taxes pay for the federal share of EB (50%) and for administrative grants to the states. Additionally, through the federal loan account within the UTF, FUTA funds may be loaned to insolvent states to assist the payment of the states' UC obligations. FUTA imposes a 6.0% gross federal unemployment tax rate on the first $7,000 paid annually by employers to each employee. Employers in states with programs approved by the U.S. Labor Secretary and with no outstanding federal loans may credit up to 5.4 percentage points of state unemployment taxes paid against the 6.0% tax rate, making the minimum net federal unemployment tax rate 0.6%. Because most employees earn more than the $7,000 taxable wage ceiling in a calendar year, the FUTA tax typically is $42 per worker per year ($7,000 × 0.6%), or just over 2 cents per hour for a full-time, year-round worker. States have a great deal of autonomy in how they establish and run their unemployment insurance programs. However, the framework established by federal laws is clear and requires states to promptly pay the UC benefits as provided under state law. In budgetary terms, UC benefits are an entitlement (although the program is financed by a dedicated tax imposed on employers and not by general revenue). Thus, even if a recession hits a given state and, as a result, that state's trust fund account is depleted, the state remains legally required to continue paying benefits. To do so, the state might borrow money either from the dedicated loan account within the UTF or from outside sources. If the state chooses to borrow funds from the UTF, not only will the state be required to continue paying benefits, it also will be required to repay the funds (plus any interest due) it has borrowed from the federal loan account within a few years. Such states may need to raise taxes on their employers or reduce UC benefit levels, actions that dampen economic growth, job creation, and consumer demand. In short, states have strong incentives to keep adequate funds in their trust fund accounts. If the state borrows from sources outside the UTF, the state would not be subject to the loan restrictions described below. Instead, the state would be subject to the terms within that outside loan agreement, which might offer a different (more favorable) interest rate or repayment schedule but may include fees to establish the loan. The Federal Unemployment Account (FUA) is the federal loan account within the UTF. The FUA is primarily funded from the statutory transfer of excess revenue from the Extended Unemployment Compensation Account (EUCA) being deposited into the FUA. If needed, the FUA may borrow funds from other federal accounts within the UTF or from the general fund of the U.S. Treasury. From FY2009 to FY2015, the FUA had to borrow funds from the U.S. Treasury to finance loans to the state accounts. 1. Revenue from additional FUTA taxes paid by employers when a reduced credit against federal unemployment taxes exists because the state has an outstanding unpaid loan from FUA is deposited into the FUA. (See the discussion below on \" Federal Tax Increases on Outstanding Loans Through Credit Reductions \" for a more detailed explanation of these additional taxes.) 2. Federal law allows the FUA to borrow available funds from the other federal (EUCA and ESAA) accounts within the UTF. 3. Federal law also authorizes appropriations as loans from the general fund of the U.S. Treasury if balances in the federal accounts are insufficient to cover their expenditures. (For example, if the states' borrowing needs exceed the available FUA balance.) Such appropriations require discretionary action by Congress and the President. Once a state recognizes that it does not have sufficient funds to pay UC benefits, the mechanism for receiving a loan from the UTF is straightforward. The state's governor (or the governor's designee) must submit a letter requesting that the U.S. Labor Secretary advance funds to the state account within the UTF. Once the loan is approved by the U.S. Labor Secretary, the funds are placed into the state account in monthly increments. States with outstanding loans from the UTF must repay them fully by the November 10 following the second consecutive January 1 on which the state has an outstanding loan. If the outstanding loan is not repaid by that time, the state will face an effective federal tax increase. Thus, a state may have approximately 22 months (if borrowing began on January 1) to 34 months (if borrowing began on January 2) to repay the loan without a federal tax increase, depending on when it obtained the outstanding loan. As of January 29, 2019, approximately $68.3 million in federal UTF loans to the states were outstanding. A current list of states with outstanding loans may be found at the Department of Labor's (DOL's) website, https://oui.doleta.gov/unemploy/budget.asp . If the state does not repay a loan by November 10 of the second year, the state becomes subject to a reduction in the amount of state unemployment tax credit applied against the federal unemployment tax beginning with the preceding January 1 until the state repays the loan fully. Depending on the duration of the loan and certain other measures, one or more of three different credit reductions may be required. These reductions are fully catalogued in Table 1 . At the height of the period following the most recent recession (2011), 20 states and the Virgin Islands faced increased FUTA rates because of outstanding UTF loans. The credit reduction is initially a 0.3 percentage point reduction for the year beginning with the calendar year in which the second consecutive January 1 passes during which the loan is outstanding and increases by a 0.3 percentage point reduction for each year there is an outstanding loan. For example, in the first year, the credit reduction results in the net federal tax rate increasing from 0.6% to 0.9%—an additional $21 for each employee; in the second year, it would increase to 1.2%—a cumulative additional $42 for each employee. Two potential other credit reductions exist (in addition to the cumulative 0.3 percentage point increases) during the ensuing calendar years in which a state has an outstanding loan: 1. Beginning in the third year, the 2.7 add-on uses a statutory formula that takes into consideration the average annual wages and average employment contribution rate. 2. Beginning in the fifth year, the Benefit-Cost Ratio (BCR) add-on replaces the 2.7 add-on and uses the five-year benefit-cost rate as well as average wages in its calculation. Table 1 presents these reductions and the subsequent net FUTA tax faced by state employers as a result of these unpaid loans. If any January 1 passes without an outstanding balance, the year count starts over with the next loan. DOL maintains a list of potential reduced credit states at http://workforcesecurity.doleta.gov/unemploy/docs/reduced_credit_states.xlsx . Section 272 of P.L. 97-248 allows a delinquent state the option of repaying—on or before November 9—a portion of its outstanding loans each year through transfer of a specified amount from its account in the UTF to the FUA. If the state complies with all the requirements listed below, the potential credit reduction is avoided (there is no reduction): The state must repay all loans for the most recent one-year period ending on November 9, plus the potential additional taxes that would have been imposed for the tax year based upon a state tax credit reduction. The state must have sufficient amounts in the state account of the UTF to pay all compensation for the last quarter of that calendar year without receiving a loan. The state also must have altered its state law to increase the net solvency of its account with the UTF. From 2011 through 2014, South Carolina met these requirements. As a result, employers in South Carolina were not subject to a state tax credit reduction in the calculation of their FUTA taxes. (Generally, employers in South Carolina would have paid more in state unemployment taxes to meet these requirements.) Once a state begins to have a credit reduction, the state may apply to have the reductions capped if the state meets four criteria: No legislative or other action in 12 months ending September 30 has been taken to decrease the state's unemployment tax effort. (A state cannot actively decrease its expected state unemployment tax revenue from current law.) No legislative or other action has been taken to decrease the net solvency of the state's trust fund account. (For example, the state would not be allowed to actively increase the average UC benefit amount from current law requirements.) Average state unemployment tax rate on total wages must exceed the five-year average benefit-cost rate on total wages. Balance of outstanding loans as of September 30 must not be greater than the balance three years before. The BCR add-on may be waived if the Secretary of Labor determines the state did not take legislative or other actions to decrease the net solvency of the state's trust fund account. The 2.7 add-on would then replace the BCR add-on. The additional federal taxes attributable to the credit reduction are applied against the state's outstanding UTF loan. Thus, although technically employers are paying additional FUTA taxes, the additional tax pays off a state's debt. The state's employers will pay the additional federal taxes resulting from the credit reduction no later than January 31 of the next calendar year. Since April 1, 1982 ( P.L. 97-35 as amended), states have been charged interest on new loans that are not repaid by the end of the fiscal year in which they were obtained. (Before April 1, 1982, states could receive these loans interest free.) The interest is the same rate as that paid by the federal government on state reserves in the UTF for the quarter ending December 31 of the preceding year but not higher than 10% per annum. The interest rate for calendar year loans is determined by Section 1202(b)(4) of the Social Security Act. The interest rate for a calendar year is the earnings yield on the UTF for the quarter ending December 31 of the previous calendar year. The U.S. Treasury Department calculated the fourth-quarter earnings yield in 2018 to be 2.3081%. Thus, loans made in calendar year 2019 are subject to an interest rate of 2.3081%. States may not pay the interest directly or indirectly from SUTA revenue or funds in their state account within the UTF. If a state does not repay the interest, or if it pays the interest with funds from SUTA taxes, DOL is required by federal law to refuse to certify that state's program as being in compliance with federal law. Not being in compliance with federal unemployment law would mean that the state would not be eligible to receive administrative grants and employers in that state would not receive the state unemployment tax credit in the calculation of their federal unemployment taxes. States may borrow funds without interest from the UTF during the year. To receive these interest-free loans, the states must meet five conditions: 1. The states must repay the loans by September 30. 2. For those repaid (by September 30) loans to maintain their interest-free status, there cannot be any loans made to that state in October, November, or December of the calendar year of such an interest-free loan. If loans are made in the last quarter of the calendar year, the \"interest-free\" loans made in the previous fiscal year will retroactively accrue interest charges. 3. The states must meet funding goals relating to their account in the UTF, established under regulations issued by DOL. In addition to these first three requirements, the phase-in of two new requirements began in 2014. The full effect of the requirements began in 2019. 4. States must have had at least one year in the past five calendar years before the year in which advances are taken in which the Average High Cost Multiple (AHCM) was greater than or equal to 1.0. 5. Additionally, states must meet two criteria for maintenance-of-tax effort in every year from the most recent year the AHCM was at least 1.0 and the year in which loans are taken. a. The average state unemployment tax rate (total state unemployment tax amount collected over total taxable wages) was at least 80% of the prior year's rate. b. The average state unemployment tax rate was at least 75% of the average benefit-cost ratio over the preceding five calendar years, where the benefit-cost ratio for a year is defined as the amount of benefits and interest paid in the year divided by the total covered wages paid in the year. Table 2 lists outstanding state loans. (At this time, only the U.S. Virgin Islands has an outstanding loan.) The table also includes information on accrued interest payments for FY2019. The third column provides information on whether the state was subject to a credit reduction for tax year 2018. The last column provides the net FUTA tax faced by employers in each state that had an outstanding loan. ", "summary": "Although states have a great deal of autonomy in how they establish and run their unemployment insurance programs, federal law requires states to pay Unemployment Compensation (UC) benefits promptly as provided under state law. During some recessions, current taxes and reserve balances may be insufficient to cover state obligations for UC benefits. States may borrow funds from the federal loan account within the Unemployment Trust Fund (UTF) to meet UC benefit obligations. This report summarizes how insolvent states may borrow funds from the UTF loan account to meet their UC benefit obligations. It includes the manner in which states must repay federal UTF loans. It also provides details on how the UTF loans may trigger potential interest accrual and explains the timetable for increased net Federal Unemployment Taxes Act (FUTA) taxes if the funds are not repaid promptly. Outstanding loans listed by state may be found at the Department of Labor's (DOL's) website, https://oui.doleta.gov/unemploy/budget.asp.", "document_type": "crs"}
{"report": "M ost of the funding for the activities of the Department of Housing and Urban Development (HUD) comes from discretionary appropriations provided each year in annual appropriations acts, typically as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD). HUD's programs are designed primarily to address housing problems faced by households with very low incomes or other special housing needs and to expand access to homeownership. Three main rental assistance programs—Section 8 tenant-based rental assistance (which funds Section 8 Housing Choice Vouchers), Section 8 project-based rental assistance, and public housing—account for the majority of the department's funding (about 78% of total HUD appropriations in FY2018; see Figure 1 ). All three programs provide deep subsidies allowing low-income recipients to pay below-market, income-based rents. Additional, smaller programs are targeted specifically to persons who are elderly and persons with disabilities. Two flexible block grant programs—the HOME Investment Partnerships grant program and the Community Development Block Grant (CDBG) program—help states and local governments finance a variety of housing and community development activities designed to serve low-income families. Following disasters, special supplemental CDBG disaster recovery (CDBG-DR) grants are funded by Congress to help communities rebuild damaged housing and community infrastructure. Native American tribes receive their own direct housing grants through the Native American Housing Block Grant. Other, more-specialized grant programs help communities meet the needs of homeless persons, through the Homeless Assistance Grants and the Continuum of Care and Emergency Solutions Grants programs, as well as those living with HIV/AIDS. Additional programs fund fair housing enforcement activities and healthy homes activities, including lead-based paint hazard identification and remediation. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to homebuyers with low down payments and to developers of multifamily rental buildings containing relatively affordable units. FHA collects fees from insured borrowers, which are used to sustain its insurance funds. Surplus FHA funds have been used to offset the cost of the HUD budget. This In Brief report tracks progress on FY2019 HUD appropriations and provides detailed account-level, and in some cases subaccount-level, funding information ( Table 1 ) as well as a discussion of selected key issues. For more information about the Transportation, HUD, and Related Agencies appropriations bill see CRS Report R45487, Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations for FY2019: In Brief , by Maggie McCarty and David Randall Peterman. For more information on trends in HUD funding, see CRS Report R42542, Department of Housing and Urban Development (HUD): Funding Trends Since FY2002 . Figure 1. Composition of HUD's Budget, FY2018Gross Budget AuthoritySource: Prepared by CRS, based on data in Table 1.Notes: Primary rental assistance programs include Tenant-based Rental Assistance (Housing Choice Voucher Program), Public Housing Capital Fund, Public Housing Operating Fund, Choice Neighborhoods, Family Self Sufficiency Program, and Project-based Rental Assistance. Formula grants include CDBG, HOME, Homeless Assistance Grants, Housing for Persons with AIDS (HOPWA), and Native American Housing Block Grants. Other programs and activities encompass the remainder of HUD accounts. The FY2019 appropriations process spanned two Congresses, both of which took action, as summarized below. On February 12, 2018, the Trump Administration submitted its FY2019 budget request to Congress. The budget request was released before final FY2018 appropriations were enacted and shortly after enactment of the Bipartisan Budget Act of FY2018 (BBA; P.L. 115-123 ), which, among other things, increased the statutory limits on discretionary spending for FY2018 and FY2019. The President's FY2019 request proposed $41.4 billion in gross discretionary appropriations for HUD, which is the amount of new budget authority available for HUD programs and activities, not accounting for savings from offsets and other sources. That amount is about $11.3 billion (21.5%) less than was provided in FY2018. Most of that reduction ($7.7 billion) is attributable to program eliminations proposed by the President, including CDBG, HOME, Public Housing Capital Funding, Choice Neighborhoods grants, and the programs funded in the Self-Help Homeownership Opportunity Program (SHOP) account. On May 23, 2018, the House Appropriations Committee approved its version of a FY2019 THUD appropriations bill ( H.R. 6072 ; H.Rept. 115-750 ), about a week after THUD subcommittee approval (May 16, 2018). The bill included $53.2 billion in gross funding for HUD, or $43.7 billion after accounting for savings from offsets and rescissions. This is about 29% more in gross funding than was requested by the President and slightly more (1%) than was provided in FY2018. The bill did not include the program eliminations proposed by the President, and instead funded CDBG and the Public Housing Capital Fund at FY2018 levels while reducing funding for the HOME and SHOP accounts (-12% and -7%, respectively). On June 7, 2018, the Senate Appropriations Committee approved its version of a FY2019 THUD appropriations bill ( S. 3023 ; S.Rept. 115-268 ), two days after THUD subcommittee approval. It included more than $54 billion in gross funding for HUD, or $44.5 billion after accounting for savings from offsets and rescissions. This is 30% more in gross funding than was requested by the President, and about 2.5% more than was provided in FY2018. Like the House committee-passed bill, S. 3023 did not include the President's proposed program eliminations, and instead proposed funding those programs at their prior-year levels. On August 1, 2018, the Senate approved H.R. 6147 , the Financial Services Appropriations bill, which was amended to include four regular appropriations acts, including the text of S. 3023 as Division D. Several HUD-related amendments were approved during floor consideration, none of which changed funding levels. On September 28, 2018, a continuing resolution (CR) through December 7, 2018, was enacted as part of a consolidated full-year Defense and Labor, Health and Human Services, and Education spending bill ( P.L. 115-245 , Division C). The CR covered the agencies and activities generally funded under seven regular FY2019 appropriations bills that had not been enacted before the end of the fiscal year, including THUD. On December 7, 2018, the previous CR was extended through December 21, 2018 ( P.L. 115-298 ). No further funding action was completed before the expiration of the CR on December 21, 2018, and a funding lapse affecting the unfunded portions of the federal government, including HUD, commenced on December 22, 2018. Following the start of the 116 th Congress and during the funding lapse, the House passed several full-year THUD funding bills, none of which were taken up in the Senate. These include the following: H.R. 21 , an omnibus funding bill, which included THUD language identical to that which had passed the Senate in the 115 th Congress in H.R. 6147 ; H.R. 267 , a standalone THUD bill, again containing language identical to the 115 th Congress Senate-passed THUD language; and H.R. 648 , an omnibus funding bill containing provisions and funding levels characterized by the chairwoman of the House Appropriations Committee as reflecting House-Senate conference negotiations on H.R. 6147 from the 115 th Congress. (The Transportation, HUD, and Related Agencies Appropriations Act of 2019 was included as Division F.) On January 16, 2019, the House passed H.R. 268 , a supplemental appropriations bill. As passed by the House, the bill would have provided supplemental appropriations to HUD (as well as other agencies) in response to the major disasters of 2018. The bill also contained CR provisions to extend regular appropriations through February 8, 2019, for agencies and programs affected by the funding lapse. On January 24, 2019, the Senate considered H.R. 268 , the supplemental appropriations bill that previously passed the House. One amendment, S.Amdt. 5 , offered by Senator Shelby, included additional funding for border security, as well as full-year appropriations for those agencies affected by the funding lapse. The THUD provisions in Division G were identical to those that had passed the Senate in the 115 th Congress in H.R. 6147 . The Senate voted not to invoke cloture on S.Amdt. 5 on January 24, 2019. Late on January 25, 2019, a CR ( H.J.Res. 28 ; P.L. 116-5 ) was enacted, providing funding through February 15, 2019, for THUD and the six other funding bills that had not received full-year funding, allowing HUD and the other agencies that had been subject to the funding lapse to resume full operations. On February 15, 2019, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) was enacted providing full-year appropriations for the remaining agencies that had lacked full-year appropriations. The Transportation, HUD, and Related Agencies Appropriations Act of 2019 was included as Division G and its text mirrored that of H.R. 648 . The cost of renewing existing Section 8 Housing Choice Vouchers is generally one of the most high-profile HUD funding issues each year. It is the largest single expense in the largest account (the tenant-based rental assistance account) in HUD's budget. All of the roughly 2 million portable rental vouchers that are currently authorized and in use are funded annually, so for the low-income families currently renting housing with their vouchers to continue to receive assistance (i.e., renew their leases at the end of the year), new funding is needed each year. If the amount ultimately provided proves to be less than the amount needed to fund all vouchers currently in use, then several things may happen. The Public Housing Authorities (PHAs)—the state-chartered entities that administer the program at the local level—with reserve funding from prior years, may spend some of those reserves to maintain current services. PHAs without reserve funding may apply to HUD for a share of the set-aside funding that is generally provided in the annual appropriations acts to the department and allowed to be used to prevent termination of assistance. And PHAs may undertake cost-saving measures, such as not reissuing vouchers to families on their waiting lists when currently assisted families leave the program. Conversely, if the amount is greater than the amount needed to renew existing vouchers, PHAs may be able to serve additional families from their waiting lists. Although the President's budget request, the House committee-reported HUD appropriations bill, and the Senate bill all included different funding levels for voucher renewals for FY2019, each purported to provide enough to fund all vouchers currently in use. The final FY2019 enacted funding level was $22.598 billion, an amount between the House committee-reported and Senate-passed levels. Advocacy groups have estimated that the amount provided will be enough at least to renew all existing voucher holders' leases, as well as potentially serve some additional families. The low-rent public housing program houses approximately 1 million families in properties owned by local PHAs but subsidized by the federal government. PHAs' budgets for public housing are made up of rent paid by tenants and formula grant funding from the federal government to make up the difference between the rents collected from tenants and the cost of maintaining the properties. The two primary formula funding programs are Operating Fund program and Capital Fund program. Additionally, PHAs may apply for competitive Choice Neighborhood Initiative grants. The largest source of federal funding to support the low-rent public housing program is provided through the public housing Operating Fund account. Operating funds are allocated to PHAs according to a formula that estimates what it should cost PHAs to maintain their public housing properties based on the characteristics of those properties. When the amount of appropriations provided is insufficient to fully fund the amount PHAs qualify for under the formula, their allocation is prorated. Assuming the Operating Fund formula accurately reflects the costs of maintaining public housing, less than full funding means PHAs either will not be able to meet their full operating needs (e.g., maintenance, staffing, services for residents) or will have to spend down reserves they may have accumulated or seek other sources of funding. According to HUD's Congressional Budget Justifications, the amount requested in the President's budget for the Operating Fund for FY2019 (a 28% decrease from FY2018) would be sufficient to fund an estimated 54% of PHAs' formula eligibility in CY2019 (the program runs on a calendar year basis). Both the House committee-passed bill and the Senate bill proposed more funding than requested, but neither proposed the full amount the President's budget estimated would be needed to fully fund PHAs' formula eligibility in CY2019. The final HUD appropriations law provided $4.65 billion for operating funding in FY2019, which is more than the House committee-passed bill, but less than the Senate level. While it is not expected to fund 100% of formula eligibility in CY2019, the funding increase may result in a higher proration level than CY2018. The other major source of federal funding for public housing is the Capital Fund. Capital Fund formula grants are used to meet the major modernization needs of public housing, beyond the day-to-day maintenance expenses included among operating expenses. The most recent national assessment of public housing capital needs sponsored by HUD found that inadequate funding had resulted in a backlog of about $25.6 billion in capital/modernization needs across the public housing stock, with new needs accruing nationally at a rate of about $3.4 billion per year. For FY2019, the President's budget requested no funding for the Capital Fund, citing federal fiscal constraints and a desire to \"strategically reduce the footprint of Public Housing.\" Both the House committee bill and the Senate bill would have provided funding for the Capital Fund, with H.Rept. 115-750 explicitly stating that it rejected the Administration's proposed strategic reduction of public housing. The final FY2019 appropriations law provided $2.775 billion for the Capital Fund, a $25 million increase over FY2018 funding. That $25 million is provided as a set-aside to provide grants to PHAs to address lead hazards in public housing. Similarly, the Administration's budget requested no new funding for competitive Choice Neighborhoods grants that are used to redevelop distressed public housing and other assisted housing. Both the House committee bill and the Senate bill proposed to fund the program. The House committee bill proposed even funding with FY2018 ($150 million) and the Senate bill proposed a decrease in funding relative to FY2018 (a reduction of $50 million, or 33%). The final FY2019 appropriations law funded the account at the FY2018 level of $150 million. The President's budget request included a proposal to eliminate funding for several HUD grant programs that support various affordable housing and community development activities. Most notable among these are HUD's two largest block grant programs for states and localities, CDBG and HOME, as well as competitive grants funded in the SHOP account (i.e., funding for sweat-equity programs, like Habitat for Humanity, and certain capacity building programs). These grant programs were also slated for elimination in the President's FY2018 budget request, although they were ultimately funded in FY2018. The press release accompanying the budget request suggested that the activities funded by these grant programs should be devolved to the state and local levels. Both the House committee bill and the Senate bill would have continued funding for these programs. The House committee bill would have provided level funding for CDBG, but funding reductions for the other accounts. The Senate bill would have provided level funding for all three accounts. Like the House committee and Senate bills, the final FY2019 appropriations law continued funding for all three accounts. In the case of CDBG and SHOP, it provided level funding with FY2018 at $3.365 billion and $54 million, respectively; in the case of HOME, the FY2019 law decreased funding by 8.2% relative to FY2018, bringing it down to $1.250 billion. Under the terms of the Budget Control Act, as amended, discretionary appropriations are generally subject to limits, or caps, on the amount of funding that can be provided in a fiscal year. In addition, the annual appropriations bills also are individually subject to limits on the funding within them that are associated with the annual congressional budget resolution. Congressional appropriators can keep these bills within their respective limits in a number of ways, including by providing less funding for certain purposes to allow for increases elsewhere in the bill. In certain circumstances, appropriators also can credit \"offsetting collections\" or \"offsetting receipts\" against the funding in the bill, thereby lowering the net amount of budget authority in that bill. In the THUD bill, the largest source of these offsets is generally the Federal Housing Administration (FHA). FHA generates offsetting receipts when estimates suggest that the loans that it will insure during the fiscal year are expected to collect more in fees paid by borrowers than will be needed to pay default claims to lenders over the life of those loans.  While usually not as large a source, the Government National Mortgage Association (GNMA), or Ginnie Mae, generally provides significant offsets within the THUD bill as well. GNMA guarantees mortgage-backed securities made up of government-insured mortgages (such as FHA-insured mortgages) and similarly generates offsetting receipts when the associated fees it collects are estimated to exceed any payments made on its guarantee. The amount of offsets available from FHA and GNMA varies from year to year based on estimates of the amount of mortgages that FHA will insure, and that GNMA will guarantee, in a given year and how much those mortgages are expected to earn for the government. These estimates, in turn, are based on expectations about the housing market, the economy, the credit quality of borrowers, and relevant fee levels, most of which are factors outside of the immediate control of policymakers. If the amount of available offsets increases from one year to the next, then additional funds could be appropriated relative to the prior year's funding level while still maintaining the same overall net level of budget authority. If the amount of offsets decreases, however, then less funding would need to be appropriated relative to the prior year to avoid increasing the overall net level of budget authority, all else equal. For FY2019, the Congressional Budget Office (CBO) estimated that offsetting receipts available from FHA would be lower than in FY2018 ($7.6 billion compared to $8.3 billion) while the amount of offsets available from Ginnie Mae would be higher (about $2 billion compared to $1.7 billion). The total combined amount of offsets, then, was estimated at about $500 million less in FY2019 as compared to the prior year. As a result of this lower amount of offsets, the increase in net budget authority proposed in both the House committee bill and the Senate bill, as well as that ultimately provided by the final FY2019 appropriations law, as compared to FY2018 is greater than the increase in gross appropriations for HUD programs and activities. ", "summary": "The programs and activities of the Department of Housing and Urban Development (HUD) are designed primarily to address housing problems faced by households with very low incomes or other special housing needs and to expand access to homeownership. Nearly all of the department's budget comes from discretionary appropriations provided each year in the annual appropriations acts, typically as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD). On February 12, 2018, the Trump Administration submitted its FY2019 budget request to Congress, including $41.4 billion in gross new budget authority for HUD (not accounting for savings from offsets or rescissions). That is about $11.3 billion (21.5%) less than was provided in FY2018. Most of that reduction ($7.7 billion) is attributable to proposed program eliminations, including Community Development Block Grants (CDBG), the HOME Investment Partnerships grant program, Public Housing Capital Funding, Choice Neighborhoods grants, and the programs funded in the Self-Help Homeownership Opportunity Program (SHOP) account. On May 23, 2018, the House Appropriations Committee approved its version of a FY2019 THUD appropriations bill ( H.R. 6072 ; H.Rept. 115-750 ), which proposed $53.2 billion in gross funding for HUD. This was about 29% more in gross funding than was requested by the President and slightly more (1%) than was provided in FY2018. The bill did not include the program eliminations proposed by the President, and instead proposed to fund CDBG and the Public Housing Capital Fund at FY2018 levels while reducing funding for the HOME and SHOP accounts (-12% and -7%, respectively). On August 1, 2018, the Senate approved H.R. 6147 , the Financial Services Appropriations bill, which had been amended to include the Senate Appropriations Committee-approved version of a FY2019 THUD appropriations bill ( S. 3023 , incorporated as Division D), along with three other appropriations bills. It included more than $54 billion in gross funding for HUD. This is 30% more in gross funding than was requested by the President, and about 2.5% more than was provided in FY2018. Like H.R. 6072 , the Senate-passed bill did not include the President's proposed program eliminations, and instead proposed to fund those programs at their prior-year levels. Final FY2019 appropriations were not completed before the start of the fiscal year. Funding for HUD and most other federal agencies was continued under a series of continuing resolutions until December 21, 2018, at which point funding lapsed and a partial government shutdown commenced. It continued until January 25, 2019, when another short-term continuing resolution was enacted. Final FY2019 HUD appropriations were enacted on February 15, 2019 as a part of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). Appropriations for Selected HUD Accounts, FY2018-FY2019 (dollars in millions)", "document_type": "crs"}
{"report": "The federal government, through the Department of Energy, operates four regional power marketing administrations (PMAs), created by statute: the Bonneville Power Administration (BPA), the Southeastern Power Administration (SEPA), the Southwestern Power Administration (SWPA), and the Western Area Power Administration (WAPA). Each PMA operates in a distinct geographic area of the coterminous United States (see Figure 1 ). Congressional interest in the PMAs has included diverse issues such as rate setting, cost and compliance associated with the Endangered Species Act (ESA; P.L. 93-205 ; 16 U.S.C. §§1531 et seq.), and questions of privatization of these federal agencies. In general, the PMAs came into being because of the government's need to dispose of electric power produced by federal dams constructed largely for irrigation, flood control, or other purposes, and to achieve small community and farm electrification—that is, providing service to customers whom it would not have been profitable for a private utility to serve. With minor exceptions, these agencies market the electric power produced by federal dams constructed, owned, and operated by the Corps of Engineers (Corps) and the U.S. Bureau of Reclamation (BOR). PMAs must give preference to public utility districts and cooperatives (e.g., \"preference customers\"), selling their power at cost-based rates set at the lowest possible rate consistent with sound business principles. The Federal Energy Regulatory Commission (FERC) regulates PMA rates to ensure that they are set high enough to repay the U.S. Treasury on schedule for the portion of federal facility costs that have been allocated to hydropower beneficiaries. Since FY2011, power revenues associated with the PMAs have been classified as discretionary offsetting receipts (i.e., receipts that are available for spending by the PMAs), thus the agencies are sometimes noted as having a \"net-zero\" spending authority. Only the capital expenses of WAPA and SWPA require appropriations from Congress. Each PMA also has unique elements and regional issues that affect its business. They are discussed in alphabetical order. Created by the Bonneville Project Act of 1937 (16 U.S.C. §832) just before the completion of two large dams in the Pacific Northwest—Bonneville Dam in 1938 and Grand Coulee Dam in 1941—BPA was the first PMA. Though it serves a smaller geographical area, BPA is on par with WAPA (which serves the largest area) in the size of its transmission system. The agency operates and maintains about 75% of the high voltage transmission lines in its service territory, which includes Idaho, Oregon, Washington, western Montana and small parts of eastern Montana, California, Nevada, Utah, and Wyoming. BPA also markets wholesale electricity from 31 federally owned hydropower facilities in the Northwest. These generation facilities are owned both by the Corps and BOR. BPA differs from the other three PMAs in that it is self-financed: it receives no federal appropriations. Since passage of the Federal Columbia River Transmission System Act of 1974 (16 U.S.C. §838), BPA has covered its operating costs through power rates set to ensure repayment to the Treasury of capital and interest on funds used to construct the Columbia River power system. BPA also has permanent Treasury borrowing authority, which it may use for capital on large projects. This money is repaid with interest, through power sales. As of 2018, BPA had $5.53 billion of bonds outstanding to the U.S. Treasury, with BPA's current borrowing authority capped by Congress at $7.70 billion. BPA has also looked at other financing options as it approaches its debt limit, looking at nonfederal debt refinancing, lease-purchases, and other asset management strategies. BPA has initiated strategies and a financial plan to address a changing power generation and demand market, as it endeavors to meet its mandate for cost-based electric power rates. These plans are outlined in its Strategic Plan for 2018 to 2023, and address goals from financial health to infrastructure modernization. Wholesale power prices in the United States are generally trending downward, while BPA's firm power rates have trended upward. BPA repays its funding from the U.S. Treasury largely through electricity sales to customers. While BPA generates its electricity from hydropower (which is traditionally one of the lower-cost means of power generation), increasing amounts of renewable electricity from growing wind and solar capacity installations in the Pacific Northwest are challenging BPA's price competitiveness, and perhaps its ability to repay its debts in a timely manner. In 2014, BPA entered into the Regional Cooperation Agreement (RCA) with the State of Washington to address the debt of Energy Northwest, a \"joint action agency formed by the Washington state legislature in 1957\" to manage public power utility costs. Energy Northwest owns and operates four electric power generation facilities: White Bluffs Solar Station, Packwood Lake Hydroelectric Project, Nine Canyon Wind Project, and the Columbia Generating Station. The Regional Cooperation debt is \"the issuance of new bonds by Energy Northwest to refund outstanding bonds shortly before their maturities when substantial principal repayments were and are due.\" According to BPA, this allows for \"integrated debt management\" for the combined total debt portfolios of BPA and Energy Northwest, with a net effect reducing the \"weighted average interest rate and the maturity of BPA's overall debt portfolio\" over the life of the program. This refinancing, according to BPA, has enabled BPA to prepay higher-interest-rate federal obligations, and has \"preserved or restored U.S. Treasury borrowing authority.\" However, the debt service of the RCA is \"borne by BPA ratepayers through BPA rates.\" BPA estimates that the \"aggregate potential principal amount\" of RCA refunding through bonds issued in fiscal years 2019 through 2030 could exceed $4.0 billion. BPA is responsible for maintaining and modernizing the generation and transmission infrastructure of its systems, and preserving and enhancing its physical and cybersecurity. With energy and capacity markets changing in the western United States (especially with the growing need to integrate increasing amounts of variable renewable sources), and the development of the Energy Imbalance Market (EIM) in the West, BPA is considering whether to join the EIM, and how this might affect its operations and customers. Environmental, fishing, and tribal advocates have sued the federal government over concerns that operating rules for hydropower dams on the Columbia and Snake Rivers (i.e., operations consistent with the National Marine Fisheries Service Biological Opinion) are inadequate to ensure survival of species threatened or endangered under the Endangered Species Act. In addition, several environmental groups filed a lawsuit blaming the dams for warm river waters in summer 2015 that resulted in the deaths of about 250,000 adult sockeye salmon migrating up the Columbia and Snake Rivers. Some of these parties have sought to remove the four lower dams on the Snake River to ensure survival of some salmon and steelhead species. In 2016, a federal judge overturned a previous management plan for the dams, finding that it would not be sufficient to protect salmon runs, and ordered a new management plan that could include removing the dams. However, in 2018, President Trump issued a Presidential Memorandum accelerating the process for a new management plan, requiring the biological opinion to be ready by 2020. The memorandum ordered the Secretary of the Interior and the Secretary of Commerce \"to appropriately suspend, revise, or rescind any regulations or procedures that unduly burden\" water infrastructure projects so they \"are better able to meet the demands of their authorized purposes.\" How this will affect the fish endangerment finding is unclear at this time. The Southeastern Power Administration was created in 1950 by the Secretary of the Interior to carry out the functions assigned to the Secretary by the Flood Control Act of 1944 (P.L. 78-534) in 11 states (Alabama, Florida, Georgia, Illinois, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia). SEPA is unique among the four PMAs in two ways. It is the smallest PMA, with just over 40 employees, and, unlike the other three agencies, SEPA does not operate or maintain any transmission facilities, and thus contracts with other utilities for transmitting the federal power it markets to more than 12 million consumers. Southeastern markets approximately 3,400 MW of power produced at 22 multipurpose water projects, operated and maintained by the Corps. SEPA's facilities are aging; for instance, in 2018 it reported that its Cumberland System customers have agreed to fund $1.2 billion of planned rehabilitations of the nine hydroelectric facilities in the Corps' Nashville District. According to SEPA, it has an overcapacity issue. Projections for electricity load growth (in consultation with its preference customers) made before the 2008 economic downturn reportedly led to SEPA acquiring additional capacity it currently does not use. As a result, municipalities and electric cooperatives in SEPA's service area will have to make economic decisions regarding how to handle this excess capacity. As of 2018, at least one preference customer has terminated its contract with SEPA due to this issue. Section 5 of the Flood Control Act of 1944 (P.L. 78-534) established the Southwestern Power Administration. SWPA markets hydroelectric power in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas from 24 multipurpose Corps dams with a combined capacity of 2,194 MW. SWPA serves more than 100 preference customer utilities with more than 8 million end-use customers. The agency manages nearly 1,400 miles of high-voltage transmission lines. SWPA is the only U.S. electrical balancing area supported solely by hydroelectric generation, and its use of the reservoirs and river systems within the SWPA marketing area must be balanced with flood control and other required uses so that the power needs of its customers can be met. SWPA states that it uses alternative financing and offsetting collection authorities to fund expenses and purchase power to help SWPA meet its obligations while minimizing congressional appropriations. Periodically, SWPA has been challenged by low water conditions. It has a rain-based water supply—rather than one that is snow-based, like the mountain snowpack water supply of WAPA and BPA—and sells power from a comparatively small reservoir system which stores that water. Extended dry periods sometimes mean that SWPA must purchase replacement power and energy to meet its contractual obligations. This means that SWPA requires congressional authority to use its revenues from power sales over the long term—across high and low water years. Prior year balances have been available to Southwestern so that we are financially prepared and able to achieve rate stability for our customers. This authority is critical to operating our program according to sound business principles. Southwestern's program is funded by authority to use receipts, alternative financing, and other authorities approved by Congress, including appropriations, which represent only 6.5% of Southwestern's total program. Created by the Department of Energy Organization Act of 1977 ( P.L. 95-91 ), WAPA is the newest and largest of the PMAs in terms of service area. WAPA's service area covers 1.3 million square miles, and its power—transmitted by a high voltage grid over 17,000 miles long—serves customers in 15 western states. WAPA markets and transmits hydropower from 56 federal dams operated by BOR, and the Corps. It also sells hydropower power produced by facilities administered by the International Boundary and Water Commission, and markets the United States' 24.3% share (547 megawatts) of the coal-fired Navajo Generating Station in Arizona. In addition to the types of public bodies traditionally served as preference customers by the other PMAs, WAPA has developed a policy to give preference to Native American tribes regardless of their utility status. WAPA has been working with other regional entities to address the changing electric power needs of its customers. In 2014, WAPA published its Strategic Roadmap 2024, titled \"Powering the Energy Frontier.\" The document is intended to serve as WAPA's strategic plan to guide the agency's actions for the next 10 years. However, according to some, the developing Energy Imbalance Market in the West may provide additional options for WAPA to address transmission development needs to balance regional generation and demand. An issue of continuing importance to WAPA is its role in relieving transmission congestion within its marketing area. There are a number of constrained transmission paths in the West whose limited capacity to transfer power may reduce the ability of utilities to serve electric loads on a seasonal or ongoing basis. In 2009, Section 402 of the American Recovery and Reinvestment Act ( P.L. 111-5 ) amended the Hoover Power Plant Act of 1984 to give WAPA authority to borrow up to $3.25 billion from the U.S. Treasury to pursue transmission projects that integrate renewable generation sources into the electric transmission grid. The law provides authority to construct and upgrade transmission lines to help deliver renewable resources to market. Western created the Transmission Infrastructure Program, also known as TIP, to implement this new initiative. Several transmission projects have been initiated under the program. Previous budget proposals and legislation have proposed repealing WAPA's loan authority, but to date, none of these proposals have been enacted. In 2015, WAPA's Upper Great Plains (UGP) region joined the Southwest Power Pool (SPP), a Regional Transmission Organization (RTO). Under the operating agreement with SPP, WAPA was required to transfer functional control of UGP's eligible transmission facilities to SPP. WAPA is the first PMA to formally join an RTO, and states that benefits to date from joining SPP have significantly exceeded the original estimate of $11.5 million per year. WAPA reports that two of its other regions are considering joining SPP. For Water Year 2017, WAPA reported that it delivered 26,148 gigawatt-hours of hydroelectric power to its customers, which is 101% of average annual power sales. The West has been experiencing periodic droughts for a number of years, resulting in lower snowmelts and less water in storage and available for power generation. To help smooth the resulting annual differences, a \"drought-adder\" reduction program has been implemented in recent years. A drought-adder charge was levied to help repay deferred drought costs accrued during the 2000s in the Rocky Mountain and Upper Great Plains regions. The balance was paid a year ahead of schedule and, as of this year, has resulted in $40 million annual savings for more than 50 percent of WAPA's customers in Colorado, Wyoming, Montana, Kansas, Nebraska, the Dakotas and the western sections of Minnesota and Iowa. This is the second year that 417 of WAPA's customers, out of 700, have had a rate reduction. The drought-adder component of the rate remains available to WAPA to adjust to the variable hydropower resource—a lasting risk if drought conditions persist in WAPA's territory. Moderate to extreme drought conditions have been reported in parts of the western United States. In addition to issues specific to individual PMAs, some recent proposals have applied to multiple PMAs. In 2018, the Trump Administration proposed to sell the transmission assets owned and operated by the federal Power Marketing Administrations. The proposal suggested that \"eliminating or reducing\" the federal government's role in owning and operating transmission assets and increasing the private sector role would \"encourage a more efficient allocation of economic resources and mitigate unnecessary risk to taxpayers.\" The proposal calls for federal transmission infrastructure assets (lines, towers, substations, and/or rights of way) to be sold, with the private sector and/or state and local entities potentially taking over the transmission functions now provided by the PMAs. The Federal entities that would result after such sales could contract with other utilities to provide transmission service for the delivery of Federal power just as the Southeastern Power Administration, which does not own transmission lines, already does. The proposal reports that according to the Administration's FY2019 budget justification, the sale of federal transmission assets would result in a net budgetary savings of $9.5 billion, in total, over a 10-year window. Reportedly, the Administration dropped the plan due to stakeholder opposition, with the Department of Energy stating that such a sale of PMA transmission assets would not proceed unless directed by Congress. Proposals to sell all or part of the PMAs are not new, and have been made in some form by almost every President since Reagan. However, Congress has sought to prevent executive branch alterations of PMA structures and authority. Under Section 208 of the Urgent Supplemental Appropriations Act, 1986 ( P.L. 99-349 ), the executive branch is prohibited from spending funds to study or draft proposals to transfer from federal control any portion of the assets of the PMAs unless specifically authorized by Congress. The Trump Administration divestment proposal could have had an indirect impact on the original congressional intent for the PMAs to provide electricity at the lowest possible cost. This in turn could require changes to the following provisions: Flood Control Act of 1944, as amended (FCA; 16 U.S.C. §825s et seq. ); The 1937 Bonneville Project Act (BPA; 16 U.S.C. §832c ); and The Reclamation Project Act of 1939 (RPA; 43 U.S.C. §485h(c)) . These laws also stipulate a preference of public bodies for the sale of federal power. Selling federally owned transmission assets could potentially affect the \"lowest possible\" rates of sale, and the statutory preference for publicly or cooperatively owned utilities to be the vehicle for sale of electric power produced by federal facilities.", "summary": "The federal government, through the Department of Energy, operates four regional power marketing administrations (PMAs), created by statute: the Bonneville Power Administration (BPA), the Southeastern Power Administration (SEPA), the Southwestern Power Administration (SWPA), and the Western Area Power Administration (WAPA). Each PMA operates in a distinct geographic area. Congressional interest in the PMAs has included diverse issues such as rate setting, cost and compliance associated with the Endangered Species Act (ESA; P.L. 93-205; 16 U.S.C. §§1531 et seq.), and questions of privatization of these federal agencies. In general, the PMAs came into being because of the government's need to dispose of electric power produced by dams constructed largely for irrigation, flood control, or other purposes, and to achieve small community and farm electrification—that is, providing service to customers whom it would not have been profitable for a private utility to serve. With minor exceptions, these agencies market the electric power produced by federal dams constructed, owned, and operated by the U.S. Army Corps of Engineers (Corps) and the Bureau of Reclamation (BOR). By statute, PMAs must give preference to public utility districts and cooperatives (e.g., \"preference customers\"), and sell their power at cost-based rates set at the lowest possible rate consistent with sound business principles. The Federal Energy Regulatory Commission regulates PMA rates to ensure that they are set high enough to repay the U.S. Treasury for the portion of federal facility costs allocated to hydropower beneficiaries. With energy and capacity markets changing in the western United States (especially with the growing need to integrate increasing amounts of variable renewable sources), and the development of the Energy Imbalance Market in the West, BPA and WAPA may have to adapt their plans with regard to generation needs and how transmission systems are developed. In 2018, the Trump Administration proposed to sell the transmission assets (lines, towers, substations, and/or rights of way) owned and operated by the federal Power Marketing Administrations. The proposal suggested that \"eliminating or reducing\" the federal government's role in owning and operating transmission assets, and increasing the private sector's role, would \"encourage a more efficient allocation of economic resources and mitigate unnecessary risk to taxpayers.\" The resulting PMA entities would then contract with other utilities to provide transmission services for the delivery of federal power, similar to what SEPA does currently. Reportedly, the proposed sale of PMA assets was dropped after opposition to the plan emerged from stakeholders. Under Section 208 of the Urgent Supplemental Appropriations Act, 1986 (P.L. 99-349), the executive branch is prohibited from spending funds to study or draft proposals to transfer from federal control any portion of the assets of the PMAs unless specifically authorized by Congress. Environmental, fishing, and tribal advocates have sued the federal government over concerns that operating rules for hydropower dams on the Columbia and Snake Rivers (i.e., the National Marine Fisheries Service Biological Opinion) are inadequate to ensure survival of species threatened or endangered under the ESA. In 2016, a federal judge overturned a previous management plan for the dams, finding that it would not be sufficient to protect salmon runs, and ordered a new management plan that could include removing the dams. However, in 2018, President Trump issued a Presidential Memorandum accelerating the process for a new management plan, requiring the biological opinion to be ready by 2020. Since FY2011, power revenues associated with the PMAs have been classified as discretionary offsetting receipts (i.e., receipts that are available for spending by the PMAs), thus the agencies are sometimes noted as having a \"net-zero\" spending authority. Only the capital expenses of WAPA and SWPA require appropriations from Congress.", "document_type": "crs"}
{"report": "Prior to 1867, Qatar was ruled by the family of the leaders of neighboring Bahrain, the Al Khalifa. That year, an uprising in the territory led the United Kingdom, then the main Western power in the Persian Gulf region, to install a leading Qatari family, the Al Thani, to rule over what is now Qatar. The Al Thani family claims descent from the central Arabian tribe of Banu Tamim, the tribe to which Shaykh Muhammad ibn Abd Al Wahhab, the founder of Wahhabism, belonged. Thus, Qatar officially subscribes to Wahhabism, a conservative Islamic tradition that it shares with Saudi Arabia. In 1916, in the aftermath of World War I and the demise of the Ottoman Empire, Qatar and Britain signed an agreement under which Qatar formally became a British protectorate. In 1971, after Britain announced it would no longer exercise responsibility for Persian Gulf security, Qatar and Bahrain considered joining with the seven emirates (principalities) that were then called the \"Trucial States\" to form the United Arab Emirates. However, Qatar and Bahrain decided to become independent rather than join that union. The UAE was separately formed in late 1971. Qatar adopted its first written constitution in April 1970 and became fully independent on September 1, 1971. The United States opened an embassy in Doha in 1973. The last U.S. Ambassador to Qatar, Dana Shell Smith, resigned from that post in June 2017, reportedly over disagreements with the Trump Administration. Mary Catherine Phee has been nominated as a replacement. Qatar's governing structure approximates that of the other GCC states. The country is led by a hereditary Amir (literally \"prince,\" but interpreted as \"ruler\"), Shaykh Tamim bin Hamad Al Thani. He became ruler in June 2013 when his father, Amir Hamad bin Khalifa Al Thani, relinquished power voluntarily. The Amir governs through a prime minister, who is a member of the Al Thani family, and a cabinet, several of whom are members of the Al Thani family or of prominent allied families. Amir Tamim serves concurrently as Minister of Defense, although most of the defense policy functions are performed by the Minister of State for Defense, a position with less authority than that of full minister. In November 2014, Amir Tamim appointed a younger brother, Shaykh Abdullah bin Hamad, to be deputy Amir and the heir apparent. The Prime Minister, Shaykh Abdullah bin Nasir bin Khalifa Al Thani, also serves as Interior Minister. There is dissent within the Al Thani family—mostly from those of lineages linked to ousted former Qatari rulers—but no significant challenge to Tamim's rule is evident. There were no significant protests in Qatar during the \"Arab Spring\" uprising of 2011 or since. Political parties are banned, and unlike in Kuwait and Bahrain, there are no well-defined \"political societies\" that act as the equivalent of parties. Political disagreements in Qatar are aired mainly in private as part of a process of consensus building in which the leadership tries to balance the interests of the various families and other constituencies. Then-Amir Hamad put a revised constitution to a public referendum on April 29, 2003, achieving a 98% vote in favor. Nevertheless, it left in place significant limitations: for example, it affirms that Qatar is a hereditary emirate. Some Western experts also criticize Qatar's constitution for specifying Islamic law as the main source of legislation. The constitution stipulates that elections will be held for 30 of the 45 seats of the country's Advisory Council ( Majlis Ash-Shura ), a national legislative body, but elections have been repeatedly delayed. The elected Council is also to have broader powers, including the ability to remove ministers (two-thirds majority vote), to approve a national budget, and to draft and vote on proposed legislation that can become law (two-thirds majority vote and concurrence by the Amir). In 2008, it was agreed that naturalized Qataris who have been citizens for at least 10 years will be eligible to vote, and those whose fathers were born in Qatar will be eligible to run. Qatar is the only GCC state other than Saudi Arabia not to have held elections for any seats in a legislative body. The country holds elections for a 29-seat Central Municipal Council. Elections for the fourth Council (each serving a four-year term) were held on May 13, 2015. The Central Municipal Council advises the Minister of Municipality and Urban Affairs on local public services. Voter registration and turnout—21,735 voters registered out of an estimate 150,000 eligible voters, and 15,171 of those voted—were lower than expected, suggesting that citizens viewed the Council as lacking influence. The State Department stated that \"observers considered [the municipal council elections] free and fair.\" Recent State Department reports identify the most significant human rights problems in the country as limits on the ability of citizens to choose their government in free and fair elections; restrictions on freedoms of assembly and association, including prohibitions on political parties and labor unions; restrictions on the rights of expatriate workers; and criminalization of consensual same-sex sexual activity. A nominally independent, government-funded National Human Rights Committee (NHRC) investigates allegations of human rights abuses in the country. It is under the authority of the Qatar Foundation that was founded and is still run by the Amir's mother, Shaykha Moza. The NHRC also monitors the situation of about 1,000-2,000 stateless residents (\" bidoons \"), who are able to register for public services but cannot own property or travel freely to other GCC countries. Although the constitution provides for an independent judiciary, the Amir, based on recommended selections from the Supreme Judicial Council, appoints all judges, who hold their positions at his discretion. As have the other GCC states, Qatar has, since the 2011 \"Arab Spring\" uprisings, issued new laws that restrict freedom of expression and increase penalties for criticizing the ruling establishment. In 2014, the government approved a new cybercrimes law that provides for up to three years in prison for anyone convicted of threatening Qatar's security or of spreading \"false news.\" A November 2015 law increased penalties for removing or expressing contempt at the national flag or the GCC flag. In July 2017, the country held a national conference on freedom of expression at which, according to the State Department, members of international human rights organizations were able to criticize the country's human rights record. Al Jazeera. The government owns and continues to partially fund the Al Jazeera satellite television network, which has evolved into a global media conglomerate that features debates on controversial issues, as well as criticism of some Arab leaders. The State Department quotes \"some observers and former Al Jazeera employees\" as alleging that the government \"influences\" Al Jazeera content. Some Members of Congress have asserted that Al Jazeera is an arm of the Qatar government and that its U.S. bureau should be required to register under the Foreign Agents Registration Act (FARA). According to the State Department, social and legal discrimination against women continues, despite the constitutional assertion of equality. No specific law criminalizes domestic violence, and a national housing law discriminates against women married to noncitizen men and divorced women. The laws criminalizes rape. Court testimony by women carries half the weight of that of a man. On the other hand, women in Qatar drive and own property, and constitute about 15% of business owners and more than a third of the overall workforce, including in professional positions. Women serve in public office, such as minister of public health, chair of the Qatar Foundation, head of the General Authority for Museums, permanent representative to the United Nations, and ambassadors to Croatia and the Holy See. In November 2017, the Amir appointed four women to the national consultative council for the first time in the legislative body's history. However, most of the other small GCC states have more than one female minister. The State Department's Trafficking in Persons report for 2018 upgraded Qatar's ranking to Tier 2 from Tier 2: Watch List, on the basis that the government has made significant efforts to comply with the minimum standards for the elimination of trafficking over the past year. Qatar enacted a Domestic Worker Law to better protect domestic workers and, in recent years, it also established a coordinating body to oversee and facilitate anti-trafficking initiatives and enacting a law that reforms the sponsorship system to significantly reduce vulnerability to forced labor. But Qatar remains a destination country for men and women subjected to forced labor and, to a much lesser extent, forced prostitution. Female domestic workers are particularly vulnerable to trafficking due to their isolation in private residences and lack of protection under Qatari labor laws. In the course of the January 2018 U.S.-Qatar \"Strategic Dialogue,\" the two countries signed a memorandum of understanding to create a framework to combat trafficking in persons. The State Department assesses Qatar's labor rights as not adequately protecting the rights of workers to form and join independent unions, conduct legal strikes, or bargain collectively. Qatari law does not prohibit antiunion discrimination or provide for reinstatement of workers fired for union activity. The single permitted trade union, the General Union of Workers of Qatar, is assessed as \"not functioning.\" International scrutiny of Qatar's labor practices has increased as Qatar makes preparations to host the 2022 FIFA World Cup soccer tournament; additional engineers, construction workers, and other laborers have been hired to work in Qatar. Some workers report not being paid for work and a lack of dispute resolution, causing salary delays or nonpayment. Some human rights groups have criticized Qatar for allowing outdoor work (primarily construction) in very hot weather. Yet, the State Department credits the country with taking steps to protect labor rights, including for expatriate workers. In December 2016, a labor reform went into effect that offers greater protections for foreign workers by changing the \" kafala \" system (sponsorship requirement for foreign workers) to enable employees to switch employers at the end of their labor contracts rather than having to leave Qatar when their contracts end. In 2018, the government established and is funding several housing sites to replace unsafe temporary housing for expatriate workers. The government also has stepped up arrests and prosecutions of individuals for suspected labor law violations, and has increased its cooperation with the ILO to take in worker complaints and better inform expatriate workers of their rights. Qatar's constitution stipulates that Islam is the state religion and Islamic law is \"a main source of legislation,\" but Qatari laws incorporate secular legal traditions as well as Islamic law. The law recognizes only Islam, Christianity, and Judaism. The overwhelming majority (as much as 95%) of Qatari citizens are Sunni Muslims, possibly explaining why there have been no signs of sectarian schisms within the citizenry. The government permits eight registered Christian denominations to worship publicly at the Mesaymir Religious Complex (commonly referred to as \"Church City\"), and it has allowed the Evangelical Churches Alliance of Qatar to build a church. Jews and adherents of unrecognized religions—such as Hindus, Buddhists, and Baha'is—are allowed to worship privately but do not have authorized facilities in which to practice their religions. Qatari officials state that they are open to considering the creation of dedicated worship spaces for Hindus, Jews, and Buddhists and that any organized, non-Muslim religious group could use the same process as Christians to apply for official registration. Members of at least one group reportedly filed for land in previous years to build their own complex but received no response from the government. Qatar uses its financial resources to implement a foreign policy that engages a wide range of regional actors, including those that are at odds with each other. Qatari officials periodically meet with Israeli officials while at the same hosting leaders of the Palestinian militant group, Hamas. Qatar maintains consistent ties to Iran while at the same time hosting U.S. forces that contain Iran's military power. Qatar hosts an office of the Afghan Taliban movement that facilitates U.S.-Taliban talks. Its policies have enabled Qatar to mediate some regional conflicts and to obtain the freedom of captives held by regional armed groups. Yet, Qatar often backs regional actors at odds with those backed by de facto GCC leader Saudi Arabia and other GCC states, causing Saudi Arabia and its close allies in the GCC to accuse Qatar of undermining the other GCC countries. As have some of the other GCC states, Qatar has shown an increasing willingness to use its own military forces to try to shape the outcome of regional conflicts. A consistent source of friction within the GCC has been Qatar's embrace of Muslim Brotherhood movements as representing a moderate political Islamist movement that can foster regional stability. Qatar hosts Islamists who adhere to the Brotherhood's traditions, including the aging, outspoken Egyptian cleric Yusuf al-Qaradawi. In 2013-2014, differences over this and other issues widened to the point where Saudi Arabia, UAE, and Bahrain withdrew their ambassadors from Doha in March 2014, accusing Qatar of supporting \"terrorism.\" The Ambassadors returned in November 2014 in exchange for a reported pledge by Qatar to fully implement a November 2013 \"Riyadh Agreement\" that committed Qatar to noninterference in the affairs of other GCC states and to refrain from supporting Muslim Brotherhood-linked organizations. These differences erupted again following the May 20-22, 2017, visit of President Donald Trump to Saudi Arabia, during which expressed substantial support for Saudi leaders. On June 5, 2017, Saudi Arabia, UAE, and Bahrain, joined by Egypt and a few other Muslim countries, severed diplomatic relations with Qatar, expelled Qatar's diplomats, recalled their ambassadors, and imposed limits on the entry and transit of Qatari nationals and vessels in their territories, waters, and airspace. They also accused Qatar of supporting terrorist groups and Iran. On June 22, 2017, the Saudi-led group presented Qatar with 13 demands, including closing Al Jazeera, severing relations with the Muslim Brotherhood, scaling back relations with Iran, closing a Turkish military base in Qatar, and paying reparations for its actions. Amir Tamim expressed openness to negotiations but said it would not \"surrender\" its sovereignty. The Saudi-led group subsequently reframed its demands as six \"principles,\" among which were for Qatar to \"combat extremism and terrorism\" and prevent their financing, suspend \"all acts of provocation,\" fully comply with the commitments Qatar made in 2013 and 2014 (see above), and refrain \"from interfering in the internal affairs of states.\" President Trump initially responded to the crisis by echoing the Saudi-led criticism of Qatar's policies, but later sought to settle the rift. Then-Secretary of State Rex Tillerson, working with Kuwait, took the lead within the Trump Administration to mediating the dispute, including by conducting \"shuttle diplomacy\" in the region during July 10-13, 2017. President Trump facilitated a phone call between Amir Tamim and Saudi Crown Prince Mohammad bin Salman on September 9, 2017, but the direct dialogue faltered over a dispute about which leader had initiated the talks. No subsequent meetings between President Trump and the leaders of the parties to the dispute, or subsequent actions or proposals, have produced any significant progress toward resolution of the rift. Secretary of State Pompeo's visit to the Gulf states in January 2019 produced no evident movement, and the U.S. envoy who was assigned to work on this issue, General Anthony Zinni (retired), resigned as envoy in early January 2019. Yet, there are signs that Saudi Arabia and the UAE, facing criticism over the Kashoggi issue and their involvement in Yemen, might want to de-escalate the dispute. Qatari forces and commanders have been participating in GCC \"Gulf Shield\" military exercises and command meetings in Saudi Arabia and other GCC states. Amir Tamim was invited by Saudi Arabia to the annual GCC summit in Dammam, Saudi Arabia, during December 7-9, 2018, but he did not attend. Qatar asserts that the blockading countries are seeking to change Qatar's leadership and might take military action to force Qatar to accept their demands. In December 2017, Saudi Arabia \"permanently\" closed its Salwa border crossing into Qatar, and some press reports say that Saudi Arabia is contemplating building a canal that would physically separate its territory from that of Qatar. Qatari officials assert that the country's ample wealth is enabling it to limit the economic effects of the Saudi-led move, but that the blockade has separated families and caused other social disruptions. Qataris reportedly have rallied around their leadership to resist Saudi-led demands. The dispute has to date thwarted U.S. efforts to assemble the a new \"Middle East Strategic Alliance\" to counter Iran and regional terrorist groups. This alliance – to consist of the United States, the GCC countries, and other Sunni-led states, is reportedly to be formally unveiled at U.S.-GCC summit that has been repeatedly postponed since early 2018 and is not scheduled. The MESA has also been hampered by the global criticism of Saudi de facto leader Crown Prince Mohammad bin Salman for his possible involvement in the October 2018 killing of U.S.-based Saudi journalist Jamal Kashoggi at the Saudi consulate in Istanbul, and Egypt's April 2019 decision to refrain from joining the Alliance. Qatar's disputes with other GCC countries have come despite the resolution in 2011 of a long-standing territorial dispute between Qatar and Bahrain, dating back to the 18 th century, when the ruling families of both countries controlled parts of the Arabian peninsula. Qatar and Bahrain referred the dispute to the International Court of Justice (ICJ) in 1991 after clashes in 1986 in which Qatar landed military personnel on a disputed man-made reef (Fasht al-Dibal). In March 2001, the ICJ sided with Bahrain on the central dispute over the Hawar Islands, but with Qatar on ownership of the Fasht al-Dibal reef and the town of Zubara on the Qatari mainland, where some members of the ruling Al Khalifa family of Bahrain are buried. Two smaller islands, Janan and Hadd Janan, were awarded to Qatar. Qatar accepted the ruling as binding. Even though the Saudi-led bloc asserts that Qatar had close relations with Iran, Qatar has long helped counter Iran strategically. Qatar enforced international sanctions against Iran during 2010-2016, and no Qatar-based entity has been designated by the United States as an Iran sanctions violator. Amir Tamim attended both U.S.-GCC summits (May 2015 at Camp David and April 2016 in Saudi Arabia) that addressed GCC concerns about the July 2015 U.S.-led multilateral agreement on Iran's nuclear program (Joint Comprehensive Plan of Action, JCPOA). Qatar withdrew its Ambassador from Tehran in January 2016 in solidarity with Saudi Arabia over the Saudi execution of a dissident Shiite cleric, and Qatar joined the February 2016 GCC declaration that Lebanese Hezbollah is a terrorist group. Yet Qatari leaders have always argued that dialogue with Iran is key to reducing regional tensions. Qatar and Iran have shared a large natural gas field in the Persian Gulf without incident, although some Iranian officials have occasionally accused Qatar of cheating on the arrangement. In February 2010, as Crown Prince, Shaykh Tamim, visited Iran for talks with Iranian leaders, and as Amir, he has maintained direct contact with Iran's President Hassan Rouhani. Apparently perceiving that the June 2017 intra-GCC rift provided an opportunity to drive a wedge within the GCC, Iran supported Qatar in the dispute and has exported additional foodstuffs to Qatar to help it compensate for the cutoff of Saudi food exports. It has permitted Qatar Airways to overfly its airspace in light of the Saudi, UAE, and Bahraini denial of their airspace to that carrier. In August 2017, Qatar formally restored full diplomatic relations with Iran. Qatar did not directly support the May 8, 2018, U.S. withdrawal from the JCPOA, instead issuing a statement hoping that efforts to \"denuclearize\" the region will not lead to \"escalation.\" Saudi official statements also cited Qatar's alleged support for pro-Iranian dissidents in Bahrain as part of the justification for isolating Qatar in June 2017. Contributing to that Saudi perception was Qatar's brokering in 2008 of the \"Doha Agreement\" to resolve a political crisis in Lebanon that led to clashes between Lebanon government forces and Hezbollah. Qatar's role as a mediator stemmed, at least in part, from Qatar's role in helping reconstruct Lebanon after the 2006 Israel-Hezbollah war, and from then-Amir Hamad's postwar visit to Hezbollah strongholds in Lebanon. Further fueling Saudi and UAE suspicions was a 2017 Qatari payment to certain Iraqi Shiite militia factions of several hundred million dollars to release Qatari citizens, including royal family members, who were kidnapped in 2016 while falcon hunting in southern Iraq. In Egypt, after the fall of Egyptian President Hosni Mubarak in 2011, a Muslim Brotherhood-linked figure, Muhammad Morsi, won presidential elections in 2012. Qatar contributed about $5 billion in aid, aggravating a split between Qatar and the other GCC states over the Muslim Brotherhood. Saudi Arabia and the UAE backed Morsi's ouster by Egypt's military in 2013. Because of its support for Morsi, Qatar's relations with former military leader and now President Abdel Fattah el-Sisi have been strained, and Egypt joined the 2017 Saudi-led move against Qatar. In Libya, Qatar joined the United States and several GCC and other partner countries in air operations to help oust Qadhafi in 2011. Subsequently, however, Qatar has supported Muslim Brotherhood-linked factions in Libya opposed by the UAE, Egypt, and Saudi Arabia. This difference in approaches in Libya among the GCC states contributed to the intra-GCC rift. As of April 2019, it appears that the UAE and Egypt-backed ex-military commander Khalifa Hifter, who has consolidated his control of much of Libya over the past four years, is poised to reunite the country by force. In 2015, Qatar joined the Saudi-led military coalition that is battling Iran-backed Zaidi Shiite Houthi rebels in Yemen, including conducting air strikes against Houthi and allied positions. This was a departure from Qatar's 2006-2007 failed efforts to mediate between the Houthis and the government of President Ali Abdullah Saleh, who left office in 2012 following an \"Arab Spring\"-related uprising in Yemen. In September 2015, Qatar deployed about 1,000 military personnel, along with armor, to Yemen. Four Qatar soldiers were killed fighting there. As a result of the intra-GCC rift, in mid-2017 Qatar withdrew from the Saudi-led military effort in Yemen. In Syria, Qatar provided funds and weaponry to rebels fighting the regime of President Bashar Al Asad, including those, such as Ahrar Al Sham, that competed with and sometimes fought anti-Asad factions supported by Saudi Arabia and the UAE. Qatar also built ties to Jabhat al Nusra (JAN), an Al Qaeda affiliate that was designated by the United States as a Foreign Terrorist Organization (FTO), although Qatari officials assert that their intent was to induce the group to sever its ties to Al Qaeda, which it formally did in July 2016. Qatari mediation also obtained the release of Lebanese and Western prisoners captured by that group. However, Asad regime recent gains in Syria likely render Qatar's involvement moot. Qatar has not, to date, followed Kuwait or Bahrain in reopening its embassy in Damascus; its Foreign Minister stated in January 2019 that Qatar saw \"no reason\" to do so. According to the State Department, Qatar has allowed 20,000 Syrians fleeing the civil war there to retain residency in Qatar. Qatar is a member of the U.S.-led coalition combating the Islamic State. In 2014, Qatar flew some airstrikes in Syria against Islamic State positions. However, after several weeks, the coalition ceased identifying Qatar as a participant in coalition strikes inside Syria. Neither Qatar nor any other GCC state participated in coalition air operations against the Islamic State inside Iraq. In April 2017, Qatar reportedly paid ransom to obtain the release of 26 Qatari ruling family members abducted Iraqi Shia militiamen while on a hunting trip in southern Iraq in 2015. The Iraqi government said in June 2017 that it, not Shia fighters, received the ransom. Qatar has sought to exert some influence in Lebanon, possibly as a counterweight to that exerted by Saudi Arabia. In January 2019, Amir Tamim was one of the few regional leaders to attend an Arab League summit held in Beirut. In late January 2019, Qatar announced a $500 million investment in Lebanon government bonds to support that country's ailing economy. Qatar has attempted to play a role in Israeli-Palestinian peace negotiations by engaging all parties. In directly engaging Israel, in 1996, then-Amir Hamad hosted a visit by then-Prime Minister of Israel Shimon Peres and allowed Israel to open a formal trade office in Doha—going beyond the GCC's dropping in 1998 of the secondary Arab League boycott of Israel. In April 2008, then-Foreign Minister Tzipi Livni attended the government-sponsored Doha Forum and met with Amir Hamad. Qatar ordered the Israeli offices in Doha closed in January 2009 at the height of an Israel-Hamas conflict and the offices have not formally reopened. Still, small levels of direct Israel-Qatar trade reportedly continue; Israeli exports to Qatar consist mostly of machinery and technology, and imports from Qatar are primarily plastics. Amir Tamim regularly accuses Israel of abuses against the Palestinians and expresses consistent support for Palestinian efforts for full United Nations membership and recognition, while at the same time backing negotiations between the Palestinians and Israel. Qatar has also engaged the Islamist group Hamas, a Muslim Brotherhood offshoot that has exercised de facto control of the Gaza Strip since 2007. Qatari officials assert that their engagement with Hamas can help broker reconciliation between Hamas and the Fatah-led Palestinian Authority (PA). U.S. officials have told Members of Congress that Qatar's leverage over Hamas can be helpful to reducing conflict between Hamas and Israel and that Qatar has pledged that none of its assistance to the Palestinians goes to Hamas. Qatar reportedly asked former Hamas political bureau chief Khalid Meshal to leave Qatar after the intra-GCC rift erupted, apparently to accommodate the blockading states. Qatar's critics assert that Hamas leaders are too often featured on Al Jazeera and that Qatar's relations with Hamas constitute support for a terrorist organization. In the 115 th Congress, the Palestinian International Terrorism Support Act of 2017 ( H.R. 2712 ), which was ordered to be reported to the full House on November 15, 2017, appeared directed at Qatar by sanctioning foreign governments determined to be providing financial or other material support to Hamas or its leaders. As have the other Gulf states, Qatar has sought to compensate for a curtailment of U.S. contributions to the U.N. Relief Works Agency (UNRWA). In April 2018, Qatar donated $50 million to that agency. In December 2018, Qatar reached a two-year agreement with UNRWA to donate to that agency's programs in education and health care. Qatari forces did not join any U.S.-led operations inside Afghanistan, but its facilities and forces support U.S. operations there, and Qatar has brokered talks between the United States and Taliban representatives. Unlike Saudi Arabia and UAE, Qatar did not recognize the Taliban as the legitimate government of Kabul when the movement ruled during 1996-2001. In June 2013, the Taliban opened a representative office in Qatar, but it violated U.S.-Qatar-Taliban understandings by raising a flag of the former Taliban regime on the building and Qatar, at U.S. request, immediately closed the office. Taliban officials remained in Qatar, and revived U.S.-Taliban talks led to the May 31, 2014, exchange of captured U.S. soldier Bowe Bergdahl for five Taliban figures held by the United States at the prison facility in Guantanamo Bay, Cuba. The five were banned from traveling outside Qatar until there is an agreed solution that would ensure that they could not rejoin the Taliban insurgency. In November 2018, the five joined the Taliban representative office in Doha. Qatar permitted the Taliban office in Qatar to formally reopen in 2015. Deputy Assistant Secretary of State for South and Central Asia Alice Wells met with Taliban figures from the office in Doha in July 2018 for discussions about a future peace settlement in Afghanistan. Since mid-2018, further talks, with increasing levels of intensity, have taken place in Doha between Taliban negotiators and the U.S. envoy for Afghanistan, Ambassador Zalmay Khalilzad. Qatar might also have some contacts with the Haqqani Network, a U.S.-designated Foreign Terrorist Organization (FTO) that is allied with the Taliban. In January 2016, Qatari mediation reportedly caused the Haqqani Network to release a Canadian hostage, Colin Rutherford. The mediation did not, as Qatar had hoped, lead to the freedom of the Coleman family, also held by that group, who were rescued from the group by a U.S. and Pakistani operation in October 2016. In January 2018, Qatar's air force completed the first two flights of its C-17 (Globemaster) cargo aircraft to Afghanistan and back. According to then-Defense Secretary Mattis, the flights provided logistical support to the NATO \"counterterrorism\" campaign there. Somewhat outside the traditional Middle East: Qatar has played an active role in mediating conflict over Sudan's Darfur region. In 2010, Qatar, including through grants and promises of investment, helped broker a series of agreements, collectively known as the Doha Agreements, between the government and various rebel factions. In March 2018, Qatar and Sudan signed an agreement to jointly invest $4 billion to develop the Red Sea port of Suakin off Sudan's coast. Qatar has forged relationships with several countries in Central Asia, possibly in an effort to shape energy routes in the region. Amir Tamim has exchanged leadership visits with the President of Turkmenistan, Gurbanguly Berdymukhamedov in 2016 and 2017. The two countries are major world gas suppliers. The leader of Tajikistan, Imamali Rahmonov, visited Doha in February 2017 to reportedly discuss Qatari investment and other joint projects. Qatar funded a large portion of a $100 million mosque in Dushanbe, which purports to be the largest mosque in Central Asia. U.S.-Qatar defense and security relations are long-standing and extensive—a characterization emphasized by senior U.S. officials in the course of the two U.S.-Qatar \"Strategic Dialogue\" sessions—in Washington, DC, in January 2018, and in Doha in January 2019. Senior U.S. officials have praised Qatar as \"a longtime friend and military partner for peace and stability in the Middle East and a supporter of NATO's mission in Afghanistan.\" The U.S-Qatar defense relationship emerged during the 1980-1988 Iran-Iraq war. The six Gulf monarchies formed the GCC in late 1981 and collectively backed Iraq against the threat posed by Iran in that war, despite their political and ideological differences with Iraq's Saddam Hussein. In the latter stages of that war, Iran attacked international shipping in the Gulf and some Gulf state oil loading facilities, but none in Qatar. After Iraq invaded GCC member Kuwait in August 1990, the GCC participated in the U.S.-led military coalition that expelled Iraq from Kuwait in February 1991. In January 1991, Qatari armored forces helped coalition troops defeat an Iraqi attack on the Saudi town of Khafji. The Qatari participation in that war ended U.S.-Qatar strains over Qatar's illicit procurement in the late 1980s of U.S.-made \"Stinger\" shoulder-held antiaircraft missiles. U.S.-Qatar defense relations subsequently deepened and the two countries signed a formal defense cooperation agreement (DCA). U.S. Central Command (CENTCOM) Commander General Joseph Votel testified on February 27, 2018, that U.S. operations have not been affected by the intra-GCC rift. Qatar, one of the wealthiest states in the world on a per capita gross domestic product (GDP) basis, receives virtually no U.S. military assistance. At times, small amounts of U.S. aid have been provided to help Qatar develop capabilities to prevent smuggling and the movement of terrorists or proliferation-related gear into Qatar or around its waterways. The United States and Qatar signed a formal defense cooperation agreement (DCA) on June 23, 1992. The DCA was renewed for 10 years, reportedly with some modifications, in December 2013. The text of the pact is classified, but it reportedly addresses U.S. military access to Qatari military facilities, prepositioning of U.S. armor and other military equipment, and U.S. training of Qatar's military forces. Up to 13,000 U.S. troops are deployed at the various facilities in Qatar. Most are U.S. Air Force personnel based at the large Al Udeid air base southwest of Doha, working as part of the Coalition Forward Air Component Command (CFACC). The U.S. personnel deployed to Qatar participate in U.S. operations such as Operation Inherent Resolve (OIR) against the Islamic State organization and Operation Freedom's Sentinel in Afghanistan, and they provide a substantial capability against Iran. The U.S. Army component of U.S. Central Command prepositions armor (enough to outfit one brigade) at Camp As Sayliyah outside Doha. U.S. armor stationed in Qatar was deployed in Operation Iraqi Freedom that removed Saddam Hussein from power in Iraq in 2003. The DCA also reportedly addresses U.S. training of Qatar's military. Qatar's force of about 12,000 is the smallest in the region except for Bahrain. Of that force, about 8,500 are ground forces, 1,800 are naval forces, and 1,500 are air forces. A 2014 law mandates four months (three months for students) of military training for males between the ages of 18 and 35, with a reserve commitment of 10 years (up to age 40). General Votel's February 2018 testimony, referenced above, stated that Qatar is seeking to expand its military both in size and capacity. Since 2002, Qatar has contributed over $8 billion to support U.S. and coalition operations at Al Udeid. The air field, which also hosts the forward headquarters for CENTCOM, has been steadily expanded and enhanced not only with Qatari funding but also about $450 million in U.S. military construction funding since 2003. In March 2018, the State Department approved the sale to Qatar of equipment, with an estimated value of about $200 million, to upgrade the Air Operation Center at Al Udeid. The January 2018 Strategic Dialogue resulted in a number of U.S.-Qatar announcements of expanded defense and security cooperation, including Qatari offers to fund capital expenditures that offer the possibility of an \"enduring\" U.S. military presence in Qatar and to discuss the possibility of \"permanent [U.S.] basing\" there. To enable an enduring U.S. presence, Qatar is expanding and enhance Al Udeid over the next two decades—an effort that would facilitate an enduring U.S. presence there. On July 24, 2018, the U.S. and Qatari military attended a groundbreaking ceremony for the Al Udeid expansion, which will include over 200 housing units for families of officers and expansion of the base's ramps and cargo facilities. On January 24, 2019, in the course of the second U.S.-Qatar Strategic Dialogue, the Qatar Ministry of Defense and the U.S. Department of Defense signed a memorandum of understanding that DOD referred to as a \"positive step towards the eventual formalization of Qatar's commitment to support sustainment costs and future infrastructure costs at [Al Udeid Air Base].\" Qatar has also extended the Hamad Port to be able to accommodate U.S. Navy operations were there a U.S. decision to base such operations in Qatar. Qatar's forces continue to field mostly French-made equipment, such as the AMX-30 main battle tank, but Qatar is increasingly shifting its weaponry mix to U.S.-made equipment. According to General Votel's February 27, 2018, testimony, Qatar is currently the second-largest U.S. Foreign Military Sales (FMS) customer, with $25 billion in new FMS cases. And, Qatar is \"on track\" to surpass $40 billion in the next five years with additional FMS purchases. The joint statement of the U.S.-Qatar Strategic Dialogue in January 2018 said that Qatari FMS purchases had resulted in over 110,000 American jobs and the sustainment of critical U.S. military capabilities. Tanks. Qatar's 30 main battle tanks are French-made AMX-30s. In 2015, Germany exported several \"Leopard 2\" tanks to Qatar. Qatar has not purchased U.S.-made tanks, to date. Combat Aircraft. Qatar currently has only 18 combat aircraft, of which 12 are French-made Mirage 2000s. To redress that deficiency, in 2013 Qatar submitted a letter of request to purchase 72 U.S.-made F-15s. After a long delay reportedly linked to the U.S. commitment to Israel's \"Qualitative Military Edge\" (QME), on November 17, 2016, the Defense Security Cooperation Agency (DSCA) notified Congress of the potential sale, which has an estimated value of $21 billion. The FY2016 National Defense Authorization Act (Section 1278 of P.L. 114-92 ) required a DoD briefing for Congress on the sale, including its effect on Israel's QME. On June 14, 2017, the United States and Qatar signed an agreement for a reported 36 of the F-15 fighters, which predated (and therefore were not covered by) then-Senate Foreign Relations Committee Chairman Senator Bob Corker's June 26, 2017 announcement that he would not provide informal concurrence to arms sales to the GCC countries until the intra-GCC rift was resolved. That blanket hold was dropped on February 8, 2018. In December 2017, the Defense Department announced that Qatar would buy the second group of 36 F-15s under the sale agreement. Deliveries of all aircraft are to be completed by the end of 2022. Qatar signed a $7 billion agreement in May 2015 to purchase 24 French-made Rafale aircraft, and, in September 2017, a \"Statement of Intent\" with Britain to purchase 24 Typhoon combat aircraft. Heli copters . In 2012, the United States sold Qatar AH-64 Apache attack helicopters and related equipment; UH-60 M Blackhawk helicopters; and MH-60 Seahawk helicopters. The total potential value of the sales was estimated at about $6.6 billion, of which about half consisted of the Apache sale. On April 9, 2018, DSCA announced that the State Department had approved a sale to Qatar of 5,000 Advanced Precision Kill Weapons Systems II Guidance Sections for use on its Apache fleet, with an estimated sale value of $300 million. Short-Range Missile and Rocket Systems. Qatar is not known to have any extended-range missiles, but various suppliers have provided the country with short-range systems that can be used primarily in ground operations. During 2012-2013, the United States sold Qatar Hellfire air-to-ground missiles, Javelin guided missiles, the M142 High Mobility Artillery Rocket System (HIMARS), the Army Tactical Missile System (ATACMS), and the M31A1 Guided Multiple Launch Rocket System (GMLRS). The total potential value of the sales was estimated at about $665 million. On April 22, 2016, the Defense Security Cooperation Agency notified to Congress a potential sale to Qatar of 252 RIM-116C Rolling Airframe Tactical Missiles and 2 RIM 116C-2 Rolling Airframe Telemetry Missiles, plus associated equipment and support, with an estimated sale value of $260 million. On May 26, 2016, DSCA notified to Congress an additional sale of 10 Javelin launch units and 50 Javelin missiles, with an estimated value of $20 million. On November 27, 2018, DSCA notified Congress of a State Department approval of a commercial sale by Raytheon of 40 National Advanced Surface-to-Air Missile Systems (NADSAMS) at an estimated value of $215 million. Ballistic Missiles . At its national day parade in Doha in mid-December 2017, the Qatari military displayed its newly purchased SY 400-BP-12A ballistic missile, which has a 120-mile range and is considered suited to a surface attack mission. The display was widely viewed as an effort to demonstrate to the Saudi-led bloc Qatar's capabilities to resist concerted pressure. Ballistic Missile Defense (BMD) Systems . Qatar has purchased various U.S.-made BMD systems, consistent with U.S. efforts to promote a coordinated Gulf missile defense capability against Iran's missile arsenal. In 2012, the United States sold Qatar Patriot Configuration 3 (PAC-3, made by Raytheon) fire units and missiles at an estimated value of nearly $10 billion. Also that year, the United States agreed to sell Qatar the Terminal High Altitude Area Air Defense (THAAD), the most sophisticated ground-based missile defense system the United States has made available for sale. However, because of Qatar's budget difficulties and operational concerns, the THAAD sale has not been finalized. In February 2017, Raytheon concluded an agreement to sell Qatar an early warning radar system to improve the capabilities of its existing missile defense systems, with an estimated value of $1.1 billion. In December 2017, the Defense Department awarded Raytheon a $150 million contract to provide Qatar with services and support for its PAC-3 system. Naval Vessels . In August 2016, DSCA transmitted a proposed sale to Qatar of an unspecified number of U.S.-made Mk-V fast patrol boats, along with other equipment, with a total estimated value of about $124 million. In August 2017, Qatar finalized a purchase from Italy of four multirole corvette ships, two fast patrol missile ships, and an amphibious logistics ship, with an estimated value of over $5 billion. Qatar has also developed relations with NATO under the \"Istanbul Cooperation Initiative\" (ICI). Qatar's Ambassador to Belgium serves as the interlocutor with NATO, the headquarters of which is based near Brussels. In June 2018, Qatar's Defense Minister said that his country's long-term strategic \"ambition\" is to join NATO. As noted above, Qatar has historically bought most of its major combat systems from France. On March 28, 2019, French Prime Minister Edouard Phillipe visited Doha and signed with Qatar's Defense and Interior Minister five agreements to boost ties. The agreements focused on defense information exchange, cooperation to combat cybercrime, and culture and education agreements. Qatar's defense relationship with Turkey has become an element in Qatar's efforts to resist the Saudi-led pressure in the intra-GCC crisis. In 2014, Qatar allowed Turkey—a country that, like Qatar, often supports Muslim Brotherhood—to open a military base (Tariq bin Ziyad base) in Qatar, an initiative that might have contributed to Turkey's support for Qatar in the June 2017 intra-GCC rift. One of the \"13 demands\" of the Saudi-led bloc has been that Qatar close the Turkish base in Qatar—a demand Qatari officials say will not be met. Turkey has demonstrated its support for Qatar by sending additional troops there and conducting joint exercises in August 2017 and by increasing food exports to replace those previously provided by Saudi Arabia. Turkey further added to its Qatar troop contingent in December 2017. Qatar has broadened its relationship with Russia since early 2016 in conjunction with efforts to resolve the conflict in Syria and in recognition of Russia's heightened role in the region. One of Qatar's sovereign wealth funds has increased its investments in Russia, particularly in its large Rosneft energy firm. Amir Tamim has made several visits to Russia, the latest of which was in March 2018. During the visit, it was announced that Qatar Airways would buy a 25% stake in the Vnukovo International Airport, one of Moscow's airports. Qatar is also reportedly considering buying the S-400 sophisticated air defense system. Qatar-Russia discussions about the purchase have apparently caused a degree of alarm among the Saudi-led states, with Saudi Arabia going so far as to threaten military action against Qatar if it buys the system. Saudi officials also reportedly asked French President Emmanuel Macron to persuade Qatar not to buy the weapon. Were Qatar to purchase the S-400, it might be subject to U.S. sanctions under Section 231 of the Countering America's Adversaries through Sanctions Act ( P.L. 115-44 ). That section sanctions persons or entities that conduct transactions with Russia's defense or intelligence sector. It mandates the imposition of several sanctions that might include restrictions on certain exports to Qatar, restrictions on Qatari banking activities in the United States, restrictions on Qatari acquisition of property in the United States, and a ban on U.S. investments in any Qatari sovereign debt. U.S.-Qatar's cooperation against groups that both countries agree are terrorist groups, such as the Islamic State organization, is extensive. However, some groups that the United States considers as terrorist organizations, such as Hamas, are considered by Qatar to be Arab movements pursuing legitimate goals. Perhaps in part as a means to attract U.S. support in the context of the intra-GCC rift, on July 10, 2017, Qatar's foreign minister and then-Secretary Tillerson signed in Doha a Memorandum of Understanding on broad U.S.-Qatar counterterrorism cooperation, including but going beyond just combatting terrorism financing. The United States and Qatar held a Counterterrorism Dialogue on November 8, 2017, in which they reaffirmed progress on implementing the MoU. The joint statement of the January 2018 Strategic Dialogue noted \"positive progress\" under the July 2017 MoU, and thanked Qatar for its action to counter terrorism. The statement also noted the recent conclusion of a memorandum of understanding between the U.S. Attorney General and his Qatari counterpart on the fight against terrorism and its financing and combating cybercrime. In an effort to implement the U.S.-Qatar MoU, and perhaps also as a gesture to the blockading states, on March 22, 2018, the Qatar Ministry of Interior issued list of 19 individuals and eight entities that it considers as \"terrorists.\" The list includes 10 persons who are also are also named as terrorists by the blockading GCC states. On April 2-5, 2018, Qatar held a conference attended by international experts and security professionals from 42 countries. Qatar participates in the State Department's Antiterrorism Assistance (ATA) program to boost domestic security capabilities, and it has continued to participate in and host Global Counterterrorism Forum events. Under the ATA program, participating countries are provided with U.S. training and advice on equipment and techniques to prevent terrorists from entering or moving across their borders. However, Qatari agencies such as the State Security Bureau and the Ministry of Interior have limited manpower and are reliant on nationals from third countries to fill law enforcement positions—a limitation Qatar has tried to address by employing U.S. and other Western-supplied high technology. In the past, at least one high-ranking Qatari official provided support to Al Qaeda figures residing in or transiting Qatar, including suspected September 11, 2001, attacks mastermind Khalid Shaykh Mohammad. None of the September 11 hijackers was a Qatari national. U.S. officials have stated that Qatar is taking steps to prevent terrorism financing and the movement of suspected terrorists into or through Qatar. The country is a member of the Middle East North Africa Financial Action Task Force (MENAFATF), a regional financial action task force that coordinates efforts combatting money laundering and terrorism financing. In 2014, the Amir approved Law Number 14, the \"Cybercrime Prevention Law,\" which criminalized terrorism-linked cyber offenses, and clarified that it is illegal to use an information network to contact a terrorist organization or raise funds for terrorist groups, or to promote the ideology of terrorist organizations. In 2017, the country passed updated terrorism financing legislation. In February 2017, Qatar hosted a meeting of the \"Egmont Group\" global working group consisting of 152 country Financial Intelligence Units. Qatar is a member of the Terrorist Financing Targeting Center (TFTC), a U.S.-GCC initiative announced during President Trump's May 2017 visit to Saudi Arabia. In October 2017, and despite the intra-GCC rift, Qatar joined the United States and other TFTC countries in designating terrorists affiliated with Al Qaeda and ISIS. The State Department's 2017 report on international terrorism says that, in 2017, Qatar took sweeping measures to monitor and restrict the overseas activities of Qatari charities. According to the State Department's report on international terrorism for 2015, entities and individuals within Qatar continue to serve as a source of financial support for terrorist and violent extremist groups, particularly regional Al Qa'ida affiliates such as the Nusrah Front.\" The State Department report for 2017 stated: \"While the Government of Qatar has made progress on countering the financing of terrorism, terrorist financiers within the country are still able to exploit Qatar's informal financial system.\" The United States has imposed sanctions on several persons living in Qatar, including Qatari nationals, for allegedly raising funds or making donations to both Al Qaeda and the Islamic State. Qatar has hosted workshops on developing plans to counter violent extremism and has participated in similar sessions hosted by the UAE's Hedayat Center that focuses on that issue. Also in 2015, Qatar pledged funding to the U.N. Office on Drugs and Crime (UNODC) to help address violent extremism and radicalization among youth and vulnerable populations. However, some experts have noted that the government has violated a pledge to the United States not to allow Qatari preachers to conduct what some consider religious incitement in mosques in Education City, where several U.S. universities have branches. Education City was established by the Qatar Foundation, which is at the core of Qatar's strategy to counter violent extremism through investment in education. Even before the June 2017 intra-GCC rift, Qatar had been wrestling with the economic effects of the fall in world energy prices since mid-2014—a development that has caused GCC economic growth to slow, their budgets to fall into deficit, and the balance of their ample sovereign wealth funds to decline. Oil and gas reserves have made Qatar the country with the world's highest per capita income. Qatar is a member of the Organization of the Petroleum Exporting Countries (OPEC), along with other GCC states Saudi Arabia, Kuwait, and UAE and other countries. However, on December 3, 2018, Qatar announced it would withdraw from OPEC in early 2019 in order to focus on its more high-priority natural gas exports. Some observers attributed the decision, at least in part, to the ongoing intra-GCC rift, insofar as rival Saudi Arabia is considered the dominant actor within OPEC. The economic impact on Qatar of the June 2017 intra-GCC rift is difficult to discern. About 40% of Qatar's food was imported from Saudi Arabia precrisis, and there were reports of runs on stocks of food when the blockade began. However, the government's ample financial resources enabled it to quickly arrange substitute sources of goods primarily from Turkey, Iran, and India. The effects on Qatar's growing international air carrier, Qatar Airways, have been significant because of the prohibition on its overflying the blockading states. In November 2017, Iran and Turkey signed a deal with Qatar to facilitate the mutual transiting of goods. Qatar's main sovereign wealth fund, run by the Qatar Investment Authority (QIA), as well as funds held by the Central Bank, total about $350 billion, according to Qatar's Central Bank governor in July 2017, giving the country a substantial cushion to weather its financial demands. QIA's investments consist of real estate and other relatively illiquid holdings, such as interest in London's Canary Wharf project. In May 2016, Qatar offered $9 billion in bonds as a means of raising funds without drawing down its investment holdings. In April 2018, the country raised $12 billion in another, larger, bond issue. Qatar also has cut some subsidies to address its budgetary shortfalls. In early October 2017, it was reported that QIA is considering divesting a large portion of its overseas assets and investing the funds locally—a move that is at least partly attributable to the economic pressures of the intra-GCC rift. The intra-GCC rift has not harmed Qatar's ability to earn substantial funds from energy exports. Oil and gas still account for 92% of Qatar's export earnings, and 56% of government revenues. Proven oil reserves of about 25 billion barrels are far less than those of Saudi Arabia and Kuwait, but enough to enable Qatar to continue its current levels of oil production (about 700,000 barrels per day) for over 50 years. Its proven reserves of natural gas exceed 25 trillion cubic meters, about 13% of the world's total and third largest in the world. Along with Kuwait and UAE, in November 2016 Qatar agreed to a modest oil production cut (about 30,000 barrels per day) as part of an OPEC-wide production cut intended to raise world crude oil prices. Qatar is the world's largest supplier of liquefied natural gas (LNG), which is exported from the large Ras Laffan processing site north of Doha. That facility has been built up with U.S.-made equipment, much of which was exported with the help of about $1 billion in Export-Import Bank loan guarantees. Qatar is a member and hosts the headquarters of the Gas Exporting Countries Forum (GECF), which is a nascent natural gas cartel and includes Iran and Russia, among other countries. State-run Qatar Petroleum is a major investor in the emerging U.S. LNG export market, with a 70% stake (Exxon-Mobil and Conoco-Phillips are minority stakeholders) in an LNG terminal in Texas that is seeking U.S. government approval to expand the facility to the point where it can export over 15 million tons of LNG per year. In June 2018, Qatar Petroleum bought a 30% state in an Exxon-Mobil-run development of an onshore shale natural gas basin in Argentina (Vaca Muerta). Qatar is the source of the gas supplies for the Dolphin Gas Project established by the UAE in 1999 and which became operational in 2007. The project involves production and processing of natural gas from Qatar's offshore North Field, which is connected to Iran's South Pars Field (see Figure 2 ), and transportation of the processed gas by subsea pipeline to the UAE and Oman. Its gas industry gives Qatar some counter leverage against the Saudi-led group, but Qatar has said it will not reduce its gas supplies under existing agreements with other GCC states. Both the UAE and Qatar have filed complaints at the WTO over their boycotting each other's goods; the United States reportedly has backed the UAE's arguments that the WTO does not have the authority to adjudicate issues of national security. Because prices of hydrocarbon exports have fallen dramatically since mid-2014, in 2016 Qatar ran its first budget deficit (about $13 billion). As have other GCC rulers, Qatari leaders assert publicly that the country needs to diversify its economy, that generous benefits and subsidies need to be reduced, and that government must operate more efficiently. At the same time, the leadership apparently seeks to minimize the effect of any cutbacks on Qatari citizens. Still, if oil prices remain far below their 2014 levels and the intra-GCC rift continues much further, it is likely that many Qatari citizens will be required to seek employment in the private sector, which they generally have shunned in favor of less demanding jobs in the government. The national development strategy from 2011 to 2016 focused on Qatar's housing, water, roads, airports, and shipping infrastructure in part to promote economic diversification, as well as to prepare to host the 2022 FIFA World Cup soccer tournament, investing as much as $200 billion. In Doha, the result has been a construction boom, which by some reports has outpaced the capacity of the government to manage, and perhaps fund. A metro transportation system is under construction in Doha. In contrast to the two least wealthy GCC states (Bahrain and Oman), which have free trade agreements with the United States, Qatar and the United States have not negotiated an FTA. However, in April 2004, the United States and Qatar signed a Trade and Investment Framework Agreement (TIFA). Qatar has used the benefits of the more limited agreement to undertake large investments in the United States, including the City Center project in Washington, DC. Also, several U.S. universities and other institutions, such as Cornell University, Carnegie Mellon University, Georgetown University, Brookings Institution, and Rand Corporation, have established branches and offices at the Qatar Foundation's Education City outside Doha. In 2005, Qatar donated $100 million to the victims of Hurricane Katrina. The joint statement of the January 2018 U.S.-Qatar Strategic Dialogue \"recognized\" QIA's commitment of $45 billion in future investments in U.S. companies and real estate. According to the U.S. Census Bureau's \"Foreign Trade Statistics\" compilation, the United States exported $4.9 billion in goods to Qatar in 2016 (about $600 million higher than 2015), and imported $1.16 billion worth of Qatari goods in 2016, slightly less than in 2015. U.S. exports to Qatar for 2017 ran about 40% less than the 2016 level, but U.S. imports from Qatar were about the same as in 2016. U.S. exports to Qatar rebounded to $4.4 billion in 2018 and imports were about $1.57 billion. U.S. exports to Qatar consist mainly of aircraft, machinery, and information technology. U.S. imports from Qatar consist mainly of petroleum products, but U.S. imports of Qatar's crude oil or natural gas have declined to negligible levels in recent years, reflecting the significant increase in U.S. domestic production of those commodities. Qatar's growing airline, Qatar Airways, is a major buyer of U.S. commercial aircraft. In October 2016, the airline agreed to purchase from Boeing up to another 100 passenger jets with an estimated value of $18 billion—likely about $10 billion if standard industry discounts are applied. However, some U.S. airlines challenged Qatar Airways' benefits under a U.S.-Qatar \"open skies\" agreement. The U.S. carriers asserted that the airline's privileges under that agreement should be revoked because the airline's aircraft purchases are subsidized by Qatar's government, giving it an unfair competitive advantage. The Obama Administration did not reopen that agreement in response to the complaints, nor did the Trump Administration. However, the United States and Qatar reached a set of \"understandings\" on civil aviation on January 29, 2018, committing Qatar Airways to financial transparency and containing some limitations on the airline's ability to pick up passengers in Europe for flights to the United States. Some assert that Qatar Airway's 2018 purchase of Air Italy might represent a violation of those limitations. As one of the wealthiest countries per capita in the world, Qatar gets negligible amounts of U.S. assistance. In FY2016, the United States spent about $100,000 on programs in Qatar, about two-thirds of which was for counternarcotics programming. In FY2015, the United States spent $35,000 on programs in Qatar, of which two-thirds was for counternarcotics. ", "summary": "The State of Qatar has employed its ample financial resources to exert regional influence separate from and independent of Saudi Arabia, the de facto leader of the Gulf Cooperation Council (GCC: Saudi Arabia, Kuwait, Qatar, United Arab Emirates, Bahrain, and Oman), an alliance of six Gulf monarchies. Qatar has intervened in several regional conflicts, including in Syria and Libya, and has engaged both Sunni Islamist and Iran-backed Shiite groups in Lebanon, Sudan, the Gaza Strip, Iraq, and Afghanistan. Qatar has maintained consistent dialogue with Iran while also supporting U.S. and GCC efforts to limit Iran's regional influence. Qatar's independent policies, which include supporting regional Muslim Brotherhood organizations and hosting a global media network often critical of Arab leaders called Al Jazeera, have caused a backlash against Qatar by Saudi Arabia and some other GCC members. A rift within the GCC opened on June 5, 2017, when Saudi Arabia, the UAE, and Bahrain, joined by Egypt and a few other governments, severed relations with Qatar and imposed limits on the entry and transit of Qatari nationals and vessels in their territories, waters, and airspace. The Trump Administration has sought, unsuccessfully to date, to mediate a resolution of the dispute. The rift has hindered U.S. efforts to hold another U.S.-GCC summit that would formalize a new \"Middle East Strategic Alliance\" of the United States, the GCC, and other Sunni-led countries in the region to counter Iran and other regional threats. Qatar has countered the Saudi-led pressure with new arms buys and deepening relations with Turkey and Iran. As do the other GCC leaders, Qatar's leaders have looked to the United States to guarantee their external security since the 1980s. Since 1992, the United States and Qatar have had a formal Defense Cooperation Agreement (DCA) that reportedly addresses a U.S. troop presence in Qatar, consideration of U.S. arms sales to Qatar, U.S. training, and other defense cooperation. Under the DCA, Qatar hosts about 13,000 U.S. forces and the regional headquarters for U.S. Central Command (CENTCOM) at various military facilities, including the large Al Udeid Air Base. U.S. forces in Qatar participate in all U.S. operations in the region. Qatar is a significant buyer of U.S.-made weaponry, including combat aircraft. In January 2018, Qatar and the United States inaugurated a \"Strategic Dialogue\" to strengthen the U.S.-Qatar defense partnership, which Qatar says might include permanent U.S. basing there. The second iteration of the dialogue, in January 2019, resulted in a U.S.-Qatar memorandum of understanding to expand Al Udeid Air Base to improve and expand accommodation for U.S. military personnel. Qatar signed a broad memorandum of understanding with the United States in 2017 to cooperate against international terrorism. That MOU appeared intended to counter assertions that Qatar's ties to regional Islamist movements support terrorism. The voluntary relinquishing of power in 2013 by Qatar's former Amir (ruler), Shaykh Hamad bin Khalifa Al Thani, departed from GCC patterns of governance in which leaders generally remain in power for life. However, Qatar is the only one of the smaller GCC states that has not yet held elections for a legislative body. U.S. and international reports criticize Qatar for failing to adhere to international standards of labor rights practices, but credit it for taking steps in 2018 to improve the conditions for expatriate workers. As are the other GCC states, Qatar is wrestling with the fluctuations in global hydrocarbons prices since 2014, now compounded by the Saudi-led embargo. Qatar is positioned to weather these headwinds because of its small population and substantial financial reserves. But, Qatar shares with virtually all the other GCC states a lack of economic diversification and reliance on revenues from sales of hydrocarbon products. On December 3, 2018, Qatar announced it would withdraw from the OPEC oil cartel in order to focus on its natural gas export sector.", "document_type": "crs"}
{"report": "U.S. insurers and Congress face new policy issues and questions related to the opportunities and risks presented by the growth in the international insurance market and trade in insurance products. Insurance is often seen as a localized product and U.S. insurance regulation has addressed this through a state-centric regulatory system. The McCarran-Ferguson Act, passed by Congress in 1945, gives primacy to the individual states, and every state has its own insurance regulator and state laws governing insurance. Although the risks of loss and the regulation may be local, the business of insurance, as with many financial services, has an increasingly substantial international component as companies look to grow and diversify. The international aspects of insurance have spurred the creation of a variety of entities and measures, both domestic and foreign, to facilitate the trade and regulation of insurance services. Financial services have been addressed in a number of U.S. trade agreements going back to the North American Free Trade Agreement (NAFTA) in 1994. The International Association of Insurance Supervisors (IAIS) was created more than 20 years ago, largely under the impetus of the U.S. National Association of Insurance Commissioners (NAIC), to promote cooperation and exchange of information among insurance supervisors, including development of regulatory standards. The 2007-2009 financial crisis sparked further international developments, with heads of state of the G-20 nations creating the Financial Stability Board (FSB). The postcrisis 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) altered the U.S. insurance regulatory system, particularly as it relates to international issues. With the states continuing as the primary insurance regulators, following Dodd-Frank, the Federal Reserve exercised holding company oversight over insurers who owned a bank subsidiary or who were designated for enhanced supervision (popularly known as systemically important financial institutions or SIFIs) by the new Financial Stability Oversight Council (FSOC). The FSOC includes a presidentially appointed, independent voting member with insurance expertise as well as a state regulator as a nonvoting member. The Federal Reserve, already a major actor in efforts at the FSB and the Basel Committee on Banking Supervision, thus became a significant insurance supervisor and joined the IAIS shortly thereafter. Dodd-Frank also created a new Federal Insurance Office (FIO). The FIO is not a federal insurance regulator, but is tasked with representing the United States in international fora and, along with the United States Trade Representative (USTR), can negotiate international covered agreements relating to insurance prudential measures. The FIO also became a member of the IAIS and is participating significantly in IAIS efforts to create insurance capital standards. The new federal involvement in insurance issues, both domestic and international, has created frictions both among the federal entities and between the states and the federal entities, and has been a subject of both congressional hearings and proposed legislation. This report discusses trade in insurance services and summarizes the various international entities and agreements affecting the regulation of and trade in insurance. It then addresses particular issues and controversies in greater depth, including the concluded U.S.-EU covered agreement, pending U.S.-UK covered agreement, and issues relating to international insurance standards. It includes an Appendix addressing legislation in the 115 th Congress. In 2017, total U.S. services accounted for $798 billion of U.S. exports and $542 billion of U.S. imports, creating a surplus of $255 billion. In financial services generally, the United States runs a substantial trade surplus, exporting $110 billion and importing $29 billion. In contrast, the United States imported nearly $51 billion in insurance services and exported $18 billion in 2017, mostly due to firms' reliance on foreign reinsurance. This deficit has dropped from its peak in 2009, but U.S. insurance services trade has been consistently in deficit for many years (see Figure 1 ). Global performance by insurance brokers and agencies is concentrated, with Europe, North America, and North Asia accounting for 88.6% of total written premiums. Overall, the North American and European domestic insurance markets are highly competitive and there are fewer suppliers and less competition in the Asia-Pacific region. A third of U.S. insurance services exports are with Asia-Pacific, with Japan accounting for 14% of total U.S. insurance exports in 2017 (see Figure 2 ). Bermuda and the United Kingdom each account for another 15% of U.S. international insurance exports. Industry analysts note that although the current level of trade is relatively low for industry segments such as property, casualty, and direct insurance, it is rising as companies seek new markets for growth and risk diversification. The property casualty market declined from 2013 to 2018, in part due to intensifying natural disasters; however, moving forward, that market is expected to grow due to demand in emerging markets. Services, including financial and insurance services, are traded internationally in accordance with trade agreements negotiated by the USTR on behalf of the United States, similar to trade in goods. As a member of the World Trade Organization (WTO), the United States helped lead the conclusion of negotiations on the General Agreement on Trade in Services (GATS) in 1994, thus creating the first and only multilateral framework of principles and rules for government policies and regulations affecting trade in services among the 164 WTO countries. The GATS provides the foundational floor on which rules in other agreements on services, including U.S. free trade agreements (FTAs), are based. Core GATS principles include most-favored nation (MFN), transparency, and national treatment. As part of the GATS negotiations, WTO members also agreed to binding market access commitments on a positive list basis in which each member specified the sectors covered by its commitments. For insurance services, the United States submitted its schedule of market access and national treatment commitments, as well as exceptions, under GATS to allow foreign companies to compete in the United States in accordance with the U.S. state-based system. The GATS Financial S ervices Annex applies to \" all insurance and insurance-related services, and all banking and other financial services (excluding insurance) .\" The Annex defines insurance services as follows: (i.) Direct insurance (including co-insurance): (A.) life (B.) non-life (ii.) Reinsurance and retrocession; (iii.) Insurance intermediation, such as brokerage and agency; (iv.) Services auxiliary to insurance, such as consultancy, actuarial, risk assessment and claim settlement services. The annex excludes \"services supplied in the exe rcise of governmental authority,\" such as central banks, Social Security, or public pension plans. In the U.S. Schedule of Specific Commitments, the United States lists market access and national treatment limitations that constrain foreign companies' access in line with state laws. These include clarifying which states have no mechanism for licensing initial entry of non-U.S. insurance companies except under certain circumstances and which states require U.S. citizenship for boards of directors. Furthermore, the GATS and U.S. FTAs explicitly protect prudential financial regulation . The prudential exception within the GATS allows members to take \" measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system ,\" even if those measures do not comply with the agreement. Most U.S. FTAs contain a chapter on financial services that builds on the commitments under GATS (\"WTO-plus\"). Like GATS, these chapters exclude government-provided public services. In addition to market access, national treatment, and MFN obligations, FTAs include WTO-plus obligations, such as increased transparency by providing interested persons from one party the opportunity to comment on proposed regulations of another party; allowing foreign providers to supply new financial services if domestic companies are permitted to do so; and providing access to public payment and clearing systems. Each FTA chapter defines the specific financial and insurance services covered and incorporates relevant provisions in other FTA chapters, such as Investment and Cross-Border Services. On November 30, 2018, President Trump and the leaders of Canada and Mexico signed the United States-Mexico-Canada Trade Agreement (USMCA) to update and revise the North American Free Trade Agreement (NAFTA). Still subject to congressional approval, the proposed USMCA contains several differences from NAFTA and is seen as representing the Trump Administration's approach to trade agreements. The proposed agreement has some similarities and differences from the proposed Trans-Pacific Partnership (TPP), which was negotiated under the Obama Administration and from which the United States withdrew in 2017. Given that the TPP also included both Mexico and Canada, many observers saw it as a template for the NAFTA renegotiations on certain issues. Like the TPP, the financial services chapter in the proposed USMCA reflects the growing trade in insurance and is an example of extensive and enforceable \"WTO-plus\" commitments. Compared with NAFTA, the proposed agreement clarifies the coverage of insurance services and contains a specific new provision on expedited availability of insurance services and transparency requirements designed to ensure the use of good regulatory practices to better enable U.S. firms to do business in those markets. In contrast to NAFTA, the proposed USMCA would apply both national treatment and market access obligations to cross-border supply of insurance services. The USMCA provisions on cross-border data flows are stronger than similar provisions in recent U.S. FTAs. They would, for example, prohibit the use of data or computing localization requirements for financial services. Canada would have one year to comply with the ban, and it would need to remove existing localization requirements that have been a trade barrier for U.S. firms seeking to do business in Canada. Many provisions in the USMCA Digital Trade chapter are relevant to the insurance industry, such as permitting electronic signatures, protecting source code and algorithms, promoting cybersecurity, and allowing cross-border data flows. By contrast, some changes in the investor-state dispute settlement system (ISDS) provide a narrower scope than in TPP or NAFTA, and ISDS would apply only to certain U.S. or Mexican covered investments, excluding Canada completely. Changes in the state-to-state dispute settlement system also may limit its effectiveness for the insurance sector in certain situations. These changes have raised concerns among insurance companies. Similar to other trade agreements, the proposed USMCA would establish a Committee on Financial Services and provide for consultations between the parties on ongoing implementation and other issues of interest. In comparison to trade agreements, a covered agreement is a relatively new form of an international agreement, established along with the FIO in Title V of the Dodd-Frank Act. The statute defines a covered agreement as a type of international insurance or reinsurance agreement for recognition of prudential measures that the FIO and the USTR negotiate on a bilateral or multilateral basis. FIO has no regulatory authority over the insurance industry, which is generally regulated by the individual states. This is a significant contrast to, for example, federal financial regulators, such as the Federal Reserve or the Securities and Exchange Commission (SEC), that might enter into international regulatory agreements at the Basel Committee on Banking Supervision or the International Organization of Securities Commissions, respectively. After such agreements are reached, the Federal Reserve or SEC would generally then implement the agreements under its regulatory authority using the federal rulemaking process. Although the FIO lacks regulatory authority, some state laws may be preempted if the FIO director determines that a state measure (1) is inconsistent with a covered agreement and (2) results in less favorable treatment for foreign insurers. The statute limits the preemption with the following provision: (j) Savings Provisions. — Nothing in this section shall— (1) preempt— (A) any State insurance measure that governs any insurer's rates, premiums, underwriting, or sales practices; (B) any State coverage requirements for insurance; (C) the application of the antitrust laws of any State to the business of insurance; or (D) any State insurance measure governing the capital or solvency of an insurer, except to the extent that such State insurance measure results in less favorable treatment of a non-United State insurer than a United States insurer. Further strictures are placed on the FIO determination, including notice to the states involved and to congressional committees; public notice and comment in the Federal Register ; and the specific application of the Administrative Procedure Act, including de novo determination by courts in a judicial review. Although there is no legal precedent interpreting the covered agreement statute, it appears that these provisions would narrow the breadth of any covered agreement, particularly compared with other international agreements reached by federal financial regulators. International agreements have been undertaken without direct congressional direction under agencies' existing regulatory authorities. These authorities are then implemented through the regulatory rulemaking process, which may, in some cases, preempt state laws and regulations. Although the FIO and the USTR must consult with Congress on covered agreement negotiations, the statute does not require specific authorization or approval from Congress for a covered agreement. It does, however, require a 90-day layover period. Although the goals of a covered agreement and aspects of trade agreements may be similar—market access and regulatory compatibility—the role of Congress is different in each instance. Congress has direct constitutional authority over foreign commerce, while Congress has given itself a consultative role in insurance negotiations through the Dodd-Frank Act. The U.S. Constitution assigns express authority over foreign trade to Congress. Article I, Section 8, of the Constitution gives Congress the power to \"regulate commerce with foreign nations\" and to \"lay and collect taxes, duties, imposts, and excises.\" U.S. trade agreements such as the North American Free Trade Agreement (NAFTA), WTO agreements, and bilateral FTAs have been approved by majority vote of each house rather than by two-thirds vote of the Senate—that is, they have been treated as congressional-executive agreements rather than as treaties. This practice contrasts with the covered agreements, defined by Dodd-Frank (see above), which require congressional notification and a 90-day layover. The layover time could give Congress time to act on the agreement if Congress chooses, but congressional action is not required for a covered agreement to take effect. In further contrast, as mentioned previously, international agreements entered into by federal financial regulators, such as the Basel Capital accords in banking, have no specific congressional notification requirements, but must be implemented through the rulemaking process. U.S. bilateral, regional, and free trade agreements are conducted under the auspices of Trade Promotion Authority (TPA). TPA is the time-limited authority that Congress uses to set U.S. trade negotiating objectives, establish notification and consultation requirements, and allow implementing bills for certain reciprocal trade agreements to be considered under expedited procedures, provided certain statutory requirements are met. As noted above, the Dodd-Frank Act requires that the FIO or the Treasury Secretary and the USTR notify and consult with Congress before and during negotiations on a covered agreement. In addition, it requires the submission of the agreement and a layover period of 90 days, but does not require congressional approval. By contrast, legislation implementing FTAs must be approved by Congress. Under TPA, the President must fulfill notification and consultative requirements in order to begin negotiations and during negotiations. Once the negotiations are concluded, the President must notify Congress 90 days prior to signing the agreement. After the agreement is signed, there are additional reporting requirements to disclose texts and release the U.S. International Trade Commission's economic assessment of the agreement. The introduction of implementing legislation sets off a 90-legislative-day maximum period of time for congressional consideration, and the legislation is accompanied by additional reports. If these notification and consultation procedures are not met to the satisfaction of Congress, procedures are available to remove expedited treatment from the implementing legislation. As discussed above, the FIO and the USTR jointly negotiate covered agreements, with the states having a consultative role set in the statute. In international trade agreements the USTR is the lead U.S. negotiator, with representatives from executive branch agencies participating to provide expertise. In addition to consultations within the executive branch under an interagency process, USTR formally consults with state governments and regulators through the Intergovernmental Policy Advisory Committee on Trade (IGPAC) as part of the USTR advisory committee system for trade negotiations. USTR's Office of Intergovernmental Affairs and Public Engagement (IAPE) manages the advisory committees and provides outreach to official state points of contact, governors, legislatures, and associations on all trade issues of interest to states. The USTR cannot make commitments on behalf of U.S. states in trade negotiations. This can be a source of frustration for negotiating partners who seek market openings at the state level. As part of trade negotiations, USTR may try to persuade individual states to make regulatory changes, but USTR is limited to what state regulators voluntarily consent to do. In general, state laws and state insurance regulations are explicitly exempted from trade negotiations. For example, in the proposed USMCA agreement, the United States listed measures for which the FTA obligations would not apply, including \"All existing non-conforming measures of all states of the United States, the District of Columbia, and Puerto Rico.\" In contrast, as explained above, in the context of a covered agreement, FIO and USTR may make limited commitments that result in preempting some state laws and regulations. In general, international trade agreements are binding agreements. If a party to a trade agreement believes another party has adopted a law, regulation, or practice that violates the commitments under the trade agreement, the party may initiate dispute settlement proceedings under the agreement's dispute settlement provisions, which may differ for each agreement. Each party to a trade agreement has an obligation to comply with dispute resolution rulings or potentially face withdrawal of certain benefits under the agreement. Dodd-Frank does not specify how disagreements might be resolved in covered agreements, thus each covered agreement would need to clarify the dispute resolution process. As discussed, U.S. FTAs include market access commitments and rules and disciplines governing financial services measures, such as nondiscrimination and transparency obligations. Although FTAs customarily establish a Financial Services Committee composed of each party's regulators to oversee implementation of the agreement and provide a forum for communication, U.S. FTAs to date exclude regulatory cooperation commitments for the financial services sector, though this is subject to change in future trade agreements. On October 16, 2018, the Trump Administration notified Congress, under Trade Promotion Authority (TPA), of its intent to enter trade agreement negotiations with the European Union (EU), its largest overall trade and investment partner. The negotiating objectives published by USTR include to \"expand competitive market opportunities for U.S. financial service suppliers to obtain fairer and more open conditions of financial services trade\" and \"improve transparency and predictability in the EU's financial services regulatory procedures, and ensure that the EU's financial regulatory measures are administered in an equitable manner.\" The EU member states are currently discussing the scope of the EU negotiating mandate, and U.S.-EU preparatory talks have been ongoing. In prior trade agreement negotiations between the two sides, the EU sought to include regulatory cooperation issues that could have addressed some of the same matters as the recent U.S.-EU covered agreement (see below). Some Members of Congress supported this position, whereas U.S. financial regulators opposed the inclusion at that time. During the prior negotiations, the United States and the EU agreed to establish the Joint U.S.-EU Financial Regulatory Forum, which has met regularly. U.S. participants include representatives of the Treasury Department, Federal Reserve, Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), SEC, and Office of the Comptroller of the Currency (OCC). The forum meetings include discussions of financial regulatory reforms, agency priorities, assessments of the cross-border impact of regulation, and cooperation efforts on specific financial issues. On September 22, 2017, the United States and European Union signed the first bilateral insurance covered agreement. The covered agreement had been submitted to the House Committees on Financial Services and Ways and Means and the Senate Committees on Banking, Housing, and Urban Affairs and Finance on January 13, 2017. As noted above, a 90-day layover period is mandated in statute to allow Congress to review the agreement. The House Financial Services Committee Subcommittee on Housing and Insurance and the Senate Committee on Banking, Housing, and Urban Affairs each held a hearing on the agreement, but no legislative action affecting the agreement occurred. To address concerns among U.S. insurance firms that their market access to the EU would become limited due to changes in EU regulatory policy, in November 2015, the Obama Administration notified Congress regarding plans to begin negotiations with the EU on a covered agreement. Expressed goals for the negotiations included (1) achieving recognition of the U.S. regulatory system by the EU, particularly through an \"equivalency\" determination by the EU that would allow U.S. insurers and reinsurers to operate throughout the EU without increased regulatory burdens, and (2) obtaining uniform treatment of EU-based reinsurers operating in the United States, particularly with respect to collateral requirements. The issue of equivalency for U.S. regulation is a relatively new one, as Solvency II only came into effect at the beginning of 2016 (see \" The European Union, Solvency II, and Equivalency \" below), whereas the question of reinsurance collateral has been a concern of the EU for many years (see \" Reinsurance Collateral \" below). The covered agreement negotiations also sought to facilitate the exchange of confidential information among supervisors across borders. According to the USTR and Treasury, the bilateral agreement allows U.S. and EU insurers to rely on their home country regulators for worldwide prudential insurance group supervision when operating in either market; eliminates collateral and local presence requirements for reinsurers meeting certain solvency and market conduct conditions; and encourages information sharing between insurance supervisors. The proposal sets time lines for each side to make the necessary changes and allows either side to not apply the agreement if the other side falls short on full implementation. Unlike the goals expressed to Congress when negotiations began, the agreement does not explicitly call for equivalency recognition of the U.S. insurance regulatory system by the EU. However, the agreement's provisions on group supervision would seem to meet the same goal of reducing the regulatory burden on U.S. insurers operating inside the EU. The proposal goes beyond a previous state-level proposal on reinsurance collateral requirements put forth by the NAIC and adopted by many states, and allows for the possibility of federal preemption if states are not in compliance. Several U.S. industry groups welcomed the agreement, including the American Insurance Association (AIA), the Reinsurance Association of America, and the American Council of Life Insurers (ACLI) . The AIA's senior vice president and general counsel noted that, \"when negotiations began, U.S. insurance and reinsurance groups were facing growing obstacles to their ability to do business in Europe, but this agreement removes those barriers—affirming not only each other's regulatory systems, but also their commitments to non-discriminatory treatment and open, reciprocal, competitive insurance markets.\" State regulators and state lawmakers , respectively represented by the NAIC and National Council of Insurance Legislators (NCOIL), expressed concern with the agreement due to the limited state involvement in the negotiation process and the potential federal preemption of state laws and regulations. NCOIL expressed disappointment with the final signing, stating \"this agreement is an intrusion by both the federal government and international regulatory authorities into the U.S. state based regulation of insurance regulation.\" Some insurers also question the utility of the agreement, with the president of the National Association of Mutual Insurance Companies (NAMIC) seeing ambiguity that \"will result in confusion and potentially endless negotiations with Europe on insurance regulation.\" As mentioned, the agreement includes a review after an initial implementation period, at which time either the United States or EU may pull out of the agreement. The covered agreement aims to address EU concerns regarding U.S. state regulatory requirements that reinsurance issued by non-U.S. or alien reinsurers must be backed by collateral deposited in the United States. In the past, this requirement was generally for a 100% collateral deposit. Non-U.S. reinsurers long resisted this requirement, pointing out, among other arguments, that U.S. reinsurers do not have any collateral requirements in many foreign countries and that the current regulations do not recognize when an alien reinsurer cedes some of the risk back to a U.S. reinsurer. Formerly, the NAIC and the individual states declined to reduce collateral requirements, citing fears of unpaid claims from non-U.S. reinsurers and an inability to collect judgments in courts overseas. This stance, however, has changed in recent years. In 2010, an NAIC Task Force approved recommendations to reduce required collateral based on the financial strength of the reinsurer involved and recognition of the insurer's domiciliary regulator as a qualified jurisdiction. The NAIC, in November 2011, adopted this proposal as a model law and accompanying model regulation. To take effect, however, these changes must be made to state law and regulation by the individual state legislatures and insurance regulators. The reinsurance models are part of the NAIC accreditation standards, and all states are expected to adopt them by 2019. According to information provided to CRS by the NAIC, as of December 2018, 49 states have adopted the model law and 42 have adopted the accompanying regulation. To date, 29 reinsurers have been approved by the states as certified reinsurers for reduction in collateral requirements. To receive the reduced collateral requirements, the reinsurer's home jurisdiction must also be reviewed and listed on the NAIC List of Qualified Jurisdictions. As of January 2019, seven jurisdictions have been approved. The state actions addressing reinsurance collateral requirements, however, have not fully met concerns of foreign insurers regarding the issue. Non-U.S. reinsurers reportedly would like a single standard across the United States that would eliminate, not just reduce, collateral requirements. This desire was a significant part of the EU's expressed motivation to enter into covered agreement negotiations. A Council of the EU representative indicated that \"an agreement with the U.S. will greatly facilitate trade in reinsurance and related activities\" and would \"enable us, for instance, to recognize each other's prudential rules and help supervisors exchange information.\" The covered agreement also aims to assist U.S. insurers concerned with potential regulatory burdens in relation to EU market requirements that went into effect in 2016. The European Union's Solvency II is part of a project aimed at transforming the EU into a single market for financial services, including insurance. In some ways, Solvency II is purely an internal EU project designed to more closely harmonize laws among the EU countries. However, as part of the Solvency II project, new equivalency determinations of foreign jurisdictions are to be made by the EU. An equivalency determination would allow insurers from a foreign jurisdiction to operate throughout the EU as do EU insurers. If the U.S. system of state-centered supervision of insurers were not judged to be \"equivalent\" to the EU insurance supervision, U.S. insurers could face more difficulty in operating in EU markets. Past suggestions have been made that an EU regulatory change might serve as \"a useful tool in international trade negotiations as it could help improve access for European reinsurers to foreign markets,\" such as the United States. A June 6, 2014, letter from the European Commission to FIO and the NAIC drew an explicit connection between an equivalency designation applying to the United States and the U.S. removal of reinsurance capital requirements that the states place on non-U.S. reinsurers. Solvency II came into effect in the EU at the beginning of 2016. The EU has granted provisional equivalence to the United States along with five other countries and equivalence to three countries. The grant of provisional U.S. equivalence, however, applies only to capital requirements of EU insurers with U.S. operations, and U.S. insurers had reported experiencing difficulties with their operation in EU countries prior to the signing of the covered agreement. Following the 2016 referendum on the United Kingdom remaining in the European Union (popularly known as Brexit ), the UK is scheduled to leave the EU by March 29, 2019. The future status and terms of the UK withdrawal from the EU is highly uncertain. Withdrawal from the EU may leave the UK outside the scope of any existing EU international agreements, including the U.S.-EU covered agreement. Thus, insurance trade between the United States and the UK could be negatively affected. As noted, the UK is an important market for U.S. firms, accounting for more than half of U.S. insurance exports in 2017. The United States and UK negotiated a separate covered agreement to address the potential disruption to insurance trade under Brexit. Announced on December 11, 2018, the substantive provisions of the U.S.-UK agreement mirror those in the U.S.-EU covered agreement—reinsurance capital and local presence requirements are to be eliminated and home country regulation is to be recognized for worldwide group supervision. According to the USTR and Treasury Department, the bilateral agreement aims to provide \"regulatory certainty and market continuity\" for U.S. and UK firms operating in the two markets. The Administration submitted the final text to Congress on December 11, 2018, starting the 90-day layover period for Congress to review the agreement prior to signature. The agreement implicitly recognizes the uncertainty regarding Brexit and will not come into effect until both parties provide notification that their internal procedures have been completed with the UK specifically taking account \"of its obligations arising in respect of any agreement between the EU and the UK pursuant to Article 50 of the Treaty on European Union.\" The U.S.-UK covered agreement has been welcomed by most insurance stakeholders for addressing the uncertainty surrounding Brexit. For example, although the NAIC continues to have \"concerns with the covered agreement mechanism, [the NAIC does] not object to its use in this instance to replicate consistent treatment for the UK.\" In addition to the covered agreement, on October 16, 2018, the Administration formally notified Congress of its intent to enter into negotiations of a bilateral U.S.-UK free trade agreement. Whether an agreement would include financial services regulatory cooperation is unclear, and the United States and the UK would not be able to start formal trade negotiations until the UK officially leaves the EU. The U.S.-EU and U.S.-UK covered agreements as negotiated apply only to the jurisdictions that are party to the respective agreements. The United States, however, engages in a significant amount of trade in insurance services with other countries. Depending on what changes might be made to state insurance laws, reinsurers from other countries such as Bermuda or Japan could continue to face collateral requirements when offering products in the United States while competing with EU reinsurers free from such requirements. Two primary policy approaches are being considered to address concerns regarding an uneven playing field between European and non-European reinsurers. It would be possible to negotiate additional covered agreements with non-European jurisdictions, as was done with the UK. In addition to the negotiation of new covered agreements, state laws enacted in response to the U.S.-EU covered agreement might themselves remove reinsurance collateral requirements for all or some non-EU jurisdictions. The NAIC is in the process of adopting an updated model law regarding reinsurance collateral, which would do this for a subset of \"qualified jurisdictions\" including Japan, Bermuda, and Switzerland. Outside of international trade negotiations and agreements, two separate but interrelated entities have the most significant impact on international insurance issues in the United States: the Financial Stability Board and the International Association of Insurance Supervisors. The FSB was established in April 2009 by G-20 nations to help strengthen the global financial system following the 2008 financial crisis. The FSB's functions include assessing vulnerabilities to the global financial system; coordinating with financial authorities of member nations; and recommending measures to protect and strengthen the global financial system. The FSB's members comprise financial regulatory agencies of G-20 nations. U.S. FSB members are the Department of the Treasury, the Federal Reserve, and the SEC; no insurance-focused representative from the United States is included. The FSB's recommendations and decisions are not legally binding on any of its member nations. Rather, the FSB \"operates by moral suasion and peer pressure, in order to set internationally agreed policies and minimum standards that its members commit to implementing at national level.\" The IAIS, created in 1994, is the international standard-setting body, establishing a variety of guidance documents and conducting educational efforts for the insurance sector. Its mission is \"to promote effective and globally consistent supervision of the insurance industry.\" The IAIS is primarily made up of insurance regulators worldwide with most jurisdictions having membership. U.S. members include all the individual states, the NAIC, the Federal Reserve, and the Federal Insurance Office. FIO and the Federal Reserve became IAIS members only after the passage of the Dodd-Frank Act. These U.S. members serve on many IAIS committees and working groups and have held various committee positions, past and present. An NAIC representative serves as chair of the IAIS Policy Development Committee, which plays a central role in drafting IAIS-proposed standards; the FIO director previously served as chair of this committee's prior incarnation, the IAIS Financial Stability and Technical Committee. The NAIC coordinates individual state participation in IAIS committees and working groups. According to the NAIC, three NAIC members serve on the IAIS Executive Committee, including one as vice chair; three serve on the Policy Development Committee; and three serve on the Macroprudential Committee. The NAIC's 56 members have 15 votes in the IAIS general meetings, with the NAIC designating which of its members may exercise their votes. Figure 3 provides a graphical representation of the relationships between international entities and their U.S. members. As part of its monitoring of global financial stability, the FSB has designated a number of financial institutions as globally systemically important. An FSB designation is meant to indicate that the failure of an individual institution could have a negative impact on the global financial system. Initially, the designation focused on global systemically important banks (G-SIBs) , but it also encompasses global systemically important insurers (G-SIIs), and nonbank noninsurer global systemically important financial institutions (NBNI G-SIFIs) , such as large asset managers, broker-dealers, and hedge funds. Designated institutions are expected to meet higher qualitative and quantitative regulatory and capital standards to help ensure their stability during a crisis. Although the FSB designations may be similar in intent to the designations done under the FSOC in the United States, FSB designations are a separate process with somewhat different criteria. In 2016, the FSB designated nine G-SIIs, including three U.S. insurers (AIG, MetLife, and Prudential Financial). The FSB also had requested that the IAIS develop capital standards and other regulatory measures to apply to G-SIIs as well as Internationally Active Insurance Groups (IAIGs), a wider set of insurers that fall short of the G-SII designation. In 2017, the FSB did not publish a new G-SII list, allowing the 2016 list to continue to be in effect. In 2018, the FSB decided not to identify G-SIIs, and it may suspend or discontinue the identification of G-SIIs depending on a new IAIS \"holistic framework\" to address systemic risk based on specific activities rather than individual firm designations. In addition to the standards addressing systemic risk, the IAIS is developing a general Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame). ComFrame encompasses a range of supervisory standards, particularly capital standards for IAIGs. The ComFrame process dates to 2010; currently, a public comment period has ended for a draft of the overall framework and a \"2.0\" version of specific insurance capital standards, with additional consultations continuing and formal adoption scheduled at the end of 2019. In general, actions undertaken by international bodies, such as the FSB's designations of G-SIIs or adoption of capital standards by the IAIS, have no immediate effect on the regulatory system within the United States. To be implemented, such standards must be adopted by regulators in the United States or enacted into law if regulators do not already have sufficient legal authority to adopt the standards. In many cases, it is expected that members of such international bodies will adopt the agreed-to standards. For example, the Basel Committee on Bank Supervision (BCBS) charter includes among the members' responsibilities that they commit to \"implement and apply BCBS standards in their domestic jurisdictions within the pre-defined timeframe established by the Committee.\" In some situations, the translation from international standard to national implementation may be relatively straightforward because the agencies agreeing to the international standards are the same agencies that have the authority to implement the standards at home. The mix of federal and state authorities over insurance in the United States, however, has the potential to complicate the adoption of international standards, such as the IAIS's capital standards that are under development. In the case of insurance, the U.S. representation at the IAIS includes (1) the NAIC, which collectively represents the U.S. state regulators, but has no regulatory authority of its own; (2) the 56 different states and territories, which collectively regulate the entire U.S. insurance market, but individually oversee only individual states and territories; (3) the Federal Reserve, which has holding company oversight only over designated systemically significant insurers and insurers with depository subsidiaries; and (4) the FIO, which has authority to monitor and report but no specific regulatory authority. Thus, it is possible for a situation to develop where some part of the U.S. representation at the IAIS may agree to particular policies or standards without agreement by the entity having authority to actually implement the policies or standards that are being agreed to. Although international standards may not be self-executing, nations may still face pressures to implement these standards. For example, the International Monetary Fund performs a Financial Sector Assessment Program (FSAP) of many countries every five years. In the latest FSAPs from 2010 and 2015, the judgments and recommendations offered regarding the U.S. insurance regulatory system compared U.S. laws and regulations to core principles adopted by the IAIS. Although U.S. regulators generally accept the IAIS core principles, the FSAP does note that state regulators specifically \"disagree with a few of the ratings ascribed to certain\" core principles and the states \"do not believe that each of the proposed regulatory reforms recommended in the Report is warranted, or would necessarily result in more effective supervision.\" Pressure may also derive from internationally active market participants, including both domestic and foreign firms. Companies operating in different jurisdictions incur costs adapting to different regulatory environments. To minimize these costs, companies may pressure jurisdictions to adopt similar rules. Even if one country's rules might be more favorable to the company seen in the abstract, it may still be more efficient for a company if all the countries adopt slightly less favorable, but substantially similar, rules. Thus, for example, a U.S. company operating in multiple countries might favor adoption of U.S. regulations similar to international standards to simplify business operations, even if it finds the U.S. regulations generally preferable. Those concerned about potential international insurance standards often raise the possibility that these standards may be \"bank-like\" and thus inappropriate for application to insurers. A primary concern in this regard is the treatment of financial groups. In banking regulation, a group holding company is expected, if not legally required, to provide financial assistance to subsidiaries if necessary. In addition, safety and soundness regulations may be applied at a group-wide level. A somewhat similar focus on the group-wide level is also found in the EU's Solvency II and in possible future IAIS standards. Within U.S. insurance regulation, however, state regulators in the United States historically have focused on the individual legal entities and on ensuring that the specific subsidiaries have sufficient capital to fulfill the promises inherent in the contracts made with policyholders. Since the financial crisis, the U.S. regulators have increased oversight at the overall group level, but the possible movement of capital between subsidiaries remains an issue. The NAIC has indicated specifically that \"it is critical that the free flow of capital (i.e., assets) across a group should not jeopardize the financial strength of any insurer in the group.\" A group-wide approach that facilitates capital movement among subsidiaries could potentially improve financial stability as a whole if it prevents a large financial firm from becoming insolvent in the short run. It also could provide protection for individual policyholders if it results in additional resources being made available to pay immediate claims. Potential movement of capital within groups, however, could also potentially reduce financial stability if it were to cause customers to doubt the payment of future claims and thus promote panic or contagion. Free movement of capital across subsidiaries could also harm policyholders in the future if it results in insufficient capital to pay such claims. The 116 th Congress faces an immediate issue regarding the U.S.-UK covered agreement. This agreement is currently in its statutory 90-day layover period (which began December 11, 2018) before it can take effect. Congress could enact legislation directly affecting the agreement, conduct hearings or other oversight mechanisms, or allow the covered agreement to take effect without direct action. The U.S.-UK covered agreement may not be the only international insurance issue before this Congress. With expected continued growth in the international insurance market and differences in regulatory approaches, the frictions between U.S. and foreign regulators as well as between state and federal regulators seem likely to continue. Congress may choose to address these issues in multiple ways including, for example, amending Dodd-Frank and the statutory role of FIO and the USTR in international insurance negotiations; legislating an increased role for states in U.S. representation to international insurance regulatory entities; endorsing international insurance standards and legislating their adoption by states; encouraging additional covered agreements to address the countries not covered by the current ones; or encouraging the inclusion of insurance services as part of negotiations of potential free trade agreements. The following summarizes legislation addressing international insurance issues in the 115 th Congress. Legislation is ordered according to the stage to which it advanced in the legislative process. Economic Growth, Regulatory Relief, and Consumer Protection Act ( P.L. 115-174 / S. 2155 ) S. 2155 was introduced by Senator Michael Crapo and 19 cosponsors on November 16, 2017. The bill, covering a broad range of financial services provisions largely dealing with noninsurance issues, was marked up and reported on a vote of 16-7 by the Senate Committee on Banking, Housing, and Urban Affairs in December 2017. A new section was added during the Senate committee markup with language similar to S. 1360 (discussed below). S. 2155 passed the Senate by a vote of 67-31 on March 14, 2018. The House passed S. 2155 without amendment on May 22, 2018, and the President signed the bill into P.L. 115-174 on May 24, 2018. Section 211 of P.L. 115-174 finds that the Treasury, Federal Reserve, and FIO director shall support transparency in international insurance fora and shall \"achieve consensus positions with State insurance regulators through the [NAIC]\" when taking positions in international fora. It creates an \"Insurance Policy Advisory Committee on International Capital Standards and Other Insurance Issues\" at the Federal Reserve made up of 21 members with expertise on various aspects of insurance. The Federal Reserve and the Department of the Treasury are to complete an annual report and to provide testimony on the ongoing discussions at the IAIS through 2022, and the Federal Reserve and FIO are to complete a study and report, along with the opportunity for public comment and review by the Government Accountability Office (GAO), on the impact of international capital standards or other proposals prior to agreeing to such standards. Unlike S. 1360 , however, the enacted law does not have specific requirements on the final text of any international capital standard. After signing S. 2155 , the President released a statement indicating that the congressional directions in the findings contravene the President's \"exclusive constitutional authority to determine the time, scope, and objectives of international negotiations\" but that the President will \"give careful and respectful consideration to the preferences expressed by the Congress in section 211(a) and will consult with State officials as appropriate.\" International Insurance Standards Act ( H.R. 4537 / S. 488 , Title XIV) Representative Sean Duffy, along with seven cosponsors, introduced H.R. 4537 on December 4, 2017. (A substantially similar bill, H.R. 3762 , was previously introduced and addressed in an October 24, 2017, hearing by the House Financial Services' Subcommittee on Housing and Insurance.) H.R. 4537 was marked up and ordered reported on a vote of 56-4 by the House Committee on Financial Services on December 12-13, 2017. It was reported ( H.Rept. 115-804 ) on July 3, 2018. The House considered a further amended version on July 10, 2018, and passed it under suspension of the rule by a voice vote. H.R. 4537 was not taken up by the Senate in the 115 th Congress. S. 488 originally was introduced by Senator Pat Toomey as the Encouraging Employee Ownership Act, increasing the threshold for disclosure relating to compensatory benefit plans. After Senate passage on September 11, 2017, it was taken up in the House and amended with a number of different provisions, mostly focusing on securities regulation. Title XIV of the amended version of S. 488 , however, was nearly identical to H.R. 4537 as it passed the House. The House-passed version of S. 488 was not taken up by the Senate in the 115 th Congress. H.R. 4537 as passed by the House and S. 488 as passed by the House would have instituted a number of requirements relating to international insurance standards and insurance covered agreements. U.S. federal representatives in international fora would have been directed not to agree to any proposal that does not recognize the U.S. system as satisfying that proposal. Such representatives would have been required to consult and coordinate with the state insurance regulators and with Congress prior to and during negotiations and to submit a report to Congress prior to entering into an agreement. With regard to future covered agreements, the bill would have required U.S. negotiators to provide congressional access to negotiating texts and to \"closely consult and coordinate with State insurance commissioners.\" Future covered agreements were to be submitted to Congress for possible disapproval under \"fast track\" legislative provisions. The Congressional Budget Office's cost estimate on H.R. 4537 as reported from committee found that, Any budgetary effects of enacting H.R. 4537 would depend, in part, on how often the United States negotiates international insurance agreements and how frequently the negotiators must consult and coordinate with state insurance commissioners. CBO has no basis for predicting that frequency but expects that the cost of such consultations would be less than $500,000 per year. International Insurance Capital Standards Accountability Act of 2017 ( S. 1360 ) S. 1360 was introduced by Senator Dean Heller with cosponsor Senator Jon Tester on June 14, 2017, and referred to the Senate Committee on Banking, Housing, and Urban Affairs. Similar language to S. 1360 was added to P.L. 115-174 / S. 2155 as discussed above. S. 1360 would have created an \"Insurance Policy Advisory Committee on International Capital Standards and Other Insurance Issues\" at the Federal Reserve made up of 11 members with expertise on various aspects of insurance. It would have required both an annual report and testimony from the Federal Reserve and the Department of the Treasury on the ongoing discussions at the IAIS through 2020. The Federal Reserve and FIO would have been required to complete a study and report, along with the opportunity for public comment and review by GAO, on the impact of international capital standards or other proposals prior to agreeing to such standards. Any final text of an international capital standard would have been required to be published in the Federal Register for comment and could not have been inconsistent with either state or Federal Reserve capital standards for insurers. International Insurance Standards Act of 2017 ( H.R. 3762 ) H.R. 3762 was introduced by Representative Sean Duffy with cosponsor Representative Denny Heck on September 13, 2017. It was addressed in an October 24, 2017, hearing by the House Financial Services' Subcommittee on Housing and Insurance, but it was not the subject of further committee action. The sponsor introduced an identically titled and substantially similar bill, H.R. 4537 , which was ordered reported by the House Committee on Financial Services on December 13, 2017. See the above section on H.R. 4537 for more information on the bill. Federal Insurance Office Reform Act of 2017 ( H.R. 3861 ) H.R. 3861 was introduced by Representative Sean Duffy with cosponsor Representative Denny Heck on September 28, 2017. It was addressed in an October 24, 2017, hearing by the House Financial Services' Subcommittee on Housing and Insurance, but it was not the subject of further action. H.R. 3861 would have amended the Dodd-Frank Act provisions creating the Federal Insurance Office, generally limiting the focus and size of FIO. It would have placed FIO specifically within the Office of International Affairs and narrowed its function in international issues to representing the Treasury rather than all of the United States. It also would have required FIO to reach a consensus with the states on international matters. The bill would have removed FIO's authority to collect and analyze information from insurers, including its subpoena power, and to issue reports with this information. Under the bill, the authority to preempt state laws pursuant to covered agreements would have rested with the Secretary of the Treasury, and FIO would have been limited to five employees.", "summary": "The growth of the international insurance market and trade in insurance products and services has created opportunities and new policy issues for U.S. insurers, Congress, and the U.S. financial system. Insurance regulation is centered on the states, with the federal government having a limited role. Although the risks of loss and the regulation may be local, the business of insurance, as with many financial services, has an increasingly substantial international component as companies and investors look to grow and diversify. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203) enhanced the federal role in insurance markets through several provisions, including the Financial Stability Oversight Council's (FSOC's) ability to designate insurers as systemically important financial institutions (SIFIs); Federal Reserve oversight of SIFIs and insurers with depository affiliates; and the creation of a Federal Insurance Office (FIO) inside the Department of the Treasury. Alongside FIO, Dodd-Frank defined a new class of international insurance agreements called covered agreements for recognition of prudential measures which the FIO and the United States Trade Representative (USTR) may negotiate with foreign entities. Although not a regulator, FIO has the authority to monitor the insurance industry and limited power to preempt state laws in conjunction with covered agreements. Dodd-Frank requires congressional consultations and a 90-day layover period for covered agreements, but such agreements do not require congressional approval. International Insurance Stakeholders and Concerns The international response to the financial crisis included the creation of a Financial Stability Board (FSB), largely made up of various countries' financial regulators, and increasing the focus of the International Association of Insurance Supervisors (IAIS) on creating regulatory standards, especially relating to insurer capital levels. The Federal Reserve and the FIO have assumed roles in the IAIS, whereas previously the individual states and the U.S. National Association of Insurance Commissioners (NAIC) had been the only U.S. members. Any agreements reached under the FSB or IAIS would have no legal impact in the United States until adopted in regulation by federal or state regulators or enacted into federal or state statute. Congress has little direct role in international regulatory cooperation agreements such as those reached at the FSB or IAIS, but past hearings and proposed legislation has addressed these issues. The federal involvement in insurance issues has created frictions both among the federal entities and between the states and the federal entities, and it has been a subject of congressional hearings and legislation. The first covered agreement, between the United States and the European Union (EU), went into effect on September 22, 2017. The agreement was largely rejected by the states and the NAIC, with the insurance industry split in its support, or lack thereof, for the agreement. Treasury and USTR announced a second covered agreement, with the United Kingdom (UK), on December 11, 2018. Congressional Outlook The recently negotiated U.S.-UK covered agreement is currently in the 90-day layover period giving the 116th Congress the opportunity to conduct oversight or pass legislation affecting the agreement. Past Congresses have been interested in revisiting the Dodd-Frank authorities that created covered agreements and the current Congress may consider similar legislation. The potential impact of international organizations and standards on the U.S. insurance markets and the potential for new trade agreements may also be of congressional concern.", "document_type": "crs"}
{"report": "Under existing law (Atomic Energy Act [AEA] of 1954, as amended [P.L. 83-703; 42 U.S.C. §2153 et seq.]), all significant U.S. nuclear cooperation with other countries requires a peaceful nuclear cooperation agreement. Significant nuclear cooperation includes the transfer of U.S.-origin special nuclear material subject to licensing for commercial, medical, and industrial purposes, and the export of reactors and critical parts of reactors. Section 123 agreements are required for the export of commodities under NRC export licensing authority (10 C.F.R. 110). Such agreements, which are \"congressional-executive agreements\" requiring congressional approval, do not guarantee that cooperation will take place or that nuclear material will be transferred, but rather set the terms of reference and authorize cooperation. The AEA includes requirements for an agreement's content, conditions for the President to exempt an agreement from those requirements, presidential determinations and other supporting information to be submitted to Congress, conditions affecting the implementation of an agreement once it takes effect, and procedures for Congress to consider and approve the agreement. Section 123 of the AEA requires that any agreement for nuclear cooperation meet nine nonproliferation criteria and that the President submit any such agreement to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations. The Department of State is required to provide the President with an unclassified Nuclear Proliferation Assessment Statement (NPAS), which the President is to submit, along with the agreement, to those two committees. The State Department is also required to provide a classified annex to the NPAS, prepared in consultation with the Director of National Intelligence. The NPAS is meant to explain how the agreement meets the AEA nonproliferation requirements. The President must also make a written determination \"that the performance of the proposed agreement will promote and will not constitute an unreasonable risk to, the common defense and security.\" Section 123 of the AEA specifies the necessary steps for engaging in nuclear cooperation with another country. Section 123a. states that the proposed agreement is to include the terms, conditions, duration, nature, and scope of cooperation and lists nine criteria that the agreement must meet. It also contains provisions for the President to exempt an agreement from any of several criteria described in that section and includes details on the kinds of information the executive branch must provide to Congress. Section 123b. specifies the process for submitting the text of the agreement to Congress. Section 123c. specifies the procedure for congressional approval of cooperation agreements that are limited in scope (e.g., do not transfer nuclear material or cover reactors larger than 5 megawatts electric [MWe]). This report does not discuss such agreements. Section 123d. specifies the procedure for congressional approval of agreements that do cover significant nuclear cooperation (transfer of nuclear material or reactors larger than 5 MWe), including exempted agreements. Section 123a., paragraphs (1) through (9), lists nine criteria that an agreement with a nonnuclear weapon state must meet unless the President determines an exemption is necessary. These include guarantees that safeguards on transferred nuclear material and equipment continue in perpetuity; International Atomic Energy Agency (IAEA) comprehensive safeguards are applied in nonnuclear weapon states; nothing transferred is used for any nuclear explosive device or for any other military purpose; the United States has the right to demand the return of transferred nuclear materials and equipment, as well as any special nuclear material produced through their use, if the cooperating state detonates a nuclear explosive device or terminates or abrogates an IAEA safeguards agreement; there is no retransfer of material or classified data without U.S. consent; physical security on nuclear material is maintained; there is no enrichment or reprocessing by the recipient state of transferred nuclear material or nuclear material produced with materials or facilities transferred pursuant to the agreement without prior approval; storage for transferred plutonium and highly enriched uranium is approved in advance by the United States; and any material or facility produced or constructed through use of special nuclear technology transferred under the cooperation agreement is subject to all of the above requirements. Although some experts have advocated requiring governments to forgo enrichment and reprocessing (a nonproliferation commitment sometimes referred to as the \"Gold Standard\") as a condition for concluding a nuclear cooperation agreement, the Atomic Energy Act does not include such a requirement (see Appendix B ). The President may exempt an agreement for cooperation from any of the requirements in Section 123a. if he determines that the requirement would be \"seriously prejudicial to the achievement of U.S. nonproliferation objectives or otherwise jeopardize the common defense and security.\" The AEA provides different requirements, conditions, and procedures for exempt and nonexempt agreements. To date, all of the Section 123 agreements in force are nonexempt agreements. Prior to the adoption of P.L. 109-401 , the Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006, the President would have needed to exempt the nuclear cooperation agreement with India from some requirements of Section 123a. However, P.L. 109-401 exempted nuclear cooperation with India from some of the AEA's requirements. Under the AEA, Congress has the opportunity to review a nuclear cooperation agreement for two time periods totaling 90 days of continuous session. The President must submit the text of the proposed agreement, along with required supporting documents (including the unclassified NPAS) to the House Foreign Affairs Committee and the Senate Foreign Relations Committee. The President is to consult with the committees \"for a period of not less than 30 days of continuous session.\" After this period of consultation, the President is to submit the agreement to Congress, along with the classified annex to the NPAS and a statement of his approval of the agreement and determination that it will not damage U.S. national security interests. This action begins the second period, which consists of 60 days of continuous session. In practice, the President has sent the agreement to Congress at the beginning of the full 90-day period, which begins on the date of transmittal. Typically, the 60-day period has immediately followed the expiration of the 30-day period. The President transmits the text of the proposed agreement along with a letter of support with a national security determination, the unclassified NPAS, its classified annex, and letters of support for the agreement from the Secretary of State and the Nuclear Regulatory Commission. If the President has not exempted the agreement from any requirements of Section 123a., it may enter into force after the end of the 60-day period unless, during that time, Congress adopts a joint resolution disapproving the agreement and the resolution becomes law. If the agreement is an exempted agreement, Congress must adopt a joint resolution of approval and it must become law by the end of the 60-day period or the agreement may not enter into force. At the beginning of this 60-day period, joint resolutions of approval or disapproval, as appropriate, are to be automatically introduced in each house. During this period, the committees are to hold hearings on the proposed agreement and \"submit a report to their respective bodies recommending whether it should be approved or disapproved.\" If either committee has not reported the requisite joint resolution of approval or disapproval by the end of 45 days, it is automatically discharged from further consideration of the measure. After the joint resolution is reported or discharged, Congress is to consider it under expedited procedures, as established by Section 130.i. of the AEA. Congress has used procedures outside the above-described process to adopt legislation approving some nuclear cooperation agreements (see Appendix C ). Section 202 of P.L. 110-369 , the United States-India Nuclear Cooperation Approval and Nonproliferation Enhancement Act, which President Bush signed into law October 8, 2008, amended Section 123 of the AEA to require the President to keep the Senate Foreign Relations Committee and the House Foreign Affairs Committee \"fully and currently informed of any initiative or negotiations relating to a new or amended agreement for peaceful nuclear cooperation.\" The AEA sets out procedures for licensing exports to states with which the United States has nuclear cooperation agreements. (Sections 126, 127, and 128 codified as amended at 42 U.S.C. 2155, 2156, 2157.) Each export of nuclear material, equipment, or technology requires a specific export license or other authorization. The Nuclear Regulatory Commission (NRC) is required to meet criteria in Sections 127 and 128 in authorizing export licenses. These criteria are as follows: Application of IAEA safeguards to any material or facilities proposed to be exported, material or facilities previously exported, and to any special nuclear material used in or produced through the use thereof (these are not full-scope safeguards, but safeguards required under Article III.2 of the nuclear Nonproliferation Treaty [NPT]). Nothing exported can be used for any nuclear explosive device or for research on or development of any nuclear explosive device. Recipient states must have adequate physical security on \"such material or facilities proposed to be exported and to any special nuclear material used in or produced through the use thereof.\" Recipient states are not to retransfer exported nuclear materials, facilities, sensitive nuclear technology, or \"special nuclear material produced through the use of such material\" without prior U.S. approval. Recipient states may not reprocess or alter in form or content exported nuclear material or special nuclear material produced though the use of exported nuclear material without prior U.S. approval. The foregoing conditions must be applied to any nuclear material or equipment that is produced or constructed under the jurisdiction of the recipient by or through the use of any exported sensitive nuclear technology. Section 128 requires that recipient nonnuclear weapon states must have full-scope IAEA safeguards. The President must judge that the proposed export or exemption will \"not be inimical to the common defense and security\" or that any export of that type \"would not be inimical to the common defense and security because it lacks significance for nuclear explosive purposes.\" The executive branch may also consider other factors, such as \"whether the license or exemption will materially advance the nonproliferation policy of the United States by encouraging the recipient nation to adhere\" to the NPT; whether \"failure to issue the license or grant the exemption would otherwise be seriously prejudicial\" to U.S. nonproliferation objectives; and whether the recipient nation has agreed to conditions identical to those laid out in Section 127. Section 126b.(2) contains a provision for the President to authorize an export in the event that the NRC deems that the export would not meet Section 127 and 128 criteria. The President must determine \"that failure to approve an export would be seriously prejudicial to the achievement of U.S. nonproliferation objectives or otherwise jeopardize the common defense and security.\" In that case, the President would submit his executive order, along with a detailed assessment and other documentation, to Congress for 60 days of continuous session. After 60 days of continuous session, the export would go through unless Congress were to adopt a concurrent resolution of disapproval. Section 128b.(2) contains a provision for the President to waive termination of exports by notifying Congress that the state has adopted full-scope safeguards or that the state has made significant progress toward adopting such safeguards, or that U.S. foreign policy interests dictate reconsideration. Such a determination would become effective unless Congress were to adopt a concurrent resolution of disapproval within 60 days of continuous session. Additionally, Section 129b.(1) forbids the export of \"nuclear materials and equipment or sensitive nuclear technology\" to any country designated as a state sponsor of terrorism. Section 129b.(3) allows the President to waive this provision. The Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010 ( P.L. 111-195 ), which became law July 1, 2010, contains additional restrictions on licensing nuclear exports to countries with entities that have been sanctioned for conducting certain types of nuclear weapons-related transactions with Iran. Section 102a.(2)(A) of the law states that \"no license may be issued for the export, and no approval may be given for the transfer or retransfer\" of \"any nuclear material, facilities, components, or other goods, services, or technology that are or would be subject to an agreement for cooperation between the United States\" and such countries. Section 102 a.(2)(B), however, allows the President to waive these restrictions. Section 102a.(2)(C) allows the President to authorize licenses for nuclear exports \"on a case-by-case basis\" to entities (which have not been sanctioned) in countries subject to the restrictions described above. Section 131 of the AEA details procedures for subsequent arrangements to nuclear cooperation agreements concluded pursuant to Section 123. Such arrangements are required for forms of nuclear cooperation requiring additional congressional approval, such as transfers of nuclear material or technology and recipient states' enrichment or reprocessing of nuclear materials transferred pursuant to the agreement. Subsequent arrangements may also include arrangements for physical security, storage, or disposition of spent nuclear fuel; the application of safeguards on nuclear materials or equipment; or \"any other arrangement which the President finds to be important from the standpoint of preventing proliferation.\" Before entering into a subsequent arrangement, the Secretary of Energy must publish in the Federal Register a determination that the arrangement \"will not be inimical to the common defense and security.\" A proposed subsequent arrangement shall not take effect before 15 days after publication of both this determination and notice of the proposed arrangement. The Secretary of State is required to prepare an unclassified Nuclear Proliferation Assessment Statement (NPAS) if, \"in the view of\" the Secretary of State, Secretary of Energy, Secretary of Defense, or the Nuclear Regulatory Commission, a proposed subsequent arrangement \"might significantly contribute to proliferation.\" The Secretary of State is to submit the NPAS to the Secretary of Energy within 60 days of receiving a copy of the proposed subsequent arrangement. The President may waive the 60-day requirement if the Secretary of State so requests, but must notify both the House Foreign Affairs Committee and Senate Foreign Relations Committee of any such waiver and the justification for it. The Secretary of Energy may not enter into the subsequent arrangement before receiving the NPAS. Section 131 specifies requirements for certain types of subsequent arrangements. Section 131b. describes procedures for the executive branch to follow before entering into a subsequent arrangement involving the reprocessing of U.S.-origin nuclear material or nuclear material produced with U.S.-supplied nuclear technology. These procedures also cover subsequent arrangements allowing the retransfer of such material to a \"third country for reprocessing\" or \"the subsequent retransfer\" of more than 500 grams of any plutonium produced by reprocessing such material. The Secretary of Energy must provide both the House Foreign Affairs Committee and Senate Foreign Relations Committee with a report describing the reasons for entering into the arrangement. Additionally, 15 days of continuous session must elapse before the Secretary may enter into the arrangement, unless the President judges that \"an emergency exists due to unforeseen circumstances requiring immediate entry\" into the arrangement. In such a case, the waiting period would be 15 calendar days. If a subsequent arrangement described in the above paragraph involves a facility that has not processed spent nuclear reactor fuel prior to March 10, 1978 (when the Nuclear Nonproliferation Act of 1978 was enacted), the Secretaries of State and Energy must judge that the arrangement \"will not result in a significant increase of the risk of proliferation.\" In making this judgment, the Secretaries are to give \"foremost consideration ... to whether or not the reprocessing or retransfer will take place under conditions that will ensure timely warning to the United States of any diversion well in advance of the time at which the non-nuclear weapon state could transform the diverted material into a nuclear explosive device.\" For a subsequent arrangement involving reprocessing in a facility that has processed spent nuclear reactor fuel prior to March 10, 1978, the Secretary of Energy will \"attempt to ensure\" that reprocessing \"shall take place under conditions\" that would satisfy the timely-warning conditions described above. Section 131f. specifies procedures for congressional approval of subsequent arrangements involving the storage or disposition of foreign spent nuclear fuel in the United States. Section 133 states that, before approving a subsequent arrangement involving certain transfers of special nuclear material, the Secretary of Energy must consult with the Secretary of Defense \"on whether the physical protection of that material during the export or transfer will be adequate to deter theft, sabotage, and other acts of international terrorism which would result in the diversion of that material.\" If the Secretary of Defense determines that \"the export or transfer might be subject to a genuine terrorist threat,\" that Secretary is required to provide a written risk assessment of the risk and a \"description of the actions\" that he or she \"considers necessary to upgrade physical protection measures.\" The first test of the subsequent arrangement provisions came in August 1978, when the Department of Energy informed the House and Senate foreign relations committees of a Japanese request for approval of the transfer of spent fuel assemblies from Japan to the United Kingdom for reprocessing. This was the first \"subsequent arrangement\" approved. The United States and Japan entered into similar arrangements until 1988, when the two governments revised their nuclear cooperation agreement. That agreement included an \"implementing agreement,\" which provided 30-year advance consent for the transfer of spent fuel from Japan to Europe for reprocessing. While controversial, Congress did not block the nuclear cooperation agreement. A subsequent arrangement was also necessary for the sea transport from Europe to Japan of plutonium that had been separated from the Japanese spent fuel. The Department of Energy approved a Japanese request for 30-year advance consent for the sea transport of plutonium. It was submitted to Congress as a subsequent arrangement, and took effect in October 1988. The U.S. nuclear cooperation agreement with India grants New Delhi consent to reprocess nuclear material transferred pursuant to the agreement, as well as \"nuclear material and by-product material used in or produced through the use of nuclear material, non-nuclear material, or equipment so transferred.\" However, the agreement also includes a requirement that India first build a new national reprocessing facility to be operated under IAEA safeguards. The two countries signed a subsequent arrangement July 30, 2010, which governs the procedures for operating two new reprocessing facilities in India. The agreement also describes procedures for U.S. officials to inspect and receive information about physical protection measures at the new facilities. The arrangement would not have taken effect if Congress had adopted a joint resolution of disapproval within 30 days of continuous session; Congress did not adopt such a resolution. If India were to construct any additional facilities to reprocess fuel from U.S.-supplied reactors, a new subsequent arrangement would need to be submitted to Congress. Section 129a. of the AEA requires that the United States end exports of nuclear materials and equipment or sensitive nuclear technology to any nonnuclear weapon state that, after March 10, 1978, the President determines to have detonated a nuclear explosive device; terminated or abrogated IAEA safeguards; materially violated an IAEA safeguards agreement; or engaged in activities involving source or special nuclear material and having \"direct significance\" for the manufacture or acquisition of nuclear explosive devices, and \"has failed to take steps which, in the President's judgment, represent sufficient progress toward terminating such activities.\" Section 129a. also requires that the United States halt exports to any nation the President determines to have materially violated the terms of an agreement for cooperation with the United States; assisted, encouraged, or induced any nonnuclear weapon state to obtain nuclear explosives or the materials and technologies needed to manufacture them; or retransferred or entered into an agreement for exporting reprocessing equipment, materials, or technology to a nonnuclear weapon state, unless in connection with an international agreement to which the United States subscribes. The President can waive termination of exports if he determines that \"cessation of such exports would be seriously prejudicial to the achievement of United States nonproliferation objectives or otherwise jeopardize the common defense and security.\" The President must submit his determination to Congress, which is then referred to the House Committee on Foreign Affairs and the Senate Foreign Relations Committee for 60 days of continuous session. The determination becomes effective unless Congress adopts a joint resolution opposing the determination. Section 57.b. (2) of the Atomic Energy Act allows for limited forms of nuclear cooperation related to the \"development or production of any special nuclear material outside of the United States\" if that activity has been authorized by the Secretary of Energy following a determination that it \"will not be inimical to the interest of the United States.\" The Secretary may only make such a finding with \"the concurrence of the Department of State, and after consultation with the Nuclear Regulatory Commission [NRC], the Department of Commerce, and the Department of Defense.\" Authorizations of such activities are also known as \"Part 810 authorizations,\" after 10 Code of Federal Regulations (C.F.R.) Part 810. Part 810 regulations describe activities that are \"generally authorized\" by the Secretary of Energy and activities that require \"specific authorization\" by the Secretary. Some \"generally authorized activities\" are limited to a list of \"generally authorized destinations.\" These regulations also detail \"reporting requirements for authorized activities.\" Part 810 authorizations mostly involve unclassified nuclear technology transfer and services, such as nuclear reactor designs, nuclear facility operational information and training, and nuclear fuel fabrication. Such an authorization is not required for exports of components and materials licensed by NRC governed by 10 C.F.R. Part 110. Civilian nuclear cooperation agreements under Section 123 of the Atomic Energy Act of 1954, as amended (hereinafter Atomic Energy Act or AEA), are not required for an 810 authorization or for transmission of nuclear-related information, except for restricted data. Such agreements are, however, required for such forms of nuclear cooperation as the transfer of U.S.-origin special nuclear material subject to licensing for commercial, medical, and industrial purposes; the export of reactors and critical parts of reactors; and other commodities under NRC export licensing authority (10 C.F.R. 110). The NRC may also authorize activities governed by Part 810 authorizations under a 123 agreement or under a subsequent arrangement to such an agreement. It is worth noting that Part 810.9 includes \"[w]hether the United States has an agreement for cooperation in force covering exports to the country or entity involved\" as a factor for the Secretary of Energy to use in determining that an activity \"will not be inimical to the interest [sic] of the United States.\" Moreover, the list of \"generally authorized destinations\" is \"based principally on the United States agreements for civil nuclear cooperation,\" according to guidance from the National Nuclear Security Administration. On December 19, 2018, Senators Markey and Rubio introduced S. 3785 , the No Nuclear Weapons for Saudi Arabia Act of 2018, and Representatives Sherman and Messer introduced the companion bill, H.R. 7350 . The bills would require a joint resolution of approval for a 123 agreement with Saudi Arabia. In addition, the bills' text includes the sense of Congress that no 123 agreement should be approved until Saudi Arabia has \"been truthful and transparent with regard to the death of Jamal Khashoggi\" and prosecuted those responsible, \"renounced uranium enrichment and reprocessing on its territory,\" concluded an IAEA Additional Protocol, and made \"substantial progress on the protection of human rights, including the release of political prisoners.\" The bills require the President to submit a report assessing progress on the above actions along with a proposed agreement. The text also includes a statement of policy that the United States should oppose sales of nuclear technology to Saudi Arabia through the Nuclear Suppliers Group (NSG) until Saudi Arabia has renounced enrichment and reprocessing. On December 19, 2018, Representative Brad Sherman introduced H.R. 7351 , the Nuclear Cooperation Agreements Reform Act of 2018, which would amend the Atomic Energy Act to require nonexempt nuclear cooperation agreements to include several additional provisions. These provisions include a legally binding \"commitment\" from the cooperating government stipulating that \"no enrichment or reprocessing activities, or acquisition or construction of such facilities, [would] occur within the territory over which the cooperating party exercises sovereignty\"; \"a guaranty by the cooperating party that no nationals of a third country\" would be \"permitted access to any reactor, related equipment, or sensitive materials transferred under\" the agreement without prior U.S. consent; a \"commitment to maintain\" or enact \"a legal regime providing for adequate protection from civil liability that will allow for the participation of United States suppliers in any effort by the country to develop civilian nuclear power\"; and a stipulation that the United States can demand the return of transferred items if the cooperating government \"violates or abrogates any provision\" of its IAEA safeguards agreement. H.R. 7351 would also require a cooperating party to sign, ratify, and implement an Additional Protocol to its IAEA safeguards agreement; implement a number of export control-related measures; comply with \"all United Nations conventions to which the United States is a party and all [UN] Security Council resolutions regarding the prevention of the proliferation of weapons of mass destruction\"; and be party to, as well as fully implement, \"the provisions and guidelines\" of the Biological Weapons Convention and the Chemical Weapons Convention, as well as \"all other international agreements to which the United States is a party regarding the export of nuclear, chemical, biological, and advanced conventional weapons, including missiles and other delivery systems.\" In addition, the bill would prohibit nuclear cooperation agreements with a country designated as a Destination of Diversion Concern pursuant to the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ( P.L. 111-195 ). The bill would also prohibit such agreements with a country that is not \"closely cooperating with the United States to prevent state sponsors of terrorism\" from \"acquiring or developing\" nuclear, chemical, or biological (NBC) weapons \"or related technologies\" or \"destabilizing numbers and types of advanced conventional weapons.\" H.R. 7351 would also limit the duration of a nuclear cooperation agreement to 15 years, as well as prohibit nuclear-related exports to a country identified in the most recent version of a report mandated by the National Defense Authorization Act for Fiscal Year 1998 ( P.L. 105-85 ) as possessing or seeking to \"acquire or develop\" NBC weapons, ballistic missiles, or cruise missiles. Moreover, the bill would amend the AEA's congressional notification provisions concerning ongoing nuclear cooperation agreement negotiations by requiring the President to \"consult\" with the Senate Foreign Relations Committee and the House Foreign Affairs Committee concerning such initiative or negotiations beginning not later than 15 calendar days after the initiation of any such negotiations, or the receipt or transmission of a draft agreement, whichever occurs first, and monthly thereafter until such time as the negotiations are concluded. These consultations would include the provision of \"current working drafts and proposed text put forward for negotiation by the parties for inclusion in such agreement.\" The bill would also require the President to submit a report to the House Foreign Affairs and Senate Foreign Relations Committees \"on the extent to which each country that engages in civil nuclear exports ... requires nuclear nonproliferation requirements as conditions for export comparable to those\" in the AEA as amended by the bill, which would also stipulate that the report include \"the extent to which the exports of each such country incorporate United States-origin components, technology, or materials that require United States approval for re-export\"; \"the civil nuclear-related trade and investments in the United States by any entity from each such country\"; and a list of \"any United States grant, concessionary loan or loan guarantee, or any other incentive or inducement to any such country or entity related to nuclear exports or investments in the United States.\" H.R. 7351 contains provisions concerning U.S. foreign assistance. For example, the bill would prohibit \"assistance (other than humanitarian assistance) under any provision of law ... to a country that has withdrawn\" from the NPT. H.R. 7351 would also require the United States to \"seek the return of any material, equipment, or components transferred under\" a nuclear cooperation agreement with such a country, as well as the return of any \"special fissionable material produced through the use\" of such transferred items. In addition, the bill would prohibit any assistance under the Foreign Assistance Act of 1961 [FAA], the Arms Export Control Act [AECA], the Foreign Military Sales Act [FMSA], the Food for Peace Act, the Peace Corps Act, or the Export-Import Bank Act of 1945 to any country if the Secretary of State determines that the government of the country has repeatedly provided support for acts of proliferation of equipment, technology, or materials to support the design, acquisition, manufacture, or use of weapons of mass destruction or the acquisition or development of missiles to carry such weapons. This section of the bill includes a reporting requirement and a presidential waiver provision. H.R. 7351 would also require the U.S. government to \"take into consideration whether\" proposed recipients of assistance pursuant to the AECA, FAA, or FMSA, have Additional Protocols to their IAEA safeguards agreements. The bill would also permit joint resolutions approving nuclear cooperation agreements to \"include any other provisions to accompany such proposed agreement for cooperation.'' Lastly, H.R. 7351 would require Congress to enact a joint resolution of approval for subsequent arrangements to nuclear cooperation agreements. Appendix A. Key Dates for Bilateral Civilian Nuclear Cooperation (\"Section 123\") Agreements Appendix B. Enrichment and Reprocessing Restrictions Although some experts have advocated requiring governments to forgo enrichment and reprocessing (a nonproliferation commitment sometimes referred to as the \"Gold Standard\") as a condition for concluding a nuclear cooperation agreement, the Atomic Energy Act (AEA) does not include such a requirement. In recent years, the United States has attempted to persuade certain countries with which it is negotiating nuclear cooperation agreements to forgo enrichment and reprocessing and conclude Additional Protocols to their International Atomic Energy Agency (IAEA) safeguards agreements; past U.S. nuclear cooperation agreements have not included these additional components. The AEA does mandate that U.S. nuclear cooperation agreements require U.S. consent for any \"alteration in form or content\" (to include enrichment or reprocessing) of U.S.-origin material or any material processed in a plant containing transferred U.S. nuclear technology. Such agreements also require U.S. consent for any retransfer of material or technology. The United States has argued that its December 2009 nuclear cooperation agreement with the United Arab Emirates (UAE) could set a useful precedent for mitigating the dangers of nuclear proliferation. For example, President Barack Obama's May 21, 2009, letter transmitting the agreement to Congress argued that the agreement had \"the potential to serve as a model for other countries in the region that wish to pursue responsible nuclear energy development.\" Similarly, then-State Department spokesperson P.J. Crowley described the agreement as \"the gold standard\" during an August 5, 2010, press briefing, although the Obama Administration generally did not use this term when describing its nuclear cooperation policies. The U.S.-UAE agreement's status as a potential model is grounded in two nonproliferation provisions not found in other U.S. nuclear cooperation agreements. First, the agreement requires the country to bring into force the Additional Protocol to its safeguards agreement before the United States licenses \"exports of nuclear material, equipment, components, or technology\" pursuant to the agreement. Second, the agreement states that the UAE shall not possess sensitive nuclear facilities within its territory or otherwise engage in activities within its territory for, or relating to, the enrichment or reprocessing of material, or for the alteration in form or content (except by irradiation or further irradiation or, if agreed by the Parties, post-irradiation examination) of plutonium, uranium 233, high enriched uranium, or irradiated source or special fissionable material. The U.S.-UAE agreement also provides the United States with the right to terminate nuclear cooperation and to require the return of any nuclear \"material, equipment or components ... and any special fissionable material produced through their use\" if, after the agreement's entry into force, the UAE \"possesses sensitive nuclear facilities within its territory or otherwise engages in activities within its territory relating to enrichment of uranium or reprocessing of nuclear fuel.\" Notwithstanding its characterization of the U.S.-UAE agreement, the Obama Administration announced in December 2013 after an interagency review that renouncing domestic enrichment and reprocessing would not be a prerequisite to concluding a nuclear cooperation agreement for all countries, and each partner country would be considered individually. The U.S. nuclear cooperation agreement with Vietnam, which the two governments concluded in 2014, did not include a provision requiring the country to forgo enrichment and reprocessing, although the agreement's preamble includes a political commitment stating that Vietnam intends to rely on international markets for its nuclear fuel supply, rather than acquiring sensitive nuclear technologies. Appendix C. Nuclear Cooperation Agreements Approved Outside Atomic Energy Act Process Congress has used legislation to approve nuclear cooperation agreements that did not use the legislative process mandated by the Atomic Energy Act (AEA) of 1954, as amended. Australia On May 5, 2010, President Barack Obama submitted a renewed U.S.-Australia nuclear cooperation agreement to Congress for approval. H.R. 6411 , which the House adopted on November 30, 2010, would have approved the agreement even if there had not been sufficient legislative days remaining in the 111 th Congress; the Senate did not adopt its version of the bill ( S. 3844 ). These bills were not needed because the 111 th Congress contained a sufficient number of days for the agreement to enter into force. China In 1985, President Ronald Reagan submitted the first U.S.-China nuclear cooperation agreement to Congress, which adopted a joint resolution, P.L. 99-183 , requiring that the President make certain nonproliferation-related certifications in order for the agreement to be implemented. P.L. 99-183 required a presidential certification and a report followed by a period of 30 days of continuous session of Congress. P.L. 101-246 , the Foreign Relations Authorization Act for Fiscal Years 1990 and 1991, imposed sanctions on China, including suspending nuclear cooperation and requiring an additional presidential certification on Beijing's nuclear nonproliferation assurances. Before a summit with China, President William Clinton on January 12, 1998, signed the required certifications regarding China's nuclear nonproliferation policy and practices. Clinton also issued a certification and waived a sanction imposed under P.L. 101-246 . Congressional review ended on March 18, 1998, allowing the agreement to be implemented. India P.L. 109-401 , which became law on December 18, 2006, permitted the President to waive several provisions of the AEA with respect to a nuclear cooperation agreement with India. On September 10, 2008, President George W. Bush submitted to Congress a determination that P.L. 109-401 's requirements for such an agreement to proceed had been met. President Bush signed P.L. 110-369 , which approved the agreement, into law on October 8, 2008. Norway The President submitted an extension of the U.S.-Norway nuclear cooperation agreement to Congress on June 14, 2016. P.L. 114-320 , which became law on December 16, 2016, approved the agreement \"[n]otwithstanding the provisions for congressional consideration\" in the AEA, thereby addressing concerns that that there was an insufficient number of legislative days remaining in the 114 th Congress for congressional consideration. ", "summary": "In order for the United States to engage in significant civilian nuclear cooperation with other states, it must conclude a framework agreement that meets specific requirements under Section 123 of the Atomic Energy Act (AEA). Significant nuclear cooperation includes the export of reactors, critical parts of reactors, and reactor fuel. The AEA also provides for export control licensing procedures and criteria for terminating cooperation. Congressional review is required for Section 123 agreements; the AEA establishes special parliamentary procedures by which Congress may act on a proposed agreement.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; programs to increase small business opportunities in federal contracting; direct loans for businesses, homeowners, and renters to assist their recovery from natural disasters; and access to entrepreneurial education to assist with business formation and expansion. The SBA has provided \"technical and managerial aides to small-business concerns, by advising and counseling on matters in connection with government procurement and on policies, principles and practices of good management\" since it began operations in 1953. Initially, the SBA provided its own management and technical assistance training programs. Over time, the SBA has relied increasingly on third parties to provide that training. More than 1.2 million aspiring entrepreneurs and small business owners receive training from an SBA-supported resource partner each year. The SBA has argued that its support of management and technical assistance training for small businesses has contributed \"to the long-term success of these businesses and their ability to grow and create jobs.\" It currently provides financial support to about 14,000 resource partners, including 63 small business development centers (SBDCs) and nearly 900 SBDC local outreach locations, 128 women's business centers (WBCs), and 350 chapters of the mentoring program, SCORE (Service Corps of Retired Executives). The SBA receives an annual appropriation for entrepreneurial development/noncredit programs collectively (currently $247.7 million). The SBA uses these funds for its management and training programs ($226.7 million in FY2019), administration of the HUBZone program ($3.0 million), and the State Trade and Export Promotion program ($18.0 million). Congress specifies the appropriation amount for SBDCs (currently $131.0 million) and the Microloan Technical Assistance Program (currently $31.0 million) in its annual appropriation act and includes recommended appropriation amounts for the SBA's other management and training programs in either the explanatory statement or the committee report accompanying the appropriations act. The SBA is not legally required to adhere to the recommended amounts but has traditionally done so in the past. Table 1 shows the appropriation amounts Congress specified for SBDCs and the Microloan Technical Assistance Program and the appropriation amounts Congress recommended for the SBA's other management and training programs in FY2015 ($198.6 million), FY2016 ($210.1 million), FY2017 ($224.1 million), FY2018 ($226.1 million), and FY2019 ($226.7 million). The Department of Commerce also provides management and technical assistance training for small businesses. For example, the Department of Commerce's Minority Business Development Agency (MBDA) provides training to minority business owners to assist them in obtaining contracts and financial awards. In addition, the Department of Commerce's Economic Development Administration's Local Technical Assistance Program promotes efforts to build and expand local organizational capacity in economically distressed areas. As part of that effort, it funds projects that focus on technical or market feasibility studies of economic development projects or programs, which often include consultation with small businesses. For many years, a recurring theme at congressional hearings concerning the SBA's management and technical assistance training programs has been the perceived need to improve program efficiency by eliminating duplication of services and increasing cooperation and coordination both within and among its training resource partners. For example, the Obama Administration recommended in its FY2012-FY2017 budget recommendations that funding for the PRIME technical assistance program end. The Administration argued that PRIME overlaps and duplicates \"the technical assistance provided by SBA's microlending intermediaries.\" The Trump Administration has also requested the program's elimination. The House Committee on Small Business has argued that the SBA's various management and technical assistance training programs should be \"folded into the mission of the SBDC program or their responsibilities should be taken over by other agencies\" because they \"overlap each other and duplicate the educational services provided by other agencies.\" Congress has also explored ways to improve the SBA's measurement of these programs' effectiveness. This report examines the historical development of federal small business management and technical assistance training programs; describes their current structures, operations, and budgets; and assesses their administration and oversight, including measures used to determine their effectiveness. This report also examines legislation to improve SBA program performance and oversight, including P.L. 114-88 , the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE After Disaster Act of 2015), which, among other things, authorizes the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area and authorizes SBDCs to provide assistance to small businesses outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is in a presidentially declared major disaster area. This assistance can be provided \"for a period of not more than two years after the date on which the President\" has declared the area a major disaster; and P.L. 115-141 , the Consolidated Appropriations Act of 2018, among other provisions, relaxed requirements that Microloan intermediaries may spend no more than 25% of Microloan technical assistance grant funds on prospective borrowers and no more than 25% of those funds on contracts with third parties to provide that technical assistance by increasing those percentages to no more than 50% (originally in H.R. 2056 , the Microloan Modernization Act of 2017, and S. 526 , the Microloan Modernization Act of 2018). In addition, it discusses H.R. 1774 , the Developing the Next Generation of Small Businesses Act of 2017, which was introduced during the 115 th Congress. The bill would have required the SBA to only use authorized entrepreneurial development programs (SCORE, WBCs, SBDCs, etc.) to deliver specified entrepreneurial development services; added data collection and reporting requirements for SBDCs; authorized to be appropriated $21.75 million for WBCs for each of FY2018-FY2021 (WBCs were appropriated $18.0 million in FY2018); increased the WBC annual grant award from not more than $150,000 to not more than $185,000 (adjusted annually to reflect change in inflation); authorized the award of an additional $65,000 to WBCs under specified circumstances; authorized the SBA to waive, in whole or in part, the WBC nonfederal matching requirement for up to two consecutive fiscal years under specified circumstances; modified SCORE program requirements with respect to the role of participating volunteers, program plans and goals, and reporting; and added language concerning the provision and reporting of online counseling by SCORE. The SBA supports a number of management and technical assistance training programs, including the following: Small Business Development Center Grants Program, Microloan Technical Assistance Program, Women's Business Center Grants Program, Veterans Business Development Programs, SCORE (Service Corps of Retired Executives), PRIME Technical Assistance Program, 7(j) Technical Assistance Program, Native American Outreach Program, and Several initiatives, including the Entrepreneurial Development Initiative (Regional Innovation Clusters), Boots to Business, Entrepreneurial Education, and Growth Accelerators. The legislative history and current operating structures, functions, and budget for each of these programs is presented in this report. In addition, if the data are available, the program's performance based on outcome-based measures, such as their effect on small business formation, survivability, and expansion, and on job creation and retention, is also presented. Also, a brief description of each of these programs is provided in the Appendix . In 1976, the SBA created the University Business Development Center pilot program to establish small business centers within universities to provide counseling and training for small businesses. The first center was founded at California State Polytechnic University at Pomona in December 1976. Seven more centers were funded over the next six months at universities in seven different states. By 1979, 16 SBDCs received SBA funding and were providing management and technical training assistance to small businesses. The SBDC program was provided statutory authorization by P.L. 96-302 , the Small Business Development Center Act of 1980. SBDCs were to \"rely on the private sector primarily, and the university community, in partnership with the SBA and its other programs, to fill gaps in making quality management assistance available to the small business owner.\" Although most SBDCs continued to be affiliated with universities, the legislation authorized the SBA to provide funding to any State government or any agency thereof, any regional entity, any State-chartered development, credit or finance corporation, any public or private institution of higher education, including but not limited to any land-grant college or university, any college or school of business, engineering, commerce, or agriculture, community college or junior college, or to any entity formed by two or more of the above entities. SBDC funding is allocated on a pro rata basis among the states (defined to include the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa) by a statutory formula \"based on the percentage of the population of each State, as compared to the population of the United States.\" If, as is currently the case, SBDC funding exceeds $90 million, the minimum funding level is \"the sum of $500,000, plus a percentage of $500,000 equal to the percentage amount by which the amount made available exceeds $90 million.\" In 1984, P.L. 98-395 , the Small Business Development Center Improvement Act of 1984, required SBDCs, as a condition of receiving SBA funding, to contribute a matching amount equal to the grant amount, and that the match must be provided by nonfederal sources and be comprised of not less than 50% cash and not more than 50% of indirect costs and in-kind contributions. It also required SBDCs to have an advisory board and a full-time director who has authority to make expenditures under the center's budget. It also required the SBA to implement a program of onsite evaluations for each SBDC and to make those evaluations at least once every two years. Today, the SBA provides grants to SBDCs that are \"hosted by leading universities, colleges, and state economic development agencies\" to deliver management and technical assistance training \"to small businesses and nascent entrepreneurs (pre-venture) in order to promote growth, expansion, innovation, increased productivity and management improvement.\" These services are delivered, in most instances, on a nonfee, one-on-one confidential counseling basis and are administered by 63 lead service centers, one located in each state (four in Texas and six in California), the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa. These lead centers manage nearly 900 service centers located throughout the United States and the territories. As shown in Table 2 , SBDCs provided technical assistance training services to 443,376 clients in FY2018 (250,926 clients received training and 192,450 clients were advised), and assisted in forming 14,422 new businesses. SBDCs received an appropriation of $115.0 million in FY2015, $117.0 million in FY2016, $125.0 million in FY2017, $130.0 million in FY2018, and $131.0 million in FY2019 (see Table 1 ). The Trump Administration requested $110.0 million for the program in FY2018 and $110.0 million in FY2019. In addition, as mentioned earlier, P.L. 114-88 expanded the role of SBDCs by, among other things authorizing the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area; and authorizing SBDCs to provide assistance to small businesses outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is located in a presidentially declared major disaster area. This assistance can be provided \"for a period of not more than two years after the date on which the President\" has declared the area a major disaster. As part of its legislative mandate to evaluate each SBDC, in 2003, the SBA's Office of Entrepreneurial Development designed \"a multi-year time series study to assess the impact of the programs it offers to small businesses.\" The survey has been administered annually in partnership with a private firm. The 2014 survey was sent to 70,262 SBDC clients who had received five or more hours of counseling assistance in calendar year 2012. The survey was administered in the spring and summer of 2013. A total of 10,407 surveys (14.8% return rate) were completed either by mail, email, or the internet. The 2014 survey indicated that, of the SBDC clients 90.7% reported that the services they received from SBDC counselors were beneficial; 87.8% reported that the knowledge and expertise of their SBDC counselor was excellent (66.0%) or above average (21.8%); 86.2% reported that their overall working relationship with their SBDC counselor was excellent (68.9%) or above average (17.3%); and 94.4% reported that they would recommend that other businesspersons contact the SBDC. As mentioned previously, P.L. 114-88 , among other things, authorizes the SBA to provide up to two years of additional funding to its management and training resource partners to assist small businesses located in a presidentially declared major disaster area and authorizes SBDCs to provide assistance outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is in a presidentially declared major disaster area. This assistance can be provided \"for a period of not more than two years after the date on which the President\" has declared the area a major disaster. Also, H.R. 1774 , the Developing the Next Generation of Small Businesses Act of 2017, introduced during the 115 th Congress, among other provisions, would have required the SBA to only use authorized entrepreneurial development programs (SCORE, WBCs, SBDCs, etc.) \"to deliver entrepreneurial development services, entrepreneurial education, support for the development and maintenance of clusters, or business training\" and would have added SBDC data collection and reporting requirements. Similar legislation was introduced during the 114 th Congress ( H.R. 207 and S. 999 ). Congress authorized the SBA's Microloan lending program in 1991 ( P.L. 102-140 , the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1992) to address the perceived disadvantages faced by women, low-income, veteran, and minority entrepreneurs and business owners gaining access to capital for starting or expanding their business. The program became operational in 1992. Its stated purpose is to assist women, low-income, veteran ... and minority entrepreneurs and business owners and other individuals possessing the capability to operate successful business concerns; to assist small business concerns in those areas suffering from a lack of credit due to economic downturns; ... to make loans to eligible intermediaries to enable such intermediaries to provide small-scale loans, particularly loans in amounts averaging not more than $10,000, to start-up, newly established, or growing small business concerns for working capital or the acquisition of materials, supplies, or equipment; [and] to make grants to eligible intermediaries that, together with non-Federal matching funds, will enable such intermediaries to provide intensive marketing, management, and technical assistance to microloan borrowers. Initially, the SBA's Microloan program was authorized as a five-year demonstration project. It was made permanent, subject to reauthorization, by P.L. 105-135 , the Small Business Reauthorization Act of 1997. The SBA's Microloan Technical Assistance Program, which is affiliated with the SBA's Microloan lending program but receives a separate appropriation, provides grants to Microloan intermediaries to provide management and technical training assistance to Microloan program borrowers and prospective borrowers. There are currently 147 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico. Intermediaries are eligible to receive a Microloan technical assistance grant \"of not more than 25% of the total outstanding balance of loans made to it\" under the Microloan program. Grant funds may be used only to provide marketing, management, and technical assistance to Microloan borrowers, except that no more than 50% of the funds may be used to provide such assistance to prospective Microloan borrowers and no more than 50% of the funds may be awarded to third parties to provide that technical assistance. Grant funds also may be used to attend required training. In most instances, intermediaries must contribute, solely from nonfederal sources, an amount equal to 25% of the grant amount. In addition to cash or other direct funding, the contribution may include indirect costs or in-kind contributions paid for under nonfederal programs. The SBA does not require Microloan borrowers to participate in the Microloan Technical Assistance Program. However, intermediaries typically require Microloan borrowers to participate in the training program as a condition of the receipt of a microloan. Combining loan and intensive management and technical assistance training is one of the Microloan program's distinguishing features. As shown in Table 3 , the Microloan Technical Assistance Program provided counseling services to 21,800 small businesses in FY2018 and there were 147 grant eligible microloan intermediaries. The program was appropriated $22.3 million in FY2015, $25.0 million in FY2016, and $31.0 million in FY2017, FY2018, and FY2019 (see Table 1 ). The Trump Administration requested $25.0 million for the program in FY2018 and $25.0 million in FY2019. As mentioned previously, P.L. 115-141 , among other provisions, relaxed requirements that Microloan intermediaries may spend no more than 25% of Microloan technical assistance grant funds on prospective borrowers and no more than 25% of those funds on contracts with third parties to provide that technical assistance by increasing those percentages to no more than 50%. These provisions were originally in H.R. 2056 and S. 526 . During the 114 th Congress, H.R. 2670 and S. 1857 (its Senate companion bill) would have required the SBA administrator to establish a rule enabling intermediaries to apply for a waiver to the requirement that no more than 25% of Microloan technical assistance grant funds may be used to provide technical assistance to prospective borrowers. The Women's Business Center (WBC) Renewable Grant Program was initially established by P.L. 100-533 , the Women's Business Ownership Act of 1988, as the Women's Business Demonstration Pilot Program. The act directed the SBA to provide financial assistance to private, nonprofit organizations to conduct demonstration projects giving financial, management, and marketing assistance to small businesses, including start-up businesses, owned and controlled by women. Since its inception, the program has targeted the needs of socially and economically disadvantaged women. The WBC program was expanded and provided permanent legislative status by P.L. 109-108 , the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006. Since the program's inception, the SBA has awarded WBCs a grant of up to $150,000 per year. Initially, the grant was awarded for one year, with the possibility of being renewed twice, for a total of up to three years. As a condition of the receipt of funds, the WBC was required to raise at least one nonfederal dollar for each two federal dollars during the grant's first year (1:2), one nonfederal dollar for each federal dollar during year two (1:1), and two nonfederal dollars for each federal dollar during year three (2:1). Over the years, Congress has extended the length of the WBC program's grant award and reduced the program's matching requirement. Today, WBC initial grants are awarded for up to five years, consisting of a base period of 12 months from the date of the award and four 12-month option periods. The SBA determines if the option periods are exercised and makes that determination subject to the continuation of program authority, the availability of funds, and the recipient organization's compliance with federal law, SBA regulations, and the terms and conditions specified in a cooperative agreement. WBCs that successfully complete the initial five-year grant period may apply for an unlimited number of three-year funding intervals. During their initial five-year grant period, WBCs are now required to provide a nonfederal match of one nonfederal dollar for each two federal dollars in years one and two (1:2), and one nonfederal dollar for each federal dollar in years three, four and five (1:1). After the initial five-year grant period, the matching requirement in subsequent three-year funding intervals is not more than 50% of federal funding (1:1). The nonfederal match may consist of cash, in-kind, and program income. Today, there are 128 WBCs located throughout most of the United States and the territories. As shown in Table 4 , WBCs provided assistance to 151,861 clients in FY2018 (123,680 clients received technical assistance training services and 28,181 clients were advised), and assisted in the formation of 11,687 new businesses. Congress recommended that the WBC program receive $15.0 million in FY2015, $17.0 million in FY2016, $18.0 million in FY2017, $18.0 million in FY2018, and $18.5 million in FY2019 (see Table 1 ). The Trump Administration requested $16.0 million for the program for FY2018 and $16.0 million for FY2019. P.L. 105-135 required the SBA to \"develop and implement an annual programmatic and financial examination of each\" WBC. As part of its legislative mandate to implement an annual programmatic and financial examination of each WBC, the SBA's Office of Entrepreneurial Development includes WBCs in its previously mentioned multiyear time series study of its programs. Data from the SBA's 2014 client survey concerning WBCs are not yet available. The firm administering the 2013 survey of SBA management and training clients contacted 2,997 WBC clients and received 529 completed surveys (17.7% return rate). The survey indicated that 80% of WBC clients reported that the services they received from counselors were useful or very useful, 2% had no opinion, and 18% reported that the services they received from counselors were somewhat useful or not useful; 61% of WBC clients reported that they changed their management practices/strategies as a result of the assistance they received; and the top five changes to management practices involved their business plan (56%), marketing plan (46%), general management (36%), cash flow analysis (31%), and financial strategy (30%). As mentioned earlier, P.L. 114-88 expanded the role of WBCs by authorizing the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area. In addition, H.R. 1774 , introduced during the 115 th Congress, would have required the SBA to use only authorized entrepreneurial development programs (SCORE, WBCs, SBDCs, etc.) to deliver specified entrepreneurial development services; authorized to be appropriated $21.75 million for WBCs for each of FY2018-FY2021 (WBCs received $18.0 million in FY2018); increased the WBC annual grant award from not more than $150,000 to not more than $185,000 (adjusted annually to reflect change in inflation); authorized the award of an additional $65,000 to WBCs under specified circumstances; and authorized the SBA to waive, in whole or in part, the WBC nonfederal matching requirement for up to two consecutive fiscal years under specified circumstances. Similar legislation was introduced during the 114 th Congress ( H.R. 207 and S. 2126 ). The SBA has supported management and technical assistance training for veteran-owned small businesses since its formation as an agency. However, during the 1990s, some in Congress noted that a direct loan program for veterans was eliminated by the SBA in 1995 and that the \"training and counseling for veterans dropped from 38,775 total counseling sessions for veterans in 1993 to 29,821 sessions in 1998.\" Concerned that \"the needs of veterans have been diminished systematically at the SBA,\" Congress adopted P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999. The act reemphasized the SBA's responsibility \"to reach out to and include veterans in its programs providing financial and technical assistance.\" It also included veterans as a target group for the SBA's 7(a), 504/CDC, and Microloan programs. In addition, it required the SBA to enter into a memorandum of understanding with SCORE to, among other things, establish \"a program to coordinate counseling and training regarding entrepreneurship to veterans through the chapters of SCORE throughout the United States.\" The act also directed the SBA to enter into a memorandum of understanding with SBDCs, the Department of Veteran Affairs, and the National Veterans Business Development Corporation \"with respect to entrepreneurial assistance to veterans, including service-disabled veterans.\" It specified, among other things, that the SBA conduct and distribute studies on the formation, management, financing, marketing, and operation of small business concerns by veterans; provide training and counseling on these topics to veterans; assist veterans regarding procurement opportunities with federal, state, and local agencies, especially agencies funded in whole or in part with federal funds; and provide internet or other distance-learning academic instruction for veterans in business subjects, including accounting, marketing, and business fundamentals. The SBA's Office of Veterans Business Development (OVBD) was established to address these statutory requirements. The OVBD currently administers several management and training programs to assist veteran-owned businesses, including the following: The Entrepreneurship Bootcamp for Veterans with Disabilities Consortium of Universities provides \"experiential training in entrepreneurship and small business management to post-9/11 veterans with disabilities\" at eight universities. The Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE) program, administered through a cooperative agreement with Syracuse University, offers women veterans a 15-day, online course on entrepreneurship skills and the \"language of business,\" followed by a 3-day conference (offered twice a year at varying locations) in which participants \"are exposed to successful entrepreneurs and CEOs of Fortune 500 companies and leaders in government\" and participate in courses on business planning, marketing, accounting and finance, operations and production, human resources, and work-life balance. The Operation Endure and Grow Program, administered through a cooperative agreement with Syracuse University, offers an eight-week online training program on \"the fundamentals of launching and/or growing a small business\" and is available to National Guard and reservists and their family members. The Boots to Business program (started in 2012), which is \"an elective track within the Department of Defense's revised Training Assistance Program called Transition Goals, Plans, Success (Transition GPS) and has three parts: the Entrepreneurship Track Overview—a 10-minute introductory video shown during the mandatory five-day Transition GPS course which introduces entrepreneurship as a post-service career option; Introduction to Entrepreneurship—a two-day classroom course on entrepreneurship and business fundamentals offered as one of the three Transition GPS elective tracks; and Foundations of Entrepreneurship—an eight-week, instructor-led online course that offers in-depth instruction on the elements of a business plan and tips and techniques for starting a business.\" The Boots to Business Reboot program (started in 2014) assists veterans who have already transitioned to civilian life. The Veterans Business Outreach Centers (VBOC) program provides veterans and their spouses management and technical assistance training at 22 locations, including assistance with the Boots to Business program, the development and maintenance of a five-year business plan, and referrals to other SBA resource partners when appropriate for additional training or mentoring services. Prior to FY2016, Congress recommended appropriations for VBOCs and the Boots to Business initiative. Funding for the OVBD's other veterans assistance programs was provided through the SBA's salaries and expenses account. Starting in FY2016, Congress has recommended a single amount for all OVBD programs (currently $12.7 million) (see Table 1 ). The Trump Administration requested $11.25 million for these programs in FY2018 and $11.25 million in FY2019. As shown in Table 5 , VBOCs trained or advised 51,945 veterans in FY2018 and 17,167 veterans participated in the Boots to Business Initiative. The SBA has partnered with various voluntary business and professional service organizations to provide management and technical assistance training to small businesses since the 1950s. On October 5, 1964, using authority under the Small Business Act to provide \"technical and managerial aids to small business concerns\" in cooperation with \"educational and other nonprofit organizations, associations, and institutions,\" then-SBA Administrator Eugene P. Foley officially launched SCORE (Service Corps of Retired Executives) as a national, volunteer organization with 2,000 members, uniting more than 50 independent nonprofit organizations into a single, national nonprofit organization. Since then, the SBA has provided financial assistance to SCORE to provide training to small business owners and prospective owners. Over the years, Congress has authorized the SBA to take certain actions relating to SCORE. For example, P.L. 89-754, the Demonstration Cities and Metropolitan Development Act of 1966, authorized the SBA to permit members of nonprofit organizations use of the SBA's office facilities and services. P.L. 90-104, the Small Business Act Amendments of 1967, added the authority to pay travel and subsistence expenses \"incurred at the request of the Administration in connection with travel to a point more than fifty miles distant from the home of that individual in providing gratuitous services to small businessmen\" or \"in connection with attendance at meetings sponsored by the Administration.\" P.L. 93-113 , the Domestic Volunteer Service Act of 1973, was the first statute to mention SCORE directly, providing the Director of ACTION authority to work with SCORE to \"expand the application of their expertise beyond Small Business Administration clients.\" P.L. 95-510 , a bill to amend the Small Business Act, provided the SBA explicit statutory authorization to work with SCORE (Section 8(b)(1)(B)). P.L. 106-554 , the Consolidated Appropriations Act, 2001 (Section 1(a)(9)—the Small Business Reauthorization Act of 2000) authorized SCORE to solicit cash and in-kind contributions from the private sector to be used to carry out its functions. The SBA currently provides grants to SCORE to provide in-person mentoring, online training, and \"nearly 9,000 local training workshops annually\" to small businesses. SCORE's 350 chapters and more than 800 branch offices are located throughout the United States and partner with more than 11,000 volunteer counselors, who are working or retired business owners, executives and corporate leaders, to provide management and training assistance to small businesses \"at no charge or at very low cost.\" As shown in Table 6 , SCORE's volunteer network of business professionals provided assistance to 686,208 clients in FY2018 (559,805 clients received technical assistance training services and 126,403 client received counseling services). Congress recommended that SCORE receive $8.0 million in FY2015, $10.5 million in FY2016 and FY2017, $11.5 million in FY2018, and $11.7 million in FY2019 (see Table 1 ). The Trump Administration requested $9.9 million for the program in FY2018 and FY2019. The SBA Office of Entrepreneurial Development includes SCORE in its multiyear time series study to assess its programs' effectiveness. The 2014 survey was sent to 124,612 SCORE clients who had a valid email address and received at least one mentoring session in any form (telephone, online/email, in-person, or other form) during FY2013 (October 2012-September 2013). The survey was initially distributed by email, and telephone calls were used as a follow-up to ensure at least 30 responses were received from each responding SCORE chapter. The survey was administered between October 2013 and December 2013. A total of 13,548 surveys (10.9% return rate) were completed either by email or telephone, representing 318 of SCORE's then-330 chapters. The 2014 survey indicated that, of the SCORE clients 60.9% reported that they strongly agreed (32.2%) or agreed (28.7%) with the following statement: SCORE is important to my success; 44.8% reported that they strongly agreed (18.4%) or agreed (26.4%) with the following statement: As a result of working with SCORE, I have changed my business strategies or practices; 32.6% reported that they strongly agreed (12.1%) or agreed (20.5%) with the following statement: Working with SCORE helped me add employees in the past year; and 51.8% reported that they strongly agreed (17.0%) or agreed (34.8%) with the following statement: Working with SCORE helped me grow my business revenue. As mentioned earlier, P.L. 114-88 expanded SCORE's role by authorizing the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area. In addition, H.R. 1774 , introduced during the 115 th Congress, would have required the SBA to use only authorized entrepreneurial development programs (SCORE, WBCs, SBDCs, etc.) to deliver specified entrepreneurial development services; modified SCORE program requirements with respect to the role of participating volunteers, program plans and goals, and reporting; and added language concerning the provision and reporting of online counseling by SCORE. Similar legislation was introduced during the 114 th Congress ( H.R. 207 , H.R. 4788 , and S. 1000 ). P.L. 106-102 , the Gramm-Leach-Bliley Act (of 1999) (Subtitle C—Microenterprise Technical Assistance and Capacity Building Program), amended P.L. 103-325 , the Riegle Community Development and Regulatory Improvement Act of 1994, to authorize the SBA to \"establish a microenterprise technical assistance and capacity building grant program.\" The program was to \"provide assistance from the Administration in the form of grants\" to nonprofit microenterprise development organizations or programs (or a group or collaborative thereof) that has a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; an intermediary; a microenterprise development organization or program that is accountable to a local community, working in conjunction with a state or local government or Indian tribe; or an Indian tribe acting on its own, if the Indian tribe can certify that no private organization or program referred to in this paragraph exists within its jurisdiction.\" The SBA was directed \"to ensure that not less than 50% of the grants … are used to benefit very low-income persons, including those residing on Indian reservations.\" It was also directed to (1) provide training and technical assistance to disadvantaged entrepreneurs; (2) provide training and capacity building services to microenterprise development organizations and programs and groups of such organizations to assist such organizations and programs in developing microenterprise training and services; (3) aid in researching and developing the best practices in the field of microenterprise and technical assistance programs for disadvantaged entrepreneurs; and (4) for such other activities as the Administrator determines are consistent with the purposes of this subtitle. The SBA's PRIME program was designed to meet these legislative requirements by providing assistance to organizations that \"help low-income entrepreneurs who lack sufficient training and education to gain access to capital to establish and expand their small businesses.\" The program offers four types of grants: Technical Assistance Grants support training and technical assistance to disadvantaged microentrepreneurs, Capacity Building Grants support training and capacity building services to microenterprise development organizations and programs to assist them in developing microenterprise training and services, Research and Development Grants support the development and sharing of best practices in the field of microenterprise development and technical assistance programs for disadvantaged microentrepreneurs, and Discretionary Grants support other activities determined to be consistent with these purposes. Grants are awarded on an annual basis. Applicants may be approved for option year funding for up to four subsequent years. Award amounts vary depending on the availability of funds. However, no single grantee may receive more than $250,000 or 10% of the total funds made available for the program in a single fiscal year, whichever is less. The minimum grant award for technical assistance and capacity building grants is $50,000. There is no minimum grant award amount for research and development or discretionary grants. The SBA typically awards at least 75% of the grant funds for technical assistance, at least 15% for capacity building, and the remainder for research and development or discretionary activities. Recipients must match 50% of the funding from nonfederal sources. Revenue from fees, grants, and gifts; income from loan sources; and in-kind resources from nonfederal public or private sources may be used to comply with the matching requirement. SBA regulations indicate that \"applicants or grantees with severe constraints on available sources of matching funds may request that the Administrator or designee reduce or eliminate the matching requirements.\" Any reductions or eliminations must not exceed 10% of the aggregate of all PRIME grant funds made available by SBA in any fiscal year. Table 7 provides the number and amount of PRIME awards from FY2014 to FY2018. Congress has recommended that the PRIME program receive $5.0 million in each fiscal year since FY2015 (see Table 1 ). As mentioned previously, the Obama Administration recommended in its FY2012-FY2017 budget requests that funding for the PRIME program be eliminated. It argued that the PRIME program overlaps and duplicates the SBA's Microloan Technical Assistance Program. The Trump Administration requested that the program receive no funding in FY2018 and FY2019. Using what it viewed as broad statutory powers granted under Section 8(a) of the Small Business Act of 1958, as amended, the SBA issued regulations in 1970 creating the 8(a) contracting program to \"assist small concerns owned by disadvantaged persons to become self-sufficient, viable businesses capable of competing effectively in the market place.\" Using its statutory authority under Section 7(j) of the Small Business Act to provide management and technical assistance through contracts, grants, and cooperative agreement to qualified service providers, the regulations specified that \"the SBA may provide technical and management assistance to assist in the performance of the subcontracts.\" On October 24, 1978, P.L. 95-507 , to amend the Small Business Act and the Small Business Investment Act of 1958, provided the SBA explicit statutory authority to extend financial, management, technical, and other services to socially and economically disadvantaged small businesses. The SBA's current regulations indicate that the 7(j) Management and Technical Assistance Program, named after the section of the Small Business Act of 1958, as amended, authorizing the SBA to provide management and technical assistance training, will, \"through its private sector service providers\" deliver \"a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities.\" Eligible individuals and businesses include \"8(a) certified firms, small disadvantaged businesses, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals.\" As shown on Table 8 , the 7(j) program assisted 6,483 small business owners in FY2018. Congress has recommended that the 7(j) program receive $2.8 million in each fiscal year since FY2015 (see Table 1 ). The Trump Administration requested $2.8 million for the program in FY2018 and FY2019. The SBA established the Office of Native American Affairs in 1994 to \"address the unique needs of America's First people.\" It oversees the Native American Outreach Program, which provides management and technical educational assistance to American Indians, Alaska Natives, Native Hawaiians, and \"the indigenous people of Guam and American Samoa … to promote entity-owned and individual 8(a) certification, government contracting, entrepreneurial education, and capital access.\" The program's management and technical assistance services are available to members of these groups living in most areas of the nation. However, \"for Native Americans living in much of Indian Country, actual reservations communities where the land is held in trust by the U.S. federal government, SBA loan guaranties and technical assistance services are not available.\" In FY2018, the SBA's Office of Native American Affairs assisted 1,549 small businesses. It provided workshops on business development and financial literacy, training webinars, incubator training, and online classes for Native American entrepreneurs. Congress has recommended that the Native American Outreach Program receive $2.0 million in each fiscal year since FY2015 (see Table 1 ). The Trump Administration requested $1.5 million for the program in FY2018 and FY2019. In addition to the Boots to Business initiative discussed under \" Veterans Business Development Programs ,\" Congress has recommended appropriations for the following three Obama Administration management and training initiatives: the Entrepreneurial Development Initiative (Regional Innovation Clusters), Entrepreneurial Education, and Growth Accelerators. The SBA has supported regional innovation clusters since FY2009, when it partnered with small business suppliers working in the field of robotics in Michigan. In FY2010, the SBA was involved in the rollouts of two additional clusters: another robotics cluster in southeast Virginia and a cluster involving a partnership with the Department of Energy and several other federal agencies with the goal of developing a regional cluster in energy efficiency homes and businesses. In FY2011, SBA awarded funds to 10 regional innovation clusters. In FY2012, these clusters \"spurred $48 million in private capital raised through venture and angel capital sources, $6.5 million in early stage investment from SBIR [Small Business Innovation Research program] and STTR [Small Business Technology Transfer program] awards, and over $217 million in contracts or subcontracts from the federal government.\" President Obama requested, and Congress recommended, an appropriation of $5.0 million for the SBA's Entrepreneurial Development Initiative (Regional Innovation Clusters) in FY2014. Congress recommended that the program receive $6.0 million in FY2015, $6.0 million in FY2016, and $5.0 million in each fiscal year since FY2017 (see Table 1 ). The Trump Administration requested that the program receive no funds in FY2018 and in FY2019. The SBA reports that there are currently 56 federally supported regional innovation clusters, with the SBA directly involved in 40 of them. The SBA describes regional innovation clusters as \"on-the-ground collaborations between business, research, education, financing and government institutions that work to develop and grow a particular industry or related set of industries in a particular geographic region.\" Targeted activities for the 40 clusters currently being supported by the SBA include \"business development, intellectual property matters, export and import development, finance, marketing, commercialization of new technology and federal and private-sector supply chain opportunities.\" The SBA started its Entrepreneurship Education initiative in 2008. At that time, it was called the Emerging 200 Underserved initiative (E200), reflecting the initiative's provision of assistance to 200 inner city small businesses. In FY2009, it was renamed the Emerging Leaders initiative to reflect the SBA's decision to increase the number of small businesses participating in the initiative. It was renamed the Entrepreneurial Education initiative in FY2013, and it is funded under that name in appropriation acts, but the SBA, and others, often still call it the Emerging Leaders Initiative. The initiative currently offers high‐growth small businesses in underserved communities a seven‐month executive leader education series that elevates their growth trajectory, creates jobs, and contributes to the economic well‐being of their local communities. Participants receive more than 100 hours of specialized training, technical resources, a professional networking system, and other resources to strengthen their business model and promote economic development within urban communities. At the conclusion of the training, participants produce a three‐year strategic growth action plan with benchmarks and performance targets that help them access the necessary support and resources to move forward for the next stage of business growth. The Entrepreneurial Education initiative was initially offered in 10 communities (Albuquerque, Atlanta, Baltimore, Boston, Chicago, Des Moines, Memphis, Milwaukee, New Orleans, and Philadelphia) and provided training to 200 inner city small businesses. The program was funded through the SBA's Office of Entrepreneurship Education. Since the initiative's inception, the SBA has requested separate appropriations to fund and expand the initiative. In FY2012, the initiative offered training in 27 communities, with more than 450 small businesses participating. The Obama Administration requested $40.0 million in its FY2014 budget request to sponsor entrepreneur training in 40 locations and to create an online entrepreneurship training program. Congress included the Entrepreneurship Education initiative in its list of SBA entrepreneurial development/noncredit programs to be funded in FY2014. This was the first time that the initiative was included in the list. In the explanatory statement accompanying the Consolidated Appropriations Act, 2014, Congress recommended that the initiative receive $5.0 million in FY2014. Congress recommended that the program receive $7.0 million in FY2015, $10.0 million in FY2016 and FY2017, $6.0 million in FY2018, and $3.5 million in FY2019 (see Table 1 ). The Trump Administration requested $2.0 million for the program in FY2018 and FY2019. The Entrepreneurship Education initiative was offered in 60 cities in FY2018 and served more than 800 small business owners. These owners are required to have been in business for at least three years, have annual revenue of at least $400,000, and have at least one employee, other than the owner, to participate in the initiative. There is no cost to the participants. The SBA describes growth accelerators as \"organizations that help entrepreneurs start and scale their businesses.\" Growth accelerators are typically run by experienced entrepreneurs and help small businesses access seed capital and mentors. The SBA claims that growth accelerators \"help accelerate a startup company's path towards success with targeted advice on revenue growth, job, and sourcing outside funding.\" In FY2012, the SBA sponsored several meetings with university officials and faculty, entrepreneurs, and representatives of growth accelerators to discuss mentoring and how to best assist \"high-growth\" entrepreneurs. These meetings \"culminated with a White House event co‐hosted by the SBA and the Department of Commerce to help formalize the network of universities and accelerators, provide a series of 'train the trainers' events on various government programs that benefit high‐growth entrepreneurs, and provide a playbook of best practices on engaging universities on innovation and entrepreneurship.\" In FY2014, the Obama Administration requested $5.0 million, and Congress recommended an appropriation of $2.5 million, for the growth accelerator initiative. The Obama Administration proposed to use the funding to provide matching grants to universities and private sector accelerators \"to start a new accelerator program (based on successful models) or scale an existing program.\" The Obama Administration also indicated that it planned to request funding for five years ($25 million in total funding) and feature a required 4:1 private-sector match. However, because it received half of its budget request ($2.5 million), the SBA decided to reconsider the program's requirements. As part of that reconsideration, the SBA decided to drop the 4:1 private-sector match in an effort to enable the program to have a larger effect. The SBA announced the availability of 50 growth accelerator grants of $50,000 each on May 12, 2014, and received more than 800 applications by the August 2, 2014, deadline. The 50 awards were announced in September 2014. Congress recommended that the program receive $4.0 million in FY2015, $1.0 million in FY2016, FY2017, and FY2018, and $2 million in FY2019 (see Table 1 ). Congress also directed the SBA in its explanatory statements accompanying P.L. 113-235 and P.L. 114-113 to \"require $4 of matching funds for every $1 awarded under the growth accelerators program.\" The Trump Administration requested that the program receive no funding in FY2018 and FY2019. The SBA announced the award of 80 growth accelerator grants of $50,000 each on August 4, 2015 ($4.0 million), 68 growth accelerator grants of $50,000 each on August 31, 2016 ($3.4 million), and 20 growth accelerator grants of $50,000 each on October 30, 2017 ($1 million). The SBA did not issue a competitive announcement for Growth Accelerator awards in FY2018. The SBA plans to make Growth Accelerator awards in FY2019 using both the FY2018 and FY2019 funding amounts. As mentioned previously, the Department of Commerce's Minority Business Development Agency (MBDA) provides training to minority business owners to assist them in obtaining contracts and financial awards. In addition, the Department of Commerce's Economic Development Administration's Local Technical Assistance Program promotes efforts to build and expand local organizational capacity in distressed areas. As part of that effort, it funds projects that focus on technical or market feasibility studies of economic development projects or programs, which often include consultation with small businesses. The MBDA was established by President Richard M. Nixon by Executive Order 11625, issued on October 13, 1971, and published in the Federal Register the next day. It clarified the authority of the Secretary of Commerce to implement federal policy in support of the minority business enterprise program, provide additional technical and management assistance to disadvantaged businesses, assist in demonstration projects, and coordinate the participation of all federal departments and agencies in an increased minority enterprise effort. The MBDA received an appropriation of $30.0 million in FY2015, $32.0 million in FY2016, $34.0 million in FY2017, $39.0 million in FY2018, and $40 million in FY2019. The Trump Administration requested $6.0 million to close the agency in FY2018 and a reduction to $10.0 million in FY2019. As part of its mission, the MBDA seeks to train minority business owners to become first- or second-tier suppliers to private corporations and the federal government. Progress is measured in the business's increased gross receipts, number of employees, and size and scale of the firms associated with minority business enterprises. The MBDA reported that in FY2015 it helped to create and retain 36,896 jobs and assisted minority-owned and operated businesses in obtaining more than $5.9 billion in contracts and capital awards. P.L. 89-186, the Public Works and Economic Development Act of 1965, authorized the Department of Commerce's Economic Development Administration (EDA) to provide financial assistance to economically distressed areas in the United States that are characterized by high levels of unemployment and low per-capita income. The EDA currently administers seven Economic Development Assistance Programs (EDAPs) that award matching grants for public works, economic adjustment, planning, technical assistance, research and evaluation, trade adjustment assistance, and global climate change mitigation. Grants awarded under the EDA's Local Technical Assistance Program are designed to help solve specific economic development problems, respond to development opportunities, and build and expand local organizational capacity in distressed areas. The majority of local technical assistance projects focus on technical or market feasibility studies of economic development projects or programs, including consultation with small businesses. The EDA's Local Technical Assistance Program received an appropriation of $11.0 million in FY2015, $10.5 million in FY2016, $9.0 million in FY2017, and $9.5 million in FY2018 and FY2019. The Trump Administration requested $30.0 million to close the EDA in FY2018 and $14.9 million to close it in FY2019. For many years, a recurring theme at congressional hearings concerning the SBA's management and technical assistance training programs has been the perceived need to improve program efficiency by eliminating duplication of services or increasing cooperation and coordination both within and among SCORE, WBCs, and SBDCs. For example, the House Committee on Small Business has argued that the SBA's various management and technical assistance training programs should be \"folded into the mission of the SBDC program or their responsibilities should be taken over by other agencies\" because they \"overlap each other and duplicate the educational services provided by other agencies.\" In addition, as mentioned previously, the Obama Administration recommended that the PRIME program be eliminated, arguing that it overlaps and duplicates the SBA's Microloan Technical Assistance Program. The Trump Administration has also recommended that the PRIME program, the Growth Accelerators Initiative, and the Entrepreneurial Development Initiative (Regional Innovation Clusters) be eliminated because they overlap private-sector \"mechanisms to foster local business development and investment\" or are \"duplicative of other federal programs.\" In contrast, Congress has approved continued funding for these programs and the Boots to Business and Boots to Business: Reboot initiatives. In recent years, Congress has also explored ways to improve the SBA's measurement of its management and training programs' effectiveness. In 2007, the U.S. Government Accountability Office (GAO) was asked to assess the SBA's oversight of WBCs and the coordination and duplication of services among the SBA's management and technical training assistance programs. GAO found that As described in the terms of the SBA award, WBCs are required to coordinate with local SBDCs and SCORE chapters. In addition, SBA officials told us that they expected district offices to ensure that the programs did not duplicate each other. However, based on our review, WBCs lacked guidance and information from SBA on how to successfully carry out their coordination efforts. Most of the WBCs that we spoke with explained that in some situations they referred clients to an SBDC or SCORE counselor, and some WBCs also took steps to more actively coordinate with local SBDCs and SCORE chapters to avoid duplication and leverage resources. We learned that WBCs used a variety of approaches to facilitate coordination, such as memorandums of understanding, information-sharing meetings, and co-locating staff and services. However, some WBCs told us that they faced challenges in coordinating services with SBDC and SCORE, in part because the programs have similar performance measures, and this could result in competition among the service providers in some locations. We also found that on some occasions SBA encouraged WBCs to provide services that were similar to services already provided by SBDCs in their district. Such challenges thwart coordination efforts and could increase the risk of duplication in some geographic areas. Some organizations have argued that the SBA's management and technical assistance training programs should be merged. For example, the U.S. Women's Chamber of Commerce argued that over the last 50 years, the SBA entrepreneurial development system has grown into a fragmented array of programs, which has resulted in a disorganized, overlapping, and [in] efficient delivery of service through a system that is ill-prepared to effectively address the challenges of our economy…. if we are to serve the needs of American entrepreneurs, we must commit to a top to bottom restructuring of the delivery of the entrepreneurial services of the SBA. The myriad of entrepreneurial development programs should be unified into one centrally managed organization that has the flexibility to provide services when and where they are needed. These organizations argue that merging the SBA's management and technical assistance training programs would provide greater coordination of services and \"one clear channel for assistance\" that \"is paramount to the average business owner seeking help.\" Advocates of merging the SBA's management and technical assistance training programs often mention merging them into the SBDC Program because, in their view, it has the advantage of having a broader connection to mainstream resources and its locations are \"greater and more diverse\" than other SBA management and technical assistance training programs. Others argue that providing separate management and training assistance programs for specific groups is the best means to ensure that those groups' unique challenges are recognized and their unique needs are met. For example, when asked at a congressional hearing about the rationale for having separate management and technical assistance training programs for specific groups, a representative of the Association of Women's Business Centers stated, I think that there is tremendous rationale for having different programs…. The women's business center programs really target a very different kind of population than the SBDCs.… We serve very different clientele…. We create a very different culture at the women's business center. We really have made it a welcoming place where … they feel comfortable.… And it's very important to me that the woman have a place where they feel comfortable … and where they see other women like themselves who are aspiring to reach their dreams. At another congressional hearing, the Association of Women's Business Centers' executive director argued that \"the new three-year funding arrangement\" for WBCs had enabled them to \"concentrate on better serving their clients and growing their programs\" and that WBCs should be provided continued and expanded funding because they provide effective services: We know that when our program performance is measured against any other enterprise assistance program, we will meet or exceed any performance measures. Indeed, the SBA's own client-based performance reviews have shown our clients to be just as satisfied or in some cases more satisfied with the services they have received compared to the SBA's other entrepreneurial development efforts. Instead of merging programs, some argue that improved communication among the SBA's management and technical assistance training resource partners and enhanced SBA program oversight is needed. For example, during the 111 th Congress, the House passed H.R. 2352 , the Job Creation Through Entrepreneurship Act of 2009, on May 20, 2009, by a vote of 406-15. The Senate did not take action on the bill. In its committee report accompanying the bill, the House Committee on Small Business concluded that Each ED [Entrepreneurial Development] program has a unique mandate and service delivery approach that is customized to its particular clients. However, as a network, the programs have established local connections and resources that benefit entrepreneurs within a region. Enhanced coordination among this network is critical to make the most of scarce resources available for small firms. It can also ensure that best practices are shared amongst providers that have similar goals but work within different contexts. In an effort to enhance the oversight and coordination of the SBA's management and technical assistance training programs, the Job Creation Through Entrepreneurship Act of 2009 would have required the SBA to create a new online, multilingual distance training and education program that was fully integrated into the SBA's existing management and technical assistance training programs and \"allows entrepreneurs and small business owners the opportunity to exchange technical assistance through the sharing of information.\" coordinate its management and technical assistance training programs \"with State and local economic development agencies and other federal agencies as appropriate.\" \"report annually to Congress, in consultation with other federal departments and agencies as appropriate, on opportunities to foster coordination, limit duplication, and improve program delivery for federal entrepreneurial development activities.\" During the 112 th Congress, S. 3442 , the SUCCESS Act of 2012, and S. 3572 , the Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012, sought to address the coordination issue by requiring the SBA, in consultation with other federal departments and agencies, to submit an annual report to Congress \"describing opportunities to foster coordination of, limit duplication among, and improve program delivery for federal entrepreneurial development programs.\" The SUCCESS Act of 2012 was referred to the Senate Committee on Small Business and Entrepreneurship, which held hearings on the bill. The Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012 was referred to the Senate Committee on Finance. There has also been some discussion of merging SBA's small business management and training programs with business management and training programs offered by other federal agencies, both as a means to improve program performance and to achieve savings. For example, P.L. 111-139 , Increasing the Statutory Limit on the Public Debt, requires GAO to \"conduct routine investigations to identify programs, agencies, offices, and initiatives with duplicative goals and activities within Departments and governmentwide and report annually to Congress on the findings.\" GAO identified 51 programmatic areas in its 2012 annual report on federal duplication \"where programs may be able to achieve greater efficiencies or become more effective in providing government services.\" GAO identified management and training assistance provided to businesses by the SBA and the Departments of Commerce, Housing and Urban Development, and Agriculture as one of these areas. GAO identified 53 business management and technical assistance programs sponsored by the SBA and these three departments. GAO reported that \"the number of programs that support entrepreneurs—53—and the overlap among these programs raise questions about whether a fragmented system is the most effective way to support entrepreneurs. By exploring alternatives, agencies may be able to determine whether there are more efficient ways to continue to serve the unique needs of entrepreneurs, including consolidating various programs.\" As mentioned previously, the House Committee on Small Business has argued that \"given tight budgetary constraints\" the SBA's various management and technical assistance training programs \"should be folded into the mission of the SBDC program or their responsibilities should be taken over by other agencies.\" The House Committee on Small Business has also indicated its opposition to the Obama Administration's increased use of, and requests for increased funding for, management and training initiatives. For example, Representative Sam Graves, then-chair of the House Committee on Small Business, indicated in his opening remarks at a congressional hearing in April 2014 that Despite reports that the federal government is riddled with redundant [management and training] programs for entrepreneurs, the SBA has increasingly spawned its own entrepreneurial development initiatives. In doing so, the SBA has repeatedly requested increased funding for its own initiatives while allowing funding for statutorily authorized programs, such as SBDCs, to remain static.… I continue to question the necessity of these initiatives given the potential overlap with both private and public sector efforts already in existence. In addition, as mentioned previously, H.R. 1774 would, among other provisions, require the SBA to only use authorized entrepreneurial development programs (SCORE, WBCs, SBDCs, etc.) to deliver specified entrepreneurial development services. GAO noted in its 2007 assessment of the SBA's management and technical assistance training programs that, in addition to its annual survey of WBC, SBDC, and SCORE participants, the SBA requires WBCs to provide quarterly performance reports that include \"the WBCs' actual accomplishments, compared with their performance goals for the reporting period; actual budget expenditures, compared with an estimated budget; cost of client fees; success stories; and names of WBC personnel and board members.\" GAO also noted that WBCs are also required to issue fourth quarter performance reports that \"also include a summary of the year's activities and economic impact data that the WBCs collect from their clients, such as number of business start-ups, number of jobs created, and gross receipts.\" SBDCs have similar reporting requirements. In recent years, Congress has considered requiring the SBA to expand its use of outcome-based measures to determine the effectiveness of its management and technical training assistance programs. For example, during the 111 th Congress, the previously mentioned Job Creation Through Entrepreneurship Act of 2009 would have required the SBA to create \"outcome-based measures of the amount of job creation or economic activity generated in the local community as a result of efforts made and services provided by each women's business center.\" It would also have required the SBA to \"develop and implement a consistent data collection process to cover all entrepreneurial development programs\" including \"data relating to job creation, performance, and any other data determined appropriate by the Administrator with respect to the Administration's entrepreneurial development programs.\" During the 112 th Congress, the SUCCESS Act of 2012 and Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012 would have required the SBA to \"promulgate a rule to develop and implement a consistent data collection process for the entrepreneurial development programs\" that included data \"relating to job creation and performance and any other data determined appropriate by the Administrator.\" During the 114 th Congress, H.R. 207 would have required the SBA to issue an annual report concerning \"all entrepreneurial development activities undertaken in the current fiscal year.\" This report would include a description and operating details for each program and activity; operating circulars, manuals, and standard operating procedures for each program and activity; a description of the process used to award grants under each program and activity; a list of all awardees, contractors, and vendors and the amount of awards provided for the current fiscal year for each program and activity; the amount of funding obligated for the current fiscal year for each program and activity; and the names and titles for those individuals responsible for each program and activity. This legislative language was reintroduced during the 115 th Congress in H.R. 1774 , the Developing the Next Generation of Small Businesses Act of 2017. Congressional interest in the federal government's small business management and technical assistance training programs has increased in recent years. One of the reasons for the heightened level of interest in these programs is that small business has led job formation and retention during previous economic recoveries. It has been argued that effective small business management and technical assistance training programs are needed if small businesses are to lead job creation and retention during the current economic recovery. As then-Representative Heath Shuler stated during a congressional hearing in 2009: We often talk about the role that small business plays in the creation of jobs and with good reason. Small firms generate between 60 and 80 percent of new positions. Following the recession in the mid-1990s, they created 3.8 million jobs…. we could use that growth today. But unfortunately, many firms are struggling to make ends meet. Let's allow them to hire new workers. In the face of historic economic challenges, we should be investing in America's job creators. SBA's Entrepreneurial Development Programs, or ED, do just that. Of all the tools in the small business toolbox, these are some of the most critical. They help small firms do everything from draft business plans to access capital. The general consensus is that federal management and technical assistance training programs serve an important purpose and, for the most part, are providing needed services that are not available elsewhere. As Karen Mills, then-SBA administrator, stated during a press interview in 2010: We find that our counseling operations are equally important as our credit operations because small businesses really need help and advice, and when they get it, they tend to have more sales and more profits and more longevity, and they hire more people. So we have looked forward and said, \"How do we get all the tools small businesses need into their hands?\" Maybe they want to export. Maybe they want to know how to use broadband. Maybe they are veterans who are coming back and want to start a business or grow their business. Our job is to make sure all that information and opportunity is accessible for small businesses so they can do what they do, which is keep our economy strong. There is also a general consensus that making federal management and technical assistance training programs more effective and responsive to the needs of small business would assist the national economic recovery. However, there are disagreements over how to achieve that goal. Some advocate (1) increasing funding for existing programs to enable them to provide additional training opportunities for small businesses while, at the same time, maintaining separate training programs for specific demographic groups as a means to ensure that those groups' specific needs are met; (2) requiring the SBA to make more extensive use of outcome-based measures to better determine the programs' effect on small business formation and retention, job creation and retention, and the generation of wealth; and (3) temporarily reducing or eliminating federal matching requirements to enable SBA's management and technical assistance training resource partners to focus greater attention to service delivery and less to fund raising. Others argue for a merger of existing programs to reduce costs and improve program efficiency, to focus available resources on augmenting the capacity of SBDCs to meet the needs of all small business groups, and require the SBA to make more extensive use of outcome-based performance measures to determine program effectiveness. No case studies or empirical data are available concerning the efficiencies that might be gained by merging the SBA's management and technical assistance training programs. Advocates argue that merging the programs would improve communications, reduce confusion by business owners seeking assistance by ensuring that all small business management and technical assistance training centers serve all small business owners and aspiring entrepreneurs, lead to more sustainable and predictable funding for the programs from nonfederal sources, and result in more consistent and standard operating procedures throughout the country. Opponents argue that any gains in program efficiency that might be realized would be more than offset by the loss of targeted services for constituencies that often require different information and training to meet their unique challenges and needs.", "summary": "The Small Business Administration (SBA) has provided technical and managerial assistance to small businesses since it began operations in 1953. Initially, the SBA provided its own small business management and technical assistance training programs. Over time, the SBA has relied increasingly on third parties to provide that training. Congressional interest in the SBA's management and technical assistance training programs ($226.7 million in FY2019) has increased in recent years, primarily because these programs are viewed as a means to assist small businesses create and retain jobs. These programs fund about \"14,000 resource partners,\" including 63 lead small business development centers (SBDCs) and nearly 900 SBDC local outreach locations, 128 women's business centers (WBCs), and 350 chapters of the mentoring program, SCORE. The SBA reports that more than 1.2 million aspiring entrepreneurs and small business owners receive training from an SBA-supported resource partner each year. The Department of Commerce also provides management and technical assistance training for small businesses. For example, its Minority Business Development Agency provides training to minority business owners to assist them in obtaining contracts and financial awards. Some have argued that the SBA could improve program efficiency by eliminating duplication of services across federal agencies and improving cooperation and coordination among the SBA's resource partners. Congress has also explored ways to improve the SBA's measurement of these programs' effectiveness. This report examines the historical development of federal small business management and technical assistance training programs; describes their current structures, operations, and budgets; and assesses their administration and oversight and the measures used to determine their effectiveness. It also discusses legislation to improve program performance, including P.L. 114-88, the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE After Disaster Act of 2015), which, among other things, authorizes the SBA to provide up to two years of additional funding to its resource partners to assist small businesses located in a presidentially declared major disaster area and authorizes SBDCs to provide assistance outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is in a presidentially declared major disaster area. This assistance can be provided \"for a period of not more than two years after the date on which the President\" has declared the area a major disaster; and P.L. 115-141, the Consolidated Appropriations Act of 2018, among other provisions, relaxed requirements that Microloan intermediaries may spend no more than 25% of Microloan technical assistance grant funds on prospective borrowers and no more than 25% of those funds on contracts with third parties to provide that technical assistance by increasing those percentages to no more than 50%.", "document_type": "crs"}
{"report": "The Elementary and Secondary Education Act (ESEA), most recently comprehensively amended by the Every Student Succeeds Act (ESSA; P.L. 114-95 ), is the primary source of federal aid to elementary and secondary education. Title I-A is the largest program in the ESEA, funded at $15.8 billion for FY2018. Title I-A is designed to provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. The U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). This report provides estimated FY2018 state grant amounts under each of the four formulas used to determine Title I-A grants. For a general overview of the Title I-A formulas, see CRS Report R44164, ESEA Title I-A Formulas: In Brief . For a more detailed discussion of the Title I-A formulas, see CRS Report R44461, Allocation of Funds Under Title I-A of the Elementary and Secondary Education Act . Under Title I-A, funds are allocated to LEAs via state educational agencies (SEAs) using the four Title I-A formulas. Annual appropriations bills specify portions of each year's Title I-A appropriation to be allocated to LEAs and states under each of the formulas. In FY2018, about 41% of Title I-A appropriations were allocated through the Basic Grants formula, 9% through the Concentration Grants formula, and 25% each through the Targeted Grants and EFIG formulas. Once funds reach LEAs, the amounts allocated under the four formulas are combined and used jointly. For each formula, a maximum grant is calculated by multiplying a \"formula child count,\" consisting primarily of estimated numbers of school-age children living in families in poverty, by an \"expenditure factor\" based on state average per pupil expenditures for public elementary and secondary education. In some of the Title I-A formulas, additional factors are multiplied by the formula child count and expenditure factor to determine a maximum grant amount. These maximum grants are then reduced to equal the level of available appropriations for each formula, taking into account a variety of state and LEA minimum grant provisions. In general, LEAs must have a minimum number of formula children and/or a minimum formula child rate to be eligible to receive a grant under a specific Title I-A formula. Some LEAs may qualify for a grant under only one formula, while other LEAs may be eligible to receive grants under multiple formulas. Under three of the formulas—Basic, Concentration, and Targeted Grants—funds are initially calculated at the LEA level. State grants are the total of allocations for all LEAs in the state, adjusted for state minimum grant provisions. Under EFIG, grants are first calculated for each state overall and then are subsequently suballocated to LEAs within the state using a different formula. FY2018 grants included in this report were calculated by ED. The percentage share of funds allocated under each of the Title I-A formulas was calculated by CRS for each state by dividing the total grant received by the total amount allocated under each formula. Table 1 provides each state's estimated grant amount and percentage share of funds allocated under each of the Title I-A formulas for FY2018. Total Title I-A grants for each state, calculated by summing the state level grant for each of the four formulas, are also shown in Table 1 . Overall, California received the largest total Title I-A grant amount ($2.0 billion) and, as a result, the largest percentage share (12.76%) of Title I-A grants. Wyoming received the smallest total Title I-A grant amount ($35.9 million) and, as a result, the smallest percentage share (0.23%) of Title I-A grants. In general, grant amounts for states vary among formulas due to the different allocation amounts for the formulas. For example, the Basic Grant formula receives a greater share of overall Title I-A appropriations than the Concentration Grant formula, so states generally receive higher estimated grant amounts under the Basic Grant formula than under the Concentration Grant formula. Among states, Title I-A grant amounts and the percentage shares of funds vary due to the different characteristics of each state. For example, Texas has a larger population of children included in the formula calculations than North Carolina and, therefore, is estimated to receive a higher estimated grant amount and larger share of Title I-A funds. Within a state, the percentage share of funds allocated may vary by formula, as certain formulas are more favorable to certain types of states (e.g., EFIG is generally more favorable to states with comparatively equal levels of spending per pupil among their LEAs). If a state's share of a given Title I-A formula exceeds its share of overall Title I-A funds, this is generally an indication that this particular formula is more favorable to the state than formulas under which the state's share of funds is below its overall share of Title I-A funds. For example, Florida, Nevada, New York, and Texas are estimated to receive a higher percentage share of Targeted Grants than of overall Title I-A funds, indicating that the Targeted Grant formula is more favorable to them than other Title I-A formulas may be. At the same time, all four states are estimated to receive a smaller percentage share of Basic Grants than of overall Title I-A funds, indicating that the Basic Grant formula is less favorable to them than other Title I-A formulas may be. In states that are estimated to receive a minimum grant under all four formulas (North Dakota, South Dakota, Vermont, and Wyoming), the shares under the Targeted Grant and EFIG formulas are greater than under the Basic Grant or Concentration Grant formulas, due to higher state minimums under these formulas. If a state received the minimum grant under a given Title I-A formula, the grant amount is denoted with an asterisk (*) in Table 1 . ", "summary": "The Elementary and Secondary Education Act (ESEA), most recently comprehensively amended by the Every Student Succeeds Act (ESSA; P.L. 114-95), is the primary source of federal aid to K-12 education. The Title I-A program is the largest grant program authorized under the ESEA and was funded at $15.8 billion for FY2018. It is designed to provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. Under current law, the U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). The four Title I-A formulas have somewhat distinct allocation patterns, providing varying shares of allocated funds to different types of states. Thus, for some states, certain formulas are more favorable than others. This report provides FY2018 state grant amounts under each of the four formulas used to determine Title I-A grants. Overall, California received the largest FY2018 Title I-A grant amount ($2.0 billion, or 12.76% of total Title I-A grants). Wyoming received the smallest FY2018 Title I-A grant amount ($35.9 million, or 0.23% of total Title I-A grants).", "document_type": "crs"}
{"report": "F irearms have a unique significance in American society. Millions own or use firearms for numerous lawful purposes, such as hunting and protecting themselves in the home. Still, firearms annually cause tens of thousands of injuries and deaths, including in high-profile mass shootings. The widespread lawful and unlawful uses of firearms have prompted vigorous debate over wheth er further firearm regulation would be effective or appropriate. And framing the policy debate are legal issues stemming from the existing federal framework of firearms laws and the constitutional constraints that may cabin Congress's ability to legislate in this area. Firearms regulation at the federal level has grown more expansive over time, setting rules for the lawful manufacture, sale, and possession of firearms at the national level. These federal firearms laws mostly serve as a baseline that states can (and sometimes do) supplement, and Congress regularly considers legislation to address perceived gaps in these laws. Proposals to modify the current federal framework for regulating firearms may be informed by numerous constitutional considerations, including the scope of the Second Amendment right to keep and bear arms and the need to ground legislation in one of Congress's enumerated powers. This report provides an overview of the development of federal firearms laws and the major components of the current statutory regimes governing firearms. It then describes the constitutional considerations that may impact Congress's ability to enact firearms laws. Finally, this report describes selected topical areas where the 115 th and 116 th Congresses have considered legislation to amend the existing federal framework regulating firearms, highlighting some of the constitutional issues that may arise in those areas. Federal laws regulating firearms date back roughly a century, and over time lawmakers have established more stringent requirements for the transfer, possession, and transportation of firearms. Though not a regulation of firearms per se, an excise tax was levied on imported firearms and ammunition beginning in 1919. In 1927, a federal law was enacted prohibiting the use of the U.S. Postal Service to ship concealable firearms. Then, \"[s]purred by the bloody 'Tommy gun' era\" of the 1920s and early 1930s, Congress passed the National Firearms Act of 1934 (NFA), which established a stringent taxation and registration scheme for specified weapons associated with the Prohibition-fueled gang violence of the time. A few years later, Congress enacted the Federal Firearms Act of 1938 (FFA), which created a licensing scheme for the manufacture, importation, and sale of firearms and established limited categories of persons who could not possess firearms. The FFA eventually was superseded, however, by the more comprehensive Gun Control Act of 1968 (GCA). In addition to expanding the FFA's licensing scheme and categories of prohibited persons—which largely had been restricted to certain criminals—the GCA augmented the criminal penalties available for violations and established procedures for obtaining relief from firearm disabilities. Since the GCA's passage, intervening legislation has amended the regulatory regime significantly. For instance, the Firearm Owners' Protection Act of 1986 (FOPA) carved out exceptions to the felony firearm prohibition for certain crimes, repealed certain regulations pertaining to ammunition, expressly prohibited the creation of a national gun registry, added additional categories of persons who are barred from possessing firearms, prohibited the private possession of machineguns manufactured on or after the date of FOPA's enactment, and further expanded the available criminal penalties for violations, among other things. Additionally, the Brady Handgun Violence Protection Act of 1993 (Brady Act) mandated that the Attorney General create a background check system—the National Instant Criminal Background Check System (NICS)—which queries various government records that could indicate that a prospective transferee is ineligible to receive a firearm. The Brady Act further required that a background check be run for many, but not all, proposed firearms transfers before they can be completed. And the Gun-Free School Zones Act added a provision to the GCA that, subject to certain exceptions, bans firearms in statutorily defined school zones. In 1994, Congress also imposed a 10-year moratorium on the manufacture, transfer, or possession of \"semiautomatic assault weapons,\" as defined in the act, and large capacity ammunition feeding devices, but the ban was permitted to expire in 2004. Finally, some piecemeal legislation in recent years has sought to protect lawful firearm owners, manufacturers, or dealers in certain ways. For example, the Protection of Lawful Commerce in Arms Act, enacted in 2005, grants civil immunity to firearm manufacturers, dealers, and importers when weapons made or sold by them are misused by others. Firearms regulation in the United States is an area of shared authority among federal, state, and local governments. Individual states have enacted a variety of laws relating to the possession, registration, and carrying of firearms, among other things. However, federal law establishes a baseline regulatory framework that state and local laws may not contradict. Thus, the current collection of federal firearms laws may be thought of as a regulatory floor that sets out, at the federal level, the minimum requirements for lawful manufacture, sale, and possession of firearms. The two principal federal firearms laws currently in force are the NFA and the GCA, as amended. The Department of Justice's Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is the principal agency charged with administering these laws. The NFA was the first major piece of federal legislation regulating the sale and possession of firearms. Through a taxation and registration scheme, the law sought to curb the rise of violence connected to organized crime by targeting the types of weapons that (at the time of passage) were commonly used by gang members. In its current form, the NFA regulates the manufacture, transfer, and possession of certain enumerated weapons deemed to be \"particularly dangerous\" : (1) short-barreled shotguns, defined as having a barrel length under 18 inches; (2) short-barreled rifles, defined as having a barrel length under 16 inches; (3) modified shotguns or rifles with an overall length under 26 inches; (4) machineguns, defined as weapons—including frames or receivers—that shoot \"automatically more than one shot, without manual reloading, by a single function of the trigger,\" as well as parts intended to convert other weapons into machineguns; (5) silencers; (6) \"destructive devices,\" including bombs, grenades, rockets, and mines; and finally (7) a catchall category of \"any other weapon\" that is \"capable of being concealed on the person from which a shot can be discharged through the energy of an explosive,\" among other things. The NFA explicitly exempts from regulation antique firearms and other devices that are primarily \"collector's item[s]\" not likely to be used as weapons. All NFA firearms that are produced or imported—as well as their manufacturers, dealers, or importers—must be authorized by and registered with the Attorney General (previously, the Secretary of the Treasury). Any transfer of an NFA firearm must likewise be accompanied by a registration in the name of the transferee. The registrations of all NFA firearms not in the possession or under the control of the United States are maintained in a central registry, and all persons possessing NFA firearms must retain proof that such firearms have been registered. Any NFA firearm that is produced or imported must be identifiable, with firearms that are not destructive devices bearing, among other things, a serial number that \"may not be readily removed, obliterated, or altered.\" Every importer, manufacturer, and dealer in NFA firearms must pay an annual \"special (occupational) tax for each place of business,\" and a separate tax must also be paid for each firearm made. Upon transfer of an NFA firearm, the transferor is subject to a tax of a varying amount depending on whether the firearm to be transferred falls under the catchall category of \"any other weapon.\" A number of tax exemptions exist. Most notably, firearms made by or transferred to the United States, any state, any political subdivision of a state, or any official police organization engaged in criminal investigations are exempted, as are firearms made by or transferred between qualified manufacturers or dealers. A person who violates or fails to comply with the requirements of the NFA is subject to a fine of up to $10,000, imprisonment for up to 10 years, or both. Firearms involved in violations are also subject to forfeiture. To be criminally culpable for a violation of the NFA, one generally must have knowledge of the features of the firearm that make it a \"firearm\" under the statute, but one need not know that such a firearm is unregistered. As originally enacted, a person compelled by the NFA to disclose possession through registration could then be prosecuted if the registration reflected that the person was barred by other legal provisions from possessing firearms. However, the Supreme Court ruled in Haynes v. United States that this forced disclosure of potentially incriminating information violated the Fifth Amendment to the U.S. Constitution, which provides in part that no person \"shall be compelled in any criminal case to be a witness against himself[.]\" Haynes prompted Congress to amend the statute to make clear, among other things, that no information from registration records that are required to be submitted or retained by a natural person may be used as evidence against that person in a criminal proceeding for a violation of law occurring prior to or concurrently with the filing of the records, unless the prosecution relates to the furnishing of false information. As amended, the Court has rejected a subsequent challenge to the NFA on Fifth Amendment grounds. Congress passed the GCA in the wake of the assassinations of Dr. Martin Luther King Jr. and Senator Robert Kennedy to \"keep firearms out of the hands of those not legally entitled to possess them because of age, criminal background, or incompetency and to assist law enforcement authorities in the states and their subdivisions in combating the increasing prevalence of crime in the United States.\" Among other things, the statute represented \"a Congressional attempt to stem the traffic in dangerous weapons being used in an increasing number of crimes involving personal injury.\" As enacted, the GCA expanded the existing licensing scheme for the manufacture, importation, and sale of firearms and augmented a previously enacted prohibition on the possession of firearms by certain categories of persons (including felons and \"mental defective[s]\"). It also supplemented available criminal penalties and established procedures for obtaining relief from firearms disabilities. The GCA today is not a single statute but rather a complex statutory regime that has been supplemented regularly in the decades since its inception. Broadly speaking, the GCA, as amended, regulates the manufacture, transfer, and possession of firearms, extending to categories of weapons that fall outside the scope of the NFA. In general terms, the GCA sets forth who can—and cannot—sell, purchase, and possess firearms; how those sales and purchases may lawfully take place; what firearms may lawfully be possessed; and where firearm possession may be restricted. Major components of the GCA and related supplementing statutes are discussed below, focusing on (1) licensing requirements for firearm manufacturers and dealers, (2) prohibitions on firearm possession, (3) background checks for firearm purchases, (4) interstate firearm sales and transfers, and (5) penalties. The GCA regulates the manufacture and sale of firearms by requiring persons and organizations \"engaged in the [firearms] business\"—that is, importers, manufacturers, and dealers—to obtain a license from the federal government and pay an annual fee. These persons and entities are commonly known as Federal Firearm Licensees, or FFLs. Applicants must meet various requirements to become FFLs, including being at least 21 years of age, maintaining a premises from which to conduct business that meets safety standards, and certifying compliance with applicable state and local laws. Upon licensing, FFLs are subject to recordkeeping and reporting obligations with respect to the disposition of firearms to non-FFLs and must identify imported or manufactured firearms by means of a serial number, among other things. FFLs also must comply with background-check requirements and certain other transfer restrictions discussed in more detail below. An FFL who willfully violates any provision of the GCA or implementing regulations may, after notice and opportunity for hearing, have his or her license revoked. In this context, a \"willful\" violation means that the FFL purposefully disregarded or was plainly indifferent to his or her known legal obligation. A key question with respect to the GCA's licensing regime is what it means to be \"engaged in the [firearms] business.\" Manufacturers are considered to be \"engaged in the business\" if they \"devote time, attention, and labor to manufacturing firearms as a regular course of trade or business with the principal objective of livelihood and profit through the sale or distribution of firearms manufactured.\" And dealers are considered to be \"engaged in the business\" if they \"devote[] time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms.\" A person is not \"engaged in the business\" of dealing in firearms, however, if that person \"makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms.\" Accordingly, if a person falls within this definitional exclusion, he or she is not subject to the licensing regime and other FFL requirements, such as conducting background checks. There have been a number of court decisions shedding further light on what it means to be \"engaged in the business\" of dealing in firearms under the GCA, which is a fact-specific question that is dependent on the particular circumstances of the case. Even though the statute mandates that, to require a license, the dealer's principal objective in selling firearms must be livelihood and profit, courts have recognized that firearms sales need not be the person's sole source of income or main occupation. Instead, relevant factors include (1) the quantity and frequency of firearms sales; (2) sale location; (3) how the sales occurred; (4) the defendant's behavior before, during, and after the sales; (5) the type of firearms sold and prices charged; and (6) the defendant's intent at the time of the sales. At least one federal appellate court appears to apply a broad standard, requiring the government to prove only that the defendant holds himself out as a source of firearms. Furthermore, because the number of firearms sold is typically only one of many factors courts consider, convictions under the GCA for unlawfully dealing in firearms without a license have been sustained for as few as two or four firearms sales. The GCA regulates firearm possession in several ways. Principally, the statute establishes categories of persons who, because of risk-related characteristics, may not possess firearms. Possession of certain types of firearms, as well as possession of firearms in certain locations , also are restricted. Under the GCA, it is unlawful for a person who falls into at least one of nine categories to ship, transport, possess, or receive any firearms or ammunition. Specifically, a person is prohibited if he or she is a felon (i.e., someone who has been convicted in any court of a crime punishable by a term of imprisonment exceeding one year); is a fugitive from justice; is an unlawful user of, or is addicted to, any controlled substance; has been adjudicated as a \"mental defective\" or committed to a mental institution; has been admitted to the United States pursuant to a nonimmigrant visa or is an unlawfully present alien; has been dishonorably discharged from the Armed Forces; has renounced his or her U.S. citizenship; is subject to a court order preventing that person from harassing, stalking, or threatening an intimate partner (or that partner's child) or engaging in other conduct that would cause the partner to reasonably fear bodily injury to himself or herself or the child; or has been convicted in any court of a misdemeanor crime of domestic violence. A separate GCA provision prohibits anyone—not just FFLs—from selling or otherwise disposing of a firearm if that person knows or has \"reasonable cause\" to believe that the prospective recipient fits into any of the above categories. Additionally, a person under indictment for a crime punishable by a term of imprisonment exceeding one year is not barred by the GCA from possessing a firearm but may not receive, ship, or transport a firearm. In other words, a person who has been charged with a felony need not forfeit already-owned firearms, but he or she may not acquire new ones while the charges are pending. The GCA also places significant restrictions on the transfer to, and possession of, firearms by persons under the age of 18. Because a number of the terms in the individual prohibitions of Section 922(g) are not defined by statute, the contours of some of the prohibitions have had to be fleshed out by regulations and judicial construction. Some of the interpretative issues raised with respect to these prohibitions are discussed briefly below. \" Possession \" by a prohibited person . For possession of a firearm by a prohibited person to be unlawful, that possession may be \"actual\" or \"constructive.\" Actual possession occurs when a person exercises physical control over a firearm. Constructive possession exists when a person has the power to exercise dominion and control over a firearm directly or through others. For example, actual possession may be found when, during a traffic stop, a police officer pats down the driver and discovers a firearm in the driver's waistband. Constructive possession, on the other hand, may be found when, during a traffic stop, an officer observes a firearm not on the driver's person but elsewhere inside the vehicle. Although proximity to a firearm, alone, is insufficient to establish constructive possession, the totality of the circumstances—including other evidence of a connection to the firearm, movements implying control, or the defendant's activities before and after the discovery—is used to establish constructive possession. Persons prohibited due to a conviction for a felony or misdemeanor crime of domestic violence \"in any court . \" The prohibitions on possession of a firearm by a person convicted of a felony or a misdemeanor crime of domestic violence \"in any court,\" which are among the most frequently enforced prohibitions in the statute, raise the question of what constitutes \"any court.\" Initially, federal courts took an expansive view of the term. For instance, in holding that a military court-martial is a court within the meaning of the GCA, a 1997 opinion from the Seventh Circuit Court of Appeals used the dictionary definition of the word any : Looking to section 922(g)(1), we find nothing that defines or limits the term \"court,\" only a requirement that a conviction have been \"in any court\" in the course of prohibiting possession of firearms by a felon. Certainly \"any court\" includes a military court, the adjective \"any\" expanding the term \"court\" to include \"one or some indiscriminately of whatever kind\"; \"one that is selected without restriction or limitation of choice\"; or \"all.\" Additionally, some federal courts had concluded that a conviction in \"any court,\" for the purposes of determining a firearm disability, included convictions in foreign courts. But in resolving a circuit split over this issue, the Supreme Court interpreted the phrase to cover only domestic convictions in its 2005 ruling Small v. United States . In a 5-4 decision, the Court adopted a more limited interpretation of the GCA's reference to \"any\" court than employed by the Seventh Circuit and other lower courts. In reaching its conclusion, the Court applied the legal presumption that \"Congress ordinarily intends its statutes to have domestic, not extraterritorial application.\" The Court ruled that this presumption against extraterritorial application was particularly relevant to the GCA, given the many potential differences between foreign and domestic convictions and \"the potential unfairness of preventing those with inapt foreign convictions from possessing guns.\" The Court additionally reasoned that nothing in the GCA's text or legislative history suggests that the act was intended to allow foreign convictions to give rise to a firearms disability. Although the Supreme Court's opinion in Small abrogated lower court rulings holding that foreign convictions serve as a predicate offense for the GCA's firearm ban for felons, the opinion did not directly disturb earlier rulings holding that U.S. military convictions count for the ban. And a conviction by a court-martial does not appear to raise any of the concerns mentioned by the Supreme Court in Small about foreign convictions. Federal courts have not found tension with Small when analyzing the related issue of whether a court-martial conviction is encompassed by the term any court in statutes that provide heightened penalties for certain repeat offenders. For instance, the Eighth Circuit opined that courts-martial proceedings maintain a connection to the U.S. government, given that they were created by Congress and are governed by federal statute. And the Fourth Circuit reasoned that, although there are some differences between courts-martial and civilian courts, they do not \"rise to the level of contrasts between domestic and foreign courts that Small highlighted.\" Accordingly, a conviction by a court-martial for a crime punishable by a term exceeding one year or a misdemeanor crime of domestic violence likely would qualify as a conviction in \"any court\" for the purposes of the GCA's firearm disqualifiers. Prohibition applicable to nonimmigrant visa holders . With respect to the prohibition for aliens admitted to the United States pursuant to nonimmigrant visas, the terms of the provision do not explicitly prohibit firearm possession for aliens otherwise admitted (e.g., those admitted on an immigrant visa, through the Visa Waiver Program, as refugees, or without a visa for brief visits for business or tourism by Canadian citizens and certain residents of the Caribbean islands). Initially, ATF interpreted the GCA provision barring firearm possession for aliens admitted on nonimmigrant visas as encompassing all foreign nationals in nonimmigrant status in the United States, including those categories of nonimmigrant aliens who do not need a visa to enter the United States. ATF reasoned that Congress intended for the prohibition to cover all nonimmigrant aliens, given that a nonimmigrant visa is needed for fewer than 50% of nonimmigrants entering the United States and merely \"facilitates travel\" rather than conferring nonimmigrant status. However, the DOJ's Office of Legal Counsel (OLC) overruled ATF's interpretation in 2011. \"The text is clear,\" OLC said, \"the provision applies only to nonimmigrant aliens who must have visas to be admitted , not to all aliens with nonimmigrant status.\" Additionally, OLC rejected ATF's contention that \"applying the [firearm] prohibit[ion] to only a particular subset of nonimmigrants would produce 'irrational' results.\" Rather, OLC opined that Congress could have rationally concluded that nonimmigrants eligible for admission without a visa are less of a public safety risk or that nonimmigrants on brief visits to the United States may be less likely to purchase a firearm. In response, ATF issued a final rule imposing the firearm prohibition on only those nonimmigrants admitted to the United States with a nonimmigrant visa. ATF further announced that \"[n]onimmigrant aliens lawfully admitted to the United States without a visa, pursuant either to the Visa Waiver Program or other exemptions from visa requirements, will not be prohibited from … possessing firearms.\" Prohibition applicable to those who unlawfully use or are addicted to a controlled substance . The prohibition on firearm possession by those who unlawfully use or are addicted to controlled substances also raises the question of what it means to be an \"unlawful user\" or \"addicted.\" Regulations define the terms as including those who have \"lost the power of self-control with reference to the use of [a] controlled substance,\" as well as \"current user[s]\" of a controlled substance \"in a manner other than as prescribed by a licensed physician.\" The regulations make clear that one need not be using a controlled substance \"at the precise time\" a firearm is sought so long as use has occurred \"recently enough to indicate that the individual is actively engaged in such conduct.\" Prosecutions and court decisions appear to focus on the term unlawful user , which establishes a lower disability threshold than \"addict[].\" Cases interpreting the term \"typically discuss two concepts: contemporaneousness and regularity,\" requiring that there be some \"pattern\" and \"recency\" of controlled-substance use. For this reason, the prohibition appears to be temporary—that is, one may \"regain his right to possess a firearm simply by ending his drug abuse.\" Prohibition applicable to a person \"adjudicated as a mental defective\" or \"committed to a mental institutio n.\" The GCA is likewise silent as to the meaning of the terms adjudicated as a mental defective and committed to a mental institution for purposes of that prohibition. The term adjudicated as a mental defective has been interpreted in federal regulations, however, as: (a) A determination by a court, board, commission, or other lawful authority that a person, as a result of marked subnormal intelligence, or mental illness, incompetency, condition, or disease: (1) Is a danger to himself or to others; or (2) Lacks the capacity to manage his own affairs. (b) The term shall include—(1) a finding of insanity by a court in a criminal case, and (2) those persons found incompetent to stand trial or found not guilty by lack of mental responsibility [under the Uniform Code of Military Justice]. Prior to the issuance of the regulatory definition, at least one court had construed the term mental defective narrowly, encompassing only those who have \"never possessed a normal degree of intellectual capacity\" and excluding persons with \"faculties which were originally normal [but which] have been impaired by mental disease.\" The term committed to a mental institution has also been interpreted in regulations as including a \"formal commitment\" for \"mental defectiveness,\" mental illness, or \"other reasons, such as drug use\" by a \"court, board, commission, or other lawful authority\" that is \"involuntary.\" Whether a person has been formally and involuntarily committed appears to be fact-specific and dependent on state law. Federal law generally does not bar the possession or sale of particular types of firearms, with two major caveats currently in effect. First, the Firearm Protection Owners' Act of 1986 amended the GCA to prohibit the transfer and possession of machineguns. This prohibition does not apply, however, to (1) the transfer to or from, or possession by (or under the authority of) federal or state authorities; and (2) the transfer or possession of a machinegun lawfully possessed before the effective date of the act (May 19, 1986). In response to the 2017 mass shooting in Las Vegas, ATF recently amended the regulatory definition of machinegun for purposes of the NFA and GCA to include bump-stock-type devices, i.e., devices that \"allow a shooter of a semiautomatic firearm to initiate a continuous firing cycle with a single pull of the trigger.\" The amended definition is effective as of March 26, 2019, rendering possession of bump-stock-type devices illegal (subject to exceptions) as of that date pursuant to the machinegun prohibition. Second, the Undetectable Firearms Act of 1988 (UFA) banned the manufacture, importation, possession, transfer, or receipt of firearms that are undetectable by x-ray machines or metal detectors at security checkpoints. The UFA has recently come under renewed scrutiny amid litigation over the dissemination of 3D-printed firearm designs that potentially could undermine the statute's requirements. Though most other types of firearms are lawful, possession of particular firearms may be prohibited based on external factors or the status of the possessor. For instance, it is unlawful to knowingly receive, possess, conceal, store, barter, sell, dispose of, or transport in interstate or foreign commerce any stolen firearm or stolen ammunition. Receipt, possession, and transportation of firearms that have had the importer's or manufacturer's serial number removed or altered are likewise prohibited. Additionally, juveniles—that is, persons under 18 years of age—are barred from knowingly possessing handguns and handgun ammunition, and others may not knowingly transfer such items to them. However, exception is made for, among other things, temporary transfers in the course of employment, ranching or farming activities or for target practice, hunting, or a safety course; possession in the line of duty by juvenile members of the Armed Forces or national guard; transfers of title by inheritance; and possession in defense of the juvenile or another against an intruder into certain residences. Beyond firearms themselves, the GCA prohibits any person from manufacturing or importing armor-piercing ammunition and any manufacturer or importer from selling or delivering such ammunition unless (1) the ammunition is for the use of the U.S. government, a state, or a political subdivision of a state; (2) the ammunition is to be exported; or (3) the ammunition is to be tested or used for experimentation as authorized by the Attorney General. A person who possesses armor-piercing ammunition with a firearm \"during and in relation to the commission of a crime of violence or drug trafficking crime\" is also subject to separate criminal sentencing provisions. Finally, a person who has been convicted of a felony crime of violence is barred from purchasing, owning, or possessing body armor unless the person has obtained prior written certification from his or her employer that the body armor is needed \"for the safe performance of lawful business activity\" and the armor's use is limited to the course of such performance. The GCA prohibits the possession of firearms in certain locations. For instance, subject to exceptions, firearms may not be possessed in a \"Federal facility,\" defined as a building (or part of a building) owned or leased by the federal government where federal employees are regularly present for performing their official employment. Additionally, loaded firearms are largely banned on federal land managed by the Army Corps of Engineers with exceptions for law enforcement, certain hunting and fishing activities, use at authorized shooting ranges, and with permission from the district commander. Firearms may generally be carried on most other kinds of federal lands, however, so long as the carrier is not otherwise prohibited by federal law from possessing a firearm and is complying with relevant local firearm laws. The Gun-Free School Zones Act (GFSZA) also amended the GCA to prohibit the knowing possession or discharge of a firearm in a school zone subject to exceptions for law enforcement and possession or discharge on private property not part of school grounds, among other things. As originally enacted, the GFSZA prohibited possession or discharge of any firearm in a school zone. The Supreme Court ruled in United States v. Lopez , however, that such a prohibition exceeded Congress's constitutional authority under the Commerce Clause. In response, Congress amended the statute in 1996 to make clear that it applies only to firearms that have \"moved in or that otherwise affect[] interstate or foreign commerce.\" Though the Supreme Court has not reconsidered the amended GFSZA, lower courts have generally upheld it on the basis of the added textual link to commerce. Several exceptions are set out in 18 U.S.C. § 925 to the firearm possession and transfer restrictions found elsewhere in the GCA. These exceptions primarily relate to firearms intended for the use of federal, state, or local governments or active duty military personnel. But Section 925 also authorizes a person who is barred by the GCA from possessing, transporting, or receiving firearms or ammunition to \"make application to the Attorney General for relief\" from the disability. The Attorney General has discretion to grant relief if the applicant establishes \"to his satisfaction\" that relief would not be contrary to the public interest and that the \"circumstances regarding the disability, and the applicant's record and reputation, are such that the applicant will not be likely to act in a manner dangerous to public safety.\" Review of the Attorney General's decision is available in federal district court. This relief-from-disability process has been essentially defunct since 1992, however, as Congress has annually included a provision in ATF appropriations measures prohibiting the expenditure of funds to act on petitions by individuals. Nevertheless, the NICS Improvement Amendments Act of 2007 (NIAA) established, as relevant here, alternative mechanisms for obtaining relief from one of the GCA's firearm disabilities: the disability based on adjudication as a \"mental defective\" or commitment to a mental institution. Under NIAA, federal departments or agencies making determinations pertinent to that disability—for example, the Department of Veterans Affairs (VA) —must establish programs permitting affected persons to apply for relief. Applications must be acted on within one year, and judicial review is available. Further, the statute encourages states to create similar programs through conditional grants. If an application for relief is granted under one of these programs, the adjudication or commitment \"is deemed not to have occurred\" for purposes of the GCA, meaning that the firearm prohibition no longer applies. As of December 2017, some three dozen states had enacted qualifying relief programs. The Brady Act requires FFLs—but not private parties who make occasional firearm sales from personal collections or as a hobby—to conduct background checks on prospective firearm purchasers who are not licensed dealers themselves in order to ensure that the purchasers are not prohibited from acquiring firearms under federal or state law. To implement the Brady Act, the FBI created the National Instant Criminal Background Check System (NICS), which launched in 1998. Between the enactment of the Brady Act and the launch of NICS, a set of interim provisions required background checks to be conducted through \"the chief law enforcement officer of the place of residence of the transferee,\" but the Supreme Court struck down those provisions as an unconstitutional usurpation of state executive prerogatives. Today, the NICS background check is completed either by a state \"point of contact\" (in states that have voluntarily agreed to provide that service) or, otherwise, by the FBI. Through NICS, FFLs can determine whether a prospective firearm purchaser is disqualified from receiving a firearm. NICS is comprised of three FBI-maintained databases The National Crime Information Center Database (NCIC) contains crime data related to persons and property, including persons subject to protective orders, fugitive records, and aliens who have been deported or are deportable because of committing certain crimes. The Interstate Identification Index System (III) contains criminal history information for persons who have been arrested or indicted for any federal or state felony or serious misdemeanor. The NICS Index was created solely for NICS checks and is a catchall index housing records that do not fit under NCIC or III, including mental health and immigration records. Because the three NICS databases rely on record submissions from multiple federal entities and voluntary submissions from individual states, they are not comprehensive catalogues of the records that could identify a person as being prohibited from possessing or purchasing a firearm. As discussed below, Congress has sought on multiple occasions to improve the processes by which records are collected and to make the databases more comprehensive. Generally, the NICS check will quickly tell the dealer whether the sale may or may not proceed, or if it must be delayed for further investigation. If a dealer receives a response that the sale must be delayed, and the NICS check does not further alert the dealer as to whether the prospective purchaser is disqualified within three business days, the sale may proceed at the dealer's discretion. However, the FFL must still verify the transferee's identity by examining a valid identification document. The extent to which NICS examiners continue to investigate delayed requests after the three-day period is unclear, but if an FFL receives a \"denied\" response after the third day and after the firearm has already been transferred, the FFL \"should notify\" the NICS Section of ATF that the transfer was completed. An FFL who receives a NICS response denying a transfer will not see the reason for the denial, but the prospective transferee may request the reason from the denying agency (either the FBI or the state or local agency in a point-of-contact state). The denying agency must provide the reason or reasons, in writing, within five business days of receiving the request. Prospective transferees who are denied firearms on the basis of a NICS background check have multiple avenues to challenge the denial. First, the prospective transferee may challenge the accuracy of a record on which the denial was based or assert that his or her right to possess a firearm has been restored by appealing to the denying agency. Second, if that agency cannot resolve the appeal, the prospective transferee may apply for correction of the record directly to the agency that originated the record. If a record is corrected as the result of an appeal, the prospective transferee and relevant agencies are to be notified, and the record is to be corrected in NICS. At this point, the contested firearm transfer may go forward if there are no other disqualifying records, though the FFL will be required to query NICS again if too much time has elapsed since the initial background check. Finally, as an alternative to the agency appeals process, a prospective firearm transferee may contest the accuracy or validity of a disqualifying record in court by bringing an action against the United States or the relevant state or political subdivision, as applicable. Although NICS records of approved firearms transfers containing transferees' identifying information are destroyed within 24 hours, transferees who may be subject to repeated, erroneous denials because of similarities in name or identifying information to prohibited persons may consent to the FBI's retention of their personal information in a \"Voluntary Appeal File\" for use in preventing \"the future erroneous denial or extended delay by the NICS of a firearm transfer.\" In an attempt to improve access to records concerning persons prohibited from possessing or receiving firearms because of mental illness, restraining orders, and misdemeanor domestic violence convictions, Congress passed the NIAA in early 2008. With respect to federal records, the statute (among other things) imposes a requirement that federal departments and agencies provide information in records pertaining to prohibited persons on a quarterly basis. With respect to state records, NIAA authorizes monetary incentives and penalties tied to submitting records to NICS. First, a state that provides at least 90% of its relevant records is eligible under NIAA for a waiver of a 10% matching requirement connected to an existing state grant program for upgrading criminal history and criminal justice record systems (among other things). To remain eligible for the waiver, a state must biannually certify that at least 90% of records have been made electronically available to the Attorney General. As another incentive, the statute directs the Attorney General to withhold, subject to waiver, up to 5% of funds available from the Edward Byrne Memorial Justice Assistance Grant Program (which provides federal funds for local law enforcement initiatives) if a state provides less than 90% of its available prohibiting records. NIAA also establishes additional grant programs that provide states with money to establish or update information and identification technologies for firearms eligibility determinations, automate record systems, and transmit to NICS the targeted prohibiting records. The recently enacted Fix NICS Act (Fix NICS) aims to further increase federal and state submission of prohibiting records to NICS through additional incentive and accountability measures. At the federal level, departments and agencies must semiannually certify whether they are submitting all prohibiting records on at least a quarterly basis. Federal departments and agencies also must each create an \"implementation plan\" within one year that is designed to \"ensure maximum coordination and automated reporting or making available of records to the Attorney General,\" and \"the verification of the accuracy of those records,\" with annual benchmarks. The Attorney General is to publish and semiannually submit to Congress the names of departments and agencies that fail to submit the required certification, fail to certify compliance with the reporting obligation, fail to create an implementation plan, or fail to obtain substantial compliance with the implementation plan. Political appointees within a federal department or agency that fail to either certify compliance or substantially comply with an implementation plan will be ineligible for bonus pay. At the state level, Fix NICS reauthorizes some of the grant programs established or utilized by NIAA and ties monetary incentives and preferences under those programs to state creation and substantial compliance with implementation plans like those required of federal departments and agencies. Names of states that do not achieve substantial compliance with their implementation plans are to be published by the Attorney General, while those states determined to be in substantial compliance will receive affirmative preference in Bureau of Justice Assistance discretionary grant applications. The GCA strictly limits the interstate transfer of firearms to non-FFLs. This limitation takes several forms. First, a non-FFL is barred from directly selling or transferring any firearm to any person (other than an FFL) whom the transferor knows or has reason to believe is not a resident of the state in which the transferor resides. Second, FFLs are prohibited from selling or shipping firearms directly to non-FFLs in other states, but FFLs may make in-person, over-the-counter sales of long guns (i.e., shotguns or rifles) to qualified individuals who are out-of-state residents so long as the sales fully comply with the legal conditions of both states. Handguns may be sold only to persons who are residents of the state in which the FFL's premises are located. Non-FFLs who lawfully purchase long guns from out-of-state dealers may transport those firearms back into their states of residence, but such persons are otherwise prohibited from directly transporting into or receiving in their states of residence any firearms purchased or obtained outside the state. Despite the substantial restrictions on interstate firearm sales, federal law ensures that lawful firearm owners may transport their weapons between jurisdictions where it is legal to \"possess and carry\" them without incurring criminal liability under inconsistent state or local laws so long as the firearms are transported in a specified manner. Current or retired law enforcement officers who meet certain requirements are also entitled to carry concealed firearms throughout the United States regardless of restrictions under state or local law. Violations of many of the prohibitions contained in the GCA and supplementing statutes are punishable as felonies, subjecting violators to criminal fines and statutory imprisonment ranges of varying lengths. Increased penalties are also tied to transporting or receiving firearms in interstate or foreign commerce with intent to use the firearms (or with knowledge they will be used) to commit separate felony crimes, as well as using, carrying, or possessing firearms in connection with \"any crime of violence or drug trafficking crime.\" A person thrice convicted of a \"violent felony or a serious drug offense,\" committed on different occasions, who subsequently possesses or receives a firearm unlawfully is likewise subject to a heightened mandatory minimum sentence of imprisonment. However, the Supreme Court has partially struck down as unconstitutionally vague the definition of the term violent felony , which includes (among other things) any offense involving \"conduct that presents a serious potential risk of physical injury to another.\" In response, past Congresses have considered legislation that would link the heightened penalty instead to prior \"serious felony\" convictions, with the term serious felony being tied to the authorized or imposed sentence of imprisonment. In a 1986 amendment, FOPA added an explicit mens rea , or intent, requirement to the GCA's penalty provisions. Accordingly, the GCA now imposes its criminal penalties for either knowing or willful violations, depending on the provision. A violation is made knowingly when the person knows the facts that establish the offense. Under this standard, the government need not prove that the defendant knew his behavior was illegal. This is so, according to the Supreme Court, because of the \"background presumption that every citizen knows the law,\" thus making it \"unnecessary to adduce specific evidence to prove that 'an evil-meaning mind' directed the 'evil-doing hand.'\" Further, to prosecute unlawful possession of a firearm under 18 U.S.C. § 922(g), the federal courts of appeals have consistently concluded that the government must prove only that the defendant knowingly possessed a firearm but not that he had knowledge of the circumstances disqualifying him from possessing a firearm. For example, a prosecutor may prove a knowing violation of 18 U.S.C. § 922(g)(1)—the GCA provision that bars felons from possessing firearms—by establishing only that the defendant knew that he possessed a firearm but not that he knew of his status as a felon at the time he possessed the firearm. However, in January 2019, the Supreme Court granted certiorari in Rehaif v. United States in order to determine whether this interpretation of the GCA is correct or whether the \"knowing\" requirement must apply to both possession and disqualifying status. Argument in the case is set for April 23, 2019. For willful violations, there is a heightened intent requirement: A violation is willful when the actor knows that the conduct is unlawful. However, for the act to be willful, the actor need not have specific knowledge of provisions of the law he is breaking. Instead, the person must act only \"with knowledge that his conduct [is] unlawful.\" Depending on proof of the requisite mens rea , firearms or ammunition involved in certain violations of the GCA or other federal criminal laws are subject to seizure and forfeiture. Numerous constitutional considerations may inform congressional proposals to modify the current framework for regulating firearms sales and possession. Although Congress has broad constitutional authority to regulate firearms, any firearm measure must be rooted in one of Congress's enumerated powers. In enacting firearms laws, Congress has typically invoked its tax, commerce, and spending powers. Still, when exercising those enumerated powers, Congress must be mindful of other constitutional restraints, such as those flowing from the Second Amendment, the Fifth Amendment's Due Process Clause, and principles of federalism. This section provides an overview of the primary powers Congress has invoked to enact firearms measures and then addresses the constitutional constraints that independently could limit Congress's ability to regulate firearms. Article I of the Constitution, which enumerates powers of Congress, declares that \"[t]he Congress shall have Power To lay and collect Taxes.\" This broad power enables Congress to tax many activities that it could not directly regulate. Still, \"[e]very tax is in some measure regulatory\" by creating \"an economic impediment to the activity taxed as compared with others not taxed.\" Because a tax can shape behavior, when imposing a tax Congress may be motivated by an objective other than raising revenue, like limiting the supply of certain firearms. And provisions of a tax measure that go beyond the actual collection of the tax, such as penalty provisions, are considered lawful so long as they are reasonably related to the exercise of Congress's tax power and not \"extraneous to any tax need.\" Congress's tax power is not without limitation, however. While the Supreme Court often will \"decline[] to closely examine the regulatory motive or effect of revenue-raising measures,\" the Court has indicated that it will step in when a tax measure is \"so punitive\" that it \"loses its character as [a tax] and becomes a mere penalty with the characteristics of regulation and punishment.\" Congress invoked its tax power when enacting the NFA. Within a few years of its enactment, in 1937, the Supreme Court upheld the NFA as a lawful exercise of Congress's tax power in Sonzinsky v. United States . Notwithstanding the NFA's deterrent purpose, the Court opined that \"a tax is not any the less a tax because it has a regulatory affect.\" The Court further concluded that the NFA's registration requirements were \"obviously supportable as in aid of a revenue purpose,\" and, the Court added, the tax produced \"some revenue.\" More recently, in 2018 the Tenth Circuit, relying on Sonzinsky , upheld the NFA's taxing and registration scheme as a valid exercise of Congress's tax power in a challenge to the NFA's regulation of firearm silencers. The Tenth Circuit rejected the defendants' argument that the NFA, in modern times, is \"far more of a gun- control measure than a gun- tax measure.\" The defendants had principally argued that, because the NFA taxes collect no net revenue, \"the NFA's taxing purpose disappear[ed], leaving only its regulatory effect,\" thus rendering the tax unconstitutional. But the Tenth Circuit declined to create a heightened constitutional requirement for Congress's tax power that would require a tax to produce net revenue, pointing to the Supreme Court's continued emphasis, since Sonzinsky , on whether a tax measure collects \"some\" gross revenue, no matter how small. The Constitution grants Congress the power \"to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.\" The Commerce Clause, as interpreted by the Supreme Court, authorizes Congress to regulate three categories of activities related to interstate commerce: (1) \"channels\" of interstate commerce, like highways and hotels; (2) \"instrumentalities of interstate commerce, or persons or things in interstate commerce,\" such as motor vehicles and goods that are shipped; and (3) \"activities that substantially affect interstate commerce,\" which include intrastate activities (such as robbery) \"that might, through repetition elsewhere,\" substantially affect interstate commerce. Congress has relied on the Commerce Clause as a constitutional basis for GCA provisions restricting the manufacture, import, sale, transfer, and possession of firearms, and the Supreme Court has reviewed a number of these regulations. Early cases mainly involved statutory interpretation, centering on what conduct the statutory prohibitions reached. Only the most recent case— United States v. Lopez —directly addressed the scope of Congress's Commerce Clause power to regulate firearms. For example, in the 1971 ruling United States v. Bass , the Supreme Court analyzed the scope of a law enacted as part of Title VII of the Omnibus Crime Control and Safe Streets Act of 1968, which made it a federal crime for a felon to \"receive[], possess[], or transport[] in commerce o r affecting commerce ... any firearm.\" (A similar provision is found in the current version of the GCA. ) In Bass , the Court held that the language \"in commerce or affecting commerce\" applied to all three listed activities—receiving, possessing, and transporting—and not just the last one. In resolving the textual ambiguity this way, the Court in part relied on federalism principles (discussed in more detail infra ), reasoning that if the statute had reached \"mere possession,\" wholly untethered to interstate commerce, the provision would have \"dramatically intrud[ed] upon traditional state criminal jurisdiction.\" In light of the Court's interpretation of the statute, it declined to opine on whether the Commerce Clause could provide a basis for Congress to regulate the \"mere possession\" of a firearm. A few years later, in Scarborough v. United States , the Supreme Court reviewed the same provision to determine when the firearm must travel in interstate commerce for the possession ban to apply to felons. The Court ultimately concluded that the criminal provision applied to any felon who possessed a firearm that had \"at some time\" traveled in interstate commerce. In rejecting the defendant's contention that the possession itself must be contemporaneous with interstate commerce, the Court pointed to contrary legislative intent. In particular, the Court concluded that the legislative history \"supports the view that Congress sought to rule broadly to keep guns out of the hands of those who have demonstrated that 'they may not be trusted to possess a firearm without becoming a threat to society,'\" without \"any concern with either the movement of the gun or the possessor or with the time of acquisition.\" Similarly, in Barrett v. United States , the Supreme Court analyzed the scope of the interstate commerce nexus in a GCA provision that made it unlawful for certain categories of persons, such as felons, \"to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce.\" The Court concluded that the term to receive applies to the intrastate acquisition of a firearm if that firearm previously had been transported in interstate commerce (e.g., from the manufacturer to the distributor to the dealer). The Court reasoned that the language \"has been\" shipped or transported in interstate commerce \"denot[es] an act that has been completed\" and thus applies \"to a firearm that already has completed its interstate journey and has come to rest in the dealer's showcase at the time of its purchase and receipt by the felon.\" Finally, the Court commented that interpreting the provision to apply only to interstate receipts \"would remove from the statute the most usual transaction, namely, the felon's purchase or receipt from his local dealer,\" and that interpretation, in the Court's view, would contravene Congress's \"concern with keeping firearms out of the hands of categories of potentially irresponsible persons.\" Most recently, in its 1995 opinion United States v. Lopez , the Supreme Court reviewed—and invalidated—the GFSZA, which criminalized the possession of a firearm in a school zone but contained no explicit nexus to interstate commerce. The government had argued that firearm possession in a school zone may cause violent crime, which could affect the national economy by (1) handicapping the educational process, which would generate a \"less productive citizenry,\" and (2) spawning substantial financial losses \"spread throughout the population\" through insurance costs and the \"reduce[d] willingness of individuals to travel to areas within the country that are perceived to be unsafe.\" The Court rejected these arguments, opining that if the Commerce Clause could reach such activity, it essentially would authorize a federal police power, a constitutional power the Framers declined to give to the federal government. Without finding a substantial effect on interstate commerce, the Court further concluded that the law exceeded Congress's power under the Commerce Clause because \"[t]he Act neither regulate[d] a commercial activity nor contain[ed] a requirement that the possession be connected in any way to interstate commerce.\" Congress subsequently amended the provision to provide expressly that, for the possession of a firearm in a school zone to be a federal crime, the government must show that the firearm \"moved in or ... otherwise affects interstate or foreign commerce.\" This amended version of the statute has been upheld by lower courts against constitutional challenges. Article I grants Congress broad authority to enact legislation for the \"general welfare\" through its spending power. When invoking this power, Congress can place conditions on funds distributed to the states that require those accepting the funds to take certain actions that Congress otherwise could not directly compel the states to perform. Still, the Supreme Court has articulated several limitations on Congress's power to attach conditions to the receipt of federal funds—namely, any condition must be written unambiguously, so that state lawmakers understand the full consequences of accepting or declining funds; must be germane to the federal interest in the particular program to which the money is directed; cannot induce the recipient states to engage in an activity that would independently violate the Constitution; and cannot be \"so coercive as to pass the point at which pressure turns into compulsion.\" Arguably, the most difficult limitation to glean is whether a spending condition is unduly coercive. Two Supreme Court opinions exploring the bounds within which Congress must stay offer some guidance. First, in South Dakota v. Dole , the Supreme Court upheld a 1984 congressional measure designed to encourage states to raise the minimum drinking age to 21. To achieve this result, Congress directed the Secretary of Transportation to withhold 5% of certain federal highway grant funds from states with a lower minimum drinking age. In upholding the spending condition, the Court concluded that a state stood to lose only \"a relatively small percentage of certain federal highway funds,\" which the Court further described as \"relatively mild encouragement.\" Second, and more recently, in National Federation of Independent Business v. Sebelius ( NFIB ), the Supreme Court struck down a provision of the Patient Protection and Affordable Care Act of 2010 (ACA) that purported to withhold Medicaid funding from states that did not expand their Medicaid programs. Unlike in Dole , in NFIB the Court concluded that the financial condition placed on the states in the ACA (withholding all federal Medicaid funding, which, according to the Court, typically totals about 20% of a state's entire budget) was akin to \"a gun to the head\" and thus unlawfully coercive. The Second Amendment states that \"[a] well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear arms, shall not be infringed.\" In District of Columbia v. Heller , the Supreme Court held that the Second Amendment guarantees an individual right to possess firearms for historically lawful purposes. Since Heller , the Supreme Court has substantively opined on the Second Amendment one other time, holding in McDonald v. City of Chicago that the Second Amendment right is incorporated through the Fourteenth Amendment to apply to the states. During the upcoming October 2019 term, the Supreme Court is scheduled to review a Second Amendment challenge to a New York City firearm licensing provision in New York Rifle & Pistol Association v. City of New York . That ruling may provide further guidance for Congress in crafting legislation that comports with the Second Amendment. In Heller the Supreme Court did not elaborate on the full extent of the Second Amendment right. But a number of takeaways may be distilled from the Court's opinion. First, the Court concluded that the Second Amendment codified a pre-existing individual right to keep and bear arms for lawful purposes, such as self-defense and hunting, unrelated to militia activities. Second, the Court singled out the handgun as the weapon that \"the American people have considered ... to be the quintessential self-defense weapon.\" But the Court clarified that, \"[l]ike most rights, the right secured by the Second Amendment is not unlimited\" and further announced that \"nothing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of firearms,\" among other \"presumptively lawful\" regulations. Additionally, as for the kind of weapons that may obtain Second Amendment protection, the Court opined that the Second Amendment's coverage is limited to weapons \"in common use at the time\" that the reviewing court is examining a particular firearm; the conclusion, the Court added, \"is fairly supported by the historical tradition of prohibiting the carrying of dangerous and unusual weapons.\" Since Heller , the circuit courts have largely been applying a two-step inquiry, drawn from the discussion in Heller , to determine whether a particular law is constitutional. First, courts ask whether the challenged law burdens conduct protected by the Second Amendment. If so, courts next ask whether, under some type of means-end scrutiny, the law is constitutional under that standard of review. To date, no federal appellate court has invalidated on Second Amendment grounds any provision of the GCA or NFA. Nonetheless, when considering proposals to expand federal firearm restrictions, Congress may want to consider whether the expansion would fit within the parameters established in Heller and subsequent jurisprudence as permissible under the Second Amendment. The Due Process Clause of the Fifth Amendment provides that \"[n]o person shall be ... deprived of life, liberty, or property, without due process of law.\" \"The touchstone of due process is protection of the individual against arbitrary action of government.\" The Due Process Clause has a substantive and procedural component, described below, and may become relevant in the context on firearms regulation if the government deprives a person of constitutionally protected liberty interest (e.g., a right to keep and bear arms under the Second Amendment) or property interest (e.g., a firearm license). The substantive component of the Due Process Clause prohibits \"the exercise of power without any reasonable justification in the service of a legitimate governmental objective.\" As relevant here, a substantive due process violation may occur when a legislative measure infringes on a fundamental right. But \"[w]here a particular [constitutional] Amendment provides an explicit textual source of constitutional protection against a particular sort of government behavior,\" like the Second Amendment, \"that Amendment, not the more generalized notion of 'substantive due process,' must be the guide for analyzing\" such claims. Accordingly, it appears that in the event the government deprives a person of the right to keep and bear arms—the potential result of an overly stringent federal firearms measure—the touchtone of a reviewing court's constitutional analysis would be the Second Amendment rather than the substantive component of the Due Process Clause. Still, the Due Process Clause also requires that the government afford persons with adequate procedures when depriving them of a constitutionally protected interest. This \"[p]rocedural due process imposes constraints on governmental decisions which deprive individuals of 'liberty' or 'property' interests within the meaning of the Due Process Clause of the Fifth ... Amendment.\" Examining procedural due process involves a two-step inquiry. First, a court asks whether the government has interfered with a protected liberty or property interest. In the context of federal firearms regulations, at least two constitutionally protected interests could be affected: (1) the fundamental liberty interest in a person's right to keep and bear arms, granted by the Second Amendment (i.e., the right to purchase and possess firearms for lawful purposes), and (2) the property interest in a government-issued firearms license (e.g., if the person is an FFL whose license is revoked by the government). If the government has deprived a person of one of these constitutionally protected interests, courts ask, second, whether the government, in deciding whether to make the deprivation, used constitutionally sufficient procedures. Adequate due process generally requires notice of the deprivation and an opportunity to be heard before a neutral party. This constitutional requirement, the Supreme Court says, is meant to be \"flexible and calls for such procedural protections as the particular situation demands.\" Accordingly, the appropriate process due—i.e., the type of notice, the manner and time of a hearing regarding the deprivation, and the identity of the decisionmaker—will vary based on the specific circumstances at hand. To determine what procedures should be applied to a deprivation of a constitutionally protected interest, courts apply the balancing test outlined in Mathews v. Eldridge. This test requires courts to weigh three factors: (1) the private interest affected; (2) the risk of an erroneous deprivation of that interest through the procedures used; and (3) the government's interest. Accordingly, although substantive due process concerns surrounding firearms measures may fuse with the Second Amendment concerns identified above, the procedural component of the Due Process Clause raises independent considerations for Congress. For instance, procedural due process may be relevant to congressional consideration of firearm measures that may result in the revocation or inability to obtain a license to own, purchase, or sell a firearm. Accordingly, when considering a firearms licensing measure, Congress may want to keep in mind the standards and procedures for obtaining and revoking such a license to ensure that due process is supplied. The Constitution establishes a system of dual sovereignty in which \"both the National and State Government have elements of sovereignty the other is bound to respect.\" For instance, the Constitution explicitly grants certain legislative powers to Congress in Article I and then reserves all other legislative powers for the states to exercise. Both the federal government and the states regulate firearms, and two federalism principles particularly inform this shared policymaking role: the preemption and anti-commandeering doctrines. The preemption doctrine derives from the Constitution's Supremacy Clause, which declares that \"the Laws of the United States ... shall be the supreme Law of the Land.\" Congress, through legislation lawfully enacted pursuant to an independent source of constitutional authority, may \"preempt\" (i.e., invalidate) state law. The Supreme Court has articulated that the doctrine operates as follows: \"Congress enacts a law that imposes restrictions or confers rights on private actors; a state law confers or imposes restrictions that conflict with the federal law; and therefore the federal law takes precedence and the state law is preempted.\" In other words, whenever states and the federal government regulate in the same area, like firearms, and the state and federal measures conflict, the conflict is to be resolved in favor of the federal government. Notwithstanding the supremacy of federal law, the anti-commandeering doctrine bars the federal government from directly regulating the states. The doctrine is \"the expression of a fundamental structural decision incorporated into the Constitution\" to limit Congress's authority, including \"to withhold from Congress the power to issue orders directly to the States.\" Accordingly, Congress cannot direct the states to enact a particular measure, nor can it conscript state employees, or those of its political subdivisions, to enforce a federal regulatory program. Similarly, the federal government cannot prohibit a state from enacting new laws. As a result, the federal government cannot require the states to enforce a particular federal firearm regulatory regime. In Printz v. United States , for example, the Supreme Court struck down under the anti-commandeering doctrine certain interim provisions of the Brady Act. The relevant provisions required state and local law enforcement officers to conduct background checks on prospective handgun purchasers. The Court held that a federal mandate requiring state and local law enforcement to perform background checks on prospective handgun purchasers violated constitutional principles of federalism \"by conscripting the State's officers directly\" to enforce a federal regulatory scheme. Federal firearms regulation has been a subject of continuous interest for Congress. A range of proposals have been in this and past Congresses. Some seek to ease federal firearms restrictions or facilitate state reciprocity in the treatment of persons authorized to carry firearms by another state; others seek greater restrictions on the federal laws concerning the possession, transfer, or sale of firearms or the expansion of background checks for firearm purchases. These various approaches, in turn, prompt various constitutional questions, including Congress's constitutional authority to legislate on such matters and whether the proposed measures comport with the Second Amendment and other constitutional constraints. This section discusses several congressional proposals related to 3D-printed firearms, background checks, mental illness, particular firearms and accessories (e.g., semiautomatic assault weapons, bump stocks, silencers), and \"red flag\" laws and identifies related constitutional questions. Under the Undetectable Firearms Act of 1988 (UFA), it is unlawful for any person to manufacture, import, sell, ship, deliver, possess, transfer, or receive a firearm (1) that, after removal of grips, stocks, and magazines, is not detectable by walk-through metal detectors; or (2) any major component of which does not generate an accurate image when scanned by the types of x-ray machines commonly used at airports. These prohibitions grew out of a concern that the increasing use of lightweight, noncorrosive plastics as a substitute for metal in firearm-component manufacturing would lead to the proliferation of firearms not detectable at security checkpoints. Despite the prohibitions in the UFA, the advent of 3D-printing technology and its application to firearms has prompted concern about a new wave of undetectable, plastic guns that technically comply with the statute and could fall into the wrong hands. A high-profile example of a design for such a gun is the \"Liberator\" pistol, plans for which were first disseminated in 2013 by Defense Distributed—a nonprofit \"private defense firm\" and FFL. According to media reports, the design for the Liberator allows for the 3D-printing of a functioning pistol that is almost entirely plastic, with the only metal components being a small firing pin and a removable piece of steel that is included specifically to make the design compliant with the UFA. In other words, the irrelevance of the steel block to the firearm's functionality potentially could allow bad actors to produce operable and concealable plastic firearms that would not be caught by metal detectors. With respect to Defense Distributed specifically, years of litigation over the company's online dissemination of computer files for 3D-printed nonmetallic firearms has mostly stymied the company's efforts to share its files on the internet. Most recently, a federal district court in Washington entered an order that effectively bars Defense Distributed from making its disputed files available online for the duration of the ongoing lawsuit in that jurisdiction. Nevertheless, the company's continuing efforts to spread its designs for nonmetallic firearms have raised novel constitutional questions without easy answers, including (1) whether First Amendment free speech protections extend to computer code (which could bring Defense Distributed's activities within the amendment's scope), and (2) whether the Second Amendment protects the right to make arms as a necessary precursor to keeping and bearing them. Faced with the long-simmering dispute over dissemination of 3D-printed gun files and the possibly incomplete protections of the UFA, the 115 th and 116 th Congresses have considered legislation addressing the online spread of 3D-printed gun files and the possession of 3D-printed guns themselves. For instance, the 3D-Printed Gun Safety Act of 2018 would have made it unlawful to \"intentionally publish\" on the internet \"digital instructions ... that can automatically program\" a 3D printer or similar device to produce or complete a firearm. Perhaps with First Amendment concerns in mind, the bill's \"Findings\" section stated that Congress's intention was not \"to regulate the rights of computer programmers\" but was instead \"to curb the pernicious effects of untraceable—and potentially undetectable—firearms.\" Other legislation would appear to have banned firearm assembly kits or firearm components that might be produced with a 3D printer either by amending the definition of firearm in the GCA or by bringing such items within the purview of the Consumer Product Safety Act. The Untraceable Firearms Act of 2018 additionally would have expanded serial number requirements, extended the UFA to firearms lacking detectable major components, and clarified that manufacturing firearms under the GCA includes 3D printing, among other things. Finally, a bill introduced in the 115 th Congress would have amended the GCA to prohibit the manufacture of firearms or components by means of a 3D printer and the transfer or possession of any such items. The 116 th Congress began with a push in the House to expand firearm background checks. Two House bills were passed in February 2019: (1) H.R. 8, the Bipartisan Background Checks Act of 2019, and (2) H.R. 1112 , the Enhanced Background Checks Act of 2019. If enacted, H.R. 8 would expand background checks to capture many private transfers between non-FFLs, subject to enumerated exceptions. (A similar bill has been introduced in the Senate. ) One question the bill raises is whether it may be lawfully enacted under one of Congress's Article I powers. The bill's accompanying constitutional authority statement does not specify which Article I power Congress is invoking to enact the measure, but the bill may be an attempt to exercise Congress's commerce power. Although the bill does not use the word commerce , other GCA provisions lack an explicit textual hook to the Commerce Clause. Courts reviewing other federal firearms law without a textual hook have upheld those measures after distinguishing them from the firearm possession law struck down in Lopez . Accordingly, the constitutionality of H.R. 8, as a lawful enactment under the Commerce Clause, may depend on the ability to distinguish it from the flaws the Supreme Court identified in Lopez . H.R. 1112 would amend the so-called \"default proceed\" process that allows an FFL to transfer a firearm when the NICS check has not been completed within three business days. The bill provides a mechanism for a transfer to occur if the FFL does not receive instructions from the NICS system on whether to proceed with or deny a proposed transaction within 10 business days. If the transferee wishes to proceed with the sale in such cases, he or she must file a petition (electronically or via first-class mail) to the Attorney General certifying that the transferee does not believe he or she is prohibited from acquiring the firearm. If a response is not provided within 10 business days, the FFL would be allowed to proceed with the transfer. The committee report accompanying the bill appears to construe these 10-day periods as occurring in succession rather than concurrently (i.e., the delay period might last up to 20 business days). Because the bill potentially could delay a sale to a law-abiding citizen up to 20 business days, there may be questions about whether those persons have received adequate procedural due process in the short-term deprivation of a constitutionally protected interest. Because the temporary deprivation (i.e., the inability to purchase a firearm for self-defense) would occur before a firearm may be transferred to the prospective purchaser, a reviewing court would be tasked with determining whether post-deprivation proceedings—meaning proceedings that take place after a person has been deprived of a constitutionally protected interest—are constitutionally permissible. Typically, due process requires that a person be given an opportunity to be heard before the deprivation of a protected interest may occur; in that case there are pre-deprivation hearings. But the Supreme Court has recognized in circumstances in which the government \"must act quickly, or where it would be impractical to provide pre-deprivation process, post-deprivation process satisfies the requirements of the Due Process Clause.\" Some Members of Congress have proposed measures that would require states to recognize concealed carry privileges afforded by other states. Both S. 69, the Constitutional Carry Reciprocity Act of 2019, and H.R. 38 , the Concealed Carry Reciprocity Act of 2019, if enacted, would allow persons who are eligible to carry a concealed handgun in one state to lawfully carry a handgun in other states that have a concealed-carry regime for their residents without regard to differences in the states' eligibility requirements for concealed carry. Both bills purport to preempt state laws to varying degrees. Whether these preemption provisions are considered to be valid likely will depend on whether the bills, as a whole, are interpreted to \"confer[] on private entities ... a federal right to engage in certain conduct,\" i.e., carrying a concealed handgun, \"subject only to certain (federal) constraints.\" H.R. 38 also contains a civil-suit provision that would authorize a private right of action against any person, state, or local government entity that interferes with a concealed-carry right that the bill establishes. Because the bill seeks to abrogate the states' Eleventh Amendment immunity from suit in federal court, several questions need to be answered, the first being what exception to Eleventh Amendment immunity the bill is invoking. Given that the bill cites the Second Amendment as the constitutional source of authority, it is possible that the bill seeks to invoke Congress's enforcement power under Section Five of the Fourteenth Amendment. Section Five of the Fourteenth Amendment enables Congress to abrogate a state's Eleventh Amendment immunity through legislation designed to enforce the Fourteenth Amendment's protections. And the Second Amendment is made enforceable on the states via the Fourteenth Amendment. If Congress, indeed, intends to invoke its Section Five power, a second question raised is whether legislation designed to remedy or deter state violations of the Second Amendment would be a permissible exercise of Congress's Section Five enforcement power. And assuming that Congress could lawfully exercise its Section Five power to enforce violations of Second Amendment rights, a third question would be whether the Second Amendment protects the right to carry a concealed handgun—an issue that has divided the federal appellate courts. As described previously, a person who has been \"adjudicated as a mental defective\" or \"committed to a mental institution\" is barred by federal law from transporting, possessing, or receiving firearms or ammunition. Both regulatory and judicial interpretations of these terms have focused on the need for a formal decision by an authoritative body like a court or board after an adjudicative hearing, as broader interpretations could raise constitutional due process and Second Amendment concerns. Nevertheless, the prohibition—even construed narrowly—has been criticized in some quarters as unconstitutional given its effectively permanent nature or as stigmatizing mental illness and unfairly painting as dangerous individuals who are more likely to be victims than perpetrators of violent crime. At the same time, some observers have, in response to past mass shootings, called for even stricter limits on possession of firearms by the mentally ill. For its part, the 115 th Congress considered bills that would have both broadened and narrowed the existing firearm prohibition. Some legislation would have, among other things, adopted the narrow understanding that an adjudication or commitment for purposes of the firearm prohibition must stem from an order or finding of an \"adjudicative body\" after a hearing and that the order or finding may impose only a temporary disability. Other legislation would have added temporary firearm prohibitions for persons assessed by mental health professionals to pose a risk of danger to others. Apart from constitutional and interpretive issues, commentators have highlighted the challenges of collecting comprehensive mental health records for use in NICS background checks, contending that the 2007 Virginia Tech shooting could have been avoided if the gunman's prior state mental health adjudication had been reported. One challenge specific to collecting mental health records is that many such records are held by state or local agencies that may believe patient information must remain confidential pursuant to the Health Insurance Portability and Accountability Act (HIPAA). To combat this perception, the Department of Health and Human Services issued a rule in 2016 that expressly allows specified state entities to report limited information otherwise covered by HIPAA to NICS or to another entity that reports to NICS. As noted above, Congress has also sought to improve mental health record reporting at the state level through NIAA, which (among other things) funds state efforts to develop systems for accurate and complete reporting. NICS reporting of mental health records at the federal level has raised somewhat different issues. Although federal agencies are generally required to report mental health adjudication records for background check purposes, NIAA makes clear that federal departments and agencies may not furnish such records if the relevant adjudication has been set aside or the person has been found to be \"rehabilitated,\" among other things. Additionally, the Department of Veterans Affairs (VA), which appears to supply the vast majority of federal mental health records to NICS, has for years provided records of beneficiaries who are appointed fiduciaries to manage their financial affairs based on a VA determination that the beneficiaries are \"mentally incompetent\"; concern that this practice may unfairly deprive veterans of their right to possess firearms, however, led to the introduction of legislation in the 115 th Congress that would have ensured that veterans for whom fiduciaries are appointed are not considered \"adjudicated as a mental defective\" unless a judicial authority has issued an order or finding \"that such person is a danger to himself or herself or others.\" A final rule published by the Social Security Administration (SSA) in December 2016, which specified similar conditions for SSA reporting of disability program beneficiaries who were appointed a representative payee, was also vacated by Congress through a Congressional Review Act resolution early in 2017. Numerous proposals have been made over the years to limit or expand the ability to possess certain kinds of firearms and accessories. For example, bills have targeted limiting the possession of semiautomatic \"assault weapons,\" large-capacity ammunition feeding devices, and bump stocks. Conversely, other bills have proposed decreasing regulations on firearm silencers. There has been continued interest in tightening the regulation of semiautomatic \"assault weapons\" since the 1994 ban expired in 2004. Some proposals seek to reinstate and expand upon the former assault weapon ban. Congress has also considered bringing certain semiautomatic firearms under the more-stringent NFA's regulatory scheme. Further, some Members of Congress have proposed to make it unlawful for an FFL to sell or transfer to any person under 21 years old certain semiautomatic rifles; currently, anyone age 18 or older may purchase such rifles from an FFL. Banning the possession of these kinds of firearms entirely or by a subset of the population may raise Second Amendment questions, such as the extent to which the Second Amendment protects the right of all persons to bear specific arms other than handguns in the home for self-defense. To date every federal appellate court that has reviewed a state or local semiautomatic assault weapon ban has rejected Second Amendment challenges to those laws. Nor has a federal appellate court sustained a challenge to the current federal law that prohibits the sale of handguns to persons under 21 years old. There have also been proposals to ban \"bump stock\" devices, which can be attached to a semiautomatic firearm and allow it to effectively mimic the firing capability of a fully automatic weapon. After it was discovered that the assailant behind the Las Vegas, Nevada, mass shooting in October 2017 used one of these firearm accessories, ATF initiated the process of regulating them. ATF published a final rule the next year, on December 26, 2018, banning the transfer and possession of all bump stock devices, effective March 26, 2019. Litigation seeking to enjoin the rule before its effective date followed. The plaintiffs challenged the rulemaking process and the rule itself. Codifying the ban through legislation would avoid the challenges to the rulemaking process but could potentially be subject to constitutional challenge under the Takings Clause, which forbids \"private property [to] be taken for public use, without just compensation.\" In this vein, takings lawsuits for compensation under the Tucker Act or Little Tucker Act potentially could be brought by persons who owned bump stock devices before the effective date of any statutory ban. Still, these constitutional concerns could be alleviated by creating a grandfather clause for bump stocks that were lawfully owned before the effective date of any bump stock ban. Additionally, there have been congressional efforts to deregulate firearm silencers, which are currently regulated under the NFA and GCA. In the SHUSH Acts, as introduced in the House and Senate, some Members have proposed measures that, if enacted, would eliminate the federal regulation of firearm silencers entirely. These bills also seek to preempt state and local laws that impose a tax on the making, transferring, possessing, or transporting of a firearm silencer as well as those that require marking, recordkeeping, or registering the same. Less expansive proposals purport only to remove silencers from NFA regulation. Thus, if the bills were enacted, silencers would not be subject to the NFA's tax and registration requirements but would still be subject to all GCA firearm regulations. Still, this proposal contains the same preemption provisions as the more comprehensive SHUSH Acts. All three bills may raise questions about whether the preemption provisions are constitutionally valid, as Congress can only preempt state and local measures when those measures conflict with a federal regulation covering the same activity. As relevant here, though, Congress, as part of a deregulation measure, may expressly prohibit states from further regulating the same activity \"[t]o ensure that the States would not undo federal deregulation with regulation of their own.\" Somewhat related to mental health firearm restrictions are proposals for so-called \"red flag\" laws, which generally permit courts to issue temporary orders barring particular persons from possessing guns based on some showing of imminent danger or a risk of misuse. Following the February 2018 school shooting in Parkland, Florida, a number of states proposed or passed red-flag laws, and legislation has been introduced in the 116 th Congress on the subject. Disagreement over various proposals has largely turned on the stringency of the showing that must be made to obtain an order, the persons who may seek an order, whether an initial order may be obtained without the presence of the gun owner, and the length of the resultant firearm disability. Red-flag legislation may raise questions as to whether such measures run afoul of the Second Amendment and deprive gun owners (or prospective gun owners) of constitutionally protected interests without due process of law. However, proponents of such laws assert that they are an effective and needed means of averting gun violence before it happens and that hearing and review procedures are constitutionally adequate. Were a court to consider a constitutional challenge to a red-flag measure under the Second Amendment or Due Process Clause, the outcome potentially could depend on (1) the court's conception of the scope of the right to keep and bear arms in light of Heller and (2) the weight ascribed by the court to the three Mathews v. Eldridge factors based on the particular procedures of the measure at issue.", "summary": "Firearms regulation is an area of shared authority among federal, state, and local governments. Individual states have enacted a diverse range of laws relating to the possession, registration, and carrying of firearms, among other things. Federal law establishes a regulatory framework for the lawful manufacture, sale, and possession of firearms at the national level. The federal framework generally serves as a floor for permissible firearm use and transactions, leaving states free to supplement with additional restrictions so long as they do not conflict with federal law. Federal laws regulating firearms date back roughly a century, and over time lawmakers have established more stringent requirements for the transfer, possession, and transportation of firearms. The two principal federal firearms laws currently in force are the National Firearms Act of 1934 (NFA) and the Gun Control Act of 1968 (GCA), as amended. The NFA was the first major piece of federal legislation regulating the sale and possession of firearms. Through a taxation and registration scheme, the law sought to curb the rise of violence connected to organized crime by targeting the types of weapons that (at the time of passage) were commonly used by gang members. Congress passed the GCA in the wake of the assassinations of Dr. Martin Luther King Jr. and Senator Robert Kennedy to prevent firearm possession by prohibited persons and to help law enforcement stem increasing crime rates. The GCA is a complex statutory regime that has been supplemented regularly in the decades since its inception. Broadly speaking, the GCA, as amended, regulates the manufacture, transfer, and possession of firearms, extending to categories of weapons that fall outside the scope of the NFA. In general terms, the GCA sets forth who can—and cannot—sell, purchase, and possess firearms, how those sales and purchases may lawfully take place, what firearms may lawfully be possessed, and where firearm possession may be restricted. The Brady Handgun Violence Prevention Act amended the GCA to require a background check for many, but not all, firearms transfers. Numerous constitutional considerations may inform congressional proposals to modify the current framework for regulating firearms sales and possession. Although Congress has broad constitutional authority to regulate firearms, any firearm measure must be rooted in one of Congress's enumerated powers. In enacting firearms laws, Congress has typically invoked its tax, commerce, and spending powers. For example, the NFA invokes Congress's tax power, and many GCA provisions invoke Congress's commerce power. Additionally, Congress has used its spending power to incentivize states, through offering grant money, to provide comprehensive records to the FBI's National Instant Background Check System (NICS). When exercising its enumerated powers, Congress nevertheless must be mindful of other constitutional restraints. Congress may want to look to the Supreme Court's Second Amendment jurisprudence—chiefly, District of Columbia v. Heller—when imposing any firearm restriction. In Heller, the Supreme Court held that the Second Amendment provides an individual right to keep and bear arms for lawful purposes. Further, the Due Process Clause of the Fifth Amendment limits Congress's ability to deprive a person of any constitutionally protected interest, such as Second Amendment firearms rights, and rights in property, such as firearms and accessories. Moreover, when enacting measures seeking to limit state firearm schemes, Congress may want to consider the federalism limits inherent in the Constitution's system of dual sovereignty, such as the anti-commandeering doctrine. These constitutional considerations are relevant to the scope of legislation that the 115th and 116th Congresses have considered to amend the existing federal statutory framework of firearms regulation. Among other things, such legislation has focused on issues arising from the dissemination of 3D-printed and untraceable firearms, gaps in the collection of records for background checks of prospective firearm purchasers, restrictions on certain types of firearms and accessories, possession of firearms by the mentally ill, interstate reciprocity for lawful concealed carry of firearms, and laws permitting courts to order that firearms be temporarily removed from persons deemed to be a risk to themselves or others.", "document_type": "crs"}
{"report": "I n the midst of ongoing concerns about illicit drug use and abuse, there has been heightened attention to the issue of opioid abuse—including both prescription opioids and nonprescription opioids such as heroin. The increased attention to opioid abuse and addiction first centered on the abuse of prescription painkillers. According to the Substance Abuse and Mental Health Services Administration (SAMHSA), about 3.3 million individuals were current (at least once in the past month) nonmedical users of prescription pain relievers such as OxyContin in 2016. Mirroring the nation's concern about prescription drug abuse, there has been corresponding unease regarding the rise in heroin abuse. According to the 2016 National Survey on Drug Use and Health, there were an estimated 948,000 individuals (0.4% of the 12 and older population) who reported using heroin within the past year—up from 0.2% to 0.3% of this population reporting use in the previous decade. In addition, about 626,000 individuals (0.2% of the 12 and older population) had a heroin use disorder in 2016. While this is similar to the proportion of the 12 and older population with a heroin use disorder from 2011 to 2015, it is significantly greater than the proportion from 2002 to 2010. Further, heroin overdose deaths increased by about 20% nationally between 2015 and 2016, and the Midwest and Northeast regions have been highlighted as areas of particular concern. In addition to increases in heroin use and abuse, there has been a simultaneous increase in its availability in the United States over the past decade. This has been fueled by a number of factors, including increased production and trafficking of heroin—principally by Mexican criminal networks. Mexican drug traffickers have been expanding their control of the U.S. heroin market, though the United States still receives some heroin from South America and Southwest Asia as well. Notably, while the majority of the world's opium is produced in Afghanistan, only a small proportion of that feeds the U.S. heroin market. Policymakers may want to examine U.S. efforts to counter heroin trafficking as a means of addressing opioid abuse in the United States. This report provides an overview of heroin trafficking into and within the United States. It includes a discussion of links between the trafficking of heroin and the illicit movement of related substances such as controlled prescription opioids and synthetic substances like fentanyl. The report also outlines existing U.S. efforts to counter heroin trafficking and possible congressional considerations going forward. Mexican transnational criminal organizations (TCOs) \"remain the greatest criminal drug threat to the United States; no other group is currently positioned to challenge them.\" They are the major suppliers and key producers of most illegal drugs smuggled into the United States, and they have been increasing their share of the U.S. drug market—particularly with respect to heroin. The Drug Enforcement Administration (DEA) notes that the Southwest border \"remains the primary entry point for heroin into the United States.\" Mexican TCOs control the flow of heroin across the border, the majority of which \"is through [privately owned vehicles] entering the United States at legal ports of entry, followed by tractor-trailers, where the heroin is co-mingled with legal goods.\" Mexican criminal networks have not always featured so prominently (or broadly) in the U.S. heroin market. Historically, Colombian criminal organizations controlled heroin markets in the Midwest and on the East Coast. Now, supply for these markets also comes directly from Mexican traffickers. The DEA indicates that \"[s]ince 2015 most of the heroin sold in the U.S. is from Mexico.\" Mexican poppy cultivation reportedly increased by 35% from 2016 to 2017; officials project that the estimated 44,100 hectares cultivated in 2017 allowed for about 111 metric tons of pure heroin production. The DEA has observed that \"[t]he increased role of Mexican traffickers is affecting heroin trafficking patterns.\" Historically, Mexican-produced black tar and brown powder heroin have been consumed in markets west of the Mississippi River, while markets east of the Mississippi have consumed more white powder heroin from South America. However, as the Mexican traffickers have taken on a larger role in the U.S. heroin market and have developed techniques to produce white powder heroin, they have moved their white powder heroin into both eastern and western U.S. markets. To facilitate the distribution and local sale of drugs in the United States, Mexican drug traffickers have sometimes formed relationships with U.S. gangs. Trafficking and distribution of illicit drugs is a primary source of revenue for these gangs and among the most common of their criminal activities. Gangs may work with a variety of drug trafficking organizations, and are often involved in selling multiple types of drugs besides heroin or other opioids. The majority of heroin making its way to the United States originates in Mexico and, to a lesser degree, Colombia. The amount of heroin seized across the United States, including at the Southwest border, has generally increased over the past decade, as illustrated in Figure 1 . Nationwide heroin seizures reached 7,979 kg in 2017, with 3,090 kg (39%) seized at the Southwest border. The United Nations Office on Drugs and Crime (UNODC) has outlined how seizure data can be used in combination with data on drug prices and purity to help serve as a drug market indicator. The UNODC notes that \"[f]alling seizures in combination with rising drug prices and falling purity levels may suggest a decline in overall drug supply, while rising seizures in combination with falling drug prices and rising purity levels are usually considered a good indicator of an increase in drug supply.\" The UNODC's model can be applied to heroin seizure data to help assess the scope of the heroin market in the United States. Notably, heroin seizures have generally been increasing, as illustrated in Figure 1 . In addition, the average purity of retail-level heroin has been between 31% and 39% from 2012 to 2016; while the purity has fluctuated somewhat, it has remained elevated relative to levels in the 1980s. And while the retail-level price per gram has vacillated over the past couple of decades, it has remained lower than prices in the 1980s. This combination of seizures, purity, and price could indicate that there is an increased heroin supply for the U.S. market. Experts have noted an increase in Mexican heroin production, which is primarily destined for the United States. The increase in seizures, however, may reflect more than just increases in the heroin supply and demand in the U.S. market. This could also be driven by factors such as enhanced U.S. law enforcement efforts to interdict and seize the contraband and/or by less stringent efforts by traffickers and buyers to conceal the drugs. Data from the DEA indicate that many of their heroin-related arrests are for trafficking-related offenses. In 2017, the DEA made 5,408 heroin-related arrests. The bulk of these were made for conspiracy (35%), distribution (24%), possession with intent (23%), and simple possession (11%). Other offense categories for which a much smaller proportion of arrests were made include importation, manufacture, RICO (Racketeer Influenced and Corrupt Organization), and CCE (continuing criminal enterprise). In other words, more of these heroin-related arrests were for offenses that may be considered to fall under the umbrella of trafficking rather than simple possession. DEA heroin arrest data indicate that since remaining relatively flat in the mid-2000s, overall heroin arrests generally increased through 2015 before declining through 2017 (see Figure 2 ). The U.S. Sentencing Commission reports that 2,658 individuals were sentenced for heroin trafficking offenses in U.S. District Courts in FY2017. While this was a decrease from FY2016, the number of individuals sentenced for heroin trafficking has generally moved upward over the past decade. FY2017 data indicate that of the 19,240 cases involving individuals sentenced for drug trafficking offenses, 2,658 (13.8%) involved individuals who were sentenced for heroin trafficking. That amounts to 4% of all cases sentenced in U.S. District Courts. (See Figure 3 .) Some have theorized that prescription opioid abuse may lead to, or be a \"gateway\" for, abuse of nonprescription opioids such as heroin. Results from one SAMHSA study indicate that the \"recent (12 months preceding interview) heroin incidence rate was 19 times higher among those who reported prior nonmedical pain reliever (NMPR) use than among those who did not (0.39% vs. 0.02%).\" However, while \"four out of five recent heroin initiates (79.5%) previously used NMPR ... the vast majority of NMPR users have not progressed to heroin use.\" The 2016 National Heroin Threat Assessment Summary notes that about 4% of individuals who abuse prescription drugs will go on to use heroin. One factor that may sway opioid abusers' shifts from prescription opioids to heroin may be the cost. If users cannot afford prescription opioids, they may switch to heroin as a lower-cost alternative. While estimates vary, some have noted that an 80 mg pill of OxyContin (a prescription opioid containing oxycodone) can cost $80 on the street; a bag of heroin can cost $5-$10. The DEA reported that drug trafficking organizations have responded to the demand for lower cost opioids by sometimes shifting heroin trafficking operations to areas with higher prevalence of nonmedical prescription drug use. Fentanyl is a synthetic opioid that is approximately 50 times stronger than heroin and 100 times more potent than morphine. There are both legal and illegal forms of fentanyl. Legal fentanyl has pharmaceutical uses for treating post-operative pain and chronic pain associated with late stage cancer, and illicit fentanyl is sold on the black market and used/abused in similar ways as other opioid drugs. Most cases of fentanyl-related overdoses are associated with non-pharmaceutical, illegal fentanyl ; non-pharmaceutical fentanyl is often mixed with heroin and/or other drugs, sometimes without the consumer's knowledge. Some have purported that fentanyl is easier to mix with white powder heroin than with the black tar variety. As such, there have reportedly been more fentanyl-related overdose deaths in U.S. markets fueled by white powder heroin than those dominated by the black tar form. However, this could change as distributors are finding ways to incorporate fentanyl into the black tar heroin. Non-pharmaceutical fentanyl found in the United States is manufactured in China and Mexico. It is trafficked into the United States across the Southwest border or delivered through mail couriers directly from China, or from China through Canada. In addition, fentanyl-related substances—substances that are in the fentanyl chemical family but have minor variations in chemical structure—may be attractive to traffickers because the analogs are often unscheduled or unregulated. Like fentanyl, they can be sold as, or mixed in with, heroin or pressed into counterfeit pills. The DEA indicates that the majority of seized fentanyl samples analyzed involved fentanyl in powder form. However, law enforcement is concerned about the risks from fentanyl being pressed into counterfeit pills, in part, because there are more abusers of prescription pain pills than of heroin. As such, fentanyl pressed into counterfeit pills could ultimately affect a larger population of individuals. The United States confronts the drug problem through a combination of efforts targeting both the supply of and demand for drugs. As such, the Administration has directed resources into the areas of law enforcement initiatives, prevention, and treatment. In targeting one element of the drug problem—trafficking—U.S. efforts have centered on law enforcement initiatives. There are a number of federal law enforcement activities aimed specifically at (or which may be tailored to) curbing heroin trafficking. This section contains a snapshot of some of these efforts. The DEA has developed a 360 Strategy aimed at \"tackling the cycle of violence and addiction generated by the link between drug cartels, violent gangs, and the rising problem of prescription opioid and heroin abuse.\" The strategy was launched in November 2015 as a pilot program in Pittsburgh, PA, and has since expanded to other cities. It leverages federal, state, and local law enforcement, diversion control, and community outreach organizations. As the program is relatively new, there have only been anecdotal reports of the operations that fall under the 360 Strategy framework, and an outcome evaluation of the strategy has not been conducted. The DEA operates a heroin signature program (HSP) and a heroin domestic monitor program (HDMP), with the goal of identifying the geographic source of heroin found in the United States. The HSP analyzes wholesale-level samples of \"heroin seized at U.S. ports of entry (POEs), all non-POE heroin exhibits weighing more than one kilogram, randomly chosen samples, and special requests for analysis.\" Chemical analysis of a given heroin sample can identify its \"signature,\" which indicates a particular heroin production process that has been linked to a specific geographic source region. The HDMP assesses the signature source of retail-level heroin seized in the United States. This program samples retail-level heroin seized in 27 cities across the country and provides data on the price, purity, and geographic source of the heroin. The results from the HSP and HDMP can be used to help understand trafficking and distribution patterns throughout the country. The HSP started in 1977, and the HDMP began in 1979. The HSP tests about 600-900 heroin samples annually. In 2016, the HSP tested 744 samples from seizures totaling 1,632 kg—slightly more than 22% of the total heroin seized that year. Of the heroin analyzed in the HSP in 2016, 86% was identified as originating from Mexico, 10% was inconclusive, 4% was from South America, and less than 1% was from Southwest Asia. Wholesale-level Mexican white powder heroin produced with South American techniques had an average purity of 82%. Data from the HDMP indicate that retail-level Mexican white powder heroin produced with South American techniques had an average purity of 39.7% in 2016. The DEA has also started a Fentanyl Signature Profiling Program (FSPP), analyzing samples from fentanyl seizures to help \"identify the international and domestic trafficking networks responsible for many of the drugs fueling the opioid crisis.\" In 2017, the FSPP analyzed 520 fentanyl powder samples from seizures totaling 960 kg of fentanyl. While the average purity was 5%, the DEA has indicated that fentanyl shipped directly from China often has purity levels above 90%, while fentanyl trafficked over the Southwest border from Mexico often has purity levels below 10%. The High Intensity Drug Trafficking Areas (HIDTA) program provides assistance to law enforcement agencies—at the federal, state, local, and tribal levels—that are operating in regions of the United States that have been deemed critical drug trafficking areas. There are 29 designated HIDTAs throughout the United States and its territories. Administered by the Office of National Drug Control Policy (ONDCP), the program aims to reduce drug production and trafficking through four means: promoting coordination and information sharing between federal, state, local, and tribal law enforcement; bolstering intelligence sharing between federal, state, local, and tribal law enforcement; providing reliable intelligence to law enforcement agencies such that they may be better equipped to design effective enforcement operations and strategies; and promoting coordinated law enforcement strategies that rely upon available resources to reduce illegal drug supplies not only in a given area, but throughout the country. The HIDTA program does not mandate that all regional HIDTAs focus on the same drug threat—such as heroin trafficking; rather, funds can be used to support the most pressing drug threats in the region. As such, when heroin trafficking is found to be a top priority in a HIDTA region, funds may be used to support initiatives targeting it. In 2015, ONDCP launched the Heroin Response Strategy (HRS), \"a multi-HIDTA, cross-disciplinary approach that develops partnerships among public safety and public health agencies at the Federal, state and local levels to reduce drug overdose fatalities and disrupt trafficking in illicit opioids.\" Within the HRS, a Public Health and Public Safety Network coordinates teams of drug intelligence officers and public health analysts in each state. The HRS not only provides information to these participating entities on drug trafficking and use, but it has \"developed and disseminated prevention activities, including a parent helpline and online materials.\" The OCDETF program targets—with the intent to disrupt and dismantle—major drug trafficking and money laundering organizations. Federal agencies that participate in the OCDETF program include the DEA; Federal Bureau of Investigation (FBI); Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF); U.S. Marshals; Internal Revenue Service (IRS); U.S. Immigration and Customs Enforcement (ICE); U.S. Coast Guard (USCG); Offices of the U.S. Attorneys; and the Department of Justice's (DOJ's) Criminal Division. These federal agencies also collaborate with state and local law enforcement on task forces. There are 14 OCDETF strike forces around the country and an OCDETF Fusion Center that gathers and analyzes intelligence and information to support OCDETF operations. The OCDETFs target those organizations that have been identified on the Consolidated Priority Organization Targets (CPOT) List, the \"most wanted\" list for leaders of drug trafficking and money laundering organizations. During FY2017, 20% (932) of active OCDETF investigations were linked to valid CPOTs. Notably, 50% of the FY2017 CPOT investigations involved heroin trafficking. Within DOJ, the Community Oriented Policing Services (COPS) Office's Anti-Heroin Task Force (AHTF) Program provides funding assistance to state law enforcement agencies to investigate illicit activities related to the trafficking or distribution of heroin or diverted prescription opioids. While the AHTF program is not a federal enforcement program, it is a federal grant program that exclusively provides money targeted specifically for heroin trafficking enforcement efforts. Funds cannot be used for treatment or other purposes because the program focuses on trafficking and distribution. Further, the program focuses its funding on state law enforcement agencies with multi-jurisdictional reach and interdisciplinary team structures—such as task forces. For FY2017, grants were awarded to entities in eight states. What is known about heroin trafficking flows is contingent on a number of factors surrounding the collection and reporting of these data, which are both multifaceted and incomplete. Data on various elements (e.g., production, price, purity, seizures, etc.) can help provide insight into the landscape of heroin trafficking, though these data are sometimes imprecise. For example, as the bulk of heroin consumed in the United States has been traced to Mexico, one central piece of data in understanding trafficking flows to the United States is the total potential production in the source countries. The United Nations Office on Drugs and Crime has noted, however, that \"[o]nly partial information about the extent of opium poppy cultivation and heroin production in the Americas is available.\" The DEA's 201 8 National Drug Threat Assessment estimates that Mexico may have cultivated 44,100 hectares of opium poppy in 2017, potentially yielding 111 metric tons of pure heroin. This is 38% higher than the estimated production in 2016. In the past, officials have noted that crop yield data are unreliable, and it is unclear whether the newer data are more reliable. Even with these questions about the data's reliability, U.S. officials state that production of heroin in Mexico has increased. While much of Mexican-produced heroin is reportedly destined for the United States, that proportion is unknown. In addition, it is unknown how much pure heroin is making its way into the United States. Data on seizures are available, but these reflect an unknown portion of total drugs traversing U.S. borders. In addition, as noted, officials have estimated heroin availability in the United States based, in part, on estimated production, known seizures, and the price and purity of select samples of wholesale and retail-level heroin, but these numbers collectively represent an imprecise picture of heroin trafficking. Policymakers may, in their oversight of efforts to counter the flow of heroin into the country, assess means to bolster the accuracy and completeness of data. Over the past few years, officials have repeatedly referred to heroin as a top drug threat in the United States. The 201 8 National Drug Threat Assessmen t notes that heroin is one of the most significant drug threats. This is largely based on the health risks—overdose and death—posed by these substances. Nationally, however, federal law enforcement seizures of heroin have generally increased in the past several years, as illustrated in Figure 1 . Policymakers may question whether federal enforcement efforts prioritize curbing heroin trafficking to an extent commensurate with the reported threat of the drug. While seizures have generally increased both along the Southwest border and throughout the country, it is unclear whether enforcement efforts should, or are able to, increasingly target heroin trafficking networks. In addition, law enforcement data indicate that there have been changes in heroin trafficking patterns along the Southwest border. For instance, from 2016 to 2017 heroin trafficking, by weight, increased 238% in the El Centro corridor, 174% in the Del Rio corridor, and 104% in the Yuma corridor, while it declined in other areas such as the Rio Grande Valley (by 24%). Policymakers may ask if heroin enforcement efforts are nimble and able to respond (and if so, how) to shifts in heroin trafficking patterns and maximize seizures in the areas where heroin flows are increasing. ONDCP has noted that the \"responsibility for curbing heroin production and trafficking lies primarily with the source countries.\" Policymakers may examine the balance of resources targeted toward domestic efforts to reduce drug trafficking through interdiction and prosecution relative to resources dedicated to eradication, alternative economic development, and other options abroad. The United States has a number of strategies and initiatives targeting illicit drugs. While they do not all focus on drug trafficking per se—or even more specifically, heroin trafficking—their goals include reducing drug trafficking. Policymakers may evaluate whether these strategies and initiatives are sufficient to effectively respond to the threat of heroin trafficking in the United States as well as to the role heroin trafficking may play in the opioid epidemic. If not, how might a strategy look that focuses specifically on heroin/opioid trafficking, and would such a strategy be nimble enough to counter the constantly evolving drug trafficking threats facing the United States? Examples of existing efforts are outlined here. ONDCP is charged with coordinating federal drug control policy. In doing so, ONDCP is responsible for producing the annual National Drug Control Strategy (strategy), the purpose of which is to outline a plan to reduce illicit drug consumption in the United States and the consequences of such use. The most recent strategy was released in 2016. The 2016 strategy prioritizes seven approaches to reduce both illicit drug use and its consequences: preventing drug use in U.S. communities; seeking early intervention opportunities in health care; increasing access to treatment and supporting recovery; reforming the criminal justice system to better address substance use disorders; disrupting domestic drug trafficking and production; bolstering international partnerships; and improving information systems for analysis, assessment, and management. Each of these approaches is based on several principles and fosters certain federal drug control activities. While these approaches and principles are not necessarily directed at countering heroin trafficking, they focus on confronting the top drug threats, which have in recent years involved heroin trafficking and its role in the opioid epidemic. Notably, the 2016 strategy identified the greatest drug threat to the United States as \"the continuing opioid epidemic, which began with the overprescribing of powerful long-acting, time-released opioid medications … [and] was further complicated by a sharp increase in the supply and subsequent use of high purity, low cost heroin produced in Mexico and Colombia and the trafficking of illicitly produced fentanyl.\" It is unclear whether the Trump Administration will release a strategy or how prominently countering heroin trafficking as it contributes to the opioid epidemic may feature in that strategy. The National Southwest Border Counternarcotics Strategy (NSBCS) was first launched in 2009, and it outlines domestic and transnational efforts to reduce the flow of illegal drugs, money, and contraband across the Southwest border. It has a number of strategic objectives: enhance intelligence and information sharing capabilities and processes; reduce the flow of drugs, drug proceeds, and associated instruments of crime that cross the Southwest border; develop strong, resilient communities that resist criminal activity and promote healthy lifestyles; disrupt and dismantle TCOs operating along the Southwest border; stem the flow of illicit proceeds across the Southwest border; and enhance U.S.-Mexican-Central American cooperation on joint counterdrug efforts. The 2016 NSBCS focuses on drug trafficking broadly, noting that the Southwest border is the primary entry point for many illegal drugs arriving in the United States. Nonetheless, it mentions that \"the threat posed by heroin in the United States is serious and continues to intensify.\" The objectives and action items, however, target the broader array of drug and criminal threats at the border. It is unclear whether the Trump Administration will use the NSBCS, modify it, or develop other measures and strategies to counter the threats—including those posed by heroin trafficking—at the Southwest border. In July 2011, the Obama Administration released the Strategy to Combat Transnational Organized Crime: Addressing Converging Threats to National Security . The strategy provided the federal government's first broad conceptualization of \"transnational organized crime,\" highlighting it as a national security concern. It highlights 10 primary categories of threats posed by transnational organized crime, one of which is the expansion of drug trafficking. Additionally, the strategy outlines six key priority actions to counter threats posed by transnational organized crime: taking shared responsibility and identifying what actions the United States can take to protect against the threat and impact of transnational organized crime; enhancing intelligence and information sharing; protecting the financial system and strategic markets; strengthening interdiction, investigations, and prosecutions; disrupting drug trafficking and its facilitation of other transnational threats; and building international capacity, cooperation, and partnerships. While this strategy is not tailored solely to drug trafficking (or more specifically, heroin trafficking) activities of criminal networks, it includes a discussion of the threat. Additionally, the strategy notes that a number of the threats outlined in the strategy may be facilitated by drug trafficking and the proceeds generated by those activities. For instance, the illicit drugs trade is at times linked to crimes such as weapons trafficking or human trafficking. Similar to the case with the NSBCS, it is unclear whether the Trump Administration will rely upon this strategy either broadly or more specifically to counter heroin trafficking. The Trump Administration has issued executive orders that could affect federal efforts to counter heroin trafficking, though they do not focus solely on them. For instance, the executive order Enforcing Federal Law with Respect to Transnational Criminal Organizations and Preventing International Trafficking , issued in February 2017, relies in part on the Threat Mitigation Working Group—which was established as part of the Strategy to Combat Transnational Organized Crime—to, among other things, support and bolster U.S. efforts to counter criminal organizations. However, the executive order does not speak to the larger strategy or specific efforts to counter heroin trafficking. In addition, President Trump issued the executive order Establishing the President's Commission on Combating Drug Addiction and the Opioid Crisis in March 2017. The commission's final report recommended a number of actions, including providing enhanced penalties for the trafficking of fentanyl and its analogues as well as bolstering tools and technologies to detect fentanyl before it enters the United States. The National Heroin Task Force was convened by DOJ and ONDCP in March 2015 pursuant to P.L. 113-235 . The task force examined the Administration's efforts to tackle the heroin epidemic from various angles including criminal enforcement, prevention, and substance use disorder treatment and recovery services, and it developed a set of recommendations to \"curtail the escalating overdose epidemic and death rates.\" The report's recommendations target the public safety and public health aspects of the opioid epidemic, and several specifically address countering heroin trafficking. The task force suggested, for instance, that the federal government prioritize prosecutions of heroin distributors and enhance investigation and prosecution techniques to target the heroin supply chain—particularly when the drug caused a death. The report noted that identifying the source of particularly potent heroin and cutting off the flow of heroin from the source may ultimately save lives. It also noted that prominent prosecutions of distributors and traffickers can help serve as a deterrent to other potential drug dealers. The task force also recommended using coordinated, real time data sharing to disrupt drug supply and to focus prevention, treatment, and intervention resources on the areas that need them most. It highlights the HIDTA program and the OCDETF program as examples of task forces that can be leveraged for information sharing purposes; while these programs have information sharing capacities, it is unclear how rapidly this sharing could be executed to fulfill the task force's recommendation of striving for \"real time\" information sharing.", "summary": "Over the past several years, the nation has seen an uptick in the use and abuse of opioids—both prescription opioids and non-prescription opioids such as heroin. In 2016, there were an estimated 948,000 individuals (0.4% of the 12 and older population) who reported using heroin within the past year—up from 0.2% to 0.3% of this population reporting use in the previous decade. In addition to an increase in heroin use over the past several years, there has been a simultaneous increase in its availability in the United States. The increase in availability has been fueled by a number of factors, including increased production and trafficking of heroin—principally by Mexican criminal networks. Mexican transnational criminal organizations are the major suppliers and key producers of most illegal drugs smuggled into the United States. They have been increasing their share of the U.S. drug market—particularly with respect to heroin—even though the United States still receives some heroin from South America and, to a lesser extent, Southwest Asia. To facilitate the distribution and sale of drugs in the United States, Mexican drug traffickers have formed relationships with U.S. gangs. Heroin seizures across the country, as well as those at the Southwest border, have generally increased over the past decade. Nationwide heroin seizures reached 7,979 kg in 2017, with 3,090 kg (39%) seized at the Southwest border. This is up from about 2,000 kg seized at the Southwest border a decade prior. Further, there has been an increase in federal arrests and sentences for heroin-related crimes. For instance, the Drug Enforcement Administration made 5,408 heroin-related arrests in 2017—up from about 2,500 a decade prior. In addition, U.S. Sentencing Commission data indicate that from 2007 to 2017, there was a general increase in the number of individuals sentenced for heroin trafficking offenses in U.S. District Courts. The federal government—specifically, law enforcement—relies on a number of tools and initiatives to counter heroin trafficking. Many of these efforts focus on drug trafficking broadly and prioritize the greatest drug trafficking threats in a given area, whether those threats come from trafficking heroin or other illicit drugs or substances. Going forward, there are a number of issues policymakers may consider as they address heroin trafficking. For instance, what is known about drug trafficking is contingent on data surrounding poppy cultivation, heroin production, and product inflows into the United States. Given that these are often based on snapshots of knowledge from disparate sources, Congress may question how these data are collected and their adequacy. In addition, Congress may examine current law enforcement efforts to dismantle heroin trafficking networks and prosecute their leaders. Policymakers may also look at existing federal strategies on drug control and transnational crime to evaluate whether they are able to target the heroin trafficking threat effectively.", "document_type": "crs"}
{"report": "The Minority Small Business and Capital Ownership Development Program—commonly known as the \"8(a) Program\"—provides participating small businesses with training and technical assistance designed to enhance their ability to compete effectively in the private marketplace. One of the program's major benefits is that 8(a) firms can receive federal contracting preferences in the form of set-aside and sole-source awards. A set-aside award is a contract in which only certain contractors may compete, whereas a sole-source award is a contract awarded, or proposed for award, without competition. As a business development program, its overall goal is for 8(a) firms to graduate from the program and continue to do well in a competitive business environment. 8(a) Program eligibility is generally limited to small businesses which are \"unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States\" and demonstrate \"potential for success.\" However, small businesses owned by Alaska Native Corporations (ANCs), Community Development Corporations (CDCs), Indian tribes, and Native Hawaiian Organizations (NHOs) are also eligible to participate in the 8(a) Program under somewhat different terms. In FY2017, 3,421 8(a) firms were awarded more than $27.1 billion in federal contracts, including $8.0 billion in 8(a) set-aside awards and $8.4 billion in 8(a) sole-source awards. Other programs provide similar assistance to other types of small businesses (e.g., women-owned, HUBZone, and service-disabled veteran-owned). Congress has a perennial interest in small business programs, including the 8(a) Program. As stated in the Small Business Act It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation. The Small Business Act also indicates \"that the opportunity for full participation in our free enterprise system by socially and economically disadvantaged persons is essential if we are to obtain social and economic equality for such persons and improve the functioning of our national economy.\" To help achieve these goals, the 8(a) Program's stated statutory purposes are to (A) promote the business development of small business concerns owned and controlled by socially and economically disadvantaged individuals so that such concerns can compete on an equal basis in the American economy; (B) promote the competitive viability of such concerns in the marketplace by providing such available contract, financial, technical, and management assistance as may be necessary; and (C) clarify and expand the program for the procurement by the United States of articles, supplies, services, materials, and construction work from small business concerns owned by socially and economically disadvantaged individuals. Recent Congresses have had particular interest in the 8(a) Program largely because of its effects on minority-owned small businesses and small businesses' overall role in job creation. 8(a) business development assistance has many forms, including business counseling and mentoring, both in online and traditional face-to-face settings; access to capital and surety bond guarantees; contract marketing guidance; and assistance with acquiring federal government surplus property. In addition, the Small Business Administration (SBA) reviews and certifies eligible clients; assigns SBA personnel (Business Opportunity Specialists, BOSs) to monitor and measure each firm's progress through annual reviews, business planning collaboration, and systematic evaluations; helps to identify potential contract opportunities; and markets each firm's technical capabilities to federal agency procurement officials. This report examines the 8(a) Program's historical development, key requirements, administrative structures and operations, and the SBA's oversight of 8(a) firms. It also discusses two SBA programs designed to support 8(a) firms, the 7(j) Management and Technical Assistance Program and the 8(a) Mentor-Protégé Program, and provides various program statistics. It concludes with an analysis of the following current 8(a) Program issues: The SBA's decision to address recent declines in the number of program participants by revising and streamlining the program's application process, an action which the SBA's Office of Inspector General (SBA OIG) reports \"may erode core safeguards that prevented questionable firms from entering the 8(a) Program.\" Reported variation in 8(a) Program service delivery. Reported deficiencies in the oversight of 8(a) Program participant's continuing eligibility. Disagreements concerning the financial thresholds used to determine economic disadvantage, including the SBA's decision to exclude equity in a primary residence from the calculation of an individual's net worth. The adequacy of the performance measures used to evaluate the program's effectiveness in meeting its statutory goals. The current 8(a) Program is the result of the merger of two distinct types of federal programs: those seeking to assist small businesses in general and those seeking to assist racial and ethnic minorities. The merger first occurred, as a matter of executive branch practice, in 1967 and was given a statutory basis in 1978. In 1942, Congress first authorized a federal agency to enter into prime contracts with other agencies and subcontract with small businesses for the performance of these contracts. The agency was the Smaller War Plants Corporation (SWPC), which was partly created for this purpose, and Congress gave it these powers to ameliorate small businesses' financial difficulties while \"mobiliz[ing] the productive facilities of small business in the interest of successful prosecution of the war.\" The SWPC's subcontracting authority expired along with the SWPC at the end of the World War II. However, in 1951, at the start of the Korean War, Congress created the Small Defense Plants Administration (SDPA), which was generally given the same powers that the SWPC had exercised. Two years later, in 1953, Congress transferred the SDPA's subcontracting authorities, among others, to the newly created SBA, with the intent that the SBA would exercise these powers in peacetime, as well as in wartime. When the Small Business Act of 1958 transformed the SBA into a permanent agency, this subcontracting authority was included in Section 8(a) of the act. At its inception, the SBA's subcontracting authority was not limited to small businesses owned and controlled by the socially and economically disadvantaged. Under the original Section 8(a), the SBA could contract with any \"small-business concerns or others,\" but it reportedly seldom, if ever, employed this subcontracting authority, focusing instead upon its loan and other programs. Federal programs for racial and ethnic minorities began developing at approximately the same time as those for small businesses, although there was initially no explicit overlap between them. The earliest programs were created by executive orders, beginning with President Franklin Roosevelt's order on June 25, 1941, requiring that all federal agencies include a clause in defense-related contracts prohibiting contractors from discriminating on the basis of \"race, creed, color, or national origin.\" Subsequent Presidents followed Roosevelt's example, issuing a number of executive orders seeking to improve the employment opportunities for various racial and ethnic groups. These executive branch initiatives took on new importance after the Kerner Commission's report on the causes of the 1966 urban riots concluded that African Americans would need \"special encouragement\" to enter the economic mainstream. Presidents Lyndon Johnson and Richard Nixon laid foundations for the present 8(a) Program in the hope of providing such \"encouragement.\" Johnson created the President's Test Cities Program (PTCP), which involved a small-scale use of the SBA's authority under Section 8(a) to award contracts to firms willing to locate in urban areas and hire unemployed individuals, largely African Americans, or sponsor minority-owned businesses by providing capital or management assistance. However, under the PTCP, small businesses did not have to be minority-owned to receive subcontracts under Section 8(a). Nixon's program was larger and focused more specifically on minority-owned small businesses. During the Nixon Administration, the SBA promulgated its earliest regulations for the 8(a) Program. In 1970, the first of these regulations articulated the SBA's policy of using Section 8(a) to \"assist small concerns owned by disadvantaged persons to become self-sufficient, viable businesses capable of competing effectively in the market place.\" A later regulation, promulgated in 1973, defined disadvantaged persons as including, but not limited to, \"black Americans, Spanish-Americans, oriental Americans, Eskimos, and Aleuts.\" However, the SBA lacked explicit statutory authority for focusing its 8(a) Program on minority-owned businesses until 1978, although courts generally rejected challenges alleging that SBA's implementation of the program was unauthorized because it was \"not specifically mentioned in statute.\" In 1978, Congress amended the Small Business Act to give the SBA express statutory authority for its 8(a) Program for minority-owned businesses. Under the 1978 amendments, the SBA can only subcontract under Section 8(a) with \"socially and economically disadvantaged small business concerns,\" or businesses that are least 51% owned by one or more socially and economically disadvantaged individuals and whose management and daily operations are controlled by such individual(s). The 1978 amendments established a basic definition of socially disadvantaged individuals , which included those who have been \"subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.\" They also included congressional findings that \"Black Americans, Hispanic Americans, Native Americans, and other minorities\" are socially disadvantaged. Thus, if an individual was a member of one of these groups, he or she was presumed to be socially disadvantaged. Otherwise, the amendments were generally seen to grant the SBA discretion to recognize additional groups or individuals as socially disadvantaged based upon criteria promulgated in regulations. Under these regulations, which include a three-part test for determining whether minority groups not mentioned in the amendment's findings are disadvantaged, the SBA recognized the racial or ethnic groups listed in Table 1 as socially disadvantaged for 8(a) purposes. The regulations also established standards of evidence to be met by individuals demonstrating personal disadvantage and procedures for rebutting the presumption of social disadvantage accorded to members of recognized minority groups. The 1978 amendments also defined economically disadvantaged individuals , for purposes of the 8(a) Program, as \"those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.\" In 1989, the SBA established by regulation that personal net worth of less than $250,000 at the time of entry into the program ($750,000 for continuing eligibility) constitutes economic disadvantage. As will be discussed, these financial thresholds have not been adjusted for inflation. Although the 8(a) Program was originally established for the benefit of disadvantaged individuals , in the 1980s, Congress expanded the program to include small businesses owned by four disadvantaged groups . The first owner-group to be included was Community Development Corporations (CDCs). A CDC is a nonprofit organization responsible to residents of the area it serves which is receiving financial assistance under part A of this subchapter [42 U.S.C. §§9805 et seq .] and any organization more than 50 percent of which is owned by such an organization, or otherwise controlled by such an organization, or designated by such an organization for the purpose of this subchapter [42 U.S.C. §§9801 et seq .]. Congress created CDCs with the Community Economic Development Act of 1981 and instructed the SBA to issue regulations ensuring that CDCs could participate in the 8(a) Program. In 1986, two additional owner-groups, Indian tribes and Alaska Native Corporations (ANCs), became eligible for the program when Congress passed legislation providing that firms owned by Indian tribes, which include ANCs, were to be deemed socially disadvantaged for 8(a) Program purposes. In 1992, ANCs were further deemed to be \"economically disadvantaged.\" The final owner-group, Native Hawaiian Organizations (NHOs), was recognized in 1988. An NHO is defined as any community service organization serving Native Hawaiians in the State of Hawaii which (A) is a nonprofit corporation that has filed articles of incorporation with the director (or the designee thereof) of the Hawaii Department of Commerce and Consumer Affairs, or any successor agency, (B) is controlled by Native Hawaiians, and (C) whose business activities will principally benefit such Native Hawaiians. Detailed statutory and regulatory requirements govern 8(a) Program eligibility, set-aside and sole-source awards, and related issues. These requirements are generally the same for all 8(a) firms, although there are instances where there are \"special rules\" for group-owned 8(a) firms. An Appendix to this report compares the requirements applicable to individual owners of 8(a) firms to those applicable to groups owning 8(a) firms (i.e., ANCs, CDCs, NHOs, and Indian tribes). As mentioned previously, 8(a) Program eligibility is limited to \"small business[es] which [are] unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States, and which demonstrates potential for success.\" Each of these terms is defined by the Small Business Act; SBA regulations; and judicial and administrative decisions. The eligibility requirements are the same at the time of entry into the program and throughout the program unless otherwise noted. Except for small agricultural cooperatives, a business is a for-profit entity that has a place of business located in the United States and operates primarily within the United States or makes a significant contribution to the U.S. economy by paying taxes or using American products, materials, or labor. For 8(a) Program purposes, businesses are individual proprietorships, partnerships, limited liability companies, corporations, joint ventures, associations, trusts, or cooperatives. A business is small if it is independently owned and operated; is not dominant in its field of operations; and meets any definitions or standards established by the SBA Administrator. These standards focus primarily upon the size of the business as measured by the number of employees or average annual receipts (gross income for sole proprietorships), but they also take into account the size of other businesses within the same industry. For example, businesses in the field of scheduled passenger air transportation are small if they have 1,500 or fewer employees, whereas those in the data processing field are small if they have average annual receipts of $32.5 million or less. Affiliations among businesses, or relationships allowing one party control or the power of control over another, generally count in size determinations, with the SBA considering \"the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit.\" Businesses can thus be determined to be other than small because of their involvement in joint ventures, subcontracting arrangements, or franchise or license agreements, among other things, provided that their income or personnel numbers, plus those of their affiliate(s), are over the pertinent size threshold. 8(a) firms must be \"at least 51% unconditionally and directly owned by one or more socially and economically disadvantaged individuals who are citizens of the United States\" unless they are owned by an ANC, CDC, NHO, or Indian tribe. Ownership is unconditional when it is not subject to any conditions precedent or subsequent, executory agreements, voting trusts, restrictions on or assignments of voting rights, or other arrangements that could cause the benefits of ownership to go to another entity. Ownership is direct when the disadvantaged individuals own the business in their own right and not through an intermediary (e.g., ownership by another business entity or by a trust that is owned and controlled by one or more disadvantaged individuals). Non-disadvantaged individuals and nonparticipant businesses that own at least 10% of an 8(a) business may generally own no more than 10% to 20% of any other 8(a) firm. Nonparticipant businesses that earn the majority of their revenue in the same or similar line of business are likewise barred from owning more than 10% (increasing to 20%-30% in certain circumstances) of another 8(a) firm. In addition, 8(a) firms must be controlled by one or more disadvantaged individuals. \"Control is not the same as ownership\" and includes both strategic policy setting and day-to-day management and administration of business operations. Management and daily business operations must be conducted by one or more disadvantaged individuals unless the 8(a) business is owned by an ANC, CDC, NHO, or Indian tribe. These individuals must have managerial experience \"of the extent and complexity needed to run the concern\" and generally must devote themselves full-time to the business \"during the normal working hours of firms in the same or similar line of business.\" A disadvantaged individual must hold the highest officer position within the business. Non-disadvantaged individuals may otherwise be involved in the management of an 8(a) business, or may be stockholders, partners, limited liability members, officers, or directors of an 8(a) business. However, non-disadvantaged individuals may not exercise actual control or have the power to control the firm or its disadvantaged owner(s), or receive compensation greater than that of the highest-paid officer (usually the chief executive officer or president) without the SBA's approval. Socially disadvantaged individuals are \"those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities.\" Members of designated groups, listed in Table 1 , are entitled to a rebuttable presumption of social disadvantage for 8(a) Program purposes, although this presumption can be overcome with \"credible evidence to the contrary.\" Individuals who are not designated-group members must prove they are socially disadvantaged by a preponderance of the evidence. Such individuals must show (1) at least one objective distinguishing feature that has contributed to social disadvantage (e.g., race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from mainstream American society); (2) personal experiences of substantial and chronic social disadvantage in American society; and (3) negative impact on entry into or advancement in the business world. In assessing the third factor, the SBA will consider all relevant evidence the applicant produces, but must consider the applicant's education, employment, and business history to see if the totality of the circumstances shows disadvantage. Groups not included in Table 1 may obtain eligibility by demonstrating disadvantage by a preponderance of the evidence. Economically disadvantaged individuals are \"socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.\" Individuals claiming economic disadvantage must submit financial documentation for eligibility purposes. The SBA will examine the individual's personal income for the past three years, their net worth, and the fair market value of their assets. However, principal ownership in a prospective or current 8(a) business is generally excluded when calculating net worth, as is equity in individuals' primary residence. For initial eligibility, applicants must have a net worth of less than $250,000. For continued eligibility, net worth must be less than $750,000. In determining whether an applicant to, or participant in, the 8(a) Program possesses good character , the SBA considers any criminal conduct, violations of SBA regulations, current debarment or suspension from government contracting, managers or key employees who lack business integrity, and the knowing submission of false information to the SBA. For a firm to have demonstrated potential for success, it generally must have been in business in its primary industry classification for at least two full years immediately prior to the date of its application to the 8(a) Program. However, the SBA may grant a waiver allowing firms that have been in business for less than two years to enter the program under specified circumstances. Section 8(a) of the Small Business Act authorizes agencies to award contracts for goods or services, or to perform construction work, to the SBA for subcontracting to 8(a) firms. The act also authorizes the SBA to delegate the function of executing contracts to the procuring agencies and often does so. A set-aside award is a contract awarded in which only certain contractors may compete, whereas a sole-source award is a contract awarded, or proposed for award, without competition. The Competition in Contracting Act (CICA) generally requires federal agencies to allow full and open competition through the use of competitive procedures when procuring goods or services. However, set-aside and sole-source awards to 8(a) firms are permissible under CICA under certain circumstances. In fact, an 8(a) set-aside is a recognized competitive procedure. Agencies are effectively encouraged to subcontract through the 8(a) Program because there are government-wide and agency-specific goals regarding the percentage of procurement dollars awarded to small disadvantaged businesses, which include 8(a) firms (the current government-wide goal is 5% of all small business eligible federal contracts). There are few limits on agency discretion to subcontract through the 8(a) Program. However, the SBA is prohibited by regulation from accepting procurements for award under Section 8(a) when 1. the procuring agency issued a solicitation for or otherwise expressed publicly a clear intent to reserve the procurement as a set-aside for small businesses not participating in the program prior to offering the requirement to the SBA for award as an 8(a) contract; 2. the procuring agency competed the requirement among 8(a) firms prior to offering the requirement to the SBA and receiving the SBA's acceptance of it; or 3. the SBA makes a written determination that \"acceptance of the procurement for 8(a) award would have an adverse impact on an individual small business, a group of small businesses located in a specific geographical location, or other small business programs.\" In addition, the SBA is barred from awarding an 8(a) contract, either via a set-aside or on a sole-source basis, \"if the price of the contract results in a cost to the contracting agency which exceeds a fair market price.\" Otherwise, agency officials may offer contracts to the SBA \"in [their] discretion,\" and the SBA may accept requirements for the 8(a) Program \"whenever it determines such action is necessary or appropriate.\" The courts and the Government Accountability Office (GAO) will generally not hear protests of agencies' determinations regarding whether to procure specific requirements through the 8(a) Program unless it can be shown that government officials acted in bad faith or contrary to federal law. Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded through either a set-aside or on a sole-source basis, with the contract amount generally determining the acquisition method used. When the contract's anticipated total value, including any options, is less than $4 million ($7 million for manufacturing contracts), the contract is normally awarded without competition. In contrast, when the contract's anticipated value exceeds these thresholds, the contract generally must be awarded via a set-aside with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price. Sole-source awards of contracts valued at $4 million ($7 million or more for manufacturing contracts) may be made only when (1) there is not a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price or (2) the SBA accepts the requirement on behalf of an 8(a) firm owned by an Indian tribe, an ANC or, in the case of Department of Defense contracts, an NHO. Requirements valued at more than $4 million ($7 million for manufacturing contracts) cannot be divided into several acquisitions at lesser amounts in order to make sole-source awards. In addition, the Federal Acquisition Regulatory Council has the responsibility of adjusting each acquisition-related dollar threshold (including those for the 8(a) Program), on October 1, of each year that is evenly divisible by five. The next adjustment for inflation will take place on October 1, 2020. Other key 8(a) Program requirements include the following: Inability to protest an 8(a) firm's eligibility for an award . When the SBA makes or proposes an award to an 8(a) firm, the firm's eligibility cannot be challenged or protested as part of the solicitation or proposed contract award. Instead, information concerning a firm's eligibility must be submitted to the SBA in accordance with separate requirements contained in Section 124.517 of Title 13 of the Code of Federal Regulations . Nine-year m aximum participation. Firms may participate in the program for no more than nine years from the date of their admission, although they may be terminated or graduate from the program before nine years have passed. One-time eligibility . Once a firm or a disadvantaged individual upon whom a firm's eligibility was based has exited the program after participating in it for any length of time, neither the firm nor the individual is generally eligible to participate in the program again. Firms are considered identical for purposes of program eligibility when at least 50% of the assets of one firm are the same as those of another firm. Ownership l imit ation s on family members of current or former 8(a) firm owners . Individuals generally may not use their disadvantaged status to qualify a firm for the program if the individual has an immediate family member who is using, or has used, the disadvantaged status to qualify a firm for the program. Award Limit ations. In general, 8(a) firms may not receive additional 8(a) sole-source awards once they have been awarded a combined total of competitive and sole-source awards in excess of $100 million, in the case of firms whose size is based on their number of employees, or in excess of an amount equivalent to the lesser of (1) $100 million or (2) five times the size standard for the industry, in the case of firms whose size is based on their revenues. In addition, 8(a) firms in the transitional stage , or the last five years of participation, must achieve annual targets for the amount of revenues they receive from non-8(a) sources. These targets increase over time, with firms required to attain 15% of their revenue from non-8(a) sources in the fifth year, 25% in the sixth year, 35% in the seventh year, 45% in the eight year, and 55% in the ninth year. Firms that do not display the relevant percentages of revenue from non-8(a) sources are ineligible for sole-source 8(a) contracts \"unless and until\" they correct the situation. Subcontracting Limitations . Federal subcontracting limitations require small businesses receiving contracts under set-asides to perform work that equals certain minimum percentages of the amount paid under the contract. Specifically, small businesses must generally perform at least 50% of the costs of the contract incurred for personnel with its own employees, in the case of service contracts; and at least 50% of the cost of manufacturing supplies or products (excluding the cost of materials), in the case of manufacturing contracts. Tribes, Alaska Native Corporations (ANCs), Native Hawaiian Organizations (NHOs) or Community Development Corporations (CDCs) themselves generally do not participate in the 8(a) Program. Rather, businesses that are at least 51% owned by such entities participate in the program, although the rules governing their participation are somewhat different from those for the program generally. Firms owned by Indian tribes, ANCs, NHOs, and CDCs must be deemed small under the SBA's size standards. However, certain affiliations with the owning entity or other business enterprises of that entity are excluded in size determinations unless the SBA Administrator determines that a small business owned by an ANC, CDC, NHO, or Indian tribe \"[has] obtained, or [is] likely to obtain, a substantial unfair competitive advantage within an industry category\" because of such exclusions. Other affiliations of small businesses owned by ANCs, CDCs, NHOs, and Indian tribes may be included in size determinations, and ANC-owned firms, in particular, have been subjected to early graduation from the 8(a) Program because they exceeded size standards. Firms owned by ANCs, CDCs, NHOs, and Indian tribes must be \"businesses\" under the SBA's definition. Although ANCs themselves may be for-profit or nonprofit, ANC-owned businesses must be for-profit to participate in the program. Firms owned by ANCs, CDCs, NHOs, or Indian tribes must be unconditionally owned and substantially controlled by the ANC, CDC, NHO, or Indian tribe, respectively. However, under SBA regulations, tribally or ANC-owned firms may be managed by individuals who are not members of the tribe or Alaska Natives if the firm can demonstrate: that the Tribe [or ANC] can hire and fire those individuals, that it will retain control of all management decisions common to boards of directors, including strategic planning, budget approval, and the employment and compensation of officers, and that a written management development plan exists which shows how Tribal members will develop managerial skills sufficient to manage the concern or similar Tribally-owned concerns in the future. NHO-owned firms must demonstrate that the NHO controls the board of directors. However, the individual who is responsible for the NHO-owned firm's day-to-day management need not establish personal social and economic disadvantage. CDCs are to be managed and have their daily operations conducted by individuals with \"managerial experience of an extent and complexity needed to run the [firm].\" As owners of prospective or current 8(a) firms, Indian tribes, ANCs, NHOs, and CDCs are all presumed to be socially disadvantaged. By statute, ANCs are deemed to be economically disadvantaged, and CDCs are similarly treated as economically disadvantaged. In contrast, Indian tribes and NHOs must establish economic disadvantage. Indian tribes must present data on, among other things, the number of tribe members; the tribe members' unemployment rate and per capita income; the percentage of the local Indian population above the poverty level; the tribe's access to capital and assets as disclosed in current financial statements; and all businesses wholly or partially owned by tribal enterprises or affiliates, as well as their primary industry classification. Effective August 24, 2016, NHOs establish economic disadvantage in the same manner as Indian tribes. Prior to this revision, the SBA considered \"the individual economic status of NHO's members,\" the majority of whom had to qualify as economically disadvantaged, under the same standards as individual applicants to the program. Once a tribe or NHO has established that it is economically disadvantaged for purposes of one 8(a) business, it need not reestablish economic disadvantage in order to have other businesses certified for the program unless the Director of the Office of Business Development requires it to do so. The SBA's regulations governing tribally and ANC-owned 8(a) firms explicitly state that the good character requirement applies only to officers or directors of the firm, or shareholders owning more than a 20% interest. NHO-owned firms may be subject to the same requirements in practice. With CDC-owned firms, the firm itself and \"all of its principals\" must have good character. Firms owned by ANCs, CDCs, NHOs, and Indian tribes may provide evidence of potential for success in several ways: 1. The firm has been in business for at least two years, as shown by individual or consolidated income tax returns for each of the two previous tax years showing operating revenues in the primary industry in which the firm seeks certification. 2. The individuals who will manage and control the firm's daily operations have substantial technical and management experience; the firm has a record of successful performance on government or other contracts in its primary industry category; and the firm has adequate capital to sustain its operations and carry out its business plan. 3. The owner-group has made a firm written commitment to support the firm's operations and has the financial ability to do so. The first of these ways for demonstrating potential for success is the same for individually owned firms, and the second arguably corresponds to the circumstances in which the SBA may waive the requirement that individually owned firms have been in business for at least two years. There is no equivalent to the third way for individually owned firms, and some commentators have suggested that this provision could \"benefit ANCs [and other owner groups] by allowing more expeditious and effortless access to 8(a) contracts for new concerns without having to staff new subsidiaries with experienced management.\" 8(a) firms owned by ANCs, CDCs, NHOs, and Indian tribes must submit information with its annual financial statement to the SBA showing how the Tribe, ANC, NHO or CDC has provided benefits to the Tribal or native members and/or the Tribal, native or other community due to the Tribe's/ANC's/NHO's/CDC's participation in the 8(a) … program through one or more firms. This data includes information relating to funding cultural programs, employment assistance, jobs, scholarships, internships, subsistence activities, and other services provided by the Tribe, ANC, NHO or CDC to the affected community. Similar to other participants, firms owned by ANCs, CDCs, NHOs, and Indian tribes are eligible for 8(a) set-asides and may receive sole-source awards valued at less than $4 million ($7 million for manufacturing contracts). However, firms owned by ANCs and Indian tribes can also receive sole-source awards in excess of $4 million ($7 million for manufacturing contracts) even when contracting officers reasonably expect that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price. NHO-owned firms may receive sole-source awards from the Department of Defense under the same conditions. Firms owned by ANCs, CDCs, NHOs, and Indian tribes are governed by the same regulations as other 8(a) firms in which certain of the \"other requirements\" are involved, including (1) inability to protest an 8(a) firm's eligibility for an award; (2) maximum of nine years in the program (for individual firms); and (3) limits on subcontracting. However, requirements for such firms differ somewhat from those for other 8(a) firms, including the one-time eligibility for the 8(a) Program; limits on majority ownership of 8(a) firms; and limits on the amount of 8(a) contracts that a firm may receive. Firms owned by ANCs, CDCs, NHOs, and Indian tribes may participate in the 8(a) Program only one time. However, unlike the disadvantaged individuals upon whom other firms' eligibility for the 8(a) Program is based, ANCs, CDCs, NHOs, and Indian tribes may confer program eligibility upon firms on multiple occasions and for an indefinite period. In addition, ANCs, CDCs, NHOs, and Indian tribes may not own 51% or more of another firm that \"either at the time of application or within the previous two years,\" obtains the majority of its revenue from the same \"primary\" industry as the applicant. However, there are no limits on the number of firms they may own that operate in other primary industries. Moreover, ANCs, CDCs, NHOs, and Indian tribes may own multiple firms that earn less than 50% of their revenue in the same \"secondary\" industries. Finally, firms owned by ANCs, CDCs, NHOs, and Indian tribes may continue to receive additional sole-source awards even after they have received a combined total of competitive and sole-source 8(a) contracts in excess of the dollar amount set forth in Section 124.519 of Title 13 of the Code of Federal Regulations . Individually owned firms may not exceed this threshold. However, firms owned by any of these four types of entities are subject to the same requirements regarding the percentages of revenue received from non-8(a) sources at various stages of their participation in the program as other 8(a) firms. The SBA's Office of Business Development (BD), housed within the Office of Government Contracts and Business Development, oversees the 8(a) Program. BD has three offices: the Office of Certification and Eligibility (OCE), the Office of Management and Technical Assistance (OMTA); and the Office of Program Review (OPR). Their functions are provided in the footnote below. Applications for the 8(a) Program are processed at one of two central office duty stations (CODS), one located in San Francisco, CA, and the other in Philadelphia, PA. Applicants apply to the CODS that serve the territory where the applicant's principal place of business is located. Business Opportunity Specialists (BOSs) work directly with 8(a) firms in district offices under the general supervision of the SBA's Office of Field Operations (OFO). Although BOSs report to the SBA's OFO, they interact extensively with BD, which is located in the SBA's headquarters building in Washington, DC. As will be discussed, GAO and others have argued that this overlapping organizational structure may \"create programmatic challenges.\" Prior to applying for certification, firms must complete all requirements for contracting with the federal government (e.g., get a free D-U-N-S number—a unique nine-digit identification number of each physical business location from Dun and Bradstreet; obtain a free tax identification number or employer identification number from the Internal Revenue Service; create a profile in the federal System for Award Management, and get a free SBA general login system user ID). The SBA's district office staff generally encourage potential 8(a) Program applicants \"to attend an information session to obtain information regarding the program and its eligibility criteria prior to filing an application … [and] also refer the applicant to SBA's website for forms, specific eligibility criteria, pertinent regulatory sections in the Code of Federal Regulations, and overall information on the program.\" In an attempt to encourage more applicants, the SBA revised and streamlined the 8(a) Program's application process in 2016 by accepting online applications only (hard copy applications are no longer accepted) and eliminating the requirement for a wet signature application; a completed IRS Form 4506T, Request for Copy or Transcript of Tax Form, in every case; and narrative statements in support of the applicants' claims of economic disadvantage. That determination is now based solely on an analysis of objective financial data relating to the individual's net worth, income and total assets. In addition, to prevent what it viewed as unnecessary delays for minor infractions that may have \"occurred many years ago\" and may have \"nothing to do with the individual's business integrity,\" the SBA made optional the automatic suspension of consideration and referral to the SBA OIG of all applications with adverse information regarding the applicant's or any of its principals' possible criminal conduct. Despite these changes, applicants still have a relatively long list of supporting documents (and required SBA Forms) that they must submit, including the following: Signed and dated federal income tax returns for the firm and all individuals that either own more than 10% of the firm or have a key position in the firm for the past three years preceding the date of application (including all forms, statements, schedules and attachments). The firm's financial statements, balance sheet, and profit and loss statements for the past three years (including the most recent balance sheet, current within 90 days of application). A completed personal financial statement form (from all principals and their spouses), including a list of all assets, liabilities, real estate and other personal property, including transferred assets, information on delinquent federal obligations, past due taxes or liens, bankruptcy filings and pending civil lawsuits, and a list of any SBA loans for the firm and other businesses owned by the principal(s). A list or chart of the firm's current and past federal and nonfederal contracts within the most recently completed fiscal year. A list of any lease agreements. Proof of signature authority on the firm's bank account(s) (i.e., signature card(s) for firm bank account(s) or letter from the bank). Documented proof of contributions: (1) used to acquire ownership (for each owner), (2) of any transfer of assets to or from the firm, and (3) of any transfer of assets to or from any of the firm's owners over the past two years. State filings (signed, dated and stamped by the state where the firm does business) and certificate of good standing. List of any foreign corporation filings. Articles of incorporation, articles of organization, any DBA (\"doing business as\") filings, governing documents signed by the principals, bylaws, operating agreements, partnership agreements, and meeting minutes. Any stock certificates and ledgers. Proof of social disadvantage from majority owners and firm managers. Background information and personal information from all principals, including a resume, a completed Statement of Personal History form, proof of U.S. citizenship or naturalization, duties within the firm and time devotion, a list of other business interests and time devotion, and the nature of outside employment and time devotion. Documentation addressing how the firm meets specified objectives, if it is applying for a two-year waiver. As mentioned previously, applications are processed at the San Francisco or Philadelphia CODS. In general, the SBA processes an application and issues a decision letter within 90 days of the receipt of an application package. The processing time will be suspended only if an applicant is referred to the SBA OIG, for a formal size determination, or both. Applicants are notified within 15 days of receipt whether the application package is complete or incomplete. The SBA will not process an incomplete application. Complete means that the application is ready to be processed. A BOS, at one of the CODS, initially reviews the application. If, during the eligibility review process, it is determined that an application is incomplete, the BOS may request additional information or clarification \"via a delivery method that tracks delivery and provides return receipt capability.\" The applicant must provide the requested information within five calendar days of receipt of the request. Failure to meet the deadline may result in the applicant's ineligibility to participate in the program. However, a request for additional information does not stop the 90-day processing clock. \"Once the requested information is provided, the case may require priority handling in order for the CODS to complete the eligibility review within the required timeframe.\" After the initial review, the BOS submits the case file, the BOS analysis, and a decision letter to the CODS' chief for review. The chief examines the BOS analysis and decision letter to verify that all required steps and regulations have been properly applied. Upon completing the examination, the chief returns the case file and attachments to the BOS along with any applicable comments and recommendations. The BOS then makes any changes or corrections to the analysis or decision letter as requested by the chief. The chief then signs and returns the case file to the processing BOS. The chief makes his or her recommendation in the electronic application system (which is equivalent to transmitting it to the OCE's director, who approves or declines the application largely based on the CODS' review). After the OCE review, the associate administrator for Business Development (AA/BD) ultimately approves or declines the application in writing. The electronic application system notifies the firm by issuing an approval or declination letter. All declination letters must clearly explain the reason(s) why the firm was found to be ineligible, including a direct reference to regulatory provisions that the applicant failed to satisfy. The letter must also include the applicant's right to request reconsideration and, if applicable, to appeal the decision to the SBA's Office of Hearings and Appeals. As discussed below in the \"Current Issues\" section, the SBA and others have identified the application process, and its relatively high rate of rejection, as an impediment to the 8(a) Program's growth. BOSs assist both prospective and existing 8(a) firms with questions related to the application process, required forms, and the program's various eligibility, reporting, and performance requirements. BOSs also provide general business development assistance, assist with the firm's planning and establishment of goals, work with the firm as it develops and submits its required business plan, and ensure that the firm is on track regarding anticipated business growth. BOSs \"on-going responsibility is to assist the Participant in developing its business to the fullest extent possible so that it attains competitive viability during its program participation term, and maintains viability thereafter.\" As directed, BOSs accomplish this by (1) helping the firm identify its strengths and weaknesses; (2) providing advice, counsel, and guidance in the areas of marketing to the federal government, prime contracting, and contract administration; (3) referring the firm to appropriate internal and external resources for assistance in technical, management, and financial matters; and (4) monitoring the firm's progress in the program and its compliance with program requirements. 8(a) firms must demonstrate program compliance by reporting specific information to the SBA on an as needed, periodic, or requested basis. Much of the reporting is accomplished through the required annual review, which focuses on the firm and its business development, and the continuing eligibility review. The annual review requires numerous forms and documentation, including the following: Form 1450—8(a) Annual Update Review (information about the firm, including its tenure in the program, current financial data, business development targets, loans and other sources of capital, and applicable bonding information); Form 1623—Certification Regarding Debarment, Suspension, and Other Responsibility Matters Primary Covered Transactions (detailed information regarding any debarments, suspensions, or other potentially adverse matters); Form 1790—Representatives Used and Compensation Paid for Services in Connection with Obtaining Federal Contracts (required semiannually, includes a list of any agents, representatives, accountants, consultants, etc. that receive fees, commissions, or compensation of any kind to assist the firm in obtaining or seeking federal contracts); Form 912—Statement of Personal History (information related to claiming disadvantaged status for all officers, directors, general partners, managing members, and holders of more than 10% ownership in the firm); and Form 413—Personal Financial Statement (information concerning the owner's and their spouse's personal net worth). 8(a) firms are also required to provide any updates or modifications to their business plan. If the firm participates in the 8(a) Mentor-Protégé Program (see below) it must provide \"a narrative report detailing the contracts it has had with its mentor and benefits it has received from the mentor/protégé relationship.\" In addition, the firm must provide a report for each 8(a) contract performed during the year \"explaining how the performance of work requirements are being met for the contract, including any 8(a) contracts performed as a joint venture.\" In 2010, GAO reported that the district staff's \"dual role of advocacy for and monitoring of the firms may have contributed in part to the retention of ineligible firms.\" In response, in 2012, the SBA shifted responsibility for processing the continued eligibility portion of the required annual review from BOSs located in the SBA district offices to its Washington, DC, office. While BOSs continue to perform other components of the annual review, \"shifting the responsibility for processing continued eligibility to headquarters was designed to eliminate conflict of interest for district offices associated with performing both assistance and oversight roles.\" 8(a) firms may leave the program by any of the following means: voluntary withdrawal; voluntary early graduation (where the firm voluntarily decides to leave the program after the SBA has determined that the firm has substantially achieved its business plan's targets, objectives, and goals and has demonstrated the ability to compete in the marketplace without program assistance); involuntary early graduation (where the SBA requires a firm to leave the program because it has determined that the firm has substantially achieved its business plan's targets, objectives, and goals and has demonstrated the ability to compete in the marketplace without program assistance; or one or more of the disadvantaged owners upon whom the firm's eligibility is based are no longer economically disadvantaged); termination for good cause; expiration of the program term (maximum of nine years) without meeting the SBA's graduation requirements; or graduation at the expiration of the program term. The SBA's 7(j) Management and Technical Assistance Program assists 8(a) firms by providing management and technical assistance training. The program's origin dates back to 1970 when the SBA issued regulations creating the 8(a) contracting program to \"assist small concerns owned by disadvantaged persons to become self-sufficient, viable businesses capable of competing effectively in the market place.\" Using its statutory authority under Section 7(j) of the Small Business Act to provide management and technical assistance through contracts, grants, and cooperative agreements to qualified service providers, the regulations specified that \"the SBA may provide technical and management assistance to assist in the performance of the subcontracts.\" On October 24, 1978, P.L. 95-507 , To amend the Small Business Act and the Small Business Investment Act of 1958, provided the SBA explicit statutory authority to extend financial, management, technical, and other services to socially and economically disadvantaged small businesses. The SBA's current regulations indicate that the 7(j) Management and Technical Assistance Program will, \"through its private sector service providers [deliver] a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities.\" Eligible individuals and businesses include \"8(a) certified firms, small disadvantaged businesses, businesses operating in areas of high unemployment or low income, or small businesses owned by low income individuals.\" As shown in Table 2 , 6,483 small businesses received 7(j) program assistance in FY2018. The SBA has been marketing the 7(j) program to 8(a) firms in an effort increase awareness of the program, to help those small businesses \"better prepare themselves for federal contracting opportunities,\" and to retain 8(a) firms in the 8(a) program. Table 2 also shows the amount of total administrative resources the SBA provides the 7(j) program each year. The SBA established the 8(a) Mentor-Protégé Program on July 30, 1998. The program is designed to \"enhance the capabilities\" of 8(a) firms and \"improve [their] ability to successfully compete for contracts\" by providing various forms of assistance, including technical or management training, financial assistance in the form of equity investments or loans, subcontracts, trade education, and assistance in performing prime contracts with the federal government through joint venture agreements. Although the SBA established the 8(a) Mentor-Protégé Program and SBA rules govern participation in the program, the 8(a) Mentor-Protégé Program is government-wide in the sense that firms may enjoy the benefits of participation in the program while performing the contracts of any federal agency. In fact, when agencies that do not have their own mentor-protégé programs are involved, the 8(a) Mentor-Protégé Program may be referred to as if it were that agency's program. The SBA's Office of Business Development (BD) administers the 8(a) Mentor-Protégé Program. This makes it somewhat different from agency-specific mentor-protégé programs, which are generally administered by the agency's Office of Small and Disadvantaged Business Utilization (OSDBU) and may involve coordination with agency contracting offices. SBA regulations govern various aspects of the 8(a) Mentor-Protégé Program, including who may qualify as a mentor or protégé, the content of written agreements between mentors and protégés, and the SBA's evaluation of the mentor-protégé relationship. For example, mentors must be for-profit concerns that demonstrate a commitment and the ability to assist developing 8(a) firms, including large firms, other small businesses, firms that have graduated from the program, and other 8(a) firms that are in the transitional stage , or final five years of the program. Only SBA approved firms may serve as mentors, and each mentor must (1) demonstrate that it \"is capable of carrying out its responsibilities to assist the protégé firm under the proposed mentor-protégé agreement\"; (2) possess good character; (3) not be debarred or suspended from government contracting; and (4) be able to \"impart value to a protégé firm due to lessons learned and practical experienced gained because of the [8(a) program], or through its knowledge of general business operations and government contracting.\" Protégés, in turn, are required to be small businesses owned and controlled by socially and economically disadvantaged individuals that are in good standing in the 8(a) Program. Protégés must also qualify as small for the size standard corresponding to their primary (or, under specified circumstances, their secondary) North American Industry (NAICS) code and demonstrate how the business development assistance to be received through the mentor-protégé relationship would advance the goals and objectives set forth in their business plans. Mentors are generally expected to have only one protégé at a time. However, mentors may have up to three protégés at one time provided they can demonstrate that \"the additional mentor/protégé relationship[s] will not adversely affect the development of either protégé firm.\" Similarly, protégés are expected to have one mentor at a time. However, protégés may, under specified circumstances, have two mentors. Mentors and protégés are required to enter a written agreement, approved by the SBA's AA/BD which sets forth the protégé's needs and describes the mentor's assistance. This agreement generally obligates the mentor to furnish assistance to the protégé for at least one year, although it does allow either mentor or protégé to terminate the agreement with 30 days' advance notice to the other party and the SBA. Unless rescinded in writing, the mentor-protégé agreement automatically renews for another year. The term of a mentor-protégé agreement is limited to three years but may be extended for a second three-year period. The 8(a) Mentor-Protégé Program is intended to benefit both mentors and protégés. Serving as a mentor to an 8(a) firm counts toward any subcontracting requirements to which the mentor firm may be subject under Section 8(d) of the Small Business Act. Section 8(d) requires that all federal contractors awarded a contract valued in excess of $700,000 ($1.5 million for construction contracts) that offers subcontracting possibilities agree to a \"subcontracting plan\" that ensures small businesses have \"the maximum practicable opportunity to participate in [contract] performance.\" In addition, in certain circumstances, mentors may form joint ventures with their protégés that are eligible to be awarded an 8(a) contract or another contract set aside for small businesses. Mentor firms and joint ventures involving mentor firms would otherwise generally be ineligible for such contracts because they would not qualify as small under SBA regulations. Mentor firms may also acquire an equity interest of up to 40% in the protégé firm in order to help the protégé firm raise capital. Because mentor firms are not 8(a) participants, they would generally be prohibited from owning more than 10%-20% of an 8(a) firm. However, their participation in the 8(a) Mentor-Protégé Program permits them to acquire a larger ownership share. Protégés not only receive various forms of assistance from their mentors, but also may generally retain their status as \"small businesses\" while doing so. If they received similar assistance from entities other than their mentors, they could risk being found to be other than \"small\" because of how the SBA determines size. The SBA combines the gross income of the firm, or the number of its employees, with those of its \"affiliates\" when determining whether the firm is small, and the SBA could potentially find that firms are affiliates because of assistance such as that which mentors provide to protégés. However, SBA regulations provide that \"[n]o determination of affiliation or control may be found between a protégé firm and its mentor based on the mentor-protégé agreement or any assistance provided pursuant to the agreement.\" As of September 30, 2017, there were 314 active 8(a) mentor-protégé agreements. As shown in Table 3 , the number of 8(a) firms assisted by SBA Business Opportunity Specialists (BOS) has declined somewhat since FY2010, the number of federal contracts awarded to 8(a) firms increased from 3,421 in FY2017 to 3,709 in FY2018, and the 8(a) program's administrative costs have increased. As shown in Table 4 , in FY2017, 8(a) firms were awarded $27.167 billion in federal contracts (5.14% of all federal contracts awarded). Of that amount, these firms received $7.971 billion through an 8(a) set-aside award, $8.445 billion through an 8(a) sole-source award, and $6.110 billion through either open competition or with another small business preference applied (e.g., small business set-aside and HUBZone set-aside or sole-source award). From FY2010 through FY2017, 8(a) firms were awarded, on average, approximately 5.45% of the total amount of federal contracts awarded, ranging from a low of 4.97% of all federal contracts in FY2011 to a high of 6.11% in FY2014. During this period, 8(a) firms received about $214.902 billion in federal contracts: $58.609 billion through an 8(a) set-aside (27.2% of all 8(a) contracts), $73.544 billion through an 8(a) sole-source award (34.3% of all 8(a) contracts), and $82.749 billion through either open competition or with another small business preference applied (38.5% of all 8(a) contracts). The SBA faces several challenges concerning the 8(a) Program, including a recent decline in participation, reported variation in program service delivery, disagreements related to the program's financial thresholds used to determine economic disadvantage, and concerns related to the performance measures used to evaluate the program's success. Noting that the number of certified 8(a) firms had declined from 2010 to 2015, the SBA announced in 2015 that it was establishing a goal to \"increase the number of approved firms\" in the program by 5% in FY2016 and FY2017. In an effort to achieve this goal and increase 8(a) Program retention, the SBA initiated a pilot program to streamline the program's application process; increased its marketing of the 7(j) Management and Training Assistance Program to 8(a) firms; increased its efforts to expand the 8(a) Mentor-Protégé Program by streamlining that program's application process, shortening its application response time from 45 days to 10 days, and initiating an annual mentor-protégé conference to help 8(a) firms become more knowledgeable about the potential benefits of joint ventures and the various rules and compliance requirements for mentor-protégé agreements. The SBA presented four reasons to streamline the program's application process: 1. Although regulatory guidance provides the SBA approximately 90 days to process a complete application, several firms endured delays that extended anywhere from six months to several years. 2. Nearly three-quarters of 8(a) applications are initially rejected due to incomplete or missing documentation. 3. Less than half of complete applications are approved. 4. The SBA's low rate of approval has led to an industry of third party firms that charge 8(a) applicants from $5,000 to $75,000 to prepare the application and respond to the SBA's processors. The SBA argued that some of these firms are taking advantage of applicants, and regardless of the amount paid, there is no guaranteed approval because the approval rate is consistently less than 50%. The SBA reported that it certified 568 applicants to the 8(a) Program in FY2015 (before the streamlined process), 911 in FY2016 (after the streamlined process was instituted on a pilot basis), and 557 in FY2017. The agency declared the pilot streamlined application process a success. However, the SBA's OIG has argued that shortening the review process by eliminating required documents may erode core safeguards that prevented questionable firms from entering the program: Federal prosecutors have told OIG that it would be difficult for them to describe SBA, the procuring agency, or honest 8(a) competitors as fraud victims when SBA is perceived not to have exercised proper due diligence in admitting firms' into the 8(a) Program. Although SBA's efforts to increase the participation in the 8(a) Program is commendable, SBA still needs to ensure that only eligible firms are admitted into the program, and the documentation supporting 8(a) Program application approvals is maintained in a method ensuring clear eligibility of the applicant. In a related development, a recent SBA OIG audit of the 8(a) Program's application determination process found that the SBA did not always document why the AA/BD approved applications even though lower-level \"reviewers [had] identified one or more eligibility issues\" with the applications. The OIG concluded that this lack of documentation resulted in \"potentially ineligible firms\" being accepted into the program. To address this situation, the SBA agreed with the OIG's recommendation to clearly document, in its Business Development Management Information System (BDMIS) which tracks 8(a) Program applications, justifications for approval when they differ from that of lower-level reviewers. The SBA asserted that this lack of documentation was not an indication that ineligible firms were being certified into the program without adequate review. Witnesses at congressional hearings have reported that common Business Opportunity Specialists (BOS) practices, including the interpretation and implementation of standardized policies and procedures, vary from SBA district office to SBA district office and across state lines. Some Members of Congress have argued that \"many of the problems with … BOS advocates are compounded by the fact that\" the position's responsibilities are not laid out in statute. Instead, they argue, the position's responsibilities \"have been left to develop with SOPs [Standard Operating Procedures] and common practices.\" They have also asserted that BOSs are \"often pulled by their district offices to help with other small business programs rather than overseeing the 8(a) participants as intended.\" During the 115 th Congress, P.L. 115-91 , the National Defense Authorization Act for Fiscal Year 2018, among other provisions, amended the Small Business Act to clarify the responsibilities of Business Opportunity Specialists by providing them a statutory list of duties. Those concerned about variation in 8(a) Program service delivery also note that a 2010 GAO report found a \"breakdown in communication between SBA district offices and headquarters … that resulted in inconsistencies in the way district offices delivered the program.\" In addition, in 2015, GAO indicated that the SBA's overlapping organizational structure may contribute to variation in 8(a) Program service delivery: SBA's organizational structure often results in working relationships between headquarters and field offices that differ from reporting relationships, potentially posing programmatic challenges. District officials work with program offices at SBA's headquarters to implement the agency's programs, but these officials report to regional administrators, who themselves report to the Office of Field Operations. For example, … business opportunity specialists in the district offices work with the Office of Government Contracting and Business Development at SBA headquarters to assist small businesses with securing government contracts but report to district office management. During the 114 th Congress, legislation ( H.R. 4341 ) was introduced to require GAO to review the SBA's Office of Government Contracting and Business Development (GCBD) and make recommendations to address several administrative concerns, including issues related to the SBA's organizational overlap. In a related development, GAO reported that a \"skill gap\" among BOSs may also contribute to the possibility of variation in the program's service delivery. GAO noted that the SBA's Office of Field Operations (OFO) revised its field office operations in 2012 following a 2010 review of all position descriptions to ensure that the descriptions aligned with the SBA's strategic plan and district office strategic plans. The SBA informed GAO that it undertook this review because district office staff were given new responsibilities after the SBA moved loan processing from district offices to loan processing centers in 2004. Before the review, district office staff had two principal program delivery positions, lender relations specialist and business development specialist. As a result of the review, descriptions for both of these positions were rewritten and the business development position was split into two separate positions, economic development specialist and business opportunity specialist. The skills and competencies for the new position descriptions focused on the change in the district office's function from loan processing to program compliance and community outreach. Staff were retrained for the rewritten positions. The SBA reported that the change in the position descriptions created a \"skill gap\" because employees who were originally required to have a financial background for loan processing were now required to have different skills, such as a marketing background and interpersonal skills needed for assisting and overseeing 8(a) firms and conducting outreach to small businesses. The SBA informed GAO that the skill gap was particularly pronounced among 885 employees in two job series, GS-1101 and GS-1102, including BOSs, economic development specialists, and procurement staff, and that despite its efforts to address this skill gap through training and offering early retirement and separation incentives in FY2012 and FY2014 in an effort to restructure its personnel, \"the competency gap remains.\" The SBA also noted that its skill gap had been compounded by recent changes in job requirements and new initiatives that require new skill sets for its employees. For example, P.L. 114-92 , the National Defense Authorization Act of FY2016, requires BOSs to obtain federal acquisition certification in contracting as a prerequisite for employment. Arguably, the SBA's relatively recent issuance of a new 300-page SOP (effective September 2016) for the Office of Business Development, which oversees the 8(a) Program, may help to address the reported skill gap. The new SOP provides all SBA staff, including BOSs, specific guidance concerning their roles and responsibilities in 8(a) Program service delivery. As mentioned previously, two SBA offices, the GCBD and the OFO, share responsibility for overseeing the 8(a) Program. Within GCBD, BOSs assigned to the Office of Certification and Eligibility (OCE) evaluate all 8(a) program applications and conduct continuing eligibility reviews of \"high-risk\" or \"complex\" 8(a) firms, including those firms with total 8(a) revenue exceeding $10 million, are part of a joint venture, are party to a mentor-protégé agreement, or are an entity-owned firm such as an Alaska Native Corporation, and those that are requested from district office field staff. However, an SBA OIG audit found that the OCE reviewed the continuing eligibility of less than half of the firms identified as high risk in FY2016 (352 of 859 firms, or 41%) and in FY2017 (350 of 798 firms, or 44%). Within OFO, BOSs in each of the SBA's 68 district offices work directly with their assigned 8(a) firms and, among other duties, conduct annual reviews of those firms' progress toward achieving the targets, objectives, and goals set forth in their business development plan. According to the 8(a) Program's Standard Operating Procedures (SOP) manual, BOSs in each of the SBA's 68 district offices conduct continuing eligibility reviews for all 8(a) firms not reviewed by the GCBD to ensure their compliance with all continuing eligibility requirements during the annual review process. However, in practice, the SBA OIG's audit found that district office BOSs assess continuing eligibility as part of the annual review process for all 8(a) firms, including those deemed to be high risk or complex. The SBA is also required to review the participant's continuing eligibility \"upon receipt of specific and credible information alleging that a participant no longer meets the eligibility requirements.\" Generally, the SBA receives this information from the SBA OIG's Hotline. However, the SBA OIG's audit found that the OCE did not conduct continuing eligibility reviews for any of the 44 OIG Hotline complaints that were referred to the GCBD from October 1, 2015, through May 4, 2017. In addition, GCBD did not inform district office BOSs of complaints filed against firms within their purview. As a result, district office BOSs took no action regarding the complaints. The SBA OIG's audit reviewed the continuing eligibility of two samples of 8(a) firms to determine whether the SBA's continuing eligibility review process \"consistently identify ineligible firms enrolled in the program\": the 15 individually owned 8(a) firms with the highest set-aside dollars in FY2016 that were scheduled to have continuing eligibility reviews within the first half of FY2017 and 10 individually owned 8(a) firms that were identified as being ineligible in Hotline complaints received between October 1, 2015, and May 4, 2017. The SBA OIG found that \"despite OCE and district offices having shared responsibility for assessing 8(a) firms' continuing eligibility, they did not detect that 4 of the 15 individually-owned 8(a) firms we reviewed were ineligible for the 8(a) Program,\" and \"our review of the 10 firms referred by the OIG Hotline revealed that they were all ineligible for the 8(a) program, based on issues such as excessive income and lack of good character.\" In addition, the SBA OIG found that the SBA had identified eligibility concerns through its annual reviews and continuing eligibility reviews for 6 of the 15 individually owned 8(a) firms the OIG had reviewed, but \"did not take timely action to remove these firms from the 8(a) Program or document resolution of eligibility issues.\" The SBA OIG concluded that 20 of the 25 firms it reviewed should have been removed from the 8(a) Program and made 11 recommendations \"to improve the overall management and effectiveness\" of the 8(a) Program's continuing eligibility review process. SBA management agreed with seven of the recommendations, partially agreed to the other four recommendations, and indicated that it would conduct continuing eligibility reviews for the firms identified in the SBA OIG's audit as ineligible and take appropriate action. Section 8(a)(6)(A) of the Small Business Act defines economically disadvantaged individuals as \"socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.\" In determining the degree of diminished credit and capital opportunities, Section 8(a)(6)(A) authorizes the SBA to \"consider, but not be limited to, the assets and net worth of such socially disadvantaged individual.\" As mentioned previously, in 1989, the SBA established by regulation that personal net worth of less than $250,000 at the time of entry into the program (and $750,000 for continuing eligibility) constitutes economic disadvantage. Some Members of Congress have argued that these financial thresholds should be increased or periodically adjusted for inflation. During the 112 th Congress, H.R. 3754 , the Not Too Small to Succeed in Business Act of 2011, would have increased these thresholds to $750,000 for 8(a) Program admission and $2.25 million for continued participation after admission. H.R. 2424 , the Expanding Opportunities for Main Street Act of 2011, would have amended Section 8(a)(6)(A) by inserting after \"disadvantaged individual\" the following: \"For purposes of this section, an individual having a net worth of more than $1,500,000 is not economically disadvantaged.\" Legislation with provisions similar to those in H.R. 2424 was also introduced during the 113 th Congress ( H.R. 2550 , the Minority Small Business Enhancement Act of 2013, and H.R. 2551 , the Expanding Opportunities for Main Street Act of 2013). Advocates for increasing the program's personal net worth threshold noted that the Department of Transportation (DOT) increased the personal net worth threshold for determining eligibility for the Disadvantaged Business Enterprise (DBE) program in 2011 to account for inflation. The DBE threshold was increased from $750,000 (which was set by DOT in 1999, and was based on the 8(a) Program's $750,000 threshold) to $1.32 million. DBE firms, which are provided special consideration in the awarding of federal transportation contracts, argued that the limit penalized success and imposed \"a glass ceiling on the growth and competitiveness of DBE firms.\" Opponents argued that the $1.32 million limit was too high and would include business owners who were not truly disadvantaged and that raising the limit would favor larger, established, and richer DBEs at the expense of smaller, start-up firms because the larger companies would be able to stay in the program longer. More recently, the SBA's OIG has argued that the SBA's 1989 decision to exclude equity in a primary residence from an individual's net worth calculation \"serves as a loophole allowing affluent business owners to shelter wealth in personal real estate, while taking advantage of a program designed to help the socially and economically disadvantaged.\" Pursuant to P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, the SBA is required to \"develop and implement a process for the systematic collection of data on the operations of the [8(a)] Program\" and to report this data, not later than April 30 of each year, to Congress. The act requires the report to include the following: The average personal net worth of individuals who own and control concerns that were initially certified for program participation during the immediately preceding fiscal year and the dollar distribution of each of these individual's net worth, at $50,000 increments. A description and estimate of the benefits and costs that have accrued to the economy and the federal government in the immediately preceding fiscal year due to the operations of those business concerns that were performing 8(a) contracts. A compilation and evaluation of those business concerns that have exited the program during the immediately preceding three fiscal years, including the number of concerns actively engaged in business operations, those that have ceased or substantially curtailed operations, including the reasons for such actions, and those concerns that have been acquired by other firms or organizations owned and controlled by other than socially and economically disadvantaged individuals. For those businesses that have continued operations after they exited from the program, the SBA Administrator is required to separately detail the benefits and costs that have accrued to the economy during the immediately preceding fiscal year due to their operations. A listing of all program participants during the preceding fiscal year identifying, by state and region, for each firm: the concern's name, the race or ethnicity, and gender of the disadvantaged owners, the dollar value of all contracts received in the preceding year, the dollar amount of advance payments received by each concern pursuant to contracts awarded under Section 8(a), and a description including (if appropriate) an estimate of the dollar value of all benefits and loans received during such year. The total dollar value of 8(a) contracts and options awarded during the preceding fiscal year and such amount expressed as a percentage of total sales of all firms participating in the program during such year; and of firms in each of the nine years of program participation. A description of additional resources or program authorities required to provide the types of services needed over the next two-year period to service the expected portfolio of 8(a) certified firms. The total dollar value of 8(a) contracts and options, at such dollar increments as the SBA Administrator deems appropriate, for each four digit standard industrial classification code under which such contracts and options were classified. The SBA's FY2014 report (the latest one available) indicated that 8(a) firms \"contributed an estimated 158,018 jobs to the Nation's economy,\" and that 2,209 of the 2,288 firms that had exited and completed the program during the three preceding fiscal years (October 1, 2010 through September 30, 2013) were still active, 45 had ceased operations, and 34 did not have data available for determining their status as reported by Dun and Bradstreet. Of the active firms, \"two were acquired by another firm or organization owned and controlled by other than socially and economically disadvantages individuals and 144 firms were substantially curtailed within the past three years.\" In addition, the 2,209 still active firms reported FY2014 revenue of approximately $5.49 billion and provided jobs for approximately 70,330 persons. In 2000, GAO recommended that the SBA augment its data collection activities by periodically surveying a nationwide sample of 8(a) firms. GAO argued that a survey would improve the SBA's ability to determine how well the program is working, further arguing that \"at a minimum, the survey should assess whether SBA assistance is meeting the firms' expectations and needs.\" The SBA currently contracts with a third-party to conduct an annual client satisfaction survey of small businesses that have received management training and technical assistance from Small Business Development Centers, SCORE, and Women Business Centers. The survey's objective is to measure these programs' impact \"on the creation, financial development and survival of client firms.\" The wording of many of that survey's questions, which focus on client satisfaction and the programs' impact on client behavior and economic success, could prove useful should the SBA decide to conduct a nationwide survey of 8(a) firms. ", "summary": "The Minority Small Business and Capital Ownership Development Program—commonly known as the \"8(a) Program\"—provides participating small businesses with training, technical assistance, and contracting opportunities in the form of set-aside and sole-source awards. A set-aside award is a contract in which only certain contractors may compete, whereas a sole-source award is a contract awarded, or proposed for award, without competition. In FY2017, 3,421 8(a) firms were awarded more than $27.1 billion in federal contracts, including $8.0 billion in 8(a) set-aside awards and $8.4 billion in 8(a) sole-source awards. Other programs provide similar assistance to other types of small businesses (e.g., women-owned, HUBZone, and service-disabled veteran-owned). 8(a) Program eligibility is generally limited to small businesses \"unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States\" that demonstrate \"potential for success.\" Members of certain racial and ethnic groups are presumed to be socially disadvantaged, although individuals who do not belong to these groups may prove they are also socially disadvantaged. To be economically disadvantaged, an individual must have a net worth of less than $250,000 (excluding ownership in the 8(a) firm and equity in his or her primary residence) at the time of entry into the program. This amount increases to $750,000 for continuing eligibility. In determining whether an applicant has good character, the SBA takes into account any criminal conduct, violations of SBA regulations, or debarment or suspension from federal contracting. For a firm to demonstrate potential for success, it generally must have been in business in its primary industry classification for two years immediately prior to applying to the program. However, small businesses owned by Alaska Native Corporations, Community Development Corporations, Indian tribes, and Native Hawaiian Organizations are eligible to participate in the 8(a) Program under somewhat different terms. Each of these terms is further defined by the Small Business Act, Small Business Administration (SBA) regulations, and judicial and administrative decisions. This report examines the 8(a) Program's historical development, key requirements, administrative structures and operations, and the SBA's oversight of 8(a) firms. It also discusses two SBA programs designed to support 8(a) firms, the 7(j) Management and Technical Assistance Program and the 8(a) Mentor-Protégé Program, and provides various program statistics. It concludes with an analysis of the following current 8(a) Program issues: The SBA's decision to address recent declines in the number of program participants by revising and streamlining the program's application process, an action which the SBA's Office of Inspector General (SBA OIG) reports \"may erode core safeguards that prevented questionable firms from entering the 8(a) Program.\" Reported variation in 8(a) Program service delivery. Reported deficiencies in the oversight of 8(a) Program participant's continuing eligibility. Disagreements concerning the financial thresholds used to determine economic disadvantage, including the SBA's decision to exclude equity in a primary residence from the calculation of an individual's net worth. The adequacy of the performance measures used to evaluate the program's effectiveness in meeting its statutory goals.", "document_type": "crs"}
{"report": "This report provides historical documents and other resources related to past government shutdowns, along with brief annotations that describe the contents of the documents. The report includes links to full-text documents when available. There is limited information and guidance related to shutdowns, and it is difficult to predict what might happen in the event of one, but information about past events may help inform future deliberations. The following annotated resources are meant to guide readers to relevant materials from governmental and selected nongovernmental sources. The following select CRS products include information related to past government shutdowns. CRS Report RL34680, Shutdown of the Federal Government: Causes, Processes, and Effects , coordinated by Clinton T. Brass. This report discusses the causes, processes, and effects of federal government shutdowns, including potential issues for Congress. CRS Report RS20348, Federal Funding Gaps: A Brief Overview , by James V. Saturno This report provides a discussion of funding gaps in recent decades and a more detailed chronology of legislative actions and funding gaps that led to the two shutdowns of FY1996 and the single shutdown of FY2014. CRS Report R43292, The FY2014 Government Shutdown: Economic Effects , by Marc Labonte This report discusses the effects of the FY2014 government shutdown on the economy and financial markets. It also reviews third-party estimates of the effects of the shutdown on the economy. CRS Report R43250, CRS Resources on the FY2014 Funding Gap, Shutdown, and Status of Appropriations , by Justin Murray This brief report includes short annotations and links to CRS products related to the October 2013 government shutdown. CRS Legal Sidebar LSB10243, How a Government Shutdown Affects Government Contracts, by David H. Carpenter This Legal Sidebar briefly covers potential effects of a shutdown on new and existing contracts. CRS In Focus, IF11079, National Park Service: Issues Related to a Government Shutdown, by Laura B. Comay and Carol Hardy Vincent This In Focus covers the National Parks Service and topics such as the accessibility and funding for limited operations during a government shutdown. CRS Insight, CRS Insight IN11011, Economic Effects of the FY2019 Government Shutdown, by Marc Labonte This Insight briefly covers the FY2019 shutdown and its effects on economic activity and employment. CRS Insight, CRS Insight IN11020, Federal Grants to State and Local Governments: Issues Raised by the Partial Government Shutdown, by Natalie Keegan This Insight briefly covers the FY2019 shutdown and its effect on the timing and payment of grant awards. The U.S. Government Accountability Office (GAO) has published reports related to past and potential shutdowns. The following documents investigate possible issues and provide historical context surrounding government shutdowns. U.S. Government Accountability Office, Government Shutdown: Three Departments Reporting Varying Degrees of Impacts on Operations, Grants, and Contracts , GAO-15-86, November 14, 2014, available at https://www.gao.gov/products/GAO-15-86 . GAO reviewed how the 2013 shutdown affected some operations and services at three departments: the Departments of Energy, Health and Human Services (HHS), and Transportation (DOT). GAO selected these three departments for review based on the value of grants and contracts, the percentage of employees expected to be furloughed, and the potential for longer-term effects. GAO recommended that the Office of Management and Budget (OMB) instruct agencies to document lessons learned in planning for and implementing a shutdown, as well as for resuming activities following a shutdown should a funding gap longer than five days occur in the future. OMB staff did not state whether they agreed or disagreed with the recommendation. U.S. General Accounting Office, Cost of the Recent Partial Shutdown of Government Offices , PAD-82-24, December 10, 1981, available at http://www.gao.gov/products/PAD-82-24 . According to GAO, this report was completed \"in response to congressional requests,\" for which \"GAO contacted 13 cabinet departments and 12 selected agencies and offices to obtain information about the costs of a 1981 partial shutdown of government offices.\" It includes cost estimates, background information about the costs, and GAO recommendations to Congress concerning agency operations in the event of a government shutdown. U.S. General Accounting Office, Funding Gaps Jeopardize Federal Government Operations , PAD-81-31, March 3, 1981, available at http://www.gao.gov/products/PAD-81-31 . According to GAO, as of March 1981, \"interruptions in federal agency funding at the beginning of the fiscal year (FY) and operations on continuing resolutions have become the norm rather than the exception.\" For years, many federal agencies continued to operate during a funding gap, while \"minimizing all nonessential operations and obligations, believing that Congress did not intend that agencies close down\" while waiting for the enactment of annual appropriations acts or continuing resolutions. During the FY1981 appropriations process, the President requested opinions on the Antideficiency Act from the then-U.S. Attorney General, Benjamin Civiletti. In two memoranda issued in 1980 and 1981, the Attorney General stated that the act required agencies to terminate all operations when their current appropriations expired. According to GAO, agencies were uncertain how to respond to the Attorney General's opinion and what activities they would be able to continue if appropriations expired. This GAO report outlines some of the problems surrounding late appropriations and funding gaps. It also includes Attorney General Civiletti's opinions within Appendices IV and VIII. U.S. General Accounting Office, Government Shutdown: Funding Lapse Furlough Information , GGD-96-52R, December 1, 1995, available at http://www.gao.gov/products/GGD-96-52R . GAO was asked to provide available information on the numbers of federal employees who might have been subject to furlough in the event of a second shutdown in 1995. GAO provided numbers that were based on plans provided by the Office of Management and Budget (OMB) to GAO in October 1995. The numbers included within this document do not represent actual furloughs. The numbers represent planned furloughs in advance of the two shutdowns, which occurred later in November and December–January. U.S. General Accounting Office, Government Shutdown: Permanent Funding Lapse Legislation Needed , GGD-91-76, June 6, 1991, available at http://www.gao.gov/products/GGD-91-76 . In 1990, GAO issued a questionnaire to government agencies in an attempt to measure the effects of a partial shutdown which occurred on Columbus Day weekend. This report also includes estimates on the effects of a hypothetical three-day shutdown during a nonholiday workweek. The following committee print includes historical information on a past government shutdown. U.S. Congress, House Committee on Post Office and Civil Service, Cost of Shutting Down Federal Government on November, 23, 1981 , committee print, 97 th Congress, 2 nd session, March 25, 1982 (Washington: GPO, 1982), available at http://hdl.handle.net/2027/pur1.32754077662413 . This committee print assessed the cost of the November 23, 1981, shutdown of federal offices resulting from a presidential veto of a continuing resolution for FY1982. The committee print includes individual federal departments' and agencies' shutdown impact assessments that were collected by GAO (pp. 73-212). It also includes cost estimates, an OMB memorandum, and a presidential veto statement. The following are congressional hearings that include historical information on past shutdowns. Some of these hearings include items for the record such as OMB memoranda. U.S. Congress, House and Senate Committees on the Budget, Effects of Potential Government Shutdown , hearing, 104 th Congress, 1 st session, September 19, 1995 (Washington: GPO, 1995), available at http://www.archive.org/stream/effectsofpotenti00unit . This hearing took place before the November 1995 shutdown, and it examined potential scenarios if a shutdown were to occur. The hearing includes testimony from Walter Dellinger, Assistant Attorney General, U.S. Department of Justice, and Alice M. Rivlin, Director, OMB. The hearing includes additional materials such as articles, letters from the Federal Reserve System, and a memo from Walter Dellinger to Alice Rivlin. U.S. Congress, House Committee on Government Reform and Oversight, Subcommittee on Civil Service, Government Shutdown I: What's Essential ?, hearings, 104 th Congress, 1 st session, December 6, and 14, 1995 (Washington: GPO 1997), available at http://www.gpo.gov/fdsys/pkg/CHRG-104hhrg23275/pdf/CHRG-104hhrg23275.pdf . These hearings were held in December 1995 and generally covered the November 1995 shutdown. Because the hearings were not published until 1997, some additional information related to the December 1995-January 1996 government shutdown is included. U.S. Congress, House Committee on Resources, State Service Donations in Budgetary Shutdowns , hearing, 104 th Congress, 1 st session, December 5, 1995 (Washington: GPO 1996), available at http://www.archive.org/stream/stateservicedona00unit . The hearing was held to consider legislation that would have directed the Department of the Interior to accept donations of assistance from state governments' employee services for operating national parks and wildlife refuges during federal government shutdowns. U.S. Congress, House Committee on Oversight and Government Reform, As Difficult As Possible: The National Park Service's Implementation of the Government Shutdown , hearing, 113 th Congress, 1 st session, October 16, 2013. Available at http://www.gpo.gov/fdsys/pkg/CHRG-113hhrg88621/pdf/CHRG-113hhrg88621.pdf . The hearing was held during the October 2013 shutdown and looked at the National Park Service's implementation of the government shutdown. U.S. Congress, House Committee on Veterans' Affairs. Effect of Government Shutdown on VA Benefits and Services to Veteran s , hearing, 113 th Congress, 1 st session, October 9, 2013. Available at http://www.gpo.gov/fdsys/pkg/CHRG-113hhrg85863/pdf/CHRG-113hhrg85863.pdf . The hearing was held during the October 2013 shutdown and focused on the impact of the shutdown on benefits payments and services for veterans. U.S. Congress, Senate Committee on Commerce, Science, and Transportation. Impacts of the Government Shutdown on Our Economic Security , hearing, 113 th Congress, 1 st session, October 11, 2013. Available at http://www.gpo.gov/fdsys/pkg/CHRG-113shrg93946/pdf/CHRG-113shrg93946.pdf . The hearing was held during the October 2013 shutdown and focused on the possible and emerging economic and other impacts related to the shutdown. U.S. Congress, Senate Committee on Small Business and Entrepreneurship. Small Businesses Speak: Surviving the Government Shutdown? , hearing, 113 th Congress, 1 st session, October 15, 2013. Available at http://www.gpo.gov/fdsys/pkg/CHRG-113shrg87989/pdf/CHRG-113shrg87989.pdf . The hearing was held during the October 2013 shutdown and it examined the impacts the shutdown was having on small businesses. U.S. Congress, House Committee on Armed Services, Subcommittee on Readiness. The Interpretation of H.R. 3210 : 'Pay Our Military Act', hearing, 113 th Congress, 1 st session, October 10, 2013. Available at http://www.gpo.gov/fdsys/pkg/CHRG-113hhrg85325/pdf/CHRG-113hhrg85325.pdf . The hearing was held during the October 2013 shutdown, and it examined interpretations of H.R. 3210 , the Pay Our Military Act, which ultimately was enacted as P.L. 113-39 . U.S. Congress, Senate Joint Economic Committee. The Way Forward: Long-Term Fiscal Responsibility and Economic Growth , hearing, 113 th Congress, 1 st session, October 11, 2013. Available at http://www.gpo.gov/fdsys/pkg/CHRG-113shrg85408/pdf/CHRG-113shrg85408.pdf . The hearing was held during the October 2013 shutdown. The hearing examined policy options for ending the shutdown and addressing the debt ceiling, and it also reviewed potential solutions to promote fiscal sustainability and economic growth. OMB documents and guidance regarding potential or actual funding gaps and shutdowns may provide insights into current and future practices. The Office of Personnel Management (OPM) has provided links to copies of previous OMB bulletins and memoranda for reference. This website, entitled Pay & Leave Furlough Guidance: Shutdown Furlough , is available at http://www.opm.gov/policy-data-oversight/pay-leave/furlough-guidance/#url=Shutdown-Furlough . Some of the OMB documents include the following. OMB Bulletin No. 80-14, Shutdown of Agency Operations Upon Failure by the Congress to Enact Appropriations , August 28, 1980 (citing the 1980 Civiletti opinion and requiring agencies to develop shutdown plans); OMB Memorandum, Agency Operations in the Absence of Appropriations , November 17, 1981 (referencing OMB Bulletin No. 80-14; stating the 1981 Civiletti opinion remains in effect; and providing examples of \"excepted activities\" that may be continued under a funding gap); OMB Bulletin No. 80-14, Supplement No. 1, Agency Operations in the Absence of Appropriations , August 20, 1982 (\"updating\" OMB Bulletin No. 80-14 and newly requiring agencies to submit contingency plans for review by OMB); OMB Memorandum M-91-02, Agency Operations in the Absence of Appropriations , October 5, 1990 (referencing OMB Bulletin No. 80-14; stating that OMB Bulletin No. 80-14 was \"amended\" by the OMB Memorandum of November 17, 1981; stating the 1981 Civiletti opinion remains in effect; and directing agencies how to respond to an anticipated funding gap that would begin during the weekend); OMB Memorandum M-95-18, Agency Plans for Operations During Funding Hiatus , August 22, 1995 (referencing OMB Bulletin No. 80-14, as amended; citing the 1981 Civiletti opinion; transmitting to agencies a 1995 Office of Legal Counsel opinion as an \"update\" to the 1981 Civiletti opinion; and directing agencies to send updated contingency plans to OMB); and OMB Memorandum M-13-22, Planning for Agency Operations during a Potential Lapse in Appropriations , September 17, 2013 (citing Section 124 of Circular A-11 and providing guidance and coordinating efforts to facilitate contingency planning in accordance with the Antideficiency Act). OMB Memorandum M-18-05, Planning for Agency Operations during a Potential Lapse in Appropriations , January 19, 2018 (citing Section 124 of Circular A-11 and providing guidance and coordinating efforts to facilitate contingency planning in accordance with the Antideficiency Act). OMB also provides agencies with annual instructions in Circular No. A-11 on how to prepare for and operate during a funding gap. U.S. Executive Office of the President, Office of Management and Budget, Circular No. A-11: Preparation, Submission, and Execution of the Budget , June 2018, Section 124, available at https://www.whitehouse.gov/wp-content/uploads/2018/06/s124.pdf . The circular establishes two \"policies\" regarding the absence of appropriations: (1) a prohibition on incurring obligations unless the obligations are otherwise authorized by law and (2) permission to incur obligations \"as necessary for orderly termination of an agency's functions,\" but prohibition of any disbursement (i.e., payment). The circular also directs agency heads to develop and maintain shutdown plans, which are to be submitted to OMB at a minimum every two years starting August 1, 2015, and also when revised to reflect certain changes in circumstances. Agency heads are to use the Civiletti opinions, a 1995 Department of Justice, Office of Legal Counsel opinion, and the circular to \"decide what agency activities are excepted or otherwise legally authorized to continue during a lapse in appropriations.\" OMB has a website with links to agency shutdown contingency plans arranged by agency. This website, entitled \"Agency Contingency Plans,\" is available at https://www.whitehouse.gov/omb/information-for-agencies/Agency-Contingency-Plans . The hearing entitled Government Shutdown I: What's Essential ?, includes some estimates related to the December 1995–January 1996 shutdowns. The hearing includes an OMB letter with information about the effects of the shutdowns and counts of employees who were excepted and not excepted from furlough, pp. 266-270 and 272-274. This hearing is available at http://www.gpo.gov/fdsys/pkg/CHRG-104hhrg23275/pdf/CHRG-104hhrg23275.pdf . OMB released a report on November 7, 2013, with some estimates on the cost of the October 2013 shutdown. The report includes information on federal employee furloughs, economic effects of the shutdown, and some impact estimates related to select programs. This report is available at http://web.archive.org/web/20140701035515/http://www.whitehouse.gov/sites/default/files/omb/reports/impacts-and-costs-of-october-2013-federal-government-shutdown-report.pdf . The Congressional Budget Office (CBO) released a report on January 28, 2019, with some estimates of effects of the December-January partial government shutdown. The report includes estimates related to the shutdown's effect on discretionary spending, economic activity and GDP. The report is available at https://www.cbo.gov/publication/54937 . OPM has some information publicly available on the internet related to government shutdowns and furloughs. U.S. Office of Personnel Management, Pay & Leave Furlough Guidance , available at https://www.opm.gov/policy-data-oversight/pay-leave/furlough-guidance/#url=Shutdown-Furlough . This website includes links to guidance related to administrative and shutdown furloughs. The shutdown portion of this website includes the following additional references to historical guidance including U.S. Office of Personnel Management, Memorandum to Agencies on Retroactive Pay and Other Matters , October 17, 2013; U.S. Office of Personnel Management, Information on Paychecks for September 22 through October 5, 2013 Pay Period; U.S. Office of Personnel Management, Guidance for Shutdown Furloughs , September 2015; U.S. Chief Human Capital Council, Memorandum for Heads of Executive Departments and Agencies . Fact Sheet: Pay and Benefits Information for Employees Affected by the Lapse in Appropriations. January 23, 2019; U.S. Chief Human Capital Council, Memorandum for Heads of Executive Departments and Agencies. Government Fair Treatment Act of 2019 , January 23, 2019; U.S. Chief Human Capital Council, Memorandum for Heads of Executive Departments and Agencies. Telework and other Workplace Flexibilities for Excepted Employees during a Lapse in Appropriations . January 23, 2019. The following documents are from the National Archives and Records Administration (NARA) and current Administration websites. These documents cover statements made by Presidents and Administration officials during government shutdowns and are arranged by date. Historical Context . The November 1995 shutdown began on November 14, 1995, and ended on November 19, 1995. An estimated 800,000 federal employees were furloughed during the five full days of the shutdown. The furlough action was due to the expiration of a continuing resolution ( P.L. 104-31 ), which funded the government through November 13, 1995. On November 13, President William Clinton vetoed a second continuing resolution ( H.J.Res. 115 ) and a debt limit extension bill ( H.R. 2586 ) and instructed agencies to begin shutdown operations. The following presidential statements occurred during this time period. U.S. President (Clinton), November 13, 1995, President's Message to Congress on Continuing Resolution Veto , available at https://clintonwhitehouse6.archives.gov/1995/11/1995-11-13-president-message-to-congress-on-continuing-res-veto.html . U.S. President (Clinton), November 14, 1995, Statement by the President on Government Shutdown , available at https://clintonwhitehouse6.archives.gov/1995/11/1995-11-14-for-the-record-president-on-government-shutdown.html . U.S. President (Clinton), November 17, 1995, Transmittal to Congress of Presidential C.R ., available at https://clintonwhitehouse6.archives.gov/1995/11/1995-11-17-transmittal-to-congress-of-presidential-cr.html . U.S. President (Clinton), November 18, 1995, Radio Address by the President to the Nation , available at https://clintonwhitehouse6.archives.gov/1995/11/1995-11-18-radio-address-by-the-president-to-the-nation.html . U.S. President (Clinton), November 19, 1995, Statement by the President on Budget Agreement , available at https://clintonwhitehouse6.archives.gov/1995/11/1995-11-19-statement-by-the-president-on-budget-agreement.html . Historical Context . The December 1995-January 1996 shutdown began on December 16, 1995, and ended on January 6, 1996. The shutdown was triggered by the expiration of a continuing funding resolution enacted on November 20, 1995 ( P.L. 104-56 ), which funded the government through December 15, 1995. This shutdown officially ended on January 6, with the passage of three continuing resolutions (CRs) ( P.L. 104-91 , P.L. 104-92 , and P.L. 104-94 ). There were five additional short-term continuing resolutions needed to prevent further funding gaps from occurring through April 26, 1996, when the Omnibus Consolidated Rescissions and Appropriations Act of 1996 ( P.L. 104-134 ) was enacted to fund any agencies or programs not yet funded through FY1996. The following presidential statements occurred during the time period of December 15, 1995, through January 6, 1996. U.S. President (Clinton), December 15, 1995, Statement by the President on Budget Negotiations , available at https://clintonwhitehouse6.archives.gov/1995/12/1995-12-15-president-statement-on-budget-negotiations.html . U.S. President (Clinton), December 16, 1995, Radio Address by the President to the Nation , available at https://clintonwhitehouse6.archives.gov/1995/12/1995-12-16-radio-address-by-the-president-to-the-nation.html . U.S. President (Clinton), December 18, 1995, Statement by the President on the Budget , available at https://clintonwhitehouse6.archives.gov/1995/12/1995-12-18-statement-by-the-president-on-the-budget.html . U.S. President (Clinton), December 22, 1995, Statement by the President on Signing House Joint Res. 136 , available at https://clintonwhitehouse6.archives.gov/1995/12/1995-12-22-president-statement-on-signing-house-joint-res.html . U.S. President (Clinton), December 23, 1995, Radio Address by the President to the Nation , available at https://clintonwhitehouse6.archives.gov/1995/12/1995-12-23-radio-address-by-the-president-to-the-nation.html . U.S. President (Clinton), January 4, 1996, Statement by the President on House Joint Resolution 153 , available at https://clintonwhitehouse6.archives.gov/1996/01/1996-01-04-president-statement-on-house-joint-resolution.html . U.S. President (Clinton), January 6, 1996, Statement by the President on Balanced Budget Proposal , available at https://clintonwhitehouse6.archives.gov/1996/01/1996-01-06-president-remarks-on-balanced-budget-proposal.html . U.S. President (Clinton), January 6, 1996, Statement by the President in Signing H.R. 1358 , available at https://clintonwhitehouse6.archives.gov/1996/01/1996-01-06-president-statement-in-signing-hr.html . U.S. President (Clinton), January 6, 1996, Statement by the President in Signing H.R. 1643 , available at https://clintonwhitehouse6.archives.gov/1996/01/1996-01-06-president-statement-in-signing-hr-a.html . U.S. President (Clinton), January 6, 1996, Radio Address by the President to the Nation , available at https://clintonwhitehouse6.archives.gov/1996/01/1996-01-06-radio-address-by-the-president-to-the-nation.html . Historical Context . A shutdown occurred at the beginning of FY2014 (October 1, 2013) and lasted for a total of 16 full days. At the beginning of the fiscal year, none of the 12 regular appropriations bills for FY2014 were enacted. In addition, a continuing resolution to provide temporary funding for the previous year's projects and activities had also not been enacted. On September 30, however, an automatic continuing resolution was enacted that covered FY2014 pay and allowances for (1) certain members of the Armed Forces, (2) certain Department of Defense (DOD) civilian personnel, and (3) other specified DOD and Department of Homeland Security contractors ( P.L. 113-39 ). A continuing resolution was signed into law ( P.L. 113-46 ) on October 17, 2013, which ended the shutdown and allowed government departments and agencies to reopen. The following presidential statements occurred during the time period of September 30, 2013, through October 19, 2013, and included discussion of the shutdown. U.S. President (Obama), September 30, 2013, Statement by the President , available at https://obamawhitehouse.archives.gov/the-press-office/2013/09/30/statement-president . U.S. President (Obama), September 30, 2013, Weekly Address: Averting a Government Shutdown and Expanding Access to Affordable Healthcare , available at https://obamawhitehouse.archives.gov/blog/2013/09/28/weekly-address-averting-government-shutdown-and-expanding-access-affordable-healthca . U.S. President (Obama), October 1, 2013, Remarks by the President on the Affordable Care Act and the Government Shutdown , available at https://obamawhitehouse.archives.gov/the-press-office/2013/10/01/remarks-president-affordable-care-act-and-government-shutdown . U.S. President (Obama), October 3, 2013, Remarks by the President on the Government Shutdown, available at https://obamawhitehouse.archives.gov/the-press-office/2013/10/03/remarks-president-government-shutdown . U.S. President (Obama), October 5, 2013, Weekly Address: End This Government Shutdown , available at https://obamawhitehouse.archives.gov/blog/2013/10/05/your-weekly-address-end-government-shutdown . U.S. President (Obama), October 7, 2013, Remarks by the President at FEMA Headquarters, available at https://obamawhitehouse.archives.gov/the-press-office/2013/10/07/remarks-president-fema-headquarters . U.S. President (Obama), October 12, 2013, Weekly Address: Let's Get Back to the Work of the American People , available at https://obamawhitehouse.archives.gov/blog/2013/10/12/weekly-address-let-s-get-back-work-american-people . U.S. President (Obama), October 16, 2013, Statement by the President of the United States, available at https://obamawhitehouse.archives.gov/the-press-office/2013/10/16/statement-president-united-states . U.S. President (Obama), October 17, 2013, Remarks by the President on the Reopening of the Government , available at https://obamawhitehouse.archives.gov/the-press-office/2013/10/17/remarks-president-reopening-government . U.S. President (Obama), October 19, 2013, Weekly Address: Working Together on Behalf of the American People, available at https://obamawhitehouse.archives.gov/blog/2013/10/19/weekly-address-working-together-behalf-american-people . Historical Context. At the beginning of FY2018, none of the 12 regular appropriations bills had been enacted, so the federal government operated under a series of CRs. The first, P.L. 115-56 , provided government-wide funding through December 8, 2017. The second, P.L. 115-90 , extended funding through December 22, and the third, P.L. 115-96 , extended it through January 19, 2018. In the absence of agreement on legislation that would further extend the period of these CRs, a funding gap began with the expiration of P.L. 115-96 at midnight on January 19. A furlough of federal personnel began over the weekend and continued through Monday of the following week, ending with enactment of a fourth CR, P.L. 115-120 , on January 22. The following presidential and Trump Administration statements occurred during the time period of January 19, 2018, through January 22, 2018, and included discussion of the shutdown. January19, 2018, Press Briefing by OMB Director Mick Mulvaney and Legislative Affairs Director Marc Short on the Potential Government Shutdown, available at https://www.whitehouse.gov/briefings-statements/press-briefing-by-omb-director-mick-mulvaney-and-legislative-affairs-director-marc-short-on-the-potential-government-shutdown01192018/ . January 20, 2018, Press Briefing by OMB Director Mick Mulvaney and Legislative Affairs Director Marc Short on the Government Shutdown , available at https://www.whitehouse.gov/briefings-statements/press-briefing-omb-director-mick-mulvaney-legislative-affairs-director-marc-short-government-shutdown/ . U.S. President (Trump) January 22, 2018, Statement from President Donald J. Trump , available at https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-trump-8/ . January 22, 2018, Press Briefing by Press Secretary Sarah Sanders available at https://www.whitehouse.gov/briefings-statements/press-briefing-press-secretary-sarah-sanders-012218/ . Historical Context. The December 2018-January 2019 partial government shutdown began on December 22, 2018, and ended on January 25, 2019. At the beginning of FY2019 (October 1, 2018), five of the 12 regular appropriations bills had been enacted in consolidated appropriations bills and the other seven appropriations bills were funded under two CRs. The first CR , P.L. 115-245 , provided funding for these remaining seven appropriations bills through December 7, 2018. The second CR, P.L. 115-298 , extended funding for these seven appropriations bills through December 21, 2018. When no agreement was reached on legislation to further extend the period of these CRs for the remaining seven appropriations bills, a funding gap began with the expiration of the funding in P.L. 115-298 at midnight at the end of the day on December 21, 2018. The funding gap ended when a CR was signed into law on January 25, 2019, which ended the partial government shutdown and allowed government departments and agencies to reopen. The partial government shutdown lasted 35 days making it the longest shutdown in history, compared with other shutdowns that have occurred since key Department of Justice opinions were issued in 1980 and 1981. The following presidential statements occurred during the time period of December 21, 2019, through January 25, 2019, and included discussion of the shutdown. U.S. President (Trump), December 27, 2018, Remarks by President Trump in Christmas Video Teleconference with Members of the Military , available at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-christmas-video-teleconference-members-military/ . U.S. President (Trump), January 4, 2019, Remarks by President Trump After Meeting with Congressional Leadership on Border Security , available at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-meeting-congressional-leadership-border-security/ . U.S. President (Trump), January 8, 2019, President Donald J. Trump's Address to the Nation on the Crisis at the Border , available at https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-address-nation-crisis-border/ . U.S. President (Trump), January 11, 2019, Remarks by President Trump During Briefing at the Rio Grande Valley U.S.-Mexico Border , available at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-briefing-rio-grande-valley-u-s-mexico-border/ . January 11, 2019, Remarks by Vice President Pence Before Meet-and-Greet with U.S. Customs and Border Patrol Employees , available at https://www.whitehouse.gov/briefings-statements/remarks-vice-president-pence-meet-greet-u-s-customs-border-patrol-employees/ . U.S. President (Trump), January 25, 2019, Remarks by President Trump on the Government Shutdown , available at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-government-shutdown/ .", "summary": "When federal government agencies and programs lack budget authority after the expiration of either full-year or interim appropriations, they experience a \"funding gap.\" Under the Antideficiency Act (31 U.S.C. §§1341 et seq.), they must cease operations, except in certain circumstances when continued activities are authorized by law. When there is a funding gap that affects many federal entities, the situation is often referred to as a government shutdown. In the past, there have occasionally been funding gaps that led to government shutdowns, one of which lasted 21 days, from December 16, 1995, to January 6, 1996. A shutdown occurred at the beginning of FY2014 (October 1, 2013) and lasted for a total of 16 days. Subsequently, two comparatively brief shutdowns occurred during FY2018, in January and February 2018, respectively. The longest shutdown occurred in FY2019—beginning at the end of the day on December 21, 2018, and lasting 35 days. The relevant laws that govern shutdowns have remained relatively constant in recent decades. However, agencies and officials may exercise some discretion in how they interpret the laws, and circumstances that confront agencies and officials may differ over time. Consequently, it is difficult to predict what might happen in the event of a future shutdown. Still, information about past events may offer some insight into possible outcomes and help inform future deliberations. This report provides an annotated list of historical documents and other resources related to several past government shutdowns. Sources for these documents and resources include the Congressional Research Service (CRS), Government Accountability Office (GAO), House and Senate Committees, Office of Management and Budget (OMB), Office of Personnel Management (OPM), and Executive Office of the President. When possible, the report includes links to full-text documents. For more information about federal government shutdowns and funding gaps, see CRS Report RL34680, Shutdown of the Federal Government: Causes, Processes, and Effects, coordinated by Clinton T. Brass. For more information about funding gaps, see CRS Report RS20348, Federal Funding Gaps: A Brief Overview, by James V. Saturno. This report will be updated as additional resources are identified.", "document_type": "crs"}
{"report": "The Land and Water Conservation Fund (LWCF) Act of 1965 was enacted to \"assist in preserving, developing, and assuring accessibility to ... outdoor recreation resources.\" Two main goals of the law were to facilitate participation in recreation and \"to strengthen the health and vitality\" of U.S. citizens. To accomplish these goals, purposes of the law included \"providing funds\" for federal land acquisition and for federal assistance to states generally related to outdoor recreation. The fund is authorized to receive $900 million in revenues annually under the LWCF Act. Each year the fund accrues revenues at this level. The fund accumulates the majority of its revenues from oil and gas leases on the Outer Continental Shelf (OCS). It also accumulates revenues from the federal motorboat fuel tax and surplus property sales. However, revenues that accrue under the LWCF Act are available only if appropriated by Congress through the discretionary appropriations process. The LWCF receives additional revenue (beyond the $900 million) from OCS leasing under the Gulf of Mexico Energy Security Act of 2006 (GOMESA). Unlike revenues under the LWCF Act, GOMESA revenues are mandatory appropriations (and thus are not subject to annual appropriation by Congress). They can be used only for grants to states for outdoor recreation purposes. The overall level of annual appropriations (discretionary and mandatory combined) has varied widely since the fund's origin in FY1965. Of the total revenues that have accrued throughout the program's history ($40.9 billion), less than half have been appropriated ($18.9 billion) through FY2019. Thus, the unappropriated balance in the fund is estimated at $22.0 billion through FY2019. The LWCF Act outlines uses of the fund for federal and state purposes. It states that of the total made available to the fund, not less than 40% is to be used for \"federal purposes\" and not less than 40% is to be used to provide \"financial assistance to states.\" The act lists the federal purposes for which the President is to allot LWCF funds \"unless otherwise allotted in the appropriation Act making them available.\" These purposes primarily relate to the acquisition of lands and waters (and interests therein) by the federal government. With regard to state purposes, the act authorizes a matching grant program to states for outdoor recreation purposes. In practice, over the history of the LWCF, appropriations acts have provided funding for three general purposes. First, for each year since FY1965, appropriations for land acquisition have been provided to some or all of the major federal land management agencies—the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), National Park Service (NPS), and Forest Service (FS). Second, for nearly every year since FY1965, appropriations have funded the outdoor recreation matching grant program, to assist states in recreational planning, acquiring recreational lands and waters, and developing outdoor recreational facilities. Third, beginning in FY1998, appropriations from the LWCF have been provided each year, except FY1999, to fund other federal programs with related natural resource purposes. Hereinafter, the third type of appropriations is referred to as funding other purposes . The $18.9 billion appropriated from the fund through FY2019 has been allocated in different proportions among federal land acquisition, the state grant program, and other purposes. The largest portion of the total—$11.4 billion—has been appropriated for federal land acquisition. The state grant program has received the second-largest portion, $4.8 billion. Other purposes have received the remaining $2.7 billion. Appendix A shows the total LWCF appropriation for other purposes. Congress continues to consider the extent to which the LWCF should fund purposes other than federal land acquisition and outdoor recreation grants to states. Some traditional LWCF advocates and beneficiaries have expressed concern about expanding the use of the funds, particularly if such expansion results in lower appropriations for land acquisition and outdoor recreation grants to states. Some Members of Congress, Presidents, and stakeholders have supported funding other purposes in order to draw on the balance in the fund for policy priorities, to shift the focus of the fund from land acquisition, or to achieve other goals. A number of measures introduced in recent Congresses sought to authorize funding from the LWCF for various other purposes. These measures were not enacted. They included proposals to specify an amount or percentage of funding for two programs that are currently funded by the LWCF—the Forest Legacy Program and Cooperative Endangered Species Conservation grants—although the LWCF Act does not specifically authorize this funding. Other proposals sought to authorize programs or activities that have not been funded by LWCF in the past, or that have been rarely funded by LWCF in the past. For instance, one 115 th Congress bill would have authorized LWCF funding for certain programs and activities of the major land management agencies, including deferred maintenance, critical infrastructure, visitor services, and clean-up efforts; the Payments in Lieu of Taxes Program; and certain offshore energy exploration, innovation, and education activities. As another example, one 115 th Congress bill proposed to authorize LWCF funding for financial assistance from the Secretary of Housing and Urban Development for park and recreation infrastructure projects. The balance of this report discusses the other purposes for which LWCF appropriations have been provided throughout the fund's history. It identifies the amount of funding contained in annual appropriations laws for other purposes and the types of purposes for which funds have been appropriated. A total of $72.0 million was appropriated from the LWCF for other purposes in FY1998, the first year in which LWCF was used to fund other purposes. The total included $60.0 million for maintenance needs of the four land management agencies and $12.0 million for rehabilitation and maintenance of the Beartooth Highway (in Wyoming and Montana). In FY1998, total LWCF appropriations had spiked to approximately $969 million from the FY1997 level of about $159 million. Both the dollar amounts and the percentages of annual LWCF appropriations for other purposes have varied widely since FY1998. (See Appendix B .) Over the most recent 10 years, LWCF appropriations for other purposes fluctuated, declining overall from $132.5 million in FY2010 to $93.3 million in FY2019 (in current dollars). However, the FY2019 level was the highest appropriation since FY2010. Beginning in FY2011, appropriations for other purposes in each year have been less than $100 million, as was the case for FY1998-FY2000. Appropriations for other purposes were at their lowest dollar amount in FY1999, when no funds for other purposes were appropriated. The next-lowest dollar value was provided for FY2000, when a total of $20.0 million was appropriated for three purposes: Elwha River Ecosystem restoration (in Washington), deferred maintenance of the NPS, and the FS Forest Legacy program. By contrast, from FY2001 to FY2010, appropriations for other purposes exceeded $100 million in each year. In fact, during four of these years (FY2004-FY2007), the annual appropriation was between $200 million and $225 million. The appropriation surpassed $400 million in another year during the period. Specifically, the $456.0 million appropriation in FY2001 was more than double the amount provided for other purposes in any other year. These appropriations were used to fund more than a dozen programs in the Clinton Administration's Lands Legacy Initiative. In that year, total LWCF appropriations exceeded the annual authorization level, totaling nearly $1 billion. This record level of funding was provided partly in response to President Clinton's Lands Legacy Initiative, which sought $1.4 billion for about two dozen resource-protection programs, including the LWCF. It also was provided partly in response to some congressional interest in securing increased and more certain funding for the LWCF. The highest percentage of annual funds provided for other purposes occurred in FY2006 and FY2007 (59% in both years), in response to President George W. Bush's request for funding for an array of programs. For instance, in FY2007 the Bush Administration sought funding from the LWCF for 15 programs in addition to land acquisition and state grants. For that year, the appropriation for five other purposes was $216.1 million, out of a total LWCF appropriation of $366.1 million. In some years, the appropriation for other purposes was significantly less than the Administration requested. For example, for FY2008 the Bush Administration sought $313.1 million for other purposes, or 83% of the total request of $378.7 million. The FY2008 appropriation for other purposes was $101.3 million, or 40% of the LWCF total of $255.1 million. The $2.7 billion appropriated from the LWCF from FY1998 to FY2019 for other purposes represents 27% of the $10.0 billion total appropriations from LWCF during the period. FWS and FS have received the largest shares of the appropriations for other purposes, about $1.4 billion (53%) and $1.0 billion (38%), respectively. BLM, NPS, the U.S. Geological Survey, and the Bureau of Indian Affairs have shared the remaining $0.2 billion (9%) of the appropriations for other purposes. (See Figure 1 .) Because there is no set of other purposes specified in the LWCF Act to be funded from the LWCF, presidents have sought funds for a variety of purposes. Congress has chosen which of these requests to fund from the LWCF, and whether to fund any additional programs from the LWCF not suggested by the President. Appropriations for other purposes have been provided for more than a dozen diverse natural resource-related programs, including facility maintenance of the land management agencies, ecosystem restoration, the Historic Preservation Fund, the Payments in Lieu of Taxes program, the FS Forest Legacy program, FWS State and Tribal Wildlife Grants, the FWS Cooperative Endangered Species Conservation Fund, U.S. Geological Survey science and cooperative programs, and Bureau of Indian Affairs Indian Land and Water Claim Settlements. (See Appendix A .) Although in earlier years several other purposes typically were funded from LWCF, since FY2008, funds have been appropriated annually only for grants under two programs: Forest Legacy and Cooperative Endangered Species Conservation Fund. (See Appendix B and Figure 2 . ) The total appropriation from LWCF for these two programs (since FY1998) is $1.7 billion, or 63% of all appropriations for other purposes ($2.7 billion). These two programs and a third grant program funded prior to FY2008 from LWCF—FWS State and Tribal Wildlife Grants—have received more than three-quarters ($2.1 billion, 79%) of the total appropriations for other purposes. The appropriations through FY2019 are $944.4 million for Forest Legacy (35% of the other purposes total), $753.3 million for Cooperative Endangered Species Conservation Fund (28% of total), and $448.5 million for State and Tribal Wildlife Grants (17% of total). Grants under the Forest Legacy program are used to acquire lands or conservation easements to preserve private forests threatened by conversion to non-forest uses, such as agriculture or residences. FS provides matching grants to states through a competitive process that requires state approval and then national approval and ranking. The ranking is based on the importance of the project (potential public benefits from protection), the likelihood of the forest's conversion to non-forest uses, and the strategic relevance of the project, among other factors. The program is implemented primarily through state partners, usually state forestry agencies. State partners generally acquire, hold, and administer the easements or land purchases, although the federal government also may do so. The Cooperative Endangered Species Conservation Fund provides grants \"for species and habitat conservation actions on non-Federal lands, including habitat acquisition, conservation planning, habitat restoration, status surveys, captive propagation and reintroduction, research, and education.\" In addition to appropriations from LWCF, the Cooperative Endangered Species Conservation Fund typically receives additional appropriations. In recent years, the appropriations from LWCF generally have been used for two types of land acquisition grants provided to state and territories on a matching basis. Recovery land acquisition grants have been made for acquisition of habitats in support of species recovery goals and objectives. Habitat conservation plan land acquisition grants have been made for acquisition of lands that are associated with habitat conservation plans. State and Tribal Wildlife Grants are provided to states, territories, and tribes to develop and implement programs for the benefit of fish and wildlife and their habitats, including nongame species. State and Tribal Wildlife Grants received funding from the LWCF for FY2001-FY2007; subsequently, funding has been provided from the General Fund of the U.S. Treasury. Currently, the largest portion of the program is for formula grants to states and territories on a matching basis. Funds from the formula grants may be used to develop state conservation plans and to implement specific conservation projects. Smaller amounts of funding have been appropriated for competitive grants to states and territories, and to tribal governments. The competitive grant programs do not have matching requirements. Appendix A shows the total LWCF appropriations for other purposes summed from FY1998 to FY2019. Appendix B shows the other purposes that received LWCF appropriations each year, the amount of LWCF appropriations for each purpose, and the total annual appropriations for other purposes. Appendix A. Total LWCF Appropriations for Other Purposes Appendix B. Annual LWCF Appropriations for Other Purposes ", "summary": "The Land and Water Conservation Fund (LWCF) Act of 1965 (P.L. 88-578) created the LWCF in the Treasury as a funding source to implement the outdoor recreation goals set out by the act. The LWCF Act authorizes the fund to receive $900 million annually, with the monies available only if appropriated by Congress (i.e., discretionary appropriations). The fund also receives mandatory appropriations under the Gulf of Mexico Energy Security Act of 2006 (GOMESA). The level of annual appropriations for the LWCF has varied since the origin of the fund in FY1965. The LWCF Act outlines uses of the fund for federal and state purposes. Of the total made available through appropriations or deposits under GOMESA, not less than 40% is to be used for \"federal purposes\" and not less than 40% is to be used to provide \"financial assistance to states.\" The act lists the federal purposes for which the President is to allot LWCF funds \"unless otherwise allotted in the appropriation Act making them available.\" These purposes primarily relate to acquisition of lands and waters (and interests therein) by the federal government. With regard to state purposes, the act authorizes a matching grant program to states for outdoor recreation purposes. Throughout the LWCF's history, appropriations acts typically have provided funds for land acquisition and outdoor recreational grants to states. Beginning in FY1998, appropriations also have been provided each year (except FY1999) to fund other purposes related to natural resources. The extent to which the LWCF should be used for purposes other than federal land acquisition and outdoor recreation grants to states, and which other purposes should be funded from the LWCF, continue to be the subject of legislation and debate in Congress. In the past few decades, Presidents have sought LWCF funds for a variety of other purposes. Congress chooses which if any of these requests to fund, and has chosen programs not sought by the President for a particular year. Among other programs, appropriations have been provided for facility maintenance of the land management agencies, ecosystem restoration, the Historic Preservation Fund, the Payments in Lieu of Taxes program, the Forest Legacy Program, State and Tribal Wildlife Grants (under the Fish and Wildlife Service), the Cooperative Endangered Species Conservation Fund, U.S. Geological Survey science and cooperative programs, and Bureau of Indian Affairs Indian Land and Water Claim Settlements. Since FY1998, a total of $2.7 billion has been appropriated for other purposes, of a total LWCF appropriation of $18.9 billion over the history of the fund. The Fish and Wildlife Service and the Forest Service have received the largest shares of the total appropriations for other purposes, about $1.4 billion (53%) and $1.0.billion (38%), respectively, from FY1998 to FY2019. Several agencies shared the remaining $0.2 billion (9%) of the appropriations. Both the dollar amounts and the percentages of annual LWCF appropriations for other purposes have varied widely since FY1998. The dollar amounts have ranged from $0 in FY1999 to $456.0 million in FY2001. The percentage of annual funds provided for other purposes ranged from 0% in FY1999 to a high of 59% in both FY2006 and FY2007. In some years, the appropriation for other purposes was significantly less than the Administration requested. For instance, for FY2008, the George W. Bush Administration sought $313.1 million; the appropriation was $101.3 million. The appropriation for other purposes last exceeded $100.0 million in FY2010, and most recently was $93.3 million, in FY2019. Prior to FY2008, several other purposes typically were funded each year from LWCF. Since FY2008, funds have been appropriated annually only for grants under two programs: Forest Legacy and Cooperative Endangered Species Conservation Fund. These two programs and a third grant program—State and Tribal Wildlife Grants—have received more than three-quarters ($2.1 billion, 79%) of the total appropriation for other purposes since FY1998.", "document_type": "crs"}
{"report": "The Railroad Retirement Board (RRB), an independent federal agency, administers retirement, survivor, disability, unemployment, and sickness insurance for railroad workers and their families under the Railroad Retirement Act (RRA) and the Railroad Unemployment Insurance Act (RUIA). These acts cover workers who are employed by railroads engaged in interstate commerce and related subsidiaries, railroad associations, and railroad labor organizations. Lifelong railroad workers receive railroad retirement benefits instead of Social Security benefits; railroad workers with nonrailroad experience receive benefits either from railroad retirement or Social Security, depending on the length of their railroad service. The number of railroad workers has been declining since the 1950s, although the rate of decline has been irregular and recent years have seen increases in railroad employment after reaching an all-time low of 215,000 workers in January 2010. Recently, railroad employment peaked in April 2015 to 253,000 workers, the highest level since November 1999, and then declined through FY2017, falling to 221,000 workers. The total number of beneficiaries under the RRA and RUIA decreased from 623,000 in FY2008 to 574,000 in FY2017, and total benefit payments increased from $10.1 billion to $12.6 billion during the same time. During FY2017, the RRB paid nearly $12.5 billion in retirement, disability, and survivor benefits to approximately 548,000 beneficiaries. Almost $105.4 million in unemployment and sickness benefits were paid to approximately 28,000 claimants. This report explains the programs under RRA and RUIA, including how each program is financed, the eligibility rules, and the types of benefits available to railroad workers and family members. It also discusses how railroad retirement relates to the Social Security system. For a quick overview of this topic, see CRS In Focus IF10481, Railroad Retirement Board: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits . The RRA authorizes retirement, survivor, and disability benefits for railroad workers and their families. In December 2017, there were a total of 526,100 RRA beneficiaries, decreasing from 672,400 in 2001. This decline might partly result from the decline in railroad employment in the past five decades. The average monthly benefit for each beneficiary was about $1,986 in 2017, which increased from $1,043 in 2001, reflecting the growth in average wages and prices (see Figure 1 ). The railroad retirement, disability, and survivor program is mainly financed by payroll taxes, financial interchanges from Social Security, and transfers from the National Railroad Retirement Investment Trust (NRRIT) (see Figure 2 ), all of which accounted for 93.9% of the $12.7 billion gross funding of the RRA program during FY2017. The remaining 6.1% of the program was financed by federal income taxes levied on railroad retirement benefits, interest on investment and other revenue, and general appropriations to pay the costs of phasing out vested dual benefits. Payroll taxes, which provided 47.0% of gross RRA funding in FY2017, are the largest funding source for railroad retirement, survivor, and disability benefits. Railroad retirement payroll taxes are divided into two tiers—Tier I and Tier II taxes. The Tier I tax is the same as the Social Security payroll tax: railroad employers and employees each pay 6.2% on earnings up to $132,900 in 2019. The Tier II tax is set each year based on the railroad retirement system's asset balances, benefit payments, and administrative costs. In 2019, the Tier II tax is 13.1% for employers and 4.9% for employees on earnings up to $98,700. Tier II taxes are used to finance Tier II benefits, the portion of Tier I benefits in excess of Social Security retirement benefits (such as unreduced early retirement benefits for railroad employees with at least 30 years of railroad service), and supplemental annuities. Tier I payroll taxes are deposited in the Social Security Equivalent Benefit Account (SSEBA), which pays the Social Security level of benefits and administrative expenses allocable to those benefits. The SSEBA also receives or pays the financial interchange transfers between the railroad retirement and Social Security systems. The financial interchange with Social Security provided 32.6% of gross RRA funding in FY2017. The purpose of the financial interchange is to place the Social Security trust funds in the same position they would have been in, if railroad employment had been covered under Social Security since that program's inception. Tier II tax revenues that are not needed to pay current benefits or associated administrative costs are held in the National Railroad Retirement Investment Trust (NRRIT), which is invested in both government securities and private equities. NRRIT transfers provide another revenue source for railroad benefits, and they were 14.3% of gross RRA funding in FY2017. Prior to the Railroad Retirement and Survivors' Improvement Act of 2001 ( P.L. 107-90 ), surplus railroad retirement assets could only be invested in U.S. government securities—just as the Social Security trust funds must be invested in securities issued or guaranteed by the U.S. government. The 2001 act established the NRRIT to manage and invest the assets in the Railroad Retirement Account in the same way that the assets of private-sector and most state and local government pension plans are invested. The remainder of the railroad retirement system's assets, such as assets in SSEBA, continues to be invested solely in U.S. government-issued or -granted securities. The combined fair market value of Tier II taxes and NRRIT assets is designed to maintain four to six years' worth of RRB benefits and administrative expenses. To maintain this balance, the Railroad Retirement Tier II tax rates automatically adjust as needed. This tax adjustment does not require congressional action, according to Section 204 of the 2001 act. To be insured for railroad benefits, a worker must generally have at least 10 years of covered railroad work or 5 years performed after 1995 and \"insured status\" under Social Security rules (generally 40 earnings credits) based on combined railroad retirement and Social Security-covered earnings. An insured railroad worker's family may be entitled to receive railroad retirement benefits. If a worker does not qualify for railroad retirement benefits, his or her railroad work counts toward Social Security benefits. Of the total $12.5 billion benefit payments during FY2017, 60.0% (or $7.5 billion) were paid in retirement annuities to retired workers, 8.0% (or $1.0 billion) in disability annuities, 14.4% (or $1.8 billion) in spouse annuities, and 16.8% (or $2.1 billion) in survivor annuities. Tier I annuities are designed to be nearly equivalent to Social Security Old Age, Survivors, and Disability Insurance benefits. Tier I annuities are calculated using the Social Security benefit formula and are based on both railroad retirement and Social Security-covered employment. However, Tier I annuities are more generous than Social Security benefits in certain situation. For example, at the age of 60, railroad workers with at least 30 years of covered railroad work may receive unreduced retirement annuities. At the full retirement age (FRA), which is gradually increasing from 65 to 67 for Social Security and railroad retirement beneficiaries, insured workers with fewer than 30 years of service may receive full retirement ann uities. Alternatively, workers with fewer than 30 years of service may, starting at the age of 62, receive annuities that have been reduced actuarially for the additional years the worker is expected to spend in retirement. Tier I benefit reductions for early retirement are similar to those in the Social Security system. As the FRA rises, so will the reduction for early retirement. If a railroad employee delays retirement past FRA, Tier I annuities are increased by a certain percentage for each month up until the age of 70, which is identical to the benefit increase provided by Delayed Retirement Credits under the Social Security system. In general, Social Security benefits are subtracted from Tier I annuities, because work covered by Social Security is counted toward Tier I annuities. Beneficiaries insured by both systems receive a single check from the RRB. Railroad retirement annuities may also be reduced for certain pensions earned through federal, state, and local government work that is not covered by Social Security. For early retirees who continue to work for a nonrailroad employer while receiving the retirement benefit during the year prior to FRA, Tier I benefits are reduced by $1 for every $2 earned above an exempt amount ($17,040 in 2018). After Tier I benefits are first paid, they increase annually with a cost-of-living adjustment (COLA) in the same manner as Social Security benefits. Retirement annuities are not payable to workers who continue to work in a covered railroad job or who return to railroad work after retirement. Tier II retirement annuities are paid in addition to Tier I annuities and any private pension and retirement saving plans offered by railroad employers. They are similar to private pensions and based solely on covered railroad service. Tier II annuities for current retirees are equal to seven-tenths of 1% of the employee's average monthly earnings in the 60 months of highest earnings, times the total number of years of railroad service. Tier II annuities are increased annually by 32.5% of the Social Security COLA. Tier II annuities are not (in contrast to Tier I annuities) reduced if a worker receives Social Security benefits or a government pension that was not covered by Social Security. For railroad retirees and spouses who work for their last pre-retirement nonrailroad employer while receiving retirement benefits, Tier II annuities are reduced by $1 for every $2 earned, capped at 50% of the Tier II annuity. There is no cap to the earnings-related reduction in railroad Tier I or Social Security benefits. In addition, the earnings-related reduction applies to all Tier II beneficiaries regardless of age, whereas for railroad Tier I and Social Security benefits, the earnings-related reduction applies only until the beneficiary reaches FRA. Tier II payroll taxes also finance a supplemental annuity program. Supplemental annuities are payable to employees first hired before October 1981, aged 60 with at least 30 years of covered railroad service or aged 65 and older with at least 25 years of covered railroad service, and a current connection with the railroad industry. In addition, general revenues finance a vested dual benefit for those who were insured for both railroad retirement and Social Security in 1974 when the two-tier railroad retirement benefit structure was established. Neither supplemental annuities nor vested dual benefits are adjusted for changes in the cost of living during retirement. Supplemental annuities are subject to the same earnings reductions as Tier II benefits; vested dual benefits are subject to the same earnings reductions as Tier I benefits. Railroad workers may be eligible for disability annuities if they become disabled regardless of whether the disability is caused by railroad work. The RRB determines whether a worker is disabled based on the medical evidence provided during the application process. Railroad workers found to be totally and permanently disabled from all work may be eligible for Tier I benefits at any age if the worker has at least 10 years of railroad service. Totally disabled workers may also receive Tier II benefits at the age of 62 if they have 10 or more years of service. Occupational disability annuities are also payable to workers found to be permanently disabled from their regular railroad occupations, if the worker is at least 60 years old with 10 years of service (or any age with 20 years of service), and with a current connection to the railroad industry. A five-month waiting period after the onset of disability is required before any disability annuity can be payable. Disability annuities are not payable if a worker is currently employed in a covered railroad job. Disability benefits are suspended if a beneficiary earns more than a certain amount after deducting certain disability-related work expenses. The Tier I portion of disability benefits may be reduced for the receipt of workers compensation or government disability benefits. In any month that a worker collects a railroad retirement or disability annuity, his or her spouse may also be eligible for a spousal annuity equal to or greater than the benefit he or she would have received if the worker's railroad work had been covered by Social Security. A spouse is eligible for a spousal annuity when he or she reaches the same minimum age required for the worker (i.e., either at the age of 60 or 62, depending on years of the worker's service). At any age, a spouse may be eligible for a spousal annuity if he or she cares for the worker's unmarried child under the age of 18 (or a child of any age that was disabled before the age of 22). An individual must have been married to the railroad worker for at least one year before he or she applies for the spousal annuities, with certain exceptions. A qualifying spouse receives 50% of the worker's Tier I benefit before any reductions (or, if higher, a Social Security benefit based on his or her own earnings). Spouses may also receive 45% of the worker's Tier II benefit before any reductions. Divorced spouses of retired or disabled railroad workers may also be eligible for spousal annuities. A divorced spouse may receive 50% of the worker's Tier I benefit before reductions, but no Tier II benefits. To qualify, the former spouse must have been married to the worker for at least 10 years and must not currently be married (remarriages if any must have terminated); both the worker and former spouse must be at least 62 years old. For spouses, as for railroad workers, Social Security benefits are subtracted from Tier I annuities. The Tier I portion of a spouse annuity may also be reduced for receipt of any pension from government employment not covered by Social Security based on the spouse's own earnings. Spouses are subject to reductions based on the primary worker's earnings as well as on their own earnings. For example, for early retirement, spouses are subject to different benefit reductions from workers. Finally, spouse annuities are reduced by the amount of any railroad benefits earned based on their own work. After the worker's death, surviving spouses, former spouses, children, and other dependents may be eligible to receive survivor annuities, which are paid in addition to any private life insurance offered by railroad employers. To be insured for survivor annuities, the worker must have had a current connection with the railroad industry at the time of death. Railroad survivor annuities are generally higher than comparable Social Security benefits because railroad workers' families may be entitled to Tier II annuities as well as Tier I annuities (as noted above, Tier I annuities are equivalent to Social Security benefits). In cases where no monthly survivor annuities are paid, a lump-sum payment may be made to certain survivors. The widows and widowers of railroad workers may be eligible to receive survivor annuities. At FRA, a surviving spouse may be eligible for 100% of the worker's Tier I annuity (or his or her own Social Security or railroad retirement Tier I benefit, if higher). The widow(er) may also receive up to 100% of the worker's Tier II annuity. As early as the age of 60 (or age 50, if disabled), widows and widowers may receive reduced survivor annuities. A qualifying widow(er) must have been married to the deceased railroad worker for at least nine months, with certain exceptions. At any age, a widow(er) caring for a deceased worker's child under the age of 18 may receive a survivor annuity equal to 75% of the worker's Tier I annuity, as well as up to 100% of the worker's Tier II annuity. Widow(er)s who are the natural or adoptive parent of the deceased worker's child do not have to meet the length of marriage requirement. Survivor annuities may also be payable to a surviving divorced spouse or remarried widow(er). To qualify for benefits, a surviving divorced spouse has to be married to the employee for at least 10 years and is unmarried or remarried after age 60 (age 50 for disabled surviving divorced spouse). A surviving divorced spouse who is unmarried can qualify for benefits at any age if caring for the employee's child who is under age 16 or disabled. Benefits are limited to the amounts Social Security would pay (Tier I only) and therefore are less than the amount of the survivor annuity otherwise payable. Railroad workers' children may also receive survivor annuities. To qualify, a child must be unmarried and under the age of 18 (or 19 if still in high school). Disabled adult children may qualify if their disability began before the age of 22. Eligible children receive 75% of the worker's Tier I annuity and 15% of the worker's Tier II annuity. In addition, if a worker's parent was dependent on the worker for at least half of the parent's support, he or she may receive 82.5% of the worker's Tier I annuity and 35% of the worker's Tier II annuity after reaching age 60. Survivor annuities are not payable to a current railroad employee, and survivor annuities are reduced by any railroad retirement benefit the survivor has earned through his or her own railroad work. Survivors receive the same reductions as retired workers for Social Security benefit receipt; they also have reductions from government pension receipts that are not covered by Social Security. A family maximum applies to survivor benefits, usually applicable when three or more survivors receive benefits on a worker's record (not counting divorced spouses). In summary, Table 1 provides data on railroad retirement, survivor, and disability annuities as of June 2018. Railroad workers may qualify for daily unemployment and sickness benefits under the Railroad Unemployment Insurance Act (RUIA). These monetary benefits are paid in addition to any paid leave or private insurance an employee may have. For sickness benefits, a worker must be unable to work because of illness or injury. Sickness benefits are distinct from disability benefits because they are intended to cover a finite, temporary period of time. Workers may not earn any money while receiving unemployment or sickness benefits. Figure 3 displays the monthly number of beneficiaries with unemployment and sickness benefits from January 2002 to July 2018, respectively. Although the number of sickness beneficiaries stayed relatively stable over time, the number of unemployment insurance beneficiaries increased significantly during and after the most recent economic recession from 2007 to 2009. Railroad unemployment and sickness benefits are financed solely by railroad employers' payroll taxes, based on the taxable earnings of their employees. Employers' tax rates depend on the past rates of unemployment and employees' sickness claims. For calendar year 2018, the employer tax rate ranges from 2.2% to 12.0% on the first $1,560 of each employee's monthly earnings. The payroll tax proceeds not needed immediately for unemployment and sickness insurance benefits or operating expenses are deposited in the Railroad Unemployment Insurance Account maintained by the Treasury. This account, together with similar unemployment insurance accounts for each state, forms a Federal Unemployment Insurance Trust Fund whose deposits are invested in U.S. government securities, and the Railroad Unemployment Insurance Account receives interest based on these deposits. During FY2017, payroll tax contributions from railroad employers totaled $126.4 million and interest income was about $4 million. The RUIA provides for employers to pay a surcharge if the Railroad Unemployment Insurance Account falls below an indexed threshold amount. The surcharge is added to the employer's tax rate. However, the total tax rate plus the surcharge cannot exceed the maximum rate of 12.0%, unless the surcharge is 3.5%, in which case the maximum tax rate is increased to 12.5%. From 2004 through 2010, the surcharge was 1.5%. The surcharge in 2011 was 2.5% and 1.5% in 2012 with no surcharges in 2013 or 2014. The surcharge in 2018 was 1.5%, the same as the level in the past three years. Eligibility for railroad unemployment and sickness benefits is based on recent railroad service and earnings. The annual benefit year begins on July 1. Eligibility is based on work in the prior year, or the base year. To qualify in the benefit year beginning July 1, 2018, railroad workers must have base year earnings of $3,862.50 in calendar year 2017, counting no more than $1,545 per month. New railroad workers must also have at least five months of covered railroad work in the base year. To receive unemployment benefits, a worker must be ready, willing, and able to work. The maximum daily unemployment and sickness benefit payable in the benefit year that began July 1, 2018, is $77, and the maximum benefit for a biweekly claim is $770. However, due to sequestration pursuant to the Budget Control Act of 2011 ( P.L. 112-25 , as amended), the maximum daily benefit of $77 is reduced by 6.2% to $72.23 and the maximum biweekly benefit is reduced by 6.2% to $722.26 through September 30, 2019. Railroad workers receive these benefits only to the extent that they are higher than other benefits they receive under the RRA, the Social Security Act, or certain other public programs, including workers compensation. Unemployment and sickness beneficiaries may receive normal benefits for up to 26 weeks in a benefit year or until the benefits they receive equal their creditable earnings in the base year if sooner. Employees with at least 10 years of covered railroad service may qualify for extended benefits for 13 weeks after they have exhausted normal benefits. Table 2 displays the number and average weekly amount of RUIA benefits paid in June 2018. Workers who apply for unemployment benefits are automatically enrolled in a free job placement service operated by railroad employers and the RRB. ", "summary": "The Railroad Retirement Board (RRB), an independent federal agency, administers retirement, survivor, disability, unemployment, and sickness insurance for railroad workers and their families. During FY2017, the RRB paid nearly $12.5 billion in retirement, disability, and survivor benefits to approximately 548,000 beneficiaries and paid $105.4 million in unemployment and sickness benefits to approximately 28,000 claimants. Of the total $12.5 billion benefit payments in the same fiscal year, 60.0% was paid to retired workers, 8.0% to disabled workers, 14.4% to spouses, and 16.8% to survivors. The Railroad Retirement Act (RRA) authorizes retirement, disability, and survivor benefits for railroad workers and their families. RRA is financed primarily by payroll taxes, financial interchanges from Social Security, and transfers from the National Railroad Retirement Investment Trust (NRRIT). Railroad retirement payroll taxes have two tiers: the Tier I tax is essentially the same as the Social Security payroll tax and the Tier II tax is set each year based on the railroad retirement system's asset balances, benefit payments, and administrative costs. In FY2017, the gross RRA funding was about $12.7 billion. Railroad retirement annuities are also divided into two tiers. Tier I annuities are designed to be nearly equivalent to Social Security benefits and are based on both railroad retirement and Social Security-covered employment. However, Tier I annuities are more generous than Social Security benefits in certain situations. For example, at the age of 60, railroad workers with at least 30 years of covered railroad work may receive unreduced retirement annuities. Tier II annuities are similar to private pensions and based solely on covered railroad service. Tier II annuities are paid in addition to Tier I annuities. Railroad disability annuities may be payable to totally disabled railroad workers who are permanently disabled from all work and occupational disabled workers who are found to be permanently disabled from their regular railroad occupations. Eligible spouses and survivors of railroad workers may receive a certain portion of Tier I and Tier II benefits, but divorced spouses and surviving divorced spouses are eligible for only a certain portion of Tier I benefits. The Railroad Unemployment Insurance Act (RUIA) authorizes unemployment and sickness benefits for railroad workers. RUIA is financed solely by railroad employers, whose contributions are based on the taxable earnings of their employees. Eligibility for railroad unemployment and sickness benefits is based on recent railroad service and earnings. The maximum daily unemployment and sickness benefit payable in the benefit year that began July 1, 2018, is $77, and the maximum benefit for a biweekly claim is $770. Normal benefits are paid for up to 26 weeks in a benefit year. The railroad unemployment and sickness system remains affected by sequestration, as unemployment benefits will continue to be reduced through at least September 30, 2019.", "document_type": "crs"}
{"report": "A range of federal incentives supports the development and deployment of alternatives to conventional fuels and engines in transportation. These incentives include tax deductions and credits for vehicle purchases and the installation of refueling systems, federal grants for conversion of older vehicles to newer technologies, mandates for the use of biofuels, and incentives for manufacturers to produce alternative fuel vehicles. Some of these incentives have expired in recent years when their authorizations expired. Many of the policy choices presented for alternative fuel and advanced vehicle technologies originated as a response to the nation's interest in reducing petroleum imports, a goal first articulated at the time of the two oil embargoes imposed by the Organization of Petroleum Exporting Countries (OPEC) in the 1970s. While President Richard Nixon is often cited as the first President to call for \"energy independence,\" successive Presidents and Congresses have made efforts to reduce petroleum import dependence as well. As shown in Figure 1 , since peaking in 2005, net U.S. oil imports have fallen by 70%. Factors in this reversal include the last recession, which reduced domestic demand, followed by a rise in the supply of U.S. oil and oil alternatives due to increased private sector investment and federal incentives, some of which are cited in this report. In addition, the United States has become a net exporter of petroleum products (while it remains a net importer of crude oil). With declining U.S. import dependence, reliance on petroleum and petroleum products may be less of a factor in promoting alternative fuels and alternative fuel vehicles in the future. In addition to concerns over petroleum import dependence, other factors also have driven policy on alternative fuels and advanced vehicle technologies. Federal incentives do not reflect a single, comprehensive strategy but rather an aggregative approach to a range of discrete public policy issues, including improving environmental quality, expanding domestic manufacturing, and promoting agriculture and rural development. While a reliance on foreign sources of petroleum was an overriding concern for much of the past 40 years, other factors, such as rural development, promotion of domestic manufacturing, and environmental concerns, have also shaped congressional interest in alternative fuels and technologies. A variety of programs affecting the development and commercialization of alternative fuels and technologies have been proposed and enacted, each with its own benefits and drawbacks. (This report does not evaluate the effectiveness of alternative fuel programs and incentives.) Alternative fuels programs can be generally classified into six categories: expanding domestic ethanol production; establishing other alternative fuels; encouraging the purchase of nonpetroleum vehicles; reducing fuel consumption and greenhouse gas emissions; supporting U.S. vehicle manufacturing; and funding U.S. highways. Ethanol has been seen as a homegrown alternative to imported oil. A number of programs were put in place to encourage its domestic development (instead of importing from other ethanol producers, such as Brazil). To spur establishment of this domestic industry, Congress has enacted a number of laws, which are beneficial to states that have a large concentration of corn growers (corn being the raw material feedstock in most U.S. ethanol). Many of the incentives for ethanol production have been included in farm-related legislation and appropriations acts and hence have been administered by the U.S. Department of Agriculture (USDA), or in tax provisions administered by the Internal Revenue Service (IRS). The volumetric ethanol excise tax credit (VEETC) provided a tax credit to gasoline suppliers who blended ethanol with gasoline. The small ethanol producer tax credit provided a limited additional credit for small ethanol producers. Both credits expired at the end of 2011. Since 2005, petroleum refiners and importers have been required to supply biofuels as a share of their gasoline and diesel supply. This mandate, the Renewable Fuel Standard (RFS), has been an impetus for expanded production and use of ethanol and other biofuels. In addition to ethanol, Congress has sought to spur development of other alternative fuels, such as biodiesel, cellulosic biofuel, hydrogen, liquefied petroleum gas (LPG), compressed natural gas (CNG), and liquefied natural gas (LNG). Some of these fuels have been supported through tax credits (such as the biodiesel tax credit), federal mandates (mainly the RFS), and R&D programs (such as the Biomass Research and Development Initiative, which provides grants for new technologies leading to the commercialization of biofuels). Congress has enacted laws which seek to boost consumer adoption by providing tax credits for the purchase of some vehicles that consume far less petroleum than conventional vehicles, or that do not consume petroleum at all. These tax credit programs generally are limited in duration as a way to encourage early adopters to take a risk on new kinds of vehicles. The proponents contend that once a significant number of such new cars and trucks are on the road, additional buyers would be attracted to them, the increased volume would result in lower prices, and the tax credits would no longer be needed. Currently, a credit is available for the purchase of plug-in electric vehicles. Expired credits include incentives for hybrid vehicles, fuel cell vehicles, advanced lean burn technology vehicles, and certain alternative fuel vehicles. Congress has also enacted tax credits to spur the expansion of infrastructure to fuel such vehicles, although these credits have likewise expired. Several agencies, including the Environmental Protection Agency (EPA) and the Department of Transportation (DOT), have been mandated by statute to address concerns over fuel consumption and vehicle emissions through programs for alternative fuels. The most significant and long-standing program to reduce vehicle fuel consumption is the Corporate Average Fuel Economy (CAFE) program administered by DOT. Under CAFE, each manufacturer's fleet must meet specific miles-per-gallon standards for passenger vehicles and light trucks. If a manufacturer fails to do so, it is subject to financial penalties. Manufacturers can accrue credits toward meeting CAFE standards for the production and sale of certain types of alternative fuel vehicles. A joint rulemaking process between DOT and EPA links future CAFE standards with greenhouse gas (GHG) standards promulgated under EPA's Clean Air Act authority. DOT also established the Congestion Mitigation and Air Quality Improvement Program (CMAQ) to fund programs that intended to reduce emissions in urban areas that exceed certain air quality standards. At EPA, the Diesel Emission Reduction Act (DERA) was implemented with a goal of reducing diesel emissions by funding and implementing new technologies. In addition, EPA's RFS mandates the use of renewable fuels for transportation. Under the RFS, some classes of biofuels must achieve GHG emission reductions relative to gasoline. The Department of Energy (DOE), in partnership with U.S. automakers, federal labs, and academic institutions, has funded and overseen research and development programs on vehicle electrification for decades, in particular research focused on how to produce economical batteries that extend electric vehicle range. These R&D programs were supplemented in the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) to include grants to U.S.-based companies for facilities to manufacture advanced battery systems, component manufacturers, and software designers to boost domestic production and international competitiveness. The Advanced Technology Vehicles Manufacturing (ATVM) loan program at DOE, established by the Energy Independence and Security Act of 2007 ( P.L. 110-140 ), has supported manufacturing plant investments to enable the development of technologies to reduce petroleum consumption, including the manufacture of electric and hybrid vehicles, although no new loans have been approved since 2011. As described below (see \" Motor Fuel Excise Taxes \"), one of the earliest fuels-related federal programs is the motor vehicle fuels excise tax first passed in the Highway Revenue Act of 1956 to fund construction and maintenance of the interstate highway system. Originally, only gasoline and diesel were taxed, but as newer fuels became available (such as ethanol and compressed natural gas), they were added to the federal revenue program, but often at lower tax rates than gasoline or diesel. Lower tax burdens for some fuels or vehicles may effectively incentivize those choices over conventional options. However, lower tax burdens for these vehicles and fuels could compromise federal highway revenue. The vehicles responsible for lower tax revenues include traditional internal combustion engine vehicles with higher mileage per gallon as well as new technology electric and hybrid cars. The federal tax incentives and programs discussed in this report aim to support the development and deployment of alternative fuels. There is no central coordination of how these incentives interact. In general, they are independently administered by separate federal agencies, including five agencies: Department of the Treasury, DOE, DOT, EPA, and USDA. This report focuses strictly on programs that directly support alternative fuels or advanced vehicles. It does not address more general programs (e.g., general manufacturing loans, rural development loans), or programs that have been authorized but never funded. The programs are presented by agency, starting with those that generally address the above factors, followed by those that are fuel- or technology-specific. Programs that expired or were repealed on or after December 31, 2017, are included in Appendix A , Recently Expired or Repealed Programs. Congress may explore whether to reinstate these expired programs or establish similar programs. Appendix B contains four tables: 1. a summary of the programs discussed in the body of the report, listed by agency ( Table B-1 ); 2. a listing of programs and incentives for alternative fuels, by fuel type ( Table B-2 ); 3. a listing of programs and incentives for advanced technology vehicles, by vehicle type ( Table B-3 ); and 4. a listing of recently expired programs by agency ( Table B-4 ). Appendix A. Recently Expired or Repealed Programs Alternative Fuel Refueling Property Credit Alternative Motor Vehicle Credit Biodiesel or Renewable Diesel Income Tax Credit Biodiesel or Renewable Diesel Mixture Tax Credit Incentives for Alternative Fuel and Alternative Fuel Mixtures Plug-In Electric Vehicle Credit (Two- or Three-Wheeled) Repowering Assistance Program Second Generation Biofuel Producer Credit (previously the Credit for Production of Cellulosic and Algae-Based Biofuel) Small Agri-Biodiesel Producer Credit Special Depreciation Allowance for Second Generation (Cellulosic and Algae-Based) Biofuel Plant Property Appendix B. Summary Tables Appendix B contains four tables Table B-1 provides a summary of the programs discussed in the body of the report, listed by agency; Table B-2 lists programs and incentives for alternative fuels, by fuel type; Table B-3 lists programs and incentives for advanced technology vehicles, by vehicle type; and Table B-4 lists programs by agency that have expired or were repealed since December 31, 2017.", "summary": "A wide array of federal incentives supports the development and deployment of alternatives to conventional fuels and engines in transportation. These incentives include tax deductions and credits for vehicle purchases and the installation of refueling systems, federal grants for conversion of older vehicles to newer technologies, mandates for the use of biofuels, and incentives for manufacturers to produce alternative fuel vehicles. The current array of incentives for alternative fuels and related technologies does not reflect a single, comprehensive strategy, but rather an aggregative approach to a range of discrete public policy issues, including goals of reducing petroleum consumption and import dependence, improving environmental quality, expanding domestic manufacturing, and promoting agriculture and rural development. Current federal programs are administered by five key agencies: Department of the Treasury (Treasury), Department of Energy (DOE), Department of Transportation (DOT), Environmental Protection Agency (EPA), and the U.S. Department of Agriculture (USDA). The incentives and programs described in this report are organized by the responsible agency. Treasury (through the Internal Revenue Service, IRS) administers tax credits and deductions for alternative fuel and advanced technology vehicle purchases, expansion of alternative fuel refueling infrastructure, and incentives for the production and/or distribution of alternative fuels. Many of these incentives have expired in recent years. DOE (mainly through the Office of Energy Efficiency and Renewable Energy, EERE) administers research and development (R&D) programs for advanced fuels and transportation technology, grant programs to deploy alternative fuels and vehicles, and a loan program to promote domestic manufacturing of high-efficiency vehicles. DOT (mainly through the Federal Highway Administration, FHWA, and Federal Transit Administration, FTA) administers grant programs to deploy \"clean fuel\" buses and other alternative fuel vehicles. DOT (through the National Highway Traffic Safety Administration, NHTSA) also administers federal Corporate Average Fuel Economy (CAFE) standards, which include incentives for production of alternative fuel vehicles. EPA (mainly through the Office of Transportation and Air Quality, OTAQ) administers the Renewable Fuel Standard, which mandates the use of biofuels in transportation. EPA also administers grant programs to replace older diesel engines with newer technology. USDA (mainly through the Rural Business-Cooperative Service, RBS) administers grant, loan, and loan guarantee programs to expand agricultural production of biofuel feedstocks, conduct R&D on biofuels and bioenergy, and establish and expand facilities to produce biofuels, bioenergy, and bioproducts.", "document_type": "crs"}
{"report": "The United States was the driving proponent of NATO's creation in 1949 and has been the unquestioned leader of the alliance as it has evolved from a regionally focused collective defense organization of 12 members to a globally engaged security organization of 29 members. Successive U.S. Administrations have viewed U.S. leadership of NATO as a cornerstone of U.S. national security strategy, bringing benefits ranging from peace and stability in Europe to the political and military support of 28 allies, including many of the world's most advanced militaries. For almost as long as NATO has been in existence, it also has faced criticism. One chief concern of critics in the United States, including some Members of Congress, has been that European allies' reliance on U.S. security guarantees have fostered an imbalanced and unsustainable \"burdensharing\" arrangement by which the United States carries an unfair share of the responsibility for ensuring European security. President Donald Trump has amplified these concerns, and his assertions that NATO is a \"bad deal\" have caused some analysts and policymakers to reassess the costs and benefits to the United States of its long-standing leadership of the alliance. Although successive U.S. presidents have called on the allies to increase defense spending, none has done so as stridently as President Trump. He is also the first U.S. president to publicly suggest that the United States could modify its commitment to NATO should the allies fail to meet agreed defense spending targets. Trump Administration officials stress that the United States remains committed to NATO, as articulated in the Administration's National Security and Defense Strategies. They highlight the Administration's successful efforts in 2017 and 2018 to substantially increase funding for the U.S. force presence in Europe. President Trump's supporters, including some Members of Congress, also argue that Trump's forceful statements have succeeded in securing defense spending increases across the alliance that were not forthcoming under his predecessors. Nevertheless, many supporters of NATO, including some allied governments, continue to question the President's commitment to the alliance and worry that his condemnations could damage NATO cohesion and credibility. In the face of these concerns, Congress has demonstrated significant bipartisan support for NATO and U.S. leadership of the alliance. In January 2019, following reports that the President has considered seeking to withdraw the United States from NATO, the House of Representatives passed legislation reaffirming U.S. support for the alliance and limiting the President's authority to withdraw ( H.R. 676 , passed by a vote of 357-22); similar legislation has been introduced in the Senate (S.J.Res. 4). Many analysts view the bipartisan, House-Senate invitation to NATO Secretary General Jens Stoltenberg to address a joint session of Congress on April 3, 2019, as an additional sign of continued congressional support. At the same time, Congress continues to assess NATO's utility and value to the United States and some Members are concerned about several key challenges that continue to face the alliance, including burdensharing, managing relations with Russia, and divergent threat perceptions within the alliance. This report provides context for ongoing discussions about NATO's value to the United States and the extent to which NATO serves U.S. strategic interests. A historical overview focuses on the perceived benefits to the United States of NATO membership from NATO's founding to the present day. Sections on burdensharing and Russia address key challenges facing the alliance. The report concludes with a discussion of U.S. policy and considerations for Congress. An appendix provides data on defense spending by NATO members. Broadly speaking, NATO has evolved through four phases since its inception in 1949: t he Cold War era between 1949 and 1991; t he post-Cold War transformation of the 1990s , marked by the start of NATO enlargement to former Warsaw Pact countries and debates over \"out-of-area\" military operations prompted by wars in the Western Balkans; t he post-September 11, 2001 , focus on crisis management and stabilizing Afghanistan; and s ince 2014, a renewed focus on deterring Russia and heightened concern about threats emanating from the Middle East and North Africa. NATO's current Strategic Concept, adopted in 2010, articulates three broad activities for NATO: collective defense, crisis management, and cooperative security. The far-reaching nature of these priorities reflects both the increasingly complex global security environment and the diverse range of threat perceptions inherent in an alliance of 29 members. Some observers express concern that NATO may lack the collective political will and the requisite military capacities to fulfill these objectives, which in turn could lead to an erosion of political and public support for the alliance. Others counter that despite such concerns, NATO's capacity to enhance security for its member states remains unparalleled and that the alliance has demonstrated flexibility in adapting to meet a wide range of evolving security threats. In the aftermath of World War II, the United States designed NATO to provide a framework for coordinating U.S., Canadian, and West European defense against the threat from the Soviet Union and the Warsaw Pact. NATO's foundational mutual defense clause—enshrined in Article 5 of NATO's founding North Atlantic Treaty—sought to prevent both further Soviet expansion and the U.S.S.R's ability to fracture the alliance (see text box). An additional objective was to bind the formerly warring European states (including France, the UK, Italy, and, crucially, West Germany) in a security arrangement that could prevent the outbreak of future hostilities among them. As NATO's first Secretary General, Lord Ismay reportedly quipped, NATO was created \"to keep the Soviet Union out, the Americans in, and the Germans down.\" Throughout the Cold War, U.S. leaders assessed that the strategic benefits of defending Western Europe from an expansionist Soviet Union, building interoperable European militaries, and preventing renewed hostilities among Western European states outweighed the cost of maintaining a vast U.S. military presence in Europe that included more than 400,000 U.S. troops as well as U.S. nuclear weapons. For European allies, the benefits of the U.S. security umbrella were perceived largely as outweighing the costs of hosting U.S. military facilities, fulfilling defense and other requirements determined by the United States, and a loss of strategic autonomy. With the fall of the Berlin Wall in 1989, the subsequent reunification of Germany, and the collapse of the Soviet Union, some in NATO questioned whether or in what form NATO should continue to exist. The United States and other allied leaders determined that the alliance could still play an important role in fulfilling shared security objectives beyond Cold War territorial defense. Chiefly, the allies agreed to a new nonconfrontational posture based on a drawdown of military forces and pursuit of partnership with former adversaries in the Warsaw Pact. A focus on spreading peace, stability, and democracy throughout Europe led to the accession of 10 new member states in 1999 and 2004 (see Figure 1 ). Although NATO and Russia took the first steps toward partnership during this period, leaders in Moscow remained uneasy with NATO and would later characterize NATO enlargement towards Russian borders as a major security threat. The wars in the Western Balkans in the 1990s spurred debate within NATO about so-called \"out of area\" operations. During the Cold War, NATO's military posture had been limited to defending allied territory. The United States and other allies now argued that to remain relevant, NATO must be prepared to confront security threats outside of alliance territory—\"out of area or out of business\" became NATO's de facto mantra. NATO's military intervention in the Western Balkans—beginning in Bosnia in 1995—was a first step in this direction and a monumental one for Germany, which had been constitutionally barred from deploying its forces abroad since World War II. At the behest of the United States, NATO's 1999 Strategic Concept articulated a broader definition of security and identified new security threats, including terrorism, ethnic conflict, human rights abuses, political instability, and the spread of nuclear, biological, and chemical weapons. At the same time, the changed European security environment and the so-called \"peace dividend\" marked the beginning of reductions in European defense spending and military capabilities that created tensions in later years. The United States also embarked on a sharp reduction of U.S. forces in Europe. The September 11, 2001, terrorist attacks on the United States were another pivotal moment in NATO's evolution. For the first and only time, the allies invoked NATO's Article 5 mutual defense clause and offered military assistance to the United States in responding to the attacks. Over the next 13 years, Canada and the European allies would join the United States to lead military operations in Afghanistan in what became by far the longest and most expansive operation in NATO history. As of March 2019, almost one-third of the fatalities suffered by coalition forces in Afghanistan have been from NATO members and partner countries other than the United States. In 2011, the high point of the NATO mission in Afghanistan, about 40,000 of the 130,000 troops deployed to the mission were from non-U.S. NATO countries and partners. Many analysts viewed the significant allied support of the United States following 9/11 as a powerful testament of NATO's enduring strength. The extent of European support could be considered especially remarkable given that many European publics were opposed to, or at best skeptical of, the war in Afghanistan and did not view the Taliban or Al Qaeda as imminent threats to Europe. Canada and the European allies also took on greater responsibilities in Afghanistan despite U.S. reluctance to involve NATO in initial military operations, and despite an acrimonious split between many European governments and the George W. Bush Administration over the U.S.-led war in Iraq. Many analysts point out that the United States only turned to NATO to take on a greater burden in Afghanistan after having launched military operations against Iraq in 2003. They argue that the United States would have been severely challenged to carry out both missions simultaneously without NATO support in Afghanistan. Despite the unprecedented show of solidarity following the September 11 attacks, NATO operations in Afghanistan also exposed significant disparities in allied military capabilities and in allies' willingness to engage in combat operations. U.S. officials, including many Members of Congress, consistently criticized the European allies, and especially Germany, for shortfalls in capabilities and for national \"caveats\" that limited the scope of allied military engagement. The United States led a renewed push for the allies to increase defense spending and develop military capabilities to better respond to the new security environment, including \"out-of-area\" stabilization and counter-insurgency operations. The allies first adopted, albeit informally, the 2% of GDP defense spending guideline at NATO's 2006 summit in Prague. Russia's annexation of Crimea in 2014 and subsequent invasion of eastern Ukraine upended NATO's post-Cold War transformation into a more globally oriented security organization. Since 2014, the alliance has taken major steps to strengthen its territorial defense capabilities and deter Russia. NATO's renewed focus on collective defense and deterrence has created some tensions within the alliance, particularly between those member states that perceive Russia as an acute threat and those that favor engagement with Russia over confrontation. In addition, heightened fears about instability in the Middle East and North Africa have exposed differences between those allies more concerned about security threats from NATO's south and those that continue to prioritize deterring and managing Russia. Reflecting the broadening security priorities of its member states, NATO has launched a range of initiatives, including a more robust military presence in its eastern member states and counterterrorism efforts in the Middle East and North Africa. NATO has established an Enhanced Forward Presence (EFP) of about 4,500 troops in the three Baltic States and Poland, increased military exercises and training activities in Central and Eastern Europe, and created new NATO command structures in six Central and Eastern European countries. As part of broader efforts to confront terrorist threats posed by instability in the Middle East and North Africa, NATO has launched a training mission in Iraq. The allies remain heavily invested in seeking to bring long-term stability to Afghanistan, including through a train-and-assist mission of about 17,000 (8,500 non-U.S.) soldiers. NATO continues to maintain a security force of 3,800 troops in Kosovo and also is seeking to develop more robust cyber defense capabilities and address the need to more effectively confront so-called hybrid warfare. Most analysts agree, however, that while NATO has never been more engaged in such a broad range of security efforts, its activities continue to expose significant shortfalls, both in its deterrent posture and in broader crisis management efforts. Since NATO's creation in 1949, the United States has been viewed as the unrivaled leader of the alliance. The United States continues to be the world's preeminent military power and U.S. defense spending long has been significantly higher than those of any other NATO ally. As early as the 1950s, however, U.S. political and military leaders—including some Members of Congress—expressed concern about European dependence on the U.S. security umbrella in Europe and the longer-term political and military implications of this dependence. To promote a more equitable sharing of the transatlantic security burden, Members of Congress and other U.S. leaders have focused most often on seeking to compel European allies to increase their national defense budgets in order to take on a greater share of the security burden. In the 1980s, for example, the U.S. Congress enacted legislation that would place a cap on U.S. force strength in Europe if the allies did not meet a target to grow national defense budgets annually by a rate of 3% higher than inflation. More recently, the allies have agreed to ensure that national defense budgets reach at least 2% of GDP by 2024 (discussed in more detail below). Analysts on both sides of the Atlantic have argued, however, that a relatively narrow focus on defense inputs (i.e., the size of defense budgets) could be wasted if not accompanied by an equal, if not greater, focus on defense outputs (i.e., military capabilities and the effectiveness of contributions to NATO missions and activities). The alliance's target to devote at least 20% of each member's national defense expenditure to new equipment and related research and development reflects this goal. NATO Secretary General Jens Stoltenberg also has emphasized a broader approach to measuring contributions to the alliance, using a metric of \"cash, capabilities, and contributions.\" Others add that such a broader assessment of allied contributions would be more appropriate given NATO's wide-ranging strategic objectives, some of which may require capabilities beyond the military sphere. NATO members contribute financially to the alliance in various ways. The most fundamental way is by funding, in members' individual national defense budgets, the development of military capabilities that could support NATO missions and the deployment of their respective armed forces. NATO member states also fund NATO's annual budget of about $2. 6 billion by contributing to NATO's so-called \"common funds .\" National contributions to the common funds pay for the day-to-day operations of NATO headquarters, as well as some collective NATO military assets and infrastructure. According to NATO, in 2018, the U.S. share of NATO's common-funded budgets was about 22% , or about $570 million, followed by Germany (15%), France (11%), and the United Kingdom (UK; 10%). In 2006, NATO members agreed informally to aim to spend at least 2% of gross domestic product (GDP) on national defense budgets annually and to devote at least 20% of national defense expenditure to procuring new equipment and related research and development. These targets were formalized at NATO's 2014 Wales Summit, when the allies pledged to \" halt any decline in defence expenditure\" and to \"aim to move towards the 2% guideline within a decade. \" The 2% and 20% spending targets are intended to guide national defense spending by individual NATO members; they do not refer to contributions made directly to NATO nor would all defense spending increases necessarily be devoted solely to meet NATO goals. For example, although the United States spends about 3.4% of GDP on defense, a relatively small portion of this spending goes to NATO and European security as the U.S. defense budget supports U.S. military engagements throughout the world. Most analysts agree that the 2% spending figure \"does not represent any type of critical threshold or 'tipping point' in terms of defens e capabilities, \" and NATO does not impose sanctions on countries that fail to meet the target. However, the target is considered politically and symbolically important. U.S. and NATO officials say they are encouraged by a steady rise in defense spending since the 2014 Wales Summit (See Figure 2 ). Whereas three allies met the 2% guideline in 2014, NATO estimates that seven allies met the target in 2018 (see Table A-1 ). Sixteen allies have submitted plans to meet the 2% and 20% targets by 2024. President Trump and others continue to criticize those NATO members perceived to be reluctant to achieve defense spending targets, however. This includes Europe's largest economy, Germany, which currently spends about 1.25% of GDP on defense and does not plan to reach 2% of GDP by 2024. According to NATO defense spending figures, if every ally were to meet the 2% benchmark, the aggregate sum of NATO members' national defense budgets would increase by about $100 billion (from about $988 billion). Although most analysts agree that such an increase could benefit the alliance significantly, many stress that how additional resources are invested is equally, if not more, important . Critics note, for example, that an ally spending less than 2% of GDP on defense could have more modern, effective military capabilities than an ally that meets the 2% target but allocates most of that funding to personnel costs and relatively little to procurement and modernization. NATO proponents point out that despite long-standing criticisms of European defense spending levels, the forces of key European allies still rank among the most capable militaries in the world; this assessment remains particularly true for the UK and France, which rank sixth and seventh, respectively in global defense expenditure (Germany ranks ninth). In 2018, total defense spending by European allies is expected to amount to about $282 billion (compared to about $685 billion for the United States), funding close to 1.8 million military personnel (compared to 1.3 million U.S. military personnel). Critics contend that defense spending in Europe is often inefficient, with disproportionately high personnel costs coming at the expense of much-needed research, development, and procurement and what they view as a considerable amount of duplication. They point to significant, long-standing shortfalls in key military capabilities, including strategic air- and sealift; air-to-air refueling; and intelligence, surveillance, and reconnaissance (ISR). NATO military planners also have sought to address so-called readiness shortfalls by urging allies to shorten the time it would take to mobilize and deploy forces. With respect to duplication, NATO officials lament that taken together, European countries have 17 different types of main battle tanks, 13 different types of air-to-air missiles, and 29 different types of naval frigates. In an effort to address these concerns, in 2014, the allies adopted the aforementioned guideline calling for 20% of member states' national defense budgets to be allocated to the procurement of new equipment and related research and development, considered to be a key indicator of the pace of military modernization. NATO leaders say they are encouraged by allied progress toward achieving this target: whereas four allies met the 20% target in 2013, 16 allies met the target in 2018 (see Table A-1 ). NATO officials have long sought to ensure that the national defense spending priorities of member states reflect the broader strategic priorities of the alliance. As these priorities have shifted, so too have its capabilities requirements. To this end, the alliance conducts a Defense Planning Process in order to harmonize national and NATO defense planning efforts to provide the required forces and capabilities in the most efficient way. These planning efforts also reflect the fact that among the NATO members only the United States, France, and the UK aspire to develop the full range of military capabilities necessary to maintain a global military footprint. In light of this reality, NATO and U.S. leaders have promoted defense cooperation initiatives, including the pooling and sharing of national resources and joint acquisition of shared capabilities, aimed at stretching existing defense resources further. Analysts argue that the European defense industry remains fractured and compartmentalized along national lines; many believe that European defense efforts would benefit from a more cooperative consolidation of defense-industrial production and procurement as well as more transatlantic defense industrial cooperation. Progress on these fronts have been limited, however, with critics charging that national governments often remain more committed to protecting domestic constituencies than making substantive progress in joint capabilities development. Shifting strategic priorities present an additional challenge to long-term defense planning. In the two decades following the end of the Cold War, NATO defense planners promoted military modernization plans aimed at moving away from the large, heavily armored forces that were required for Cold War territorial defense to smaller, more agile forces that could be deployed across the globe. Some allies eliminated capabilities such as tanks (the Netherlands) and submarines (Denmark) that were thought to be outdated and unnecessary. Renewed concerns about Russian aggression have caused some analysts and policymakers to question those decisions, and have prompted reevaluations of capabilities targets in many European countries. Allied contributions to NATO operations are another key factor often considered when assessing burdensharing dynamics in the alliance. Since the end of the Cold War, NATO allies and partner countries have contributed to a range of NATO-led military operations across the globe, including in the Western Balkans, Afghanistan, the Mediterranean Sea, the Middle East, and Eastern Europe. Many in Europe and Canada view their contributions to NATO operations in Afghanistan as an unparalleled demonstration of solidarity with the United States and a testament to the value they can provide in achieving shared security objectives. Some analysts also point out that to meet the costs of maintaining continuous deployments to Afghanistan, many member states delayed needed defense modernization efforts. Ongoing contributions often cited by European allies include the following: Afghanistan . More than 100,000 troops from Canada and European NATO members have served in the country since 2001, when U.S.-led military operations commenced. At the height of NATO-led operations in the country, over 40,000 non-U.S. allies and partner country personnel were deployed to the mission. As of March 2019, Canada and the European allies had suffered approximately 1,050 of the 3,561 of coalition fatalities suffered in Afghanistan. Since 2007, non-U.S. allies and NATO partners have committed more than $2.6 billion to the Afghan National Army Trust Fund. As of February 2019, approximately 8,500 of the 17,000 troops deployed to NATO's follow-on train-and-assist mission in Afghanistan are from European NATO member states or NATO partner countries (including 1,300 from Germany, 1,100 from the UK, and 895 from Italy). NATO deterrence and collective defense efforts . Since 2014, European allies and Canada have contributed forces and capabilities to bolster deterrence and collective defense initiatives. This includes leading three of the four battlegroups of NATO's Enhanced Forward Presence in Poland and the Baltic States, commanding NATO's Baltic Air Policing Mission, contributing to NATO's standing naval forces in the Baltic and Black Seas, AWACS patrols over Eastern Europe, command of the NATO Response Force and Very High Readiness Joint Task Force, and hosting new NATO command and control facilities in Central and Eastern Europe. Kosovo . Since 1999, tens of thousands of non-U.S. allies have contributed to NATO's Kosovo Force (KFOR) to maintain security and stability in Kosovo. As of February 2019, non-U.S. allies and NATO partner countries contributed about 3,000 of the 3,500 KFOR troops. NATO operations also have exposed significant disparities in allied military capabilities, especially between the United States and the other allies. In most, if not all, NATO military interventions, European allies and Canada have depended on the United States to provide key capabilities such as air- and sea-lift, refueling, and ISR. In some cases, the United States has filled more basic shortfalls, in munitions for example. NATO's 2011 military intervention in Libya, Operation Unified Protector (OUP), highlighted these shortfalls. Although OUP was the first NATO mission in which the United States did not lead military operations, the six allies carrying out NATO airstrikes—Belgium, Canada, Denmark, France, Norway, and the UK—faced munition and other shortfalls relatively early on. Then-Secretary of Defense Robert Gates encapsulated U.S. frustration when he stated, \"the mightiest military alliance in history is only 11 weeks into an operation against a poorly armed regime in a sparsely populated country – yet many allies are beginning to run short of munitions, requiring the U.S., once more, to make up the difference.\" Russia's annexation of Crimea and subsequent invasion of Eastern Ukraine in 2014 prompted a sweeping reassessment of NATO's post-Cold War efforts to build a cooperative relationship with Moscow. In the words of then-NATO Deputy Secretary General Alexander Vershbow, \"For 20 years, the security of the Euro-Atlantic region has been based on the premise that we do not face an adversary to our east. That premise is now in doubt.\" Since 2014, Russia also has increased its military activities in northern Europe, particularly through reportedly deploying nuclear-capable missiles to Kaliningrad, enhancing its air patrolling activities close to allied airspace, and increasing its naval presence in the Baltic Sea, the Arctic Ocean, and the North Sea. In response to Russian aggression in Ukraine, NATO has moved to implement what its leadership characterized as the greatest reinforcement of NATO's collective defense since the end of the Cold War. Although the allies have continued to support and contribute to NATO deterrence initiatives, some express concern about the effectiveness and sustainability of these efforts. Many analysts, including the authors of a February 2016 report by the RAND Corporation, contend that \"as presently postured, NATO cannot successfully defend the territory of its most exposed members.\" Some allies, including Poland and the Baltic States, have urged a more robust allied military presence in the region to \"make it plain that crossing NATO's borders is not an option.\" Others, including leaders in Western European countries like Germany and Italy, have stressed the importance of a dual-track approach to Russia that complements deterrence with dialogue. For these allies, efforts to rebuild cooperative relations with Moscow may be given as much attention as efforts to deter Russia. Accordingly, NATO continues to resist calls to permanently deploy troops in countries that joined after the collapse of the Soviet Union due to concerns in these member states that this would violate the terms of the 1997 NATO-Russia Founding Act; NATO's Enhanced Forward Presence has been referred to as \"continuous,\" but rotational. Former German Foreign Minister (and current German President) Frank-Walter Steinmeier encapsulated concerns about NATO's deterrence posture in 2016 when he likened a military exercise of NATO member states and partner countries taking place in Poland to \"saber-rattling and war cries.\" He added, \"whoever believes that a symbolic tank parade on the alliance's eastern border will bring security, is mistaken.\" NATO and U.S. officials subsequently rebutted Steinmeier's comments. Discussions over NATO's strategic posture could continue to be marked by these divergent views over the threat posed by Russia and by debate over the appropriate role for NATO in addressing the wide-ranging security challenges emanating from the Middle East and North Africa (MENA). On threats from the MENA region, several allies are reluctant to endorse a bigger role for NATO in issues—such as terrorism and migration—on which the European Union (EU) has traditionally taken the lead. Furthermore, many analysts contend that significant budgetary and political constraints facing many allied governments could limit NATO's capacity to deter Russia while addressing security threats to NATO's south. Since NATO's founding, successive U.S. Administrations have viewed U.S. membership in, and leadership of, NATO as a key pillar of U.S. national security strategy. As outlined above, throughout NATO's evolution, U.S. leadership has given the United States a strong voice in formulating strategic objectives for NATO that align with U.S. national security objectives. U.S. military objectives in Europe also have shifted over time, especially since the end of the Cold War. Today, about 74,000 U.S. military service members, including two Brigade Combat Teams (BCTs), are stationed in Europe, compared to more than 400,000 troops at the height of the Cold War. Throughout the 1990s and 2000s, United States European Command (EUCOM) shifted its activities in Europe to non-warfighting missions, including building defense capacity and capability in former Warsaw Pact states and logistically supporting other U.S. combatant commands. Events in recent years, particularly Russia's actions in Ukraine since 2014 and increased military activities near NATO borders, have tested the strategic assumptions underpinning EUCOM's posture. While President Trump has criticized NATO, his Administration's National Security Strategy and National Defense Strategy both identify European security and stability as key U.S. national security interests and emphasize the U.S. commitment to NATO and Article 5. Administration officials and many Members of Congress underscore that the Administration has requested significant increases in funding for U.S. military deployments in Europe under the European Deterrence Initiative (EDI, previously known as the European Reassurance Initiative, or ERI). Proponents of NATO argue that U.S. membership in and leadership of NATO brings a range of important benefits to the United States. These include, but are not limited to, the following: Peace, stability, conflict prevention, and deterrence . Many analysts believe that NATO has played a vital role in keeping the peace in Europe for the last 70 years and preventing a repeat of the two World Wars of the first half of the 20 th century. NATO proponents add that a divided NATO with a less committed United States could benefit Russia's widely acknowledged efforts to undermine NATO and the EU. Treaty-based defense and security support from 28 allies, including many of t he world's most advanced militaries , including a nuclear deterrent and missile defense systems based in Europe. Despite the criticisms of European defense spending trends, non-U.S. allies still possess significant military capabilities, which they have deployed in support of U.S. security objectives. An u nrivaled platform for constructing and operating international military coalitions. Through its history, NATO has developed an integrated command structure to carry out collective defense and crisis management operations that is unprecedented in terms of size, scale, and complexity. This includes advancing allied interoperability by designing command and control systems, holding multinational training exercises, and creating policies for standardizing equipment amongst its members. U.S. military bases in strategically important locations. U.S. leadership of NATO has allowed the United States to station U.S. forces in Europe at bases that enable quicker air, sea, and land access to other locations of strategic importance, including the Middle East and Africa. Economic stability. The EU, which includes 22 NATO allies, is the United States' largest trade and investment partner. By promoting security and stability in Europe, NATO helps protect this extensive economic relationship that accounts for 46% of global GDP. Nevertheless, questions about the value of NATO to the United States have led some to reassess the benefits and costs of U.S. membership. Critics of NATO highlight a number of costs incurred by the United States—both qualitative and quantitative—due to its leadership of NATO. These include the following: Loss of autonomy. Whether at the strategic or the operational level, forging agreement with 28 other governments is undoubtedly more difficult than maintaining full national control. Analysts note, for example, that U.S. military planners' negative experience working with European counterparts during the NATO intervention in Kosovo in 1999 (European allies' reportedly rejected bombing targets proposed by U.S. commanders) was a key factor behind the U.S. decision to conduct initial military operations in Afghanistan outside the NATO command structure. Some have argued that ad hoc coalitions of like-minded allies under unified U.S. command could be more desirable than working within established NATO structures. Heightened risks to U.S. forces. Some critics argue that the Article 5 commitment to defend a NATO ally in the event of an attack could draw the United States into a conflict that it might otherwise avoid. Others note that Article 5 commits an ally to respond to an attack by \"taking such action as it deems necessary.\" Continued European dependence. Some critics contend that European allies' dependence on the U.S. security guarantee limits their incentive to invest in defense capabilities that would make them more capable partners for the United States. At the same time, President Trump's criticisms of NATO and individual allies have caused some in Europe to question the United States' continued reliance as a security partner. Provoking Russia . Some critics of NATO argue that NATO's post-Cold War enlargement to include former members of the Warsaw Pact and the Baltic states represented an unnecessary and counter-productive provocation of Russia and ensured long-term rivalry between Russia and \"the West.\" A negative b udgetary impact. U.S membership in NATO carries with it certain financial commitments, including annual contributions to NATO's Common Fund (about $570 million in 2018). The U.S. missile defense capability in Europe is also under NATO command, and the United States contributes an estimated $800 million annually to additional NATO capabilities such as Allied Ground Surveillance and strategic airlift. Although the United States could potentially reduce its military footprint in Europe, analysts point out that without a reduction in overall U.S. force structure, the Department of Defense would still cover the costs of redeployed personnel. Additionally, as noted above, U.S. military bases in Europe offer strategic and logistical advantages beyond enabling U.S. commitments to NATO. Congress was instrumental in creating NATO in 1949 and has played a critical role in shaping U.S. policy toward the alliance ever since. While many Members of Congress have criticized specific developments within NATO—regarding burdensharing, for example—Congress as a whole has consistently demonstrated strong bipartisan support for active U.S. leadership of and support for NATO. This support has manifested itself through an array of congressional action including financial support through the authorization and appropriations processes and legislation enabling NATO enlargement and NATO military operations and deterrence efforts. Congress also has been at the forefront of the burdensharing debate within NATO since the alliance's inception and has often called on U.S. Administrations to do more to secure increased allied commitments to NATO. Congressional support for NATO has traditionally served to buttress broader U.S. policy toward the alliance. During the Trump Administration, however, demonstrations of congressional support for NATO have at times been viewed more as an effort to reassure allies about the U.S. commitment to NATO after President Trump's criticisms of the alliance. Trump Administration officials stress that the Administration remains strongly committed to NATO and to European security (as articulated in the National Security and Defense strategies), and Congress has supported the Administration's requests to increase funding for key U.S. defense activities in Europe such as the European Deterrence Initiative. Nevertheless, during the Trump Administration both chambers of Congress have passed legislation expressly reaffirming U.S. support for NATO at times when some allies have questioned the President's commitment. This includes legislation passed by the House in January 2019 ( H.R. 676 , see below) seeking to limit the president's ability to unilaterally withdraw from NATO; similar legislation has been introduced in the Senate (S.J.Res. 4). Some analysts portrayed House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell's joint invitation to NATO Secretary General Jens Stoltenberg to address a joint session of Congress on April 3, 2019, in commemoration of NATO's 70 th anniversary as an additional demonstration of NATO's importance to the Congress. Examples of legislation in support of NATO passed in Congress since 2017 include the following: H.Res. 397 (115 th Congress) , Solemnly reaffirming the commitment of the United States to NATO's principle of collective defense as enumerated in Article 5 of the North Atlantic Treaty. Passed by the House by a vote of 423-4 on June 27, 2017. H.R. 5515 / P.L. 115-232 (115 th Congress) , John S. McCain National Defense Authorization Act for FY2019 . After the Senate agreed to go to conference with the House on H.R. 5515 , Senator Reed (RI) made a motion to instruct conferees to reaffirm the commitment of the United States to NATO. The Senate agreed to the motion by a vote of 97-2. H.Res. 256 (115 th Congress) , Expressing support for NATO and the countries of Central and Eastern Europe. Passed by the House by unanimous consent on July 11, 2018. H.R. 676 (116 th Congress) , NATO Support Act . Passed by the House by a vote of 357-22 on January 22, 2019. The bill prohibits the appropriation or use of funds to withdraw the United States from NATO. Although Congress has expressed consistent bipartisan support for NATO and its cornerstone Article 5 mutual defense commitment, congressional hearings on NATO in the 115 th and 116 th Congresses have reflected disagreement on the impact President Trump is having on the alliance. Some in Congress argue that President Trump's criticism of allied defense spending levels has spurred recent defense spending increases by NATO members that were not forthcoming under prior Administrations despite long-standing U.S. concern. They point out that NATO Secretary General Jens Stoltenberg has acknowledged that President Trump \"is having an impact\" in securing $41 billion of additional defense spending by European allies and Canada since 2016. Others in Congress counter that President Trump's admonition of U.S. allies and his questioning of NATO's utility has damaged essential relationships and undermined NATO's credibility and cohesion. They contend that doubts about the U.S. commitment to NATO could embolden adversaries, including Russia, and ultimately weaken the commitment of other allies to the alliance. Some analysts argue that European allies who feel belittled by the U.S. president might be less likely to support future NATO operations advocated by the United States. Critics also tend to downplay President Trump's role in securing recent defense spending increases by NATO allies. They argue that Russian aggression in Europe has been a greater factor behind rising defense budgets, particularly in Central and Eastern Europe. Despite disagreement over President Trump's impact on the alliance, most Members of Congress continue to express support for robust U.S. leadership of NATO, in particular to address potential threats posed by Russia. Many Members have called for enhanced NATO and U.S. military responses to Russian aggression in Ukraine and others have advocated stronger European contributions to collective defense measures in Europe. Congressional consideration of EDI could enable further examination of U.S. force posture in Europe and the U.S. capacity and willingness to uphold its collective defense commitments. Deliberations could also highlight longer-standing concerns about European contributions to NATO security and defense measures. In light of these considerations, Members of Congress could focus on several key questions regarding NATO's future. These might include the following: addressing the strategic value of NATO to the United States and the leadership role of the United States within NATO; examining whether the alliance should adopt a new strategic concept that better reflects views of the security threat posed by Russia and new and emerging threats in the cyber and hybrid warfare domains (NATO's current strategic concept was adopted in 2010); examining NATO's capacity and willingness to address other security threats to the Euro-Atlantic region, including from the Middle East and North Africa, posed by challenges such as terrorism and migration; examining the possible consequences of member states' failure to meet agreed defense spending targets; assessing U.S. force posture in Europe and the willingness of European allies to contribute to NATO deterrence efforts and U.S. defense initiatives in Europe such as the ballistic missile defense program and EDI; revisiting the allies' commitment to NATO's stated \"open door\" policy on enlargement, especially with respect to the membership aspirations of Georgia and Ukraine; and developing a NATO strategy toward China, particularly given U.S. and other allies' concerns about the security ramifications of increased Chinese investment in Europe. ", "summary": "On April 4, 2019, foreign ministers from the 29 member states of the North Atlantic Treaty Organization (NATO) are to gather in Washington, DC, to mark the 70th anniversary of the North Atlantic Treaty (also known as the Washington Treaty). NATO Secretary General Jens Stoltenberg is to address a joint session of Congress on April 3, 2019, the first ever to do so. Congress was instrumental in creating NATO in 1949 and has played a critical role in shaping U.S. policy toward the alliance ever since. A key goal of the 70th anniversary meeting will be to highlight NATO's past successes and present a unified vision for its future. The United States was the driving proponent of NATO's creation and has been the unquestioned leader of the alliance as it has evolved from a collective defense organization of 12 members focused on deterring the Soviet Union to a globally engaged security organization of 29 members. Successive U.S. Administrations have viewed U.S. leadership of NATO as a cornerstone of U.S. national security strategy. Proponents of NATO cite numerous benefits to the United States, including peace, stability, conflict prevention, and deterrence in Europe; treaty-based defense and security support from 28 allies, including many of the world's most advanced militaries; an unrivaled platform for constructing and operating international military coalitions; U.S. military bases in strategically important locations; and economic stability in the world's largest trade and investment marketplace. On the other hand, NATO's critics argue that European reliance on U.S. security guarantees have fostered an imbalanced and unsustainable \"burdensharing\" arrangement by which the United States carries an unfair share of the responsibility for ensuring European security. Critics cite the following costs to the United States of its leadership of NATO: loss of autonomy; heightened risks to U.S. forces; continued European military dependence on the United States; provoking Russia; and a negative budgetary impact. The anniversary meeting comes at a tense time for NATO, as the allies have struggled to present a unified response to vocal criticism from U.S. President Donald Trump. President Trump has admonished European allies for failing to meet agreed NATO defense spending targets and has repeatedly questioned NATO's value to the United States. Although he is not the first U.S. president to press the allies to increase defense spending, none has done so as stridently and none has called into question the U.S. commitment to NATO as openly or to the same extent as Trump. The President's criticisms have provoked mixed reactions in the United States, with NATO supporters, including many Members of Congress, reaffirming the U.S. commitment to NATO, and others reevaluating the costs and benefits of long-standing U.S. leadership of the alliance. Trump Administration officials stress that they remain committed to NATO and to upholding European security. They underscore that Congress has supported the Administration's requests to increase funding for U.S. defense activities in Europe such as the European Deterrence Initiative. President Trump's supporters also argue that his forceful statements have succeeded in securing defense spending increases by European allies that were not forthcoming under his predecessors. While many Members of Congress have criticized specific developments within NATO—regarding burdensharing, for example—Congress as a whole has demonstrated consistent bipartisan support for NATO. During the Trump Administration, congressional support has at times been viewed as an effort to reassure allies troubled by President Trump's criticisms of the alliance. During the Trump Administration, both chambers of Congress have passed legislation expressly reaffirming U.S. support (H.Res. 397; H.R. 5515/P.L. 115-232; H.Res. 256), including legislation passed by the House in January 2019 (H.R. 676) seeking to limit the president's ability to withdraw from NATO unilaterally (similar legislation, S.J.Res. 4, has been introduced in the Senate). Some analysts portrayed the bipartisan House-Senate invitation to Secretary General Stoltenberg to address a joint session as an additional demonstration of NATO's importance to the Congress.", "document_type": "crs"}
{"report": "T he Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury (Title I), the Executive Office of the President (EOP; Title II), the judiciary (Title III), the District of Columbia (Title IV), and more than two dozen independent agencies (Title V). The bill typically funds mandatory retirement accounts in Title VI, which also contains additional general provisions applying to the funding provided to agencies through the FSGG bill. Title VII typically contains general provisions applying government-wide. The FSGG bill has also often contained provisions relating to the U.S. policy toward Cuba. The House and Senate FSGG bills fund the same agencies, with one exception. The Commodity Futures Trading Commission (CFTC) is funded through the Agriculture appropriations bill in the House and the FSGG bill in the Senate. Where the CFTC is funded upon enactment depends on which chamber originated the law, which typically alternates annually. Thus, the enacted amounts for the CFTC typically are in the Agriculture appropriations bill one year and FSGG the following year. This structure has existed in its current form since the 2007 reorganization of the House and Senate Committees on Appropriations. Although financial services are a major focus of the bill, the FSGG appropriations bill does not include funding for many financial regulatory agencies, which are instead funded outside of the appropriations process. It is not uncommon for legislative provisions addressing various financial regulatory issues to be included in titles at the end of the bill. President Trump submitted his FY2019 budget request on February 12, 2018. The request included a total of $49.1 billion for agencies funded through the FSGG appropriations bill, including $282 million for the CFTC. This total included a proposed legislative provision on government-wide transfer authority in Section 737, which was estimated at $3 billion by the appropriations committees. The House Committee on Appropriations reported a Financial Services and General Government Appropriations Act, 2019 ( H.R. 6258 , H.Rept. 115-792 ) on June 15, 2018. Total FY2019 funding in the reported bill would have beeen $45.7 billion, with another $255 million for the CFTC included in the Agriculture appropriations bill ( H.R. 5961 , H.Rept. 115-706 ). The combined total of $45.9 billion would have been about $3.2 billion below the President's FY2019 request, with the largest differences in the funding for the General Services Administration (GSA) and in language relating to government-wide transfers that was requested by the President but not included in the legislation (Section 737). H.R. 6258 was included as Division B of H.R. 6147 , the Interior appropriations bill, when it was considered by the House of Representatives beginning on July 17, 2018. The bill was amended numerous times, shifting funding among FSGG agencies but not changing the FSGG totals. H.R. 6147 passed the House on July 19, 2018. The Senate Committee on Appropriations reported a Financial Services and General Government Appropriations Act, 2019 ( S. 3107 , S.Rept. 115-281 ) on June 28, 2018. Funding in S. 3107 totaled $45.9 billion, about $3.2 billion below the President's FY2019 request, with the largest differences in the funding for the GSA and in the government-wide transfers requested language (Section 737). The Senate began floor consideration of H.R. 6147 on July 24, 2018, including the text of S. 3107 as Division B of the amendment in the nature of a substitute ( S.Amdt. 3399 ). The amendment also included three other appropriations bills. The amended version of H.R. 6147 was passed by the Senate on August 1, 2018. The conference committee on H.R. 6147 convened on September 13, 2018. No conference report was reported, however, prior to the end of the fiscal year. Instead, Division C of P.L. 115-245 , enacted on September 28, 2018, generally provided for continuing appropriations at FY2018 levels for the FSGG agencies through December 7, 2018. A further continuing resolution ( P.L. 115-298 ) was passed providing funding through December 21, 2018. No additional appropriations were passed in the 115 th Congress, leading to a funding lapse for the FSGG agencies as well as those funded in six other appropriations bills beginning on December 22, 2018. The House of Representatives passed two consolidated appropriations bills in January 2019. H.R. 21 —which contained six full FY2019 appropriations bills, including FSGG provisions nearly identical to those passed by the Senate in the 115 th Congress—passed on January 3, 2019. H.R. 21 would have provided a total of $45.9 billion for the FSGG agencies, with the CFTC funding included with FSGG funding in Division B, following the Senate structure. On January 23, 2019, the House passed H.R. 648 , also containing the same six full FY2019 appropriations bills, which was reportedly based on a potential conference report from the 115 th Congress. H.R. 648 would have provided $46.0 billion for the FSGG agencies, with the FSGG portion—including CFTC funding—in Division C. Neither of these bills included the financial regulatory provisions in Title IX of the House-passed bill in the 115 th Congress. The Senate did not act on either of these bills. On February 14, 2019, the House and the Senate agreed to a conference report ( H.Rept. 116-9 ) on H.J.Res 31 , the Consolidated Appropriations Act, 2019, containing seven appropriations bills. This act provides full FY2019 funding for the government's operations that had not been previously funded, including FSGG provisions nearly identical to H.R. 648 , but located in Division D. The primary substantive differences were in the Department of the Treasury Forfeiture Fund and in funding for GSA. The President signed the resolution on February 15, 2019, enacting it into law as P.L. 116-6 . P.L. 116-6 included $45.7 billion in FSGG funding, including the CFTC. It did not include the Title IX financial regulatory provisions passed by the House in the 115 th Congress. The final total was approximately $3.4 billion less than the President's request, with most of the difference coming from the Section 737 transfer authority, which was not included by Congress. Other notable differences included the funding for the GSA and the Executive Office of the President. Table 1 below reflects the status of FSGG appropriations measures at key points in the appropriations process across the 115 th and 116 th Congresses. Table 2 lists the broad amounts requested by the President and included in the various FSGG bills, largely by title, and Table 3 details the amounts for the independent agencies. Specific columns in Table 2 and Table 3 are FSGG agencies' enacted amounts for FY2018, the President's FY2019 request, the FY2019 amounts from the 115 th Congress bills ( H.R. 6147 as passed by the House and H.R. 6147 as passed by the Senate), the FY2019 amounts from the 116 th Congress House-passed bills ( H.R. 21 and H.R. 648 ), and the final FY2019 enacted amounts from P.L. 116-6 . Although financial services are a focus of the FSGG bill, the bill does not actually include funding for the regulation of much of the financial services industry. Financial services as an industry is often subdivided into banking, insurance, and securities. Federal regulation of the banking industry is divided among the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency (OCC), and the Bureau of Consumer Financial Protection (generally known as the Consumer Financial Protection Bureau, or CFPB). In addition, credit unions, which operate similarly to many banks, are regulated by the National Credit Union Administration (NCUA). None of these agencies receives its primary funding through the appropriations process, with only the FDIC inspector general and a small NCUA-operated program currently funded in the FSGG bill. Insurance is generally regulated at the state level, with some Federal Reserve oversight at the holding company level. There is a relatively small Federal Insurance Office (FIO) inside the Treasury, which is funded through the Departmental Offices account, but FIO has no regulatory authority. Federal securities regulation is divided between the Securities and Exchange Commission (SEC) and the CFTC, both of which are funded through appropriations. The CFTC funding is a relatively straightforward appropriation from the general fund, whereas the SEC funding is provided by the FSGG bill, but then offset through fees collected by the SEC. Although funding for many financial regulatory agencies may not be provided by the FSGG bill, legislative provisions affecting financial regulation in general and some of these agencies specifically have often been included in FSGG bills. In the 115 th Congress, H.R. 6258 and H.R. 6147 as passed by the House included many provisions, particularly in Title IX, that would have amended the 2010 Dodd-Frank Act and other statutes relating to the regulation of financial institutions and the authority and funding of financial regulators. Many of these provisions were included in other legislation, notably H.R. 10 , which passed the House on June 8, 2017, and S. 488 as amended by the House, which passed the House on July 17, 2018, though neither of these bills were enacted in the 115 th Congress. Of particular interest from the appropriations perspective, H.R. 6258 and H.R. 6147 as passed by the House would have brought the CFPB under the FSGG bill instead of receiving funding from outside of the appropriations process, as is currently the case. S. 3107 and H.R. 6147 as passed by the Senate did not include similar provisions affecting the CFPB or other aspects of financial regulation as in Title IX of the House bills. In the 116 th Congress, the bills passed by the House ( H.R. 21 and H.R. 648 ) did not include financial regulatory provisions similar to those in the 115 th Congress House-passed bill, and neither did the enacted P.L. 116-6 . The House and Senate Committees on Appropriations reorganized their subcommittee structures in early 2007. Each chamber created a new Financial Services and General Government Subcommittee. In the House, the FSGG Subcommittee's jurisdiction is primarily composed of agencies that had been under the jurisdiction of the Subcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies, commonly referred to as TTHUD. In addition, the House FSGG Subcommittee was assigned four independent agencies that had been under the jurisdiction of the Science, State, Justice, Commerce, and Related Agencies Subcommittee: the Federal Communications Commission (FCC), the Federal Trade Commission (FTC), the SEC, and the Small Business Administration (SBA). In the Senate, the new FSGG Subcommittee's jurisdiction is a combination of agencies from the jurisdiction of three previously existing subcommittees. Most of the agencies that had been under the jurisdiction of the Transportation, Treasury, the Judiciary, and Housing and Urban Development, and Related Agencies Subcommittee were assigned to the FSGG subcommittee. In addition, the District of Columbia, which had its own subcommittee in the 109 th Congress, was placed under the purview of the FSGG Subcommittee, as were four independent agencies that had been under the jurisdiction of the Commerce, Justice, Science, and Related Agencies Subcommittee: the FCC, FTC, SEC, and SBA. As a result of this reorganization, the House and Senate FSGG Subcommittees have nearly identical jurisdictions, except that the CFTC is under the jurisdiction of the FSGG Subcommittee in the Senate and the Agriculture Subcommittee in the House. Table 4 below lists various departments and agencies funded through FSGG appropriations and the CRS experts' names pertaining to these departments and agencies.", "summary": "The Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury, the Executive Office of the President (EOP), the judiciary, the District of Columbia, and more than two dozen independent agencies. The House and Senate FSGG bills fund the same agencies, with one exception. The Commodity Futures Trading Commission (CFTC) is usually funded through the Agriculture appropriations bill in the House and the FSGG bill in the Senate. President Trump submitted his FY2019 budget request on February 12, 2018. The request included a total of $49.1 billion for agencies funded through the FSGG appropriations bill, including $282 million for the CFTC. The $49.1 billion figure includes $3 billion for a legislative provision on government-wide transfers (Section 737). The 115th Congress House and Senate Committees on Appropriations reported FSGG appropriations bills (H.R. 6258, H.Rept. 115-792 and S. 3107, S.Rept. 115-281) and both houses passed different versions of a broader bill (H.R. 6147) that would have provided FY2019 appropriations. The House-passed H.R. 6147 would have provided a combined total of $45.9 billion for the FSGG agencies, while the Senate-passed H.R. 6147 would have provided $45.7 billion. In both cases, the largest differences compared to the President's request were in the funding for the General Services Administration (GSA), the funding for the Executive Office of the President, and the absence of the Section 737 provision on government-wide transfers in both bills. No full-year FY2019 FSGG bill was enacted prior to the end of FY2018. The FSGG agencies were provided continuing appropriations until December 7, 2018, in P.L. 115-245 and until December 21, 2018, in P.L. 115-298. No final bill was enacted, and funding for FSGG agencies, along with much of the rest of the government, lapsed on December 22, 2018. No further appropriations occurred prior to the 116th Congress. In the 116th Congress, the House of Representatives passed H.R. 21, which contained six full FY2019 appropriations bills, including FSGG provisions nearly identical to those passed by the Senate in the 115th Congress on January 3, 2019. On January 23, 2019, the House passed H.R. 648, also containing six appropriations bills, which was reportedly based on a potential conference report from the 115th Congress and would have provided $46.0 billion for FSGG appropriations. (Neither of these bills provided full-year funding for the Department of Homeland Security.) The Senate did not act on either of these bills. On February 14, 2019, both the House and the Senate passed a conference report (H.Rept. 116-9) for H.J.Res. 31, containing seven appropriations bills providing full FY2019 funding for the government's operations that had not been previously funded, including FSGG provisions nearly identical to H.R. 648. The President signed the resolution on February 15, 2019, enacting it into law as P.L. 116-6. The law provides $45.7 billion in the FSGG appropriations portion (Division D), which includes the funding for the CFTC. This is $3.4 billion less than the President's request, with the bulk of this due to the absence of the Section 737 transfer authority in P.L. 116-6. Other notable differences include the funding for GSA and the Executive Office of the President. Although financial services are a major focus of the FSGG appropriations bills, these bills do not include funding for many financial regulatory agencies, which are funded outside of the appropriations process. The FSGG bills have, however, often contained additional legislative provisions relating to such agencies, as is the case with H.R. 6258/H.R. 6147 in the 115th Congress, whose Title IX contained language from a number of different bills relating to financial regulation. P.L. 116-6 did not contain this language.", "document_type": "crs"}
{"report": "The Strategic Petroleum Reserve (SPR), administered by the Department of Energy (DOE), has been a part of U.S. oil security policy for over 40 years. Originally intended as a reserve to replace oil that might be withdrawn from the world market to forward political purposes and objectives, its rationale has evolved with the changing world oil market and the role of the United States in the market. In addition to replacing oil lost to political turmoil, as in Libya in 2011, in recent years it has been more commonly used to replace oil supplies curtailed due to natural disasters, mainly hurricanes. The effects of hurricanes, especially those of the magnitude of Katrina, Rita, and others, has threatened to disrupt oil production, refining, and distribution, creating potential economic dislocation. Use of oil from the SPR has helped to minimize the economic effect of those events. Since 2010, the oil market in the United States has been transformed. Low growth in petroleum product demand, rapidly increasing domestic oil production, and falling net imports of crude oil and petroleum products have reduced U.S. dependence on foreign oil suppliers. At the same time, export sources on the world market have expanded, reducing the ability of any one exporter, or group of exporters, to manipulate the market. As the U.S. oil position in the world oil market has strengthened, some have questioned whether the SPR should be either downsized to reflect current supply and demand balances, or even eliminated entirely. Since 2015, Congress has passed legislation which mandates the sale of SPR oil to fund a variety of government activities. For some, a question exists as to how much oil might be withdrawn from the Reserve while still maintaining an adequate oil \"safety net.\" Others question whether the evolving world oil market requires the United States to maintain any government-owned reserve holdings. Enacted legislation to date has mandated the sale of over 250 million barrels of oil from the SPR, a situation that brings up another policy issue. If there is less oil in the SPR, what might be done with the \"excess capacity\" inevitably created? The government may be able to reduce the operating costs of the SPR by leasing reserve capacity freed by mandated sales. This report addresses the questions of mandated sales and \"right sizing\" the SPR, as well as strategies to make optimal use of the reduced need for oil storage capacity. The SPR was authorized by the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) of 1975. The intent was to establish a petroleum reserve of 1 billion barrels that could prevent the economic dislocation caused by the Organization of Arab Petroleum Exporting Countries (OAPEC) 1973/1974 embargo of oil sales to the United States and other countries. That event, in retaliation against the United States' support for Israel in the 1973 Arab-Israeli War, came at an important transition point in U.S. petroleum markets. U.S. production of crude oil had reached a then-peak in 1970 at about 9.4 million barrels per day (mm/d) and was considered likely to be in long-term decline. It was also believed that U.S. oil consumption would likely continue to increase. These supply and demand trends seemed to guarantee that U.S. oil dependence on the world oil market through increasing imports would continue to grow. Although the original intent of EPCA was to create a reserve of 1 billion barrels of crude oil, the SPR only reached its original design capacity of 750 million barrels in 1991. Available storage capacity was reduced to the current 726.7 million barrels with the closure of the Weeks Island facility due to structural damage in 1996. The SPR was filled to near its maximum capacity at 726.6 million barrels on December 27, 2009. That total represents the largest amount of oil ever held in the SPR. In 2011, 30 million barrels of oil was sold from the reserve in conjunction with the loss of Libyan oil exports due to the political and military upheaval in that country. Over its history, the SPR has expanded to include the Northeast Home Heating Oil Reserve (NEHHOR) as well as the 1-million-barrel Northeast Gasoline Supply Reserve (NGSR) located on the U.S. East Coast. The NEHHOR was created to support and stabilize the essentially regional demand for home heating oil in New England. The NGSR was set up in the wake of Hurricane Sandy in 2012. That hurricane caused disruption of gasoline supply deliveries due mainly to electric power disruption and flooding. Gasoline is less amenable to long-term storage than crude oil. While crude oil may be stored with little observed deterioration for periods in excess of five years, the storage life of gasoline is shorter. Typical gasoline blended with 10% ethanol may have a shelf life in storage of approximately three months. The short shelf life of gasoline requires active supply management of the NGSR. The IEA was established in November 1974, with a broad mandate on energy security and energy policy coordination among member countries during energy-related emergencies. Strategic stock holdings are one of the policies included in the agency's International Energy Program (IEP). IEA member countries, including the United States, have committed to maintaining stocks of crude oil and petroleum products equivalent to 90 days of their previous year's net imports; developing programs for demand restraint in the event of emergencies; and agreeing to participate in an allocation of oil deliveries program to balance shortages among IEA member nations. For example, in 2011, the United States participated in a coordinated IEA oil stock drawdown in response to the withdrawal of Libyan oil exports from the market as a result of political and military turmoil in that country. The SPR at its current holdings of 649.1 million barrels of crude oil satisfies the U.S. strategic stock holding requirement. Based on 2017 net import levels of 3.768 mmb/d, the SPR holds over 170 days of net imports of crude oil and petroleum products. Considered in another way, the net import level of 3.768 mmb/d, when multiplied by 90 days required stocks, implies a need for the United States to hold about 340 million barrels in the SPR. The difference between actual SPR holding and the implied holdings required to meet the IEA requirements has given rise to the viewpoint that U.S. reserve oil holdings are in excess of those needed and might be sold on the market. At the full drawdown rate, the SPR can deliver 4.4 mmb/d of crude oil for 90 days, dropping to a rate of 3.8 mmb/d for an additional 30 days, and dropping further in drawdown rate for up to 180 days as stocks deplete. These drawdown rates are those likely to be associated with a total, or major, curtailment of potential imports from the world market, an unlikely scenario given the large portion of U.S. imports obtained from Canada, Mexico, and Venezuela, until recently. According to the IEA, only the United States, the Czech Republic, and New Zealand meet their stock requirements using solely government-owned emergency oil and petroleum product stocks. Other nations meet their stock requirements through holding private industry or agency stocks or portions in combination. It is also possible, under IEA rules, for a nation to hold its IEA required oil reserves outside its borders. This could create a demand for SPR unused capacity by nations that have a shortage of domestic oil storage facilities. Total U.S. oil stocks, including both commercial and publicly held stocks, of both crude oil and petroleum products, are generally in excess of 1.9 billion barrels on a monthly basis, far in excess of IEA requirements. The most recent emergency release of SPR oil was in 2011 due to the Libyan export curtailment. At that time, the United States and other members of the IEA decided to release 60 million barrels of oil onto the world market. The U.S. obligation was set at 30 million barrels. In June 2011, competitive offers were solicited for the purchase of selling oil to be delivered by the end of August 2011. In addition to selling oil, the SPR can enter into exchange agreements. Exchange agreements, which are similar to loans, allow for delivery of oil from the SPR with return of the oil in kind, plus a premium, by a set future date. For example, in August and September 2017, following Hurricane Harvey, 5.2 million barrels of oil was delivered to Gulf Coast refineries to offset fuel shortages as a result damage and flooding. All of the original 5.2 million barrels plus the premium was returned by February 2018. In 2014, a test sale was undertaken to evaluate SPR drawdown and sales procedure capabilities. Between March and May 2014, 4.62 million barrels was delivered by pipeline to successful bidders, and 0.38 million barrels was delivered via marine transportation. Beginning in 2015, the debate over whether the SPR storage balance was too large given the evolving nature of U.S. oil production, consumption, and net imports resulted in Congress mandating the sale of SPR oil. The sales revenue accrued through SPR sales was allocated to a variety of uses; however, energy policy, or security, was not among them. The legislation that mandated SPR oil sales includes the Bipartisan Budget Act of 2015 ( P.L. 114-74 ), the FAST Act of 2015 ( P.L. 114-94 ), the 21 st Century Cures Act of 2016 ( P.L. 114-255 ), the 2017 Tax Revision ( P.L. 115-97 ), the Bipartisan Budget Act of 2018 ( P.L. 115-123 ), and the Consolidated Appropriations Act, 2018. Broadly considered, this legislation requires oil to be sold from the reserve over the period FY2017 through FY2027. Table 1 presents mandated SPR sales data. The data in Table 1 show that while the 21 st Century Cures Act draws revenues from SPR sales during the three-year period 2017 through 2019, and the Balanced Budget Act of 2015 mandates SPR sales from 2018 through 2025, and the Consolidated Appropriations Act, 2018, mandates SPR sales in 2020 and 2021, the remaining legislation is oriented toward out-year sales, 2023 to 2027. This pattern of SPR sales might be important, because while it is likely that the favorable position of the United States with respect to oil production and imports will continue in the near-term, less certainty can be associated with a long-term perspective. Forecasting oil demand and supply is far from accurate, and when expected demand or supply respectively exceeds, or falls short of, expectations, the result is likely to be price volatility. Price volatility in the oil market can result in economic disruptions and slowdowns. As per Section 510 of the 21 st Century Cures Act, the DOE offered 10 million barrels of SPR oil for sale in FY2017. A total of 9.89 million barrels of oil was delivered in FY2017, earning over $449 million, an average price of over $45 per barrel. DOE offered 9 million barrels of SPR oil sold in FY2018, earning approximately $522 million at an average price of over $58 per barrel. The Balanced Budget Act of 2015, Section 404, authorizes the DOE to sell up to $2 billion of SPR crude oil for fiscal years 2017 through 2020. A total of 6.28 million barrels was sold in FY2017, earning $323.2 million. In FY2018, DOE offered 5 million barrels of SPR oil for sale, yielding approximately $290 million. The legislation that directs sales from the SPR is not time coordinated. Possible problems could result from uncoordinated sales exceeding an amount consistent with energy security. However, the cited legislation generally has built-in \"safety valve\" language that ensures that SPR sales do not cause the United States to violate its international commitments, or allow the SPR holdings to fall below a specified value. In the case of P.L. 115-123 this value is set at 350 million barrels. Determining the optimal level of oil holdings in the SPR is likely to remain controversial. Analytical tools common in public policy analysis, such as cost-benefit analysis, dynamic programming, or other optimization techniques depend on determining the value of variables that are highly uncertain in this case. The responsiveness of the adjustment of oil quantities on both the demand and the supply sides of the market, the price volatility of oil, and the probabilities of different degrees of political/military disruption in the oil market are all uncertain. The SPR might be thought of as an insurance policy where fixed payments are made over time to avoid the large negative costs associated with low-probability events. For example, if conflict in the Persian Gulf resulted in the Strait of Hormuz being closed for a period of time, large volumes of Persian Gulf oil would likely be withdrawn from the world market. The reality of reduced oil supply coupled with expectations and speculation on the futures markets would likely result in an increasing and volatile oil price. Significant price increases, coupled with supply shortages could result in significant disruption of consuming and importing nations' economies. Reduced economic growth, rising unemployment, and inflation are likely consequences. With respect to this example, an analysis of the appropriate size of the SPR might focus on values such as the risk tolerance of society with respect to bearing the consequences of an event of a given particular magnitude. Set against these values might be the cost of maintaining the SPR, which might be taken as an \"insurance premium.\" In this case, the optimal strategy might be to minimize the cost of insurance as well as the probability that the negative event might occur. However, complications might still arise in transforming the theoretical analysis into a consistent practical decision guide. Additional reform factors that could be considered, beyond the size of the SPR, might include the mix of crude oils held in reserve as well as the infrastructure available to deliver reserve crudes to the market. A consequence of the fixed capacity of the SPR in conjunction with mandated sales from the reserve is the appearance of underutilized capacity. In the 115 th Congress, the House passed legislation to reform the SPR to include commercial leasing of storage capacity as well as leasing of capacity to foreign governments. H.R. 6511 would have authorized the Secretary of Energy to develop a leasing program and establish a pilot program for the leasing of storage and related facilities. The most important benefit of leasing excess SPR capacity is the receipt of fees to \"fully compensate the United States for all costs of storage, and removals of petroleum products (including the proportionate cost of replacement facilities necessitated as a result of withdrawals) incurred by the United States as a result of such lease.\" These fees can help offset the facilities operation and maintenance costs of the reserve, which were $233 million in FY2017. While leasing excess reserve capacity provides the United States the benefit of reducing the cost of the energy security insurance the reserve provides, potential problems might exist. Commercial clients' usage patterns may not match the physical capabilities of SPR facilities. The salt domes that contain SPR crude oil are suitable for long-term oil storage and they may be less suitable for short-term injections and withdrawals. Oil is drawn from the SPR storage caverns by injecting brine into the caverns and causing the contained oil to rise, and then exit, the facility. Frequent brine injection and withdrawal could result in accelerated structural deterioration of the caverns. Commercial oil companies are more likely to store oil for the short-term, rather than as a long-term security stock. Commercial stocks are typically part of a supply chain that holds stocks only until they can be shipped to refineries or other facilities for processing. In addition, emergency withdrawals of SPR oil may interfere with commercial withdrawals unless extraction and shipping infrastructure at the SPR is enhanced. Leasing of excess SPR capacity to foreign governments for oil reserve storage is less likely to be associated with the short-term problems identified with commercial leasing. In addition to the H.R. 6511 reform approach, some have called for partial, or total, elimination of the reserve. This approach usually cites the broader, more transparent nature of the world oil market compared to the 1970s, the large commercial stock holdings in the United States, or the existence of derivative market strategies available to firms, not available in the 1970s, which might be used to mitigate oil supply shocks. Beyond partial or total liquidation of the reserve, analysts have developed other alternatives. Inventory monetization is a generally risk-free approach, generating revenues to cover expenses by monetizing a portion of the idle oil balances in the SPR. This approach uses options markets to generate revenues. For example, suppose the oil futures market was in backwardation, a condition whereby the price of oil today is higher than the price a year from now by $3 per barrel. The government could sell crude oil paper contracts at today's price and purchase an equivalent number of barrels of crude a year from now at the lower future price. If this strategy were undertaken with perhaps 100 million barrels of SPR oil, the net revenue would be $300 million minus expenses and fees, an amount well in excess of yearly SPR operations and maintenance costs. If, in the example, the relative prices over time were reversed, and the future price was higher than the current price the government would buy oil now and simultaneously sell oil in the future, again profiting by the amount of the spread between the two prices. These purchases and sales are all on paper, no oil is actually required to leave the reserve, and the transactions are taken at the same time, locking in a profit with essentially potentially very low risk. A drawback of this approach is that the volume of government purchases and sales might be large enough to influence the market prices, or interfere with private sector traders. The SPR has met many challenges. First conceived as protection against the \"weaponization\" of oil in the 1970s, it later became a safeguard against the disruption caused by domestic natural disasters. Most recently the Reserve has served as a source of funding for a variety of programs and activities. In each case, while its range of application has expanded, it still maintained its ability to respond to its original requirements. Evolving oil market conditions have raised the question of whether the SPR can be further downsized, or even eliminated. Even if changing market conditions have made the reserve's rationale less compelling in the current environment than in the past, the SPR can provide a component of energy security policy as well as meeting other policy needs. ", "summary": "The Strategic Petroleum Reserve (SPR), administered by the Department of Energy (DOE), has played a role in U.S. energy policy for over 40 years. Over that time, its primary focus has changed from its original intent as world oil market conditions have changed. Originally intended to offset the market power of cartels and prevent economic damage from oil supply disruption, it has become primarily a tool for combatting the fuel market effects of domestic natural disasters like hurricanes. Most recently, U.S. net imports of oil and petroleum products have decreased as a result of the increase in domestic oil production. Because of lower reliance on imports, some stakeholders see less need for an oil stockpile, and view the SPR more as a mechanism for providing funding for a wide variety of legislative purposes, ranging from health care, to highways, and general purpose revenues. Over this period, the SPR has expanded its potential usefulness to cover all of these purposes. As a member of the International Energy Agency (IEA) and a participant in the International Energy Program established by the IEA, the United States, as are all net-importer nations in the IEA, is required to hold the equivalent of 90 days of its net imports of oil and petroleum products as a reserve stock. As a result of relatively stable U.S. oil consumption and rapidly increasing production, and declining net imports, available oil stocks held in the SPR now are almost double the 90-day requirement. While the SPR has recently seen relatively little use in combatting oil supply disruptions caused by political and military instability, or even natural disasters, it has provided a source of funding for a variety of legislative initiatives. These mandated sales from the SPR have committed almost 260 million barrels of oil for sale by FY2027, leaving less than 400 million barrels of uncommitted oil reserves. Determining whether further reductions can be made from the reserve while maintaining its ability to carry out its designed purpose is a key energy policy question. The extreme variant of this question is whether a reserve is required at all, or whether privately held stocks, as practiced by most European countries, are adequate to meet international commitments. Legislation in the 115th Congress, H.R. 6511, sought to maintain the SPR facility and infrastructure, while reducing operating and maintenance costs, by renting unused storage capacity in the reserve to private companies and foreign nations. As of this writing, no bills have been introduced in the 116th Congress modifying the SPR.", "document_type": "crs"}
{"report": "Congress is composed of 541 individuals from the 50 states, the District of Columbia, Guam, the U.S. Virgin Islands, American Samoa, the Northern Mariana Islands, and Puerto Rico. Since 1789, 12,343 individuals have served as either Representatives (11,037 individuals) or as Senators (1,983 individuals). Of these individuals, 677 have served in both chambers. An additional 178 individuals have served in the House in the roles of territorial Delegates or Resident Commissioners. The following is a profile of the 116 th Congress (2019-2020). In the 116 th Congress, the current party alignments as of March 7, 2019, are as follows: House of Representatives: 239 Democrats (including 4 Delegates), 199 Republicans (including 1 Delegate and the Resident Commissioner of Puerto Rico), and 3 vacant seats. Senate: 53 Republicans, 45 Democrats, and 2 Independents, who both caucus with the Democrats. The average age at the beginning of the 116 th Congress was 57.6 years for Representatives and 62.9 years for Senators. Table 1 shows the average ages at the beginning of the 116 th and three previous Congresses. The U.S. Constitution requires Representatives to be at least 25 years old when they take office. The youngest Representative in the 116 th Congress, and the youngest woman ever to serve in Congress, is Alexandria Ocasio-Cortez (D-NY), born October 13, 1989, who was 29 at the beginning of the 116 th Congress. The oldest Representative is Don Young (R-AK), born June 9, 1933, who was 85. Senators must be at least 30 years old when they take office. The youngest Senator in the 116 th Congress is Josh Hawley (R-MO), born December 31, 1979, who was 39 at the beginning of the Congress. The oldest Senator in the 116 th Congress is Dianne Feinstein (D-CA), born June 22, 1933, who was 85. According to data on occupations in the CQ New Members Guide , in the 116 th Congress law ties with public service/politics as the most commonly declared profession of Senators, followed by business; for Representatives, public service/politics is first, closely followed by business, then law. Table 2 uses data from the CQ Member Profiles to present the occupational categories most frequently listed as prior careers of Members of the 116 th Congress. A closer look at the range of prior occupations and previously held public offices of Members of the House and Senate at the beginning of the 116 th Congress, as listed in their CQ Member Profiles , also shows the following: 50 Senators with previous House service; 95 Members have worked in education, including teachers, professors, instructors, school fundraisers, counselors, administrators, or coaches (75 in the House, including 2 delegates, 20 in the Senate); 3 physicians in the Senate, 13 physicians in the House, plus 5 dentists and 3 veterinarians; 2 psychologists (all in the House), an optometrist (in the Senate), a pharmacist (in the House), and 2 nurses and 1 physician assistant (in the House); 7 ordained ministers, all in the House; 41 former mayors (34 in the House, 7 in the Senate); 13 former state governors (12 in the Senate, 1 in the House) and 7 lieutenant governors (4 in the Senate, 3 in the House); 16 former judges (all but 1 in the House) and 42 prosecutors (10 in the Senate, 32 in the House) who have served in city, county, state, federal, or military capacities; 2 former Cabinet Secretaries (1 in each chamber), and 3 Ambassadors (all in the House); 246 former state or territorial legislators (43 in the Senate, 203 in the House, including 2 Delegates and the Resident Commissioner from Puerto Rico); at least 89 former congressional staffers (19 in the Senate, 70 in the House, including 3 Delegates), as well as 6 congressional pages (3 in the House and 3 in the Senate); 3 sheriffs, 1 police chief and 3 other police officers, 1 firefighter, 3 CIA employees, and 1 FBI agent (all in the House); 3 Peace Corps volunteers, all in the House; 1 physicist and 1 chemist, both in the House; 11 engineers (10 in the House and 1 in the Senate); 20 public relations or communications professionals (4 in the Senate, 16 in the House), and 10 accountants (2 in the Senate and 8 in the House); 6 software company executives in the House and 2 in the Senate; 19 management consultants (5 in the Senate, 14 in the House), 5 car dealership owners (all in the House), and 4 venture capitalists (2 in the House, 2 in the Senate); 12 bankers or bank executives (3 in the Senate, 9 in the House), 29 veterans of the real estate industry (4 in the Senate, 25 in the House), and 10 Members who have worked in the construction industry (1 in the Senate, 9 in the House); 6 social workers (2 in the Senate, 4 in the House) and 3 union representatives (all in the House); 13 nonprofit executives in the House; 3 radio talk show hosts (1 in the Senate, 2 in the House); 4 radio or television broadcasters, managers, or owners (all in the House); 6 reporters or journalists (1 in the Senate, 5 in the House), a public television producer in the House, and a newspaper publisher in each chamber; 21 insurance agents or executives (4 in the Senate, 17 in the House) and 4 Members who have worked with stocks or bonds (all in the House); 1 artist, 1 book publisher, and 2 speechwriters (all in the House), and 1 documentary filmmaker in the Senate; 6 restaurateurs (5 in the House, 1 in the Senate), as well as 2 coffee shop owners, 1 wine store owner, and 1 whiskey distiller (all in the House); 27 farmers, ranchers, or cattle farm owners (5 in the Senate, 22 in the House); 1 almond orchard owner and vintner, as well as a forester and a fruit orchard worker (all in the House); 1 flight attendant and 1 pilot, both in the House; 3 professional football players, 1 hockey player, 1 baseball player, and 1 mixed martial arts fighter (all in the House); and 9 current members of the military reserves (8 in the House, 1 in the Senate) and 7 current members of the National Guard (all in the House). Other occupations listed in the CQ Member Profiles include emergency dispatcher, letter carrier, animal nutrition specialist, cake decorator, waiter, electrician, rodeo announcer, carpenter, computer systems analyst, software engineer, R&D lab executive, and explosives expert. As has been true in recent Congresses, the vast majority of Members (94.8% of House Members and 100% of Senators) at the beginning of the 116 th Congress hold bachelor's degrees. Sixty-eight percent of House Members and 77% of Senators hold educational degrees beyond a bachelor's. The CQ Member Profiles at the beginning of the 116 th Congress indicate the following: 17 Members of the House have no educational degree beyond a high school diploma; 6 Members of the House have associate's degrees as their highest degrees; 99 Members of the House and 18 Senators earned a master's degree as their highest attained degrees; 161 Members of the House (36.6% of the House) and 53 Senators (53% of the Senate) hold law degrees; 21 Representatives and 4 Senators have doctoral (Ph.D., D.Phil., Ed.D., or D. Min) degrees; and 21 Members of the House and 4 Senators have medical degrees. By comparison, approximately 35 years ago in the 99 th Congress (1985-1986), 85% of House Members and 88% of Senators held bachelor's degrees. Approximately 45 years ago, in the 94 th Congress (1975-1976), 82% of House Members and 88% of Senators held bachelor's degrees. About 60 years ago, in the 87 th Congress (1961-1962), 76% of House Members and 76% of Senators held bachelor's degrees. Five Representatives and one Senator are graduates of the U.S. Military Academy, two Representatives and one Senator graduated from the U.S. Naval Academy, and one Senator graduated from the U.S. Air Force Academy. Five Representatives and one Senator were Rhodes Scholars, two Representatives were Fulbright Scholars, two Representatives were Marshall Scholars, and two Representatives and one Senator were Truman Scholars. The average length of service for Representatives at the beginning of the 116 th Congress was 8.6 years (4.3 House terms); for Senators, 10.1 years (1.7 Senate terms). At the beginning of the 116 th Congress, 90 of the House Members, including the Resident Commissioner for Puerto Rico (20.4% of the total House Membership), had first been elected to the House in November 2018, and 9 of the Senators (9% of the total Senate membership) had first been elected to the Senate in November 2018. These numbers are higher than at the beginning of the 115 th Congress, when 11.8% of the House and 7% of the Senate were newly elected \"freshmen.\" At the beginning of the 116 th Congress, 144 House Members, including 1 Delegate and the Resident Commissioner (32.7% of House Members), had no more than two years of House experience, and 19 Senators (19% of Senators) had no more than two years of Senate experience. For more historical information on the tenure of Members of Congress, see CRS Report R41545, Congressional Careers: Service Tenure and Patterns of Member Service, 1789-2019 , by William T. Egar and Amber Hope Wilhelm. Ninety-seven percent of the Members of the 116 th Congress report an affiliation with a specific religion. Statistics gathered by the Pew Research Center on Religion and Public Life, which studies the religious affiliation of Representatives and Senators, and CQ at the beginning of the 116 th Congress showed the following: 54.9% of Members (233 in the House, 60 in the Senate) are Protestant, with Baptist as the most represented denomination, followed by Methodist; 30.5% of Members (141 in the House, 22 in the Senate) are Catholic; 6.4% of Members (26 in the House, 8 in the Senate) are Jewish; 1.9% of Members (6 in the House, 4 in the Senate) are Mormon (Church of Jesus Christ of Latter-day Saints); 2 Members (1 in the House, 1 in the Senate) are Buddhist, 3 Representatives are Muslim, and 3 Representatives are Hindu; and other religious affiliations represented include Greek Orthodox, Pentecostal Christian, Unitarian Universalist, and Adventist. A record 131 women Members (24.2% of the total membership) serve in the 116 th Congress, 22 more than at the beginning of the 115 th Congress. One hundred six women, including 3 Delegates as well as the Resident Commissioner, serve in the House and 25 in the Senate. Of the 106 women in the House, 91 are Democrats, including 2 of the Delegates, and 15 are Republicans, including 1 Delegate as well as the Resident Commissioner. Of the 25 women in the Senate, 17 are Democrats and 8 are Republicans. By comparison, approximately 35 years ago in the 99 th Congress (1985-1986), 23 women served in the House, and 2 in the Senate. Approximately 45 years ago, in the 94 th Congress (1975-1976), there were 19 women in the House, and none in the Senate. There are a record 58 African American Members (10.7% of the total membership) in the 116 th Congress, 6 more than at the beginning of the 115 th Congress. Fifty-five serve in the House, including two Delegates, and three serve in the Senate. This number includes one Representative, as well as one Senator, who are of African American and Asian ancestry, and two Representatives who are of African American and Hispanic ancestry. In this report, each of these four Members is counted as belonging to two ethnic groups. Fifty-four of the African American House Members, including two Delegates, are Democrats, and one is a Republican. Two of the Senators are Democrats and one is Republican. Twenty-four African American women, including two Delegates, serve in the House, and one serves in the Senate. By comparison, approximately 35 years ago in the 99 th Congress (1985-1986), 21 African American Members served in the House, and none in the Senate. About 60 years ago, in the 87 th Congress (1961-1962), there were 4 African American Members of Congress, all serving in the House. There are 50 Hispanic or Latino Members in the 116 th Congress, 9.2% of the total membership and a record number. Forty-five serve in the House, including two delegates and the Resident Commissioner, and 5 in the Senate. These numbers include two House Members who are also of Asian descent, and two House Members also of African ancestry; these Members are counted in both ethnic categories in this report. Of the Members of the House, 37 are Democrats (including 2 Delegates) and 8 are Republicans (including the Resident Commissioner). Fourteen are women, including the Resident Commissioner. Of the five Hispanic Senators (three Republicans, two Democrats), one is a woman. By comparison, approximately 35 years ago in the 99 th Congress (1985-1986), 14 Hispanic or Latino Members served in Congress. All 14 were male Members of the House. A record 20 Members of the 116 th Congress (3.8% of the total membership) are of Asian, South Asian, or Pacific Islander ancestry. Seventeen of them (16 Democrats, 1 Republican) serve in the House, and 3 (all Democrats) serve in the Senate. These numbers include one House Member and one Senator who are also of African American ancestry, and another House Member of Hispanic ancestry; these Members are counted in both ethnic categories in this report. Of those serving in the House, three are Delegates. Ten of the Asian, Pacific Islander, or South Asian American Members are female: seven in the House, and all three in the Senate. By comparison, approximately 35 years ago in the 99 th Congress (1985-1986), there were five Asian/Pacific Islander Americans in the House, and two in the Senate. There are four American Indian (Native American) Members of the 116 th Congress; two of each party, all in the House. This is two more than in the 115 th Congress, and a record number. Twenty-four Representatives and five Senators (5.3% of the 116 th Congress) were born outside the United States. Their places of birth include Canada, Cuba, Ecuador, Germany, Japan, Peru, and India. Some of these Members were born to American citizens working or serving abroad. The U.S. Constitution requires that Representatives be citizens for seven years and Senators be citizens for nine years before they take office. At the beginning of the 116 th Congress, there were 96 individuals (17.8% of the total membership) who had served or were serving in the military, 6 fewer than at the beginning of the 115 th Congress (102 Members). According to lists compiled by CQ , the House as of January 2019 had 78 veterans (including 4 female Members, as well as 1 Delegate); the Senate had 18 veterans, including 3 women. These Members served in the Vietnam War, the Persian Gulf War, and combat or peacekeeping missions in Afghanistan, Iraq, and Kosovo, as well as during times of peace. Eight House Members and one Senator are still serving in the reserves, and seven House Members are still serving in the National Guard. Four of the seven female veterans are combat veterans. The number of veterans in the 116 th Congress reflects the trend of steady decline in recent decades in the number of Members who have served in the military. For example, 64% of the Members of the 97 th Congress (1981-1982) were veterans, and in the 92 nd Congress (1971-1972), 73% of the Members were veterans. For summary information on the demographics of Members in selected past Congresses, including age trends, occupational backgrounds, military veteran status, and educational attainment, see CRS Report R42365, Representatives and Senators: Trends in Member Characteristics Since 1945 , coordinated by R. Eric Petersen. ", "summary": "This report presents a profile of the membership of the 116th Congress (2019-2020) as of March 7, 2019. Statistical information is included on selected characteristics of Members, including data on party affiliation, average age, occupation, education, length of congressional service, religious affiliation, gender, ethnicity, foreign birth, and military service. In the House of Representatives, there are 239 Democrats (including 4 Delegates), 199 Republicans (including 1 Delegate and the Resident Commissioner of Puerto Rico), and 3 vacant seats. The Senate has 53 Republicans, 45 Democrats, and 2 Independents, who both caucus with the Democrats. Additionally The average age of Members of the House at the beginning of the 116th Congress was 57.6 years; of Senators, 62.9 years. The overwhelming majority, 96%, of Members of Congress have a college education. The dominant professions of Members are public service/politics, business, and law. Most Members identify as Christians, and the collective majority of these affiliate with a Protestant denomination. Roman Catholics account for the largest single religious denomination, and numerous other affiliations are represented, including Jewish, Mormon, Buddhist, Muslim, Hindu, Greek Orthodox, Pentecostal Christian, Unitarian Universalist, and Adventist. The average length of service for Representatives at the beginning of the 116th Congress was 8.6 years (4.3 House terms); for Senators, 10.1 years (1.7 Senate terms). A record 131 women serve in the 116th Congress: 106 in the House, including 3 Delegates and the Resident Commissioner, and 25 in the Senate. There are 55 African American Members of the House and 3 in the Senate. This House number includes two Delegates. There are 50 Hispanic or Latino Members (a record number) serving: 45 in the House, including 2 Delegates and the Resident Commissioner, and 5 in the Senate. There are 20 Members (14 Representatives, 3 Delegates, and 3 Senators) who are Asian Americans, Indian Americans, or Pacific Islander Americans. This is also a record number. A record four American Indians (Native Americans) serve in the House. The portions of this report covering political party affiliation, gender, ethnicity, and vacant seats may be updated as events warrant. The remainder of the report will not be updated.", "document_type": "crs"}
{"report": "This report provides an overview of the FY2019 budget request and appropriations for the International Trade Administration (ITA), the U.S. International Trade Commission (USITC), and the Office of the United States Trade Representative (USTR). These three trade-related agencies are funded through the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations. This report also provides a review of these trade agencies' programs. When comparing the Administration's FY2019 request with FY2018 funding, one may want to consider that the Administration formulated its FY2019 budget request before full-year appropriations for FY2018 were enacted. In this report, FY2018 funding levels reflect the amounts appropriated in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), enacted on March 23, 2018. The Consolidated Appropriations Act, 2018, provided $482.0 million in direct funding for ITA, $93.7 million for USTIC, and a total of $72.6 million for USTR for FY2018. The FY2018 appropriation for the three CJS trade-related agencies totaled $648.3 million. The Consolidated Appropriations Act, 2019, provided $484.0 million in direct appropriations for ITA, $95.0 million in funding for USITC, and a total of $68.0 million for USTR. The FY2019 appropriations for three CJS trade-related agencies totaled $647.0 million, a 0.2% decrease from FY2018 appropriations. See the Appendix for enacted budget authority for the trade-related agencies for FY2009-FY2019. The President submitted his FY2019 budget request to Congress on February 12, 2018. In it, the Administration requested a total of $590.8 million for the three CJS trade-related agencies (see Table 1 ). This request represented an 8.9% decrease in funding from the FY2018 appropriated amount. The request included reduced funding for all three trade agencies: $440.1 million in direct funding for ITA (an 8.7% decrease from the FY2018 appropriation), $87.6 million for USITC (a 6.5% decrease), and $63.0 million for USTR (a 13.2% decrease). Despite the proposed overall decrease in funding for CJS trade-related agencies, the Administration proposed increasing some trade enforcement activities within ITA and USTR. For ITA, the Administration proposed increasing trade enforcement activities while reducing funding for certain export promotion activities. For USTR, the Administration requested funds to increase staffing; however, the request did not include a request for funding to be drawn from the Trade Enforcement Trust Fund. (For a description of the \" Trade Enforcement Trust Fund ,\" see section below.) The President's budget did not provide a rationale for requesting a decrease in funding for USITC. A more detailed overview of these agencies' FY2019 budget requests is provided below. The House and Senate Appropriations Committees reported their CJS appropriation bills in the spring of 2018. Both committees largely declined the budget cuts requested by the Administration for these three trade agencies. (See Table 1 .) The House Committee on Appropriations reported H.R. 5952 on May 17, 2018. The House committee bill included a total of $647.6 million for the three trade-related agencies, which was $56.8 million more (9.6%) than the Administration's request and $0.7 million less (-0.1%) than the FY2018-enacted amount. The House committee recommended $480.0 million in direct funding for ITA, $95.0 million for USTIC, and a total of $72.6 million for USTR. The Senate Committee on Appropriations reported S. 3072 on June 14, 2018. The Senate bill included a total of $655.6 million for the three agencies, which was $64.8 million (11.0%) more than the Administration's request and $7.3 million (1.1%) more than the FY2018-enacted appropriation. The Senate committee recommended $488.0 million in direct funding for ITA, $95.0 million for USITC, and a total of $72.6 million for USTR. Through February 15, 2019, the CJS trade-related agencies operated under continuing resolutions (CR)—with the exception of a three-week lapse in funding when agencies halted most operations. Congress passed final FY2019 appropriations in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), which was signed into law on February 15, 2019. The act included a total of $647.0 million in funding for the three trade-related agencies—a 0.2% decrease from FY2018 appropriations. For FY2019, the Consolidated Appropriations Act, 2019, included $484.0 million in direct appropriations for ITA (a 0.4% increase from the FY2018 appropriation), $95.0 million in funding for USITC (a 1.4% increase), and a total of $68.0 million for USTR (a 0.2% decrease). Within the Department of Commerce, ITA's mission is to improve U.S. prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring compliance with trade laws and agreements. ITA provides export promotion services; works to enforce and ensure compliance with trade laws and agreements; administers trade remedies such as antidumping and countervailing duties; and provides analytical support for ongoing trade negotiations. ITA went through a major organizational change in October 2013 in which it consolidated four organizational units into three more functionally aligned units: (1) Global Markets; (2) Industry and Analysis; and (3) Enforcement and Compliance. ITA also has a fourth organizational unit, the Executive and Administrative Directorate, which is responsible for providing policy leadership, information technology support, and administration services for all of ITA. ( Table A-1 shows budget amounts for ITA by unit between FY2009 and FY2019.) For FY2019, the Administration requested $440.1 million for ITA in direct funding, with an additional $11.0 million to be collected in user fees, for a total of $451.1 million in authorized spending. The request for direct funding represents a $41.9 million decrease (-8.7%) from the FY2018-enacted amount ($482.0 million). According to ITA's budget justification, the Administration proposed increasing ITA's enforcement and compliance efforts in FY2019, while deemphasizing other initiatives, such as export promotion. The Administration specifically proposed closing some domestic and international offices of the United States and Foreign Commercial Service (US&FCS). The House committee-reported H.R. 5952 proposed $480.0 million for ITA in direct funding, with an additional $11.0 million to be collected from user fees, for a total of $491.0 million in authorized spending. The amount in direct funding proposed by the House Committee on Appropriations was $39.9 million (9.1%) more than the Administration's request and $2.0 million less (-0.4%) than the FY2018-enacted amount. The Senate committee-reported S. 3072 included $488.0 million in direct funding for ITA, with an additional $11.0 million in user fees, for a total of $499.0 million in authorized spending. The amount in direct funding proposed by the Senate Committee on Appropriations was $47.9 million (10.9%) more than the Administration's request and $6.0 million (1.2%) more than the FY2018-enacted amount. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $484.0 million in direct appropriations for ITA, with an additional $11.0 million to be collected in user fees, for a total of $495.0 in authorized spending. The act provided $2 million more (0.4%) in direct appropriations for ITA than the FY2018-enacted amount and $43.9 million more (10.0%) than the Administration's request. ITA's Global Markets (GM) unit is a combination of the United States and Foreign Commercial Service (US&FCS) unit, a program that provides export promotion services to U.S. businesses, and SelectUSA, a program that works to attract foreign investment into the United States. Through US&FCS, GM promotes U.S. exports by helping U.S. exporters research foreign markets and identify opportunities abroad. GM's country and regional experts―in domestic and overseas offices—help to advise U.S. companies on market access, local standards, and regulations. The unit also helps to make connections through business-to-business trade shows, fairs, and missions. GM is designed to advance U.S. commercial interests by engaging with foreign governments and U.S. businesses, identifying and resolving market barriers, and leading efforts that advocate for U.S. firms with foreign governments. Through its SelectUSA program, the GM unit also promotes the United States as a destination for foreign investment. (For more on SelectUSA, see section below, \" SelectUSA Program .\") For FY2019, the Administration proposed reducing funding for the Global Markets unit. The Administration requested $276.5 million for Global Markets in direct funding, a 13.4% decrease from the FY2018-enacted appropriation. In its FY2019 budget submission, ITA proposed \"rescaling export promotion\" activities in the GM unit by reducing staff and its domestic and overseas offices, with a total reduction of 133 positions. The budget submission did not indicate how many or which domestic and overseas offices it was proposing to close. The House and Senate Appropriation Committees did not adopt the proposed cuts. The House Appropriations Committee recommended $319.0 million for the Global Markets unit for FY2019. This was $42.5 million (15.4%) more than the Administration's request. According to the committee report, \"the recommendation does not adopt the proposal to reduce U.S. and Foreign Commercial Service staff or close overseas offices or U.S. Export Assistance Centers.\" The Senate Appropriations Committee report did not provide an exact funding amount, but recommended that ITA \"fund US&FCS, and its core mission of export promotion, at the highest possible level in fiscal year 2019, and at no less than the amount provided in fiscal year 2018.\" Like the House committee, the Senate committee did not adopt the Administration's proposal to close offices. The Senate committee report specifically noted, \"No offices shall be closed in fiscal year 2019 unless the Committee approves a reprogramming request to close such office or offices. Additionally, the Committee will not approve requests to close any domestic offices, called U.S. Export Assistance Centers, if such Center is the only one located in a given State.\" According to the conference report accompanying the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), the final agreement for FY2019 appropriations included \"no less than $320 million\" in funding for Global Markets and required ITA to report quarterly to the Committees on staffing levels within the US&FCS. ITA's Industry and Analysis unit brings together ITA's industry, trade, and economic experts to advance the competitiveness of U.S. industries through the development and execution of international trade and investment policies, export promotion strategies, and investment promotion. It develops economic and international policy analysis to improve market access for U.S. businesses, and designs and implements trade and investment promotion programs. The unit serves as the primary liaison between U.S. industries and the federal government on trade and investment promotion. It administers programs that support small and medium-sized enterprises, such as the Market Development Cooperator Program. For FY2019, the Administration requested $52.3 million for Industry and Analysis. The request is $3.4 million less than the FY2018 funding level. The Administration proposed refocusing some of the unit's priorities away from export promotion and toward trade enforcement. Specifically, the Administration proposed reducing activities related to trade missions, the International Buyer Program, and certified trade fairs, and eliminating Market Development Cooperator Program grants. The House committee proposed $52.0 million for Industry and Analysis. This represented $0.3 million less (-0.5%) than the Administration's request. The Senate committee-reported bill did not include a specific recommendation for Industry and Analysis. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), did not provide an exact funding guidance for Industry and Analysis. The mission of ITA's Enforcement and Compliance unit is to enforce U.S. trade laws and ensure compliance with negotiated international trade agreements. It is responsible for enforcing U.S. antidumping and countervailing duty (AD/CVD) laws; overseeing a variety of programs and policies regarding the enforcement and administration of U.S. trade remedy laws; assisting U.S. industry and businesses with unfair trade matters; and administering the Foreign Trade Zone program and other U.S. import programs. For FY2019, the Administration requested $90.6 million for the Enforcement and Compliance unit, an increase of $3.1 million (3.6%) from the FY2018-enacted amount. For the requested increase in funding, ITA cited the unit's increasing number of AD/CVD investigations, its new focus on self-initiating AD/CVD cases, and the increased workload due to the tariffs and investigations initiated through Section 232 of the Trade Expansion Act of 1962. The House Appropriations Committee proposed $85.5 million for Enforcement and Compliance. The House committee proposal represented $2.1 million less (-2.3%) than the Administration's request, and $1.0 million (1.1%) more than the FY2018-enacted amount . The Senate Committee on Appropriations recommended $91.5 million for Enforcement and Compliance. The Senate recommendation represented $0.9 million more than the Administration's request and $4.0 million more than the 2018-enacted amount. The Senate committee report noted that the committee was supportive of the Administration's request to self-initiate AD/CVD cases. For FY2019 appropriations, the conference report accompanying the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), included $88.5 million for Enforcement and Compliance. This amount was $1.0 million more (1.1%) than the FY2018 funding, and $2.1 million less (-2.1%) than the Administration's request. USITC is an independent, quasi-judicial agency responsible for conducting trade-related investigations and providing independent technical advice related to U.S. international trade policy to Congress, the President, and the USTR. The commission (1) investigates and determines whether imports injure a domestic industry or violate U.S. intellectual property rights; (2) provides independent tariff, trade, and competitiveness-related analysis to the President and Congress; and (3) maintains the U.S. tariff schedule. USITC also serves as a federal resource for trade data and other trade policy information. It makes most of its information and analyses available to the public to promote understanding of competitiveness, international trade issues, and the role that international trade plays in the U.S. economy. In addition to the President's budget request for the commission, USITC also has bypass authority to submit its budget directly to Congress without revision by the President, pursuant to Section 175 of the Trade Act of 1975. For FY2019, the President requested $87.6 million for USITC, which represented a $6.1 million decrease (-6.5%) from the FY2018-enacted amount ($93.7 million). While the President requested a decrease in funding for USITC, the commission's independent budget submission—sent directly to Congress without revision by the President—requested $97.5 million for FY2019, an increase of $3.8 million (4.0%) from the FY2018-enacted amount. USITC cited the increasing number of import injury cases in the previous five years and projected that the caseload would increase further in FY2019. Both the House and Senate committee-reported bills recommended $95.0 million for USITC. This amount was $7.4 million (8.4%) more than the President's request and $1.3 million (1.4%) more than the FY2018-enacted amount. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), provided $95.0 million for USITC, which was $7.4 million (8.4%) more than the President's request and $1.3 million (1.4%) more than the FY2018-enacted amount. USTR, located in the Executive Office of the President, is responsible for developing and coordinating U.S. international trade and direct investment policies. USTR is the President's chief negotiator for international trade agreements, including commodity and direct investment negotiations. It negotiates directly with foreign governments to create trade agreements, resolve disputes, and participate in global trade policy organizations such as the World Trade Organization. It also meets with business groups, policymakers, and public interest groups on trade policy issues. In 2018, USTR led the negotiations for the modernization of the North American Free Trade Agreement (NAFTA) and the investigations into Chinese intellectual property practices. In addition to direct appropriations for USTR, supplementary funding for the agency is available through the congressionally established Trade Enforcement Trust Fund. For more detail on the trust fund, see section \" Trade Enforcement Trust Fund ,\" below. For FY2019, the Administration requested $63.0 million for USTR's salaries and expenses, and no additional funding from the Trade Enforcement Trust Fund. The request represents a $9.6 million decrease (-13.2%) from the FY2018-enacted amounts ($72.6 million). In the Administration's budget request, USTR outlined the Trump Administration's \"aggressive trade agenda,\" and its goals of \"(1) defending U.S. national sovereignty over trade policy; (2) strictly enforcing U.S. trade laws; (3) using all possible sources of leverage to encourage other countries to open their markets to U.S. exports of goods and services, and protecting U.S. intellectual property rights; and (4) negotiating better trade deals with countries in key markets around the world.\" Both the House and Senate committee-reported bills recommended a total of $72.6 million for USTR for FY2019. These proposals included $57.6 million for USTR's salaries and expenses and $15.0 million from the Trade Enforcement Trust Fund for enforcement activities authorized in Section 611 of the Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 ). The total proposals were $9.6 million (15.2%) more than the Administration's request, and were equal to the FY2018-enacted amount. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), provided a total of $63.0 million for USTR, which included $53.0 million in salaries and expenses for USTR and an additional $15.0 million to be derived from the Trade Enforcement Trust Fund. The total funding was $4.6 million less (-6.3%) than the FY2018 appropriated amount. Over the past decade, Congress has provided funding for specific trade-related programs, including (1) China trade enforcement and compliance activities; (2) trade promotion and attracting foreign direct investment to the United States through ITA's SelectUSA program; and (3) trade enforcement activities through the Trade Enforcement Trust Fund and the Interagency Center on Trade Implementation, Monitoring, and Enforcement (ICTIME, formerly the Interagency Trade Enforcement Center (ITEC)). Since 2004, Congress has dedicated some of ITA's funding to AD/CVD enforcement and compliance activities with respect to China and other nonmarket economies. ITA's Office of China Compliance was established by the Consolidated Appropriations Act of 2004 ( P.L. 108-199 ). Its primary role has been to enforce U.S. AD/CVD laws and to develop and implement other policies and programs aimed at countering unfair foreign trade practices in China. ITA's China Countervailing Duty Group was established in FY2009 to accommodate the workload that resulted from the application of countervailing duty law to imports from nonmarket economy countries. The Office of China Compliance is within the Enforcement and Compliance unit at ITA. ITA's FY2019 budget justification did not provide a breakdown of funding for its China AD/CVD activities. Both the House and Senate committee-reported bills included $16.4 million from ITA's funding for China AD/CVD enforcement and compliance activities for FY2019. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), provided $16.4 million from ITA's funding for China AD/CVD enforcement and compliance activities for FY2019. This amount was equal to the FY2018-enacted amount. SelectUSA was created in 2011 and is now part of ITA's Global Markets unit. It coordinates investment-related resources across more than 20 federal agencies to (1) promote the United States as an investment market and (2) address investor climate concerns that may impede investment in the United States. The program serves as an information resource for international investors and advocates for U.S. cities, states, and regions as investment destinations. ITA's budget justification did not provide a breakdown for requested funding for SelectUSA. The House committee-reported bill did not propose a specific funding amount for SelectUSA. The Senate committee report recommended $10.0 million in funding for SelectUSA, an amount equal to the FY2018-enacted amount. The Senate Committee on Appropriation proposed making funding contingent on (1) SelectUSA updating its protocol to ensure that its programs did not encourage foreign investments by state-owned entities into the United States and (2) SelectUSA reporting its updated protocol to the committee within 30 days of enactment of the bill. According to the conference report accompanying the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), the final agreement adopted the Senate committee report language regarding SelectUSA. ITA's Survey of International Air Travelers (SIAT) gathers statistics about air passenger travelers in the United States. These statistics are used across federal agencies, for a variety of purposes, such as to estimate the contribution of international travel to the economy, develop public policy on the travel industry, and forecast staffing needs at consulates and ports of entry. The Administration requested $5.0 million for FY2019 for SIAT to expand the survey and data collection. The Administration proposed that \"$5 million in fee revenues collected from the surcharge on international travelers utilizing the Electronic System for Travel Authorization (ESTA) be redirected to fully fund the SIAT.\" The House committee-reported bill did not include a specific recommendation for SIAT. According to the Senate committee report, the Senate Committee on Appropriations did not adopt the Administration's proposal to seek alternative funding sources for SIAT and \"direct[ed] ITA to continue funding SIAT out of its base budget. Within funds provided, ITA [was] encouraged to increase the sample size for SIAT.\" The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), and the accompanying conference report did not provide specific language regarding SIAT. In order to provide additional funding for USTR's trade enforcement activities, Congress established the Trade Enforcement Trust Fund (TETF) in 2016. In Section 611 of the Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 ), Congress set up the trust fund and outlined authorized uses of the funds. According to Section 611(d), USTR can use funds from the TETF to monitor and enforce trade agreements and WTO commitments and to support trade capacity-building assistance to help partner countries meet their free-trade agreement obligations and commitments. USTR can also transfer funds to select federal agencies for trade enforcement activities authorized in Section 611(d) of the Trade Facilitation and Trade Enforcement Act of 2015. For FY2019, the Administration requested no funding to be derived from the TETF; the FY2018-enacted amount was $15.0 million. Both the House and Senate committee bills proposed $15.0 million from the TETF for enforcement activities authorized in Section 611 of the Trade Facilitation and Trade Enforcement Act of 2015. These proposals were equal to the FY2018-enacted amount. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), provided $15.0 million to be derived from the TETF for USTR, for enforcement activities authorized in Section 611 of the Trade Facilitation and Trade Enforcement Act of 2015. This amount is equal to the FY2018-enacted amount. ITEC was established by executive order in 2012 to take a \"whole-of-government\" approach to monitoring and enforcing U.S. trade rights by using expertise from across the federal government. In 2016, the ITEC was succeeded by ICTIME, which Congress established through the Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 ). The executive-established ITEC received its funding through ITA; funding for ICTIME is now appropriated through USTR. ICTIME's purpose is to advance U.S. trade policy through strengthened and coordinated enforcement of U.S. trade rights. ICTIME investigates potential disputes under the auspices of the World Trade Organization; inspects potential disputes pursuant to bilateral and regional trade agreements to which the United States is a party; and carries out the functions of USTR with respect to the monitoring and enforcement of trade agreements to which the United States is a party. USTR and ITA work closely within the ICTIME to identify issues and develop information in areas of economic importance to U.S. industries. The USTR's budget justification did not provide a breakdown for requested funding for ICTIME. The House and Senate committee-reported bills did not include a specific funding amount for ICTIME. The Senate committee report did note that the Senate committee supports ICTIME within the funds provided for USTR. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) and the accompanying conference report also did not provide specific language regarding ICTIME.", "summary": "The Consolidated Appropriations Act, 2019 (P.L. 116-6), was signed into law on February 15, 2019. The act included a total of $647.0 million in funding for three trade-related agencies under the Commerce, Justice, Science and Related Agencies (CJS) account—the International Trade Administration (ITA), the U.S. International Trade Commission (USITC), and the office of the United States Trade Representative (USTR). This represents a 0.2% decrease from FY2018 appropriations. For FY2019, the Consolidated Appropriations Act, 2019, included $484.0 million in direct appropriations for ITA (a 0.4% increase from the FY2018 appropriation), $95.0 million in funding for USITC (a 1.4% increase), and a total of $68.0 million for USTR (a 0.2% decrease). The Administration's Request On February 12, 2018, the Trump Administration submitted its FY2019 budget request to Congress. The FY2019 proposal included a total of $590.8 million for the three CJS trade-related agencies, an 8.9% decrease from FY2018 total appropriated amounts for these agencies. The Administration requested reducing funding for all three trade-related agencies. For FY2019, the request included $440.1 million in direct funding for ITA (an 8.7% decrease from the FY2018 appropriation), $87.6 million for USITC (a 6.5% decrease), and $63.0 million for USTR (a 13.2% decrease). Congressional Actions In the spring of 2018, the House and Senate reported FY2019 CJS appropriations bills, which included proposed funding for ITA, USITC, and USTR. The reported bills did not adopt many of the Administration's budget reductions, and instead proposed funding levels that were more similar to the FY2018-enacted amounts. The House Committee on Appropriations reported H.R. 5952 on May 17, 2018. The House proposal recommended a total of $647.6 million for the three CJS trade-related agencies. This proposal was $56.8 million more (9.6%) than the Administration's request, and $0.7 million less (-0.1%) than the FY2018-enacted legislation. The House committee proposed $480.0 million in direct funding for ITA, $95.0 million for USTIC, and a total of $72.6 million for USTR, comprised of $57.6 million for salaries and expenses and an additional $15.0 million from the Trade Enforcement Trust Fund for trade enforcement activities as authorized by the Trade Facilitation and Trade Enforcement Act of 2015 (P.L. 114-125). The Senate Committee on Appropriations reported S. 3072 on June 14, 2018. The Senate committee-reported proposal recommended a total of $655.6 million for the three CJS trade-related agencies. This is $64.8 million (11.0%) more than the Administration's request and $7.3 million (1.1%) more than the FY2018-enacted appropriations. The Senate committee proposed $488.0 million in direct funding for ITA, $95 million for USITC, and a total of $72.6 million for USTR, comprised of $57.6 million for salaries and expenses and an additional $15.0 million from the Trade Enforcement Trust Fund for trade enforcement activities. After three continuing resolutions and a three-week lapse in funding, Congress passed the Consolidated Appropriations Act. 2019 (P.L. 116-6), which was signed into law on February 15, 2019. The act included a total of $647.0 million in funding for the three trade-related agencies, which represented a 0.2% decrease from FY2018 funding levels.", "document_type": "crs"}
{"report": "The 116 th Congress, in both its legislative and oversight capacities, faces numerous trade policy issues related to the North American Free Trade Agreement (NAFTA) renegotiations and the proposed United States-Mexico-Canada Agreement (USMCA). On May 18, 2017, the Trump Administration sent a 90-day notification to Congress of its intent to begin talks with Canada and Mexico to renegotiate and modernize NAFTA, as required by the 2015 Trade Promotion Authority (TPA). Talks officially began on August 16, 2017. On September 30, 2018, leaders from the United States, Canada, and Mexico announced the conclusion of the negotiations for a modernized NAFTA, which would now be called the USMCA. On November 30, 2018, the proposed USMCA was signed by President Donald J. Trump, then President Enrique Peña Nieto of Mexico, and Canadian Prime Minister Justin Trudeau. President Trump stated his intention to withdraw from or renegotiate NAFTA during his election campaign and has hinted at the possibility of NAFTA withdrawal since he entered into office. Key issues for Congress in regard to the consideration of the proposed USMCA include the constitutional authority of Congress over international trade, its role in revising, approving, or withdrawing from the agreement, U.S. negotiating objectives and the extent to which the proposed agreement makes progress in meeting them as required under TPA. Congress may also consider the agreement's impact on U.S. industries, the U.S. economy, and broader U.S. trade relations with Canada and Mexico, two of the United States' largest trading partners. The proposed USMCA, if approved by Congress, would revise some key provisions such as auto rules of origin, which, some argue roll back longstanding U.S. FTA provisions. On the other hand, it establish new updated provisions in areas such as digital trade and intellectual property rights. A key question for Congress may be whether the agreement strikes the right balance overall. After numerous rounds of negotiations, on August 31, 2018, after the United States and Mexico announced a preliminary U.S.-Mexico agreement, President Trump notified Congress of his intention to \"enter into a trade agreement with Mexico – and with Canada if it is willing.\" On September 30, 2018, U.S. Trade Representative (USTR) Robert Lighthizer announced that the three countries had reached an agreement on a USMCA trade deal that would revise, modernize, and replace NAFTA upon ratification. Canada, in its negotiating objectives, pledged to make NAFTA more \"progressive\" by strengthening labor and environmental provisions, adding a new chapter on indigenous rights, reforming the investor-state dispute settlement process, and protecting Canada's supply-management system for dairy and poultry, among other objectives. Mexico's set of negotiating objectives prioritized free trade of goods and services, and included provisions to update NAFTA, such as working toward \"inclusive and responsible\" trade by incorporating cooperation mechanisms in areas related to labor standards, anticorruption, and the environment, as well as strengthening energy security by enhancing NAFTA's chapter on energy. While the USTR's NAFTA negotiating objectives included many goals consistent with TPA, USTR also sought, for the first time in U.S. trade negotiations, to reduce the U.S. trade deficit with NAFTA countries, among other specific objectives. U.S. objectives appeared to seek to \"rebalance the benefits\" of the agreement, echoing President Trump's statements that NAFTA has been a \"disaster\" and the \"worst agreement ever negotiated.\" Some U.S. negotiating positions could be seen to have the explicit or implicit goal of promoting U.S. economic sovereignty and/or rolling back previous liberalization commitments in specific areas, such as reviewing and potentially sunsetting the agreement every five years, questioning the validity of binational dispute settlement, enhancing government procurement restrictions, and increasing U.S. and North American content in the auto rules of origin. Trump Administration officials also spoke of unraveling the North American and global supply chains as a way of attempting to divert trade and investment from Canada and Mexico to the United States. Mexican and Canadian negotiators viewed such proposals as counterproductive to the spirit and mutual economic benefits of NAFTA and repeated their positions to modernize NAFTA with provisions such as those in the proposed Trans-Pacific Partnership (TPP). The differences between views on modernizing the agreement and U.S. proposals led to perceived tensions in the negotiations. The proposed USMCA presents an opportunity to incorporate elements of more recent FTAs that have entered into force or were negotiated, such as the U.S.-Korea FTA (KORUS) and the proposed TPP. The U.S. and global economies have changed significantly since NAFTA entered into force 25 years ago, especially due to technology advances. The widespread use of the commercial internet, for example, has dramatically affected consumer habits, commercial activities such as e-commerce and supply chain management. Negotiators also sought updated provisions in other areas such as intellectual property rights (IPR), labor, and the environment. The increased role of state-led or supported firms in trade competition with private sector firms is also a new issue of debate and focus of new rules-setting. Many economists and business representatives generally look to maintain and strengthen the trade and investment relationship with Canada and Mexico under NAFTA or the proposed USMCA, and to further improve overall relations and economic integration within the region. However, labor groups and some consumer-advocacy groups argue that NAFTA resulted in outsourcing and lower wages that have had a negative effect on the U.S. economy. Some proponents and critics of NAFTA agree that NAFTA should be modernized, but have contrasting views on how to revise the agreement. This report provides a brief overview of NAFTA and the role of Congress in the renegotiation process, and discusses key provisions in the proposed USMCA, as well as issues related to the negotiations. It also provides a discussion of policy implications for Congress going forward. It will not examine existing NAFTA provisions and economic relations in depth. For more information on these issues, please see CRS Report R42965, The North American Free Trade Agreement (NAFTA) , by M. Angeles Villarreal and Ian F. Fergusson. NAFTA negotiations were first launched under President George H. W. Bush. President William J. Clinton signed into law the NAFTA Implementation Act on December 8, 1993 ( P.L. 103-182 ). NAFTA entered into force on January 1, 1994. It is significant because it was the first FTA among two wealthy countries and a lower-income country and because it established trade liberalization commitments that led the way in setting new rules for future trade agreements on issues important to the United States. These include provisions on intellectual property rights (IPR) protection, services trade, agriculture, dispute settlement procedures, investment, labor, and the environment. NAFTA addressed policy issues that were new to FTAs and was influential in concluding major multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO). The United States now has 14 FTAs with 20 countries. NAFTA's market-opening provisions gradually eliminated nearly all tariff and most nontariff barriers on goods and services produced and traded within North America. At the start of NAFTA, average applied U.S. duties on imports from Mexico were 2.07% and over 50% of U.S. imports from Mexico entered duty free. In contrast, the United States faced higher tariff, nontariff, and investment barriers in Mexico. Trade among NAFTA partners has more than tripled since the agreement entered into force, forming integrated production chains among all three countries. Many trade policy experts and economists give credit to NAFTA for expanding trade and economic linkages among the parties, creating more efficient production processes, increasing the availability of lower-priced and greater choice of consumer goods, and improving living standards and working conditions. Others blame NAFTA and subsequent U.S. FTAs for disappointing employment trends, a decline in average U.S. wages, and for not having done enough to improve labor standards and environmental conditions abroad. Another important element of NAFTA is that it helped \"lock in\" trade and investment liberalization efforts taking place at the time, especially in Mexico. NAFTA was instrumental in developing closer U.S. relations with both Mexico and Canada and it may have accelerated ongoing trade and investment trends. At the time that NAFTA was implemented, the U.S.-Canada Free Trade Agreement (CUSFTA) was already in effect and U.S. tariffs on most Mexican goods were low, while Mexico had the highest level of trade barriers among the three countries. From the 1930s through part of the 1980s, Mexico maintained a strong protectionist trade policy in an effort to be independent of any foreign power and as a means to promote domestic-led industrialization. In 1991, for example, U.S. businesses were very restricted in investing in Mexico. Under Mexico's restrictive Law to Promote Mexican Investment and Regulate Foreign Investment , about a third of Mexican economic activity was not open to majority foreign ownership. Mexico's failed protectionist policies did not result in increased income levels or economic growth, and the income disparity with the United States remains large, even after NAFTA . NAFTA coincided with Mexico's unilateral trade liberalization efforts. After NAFTA, the United States and Canada gained greater access to the Mexican market, which was the fastest-growing major export market for U.S. goods and services at the time. NAFTA also opened up the U.S. market to increased imports from Mexico and Canada, creating one of the largest free trade areas in the world. Since NAFTA, the three countries have made efforts to cooperate on issues of mutual interest, including trade and investment, and also in other, broader aspects of the relationship, such as regulatory cooperation, industrial competitiveness, trade facilitation, border environmental cooperation, and security. Some key NAFTA provisions include tariff and nontariff trade liberalization, rules of origin, commitments on services trade and foreign investment, IPR protection, government procurement rules, and dispute resolution. Labor and environmental provisions are included in separate NAFTA side agreements. NAFTA provisions and rules governing trade were groundbreaking in a number of areas, particularly in regard to enforceable rules and disciplines that were included in a trade agreement for the first time. There were almost no FTAs in place worldwide at the time, and NAFTA influenced subsequent agreements negotiated by the United States and other countries, especially at the multilateral level in light of the then-pending Uruguay Round of major multilateral trade liberalization negotiations. The market-opening provisions of the agreement gradually eliminated nearly all tariffs and most nontariff barriers on goods produced and traded within North America, mostly over a period of 10 years after it entered into force. Some tariffs were eliminated immediately, while others were phased out in various schedules of 5 to 15 years. Most of the market-opening measures from NAFTA resulted in the removal of tariffs and quotas applied by Mexico on imports from the United States and Canada. The average applied U.S. duty for all imports from Mexico was 2.07% in 1993. Moreover, many Mexican products entered the United States duty-free under the U.S. Generalized System of Preferences (GSP). In 1993, over 50% of U.S. imports from Mexico entered the United States duty-free. In contrast, the United States faced considerably higher tariffs and substantial nontariff barriers on exports to Mexico. In 1993, Mexico's average applied tariff on all imports from the United States was 10% (Canada's average tariff on U.S. goods was 0.37%). Non-tariff barriers also affected U.S.-Mexico trade, such as sanitary and phytosanitary (SPS) rules, Mexican import licensing requirements, and U.S. marketing orders. The market opening that occurred after NAFTA is likely a factor in the significance of trade for Mexico's economy. In 1994, Mexico's exports and imports equaled 14% and 18%, respectively, of GDP, while in 2017, these percentages increased to 37% and 39%. For the United States, trade is less significant for the economy, with the value of imports and exports equaling 15% and 12%, respectively, of GDP in 2017 (see Table 1 ). NAFTA rules, disciplines and nontariff provisions include the following: Agri c ulture. NAFTA eliminated tariffs and tariff-rate quotas (TRQs) on most agricultural products. It maintains TRQs with high over-quota tariffs for U.S. exports of dairy, poultry, and egg products to Canada. NAFTA addressed sanitary and phytosanitary (SPS) measures and other types of agricultural non-tariff barriers. SPS regulations are often regarded by agricultural exporters as one of the greatest challenges in trade, often resulting in increased costs and product loss and disrupting integrated supply chains. Investment . NAFTA removed significant investment barriers in Mexico, ensured basic protections for NAFTA investors, and provided a mechanism for the settlement of disputes between investors and a NAFTA country. NAFTA provided for national and \"nondiscriminatory treatment\" for foreign investment by NAFTA parties in certain sectors of other NAFTA countries. The agreement included country-specific liberalization commitments and exceptions to national treatment. Exemptions from NAFTA included the energy sector in Mexico, in which the Mexican government reserved the right to prohibit private investment or foreign participation. Services Trade . NAFTA services provisions established a set of basic rules and obligations in services trade among partner countries. The agreement granted services providers certain rights concerning nondiscriminatory treatment, cross-border sales and entry, investment, and access to information. However, there were certain exclusions and reservations by each country. These included maritime shipping (United States), film and publishing (Canada), and oil and gas drilling (Mexico). NAFTA liberalized certain service sectors in Mexico, particularly financial services, which significantly opened its banking sector. Financial and Telecommunications S ervices . Under NAFTA, Canada extended an exemption granted to the United States, under the CUSFTA, to Mexico in which Mexican banks would not be subject to Canadian investment restrictions. In turn, Mexico agreed to permit financial firms from another NAFTA country to establish financial institutions in Mexico, subject to certain market-share limits applied during a transition period ending by the year 2000. In telecommunications, NAFTA partners agreed to exclude provision of, but not the use of, basic telecommunications services. NAFTA granted a \"bill of rights\" for the providers and users of telecommunications services, including access to public telecommunications services; connection to private lines that reflect economic costs and available on a flat-rate pricing basis; and the right to choose, purchase, or lease terminal equipment best suited to their needs. NAFTA did not require parties to authorize a person of another NAFTA country to provide or operate telecommunications transport networks or services. Nor did it bar a party from maintaining a monopoly provider of public networks or services, such as Telmex, Mexico's dominant telecommunications company. Intellectual Property Rights (IPR) Protection . NAFTA was the first U.S. FTA to include IPR protection provisions. It built upon the then-ongoing Uruguay Round negotiations that would create the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement in the WTO and on various existing international intellectual property treaties. The agreement set specific enforceable commitments by NAFTA parties regarding the protection of copyrights, patents, trademarks, and trade secrets, among other provisions. Dispute Resolution . NAFTA's provisions for preventing and settling disputes regarding enforcement of commitments under the agreement were built upon provisions in the CUSFTA. NAFTA created a system of arbitration for resolving disputes that included initial consultations, taking the issue to the NAFTA Trade Commission, or going through arbitral panel proceedings. NAFTA included separate dispute settlement provisions for addressing disputes related to investment and over antidumping and countervailing duty determinations. Government Procurement . NAFTA opened up a significant portion of federal government procurement in each country on a nondiscriminatory basis to suppliers from other NAFTA countries for goods and services. It contains some limitations for procurement by state-owned enterprises. Labor and Environment . NAFTA marked the first time that labor and environmental provisions were associated with an FTA. For many, it represented an opportunity for establishing a new type of relationship among NAFTA partners. Labor and environmental provisions were included in separate side agreements. They included language to promote cooperation on labor and environmental matters as well as provisions to address a party's failure to enforce its own labor and environmental laws. Perhaps most notable were the side agreements' dispute settlement processes that, as a last resort, may impose monetary assessments and sanctions to address a party's failure to enforce its laws. U.S. trade with NAFTA partners increased rapidly once the agreement took effect, increasing more rapidly than trade with most other countries. U.S. total merchandise imports from NAFTA partners increased from $151 billion in 1993 to $614 billion in 2017 (307%), while merchandise exports increased from $142 billion to $525 billion (270%) (see Figure 1 ). The United States had a trade deficit with Canada and Mexico of $89.6 billion in 2017, compared to a deficit of $9.1 billion in 1993. Services trade with NAFTA partners has also increased. The United States had a services trade surplus with Canada and Mexico of $31.4 billion in 2016 (see Figure 2 ). Trade in oil and gas is a significant component of trilateral trade, accounting for 7.2% of total U.S. merchandise trade with Canada and Mexico in 2017. As shown in Figure 3 , U.S. oil and gas exports to Canada and Mexico increased from $0.9 billion in 1997 to $13.4 billion in 2017, while imports increased from $22.3 billion to $69.0 billion. If oil and gas products are excluded from the trade balance, the deficit with NAFTA partners is lower than the overall trade deficit. In 2017, the total U.S. merchandise trade deficit with Canada and Mexico was $88.6 billion, while the merchandise deficit without oil and gas products was a significantly lower $33.0 billion. Conventional measures of international trade do not always reflect the flows of goods and services within global production chains. For example, some auto trade experts claim that auto parts and components may cross the borders of NAFTA countries as many as eight times before being installed in a final assembly plant in a NAFTA country. Traditional trade statistics include the value of the parts every time they cross the border and count the value multiple times. The Organization for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO) developed a Trade in Value Added (TiVA) database, which presents indicators that provide insight into domestic and foreign value added content of gross exports by an exporting industry. These statistics provide a more detailed picture of the location where value is added during the various stages of production. U.S. trade with Canada and Mexico is diverse and complex since a final good sold in the market could have a combination of value added from all three countries, or from other trading partners. The most recent TiVA data available (2011) for trade in goods and services indicate that the conventional measurement puts the total U.S. trade deficit (including goods and services) with NAFTA countries at $135 billion, while the TiVA methodology puts the deficit at $79.8 billion (see Figure 4 ). NAFTA removed Mexico's protectionist policies in the auto sector and was instrumental in the integration of the motor vehicle industry in all three countries. The sector experienced some of the most significant changes in trade following the agreement. Motor vehicles and motor vehicle parts rank first among leading exports to and imports from NAFTA countries as shown in Figure 5 . Agriculture trade also expanded after NAFTA, but to a lesser degree than the motor vehicle industry. The trade balance in agriculture also has a far lower trade deficit. Trade trends by sector indicate that NAFTA achieved many of the trade and economic benefits that proponents claimed it would bring, although there have been adjustment costs. It is difficult to isolate the effects of NAFTA to quantify the effects on trade in specific industries because other factors, such as economic growth and currency fluctuations, also affect trade. Foreign direct investment (FDI) has been an integral part of the economic relationship between the United States and NAFTA partners for many years. Two-way investment between Canada and the United States has increased markedly since NAFTA, both in terms of the stock and flow of investment. The United States is the largest single investor in Canada with a stock of FDI into Canada reaching $391.2 billion in 2017, up from a stock of $69.9 billion in 1993 (see Figure 6 ). U.S. investment represents about half of the total stock of FDI in Canada from global investors. The United States was the largest destination for Canadian FDI in 2017 with a stock of $453.1 billion, a significant increase from $40.4 billion in 1993. These trends highlight the changing view of FDI among Canadians, from one that could be considered fearful or hostile to FDI as vehicles of foreign control over the Canadian economy, to one that is more welcoming of new jobs and technologies that result from FDI. In Mexico, the United States is the largest source of FDI. The stock of U.S. FDI in Mexico increased from $15.2 billion in 1993 to $109.7 billion in 2017 (see Figure 6 ). Total FDI in Mexico dropped 19% in 2015, mainly due to a decline in investment in the services sector and automotive industry. Other countries in Latin America also experienced similar declines in FDI in 2015. Some economists contend that Mexico's recent economic reforms have added resilience to the Mexican economy and that greater economic growth and investment in Mexico would occur over time as a result. Mexican FDI in the United States, while substantially lower than U.S. investment in Mexico, has also increased rapidly, from $1.2 billion in 1993 to $18.0 billion in 2017. Under Article II of the Constitution, the President has the authority, with the advice and consent of the Senate, to make treaties. Under Article I, Section 8, Congress has the authority to lay and collect duties, and to regulate foreign commerce. The President may seek expedited treatment of the implementing legislation of a renegotiated NAFTA under the Bipartisan Comprehensive Trade Promotion and Accountability Act of 2015 (TPA). NAFTA provides, \"The Parties may agree on any modification of or addition to this Agreement. When so agreed, and approved in accordance with the applicable legal procedures of each party, a modification or addition shall constitute an integral part of the agreement.\" Under TPA, the President must consult with Congress before giving the required 90-day notice of his intention to start negotiations. The Trump Administration's consultations included meetings between U.S. Trade Representative Robert Lighthizer and members of the House Ways and Means Committee and Senate Finance Committee and with members of the House and Senate Advisory Groups on Negotiations. The Office of the United States Trade Representative (USTR) held public hearings and has received more than 12,000 public comments on NAFTA renegotiation. In order to use the expedited procedures of TPA, the President must notify and consult with Congress before initiating and during negotiations, and adhere to several reporting requirements following the conclusion of any negotiations resulting in an agreement. The President must conduct the negotiations based on the negotiating objectives set forth by Congress in the 2015 TPA authority. See box below for the dates on which these requirements were or are expected to be met. The Trump Administration, for the first time in the negotiating objectives of an FTA, indicated its aim to improve the U.S. trade balance and reduce the trade deficit with NAFTA countries in the renegotiation of NAFTA. The trade balance with NAFTA partners has fluctuated since the agreement entered into force, increasing from $9.1 billion in 1993 to $89.6 billion in 2017. President Trump and some officials within his Administration believe that trade deficits are detrimental to the U.S. economy. USTR Robert Lighthizer stated after the second round of negotiations that while he wanted to negotiate an agreement that is approved by Congress, he also wanted to bring down the trade deficit, as part of his mission, in order to help American workers and farmers. Other critics of NAFTA also argue that U.S. free trade agreements (FTAs) have contributed to rising trade deficits with some trade partners. Economists generally argue that it is not feasible to use trade agreement provisions as a tool to decrease the deficit because trade imbalances are determined by underlying macroeconomic fundamentals, such as a savings-investment imbalance in which the demand for capital in the U.S. economy outstrips the amount of gross savings supplied by households, firms, and the government sector. According to some economists, a more constructive alternative would be to help strengthen Mexico's economy and boost Mexico's imports from the United States. Others contend that FTAs are likely to affect the composition of trade among trade partners, but have little impact on the overall size of the trade deficit. They argue that trade balances are incomplete measures of the comprehensive nature of economic relations between the United States and its trading partners, and maintain that trade imbalances are determined by macroeconomic fundamentals and not by trade policy. From this perspective, it is not clear how the Administration would expect to reduce the trade deficit through the proposed USMCA. The proposed USMCA, comprising 34 chapters and 12 side letters, retains most of NAFTA's chapters, making notable changes to market access provisions for autos and agriculture products, and to rules and disciplines, such as on investment, government procurement, and IPR. New issues, such as digital trade, state-owned enterprises, anticorruption, and currency misalignment, are also addressed. Because NAFTA is 25 years old, the proposed USMCA could be viewed as an opportunity to include obligations not currently covered in the original text, such as digital trade or more enforceable labor and environmental provisions. The following selective topics provide an overview of proposed USMCA provisions and a comparison to existing NAFTA provisions. Rules of origin in NAFTA and other FTAs help ensure that the benefits of the FTA are granted only to goods produced by the parties that are signatories to the FTAs rather than to goods made wholly or in large part in other countries. If a U.S. import does not meet NAFTA rules-of-origin requirements, it will enter the United States under another import program or at U.S. MFN tariff rates. In 2017, 53% of U.S. imports from Canada and Mexico entered duty-free under NAFTA, while 47% entered under normal trade relations. In the case of NAFTA, most goods that contain materials from non-NAFTA countries may also be considered as North American if the materials are sufficiently transformed in the NAFTA region to go through a Harmonized Tariff Schedule (HTS) change in tariff classification (called a \"tariff shift\"). In many cases, goods must have a minimum level of North American content in addition to undergoing a tariff shift. Regional value content may be calculated using either the \"transaction-value\" or the \"net-cost\" method. The transaction-value method, which is simpler, is based on the price of the good, while the net-cost method is based on the total cost of the good less the costs of royalties, sales promotion, and packing and shipping. Producers generally have the option to choose which method they use, with some exceptions, such as the motor vehicle industry, which must use the net-cost method. The U.S. proposal on tightening rules of origin in the motor vehicle industry was viewed as one of the more contentious issues in the negotiations. Please see section below on the \" Motor Vehicle Industry \" for a discussion of the auto rules of origin. NAFTA's rules of origin requirements state that if the transaction value method is used, not less than 60 per cent if the good must be of North American content for a good to receive NAFTA benefits. If the net cost method is used, not less than 50 percent if the value of the good must be of North American content. The proposed USMCA maintains these percentages for general imports. As noted below, certain industries such as the motor vehicle industry have specific rules of origin requirements. NAFTA phased out U.S. tariffs on motor vehicle imports from Mexico and Mexican tariffs on U.S. and Canadian products as long as they met the rules of origin requirements of 62.5% North American content for autos, light trucks, engines and transmissions; and 60% for automotive parts. Some tariffs were eliminated immediately, while others were phased out in periods over 5 to 10 years. The agreement phased out Mexico's restrictive auto decrees, which for many years imposed high import tariffs and investment restrictions in Mexico's auto sector, and opened the Mexican motor vehicle sector to trade with and investment from the United States. NAFTA and the elimination of Mexican trade barriers liberalized North American motor vehicle trade and was instrumental in the integration of the North American motor vehicle industry. North American motor vehicle manufacturing is now highly integrated, with major Asia- and Europe-based automakers constructing their own supply chains within the region. The major recent growth in the North American market occurred largely in Mexico, which now accounts for about 20% of total continental vehicle production. In general, recent investments in U.S. and Canadian assembly plants have involved modernization or expansion of existing facilities, while Mexico has seen new assembly plants. The proposed USMCA would tighten auto rules of origin by including new motor vehicle rules of origin and procedures, including product-specific rules, and requiring 75% North American content; for the first time in a trade agreement, wage requirements stipulating 40%-45% of North American auto content be made by workers earning at least $16 per hour; a requirement that 70% of a vehicle's steel and aluminum must originate in North America; and a provision aiming to streamline the enforcement of manufacturers' rules of origin certification requirements. In addition, side letters would exempt from potential Section 232 tariffs, which are being investigated by the Department of Commerce , the following items from Canada and Mexico: 2.6 million passenger vehicles each from Canada and Mexico on an annual basis; light trucks imported from Canada or Mexico; and auto part imports amounting to U.S. $32.4 billion from Canada and U.S. $108 billion from Mexico in declared customs value in any calendar year. During the negotiations, vehicle and parts manufacturers generally supported retaining the current rules of origin under NAFTA, whereas labor groups sought to require a higher percentage of regional content, which they believe would reduce the share of parts produced in non-NAFTA countries. Some observers state that \"it is unclear\" whether the auto rules of origin in the proposed USMCA meet the requirements under the World Trade Organization's Article XXIV of the General Agreement on Tariffs and Trade. Article XXIV states that duties and other commerce regulations between parties of a customs union \"should not on the whole be higher or more restrictive\" than the rate of the duties and regulations \"applicable in the constituent territories prior to the formation of such union.\" Some economists and other experts believe that the higher North American content requirement in the proposed USMCA could have unintended consequences. They contend that trade in motor vehicles within North America may not be able to meet the new requirements and would be ineligible for USMCA benefits. Such experts say that it would be more cost efficient for manufacturers of motor vehicles and motor vehicle parts to pay the MFN tariff of about 2.5%, rather than meet the cumbersome rules-of-origin requirements. They argue that a change in rules poses a significant risk to North American auto production, because it is likely that manufacturers would not have the supply to meet the new rules and would not be able to remain competitive in the market. Auto manufacturers in Mexico are concerned that they may lose market share to Asian manufacturers. For example, because the rules of origin in the U.S.-South Korea FTA are much lower than those in the USMCA, it is possible that motor vehicle producers would shift production to South Korea, especially in light trucks. Even with these concerns, motor vehicle producers, in general, support the conclusion of the negotiations for the proposed USMCA and its ratification. Some automakers say that complying with the new rules of origin may be cumbersome, but probably manageable. Some also contend that production in the United States has the potential to increase under the agreement, although it is not clear whether this would translate into more U.S. jobs. Auto industry representatives reacted favorably to the conclusion of the negotiations and generally agree with changes modernizing the agreement, such as updating border customs procedures (i.e., trade facilitation measures), digital trade provisions, and IPR protection. The United Auto Workers union (UAW) called for the renegotiation of NAFTA to provide more benefits to workers in all three signatory countries. The UAW supports a strengthening of labor and environmental provisions, ensuring \"fair\" trade among all NAFTA parties through more enforceable provisions, and enhancing provisions on worker rights protection. After the announcement of the proposed USMCA, the UAW issued a statement that it would need time to evaluate the details of the agreement before determining whether the \"agreement will protect our UAW jobs and the living standards of all Americans.\" NAFTA's agriculture provisions include tariff and quota elimination, sanitary and phytosanitary (SPS) measures, rules of origin, and grade and quality standards. NAFTA set separate bilateral undertakings on cross-border trade in agriculture, one between Canada and Mexico, and the other between Mexico and the United States. As a general matter, CUSFTA provisions continued to apply on trade with Canada. Under CUSFTA, Canada excluded dairy, poultry, and eggs for tariff elimination. In return, the United States excluded dairy, sugar, cotton, tobacco, peanuts, and peanut butter. Although NAFTA resulted in tariff elimination for most agricultural products and redefined import quotas for some commodities as tariff-rate quotas (TRQs), some products are still subject to high above-quota tariffs, such as U.S. dairy and poultry exports to Canada. Canada maintains a supply-management system for these sectors that effectively limits U.S. market access. These products were also exempt from Canada-Mexico trade liberalization. NAFTA also addressed SPS measures and other types of nontariff barriers that may limit agricultural trade. SPS regulations continue to be regarded by agricultural exporters as challenging to trade and disruptive to integrated supply chains. In conjunction with agricultural reforms underway in Mexico at the time, NAFTA eliminated most nontariff barriers in agricultural trade with Mexico, including import licensing requirements, through their conversion either to TRQs or to ordinary tariffs. Tariffs were phased out over 15 years with sensitive products such as sugar and corn receiving the longest phase-out periods. Approximately one-half of U.S.-Mexico agricultural trade became duty-free when the agreement went into effect. Prior to NAFTA, most tariffs in agricultural trade between the United States and Mexico, on average, were fairly low, though some U.S. exports to Mexico faced tariffs as high as 12%. However, approximately one-fourth of U.S. agricultural exports to Mexico (by value) were subjected to restrictive import licensing requirements. In the USMCA negotiations on agriculture, a principal U.S. demand was for additional market access to Canada's supply-management-restricted dairy, poultry, and egg markets. This system places a tariff-rate quota on imports of those products into Canada. While most of the in-quota tariff levied is 0%, out of quota tariffs (TRQ) can reach 313.5% for dairy products. Canada was not willing to abolish supply management, but did allow a yearly expansion of the TRQ for dairy products; an expansion of duty-free quota for poultry from 47,000 tons to 57,000 tons in year six, and a subsequent 1% annual increase for 10 years. The TRQ for eggs would increase to 10 million dozen annually. In return, the United States is providing more access to Canadian dairy, sugar, peanuts and cotton. U.S. tariffs for peanuts and cotton are to be phased-out over five years, and TRQs for dairy and sugar products are to be increased. The United States also negotiated changes to Canadian wheat grading system and providing national treatment for beer, wine, and spirits labeling and sales. A U.S. proposal to allow trade remedies to be used for seasonal produce was not adopted. USMCA partners agreed to several other non-market access provision in the agriculture and sanitary and phytosanitary standards chapter. These include regulatory alignment among the parties; protection for proprietary formulas for pre-packaged foods and food additives (limited to furthering \"legitimate objective[s],\" which is not defined); and SPS rules based on \"relevant scientific principles;\" greater transparency in SPS rules. Biotechnology provisions affecting agriculture include transparent and timely application and approval process for crops using biotechnology; procedures for import shipments containing a low-level presence of an unapproved crop produced with biotechnology; and establishment of a working group on agricultural biotechnology. Customs and trade facilitation relates to the efficient flow of legally traded goods in and out of the United States. Enforcement of U.S. trade laws and import security are other important components of customs operations at the border. NAFTA's chapter on customs procedures includes provisions on certificates of origin, administration and enforcement, and customs regulation and cooperation. More recent agreements have modernized provisions in regard to customs procedures and trade facilitation. The World Trade Organization (WTO) Trade Facilitation Agreement (TFA), the newest international trade agreement in the WTO, entered into force on February 22, 2017. Two-thirds of WTO members, including the United States, Canada, and Mexico, ratified the multilateral agreement. Trade facilitation measures aim to simplify and streamline customs procedures to allow the easier flow of trade across borders and thereby reduce the costs of trade. There is no precise definition of trade facilitation, even in the WTO agreements. Trade facilitation can be defined narrowly as improving administrative procedures at the border or more broadly to also encompass behind-the-border measures and regulations. The TFA aims to address trade barriers, such as lack of customs procedural transparency and overly burdensome documentation requirements. In the proposed USMCA, parties affirmed their rights and obligations under the TFA of the WTO. USMCA provisions also include commitments to administer customs procedures in such ways as to facilitate trade or the transit of a good while supporting compliance with domestic laws and regulations. Parties commit to create a Trade Facilitation Committee to cooperate on trade facilitation and adopt additional measures if necessary. Other provisions include measures for online publication of information and resources related to trade facilitation, communications mechanisms, establishment of enquiry points to respond to enquiries by interested persons, rules for issuing written advance customs rulings, procedures for efficient release of goods in order to facilitate trade between the parties, expedited customs procedures for express shipments, automated risk analysis and management procedures, creation of a single-access window system to enable electronic submission through a single entry point for importation into the territory of another party, and transparency procedures. Given the magnitude and frequency of U.S. trade with NAFTA partners, more updated customs provisions in NAFTA could have a significant impact on companies engaged in trilateral trade. The USMCA would set d e m inimis customs threshold for duty free treatment at US$800 for the United States, C$150 (about US$117) for Canada, and US$117 for Mexico. Tax-free threshold would be set at C$40 (about US$31) for Canada and US$50 for Mexico. Proponents of the higher de minimis thresholds contend that these changes will facilitate North American trade by allowing low-value parcels to be shipped across international borders tax and tariff free and with simple customs forms. Some Members and other stakeholders have raised concerns about a footnote that would allow the United States to decrease its threshold to a reciprocal de minimis amount in an amount no greater than the Canadian or Mexican threshold. They contend that lowering the current U.S. threshold could come at a cost to U.S. consumers and express carriers. NAFTA includes explicit country-specific exceptions and reservations, including the energy sector in Mexico. In NAFTA's energy chapter, the three parties confirmed respect for their constitutions. This was of particular importance for Mexico and its 1917 Constitution, which established Mexican national ownership of all hydrocarbons resources. Under NAFTA, the Mexican government reserved to itself strategic activities, including investment and provisions in such activities, related to the exploration and exploitation of crude oil, natural gas, and basic petrochemicals. Mexico also reserved the right to provide electricity as a public service within the country. Despite these exclusions from NAFTA, energy remains a central component of U.S.-Mexico trade. The proposed USMCA does not have an energy chapter and moves some of NAFTA's energy provisions to other parts of the agreement. The USMCA adds a new chapter specifically recognizing Mexico's constitutional prohibitions on foreign investment or ownership of Mexico's energy sector. Other provisions in the USMCA, such as the investor-state dispute settlement (ISDS) provisions in regard to Mexico's energy sector, would help protect private U.S. energy projects in Mexico. In 2013, the Mexican Congress approved the Peña Nieto Administration's constitutional reform proposals for the energy sector. The reforms restructured Mexico's state-owned oil company, PEMEX, as a \"state productive company,\" which means that despite being owned by the state, it competes in the market like any private company. It has operational autonomy, in addition to its own assets. These reforms opened Mexico's energy sector to production-sharing contracts with private and foreign investors while keeping the ownership of Mexico's hydrocarbons under state control. Following the reforms, Mexico adopted new procurement rules to increase efficiency and effectiveness in the procurement process. In the NAFTA renegotiations, U.S. industry groups called for the United States to use NAFTA's so-called ratchet mechanism in regard to Mexico's energy reforms, which would prevent the reforms from being reversed and grant protection to U.S. investors. In regard to Canada, negotiators addressed a so-called \"proportionality\" provision contained in the energy chapters of both CUSFTA and NAFTA, which would be dropped under the proposed USMCA. This provision provides that Canadian restrictions on energy exports cannot reduce the proportion of exports delivered to the United States. The chapter also prohibits pricing discrimination between domestic consumption and exports to the United States. Some Canadians maintain that this provision restricts the ability of Canada to make energy policy decisions and may seek to change this provision. The NAFTA government procurement chapter sets standards and parameters for government purchases of goods and services. Government procurement chapters typically extend national and nondiscriminatory treatment among parties and promote transparency in the tendering process. The schedule of commitments, set out in an annex to the chapter, provides opportunities for firms of each nation to bid on certain contracts for specified government agencies over a set monetary threshold on a reciprocal basis. The United States and Canada also have made certain government procurement opportunities available through similar obligations in the plurilateral WTO Government Procurement Agreement (GPA). Mexico is currently not a member of the GPA. Supporters of expanded procurement opportunities in FTAs argue that the reciprocal nature of the government procurement provisions in FTAs allows U.S. firms access to major government procurement market opportunities overseas. In addition, supporters claim open government procurement markets at home allow government entities to accept bids from partner country suppliers, potentially making more efficient use of public funds. Other stakeholders contend that public procurement should primarily benefit domestic industries. The Buy American Act of 1933, as amended, limits the ability of foreign companies to bid on government procurements of manufactured and construction products. Buy American provisions periodically are proposed for legislation such as infrastructure projects requiring government purchases of iron, steel, and manufactured products. Such restrictions are waived for products from countries with which the United States has FTAs or to countries belonging to the GPA. The Trump Administration has made it a priority to support strong Buy American and Hire American policies in government procurement and has sought to minimize government procurement commitments with other parties. The proposed USMCA government procurement chapter only applies to procurement between Mexico and the United States. It is the first U.S. FTA not to include procurement commitments for all parties. Procurement opportunities between the United States and Canada continue to be covered by the plurilateral WTO GPA. The proposed USMCA carries over much of the NAFTA government procurement chapter's coverage for U.S.-Mexico procurement. It covers largely the same entities and maintains the same thresholds as NAFTA, as adjusted annually for inflation. Core provisions promote transparency in the tendering process through online tender information and descriptions; provide online application and documentation processes without cost to the applicant; provide for publication of post-award explanations of procurement decisions; exclude government procurement from the financial services chapter; exclude textile and apparel procured by the Transportation Security Administration (TSA) under the \"Kissell Amendment;\" allow Mexico to set aside annual procurement contracts of $2.328 billion, annually adjusted for inflation, to Mexican suppliers; allow for coverage of build-operate-transfer (BOT) contracts (As Mexico has taken an exception to this provision, the United States will extend this coverage to Mexico when Mexico reciprocates.) The exclusion of Canada is a break from previous government procurement chapters in U.S. FTAs. As noted above, procurement opportunities in each country for U.S. and Canadian firms will continue to be covered by the GPA, which was revised and updated in 2014. The national treatment and transparency provisions are common to both the GPA and the proposed USMCA, as are the provisions modernizing the agreement to provide for online tendering. The differences primarily are with the schedules and the thresholds. In some areas, the GPA provides a more open procurement market. For example, the GPA covers 75 U.S. government entities, including 35 U.S. states, whereas NAFTA covers 56 federal entities and does not cover state procurement. The GPA has a higher monetary threshold than NAFTA for procurement of goods and services ($180,000 v. $80,317), but a lower construction procurement threshold ($6.9 million v. $10.4 million). In addition, while the proposed USMCA uses a negative list approach for services (all services included unless specifically excluded), Canada—though not the United States—maintains a positive list (only services specifically enumerated are covered) for services in the GPA. Government procurement between Canada and Mexico will continue to be covered by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11). Some industry groups have criticized the exclusion of Canada and financial services from the agreement. The Automotive and Capital Goods Advisory Committee (ITAC-2) maintained that excluding countries sets a bad precedent for future FTAs, that there was a \"not inconceivable\" chance that the United States could withdraw from the GPA, leaving no reciprocal access to the Canadian procurement market, and that other countries with FTAs with Canada, such as the EU and the TPP-11, would have greater access to the Canadian procurement market than that provided by the GPA. The Services ITAC (ITAC-10) expressed concern that continued access to government procurement for financial services under USMCA has been called into doubt by the exclusion of that sector from the agreement. ITAC-10 noted that, under NAFTA coverage, U.S. insurance providers cover two-thirds of Mexican government employees. NAFTA removed significant investment barriers, ensured basic protections for NAFTA investors, and provided a mechanism for the settlement of disputes between investors and a NAFTA country. U.S. FTAs, including NAFTA and bilateral investment treaties (BITs) maintain core investor protections reflecting U.S. law, such as obligations for governments to provide investors with nondiscriminatory treatment, a minimum standard of treatment, and protections against uncompensated expropriation, among other provisions. Since NAFTA, investment chapters in FTAs and the U.S. model BIT clarified certain provisions, including commitments to affirm more clearly a government's right to regulate for environmental, health, and other public policy objectives. The proposed USMCA provisions, in general, largely track those of NAFTA, with the exception of the elimination of some investor-state dispute settlement (ISDS) provisions in NAFTA's investment chapter (See \" Investor-State Dispute Settlement (ISDS) \"). During the negotiations of the proposed USMCA, the U.S. business community strongly opposed reported U.S. proposals to scale back or eliminate NAFTA ISDS provisions. The American Petroleum Institute (API), for example, stated that strong ISDS provisions protect U.S. business interests and that weakening or eliminating NAFTA's ISDS would \"undermine U.S. energy security, investment protections and our global energy leadership.\" On the other hand, U.S. labor and civil society groups welcomed the Administration's more skeptical approach to ISDS. The 2015 TPA called for \"providing meaningful procedures for resolving investment disputes,\" which may affect congressional consideration of an agreement. The proposed USMCA clarifies language related to national treatment and most-favored-nation treatment. In determining whether an investment is afforded national treatment in the context of expropriation, a \"like circumstances\" analysis can be used. Under the article, \"like circumstances\" depends on the totality of the circumstances including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives.\" The proposed USMCA, like NAFTA, requires parties to provide MST to investments in accordance with applicable customary international law, including fair and equitable treatment and full protection and security. It defines the applicable standard of treatment for a covered investment as the customary international law MST of aliens, and that \"fair and equitable treatment\" and \"full protection and security\" do not create additional substantive rights. However, the proposed USMCA clarifies that a party's action (or inaction) that may be inconsistent with investor expectations is not, on its own, a breach of MST, even if loss or damage to the investment follows. The proposed USMCA would prohibit parties from imposing specific \"performance requirements\" in connection with an investment or related to the receipt of an advantage in connection with it. These include prohibitions on performance requirements such as to export a given level or percentage of goods, achieve a given level or percentage of domestic content, or transfer a particular technology. A new feature not in NAFTA includes prohibitions on performance requirements related to the purchase, use, or according of a preference to a technology of the party (or of a person of the party), and related to certain royalties and license contracts. The proposed USMCA's denial of benefits article, among other things, permits a party to deny the investment chapter's benefits to an investor that is an enterprise of another party (and to the investments of that investor) if that enterprise is owned or controlled by a person of a non-party or of the denying party or does not have \"substantial business activities\" in the territory of any party other than the party denying benefits. This article presumably is intended to address some stakeholder concerns that the chapter could be used to afford shell companies access to its protections. Unlike NAFTA, the proposed USMCA contains a provision stating that, except in rare circumstances, nondiscriminatory regulatory action by a party to protect legitimate public welfare objectives (e.g., in public health, safety, and the environment) do not constitute indirect expropriation. Debate exists about what exactly are \"rare circumstances.\" The proposed USMCA includes a statement that nothing in the Investment Chapter shall be construed to prevent a government from regulating in a manner sensitive to \"health, environmental, and other regulatory objectives,\" as long as the action taken is otherwise consistent with the chapter. Previous U.S. FTAs, including NAFTA, limited the affirmation of a government's right to regulate to \"environmental concerns.\" ISDS has been a controversial aspect of the NAFTA investment chapter. It is a form of binding arbitration that allows private investors to pursue claims against sovereign nations for alleged violations of the investment provisions in trade agreements. It is included in NAFTA and nearly all other U.S. trade agreements that have been enacted since then, and is also a core provision in U.S. bilateral investment treaties (BITs). Generally, ISDS tribunals are composed of three lawyer-arbitrators: one chosen by the claimant investor, one by the respondent country, and one by mutual decision between the two parties. Most cases follow the rules of the World Bank's Centre for Settlement for Investor Dispute or the United Nations Commission on International Trade Law. Fifty-nine ISDS actions have been adjudicated under NAFTA, with the majority coming after 2004. Supporters argue that ISDS is important for protecting investors from discriminatory treatment and are modeled after U.S. law. They also argue that trade agreements do not prevent governments from regulating in the public interest, with clear exceptions for these actions, as well as for national security and for prudential reasons; ISDS remedies are limited to monetary penalties; and ISDS cannot force governments to change their laws or regulations. Critics counter that companies use ISDS to restrict governments' ability to regulate in the public interest (such as for environmental or health reasons), leading to \"regulatory chilling\" even if an ISDS outcome is not in a company's favor. The United States, to date, has never lost a claim brought against it under ISDS in a U.S. investment agreement. ISDS provisions in the proposed USMCA would substantially revise longstanding provisions in NAFTA, other U.S. FTAs, and current BITs that were actively sought by past Administrations. Significantly, ISDS between Canada and the United States is ended under the new agreement. U.S. and Mexican investors would not be able to bring arbitration claims under USMCA against Canada, nor would Canadian investors bring such claims against the United States or Mexico. With respect to Mexico and the United States, the proposed USMCA would limit ISDS to claimants regarding government contracts in natural gas, power generation, infrastructure, transportation, and telecommunications sectors; or in other sectors provided the claimant exhausts national remedies first. Canada and Mexico are maintaining ISDS among themselves through CPTPP. Under the proposed USMCA, ISDS is continued in three circumstances: Legacy claims from existing investments are eligible for arbitration under NAFTA ISDS provisions for three years from the date of NAFTA termination; Direct expropriation claims, including claims of violation of national treatment, would continue to be eligible for arbitration for United States and Mexican investors, provided that they exhaust domestic remedies first. Indirect expropriation, in which an action or series of actions by a Party has an effect equivalent to direct expropriation without formal transfer of title or outright seizure, is no longer covered; and Government contracts in certain covered sectors (oil and gas, power generation, telecommunications, transportation, and infrastructure) would be eligible for arbitration under USMCA ISDS. This use of ISDS is designed to protect investors in heavily regulated industries whose investments may be affected by the presence of state-owned enterprises in the sector. The United States has a highly competitive services sector and has made services trade liberalization a priority in its negotiations of FTAs, including NAFTA and the proposed USMCA. NAFTA covers core obligations in services trade in its own chapter, but because of the complexity of the issues, it also covers services trade in other related chapters, including financial services and telecommunications. NAFTA contained the first \"negative list\" services chapter in a U.S. trade agreement, and it is maintained in the proposed USMCA. With a negative list, all services are covered under the agreement unless specifically excluded from it, or unless NAFTA parties reserved a service to domestic providers at the time of the agreement. This approach generally is considered to be more comprehensive than the \"positive list approach\" used in the WTO General Agreement on Trade in Services (GATS), which requires each covered service to be identified. The negative list approach also implies that any new type of service that is developed after the agreement enters into force is automatically covered unless it is specifically excluded. Key provisions of the services chapter in NAFTA and the proposed USMCA include the following: nondiscriminatory treatment of services from partner-country providers in like circumstances, including national treatment and MFN treatment; no limitations on the number of service suppliers, the total value or volume of services provided, the number of persons employed, or the types of legal entities or joint ventures that a foreign service supplier may employ; prohibition on locality requirements that a service provider maintain a commercial presence in the country of the buyer; support of mutual recognition of professional qualifications for certification of service providers; transparency in the development and application of government regulations; and allowance for payments and transfers of capital flows \"freely and without delay\" that relate to the provision of services, with permissible restrictions in some cases for bankruptcy and criminal offences. NAFTA did not contain commitments on express delivery; however, the United States made market access of express delivery services a priority in its more recent FTA negotiations. The proposed USMCA addresses express delivery in a chapter annex. The commitments on express delivery focus, in particular, on cases where a government-owned and operated postal system provides express delivery services competing with private sector providers. The proposed USMCA stipulates that the postal system cannot use revenue generated from its monopoly power in providing postal services to cross-subsidize an express delivery service. The proposed USMCA would also require independence between express delivery regulators and providers, prohibit the requirement of providing universal postal service as a prerequisite for express delivery, and prohibit fees on express delivery providers for the purpose of funding other such providers. In addition, the proposed USMCA specified a threshold level for the customs de minimi s , a critical commitment for express delivery providers and small businesses as shipments valued below the de minimis receive expedited customs treatment and pay no duties or taxes. In addition to cross-border trade in services, a person supplying the service may travel to and provide certain services in the location where the service is performed. NAFTA includes commitments on temporary entry for service professionals, such as accountants, architects, legal, and medical providers, and other business personnel, in order to facilitate such trade. As temporary entry has been a controversial issue in the context of previous trade agreements, the proposed USMCA chapter on temporary entry largely replicates NAFTA's provisions. The proposed USMCA does not place new restrictions on the number of entrants or expand the list of eligible professionals, as many businesses and other service providers had hoped. Financial services, including insurance and insurance-related services, banking and related services, as well as auxiliary services of a financial nature, are addressed in a separate USMCA chapter as in previous U.S. FTAs. The financial services chapter adapts relevant provisions from the foreign investment chapter and the cross-border trade in services chapter. The prudential exception in NAFTA and the proposed USMCA provides that nothing in the FTA would prevent a party to the agreement from imposing measures to ensure the integrity and stability of the financial system. As with NAFTA and other FTAs, the proposed USMCA distinguishes between financial services traded across borders and those sold by a provider with a commercial presence in the home country of the buyer. In the case of providers with a foreign commercial presence, the USMCA applies the negative list approach with commitments applying generally except where noted; in the case of cross-border trade, the proposed language limits coverage to a positive list of specific banking and insurance services as defined by each country. Perhaps the provision in the proposed USMCA that has drawn the most attention is the prohibition on data localization requirements. Financial services firms rely on cross-border data flows to ensure data security, create efficiencies and cost savings through economies of scale, and utilize internet cloud services that are often provided by U.S. technology firms. Localization requirements imposed by countries could require companies to have in-country servers and data centers to store data. These types of regulations can create additional costs and may serve as a deterrent for firms seeking to enter new markets or a disguised barrier to trade. Localization supporters, though, claim they increase local control, privacy protection, and data security. While NAFTA allowed the transfer of data in and out of a party in the ordinary course of business, TPP was the first proposed U.S. FTA to prohibit data localization for e-commerce applications. However, it specifically carved out financial services, based on the apprehension of regulatory authorities that such data may not be available during time of crisis. The proposed USMCA strengthened the language to protect the free flow of data and removes the carve-out provided that a Party's financial regulatory authorities have \"for regulatory and supervisory purposes, immediate, direct, complete, and ongoing access\" to data located in another party's territory. Canada has a one-year transition period to implement the data localization prohibition. The proposed USMCA also includes commitments on electronic payment card services. It requires that each country in the agreement allow for the supply, by persons of other parties, of electronic payment services for payment card transactions, defined by each country, generally including credit and debit cards. The provisions on card services would, however, allow for certain preconditions of access, including requiring a representative or office within country. Other new USMCA financial services provisions would exclude government procurement from financial services disciplines; modify investor-state dispute settlement (ISDS) through a bilateral annex on Mexico-United States Investment Disputes in Financial Services; allow a financial institution from one party with a presence in a second party to have access to the latter's payment and clearance system; and protect source code and algorithms and a prohibition on forced technology transfer in the digital trade section. The telecommunication chapter in NAFTA requires regulatory transparency; interconnection among providers; reasonable and nondiscriminatory access to network infrastructure and government-controlled resources like spectrum bandwidth for reasonable rates; and protection of the supplier's options for employing technology. The proposed USMCA telecommunications chapter adopts these provisions and would be the first U.S. FTA to cover mobile service providers. The chapter would promote cooperation on charges for international roaming services and allow regulation for mobile roaming service rates. Other provisions aim to ensure that suppliers can resell and unbundle services, and that suppliers can furnish value-added services. The telecommunications chapter does not cover television or radio broadcast or cable suppliers. It also promotes the independence of regulators. It does not contain the provision in NAFTA recognizing the importance of international standards for global compatibility and interoperability. The chapter has the effect of binding Mexico to its 2013 Constitutional reforms in telecommunications, by guaranteeing the independence of the regulatory commission, nondiscriminatory repurchase rates, and interconnection obligations. The proposed USMCA chapter does not affect Canadian restrictions on foreign ownership of telecommunications common carriers. NAFTA was negotiated and came into effect at the dawn of the consumer Internet age, and it did not contain provisions to address barriers and rules and disciplines on digital trade. Congress established principal negotiating objectives in TPA-2015 on digital trade in goods and services, as well as on cross-border data flows. The objectives include equal treatment of electronically delivered goods and services, as compared to physical products, protection of cross-border data flows, and prevention of data localization regulations, as well as prohibitions on duties on electronic transmissions. The proposed USMCA digital trade chapter broadly covers all industries, but explicitly excludes government procurement or provisions on data held or processed by governments of the parties. It also does not include financial services, which has separate obligations in the financial services chapter. Overall, the chapter aims to promote digital trade and the free flow of information, and to ensure an open Internet. While the majority of the obligations related to digital trade are found in the digital trade chapter, there are relevant provisions in other chapters, including financial services, IPR, and telecommunications. Key provisions of the proposed USMCA digital trade chapter ensure nondiscriminatory treatment of digital products; prohibit cross-border data flows restrictions and data localization requirements; prohibit requirements for source code or algorithm disclosure or transfer as a condition for market access, with exceptions; prohibit customs duties or other charges for electronically transmitted products; require parties to have online consumer protection and anti-spam laws, and a legal framework on privacy; promote cooperation on cybersecurity, and risk-based strategies and consensus-based standards over prescriptive regulation in combating cybersecurity risks and events; prohibit imposition of liability for harms against Internet services providers or users related to information stored, processed, transmitted, distributed, or made available by the service, with the exclusion of ISP liability for intellectual property rights (IPR) infringement; and promote publication of open government data in machine readable format for public usage. NAFTA was the first FTA to contain an IPR chapter, which in turn was the model for the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement that came into effect a year later in 1995. IPR chapters in trade agreements include provisions on patents, copyrights, trademarks, trade secrets, geographical indications (GIs), and enforcement. NAFTA predated the widespread use of the commercial Internet, and subsequent IPR chapters in U.S. FTAs contain obligations more extensive than those found in TRIPS and NAFTA. In general, they have followed the TPA negotiating objective that agreements should \"reflect a standard of protection similar to that found in U.S. law.\" The President's NAFTA renegotiation objectives reflect TPA-2015 and the aims of U.S. negotiators in the TPP (although in some instances the negotiated TPP outcomes were less extensive). The United States achieved most of what it sought in the proposed USMCA and some results that went beyond TPP: Patents protect new innovations, such as pharmaceutical products, chemical processes, business technologies, and computer software. These provisions largely track provisions in more recent U.S. FTAs, including TPP: Copyrights provide creators of artistic and literary works with the exclusive right to authorize or prohibit others from reproducing, communicating, or distributing their works. Debate exists over balancing copyright protections while protecting the free flow of information, with digital trade raising new issues: Extension of copyright terms. Extends copyright terms from 50 years after death of the author, or 50 years from the publication (the WTO standard) to a 70-year period. Among the USMCA parties, only Canada maintains the 50-year term. Technological Protection Measures. Prohibits circumventing technological protection measures (TPMs), such as encryption, or altering or disabling rights management information (RMI). Limitation and Exceptions. Confines \"limitations and exceptions to \"certain special cases that do not conflict with the normal exploitation of the work….and do not unreasonably prejudice the legitimate interests of the rights holder.\" The proposed USMCA does not contain additional language that was in the TPP to \"endeavor to achieve an appropriate balance\" between users and rights holders in their copyright systems, including digitally, through exceptions for legitimate purposes (e.g., criticism, comment, news reporting, teaching, research). The \"appropriate balance\" language speaks to \"fair use,\" exceptions in copyright law for media, research, and teaching. Rights-holder groups have criticized such provisions in the FTA context, while open Internet groups have sought to have the fair-use provision inserted into the proposed USMCA. \" Safe harbor . \" Protects internet service providers (ISPs) against liability for digital copyright infringement, provided ISPs address intermediary copyright liability through \"notice and takedown\" or alternative systems (e.g., \"notice and notice\" in Canada). Rights-holder groups sought to limit what they considered \"overly broad safe harbor provisions,\" while technology and business groups favored retention. Trademarks protect distinctive commercial names, marks, and symbols. The proposed USMCA includes provisions on trademark protection and enforcement and provides for the following: Sound and Scent Marks. Extends trademark protection to sounds and requires \"best efforts\" to register scents. (Under NAFTA, a party could require that marks be \"visually perceptible\" in order to be registered.) Certification and Collective M arks. Provides trademark protections to \"certification marks\" (e.g., such as the Underwriters' Laboratory or Good Housekeeping Seal) and adds protection for \"collective marks.\" Certification marks are usually given for \"compliance with defined standards,\" while collective marks are usually defined as \"signs which distinguish the geographical origin, material, mode of manufacture or other common characteristics of goods or services of different enterprises using the collective mark.\"   Well-known Trademarks. Extends specific protections for \"well-known marks\" to dissimilar goods and services, whether or not registered, so long as the use of the mark would indicate a connection between the goods or services and the owner of the well-known mark and the trademark owner's interests are likely to be damaged by the use. Domain Names. Requires each party to have a system for managing its country-code top level domains (ccTLDs) and to make available online public access to a database of contact information for domain-name registrants. The proposed USMCA requires parties to make available appropriate remedies when a person registers or holds, with \"bad faith intent to profit,\" a domain name that is identical or confusingly similar to a trademark. This provision is intended to protect against what is often referred to as \"cybersquatting.\" Trade secrets are confidential business information (e.g., formula, customer list) that are commercially valuable. The proposed USMCA parties agreed to require criminal and civil procedures and penalties for trade secret theft, prohibition on impeding licensing of trade secrets, protections for trade secrets during the litigation process, and penalties for government officials who wrongfully disclose trade secrets, including through cyber theft and by state-owned enterprises (SOEs). GIs are geographical names that protect the quality and reputation of a distinctive product from a region (e.g., Ontario ice wine, Florida oranges). In FTA negotiations, the United States has sought to limit GI protections that can improperly constrain U.S. agricultural market access in other countries by protecting terms viewed as \"common.\" This goal may be complicated by the recent Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, which provides additional protections for GIs in Canada. The proposed USMCA protects GIs for food products that Canada and Mexico have already accepted as a consequence of trade agreements with the European Union; provides transparency and notification requirements, and objection procedures, for new GIs; and sets forth guidelines to determine whether a term is customary in the common language. Like previous U.S. FTAs, the proposed USMCA commits parties to provide civil, criminal, and other national enforcement for IPR violations, such as copyright enforcement in the digital environment, criminal penalties for trade secret theft and camcording, and ex-officio authority to seize counterfeit trademark and pirated copyright goods at the border. The provisions of the chapter, in turn, are enforceable through the state-to-state dispute settlement chapter. Since the U.S.-Canada FTA, Canada has taken an exclusion on cultural industries from national treatment and MFN treatment. This exclusion reflects the Canadian government's attempts to promote a distinctly Canadian culture and the fear that, without its support, American culture would come to dominate Canada. Thus, the government imposes Canadian content (\"Cancon\") requirements on radio and television broadcasts, cable and satellite diffusion, the production of audio-visual material, film or video recording, and on various print media. The U.S. entertainment industry, in particular, has long sought to have this provision eliminated. In the end, Canada prevailed and the exclusion remains, although a provision was inserted allowing the United States and Mexico to take reciprocal action. NAFTA includes provisions on SOEs, but they are limited in scope. They allow parties to maintain or establish SOEs, while requiring that any enterprise owned or controlled by a federal, provincial, or state government must act in a manner consistent with that country's NAFTA obligations when exercising regulatory, administrative, or other government authority, such as the granting of licenses. NAFTA committed parties to ensure that any SOEs accord nondiscriminatory treatment in the sale of goods or services to another party's investment in that territory. The proposed USMCA includes a new chapter on SOEs, requiring SOEs to act in accordance with commercial considerations and to provide nondiscriminatory treatment to other USCMA country firms. The provisions update NAFTA by ensuring that SOEs compete on a commercial basis, and that the advantages SOEs receive from their governments, such as subsidies, do not have an adverse impact on U.S. workers and businesses. The renegotiations addressed potential commercial disadvantages to private sector firms from state-supported competitors receiving preferential treatment. U.S. government and business stakeholders raised concerns in the TPP negotiations over competition with companies linked to the state through ownership or influence. As a result, they supported new specific FTA disciplines, such as those in the proposed USMCA, to address such competition. Some legal analysts contend that the proposed USMCA limits the definition of expropriation so as to protect against \"direct\" expropriation only, and that it does not protect interests against indirect expropriation. Indirect expropriation occurs when a state's regulatory actions could take effective control of—or interfere with—an investment. NAFTA marked the first time that worker rights provisions were associated with an FTA by including labor provisions in a side agreement, the North American Agreement on Labor Cooperation (NAALC), which required all parties to enforce their own labor laws, as well as provisions to encourage greater cooperation. The side agreement includes a consultation mechanism for addressing labor disputes and a special labor dispute settlement procedure. The enforcement mechanism applies mainly to a party's failure to enforce its own labor laws. Under provisions of the 2002 TPA, seven subsequent FTAs included a similar provision within the main text of the agreement. The rationale for including labor provisions in U.S. FTAs is to help ensure that countries not derogate from labor laws to attract trade and investment and that liberalized trade does not give a competitive advantage to developing countries due to a lack of adequate standards. Worker rights provisions in U.S. trade agreements have evolved significantly since NAFTA. More recent agreements, including FTAs with Colombia, Panama, Peru, and South Korea, incorporated internationally recognized labor principles requiring parties to adopt and maintain in their statutes and regulations core labor principles of the International Labor Organization (ILO) (ILO Declaration). They also required countries to enforce their labor laws and not to waive or derogate from those laws to attract trade and investment. These provisions are enforceable under the same dispute settlement procedures that apply to other provisions of the FTA, and violations are subject to the same potential trade sanctions. In the NAFTA renegotiations, the United States sought to strengthen NAFTA provisions related to the protection of worker rights. The proposed USMCA revises these provisions and provides the same dispute mechanism as other parts of the agreement. USMCA's provisions on labor would require parties to not only enforce their own laws, but also to adopt and maintain specific laws related to the ILO Declaration. It would require parties to adopt and maintain in statutes and regulation, and practices, worker rights as stated in the ILO Declaration of Rights at Work, in addition to acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health; not waive or otherwise derogate from its statues or regulations; not fail to effectively enforce labor laws through a sustained or recurring course of action or inaction in a manner affecting trade or investment between parties; promote compliance with labor laws through appropriate government action such as appointing and training inspectors or monitoring compliance and investigating suspected violations. The provisions include language stating that each party retains the right to exercise reasonable enforcement discretion and to make bona fide decisions with regard to the allocation of enforcement resources provided that the exercise of that discretion is not inconsistent with the labor obligations. The agreement also states that nothing in the labor chapter shall be construed to empower a party's authorities to undertake labor law enforcement activities in the territory of another party. Additionally, the USMCA would commit Mexico to enact specific legislative action to establish effective recognition of the right to collective bargaining; establish and maintain independent and impartial bodies to register union activities and collective bargaining agreements; establish independent Labor Courts for the adjudication of labor disputes; and enact other legislation to protect worker rights. Concerns over NAFTA labor provisions are often discussed in the context of Mexico's record on worker rights. While Mexico has enacted labor laws and undertaken constitutional reforms, the challenge has been to enforce those laws. Mexican labor reform is a priority for Mexico's new President Andrés Manuel López Obrador. In the proposed TPP, the United States signed separate labor consistency plans with Vietnam, Malaysia, and Brunei, which included commitments for specific legal reforms and other measures. Some stakeholders advocated for a similar plan for Mexico in conjunction with a revised NAFTA, although the United States was unable to negotiate one with Mexico in TPP. However, in the USMCA, Mexico agreed to develop and implement reforms to strengthen its labor laws to protect collective bargaining and to reform its system for administering labor justice. Labor reform measures to increase protection of worker rights have been introduced in the Mexican Senate. Mexican Trade Undersecretary Maria Luz de la Mora stated that legislation enacting Mexican labor reforms is expected to be passed by the Mexican Senate before the end of the legislative session, in April 2019. NAFTA was the first U.S. FTA to include a side agreement related to the environment. As with the chapter on worker rights, environment provisions in U.S. FTAs have evolved significantly over time. The NAFTA side agreement—the North American Agreement on Environmental Cooperation (NAAEC)—requires all parties to enforce their own environmental laws, and contains an enforcement mechanism applicable to a party's failure to enforce these laws. NAAEC includes a consultation mechanism for addressing disputes with a special dispute settlement procedure. Seven subsequent FTAs, negotiated under the 2002 TPA, included a similar environmental chapter within the main text of the agreement, including a country's obligations to enforce their own laws. More recent U.S. FTAs added an affirmative obligation for FTA partner countries to adhere to multilateral environmental agreements (MEAs) and allowed for environmental disputes under the FTAs to access the main dispute settlement provisions of the agreement. These obligations generally were reflected in the TPA-2015 negotiating objectives. The proposed USMCA environment chapter obligates each party to not to fail to effectively enforce its environmental laws through a sustained or recurring course of action or inaction to attract trade and investment; not to waive or derogate from such laws in a manner that weakens or reduces the protections afforded in those law to encourage trade or investment; and ensure that its environmental laws and policies provide for and encourage high levels of protection; and strive to improve its levels of environmental protection. The agreement also would require parties to adopt and maintain statutes and regulations consistent with multilateral environmental agreements to which each is a party; recognize the sovereign right of each party to establish its own levels of domestic environmental protection, its own regulatory priorities, and to adopt or modify its priorities accordingly; acknowledge a party's right to exercise discretion with regard to enforcement resources; provide for the resolution of disputes; and provide for a mechanism on implementation of the agreement. The proposed USMCA directly or implicitly addresses obligations under major Multilateral Environmental Agreements (MEAs). It also includes obligations and encouragements to protect the ozone layer, protect the marine environment from ship pollution, encourage conservation and sustainable use of biodiversity, and encourage sustainable fisheries management. NAFTA and other U.S. FTAs, as well as the WTO, provide for the resolution of disputes arising under the agreement. These provisions are in addition to procedures with regard to investor-state dispute resolution (see \" Investor-State Dispute Settlement \"). The proposed USMCA dispute settlement provisions are designed to resolve disputes in a cooperative manner. A party first seeks redress of a grievance through a request for consultation with the other party. These steps include initial consultations between the parties; good offices, conciliation, or mediation; and (if no resolution); establishment of a dispute settlement panel. Panels are composed of five members, of whom each side appoints two. A chair is appointed by mutual consent of the parties. Failing that, the disputing party selected by lot makes the decision. After the panel renders its decision, the unsuccessful party is expected to remedy the measure or practice under dispute. If it does not, the aggrieved party may seek compensation, suspension of benefits, or fines. In cases in which a dispute is common to both WTO and FTA rules, a party can choose the forum in which to bring the dispute (i.e., at the WTO or before a NAFTA panel), but cannot bring the dispute to multiple fora. Three state-to-state dispute resolution panels under NAFTA were completed between 1994 and 2001 A fourth case (Restrictions on Sugar from Mexico) was never considered because the United States was able to block a panel chair—and, consequently, a panel—from forming. This action exposed an issue in the panel selection process, which has not been used since. Under the panel selection process, the parties shall select and maintain a roster of 30 panelists, chosen by consensus for a three-year term with the possibility of reappointment. The issue arises when the roster is not constituted or maintained. If a roster has lapsed, as may have been the case in the sugar dispute, a party can challenge any proposed panelist and potentially block any panel from being established. As noted above, a party seeking redress of an issue common to the USMCA and WTO can use either venue. However, the proposed USMCA contains several provisions that are not in the WTO agreements at all, or are treated less extensively. In this case, a functioning USMCA dispute settlement system could be the only arbiter of such disputes. This issue was not resolved in the USMCA. In addition, some chapters or sections are not subject to dispute settlement including The Good Regulatory Practices chapter; The Competition Policy chapter; The Competitiveness chapter; The Small and Medium-Sized Enterprise chapter; The Transparency and Procedural Fairness for Pharmaceutical Products and Medical Devices section of the Publications and Administration chapters; The Macroeconomic Policies and Exchange Rate Matters Chapter other than transparency and reporting obligations that have not been resolved through consultations. Unlike other U.S. FTAs, NAFTA (and the proposed USMCA) contains a binational dispute settlement mechanism (NAFTA Chapter 19, USMCA Chapter 10). It provides disciplines for settling disputes arising from a NAFTA party's statutory amendment of its antidumping (AD) or countervailing duty (CVD) laws, or from a NAFTA party's AD or CVD final determination on the goods of an exporting NAFTA party. The dispute settlement system in NAFTA Chapter 19 originated during the Canada-United States Free Trade Agreement (CUSFTA) negotiations that culminated in 1988, and it was retained under NAFTA. It was a priority negotiating issue for the Canadian government. The binational panel mechanism provides for a review of NAFTA parties' final administrative determinations in AD/CVD investigations in lieu of judicial review in domestic courts. In cases in which an aggrieved NAFTA country maintains that a NAFTA partner did not preserve \"fair and predictable disciplines on unfair trade practices,\" or asserts that a NAFTA partner's amendment to its AD or CVD law is inconsistent with the WTO Antidumping or Subsidies Agreements, the aggrieved NAFTA partner may request a judgment from a binational panel rather than through the legal system of the defending party. The Trump Administration sought to eliminate the Chapter 19 dispute settlement mechanism during the USMCA negotiations. By contrast, Canada and Mexico expressed support for retaining the mechanism, with Canada drawing a \"red line\" firmly opposing its elimination. At the end of the negotiations, the three countries decided to retain the system. NAFTA Chapter 19 is effectively replicated in the Trade Remedies Chapter of the USMCA. NAFTA does not have provisions related to currency manipulation. For the first time in a U.S. trade agreement, the proposed USMCA includes obligations to guard against currency manipulation. The parties agreed to \"achieve and maintain a market-determined exchange rate regime,\" and to \"refrain from competitive devaluation, including through intervention in the foreign exchange market.\" However, only transparency and reporting requirements are subject to dispute settlement procedures. The June 2015 TPA included, for the first time, a principal trade negotiating objective addressing currency manipulation. While neither Canada nor Mexico have been accused of currency manipulation in the past, the inclusion of a currency manipulation chapter could serve as a precedent for including such provisions in future FTAs. Over the past decade, some Members of Congress and policy experts have been concerned that foreign countries may use exchange rate policies to gain an unfair trade advantage against the United States, or are \"manipulating\" their currencies. Specifically, the concern is that other countries may purposefully undervalue their currencies to boost exports, making it harder for other countries to compete in global markets. They argue that U.S. companies and jobs have been adversely affected by the exchange rate policies adopted by China, Japan, and other countries \"manipulating\" their currencies. Some economists are skeptical about currency manipulation and whether it is a significant problem. They raise questions about whether government policies have long-term effects on exchange rates, whether it is possible to differentiate between \"manipulation\" and legitimate central bank activities, and the net effect of alleged currency manipulation on the U.S. economy. Nontariff barriers, including discriminatory and unpredictable regulatory processes, can be an impediment to market access for U.S. goods and services exports. NAFTA includes broad provisions on regulatory practices in several chapters, including the Customs Procedures, Financial Services, and Energy chapters, but does not have a specific chapter on regulatory practices. NAFTA may have influenced the United States, Canada, and Mexico to increase cooperation on economic and security issues through various endeavors such as the North American Leaders' Summits, the North American Trusted Traveler Program, the U.S.-Canada Beyond the Border Action Plan, and the U.S.-Mexico High Level Regulatory Cooperation Council. The proposed USMCA has a new, separate chapter on regulatory practices in which the parties agreed upon commitments to promote regulatory quality through greater transparency, objective analysis, accountability, and predictability to facilitate international trade, investment, and economic growth. The chapter states that the application of good regulatory practices can support the development of compatible regulatory approaches among the parties, and reduce or eliminate unnecessarily burdensome, duplicative, or divergent regulatory requirements. Such commitments could complement ongoing efforts and include increased transparency in the development and implementation of proposed regulations, opportunities for public comment in the development of regulations, and/or the use of impact assessments and other methods to ensure regulations are evidence-based and current. The implementation of NAFTA trucking provisions was a major trade issue between the United States and Mexico for many years because the United States delayed its trucking commitments under NAFTA. NAFTA provided Mexican commercial trucks full access to four U.S.-border states by 1995 and full access throughout the United States by 2000. The two countries cooperated to resolve the issue over time and engaged in numerous talks regarding safety and operational issues. By 2015, the trucking issue had been resolved. Under NAFTA, Mexican commercial trucks have authority under the agreement to operate in the United States, but they cannot operate between two points within the country. This means that they can haul cross-border loads but cannot haul loads that originate and end in the United States. The proposed USMCA would cap the number of Mexican-domiciled carriers that can receive U.S. operating authority and would continue the prohibition on Mexican-based carriers hauling freight between two points within the United States. Mexican carriers that already have authority under NAFTA to operate in the United States would continue to be allowed to operate in the United States. The United States has been influential in including commitments to combat corruption in international trade into its FTAs by incorporating chapters on transparency and anticorruption into the agreements. Although it has been part of U.S. policy for many years, the use of these types of provisions has evolved over time with anticorruption commitments becoming progressively stronger. NAFTA does not include a separate chapter related to transparency or anticorruption, but it does include several provisions that were considered groundbreaking at the time, including binding rules and disciplines on and removal of barriers to foreign investment. It was not until the proposed TPP that anticorruption provisions were specifically included as a U.S. FTA chapter. Earlier agreements such as the U.S.-Chile FTA included anticorruption provisions related to government procurement, but none in the transparency chapter. The Dominican Republic-Central America FTA (CAFTA-DR) was negotiated several years later and contains anticorruption provisions in the transparency chapters that apply to the whole agreement. In the NAFTA renegotiations, both the United States and Mexico included anticorruption provisions in their negotiating objectives. The proposed USMCA has a new chapter on anti-corruption, similar to that of the proposed TPP, in which the parties affirm their resolve to prevent and combat bribery and corruption in international trade and investment. The scope of the chapter is limited to measures to prevent and combat bribery and corruption in regard to any matter covered by the agreement. In the Final Provisions chapter of the proposed USMCA, parties commit to a review of the agreement on the sixth anniversary of the agreement's entry into force. If all parties agree to continue the agreement after six years, it shall remain in force for another 16 years. If a party does not confirm its wish to extend the term of the agreement for another 16-year period, parties shall conduct a joint review of the agreement every year. The agreement only specifies that a \"party\" would review the agreement; it does not state whether it would be the President or Congress that reviews the agreement. This may be of interest to Congress as it considers the USMCA implementing legislation and what its role would be in reviewing the USMCA. Some industry observers contend that the sunset provision may have a detrimental effect on investor confidence and affect long-term investments. Others believe that the provision will not have an effect as parties can choose to review an agreement at any time. There are a number of significant issues for Congress in the consideration of the proposed USMCA. Key issues Congress may examine include modernized provisions of the agreement, the role of the Congress and the President in the NAFTA renegotiation and approval process, whether the agreement meets TPA objectives, the possible economic impact, especially in the auto industry, and how the agreement may impact U.S. relations with Canada and Mexico, two of the United States' largest trading partners. Some lawmakers believe that the renegotiations resulted in a positive outcome that would enhance relations with NAFTA partners through a modernized agreement. Other lawmakers have expressed concerns about specific aspects of the agreement, including labor, with a goal of revision. What follows are a few selected areas of potential congressional interest. A possible issue for Congress relates to the roles of Congress and the President in the modernization of the agreement or possible withdrawal. Implementing legislation for the USMCA agreement may be considered under Trade Promotion Authority (TPA). Under TPA, if the President \"makes progress in meeting\" TPA's principal trade negotiating objectives and meets various consultative, notifications, and reporting requirements before, during, and after the conclusion of negotiations, Congress shall provide expedited procedures for automatic introduction of the implementing bill submitted by the President, a timetable for guaranteed committee consideration and discharge, floor consideration, prohibition of amendments, and limitation on debate. The process from introduction must be completed within 90 days, but it has often been completed much more quickly. As TPA was in effect when the USMCA was signed on November 30, 2018, it is eligible for TPA consideration. There is no deadline for presidential submission or congressional consideration of implementing legislation. TPA's requirement that the President fulfill consultation, notification and reporting obligations helps preserve the congressional role in trade agreements by giving Congress the opportunity to influence the agreement before it is finalized. Congress may be interested in the extent to which the President advances U.S. negotiating objectives in TPA as approved by Congress in 2015, given several notable breaks in USMCA with the contents of previous U.S. FTAs. Should Congress determine that the President has failed to meet these and other requirements, it may decide that the implementing bill is not eligible for consideration under TPA rules. It would implement this decision by adopting a joint \"procedural disapproval\" resolution in both houses of Congress or a Consultation and Compliance Resolution in either house. In addition, expedited procedures under TPA are considered rules of Congress and can be changed at any time. Given that, either House can deny expedited treatment to implementing legislation. In the House, the Speaker may direct the Rules Committee to enact a rule stripping expedited treatment from the implementing legislation. In the Senate, changing a rule would require unanimous consent, or a supermajority to waive it. President Trump has indicated that he would consider withdrawing from NAFTA as a means of pressuring Congress to support timely action on implementing legislation. It is not clear, though, whether the President has the legal authority for withdrawing from an agreement without the consent of Congress. If President Trump attempts to withdraw from the agreement, it is possible that Congress would attempt to challenge or delay the effort. The question of who has the authority to terminate NAFTA, a congressional-executive agreement, has been debated by lawmakers, legal experts, and others. Congress may examine the economic effects of a USMCA and the broader strategic implications of possible withdrawal from NAFTA absent action on legislation to implement the USCMA. President Trump has repeatedly threatened to withdraw from NAFTA. Some analysts maintain that these statements are not to be taken lightly because the potential cost of such actions could be very significant for the U.S. economy. The United States shares strong economic ties with Mexico and Canada. Any disruption to the economic relationship could have adverse effects on investment, employment, productivity, and North American competitiveness. In addition, Mexico and Canada could consider imposing retaliatory tariffs on U.S. exports if the United States were to withdraw, while at the same time maintaining existing and pursuing new FTAs without the United States. The full effects of the proposed USMCA on North American trade relations are not be expected to be significant because nearly all U.S. trade with Canada and Mexico that meets rules of origin requirements is now conducted duty and barrier free under NAFTA. The proposed USMCA would maintain NAFTA's tariff and non-tariff barrier eliminations. If the USMCA is approved by Congress and it enters into force, many economists and other observers believe that it is not expected to have a measurable effect on U.S. trade and investment with other NAFTA parties, jobs, wages, or overall economic growth, and that it would probably not have a measurable effect on the U.S. trade deficit. The U.S. International Trade Commission (ITC) is conducting an investigation into the likely economic impacts of the proposed USMCA, a required element of the Trade Promotion Authority (TPA) process. TPA 2015 states that the ITC must issue its report within 105 days of the President's signing of a trade deal. The ITC report, due by March 15, 2019, has been delayed because of the partial government shutdown, which lasted 35 days. It is now expected to be released by April 20, 2019. One exception to this overall economic evaluation may be the motor vehicle industry, which may experience more significant effects than other industries because of the changes in rules of origin in the USMCA and because of the high percentage of motor vehicle goods that enter duty-free under NAFTA. The highest share of U.S. trade with Mexico is in the motor vehicle industry and it is also the industry with the highest percentage of duty-free treatment under NAFTA because of high North American content. In 2017, leading U.S. merchandise imports from NAFTA partners were motor vehicles ($102.1 billion or 17% of total imports from Canada and Mexico), oil and gas ($68.8 billion or 11% of imports), and motor vehicle parts ($58.7 billion or 10% of imports). About 98.6% of U.S. motor vehicle imports and about 77.5% of motor vehicle parts imports from Canada and Mexico entered the United States duty-free under NAFTA. In comparison, only 12.6% of oil and gas imports and 49.3% of total U.S. imports from Canada and Mexico in 2017 received duty-free benefits under NAFTA as shown in Figure 7 . Some analysts believe that the updated auto rules of origin requirements contained in the USMCA could raise compliance and production costs and could lead to higher prices, which could possibly negatively affect U.S. vehicle sales. The net impact, however, may be more limited depending on the capacity of U.S. automakers and parts manufacturers to shift suppliers and production locations and the ability to absorb higher costs, according to some observers. Some observers contend that manufacturers with a stronger presence in Mexico, such as General Motors and Fiat Chrysler Automobiles, may be more impacted. Other observers and stakeholders are continuing to review the provisions in the new agreement and what effect, if any, these changes would have on U.S. economic relations with Canada and Mexico. To some analysts, provisions in areas such as customs regulation, digital trade, sanitary and phytosanitary measures, and enforcement on labor and the environment are considered an improvement over similar provisions in NAFTA. Other proposed changes in the agreement, such as largely heightened IPR protections and generally less extensive investment provisions, have both supporters and detractors. For example, there is some concern that the ISDS provisions in the USMCA effectively may only apply to certain U.S. contracts in Mexico's energy sector and possibly leave out other sectors such as services. Under USMCA, investors in many sectors would be limited to filing ISDS claims for breaches of national treatment, most-favored nation treatment, or expropriation, but not indirect expropriation. On July 1, 2018, Mexico held presidential and legislative elections in which Andrés Manuel López Obrador and his leftist MORENA party won by wide margins. President López Obrador entered into office on December 1, 2018. He won the presidency with 53.2% of the vote, more than 30 percentage points ahead of his nearest rival. MORENA's coalition also won majorities in both chambers of Mexico's Congress. Although President López Obrador voiced skepticism about NAFTA in the past, he has stated on several occasions that he supports the agreement, arguing that it should be improved to benefit Mexico rather than being terminated. Mexico's chief NAFTA negotiator under López Obrador's Administration, Jesús Seade, stated that the proposed USMCA is a \"satisfactory result\" for Mexico and that it will create an incentive for increased investment linkages and deeper economic integration. An issue for congressional consideration is Mexico and Canada's ongoing trade initiatives and how they may affect the United States. In addition to numerous FTAs with other countries, Canada and Mexico are signatories to the TPP, now known as CPTPP or TPP-11. Following the withdrawal of the Trump Administration from the then-proposed TPP in January 2017, the 11 parties agreed on a final deal for the CPTPP on January 23, 2018; it was signed on March 8, 2018. Canada and Mexico have ratified the agreement. With six of the 11 countries having ratified it, the CPTPP came into effect on December 30, 2018. It provides Canada and Mexico preferential market access in numerous industries to several lucrative Asian markets, especially Japan, and may affect current trade and investment trends with the United States. According to a June 2017 study, Canada and Mexico could have potential gains from CPTPP, mainly because they would have increased access to other markets, especially Japan, without having to compete with U.S. exports. The study projects that Canada's exports to CPTPP countries, without the United States, would increase by 4.7% by 2035 and that Mexico's would increase by 3.1%. The study states that Canada's agricultural exports, particularly beef, would benefit from access to the Japanese market. In addition to NAFTA, and the CPTPP, Canada has also negotiated other FTAs. Canada's Comprehensive Economic and Trade Agreement (CETA) with the European Union provisionally came into force on September 21, 2017. This agreement provides preferential market access for goods and certain services (including agriculture) among other provisions such as those on geographical indications (GIs)—geographical names that protect the quality and reputation of a distinctive product originating in a certain region. For instance, Canada agreed to recognize GIs on certain cheeses generally viewed as common food names in the United States, some of which survived as recognized GIs under the USMCA. Canada likely will begin talks with the United Kingdom for an FTA, if the terms of Brexit allow it to negotiate FTAs with other countries. Canada also has a free trade agreement in force with South Korea and has conducted exploratory discussions on launching FTA negotiations with China. In addition, Canada has FTAs with several countries in Central and South America, and is an observer to the Pacific Alliance. Some observers contend that Mexico's trade policy is the most open in the world. It has a total of 11 free trade agreements involving 46 countries, including it the 11-member CPTPP. These also include agreements with most countries in the Western Hemisphere, as well as agreements with Israel, Japan, and the EU. Mexico and the EU renegotiated a new FTA that is expected to open up the Mexican market to more EU exporters and investors. The two parties announced an agreement in principle on April 21, 2018. The new agreement, which must be ratified by both parties before entering into force, includes commitments to cooperate on issues such as climate change, human rights, combating poverty, or researching new medicines. Mexico is also a party to the Pacific Alliance, a regional trade integration initiative formed by Chile, Colombia, Mexico, and Peru. The trade bloc's main purpose is for members to forge stronger economic ties and integration with the Asia-Pacific region. In addition to reducing trade barriers, the Alliance has sought to integrate in areas including financial markets and the free movement of people. In 2018, the Pacific Alliance admitted Singapore, Australia, New Zealand, and Canada as associate members as a first step to deepening the relationship. President Trump stated to reporters on December 1, 2018, that he intended to notify Canada and Mexico of his intention to withdraw from NAFTA in six months. Article 2205 of NAFTA states that a party may withdraw from the agreement six months after it provides written notice of withdrawal to the other parties. If a party withdraws, the agreement shall remain in force for the remaining parties. Private sector groups are urging the President to remain within NAFTA until the proposed USMCA enters into force. They claim that withdrawing from NAFTA would have \"devastating\" negative consequences. Congress may consider the ramifications of withdrawing from NAFTA and how it may affect the U.S. economy and foreign relations with Mexico. It may monitor and consider the congressional role in a possible withdrawal. Numerous think tanks and economists have written about the possible economic consequences of U.S. withdrawal from NAFTA. For example An analysis by the Peterson Institute for International Economics (PIIE) finds that a withdrawal from NAFTA would cost the United States 187,000 jobs that rely on exports to Mexico and Canada. These job losses would occur over a period of one to three years. By comparison, according to the study, between 2013 and 2015, 7.4 million U.S. workers were displaced or lost their jobs involuntarily due to companies shutting down or moving elsewhere globally. The study notes that the most affected states would be Arkansas, Kentucky, Mississippi, and Indiana. The most affected sectors would be autos, agriculture, and non-auto manufacturing. A 2017 study by ImpactEcon, an economic analysis consulting company, estimates that if NAFTA were to terminate, real GDP, trade, investment, and employment in all three NAFTA countries would decline. The study estimates U.S. job losses of between 256,000 and 1.2 million in three to five years, with about 95,000 forced to relocate to other sectors. Canadian and Mexican employment of low skilled workers would decline by 125,000 and 951,000, respectively. The authors of the study estimate a decline in U.S. GDP of 0.64% (over $100 billion). The Coalition of Services Industries (CSI) argues that NAFTA continues to be a remarkable success for U.S. services providers, creating a vast market for U.S. services providers, such as telecommunications and financial services. CSI estimates that if NAFTA is terminated, the United States risks losing $88 billion in annual U.S. services exports to Canada and Mexico, which support 587,000 high-paying U.S. jobs. Some trade policy experts contend that NAFTA has been a bad deal for U.S. workers and cost the United States nearly 700,000 jobs as of 2010. They contend that renegotiating NAFTA offers new opportunities to update the agreement with a new labor template and updated provisions to raise labor standards and help protect U.S. workers. The Economic Policy Institute (EPI) recommends that the United States seek stronger labor standards and enforcement in the NAFTA renegotiations. USMCA's modernized labor provisions may reflect some of the EPI recommended changes of including ILO conventions concerning the freedom of association, collective bargaining, discrimination, forced labor, child labor, and workplace safety and health. Canada and Mexico likely would maintain NAFTA between themselves if the United States were to withdraw. U.S.-Canada trade could be governed either by CUSFTA, which entered into force in 1989 (suspended since the advent of NAFTA), or by the baseline commitments common to both countries as members of the World Trade Organization. If CUSFTA remains in effect, the United States and Canada would continue to exchange goods duty free and would continue to adhere to many provisions of the agreement common to both CUSFTA and NAFTA. Some commitments not included in the CUSFTA, such as intellectual property rights, would continue as baseline obligations in the WTO. However, it is unclear whether CUSFTA would remain in effect, as its continuance would require the assent of both parties. In the unlikely event of a U.S. withdrawal from NAFTA, the United States would presumably would return WTO most-favored-nation tariffs, the rate it applies to all countries with which the United State does not have an FTA. The United States and Canada maintain relatively low simple average MFN rates, at 3.5% and 4.1%, respectively. Mexico has a higher 7.0% simple average rate. However, all countries have higher \"peak\" tariffs on labor intensive goods, such as apparel and footwear, and some agriculture products. Of the three NAFTA parties, the United States has the lowest MFN tariffs in most categories. Applied tariffs are higher in Mexico than the United States or Canada, although Canada has double-digit applied agricultural tariffs. The United States and Canada have relatively similar bound and applied tariffs at the WTO. Mexico's bound tariff rates are very high and far exceed U.S. bound rates. Without NAFTA, there is a risk that tariffs on U.S. exports to Mexico could reach up to 36.2% (see Table 2 ). In agriculture, U.S. farmers would face double-digit applied and trade-weighted rates in both Mexico and Canada. Mexico and Canada likely would maintain duty-free treatment between themselves through maintenance of a bilateral NAFTA, or through commitments made in conjunction with the CPTPP (TPP-11) If the United States withdrew from NAFTA, certain commitments would be affected, such as the following: Services Access . The three NAFTA countries committed themselves to allowing market access and nondiscriminatory treatment in certain service sectors. If the United States withdrew from NAFTA, it would still be obligated to adhere to the commitments it made for the WTO's General Agreement on Trade in Services. While these commitments were made contemporaneously with NAFTA, given that the NAFTA schedule operated under a negative list basis—all sectors included unless specifically excluded—and GATS on a positive list—specific sectors are listed for inclusion—NAFTA is likely more extensive. Government Procurement . As noted previously in this report, the NAFTA government procurement chapter sets standards and parameters for government purchases of goods and services. The schedule annexes set forth opportunities for firms of each party to bid on certain contracts for specified government agencies. The WTO Government Procurement Agreement (GPA) also imposes disciplines and obligations on government procurement. Unlike most other WTO agreements, membership in the GPA is optional. Canada and the United States would still have reciprocal obligations as members of the GPA. In fact, since the GPA was renegotiated in 2014, commitments between the two are greater than under NAFTA. However, Mexico is not a member of the GPA, and U.S. withdrawal from NAFTA would allow Mexico to adopt any domestic content or buy local provisions. (Since U.S. firms are more competitive in obtaining Mexican contracts than Mexican firms in the United States, this may adversely affect some U.S. domestic firms.) Investment . Unlike many chapters in NAFTA which have analogous counterparts in the WTO Agreements, the investment chapter in the WTO does not provide the level of protection for investors as does NAFTA, subsequent U.S. trade agreements, or bilateral investment treaties. If the United States withdrew from NAFTA, U.S. investors would lose protections in Canada and Mexico. Countries would have more leeway to block individual investments. U.S. investors would not have recourse to the investor-state dispute settlement (ISDS) mechanism, but would need to deal with claims of expropriation through domestic courts, or recourse to government-to-government consultation. Canada and Mexico likely would maintain investor protection between them through the prospective CPTPP or through maintenance of NAFTA provisions. The timeline for congressional consideration of the proposed USMCA remains unclear in part because of the TPA timeline and also because of issues voiced by Congress related to various provisions of the agreement and other ongoing trade issues with Canada and Mexico. The agreement would have to be approved by Congress and ratified by Mexico and Canada before entering into force. On August 31, 2018, pursuant to TPA, President Trump provided Congress a 90-day notification of his intent to sign an FTA with Canada and Mexico. On January 29, 2019, as required by TPA 60 days after an agreement is signed, U.S. Trade Representative Robert Lighthizer submitted to Congress changes to existing U.S. laws that will be needed to bring the United States into compliance with the proposed USMCA. A report by the ITC on the possible economic impact of TPA is not expected to be completed until April 20, 2019 due to the 35-day government shut down. The report has been cited by some Members of Congress as key to their decisions on whether to support the agreement. Some policymakers have stated that the path forward to passage of the USMCA by Congress is uncertain partially because the three countries have yet to resolve disputes over U.S. steel and aluminum tariffs. The United States, Canada, and Mexico are currently in a trade dispute over U.S. actions to impose tariffs on such imports due to national security concerns as discussed earlier in the report, The conclusion of the proposed USMCA did not resolve the Section 232 tariff dispute. The U.S. business community, industry groups, some congressional leaders, and Mexican government officials have publicly stated that the tariff issues must be resolved before the USMCA could enter into force. Questions surrounding passage of Mexico's proposed labor reforms could be a key issue for Congress as lawmakers consider the proposed USMCA. Under Annex 23-A of USMCA's labor chapter, Mexico has commitments to adopt and maintain measures necessary for the effective recognition of the right to bargain collectively, including the establishment of an independent Labor Court for the adjudication of labor disputes. The reforms were expected to be passed into law before January 1, 2019 in order to avoid a delay of the USMCA's entry into force. Mexico has not yet passed the reforms. Mexican officials have stated that passing labor reforms are a priority for President López Obrador and the Mexican Congress and that the legislation could be passed as early as February 2019. Other issues are also surfacing as major areas of debate among Members and between the Executive Branch and Congress, as discussed above.", "summary": "The 116th Congress faces policy issues related to the Trump Administration's renegotiation of the North American Free Trade Agreement (NAFTA) and the proposed United States-Mexico-Canada Agreement (USMCA). On May 18, 2017, the Trump Administration sent a 90-day notification to Congress of its intent to begin talks with Canada and Mexico to renegotiate and modernize NAFTA, as required by the 2015 Trade Promotion Authority (TPA). Talks officially began on August 16, 2017. Negotiations were concluded on September 30, 2018. The proposed USMCA was signed on November 30, 2018. The agreement must be approved by Congress and ratified by the governments of Mexico and Canada before it can enter into force. The first NAFTA negotiations were launched in 1992 under President George H.W. Bush and continued under President William J. Clinton, who signed the implementing legislation on December 8, 1991 (P.L. 103-182). NAFTA entered into force on January 1, 1994. It is particularly significant because it was the most comprehensive free trade agreement (FTA) negotiated at the time, contained several groundbreaking provisions, and was the first of a new generation of U.S. FTAs later negotiated. Congress played a major role during its consideration and, after contentious and comprehensive debate, ultimately approved legislation to implement the agreement. NAFTA established trade liberalization commitments and set new rules and disciplines for future FTAs on issues important to the United States, including intellectual property rights protection, services trade, dispute settlement procedures, investment, labor, and environment. NAFTA's market-opening provisions gradually eliminated nearly all tariff and most nontariff barriers on merchandise trade. At the time of NAFTA negotiations, average applied U.S. duties on imports from Mexico were 2.07%, while U.S. businesses faced average tariffs of 10%, in addition to nontariff and investment barriers, in Mexico. The U.S.-Canada FTA had been in effect since 1989. The proposed USMCA, comprising 34 chapters and 12 side letters, retains most of NAFTA's market opening measures and most of its chapters, while making notable changes to auto rules of origin, dispute settlement provisions, government procurement, investment, and intellectual property rights (IPR) protection. It also modernizes provisions in services, labor, and the environment. New trade issues, such as digital trade, state-owned enterprises, anticorruption, and currency misalignment, are also addressed. Key issues for Congress in regard to the proposed USMCA include the constitutional authority of Congress over international trade, its role in revising, approving, or withdrawing from the agreement, U.S. negotiating objectives and the extent to which the proposed agreement makes progress in meeting them as required under TPA. Congress may also consider the agreement's impact on U.S. industries, the U.S. economy, and broader U.S. trade relations with Canada and Mexico. The timing for congressional consideration of the proposed USMCA is unclear in part because of the TPA timeline and also because of issues of interest and concern voiced by Congress, including the level of enforceable labor provisions, auto rules of origin, and investor-state dispute settlement. Some policymakers have stated that the path forward to passage of the USMCA by Congress is uncertain partially because the three countries have yet to resolve disputes over U.S. steel and aluminum tariffs imposed by the Trump Administration. The United States, Canada, and Mexico are currently in a trade dispute over U.S. actions under Section 232 of the Trade Act of 1962 to impose tariffs on such imports due to national security concerns. In response to the U.S. action, Mexico and Canada initiated World Trade Organization dispute settlement proceedings and retaliated against certain U.S. exports. The conclusion of the proposed USMCA did not resolve the Section 232 tariff dispute. The U.S. business community, industry groups, and some congressional leaders have publicly stated that the tariff issue must be resolved before the USMCA could enter into force.", "document_type": "crs"}
{"report": "World Bank President Jim Yong Kim recently announced that he was stepping down in February 2019 to join Global Infrastructure Partners, a private equity fund that invests in projects in advanced and developing countries. Kim's unexpected resignation, combined with his joining of a private firm that could directly compete with the World Bank for investments, raises questions for policymakers as they nominate and select a new president for the World Bank, a central component of the U.S.-led international economic order for the past eight decades. According to an informal agreement among their member countries, the U.S. nominee is chosen as the World Bank president and a European candidate (typically French or German) is appointed as managing director of the International Monetary Fund (IMF). This custom has been subject to increasing criticism during the past two decades. The first line of criticism is directed at the current distribution of voting power, which critics contend does not account for the increasing integration of developing countries into the global economy. A second line of criticism is directed at the method of selecting World Bank and IMF leadership, which critics argue, elevates nationality above merit and undermines the legitimacy and effectiveness of the institutions. This report provides information on the 2019 World Bank selection process and discusses efforts to reform the selection process. The World Bank is a multilateral development bank (MDB) that offers loans and grants to low- and middle-income countries to promote poverty alleviation and economic development. The World Bank has near-universal membership, with 189 member nations. U.S. membership in the World Bank is authorized by a federal statute known as the Bretton Woods Agreements Act (22 U.S.C. 286 et seq .). Only Cuba and North Korea, and a few microstates such as the Vatican, Monaco, and Andorra, are nonmembers. Two of the Bank's five facilities, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), lend directly to governments to finance development projects and policy programs in member countries. The IBRD provides middle-income developing countries with loans at near-market rates using funds raised by the World Bank on international capital markets. IDA was established in 1960 due to concerns that low-income countries could not afford to borrow at the near-market rate terms offered by the IBRD. IDA provides grants and concessional loans funded by contributions from donors and transfers from the IBRD to low-income countries. A country's eligibility for IBRD or IDA financial assistance depends on its relative poverty, defined as gross national income (GNI). For 2019, countries with a per capita GNI below $1,145 are eligible for IDA funding. IBRD commitments totaled $23.6 billion in 2018. Commitments from IDA to low-income countries were $24 billion in 2018 ( Table 1 ). Three other World Bank-affiliated organizations are dedicated to promoting private sector finance and investment in low-income countries. The International Finance Corporation (IFC) promotes private sector development in developing countries by making loans and investments in small- and medium-sized companies in those countries. The Multilateral Investment Guarantee Agency (MIGA) provides private investors with insurance coverage against noncommercial risk (expropriation, war and civil disturbance, and/or breach of contract) in developing countries. The International Center for the Settlement of Investment Disputes (ICSID) provides dispute resolution for investment disputes between governments and foreign investors. The United States is the largest contributor to the World Bank, having the largest share of the IBRD's subscribed capital, $46.4 billion (16.88%) of a total of $275 billion. As the largest contributor, the United States holds a single seat on the 25-member Board of Executive Directors and carries 16.32% of the total votes in Bank decisionmaking, which provides veto power on decisions requiring an 85% majority vote. The largest shareholders after the United States are Japan (6.89% of voting power), China (4.45%), Germany (4.03%), France (3.78%), and the United Kingdom (3.78%). The large voting power of the United States ensures the U.S. ability to veto major policy decisions at the Bank. A citizen of the United States has always held the presidency of the World Bank. The World Bank's president is chairman of the Board and elected by the Board of Directors. The president is the chief of the operating staff of the Bank and conducts, under direction of the executive directors, the ordinary business of the Bank. The Bank's 12 th president, Jim Yong Kim, has served since 2012. On September 27, 2016, Dr. Kim was reelected as the World Bank president, for a second five-year term beginning July 1, 2017. The Trump Administration has continued to support U.S. participation in the international financial institutions (IFIs) and has funded recent U.S. MDB commitments. The Trump Administration is supporting a $60.1 billion capital increase for the World Bank's main lending facility, the IBRD, which would raise its capital from $268.9 billion to $329 billion. World Bank members also endorsed a $5.5 billion capital increase for the IFC, which would more than triple the IFC's capital base from $2.57 billion to $8.2 billion. The Trump Administration supports the capital increase, which is to be accompanied by reforms designed, in part, to address a long-standing concern for many U.S. policymakers: high levels of World Bank lending to upper-middle income countries, especially China. In a statement at the 2017 IMF and World Bank spring meetings, U.S. Treasury Secretary Steven Mnuchin stated that, \"the relationship between the World Bank and more creditworthy countries [such as China] should mature over time, with the absolute level of borrowing declining as countries become better able to finance their own development objectives.\" Selecting the leadership at the two major international financial institutions—the IMF and the World Bank—is guided by a tradition that the World Bank president is an American and that the IMF managing director is a European. The informal agreement reflects the political and economic balance of power at the end of World War II. At the time, the United States believed that the World Bank should be headed by an American since the United States was the only capital surplus nation, and World Bank lending would be dependent on American financial markets. The U.S. Secretary of the Treasury at the time, Fred Vinson, believed that if an American representative headed the World Bank, the IMF must be headed by a non-American. Moreover, he noted, \"it would be impracticable to appoint U.S. citizens to head both the Bank and the Fund.\" Despite the growth of world capital markets, and the fact that the World Bank is no longer reliant on U.S. capital markets, the convention on the IMF and World Bank selection has remained intact. The U.S.-EU agreement is not unique. A 2009 study finds that Informal agreements allocating positions of authority and decision making pervade international organizations. Whether in secretariats or political, judicial, and administrative bodies, tacit understandings that assign representation to certain states or groups of states are the norm, not the exception... The Articles of Agreement of the African Development Bank (AfDB) and the Asian Development Bank (AsDB) each specify that only citizens of regional countries may serve as presidents of those banks. By tradition, the Japanese Finance Ministry nominates a Japanese citizen to be president of the AsDB. The Articles of the Inter-American Development Bank (IDB) and the European Bank for Reconstruction and Development (EBRD) specify only that their president must come from a member country. By tradition, the IDB president is selected by a competitive process from among citizens of the Latin American countries. The EBRD president is also elected by a presumably competitive process, though only French and German citizens have served to date in that capacity and there is normally only one nominee. Second-tier offices in these institutions have also traditionally been reserved for U.S. citizens. First deputy managing director at the IMF and executive vice president at the IDB are traditionally U.S. citizens. These individuals are appointed by the chief executive of the institution, but in the case of the IMF and IDB an individual is typically designated by the U.S. Government. At the Asian Development Bank and EBRD, one of the vice presidents for an operational region has typically been a U.S. citizen. However, despite these restrictions, there have been successful efforts to open up the selection process across the MDBs. In 2015, the AfDB members elected Akinwumi Adesina of Nigeria, after a transparent election involving seven other candidates. Adesina garnered 58% of the total vote of AfDB shareholders. The 2012 World Bank election was the first to include several candidates and Kim's nomination was, unlike past nominations, not unanimous. The announcement of Kim's selection noted that a new selection process (introduced in 2011) yielded multiple nominees (former Nigerian Finance Minister Ngozi Okonjo-Iweala and former Colombian Finance Minister and United Nations Under Secretary-General for Economic and Social Affairs Jose Antonio Ocampo) and that the nominees received support from different member countries. The formal guidelines for choosing the World Bank president are laid out in the Bank's Articles of Agreements and Bylaws. Article V, Section 5, states that \"[t]he Executive Board shall select a President who shall not be a Governor or an Executive Director. \" This decision may be reached by a simple majority of the Executive Board. Section 13(c) of the Bank's bylaws stipulates the terms of service. World Bank presidents are elected for renewable five-year terms. Neither the articles nor the bylaws articulate any specific qualifications for the position of president of the World Bank. The Bank's Articles of Agreement, however, are silent on any requirements on how individuals are selected, on what criteria, or by what process they are vetted. There is no formal search process for candidates. Nominations can only be made by the 25 World Bank executive directors and there is no concerted search process of the Executive Board to identify and vet possible candidates. In 2000, two internal working groups (the World Bank Working Group to Review the Process for Selection of the President and the International Monetary Fund Working Group to Review the Process for Selection of the Managing Director) were created to discuss the selection procedure. A joint draft report of the working groups was endorsed by the executive directors on April 26, 2001, but never formally implemented. The report declared, among other things, that transparency and accountability are critical to the selection process. Instead of implementing the 2001 report's recommendations, the Executive Board adopted in 2011 a procedure that specified qualification criteria, established a nomination period, and provided for an interview process. Critics point out that the agreed procedures remain vague and largely nontransparent. Most notably, development expertise is not included as a qualification and the decision will be taken not by public vote, but rather by consensus according to prior practice. Declaring the importance of an \"open, transparent, and merit-based\" process, yet continuing to perpetuate the status quo, according to three former World Bank chief economists, is hypocritical, and \"destroys the trust and spirit of collaboration needed to manage the profound problems facing the world.\" The decision to select a new World Bank president is to be made by a majority vote of the World Bank's Executive Board. Unlike the United Nations General Assembly, which relies on a one-person, one-vote governance system, the World Bank uses a weighted voted system. Voting is loosely based on contributions to the Bank. The five largest shareholders (United States, Japan, Germany, France, and the United Kingdom) have their own seat on the Executive Board. In addition to the five largest shareholders, China, Russia, and Saudi Arabia have enough votes to elect their own executive directors. All other countries have gravitated into mixed-state groupings or constituencies. These constituencies range in size from 3 countries (South Africa, Angola, and Nigeria) to 21. The mixed-state constituencies are flexible in their membership. Countries have periodically switched constituencies, often to a new group that will allow them to have a bigger vote or leadership role. Unlike the eight countries that have their own ED, the influence of countries in mixed-state constituencies is not equivalent to their quota-determined voting weight. Since they vote in constituencies, small countries can easily be sidestepped by the larger countries in the constituency. For many countries at the World Bank, they \"can at best express a divergent opinion orally but cannot bring it to bear in the form of a vote.\" Executive directors must cast their votes as single unit, even though some of the countries they represent may disagree with their position. There is no provision for splitting a constituency's vote. There is no formal congressional involvement in the selection of Bank management. U.S. participation in the World Bank is authorized by the Bretton Woods Agreement Act of 1945. The act delegates to the President ultimate authority under U.S. law to direct U.S. policy and instruct the U.S. representatives at the Bank. The President, in turn, has generally delegated authority to the Secretary of the Treasury. With the advice and consent of the Senate, the President names individuals to represent the United States on the Executive Board of the World Bank. The position of U.S. executive director is currently vacant. The alternate executive director is Erik Bethel. The Executive Board has authority over operations and policy and must approve any loan or policy decision. The U.S. executive director is supported primarily by Treasury Department staff. Unique among the founding members, the Bretton Woods Agreement Act requires specific congressional authorization for certain decisions, such as changing the U.S. share at the Bank or amending the Articles of Agreement. However, neither the approval of individual loans nor the selection of the managing director requires congressional approval. The European-U.S. arrangement to split the leadership at the IMF and World Bank has generated controversy, which may undermine the effectiveness of the eventual nominee. Critics of the current selection process make two general arguments. First, the gentlemen's agreement on IMF and World Bank leadership is seen as a relic of a global economy that no longer exists. Whereas the United States and Europe dominated the postwar economy, the current international economy is more diverse. Developing and emerging market countries contribute half of global output, up from 25% 30 years ago. Over the past several decades, the balance of global economic power has been shifting from the United States and Europe to China and a number of other fast-developing countries ( Figure 1 ). These economies account for rising shares of global GDP, manufacturing, and trade, and also are driven by a significant expansion of trade among the developing countries (South-South trade). These shifts are driven by growing economic integration and interdependence among economies, particularly through new global production and supply chains that incorporate inputs from many different countries. In recent years, China has also invested in, created, and led a range of institutions and initiatives, including the Asian Infrastructure Investment Bank (AIIB) and other funding mechanisms, such as the Silk Road Fund and the New Development Bank (also known as the BRICS Bank), a collective arrangement with Brazil, Russia, India, and South Africa. At the same time, China is pursuing its own bilateral and regional trade agreements, such as the proposed Regional Comprehensive Economic Partnership (RCEP) with 15 other countries in the Asia Pacific. China has also positioned itself to act as a lender of last resort through monetary arrangements such as the BRICs Contingent Reserve Arrangement (CRA) and the Chiang Mai Initiative Multilateralization (CMIM). In such a diverse global economy, any agreement that grants the leadership position based on nationality, critics argue, unnecessarily limits the pool of potential candidates that may be exceptionally competent in addressing the issues before the Bank. \"Since the creation of the International Monetary Fund and World Bank at the end of the second world war, an American has led the Bank and a European the IMF,\" noted Mark Sobel, U.S. chairman of the Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank, and former U.S. representative at the IMF. \"It is time for a change.\" According to Nancy Birdsall, senior fellow and founding president of the Center for Global Development, \"the logic of an American president to ensure sustained U.S. support for the World Bank is no longer as clear as it has been.\" According to Birdsall, and others, the Trump Administration's \"America First\" rhetoric may make it harder for the United States to coalesce support for the U.S. candidate. Others argue that these concerns are overblown and that any serious effort to block the U.S. nominee would backfire. David Dollar, a former U.S. Treasury and senior World Bank official, says that, \"it's a very complicated game. My instinct is that there is a very strong likelihood that the U.S. nominee will be approved. The world has an interest in the United States staying engaged with the World Bank.\" Devesh Kapur, a professor at Paul H. Nitze School of Advanced International Studies at Johns Hopkins University, puts it more bluntly, saying \"powerful nations' relationships with the United States matter much more than who heads the World Bank.\" Following Kim's announcement of his resignation, the Bank's Executive Board met on January 9, 2019, and issued a formal statement on the selection process. The nomination period for the next president ends on March 14, after which the Executive Board is to decide on a shortlist of three candidates. Following interviews, the Executive Board aims to select the next president before the spring meetings in April 2019. On February 6, President Trump nominated David Malpass, Treasury's Under Secretary for International Affairs, to be the next World Bank president. Reportedly, Ivanka Trump, President Trump's oldest daughter and senior advisor, played a role in selecting the U.S. nominee. In 2017, Ms. Trump helped start a World Bank-administered fund, the Women Entrepreneurs Finance Initiative, which aims to generate $1.6 billion in capital for female entrepreneurs. The White House, according to reports, also considered Indra Nooyi, the former chief executive officer of PepsiCo; Ray Washburne, President and Chief Executive of the Overseas Private Investment Corporation; Mark Green, U.S. Agency for International Development Administrator; and Robert Kimmitt, Deputy Treasury Secretary under George W. Bush.", "summary": "On January 7, 2018, World Bank President Jim Yong Kim announced that he would resign by February 1, three years before the expiration of his second five-year term in 2022. Following his resignation, Dr. Kim is to join Global Infrastructure Partners (GIP), a private equity fund that invests in projects in advanced and developing countries. Prior to his nomination to the World Bank by President Barack Obama in 2012, Dr. Kim served as the president of Dartmouth College. The nomination period for the next president ends on March 14, after which the Executive Board is to select three candidates for interviews. To date, the only candidate is David Malpass, the Treasury Department's Under Secretary for International Affairs, nominated by President Trump on February 6, 2019. Following the interviews, the Executive Board is to select the next president, something which it aims to do before the spring meetings in April 2019. Since its founding after World War II, the presidency of the World Bank has been held by a citizen of the United States, the Bank's largest shareholder. According to an informal agreement among World Bank member countries, a U.S. candidate is chosen as the president of the World Bank and a European candidate (typically French or German) is appointed as the managing director of the International Monetary Fund (IMF). The formal requirement for the selection of the World Bank president is that the executive directors appoint, by at least a 50% majority, an individual who is neither a member of the Board of Governors nor Board of Executive Directors. There are no requirements on how individuals are selected, on what criteria, or by what process they are vetted. Although the executive directors may select the IMF managing director by a simple majority vote, they historically aim to reach agreement by consensus. With these factors combined, the custom guaranteeing European leadership at the IMF and American leadership at the World Bank has remained in place. This custom has been subject to increasing criticism during the past two decades. The first line of criticism is directed at the current distribution of voting power, which critics contend does not account for the increasing integration of developing countries into the global economy. A second line of criticism is directed at the method of selecting World Bank and IMF leadership, which critics argue elevates nationality above merit and undermines the legitimacy and effectiveness of the institutions. Calls for a more open, transparent, and merit-based leadership selection process have been made consistently in the past, and at times have been incorporated into communiqués of various summits, but have yet to change the leadership selection process at either institution.", "document_type": "crs"}
{"report": "Article II, Section 2, of the Constitution provides that the President shall appoint officers of the United States \"by and with the Advice and Consent of the Senate.\" The method by which the Senate provides advice and consent on presidential nominations, referred to broadly as the confirmation process, serves several purposes. First, largely through committee investigations and hearings, the confirmation process allows the Senate to examine the qualifications of nominees and any potential conflicts of interest. Second, Senators can influence policy through the confirmation process, either by rejecting nominees or by extracting promises from nominees before granting consent. Also, the Senate sometimes has delayed the confirmation process in order to increase its influence with the executive branch on unrelated matters. Senate confirmation is required for several categories of government officials. Military appointments and promotions make up the majority of nominations, approximately 65,000 per two-year Congress, and most are confirmed routinely. Each Congress, the Senate also considers approximately 2,000 civilian nominations, and, again, many of them, such as appointments to or promotions in the Foreign Service, are routine. Civilian nominations considered by the Senate also include federal judges and specified officers in executive departments, independent agencies, and regulatory boards and commissions. Many presidential appointees are confirmed routinely by the Senate. With tens of thousands of nominations each Congress, the Senate cannot possibly consider them all in detail. A regularized process facilitates quick action on thousands of government positions. The Senate may approve en bloc hundreds of nominations at a time, especially military appointments and promotions. The process also allows for close scrutiny of candidates when necessary. Each year, a few hundred nominees to high-level positions are regularly subject to Senate investigations and public hearings. Most of these are routinely approved, while a small number of nominations are disputed and receive more attention from the media and Congress. Judicial nominations, particularly Supreme Court appointees, are generally subject to greater scrutiny than nominations to executive posts, partly because judges may serve for life. Among the executive branch positions, nominees for policymaking positions are more likely to be examined closely, and are slightly less likely to be confirmed, than nominees for non-policy positions. There are several reasons that the Senate confirms a high percentage of nominations. Most nominations and promotions are not to policymaking positions and are of less interest to the Senate. In addition, some sentiment exists in the Senate that the selection of persons to fill executive branch positions is largely a presidential prerogative. Historically, the President has been granted wide latitude in the selection of his Cabinet and other high-ranking executive branch officials. Another important reason for the high percentage of confirmations is that Senators are often involved in the nomination stage. The President would prefer a smooth and fast confirmation process, so he may decide to consult with Senators prior to choosing a nominee. Senators most likely to be consulted, typically by White House congressional relations staff, are Senators from a nominee's home state, leaders of the committee of jurisdiction, and leaders of the President's party in the Senate. Senators of the President's party are sometimes invited to express opinions or even propose candidates for federal appointments in their own states. There is a long-standing custom of \"senatorial courtesy,\" whereby the Senate will sometimes decline to proceed on a nomination if a home-state Senator expresses opposition. Positions subject to senatorial courtesy include U.S. attorneys, U.S. marshals, and U.S. district judges. Over the past decade, Senators have expressed concerns over various aspects of the confirmation process, including the rate of confirmation for high-ranking executive branch positions and judgeships, as well as the speed of Senate action on routine nominations. When the Senate is controlled by the party of the President, this concern has often been raised as a complaint that minority party Senators are disputing a higher number of nominations, and have increasingly used their leverage under Senate proceedings to delay or even block their consideration. These concerns have led the Senate to make several changes to the confirmation process since 2011. The changes are taken into account in the following description of the process and are described in detail in other CRS Reports. The President customarily sends nomination messages to the Senate in writing. Once received, nominations are numbered by the executive clerk and read on the floor. The clerk actually assigns numbers to the presidential messages, not to individual nominations, so a message listing several nominations would receive a single number. Except by unanimous consent, the Senate cannot vote on nominations the day they are received, and most are referred immediately to committees. Senate Rule XXXI provides that nominations shall be referred to appropriate committees \"unless otherwise ordered.\" A standing order of the Senate provides that some nominations to specified positions will not be referred unless a Senator requests referral. Instead of being immediately referred, the nominations are instead listed in a special section of the Executive Calendar , a document distributed daily to congressional offices and available online. This section of the Calendar is titled \"Privileged Nominations.\" After the chair of the committee with jurisdiction over a nomination has notified the executive clerk that biographical and financial information on the nominee has been received, this is indicated in the Calendar. After 10 days, the nomination is moved from the \"Privileged Nominations\" section of the Calendar and placed on the \"Nominations\" section with the same status as a nomination that had been reported by a committee. (See \" Executive Calendar \" below.) Importantly, at any time that the nomination is listed in the new section of the Executive Calendar , any Senator can request that a nomination be referred, and it is then sent to the appropriate committee of jurisdiction. Formally the presiding officer, but administratively the executive clerk's office, refers the nominations to committees according to the Senate's rules and precedents. The Senate rule concerning committee jurisdictions (Rule XXV) broadly defines issue areas for committees, and the same jurisdictional statements generally apply to nominations as well as legislation. An executive department nomination can be expected to be referred to the committee with jurisdiction over legislation concerning that department or to the committee that handled the legislation creating the position. Judicial branch nominations, including judges, U.S. attorneys, and U.S. marshals, are under the jurisdiction of the Judiciary Committee. In some instances, the committee of jurisdiction for a nomination has been set in statute. The number of nominations referred to various committees differs considerably. The Committee on Armed Services, which handles all military appointments and promotions, receives the most. The two other committees with major confirmation responsibilities are the Committee on the Judiciary, with its jurisdiction over nominations in the judicial branch, and the Committee on Foreign Relations, which considers ambassadorial and other diplomatic appointments. Occasionally, nominations are referred to more than one committee, either jointly or sequentially. A joint referral might occur when the jurisdictional claim of two committees is essentially equal. In such cases, both committees must report on the nomination before the whole Senate can act on it, unless the Senate discharges one or both committees. If two committees have unequal jurisdictional claims, then the nomination is more likely to be sequentially referred. In this case, the first committee must report the nomination before it is sequentially referred to the second committee. The second referral often is subject to a requirement that the committee report within a certain number of days. Typically, nominations are jointly or sequentially referred by unanimous consent. Sometimes the unanimous consent agreement applies to all future nominations to a position or category of positions. Most Senate committees that consider nominations have written rules concerning the process. Although committee rules vary, most contain standards concerning information to be gathered from a nominee. Many committees expect a biographical resumé and some kind of financial statement listing assets and liabilities. Some specify the terms under which financial statements will or will not be made public. Committee rules also frequently contain timetables outlining the minimum layover required between committee actions. A common timing provision is a requirement that nominations be held for one or two weeks before the committee proceeds to a hearing or a vote, permitting Senators time to review a nomination before committee consideration. Other committee rules specifically mandate a delay between steps of the process, such as the receipt of pre-hearing information and the date of the hearing, or the distribution of hearing transcripts and the committee vote on the nomination. Some of the written rules also contain provisions for the rules to be waived by majority vote, by unanimous consent, or by the chair and the ranking minority Member. Committees often gather and review information about a nominee either before or instead of a formal hearing. Because the executive branch acts first in selecting a nominee, congressional committees are sometimes able to rely partially on any field investigations and reports conducted by the Federal Bureau of Investigation (FBI). Records of FBI investigations are provided only to the White House, although a report or a summary of a report may be shared, with the President's authorization, with Senators on the relevant committee. The practices of the committees with regard to FBI materials vary. Some rarely if ever request them. On other committees, the chair and ranking Member review any FBI report or summary, but on some committees these materials are available to any Senator upon request. Committee staff usually do not review FBI materials. Almost all nominees are also asked by the Office of the Counsel to the President to complete an \"Executive Personnel Financial Disclosure Report, SF-278,\" which is reviewed and certified by the relevant agency as well as the Director of the Office of Government Ethics. The documents are then forwarded to the relevant committee, along with opinion letters from ethics officers in the relevant agency and the director of the Office of Government Ethics. In contrast to FBI reports, financial disclosure forms are made public. All committees review financial disclosure reports and some make them available in committee offices to Members, staff, and the public. To varying degrees, committees also conduct their own information-gathering exercises. Some committees, after reviewing responses to their standard questionnaire, might ask a nominee to complete a second questionnaire. Committees frequently require that written responses to these questionnaires be submitted before a hearing is scheduled. The Committee on the Judiciary sends form letters, sometimes called \"blue slips,\" to Senators from a nominee's home state to determine whether they support the nomination. The Committee on the Judiciary also has its own investigative staff. The Committee on Rules and Administration handles relatively few nominations and conducts its own investigations, sometimes with the assistance of the FBI or the Government Accountability Office (GAO). It is not unusual for nominees to meet with committee staff prior to a hearing. High-level nominees may meet privately with Senators. Generally speaking, these meetings, sometimes initiated by the nominee, serve basically to acquaint the nominee with the Members and committee staff, and vice versa. They occasionally address substantive matters as well. A nominee also might meet with the committee's chief counsel to discuss the financial disclosure report and any potential conflict-of-interest issues. Historically, approximately half of all civilian appointees were confirmed without a hearing. All committees that receive nominations do hold hearings on some nominations, and the likelihood of hearings varies with the importance of the position and the workload of the committee. The Committee on the Judiciary, for example, which receives a large number of nominations, does not usually hold hearings for U.S. attorneys, U.S. marshals, or members of part-time commissions. The Committee on Agriculture, Nutrition, and Forestry and the Committee on Energy and Natural Resources, on the other hand, typically hold hearings on most nominations that are referred to them. Committees often combine related nominations into a single hearing. The length and nature of hearings varies. One or both home-state Senators will often introduce a nominee at a hearing. The nominee typically testifies at the hearing, and occasionally the committee will invite other witnesses, including Members of the House of Representatives, to testify as well. Some hearings function as routine welcomes, while others are directed at influencing the policy program of an appointee. In addition to policy views, hearings might address the nominee's qualifications and potential conflicts of interest. Senators also might take the opportunity to ask questions of particular concern to them or their constituents. Committees sometimes send questions to nominees in advance of a hearing and ask for written responses. Nominees also might be asked to respond in writing to additional questions after a hearing. Especially for high-level positions, the nomination hearing may be only the first of many times an individual will be asked to testify before a committee. Therefore, the committee often gains a commitment from the nominee to be cooperative with future oversight activities of the committee. Hearings, under Senate Rule XXVI, are open to the public unless closed by majority vote for one of the reasons specified in the rule. Witness testimony is sometimes made available online through the website of the relevant committee and also through several commercial services, including Congressional Quarterly. Most committees print the hearings, although no rule requires it. The number of Senators necessary to constitute a quorum for the purpose of taking testimony varies from committee to committee, but it is usually smaller than a majority of the membership. A committee considering a nomination has four options. It may report the nomination to the Senate favorably, unfavorably, or without recommendation, or it may choose to take no action at all. It is more common for a committee to take no action on a nomination than to report unfavorably. Particularly for policymaking positions, committees sometimes report a nomination favorably, subject to the commitment of the nominee to testify before a Senate committee. Sometimes, committees choose to report a nomination without recommendation. Even if a majority of Senators on a committee do not agree that a nomination should be reported favorably, a majority might agree to report a nomination without a recommendation in order to permit a vote by the whole Senate. The timing of a vote to report a nomination varies in accordance with committee rules and practice. Most committees do not vote to report a nomination on the same day that they hold a hearing, but instead wait until the next meeting of the committee. Senate Rule XXVI, clause 7(a)(1) requires that a quorum for making a recommendation on a nomination consist of a majority of the membership of the committee. In most cases, the number of Senators necessary to constitute a quorum for making a recommendation on a nomination to the Senate is the same that the committee requires for reporting a measure. Every committee reports a majority of nominations favorably. Most of the time, committees do not formally present reports on nominations on the floor of the Senate. Instead, committee staff prepare the appropriate paperwork on behalf of the committee chair and file it with the clerk. The executive clerk then arranges for the nomination to be printed in the Congressional Record and placed on the Executive Calendar . If a report were presented on the floor, it would have to be done in executive session. Executive session and the Executive Calendar will be discussed in the next section. According to Senate Rule XXXI, the Senate cannot vote on a nomination the same day it is reported except by unanimous consent. It is fairly common for the Senate to discharge a committee from consideration of an unreported nomination by unanimous consent. This removes the nomination from the committee in order to allow the full Senate to consider it. When the Senate discharges a committee by unanimous consent, it is doing so with the support of the committee for the purposes of simplifying the process. It is unusual for Senators to attempt to discharge a committee by motion or resolution, instead of by unanimous consent, and only a few attempts have ever been successful. Senate Rule XVII does permit any Senator to submit a motion or resolution that a committee be discharged from the consideration of a subject referred to it. The discharge process, however, does not allow a simple majority to quickly initiate consideration of a nomination still in committee. It requires several steps and, most notably, a motion or resolution to discharge is debatable. This means that a cloture process may be necessary to discharge a committee. Cloture on a discharge motion or resolution requires the support of three-fifths of the Senate, usually 60 Senators, and several days. The Senate handles executive business, which includes both nominations and treaties, separately from its legislative business. All nominations reported from committee, regardless of whether they were reported favorably, unfavorably, or without recommendation, are listed on the Executive Calendar , a separate document from the Calendar of Business , which lists pending bills and resolutions. Usually, the majority leader schedules the consideration of nominations on the Calendar. Nominations are considered in executive session, a parliamentary form of the Senate in session that has its own journal and, to some extent, its own rules of procedure. After a committee reports a nomination or is discharged from considering it, the nomination is assigned a number by the executive clerk and placed on the Executive Calendar . Under a standing order of the Senate, certain nominations might also be placed in this status on the Executive Calendar after certain informational and time requirements are met. The list of nominations in the Executive Calendar includes basic information such as the name and office of the nominee, the name of the previous holder of the office, and whether the committee reported the nomination favorably, unfavorably, or without recommendation. Long lists of routine nominations are printed in the Congressional Record and identified only by a short title in the Executive Calendar , such as \"Foreign Service nominations (84) beginning John F. Aloia, and ending Paul G. Churchill.\" In addition to reported nominations and treaties, the Executive Calendar contains the text of any unanimous consent agreements concerning executive business. The Executive Calendar is distributed to Senate personal offices and committee offices when there is business on it. It is also available online by following the link to \"Calendars and Schedules\" on the Virtual Reference Desk under the Reference tab of the Senate website (www.Senate.gov) . Business on the Executive Calendar , which consists of nominations and treaties, is considered in executive session. In contrast, all measures and matters associated with lawmaking are considered in legislative session. Until 1929 executive sessions were also closed to the public, but now they are open unless ordered otherwise by the Senate. The Senate usually begins the day in legislative session and enters executive session either by a non-debatable motion or, far more often, by unanimous consent. Only if the Senate adjourned or recessed while in executive session would the next meeting automatically open in executive session. The motion to go into executive session can be offered at any time, is not debatable, and cannot be laid upon the table. All business concerning nominations, including seemingly routine matters such as requests for joint referral or motions to print hearings, must be done in executive session. In practice, Senators often make such motions or unanimous consent requests \"as if in executive session.\" These usually brief proceedings during a legislative session do not constitute an official executive session. In addition, at the start of each Congress, the Senate adopts a standing order, by unanimous consent, that allows the Senate to receive nominations from the President and for them to be referred to committees even on days when the Senate does not meet in executive session. The majority leader, by custom, makes most motions and requests that determine when or whether a nomination will be called up for consideration. For example, the majority leader may move or ask unanimous consent to \"immediately proceed to executive session to consider the following nomination on the Executive Calendar.... \" By precedent, the motion to go into executive session to take up a specified nomination is not debatable. The nomination itself, however, is debatable. It is not in order for a Senator to move to consider a nomination that is not on the Calendar, and, except by unanimous consent, a nomination on the Calendar cannot be taken up until it has been on the Calendar at least one day (Rule XXXI, clause 1). A day for this purpose is a calendar day. In other words, a nomination reported and placed on the Calendar on a Monday can be considered on Tuesday, even if it is the same legislative day. If the Senate simply resolved into executive session, the business immediately pending would be the first item on the Executive Calendar . A motion to proceed to another matter on the Calendar would be debatable and subject to a filibuster. For this reason, the Senate does not begin consideration of executive business this way. Instead, the motion made to call up a nomination is a motion to proceed to executive session to consider that specific nomination. If the Senate is already in executive session, and the Leader wishes to call up a nomination, the Leader will first move that the Senate enter legislative session and then that the Senate enter executive session to take up the nomination. Both motions (to enter legislative session and to enter executive session) are not subject to debate and are decided by a simple majority. Typically they are approved by voice vote. The question before the Senate when a nomination is taken up is \"will the Senate advise and consent to this nomination?\" The Senate can approve or reject a nomination. A majority of Senators present and voting, a quorum being present, is required to approve a nomination. According to Senate Rule XXXI, any Senator who voted with the majority on the nomination has the option of moving to reconsider a vote on the day of the vote or the next two days the Senate meets in executive session. Only one motion to reconsider is in order on each nomination, and often the motion to reconsider is laid upon the table, by unanimous consent, shortly after the vote on the nomination. This action prevents any subsequent attempt to reconsider. After the Senate acts on a nomination, the Secretary of the Senate attests to a resolution of confirmation or disapproval and transmits it to the White House. Many nominations are brought up by unanimous consent and approved without objection; routine nominations often are grouped by unanimous consent in order to be brought up and approved together, or en bloc . A small proportion of nominations, generally to higher-level positions, may need more consideration. When there is debate on a nomination, the chair of the committee usually makes an opening speech. For positions within a state, Senators from the state may wish to speak on the nominee, particularly if they were involved in the selection process. Under Senate rules, there are no time limits on debate except when conducted under cloture or a unanimous consent agreement. Senate Rule XXII provides a means to bring debate on a nomination to a close, if necessary. Under the terms of Rule XXII, at least 16 Senators sign a cloture motion to end debate on a pending nomination. The motion proposed is \"to bring to a close the debate upon [the pending nomination].\" A Senator can interrupt a Senator who is speaking to present a cloture motion. Cloture may be moved only on a question that is pending before the Senate; therefore, absent unanimous consent, the Senate must be in executive session and considering the nomination when the motion is filed. After the clerk reads the motion, the Senate returns to the business it was considering before the presentation of the motion. Unless a unanimous consent agreement provides otherwise, the Senate does not vote on the cloture motion until the second day of session after the day it is presented; for example, if the motion was presented on a Monday, the Senate would act on it on Wednesday. One hour after the Senate has convened on the day the motion \"ripened,\" the presiding officer can interrupt the proceedings during an executive session to present a cloture motion for a vote. If the Senate is in legislative session when the time arrives for voting on the cloture motion, it proceeds into executive session prior to taking action on the cloture petition. According to Rule XXII, the presiding officer first directs the clerk to call the roll to ascertain that a quorum is present, although this requirement is often waived by unanimous consent. Senators then vote either yea or nay on the question: \"Is it the sense of the Senate that the debate shall be brought to a close?\" In April 2017, the Senate reinterpreted Rule XXII in order to allow cloture to be invoked on all nominations by a majority of Senators voting (a quorum being present), including Supreme Court justice nominations. This expanded the results of similar actions taken by the Senate in November 2013, which changed the cloture vote requirement to a majority for nominations except to the Supreme Court. Once cloture is invoked, for most nominations there can be a maximum of two hours of post-cloture consideration. The two hour maximum includes debate as well as any actions taken while the nomination is formally pending, including quorum calls. If cloture is invoked on nominations to the highest ranking executive branch positions, or on nominations to the Supreme Court or the U.S. Circuit Court of Appeals, then the maximum time for consideration after cloture is invoked is 30 hours (see Table 1 ). Under the rule, the 2 or 30 hours is floor time spent considering the nomination in the Senate, not simply the passage of time. Thus, for time to count against the 2 or 30-hour maximum, the Senate must be in session and the question must be pending. Time spent in recess or adjournment does not count, and if the Senate were to take up other business by unanimous consent, the time spent on that other business also would not count against the post-cloture time. A hold is a request by a Senator to his or her party leader to prevent or delay action on a nomination or a bill. Holds are not mentioned in the rules or precedents of the Senate, and they are enforced only through the agenda decisions of party leaders. A standing order of the Senate aims to ensure that any Senator who places a hold on any matter (including a nomination) make public his or her objection to the matter. Senators have placed holds on nominations for a number of reasons. One common purpose is to give a Senator more time to review a nomination or to consult with the nominee. Senators may also place holds because they disagree with the policy positions of the nominee. Senators have also admitted to using holds in order to gain concessions from the executive branch on matters not directly related to the nomination. The Senate precedents reducing the threshold necessary to invoke cloture on nominations, and the recent precedent reducing the time necessary for a cloture process, could affect the practice of holds. In some sense, holds are connected to the Senate traditions of mutual deference, since they may have originated as requests for more time to examine a pending nomination or bill. The effectiveness of a hold, however, ultimately has been grounded in the power of the Senator placing the hold to filibuster the nomination and the difficulty of invoking cloture to overcome a filibuster. Invoking cloture is now easier because the support of fewer Senators is necessary, and in most cases, the floor time required for a cloture process is less. The large number of nominations submitted by the President for Senate consideration, however, might still lead Senators to seek unanimous consent to quickly approve nominations. On April 3, 2019, the Senate reinterpreted Senate Rule XXII to reduce, from 30 hours to 2 hours, the maximum time allowed for consideration of most nominations after cloture is invoked. The Senate took this step by reversing two rulings by the Presiding Officer. The first vote established that \"postcloture time under rule XXII for all executive branch nominations other than a position at level 1 of the Executive Schedule under section 5312 of title 5 of the United States Code is 2 hours.\" On the second vote, the Senate established that \"postcloture time under rule XXII for all judicial nominations, other than circuit courts or Supreme Court of the United States, is 2 hours\" (see Table 1 ). It is uncommon for the Senate to reverse a decision by the Presiding Officer. Any Senator can attempt to reverse a ruling by making an appeal, and except in specific cases, appeals are decided by majority vote. In most circumstances, however, appeals are debatable, and therefore supermajority support (through a cloture process) is typically necessary to reach a vote to reverse a decision of the Presiding Officer. In the April 3 proceedings, however, the appeal was raised after cloture had been invoked. Senate Rule XXII states that after a successful cloture vote, \"appeals from the decision of the Presiding Officer, shall be decided without debate.\" Therefore, when the Majority Leader appealed the rulings of the Presiding Officer, the questions on whether the ruling should stand as the judgment of the Senate received a vote without an opportunity for extended debate. The Senate voted that the ruling should not stand, and thereby upheld instead the position of the Majority Leader. The future impact of these decisions on the nominations process is difficult to assess. The immediate and obvious expected impact is that the time between a cloture vote and a confirmation vote will decrease. In recent years, a vote to confirm a nominee has typically occurred the day after cloture was invoked (or on the next day of Senate session). Usually, Senators did not spend all of the time between the votes debating the nomination. Instead, Senators typically debated the nomination for some time post-cloture, but also usually entered into unanimous consent agreements that affected when the vote would occur. For example, it became common in recent Congresses for the Senate to agree, by unanimous consent, to consider the time the Senate spent in adjournment or recesses (e.g., overnight) to count as post-cloture time. The cloture rule affected the time of the vote set by unanimous consent: the rule provided for up to 30 hours of consideration of the nomination, and the Senate would agree to vote on the nomination a day later—reflecting the approximate time that the Senate could have debated the nomination under the rule. Assuming the Senate continues to establish times for voting on nominations by unanimous consent, those negotiations will be affected by the reinterpretation of the rule. In the absence of a unanimous consent agreement, most nominations can now receive a vote two hours after a vote to invoke cloture. The two hours is not formally divided between the parties pursuant to the rule (or pursuant to the reinterpretation of the rule), but it might be divided, by unanimous consent, between the Majority and Minority Leader. Even without an explicit unanimous consent agreement, the Majority and Minority Leaders are recognized before any other Senators. In addition, a Senator can speak for a maximum of one hour post-cloture. As a result, the Majority Leader could claim the first hour, and the Minority Leader the second, or vice versa. (Of course, Senators could speak on a nomination at times other than after cloture has been invoked, even when the nomination is not formally pending before the Senate. ) It is also possible that the recent reinterpretation of the rule will affect how often the Senate relies on the cloture process to approve nominations. After the first reinterpretation of the cloture rule in 2013, the number of nominations subjected to cloture motions increased significantly in both of the Congresses when the Senate was controlled by the same party as the President (113 th (2013-2014) and 115 th (2017-2018) Congresses). Nominations that are not confirmed or rejected are returned to the President at the end of a session or when the Senate adjourns or recesses for more than 30 days (Senate Rule XXXI, paragraph 6). If the President still wants a nominee considered, he must submit a new nomination to the Senate. The Senate can, however, waive this rule by unanimous consent, and it often does to allow nominations to remain \"in status quo\" between the first and second sessions of a Congress or during a long recess. The majority leader or his designee also may exempt specific nominees by name from the unanimous consent agreement, allowing them to be returned during the recess or adjournment. The Constitution, in Article II, Section 2, grants the President the authority to fill temporarily vacancies that \"may happen during the Recess of the Senate.\" These appointments do not require the advice and consent of the Senate; the appointees temporarily fill the vacancies without Senate confirmation. In most cases, recess appointees have also been nominated to the positions to which they were appointed. Furthermore, when a recess appointment is made of an individual previously nominated to the position, the President usually submits a new nomination to the Senate in order to comply with a provision of law affecting the pay of recess appointees (5 U.S.C. 5503(a)). Recess appointments have sometimes been controversial and have occasionally led to inter-branch conflict.", "summary": "Article II, Section 2, of the Constitution provides that the President shall appoint officers of the United States \"by and with the Advice and Consent of the Senate.\" This report describes the process by which the Senate provides advice and consent on presidential nominations, including receipt and referral of nominations, committee practices, and floor procedure. Committees play the central role in the process through investigations and hearings. Senate Rule XXXI provides that nominations shall be referred to appropriate committees \"unless otherwise ordered.\" Most nominations are referred, although a Senate standing order provides that some \"privileged\" nominations to specified positions will not be referred unless requested by a Senator. The Senate rule concerning committee jurisdictions (Rule XXV) broadly defines issue areas for committees, and the same jurisdictional statements generally apply to nominations as well as legislation. A committee often gathers information about a nominee either before or instead of a formal hearing. A committee considering a nomination has four options. It can report the nomination to the Senate favorably, unfavorably, or without recommendation, or it can choose to take no action. It is more common for a committee to take no action on a nomination than to reject a nominee outright. The Senate handles executive business, which includes both nominations and treaties, separately from its legislative business. All nominations reported from committee are listed on the Executive Calendar, a separate document from the Calendar of Business, which lists pending bills and resolutions. Generally speaking, the majority leader schedules floor consideration of nominations on the Calendar. Nominations are considered in \"executive session,\" a parliamentary form of the Senate in session that has its own journal and, to some extent, its own rules of procedure. The Senate can call up a nomination expeditiously, because a motion to enter executive session to consider a specific nomination on the Calendar is not debatable. This motion requires a majority of Senators present and voting, a quorum being present, for approval. After a nomination has been called up, the question before the Senate is \"will the Senate advise and consent to this nomination?\" A majority of Senators voting is required to approve a nomination. However, Senate rules place no limit on how long a nomination may be debated, and ending consideration could require invoking cloture. On April 6, 2017, the Senate reinterpreted Rule XXII in order to allow cloture to be invoked on nominations to the Supreme Court by a majority of Senators voting. This expanded the results of similar actions taken by the Senate in November 2013, which changed the cloture vote requirement to a majority for nominations other than to the Supreme Court. After the 2013 decision, the number of nominations subjected to a cloture process increased. On April 3, 2019, the Senate reinterpreted Rule XXII again. The Senate reduced, from 30 hours to 2 hours, the maximum time nominations can be considered after cloture has been invoked. This change applied to all executive branch nominations except to high-level positions such as heads of departments, and it applied to all judicial nominations except to the Supreme Court and the U.S. Circuit Court of Appeals. The full impact of this change is difficult to assess at this time, but it is likely to shorten the time between a cloture vote and a vote on the nomination. If Senators respond as they did to the last reinterpretation of the cloture rule, it might also increase the number of nominations subjected to a cloture process. Nominations that are pending when the Senate adjourns sine die at the end of a session or recesses for more than 30 days are returned to the President unless the Senate, by unanimous consent, waives the rule requiring their return (Senate Rule XXXI, clause 6). If a nomination is returned, and the President still desires Senate consideration, he must submit a new nomination.", "document_type": "crs"}
{"report": "The Department of the Interior (DOI) is a federal executive department responsible for the conservation and use of roughly three-quarters of U.S. public lands. DOI defines its mission as to protect and manage the nation's natural resources and cultural heritage for the benefit of the American people; to provide scientific and scholarly information about those resources and natural hazards; and to exercise the country's trust responsibilities and special commitments to American Indians, Alaska Natives, and island territories under U.S. administration. Initially conceived as a \"home department\" in 1849 to oversee a broad array of internal affairs, DOI has evolved to become the nation's principal land management agency, charged with administering the use of more than 480 million acres of public lands, 700 million acres of subsurface minerals, and 1.7 billion acres of the outer continental shelf (OCS). As is the case for many federal departments, DOI's organizational structure and functions are under continual congressional examination as part of Congress's lawmaking and oversight functions. Similarly, DOI's executive branch structure and operations are also the subject of administrative scrutiny. Over the course of the department's roughly 170-year history, DOI has evolved in response to the needs of the nation and at the behest of Congress and the President (see Figure 1 for a timeline of selected events that influenced the current structure of the department). Some of these changes have been relatively broad in nature, such as the creation of a new agency or regulatory body. Other shifts have been smaller in scope, such as modifications to interagency processes or reorganizations in how resources or responsibilities are distributed among offices or programs. DOI reorganization proposals put forth by the Trump Administration have renewed attention to the structural relationship between the department's various bureaus and their regulatory responsibilities. In March 2017, President Trump signed an executive order calling on agency leaders to, \"if appropriate,\" submit a proposed reorganization plan for their agencies to the director of the Office of Management and Budget within 180 days. In September 2017, then-Secretary of the Interior Ryan Zinke issued a reorganization proposal for DOI in response to this order. In June 2018, President Trump issued a more expansive government-wide reorganization proposal, which included further recommendations and proposals affecting the structure of DOI. In addition to these broader proposals, smaller interagency administrative changes either took effect in FY2019 or are proposed for FY2019 implementation, including the transfer and consolidation of several department offices and programs. This report is a primer to understanding the organizational framework under which DOI operates, while providing context for how ongoing and proposed reorganizations might affect these operations. The report provides a timeline of congressional and executive actions that have shaped the structure and function of DOI since its establishment. It also offers a brief summary of DOI's history, mission, and current structure, as well as an overview of the primary functions of its multiple bureaus and offices as of December 2018. Employment figures and corresponding maps illustrate the varying regional office structures among DOI bureaus, as they exist currently. In addition, the report includes an overview of the annual funding and appropriations process for the department. Although the report provides a broad summary of the proposed reorganization efforts under way or in effect as of December 2018, it does not offer a detailed analysis of these plans or their potential impact on DOI's structure and function. A list of CRS experts for the issue areas covered by DOI and its bureaus is at the end of the report. In general, this report contains the most recently available data and estimates as of December 2018. Prior to the establishment of DOI in 1849, Congress apportioned domestic affairs in the United States across the three original executive departments: Department of State, Department of War (now Department of Defense), and Department of the Treasury. The Department of State housed the nation's Patent Office, and the Department of War housed the Office of Indian Affairs and the Pension Office, which at the time administered pensions solely for military personnel. Meanwhile, the General Land Office (GLO), which oversaw and disposed of the public domain, was placed by Congress within the Department of the Treasury because of the revenue generated by the GLO from land sales. By the 1840s, the growing federal estate acquired through the Louisiana Purchase, the Mexican-American War, and the newly negotiated Oregon Territory placed an increasing burden on the departments and their leadership. In 1848, then-Secretary of the Treasury Robert J. Walker submitted to Congress a proposal that would bring together GLO, the Office of Indian Affairs, and several other disparate offices and functions under a single, separate executive department. Congress officially established the Department of the Interior on March 3, 1849. In addition to absorbing the functions of the Patent Office, the Office of Indian Affairs, Pension Office, and GLO, the newly established DOI assumed responsibility for a wide range of other domestic matters. As part of DOI's organic legislation, Congress conferred on the Secretary of the Interior the \"supervisory and appellate powers\" held by the President over the commissioner of Public Buildings, as well as oversight responsibility for both the U.S. Census and the Penitentiary of the District of Columbia. Over time, Congress further expanded the department's functions to include the construction of the national capital's water system, the colonization of freed slaves in Haiti, water pollution control, and the regulation of interstate commerce. Most of these early activities eventually were transferred from DOI's charge as Congress began to authorize and create new executive departments and independent agencies to handle this growing list of responsibilities. Now, DOI has evolved to focus primarily on protecting and managing natural resources, conducting scientific research, and exercising the nation's trust responsibilities to American Indians, Alaska Natives, and affiliated island communities. DOI is a Cabinet-level department that employs approximately 65,000 full-time employees across nine technical bureaus and various administrative and programmatic offices. In addition to its headquarters in Washington, DC, DOI has staff in roughly 2,400 locations across the United States, including both regional offices and field centers. Each of DOI's technical bureaus and programmatic offices has a unique mission and set of responsibilities, as well as a distinct organizational structure that serves to meet its functional duties. Figure 2 shows the DOI organization chart as of December 2018. The leadership team and senior executives of DOI provide oversight and guidance for the department's various offices, bureaus, and field locations. The department is administered and overseen by the Secretary of the Interior (referred to in this report as the Secretary ) and a Deputy Secretary, who serves in a leadership capacity under the Secretary. The President appoints both positions, and the U.S. Senate confirms them (see text box for a full list of DOI appointees requiring Senate confirmation). Serving under the Secretary and Deputy Secretary are six Assistant Secretaries, who oversee DOI's nine technical bureaus and different administrative and programmatic offices (see Figure 2 for these position titles and responsibilities). In addition to the Secretary, the Deputy Secretary, and the six Assistant Secretaries, DOI has a number of other congressionally mandated leadership positions. Like other Cabinet-level agencies, DOI has an inspector general, who administers the office responsible for providing oversight to DOI's programs, operations, and management. The DOI solicitor heads the Office of the Solicitor, which provides legal counsel, advice, and representation for the department. In 1994, Congress established the position of special trustee for Indian Affairs to manage DOI's fiduciary responsibilities to American Indians. Since its establishment, the Office of the Special Trustee (OST) has operated independently from the Bureau of Indian Affairs (BIA), which held these responsibilities prior to 1994. Finally, the chairperson of the National Indian Gaming Commission oversees an independent regulatory body within DOI responsible for administering and promoting economic development through gaming on Indian lands. Similar to the Special Trustee, the chairperson of the commission operates in an independent capacity separate from the Assistant Secretary of Indian Affairs. Nine technical bureaus comprising more than 90% of the DOI workforce are responsible for implementing the department's mission and responsibilities. The names, structures, and duties of these bureaus have evolved over time in accordance with both administrative actions and shifts in the authorities provided to them by Congress. Below is a brief overview of each bureau, the historical context within which it was created, its organizational structure, and its current mission and responsibilities. Bureaus appear below in alphabetical order. An \"At a Glance\" box provides a snapshot of key information and data for each respective bureau. The \"Established\" date reflects the year in which a bureau was created. The \"Key Statute\" listed may represent the initial legislative authorization for a bureau to carry out its regulatory duties, or it may reference an agency's organic act, which articulates it mission and/or responsibilities. This information does not reflect the full list of governing statutes for DOI bureaus, as each bureau is subject to numerous laws. The number of employees listed for each bureau reflects the average for the four reporting periods from September 2017 to June 2018, with employment figures rounded to the nearest hundred, as reported to OPM. These annual averages differ from the figures included in the narrative sections of each agency, which reflect June 2018 figures, the most recently reported by OPM's Fedscope database as of the publication of this report. DOI employee data are discussed in more detail in the section \"DOI Employment.\" Established in 1824, the Bureau of Indian Affairs (BIA) is the oldest bureau within DOI, predating the department by 25 years. Then-Secretary of War John C. Calhoun established the Office of Indian Affairs to help centralize what was at the time a fractured administrative approach to Indian policy and relations in the United States. It was not until 1832 that Congress officially recognized the Office of Indian Affairs as a bureau of the War Department by appointing a commissioner to oversee the agency. The Office of Indian Affairs was transferred to DOI in 1849, when the department was created. DOI formally adopted the name Bureau of Indian Affairs in 1947. BIA provides services to federally recognized American Indian and Alaska Native tribes and their nearly 1.9 million members. These services include disaster relief, child welfare, and road construction, as well as the operation and funding of law enforcement, tribal courts, and detention facilities within native villages and reservations. The bureau also is responsible for protecting and administering assets on tribal lands, including the management of 55 million surface acres and 57 million acres of subsurface mineral estates held in trust by the United States. The BIA was also previously responsible for providing elementary and secondary education and educational assistance to Indian children through BIA's Office of Indian Education Programs. In 2006, however, the Secretary of the Interior separated the BIA education programs from the rest of the BIA and placed them in a new Bureau of Indian Education (BIE) under the Assistant Secretary—Indian Affairs. As of FY2018, the BIE education system served approximately 47,000 students through 169 elementary/secondary schools and 14 dormitories located in 23 states. For the purposes of this report, BIE is not considered a technical bureau of DOI. However, BIE employment figures are included in BIA totals listed above and in the \" DOI Employment Levels \" section. The BIA is administered by a director who oversees the agency's functions and reports to the Assistant Secretary of Indian Affairs. Similar to other DOI agencies, the BIA has a three-tiered organizational structure, with leadership and senior executives operating from headquarters in Washington, DC, and 12 regional offices that oversee 53 field offices (referred to as agencies by the BIA); these agencies deliver program services directly to tribal communities. As of June 2018, the BIA and BIE combined had roughly 7,000 employees. The Bureau of Land Management (BLM) was created in 1946, following the merger of DOI's General Land Office (GLO) and the U.S. Grazing Service, known previously as the Division of Grazing Control and subsequently as the Division of Grazing. BLM manages just under 250 million acres of public land — roughly 10% of the total U.S. land area. The vast majority of this land (more than 99%) is located in 12 western states, including Alaska. The agency also is responsible for approximately 800 million acres of the federal onshore subsurface mineral estate and for mineral development on about 60 million acres of Indian trust lands. BLM manages public lands under the dual framework of multiple use and sustained yield, as required under the Federal Land Policy and Management Act of 1976. These uses include a wide range of activities, such as energy and mineral development, livestock grazing, and preservation, as well as hunting, fishing, and other recreational activities. The BLM national headquarters in Washington, DC, is home to the agency's leadership, which provides strategic direction, policy guidance, and oversight of BLM's national-level activities. Twelve state offices—which are akin to the regional office structure of other agencies—carry out BLM's mission within their respective geographical areas of jurisdiction. Reporting to these 12 state offices are numerous district offices, which are further divided into localized field offices. Field offices oversee the day-to-day management of public land resources and the on-the-ground delivery of BLM programs and services. BLM also has several national-level support and service centers. As of June 2018, BLM had roughly 10,700 employees. Established in 2010, the Bureau of Ocean Energy Management (BOEM) manages development of the nation's energy and mineral resources on the outer continental shelf (OCS). The Outer Continental Shelf Lands Act (OCSLA) of 1953 defines the OCS as all submerged lands lying seaward of state coastal waters that are subject to federal jurisdiction, constituting approximately 1.7 billion acres. Under OCSLA, the Secretary of the Interior has the authority to manage the development of the OCS. Prior to BOEM's establishment, the Secretary delegated the leasing and management authority granted by OCSLA to the DOI agency known as the Minerals Management Service (MMS). During its existence, MMS had three primary responsibilities concerning offshore development: resource management, safety and environmental oversight and enforcement, and revenue collection. Following the Deepwater Horizon oil spill in 2010, concerns about perceived conflicts between these three missions prompted then-Secretary of the Interior Ken Salazar to reorganize the agency. MMS was formally abolished, and three new units were established within DOI: BOEM, the Bureau of Safety and Environmental Enforcement (BSEE), and the Office of Natural Resource Revenue (ONRR). As of June 2018, BOEM employed approximately 500 people to carry out its mission of managing offshore conventional and renewable energy resources on the OCS. The agency's leadership in Washington, DC, divides itself between three programmatic offices covering strategic resource development, environmental analysis and applied science, and offshore renewable energy development. Meanwhile, regional offices oversee on-the-ground operations and policy implementation in the four OCS regions in the Atlantic, the Gulf of Mexico, the Pacific, and Alaska. The large-scale construction of federal dams and irrigation projects throughout the 20 th century was born, in part, out of a growing need for water supplies in the arid and rapidly expanding western United States. To meet this need, Congress passed the Reclamation Act of 1902, which set aside federal dollars to fund irrigation projects in 13 western states. Shortly thereafter, Congress established the U.S. Reclamation Service as a program within the U.S. Geological Survey (USGS). In its first five years, the service began work on more than 30 projects across the American West. In 1907, the Secretary of the Interior elevated the program to an independent bureau within DOI before renaming it the Bureau of Reclamation (Reclamation) in 1923. Since its establishment, Reclamation has constructed or overseen the completion of more than 600 projects across the western United States. Beneficiaries of these projects generally repay the costs for construction and operations of these facilities to the federal government over extended terms (in some cases without interest). The exception are costs deemed \"federal\" in nature, as federal costs are nonreimbursable. Whereas Reclamation originally focused almost entirely on building new water storage and diversion projects, the agency now largely focuses on the operation and maintenance of existing facilities. Reclamation's mission also has expanded to include support for other efforts to improve water supplies in the western United States, such as promoting water reuse and recycling efforts, desalination projects, and Indian water rights settlements. A presidentially appointed commissioner oversees the work of Reclamation and, along with other senior-level executives, manages the overall operations of the agency from its headquarters in Washington, DC. Due to the amount of projects and employees based in western states, Reclamation also maintains federal offices in Denver, CO, which administer many of Reclamation's programs, initiatives, and activities. These programs include efforts that address dam safety, flood hydrology, fisheries and wildlife resources, and research programs that seek to improve management and increase water supplies. Meanwhile, five regional offices manage Reclamation's water projects and oversee various local area offices responsible for the day-to-day operations of the nearly 180 projects currently under the agency's authority. As of June 2018, Reclamation had roughly 5,500 employees. Following the 2010 restructuring of MMS, the Bureau of Safety and Environmental Enforcement (BSEE) inherited the safety and environmental enforcement functions previously carried out by MMS. These functions are primarily concerned with the offshore energy industry on the OCS—largely oil and natural gas production. BSEE's responsibilities include regulation of worker safety, emergency preparedness, environmental compliance, and resource conservation. BSEE is administered by a director based out of the agency's headquarters in Washington, DC. The agency also has a second headquarters location in Sterling, VA, that oversees many of BSEE's national programs (see below) and provides technical and administrative support for the bureau. To carry out the duties of the department, BSEE coordinates between leadership in these two locations and staff operating across three regional offices (serving Alaska, the Pacific, and the Gulf of Mexico OCS regions), and five Gulf Coast district offices (Houma, Lafayette, Lake Charles, and New Orleans, LA, and Lake Jackson, TX).  Senior leadership sets the policies and performance goals implemented at these local offices across the agency's six national programs. As of June 2018, BSEE had approximately 800 employees across the United States. In 1916, the National Park Service Organic Act (Organic Act) centralized administration of the nation's national parks and national monuments. With the Organic Act, Congress created the National Park Service (NPS) and established the agency's dual mandate—to protect the country's natural and cultural resources while providing for their public use and enjoyment. In undertaking that mission, NPS administers approximately 80 million acres of federal land, including 418 units that comprise the National Park System across all 50 states and U.S. territories. Each NPS unit is overseen by a park superintendent, who manages day-to-day administration in accordance with both the agency's mission and any laws and regulations specific to the unit. These units and their leadership report to seven regional directors, who oversee park management and program implementation across defined geographic regions. At the national level, NPS is led by a director and senior executives who manage national programs, policy, and budget from the agency's headquarters in Washington, DC. As of June 2018, NPS employed roughly 23,000 employees. The Office of Surface Mining Reclamation and Enforcement (OSMRE) was established as a bureau within DOI following passage of the Surface Mining Control and Reclamation Act (SMCRA) in 1977. The law provided the new agency with the statutory authority to carry out and administer a nationwide program aimed at regulating coal mining in the United States. In particular, OSMRE works with states and tribal communities to reclaim abandoned coal mines, and regulate active surface coal mining operations to minimize adverse impacts to the environment and local communities. SMCRA also authorizes OSMRE to issue federal payments to the United Mine Workers of America (UMWA) coal mineworker health benefits plans. OSMRE serves as the lead regulatory authority over surface coal mining and reclamation activities for states and tribal communities under the authority granted by Title V of SMCRA. SMCRA does, however, allow OSMRE to delegate regulatory primacy to states and tribes upon demonstration that a given state or tribe has established regulatory requirements consistent with federal standards. Although OSMRE operates in an oversight capacity for states that have established such regulatory primacy, no tribe has attained this delegated authority to date (although tribes are eligible to seek regulatory primacy as well). OSMRE fulfills its missions through a three-tiered organizational structure: headquarters in Washington, DC; three regional Offices (Appalachian, Mid-continent, and Western Offices); and multiple area and field Offices that report directly to the regional offices. OSMRE is the smallest of DOI's technical bureaus, employing approximately 400 people nationwide as of June 2018. The U.S. Fish and Wildlife Service (FWS) is the principal federal agency tasked with the conservation, protection, and restoration of fish, wildlife, and natural habitats across the United States and its insular territories. The history of FWS can be traced back to the creation of two now-defunct agencies in the late 1800s: the U.S. Commission on Fish and Fisheries in the Department of Commerce and the Division of Economic Ornithology and Mammalogy in the Department of Agriculture. These two agencies were transferred to DOI in 1939 and subsequently consolidated, creating a single agency known at the time as the Fish and Wildlife Service. In 1956, Congress established the U.S. Fish and Wildlife Service. The FWS has a primary-use mission \"to conserve, protect and enhance fish, wildlife and plants and their habitats for the continuing benefit of the American people.\" Among its responsibilities, FWS manages the National Wildlife Refuge System (NWRS) under the authority granted by the National Wildlife Refuge System Administration Act of 1966. The NWRS is a network of lands and waters set aside to conserve the nation's fish, wildlife, and plants that has grown to include more than 560 refuges, 38 wetland management districts, and other protected areas. More than 836 million acres of lands and waters comprise the NWRS; of these lands and waters, 146 million acres are classified as National Wildlife Refuges. In addition, FWS, along with the National Oceanic and Atmospheric Administration (NOAA) in the Department of Commerce, is responsible for implementing the Endangered Species Act (ESA). The ESA aims to protect species that are in danger of becoming extinct or could be in danger of becoming extinct in the near future. FWS also assists in international conservation efforts, enforces federal wildlife laws, and administers grant funds to states and territories for fish and wildlife programs. Similar to most DOI agencies, FWS has a three-tiered organizational structure comprised of national, regional, and local field offices across the United States. The headquarters office—led by an agency director—is split between two locations in Washington, DC, and Falls Church, VA, which together have primary responsibility for policy formulation and budgeting across the agency's 13 major program areas. Eight regional offices oversee FWS field offices and science centers across the United States and U.S. territories, which implement these policies and programs at the local level. As of June 2018, FWS had roughly 9,000 employees across the country. In 1878, the National Academy of Sciences issued a report to Congress asking Congress to provide a plan for surveying and mapping the western territories of the United States. In response, Congress passed an appropriations bill the following year that authorized the creation of the U.S. Geological Survey (USGS). Congress established the USGS for the express purpose of overseeing the \"classification of the public lands, and examination of the geological structure, mineral resources, and products of the national domain.\" The authorities and responsibilities of USGS have shifted and evolved over time, with many of its prior activities leading to the formation of new governmental agencies. Today, however, USGS serves as the science agency of DOI, providing physical and biological information across seven interdisciplinary areas: (1) water resources, (2) climate and land use change, (3) energy and minerals, (4) natural hazards, (5) core science systems, (6) ecosystems, and (7) environmental health. Unlike other DOI bureaus, USGS has no regulatory or land management mandate. In addition to its seven programmatic areas, USGS is further organized into seven geographic regions, each under the supervision of a regional director. The regional directors report to a presidentially appointed director based out of the agency's headquarters in Reston, VA. Within each region, USGS operates science centers, laboratories, and field offices that monitor, assess, and conduct research on a wide range of topics. Overall, USGS had roughly 8,000 employees as of June 2018. In addition to the nine technical bureaus, DOI has multiple departmental offices that provide leadership, coordination, and services to the department's various bureaus and programs. These offices coordinate department-wide activities and oversee specialized functions under DOI's jurisdiction not administered directly at the bureau level. The Office of the Secretary provides leadership for the entire department through the development of policy and through executive oversight of the annual budget and appropriations process. The Office of the Secretary also manages the administrative operations of DOI, including (but not limited to) financial services, information technology and resources, acquisition, and human resources. In addition, the Office of the Secretary manages six other department-wide programs, offices, and revolving funds: 1. Central Hazardous Materials Fund provides remediation services to national parks, national wildlife refuges, and other DOI-managed lands impacted by hazardous substances. This remediation process follows the guidelines established under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)—also known as the Superfund statute. 2. Natural Resource Damage Assessment and Restoration program coordinates and oversees DOI's restoration efforts for DOI-managed lands impacted by oil spills or the release of hazardous substances. In partnership with federal, state, and tribal co-trustees, the program conducts damage assessments, planning, and restoration implementation on DOI lands. 3. Office of Natural Resource s Revenue (ONRR) is responsible for the collection, accounting, and verification of any natural resource and energy revenue generated from federal and Indian leases and royalty payments. (See \" Bureau of Ocean Energy Management \" section for the history behind ONRR's creation.) 4. Payments in Lieu of Taxes (PILT) program makes payments to nearly 1,900 local government units across the United States and its insular areas where certain federal lands are located. The PILT payments are intended to help offset the loss in property taxes to local governments caused by the presence of federal lands, which largely are exempt from taxation. 5. Wildland Fire Management program is responsible for addressing wildfires on public lands. The program is comprised of the Office of Wildland Fire and the four DOI land management bureaus with wildland fire management responsibilities (BIA, BLM, FWS, and NPS). 6. Working Capital Fund (WCF) is a revolving fund that finances centralized administrative services and systems to DOI bureaus and offices. The WCF aims to reduce duplicative systems and staff across DOI; it provides financing for centralized functions that provide payroll, accounting, information technology, and other support services. In 1946, Congress established the Office of the Solicitor to provide advice, counsel, and legal representation to DOI. The office manages DOI's Ethics Office and resolves Freedom of Information Act appeals. To accomplish this work, the Office of the Solicitor employs more than 400 employees, 300 of whom are licensed attorneys. The Office of the Solicitor is organized into the Immediate Office of the Solicitor, the Ethics Office, five legal divisions, an administrative division, and eight regional offices. In 1978, Congress established inspector general positions and offices in more than a dozen specific departments and agencies, including DOI. The mission of the Office of the Inspector General (OIG) is to provide independent oversight and accountability to the programs, operations, and management of the department. OIG has three primary office divisions: (1) the Office of Management serves as the administrative arm; (2) the Office of Investigations conducts, supervises, and coordinates internal investigations on a variety of potential abuses; and (3) the Office of Audits, Inspections, and Evaluations reviews DOI programs and operations for effectiveness and evaluates the financial statements and expenditures of these programs. The OIG also operates three regional offices, located in Herndon, VA; Lakewood, CA; and Sacramento, CA. The American Indian Trust Fund Management Reform Act established the Office of the Special Trustee for American Indians (OST) in 1994. The OST provides fiduciary oversight and management of the more than 55 million surface acres and 57 million subsurface mineral acres of tribal assets held in trust by the federal government. The office carries out its mission from a national office in Washington, DC, and through five regional offices across the nation. The OST operates independently from BIA, which carried out these trust responsibilities prior to the 1994 legislation. However, in 2016, Congress passed the Indian Trust Asset Reform Act (ITARA) requiring the Secretary to prepare \"a transition plan and timetable for the termination of the Office of the Special Trustee\" within two years. Although OST still exists, the 2019 Budget Justification proposes transferring some of the functions of OST to other DOI agencies and offices to comply with the reorganization requirements mandated by Congress in ITARA. The Budget Justification also includes a proposal to have OST — and the appointed Special Trustee — report directly to the Assistant Secretary of Indian Affairs starting in FY2019. More information regarding this change in OST organizational structure and function is provided in the \" DOI Reorganization Plans and Proposals: Issues for Congress \" section. The United States acquired its first insular territories in 1898 with the annexation of the Hawaiian Islands and the acquisition of Puerto Rico, Guam, and the Philippines from Spain following the Spanish-American War. For much of the early 20th century, territorial oversight of these new possessions fell largely to the War Department. In 1934, President Franklin D. Roosevelt created the Division of Territories and Island Possessions to centralize responsibility for coordinating oversight of the nation's insular regions. The division—now known as the Office of Insular Affairs—currently administers federal oversight of American Samoa, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, with the goal of promoting their economic, social, and political development. The office also administers federal assistance and U.S. economic commitments to the Freely Associated States: the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. As of June 2018, the total number of employees working for DOI was 69,563, according to OPM (see Table 1 ). The data reflect \"on-board employment\" figures, which calculate the number of employees in pay status at the end of the quarter. Data are published on a quarterly basis (March, June, September, and December); however, figures for September and December 2018 were not available prior to the publication of this report. Because OPM data include full-time, part-time, and seasonal staff, employment totals tend to spike during the summer months, when agencies such as NPS, BLM, and FWS increase their seasonal workforce. OPM figures differ from DOI Budget Office data. The DOI Budget Office calculates employment by full-time equivalents (FTEs), defined as the total number of regular straight-time hours (not including overtime or holiday hours) worked by employees, divided by the number of compensable hours applicable to each fiscal year. The OPM Fedscope data presented in Table 1 are available by location of employment for each bureau and office reflected. Table 2 shows DOI employment figures both within and outside the DC core-based statistical area (CBSA). OPM defines a CBSA as \"a geographic area having at least one urban area of population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties.\" CBSAs differ from metropolitan statistical areas (MSAs)—a separate statistical definition also reported on by OPM—which typically encompass a smaller geographic area than CBSAs. For example, the DC MSA includes many but not all of the counties and surrounding cities covered under the DC CBSA. For instance, the DC MSA excludes Reston, VA, where the headquarters of USGS is located. Discretionary funding for DOI is provided primarily through Title I of the annual Interior, Environment, and Related Agencies appropriations bill. The Bureau of Reclamation (Reclamation) and the Central Utah Project are the exceptions, as they receive funding through the Energy and Water Development appropriations bill. Several of the agencies that receive discretionary funds through these two appropriations bills also receive mandatory funding under various authorizing statutes. Figure 3 shows the budget trends for both the Interior and the Energy and Water appropriations bills over the past five fiscal years (FY2014-FY2018). From FY2014 to FY2018, total DOI appropriations increased 29% in current dollars. This increase includes the $566 million in FY2018 emergency supplemental appropriations for disaster relief appropriated to DOI in P.L. 115-72 and P.L. 115-123 . If supplemental appropriations are not considered, total DOI appropriations increased 23% over the same period. Figure 4 shows the breakdown of enacted FY2018 appropriations for DOI bureaus, offices, and programs funded through the Interior and the Energy and Water appropriations bills. Figures are presented in total dollars (in millions) and as percentages of the department's $15.2 billion in enacted appropriations for FY2018. Supplemental emergency appropriations for FY2018 are shown as a separate segment of the total DOI budget; however, these funds were distributed across several DOI bureaus and programs. Executive branch reorganization efforts are an ongoing area of congressional interest and scrutiny as part of Congress's lawmaking and oversight functions. Congress uses a variety of tools—including authorizing legislation, appropriations legislation, and oversight activities—to shape and organize the executive branch and its agencies. Several changes to DOI and its organizational structure have taken effect starting in FY2019. Congress previously authorized and approved some of these changes and proposals in the form of appropriations and/or authorizing legislation. Other changes—including broader reorganization proposals put forth by the Trump Administration—have been proposed for FY2019 but are not in effect. The 115 th Congress approved several internal office transfers and realignments. For instance, Congress transferred appropriations for the Office of Natural Resources Revenue (ONRR) from DOI's Office of the Secretary to Department-Wide Programs for FY2018. Meanwhile, the 2019 Interior Budget in Brief reflects the transfer of both DOI's Oceans Program and the Office of International Affairs from the Office of the Assistant Secretary, Policy, Management and Budget to the Office of the Assistant Secretary, Insular and International Affairs. The 114 th Congress passed legislation authorizing the reorganization of the Office of the Special Trustee for American Indians (OST). In 2016, ITARA directed the Secretary to—among other things—\"ensure that appraisals and valuations of Indian trust property are administered by a single bureau, agency, or other administrative entity within the Department\" not later than 18 months after enactment. To comply with this requirement, the FY2019 budget request reflects the approved transfer of the Office of Appraisal Services within OST to the Office of the Secretary's Appraisal and Valuation Services Office, thereby consolidating all appraisal activities within a single entity. This change is in addition to a proposed shift in the reporting relationship of OST also included in the FY2019 request. Under this proposal, starting in FY2019, OST would report through the Office of the Assistant Secretary of Indian Affairs rather than directly to the Office of the Secretary (see Figure 2 ). As noted in the \" Introduction \" to this report, the Trump Administration also proposed additional, broader DOI reorganizational plans for consideration. On March 13, 2017, President Trump issued Executive Order 13781 to \"improve the efficiency, effectiveness, and accountability of the executive branch.\" The order required executive agency heads to, \"if appropriate,\" submit a proposed reorganization plan for their agencies to the director of the Office of Management and Budget within 180 days. Then-Secretary of the Interior Zinke subsequently submitted a proposal for reorganization aimed at—among other goals—improving agency coordination and service to the public. Included in this proposal is a plan to consolidate the various agency-specific regional boundaries (as seen in the \"At a Glance\" boxes included in each bureau summary) into 12 Unified Regional Boundaries. In addition, the plan looks to shift some resources and authority \"to the field,\" potentially in the form of staff, budget, and/or facilities. President Trump issued a separate set of reorganization recommendations in June 2018 as part of the Delivering Government Solutions in the 21 st Century report. Two proposals in particular would affect DOI and its structure. The first would consolidate most of the U.S. Army Corps of Engineers' (USACE's) Civil Works Division within DOI, including USACE's activities related to flood and storm damage reduction and aquatic ecosystem restoration. The second recommendation would transfer NOAA's National Marine Fisheries Service from the Department of Commerce to DOI and merge it with the FWS. This proposal would consolidate administration of the ESA and other wildlife laws under one agency. The transfers and reorganization proposals discussed here illustrate the potential changes in the structure of DOI and its operations. They also provide insight into areas of possible congressional and executive branch interest moving forward. The 116 th Congress may consider additional oversight of these proposals and/or propose new initiatives and plans for the organization and administration of DOI and its bureaus.", "summary": "The U.S. Department of the Interior (DOI) is a federal executive department responsible for the conservation and administration of the public lands and mineral estate of the United States. DOI describes its mission as protecting and managing the nation's natural resources and cultural heritage for the benefit of the American people; providing scientific and scholarly information about those resources and natural hazards; and exercising the nation's trust responsibilities and special commitments to American Indians, Alaska Natives, and island territories under U.S. administration. As part of its responsibilities, DOI oversees and fosters the use of more than 480 million acres of public lands, 700 million acres of subsurface minerals, and 1.7 billion acres of the outer continental shelf. Each year, Congress deliberates legislation that could affect DOI's management of this vast federal estate. As a result, understanding the roles and responsibilities of DOI's various components and offices is valuable when crafting legislation that affects the department's operations and ability to fulfill its mission. DOI primarily implements its responsibilities and mission through nine technical bureaus that make up more than 80% of the agency's workforce. These technical bureaus are the Bureau of Indian Affairs (BIA), Bureau of Land Management (BLM), Bureau of Ocean Energy Management (BOEM), Bureau of Reclamation (Reclamation), Bureau of Safety and Environmental Enforcement (BSEE), National Park Service (NPS), Office of Surface Mining Reclamation and Enforcement (OSMRE), U.S. Fish and Wildlife Service (FWS), and U.S. Geological Survey (USGS). Each of these bureaus has a unique mission and set of responsibilities, as well as a distinct organizational structure that serves to meet its functional duties. In addition to these technical bureaus, DOI has multiple departmental offices, which provide leadership, coordination, and services to DOI's various bureaus and programs. As of June 2018, DOI employed a staff of 69,563 nationwide across its bureaus and offices. However, total DOI employment figures fluctuate throughout the year, as some bureaus rely on seasonal and part-time staff, increasing staff totals during the summer months. The Office of Personnel Management (OPM) reports the average total DOI employment as 65,350 for the four reporting periods from September 2017 to June 2018. The largest bureau within DOI based on number of staff is NPS, which averaged close to 20,000 staff over the same time period—more than twice the size of the second-largest bureau, BLM. The smallest technical bureau by employment is OSMRE, which averaged just over 400 employees. Approximately 10% of all DOI staff are within the District of Columbia core-based statistical area (CBSA), which includes the District of Columbia and selected counties in Maryland, Virginia, and West Virginia. Congress provides discretionary appropriations for DOI through two annual appropriations bills: the Interior, Environment, and Related Agencies bill and the Energy and Water appropriations bill. Enacted discretionary appropriations for FY2018 totaled $14.6 billion. DOI also received $566 million in supplemental emergency appropriations in FY2018, for a total of $15.2 billion in discretionary appropriations for FY2018. The organizational structure of DOI is subject to continual congressional oversight and executive branch examination. In 2017 and 2018, President Trump and then-Secretary of the Interior Ryan Zinke submitted reorganization plans for the department and its bureaus. These plans put forth several recommendations, including the consolidation and transfer of most functions of the Army Corps of Engineers Civil Works Division to DOI, the merger of the Department of Commerce's National Marine Fisheries Service with FWS, and the creation of 12 \"Unified Regional Boundaries\" across DOI's various bureaus.", "document_type": "crs"}
{"report": "Oman is located along the Arabian Sea, on the southern approaches to the Strait of Hormuz, across from Iran. Except for a brief period of Persian rule, Omanis have remained independent since expelling the Portuguese in 1650. The Al Said monarchy began in 1744, extending Omani influence into Zanzibar and other parts of East Africa until 1861. Sultan Qaboos bin Sa'id Al Said, born in November 1940, is the eighth in the line of the monarchy; he became sultan in July 1970 when, with British support, he forced his father, Sultan Said bin Taymur Al Said, to abdicate. The United States has had relations with Oman from the early days since American independence. The U.S. merchant ship Ramber made a port visit to Muscat in September 1790. The United States signed a Treaty of Amity and Commerce with Oman in 1833, one of the first of its kind with an Arab state. This treaty was replaced by the Treaty of Amity, Economic Relations, and Consular Rights signed at Salalah on December 20, 1958. Oman sent an official envoy to the United States in 1840. A U.S. consulate was maintained in Muscat during 1880-1915, a U.S. embassy was opened in 1972, and the first resident U.S. Ambassador arrived in July 1974. Oman opened its embassy in Washington, DC, in 1973. Sultan Qaboos was accorded formal state visits in 1974, by President Gerald Ford, and in 1983, by President Ronald Reagan. President Bill Clinton visited Oman in March 2000. Career diplomat Marc Sievers has been Ambassador to Oman since late 2015. Oman remains a monarchy in which decisionmaking still is concentrated with Sultan Qaboos. Throughout his reign, Qaboos has also formally held the position of Prime Minister, as well as the positions of Foreign Minister, Defense Minister, Finance Minister, and Central Bank Governor. Other officials serve as \"Ministers of State\" for those portfolios and serve de-facto as ministers. Qaboos's government, and Omani society, reflects the diverse backgrounds of the Omani population, many of whom have long-standing family connections to parts of East Africa that Oman once controlled, and to the Indian subcontinent. Some senior Omanis argue that a formal position of Prime Minister is needed to organize the functions of the government and enable the Sultan to focus on larger strategic decisions. Should such a post be established, potential candidates include the deputy prime minister for cabinet affairs, Fahd bin Mahmud Al Said (who Omanis already widely refer to as \"Prime Minister\"); the secretary general of the Foreign Ministry, Sayyid Badr bin Hamad Albusaidi; Salim bin Nasir al-Ismaily, a businessman and economic adviser to the Sultan who reportedly brokered 2013 U.S.-Iran meetings; and Royal Office head General Sultan bin Mohammad al-Naamani. Along with political reform issues, the question of succession has long been central to observers of Oman. Qaboos's brief marriage in the 1970s produced no children, and the sultan, who was born in November 1940, has no heir apparent. According to Omani officials, succession would be decided by a \"Ruling Family Council\" of his relatively small Al Said family (about 50 male members). If the family council cannot reach agreement within three days, it is to select the successor recommended by Qaboos in a sealed letter to be opened upon his death; there are no confirmed accounts of whom Qaboos has recommended. The succession issue has come to the fore since he underwent cancer treatment in Germany during 2014-15. Since returning to Oman, he has appeared in public only on major occasions or to meet visiting foreign leaders. Potential Successors . The leading contenders to succeed Qaboos include three brothers who are cousins of the Sultan and whose sister was the woman who was briefly married to Qaboos. They are Minister of Heritage and Culture Sayyid Haythim bin Tariq Al Said, whom some assess indecisive; Asad bin Tariq Al Said, a former military officer who has the title \"Representative of the Sultan\" and was appointed deputy prime minister for international relations and cooperation affairs in early 2017; and Shihab bin Tariq Al Said, the former commander of Oman's Navy. All are in their 60s. Another potential choice is Fahd bin Mahmud, above. Many Omanis, U.S. officials, and international observers credit Sultan Qaboos for establishing consultative institutions and electoral processes before there was evident public pressure to do so. Under a 1996 \"Basic Law,\" Qaboos created a bicameral \"legislature\" called the Oman Council, consisting of the existing Consultative Council ( Majlis As Shura ) and an appointed State Council ( Majlis Ad Dawla ), established by the Basic Law. The Consultative Council was formed in 1991 to replace a 10-year-old all-appointed advisory council. A March 2011 decree expanded the Oman Council's powers to include questioning ministers, selecting its own leadership, and reviewing government-drafted legislation, but it still does not have the power to draft legislation or to overturn the Sultan's decrees or government regulations. As in the other GCC states, formal political parties are not allowed. But, unlike Bahrain or Kuwait, well-defined \"political societies\" (de-facto parties) that compete within the electoral process have not developed in Oman. The electoral process has broadened consistently. The Consultative Council was initially chosen through a selection process in which the government had substantial influence over the body's composition, but this process was gradually altered to a full popular election. When it was formed in 1991, the body had 59 seats, and was gradually expanded to its current 85 seats. Prior to 2011, the Sultan selected the Consultative Council chairman; since then, the chairman and a deputy chairman have been elected by the Council membership. Also in 2011, Qaboos instituted elections for municipal councils. Each province with a population of more than 30,000 elects two members, whereas a province with fewer than that elects one. The electorate for the Consultative Council has gradually expanded. In the 1994 and 1997 selection cycles for the council, \"notables\" in each of Oman's districts nominated three persons and Qaboos selected one of them to occupy that district's seat. The first direct elections were held in September 2000, but the electorate was limited (25% of all citizens over 21 years old). For the October 4, 2003, election, voting rights were extended to all citizens, male and female, over 21 years of age. About 195,000 Omanis voted in that election (74% turnout). The same 2 women were elected as happened in the 2000 vote (out of 15 women candidates). In the October 27, 2007, election (after changing to a four-year term), public campaigning was allowed for the first time and about 250,000 people voted (63% turnout). None of the 21 females (out of 631 candidates) won. The more recent Consultative Council elections are discussed below. Appointed State Council . The government considers the State Council as a counterweight to the Consultative Council, and it remains all-appointed. The Council, which had 53 members at inception, has been expanded to 84 members. By law, it cannot have more members than the Consultative Council. Appointees are usually former high-ranking government officials, military officials, tribal leaders, and other notables. The expansion of the electoral process did not satisfy those Omanis, particularly those younger and well-educated, who consider the pace of liberalization too slow, or those dissatisfied with the country's economic performance and apparent lack of job opportunities. In July 2010, 50 prominent Omanis petitioned Sultan Qaboos for a \"contractual constitution\" that would provide for a fully elected legislature. In February 2011, after protests in Egypt toppled President Hosni Mubarak, protests broke out in the northern industrial town of Sohar, Oman, and later spread to the capital, Muscat. Although most protesters asserted that their protests were motivated primarily by economic factors, some echoed calls for a fully elected legislature. One person was killed in February 2011 by security forces. But, many protestors carried posters lauding his rule. And, many older Omanis apparently did not support the protests, apparently comparing the existing degree of \"political space\" favorably with that during the reign of Qaboos's father, Sultan Said bin Taymur. During his father's reign, Omanis needed the sultan's approval even to wear spectacles or to import cement, for example. Some experts argue that Sultan Said kept Oman isolated in an effort to insulate it from leftist extremism that gained strength in the region during the 1960s. By mid-2012, the government had calmed the unrest through a combination of reforms and punishments, including expanding the powers of the Oman Council; appointing several members of the Consultative Council as ministers; giving the office of the public prosecutor autonomy and consumers additional protections; naming an additional woman minister; ordering that additional public sector jobs be created; increasing the minimum wage; making grants to unemployed job seekers; and arresting journalists, bloggers, and other activists for \"defaming the Sultan,\" \"illegal gathering,\" or violating the country's cyber laws. Twenty-four of those arrested went on a hunger strike in February 2013 and the Sultan pardoned virtually all. Omanis who had been dismissed from public and private sector jobs for participating in unrest were reinstated. The U.S. reaction to the unrest in Oman was muted, possibly because Oman is a key ally of the United States and perhaps because the unrest appeared relatively minor. Small demonstrations occurred again for two weeks in January 2018. Protesters generally cited a perceived lack of job opportunities rather than a demand for political reform. In response, the government reiterated an October 2017 plan to create 25,000 jobs for Omani citizens and banned the issuance of new visas for expatriate workers in 87 private sector professions. The October 15, 2011, Consultative Council elections went forward despite the unrest. The enhancement of the Oman Council's powers generated additional interest in the vote—1,330 candidates applied to run, a 70% increase from the 2007 vote. A record 77 were women. However, voter turnout (about 60%) was not higher than in past elections. The expectation of several female victors was not realized: only one was elected. Some reformists were heartened by the victory of two political activists—Salim bin Abdullah Al Oufi, and Talib Al Maamari. A relatively young entrepreneur was selected speaker of the Consultative Council (Khalid al-Mawali). In the State Council appointments, the Sultan appointed 15 women, bringing the total female participation in the Oman Council to 16—over 10%. The government did not permit outside election monitoring. In 2012, the government also initiated elections for 11 municipal councils. Previously, only one such council, all appointed, had been established—for the capital region. The elected \"councilors\" make recommendations to the government on development projects, but do not make final funding decisions. The chairman and deputy chairman of each municipal council are appointed by the government. In the December 22, 2012, municipal elections, there were 192 seats up for election. There were more than 1,600 candidates, including 48 women. About 546,000 citizens voted. Four women were elected. Elections to the Consultative Council (expanded by one seat, to 85) were last held on October 25, 2015. A total of 674 candidates applied to run, although 75 candidates were barred, apparently based on their participation in the 2011-2012 unrest. There were 20 female candidates. Turnout was estimated at 56% of the 612,000 eligible voters. The one woman on the Council was reelected and no other female was elected. As happened in 2011, only one woman was elected. Khalid al-Mawali was reelected Consultative Council chairman. On November 8, 2015, Qaboos appointed the 84-seat State Council, of whom 13 were women. On December 25, 2016, the second municipal elections were held to choose 202 councilors—an expanded number from the 2012 municipal elections. There were 731 candidates, of whom 23 were women. Turnout was about 40% of the 625,000 eligible voters, according to the government. Seven women were elected, more than were elected in 2012 but still a small percentage of the 202 seats up for vote. The next Consultative Council elections are due to be held in the fall of 2019. No date has been announced. According to the most recent State Department report on human rights, the principal human rights problems in Oman, other than the political structure, are limits on freedom of speech, assembly, and association; torture of prisoners and detainees; censorship of Internet content; and criminalization of LGBT conduct. U.S. and other reports generally credit the government with holding accountable security personnel and other officials for abuses, including prosecuting multiple corruption cases. The law provides for an independent judiciary, but the Sultan chairs the country's highest legal body, the Supreme Judicial Council, which can review judicial decisions. An \"Oman Human Rights Commission,\" a quasi-independent but government-sanctioned body, investigates and monitors prison and detention center conditions through site visits. State Department funds (Middle East Partnership Initiative, Near East Regional Democracy account, and other accounts) have been used in past fiscal years to promote Omani civil society, judicial reform, election management, media independence, and women's empowerment. The U.S. Commerce Department's Commercial Law Development Program has worked to improve Oman's legislative and regulatory frameworks for business. Omani law provides for limited freedom of speech and press, but the government generally does not respect these rights. A 2014 royal decree stipulates that citizens joining groups deemed \"harmful to national interests\" could be subject to revocation of citizenship. No revocations on those grounds have been announced. Press criticism of the government is tolerated, but criticism of the Sultan and, by extension, senior government officials, is not. In October 2015, Oman followed the lead of many of the other GCC states in issuing a new royal decree prohibiting disseminating information that targets \"the prestige of the State's authorities or aimed to weaken confidence in them.\" The government has prosecuted dissident bloggers and cyber-activists under that decree and other laws. In 2017, Oman permanently shuttered the Al Zaman independent daily newspaper for 2016 articles accusing senior judicial officials of corruption. Private ownership of radio and television stations is not prohibited, but there are few privately owned stations. Satellite dishes have made foreign broadcasts accessible to the public. Still, there are some legal and practical restrictions to Internet usage, and only a minority of the population has subscriptions to internet service. Many Internet sites are blocked, primarily for sexual content, but many Omanis are able to bypass restrictions by accessing the Internet by cell phone. Omani law provides for freedom of association for \"legitimate objectives and in a proper manner\"—language that enables the government to restrict such rights in practice. A 2014 decree by the Sultan imposed a new nationality law that stipulates that citizens who join groups deemed harmful to national interests could be subject to citizenship revocation. Associations must register with the Ministry of Social Development. Registered associations for foreign nationalities include the Indian Social Group. Oman is a destination and transit country for men and women primarily from South Asia and East Africa who are subjected to forced labor and, to a lesser extent, sex trafficking. In October 2008, President George W. Bush directed that Oman be moved from a \"Tier 3\" ranking on trafficking in persons (worst level) by the State Department Trafficking in Persons report for 2008 to \"Tier 2/Watch List.\" The upgrade was based on Omani pledges to increase efforts to counter trafficking in persons (Presidential Determination 2009-5). Oman was rated Tier 2 in the 2009-2015 Trafficking in Persons reports, but the report for 2016 and 2017 downgraded Oman back to Tier 2: Watch List on the basis that, in the aggregate, it did not increase its anti-trafficking efforts during the reporting periods. The 2018 Trafficking in Persons report upgraded Oman to Tier 2. The upgrade was based on the government's demonstrating increased efforts against trafficking by investigating, prosecuting, and convicting more suspected traffickers and standing up a specialized antitrafficking prosecutorial unit. The government also identified more victims and provided them with robust care. The government also developed, funded, and began implementing a new five-year national action plan, which included funding a full-time liaison between relevant agencies to facilitate a whole-of-government effort. On broader labor rights, Omani workers have the right to form unions and to strike (except in the oil and gas industry). However, only one government-backed federation of trade unions exists—the General Federation of Oman Trade Unions. The calling of a strike requires an absolute majority of workers in an enterprise. The labor laws permit collective bargaining and prohibit employers from firing or penalizing workers for union activity. Labor rights are regulated by the Ministry of Manpower. Some occupations and businesses are exempt from paying the minimum wage for citizens ($845 per month). Oman has historically had a high degree of religious tolerance. An estimated 45%-75% (government figure) of Omanis adhere to the Ibadhi sect, a relatively moderate school of Islam centered mostly in Oman, East Africa, and in parts of Algeria, Libya, and Tunisia. Ibadhism has been sometimes misrepresented as a Sunni sect. Ibadhi religious and political dogma generally resembles basic Sunni doctrine, although the Ibadhis are neither Sunni nor Shiite. Ibadhis believe strongly in the existence of a just Muslim society and argue that religious leaders should be chosen by community leaders for their knowledge and piety, without regard to race or lineage. A long-term rebellion led by the Imam of Oman, leader of the Ibadhi sect, ended in 1959. About 5% of Oman's population are Shiite Muslims. Oman's Shiites are allowed to resolve family and personal status cases according to Shiite jurisprudence outside the court system. Recent State Department religious freedom reports have noted no reports of societal abuses or discrimination based on religious affiliation, belief, or practice. Non-Muslims are free to worship at temples and churches built on land donated by the government, but there are some limitations on non-Muslims' proselytizing and on religious gatherings in other than government-approved houses of worship. All religious organizations must be registered with the Ministry of Endowments and Religious Affairs (MERA). Among non-Muslim sponsors recognized by MERA are the Protestant Church of Oman; the Catholic Diocese of Oman; the al Amana Center (interdenominational Christian); the Hindu Mahajan Temple; and the Anwar al-Ghubairia Trading Co. Muscat (for the Sikh community). Buddhists have been able to worship in private spaces. Members of all religions and sects are free to maintain links with coreligionists abroad and travel outside Oman for religious purposes. To address crowded conditions in some non-Muslim places of worship, MERA has made plans to use land donated by Sultan Qaboos for construction of a new building for Orthodox Christians, with separate halls for Syrian, Coptic, and Greek Orthodox Christians. The government has also approved new worship space for Baptists. The Church of Jesus Christ of Latter Day Saints (Mormons) reportedly did not receive approval to register with MERA because it had not identified a sponsor in the Christian community, but its representatives have met with the MERA and are working toward a solution. There is no indigenous Jewish population. Private media have occasionally published anti-Semitic editorial cartoons. Sultan Qaboos has emphasized that he considers Omani women vital to national development. Women now constitute over 30% of the workforce. The first woman of ministerial rank in Oman was appointed in March 2003, and, since then, there have been several female ministers in each cabinet. Oman's ambassadors to the United States and to the United Nations are women. The number of women in Oman's elected institutions was discussed above, but campaigns by Omani women's groups failed to establish a minimum number of women elected to the Consultative Council. Below the elite level, however, Omani women continue to face social discrimination, often as a result of the interpretation of Islamic law. Allegations of spousal abuse and domestic violence are fairly common, with women finding protection primarily through their families. Omani nationality can be passed on only by a male Omani parent. Under Sultan Qaboos, Oman has pursued a foreign policy that sometimes diverges from that of Oman's GCC allies Saudi Arabia and the UAE. Oman has generally sought to mediate resolution of regional conflicts and refrain from direct military involvement in them. Oman joined the U.S.-led coalition against the Islamic State, but did not conduct any airstrikes against that group. Oman did not join the Saudi-led Arab coalition fighting the Iran-backed Houthi forces in Yemen and is one of the countries seeking to negotiate a solution to that conflict. Oman did not supply forces to the GCC's \"Peninsula Shield\" 2011 deployment to Bahrain to help the Al Khalifa regime counter the uprising there. Oman strongly opposed the Saudi-led move in June 2017 to isolate Qatar over a number of policy disagreements. Oman's top diplomat Yusuf Alawi has visited Washington, DC, several times, most recently in late July 2018, in part to work with U.S. officials seeking to resolve the rift. Omani diplomats were hopeful that the annual GCC summit during December 5-6, 2017, would make progress on the dispute, but that meeting adjourned on December 5, 2017, after only two hours of talks. Qaboos, primarily because of his fragile health, has not attended any of the annual GCC summits since 2013. Oman opposed a 2012 Saudi proposal for political unity among the GCC states as a signal of GCC solidarity against the Iran, even threatening to withdraw from the GCC if the plan were adopted. Other GCC leaders are similarly concerned about surrendering any of their sovereignty, and the plan has not been dropped entirely but neither has it advanced. In 2007, Oman was virtually alone within the GCC in balking at a plan to form a monetary union. Lingering border disputes also have plagued Oman-UAE relations; the two finalized their borders in 2008, nearly a decade after a tentative border settlement in 1999. Omani leaders assert that engagement with Iran better mitigates the potential threat from that country than confrontation—a stance that has positioned Oman as a mediator in several regional conflicts in which Iran or its proxies are involved. Omani leaders have not expressed concerns about potential Iranian meddling in Oman's affairs because Oman's citizens are mostly Ibadhis (see above) and not generally receptive to either Sunni or Shiite Islamist extremist appeals. There are positive sentiments among the Omani leadership for the Shah of Iran's support for Qaboos's 1970 takeover and its provision of troops to help Oman end the leftist revolt in Oman's Dhofar Province during 1962-1975, a conflict in which 700 Iranian soldiers died. Exemplifying Oman's policy toward Iran, Sultan Qaboos bucked U.S. and GCC criticism by visiting Tehran in August 2009 at the time of protests in Iran over alleged governmental fraud in declaring the reelection of President Mahmoud Ahmadinejad in the June 2009 election. He visited again in August 2013, after Iran's President Hassan Rouhani first took office. Rouhani visited Oman in 2014 and again in February 2017, as part of an Iranian effort to begin a political dialogue with the GCC. Following the Rouhani visit, Oman and Kuwait undertook a joint, but unsuccessful, attempt to enlist the other GCC countries in a dialogue with Iran. In July 2017, during a visit by Oman's de-facto Foreign Minister Yusuf Alawi to Tehran, Iran and Oman announced plans to strengthen their ties—a statement interpreted as an Omani signal of disagreement with the Saudi-led move to isolate Qatar. Iran's Foreign Minister visited Oman and met with Sultan Qaboos in October 2017 to discuss regional issues. As a further overture toward Iran, Oman did not immediately join the December 2015 Saudi assembly of a Muslim-nation \"counterterrorism coalition\" that excludes Iran and Iran's allies, although Oman finally did join that initiative in December 2016. And, Oman was the only GCC state not to downgrade relations with Iran in January 2016 in solidarity with Saudi Arabia when the Kingdom broke relations with Iran in connection with the dispute over the Saudi execution of dissident Shiite cleric Nimr Al Nimr. In February 2016, all the GCC states declared Lebanese Hezbollah a terrorist group, but Oman did not also restrict travel by its citizens to Lebanon. Some experts and GCC officials argue that Oman-Iran relations, particularly their security cooperation, are undermining GCC defense solidarity. In 2009, Iran and Oman agreed to cooperate against smuggling across the Gulf of Oman, which separates the two countries. On August 4, 2010, Oman signed a security pact with Iran to cooperate in patrolling the Strait of Hormuz, an agreement that reportedly committed the two to hold joint military exercises. The two countries expanded that agreement by signing a Memorandum of Understanding on military cooperation in 2013. The two countries have held joint exercises under these agreements, most recently a December 2015 joint naval exercise. Omani leaders have sought to ensure that the country's relations with Iran do not harm relations with the United States. In the course of his January 2019 regional trip, Secretary of State Michael Pompeo met with Sultan Qaboos to discuss regional issues, and he praised Oman for enforcing the sanctions that the Trump Administration reimposed on Iran. Still, Iran and Oman conduct significant volumes of civilian trade, in keeping with historic patterns in the Gulf region. A number of Iran-Oman joint ventures are active or pending. Most notably, Iran reportedly envisions the joint expansion of Oman's port of Al Duqm as providing Tehran with a major trading hub to interact with the global economy. Oman and Iran's Khodro Industrial Group are conducting a feasibility study of a t a $200 million car production plant there. China, Britain, and numerous other powers are also large investors in Oman's Al Duqm development, and in February 2018 India reportedly signed an agreement with Oman granting the Indian navy certain rights at the port. In March 2019, Oman agreed to grant the United States military access to Al Duqm port as well, as discussed further below. Iran and Oman have jointly developed the Hengham oilfield in the Persian Gulf, a field that will eventually produce about 80 million cubic feet of natural gas per day. The two countries have also discussed potential investments to further develop Iranian offshore natural gas fields that adjoin Oman's West Bukha oil and gas field in the Strait of Hormuz. The field began producing oil and gas in 2009. During Iranian President Hassan Rouhani's 2014 visit to Oman, the two countries signed a deal to build a $1 billion undersea pipeline to bring Iranian natural gas from Iran's Hormuzegan Province to Sohar in Oman, where it will be converted to liquefied natural gas (LNG) and then exported. Several major international energy firms are reportedly involved in the project, but the reimposition of U.S. sanctions in 2018 appear to have slowed progress on the concept. In neighboring Yemen, Oman and Iran's interests in some ways conflict. A GCC-wide initiative helped organize a peaceful transition from the rule of Ali Abdullah Saleh in 2011-2012. However, Saleh's successor, Abdu Rabu Mansur Al Hadi, was driven out of Sanaa in 2015 by Zaidi Shiite Houthi rebels who are increasingly supported by Iran. The Yemeni affiliate of Al Qaeda, Al Qaeda in the Arabian Peninsula (AQAP), also continues to operate there. Oman has closely patrolled the border with Yemen since 2015, has built some refugee camps near the border, and has sought to improve ties with tribes and residents just over the border to ensure that the conflict in Yemen does not spill over into Oman. The current instability in Yemen builds on a long record of difficulty in Oman-Yemen relations. The former People's Democratic Republic of Yemen (PDRY), considered Marxist and pro-Soviet, supported Oman's Dhofar rebellion. Oman-PDRY relations were normalized in 1983, but the two engaged in occasional border clashes later in that decade. Relations improved after 1990, when PDRY merged with North Yemen to form the Republic of Yemen. As the only GCC state that has not joined the Saudi-led Arab coalition fighting to restore the Hadi government and with its ties to Iran, Oman has become a mediator of the Yemen conflict. The U.N. Special Envoy for Yemen, Martin Griffiths, has described Oman as \"playing a pivotal role in all our efforts to help people in Yemen.\" Oman has hosted talks between U.S. diplomats and Houthi representatives, and brokered the release of several captives there, including the November 2016 release of a U.S. Marine veteran who was detained by the Houthis in April 2015. During 2015-2017, Omani mediation also secured the release in Yemen of another American, a French national, an Australian national, and an Indian priest. In late 2018, Oman attempted to secure the release of Yemen's Defense Minister, Mahmoud al-Subaihi, who has been held captive by the Houthis since 2014. In December 2018, Oman received several wounded Houthi fighters for treatment, fulfilling a Houthi condition to attend peace talks in Sweden. Iran's interference in Yemen has brought more international scrutiny to Oman's relations with Iran. Since 2016, media reports have indicated that Iran has used Omani territory to smuggle weapons into Yemen, taking advantage of the porous and sparsely populated 179-mile border between the two countries. Smuggled materiel allegedly includes anti-ship missiles (some of which have reportedly been used to target U.S. warships), surface-to-surface short-range missiles, small arms, and explosives. Some reports indicate that Iran-made unmanned aerial vehicles (UAVs) used by Houthi forces in Yemen may have transited through Oman. Successive U.N. reports from the Panel of Experts established pursuant to resolution 2140 (2014) have identified both land routes that stretch from the Omani border to Houthi-controlled areas in the west and Omani ports with road access to Yemen as possible channels for weapons smuggling. Omani officials deny these allegations, and some observers assert that the allegations \"appear implausible given the long distance the weapons would have to be transported overland through territory the Houthis do not control.\" In March 2018, then-Defense Secretary James Mattis stated that the Omanis \"have security concerns that we share. I'm going there to listen ... and find out how they assess any trafficking that's going on at all. What is their assessment? What is their view of routes and that sort of thing?\" Since that visit, Omani officials have asserted that the \"file\" of Iran smuggling weaponry to the Houthis via Omani territory is \"closed,\" suggesting that Oman has stopped any such trafficking through it. In May 2018, the State Department notified Congress of its intention to obligate FY2017 Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) funds for counterterrorism programming in Yemen and Oman, including the Oman Border Security Enhancement Program, a \"program focused on developing and enhancing Omani border security capabilities along the Oman-Yemen border.\" The FY2019 National Defense Authorization Act (NDAA, H.R. 5515 , P.L. 115-232 ) extends the authority to provide funds to Oman under Section 1226 of the FY2016 NDAA (22 U.S.C. 2151) to secure the border with Yemen. U.S. officials have used the Oman-Iran relationship to reach out to Iranian officials when doing so has been deemed in the U.S. interest. Press reports indicate that then-Deputy Secretary of State William Burns and other U.S. officials began secretly meeting with Iranian officials in early 2013—before the June 2013 election of the moderate Hassan Rouhani as Iran's president—to explore the possibility of a nuclear deal. The U.S-Iran meetings accelerated after Sultan Qaboos's August 25-27, 2013, visit to Iran. In November 2014, then-Secretary of State John Kerry met with Iranian Foreign Minister Mohammad Javad Zarif in Muscat to accelerate the negotiations, followed by a meeting between the entire P5+1 and Iranian negotiators. An additional round of P5+1-Iran talks was held in Oman, and the JCPOA was finalized in July 2015. In December 2015, Oman hosted a meeting between Energy Secretary Ernest Moniz and head of Iran's Atomic Energy Organization Ali Akbar Salehi, to discuss JCPOA implementation. In November 2016, Iran exported 11 tons of heavy water to Oman, reducing Iran's stockpile below that allowed. Omani banks, some of which operate in Iran, were used to implement some of the financial arrangements of the JPA and JCPOA. As a consequence, a total of $5.7 billion in Iranian funds had built up in Oman's Bank Muscat by the time of implementation of the JCPOA in January 2016. In its efforts to easily access these funds, Iran obtained from the Office of Foreign Assets Control (OFAC) of the Treasury Department a February 2016 special license to convert the funds (held as Omani rials) to dollars as a means of easily converting the funds into Euros. Iran ultimately used a different mechanism to access the funds as hard currency, but the special license issuance resulted in a May 2018 review by the majority of the Senate Permanent Subcommittee on Investigation to assess whether that license was consistent with U.S. regulations barring Iran access to the U.S. financial system. Oman also has been an intermediary through which the United States and Iran have exchanged captives. Oman brokered a U.S. hand-over of Iranians captured during U.S.-Iran skirmishes in the Persian Gulf in 1987-1988. In 2007, Oman helped broker Iran's release of 15 sailors from close U.S. ally the United Kingdom, who Iran had captured in the Shatt al Arab waterway. U.S. State Department officials publicly confirmed that Oman helped broker the 2010-2011 releases from Iran of three U.S. hikers (Sara Shourd, Josh Fattal, and Shane Bauer), in part by paying their $500,000 per person bail to Iran. In April 2013, Omani mediation obtained the release to Iran of an Iranian scientist, Mojtaba Atarodi, imprisoned in the United States in 2011 for procuring nuclear equipment for Iran. U.S. officials also have sought Oman's help to determine the fate of retired FBI agent Robert Levinson, who disappeared on Iran's Kish Island in 2007. The October 25, 2018, visit to Oman by Israeli Prime Minister Benjamin Netanyahu might have represented an Israeli effort to indirectly communicate with Iran over Syria, Lebanon, and other issues of significant dispute. If so, Israel might have been seeking to take advantage of Oman's ties to Iran in ways similar to those used by the United States, as discussed above. Oman, along with the other GCC states, joined the U.S.-led coalition to counter the Islamic State in 2014. Oman offered the use of its air bases for the coalition but, unlike several GCC states, Oman did not conduct airstrikes against the group. In the Syria internal conflict, possibly because of its relations with Iran, Oman has refrained from backing rebel groups against Iran's close ally, Syrian President Bashar Al Assad, and instead focused on mediation. Oman joined other Arab states in 2011 in suspending Syria's membership in the Arab League or closing Oman's embassy in Damascus. In August 2015, Oman hosted Syria's foreign minister for talks on possible political solutions to the Syria conflict, and in October 2015, Omani Minister of State for Foreign Affairs Yusuf Alawi visited Damascus to convey a U.S. message to Asad. Oman attended multilateral meetings in Vienna on the Syria conflict in late 2015, and Oman hosted Russian Foreign Minister Sergei Lavrov in February 2016 to discuss Syria. On Iraq, no GCC state undertook air strikes against the Islamic State fighters there. The GCC states have tended to resist helping the Shiite-dominated government in post-Saddam Iraq. Oman opened an embassy in Iraq after the 2003 ousting of Saddam but then closed it for several years following a shooting outside it in November 2005 that wounded four, including an embassy employee. The embassy reopened in 2007 but Oman's Ambassador to Iraq, appointed in March 2012, is resident in Jordan, where he serves concurrently. Oman provided a small amount of funds for Iraq's post-Saddam reconstruction. Libya . Oman did not play an active a role in supporting the 2011 Libyan uprising that overthrew Mu'ammar Al Qadhafi. In March 2013, Oman granted asylum to Qadhafi's widow and her and Qadhafi's daughter, Aisha, and sons Mohammad and Hannibal, who had entered Oman in October 2012. Omani officials said they were granted asylum on the grounds that they not engage in any political activities. Egypt. The GCC has been divided on post-Mubarak Egypt. Qatar supported the 2012 election of Muslim Brotherhood leader Mohammad Morsi as the first elected post-Mubarak president, but Saudi Arabia and the UAE oppose the Brotherhood and supported the Egyptian military's ouster of Morsi in 2013. Oman criticized a post-coup crackdown on Brotherhood supporters but, in November 2017, Oman hosted a visit by Egyptian leader Abdel Fattah Al Sisi, who is supported by Saudi Arabia and the UAE. Oman was the one of the few Arab countries not to break relations with Egypt after the signing of the U.S.-brokered Egyptian-Israeli peace treaty in 1979. The GCC states participated in the multilateral peace talks established by the 1991 U.S.-sponsored Madrid peace process, and Oman hosted an April 1994 session of the multilateral working group on water that resulted in the establishment of a Middle East Desalination Research Center in Oman. Participants in the Center include Israel, the Palestinian Authority, the United States, Japan, Jordan, the Netherlands, South Korea, and Qatar. In September 1994, Oman and the other GCC states renounced the secondary and tertiary Arab boycott of Israel. In December 1994, it became the first Gulf state to officially host a visit by an Israeli prime minister (Yitzhak Rabin), and it hosted then Prime Minister Shimon Peres in April 1996. In October 1995, Oman exchanged trade offices with Israel, essentially renouncing the primary boycott of Israel. However, there was no move to establish diplomatic relations. The trade offices closed following the September 2000 Palestinian uprising. In an April 2008 meeting in Qatar, de-facto Foreign Minister Alawi informed his Israeli counterpart (visiting Doha for a conference) that the Israeli trade office in Oman would remain closed until agreement was reached on a Palestinian state. Several Israeli officials reportedly visited Oman in November 2009 to attend the annual conference of the Desalination Center and to hold talks with Omani officials on the margins of the conference. Oman offered to resume trade contacts with Israel if it halted settlement construction in the West Bank—a condition Israel has not met. Oman publicly supports the Palestinian Authority (PA) drive for full U.N. recognition. In February 2018, Foreign Minister Alawi visited the Al Aqsa Mosque in east Jerusalem, which required coordination with Israeli authorities. He also met Palestinian officials in Ramallah during that trip. On October 25, 2018, Israel's Prime Minister Benjamin Netanyahu visited Oman and met with Sultan Qaboos. The visit, which came a few weeks after a visit to Oman by Palestinian leader Mahmoud Abbas, was announced by both countries after Netanyahu had returned to Israel. Analysts and press reports suggested that the two leaders discussed possible ways forward on the Israeli-Palestinian peace process and on indirect Israeli communication with Iran via Oman. The visit represented confirmation of the burgeoning ties between Israel and the GCC states on security and other regional issues. In early November 2018, Israel's Minister of Transportation and Minister of Intelligence Yisrael Katz visited Oman to attend an international conference during which he presented a concept for a railway between Israel, Jordan, and the Gulf states. In February 2019, White House adviser Jared Kushner, Special Representative for International Negotiations Jason Greenblatt, and the State Dept. special representative for Iran Brian Hook met with Qaboos in Muscat to discuss the administration's Middle East peace proposals and U.S. policy toward Iran. Sultan Qaboos, who is Sandhurst-educated, is respected by his fellow Gulf rulers as a defense strategist. He has long asserted that the United States is the security guarantor of the region. Oman's approximately 43,000-person armed force—collectively called the \"Sultan of Oman's Armed Forces\"—is the third largest of the GCC states and widely considered one of the best trained. However, in large part because of Oman's limited funds, it is one of the least well equipped of the GCC countries. Oman's annual defense budget is about $9 billion out of government expenditures of about $30 billion. Sultan Qaboos has always supported close defense cooperation with the United States. In the wake of Iran's 1979 Islamic revolution, Oman signed a \"facilities access agreement\" that allows U.S. forces access to Omani military facilities on April 21, 1980. Days after the signing, the United States used Oman's Masirah Island air base to launch the failed attempt to rescue the U.S. Embassy hostages in Iran, although Omani officials assert that they were not informed of that operation in advance. Under the agreement, which was last renewed in 2010, the United States reportedly can use—with advance notice and for specified purposes—Oman's military airfields in Muscat (the capital), Thumrait, Masirah Island, and Musnanah. Some U.S. Air Force equipment, including lethal munitions, is reportedly stored at these bases. According to February 2018 testimony of CENTCOM commander General Joseph Votel, each year Omani military forces participate in several exercises, and Oman allows 5,000 overflights and 600 landings by U.S. military aircraft and hosts 80 port calls by U.S. naval vessels. A few hundred U.S. military personnel are stationed in Oman, mostly Air Force. 2019 Port Access Agreement . On March 24, 2019, Oman and the United States signed a \"Strategic Framework Agreement\" that expands the U.S.-Oman facilities access agreements by allowing U.S. forces to use the ports of Al Duqm (see above) and Salalah. Al Duqm, in particular, is large enough to handle U.S. aircraft carriers, and the agreement was seen by the United States as improving the U.S. ability to counter Iran in the region. Oman reportedly views the accord as bringing in additional investment to Al Duqm. Participation in Middle East Strategic Alliance . Omani leaders express willingness to join a U.S.-backed \"Middle East Strategic Alliance\" of the GCC states and Jordan and Egypt, envisioned as countering Iran. That coalition was to be formalized at a U.S.-GCC summit planned for spring 2018 but, because of the intra-GCC rift, has been repeatedly postponed. The intra-GCC rift, as well as Yemen, Iran, and other issues, was discussed during the January 2019 visit to Oman of Secretary of State Michael Pompeo, according to a State Department announcement. On January 9, 2019, Sultan Qaboos hosted meetings on the \"economic and energy pillars of the Middle East Strategic Alliance,\" according to the Secretary's readout of his meeting with Qaboos on January 15, 2019. Oman has shown its support for major U.S. operations in the region by making its facilities available consistently. Oman's facilities contributed to U.S. major combat operations in Afghanistan (Operation Enduring Freedom, OEF) and, to a lesser extent, Iraq (Operation Iraqi Freedom, OIF). According to the Defense Department, during major combat operations of OEF (late 2001) there were about 4,300 U.S. personnel in Oman, mostly Air Force, and U.S. B-1 bombers, indicating that the Omani facilities were used extensively for strikes during OEF. The U.S. military presence in Oman fell to 3,750 during OIF (which began in March 2003) because facilities closer to Iraq were used more extensively. Oman did not contribute forces either to OEF or OIF. After 2004, Omani facilities were not used for U.S. air operations in Afghanistan or Iraq. Because of his historic ties to the British military, Qaboos early on relied on seconded British officers to command Omani military services, and Oman bought British weaponry. Over the past two decades, British officers have become mostly advisory and Oman has shifted its arsenal mostly to U.S.-made major combat systems. Still, as a signal of the continuing close defense relationship, in April 2016 Britain and Oman signed a memorandum of understanding to build a base near Al Duqm port, at a cost of about $110 million, to support the stationing of British naval and other forces in Oman on a permanent basis. Oman is trying to expand and modernize its arsenal primarily with purchases from the United States. However, Oman is one of the least wealthy GCC states and cannot buy U.S. arms as readily as the wealthier GCC states. Oman has received small amounts of Foreign Military Financing (FMF) that have been used to help purchase U.S. equipment, and Oman is eligible for grant U.S. excess defense articles (EDA) under Section 516 of the Foreign Assistance Act. The United States has not provided Oman with any FMF since FY2017 and none is requested for FY2020. Nonetheless, General Votel testified on February 5, 2019, that Oman \"will continue to develop an FMS (foreign military sales) portfolio that already includes over $2.7 billion in open FMS cases, though budgetary constraints may significantly slow new acquisitions in coming years.\" Some of the pending and prior FMS cases are discussed below. F-16s . In October 2001, Oman purchased (with its own funds) 12 U.S.-made F-16 C/D aircraft. Along with associated weapons (Harpoon and AIM missiles), a podded reconnaissance system, and training, the sale was valued at about $825 million; deliveries were completed in 2006. In 2010, the United States approved a sale to Oman of 18 additional F-16s, with a value (including associated support) of up to $3.5 billion. Oman signed a contract with Lockheed Martin for 12 of the aircraft in December 2011, and deliveries were completed in 2016. Oman's Air Force also possesses 12 Eurofighter \"Typhoon\" fighter aircraft. Precision-Guided Munitions . Oman has bought associated weapons systems, including \"AIM\" advanced medium-range air-to-air missiles (AIM-120C-7, AIM-9X Sidewinder), 162 GBU laser-guided bombs, and other equipment. Countermeasures for Head of State Aircraft . In 2010 and 2013, the United States sold Oman equipment to protect the aircraft that Oman uses to transport Qaboos. Surface-to-Air and Air-to-Air Missiles . On October 19, 2011, DSCA notified Congress of a potential sale to Oman of AVENGER and Stinger air defense systems, asserted as helping Oman develop a layered air defense system. Missile Defense . In May 2013, then-Secretary of State John Kerry visited Oman reportedly in part to help finalize a sale to Oman of the THAAD (Theater High Altitude Area Defense system), the most sophisticated land-based missile defense system the U.S. exports. A tentative agreement by Oman to purchase the system, made by Raytheon, was announced on May 27, 2013, with an estimated value of $2.1 billion. However, a sale has not been announced. Several other GCC states have bought or are in discussions to buy the THAAD. Tanks as Excess Defense Articles . Oman received 30 U.S.-made M-60A3 tanks in September 1996 on a \"no rent\" lease basis (later receiving title outright). In 2004, it turned down a U.S. offer of EDA U.S.-made M1A1 tanks, but Oman asserts that it still requires armor to supplement the 38 British-made Challenger 2 tanks and 80 British-made Piranha armored personnel carriers it bought in the mid-1990s. Oman has also bought some Chinese-made armored personnel carriers and other gear, and it reportedly is considering buying 70 Leopard tanks from Germany with a value of $2.2 billion. Patrol Boats/ Maritime Security . Oman has bought U.S.-made coastal patrol boats (\"Mark V\") for counternarcotics, antismuggling, and antipiracy missions, as well as aircraft munitions, night-vision goggles, upgrades to coastal surveillance systems, communications equipment, and de-mining equipment. EDA grants since 2000 have gone primarily to help Oman monitor its borders and waters and to improve interoperability with U.S. forces. Oman has bought some British-made patrol boats. The United States also has sold Oman the AGM-84 Harpoon anti-ship missile. Anti t ank Weaponry . The United States has sold Oman antitank weaponry to help it protect from ground attack and to protect critical infrastructure. In December 2015, DSCA notified a potential sale to Oman of more than 400 TOW (tube-launched, optically tracked, wire-guided) antitank systems. The sale has an estimated value of $51 million. The United States also has provided to Oman 400 \"Javelin\" antitank guided missiles. The International Military Education and Training program (IMET) program is used to promote U.S. standards of human rights and civilian control of military and security forces, as well as to fund English language instruction, and promote interoperability with U.S. forces. About 100 Omani military students participate in the program each year, studying at 29 different U.S. military institutions. Oman cooperates with U.S. legal, intelligence, and financial efforts against various cross-border threats, particularly those posed by terrorist groups including Al Qaeda, Al Qaeda in the Arabian Peninsula (AQAP, headquartered in neighboring Yemen), and the Islamic State organization. No Omani nationals were part of the September 11, 2001, attacks and no Omanis have been publicly identified as senior members of any of those groups. According to recent State Department reports on terrorism, Oman is actively trying to prevent terrorist groups from conducting attacks and using the country for safe haven or transport. As shown in the table above, the United States provides funding—primarily through Nonproliferation, Antiterrorism, Demining, and Related (NADR) and other programs—to help Oman counter terrorist and related activity and combat trafficking of WMD-related equipment. NADR funding falls into three categories: Export Control and Related Border Security (EXBS) funds, Anti-Terrorism Assistance (ATA) funds, and Terrorism Interdiction Program funding. These programs enhance the capabilities of the Royal Oman Police (ROP), the ROP Coast Guard, the Directorate General of Customs, the Ministry of Defense, the Ministry of Foreign Affairs, the Ministry of Transportation, the Ministry of Commerce and Industry, the Ministry of Transportation and Communication, and the Royal Army of Oman to interdict weapons of mass destruction (WMD), advanced conventional weapons, or illegal drugs at official Ports of Entry on land and at sea ports and along land and maritime borders. ATA funds are used to train the Royal Army of Oman and several Omani civilian law enforcement agencies on investigative techniques, maritime border security, cybersecurity, and to enhance their ability to detect and respond to the entry of terrorists into Oman. In 2017, a 10-week EXBS training course helped the government of Oman establish a port control at the Port of Sohar. On December 13, 2018, the Administration notified Congress that up to $220,000 in FY2018 ATA funds would be provided to Oman to support training designed to enhance Oman's capabilities to reduce the flow of foreign terrorist fighters and related goods at points of entry, including through courses such as fraudulent travel document and behavioral analysis. In 2005, Oman joined the U.S. \"Container Security Initiative,\" agreeing to pre-screening of U.S.-bound cargo from its port of Salalah to prevent smuggling of nuclear material, terrorists, and weapons. However, the effect of some U.S. programs on Omani performance is sometimes hindered by the lack of clear delineation between the roles and responsibilities of Oman's armed forces and law enforcement agencies. There are no Omani nationals currently held in the U.S. prison for suspected terrorists in Guantanamo Bay, Cuba. During 2015-17, Oman accepted the transfer of 23 non-Omani nationals from Guantanamo Bay as part of an effort to support U.S. efforts to close the facility. Oman is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF). Recent State Department terrorism reports credit Oman with transparency regarding its anti-money laundering and counterterrorist financing enforcement efforts and say that it has the lowest risk for terrorism financing or money laundering of any of the GCC countries. Oman does not permit the use of hawalas , or traditional money exchanges, in the financial services sector, and Oman has on some occasions shuttered hawala operations entirely. A 2010 Royal Decree was Oman's main legislation on anti-money laundering and combatting terrorism financing but, in 2016, Royal Decree 30/2016 increased efforts to counter terrorism financing by requiring financial institutions to screen transactions for money laundering or terrorist financing. In 2015, Oman signed an agreement with India to improve cooperation on investigations, prosecutions, and counterterrorism efforts. In May 2017, Oman joined with the other GCC states and the United States to form a Riyadh-based \"Terrorist Finance Target Center.\" The State Department report on terrorism for 2017, referenced earlier, characterizes Oman's initiatives to address domestic radicalization and recruitment to violence as \"unclear\" in nature and scope. Oman's government, through the Ministry of Endowments and Religious Affairs (MERA), has conducted advocacy campaigns designed to encourage tolerant and inclusive Islamic practices, including through an advocacy campaign titled \"Islam in Oman.\" The Grand Mufti of Oman, Shaykh Ahmad al-Khalili, calls on Muslims to reject terrorism in his widely broadcast weekly television program. Oman is in a difficult economic situation. It ran a budget deficit of $13 billion in 2016, and about $8 billion in 2017. Oman has addressed the shortfalls—without drawing down its estimated $24 billion in sovereign wealth reserves—by raising capital internationally. Since the beginning of 2017, Oman has raised over $10 billion by selling government bonds and receiving loans from Chinese and other banks. The government has cut subsidies substantially and has reduced the size of the government. Despite Oman's efforts to diversify its economy, oil exports still generate over 70% of government revenues and nearly 50% of its gross domestic product (GDP). Oman has a relatively small 5.5 billion barrels (maximum estimate) of proven oil reserves, enough for about 15 years at current production rates. It exports approximately 820,000 barrels of crude oil per day. In part because it is a small producer, Oman is not a member of the Organization of the Petroleum Exporting Countries (OPEC). Oman has announced a \"Vision 2020\" strategy to reduce its dependence on the oil and gas sector. Oman has in recent years expanded its liquefied natural gas (LNG) exports, for which Oman has a large market in Asia. Oman is part of the \"Dolphin project,\" operating since 2007, under which Qatar is exporting natural gas to UAE and Oman through undersea pipelines, freeing up Oman's own natural gas supplies for sale to other customers. In December 2013, Oman signed a $16 billion agreement for energy major BP to develop Oman's natural gas reserves. Oman is trying to attract foreign investment by positioning itself as a trading hub. The key to that strategy is the $60 billion project—with some investment funding coming from Iran, Kuwait, China, the United Kingdom, and the United States—build up Al Duqm (see Figure 1 ) as a transportation, energy, and military hub. Oman's plans for the port include a refinery ($6 billion alone), a container port, a dry dock, and other facilities for transportation of petrochemicals. A planned transit hub would link to the other GCC states by rail and enable them to access the Indian Ocean directly, bypassing the Persian Gulf. China's investments in Al Duqm are part of its \"Belt and Road Initiative\" to build a continuous trade link between China and Europe. Its $11 billion investment in Al Duqm is to build the \"Sino-Oman Industrial City\" there. The Chinese investments in Oman help China secure its oil supplies; Oman is China's fourth-largest source of oil. The United States is Oman's fourth-largest trading partner. In 2018, the United States exported about $2 billion in goods to Oman, and imported about $1.1 billion in goods from it—figures roughly equal to those of 2017. The largest U.S. export categories to Oman are automobiles, aircraft (including military) and related parts, drilling and other oilfield equipment, and other machinery. Of the imports, the largest product categories are fertilizers, industrial supplies, and oil by-products such as plastics. In part because of expanded U.S. oil production, the United States imports almost no Omani oil. Oman was admitted to the WTO in September 2000. The U.S.-Oman Free Trade Agreement was signed on January 19, 2006, and ratified by Congress ( P.L. 109-283 , signed September 26, 2006). According to the U.S. Embassy in Muscat, the FTA has led to increased partnerships between Omani and U.S. companies. General Cables and Dura-Line Middle East are two successful examples of joint ventures between American and Omani firms. These ventures are not focused on hydrocarbons, suggesting the U.S.-Oman trade relationship is not focused only on oil. The United States phased out development assistance to Oman in 1996. At the height of that development assistance program in the 1980s, the United States was giving Oman about $15 million per year in Economic Support Funds (ESF) for conservation and management of Omani fisheries and water resources. On January 23, 2016, the United States and Oman signed an agreement on cooperation in science and technology. The agreement paves the way for exchanges of scientists, joint workshops, and U.S. training of Omani personnel in those fields. ", "summary": "The Sultanate of Oman has been a strategic ally of the United States since 1980, when it became the first Persian Gulf state to sign a formal accord permitting the U.S. military to use its facilities. Oman has hosted U.S. forces during every U.S. military operation in the region since then, and it is a partner in U.S. efforts to counter regional terrorism and related threats. Oman's ties to the United States are unlikely to loosen even after its ailing leader, Sultan Qaboos bin Sa'id Al Said, leaves the scene. Qaboos underwent cancer treatment abroad during 2014-2015, and his frail appearance in public appearance fuels speculation about succession. He does continue to meet with visiting leaders, including Israeli Prime Minister Benjamin Netanyahu on October 25, 2018, the first such visit by Israeli leadership to Oman in more than 20 years. Oman has tended to position itself as a mediator of regional conflicts, and generally avoids joining its Gulf allies of the Gulf Cooperation Council (GCC: Saudi Arabia, Kuwait, UAE, Bahrain, Qatar, and Oman) in regional military interventions such as that in Yemen. Oman joined the U.S.-led coalition against the Islamic State organization, but it did not send forces to that effort, nor did it support groups fighting Syrian President Bashar Al Asad's regime. It refrained from joining a Saudi-led regional counterterrorism alliance until a year after that group was formed in December 2015, and Oman opposed the June 2017 Saudi/UAE isolation of Qatar. Oman also has historically asserted that engaging Iran is the optimal strategy to reduce the potential threat from that country. It was the only GCC state not to downgrade its relations with Iran in connection with a January 2016 Saudi-Iran dispute. Oman's ties to Iran have enabled it to broker agreements between the United States and Iran, including the release of U.S. citizens held by Iran as well as U.S.-Iran direct talks that later produced the July 14, 2015, nuclear agreement between Iran and the international community (Joint Comprehensive Plan of Action, JCPOA). Yet, U.S. officials credit Oman with enforcing re-imposed U.S. sanctions and with taking steps to block Iran's efforts to ship weapons across Oman's borders to Houthi rebels in Yemen. Prior to the 2011 wave of Middle East unrest, the United States consistently praised Sultan Qaboos for gradually opening the political process even in the absence of evident public pressure to do so. The liberalization allows Omanis a measure of representation through elections for the lower house of a legislative body, but does not significantly limit Qaboos's role as paramount decisionmaker. The public support for additional political reform, and resentment of inadequate employment opportunities produced protests in several Omani cities for much of 2011, and for two weeks in January 2018, but government commitments to create jobs helped calm the unrest. Oman has followed policies similar to the other GCC states since 2011 by increasing press censorship and arresting critics of the government who use social media. The periodic economy-driven unrest demonstrates that Oman is having difficulty coping with the decline in the price of crude oil since mid-2014. Oman's economy and workforce has always been somewhat more diversified than some of the other GCC states, but Oman has only a modest financial cushion to invest in projects that can further diversify its revenue sources. The U.S.-Oman free trade agreement (FTA) was intended to facilitate Oman's access to the large U.S. economy and accelerate Oman's efforts to diversify. Oman receives small amounts of U.S. security assistance, and no economic aid.", "document_type": "crs"}
{"report": "The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides long-term, low-interest loans and other types of credit assistance for the construction of surface transportation projects. The TIFIA prog ram, administered by the Build America Bureau of the Department of Transportation (DOT), was reauthorized most recently in the Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ) from FY2016 through FY2020. Direct funding for the TIFIA program to make loans is authorized at $300 million for each of FY2019 and FY2020, but state departments of transportation can also use federal-aid highway grant money, both formula and discretionary, to subsidize much larger loans. The primary goal of the TIFIA program, historically, has been to enable the construction of large-scale surface transportation projects by providing low-interest, long-term financing to complement state, local, and private investment. The TIFIA program has been one of the main ways in which the federal government has encouraged the development of public-private partnerships (P3s) and private financing in surface transportation often backed by new, but sometimes uncertain, revenue sources such as highway tolls, other types of user charges, and incremental real estate taxes. Since its enactment in 1998 as part of the Transportation Equity Act for the 21 st Century (TEA-21; P.L. 105-178 ) through FY2018, the TIFIA program has provided assistance of $32 billion to 74 projects with a total cost of about $117 billion (in FY2018 inflation-adjusted dollars). Congress has used the TIFIA program as a model for other initiatives, notably the Water Infrastructure Finance and Innovation Act (WIFIA) program, administered by the Environmental Protection Agency and the Army Corps of Engineers. Several recent proposals would expand TIFIA assistance. For example, the Trump Administration's $200 billion infrastructure plan, based on leveraging state, local, and private resources, proposed adding several billion dollars of budget authority for TIFIA and expanding eligibility to ports and airports. The experience of TIFIA over the past decade shows, however, that there are limits to financing projects in this way. These limits include the number of projects that can take advantage of credit assistance, the difficulties of developing revenue mechanisms to service loans, the typical need for grant funding to make up a portion of the capital, and the difficulties of attracting private investment to risky projects, particularly those for which demand is uncertain or hard to predict. Credit assistance provided by the TIFIA program can be in the form of loans, loan guarantees, and lines of credit. To date, all TIFIA assistance except one loan guarantee has been in the form of loans. Loans and loan guarantees can be provided up to a maximum of 49% of project costs; lines of credit can be for an amount up to a maximum of 33% of project costs. Despite the higher limit established in law, DOT has generally limited loans and loan guarantees to no more than 33% of project costs, so as \"to ensure that the DOT shares the credit risk with other participants.\" Projects eligible for TIFIA assistance include highways and bridges, public transportation, transit-oriented development, intercity passenger bus and rail, intermodal connectors, intermodal freight facilities, and the capitalization of a rural projects fund. Eligible applicants for TIFIA assistance include state and local governments, railroad companies (including Amtrak), transit agencies, and private entities. Surface transportation projects are not evaluated for TIFIA assistance based on their projected benefits and costs. Instead, projects are assessed on creditworthiness, the ability of borrowers to repay their loans, and a number of other eligibility criteria. To be judged creditworthy, a project's senior debt obligations and the borrower's ability to repay the federal credit instrument must receive investment-grade ratings from at least one, but typically two, nationally recognized credit rating agencies. Generally, a project must cost $50 million or more to be eligible for assistance, but the threshold is $15 million for intelligent transportation system projects and $10 million for transit-oriented development projects, rural projects, and local projects. Another requirement is that loans must be repaid with a dedicated revenue stream, typically a project-related user fee, such as a toll, but sometimes dedicated tax revenue. The attractiveness of TIFIA financing is its low cost, its flexibility, and its long duration, features that are hard to match in the private capital market. Federal credit assistance provides funds at a low fixed rate, the Treasury rate for a similar maturity; for rural infrastructure projects, federal assistance is provided at half the Treasury rate. Loans are available for up to 35 years from the date of substantial completion of a project. Repayments can be deferred for up to five years after substantial completion, and amortization can be flexible. In some circumstances, TIFIA can reduce the transaction costs of borrowing, which for tax-exempt bonds typically include underwriter fees, bond counsel expenses, and the cost of borrowing funds before they are needed (known as \"negative carry\"). The Riverside County Transportation Commission in California is using TIFIA financing to build the I-15 Tolled Express Lanes Project, and has estimated that using traditional bond financing in lieu of a $150 million TIFIA loan would have cost an additional $25 million for the $471 million project. The characteristics of TIFIA financing can make it easier for project sponsors to attract the less patient and less flexible capital that is typically offered in the private market. This is especially important for projects like new toll roads, for which usage and revenue may take several years to grow to cover debt repayment. TIFIA financing is available with a senior or subordinate lien, but is typically used as subordinate debt, meaning it is in line to be repaid after the project's operational expenses and senior debt obligations. However, the TIFIA statute includes a provision which requires that in the event of a project bankruptcy, the federal government will be made equal with senior debt holders. This is referred to as the \"springing lien,\" and has led some to ask whether TIFIA financing is truly subordinate. The springing lien issue notwithstanding, TIFIA financing is generally thought to reduce project risk, thereby helping to secure private financing at rates lower than would otherwise be available. Financing projects instead of relying on pay-as-you go funding can mean such projects can be constructed years earlier than otherwise. TIFIA, therefore, is a means to accelerate project delivery and the benefits that flow from new infrastructure. Because of its advantages in terms of cost and flexibility, TIFIA may increase the number of projects that can be financed and thus provided on an accelerated schedule. In its 2016 report to Congress, DOT cited the example of managed lanes on U.S. 36 connecting Boulder and Denver, CO, a project it says was delivered 20 years earlier than anticipated because of TIFIA assistance. Applications for credit assistance to DOT are accepted at any time. Formal acceptance into the program for evaluation follows a letter of interest from the project sponsor in a format prescribed by DOT. However, DOT recommends that project sponsors contact DOT much earlier for technical assistance to discuss and develop an application. This can involve an emerging project agreement between DOT and the project sponsor. Acceptance into the TIFIA program requires a fee of $250,000 that is used to cover the costs of DOT's outside financial and legal advice. Additional amounts may be necessary if DOT's costs exceed $250,000. DOT notes that fees for a single project are typically between $400,000 and $700,000. For projects with estimated costs of less than $75 million, DOT is permitted to draw on federal funds to cover its costs, up to a total of $2 million annually, rather than charging fees to prospective borrowers. Prior to submitting a formal application for credit assistance, DOT will review the letter of interest, the independent financial analysis, and any other supporting material. A key element of this review is an analysis of the creditworthiness of the project sponsor and the quality of the revenue pledged to repay the federal government. DOT also requires an oral presentation by the project sponsor. If these are satisfactory, DOT will invite the project sponsor to submit a formal application. The statute requires DOT to determine within 30 days whether the application is complete or whether additional material needs to be submitted. Within 60 days of that determination, DOT must inform the applicant whether the application has been approved or not. DOT staff make a recommendation to the DOT Council on Credit and Finance, with the Secretary of Transportation making the final decision. In addition to the regular credit assistance process, the FAST Act required DOT to create an expedited application process for low-risk projects. These are defined as projects requesting $100 million or less in credit assistance, with a dedicated revenue stream unrelated to project performance (e.g., a dedicated sales tax) and standard loan terms. Like highway and public transportation projects that receive federal grants, projects financed under TIFIA are subject to laws and regulations concerning planning requirements; review and mitigation of environmental effects; the use of domestic iron, steel, and manufactured goods; and payment of prevailing wages. For example, projects must comply with the requirements of the National Environmental Policy Act of 1969 (NEPA) regarding the effects of the project on the human and natural environment. Typically, the NEPA analysis must be well advanced before a letter of interest is submitted. A TIFIA loan or other credit assistance will not be made until a final NEPA decision has been issued. The process for securing assistance has been praised for being predictable, but it has also been criticized for being slow and bureaucratic. For example, an official of Transurban, an Australia-based operator of toll roads, told Congress that the company did not pursue a TIFIA loan for the I-395 high occupancy toll (HOT) lanes in Virginia, in part because of the slowness of the approval process. There has also been criticism that the TIFIA program office has become more risk-averse, favoring low-risk projects that might be able to obtain financing from conventional sources. Credit programs like TIFIA are governed by the Federal Credit Reform Act (FCRA) of 1990. Under FCRA, the cost to the federal government of a credit program is the administrative cost plus the subsidy cost of the credit assistance. According to FCRA, the subsidy cost is \"the estimated long-term cost to the government of a direct loan or a loan guarantee ... calculated on a net present value basis.\" The subsidy cost estimate takes into account potential losses to the government resulting from loan defaults. Budget authority is typically provided to cover subsidy and administrative costs of a credit program. Costs of the TIFIA program are met by funding from the Highway Trust Fund (HTF) authorized by the FAST Act. When a loan is made, the subsidy cost amount is taken from the available budget authority and added to money borrowed from the Treasury to make the loan. When the principal and interest are repaid by the borrower, money is transferred back to the Treasury. Budgeting for credit programs is done for a cohort of loans, which is a group of loans funded by one fiscal year's appropriation. If the subsidy cost estimate proves correct, the cost to the government, outside of the budget authority already provided, will be zero. The amount of credit assistance available to borrowers from an amount of budget authority is determined by the subsidy rate after administrative costs are subtracted. The subsidy rate is the subsidy cost as a percentage of the dollars disbursed. As an example, if administrative costs are ignored, for every $100 of budget authority at a subsidy rate of 10%, the federal government can loan out $1,000 because it expects to eventually receive back $900 calculated in today's dollars. The budget authority covers the subsidy cost, which in this case is $100. As the subsidy rate declines, the government can provide more credit assistance because it expects a greater amount to be repaid by borrowers. With a subsidy rate of 5%, the TIFIA program could lend $2,000 for every $100 of budget authority ($100/5% = $2,000). Forecasts of the cost of credit assistance necessarily rely on estimates of the interest rate (a Treasury bond with the same maturity as the loan), the repayment of loans, and the rate of defaults. Because conditions can change, agencies must reestimate the subsidy rate periodically, generally annually, for outstanding loans and loan guarantees. These reestimates appear in the Federal Credit Supplement published in the President's annual budget submission. Estimates and reestimates of the TIFIA subsidy rate are done by DOT in cooperation with the Office of Management and Budget (OMB). The subsidy rate and its reestimation provide information about the level of risk being undertaken by DOT and the subsequent performance of TIFIA-assisted projects. A single subsidy rate is calculated for all loans originated in a given fiscal year. The original subsidy rate for TIFIA loans originated in fiscal years with loans still outstanding ranges from 15.16% to 3.36%. The subsidy rate for FY2019 is estimated to be 6.3%. Current reestimates of these original subsidy rates range from -8.06% to 46.12%. The subsidy rate is negative when the government expects to receive repayments greater than the amount of loans, on a net present value basis. The increased (+) or decreased (-) cost to the government of these reestimates is reflected in the net lifetime reestimate amount ( Table 1 ). Based on the subsidy rate, the cost to the government has been approximately 7 cents for every dollar financed, according to DOT. However, the Congressional Budget Office (CBO) notes that this does not take into account the market value of the financial risk to which taxpayers are exposed by federal credit programs such as TIFIA. CBO estimates that including this financial risk the TIFIA program costs 33 cents for every dollar financed. The FAST Act authorized $275 million for the TIFIA program in each of FY2016 and FY2017, $285 million in FY2018, and $300 million in each of FY2019 and FY2020. These amounts are much lower than those authorized in the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ), which greatly enlarged the TIFIA program ( Figure 1 ). Seen in isolation, this reduced DOT's capacity to issue loans by approximately $7.25 billion in FY2016, assuming a 10% subsidy rate and excluding administrative costs. However, the FAST Act also allows states to use funds from three other highway programs to pay for the subsidy and administrative costs of credit assistance: the discretionary Nationally Significant Freight and Highway Projects Program, known as INFRA grants; the formula National Highway Performance Program; and the formula Surface Transportation Block Grant Program. This use of grant funds has the potential to increase TIFIA financing much above the direct authorization, but at the discretion of state departments of transportation. Payment of the TIFIA subsidy cost has also been allowed as part of the Better Utilizing Investments to Leverage Development (BUILD) Transportation Discretionary Grants program (formerly TIGER program). Although direct funding for the TIFIA program was reduced in the FAST Act, DOT has not been limited in providing credit assistance. Funding for the TIFIA program is available until expended, and thus unused money accumulates from year to year. Unobligated budget authority in the TIFIA program was $1.65 billion at the end of FY2018, according to DOT. This amount has accumulated despite a clawback provision in MAP-21 that reduced TIFIA's budget authority by $640 million. The clawback provision was subsequently abolished in the FAST Act, presumably because of the reduction in the TIFIA program's authorization. Except for one loan guarantee, every credit agreement under the TIFIA program to date has been a loan. Through FY2018, TIFIA had provided loans worth about $32 billion (in FY2018 inflation-adjusted dollars). The overall cost of the 74 projects supported by TIFIA loans is estimated to be $117 billion (FY2018 dollars). The average project cost is about $1.5 billion and the average loan amount $430 million (both in FY2018 dollars). Consequently, the average TIFIA share of project costs has been about 28%. Over the 20-year history of the program, the average number of loans has been about four per year, worth about $1.6 billion (FY2018 dollars). The enlargement of the TIFIA program in FY2013 led to an increase in lending, but much of that occurred in a single year, FY2014 ( Figure 2 ). About two-thirds of TIFIA loans have gone to highway and highway bridge projects and another quarter to public transportation. Two loans (3%) have gone to railroad projects and another five (7%) to other surface transportation projects, including a combined parking and public transportation facility at O'Hare International Airport in Chicago. TIFIA assistance has been geographically limited, with projects in 21 states, the District of Columbia, and Puerto Rico receiving financing. Ten states account for about 80% of the 74 projects supported. These are California, Texas, Virginia, Colorado, Florida, Illinois, Washington, New York, North Carolina, and Maryland. User charges, including highway tolls, are the revenue pledge most often made by borrowers, accounting for half of the projects. Various taxes, particularly sales taxes, and general revenues make up most of the other half of project revenue pledges. At the time of DOT's most recent report to Congress on TIFIA, issued in August 2016, 86% of TIFIA loans were performing as expected, 8% were exceeding expectations, and 6% were performing below expectations. Through FY2018, two TIFIA-assisted projects have gone into bankruptcy, the South Bay Expressway toll road project in San Diego, CA, and the SH-130 toll road project (segments 5 and 6) near Austin, TX. The San Diego Association of Governments bought the South Bay Expressway project after it went bankrupt, and, according to DOT, \"repaid all outstanding TIFIA indebtedness.\" According to the DOT, the SH-130 TIFIA loan was converted to 34% ownership of the new company that will operate the toll road until 2062, a payment to the government of $15 million, and remaining debt of $87 million. It is uncertain whether the federal government will eventually receive payment equal to the amount of principal and interest that were originally payable on the $430 million TIFIA loan. The TIFIA program is the federal government's main tool for encouraging the establishment of public-private partnerships (P3s) and the investment of private capital in surface transportation. The low cost of borrowing, term length, and repayment flexibility can lower financial risk for private investors. P3s offer several advantages over traditional procurement methods, including additional capital, private management expertise, and risk transfer. By encouraging private finance and insisting on creditworthiness standards, the program relies, in part, on market discipline to stimulate projects with favorable benefits versus costs. Although the TIFIA program has supported the creation of P3s and leveraged private capital for transportation projects, government involvement remains more important in TIFIA-supported projects. According to one analysis of the TIFIA program through 2016, about one-third of TIFIA-supported projects (23 projects) were developed as P3s and the other two-thirds were governmentally procured. The 23 P3 projects had total project costs of $33 billion, of which 29% came from government grants, 28% TIFIA loans, 28% other debt, 13% private equity, and 1% other capital. TIFIA was initially designed to support large and very costly projects for which grant funding was unlikely to be enough. Despite this, there have been complaints that relatively few projects can take advantage of the program. Most typical highway and public transportation projects cost much less than the TIFIA thresholds for eligibility and have no obvious revenue stream to generate a repayment mechanism. Modifications to the TIFIA program, such as lower cost thresholds, lower interest rates for rural projects, and waived fees for smaller projects, have sought to make financing more accessible. However, to date, the size of TIFIA-supported projects does not appear to have declined. The smallest project since the passage of MAP-21 in July 2012, for example, is the U.S. 36 Managed Lane/Bus Rapid Transit Project between Boulder and Denver, CO, which had a total cost of $175 million. But this is phase 2 of a project that totaled almost $500 million. Moreover, there have been no TIFIA loans to rural project funds. In addition to the use of direct program funding, TIFIA assistance can be obtained by using other federal-aid highway funds, both discretionary and formula, and discretionary BUILD program (formerly TIGER program) funds. There have been a few BUILD program-funded TIFIA loans, but to date no states have traded formula grant funding for a larger loan. At the moment, states do not have to make that trade because the TIFIA program is not in danger of running out of budget authority. DOT calculated that unobligated budget authority in the TIFIA program at the end of FY2018 was $1.65 billion. This amount of end of fiscal year unobligated budget authority is much higher now than it was in FY2012, but the level has stabilized over the past few years ( Table 2 ). If the TIFIA program does exhaust its direct funding in the future, an unanswered question is whether states will choose to use grant funding to pay the subsidy and administrative costs of a loan. A similar option, the capitalization of a state infrastructure bank with grant funds, has largely gone unused, partly because states have planned to commit these funds to traditional projects years in advance. Congress could increase the lending capacity of the TIFIA program by authorizing and appropriating additional funding. However, there may not be enough suitable projects to make use of significantly greater budget authority, even if eligibility is expanded beyond surface transportation to include port, aviation, and economic development projects. To date, the greatest value of loans issued in any year has been about $8 billion. The average since the expansion of the program in FY2013 has been about $3.5 billion (in FY2018 dollars). More applications for credit assistance might result from lowering the fees and other costs associated with federal support. One option is to reduce the fees for projects of $75 million or more. All else equal, however, this would increase the administrative costs of the program and reduce its lending capacity. Another option is to increase the threshold below which one credit agency rating is needed rather than two on the senior debt and the federal credit instrument. Currently, the threshold is $75 million, but S. 3631 (115 th Congress) proposed to increase it to $150 million. The calculation of the TIFIA program's subsidy cost has generally been conservative. To date, two TIFIA-financed projects have gone bankrupt, and, according to DOT, 6% of loans were underperforming in 2016. A less conservative calculation by DOT and OMB could allow DOT to lend a greater amount with the same amount of budget authority. It does appear that the federal government has adjusted its subsidy cost estimates downward over the past few years in recognition of DOT's loss experience under the TIFIA program. However, the lack of defaults may be due to the types of projects being assisted and the generally favorable economic conditions. An enlarged TIFIA program might mean assisting more risky projects, leading to a higher subsidy rate, all else being equal. The 20-year experience of the TIFIA program, furthermore, is possibly less informative than it appears. The share of loans that have been fully repaid is about 15%. Many of the projects that have received assistance are permitted to defer interest and principal payments and have very long amortization schedules, so there is still a great deal of uncertainty as to how they will perform over the long term. For example, the I-495 high occupancy toll (HOT) lanes project in Northern Virginia received credit assistance in 2007 and the lanes opened in 2012, but interest payments did not begin until 2017. Principal repayments are not scheduled to begin until 2032, and are to continue until loan maturity in 2047. Ultimately, decisions about the level of risk that the TIFIA program is willing to take are made by DOT's Credit Council and the Secretary of Transportation within the limits of the program's statutory requirements. However, a critic of TIFIA's decisions on risk has suggested developing \"an underlying risk framework and underwriting standards within which loans can be negotiated,\" and \"creating a federal advisory committee to evaluate industry trends and periodically assess the effectiveness of TIFIA's risk framework in meeting its policy objectives.\" MAP-21 greatly enlarged the TIFIA program and at the same time raised the maximum federal share from 33% to 49% of eligible project costs. However, DOT announced after the statutory change that it would typically provide up to 33% and would provide amounts between 33% and 49% only in exceptional circumstances. To date, no project has received more than 33%. TIFIA appears to be maximizing its leveraging of nonfederal resources, but it may be limiting the projects that could use a larger share of TIFIA assistance. For example, the American Public Transportation Association has argued that an increased federal share \"would enable TIFIA credit assistance to meaningfully support certain projects with large public benefits that may be difficult to finance conventionally without federal credit support, while still ensuring other investors share in project costs and risks.\" By statute, the Secretary of Transportation may consider a TIFIA loan as part of the nonfederal share for federally funded highway and public transportation projects if the loan is repaid from nonfederal funds. For major public transportation capital projects seeking funding from the federal Capital Investment Grant (CIG) program (also known as \"New Starts\"), the Trump Administration has decided that it \"considers U.S. Department of Transportation loans in the context of all Federal funding sources requested by the project sponsor when completing the CIG evaluation process, and not separate from the Federal funding sources.\" In the CIG program, the maximum federal share of a project is 80%, although the share of funding permissible from the CIG program alone is lower. If projects seeking CIG grant funding receive unfavorable ratings because they are also proposing to use large TIFIA loans, then CIG project sponsors are more likely to request smaller TIFIA loans or perhaps to seek alternatives to TIFIA program financing. Low ratings on transit projects drawing on TIFIA loans could also stop them from moving forward. An option for Congress, such as H.R. 731 (116 th Congress), is to require TIFIA loans to be considered part of the nonfederal share of surface transportation projects. Some project sponsors have stated that the process for obtaining TIFIA assistance led them not to seek TIFIA loans. A number of proposals have been suggested to speed up approvals, such as regular and more frequent DOT credit council meetings, increased administrative spending to more quickly assess applications, regular publication of information on the time it takes to reach application milestones, and changes to the Letter of Interest process to provide greater schedule certainty. The FAST Act required DOT to expedite projects thought to be lower-risk—those requesting $100 million or less in credit assistance with a dedicated revenue stream unrelated to project performance and standard loan terms—but it is not clear what effect this could have, as only two projects have received TIFIA loans of less than $100 million since the passage of the FAST Act. S. 3631 (115 th Congress) proposed additional criteria for expedited loans for public agency borrowers. Other options, though possibly more controversial, would be to expedite reviews with experienced sponsors or to prioritize the evaluation of certain projects, such as those with national benefits or that involve significant private capital, over others. The Trump Administration has proposed broadening the eligibility of TIFIA assistance from highways and public transportation to ports and airports. S. 3647 (115 th Congress) would have allowed $10 million in TIFIA program funds to pay the subsidy costs of credit assistance to airport-related projects. One reason TIFIA eligibility has been limited to surface transportation projects is that funding for the program comes from the Highway Trust Fund (HTF), which traditionally has been supported by revenues from highway users. Now that the HTF has relied heavily on general Treasury funds for a decade, Congress may want to revisit this limitation. If TIFIA were to begin making loans to a broader set of projects, DOT likely would need to bring in expertise to provide analysis and advice on these new sectors. Another option for broadening eligibility is to create a new entity such as a national infrastructure bank. Such proposals in the 115 th Congress include the National Infrastructure Development Bank Act of 2017 ( H.R. 547 ), the Partnership to Build America Act of 2017 ( H.R. 1669 ), and the Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) Act ( S. 1168 ). Most proposals include a wide range of infrastructure projects, including transportation, water, energy, and telecommunications infrastructure. One purported advantage of a national infrastructure bank over other loan programs, such as TIFIA, is that it would have more independence in its operation, such as in project selection, and have greater expertise at its disposal. Most infrastructure bank proposals assume the bank would improve the allocation of public resources by funding projects with the highest economic returns regardless of infrastructure system or type. Selection of the projects with the highest returns, however, might conflict with the traditional desire of Congress to ensure funding for various types of projects. In the extreme case, major transportation projects might not be funded if the bank were to exhaust its lending authority on water or energy projects offering higher returns. The limitations of a national infrastructure bank include its duplication of existing programs like TIFIA. Most legislative proposals for infrastructure banks do not address this duplication, leading to questions about how each would run in parallel. Would a national infrastructure bank avoid current TIFIA-type projects or would it \"compete\" with the TIFIA program to finance these projects? The addition of a national infrastructure bank seems unlikely to increase the number of surface transportation projects involving major credit assistance without other substantial changes in the way such projects are typically funded and financed.", "summary": "The Transportation Infrastructure Finance and Innovation Act (TIFIA) program, administered by the Department of Transportation's Build America Bureau, provides long-term, low-interest loans and other types of credit assistance for the construction of surface transportation projects (23 U.S.C. §601 et seq.). The TIFIA program was reauthorized from FY2016 through FY2020 in the Fixing America's Surface Transportation (FAST) Act (P.L. 114-94). Direct funding for the TIFIA program is authorized at $300 million for each of FY2019 and FY2020. Additionally, state departments of transportation can use other federal-aid highway grant money, both formula and discretionary, to subsidize much larger loans. To date, states have not had to use other grant funding to subsidize credit assistance because the TIFIA program has a relatively large unexpended funding balance. The primary goal of the TIFIA program, historically, has been to enable the construction of large-scale surface transportation projects by providing financing to complement state, local, and private investment. The TIFIA program has been one of the main ways in which the federal government has encouraged the development of public-private partnerships (P3s) and private financing in surface transportation often backed by new, but sometimes uncertain, revenue sources such as highway tolls, other types of user charges, and incremental real estate taxes. To be eligible for TIFIA assistance, a project sponsor must be deemed creditworthy, that is, a good risk for repaying its debts, and must have a dedicated source of revenue for repayment. Project sponsors, therefore, are required to develop a funding mechanism, whether this is a new user fee or tax or the repurposing of existing fees and taxes. Changes to the TIFIA program have sought to make TIFIA assistance more accessible to less costly projects, but so far every TIFIA-supported project has cost $175 million or more. Financing projects instead of relying on pay-as-you go funding from taxes and other existing revenues can mean such projects can be constructed years earlier. TIFIA, therefore, is a means to accelerate project delivery and the benefits that flow from new infrastructure. The TIFIA program is also a relatively low-cost way for the federal government to support surface transportation projects because it relies on loans, not grants, and the TIFIA assistance is typically one-third or less of project costs. Another advantage from the federal point of view is that a relatively small amount of budget authority can be leveraged into a large amount of loan capacity. Because the government expects its loans to be repaid, an appropriation need only cover administrative costs and the subsidy cost of credit assistance. Program funding of $300 million can support approximately $4 billion in TIFIA loans. Since its enactment in 1998, the TIFIA program has provided assistance of $32 billion to 74 projects with a total cost of about $117 billion (in FY2018 inflation-adjusted dollars). All but one TIFIA credit agreement has been a loan; the exception is a loan guarantee. The average TIFIA-supported project cost is $1.5 billion, and the average TIFIA loan is $430 million (both in FY2018 dollars). About two-thirds of TIFIA loans have gone to highway and highway bridge projects, and another quarter to public transportation. TIFIA has supported at least one project in 21 states, the District of Columbia, and Puerto Rico, but the top 10 states account for about 80% of the 74 projects supported. The TIFIA program is likely to be considered in the 116th Congress during the reauthorization of the surface transportation programs. Program funding is one issue that may be discussed, because some stakeholders would like more budget authority despite a relatively large unexpended balance and the existing authority of states to use grant funding to pay the subsidy cost of credit assistance. Criticisms of the program and its implementation include the often slow decisionmaking process, the program's increasing risk aversion, and the limitation of the federal share of project costs to 33%, despite a statutory limit of 49%. Because of the relatively large unexpended balance, Congress might considered broadening the use of TIFIA assistance to nonsurface transportation and nontransportation infrastructure. Another option might be to create a national infrastructure bank, a federal infrastructure financing entity largely independent of other executive branch agencies, to take the place of TIFIA and other federal infrastructure credit assistance programs.", "document_type": "crs"}
{"report": "The Select Committee on the Modernization of Congress is the most recent effort of the House of Representatives to examine its internal procedures and operations through the use of a specialized committee, commission, or party conference or caucus group. The original Joint Committee on the Organization of Congress was constituted during the 79 th Congress (1945-1946) for the purpose of strengthening the role of Congress and its committees in the lawmaking process. In 1965, Congress reincarnated this joint committee to suggest additional changes in how the two chambers operate, and the committee was reconstituted during the 102 nd and 103 rd Congresses (1991-1994). While these efforts were bicameral in nature, other examinations of congressional operations, such as that being undertaken by this panel, have been focused primarily on the House. On January 4, 2019, the House established the Select Committee on the Modernization of Congress by adopting Title II of H.Res. 6 , the House rules package for the 116 th Congress (2019-2020), on a 418-12 vote. The stated purpose of the select committee is \"to investigate, study, make findings, hold public hearings, and develop recommendations on modernizing Congress.\" The select committee's authorization ends on February 1, 2020, and any activities beyond that date would require additional authorization. Twelve Members have been appointed by the Speaker to the select committee in accordance with H.Res. 6 , six of whom were appointed on the recommendation of the minority leader. The committee's authorizing resolution further requires the membership of the committee to include two freshman Members, two Members from the Committee on Rules, and two Members from the Committee on House Administration. The membership of this committee differs from that of other committees in three key ways: 1. Party ratios on committees generally reflect the overall party balance in the chamber. The select committee, however, is composed of an equal number of Democrats and Republicans (like the House Ethics Committee). 2. Service on the select committee does not count toward the committee membership limitations in House Rule X. 3. Members of the select committee are appointed by the Speaker based in part on recommendations of the minority leader. By comparison, placement on a standing committee generally occurs on the basis of a three-step process: first, recommendations of a party's steering committee are made; second, each party must approve those recommendations; third, committee assignment resolutions ratifying each party's selections are adopted on the House floor. On January 4, 2019, Speaker Pelosi selected Representative Derek Kilmer (WA) to serve as chair of the Select Committee on the Modernization of Congress. On January 29, 2019, the Speaker appointed the five additional Democratic Members: Emanuel Cleaver (MO), Suzan DelBene (WA), Zoe Lofgren (CA), Mark Pocan (WI), and Mary Gay Scanlon (PA). On February 11, Republican Leader Kevin McCarthy recommended the six GOP Members: Tom Graves (vice chair, GA), Rob Woodall (GA), Susan Brooks (IN), Rodney Davis (IL), Dan Newhouse (WA), and William Timmons (SC). Section two of the select committee's authorizing resolution (Title II of H.Res. 6 ) created a set of procedures specific to the select committee that will help guide the committee's work during its year-long operation. These rules supplement House Rules X and XI, which govern most committee procedure that applies to the select committee, with certain exceptions. No legislative jurisdiction was delegated to the committee—introduced measures will not be referred to it. The committee has the broad responsibility to study House operations with an eye toward modernizing the conduct of its business. In particular, the committee is charged with investigating the following seven areas: 1. rules to promote a more modern and efficient Congress; 2. procedures, including the schedule and calendar; 3. policies to develop the next generation of leaders; 4. staff recruitment, diversity, retention, and compensation and benefits; 5. administrative efficiencies, including purchasing, travel, outside services, and shared administrative staff; 6. technology and innovation; and 7. the work of the House Commission on Congressional Mailing Standards (Franking Commission). Building on the requirements of H.Res. 6, the select committee by a unanimous vote agreed to additional rules of procedure at its first meeting, held on March 12, 2019. The committee established its regular meeting day (the first Tuesday of each month), quorum requirements for various committee activities, and how the committee intends to conduct its questioning of invited witnesses. It takes two Members to make a quorum for a hearing, one-third for a markup (for instance, of any report the committee might release), and a majority \"actually present\" to issue a report. Committee rules also incentivize on-time arrival at a hearing with \"early-bird\" rules allowing Members present at the start to question witnesses before late-arrivers. The chair (Representative Kilmer) and vice chair (Representative Graves) are provided five minutes each to make opening statements, and the chair may recognize others to make opening statements as well. Committee rules place an overall time limit of 10 minutes for opening statements. Questioning witnesses occurs under the five-minute rule, and any committee member may submit to the chair \"questions for the record\" (written questions to witnesses who appeared) within 10 business days of a hearing. Although the committee is not authorized to issue subpoenas to compel the attendance of witnesses or the production of documents, it \"may recommend subpoenas and depositions and submit such recommendations to the relevant standing committee.\" On March 26, 2019, the Committee on House Administration reported H.Res. 245 , a resolution to fund House standing and select committees during the 116 th Congress, which the House agreed to the following day. This resolution authorized $487,500 for expenditures of the select committee during the course of its investigation. With operations of the select committee scheduled to end on February 1, 2020, all but $37,500 of this amount has been reserved for use during the first session of the 116 th Congress (2019). Prior to the adoption of H.Res. 245 , the select committee was provided with interim funding. In addition, pursuant to H.Res. 6 , the select committee may use the services of House staff. Consistent with its mandate, the committee's first hearing (March 12) was held for the purpose of receiving testimony from Members themselves regarding any suggested improvements to congressional operations. Thirty-five Members testified before the committee to present their own reform ideas spanning a wide range of subjects—for instance, changes to the standing rules, family-friendly adjustments to the House schedule, additional resources to support the work of Congress, and ways to delegate more policymaking responsibilities to individual Members. The committee's next three hearings (held on March 27, May 1, and May 10) included testimony from Capitol Hill practitioners, former Members, scholars, and others on a number of proposals the committee might consider in making its own recommendations. Additional hearings and other meetings are likely to be convened throughout calendar year 2019, and information on current and upcoming activities of the committee can be found on its official website. H.Res. 6 states that the select committee \"shall submit a final report to the House.\" The final report is to include the committee's findings and any policy recommendations it might have. Documents produced by House committees generally require a majority of the committee with a quorum present to support their publication. In the case of the select committee, a higher threshold of two-thirds is required to publish its final report. Given that the committee is composed of six Members from each party, some amount of bipartisan support will be needed to publish the final report. If all committee members are present for this vote, support from at least 8 of the 12 would be needed to meet the two-thirds threshold. House rules generally require committees to make their proceedings and written documents available to the public within a specified period of time. The select committee is not excepted from this obligation. As specified in Committee Rule 6, \"documents reflecting the proceedings of the Committee shall be made publicly available ... not more than 24 hours after each meeting has adjourned.\" After the committee's work is concluded, any records it produced during the course of its investigation will be distributed to the relevant standing committee(s) as designated by the Speaker, and any recommendations offered by the committee in its final report must be made public within 30 days of its submission to the House. The below CRS experts are available to answer inquiries from congressional clients concerning the topics specified.", "summary": "On January 4, 2019, the House established the Select Committee on the Modernization of Congress by adopting Title II of H.Res. 6, the House rules package for the 116th Congress (2019-2020), on a 418-12 vote. The purpose of the select committee as stated in its authorizing resolution is \"to investigate, study, make findings, hold public hearings, and develop recommendations on modernizing Congress.\" Twelve Members, six from each party, have been selected by their leadership to serve on the select committee during its year-long investigation. The committee's authorizing resolution requires its membership to include two Members from the freshman class of the 116th Congress, two Members of the Rules Committee, and two Members of the Committee on House Administration. Funding for the select committee in the amount of $487,500 was provided through House adoption of H.Res. 245 on March 27, 2019. The committee has held four hearings to date, with additional meetings likely. Committee operations are scheduled to end on February 1, 2020. Any final report of the committee will be made public. Publication of the final report will require approval from at least two-thirds of the committee. Given that both parties are equally represented on the committee, some amount of bipartisan support will be needed to approve and publish the final report.", "document_type": "crs"}
{"report": "U.S. relations with the Kingdom of Cambodia have become increasingly strained in recent years in light of Prime Minister Hun Sen's suppression of the political opposition and his growing embrace of the People's Republic of China (PRC). During the previous decade, U.S. engagement with the Kingdom slowly strengthened as Western countries continued to pressure Hun Sen to abide by democratic norms and institutions and as the U.S. government attempted to prevent Cambodia from falling too heavily under China's influence. Following strong performances by the opposition in the 2013 and 2017 elections, the Cambodian government banned the largest opposition party, the Cambodia National Rescue Party (CNRP), in 2017. As a result, the ruling Cambodian People's Party (CPP) ran virtually unopposed in the July 2018 National Assembly election and won all 125 seats. The Trump Administration stated that the election \"failed to represent the will of the Cambodian people\" and represented \"the most significant setback yet to the democratic system enshrined in Cambodia's constitution.…\" Between 1975 and 1991, Cambodia endured the four-year reign of the Communist Party of Kampuchea (also known as the Khmer Rouge), during which an estimated 2 million Cambodians died; an invasion and occupation by Vietnam; and civil war. The Paris Peace Agreement, signed by Cambodia and 18 other nations pledging to support the country's sovereignty and reconstruction on October 23, 1991, ended the Cambodian-Vietnamese War and set out a framework for a liberal democracy with periodic and genuine elections. Since the United Nations administered the first postwar national elections in 1993, Cambodia has made fitful progress in its political and social development, including the conduct of elections, a vibrant civil society, and a relatively open mass media. Hun Sen, age 65, has been the nation's leader for over 30 years, including as Premier of the Vietnam-backed Republic of Kampuchea between 1985 and 1993, and as Prime Minister after the United Nations-sponsored national elections in 1993. National politics are highly personalized, with Hun Sen at the helm, while corruption is widespread and political, legal, and judicial institutions remain weak. Although democratic institutions and practices have developed since the Peace Accords, Hun Sen often has employed undemocratic means to remain in power. According to some experts, the Cambodian leader has bolstered his political strength through a combination of \"guile and force\"; electoral victories; legal and extralegal political maneuvers; influence over the judiciary, broadcast media, and labor unions; patronage; cronyism; and intimidation. Some scholars have described the Cambodian polity before the election as an example of \"competitive authoritarianism,\" whereby multiparty elections are held and a civil society exists, but the national leader or political party maintains its dominance over them in undemocratic or unconstitutional ways. The Cambodian National Rescue Party (CNRP), a union of two opposition parties led by Sam Rainsy, a long-time opposition leader, and politician and human rights activist Kem Sokha, made significant gains in the 2013 parliamentary election and 2017 local elections. Following the party's strong showing in the 2017 commune council elections, many political observers predicted that the 2018 national elections would continue the trend of increasing competitiveness between the CPP and the CNRP. Furthermore, some observers reported fewer irregularities in 2017 compared to the 2013 National Assembly election, due in part to financial and technical assistance from Japan and the European Union that focused on improvements in the voter registration system. Hun Sen, on the one hand, has maintained electoral support, particularly in rural areas, due in part to Cambodia's three decades of relative political stability and economic development under his regime. The CNRP's growing electoral strength, on the other hand, reflected the will of a younger and more globalized electorate that is less focused on Cambodia's past turbulence, more concerned about corruption and inequality, and more demanding about government accountability and performance, according to observers. Nearly two-thirds of the country's population are under the age of 30 and half are under the age of 25. In November 2017, the Supreme Court of Cambodia, at the behest of the government, made a ruling that dissolved the CNRP for \"conspiring with the United States to overthrow the government.\" Then-U.S. Ambassador to Cambodia William Heidt stated that Hun Sen's accusations that the United States is attempting to overthrow the government were \"inaccurate, misleading, and baseless.\" In addition, the Supreme Court banned 118 CNRP members from participating in politics for five years. The government allowed 55 opposition seats to be filled instead by third parties, with many of them going to FUNCINPEC, the royalist party that dominated opposition politics until the late 2000s. The National Assembly also amended laws to remove CNRP commune councilors and village chiefs and replace them mostly with CPP members. Since 2008, the government has pursued several defamation charges against former CNRP president Sam Rainsy, a move regarded by many observers as politically motivated. Sam Rainsy subsequently has spent most of his time in self-imposed exile. In December 2017, the government charged Sam Rainsy with treason for posting a video on social media urging security personnel not to \"obey orders from any dictators if they order you to shoot and kill innocent people.\" Former CNRP vice-president Kem Sokha was detained between September 2017 and September 2018, awaiting trial for treason , allegedly for collaborating with the United States to foment a popular overthrow of the CPP. Kem was released on bail and placed under house arrest in September 2018. A U.S. Embassy spokesperson stated, \"We continue to call on the government of Cambodia to drop all charges against Mr. Sokha, remove restrictions on the political rights of him and other opposition leaders, and engage opposition leaders in an urgent dialogue aimed at building genuine national reconciliation.\" Beginning in 2015 with new government restrictions on nongovernmental organizations (NGOs), and during the lead-up to the 2018 national elections, the Cambodian government placed increasing restrictions on political and social activism, civil society, free speech, and foreign-funded democracy programs. During 2015-2017, more than 25 opposition members and government critics were arrested, and many fled the country. In June 2016, government critic Kem Ley was killed under suspicious circumstances. In 2017, the Cambodian Foreign Ministry expelled the Washington, DC-based National Democratic Institute (NDI), which was engaged in democracy programs in Cambodia, on the grounds that NDI was not registered with the government. Government media outlets also alleged that NDI, which received financial support from the U.S. Agency for International Development (USAID), was involved in a conspiracy involving the CNRP and U.S.-funded NGOs to overthrow the government. In 2017, the government closed more than one dozen Cambodian radio stations that sold airtime to Voice of America (VOA) and Radio Free Asia (RFA). RFA, facing political and economic pressure from the government, closed its Phnom Penh office. Authorities also ordered the Cambodia Daily , known as an opposition newspaper, to shut down in September 2017, ostensibly for failing to pay taxes. In 2018, the government made its first arrest under a lèse-majesté law, passed by the National Assembly in February 2018, which makes insulting the monarch a crime. Congress periodically has imposed conditions upon some U.S. assistance to Cambodia in order to promote democracy and human rights in the Kingdom. From 1998 to 2007, Congress prohibited government-to-government assistance to Cambodia in order to pressure Hun Sen into fully instituting democracy, but allowed U.S. assistance to NGOs and some humanitarian programs to continue. Congress lifted the ban in 2007 due in part to improving democratic processes, although most U.S. assistance efforts in Cambodia continue to be channeled through NGOs. The FY2014 and FY2017 Consolidated Appropriations Acts placed conditions related to democratic governance upon some assistance to Cambodia. The Administration and the 115 th Congress (2017-2018) took numerous steps in response to Hun Sen's recent suppression of the opposition, which include the following: In November 2017, the Trump Administration withdrew $1.8 million in assistance to the National Election Committee (NEC). On December 12, 2017, the Subcommittee on Asia and the Pacific of the House Committee on Foreign Affairs held a hearing on U.S. policy options to promote democracy and human rights in Cambodia. On November 16, 2017, the Senate passed S.Res. 279 , urging the Department of the Treasury to consider blocking the assets of senior Cambodian government officials implicated in the suppression of democracy and human rights abuses. In December 2017, the Trump Administration announced that the U.S. government would \"restrict entry into the United States of those individuals involved in undermining democracy in Cambodia.\" In August 2018, in response to the National Assembly election, the Administration announced that it would \"expand\" the restrictions. Pursuant to Executive Order 13818, which implemented the Global Magnitsky Human Rights Accountability Act (Section 1261 of P.L. 114-328 ), in June 2018, the U.S. Department of the Treasury sanctioned Cambodian General Hing Bun Hieng, commander of Hun Sen's bodyguard unit, \"for being the leader of an entity involved in serious human rights abuses\" over a span of two decades. Sanctioned individuals are denied entry into the United States, and any assets that they hold in the United States are blocked. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), enacted on March 23, 2018, imposed conditions upon U.S. assistance to the Government of Cambodia related to democracy and regional security. The act mandated funds for democracy programs and \"programs in the Khmer language to counter the influence of the People's Republic of China in Cambodia.\" In the 116 th Congress, on January 8, 2019, Senators Cruz and Coons introduced the Cambodia Trade Act of 2019 ( S. 34 ), which would require a report on the continuing participation of Cambodia in the U.S. Generalized System of Preferences (GSP) program. On January 11, 2019, Representatives Yoho, McCaul, and Engel introduced the Cambodia Democracy Act of 2019 ( H.R. 526 ), which would impose visa restrictions upon and block assets of Cambodian senior government officials that the President determines have undermined democracy or committed or directed serious human rights violations. Some policy experts maintain that continued U.S. engagement is the most effective course for promoting democratization from within and countering PRC influence. Some contend that many Cambodians view the United States favorably, and that Washington should continue to promote U.S. interaction with democratic forces in the Kingdom. In September 2018, Prime Minister Hun Sen, in a speech before the United Nations General Assembly, stated, \"We are heartedly regretful to highlight the fact that human rights nowadays have become 'a mission to impose civilization' for some powerful nations or, perhaps, as their operating standards as the pretext for interference under the name of political right protection.\" U.S.-Cambodian relations expanded after 2007, when political and human rights conditions in the Kingdom improved and the U.S. government lifted some restrictions on U.S. assistance. Principal areas of U.S. engagement have included U.S. foreign assistance programs, demining activities, limited military assistance and cooperation, U.S. missing-in-action (MIA) recovery efforts, and U.S. naval port visits. In 2017, the Cambodian government suspended Angkor Sentinel, an annual bilateral military exercise launched in 2010 that focuses on international peacekeeping, humanitarian assistance, and military-to-military cooperation. Some observers interpreted the unilateral action as a sign of Hun Sen's further distancing the Kingdom from the United States. The Cambodian government also postponed indefinitely a U.S. humanitarian mission in the Kingdom, the U.S. Navy Mobile Construction Battalion (also known as Seabees), without an explanation. The Seabees had worked with RCAF since 2008 and performed more than $5 million in community service projects throughout the country. In January 2019, U.S. Department of Defense Deputy Assistant Secretary for South and Southeast Asia Joseph H. Felter met with Cambodian military officials in Phnom Penh. The two sides discussed regional security issues and bilateral cooperation, including ways to improve defense ties and restart joint military activities. Felter also called on the Cambodian government to drop treason charges against Kem Sokha. Postwar Cambodia has been heavily dependent upon foreign assistance from major foreign aid donors, particularly Japan, South Korea, the United States, Australia, and France. Official Development Assistance (ODA) for Cambodia totaled $797 million in 2016, not including assistance from China. The Kingdom's reliance upon foreign assistance, while still significant, has declined during the past decade-and-a-half. ODA fell from 120% of central government expenditures in 2002 to less than a third in 2015, according to World Bank figures. Some analysts contend that ODA for Cambodia, part of a \"multibillion dollar international effort to transplant democracy in Cambodia since the early 1990s,\" long has kept Hun Sen's authoritarian tendencies in check, but has lost its effectiveness in doing so. The United States provided roughly $235 million in assistance related to good governance, democracy, and civil society between 1993 and 2018. In recent years, by some measures, assistance from China, which comes without conditions for good governance and human rights, has roughly matched the total assistance from major providers of ODA. The United States provided an estimated $79.3 million in foreign assistance to the Kingdom in FY2018, a decrease of 10% compared to FY2017. U.S. foreign assistance to Cambodia includes efforts to strengthen democratic institutions and civil society; reduce child and maternal mortality; and combat HIV/AIDS and other infectious diseases. International Military Education and Training (IMET) programs provide English language instruction and aim to expose the next generation of Cambodia's military leaders to \"American ways and values.\" U.S. demining assistance supports the removal of landmines and other unexploded ordnance (UXO). The Trump Administration's FY2019 foreign operations budget request would reduce annual assistance to Cambodia by nearly 75% compared to FY2017. The Extraordinary Chambers in the Courts of Cambodia (ECCC), an international tribunal established through an agreement between the government of Cambodia and the United Nations, began proceedings in 2006 to try Khmer Rouge leaders and officials responsible for grave violations of national and international law. The ECCC, which has convicted three Khmer Rouge senior figures at a reported cost of $300 million, has been financed through contributions by the Cambodian government and with donations by foreign countries, particularly Japan, both directly to the ECCC and to a U.N.-administered international trust fund. The U.S. government withheld assistance to the ECCC from 2006 to 2008 due to doubts about the court's independence due to alleged Cambodian government interference. In 2008, the United States began providing annual contributions to the international trust fund. In addition, the U.S. government has contributed to the Documentation Center of Cambodia (DC-Cam), an archive, library, and public service center focused upon Khmer Rouge atrocities, providing $9.8 million to DC-Cam since 2005. Since 2010, some U.S. foreign operations appropriations measures have placed conditions upon assistance to the tribunal in order to discourage corruption and political interference within the court and to ensure that the Cambodian government also was contributing to its costs. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) states that no assistance may be made available for the ECCC. ECCC prosecutors charged five former Khmer Rouge leaders with crimes against humanity and war crimes. In 2012, \"chief executioner\" Kaing Guek Eav, who ran the infamous Toul Sleng prison in Phnom Penh, was sentenced to life in prison. Former Foreign Minister Ieng Sary died in March 2013, before the completion of his trial, while his wife, former Minister of Social Affairs Ieng Thirith, was declared mentally unfit for trial. In August 2014, the court sentenced former leaders Nuon Chea and Khieu Samphan each to life in prison for some crimes against humanity, and in a separate trial in November 2018, each was convicted of additional crimes, including genocide. Although Cambodian and international human rights groups have advocated prosecuting midranking Khmer Rouge officials, Hun Sen has opposed further indictments, arguing that they would undermine national stability. At the end of the trials of Nuon Chea and Khieu Samphan in November 2018, Deputy Prime Minister Sar Kheng announced that the tribunal's work was finished. Cambodia is among the world countries most heavily contaminated by unexploded ordnance (UXO), including cluster munitions, landmines, and other undetonated weapons left from U.S. bombing during the Vietnam War, the Vietnamese invasion of Cambodia in 1978, and civil wars during the 1970s and 1980s. In 1969, the United States launched a four-year carpet-bombing campaign, dropping 2.7 million tons of ordnance, mostly cluster munitions, on Cambodia, more than the amount that fell on Germany and Japan combined during World War II. Up to 25% of the cluster bombs failed to explode, according to some estimates. There have been over 64,000 UXO casualties in Cambodia since 1979, including over 19,000 deaths. The economic costs of UXO include land prevented from being used for agricultural purposes, forestry, and cattle, and disruptions to irrigation and drinking water supplies. An estimated 761 square miles of the country remain contaminated with UXO. With the help of international assistance, Cambodia has reduced the UXO casualty rate from roughly 250 people per year a decade ago to about 100 annually in recent years, according to the Landmine and Cluster Munition Monitor. About 50% of contaminated land reportedly has been cleared, although many of the remaining areas are the most densely affected. The Cambodian Mine Action Authority is finalizing plans to clear all contaminated land by 2025. Despite progress, the migration of many poor Cambodians to areas that have high concentrations of UXO reportedly has contributed to a recent spike in casualties. Between 1993 and 2016, the U.S. government contributed over $124 million for UXO removal and disposal, related educational efforts, and survivor assistance programs in Cambodia. USAID's Leahy War Victims Fund has supported programs to help provide medical and rehabilitation services and prosthetics to Cambodian victims of UXO. Congress appropriated $5.5 million and $4.5 million in FY2016 and FY2017, respectively, for Department of State demining efforts in the Kingdom. More than 1,900 U.S. residents of Cambodian descent, of whom about 1,400 have felony convictions, are subject to deportation, according to U.S. Immigration and Customs Enforcement (ICE). Between 2002, when the two countries signed a Memorandum of Understanding on repatriation, and 2017, roughly 600 Cambodian nationals who were permanent U.S. residents and who had been convicted of felony crimes were deported to Cambodia. Many of them came to the United States during the 1980s as refugee children, and never have lived in Cambodia or had left when they were very young. Many Cambodians subject to deportation have jobs and families in the United States, and many served prison time in the United States for crimes committed during their youth. Under the Trump Administration, the number of Cambodian, Laotian, and Vietnamese nationals who have received orders of removal has risen significantly. In 2018, 110 U.S. residents of Cambodian descent were deported to Cambodia, compared to 29 in 2017 and 74 in 2016. In 2017, the Department of Homeland Security's Immigration and Customs Enforcement agency (ICE) deemed that the Cambodian government was uncooperative or hindering U.S. deportation efforts, and in violation of its international obligations, and placed Cambodia on a list of \"recalcitrant countries.\" The U.S. government imposed limited visa restrictions upon Cambodian Foreign Ministry employees and their families pursuant to Section 243(d) of the Immigration and Nationality Act. In the past decade-and-a-half, Cambodia, one of the poorest countries in Asia, has performed well on some socioeconomic indicators. The Kingdom's economy, which largely was destroyed by the Khmer Rouge and subsequent conflicts, has achieved an average annual growth rate of 7.7% since 1995 and 7.0% since 2014, driven largely by foreign investment and the development of the agricultural, construction, garment, real estate, and tourism sectors. China, Japan, South Korea, and Southeast Asian countries are the main sources of foreign investment in Cambodia. Cambodia's garment industry, largely run by companies from China, Hong Kong, and Taiwan, forms a growing pillar of the nation's economy, employing roughly 800,000 workers and constituting about 40% of the nation's GDP. Since 2000, Cambodia has risen from being the 39 th -largest exporter of textiles and apparel to the 15 th largest in 2016, according to World Bank trade data. Garment and footwear products constitute about 80% of Cambodian merchandise exports, with 43% reportedly going to the EU and 29% to the United States. Economic development has brought social and environmental costs. Hundreds of thousands of Cambodians reportedly have been displaced as government, business, and foreign entities, often in collusion, have confiscated their land and homes, sometimes forcibly or without proper compensation, to make way for agricultural, mining, logging, tourism, and urban development projects. Although forced relocations have continued, the number of cases reportedly has declined in recent years. Cambodia has one of the highest deforestation rates in the world and illegal logging continues, due to strong demand for wood from China and Vietnam, corruption, and suppression of environmental activists. Labor relations have shown some signs of strain in recent years, particularly as the garment industry has developed. Garment workers participated in large-scale demonstrations for higher wages in 2013-2014, which coincided with antigovernment demonstrations led by the CNRP. Cambodia's National Assembly adopted a new Law on Trade Unions in 2016, which some analysts say imposes greater restrictions on labor rights. In August 2017, the Cambodian government announced that it would enact a national minimum wage law, which some analysts surmise was done to boost labor support for the CPP. In 2017, U.S.-Cambodia bilateral trade was worth nearly $3.46 billion, including $3.06 billion in Cambodian goods exported to the United States. Although China surpassed the United States as Cambodia's largest trading partner in 2012, the United States remains the largest single overseas market for Cambodian merchandise exports. According to the U.S. International Trade Commission, over half of U.S. imports from Cambodia in 2017 were knitted or crocheted clothing. Some Cambodian products, including handbags and travel goods, receive preferential or duty-free tariff treatment under the U.S. Generalized System of Preferences program. Some policymakers have considered suspending GSP treatment upon certain Cambodian exports to the United States worth about $400 million annually in order to pressure Hun Sen into reversing his suppression of democracy. Other experts argue that restrictions on Cambodian exports may hurt Cambodian workers and encourage Cambodia to seek even closer relations with China, while it is uncertain whether such economic sanctions would weaken Hun Sen politically. Cambodia acceded to the World Trade Organization in 2004, and the Kingdom has made commitments to reduce tariffs and fulfill other obligations by 2018 as a member of the Association of Southeast Asian Nations (ASEAN) Free Trade Area. Cambodia also is a party to the proposed Regional Comprehensive Economic Partnership (RCEP), a trade pact that includes the 10 ASEAN member states and 6 other Indo-Pacific countries, including China. Negotiations to reach a final agreement are expected to continue in 2019. The PRC has become Cambodia's largest economic benefactor at a time when major ODA donors have become increasingly critical of Hun Sen's authoritarian policies. China's economic support has lessened the influence of foreign assistance conditions imposed by Western aid donors and given Hun Sen more political room to maneuver, both domestically and internationally, according to some analysts. In return, Cambodia has appeared increasingly willing to accommodate or support Beijing's positions on various regional issues, including territorial disputes in the South China Sea. Cambodia is said to be the Southeast Asian country upon which China exerts the greatest influence, and to be China's \"most reliable partner in Southeast Asia.\" According to one assessment, China has provided Cambodia about $15 billion in assistance and concessionary loans over the past two decades, and around 42% of the kingdom's external debt is owed to China. PRC foreign assistance to Cambodia, which has included development financing and grants, Chinese-built infrastructure, government buildings, and sports facilities, as well as support for public health and education, has become a dominant influence on the Kingdom's development. A PRC entity is constructing one of Cambodia's largest development projects, a $3.8 billion deep-water port on the Gulf of Thailand. By some accounts, China is the largest foreign investor in Cambodia, with cumulative investment of between $14 billion and $16 billion. Major sectors for Chinese investment include agriculture, garments, hydropower, infrastructure, mining, and tourism. According to one report, China accounted for nearly 30% of investment capital in Cambodia in 2016, while that from the United States constituted less than 4%. Cambodians have expressed mixed views about China's economic influence. Some say that Chinese investments and infrastructure have brought tangible economic benefits and spurred economic development. Cambodian social and political activists have expressed concerns about Chinese economic projects, including their quality, effects on the environment, and lack of transparency. Furthermore, many Cambodians have been evicted from their homes to make way for Chinese-backed economic projects, or their communities have been adversely affected by an influx of Chinese businesses, workers, and tourists. Domestic and regional demand for energy and foreign investment largely from China have driven hydropower projects in Cambodia and neighboring countries. Chinese firms reportedly have invested roughly $2 billion in the construction of seven dams in the Kingdom. Many experts have warned about environmental degradation and ecological damage, loss of fish stocks, displacement of communities, and adverse effects on livelihoods due to unregulated hydropower projects on the Mekong River. A proposed, Chinese-backed, 2,600-megawatt hydropower project, the Sambor Dam, would dwarf other dams in Cambodia. According to a government-commissioned report that reportedly was leaked in 2018, the Sambor megadam, if built, would have devastating impacts on food security in the region, particularly in Cambodia and Vietnam. Experts say that it would block fish migrations between southern Laos and Cambodia's Tonle Sap Lake, destroy fish habitats, and prevent sediment from flowing downstream and fertilizing agricultural areas in the Mekong Delta. Beijing has become a principal provider of military assistance to Cambodia, extending loans and military equipment, including small arms, tanks, trucks, helicopters, and aircraft, to the Royal Cambodian Armed Forces. China reportedly also has provided military education and training and sponsored exchanges of senior military leaders. Some analysts see PRC-Cambodian military cooperation as a response to growing security ties between the United States and Vietnam. Since 2016, China and Cambodia twice have carried out Golden Dragon , a joint military exercise involving over 400 People's Liberation Army (PLA) and RCAF soldiers involved in combat, counterterrorism, UXO removal, humanitarian, and disaster response exercises. The two countries reportedly plan a larger Golden Dragon event in 2019. ", "summary": "U.S. relations with the Kingdom of Cambodia have become increasingly strained in recent years in light of Prime Minister Hun Sen's suppression of the political opposition and his growing embrace of the People's Republic of China (PRC). During the previous decade, U.S. engagement with the Kingdom slowly strengthened as Western countries continued to pressure Hun Sen to abide by democratic norms and institutions and as the U.S. government attempted to prevent Cambodia from falling too heavily under China's influence. Following strong performances by the opposition in the 2013 and 2017 elections, the Cambodian government banned the largest opposition party, the Cambodia National Rescue Party (CNRP), in 2017. As a result, the ruling Cambodian People's Party (CPP) ran virtually unopposed in the 2018 National Assembly election. The Trump Administration and Congress have imposed sanctions in order to pressure Hun Sen into restoring democratic rights and dropping criminal charges against opposition leaders. While the U.S. government has criticized Hun Sen's backtracking on democracy, it also has sought to remain engaged with Cambodia. During the past decade, U.S. interests and foreign assistance efforts in Cambodia have included strengthening democratic institutions and norms, promoting the rule of law, increasing bilateral trade and investment, supporting economic growth, reducing poverty, and improving public health. The U.S. government has supported demining and related activities in Cambodia, which is among the countries most heavily affected by unexploded ordnance (UXO). Military engagement has included U.S. naval port visits, U.S. military assistance and training, and joint exercises. The United States and other countries have provided funding for the Extraordinary Chambers in the Courts of Cambodia (ECCC), also known as the Khmer Rouge Tribunal, established through a 2003 agreement between the government of Cambodia and the United Nations. Since the court commenced proceedings in 2006, it has convicted and sentenced three former Khmer Rouge leaders for crimes against humanity and war crimes committed during the period of Khmer Rouge rule (1975-1978). Following the conclusion of two trials in November 2018, the Cambodian government announced that the ECCC's work was concluded, despite calls by some Cambodians and international human rights groups to prosecute additional Khmer Rouge officials. In recent years, PRC assistance to Cambodia, by some measures, has begun to match total annual foreign aid flows from traditional major providers of official development assistance to Cambodia. China's economic support has given Hun Sen greater political room to maneuver, according to some analysts. In return, Cambodia has appeared increasingly willing to accommodate or support Beijing's positions on various regional issues, including territorial disputes in the South China Sea. Japan is the largest provider of Official Development Assistance and second-largest source of foreign direct investment in Cambodia. One of the poorest countries in Asia, Cambodia has performed well on some socioeconomic indicators since the United Nations brokered a peace settlement in 1991 and restored a constitutional monarchy in 1993. The Kingdom's economy has achieved an average annual growth rate of 7.7% since 1995, driven by growth in the agricultural, construction, garment, real estate, and tourism sectors. China, Japan, South Korea, and Southeast Asian countries are the main sources of foreign investment. The United States is the single largest overseas market for Cambodian merchandise exports, which consist mostly of garments and footwear.", "document_type": "crs"}
{"report": "Whistleblowing is \"the act of reporting waste, fraud, abuse and corruption in a lawful manner to those who can correct the wrongdoing.\" Intelligence Community (IC) whistleblowers are those employees or contractors working in any of the 17 elements of the IC who reasonably believe there has been a violation of law, rule, or regulation; gross mismanagement; waste of resources; abuse of authority; or a substantial danger to public health and safety. The essential distinction between whistleblowers generally and those in the IC (or those who otherwise have security clearances) is the concern for protecting classified information that may be involved in an IC-related incident or complaint. The IC has recognized that whistleblowing can save taxpayers' dollars, help ensure an ethical and safe working environment, and enable timely responses for corrective action. Whistleblowing protections for employees and contractors in the IC are extended only to those who make a lawful disclosure. They do not cover disclosures that do not conform to statutes and directives prescribing reporting procedures intended to protect classified information, such as leaking to the media or a foreign government. The whistleblower protections do not apply to a difference of opinion over policy, strategy, analysis, or priorities for intelligence funding or collection unless there is a reasonable concern over legality or constitutionality. Whistleblowing protections also do not protect against legitimate adverse personnel or security clearance eligibility decisions if the agency can demonstrate that it would have taken the same action in the absence of a protected disclosure. Congress and the executive branch have defined in statute and directives procedures for IC whistleblowers to make protected disclosures that also provide for the security of classified information. The Director of National Intelligence (DNI) whistleblowing policy and guidance is publicly available and specifically addresses whistleblower process and protections for IC contractors, members of the Armed Forces, and federal employees. There are differing opinions, however, on whether the IC's internal processes have the transparency necessary to ensure adequate protections against reprisal, and whether protections for IC contractors are sufficient. IC whistleblower protections have evolved in response to perceptions of gaps that many believed left whistleblowers vulnerable to reprisal. The first whistleblower legislation specific to the IC was the Intelligence Community Whistleblower Protection Act (ICWPA) of 1998. It was limited to specifying a process for an IC whistleblower to make a complaint but offered no specific protections. The Intelligence Authorization Act for Fiscal Year 2010 included provisions for protecting IC whistleblowers, though these were general and subject to different standards of implementation. Presidential Policy Directive (PPD)-19, signed in 2012, provided the first specific protections in response to perceptions that IC whistleblowers remained vulnerable to reprisal actions for making a complaint. The Intelligence Authorization Act for Fiscal Year 2014 codified the PPD-19 provisions and Intelligence Community Directive (ICD)-120 established a PPD-19 implementation policy. For members of the Armed Forces assigned to elements of the IC, 10 U.S.C. §1034 provides whistleblower protections. Department of Defense (DOD) implementing guidance for Section 1034 can be found in DOD Directive 7050.06, Military Whistleblower Protection . In January 2018, Congress passed P.L. 115-118 . Section 110 amended the National Security Act of 1947 and the Intelligence Reform and Terrorism Prevention Act of 2004 to include provisions to address perceived gaps in protections for IC contractors. The Intelligence Community Whistleblower Protection Act of 1998 (ICWPA) was intended to assist whistleblowers in the IC who are specifically excluded from the Whistleblower Protection Act of 1989. It should be noted that the ICWPA makes no explicit mention of members of the Armed Forces assigned to an IC element. It amended previous acts of Congress—the Central Intelligence Agency Act of 1949 and the Inspector General Act of 1978—to enable an IC government employee or contractor \"who intends to report to Congress a complaint or information with respect to an urgent concern\" to report to the Inspector General (IG) of the employee's or contractor's IC agency. Congress noted that the absence of this provision in law previously \"may have impaired the flow of information needed by the intelligence committees to carry out oversight responsibilities.\" Consequently, the ICWPA defines formal processes for submitting complaints that ensure the protection of classified information that may be involved: It requires the IG to report within 14 days all credible complaints to the Director of the CIA or to the head of the establishment who, in turn, is required to report the complaint to the congressional intelligence committees within 7 days. In the event the IG does not report the complaint or reports it inaccurately, the employee or contractor has the right to submit the complaint to Congress directly. This may be done (1) after the employee has provided notice to the IG, and (2) after the employee has obtained from the IG procedures for protecting classified information when contacting the congressional intelligence committees. Although the ICWPA provides a process for IC whistleblowers—employees and contractors—to securely report complaints to Congress via the relevant IC agency IG, it offers no specific provisions for protecting whistleblowers from reprisal or punishment. The IAA for FY2010 ( P.L. 111-259 ) included the first general provisions for protection of whistleblowers as part of legislation that established the Office of the Inspector General of the Intelligence Community (OIGIC), headed by the Inspector General of the Intelligence Community (IGIC). Section 405(a)(1) of the IAA for FY2010 added a new Section 103H to the National Security Act of 1947. Section 103H(g) permitted lawful disclosures to the IGIC, but lacked the specificity of later whistleblower protection legislation and directives: (3) The Inspector General [of the Intelligence Community] is authorized to receive and investigate, pursuant to subsection (h), complaints or information from any person concerning the existence of an activity within the authorities and responsibilities of the Director of National Intelligence constituting a violation of laws, rules, or regulations, or mismanagement, gross waste of funds, abuse of authority, or a substantial and specific danger to the public health and safety. Once such complaint or information has been received from an employee of the intelligence community— (A) the Inspector General shall not disclose the identity of the employee without the consent of the employee, unless the Inspector General determines that such disclosure is unavoidable during the course of the investigation or the disclosure is made to an official of the Department of Justice responsible for determining whether a prosecution should be undertaken; and (B) no action constituting a reprisal, or threat of reprisal, for making such complaint or disclosing such information to the Inspector General may be taken by any employee in a position to take such actions, unless the complaint was made or the information was disclosed with the knowledge that it was false or with willful disregard for its truth or falsity. Section 405 does cover contractors in addition to federal employees of IC elements: The Inspector General [of the IC] shall have access to any employee, or any employee of a contractor, of any element of the intelligence community needed for the performance of the duties of the Inspector General.\" An employee of an element of the intelligence community, an employee assigned or detailed to an element of the intelligence community, or an employee of a contractor to the intelligence community who intends to report to Congress a complaint or information with respect to an urgent concern may report such complaint or information to the Inspector General. Section 425(d) of the IAA for FY2010 also amended the Central Intelligence Agency Act of 1949 clarifying existing protections against reprisals against CIA employees who make lawful disclosures to the CIA Inspector General. PPD-19, Protecting Whistleblowers with Access to Classified Information , signed by President Obama on October 10, 2012, provided the first executive branch protections for IC whistleblowers. PPD-19 specifically protects some employees in the IC (it specifically excludes members of the Armed Forces) with access to classified information, from personnel actions taken in reprisal for making a lawful disclosure. PPD-19 defines a protected disclosure in part as follows: a disclosure of information by the employee to a supervisor in the employee's direct chain of command up to and including the head of the employing agency, to the Inspector General of the employing agency or Intelligence Community Element, to the Director of National Intelligence, to the Inspector General of the Intelligence Community, or to an employee designated by any of the above officials for the purpose of receiving such disclosures, that the employee reasonably believes evidences (i) a violation of any law, rule, or regulation; or (ii) gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety. PPD-19 prohibits reprisals (1) that could affect a whistleblower's eligibility for access to classified information; or (2) involve a personnel action against the IC employee making a protected disclosure. PPD-19 requires IC elements to certify to the DNI a process for IC employees to seek a review of personnel actions the employee believes are in reprisal for making a lawful disclosure. The review process also must provide for the security of classified information involved in a disclosure. As part of the review process, PPD-19 requires the IC element Inspector General to determine whether a personnel action was in reprisal for a lawful disclosure. The IG makes recommendations for corrective action in the event of a determination that a violation took place. The agency head \"shall carefully consider the findings of and actions recommended by the agency Inspector General.\" The agency head does not have to accept an IG's recommendation for corrective action. IC agencies also have to certify to the DNI that the agency has a review process that permits employees to appeal actions involving eligibility for access to classified information that are alleged to be in violation of prohibitions against retaliation for making lawful disclosures. PPD-19 allows for a whistleblower to request an external review by an IG panel chaired by the IGIC if the employee has exhausted the agency review process. In the event the panel decides in the employee's favor, the agency must consider but does not have to accept the panel's recommendation for corrective action. It requires the IGIC to report annually to the congressional intelligence committees the IG determinations and recommendations and IC element head responses to the determinations and recommendations. PDD-19 requires the executive branch to provide training to employees with access to classified information (not including contractors or members of the Armed Forces) regarding protections for whistleblowers. Title VI of the FY2014 IAA ( P.L. 113-126 ) codified provisions of PPD-19 and provided the first expansive statutory protections for IC whistleblowers against personnel or security clearance actions made in reprisal for protected disclosures. Section 601 of Title VI protected IC whistleblowers from any personnel action made in retaliation for a lawful disclosure. This includes a lawful disclosure to the Director of National Intelligence (or any employees designated by the DNI for such purpose), the Inspector General of the Intelligence Community, the head of the employing agency (or an employee designated by the head of that agency for such purpose), the appropriate inspector general of the employing agency, and a congressional intelligence committee, or a member of a congressional intelligence committee. Section 601 of Title VI made no specific mention of protections for contractors, however. A lawful disclosure is defined in the legislation as a disclosure that an IC employee whistleblower reasonably believes is a violation of \"Federal law, rule or regulation ... or mismanagement, a gross waste of funds, an abuse of authority, or substantial and specific danger to public health and safety.\" Section 602 of Title VI provided protections against retaliatory revocation of the security clearance of a covered government employee whistleblower for making a lawful disclosure . Section 602 also requires the development of appeal policies and procedures for any decision affecting a whistleblower's security clearance that the whistleblower alleges is in reprisal for having made a protected disclosure. This provision also enabled the whistleblower to retain his/her current employment status in the government, pending the outcome of the appeal. Section 602 of Title VI did not permit judicial review, nor does it permit a private right of action. Section 602 of Title VI does not make any mention of contractors. First signed in 2014, and updated on April 29, 2016, ICD-120, Intelligence Community Whistleblower Protection , provides IC implementing guidance for PPD-19. ICD-120 provisions include the following: Protections against reprisal involving a personnel action against the IC employee making a protected disclosure. ICD-120 excludes members of the Armed Forces, and makes no reference to contractors. Protections from reprisal for a protected disclosure that could affect an IC whistleblower's eligibility for access to classified information. This provision includes contractors and members of the Armed Forces. A requirement for each IC element to have a review process to permit appeals for any decision involving a security clearance allegedly in retribution for making a lawful disclosure. The provision allows the whistleblower to maintain his/her employment status while a decision is pending. Provision for an employee alleging a reprisal who has exhausted the internal agency review process to request an External Review Panel chaired by the IGIC. A requirement for IC-wide communications and training on whistleblower protections. Section 1034 of Title 10 U. S. Code provides protections against personnel actions taken in retaliation for protected communications by members of the Armed Forces. The Office of the DNI cites this statute as applicable to members of the Armed Forces assigned to the IC elements. Section 1034—unlike the ICWPA, which makes no mention of applicability to the Armed Forces—does not provide a process for making a protected communication that also protects classified information. Section 1034 allows members of the Armed Forces to communicate with a Member or Members of Congress; an Inspector General; a member of the DOD audit, inspection, investigation, or law enforcement organization; any person or organization in the chain of command; a court-martial proceeding; or any other organization designated pursuant to regulations or other established administrative procedures for such communications; or testimony, or otherwise participating in or assisting in an investigation or proceeding involving Congress or an Inspector General; specifies prohibited personnel actions in reprisal for a member of the Armed Forces making a protected communication; enables the DOD to take action to mitigate hardship for an Armed Forces member following a preliminary finding concerning an alleged reprisal for a protected communication; requires the inspector general conducting an investigation into a protected communication to provide periodic updates to Congress, the whistleblower, the Secretary of Defense, and the relevant service; and requires the DOD Inspector General to prescribe uniform standards for (1) investigations of allegations of prohibited personnel actions, and (2) training for staffs of Inspectors General on the conduct of such investigations. Coverage of contractors in existing IC whistleblower protection legislation is inconsistent. The ICWPA of 1998, which provides for a process for reporting a whistleblower complaint, does cover contractors, as do protections in Section 405 of the IAA for FY2010, and Title VI of the IAA of 2014. However, PPD-19 and ICD-120 do not mention contractors. There have been three subsequent efforts in Congress to address the gap in perceived coverage, culminating on January 19, 2018, when Congress passed P.L. 115-118 , an amendment to the Foreign Intelligence Surveillance Act of 1978, which included Section 110 provisions to address perceived gaps in protections for IC contractors. Senator McCaskill introduced S. 2002 on October 24, 2017. It was referred to the Senate Select Committee on Intelligence (SSCI) and no further action was taken. S. 2002 would have provided protections for IC employees—to include applicants, former employees, contractors, personal services contractors, and subcontractors—from being \"discharged, demoted, or otherwise discriminated against\" as a consequence of making a protected disclosure. It also included provisions for a process for making a complaint. On March 18, 2015, Senator McCaskill introduced S. 794 . It was referred to the SSCI and no further action was taken. The bill would have amended Section 2409 of Title 10 U.S. Code by extending protections for contractor employees on a contract with DOD or other federal agencies to contractor employees on a contract with an IC element who comply with an existing lawful process for making a whistleblower complaint, to include protection of classified information that is part of a court action. On January 19, 2018, Congress passed P.L. 115-118 , an amendment to the Federal Intelligence Surveillance Act of 1978. Section 110 amended Section 1104 of the National Security Act of 1947 by providing protections for IC contractor whistleblowers. Section 110 amended existing whistleblower protections to enable IC contractors to make lawful disclosures to the head of the contracting agency (or an employee designated by the head of that agency for such purpose), or to the appropriate inspector general of the contracting agency, as well as to the DNI, IGIC, and the congressional intelligence committees (or members of the committees). These protections are similar to those for IC employees under Title VI of the IAA for FY2014 ( P.L. 113-126 ). That legislation, however, included no provisions for contractors. Section 110 provides unambiguous protections for IC contractors making a lawful complaint against any retaliatory personnel action involving an appointment, promotion/demotion, disciplinary or corrective action, detail, transfer or reassignment, suspension, termination, reinstatement, performance evaluation, decisions concerning pay, benefits, awards, education, or training. The protections extend to lawful complaints involving, a violation of any Federal law, rule or regulation (including with respect to evidence of another employee or contractor employee accessing or sharing classified information without authorization); or gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety. These protections extend to contractors of the FBI—including contractors of the IC element of FBI, the Intelligence Branch—similar to the protections for IC employees and contractors under the Section 3234 of Title 50, U.S. Code, as amended. Section 110 also amended Section 3341(j) of Title 50, U.S. Code, to include protections for IC contractors who make lawful whistleblower disclosures against retaliatory revocation of their security clearances . H.Amdt. 894 , 113 th Congress, to the DOD Appropriations Act for Fiscal Year 2015 ( H.R. 4870 ), was agreed by a voice vote on June 18, 2014, redirecting $2 million dollars to fund the IC Whistleblower and Source Protection Directorate. This directorate exists within the OIGIC. The funds, which augmented the Intelligence Community Management Account, were to support the hiring of investigators and support staff to provide the IGIC greater ability to investigate fraud, waste, and abuse. Although it does not provide protections for whistleblowers per se, the measure addressed an underfunded capability in order to enable responsive follow-up on whistleblower complaints. ", "summary": "Whistleblowing is \"the act of reporting waste, fraud, abuse and corruption in a lawful manner to those who can correct the wrongdoing.\" Intelligence community (IC) whistleblowers are those employees or contractors working in any of the 17 elements of the IC who reasonably believe there has been a violation of law, rule, or regulation; gross mismanagement; waste of resources; abuse of authority; or a substantial danger to public health and safety. The IC has publicly recognized the importance of whistleblowing, and supports protections for whistleblowers who conform to guidelines to protect classified information. The Director of National Intelligence (DNI) whistleblowing policy and guidance is publicly available and specifically addresses the process for making protected disclosures and whistleblower protections for IC contractors, members of the Armed Forces, and federal employees. There are differing opinions, however, on whether the IC's internal processes have the transparency necessary to ensure adequate protections against reprisal, and whether protections for IC contractors are sufficient. IC whistleblower protections have evolved in response to perceptions of gaps that many believed left whistleblowers vulnerable to reprisal. The first whistleblower legislation specific to the IC was limited to specifying a process for IC whistleblowers to make a complaint but offered no specific protections. Subsequent legislation included only general provisions for protecting IC whistleblowers with no additional guidance on standards for implementation. Presidential Policy Directive (PPD)-19, signed in 2012, provided the first specific protections against reprisal actions for making a complaint. The Intelligence Authorization Act for Fiscal Year 2014 codified these provisions, which were further supported with IC implementation policy. Separate legislation under Title 10 of the U.S. Code, along with DOD implementing guidance, provides protections for members of the Armed Forces, including those assigned to elements of the IC. In early 2018, Congress passed legislation to address perceived gaps in protections for IC contractors.", "document_type": "crs"}
{"report": "Since the founding, the federal courts have played a critical role in adjudicating legal disputes, including ones involving executive action. As the Supreme Court stated in Marbury v. Madison , \"where a specific duty is assigned by law . . . the individual who considers himself injured[] has a right to resort to the laws of his country for a remedy.\" Naturally, Congress and its Members have an interest in litigating in federal court, for example, to vindicate their institutional priorities, to argue that the Executive is violating their legislative prerogatives, or to advance their legislative policy interests. During the Obama Administration, for instance, legislative entities brought or joined litigation in federal court for a host of reasons, such as to challenge the Executive's decision to allegedly expend money without a congressional appropriation, to defend the Defense of Marriage Act from constitutional challenge in lieu of the Executive, and to challenge the Executive's decision to engage in military action in Libya. Likewise, during the Trump Administration, legislators have become involved in lawsuits that challenge the President's alleged unconstitutional acceptance of emoluments, suits demanding the production of documents from the Administration, and, in an amicus capacity, challenges to legality of the so-called travel ban. Congressional interest in litigation may increase in salience under the current divided government, as illustrated by the House of Representatives' resolution to authorize the House to participate in ongoing litigation in Texas involving the Affordable Care Act and a recent lawsuit brought by several Members of Congress challenging the President's appointment of an acting Attorney General. However, whenever any party seeks to invoke the power of the federal courts, it must first show that its dispute belongs there. For nearly its entire history, the Supreme Court has emphasized that the role of courts is in \"decid[ing] on the rights of individuals.\" By contrast, \"[v]indicating the public interest (including the public interest in Government observance of the Constitution and laws) is the function of Congress and the Chief Executive.\" The federal courts apply a number of doctrines, known as justiciability doctrines, to ensure that they do not step beyond their bounds and decide issues more properly reserved for the other branches. Foremost among these doctrines is the requirement that a party seeking judicial relief from a federal court demonstrate \"standing.\" This report provides an overview of the standing doctrine as it applies to lawsuits involving legislators, committees, and houses of Congress. First, the report lays out the general rules of standing as they apply in every case in the federal courts and the main purpose behind the doctrine. One central purpose of the standing doctrine—protecting the court's role in the constitutional balance of powers—is a theme that underlies this report, as many of these cases involve courts deciding whether they have the power to adjudicate high-profile political disputes between the other two branches of the federal government. Next, the report considers the relatively few Supreme Court cases to discuss legislator standing, explaining the general principles that courts have drawn from those cases. The report then analyzes how lower courts have interpreted the limited Supreme Court case law on the issue, beginning with cases involving individual legislators, and following with cases brought by entire institutions, such as committees or houses of a legislature. The report then considers other issues relating to legislator participation in litigation, such as intervention under the Federal Rules of Civil Procedure or participation purely as an \"amicus curiae,\" or a \"friend of the court.\" The report concludes by identifying unresolved doctrinal questions and offering takeaways for prospective congressional litigants. Article III of the Constitution limits the exercise of the federal courts' judicial power to \"cases\" and \"controversies.\" The Supreme Court has interpreted this \"case or controversy\" language to impose various restrictions on the \"justiciability\" of disputes in the federal courts—that is, constraints on the federal courts' power to adjudicate and resolve disagreements between parties. One aspect of justiciability requires a party seeking judicial relief from a federal court to have \"standing,\" such that the party has \"a personal stake in the outcome of the controversy as to warrant [the] invocation of federal-court jurisdiction and to justify exercise of the court's remedial powers on his behalf.\" Further, a litigant must demonstrate standing for each claim he seeks to press and each form of relief that he seeks to obtain. The Supreme Court articulated a three-part test for standing in its seminal 1992 decision Lujan v. Defenders of Wildlife . To establish standing under that test, a party must show that it has a genuine stake in the relief sought because it has personally suffered (or will suffer) (1) a concrete and particularized and actual or imminent injury-in-fact (2) that is traceable to the allegedly unlawful actions of the opposing party and (3) that is redressable by a favorable judicial decision. While each of these requirements is complex and can blend into each other, courts generally regard the injury-in-fact requirement to be the \"central focus\" of the inquiry. A party that seeks to demonstrate standing must show that his injury is \"concrete\"—meaning an injury that is \"real\" and not \"abstract.\" Nonetheless, an injury can be intangible in nature, as the deprivation of a constitutional right, like freedom of speech or the free exercise of one's religion, constitutes an injury-in-fact absent any tangible economic loss. While it may sometimes be difficult to draw a distinction between an \"intangible\" injury and an \"abstract\" injury, the Court has provided some guidance. For example, the Court has held that an alleged injury sufficient for standing may be one similar to those that have \"traditionally been regarded as providing a basis for a lawsuit in English or American courts,\" such as the interest of a qui tam relator in the outcome of his suit. The Court has also stated that Congress can build on common law conceptions of injury, as Congress is \"well positioned\" to \"identify intangible harms that meet minimum Article III requirements\" and establish new causes of action to remedy such harms. Finally, the Court has explicitly considered and rejected several types of abstract injuries in previous cases. For instance, in Valley Forge Christian College v. Americans United for Separation of Church and State , the Supreme Court held that a public interest organization lacked standing to challenge the transfer of federal land to a religiously affiliated school, as the only injuries identified by the plaintiffs were the \"psychological consequence[s] presumably produced by observation of conduct with which one disagrees.\" A claim based only on this sort of psychological discomfort will generally not support an injury-in-fact. Along with the requirement of concreteness, a plaintiff's alleged injury must be \"particularized.\" This requirement focuses on whether the alleged injury affects the plaintiff in a \"personal and individual way.\" Significantly, the need for particularization bars plaintiffs from seeking redress for so-called \"generalized grievances.\" Under this doctrine, a plaintiff \"claiming only harm to his and every citizen's interest in proper application of the Constitution and laws\" does not state a sufficiently particularized injury. This principle does not mean, however, that injuries suffered by many are not justiciable. Rather, particularization only requires plaintiffs to connect to the injury they allege in some particular way, even if that injury is widely shared. For instance, in Federal Election Commission v. Akins , the Supreme Court recognized that individual voters had suffered a justiciable injury based on the Federal Election Commission's allegedly unlawful decision to not obtain and disclose certain information about a political organization. The Court concluded that even though that injury was \"widely shared,\" the deprivation of a statutory right granting access to information \"directly related to voting\" was sufficiently \"specific\" to allow Congress to authorize individuals to vindicate that right. These limitations on the courts, as they are rooted in the Constitution, are not easily circumvented. For example, subject to \"limited exceptions,\" a litigant must assert \"his or her own legal rights and interests, and cannot rest a claim to relief on the legal rights or interests of third parties.\" To illustrate, in Hollingsworth v. Perry , the Court held that the proponents of a California voter initiative lacked standing to defend that initiative from constitutional challenge when the California Attorney General declined to do so. In that case, the Court agreed that a \"political corporate body\" can designate an agent to proceed in court on its behalf, but held that the proponents could not simply assert to be acting in such a capacity. Rather, some evidence of actual agency, such as the principal's right to control the agent, must be present. Because this control was lacking in Hollingsworth —the State of California had no power to control or authority over the proponents of the initiative—the proponents could not claim to be proceeding on behalf of the State, and had to rely upon their own interests, which were not sufficiently concrete or particularized to amount to an injury-in-fact. The requirement of concrete and particular injury is essential in every case, but it is especially significant in cases involving the constitutionality of government action because of the important role that the standing doctrine plays in preserving the separation of powers. As one prominent treatise explains, difficult standing decisions often depend on \"the importance of having the issues decided by the courts\" versus \"the importance of leaving the issues for resolution by other means.\" In other words, \"[s]eparation of powers concerns\" often \"control the seemingly precise concept of injury.\" Accordingly, the Supreme Court has long recognized that the separation of powers is the driving force behind the standing doctrine. As the Court explained in Lujan , \"the Constitution's central mechanism of separation-of-powers depends largely upon common understanding of what activities are appropriate to legislatures, to executives, and to courts.\" The doctrine of standing, the Court explained, serves to identify those disputes that are \"appropriately resolved in the judicial process.\" Thus, while the formal standing doctrine has some requirements that express \"merely prudential considerations,\" its \"core\" is in ensuring that the courts do not stray beyond their essential role. The doctrine of standing, therefore, forces the courts to police their own jurisdiction, preventing individuals from enlisting the courts in fights that should be resolved through the political process. This conception of standing helps explain why the Court has said that the standing inquiry is \"especially rigorous\" in cases involving the constitutionality of government action. In such cases, the courts are being asked to participate in a dispute that may particularly involve the constitutional balance of power, placing the court's role in resolving that dispute under significant scrutiny. Separation of powers is logically the central focus when the plaintiff is a branch of government, such as a legislature. Although the Supreme Court has decided relatively few cases involving legislative standing, in those cases it articulated several principles that apply specifically when the plaintiff is a legislative entity. The first significant Supreme Court case to involve legislators filing a lawsuit challenging a governmental action was the 1939 case Coleman v. Miller . Coleman involved the Kansas legislature's then-recent approval of the proposed Child Labor Amendment to the U.S. Constitution, which Congress had submitted to the states for ratification 15 years prior. A bare majority of the Kansas legislature voted to ratify the amendment, with the Kansas lieutenant governor casting the tie-breaking vote in favor of ratification in the Kansas Senate. Seeking to undo this ratification, the plaintiffs, individual members of the Kansas legislature who had voted against the amendment, challenged the lieutenant governor's right to cast his tie-breaking vote. The plaintiffs argued that the lieutenant governor was not a part of the \"legislature\" and so his vote could not be counted to ratify the amendment under Article V of the Constitution. The Coleman plaintiffs also argued that the passage of time had sapped the amendment of its vitality. They sued to compel the Kansas secretary of state to annul the ratification. The Supreme Court splintered and issued three opinions, none of which obtained five votes. However, a majority of the Court concluded that the plaintiff legislators had standing. Chief Justice Charles Evans Hughes, writing the \"opinion of the Court\" for himself and two other Justices, concluded that the petitioners had an \"adequate interest to invoke [the Court's] jurisdiction\" because the senators' votes \"would have been sufficient to defeat ratification\" if they had been right that the lieutenant governor's vote was invalid. As a result, their votes had been \"held for naught\" and \"overridden,\" which ran contrary to the senators' \"plain, direct and adequate interest in maintaining the effectiveness of their votes.\" Justices Butler and McReynolds dissented from the majority's disposition of the case on the merits, but implicitly agreed with its conclusion that the plaintiffs had standing. Justice Frankfurter, writing for four Justices, would have held that the legislators lacked standing. He argued that so-called \"intra-parliamentary disputes\" should be left to parliaments, and that the injuries suffered here \"pertain[ed] to legislators not as individuals but as political representatives executing the legislative process.\" If these interests were recognized, Frankfurter feared that the courts would end up \"sit[ting] in judgment on the manifold disputes engendered by procedures for voting in legislative assemblies.\" Despite these arguments, Justice Frankfurter's view did not control, and Coleman is recognized as the first case in which the Supreme Court acknowledged that legislators' interest in their votes may constitute an injury that could be vindicated in federal court. The Court returned to the issue of legislator standing 30 years later in Powell v. McCormack . In that case, the House Special Subcommittee on Contracts concluded that Representative Adam Clayton Powell Jr., the chairman of the Committee on Education and Labor, had deceived House authorities as to travel expenses. After voters nonetheless reelected Representative Powell to the House of Representatives in 1966, the House adopted a resolution excluding him from taking his seat, and the House Sergeant at Arms refused to pay Representative Powell his salary. Representative Powell sued the Speaker of the House in his official capacity, seeking a declaratory judgment that his exclusion was unconstitutional, an injunction restraining respondents from excluding him from the House, and an injunction commanding the Sergeant at Arms to pay Representative Powell his salary. After the Supreme Court elected to take review of the case, the Congress that had excluded Powell terminated, and Representative Powell was seated in the House in January 1969. The Court concluded that Representative Powell's case was justiciable. In particular, the Court looked to see if Representative Powell had a \"legally cognizable interest\" in the outcome of the case. The Court concluded that Representative Powell's claim for back salary was itself sufficient to \"supply the constitutional requirement of a case or controversy.\" Powell thus stands for the proposition that legislators—no less than other individuals—have a personal pecuniary interest in their salary (and other personal prerogatives of office) that can amount to an injury to support standing when a defendant threatens that interest. The next case concerning legislative standing to come before the Court was 1997's Raines v. Byrd . Raines concerned a constitutional challenge to the Line Item Veto Act of 1996, which purported to authorize the President to \"cancel\" certain spending and tax benefit measures after they were signed into law. The statute provided that \"[a]ny Member of Congress or any individual adversely affected by [the Line Item Veto Act] may bring an action . . . for declaratory judgment and injunctive relief on the ground that any provision of this part violates the Constitution.\" Accordingly, the day after the statute was signed into law, four Senators and two Members of the House, including Senator Robert Byrd, all of whom had voted against the act, sued under this provision alleging that the act was unconstitutional. Senator Byrd alleged that the act injured him in his official capacity in three ways: (1) by \"alter[ing] the legal and practical effect of all votes\" cast in the future on bills that would be subject to the \"line item\" veto; (2) by divesting him of his constitutional role in the repeal of legislation; and (3) by altering the constitutional balance of powers between the legislative and executive branch. The Supreme Court held that Senator Byrd and the other legislators lacked standing to bring their claims. Chief Justice Rehnquist's opinion for the Court emphasized that the standing inquiry turns, in part, on \"whether the plaintiff is the proper party to bring this suit\" and the requirement that the alleged injury be \"particularized.\" The Court's opinion also restated the standing doctrine's important role in \"keeping the Judiciary's power within its proper constitutional sphere\" and the need to \"carefully inquire\" as to whether the plaintiffs had a sufficiently personal, particular, and concrete interest so as to justify a court's involvement. Chief Justice Rehnquist observed that, in contrast to the plaintiff in Powell , Senator Byrd was not asserting that he was deprived of anything to which he was personally entitled, such as a salary. Instead, Senator Byrd was asserting that he had lost power as a result of the statute because it altered the balance of power between Congress and the President. Thus, the individual legislators were, in the majority's view, impermissibly attempting to assert an \"institutional injury\" that they shared in common with the entire Congress. Such injuries, in the form of the dilution of the power of the legislative body, could not give rise to standing because they were neither concrete—they were \"wholly abstract\"—nor were they particularized—they were \"widely dispersed.\" The Court acknowledged that, in Coleman , it had upheld standing for legislators claiming a similar institutional injury—an interest in the effectiveness of their votes. However, unlike the plaintiffs in Coleman , Senator Byrd was not complaining that some illegal action had prevented his vote from counting, causing the bill to be passed in spite of his vote. Rather, Senator Byrd had voted, and he had \"simply lost that vote.\" In other words, as the Chief Justice explained, individual legislators could validly assert the institutional injury in Coleman only because the Kansas senators' votes would have actually been enough to defeat the measure at issue, but were \"completely nullified\" by the allegedly illegal action. Senator Byrd, in contrast, alleged \"wholly abstract and widely dispersed\" diminution of his future voting power. The Court went on to explain that Members of Congress had an alternative remedy to their judicial challenge—they could repeal the Line Item Veto Act. Further, the Court noted that the statute was not immune from other judicial challenges—an individual with a cognizable injury could still bring suit. Raines thus greatly limited the ability of individual legislators to sue on behalf of their institutions. Nevertheless, the 1997 decision reaffirmed Coleman , thereby not completely closing off the possibility that an individual legislator could assert an institutional injury. In Raines , the Court found it \"of some importance\" that the various houses of Congress did not authorize Byrd and the other plaintiffs to bring the suit. Although Congress had created a right to challenge the statute's constitutionality in the Line Item Veto Act itself, the plaintiffs had brought their suit only on their own behalf, and the plaintiffs' respective houses of Congress as a whole had opposed it on the merits. This factor would turn out to be decisive in the next legislative standing case to come before the Court, Arizona State Legislature v. Arizona Independent Redistricting Commission . In that case, the Arizona state legislature—as a whole—sued the Arizona Redistricting Commission (Commission), an independent commission vested by popular initiative with the authority to draw redistricting maps for congressional districts. The Arizona legislature sought to challenge the map adopted by the Commission for the 2012 elections as unconstitutional. The Arizona legislature argued that, under the Elections Clause of the Constitution, the \"Legislature\" of a state had to have \"primary responsibility\" to set the manner of elections, and the Commission did not qualify as a legislature. The Court concluded that, in contrast with the individual Member plaintiffs in Raines , the Arizona legislature had standing. The Court found that the key difference between the Arizona legislature and the plaintiffs in Raines was that the former was \"an institutional plaintiff asserting an institutional injury [that had] commenced this action after authorizing votes in both of its chambers.\" The problem with the individual Members asserting institutional injury in Raines , as the Arizona State Legislature Court saw it, was that the injury was \"widely dispersed,\" and no plaintiff in the 1997 case could \"tenably claim a personal stake in the suit.\" In contrast with Raines , the Court concluded, Arizona State Legislature was closer to the Coleman facts, in that the Commission's authority \"completely nullif[ied]\" any vote by the legislature purporting to adopt a redistricting plan—and that injury was adequately particularized to the plaintiff that was bringing the suit. Importantly, however, the Court stated in a footnote that the standing inquiry might have been different had the suit involved Congress mounting a legal challenge to the President, which would have raised \"separation-of-powers concerns absent here.\" A few key principles can be drawn from this line of Supreme Court cases. With respect to cases brought by individual legislators, Raines drew a fundamental distinction between so-called \"institutional injury\" and the sort of personal injury that was at issue with the plaintiff's lost salary in Powell . As the Court would go on to explain in Arizona State Legislature , an \"institutional injury\" is an injury that \"scarcely zeroe[s] in on any individual member,\" but rather \"impact[s] all Members of Congress and both Houses . . . equally.\" The Arizona State Legislature court, interpreting Raines , explained that individual legislators generally cannot assert institutional injuries: \"[h]aving failed to prevail in their own Houses, the suitors [in Raines ] could not repair to the Judiciary to complain.\" However, Raines also determined that there was an exception to this general rule based on the Court's holding in Coleman v. Miller , \"[t]he one case in which [the Court] upheld standing for legislators . . . claiming an institutional injury.\" The Court justified this exception because the plaintiffs in Coleman , if they had been correct on the merits of their claim, would have been in a situation where \"their votes not to ratify the amendment were deprived of all validity.\" The challenge, then, for any individual legislator asserting an institutional injury is to show that the asserted injury is analogous to the \"vote nullification\" that took place in Coleman . These principles will be discussed in the next section. Much of the lower court case law on legislative standing has focused on when an individual can assert an institutional injury akin to the injury asserted by the plaintiffs in Coleman . The courts inside and outside the D.C. Circuit have taken slightly different approaches to analyzing this question. Because Members of Congress serve in the federal government in Washington, DC, and because the District is also the site of executive branch actions that could be the subject of a congressional lawsuit, such cases are often initiated in D.C. federal court. As a result, the federal appellate body in DC, the D.C. Circuit—often referred to as the second-most important court in the country —has a significant influence over the case law concerning congressional standing. In a pair of cases following Raines , the D.C. Circuit considered when individual Member plaintiffs can assert institutional injuries: the 1999 case Chenoweth v. Clinton , and the 2000 case Campbell v. Clinton . In Chenoweth , three Members of the House sued to enjoin the American Heritage Rivers Initiative (AHRI), a program promulgated by executive order that required certain federal agencies to support local efforts to preserve certain historically significant rivers and riverside communities. The Member plaintiffs argued that the AHRI violated the Constitution by depriving them of their constitutional role in the passage of legislation by creating the AHRI via executive order. The Members argued that their injury was more severe than the injury at stake in Raines because the President's action had \"denied Members of Congress any opportunity to vote for or against the AHRI.\" The D.C. Circuit disagreed, concluding instead that the injury asserted by the plaintiffs in Chenoweth was fundamentally the same as that asserted in Raines —that their injury was an \"alter[ation] [in] the constitutional balance of powers between the Legislative and Executive Branches.\" Further, the court observed that here, as in Raines , it was \"uncontested that the Congress could terminate the AHRI were a sufficient number in each House so inclined,\" meaning that, as in Raines , Congress had a legislative remedy. The Chenoweth court acknowledged that, following Coleman , it might be a different case if the Representatives alleged that the necessary majorities in Congress had voted to block the AHRI. In such a case, legislators could argue that their votes had been \"effectively nullified,\" but because plaintiffs in Chenoweth made no such allegations, the court dismissed the case for want of standing. The second of the influential post- Raines D.C. Circuit decisions is Campbell v. Clinton , decided the year after Chenoweth . That case challenged the legality of the United States' involvement in NATO air and cruise missile attacks in Yugoslavia. Prior to the lawsuit, Congress had voted on four resolutions related to the conflict, including an \"authorization\" of the air strikes that failed by a tie vote, 213-213, and a declaration of war that failed 427-2. Congress also voted against requiring the President to immediately end U.S. participation in the conflict and voted to fund the involvement. After these votes, the plaintiffs, 31 Members of Congress who were opposed to U.S. military involvement, filed suit, alleging that the President's use of American forces violated the Constitution's War Powers Clause and the War Powers Resolution. Representative Tom Campbell and the other Member plaintiffs argued that the Executive's action had \"completely nullified\" the tie vote against the airstrikes and the vote against the declaration of war, equating themselves to the Kansas senators in Coleman . The D.C. Circuit disagreed, concluding that the reason the Coleman plaintiffs' votes had been \"nullified\" was because of the unique context of a vote against a constitutional amendment, which left them without any alternative remedy. The appellate court argued that, in Coleman , the Kansas senators were in a unique position because they were \"powerless\" to rescind the ratification by legislative action—according to the court, it was \"not at all clear\" whether the ratification could have been rescinded once it was deemed ratified. The court saw Raines as having attached critical importance to this absence of legislative remedy; this fact is what \"nullified\" the Kansas senators' votes and supplied the necessary concrete injury. In contrast, the Campbell plaintiffs had several legislative remedies, including the power to withdraw appropriations and impeachment. As a result, the court concluded that their vote had not been \"nullified\" in the same manner as the Coleman plaintiffs. Rather, the court viewed the Campbell plaintiffs' argument to essentially be that the President acted illegally in excess of his constitutional authority and in violation of a statute. As a result, the circuit court determined that the case was indistinguishable from Raines , and the plaintiffs had not suffered a concrete and particularized injury. Following these precedents, the trial courts in the D.C. Circuit have generally been hesitant to find concrete and particularized injury in cases involving individual legislators asserting institutional injuries, especially where the legislature as a whole possessed other potential avenues for relief through the legislative process. For example, in 2002, the court concluded that 32 Members of the House of Representatives lacked standing to challenge President George W. Bush's unilateral withdrawal from 1972's Anti-Ballistic Missile Treaty. As in Campbell , the court emphasized the \"widely dispersed\" nature of the injury and the \"extensive self-help\" remedies available to Congress that could be used to remedy the President's allegedly illegal actions, such as the appropriations power, or, as a last resort, impeachment. The court concluded that the availability of these alternate remedies, combined with the fact that Congress as a whole had not authorized these individual Members to represent its interests in federal litigation, demonstrated that the plaintiffs could not assert the institutional injury alleged. Similarly, in a 2011 case, a D.C. district court determined that 10 Members of the House lacked standing to challenge President Obama's alleged violation of the War Powers Clause of the Constitution and the War Powers Resolution. In that case, the plaintiffs alleged that the President had pursued military action in Libya without seeking any approval from Congress and had spent funds on an \"unauthorized war.\" The court, again following Campbell , emphasized that \"nullification necessitates the absence of a legislative remedy\" and found that the plaintiffs had \"voted on essentially what the plaintiffs now ask this Court to award . . . . Thus, the plaintiffs' votes were given full effect. They simply lost that vote.\" The one post- Raines ruling from a D.C. district court to reach a contrary conclusion and find legislative standing was the 2018 case Blumenthal v. Trump . The plaintiffs in Blumenthal —approximately 201 minority Members of the Senate and House—alleged that President Donald Trump, by receiving benefits from his business entities' dealings with foreign governments, had violated the Foreign Emoluments Clause of the Constitution, which prohibits persons holding certain offices from receiving any \"present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.\" Plaintiffs sought declaratory as well as injunctive relief preventing the President from accepting any further emoluments without the consent of Congress. The plaintiffs argued that they had suffered injury because the President's conduct, in allegedly accepting emoluments and failing to submit those emoluments to Congress, had nullified their votes by \"den[ying] them a voting opportunity to which the Constitution entitles them.\" The district court reasoned that, although this injury was an institutional injury dispersed among all Members of Congress, it nonetheless was comparable to the injury upheld in Coleman because the plaintiffs in Blumenthal , like the plaintiffs in Coleman , were not complaining about dilution of legislative power, but rather about the complete nullification of their votes. This distinction turned decisively on the plaintiffs' lack of a legislative remedy. The Blumenthal court contrasted the case with Raines and Chenoweth , in which the plaintiffs \"either lost the vote in Congress or did not have the political influence to bring their bill to a vote.\" By contrast, in the view of the district court, Senator Blumenthal and the other Member plaintiffs lacked any legislative means to remedy their complaints because the President never provided them with the opportunity to approve the emoluments in the first place. Although the defendants suggested several potential nonjudicial remedies, such as a vote by Congress rejecting specific supposed emoluments, or a bill defining emoluments and prohibiting the receipt of them, the court went on to reject all of these proposed possible legislative remedies as inadequate, asserting that none would require the President to submit his emoluments for congressional consent for prior approval or even force him to provide information about future emoluments to Congress. Further, the court determined that appropriations remedies that the D.C. Circuit saw as adequate in Campbell and Chenoweth would not work in this case, as there are no federal appropriations associated with the President's alleged receipt of emoluments. Finally, the court concluded that impeachment was too \"extreme\" to be considered an adequate remedy. Whereas the D.C. Circuit and the U.S. District Court for the District of Columbia have generally concluded that whether individual legislators possess standing largely turns on the availability of alternative legislative remedies, other circuits considering the question have not arrived at the same consensus. These courts have generally viewed the Coleman exception even more narrowly than the D.C. Circuit, further limiting the availability of legislative standing. In Baird v. Norton , for example, the Sixth Circuit ruled that Members of the Michigan state legislature lacked standing to challenge the procedures followed by their legislature in approving certain gaming compacts between the State of Michigan and Indian tribes. The plaintiffs alleged that the legislature had unlawfully approved the gaming compacts without complying with certain procedural safeguards required by the Michigan Constitution. First, the court held that the procedural harm inflicted by this neglect of constitutional procedures was only a \"generalized grievance shared by all Michigan residents\" and could not give rise to standing. Second, in response to the argument that the use of these procedures had \"nullified\" the plaintiffs' votes in the legislature, the court, analyzing Raines and Coleman , concluded that \"[f]or legislators to have standing as legislators, then, they must possess votes sufficient to have either defeated or approved the measure at issue.\" As this court read Coleman , standing required that the lawsuit be joined by sufficient members of their respective houses to defeat the legislation in order to show that actual nullification occurred. Because the legislators in Baird could not make that showing, the court concluded that they lacked standing without examining the availability of alternative legislative remedies. Reading Raines even more narrowly, the Tenth Circuit has concluded that individual legislators can never bring suit to assert institutional injuries. In Kerr v. Hickenlooper , on remand to the Tenth Circuit after the Supreme Court's decision in Arizona State Legislature , the court considered whether then-current Colorado state legislators could have standing to challenge an amendment to the Colorado Constitution that required voter approval in advance for new taxes. The Tenth Circuit had previously concluded that the legislators had standing because this amendment \"deprive[d] them of their ability to perform the legislative core functions of taxation and appropriation,\" rendering their votes \"advisory.\" On remand, however, the court changed its view, and read Raines and Arizona State Legislature together to conclude that \"individual legislators may not support standing by alleging only an institutional injury,\" which only institutional plaintiffs like the Arizona state legislature could assert. Arizona State Legislature , the court determined, had changed the law such that the nature of the injury—whether it was personal or institutional—was the determinative factor. The Tenth Circuit concluded that Coleman , which Raines had characterized as an institutional injury case, was in fact a case involving a \"personal\" injury to the senators whose votes were allegedly nullified. This injury was not, in the Tenth Circuit's view, \"institutional\" as the Supreme Court used that term in Arizona State Legislature because institutional injuries necessarily affect all members of a legislature in equal measure, and in Coleman , the only injured legislators were those who had their votes nullified. As a result, the court concluded that the plaintiffs in Kerr had asserted only institutional injuries to the power of the legislature, and they accordingly lacked standing. The views on institutional injuries announced in Baird and Kerr appear to contrast with the somewhat more receptive standard that has developed in the D.C. Circuit. In both Baird and Kerr , the court interpreted the standing upheld in Coleman , the so-called vote nullification injury, as being about the deprivation inflicted on individual legislators by virtue of their vote being defeated by the allegedly unlawful action. In contrast, after Campbell , the D.C. Circuit has focused on the lack of a legislative remedy and whether the legislature as a whole continues to enjoy \"ample legislative power\" to remedy the alleged wrong. As the Supreme Court explained in R aines , there may be fewer obstacles for legislators to sue for \"something to which they are personally\" entitled, such as the loss of salary claimed by Representative Powell in Powell v. McCormack . This section examines how lower courts have distinguished between \"personal\" and \"institutional\" injuries and the other justiciability considerations that have been applied to injuries that were undoubtedly personal. In Raines and Arizona State Legislature , the alleged injuries were clearly institutional because the alleged wrongful conduct represented diminution in the power of the legislature as a whole, affecting \"all Members of Congress and both Houses . . . equally.\" However, it is possible for an injury to have apparently unequal effects within the legislature but nonetheless be \"institutional.\" Best illustrating this principle is a pair of cases from different districts considering claims brought under 5 U.S.C. § 2954—which provides that executive agencies, on request of the House Committee on Oversight and Reform or the Senate Homeland Security and Governmental Affairs Committee, or \"any seven members thereof,\" \"shall submit any information requested of it relating to any matter within the jurisdiction of the committee.\" Known as the \"Seven-Member Rule,\" this statute authorizes Members of the minority party to obtain information from the Administration, but does not provide explicitly for judicial enforcement. In Waxman v. Thompson , a 2006 case out of the Central District of California, 18 Members of the House sued under Section 2954 after they had received an allegedly incomplete response from the Executive to their demand for documents relating to the anticipated cost of the Medicare Prescription Drug and Modernization Act of 2003. The court determined that the plaintiffs had not shown that their vote had been nullified within the meaning of Coleman —plaintiffs had alleged only that they \"ha[d] been required to vote and legislate without full access to information.\" The plaintiffs, however, argued that their injury was personal, not institutional, because they had a \"distinct legal entitlement not shared by all Members of Congress.\" The court disagreed. Rather, the court explained, the right the plaintiffs asserted \"runs with their congressional and committee seats.\" Their injury, in the view of the court, was not an injury to themselves personally, but an injury to \"Congress, on whose behalf they acted,\" and it was the same type of institutional injury that the Supreme Court deemed insufficient to confer standing in Raines . This same issue arose again in 2018, in the case Cummings v. Murphy in the U.S. District Court for the District of Columbia. As in Waxman , the Cummings plaintiffs were minority Members of the House Oversight Committee who sought documents from an executive agency under Section 2954. The court observed that the \"Plaintiffs tie[d] their injury directly to their constitutional duties as legislators, claiming their alleged harm to be impedance of the oversight and legislative responsibilities that have been delegated to them by Congress\" and that the injury alleged ran \"in a sense with the Plaintiff's seat.\" Despite these facts, the plaintiffs argued, as in Waxman , that because their injury was not shared by all Members of Congress equally, their injury was not institutional in nature. The court disagreed. Relying on Raines , the court concluded that the plaintiffs' injury was institutional because it was \"rooted in a right granted to them as Members of Congress.\" Further, because any violation of the \"Seven-Member Rule\" was an institutional injury, the court determined that, although the Member plaintiffs had a \"stronger case\" for standing than the plaintiffs had in Raines , historical practice, a lack of congressional authorization, and the availability of alternative remedies demonstrated that the injury was too \"wholly abstract\" and \"widely dispersed\" to confer standing on an individual Member. These cases make clear that the difference between a \"personal\" and an \"institutional injury\" does not hinge on the issue of particularization. Rather, the difference is the source of the right that has been violated. The Seven-Member Rule cases demonstrate that, even where an injury has a particular effect on certain Members, it can nonetheless be insufficiently \"concrete\" under Raines if the Member's injury does not deprive him of something to which he is personally entitled. In other words, where the right alleged to have been violated is tied to a right granted to a plaintiff \"as [a] Member[] of Congress,\" all of Congress is harmed equally, as a diminution of that right affects the institution as a whole, even if it is only a single Member who is asserting that right at a given moment. Even if a legislator alleges an injury that seems to be genuinely \"personal\" rather than \"institutional,\" that injury must nonetheless meet the typical standing requirements of particularization and concreteness. Further, that injury must be likely and imminent as opposed to merely speculative, causally connected to the challenged action, and redressable by the court. A number of cases illustrate how an alleged injury to legislators can fail to meet these requirements. For example, post- Raines , federal courts of appeals have generally concluded that a mere possibility of electoral or reputational harm to a legislator is too speculative to support Article III standing. In Schaffer v. Clinton , the Tenth Circuit dismissed a claim brought by Representative Bob Schaffer, a Member of Congress who alleged that the cost of living adjustment (COLA) in the Ethics Reform Act of 1989 violated the Twenty-seventh Amendment to the Constitution. Representative Schaffer, who received an increase in pay based on the COLAs, argued that they were \"damaging to his political position and his credibility among his constituency\" because the COLAs involved paying him with monies allegedly \"appropriated unconstitutionally.\" This argument relied heavily on a pre- Raines D.C. Circuit case, Boehner v. Anderson . In Boehner , the D.C. Circuit had concluded that Representative John Boehner had standing to challenge the COLAs based on his claim that it undermined his \"political position.\" However, as the Tenth Circuit observed, this case predated Raines , and its analysis was \"cursory.\" Rejecting Boehner , the Tenth Circuit concluded that Representative Schaffer's asserted injury was supported by no concrete evidence of reputational injury and was much like the injury rejected in Raines —an abstract claim that applied to every Member of Congress. As a result, the injury alleged was insufficiently concrete and particularized to give rise to standing. Another pair of cases illustrates how alleged injuries to legislators can fail to meet standing requirements on causation and redressability, even if the injuries alleged are seemingly sufficiently concrete and particular. The first of these cases is a 2018 case from the Middle District of Pennsylvania, Corman v. Torres . Corman involved a challenge brought by several parties to the Pennsylvania Supreme Court's 2018 decision to strike the 2011 redistricting map and issue its own replacement map. Among the challengers were eight Republican Members of Pennsylvania's delegation to the U.S. House of Representatives, who challenged the Pennsylvania Supreme Court's decision as a violation of the Elections Clause of the Constitution. The Members argued that they were injured by the alterations to their districts, thereby reducing their incumbency advantage, and by wasting time, energy, and resources expended in their former districts. The court set aside the question of whether these injuries were sufficiently concrete and particular, but nonetheless observed that no case supported \"the proposition that an elected representative has a legally cognizable interest in the composition of his or her electoral district.\" Irrespective of this question, the court concluded that the Members' claim failed on the causation prong of standing. Because the plaintiff Members conceded that the state supreme court had the authority to order the redrawing of the redistricting map, they could not trace their injuries to the substantive decisions that actually led to the court-drawn map: Even if the Pennsylvania Supreme Court had simply ordered that a new redistricting map be drawn, but had given the General Assembly free substantive rein . . . to accomplish that objective, the . . . injury would persist. In that circumstance, the court would not have committed any of the improprieties alleged in the verified complaint, but district boundaries would still have changed. The court concluded that the plaintiffs could not bridge this \"gap\" in the causal chain and dismissed the Members' claims. Another case in which a legislator's purported claims could not overcome the second two elements of the standing inquiry is Rangel v. Boehner , a 2013 case out of the District Court for the District of Columbia. R angel arose out of disciplinary proceedings and a vote of censure against Representative Charles Rangel. Representative Rangel alleged that certain improprieties had colored the proceedings of the Ethics Committee that had investigated him. He sued officials of the House, but not the House itself, seeking declaratory relief and an injunction requiring the defendants to \"remove the recording of censure.\" Representative Rangel claimed four separate injuries that he argued gave rise to standing: damage to his reputation, the loss of his status on the House Ways and Means Committee, \"political injury,\" and a violation of his due process rights. On these alleged injuries, the court generally concluded that Representative Rangel's claims failed on grounds of lack of causation and redressability. For example, although the court had no doubt that alleged injury to Representative Rangel's reputation was sufficiently concrete and particularized, the plaintiff's failure to sue the House itself doomed his ability to show causation. After all, the actions of the individual defendant House Members did not cause his injury—it was, as the court noted, the House that censured him, not the individual Member defendants. Similarly, Representative Rangel was unable to demonstrate redressability because the court determined that it had no authority to order the House to rescind his censure, as authority over the House's Journal was constitutionally vested in the House itself. As a consequence, a legislator plaintiff having a concrete and particularized injury is not alone sufficient to establish Article III standing, especially when the plaintiff seeks to involve the court in the internal affairs of the other branches of government. The Supreme Court's decision in Arizona State Legislature v. Arizona Independent Redistricting Commission reinforces that an institutional plaintiff, like the Arizona state legislature, will typically have standing to assert an \"institutional injury.\" In that case, discussed above, the Court determined that the Arizona state legislature had standing based on the Redistricting Commission's usurpation of its \"primary responsibility\" for redistricting under the Constitution's Elections Clause. Although the Court concluded that the legislature did not, in fact, have the exclusive authority it alleged, the Court nonetheless determined that this merits determination did not undercut the legislature's claim of injury for the purposes of justiciability. This analysis indicates that an institution, such as a legislature as a whole, may potentially assert an institutional injury and obtain standing in federal court. The Court left open, however, the possibility that separation-of-powers considerations could lead to a different result if the case instead involved Congress suing the President. In addition to the separation-of-powers concerns that might arise, Arizona State Legislature raises questions regarding who constitutes an institutional plaintiff and which institutional injuries are sufficiently concrete and particularized to give rise to standing. These questions are the focus of the following sections. Courts have routinely concluded that congressional plaintiffs who obtain authorization to sue before initiating litigation are significantly more likely to have standing. As one court has explained, the presence of authorization is the \"key factor\" when determining whether a congressional plaintiff possesses standing to vindicate an institutional injury on behalf of the authorizing institution. When a legislative plaintiff possesses authorization to pursue litigation from its respective institution, it decreases the likelihood that the plaintiff is impermissibly attempting to assert the rights of a third party instead of proceeding on the institution's behalf. Although the Arizona State Legislature Court deemed it important that the legislative plaintiffs commenced the lawsuit after \"authorizing votes in both of its chambers,\" that does not mean that a congressional plaintiff must always obtain the imprimatur of both the Senate and the House of Representatives in order to bring suit. Rather, courts have held that a plaintiff may sue on behalf of a single house of Congress to vindicate that particular chamber's unique institutional interests. Several courts have considered what sort of authorization, short of authorizing votes in both chambers leading to a suit being brought by the institution itself, suffices to permit a suit on behalf of a legislative institution. A number of cases prior to Arizona State Legislature considered this question. The most common setting for these cases involved legislative demands for information. The Supreme Court has long recognized \"that the power of inquiry—with process to enforce it—is an essential and appropriate auxiliary to the legislative function.\" In other words, Congress has an interest in obtaining information necessary to fulfill its constitutionally designated role in the tripartite system of American government. At the same time, however, courts have acknowledged a distinction between a chamber of Congress utilizing its own powers to demand and obtain information and invoking the federal courts ' power to enforce its demands. In order to utilize the judicial process—rather than the political process—to enforce congressional demands for information, Supreme Court precedent requires the plaintiffs to show that they are validly acting on behalf of the injured institution. In the 1976 case of United States v. AT&T Co. , for instance, the D.C. Circuit ruled that the chairman of the House Subcommittee on Oversight and Investigations had standing to appear in federal court to challenge the executive branch's objection to a subpoena that the subcommittee had issued to a private party. The court reasoned \"that the House as a whole has standing to assert its investigatory power, and can designate a member to act on its own behalf.\" Crucially, because the House of Representatives had passed a resolution authorizing the chairman to participate in the case \"on behalf of the Committee and the House,\" the chairman did not encounter the standing obstacles that might exist if \"a single [M]ember of Congress\" attempted \"to advocate his own interest in the congressional subpoena power\" without the affirmative consent of his or her respective chamber or if \"a wayward committee\" were \"acting contrary to the will of the House.\" Although AT&T predates Raines and the subsequent D.C. Circuit cases interpreting it, courts have generally concluded that AT&T 's holding—namely, that congressional plaintiffs usually have standing to assert Congress's interests in obtaining information so long as they have congressional authorization to do so—survives Raines . AT&T's holding comports with broader standing principles that a plaintiff may \"designate agents to represent it in federal court\" without running afoul of the standing requirement. In this vein, courts have held that a house of Congress can authorize a committee to sue on its behalf. For example, in the District Court for the District of Columbia's 2008 opinion in Committee on the Judiciary, U.S. House of Representatives v. Miers , the House Committee on the Judiciary filed suit in federal court to enforce a subpoena it had issued against certain executive officials. Critically, before the committee filed its lawsuit, the full House of Representatives passed a resolution authorizing the chairman of the committee \"to initiate a civil action in federal court\" to enforce the subpoena. The court therefore ultimately concluded \"that the Committee ha[d] standing to enforce its duly issued subpoena through a civil suit.\" According to the court, the fact that the committee had \"been expressly authorized by House Resolution to proceed on behalf of the House of Representatives as an institution \" distinguished Miers from cases like Raines in which individual legislators had invalidly attempted to assert injuries to their respective institutions as a whole rather than to themselves personally. In other words, \"the fact that the House ha[d] issued a subpoena and explicitly authorized th[e] suit\" was \"the key factor that move[d Miers ] from the impermissible category of an individual plaintiff asserting an institutional injury . . . to the permissible category of an institutional plaintiff asserting an institutional injury.\" Thus, the committee, acting on the full House's behalf with the House's imprimatur, could validly sue \"to vindicate both its right to the information that [was] the subject of the subpoena and its institutional prerogative to compel compliance with its subpoenas.\" Where, by contrast, a legislative plaintiff has not obtained congressional authorization to represent his respective house via an authorizing vote, courts have typically determined that the plaintiff lacks standing to sue to enforce subpoenas or otherwise assert an informational injury to Congress as a whole. For instance, in Cummings v. Murphy , the Seven-Member Rule case discussed above, the court concluded that individual Members lacked standing to argue that they were, in fact, validly proceeding on behalf of the institution. As the court explained, \"[i]ndividual Members of Congress generally do not have standing to vindicate the institutional interests of the house in which they serve\" unless they have obtained affirmative authorization from their respective chambers of Congress. The court opined that \"requiring authorization protects Congress' institutional concerns from the caprice of a restless minority of Members.\" Cummings thus demonstrates that \"it is not simply enough\" for individual legislators \"to point to an informational injury arising from an unmet statutory demand to demonstrate standing\"; courts generally also \"look to the presence of authorization as a necessary . . . factor in evaluating standing in cases that pit the Executive and Legislative Branches against each other.\" Significantly, at least one opinion suggests that to validly authorize a plaintiff to pursue litigation on an institution's behalf, that institution must expressly authorize the plaintiff to bring that specific lawsuit prior to the commencement of that suit; a freestanding authorization to pursue litigation may not always suffice to confer standing. Namely, in Walker v. Cheney , the Comptroller General sought a court order requiring the Vice President to produce certain documents. To support his argument that he possessed congressional authorization—and thus standing—to pursue this lawsuit on Congress's behalf, the Comptroller General invoked 31 U.S.C. § 716(b)(2), which purports to authorize the Comptroller General to \"bring a civil action in the district court of the United States for the District of Columbia to require the head of [an executive] agency to produce a record.\" The court, however, rejected that argument, concluding that this \" generalized allocation of enforcement power\" did not suffice to establish \"that the current Congress ha[d] authorized the Comptroller General to pursue a judicial resolution of the specific issues\" in the case before the court. To support that conclusion, the court emphasized that no committee requested the documents or issued a subpoena requiring the Vice President to produce them. Thus, in spite of the aforementioned statutory language purporting to empower the Comptroller General to bring suit, the court determined that \"neither House of Congress, and no congressional committee, ha[d] authorized the Comptroller General to pursue the requested information through [a] judicial proceeding.\" Even where a legislature as a whole has purported to authorize a particular plaintiff to file suit on its behalf, that plaintiff must still satisfy the various requirements of standing, including the requirements of concrete and particular injury as to that institution. To illustrate, whereas a legislative plaintiff acting pursuant to the authorization of its respective institution generally possesses standing to sue to redress concrete and particular informational injuries to that institution, even an entire legislative body proceeding under valid authorization will not have standing to assert abstract or nonparticular injuries. As an example of a putative injury in the latter category, courts have generally rejected the idea that legislatures have standing based on their duty to legislate to challenge allegedly illegal acts by the Executive. In Alaska Legislative Council v. Babbitt , for instance, the D.C. Circuit determined that the Alaska Legislative Council lacked standing to challenge federal management of subsistence taking of fish and wildlife on federal lands in Alaska. The council claimed that it was injured because individual Alaskan legislators had a \"duty to legislate for the management of all the State's resources\" and the federal program interfered with this duty. Although the Alaska legislature had not explicitly voted to authorize the council to sue, the court assumed the plaintiff possessed such authorization because of its status as a \"permanent interim committee and service agency of the legislature.\" Despite this authorization, the court concluded that the committee lacked standing because its injuries did not belong to it, but rather, belonged to the \"State itself,\" and only the governor could bring that suit on behalf of Alaska. The legislature had thus failed to identify a \"separate [and] identifiable\" injury entitling it to sue. Additionally, several courts have concluded that legislative plaintiffs lack standing to assert a generalized interest in the proper interpretation or application of a statute irrespective of whether the full legislative body has authorized the plaintiffs to sue. For instance, Newdow v. U.S. Congress involved a challenge brought by an individual plaintiff to the constitutionality of the Pledge of Allegiance's use of the phrase \"under God.\" After the Ninth Circuit had issued a ruling allowing the case to proceed, the Senate moved to intervene in the case pursuant to a provision of the U.S. Code giving the Senate Legal Counsel the right to intervene unless the Senate would lack \"standing to intervene under . . . [A]rticle III of the Constitution.\" The court concluded that this language required it to examine the Senate's putative interest in the case at hand. The Ninth Circuit denied the Senate's motion, concluding that the Senate lacked standing to defend the law's constitutionality. The court explained that a \"general desire to see the law enforced as written\" did not suffice to give standing to a house of Congress to defend the law. A more recent consideration of institutional standing occurred in the 2015 case of United States House of Representatives v. Burwell . In that case, the House of Representatives asserted two claims against various executive branch entities: (1) a constitutional claim that the defendants \"spent billions of unappropriated dollars to support the Patient Protection and Affordable Care Act\" (ACA) in violation of the Appropriations Clause of the U.S. Constitution; and (2) a statutory claim that the Secretary of the Treasury, \"under the guise of implementing regulations,\" had \"effectively amended\" certain aspects of the ACA \"by delaying its effect and narrowing its scope.\" The court concluded that the House possessed standing to pursue the constitutional claim but not the statutory claim. The court first determined that the House had standing to pursue its constitutional claim because \"Congress (of which the House and Senate are equal) is the only body empowered by the Constitution to adopt laws directing monies to be spent from the U.S. Treasury,\" and the Executive's alleged circumvention of that structure was a sufficiently concrete and particularized injury as to the House as a whole. However, the district court then ruled that the House lacked standing to pursue its parallel challenges to the Executive's alleged violation of the statutory scheme, reasoning that Article III does not create \"general legislative standing\" by which the branches of Congress may sue the Executive for any alleged violation of statutes or the Constitution by the Executive. Because the Executive's alleged violation of the ACA would cause the House \"no particular harm,\" the House lacked standing to pursue its statutory claim. Burwell also rejected the argument that separation-of-powers concerns required the dismissal of the House's claims. In Arizona State Legislature , the Court had noted that such concerns might be significant in a dispute between Congress and the President, but the Burwell court dismissed such concerns as dicta and did not find them controlling. Instead, the court determined that the case presented a \"plain dispute over a constitutional command\" that the judiciary was well suited to resolve. These separation-of-powers concerns, particularly as they relate to Congress's interests with respect to the executive branch's execution of a statutory scheme, play a particularly important role in answering the question of when Congress can intervene in litigation, as discussed below. Whereas the analysis above focuses mainly on congressional entities filing their own lawsuits as plaintiffs , legislators or a legislature as a whole may also attempt to participate in ongoing litigation between nonlegislative parties in a variety of ways. The procedural rules governing the federal courts contemplate that, subject to specified conditions, a nonparty may \"intervene\" in an existing federal case. Generally, if a court permits an entity to intervene in a case, that entity becomes a full party to the litigation and may freely participate in the case to the same extent as the original parties. For instance, subject to certain exceptions and conditions, an intervenor may generally (among other things) file briefs and motions, participate in discovery, and appeal adverse judgments. As relevant here, congressional litigants periodically attempt to intervene in existing federal cases initiated by noncongressional parties. As explained in the following subsections, whether such attempts ultimately succeed depends on a variety of factors that to a large degree mirror the considerations relevant to whether a legislative plaintiff may initiate new litigation in federal court. One potentially key—albeit infrequent —situation in which a congressional entity may attempt to intervene in an ongoing lawsuit is when the executive branch declines to defend the constitutionality of a federal statute. For instance, the U.S. House of Representatives recently intervened in the case of Texas v. United States to defend the constitutionality of provisions of the Affordable Care Act after the executive branch declined to defend the law in its entirety. As explained below, at least two questions may arise when Congress (or a Member, committee, or house thereof) attempts to intervene to defend a statute's validity: (1) whether the executive branch's refusal to defend the statute renders the original parties insufficiently adverse to create a justiciable controversy; and (2) whether Congress possesses standing to intervene in the case. With regard to the first question, whenever a plaintiff sues the United States to invalidate a federal statute, and the United States does not dispute the plaintiff's assertion that the statute is unconstitutional, the fact that none of the named litigants wishes to defend the statute's validity creates a potential risk that the original parties are not truly adverse to each other. The Supreme Court has ruled that \"the business of federal courts\" is limited \"to questions presented in an adversary context,\" rather than lawsuits between friendly parties. Like standing, this \"adversity\" requirement is a justiciability doctrine that the Supreme Court has derived (at least in part) from Article III's \"case or controversy\" language. The Supreme Court has held that where \"both litigants desire precisely the same result\" in a particular case, there is generally \"no case or controversy within the meaning of [Article] III of the Constitution,\" and a federal court accordingly lacks jurisdiction over the case. In addition to this constitutional foundation, the Supreme Court has recognized that the adversity requirement also has a prudential dimension. In other words, \"even when Article III permits the exercise of federal jurisdiction, prudential considerations\" may sometimes counsel against adjudicating a lawsuit where the parties lack that \"concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions.\" With respect to the second question, while the standing doctrine is generally concerned with whether a plaintiff is a proper party to a particular lawsuit, other putative parties who are not plaintiffs, but are seeking distinct judicial relief from a federal court—such as intervenor-defendants or defendant-appellants—likewise need to demonstrate that they possess standing in order to obtain the relief sought. For example, in Diamond v. Charles , the Supreme Court concluded that an intervenor lacked standing to appeal an adverse judgment against the original defendant after that defendant declined to file an appeal of its own. Under Supreme Court precedent, as long as the existing parties to the case present a justiciable controversy on their own, an intervenor need not independently possess standing to participate in the lawsuit so long as the intervenor seeks the same judicial relief as one or more of the existing parties. To the extent an intervenor seeks \"relief that is different from that which is sought by a party with standing,\" however, that intervenor must independently \"possess Article III standing to intervene\" in the case. The Supreme Court has periodically considered how the adversity and standing doctrines apply in the congressional intervention context and has ultimately concluded that cases in which the executive branch declines to defend a federal statute and Congress steps in to defend the law may potentially be justiciable. For instance, in Immigration and Naturalization Service (INS) v. Chadha , an alien challenged the constitutionality of a particular provision of the Immigration and Nationality Act that had authorized one house of Congress, by resolution, to invalidate the decisions of the executive branch. Because the INS agreed with the alien that this \"one-house veto\" provision was unconstitutional, the Court needed to examine whether the case presented \"a genuine controversy\" rather than a nonjusticiable \"non-adversary[] proceeding\" between two friendly parties. Crucially, however, both the Senate and the House had intervened in the case to defend the statute's constitutionality. The Court therefore held that, because Congress was \"a proper party to defend the constitutionality of\" this statute, \"the concrete adverseness\" required by Article III existed \"beyond doubt\" \"from the time of Congress' formal intervention\" in the case. Going further, the Court also explained in dicta that \"there was adequate [Article] III adverseness\" in the case even \" prior to Congress' intervention\" because the \"INS would have deported\" the alien against his wishes if the federal courts had rejected the alien's constitutional challenge. In other words, because the INS would have enforced the challenged statute despite its unwillingness to defend the statute's constitutionality in a judicial proceeding, the majority viewed the case as presenting a justiciable controversy between the INS and the alien even if Congress had never intervened. Although the Chadha Court also acknowledged that \"there may be prudential, as opposed to [Article] III, concerns about sanctioning the adjudication of th[e] case in the absence of any participant supporting the validity of\" the provision's constitutionality, the Supreme Court explained that the lower court had \"properly dispelled any such concerns by inviting and accepting briefs from both Houses of Congress.\" The Court further opined that \"Congress is the proper party to defend the validity of a statute when an agency of government, as a defendant charged with enforcing the statute, agrees with [the] plaintiffs that the statute is inapplicable or unconstitutional.\" Prior to the Supreme Court's 2013 decision in United States v. Windsor , one might plausibly read Chadha to stand for the limited proposition that Congress may intervene to defend an undefended federal law (albeit one that the Executive has continued to enforce) only when the judicial invalidation of that law would directly affect Congress's institutional powers, such as by eliminating Congress's ability to validly utilize a one-house legislative veto. In Windsor , however, the Court appeared to implicitly adopt a broader conception of Chadha by permitting a congressional entity to intervene to defend an undefended law even though the statute at issue had no direct bearing on Congress's institutional powers. The respondents in Windsor challenged the constitutionality of a provision of the Defense of Marriage Act (DOMA) on equal protection grounds. During the course of the litigation, however, \"the Attorney General of the United States notified the Speaker of the House of Representatives . . . that the Department of Justice would no longer defend the constitutionality of\" the challenged provision. Nevertheless, the Attorney General stated that he would continue to enforce the provision in order to \"provid[e] Congress a full and fair opportunity to participate in the litigation\" over the provision's validity, and accordingly appealed the lower court's judgment invalidating the statute to the Supreme Court. After the Attorney General announced that he would not defend the statute, the House's Bipartisan Legal Advisory Group (BLAG)—which is \"composed of the Speaker and the majority and minority leaderships\" of the House —\"voted to intervene in the litigation to defend the constitutionality of\" the provision. The district court permitted BLAG to intervene. Because \"the Government largely agree[d] with the opposing part[ies] on the merits of the controversy,\" the Supreme Court needed to determine whether the executive branch's \"concession that [the challenged provision was] unconstitutional\" rendered the case nonjusticiable on adversity grounds. The Court first concluded that the case presented \"a justiciable dispute as required by Article III\" because (1) the executive branch had announced its \"inten[tion] to enforce the challenged law\" if the court ultimately deemed the provision constitutional; and (2) the lower court had \"order[ed] the United States to pay money\" to the challengers \"that it would not disburse but for the court's order.\" The Court accordingly determined that \"the United States retain[ed] a stake sufficient to support Article III jurisdiction on appeal and in proceedings before th[e] Court.\" The Court next concluded that the legislative branch's presence in the case alleviated any purely prudential concerns posed by the executive branch's refusal to defend the provision's validity. The Court explained that \"BLAG's sharp adversarial presentation of the issues satisfie[d] the prudential concerns that otherwise might counsel against hearing an appeal from a decision with which the principal parties agree.\" Critically, because Windsor and the United States presented a justiciable controversy within the meaning of Article III on their own, the Court did not need to resolve whether BLAG would have independently possessed Article III standing to intervene in the case and defend the statute on its own authority. As explained in greater detail below, however, the Court also implied that it might have deemed the case nonjusticiable if the Executive had declined to enforce the challenged statute in addition to merely refusing to defend its constitutionality. Chadha and Windsor thus stand for the propositions that (1) the Executive's refusal to defend a statute will not always render the lawsuit challenging that statute nonjusticiable; and (2) congressional intervention in ongoing federal litigation does not necessarily raise Article III standing problems —at least as long as Congress does not pursue additional relief beyond a judgment in the United States' favor. To that end, lower federal courts have frequently permitted legislative actors to intervene as defendants in cases where the executive branch agreed with the plaintiff that a challenged statute was unconstitutional . Still, the federal courts' Article III jurisdiction to adjudicate such cases may not be unlimited. Although Chadha and Windsor suggest that Congress may help alleviate prudential adversity problems created by the executive branch's nondefense of a statute by intervening to defend the challenged law, neither case says anything definitive about whether a congressional intervenor would have independently possessed Article III standing in those cases, especially in cases where the Executive refuses to enforce the underlying statute. Because the Executive continued to enforce the challenged statutes in Chadha and Windsor despite its refusal to defend their constitutionality, the Court concluded that the \"refusal of the Executive to provide the relief sought\" by the plaintiff \"suffice[d] to preserve a justiciable dispute as required by Article III\" regardless of whether or not Congress had intervened to mitigate any purely prudential obstacles to justiciability resulting from the Executive's refusal to defend the law. In other words, because \"the United States retains a stake sufficient to support Article III jurisdiction\" when it continues to enforce a statute that it declines to defend in court, the existence of a justiciable controversy between the plaintiff and the United States relieved the congressional intervenors in Chadha and Windsor of the burden to independently demonstrate Article III standing of their own before participating in the case. The Windsor Court expressly declined to decide, however, \"whether BLAG would have standing to\" defend DOMA \"on BLAG's own authority\" if the Executive had also refused to enforce the statute in addition to merely refusing to defend it. The dissenting Justices in Windsor —who disagreed with the majority on the issue of adversity and therefore had to reach the standing question—could not agree on whether and when a house of Congress possesses standing to defend an undefended statute. Justice Alito, for instance, reasoned that \"in the narrow category of cases in which a court strikes down an Act of Congress and the Executive declines to defend the Act, Congress both has standing to defend the undefended statute and is a proper party to do so.\" According to Justice Alito, \"because legislating is Congress' central function,\" a judicial decision \"striking down an Act of Congress\" injures each chamber of Congress as an institution by \"impair[ing] Congress' legislative power.\" By contrast, Justice Scalia, joined by Chief Justice Roberts and Justice Thomas, instead suggested that the legislative branch possesses standing to intervene in such lawsuits only when the case implicates \"the validity of a mode of congressional action,\" such as the one-house legislative veto challenged in Chadha . According to Justice Scalia, Congress may only \"hale the Executive before the courts . . . to vindicate its own institutional powers to act,\" not \"to correct a perceived inadequacy in the execution of its laws\"—which, in Justice Scalia's view, does not constitute an institutional injury to Congress itself. As this exchange between the dissenting Justices in Windsor reflects, the circumstances under which Congress may permissibly intervene to defend the validity of a statute the Executive refuses to enforce remains an unanswered question, and the answer to that question will likely implicate the same sorts of policies and principles that animate the doctrines governing whether and when a plaintiff may sue to vindicate Congress's institutional interests. In addition to the adversity and standing doctrines discussed above, other legal principles may also affect whether a congressional entity may permissibly intervene in a federal case to defend a statute's constitutionality or for some other purpose. For one, just as a legislator ordinarily may not initiate a lawsuit without the affirmative consent of his or her respective house, a congressional entity typically cannot intervene in a preexisting federal case without first obtaining authorization to do so. Where congressional entities have first obtained authorization to participate in an ongoing lawsuit from their respective houses, however, courts have typically allowed those entities to intervene. However, a congressional entity seeking to intervene in ongoing litigation must comply with all applicable statutory and procedural rules governing legislative intervention in federal court. If Congress (or a unit or individual Member thereof) cannot participate as a full party to a particular lawsuit due to one or more of the constitutional, statutory, procedural, and prudential obstacles discussed above, it may still be able to participate in the case in a more limited capacity as an amicus curiae . An amicus curiae —a Latin term for \"friend of the court\"—is an entity with \"a strong interest in the subject matter\" of a particular case that may submit legal briefs or other filings to the court in support of (or against) a particular position, but may not otherwise participate in the suit to the same extent as an original party or an intervenor. Members, houses, and committees of Congress have successfully filed amicus briefs in a wide variety of cases. To name just a few salient examples, after the executive branch declined to defend the validity of the independent counsel provision of the Ethics in Government Act, \"both houses [of Congress] filed amicus briefs defending the legislation's constitutionality.\" Similarly, two opposing coalitions of individual Members of Congress filed dueling amicus briefs in a Supreme Court case concerning the continued vitality of Roe v. Wade . The procedural rules governing the submission of amicus briefs may vary from court to court. Ultimately, however, federal courts possess broad discretion to decide whether to allow a nonparty to submit an amicus brief in a particular case. Thus, on rare occasions, some courts have exercised that discretion to reject congressional attempts to file amicus briefs. For instance, the U.S. Court of Federal Claims recently prohibited the House of Representatives from filing an amicus brief in a private party's lawsuit against the United States. The court, noting that \"the sole purpose of the House's proposed amicus brief [was] to urge a ground for dismissing [the] plaintiff's complaint that was not raised by the [Department of Justice] in its motion to dismiss,\" reasoned that allowing the House to participate as an amicus would \"improperly intrud[e] on the DOJ's 'exclusive and plenary' authority to litigate the case on the United States' behalf.\" As discussed, courts have identified several considerations that may be relevant when assessing whether a legislative entity has suffered a justiciable injury-in-fact allowing it to seek judicial relief from a federal court, including the presence of congressional authorization; the absence of other legislative or nonlegislative remedies; allegations of vote nullification; historical practice; availability of alternative plaintiffs to bring a judicial challenge; and whether the lawsuit is an attempt to assert an interest other than the generalized interest in the proper application and implementation of the law. While these considerations provide some guidance with regard to the standing inquiry in lawsuits involving a legislative entity, they do not comprehensively resolve every question that may arise. Additionally, the legal principles that courts have articulated in congressional standing cases to date are not always perfectly consistent with each other, making it difficult to predict whether any particular legislative attempt to participate in litigation will overcome the standing hurdle. Further compounding that difficulty is the fact that there are very few cases analyzing the legislative standing doctrine and only a handful of rulings on the issue from the Supreme Court itself. As a consequence, it is important to identify areas of lingering doctrinal uncertainty, as well as measures that Members, committees, and houses of Congress may take to increase the likelihood that any given lawsuit will surmount the standing barrier. One of the key unanswered questions regarding legislative standing concerns what form of authorization is necessary to empower a legislative plaintiff to assert an institutional injury on behalf of his respective institution. In Raines v. Byrd , for instance, the Supreme Court concluded that the individual Member plaintiffs \"ha[d] not been authorized to represent their respective Houses of Congress\" for standing purposes even though Congress specifically enacted a statute purporting to authorize \"any Member of Congress\" to \"bring an action . . . for declaratory judgment and injunctive relief on the ground that any provision of [the Line Item Veto Act] violates the Constitution.\" Similarly, in Walker v. Cheney , the court concluded that 31 U.S.C. § 716(b)(2)—which purports to grant the Comptroller General freestanding authority to \"bring a civil action . . . to require the head of [an] agency to produce a record\" —nonetheless did not authorize the Comptroller General to sue the Vice President. These cases suggest that a congressional litigant asserting an institutional injury who obtains express authorization to participate in a specifically identified lawsuit is more likely to satisfy the standing requirement than a litigant who does not. It remains uncertain, however, when (if ever) a statute purporting to authorize an entity to litigate on Congress's behalf generally—without a specific vote authorizing that entity to participate in a particular case—would satisfy the authorization prong of the standing analysis. An additional open question that existing precedent does not conclusively resolve is whether and under what circumstances the general availability of blunt legislative remedies—such as impeachment—will deprive a legislative litigant of standing to seek judicial relief against the executive branch. In Campbell v. Clinton , for instance, the D.C. Circuit concluded that individual Members lacked standing to sue the President in part because \"there always remains the possibility of impeachment should a President act in disregard of Congress' authority.\" In Blumenthal v. Trump , by contrast, the court concluded that a group of individual Members did have standing to sue the President, stating (with little explanation) that \"the availability of the extreme measure of impeachment to enforce the President's compliance with the [Emoluments] Clause is not an adequate remedy.\" Further litigation will likely be necessary to resolve these conflicting strands of congressional standing precedent. Perhaps the most difficult open question raised by the legislative standing jurisprudence concerns what sort of institutional injury is sufficient to afford a legislative entity standing. At one end of the spectrum, courts have generally recognized that institutional plaintiffs may sue to remedy discrete injuries, such as informational injuries resulting from an executive branch agency's refusal to comply with a subpoena. At the other end, courts have typically determined that even institutional plaintiffs cannot assert a generalized, nonparticularized interest in the proper application, interpretation, or enforcement of the law. Some recent cases from the district courts, however, appear to envision a broader conception of institutional injury. The court in U.S. House of Representatives v. Burwell , for example, concluded that the House possessed standing to pursue constitutional claims \"that the Executive ha[d] drawn funds from the Treasury without a congressional appropriation.\" Critical to the court's holding was the fact that the Constitution designated \"the Congress (of which the House and Senate are equal)\" as \"the only body empowered . . . to adopt laws directing monies to be spent from the U.S. Treasury.\" According to the court, the \"constitutional structure would collapse, and the role of the House would be meaningless, if the Executive could circumvent the appropriations process and spend funds however it pleases.\" Similarly, the Blumenthal v. Trump court concluded that the individual Member plaintiffs possessed standing in part because they did not merely \"disagree with the manner in which the President [wa]s administering or enforcing the law,\" but were instead wholly prevented from discharging their constitutionally designated role in the emoluments process. Burwell and Blumenthal thus suggest that Congress could have a justiciable injury when the executive branch violates the Constitution in a way that specifically undermines Congress's authority in a particular governmental process. It is unclear whether the Supreme Court or the federal appellate courts would ultimately endorse the broad conceptions of congressional standing that the Burwell and Blumenthal courts adopted. Because the parties in Burwell ultimately settled their dispute, neither the D.C. Circuit nor the Supreme Court ever determined whether the district court's standing conclusions were correct. Nor has the D.C. Circuit resolved whether the district court correctly concluded that the plaintiffs in Blumenthal possess standing to pursue their Emoluments Clause challenges. Some (though not all) academics have argued, however, that the Burwell and Blumenthal courts' expanded conception of standing may be unsound, as these decisions would appear to authorize congressional litigants to hale executive branch entities into the federal courts in a fairly broad array of factual circumstances that implicate separation-of-powers principles. Burwell , for instance, contains language suggesting that at least some congressional litigants possess standing to sue the executive branch whenever it spends unappropriated funds. Blumenthal likewise contains language suggesting that legislative litigants—including individual Members—could very well possess standing to sue the President in a variety of contexts in which the Constitution offers Congress (or a house thereof) an opportunity to provide prior approval to a particular executive action, such as appointments. Future judicial decisions may provide further guidance on whether, how, and under what circumstances this sort of freestanding congressional authority to summon executive branch entities before a federal judge is consistent with the Supreme Court's admonition that the \"standing inquiry\" is \"especially rigorous when reaching the merits of the dispute would require [a court] to decide whether an action taken by one of the other two branches of the Federal Government was unconstitutional.\" The fact that standing is a constitutional requirement circumscribes Congress's ability to alter the aforementioned standing rules by enacting legislation. The Supreme Court has repeatedly reaffirmed \"that Congress cannot erase Article III's standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing.\" At the same time, however, the Court has also recognized \"that Congress may 'elevat[e] to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.'\" It is therefore possible that, even though Congress may not \"abrogate the Art[icle] III minima,\" Congress may under presently undefined circumstances enact a statute that grants it standing to pursue a claim in federal court that it could not pursue in that statute's absence. However, whether (and to what extent) Congress possesses such power to do so in the context of legislative standing may need to await further explication from the courts. In the absence of such guidance from the judiciary, a congressional litigant's best strategy may be to attempt to satisfy as many of the considerations listed above—that is, to attempt to obtain authorization to pursue the specific lawsuit in question from one or both houses of Congress; attempt to persuade the court that all possible legislative remedies would be futile; argue that the allegedly unlawful action has deprived Members of Congress of the efficacy of their votes; analogize to historical precedent in which courts entertained similar challenges by congressional litigants; demonstrate that no other litigant would possess standing to vindicate the congressional interest in dispute; and avoid framing the legal theory as a generalized grievance challenging the opposing party's implementation or interpretation of a federal statute. Nonetheless, as several scholars have emphasized, \"not all interbranch disputes—even constitutional disputes—need to be resolved in the courts.\" Indeed, the federal judiciary has in many cases expressed marked hesitance to interpose itself between dueling branches of the U.S. government. The lack of a judicial remedy to a congressional complaint may indicate that Congress's most promising means for resolving disputes with the executive branch may be the political process, where a significant amount of constitutional decisionmaking occurs.", "summary": "Houses, committees, and Members of Congress periodically seek to initiate or participate in litigation to, among other purposes, advance their legislative objectives, argue that the Executive is violating their legislative prerogatives, or defend core institutional interests. However, the constitutionally based doctrine of \"standing\"—which requires a litigant seeking federal judicial relief to demonstrate (1) a concrete and particularized and actual or imminent injury-in-fact (2) that is traceable to the allegedly unlawful actions of the opposing party and (3) that is redressable by a favorable judicial decision—may prevent legislators from pursuing litigation in federal court. The U.S. Supreme Court and the lower federal courts have issued several important opinions analyzing whether—and under what circumstances—a legislative entity has standing to seek relief. Although legislative standing jurisprudence defies easy characterization, it is possible to distill several principles from existing precedent. For example, whereas courts commonly allow individual legislators to assert injuries to their own personal interests, following the Supreme Court's seminal opinion in Raines v. Byrd, 521 U.S. 811 (1997), courts have generally (though not universally) been less willing to permit individual legislators to seek redress for injuries to a house of Congress as a whole, at least in the absence of explicit authorization to do so from the legislative body itself. The Supreme Court's case Coleman v. Miller, 307 U.S. 433 (1939), is generally understood as setting forth the lone exception, allowing individual legislators to sue when their vote has been \"nullified\" by some claimed illegal action. In addition, generally speaking, a congressional plaintiff cannot predicate a federal lawsuit solely on a complaint that the executive branch is misapplying or misinterpreting a statute, as litigants must demonstrate concrete and particularized injury to themselves. In addition to initiating litigation, Congress also occasionally seeks to intervene in preexisting litigation. In cases in which the executive branch has declined to defend a federal statute from a constitutional challenge, for example, congressional entities have attempted to intervene as defendants in support of the law. The Supreme Court, in INS v. Chadha, 462 U.S. 919 (1983) and United States v. Windsor, 570 U.S. 744 (2013), has allowed Congress to intervene to defend a law that the executive branch has declined to defend but still enforces. Nonetheless, neither case resolved whether significant exceptions to this rule exist, let alone explored what rules are in place when the President both declines to defend and enforce a federal law. Moreover, in cases that do not involve the executive branch's refusal to defend a federal statute, Congress's ability to intervene as a full party to the case may be more circumscribed. Even when Congress lacks standing to initiate or intervene in a federal lawsuit as a full-fledged party, Congress may still play a role in litigation by participating as an amicus curiae, or \"friend of the court.\" Courts frequently allow Members, houses, and committees of Congress to file amicus briefs in support of (or opposition to) particular parties or positions.", "document_type": "crs"}
{"report": "This report describes and analyzes annual appropriations for the Department of Homeland Security (DHS) for FY2019. It compares the enacted FY2018 appropriations for DHS, the Donald J. Trump Administration's FY2019 budget request, and the appropriations measures developed and considered by Congress in response to it. This report identifies additional informational resources, reports, and products on DHS appropriations that provide context for the discussion, and it provides a list of Congressional Research Service (CRS) policy experts with whom clients may consult on specific topics. The suite of CRS reports on homeland security appropriations tracks legislative action and congressional issues related to DHS appropriations, with particular attention paid to discretionary funding amounts. These reports do not provide in-depth analysis of specific issues related to mandatory funding—such as retirement pay—nor do they systematically follow other legislation related to the authorizing or amending of DHS programs, activities, or fee revenues. Discussion of appropriations legislation involves a variety of specialized budgetary concepts. The Appendix to this report explains several of these concepts, including budget authority, obligations, outlays, discretionary and mandatory spending, offsetting collections, allocations, and adjustments to the discretionary spending caps under the Budget Control Act (BCA; P.L. 112-25 ). A more complete discussion of those terms and the appropriations process in general can be found in CRS Report R42388, The Congressional Appropriations Process: An Introduction , coordinated by James V. Saturno, and the Government Accountability Office's A Glossary of Terms Used in the Federal Budget Process . All amounts contained in the suite of CRS reports on homeland security appropriations represent budget authority. For precision in percentages and totals, all calculations in these reports used unrounded data, which are presented in each report's tables. However, amounts in narrative discussions are rounded to the nearest million (or 10 million, in the case of numbers larger than 1 billion), unless noted otherwise. Data used in this report for FY2018 amounts are derived from the explanatory statement accompanying P.L. 115-141 , the Consolidated Appropriations Act, 2017—Division F of which is the Department of Homeland Security Appropriations Act, 2018. The explanatory statement also includes data on FY2018 supplemental appropriations for DHS enacted prior to the development of the consolidated appropriations act for FY2018. Data for the FY2019 requested levels and enacted levels are drawn from H.Rept. 116-9 , the explanatory statement accompanying P.L. 116-6 . Data on the Senate Appropriations Committee recommendation are drawn from S.Rept. 115-283 , and data for the House Appropriations Committee recommendation are drawn from H.Rept. 115-948 . Scoring methodology is consistent across this report, relying on data provided by the Appropriations Committees that has been developed with Congressional Budget Office (CBO) methodology. CRS does not attempt to compare this data with Office of Management and Budget (OMB) data because technical scoring differences do not allow precise comparisons. This section provides an overview of the process of enactment of appropriations for the Department of Homeland Security for FY2019, from the Administration's initial request, through committee action in the House and Senate, continuing appropriations (and their lapse), and enactment of the consolidated appropriations bill that contained DHS annual appropriation. On February 12, 2018, the Trump Administration released its budget request for FY2019. The enactment of the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) three days before had established discretionary spending limits for FY2018 and FY2019, replacing the limits prescribed by the Budget Control Act of 2011 ( P.L. 112-25 ). The Administration chose to submit an addendum to their request in a letter accompanying the formal request documentation, which included additional requests for resources for DHS and several other departments and agencies. The Trump Administration requested $47.43 billion in adjusted net discretionary budget authority for DHS for FY2019, as part of an overall budget that the Office of Management and Budget estimated to be $74.88 billion (including fees, trust funds, and other funding that is not annually appropriated or does not score against discretionary budget limits). The request amounted to a $0.29 billion (0.6%) decrease from the $47.72 billion in annual appropriations enacted for FY2018 through the Department of Homeland Security Appropriations Act, 2018 ( P.L. 115-141 , Division F). The Trump Administration also requested discretionary funding for DHS components that does not count against discretionary spending limits set by the Budget Control Act (BCA; P.L. 112-25 ) and is not reflected in the above totals. The Administration requested an additional $6.65 billion for the Federal Emergency Management Agency (FEMA) in disaster relief funding, as defined by the BCA, and in the budget request for the Department of Defense, $165 million in Overseas Contingency Operations/Global War on Terror designated funding (OCO), to be transferred to the Coast Guard. On June 21, 2018, the Senate Appropriations Committee reported out S. 3109 , the Department of Homeland Security Appropriations Act, 2019, accompanied by S.Rept. 115-283 . Committee-reported S. 3109 included $48.33 billion in adjusted net discretionary budget authority for FY2019. This was $901 million (1.9%) above the level requested by the Administration, and $611 million (1.3%) above the enacted level for FY2018. The Senate committee-reported bill also included the Administration-requested levels for disaster relief funding, and $163 million in OCO-designated funding directly for the Coast Guard, as had been done in FY2018, rather than as a transfer, as had been requested by the Administration. This bill was never taken up for action on the Senate floor. On July 26, 2018, the House Appropriations Committee marked up H.R. 6776 , its version of the Department of Homeland Security Appropriations Act, 2019. H.Rept. 115-948 was filed September 12, 2018. Committee-reported H.R. 6776 included $51.44 billion in adjusted net discretionary budget authority. The House committee-reported bill included the Administration-requested levels for disaster relief funding, but unlike S. 3109 , did not include the OCO funding for the Coast Guard. This bill did not see action on the House floor. As some of the annual appropriations for FY2019 remained unfinished, a consolidated appropriations bill that included a continuing resolution was passed by Congress and signed into law on September 28, 2018, as P.L. 115-245 . The continuing resolution (Division C) continued funding for DHS at a rate of operations equal to that of the Department of Homeland Security Appropriations Act, 2018, with some exceptions. The continuing resolution was extended through December 21, 2018, at which point it expired, and annual appropriations for DHS lapsed, resulting in a partial shutdown of DHS for 35 days. Continuing appropriations were restored at the FY2018 rate of operations with the enactment of P.L. 116-4 on January 25, 2019. On February 14, 2019, the House took up H.J.Res. 31 , a consolidated appropriations bill that included eight annual appropriations bills. Division A, the Department of Homeland Security Appropriations Act, 2019, included $49.41 billion in adjusted net discretionary budget authority, $1.69 billion (3.5%) more than had been provided for FY2018, and $2.04 billion more than had been requested by the Administration in February 2018. In addition to that total, the bill included $12 billion designated for the costs of major disasters—$5.35 billion (80.4%) more than had been requested, and the requested $165 million in OCO funding appropriated for the Coast Guard operating budget, rather than a transfer from the Navy. The bill passed the House by a vote of 300-128, and the Senate that same day by a vote of 83-16. The President signed it into law the next day. Generally, the homeland security appropriations bill includes all annual appropriations provided for DHS, allocating resources to every departmental component. Discretionary appropriations provide roughly two-thirds to three-fourths of the annual funding for DHS operations, depending how one accounts for disaster relief spending and funding for overseas contingency operations. The remainder of the budget is a mix of fee revenues, trust funds, and mandatory spending. Appropriations measures for DHS typically have been organized into five titles. The first four are thematic groupings of components, while the fifth provides general direction to the department, and sometimes includes provisions providing additional budget authority. Prior to the FY2017 act, the legislative language of many appropriations included directions to components or specific conditions on how the budget authority it provided could be used. Similarly, general provisions provided directions or conditions to one or more components. In the FY2017 act, a number of these provisions within appropriations and component-specific general provisions were grouped at the ends of the titles where their targeted components are funded, and identified as \"administrative provisions.\" This practice has continued in subsequent years. When DHS was established in 2003, components of other agencies were brought together over a matter of months, in the midst of ongoing budget cycles. Rather than developing a new structure of appropriations for the entire department, Congress and the Administration continued to provide resources through existing account structures when possible. At the direction of Congress, in 2014 DHS began to work on a new Common Appropriations Structure (CAS), which would standardize the format of DHS appropriations across components. In an interim report in 2015, DHS noted that operating with \"over 70 different appropriations and over 100 Programs, Projects, and Activities ... has contributed to a lack of transparency, inhibited comparisons between programs, and complicated spending decisions and other managerial decision-making.\" After several years of work and negotiations with Congress, DHS made its first budget request in the CAS for FY2017, and implemented it while operating under the continuing resolutions funding the department in October 2016. For FY2017 and FY2018, all DHS components requested appropriations under the CAS except for the Coast Guard, due to constraints of its financial management system. For FY2019, all the components' requests generally conformed to the CAS. A visual representation of the FY2019 requested funding in this new structure follows in Figure 1 . On the left, CAS appropriations categories are listed next to a black bar representing the total FY2018 funding levels requested for DHS for each category. A catch-all \"other\" category is included for budget authority associated with the legislation that does not fit the CAS categories. Colored lines flow to the DHS components listed on the right, showing how the amount of funding for each appropriations category is distributed across DHS components. Wider lines indicate greater funding levels, so it is possible to understand how components may be funded differently. For example, while Customs and Border Protection (CBP) gets most of its funding from Operations and Support appropriations, the Federal Emergency Management Agency (FEMA) receives most of its discretionary funding from the Disaster Relief Fund appropriation. The following sections present textual and tabular comparisons among FY2018 enacted appropriations, FY2019 requested appropriations, the FY2019 appropriations bills developed by the appropriations committees, and the final enacted annual appropriation in Division A of the FY2019 Consolidated Appropriations Act ( P.L. 116-6 ). The structure of the appropriations reflects the organization outlined in the detail table of the explanatory statement accompanying the act ( H.Rept. 116-9 ). The tables summarize enacted appropriations for FY2018, and those requested by the Administration, and proposed in appropriations committee-developed legislation under development for FY2019. Only the formal request for FY2019 annual appropriations is reflected in the \"Request\" column. The tables include data on enacted annual and supplemental appropriations. Instances where appropriations are provided for a title's components in other parts of the bill (such as in general provisions or by transfer) are shown separately. Supplemental appropriations provided with an emergency designation for a given component in FY2018 are displayed after the subtotal of annual appropriations. Following the methodology used by the appropriations committees, totals of \"appropriations\" do not include resources provided by transfer or under adjustments to discretionary spending limits (i.e., for emergency requirements, overseas contingency operations for the Coast Guard or the cost of major disasters under the Stafford Act for the Federal Emergency Management Agency). Amounts covered by adjustments are included with discretionary appropriations in a separate total for \"discretionary funding.\" A subtotal for each component of total estimated budgetary resources that would be available under the legislation and from other sources (such as fees, mandatory spending, and trust funds) for the given fiscal year is also provided at the end of each component section. Totals at the bottom of each table indicate the total net discretionary appropriation for the title on its own, the total net discretionary funding from the annual appropriations bill and any supplemental appropriations (when such were provided), and the projected total estimated budgetary resources for each phase in the appropriations process shown in the table. Title I, Departmental Management and Operations, the smallest of the component-specific titles, contains appropriations for the Office of the Secretary and Executive Management, the Management Directorate, Analysis and Operations (A&O), and the Office of the Inspector General (OIG). For FY2018, these components received $1.36 billion in net discretionary funding through the appropriations process, including $25 million in FY2018 supplemental appropriations. The Trump Administration requested $1.60 billion in FY2019 net discretionary funding for components included in this title. In addition, $24 million was requested as a transfer from the FY2019 appropriation for the Disaster Relief Fund to the OIG. Not including the transfer, the appropriations request was $241 million (17.7%) more than the amount provided for FY2018. Senate Appropriations Committee-reported S. 3109 included $1.47 billion in FY2019 net discretionary funding for the components funded in this title. This was $137 million (8.6%) less than requested by the Trump Administration and $103 million (7.6%) more than the amount provided for FY2018. S. 3109 included $72 million in discretionary budget authority drawn from unobligated prior-year balances from the DRF, but did not include the proposed transfer of FY2019 DRF resources to the OIG. As a result, the gross budgetary resources provided to components funded in Title I was $89 million (5.5%) less than the request, and $176 million (12.9%) more than provided in FY2018. House Appropriations Committee-reported H.R. 6776 included $1.48 billion in FY2019 net discretionary funding for the components funded in this title. This was $119 million (7.4%) less than requested by the Trump Administration and $122 million (8.9%) more than the amount provided for FY2018. H.R. 6776 , like the Senate committee-reported bill, did not include the proposed transfer of FY2019 DRF resources to the OIG. As a result, the gross budgetary resources provided to components funded in Title I were $143 million (8.8%) less than the request, and $122 million (8.9%) more than provided in FY2018. P.L. 116-6 included a total of $1.88 billion in FY2019 net discretionary funding for the components funded in this title. This included $51 million in a general provision for financial systems modernization, controlled by the management directorate. The total was $513 million (37.7%) more than was provided in FY2018, and $248 million (15.2%) more than was requested by the Administration, if one included the Administration's proposed transfer of $24 million from the Disaster Relief Fund to the Office of the Inspector General. Table 1 shows these comparisons in greater detail. As resources were requested or provided for the Management Directorate and Office of the Inspector General in some cases from outside Title I, separate lines are included for each of those components showing a total for what is provided solely within Title I, then the individual items funded outside the title, followed by the total annual appropriation for the components. Title II, Security, Enforcement, and Investigations, contains appropriations for U.S. Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), the Coast Guard (USCG), and the U.S. Secret Service (USSS). Title II funding represents the majority of DHS's budget, comprising roughly three-quarters of the funding appropriated annually for the department. For FY2018, these components received $39.52 billion in net discretionary funding, as part of $47.13 billion in projected total budget authority. This included $1.06 billion in supplemental appropriations. The Trump Administration formally requested $38.41 billion in FY2019 net discretionary funding for components included in this title, as part of a total budget request for these components of $47.08 billion for FY2019. The funding request was $45 million (0.1%) less than the amount provided for FY2018, setting aside FY2018 supplemental appropriations. Again setting aside FY2018 supplemental appropriations, the total resources proposed for FY2019 was $1.01 billion (2.2%) more than projected for FY2018. The Administration reportedly sought additional funding in this title for construction of border barriers, above the formally requested level. In January 2019, the acting director of the Office of Management and Budget sent a letter to congressional leaders officially seeking an additional $4.1 billion. Those amounts are not included in these comparative calculations or in the table below. Senate Appropriations Committee-reported S. 3109 included $38.68 billion in FY2019 net discretionary funding for the components funded in this title. This was $271 million (0.7%) more than formally requested by the Trump Administration and $227 million (0.6%) more than the amount provided for FY2018, setting aside FY2018 supplemental appropriations. The total budgetary resources projected under S. 3109 were $614 million (1.3%) less than the Administration's request (largely due to rejection of a proposed TSA fee increase), but $391 million (0.8%) more than projected for FY2018, again setting aside FY2018 supplemental appropriations. House Appropriations Committee-reported H.R. 6776 included $41.28 billion in FY2019 net discretionary funding for the components funded in this title. This was $2.87 billion (7.5%) more than formally requested by the Trump Administration and $2.82 billion (7.3%) more than the amount provided for FY2018, setting aside FY2018 supplemental appropriations. The total budgetary resources projected under H.R. 6776 were $2.08 billion (4.4%) more than formally requested by the Administration and $3.12 billion (6.8%) more than projected for FY2018, again setting aside FY2018 supplemental appropriations. H.R. 6776 would have provided $2.59 billion (6.7%) more than S. 3019 , largely due to the House Appropriations Committee recommending $3.35 billion more than its Senate counterpart for CBP's Border Security Assets and Infrastructure activity. P.L. 116-6 included $40.00 billion in net discretionary funding for the components funded in this title. The enacted annual appropriations were $1.59 billion (4.1%) more than requested, and $486 million (1.2%) more than the amount provided in FY2018. Setting aside FY2018 supplemental funding, FY2019 enacted net discretionary funding exceeded FY2018 levels by $1.55 billion (4.0%). The total budgetary resources projected for components funded in this title were $47.82 billion, $704 million (1.5%) more than was formally requested by the Administration, and $1.75 billion (3.8%) more than was provided in FY2018, setting aside the FY2018 supplemental funding. Table 2 shows these comparisons in greater detail. Title III, Protection, Preparedness, Response, and Recovery, contains appropriations for the Cybersecurity and Infrastructure Security Agency (CISA), the Office of Health Affairs (OHA), and the Federal Emergency Management Agency (FEMA). It is the second largest of the component-specific titles. For FY2018, these components received $7.22 billion in net discretionary appropriations and $7.37 billion in specially designated funding for disaster relief through the annual appropriations process. In addition to that annual funding, $58.23 billion was provided for FEMA in emergency supplemental appropriations in FY2018. Incorporating all these elements, the total net discretionary funding level for all Title III components was $72.61 billion for FY2018. The Trump Administration requested $6.19 billion in FY2019 net discretionary appropriations for components included in this title, and $6.65 billion in specially designated funding for disaster relief as part of a total net discretionary funding level for these components of $12.84 billion for FY2019. Setting aside the $58.23 billion in FY2018 supplemental appropriations, the appropriations request was $1.54 billion (10.7%) less than the amount provided for FY2018 in net discretionary funding. Senate Appropriations Committee-reported S. 3109 included $13.54 billion in FY2019 net discretionary funding for the components funded in this title. This was $694 million (5.4%) more than requested by the Trump Administration and $847 million (5.9%) less than the amount provided for FY2018, setting aside supplemental funding. The total budgetary resources projected would be $718 million (3.8%) more than the Administration's request, but $1.29 billion (6.2%) less than projected for FY2018, setting aside supplemental funding. The Senate committee-reported bill included within these totals the requested disaster relief funding of $6.65 billion, and offset $228 million in its Federal Assistance appropriation from unobligated DRF balances. House Appropriations Committee-reported H.R. 6776 included $13.70 billion in FY2019 net discretionary funding for the components funded in this title. This was $861 million (6.7%) more than requested by the Trump Administration and $681 million (4.7%) less than the amount provided for FY2018, setting aside supplemental funding. The total budgetary resources projected would be $885 million (4.7%) more than the Administration's request, but $1.13 billion (5.4%) less than projected for FY2018, setting aside supplemental funding. The House committee-reported bill included within these totals the requested disaster relief funding of $6.65 billion. P.L. 116-6 included $18.27 billion in FY2019 net discretionary funding for the components funded in this title. The enacted discretionary funding level was $5.43 billion (42.3%) more than requested, and $3.89 billion (27.1%) more than the amount provided for FY2018, setting aside the historically high level of supplemental appropriations. The total budgetary resources projected for FY2019 was $5.46 billion (29.0%) more than was requested, and $3.44 billion (16.5%) more than was projected for FY2018, setting aside FY2018 supplemental funding. Table 3 shows these comparisons in greater detail. As some annually appropriated resources were provided for FEMA from outside Title III in FY2018, a separate line is included for FEMA showing a total for what is provided solely within Title III, then the non-Title III appropriation, followed by the total annual appropriation for FEMA. Title IV, Research and Development, Training, and Services, the second smallest of the component-specific titles, contains appropriations for the U.S. Citizenship and Immigration Services (USCIS), the Federal Law Enforcement Training Center (FLETC), the Science and Technology Directorate (S&T), and the Domestic Nuclear Detection Office (DNDO). In FY2018, these components received $1.57 billion in net discretionary funding, as part of a projected total budget of $5.92 billion. This included $10 million in supplemental appropriations for FLETC. The Trump Administration requested $1.53 billion in FY2019 net discretionary funding for components included in this title, as part of a total budget for these components of $6.11 billion for FY2018. The funding request was $36 million (2.3%) less than the amount provided for FY2018, setting aside supplemental appropriations, although the overall budget request was $201 million (3.3%) higher than the annual budget projected for FY2018 (again, setting aside supplemental funding). This is due to changes in anticipated fee collections for USCIS and reorganization of most of the Office of Health Affairs and DNDO into the new CWMD component reflected in the request. Senate Appropriations Committee-reported S. 3109 included $1.53 billion in net discretionary funding for components included in this title, as part of a projected total budget of $6.23 billion. This was $115 million (7.5%) more than requested, and $79 million (5.0%) less than the amount provided for FY2018, not including supplemental funding. The total budgetary resources projected under S. 3109 would have been $115 million (1.9%) more than the Administration's request, and $316 million (5.3%) more than projected for FY2018, setting aside supplemental funding. House Appropriations Committee-reported H.R. 6776 included $1.64 billion in net discretionary funding for components included in this title, as part of a projected total budget of $6.21 billion. This was $97 million (6.3%) more than requested, and $60 million (3.9%) more than the amount provided for FY2018, not including supplemental funding. The total budgetary resources projected under H.R. 6776 would have been $97 million (1.6%) more than the Administration's request, and $297 million (5.0%) more than projected for FY2018, setting aside supplemental funding. P.L. 116-6 included $1.62 billion in FY2019 net discretionary funding for the components funded in this title. Enacted FY2019 appropriations were $199 million (3.3%) more than was requested by the Administration, and $163 million (10.4%) more than was provided in FY2018, setting aside FY2018 supplemental funding. Total budgetary resources projected for FY2019 are $199 million (3.3%) more than were requested by the Administration, and $400 million (6.8%) more than was projected for FY2018, setting aside FY2018 supplemental funding. Table 4 shows these comparisons in greater detail. As noted above, the fifth title of the FY2019 DHS appropriations act contains general provisions, the impact of which may reach across the entire department, affect multiple components, or focus on a single activity. Rescissions of prior-year appropriations—cancellations of budget authority that reduce the net funding level in the bill—are found in this title. For FY2018, Division F of P.L. 115-141 included $489 million in rescissions. For FY2019, the Administration proposed rescinding $300 million in prior-year funding from the DRF. S. 3109 included $137 million in rescissions from other appropriations, but specifically directed the $300 million the Administration had proposed rescinding from the DRF to other activities within DHS. H.R. 6776 did not include any rescissions, although an amendment from Representative Palazzo was passed in full committee markup on a voice vote redirecting unobligated balances from the Science and Technology Directorate to the Coast Guard. Division A of P.L. 116-6 included $303 million in rescissions, and a provision directing that $300 million of DRF unobligated balances be used to offset new DRF appropriations. In FY2018, funding was also included in Title V for the Financial Systems Modernization initiative and a grant program for Presidential Residence Protection costs, which are reflected in the tables for Title I and Title III, respectively, as those titles fund the components that manage these resources. For FY2019, Title V of S. 3109 only funded the Financial Systems Modernization initiative, and Title V of H.R. 6776 only funded Presidential Residence Protection costs. Title V of P.L. 116-6 , Division A, included funding for both the Financial Systems Modernization initiative and Presidential Residence Protection costs. The detail table in the back of H.Rept. 115-948 also notes the discretionary cost of several policy changes in H.R. 6776 . Four amendments adopted in House Appropriations Committee markup resulted in a net $13 million increase in the score of the bill, which is reflected in the detail table, but not in the tables of this report. No such costs are reflected in the detail table of H.Rept. 116-9 . For additional perspectives on FY2019 DHS appropriations, see the following: CRS Report R44604, Trends in the Timing and Size of DHS Appropriations: In Brief ; CRS Report R44052, DHS Budget v. DHS Appropriations: Fact Sheet ; and CRS Report R45262, Comparing DHS Component Funding, FY2019: In Brief . Congressional clients also may wish to consult CRS's experts directly. The following table lists CRS analysts and specialists who have expertise in policy areas linked to DHS appropriations. Budget Authority, Obligations, and Outlays Federal government spending involves a multistep process that begins with the enactment of budget authority by Congress. Federal agencies then obligate funds from enacted budget authority to pay for their activities. Finally, payments are made to liquidate those obligations; the actual payment amounts are reflected in the budget as outlays. Budget authority is established through appropriations acts or direct spending legislation and determines the amounts that are available for federal agencies to spend. The Antideficiency Act prohibits federal agencies from obligating more funds than the budget authority enacted by Congress. Budget authority also may be indefinite in amount, as when Congress enacts language providing \"such sums as may be necessary\" to complete a project or purpose. Budget authority may be available on a one-year, multiyear, or no-year basis. One-year budget authority is available for obligation only during a specific fiscal year; any unobligated funds at the end of that year are no longer available for spending. Multiyear budget authority specifies a range of time during which funds may be obligated for spending, and no-year budget authority is available for obligation for an indefinite period of time. Obligations are incurred when federal agencies employ personnel, enter into contracts, receive services, and engage in similar transactions in a given fiscal year—which create a legal requirement for the government to pay. Outlays are the funds that are actually spent during the fiscal year. Because multiyear and no-year budget authorities may be obligated over a number of years, outlays do not always match the budget authority enacted in a given year. Additionally, budget authority may be obligated in one fiscal year but spent in a future fiscal year, especially with certain contracts. In sum, budget authority allows federal agencies to incur obligations and authorizes payments, or outlays, to be made from the Treasury. Discretionary funded agencies and programs, and appropriated entitlement programs, are funded each year in appropriations acts. Discretionary and Mandatory Spending Gross budget authority , or the total funds available for spending by a federal agency, may be composed of discretionary and mandatory spending. Discretionary spending is not mandated by existing law and is thus appropriated yearly by Congress through appropriations acts. The Budget Enforcement Act of 1990 defines discretionary appropriations as budget authority provided in annual appropriations acts and the outlays derived from that authority, but it excludes appropriations for entitlements. Mandatory spending , also known as direct spending , consists of budget authority and resulting outlays provided in laws other than appropriations acts and is typically not appropriated each year. Some mandatory entitlement programs, however, must be appropriated each year and are included in appropriations acts. Within DHS, Coast Guard retirement pay is an example of appropriated mandatory spending. Offsetting Collections Offsetting funds are collected by the federal government, either from government accounts or the public, as part of a business-type transaction such as collection of a fee. These funds are not considered federal revenue. Instead, they are counted as negative outlays. DHS net discretionary budget authority , or the total funds appropriated by Congress each year, is composed of discretionary spending minus any fee or fund collections that offset discretionary spending. Some collections offset a portion of an agency's discretionary budget authority. Other collections offset an agency's mandatory spending. These mandatory spending elements are typically entitlement programs under which individuals, businesses, or units of government that meet the requirements or qualifications established by law are entitled to receive certain payments if they establish eligibility. The DHS budget features two mandatory entitlement programs: the Secret Service and the Coast Guard retired pay accounts (pensions). Some entitlements are funded by permanent appropriations, and others are funded by annual appropriations. Secret Service retirement pay is a permanent appropriation and, as such, is not annually appropriated. In contrast, Coast Guard retirement pay is annually appropriated. In addition to these entitlements, the DHS budget contains offsetting Trust and Public Enterprise Funds. These funds are not appropriated by Congress. They are available for obligation and included in the President's budget to calculate the gross budget authority. 302(a) and 302(b) Allocations In general practice, the maximum budget authority for annual appropriations (including DHS) is determined through a two-stage congressional budget process. In the first stage, Congress sets overall spending totals in the annual concurrent resolution on the budget. Subsequently, these totals are allocated among the appropriations committees, usually through the statement of managers for the conference report on the budget resolution. These amounts are known as the 302(a) allocations . They include discretionary totals available to the House and Senate Committees on Appropriations for enactment in annual appropriations bills through the subcommittees responsible for the development of the bills. In the second stage of the process, the appropriations committees allocate the 302(a) discretionary funds among their subcommittees for each of the appropriations bills. These amounts are known as the 302(b) allocations . These allocations must add up to no more than the 302(a) discretionary allocation and form the basis for enforcing budget discipline, since any bill reported with a total above the ceiling is subject to a point of order. The 302(b) allocations may be adjusted during the year by the respective appropriations committee issuing a report delineating the revised suballocations as the various appropriations bills progress toward final enactment. No subcommittee allocations are developed for conference reports or enacted appropriations bills. Table A-1 shows comparable figures for the 302(b) allocation for FY2018, based on the adjusted net discretionary budget authority included in Division F of P.L. 115-141 , the President's request for FY2019, and the House and Senate subcommittee allocations for the Homeland Security appropriations bills for FY2019. The Budget Control Act, Discretionary Spending Caps, and Adjustments The Budget Control Act established enforceable discretionary limits, or caps, for defense and nondefense spending for each fiscal year from FY2012 through FY2021. Subsequent legislation, including the Bipartisan Budget Act of 2013, amended those caps. Most of the budget for DHS is considered nondefense spending. In addition, the Budget Control Act allows for adjustments that would raise the statutory caps to cover funding for overseas contingency operations/Global War on Terror, emergency spending, and, to a limited extent, disaster relief and appropriations for continuing disability reviews and control of health care fraud and abuse. Three of the four justifications outlined in the Budget Control Act for adjusting the caps on discretionary budget authority have played a role in DHS's appropriations process. Two of these—emergency spending and overseas contingency operations/Global War on Terror—are not limited. The third justification—disaster relief—is limited. Under the Budget Control Act, the allowable adjustment for disaster relief was determined by the Office of Management and Budget (OMB), using the following formula until FY2019: Limit on disaster relief cap adjustment for the fiscal year = Rolling average of the disaster relief spending over the last ten fiscal years (throwing out the high and low years) + the unused amount of the potential adjustment for disaster relief from the previous fiscal year. The Bipartisan Budget Act of 2018 amended the above formula, increasing the allowable size of the adjustment by adding 5% of the amount of emergency-designated funding for major disasters under the Stafford Act, calculated by OMB as $6.296 billion. The act also extended the availability of unused adjustment capacity. In August 2018, OMB released a sequestration update report for FY2019 that provided a preview estimate of the allowable adjustment for FY2019 of $14.965 billion —the second-largest allowable adjustment for disaster relief in the history of the mechanism. $12 billion of that adjustment was exercised in P.L. 116-6 , Division A, in appropriations for the Disaster Relief Fund. No other annual appropriations used the disaster relief adjustment for FY2019. ", "summary": "This report provides an overview and analysis of FY2019 appropriations for the Department of Homeland Security (DHS). The primary focus of this report is on congressional direction and funding provided to DHS through the appropriations process. It includes an Appendix with definitions of key budget terms used throughout the suite of Congressional Research Service reports on homeland security appropriations. It also directs the reader to other reports providing context for specific component appropriations. As part of an overall DHS budget that the Office of Management and Budget (OMB) estimated to be $74.88 billion, the Trump Administration requested $47.43 billion in adjusted net discretionary budget authority through the appropriations process for DHS for FY2018. The request amounted to a $0.29 billion (0.6%) decrease from the $47.72 billion in annual appropriations enacted for FY2018 through the Department of Homeland Security Appropriations Act, 2018 (P.L. 115-141, Division F). The Administration also requested discretionary funding for DHS components that does not count against discretionary spending limits and is not reflected in the adjusted net discretionary budget authority total. The Administration requested an additional $6.65 billion for the Federal Emergency Management Agency (FEMA) in disaster relief funding, as defined by the Budget Control Act (P.L. 112-25; BCA), and in the budget request for the Department of Defense (DOD), $165 million in Overseas Contingency Operations designated funding (OCO) from the Operations and Maintenance budget of the U.S. Navy. On June 21, 2018, the Senate Committee on Appropriations reported out S. 3109, the Department of Homeland Security Appropriations Act, 2019, accompanied by S.Rept. 115-283. Committee-reported S. 3109 included $48.33 billion in adjusted net discretionary budget authority for FY2019. This was $901 million (1.9%) above the level requested by the Administration, and $611 million (1.3%) above the enacted level for FY2018. The Senate committee-reported bill included the Administration-requested levels for disaster relief funding, and included the OCO funding in an appropriation to the Coast Guard, rather than as a transfer from the U.S. Navy. On July 26, 2018, the House Appropriations Committee marked up H.R. 6776, its version of the Department of Homeland Security Appropriations Act, 2019. H.Rept. 115-948 was filed September 12, 2018. Committee-reported H.R. 6776 included $51.44 billion in adjusted net discretionary budget authority. The House committee-reported bill included the Administration-requested levels for disaster relief funding, but unlike S. 3109, did not include the OCO funding for the Coast Guard. As some of the annual appropriations for FY2019 remained unfinished, a consolidated appropriations bill that included a continuing resolution was passed by Congress and signed into law on September 28, 2018. The resolution, which covered DHS along with several other departments and agencies, continued funding at a rate of operations equal to FY2018 with some exceptions. This continuing resolution was extended through December 21, 2018, after which point annual appropriations lapsed. A partial government shutdown ensued for 35 days until continuing appropriations were resumed January 25, 2019, by P.L. 116-5. P.L. 116-6, the Consolidated Appropriations Act, 2019, was passed by Congress on February 14, 2019, and signed into law the following day. Division A of the act included the Homeland Security Appropriations Act, 2019, which included $49.41 billion in adjusted net discretionary budget authority, $12 billion designated for the costs of major disasters, and $165 million in OCO funding for the Coast Guard. This report will be updated in the event of FY2019 supplemental appropriations actions.", "document_type": "crs"}
{"report": "This report summarizes and analyzes selected forest management provisions enacted in the 115 th Congress and compares them with prior law or policy. These provisions were enacted through two legislative vehicles The Stephen Sepp Wildfire Suppression Funding and Forest Management Activities Act, enacted as Division O of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 , commonly referred to as the FY2018 omnibus) and signed into law on March 23, 2018. The Agricultural Improvement Act of 2018 ( P.L. 115-334 , Title VIII), signed into law on December 20, 2018. This law is commonly referred to as the 2018 farm bill. Both laws included provisions that address forest management through three general perspectives: (1) management of forested federal land, (2) federal programs to support forest management on nonfederal lands, known as forest assistance programs , and (3) programs to promote or conduct forestry research (to benefit both federal and nonfederal forests). This report focuses primarily on the provisions related to management of forested federal land. The federal forest management provisions change how the Forest Service (FS, within the Department of Agriculture (USDA)) and the Bureau of Land Management (BLM, within the Department of the Interior (DOI)) manage their lands. FS is responsible for managing the 193 million acres of the National Forest System (NFS), and BLM manages 246 million acres of public lands under its jurisdiction. This report begins with background information on the NFS and BLM's public lands and an overview of two laws: the National Environmental Policy Act (NEPA), and the Healthy Forests Restoration Act (HFRA). These laws, among others, authorize specific forest management activities and establish procedures relevant to the respective agency's decisionmaking processes for those activities. The 115 th Congress enacted provisions that affect how FS and BLM implement those activities and procedural requirements. The report summarizes and analyzes the provisions in the following categories: project planning and implementation, wildland fire management, forest management and restoration programs, and miscellaneous. Within each of those categories, the report broadly discusses relevant issues, summarizes the changes made in the 115 th Congress, and discusses potential issues for Congress related to that category. Some provisions or sections are covered in more depth than others, generally reflecting the complexity of the issue, nature of the enacted changes, or level of congressional interest. A separate section at the end of the report discusses overall issues for Congress. The Appendix contains side-by-side tables comparing all of the forest-related provisions in each law to prior law (including provisions related to forestry assistance programs and forestry research). Approximately 145 million acres of the 193-million-acre NFS consists of forests and woodlands. Congress directed that management of the national forests shall be to protect watersheds and forests and provide a \"continuous supply of timber for the use and necessities of citizens of the United States\" and authorized the sale of \"dead, matured, or large growth of trees.\" Congress added recreation, livestock grazing, energy and mineral development, and protection of wildlife and fish habitat as official uses of the national forests, in addition to watershed protection and timber production, in the Multiple-Use Sustained-Yield Act of 1960 (MUSY). Pursuant to MUSY, management of the resources is to be coordinated for multiple use —considering the relative values of the various resources but not necessarily maximizing dollar returns or requiring that any one particular area be managed for all or even most uses—and sustained yield , meaning maintaining a high level of resource outputs in perpetuity without impairing the productivity of the land. The National Forest Management Act of 1976 (NFMA) requires FS to prepare and update comprehensive land and resource management plans (also referred to as forest plans ) for each NFS unit. NFMA, as amended, specifies that the plans must be developed and revised with public involvement. Plans, like all discretionary actions taken by the FS, must also comply with any cross-cutting laws that apply broadly to all federal agency actions. This includes compliance with NEPA, as well as Section 7 of Endangered Species Act (ESA), and Section 106 of the National Historic Preservation Act (NHPA), among others. Each forest plan broadly describes a range of desired resource conditions across the specified NFS unit but does not authorize individual projects or specific on-the-ground actions. Projects are the on-the-ground actions that implement the forest plan prepared for that site. These may include activities such as timber harvests, watershed restoration, trail maintenance, and hazardous fuel reduction, among many others. Projects must be consistent with the resource objectives established in the forest plans. These projects must be planned, evaluated, and implemented using FS procedures intended to ensure compliance with applicable requirements (e.g., NEPA, ESA, NHPA). The timing and scope of review for a given project may vary based on the specific statutory authority underpinning each project's implementation, the types of resources that could be affected at the site, and the level of those potential effects. BLM manages 246 million acres of public lands, primarily in the western United States. Approximately 38 million acres of those public lands are woodlands and forests. The public lands—forested and otherwise—are managed under the principles of multiple use and sustained yield, as directed by the Federal Land Policy and Management Act (FLPMA). These principles are similar to those that govern the NFS. The 2.6 million acres of Oregon and California Railroad (O&C) Lands and Coos Bay Wagon Road (CBWR) Lands in western Oregon, however, are forested lands managed under a statutory direction for permanent forest production under the principle of sustained yield and with the purposes of providing timber, protecting watersheds, providing recreational opportunities, and contributing to the economic stability of the local communities. Similar to the requirements applicable to FS decisionmaking, FLPMA directs BLM to prepare and maintain comprehensive resource management plans and to revise them as necessary. Any proposed on-the-ground activities or projects must be consistent with those plans and must be planned, evaluated, and implemented using BLM's procedures for ensuring compliance with the laws that apply broadly to any federal agency action (e.g., NEPA, ESA, NHPA). Broadly, NEPA requires federal agencies to identify the environmental impacts of a proposed action before making a final decision about that action. How a federal agency demonstrates compliance with NEPA depends on the level of the proposal's impacts. A proposed action that would significantly affect the \"quality of the human environment\" requires the preparation of an environmental impact statement (EIS) leading to a Record of Decision. If the impacts are uncertain, an agency may prepare an environmental assessment (EA) to determine whether an EIS is necessary, or whether a finding of no significant impact (FONSI) may be issued through a Decision Notice. For actions that require an EA or EIS, an agency generally must evaluate the impacts of the proposed action and reasonable alternatives to it, including the alternative of taking no action (i.e., a no-action alternative ). The analysis included in the EIS or EA/FONSI is used to inform the agency's decisionmaking process regarding the proposal. Under NEPA implementing regulations, categorical exclusions (CEs) refer broadly to categories of actions that do not individually or cumulatively have a significant effect on the environment and hence are excluded from the requirement to prepare an EIS or an EA. FS and BLM have identified CEs based on each agency's past experience with similar actions. Some CEs have been explicitly established in statute by Congress, as discussed in the \" Statutorily Established NEPA CEs \" section of this report. Individual agencies also may determine whether or what additional documentation may be required for a CE. In its list of CEs, FS distinguishes between actions that generally do not require any further documentation and those that generally require the preparation of a decision memorandum as part of an administrative record supporting the decision to approve the proposal as a CE. In their agency-specific procedures implementing NEPA, each federal agency has identified and listed actions it is authorized to approve that normally require an EIS, or an EA resulting in a FONSI, or that can be approved using a CE. FS and BLM regulations also provide for and identify the resource conditions in which a normally excluded action may have the potential for a significant environmental effect and warrant further analysis in an EA or EIS. The presence of these resource conditions is termed extraordinary circumstances. For example, FS has identified the presence of flood plains, municipal watersheds, endangered species or their habitat, wilderness areas, inventoried roadless areas, and archaeological sites, among others, as potential extraordinary circumstances that may preclude the use of a CE for an otherwise eligible project. As commonly implemented, the process of identifying potential environmental impacts pursuant to NEPA serves as a framework to identify any other environmental requirements that may apply to that project as a result of those impacts. In this way, an agency's procedures to implement NEPA may serve as an umbrella compliance process. For example, within the framework of determining the resources affected and level of effects of a given proposal, the agency's NEPA process would identify project impacts that may trigger additional environmental review and consultation requirements under ESA and NHPA, among other laws. If compliance with NEPA was waived for a given category of action, the requirements triggered by impacts to those resources under other federal laws would still apply. HFRA, among other purposes, was intended to expedite the planning and review process for hazardous fuel reduction and forest restoration projects on NFS and BLM lands. Hazardous fuel reduction projects are intended to reduce the risk of catastrophic wildfire by removing or modifying the availability of biomass (e.g., trees, shrubs, grasses, needles, leaves, and twigs) that fuel a wildland fire through a variety of methods and measures. HFRA defined specific hazardous fuel reduction projects and authorized an expedited planning and review process for those projects. The authorization is available to be used for projects covering up to a cumulative total of 20 million acres of federal land. HFRA defined several other relevant terms, some of which are summarized below At-Risk Community : an area that is comprised of an interface community as defined in the notice published in 66 Federal Register 753, or a group of homes and other structures with basic infrastructure and services within or adjacent to federal land, and an area in which conditions are conducive to a large-scale wildland fire disturbance event and for which a significant threat to human life or property exists as a result of significant wildland fire disturbance event. Authorized H azardous F uels R eduction P roject s (HFRA P rojects) : methods and measures for reducing hazardous fuels including prescribed fire, wildland fire use, and various mechanical methods (e.g., pruning or thinning, which is the removal of small-diameter trees to produce commercial and pre-commercial products). Fire R egimes and C ondition C lasses : terms used to describe the relative change between the historical frequency and intensity of fire patterns across a vegetated landscape to the current fire patterns. These terms are used to prioritize and assess hazardous fuel reduction projects. For a complete definition, see the shaded text box and Figure 1 . Wildland-Urban Interface (WUI) : an area within or adjacent to an at-risk community with a community wildfire protection plan (CWPP), or an area within a specified distance to an at-risk community without a CWPP and with specified characteristics (e.g., steep slopes). HFRA projects may be conducted in the WUI; on specified areas within a municipal watershed and with moderate or significant departure from the historical fire regimes (see shaded text box); on wind-, ice-, insect-, or disease-damaged land, or land at risk of insect or disease damage; or on lands with threatened and endangered species habitat threatened by wildfire. HFRA explicitly excluded projects that would occur on designated wilderness areas, wilderness study areas, or areas that otherwise prohibit vegetation removal by an act of Congress or presidential proclamation. Also, HFRA projects must be consistent with the land and resource management plan in place for the area. Certain covered projects —basically, any HFRA project except those in response to or anticipation of wind, ice, insect, or disease damage—must focus on thinning, prescribed fire, or removing small-diameter trees to modify fire behavior, while maximizing large or old-growth tree retention (if retention promotes fire resiliency). HFRA also directed FS to establish a pre-decisional administrative review process—referred to as an objection process—for proposed HFRA projects. The review is called pre-decisional because HFRA explicitly requires objections to be filed within 30 days of the agency's publication of the draft decision documents associated with the proposed project (e.g., a draft Decision Notice and final EA, or draft Record of Decision and final EIS). Objections are limited to parties that submitted specific comments during the comment periods and may only be on issues raised within those comments. If no comments were received on a project, no objections will be accepted. HFRA also set forth requirements for judicial review. If the objector is still not satisfied with the agency's decision after the administrative review (i.e., objections) process has been exhausted, the next step is judicial review in federal court. However, only issues that were raised during the public comment period and the pre-decisional administrative review process may be considered during judicial proceedings, unless significant new issues arise after the conclusion of the administration review. Congress later directed FS to replace the post-decisional administrative appeals process used for non-HFRA projects with the pre-decisional objection process used by HFRA projects. As a result, all FS projects fall under the same pre-decisional objection process, although there are some differences between HFRA and non-HFRA projects. For example, the Chief of the Forest Service may declare a non-HFRA project an emergency situation and proceed directly to implementation after the publication of the decision document. The Agricultural Act of 2014 (the 2014 farm bill) added a new Section 602 to HFRA and authorized the establishment of landscape-scale insect and disease treatment areas within the NFS, by state, as requested by the state governor and then designated by the Chief of the Forest Service. To be eligible for this insect and disease treatment area designation, the NFS area must be experiencing declining forest health based on annual forest health surveys, at risk of experiencing substantial tree mortality over the next 15 years, or in an area in which hazard trees pose an imminent risk to public safety. In total, FS has designated approximately 74.5 million acres nationwide (see Figure 2 ). (Hereinafter this report refers to these designated areas as I&D areas . ) The act specified that FS may prioritize projects that reduce the risk or extent of, or increase the resilience to, insect or disease infestations within the I&D areas. The act further specified that such projects initiated prior to the end of FY2018 are to be considered hazardous fuel reduction projects pursuant to HFRA. Thus, these projects also are subject to HFRA's pre-decisional objections process; must be developed through a collaborative process with state, local, and tribal government collaboration and participation of interested persons; consider the best available science; and maximize the retention of old-growth and large trees, as appropriate for the forest type and to the extent it would promote insect and disease resiliency. Also pursuant to HFRA, projects planned within the WUI require the analysis of the proposed action and one action alternative during the preparation of an EA or EIS. If the proposed action is within 1.5 miles to an at-risk community, then only analysis of the proposed action is required (i.e., the no-action alternative does not need to be analyzed). For projects outside of the WUI, the no-action alternative must also be considered. In sum, Congress authorized FS to identify eligible NFS areas for designation as I&D areas, prioritize projects in those designated areas, and plan and implement those projects through a potentially expedited process. In some states, all eligible lands were designated. In those states, the expedited project planning procedures are thus broadly available, but any prioritization benefit is effectively nullified. As of March, 2019, FS reports 206 projects across 59 national forests and 18 states have been proposed under these authorities. Of those, FS evaluated or is evaluating 20 using the EA analysis procedures and three using an EIS. The remaining 183 projects are being processed or were processed using a CE, described below. The 2014 farm bill also added a new Section 603 to HFRA, which specified in statute that certain projects intended to reduce the risk or extent of insect or disease infestations within I&D areas would be considered actions categorically excluded from the requirements of NEPA (commonly referred to as the F arm B ill CE ). (The 2018 farm bill added hazardous fuels projects as a priority project category eligible to be implemented through the CE, discussed in the \" Planning and Project Implementation Requirements \" section). The law specified that these projects are exempt from the pre-decisional administrative review objections process. To be eligible for the 2014 Farm Bill CE, projects must either 1. comply with the eligibility requirements of the Collaborative Forest Landscape Restoration Program (CFLRP), or 2. consider the best available science; maximize the retention of old-growth and large trees, as appropriate for the forest type and to the extent that it would promote insect and disease resiliency; and be developed through a collaborative process that is transparent and nonexclusive, or which meets specified requirements. Projects may not establish any new permanent roads, and any temporary roads must be decommissioned within three years of the project's completion. However, maintenance and repairs of existing roads may be performed as needed to implement the project. Projects cannot exceed 3,000 acres. The projects must be located within designated I&D areas. In addition, projects may be located within the WUI, or outside of the WUI but in areas classified as Condition Classes 2 or 3 in Fire Regime Group I, II, or III, as defined by HFRA. FS policy is to document its decision on a proposal using the Farm Bill CE through a decision memorandum, after determining whether resource conditions at the site result in any extraordinary circumstances subject to further review and consultation. The FY2018 omnibus and the 2018 farm bill both changed certain FS and BLM planning and project implementation requirements. For example, both laws expanded various HFRA authorities The FY2018 omnibus (§203) amended HFRA to expand the definition of an authorized fuel reduction project to include the installation of fuel breaks (e.g., measures that change fuel characteristics in an attempt to modify the potential behavior of future wildfires) and fire breaks (e.g., natural or constructed barriers to stop, or establish an area to work to stop, the spread of a wildfire). Thus, projects to build fuel or fire breaks may be planned and implemented using the procedures authorized under HFRA, such as requiring analysis of a specific number of alternatives depending on the proposed action's location. The 2018 farm bill reauthorized (through FY2023) the use of the procedures intended to expedite priority projects in I&D areas. It also added projects to reduce hazardous fuels as a priority project category (§8407(b)). This means that hazardous fuels reduction projects may be planned and implemented using the Farm Bill CE, if those actions are located within I&D areas and meet the other eligibility requirements. In addition, both the FY2018 omnibus and the 2018 farm bill each established a new statutory NEPA CE. The 2018 farm bill also included provisions affecting the interagency consultation requirements under the Endangered Species Act (ESA). These changes are each discussed in the following sections. Both laws established new statutory CEs intended to expedite the planning and implementation of specific projects. The FY2018 omnibus established a CE for wildfire resilience projects, which is effectively available only for FS. The 2018 farm bill established a CE for projects related to greater sage grouse or mule deer habitat, which is available to both FS and BLM. The provisions of each CE share some similarities with the Farm Bill CE (see Table 1 for a side-by-side comparison of the three CEs). It is difficult to assess the potential impact of these new CEs, either on the pace of project planning and implementation or on various forest management goals. Both of the statutory CEs—as well as the 2014 Farm Bill CE—allow FS (and BLM, as applicable) to plan for larger projects (up to 3,000 to 4,500 acres) through a CE. Some say larger project sizes—with or without a CE—will allow FS to achieve landscape-level goals more efficiently. Some also contend that using a CE for the environmental review will allow FS to proceed from project planning to project implementation at a faster pace, improving agency efficiency. For example, a 2014 Government Accountability Office (GAO) report found that FS took an average of 177 days to complete CEs, compared with 565 days to complete EAs, in FY2012. That same GAO report found that from FY2008 to FY2012, FS used CEs less frequently and the process took longer to complete compared with other agencies. However, the analysis period occurred before Congress authorized the Farm Bill CE, and it is possible that FS trends have since changed. In contrast, others are concerned that conducting landscape-scale projects without more detailed environmental reviews and documentation, or implementing projects of additional types and larger areas through CEs, may lead to undesirable resource effects. Section 202 of the FY2018 omnibus added a new Section 605 to HFRA and established a Wildfire Resilience CE for specified hazardous fuel reduction projects. The Wildfire Resilience CE is similar to the Farm Bill CE. Projects must be located within designated I&D areas on NFS lands. FS policy is to document the decision to use the Farm Bill CE through a decision memo, after determining if there are any extraordinary circumstances present that could have a significant environmental effect, as specified in the statute and consistent with FS regulations. Eligible projects must either 1. comply with the CFLRP eligibility requirements, or 2. maximize the retention of old-growth and large trees to the extent that the trees promote resiliency; consider best available science; and be developed through a collaborative process that is transparent and nonexclusive, or which meets specified requirements. Projects may not establish any new permanent roads, and temporary roads must be decommissioned within three years of project completion. However, maintenance and repairs of existing roads may be performed as needed to implement the project. Projects cannot exceed 3,000 acres. In addition to being located within I&D areas, the law specifies that projects located within the WUI are prioritized, but projects may be located outside the WUI if they are located in areas classified as Condition Class 2 or 3 in Fire Regime groups I, II, or III that contain very high wildfire hazard potential. The law further requires the Secretary to submit an annual report on the use of the CEs authorized under this section to specified congressional committees and GAO. FS reports that seven projects were proposed using the authority in FY2018. Many of the same location and purpose requirements for projects planned under the 2014 Farm Bill CE are required for projects that could be planned and implemented under the Wildfire Resilience CE (see Table 1 ). For example, both CEs require projects to be located within designated I&D areas. Both CEs also require projects located outside of the WUI to be in the same specified fire regime condition classes, but the Wildfire Resilience CE also specifies that those projects should be located in areas that also contain very high wildfire hazard potential. In addition, the Wildfire Resilience CE specifies that projects located within the WUI should be prioritized; the Farm Bill CE does not include that prioritization. The Wildfire Resilience CE is available only for specified hazardous fuels reduction projects, while the Farm Bill CE is also available for projects to address insect and disease infestation. In the Wildfire Resilience CE, Congress explicitly directed FS to apply its procedures for evaluating if the resource conditions identified as extraordinary circumstances are present on the project site, and if the presence of those extraordinary circumstances may thus preclude the use of the CE and require further analysis of potential impacts through an EA or EIS. Although similar legislative language was not included, FS must still also assess if there are extraordinary circumstances present that may preclude the use of the Farm Bill CE (and all other CEs). Section 8611 of the 2018 farm bill directs the Secretary of Agriculture, for NFS lands, and the Secretary of the Interior, for BLM lands, to establish a CE for specified projects to protect, restore, or improve greater sage-grouse and/or mule-deer habitat within one year of enactment. It also specifies requirements for applying the CE. Projects must protect, restore, or improve habitat in a sagebrush steppe ecosystem for either species, or concurrently for both species if the project is located in both mule deer and sage-grouse habitat. Projects must be consistent with the existing resource management plan and for projects on BLM lands, comply with DOI Secretarial Order 3336. The law also described the specific activities that may be part of a project, such as removal of juniper trees, cheat grass, and other nonnative or invasive vegetation; targeted use of livestock grazing to manage vegetation; and targeted herbicide use, subject to applicable legal requirements. Projects may not occur in designated wilderness areas, wilderness study areas, inventoried roadless areas, or any area where the removal of vegetation is restricted or prohibited. Projects may not include any new permanent roads, but may repair existing permanent roads. Temporary roads shall be decommissioned within three years of project completion, or when no longer needed. Projects may not be larger than 4,500 acres. On NFS lands, projects may occur only within designated I&D areas. The law directs each agency to apply its respective extraordinary circumstances procedures in determining whether to use the CE. In addition, the law directs the agencies to consider the relative efficacy of landscape-scale habitat projects, the likelihood of continued population declines in the absence of landscape-scale vegetation management, and the need for habitat restoration. The agencies must also develop a 20-year monitoring plan prior to using the CE. This CE has some basic similarities to the other two CEs—such as requirements for projects to be developed through a collaborative process—but the project purposes and requirements differ significantly (see Table 1 ). The Endangered Species Act (ESA) has a stated purpose of conserving species identified as endangered or threatened with extinction and conserving ecosystems on which these species depend. It is administered primarily by the Fish and Wildlife Service (FWS, in DOI) for terrestrial and freshwater species, but also by the National Marine Fisheries Service (NMFS, in the Department of Commerce) for certain marine species. Under the ESA, individual species of plants and animals (both vertebrate and invertebrate) can be listed as either endangered or threatened according to assessments of the risk of their extinction. Once a species is listed, a set of prohibitions applies to the species. The ESA provides federal agencies with an opportunity to gain an exemption from the prohibitions under certain circumstances. Federal agencies must ensure that their actions—or the actions of nonfederal parties granted a federal approval, permit, or funding—are \"not likely to jeopardize the continued existence\" of any endangered or threatened species, or adversely modify their critical habitat. The federal agencies must consult with either FWS or NMFS if such an action might adversely affect a listed species as determined by the Secretary of the Interior or the Secretary of Commerce. This is referred to as a Section 7 consultation . Where a federal action is dictated by statute, a Section 7 consultation is not required, as it applies to only discretionary actions. If the appropriate Secretary finds that an action would neither jeopardize a species nor adversely modify the critical habitat of that species, the Secretary issues a biological opinion (BiOp) to that effect. The BiOp specifies the terms and conditions under which the federal action may proceed to avoid jeopardy or adverse modification of critical habitat. Alternatively, if the proposed action is judged to jeopardize listed species or adversely modify critical habitat, the Secretary must suggest any reasonable and prudent alternatives that would avoid harm to the species. The great majority of consultations result in \"no jeopardy\" opinions, and nearly all of the rest find that the project has reasonable and prudent alternatives, which will permit it to go forward. The FY2018 omnibus enacted changes to how the Section 7 consultation requirements interact with the development of land and resources management plans for the NFS and for the O&C and CBWR lands managed by the BLM in Oregon (§§208, 209). The law specifies that the listing of a species as threatened or endangered or the designation of critical habitat pursuant to the ESA does not require the Secretary of Agriculture (for NFS lands) or the Secretary of the Interior (for the O&C and CBWR lands) to engage in Section 7 consultation to update or revise a forest plan, unless the plan is older than 15 years and 5 years has passed since either the date of enactment or the listing of the species, whichever is later. The law further specifies, however, that this does not affect the requirements for Section 7 consultation for projects implementing forest plans or for plan updates or amendments. The changes in the FY2018 omnibus are controversial, because some argue that they set a new precedent for implementing ESA. According to some, the provisions were needed to override a decision by the Ninth Circuit Court of Appeals that required FS to conduct re-consultation on its land management plans after critical habitat was designated for the Canada lynx. Those in favor of the enacted changes contend that not requiring Section 7 consultations for existing land management plans due to a species listing or designation of critical habitat will provide more flexibility in implementing plans, allow for consistency in keeping the plans in place, and enable plan and project implementation to proceed with fewer delays. The exceptions in the law would allow for changes in plans after a certain time, thereby reflecting changes to listed species and their critical habitat. Those opposed to these provisions contend that not allowing for consultation or re-consultation to take place due to changes in listing species and critical habitat could negatively affect species if plans prescribe harmful activities and are allowed to be kept in place. In addition, some contend that the time lag before consultation is required could be long enough to harm species and negatively affect their habitat. Proponents of the change, however, note that projects under a plan are still required to undergo consultation, thereby making the consultation of the plan redundant. However, critics of the provision contend that plans address projects and activities at a higher level and could influence the cumulative effect of all projects and activities under the plan. The federal government's wildland fire management responsibilities—fulfilled primarily by FS and DOI—include fuel reduction, preparedness, prevention, detection, response, suppression, and recovery activities. The FY2018 omnibus and 2018 farm bill contained provisions that changed how Congress appropriates funding specifically for wildfire suppression purposes, added specific requirements for wildfire risk mapping (part of preparedness), and added specific reporting requirements. This section provides some background information on wildland fire appropriations and then discusses those changes in more detail. The laws also changed aspects of FS and DOI's hazardous fuel reduction programs. This included reauthorizing the use of procedures intended to expedite the priority projects in NFS areas designated as I&D areas and expanding the definition of an authorized fuel reduction project, as discussed previously in the \" Planning and Project Implementation Requirements \" section. Congress provides discretionary appropriations for wildland fire management to both FS and DOI through the Interior, Environment, and Related Agencies appropriations bill. Funding for DOI is provided to the department, which then allocates the funding to the Office of Wildland Fire and four agencies—BLM, the Bureau of Indian Affairs, the National Park Service, and the U.S. Fish and Wildlife Service. Within FS's and DOI's respective Wildland Fire Management (WFM) account, funding is provided to the Suppression Operations program to fund the control of wildfires that originate on federal land. This includes firefighter salaries, equipment, aviation asset operations, and incident support functions in direct support of wildfire response, plus personnel and resources for post-wildfire response programs. If their suppression funding is exhausted during a fiscal year, FS and DOI are authorized to transfer funds from their other accounts to pay for suppression activities; this is often referred to as fire borrowing . Overall appropriations to FS and DOI for wildland fire management have increased considerably since the 1990s. A significant portion of that increase is related to rising suppression costs, even during years of relatively mild wildfire activity, although the costs vary annually and are difficult to predict. FS and DOI frequently have required more suppression funds than have been appropriated to them. This discrepancy often leads to fire borrowing, prompting concerns that increasing suppression spending may be detrimental to other agency programs. In response, Congress has typically enacted supplemental appropriations to repay the transferred funds and/or to replenish the agency's wildfire accounts. Wildfire spending—like all discretionary spending—is currently subject to procedural and budgetary controls. In the past, Congress has sometimes—but not always—effectively waived some of these controls for certain wildfire spending. This situation prompted the 115 th Congress to explore providing wildfire spending outside of those constraints, as discussed below. In the FY2018 omnibus, the 115 th Congress established a new mechanism for suppression funding, commonly referred to as the wildfire funding fix (§102(a)). Pursuant to the Budget Control Act of 2011 (BCA), discretionary spending currently is subject to statutory limits for each of the fiscal years between FY2012 and FY2021. Enacted discretionary spending may not exceed these limits. If spending that exceeds a limit is enacted, the limit is to be enforced through sequestration, which involves the automatic cancellation of budget authority largely through across-the-board reductions of nonexempt programs and activities. Certain spending is effectively exempt from the discretionary spending limits pursuant to Section 251(b) of the Balanced Budget and Emergency Deficit Control Act (BBEDCA), because those limits are \"adjusted\" upward each year to accommodate that spending. Spending for specified emergency requirements and disaster-relief purposes falls into this category. Section 102(a)(3) of the FY2018 omnibus amended BBEDCA to add a new adjustment to the nondefense discretionary spending limit for wildfire suppression operations. This new adjustment starts in FY2020 and continues for each year thereafter through FY2027. For the purposes of the adjustment, wildfire suppression operations includes spending for the purposes of the emergency and unpredictable aspects of wildland firefighting, including support, response, and emergency stabilization activities; other emergency management activities; and funds necessary to repay any transfers needed for these costs. The new adjustment would apply to appropriations provided above an amount equal to the 10-year average spending level for wildfire suppression operations as calculated for FY2015 (\"FY2015 baseline\"). That is, an amount equal to the FY2015 baseline would be subject to the statutory discretionary limits, and then any additional funding appropriated would be considered outside the limits and would be the amount of the adjustment. The amount of the adjustment is capped each fiscal year, starting at $2.25 billion in FY2020 and increasing by $0.1 billion ($100 million) to $2.95 billion in FY2027. Whatever amount, if any, Congress elects to appropriate for wildfire suppression over the FY2015 baseline ($1.39 billion combined) effectively would not be subject to the discretionary spending limits established in the BCA for FY2020 and FY2021, up to the specified maximum. For example, in FY2020, Congress could appropriate the minimum FY2015 baseline of $1.39 billion for suppression operations, as requested by the agencies. This amount would be subject to the BCA discretionary limits. But then Congress could appropriate up to an additional $2.25 billion in FY2020, effectively outside of the discretionary limits. This means the agencies could be appropriated up to $3.64 billion in total in FY2020, for the same discretionary budget \"score\" as $1.39 billion. For context, FS and DOI combined received $2.05 billion for suppression purposes in FY2019 ($1.67 billion for FS; $388 million for DOI). Over the past 5 years, FS and DOI combined received $2.16 billion annually on average ($1.74 billion for FS; $428 million for DOI). The enactment of the wildfire funding fix potentially removes some budget process barriers to providing additional wildfire suppression funds, at least for FY2020 and FY2021. This is because the BCA statutory limits for discretionary spending are only in effect until FY2021. If new limits are statutorily established for any year between FY2022 through FY2027, then the wildfire adjustment would still be applicable. If no new limits are enacted, though, the wildfire adjustment would no longer apply. It is also unclear if Congress would continue to provide the fire borrowing authority to the agencies once the wildfire adjustment is in effect starting in FY2020. Section 103 of the FY2018 omnibus requires the applicable Secretary, in consultation with the Director of the Office of Management and Budget (OMB), to \"promptly\" submit a request to Congress for supplemental appropriations if the amount provided for wildfire suppression operations for a fiscal year is estimated to be exhausted within 30 days. This provision would give Congress notice of the likely need for additional funding but would require additional action from Congress to ensure the agencies have access to funds to enable continued federal services in response to wildfires. The wildfire funding fix raises several potential concerns for Congress. As one example, FS did not report its 10-year suppression obligation for FY2020 since suppression appropriations are now tied to the FY2015 baseline (DOI reported its 10-year obligation average to be $403 million). This may raise concerns related to accountability and oversight of suppression spending. Another concern may be that the FY2015 baseline and the annual adjustment limits are not tied to any inflationary factors. Further, the wildfire funding fix is a temporary procedural change for how Congress funds suppression operations and does not address a variety of other concerns related to suppression costs, such as improving suppression cost forecasting, evaluating the effectiveness of suppression methods, or addressing any of the drivers of increasing suppression costs, among other concerns broadly related to wildland fire management. The Fire Modeling Institute, part of FS's Rocky Mountain Research Station, developed a Wildfire Hazard Potential (WHP) index and map to help inform strategic planning and fuel management decisions at a national scale (see Figure 3 ). Using vegetation, fuels, wildfire likelihood, wildfire intensity, and past wildfire location data, the WHP is an index that reflects the relative potential for a wildfire to occur that would then be difficult to suppress or contain. Based on this data, FS estimates that approximately 226 million acres of land in the continental United States are classified at high or very high WHP. Of those lands identified at high or very high WHP, 120 million acres (53%) are federal land (58 million acres of NFS lands and 62 million acres of DOI lands), and the remaining 106 million acres (47%) are state, tribal, other public, or private lands. According to the index, high or very high WHP reflects fuels that have a higher probability of experiencing extreme fire behavior given certain weather conditions. The WHP data, when paired with appropriate spatial data, can approximate the relative wildfire risk to resources and assets identified from that data. The FY2018 omnibus directs FS to pair the WHP with the appropriate spatial data and scale for community use. Specifically, Section 210 directs FS to consult with federal and state partners, and relevant colleges and universities to develop, within two years, web-based wildfire hazard severity maps for use at the community level to inform risk management decisions for at-risk communities adjacent to NFS lands or affected by wildland fire. Both the FY2018 omnibus and the 2018 farm bill require FS and BLM to submit reports to Congress on specified topics related to wildland fire management. Specifically, the FY2018 omnibus requires the Secretary of Agriculture (for FS) or the Secretary of the Interior to submit an annual report within 90 days after the end of a fiscal year in which the wildfire funding fix is used. The omnibus also establishes requirements for the report components (§104). The first possible report will be required by December 30, 2021, if the wildfire adjustment is used in the first possible year (FY2020). The Secretaries are to prepare the reports in consultation with the OMB Director. The report is to be available to the public and submitted to the House Committees on Appropriations, the Budget, and Natural Resources and the Senate Committees on Appropriations, the Budget, and Energy and Natural Resources. The report shall document the use of the wildfire funding fix (e.g., specific funding obligations and outlays) and overall wildland fire management spending, analyzed by fire size, costs, regional location, and other factors. The report also shall identify the \"risk-based factors\" that influenced suppression management decisions and describe any lessons learned. In addition, the law specified that the report shall include an analysis of a \"statistically significant sample of large fires\" across a variety of measures, including but not limited to: cost drivers and analysis, effectiveness of fuel treatments on fire behavior and suppression costs, and the impact of investments in preparedness activities, among others. The 2018 farm bill also requires the Secretaries of Agriculture and the Interior to jointly compile and submit a report to Congress on wildfire, insect infestation, and disease prevention on federal land (§8706). The report must be submitted to the House Committee on Agriculture, House Committee on Natural Resources, Senate Committee on Agriculture, Nutrition, and Forestry, and Senate Committee on Energy and Natural Resources. The first report is due within 180 days of enactment of the farm bill (it is due on June 20, 2019) and then annually thereafter. The agencies shall report on the number of acres of federal land treated for wildfire, insect and infestation, and disease prevention; number of acres of federal land categorized as high or extreme fire risk; number of acres and average intensity of wildfires affecting federal land both treated and not treated for wildfire, insect infestation, or disease prevention; federal response time for each fire greater than 25,000 acres; total timber production on federal land; number of miles of roads and trails in need of maintenance; maintenance backlog for roads, trails, and recreational facilities on federal land; other measures needed to maintain, improve or restore water quality on federal land; and other measures needed to improve ecosystem function or resiliency on federal land. Forest restoration activities seek to establish or reestablish the composition, structure, pattern, and ecological processes and functioning necessary to facilitate resilience and resistance to disturbance events (e.g., insect or disease infestation, catastrophic wildfire, ice or windstorm). For example, forest restoration may include activities such as removing small-diameter trees (called thinning ) to reduce tree density, potentially mitigating against the spread of some insect or disease infestations. Or, forest restoration may include prescribed fire to reduce the building up of understory vegetation or biomass, to mitigate the potential for a wildfire to increase in intensity and severity, and to facilitate post-fire recovery. BLM's authority to conduct restoration projects is derived primarily from FLPMA. FS's authority is derived primarily from its responsibilities to: protect the NFS from destruction as specified in the Organic Administration Act of 1897; manage the national forests for multiple use and sustained yield as specified in MUSY; and maintain forest conditions designed to secure the maximum benefits and provide for a diversity of plant and animal communities as specified in the Forest and Rangeland Renewable Resources Planning Act of 1974, as amended by NFMA. Congress also has authorized specific forest restoration programs for FS and BLM, or has authorized forest restoration to be one of many activities or land management objectives for other programs. The 115 th Congress established two new programs for FS (watershed condition framework and water source protection), and amended three existing programs: the Collaborative Forest Landscape Restoration Program (CFLRP, available only for FS), stewardship contracting authority, and the good neighbor authority. Among other provisions, aspects of these programs allow FS and BLM to partner with various stakeholders in different ways to identify forest restoration needs and perform specified forest management and restoration activities. These programs are elements of the FS's \"Shared Stewardship\" approach to address land management concerns at a landscape-scale and across ownership boundaries. These programs are generally perceived as offering opportunities to accelerate forest restoration to mitigate against insect and disease infestations or reduce the risk of catastrophic wildfires to federal lands and surrounding communities. In addition, proponents point to other potential benefits to the surrounding communities, such as providing forest products to support local industries, promoting new markets for restoration by-products (e.g., small diameter trees, woody biomass), and fostering collaboration. These programs are generally supported by many stakeholders, although some have raised concerns about specific aspects of each program. Title IV of the Omnibus Public Lands Management Act of 2009 ( P.L. 111-11 ) established the CFLRP to select and fund the implementation of collaboratively developed restoration proposals for priority forest landscapes. The collaboration process must include multiple interested persons representing diverse interests and must be transparent and nonexclusive, or meet the requirements for Resource Advisory Committees (RACs, as specified by the Secure Rural Schools and Community Self-Determination Act (SRS)). Priority forest landscapes must be at least 50,000 acres and must consist primarily of NFS lands in need of restoration, but may include other federal, state, tribal, or private land within the project area. In addition, the proposal area should be accessible by wood-processing infrastructure. Proposals must incorporate the best available science, and include projects that would maintain or contribute to the restoration of old-growth stands, and restoration treatments that would reduce hazardous fuels, such as thinning small-diameter trees. The proposals may not include plans to establish any new permanent roads, and any temporary roads must be decommissioned. The law requires the publication of an annual accomplishments report and submission of 5-year status reports to specified congressional committees. The law authorized the Secretary of Agriculture to select and fund up to 10 proposals for any given fiscal year, but also gave the Secretary the discretion to limit the number of proposals selected based on funding availability. FS has selected and funded 23 proposals since the program was established in FY2010. Each selected proposal includes a range of individual projects to implement the proposal's forest restoration goals over the specified time period of the funding commitment . The law established a fund to pay for up to 50% of the costs to implement and monitor proposal projects, and authorizes up to $40 million in annual appropriations to the fund through FY2019. Each selected proposal can receive a funding commitment of up to $4 million per year for up to 10 years to fund project implementation, but appropriations from the fund may not be used to cover any costs related to project planning. The program received $40 million annually in appropriations from FY2014 through FY2019. CFLRP is generally perceived as successful, achieving progress towards the specified land management objectives as well as contributing to local economies and fostering collaboration. Agen cy staff found the dedicated funding commitment to be one of the most valuable aspects of the program, providing long-term stability and predictability for project implementation and coordination. Some may note, however, that this funding commitment may direct resources away from NFS lands in areas not covered by selected projects. While the program provide s some economic benefits, some fe el it f a ll s short in fostering new markets for smaller-scale wood products or reducing treatment costs. In addition, while the program is generally perceived as improving relationship s with community stakeholders and fostering collaboration, some note that much of the collaboration ha d focused on relatively simple and non controversial issues and ha d not made progress towards resolving more complex or controversial issues. Section 8629 of the 2018 farm bill reauthorized the program, and authorized up to $80 million in appropriations annually through FY2023. The law authorized the Secretary of Agriculture to issue a one-time waiver to extend the funding commitment to an existing project for up to an additional 10 years, subject to the project continuing to meet the specified eligibility criteria. The law also added the House and Senate Committees on Agriculture as recipients of the five-year program status reports. The funding commitment for the 23 selected proposals is set to expire at the end of FY2019 , so the reauthorization and extension of eligibility could result in some projects continuing beyond that initial time-frame . In addition, i f Congress chooses to appropriate to the new authorization level, it could also result in more projects being selected and funded. The 2014 farm bill authorized FS and BLM to enter into good neighbor agreements (GNAs) with state governments. The program was initially authorized as a temporary pilot on NFS land in Colorado in 2001, before the permanent authorization made it available nationwide for all NFS lands as well as BLM lands. Under an approved GNA, states are authorized to do restoration work on NFS and BLM public lands. The authorized restoration services include treating insect- and disease-infested trees, reducing hazardous fuels, and any other activities to restore or improve forest, rangeland, and watershed health. This could include activities such as fish and wildlife improvement projects, commercial timber removal, and tree planting or seeding, among others. The law prohibited treatments in designated wilderness areas, wilderness study areas, or areas where removal of vegetation is prohibited. The 2014 farm bill authorization did not include construction, reconstruction, repair, or restoration of paved or permanent roads, and did not specify any special treatment for any revenue generated through the sale of wood products from the federal lands. While states may perform the work, FS and BLM retain the responsibility to comply with all applicable federal laws regarding federal decisionmaking, including NEPA, as well as approving and marking any silvicultural prescriptions. Generally, a Master Agreement (MA) between the state and FS or BLM outlines the general scope of the GNA, and serves as an umbrella for Supplemental Project Agreements (SPAs). SPAs are tiered to the MA and outline the specific terms and conditions for project implementation. FS reports that they have executed 48 MAs in 33 states and 105 SPAs in 28 states, covering 82 national forests. While many of the GNAs are broad in scope—allowing for the full suite of authorized activities—they typically have a primary emphasis on a specific project type or purpose. This includes timber production (42%), wildlife or fisheries (18%), hazardous fuels management (16%), and other or unspecified activities (19%). The good neighbor authority is generally perceived as successful, particularly in terms of enhancing state-federal relationships and performing cross boundary restoration work. Other benefits include leveraging state resources, although funding and other resource capacity varied across participating states. Some states reported concerns related to the uncertainty of sustained future GNA work, however. Both the FY2018 omnibus and the 2018 farm bill enacted changes to the good neighbor authority. The FY2018 omnibus authorized GNA forest restoration activities to include road construction, reconstruction, repair, restoration, or decommissioning activities on defined NFS roads, and as necessary to implement authorized forest restoration services (§212). The 2018 farm bill expanded the availability of GNAs to include federally recognized Indian tribes and county governments (§8624). The farm bill further specified that, through FY2023, funds received by a state through the sale of timber under a GNA shall be retained and used by the state on additional GNA projects. In addition, the farm bill further specified that any payment made by a county to the relevant Secretary under a project conducted pursuant to a GNA is not subject to any applicable revenue-sharing laws. The expansion of GNA to tribes and county governments has the potential to increase the use of the authority significantly. This may result in increased opportunities for achieving cross-boundary restoration work, as well as leveraging additional nonfederal resources. However, it is also possible that it increases administrative demands on FS or BLM, such as contract administration, project planning, or oversight of project implementation. Other concerns may include the distribution of receipts from the sale of timber or other wood products. Some may prefer to have the revenue from GNA projects subject to revenue-sharing with county governments. Stewardship end-result contracting (stewardship contracting) was established as a temporary pilot program by the Department of the Interior and Related Agencies Appropriations Act of 1999, and was extended multiple times, through 2013. The 2014 farm bill made the authority permanent. This authority allows FS and BLM to enter into multi-year (up to 10 years), dual service and timber sale contracts or agreements to achieve specified land management goals on the lands within their jurisdiction. This means that FS and BLM may combine a timber sale contract (in which the federal government sells the right to harvest federal timber) with a service contract (in which the federal government hires an entity to perform various service activities, such as removing brush and small diameter trees). By combining the two contract types, the agencies can use the value of the harvested timber to offset the cost of service activities (i.e., trade goods for services). The specified land management goals include objectives such as restoring or maintaining water quality through road and trail maintenance or obliteration, improving forest health and reducing fire hazards, increasing soil productivity, restoring and maintaining watersheds, restoring and maintaining fish and wildlife, and reestablishing native plant species. FS and BLM can deposit any timber sale revenue exceeding the cost of contracted services (referred to as excess revenue) in their respective Stewardship Contracting Fund. FS and BLM may use the funds on other stewardship projects without further appropriation. The law authorized contracts to be awarded on a best-value basis, meaning FS and BLM may consider past performance, proposal quality, and other factors in addition to cost, and allows FS and BLM to give procurement preference for contractors making innovative use of wood products. FS and BLM are required to submit annual reports on the development, execution, administration, and accomplishments of stewardship contracts. Stewardship contracting is generally perceived favorably among stakeholders. The agencies report increased opportunities for accomplishing more restoration goals and improving collaborative relationships. Other stakeholders report economic benefits, such as contributions to local economic activity or improved certainty in the development of new markets for woody biomass and other restoration by-products, although some may contend that more certainty or market support is needed. In addition, some might report concern that that there may be a higher than appropriate incentive to remove large or high value—but ecologically important—trees to pay for more service work, or other issues related to program implementation. There may also be concern related to the distribution of receipts from stewardship contracts, as some may prefer to maintain the revenue-sharing requirements with county governments. Other concerns include the amount of up-front financial obligations required and the perceived slow pace of implementation. The initial implementation of the stewardship contracting was difficult to assess due in part to the complexity of integrating the different contract types and a lack of reliable record-keeping. After that initial period, however, the agencies began integrating their respective contracting systems, improving record-keeping, and offering more contracts annually, covering larger areas. However, a 2015 USDA Office of Inspector General (OIG) report found issues with FS' contract administration and record-keeping related to stewardship contracts. Specifically, the OIG report found FS did not consistently comply with applicable procurement requirements by clearly defining the evaluation factors used when awarding contracts. FS published new guidance in 2016, partially in response to the findings of the report. The FY2018 omnibus made several changes to the stewardship contracting authority (§§204-207). In Section 207, the FY2018 omnibus authorized FS and BLM to enter into 20-year stewardship contracts or agreements, if the majority of the federal lands are located in areas classified in Fire Regime Groups I, II, and III. The law also authorized the Secretary to give a procurement preference to a contractor that promotes an innovative use of forest products as part of the contract. In addition, the law authorized FS and BLM to include a cancellation ceiling when entering stewardship contracts. FS and BLM may obligate funds for cancellation ceilings in stages which are economically or programmatically viable. The law further authorized the use of excess revenues to pay for any outstanding liabilities associated with cancelled contracts. Congressional notification is required if FS or BLM intend to enter a stewardship contract or agreement with a cancellation ceiling higher than $25 million without proposed funding for the costs of canceling the contract. The cancellation ceiling provision allows FS and BLM to obligate funds for cancellation ceilings in stages, rather than obligating funds up-front when the contract is entered. This has the potential of resolving concerns related to those up-front financial obligations, and the ability to use excess revenue to offset costs also has potential benefits. Both the use of 20-year stewardship contracts in certain locations and procurement preference may provide for increased market certainty for forest products industries and allow for continued innovation in the use of forest restoration by-products. It is unclear if there are any potential drawbacks to the expanded time-frame. The protection of watersheds is one of the authorized uses of the NFS, and as such is an authorized activity or goal of many FS programs. As part of a regular program review, OMB cited inadequacies in FS's watershed programs in a 2006 assessment report. The report cited lack of adequate water quality data and performance measures and an inconsistent national approach to prioritize watershed management on NFS lands as areas of concern. As part of the improvement plan developed from the assessment, FS committed to developing long-term, outcome-based performance measures; generating better water quality, habitat, and biological data; and developing and implementing a strategy to make watersheds a priority for management activities as the basis for program allocations. As part of this effort, FS developed a Watershed Condition Framework (WCF) to classify watershed conditions across the NFS, identify priority watersheds, and develop restoration action plans. FS classified and prioritized watersheds by 2011, began to develop watershed restoration action plans in 2013, and began to implement projects to achieve the goals described in those plans soon thereafter. A 2017 USDA OIG report found inadequacies in FS' management and implementation of the WCF program, such as inadequate coordination and oversight at the national level, inadequate methodologies for record-keeping generally and specifically in regard to monitoring project costs and performance towards watershed restoration. Section 8405 of the 2018 farm bill codified the WCF program in statute, assigned specific program responsibilities, and provided guidance on program priorities. More specifically, the law authorized the Secretary of Agriculture, through the Chief of the Forest Service, to establish a WCF for NFS land. Under the framework, FS may evaluate and classify watershed conditions and establish the assessment criteria (e.g., water quality and quantity, aquatic habitat, vegetation, soil condition, among others). FS may identify up to five priority watersheds in each national forest (and two in each national grassland) for protection and restoration. In addition, FS may develop, implement, and monitor restoration action plans, in coordination with interested nonfederal landowners and other governments, to prioritize protection and restoration activities on those priority watersheds and to achieve the desired watershed conditions. The law also authorizes an emergency designation process to prioritize a watershed for rehabilitation if wildfire has had significant impact on a watershed and post-fire stabilization activities have not returned the watershed to \"proper function.\" Watershed protection generally—and water source protection specifically—is one of the authorized uses of the NFS. Water source protection as such is an authorized activity or goal of many FS programs. As one example, the Secretary of Agriculture is authorized to enter into cooperative agreements for watershed restoration and enhancement purposes with willing federal, tribal, state and local governments, private and nonprofit entities and landowners. If the Secretary determines that the expenditure of federal funds is in the public interest, then the federal government may share the costs of implementing the agreement with the nonfederal partners. The watershed restoration and enhancement purposes include activities such as improving fish, wildlife, and other resources on NFS lands within the watershed. The 2018 farm bill amended HFRA and authorized the Secretary of Agriculture to establish a specific Water Source Protection program on NFS land (§8404). This authorizes FS to enter into multi-year water source investment partnership agreements with nonfederal partners to protect and restore NFS watersheds that serve as sources of municipal water. In cooperation with those nonfederal partners, FS may develop a water source management plan to describe proposed watershed protection and restoration projects. As part of those projects, FS shall carry out forest management activities to protect a municipal water supply and/or restore forest health from insect infestations and disease. The law authorizes FS to conduct a single environmental analysis pursuant to NEPA for the development or finalization of the water source management plan or for each project proposed pursuant to a plan. The law authorizes FS to accept and use cash, in-kind donations, services, and other forms of investment and assistance from partners—directly or through the National Forest Foundation—to implement the water source management plan; the law also specifies that contributions must be in amounts equal to the federal funding, and establishes a Water Source Protection Fund to match the partner donations. Congress authorized $10 million in annual appropriations to the Fund through FY2023. Both the FY2018 omnibus and the 2018 farm bill enacted various other provisions related to federal forest land, such as designating NFS lands as part of the National Wilderness Preservation System. Other miscellaneous provisions are related to land acquisition, exchange and disposal; the issuance of special use authorizations for the use or occupancy of federal lands; Secure Rural Schools Act payments, activities, and Resource Advisory Committees; and forest management on tribal lands. Section 8626 of the 2018 farm bill designated one new wilderness area and expanded five existing areas in NFS lands Tennessee. Specifically, the Upper Bald River Wilderness was established on the Cherokee National Forest, covering approximately 9,038 acres. Just over 10,500 acres were designated as additions to existing wilderness areas on the Cherokee National Forest: Big Frog (348 acres), Big Laurel Branch (4,446 acres), Joyce Kilmer-Slickrock Wilderness (1,836 acres), Little Frog Mountain (966 acres across two additions), and Sampson Mountain (2,922 acres). The law specified that the areas are to be managed in accordance with the Wilderness Act. This means that most commercial activities, motorized access and use, and other activities are prohibited within the designated areas, subject to valid existing rights. Both the FY2018 omnibus and 2018 farm bill enacted provisions that would change how FS and/or BLM acquire, exchange, or dispose of federal land. These provisions established, reauthorized, or modified specific authorities. For example, Section 8623 of the 2018 farm bill established a new program authorizing the Secretary of Agriculture to lease up to 10 isolated and undeveloped parcels for administrative sites, at market value through cash or in-kind consideration. Section 302 of the FY2018 omnibus reauthorized an expired program to sell or exchange BLM lands identified for disposal and use the proceeds to acquire lands for administrative purposes (Federal Land Transaction Facilitation Act). The 2018 farm bill also reauthorized an expired program: the Forest Service Facility Realignment and Enhancement program, which authorized the conveyance of administrative sites or the conveyance of up to 10 undeveloped parcels of up to 40 acres of NFS land (§8504). The program expired in FY2016, but was reauthorized for FY2019 through FY2023. Section 8621 of the 2018 farm bill modified an existing FS program (Small Tracts Act) by expanding the eligibility requirements, among other provisions. In addition, the 2018 farm bill contained several other provisions authorizing exchanges or sales for specifically identified parcels and sometimes to specifically identified entities (§§8625, 8627, 8628, 8631, and 8707). (See the tables in Appendix for more specific information). The Secretary of the Interior and the Secretary of Agriculture are authorized to issue rights-of-way (ROW) for the use and occupancy of BLM and NFS lands, respectively (these are sometimes referred to as special use authorizations for FS). The rights-of-way allow for the specific use of those federal lands for numerous purposes. Among other activities, these purposes also generally include issuing linear rights-of-way authorizing access \"over, upon, under, or through\" the specified lands for facilities and systems for : various types of water infrastructure ; infrastructure for the storage, transportation , or distribution of liquids , gases (with specified exceptions), and solid materials ; electricity generation, transmission, and distribution infrastructure ; communication systems infrastructure ; roads, trails, highways, canals, tunnels and other means of transportation in general; and other \"necessary\" systems and facilities which are in the public interest. FS and BLM charge cost-recovery fees for processing and monitoring applications as well as an annual land use rental fee. The processing and monitoring fees are generally based on the estimated number of hours it will take the agency to process the application (or renewal) and monitor the activity to ensure compliance with the authorization. There is a general rental fee schedule for linear ROWs, based on land value, and a separate rental fee schedule for communication uses, based on the type of communication use and population served. BLM and FS use the same schedule for the processing and monitoring fees and the same land use rental fee schedules for linear ROWs and communication sites. The 115 th Congress enacted provisions directing FS to update their process and fee schedule for issuing special use authorizations for communication sites, directed FS and BLM to issue new regulations for certain activities within electricity ROWs, and also established a similar pilot process for FS for many of the same activities within utility (defined as electricity, natural gas infrastructure, or related infrastructure) ROWs. In some cases, these provisions are related to concerns about wildfire ignitions within electricity transmission and distribution ROWs. For example, power line ignitions are associated with fires that burn across larger areas. This is in part due to weather conditions (e.g., wind) causing vegetation (e.g., tree limbs) to come into increasing contact with power lines. Some have asserted that confusing or burdensome administrative processes prevent ROW permit-holders from conducting necessary maintenance activities (e.g., vegetation management) to mitigate the risk of ignitions on the federal lands within their ROWs. In contrast, others have placed more of the responsibility on the permit holders. The 115 th Congress provisions are perceived by some as potentially improving the processes for ROW permit holders to obtain approvals and implement vegetation management projects on federal lands. Others may acknowledge that process improvements could facilitate improved land conditions but are concerned about the appropriate balance between expediting project implementation and maintaining accountability and adherence to the laws regarding federal lands. Some of the provisions specify the responsibilities for wildfire suppression costs for wildfires ignited within ROWs, costs associated with other damages, or place a cap on liability costs for ROW permit holders. Some are concerned with the breadth of these provisions and the potential implications for the federal government or others bearing a disproportionate share of the costs to suppress wildfires ignited within a ROW on federal lands. Others contend that the provisions limiting damages and liability will incentivize prompt agency action on maintenance requests from ROW permit holders and also reflect that utilities should not be responsible for the full costs of a wildfire—regardless of ignition point or cause—because past agency actions have contributed to the increased fuel levels surrounding ROWs. Further, others contend that limiting unexpected costs for the utilities would reduce the likelihood of passing on those costs to the ratepayers. Section 8705 of the 2018 farm bill directed the Secretary of Agriculture to issue regulations revising the process to issue special use authorizations for communications uses on NFS lands within one year of enactment, defined relevant terms, and identified specific requirements for the process. Among other provisions, the law specified that: the new process must be streamlined, uniform, and standardized across the NFS to the extent practicable; FS must consider and grant applications on a competitively neutral, technology neutral, and nondiscriminatory basis; and the lease terms must be for a minimum of 15 years. The law also specified that the regulations must establish a fee structure based on the cost of processing and monitoring applications and approvals, and established a new account in the Treasury for the FS to deposit and use those fees for specified activities related to managing communication sites, subject to appropriations. Such activities include preparing needs assessments or programmatic analyses relating to communications sites or use authorizations, developing management plans and training for management of communication sites, and obtaining or improving access to communication sites. Section 211 of the FY2018 omnibus amended FLPMA and established a new Section 512, titled Vegetation Management, Facility Inspection, and Operation and Maintenance on Federal Land Containing Electric Transmission and Distribution Facilities . The law directed FS and BLM to issue guidance for planning and implementing vegetation management, facility inspections, and operation and maintenance activities within electric transmission and distribution ROWs and identified specific requirements for those processes. The guidance must describe the process for FS and BLM to review, approve, and modify plans for vegetation management, facility inspections, and operation and maintenance activities submitted by eligible ROW permit holders (referred to as \"owners\"). The law specifies the components of the plans, authorizes owners to develop and submit those plans for approval by the appropriate Secretary and conduct activities within their ROW pursuant to an approved plan. The law also specifies circumstances when owners may conduct certain management activities without an approved plan or without the approval of FS or BLM (e.g., when trees are in imminent danger of touching a power line). FS and BLM are also directed to identify any applicable NEPA categorical exclusions for these activities. The law directed the Secretaries to propose regulations implementing the provisions within one year of enactment and to finalize the regulations within two years. Section 211 also encouraged FS and BLM to develop training programs for FS and DOI employees on vegetation management and the electrical transmission and distribution system. The FY2018 omnibus also specified ROW permit holder liabilities related to vegetation management activities in the ROW, including addressing the relationship between permit holder liability and the plan's approval status. For ten years after enactment, the law prohibits the applicable Secretary from imposing strict liability for damages or injury greater than $500,000 resulting from activities conducted by a ROW holder pursuant to a plan under certain conditions. Those conditions include the Secretary concerned unreasonably withholding or delaying plan approval or failing to adhere to an applicable schedule in an approved plan. Within four years of the enactment, FS and BLM must report the impacts of the liability clauses to Congress. Section 8630 of the 2018 farm bill established a pilot program, through FY2023, for utility ROW permit holders on NFS land, excluding national grasslands and land utilization projects and established specific requirements for the pilot program. The law defined utility ROWs to include electric transmission lines, natural gas infrastructure, or related infrastructure. Under the pilot program, participating permit holders may develop and implement vegetation management plans, subject to FS approval, for the NFS lands within their ROWs. Pursuant to those plans, pilot participants may also pay for and perform projects on specified NFS lands within and up to 75 feet from the ROW. Participants must adhere to FS and some state regulations regarding various fire prevention and vegetation removal activities when conducting projects on NFS lands. Participants are generally responsible for project costs, although FS may contribute funds at the discretion of the Secretary of Agriculture. Should a participant provide funds to the FS, the Secretary may retain those funds for implementing the pilot, subject to appropriations. The law directed FS to submit a program status report to Congress by December 31, 2020, and every two years afterwards. Section 8630 also specified the financial responsibility of pilot participants related to wildfire: participants must reimburse FS for the costs of wildfire suppression and damage to FS resources if the wildfire is caused by the operations of the pilot participant, under certain conditions. If the participant provides resources to suppress a wildfire caused by their operations in the ROW, the cost of those resources shall be credited toward the reimbursement costs, or if they exceed the maximum reimbursement costs, the FS must reimburse the pilot participant the excess. Section 8630 limits reimbursement costs to up to $500,000 in certain circumstances. Although similar, the electricity ROW provisions prescribed in the FY2018 omnibus for FS and BLM differ from those in the ROW pilot program on NFS lands. The FY2018 omnibus program is specific to electricity ROWs, while the FS pilot program established under the 2018 farm bill is applicable to electricity ROWs as well as natural gas and other related infrastructure. The 2018 farm bill pilot limits participant responsibilities to wildfire and vegetation management, but does not address liability, while the FY2018 omnibus caps liability costs for program participants. Counties containing NFS, O&C, and CBWR lands receive payments from the federal government based on the revenue generated from those lands in the prior year. SRS authorized an optional payment system to those counties as an alternative to the revenue-sharing payments. SRS payments were based on a formula that accounted for historic revenue payments, acreage of land, and the counties' per capita income. The SRS statute specified the payments to be allocated among three categories based on payment level: Title I FS payments were to be used for funding education and roads (BLM payments were to be used for any governmental purpose); Title II payments were retained by the applicable agency to be used for projects on the lands under jurisdiction and within the county; and Title III payments were to be used for specified county programs, including fire prevention, county planning, and emergency services (e.g., search and rescue operations and firefighting). Title II also established Resource Advisory Committees (RACs) to \"improve collaborative relationships and provide advice and recommendations\" to the agencies, and established minimum membership requirements. Specifically, the law specified that RACs members must be appointed by the applicable Secretary and must consist of a total of 15 members representing specific interests (this includes outdoor recreation interests, the timber industry, environmental organizations, and local elected officials, among others). The authorized payment level was set in statute at 95% of the previous year's payment level. The original authorization for SRS payments expired at the end of FY2006, but the payments were extended several times through FY2015. Since payments were disbursed after the end of the fiscal year, the last authorized payment was disbursed in FY2016. When SRS payments are not authorized, counties receive a revenue-sharing payment, which is typically much less than they would receive under SRS. After the last authorized SRS payments had been disbursed in FY2016, counties received a revenue-sharing payment in FY2017. The FY2018 omnibus reauthorized SRS payments for FY2017 and FY2018 (§§401, 402). This act authorized payments to be made in FY2018 and FY2019, respectively; however, the revenue-sharing payment for FY2017 had already been distributed at the time of enactment. The reauthorization set the FY2017 payment level at 95% of the level of the last authorized payment and specified that the payment should account for the revenue-sharing payments already disbursed. Thus, counties received a full SRS payment for FY2017 (payments made in FY2018), but the payments were essentially made in two installments. The reauthorization also changed some of the payment allocation requirements and expanded the uses for Title III funds (added law enforcement patrols, training, and equipment costs). The reauthorization expired at the end of FY2018, meaning that no additional payments are authorized after the FY2018 payments are distributed in FY2019. In addition, the 2018 farm bill enacted changes to the SRS statute, despite the law's expiration at the time of enactment. The 2018 farm bill established a process for the applicable Secretary to modify the RAC membership requirements, and established a pilot program, through FY2023, for the Secretary to designate a regional forester to appoint RAC members in Montana and Arizona (§8702). These changes appear to be in response to concerns that the requirements for RACs to consist of 15 members were prohibitive. The Tribal Forest Protection Act (TFPA) authorized the Secretary of Agriculture (for NFS lands) and the Secretary of the Interior (for BLM Lands) to enter into an agreement with federally recognized Indian tribes to implement specified forest or rangeland projects on Indian trust or restricted lands or on NFS and BLM lands adjacent to those tribal lands. The applicable NFS or BLM land should be in need of forest restoration activities or pose a fire, disease or other threat to tribal lands or communities, and include a \"feature or circumstance unique to that Indian Tribe.\" Under TFPA, the applicable Secretary is to evaluate a tribe's request on a \"best value basis\" and in consideration of a set of tribally related factors. The Indian Self-Determination and Education Assistance Act (ISDEAA) authorized federally recognized tribes to enter into self-determination contracts with the federal government to operate specified federal Indian programs, such as a Bureau of Indian Affairs school or an Indian Health Service hospital. In addition to extending the good neighbor authority to tribes (see the \" Good Neighbor Authority \" section), the 2018 farm bill authorized the Secretary concerned to enter into self-determination contracts, on a demonstration basis, with federally recognized tribes to perform administrative, management, and other functions of the TFPA (§8703). These contracts shall be in accordance with Section 403(b)(2) of the ISDEAA. The law specified that for such contracts on NFS land, the Secretary of Agriculture shall carry out all responsibilities delegated to the Secretary of the Interior. The law also requires the Secretary concerned to retain decisionmaking authority over decisions related to NEPA and TFPA. Congress may consider several issues related to the forestry provisions enacted by the 115 th Congress, including oversight of the agencies' implementation of the new laws. Congress may also be interested in the implication of these changes or how these provisions address concerns with federal forest management generally, and forest restoration specifically. For example, the Forest Service has identified around 52-58 million acres of NFS lands at high or very high fire risk or insect infestation and in need of restoration treatments. FS reports that they accomplish around 2-6 million acres of treatments annually. At that pace, it would take at least 9 but possibly up to 29 years to eliminate the backlog of treatment needs, and that does not account for maintaining already treated areas to the desired resource conditions. Some estimate that hazardous fuels are accumulating three times faster than the rate of treatment. To address these concerns, FS has proposed to increase the scale, scope, and implementation of forest management projects generally, and forest restoration treatments specifically. FS, and others, identify administrative process barriers as one of many factors impeding progress towards these restoration goals. More specifically, some identify agency decisionmaking processes, particularly related to implementation of the National Environmental Policy Act and opportunities for the public to challenge agency decisions administratively and judicially, as preventing the agencies from implementing projects at the pace and scale necessary to address forest health concerns. Others may point to FS-specific implementation issues related to NEPA as contributing to planning delays more than involvement from the public or administrative or judicial challenges. Other stakeholders identify other administrative barriers—such as inadequate program funding levels and training—as preventing the agency from implementing project planning requirements in a more efficient manner. Many of the provisions enacted by the 115 th Congress aim to improve agency efficiencies by expanding the applicability of procedures intended to expedite the planning and review process for projects, such as hazardous fuel reduction and forest restoration projects. For example, proponents of this approach contend that expanding the use of Healthy Forests Restoration Act authorities and allowing the agencies to plan more projects over larger areas under NEPA Categorical Exclusions would expedite project implementation and allow FS and BLM to achieve progress towards their restoration goals. Some, however, contend that changes made to the agency's decisionmaking processes—such as through the establishment of CEs—are changing the basic legal framework for federal forest management, and making it increasingly difficult for citizens to participate or challenge government decisions. In addition, some stakeholders contend that expanding the use of these authorities could result in environmental impacts that exacerbate forest health concerns. Many of these issues have been ongoing for decades. For example, concerns about deteriorating forest health conditions and high fuel levels were raised after wildfires in Yellowstone National Park in 1988. In 1994, the congressionally chartered National Commission on Wildfire Disasters recommended federal land management agencies invest more in reducing hazardous fuels in high-risk ecosystems, and observed that \"the question is no longer if policy-makers will face disastrous wildfires and their enormous costs, but when.\" A 1995 study recommended FS increase hazardous fuel treatments to up to 3 million acres per year by 2005. As another example, in 1999, GAO recommended FS develop a strategy to identify long-term options for reducing fuels to address forest health issues and mitigate wildfire risk. In 2006 OIG raised concerns with FS' hazardous fuels reduction program and recommended FS develop guidance and controls to identify, prioritize, implement, monitor, and report on hazardous fuels reduction projects and funding. A 2016 OIG report assessed FS' progress towards implementing the recommendations from that 2006 report and found continued issues with FS prioritizing, tracking, and reporting of hazardous fuels reduction projects. Concerns about FS project implementation also have been ongoing. For example, in 2001 Congress asked GAO to evaluate the extent administrative or judicial challenges impeded FS' implementation of fuel management projects. The report found that approximately 24% of the fuel reduction decisions signed in FY2001 and FY2002 were appealed. A similar GAO analysis found that 20% of the fuel management projects identified for implementation in FY2006 through FY2008 were challenged through appeals or objections. In addition, there have been several academic studies examining FS NEPA implementation. Collectively, these studies suggest that projects that are more complex—in terms of scale and scope—are more likely to be challenged, but other project characteristics (e.g., timber harvests) and factors related to staffing, documentation, and implementation of the public involvement requirements also affect the likelihood of project challenges. HFRA, passed in 2003, included provisions intended to expedite implementation of hazardous fuels reduction projects. Despite these provisions, the extent of NFS areas in need of treatment has continued to increase, and FS continues to look for ways to increase the pace of project implementation. To some, this implies that the HFRA approach to streamline agency decisionmaking has not been successful. To others, this implies that the HFRA approach needs to be more broadly applied, as it was in legislation enacted during the 115 th Congress. The following two tables provide side-by-side comparisons that briefly describe the forest-related provisions enacted by each law (the FY2018 omnibus and 2018 farm bill) to prior law, generally in the order in which they were included in the legislation, with a few exceptions for purposes of clarity. Provisions in each law that do not directly affect forest management are not included.", "summary": "The 115th Congress enacted several provisions affecting management of the National Forest System (NFS), administered by the Forest Service (in the Department of Agriculture), and the lands managed by the Bureau of Land Management (BLM, in the Department of the Interior). The provisions were enacted through two laws: the Stephen Sepp Wildfire Suppression Funding and Forest Management Activities Act, enacted as Division O of the Consolidated Appropriations Act, 2018 (P.L. 115-141, commonly referred to as the FY2018 omnibus), and the Agricultural Improvement Act of 2018 (P.L. 115-334, Title VIII, commonly referred to as the 2018 farm bill). Many of the provisions enacted by the 115th Congress affect Forest Service and BLM implementation of two laws: the National Environmental Policy Act (NEPA), and the Healthy Forests Restoration Act (HFRA). These laws, among others, authorize specific forest management activities and establish decisionmaking procedures for those activities. The enacted provisions are summarized and analyzed in the following categories: project planning and implementation, wildland fire management, forest management and restoration programs, and miscellaneous. Ongoing issues for Congress include oversight of (i) the agencies' implementation of the new laws, and (ii) the extent these provisions achieve their specified purposes, such as improving agency efficiencies, increasing the scale, scope, and implementation of forest restoration projects, and reducing hazardous fuel levels to mitigate against the risk of catastrophic wildfire. Both the FY2018 omnibus and 2018 farm bill included provisions that affect Forest Service and BLM decisionmaking processes by changing certain aspects of the NEPA process and the interagency consultation requirements established in Section 7 of the Endangered Species Act (ESA). For example, each law specified that certain forest management projects would be considered actions categorically excluded from the requirements of NEPA. Also, both laws expanded various authorities originally authorized in HFRA intended to expedite decisionmaking for specific projects. This included reauthorizing the use of procedures intended to expedite priority projects in designated NFS insect and disease treatment areas and amending the definition of an authorized fuel reduction project to include additional activities. The FY2018 omnibus and 2018 farm bill also contained provisions that affect federal wildland fire management. The FY2018 omnibus directed the Secretary of Agriculture to adapt the national-scale wildfire hazard potential map for use at the community level to inform risk management decisions. Both laws directed Forest Service and DOI to provide annual reports on a variety of wildfire-related metrics. The FY2018 omnibus also changed how Congress appropriates funding specifically for wildfire suppression purposes. The so-called wildfire funding fix authorized an adjustment to the discretionary spending limits for wildfire suppression operations for each year from FY2020 through FY2027. However, statutory spending limits are set to expire after FY2021, meaning that the adjustment is effectively in place for two years. Congress has established specific forest restoration programs for Forest Service and BLM, or has authorized forest restoration to be one of many activities or land management objectives for some programs. Forest restoration activities address concerns related to forest health, such as improving forest resistance and resilience to disturbance events (e.g., insect and disease infestation or uncharacteristically catastrophic wildfires). The 115th Congress established two new programs for Forest Service (water source protection and watershed condition framework) and amended three others: the Collaborative Forest Landscape Restoration Program (CFLRP, available only for Forest Service), stewardship contracting authority, and the good neighbor authority. Aspects of several of these programs allow Forest Service and BLM to partner with various stakeholders in different ways to perform specified forest management and restoration activities. Both the FY2018 omnibus and the 2018 farm bill enacted various other provisions related to land acquisition, exchange and disposal; the issuance of special use authorizations for the use or occupancy of federal lands; the payments, activities, and Resource Advisory Committees authorized by the Secure Rural Schools and Community Self-Determination Act; and forest management on tribal lands.", "document_type": "crs"}
{"report": "T he Agriculture appropriations bill—formally called the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act—funds all of the U.S. Department of Agriculture (USDA), excluding the U.S. Forest Service. Congress passed the FY2018 Consolidated Appropriations Act on March 23, 2018 ( P.L. 115-141 ). FY2019 began with seven appropriations bills, including USDA, unfinished. The House and Senate Appropriations Committees reported Agriculture appropriations bills for FY2019 ( H.R. 5961 , S. 2976 ), with the Senate having amended and passed its version as Division C of a four-bill minibus ( H.R. 6147 ). Congress and the President approved continuing resolutions to fund the affected federal agencies through December 21, 2018, at the FY2018 level ( P.L. 115-245 and P.L. 115-298 ). After December 21, 2018, a partial shutdown of the government, including many agencies within USDA, occurred. One of the few exceptions was the Natural Resources Conservation Service (NRCS), which was able to operate on mandatory and carryover funds during the majority of the shutdown. On January 25, 2019, an agreement was reached to continue funding for USDA and other appropriations that had lapsed through February 15, at the FY2018 level ( P.L. 116-5 ). The FY2019 Consolidated Appropriations Act was signed into law on February 15, 2019, funding USDA through the end of the fiscal year (Division B, P.L. 116-6 ). This report provides a brief overview of the conservation-related provisions in the FY2018 and FY2019 Agriculture appropriations acts. For a general analysis of the FY2018 appropriations for agriculture, see CRS Report R45128, Agriculture and Related Agencies: FY2018 Appropriations , and for FY2019, see CRS Report R45230, Agriculture and Related Agencies: FY2019 Appropriations . USDA administers a number of agricultural conservation programs that assist private landowners with natural resource concerns. These include working land programs, land retirement and easement programs, watershed programs, technical assistance, and other programs. The two lead agricultural conservation agencies within USDA are the Natural Resources Conservation Service (NRCS), which provides technical assistance and administers most conservation programs, and the Farm Service Agency (FSA), which administers the Conservation Reserve Program (CRP). Most conservation program funding is mandatory, obtained through the Commodity Credit Corporation (CCC) and authorized in omnibus farm bills (about $5.3 billion of CCC funds for conservation in FY2018). Other conservation programs—mostly technical assistance—are discretionary spending and are funded through annual appropriations (about $1 billion annually). For the first time since FY2002, the FY2018 Agriculture appropriations act did not include reductions to mandatory conservation programs. It did, however, include legislative changes that affect farm bill programs and watershed programs. Similarly, the FY2019 appropriations act did not include reductions to mandatory conservation programs; however, the enacted 2018 farm bill (Agriculture Improvement Act, P.L. 115-334 ) reauthorized and amended funding for many of the mandatory conservation programs. The FY2018 appropriations act included a slight increase from FY2017 levels for discretionary conservation programs. The FY2019 appropriations act included a decrease from FY2018 levels for discretionary conservation programs and redirected funding to the new Farm Production and Conservation Business Center (see Table 1 and Figure 1 ). NRCS administers all discretionary conservation programs. The largest program and the account that funds most NRCS activities is Conservation Operations (CO). The CO account primarily funds Conservation Technical Assistance (CTA), which provides conservation planning and implementation assistance through field staff placed in almost all counties within the United States and territories. Other components of CO include the Soil Surveys, Snow Survey and Water Supply Forecasting, and Plant Materials Centers. The enacted FY2018 appropriation provided $874 million—more than the FY2017 enacted amount ($864 million). The enacted FY2019 appropriation decreases funding for CO below FY2018 levels to $819 million and redirects funding to the new Farm Production and Conservation Business Center. The Trump Administration's FY2019 budget request ($699 million) was less than the amount later enacted for FY2019 due to a proposed consolidation of mandatory and discretionary accounts to pay for conservation technical assistance. The proposal to consolidate funding has been made by USDA through multiple Administrations but never adopted by Congress (see text box below). The FY2018 and FY2019 Agriculture appropriations acts direct CO funding for a number of conservation programs ( Table 1 ). Report language further directs funding to selected activities ( Table 3 ). The enacted FY2018 and FY2019 appropriations also contain funding for watershed activities, including $150 million annually for Watershed and Flood Prevention Operations (WFPO)—a program that assists state and local organizations with planning and installing measures to prevent erosion, sedimentation, and flood damage. This is the same level as appropriated in FY2017, which was the first appropriated funding for the WFPO program since FY2010. Beginning in FY2006, Administrations began requesting no funding for WFPO, citing program inflexibility and a backlog of congressionally earmarked projects. The Trump Administration's FY2018 and FY2019 requests proposed no funding for the program. Since FY2014, Congress has directed a portion of CO funds to select WFPO activities. Similar directive language ($5.6 million; see Table 1 ) is in the FY2018 and FY2019 appropriations, in addition to the $150 million made available each fiscal year for the program as a whole. The enacted FY2018 and FY2019 appropriations include $10 million annually for the Watershed Rehabilitation program––a reduction from the FY2017 level of $12 million. The Watershed Rehabilitation program repairs aging dams previously built by USDA under WFPO. The Administration proposed no funding in FY2018 and FY2019. The 2018 farm bill made minor amendments to WFPO, the most substantial being the authorization of permanent mandatory funding of $50 million annually. The new mandatory funding will be in addition to discretionary funding provided through annual appropriations and could be used for either WFPO or Watershed Rehabilitation activities. Mandatory conservation programs are generally authorized in omnibus farm bills and receive funding from the CCC and thus do not require an annual appropriation. In the past, Congress has used annual agriculture appropriations acts to reduce mandatory conservation programs through changes in mandatory program spending (CHIMPS) every year from FY2003 to FY2017. The FY2018 Consolidated Appropriations Act marked the first appropriation since FY2002 that did not include CHIMPS to conservation programs. This allowed all mandatory conservation programs to utilize their full authorized level of funding in FY2018, minus sequestration. Additionally, prior-year CHIMPS concerning programs that are authorized to remain available until expended (e.g., Watershed Rehabilitation) became available for obligation in FY2018. Nearly all mandatory conservation programs authorized in the 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ) expired on September 30, 2018. One exception is the Environmental Quality Incentives Program (EQIP), whose authority was extended to FY2019 in the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123 ). The 2018 farm bill reauthorized mandatory funding for all conservation programs, including for FY2019. Similar to FY2018, the FY2019 appropriations bill, which was enacted after enactment of the 2018 farm bill, does not include reductions to mandatory conservation programs. On May 11, 2017, USDA announced the creation of the Farm Production and Conservation (FPAC) mission area as part of a larger Departmental reorganization. FPAC includes NRCS, FSA, Risk Management Agency (RMA), and a new FPAC Business Center. The FPAC Business Center is responsible for financial management, budgeting, human resources, information technology, acquisitions/procurement, strategic planning, and other customer-oriented operations of the three domestic agriculture agencies (NRCS, FSA, and RMA). The FY2018 Administration budget request was released two weeks following the announcement for FPAC (May 23, 2017), but did not include funding for the FPAC Business Center. The FY2019 Administration budget request did include funding for the Business Center ($196.4 million), as well as a request to transfer funding from other accounts ($76.3 million) to the Business Center. Final enactment of the FY2018 appropriation occurred on March 23, 2018, after the release of the Administration's FY2019 budget request, which occurred on February 12, 2018. The FY2018 appropriation included about $1 million for the Business Center. The FY2018 explanatory statement required USDA to submit an implementation and spending plan to Congress for the new FPAC mission area that would detail requested transfers. USDA submitted the FPAC spending plan on August 28, 2018. The FY2019 appropriation had already been marked up in the House and Senate, and did not include the full level of requested funding for the Business Center. The enacted FY2019 appropriations (February 15, 2019), however, did increase funding for the Business Center. The enacted level is more than the Administration's request and directs a transfer of funds from other accounts into the Business Center, including mandatory conservation programs and farm loan accounts. Funding for NRCS and FSA is reduced accordingly and FPAC Business Center funding shifts are dictated in the FY2019 explanatory statement (see Table 2 ). It is unclear what level of savings is projected from the centralization of agency functions and what this savings will ultimately be redirected toward. Overall, the total changes in funding for the new Business Center do not necessarily reflect a decline in NRCS resources. Total CO (discretionary spending) was reduced between FY2018 and FY2019 by $54.6 million, whereas NRCS' contribution to the FPAC Business Center appropriation for FY2019 is $70.8 million, thus indicating an effective increase of $16.2 million to NRCS in FY2019. This could result in NRCS effectively receiving less in total funding depending whether the amount shifted would have been used for administrative or technical assistance purposes had the Business Center not been in existence. The mandatory conservation program funding ($60.2 million) that is authorized to be transferred to the FPAC Business Center comes from programs authorized to receive CCC funding under 16 U.S.C. 3841(a). Three programs within the conservation title of the 2018 farm bill are included in this transfer—EQIP, CSP, and the Agricultural Conservation Easement Program (ACEP). Other mandatory conservation programs funded through the cited CCC authority (16 U.S.C. 3841(a)) are not included in the transfer, including CRP, which is administered by FSA. The transfer in the FY2019 appropriations act redirects mandatory funding that was authorized in the farm bill. It is unclear what, if any, effect the transfer could have on the implementation of EQIP, CSP, and ACEP, and the financial assistance offered by those programs. In FY2019, a 34-day funding gap lasted from December 22, 2018, through January 25, 2019. It affected agencies funded by 7 of the 12 appropriations bills, including Agriculture appropriations. In general, a shutdown results in the furlough of many personnel and curtailment of affected agency activities and services. Exceptions may allow certain activities to continue, such as for law enforcement, protection of human life or property, and activities funded by other means such as carryover funds or user fees. Agencies make their own determinations about activities and personnel that are \"excepted\" from furlough and publish their intentions in \"contingency plans\" that are supervised by the Office of Management and Budget (OMB). USDA published contingency plans for each agency, including NRCS. USDA initially estimated on December 23, 2018, that 61% of its employees were excepted from furlough in the agencies that are funded by Agriculture appropriations (all of USDA except the Forest Service), which amounts to 37,860 staff being excepted out of 62,288. The number of excepted and furloughed personnel varied by agency. As previously discussed, NRCS funds technical assistance and related agency staff through both mandatory and discretionary accounts. As such, NRCS was initially able to claim as excepted 100% of its 9,342 staff using mandatory conservation program funding authorized through the farm bill (and therefore not affected by the lapse in discretionary appropriations), and discretionary carryover funding from prior fiscal years. As the shutdown continued, however, NRCS announced its intention to furlough some employees beginning on February 3, 2019, to conserve carryover balances and focus excepted staff on mandatory farm bill conservation program implementation. This plan was not implemented because the shutdown ended on January 25, 2019. Generally, Congress employs two separate types of legislative measures—authorizations and appropriations. Authorization acts establish, continue, or modify agencies or programs. Appropriations acts generally provide discretionary funding for authorized agencies and programs. While this practice is infrequent and subject to various procedural rules and limitations, the Agriculture appropriations bill may serve as a vehicle for amendments to authorized programs that permanently alter or create programs. These amendments generally have the force of law by amending the U.S. Code or by creating a permanent authorization. This is different from policy-related provisions (discussed in the \" Policy-Related Provisions \" section), which generally direct how the executive branch should carry out the appropriations and whose effect is typically limited to the current fiscal year. In some cases, the 2018 farm bill further amended the conservation programs that were amended in the FY2018 appropriations act. Where relevant, these amendments are noted; however, the focus is on amendments made in appropriations acts. The FY2018 agriculture appropriations act included statutory amendments to the WFPO program. Section 761 of P.L. 115-141 amended the Watershed Protection and Flood Prevention Act of 1954 (16 U.S.C. 1001 et seq. ) by increasing the size thresholds required for congressional approval under the program. Under the amended language, approval by the Senate and House Agriculture Committees is required for individual projects that need an estimated federal contribution of more than $25 million for construction, an increase from the previous $5 million threshold. This amendment originated in the FY2018 Senate-reported bill ( S. 1603 , §754). The FY2018 appropriation also amended Title XII of the Food Security Act of 1985 ( P.L. 99-198 ; often referred to as the \"1985 farm bill\") by adding a new section that exempts farm bill conservation programs from certain reporting requirements. Federal grant recipients must comply with government-wide financial management policies and reporting requirements when receiving federal grants and agreements. Many of these reporting requirements are not new for USDA programs and have been in place for a number of years. Interested stakeholders raised concerns when a number of the farm bill conservation programs were designated as grants (rather than direct payments) under a 2010 regulation. This designation triggered the use of a Data Universal Numbering System (DUNS) number and System for Award Management (SAM) registration. The DUNS number requirement and SAM registration did not affect individuals or entities that apply for conservation programs using a Social Security number. Rather, it applied only to those applying as an entity with a Taxpayer Identification Number or Employee Identification Number. The amendment exempts producers and landowners who participate in farm bill conservation programs from the DUNS number and SAM registration requirement. The amendment originated in the FY2018 Senate-reported bill ( S. 1603 , §740). The 2018 farm bill moved and expanded this exemption to include conservation, indemnity or disease control, or commodity programs administered by NRCS, FSA, and the Animal and Plant Health Inspection Service. In addition to setting budgetary amounts, the Agriculture appropriations bill may also include policy-related provisions that direct how the executive branch should carry out an appropriation. These provisions may have the force of law if they are included in the text of an appropriations act, but their effect is generally limited to the current fiscal year (see Table 3 ). Unlike the aforementioned authorization amendments that may be included in appropriations acts, policy-related provisions generally do not amend the U.S. Code or have long-standing effects. For example, the WFPO program has historically been called the \"small watershed program,\" because no project may exceed 250,000 acres, and no structure may exceed more than 12,500 acre-feet of floodwater detention capacity or 25,000 acre-feet of total capacity. The FY2018 and FY2019 enacted appropriations also include a policy provision that waives the 250,000-acre project limit when the project's primary purpose is something other than flood prevention. This provision does not amend the WFPO authorization and therefore is effective only for the funds provided during the appropriation year. Table 3 compares some of the policy provisions that have been identified in the Farm Production and Conservation Programs (Title II) and General Provisions (Title VII) titles of the FY2018 and FY2019 Agriculture appropriations bills related to conservation. Many of these provisions were also included in past years' appropriations laws. The explanatory statement that accompanies the final appropriation—and the House and Senate report language that accompanies the committee-reported bills—may also provide policy instructions. These documents do not have the force of law but often explain congressional intent, which the agencies are expected to follow (see Table 4 ). The committee reports and explanatory statement may need to be read together to capture all of the congressional intent for a given fiscal year. Table 4 compares some of the policy provisions that have been identified in the FY2018 and FY2019 Agriculture appropriations reported language related to conservation. The FY2018 enacted report language column includes references to the House (H) and Senate (S) report language, as well as the enacted (E) explanatory statement. The FY2019 enacted report language column includes references to the House (H) and Senate (S) report language, and the enacted (E) conference report. The inclusion of all three reports better captures congressional intent for each fiscal year. Many of these provisions have been included in past years' appropriations laws. Some provisions in report language and bill text address conservation programs not authorized or funded within the annual appropriation (i.e., mandatory spending for farm-bill-authorized programs). ", "summary": "The Agriculture appropriations bill funds the U.S. Department of Agriculture (USDA) except for the Forest Service. The FY2018 Consolidated Appropriations Act (P.L. 115-141, Division A), and the FY2019 Consolidated Appropriations Act (P.L. 116-6, Division B) include funding for conservation programs and activities at USDA. Congress passed the FY2018 Consolidated Appropriations Act on March 23, 2018. FY2019 began with seven appropriations bills, including USDA, unfinished. The House and Senate Appropriations Committees reported Agriculture appropriations bills for FY2019 (H.R. 5961, S. 2976), with the Senate having amended and passed its version as Division C of a four-bill minibus (H.R. 6147). Congress and the President approved continuing resolutions to fund the affected federal agencies through December 21, 2018, at the FY2018 level (P.L. 115-245). After December 21, 2018, a partial shutdown of the government, including many agencies within USDA, occurred. One of the few exceptions was the Natural Resources Conservation Service (NRCS), which was able to operate on mandatory and carryover funds during the majority of the shutdown. On January 25, 2019, an agreement was reached to continue funding for USDA and other appropriations that had lapsed through February 15, at the FY2018 level (P.L. 116-5). The FY2019 Consolidated Appropriations Act was signed into law on February 15, 2019, funding USDA through the end of the fiscal year (Division B, P.L. 116-6). Agricultural conservation programs include both mandatory and discretionary spending. Most conservation program funding is mandatory and is authorized in omnibus farm bills. Other conservation programs—mostly technical assistance—are discretionary and are funded through annual appropriations. The largest discretionary program is the Conservation Operations (CO) account, which funds conservation planning and implementation assistance on private agricultural lands across the country. The enacted FY2018 appropriation provided $874 million for CO, an increase from the FY2017 enacted amount ($864 million). The enacted FY2019 appropriation decreases funding for CO below FY2018 levels to $819 million and redirects funding to the new Farm Production and Conservation Business Center. Other discretionary spending is primarily for watershed programs. The largest—Watershed and Flood Prevention Operations (WFPO)—was funded at $150 million annually in FY2018 and FY2019. Most mandatory conservation programs are authorized in omnibus farm bills and do not require an annual appropriation. However, Congress has reduced mandatory conservation programs through changes in mandatory program spending (CHIMPS) in the annual agricultural appropriations law every year since FY2003. The enacted FY2018 omnibus marks the first appropriation since FY2002 that did not include CHIMPS to mandatory conservation programs. The enacted FY2019 appropriation also does not include reductions to mandatory conservation programs, as most programs' authorizations expired on September 30, 2018, making these programs ineligible for reduction. The 2018 farm bill (Agricultural Improvement Act of 2018, P.L. 115-334) reauthorized and amended funding for many of the mandatory conservation programs. While this is infrequent, the Agriculture appropriations bill may also serve as a vehicle for amendments to authorized programs that permanently alter or create programs. The FY2018 Agriculture appropriations act included two such amendments—one to WFPO and one to farm bill conservation program reporting requirements. The WFPO amendment increased the size threshold required for congressional approval. Under the amended language, the Senate and House Agriculture Committees must approve WFPO projects that include an estimated federal contribution of more than $25 million for construction, an increase from the previous $5 million threshold. Additionally, the FY2018 appropriations act exempted farm bill conservation programs from select federal reporting requirements, including obtaining a Data Universal Numbering System (DUNS) number and System for Award Management (SAM) registration. Agriculture appropriations bills may also include policy-related provisions that direct how the executive branch should carry out the appropriation. The FY2018 and FY2019 appropriations acts both include policy provisions for conservation programs that range from reports to Congress to suggested natural resource priorities.", "document_type": "crs"}
{"report": "Congressional rules establish a general division of responsibility under which questions of policy are kept separate from questions of funding. Broadly, the term authorization is used to describe legislation that establishes, continues, or modifies the organization or activities of a federal entity or program. By itself, such legislation does not provide funding for such purposes. Instead, the authority to obligate payments from the Treasury is left to separate appropriations measures. This distinction between appropriations and general legislation as two separate classes of measures, and their consideration in separate legislative vehicles, is a construct of congressional rules and practices. It has been developed and formalized by the House and Senate pursuant to the constitutional authority for each chamber to \"determine the Rules of its Proceedings.\" This power permits each chamber of Congress to enforce, modify, waive, repeal, or ignore its rules as it sees fit. Because the two chambers exercise this rulemaking authority independently, they have developed differing (albeit generally similar) rules and practices. This report addresses solely developments in the House. According to Hinds' Precedents , the origin of a formal rule mandating the separation of general legislation from appropriations can be traced to 1835, when the House debated the increasing problem of delay in enacting appropriations due to the inclusion of \"debatable matters of another character, new laws which created long debates in both Houses\" and suggested that the Committee on Ways and Means should \"strip the appropriation bills of every thing but were legitimate matters of appropriation.\" In the following Congress (25 th Congress, 1837-1839), language was added to House rules that stated: No appropriation shall be reported in such general appropriation bills, or be in order as an amendment thereto, for any expenditure not previously authorized by law. This rule was applied broadly on occasion to exclude legislative provisions authorizing new expenditures as well, such as a case in 1838 when it was used to exclude an amendment that included a provision for refurnishing the White House. Gradually, the rule \"became construed through a long line of decisions to admit amendments increasing salaries but as excluding amendments providing for decreases.\" As a consequence of this, in 1876, the language was expanded (at the suggestion of Representative William Holman of Indiana) to further state: Nor shall any provision in any such bill or amendment thereto, changing existing law, be in order except such as, being germane to the subject matter of the bill, shall retrench expenditures. As described by one scholar, this provision effectively granted the Appropriations Committee authority to include virtually any legislative provision in an appropriations measure so long as it reduced the number and salary of federal officials, the compensation of any person paid out of the Treasury, or the amounts of money covered in an appropriation bill. According to one contemporary account, a broad initial construction of the rule by the House resulted in \"putting a great mass of general legislation upon the appropriation bills.\" The rule was retained in this form until 1880 (46 th Congress), when it was modified to define retrenchments as the reduction of \"the number and salary of officers of the United States, the reduction of compensation of any person paid out of the Treasury of the United States, or the reduction of the amounts of money covered by the bill.\" That form of the rule remained a part of House rules until the 49 th Congress eliminated it in 1885. It was reinserted in the rules for the 52 nd and 53 rd Congresses (1891-1895) but was again dropped for the 54 th through 61 st Congresses (1895-1911) before being readopted in the 62 nd Congress. Although the Holman rule has remained a part of House rules since that time, its language was amended at the start of the 98 th Congress (1983-1984). At that time, it was restructured to narrow the exception to the general prohibition against legislation to allow only retrenchments reducing amounts of money covered by the bill. In addition, the House rules for the 98 th Congress changed when retrenchment amendments could be offered. Amendments that only alter the items or amounts in an appropriation bill are generally in order when the measure is read for amendment and must be offered as the relevant paragraph or section of the bill is read. The new version of the rule provided, however, that germane amendments to retrench expenditures (as well as limitation amendments) would be in order only after the reading of a general appropriation bill and if a preferential motion that the Committee of the Whole rise and report (essentially ending consideration of the bill) were rejected. Further stylistic changes were made when the House recodified its rules in the 106 th Congress (1999-2000) to make explicit that retrenchment amendments are in order if the motion to rise and report is not offered—as well as if the motion is rejected. It also clarified that the effect of a point of order against legislation in an appropriations bill (and, by extension, the application of the Holman rule exception) is surgical so that it lies against an offending provision in the text and not against consideration of the entire bill. The Holman rule currently states the following: A provision changing existing law may not be reported in a general appropriation bill, including a provision making the availability of funds contingent on the receipt or possession of information not required by existing law for the period of the appropriation, except germane provisions that retrench expenditures by the reduction of amounts of money covered by the bill [emphasis added]. The Holman rule, thus, does not circumscribe Congress's lawmaking authority but rather provides a limited exception to the general prohibition in House rules against legislation in appropriation measures. For the 115 th Congress, the House included a separate order as Section 3(a) of H.Res. 5 , adopting the rules of the House, that provides the following: During the first session of the One Hundred Fifteenth Congress, any reference in clause 2 of rule XXI to a provision or amendment that retrenches expenditures by a reduction of amounts of money covered by the bill shall be construed as applying to any provision or amendment (offered after the bill has been read for amendment) that retrenches expenditures by— (1) the reduction of amounts of money in the bill; (2) the reduction of the number and salary of the officers of the United States; or (3) the reduction of the compensation of any person paid out of the Treasury of the United States. As stated in a section-by section summary included in the Congressional Record by Representative Pete Sessions, the chairman of the House Rules Committee, the purpose of this provision is \"to see if the reinstatement of the Holman rule will provide Members with additional tools to reduce spending during consideration of the regular general appropriation bill.\" The applicability of this separate order was extended under Section 5 of H.Res. 787 (115 th Congress) which provided that \"Section 3(a) of House Resolution 5 is amended by striking 'the first session of.'\" This separate order was not adopted for the 116 th Congress, so the application of the rule reverts to being guided by prior precedents rather than this language. Since the period immediately after the initial adoption of the rule in the 19 th century, the House has interpreted it through precedents that have tended to incrementally narrow its application. For example, early precedents established that while it was not always necessary that a retrenchment specify the amount of a reduction of expenditures, it must appear as a necessary result of the legislation to be in order and that it is not sufficient that such reduction would probably (or would in the opinion of the chair) result therefrom. For example, legislation that would simply confer discretionary authority to terminate employment of federal employees is not in order under the Holman exception because any resulting savings would be speculative. The reduction also may not be contingent on an event. Furthermore, the rule is not applicable to funds other than those appropriated in the pending general appropriations bill. The Holman rule then is intended to apply only when an obvious reduction of funds in a general appropriations bill is achieved by the provision in question, such as the cessation of specific government activities, or through a specific reduction of total appropriations in the bill. In addition, the exception does not apply to limitations (on the grounds that such language is not legislative) or legislative language unaccompanied by a reduction of funds in the bill. Legislation that is too broad has also typically not been allowed under the Holman rule exception. The House has held, for example, that a provision that stated no part of an appropriation could be expended for a specific, designated purpose qualified as a retrenchment. However, a proposal that effectively repealed the law under which appropriations for that purpose were authorized was held not to come within the exception. In another case, the House held that even when a provision does reduce expenditures, it may not be accompanied by additional legislative provisions not directly contributing to the reduction. The separate order for the 115 th Congress effectively reinstated language that had been stricken from the rule in 1983. While the full scope of amendments might be in order as a consequence of this language, it is possible to analyze its potential impact based on past precedents and the limited experience of the 115 th Congress. The additional language opened the door to the consideration of retrenchments resulting from a reduction of the number and salary of the officers of the United States or the reduction of the compensation of any person paid out of the Treasury of the United States. There are precedents regarding provisions allowed under the older, pre-1983 form of the rule that may be illustrative for understanding what might be in order. For example, a proposal that pay for a class of employees be limited to a smaller number of employees than authorized by law was allowed, as were proposals that would reduce the number of officers. The Holman rule also allowed proposals that would consolidate or eliminate offices. On at least one occasion, the Holman rule was the basis for allowing a proposal to replace civilian employees with lower paid U.S. Army enlisted personnel. In another case, the rule allowed for an amendment that capped the salaries of certain employees. In the 115 th Congress, one amendment was considered in order based on a plain reading of the text of the separate order to allow for \"the reduction of the compensation of any person paid out of the Treasury of the United States.\" Although the amendment failed of passage, it would have provided that: The salary of Mark Gabriel, the Administrator of the Western Area Power Administration, shall be reduced to $1. As cited above, however, neither the rule nor the separate order allows for retrenchments that would be applicable to funds other than those appropriated in the pending general appropriations bill. In addition, the application of the broader exceptions in the separate order were still subject to the general requirement for germaneness. The Holman rule is not intended to open the door for legislative provisions that would expand the scope of the bill. As a consequence, even with the additional scope provided by the language of the separate order, it would likely not be in order to include broad legislative provisions in, or amendments to, a specific appropriation bill that would apply to the salary or number of federal employees funded through appropriations in other measures. Furthermore, House precedent establishes that simply providing for a reduction of the number and salaries of officers in a paragraph when it is complicated by other elements does not necessarily bring a proposition within the exception. The Holman rule was also cited as the basis for allowing the consideration of one additional amendment during the 115 th Congress. That amendment also failed to pass, but it would have abolished the Budget Analysis Division of the Congressional Budget Office, comprising 89 employees with annual salaries aggregating $15 million, transferring responsibility for any duties imposed by law and regulation to the Office of the Director of the Congressional Budget Office. When discussing the application of rules and precedents, it is important to note that the House Parliamentarian is the sole definitive authority on questions relating to the chamber's precedents and procedures and should be consulted if a formal opinion on any specific parliamentary question is desired.", "summary": "Although congressional rules establish a general division of responsibility under which questions of policy are kept separate from questions of funding, House rules provide for exceptions in certain circumstances. One such circumstance allows for the inclusion of legislative language in general appropriations bills or amendments thereto for \"germane provisions that retrench expenditures by the reduction of amounts of money covered by the bill.\" This exception appears in clause 2(b) of House Rule XXI and is known as the Holman rule, after Representative William Holman of Indiana, who first proposed the exception in 1876. Since the period immediately after its initial adoption, the House has interpreted the Holman rule through precedents that have tended to incrementally narrow its application. Under current precedents, for a legislative provision or amendment to be in order, the legislative language in question must be both germane to other provisions in the measure and must produce a clear reduction of appropriations in that bill. In addition, the House adopted a separate order during the 115th Congress that provided for retrenchments of expenditures by a reduction of amounts of money covered by the bill to be construed as applying to: any provision or amendment that retrenches expenditures by— (1) the reduction of amounts of money in the bill; (2) the reduction of the number and salary of the officers of the United States; or (3) the reduction of the compensation of any person paid out of the Treasury of the United States. This separate order was not readopted for the 116th Congress. This report provides a history of this provision in House rules and an analysis of precedents that are illustrative of its possible application.", "document_type": "crs"}
{"report": "\"Too big to fail\" (TBTF) is the concept that a financial firm's disorderly failure would cause widespread disruptions in financial markets and result in devastating economic and societal outcomes that the government would feel compelled to prevent, perhaps by providing direct support to the firm . Such firms are a source of systemic risk —the potential for widespread disruption to the financial system, as occurred in 2008 when the securities firm Lehman Brothers failed. Although TBTF has been a perennial policy issue, it was highlighted by the near-collapse of several large financial firms in 2008. Some of the large firms were nonbank financial firms, but a few were depository institutions. To avert the imminent failures of Wachovia and Washington Mutual, the Federal Deposit Insurance Corporation (FDIC) arranged for them to be acquired by other banks without government financial assistance. Citigroup and Bank of America were offered additional preferred shares through the Troubled Asset Relief Program (TARP) and government guarantees on selected assets they owned. In many of these cases, policymakers justified government intervention on the grounds that the firms were \"systemically important\" (popularly understood to be synonymous with too big to fail). Some firms were rescued on those grounds once the crisis struck, although the government had no explicit policy to rescue TBTF firms beforehand. In response to the crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter, the Dodd-Frank Act; P.L. 111-203 ), a comprehensive financial regulatory reform, was enacted in 2010. Among its stated purposes are \"to promote the financial stability of the United States…, [and] to end 'too big to fail,' to protect the American taxpayer by ending bailouts.\" The Dodd-Frank Act took a multifaceted approach to addressing the TBTF problem. This report focuses on one pillar of that approach—the Federal Reserve's (Fed's) enhanced (heightened) prudential regulation for large banks and nonbank financial firms designated as systemically important by the Financial Stability Oversight Council (FSOC). For an overview of the TBTF issue and other policy approaches to mitigating it, see CRS Report R42150, Systemically Important or \"Too Big to Fail\" Financial Institutions , by Marc Labonte. The Dodd-Frank Act automatically subjected all bank holding companies and foreign banks with more than $50 billion in assets to enhanced prudential regulation (EPR). In addition, Basel III (a nonbinding international agreement that U.S. banking regulators implemented through rulemaking after the financial crisis) included several capital requirements that only apply to large banks. In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (referred to herein as P.L. 115-174 ) eliminated most EPR requirements for banks with assets between $50 billion and $100 billion. Banks that have been designated as Global-Systemically Important Banks (G-SIBs) by the Financial Stability Board (an international, intergovernmental forum) or have more than $250 billion in assets automatically remain subject to all EPR requirements, as modified. P.L. 115-174 gives the Fed discretion to apply most individual EPR provisions to banks with between $100 billion and $250 billion in assets on a case-by-case basis only if it would promote financial stability or the institution's safety and soundness. This report begins with a description of who is subject to enhanced prudential regulation and what requirements make up EPR. It then discusses several rules proposed by the Fed that would reduce EPR requirements for some large banks; some in response to P.L. 115-174 and some before it was enacted. Under P.L. 115-174 , the application of EPR remains mainly based on asset size and charter type. Broadly speaking, only three types of financial charters allow financial institutions to accept insured deposits—banks, thrifts, and credit unions. Banks operating in the United States can be U.S. or foreign based. Depository institutions are regulated much differently than other types of financial institutions. This section discusses whether or not EPR is applied to each of those types of institutions, as well as other types of financial firms. A detailed discussion of which provisions apply at which size threshold is discussed in the \" Higher, Tiered Thresholds \" section below. By statute, enhanced regulation applies to large U.S. bank holding companies (BHCs). A BHC is used any time a company owns multiple banks, but the BHC structure also allows for a large, complex financial firm with depository banks to operate multiple subsidiaries in different financial sectors. In general, the regime's requirements are applied to all parts of the BHC, not just its banking subsidiaries. Five large investment \"banks\" that operated in securities markets and did not have depository subsidiaries (and therefore were not BHCs) were among the largest, most interconnected U.S. financial firms and were at the center of events during the financial crisis. Two of the large investment banks, Goldman Sachs and Morgan Stanley, were granted BHC charters in 2008, whereas others failed (Lehman Brothers) or were acquired by BHCs (Merrill Lynch and Bear Stearns). As a result, all of the largest U.S. investment banks are now BHCs, subject to the enhanced prudential regime. If a bank does not have a BHC structure, it is not subject to enhanced regulation. The Congressional Research Service (CRS) found two banks that are currently over the previous $50 billion threshold and do not have a BHC structure. One of the two, Zions, converted its corporate structure from a BHC to a standalone bank in 2018, reportedly in order to no longer be subject to EPR. Under Title I of the Dodd-Frank Act's \"Hotel California\" provision, which was unchanged by P.L. 115-174 , BHCs with more than $50 billion in assets that participated in TARP cannot escape enhanced regulation by debanking (i.e., divesting of their depository business) unless permitted to by FSOC. FSOC found that \"there is not a significant risk that Zions could pose a threat to U.S. financial stability,\" and permitted it to withdraw from EPR. Similar to BHCs, thrift holding companies (THCs), also called savings and loan holding companies, have subsidiaries that accept deposits, make loans, and can also have nonbank subsidiaries. Although THCs are also regulated by the Fed, the EPR statute does not mention THCs. To date, enhanced prudential regulatory requirements have not been applied to large thrift (savings and loan) holding companies, with the exception of company-run stress tests. The Fed's 2018 proposed rule implementing P.L. 115-174 changes would subject THCs to EPR for the first time if they are not substantially engaged in insurance. Official regulatory data report four THCs with more than $100 billion in assets; three are substantially engaged in insurance, so only the one that is not (Charles Schwab) is subject to EPR. Two THCs have between $50 billion to $100 billion in assets, and are therefore not subject to EPR. The proposed rule that would implement P.L. 115-174 's changes to the $50 billion asset threshold creates four categories of banks based on their asset size and systemic importance, with increasingly stringent EPR requirements applied to each category as these characteristics increase. Table 1 shows which BHCs and THCs would currently be assigned to each category, as well as banks no longer subject to EPR because they hold between $50 billion and $100 billion in assets. A discussion of which requirements apply to each category is found in the \" Higher, Tiered Thresholds \" section below. Banks are assigned to categories based on size or other measures of complexity and interconnectedness, reflecting the relationship between those factors and systemic importance. The most stringent tier of regulation applies only to G-SIBs (Category I). Since 2011, the Financial Stability Board (FSB), an international forum that coordinates the work of national financial authorities and international standard-setting bodies, has annually designated G-SIBs based on the banks' cross-jurisdictional activity, size, interconnectedness, substitutability, and complexity. Currently, 30 banks are designated as G-SIBs worldwide, 8 of which are headquartered in the United States. Category II includes other banks with more than $700 billion in assets or more than $75 billion in cross-jurisdictional activity (and at least $100 billion in total assets). Currently, no bank meets the former test but one bank meets the latter test. Category III includes all other banks with $250 billion or more in assets or more than $75 billion in nonbank assets, weighted short-term funding, or off-balance sheet exposure (and at least $100 billion in total assets). Currently, all Category III banks meet the $250 billion asset test. Category IV includes banks with between $100 and $250 billion in assets who do not meet the criteria in one of the other categories. The enhanced prudential regime also applies to foreign banking organizations operating in the United States that meet the EPR asset threshold based on global assets. However, the implementing regulations, before P.L. 115-174 was enacted, have imposed most EPR requirements only on foreign banks with more than $50 billion in U.S. nonbranch, nonagency assets. Foreign banks with more than $50 billion in U.S. nonbranch, nonagency assets must form intermediate holding companies (IHCs) for their U.S. operations; those intermediate holding companies are essentially treated as equivalent to U.S. banks for purposes of applicability of the enhanced regime and bank regulation more generally. P.L. 115-174 raised the EPR threshold for global assets, but did not introduce a threshold for U.S. assets of foreign banks. It clarified that the act did not affect the Fed's rule on IHCs for foreign banks with more than $100 billion in global assets or limit the Fed's authority to subject those banks to EPR. Because the threshold for domestic banks has been raised, there is now a question of whether to raise the threshold for U.S. assets of foreign banks to maintain regulatory parity with U.S. banks. The Dodd-Frank Act states that enhanced regulation of foreign banks should \"give due regard to the principle of national treatment and equality of competitive opportunity; and take into account the extent to which the foreign financial company is subject on a consolidated basis to home country standards that are comparable\" to U.S. standards. The parity issue can be viewed from the perspective of U.S. assets or foreign assets. For example, should a foreign G-SIB with between $50 billion and $100 billion in U.S. assets have its U.S. operations regulated similarly to a U.S. bank with less than $100 billion in assets (i.e., not subject to EPR requirements) or to a U.S. G-SIB (i.e., subject to the most stringent EPR requirements)? Under proposed rules, the 23 foreign banks listed in Table 2 would currently be subject to some EPR requirements. Most foreign banks have less than $250 billion in U.S. assets, but the banks in Table 2 have more than $250 billion in global assets, and several are foreign G-SIBs. The proposed rules use $50 billion in U.S. assets as a minimum threshold for EPR, but are tiered so that most requirements only apply at higher thresholds. To determine which foreign banks are subject to which EPR requirements, the proposals would use total U.S. assets—in contrast to existing EPR rules, which exempt assets in U.S. branches or agencies. As a result, more foreign banks would become subject to some EPR requirements under the proposal. In addition, over 80 foreign banks (including those in Table 2 ) would be required to submit resolution plans (or living wills) under a proposed rule, because they had more than $250 billion in worldwide assets and operate in the United States, regardless of the extent of their U.S. assets. Hereinafter, the report will refer to BHCs, THCs, and foreign banking operations meeting the criteria described above as banks subject to EPR , unless otherwise noted. Numerous other large financial firms operating in the United States are not BHCs and are not automatically subject to enhanced regulation, such as credit unions, insurance companies, government-sponsored enterprises (GSEs), securities holding companies, and nonbank lenders. However, the FSOC may designate any nonbank financial firm as a systemically important financial institution (SIFI) if its failure or activities could pose a risk to financial stability. Designated SIFIs are then subject to the Fed's EPR regime, which can be tailored to consider their business models. Since inception, FSOC has designated three insurers (AIG, MetLife, and Prudential Financial) and one other financial firm (GE Capital) as SIFIs. MetLife's designation was subsequently invalidated by a court decision, which the Trump Administration declined to appeal, and the other three designations were later rescinded by FSOC. In some cases, these former SIFIs had substantially altered or shrank their operations between designation and de-designation. In addition to the former SIFIs, a CRS search of the proprietary database S&P Capital IQ identified multiple insurance companies and GSEs with more than $250 billion in assets. A Credit Union Times database includes only one credit union with more than $50 billion in assets (Navy Federal Credit Union) and zero credit unions with more than $100 billion in assets. Many investment companies have more than $250 billion in assets under management; these are not assets they own, but rather assets that they invest at their customers' behest. All BHCs are subject to long-standing prudential (safety and soundness) regulation conducted by the Fed. The novelty in the Dodd-Frank Act was to create a group of specific prudential requirements that apply only to large banks. Some of these requirements related to capital and liquidity overlap with parts of the Basel III international agreement. Under Title I of the Dodd-Frank Act, the Fed is responsible for administering EPR. It promulgates regulations implementing the regime (based on recommendations, if any, made by FSOC) and supervises firms subject to the regime. The Dodd-Frank regime is referred to as enhanced or heightened because it applies higher or more stringent standards to large banks than it applies to smaller banks. It is a prudential regime because the regulations are intended to contribute toward the safety and soundness of the banks subject to the regime. The cost to the Fed of administering the regime is financed through assessments on firms subject to the regime. Some EPR provisions are intended to reduce the likelihood that a bank will experience financial difficulties, while others are intended to help regulators cope with a failing bank. Several of these provisions directly address problems or regulatory shortcomings that arose during the financial crisis. As of the date of this report, no bank has experienced financial difficulties since EPR came into effect, but the economy has not experienced a downturn in which financial difficulties at banks become more likely. Thus, the risk mitigation provisions that have shown robustness in an expansion have not yet proven to be robust in a downturn, while the provisions intended to cope with a failing bank remain untested. Finally, some parts of enhanced regulation cannot be evaluated because, as noted below, they still have not been implemented through final rules. The following sections provide more detail on the requirements that Title I of the Dodd-Frank Act (which will be referred to hereinafter as Title 1) and Basel III place on banks subject to EPR. Subsequent to initial implementation, numerous regulatory changes over the years have tailored the individual provisions discussed in this section to reduce their regulatory burden; this report does not provide a comprehensive catalog of those subsequent changes. Stress tests and capital planning are two enhanced requirements that have been implemented together. Title I requires company-run stress tests for any (bank or nonbank) financial firm with more than $10 billion in assets, which P.L. 115-174 raised to more than $250 billion in assets (with Fed discretion to apply to financial firms with between $100 billion and $250 billion in assets), and Fed-run (or \"supervisory\") stress tests (called DFAST) for any BHC or nonbank SIFI with more than $50 billion in assets, which P.L. 115-174 raised to more than $100 billion in assets. P.L. 115-174 also reduced the number of stress test scenarios and the frequency of company-run stress tests from semi-annually to periodically. Stress test and capital planning requirements were implemented through final rules in 2012, effective beginning in 2013. Stress tests attempt to project the losses that banks would suffer under a hypothetical deterioration in economic and financial conditions to determine whether banks would remain solvent in a future crisis. Unlike general capital requirements that are based on current asset values, stress tests incorporate an adverse scenario that focuses on projected asset values based on specific areas of concern each year. For example in 2017, the adverse scenario is \"characterized by a severe global recession that is accompanied by a period of heightened stress in corporate loan markets and commercial real estate markets.\" In 2019, the Fed made changes to the stress test process to increase its transparency. Capital requirements are intended to ensure that a bank has enough capital backing its assets to absorb any unexpected losses on those assets without failing. Title I required enhanced capital requirements for banks with more than $50 billion in assets, which P.L. 115-174 raised to more than $250 billion in assets (with Fed discretion to apply to banks with between $100 billion and $250 billion in assets). Overall capital requirements were revamped through Basel III after the financial crisis (described below in the \" Basel III Capital Requirements \" section). Outside of Basel III, enhanced capital requirements were primarily implemented through capital planning requirements that are tied to stress test results. The final rule for capital planning was implemented in 2011. Under the Comprehensive Capital Analysis and Review (CCAR), banks must submit a capital plan to the Fed annually. The capital plan must include a projection of the expected uses and sources of capital, including planned debt or equity issuance and dividend payments. The plan must demonstrate that the bank will remain in compliance with capital requirements under the stress tests. The Fed evaluates the plan on quantitative (whether the bank would have insufficient capital under the stress tests) and qualitative grounds (the adequacy of bank's risk management policies and processes). If the Fed rejects the bank's capital plan, the bank will not be allowed to make any capital distributions, including dividend payments, until a revised capital plan is resubmitted and approved by the Fed. In 2017, the Fed removed qualitative requirements from the capital planning process for banks with less than $250 billion in assets that are not complex. Each year, the Fed has required some banks to revise their capital plans or objected to them on qualitative or quantitative grounds, or due to other weaknesses in their processes. Policymakers claimed that one reason they intervened to prevent large financial firms from failing during the financial crisis was because the opacity and complexity of these firms made it too difficult to wind them down quickly and safely through bankruptcy. Title I requires banks with more than $50 billion in assets, which P.L. 115-174 raised to more than $250 billion in assets (with Fed discretion to apply to banks with between $100 billion and $250 billion in assets), to periodically submit resolution plans (popularly known as \"living wills\") to the Fed, FSOC, and FDIC that explain how they can safely enter bankruptcy in the event of their failures. The living wills requirement was implemented through a final rule in 2011, and it became fully effective at the end of 2013. The final rule required resolution plans to include details of the firm's ownership, structure, assets, and obligations; information on how the firm's depository subsidiaries are protected from risks posed by its nonbank subsidiaries; and information on the firm's cross-guarantees, counterparties, and processes for determining to whom collateral has been pledged. Proposed rules would reduce the frequency of living will submissions from annually to biennially for G-SIBs and triennially for other large banks. In the 2011 final rule, the regulators highlighted that the resolution plans would help them understand the firms' structure and complexity, as well as their resolution processes and strategies, including cross-border issues for banks operating internationally. The resolution plan is required to explain how the firm could be resolved under the bankruptcy code —as opposed to being liquidated by the FDIC under the Orderly Liquidation Authority created by Title II of the Dodd-Frank Act. The plan is required to explain how the firm can be wound down in a stressed environment in a \"rapidly and orderly\" fashion without receiving \"extraordinary support\" from the government (as some firms received during the crisis) or without disrupting financial stability. To do so, the plan must include information on core business lines, funding and capital, critical operations, legal entities, information systems, and operating jurisdictions. Resolution plans are divided into a public part that is disclosed and a private part that contains confidential information. Some banks have submitted resolution plans containing tens of thousands of pages. If regulators find that a plan is incomplete, deficient, or not credible, they may require the firm to revise and resubmit. If the firm cannot resubmit an adequate plan, regulators have the authority to take remedial steps against it—increasing its capital and liquidity requirements; restricting its growth or activities; or ultimately taking it into resolution. Since the process began in 2013, multiple firms' plans have been found insufficient, including all eleven that were submitted and subsequently resubmitted in the first wave. In 2016, Wells Fargo became the first bank to be sanctioned for failing to submit an adequate living will. Bank liquidity refers to a bank's ability to meet cash flow needs and readily convert assets into cash. Banks are vulnerable to liquidity crises because of the liquidity mismatch between illiquid loans and deposits that can be withdrawn on demand. Although all banks are regulated for liquidity adequacy, Title I requires more stringent liquidity requirements for banks with more than $50 billion in assets, which P.L. 115-174 raised to more than $250 billion in assets (with Fed discretion to apply to banks with between $100 billion and $250 billion in assets). These liquidity requirements are being implemented through three rules: (1) a 2014 final rule implementing firm-run liquidity stress tests, (2) a 2014 final rule implementing the Fed-run liquidity coverage ratio (LCR), and (3) a 2016 proposed rule that would implement the Fed-run net stable funding ratio (NSFR). The firm-run liquidity stress tests apply to domestic banks with more than $100 billion in assets under the Fed's proposed rule. More stringent versions of the LCR and NSFR apply to G-SIBs and Category II banks. A less stringent version applies to Category III banks, except those with significant insurance or commercial operations. Proposed rules would extend the LCR and NSFR to large foreign banks operating in the United States. The final rule implementing firm-run liquidity stress tests was issued in 2014, effective January 2015 for U.S. banks and July 2016 for foreign banks. The rule requires banks subject to EPR to establish a liquidity risk management framework involving a bank's management and board, conduct monthly internal liquidity stress tests, and maintain a buffer of high-quality liquid assets (HQLA). The final rule implementing the liquidity coverage ratio was issued in 2014. The LCR came into effect at the beginning of 2015 and was fully phased in at the beginning of 2017. The LCR requires banks subject to EPR to hold enough HQLA to match net cash outflows over a 30-day period in a hypothetical scenario of market stress where creditors are withdrawing funds. An asset can qualify as a HQLA if it has lower risk, has a high likelihood of remaining liquid during a crisis, is actively traded in secondary markets, is not subject to excessive price volatility, can be easily valued, and is accepted by the Fed as collateral for loans. Different types of assets are relatively more or less liquid, and there is disagreement on what the cutoff point should be to qualify as a HQLA under the LCR. In the LCR, eligible assets are assigned to one of three categories, ranging from most to least liquid. Assets assigned to the most liquid category are given more credit toward meeting the requirement, and assets in the least liquid category are given less credit. Section 403 of P.L. 115-174 required regulators to place municipal bonds in a more liquid category, so that banks could get more credit under the LCR for holding them. The proposed rule to implement the net stable funding ratio was issued in 2016, and to date has not been finalized. The NSFR would require banks subject to EPR to have a minimum amount of stable funding backing their assets over a one-year horizon. Different types of funding and assets would receive different weights based on their stability and liquidity, respectively, under a stressed scenario. The rule would define funding as stable based on how likely it is to be available in a panic, classifies it by type, counterparty, and time to maturity. Assets that do not qualify as HQLA under the LCR would require the most backing by stable funding under the NSFR. Long-term equity would get the most credit toward fulfilling the NSFR, insured retail deposits get medium credit, and other types of deposits and long-term borrowing would get less credit. Borrowing from other financial institutions, derivatives, and certain brokered deposits would not qualify under the rule. One source of systemic risk associated with TBTF comes from \"spillover effects.\" When a large firm fails, it imposes losses on its counterparties. If large enough, the losses could be debilitating to the counterparty, thus causing stress to spread to other institutions and further threaten financial stability. Title I requires banks with more than $50 billion in assets, which P.L. 115-174 raised to more than $250 billion in assets (with Fed discretion to apply to banks with between $100 billion and $250 billion in assets), to limit their exposure to unaffiliated counterparties on an individual counterparty basis and to periodically report on their credit exposures to counterparties. Counterparty exposure limits remain mandatory, but P.L. 115-174 placed credit exposure reports at the Fed's discretion. In 2011, the Fed proposed rules implementing these provisions, but they were not included in subsequent final rules. In 2018, the Fed finalized a reproposed rule to implement a single counterparty credit limit (SCCL), effective in 2020; to date, the counterparty exposure reporting requirement has not been reproposed. Counterparty exposure for all banks was subject to regulation before the crisis, but did not cover certain off balance sheet exposures or holding company level exposures. The SCCL is tailored to have increasingly stringent requirements as asset size increases. For banks with more than $250 billion in total assets that are not G-SIBs, net counterparty credit exposure is limited to 25% of the bank's capital. For G-SIBs, counterparty exposure to another G-SIB or a nonbank SIFI is limited to 15% of the G-SIB's capital and exposure to any other counterparty is limited to 25% of its capital. The 2011 credit exposure reporting proposal would have required banks to regularly report on the nature and extent of their credit exposures to significant counterparties. These reports would help regulators understand spillover effects if firms experienced financial distress. There has been no subsequent rulemaking on credit exposure reporting since the 2011 proposal. The board of directors of publicly traded companies oversees the company's management on behalf of shareholders. The Dodd-Frank Act required publicly traded banks with at least $10 billion in assets, which P.L. 115-174 raised to at least $50 billion in assets, to form risk committees on their boards of directors that include a risk management expert responsible for oversight of the bank's risk management. Title I also requires the Fed to develop overall risk management requirements for banks with more than $50 billion in assets. The Fed issued the final rule implementing this provision in 2014, effective in January 2015 for domestic banks and July 2016 for foreign banks. The rule requires the risk committee be led by an independent director. The rule requires banks with more than $50 billion in assets to employ a chief risk officer responsible for risk management, which the proposed rule implementing P.L. 115-174 leaves unchanged. Title I of the Dodd-Frank Act provides several powers for—depending on the provision—FSOC, the Fed, or the FDIC to use when the respective entity believes that a bank with more than $50 billion in assets or designated nonbank SIFI poses a threat to financial stability. Unless otherwise noted, P.L. 115-174 raises the threshold at which the powers can be applied to banks with $250 billion in assets, with no discretion to apply them to banks between $100 billion and $250 billion in assets. Unlike the enhanced regulation requirements described earlier in this section, financial stability provisions generally do not require any ongoing compliance and would be triggered only when a perceived threat to financial stability has arisen—and none of these provisions have been triggered to date. Some of the following powers are similar to powers that bank regulators already have over all banks, but they are new powers over nonbank SIFIs. These powers are listed here because they, to varying degrees, expand regulatory authority over banks (or extend authority from bank subsidiaries to bank holding companies) with more than $250 billion in assets vis-a-vis smaller banks. FSOC Reporting Requirements. To determine whether a bank with more than $250 billion in assets poses a threat to financial stability, FSOC may require the bank to submit certified reports. However, FSOC may make information requests only if publicly available information is not available. Mitigation of Grave Threats to Financial Stability. When at least two-thirds of the FSOC find that a bank with more than $250 billion in assets poses a grave threat to financial stability, the Fed may limit the firm's mergers and acquisitions, restrict specific products it offers, and terminate or limit specific activities. If none of those steps eliminates the threat, the Fed may require the firm to divest assets. The firm may request a Fed hearing to contest the Fed's actions. To date, this provision has not been triggered, and the FSOC has never identified any bank as posing a grave threat. Acquisitions . Title I broadens the requirement for banks with more than $250 billion in assets to provide the Fed with prior notice of U.S. nonbank acquisitions that exceed $10 billion in assets and 5% of the acquisition's voting shares, subject to various statutory exemptions. The Fed is required to consider whether the acquisition would pose risks to financial stability or the economy. E mergency 15-to-1 Debt-to-Equity Ratio . For banks with more than $250 billion in assets, with Fed discretion to apply to banks with between $100 billion and $250 billion in assets, Title I creates an emergency limit of 15-to-1 on the bank's ratio of liabilities to equity capital (sometimes referred to as a leverage ratio ). The Fed issued a final rule implementing this provision in 2014, effective June 2014 for domestic banks and July 2016 for foreign banks. The ratio is applied only if a bank receives written warning from FSOC that it poses a \"grave threat to U.S. financial stability,\" and ceases to apply when the bank no longer poses a grave threat. To date, this provision has not been triggered. Early Remediation Requirements. Early remediation is the principle that financial problems at banks should be addressed early before they become more serious. Title I requires the Fed to \"establish a series of specific remedial actions\" to reduce the probability that a bank with more than $250 billion in assets experiencing financial distress will fail. This establishes a requirement for BHCs similar in spirit to the prompt corrective action requirements that apply to insured depository subsidiaries. Unlike prompt corrective action, early remediation requirements are not based solely on capital adequacy. As the financial condition of a firm deteriorates, statute requires the steps taken under early remediation to become more stringent, increasing in four steps from heightened supervision to resolution. The Fed issued a proposed rule in 2011 to implement this provision that to date has not been finalized. Expanded FDIC Examination and E nforcement P owers . Title I expands the FDIC's examination and enforcement powers over certain large banks. To determine whether an orderly liquidation under Title II of the Dodd-Frank Act is necessary, the FDIC is granted authority to examine the condition of banks with more than $250 billion in assets. Title I also grants the FDIC enforcement powers over BHCs or THCs that pose a risk to the Deposit Insurance Fund. Parallel to the Dodd-Frank Act, Basel III reformed bank regulation after the financial crisis. U.S. bank regulators implemented this nonbinding international agreement through rulemaking. Basel III determined many of the current capital requirements applied to all U.S. banks. Capital requirements are intended to ensure that a bank has enough capital backing its assets to absorb any unexpected losses on those assets without resulting in the bank's insolvency. Basel III did not include enhanced capital requirements at the original $50 billion threshold, but it did include more stringent capital requirements for the largest banks. The following Basel III capital requirements apply only to large banks: S upplementary L everage R atio (SLR) . Leverage ratios determine how much capital banks must hold relative to their assets without adjusting for the riskiness of their assets. Banks with more than $250 billion in assets or more than $10 billion in foreign exposure must meet a 3% SLR, which differs from the leverage ratio that applies to all banks by including the bank's off-balance-sheet exposures. Unanticipated losses related to opaque off-balance-sheet exposures exacerbated uncertainty about banks' solvency during the financial crisis. In April 2014, U.S. bank regulators adopted a joint rule that would require the G-SIBs to meet an enhanced SLR of 5% at the holding company level to pay all discretionary bonuses and capital distributions and 6% at the depository subsidiary level to be considered well capitalized as of 2018. The amount of capital required by the SLR and to whom it applies would be modified by proposed rules discussed below. G-SIB Capital Surcharge. Basel III also required G-SIBs to hold relatively more capital than other banks in the form of a common equity surcharge of at least 1% to \"reflect the greater risks that they pose to the financial system.\" In July 2015, the Fed issued a final rule that began phasing in this capital surcharge in 2016. Currently, the surcharge applies to the eight G-SIBs, but under its rule, it could designate additional firms as G-SIBs, and it could increase the capital surcharge to as high as 4.5%. The Fed stated that under its rule, most G-SIBs would face a higher capital surcharge than required by Basel III. Countercyclical Capital Buffer. The banking regulators also issued a final rule implementing a Basel III countercyclical capital buffer applied to banks with more than $250 billion in assets or more $10 billion in foreign exposure. The countercyclical buffer requires these banks to hold more capital than other banks when regulators believe that financial conditions make the risk of losses abnormally high. It has been set at zero since inception. Because the countercyclical buffer has not yet been in place for a full business cycle, it is unclear how likely it is that regulators would raise it above zero, and under what circumstances an increase would be triggered. Total Loss-Absorbing Capacity (TLAC) . The Fed issued a 2017 final rule implementing a TLAC requirement for U.S. G-SIBs and U.S. operations of foreign G-SIBs effective at the beginning of 2019. The rule requires G-SIBs to hold a minimum amount of capital and long-term debt at the holding company level so that these equity and debt holders can absorb losses and be \"bailed in\" in the event of the firm's insolvency. This furthers the policy goal of avoiding taxpayer bailouts of large financial firms. TLAC would be affected by a proposed rule discussed below. These capital requirements determine how the largest banks must fund all of their activities on a day-to-day basis. In that sense, these requirements arguably have a larger ongoing impact on banks' marginal costs of providing credit and other services than most of the Title I provisions discussed in the last section that impose only fixed compliance costs on banks. The Dodd-Frank Act imposes various assessments on banks with more than $50 billion in assets. P.L. 115-174 raised the threshold for some of these assessments. As amended, fees are assessed on BHCs with more than $250 billion in assets (beginning in November 2019) and designated SIFIs to fund the Office of Financial Research; BHCs and THCs with assets over $100 billion and designated SIFIs to fund the cost of administering EPR. Assessments on BHCs and THCs with $100 billion to $250 billion in assets must reflect the tailoring of EPR; and BHCs with assets over $50 billion and designated SIFIs to repay any uncompensated costs borne by the government in the event of a liquidation under the Orderly Liquidation Authority. This assessment is imposed only after a liquidation occurs. As of the date of this report, the Fed and the other bank regulators have proposed several rules that would modify EPR One set of rules, implementing Section 401 of P.L. 115-174 , would raise the asset thresholds for EPR. This rule would exempt banks with less than $100 billion in assets from EPR and reduce EPR requirements mostly for banks with between $100 billion and $250 billion in assets. A second proposed rule, implementing Section 402 of P.L. 115-174 , would reduce capital requirements under the SLR for three custody banks, two of which are G-SIBs. Two other rules were proposed independently of any legislative action One would combine elements of stress tests requirements and Basel III to create a stress capital buffer requirement for large banks, effectively reducing capital requirements mainly for large banks that are not G-SIBs. The other would reduce capital requirements under the SLR for G-SIBs by changing how the SLR is calculated. This section summarizes these proposed rules and their projected effects. Prior to the enactment of P.L. 115-174 , U.S. regulators described the prudential regulatory regime applying to all banks as tiered regulation , meaning that increasingly stringent regulatory requirements are applied as metrics, such as a bank's size, increase. These different tiers have been applied on an ad hoc basis—in some cases, statute requires a given regulation to be applied at a certain size; in some cases, regulators have discretion to apply a regulation at a certain size; and in other cases, regulators must apply a regulation to all banks. In addition to $100 billion and $250 billion, notable thresholds found in bank regulation are $1 billion, $3 billion, $5 billion, and $10 billion. P.L. 115-174 expanded tiered regulation for EPR and other types of bank regulation (see text box). Even before enactment of P.L. 115-174, EPR was itself an example of tiered regulation, as it imposed requirements only on banks with more than $50 billion in assets, banks with $250 billion in assets, or G-SIBs, depending on the requirement. Before P.L. 115-174 , the Fed's rules had also tailored some of the EPR requirements for banks with more than $50 billion in assets, so that more stringent regulatory or compliance requirements were applied to banks with more than $250 billion in assets or G-SIBs, depending on the requirement. Under P.L. 115-174 , EPR would become much more tiered and tailored by bank size. The Fed has proposed rules that would implement changes to bank asset thresholds and specific EPR requirements found in P.L. 115-174 and would make additional changes to EPR requirements using the discretionary authority provided in P.L. 115-174 . Under these proposed rules, EPR would impose progressively more stringent requirements across four categories of banks, as summarized in Table 3 . As proposed, the Fed used the discretion granted by P.L. 115-174 to exempt banks with $100 billion to $250 billion from most, but not all, EPR requirements unless they had other characteristics that made them qualify as Category II or III banks. Consistent with P.L. 115-174 , banks with under $100 billion would be exempted from all EPR requirements except those related to risk management. Under proposed rules, foreign banks would be placed in the same categories, based on their U.S. assets, with requirements for each category similar to those applied to U.S. banks. In most cases, compared to the status quo for foreign banks, EPR requirements for foreign banks in Category II and III (see Table 2 ) would remain largely unchanged, whereas foreign banks with an IHC in Category IV would be exempted from or face less stringent versions of most EPR requirements, depending on the requirement. Most requirements would continue to be applied to the U.S. IHC, but a few would apply to all U.S. operations, including U.S. branches and agencies. Because assets of U.S. branches and agencies were not used to determine who was subject to EPR previously, the proposed rule would apply a few EPR requirements to foreign banks that were not previously subject to EPR. But overall the proposed rules would mostly continue to defer to home country regulation for foreign banks operating in the United States that do not qualify as Category II or III banks. Stress tests and capital planning requirements play a specific role in EPR—they provide the Fed with an assessment of whether large banks have enough capital to withstand another crisis, as simulated using a specific adverse scenario developed by the Fed. This is similar to the role of capital requirements more generally and creates some overlap and redundancy between the two. More generally, the Fed points out that banks with more than $100 billion in assets must simultaneously comply with 18 capital requirements and G-SIBs must simultaneously comply with 24 different capital requirements, each addressing a separate but related risk. To try to minimize what it perceives as redundancy between these various measures, the Fed has proposed a rule to combine elements of the stress tests and the Basel III requirements. Under the proposed rule, banks with more than $100 billion in assets would have to simultaneously comply with 8 capital requirements and G-SIBs would have to simultaneously comply with 14 capital requirements. The proposed rule would accomplish this by eliminating 5 requirements tied to the \"adverse\" scenario in the stress tests, which the Fed is allowed to do under P.L. 115-174 , and by combining 4 requirements tied to the \"severely adverse\" stress tests with 4 Basel III capital requirements. Under current Basel III risk-weighted capital requirements, all banks must hold a common equity capital conservation buffer (CCB) equal to 2.5% of their risk-weighted assets (on top of the minimum amount of common equity, Tier 1, and total capital required) to avoid limitations on capital distributions. They also must meet an unweighted leverage capital requirement. Under capital planning requirements, banks currently must hold enough capital to still meet the minimum amount required under the common equity, Tier 1, and total capital, and leverage requirements after their stress test losses, planned capital distributions (such as dividends and share buybacks), and projected balance sheet growth (because an increase in assets requires a proportional increase in capital). The proposed rule would replace these separate requirements with a combined stress capital buffer (SCB) requirement that banks hold enough capital to cover stress test losses and dividends or 2.5% of risk-weighted assets, whichever is larger (see Figure 1 ). The former is less restrictive than what banks face if their projected capital levels fall below the minimum under current stress test requirements. The Fed has provided three justifications for making these requirements less stringent than the current capital planning requirements. First, the Fed argues that because capital distributions would automatically face restrictions if the proposed stress capital buffer was not met, it would no longer be necessary for firms to hold enough capital to meet all planned capital distributions. However, distributions are not entirely forbidden unless the stress capital buffer falls below 0.625%. Second, the Fed argues for removing stock repurchases from capital planning on the grounds that only dividends are likely to be continued as planned in a period of financial stress. Finally, the Fed argues that its previous assumption that balance sheets continue to grow in a stressed environment was an unreasonable one. Because the Fed decided that banks would no longer have to hold capital to account for capital distributions other than dividends and balance sheet growth, they have reduced capital requirements relative to current stress tests for non G-SIBs. However, whether the stress capital buffer would be a lower capital requirement than the stress tests and the risk-weighted Basel III requirements it is replacing depends on whether losses under the stress tests were greater than 2.5%. If they were less than 2.5%, then a bank is required to hold the same amount of capital under the proposal as currently under the capital conservation buffer. If they were more than 2.5%, then a bank is required to hold less capital under the proposal than currently under the stress tests. Under the proposal, banks would also face a stress leverage buffer in lieu of the leverage ratio. The stress leverage buffer would require large banks to hold Tier 1 capital equal to stress tests losses and dividends, but the leverage buffer would not include any minimum (see Figure 2 ). Currently, the leverage ratio does not include a buffer requirement, although banks must hold an additional 1% of capital to be considered well capitalized under prompt-corrective action requirements. So in this case, whether the stress leverage buffer would be a lower capital requirement than the stress tests and Basel III leverage requirements it is replacing depends on whether losses, planned capital distributions, and projected balance sheet growth under the stress tests were greater than 1%—which the Fed reports is generally the case. These proposed buffers would work similarly to the CCB, in that capital restrictions would be automatically triggered if a bank's capital level falls below the buffers. It would not feature the annual quantitative \"pass/fail\" announcement that is a current feature of the stress tests. The Fed calculated what would have happened if this proposed rule had been in place in recent years. It found that the proposed rule would have reduced required capital for large banks that are not G-SIBs (because the stress test is currently the binding constraint) by between $10 billion and $45 billion and would have required G-SIBs to hold the same or more capital (because the G-SIB surcharge is being added to the stress capital buffer); overall, capital requirements for G-SIBs would have increased by between $10 billion and $50 billion. The Fed also found that all banks would have had enough actual capital in those years to meet the SCB requirement. Custody banks provide a unique set of services not offered by many other banks, but are generally subject to the same regulatory requirements as other banks. Custody banks hold securities; receive interest or dividends on those securities; provide related administrative services; and transfer ownership of securities on behalf of financial market asset managers, including investment companies such as mutual funds. Asset managers access central counterparties and payment systems via custodian banks. Custodian banks play a passive role in their clients' decisions, carrying out instructions. As discussed in the \" Basel III Capital Requirements \" section above, under leverage ratios, including the SLR, the same amount of capital must be held against any asset, irrespective of risk to ensure that banks have a minimum amount of total capital. Banks must hold capital against their deposits at central banks under the leverage or supplemental leverage ratio, although there is no risk associated with those deposits. Custody banks argue that this disproportionately burdens them because of their business model. Other observers counter that the purpose of the leverage ratio is to measure the amount of bank capital against assets regardless of risk, and to exempt \"safe\" assets undermines the usefulness of that measure. Section 402 of P.L. 115-174 allows for custody banks—defined by the legislation as banks predominantly engaged in custody, safekeeping, and asset servicing activities—to no longer hold capital against funds deposited at certain central banks to meet the SLR, up to an amount equal to customer deposits linked to fiduciary, custodial, and safekeeping accounts. All other banks would continue to be required to hold capital against central bank deposits. In April 2019, the banking regulators proposed a rule to implement this provision. Custody banks are generally an industry concept, not a regulatory concept. P.L. 115-174 leaves it to bank regulators to define which banks meet the definition of \"predominantly engaged in custody, safekeeping, and asset servicing activities.\" The proposed rule uses a ratio of at least 30 times more assets under custody than the banks' assets to determine \"predominantly engaged.\" By this measure, three banks would qualify—Bank of New York Mellon, Northern Trust, and State Street. Depending on who qualifies in the final rule, other large banks that offer custody services but do not qualify for relief under the \"predominantly engaged\" definition may be at a relative disadvantage under this provision. Under the proposed rule, Northern Trust would be able to reduce its capital by $3 for every $100 it deposits at central banks, and Bank of New York Mellon and State Street (as G-SIBs) would be able to reduce their capital by $6 for every $100 of banking subsidiary deposits at central banks—although the latter two would face a lower leverage ratio under the enhanced SLR proposed rule discussed in the next section. The proposed rule implementing Section 402 estimates that the three eligible custody banks would be granted an exclusion equivalent to 21% to 30% of their assets and be able to reduce their capital requirements at the holding company level under the SLR by an aggregate $8 billion. However, the proposed rule states that the SLR was not the binding capital requirement for the custody banks at the holding company level, but it was the binding requirement at the depository level for two of the banks, as of the third quarter of 2018. As a result, capital requirements would have declined by a combined $7 billion or 23% for those two banks had the rule been in effect. As noted in the \" Basel III Capital Requirements \" section, G-SIBs must currently comply with a higher SLR than other banks with $250 billion in assets. For G-SIBs, the current enhanced SLR is set at 5% at the holding company level and 6% for the depository subsidiary to be considered well capitalized. In April 2018, the Fed and the Office of the Comptroller of the Currency (OCC) proposed a rule to modify the enhanced SLR for G-SIBs. Instead of 5% and 6%, respectively, the enhanced SLR would now be set for each G-SIB at 3% plus half of its G-SIB surcharge for both the holding company and the depository subsidiary. In this way, the amount of capital required to be held by G-SIBs would increase with their systemic importance. Because each G-SIB has a surcharge that is less than 4% or 6%, respectively, the proposed rule would reduce capital requirements under the enhanced SLR for each G-SIB to between 3.75% and 4.75%, depending on the bank. Figure 3 compares the current SLR requirement for G-SIBs to the anticipated SLR requirement for each G-SIB if the proposed rule were finalized. Whether this reduces how much capital the G-SIBs are required to hold depends on whether the SLR is the binding capital ratio. The Fed reported that in 2017, the SLR was the binding ratio for each G-SIB's bank subsidiary. Thus, the proposed rule would have reduced how much capital each G-SIB had to hold at the subsidiary level by $121 billion in total. The effect on the overall BHC would have been much smaller. At the holding company level, the proposed rule would have reduced required capital by $400 million in total. The Fed argues that it is undesirable for the SLR to be the binding capital requirement because it is intended to act as a backstop if risk-weighted requirements fail. If the SLR is the binding ratio, banks have more incentive to hold riskier assets. To avoid having the SLR be the binding ratio, banking regulators could raise risk-weighted capital requirements or reduce the SLR, as is proposed. The Fed estimates that under the proposal, the SLR would still be the binding ratio for three G-SIBs. The proposed rule would make similar changes to G-SIBs' TLAC requirement. Currently, G-SIBs must meet a 9.5% leverage buffer under TLAC. Under the proposed rule, G-SIBs would be required to meet a leverage buffer equal to 7.5% plus half of their G-SIB surcharge. Because all G-SIBs currently have a surcharge below 4%, this would reduce their TLAC requirement. The proposed rule would also make a similar change to the TLAC long-term debt requirement for G-SIBs. Collectively, recent proposed changes would, to varying degrees, reduce capital and other advanced EPR requirements for banks with more than $50 billion in assets. In the view of the banking regulators and the supporters of P.L. 115-174 , these changes better tailor EPR to match the risks that large banks pose. Opponents are concerned that the additional systemic and prudential risks these changes pose outweigh the benefits to society of reduced regulatory burden, believing that the benefits will mainly accrue to the affected banks. One way these changes can be evaluated is by comparing the benefits of EPR to its costs. According to Section 165 of the Dodd-Frank Act, the purpose of enhanced regulation is \"to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected financial institutions.\" General prudential regulation applying to all banks is intended to be microprudential , focusing mainly on the individual institution's safety and soundness. Enhanced regulation is intended to be macroprudential , focusing mainly on the broader systemic risk that large institutions pose. In particular, it is meant to address concerns that large banks are TBTF. Enhanced regulation is not necessarily mutually exclusive with other policy approaches to eliminating TBTF, although combining approaches could dilute any single approach's effectiveness. Different parts of the Dodd-Frank Act pursue several different approaches to eliminating TBTF. In the case of proposed changes that would not apply to G-SIBs, the main question from a systemic risk perspective is whether firms that have more than $50 billion in assets but are not G-SIBs are a source of systemic risk. If a bank does not pose systemic risk or is not perceived as TBTF, the main benefit of enhanced regulation is not present, \"and it is subjected to unnecessary costs without any offsetting benefits.\" Although there is widespread consensus that G-SIBs pose the most systemic risk, there is little agreement on how much, if any, systemic risk is posed by the next tier of institutions. Ultimately, the risk to financial stability posed by a large bank failing—and the efficacy of EPR in mitigating that risk—cannot be known for certain until a large bank fails, and no failure has occurred since the crisis. Quantifying the benefits of EPR is difficult because the benefits of preventing another financial crisis are large, but the probability of another crisis at any given time is small. Furthermore, the ability to isolate the effects of any particular provision on financial stability is hindered because maintaining financial stability likely depends on the joint effects of a number of policies. The effect of various proposals on systemic risk may jointly be greater than the sum of their individual parts. Although systemic risk mitigation is the main purpose of enhanced regulation, there are also other potential benefits that could be lost by reducing the number of banks subject to it. First, enhanced regulation could reduce the likelihood that a bank's failure would result in taxpayer exposure to FDIC insurance losses or due to \"bailouts.\" For example, the government lost money on TARP investments following the financial crisis in some midsized institutions (such as Ally Financial and CIT Group, which had between $50 billion and $250 billion in assets) although they were not viewed as systemically important. An Inspector General report found that if Washington Mutual, which was taken into receivership in September 2008, had been liquidated, it would have depleted the entire FDIC deposit insurance fund. Second, EPR could reduce the likelihood of a bank failure that did not pose systemic risk but could still result in localized or sectoral disruptions to the availability of credit and the provision of financial services. Third, some have argued that some enhanced prudential requirements (e.g., risk committees, chief risk officers, company-run stress tests) represent good risk management practices that any large, well-managed firm should apply in the interest of shareholders. Comparing the magnitude of benefits to the costs EPR imposes involves additional difficulty. In general, enhanced prudential requirements impose costs on large banks. However, the extent to which those costs are passed on to customers potentially depends on a variety of economic factors, such as the degree of market competition and the price sensitivity of customers. Furthermore, from an economic net benefit perspective, the cost to large banks is less relevant than the overall effects on the cost and availability of credit throughout the financial system. If banks subject to EPR face higher costs, then more credit will be supplied by other financial firms, at least partially offsetting the reduction in credit from banks subject to EPR. Some of these firms will be small banks, but some financial intermediation could also migrate from large banks to firms that are not regulated for safety and soundness. Whether overall systemic risk is higher or lower if financial activity migrates from large banks subject to EPR to less regulated sectors is beyond the scope of this report. But in that sense, even if a heightened prudential regime worked as planned, net benefits (i.e., reduction of overall systemic risk) could be smaller than anticipated. The possibility that TBTF banks create market distortions creates additional considerations. Normally, higher costs imposed by regulation reduce economic efficiency, which must be balanced against the benefits they provide. However, if TBTF banks create moral hazard—the theory that if TBTF firms expect that failure will be prevented, they have an incentive to take greater risks than they otherwise would because they are shielded from at least some negative consequences of those risks (a market failure that reduces efficiency), then regulatory costs may increase efficiency (from a societal perspective) by reducing risk-taking. Put differently, if there is a TBTF \"subsidy,\" then enhanced regulation may reduce that subsidy by partially offsetting the funding advantage that some believe is caused by moral hazard. On these grounds, the costs and benefits of tailoring EPR or removing some banks from EPR will depend crucially on which banks are TBTF—a question that cannot be answered definitively until a bank fails. Tailoring also addresses the concern that enhanced regulation poses disproportionately greater compliance costs on smaller banks than on the largest banks. Some EPR requirements are highly complex and more costly to comply with. Proponents of the recent proposals believe that EPR could be modified to reduce costs for banks that are not TBTF without a substantial decline in benefits, while opponents disagree. ", "summary": "The 2007-2009 financial crisis highlighted the problem of \"too big to fail\" financial institutions—the concept that the failure of large financial firms could trigger financial instability, which in several cases prompted extraordinary federal assistance to prevent their failure. One pillar of the 2010 Dodd-Frank Act's (P.L. 111-203) response to addressing financial stability and ending too big to fail is a new enhanced prudential regulatory (EPR) regime that applies to large banks and to nonbank financial institutions designated by the Financial Stability Oversight Council (FSOC) as systemically important financial institutions (SIFIs). Previously, FSOC had designated four nonbank SIFIs for enhanced prudential regulation, but all four have since been de-designated. Under this regime, the Federal Reserve (Fed) is required to apply a number of safety and soundness requirements to large banks that are more stringent than those applied to smaller banks. These requirements are intended to mitigate systemic risk posed by large banks Stress tests and capital planning ensure banks hold enough capital to survive a crisis. Living wills provide a plan to safely wind down a failing bank. Liquidity requirements ensure that banks are sufficiently liquid if they lose access to funding markets. Counterparty limits restrict the bank's exposure to counterparty default. Risk management requires publicly traded companies to have risk committees on their boards and banks to have chief risk officers. Financial stability requirements provide for regulatory interventions that can be taken only if a bank poses a threat to financial stability. Capital requirements under Basel III, an international agreement, require large banks hold more capital than other banks to potentially absorb unforeseen losses. The Dodd-Frank Act automatically subjected all bank holding companies and foreign banks with more than $50 billion in assets to enhanced prudential regulation. In 2017, the Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174) created a more \"tiered\" and \"tailored\" EPR regime for banks. It automatically exempted domestic banks with assets between $50 billion and $100 billion (five at present) from enhanced regulation. The Fed has discretion to apply most individual enhanced prudential provisions to the 11 domestic banks with between $100 billion and $250 billion in assets on a case-by-case basis if it would promote financial stability or the institutions' safety and soundness, and has proposed exempting them from several EPR requirements. The eight domestic banks that have been designated as Global-Systemically Important Banks (G-SIBs) and the five banks with more than $250 billion in assets or $75 billion in cross-jurisdictional activity remain subject to all Dodd-Frank EPR requirements. In addition, the Fed has proposed applying some EPR requirements on a progressively tiered basis to the 23 foreign banks with over $50 billion in U.S. assets and $250 billion in global assets. P.L. 115-174 also reduced the amount of capital that custody banks are required to hold against one of the EPR capital requirements, the supplementary leverage ratio (SLR). In addition, the Fed has issued a proposed rule that would reduce the amount of capital that G-SIBs are required to hold against the SLR. Finally, the Fed has proposed another rule that would combine capital planning under the stress tests with overall capital requirements for large banks. Collectively, these proposed changes would reduce, to varying degrees, capital and other advanced EPR requirements for banks with more than $50 billion in assets. In the view of the banking regulators and the supporters of P.L. 115-174, these changes better tailor EPR to match the risks posed by large banks. Opponents are concerned that the additional systemic and prudential risks posed by these changes outweigh the benefits to society of reduced regulatory burden, believing that the benefits will mainly accrue to the affected banks. The 2007-2009 financial crisis highlighted the problem of \"too big to fail\" financial institutions—the concept that the failure of large financial firms could trigger financial instability, which in several cases prompted extraordinary federal assistance to prevent their failure. One pillar of the 2010 Dodd-Frank Act's (P.L. 111-203) response to addressing financial stability and ending too big to fail is a new enhanced prudential regulatory (EPR) regime that applies to large banks and to nonbank financial institutions designated by the Financial Stability Oversight Council (FSOC) as systemically important financial institutions (SIFIs). Previously, FSOC had designated four nonbank SIFIs for enhanced prudential regulation, but all four have since been de-designated. Under this regime, the Federal Reserve (Fed) is required to apply a number of safety and soundness requirements to large banks that are more stringent than those applied to smaller banks. These requirements are intended to mitigate systemic risk posed by large banks Stress tests and capital planning ensure banks hold enough capital to survive a crisis. Living wills provide a plan to safely wind down a failing bank. Liquidity requirements ensure that banks are sufficiently liquid if they lose access to funding markets. Counterparty limits restrict the bank's exposure to counterparty default. Risk management requires publicly traded companies to have risk committees on their boards and banks to have chief risk officers. Financial stability requirements provide for regulatory interventions that can be taken only if a bank poses a threat to financial stability. Capital requirements under Basel III, an international agreement, require large banks hold more capital than other banks to potentially absorb unforeseen losses. The Dodd-Frank Act automatically subjected all bank holding companies and foreign banks with more than $50 billion in assets to enhanced prudential regulation. In 2017, the Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174) created a more \"tiered\" and \"tailored\" EPR regime for banks. It automatically exempted domestic banks with assets between $50 billion and $100 billion (five at present) from enhanced regulation. The Fed has discretion to apply most individual enhanced prudential provisions to the 11 domestic banks with between $100 billion and $250 billion in assets on a case-by-case basis if it would promote financial stability or the institutions' safety and soundness, and has proposed exempting them from several EPR requirements. The eight domestic banks that have been designated as Global-Systemically Important Banks (G-SIBs) and the five banks with more than $250 billion in assets or $75 billion in cross-jurisdictional activity remain subject to all Dodd-Frank EPR requirements. In addition, the Fed has proposed applying some EPR requirements on a progressively tiered basis to the 23 foreign banks with over $50 billion in U.S. assets and $250 billion in global assets. P.L. 115-174 also reduced the amount of capital that custody banks are required to hold against one of the EPR capital requirements, the supplementary leverage ratio (SLR). In addition, the Fed has issued a proposed rule that would reduce the amount of capital that G-SIBs are required to hold against the SLR. Finally, the Fed has proposed another rule that would combine capital planning under the stress tests with overall capital requirements for large banks. Collectively, these proposed changes would reduce, to varying degrees, capital and other advanced EPR requirements for banks with more than $50 billion in assets. In the view of the banking regulators and the supporters of P.L. 115-174, these changes better tailor EPR to match the risks posed by large banks. Opponents are concerned that the additional systemic and prudential risks posed by these changes outweigh the benefits to society of reduced regulatory burden, believing that the benefits will mainly accrue to the affected banks.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers programs that support small businesses, including loan guarantees to lenders to encourage them to provide loans to small businesses \"that might not otherwise obtain financing on reasonable terms and conditions\" and grants to nonprofit organizations to provide marketing, management, and technical training assistance to small business owners. Historically, one of the justifications presented for funding the SBA's loan guarantee programs has been that small businesses can be at a disadvantage, compared with other businesses, when trying to obtain access to sufficient capital and credit. It has been argued that this disadvantage is particularly acute for startups and microbusinesses (firms with fewer than five employees): Traditional lending institutions, such as banks and investors, are unlikely to offer loans and investment capital to microfirms due to a variety of reasons. One barrier to microlending is a concern that startups and smaller enterprises are risky investments since growing businesses typically exhibit erratic bursts of growth and downturn. The perceived risk of these types of companies reduces the chances of a microbusiness to obtain financing. Another issue is that microbusinesses by and large require smaller amounts of capital, and thus banks or investment companies often believe that it is not efficient use of their time or resources, nor will they receive a substantive return on investment from such a small loan amount. An Urban Institute survey of SBA 7(a), 504/Certified Development Company (504/CDC), Small Business Investment Company (SBIC), and Microloan borrowers conducted in 2007 found that Microloan borrowers reported having the most difficulty in finding acceptable financing elsewhere. Less than one-third (31%) of Microloan borrowers reported that they would have been able to find acceptable financing elsewhere, compared with 35% of SBIC borrowers, 40% of 7(a) borrowers, and 48% of 504/CDC borrowers. Since its inception in 1953, the SBA has provided loan guarantees to encourage lenders to issue small businesses loans. Interest in creating a separate loan program to address the specific needs of startups and microbusinesses increased during the 1980s, primarily due to the growth and experience of microlending institutions abroad and evidence concerning private lending practices that led Congress to conclude that a new loan program was necessary \"to reach very small businesses that were not being served by traditional lenders of SBA's credit programs.\" To address the perceived disadvantages faced by very small businesses in gaining access to capital, Congress authorized the SBA's Microloan lending program in 1991 ( P.L. 102-140 , the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1992). The program became operational in 1992. Its stated purpose is to assist women, low-income, veteran ... and minority entrepreneurs and business owners and other individuals possessing the capability to operate successful business concerns; to assist small business concerns in those areas suffering from a lack of credit due to economic downturns; ... to make loans to eligible intermediaries to enable such intermediaries to provide small-scale loans, particularly loans in amounts averaging not more than $10,000, to start-up, newly established, or growing small business concerns for working capital or the acquisition of materials, supplies, or equipment; [and] to make grants to eligible intermediaries that, together with non-Federal matching funds, will enable such intermediaries to provide intensive marketing, management, and technical assistance to microloan borrowers. The SBA's Microloan lending program was authorized initially as a five-year demonstration project. It was made permanent, subject to reauthorization, in 1997 ( P.L. 105-135 , the Small Business Reauthorization Act of 1997). Congressional interest in the Microloan program has increased in recent years, primarily because microloans are viewed as a means to assist very small businesses, especially women- and minority-owned startups, obtain loans that enable them to create jobs. Job creation and preservation, always a congressional interest, has taken on increased importance given continuing concerns about job growth. This report describes the Microloan program's eligibility standards and operating requirements for lenders and borrowers and examines the arguments presented by the program's critics and advocates. It also examines changes to the program authorized by P.L. 111-240 , the Small Business Jobs Act of 2010, P.L. 115-141 , the Consolidated Appropriations Act, 2018, and P.L. 115-232 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019. P.L. 111-240 authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks to provide small business loans ($4.0 billion was issued), a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, and about $12 billion in tax relief for small businesses. It also authorized changes to the SBA's loan guaranty programs, including increasing the Microloan program's loan limit for borrowers from $35,000 to $50,000, and the aggregate loan limit for intermediaries after their first year of participation in the program from $3.5 million to $5 million. It also authorized the SBA to waive, in whole or in part through FY2012, the nonfederal share requirement for loans to the Microloan program's intermediaries and for grants made to Microloan intermediaries for small business marketing, management, and technical assistance for up to a fiscal year. P.L. 115-141 , among other provisions, relaxed requirements on Microloan intermediaries that prohibited them from spending more than 25% of their technical assistance grant funds on prospective borrowers and more than 25% of those grant funds on contracts with third parties to provide that technical assistance. The act increased those percentages to 50% (originally in H.R. 2056 , the Microloan Modernization Act of 2017, and S. 526 , its companion bill in the Senate). Also, P.L. 115-232 , among other provisions, increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million (originally in H.R. 2056 , the Microloan Modernization Act of 2017, and S. 526 , its companion bill in the Senate). This report also discusses several bills introduced during the 114 th and 115 th Congresses. For example, during the 114 th Congress, S. 1445 , the Microloan Act of 2015, would have removed the requirements that no more than 25% of Microloan technical assistance grant funds may be used to provide information and technical assistance to prospective borrowers or on third-party contracts to provide that assistance. It would have also eliminated the Microloan program's minimum state allocation formula. H.R. 2670 , the Microloan Modernization Act of 2015, and S. 1857 , the Senate companion bill, would have increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million, increased the program's repayment terms from not more than 6 years to not more than 10 years for loans greater than $10,000, and required the SBA Administrator to establish a rule enabling intermediaries to apply for a waiver of the requirement that no more than 25% of Microloan technical assistance grant funds may be used to provide information and technical assistance to prospective borrowers. The House passed H.R. 2670 on July 13, 2015. S. 2850 , the Microloan Program Modernization Act of 2016, would have increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million and, among other provisions, eliminated the requirements that intermediaries spend no more than 25% of Microloan technical assistance grant funds on technical assistance to prospective borrowers and no more than 25% of those funds on third party contracts for technical assistance. During the 115 th Congress, H.R. 2056 , the Microloan Modernization Act of 2017, and S. 526 , its companion bill in the Senate would, as introduced, increase the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million and, among other provisions, eliminate the requirement that intermediaries spend no more than 25% of Microloan technical assistance grant funds on technical assistance to prospective borrowers and no more than 25% of those funds on third-party contracts for technical assistance. H.R. 2056 and S. 526 were amended in committee to require intermediaries to spend no more than 50% of Microloan technical assistance grant funds on technical assistance to prospective borrowers and no more than 50% of those funds on third-party contracts for technical assistance. The House bill, as amended, was favorably reported by the House Committee on Small Business on July 12, 2017, and agreed to by the House on July 24, 2017, by voice vote. The Senate bill was favorably reported by the Senate Committee on Small Business and Entrepreneurship on March 19, 2018. As mentioned previously, the 50% thresholds were included in P.L. 115-141 and the increase from $5 million to $6 million for the Microloan program's aggregate loan limit for intermediaries after their first year of participation was included in P.L. 115-232 . Unlike the SBA's 7(a) and 504/CDC loan guarantee programs, the SBA Microloan program does not guarantee loans. Instead, it provides direct loans to qualified nonprofit intermediary Microloan lenders who, in turn, provide \"microloans\" of up to $50,000 to small business owners, entrepreneurs, and nonprofit child care centers. There are currently 144 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico. The Microloan program's administrative costs (anticipated to be $47.66 million in FY2018) are funded through the SBA's salaries and expenses and business loan administration accounts. In addition, each year the SBA receives an appropriation for credit subsidies for its direct lending (Microloan) program. Business loan credit subsidies represent the net present value of cash flows to and from the SBA over the life of the loan portfolio. For guaranteed loans, the net present value of cash flows is primarily affected by the difference between the cost of purchasing loans that have defaulted and the revenue generated from fees and collateral liquidation. For direct (Microloan) lending, the net present value of cash flows is primarily affected by the cost of offering below market interest rates to intermediaries because the cost of purchasing loans that have defaulted is typically relatively small because intermediaries are required to maintain a loan loss reserve. In addition, the SBA does not charge intermediaries fees. In FY2019, the SBA was provided $4.0 million, to remain available until expended, for direct (Microloan) business loan credit subsidies. This appropriation was expected to support about $42.0 million in lending to intermediaries. The SBA received an appropriation of $31.0 million in FY2019 for grants to selected Microloan intermediaries and qualified \"non-lending technical assistance providers\" to provide Microloan borrowers and prospective borrowers marketing, management, and technical training assistance. As shown in Table 1 , Microloan intermediaries provided counseling services to 19,600 small businesses in FY2017. The data indicate that the number of small businesses served by the Microloan technical assistance program has generally increased in recent years. To become a qualified intermediary Microloan lender, an applicant must be organized as a nonprofit community development corporation or other entity, a consortium of nonprofit community development corporations or other entities, a quasigovernmental economic development corporation, or an agency established by a Native American Tribal Government; be located in the United States, including the Commonwealth of Puerto Rico, the U.S. Virginia Islands, Guam, and American Samoa; have made and serviced short-term, fixed rate loans of not more than $50,000 to newly established or growing small businesses for at least one year; and have at least one year of experience providing technical assistance to its borrowers. If accepted into the program by the SBA, an intermediary may borrow no more than $750,000 from the SBA during its first year of participation. After the first year, the maximum loan amount is $2.5 million. By law, an intermediary's total outstanding Microloan program debt must not exceed $6 million. The SBA approves and lends funds, subject to the availability of appropriations, to intermediaries based on the order in which applications are received. The amount provided is subject to two statutory limitations. No more than 300 intermediaries may participate in the Microloan program at any given time. During the first six months of each fiscal year, subject to the availability of appropriations, at least $800,000 or 1/55 th of available loan funds (whichever is less) is required to be made available for loans to intermediaries in each state (including the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, and American Samoa). Any applications that cannot be funded during the first six months \"due to geographic limitations will be kept on file in the order they were received\" and, subject to the availability of funds, \"will be funded during the seventh month of the fiscal year [April].\" If the amount of requested loan funds exceeds the amount of available funds, the SBA \"may hold back up to 20% of available loan funds to ensure that due consideration is given to new intermediaries and those having the greatest impact to underserved markets.\" Also, if the amount of requested loan funds from new intermediaries exceeds the amount of available funds, the SBA \"may choose to select a new intermediary in an underserved location (a location that is currently unserved by an SBA Microloan Program Intermediary Lender), as determined by the Agency, over a new applicant in an area that is already served by one or more existing Intermediaries.\" Intermediaries are not required to make any interest payments on the Microloan during the first year, but interest accrues from the date that the SBA disburses the loan proceeds to the intermediary. After that, the SBA determines the schedule for periodic payments. Loans must be repaid within 10 years. The SBA charges intermediaries an interest rate that is based on the five-year Treasury rate, adjusted to the nearest one-eighth percent (called the Base Rate), less 1.25% if the intermediary maintains an historic portfolio of Microloans averaging more than $10,000, and less 2.0% if the intermediary maintains an historic portfolio of Microloans averaging $10,000 or less. The Base Rate, after adjustment, is called the Intermediary's Cost of Funds. The Intermediary's Cost of Funds is initially calculated one year from the date of the note and is reviewed annually and adjusted as necessary (called recasting). The interest rate cannot be less than zero. Intermediaries are required to contribute not less than 15% of the loan amount in cash from nonfederal sources and, as security for repayment of the loan, must provide the SBA first lien position on all notes receivable from any microloans issued under the program. Unlike the SBA's 7(a) and 504/CDC loan guarantee programs, the SBA does not charge intermediaries upfront or ongoing service fees under the Microloan program. As mentioned previously, P.L. 111-240 temporarily allowed the SBA to waive, in whole or in part through FY2012, the intermediary's 15% nonfederal share requirement under specified circumstances (e.g., the economic conditions affecting the intermediary and the intermediary's performance) for up to a fiscal year. Intermediaries are required to deposit the proceeds from the SBA's loans, their 15% contribution, and payments from their Microloan borrowers into a Microloan Revolving Fund. Intermediaries may only withdraw from this account funds necessary to make microloans to borrowers, repay the SBA, and establish and maintain a Loan Loss Reserve Fund to pay any shortage in the Microloan Revolving Fund caused by delinquencies or losses on its microloans. They are required, until they have been in the program for at least five years, to maintain a balance in the Loan Loss Reserve Fund equal to 15% of the outstanding balance of the notes receivable from their Microloan borrowers. After five years, if the intermediary's average annual loss rate during the preceding five years is less than 15% and no other factors exist that may impair the intermediary's ability to repay its obligations to the SBA, the SBA Administrator may reduce the required balance in the intermediary's Loan Loss Reserve Fund to the intermediary's average annual loss rate during the preceding five years, but not less than 10% of the portfolio. Intermediaries are required to maintain their Loan Loss Reserve Fund until they have repaid all obligations owed to the SBA. The SBA does not maintain detailed data necessary to determine an aggregate default rate for Microloan borrowers. However, in 2007, the SBA estimated that the borrower default rate for the Microloan program was about 12%. Because the Loan Loss Reserve Fund is used to contribute toward the cost of borrower defaults, and is often sufficient to cover the entire cost of such defaults, the SBA's loss rate for intermediary repayment is typically less than 3% each year. An intermediary may be suspended or removed from the Microloan program if it fails to comply with a specified list of program performance standards. For example, intermediaries are required to close and fund at least 10 microloans per year, cover the service territory assigned by the SBA, honor the SBA determined boundaries of neighboring intermediaries and non-lender technical assistance providers, fulfill reporting requirements, maintain a loan currency rate of 85% or more (where loans are no more than 30 days late in scheduled payments), maintain a default rate of 15% or less, and \"satisfactorily provide\" in-house technical assistance to microloan clients and prospective microloan clients. As mentioned previously, in FY2019, the SBA received $31.0 million for grants to Microloan intermediaries and qualified \"non-lending technical assistance providers\" to provide Microloan borrowers and prospective borrowers marketing, management, and technical training assistance (see Appendix for previous funding levels). Intermediaries are eligible to receive a Microloan technical assistance grant \"of not more than 25% of the total outstanding balance of loans made to it under this subsection.\" Grant funds may be used only to provide marketing, management, and technical assistance to Microloan borrowers, except that no more than 50% of the funds may be used to provide such assistance to prospective Microloan borrowers. Grant funds may also be used to attend training required by the SBA. Also, intermediaries must contribute, solely from nonfederal sources, an amount equal to 25% of the grant amount. In addition to cash or other direct funding, the contribution may include indirect costs or in-kind contributions paid for under nonfederal programs. Intermediaries may expend no more than 50% of the grant funds on third-party contracts for the provision of technical assistance. In addition, as mentioned earlier, P.L. 111-240 temporarily allowed the SBA to waive, in whole or in part through FY2012, the 25% nonfederal share requirement for grants made to Microloan intermediaries for small business marketing, management, and technical assistance under specified circumstances (e.g., the economic conditions affecting the intermediary and the intermediary's performance) for up to a fiscal year. The SBA does not require Microloan borrowers to participate in the marketing, management, and technical assistance program. However, intermediaries typically require Microloan borrowers to participate in the training program as a condition of the receipt of a microloan. Combining loan and intensive training assistance is one of the Microloan program's distinguishing features. Intermediaries that have a portfolio of loans made under the program \"that averages not more than $10,000 during the period of the intermediary's participation in the program\" are eligible to receive an additional training grant equal to 5% of \"the total outstanding balance of loans made to the intermediary.\" Intermediaries are not required to make a matching contribution as a condition of receiving these additional grant funds. Each year, the SBA is authorized to select qualified nonprofit, non-lending technical assistance providers to receive grant funds to provide marketing, management, and technical assistance to Microloan borrowers. Any nonprofit entity that is not an intermediary may apply for these funds. The SBA may award up to 55 grants each year to qualified non-lending technical assistance providers to deliver marketing, management, and technical assistance to Microloan borrowers. The grants may be for terms of up to five years and may not exceed $200,000. The nonprofit entity must contribute, solely from nonfederal sources, an amount equal to 20% of the grant. In addition to cash or other direct funding, the contribution may include indirect costs or in-kind contributions paid for under nonfederal programs. The SBA stopped awarding these grants at the beginning of FY2005. The SBA determined at that time that the non-lending technical assistance providers duplicated much of what was already being provided by Microloan intermediaries and other SBA entrepreneurial development programs. With one exception, Microloan borrowers must be an eligible, for-profit small business as defined by the Small Business Act. P.L. 105-135 , the Small Business Reauthorization Act of 1997, expanded the Microloan program's eligibility to include borrowers establishing a nonprofit childcare business. Intermediaries are directed by legislative language to provide borrowers \"small-scale loans, particularly loans in amounts averaging not more than $10,000.\" They are also directed, \"to the extent practicable ... to maintain a microloan portfolio with an average loan size of not more than $15,000.\" Microloans for more than $20,000 are allowed \"only if such small business concern demonstrates that it is unable to obtain credit elsewhere at comparable interest rates and that it has good prospects for success.\" The maximum loan amount is $50,000 and no borrower may owe an intermediary more than $50,000 at any one time. Microloan proceeds may be used only for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. Loans cannot be made to acquire land or property, and must be repaid within six years. Within these parameters, loan terms vary depending on the loan's size, the planned use of funds, the requirements of the intermediary lender, and the needs of the small business borrower. During the 114 th Congress, H.R. 2670 would have increased the program's repayment terms from not more than 6 years to not more than 10 years for loans greater than $10,000. On loans of more than $10,000, the maximum interest rate that can be charged to the borrower is the interest rate charged by the SBA on the loan to the intermediary, plus 7.75 percentage points. On loans of $10,000 or less, the maximum interest rate that can be charged to the borrower is the interest charged by the SBA on the loan to the intermediary, plus 8.5 percentage points. Rates are negotiated between the borrower and the intermediary, and typically range from 6.5% to 9%. In FY2018, the average interest rate charged was 7.6%. Each intermediary establishes its own lending and credit requirements. However, borrowers are generally required to provide some type of collateral (consistent with prudent lending practices), and a personal guarantee to repay the loan. The SBA does not review the loan for creditworthiness. Intermediaries are allowed to charge borrowers reasonable packaging fees limited to 3% of the loan amount for loans with terms of one year or more, and 2% for loans with terms of less than one year. Intermediaries are also allowed to charge borrowers \"actual, paid and documented out-of-pocket closing costs … such as filing or recording fees, collateral appraisals, credit reports, and other such direct charges related to loan closing.\" These fees may be added to the loan amount and financed over the life of the loan \"provided the total loan amount, including the fee, does not exceed $50,000.\" Table 2 provides the number and amount of loans that the SBA provided Microloan intermediaries from FY2010 through FY2017, the number and amount of loans to Microloan intermediaries that the SBA approved in FY2018 (before loan cancelations, etc.), and the number and amount of Microloans that intermediaries provided small businesses from FY2010 through FY2018. As shown in Table 2 , in FY2018, the SBA approved 58 loans to intermediaries totaling $37.3 million. The average approved intermediary loan amount was $643,724. Microloan intermediaries provided 5,459 loans to small businesses totaling $76.8 million. The average Microloan amount was $14,071. As of the end of FY2018, the SBA had disbursed 1,230 loans to Microloan intermediaries totaling $562.5 million. At that time, there were 485 active Microloan intermediary loans with an unpaid principal balance of $165.3 million. As shown in Table 2 , the number and amount of Microloans provided to small businesses have generally increased in recent years. The Microloan program is open to all small business entrepreneurs, but targets new and early-stage businesses in \"underserved markets, including borrowers with little to no credit history, low-income borrowers, and women and minority entrepreneurs in both rural and urban areas who generally do not qualify for conventional loans or other, larger SBA guaranteed loans.\" An analysis conducted by the Urban Institute found that about 9.9% of conventional small business loans are issued to minority-owned small businesses and about 16% of conventional small business loans are issued to women-owned businesses. In FY2018, of those reporting their race, minority-owned or -controlled firms received 47.4% of the number of microloans issued and 33.8% of the amount issued. Women-owned or -controlled firms received 48.7% of the number of microloans issued and 38.9% of the amount issued. More than three-quarters of all Microloan borrowers (81.0%) in FY2018 were located in an urban area. Also, in FY2018, startup companies received 38.0% of the number of microloans issued and 36.4% of the total amount of microloans issued. As mentioned previously, the Microloan program's estimated borrower default rate is about 12%. Because the Loan Loss Reserve Fund is used to contribute toward the cost of borrower defaults, and is often sufficient to cover the entire cost of such defaults, the SBA's loss rate for intermediary repayment is typically less than 3% annually. For example, the Microloan program's intermediary default rate was 2.36% in FY2015, 1.60% in FY2016, 2.26% in FY2017, and 2.29% in FY2018. Microloans are often used for more than one purpose. In FY2018, they were most commonly used for working capital (70.4%), equipment (25.8%), inventory (21.5%), and supplies (7.6%). Critics of the SBA's Microloan program argue that it is duplicative of other available programs, expensive relative to alternative programs, and subject to administrative shortfalls. The program's advocates argue that it provides assistance that \"reaches many who otherwise would not be served by the private sector or even the SBA's 7(a) loan program\" and \"has provided an important source of capital for low-income women business owners and minority borrowers.\" Critics of the SBA's Microloan program argue that its direct lending program is duplicative of the SBA's 7(a) loan guarantee program and its marketing, management, and technical training assistance grant program is duplicative of the SBA's training assistance provided through Small Business Development Centers, SCORE (Service Corps of Retired Executives), and Women Business Centers. For example, President George W. Bush proposed to eliminate all funding for the Microloan program in his FY2005, FY2006, and FY2007 budget requests to Congress, arguing that \"the 7(a) program is capable of serving the same clientele through the Community Express programs for much lower cost to the Government.\" President Bush also proposed to terminate the Microloan program's marketing, management, and technical assistance grant program in his FY2008 and FY2009 budget requests to Congress. Critics argued in 2007 that about 44% of the SBA's 7(a) program's loan guarantees at that time were for loans under $35,000 (the Microloan program's former loan limit for borrowers), representing more than 17 times the number of loans issued through the SBA's Microloan program. In their view, the 7(a) program had demonstrated that it can service the needs of small businesses targeted by the SBA's Microloan program. They also argued that the SBA's Microloan program's marketing, management, and technical assistance grants program was not necessary because the SBA \"already supports a nationwide network of resource partners who provide counseling and training to entrepreneurs, including Small Business Development Centers, Women's Business Centers, and SCORE.\" They argued that about 94% of Microloan intermediaries are located within 20 miles of a Small Business Development Center, a Women's Business Center, or a SCORE partner. Advocates argue that the SBA's Microloan program is complementary, not duplicative, of the SBA's 7(a) loan guarantee program. They assert that Microloan borrowers are particularly disadvantaged when seeking access to capital, often having no credit history or lower credit scores than most applicants for the SBA's 7(a) loan guarantee program. In their view, it is important that the SBA has a program whose sole focus is to assist Microloan borrowers in starting microbusinesses and have in place intermediaries that \"have essential expertise on the needs of this key demographic.\" Advocates also argue that the SBA's Microloan marketing, management, and technical assistance grants program is \"a crucial element which enables intermediaries to assist microbusiness owners step by step through their development and growth\" and \"not only increases the likelihood of full repayment of the loan, but augments business survival and success.\" As mentioned previously, intermediaries typically require Microloan borrowers to participate in the training program as a condition of the receipt of the microloan. Critics of the SBA's Microloan program argue that it is expensive relative to other SBA programs, costing about $7,506 per small business assisted in FY2017, compared to $1,316 per small business assisted in the SBA's 7(a) loan guarantee program. President George W. Bush cited the program's higher expense when he recommended in his FY2005, FY2006, and FY2007 budget requests to Congress that the program be terminated and when he recommended in his FY2008 and FY2009 budget requests to Congress that the interest rate charged to Microloan intermediaries be increased to make the program \"self-financing.\" Advocates argue that the program's higher cost per small business assisted is unavoidable given the relatively unique nature of the program and the special needs of its borrowers. They assert that intermediaries often have to spend a significant amount of time with Microloan borrowers because those borrowers tend to have less experience with the credit application process and a more difficult time documenting their qualifications for assistance than borrowers in the SBA's loan guaranty programs. Also, in their view, raising the interest rate charged to intermediaries to make the program self-financing would reduce the program's cost, but could also defeat the program's purpose. They assert that because microloans are small, it is difficult for intermediaries to generate enough interest income to cover their costs. As a result, if the interest rate charged to intermediaries is increased, they contend that intermediaries would have to pass the increase on to Microloan borrowers. In their view, increasing the program's cost to Microloan borrowers \"will create an economic hardship for them and make it more difficult for them to grow their businesses\" and \"lead to fewer jobs created and fewer tax dollars paid.\" On September 28, 2017, the SBA's Office of Inspector General (OIG) released an audit of the SBA's administration of the Microloan program, following up on an earlier audit released on December 28, 2009. The OIG reported a number of deficiencies that it argued needed to be addressed \"to ensure effective operation of the Microloan program.\" In 2009, the OIG found that the SBA's oversight of the Microloan program was focused on the intermediaries' ability to repay their SBA loans and was limited to a cursory review of quarterly financial reports supported by only one monthly bank statement. The bank statements were used to simply verify the outstanding balances reported on the intermediaries' quarterly reports. This review process did not allow the SBA to analyze the sources and uses of funds \"which is necessary to detect inappropriate fund transfers between the intermediaries' [Microloan Revolving Funds and Loan Loss Reserve Funds] accounts.\" onsite reviews were conducted only when an intermediary defaulted on its SBA loan. the program was inadequately staffed, operating at that time \"with 6 analysts who oversee more than 160 intermediaries, 460 intermediary loans, and approximately 2,500 microloans per year.\" the reported Microloan borrower default rate of 12% \"appeared low given the high-risk nature of the program.\" the audit identified duplicate loan reporting and 92 Microloan borrowers with outstanding microloan balances exceeding the then-$35,000 limit. the SBA's output performance metrics \"do not ensure the ultimate program beneficiaries, the microloan borrowers, are truly assisted by the program\" and \"without appropriate [outcome performance] metrics, SBA cannot ensure the Microloan program is meeting policy goals.\" The OIG recommended that the SBA \"develop additional performance metrics to measure the program's achievement in assisting microloan borrowers in establishing and maintaining successful small businesses.\" In its 2017 audit, the OIG found that the SBA had taken several actions (see footnote below) to improve its oversight of the Microloan program since the 2009 audit but that the agency still had \"internal control weaknesses\" that prevented it from conducting \"adequate program oversight to measure program performance and ensure program integrity.\" Specifically, the OIG audited 14 intermediary lenders and 52 microloan files and found documentation deficiencies, or differences between the information contained in the lender's loan file versus that in the SBA Microloan Program Electronic Reporting System (MPERS) in 44 of the 52 files. The OIG also argued that the audit revealed that inadequate documentation exists to show that the \"no credit elsewhere\" test had been properly administered; that, in some cases, inadequate supporting documentation existed to show how the microloan funds were used by the borrower; and that, in some cases, interest rates and fees were charged that exceeded the limits allowed under the program rules and regulations. The identified internal control weaknesses were due to the SBA not having an overall site visit plan, an adequate information system, available funding for system improvements, or clear Standard Operating Procedures (SOPs). Additionally, SBA management focused on output-based performance measures instead of outcome measures. The OIG recommended that the SBA (1) continue efforts to improve the information system to include outcome-based performance measurements and ensure the data captured can be used to effectively monitor the Microloan Program compliance, performance, and integrity; (2) develop and implement a site visit plan to comprehensively monitor microloan portfolio performance and ensure program results can be evaluated program-wide; (3) update the Microloan program's SOP 52 00 A to clarify requirements regarding evidence for use of proceeds and credit elsewhere; and (4) update the microloan reporting system manual to reflect current technology capabilities. The SBA concurred with the four recommendations and targeted September 30, 2019, for full implementation. For example, the Microloan program's SOP 52 00 B, effective July 1, 2018, clarified requirements regarding evidence for use of proceeds and credit elsewhere. As mentioned previously, during the 111 th Congress, P.L. 111-240 , the Small Business Jobs Act of 2010, increased the Microloan program's loan limit for borrowers from $35,000 to $50,000, and increased the loan limit for Microloan intermediaries after their first year of participation in the program from $3.5 million to $5 million. It also temporarily allowed the SBA to waive, in whole or in part through FY2012, the nonfederal share requirement for loans to the Microloan program's intermediaries and for grants made to Microloan intermediaries for small business marketing, management, and technical assistance under specified circumstances (e.g., the economic conditions affecting the intermediary and the intermediary's performance) for up to a fiscal year. No bills were introduced during the 112 th Congress concerning the Microloan program. During the 113 th Congress, H.R. 3191 , the Expanding Opportunities to Underserved Businesses Act, would have increased the Microloan program's loan limit for borrowers from $50,000 to $75,000. S. 2487 , the Access to Capital, Access to Opportunity Act, would have increased that limit to $100,000. S. 2693 , the Women's Small Business Ownership Act of 2014, and its House companion bill, H.R. 5584 , would have increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $7 million. These bills would have also removed the requirements that no more than 25% of Microloan technical assistance grant funds may be used to provi de information and technical assistance to prospective borrowers or on third-party contracts to provide the assistance. During the 114 th Congress, as mentioned earlier, S. 1445 , the Microloan Act of 2015, would have removed the requirements that no more than 25% of Microloan technical assistance grant funds may be used to provide information and technical assistance to prospective borrowers or on third-party contracts to provide the assistance. It would have also eliminated the Microloan program's minimum state allocation formula. H.R. 2670 , the Microloan Modernization Act of 2015, and its companion bill in the Senate ( S. 1857 ) would have increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million, increased the program's repayment terms from not more than 6 years to not more than 10 years for loans greater than $10,000, and require the SBA Administrator to establish a rule enabling intermediaries to apply for a waiver of the requirement that no more than 25% of Microloan technical assistance grant funds may be used to provide information and technical assistance to prospective borrowers. The House passed H.R. 2670 on July 13, 2015. S. 1857 was reported by the Senate Committee on Small Business and Entrepreneurship on July 29, 2015. S. 2850 , the Microloan Program Modernization Act of 2016, would have increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million; eliminated the requirements that intermediaries spend no more than 25% of Microloan technical assistance grant funds on technical assistance to prospective borrowers and no more than 25% of those funds on third-party contracts for technical assistance; required the SBA to study and report on the operations of a representative sample of Microloan intermediaries and other intermediaries and make recommendations on how to reduce costs associated with intermediaries' participation in the program and to increase intermediary participation in the program; and required the Government Accountability Office to study and report on the SBA's oversight of the program, SBA's processes to ensure intermediary compliance with program rules and regulations, and the program's overall performance. During the 115 th Congress, P.L. 115-141 , the Consolidated Appropriations Act, 2018, relaxed the requirements that intermediaries spend no more than 25% of Microloan technical assistance grant funds on technical assistance to prospective borrowers and no more than 25% of those funds on third-party contracts for technical assistance by increasing those percentages to 50%. These provisions were originally in H.R. 2056 , the Microloan Modernization Act of 2017, and S. 526 , its companion bill in the Senate (as amended in committee). P.L. 115-232 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019, among other provisions, increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million. These provisions were originally in H.R. 2056 , the Microloan Modernization Act of 2017, and S. 526 , its companion bill in the Senate. During the 111 th Congress, congressional debate concerning proposed changes to the SBA's loan guaranty programs, including the Microloan program, centered on the likely impact the changes would have on small business access to capital, job retention, and job creation. As a general proposition, some, including President Obama, argued that economic conditions made it imperative that the SBA be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small business economic growth and job creation. In terms of specific program changes, the provisions enacted in P.L. 111-240 (allowing the SBA to temporarily waive the Microloan program's nonfederal share matching requirements, increasing the loan limit for borrowers from $35,000 to $50,000, and increasing the loan limit for intermediaries after their first year of participation in the program from $3.5 million to $5 million), P.L. 115-141 (relaxing restraints on the use of technical assistance grants), and P.L. 115-232 (increasing the loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million) are all designed to achieve the same goal: create jobs by enhancing micro borrowers' access to capital and technical training assistance. Determining how specific changes in federal policy are most likely to lead to job creation is a challenging question. For example, a 2008 Urban Institute study concluded that differences in the term, interest rate, and amount of SBA financing \"was not significantly associated with increasing sales or employment among firms receiving SBA financing.\" However, they also reported that their analysis accounted for less than 10% of the variation in firm performance. The Urban Institute suggested that local economic conditions, local zoning regulations, state and local tax rates, state and local business assistance programs, and the business owner's charisma or business acumen also \"may play a role in determining how well a business performs after receipt of SBA financing.\" As the Urban Institute study suggests, given the many factors that influence business success, measuring the SBA's Microloan program's effect on job retention and creation is complicated. That task is made even more challenging by the absence of performance-oriented measures that could serve as a guide. The SBA's Office of Inspector General has recommended that the SBA adopt performance-oriented measures, specifically recommending that the SBA track the number of Microloan borrowers who remain in business after receiving a microloan to measure the extent to which the Microloan program contributed to their ability to stay in business. It has also recommended that the SBA require intermediaries to report the technical assistance provided to each Microloan borrower and \"use this data to analyze the effect technical assistance may have on the success of Microloan borrowers and their ability to repay microloans.\" Other performance-oriented measures that Congress might also consider include requiring the SBA to survey Microloan borrowers to measure the difficulty they experienced in obtaining a loan from the private sector; the ease or difficulty of finding, applying, and obtaining a microloan from an intermediary; and the extent to which the microloan or technical assistance received contributed to their ability to create jobs or expand their scope of operations.", "summary": "The Small Business Administration's (SBA's) Microloan program provides direct loans to qualified nonprofit intermediary lenders who, in turn, provide \"microloans\" of up to $50,000 to small businesses and nonprofit child care centers. It also provides marketing, management, and technical assistance to microloan borrowers and potential borrowers. Authorized in 1991 as a five-year demonstration project, it became operational in 1992, and was made permanent, subject to reauthorization, in 1997. The Microloan program is designed to assist women, low-income, veteran, and minority entrepreneurs and small business owners by providing them small-scale loans for working capital or the acquisition of materials, supplies, or equipment. In FY2018, Microloan intermediaries provided 5,459 microloans totaling $76.8 million. The average Microloan was $14,071 and had a 7.6% interest rate. Critics of the SBA's Microloan program argue that it is expensive relative to alternative programs, duplicative of the SBA's 7(a) loan guaranty program, and subject to administrative shortfalls. The program's advocates argue that it assists many who otherwise would not be served by the private sector and is an important source of capital and training assistance for low-income, women, and minority business owners. Congressional interest in the Microloan program has increased in recent years, primarily because microloans are viewed as a means to assist very small businesses, especially women- and minority-owned startups, to get loans that enable them to create and retain jobs. Job creation, always a congressional interest, has taken on increased importance given continuing concerns about job growth during the current economic recovery. This report opens with a discussion of the rationale provided for having a Microloan program, describes the program's eligibility standards and operating requirements for lenders and borrowers, and examines the arguments presented by the program's critics and advocates. It then discusses P.L. 111-240, the Small Business Jobs Act of 2010, which increased the Microloan program's loan limit for borrowers from $35,000 to $50,000, and the aggregate loan limit for intermediaries after their first year of participation in the program from $3.5 million to $5 million. It also discusses P.L. 115-141, the Consolidated Appropriations Act, 2018, which, among other provisions, relaxed requirements on Microloan intermediaries that prohibited them from spending more than 25% of their technical assistance grant funds on prospective borrowers and more than 25% of those grant funds on contracts with third parties to provide that technical assistance. The act increased those percentages to 50% (originally in H.R. 2056, the Microloan Modernization Act of 2017, and S. 526, its companion bill in the Senate). In addition, P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year 2019, among other provisions, increased the Microloan program's aggregate loan limit for intermediaries after their first year of participation in the program from $5 million to $6 million.", "document_type": "crs"}
{"report": "The Old-Age, Survivors, and Disability Insurance (OASDI) program provides monthly benefits to retired or disabled workers and their family members and to the family members of deceased workers. The OASDI program operates as a pay-as-you-go program in which revenues (collected from payroll taxes and taxation of benefits) are paid out as monthly benefits. These monthly benefits constitute a substantial portion of income for a large segment of recipients. The payroll tax and the taxation of monthly benefits are major contributors to the OASDI program's revenues. For many years, the program's revenues exceeded its costs (i.e., benefit payments), resulting in annual surpluses. Annual surpluses are not needed to cover scheduled benefits, and the money is credited to the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund, or trust funds. The OASDI Trust Funds are invested in nonmarketable U.S. government securities (government bonds), where they earn interest. This interest provides a third source of revenue to the OASDI program. The combined OASDI Trust Funds had approximately $2.9 trillion in assets at the beginning of 2018. The OASDI Trust Funds' Board of Trustees (the trustees) manages the trust funds according to requirements set forth in the Social Security Act. Under current law, the trust funds' assets may be invested only in U.S. government securities issued by the Secretary of the Treasury. In practice, the trust funds invest solely in special, nonmarketable U.S. Treasury securities. By investing only in nonmarketable U.S. Treasury securities, or special issues , the trustees have not intervened directly in the private economy. Investing in marketable securities would signify a departure from the norms that govern the current investment practice. Investing in equities—for example, by purchasing company stock in the open market—would demonstrate a similar departure from the trust funds' investment norms and would represent a government intervention into the private market. Some argue this expansion of investment options would be problematic because it dictates government ownership of, and possibly influence on, private companies. Although this event may never come to pass, the historically higher returns on equity investment may motivate policymakers to enact changes to the OASDI Trust Funds' investment options and practices. Section 201(c) of the Social Security Act establishes the Board of Trustees of the OASDI Trust Funds and states that the Secretary of the Treasury shall be the managing trustee. Subsequent sections outline the main duties of the managing trustee and provide instructions for how to conduct the trust funds' investment activities. The directives include the following: 1. The managing trustee is to invest portions of the trust funds that are not required for current costs. 2. The funds not necessary to meet current costs are to be invested only in interest-bearing securities issued by the Secretary of the Treasury. Upon purchasing a government security (i.e., exchanging tax revenues or earned interest for a government security), the surplus funds are deposited into the General Fund and the funds are available to the rest of the federal government to meet other spending needs, reduce taxes, or reduce publicly held debt. This transaction essentially results in excess revenues being loaned to the government. 3. The U.S. Treasury will make these securities available to the managing trustee for the trust funds' investments. These issues are referred to as special issues or special obligations . a. The maturity of special issues is fixed with due regard for the needs of the trust funds. b. The interest rate earned by special issues is equal to the average market yield on marketable, interest-bearing government securities due at least four years in the future. 4. The managing trustee may redeem any of these special issues, at any time, at par (i.e., face value) plus accrued interest. The ability to redeem the special issues at any time for par value, thus ensuring they cannot lose value, makes them nonmarketable. Other U.S. government issuances, if sold prior to maturity, are redeemed at the prevailing market rate. Because these special issues can always be redeemed at par, their early redemption at any time does not negatively affect the trust funds' value. If it is determined to be in the public interest, the managing trustee may purchase non - special issues (e.g., marketable U.S. securities) at the original or market price. Doing so would imply that any redemption, if needed prior to the maturity date of such security, would return the market price and possibly result in losses to the trust funds' capital. The 1957-1959 Advisory Council on Social Security Financing acknowledged that the trust funds could invest in public (i.e., marketable) issues, but recommended amending the Social Security Act to allow investment in public issues only \"when they will provide currently a yield equal to or greater than the yield that would be provided by the alternative of investing in special issues.\" Had this amendment been enacted into law, it would have mandated the preference for special issues. The Social Security Act provides no direction on how the trust funds' investments should be redeemed. In practice, the trustees have adopted two administrative policies to address this gap. First, special issues are redeemed before maturity only when they are required to cover immediate costs. This policy prevents special issues with a low yield from being redeemed and then immediately reinvested at a higher rate. Second, special issues are redeemed in maturity-date order . This policy provides a reliable order of redemption. Actuarial Note Number 142 , published by the Social Security Administration's Office of the Chief Actuary (OCACT), outlines the OASDI Trust Funds' investment principles. The note acknowledges that the legislative history of the Social Security Act provides only limited guidance, and the rest can be inferred from the administrative policies adopted over the duration of the trust funds' existence. The principle of nonintervention has long been recognized as important in the consideration of the trust funds' finances. The 1957-1959 Advisory Council on Social Security Financing stated the following in its final report: The Council recommends that investment of the trust funds should, as in the past, be restricted to obligations [issues] of the United States Government. Departure from this principle would put trust fund operations into direct involvement in the operation of the private economy or the affairs of State and local governments. Investment in private business corporations could have unfortunate consequences for the social security system—both financial and political—and would constitute an unnecessary interference with our free enterprise economy. Similarly, investment in the securities of State and local governments would unnecessarily involve the trust funds in affairs which are entirely apart from the social security system. The principle of nonintervention is reinforced by the creation and use of the special issue securities as the OASDI Trust Funds' primary investment mechanism. The purchase or sale of large quantities of marketable government securities in the open market by the OASDI Trust Funds could cause market disruptions and appear as interference in the open market operations of the Federal Reserve. Section 201(d) of the Social Security Act explicitly states the OASDI Trust Funds may only be invested in interest-bearing securities issued by or guaranteed by the U.S. government. These securities are backed by the full faith and credit of the government, offering them a high measure of protection. Furthermore, to the degree that the trust funds remain invested solely in special obligations (special issues), they are well protected from any loss to capital, earning a risk-free return. With respect to operating neutrally, Actuarial Note Number 142 states the following: Trust fund investment policies have, for the most part, followed a principle of neutrality, in the sense that they have generally been intended neither to advantage or disadvantage the trust funds (the lenders) with respect to other Federal accounts (the borrowers). The underlying concept is that when the trust funds invest assets by lending to the general fund of the Treasury, these transactions should produce investment results similar to those that might be obtained by a prudent, private sector investor in Federal securities. If the general fund could not borrow from the trust funds, it would have to meet its borrowing needs by selling additional securities to just such private investors. The practice of neutrality is required, in part, by law in determining the interest rates for the special issues (see \" Current Policies and Practices \"). It is also encouraged by two administrative policies adopted by the trust funds: (1) only redeeming special issues before maturity when they are needed to meet program costs and (2) ensuring the maturities of special issues are evenly distributed among 1-year through 15-year durations. Note 142 concludes that \"the administrative policy governing early redemption of special obligations [special issues], in combination with the policy of spreading maturities, is designed to compensate at least partially for, or neutralize, the advantage of no-risk liquidity.\" The parameters for the trust funds' investment set forth in the Social Security Act and the administrative policies adopted over time render active or day-to-day management of the trust funds' investments unnecessary. The types of possible investment vehicles are limited by law and by common practices. These practices have also eliminated discretion for when and why securities should be redeemed. Note 142 also explains that adhering to the principles of security and neutrality necessitates following the principle of minimal management, as active management (e.g., profit maximizing) would violate the first two principles. Figure 1 displays the returns earned by the assets in the trust funds over the period 1940 to 2017. The average interest rate is the average of the monthly interest rates on new special issues acquired by the trust funds during that year. In 2003, for instance, the average interest rate for the special issues acquired by the OASDI Trust Funds was 4.1%. The effective interest rate is the interest earned during the calendar year on all of the securities held by the trust funds divided by the average amount of securities held by the trust funds during the year. Since 1985, the effective interest rate has been higher than the average interest rate due to securities in the trust funds acquired in earlier years when interest rates were much higher. For example, Figure 1 shows that in 2003 the effective interest earned by all special issues held in the trust funds was 6.0%. This relationship between the average interest rate and the effective interest rate is a consequence of the trust funds' special issues being evenly spread over maturity periods ranging from 1 year to 15 years. In an environment of falling interest rates, the trust funds' investment practices result in one-fifteenth of the trust funds' assets coming due each year and being invested at a lower interest rate. For instance, a portion of the special issues acquired in 1989 was invested for a duration of 15 years, thus maturing in 2003. Those special issues returned an average rate of 8.7% and would have then been invested in assets that were expected to earn an average rate of 4.1% (i.e., the average interest rate for new special issues in 2003). Similarly, a portion of special issues acquired in 1994 for a duration of 10 years earned an average rate of 7.1%; these special issues would also have been invested to earn an average of 4.1% (i.e., the average interest rate for new special issues in 2003). It must be reiterated, however, that this duration structure has afforded the trust funds a higher effective rate than the average rate, earned in an essentially risk-free manner. Criticism of the OASDI Trust Funds' current investment practices stems from the program's long-term solvency issues. The program is facing a funding shortfall due largely to demographic factors, and restoring long-term solvency would require a payroll tax increase or reduction in benefits. Critics argue that if the trust funds had earned a better return in the past, they would be in a better long-term financial position. The 1994-1996 Advisory Council on Social Security stated the following in its final report: Historically, returns on equities have exceeded those on Government bonds (where all Social Security funds are now invested). If this equity premium persists, it would be possible to maintain Social Security benefits for all income groups of workers, greatly improving the money's worth for younger workers without incurring the risks that could accompany individual investment.… As a matter of financial theory, the diversification achieved by investing in both stocks and government bonds should also reduce portfolio risk for the OASDI Trust Fund. Starting in 1998, the Social Security Advisory Board (SSAB) replaced the advisory councils. Since then, the SSAB has released numerous reports that affirm the prior advisory council's findings. In reports from 2005 and 2010, the SSAB noted that the increased rate of return offered by equities would eliminate a large portion of the projected funding shortfall and reduce the need for tax increases or benefit reductions. Because of declining interest rates and the trust funds' duration and reinvestment practice, a portion of the trust funds' holdings was continually being invested in securities that earned less than they did in the past (see Figure 1 ). This trend is expected to continue. Although the SSA's OCACT projects interest rates to increase over the next 10 years, much of the maturing holdings would still be reinvested at a lower rate. Figure 2 shows the value of the asset reserves in the OASDI Trust Funds at the end of each calendar year from 1957 to 2034 based on historical data and projections. The figure shows the value of assets growing from 1983 through 2017. The Social Security Amendments of 1983 established a number of provisions, including increasing the full retirement age, adding new federal workers into the OASDI program, and taxing Social Security benefits, which had a positive effect on the OASDI Trust Funds. From 1983 to 2017, OASDI program revenues exceeded program cost, resulting in annual surpluses. However, during the 1983-2017 period of sustained annual surpluses, the trust funds experienced falling interest rates (see Figure 1 ). Figure 2 depicts that at the end of 2017, the trust funds are also projected to be at peak value. For 2018, the trustees project that program costs will exceed program revenues. The assets previously invested in the trust funds will be drawn down to augment annual program revenues and fulfill annual scheduled payments. The trustees also project that under current law costs will exceed revenues for the entirety of their 75-year projection period. Under the projection, the OASDI program will be able to draw upon the trust funds' assets to fulfill scheduled payments until 2034, the date at which the trustees project assets will be depleted. The 1994-1996 Advisory Council on Social Security identified the demographic implications of the aging b aby b oom generation—those born from 1946 through 1964—and the associated effects on the trust funds as an issue. As a result, the council's final report recommended investing a portion of the trust funds in equities to help alleviate pressure on the OASDI program's long-term actuarial balance. Other alternatives included investments in private (e.g., corporate) bonds, or in social and economic activities, such as housing construction. The primary argument for the trust funds to invest in private equity is that historical returns on equity have been greater than returns on government bonds. Some critics of this approach are concerned that by investing in private companies and gaining some control over their activities, the federal government would be intervening in the market, resulting in what some have described as \"socialism by the backdoor method.\" The advisory council reasoned as follows: Another practical disadvantage would be the need for a far-reaching and deep-searching investment policy that would permit the trust funds to obtain an adequate rate of interest with reasonable security of principal. Under such a policy, the Federal Government would, in effect, be setting itself up as a rating organization, because the investment procedures would naturally have to be open to full public view. If no preference were shown for different types of securities, but rather investments were made widely and indiscriminately, there would be a substantial risk of diminution of investment income, or even loss of principal. Alternatively, it could be argued that if the trust funds invested passively into an index fund, the managing trustee or Board of Trustees could forgo voting rights. Although this may help to solve, or at least alleviate, the issue of government control over private companies, it may introduce new risks. The value of shares in companies included in the chosen index would receive a steady stream of support from routine and unconditional government purchase of their shares. Investing trust fund assets in index funds—for example, by investing in an index of the largest 500 companies—may effectively create an atmosphere where these companies, by the value of their market capitalization , are chosen as the \"winners\" via the trust funds' purchases. The benefits of being among the winners could provide incentives for companies near the cutoff in market capitalization to adopt accounting methods not generally accepted as good practice. Deceptive accounting methods could be used to inflate stock prices and market capitalization for the purpose of becoming a winner wherein the company would benefit from consistent purchase of its stock by the trust funds. Investing the trust funds' assets in private equities or bonds could also introduce instability to the financial markets. Whereas Figure 2 shows that the trust funds' values on a year-to-year basis are smooth, the trust funds' balance fluctuates greatly throughout the year. The need to redeem the trust funds' assets throughout the year, combined with the trust funds' ebbs and flows, presents conditions that have the potential to disrupt private markets. Large sales of private stocks and bonds needed to smooth fluctuations in the trust funds' value may create a liquidity crisis where irregular price movements prohibit sales and purchases at market prices; a lack of liquidity is also a reason critics cite for not investing in social projects such as housing or hospitals. Lastly, for the trust funds to purchase equities, some portion of the trust funds' existing special issues would need to be redeemed to provide the necessary capital. Research presented in the following sections suggests a phase-in of equity purchases worth 2.67 percentage points of the trust funds' value per year. Phasing in the purchase of equities in 2018 at 2.67 percentage points would have required the redemption of approximately $77 billion worth of special issues. In other words, the federal government would have needed to find $77 billion to redeem these special issues so the cash could be invested in equities. Providing that capital for the new equity investments would require a corresponding increase in publicly held debt, a corresponding increase in tax revenue, or a corresponding reduction in other government spending. Subsequent years would require similar redemptions as well. Investing the trust funds' assets in equities could introduce instability to the financial markets. Conversely, the trust funds would also be subject to the volatility already present in the markets. The higher average returns offered by equity investments are accompanied by higher risk. The degree of volatility, or risk, among investment vehicles is positively correlated to returns; that is, investments that can offer greater returns are accompanied by greater volatility. Likewise, investments that offer lower returns are accompanied by lower volatility. Investing in equities may improve the overall financial health of the trust funds, but it would likely be accompanied by higher volatility, which could pose challenges for a system dependent on dedicated sources of funding. Figure 3 displays the effective interest rate earned by the special issues in the combined OASDI Trust Funds and the returns of the equity market as measured by the Wilshire 5000 Total Market Index, or Wilshire 5000. During the 1983-2017 period, the Wilshire 5000 returns outperformed the trust funds' effective interest rate in 21 of the 35 years. The average effective interest rate of special issues in the OASDI Trust Funds over this period was 5.8% versus an average return of 12.7% earned in the Wilshire 5000. At the same time, the equity returns demonstrated a higher degree of volatility. Many of the issues mentioned above are similar to the experiences of the Railroad Retirement Board, or RRB, an independent federal agency that administers benefits to railroad workers and their families. In 2001, Congress passed the Railroad Retirement Survivors' Improvement Act, which established the National Railroad Retirement Investment Trust (NRRIT). To ensure independence and limit political interference, the NRRIT is not a part of the federal government and is independent of the RRB. Congress aimed to increase RRB funding by realizing higher returns than would be possible from investing solely in government securities. As such, the act requires the NRRIT to invest a portion of the RRB's assets in non-U.S. government securities, such as private stocks and bonds. The NRRIT investment practices require a diversified portfolio to minimize risk and avoid disproportionate influence over a firm or industry. From the NRRIT's inception to the end of FY2016, the investment returns helped increase the value of assets held by the RRB. From FY2003 to FY2016, annual returns averaged 7.9%, compared with expected returns of 8%. These rates of return are higher than what would have been earned if the NRRIT invested solely in government securities ( Figure 1 ); prior to the act's implementation, the NRRIT was invested in government securities in much the same manner as the OASDI Trust Funds. The overall size of assets held by the NRRIT is considerably smaller than the OASDI Trust Funds. For instance, at the end of FY2017, the market value of NRRIT-managed assets was $26.5 billion, whereas at the end of CY2017, the OASDI Trust Funds held $2,892 billion in assets. For a complete overview of the NRRIT, see CRS Report RS22782, Railroad Retirement Board: Trust Fund Investment Practices . With accurate and precise knowledge of the OASDI Trust Funds' cash flows from 1983 through 2016, it is possible to model the trust funds' performance had they participated in alternative investments. Research published by Burtless et al. at the Center for Retirement Research in 2017 sought to determine how the trust funds would have benefited if alternative investments began in 1984, after the Social Security Amendments of 1983 ushered in a 34-year period of annual surpluses, and in 1997, after the last Advisory Council on Social Security recommended trust fund investment in equity. This analysis compares how incorporating equity investments would have affected the OASDI Trust Funds ratio. The t rust f und s ratio is the measure of the trust funds' asset reserves at the beginning of the year divided by the projected total cost for the year. According to the trustees, a trust funds ratio above 100% throughout the short-range period (10 years) indicates a financially healthy program, whereas a ratio below 100% signals the program is in a financially inadequate position. The results are presented in Figure 4 below. The scenarios presented below assume that the amount of the trust funds' reserves invested in equities would increase by 2.67 percentage points per year until 40% of reserves were allocated in equities. That is, the trust funds' purchase of equities was phased in until equities represented 40% of total assets. This analysis yields several insights, the most pertinent of which may be that if the trust funds had invested in equities in the past, they would have higher levels of assets today than they currently do. Figure 4 shows that at the end of 2016, undertaking equity investments in 1983 would have left the trust funds with reserves enough to cover about an additional 1.2 years of program costs (424% less 302%); equity investing beginning in 1997 would have supplied the trust funds with assets to cover an additional 0.88 years of program costs (390% less 302%). In other words, the trust funds would still be facing long-term insolvency even with equity investment. A second item of note is that from 1983 to 2008, when the actual trust funds ratio peaked, the analysis shows that investing in equities would not have drastically improved the financial situation. The actual trust funds ratio was 358% in 2008, contrasted with a ratio of 371% if investment in equities began in 1984 and a ratio of 383% if investment began in 1997. By 2008, the current investment strategy resulted in a similar trust funds ratio, accomplished with less risk, with no intervention into the capital markets, and at minimal cost. A third observation is that despite several large downturns, most notably the 2008-2009 financial crisis, the trust funds would still stand in a better financial position today had equity investments been incorporated. Lastly, in each of these two alternative cases, the trust funds would have owned less than 10% of the total value of the stock market today. This result owes to the growth in aggregate equity value contrasted with the phased-in purchases of equity. Trust fund ownership at this level would perhaps assuage the concerns of critics wary of government intervention in the equity markets. OCACT maintains relevant estimates on policy options that would affect the program's long-range solvency. The options for investing in equities presented in Table 1 vary by phase-in date, percentage of reserves that would be invested in equities, and assumed real rate of return. Policy options that incorporate equity investing can be assessed by examining their effects on the long-range actuarial balance . Table 1 shows that under current law, the long-range actuarial balance is -2.84% of taxable payroll, indicating that under intermediate assumptions provided in T he 2018 Annual Report , an approximately 2.84-percentage-point increase in payroll tax rate (from current the 12.40% to 15.24%) or a comparable reduction in benefits would be needed to maintain program solvency throughout the projection period and result in a trust funds ratio of 100% at the end of the projection period. As shown in Table 1 , none of the options that incorporate investing the trust funds in equities is projected to result in an appreciable change in the long-term solvency of the program. The best-performing option, G1, involves investing 40% of the OASDI Trust Funds into equities, phased in from 2019 to 2033, and it assumes a real rate of return of 6.2%. Although OCACT projects this option to improve the long-range actuarial balance by 0.51 percentage points, the trust funds' cash flow operations are still projected to result in depletion, albeit in 2035, one year later than expected under current law. As shown in Figure 2 , the combined OASDI Trust Funds value at the end of 2017 represents a peak value. As it becomes necessary to draw upon those assets to pay scheduled benefits, there will be less and less money that can be invested. Therefore, the projected drawdown of the trust funds makes any potential advantage of investing in equities less effective over time. Once the trust funds are depleted, the OASDI program's cost is projected to remain greater than revenues indefinitely. When the trust funds are depleted, any measure involving investment in equities would have no effect on solvency, as there would be no money to invest. The Burtless et al. research that examined how the trust funds would have fared by including alternative investments from 1984 to 2016 also sought to determine how the trust funds would perform moving forward from 2017. Table 1 shows that policy options that do not include any increase to revenue do not result in an appreciable change to the current trajectory of the OASDI Trust Funds' insolvency. As such, the researchers' simulations first require that Congress passes legislation to \"restore balance to the system.\" To restore balance to the system, the authors assume that payroll taxes are raised to eliminate the long-run funding shortfall—at the end of 2016 this was projected to require a 2.58-percentage-point increase in the payroll tax. After the balance is restored, there is no longer any long-term funding shortfall, as the actuarial deficit is brought to zero. If enacted in 2016, an increase in the payroll tax of 2.58 percentage points, on a stand-alone basis, would have resulted in the projected solvency being extended from 2034 to 2091. With balance now restored to the system, the authors present two scenarios. The first scenario is a continuation of current policy in which the trust funds remain solely invested in special issues. The second scenario presents projections in which the trust funds increase the amount of their reserves invested in equities by 2.67 percentage points per year until no more than 40% of the trust funds' assets are equities. This second scenario is similar to the simulated scenarios of past performance presented in \" Alternative Investments and Review of Past Performance .\" Once the OASDI program is brought back into balance (i.e., projected to be solvent throughout the 75-year projection period), Monte Carlo simulations are used to model the two scenarios. The results of continuing to invest only in special issues are presented below in Figure 5 , which shows the range of outcomes for the trust funds ratios for simulated special issue returns grouped into percentiles based on the outcome of the final year in the simulation. For instance, the 95 th percentile shows that the average of the top 5% of simulations resulted in a trust funds ratio of 100% in the final year, 2091. Conversely, the 5 th percentile, those simulations in the bottom 5%, resulted in trust fund depletion in 2083, on average. For reference, the graph also shows the projected trust funds ratio from T he 2018 Annual Report (solid black line), which does not include any increase in payroll tax or investment in equities. The results of the simulations correspond with the Trustees' 2018 Annual R eport . The simulations at the 50 th percentile, the best guess estimate, project that program solvency would be extended to about 2090, assuming first a reduction in the actuarial deficit. The simulations at the 5 th percentile resulted in maintaining short-range financial adequacy through 2071 and solvency through 2082. In essence, Figure 5 shows the improved adequacy of the trust funds' financial position from a tax increase but with no change to the current investment practices. In contrast, a second scenario, shown in Figure 6 , simulates how incorporating equity investment following the tax increase, wherein the trust funds hold a mixed portfolio of equity (at most 40%) and special issues (at least 60%), would alter the trust funds' performance. The results in Figure 6 show the potential benefits from equity investing. In this scenario, the simulations at the 50 th percentile, the best guess estimate, resulted in a mixed portfolio that is valued at 330% of the next year's projected costs (i.e., a trust funds ratio of 330%) at the end of the projection period. Comparing the 50 th percentile outcomes under each scenario shows that incorporating equity investments could improve the trust funds' long-range financial position. The only instance in which the special issue-only practice performs similarly to the mixed portfolio is under the worst possible outcomes, those in the 5 th percentile of each scenario. In these groups, the mixed portfolio fails the short-range adequacy test at an earlier date, 2069 versus 2071 for the special issue-only; however, it remains solvent for two years longer than the special issue-only, 2084 versus 2082. In almost all simulated scenarios, the inclusion of equities into the trust funds' investment practices improved their long-range financial position. The scenarios presented above appear suggest that after the long-term funding shortfall is eliminated, the inclusion of equity investing into the trust funds could improve the Social Security program's solvency. A change of this nature would represent a large departure from current policy. Since 2002, the National Railroad Retirement Investment Trust (NRRIT) has incorporated equity purchases in its management of a portion of Railroad Retirement Board (RRB) assets. From FY2003 through FY2017, the NRRIT achieved annual rates of return after fees of 8.3%. From calendar years 2003 through 2017, the OASDI Trust Funds achieved an average effective return of 4.5%. Although this comparison in performance between the NRRIT and OASDI Trust Funds covers the 2008-2009 financial crisis, it is somewhat limited in overall duration. In addition, any comparison between the two programs must take into account the smaller size of the NRRIT. The board of the NRRIT is composed of seven trustees who have expertise in financial management and pension plans. Three of the members are selected by labor unions and three by railroad management. These six members select the final trustee, and all trustees are limited to three-year terms. The trustees hire independent investment managers to invest the NRRIT assets, with no one manager controlling more than 10% of the assets. Whereas features such as a nonfederal entity of trustees seem easily replicable, other features of the NRRIT model may prove more difficult to copy. The pursuit of higher returns is accompanied by additional risk (see \" Equity Investment and Risk \"). To compensate for the additional risk, the NRRIT has developed safeguards to protect against periods of low returns. These safeguards include fund reserves of four to six years' worth of benefits (i.e., trust fund ratio of 400% to 600%) and automatic payroll tax adjustments on employees and employers. To acquire asset reserves of at least four years of annual program costs, thus maintaining a safeguard similar to the NRRIT's, the OASDI Trust Funds would require substantial revenue-increasing or benefit-reducing measures. For instance, as discussed in the previous section, for the OASDI Trust Funds to be brought into balance before the purchase of equities, an increase of 2.58 percentage points to the payroll tax is required. Even with the additional returns generated by equity investments under the best-case scenario presented in Figure 6 (i.e., simulated equity returns in the 95 th percentile), a trust funds ratio of 400% is not attained until 2035. Some features of the NRRIT model may prove more difficult for policymakers to accept. For instance, automatic payroll tax adjustments could prove hard to implement. About 93% of the work in the United States is covered by Social Security. Given this high coverage rate, some policymakers may object to automatic adjustments to a payroll tax that affects so many workers. In addition, an automatic increase of the payroll tax to maintain a specific trust funds ratio (e.g., 400%) would most likely occur during a period of low equity returns. Thus, such an increase could occur when workers and businesses were already subject to negative equity returns. However, a more sizeable trust funds ratio, such as 600%, could provide adequate contingency funds such that an automatic increase in the payroll tax would not be prompted. Periods with a high trust funds ratio and positive equity returns could prompt an automatic payroll tax decrease. Lastly, the amount of funds managed by the NRRIT versus those managed by the OASDI Trust Funds are different. At the end of FY2017, the NRRIT managed assets with a market value of $26.5 billion. At the end of CY2017, the OASDI Trust Funds managed assets worth $2,892 billion. Because the NRRIT is an independent nongovernmental entity, it is not subject to the same oversight as federal agencies. Several times since its inception, the RRB Office of the Inspector General (OIG) has expressed concerns regarding the effectiveness of proper oversight of the NRRIT. Most specifically, the OIG noted that, under current policy, there are fewer safeguards protecting the NRRIT than for retirement investments of federal government and private-sector workers. Given the magnitude of the Social Security program and its importance for retired workers, a similar absence oversight may prove unacceptable to policymakers. Under current law, and assuming the Board of Trustees' intermediate projections will unfold close to its assumptions, the long-range solvency of the OASDI Trust Funds is at risk. In addition, under current law, the trust funds' financial position would not be improved by the inclusion of alternative investments, namely equity investments. However, should Congress pass legislation to reduce the actuarial deficit, available research suggests that investing the trust funds' newly increased assets in equities could result in a higher trust funds ratio (i.e., greater solvency) than if the trust funds' assets were invested in only government bonds. Phasing in equity investments over a sufficient length of time could minimize adverse effects and result in the trust funds holding a relatively small position in the stock market. Although much smaller in scale, the practices of the RRB provide a framework and history for the use of equity investment in a trust fund (see CRS Report RS22782, Railroad Retirement Board: Trust Fund Investment Practices ). This would, however, require putting aside current investment principles and methods that have guided investment practices. These practices have led the OASDI Trust Funds to be managed at a low cost with minimal risk and resulted in no direct intervention in the private equity markets.", "summary": "The Old-Age, Survivors, and Disability Insurance (OASDI) program provides monthly benefits to retired or disabled workers and their family members and to the family members of deceased workers. These monthly benefits constitute a substantial portion of income for a large segment of recipients. The OASDI program is financed primarily by payroll taxes on covered earnings up to an annual limit, as well as federal income taxes paid by some beneficiaries on a portion of their OASDI benefits. OASDI program revenues are invested in federal government securities held by the Federal Old-Age Survivors Insurance (OASI) and Federal Disability Insurance (DI) Trust Funds, where they earn interest. The interest earned on assets in the trust funds provides a third stream of revenue to the OASDI program. The OASDI Trust Funds are overseen by a Board of Trustees, which is composed of six members: the Secretary of the Treasury, who is the managing trustee; the Secretary of Labor; the Secretary of Health and Human Services; the Commissioner of Social Security; and two public trustees, who are appointed by the President with advice and consent of the Senate. By law, the assets of the OASDI Trust Funds may be invested only in federal government securities issued by the Secretary of the Treasury. Although the Managing Trustee may invest in U.S. securities that are sold on the open market (marketable securities) if it is deemed in the public interest to do so, in practice, the OASDI Trust Funds' assets are invested in nonmarketable U.S. securities, known as special issues. The practice of investing solely in special issues has led the Board of Trustees to effectively adopt the principles of (1) nonintervention in the private economy, (2) security, (3) neutrality, and (4) minimal management. Although not explicitly codified in the Social Security Act, these principles have provided a framework to guide the trustees in their investment operations. At the beginning of 2018, the trust funds reported asset reserves of around $2.9 trillion, which represents the projected peak value of the funds. The OASDI program's total costs are projected to exceed its total revenues, due largely to the aging of the baby boomers, thus requiring the trust funds to draw down their assets to pay scheduled benefits. The trustees expect this trend to continue indefinitely, with the trust funds' reserves reaching depletion in 2034. To extend the trust funds' solvency, some argue the trust funds' assets should be invested in equities (i.e., stocks sold on the open market). The main argument for this approach is that equities have historically produced higher rates of return, on average, than U.S. securities, which are the trust funds' only investment option under current law. Proposals favoring equity investment seek to earn higher rates of return for the trust funds than provided by special issues. However, the higher average rates of return associated with equity investing come with more risk. Investing the trust funds in equities would expose them to a higher degree of volatility than the current investment practices. The trustees estimate that bringing OASDI program revenues into balance with program costs would require an immediate permanent increase of 2.78 percentage points in the payroll tax rate, from 12.40% to 15.18%, a permanent reduction in benefits of about 17%, or some combination of the two approaches. Although investing in equities may result in a higher return on the trust funds' assets, such a proposal would, by itself, have little effect on the program's long-term outlook, and it would have budgetary implications by requiring the immediate liquidation of the trust funds' existing assets. Because the trust funds are projected to be depleted in 2034 and because costs are expected to exceed revenues indefinitely, any proposal to invest the trust funds' asset in equities without first bringing the OASDI program into balance would result in little change to the program's solvency. Should Congress pass legislation that reduces the actuarial deficit, research indicates that including equity in the trust funds' investment practices could improve the program's financial position. This practice, if enacted, would disregard several of the trust funds' investment principles.", "document_type": "crs"}
{"report": "As congressional policymakers continue to debate telecommunications reform, a major discussion point revolves around what approach should be taken to ensure unfettered access to the internet. The move to place restrictions on the owners of the networks that compose and provide access to the internet, to ensure equal access and nondiscriminatory treatment, is referred to as \"net neutrality.\" There is no single accepted definition of \"net neutrality.\" However, most agree that any such definition should include the general principles that owners of the networks that compose and provide access to the internet should not control how consumers lawfully use that network, and they should not be able to discriminate against content provider access to that network. A major focus in the debate is concern over whether the regulatory framework as delineated in the Federal Communications Commission's (FCC's) 2015 Open Internet Order is the appropriate approach to ensure access to the internet for content, services, and applications providers, as well as consumers, or whether a less regulatory approach contained in the 2017 Order is more suitable. The issue of regulation of and access to broadband networks is currently being addressed in three venues at the FCC, where the commissioners on December 14, 2017, adopted (3-2) an Order that went into effect on June 11, 2018, that revokes the 2015 regulatory framework in favor of one that reverses the 2015 classification of broadband internet access services as a telecommunications service under Title II of the Communications Act, provides for a less regulatory approach, and shifts much of the oversight from the FCC to the Federal Trade Commission (FTC) and the Department of Justice (DOJ); in the courts, where consolidated petitions for review of the 2017 Order are under consideration in the U.S. Court of Appeals, D.C. Circuit; and a suit filed in the U.S. District Court of the Eastern District of California by the DOJ and various trade groups, challenging the legality of a California internet regulation law, is pending; in the 116 th Congress, where debate over what the appropriate regulatory framework should be for broadband access continues. Whether Congress will take broader action to amend existing law to provide guidance and more stability to FCC authority over broadband access remains to be seen. In 2005 two major actions dramatically changed the regulatory landscape as it applied to broadband services, further fueling the net neutrality debate. In both cases these actions led to the classification of broadband internet access services as Title I information services, thereby subjecting them to a less rigorous regulatory framework than those services classified as telecommunications services. In the first action, the U.S. Supreme Court, in a June 2005 decision ( National Cable & Telecommunications Association v. Brand X Internet Services ), upheld the Federal Communications Commission's (FCC's) 2002 ruling that the provision of cable modem service (i.e., cable television broadband internet) is an interstate information service and is therefore subject to the less stringent regulatory regime under Title I of the Communications Act of 1934. In a second action, the FCC, in an August 5, 2005, decision, extended the same regulatory relief to telephone company internet access services (i.e., wireline broadband internet access, or DSL), thereby also defining such services as information services subject to Title I regulation. As a result, neither telephone companies nor cable companies, when providing broadband services, are required to adhere to the more stringent regulatory regime for telecommunications services found under Title II (common carrier) of the 1934 act. However, classification as an information service does not free the service from regulation. The FCC continues to have regulatory authority over information services under its Title I, ancillary jurisdiction. Similarly, classification under Title II does not mean that an entity will be subject to the full range of regulatory requirements, as the FCC is given the authority, under Section 10 of the Communications Act of 1934, to forbear from regulation. Simultaneous to the issuing of its August 2005 information services classification order, the FCC also adopted a policy statement (internet policy statement) outlining four principles to \"encourage broadband deployment and preserve and promote the open and interconnected nature of [the] public Internet.\" The four principles are (1) consumers are entitled to access the lawful internet content of their choice; (2) consumers are entitled to run applications and services of their choice (subject to the needs of law enforcement); (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (4) consumers are entitled to competition among network providers, application and service providers, and content providers. Then-FCC Chairman Martin did not call for their codification. However, he stated that they would be incorporated into the policymaking activities of the commission. For example, one of the agreed-upon conditions for the October 2005 approval of both the Verizon/MCI and the SBC/AT&T mergers was an agreement made by the involved parties to commit, for two years, \"to conduct business in a way that comports with the commission's (2005) Internet policy statement.\" In a further action, AT&T included in its concessions to gain FCC approval of its merger to BellSouth an agreement to adhere, for two years, to significant net neutrality requirements. Under terms of the merger agreement, which was approved on December 29, 2006, AT&T not only agreed to uphold, for 30 months, the FCC's internet policy statement principles, but also committed, for two years (expired December 2008), to stringent requirements to \"maintain a neutral network and neutral routing in its wireline broadband Internet access service.\" Then-FCC Chairman Genachowski announced, in a September 21, 2009, speech, a proposal to consider the expansion and codification of the 2005 internet policy statement and suggested that this be accomplished through a notice of proposed rulemaking (NPR) process. Shortly thereafter, an NPR on preserving the open internet and broadband industry practices was adopted by the FCC in its October 22, 2009, meeting. (See \" The FCC 2010 Open Internet Order ,\" below.) In perhaps one of its most significant actions relating to its internet policy statement to date, the FCC, on August 1, 2008, ruled that Comcast Corp., a provider of internet access over cable lines, violated the FCC's policy statement when it selectively blocked peer-to-peer connections in an attempt to manage its traffic. This practice, the FCC concluded, \"unduly interfered with Internet users' rights to access the lawful Internet content and to use the applications of their choice.\" Although no monetary penalties were imposed, Comcast was required to stop these practices by the end of 2008. Comcast complied with the order, and developed a new system to manage network congestion. Comcast no longer manages congestion by focusing on specific applications (such as peer-to-peer), nor by focusing on online activities, or protocols, but identifies individual users within congested neighborhoods that are using large amounts of bandwidth in real time and slows them down, by placing them in a lower priority category, for short periods. This new system complies with the FCC internet principles in that it is application agnostic; that is, it does not discriminate against or favor one application over another but manages congestion based on the amount of a user's real-time bandwidth usage. As a result of an April 6, 2010, court ruling, the FCC's order was vacated. Comcast, however, stated that it will continue to comply with the internet principles issued in the FCC's August 2005 internet policy statement. (See \" Comcast v. FCC ,\" below.) Despite compliance, however, Comcast filed an appeal in the U.S. Court of Appeals for the District of Columbia, claiming that the FCC did not have the authority to enforce its internet policy statement, therefore making the order invalid. The FCC argued that while it did not have express statutory authority over such practices, it derived such authority based on its ancillary authority contained in Title I of the 1934 Communications Act. The court, in an April 6, 2010, decision, ruled (3-0) that the FCC did not have the authority to regulate an internet service provider's (in this case Comcast's) network management practices and vacated the FCC's order. The court ruled that the exercise of ancillary authority must be linked to statutory authority and that the FCC did not in its arguments prove that connection; it cannot exercise ancillary authority based on policy alone. More specifically, the Court ruled that the FCC \"failed to tie its assertion of ancillary authority over Comcast's Internet service to any ['statutorily mandated responsibility'].\" Based on that conclusion the court granted the petition for review and vacated the order. The impact of this decision on the FCC's ability to regulate broadband services and implement its broadband policy goals remains unclear. Regardless of the path that is taken, then-FCC Chairman Genachowski stated that the court decision \"does not change our broadband policy goals, or the ultimate authority of the FCC to act to achieve those goals.\" He further stated that \"[T]he court did not question the FCC's goals; it merely invalidated one, technical, legal mechanism for broadband policy chosen by prior Commissions.\" Consistent with this statement, the FCC in a December 21, 2010, action adopted the Open Internet Order to establish rules to maintain network neutrality. (See \" The FCC 2010 Open Internet Order ,\" below.) The FCC adopted, on December 21, 2010, an Open Internet Order establishing rules to govern the network management practices of broadband internet access providers. The order, which was passed by a 3-2 vote, intended to maintain network neutrality by establishing three rules covering transparency, no blocking, and no unreasonable discrimination. More specifically fixed and mobile broadband internet service providers were required to publicly disclose accurate information regarding network management practices, performance, and commercial terms to consumers as well as content, application, service, and device providers; fixed and mobile broadband internet service providers were both subject, to varying degrees, to no blocking requirements. Fixed providers were prohibited from blocking lawful content, applications, services, or nonharmful devices, subject to reasonable network management. Mobile providers were prohibited from blocking consumers from accessing lawful websites, subject to reasonable network management, nor were they allowed to block applications that compete with the provider's voice or video telephony services, subject to reasonable network management; and fixed broadband internet service providers were subject to a \"no unreasonable discrimination rule\" that states that they shall not unreasonably discriminate in transmitting lawful network traffic over a consumer's broadband internet access service. Reasonable network management shall not constitute unreasonable discrimination. Additional provisions in the order included those which provided for ongoing monitoring of the mobile broadband sector and created an Open Internet Advisory Committee to track and evaluate the effects of the rules and provide recommendations to the FCC regarding open internet policies and practices; while not banning paid prioritization, stated that it was unlikely to satisfy the \"no unreasonable discrimination\" rule; raised concerns about specialized services and while not \"adopting policies specific to such services at this time,\" would closely monitor such services; called for review, and possible adjustment, of all rules in the order no later than two years from their effective date; and detailed a formal and informal complaint process. The order, however, did not prohibit tiered or usage-based pricing (see \" Metered/Usage-Based Billing ,\" below). According to the order, the framework \"does not prevent broadband providers from asking subscribers who use the network less to pay less, and subscribers who use the network more to pay more\" since prohibiting such practices \"would force lighter end users of the network to subsidize heavier end users\" and \"would also foreclose practices that may appropriately align incentives to encourage efficient use of networks.\" The authority to adopt the order abandoned the \"third way approach\" previously endorsed by then-Chairman Genachowski and other Democratic commissioners, and treated broadband internet access service as an information service under Title I. The order relied on a number of provisions contained in the 1934 Communications Act, as amended, to support FCC authority. According to the order the authority to implement these rules lies in Section 706 of the 1996 Telecommunications Act, which directs the FCC to \"encourage the deployment on a reasonable and timely basis\" of \"advanced telecommunications capability\" to all Americans and to take action if it finds that such capability is not being deployed in a reasonable and timely fashion; Title II of the Communications Act and its role in protecting competition and consumers of telecommunications services; Title III, which gives the FCC the authority to license spectrum, subject to terms that serve the public interest, used to provide fixed and mobile wireless services; and Title VI, which gives the FCC the duty to protect competition in video services. The Order went into effect November 20, 2011, which was 60 days after its publication in the Federal Register . Since the Order's publication multiple appeals were filed and subsequently consolidated for review in the U.S. Court of Appeals, D.C. Circuit. Verizon Communications was the remaining challenger seeking review claiming, among issues, that it was a violation of free speech and that the FCC had exceeded its authority in establishing the rules. The court issued its ruling on January 14, 2014, and remanded the decision to the FCC for consideration. (See \" The 2014 Open Internet Order Court Ruling and the FCC Response ,\" below.) On January 14, 2014, the U.S. Court of Appeals, D.C. Circuit, issued its ruling on the challenge to the FCC's Open Internet Order ( Verizon Communications Inc. v. Federal Communications Commission , D.C. Cir., No. 11-1355). The court upheld the FCC's authority to regulate broadband internet access providers, and upheld the disclosure requirements of the Open Internet Order, but struck down the specific antiblocking and nondiscrimination rules contained in the Order. (See \" The FCC 2010 Open Internet Order ,\" above.) Citing the decision by the FCC to classify broadband providers as information service providers (see \" The Information Services Designation and Title I \"), not common carriers, the court stated that the Communications Act expressly prohibits the FCC from regulating them as such. The court was of the opinion that the Order's nondiscrimination rules, applied to fixed broadband providers, and antiblocking rules, applied to both fixed and wireless broadband providers, were an impermissible common carrier regulation of an information service and could not be applied. However, the court upheld the disclosure rules, and more importantly upheld the FCC's general authority to use Section 706 (advanced communications incentives) of the Telecommunications Act of 1996 ( P.L. 104-104 ) to regulate broadband internet providers. Therefore the court concluded that the FCC does, within limitations, have statutory authority, under Section 706, to establish rules relating to broadband deployment and broadband providers' treatment of internet traffic. The court remanded the case to the FCC for further action. In response to the court remand, then FCC Chairman Wheeler issued, on February 19, 2014, a statement outlining the steps proposed \"to ensure that the Internet remains a platform for innovation, economic growth, and free expression.\" Chairman Wheeler proposed that the FCC establish new rules under its Section 706 authority that enforce and enhance the transparency rule that was upheld by the court; fulfill the \"no blocking\" goal; fulfill the goals of the nondiscrimination rule; leave open as an option the possible reclassification of internet access service as telecommunications service subject to Title II authority; forgo judicial review of the appeals court decision; solicit public comment; hold internet service providers to their commitment to honor the safeguards articulated in the 2010 Open Internet Order; and seek opportunities to enhance competition in the internet access market. In conjunction with this statement the FCC established a new docket (GN Docket No. 14-28) to seek input on how to address the remand of the FCC's Open Internet rules. This docket was released February 19, 2014, to seek opinion on \"what actions the commission should make, consistent with our authority under section 706 and all other available sources of Commission authority, in light of the court's decision.\" However, it should be noted that FCC Commissioners O'Rielly and Pai issued separate statements expressing their disagreement with then-Chairman Wheeler's proposal to establish new rules to regulate the internet. Despite this opposition, the FCC, on a 3-2 vote, initiated a proceeding to establish rules to address the court's remand of its 2010 open internet order. (See \" The FCC 2014 Open Internet Notice of Proposed Rulemaking ,\" below.) On May 15, 2014, the FCC adopted, by a 3-2 party line vote, a Notice of Proposed Rulemaking (NPRM) seeking public comment on \"how best to protect and promote an open Internet.\" The NPRM (GN Docket No.14-28) solicited comment on a broad range of issues to help establish a policy framework to ensure that the internet remains an open platform and retains the concepts adopted by the FCC in its 2010 Open Internet Order, of transparency, no blocking, and nondiscrimination. Following the guidance of the January 2014 D.C. Circuit Appeals Court decision, the NPRM tentatively concluded that the FCC should rely on Section 706 of the 1996 Telecommunications Act for its legal authority. However, the NPRM noted that the FCC \"will seriously consider the use of Title II of the Communications Act as the basis for legal authority\" and recognizes that Section 706 and Title II are both \"viable solutions.\" The NPRM also recognized the use of Title III for mobile services and sought comment, in general, on other sources of authority the FCC may utilize. The degree to which the FCC should use forbearance was also discussed. The NPRM retained the definition and scope contained in the 2010 Open Internet Order which address the actions of broadband internet access service providers, and as defined did not, for example, cover the exchange of traffic between networks (e.g., peering), enterprise services (i.e., services offered to large organizations through individually negotiated offerings), data storage services, or specialized services. However, the NPRM did seek comment on whether the scope of services as defined in the 2010 Open Internet Order should be modified. The question of whether broadband provider service to edge providers, that is, their function as edge providers' carriers, should be addressed was also raised. Furthermore, the NPRM sought comment on whether it should revisit its different standard applied to mobile services regarding its no-blocking rule and its exclusion from the unreasonable discrimination rule, and whether technological and marketplaces changes are such that the FCC should consider if rules should be applied to satellite broadband internet access services. The FCC tentatively concluded that the nonblocking rule established in the 2010 Open Internet Order should be upheld, but that \"the revived no-blocking rule should be interpreted as requiring broadband providers to furnish edge providers with a minimum level of access to their end-user subscribers.\" However, the NPRM proposed that the conduct of broadband providers permissible under the no-blocking rule be subject to an additional independent screen which required them \"to adhere to an enforceable legal standard of commercially reasonable practices.\" Furthermore, the NPRM sought comment on whether certain practices, such as \"paid prioritization,\" should be barred altogether or permitted if they meet the \"commercial reasonableness\" legal standard. In addition, the NPRM proposed to enhance the transparency rule, which was upheld by the court; to ensure that consumers and edge providers have the needed information to understand the services received and monitor practices; and to establish a multifaceted dispute resolution process including the creation of an ombudsperson to represent the interests of consumers, start-ups, and small businesses. President Obama, in a statement released on November 10, 2014, urged the FCC to establish rules that would reclassify consumer broadband service under Title II of the 1934 Communications Act with forbearance. More specifically, the statement called for regulations that prohibit blocking; prohibit throttling; ban paid prioritization; and increase transparency. It was also stated that these rules should also be fully applicable to mobile broadband and if necessary to interconnection points. Monitored exceptions for reasonable network management and specialized services and forbearance from Title II regulations \"that are not needed to implement the principles above\" were also included in the statement. While the FCC evaluates all comments, including those of sitting Presidents, as an independent regulatory agency it has the sole responsibility to adopt the final proposal. New rules addressing this issue were adopted by the FCC in February 2015. (See \" The FCC 2015 Open Internet Order ,\" below.) The FCC, in its February 26, 2015, open meeting, voted 3-2, along party lines, to adopt new open internet rules (Open Internet Order) and subsequently released these rules on March 12, 2015. The order applies to mobile as well as fixed broadband internet access service and relies on Title II of the Communications Act and Section 706 of the Telecommunications Act of 1996 and, for mobile broadband, Title III for its legal authority. The order includes among its provisions the following: reclassifies \"broadband Internet access service\" (that is the retail broadband service Americans buy from cable, phone, and wireless providers) as a telecommunications service under Title II; bans blocking, throttling, and paid prioritization; creates a general conduct standard that internet service providers cannot harm consumers or edge providers (e.g., Google, Netflix) and gives the FCC the authority to address questionable practices on a case-by-case basis (reasonable network management will not be considered a violation of this rule); enhances existing transparency rules for both end users and edge providers (a temporary exemption from the transparency enhancements is given for small fixed and mobile providers) and creates a \"safe harbor\" process for the format and nature of the required disclosure for consumers; permits an internet service provider to engage in \"reasonable network management\" (other than paid prioritization) and will take into account the specific network management needs of mobile networks and other technologies such as unlicensed Wi-Fi networks; does not apply the open internet rules to \"non-BIAS data services,\" (aka, specialized services) a category of services defined by the FCC as those that \"do not provide access to the Internet generally\" (e.g., heart monitors or energy consumption sensors); does not apply the open internet rules to interconnection but does gives the FCC authority to hear complaints and take enforcement action, if necessary, on a case-by-case basis, under Sections 201 and 202, regarding interconnection activities of internet service providers if deemed unjust and unreasonable; applies major provisions of Title II such as no unjust and unreasonable practices or discrimination, consumer privacy, disability access, consumer complaint and enforcement processes, and fair access to poles and conduits; and forbears, without any further proceedings, from various Title II provisions (e.g., cost accounting rules, tariffs, and last-mile unbundling) resulting in forbearance from 30 statutory provisions and over 700 codified rules. With limited exceptions, the rules went into effect on June 12, 2015, which was 60 days after their publication in the Federal Register . Various trade groups and selected individual providers filed appeals to the courts challenging the 2015 Open Internet Order's legality; the appeals were consolidated in the U.S. Court of Appeals for the D.C. Circuit. A motion to stay the effective date of the Order was denied, allowing the rules to go into effect as scheduled on June 12, 2015. Subsequently, the U.S. Court of Appeals for the D.C. Circuit, in a June 14, 2016, ruling, voted (2-1) to uphold the legality of all aspects the 2015 FCC Order. A petition requesting en banc review of the decision was denied on May 1, 2017, by the majority of the judges. Various parties filed on September 28, 2017, petitions asking the U.S. Supreme Court for review; but the U.S. Supreme Court, on November 5, 2018, denied review. On May 18, 2017, the FCC adopted (2-1) a Notice of Proposed Rulemaking (NPR) to reexamine the regulatory framework established in the 2015 Open Internet Order and embrace a \"light-touch\" regulatory approach. The NPR returned internet broadband access service to a Title I classification and sought comment on the existing rules governing internet service providers. More specifically, the NPR proposed to reinstate the information service classification of broadband internet access service (both fixed and mobile), thereby removing the service from the Title II, common carrier classification imposed by the 2015 Open Internet Order and placing it under Title I; reinstate that mobile broadband internet access service is not a commercial mobile service; eliminate the general conduct standard; seek comment on the need to \"keep, modify, or eliminate\" the \"bright line\" (no blocking, no throttling, and no paid prioritization) and transparency rules; return authority to the Federal Trade Commission to oversee and enforce the privacy practices of internet service providers; reevaluate the FCC's enforcement regime with respect to the necessity for ex ante regulatory intervention; and conduct a cost-benefit analysis as part of the proceeding. The NPR comment and reply comment periods closed, and a draft order, largely upholding the NPR and overturning the 2015 Order, was approved (3-2) by the FCC on December 14, 2017. [See \" WC Docket No. 17-108 (The FCC 2017 Order) ,\" below.] The FCC, in its December 14, 2017, open meeting, voted 3-2, along party lines, to adopt a new framework for the provision of broadband internet access services that largely reversed the 2015 regulatory framework and shifted much of the oversight from the FCC to the Federal Trade Commission (FTC) and the Department of Justice (DOJ). WC Docket No. 17-108 (The 2017 Order), among other things, removed broadband internet access services (BIAS) from the 2015 regulatory classification as telecommunications services subject to common carrier Title II classification; removed the \"bright line\" no blocking, no throttling, and no paid prioritization rules; and eliminated the general conduct standard; but expanded the public transparency rules. More specifically, WC Docket No. 17-108 is divided into three parts: a Declaratory Ruling, a Report and Order, and an Order. The Declaratory Ruling includes provisions that restore the classification of BIAS as an information service; reinstate the private mobile service classification of mobile BIAS; and restore broadband consumer protection authority to the FTC. The Declaratory Ruling also finds that \" ... Title II regulation reduced Internet service provider (ISP) investment in networks, as well as hampered innovation, particularly among small ISPs serving rural customers\"; and \"... public policy, in addition to legal analysis, supports the information service classification, because it is more likely to encourage broadband investment and innovation, thereby furthering the closing of the digital divide and benefitting the entire Internet ecosystem.\" The Report and Order includes provisions that enhance transparency requirements by requiring internet service providers to publicly disclose information about their practices including blocking, throttling, and paid prioritization; and eliminates the internet conduct standard. The Report and Order also finds that \"... transparency, combined with market forces as well as antitrust and consumer protection laws, achieve benefits comparable to those of the 2015 'bright line' rules at lower cost.\" The Order finds that adding to the record in this proceeding is not in the public interest. Reaction to the 2017 Order has been mixed. Some see the 2015 FCC rules as regulatory overreach and welcome a less regulatory approach, which they feel will stimulate broadband investment, deployment, and innovation. Others support the 2015 regulations and feel that their reversal will result in a concentration of power to the detriment of content, services, and applications providers, as well as consumers, and refute the claim that these regulations have had a negative impact on broadband investment, expansion, or innovation. The 2017 Order, Restoring Internet Freedom, was released by the FCC on January 4, 2018, and published in the Federal Register on February 22, 2018. Publication in the Federal Register triggered timelines for both court challenges and Congressional Review Act consideration. Petitions challenging the legality of the 2017 Order have been consolidated in the U.S. Court of Appeals, D.C. Circuit with oral arguments held on February 1, 2019. CRA resolutions to overturn the 2017 Order were introduced in the 115 th Congress. The Senate measure ( S.J.Res. 52 ) passed (52-47) the Senate on May 16, 2018, but the House measure ( H.J.Res. 129 ) was not considered. (See \" Congressional Activity ,\" below.) The 2017 Order went into effect on June 11, 2018. As a result the 2015 Order has been revoked and replaced by the provisions contained in the 2017 Order. According to the FCC the 2017 Order framework has three parts The FTC will assume the major role and will take action against internet service providers that undertake anticompetitive acts or unfair and deceptive practices; Internet service providers will be subject to enhanced transparency requirements and must publically disclose, via a publically available, easily accessible company website or through the FCC's website, information regarding their network management practices, performance, and commercial terms of service; and Broadband internet access services are reclassified as information services, and regulations imposed by the 2015 Order are vacated, including the classification of broadband internet access services as telecommunications services subject to common carrier Title II classification; the \"bright line\" no blocking, no throttling, and no paid prioritization rules; and the general conduct standard. As consumers expand their use of the internet and new multimedia and voice services become more commonplace, control over network quality and pricing is an issue. The ability of data bits to travel the network in a nondiscriminatory manner (subject to reasonable management practices), as well as the pricing structure established by broadband service providers for consumer access to that data, have become significant issues in the debate. In the past, internet traffic has been delivered on a \"best efforts\" basis. The quality of service needed for the delivery of the most popular uses, such as email or surfing the web, is not as dependent on guaranteed quality. However, as internet use expands to include video, online gaming, and voice service, the need for uninterrupted streams of data becomes important. As the demand for such services continues to expand, a debate over the need to prioritize network traffic to ensure the quality of these services has formed. The need to establish prioritized networks, although embraced by some, has led others to express policy concerns. Concern has been expressed that the ability of network providers to prioritize traffic may give them too much power over the operation of, and access to, the internet. If a multitiered internet develops where content providers pay for different service levels, some have expressed concern that the potential to limit competition exists if smaller, less financially secure content providers are unable to afford to pay for a higher level of access. Also, they state, if network providers have control over who is given priority access, the ability to discriminate among who gets such access is also present. If such a scenario were to develop, they claim, any potential benefits to consumers of a prioritized network would be lessened by a decrease in consumer choice and/or increased costs, if the fees charged for premium access are passed on to the consumer. Others state that prioritization will benefit consumers by ensuring faster delivery and quality of service and may be necessary to ensure the proper functioning of expanded service options. They claim that the marketplace for the provision of such services is expanding and any potential abuse is significantly decreased in a marketplace where multiple, competing broadband providers exist. Under such conditions, they claim that if a network broadband provider blocks access to content or charges unreasonable fees content providers and consumers could obtain their access from other network providers. As consumers and content providers migrate to these competitors, market share and profits of the offending network provider will decrease, they state, leading to corrective action or failure. Furthermore, any abuses that may occur, they state, can be addressed by existing enforcement agencies at the federal and state level . The use of one management tool, deep packet inspection (DPI), illustrates the complexity of the net neutrality debate. DPI refers to a network management technique that enables network operators to inspect, in real time, both the header and the data field of the packets. As a result, DPI not only can allow network operators to identify the origin and destination points of the data packet, but also enables the network operator to determine the application used and content of that packet. The information that DPI provides enables the network operator to differentiate, or discriminate, among the packets travelling over its network. The ability to discriminate among packets enables the network operator to treat packets differently. This ability itself is not necessarily viewed in a negative light. Network managers use DPI to assist them in performing various functions that are necessary for network management and that contribute to a positive user experience. For example, DPI technology is used in filters and firewalls to detect and prevent spam, viruses, worms, and malware. DPI is also used to gain information to help plan network capacity and diagnostics, as well as to respond to law enforcement requests. However, some claim that the ability to discriminate based on the information gained via DPI also has the potential to be misused. It is the potential negative impact that DPI use could have on consumers and suppliers that raises concern for some policymakers. For example, concern has been expressed that the information gained could be used to discriminate against a competing service, causing harm to both the competitor and consumer choice by, for example, routing a network operator's own, or other preferred content, along a faster priority path, or selectively slowing down competitors' traffic. DPI's potential to extract personal information about the data that it inspects has also generated concerns, by some, about consumer privacy. Therefore it is not the management tool itself that is under scrutiny, but the behavior that potentially may occur as a result of the information that DPI provides. How to develop a policy that permits some types of discrimination (i.e., \"good\" discrimination) that may be beneficial to network operation and improve the user experience while protecting against what would be considered \"harmful\" or anticompetitive discrimination becomes the crux of the policy debate. The move by some network broadband operators toward the use of metered or usage-based billing has caused considerable controversy. Under such a plan, users subscribe to a set monthly bandwidth cap, for an established fee, and are charged additional fees or could be denied service if that usage level is exceeded. The use of such billing practices, on both a trial and permanent basis, is becoming more commonplace. Reaction to the imposition of usage-based billing has been mixed. Supporters of such billing models state that a small percentage of users consume a disproportionately high percentage of bandwidth and that some form of usage-based pricing may benefit the majority of subscribers, particularly those who are light users. Furthermore, they state that offering a range of service tiers at varying prices offers consumers more choice and control over their usage and subsequent costs. The major growth in bandwidth usage, they also claim, places financial pressure on existing networks for both maintenance and expansion, and establishing a pricing system which charges high bandwidth users is more equitable. Opponents of such billing plans claim that such practices will stifle innovation in high bandwidth applications and are likely to discourage the experimentation with and adoption of new applications and services. Some concerns have also been expressed that a move to metered/usage-based pricing will help to protect the market share for video services offered in packaged bundles by network broadband service providers, who compete with new applications, and that if such caps must exist, they should be applied to all online video sources. The move to usage-based pricing, they state, will unfairly disadvantage competing online video services and stifle a nascent market, since video applications are more bandwidth-intensive. Opponents have also questioned the accuracy of meters, and specific usage limits and overage fees established in specific trials, stating that the former seem to be \"arbitrarily low\" and the latter \"arbitrarily high.\" Furthermore, they state that since network congestion only occurs in specific locations and is temporary, monthly data caps are not a good measure of congestion causation. Citing the generally falling costs of network equipment and the stability of profit margins, they also question the claims of network broadband operators that increased revenue streams are needed to supply the necessary capital to invest in new infrastructure to meet the growing demand for high bandwidth applications. Zero rating plans refer to the practice by internet service providers of allowing their subscribers to consume specific content or services without incurring charges against the subscriber's usage limits. In the case of sponsored data a third party (e.g., an interested edge provider) pays the charges that the customer would otherwise incur. Many different variations of these services are being implemented in the marketplace by wireless carriers. Supporters of such plans claim that they can improve consumer choice and encourage consumers to try new and perhaps usage-heavy services and can improve competition among edge providers. Those critical of such plans state that they can be used for anticompetitive purposes to favor one edge provider over another, particularly those edge providers that are affiliated with the internet service provider, or those that are entrenched and well financed. Whether or not such activities should, or should not, be considered a violation of the terms of the FCC's 2015 Open Internet Order's general conduct rule remains controversial. The FCC, under former Chairman Wheeler, requested in a December 2015 letter that AT&T, T-Mobile, and Comcast individually meet with FCC staff to discuss their various plans to enable the FCC to \"have all the facts to understand how this service relates to the Commission's goal of maintaining a free and open Internet while incentivizing innovation and investment from all sources.\" A similar letter was sent, at a later date (January 2016), to Verizon inquiring about its FreeBee Data 360 offering. The FCC concluded in a January 11, 2017, Policy Review Report that the specific approaches taken by AT&T and Verizon may harm competition and put forward a draft framework for evaluating such data offering plans. Subsequently, however, the FCC, under current Chairman Pai, issued an Order on February 3, 2017, that retracted the report and closed the inquiries, further stating that the report \"will have no legal or other effect or meaning going forward.\" Debate over what the appropriate regulatory framework should be for broadband access has continued in the 116 th Congress. Six bills ( H.R. 1006 , H.R. 1096 , H.R. 1101 , H.R. 1644 , H.R. 1860 , S. 682 ) have been introduced to date. An amended version of H.R. 1644 passed (232-190) the House on April 10, 2019. H.R. 1644 (and its companion measure, S. 682 ) add a new title to the Communications Act that negates the 2017 Order and restores the 2015 Order and its subsequent regulations. H.R. 1644 , introduced on March 8, 2019, by Representative Doyle and S. 682 , introduced on March 6, 2019, by Senator Markey, add a new title to the Communications Act that repeals the 2017 Order, stating that the rule \"shall have no force or effect,\" and prohibits the FCC, in most circumstances, from reissuing the rule or enacting a new rule that is substantially the same. The bills also restore the 2015 Order and its subsequent regulations, thereby once again classifying both mobile and fixed broadband internet access service as a telecommunications service under Title II of the Communications Act and restoring regulations, including those that prohibit blocking, throttling, and paid prioritization and establish a general conduct standard. An amended version of H.R. 1644 was passed (30-22) by the House Energy and Commerce Committee on April 3, 2019. A revised version of the subcommittee-passed H.R. 1644 , a manager's amendment in the nature of a substitute (AINS) offered by Representative Doyle, was considered by the Committee. The AINS contained a provision, in the definition section, to clarify the forbearance provisions in the subcommittee passed bill. One amendment to the AINS, containing a one-year exemption from the 2015 Order enhanced transparency requirements for small internet service providers (that is those with 100,000 or fewer subscribers), was also approved prior to Committee passage. An amended version of H.R. 1644 (containing 12 additional amendments considered on the floor) passed (232-190) the House on April 10, 2019. Three bills ( H.R. 1006 , H.R. 1096 , H.R. 1101 ) establish a regulatory framework by amending Title I of the Communications Act and H.R. 1006 , introduced on February 6, 2019, by Representative Latta, amends Title I of the Communications Act to address potential negative behaviors of BIAS providers. Provisions include those that prohibit blocking and unjust and discriminatory behavior, subject to reasonable network management; establish transparency requirements; establish FCC enforcement authority, including the authority to issue fines and forfeitures up to $2 million; in general, prohibit the FCC from imposing regulations on BIAS services under Title II; protect the needs of emergency communications, law enforcement, public safety or national security, copyright infringement or other unlawful activity; and preserve the authority of the Department of Justice and the Federal Trade Commission. H.R. 1096 , introduced on February 7, 2019, by Representative Rodgers, amends Title I of the Communications Act to require rules applicable to BIAS providers that establish transparency requirements; prohibit blocking and degrading (throttling) lawful traffic, subject to reasonable network management; prohibit paid prioritization; and contain a savings clause relating to emergency communications, law enforcement, public safety or national security, copyright infringement or other unlawful activity. H.R. 1101 , introduced on February 7, 2019, by Representative Walden, amends Title I of the Communications Act to establish obligations for BIAS providers. These include no blocking or throttling, subject to reasonable network management; no paid prioritization; and establishment of transparency rules. Additional provisions require the FCC to enforce these rules through adjudication of complaints and establish, no later than 60 days after enactment, formal complaint procedures to address alleged violations; protect the needs of emergency communications, law enforcement, public safety or national security, copyright infringement or other unlawful activity; protect the ability of BIAS providers to offer specialized services and the right of consumers to choice of service plans or control over their chosen BIAS; and establish that BIAS or any other mass-market retail service providing advanced telecommunications capability shall be considered an information service and that Section 706 may not be relied upon as a grant of authority. A more narrowly focused measure, H.R. 1860 , introduced on March 25, 2019, by Representative Kinzinger, prohibits the FCC from regulating the rates charged for BIAS. Congressional activity in the 115 th Congress sought to address a wide range of issues directly related to the debate over the appropriate framework for the provision of and access to broadband networks. Legislation included Congressional Review Act (CRA) resolutions to overturn the 2017 Order ( H.J.Res. 129 and S.J.Res. 52 ); a measure ( S. 993 ) to nullify the 2015 Order; comprehensive legislation ( H.R. 4682 , H.R. 6393 , S. 2510 , and S. 2853 ) to provide a regulatory framework to outline FCC authority over broadband internet access services; and measures to address the privacy and transparency regulations of the 2015 Order. Publication of the 2017 Order in the Federal Register on February 22, 2018, triggered timelines for CRA consideration. CRA resolutions to overturn the 2017 Order were introduced on February 27, 2018, in both the House ( H.J.Res. 129 ) by Representative Doyle, and the Senate ( S.J.Res. 52 ) by Senator Markey. Both measures stated that Congress disapproves \"the rule\" (in this case the FCC 2017 Order) and that the rule \"shall have no force or effect.\" If the CRA joint resolution is enacted the rule \"shall be treated as though such rule had never taken effect.\" Additionally, the agency, in this case the FCC, may not, in most circumstances, promulgate the same rule again. S.J.Res. 52 passed (52-47) the Senate on May 16, 2018, and was sent to the House and held at the desk. On May 17, 2018, Representative Doyle filed a discharge petition to bring a House floor vote on H.J.Res. 129 but the House measure did not come up for consideration. On the other hand, legislation ( S. 993 ) to nullify the FCC's 2015 Open Internet Order was introduced on May 1, 2017, by Senator Lee. S. 993 nullified the FCC's 2015 Order, prohibited the FCC from reclassifying broadband internet access service as a telecommunications service, and prohibited the FCC from issuing a substantially similar rule absent congressional authorization. No further action was taken on the measure. The FCC's adoption (3-2) of the 2017 Order that largely reversed the 2015 regulatory framework (see \" WC Docket No. 17-108 (The FCC 2017 Order) \" above) reopened debate over whether Congress should take broader action to amend existing law to provide guidance and more stability to FCC authority. Four measures ( H.R. 4682 , H.R. 6393 , S. 2510 , and S. 2853 ) to provide a regulatory framework to outline FCC authority over broadband internet access services were introduced. H.R. 4682 , introduced on December 19, 2017, by Representative Blackburn, and S. 2510 , introduced by Senator Kennedy on March 7, 2018, amended the Communications Act of 1934 to address a broad range of issues. More specifically, provisions contained in both measures included those which prohibited broadband internet access service (BIAS) providers from blocking lawful content or degrading (throttling) lawful internet traffic, subject to reasonable network management; granted FCC enforcement authority and required the FCC to establish formal complaint procedures to address alleged violations; preserved the ability of BIAS providers to offer, with a prohibition on certain practices, specialized services; established BIAS as an information service; and preempted state and local authority over \"internet openness obligations\" for the provision of BIAS with exceptions for emergency communications or law enforcement, public safety, or national security obligations. Provisions in H.R. 4682 also established eligibility of BIAS services for Federal Universal Service Fund program support. H.R. 4682 and S. 2510 were referred to the House Committee on Energy and Commerce and the Senate Committee on Commerce, Science, and Transportation, respectively, but no further action was taken. S. 2853 , introduced on May 16, 2018, by Senator Thune, also amended the Communications Act of 1934 to establish a framework to address broadband internet access services. S. 2853 is similar to H.R. 4682 and S. 2510 in that it classified broadband as an information service, prohibited both blocking and throttling subject to reasonable network management, permitted with limitations the ability to provide specialized services, and provided for a similar role for the FCC. However, unlike the two previous measures, S. 2853 contained provisions that prohibit paid prioritization and contain transparency obligations; did not contain specific provisions to preempt state and local authority; and clarified that Section 706 of the Telecommunications Act of 1996 may not be used as a grant of regulatory authority. S. 2853 was referred to the Senate Committee on Commerce, Science, and Transportation but no further action was taken. H.R. 6393 , introduced on July 17, 2018, by Representative Coffman, established a new title, Title VIII, in the 1934 Communications Act to provide a regulatory framework for broadband internet access providers. Provisions included those that banned blocking, throttling, and \"paid preferential treatment\" subject to reasonable network management, and established a general conduct standard. Included among the additional provisions were those that established transparency requirements, granted the FCC oversight over interconnection, permitted specialized services, stated that internet service providers are eligible to receive funds from, and may be required to contribute to, the Universal Service Fund, ensured disability access to broadband equipment and services, and exempted Title VIII provisions from FCC forebearance authority. H.R. 6393 was referred to the House Committee on Energy and Commerce but no further action was taken. Congressional action in the 115 th Congress also focused on two specific aspects of the 2015 Open Internet Order rules: privacy ( S.J.Res. 34 , S. 878 , S. 964 , H.J.Res. 86 , H.Res. 230 , H.R. 1754 , H.R. 1868 , H.R. 2520 , H.R. 3175 ) and transparency ( S. 228 , H.R. 288 ). Congress successfully used the Congressional Review Act (CRA; 5 U.S.C. paras. 801-808) to revoke the customer privacy rules adopted by the FCC under the 2015 Open Internet Order. Legislation ( S.J.Res. 34 , H.J.Res. 86 ), in the form of a joint resolution, was introduced by Senator Flake and Representative Blackburn, respectively, to overturn the FCC's customer privacy rules. The identical joint resolutions stated \"that Congress disapproves the rule submitted by the Federal Communications Commission relating to 'Protecting the Privacy of Customers of Broadband and Other Telecommunications Services' (81 Federal Register 87274 (December 2, 2016) and such rule will have no force or effect.\" S.J.Res. 34 passed the Senate (50-48) on March 23, 2017, and the House (215-205) on March 28, 2017, and was signed by the President on April 3, 2017 ( P.L. 115-22 ). This action prevents any new rule subject to the joint resolution from taking effect and invalidates any rules that have already been in effect. Additionally, it prevents the agency (in this case the FCC) from reissuing the rule in \"substantially the same form\" or issuing a \"new rule that is substantially the same\" as the disapproved rule unless specifically authorized by a law enacted after the approved resolution (CRA. 5 U.S.C. para 801(b)(2)). Additional measures ( H.R. 1754 , H.R. 1868 , H.R. 2520 , H.R. 3175 , S. 878 , and S. 964 ) addressing other aspects of the privacy issue, as it relates to protection of broadband user data privacy, were introduced but received no further action. Legislation ( H.R. 288 , S. 228 ) addressing the transparency requirements contained in the 2015 Open Internet Order was under consideration. Transparency requirements refer to the disclosures that internet service providers are required to provide to their end users and edge providers and include, among other things, network management practices, performance, and commercial terms. These requirements were expanded upon or \"enhanced\" in the 2015 Open Internet Order, and small internet service providers (i.e., those with 100,000 or fewer subscribers) were given a temporary exemption from these enhanced requirements. H.R. 288 , introduced on January 4, 2017, by Representative Walden, addresses the transparency requirements contained in the 2015 Order. H.R. 288 expanded the exemption to include internet service providers with 250,000 or fewer subscribers and sunset the transparency exemption five years from the bill's enactment. The bill also required the FCC to report to Congress 180 days after the bill's enactment on whether the exemption should be made permanent and whether the definition of \"small\" for exemption purposes should be modified. H.R. 288 passed the House, by voice vote, on January 10, 2017, but received no further action. S. 228 , introduced on January 24, 2017, by Senator Daines, also addressed the transparency exemption and was largely identical to H.R. 288 . S. 228 provided for an exemption of the enhanced transparency rule contained in the 2015 Open Internet Order for small businesses. The term \"small business\" was defined for purposes of the exemption as any provider of broadband internet access service that has not more than 250,000 subscribers. The bill also required the FCC to report to Congress 180 days after the bill's enactment, on whether the exemption should be made permanent and whether the definition of \"small business\" for exemption purposes should be modified. The exemption was to last for five years after enactment or until the FCC completed the above report and a rulemaking to implement those recommendations. S. 228 was referred to the Senate Commerce, Science, and Transportation Committee, but no further action was taken. Ten measures ( S. 40 , S. 2283 , S. 2602 , S.J.Res. 14 , H.R. 196 , H.R. 279 , H.R. 1212 , H.R. 2666 , H.R. 4596 , and H.J.Res. 42 ) addressing broadband regulation were introduced in the 114 th Congress. Amended versions of H.R. 4596 , dealing with transparency, and H.R. 2666 , dealing with rate regulation, passed the House on March 16, 2016, and April 15, 2016, respectively. Draft legislation, offered by the House Energy and Commerce Committee and the Senate Committee on Commerce, Science, and Transportation, had also been a focal point of hearings. However, no final action was taken on any of these measures. S. 40 , the Online Competition and Consumer Choice Act of 2015, and its companion measure H.R. 196 , introduced on January 7, 2015, by Senator Leahy and Representative Matsui, respectively, addressed the relationship between a broadband internet access provider and a content provider. Both bills directed the FCC to establish/adopt regulations, within 90 days of enactment, to prohibit broadband internet access providers from entering into agreements with content providers, for pay, to give preferential treatment or priority to their content (often termed \"paid prioritization\"), and prohibited broadband providers from giving preferential treatment to their own or affiliated content. These rules applied to the traffic/content that travels between the access provider and the end user, often termed \"the last mile.\" Exceptions were given to address the needs of emergency communications or law enforcement, public safety, or national security authorities. H.R. 279 , introduced on January 12, 2015, by Representative Latta, prohibited the FCC from regulating the provision of broadband internet access as a telecommunications service. More specifically, the bill included provisions that classified broadband internet access service as an \"information service,\" not a telecommunications service, and clarified that a provider of broadband internet access service may not be treated as a telecommunications carrier when engaged in the provision of an information service. This measure prevented the FCC from regulating providers of broadband internet access services under Title II of the Communications Act. Representative Blackburn, in direct response to the FCC's February 26, 2015, adoption of the Open Internet Order, introduced H.R. 1212 , the \"Internet Freedom Act,\" on March 3, 2015. H.R. 1212 blocked the implementation of the FCC's adopted Open Internet Order (GN Docket No. 14-28) by stating that it \"shall have no force or effect.\" Furthermore, it prohibited the FCC from reissuing a rule in substantially the same form or issuing a new rule that is substantially the same, unless the reissued or new rule is specifically authorized by a law enacted after the date of the enactment of this act. Exceptions were granted to protect national security or public safety, or to assist or facilitate actions taken by federal or state law enforcement agencies. Similarly S. 2602 , the \"Restoring Internet Freedom Act,\" introduced by Senator Lee, on February 25, 2016, also negated the FCC's 2015 Open Internet Order. S. 2602 was identical to H.R. 1212 but did not contain the provisions relating to exceptions. A more targeted measure, H.R. 2666 , the No Rate Regulation of Broadband Internet Access Act, introduced by Representative Kinzinger, on June 4, 2015, prohibited the FCC from regulating the rates charged for broadband internet access as defined by the Open Internet Order. H.R. 2666 was approved (15-11) by the House Communications Subcommittee by a party line vote on February 11, 2016. An amended version of H.R. 2666 was approved (29-19) by the House Energy and Commerce Committee on March 15, 2016. Prior to full committee passage of H.R. 2666 , an amendment stating that the bill would not affect the FCC's authority over data roaming, interconnection, truth-in-billing, paid prioritization, and rates charged for services that receive universal service support was approved. H.R. 2666 passed the House (241-173) without further amendment, on April 15, 2016. Another approach, using the Congressional Review Act (CRA; 5 U.S.C. paras. 801-808) to overturn the 2015 Order, was also under consideration. H.J.Res. 42 , introduced on April 13, 2015, by Representative Doug Collins, contained a resolution stating that \"Congress disapproves the rule submitted by the Federal Communications Commission relating to the matter of protecting and promoting the open Internet ... adopted by the Commission on February 26, 2015 … and such rule shall have no force or effect.\" A similar measure, S.J.Res. 14 , introduced on April 28, 2015, by Senator Rand Paul stated that \"Congress disapproves the rule submitted by the Federal Communications Commission relating to regulating broadband Internet access ..., and such rule will have no force and effect.\" The CRA empowers Congress to review, under an expedited legislative process, new federal regulations and, if a joint resolution is passed and signed into law, to invalidate such regulations. Attempts were also made, through the appropriations process, to add language that would have delayed the FCC from using its funds to implement the Open Internet Order until the courts address its legality and/or regulate rates. Language attached to the House Financial Services FY2017 appropriation measure ( H.R. 5485 ) contained among its provisions those that prevented the FCC from using any funds \"... to implement, administer or enforce\" the Open Internet Order until the legal challenges to the Order have been resolved (Title VI §632). The bill also contained a provision that prohibited the FCC from using FY2017 funds to directly or indirectly regulate the prices, fees, or data caps and allowances charged or imposed by providers of broadband internet access services (Title VI §631). The funding bill was passed (30-17) by the House Appropriations Committee on June 9, 2016, and passed the House (239-185) on July 7, 2016. Separately, legislation ( H.R. 4596 , S. 2283 ) addressing the transparency requirements contained in the 2015 Open Internet Order was also under consideration. Transparency requirements refer to the disclosures that internet service providers are required to provide to their end users and edge providers and includes, among other things, network management practices, performance, and commercial terms. These requirements were expanded upon or \"enhanced\" in the 2015 Open Internet Order, and small internet service providers were given a temporary exemption from these enhanced requirements. H.R. 4596 , introduced on February 24, 2016, by Representative Walden, addressed the transparency requirements contained in the 2015 Order. This measure was amended and passed, by voice vote, by the House Energy and Commerce Committee on February 25, 2016, and subsequently passed (411-0) the House on March 16, 2016. H.R. 4596 , as passed by the House, sunset the transparency exemption five years from the bill's enactment and defined small internet service providers as those who have 250,000 subscribers or less. The bill also required the FCC to report to Congress 180 days after the bill's enactment on whether the exemption should be made permanent and whether the definition of \"small\" for exemption purposes should be modified. S. 2283 , introduced on November 16, 2015, by Senator Daines, also addressed the transparency exemption. An amended version of S. 2283 passed the Senate Commerce Committee, by voice vote, on June 15, 2016. The bill, as amended, provided for an exemption of the enhanced transparency rule contained in the 2015 Open Internet Order for small businesses. The term \"small business\" was defined for purposes of the exemption as any provider of broadband internet access service that has not more than 250,000 subscribers. The bill also required the FCC to report to Congress 180 days after the bill's enactment on whether the exemption should be made permanent and whether the definition of \"small\" for exemption purposes should be modified. The exemption would have lasted for three years after enactment or until the FCC completed the above report and a rulemaking to implement those recommendations. To some degree the debate in the 114 th Congress over broadband regulation became more nuanced. Some looked to the FCC to address this issue using current provisions in the 1934 Communications Act to protect the marketplace from potential abuses that could threaten the net neutrality concept. Others felt that existing laws are outdated and limited, cannot be used to establish regulations to address current issues, and would not stand up to court review. They advocated that the FCC should look to Congress for guidance to amend current law to update FCC authority before action is taken. Senator Thune released a list of 11 principles that he felt should be used as a guide to develop legislation. These principles are as follows: prohibit blocking; prohibit throttling; prohibit paid prioritization; require transparency; apply rules to both wireline and wireless; allow for reasonable network management; allow for specialized services; protect consumer choice; classify broadband internet access as an information service under the Communications Act; clarify that Section 706 of the Telecommunications Act may not be used as a grant of regulatory authority; and direct the FCC to enforce and abide by these principles. Draft legislation, guided by these principles, was offered by the House Energy and Commerce Committee and the Senate Committee on Commerce, Science, and Transportation. The draft amended the Communications Act of 1934 to prohibit blocking lawful content and nonharmful devices (subject to reasonable network management), throttling data (subject to reasonable network management), and paid prioritization; and required transparency of network management practices. The FCC was directed to enforce these provisions through the establishment of a formal complaint procedure. The draft permitted, within certain guidelines, the offering of specialized services. The provision of broadband internet access service (as well as other mass market retail services providing advanced telecommunications capability) was classified as an information service. The draft also prohibited the FCC, or any state commission, from using Section 706 of the Telecommunications Act of 1996 as a grant of authority. This draft legislation was the focus of hearings, held on January 21, 2015, in the Senate Commerce Committee and the House Subcommittee on Communications and Technology. Additional hearings focusing on a wide range of issues related to the net neutrality/broadband regulation debate were held by the Senate Commerce Committee, the House Judiciary Committee, the House Subcommittee on Communications and Technology, the House Committee on Oversight and Government Reform, and the House Financial Services Subcommittee. Seven measures ( H.R. 3982 , H.R. 4070 , H.R. 4752 , H.R. 4880 , H.R. 5429 , S. 1981 , and S. 2476 ) were introduced in direct response to the January 2014 decision issued by the U.S. Court of Appeals, D.C. Circuit, which struck down the antiblocking and nondiscrimination rules adopted by the FCC in its Open Internet Order ( Verizon Communications Inc. v. Federal Communications Commission , D.C. Cir., No.11-1355). H.R. 3982 , the Open Internet Preservation Act of 2014, and its companion measure S. 1981 , introduced on February 3, 2014, restored the antiblocking and nondiscrimination rules struck down by the court until the FCC takes final action, based on Section 706 authority, upheld by the court, to establish new rules in its current Open Internet proceeding. The FCC was also given the authority to adjudicate cases under those rules that occurred during that period. H.R. 4880 , the \"Online Competition and Consumer Choice Act of 2014,\" and its companion measure S. 2476 , introduced on June 17, 2014, directed the FCC to establish regulations that prohibit paid prioritization agreements between internet service providers and content providers on the internet connection between the internet service provider and the consumer and prohibit broadband providers from prioritizing or giving preferential treatment to their own traffic, or the traffic of their affiliates, over the traffic of others. H.R. 5429 , the \"Open Internet Act of 2014,\" introduced on September 9, 2014, restored the authority of the FCC to adopt the rules vacated by the U.S. D.C. Court of Appeals in Verizon v. Federal Communications Commission (the FCC's 2010 Open Internet Order). On the other hand, H.R. 4070 , the Internet Freedom Act, introduced on February 21, 2014, stated that the FCC's 2010 Open Internet rules shall have \"no force or effect\" and prohibited the FCC from reissuing regulations in the same or substantially the same form unless they were specifically authorized by a law enacted after the date of the enactment of the act. Exceptions were made for regulations determined by the FCC to be necessary to prevent damage to U.S. national security; ensure the public safety; or assist or facilitate actions taken by a federal or state law enforcement agency. H.R. 4752 , introduced on May 28, 2014, amended the Communications Act of 1934 to prohibit the FCC from reclassifying broadband networks under Title II of the Communications Act. The bill included, among other provisions, that the term \"information service\" is not a telecommunications service but includes broadband internet access service and that a provider of an information service may not be treated as a telecommunications carrier when engaged in the provision of an information service. The House Judiciary Committee, Subcommittee on Regulatory Reform, held a hearing on June 20, 2014, examining the role of antitrust law and regulation as it related to the broadband access debate. The Senate Judiciary Committee held a field hearing in Vermont on July 1, 2014, and a hearing on September 17, 2014, to address issues related to an open internet. A consensus on the net neutrality issue remained elusive and support for the FCC's Open Internet Order was mixed. (See \" The FCC 2010 Open Internet Order ,\" above.) While some Members of Congress supported the action and in some cases would have supported an even stronger approach, others felt that the FCC had overstepped its authority and that the regulation of the internet is not only unnecessary, but harmful. Internet regulation and the FCC's authority to implement such regulations was a topic of legislation ( H.R. 96 , H.R. 166 , S. 74 , H.R. 2434 , H.R. 1 , H.R. 3630 , H.J.Res. 37 , S.J.Res. 6 ) and hearings (Senate Commerce Committee, House Communications Subcommittee, and House Intellectual Property, Competition, and the Internet Subcommittee) in the 112 th Congress. Legislation to limit FCC regulation was introduced. H.R. 96 , the Internet Freedom Act, introduced, on January 5, 2011, by Representative Blackburn and 59 additional original cosponsors, prohibited, with exceptions, the FCC from proposing, promulgating, or issuing any regulations regarding the internet or IP-enabled services, effective the date of the bill's enactment. Exceptions were made for regulations that the FCC determined were necessary to prevent damage to national security, to ensure the public safety, or to assist or facilitate actions taken by a federal or state law enforcement agency. The bill also contained a finding that the internet and IP-enabled services are services affecting interstate commerce and are not subject to state or municipality jurisdiction. Another measure, H.R. 166 , the \"Internet Investment, Innovation, and Competition Preservation Act,\" introduced on January 5, 2011, by Representative Stearns, required the FCC to prove the existence of a \"market failure\" before regulating information services or internet access services. The FCC must also conclude that the \"market failure\" is causing \"specific, identified harm to consumers\" and that regulations are necessary to ameliorate that harm. The bill also contained provisions that required any FCC regulation to be the \"least restrictive,\" determine that the benefits exceed the cost, permit network management, not prohibit managed services, be reviewed every two years, and be subject to sunset. Any such regulation was required to be enforced on a nondiscriminatory basis between and among broadband network, service, application, and content providers. A more narrowly focused limitation was contained within H.R. 3630 , the \"Middle Class Tax Relief and Job Creation Act of 2011,\" as passed (234-193) by the House on December 13, 2011. Section 4105 of Title IV (spectrum provisions) of the bill prohibited the FCC from imposing network access/management requirements on licensees. More specifically, the provision prohibited the promulgation of auction service rules that restrict a licensee's ability to manage network traffic or prioritize the traffic on its network, or that would require providing network access on a wholesale basis. However, the provision was removed from the bill prior to final passage ( P.L. 112-96 ). Legislation to strengthen the FCC's ability to regulate open access by amending Title II of the 1934 Communications Act was also introduced. S. 74 , the Internet Freedom, Broadband Promotion, and Consumer Protection Act of 2011, introduced January 25, 2011, by Senator Cantwell, provided for strengthened open access protections. More specifically, the bill contained among its provisions those that codify the four FCC principles issued in 2005 as well as those to require internet service providers to be nondiscriminatory regarding access and transparent in their network management practices. The bill also required internet service providers to provide service to end users upon \"reasonable request\" and offer stand-alone broadband access at \"reasonable rates, terms, and conditions\" and prohibited internet service providers from requiring paid prioritization. The bill's requirements applied to both wireline and wireless platforms; however, the FCC was allowed to take into consideration differences in network technologies when applying requirements. The FCC was tasked with establishing the necessary rules, and injured parties could be awarded damages by the FCC or a federal district court. Other measures, which proved unsuccessful, were considered to prevent, or at least delay, implementation of the FCC's Open Internet Order. Attempts were made, through the appropriations process, to add language that would prevent the FCC from using its funds to implement the Open Internet Order. Language attached to the FY2011 appropriation measure, H.R. 1 , to prevent the use of FCC FY2011 funds for implementation of the order was passed by the House. The Continuing Appropriations Act, 2011 ( H.R. 1 ), passed (235-189) by the House on February 19, 2011, contained an amendment, introduced by Representative Walden and passed by the House (244-181), to prohibit the FCC from using any funds made available by the act to implement the FCC's Open Internet Order adopted on December 21, 2010. No such provision, however, was included in the final FY2011 appropriations bill, H.R. 1473 , passed by Congress and signed by the President ( P.L. 112-10 ). Similarly, language included in the FY2012 Financial Services and General Government Appropriations bill ( H.R. 2434 ), which includes funding for the FCC, contained a provision that barred the FCC from using any funds to implement its Open Internet Order adopted December 21, 2010. This measure passed the House Appropriations Committee on June 23, 2011 ( H.Rept. 112-136 ), but no such provision was included in the final FY2012 consolidated appropriations bill, H.R. 2055 , which was signed by President Obama ( P.L. 112-74 ) on December 23, 2011. Another approach, using the Congressional Review Act to overturn the order, was also considered. Identical resolutions of disapproval were introduced, on February 16, 2011, in both the House ( H.J.Res. 37 ) and Senate ( S.J.Res. 6 ). These measures stated that Congress disapproves of the rule submitted by the FCC's report and order relating to the matter of preserving the open internet and broadband industry practices adopted by the FCC on December 21, 2010, and further stated that \"such rule would have no force or effect.\" A hearing on H.J.Res. 37 was held by the House Energy and Commerce Communications and Technology Subcommittee on March 9, 2011, and the subcommittee passed the measure (15-8) on a party-line vote immediately following the hearing. On March 25, 2011, the House Energy and Commerce Committee passed (30-23) H.J.Res. 37 . On April 8, 2011, the full House considered and passed (240-179) H.J.Res. 37 . However, an identical resolution of disapproval ( S.J.Res. 6 ) failed to pass the Senate on November 10, 2011, by a 52-46 vote. Legislation addressing the issue of data usage caps was also introduced. The Data Cap Integrity Act of 2012 ( S. 3703 ), introduced on December 20, 2012, by Senator Wyden, addressed the usage of data caps by internet service providers (ISPs) and their implementation. Included among the bill's provisions were those that required that an ISP that imposes data caps must be certified by the FCC as to accuracy of data cap measurement; that the cap \"functions to reasonably limit network congestion without unnecessarily restricting Internet use\"; and that the cap does not discriminate (that is, for purposes of measuring does not provide \"preferential treatment of data that is based on the source or content of the data\"). The bill also required ISPs that apply data caps to provide data tools, or identify commercially available data measurement tools, to consumers for monitoring and management. Civil penalties for violations were to be used to reimburse those violated, and unobligated funds in excess of $5 million (annually) were to be transferred from the newly created \"Data Cap Integrity Fund\" to the U.S. Department of the Treasury for deficit reduction. Although the 111 th Congress saw considerable activity addressing the net neutrality debate, no final action was taken. One stand-alone measure ( H.R. 3458 ) that comprehensively addressed the net neutrality debate was introduced in the 111 th Congress. H.R. 3458 , the Internet Freedom Preservation Act of 2009, introduced by Representative Edward Markey, and also supported by then-House Energy and Commerce Committee Chairman Waxman, sought to establish a national policy of nondiscrimination and openness with respect to internet access offered to the public. The bill also required the offering of unbundled, or stand-alone, internet access service as well as transparency for the consuming public with respect to speed, nature, and limitations on service offerings and the public disclosure of network management practices. The FCC was tasked with promulgating the rules relating to the enforcement and implementation of the legislation. Then-House Communications, Technology, and the Internet Subcommittee Chairman Boucher stated that he continued to work with broadband providers and content providers to seek common ground on network management practices, and chose to pursue that approach. Furthermore, the Senate Commerce and House Energy and Commerce Committees and Communications Subcommittees held a series of staff-led sessions with industry stakeholders to discuss a range of communications policies including broadband regulation and FCC authority. Two bills ( S. 1836 , H.R. 3924 ) were introduced in response to the adoption by the FCC of a NPR on preserving the open internet. S. 1836 , introduced on October 22, 2009, by Senator McCain, prohibited, with some exceptions, the FCC from proposing, promulgating, or issuing any further regulations regarding the internet or IP-enabled services. Exceptions included those relating to national security, public safety, federal or state law enforcement, and Universal Service Fund solvency. Additional provisions reaffirmed that existing regulations, including those relating to CALEA, remain in force and stated as a general principle that the internet and all IP-enabled services are services affecting interstate commerce and are not subject to state or municipal locality jurisdiction. H.R. 3924 , introduced by Representative Blackburn on October 26, 2009, was identical to S. 1836 , except for title and the omission of the reference to the Universal Service Fund. H.Con.Res. 311 , introduced by Representative Gene Green and 49 other House Members on July 30, 2010, affirmed that it is the responsibility of Congress to determine the regulatory authority of the FCC with respect to broadband internet services and called upon the FCC to suspend any further action on its proceedings until such time as Congress delegates such authority to the FCC. Another measure ( H.R. 5257 ), introduced by Representative Stearns, addressed the possible reclassification of broadband service and would have required, among other provisions, that the FCC prove the existence of a \"market failure\" before regulating information services or internet access services. Furthermore, the bill required, among other provisions, that the FCC conclude that the market failure is causing \"specific, identified harm to consumers\" and if devising regulations must adopt those that are the \"least restrictive,\" permit network management, and are subject to sunset. Still another measure ( S. 3624 ), introduced by Senator DeMint, contained provisions that required the FCC to prove consumers are being substantially harmed by a lack of marketplace choice before imposing new regulations and to weigh the potential cost of action against any benefits to consumers or competition. The FCC was given the authority to hear complaints for violations and award damages to injured parties. The bill also required that any rules the FCC adopted would sunset in five years unless it could make the same finding again. The net neutrality issue was also narrowly addressed within the context of the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). The ARRA contains provisions that require the National Telecommunications and Information Administration (NTIA), in consultation with the FCC, to establish \"nondiscrimination and network interconnection obligations\" as a requirement for grant participants in the Broadband Technology Opportunities Program (BTOP). The law further directs that the FCC's four broadband policy principles, issued in August 2005, are the minimum obligations to be imposed. These obligations were issued July 1, 2009, in conjunction with the release of the notice of funds availability (NOFA) soliciting applications for the program. The FCC's National Broadband Plan (NBP), which was required to be written in compliance with provisions contained in the ARRA, while making no recommendations, did contain discussions regarding the open internet and the classification of information services. Concern over the move by some broadband network providers to expand their implementation of metered or consumption-based billing prompted the introduction of legislation ( H.R. 2902 ) to provide for oversight of volume usage service plans. H.R. 2902 , the Broadband Internet Fairness Act, introduced by former Representative Massa, required, among its provisions, that any broadband internet service provider serving 2 million or more subscribers submit any volume usage based service plan that the provider is proposing or offering to the Federal Trade Commission (FTC) for approval. The FTC, in consultation with the FCC, was required to review such plans \"to ensure that such plans are fairly based on cost.\" Such plans were subject to agency review and public hearings. Plans determined by the FTC to impose \"rates, terms, and conditions that are unjust, unreasonable, or unreasonably discriminatory\" were to be declared unlawful. Violators were subject to injunctive relief requiring the suspension, termination, or revision of such plans and were subject to a fine of not more than $1 million.", "summary": "As congressional policymakers continue to debate telecommunications reform, a major discussion point revolves around what approach should be taken to ensure unfettered access to the internet. The move to place restrictions on the owners of the networks that compose and provide access to the internet, to ensure equal access and nondiscriminatory treatment, is referred to as \"net neutrality.\" There is no single accepted definition of \"net neutrality,\" but most agree that any such definition should include the general principles that owners of the networks that compose and provide access to the internet should not control how consumers lawfully use that network, and they should not be able to discriminate against content provider access to that network. The Federal Communications Commission (FCC) in its February 26, 2015, open meeting voted 3-2, along party lines, to adopt open internet rules and released these rules on March 12, 2015. One of the most controversial aspects of the rules was the decision to reclassify broadband internet access service (BIAS) as telecommunications service under Title II, thereby subjecting internet service providers to a more stringent regulatory framework. With limited exceptions, the rules went into effect June 12, 2015. Various parties challenged the legality of the FCC's 2015 Open Internet Order, but the U.S. Court of Appeals for the D.C. Circuit, in a June 14, 2016, ruling, voted (2-1) to uphold the legality of all aspects of the 2015 FCC Order. A petition for full U.S. Appeals Court review was denied and a subsequent petition for U.S. Supreme Court review was declined. The FCC on December 14, 2017, adopted (3-2) an Order that largely reverses the 2015 regulatory framework. The 2017 Order, among other things, reverses the 2015 classification of BIAS as a telecommunications service under Title II of the Communications Act, shifts much of the oversight from the FCC to the Federal Trade Commission and the Department of Justice, and provides for a less regulatory approach. This action has once again opened up the debate over what the appropriate framework is to ensure an open internet. Reaction to the 2017 Order has been mixed. Some see the 2015 FCC rules as regulatory overreach and welcome a more \"light-touch\" approach, which they feel will stimulate broadband investment, deployment, and innovation. Others support the 2015 regulations and feel that their reversal will result in a concentration of power to the detriment of content, services, and applications providers, as well as consumers, and refute the claim that these regulations have had a negative impact on broadband investment, expansion, or innovation. The 2017 Order was published in the Federal Register on February 22, 2018, and went into effect on June 11, 2018. Federal Register publication triggered timelines for both court challenges and Congressional Review Act (CRA) consideration. Petitions for review have been consolidated in the U.S. Court of Appeals, D.C. Circuit. CRA resolutions (S.J.Res. 52, H.J.Res. 129) to overturn the 2017 Order were introduced in the 115th Congress. S.J.Res. 52 passed (52-47) the Senate, but H.J.Res. 129 was not considered in the House. Additional bills to provide a regulatory framework to outline FCC authority over broadband internet access services were introduced, but not acted on, in the 115th Congress. Debate over what the appropriate regulatory framework should be for broadband access has continued in the 116th Congress. Two bills (H.R. 1644, S. 682) add a new title to the Communications Act that overturns the 2017 Order and restores the 2015 Order. An amended version of H.R. 1644 passed (232-190) the House on April 10, 2019. Additional bills (H.R. 1006, H.R. 1096, H.R. 1101, and H.R. 1860) that address the net neutrality debate have also been introduced.", "document_type": "crs"}
{"report": "Social Security provides insured workers and their eligible family members with a measure of protection against the loss of income due to the worker's retirement, disability, or death. The amount of the monthly benefit payable to workers and their family members is based on the worker's career-average earnings from jobs covered by Social Security (i.e., jobs in which the worker's earnings were subject to the Social Security payroll tax). The Social Security benefit formula is weighted to replace a greater share of career-average earnings for low-paid workers than for high-paid workers. This means that low-paid workers receive relatively high benefits in relation to their payroll tax contributions, although the dollar amount of their benefits is lower than that provided to high-paid workers. The benefit formula, however, cannot distinguish between workers who have low career-average earnings because they worked for many years at low earnings in Social Security-covered employment and workers who appear to have low career-average earnings because they worked for many years in jobs not covered by Social Security. (Those years show up as zeros in their Social Security earnings records, which, when averaged, lower their career earnings from covered work.) Consequently, workers who split their careers between covered and noncovered employment—even highly paid ones—may also receive the advantage of the weighted formula. The windfall elimination provision (WEP) is a modified benefit formula designed to remove the unintended advantage, or \"windfall,\" of the regular benefit formula for certain retired or disabled workers who spent less than full careers in covered employment and who are also entitled to pension benefits based on earnings from jobs not covered by Social Security. The reduction in initial benefits caused by the WEP is designed to place affected workers in approximately the same position they would have been in had all their earnings been covered by Social Security. Workers qualify for Social Security benefits if they worked and paid Social Security payroll taxes for a sufficient amount of time in covered employment. Retired workers need at least 40 quarters of coverage (or about 10 years of covered work), whereas disabled workers generally need fewer quarters of coverage. Initial benefits are based on a worker's career-average earnings from jobs covered by Social Security. In computing the initial benefit amount, a worker's annual taxable earnings are indexed (i.e., adjusted) to average wage growth in the national economy. This is done to bring earlier years of earnings up to a comparable, current basis. Next, a summarized measure of a worker's career-average earnings is found by totaling the highest 35 years of covered earnings and then dividing by 35. After that, a monthly average, known as a v erage indexed monthly e arnings (AIME), is found by dividing the annual average by 12. Once the worker's AIME has been derived, it is then entered into the Social Security benefit formula to produce the worker's initial benefit amount. The benefit formula is progressive, replacing a greater share of career-average earnings for low-paid workers than for high-paid workers. The benefit formula applies three factors—90%, 32%, and 15%—to three different levels, or brackets , of AIME. The result is known as the primary insurance amount (PIA) and is rounded down to the nearest 10 cents. The PIA is the worker's basic benefit before any adjustments are applied. The benefit formula applicable to a given worker is based on the individual's earliest eligibility year (ELY), that is, the year in which the worker first attains age 62, becomes disabled, or dies. For workers whose ELY is 2019, the PIA is determined as follows in Table 1 . The averaging provision in the benefit formula tends to cause workers with short careers in Social Security-covered employment to have low AIMEs, even if they had high earnings in their noncovered career, similar to people who worked for low earnings in covered employment throughout their careers. This is because years of zero covered earnings are entered as zeros into the formula that averages the worker's earnings history over 35 years. For example, a person with 10 years in Social Security-covered employment would have an AIME that reflects 25 years of zero earnings, even if that person worked for 25 years in a high-paying, noncovered career. Consequently, for a worker whose AIME is low because his or her career was split between covered and noncovered employment, the benefit formula replaces more of covered earnings at the 90% rate than if the worker had spent a full 35-year career in covered employment at the same earnings level. The higher replacement rate for workers who have split their careers between Social Security-covered and noncovered jobs is sometimes referred to as a \"windfall.\" A different Social Security benefit formula, known informally as the windfall elimination provision , applies to certain workers who are entitled to Social Security benefits as well as to pension benefits from employment not covered by Social Security. Under the WEP, the 90% factor in the first bracket of the formula is reduced to as low as 40%. The effect is to lower the proportion of earnings in the first bracket that are converted to benefits. Table 2 illustrates how the regular benefit formula and the WEP work in 2019 for someone with a 40% factor. In this scenario, the monthly benefit is $463.00 lower under the WEP than under the regular benefit formula ($1,017.00 minus $554.00). Note that the WEP reduction is limited to the first bracket in the AIME formula (90% vs. 40%), while the 32% and 15% factors for the second and third brackets are unchanged. As a result, for AIME amounts that exceed the first formula threshold of $926, the WEP reduction remains a flat $463 per month. For example, if the worker had an AIME of $4,000 instead of $1,500, the WEP reduction would still be $463 per month. The WEP therefore causes a proportionally larger reduction in benefits for workers with lower AIMEs and monthly benefit amounts. A guarantee in the WEP ensures that the WEP reduction cannot exceed half of the noncovered pension based on the worker's noncovered work. This guarantee is designed to help protect workers with low pensions from noncovered work. The WEP does not apply to workers who have 30 or more years of substantial employment covered under Social Security, with an adjusted formula for workers with 21 to 29 years of substantial covered employment, as shown in Table 3 . The WEP applies to benefits payable to retired or disabled workers who meet the criteria above and to their eligible dependents; however, it does not apply to benefits payable to survivors of deceased insured workers. Groups of workers likely to be affected by the WEP include certain state and local government employees who are covered by alternative pension plans through their employers and most permanent civilian federal employees hired before January 1, 1984, who are covered by the Civil Service Retirement System (CSRS). The WEP does not apply to federal employees performing service on January 1, 1984, to which coverage was extended on that date by reason of the Social Security Amendments of 1983 ( P.L. 98-21 ); employees of a nonprofit organization who were exempt from Social Security coverage on December 31, 1983, and who became covered for the first time on January 1, 1984, under P.L. 98-21 ; workers who attained age 62, became disabled, or were first eligible for a pension from noncovered employment before 1986; workers who receive foreign pension payments after 1994 that are based on a totalization agreement with the United States; workers whose only noncovered pension is based on earnings from noncovered domestic or foreign employment before 1957; and railroad workers whose only noncovered pension is based on earnings from employment covered by the Railroad Retirement Act. According to the Social Security Administration (SSA), as of December 2018, nearly 1.9 million Social Security beneficiaries were affected by the WEP ( Table 4 ). The overwhelming majority of those affected (about 94%) were retired workers. Approximately 3% of all Social Security beneficiaries (including disabled workers and dependent beneficiaries) and 4% of all retired-worker beneficiaries were affected by the WEP in December 2018. Of retired workers affected by the WEP, approximately 58% were men ( Table 5 ). For data on the number and share of Social Security beneficiaries affected by the WEP, by state, see Table A-1 and Table A-2 in the Appendix , respectively. The WEP was enacted in 1983 as part of major amendments ( P.L. 98-21 ) designed to shore up the financing of the Social Security program. The 40% WEP formula factor was the result of a compromise between a House bill that would have substituted a 61% factor for the regular 90% factor and a Senate proposal that would have substituted a 32% factor. The purpose of the 1983 provision was to remove an unintended advantage that the regular Social Security benefit formula provided to certain retired or disabled worker-beneficiaries who were also entitled to pension benefits based on earnings from jobs not subject to the Social Security payroll tax. The regular formula was intended to help workers who spent their lifetimes in low-paying jobs, by providing them with a benefit that replaces a higher proportion of their career-average earnings than the benefit provided to workers with high career-average earnings. However, the formula does not differentiate between those who worked in low-paid jobs throughout their careers and other workers who appear to have been low paid because they worked many years in jobs not covered by Social Security. Under the old law, workers who were employed for only a portion of their careers in jobs covered by Social Security—even highly paid ones—also received the advantage of the weighted formula, because their few years of covered earnings were averaged over their entire working career to determine the average covered earnings on which their Social Security benefits were based. The WEP is intended to place affected workers in approximately the same position they would have been in had all their earnings been covered by Social Security. Proponents of the measure say that it is a reasonable means to prevent payment of overgenerous and unintended benefits to certain workers who otherwise would profit from happenstance (i.e., the mechanics of the Social Security benefit formula). Furthermore, they maintain that the provision rarely causes hardship because by and large the people affected are reasonably well off because by definition they also receive pensions from noncovered work. The guarantee provision ensures that the reduction in Social Security benefits cannot exceed half of the pension from noncovered work, which protects people with small pensions from noncovered work. In addition, the impact of the WEP is reduced for workers who spend 21 to 29 years in Social Security-covered work and is eliminated for people who spend 30 years or more in Social Security-covered work. Some opponents believe the provision is unfair because it substantially reduces a benefit that workers may have included in their retirement plans. Others criticize how the provision works. They say the arbitrary 40% factor in the windfall elimination formula is an imprecise way to determine the actual windfall when applied to individual cases. The impact of the WEP on low-income workers has been the subject of debate. Jeffrey Brown and Scott Weisbenner (hereinafter \"Brown and Weisbenner\") point out two reasons why the WEP can be regressive. First, because the WEP adjustment is confined to the first bracket of the benefit formula ($926 in 2019), it causes a proportionally larger reduction in benefits for workers with lower AIMEs and benefit amounts. Second, a high earner is more likely than a low earner to cross the \"substantial work\" threshold for accumulating years of covered earnings (in 2019 this threshold is $24,675 in Social Security-covered earnings); therefore, high earners are more likely to benefit from the provision that phases out the WEP for people with between 21 and 29 years of covered employment. Brown and Weisbenner found that the WEP does reduce benefits disproportionately for lower-earning households. For some high-income households, applying the WEP to covered earnings even provides a higher replacement rate than if the WEP were applied proportionately to all earnings, covered and noncovered. Brown and Weisbenner found that the WEP can also lead to large changes in Social Security replacement rates based on small changes in covered earnings, particularly when a small increase in covered earnings carries a person over the threshold for an additional year of substantial covered earnings, leading to an adjustment in the WEP formula applied to the AIME. H.R. 141 (Social Security Fairness Act of 2019) and S. 521 were introduced by Representative Rodney Davis on January 3, 2019, and Senator Sherrod Brown on February 14, 2019, respectively. The legislation would repeal the WEP and the government pension offset (GPO), which reduces the Social Security benefits paid to spouses and widow(er)s of insured workers if the spouse or widow(er) also receives a pension based on government employment not covered by Social Security. The elimination of the WEP and GPO would apply to benefits payable for months after December 2019. In 2016, SSA's Office of the Chief Actuary (OCACT) projected that repealing both the WEP and the GPO would reduce the long-range actuarial balance (i.e., increase the net long-term cost) of the combined Social Security trust funds by 0.13% of taxable payroll. The OCACT estimated that repealing only the WEP would reduce the long-range actuarial balance of the combined trust funds by 0.08% of taxable payroll. S. 710 (Social Security Fairness for Firefighters and Police Officers Act) was introduced by Senator Pat Toomey on March 7, 2019. The bill would exempt certain firefighters and police officers with five years of qualified service from the WEP and the GPO. H.R. 1205 and S. 915 , identical bills both titled the Social Security Fairness Act of 2017, would have repealed the WEP as well as the GPO. The elimination of the WEP and GPO would have applied to benefits payable for months after December 2017. H.R. 6933 and S. 3526 , identical bills both titled the Equal Treatment of Public Servants Act of 2018, proposed to replace the WEP with a new proportional formula for individuals who would become eligible for OASDI benefits in 2025 or later. The proposal would have also provided for a rebate payment starting in 2020 for individuals affected by the current WEP. In October 2018, the OCACT projected that the enactment of this legislation would increase (improve) the long-range actuarial balance of the combined trust funds by 0.04% of taxable payroll. Other bills in the 115 th Congress related to the WEP included H.R. 6962 , the Social Security Equity Act of 2018, and S. 3433 , the Social Security Fairness for Firefighters and Police Officers Act. H.R. 6962 would have reduced the WEP benefit reduction relative to current law, and S. 3433 would have exempted certain firefighters and police officers with five years of qualified service from the WEP and the GPO. ", "summary": "The windfall elimination provision (WEP) is a modified benefit formula that reduces the Social Security benefits of certain retired or disabled workers who are also entitled to pension benefits based on earnings from jobs that were not covered by Social Security and thus not subject to the Social Security payroll tax. Its purpose is to remove an unintended advantage or \"windfall\" that these workers would otherwise receive as a result of the interaction between the regular Social Security benefit formula and the workers' relatively short careers in Social Security-covered employment. In December 2018, nearly 1.9 million people (or about 3% of all Social Security beneficiaries) were affected by the WEP.", "document_type": "crs"}
{"report": "Trade promotion authority (TPA), sometimes called \"fast track,\" refers to the process Congress has made available to the President for limited periods to enable legislation to approve and implement certain international trade agreements to be considered under expedited legislative procedures. Certain trade agreements negotiated by the President, such as agreements that reduce barriers to trade in ways that require changes in U.S. law, must be approved and implemented by Congress through legislation. If the content of the implementing bill and the process of negotiating and concluding it meet certain requirements, TPA ensures time-limited congressional consideration and an up-or-down vote with no amendments. In order to be eligible for this expedited consideration, a trade agreement must be negotiated during the limited time period for which TPA is in effect, and must advance a series of U.S. trade negotiating objectives specified in the TPA statute. In addition, the negotiations must be conducted in conjunction with an extensive array of required notifications to and consultations with Congress and other public and private sector stakeholders. Finally, the President must submit to Congress a draft implementing bill, which must meet specific content requirements, and a range of supporting information. If, in any given case, Congress judges that these requirements have not been met, TPA provides mechanisms through which the implementing bill may be made ineligible for expedited consideration. More generally, TPA defines how Congress has chosen to exercise its constitutional authority over a particular aspect of trade policy, while affording the President added leverage and credibility to negotiate trade agreements by giving trading partners assurance that final agreements can receive consideration by Congress in a timely manner and without amendments. TPA may apply both when the President is seeking a new agreement as well as when he is seeking changes to an existing agreement. TPA can be used for legislation to implement trade agreements reached before July 1, 2021. Under TPA, it originally was effective until July 1, 2018, but it could be extended through July 1, 2021 provided the President asked for an extension—as he did on March 20, 2018—and Congress did not enact an extension disapproval resolution within 60 days of July 1, 2018. (See What is the effect of an \"Extension Disapproval Resolution\"? ) The Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015) ( H.R. 1890 ; S. 995 ) was introduced on April 16, 2015. Similar, though not identical, bills were ordered to be reported by the Senate Finance Committee on April 22, 2015, and by the House Ways and Means Committee the next day. The legislation, as reported by the Senate Finance Committee, was joined with legislation extending Trade Adjustment Assistance (TAA) into a substitute amendment to H.R. 1314 (an unrelated revenue measure), and that legislation was passed by the Senate on May 22 by a vote of 62-37. In the House of Representatives, the measure was voted on under a procedure known as \"division of the question,\" which requires separate votes on each component, but approval of both to pass. Voting on June 12, TPA (Title I) passed by a vote of 219-211, but TAA (Title II) was defeated 126-302. A motion to reconsider that vote was entered by then-Speaker Boehner shortly after that vote. On June 18, the House again voted on TPA, in an amendment identical to the Senate version attached to H.R. 2146 , an unrelated House bill. This amendment did not include TAA. This legislation passed the House by a vote of 218-206 and by the Senate on June 24 by a vote of 60-38. It was signed by the President on June 29, 2015 ( P.L. 114-26 ). The U.S. Constitution assigns express authority over the regulation of foreign trade to Congress. Article I, Section 8, gives Congress the power to \"regulate Commerce with foreign Nations\" and to \"lay and collect Taxes, Duties, Imposts, and Excises.\" In contrast, the Constitution assigns no specific responsibility for trade to the President. Under Article II, however, the President has exclusive authority to negotiate treaties (though his authority to enter into treaties is subject to the advice and consent of the Senate) and exercises broad authority over the conduct of the nation's foreign affairs. In a sense, TPA grants no new authority to the President. The President possesses inherent authority to negotiate with other countries to arrive at trade agreements. However, some agreements require congressional approval in order to take effect. For example, if a trade agreement requires changes in U.S. law, it could be implemented only through legislation enacted by Congress. (In some cases, as well, Congress has enacted legislation authorizing the President in advance to implement certain kinds of agreements on his own authority. An example is the historical reciprocal tariff agreement authority described under the next question.) TPA legislation provides expedited legislative procedures (also known as \"fast track\" procedures) to facilitate congressional action on legislation to approve and implement trade agreements of the kinds specified in the TPA statute. TPA legislation also establishes trade negotiating objectives and notification and consultation requirements described later. The President has the authority to negotiate international agreements, including free trade agreements (FTAs), but the Constitution gives Congress sole authority over the regulation of foreign commerce and tariffs. For 150 years, Congress exercised this authority over foreign trade by setting tariff rates directly. This policy changed with the Reciprocal Trade Agreements Act of 1934, in which Congress delegated temporary authority to the President to enter into (sign) reciprocal trade agreements that reduced tariffs within preapproved levels and implement them by proclamation without further congressional action. This authority was renewed a number of times until 1974. In the 1960s, as international trade expanded, nontariff barriers, such as antidumping measures, safety and certification requirements, and government procurement practices, became subjects of trade negotiations and agreements. Congress altered the authority delegated to the President to require enactment of an implementing bill to approve the agreement and authorize changes in U.S. law required to meet obligations of these new kinds. For trade agreements that contained such provisions, preapproval was no longer an option. Because an implementing bill faced potential amendment by Members of Congress that could alter a long-negotiated agreement, Congress adopted fast track authority in the Trade Act of 1974 ( P.L. 93-618 ) to ensure that the implementing bill could receive floor consideration and to provide a procedure under which it could not be amended. The act also established U.S. trade negotiating objectives and attempted to ensure executive branch notification of and consultation with Congress and the private sector. Fast track was renamed Trade Promotion Authority (TPA) in the Bipartisan Trade Promotion Authority Act of 2002 ( P.L. 107-210 ). Many observers point out that U.S. trade partners might be reluctant to negotiate with the United States, especially on politically sensitive issues, unless they are confident that the U.S. executive branch and Congress speak with one voice, that a trade agreement negotiated by the executive branch would receive timely legislative consideration, that it would not unravel by congressional amendments, and that the United States would implement the terms of the agreement reached. Others, however, have argued that because trade negotiations and agreements have become more complex and more comprehensive, bills to implement the agreements should be subject to amendment like other legislation. In practice, even though TPA is designed to ensure that Congress will act on implementing bills without amending them, it also affords Congress several procedural means to maintain its constitutional authority. In general, under TPA, Congress has required the President to notify Congress and consult with Congress and with private sector stakeholders before, during, and upon completion of trade agreement negotiations, whether for a new agreement or changes to an existing agreement. TPA-2015 instituted additional requirements for consultation during implementation of agreements approved by Congress. Congress also has required the President to strive to adhere to general and specific principal trade negotiating objectives in any trade agreement negotiated under TPA. After signing the agreement, the President submits a draft implementing bill to Congress, along with the text of the trade agreement and a statement of administrative action required to implement it. (See sections below.) No. If the United States enters into (signs) a trade agreement within a period for which TPA is provided, the President may submit the implementing bill to Congress a day on which both the House and the Senate are in session, regardless of whether TPA expired before that date. In practice, the submission of the implementing bill usually has been coordinated with leadership of the House and Senate. Trade promotion authority was first enacted on January 1, 1975, under the Trade Act of 1974. It was used to enact the Tokyo Round Agreements Act of 1979 ( P.L. 96-39 ), which implemented the 1974-1979 multilateral trade liberalization agreements reached under the Tokyo Round negotiations under the General Agreement on Tariffs and Trade (GATT), the predecessor to the World Trade Organization (WTO). Since that time it has been renewed four time times—1979, 1988, 2002, and 2015. In 1993, Congress provided a short-term extension to accommodate the completion of the GATT Uruguay Round negotiations. Since 1979, the authority has been used for 14 bilateral/regional free trade agreements (FTAs) and one additional set of multilateral trade liberalization agreements under the GATT (now the World Trade Organization [WTO])—the Uruguay Round Agreements Act of 1994. One FTA—the U.S.-Jordan FTA—was negotiated and approved by Congress without TPA. That FTA was largely considered noncontroversial and applies to only a small portion of U.S. total trade. In some countries, the executive may possess authority to conclude trade agreements without legislative approval. In others, especially in parliamentary systems, the head of government is typically able to secure approval of any requisite legislation without amendment under regular legislative procedures. In addition, some countries prohibit amendments to trade agreement legislation and others treat trade agreements as treaties that are self-executing. Yes. TPA applies both to negotiations of new agreements as well as changes to existing agreements. On May 18, 2017, pursuant to TPA, the President sent Congress a 90-day notification of his intent to begin talks with Canada and Mexico to renegotiate and modernize NAFTA, allowing the first round of negotiations to begin on August 16, 2017. The U.S. Trade Representative (USTR) submitted detailed negotiating objectives 30 days prior to the start of negotiations on July 17. USTR received public comments and held public hearings in June 2017. After a year of negotiations, USTR Lighthizer announced a preliminary agreement with Mexico on August 27, 2018. On August 31, President Trump gave Congress the required notice 90-day notice that he would sign a revised deal with Mexico. After further negotiations, Canada joined the pact and it was concluded on September 30, 2018. The three nations signed what is now known as the United States-Mexico-Canada Agreement (USMCA) on November 30, 2018. The Administration satisfied the requirement to provide Congress with a list of changes to U.S. law required to implement the agreement on January 29, 2019. However, the government shutdown delayed work on the International Trade Commission report on the economic effects of the agreement, and is now expected to be delivered to Congress by April 20, 2019. Congress exercises its trade policy role, in part, by defining trade negotiating objectives in TPA legislation. The negotiating objectives are definitive statements of U.S. trade policy that Congress expects the Administration to honor, if the implementing legislation is to be considered under expedited rules. Since the original fast track authorization in the Trade Act of 1974, Congress has revised and expanded the negotiating objectives in succeeding TPA/fast track authorization statutes to reflect changing priorities and the evolving international trade environment. For example, since the last grant of TPA in 2002, new issues associated with state-owned enterprises, digital trade in goods and services, and localization policies have come to the forefront of U.S. trade policy and are included in TPA-2015 as principal negotiating objectives. Under TPA-2015, Congress established trade negotiating objectives in three categories: (1) overall objectives; (2) principal objectives; and (3) capacity building and other priorities. These begin with broad goals that encapsulate the \"overall\" direction trade negotiations are expected to take, such as fostering U.S. and global economic growth and obtaining more favorable market access for U.S. products and services. Principal objectives are more specific and are considered the most politically critical set of objectives, the advancement of which is necessary for a U.S. trade agreement to receive expedited treatment under TPA. Capacity building objectives involve the provision of technical assistance to trading partners. The market access negotiating objectives under TPA seek to reduce or to eliminate tariff and nontariff barriers and practices that decrease market access for U.S. products. One new provision in TPA-2015 considers the \"utilization of global chains\" in the goal of trade liberalization. It also calls for the use of sectoral tariff and nontariff barrier elimination agreements to achieve greater market access. Agriculture (see below) and textiles and apparel are addressed by separate negotiating objectives. For textiles and apparel, U.S. negotiators are to seek competitive export opportunities \"substantially equivalent to the opportunities afforded foreign exports in the U.S. markets and to achieve fairer and more open conditions of trade\" in the sector. Both the general market access provisions and the textile and apparel provisions in TPA-2015 are the same as those in the 2002 act. Services have become an increasingly important element of the U.S. economy, and the sector plays a prominent role in U.S. trade policy. The rising importance of services is reflected in their treatment under TPA statutes as a principal negotiating objective beginning with the 1984 Trade Act. Liberalization of trade in services was expressed in the 2002 Trade Act as a principal negotiating objective. It required that U.S. negotiators to make progress in reducing or eliminating barriers to trade in services, including regulations that deny nondiscriminatory treatment to U.S. services and inhibit the right of establishment (through foreign investment) to U.S. service providers. The content of the negotiating objective on services has not changed appreciably over the years. (Because foreign direct investment is an important mode of delivery of services, negotiating objectives on foreign investment [see below] pertain to services as well.) TPA-2015 expands the principal negotiating objectives on services in the 2002 TPA by highlighting the role of services in global value chains and calling for the pursuit of liberalized trade in services through all means, including plurilateral trade agreements (presumably referring to the proposed Trade in Services Agreement [TISA]). TPA-2015 adds three new agriculture negotiating objectives to the 18 previously listed in the 2002 act. One lays out in greater detail what U.S. negotiators should achieve in negotiating robust trade rules on sanitary and phytosanitary (SPS) measures (i.e., those dealing with a country's food safety and animal and plant health laws and regulations). This increased emphasis aims to address the concerns expressed by U.S. agricultural exporters that other countries use SPS measures as disguised nontariff barriers, which undercut the market access openings that the United States negotiates in trade agreements. The second calls for trade negotiators to ensure transparency in how tariff-rate quotas (TRQs) are administered that may impede market access opportunities. The third seeks to eliminate and prevent the improper use of a country's system to protect or recognize geographical indications (GI). These are trademark-like terms used to protect the quality and reputation of distinctive agricultural products, wines, and spirits produced in a particular region of a country. This new objective is intended to counter in large part the European Union's efforts to include GI protection in its bilateral trade agreements for the names of its products that U.S. and other country exporters argue are generic in nature or commonly used across borders, such as parma ham or parmesan cheese. The United States is the largest source and destination of foreign direct investment in the world. Both the 2002 act and TPA-2015 include identical principal negotiating objectives on foreign investment. The principal negotiating objectives on foreign investment are designed to reduce or eliminate artificial or trade distorting barriers to foreign investment, while ensuring that foreign investors in the United States are not accorded greater substantive rights with respect to investment protections than domestic investors in the United States, and to secure for investors important rights comparable to those that are available under the United States legal principles and practices.... TPA-2015 seeks to accomplish these goals by including provisions establishing protections for U.S. foreign investment, such as nondiscriminatory treatment, free transfer of investment-related capital flows, reducing or eliminating local performance requirements, and including established standards for compensation for expropriation consistent with U.S. legal principles and practices. These provisions are also part of the bilateral investments treaties (BIT) that the United States negotiates with other countries. Investor-state dispute settlement (ISDS) allows for private foreign investors to seek international arbitration against host governments to settle claims over alleged violations of foreign investment provisions in FTAs. While TPA does not mention a specific ISDS mechanism, it states that trade agreements should provide meaningful procedures for resolving investment disputes; seek to improve mechanisms used to resolve disputes between an investor and a government through mechanisms to eliminate frivolous claims and to deter the filing of frivolous claims; provide procedures to ensure the efficient selection of arbitrators and the expeditious disposition of claims; provide procedures to enhance opportunities for public input into the formulation of government positions; and seek to provide for an appellate body or similar mechanism to provide coherence to interpretations of investment provisions in trade agreements. Two negotiating objectives relating to foreign investment were initially listed under the Omnibus Trade and Competitiveness Act of 1988 fast-track authority. The 2002 TPA and TPA-2015 list eight. In addition to TPA, U.S. investment negotiating objectives are shaped by the U.S. Model BIT, the template used to negotiate U.S. BITs and FTA investment chapters. The Model BIT has been revised periodically in an effort to balance investor protections and other policy interests. The 2004 Model BIT, for instance, narrowed the definitions of covered investment and minimum standard of treatment, and connected the definition of direct and indirect expropriation to \"property rights or property interests,\" reflecting the U.S. Constitution's Takings Clause and with possible implications for expropriation protection depending on foreign countries' definitions of property. It also clarified that only in rare cases do nondiscriminatory regulatory actions by governments to protect legitimate public welfare objectives result in indirect expropriation. In response to global economic changes, the 2012 Model BIT, among other things, clarified that its obligations apply to state-owned enterprises, as well as to the types of financial services that may fall under a prudential exception (such as to address balance of payments problems). Other examples of revisions to the Model BIT over time include more detailed provisions on ISDS, stronger aspirational language on environmental and labor standards, and enhanced transparency obligations. TPA-2015 states that no trade agreement is to lead to the granting of foreign investors in the United States greater substantive rights than are granted to U.S. investors in the United States. Some have argued, however, that the use of ISDS itself implies greater procedural rights. \"Trade remedies\" are statutory provisions that provide U.S. firms with the means to redress unfair trade practices by foreign actors, whether firms or governments. Examples are antidumping and countervailing duty laws. The \"escape clause\" or \"safeguard provision\" permits temporary restraints on import surges not considered to be unfairly traded that cause or threaten to cause serious injury, and thus may also be considered trade remedies. The principal trade negotiating objective concerning trade remedies in TPA-2015 and previous TPA legislation has been to \"preserve the ability of the United States to rigorously enforce its trade laws\" and to avoid concluding \"agreements that weaken the effectiveness of domestic and international disciplines on unfair trade.\" Trade remedies have usually been addressed in the context of multilateral WTO negotiations, though some FTAs have included commitments related to trade remedies. Significantly, NAFTA includes—and the proposed USMCA maintains—a controversial mechanism (\"Chapter 19\" now Chapter 10.D) that enables other parties to challenge (and potentially overturn) trade remedy decisions using special tribunals. The objective reflects the perception by some Members of Congress that other countries have sought to weaken U.S. trade remedy laws. TPA-2015 also maintains past notification provisions that require the President to notify Congress about any proposals advanced in a negotiation that involve potential changes to U.S. trade remedy laws 180 days before signing (entering into) a trade agreement. The extent to which some countries may use the value of their currency to gain competitive market advantage is a source of concern for certain industries and some Members of Congress. In TPA-2002, the President was to seek to establish consultative mechanisms with trading partners to examine the trade consequences of significant and unanticipated currency movements and to scrutinize whether a foreign government has manipulated its currency to promote a competitive advantage in international trade. This provision was contained in the section on \"Promotion of Certain Priorities.\" TPA-2015 elevates the topic of currency manipulation to a principal U.S. negotiating objective. The legislation, as introduced, stipulates that U.S. trade agreement partners \"avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain unfair competitive advantage.\" It does not specifically define currency manipulation to include or exclude central bank intervention in the domestic economy, and, hence, it does not differentiate among the ways a government can affect the value of its currency, such as currency market intervention or central bank activities to increase the money supply to stimulate the domestic economy. The language calls for multiple remedies, \"as appropriate,\" including \"cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means.\" During floor consideration, the Senate considered and passed the so-called Hatch/Wyden amendment, which was adopted by the Senate by a vote of 70-29. This amendment sought to head off concerns that the language could be used to discourage central bank activities such as an increase in the money supply to stimulate the domestic economy, as well as to head off a currency amendment introduced by Senators Portman and Stabenow (defeated 48-51) that would have required the United States to negotiate \"strong and enforceable rules against exchange rate manipulation,\" enforceable through the dispute settlement system of a potential agreement. The Hatch/Wyden amendment modified the currency language of the bill as introduced, defining unfair currency practices as \"protracted large scale intervention in one direction in the exchange market and a persistently undervalued foreign exchange rate to gain an unfair competitive advantage in trade.\" The amended objective seeks to \"establish accountability\" through potential remedies such as \"enforceable rules, transparency, reporting, monitoring, cooperative mechanism, or other means to address exchange rate manipulation.\" The legislation contains the original negotiating objective, as well as the language of the Hatch/Wyden amendment. On May 10, 2007, a bipartisan group of congressional leaders and the Bush Administration released a statement on agreed principles in five policy areas, which were subsequently reflected in four U.S. FTAs then being considered for ratification, with Colombia, Panama, Peru, and South Korea. The policy areas covered included worker rights, environment protection, intellectual property rights, government procurement, and foreign investment. This agreement has since been referred to as the \"May 10 th Agreement\" (for details, see box on \"The May 10 th Agreement,\" below). The extent to which these principles would be incorporated in negotiating objectives in any renewal of TPA authority, and reflected in future FTAs, was a source of debate among policymakers. TPA-2015 incorporates the labor and environmental principles of the May 10 th agreement, including requirements that a negotiating party's labor and environmental statutes adhere to internationally recognized core labor standards and to obligations under common multilateral environmental agreements. TPA-2015 also includes the language of the May 10 th agreement on investment, \"ensuring that foreign investors in the United States are not granted greater substantive rights with respect to investment protections than U.S. investors in the United States.\" TPA-2015 does not specifically refer to the language of the May 10 th agreement on patent protection for pharmaceuticals, which were designed to achieve greater access to medicine in developing country FTA partners. Instead, TPA-2015 language seeks to \"ensure that trade agreements foster innovation and access to medicine.\" The United States has long supported the strengthening of intellectual property rights through trade agreements, and Congress has placed IPR protection as a principal negotiating objective since the 1988 grant of fast-track authority. The overall objectives on IPR under the 2002 TPA authority were the promotion of adequate and effective protection of IPR; market access for U.S. persons relying on IPR; and respect for the WTO Declaration on the Trade-related Aspects of Intellectual Property Rights (TRIPS) Agreement and Public Health. This last objective addressed concerns for the effect of patent protection for pharmaceuticals on innovation and access to medicine, especially in developing countries. These objectives are largely reflected in the five objectives in TPA-2015. The promotion of adequate and effective protection of IPR through the negotiation of trade agreements that reflect a standard of protection similar to that found in U.S. law is a key provision. Other provisions include strong protection of new technologies; standards of protection that keep pace with technological developments; nondiscrimination in the treatment of IPR; and strong enforcement of IPR. TPA-2015 also seeks to ensure that agreements negotiated foster innovation and access to medicine. A new objective in TPA-2015 seeks to negotiate the prevention and elimination of government involvement in violations of IPR such as cybertheft or piracy. The enhanced protection of trade secrets and proprietary information collected by governments in the furtherance of regulations is contained in the negotiating objective on regulatory coherence. Both the 2002 TPA and TPA-2015 include several negotiating objectives on labor issues and worker rights. While similar, they also differ in some fundamental ways. For example, the 2002 authority states that trade agreements are to ensure that a trading partner does not fail effectively to enforce its own labor statutes. The TPA-2015 requires that the United States ensure not only that a trading partner enforces its own labor statutes but also that those statutes include internationally recognized core labor standards as defined in the bill to mean the \"core labor standards as stated in the ILO Declaration on Fundamental Principles and Rights to Work and its Follow-Up (1998).\" It also states that parties shall not waive or derogate statutes or regulations implementing internationally recognized core labor standards in a manner affecting trade or investment between the United States and the parties to an agreement. In addition, the 2002 TPA allowed some discretion on the part of a trading partner government in enforcing its laws and stated that the government would be considered fulfilling its obligations if it exercised discretion, either through action or inaction, reasonably. TPA-2015, on the other hand, states that while the government retains discretion in implementing its labor statutes, the exercise of that discretion is not a reason not to comply with its obligations under the trade agreement. The labor—and environmental—provisions also contain language to strengthen the capacity of trading partners to adhere to labor and environmental standards, as well as a provision to reduce or eliminate policies that unduly threaten sustainable development. Like the labor negotiating objectives, TPA-2015 provides not only that a party enforce its own environmental standards as in the 2002 act, but also that those laws be consistent with seven internationally recognized multilateral environmental agreements (MEAs) and other provisions. It also contains the abovementioned prohibition of waiver or derogation from environmental law in matters of trade and investment. The environmental objective contains language allowing a reasonable exercise of prosecutorial discretion in enforcement and allocation of resources: language similar to, but seemingly more flexible than, that included in the labor provisions. TPA-2015 commits negotiators \"to ensure that enforceable labor and environmental standards are subject to the same dispute settlement and remedies as other enforceable provisions under the agreement.\" Under the most recent U.S. trade agreements, this could mean the withdrawal of trade concessions until a dispute is resolved. By contrast, the 2002 TPA did not prescribe particular remedies—only suggesting that remedies should be \"equivalent\"—and trade agreements implemented using 2002 TPA provided separate remedies under dispute settlement, including the use of monetary penalties and technical assistance. The regulatory practices negotiation objective seeks to reduce or eliminate the use of governmental regulations (nontariff barriers)—such as discriminatory certification requirements or nontransparent health and safety standards—from impeding market access for U.S. goods, services, or investment. Like the 2002 TPA, it attempts to obtain commitments in trade agreements that proposed regulations are based on scientific principles, cost-benefit risk assessment, or other objective, nondiscriminatory standards. It also seeks more transparency and participation by affected parties in the development of regulations, consultative mechanisms to increase regulatory coherence, regulatory compatibility through harmonization or mutual recognition, and convergence in the standards-development process. A new provision in TPA-2015 seeks to limit governmental collection of undisclosed proprietary data—\"except to satisfy a legitimate and justifiable regulatory interest\"—and to protect those data against public disclosure. Yes, the regulatory practices negotiating objective contains language applicable to a foreign country's drug pricing system. TPA-2015 seeks to eliminate government price controls and reference prices \"which deny full market access for United States products.\" TPA-2015 also seeks to ensure that regulatory regimes adhere to principles of transparency, procedural fairness, and nondiscrimination. TPA legislation has sought to establish DS mechanisms to resolve disputes first through consultation, then by the withdrawal of benefits to encourage compliance with trade agreement commitments. TPA-2015 provisions aim to apply the principal DS negotiating objectives equally through equivalent access, procedures, and remedies. In addition, as noted above, TPA requires that labor and environmental disputes be subject to the same procedures and remedies as other disputes—an obligation that, in practice, allows for full dispute settlement of labor and environmental disputes under the agreement. TPA-2015, like its predecessors, also seeks to ensure that WTO DS panels and its appeals venue, the Appellate Body, \"apply the WTO Agreement as written, without adding to or diminishing rights and obligations under the agreement,\" and use a standard of review applicable to the Uruguay Round Agreement in question, \"including greater deference, where appropriate, to the fact finding and technical expertise of national investigating authorities.\" These provisions address the perception by some Members of Congress that the WTO dispute settlement bodies have interpreted WTO agreements in ways not foreseen or reflected in the agreement. The internet not only has become a facilitator of international trade in goods and services given its borderless nature, but also is itself a source of trade in digital services, such as search engines or data storage. At the same time, however, digital trade and cross-border data flows increasingly have become the target of trade restricting measures, especially in emerging markets. The digital trade provisions update and expand upon the e-commerce provisions from the 2002 TPA that call for trade in digital goods and services to be treated no less favorably than corresponding physical goods or services in terms of applicability of trade agreements, the classification of a good or service, or regulation. Aside from ensuring that governments refrain from enacting measures impeding digital trade in goods and services, TPA-2015 extends that commitment to cross-border data flows, data processing, and data storage. It also calls for enhanced protection of trade secrets and proprietary information collected by governments in the furtherance of regulations. The promotion of strong IPR for technologies to facilitate digital trade is included in the IPR objectives, which extends the existing WTO moratorium on duties on electronic commerce transactions. U.S. firms often face competition from state-owned or state-influenced firms. The TPA-2015 principal negotiating objective for SOEs seeks to ensure that SOEs are not favored with discriminatory purchases or subsidies and that competition is based on commercial considerations in order that U.S. firms may compete on a \"level playing field.\" TPA-2015 adds a principal negotiating objective on \"localization,\" the practice by which firms are required to locate facilities, intellectual property, services, or assets in a country as a condition of doing business. While localization can be motivated by privacy and security interests, there are concerns that such measures can be trade distorting and may be used for protectionist purposes. TPA-2015 directs U.S. negotiators to prevent and eliminate such practices, as well as the practice of indigenous innovation, where a country seeks to develop local technology by the enforced use of domestic standards or local content. The digital trade objectives described above also include localization provisions concerning the free flow of data. Localization barriers are also addressed in the foreign investment chapter with provisions to restrict or eliminate performance requirements or forced technology transfers in the establishment or operation of U.S. investments abroad. TPA-2015 contains a negotiating objective to ensure the implementation of trade commitments through promotion of good governance, transparency, and the rule of law with U.S. trade partners, \"which are important parts of the broader effort to create more open democratic societies and to promote respect for internationally recognized human rights.\" During floor consideration, the Senate adopted unopposed an amendment by Senator Lankford to add an overall negotiating objective to \"take into account conditions relating to religious freedom of any party to negotiations for a trade agreement with the United States.\" The Senate Finance Committee adopted three amendments to TPA-2015 that were incorporated into the legislation ultimately passed by Congress. These amendments Made the negotiating objective on human rights (see above) a principal negotiating objective. As with the other principal negotiating objectives, expedited procedures can be conditioned on progress toward achieving these objectives. Discouraged potential trading partners from adopting policies to limit trade or investment relations with Israel. This amendment was specific to the then-proposed Trans-Atlantic Trade and Investment Partnership. Prohibited expedited consideration of trade agreements with countries ranked in the most problematic category of countries for human trafficking concerns (Tier III) in the annual report by the Department of State on Trafficking in Persons. The House placed its amendments to TPA-2015 in the subsequently passed Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 ). These five amendments added the following: An overall negotiating objective \"to ensure that trade agreements do not require changes to the immigration laws or obligate the United States to grant access or expand access to visas issued under.... the Immigration and Nationality Act.\" An overall negotiating objective \"to ensure that trade agreements do not require changes to U.S. law or obligate the United States with respect to global warming or climate change, other than those fulfilling the other negotiating objectives\" in TPA. A principal negotiating objective to expand market access, reduce tariff and nontariff barriers, and eliminate subsidies that distort trade in fish, shellfish, and seafood products. An amendment to the Section 4(c) consultation provisions to allow for additional accreditation for staffers of the chair and ranking member of the committees of jurisdiction to serve as delegates to negotiations. An amendment to the human trafficking provision (above), which would allow the President to submit a waiver if the country has taken concrete steps to implement the principal recommendations of the United States to combat trafficking. The consultative, notification, and reporting requirements of TPA are designed to achieve greater transparency in trade negotiations and to maintain the role of Congress in shaping trade policy. Congress has required the executive branch to consult with Congress prior to and during trade negotiations, as well as upon their completion and the signing of (entering into) a trade agreement. TPA/fast track statutes have required the USTR to meet and consult with the House Ways and Means Committee, the Senate Finance Committee, and other committees that have jurisdiction over laws possibly affected by trade negotiations. While many of the provisions on consultation have some precedent in past grants of TPA in terms of advisory structure and transparency commitments, TPA-2015 contains some new provisions. These provisions require the following: The appointment of a Chief Transparency Officer at USTR. This official is required \"to consult with Congress on transparency policy, coordinate transparency in trade negotiations, engage and assist the public, and advise the U.S. Trade Representative on transparency policy.\" That USTR make available, prior to initiating FTA negotiations with a new country, \"a detailed and comprehensive summary of the specific objectives with respect to the negotiations, and a description of how the agreement, if successfully concluded, will further those objectives and benefit the United States,\" and periodically update the summary during negotiations. That the President publicly release the assessment by the U.S. International Trade Commission (ITC) of the potential impact of the trade agreement (see below), which had not been the case under the previous authority. That USTR consult with committees of jurisdiction after accepting a petition for review or taking enforcement actions in regard to potential violation of a trade agreement. The release of the negotiating text to the public 60 days prior to the agreement's being signed by the Administration. In addition, the final text of the implementing legislation and a draft Statement of Administrative Action must be submitted to Congress 30 days prior to its introduction. TPA-2015 includes consultation requirements similar to those under the 2002 TPA and previous trade negotiating authorities. TPA-2015 provides for the establishment of separate Congressional Advisory Groups on Negotiations (CAGs) for each house—a House Advisory Group on Negotiations (HAGON), chaired by the chairman of the Ways and Means Committee, and a Senate Advisory Group on Negotiations (SAGON), chaired by the chairman of the Finance Committee. In addition to the chairmen, each CAG includes the ranking member and three additional members of the respective committee, no more than two of whom could be from the same political party. Each CAG also includes the chair and ranking member, or their designees, of committees of the respective chamber with jurisdiction over laws that could possibly be affected by the trade agreements. The CAGs replaces the Congressional Oversight Group (COG), a bicameral group with similar membership created under the 2002 TPA that reportedly met infrequently. For the CAGs, USTR is required to develop guidelines \"to facilitate the useful and timely exchange of information between them and the Trade Representative.\" These guidelines include fixed-timetable briefings and access by members of the CAG and their cleared staffers to pertinent negotiating documents. The President also is required to meet with either group upon the request of the majority of that group prior to launching negotiations or at any time during the negotiations. TPA-2015 mandates that the USTR draw up several sets of guidelines to enhance consultations with Congress, the private sector Advisory Committee for Trade Policy and Negotiations (see below), sectoral and industry advisory groups, and the public at large. USTR was directed to produce the guidelines, in consultation with the chairmen and ranking members of the Senate Finance Committee and the House Ways and Means Committee, no later than 120 days after TPA-2015 was enacted. The guidelines are to provide for timely briefings on the negotiating objectives for any specific trade agreement, the status of the negotiations, and any changes in laws that might be required to implement the trade agreement. In addition, TPA-2015 requires the USTR to consult on trade negotiations with any Member of Congress who requests to do so. Designated Congressional Advisors (DCAs) are Members of Congress who are accredited as official advisers to U.S. delegations to trade negotiations. Under Section 161 of the Trade Act of 1974, as amended, the Speaker of the House selects five Members from the Ways and Means Committee (no more than three of whom are to be of the same political party), and the President Pro Tempore of the Senate selects five Members from the Senate Finance Committee (no more than three of whom can be of the same political party), as DCAs. In addition, the Speaker and the Senate President Pro Tempore may each designate as DCAs members of committees that would have jurisdiction over matters that are the subject of trade policy considerations or trade negotiations. Members of the CAG who are not already DCAs may also become DCA members. Under TPA-2015, in addition to the above, any Member of the House may be designated by the Speaker as a DCA upon consultation with the chairman and ranking member of the House Ways and Means Committee and the chairman and ranking member of the committee from which the Member is selected. Similarly, any Member of the Senate may be designated a DCA upon consultation with the President Pro Tempore and the chairman and ranking member of the committee from which the Senator is selected. In addition, USTR is to accredit members of the HAGON and SAGON as official trade advisers to U.S. trade negotiation delegations by the USTR. Under the authority of Executive Order 13526, the USTR gives classified status to draft texts of trade agreements. According to USTR, nevertheless, any Member may examine draft trade agreements and related trade negotiating documents, although the 2002 TPA did not explicitly provide for this practice. TPA-2015 expressly requires that the USTR provide Members and their appropriate staff, as well as appropriate committee staff, access to pertinent documents relating to trade negotiations, including classified materials. In order to ensure that private and public stakeholders have a voice in the formation of U.S. trade policy, Congress established a three-tier advisory committee system under Section 135 of the Trade Act of 1974, as amended. These committees advise the President on negotiations, agreements, and other matters of trade policy. At the top of the system is the 30-member Advisory Committee for Trade Policy and Negotiations (ACTPN) consisting of presidentially appointed representatives from local and state governments and representatives from the broad range of U.S. industries and labor groups. At the second tier are policy advisory committees—Trade and Environment Policy, Intergovernmental Policy, Labor Policy, Agriculture Policy, and Africa. The third tier consists of 17 sector-specific committees—one agricultural and 16 industrial sectors—which provide technical advice. In addition to consultations with the advisory committees, the USTR solicits the views of stakeholders through Federal Register notices and hearings. The legislation requires the USTR to develop guidelines on consultations with the private sector advisory committees also no later than 120 days after the legislation's entry into effect. The TPA/fast track authorities under the Trade Act of 1974, and under authorities thereafter, have required the President to submit reports from the various advisory committees on their views regarding the potential impact of an agreement negotiated under the TPA before the agreement is submitted for congressional approval. For example, the 2002 TPA requires the President to submit to Congress the reports of the advisory committees on a trade agreement no later than 30 calendar days after notifying Congress of his intent to enter into (sign) the trade agreement. Those reports are also required under TPA-2015. TPA-2015 expands the existing statutory requirement for consultation with the public. For example, it requires the USTR to develop guidelines for enhanced consultation with the public and to provide these guidelines no later than 120 calendar days after the legislation's entry into effect. The guidelines committed USTR to provide detailed information regarding trade policy online, as well as to provide public stakeholder events for interested parties to meet with and share their views with negotiators, typically during negotiating rounds. The President also is required to make public other mandated reports on the impact of future trade agreements on the environment, employment, and labor rights in the United States (see below). These guidelines did not provide for the public release of negotiating positions or texts during the course of the negotiations. Under the 2002 Trade Act and TPA-2015, import sensitive products in the agriculture, fishing, and textile sectors have special assessment and consultation requirements before initiating negotiations. Another tool Congress has employed under TPA to ensure transparency of the negotiating process is to require the President to notify Congress prior to launching trade negotiations and prior to entering into (signing) a trade agreement. TPA 2015 maintains TPA-2002 requirements that the President notify Congress 90 calendar days prior to initiating negotiations on a reciprocal trade agreement with a foreign country; notify Congress 90 calendar days prior to entering into (signing) a trade agreement; notify Congress 60 days prior to entering into the agreement of any expected changes in U.S. law that would be required in order to be in compliance with the trade agreement; notify the House Ways and Means Committee and the Senate Finance Committee of any changes in U.S. trade remedy laws (discussed earlier) that would be required by the trade agreement 180 calendar days prior to entering into a trade agreement; and comply with special notification and reporting requirements for agriculture, fishing industry, and textiles and apparel. The U.S. International Trade Commission (ITC) is an independent, quasijudicial federal agency with broad investigative responsibilities on matters related to international trade. One of its analytic functions is to examine and assess international trade agreements. Under TPA-2015, the President must submit the details of the proposed agreement to the ITC 90 calendar days prior to entering into (signing) the agreement. The ITC is required to produce an assessment of the potential economic impact of the agreement no later than 105 calendar days after the agreement is signed. Unlike TPA-2002, TPA-2015 requires that the reports be made public. Several reporting requirements were established in past TPA legislation; TPA-2015 maintains similar requirements and establishes new ones. These include the following: Extension disapproval resolution (see below). TPA was extended to July 1, 2021 in 2018. The President was required to produce the following reports in support of that extension: The President must report to Congress on the status and progress of current negotiations, and why the extension is necessary to complete negotiations. The Advisory Committee on Trade Policy and Negotiations must report on the progress made in the negotiations and a statement of its views on whether the extension should be granted. The International Trade Commission (ITC) must report on the economic impact of all trade agreements negotiated during the current period TPA is in force. Report on U.S. trade remedy laws. The President must report on any proposals that could change U.S. trade remedy laws to the committees of jurisdiction (House Ways and Means Committee and the Senate Finance Committee). Must be submitted 180 days before an agreement is signed. Upon entering into an agreement, the following reports must be completed: Advisory Committee Reports. The Advisory Committee for Trade Policy and Negotiations and appropriate policy, sectoral, and functional committees must report on whether and to what extent the agreement would promote the economic interests of the United States, and the overall and principal negotiating objectives of TPA. It must be submitted 30 days after the President notifies Congress of his intention to sign an agreement. ITC Assessment. The ITC must report on the likely impact of the agreement on the economy as a whole and on specific economic sectors. The President must provide information to the ITC on the agreement as it exists no later than 90 days before an agreement is signed (entered into) to inform the assessment. The ITC must report to Congress within 105 days after the agreement is signed. This report is to be made public under TPA-2015. Reports to be submitted by the President to committees of jurisdiction in relation to each trade agreement Environmental review of the agreement and the content and operation of consultative mechanisms established pursuant to TPA. Employment Impact Reviews and Report. Reviews the impact of future trade agreement on U.S. employment and labor markets. Labor Rights. A \"meaningful\" labor rights report on the country or countries in the negotiations and a description of any provisions that would require changes to the labor laws and practices of the United States. Implementation and Enforcement. A plan for the implementation and enforcement of the agreement, including border personnel requirements, agency staffing requirements, customs infrastructure requirements, impact on state and local governments, and cost analyses. Report on Penalties. A report one year after the imposition of a penalty or remedy under the trade agreement on the effectiveness of the penalty or remedy applied in enforcing U.S. law, whether the penalty or remedy was effective in changing the behavior of the party, and whether it had any adverse impact on other parties or interests. Report on TPA. The ITC is to submit a report on the economic impact of all trade agreements implemented under TPA procedures since 1984 one year after enactment and, again, no later than five years thereafter. TPA-2015 incorporates existing expedited procedures (\"trade authorities procedures\") prescribed in Section 151 of the Trade Act of 1974 for consideration of trade agreement implementing bills (see the text box). The expedited TPA procedures include three core elements: a mechanism to ensure timely floor consideration, limits on debate, and a prohibition on amendment. The guarantee of floor consideration is intended to ensure that Congress will have an opportunity to consider and vote on the implementing bill whether or not the committees of jurisdiction or the leadership favor the legislation. Especially in the Senate, the limitation on debate helps ensure that opponents cannot prevent a final vote on an implementation bill by filibustering. The prohibition on amendments is intended to ensure that Congress will vote on the implementing bill in the form in which it is presented to Congress. In these ways, the expedited procedures help assure that Congress will act on an implementing bill, and that if the bill is enacted, its terms will implement the trade agreement that was negotiated. This arrangement helps to increase the confidence of U.S. negotiating partners that law enacted by the United States will implement the terms of the agreement, so that they will not be compelled to renegotiate it or give up on it. As noted above, if Congress were to amend an implementing bill, the legislation ultimately enacted might fail to implement the terms of the agreement that had been agreed to. In addition, if either house were to amend the implementing bill, it would likely become necessary to resolve the differences between the House and Senate versions through a conference committee (or through amendments between the houses). Since there is no way to compel the House and Senate to reach an agreement on a single version of the legislation, this prospect would make it impossible to ensure that Congress could complete action on the implementing bill expeditiously or, possibly, at all. Because trade agreement implementing bills are eligible for expedited congressional consideration under TPA, Congress has imposed restrictions on what may be included in these bills. The 2002 TPA legislation required that the implementing bill consist only of provisions that approve the trade agreement and a statement of administrative action proposed to implement it, together with provisions \"necessary or appropriate\" to implement the agreement, \"repealing or amending existing laws or providing new statutory authority.\" What constitutes \"necessary or appropriate\" has been the subject of debate, with some Members arguing that the terms should not be interpreted too loosely, while others may argue for a broader interpretation. TPA-2015 includes the same basic language as the 2002 authority, except it requires that, in addition to provisions approving the trade agreement and statement of administrative action, an implementing bill may include \" only such provisions as are strictly necessary or appropriate\" (italics added). Along with a draft implementing bill, the President submits to Congress a Statement of Administrative Action (SAA) and other supporting information. An SAA contains an authoritative expression of Administration views regarding the interpretation and application of the trade agreement for purposes of U.S. international obligations and domestic law. It describes significant administrative actions to be taken to implement the trade agreement. To support this statement, the President submits an explanation of how the implementing bill and administrative action will \"change or affect U.S. law.\" The President is also to submit with the draft implementing bill a statement explaining how the agreement makes progress in achieving the \"purposes, policies, priorities, and objectives\" of the TPA, whether it changes an agreement previously negotiated, and how it \"serves the interests of United States commerce,\" as well as how the implementing bill meets the requirement that its provisions altering existing law are \"strictly necessary or appropriate.\" Each renewal of TPA has provided means by which Congress can determine not to extend expedited consideration to certain implementing bills. In TPA-2015, these mechanisms include the following: The \"Extension Disapproval Resolution,\" through which Congress can deny a presidential request to extend TPA for additional years. The \"Procedural Disapproval Resolution,\" through which Congress can deny expedited consideration for a specified trade agreement. An additional procedure, under which Congress could find that an implementing bill would change U.S. trade remedy laws in ways inconsistent with negotiating objectives on that subject. A \"Consultation and Compliance Resolution,\" through which either chamber, by its own action, can deny the use of TPA procedures for consideration of a specified implementing bill in that chamber. Each house always retains its constitutional authority to override the statutory requirements of the TPA procedures and consider an implementing bill under its general rules or such other procedural conditions as it may determine. The following paragraphs discuss how each of these mechanisms functions to enable Congress to limit the use of TPA, implications of each, and relations among them. As already noted, TPA-2015 made expedited procedures available until July 1, 2018, and authorized the President to request that this period be extended through July 1, 2021. The President made a request to extend TPA on March 20, 2018, but the extension would have been denied if, before that date, either chamber adopted an \"extension disapproval resolution\" (EDR). Neither chamber did this, thus, TPA was extended until July 1, 2021. The 2002 renewal and other earlier TPA statutes contained similar provisions for an extension and EDR. Like previous grants of TPA, TPA-2015 effectively places the use of the EDR in the control of the House Committee on Ways and Means and the Senate Committee on Finance. Although any Member of the respective house may introduce an EDR, such a resolution may be considered on the floor in each chamber only if the respective revenue committee (and, in the House, also the Committee on Rules) reports it. If reported, however, the measure can be considered under an expedited procedure of its own, known as the \"Section 152 procedure,\" which makes privileged a motion for consideration, limits debate, and prohibits amendment at any stage of the process. Under TPA-2015, Congress may withdraw expedited legislative consideration from a particular implementing bill if it determines either (1) that the President has not adequately notified or consulted Congress on that agreement in the ways required by the act, or (2) that the agreement \"fails to make progress in achieving the purposes, policies, priorities, and objectives\" of the act. If both houses, within 60 days of each other, adopt a \"procedural disapproval resolution\" (PDR) on the same implementing bill, neither can use the expedited procedure to consider that implementing bill. In each chamber, the PDR is a simple resolution (H.Res. or S.Res.), requiring action only in the chamber of origin, so that no conference committee or other mechanism to resolve differences between the two chambers' measures is needed. Like an EDR, a PDR can be considered in each chamber under the expedited procedure of Section 152 (see previous paragraph), with a privileged motion for consideration, limited debate, and a prohibition on amendment. This mechanism affords Congress a means to enforce the requirements that a trade agreement advance the negotiating objectives established in statute and that the specified consultations, which enable Congress to engage with the process of negotiation, will occur. If, in the judgment of both houses, these conditions are not met, then Congress can decide not to accord expedited consideration to the implementing bill. As with the EDR, however, TPA-2015 effectively places the use of the PDR in the control of the House Committee on Ways and Means and the Senate Committee on Finance. Any Member of the respective chamber may introduce the resolution, but it may be considered on the floor only if the respective revenue committee (and, in the House, also the Committee on Rules) reports it. In this way the revenue committees serve, in effect, as the agent of Congress in maintaining its legislative prerogatives. With respect to a given trade agreement, moreover, the expedited procedure for considering a PDR may be used only for the first such resolution reported in each chamber. The effect of this limitation is that each chamber may attempt to withdraw expedited consideration from an implementing bill on a given trade agreement under this procedure only once. (Further implications of this limitation are noted in the later discussion on changes in trade remedy laws.) Although not embedded in statute, a \"mock markup\" has been a traditional, informal method for the House Ways and Means Committee and Senate Finance Committee to provide advice on the contents of the implementing bill before the President formally sends the draft bill to both houses, thus triggering the expedited procedures for the bill. Subsequent to the signing of the agreement, the committees generally conduct hearings on a draft implementing bill sent by the White House, followed by the advisory \"markup.\" If the versions produced by the House and Senate Committees have significant differences, the two panels might hold a \"mock conference.\" This process is not legally binding, and it is at presidential discretion whether to accept the advice. The process is called a \"mock\" markup because the bill under consideration is only a draft, it is not actually reported to the House or Senate, and the action of the committees operates only as a signal of their preferences to the executive. Often, nevertheless, the implementing bill that the President later submits to Congress tracks the results of the mock markup. If the revenue committees are dissatisfied with the implementing bill as submitted, they may respond by asking Congress to deny expedited consideration through the use of a PDR or one of the other methods described next, including bringing the bill to the floor under the general rules rather than the statutory expedited procedures. TPA-2015 retains a procedural mechanism from the 2002 authority, under which either house can adopt a simple resolution (H.Res. or S.Res.) finding that changes to U.S. trade remedy laws provided for in a trade agreement implementing bill submitted by the President are inconsistent with statutory negotiating objectives on that subject. Such action would respond to the report by the President to the revenue committees on this subject mentioned under \" Trade Remedies ,\" above. Like a PDR, such a resolution could be introduced by any Member, but could receive floor consideration only if reported by the respective revenue committee (and, in the House, also by the Committee on Rules). If the respective committees had not previously reported any other such resolution with respect to the same agreement, the resolution would be subject to consideration under the expedited procedure of Section 152 (see \" What is the effect of an \"Extension Disapproval Resolution\"? \"). Unlike a PDR, however, TPA-2015 (like the 2002 authority) does not specify what effect the adoption of a such resolution, finding an implementing bill inconsistent with trade remedy objectives, would have on consideration of the implementing bill. As a result, it is not clear that adoption of a resolution of this kind would prevent either chamber from considering the implementing bill under its expedited procedure. Yet TPA-2015 (again like the 2002 authority) prescribes that if such a resolution has been reported in either chamber, then that chamber may not use the Section 152 expedited procedure to consider a PDR to deny expedited consideration to the same implementing bill. TPA-2015 incorporates a mechanism, not present in previous TPA statutes, that permits either house, by its own action, to make a given implementing bill ineligible for expedited consideration in that chamber. As with the PDR, the emphasis of this proposal is on its potential use to counter what the chamber may consider inadequate consultation by the executive branch with respect to a trade agreement. This mechanism provides for use of a \"Consultation and Compliance Resolution\" (CCR), which is a simple resolution of either chamber (S.Res. or H.Res.) asserting that the President had \"failed or refused to notify or consult\" as required by the act, and therefore that \"the trade authorities procedures ... shall not apply\" in that chamber to the implementing bill in question. This form of action, however, contrasts with the use of the PDR, which has the effect of withdrawing expedited consideration in both chambers, but only if both agree to similar resolutions. Withdrawal of expedited consideration in only one chamber, nevertheless, would presumably suffice to prevent the effective operation of the expedited procedure as a whole, for the acting chamber might then either decline to consider the implementing bill at all, or might never bring consideration to a close and proceed to a vote, or might amend the bill, in which case a conference committee or other process of resolving differences between the two houses might become necessary, and might never be concluded. TPA-2015 provides separate procedures for a CCR in each chamber, and does not provide for expedited consideration in either. In the Senate, if the Committee on Finance \"meets on whether to report an implementing bill,\" but does not report it favorably, it must then, instead, report a CCR. The Senate is not required to consider this resolution, but if a motion is offered to proceed to its consideration, it would normally be debatable, and could be filibustered, in which case a motion for cloture could be offered in order to limit consideration. If this motion does not receive the 60 votes necessary for adoption, the resolution is returned to committee, thereby preserving the eligibility of the implementing bill for expedited consideration. In order for the Senate to withdraw expedited consideration from an implementing bill under this procedure, accordingly, the resolution would have to secure the support of 60 Senators for cloture (unless opponents permitted the motion to consider the resolution, and then the resolution itself, to come to a vote without cloture). In addition, a cloture vote does not occur until two days after the cloture motion is offered, a matter under cloture may be considered for 30 additional hours after the cloture vote, and if the Senate agrees to the motion to proceed, the same conditions apply to consideration of the measure itself. As a result, adoption of a CCR in the Senate might require Senators to be willing to spend as much as two days getting to a cloture vote, plus 30 hours consideration, plus another two days until a cloture vote on the resolution itself, plus a further 30 hours consideration before a final vote on the resolution. In the House, the CCR process is triggered if the Committee on Ways and Means reports an implementing bill \"with other than a favorable recommendation.\" If, on the day after the committee files such a report, a Member of the House submits a CCR, the committee must consider one such resolution within the next four days of session and report it within six days of session or be discharged from its consideration. The act does not specify how such a resolution would then reach the floor or under what terms it would be considered. Normally, a resolution affecting the order of business (often called a \"special rule\") would be considered by the Committee on Rules and reported as privileged, which means the committee could call it up by motion. In the past, when the House wished to withdraw expedited consideration from an implementing bill, it has used such resolutions reported by the Committee on Rules, as described below. As the TPA statutes acknowledge, the expedited procedures for which they provide operate as procedural rules of each house, and therefore each house retains full authority, under the Constitution, to change or override them at any point. Under this authority, either house could choose not to consider an implementing bill under the expedited procedure, but instead under its general rules, which might, among other things, permit amendments. In practice, the House has usually considered implementing bills not under the statutory expedited procedure, but pursuant to special rules reported from the Committee on Rules. These special rules have normally retained the statutory prohibition against amendment (thereby duplicating the conditions under which the House usually considers any revenue bill). Such special rules have usually also barred a minority motion to recommit. However, the House could adopt a special rule permitting amendments to an implementation bill, and it has also adopted a resolution prohibiting consideration of an implementing bill for a specified trade agreement. The Senate normally considers implementing bills under the statutory expedited procedure, because supporters thereby avoid the possible need, in that chamber, to obtain a super-majority vote for cloture in order to limit debate. By unanimous consent, nevertheless, the Senate could agree to override any or all of the TPA procedures, including those that prohibit amendments to an implementing bill. Congress does not have the constitutional authority to prevent the President from entering into negotiations with a foreign government. Under the Trade and Tariff Act of 1984 ( P.L. 98-573 ) and the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ), however, a bill to implement a trade agreement could have been denied expedited consideration if, within a 60-day period after the President notified the House Ways and Means Committee and the Senate Finance Committee of his intention to begin negotiations, either committee voted to disapprove the negotiation. This provision was not included either in the 2002 statute or TPA-2015. Even though the TPA procedures are designed to ensure that Congress will act on implementing bills, and will do so without amending them, TPA legislation affords Congress several procedural means to maintain arguably tight reins on the executive branch's exercise of the delegated trade authority. In the provisions of successive TPA statutes, Congress has developed the various mechanisms just discussed for preserving its authority in relation to the content of implementing bills, even when those bills are eligible for consideration under the expedited procedure. In practice, these mechanisms enable the House Committee on Ways and Means and the Senate Committee on Finance (the \"revenue committees\") to operate as agents of Congress as a whole in protecting congressional prerogatives. TPA statutes include extensive, specific negotiating objectives to be pursued in covered trade agreements (see above). They also include extensive requirements for Congress to be notified of any trade agreement negotiations and consulted during their course. These requirements enable the revenue committees to monitor the negotiations actively and work to ensure that any trade agreements reached will be acceptable (see other sections above). The procedural mechanisms discussed in the preceding paragraphs, including the extension disapproval resolution, the procedural disapproval resolution, and the mock markup, enable Congress, and the two revenue committees in particular, to exercise a degree of control over the content and consideration of covered trade agreements that is comparable, in many respects, to that which these panels generally exercise over other legislation within their jurisdiction. Inasmuch as an implementing bill (if considered under the statutory expedited procedure) normally cannot be amended, however, the revenue committees exercise control in these cases instead through actions to shape the content of the implementing bill before it is introduced. In addition to these TPA-specific procedures, finally, each house retains the ability to consider implementing bills under its general rules rather than under the expedited procedure. Neither the 2002 TPA authority nor previous TPA/fast track authorities contained provisions addressing the issue of national sovereignty. TPA-2015 states that no provision of any trade agreement entered into under the TPA inconsistent with any law of the United States, of any state, or any locality of the United States could have any effect. Nor could any provision of a trade agreement prevent the government of the United States, of any state, or any U.S. locality from amending its laws. This provision essentially provides that, for domestic purposes, any trade agreement adopted under the TPA authority is not self-executing. Therefore, any potential agreement adopted through the TPA procedures would not displace any federal, state, or local law without further action being taken by the appropriate legislature. If the implementing legislation amends or changes U.S. law, then it would supersede existing U.S. law. However, under previous grants of TPA, changes to U.S. law made by an implementing bill are to be \"necessary or appropriate\" to implement the commitments under the trade agreement. TPA-2015 changes this provision to \"strictly necessary or appropriate.\" In general, if the United States does adopt an agreement with foreign countries, it would be bound by international law under the agreement. If a federal, state, or local law is found to be in violation of the free trade agreement, then the United States could be subject to removal of some benefits under the agreement, such as an increase in tariffs on its products, through a potential dispute resolution with a challenging country. The federal, state, or local government potentially would have to amend the law that is inconsistent with the trade agreement in order for the United States to avoid removal of benefits under the international agreement, but is not required to do so.", "summary": "Legislation to reauthorize Trade Promotion Authority (TPA)—sometimes called \"fast track\"—the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015), was signed into law by former President Obama on June 29, 2015 (P.L. 114-26). If the President negotiates an international trade agreement that would reduce tariff or nontariff barriers to trade in ways that require changes in U.S. law, the United States can implement the agreement only through the enactment of legislation. If the trade agreement and the process of negotiating it meet certain requirements, TPA allows Congress to consider the required implementing bill under expedited procedures, pursuant to which the bill may come to the floor without action by the leadership, and can receive a guaranteed up-or-down vote with no amendments. Under TPA, an implementing bill may be eligible for expedited consideration if (1) the trade agreement was negotiated during the limited time period for which TPA is in effect; (2) the agreement advances a series of U.S. trade negotiating objectives specified in the TPA statute; (3) the negotiations were conducted in compliance with an extensive array of notification and consultation with Congress and other stakeholders; and (4) the President submits to Congress a draft implementing bill, which must meet specific content requirements, and a range of required supporting information. If, in any given case, Congress judges that these requirements have not been met, TPA provides mechanisms through which the eligibility of the implementing bill for expedited consideration may be withdrawn in one or both chambers. TPA is authorized through July 1, 2021. The United States has now renegotiated the North American Free Trade Agreement (NAFTA), now known as the United States-Mexico-Canada Agreement (USMCA) for which TPA could be used to consider implementing legislation. The issue of TPA reauthorization raises a number of questions regarding TPA, and this report addresses a number of those questions that are frequently asked, including the following: What is trade promotion authority? Is TPA necessary? What are trade negotiating objectives and how are they reflected in TPA statutes? What requirements does Congress impose on the President under TPA? Does TPA affect congressional authority on trade policy? For more information on TPA, see CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, by Ian F. Fergusson and CRS In Focus IF10038, Trade Promotion Authority (TPA), by Ian F. Fergusson.", "document_type": "crs"}
{"report": "T he Second Amendment states that \"[a] well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear arms, shall not be infringed.\" Before the Supreme Court's 2008 opinion in District of Columbia v. Heller, the right generally had been understood by federal courts to be intertwined with military or militia use. That understanding was formed with little Supreme Court guidance: Before Heller, the Supreme Court had barely opined on the scope of the Second Amendment, making its last substantive remarks on the right in its 1939 ruling in United States v. Miller. In Miller, the Supreme Court evaluated a criminal law banning possession of a certain type of firearm, asking whether it bore a \"reasonable relationship to the preservation or efficiency of a well regulated militia\" such that it garnered Second Amendment protection. This passage spawned a longstanding debate over whether the Second Amendment provides an individual right to keep and bear arms versus a collective right belonging to the states to maintain militias, with the vast majority of the courts embracing the collective right theory. Indeed, before the Heller litigation began only one circuit court—the Fifth Circuit in United States v. Emerson —had concluded that the Second Amendment protects an individual's right to keep and bear arms. The Supreme Court's landmark 5-4 decision in Heller upturned the earlier majority view with its holding that the Second Amendment guarantees an individual right to possess firearms for historically lawful purposes, such as self-defense in the home. But in Heller the Court did not define the full scope of that right, leaving lower courts to fill in the gaps. Indeed, the Court has said little on the matter, most notably by holding that the Second Amendment right is incorporated through the Fourteenth Amendment to apply to the states in McDonald v. City of Chicago . Beyond McDonald, the Court has largely declined to grant certiorari to the numerous Second Amendment cases percolating in the lower federal courts with one exception: In Caetano v. Massachusetts, the Supreme Court—in a single, two page ruling—granted a petition for certiorari and issued an unsigned, per curiam opinion vacating the decision of the Massachusetts Supreme Court that had upheld a state law prohibiting the possession of stun guns. But the Court's opinion did little to clarify Second Amendment jurisprudence, principally noting that the state court opinion directly conflicted with Heller without discussing the matter in further detail. During the October 2019 term, however, the Supreme Court will review a Second Amendment challenge to a New York City firearm licensing provision in New York State Rifle & Pistol Association, Inc. v. City of New York , giving the Court another opportunity to elaborate on the scope of the individual right to keep and bear arms. Accordingly, this report evaluates how the lower federal courts have interpreted Heller and the Second Amendment through challenges to various federal, state, and local firearm laws. In particular, this report focuses on federal appellate decisions, including what categories of persons, firearms, and places may be subject to government firearm regulation, and how federal, state, and local governments may regulate those categories. These appellate decisions include challenges to provisions of the Gun Control Act —the primary federal law regulating the transfer and possession of firearms in interstate commerce—as well as state and local laws that provide further restrictions on the possession and sale of firearms, including assault weapon bans, concealed carry restrictions, and firearm licensing schemes, among others. This report is not intended to provide a comprehensive analysis of every Second Amendment issue brought in federal court since Heller, but highlights notable challenges to firearm laws that may be of interest to Congress. Before Heller, the District of Columbia had a web of regulations governing the ownership and use of firearms that, taken together, amounted to a near-total ban on handguns in the District. One law generally barred the registration of most handguns. Another law required persons with registered firearms to keep them \"unloaded and either disassembled or secured by a trigger lock, gun safe, locked box, or other secure device.\" And a third law prohibited persons within the District of Columbia from carrying (openly or concealed, in the home or elsewhere) an unlicensed firearm. In 2003, six D.C. residents challenged those three measures as unconstitutional under the Second Amendment, arguing that the Constitution provides an individual right to bear arms. In particular, the residents contended that the Second Amendment provides individuals a right to possess \"functional firearms\" that are \"readily accessible to be used . . . for self-defense in the home.\" In Parker v. District of Columbia, the district court was tasked with gleaning the meaning of the right provided by the Second Amendment. The last word from the Supreme Court on this right was in its 1939 ruling, United States v. Miller. Miller involved a challenge to a federal indictment for unlawfully transporting in interstate commerce an unregistered double barrel 12-gauge shotgun with a barrel less than 18 inches in length, as had been prohibited by the National Firearms Act of 1934. A district court had dismissed the indictment after concluding that the challenged criminal provision infringed the defendant's Second Amendment rights. The Supreme Court, on direct appeal, reversed that ruling: In the absence of any evidence tending to show that possession or use of a 'shotgun having a barrel of less than eighteen inches in length' at this time has some reasonable relationship to the preservation or efficiency of a well regulated militia, we cannot say that the Second Amendment guarantees the right to keep and bear such an instrument. In reaching that conclusion, the Court emphasized that the Second Amendment must be interpreted in the context in which it was enacted: \"[w]ith [the] obvious purpose to assure the continuation and render possible the effectiveness of\" Congress's power to \"provide for organizing, arming, and disciplining, the Militia.\" Relying on the Supreme Court's guidance in Miller, the district court in Parker rejected the plaintiffs' contention that the Second Amendment provides an individual right to bear arms unrelated to militia use. The court additionally noted that this conclusion matched those of every other federal circuit court to have considered the issue except for one recent Fifth Circuit decision. Accordingly, the district court dismissed the lawsuit for failing to state a claim for relief under the Second Amendment, reasoning that it \"would be in error to overlook sixty-five years of unchanged Supreme Court precedent and the deluge of circuit case law rejecting an individual right to bear arms not in conjunction with service in the Militia.\" The D.C.-resident plaintiffs appealed to the D.C. Circuit, and a divided 3-judge panel reversed the district court's ruling. The crux of the debate at the circuit court centered on whether the court should adopt the \"collective right\" versus \"individual right\" theory of the Second Amendment. Framed this way, the D.C. Circuit, unlike the district court, perceived the issue before it as one of first impression, opining that Miller actually addressed the kinds of \"arms\" that the Second Amendment protects. Under the collective right theory advanced by the District of Columbia (District), the Second Amendment protects only the right of states to maintain and arm their militias. Accordingly, the District argued that the Second Amendment's prefatory clause—\"[a] well regulated Militia, being necessary to the security of a free State\"—announces the Amendment's sole purpose: to protect state militias from federal intrusion, and limiting the right to keep and bear arms to military uses. Under the individual right theory, advanced by the plaintiffs, the Second Amendment guarantees individuals a right to keep and bear arms for personal use. Pointing to a different part of the Amendment's text, the plaintiffs argued that its operative clause—\" the right of the people to keep and bear Arms shall not be infringed\"—signals an individual right. The D.C. Circuit rejected the collective right theory advanced by the District, reasoning that Supreme Court precedent interpreting the meaning of \"the people,\" as used in the Bill of Rights, required the court to conclude that \"the people,\" as used in the Second Amendment, refers to individual persons, and thus the Amendment protects an individual right. The court additionally noted that, because founding era-like militias no longer exist, the argument put forth by the District would render the Second Amendment a \"dead letter.\" Having established that the Second Amendment protects an individual right to keep and bear arms, the court next addressed the scope of that right by examining the lawful, private purposes for which founding-era persons owned and used firearms. The court concluded that the right encompasses firearm uses pre-existing the Constitution, such as hunting and self-defense against private misconduct or a tyrannical government. And though the right could be subject to \"reasonable restrictions,\" the court noted that the Constitution would not tolerate laws, like the District's, that amount to a \"virtual prohibition\" on handgun possession. One judge dissented on the ground that the District is not a state within the meaning of its use in the Second Amendment, and thus its protections—whatever they may be—do not reach it. The challenge made its way to the Supreme Court, which, in a 5-4 decision authored by Justice Scalia, affirmed the D.C. Circuit's conclusion that the Second Amendment provides an individual right to keep and bear arms for lawful purposes. The majority arrived at this conclusion after undertaking an extensive analysis of the founding-era meaning of the words in the Second Amendment's prefatory and operative clauses. Applying that interpretation to the challenged D.C. firearm laws, the Court concluded that the District's functional ban on handgun possession in the home and the requirement that lawful firearms in the home be rendered inoperable were unconstitutional. The majority analyzed the Second Amendment's two clauses and concluded that the prefatory clause, indeed, announces the Amendment's purpose. And though there must be some link between the stated purpose and the command in the operative clause, the Court concluded that \"the prefatory clause does not limit . . . the scope of the operative clause.\" Accordingly, the Court assessed the meaning of the Second Amendment's two clauses. Beginning with the operative clause, the Supreme Court first concluded that the phrase the \"right of the people,\" as used in the Bill of Rights, universally communicates an individual right, and thus the Second Amendment protects a right that is \"exercised individually and belongs to all Americans.\" Next, the Court turned to the meaning of \"to keep and bear arms.\" \"Arms,\" the Court said, has the same meaning now as it did during the eighteenth century: \"any thing that a man wears for his defence, or takes into his hands, or use[s] in wrath to cast at or strike another,\" including weapons not specifically designed for military use. The Court then turned to the full phrase \"keep and bear arms.\" To \"keep arms,\" as understood during the founding period, the Court said, was a \"common way of referring to possessing arms, for militiamen and everyone else. \" And \"bearing arms,\" during the founding period as well as currently, the Court said, means to carry weapons for the purpose of confrontation; but even so, the Court added, the phrase does not \"connote[] participation in a structured military organization.\" Taken together, the Court concluded that the Second Amendment \"guarantee[s] the individual right to possess and carry weapons in case of confrontation.\" The Court added that its textual analysis was supported by the Amendment's historical background, which was relevant to its analysis because, the Court reasoned, the Second Amendment was \"widely understood\" to have codified a pre-existing individual right to keep and bear arms. Turning back to the prefatory clause, the Supreme Court majority concluded that the term \"well-regulated militia\" does not refer to state or congressionally regulated military forces as described in the Constitution's Militia Clause; rather, the Second Amendment's usage refers to all \"able-bodied men\" who are \"capable of acting in concert for the common defense.\" And the security of a free \"state,\" the Court opined, does not refer to the security of each of the several states, but rather the security of the country as a whole. Coming full circle to the Court's initial declaration that the two clauses must \"fit\" together, the majority concluded that the two clauses fit \"perfectly\" in light of the historical context showing that \"tyrants had eliminated a militia consisting of all the able-bodied men . . . by taking away the people's arms.\" Thus, the Court announced, the reason for the Second Amendment's codification was \"to prevent elimination of the militia,\" which \"might be necessary to oppose an oppressive military force if the constitutional order broke down.\" But the reason for codification, the Court clarified, does not define the entire scope of the right the Second Amendment guarantees. This is so because, the Court explained, the Second Amendment codified a pre-existing right that included using firearms for self-defense and hunting, and thus the pre-existing right also informs the meaning of the Second Amendment. The Supreme Court majority added that its conclusion was not foreclosed by its earlier ruling in Miller , which, as discussed above, had largely been viewed by the lower federal courts as advancing the collective right theory. Like the D.C. Circuit, the Supreme Court concluded that Miller addressed only the type of weapons eligible for Second Amendment protection. Furthermore, in the Court's view, the fact that Miller assessed a type of unlawfully possessed weapon supported its conclusion that the Second Amendment protects an individual right, noting that \"it would have been odd to examine the character of the weapon rather than simply note that the two crooks were not militiamen.\" Nor, the Court added, did Miller \"purport to be a thorough examination of the Second Amendment,\" and thus, the Court reasoned, it cannot be read to mean more than \"say[ing] only that the Second Amendment does not protect those weapons not typically possessed by law-abiding citizens for lawful purposes, such as short-barreled shotguns.\" After announcing that the Second Amendment protects an individual's right to possess firearms, the Supreme Court explained that, \"[l]ike most rights, the right secured by the Second Amendment is not unlimited.\" Nevertheless, the Court left for another day an analysis of the full scope of the right. The Court did clarify, however, that \"nothing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of firearms,\" among other \"presumptively lawful\" regulations. And as for the kind of weapons that may obtain Second Amendment protection, the Court noted that Miller limits Second Amendment coverage to weapons \"in common use at the time\" that the reviewing court is examining a particular firearm, which, the Court added, \"is fairly supported by the historical tradition of prohibiting the carrying of dangerous and unusual weapons.\" Finally, the Supreme Court applied the Second Amendment, as newly interpreted, to the contested D.C. firearm regulations—which amounted to a near-total handgun ban—and concluded that they were unconstitutional. First, the Court declared that possessing weapons for self-defense is \"central to the Second Amendment right,\" yet the District's handgun ban prohibits \"an entire class of 'arms' that is overwhelmingly chosen by American society for that lawful purpose.\" Moreover, the handgun prohibition extended into the home, where, the Court added, \"the need for defense of self, family, and property is most acute.\" Additionally, the requirement that firearms in the home be kept inoperable is unconstitutional because, the Court concluded, that requirement \"makes it impossible for citizens to use them for the core lawful purpose of self-defense.\" Thus, the Court ruled, the District's handgun ban could not survive under any level of scrutiny that a court typically would apply to a constitutional challenge of an enumerated right. Justice Stevens, joined by Justices Souter, Ginsburg, and Breyer, dissented. Justice Stevens did not directly quarrel with the majority's conclusion that the Second Amendment provides an individual right, asserting that it \"protects a right that can be enforced by individuals.\" But he disagreed with the majority's interpretation of the scope of the right, contending that neither the text nor history of the Amendment supports \"limiting any legislature's authority to regulate private civilian uses of firearms\" or \"that the Framers of the Amendment intended to enshrine the common-law right of self-defense in the Constitution.\" Additionally, he characterized the majority's interpretation of Miller as a \"dramatic upheaval in the law.\" In his view, Miller interpreted the Second Amendment as \"protect[ing] the right to keep and bear arms for certain military purposes\" and not \"curtail[ing] the Legislature's power to regulate the nonmilitary use and ownership of weapons.\" This interpretation, Justice Stevens added, \"is both the most natural reading of the Amendment's text and the interpretation most faithful to the history of its adaptation.\" Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, authored another dissent. Although agreeing with Justice Stevens that the Second Amendment protects only militia-related firearm uses, in his dissent he argued that the District's laws were constitutional even under the majority's conclusion that the Second Amendment protects firearm possession in the home for self-defense. He began by assessing the appropriate level of scrutiny under which Second Amendment challenges should be analyzed. Justice Breyer suggested an interest-balancing inquiry in which a court would evaluate \"the interests protected by the Second Amendment on one side and the governmental public-safety concerns on the other, the only question being whether the regulation at issue impermissibly burdens the former in the course of advancing the latter.\" In making that evaluation, Justice Breyer would ask \"how the statute seeks to further the governmental interests that it serves, how the statute burdens the interests that the Second Amendment seeks to protect, and whether there are practical less burdensome ways of furthering those interests.\" Applying those questions to the challenged D.C. laws, Justice Breyer concluded that (1) the laws sought to further compelling public-safety interests; (2) the D.C. restrictions minimally burdened the Second Amendment's purpose to preserve a \"well regulated Militia\" and burdened \"to some degree\" an interest in self-defense; and (3) there were no reasonable but less restrictive alternatives to reducing the number of handguns in the District. Thus, in Justice Breyer's view, the District's gun laws were constitutional. He also anticipated that the majority's decision would \"encourage legal challenges to gun regulation throughout the Nation.\" The majority did not seem to voice disagreement with this prediction, but noted that \"since this case represents this Court's first in-depth examination of the Second Amendment, one should not expect it to clarify the entire field.\" Indeed, after Heller a series of challenges to federal and state firearms laws occurred . Because Heller involved a challenged to a D.C. law, and because the District is generally not viewed as a state for purposes of constitutional law, a question beyond the scope of Heller was whether the Second Amendment applies to the states. Initially, the Bill of Rights was thought solely to restrict the power of the federal government. Only after the Fourteenth Amendment's adoption did the Supreme Court contemplate whether the Bill of Rights applies to the states. Section One of the Fourteenth Amendment declares that \"[n]o state shall make or enforce any law which shall abridge the privileges or immunities of the Unites States; nor shall any state deprive any person of life, liberty, or property, without due process of law.\" During the nineteenth and twentieth centuries, several theories were advanced, with varying results, concerning whether the Fourteenth Amendment requires states to comply with the Bill of Rights. The theory that eventually achieved the greatest success was selective incorporation through the Fourteenth Amendment's Due Process Clause. Under the doctrine of selective incorporation, courts address whether the Due Process Clause of the Fourteenth Amendment fully incorporates a particular provision (and not an amendment as a whole) in the Bill of Rights and thus applies to the states. To do so, courts evaluate whether the particular provision is \"fundamental to our scheme of ordered liberty\" as well as \"deeply rooted in this Nation's history and tradition.\" Most provisions of the Bill of Rights have been incorporated under this theory. And most recently in McDonald v. City of Chicago, the Supreme Court addressed whether the Second Amendment applies to the states. After Heller several firearms associations, along with residents of the City of Chicago and its neighboring suburb of Oak Park, Illinois, brought Second Amendment challenges to ordinances banning handgun possession in those municipalities. The lawsuits were dismissed in the federal district court on the ground that the Supreme Court had yet to apply the Second Amendment to the states. The Seventh Circuit affirmed, reasoning that century-old Supreme Court precedent had long ago announced that the Second Amendment does not apply to the states. The Supreme Court reversed in a 4-1-4 ruling authored by Justice Alito, concluding that \"the Framers and ratifiers of the Fourteenth Amendment counted the right to keep and bear arms among those fundamental rights necessary to our system of ordered liberty.\" Thus, the Court held that the Second Amendment is applicable to the states through the Due Process Clause of the Fourteenth Amendment. The plurality first noted that Heller makes \"unmistakabl[e]\" that the basic right to self-defense is a \"central component\" of the Second Amendment and \"deeply rooted in this Nation's history and tradition.\" The Court reiterated much of the information recited in Heller about the founders' relationship to arms, including the fear many held—based on King George III's attempts to disarm the colonists—that the newly created federal government, too, would disarm the people to impose its will. And even though the initial perceived threat of disarmament had dissipated by the 1850s, the plurality asserted that, still, \"the right to keep and bear arms was highly valued for purposes of self-defense.\" The Court also pointed to congressional debate in 1868 of the Fourteenth Amendment, during which Senators had referred to the right to keep and bear arms as a \"fundamental right deserving of protection.\" In his concurring opinion, Justice Thomas said that he would have construed the Second Amendment to be applicable to the states via the Privileges or Immunities Clause of the Fourteenth Amendment because, in his view, \"the right to keep and bear arms is guaranteed by the Fourteenth Amendment as a privilege of American citizenship.\" But his opinion, nevertheless, provided the crucial fifth vote to hold that the Second Amendment applies to the states. Justice Breyer dissented (joined by Justices Ginsburg and Sotomayor), contending that \"nothing in the Second Amendment's text, history, or underlying rationale . . . warrant[s] characterizing it as 'fundamental' insofar as it seeks to protect the keeping and bearing of arms for private self-defense purposes.\" Additionally, he asserted that the Constitution provides no authority for \"transferring ultimate regulatory authority over the private uses of firearms from democratically elected legislators to courts or from the States to the Federal Government.\" Justice Stevens authored another dissenting opinion, arguing that the question before the Court was not whether the Second Amendment, as a whole, applies to the states, but rather whether the Fourteenth Amendment requires that the liberty interest asserted—\"the right to possess a functional, personal firearm, including a handgun, within the home\"—be enforceable against the states. In his view, the Second Amendment is not enforceable against the states, particularly because the Amendment is a \"federalism provision\" that is \"directed at preserving the autonomy of the sovereign States, and its logic therefore resists incorporation by a federal court against the states.\" After Heller and McDonald , lawsuits were brought nationwide challenging on Second Amendment grounds various federal, state, and local firearms regulations. Heller did not define the full scope of the right protected by the Second Amendment, but the main take away may be summed up as follows: The Second Amendment protects the right of law-abiding citizens to possess weapons for lawful purposes, notably, self-defense in the home. With this minimal guidance from the Supreme Court, the circuit courts largely have been applying a two-step inquiry, drawn from the discussion in Heller , to determine whether a particular law is constitutional. First, courts ask whether the challenged law burdens conduct protected by the Second Amendment. If it does not, the inquiry ends, as the law does not implicate the Second Amendment. But if the challenged law does burden conduct protected by the Second Amendment, courts next ask whether, under some type of means-end scrutiny (described in more detail below), the law is constitutional under that standard of review. The Seventh Circuit stands out among the circuit courts of appeal for, at times, taking a somewhat different approach in the two-step analysis. In recent cases the court has declined, at step two, to dig \"deeply into the 'levels of scrutiny' quagmire.\" Instead, the court evaluates \"the strength of the government's justification for restricting or regulating the exercise of Second Amendment rights.\" When the firearm restriction implicates core Second Amendment rights, the Seventh Circuit has suggested that the government must make a \"rigorous showing\" that may resemble something close to strict scrutiny. For less severe burdens, the court requires the government to make a \"strong showing\" that a firearm regulation bears a \"substantial relation\" to an important governmental objective—a standard that resembles the intermediate scrutiny standard of review. It is also worth noting that, although the D.C. Circuit has applied the two-step approach when evaluating firearm legislation, the newest member of the Supreme Court bench—Justice Kavanaugh—advocated for a different approach while serving as a judge on the D.C. Circuit, arguing that: \"In my view,\" he stated, \" Heller and McDonald leave little doubt that courts are to assess gun bans and regulations based on text, history, and tradition, not by a balancing test such as strict or intermediate scrutiny.\" The first question in the two-part framework asks whether the challenged law targets conduct within the scope of the Second Amendment's protections. In making this determination, the reviewing courts typically engage in a textual and historical inquiry into the original meaning of the right, as the Supreme Court majority did in Heller. Yet, even after concluding that the challenged regulation does not burden protected activity, courts, at times, have applied step two out of an \"abundance of caution,\" given the lack of guidance from the Supreme Court as to how courts should analyze Second Amendment claims. For certain types of firearms regulations, some courts ask under step one whether the challenged regulation is \"longstanding\" and \"presumptively lawful\" and, if the answer is in the affirmative, the inquiry ends. This analysis derives from the passage in Heller in which the Supreme Court announced that \"nothing in our opinion should be taken to cast doubt on longstanding prohibitions\" that the Court considered to be \"presumptively lawful,\" on the possession of weapons by certain categories of persons and in certain \"sensitive places,\" as well as restrictions on possessing and selling certain types of weapons. In particular, the Court mentioned that such laws include those prohibiting felons and the mentally ill from possessing weapons; forbidding firearms from being carried in schools and government buildings; and imposing conditions on the commercial sale of firearms. This list was not meant to be exhaustive, and the Court did not elaborate further. Some scholars have dubbed this passage Heller 's \"safe harbor,\" intimating that restrictions similar to those listed in Heller would be found constitutional. Dissimilarly, at least one circuit court has said that if a firearms regulation is \"longstanding,\" it is not automatically constitutional but, rather, \"enjoy[s] more deferential treatment\" at step two. Whether at step one or two, the federal courts have grappled with what makes a particular firearm restriction \"longstanding\" and \"presumptively lawful.\" Laws aligning neatly with those specifically recited by the Heller majority have been upheld, in some courts, as falling into Heller's safe harbor. For laws falling outside those specified in Heller, the courts have generally found that a regulation can be longstanding even without a \"precise founding-era analogue.\" This is so because laws that the Supreme Court cited as \"longstanding\" in Heller, like laws barring felons and the mentally ill from possessing firearms, were not statutorily prohibited until the mid-twentieth century. Conversely, other courts have observed the \"relative futility of 'pars[ing] these passages of Heller as if they contain an answer'\" to whether certain gun prohibitions are valid. Additionally, one circuit court has criticized placing regulations into the so-called \"safe harbor\" because, in its view, that approach is too similar to rational-basis review, which Heller rejected. Additionally, the circuit courts have been attempting to decipher why the Supreme Court designated certain firearms restrictions as presumptively lawful. Some courts have interpreted Heller 's discussion of presumptively lawful \"longstanding prohibitions\" on certain firearms to mean that such firearms are outside the scope of the Second Amendment. Others presume, subject to rebuttal, that a longstanding regulation is unprotected by the Second Amendment and thus lawful. Yet another interpretation that has been offered is that longstanding regulations are lawful not because they are outside the scope of the Second Amendment, but because, despite burdening protected activity, they would survive analysis under any standard of scrutiny. So unlike the first two interpretations, which inquire into whether a regulation is presumptively lawful, under this latter view, the inquiry would take place during step two. At step two, most courts analyze the challenged regulation under a particular level of scrutiny. Typically, constitutional claims are evaluated under rational basis, intermediate, or strict scrutiny. Rational basis review is the most deferential to legislatures, with courts asking whether a statute is rationally related to a legitimate government purpose. Under strict scrutiny—the most exacting standard of review—the government must show that the regulation furthers a compelling governmental interest and is narrowly tailored to serve that interest. In between those two is intermediate scrutiny, in which a court asks whether (1) the regulation furthers a substantial or important governmental interest; (2) there is a reasonable or substantial fit between the asserted interest and the challenged law; and (3) the restriction is no greater than necessary to further that interest. Under this method, \"the fit needs to be reasonable,\" but \"a perfect fit is not required.\" Heller provided little guidance on how courts ought to review Second Amendment claims. The Supreme Court majority seemed to reject rational basis, as well as Justice Breyer's proposed interest-balancing inquiry, as adequate analytical tools. In the majority opinion, though, the Court made numerous comparisons between the rights secured by the First and Second Amendments. Accordingly, to determine the applicable level of scrutiny, courts have looked to First Amendment jurisprudence for guidance. The Supreme Court's First Amendment jurisprudence applies strict scrutiny to laws that regulate the content of a message. But if a law regulates only the time, place, or manner of how a message is conveyed, that law is subject to intermediate scrutiny. As in that context, in Second Amendment challenges courts typically will \"consider the nature of the conduct being regulated and the degree to which the challenged law burdens the right.\" Thus, \"[a] less severe regulation—a regulation that does not encroach on the core of the Second Amendment—requires a less demanding means-end showing.\" In that case, courts apply a form of intermediate scrutiny to Second Amendment challenges. For instance, in United States v. Masciandaro, the Fourth Circuit drew a line between firearm possession in the home versus outside the home, concluding that strict scrutiny would apply to the former and intermediate scrutiny to the latter: We assume that any law that would burden the \"fundamental,\" core right of self-defense in the home by a law-abiding citizen would be subject to strict scrutiny. But, as we move outside the home, firearm rights have always been more limited, because public safety interests often outweigh individual interests in self-defense. Borrowing further from First Amendment jurisprudence, several courts have asked whether a firearm law regulates only the \"time, place, and manner\" in which a person may exercise Second Amendment rights. If so, intermediate scrutiny would be warranted. Finally, based on Heller, most courts have viewed rational-basis review as \"off the table,\" leaving strict and intermediate scrutiny—the two categories of heightened scrutiny—for the courts to choose from. Heller largely left unresolved much of the \"who, what, where, when, and why\" of Second Amendment protections. The Supreme Court did make clear, however, that the Second Amendment (1) applies to law-abiding citizens who seek to use firearms for lawful purposes, particularly for self-defense in the home; and (2) does not protect dangerous and unusual weapons. Since Heller and McDonald, the lower courts have been attempting to apply Heller in various Second Amendment challenges to federal, state, and local firearm laws. This section of the report highlights cases that have examined what classes of persons, weapons, and places are protected by the Second Amendment, as well as the manner in which such categories may be permissibly regulated. Concerning federal regulations, most challenges stem from provisions of the Gun Control Act of 1968, as amended, which places limitations on the commercial sale and possession of firearms in interstate commerce. The challenged state laws and regulations vary; this report highlights challenges to state assault weapon bans, concealed carry restrictions, firearm licensing schemes, and the commercial sale of arms, among others. Federal laws imposing age restrictions on gun possession and purchasing have survived judicial challenges. For instance, it is unlawful under 18 U.S.C. § 922(x)(2)(A) for juveniles (statutorily defined as persons under 18) to possess a handgun (subject to several exceptions). Shortly after Heller, a 17-year-old convicted under § 922(x) challenged his conviction in the First Circuit, arguing that the statute violated his rights under the Second Amendment. In particular, he argued that his interest in self-defense is \"just as strong\" as that of an adult and that the statute—enacted in 1994—cannot be viewed as \"longstanding.\" But the First Circuit in United States v. Rene E. disagreed, concluding that there has been a \"longstanding tradition of prohibiting juveniles from both receiving and possessing handguns,\" with age-based gun restrictions being in place under federal law since 1968 and restrictions on juvenile possession of guns dating back more than a century at the state level. Thus, the court concluded that the federal ban on juvenile possession of handguns fell within Heller's safe harbor for longstanding restrictions on firearm possession. Another provision in the Gun Control Act (and corresponding regulations) makes it unlawful for firearm dealers to sell handguns to persons under 21 years old. The law was challenged in National Rifle Association v. ATF by persons between 18 and 21 years old who argued that it unconstitutionally burdened their right to keep and bear arms under the Second Amendment. In its ruling, the Fifth Circuit commented that it was \"inclined to uphold\" the law and regulation under step one as a longstanding restriction outside the scope of the Second Amendment after finding historical support for similar firearm restrictions. Nevertheless, in an \"abundance of caution,\" the court proceeded to step two of the two-part test formed after Heller . At step two, the court applied intermediate scrutiny, concluding that the age-based restriction does not burden the Second Amendment's core protections of law-abiding, responsible citizens, because \"Congress found that persons under 21 tend to be relatively irresponsible and can be prone to violent crime, especially when they have easy access to handguns.\" Nor does the restriction prevent 18- to 21-year-olds from possessing handguns for self-defense in the home because, the court added, these persons may lawfully acquire handguns from responsible parents or guardians. Ultimately, the court concluded that the laws survived intermediate scrutiny because the government showed a nexus between the firearm restriction and the government's interest in keeping guns out of the hands of young persons. In doing so, the court gave particular attention to Congress's findings after a multi-year investigation that there was a causal relationship between the easy availability of firearms to persons under 21 and a rise in crime. Under 18 U.S.C. § 922(g)(1), the Gun Control Act makes it is a criminal offense for a felon to possess a firearm. After Heller, the federal circuit courts have unanimously concluded that § 922(g)(1) does not violate the Second Amendment. In upholding § 922(g)(1), some courts have relied on the passage in Heller in which the Supreme Court announced that \"nothing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons.\" For example, in United States v. Vongxay , the Ninth Circuit rejected an argument that this proclamation in Heller was mere dicta that the court need not follow and upheld the challenged provision as constitutional. Other courts, like the D.C. Circuit, have opined that \"history and tradition support the disarmament of those who were not (or could not be) virtuous members of the community,\" and thus all felons are excluded from the Second Amendment. Yet some courts have opined, however, that the Supreme Court, \"by describing the felon disarmament ban as 'presumptively lawful,'\" meant that even if a facial challenge were to fail, the presumption could be rebutted in an as-applied challenge. For example, the Third Circuit sitting en banc in Binderup v. Attorney General United States of America held that a person could rebut the presumption in an as-applied challenge to § 922(g)(1) if that person could sufficiently distinguish himself (and the crime of conviction) from the \"traditional justifications\" for excluding convicted felons from possessing firearms. The Fourth Circuit held more narrowly in Hamilton v. Pallozzi that generally, a felony conviction \"removes one from the class of 'law-abiding, responsible citizens,' for the purposes of the Second Amendment,\" unless the person receives a pardon or the law defining the felony at issue is found unconstitutional or otherwise unlawful. Still, the court left open the possibility that the presumption could be rebutted for persons convicted of certain crimes labeled as misdemeanors but falling under the scope of § 922(g)(1) because of the potential term of imprisonment accompanying that misdemeanor. In contrast, other courts have cautioned that \"the highly-individualized approach\" of as-applied challenges \"raises serious institutional and administrative concerns.\" One court even held that an indictment under § 922(g)(1) was constitutional even as applied to a person who was not a felon forbidden from possessing a firearm, but who was charged with aiding and abetting a felon to possess a firearm in violation of that provision. In United States v. Huet, the defendant was indicted under § 922(g)(1) and argued that the indictment was based solely on the government's evidence that she possessed a rifle in her home, which she shared with a convicted felon. The district court dismissed the indictment on the ground that it would permit \"'the total elimination of the [Second Amendment] right of a sane, non-felonious citizen to possess a firearm, in her home, simply because her paramour is a felon.'\" The Third Circuit disagreed, concluding that \"a properly-brought aiding and abetting charge does not burden conduct protected by the Second Amendment.\" Ultimately, the Third Circuit concluded that the indictment's dismissal was premature because the government must be allowed to further develop the evidentiary record to show that the defendant did more than merely possess a weapon in a home shared with a convicted felon, but actually aided and abetted that felon in possessing the firearm himself. If that was the case, the defendant's conduct would be beyond the scope of the Second Amendment given Heller's comment that \"the Second Amendment does not afford citizens a right to carry arms for 'any purpose.'\" And aiding and abetting a convicted felon in possessing a firearm, the court concluded, is not a protected right. A 1996 amendment to the Gun Control Act, commonly referred to as the Lautenberg Amendment and codified at 18 U.S.C. § 922(g)(9), prohibits persons convicted of a misdemeanor crime of domestic violence from possessing firearms. Thus far, reviewing courts have uniformly upheld the provision against Second Amendment challenges. Several circuits have employed intermediate scrutiny to evaluate § 922(g)(9) and, in doing so, concluded that the firearm restriction is constitutional. For instance, in United States v. Staten, the Fourth Circuit concluded that there is a reasonable fit between § 922(g)(9) and a substantial governmental interest—reducing domestic gun violence—because the government had established that domestic violence in the United States is a serious problem with high rates of recidivism, and, additionally, the \"use of firearms in connection with domestic violence is all too common.\" Another circuit court, however, concluded that § 922(g)(9) is a presumptively lawful prohibition on the possession of firearms that need not be evaluated under a particular level of scrutiny. In doing so, the Eleventh Circuit in United States v. White reasoned that § 922(g)(9) was passed, in part, because Congress had recognized that domestic violence with firearms had not been remedied by \"longstanding felon-in-possession laws,\" and thus the court \"s[aw] no reason to exclude § 922(g)(9) from the list of longstanding prohibitions on which Heller does not cast doubt.\" Additionally, the Seventh Circuit sitting en banc and using its unique approach upheld § 922(g)(9) as constitutional after concluding that the government made a \"strong showing\" that § 922(g)(9) is substantially related to an important governmental objective. In particular, the court observed that § 922(g)(9) satisfied the government's objective of keeping firearms out of the hands of persons likely to continue to use violence (as the government had found of misdemeanants of domestic violence). In addition, studies presented showed high recidivism rates for domestic abusers and an increased risk of homicide with the presence of a firearm in the home of a convicted domestic abuser. Similarly, 18 U.S.C. § 922(g)(8), which prohibits persons subject to certain domestic violence protective orders from possessing firearms, has survived post- Heller Second Amendment challenges. For instance, in United States v. Chapman, the Fourth Circuit, applying intermediate scrutiny, assumed without deciding that a person subject to a qualifying domestic violence restraining order fell within the Second Amendment's protections and concluded that § 922(g)(8) does not unconstitutionally burden those protections. Intermediate scrutiny was appropriate because, the court reasoned, a person subject to a domestic violence restraining order is not entitled to the benefit of the \"core right identified in Heller —the right of a law-abiding, responsible citizen to possess and carry a weapon for self-defense.\" In applying intermediate scrutiny the Fourth Circuit concluded that the government established a reasonable fit between § 922(g)(8) and the government's substantial interest in reducing domestic gun violence. In particular, the court noted that § 922(g)(8) (among other things) \"by its own terms, explicitly prohibits the use, attempted use, or threatened use of physical force against [an] intimate partner or child that would reasonable be expected to cause bodily injury.\" Additionally, the court observed that § 922(g)(8)'s \"prohibitory sweep [is] exceedingly narrow\" because the provision applies only to restraining orders currently in force. Using a different approach, but reaching the same ultimate result, the Eighth Circuit in United States v. Bena concluded at step one of its analysis that § 922(g)(8) is constitutional on its face, reasoning that \"[i]nsofar as § 922(g)(8) prohibits possession of firearms by those who are found to represent a 'credible threat to the physical safety of [an] intimate partner or child . . . it is consistent with a common-law tradition that the right to bear arms is limited to peaceable or virtuous citizens.\" Additionally, in an as-applied challenge, the Fourth Circuit in United States v. Mahin upheld the conviction of a person subject to a domestic violence protective order who had been found in violation of § 922(g)(8) by renting a firearm at a shooting range. The court rejected the defendant's argument that possessing a firearm \"for a limited period of time in the controlled environment of a commercial shooting range\" is conduct that \"must be exempted from prosecution\" and is not the kind of conduct § 922(g)(8)'s seeks to criminalize. Instead, the court reasoned that the defendant, \"possessed the power . . . to leave the premises and use [a firearm] against those that sought the protections of the protective order.\" The court did not find it relevant that the defendant did not actually leave the shooting range with the handgun and incite violence, because the intermediate scrutiny standard of review applicable to the challenged restriction, in the court's view, \"has never been held to require a perfect end-means fit.\" Accordingly, the court concluded that \"[i]t is sufficient that § 922(g)(8) rests on an established link between domestic abuse, recidivism, and gun violence and applies to persons already individually adjudged in prior protective order to pose a future threat of abuse.\" 18 U.S.C. § 922(g)(3), which criminalizes the possession of firearms by persons who unlawfully use or are addicted to any controlled substance, has been upheld as constitutional by several circuit courts. In particular, circuit courts of appeals have upheld § 922(g)(3) under the Second Amendment because the ban prohibits conduct similar to those listed in Heller as presumptively lawful, namely felons and the mentally ill. For instance, the Ninth Circuit in United States v. Dugan noted that habitual drug users, like felons and the mentally ill, \"more likely will have difficulty exercising self-control, particularly when they are under the influence of controlled substances.\" Other circuits, however, have required the government to put forth evidence demonstrating a reasonable connection between § 922(g)(3) and an important governmental interest. For instance, in United States v. Carter the Fourth Circuit initially vacated the conviction of a person convicted under § 922(g)(3) for possessing a firearm while unlawfully using marijuana, and the court remanded the case to the district court for the parties to develop the record and make arguments as to whether the conviction withstood intermediate scrutiny. In evaluating the defendant's argument, the circuit court assumed without deciding that the defendant maintains Second Amendment protection notwithstanding his drug use. And the court found on the record before it that the government had not demonstrated a connection between drug use and violence and thus had not shown a reasonable fit between § 922(g)(3) and its goal of keeping guns out of the hands of irresponsible and dangerous persons. Unlike in other cases, the government had not provided any studies, empirical data, or legislative findings to support the restriction, and instead it had argued that \"the fit was a matter of common sense.\" However, the court noted that the government's burden on remand \"should not be difficult to satisfy,\" given that evidence of danger of mixing drugs and guns was, in the court's view, \"abundantly available.\" And on remand, the government indeed presented numerous studies showing a correlation between violent crime and drug use, which the Fourth Circuit ultimately found to substantiate the government's contention that \"disarming drug users reasonably serves the important governmental interest of protecting the community from gun violence.\" Another provision of the Gun Control Act, 18 U.S.C. § 922(g)(5), prohibits unlawfully present aliens and most categories of nonimmigrant visa holders from possessing firearms. In determining whether the Second Amendment covers non-U.S. citizens, courts have looked to whether such persons come within the ambit of \"the people\" as used in the text of Second Amendment. This inquiry has produced a circuit split. Some courts that have considered the issue have concluded that \"the people\" does not encompass unlawfully present aliens. For instance, the Fifth Circuit in United States v. Portillo-Munoz recounted that the Supreme Court in Heller noted that \"the people\" include \"law-abiding, responsible citizens\" and \"all members of the political community.\" Because unlawfully present aliens fit neither description, the court concluded that they are granted no rights by the Second Amendment. Moreover, to bolster its conclusion that the restriction in § 922(g)(5) is constitutional, the court added that \"Congress has the authority to make laws governing the conduct of aliens that would be unconstitutional if made to apply to citizens.\" However, a number of circuit courts, while ultimately holding § 922(g)(5) to be constitutional, have opined that \"the people,\" as used in the Second Amendment, could include some unlawfully present aliens. For example, in United States v. Meza-Rodriguez, the Seventh Circuit analyzed § 922(g)(5) as applied to an alien who was brought the United States as a young child. In determining whether the defendant was protected by the Second Amendment, the court analyzed the meaning of \"the people.\" Like the Fifth Circuit, the Seventh Circuit found that Heller links Second Amendment rights to law-abiding citizens, which, as someone who entered the country illegally, Meza-Rodriguez technically is not. But the court also concluded that the Supreme Court was not defining \"the people\" when making that connection in Heller . Accordingly, the Seventh Circuit relied on the Supreme Court's earlier opinion in United States v. Verdugo-Urquidez, which opined that \"the people,\" for the purposes of protection under the First, Second, and Fourth Amendments, \"refers to a class of persons who are part of a national community or who have otherwise developed sufficient connection with this country to be considered part of that community.\" The defendant in Meza-Rodriguez met that standard because, the Seventh Circuit concluded, he had \"extensive ties\" with the United States, including his 20-year residency beginning as a child, attendance at U.S. public schools, and close family relationships with persons in the United States. Nevertheless, the court held that § 922(g)(5) is constitutional, reasoning that the government made a strong showing that its interest in \"prohibiting persons who are difficult to track and have an interest in eluding law enforcement\" supports the firearm ban. Additionally, the Tenth Circuit in United States v. Huitron-Guizar assumed that unlawfully present aliens, like the defendant—who also had been in the United States for decades and was brought to the country as a young child—could assert a Second Amendment right, noting that \"we hesitate to infer from Heller a rule that the right to bear arms is categorically inapplicable to non-citizens.\" Applying intermediate scrutiny to § 922(g)(5), the court concluded that the law is constitutional, deferring to Congress's \"constitutional power to distinguish between citizens and non-citizens, or between lawful and unlawful aliens, and to ensure safety and order.\" Ultimately, the court found a substantial fit between the government's interests in crime control and public safety, and its desire to keep firearms out of the hands of those it deems as \"irresponsible or dangerous.\" Several state \"assault weapon\" bans have been upheld in federal court, including those in the District of Columbia, New York, Connecticut, and Maryland. The Second and D.C. Circuits, in reviewing those laws, applied intermediate scrutiny and based their decisions on the specific evidence presented to tie the bans to the asserted state interests. And most recently, the Fourth Circuit, sitting en banc, concluded that the types of assault weapons banned in Maryland do not garner Second Amendment protection. After Heller , the District of Columbia revised its gun laws by enacting the Firearms Registration Amendment Act of 2008 (FRA). The FRA, among other things, banned assault weapons (including, as relevant here, semiautomatic rifles) and large-capacity magazines capable of holding more than 10 rounds of ammunition. In evaluating the ban's constitutionality, the D.C. Circuit assumed that semiautomatic rifles and high-capacity magazines garner Second Amendment protection but, after applying intermediate scrutiny, concluded that the provision was constitutional. The court chose intermediate scrutiny because the law, in the court's view, did not substantially burden the Second Amendment because it did not completely ban handgun possession—described in Heller as the \"quintessential self-defense weapon.\" Nor, the court added, did the District's law prevent a person from having a different, \"suitable and commonly used weapon\" (e.g., handguns, non-automatic long guns) for self-defense in the home or hunting. Next, the D.C. Circuit concluded that the ban survived intermediate scrutiny because the record evidence substantiated the District's assertion that the ban was substantially related to protecting police officers and crime control. For example, evidence submitted \"suggest[ed that] assault weapons are preferred by criminals and place law enforcement 'at particular risk . . . because of their high firepower.'\" And \"the risk 'posed by military-style assault weapons,\" according to the circuit court, is \"'increased significantly if they can be equipped with high-capacity ammunition magazines' because, 'by permitting a shooter to fire more than ten rounds without reloading, they greatly increase the firepower of mass shooters.'\" The Second Circuit took a similar approach when analyzing assault weapon bans in New York and Connecticut, enacted after the shooting at Sandy Hook Elementary School in Newtown, Connecticut. In New York State Rifle & Pistol Association v. Cuomo, the Second Circuit, applying intermediate scrutiny, upheld provisions banning assault weapons—defined as semiautomatic weapons with certain enumerated features—and large-capacity magazines capable of holding more than 10 rounds of ammunition, declaring that the dangers posed by such weapons \"are manifest and incontrovertible.\" However, the court struck down one provision in each state's law. New York's law also had a \"load limit\" that banned the possession of a firearm loaded with more than seven rounds of ammunition. The court struck it down on the grounds that the ban \"is entirely untethered from the stated rationale of reducing the number of assault weapons and large capacity magazines,\" and New York \"failed to present evidence that the mere existence of this load limit will convince any would-be malefactors to load magazines capable of holding ten rounds with only the permissible seven.\" And Connecticut's law specifically banned one non-semiautomatic weapon; the court concluded that it did not pass constitutional muster under intermediate scrutiny given the state's failure to argue how the ban related to a substantial government interest. Taking a different approach, the Seventh Circuit in Friedman v. City of Highland Park evaluated the constitutionality of a Chicago suburb's assault weapon ban without applying a particular level of scrutiny to assess the ban's constitutionality, but rather, by asking \"whether [the] regulation bans weapons that were common at the time of ratification or those that have 'some reasonable relationship to the preservation of a well regulation militia,' and whether law-abiding citizens retain adequate means of self-defense.\" The court noted that features of the banned firearms were not available at ratification but are now commonly used for military and police purposes and, thus, \"bear a relation to the preservation and effectiveness of state militias.\" Still, because states are in charge of militias, the court reasoned, state governments (and other units of local government) ought to have the authority to decide when civilians may have military-grade firearms in order to have them ready for when the militia is called to duty. The court also noted that other firearms, including long guns, pistols, and revolvers, were still available for self-defense. Accordingly, the Seventh Circuit concluded that the assault weapons ban fell within the limits established by Heller and thus was constitutional. In 2015, the Supreme Court denied granting a petition for a writ of certiorari over the dissent of Justices Thomas and Scalia. In his dissent, Justice Thomas argued that the Seventh Circuit (and other circuits holding similarly) \"upheld categorical bans on firearms that millions of Americans own for lawful purposes\" and suggested that those bans ran afoul of Heller and McDonald. Lower courts have continued to review the constitutionality of assault weapon bans. Recently, the Fourth Circuit, sitting en banc in Kolbe v. Hogan, held that the Second Amendment does not protect the assault weapons and large-capacity magazines that Maryland had made unlawful. In so holding, the court relied on a passage in Heller stating that \"'weapons that are most useful in military service—M-16 rifles and the like—may be banned' without infringement upon the Second Amendment.\" The court viewed Heller as drawing a line \"between weapons that are most useful in military service,\" which garner no Second Amendment protection, and \"those that are not.\" And \"[b]ecause the banned assault weapons and large-capacity magazines are 'like' 'M-16 rifles'—'weapons that are most useful in military service,'\" the court continued, \"they are among those arms that the Second Amendment does not shield.\" For instance, the court reasoned that, although the M-16 is a fully automatic weapon, whereas the firearms banned by the challenge state law—the AR-15 and similar rifles—are semi automatic, the two types of firearms have nearly identical rates of fire and thus share \"the military features . . . that make the M16 a devastating and lethal weapon of war.\" The court similarly concluded that large-capacity magazines, by \"enabl[ing] a shooter to hit multiple human targets very rapidly [and] contribut[ing] to the unique function of any assault weapon to deliver extraordinary firepower\" are likewise \"most useful in military service.\" Additionally, the court held in the alternative that if the banned weapons garner any Second Amendment protection, the ban should be reviewed under intermediate scrutiny and, under that standard, the ban is lawful. At least one circuit court has found that ammunition, although not explicitly mentioned in the Second Amendment, is constitutionally protected because \"the right to possess firearms for protection implies a corresponding right to obtain the bullets necessary to use them.\" In the Ninth Circuit's view, \"without bullets, the right to bear arms would be meaningless.\" Even with that understanding, though, the Ninth Circuit in Jackson v. City & County of San Francisco upheld a San Francisco ordinance banning the sale of ammunition with no sporting purpose that is designed to expand or fragment upon impact. The court concluded that banning a certain type of ammunition does not substantially burden the Second Amendment right to use firearms for self-defense because the restriction burdens only the manner in which that right is exercised, and thus ought to be reviewed under intermediate scrutiny. The court ultimately concluded the ordinance substantially fit San Francisco's important interest in reducing the likelihood that shooting victims in the city will die from their injuries, noting that the city legislature, in enacting the legislation, had relied on evidence showing that hollow-point bullets are more lethal than regular bullets. The Third Circuit, in Association of New Jersey & Pistol Clubs, Inc. v. Attorney General of New Jersey , went a step further to hold that firearm magazines, which attach to certain firearms to feed the ammunition, are \"arms\" within the meaning of the Second Amendment. \"Because magazines feed ammunition into certain guns, and ammunition is necessary for such a gun to function as intended,\" the court concluded, \"magazines are 'arms' within the meaning of the Second Amendment .\" After assuming without deciding that magazines are covered by the Second Amendment, the court applied intermediate scrutiny to New Jersey's ban of large-capacity magazines capable of holding more than 10 rounds of ammunition. The Third Circuit upheld that ban, concluding that it \"reasonably fits\" New Jersey's interest in promoting public safety. Further, the court opined that the New Jersey law does not burden more conduct than reasonably necessary given that the law does not disarm individuals or limit the number of firearms, magazines, or ammunition a person may lawfully possess. Post -Heller , courts have disagreed about the extent to which the Second Amendment protects the right to carry firearms outside the home. For instance, the Ninth Circuit has opined that the Second Amendment \"gurantee[s] some right to self-defense in public,\" and that right includes openly carrying a firearm in public but not carrying a concealed firearm. First, in Peruta v. County of San Diego , the en banc Ninth Circuit concluded that the Second Amendment \"does not extend to the carrying of concealed firearms in public by members of the general public.\" In reaching this conclusion, the court engaged in a historical analysis to determine whether the Second Amendment codified a pre-existing right to carry a concealed weapon in public, including examining jurisprudence following the ratification of the Second and Fourteenth Amendments. Based on the Supreme Court's ruling a few decades after the Fourteenth Amendment's ratification, in which the Court announced that \"the right of the people to keep and bear arms . . . is not infringed by laws prohibiting the carrying of concealed weapons,\" plus state court rulings in the years following the Fourteenth Amendment's ratification concluding similarly, the Ninth Circuit held that the Second Amendment \"does not include, in any degree, the right of a member of the general public to carry concealed firearms.\" In Young v Hawaii, the Ninth Circuit analyzed the question left open in Peruta : whether the Second Amendment encompasses the right to carry a firearm openly in public. Young analyzed a Hawaii statute that enabled open-carry permits to be granted, as relevant here, only to persons \"engaged in the protection of life and property.\" Again, the Ninth Circuit examined the text and historical understanding of the Second Amendment before concluding that \"the right to bear arms must include, at the least, the right to carry a firearm openly for self-defense.\" Further, the court concluded that this right is a \"core\" Second Amendment right, given that \" Heller and McDonald describe the core purpose of the Second Amendment as self-defense,\" and \"much of Heller 's reasoning implied a core purpose of self-defense not limited to the home.\" Yet, the court concluded, Hawaii's law, which restricted open carry to persons whose work involves protecting life or property, limited open carry \"to a small and insulated subset of small of law-abiding citizens.\" And because the Second Amendment protects all law-abiding citizens, the court found that Hawaii's law—which foreclosed most law-abiding Hawaiians from openly carrying a handgun in public—\"amounts to a destruction\" of a core Second Amendment right and cannot stand under any level of scrutiny. Additionally, Illinois had banned persons (subject to certain exceptions) from carrying uncased, immediately accessible (i.e., ready to use) firearms outside the home, until the Seventh Circuit struck down that law in Moore v. Madigan , holding that it conflicted with Heller's interpretation of the Second Amendment. The circuit court declined \"to engage in another round of historical analysis to determine whether eighteenth-century America understood the Second Amendment to include a right to bear guns outside the home,\" reasoning that \"[t]he Supreme Court has decided that the amendment confers a right to bear arms for self-defense, which is as important outside the home as inside.\" And the Seventh Circuit concluded that Illinois had not met its burden of showing more than a rational basis for how its \"uniquely sweeping ban\" justified its interest of increasing public safety. The First Circuit similarly concluded in Gould v. Morgan that the Second Amendment extends to carrying firearms in public, but, in contrast to the Ninth Circuit, ruled that such activity is not core to the Second Amendment. The court so concluded when reviewing—and upholding—a Massachusetts licensing scheme for carrying firearms in public, as it had been implemented by Boston and its suburb, Brookline. Massachusetts requires a license to carry a firearm in public. Local licensing authorities \"may issue\" a license, as relevant here, to persons with \"good reason to fear injury to the applicant or the applicant's property or for any other reason, including the carrying of firearms for use in sport or target practice only.\" The litigants challenged Boston and Brookline's similar, respective policies that require an applicant to identify \"a need above and beyond a generalized desire to be safe\" in order to establish \"good reason to fear injury.\" Applicants who cannot so establish may still receive one of several types of restricted licenses that allow the license holder to carry a firearm when engaged in a specified activity, such as for employment, hunting, target practice, and sport. The First Circuit first concluded that the Second Amendment protects public carrying of firearms. The court reasoned, for example, that it would have been \"peculiar\" for the Supreme Court to describe the Second Amendment right to be \"most acute\" in the home if the right was limited to the home. Still, the First Circuit opined that the right to carry firearms in public is not a core Second Amendment right, again harking back to Heller 's pronouncement that \"the need for defense of self, family, and property is most acute\" thus \"elevat[ing] above all other interests the . . . defense of hearth and home.\" Because public carrying of firearms is not core Second Amendment activity, the First Circuit applied intermediate scrutiny to Boston and Brookline's licensing schemes. The court concluded that the fit between the governments' asserted public-safety interests and their \"good reason to fear injury\" requirement for an unrestricted license \"is close enough to pass intermediate scrutiny.\" The court reasoned that the localities, in \"[s]triving to strike a balance\" between protecting Second Amendment rights and advancing public safety, did not burden more conduct than reasonably necessary. For instance, the court recounted that the localities offer and grant various restricted licenses, and thus did not completely ban the right to carry firearms in public. In this vein, the First Circuit distinguished Boston and Brookline's licensing regimes from those struck down by the Ninth Circuit in Young and the Seventh Circuit in Moore . Some states and localities have enacted measures requiring a person seeking a concealed carry license to demonstrate \"good cause\" for needing one. The courts that have reviewed such measures have produced divergent rulings on the extent to which the ability to carry a concealed firearm is protected by the Second Amendment and what level of scrutiny should be applied to such laws. For instance, in Kachalsky v. County of Westchester , the Second Circuit considered a challenge by persons who were denied an unrestricted concealed carry license under New York law. According to the state's concealed carry requirements, an applicant must demonstrate \"proper cause\" to obtain a concealed carry license—a restriction that had been construed by the New York state courts to require an applicant seeking an unrestricted concealed carry license for self-defense purposes to \"demonstrate a special need for self-protection distinguishable from that of the general community or of persons engaged in the same profession.\" The plaintiffs in Kachalsky argued that the concealed carry law is unconstitutional by preventing them from \"carry[ing] weapons in public to defend themselves from dangerous confrontation.\" But the Second Circuit rejected that contention. Assuming that the Second Amendment applied and employing intermediate scrutiny on account of the gun restriction affecting activities outside the home, Kachalsky held that the New York statute was substantially related to the government's interests in public safety and crime prevention. And requiring persons to show an objective threat to personal safety before obtaining a concealed carry license, the court reasoned, is consistent with the right to bear arms, particularly given that \"there is no right to engage in self-defense with a firearm until the objective circumstances justify the use of deadly force.\" California has a somewhat similar law as that upheld in Kachalsky : An officer \"may\" issue a concealed carry licenses to applicants who have demonstrated good moral character and good cause for the license. But when two California counties' policies for determining good cause were challenged under the Second Amendment, the Ninth Circuit, sitting en banc in Peruta v. County of San Diego , as mentioned above, concluded that the Second Amendment \"does not extend to the carrying of concealed firearms in public by members of the general public.\" Accordingly, because concealed carry is not encompassed by the Second Amendment, the Ninth Circuit held that California's good-cause requirement withstood constitutional scrutiny. Breaking with the Second and Ninth Circuits, the D.C. Circuit in Wrenn v. District of Columbia held that the right of law-abiding citizens to carry a concealed firearm in public (i.e., \"concealed carry\") is a core component of the Second Amendment and struck down the District's good-cause concealed carry regime. The District of Columbia's framework regulating concealed carry authorized the Chief of the Metropolitan Police Department to issue a concealed carry license to a person who, as relevant here, has \"good reason to fear injury to his or her person or property\" or \"any other proper reason for carrying a pistol.\" Demonstrating the requisite fear \"at a minimum require[s] a showing of a special need for self-protection distinguishable from the general community as supported by evidence of specific threats or previous attacks that demonstrate a special danger to the applicant's life.\" Other \"proper reasons\" where a concealed carry license could be granted included employment requiring handling cash or other valuables to be transported by the applicant. In striking down the District's law, the D.C. Circuit first held that the core right in the Second Amendment for law-abiding citizens to keep and bear arms for self-defense extends beyond the home. But instead of choosing a level of scrutiny under which to analyze the law, the court ruled that the District's law effectively is a \"total ban\" on the exercise of that core right and thus is per se unconstitutional. In particular, the court reasoned that the District's law \"destroys the ordinarily situated citizen's\" self-defense needs by requiring law-abiding citizens to demonstrate a need for self-protection that is \"distinguishable\" from other law-abiding members of the community. Thus, the court concluded that it \"needn't pause to apply tiers of scrutiny, as if strong showings of public benefits could save this destruction of so many commonly situated D.C. residents' constitutional right to bear common arms for self-defense in any fashion at all.\" After the D.C. Circuit declined the District's request to rehear the case en banc, the District announced that it would not seek Supreme Court review, thus leaving the circuit split intact. For handguns to be kept in a residence in San Francisco, California the law requires that those handguns, when not on the person, be stored in a locked container or disabled with a trigger lock. The Ninth Circuit evaluated this requirement in Jackson v. City and County of San Francisco . The circuit court found that, although the law implicates the core of the Second Amendment right by imposing restrictions on the use of handguns in the home, unlike the former D.C. law evaluated in Heller requiring handguns to be made completely inoperable, the burden in San Francisco's law was not substantial, and thus intermediate scrutiny was warranted. The court appeared to distinguish San Francisco's law from D.C.'s former law by noting that firearms kept in modern gun safes may be quickly opened and retrieved for use. Moreover, the court noted that, although the law makes it more difficult for residents to use handguns for self-defense in the home by having to retrieve the firearm from a locked container or remove a trigger lock, the requirement still burdens only the manner in which persons exercise their Second Amendment right. Thus, the court concluded that a higher level of scrutiny was unwarranted. Under intermediate scrutiny, the Ninth Circuit concluded that there was a reasonable fit between the regulation and the city's substantial interest in reducing the number of gun-related injuries and deaths from unlocked handguns in the home. On appeal to the Supreme Court, the Court denied certiorari in Jackson over the dissent of Justices Thomas, who was joined by Justice Scalia. Justice Thomas described Jackson as \"in serious tension with Heller \" by prohibiting San Francisco residents from keeping their handguns \"'operable for the purpose of immediate self-defense,' when not carried on their person.\" Justice Thomas added that such a burden on a core Second Amendment right \"is significant,\" stating that \"nothing in our decision in Heller suggested that a law must rise to the level of the absolute prohibition at issue in that case to constitute a 'substantial burden' on the core of the Second Amendment right.\" Challenges brought against firearm prohibitions on federal property raise the question of whether such prohibitions fall into Heller's safe harbor for \"sensitive places.\" For instance, by regulation, firearms are prohibited on U.S. postal property. In Bonidy v. U.S. Postal Service, a Colorado resident with a concealed carry permit challenged the regulation as unconstitutional under the Second Amendment as applied to him because it forbade him from carrying his firearm into his local post office, as well as storing it in his car in the post office's parking lot while picking up his mail. The Tenth Circuit rejected his claims, concluding that the restrictions did not implicate the Second Amendment because they concerned locations that were on government property. In doing so, the court relied on the passage in Heller that carrying firearms in sensitive places like government buildings are presumptively lawful. According to the circuit court, that language applies \"with the same force\" to the parking lot adjacent to a government post office because \"the parking lot should be considered as a single unit with the postal building.\" Yet noting that the restriction's application to the parking lot question presented a closer question than the restriction's application to the postal building, the Tenth Circuit alternatively concluded that, even assuming that Second Amendment rights applied there, the regulation survived intermediate scrutiny. Ultimately, the Tenth Circuit concluded that the regulation was substantially related to the government's important interest in providing a safe environment for its employees and visitors. And despite the challenger's contention that the regulation is over-inclusive because his post office is open to the public at all times yet \"relatively unsecured,\" the court concluded that the U.S. Postal Service \"is not required to tailor its safety regulations to the unique circumstances of each customer, or to craft different rules for each of its more than 31,000 post offices, or to fashion one set of rules for parking lots and another for its buildings.\" In another case involving government property, a federal circuit court concluded that a former Department of the Interior regulation prohibiting persons from possessing a loaded weapon in vehicles on national park grounds was constitutional after applying intermediate scrutiny. The issue was brought to the Fourth Circuit in United States v. Masciandaro when a defendant convicted under the regulation contended that it violated his rights under the Second Amendment because he carried a handgun for self-defense when he slept in his car in national parks. The government argued that national parks are the kind of \"sensitive place[s]\" envisioned by Heller where firearm bans would be presumptively lawful. The Fourth Circuit declined to evaluate that argument, concluding, instead, that regardless of a national park's status as a \"sensitive place,\" the regulation survived intermediate scrutiny. Under that analysis, the court ruled that the government has a substantial interest in providing safety to national park visitors, and the regulation was a narrow prohibition that was \"reasonably adapted\" to the government's interest. Furthermore, the court reasoned that loaded firearms concealed in vehicles are more dangerous, as they can fire accidentally or provide an opportunity for an assailant to flee. The Gun Control Act invokes Congress's power to regulate interstate commerce as a jurisdictional hook to regulate the sale and possession of firearms and ammunition. Accordingly, the statutory scheme for who may possess and sell firearms, and how and where they may be acquired and possessed, are tethered to interstate commerce. As for firearm sales, two Gun Control Act provisions generally forbid direct handgun sales by a federally licensed firearms dealer to anyone who is not a resident in the state where the holder of the federal firearms license (FFL) is located. 18 U.S.C. § 922(a)(3) bars anyone except a licensed firearms importer, manufacturer, dealer, or collector from transporting into or receiving in the state where he resides a firearm that was purchased or obtained in a different state; in other words, a non-licensed person is prohibited from transporting across state lines firearms acquired outside of his state of residence. Similarly, 18 U.S.C. § 922(b)(3) prohibits, subject to exception, federally licensed importers, manufacturers, dealers, or collectors from selling or delivering any firearm to a person who is not a resident of the state in which the licensee's business is located. Thus, under these two provisions, for someone to acquire a handgun from another state, that person must have the firearms transferred from an FFL holder in the other state to an FFL holder in the state of residence. When analyzing a facial challenge to § 922(a)(3), the Second Circuit in United States v. Decastro concluded that § 922(a)(3) only minimally burdens the ability of acquire a firearm and is therefore permissible. Notably, in reaching this conclusion the Second Circuit did not apply heightened scrutiny. Instead, the court looked to First Amendment jurisprudence, which allows for content-neutral time, place, or manner regulations of free speech. In the court's view, \"[b]y analogy, [a] law that regulates the availability of firearms is not a substantial burden on the right to keep and bear arms if adequate alternative remain for law-abiding citizens to acquire a firearm for self-defense.\" Accordingly, for the defendant's facial challenge to prevail, he would have to show that '\"no set of circumstances exist under which the [statute] would be valid, i.e., that the law is unconstitutional in all of its applications,' or at least that it lacks a 'plainly legitimate sweep.'\" And the defendant could not prevail because, the court concluded, the statute has a plainly legitimate sweep by helping states enforce their own gun laws. Nor would the federal prohibition on the interstate transfer of firearms be rendered unconstitutional in the event that some state laws governing firearm sales were found to be unconstitutional because the federal restriction contains no provision that facially \"sanctions, compels, or encourages states\" to burden the Second Amendment. Later, the Fifth Circuit in Mance v. Sessions addressed a Second Amendment challenge to 18 U.S.C. § 922(b)(3) and concluded that the statute withstood strict scrutiny. In doing so, the court assumed without deciding that the Second Amendment protects against residency restrictions on the purchase of firearms and that strict scrutiny would be applied to any such restriction. The court concluded that the interstate sale restriction was narrowly tailored to prevent the circumvention of the many differing handgun laws throughout the nation. The court concluded that it would be unreasonable for the federal government to require licensed dealers to maintain up-to-date mastery of the handgun laws within all fifty states the District of Columbia—a necessary requirement were the government to authorize the direct interstate sale of handguns from a licensed dealer to a non-licensed person. Further, Section 922(b)(3) is the least restrictive means of ensuring that state handgun laws are not evaded because, the court concluded, a qualified non-licensed person may have the desired out-of-state handgun transferred to an in-state licensed dealer after only a de minimis delay. So far one federal court of appeals—the Ninth Circuit—has engaged in an in-depth analysis of whether the Second Amendment includes a right to sell commercial firearms. Overturning a 3-judge panel of the Ninth Circuit, an 11-judge en banc panel concluded in Teixeira v. County of Alameda that there is no independent Second Amendment right to sell firearms. At issue in Teixeira was an ordinance in Alameda County, California, requiring businesses seeking to sell firearms to obtain a permit. A permit would not be granted if, as relevant here, the business would be within 500 feet of a residentially zoned district. After Alameda County denied a permit on that ground to applicants seeking to open a retail firearms store, the applicants challenged the zoning ordinance under the Second Amendment. The en banc Ninth Circuit concluded that \"the Second Amendment does not confer a freestanding right, wholly detached from any customer's ability to acquire firearms, upon a proprietor of a commercial establishment to sell firearms.\" The court reasoned that regulations on firearms sales fall into Heller 's safe harbor for \"presumptively lawful\" regulations \"imposing conditions and qualifications on the commercial sale of arms.\" Still, the court viewed Heller 's safe harbor language as \"sufficiently opaque\" to warrant a full textual and historical review of the Second Amendment's applicability to the commercial sale of arms. This review led the court to the same conclusion: The Second Amendment, as written, \"did not encompass a freestanding right to engage in firearms commerce divorced from the citizenry's ability to obtain and use guns.\" But the right to acquire firearms, the Ninth Circuit clarified, is protected. The court reasoned that \"the core Second Amendment right to keep and bear arms for self-defense wouldn't mean much without the ability to acquire arms.\" And though the court concluded that firearms dealers may assert that right on behalf of their potential customers, in this case, the permit applicants did not allege that the zoning permit denial interfered with the ability of Alameda County residents to acquire firearms. The court explained that evidence established that, without the gun store that the partners sought to open, \"Alameda County residents may freely purchase firearms within the County,\" given that County was already home to 10 gun stores, including one that stood 600 feet away from the proposed site of the new store. And, the court continued, \"gun buyers have no right to have a gun store in a particular location, at least as long as their access is not meaningfully constrained.\" Accordingly, the court declined to determine the precise scope of the right to acquire firearms and the appropriate level of review to analyze claims of a deprivation of that right. After Teixeira , the Ninth Circuit was tasked with evaluating under the Second Amendment a California law regulating the types of handguns that may be sold within the state. Several California residents challenged in Pena v. Lindley provisions of the state's Unsafe Handgun Act (UHA), which, subject to exception, limits the commercial sale of new handgun models to those that (1) stamp microscopically the handgun's make, model, and serial number onto each fired shell casing, (2) have a chamber load indicator, and (3) have a magazine disconnect mechanism. The Ninth Circuit assumed without deciding that the UHA provisions burdened protected Second Amendment conduct and applied intermediate scrutiny, reasoning that the restrictions would not burden core Second Amendment rights. The court explained, for instance, that there was no evidence that the new required features interfered with the functionality of any handguns and that \"all of the plaintiffs admit that they are able to buy an operable handgun suitable for self-defense—just not the exact gun they want.\" Applying intermediate scrutiny, the court concluded that the requirements for a chamber load indicator and magazine disconnect mechanism reasonably fit the state's substantial public-safety interest in preventing accidental firearm discharges. Next, the court concluded that California had established a reasonable fit between the microstamping requirement, which limits the availability of untraceable bullets, and the state's substantial governmental interest in public safety and crime prevention. And in doing so, the court, invoking the reasoning in Teixeira , emphasized the law's application to the commercial sale of firearms, explaining that the ban applies only to manufacturers, importers, and dealers but does not punish individuals for possessing firearms made without the required features. California has a 10-day waiting period for most firearm purchases, meaning that a firearm cannot be delivered to a prospective purchaser until 10 days have passed, even after the completion of the required background check. The Ninth Circuit upheld the law under the Second Amendment when it was challenged as applied to certain Californians who previously had been vetted to qualify to purchase and possess a firearm under California law (referred to by the court as \"subsequent purchasers\"). The court assumed that the California waiting-period laws fell within the Second Amendment's ambit and applied intermediate scrutiny, explaining that the law places only a small burden on the exercise of Second Amendment rights by requiring prospective purchasers to wait the incremental period between the completion of the background check and the end of the cooling-off period before acquiring a firearm. In applying intermediate scrutiny, the court concluded that there was a reasonable fit between the government's legitimate, stated objective of promoting safety and reducing gun violence, and applying the cooling-off period to subsequent purchasers. The court pointed to studies showing that \"a cooling-off period may prevent or reduce impulsive acts of gun violence or self-harm\" for all purchasers, including subsequent purchasers. Accordingly, the Ninth Circuit upheld California's waiting period as applied to subsequent purchasers. The Supreme Court is set to review during the October 2019 term whether New York City's (NYC's) \"premise license\" scheme passes muster under the Second Amendment. In New York State, it is a crime to possess or carry a handgun without a license. The license at issue in the lawsuit—a \"premises license\"—authorizes the license holder to possess a handgun in the licensee's home. The NYC Police Commissioner, by delegation, issues handgun licenses to NYC residents. A NYC premise license authorizes the license holder to keep a handgun only at the address specified on the license. The licensee may remove the handgun from that address only for two purposes: (1) to transport the handgun to and from an authorized shooting range within the City \"[t]o maintain proficiency in the use of the handgun,\" and (2) to transport the handgun to and from areas designated by the New York State Fish and Wildlife Law for authorized hunting, so long as the permit holder has received a hunting amendment to the premises license. In both situations, the transported handgun must be unloaded, in a locked container, and held separately from any ammunition. Three NYC residents (and the organizational plaintiff, New York State Rifle & Pistol Association) challenged the constitutionality of NYC's premises licensing scheme. Each plaintiff seeks to take a premises licensed handgun to shooting ranges outside of the City, and one plaintiff wants to take his handgun to a second home elsewhere in New York. As relevant here, the plaintiffs contend that the premises license restriction on transporting firearms outside of one's residence, with its limited exceptions, violates the Second Amendment. In particular, the plaintiffs argue that the City's premises license scheme deprives them of their Second Amendment right to self-defense in a home other than the NYC home attached to the license, and the corollary right to develop competency in the use of the licensed handgun. The District Court for the Southern District of New York found no Second Amendment violation, and the Second Circuit affirmed. The Second Circuit assumed that the Second Amendment protects activity restricted by the premises license and determined the provision ought to be evaluated under intermediate scrutiny. In doing so, the court considered \"how close the law comes to the core of the Second Amendment right\" and \"the severity of the law's burden on that right.\" Citing Heller , the court opined that a statute implicates \"core\" Second Amendment activity when it interferes with the ability to protect in the home oneself and one's family and property. But the court concluded that the premises license law \"imposes no direct restriction at all on the right of the Plaintiffs, or of any other eligible New Yorker, to obtain a handgun and maintain it at their residences for self-protection,\" given that the law is designed to authorize handgun possession in one's home. Nor, the court added, does \"the City's regulatory scheme impose[] any undue burden, expense, or difficulty that impedes their ability to possess a handgun for self-protection\" because no evidence was presented showing that the law impacted a NYC resident's ability to acquire a second handgun for a second home, or that associated costs with doing so \"would be so high as to be exclusionary or prohibitive.\" Next, the court \"assume[d] that the ability to obtain firearms training and engage in firearm practice is sufficiently close to core Second Amendment concerns that regulations that sharply restrict that ability to obtain such training could impose substantial burdens on core Second Amendment rights.\" Given the existence of seven authorized firing ranges within City limits, however, the court concluded that the \"[p]laintiffs have sufficient opportunities to train with their firearms.\" Finally, the Second Circuit concluded that the premises license scheme survived intermediate scrutiny. The City argued that \"limiting the geographic range in which firearms can be carried allows the City to promote public safety by better regulating and minimizing the instances of unlicensed transport of firearms on city streets.\" The court concluded that there was a substantial fit between the licensing regime and the City's important interests in public safety and crime prevention, and observed that plaintiffs presented a \"dearth of evidence\" to support their contention that the licensing regime imposed a substantial burden on their protected rights. At this stage in the proceedings, the plaintiffs—now the petitioners—reiterate that NYC's premises license law imposes a severe burden on their Second Amendment right to keep a handgun in the home for self-defense and to enhance the safe and effective use of their handguns. Plaintiffs characterize as \"nonsensical\" the City's asserted public safety interest because, in their view, the City is proliferating \"both the number and the transportation of handguns within [C]ity limits\" in two ways: (1) by requiring handguns to be carried within the City (to shooting ranges) when they could be transported outside of the City, and (2) by requiring handguns to sit unattended in vacant homes when a City resident is at a second home. NYC objects, contending first that evidence \"explained the need to be able to effectively monitor and enforce the limits on the transport of handguns by individuals who have only a premises license, and not a carry license,\" which the City could not effectively do in the past when premises license holders could transport handguns to shooting ranges outside of NYC. NYC also argues that forcing NYC residents to leave handguns in vacant homes would create a public-safety risk only if premises license holders are not safely storing their handguns. Notably, to answer whether NYC's premise licensing scheme comports with the Second Amendment, the Supreme Court likely will have to determine how Second Amendment claims should be evaluated. As this report highlights, the lower courts have generally adopted a two-part framework for evaluating Second Amendment claims. However, some dissenting judges, including now-Justice Kavanaugh while he served on the D.C. Circuit, have advocated for a different approach—one that would analyze the Second Amendment's text, history, and tradition, rather than apply a balancing test like strict or intermediate scrutiny. These dissenting opinions potentially could be invoked in further briefing in this case in an effort to persuade a majority of Justices to adopt a \"history and tradition\" approach to analyzing Second Amendment claims. Furthermore, the Court may also resolve the split among the circuit courts about what constitutes \"core\" Second Amendment activity. Washington D.C.'s 2008 FRA (discussed above) also required firearm owners to register their firearms (limited to no more than one pistol in a 30-day period) and, in doing so, submit each pistol to be registered for ballistics identification. Applicants were required, among other things, to renew each registration in person every three years, have vision qualifying for a driver's license, submit to being fingerprinted and photographed, submit to a background check every six years, and attend a specified amount of firearms training or safety instruction. These requirements applied to long guns in addition to handguns. The new registration requirements were challenged as unconstitutional. The D.C. Circuit concluded that the \"mere registration\" of a handgun, alone, is a presumptively lawful, longstanding regulation \"deeply enough rooted in our history to support the presumption that a registration requirement is constitutional.\" But as applied to long guns, the court concluded, registration is novel. As for some of D.C.'s particular registration requirements listed above (as well as all of the requirements as applied to long guns), the court concluded that those must be evaluated under intermediate scrutiny to determine their constitutionality because they do not severely limit the exercise of Second Amendment rights. The D.C. Circuit concluded, however, that the District had not demonstrated a \"tight fit\" between the registration requirements and its asserted interests of protecting police officers and crime control. The court stated that the District must \"present some meaningful evidence, not mere assertions, to justify its predictive judgments\" about reducing firearms-related crimes, and the circuit court therefore remanded the case to the district court for the parties to have the opportunity to further develop the record. After this ruling, the District revised its firearms laws by enacting the Firearms Amendment Act of 2012 (FAA), removing some, but not all, of the contested registration requirements for handguns and keeping basic registration requirements for long guns, along with many other generally applicable requirements for persons registering firearms. Those requirements came before the D.C. Circuit again in a third round of Heller v. District of Columbia. First, the court concluded that the burden from the basic registration requirements as applied to long guns was de minimis and thus did not implicate the Second Amendment. The other requirements were met with different results. The court ruled that the District's asserted interests in protecting police officers and promoting public safety were substantial, but the circuit court concluded that only the interest in promoting public safety reasonably fit with some, but not all, of the contested regulations. Those that reasonably fit the public-safety interest, in the court's view, included the requirements to appear in person and be photographed and fingerprinted; the $13 fee to register the firearm, along with the $35 fee for fingerprinting; and the requirement that applicants satisfy a safety and training course requirement. Those that did not survive scrutiny included (1) the requirement to bring the firearm to registration; (2) the requirement to renew registration every three years; (3) the requirement to have knowledge of local gun laws; and (4) the prohibition on registering more than one pistol in a 30-day period. These divergent results were a product of the relative strength of the District's evidence, as determined by the D.C. Circuit, in attempting to show a fit between the District's asserted interests and the registration requirements. In Kwong v. Bloomberg , the Second Circuit reviewed a New York law requiring residents to obtain a license to possess a handgun, along with an implementing New York City measure that imposed a licensing fee of $340 for a three-year permit. The plaintiffs argued that the licensing fee imposed an unconstitutional burden on the exercise of their Second Amendment rights. In upholding the fee, the Second Circuit found it \"difficult to say that the licensing fee, which amounts to just over $100 per year, is anything more than a marginal, incremental or even appreciable restraint on one's Second Amendment's rights\"—and thus would not implicate heightened scrutiny—but refrained from so holding because, in its view, New York City's law also survived under intermediate scrutiny. The court reasoned that the regulation serves New York City's important interest in recouping the costs incurred in operating its licensing scheme, which is designed to promote public safety and reduce gun violence. Although the circuit courts of appeals have taken various approaches in evaluating Second Amendment challenges, the results tend to share similar outcomes. Accordingly, without further guidance—for now—from the Supreme Court, Congress may find the circuit court rulings instructive should the legislature seek to enact measures that would add or modify the categories of persons or weapons subject to firearm regulations. However, any new (and past) firearms measures will need to comport with whatever guidance, if any, the Supreme Court offers when it issues a ruling in New York State Rifle & Pistol Association, Inc. v. City of New York . Almost all federal courts reviewing Second Amendment challenges post- Heller have adopted a two-step approach to evaluating Second Amendment challenges. First, courts ask whether the regulated person, firearm, or place comes within the scope of the Second Amendment's protections. If not, the law does not run afoul of the Second Amendment. If, on the other hand, the challenged law does implicate the Second Amendment, courts must next decide the appropriate level of scrutiny—rational basis, intermediate, or strict scrutiny—to employ in determining whether the law passes constitutional muster. In deciding which level to choose, courts generally ask whether the challenged law burdens core Second Amendment conduct, like the ability to use a firearm for self-defense in the home. If a law substantially burdens core Second Amendment activity, courts typically will apply strict scrutiny. Otherwise, courts will apply intermediate scrutiny. In addition, sometimes circuit courts have taken a different approach by asking whether the challenged regulation is \"presumptively lawful\" as envisioned by Heller . Further, some courts have deemed rational-basis review as \"off the table\" based on the majority's comments in Heller. All told, most firearm laws have been reviewed under intermediate scrutiny, where the courts require a reasonable fit between the challenged law and a substantial or important governmental interest asserted as the basis for the law. Based on these various approaches, it appears that the government can justify a firearm regulation in a number of ways. First, at step one, the government can show that the regulation is a longstanding, presumptively lawful regulation. The government typically can do this by tying the regulation to those restrictions identified in Heller as presumptively lawful. In some cases, a challenged restriction might not be among those listed in Heller as presumptively lawful. However, given the Heller Court's admonishment that the list was not intended to be exhaustive, later courts have concluded that a challenged law is presumptively lawful by analogizing it to restrictions identified in Heller as presumptively permissible. In other cases, the government can show that a firearm regulation is presumptively lawful by proving that a restricted person is not a lawful, responsible citizen and thus outside the scope of the Second Amendment. Additionally, the government can make a historical showing that the firearm regulation is longstanding and thus lawful. Second, if the inquiry proceeds to the second step, the government must show that the regulation is substantially related to an important governmental interest. The cases show that the success of a law under this inquiry will depend on the evidence that the government puts forth. The courts will not take mere assertions by the government but require meaningful evidence, like legislative findings, empirical evidence, and academic studies. Based on the courts' admonishments, future legislation to regulate firearms may face a greater chance of survival in the courts if that legislation evidences a clear fit between the government's interest and the regulation. Looking ahead, the seats of two of the Justices critical to the outcomes in Heller and McDonald , Justices Scalia and Kennedy, have been filled by Justices Gorsuch and Kavanaugh respectively. During Justice Gorsuch's tenure on the Tenth Circuit, he never had the opportunity to explore the scope of Heller and the Second Amendment. But since joining the Court, he joined Justice Thomas in dissenting from the denial of certiorari in Peruta v. County of San Diego (involving California's good-cause requirement for a concealed carry license), in which Justice Thomas opined that the Second Amendment's text, history, and jurisprudence \"strongly suggest\" that the Amendment includes the right to carry a firearm in public \"in some manner.\" Conversely, while on the D.C. Circuit, Justice Kavanaugh wrote at length about Heller 's meaning in his dissenting opinion in Heller v. District of Columbia ( Heller II ), a ruling that evaluated several provisions of a comprehensive firearm scheme that the District of Columbia had enacted in the wake of the Supreme Court's more-famous Heller opinion. Unlike the majority of federal appellate courts, he did not appear to believe that Second Amendment claims should be evaluated under a particular level of constitutional scrutiny. Rather, he would have considered the Second Amendment's text, history, and tradition. Accordingly, these two new arrivals on the Court may help shape post- Heller Second Amendment jurisprudence. Indeed, the Court's consideration of New York State Rifle & Pistol Association, Inc. this upcoming October 2019 term will likely clarify the framework that should be employed when evaluating Second Amendment claims. Further, the grant of certiorari appears to signal a willingness of the Court to further develop its Second Amendment jurisprudence.", "summary": "The Second Amendment states that \"[a] well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear arms, shall not be infringed.\" Before the Supreme Court's 2008 opinion in District of Columbia v. Heller, the Second Amendment had received little Supreme Court attention and had been largely interpreted, at least by the lower federal courts, to be intertwined with military or militia use. Still, there had been ample debate in the lower federal courts and political discussion over whether the Second Amendment provides an individual right to keep and bear arms, versus a collective right belonging to the states to maintain militias. Pre-Heller, the vast majority of lower federal courts had embraced the collective right theory. In Heller, though, the Supreme Court adopted the individual right theory, holding that the Second Amendment protects an individual right for law-abiding citizens to keep and bear arms for lawful purposes including, most notably, self-defense in the home. Two years later in McDonald v. City of Chicago, the Court held that the Second Amendment applies to the states via selective incorporation through the Fourteenth Amendment. After Heller and McDonald, numerous challenges were brought on Second Amendment grounds to various federal, state, and local firearm laws and regulations. Because Heller neither purported to define the full scope of the Second Amendment, nor suggested a standard of review for evaluating Second Amendment claims, the lower federal courts have been tasked with doing so in the Second Amendment challenges brought before them. These challenges include allegations that provisions of the Gun Control Act of 1968, as amended, as well as various state and local firearm laws (e.g., \"assault weapon\" bans, concealed carry regulations, firearm licensing schemes) are unconstitutional. The analyses in these cases may provide useful guideposts for Congress should it seek to enact further firearm regulations. Generally, the courts have adopted a two-step framework for evaluating Second Amendment challenges. First, courts ask whether the regulated person, firearm, or place comes within the scope of the Second Amendment's protections. If not, the law does not implicate the Second Amendment. But if so, the court next employs the appropriate level of judicial scrutiny—rational basis, intermediate, or strict scrutiny—to assess whether the law passes constitutional muster. In deciding what level of scrutiny is warranted, courts generally ask whether the challenged law burdens core Second Amendment conduct, like the ability to use a firearm for self-defense in the home. If a law substantially burdens core Second Amendment activity, courts typically will apply strict scrutiny. Otherwise, courts generally will apply intermediate scrutiny. Most challenged laws have been reviewed for intermediate scrutiny, where a court asks whether a law is substantially related to an important governmental interest. And typically, the viability of a firearm restriction will depend on what evidence the government puts forth to justify the law. Yet sometimes courts take a different or modified approach from that described above and ask whether a challenged regulation falls within a category deemed \"presumptively lawful\" by Heller. If the law falls within such a category, a court does not need to apply a particular level of scrutiny in reviewing the restriction because the law does not facially violate the Second Amendment. In early 2019, the Supreme Court granted certiorari in New York State Rifle & Pistol Association, Inc. v. City of New York. The Court is set to review a portion of New York City's firearm licensing scheme that the U.S. Court of Appeals for the Second Circuit upheld as valid. In doing so, the Court may clarify the scope of the right protected in the Second Amendment. Importantly, to make this substantive ruling, the Court likely will have to answer a question that it has eluded since Heller: Under what framework should Second Amendment challenges be evaluated?", "document_type": "crs"}
{"report": "Social Security is a self-financing program that provides monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. As of March 2019, there were approximately 63.3 million Social Security beneficiaries. Of those, 47.2 million (74.6%) were retired workers and family members, 10.1 million (16.0%) were disabled workers and family members, and 6.0 million (9.4%) were survivors of deceased workers. Social Security is financed primarily by payroll taxes paid by covered workers and their employers. An estimated 176 million workers are covered by Social Security. Employers and employees each pay 6.2% of covered earnings, up to an annual limit; self-employed individuals pay 12.4% of net self-employment income, up to an annual limit. The annual limit on taxable earnings is $132,900 in 2019. Social Security is also credited with tax revenues from the federal income taxes paid by some beneficiaries on a portion of their benefits. In addition, Social Security receives interest income from Social Security trust fund investments. Social Security income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. This report refers to the separate OASI and DI trust funds on a combined basis as the Social Security trust funds. In 2018, the combined Social Security trust funds (OASDI) had total receipts of $1,003 billion, total expenditures of $1,000 billion, and accumulated holdings (assets) of more than $2.9 trillion. Title II of the original Social Security Act of 1935 established a national plan designed to provide economic security for the nation's workers. The system of Old-Age Insurance it created provided benefits to individuals who were aged 65 or older and who had \"earned\" retirement benefits through work in jobs covered by the system. Benefits were to be financed by a payroll tax paid by employees and their employers on wages up to a base amount ($3,000 per year at the time). Monthly benefits were to be based on cumulative wages in covered jobs. The law related the amount of the benefit to the amount of a worker's wages covered by the program, but the formula was progressive. That is, the formula was weighted to replace a larger share of the earnings of low-wage workers compared with those of higher-wage workers. Before the Old-Age Insurance program was in full operation, the Social Security Amendments of 1939 shifted the emphasis of Social Security from protection of the individual worker to protection of the family by extending monthly cash benefits to the dependents and survivors of workers. The program now provided OASI. During the decades that followed, changes to the Social Security program were mainly ones of expansion. Coverage of workers became nearly universal (the largest groups remaining outside the system are state and local government employees who have not chosen to join the system and federal employees who were hired before 1984). In 1956, Congress established the Disability Insurance (DI) program. Over the years, there were increases in the payroll tax rate, which increased from 2.0% of pay (1.0% each for employees and employers) in the 1937-1949 period to its current level of 12.4%. In addition, there were increases in the amount of wages subject to the payroll tax (the taxable wage base), which increased from $3,000 in the 1937-1950 period to $132,900 in 2019. The types of individuals eligible for benefits were expanded over the years, and benefit levels were increased periodically. In 1972, legislation provided for automatic cost-of-living adjustments, starting in 1975, indexed to the change in consumer prices as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) published by the Department of Labor's Bureau of Labor Statistics. Beginning in the late 1970s, legislative action regarding Social Security became more concentrated on solving persistent financing problems. Legislation enacted in 1977 raised taxes and curtailed future benefit growth in an effort to shore up the system's finances. Still, in 1982, the OASI trust fund needed to borrow assets from the DI trust fund and the Medicare Hospital Insurance (HI) trust fund (borrowed amounts were fully repaid by 1986). In 1983, Congress passed additional major legislation that was projected to restore solvency to the Social Security system on average over the 75-year projection period at that time. Current projections by the Social Security Board of Trustees show that the Social Security system has a long-range funding shortfall, and that the system will operate with annual cash-flow deficits each year through the end of the 75-year projection period (2093). These projections, and other factors, have focused attention on potential Social Security program changes. The Social Security program is financed primarily by revenues from Federal Insurance Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA) taxes. FICA taxes are paid by both employers and employees, however, it is employers who remit the taxes to the U.S. Treasury. Employers remit FICA taxes on a regular basis throughout the year (e.g., weekly, monthly, quarterly, or annually), depending on the employer's level of total employment taxes (Social Security, Medicare, and federal individual income tax withholding). The FICA tax rate of 7.65% each for employers and employees has two components: 6.20% for Social Security and 1.45% for Medicare HI. Under current law, employers and employees each pay 6.2% of covered wages, up to the taxable wage base, in Social Security payroll taxes. The SECA tax rate is 15.3% for self-employed individuals, with 12.4% for Social Security and 2.9% for Medicare HI. Self-employed individuals pay 12.4% of net self-employment income, up to the taxable wage base, in Social Security payroll taxes. One-half of the SECA taxes are allowed as a deduction for federal income tax purposes. SECA taxes are normally paid once a year as part of filing an annual individual income tax return. In addition to Social Security payroll taxes, the Social Security program has two other sources of income. First, certain Social Security beneficiaries must include a portion of Social Security benefits in taxable income for the federal income tax, and the Social Security program receives part of those federal tax revenues. Second, the Social Security program receives interest from the U.S. Treasury on its investments in special U.S. government obligations. As the Managing Trustee of the Social Security trust funds, the Secretary of the Treasury is required by law to invest Social Security revenues in interest-bearing federal government securities held by the trust funds. The revenues exchanged for the federal government securities are deposited into the general fund of the U.S. Treasury and are indistinguishable from revenues in the general fund that come from other sources. Because the assets held by the trust funds are federal government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the general fund of the U.S. Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption of federal government securities held by the trust funds. Since 1984, Social Security benefits have been subject to the federal income tax. As part of the Social Security Amendments of 1983 ( P.L. 98-21 ), Congress made up to 50% of a person's Social Security benefits subject to the federal income tax if he or she has provisional income above a specified threshold ($25,000 for an individual tax filer; $32,000 for a married couple filing jointly). Provisional income is defined as total income from all sources recognized for tax purposes plus certain otherwise tax-exempt income, including half of Social Security benefits. Revenues from this \"first tier\" of taxation are credited to the Social Security trust funds. In 2018, the trust funds received $35.0 billion (3.5% of total trust fund income) from this provision. Next, as part of the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ), Congress made up to 85% of a person's Social Security benefits subject to the federal income tax if he or she has provisional income above a second higher threshold ($34,000 for an individual tax filer; $44,000 for a married couple filing jointly). Revenues from this \"second tier\" of taxation are credited to the Medicare HI trust fund. In 2018, the HI trust fund received $24.2 billion (7.9% of total trust fund income) from this provision. Under current law, the income thresholds are fixed (i.e., they are not adjusted for inflation or wage growth). Over time an increasing number of beneficiaries will be subject to the federal income tax on benefits. The Congressional Budget Office (CBO) estimates that about half of current Social Security beneficiaries are affected by the taxation of benefits. Projections by the Social Security Board of Trustees (the trustees) show that Social Security expenditures will exceed tax revenues each year through the end of the 75-year valuation period (2093). That is, Social Security will operate with annual cash-flow deficits . With interest income taken into account, Social Security maintained a total surplus (tax revenues plus interest income exceeded expenditures) from 2010 through 2018. Total revenues in 2019 are projected to exceed total costs by $1 billion; the last instance of costs exceeding revenues was in 1982. The trustees project that the trust funds will have a positive balance (asset reserves) until 2035, allowing Social Security benefits scheduled under current law to be paid in full and on time until then. Over the long run, the trustees project that the 75-year actuarial deficit for the trust funds is equal to 2.78% of taxable payroll. Stated a different way, the trustees project that Social Security expenditures will exceed income by at least 20% over the next 75 years. For illustration purposes, the trustees point out that the following cha nges would be needed for the trust funds to remain solvent throughout the 75-year projection period: (1) an immediate 2.70-percentage-point increase in the payroll tax rate (from 12.40% to 15.10%); or (2) an immediate 17% reduction in benefits for all current and future beneficiaries; or (3) some combination of these approaches. Social Security's projected long-range funding shortfall is attributed primarily to demographic factors (such as lower fertility rates and increasing life expectancy) as well as program design features (such as a wage-indexed benefit formula and annual COLAs). At the end of 2018, the trust funds were credited with asset reserves of more than $2.9 trillion. With the projection that the program's total costs will begin to exceed total revenue in 2020, the trustees project the trust funds to peak at the end of 2019. Beginning in 2020, the trustees project that the trust fund balance will begin to decline, until the asset reserves are depleted in 2035. The trust fund ratio can be used to put the size of the trust fund balance into perspective. This ratio represents trust fund assets at the beginning of a year as a percentage of cost for the year. In 2019, for example, the projected trust fund ratio is 273%. (Assets held by the trust funds at the beginning of 2019 are projected to be 2.73 times greater than the cost of the program in 2019.) The trustees project that the trust fund ratio will decline to 130% in 2028 and reach zero at the point of trust fund reserve depletion in 2035. After depletion of trust fund reserves, the program would continue to operate with incoming Social Security receipts; those receipts are projected to be sufficient to pay 80% of benefits scheduled under current law in 2035, declining to 75% of scheduled benefits in 2093. Under current law, Social Security does not have authority to borrow from the general fund of the Treasury. Therefore, the program cannot draw upon general revenues to make up the difference between incoming receipts and benefit payments when the program no longer has asset reserves to draw upon. The Social Security Act does not specify what would happen to the payment of benefits scheduled under current law in the event of Social Security trust fund depletion. Two possible scenarios are (1) the payment of full monthly benefits on a delayed basis or (2) the payment of partial (reduced) monthly benefits on time. From 1984 to 2009, Social Security generated surplus tax revenues (i.e., the program operated with annual cash-flow surpluses). Surplus tax revenues and interest income credited to the trust funds in the form of federal government securities contributed to a growing trust fund balance. Beginning in 2010, however, the program began operating with annual cash-flow deficits, and the trustees project that Social Security tax revenues will remain below program expenditures each year throughout the 75-year projection period (2019-2093). When Social Security operates with a cash-flow deficit, the trust funds redeem more federal securities than the amount of current Social Security tax revenues, relying in part on trust fund asset reserves to pay benefits and administrative expenses. Because the federal securities held by the trust funds are redeemed with general revenues, this results in increased spending for Social Security from the general fund. When there are no surplus governmental receipts, the federal government must raise the necessary funds by increasing taxes or other income; reducing other spending; borrowing from the public; or some combination of these measures. With respect to the program's reliance on general revenues, it is important to note that Social Security does not have authority to borrow from the general fund of the Treasury under current law. Rather, the program relies on revenues collected for Social Security purposes in previous years that were used by the federal government at the time for other (non-Social Security) spending needs and interest income earned on trust fund investments. The program draws on those previously collected Social Security tax revenues and interest income (trust fund asset reserves) when current Social Security tax revenues fall below current program expenditures. Social Security reform is an issue of ongoing interest to lawmakers. For some advocates of reform, the focus is on restoring long-range solvency to the trust funds. For others, the focus is on constraining the projected growth in spending for entitlement programs—including Social Security, Medicare, and Medicaid—in the context of broader efforts to reduce growing federal budget deficits. The Social Security reform debate reflects other policy objectives as well, such as improving the adequacy and equity of benefits, and different philosophical views about the role of the Social Security program and the federal government in providing retirement income. Over the years, the debate has reflected two fundamentally different approaches to reform. The traditional approach would maintain the current structure of the program (i.e., a defined benefit system funded on a pay-as-you-go basis) by making relatively modest changes, such as an increase in the retirement age or an increase in the taxable wage base. In general, the goal of this approach is to preserve the social insurance nature of the program. In contrast, the personal savings and investment approach would redesign the 1930s-era program to create a prefunded system in which benefits would be based partially or entirely on personal savings and investments. More recently, the Social Security debate has reflected a shift in focus among some lawmakers away from efforts to scale back the program toward proposals that would expand Social Security benefits to address concerns about the adequacy of benefits and, more broadly, retirement income security. Social Security provides monthly cash benefits to retired or disabled workers and to the family members of retired, disabled, or deceased workers. Benefits are designed to replace part of a worker's earnings. As such, a worker's benefit is based on his or her career-average earnings in covered employment (i.e., earnings up to the annual taxable limit) and a progressive benefit formula that is intended to provide adequate benefit levels for workers with low career-average earnings. This section explains how the worker's primary insurance amount (PIA) is computed. The worker's PIA is his or her monthly benefit amount payable at the full retirement age (FRA); it also determines the amount of monthly benefits payable to family members based on the worker's record. This section also covers the basic eligibility requirements for different types of Social Security benefits. Social Security retirement benefits are first payable to retired workers at the age of 62, subject to a permanent reduction for \"early retirement.\" The age at which full (unreduced) retirement benefits are first payable is the FRA. For most of the program's history, the FRA was 65. As part of the Social Security Amendments of 1983 ( P.L. 98-21 ), Congress raised the FRA from 65 to 67. The 1983 law established a gradual phase-in from 65 to 67 over a 22-year period (2000 to 2022). Specifically, workers born in 1938 or later are affected by the increase in the FRA (i.e., workers who become eligible for retirement benefits at age 62 in 2000 or later). The increase in the FRA will be fully phased in for workers born in 1960 or later (i.e., workers who become eligible for retirement benefits at age 62 in 2022 or later). Table 1 shows the scheduled increase in the FRA being phased in under current law. Among other requirements, a worker generally needs 40 earnings credits (10 years of Social Security-covered employment) to be eligible for a Social Security retired-worker benefit. A worker's initial monthly benefit is based on his or her highest 35 years of earnings in covered employment, which are indexed to historical wage growth. The highest 35 years of indexed earnings are summed, and the total is divided by 420 months (35 years x 12 months). The resulting amount is the worker's average indexed monthly earnings (AIME). If a worker has fewer than 35 years of earnings in covered employment, years with no earnings are entered as zeroes in the computation, resulting in a lower AIME and therefore a lower monthly benefit. The worker's PIA is determined by applying a formula to the AIME as shown in Table 2 . First, the AIME is sectioned into three brackets (or segments) of earnings, which are divided by dollar amounts known as bend points. In 2019, the bend points are $926 and $5,583. Three different replacement factors—90%, 32%, and 15%—are applied to the three brackets of AIME. The three products derived from multiplying each replacement factor and bracket of AIME are added together. For workers who become eligible for retirement benefits (i.e., those who attain age 62), become disabled, or die in 2019, the PIA is determined as shown in the example in Table 2 . Generally, a worker's PIA increases each year from the year of eligibility (at age 62) to the year of benefit receipt based on the Social Security COLA. In addition, Social Security benefits already in payment generally increase each year based on the COLA. A worker's initial monthly benefit is equal to his or her PIA if he or she begins receiving benefits at the FRA. A worker's initial monthly benefit will be less than his or her PIA if he or she begins receiving benefits before the FRA, and it will be greater than his or her PIA if he or she begins receiving benefits after the FRA. A retired-worker benefit is payable as early as the age of 62, however, the benefit will be permanently reduced to reflect the longer expected period of benefit receipt. Retired-worker benefits are reduced by five-ninths of 1% (or 0.0056) of the worker's PIA for each month of entitlement before the FRA up to 36 months, for a reduction of about 6.7% per year. For each month of benefit entitlement before the FRA in excess of 36 months, retirement benefits are reduced by five-twelfths of 1% (or 0.0042), for a reduction of 5% per year. Workers who delay filing for benefits until after the FRA receive a delayed retirement credit (DRC). The DRC applies to the period that begins with the month the worker attains the FRA and ends with the month before he or she attains the age of 70. The DRC is 8% per year for workers born in 1943 or later (i.e., workers who attain the age of 62 in 2005 or later). The actuarial adjustment to benefits based on claiming age is intended to provide the worker with roughly the same total lifetime benefits, regardless of the age at which he or she begins receiving benefits (based on average life expectancy). Therefore, if a worker claims benefits before the FRA, his or her monthly benefit is reduced to take into account the longer expected period of benefit receipt. For a worker whose FRA is 66, the decision to claim benefits at the age of 62 results in a 25% reduction in his or her PIA. For a worker whose FRA is 67, the decision to claim benefits at the age of 62 results in a 30% reduction in his or her PIA. Similarly, if a worker claims benefits after the FRA, his or her monthly benefit is increased to take into account the shorter expected period of benefit receipt. Other benefit adjustments may apply, such as those related to simultaneous entitlement to more than one type of Social Security benefit. Under the dual entitlement rule, for example, a Social Security spousal benefit is reduced if the person also receives a Social Security benefit based on his or her own work in covered employment (i.e., a retired-worker or disabled-worker benefit). Similarly, under the government pension offset (GPO), a Social Security spousal benefit is reduced if the person also receives a pension based on his or her own work in non covered employment. Under the windfall elimination provision (WEP), a modified benefit formula is used to compute a worker's Social Security benefit when he or she also receives a pension from non covered employment. The modified formula results in a lower initial monthly benefit compared to the regular benefit formula. Under the retirement earnings test (RET), a person's Social Security benefit is subject to withholding when he or she is below the FRA and has wage or salary income above an annual dollar threshold (i.e., above an annual exempt amount). Under the Social Security maximum family benefit rules, benefits payable to each family member (with the exception of the worker) are subject to reduction when total benefits payable to the family based on the worker's record exceed a specified limit. For Social Security disability benefits, \"disability\" is defined as the inability to engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment that is expected to last for at least 12 months or result in death. Generally, the worker must be unable to do any kind of substantial work that exists in the national economy, taking into account age, education, and work experience. As noted previously, a worker generally needs 40 earnings credits to qualify for a Social Security retired-worker benefit. A worker under the age of 62 can qualify for a Social Security disabled-worker benefit with fewer earnings credits. The number of earnings credits needed varies, depending on the age of the worker when he or she became disabled; however, a minimum of six earnings credits is needed. Similarly, while the worker's highest 35 years of earnings are used to compute a retired-worker benefit, fewer years of earnings may be used to compute a disabled-worker benefit. Because a disabled worker's benefit is not reduced for entitlement before the FRA, a disabled worker's benefit is equal to his or her PIA. Although the majority of Social Security beneficiaries are retired or disabled workers, nearly 10.7 million beneficiaries (16.9% of the total) are the dependents and survivors of retired, disabled, or deceased workers. Social Security benefits are payable to the spouse, divorced spouse, or child of a retired or disabled worker. Benefits are also payable to the widow(er), divorced widow(er), child, or parent of a deceased worker. In addition, mother's or father's benefits are payable to a young widow(er) who is caring for a deceased worker's child; the child must be under the age of 16 or disabled, and the child must be entitled to benefits. Benefits payable to family members are equal to a specified percentage of the worker's PIA, subject to a maximum family benefit. For example, the spouse of a retired worker may receive up to 50% of the retired worker's PIA, and the widow(er) of a deceased worker may receive up to 100% of the deceased worker's PIA. Benefits payable to family members may be subject to adjustments based on the person's age at entitlement, receipt of a Social Security benefit based on his or her own work record, and other factors. Table 3 provides a summary of Social Security benefits payable to the family members of a retired, disabled, or deceased worker. It includes the basic eligibility requirements and basic benefit amounts before any applicable adjustments (such as for the maximum family benefit). The total amount of Social Security benefits payable to a family based on a retired, disabled, or deceased worker's record is capped by the maximum family benefit. The family maximum cannot be exceeded, regardless of the number of beneficiaries entitled to benefits on the worker's record. If the sum of all benefits payable on the worker's record exceeds the family maximum, the benefit payable to each dependent or survivor is reduced in equal proportion to bring the total amount of benefits payable to the family within the limit. In the case of a retired or deceased worker , the maximum family benefit is determined by a formula and varies from 150% to 188% of the worker's PIA. For the family of a worker who attains the age of 62 in 2019, or dies in 2019 before attaining the age of 62, the total amount of benefits payable to the family is limited to 150% of the first $1,184 of the worker's PIA, plus 272% of the worker's PIA over $1,184 and through $1,708, plus 134% of the worker's PIA over $1,708 and through $2,228, plus 175% of the worker's PIA over $2,228. The dollar amounts in the maximum family benefit formula ($1,184 / $1,708 / $2,228 in 2019) are indexed to average wage growth, as in the regular benefit formula. In the case of a disabled worker , the maximum family benefit is equal to 85% of the worker's AIME; however, the family maximum cannot be less than 100% or more than 150% of the worker's PIA. In March 2019, there were approximately 63.3 million Social Security beneficiaries. As shown in Table 4 , retired-worker and disabled-worker beneficiaries accounted for 83.1% of the beneficiary population. The largest single category of beneficiaries was retired workers (69.7%), with an average monthly benefit of $1,467. The second-largest category was disabled workers (13.4%), with an average monthly benefit of $1,235. Family members of retired, disabled, or deceased workers accounted for the remainder of the beneficiary population (16.9%). Table 4 provides a breakdown of the Social Security beneficiary population in March 2019.", "summary": "Social Security provides monthly cash benefits to retired or disabled workers and their family members, and to the family members of deceased workers. Among the beneficiary population, 83% are retired or disabled workers; family members of retired, disabled, or deceased workers make up the remainder. In March 2019, approximately 63.3 million beneficiaries received a total of $85.3 billion in benefit payments for the month; the average monthly benefit was $1,347. Workers become eligible for Social Security benefits for themselves and their family members by working in Social Security-covered employment. An estimated 93% of workers in paid employment or self-employment are covered, and their earnings are subject to the Social Security payroll tax. Employers and employees each pay 6.2% of covered earnings, up to an annual limit on taxable earnings ($132,900 in 2019). Among other requirements, a worker generally needs 40 earnings credits (10 years of covered employment) to be eligible for a Social Security retired-worker benefit. Fewer earnings credits are needed to qualify for a disabled-worker benefit; the number needed varies depending on the age of the worker when he or she became disabled. A worker's initial monthly benefit is based on his or her career-average earnings in covered employment. Social Security retired-worker benefits are first payable at the age of 62, subject to a permanent reduction for early retirement. Full (unreduced) retirement benefits are first payable at the full retirement age (FRA), which is increasing gradually from 65 to 67 under a law enacted by Congress in 1983. The FRA will reach 67 for persons born in 1960 or later (i.e., persons who become eligible for retirement benefits at the age of 62 in 2022 or later). In addition to payroll taxes, Social Security is financed by federal income taxes that some beneficiaries pay on a portion of their benefits and by interest income that is earned on the Treasury securities held by the Social Security trust funds. In 2018, the Social Security trust funds had receipts totaling $1,003 billion, expenditures totaling $1,000 billion, and accumulated assets (U.S. Treasury securities) totaling $2.9 trillion. The Social Security Board of Trustees (the trustees) notes, \"Over the program's 84-year history, it has collected roughly $21.9 trillion and paid out $19.0 trillion, leaving asset reserves of $2.9 trillion at the end of 2018 in its two trust funds.\" Projections by the trustees show that, based on the program's current financing and benefit structure, benefits scheduled under current law can be paid in full and on time until 2035 (under the intermediate set of assumptions). Projections also show that Social Security expenditures are estimated to exceed income by at least 20% over the next 75 years. Restoring long-range trust fund solvency and other policy objectives (such as increasing benefits for certain beneficiaries) have made Social Security reform an issue of ongoing congressional interest. This report provides an overview of Social Security financing and benefits under current law. Specifically, the report covers the origins and a brief history of the program; Social Security financing and the status of the trust funds; how Social Security benefits are computed; the types of Social Security benefits available to workers and their family members; the basic eligibility requirements for each type of benefit; the scheduled increase in the Social Security retirement age; and the federal income taxation of Social Security benefits.", "document_type": "crs"}
{"report": "Article I, Section 6, of the U.S. Constitution, states that the compensation of Members of Congress shall be \"ascertained by law, and paid out of the Treasury of the United States.\" Additionally, the Twenty-Seventh Amendment to the Constitution states, \"No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.\" This amendment was submitted to the states on September 25, 1789, along with 11 other proposed amendments, 10 of which were ratified and became the Bill of Rights. It was not ratified until May 7, 1992. Since FY1983, Member salaries have been funded in a permanent appropriations account. The most recent pay adjustment for Members of Congress was in January 2009. Since then, the compensation for most Senators, Representatives, Delegates, and the Resident Commissioner from Puerto Rico has been $174,000. The only exceptions include the Speaker of the House ($223,500) and the President pro tempore of the Senate and the majority and minority leaders in the House and Senate ($193,400). This report provides historical tables on the rate of pay for Members of Congress since 1789; details on enacted legislation with language prohibiting the automatic annual pay adjustment since the most recent adjustment; the adjustments projected by the Ethics Reform Act as compared with actual adjustments in Member pay; and Member pay in constant and current dollars since 1992. Additional CRS products also address pay and benefits for Members of Congress: For information on actions taken each year since the establishment of the Ethics Reform Act adjustment procedure, see CRS Report 97-615, Salaries of Members of Congress: Congressional Votes, 1990-2018 , by Ida A. Brudnick. Members of Congress only receive salaries during the terms for which they are elected. Following their service, former Members of Congress may be eligible for retirement benefits, which are discussed in CRS Report RL30631, Retirement Benefits for Members of Congress , by Katelin P. Isaacs. For information on health insurance options available to Members, see CRS Report R43194, Health Benefits for Members of Congress and Designated Congressional Staff: In Brief , by Ada S. Cornell. For an overview of compensation, benefits, allowances, and selected limitations, see CRS Report RL30064, Congressional Salaries and Allowances: In Brief , by Ida A. Brudnick. There are three basic ways to adjust Member pay. Specific legislation was enacted to adjust Member pay prior to 1968. It has been used periodically since, most recently affecting pay for 1991. The second method by which Member pay can be increased is pursuant to recommendations from the President, based on those made by a quadrennial salary commission. In 1967, Congress established the Commission on Executive, Legislative, and Judicial Salaries to recommend salary increases for top-level federal officials (P.L. 90-206). Three times (in 1969, 1977, and 1987) Congress received pay increases made under this procedure; on three occasions it did not. Effective with passage of the Ethics Reform Act of 1989 ( P.L. 101-194 ), the commission ceased to exist. Its authority was assumed by the Citizens' Commission on Public Service and Compensation. Although the first commission under the 1989 act was to have convened in 1993, it did not meet. The third method by which the salary of Members can be changed is by annual adjustments. Prior to 1990, the pay of Members, and other top-level federal officials, was tied to the annual comparability increases provided to General Schedule (GS) federal employees. This procedure was established in 1975 ( P.L. 94-82 ). Such increases were recommended by the President, subject to congressional acceptance, disapproval, or modification. Congress accepted 5 such increases for itself—in 1975, 1979 (partial), 1984, 1985, and 1987—and declined 10 (1976, 1977, 1978, 1980, 1981, 1982, 1983, 1986, 1988, and 1989). The Ethics Reform Act of 1989 changed the method by which the annual adjustment is determined for Members and other senior officials. This procedure employs a formula based on changes in private sector wages and salaries as measured by the Employment Cost Index (ECI). The annual adjustment automatically goes into effect unless 1. Congress statutorily prohibits the adjustment; 2. Congress statutorily revises the adjustment; or 3. The annual base pay adjustment of GS employees is established at a rate less than the scheduled adjustment for Members, in which case Members would be paid the lower rate. Under this revised method, annual adjustments were accepted 13 times (adjustments scheduled for January 1991, 1992, 1993, 1998, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2008, and 2009) and denied 16 times (adjustments scheduled for January 1994, 1995, 1996, 1997, 1999, 2007, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019). Although discussion of the Member pay adjustment sometimes occurs during consideration of annual appropriations bills, these bills do not contain funds for the annual salaries or pay adjustment for Members. Nor do they contain language authorizing an increase. The use of appropriations bills as vehicles for provisions prohibiting the automatic annual pay adjustments for Members developed by custom. A provision prohibiting an adjustment to Member pay could be offered to any bill, or be introduced as a separate bill. The maximum potential January 2020 Member pay adjustment of 2.6%, or $4,500, was known when the Bureau of Labor Statistics (BLS) released data for the change in the Employment Cost Index (ECI) during the 12-month period from December 2017 to December 2018 on January 31, 2019. Each year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the General Schedule (GS) base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The maximum potential January 2019 Member pay adjustment of 2.3%, or $4,000, was known when the BLS released data for the change in the ECI during the 12-month period from December 2016 to December 2017 on January 31, 2018. Each year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The 2019 GS base pay adjustment was 1.4%, automatically limiting any Member pay adjustment to $2,400. The House-passed ( H.R. 5894 ) and Senate-reported versions ( S. 3071 ) of the FY2019 legislative branch appropriations bill both contained provisions to prevent this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. Division B of P.L. 115-244 , enacted September 21, 2018, included the pay freeze provision. The maximum potential January 2018 member pay adjustment of 1.8%, or $3,100, was known when the BLS released data for the change in the ECI during the 12-month period from December 2015 to December 2016 on January 31, 2017. Each year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The 2018 GS base pay adjustment was 1.4%, automatically limiting any Member pay adjustment to $2,400. The House-passed ( H.R. 3162 ) and Senate-reported versions ( S. 1648 ) of the FY2018 legislative branch appropriations bill both contained provisions to prevent this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. Neither bill was enacted prior to the start of FY2018, and legislative branch activities were initially funded through a series of continuing appropriations resolutions (CRs) ( P.L. 115-56 , through December 8, 2017; P.L. 115-90 , through December 22, 2017; P.L. 115-96 , through January 19, 2018; P.L. 115-120 , through February 8, 2018; P.L. 115-123 , through March 23, 2018). P.L. 115-56 contained a provision, extended in the subsequent CRs, continuing \"section 175 of P.L. 114-223 , as amended by division A of P.L. 114-254 .\" This provision prohibited a Member pay adjustment in FY2017. Section 7 of the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ) prohibited the adjustment for the remainder of the year. The maximum potential January 2017 Member pay adjustment of 1.6%, or $2,800, was known when the BLS released data for the change in the ECI during the 12-month period from December 2014 to December 2015 on January 30, 2016. Both the House-passed ( H.R. 5325 ) and Senate-reported ( S. 2955 ) versions of the FY2017 legislative branch appropriations bill—which would provide approximately $4.4 billion in funding for the activities of the House of Representatives, Senate, and legislative branch support agencies —contained a provision that would prohibit this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. No further action was taken on H.R. 5325 or S. 2955 , but the pay prohibition language was included in the Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ). Absent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase to match the increase in base salaries for GS employees. The maximum potential January 2016 Member pay adjustment of 1.7%, or $3,000, was known when the BLS released data for the change in the ECI during the 12-month period from December 2013 to December 2014 on January 30, 2015. The House-passed and Senate-reported versions of the FY2016 legislative branch appropriations bill ( H.R. 2250 ) both contained a provision prohibiting this adjustment. The pay adjustment prohibition was subsequently included in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). Absent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase to match the increase in base salaries for GS employees. The maximum potential January 2015 pay adjustment of 1.6%, or $2,800, was known when the BLS released data for the change in the ECI during the 12-month period from December 2012 to December 2013 on January 31, 2014. Each year, the adjustment takes effect automatically unless it is either denied statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The FY2015 legislative branch appropriations bill ( H.R. 4487 ), as reported by the Committee on Appropriations and passed by the House on May 1, 2014, contained a provision prohibiting this adjustment. This provision was continued in the House-passed and Senate-reported versions of this bill, with no separate vote on the Member pay provision. No further action on this bill was taken, but the provision was subsequently included in Section 8 of Division Q of the FY2015 Consolidated and Further Continuing Appropriations Act, which was enacted on December 16, 2014. On August 29, 2014, President Obama issued an \"alternative pay plan for federal civilian employees,\" which called for a 1.0% increase in base salaries for General Schedule employees. Absent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase. The maximum potential 2014 pay adjustment of 1.2%, or $2,100, was known when the BLS released data for the change in the ECI during the 12-month period from December 2011 to December 2012 on January 31, 2013. The Continuing Appropriations Act, 2014 ( P.L. 113-46 , enacted October 17, 2013), however, prohibited the scheduled 2014 pay adjustment for Members of Congress. Each year, the adjustment takes effect automatically unless it is either denied statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The scheduled January 2014 across-the-board increase in the base pay of GS employees under the annual adjustment formula was 1.3%. A scheduled GS annual pay increase may be altered only if the President issues an alternative plan or if a different increase, or freeze, is enacted. The President issued an alternate pay plan for civilian federal employees on August 30, 2013. This plan called for a January 2014 across-the-board pay increase of 1.0% for federal civilian employees, the same percentage as proposed in the President's FY2014 budget. Legislation was not enacted to prohibit or alter the GS adjustment, and Executive Order 13655, issued on December 23, 2013, implemented a 1.0% increase for GS employees. Had the Member pay adjustment not been prohibited by law, the GS base pay adjustment would have automatically limited a salary adjustment for Members of Congress to 1.0% ($1,700). The maximum potential 2013 pay adjustment of 1.1%, or $1,900, was known when the BLS released data for the change in the ECI during the 12-month period from December 2010 to December 2011 on January 31, 2012. The adjustment takes effect automatically unless (1) denied statutorily by Congress or (2) limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The President's budget, submitted on February 13, 2012, proposed an average (i.e., base and locality) 0.5% adjustment for GS employees. President Obama later stated in a letter to congressional leadership on August 21, 2012, that the current federal pay freeze should extend until FY2013 budget negotiations are finalized. Section 114 of H.J.Res. 117 , the Continuing Appropriations Resolution, 2013, which was introduced on September 10, 2012, extended the freeze enacted by P.L. 111-322 through the duration of this continuing resolution. H.J.Res. 117 was passed by the House on September 13 and the Senate on September 22. It was signed by the President on September 28, 2012 ( P.L. 112-175 ). A delay in the implementation of pay adjustments for GS employees automatically delays any scheduled Member pay adjustment. On December 27, 2012, President Obama issued Executive Order 13635, which listed the rates of pay for various categories of officers and employees that would be effective after the expiration of the freeze extended by P.L. 112-175 . The executive order included a 0.5% increase for GS base pay, which automatically lowered the maximum potential Member pay adjustment from 1.1% to 0.5%. As in prior years, schedule 6 of the 2012 executive order listed the pay rate for Members of Congress for the upcoming year. This executive order indicated that an annual adjustment would take effect after the expiration of the freeze included in P.L. 112-175 . As stated above, the annual adjustments take effect automatically if legislation is not enacted preventing them. The executive order, however, by establishing the GS pay adjustment at a lower rate than the scheduled Member pay adjustment, automatically lowered the Member pay adjustment rate since by law Member pay adjustments cannot be higher than GS pay adjustments. Subsequently, a provision in H.R. 8 , the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013 ( P.L. 112-240 ), froze Member pay at the 2009 level for 2013. The language was included in S.Amdt. 3448 , a substitute amendment agreed to by unanimous consent. The bill, as amended, passed the Senate (89-8, vote #251) and the House (257-167, roll call #659) on January 1, 2013. This freeze was subsequently reflected in Executive Order 13641, which was signed April 5, 2013. This represented the second time, the first being in 2006, that Member pay was statutorily frozen for only a portion of the following year at the time of the issuance of the executive order. In both instances, the executive order listed new pay rates and indicated an effective date following the expiration of the statutory freeze. Pay adjustments in both years were further frozen pursuant to subsequent laws. As stated above, projected Member pay adjustments are calculated based on changes in the ECI. The projected 2011 adjustment of 0.9% was known when the BLS released data for the ECI change during the 12-month period from December 2008 to December 2009 on January 29, 2010. This adjustment would have equaled a $1,600 increase, resulting in a salary of $175,600. The 2011 pay adjustment was prohibited by the enactment of H.R. 5146 ( P.L. 111-165 ) on May 14, 2010. H.R. 5146 was introduced in the House on April 27 and was agreed to the same day (Roll no. 226). It was agreed to in the Senate the following day by unanimous consent. Other legislation was also introduced to prevent the scheduled 2011 pay adjustment. Additionally, P.L. 111-322 , which was enacted on December 22, 2010, prevents any adjustment in GS base pay before December 31, 2012. Since the percentage adjustment in Member pay may not exceed the percentage adjustment in the base pay of GS employees, Member pay is also frozen during this period. If not limited by GS pay, Members could have received a salary adjustment of 1.3% in January 2012 under the ECI formula. Pay for Members of Congress remained $174,000. Under the formula established in the Ethics Reform Act, Members were originally scheduled to receive a pay adjustment in January 2010 of 2.1%. This adjustment was denied by Congress through a provision included in the FY2009 Omnibus Appropriations Act. Section 103 of Division J of the act states, \"Notwithstanding any provision of section 601(a)(2) of the Legislative Reorganization Act of 1946 (2 U.S.C. 31(2)), the percentage adjustment scheduled to take effect under any such provision in calendar year 2010 shall not take effect.\" Had this provision not been enacted, the 2.1% projected adjustment would have been automatically reduced to 1.5% to match the 2010 GS base pay adjustment. As in previous Congresses, legislation was introduced in the 116 th Congress to repeal the automatic pay adjustment provision (for example, H.R. 751 and H.R. 1466 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution, passage of appropriations, or reaching the debt limit (for example, S. 39 , S. 44 , S. 949 , H.R. 86 , H.R. 102 , H.R. 129 , H.R. 236 , H.R. 298 , H.R. 834 , H.R. 1172 , H.R. 1178 , H.R. 1466 , H.R. 1612 , H.J.Res. 10 , and H.J.Res. 51 ); and prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, S. 74 , S. 949 , H.R. 26 , H.R. 211 , H.R. 845 , and H.R. 1612 ). Legislation was introduced in the 115 th Congress to prohibit adjustments in pay (for example, H.R. 342 ); repeal the automatic pay adjustment provision (for example, H.R. 668 and H.R. 5946 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution or reaching the debt limit (for example, H.R. 429 , H.R. 536 , H.R. 646 , H.R. 1779 , H.R. 1951 , H.R. 2153 , H.R. 2665 , H.R. 3675 , H.R. 4512 , and H.R. 5946 , and S. 14 ); reduce the pay of Members of Congress (for example, H.R. 1786 and H.R. 5539 ); and prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, H.R. 1789 , H.R. 1794 , H.R. 2214 , H.R. 4852 , H.R. 4870 , and S. 2327 ). Legislation was introduced in the 114 th Congress to prohibit adjustments in pay (for example, H.R. 109 and H.R. 302 ); repeal the automatic pay adjustment provision (for example, H.R. 179 , H.R. 513 , H.R. 688 , H.R. 1585 , and S. 17 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including the passage of a budget resolution or existence of a deficit (for example, H.Con.Res. 27 , S.Con.Res. 11 , H.R. 92 , H.R. 110 , H.R. 174 , H.R. 187 , H.R. 3757 , H.R. 4814 , H.R. 4476 , and S. 39 ); reduce the pay of Members of Congress (for example, H.R. 179 and H.R. 688 ); and prohibit or reduce pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, S. 2074 , H.R. 3562 , H.R. 2023 , and H.R. 1032 ). The House budget resolution for FY2016, H.Con.Res. 27 , included a policy statement that Congress should agree to a concurrent budget resolution each year by April 15, and if not, congressional salaries should be held in escrow (Section 819). The statement proposed that salaries would be released from the escrow account either when a chamber agrees to a concurrent resolution on the budget or the last day of the Congress, whichever is earlier. The House agreed to this resolution on March 25, 2015, and no further action was taken. The Senate agreed to its resolution on the FY2016 budget, S.Con.Res. 11 , on March 27, 2015, without this language. The conference report for S.Con.Res. 11 —agreed to in the House on April 30 and in the Senate on May 5, 2015—contains a \"Policy Statement on 'No Budget, No Pay'\" (Section 6216), which refers to actions by the House. Legislation was introduced in the 113 th Congress to prohibit adjustments in pay (for example, H.R. 54 , H.R. 243 , H.R. 636 , S. 18 , S. 30 ); repeal the automatic pay adjustment provision (for example, H.R. 134 , H.R. 150 , H.R. 196 , S. 65 , and H.R. 398 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution or reaching the debt limit (for example, H.R. 108 , H.R. 167 , H.R. 284 , H.R. 308 , H.R. 310 , H.R. 325 , H.R. 372 , H.R. 397 , H.R. 396 , H.R. 522 , H.R. 593 , H.R. 1884 , H.R. 2335 , H.R. 3234 , S. 18 , S. 30 , and S. 263 ); reduce the pay of Members of Congress (for example, H.R. 37 , H.R. 150 , H.R. 391 , H.R. 396 , H.R. 398 , and H.R. 1467 ); prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, H.R. 3160 , H.R. 3215 , H.R. 3224 , H.R. 3234 , and H.R. 3236 ); and apply any sequester to Member pay (for example, S. 436 , H.R. 1181 , H.R. 1478 , and H.R. 2677 ). H.R. 325 , which (1) included language holding congressional salaries in escrow if a concurrent resolution on the budget was not agreed to by April 15, 2013, and (2) provided for a temporary extension of the debt ceiling through May 18, 2013, was introduced on January 21, 2013. Salaries would have been held in escrow for Members in a chamber if that chamber had not agreed to a concurrent resolution by that date. Salaries would have been released from the escrow account either when that chamber agreed to a concurrent resolution on the budget or the last day of the 113 th Congress, whichever was earlier. H.R. 325 was agreed to in the House on January 23, 2013, and the Senate on January 31, 2013. It was enacted on February 4, 2013 ( P.L. 113-3 ). Both the House and Senate agreed to a budget resolution prior to that date, however, and salaries were not held in escrow. H.R. 807 , the Full Faith and Credit Act, was introduced in the House on February 25, 2013. The bill would have prioritized certain payments in the event the debt reaches the statutory limit. An amendment, H.Amdt. 61 , was offered on May 9, 2013, that would clarify that these obligations would not include compensation for Members of Congress. It was agreed to the same day. The bill passed the House on May 13, 2013. No further action was taken in the 113 th Congress. The House-passed version of H.J.Res. 59 , the Continuing Appropriations Resolution, 2014, also contained a provision addressing actions by the Secretary of the Treasury in the event that the debt limit is reached and not raised. The provision (Section 138) would, in part, prohibit borrowing to provide pay for Members of Congress in the event that the debt reaches the statutory limit prior to December 15, 2014. The bill passed the House on September 20, 2013. It was enacted on December 26, 2013, without this section. Legislation was introduced in the 112 th Congress to repeal the automatic pay adjustment provision (for example, S. 133 , S. 148 , H.R. 187 , H.R. 235 , H.R. 246 , H.R. 343 , H.R. 431 , H.R. 3673 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to other action or economic indicators (for example, H.R. 124 , H.R. 172 , H.R. 236 , H.R. 994 , H.R. 1454 , H.R. 3136 , H.R. 3565 , H.R. 3774 , H.R. 3799 , H.R. 3883 , H.R. 4036 , H.R. 6438 , S. 1442 ); reduce the pay of Members of Congress (for example, H.R. 204 , H.R. 270 , H.R. 335 , H.R. 1012 , H.R. 4399 ); otherwise alter or restrict pay for Members under certain conditions (for example, H.R. 6108 ); and freeze Member pay (for example, S. 1931 , S. 1936 , S. 2065 , S. 2079 , S. 2210 , H.R. 3858 , H.R. 6474 , H.R. 6720 , H.R. 6721 , H.R. 6722 ). Legislation was also introduced in the 112 th Congress that would have affected Member pay in the event of a lapse of appropriations resulting in a government shutdown. These included H.R. 819 , H.R. 1255 , H.R. 1305 , H.Con.Res. 56 , and S. 388 . The Senate passed S. 388 on March 1, 2011. The bill would have prohibited Members of the House and Senate from receiving pay, including retroactive pay, for each day that there is a lapse in appropriations or the federal government is unable to make payments or meet obligations because of the public debt limit. The House passed H.R. 1255 on April 1, 2011. The bill would have prohibited the disbursement of pay to Members of the House and Senate during either of these situations. No further action was taken on either bill. On April 8, 2011, the Speaker of the House issued a \"Dear Colleague\" letter indicating that in the event of a shutdown, Members of Congress would continue to be paid pursuant to the Twenty-Seventh Amendment to the Constitution, which as stated above, states: \"No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened\"—although Members could elect to return any compensation to the Treasury. Additional legislation to prohibit any Member pay adjustment in 2013 was introduced but not enacted in the 112 th Congress, including the following: Section 5421(b)(1) of H.R. 3630 , as introduced in the House, would have prohibited any adjustment for Members of Congress prior to December 31, 2013. Section 706 of the motion to recommit also contained language freezing Member pay. On December 13, 2011, the motion to recommit failed (183-244, roll call #922), and the bill passed the House (234-193, roll call #923). The House-passed version of the bill was titled the \"Middle Class Tax Relief and Job Creation Act of 2011.\" The Senate substitute amendment, which did not address pay adjustments, passed on December 17. It was titled the \"Temporary Payroll Tax Cut Continuation Act of 2011.\" The bill was enacted on February 22, 2012 ( P.L. 112-96 ), without the pay freeze language. H.R. 3835 , introduced on January 27, 2012, also would have extended the pay freeze for federal employees, including Members of Congress, to December 31, 2013. This bill passed the House on February 1, 2012. H.R. 6726 , introduced on January 1, 2013, would have extended the pay freeze for federal employees, including Members of Congress, to December 31, 2013. This bill passed the House on January 2, 2013. Table 1 provides a history of the salaries of Members of Congress since 1789. For each salary rate, both the effective date and the statutory authority are provided. Table 2 provides information on pay adjustments for Members since 1992, which was the first full year after the Ethics Reform Act that Representatives and Senators received the same salary. The table provides the projected percentage changes under the formula based on the Employment Cost Index and the actual percentage adjustment. The differences between the projected and actual Member pay adjustments resulted from the enactment of legislation preventing the increase (adjustments for 1994, 1995, 1996, 1997, 1999, 2007, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019); limits on the percentage increase of Member pay because of the percentage increase in GS base pay (adjustments for 1994, 1995, 1996, 1998, 1999, 2001, 2003, 2007, 2008, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019); and a combination of the above. In some years, the percentage adjustment for Member pay would have been lowered to match the percentage adjustment in GS base pay if Congress had not passed legislation denying the adjustment (adjustments for 1994, 1995, 1996, 1999, 2007, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, and 2019). If Members of Congress had received every adjustment prescribed by the ECI formula since 1992, and the 2 U.S.C. §4501 limitation regarding the percentage base pay increase for GS employees remained unchanged, the 2019 salary would be $210,900. Table 3 lists the laws which have previously delayed or prohibited Member pay adjustments, the dates these laws were enacted, and the text of the provision. While many of the bills in this list are appropriations bills, a prohibition on Member pay adjustments could be included in any bill, or be introduced as a separate bill. Figure 1 , which follows, shows the salary of Members of Congress in current and constant (inflation adjusted) dollars since 1992. It shows that Member salaries, when adjusted for inflation, decreased 15% from 2009 until 2019.", "summary": "Congress is required by Article I, Section 6, of the Constitution to determine its own pay. In the past, Congress periodically enacted specific legislation to alter its pay; the last time this occurred affected pay in 1991. More recently, pay has been determined pursuant to laws establishing formulas for automatic adjustments. The Ethics Reform Act of 1989 established the current automatic annual adjustment formula, which is based on changes in private sector wages as measured by the Employment Cost Index (ECI). The adjustment is automatic unless denied statutorily, although the percentage may not exceed the percentage base pay increase for General Schedule (GS) employees. Member pay has since been frozen in two ways: (1) directly, through legislation that freezes salaries for Members but not for other federal employees, and (2) indirectly, through broader pay freeze legislation that covers Members and other specified categories of federal employees. Members of Congress last received a pay adjustment in January 2009. At that time, their salary was increased 2.8%, to $174,000. A provision in P.L. 111-8 prohibited any pay adjustment for 2010. Under the pay adjustment formula, Members were originally scheduled to receive an adjustment in January 2010 of 2.1%, although this would have been revised downward automatically to 1.5% to match the GS base pay adjustment. Members next were scheduled to receive a 0.9% pay adjustment in 2011. The pay adjustment was prohibited by P.L. 111-165. Additionally, P.L. 111-322 prevented any adjustment in GS base pay before December 31, 2012. Since the percentage adjustment in Member pay may not exceed the percentage adjustment in the base pay of GS employees, Member pay was also frozen during this period. If not limited by GS pay, Member pay could have been adjusted by 1.3% in 2012. The ECI formula established a maximum potential pay adjustment in January 2013 of 1.1%. P.L. 112-175 extended the freeze on GS pay rates for the duration of this continuing resolution, which also extended the Member freeze since the percentage adjustment in Member pay may not exceed the percentage adjustment in GS base pay. Subsequently, Member pay for 2013 was further frozen in P.L. 112-240. The maximum potential 2014 pay adjustment of 1.2%, or $2,100, was denied by P.L. 113-46. The maximum potential January 2015 Member pay adjustment was 1.6%, or $2,800. President Obama proposed a 1.0% increase in the base pay of GS employees, which would automatically have limited any Member pay adjustment to 1.0%. P.L. 113-235 contained a provision prohibiting any Member pay adjustment. The maximum potential January 2016 pay adjustment of 1.7%, or $3,000, would have been limited to 1.0%, or $1,700, due to the GS base pay increase. Member pay for 2016 was frozen by P.L. 114-113. The maximum potential January 2017 pay adjustment of 1.6%, or $2,800, would have been limited to 1.0%, or $1,700, due to the GS base pay increase. Member pay for 2017 was frozen by P.L. 114-254. The maximum potential January 2018 pay adjustment of 1.8%, or $3,100, was automatically limited to 1.4%, or $2,400, before being frozen by P.L. 115-141. The maximum potential January 2019 pay adjustment of 2.3%, or $4,000, was automatically limited to 1.4%, or $2,400, before being frozen at the 2009 level by P.L. 115-244. The maximum potential January 2020 pay adjustment is 2.6%, or $4,500. If Members of Congress had received every adjustment prescribed by the ECI formula since 1992, and the 2 U.S.C. §4501 limitation regarding the percentage base pay increase for GS employees remained unchanged, the 2019 salary would be $210,900. When adjusted for inflation, Member salaries have decreased 15% since the last pay adjustment in 2009. Both the automatic annual adjustments and funding for Members' salaries are provided pursuant to other laws (2 U.S.C. §4501)—not the annual appropriations bills—and a provision prohibiting a scheduled adjustment could be included in any bill, or introduced as a separate bill.", "document_type": "crs"}
{"report": "Persistent annual budget deficits and a large and increasing federal debt have generated discussions over the long-term sustainability of current budget projections. Federal budget deficits declined from 9.8% of gross domestic product (GDP) in FY2009 to 3.8% of GDP in FY2018. However, recent estimates forecast that the government will run deficits (i.e., federal expenditures will exceed revenues) in every year through FY2029. Federal debt totaled $21.516 trillion at the end of FY2018, and as a percentage of GDP (106.0%) was at its highest value since FY1947; $15.761 trillion of that debt (or 77.8% of GDP) was held by the public. This report explores distinctions in the concept and composition of deficits and debt and explains how they interact with economic conditions and other aspects of fiscal policy. A deficit describes one of the three possible outcomes for the federal budget. The federal government incurs a deficit (also known as a net deficit) when its total outgoing payments (outlays) exceed the total money it collects (revenues). If instead federal revenues are greater than outlays, then the federal government generates a surplus. A balanced budget describes the case where federal receipts equal federal expenditures. The size of a deficit or surplus is equal to the difference between the levels of spending and receipts. Deficits are measured over the course of a defined period of time—in the case of the federal government, a fiscal year. Federal budget outcomes incorporate both \"on-budget\" activities, which represent the majority of federal taxes and spending, and \"off-budget\" government activities, which include revenues and outlays from Social Security trust funds and the Postal Service. For federal credit programs, the subsidy cost of government activities is included in deficit and surplus calculations. The federal budget is constructed in a manner that provides for lower net deficits in more robust economic conditions, attributable to higher revenues (from taxes on increased output) and, to a smaller degree, lower spending levels (from reduced demand for programs like unemployment insurance). The federal government incurred a deficit of $779 billion in FY2018, equivalent to 3.8% of GDP. From FY1969 to FY2018, the average net deficit equaled 2.9% of annual GDP ($587 billion in 2018 dollars). Over the FY1969-FY2018 period, the government generated a surplus on five occasions: in FY1969 and in each year from FY1998 through FY2001. In all other years, the federal government incurred a net deficit. The federal debt is the money that the government owes to its creditors, which include private citizens, institutions, foreign governments, and other parts of the federal government. Debt measurements may be taken at any time and represent the accumulation of all previous government borrowing activity. Federal debt increases when there are net budget deficits, outflows made for federal credit programs (net of the subsidy costs already included in deficit calculations), and increases in intragovernmental borrowing. Federal credit programs include loans issued for college tuition payments, small business programs, and other activities the government may seek to support. In those cases, debt levels increase as additional loans are granted and decrease as money for such programs is repaid. Intragovernmental debt is generated when trust funds, revolving funds, and special funds receive money from tax payments, fees, or other revenue sources that is not immediately needed to make payments. In those cases the surpluses are used to finance other government activities, and Government Account Series (GAS) securities are issued to the trust fund. GAS securities may then be redeemed when trust fund expenditures exceed revenue levels. Intragovernmental debt may be thought of as money that one part of the government owes another part. The Department of the Treasury is responsible for managing federal debt. The primary objective of Treasury's debt management strategy is to fulfill the government's borrowing needs at the lowest cost over time. Treasury finances federal borrowing activities by issuing government-backed securities that generate interest payments for their owners. Treasury securities are typically sold to the public through an auction process, and have maturity periods (the length of time that they are held before repayment) of anywhere from several weeks to 30 years. Federal debt may be divided into two major categories: (1) debt held by the public, which is the sum of accrued net deficits and outstanding money from federal credit programs; and (2) intragovernmental debt. As of February 28, 2019, the amount of federal debt outstanding was $22.087 trillion, with 73.6% of that debt held by the public and 26.4% held as intragovernmental debt. Table 1 summarizes the composition of debt held by the public and intragovernmental debt. Individuals, firms, the Federal Reserve, state and local governments, and foreign governments are all eligible to purchase publicly held debt. Debt may be acquired directly through the auction process, from which most publicly held debt is initially sold, or on the secondary market if the debt is deemed \"marketable\" or eligible for resale. The total amount of publicly held debt outstanding was $16.251 trillion as of February 28, 2019. The majority of publicly held debt is marketable, and includes all Treasury Notes, Bonds, Bills, Treasury Inflation Protected Securities (TIPS), and Floating Rate Notes (FRNs) issued by Treasury. Nonmarketable debt held by the public is composed of U.S. Savings Bonds, State and Local Government Securities (SLGS), and other, smaller issues. As of February 28, 2019, 96.8% of publicly held issues, or $15.741 trillion, was marketable. Intragovernmental debt is debt where the federal government is both the creditor and the borrower. Intragovernmental debt issuances are almost exclusively nonmarketable, as marketable debt comprised only $0.029 trillion (0.5%) of the $5.836 trillion in total intragovernmental debt on February 28, 2019. The majority of nonmarketable intragovernmental debt was held by trust funds devoted to Social Security and military and federal worker retirement. Marketable intragovernmental debt is composed primarily of debt held by the Federal Financing Bank, which is a government corporation created to reduce the cost of federal borrowing. Since intragovernmental debt is held only in government accounts, such debt cannot be accessed by institutions outside the federal government. Conversely, the bonds that finance publicly held debt activity may compete for assets in private and financial markets. Public debt issues may be a particularly attractive collateral option on the secondary market if the federal government is perceived as a safe credit risk. Federal deficit and debt outcomes are interdependent; budget deficits increase federal debt levels, which in turn increase future net deficits because of the need to service higher interest payments on the nation's debt. The nature of the relationship between deficits and debt varies depending on the type of debt considered. This section describes the relationship between federal deficits and debt. Budget deficits are the principal contributor to debt held by the public. To finance budget deficits, Treasury sells debt instruments. The value of those debt holdings (which include interest payments) represents the vast majority of publicly held debt. From FY1969 to FY2018, annual nominal budget deficits and surpluses of the federal government summed to $13.745 trillion; over the same period, total debt held by the public increased by $15.473 trillion. Publicly held debt has been the biggest determinant of historical changes in the total stock of federal debt. Figure 1 shows changes in federal debt levels from FY1969 through FY2018. Though there has been a gradual increase in intragovernmental debt in recent decades, the decline in real debt following World War II and subsequent increase in debt levels beginning in the late 1970s were each caused primarily by similar changes in the stock of publicly held debt over those time periods. Present borrowing outcomes affect future budgeting outcomes. Publicly held debt contributes directly to federal deficits through interest payments on debt issuances. Interest payments are made to both debt held by the public and intragovernmental debt. As the government serves as buyer and seller of intragovernmental debt, interest payments on those holdings do not affect the federal budget deficit. However, interest payments made on publicly held debt represent new federal spending, and are recorded in the budget as outlays when payments are made. The government incurs interest costs when it opts to finance spending through borrowing rather than through increased revenues. Net interest payments represent the amount paid from the government to debt holders in a given time period , less interest payments received for federal loan programs . For investors, purchasing a debt issuance represents both a loss of liquidity relative to currency holdings (money paid for the debt holding can be used immediately, while the debt issuance may only be resold on the secondary market or held until the date of maturity) and an opportunity cost (the money used for the purchase could have been spent on other items, invested elsewhere, or saved). Debt holders are compensated for those costs by receiving interest payments from Treasury on their issuances. From FY1969 to FY2018 net interest payments averaged 2.0% of annual GDP, equivalent to about $407 billion annually in 2018 dollars. High interest rates and increasing debt levels caused the net interest burden to peak in the 1980s and 1990s. Recent net interest payments have been lower than their long-term averages; in FY2018, net interest payments were $325 billion, or 1.6% of GDP. FY2018 payments were the product of real low interest rates and relatively high levels of real debt. Unless the federal debt is reduced, net interest payments will likely increase if interest rates shift toward their long-term averages. In its most recent forecast, the Congressional Budget Office (CBO) projects that real net interest payments will increase to 3.0% of GDP by FY2029. One way to measure the effect of debt on future deficits is to examine the relationship between total federal deficits and the primary deficit , which measures the balance of revenues and expenditures with net interest payments excluded. Figure 2 shows total and primary budget outcomes from FY1969 through FY2018. The gap between the total and primary outcomes in a given year is explained by net interest payments. The primary deficit averaged 0.9% of GDP from FY1969 to FY2018, as compared to the average total budget deficit of 2.9% of GDP recorded over the same time period. While the federal government recorded a budget surplus five times from FY1969 to FY2018, in nine other years it registered a primary surplus, most recently in 2007. This section provides a primer of how government deficits and debt are integrated into the larger economy in both the short and long run, and provides some ways to measure such interactions. The nature of interaction between fiscal outcomes and economic performance may have ramifications for how Congr ess wishes to distribute its activity both within a recession or expansion and for what fiscal targets it wishes to set in the long run. In the short run, when economic output is assumed to be fixed, output is a function of both private and public activity. Equation (1), also known as the national accounting identity , shows the different choices that can be made with all economic output in a given time period. It states that output ( Y ) in a given economy is equal to the sum of private consumption ( C ), private investment ( I ), net government investment ( G ), and net exports ( X ). Put another way, equation (1) asserts that output is the sum of private consumption, private saving, and net government activity. The net government deficit, or G , is shown in equation (2) as spending ( S ) less revenues ( R ). Absent a monetary policy intervention by the Federal Reserve (which makes monetary decisions independently), G must be obtained through government borrowing, or debt. (1) Y = C + I + G + X (2) G = S - R Since the levels of output ( Y ) and consumption ( C ) in a given time period are fixed, increases in government investment ( G ) will reduce private investment ( I ), net exports ( X ), or some combination thereof. Government borrowing increases that reduce private investment are commonly categorized as \"crowding out,\" and represent a shift from private investment to public investment. Increased government borrowing that reduces net exports (generated by borrowing from foreign sources) represents an expansion of the short-term money supply, as money is being brought into the economy now at the expense of the future stock of money (as foreign borrowing is repaid). Such a fiscal expansion increases the quantity of money demanded, which drives up interest rates (or cost of borrowing). The federal government may choose to generate short-run budget deficits for a few reasons. Deficit financing, or payment for federal government activity at least partly through debt increases, increases the total level of spending in the economy. Most economists believe that the implementation of deficit financing can be used to generate a short-term stimulus effect, either for a particular industry or for the entire economy. In this view, increases in expenditures and tax reductions can be used to generate employment opportunities and consumer spending and reduce the intensity of stagnant economic periods. Deficit financing is a less effective countercyclical strategy when it leads to \"crowding out,\" or when government financing merely replaces private-sector funding instead of inducing new economic activity, and is more likely to occur in periods of robust economic growth. Deficit reduction when the economy is operating near or at full potential can help prevent the economy from overheating and avoid \"crowding out\" of private investment, which could have positive implications for intergenerational equity and long-term growth. Deficit financing may also be used as part of a structurally balanced budget strategy, which alters government tax and spending levels to smooth the effect of business cycles. Smoothing budgetary changes may reduce the economic shocks deficits induce among businesses and households. Governments may also use federal deficits or surpluses to spread the payment burden of long-term projects across generations. This sort of intergenerational redistribution is one justification for the creation of long-run trust funds, such as those devoted to Social Security. In the long run, when economic output is affected by supply-side choices, the effect of government borrowing on economic growth depends on how amounts borrowed are used relative to what would have otherwise been done with those savings (i.e., an increase in private investment or net exports) if such borrowing had not taken place. As shown in equation (3), economic growth, or the change ( Δ ) in output ( Y ), is a function ( f ) of the stock of labor ( L , or the number of people working and hours that they work), the stock of capital ( K , which includes equipment, machines, and all other nonlabor factors), and the knowledge and technological capability (A) that determines the productivity of labor and capital. (3) ΔY= f(ΔL, ΔK, ΔA) Assuming that the stock of labor is insensitive to fiscal policy choices, the effect of federal debt on economic growth depends on how the additional government activity affects the capital stock and productivity of labor and capital relative to what would have happened had amounts borrowed been invested privately or increased net exports. If that government activity (debt-financed spending) contributes to those factors more than the economic activity it replaced, than that debt financing will have had a positive effect on future economic growth (or potential). Alternatively, if such activity contributes less to those factors than the replaced private investment and net exports, it will reduce long-term economic potential. Changes in federal debt levels shift economic resources across time periods, a process sometimes described as an intertemporal transfer . Federal debt issuances represent an increase in the current level of federal resources and a decrease in future federal resources. Net interest payments, or the total interest payments made by the federal government (to creditors) on borrowed money less interest payments received (from individuals and institutions borrowing from the federal government or debtors), may be thought of as the total expense associated with past federal borrowing. Those resources cannot be allocated to other government services. Total borrowing is constrained by the money available for investment (savings in dollars) at a given point in time. This limit means that the amount of federal debt relative to output cannot increase indefinitely. The trajectory of federal debt is therefore thought to be unsustainable if debt taken as a share of output (measured in this report with gross domestic product, or GDP) rises continuously in long-term projections. This happens when growth in the stock of debt outpaces total economic growth, which can cause a variety of adverse outcomes, including reduced output, increased unemployment, higher inflation, higher private interest rates, and currency devaluation. Recent international experiences speak to the complexity of borrowing capacity. Both Greece and Japan experienced rapid growth in government debt in the past decade. Organization for Economic Co-operation and Development (OECD) data on general government debt (including municipal government debt) indicate that Greek debt rose from 115% of GDP in 2006 to 189% of GDP in 2017, while Japanese debt rose from 180% of GDP to 234% of GDP over the same time period. A loss in market confidence in Greek debt led to a severe recession, with GDP contracting by 9 percentage points in 2011 and long-term interest rates reaching 22% in 2012. Japanese borrowing was viewed to be more sustainable despite being higher, with relatively flat GDP levels and long-term interest rates close to zero in recent years. Among 31 OECD countries, the United States had the fifth-largest level of general government debt (136% of GDP, including debt from state and local governments) in 2017, the most recent year for which full data are available. The deficit's cyclical pattern can be attributed in part to \"automatic stabilizers,\" or spending programs and tax provisions that cause the budget deficit to move in tandem with the business cycle without any change in law. More robust economic periods generally produce lower net deficits (or higher net surpluses), due to increases in receipts (from greater tax revenues) and reduced expenditures (from decreased demand for public assistance). The opposite effect occurs during recessions: as incomes and employment fall, the existing structure of the federal tax system automatically collects less revenue, and spending on mandatory income security programs, such as unemployment insurance, automatically rises. CBO estimates that the share of the deficit attributable to automatic stabilizers fell from 1.9% of GDP in FY2010 to 0.0% of GDP in FY2018. In other words, the budget deficit recorded in FY2018 (3.8% of GDP) is nearly identical to the \"structural deficit\" that economists would expect with automatic stabilizer effects removed from the budget. Figure 3 shows the real economic growth (as a percentage on the horizontal axis) and the federal budget outcome (as a percentage of GDP, on the vertical axis) in each fiscal year from FY1969 through FY2018. The positive correlation between economic outcomes and budget outcomes is picked up by the general direction of the trend line from the lower left part of the graph to the upper right area. All else equal, higher levels of nominal GDP make a given amount of debt easier to repay by eroding its real value. For example, the highest measurement of debt since 1940 occurred in 1946, when the federal debt level was 118.9% of GDP, or $271 billion in (nominal) FY1946 dollars. In contrast, $271 billion was equivalent to only 1.3% of GDP in FY2018. Increases in nominal GDP may be caused by productivity increases, economic inflation—which measures the purchasing power of currency—or a combination of each factor. Though changes in economic growth rates typically have a relatively small effect on real debt levels in the short run, long-run changes in economic productivity can have a significant effect on the trajectory and sustainability of the debt burden. For instance, from FY2009 through FY2018, federal deficits averaged 5.3% of GDP, and real economic growth averaged 1.76% per year over the same period; those factors combined to increase federal publicly held debt from 39% of GDP at the beginning of FY2008 to 78% of GDP at the end of FY2018. Though real deficits were actually larger from FY1943 to FY1952 (averaging 7.3% of GDP), robust real economic growth over that period (3.6% per year) meant that the change in publicly held debt in that decade was smaller (45% of GDP to 60% to GDP) than in the FY2009-FY2018 period. The FY2018 real deficit equaled 3.8% of GDP, which was higher than the average federal deficit from FY1969 to FY2018 (2.9% of GDP). Both real deficits and real debt are projected to increase over the course of the 10-year budget window, which runs through FY2029. In its latest economic forecast, the CBO projected that the total burden of U.S. debt held by the public would steadily increase over the course of the budget window, from 77.8% of GDP in FY2018 to 92.7% of GDP in FY2029. Table 2 provides the most recent forecasts for publicly held debt issued by the CBO. Each forecast projects an increase in publicly held debt over the next 5, 10, and 25 fiscal years. The CBO baseline assumes that current law continues as scheduled. Specifically, the CBO baseline assumes that discretionary budget authority from FY2020 through FY2021 will be restricted by the caps created by the Budget Control Act (BCA; P.L. 112-25 ), as amended, and that certain tax policy changes enacted in the 2017 tax revision ( P.L. 115-97 ) and in other laws will expire as scheduled under current law. CBO also provides alternative projections where such assumptions are revised. If discretionary spending increases with inflation after FY2019, instead of proceeding in accordance with the limits instituted by the BCA, and if tax reductions in the 2017 tax revision are extended, CBO projects that federal debt held by the public would increase to 97% of GDP by FY2029. CBO also produces a long-term baseline that uses a number of additional assumptions to extend its standard baseline an additional 20 years (thus the 2018 long-term baseline runs through FY2049). The current long-term forecast projects that publicly held federal debt will equal 147% of GDP in FY2049, which would exceed the highest stock of federal debt experienced in the FY1940-FY2018 period (106% of GDP in FY1946). CBO projects increases in both interest rates and publicly held federal debt over the next 10 years, leading to a significant rise in U.S. net interest payments. As noted above, CBO projects that publicly held federal debt will rise from 77.8% of GDP in FY2018 to 92.7% of GDP in FY2029, and projects that the average interest rate on three-month Treasury bills will rise from 1.66% in FY2017 to 2.81% in FY2029. Those factors combine to generate federal net interest payments of 3.0% of GDP in FY2029 under the CBO projections, which would be just under the highest amount paid from FY1940 through FY2017 (3.2% of GDP in FY1991). It may be useful to compare the recent U.S. federal borrowing trajectory with the practices of international governments, because future interest rate and fiscal space considerations will both be affected by the behavior of other major actors. Table 3 includes the general government debt history and projections for G-7 countries and the European Area from FY2000 to FY2023. The worldwide impact of the Great Recession led to increased general gross debt levels for all G-7 countries in 2013 relative to their 2000-2009 average. As shown in Table 3 , U.S. debt levels rose by 40% of GDP over that time period, which was larger than increases in Canada and the European Area but smaller than rises in the United Kingdom and Japan. General debt levels largely stabilized from 2013 to 2018, with decreases in Germany and the European Area and small increases in other countries. Future projections of debt included in Table 3 are characterized by a divergence between U.S. general gross debt levels and those in other G-7 countries. The IMF forecast projects that U.S. general gross debt will rise from 106% to 117% from 2018 to 2023, while those same projections forecast a decrease in debt owed by all other G-7 governments and in the European Area. Addressing the potential consequences of those projections will likely involve policy adjustments that reduce future budget deficits, either through tax increases, reductions in spending, or a combination of the two. Under CBO's extended baseline, maintaining the debt-to-GDP ratio at today's level (78%) in FY2048 would require an immediate and permanent cut in noninterest spending, increase in revenues, or some combination of the two in the amount of 1.9% of GDP (or about $400 billion in FY2018 alone) in each year. Maintaining this debt-to-GDP ratio beyond FY2047 would require additional deficit reduction. If policymakers wanted to lower future debt levels relative to today, the annual spending reductions or revenue increases would have to be larger. For example, in order to bring debt as a percentage of GDP in FY2048 down to its historical average over the past 50 years (40% of GDP), spending reductions or revenue increases or some combination of the two would need to generate net savings of roughly 3.0% of GDP (or $630 billion in FY2018 alone) in each year.", "summary": "The federal government incurs a budget deficit when its total outgoing payments (outlays) exceed the total money it collects (revenues). If instead federal revenues are greater than outlays, then the federal government generates a surplus. Deficits are measured over the course of a defined period of time—in the case of the federal government, a fiscal year. Debt measurements may be taken at any point in time, and represent the accumulation of all previous government borrowing activity from private citizens, institutions, foreign governments, and other parts of the federal government. Federal debt increases when there are net budget deficits and outflows made for federal credit programs, which combine to represent debt held by the public. Federal debt also rises through increases in intragovernmental debt, which is generated by trust fund surpluses that are used to finance other government activity. Federal debt declines when there are budget surpluses, a reduction in the federal credit portfolio, or decreases in intragovernmental borrowing. Federal deficit and debt outcomes are interdependent: budget deficits increase federal debt levels, which in turn increase future net deficits. The nature of the relationship between deficits and debt varies depending on the type of debt considered. Budget deficits are the principal contributor to debt held by the public. The effect of deficits on intragovernmental debt is less certain than their contribution to debt held by the public. All else equal, increases in net trust fund deficits will lead to increases in total budget deficits but decreases in intragovernmental debt. Interest payments made on publicly held debt instruments contribute directly to federal deficits. Holders of federal debt are compensated by receiving interest payments from Treasury. Intragovernmental debt does not contribute to future deficits. Persistent budget deficits and a large and increasing federal debt have generated discussions over the long-term sustainability of current budget projections. Federal budget deficits declined from 9.8% of gross domestic product (GDP) in FY2009 to 2.4% of GDP in FY2015, and subsequently increased to 3.8% of GDP in FY2018. Recent estimates forecast that the government will run deficits in every year through FY2029. Federal debt totaled $21.516 trillion at the end of FY2018, which as a percentage of GDP (106.0%) was its highest value since FY1947; of that debt, $15.761 trillion (or 77.8% of GDP) was held by the public. Over time, persistent budget deficits can hamper economic growth. Deficits represent an intertemporal transfer from later generations to the current one, as money borrowed now will eventually require repayment with interest. The effect of deficit financing on economic output depends on the nature of the government activity being financed and the private activity that would have otherwise taken place. Federal debt is constrained by the willingness of investors to finance borrowing. While the amount of federal borrowing investors will finance may be affected by economic growth and other factors, real federal debt cannot increase indefinitely. There are no signs that federal borrowing capacity will be exhausted in the short term. However, the consequences of exhausted fiscal space may be worth considering when examining the medium- and long-term trajectory of the federal budget.", "document_type": "crs"}
{"report": "The majority of Latin American and Caribbean countries are functional democracies, but institutional weaknesses and widespread public corruption in many of these countries have undermined effective governance and sparked protest and demands for greater transparency. From a U.S. perspective, widespread corruption in Latin America is a potential threat to regional security, has a symbiotic relationship with violent crime, and can be a stimulus for migration. This report examines how anti-corruption strategies in U.S. policy and legislation initially evolved from a desire to level the playing field for corporations working in the developing world. At first, U.S. corporations were regulated so they could not bribe or extort to win contracts, and then the focus expanded to helping build more effective institutions and the rule of law in developing countries to ensure more fair, predictable, and transparent systems. The report examines how corruption contributes to wasting public monies, distorting electoral outcomes, and reinforcing criminal structures. Although the fight against corruption is a global effort, this report focuses more closely on U.S. interests in fighting corruption in the region, and how U.S. policy and assistance programs have developed to address that goal. Contemporary anti-corruption efforts in Brazil, Mexico, and Central America are examined as case studies. The report closes with considerations for Congress in conducting its oversight role over U.S. funded anti-corruption efforts in the region and pursuing the policy objective of broadening the rule of law and encouraging good government. In the wake of numerous scandals, particularly regarding the multi-country scandal involving the Odebrecht corporation, corruption has become a searing, top-level concern in many Latin American nations, with implications for U.S. policy. In past decades, public rejection of corruption has risen and then crested and fallen back, sometimes to a tacit toleration of bribery and other corruption as the way of politics. Some critics maintain that corruption is so entrenched that it is now endemic in the region and forms the primary path to political power. The number of grand-scale scandals exposed in recent years in the region, such as payoff schemes involving high court justices and top-level officials, has led some voters to conclude that all parties and politicians are corrupt, resulting in presidents and vice presidents being pushed from office and traditional political parties being viewed as corrupt and illegitimate. Some analysts maintain that chronic corruption diminishes support for democracy and stokes cynicism about the integrity of politics. However, 2018 saw prominent anti-corruption candidates and campaigns win elections across the region, with populist and anti-establishment fervor marking campaigns in Mexico, Brazil, and several other countries. In these contests, leading candidates abandoned traditional parties sullied by corruption allegations. For instance, in Mexico, the decades-long dominance of the Institutional Revolutionary Party (PRI) —displaced in 2000, but resurgent in 2012—was again swept out in Mexico's July 2018 national elections by the National Regeneration Party, or MORENA, founded four years earlier. Throughout the region, winning candidates of the left and the right—as in Mexico and Brazil—embraced anti-establishment platforms that appealed to voter disillusionment with corrupt elites. In its global perceptions survey, Transparency International (TI) has found that a majority of Latin Americans tend to believe pervasive public corruption exists and is expanding its reach. The sense of widespread corruption may be sparking a civil society rejection of the status quo and a deeper commitment to combat corrupt behavior and demand accountability (see textbox). Grand corruption involving top political leaders has touched every nearly every partof Latin America, generating a wave of anti-corruption activism. In the past, such demonstrations have proven ephemeral, quickly fading as the systemic nature of the problem has left citizens resigned to the status quo. These anti-corruption campaigns may prove more enduring, however, as civil society organizations are attempting to build on their preliminary successes by pushing for institutional reforms to enhance transparency and accountability throughout the public sector. Regarding the relationship of perceptions of corruption as an accurate indicator of actual acts of corruption or prevalence of those acts, TI has in the past married the two. In the 20 Latin American nations polled in the Corruption Perceptions Index (CPI) for 2016, TI said that respondents identified politicians, political parties, and police as the most corrupt sectors of their societies. The most frequently cited offenses were graft, influence peddling, extortion, bribe solicitation, money laundering, and political finance violations (for 2016 and 2017 CPI results for Latin America and the Caribbean, see Figure 1 ). One of the 2016 surveys used to establish TI's country rankings asked whether respondents had paid a bribe for a public service over the past 12 months. Nearly one-third confirmed they had paid a bribe to receive a basic public service, such as health care or education. Another index, called the World Justice Project's Rule of Law Index (WJP Rule of Law Index), reports that corruption levels vary significantly across the region, although corruption appears to be both widespread and endemic. The Rule of Law Index identifies several indicators for a regional ranking related to governance. At the region's apex and exhibiting the strongest rule of law sit Chile, Costa Rica, and, at the top, Uruguay. The region's least successful on the 2019 Rule of Law Index are Nicaragua, Honduras, Bolivia, and, at the bottom, Venezuela. However, on the indicator of \"absence of corruption\" alone, the region's worst with regard to the metrics of bribery, improper influence by public or private interests, and misappropriation of public funds, were: Peru, Venezuela, Mexico, and at the bottom, Bolivia. The World Justice Project asserts that full, functioning democracies evolve slowly and anti-corruption programs able to influence and transform the status quo may take years to show results. Corruption patterns vary considerably from country to country. Transparency International and other regional surveys, such as the Latinobarómeter, have found the divergence between countries is more pronounced in Latin America and the Caribbean than in other regions. Some commentators argue that lower-level corruption is simpler to identify and root out. More widespread and higher levels of corruption are more difficult to contain and have powerful forces protecting them. For instance, compromised justice systems, apparent in recent scandals in Mexico, Colombia, and Peru, result in impunity for powerful defendants and inhibit the number of successfully completed prosecutions. This may result in diminished belief in democratic legitimacy and the rule of law. The confidence or expectation of fairness is replaced with mistrust when bribes are routinely demanded by the police; there is ample evidence of political kickback schemes; and evidence such as recordings shows the suborning of court officials and judges. In the Western Hemisphere, populist leaders including Nicaragua's Daniel Ortega and Venezuela's Nicolás Maduro have resorted to tactics that undermine democratic institutions like the free press and an independent judiciary, which, when functioning, can help prevent corruption. In Peru, President Pedro Pablo Kuczynski stepped down in March 2018 to avoid impeachment for allegedly taking Odebrecht bribes right before he was to host a Summit of the Americas focused on eradicating corruption. In Mexico and Brazil in 2018, and in El Salvador early in 2019, presidential candidates campaigned successfully against traditional political parties deemed corrupt. In 2018, Mexico's long-dominant Institutional Revolutionary Party (PRI), was dogged by corruption allegations and performed poorly in congressional and presidential elections. Political parties are crucial to a competitive democracy, but when they are no longer accountable they lose their primary function of placing a check on the consolidation and abuse of power. Disillusioned and cynical voters who have regularly experienced breaches by their governments, leaders or political parties, can lose trust that is not easily restored. The effort needed to rebuild a country's democratic institutions, such as a functioning justice system, takes patience and political will that is hard to sustain over time. Anti-corruption efforts can face towering political opposition and significant undercurrents that undercut prosecution and future transparency. The economic costs related to systemic corruption are well researched. In 2018, the costs to Mexico of corruption were estimated to be as high as 5% of the country's GDP and in Peru and Colombia as much as 10%. Many analysts contend corruption also exacerbates inequality (a persistent feature of several Latin American and Caribbean societies) which increases instability. Many observers have noted the unusual level of activism on anti-corruption reaching nearly every corner of the region in recent years and wondered whether it will endure and produce lasting reform. They question whether this current resistance to an existing culture of impunity can be prevented from falling into anti-democratic reaction, or, once again, slipping into resignation. In the realm of foreign assistance and especially investment, U.S. competitors, including China and to a lesser extent Russia, are using investment in the region, such as infrastructure or energy development projects, not to strengthen recipient governments, but to further their own economic interests. These projects can be beset by hidden costs and have unknown beneficiaries, while they lack public oversight. Greater transparency on bidding and public finance will help give the general public greater capacity to assess them. U.S. programs to strengthen the rule of law and increase governmental transparency may directly benefit recipient nations in Latin America and the Caribbean by extending the institutional foundation for sustained economic development. U.S. foreign assistance programs to bolster rule of law, encourage good governance, and eliminate bribery, extortion, and graft have been common in Latin America for about three decades. Anti-corruption programming sponsored by the United States and major international financial institutions grew out of ferment in the 1970s, when the long-time practice of businesses and foreign corporations paying bribes to gain contracts in developing countries was exposed (see textbox on Select International Efforts to Combat Corruption). Controlling bribery and payments to foreign governments by businesses became the focus, for the first time, of U.S. legislative reform, the Foreign Corrupt Practices Act (FCPA), in 1977. The law ( P.L. 95-213 , Title 1) prohibits U.S. corporate bribery of foreign officials. However, this change initially raised concern that the new policy could disadvantage U.S. corporations in comparison to firms from other countries. In 1996, the Organization of American States (OAS) adopted the Inter-American Convention Against Corruption (IACAC), the world's first anti-corruption treaty. The IACAC provides OAS member states with a set of legal tools and an institutional framework to prevent, detect, punish, and eradicate corruption. The convention covers criminalization of corruption, international cooperation, asset recovery, and considers preventive roles for business, civil society and nongovernmental organizations (NGOs) in curtailing corruption. All 34 active OAS member states are party to the IACAC, including the United States, which ratified the convention in 2000 (Treaty Doc. 105-39). The Convention requires signatory states to penalize active and passive corruption, transnational corruption, and improper use of confidential information. However, few high-level public office holders in the region have been brought to justice, especially those who are financially and politically powerful. Signatories' implementation of the IACAC treaty is largely voluntary and relies on sustained political will. (See Appendix B for background on the implementation of IACAC). In 1997, the Organization for Economic Cooperation and Development (OECD), with strong support from the United States, adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Entering into force in 1999 and binding only upon OECD member nations, the Convention on Bribery has actually had a large impact in Latin America, even though only Mexico and Chile at the time were OECD members. Subsequently, Argentina, Brazil, Colombia, and Costa Rica adopted the measures and other countries changed their laws to begin to conform to the requirements of the 1996 OAS and 1997 OECD conventions. Some of the innovations from the anti-corruption conventions allowed legislatures in Latin America to sidestep the philosophical question of the capacity of a legal entity (e.g., a corporation) to have a will or intent to commit a crime. With corporations legally capable of committing a crime (such as bribery of local or national officials) then culpability could be assessed. Another method to encourage prevention of corruption was adoption of a \"safe harbor\" defense for companies, providing them a motive to reform their practices through greater internal corruption safeguards and monitoring. If a business implemented staunch policies to prevent bribery—such as designating an officer to monitor operations for potential corruption who reports twice a year to the top officer or CEO—then the business could avoid criminal liability, even if individuals inside the corporation were caught in bribery or graft. This policy rewards self-monitoring by offering a buffer from liability as an inducement for self-policing and prevention. Since the early 1990s, the OAS has convened the Summit of the Americas to address common agenda items in the Western Hemisphere. Both President Barack Obama and President George W. Bush supported initiatives and programs aimed at increasing transparency and accountability in governance to help achieve the overarching U.S. international policy goal of fostering good governance in the region. The Summit convened in April 2018, in Lima, Peru, attended by Vice President Pence rather than President Trump, had the theme of \"Democratic Governance against Corruption,\" echoing a long-term concern with public corruption eroding support for democracy. In the past five years, as U.S. enforcement of the FCPA has increased, it has been used to expand the reach of U.S. extraterritorial jurisdiction, as evidenced in support to the Odebrecht case. Several countries are considering a similar statute, or FCPA-like laws to prohibit corporate bribery, including nations as diverse as India, Thailand, and France. In addition, the U.S. Federal Bureau of Investigation opened a unit on international corruption in Miami, Florida, in February 2019, with a focus on violations of the Foreign Corrupt Practices Act. Anti-corruption has emerged gradually on the international agenda over recent decades. Factors contributing to its growing prominence as an international policy concern include domestic pressure in many countries to curb political corruption, business risks associated with corruption exposure in a globalized economy, and the undermining impact of official corruption on economic development and foreign aid. U.S. advocacy also appears to have played a significant role internationally, although approaches to combating corruption vary widely by country. International standards can provide guidelines and a framework for domestic reform and, critically, mobilize international pressure to enact and implement anti-corruption policies. Due to widespread links between corruption and natural resource exploitation, one prominent area for broadening accountability is in the use of natural resources. Many countries endowed with minerals and resources in demand by more developed economies have sought to put in place voluntary transparency measures and public monitoring of natural resource revenue and expenditure flows to ensure the assets gained will go for public purposes. Transparency measures to prevent resource diversion through corruption and mismanagement have included enactment of broader accountability-focused legal reforms, such as mandatory state budget transparency and accountability measures, freedom of information laws, and the formalization of citizens' participatory rights in state decisionmaking and regulation of extractive industries. For many countries in Latin America and the Caribbean, extractive resources provide a critical source of government revenue. The textbox below identifies some of the important global anti-corruption efforts, such as the Extractive Industries Transparency Initiative, which some Latin American countries have adopted. Although protests decrying corruption in public office have occurred since 2015 in Brazil, Mexico, and in many countries of Central America, the events of 2018 suggest that corruption prosecutions and revelations during the year significantly increased. As a result, numerous anti-corruption candidates and campaigns played central roles during the 2018 elections, and protests against corrupt leaders erupted in countries throughout the region. (For more details, see the timeline in Appendix C ). Brazil . In Brazil, a sprawling corruption investigation underway since 2014 known as Lavo Jato (Car Wash, in English) implicated much of the political class. Brazil's multinational construction firm Odebrecht was one of the firms involved, and, in a landmark plea agreement, admitted to paying millions in bribes to politicians and office holders throughout Latin America. Odebrecht executives, in an agreement with authorities in the United States, Brazil, and Switzerland, admitted to paying some $788 million in bribes to secure public contracts worth more than $3.3 billion. The fallout extended beyond Brazil to countries such as Colombia, the Dominican Republic, Ecuador, Panama, and Peru. Both inside Brazil and in other countries, successful prosecution of cases connected to the Odebrecht plea deal received support from the U.S. Department of Justice (see Brazil case study below). In January 2019, Transparency International endorsed a comprehensive package of 70 reforms developed in conjunction with numerous public and private partners inside Brazil to set the country on a path to restore legitimacy to its political institutions. According to Transparency: The anti-corruption package includes proposals for institutional reforms, draft bills, constitutional amendments, draft resolutions and other rules to control corruption and tackle its systemic roots. Some of those proposals were incorporated into draft laws that Minister of Justice and Public Security Sérgio Moro presented to the Brazilian Congress in February 2019. Moro presided over the Car Wash investigation as a federal judge prior to being offered the Ministry of Justice and Public Security by President-elect Bolsonaro. In Brazil, former President Michel Temer (2016-2018), who was protected from investigation while in office, was arrested on charges of bribery and money laundering in March 2019. According to the Brazilian police, during his vice presidency in 2014 Temer took more than $2 million from Odebrecht to benefit himself and his Brazilian Democratic Movement Party. In addition, an array of former high-level government officials in Brazil, such as Aécio Neves, a former senator, governor, and 2014 presidential candidate for the Brazilian Social Democracy Party, face investigations for taking Odebrecht bribes for favorable consideration of legislation preferred by Odebrecht. Former President Luiz Inácio Lula da Silva (2003-2010) has been sentenced to two 12-year prison terms for steering contracts to Odebrecht and another Brazilian construction firm, OAS, in exchange for renovated properties. Venezuela . In 2018, an exodus of desperate Venezuelans continued to leave their country, which was under the sway of an authoritarian government that had asserted its power through human rights abuses and significant corruption from drug trafficking and other crimes. A May 2018 report by Insight Crime identified more than 120 high-level Venezuelan officials who had engaged in criminal activity. In Venezuela, Odebrecht reportedly provided bribes of more than $98 million to President Nicolás Maduro and his government to gain priority treatment. When President Maduro ousted his Attorney General Luisa Ortega, she reported the President solicited a $50 million bribe directly from the Brazilian construction firm. An Odebrecht executive based in Venezuela maintains that the company only paid Maduro $35 million, and other reports state that Odebrecht also sent contributions to Maduro's political opposition. Ecuador . In late 2017, Ecuador's vice president, Jorge Glás, was convicted of taking bribes exceeding $13 million from the Odebrecht firm when he served under former President Rafael Correa (2007-2017). He was removed from office, convicted, and given a seven-year prison sentence, which he is currently serving. Former President Correa, who currently resides in Europe with his Belgian wife, is also wanted by the current government of President Lenín Moreno for arranging the kidnapping of an Ecuadorian official who was a political opponent in 2012. Other charges against Correa include economic mismanagement during his 10-year tenure that involves his ties to Odebrecht. Colombia . High-level corruption networks have been exposed since March 2018, when Colombia's Supreme Court sentenced the country's top anti-corruption official, Luis Gustavo Moreno, to four years in prison for corruption. An investigation by Colombia's Attorney General's office found a corruption network pervading the national justice system involving high court justices receiving bribes from influential defendants. In late 2018, Colombia's current Attorney General, Néstor Humberto Martínez, was linked to Odebrecht bribes when he served as legal counsel to the Aval Group, a New York Stock Exchange-listed conglomerate run by the Colombia's wealthiest individual. In May 2019, Martínez announced his resignation but for an unrelated matter. Odebrecht executives admitted in their guilty plea that they had provided $32.5 million in bribes to facilitate the building of Colombia's Ruta del Sol highway and other infrastructure projects. A Colombian senator, who had accepted some bribes, cooperated in the prosecution to further expose the scheme. It ensnared a number of important Colombian officials in the previous administrations of President Juan Manuel Santos (2010-2018) and President Álvaro Uribe (2002-2010). A former governor, Sergio Fajardo, and a left-centrist presidential candidate, dedicated his 2018 presidential campaign to combating corruption, which became the impetus for a popular referendum promoting anti-corruption, promoted by the candidate who ran as Fajardo's vice president. Peru . The Odebrecht campaign-finance and bribery scandals upset political relations nowhere more than in Peru. Several high-profile political figures continue to be under investigation. Four former presidents of Peru are linked to the Odebrecht scandal and other corruption charges. President Pedro Pablo Kuczynski (2016-2018) stepped down in March 2018 to avoid impeachment, but may continue to be held in preventive detention for up to three years. The Public Ministry opened an investigation into Kuczynski's alleged involvement in buying votes to avoid impeachment as well as his ties to bribery by the Brazilian construction firm. Former president Ollanta Humala (2011-2016) and first lady Nadine Heredia, while released from pretrial detention, are under investigation for money laundering and corruption charges. Peru's government has sought to extradite former president Alejandro Toledo (2001-2006) from the United States for allegedly accepting bribes during his administration. In April 2019, former Peruvian president Alan Garcia (who served from 1985 to 1990 and 2006 to 2011) shot himself during his arrest on Odebrecht-related charges, and died shortly afterwards. His private secretary and other officials in his administrations are being closely investigated for allegedly taking bribes from Odebrecht. In October 2018, a judge ordered former presidential candidate and congressional leader Keiko Fujimori to pretrial detention for allegedly laundering illegal campaign contributions from Odebrecht. In his government's fiscal year 2019 budget, Peruvian President Vizcarra expanded funding to the judiciary by 11% to develop additional mechanisms to combat corruption. Referenda in the Andes. Voters in three Andean nations considered anti-corruption measures in public referenda held in 2018: in Ecuador in February, Colombia in August, and Peru in December. The Ecuador referendum approved all seven measures on the ballot, some of which tackled public corruption. The Colombian referendum, in which more than 11 million voted, was disqualified for not reaching its high voter threshold requirements (it was also the fourth national vote held in 2018). Although requirements for the referendum were not met, the seven measures on Colombia's ballot received high approval levels. New President Iván Duque supported most of the measures, and pledged to introduce some of them in legislation during his four-year term, although none of the measures that the Administration introduced in the first four months of 2019 passed the Colombian Congress. When Peru's President Martín Vizcarra came to office after president Kuczynski resigned in March 2018 he committed to fighting public corruption. The December 10, 2018, referendum in Peru that Vizcarra steered to a vote resulted in a ban on reelection of Members of Congress, a reform of the body that appoints members of the judiciary, and measures to regulate how political parties are financed. The only measure that failed was a controversial proposal to reestablish a bicameral Congress. In 2018, anti-corruption institutions in Guatemala and Honduras faced inhospitable governments opposed to their mission once charges got too close to either themselves, family members, or close political colleagues. The U.N.'s International Commission against Impunity in Guatemala (CICIG), established in 2006, was embraced by President Jimmy Morales when he took office in 2016, but when CICIG began to scrutinize more closely allegations of financing irregularities in his electoral campaign, Morales's government became openly hostile to extending CICIG's mandate. In early January 2019, President Morales abruptly ended CICIG's mandate, prematurely disregarding the stated will of the nation's top court and instigating a constitutional standoff (see case study). In 2016, the Organization of American States worked with the Honduran government to establish a similar organization, the Mission to Support the Fight against Corruption and Impunity in Honduras (MACCIH). The Honduran government has also sought to undermine MACCIH over the past year. Dominican Republic. In May 2017, the attorney general issued indictments for 14 people, including a cabinet minister (who then resigned) and two senators, on charges of receiving $92 million in bribes from Odebrecht in exchange for construction contracts. The government maintains that the investigation is ongoing, but none of those accused were sentenced to prison, and in June 2018, the attorney general dropped charges against seven of the 14 defendants. Others linked with the Odebrecht scandal include a senator and former public works minister, both of whom belong to the dominant Dominican Liberation Party. Reportedly, resolution of their cases could tarnish the party's image in the run-up to the 2020 national elections. El Salvador . Former president of El Salvador Mauricio Funes (2009-2014) was found guilty of massive illicit enrichment during his time in office. After fleeing to Nicaragua, he was granted asylum by President Daniel Ortega in 2018. Former Salvadoran president Anthony Saca (2004-2009), Funes's predecessor from a rightwing party, pled guilty to similar charges and was convicted and sentenced to 10 years in prison in El Salvador in September 2018; former first lady Ana Ligia de Saca, announced in April 2019 she has reached a plea deal to avoid prison for her role in laundering $25 million in public money. Panama. In Panama, several high-profile politicians have faced charges of illicit financial gains. For example, U.S. court documents contend that Odebrecht reportedly paid more than $59 million in bribe payments in Panama to secure public works contracts between 2010 and 2014. In August 2017, Odebrecht agreed to pay the Panamanian government $220 million in fines. Former President Ricardo Martinelli (2009-2014) was extradited to Panama from the United States for charges of using public funds to spy on political opponents during his administration. In late 2018, two of Martinelli's sons were arrested in the United States for illegal actions, including accusations of taking Odebrecht bribes. Top members of the Martinelli government are also being investigated for receiving bribes from Odebrecht (e.g., former Minister of the Economy Frank de Lima). Mexico . In 2018, Mexican President Andrés Manuel López Obrador campaigned successfully for office by attacking corruption and promising to remove corrupt elites. However, how the President will implement his campaign pledges remains unclear. López Obrador was inaugurated in December 2018, and his new Attorney General announced in May 2019 that he planned to prioritize Odebrecht. The former president of the state oil company, Petróleos Mexicanos (Pemex), Emilio Lozoya Austin, has been accused of a scheme involving ghost companies and bribery by Odebrecht provided to Lozoya to help fund electoral campaigns of the historically dominant Institutional Revolutionary Party (PRI). In mid-February 2019, López Obrador maintained that the cases against Mexican officials begun under his predecessor, President Enrique Peña Nieto of the PRI party, would have to be re-launched. In Mexico, corruption investigations of 20 former state governors, most from the PRI, diminished the party's legacy. Following the end of the term of PRI President Enrique Peña Nieto in late 2018, the historic party reportedly is considering changing its name due to its poor showing in legislative and presidential elections. Among the PRI party governors under investigation or in jail in Mexico are former Veracruz Governor Javier Duarte (2010-2016) who was arrested in Guatemala and extradited to Mexico in August 2017. Following his trial in Mexico, he received a nine-year sentence in September 2018. Others are Governor Roberto Borge of Quintana Roo (2010-2016) who is wanted on charges of corruption and abuse of public office; Governor Tomás Yarrington of Tamaulipas state along the U.S.-Mexico border with Texas, who was arrested in Italy and extradited to the United States for U.S. charges of money laundering and other corruption; and former PRI governor Cesar Duarte of the border state of Chihuahua, who fled Mexico and is an international fugitive wanted on a Red Notice by the International Criminal Police Organization, Interpol. Santiago Narra, the former head of the Specialized Prosecutor's Office for Attention to Electoral Crimes (FEPADE), claims in a book published in January 2019 that the Peña Nieto administration was rife with corruption. According to Narra, governors made common practice of using intimidation and bribery to quash or co-opt dissent. Southern Cone Argentina . In Argentina during 2018 a large scandal surfaced called \"the Notebooks.\" The name comes from notebooks belonging to a former government chauffeur, who allegedly recorded cash payments he ferried to the residence of Presidents Néstor Kirchner and Cristina Fernandez de Kirchner, who governed Argentina in succession from 2003 to 2015. The kickbacks to the Kirchners were allegedly in exchange for public works contracts approved between 2008 and 2015. The chauffeur's notebooks revealed an alleged bribery scheme totaling $160 million. In August 2018, federal authorities in Argentina arrested 12 former government officials and business executives on corruption-related charges. Fernandez de Kirchner has immunity from arrest as a sitting senator, but she can be prosecuted on the charges.  Other investigations into public works bribes directly tied to Odebrecht include investigations of Julio de Vido and Daniel Cameron, respectively the minister of planning under both Néstor Kirchner and Fernandez de Kirchner, and the energy secretary in the Fernandez Administration. De Vido allegedly received bribes for road construction tenders in the President's home state of Santa Cruz and other projects. Energy Minister Cameron was allegedly involved in a gas pipeline expansion project that involved taking bribes in cooperation with the Brazilian construction mega-firm. In September 2018, Cristina Fernández de Kirchner, who may be positioning herself to run again for president, was indicted on bribery charges alleging her involvement in taking some $69 million in bribes. Paraguay. Historically Paraguay has been plagued by corruption emerging from a chaotic political history. In the 20 th century, the landlocked country experienced a 35-year military dictatorship under General Alfredo Stroessner. Paraguay's legacy of dictatorship included one-party rule that endured until 2008. President Mario Benito Abdo Benítez, elected in April 2018, was a grandson of a general in the Stroessner cabinet, although he pledged to work toward greater transparency and not return to the days of nepotism and centralized rule. A grassroots protest movement known as \" escraches , \" started by a disenchanted criminal lawyer in August 2018, has led to some prominent politicians, reportedly from parties across the political spectrum, choosing to resign rather than be humiliated. Youthful supporters say that the focus of these protests is to reduce impunity from the historically weak and unresponsive judicial institutions of the country that require identifying and shaming the accused to push the cases forward. Protest leaders maintain long-unaddressed cases have been taken up and prosecuted with unprecedented speed. However, critics question the ethics of using visible protests at homes of officials (whose homes are picketed and pelted with raw eggs), when these officials are only alleged to be corrupt or to have committed crimes, and some protests have turned violent. On April 24, 2019, Paraguay's Comptroller General resigned as it became evident that the Paraguayan senate planned to vote in favor of his impeachment on charges of corruption. The vote to impeach him was reportedly supported by President Abdo Benítez. The World Economic Forum (WEF) has identified the inability of weak national institutions to cope with insecurity and prevent and punish corruption as a barrier to investment. According to the WEF's 2017-2018 Global Competitiveness Index , the largest economies in Latin America (Argentina, Brazil, Colombia, and Mexico) ranked below 100 out of 137 countries in the performance of their institutions. WEF recognizes Brazil for its efforts to use its judiciary to clean up government and punish bribery. On the other hand, El Salvador has received the lowest levels of foreign direct investment (FDI) in Central America over the past decade, with extensive insecurity and corruption cited as the primary reasons. Corruption constricts funds that should be available for legitimate socio-economic challenges, such as controlling violence and crime. On the other hand, criminal influence allowed to run rampant engenders instability that negatively affects economic growth. The worst-off victims of corruption tend to be the most marginal and therefore the most vulnerable. Some analysts maintain that private sector responses to corruption are often reactive rather than proactive and that in some countries businesses are part of the problem. Other analysts maintain that business leaders can be catalysts for demanding clean, non-corrupt governance and can serve as strong advocates for laws to prohibit bribery and extortion to end the distorted impact of corruption on competition. Private sector leaders have supported anti-bribery legislation in several of the more established Latin American democracies. In Mexico, the major business association for small and medium-sized businesses, COPARMEX, is advocating for full implementation of the National Anti-Corruption System, which began under the Peña Nieto government in 2017 (described in the Mexico case study). The business association supports establishing an independent prosecutor's office, one of the key features of the system. On the other hand, business leaders from Guatemala and Honduras have in many cases sought to weaken anti-corruption efforts and controls. The Inter-American Development Bank (IDB) report on anti-corruption, transparency and integrity in Latin America and the Caribbean called for an integrated approach for systemic change to reduce corruption. The report, published in 2018, describes earlier interventions encouraged by multilateral and regional institutions as \"uneven and partial.\" The report points out that the use of corruption indicators by the main rating agencies (Standard & Poor's, Moody's, and Fitch) are critically important for investment and loans available to a recipient country. Typically, politicians receive payoffs in exchange for favors to aid their parties or campaigns that ultimately may distort public-works bidding (some for multi-billion dollar infrastructure projects). Levels of outside direct investment are also influenced by perceptions of public corruption. For instance, Chile has had one of the lowest levels of perceived corruption in Latin America, and was quick to correct a perception of increasing corruption when its record was tarnished by scandals between 2015 and 2017. Chile's reputation has helped it achieve both high growth and significant foreign direct investment. Many scholars report that corruption affects productivity and lowers competitiveness; when it is systemic, corruption can reduce GDP. Public-sector corruption, widespread in many Latin American societies, may handicap Latin American growth, skew incentives, and erode public services. The active involvement of corrupt elites, whether from the private or public sector, may allow criminal networks to remain deeply embedded. Public-sector corruption can be a contributor to migration, since corruption that fosters criminality and corrodes the rule of law may be a factor in Central Americans leaving their countries of origin to migrate to the United States. In addition to economic factors, the growing reach of violent crime into their communities has been cited as an impetus to emigrate. Corruption hinders government efforts to address the factors that cause people to migrate, and undermines public confidence in state institutions. Many governments in Latin America, particularly those in the Central America-Mexico drug transit zone through which 90% of U.S.-bound cocaine passes, suffer from weak and overwhelmed criminal justice systems. Weak criminal justice systems are unable to investigate and punish crimes and they are easily penetrated by bribery or intimidation. As a result, all manner of criminal behavior may increase, in a self-reinforcing cycle, due to lack of trust in the justice system, failure to invest in fixing the system to bring about improvements, and greater criminal impunity or non-prosecution of crimes. This continues to erode confidence in judicial authorities who are perceived to be \"captured\" by criminal networks. Lack of confidence in the justice system can affect the morale of criminal-justice personnel and further increase their susceptibility to corruption. This negative-feedback loop has contributed to Latin America having the highest homicide rate of any region in the world outside a war zone. The linkage between violence and corruption has led Latin Americans to protest the dire situation that they face in their communities, and has been an impetus for their support of anti-corruption campaigns and anti-crime candidates in recent elections. Venezuela, Guatemala, and Honduras, ranked in TI's 2018 Corruption Perceptions Index as highly corrupt by respondents, also registered some of the region's highest homicide rates. Correspondingly, these countries have some of the most-elevated emigration rates in the region, as families facing criminal threats leave rather than rely on security forces that they perceive as corrupt for protection. In February 2019, the drug trafficking kingpin Joaquín \"El Chapo\" Guzmán who led Mexico's notorious Sinaloa cartel for decades, was convicted in New York on multiple counts of operating a continuing criminal enterprise. The charges included trafficking more than 440,000 pounds of cocaine into the United States, murder, acts of torture, kidnapping, and money laundering. According to the U.S. Drug Enforcement Administration (DEA), the Sinaloa Cartel has the most extensive reach of any transnational crime group into U.S. cities. In some of the trial's most incendiary testimony, U.S. government witnesses testified that former senior officials in the Mexican government took bribes from Guzmán; one witness alleged that former president Peña Nieto (2012-2016) received a $100 million bribe from Guzmán. The conclusion of the Guzmán trial may do little to diminish the role of corruption generated by drug trafficking, which is entrenched and secured by the enormous profits of the drug trade. U.S.-supported Mexican efforts to train judicial personnel and judges, establish rule of law programming, and professionalize police and military have had limited sustainable impact, (see Mexico case study below). Most crimes still go unreported because the public believe there is ongoing police collaboration with the criminal networks and/or public officials acquiesce to criminal acts. Successful prosecutions are rare, with 8% of every 100 homicide cases resolved, due to poor investigations, corrupt policing, and other inefficiencies. The effort to build more independence and protect the judiciary from undue political influence in Mexico has focused on establishing a separate attorney general's office. As noted in the textbox, in early 2019 Mexico's Senate appointed Alejandro Gertz Manero to serve a nine-year term in a newly defined attorney general position. The appointment has raised concerns that the desired independence may be compromised, as the appointee has a long political association with Mexican President López Obrador. How the President will direct and respond to the newly independent office remains to be seen. Extortion by criminal networks—or by public officials—on an ongoing basis can be significant and corrosive. State resources or public funds to counter violence are diminished if funds are drained by officials stealing public monies. Extortion by criminal networks or officials can reduce funding for essential services like education and healthcare or public works, while artificially raising the cost to citizens for such services. When contracts for major public infrastructure, such as dams, large transportation, or water-supply projects are awarded to the highest briber instead of the lowest priced, qualified bidder, consequences can be deadly. In Peru, in 2017, one criminal group, dubbed by authorities the Imposters of Reconstruction, set up a fake government agency to assist in letting contracts designed to recover from floods and landslides caused by El Niño. The fake agency bilked some 50 to 100 contractors to pay bribes to expedite their bids in the bogus El Niño recovery. Oversight of public procurement and transparency requirements may be insufficient to prevent office holders and politicians from using extortion and nepotism to their benefit. Furthermore, government regulatory systems are often thwarted through bribery. The mine-waste dam collapse in January 2019 in Minais Gerais, Brazil, resulted in some 300 deaths. Prosecutors are considering charges of murder and violation of mine safety requirements for the Vale SA employees involved and the German company that signed off on dam inspections for filing false reports. The regulatory body for mines in Brazil had recently approved the dam as low risk, and the inspectors are alleged to have known that the dam was unsafe and at risk of collapse. The 2017 U.S. National Security Strategy maintains that corruption of weak governments, especially those cowed by criminals and terrorists, poses a serious national security challenge. It asserts that reducing violence should be a priority in countries that are U.S. trade and security partners because extreme violence is economically and socially disruptive and creates instability. The range of corrupt practices is broad and solutions to control public corruption are quite diverse as the case studies in this report indicate. Police and justice systems are open to corruption when morale and integrity are low and external pressures high, which may allow abusive prosecutorial practices to prevail, such as the use of torture or efforts to destroy or fabricate evidence. Weak rule of law subverts justice systems, and diminishes political systems and participatory democracy. For several years, U.S. foreign assistance has been provided to fight corruption and enhance the rule of law in Latin America (including judicial training), to improve law-enforcement techniques to conduct investigations, make arrests and properly handle evidence, and enhance oversight of civil society for better accountability. U.S. assistance has supported whistleblower protections and other measures to allow private citizens to be more effective watchdogs of public officials, disrupt abuses, and prevent corruption from taking hold again. Identifying U.S. partners as tainted by corruption can increase tensions in bilateral relations. As a result, U.S. assistance programs are often identified as efforts to increase the efficiency or integrity of \"good government,\" increase \"transparency,\" and inculcate the rule of law, rather than to combat egregious violations or known violators. Furthermore, anti-establishment and populist governing styles of leaders in Latin America may define their policy ends as anti-corruption, but this may mask other political goals that are more anti-institutional rather than committed to strengthening the nation's institutions. One example of the U.S. approach is the new proposed trade agreement signed by the United States, Canada, and Mexico in late 2018. U.S. trade talks with Mexico and Canada to replace the North Trade Agreement (NAFTA) resulted in the United States-Mexico-Canada Agreement, (USMCA), which includes a chapter on anti-corruption. The main purpose of the chapter is to \"prevent and combat bribery and corruption in international trade and investment.\" The accomplishment of dedicating a full chapter to reinforce the trilateral commitment to combat corruption is significant, but success would be achieved as the provisions are translated into action. This is especially true in Mexico, where significant gaps remain in implementing anti-corruption regulation. Some scholars have identified the various anti-corruption requirements in the chapter as some of the most comprehensive in any trade treaty, though largely drawn from the proposed Trans-Pacific Partnership agreement from which the Trump Administration withdrew in 2017. The USCMA chapter includes measures to combat corruption, which are legislative, administrative, and promotional. Relevant assistance provided by the U.S. government to combat corruption includes assistance and efforts by U.S. State Department, the United States Agency for International Development (USAID), the Department of Justice, the Department of the Treasury, and the Millennium Challenge Corporation (MCC), outlined below. The U.S. government's primary manager of foreign assistance is USAID and the closely linked U.S. State Department. The two organizations are the main funders of programming for increasing transparency, rule of law, and good government, and often use NGOs to implement their programs. State and USAID program implementers range from associations to local, U.S. embassy, and national civil society groups. Anti-corruption activities are integrated in the strategy of each USAID country mission and embassy, and therefore may influence programs beyond democracy and good governance to include such areas as health, education, economic growth, and promotion of environmental and natural resources management. In 1994, USAID opened a new Office of Transition Initiatives (OTI) to provide rapid response programming to help support peace and democracy. OTI has assisted NGOs to combat antidemocratic forces and fight corruption or bolster weak institutions by providing more agile U.S. government responses on the ground. Nevertheless, the OTI concentrates on conflict settings rather than governance reform, which often require long-term interventions. The State Department's International Narcotics and Law Enforcement bureau advances the rule of law and human rights by supporting criminal justice institutions in a country, promoting accountability, and helping to strengthen and reinforce the rule of law. In the last 30 years, USAID and State Department have funded programs to reinforce institutions that tackle corruption and cultivate a \"culture of transparency\" and integrity. Rule of Law (ROL) programming and judicial and prosecutorial training were part of USAID's 2005 strategy focused on overcoming challenges posed by corruption and targeting agency resources to meet greatest need with more precision. In 2012, with the intention to integrate anti-corruption goals throughout the agency's development portfolio, USAID established the Center of Excellence on Democracy, Human Rights, and Governance. According to one analysis, worldwide programming on combating corruption has totaled roughly 330 projects over seven years (2007 to 2013). About 30 were short-term projects including evaluations, while 289 were long-term country projects. Some funds for anti-corruption and justice programs abroad involve transfers from the State Department to the U.S. Department of Justice (DOJ), such as the International Criminal Investigative Training Assistance Program (ICITAP), which is a law enforcement development agency. It works with foreign governments to develop professional and transparent law enforcement institutions that can fend off corruption, lower the threat of transnational crime, counter terrorism, and protect human rights. The 17 ICITAP field offices include three based in Mexico, Panama, and Colombia. The Office of Overseas Prosecutorial Assistance and Training (OPDAT) carries out capacity building in the justice sector, largely by assigning experienced U.S. prosecutors to U.S. Embassies, who provide peer advice and training to host country prosecutors, judges, and other justice sector personnel. They also provide advice on legislation and criminal enforcement policy. Another avenue of anticorruption assistance to the region is the U.S. Millennium Challenge Corporation, which provides positive incentives for good governance and transparency in its inventory system. The MCC requires countries to pass a \"control of corruption\" threshold in order to unlock funding such as assistance known as a compact, which on average provides a recipient country with $300 million of U.S. foreign assistance. Created by Congress in 2004, the MCC was established as an independent assistance agency to award funds to developing nations based on a competitive selection process. A country's performance record is the primary (but not the only) basis for awarding funds; and these criteria include a record of clean and transparent governance when judged in comparison with other nations with similar socio-economic characteristics. Since revising its approach in its 2016 strategy NEXT: A Strategy for MCC's Future , MCC's awards and threshold programs seek to address and promote reforms that support sustainable anti-corruption practices. In the past decade, the region has received several threshold programs (Honduras, Paraguay, and Peru) and two large compacts for El Salvador. The program for Honduras, which the MCC launched in 2005, ended prematurely because of a 2009 coup. Over the past ten years, MCC has awarded roughly $800 million of assistance to countries in the Western Hemisphere in compacts and threshold programs. U.S. Treasury Department programs, including sanctions, listings, and asset seizures in cooperation with police also address corruption. The Office of Foreign Assets Control (OFAC) in Treasury administers and enforces economic sanctions that target foreign entities and persons for their activities related to terrorism, narcotics trafficking, and other threats to the national security, foreign policy, or the economy of the United States. Two of OFAC's sanctions programs address drug trafficking while other programs target terrorist funding. Additionally, 22 individuals and 27 companies from Venezuela are designated as \"specially designated narcotics traffickers\" under the Kingpin Act. In 2015, President Obama issued E.O. 13692 to target those who have undermined democratic processes or institutions, including acts of public corruption, violence or human rights abuses by senior Venezuelan officials. The Trump Administration has imposed sanctions on 74 Venezuelan officials pursuant to E.O. 13692 (in addition to 7 officials sanctioned by President Obama). These officials include President Maduro and his wife, Vice President Delcy Rodriguez, United Socialist Party of Venezuela (PSUV) First Vice President Diosdado Cabello, Supreme Court members, and other high level military officials, state governors, and other officials. In early 2019, the United States applied strong sanctions on Venezuelan oil and the Trump Administration has issued executive orders restricting the government and the ability of Venezuela's state oil company, Petróleos de Venezuela, S.A. (PdVSA), to access the U.S. financial system ( E.O. 13808 ), barring U.S. purchases of Venezuela's new digital currency ( E.O. 13827 ), and barring U.S. purchases of Venezuelan debt ( E.O. 13835 ). On November 1, 2018, President Trump signed E.O. 13850 , creating a framework to sanction those who operate in Venezuela's gold sector or are deemed complicit in corrupt transactions involving the government. On January 28, pursuant to E.O. 13850 , the Administration imposed sanctions on PdVSA to prevent Maduro and his government from benefitting from Venezuela's oil revenue. The 116th Congress has paid close attention to the turmoil in Venezuela and is likely to continue to consider the steps to influence the Venezuelan government and a return to democratic rule. The humanitarian crisis in the country has caused an exodus of Venezuelans—reportedly the largest outflow of refugees and migrants ever in the Western Hemisphere—which has tested the capacity of receiving countries to respond. For the United States, Europe, and others, the conduit of narcotics through Venezuela has had immediate ill effects. The Maduro government, that is widely considered to be the region's most corrupt, has caused suffering within and beyond Venezuela's borders. The effectiveness of sanctions on members of the Maduro government and on the vital oil sector, along with consequences for a destitute and undernourished population, are still to be seen. Should a transition to democracy occur in Venezuela, some observers speculate that what may be revealed would be multi-jurisdictional and massive corruption. It would far exceed the scope of what the State Department identified in a mid-April 2019 fact sheet. The following examples highlight the various ways in which the U.S. government has supported recent anti-corruption efforts in Latin America. The selected cases—Brazil, Mexico, Guatemala, and Honduras—examine the extent to which U.S. support has contributed to driving anti-corruption efforts in widely divergent legal and historical contexts. The United States in these illustrative cases has sought to work closely with established authorities and civil society actors to combat impunity, increase transparency, and dislodge corruption. In Brazil, the U.S. Justice Department cooperated with Brazilian prosecutors on a complex international bribery and corruption case. In Mexico, the United States has supported rule of law reforms to increase judicial independence, reduce impunity, and protect journalists in the context of a strong central government. In Central America, with its historically weak governments, the multilateral institutions and outside experts worked alongside the justice systems in Guatemala and Honduras to expose corruption and criminal control. Over the past five years, Brazilian authorities have carried out a series of overlapping investigations that have uncovered systemic corruption. As noted above, operation Lava Jato (\"Car Wash\"), launched in March 2014, has implicated high-level politicians from across the political spectrum, as well as many of the country's most prominent business executives. The initial investigation revealed that political appointees at the state-controlled oil company, Petróleo Braileiro S.A. (Petrobras), colluded with construction firms to fix contract bidding processes. The firms then provided kickbacks equivalent to 1-2% of the value of their inflated contracts to Petrobras officials and their politician sponsors in the ruling coalition. Subsequent investigations have discovered similar practices throughout the public sector, with businesses providing bribes and illegal campaign donations in exchange for contracts or other favorable government treatment. To date, Brazilian prosecutors have charged more than 900 individuals and secured more than 200 convictions for crimes including corruption, money laundering, and abuse of the international financial system. Most of the politicians implicated by the scandals have yet to be convicted, however, since the Supreme Court, which is charged with trying high-ranking public officials, faces a significant case backlog. Brazilian officials and outside analysts have identified several legal and institutional reforms that have facilitated these anti-corruption efforts. The country's 1988 constitution grants autonomy to the office of the attorney general ( Ministério Público Federal , MPF), and, due to institutional norms that have since developed, the practice has become entrenched of the president selecting the attorney general from a list of candidates created by federal prosecutors. This operational independence has enabled the MPF to pursue politically sensitive cases against high-ranking officials. Investigations also have improved as the MPF and the federal police have begun to work together more closely, using new investigative tools. A 2013 law to combat organized crime, for example, enhanced prosecutors' discretion to reduce or drop criminal charges for cooperative defendants. Brazilian prosecutors have approved at least 218 such plea bargain agreements to advance the various investigations stemming from the Car Wash probe. Brazil's anticorruption efforts also have benefitted from extensive cooperation with the United States and other international partners. Prosecutors affiliated with Operation Car Wash have issued 269 formal requests for legal assistance to 45 countries, and have received 279 requests for legal assistance from 36 countries. Formal cooperation between the United States and Brazil is governed by a bilateral treaty on mutual legal assistance ( Treaty Doc. 105-42 )—ratified with the advice and consent of the U.S. Senate in 1998—as well as several multilateral agreements. The bilateral treaty empowers both countries to request assistance from one another, including taking the testimony or statements of persons; providing documents, records, and items; locating or identifying persons or items; serving documents; transferring persons in custody for testimony or other purposes; executing requests for searches or seizures; assisting in proceedings related to immobilization and forfeiture of assets, restitution, and collection of fines; and any other form of assistance not prohibited by law. U.S. and Brazilian authorities also engage in extensive informal cooperation. This allows them to share information more quickly, but evidence obtained this way may not be admissible in court. The U.S. Department of Justice and the MPF have cooperated formally and informally to investigate and prosecute several major corruption cases related to the Car Wash probe. To date, those efforts have resulted in coordinated resolutions with seven multinational corporations for violations of the U.S. Foreign Corrupt Practices Act (15 U.S.C. §78dd–1) and various Brazilian laws. Collectively, the companies (Braskem, Embraer, Keppel Offshore and Marine, Odebrecht, Petrobras, Rolls Royce, and SBM Offshore) have agreed to pay more than $1.9 billion in penalties to the United States and nearly $4.4 billion to Brazil. The future of Operation Car Wash and the country's broader anti-corruption efforts will depend on the actions of Brazil's new government. President Jair Bolsonaro, who began a four-year term in January 2019, relentlessly attacked the corruption of the country's political class during his campaign. Upon taking office, he appointed Sérgio Moro, the federal judge who had presided over the Car Wash investigation, as his minister of justice and public security. Moro reportedly intends to use his position to push for concrete political and judicial reforms that could help consolidate the country's recent anti-corruption progress. However, Moro's decision to join the right-wing Bolsonaro Administration could jeopardize popular support for the Car Wash investigation by lending credence to those who argue that he politicized the probe to damage the electoral prospects of the left-leaning Workers Party. The Bolsonaro Administration's initial anti-corruption proposals already have run into resistance in the Brazilian Congress where a third of federal legislators, including the leaders of both houses, are under investigation for corruption or other crimes. Official corruption is a serious problem at all levels of government in Mexico; 84% of Mexicans identify corruption as among the most pressing challenge facing the country. In Mexico, the costs of corruption reportedly reach as much as 5% of gross domestic product each year. The United States has supported programs to address corruption and impunity in Mexico since at least 2000, but lack of political will in Mexico to address these problems has arguably limited their impact. U.S. efforts have included programs aimed at supporting the country's transition to an accusatorial justice system, establishing a National Anti-corruption System (NAS), bolstering transparency and oversight of government programs, and supporting investigative journalism. Transition to Accusatorial Justice System By the mid-2000s, most Mexican legal experts had concluded that reforming Mexico's corrupt and inefficient criminal justice system was crucial for combating criminality and strengthening the rule of law. In 2008, Mexico implemented constitutional reforms mandating that by 2016, trial procedures at the federal and state level had to move from a closed-door process based on written arguments presented to a judge to an adversarial public trial system with oral arguments and the presumption of innocence. These changes aimed to create a new criminal justice system that would be less prone to corruption, more transparent, and more impartial. Federal changes followed advances made by early adopters of the new system, which included states such as Chihuahua. The United States has been supporting judicial reform efforts in Mexican states since the late 1990s, with assistance accelerating since the implementation of the Mérida Initiative in FY2008. U.S. assistance (1) has helped the federal and state governments adopt legislative frameworks to underpin the reform process, (2) provided in-depth training for justice sector operators on their roles in the system, and (3) built support for the reforms in Mexican civil society. Mexico technically met the June 2016 deadline for adopting the new system, with states that have received assistance from USAID showing, on average, better results than others do. Nevertheless, serious problems in implementation have occurred at a time when public opinion is turning against the system and government funding for ongoing training and technical support for the system has diminished. National Anticorruption System and Related Efforts to Improve Transparency In 2015, the Mexican congress approved and President Peña Nieto signed constitutional reforms creating a system to prevent and punish corruption following intense and sustained lobbying by civil society and the private sector. In July 2016, Mexico's congress approved secondary legislation to implement what became known as the National Anti-corruption System (NAS). The legislation reflected several of the proposals that were pushed by Mexican civil society groups and supported by USAID. The reforms gave the anticorruption system investigative and prosecutorial powers and a civilian board of directors, increased administrative and criminal penalties for corruption. and required three declarations (taxes, assets, and conflicts of interest) from public officials and contractors. The system took effect in July 2017. USAID has provided support to Mexican government (federal and state) anti-corruption and public administration entities, as well as efforts organized by private sector and civil society groups. Support to the Mexican government aims to help it comply with the NAS, conduct and publicize audits of government agencies and programs, develop and implement codes of conduct for public officials, and conduct transparent procurement processes. Through partnerships with private sector entities, USAID funds are helping to support research, push for public policy and legislative reforms, and foster investigative journalism. U.S. funds channeled through the World Bank and the U.N. Development Program support civic participation in federal and state-level transparency secretariats. Despite U.S. support and civil society pressure, Mexico's implementation of its NAS has lagged. In December 2017, members of the system's civilian board of directors maintained that the government had been \"thwarting\" its efforts by denying requests for information. It was not until February 2019 that a special prosecutor for corruption cases was appointed, and the 18 judges to hear corruption cases are still to be named. In addition to a lack of personnel at the federal level, many states have not fulfilled all the constitutional requirements for establishing a local anti-corruption system. In the past, President López Obrador has been critical of the NAS or largely ignored it. Yet, López Obrador made fighting corruption a central campaign promise. Since taking office, he has not prioritized NAS implementation, but the new Prosecutor General, Alejandro Gertz Manero, named a special anti-corruption prosecutor in February 2019. López Obrador has also launched a massive effort to combat fuel theft from the state petroleum company, Petróleos Mexicanos (PEMEX) and its pipelines. As part of this effort, he has called for the prosecution of high-level PEMEX officials, whose involvement in oil theft was revealed by investigative journalists. Searching for Safeguards for Investigative Journalism 100 A free and active press is widely viewed as critical to holding governments accountable for their actions, with investigative journalism playing a particularly important role in fostering government transparency and accountability. Over the past decade, at least 74 journalists have been killed in Mexico and many more have been threatened or attacked. According to the U.S.-based Freedom House NGO, officials at all levels of government in Mexico have punished critical journalists by publicly denouncing their work, pushing media owners (who rely on government advertising for revenue) to dismiss them, suing them for libel, or using other tactics to intimidate or threaten them. Criminal groups have also targeted Mexican journalists, particularly those investigating crime and corruption issues. U.S. foreign assistance has sought to help the Mexican government and civil society better protect journalists and reduce impunity in cases of crimes committed against them. USAID helped Mexico draft the 2012 legislation that established a federal protection mechanism. The State Department also initiated a high-level human rights dialogue with Mexico that includes a focus on the issue of protecting journalists. USAID has provided at least $6.6 million to support freedom of expression and protection for journalists in Mexico, and it plans to invest at least another $4.2 million through September 2019. Perhaps partially because of international pressure, the Mexican government has reported progress in resolving some of the 12 cases of journalists killed in 2017. Although some observers are skeptical of this reported progress, others remain hopeful that Mexico will take decisive action to investigate and prosecute unsolved murders and to prevent future crimes against journalists. In 2018, totals for the number of journalists and broadcasters slain vary depending on the source and criteria, according to the Justice in Mexico program at the University of San Diego. In the Justice in Mexico database, which counts Mexican journalists and media workers murdered during the year (regardless of investigated connections to their work as reporters), the total number for 2018 was 16, demonstrating that the problem continues. As part of its broader support for anti-corruption efforts in Central America, the U.S. government has provided extensive diplomatic and financial support to two innovative international institutions. The International Commission Against Impunity in Guatemala (CICIG), backed by the U.N., has recommended legal reforms and worked alongside Guatemalan institutions to dismantle a series of corruption networks. As a result of CICIG's success, civil society groups pushed for a similar institution in Honduras, leading to the establishment of the OAS-backed Mission to Support the Fight Against Corruption and Impunity in Honduras. The Guatemalan government invited the U.N. to establish CICIG to help it combat a \"parallel state\" of criminal gangs, business elites, politicians, and security services which was undermining the elected government. An independent, international entity, CICIG's mandate is to support, strengthen and assist Guatemalan state institutions in investigating, prosecuting, and dismantling illegal groups and clandestine structures responsible for organized crime, human rights violations and other crimes, and to propose effective legal reforms. The United States and other external donors provide CICIG's funding. CICIG works directly with the Guatemalan Public Ministry to strengthen rule of law in Guatemala. The Ministry, headed by the Attorney General, is responsible for public prosecution and law enforcement. A January 2019 CICIG statement reports that the commission has supported the Public Ministry in more than 100 cases, including against former President Otto Pérez Molina and Vice President Roxana Baldetti, both of whom subsequently resigned. It also has promoted more than 34 legal reforms to strengthen transparency and judicial independence, helped identify over 60 criminal networks, and secured more than 300 convictions. CICIG also builds the capacity of prosecutors, judges, and investigators working on high-profile and corruption-related cases. In its annual report on drug policy, the U.S. State Department highlighted these accomplishments and concerns in March 2019: Guatemala's Attorney General and the UN-backed International Commission Against Impunity in Guatemala (CICIG) have investigated hundreds of government officials suspected of corruption. ...Accomplishments in the broader fight against corruption in 2018 included several high profile corruption cases…Unfortunately, the government's expulsion of CICIG from Guatemala calls into question its commitment to fight entrenched corruption. As anti-corruption efforts have proven successful and investigations have broadened, attacks against CICIG and the judicial system have grown more intense. Tactics of intimidation have included death threats against the attorney general and judges in high-profile anti-corruption cases, and public and anonymous attempts to discredit the head of CICIG, as well as other officials, activists, and their organizations. President Jimmy Morales (2016 to present) established zero tolerance for corruption as a primary pillar of his government's policy approach. President Morales requested the extension of CICIG until 2019, and said that before he left office, he would extend CICIG's term again, until 2021. Since that time, however, President Morales, his brother and son, and members of his inner circle have become targets of investigation. Morales has tried to weaken and now oust CICIG. The President replaced some of his more reformist Cabinet ministers and officials who worked closely with CICIG and the attorney general's office with closer political allies. In August 2018, the newly appointed Attorney General, María Consuelo Porras, along with CICIG, called for President Morales to be stripped of his immunity so that corruption charges against him could be investigated. Although Guatemala's Supreme Court approved the request, it was blocked in the Guatemalan Congress, where almost half of the deputies are under investigation or have legal processes pending against them alleging corruption or other crimes. Morales subsequently said he would not renew CICIG's mandate and barred CICIG Commissioner Ivan Velásquez from reentering the country, in defiance of two Constitutional Court rulings that the President lacked the authority to prevent Velasquez's return. The battle to eradicate criminal networks that have coopted the Guatemalan state has drawn nearly to a standstill since January 24, 2019, when the current Attorney General cancelled the police protection for CICIG commissioners or staff in the country. When the Morales administration announced Guatemala was withdrawing from the CICIG agreement, it gave its staff 24 hours to leave the country. Guatemala's Constitutional Court overruled Morales's decision. The United Nations, European Union, and NGO advocates for government transparency and human rights, criticized Morales's decision to terminate CICIG, and citizens have protested the government's decision and called on Morales to resign. The U.N. maintained that CICIG should continue its work, in compliance with the judicial findings, but removed foreign staff because the government would not guarantee their safety. The Morales Administration subsequently tried to impeach members of Guatemala's Constitutional Court. The United States has supported the International Commission against Impunity in Guatemala (CICIG) since its inception in 2007 as a key element in its Central American strategy. U.S. assistance to CICIG is provided through the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL). There has been broad support for CICIG over the years on a bipartisan basis in Congress and across U.S. Administrations. In March 2018, however, several Members expressed concern about a Russian businessman and his family who had been found guilty of purchasing false passports, but who claimed they were unfairly targeted by CICIG; as a result, a hold on the $6 million in U.S. aid allocated for CICIG was put in place. In July 2018, however, the State Department announced that its examination found no evidence to support the allegation regarding the Russians. Funds have since been released. After President Morales announced in early January 2019 that he was expelling CICIG, the U.S. Embassy in Guatemala issued a statement expressing concern about the future of anti-corruption efforts in the country, but did not mention the President's actions against CICIG. CICIG continued its work in compliance with the judicial finding from abroad, and in February 2019 most staff returned to Guatemala under contingency safety plans. However, Velásquez and 11 investigators whose visas were revoked have not returned. Many observers are concerned that Morales's moves against CICIG are part of a wider effort to protect himself and others from prosecution and that his actions threaten Guatemala's fragile democracy . Guatemalan Human Rights Ombudsman Jordan Rodas said if the government did not comply with the court ruling concerning CICIG being allowed to operate, it would represent a failure to obey the rule of law. Although some Guatemalan institutions have built greater capacity since working with CICIG, many institutions remain vulnerable, and some fear a return to impunity for organized crime and government corruption. Some observers have also raised concern that reducing the activity of CICIG before the June 2019 national elections could facilitate continued financing of politicians by drug cartels and other criminal organizations in Guatemala. U.S. policy in Honduras is guided by the U.S. Strategy for Engagement in Central America, which is intended to promote economic prosperity, strengthen governance, and improve security in the region, and thereby mitigate migration and security threats to the United States. Recognizing that high-level corruption undermines those objectives, the U.S. government has supported a variety of efforts to increase transparency and improve accountability in Honduras. It has provided assistance to improve public financial management systems, strengthen justice-sector institutions, and encourage civil society engagement and oversight. It also has imposed targeted sanctions, such as visa restrictions, on corrupt Honduran officials. Perhaps most importantly, the United States has offered crucial diplomatic and financial support for the Organization of American States (OAS)-backed Mission to Support the Fight Against Corruption and Impunity in Honduras (MACCIH). In 2015, Honduran civil society had carried out a series of mass demonstrations demanding the establishment of an international anti-corruption organization after Honduran authorities discovered that more than $300 million was embezzled from the Honduran Social Security Institute ( Instituto Hondureño de Seguridad Social ) during the administration of President Porfirio Lobo (2010-2014) and some of the stolen funds were used to fund the election campaign of President Juan Orlando Hernández (2014-present). Hernández was reluctant to create a U.N.-backed organization with far-reaching authorities like the CICIG but, facing significant pressure, negotiated a more limited arrangement with the OAS. According to the agreement, signed in January 2016, the MACCIH is intended to support, strengthen, and collaborate with Honduran institutions to prevent, investigate, and punish acts of corruption. The MACCIH initially focused on strengthening Honduras's anticorruption legal framework. It secured congressional approval for new laws to create anticorruption courts with nationwide jurisdiction and to regulate the financing of political campaigns. Since then, however, the Honduran Congress repeatedly delayed and weakened the MACCIH's proposed reforms, hindering the mission's anti-corruption efforts. For example, prior to enactment of the law to establish anticorruption courts with nationwide jurisdiction, the Honduran Congress modified the measure by stripping the new judges of the authority to order asset forfeitures, stipulating that the new judges can hear only cases involving three or more people, and removing certain crimes—including the embezzlement of public funds—from the jurisdiction of the new courts. Similarly, between the approval of the political financing law and its official publication, the law was changed to delay its entry into force and to remove a prohibition on campaign contributions from companies awarded public contracts. Other measures the MACCIH has proposed, such as an \"effective collaboration\" bill to encourage members of criminal networks to cooperate with officials in exchange for reduced sentences, have yet to be enacted. Such plea-bargaining laws have proven crucial to anti-corruption investigations in other countries, such as the ongoing \"Car Wash\" ( Lava Jato ) probe in Brazil. MACCIH officials also are working alongside a recently established anti-corruption unit within the public prosecutor's office ( Unidad Fiscal Especial Contra la Impunidad de la Corrupción , UFECIC) to jointly investigate and prosecute high-level corruption cases. To date, their integrated criminal investigative teams have brought charges in eight cases that have implicated a former first lady as well as dozens of legislators and other government officials. In nearly all of the cases, Honduran officials allegedly diverted funds that were intended for social welfare programs to political campaigns or their own pockets. According to press reports, the MACCIH is also supporting investigations into alleged high-level government collusion with the Cachiros drug trafficking organization, and possible corruption involving public contracts awarded for the controversial Agua Zarca hydroelectric project, which Berta Cáceres—a prominent indigenous and environmental activist—was protesting at the time of her murder. This tentative progress has generated fierce backlash. In January 2018, for example, the Honduran Congress effectively blocked a MACCIH-backed investigation into legislators' mismanagement of public funds by enacting a law that prevents the public prosecutor's office from pursuing such cases for up to three years while another government body ( Tribunal Superior de Cuentas ) conducts an audit of public accounts. This \"impunity pact,\" combined with other obstruction from the Honduran government and a perceived lack of support from the OAS, led the head of the MACCIH, Juan Jiménez, to resign in February 2018. OAS Secretary General Luis Almagro nominated Luiz Antonio Marrey, a Brazilian prosecutor, to succeed Jiménez, but Marrey was not sworn in until July 2018 due to resistance from the Hernández Administration. In March 2018, lawyers representing legislators accused of embezzling public funds challenged the constitutionality of the MACCIH's mandate. Although the Honduran Supreme Court agreed to hear the case, it ultimately ruled against the challenge in May 2018. Despite these challenges, the MACCIH and the public prosecutor's office have continued to push forward. Their anti-corruption efforts are likely to face sustained resistance from all three branches of the Honduran government, however, and further progress will likely require continued financial and diplomatic support from the United States and other international donors. The MACCIH's mandate will expire in January 2020, unless the Honduran government agrees to renew the agreement. The case studies reflect recent efforts by the United States to provide support to countries that have not finished their efforts to tackle corruption. In Brazil, the Justice Department was able to complement the work of Brazilian prosecutors. In Mexico, the United States has worked for years to strengthen the Mexican justice system and help to reform it, and also to support an integrated anti-corruption system, although both new systems have only partially been put into practice. Central America's struggle with public corruption has direct effects on the United States related to crime and immigration. The outside bodies of CICIG and MACCIH, with independent outside experts assisting national judicial and investigative bodies, has been challenging official corruption, such that the local citizenry have in many instances become these institutions' strongest supporters. A March 2019 congressional hearing titled, \"Understanding Odebrecht: Lessons for Combating Corruption in the Americas,\" shows the current interest of Congress in anti-corruption and rule of law programs to reinforce the Latin American response to public corruption, which has ousted former and sitting Latin American presidents. U.S. assistance to increase justice-system proficiency has yielded some significant progress, according to some analysts. These programs may be provided through NGOs, or in exchanges and training organized by the U.S. Justice Department or USAID. Judicial system support and investigative assistance can also be provided by international bodies. Attitudinal coaching or education can help build a culture of integrity and respect for law enforcement. Those attitudes are supported by awarding the judiciary and law enforcement with salaries adequate to resist bribery; thus building respect for presumption of innocence, rejection of torture, and a commitment to equality before the law. Technical assistance may also be needed to open government to citizen scrutiny. Digital public accounting systems can be employed to increase transparency for government auditors, journalists, and the interested public to help identify how public funds are spent and pinpoint corruption if it occurs. The improvement of government practices through training is the strategy behind threshold grants from the MCC, as in Paraguay in 2009 and 2010. The threshold assistance to enact anti-corruption improvements is to enable the country to become eligible for a large MCC compact award. The ability to apply sanctions is another significant policy approach beyond the U.S. programs discussed in the preceding case studies. In 2017 and 2018, the United States targeted sanctions against individuals involved in significant acts of corruption. In recent years, the annual foreign operations appropriation has required that the Secretary of State ban entry by individuals (officials of a foreign government and immediate family members) if the Secretary has direct knowledge of their involvement in significant acts of corruption, such as gross violations of human rights or illicit practices tied to natural resource extraction. The process of \"naming and shaming\" individuals extends to visa denials by the State Department and targeted economic sanctions by the U.S. Department of the Treasury's Office of Foreign Assets Control. The U.S. government applied sanctions against officials in Venezuela, the Dominican Republic, and Nicaragua known to have committed acts of corruption, pursuant to Executive Order 13692 and to Executive Order 13818. Analysts critique individually focused sanctions used to force top-level corrupt officials out of power, because they may not result in an end to corrupt behavior. Likewise, broader economic sanctions directed at a nation may be applied to mobilize the government to remove the corrupt individuals from power. Some analysts maintain such sanctions may fail to achieve their intended results, and they can be drawn out in ways that have unintended consequences. These critics point to U.S. economic sanctions against Venezuela's state-run oil company put in place in early 2019 which they maintain could reduce the hard currency needed for food and essential medicines and thus exacerbate the ongoing humanitarian crisis. In May 2017, the House passed H.Res. 145 , reaffirming that combatting corruption is an important U.S. policy interest in the northern triangle countries of Central America, acknowledging the important work of CICIG and MACCIH, and encouraging anti-corruption efforts in the northern triangle countries. In September 2017, the Senate Foreign Relations Committee reported S. 1631 , a foreign relations authorization bill with a title focused on combating public corruption worldwide. In August 2018, Congress enacted the FY2019 defense authorization measure, P.L. 115-232 ( H.R. 5515 ), with several Latin America provisions, which include required reports on narcotics trafficking, corruption, and illicit campaign financing in El Salvador, Guatemala, and Honduras, including identifying government officials involved in such activities. In December 2018, Congress enacted the Nicaragua Human Rights and Anticorruption Act of 2018 ( P.L. 115-335 , H.R. 1918 ). The measure requires the United States to vote against loans from the international financial institutions to Nicaragua, except for the purpose of addressing basic human needs or promote democracy, and authorizes the President to impose sanctions on persons responsible for human rights violations or acts of corruption. Congress also appropriated anti-corruption funding in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) with $6 million for CICIG and $31 million for MACCIH and the northern triangle's attorneys general. The House and Senate Appropriations Committees both recommended continued funding for CICIG, MACCIH, and the attorneys general in their FY2019 foreign aid appropriations measures. In the Consolidated Appropriations Act, 2019, the omnibus legislation passed in February 2019, funding for CICIG was again $6 million, $5 million for MACCIH, and $20 million for the attorney generals of the northern triangle. The 116 th Congress may consider policy changes to NAFTA proposed in 2018 as part of the United States-Mexico-Canada Agreement (USMCA). The Trump Administration's objectives in the trade negotiations included anti-corruption measures that were included in Chapter 27, which sets forth integrated anti-corruption commitments in trade and investment for both the public and private sectors. However, in the U.S. House of Representatives, some Members have raised concerns about the USMCA enforcement measures as well as provisions on pharmaceutical drugs and labor rights, while some U.S. Senators have indicated that tariffs on Canada and Mexico must be lifted as a precondition for further consideration of USCMA. As of late May 2019, it has not been taken up. The following presents some issues Congress may consider in determining the priorities for U.S. policies and assistance related to anti-corruption. Some Members of Congress remain concerned with weak rule of law in Latin America and corrupt practices in the public sector. Congress may wish to consider heightening its support for anti-corruption programs and supporting conditional assistance to bolster good governance and rule of law as a congressional policy priority. In its legislative and oversight roles, the U.S. Congress has appropriated foreign assistance with conditions on reaching or maintaining anti-corruption standards if future funding is to be released. This \"carrot for good government\" strategy is embodied in the Millennium Challenge Corporation's approach to reward those countries that reach anti-corruption standards and other qualifying criteria with large aid compacts. Since FY2016, U.S. assistance to the governments of El Salvador, Guatemala, and Honduras has been conditioned on 16 legislative concerns, ranging from those governments' efforts to improve border security to their protection of human rights. Sanctions, on the other hand, can be a tool to punish corrupt officials. However, if the desired change in behavior extends beyond the targeted individual(s) and their behavior, the desired end result may be less easy to achieve. Such sanctions are an example of coercive diplomacy to modify behavior of a nation's leadership; and the effectiveness of a sanction is only achieved if the desired behavior (i.e., removal of the corrupt officials) can be accomplished. Some analysts contend that sanctions to effect regime change may set the price of compliance too high (i.e., loss of office), so the desired behavior will not occur, and top leaders may refuse to leave office. Civil society activism seen across the region in recent years, due to a spate of corruption exposés and high-level scandals, may provide an opportunity to forge a new commitment to higher integrity standards that reject corruption. When the Financial Times editor for Latin America recently retired after a decade in his post, he observed that over the decade he had seen extraordinary changes for the better, \"especially certain habits and expectations about justice and transparency, corruption and impunity.\" Some analysts portray the new activism as a region-wide \"anti-corruption movement,\" while others maintain it is a critical moment in the region's democratic progression, when an awareness of public officials behaving corruptly may progress beyond temporary fixes. Eliminating and arresting malign leaders is seen as an interim step that needs to be followed with the difficult—and, at times, laborious—task of crafting legislation that adapts or reforms institutions, in such areas as more transparent public procurement or campaign finance. This would be be followed by building and applying the societal pressure to ensure implementation of those reforms. Setting Expectations for U.S. Relations with New Leaders Recently elected presidents in the region's most populous countries, Mexico and Brazil, who campaigned on promises to reduce corruption might be encouraged to fulfill their anti-corruption campaign pledges. For instance, Mexico's new Prosecutor General, appointed by the Mexican congress in early 2019, is envisioned as autonomous from the Mexican executive branch, and could seek to establish a reputation for resolving some key cases to reverse the widespread view of the prior Attorney General's office, which was widely seen as lacking independence, disregarding victims, and producing high levels of impunity. The U.S. government could encourage Mexico's government to operationalize its National Anti-corruption System, which was developed in cooperation with Mexican civil society with USAID support. Anti-corruption programs can build on country-based initiatives, and seek to put into practice existing credible laws that deserve full implementation. Programs to help foster a more vibrant civil society, capable of building the political will to help achieve higher accountability standards may also inspire courageous leaders who are willing to take on corruption. Congressional expressions of support for anti-corruption efforts in the region can be important for such efforts. Also, support for OECD and OAS anti-corruption conventions and mechanisms, and the importance of improving their implementation, can be another valuable measure because of the broad legitimacy such multilateral organizations and international standards may enjoy. Evaluating the success of anti-corruption programs is challenging due to the near impossibility of establishing causality in the development of democratic governance. The \"sustainability\" of anti-corruption efforts may depend on political and economic variables external to the provision of assistance. Many analysts note that there is no single anti-corruption solution, but that approaches should be tailored to country-specific circumstances. The timeframe for change is also difficult to define and measure, and evaluating long-term sustainability may also be complex. A key constraint on firms being barred from public works contracts because of corruption is the threat of bankruptcy. Bankruptcy of a major firm, such as the Odebrecht corporation, can lead to large numbers of unpaid employees and subcontractors thrown out of work. It can have destabilizing economic consequences, and result in loss of the crucial public infrastructure which the contractor was to provide. The cynicism about democratic governance derived from long exposure to widespread corruption, when all parties may come to be viewed as corrupt and most political leaders are seen as \"on the take,\" can also create instability. In 2019, some Latin American governments are beginning to discuss how to recover from the serious consequences of the Odebrecht scandal, and move into a post-Odebrecht situation that is more stable. In recent years, reductions in U.S. foreign assistance budgets have generally reduced anti-corruption funding and more broadly programs by USAID and others under the \"governance\" rubric. The Trump Administration has sought to reduce discretionary federal spending. Congress may consider that in confronting the challenges of trade and security presented by Russia and China in Latin America, as well as competition from European and Asian businesses, the reduction of corruption and the enhancement of the rule of law most benefits U.S. investors and businesses operating in the region. The cost for foreign assistance programs for good governance may also be more affordable than security assistance requiring costly equipment or other technology-based components. Sustainable program funding is another concern. One feature of successful U.S. foreign assistance efforts is that they have been consistently funded. Perhaps this constancy of effort is best demonstrated by Plan Colombia, often cited as a success in the Western Hemisphere and even globally, and which endured for nearly two decades. U.S. assistance to Plan Colombia helped a beleaguered country reach a peace agreement, reduce acts of terrorism, and homicides (to a 40-year low in 2017), and achieve a return to growth and broader stability. Although not an anti-corruption program, the Plan Colombia example suggests that bipartisan congressional support for a foreign assistance goal, through diverse U.S. administrations (and party majorities in Congress) may be a hallmark of an enduring foreign policy success. Policies that champion human rights and prioritize governance and rule of law do not appear to be a central Trump Administration priority. The Administration's budgets have consistently sought to reduce foreign assistance overall and weigh improvement of democratic practices and good governance goals against other U.S. core interests. Instead of focusing on governance issues, the Trump Administration has prioritized security-related assistance, including for counternarcotics efforts. In contrast to prior administrations, it appears less eager to pressure governments on rule of law and transparency goals unless corruption is linked to other security interests, such as migration from Central America. At the same time, some analysts maintain that U.S. influence is decreasing in the Western Hemisphere due to the declining regard for U.S leadership (registered in opinion polling) over the past couple years, although positive views of bilateral relations between a single nation and the United States are often rated more favorably. In addition, some observers warn that attacks on the motives and accuracy of the news media by senior U.S. leaders can reduce acceptance of U.S. assistance programs designed to protect freedom of the press and investigative journalism. In essence it undermines the position of free-press advocate that the U.S. government once held. The Trump Administration has rarely applauded civil society activism in Latin America and Caribbean countries in response to high-level scandals and public corruption. Some of the regional and multilateral institutions, such as the Inter-American Development Bank and the IMF, have taken up advocacy of anti-corruption programming because it is no longer perceived as a top U.S. government concern. Appendix A. Select Reports and Recommendations Several foreign policy think tanks and the multilateral development banks have published analyses over the past three years examining broad corruption scandals in Latin American and Caribbean countries and the outpouring of civil society response. Some of these studies contend that donor assistance aimed at anti-corruption in recent times did not go far enough, or produce a measurable and enduring change in practices. For example, in November 2018, the Inter-American Development Bank (IDB) published a report by an Expert Advisory Group on anti-corruption, transparency and integrity in the countries of Latin America and the Caribbean. The IDB authors proposed a more aggressive and integrated approach to combating corruption. The report describes earlier interventions encouraged by the IDB as well as the United States and several multilateral donors as \"uneven and partial,\" and focused more on enacting reforms and making pronouncements, rather than on implementation and enforcement. It maintains that only an integrated and across-the-board framework for fighting corruption can actually transform the culture and practice of public corruption that pervades too much of the region. Calling for a transformative approach, the IBD authors maintain that it is essential that both supply and demand sides of corruption be understood and addressed. They call for public and private sector participation at the national, regional, and international level to replace weak or dysfunctional institutions and practices. The Americas program at the Center for Strategic and International Studies (CSIS), recommends key targets for reform in the region, which are: (1) political party and campaign financing; (2) public financial sector management; (3) government contracting and procurement, especially for critical infrastructure; (4) civil service reform and effective vetting of public officials; and (5) internal strengthening and oversight of public security and justice institutions. CSIS advocates peer exchanges to tap the knowledge and skills of veterans of reining in public corruption from countries such as Uruguay, Chile, and Colombia. Their transferable experiences can assist struggling nations in the Northern Triangle countries of Central America and elsewhere. The emergence and persistence of civil society activism to fight corruption may be attributed to several conditions. One is the region's expanded middle class, which grew to nearly 35% in 2015 from about 21% of Latin America's population in 2001. The middle class is a bulwark against corruption according to the theory that the costs and inefficiencies of corruption take on greater salience when basic needs have been fulfilled. An analysis of the 2016/2017 Americas barometer study found that those individuals most apt to rank corruption as their nation's top problem were better educated, male, and more affluent. However, when the link between corruption and economic problems and insecurity is made clear, citizens of any background may become energized to combat it. Some analysts identify illicit campaign finance as the root of corruption. Guatemala's current President Jimmy Morales, a former TV evangelical and comedian, campaigned in 2015 on a pledge he was neither a thief nor corrupt. Morales financed his presidential campaign secretively, and was investigated by the U.N. supported anti-corruption body CICIG for undeclared campaign donations. The Odebrecht construction company reported it paid bribes across the region to public office holders for financing their political campaigns in exchange for large infrastructure contracts. In addition, the amount of off-the-record political donations in many countries greatly outpace the reported donations. In Argentina President Mauricio Marci's successful 2016 presidential race, Macri reportedly expended about 11 times more than he publicly declared, while his opponent reportedly spent some 20 times as much as he declared. Bilateral U.S. assistance programs to bolster rule of law, encourage good governance, and eliminate bribery, extortion, and graft, have been common in Latin America. Several analysts assert that further progress in combating corruption and improving governance in the region may require a cultural shift, building on the numerous citizen-led anti-corruption social movements unleashed in 2015. These movements, some of which were nurtured by years of foreign assistance, may begin to look beyond prosecutions related to specific scandals and seek structural and institutional reforms. Some practitioners who promote an inter-related set of program elements, what has been described as an \"ecosystem\" of integrity-enhancing efforts, also contend that the features of successful anti-corruption programs have features common to good development programming more broadly. These could include efforts to: Abolish or seek to revise rules and regulations that obscure the workings of government . Many government rules and processes can obscure budgets and reduce transparency, thus discouraging citizen oversight. One example that built more transparency and encouraged citizen participation is a technological solution in Mexico. LAB Justicia, an online collaborative tool funded by USAID, provides comprehensive information on the status of criminal justice in each state of Mexico. It draws data from open source government records and research by national and international NGOs. Recruit NGOs and corporations as c ritical partners in fighting corruption . Businesses and their associations and nongovernmental groups can be important targets for assistance to build demand for honest government. These entities can encourage and benefit from information sharing via social media, strong independent journalism, and broader citizen electoral participation. The business community and the private sector may play a critical role to press for the expansion of information, education and support to sharpen government transparency as commercial relations in a free market economy can only thrive with predictable economic rules. Adapt success ful models to local conditions . Successful multilateral and regional efforts can become exemplars for other countries if the models are adapted to local conditions and dynamics. The CICIG was cited by presidential candidates in El Salvador in the early 2019 elections as an effort they would like to replicate. During the Mexican elections in 2018, candidates also considered the CICIG framework for possible replication in Mexico, and in May 2019 Ecuador announced it had launched an anti-graft commission with five outside the country experts. The CICIG model also exemplifies that due to the complexity of grand corruption cases that international cooperation and support may be critical to success to supplement local resources in their battle with powerful corrupt networks. Build anti-corruption momentum with strong independent j ournalism, social media, and whistleblower p rotectio ns. Investigative and independent journalists have always played a crucial role to uncover public and private corruption and criminality, inform the citizenry of the true costs of corruption, and mobilize the public to fight corruption. In Mexico, journalists have helped to mobilize rejection of criminal domination and the violence that crime groups perpetrate. They also have raised awareness of criminal impunity for both criminal leaders and government officials on the take. Journalists are needed to amplify the efforts of whistleblowers; and to build political will and support for anti-corruption investigations, prosecutions, and legislation. Appendix B. Implementation of the Inter-American Convention against Corruption (MESICIC) In 2002, to support member states in implementing the IACAC, the OAS created the Mechanism for Follow-up on the implementation of the Inter-American Convention Against Corruption (MESICIC). The MESICIC serves primarily to measure how member states adhere to the convention and helps members achieve better implementation. The MESICIC provides activities that include: technical cooperation, sharing of best practices, and tools for the harmonization of anticorruption legislation throughout the Americas. Including the United States, 33 OAS member states are party to the MESICIC. (Barbados is not a MESICIC signatory.) The MESICIC's two main bodies are: The Conference of State Parties and the Committee of Experts. The Conference of State Parties exercises political and operational authority over the mechanism, and is comprised of representatives from all states which are party to the mechanism. The Committee of Experts manages and supervises the technical review process that steers the IACAC's implementation. It is composed of experts appointed by each state party. The OAS General Secretariat, which serves as the technical secretariat through the Department of Legal Cooperation of the Secretariat for Legal Affairs, supports the Committee of Experts. During the country-specific evaluation process, the MESICIC drafts and adopts reports to recommend ways to better implement regulatory and institutional measures. The reports aim to align the commitments of each state signatory with the goals of the IACAC. They also provide indicators for the states to identify challenges and ways to overcome shortcomings. Civil society and NGOs participate in the IACAC review process by submitting information to the Committee of Experts for consideration. These groups may present specific proposals, methodologies, and questions for gathering information. The Committee of Experts adopts a hemispheric report at the end of each technical review. The report summarizes the progress of implementing countries in meeting the recommendations formulated by the Committee in previous technical rounds, and makes recommendations of a collective nature. The Committee has adopted hemispheric reports in 2006, 2008, 2011, and 2015. Some analysts note that the battle against corruption in the public sector appears to be more resilient than in the past. However, the elusive nature of corruption makes it difficult to draw a causal relationship between rejection of corruption in the Americas and the IACAC and MESICIC. These critics maintain that the instruments need updating to make the IACAC relevant for combating new corruption modalities, and to make the MESICIC more independent, transparent, empowered to penalize noncompliance, and technically competent. Appendix C. Latin America Corruption Timeline from March 2014 through December 2018", "summary": "Corruption of public officials in Latin America continues to be a prominent political concern. In the past few years, 11 presidents and former presidents in Latin America have been forced from office, jailed, or are under investigation for corruption. As in previous years, Transparency International's Corruption Perceptions Index covering 2018 found that the majority of respondents in several Latin American nations believed that corruption was increasing. Several analysts have suggested that heightened awareness of corruption in Latin America may be due to several possible factors: the growing use of social media to reveal violations and mobilize citizens, greater media and investor scrutiny, or, in some cases, judicial and legislative investigations. Moreover, as expectations for good government tend to rise with greater affluence, the expanding middle class in Latin America has sought more integrity from its politicians. U.S. congressional interest in addressing corruption comes at a time of this heightened rejection of corruption in public office across several Latin American and Caribbean countries. Whether or not the perception that corruption is increasing is accurate, it is nevertheless fueling civil society efforts to combat corrupt behavior and demand greater accountability. Voter discontent and outright indignation has focused on bribery and the economic consequences of official corruption, diminished public services, and the link of public corruption to organized crime and criminal impunity. In some countries, rejection of tainted political parties and leaders from across the spectrum has challenged public confidence in governmental legitimacy. In some cases, condemnation of corruption has helped to usher in populist presidents. For example, a populist of the left won Mexico's election and of the right Brazil's in 2018, as winning candidates appealed to end corruption and overcome political paralysis. The 2017 U.S. National Security Strategy characterizes corruption as a threat to the United States because criminals and terrorists may thrive under governments with rampant corruption. Studies indicate that corruption lowers productivity and mars competitiveness in developing economies. When it is systemic, it can spur migration and reduce GDP measurably. The U.S. government has used several policy tools to combat corruption. Among them are sanctions (asset blocking and visa restrictions) against leaders and other public officials to punish and deter corrupt practices, and programming and incentives to adopt anti-corruption best practices. The United States has also provided foreign assistance to some countries to promote clean or \"good\" government goals. U.S. efforts include assistance to strengthen the rule of law and judicial independence, law enforcement training, programs to institutionalize open and transparent public sector procurement and other clean government practices, and efforts to tap private-sector knowledge to combat corruption. This report examines U.S. strategies to help allies achieve anti-corruption goals, which were once again affirmed at the Summit of the Americas held in Peru in April 2018, with the theme of \"Democratic Governance against Corruption.\" The case studies in the report explore: Brazil's collaboration with the U.S. Department of Justice and other international partners to expand investigations and use tools such as plea bargaining to secure convictions; Mexico's efforts to strengthen protections for journalists and to protect investigative journalism generally, and mixed efforts to implement comprehensive reforms approved by Mexico's legislature; and the experiences of Honduras and Guatemala with multilateral anti-corruption bodies to bolster weak domestic institutions, although leaders investigated by these bodies have tried to shutter them. Some analysts maintain that U.S. funding for \"anti-corruption\" programming has been too limited, noting that by some definitions, worldwide spending in recent years has not exceeded $115 million annually. Recent congressional support for anti-corruption efforts includes: training of police and justice personnel, backing for the Trump Administration's use of targeted sanctions, and other efforts to condition assistance. Policy debates have also highlighted the importance of combating corruption related to trade and investment. The 116th Congress may consider the United States-Mexico-Canada Agreement (USMCA), which would revise the NAFTA trade agreement, and contains a new chapter on anti-corruption measures.", "document_type": "crs"}
{"report": "Federal law provides that all aliens must enter the United States pursuant to the Immigration and Nationality Act (INA). The two major categories of aliens in the INA are (1) immigrants, who are admitted to the United States permanently, and (2) nonimmigrants, who are admitted for temporary reasons (e.g., students, tourists, temporary workers, or business travelers). Foreign nationals who lack prope r immigration authorization generally fall into three categories: (1) those who are admitted legally and then overstay their nonimmigrant visas, (2) those who enter the country surreptitiously without inspection, and (3) those who are admitted on the basis of fraudulent documents. In all three instances, the aliens are in violation of the INA and subject to removal. Temporary Protected Status (TPS), codified by INA Section 244, provides temporary relief from removal and work authorization to foreign nationals in the United States from countries experiencing armed conflict, natural disaster, or other extraordinary circumstances that prevent their safe return. This report begins by situating TPS in the context of humanitarian responses to migration. Another form of blanket relief from removal —Deferred Enforced Departure (DED)—is also described, as is the historical use of these relief mechanisms. This report then provides data on the countries currently designated for TPS, including the conditions that have contributed to their designation. Past legislation to provide lawful permanent resident status to certain TPS-designated foreign nationals is also described. The report concludes with examples of activity in the 115 th and 116 th Congresses related to TPS. As a State Party to the 1967 United Nations Protocol Relating to the Status of Refugees (hereinafter, U.N. Protocol), the United States agrees to the principle of nonrefoulement , which asserts that a refugee should not be returned to a country where he/she faces serious threats to his/her life or freedom. (This is now considered a rule of customary international law.) Nonrefoulement is embodied in several provisions of U.S. immigration law. Most notably, it is reflected in INA provisions requiring the government to withhold the removal of a foreign national to a country in which his or her life or freedom would be threatened on the basis of race, religion, nationality, membership in a particular social group, or political opinion. The legal definition of a refugee in the INA, which is consistent with the U.N. Protocol, specifies that a refugee is a person who is unwilling or unable to return to his/her country of nationality or habitual residence because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. This definition also applies to individuals seeking asylum. Under the INA, refugees and asylees differ on the physical location of the persons seeking the status. Those who are displaced abroad to a country other than their home country apply for refugee status, while those who are in the United States or at a U.S. port of entry apply for asylum. Other foreign nationals in the United States who may elicit a humanitarian response do not meet the legal definition for asylum; under certain circumstances these persons may be eligible for relief from removal through TPS or DED. TPS is a blanket form of humanitarian relief. It is the statutory embodiment of safe haven for foreign nationals within the United States who may not meet the legal definition of refugee or asylee but are nonetheless fleeing—or reluctant to return to—potentially dangerous situations. TPS was established by Congress as part of the Immigration Act of 1990 ( P.L. 101-649 ). The statute gives the Secretary of the Department of Homeland Security (DHS), in consultation with other government agencies (most notably the Department of State), the authority to designate a country for TPS under one or more of the following conditions: ongoing armed conflict in a foreign state that poses a serious threat to personal safety; a foreign state request for TPS because it temporarily cannot handle the return of its nationals due to an environmental disaster; or extraordinary and temporary conditions in a foreign state that prevent its nationals from safely returning. A foreign state may not be designated for TPS if the Secretary of DHS finds that allowing its nationals to temporarily stay in the United States is against the U.S. national interest. The Secretary of DHS can designate a country for TPS for periods of 6 to 18 months and can extend these periods if the country continues to meet the conditions for designation. To obtain TPS, eligible foreign nationals within the United States must pay specified fees and submit an application to DHS's U.S. Citizenship and Immigration Services (USCIS) before the deadline set forth in the Federal Register notice announcing the TPS designation. The application must include supporting documentation as evidence of eligibility (e.g., a passport issued by the designated country and records showing continuous physical presence in the United States since the date established in the TPS designation). The statute specifies grounds of inadmissibility that cannot be waived, including those relating to criminal convictions, drug offenses, terrorist activity, and the persecution of others. Individuals granted TPS are eligible for employment authorization, cannot be detained on the basis of their immigration status, and are not subject to removal while they retain TPS relief. They may be deemed ineligible for public assistance by a state and may travel abroad with the prior consent of the DHS Secretary. TPS does not provide a path to lawful permanent residence or citizenship, but a TPS recipient is not barred from adjusting to nonimmigrant or immigrant status if he or she meets the requirements. DHS has indicated that information it collects when an individual registers for TPS may be used to enforce immigration law or in any criminal proceeding. In addition, withdrawal of an alien's TPS may subject the alien to exclusion or deportation proceedings. In addition to TPS, there is another form of blanket relief from removal known as deferred enforced departure (DED), formerly known as extended voluntary departure (EVD). DED is a temporary, discretionary, administrative stay of removal granted to aliens from designated countries. Unlike TPS, a DED designation emanates from the President's constitutional powers to conduct foreign relations and has no statutory basis. DED was first used in 1990 and has been used a total of five times (see \" Historical Use of Blanket Relief \"). Liberia is the only country currently designated under DED, and that designation is scheduled to end on March 30, 2020. DED and EVD have been used on a country-specific basis to provide relief from removal at the President's discretion, usually in response to war, civil unrest, or natural disasters. When Presidents grant DED through an executive order or presidential memorandum, they generally provide eligibility guidelines, such as demonstration of continuous presence in the United States since a specific date. Unlike TPS, the Secretary of State does not need to be consulted when DED is granted. In contrast to recipients of TPS, individuals who benefit from DED are not required to register for the status with USCIS unless they are applying for work authorization. Instead, DED is triggered when a protected individual is identified for removal. In 1990, when Congress enacted the TPS statute, it also granted TPS for 18 months to Salvadoran nationals who were residing in the United States. Since then, the Attorney General (and, later, the Secretary of DHS), in consultation with the State Department, granted and subsequently terminated TPS for foreign nationals in the United States from the following countries: Angola, Bosnia-Herzegovina, Burundi, Guinea, Lebanon, Liberia, the Kosovo Province of Serbia, Kuwait, Rwanda, and Sierra Leone. Rather than extending the initial Salvadoran TPS when it expired in 1992, the George H. W. Bush Administration granted DED to an estimated 190,000 Salvadorans through December 1994. This Administration also granted DED to about 80,000 Chinese nationals in the United States following the Tiananmen Square massacre in June 1989, and these individuals retained DED status through January 1994. In December 1997, President Bill Clinton instructed the Attorney General to grant DED to Haitian nationals in the United States for one year, providing time for the Administration to work with Congress on long-term legislative relief for Haitians. President George W. Bush directed that DED be provided to Liberian nationals whose TPS was expiring in September 2007; this status was extended several times by President Obama. President Trump has terminated DED for Liberians, with an effective date of March 30, 2020 (for more details, see \" Liberia \"). Approximately 417,000 foreign nationals from the following 10 countries have TPS: El Salvador, Haiti, Honduras, Nepal, Nicaragua, Somalia, South Sudan, Sudan, Syria, and Yemen. In addition, certain Liberian nationals are covered by a designation of DED (see \" Liberia \" section below). The Administration has announced terminations of temporary protections for seven of these countries (six with TPS and one with DED). Several lawsuits have been filed challenging these decisions. Table 1 lists the current TPS-designated countries, the most recent decision—to extend or terminate—by the Secretary of DHS, the date from which individuals are required to have continuously resided in the United States, and the designation's expiration date. In addition, Table 1 shows the approximate number of individuals from each country who registered during the previous registration period and the number of individuals with TPS as of November 29, 2018. The only time Congress has granted TPS was in 1990 (as part of the law establishing TPS) to eligible Salvadoran nationals in the United States. In the aftermath of Hurricane Mitch in November 1998, then-Attorney General Janet Reno announced that she would temporarily suspend the deportation of nationals from El Salvador, Guatemala, Honduras, and Nicaragua. On January 5, 1999, the Attorney General designated Honduras and Nicaragua for TPS due to extraordinary displacement and damage from Hurricane Mitch. Prior to leaving office in January 2001, the Clinton Administration said it would temporarily halt deportations to El Salvador because of a major earthquake. In 2001, the George W. Bush Administration decided to grant TPS to Salvadoran nationals following two earthquakes that rocked the country. Over the years, the George W. Bush Administration granted, and the Obama Administration extended, TPS to Central Americans from El Salvador, Honduras, and Nicaragua on the rationale that it was still unsafe for nationals to return due to the disruption of living conditions from environmental disasters. Beginning in late 2017, the Trump Administration announced decisions to terminate TPS for Nicaragua and El Salvador and to put on hold a decision about Honduras. In November 2017, DHS announced that TPS for Nicaragua would end on January 5, 2019—12 months after its last designation would have expired—due to nearly completed recovery efforts following Hurricane Mitch. On the same day, DHS announced that more information was necessary to make a determination about TPS for Honduras; as a result, statute dictates that its status be extended for six months. On January 8, 2018, DHS announced the decision to terminate TPS for El Salvador—whose nationals account for about 60% of TPS recipients—after an 18-month transition period. El Salvador's TPS designation is scheduled to end on September 9, 2019. On May 4, 2018, DHS announced the decision to terminate the TPS designation for Honduras, with an 18-month delay (until January 5, 2020) to allow for an orderly transition. As of the date of this report, the terminations for El Salvador and Honduras are on hold as the result of a court order. The large number of Central Americans with TPS, along with their length of U.S. residence and resulting substantial economic and family ties, have led some to support extending TPS for Central Americans and Salvadorans in particular. Supporters have argued that ongoing violence and political unrest have left these countries unable to adequately handle the return of their nationals and that a large-scale return could have negative consequences for the United States economy and labor supply, American families, foreign relations, and the flow of remittances sent by Central Americans living in the United States to their relatives in Central America. Opponents have argued that ending TPS for these countries is a move toward correctly interpreting the original intent of the program—to provide temporary safe haven. There is some support in Congress for a legislative means of allowing TPS recipients with several years of U.S. residence to remain in the United States permanently (see \" Selected Activity in the 115th and 116th Congress \" below); others argue that Congress's intent in creating the statute was to provide temporary relief and that no special consideration should be given to allow these individuals to stay in the United States. The devastation caused by the January 12, 2010, earthquake in Haiti prompted calls for the Obama Administration to grant TPS to Haitian nationals in the United States. The scale of the humanitarian crisis after the earthquake—with estimates of thousands of Haitians dead and reports of the total collapse of Port au Prince's infrastructure—led DHS to grant TPS for 18 months to Haitian nationals who were in the United States as of January 12, 2010. At the time, then-DHS Secretary Janet Napolitano stated: \"Providing a temporary refuge for Haitian nationals who are currently in the United States and whose personal safety would be endangered by returning to Haiti is part of this Administration's continuing efforts to support Haiti's recovery.\" On July 13, 2010, DHS announced an extension of the TPS registration period for Haitian nationals, citing difficulties nationals were experiencing in obtaining documents to establish identity and nationality, and in gathering funds required to apply for TPS. DHS extended the TPS designation for Haiti in May 2011, providing another 18 months of TPS, through January 22, 2013. At the same time, DHS issued a redesignation, enabling eligible Haitian nationals who arrived in the United States up to one year after the earthquake to receive TPS. The redesignation targeted individuals who were allowed to enter the United States immediately after the earthquake on temporary visas or humanitarian parole, but were not covered by the initial TPS designation. Subsequently, then-Secretary Jeh Johnson extended Haiti's designation several times, through July 22, 2017. A May 2, 2017, letter from members of the Congressional Black Caucus to then-DHS Secretary John Kelly urged an 18-month extension of TPS for Haiti, citing continued recovery difficulties from the 2010 earthquake that killed over 300,000 people, an ongoing cholera epidemic, and additional damages from Hurricane Matthew in 2016. On May 24, 2017, then-Secretary Kelly extended Haiti's TPS designation for six months (the minimum allowed by statute), from its planned expiration on July 22, 2017, to January 22, 2018, and encouraged beneficiaries to prepare to return to Haiti should its designation be terminated after six months. An October 4, 2017, letter from the Haitian ambassador to Acting DHS Secretary Elaine Duke requested that Haiti's designation be extended for an additional 18 months. On November 20, 2017, DHS announced its decision to terminate TPS for Haiti, with an 18-month transition period. Its designation is set to terminate on July 22, 2019. As of the date of this report, the termination is on hold as the result of a court order. Liberians in the United States first received TPS in March 1991 following the outbreak of civil war. Although that war ended, a second civil war began in 1999 and escalated in 2000. Approximately 10,000 Liberians in the United States were given DED in 1999 after their TPS expired. Their DED status was subsequently extended to September 29, 2002. On October 1, 2002, Liberia was redesignated for TPS for a period of 12 months, and that status continued to be extended. On September 20, 2006, the George W. Bush Administration announced that TPS for Liberia would expire on October 1, 2007, but that this population would be eligible for DED until March 31, 2009. On March 23, 2009, President Obama extended DED for those Liberians until March 31, 2010, and several times thereafter. As a result of the Ebola outbreak in West Africa in 2014, eligible Liberians were again granted TPS, as were eligible Sierra Leoneans and Guineans. On September 26, 2016, DHS issued a notice for Liberia providing a six-month extension of TPS benefits, to May 21, 2017, to allow for an \"orderly transition\" of affected persons' immigration status, and did the same for similarly affected Sierra Leoneans and Guineans. This action voided a previously scheduled November 21, 2016, expiration of TPS for all three countries. Liberia's DED status was extended by President Obama through March 31, 2018, for a specially designated population of Liberians who had been residing in the United States since October 2002. President Trump announced on March 27, 2018, that extending DED for Liberia was not warranted due to improved conditions in Liberia, but that the United States' foreign policy interests warranted a 12-month wind-down period. A lawsuit challenging the termination was filed in federal court on March 8, 2019. Three days before the effective termination date, President Trump announced a 12-month extension of the wind-down period, to last through March 30, 2020. Approximately 840 Liberians have approved employment authorization documents (EADs) under that DED directive. This number does not reflect all Liberians who might be covered under this DED announcement—only those who applied for and received an EAD. Nepal was devastated by a massive earthquake on April 25, 2015, killing over 8,000 people. The earthquake and subsequent aftershocks demolished much of Nepal's housing and infrastructure in many areas. Over half a million homes were reportedly destroyed. On June 24, 2015, citing a substantial but temporary disruption in living conditions as a result of the earthquake, then-DHS Secretary Jeh Johnson designated Nepal for TPS for an 18-month period. TPS for Nepal was extended for 18 months in October 2016. On April 26, 2018, Secretary Nielsen announced her decision to terminate the TPS designation for Nepal, citing her assessment that the original conditions under which the country was designated are no longer substantial and that Nepal can adequately handle the return of its nationals. A 12-month delay of the termination date to allow for an orderly transition was also announced; the TPS designation for Nepal is thus set to terminate on June 24, 2019. As of the date of this report, the termination is on hold as the result of a court order. Somalia has endured decades of chronic instability and humanitarian crises. Since the collapse of the authoritarian Siad Barre regime in 1991, it has lacked a viable central authority capable of exerting territorial control, securing its borders, or providing security and services to its people. Somalia was first designated for TPS in 1991 based on extraordinary and temporary conditions \"that prevent[ed] aliens who are nationals of Somalia from returning to Somalia in safety.\" Through 23 subsequent extensions or redesignations, Somalia has maintained TPS due to insecurity and ongoing armed conflict that present serious threats to the safety of returnees. DHS announced the latest extension—for 18 months—on July 19, 2018, and its current expiration date is March 17, 2020. Decades of civil war preceded South Sudan's secession from the Republic of Sudan in 2011. Citing both ongoing armed conflict and extraordinary and temporary conditions that would prevent the safe return of Sudanese nationals, the Attorney General designated Sudan for TPS on November 4, 1997. Since then, Sudan has been redesignated or had its designation extended 14 times. On July 9, 2011, South Sudan became a new nation. With South Sudan's independence from the Republic of Sudan, questions arose about whether nationals of the new nation would continue to be eligible for TPS. In response, the DHS Secretary designated South Sudan for TPS on October 17, 2011. TPS has since been extended or redesignated five times due to ongoing armed conflict and extraordinary and temporary conditions in South Sudan, including \"ongoing civil war marked by brutal violence against civilians, egregious human rights violations and abuses, and a humanitarian disaster on a devastating scale across the country.\" The latest extension was for 18 months and expires on November 2, 2020. Meanwhile, citing improved conditions in Sudan, including a reduction in violence and an increase in food harvests, then-Acting DHS Secretary Elaine Duke announced in September 2017 that Sudan's TPS designation would expire on November 2, 2018. As of the date of this report, the termination is on hold as the result of a court order. The political uprising of 2011 in Syria grew into an intensely violent civil war that has led to 5.6 million Syrians fleeing the country and 6 million more internally displaced by 2018. On March 29, 2012, then-Secretary of Homeland Security Janet Napolitano designated the Syrian Arab Republic (Syria) for TPS through September 30, 2013, citing temporary extraordinary conditions that would make it unsafe for Syrian nationals already in the United States to return to the country. In that initial granting of TPS, Secretary Napolitano made clear that DHS would conduct full background checks on Syrians registering for TPS. TPS for Syrian nationals has since been extended. The 18-month extension on August 1, 2016, was accompanied by a redesignation, which updated the required arrival date into the United States for Syrians from January 5, 2015, to August 1, 2016. On January 31, 2018, Secretary Nielsen announced her decision to extend the TPS designation for Syria for another 18 months, citing the ongoing armed conflict and extraordinary conditions that prompted the original designation. This announcement did not include a redesignation; thus, Syrians who entered the United States after August 1, 2016, are not eligible. On September 3, 2015, then-Secretary Jeh Johnson designated Yemen for TPS through March 3, 2017, due to ongoing armed conflict in the country. A 2015 DHS press release stated that \"requiring Yemeni nationals in the United States to return to Yemen would pose a serious threat to their personal safety.\" The civil war in Yemen reached new levels in 2017. The United Nations estimated that the civilian death toll had reached 10,000, and the World Food Program reported that 60% of Yemenis, or 17 million people, were in \"crisis\" or \"emergency\" food situations. Relief efforts in the region have been complicated by ongoing violence and considerable damage to the country's infrastructure. On January 4, 2017, DHS extended and redesignated Yemen's current TPS designation through September 3, 2018. The redesignation updated the required arrival date into the United States for individuals from Yemen from September 3, 2015, to January 4, 2017. The Federal Register notice explained that the \"continued deterioration of the conditions for civilians in Yemen and the resulting need to offer protection to individuals who have arrived in the United States after the eligibility cutoff dates\" warranted the redesignation of TPS. On July 5, 2018, DHS extended Yemen's TPS designation for another 18 months, resulting in an expiration date of March 3, 2020. Individuals with TPS reside in all 50 states, the District of Columbia, and the U.S. territories. The highest populations live in traditional immigrant gateway states: California, Florida, Texas, and New York. In addition to these four, six other states had at least 10,000 TPS recipients as of November 2018: Virginia, Maryland, New Jersey, Massachusetts, North Carolina, and Georgia. Hawaii, Wyoming, Vermont, and Montana had fewer than 100 individuals with TPS. See Figure 1 and Table A-1 . A grant of TPS does not provide a recipient with a designated pathway to lawful permanent resident (LPR) status; however, a TPS recipient is not barred from adjusting to nonimmigrant or immigrant status if he or she meets the requirements. There are statutory limitations on Congress providing adjustment of status to TPS recipients. Over the years, Congress has provided eligibility for LPR status to groups of nationals who had been given temporary relief from removal. In 1992, Congress enacted legislation allowing Chinese nationals who had DED following the Tiananmen Square massacre to adjust to LPR status ( P.L. 102-404 ). The Nicaraguan Adjustment and Central American Relief Act (NACARA) (Title II of P.L. 105-100 ), which became law in 1997, provided eligibility for LPR status to certain Nicaraguans, Cubans, Guatemalans, Salvadorans, and nationals of the former Soviet bloc who had applied for asylum and had been living in the United States for a certain period of time. The 105 th Congress passed the Haitian Refugee Immigration Fairness Act, enabling Haitians who had filed asylum claims or who were paroled into the United States before December 31, 1995, to adjust to legal permanent residence ( P.L. 105-277 ). Legislation that would have allowed nationals from various countries that have had TPS to adjust to LPR status received action in past Congresses, but was not enacted. For instance, the Senate-passed comprehensive immigration reform bill in the 113 th Congress ( S. 744 ) did not include specific provisions for foreign nationals with TPS to adjust status, but many would have qualified for the registered provisional immigrant status that S. 744 would have established. Various proposals related to TPS have been introduced in the 115 th and 116 th Congresses. Some bills would extend or expand TPS designations for certain countries (e.g., Venezuela), prohibit federal funds from being used to implement recent TPS terminations, or provide adjustment to LPR status for TPS recipients who have been living in the United States for several years. Other bills variously seek to limit the program by transferring authority from DHS to Congress to designate foreign states; making unauthorized aliens and members of criminal gangs ineligible; restricting the criteria for designating a foreign state; making TPS recipients subject to detention and expedited removal; or phasing out the program. ", "summary": "When civil unrest, violence, or natural disasters erupt in countries around the world, concerns arise over the ability of foreign nationals in the United States from those countries to safely return. Provisions exist in the Immigration and Nationality Act (INA) to offer temporary protected status (TPS) and other forms of relief from removal under specified circumstances. The Secretary of Homeland Security has the discretion to designate a country for TPS for periods of 6 to 18 months and can extend these periods if the country continues to meet the conditions for designation. Congress has also provided TPS legislatively. A foreign national who is granted TPS receives a registration document and employment authorization for the duration of a given TPS designation. The United States currently provides TPS to approximately 417,000 foreign nationals from 10 countries: El Salvador, Haiti, Honduras, Nepal, Nicaragua, Somalia, South Sudan, Sudan, Syria, and Yemen. Certain Liberians maintain relief under a similar administrative mechanism known as Deferred Enforced Departure (DED). Since September 2017, the Secretary of Homeland Security has announced plans to terminate TPS for six countries—El Salvador, Haiti, Honduras, Nepal, Nicaragua, and Sudan—and extend TPS for Somalia, South Sudan, Syria, and Yemen. In March 2018, President Trump announced an end to DED for Liberia. Several lawsuits have been filed challenging the TPS and DED termination decisions. There is ongoing debate about whether foreign nationals who have been living in the United States for long periods of time with TPS or DED should receive a pathway to lawful permanent resident (LPR) status. Various proposals related to TPS have been introduced in the 115th and 116th Congresses, including to expand the program to additional countries (e.g., Venezuela), provide a pathway to LPR status, prohibit gang members or those without lawful status from receiving TPS, and phase out the program.", "document_type": "crs"}
{"report": "This report presents background information and issues for Congress concerning the Navy's force structure and shipbuilding plans. The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years. The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. The issue for Congress is whether to approve, reject, or modify the Navy's proposed FY2020 shipbuilding program and the Navy's longer-term shipbuilding plans. Decisions that Congress makes on this issue can substantially affect Navy capabilities and funding requirements, and the U.S. shipbuilding industrial base. Detailed coverage of certain individual Navy shipbuilding programs can be found in the following CRS reports: CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of the Administration's FY2020 budget proposal, which the Administration withdrew on April 30, to not fund a mid-life refueling overhaul [called a refueling complex overhaul, or RCOH] for the aircraft carrier Harry S. Truman [CVN-75], and to retire CVN-75 around FY2024.) CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R43543, Navy LPD-17 Flight II Amphibious Ship Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of funding for the procurement of an amphibious assault ship called LHA-9.) CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke. For a discussion of the strategic and budgetary context in which U.S. Navy force structure and shipbuilding plans may be considered, see Appendix A . On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship force-level goal replaced a 308-ship force-level goal that the Navy released in March 2015. The 355-ship force-level goal is the largest force-level goal that the Navy has released since a 375-ship force-level goal that was in place in 2002-2004. In the years between that 375-ship goal and the 355-ship goal, Navy force-level goals were generally in the low 300s (see Appendix B ). The force level of 355 ships is a goal to be attained in the future; the actual size of the Navy in recent years has generally been between 270 and 290 ships. Table 1 shows the composition of the 355-ship force-level objective. The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. An FSA is an analysis in which the Navy solicits inputs from U.S. regional combatant commanders (CCDRs) regarding the types and amounts of Navy capabilities that CCDRs deem necessary for implementing the Navy's portion of the national military strategy and then translates those CCDR inputs into required numbers of ships, using current and projected Navy ship types. The analysis takes into account Navy capabilities for both warfighting and day-to-day forward-deployed presence. Although the result of the FSA is often reduced for convenience to single number (e.g., 355 ships), FSAs take into account a number of factors, including types and capabilities of Navy ships, aircraft, unmanned vehicles, and weapons, as well as ship homeporting arrangements and operational cycles. The Navy conducts a new FSA or an update to the existing FSA every few years, as circumstances require, to determine its force-structure goal. Section 1025 of the FY2018 National Defense Authorization Act, or NDAA ( H.R. 2810 / P.L. 115-91 of December 12, 2017), states the following: SEC. 1025. Policy of the United States on minimum number of battle force ships. (a) Policy.—It shall be the policy of the United States to have available, as soon as practicable, not fewer than 355 battle force ships, comprised of the optimal mix of platforms, with funding subject to the availability of appropriations or other funds. (b) Battle force ships defined.—In this section, the term \"battle force ship\" has the meaning given the term in Secretary of the Navy Instruction 5030.8C. The term battle force ships in the above provision refers to the ships that count toward the quoted size of the Navy in public policy discussions about the Navy. The Navy states that a new FSA is now underway as the successor to the 2016 FSA, and that this new FSA is to be completed by the end of 2019. The new FSA, Navy officials state, will take into account the Trump Administration's December 2017 National Security Strategy document and its January 2018 National Defense Strategy document, both of which put an emphasis on renewed great power competition with China and Russia, as well as updated information on Chinese and Russian naval and other military capabilities and recent developments in new technologies, including those related to unmanned vehicles (UVs). Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both. Some observers, viewing statements by Navy officials, believe the new FSA in particular might shift the Navy's surface force to a more distributed architecture that includes a reduced proportion of large surface combatants (i.e., cruisers and destroyers), an increased proportion of small surface combatants (i.e., frigates and LCSs), and a newly created third tier of unmanned surface vehicles (USVs). Some observers believe the new FSA might also change the Navy's undersea force to a more distributed architecture that includes, in addition to attack submarines (SSNs) and bottom-based sensors, a new element of extremely large unmanned underwater vehicles (XLUUVs), which might be thought of as unmanned submarines. In presenting its proposed FY2020 budget, the Navy highlighted its plans for developing and procuring USVs and UUVs in coming years. Shifting to a more distributed force architecture, Navy officials have suggested, could be appropriate for implementing the Navy's new overarching operational concept, called Distributed Maritime Operations (DMO). Observers view DMO as a response to both China's improving maritime anti-access/area denial capabilities (which include advanced weapons for attacking Navy surface ships) and opportunities created by new technologies, including technologies for UVs and for networking Navy ships, aircraft, unmanned vehicles, and sensors into distributed battle networks. Figure 1 shows a Navy briefing slide depicting the Navy's potential new surface force architecture, with each sphere representing a manned ship or a USV. Consistent with Figure 1 , the Navy's 355-ship goal, reflecting the current force architecture, calls for a Navy with twice as many large surface combatants as small surface combatants. Figure 1 suggests that the potential new surface force architecture could lead to the obverse—a planned force mix that calls for twice as many small surface combatants than large surface combatants—along with a new third tier of numerous USVs. Observers believe the new FSA might additionally change the top-level metric used to express the Navy's force-level goal or the method used to count the size of the Navy, or both, to include large USVs and large UUVs. Table 2 shows the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan. The table also shows, for reference purposes, the ships funded for procurement in FY2019. The figures in the table reflect a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019. Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019. As shown in Table 2 , the Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. If the Navy had listed CVN-81 as a ship procured in FY2019 rather than a ship to be procured in FY2020, then the total numbers of ships in FY2019 and FY2020 would be 14 and 11, respectively. As also shown Table 2 , the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year. The Navy's FY2019 budget submission also included a total of 55 ships in the period FY2020-FY2024, but the mix of ships making up the total of 55 for these years has been changed under the FY2020 budget submission to include one additional attack submarine, one additional FFG(X) frigate, and two (rather than four) LPD-17 Flight II amphibious ships over the five-year period. The FY2020 submission also makes some changes within the five-year period to annual procurement quantities for DDG-51 destroyers, ESBs, and TAO-205s without changing the five-year totals for these programs. Compared to what was projected for FY2020 itself under the FY2019 budget submission, the FY2020 request accelerates from FY2023 to FY2020 the aircraft carrier CVN-81 (as a result of Congress's action to authorize the ship in FY2019), adds a third attack submarine, accelerates from FY2021 into FY2020 a third DDG-51, defers from FY2020 to FY2021 an LPD-17 Flight II amphibious ship to FY2021, defers from FY2020 to FY2023 an ESB ship, and accelerates from FY2021 to FY2020 a second TAO-205 class oiler. Table 3 shows the Navy's FY2020-FY2049 30-year shipbuilding plan. In devising a 30-year shipbuilding plan to move the Navy toward its ship force-structure goal, key assumptions and planning factors include but are not limited to ship construction times and service lives, estimated ship procurement costs, projected shipbuilding funding levels, and industrial-base considerations. As shown in Table 3 , the Navy's FY2020 30-year shipbuilding plan includes 304 new ships, or an average of about 10 per year. Table 4 shows the Navy's projection of ship force levels for FY2020-FY2049 that would result from implementing the FY2020 30-year (FY2020-FY2049) 30-year shipbuilding plan shown in Table 3 . As shown in Table 4 , if the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034. This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan. This is not primarily because the FY2020 30-year plan includes more ships than did the FY2019 plan: The total of 304 ships in the FY2020 plan is only three ships higher than the total of 301 ships in the FY2019 plan. Instead, it is primarily due to a decision announced by the Navy in April 2018, after the FY2019 budget was submitted, to increase the service lives of all DDG-51 destroyers—both those existing and those to be built in the future—to 45 years. Prior to this decision, the Navy had planned to keep older DDG-51s (referred to as the Flight I/II DDG-51s) in service for 35 years and newer DDG-51s (the Flight II/III DDG-51s) for 40 years. Figure 2 shows the Navy's projections for the total number of ships in the Navy under the Navy's FY2019 and FY2020 budget submissions. As can be seen in the figure, the Navy projected under the FY2019 plan that the fleet would not reach a total of 355 ships any time during the 30-year period. The projected number of aircraft carriers in Table 4 , the projected total number of all ships in Table 4 , and the line showing the total number of ships under the Navy's FY2020 budget submission in Figure 2 all reflect the Navy's proposal, under its FY2020 budget submission, to not fund the mid-life nuclear refueling overhaul (called a refueling complex overhaul, or RCOH) of the aircraft carrier Harry S. Truman (CVN-75), and to instead retire CVN-75 around FY2024. On April 30, 2019, however, the Administration announced that it was withdrawing this proposal from the Navy's FY2020 budget submission. The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 in service past FY2024. As a result of the withdrawal of its proposal regarding the CVN-75 RCOH, the projected number of aircraft carriers and consequently the projected total number of all ships are now one ship higher for the period FY2022-FY2047 than what is shown in Table 4 , and the line in Figure 2 would be adjusted upward by one ship for those years. (The figures in Table 4 are left unchanged from what is shown in the FY2020 budget submission so as to accurately reflect what is shown in that budget submission.) As shown in Table 4 , although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA. Among other things, the Navy will have more than the required number of large surface combatants (i.e., cruisers and destroyers) from FY2030 through FY2040 (a consequence of the decision to extend the service lives of DDG-51s to 45 years), fewer than the required number of aircraft carriers through the end of the 30-year period, fewer than the required number of attack submarines through FY2047, and fewer than the required number of amphibious ships through the end of the 30-year period. The Navy acknowledges that the mix of ships will not match that called for by the 2016 FSA but states that if the Navy is going to have too many ships of a certain kind, DDG-51s are not a bad type of ship to have too many of, because they are very capable multi-mission ships. One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways. As discussed earlier, Navy officials have suggested in their public remarks that this new FSA could shift the Navy toward a more distributed force architecture, which could change the 355-ship figure, the planned mix of ships, or both. The issue for Congress is how to assess the appropriateness of the Navy's FY2020 shipbuilding plans when a key measuring stick for conducting that assessment—the Navy's force-level goal and planned force mix—might soon change. Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan. This issue has been a matter of oversight focus for several years, and particularly since the enactment in 2011 of the Budget Control Act, or BCA ( S. 365 / P.L. 112-25 of August 2, 2011). Observers have been particularly concerned about the plan's prospective affordability during the decade or so from the mid-2020s through the mid-2030s, when the plan calls for procuring Columbia-class ballistic missile submarines as well as replacements for large numbers of retiring attack submarines, cruisers, and destroyers. Figure 3 shows, in a graphic form, the Navy's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2020 30-year shipbuilding plan. The figure shows that during the period from the mid-2020s through the mid-2030s, the Navy estimates that implementing the FY2020 30-year shipbuilding plan would require roughly $24 billion per year in shipbuilding funds. As discussed in the CRS report on the Columbia-class program, the Navy since 2013 has identified the Columbia-class program as its top program priority, meaning that it is the Navy's intention to fully fund this program, if necessary at the expense of other Navy programs, including other Navy shipbuilding programs. This led to concerns that in a situation of finite Navy shipbuilding budgets, funding requirements for the Columbia-class program could crowd out funding for procuring other types of Navy ships. These concerns in turn led to the creation by Congress of the National Sea-Based Deterrence Fund (NSBDF), a fund in the DOD budget that is intended in part to encourage policymakers to identify funding for the Columbia-class program from sources across the entire DOD budget rather than from inside the Navy's budget alone. Several years ago, when concerns arose about the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs, the Navy's shipbuilding budget was roughly $14 billion per year, and the roughly $7 billion per year that the Columbia-class program is projected to require from the mid-2020s to the mid-2030s (see Figure 3 ) represented roughly one-half of that total. With the Navy's shipbuilding budget having grown in more recent years to a total of roughly $24 billion per year, the $7 billion per year projected to be required by the Columbia-class program during those years does not loom proportionately as large as it once did in the Navy's shipbuilding budget picture. Even so, some concerns remain regarding the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs. If one or more Navy ship designs turn out to be more expensive to build than the Navy estimates, then the projected funding levels shown in Figure 3 would not be sufficient to procure all the ships shown in the 30-year shipbuilding plan. As detailed by CBO and GAO, lead ships in Navy shipbuilding programs in many cases have turned out to be more expensive to build than the Navy had estimated. Ship designs that can be viewed as posing a risk of being more expensive to build than the Navy estimates include Gerald R. Ford (CVN-78) class aircraft carriers, Columbia-class ballistic missile submarines, Virginia-class attack submarines equipped with the Virginia Payload Module (VPM), Flight III versions of the DDG-51 destroyer, FFG(X) frigates, LPD-17 Flight II amphibious ships, and John Lewis (TAO-205) class oilers, as well as other new classes of ships that the Navy wants to begin procuring years from now. The statute that requires the Navy to submit a 30-year shipbuilding plan each year (10 U.S.C. 231) also requires CBO to submit its own independent analysis of the potential cost of the 30-year plan (10 U.S.C. 231[d]). CBO is now preparing its estimate of the cost of the Navy's FY2020 30-year shipbuilding plan. In the meantime, Figure 4 shows, in a graphic form, CBO's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2019 30-year shipbuilding plan. This figure might be compared to the Navy's estimate of its FY2020 30-year plan as shown in Figure 3 , although doing so poses some apples-vs.-oranges issues, as the Navy's FY2019 and FY2020 30-year plans do not cover exactly the same 30-year periods, and for the years they do have in common, there are some differences in types and numbers of ships to be procured in certain years. CBO analyses of past Navy 30-year shipbuilding plans have generally estimated the cost of implementing those plans to be higher than what the Navy estimated. Consistent with that past pattern, as shown in Table 5 , CBO's estimate of the cost to implement the Navy's FY2019 30-year (FY2019-FY2048) shipbuilding plan is about 27% higher than the Navy's estimated cost for the FY2019 plan. ( Table 5 does not pose an apples-vs.-oranges issue, because both the Navy and CBO estimates in this table are for the Navy's FY2019 30-year plan.) More specifically, as shown in the table, CBO estimated that the cost of the first 10 years of the FY2019 30-year plan would be about 2% higher than the Navy's estimate; that the cost of the middle 10 years of the plan would be about 13% higher than the Navy's estimate; and that the cost of the final 10 years of the plan would be about 27% higher than the Navy's estimate. The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is due in part to a technical difference between CBO and the Navy regarding the treatment of inflation. This difference compounds over time, making it increasingly important as a factor in the difference between CBO's estimates and the Navy's estimates the further one goes into the 30-year period. In other words, other things held equal, this factor tends to push the CBO and Navy estimates further apart as one proceeds from the earlier years of the plan to the later years of the plan. The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is also due to differences between CBO and the Navy about the costs of certain ship classes, particularly classes that are projected to be procured starting years from now. The designs of these future ship classes are not yet determined, creating more potential for CBO and the Navy to come to differing conclusions regarding their potential cost. For the FY2019 30-year plan, the largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of SSNs that the Navy wants to begin procuring in FY2034 as the successor to the Virginia-class SSN design. This new class of SSN, CBO says, accounted for 42% of the difference between the CBO and Navy estimates for the FY2019 30-year plan, in part because there were a substantial number of these SSNs in the plan, and because those ships occur in the latter years of the plan, where the effects of the technical difference between CBO and the Navy regarding the treatment of inflation show more strongly. The second-largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of large surface combatant (i.e., cruiser or destroyer) that the Navy wants to begin procuring in the future, which accounted for 20% of the difference, for reasons that are similar to those mentioned above for the new class of SSNs. The third-largest source of difference was the new class of frigates (FFG[X]s) that the Navy wants to begin procuring in FY2020, which accounts for 9% of the difference. The remaining 29% of difference between the CBO and Navy estimates was accounted for collectively by several other shipbuilding programs, each of which individually accounts for between 1% and 4% of the difference. The Columbia-class program, which accounted for 4%, is one of the programs in this final group. Detailed coverage of legislative activity on certain Navy shipbuilding programs (including funding levels, legislative provisions, and report language) can be found in the following CRS reports: CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of the Administration's FY2020 budget proposal, which the Administration withdrew on April 30, to not fund a mid-life refueling overhaul [called a refueling complex overhaul, or RCOH] for the aircraft carrier Harry S. Truman [CVN-75], and to retire CVN-75 around FY2024.) CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R43543, Navy LPD-17 Flight II Amphibious Ship Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of funding for the procurement of an amphibious assault ship called LHA-9.) CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke. Legislative activity on individual Navy shipbuilding programs that are not covered in detail in the above reports is covered below. The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships: 1 Gerald R. Ford (CVN-78) class aircraft carrier; 3 Virginia-class attack submarines; 3 DDG-51 class Aegis destroyers; 1 FFG(X) frigate; 2 John Lewis (TAO-205) class oilers; and 2 TATS towing, salvage, and rescue ships. As noted earlier, the above list of 12 ships reflects a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019. Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019. The Navy's proposed FY2020 shipbuilding budget also requests funding for ships that have been procured in prior fiscal years, and ships that are to be procured in future fiscal years, as well as funding for activities other than the building of new Navy ships. Table 6 summarizes congressional action on the Navy's FY2020 funding request for Navy shipbuilding. The table shows the amounts requested and congressional changes to those requested amounts. A blank cell in a filled-in column showing congressional changes to requested amounts indicates no change from the requested amount. Appendix A. Strategic and Budgetary Context This appendix presents some brief comments on elements of the strategic and budgetary context in which U.S. Navy force structure and shipbuilding plans may be considered. Shift in International Security Environment World events have led some observers, starting in late 2013, to conclude that the international security environment has undergone a shift over the past several years from the familiar post-Cold War era of the past 20-25 years, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different strategic situation that features, among other things, renewed great power competition with China and Russia, and challenges to elements of the U.S.-led international order that has operated since World War II. This situation is discussed further in another CRS report. World Geography and U.S. Grand Strategy Discussion of the above-mentioned shift in the international security environment has led to a renewed emphasis in discussions of U.S. security and foreign policy on grand strategy and geopolitics. From a U.S. perspective on grand strategy and geopolitics, it can be noted that most of the world's people, resources, and economic activity are located not in the Western Hemisphere, but in the other hemisphere, particularly Eurasia. In response to this basic feature of world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, on the grounds that such a hegemon could represent a concentration of power strong enough to threaten core U.S. interests by, for example, denying the United States access to some of the other hemisphere's resources and economic activity. Although U.S. policymakers have not often stated this key national strategic goal explicitly in public, U.S. military (and diplomatic) operations in recent decades—both wartime operations and day-to-day operations—can be viewed as having been carried out in no small part in support of this key goal. U.S. Grand Strategy and U.S. Naval Forces As noted above, in response to basic world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another. The traditional U.S. goal of preventing the emergence of a regional hegemon in one part of Eurasia or another has been a major reason why the U.S. military is structured with force elements that enable it to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. Force elements associated with this goal include, among other things, an Air Force with significant numbers of long-range bombers, long-range surveillance aircraft, long-range airlift aircraft, and aerial refueling tankers, and a Navy with significant numbers of aircraft carriers, nuclear-powered attack submarines, large surface combatants, large amphibious ships, and underway replenishment ships. The United States is the only country in the world that has designed its military to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. The other countries in the Western Hemisphere do not design their forces to do this because they cannot afford to, and because the United States has been, in effect, doing it for them. Countries in the other hemisphere do not design their forces to do this for the very basic reason that they are already in the other hemisphere, and consequently instead spend their defense money on forces that are tailored largely for influencing events in their own local region. The fact that the United States has designed its military to do something that other countries do not design their forces to do—cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival—can be important to keep in mind when comparing the U.S. military to the militaries of other nations. For example, in observing that the U.S. Navy has 11 aircraft carriers while other countries have no more than one or two, it can be noted other countries do not need a significant number of aircraft carriers because, unlike the United States, they are not designing their forces to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. As another example, it is sometimes noted, in assessing the adequacy of U.S. naval forces, that U.S. naval forces are equal in tonnage to the next dozen or more navies combined, and that most of those next dozen or more navies are the navies of U.S. allies. Those other fleets, however, are mostly of Eurasian countries, which do not design their forces to cross to the other side of the world and then conduct sustained, large-scale military operations upon arrival. The fact that the U.S. Navy is much bigger than allied navies does not necessarily prove that U.S. naval forces are either sufficient or excessive; it simply reflects the differing and generally more limited needs that U.S. allies have for naval forces. (It might also reflect an underinvestment by some of those allies to meet even their more limited naval needs.) Countries have differing needs for naval and other military forces. The United States, as a country located in the Western Hemisphere that has adopted a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, has defined a need for naval and other military forces that is quite different from the needs of allies that are located in Eurasia. The sufficiency of U.S. naval and other military forces consequently is best assessed not through comparison to the militaries of other countries, but against U.S. strategic goals. More generally, from a geopolitical perspective, it can be noted that that U.S. naval forces, while not inexpensive, give the United States the ability to convert the world's oceans—a global commons that covers more than two-thirds of the planet's surface—into a medium of maneuver and operations for projecting U.S. power ashore and otherwise defending U.S. interests around the world. The ability to use the world's oceans in this manner—and to deny other countries the use of the world's oceans for taking actions against U.S. interests—constitutes an immense asymmetric advantage for the United States. This point would be less important if less of the world were covered by water, or if the oceans were carved into territorial blocks, like the land. Most of the world, however, is covered by water, and most of those waters are international waters, where naval forces can operate freely. The point, consequently, is not that U.S. naval forces are intrinsically special or privileged—it is that they have a certain value simply as a consequence of the physical and legal organization of the planet. Uncertainty Regarding Future U.S. Role in the World The overall U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs. A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II. In addition to promoting and defending the open international order, the overall U.S. role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world. Certain statements and actions from the Trump Administration have led to uncertainty about the Administration's intentions regarding the U.S. role in the world. Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U.S. role in one or more ways. A change in the overall U.S. role could have profound implications for DOD strategy, budgets, plans, and programs, including the planned size and structure of the Navy. Declining U.S. Technological and Qualitative Edge DOD officials have expressed concern that the technological and qualitative edge that U.S. military forces have had relative to the military forces of other countries is being narrowed by improving military capabilities in other countries. China's improving military capabilities are a primary contributor to that concern. Russia's rejuvenated military capabilities are an additional contributor. DOD in recent years has taken a number of actions to arrest and reverse the decline in the U.S. technological and qualitative edge. Challenge to U.S. Sea Control and U.S. Position in Western Pacific Observers of Chinese and U.S. military forces view China's improving naval capabilities as posing a potential challenge in the Western Pacific to the U.S. Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U.S. Navy has faced since the end of the Cold War. More broadly, these observers view China's naval capabilities as a key element of an emerging broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific. Longer Ship Deployments U.S. Navy officials have testified that fully meeting requests from U.S. regional combatant commanders (CCDRs) for forward-deployed U.S. naval forces would require a Navy much larger than today's fleet. For example, Navy officials testified in March 2014 that a Navy of 450 ships would be required to fully meet CCDR requests for forward-deployed Navy forces. CCDR requests for forward-deployed U.S. Navy forces are adjudicated by DOD through a process called the Global Force Management Allocation Plan. The process essentially makes choices about how best to apportion a finite number forward-deployed U.S. Navy ships among competing CCDR requests for those ships. Even with this process, the Navy has lengthened the deployments of some ships in an attempt to meet policymaker demands for forward-deployed U.S. Navy ships. Although Navy officials are aiming to limit ship deployments to seven months, Navy ships in recent years have frequently been deployed for periods of eight months or more. Limits on Defense Spending in Budget Control Act of 2011 as Amended Limits on the \"base\" portion of the U.S. defense budget established by Budget Control Act of 2011, or BCA ( S. 365 / P.L. 112-25 of August 2, 2011), as amended, combined with some of the considerations above, have led to discussions among observers about how to balance competing demands for finite U.S. defense funds, and about whether programs for responding to China's military modernization effort can be adequately funded while also adequately funding other defense-spending priorities, such as initiatives for responding to Russia's actions in Ukraine and elsewhere in Europe and U.S. operations for countering the Islamic State organization in the Middle East. Appendix B. Earlier Navy Force-Structure Goals Dating Back to 2001 The table below shows earlier Navy force-structure goals dating back to 2001. The 308-ship force-level goal of March 2015, shown in the first column of the table, is the goal that was replaced by the 355-ship force-level goal released in December 2016. Appendix C. Comparing Past Ship Force Levels to Current or Potential Future Ship Force Levels In assessing the appropriateness of the current or potential future number of ships in the Navy, observers sometimes compare that number to historical figures for total Navy fleet size. Historical figures for total fleet size, however, can be a problematic yardstick for assessing the appropriateness of the current or potential future number of ships in the Navy, particularly if the historical figures are more than a few years old, because the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time; and the number of ships in the fleet in an earlier year might itself have been inappropriate (i.e., not enough or more than enough) for meeting the Navy's mission requirements in that year. Regarding the first bullet point above, the Navy, for example, reached a late-Cold War peak of 568 battle force ships at the end of FY1987, and as of May 7, 2019, included a total of 289 battle force ships. The FY1987 fleet, however, was intended to meet a set of mission requirements that focused on countering Soviet naval forces at sea during a potential multitheater NATO-Warsaw Pact conflict, while the May 2019 fleet is intended to meet a considerably different set of mission requirements centered on influencing events ashore by countering both land- and sea-based military forces of China, Russia, North Korea, and Iran, as well as nonstate terrorist organizations. In addition, the Navy of FY1987 differed substantially from the May 2019 fleet in areas such as profusion of precision-guided air-delivered weapons, numbers of Tomahawk-capable ships, and the sophistication of C4ISR systems and networking capabilities. In coming years, Navy missions may shift again, and the capabilities of Navy ships will likely have changed further by that time due to developments such as more comprehensive implementation of networking technology, increased use of ship-based unmanned vehicles, and the potential fielding of new types of weapons such as lasers or electromagnetic rail guns. The 568-ship fleet of FY1987 may or may not have been capable of performing its stated missions; the 289-ship fleet of May 2019 may or may not be capable of performing its stated missions; and a fleet years from now with a certain number of ships may or may not be capable of performing its stated missions. Given changes over time in mission requirements, ship mixes, and technologies, however, these three issues are to a substantial degree independent of one another. For similar reasons, trends over time in the total number of ships in the Navy are not necessarily a reliable indicator of the direction of change in the fleet's ability to perform its stated missions. An increasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform its stated missions is increasing, because the fleet's mission requirements might be increasing more rapidly than ship numbers and average ship capability. Similarly, a decreasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform stated missions is decreasing, because the fleet's mission requirements might be declining more rapidly than numbers of ships, or because average ship capability and the percentage of time that ships are in deployed locations might be increasing quickly enough to more than offset reductions in total ship numbers. Regarding the second of the two bullet points above, it can be noted that comparisons of the size of the fleet today with the size of the fleet in earlier years rarely appear to consider whether the fleet was appropriately sized in those earlier years (and therefore potentially suitable as a yardstick of comparison), even though it is quite possible that the fleet in those earlier years might not have been appropriately sized, and even though there might have been differences of opinion among observers at that time regarding that question. Just as it might not be prudent for observers years from now to tacitly assume that the 286-ship Navy of September 2018 was appropriately sized for meeting the mission requirements of 2018, even though there were differences of opinion among observers on that question, simply because a figure of 286 ships appears in the historical records for 2016, so, too, might it not be prudent for observers today to tacitly assume that the number of ships of the Navy in an earlier year was appropriate for meeting the Navy's mission requirements that year, even though there might have been differences of opinion among observers at that time regarding that question, simply because the size of the Navy in that year appears in a table like Table H-1 . Previous Navy force structure plans, such as those shown in Table B-1 , might provide some insight into the potential adequacy of a proposed new force-structure plan, but changes over time in mission requirements, technologies available to ships for performing missions, and other force-planning factors, as well as the possibility that earlier force-structure plans might not have been appropriate for meeting the mission demands of their times, suggest that some caution should be applied in using past force structure plans for this purpose, particularly if those past force structure plans are more than a few years old. The Reagan-era goal for a 600-ship Navy, for example, was designed for a Cold War set of missions focusing on countering Soviet naval forces at sea, which is not an appropriate basis for planning the Navy today, and there was considerable debate during those years as to the appropriateness of the 600-ship goal. Appendix D. Industrial Base Ability for, and Employment Impact of, Additional Shipbuilding Work This appendix presents background information on the ability of the industrial base to take on the additional shipbuilding work associated with achieving and maintaining the Navy's 355-ship force-level goal and on the employment impact of additional shipbuilding work. Industrial Base Ability The U.S. shipbuilding industrial base has some unused capacity to take on increased Navy shipbuilding work, particularly for certain kinds of surface ships, and its capacity could be increased further over time to support higher Navy shipbuilding rates. Navy shipbuilding rates could not be increased steeply across the board overnight—time (and investment) would be needed to hire and train additional workers and increase production facilities at shipyards and supplier firms, particularly for supporting higher rates of submarine production. Depending on their specialties, newly hired workers could be initially less productive per unit of time worked than more experienced workers. Some parts of the shipbuilding industrial base, such as the submarine construction industrial base, could face more challenges than others in ramping up to the higher production rates required to build the various parts of the 355-ship fleet. Over a period of a few to several years, with investment and management attention, Navy shipbuilding could ramp up to higher rates for achieving a 355-ship fleet over a period of 20-30 years. An April 2017 CBO report stated that all seven shipyards [currently involved in building the Navy's major ships] would need to increase their workforces and several would need to make improvements to their infrastructure in order to build ships at a faster rate. However, certain sectors face greater obstacles in constructing ships at faster rates than others: Building more submarines to meet the goals of the 2016 force structure assessment would pose the greatest challenge to the shipbuilding industry. Increasing the number of aircraft carriers and surface combatants would pose a small to moderate challenge to builders of those vessels. Finally, building more amphibious ships and combat logistics and support ships would be the least problematic for the shipyards. The workforces across those yards would need to increase by about 40 percent over the next 5 to 10 years. Managing the growth and training of those new workforces while maintaining the current standard of quality and efficiency would represent the most significant industrywide challenge. In addition, industry and Navy sources indicate that as much as $4 billion would need to be invested in the physical infrastructure of the shipyards to achieve the higher production rates required under the [notional] 15-year and 20-year [buildup scenarios examined by CBO]. Less investment would be needed for the [notional] 25-year or 30-year [buildup scenarios examined by CBO]. A January 13, 2017, press report states the following: The Navy's production lines are hot and the work to prepare them for the possibility of building out a much larger fleet would be manageable, the service's head of acquisition said Thursday. From a logistics perspective, building the fleet from its current 274 ships to 355, as recommended in the Navy's newest force structure assessment in December, would be straightforward, Assistant Secretary of the Navy for Research, Development and Acquisition Sean Stackley told reporters at the Surface Navy Association's annual symposium. \"By virtue of maintaining these hot production lines, frankly, over the last eight years, our facilities are in pretty good shape,\" Stackley said. \"In fact, if you talked to industry, they would say we're underutilizing the facilities that we have.\" The areas where the Navy would likely have to adjust \"tooling\" to answer demand for a larger fleet would likely be in Virginia-class attack submarines and large surface combatants, the DDG-51 guided missile destroyers—two ship classes likely to surge if the Navy gets funding to build to 355 ships, he said. \"Industry's going to have to go out and procure special tooling associated with going from current production rates to a higher rate, but I would say that's easily done,\" he said. Another key, Stackley said, is maintaining skilled workers—both the builders in the yards and the critical supply-chain vendors who provide major equipment needed for ship construction. And, he suggested, it would help to avoid budget cuts and other events that would force workforce layoffs. \"We're already prepared to ramp up,\" he said. \"In certain cases, that means not laying off the skilled workforce we want to retain.\" A January 17, 2017, press report states the following: Building stable designs with active production lines is central to the Navy's plan to grow to 355 ships. \"if you look at the 355-ship number, and you study the ship classes (desired), the big surge is in attack submarines and large surface combatants, which today are DDG-51 (destroyers),\" the Assistant Secretary of the Navy, Sean Stackley, told reporters at last week's Surface Navy Association conference. Those programs have proven themselves reliable performers both at sea and in the shipyards. From today's fleet of 274 ships, \"we're on an irreversible path to 308 by 2021. Those ships are already in construction,\" said Stackley. \"To go from there to 355, virtually all those ships are currently in production, with some exceptions: Ohio Replacement, (we) just got done the Milestone B there (to move from R&D into detailed design); and then upgrades to existing platforms. So we have hot production lines that will take us to that 355-ship Navy.\" A January 24, 2017, press report states the following: Navy officials say a recently determined plan to increase its fleet size by adding more new submarines, carriers and destroyers is \"executable\" and that early conceptual work toward this end is already underway.... Although various benchmarks will need to be reached in order for this new plan to come to fruition, such as Congressional budget allocations, Navy officials do tell Scout Warrior that the service is already working—at least in concept—on plans to vastly enlarge the fleet. Findings from this study are expected to inform an upcoming 2018 Navy Shipbuilding Plan, service officials said. A January 12, 2017, press report states the following: Brian Cuccias, president of Ingalls Shipbuilding [a shipyard owned by Huntington Ingalls Industries (HII) that builds Navy destroyers and amphibious ships as well as Coast Guard cutters], said Ingalls, which is currently building 10 ships for four Navy and Coast Guard programs at its 800-acre facility in Pascagoula, Miss., could build more because it is using only 70 to 75 percent of its capacity. A March 2017 press report states the following: As the Navy calls for a larger fleet, shipbuilders are looking toward new contracts and ramping up their yards to full capacity.... The Navy is confident that U.S. shipbuilders will be able to meet an increased demand, said Ray Mabus, then-secretary of the Navy, during a speech at the Surface Navy Association's annual conference in Arlington, Virginia. They have the capacity to \"get there because of the ships we are building today,\" Mabus said. \"I don't think we could have seven years ago.\" Shipbuilders around the United States have \"hot\" production lines and are manufacturing vessels on multi-year or block buy contracts, he added. The yards have made investments in infrastructure and in the training of their workers. \"We now have the basis ... [to] get to that much larger fleet,\" he said.... Shipbuilders have said they are prepared for more work. At Ingalls Shipbuilding—a subsidiary of Huntington Ingalls Industries—10 ships are under construction at its Pascagoula, Mississippi, yard, but it is under capacity, said Brian Cuccias, the company's president. The shipbuilder is currently constructing five guided-missile destroyers, the latest San Antonio-class amphibious transport dock ship, and two national security cutters for the Coast Guard. \"Ingalls is a very successful production line right now, but it has the ability to actually produce a lot more in the future,\" he said during a briefing with reporters in January. The company's facility is currently operating at 75 percent capacity, he noted.... Austal USA—the builder of the Independence-variant of the littoral combat ship and the expeditionary fast transport vessel—is also ready to increase its capacity should the Navy require it, said Craig Perciavalle, the company's president. The latest discussions are \"certainly something that a shipbuilder wants to hear,\" he said. \"We do have the capability of increasing throughput if the need and demand were to arise, and then we also have the ability with the present workforce and facility to meet a different mix that could arise as well.\" Austal could build fewer expeditionary fast transport vessels and more littoral combat ships, or vice versa, he added. \"The key thing for us is to keep the manufacturing lines hot and really leverage the momentum that we've gained on both of the programs,\" he said. The company—which has a 164-acre yard in Mobile, Alabama—is focused on the extension of the LCS and expeditionary fast transport ship program, but Perciavalle noted that it could look into manufacturing other types of vessels. \"We do have excess capacity to even build smaller vessels … if that opportunity were to arise and we're pursuing that,\" he said. Bryan Clark, a naval analyst at the Center for Strategic and Budgetary Assessments, a Washington, D.C.-based think tank, said shipbuilders are on average running between 70 and 80 percent capacity. While they may be ready to meet an increased demand for ships, it would take time to ramp up their workforces. However, the bigger challenge is the supplier industrial base, he said. \"Shipyards may be able to build ships but the supplier base that builds the pumps … and the radars and the radios and all those other things, they don't necessarily have that ability to ramp up,\" he said. \"You would need to put some money into building up their capacity.\" That has to happen now, he added. Rear Adm. William Gallinis, program manager for program executive office ships, said what the Navy must be \"mindful of is probably our vendor base that support the shipyards.\" Smaller companies that supply power electronics and switchboards could be challenged, he said. \"Do we need to re-sequence some of the funding to provide some of the facility improvements for some of the vendors that may be challenged? My sense is that the industrial base will size to the demand signal. We just need to be mindful of how we transition to that increased demand signal,\" he said. The acquisition workforce may also see an increased amount of stress, Gallinis noted. \"It takes a fair amount of experience and training to get a good contracting officer to the point to be [able to] manage contracts or procure contracts.\" \"But I don't see anything that is insurmountable,\" he added. At a May 24, 2017, hearing before the Seapower subcommittee of the Senate Armed Services Committee on the industrial-base aspects of the Navy's 355-ship goal, John P. Casey, executive vice president–marine systems, General Dynamics Corporation (one of the country's two principal builders of Navy ships) stated the following: It is our belief that the Nation's shipbuilding industrial base can scale-up hot production lines for existing ships and mobilize additional resources to accomplish the significant challenge of achieving the 355-ship Navy as quickly as possible.... Supporting a plan to achieve a 355-ship Navy will be the most challenging for the nuclear submarine enterprise. Much of the shipyard and industrial base capacity was eliminated following the steep drop-off in submarine production that occurred with the cancellation of the Seawolf Program in 1992. The entire submarine industrial base at all levels of the supply chain will likely need to recapitalize some portion of its facilities, workforce, and supply chain just to support the current plan to build the Columbia Class SSBN program, while concurrently building Virginia Class SSNs. Additional SSN procurement will require industry to expand its plans and associated investment beyond the level today.... Shipyard labor resources include the skilled trades needed to fabricate, build and outfit major modules, perform assembly, test and launch of submarines, and associated support organizations that include planning, material procurement, inspection, quality assurance, and ship certification. Since there is no commercial equivalency for Naval nuclear submarine shipbuilding, these trade resources cannot be easily acquired in large numbers from other industries. Rather, these shipyard resources must be acquired and developed over time to ensure the unique knowledge and know-how associated with nuclear submarine shipbuilding is passed on to the next generation of shipbuilders. The mechanisms of knowledge transfer require sufficient lead time to create the proficient, skilled craftsmen in each key trade including welding, electrical, machining, shipfitting, pipe welding, painting, and carpentry, which are among the largest trades that would need to grow to support increased demand. These trades will need to be hired in the numbers required to support the increased workload. Both shipyards have scalable processes in place to acquire, train, and develop the skilled workforce they need to build nuclear ships. These processes and associated training facilities need to be expanded to support the increased demand. As with the shipyards, the same limiting factors associated with facilities, workforce, and supply chain also limit the submarine unique first tier suppliers and sub-tiers in the industrial base for which there is no commercial equivalency.... The supply base is the third resource that will need to be expanded to meet the increased demand over the next 20 years. During the OHIO, 688 and SEAWOLF construction programs, there were over 17,000 suppliers supporting submarine construction programs. That resource base was \"rationalized\" during submarine low rate production over the last 20 years. The current submarine industrial base reflects about 5,000 suppliers, of which about 3,000 are currently active (i.e., orders placed within the last 5 years), 80% of which are single or sole source (based on $). It will take roughly 20 years to build the 12 Columbia Class submarines that starts construction in FY21. The shipyards are expanding strategic sourcing of appropriate non-core products (e.g., decks, tanks, etc.) in order to focus on core work at each shipyard facility (e.g., module outfitting and assembly). Strategic sourcing will move demand into the supply base where capacity may exist or where it can be developed more easily. This approach could offer the potential for cost savings by competition or shifting work to lower cost work centers throughout the country. Each shipyard has a process to assess their current supply base capacity and capability and to determine where it would be most advantageous to perform work in the supply base.... Achieving the increased rate of production and reducing the cost of submarines will require the Shipbuilders to rely on the supply base for more non-core products such as structural fabrication, sheet metal, machining, electrical, and standard parts. The supply base must be made ready to execute work with submarine-specific requirements at a rate and volume that they are not currently prepared to perform. Preparing the supply base to execute increased demand requires early non-recurring funding to support cross-program construction readiness and EOQ funding to procure material in a manner that does not hold up existing ship construction schedules should problems arise in supplier qualification programs. This requires longer lead times (estimates of three years to create a new qualified, critical supplier) than the current funding profile supports.... We need to rely on market principles to allow suppliers, the shipyards and GFE material providers to sort through the complicated demand equation across the multiple ship programs. Supplier development funding previously mentioned would support non-recurring efforts which are needed to place increased orders for material in multiple market spaces. Examples would include valves, build-to-print fabrication work, commodities, specialty material, engineering components, etc. We are engaging our marine industry associations to help foster innovative approaches that could reduce costs and gain efficiency for this increased volume.... Supporting the 355-ship Navy will require Industry to add capability and capacity across the entire Navy Shipbuilding value chain. Industry will need to make investment decisions for additional capital spend starting now in order to meet a step change in demand that would begin in FY19 or FY20. For the submarine enterprise, the step change was already envisioned and investment plans that embraced a growth trajectory were already being formulated. Increasing demand by adding additional submarines will require scaling facility and workforce development plans to operate at a higher rate of production. The nuclear shipyards would also look to increase material procurement proportionally to the increased demand. In some cases, the shipyard facilities may be constrained with existing capacity and may look to source additional work in the supply base where capacity exists or where there are competitive business advantages to be realized. Creating additional capacity in the supply base will require non-recurring investment in supplier qualification, facilities, capital equipment and workforce training and development. Industry is more likely to increase investment in new capability and capacity if there is certainty that the Navy will proceed with a stable shipbuilding plan. Positive signals of commitment from the Government must go beyond a published 30-year Navy Shipbuilding Plan and line items in the Future Years Defense Plan (FYDP) and should include: Multi-year contracting for Block procurement which provides stability in the industrial base and encourages investment in facilities and workforce development Funding for supplier development to support training, qualification, and facilitization efforts—Electric Boat and Newport News have recommended to the Navy funding of $400M over a three-year period starting in 2018 to support supplier development for the Submarine Industrial Base as part of an Integrated Enterprise Plan Extended Enterprise initiative Acceleration of Advance Procurement and/or Economic Order Quantities (EOQ) procurement from FY19 to FY18 for Virginia Block V Government incentives for construction readiness and facilities / special tooling for shipyard and supplier facilities, which help cash flow capital investment ahead of construction contract awards Procurement of additional production back-up (PBU) material to help ensure a ready supply of material to mitigate construction schedule risk.... So far, this testimony has focused on the Submarine Industrial Base, but the General Dynamics Marine Systems portfolio also includes surface ship construction. Unlike Electric Boat, Bath Iron Works and NASSCO are able to support increased demand without a significant increase in resources..... Bath Iron Works is well positioned to support the Administration's announced goal of increasing the size of the Navy fleet to 355 ships. For BIW that would mean increasing the total current procurement rate of two DDG 51s per year to as many as four DDGs per year, allocated equally between BIW and HII. This is the same rate that the surface combatant industrial base sustained over the first decade of full rate production of the DDG 51 Class (1989-1999).... No significant capital investment in new facilities is required to accommodate delivering two DDGs per year. However, additional funding will be required to train future shipbuilders and maintain equipment. Current hiring and training processes support the projected need, and have proven to be successful in the recent past. BIW has invested significantly in its training programs since 2014 with the restart of the DDG 51 program and given these investments and the current market in Maine, there is little concern of meeting the increase in resources required under the projected plans. A predictable and sustainable Navy workload is essential to justify expanding hiring/training programs. BIW would need the Navy's commitment that the Navy's plan will not change before it would proceed with additional hiring and training to support increased production. BIW's supply chain is prepared to support a procurement rate increase of up to four DDG 51s per year for the DDG 51 Program. BIW has long-term purchasing agreements in place for all major equipment and material for the DDG 51 Program. These agreements provide for material lead time and pricing, and are not constrained by the number of ships ordered in a year. BIW confirmed with all of its critical suppliers that they can support this increased procurement rate.... The Navy's Force Structure Assessment calls for three additional ESBs. Additionally, NASSCO has been asked by the Navy and the Congressional Budget Office (CBO) to evaluate its ability to increase the production rate of T-AOs to two ships per year. NASSCO has the capacity to build three more ESBs at a rate of one ship per year while building two T-AOs per year. The most cost effective funding profile requires funding ESB 6 in FY18 and the following ships in subsequent fiscal years to avoid increased cost resulting from a break in the production line. The most cost effective funding profile to enable a production rate of two T-AO ships per year requires funding an additional long lead time equipment set beginning in FY19 and an additional ship each year beginning in FY20. NASSCO must now reduce its employment levels due to completion of a series of commercial programs which resulted in the delivery of six ships in 2016. The proposed increase in Navy shipbuilding stabilizes NASSCO's workload and workforce to levels that were readily demonstrated over the last several years. Some moderate investment in the NASSCO shipyard will be needed to reach this level of production. The recent CBO report on the costs of building a 355-ship Navy accurately summarized NASSCO's ability to reach the above production rate stating, \"building more … combat logistics and support ships would be the least problematic for the shipyards.\" At the same hearing, Brian Cuccias, president, Ingalls Shipbuilding, Huntington Ingalls Industries (the country's other principal builder of Navy ships) stated the following: Qualifying to be a supplier is a difficult process. Depending on the commodity, it may take up to 36 months. That is a big burden on some of these small businesses. This is why creating sufficient volume and exercising early contractual authorization and advance procurement funding is necessary to grow the supplier base, and not just for traditional long-lead time components; that effort needs to expand to critical components and commodities that today are controlling the build rate of submarines and carriers alike. Many of our suppliers are small businesses and can only make decisions to invest in people, plant and tooling when they are awarded a purchase order. We need to consider how we can make commitments to suppliers early enough to ensure material readiness and availability when construction schedules demand it. With questions about the industry's ability to support an increase in shipbuilding, both Newport News and Ingalls have undertaken an extensive inventory of our suppliers and assessed their ability to ramp up their capacity. We have engaged many of our key suppliers to assess their ability to respond to an increase in production. The fortunes of related industries also impact our suppliers, and an increase in demand from the oil and gas industry may stretch our supply base. Although some low to moderate risk remains, I am convinced that our suppliers will be able to meet the forecasted Navy demand.... I strongly believe that the fastest results can come from leveraging successful platforms on current hot production lines. We commend the Navy's decision in 2014 to use the existing LPD 17 hull form for the LX(R), which will replace the LSD-class amphibious dock landing ships scheduled to retire in the coming years. However, we also recommend that the concept of commonality be taken even further to best optimize efficiency, affordability and capability. Specifically, rather than continuing with a new design for LX(R) within the \"walls\" of the LPD hull, we can leverage our hot production line and supply chain and offer the Navy a variant of the existing LPD design that satisfies the aggressive cost targets of the LX(R) program while delivering more capability and survivability to the fleet at a significantly faster pace than the current program. As much as 10-15 percent material savings can be realized across the LX(R) program by purchasing respective blocks of at least five ships each under a multi-year procurement (MYP) approach. In the aggregate, continuing production with LPD 30 in FY18, coupled with successive MYP contracts for the balance of ships, may yield savings greater than $1 billion across an 11-ship LX(R) program. Additionally, we can deliver five LX(R)s to the Navy and Marine Corps in the same timeframe that the current plan would deliver two, helping to reduce the shortfall in amphibious warships against the stated force requirement of 38 ships. Multi-ship procurements, whether a formal MYP or a block-buy, are a proven way to reduce the price of ships. The Navy took advantage of these tools on both Virginia-class submarines and Arleigh Burke-class destroyers. In addition to the LX(R) program mentioned above, expanding multi-ship procurements to other ship classes makes sense.... The most efficient approach to lower the cost of the Ford class and meet the goal of an increased CVN fleet size is also to employ a multi-ship procurement strategy and construct these ships at three-year intervals. This approach would maximize the material procurement savings benefit through economic order quantities procurement and provide labor efficiencies to enable rapid acquisition of a 12-ship CVN fleet. This three-ship approach would save at least $1.5 billion, not including additional savings that could be achieved from government-furnished equipment. As part of its Integrated Enterprise Plan, we commend the Navy's efforts to explore the prospect of material economic order quantity purchasing across carrier and submarine programs. At the same hearing, Matthew O. Paxton, president, Shipbuilders Council of America (SCA)—a trade association representing shipbuilders, suppliers, and associated firms—stated the following: To increase the Navy's Fleet to 355 ships, a substantial and sustained investment is required in both procurement and readiness. However, let me be clear: building and sustaining the larger required Fleet is achievable and our industry stands ready to help achieve that important national security objective. To meet the demand for increased vessel construction while sustaining the vessels we currently have will require U.S. shipyards to expand their work forces and improve their infrastructure in varying degrees depending on ship type and ship mix – a requirement our Nation's shipyards are eager to meet. But first, in order to build these ships in as timely and affordable manner as possible, stable and robust funding is necessary to sustain those industrial capabilities which support Navy shipbuilding and ship maintenance and modernization.... Beyond providing for the building of a 355-ship Navy, there must also be provision to fund the \"tail,\" the maintenance of the current and new ships entering the fleet. Target fleet size cannot be reached if existing ships are not maintained to their full service lives, while building those new ships. Maintenance has been deferred in the last few years because of across-the-board budget cuts.... The domestic shipyard industry certainly has the capability and know-how to build and maintain a 355-ship Navy. The Maritime Administration determined in a recent study on the Economic Benefits of the U.S. Shipyard Industry that there are nearly 110,000 skilled men and women in the Nation's private shipyards building, repairing and maintaining America's military and commercial fleets.1 The report found the U.S. shipbuilding industry supports nearly 400,000 jobs across the country and generates $25.1 billion in income and $37.3 billion worth of goods and services each year. In fact, the MARAD report found that the shipyard industry creates direct and induced employment in every State and Congressional District and each job in the private shipbuilding and repairing industry supports another 2.6 jobs nationally. This data confirms the significant economic impact of this manufacturing sector, but also that the skilled workforce and industrial base exists domestically to build these ships. Long-term, there needs to be a workforce expansion and some shipyards will need to reconfigure or expand production lines. This can and will be done as required to meet the need if adequate, stable budgets and procurement plans are established and sustained for the long-term. Funding predictability and sustainability will allow industry to invest in facilities and more effectively grow its skilled workforce. The development of that critical workforce will take time and a concerted effort in a partnership between industry and the federal government. U.S. shipyards pride themselves on implementing state of the art training and apprenticeship programs to develop skilled men and women that can cut, weld, and bend steel and aluminum and who can design, build and maintain the best Navy in the world. However, the shipbuilding industry, like so many other manufacturing sectors, faces an aging workforce. Attracting and retaining the next generation shipyard worker for an industry career is critical. Working together with the Navy, and local and state resources, our association is committed to building a robust training and development pipeline for skilled shipyard workers. In addition to repealing sequestration and stabilizing funding the continued development of a skilled workforce also needs to be included in our national maritime strategy.... In conclusion, the U.S. shipyard industry is certainly up to the task of building a 355-ship Navy and has the expertise, the capability, the critical capacity and the unmatched skilled workforce to build these national assets. Meeting the Navy's goal of a 355-ship fleet and securing America's naval dominance for the decades ahead will require sustained investment by Congress and Navy's partnership with a defense industrial base that can further attract and retain a highly-skilled workforce with critical skill sets. Again, I would like to thank this Subcommittee for inviting me to testify alongside such distinguished witnesses. As a representative of our nation's private shipyards, I can say, with confidence and certainty, that our domestic shipyards and skilled workers are ready, willing and able to build and maintain the Navy's 355-ship Fleet. Employment Impact Building the additional ships that would be needed to achieve and maintain the 355-ship fleet could create many additional manufacturing and other jobs at shipyards, associated supplier firms, and elsewhere in the U.S. economy. A 2015 Maritime Administration (MARAD) report states, Considering the indirect and induced impacts, each direct job in the shipbuilding and repairing industry is associated with another 2.6 jobs in other parts of the US economy; each dollar of direct labor income and GDP in the shipbuilding and repairing industry is associated with another $1.74 in labor income and $2.49 in GDP, respectively, in other parts of the US economy. A March 2017 press report states, \"Based on a 2015 economic impact study, the Shipbuilders Council of America [a trade association for U.S. shipbuilders and associated supplier firms] believes that a 355-ship Navy could add more than 50,000 jobs nationwide.\" The 2015 economic impact study referred to in that quote might be the 2015 MARAD study discussed in the previous paragraph. An estimate of more than 50,000 additional jobs nationwide might be viewed as a higher-end estimate; other estimates might be lower. A June 14, 2017, press report states the following: \"The shipbuilding industry will need to add between 18,000 and 25,000 jobs to build to a 350-ship Navy, according to Matthew Paxton, president of the Shipbuilders Council of America, a trade association representing the shipbuilding industrial base. Including indirect jobs like suppliers, the ramp-up may require a boost of 50,000 workers.\" Appendix E. A Summary of Some Acquisition Lessons Learned for Navy Shipbuilding This appendix presents a general summary of lessons learned in Navy shipbuilding, reflecting comments made repeatedly by various sources over the years. These lessons learned include the following: At the outset, get the operational requirements for the program right. Properly identify the program's operational requirements at the outset. Manage risk by not trying to do too much in terms of the program's operational requirements, and perhaps seek a so-called 70%-to-80% solution (i.e., a design that is intended to provide 70%-80% of desired or ideal capabilities). Achieve a realistic balance up front between operational requirements, risks, and estimated costs. Impose cost discipline up front. Use realistic price estimates, and consider not only development and procurement costs, but life-cycle operation and support (O&S) costs. Employ competition where possible in the awarding of design and construction contracts. Use a contract type that is appropriate for the amount of risk involved , and structure its terms to align incentives with desired outcomes. Minimize design/construction concurrency by developing the design to a high level of completion before starting construction and by resisting changes in requirements (and consequent design changes) during construction. Properly supervise construction work. Maintain an adequate number of properly trained Supervisor of Shipbuilding (SUPSHIP) personnel. Provide stability for industry , in part by using, where possible, multiyear procurement (MYP) or block buy contracting. Maintain a capable government acquisition workforce that understands what it is buying, as well as the above points. Identifying these lessons is arguably not the hard part—most if not all these points have been cited for years. The hard part, arguably, is living up to them without letting circumstances lead program-execution efforts away from these guidelines. Appendix F. Some Considerations Relating to Warranties in Shipbuilding and Other Defense Acquisition This appendix presents some considerations relating to warranties in shipbuilding and other defense acquisition. In discussions of Navy (and also Coast Guard) shipbuilding, one question that sometimes arises is whether including a warranty in a shipbuilding contract is preferable to not including one. The question can arise, for example, in connection with a GAO finding that \"the Navy structures shipbuilding contracts so that it pays shipbuilders to build ships as part of the construction process and then pays the same shipbuilders a second time to repair the ship when construction defects are discovered.\" Including a warranty in a shipbuilding contract (or a contract for building some other kind of defense end item), while potentially valuable, might not always be preferable to not including one—it depends on the circumstances of the acquisition, and it is not necessarily a valid criticism of an acquisition program to state that it is using a contract that does not include a warranty (or a weaker form of a warranty rather than a stronger one). Including a warranty generally shifts to the contractor the risk of having to pay for fixing problems with earlier work. Although that in itself could be deemed desirable from the government's standpoint, a contractor negotiating a contract that will have a warranty will incorporate that risk into its price, and depending on how much the contractor might charge for doing that, it is possible that the government could wind up paying more in total for acquiring the item (including fixing problems with earlier work on that item) than it would have under a contract without a warranty. When a warranty is not included in the contract and the government pays later on to fix problems with earlier work, those payments can be very visible, which can invite critical comments from observers. But that does not mean that including a warranty in the contract somehow frees the government from paying to fix problems with earlier work. In a contract that includes a warranty, the government will indeed pay something to fix problems with earlier work—but it will make the payment in the less-visible (but still very real) form of the up-front charge for including the warranty, and that charge might be more than what it would have cost the government, under a contract without a warranty, to pay later on for fixing those problems. From a cost standpoint, including a warranty in the contract might or might not be preferable, depending on the risk that there will be problems with earlier work that need fixing, the potential cost of fixing such problems, and the cost of including the warranty in the contract. The point is that the goal of avoiding highly visible payments for fixing problems with earlier work and the goal of minimizing the cost to the government of fixing problems with earlier work are separate and different goals, and that pursuing the first goal can sometimes work against achieving the second goal. The Department of Defense's guide on the use of warranties states the following: Federal Acquisition Regulation (FAR) 46.7 states that \"the use of warranties is not mandatory.\" However, if the benefits to be derived from the warranty are commensurate with the cost of the warranty, the CO [contracting officer] should consider placing it in the contract. In determining whether a warranty is appropriate for a specific acquisition, FAR Subpart 46.703 requires the CO to consider the nature and use of the supplies and services, the cost, the administration and enforcement, trade practices, and reduced requirements. The rationale for using a warranty should be documented in the contract file.... In determining the value of a warranty, a CBA [cost-benefit analysis] is used to measure the life cycle costs of the system with and without the warranty. A CBA is required to determine if the warranty will be cost beneficial. CBA is an economic analysis, which basically compares the Life Cycle Costs (LCC) of the system with and without the warranty to determine if warranty coverage will improve the LCCs. In general, five key factors will drive the results of the CBA: cost of the warranty + cost of warranty administration + compatibility with total program efforts + cost of overlap with Contractor support + intangible savings. Effective warranties integrate reliability, maintainability, supportability, availability, and life-cycle costs. Decision factors that must be evaluated include the state of the weapon system technology, the size of the warranted population, the likelihood that field performance requirements can be achieved, and the warranty period of performance. Appendix G. Some Considerations Relating to Avoiding Procurement Cost Growth vs. Minimizing Procurement Costs This appendix presents some considerations relating to avoiding procurement cost growth vs. minimizing procurement costs in shipbuilding and other defense acquisition. The affordability challenge posed by the Navy's shipbuilding plans can reinforce the strong oversight focus on preventing or minimizing procurement cost growth in Navy shipbuilding programs, which is one expression of a strong oversight focus on preventing or minimizing cost growth in DOD acquisition programs in general. This oversight focus may reflect in part an assumption that avoiding or minimizing procurement cost growth is always synonymous with minimizing procurement cost. It is important to note, however, that as paradoxical as it may seem, avoiding or minimizing procurement cost growth is not always synonymous with minimizing procurement cost, and that a sustained, singular focus on avoiding or minimizing procurement cost growth might sometimes lead to higher procurement costs for the government. How could this be? Consider the example of a design for the lead ship of a new class of Navy ships. The construction cost of this new design is uncertain, but is estimated to be likely somewhere between Point A (a minimum possible figure) and Point D (a maximum possible figure). (Point D, in other words, would represent a cost estimate with a 100% confidence factor, meaning there is a 100% chance that the cost would come in at or below that level.) If the Navy wanted to avoid cost growth on this ship, it could simply set the ship's procurement cost at Point D. Industry would likely be happy with this arrangement, and there likely would be no cost growth on the ship. The alternative strategy open to the Navy is to set the ship's target procurement cost at some figure between Points A and D—call it Point B—and then use that more challenging target cost to place pressure on industry to sharpen its pencils so as to find ways to produce the ship at that lower cost. (Navy officials sometimes refer to this as \"pressurizing\" industry.) In this example, it might turn out that industry efforts to reduce production costs are not successful enough to build the ship at the Point B cost. As a result, the ship experiences one or more rounds of procurement cost growth, and the ship's procurement cost rises over time from Point B to some higher figure—call it Point C. Here is the rub: Point C, in spite of incorporating one or more rounds of cost growth, might nevertheless turn out to be lower than Point D, because Point C reflected efforts by the shipbuilder to find ways to reduce production costs that the shipbuilder might have put less energy into pursuing if the Navy had simply set the ship's procurement cost initially at Point D. Setting the ship's cost at Point D, in other words, may eliminate the risk of cost growth on the ship, but does so at the expense of creating a risk of the government paying more for the ship than was actually necessary. DOD could avoid cost growth on new procurement programs starting tomorrow by simply setting costs for those programs at each program's equivalent of Point D. But as a result of this strategy, DOD could well wind up leaving money on the table in some instances—of not, in other words, minimizing procurement costs. DOD does not have to set a cost precisely at Point D to create a potential risk in this regard. A risk of leaving money on the table, for example, is a possible downside of requiring DOD to budget for its acquisition programs at something like an 80% confidence factor—an approach that some observers have recommended—because a cost at the 80% confidence factor is a cost that is likely fairly close to Point D. Procurement cost growth is often embarrassing for DOD and industry, and can damage their credibility in connection with future procurement efforts. Procurement cost growth can also disrupt congressional budgeting by requiring additional appropriations to pay for something Congress thought it had fully funded in a prior year. For this reason, there is a legitimate public policy value to pursuing a goal of having less rather than more procurement cost growth. Procurement cost growth, however, can sometimes be in part the result of DOD efforts to use lower initial cost targets as a means of pressuring industry to reduce production costs—efforts that, notwithstanding the cost growth, might be partially successful. A sustained, singular focus on avoiding or minimizing cost growth, and of punishing DOD for all instances of cost growth, could discourage DOD from using lower initial cost targets as a means of pressurizing industry, which could deprive DOD of a tool for controlling procurement costs. The point here is not to excuse away cost growth, because cost growth can occur in a program for reasons other than DOD's attempt to pressurize industry. Nor is the point to abandon the goal of seeking lower rather than higher procurement cost growth, because, as noted above, there is a legitimate public policy value in pursuing this goal. The point, rather, is to recognize that this goal is not always synonymous with minimizing procurement cost, and that a possibility of some amount of cost growth might be expected as part of an optimal government strategy for minimizing procurement cost. Recognizing that the goals of seeking lower rather than higher cost growth and of minimizing procurement cost can sometimes be in tension with one another can lead to an approach that takes both goals into consideration. In contrast, an approach that is instead characterized by a sustained, singular focus on avoiding and minimizing cost growth may appear virtuous, but in the end may wind up costing the government more. Appendix H. Size of the Navy and Navy Shipbuilding Rate Size of the Navy Table H-1 shows the size of the Navy in terms of total number of ships since FY1948; the numbers shown in the table reflect changes over time in the rules specifying which ships count toward the total. Differing counting rules result in differing totals, and for certain years, figures reflecting more than one set of counting rules are available. Figures in the table for FY1978 and subsequent years reflect the battle force ships counting method, which is the set of counting rules established in the early 1980s for public policy discussions of the size of the Navy. As shown in the table, the total number of battle force ships in the Navy reached a late-Cold War peak of 568 at the end of FY1987 and began declining thereafter. The Navy fell below 300 battle force ships in August 2003 and as of April 26, 2019, included 289 battle force ships. As discussed in Appendix C , historical figures for total fleet size might not be a reliable yardstick for assessing the appropriateness of proposals for the future size and structure of the Navy, particularly if the historical figures are more than a few years old, because the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time, and because the number of ships in the fleet in an earlier year might itself have been inappropriate (i.e., not enough or more than enough) for meeting the Navy's mission requirements in that year. For similar reasons, trends over time in the total number of ships in the Navy are not necessarily a reliable indicator of the direction of change in the fleet's ability to perform its stated missions. An increasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform its stated missions is increasing, because the fleet's mission requirements might be increasing more rapidly than ship numbers and average ship capability. Similarly, a decreasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform stated missions is decreasing, because the fleet's mission requirements might be declining more rapidly than numbers of ships, or because average ship capability and the percentage of time that ships are in deployed locations might be increasing quickly enough to more than offset reductions in total ship numbers. Shipbuilding Rate Table H-2 shows past (FY1982-FY2019) and requested or programmed (FY2020-FY2024) rates of Navy ship procurement.", "summary": "The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years. On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. The Navy states that a new FSA is now underway as the successor to the 2016 FSA. This new FSA, Navy officials state, is to be completed by the end of 2019. Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both. The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. The Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year. The Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan includes 304 ships, or an average of about 10 per year. If the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034. This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan—an acceleration primarily due to a decision announced by the Navy in April 2018, after the FY2019 plan was submitted, to increase the service lives of all DDG-51 destroyers to 45 years. Although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA. One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways. Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan. Decisions that Congress makes regarding Navy force structure and shipbuilding plans can substantially affect Navy capabilities and funding requirements and the U.S. shipbuilding industrial base.", "document_type": "crs"}
{"report": "The National Institutes of Health (NIH) is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. It has major roles in training biomedical researchers and disseminating health information. The NIH mission is \"to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability.\" As of FY2018, NIH was the largest single public funder of biomedical research in the world. Congress maintains a high level of interest in NIH for a variety of reasons. NIH funds extramural researchers in every state, and widespread constituencies contact Congress about funding for particular diseases and levels of research support in general. NIH is the largest and most visible contributor to the federal biomedical research effort; it represents about half of federal spending for non-Department of Defense research and development (R&D) and about one-fifth of total federal R&D funding. It has the largest budget of the eight health-related agencies that make up the Public Health Service (PHS) within the Department of Health and Human Services (HHS). In FY2018, discretionary appropriations to NIH constituted about 40% of all HHS discretionary budget authority. NIH-funded research has contributed to major scientific advances. To date, 156 NIH-funded researchers have received Nobel Prizes for their work. NIH-funded research has led to major medical innovations such as treatments for heart disease, cancer, and HIV/AIDs. Such advances have been credited with helping increase life expectancy and prevent millions of deaths. However, in light of the high cost of new medical innovations, some question whether NIH priorities are too focused on research that leads to new treatments rather than on disease prevention or improving the value of medical care. The allocation of NIH research dollars is a major source of debate. NIH has seen periods of both low and high funding growth. From FY1998 to FY2003, Congress doubled the NIH budget over a five-year period, from $13.7 billion to $27.1 billion. The agency then saw low funding growth or cuts from FY2004 to FY2015. From FY2016 through FY2019, Congress provided NIH with funding increases of over 5% each year, increasing funding from $30.3 billion in FY2015 to $39.3 billion in FY2019. Under President Trump's budget request for FY2020, NIH would be provided a program level of $34.3 billion—a 12.6% reduction from the FY2019 program level. Some members of the scientific community have cited funding variability and uncertainty as a hindrance for advancing biomedical research. They have called for steady and predictable funding growth to support the multiyear nature of research. Others have questioned whether universities and other research institutions are too reliant on NIH funding and if institutions should diversify their funding sources or use institutional funds to pay for research. Aside from funding, other potential issues of for many in Congress and the research community may include allocating funding across disease types, areas of human health, and types of research; addressing congressional priorities and concerns, while ensuring the scientific merit and quality of NIH-funded research; helping new and early-stage investigators obtain their first independent research grants; maintaining the United States' role as a leader in biomedical research; balancing the public and private sectors' relative roles in biomedical research. This report provides background and analysis on NIH organization, mission, budget, and history; outlines the agency's major responsibilities; and discusses some of the issues facing Congress as it works to guide and monitor the nation's investment in medical research. NIH traces its roots to 1887, when a one-room Laboratory of Hygiene was established at the Marine Hospital in Staten Island, NY. Relocated to Washington, DC, in 1891, and renamed the Hygienic Laboratory, it operated for its first half century as an intramural research lab for the Public Health Service. Congress designated the research laboratory the National Institute of Health in 1930 (P.L. 71-251). It moved to donated land in the Maryland suburbs in 1938. By 1948, several new institutes and divisions had been created, and the agency became the National Institutes of Health (P.L. 80-655). Congress has continued to create new institutes and centers, most recently in 2011 with the establishment of the National Center for Advancing Translational Sciences (NCATS, P.L. 112-74 ; see Table 2 ). NIH now occupies a 322-acre main campus in Bethesda, MD, and several off-campus sites, including locations in Maryland, North Carolina, Montana, Arizona. Today, NIH is a large and complex organization. NIH consists of the Office of the Director and 27 components—20 research institutes, three research centers, the National Library of Medicine (NLM), and three other support centers: the Clinical Center, the Center for Information Technology, and the Center for Scientific Review (for details, see Table 2 ). The Office of the Director (OD) sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly transinstitute research initiatives and issues. The individual institutes and centers (ICs) may focus on particular diseases (i.e., The National Cancer Institute), areas of human health and development (i.e., The National Institute on Aging), scientific fields (i.e., National Institute of Environmental Health Sciences), or biomedical professions and technology (i.e., National Institute of Biomedical Imaging and Bioengineering). Each IC plans and manages its own research programs in coordination with OD. Congress provides separate appropriations to 24 (all 20 institutes, NLM, and the 3 research centers) of the 27 ICs, to OD, and to a buildings and facilities account (see \" Budget \"). The institutes, NLM, and the three research centers have the authority to award research grants; the three operational support centers do not award research grants. Under President Trump's FY2020 budget request, the activities of the Agency for Healthcare Research and Quality (AHRQ) would be consolidated into NIH as the National Institute for Research on Safety and Quality (NIRSQ), forming a 28 th IC. The creation of a new NIH institute would require an amendment to the Public Health Service Act (PHSA) Section 401(d), which specifies that \"[i]n the National Institutes of Health, the number of national research institutes and national centers may not exceed a total of 27\" (see discussion in \" NIH Reform Act of 2006 \"). President Trump's FY2019 and FY2018 budget requests also proposed consolidating AHRQ and other HHS institutes into NIH; however, Congress did not adopt these proposals. NIH's large and decentralized organizational structure has been an issue of concern. There are costs and complexities of administering an agency made of 27 ICs, each with its own mission, budget, staff, review office, and other organizational apparatus. The resulting fragmentation may create research duplication or gaps, and might adversely affect NIH's ability to respond appropriately to new scientific and public health challenges. A number of laws have addressed administration and priorities at NIH, including the NIH Reform Act of 2006 and the 21 st Century Cures Act. In 2003, Congress requested that the National Academy of Sciences (NAS, now called the National Academies of Sciences, Engineering, and Medicine) study the structure and organization of NIH. The NAS report was released in 2003: Enhancing the Vitality of the National Institutes of Health: Organizational Change to Meet New Challenges . The 2003 NAS report found that \"the most common mechanism of origin of the institutes has been the congressional mandate responding to the health advocacy community.\" The first institute was the National Cancer Institute (NCI) established in 1937. \"From the middle 1940s to 1974, health advocates were successful in persuading Congress to establish additional institutes, often against the wishes of administrations, which generally opposed creation of new categorical institutes.\" Health advocacy \"groups have continued the long established pattern of pushing for creation of named entities at NIH to create focal points for developing more research funding for particular diseases. That has often resulted in the establishment by Congress of a named program at the office level. Through continued pressure, offices may then be elevated to centers and, in some cases, to institute status.\" The 2003 NAS report noted challenges with NIH's large and decentralized organizational structure, but said that any proposals for changing the number of ICs or OD program offices should be subject to a public evaluation process. Many of the recommendations in the 2003 NAS report were incorporated into the NIH Reform Act of 2006 ( P.L. 109-482 ). The law enhanced the authority of the NIH Director's Office to perform strategic planning, provided for trans-NIH initiatives by enacting the Common Fund into law and required strategic planning for the Fund. It established the Division of Program Coordination, Planning, and Strategic Initiatives (DPCPSI) within the Office of the Director and moved a number of individual program offices (coordinating research on AIDS, women's health, behavioral and social sciences, and disease prevention) in OD to DPCPSI. The law established the Council of Councils to advise the NIH Director on the policies and activities of DPCPSI and to participate in developing proposals for trans-NIH research. The law requires a biennial report from the Director to Congress assessing the state of biomedical research and reporting in detail on the research activities of NIH, including strategic planning and initiatives, and summaries of research in a number of broad areas. The Reform Act required the creation of a comprehensive electronic reporting system to catalogue research activities in specific disease, health areas, or by other congressionally-mandated categories from all of the ICs in a standardized format. Information from the tracking system assists the Director and DPCPSI in planning trans-NIH research initiatives that cannot be handled within individual ICs. The reporting system, called Research Portfolio Online Reporting Tools (RePORT), \"provides access to reports, data, and analyses of NIH research activities, including information on NIH expenditures and the results of NIH-supported research.\" The Reform Act did not contain any provisions on specific diseases or fields of research, nor did it eliminate or consolidate any existing ICs. However, it did provide certain authorities to HHS and NIH officials for making organizational changes to NIH. It also created the Scientific Management Review Board (SMRB) to provide advice on the use of those organizational authorities. SMRB is charged with formally and publicly reviewing NIH organizational structure at least once every seven years. SMRB may recommend restructuring but the number of ICs is capped at the current 27. The law set out time frames for the Director to take action on such recommendations, and provided for review by Congress. As required by the Reform Act, SMRB has conducted public reviews of NIH's organizational structure and processes. In its first report on organizational change and effectiveness at the agency in 2010, SMRB \"recognized that a far reaching overhaul of the NIH structure is neither advisable nor feasible.\" Instead, SMRB proposed a framework for considering and evaluating potential organizational changes at NIH. Since the first report, SMRB has issued evaluations of specific research areas or ICs at NIH, with recommendations for organizational change. SMRB also issued a report in 2014 on assessing the value of biomedical research, and a report in 2015 on streamlining the NIH grant process. 21 st Century Cures Act—Administrative Reforms The 21 st Century Cures Act (P.L. 114-255), enacted in 2016, introduced a number of administrative reforms at NIH. The act newly requires the NIH Director to develop and make publicly available an NIH-wide Strategic Plan every six years (the first to be developed within two years of enactment). The Strategic Plan is expected to provide direction to the biomedical investments made by NIH, facilitate IC collaboration, leverage scientific opportunity, and advance biomedicine (for more information about the 2016-20 NIH-Wide Strategic Plan, see \" NIH Process in Setting Research Priorities .\") The act also changed the biennial report of the NIH Director to Congress to a triennial requirement. Other reforms include efforts to reduce administrative burden at NIH, such as by exempting NIH researchers from requirements of the Paperwork Reduction Act. The act also introduced accountability measures such as five-year terms and other requirements for IC Directors, and efforts to prevent and eliminate duplicative research across the agency. The 21 st Century Cures Act also introduced a number of new programs and research efforts at NIH, as detailed in the \" 21st Century Cures Act \" section of this report. NIH derives its statutory authority from the Public Health Service Act (PHSA) of 1944, as amended (42 U.S.C. §§201-300mm-61). Section 301 of the PHSA (42 U.S.C. §241) grants the Secretary of HHS broad permanent authority to conduct and sponsor research. In addition, Title IV, \"National Research Institutes\" (42 U.S.C. §§281-290b), authorizes in greater detail various activities, functions, and responsibilities of the NIH Director and the ICs. All of the ICs are covered by specific provisions in the PHSA, but they vary considerably in the amount of detail included in the statutory language. In 2016, the 21 st Century Cures Act ( P.L. 114-255 ) amended the PHSA (Section 402A), authorizing appropriations for NIH in FY2018 ($34,851,000,000), FY2019 ($35,585,871,000), and FY2020 ($36,472,442,775) to carry out activities authorized in Title IV of the PHSA. The previous major NIH reauthorization was the NIH Reform Act of 2006 ( P.L. 109-482 ). The NIH Reform Act authorized total funding levels for NIH appropriations for FY2007 through FY2009. Overall authority for NIH, or explicit authorization of individual ICs, has lapsed at times. However, NIH continued to receive annual appropriations, with authority provided by PHSA Section 301 and the annual appropriations acts. The current authorization of appropriations for NIH is set to expire at the end of FY2020. NIH research spans all fields of biomedical and behavioral research, from basic investigation of biological mechanisms to testing new therapeutics in clinical research. The ICs sponsor two categories of research: extramural research , performed by nonfederal scientists using NIH grant or contract money, and intramural research , performed by federal NIH scientists in the NIH-operated laboratories and Clinical Center. In both the extramural and intramural programs, the research projects are largely investigator-initiated. NIH also supports a range of extramural and intramural research training programs to prepare young investigators for research careers, and it engages in a number of information dissemination activities to reach various audiences. Funding for research makes up most of NIH spending. Figure 1 shows the breakdown of NIH obligations by mechanism. Displaying budget data by mechanism reveals the balance between extramural (e.g., research grants, research centers, and R&D contracts) and intramural funding, as well as the relative emphasis on support of individual investigator-led research (e.g., research grants and intramural research) versus funding of contracted projects (e.g., R&D contracts). According to NIH, the agency conducts and supports the \"full continuum\" of biomedical and behavioral research to understand the causes and mechanisms of disease, and then translates that knowledge into clinical practice and health interventions. NIH defines the continuum of research as follows (see Figure 1 ): Basic research involves studying the fundamental mechanisms of biology and behavior. Preclinical translational research involves developing and testing new diagnostics, therapeutics, and preventive measures. This research is conducted using laboratory animals, cell cultures, samples of human or animal tissues, computer modeling, or other approaches. Clinical research is conducted with human subjects. Clinical research can include (1) clinical trials of diagnostics, therapeutics, and preventive measures, as well as any basic or other research conducted with patients; (2) epidemiological and behavioral studies; and (3) outcomes research and health services research. Postclinical translational research investigates the best methods to enhance access to and the implementation of newly discovered biomedical interventions. Clinical and community practice involves translating new biomedical research discoveries into widespread clinical and community practice. It includes NIH's effort to ensure that scientific findings are communicated rapidly and clearly to the public. NIH reports that about half of its funding is for basic research. NIH emphasizes that the research continuum is not linear. Progress in research may involve moving back and forth between different stages. For instance, a failed clinical trial on a therapeutic for a given disease may lead to new questions that then require more basic research to make progress in treating that disease. NIH extramural research funding makes up more than 80% of the overall NIH budget and supports 300,000 scientists and research personnel affiliated with over 2,500 universities, academic health centers, hospitals, and independent research institutions in every state and around the world. Extramural awards include research grants, research and development contracts, training awards, and a few smaller categories. Within the large \"research grants\" category, the bulk of the funding goes for research project grants (RPGs) awarded to individual investigators and small teams, mostly at universities and medical centers. Other types of grants are provided to groups of researchers who work in collaborative programs or in multidisciplinary centers that focus on particular diseases or areas of research, often called \"centers of excellence.\" Data on awards and recipients by state, by congressional district, by type of institution, and by subject of the research, are available on the NIH website. Scientists who wish to compete for NIH extramural research funding, whether for totally new proposals or for renewal of previous grant awards, submit detailed plans in their grant applications describing the research they plan to undertake. All NIH grant, fellowship, and cooperative agreement applications undergo review through a two-tiered system of peer review, a competitive and committee-based process to evaluate the applications. The peer review system is pursuant to Section 492 of PHSA (42 U.S.C. §289a), and federal regulations (42 C.F.R. §52). The first stage of peer review assesses the application on scientific and technical merit. In the second stage, the NIH IC makes a funding decision—weighing the project's scientific merit against the IC's research priorities (see Figure 3 ). Grant applications may be either investigator-initiated or in response to a specific Funding Opportunity Announcement for targeted research. Most applications are investigator-initiated, meaning that a scientist or group of scientists generates an original research project idea and then submits a grant application through an NIH-wide submission process. Some applications are submitted in response to solicitations by ICs for research areas the ICs wish to target and/or for which they have set aside funding, called program announcements (PAs) or requests for applications (RFAs), broadly referred to as Funding Opportunity Announcements (FOAs). In the first stage of peer review, the applications are received by the NIH Center for Scientific Review (CSR). CSR then assigns each application that meets basic requirements to both a potential awarding IC and an associated Scientific Review Group (SRG) of the IC. The potential awarding IC is the one whose mission best aligns with the objectives of the research project. Applications responding to FOAs are usually reviewed by SRGs within the IC with funding authority, as specified in the FOA. An SRG is a peer-review committee composed of 12 to 22 scientists who are experts in the relevant fields of research. No more than one-fourth of the members of any SRG may be federal employees. Peer reviewers are expected to disclose conflicts of interest and may not participate in evaluations of grant applications where they have conflicts of interest. In FY2018, over 26,000 individuals participated in over 2,600 NIH peer review meetings. The SRG is responsible for evaluating a grant proposal on the basis of scientific merit and potential impact of the research. After discussing the application, each member gives the application a final score, and an overall impact score is determined from the average of members' final scores. The application is also given a percentile ranking, based on how the overall impact score compares to other applications reviewed by the SRG in the past year. In the second stage, the funding decisions are refined by the National Advisory Councils or Boards of the potential awarding ICs. Advisory Councils and Boards are composed of scientific and lay representatives. These groups examine applications recommended for funding, place their impact scores and percentile rankings in the context of the IC's research priorities, and then make recommendations for final funding decisions. Many ICs establish a \"payline,\" or percentile cutoff for applications that get funded, though ICs may prioritize applications outside of the payline based on other considerations. The IC director then makes final funding decisions. Section 2033 of the 21 st Century Cures Act ( P.L. 115-255 ) added a new requirement that the IC Director weigh the Advisory Board or Council's advice against the IC's mission and research priorities, the NIH-Wide Strategic Plan, and programs or projects funded by other ICs on similar topics before awarding a research grant. NIH awards numerous types of research grants, administered by each IC. The most common and well-known type of grant is the R01 Research Project Grant, which is awarded for three to five years to conduct a research project. Other grants may be shorter-term exploratory grants that limit funding to two years or less. Because of the multiyear grants, in any given year, about three-fourths of the grantees are in \"noncompeting,\" or \"continuation,\" status. \"Noncompeting\" grantees have already applied and been awarded NIH funding for multiple years. Each year, a noncompeting grantee has to submit a project report to the IC that supplied the funding, but the grantee does not have to compete for the second, third, and fourth year of funding—the IC considers the award a budgetary commitment (although it is still subject to appropriations). Prior to the expiration of the award, the grantee may choose to compete for a renewal of the project. According to one IC, reviewing a new application can take up to eight weeks from submission to the final funding decision. In FY2018, in addition to making over 11,000 new and competing renewal awards, NIH made almost 26,000 noncompeting awards and over 2,000 small business awards, for a total of over 39,000 research project grants (RPG). The average annual cost of an RPG award was about $519,000 in FY2018, including both direct and indirect costs. The direct costs, averaging 72.3% of the total award in FY2018, cover project-specific expenses, while the indirect costs, averaging 27.7%, pay for facility and administration costs (i.e., overhead) of the institution where the research is conducted. Some critics of the NIH peer review and grant award process contend that it is cumbersome, biased, and ineffective at identifying promising research project proposals. Others have defended the peer review system as a rigorous and competitive process that has been honed over many years. To evaluate the process, the NIH requested an SMRB report on the peer review and award process. In its 2015 report, SMRB recommendations included fast-tracking high-scoring and high-priority applications, increasing the pool of peer reviewers, reviewing administrative processes to improve efficiency, and piloting innovative methods of peer review. In addition, the NIH Strategic Plan 2016-20 includes ways to improve the peer review process by testing and validating new approaches \"including asynchronous, electronic reviews and two- or three-stage 'editorial board' models,\" along with measures to compare the performance of each SRG. Congress has enacted many requirements for NIH-funded research, including requirements related to human subjects protections, use of animals, and others. Based on federal laws and regulations, NIH maintains an updated \"Grants Policy Statement\" on all terms and conditions of NIH grant awards. Grantees are also informed of specific award requirements in their \"Notice of Award.\" Grant awards are made to institutions, not to specific researchers. Therefore, both NIH and recipient institutions share responsibility in grant compliance and oversight of researchers. For instance, Institutional Review Boards and Institutional Animal Care and Use Committees at grantee institutions are responsible for ensuring the ethical use of human subjects and animals in research. The NIH Division of Grants Compliance and Oversight (DGCO) provides training and resources to grantees and institutions to ensure compliance. The division also conducts site visits and reviews as needed. The NIH intramural research program (IRP), at about $4.0 billion in FY2018, accounts for approximately 11% of the total NIH budget. It includes about 1,100 principal investigators and 6,000 trainees ranging from high school students to postdoctoral and clinical fellows in NIH-operated laboratories. Other IRP personnel include administrative support staff, guest researchers, and contractors. Intramural research takes place at the 322-acre main campus in Bethesda, MD, and several off-campus sites, including locations in Maryland, North Carolina, Montana, Arizona. Almost all of the ICs have an intramural research program, but the size, structure, and activities of the programs vary greatly. As with extramural funding, most intramural research proposals are investigator-initiated. However, NIH sets the direction for its intramural research program by hiring scientists of targeted expertise, through allocating resources to certain laboratories and programs, and through external reviews. Each intramural scientist is evaluated by an external Board of Scientific Counselors from their IC every four years to review their work and research portfolio. Each IC's intramural research program is reviewed by an external panel every 10 years, concerning the entire research portfolio and impact of the research. Some intramural scientists work in the Clinical Center, which houses both basic research laboratories and clinics for scientists involved with patient care in clinical research studies. The Clinical Center is the nation's largest hospital devoted to clinical research. Along with scientists, the Clinical Center employs over 1,000 nurses and allied health professionals to support its work. Most ICs with intramural research programs fund research at the center. This arrangement facilitates interdisciplinary collaboration and the direct clinical application of new knowledge derived from basic research. As stated by the agency, \"NIH's ability to ensure that it remains a leader in scientific discovery and innovation is dependent upon a pool of creative, diverse, and highly talented researchers.\" Research training activities are designed to support every stage of a biomedical research career (see \"Stages of a Research Career\" below) in both the extramural and intramural research programs. Programs range from summer internships for high school students to mentoring programs for independent investigators. Predoctoral and postdoctoral training opportunities are available through a variety of training grants, fellowships, and loan repayment programs. The largest extramural program is called the Ruth L. Kirschstein National Research Service Awards (NRSA) program, authorized by PHSA Section 487, which supports pre- and postdoctoral research training awards to both institutions and individuals. In 2015, NIH supported more than 15,600 graduate and postdoctoral students at universities, teaching hospitals, and research centers. NIH has important roles in translating the knowledge gained from biomedical research into medical practice and useful health information for the general public. The individual ICs carry out many relevant activities, such as sponsoring seminars, meetings, and consensus development conferences to inform health professionals of new findings; answering thousands of telephone, mail, and online inquiries; publishing physician and patient education materials on the internet and in print; supporting information clearinghouses and running public information campaigns on various diseases; making specialized databases available; and fostering partnerships for educating clinicians and other healthcare professionals on the latest science. At $39 billion for FY2019, NIH's budget is much larger than those of other PHS agencies such as the Food and Drug Administration (FDA), Centers for Disease Control and Prevention (CDC), Health Resources and Services Administration (HRSA), Indian Health Service (IHS), and the Substance Abuse and Mental Health Services Administration (SAMHSA). About 40% of all discretionary HHS funding is provided to NIH. Moreover, NIH represents about half of federal spending for non-Department of Defense research and development (R&D) and about one-fifth of total federal R&D funding. NIH has seen periods of high and low budget increases. Prior to 2004, Congress had doubled the NIH program level over a five-year period from its FY1998 base of $13.7 billion to the FY2003 level of $27.1 billion. Subsequently, NIH experienced a decade of stagnant growth in the agency's budget. Congress provided budget increases generally around 1%-3.2% from FY2004 to FY2015, often lower than the rate of inflation for biomedical research, which resulted in reduced purchasing power for the agency. In some years, (FY2006, FY2011, and FY2013) funding for the agency decreased in nominal dollars. Starting in FY2016 through FY2019, Congress provided NIH with funding increases of over 5% each year, increasing the program level from $30.3 billion in FY2015 to $39.3 billion in FY2019. In inflation-adjusted FY2019 dollars, the NIH program level remains 9% below the 2003 level. Under President Trump's FY2020 budget request, NIH would be provided a program level of $34.3 billion—a 12.6% reduction from the FY2019 program level. In inflation-adjusted FY2020 dollars, this proposed FY2020 program level would be 22.6% below the peak 2003 level. See Figure 4 for a visualization of NIH budget trends from FY1994 to FY2020. NIH receives funding from mostly discretionary budget authorities and one mandatory budget authority. The total NIH budget is called the \"program level.\" Discretionary funding for NIH comes primarily from the annual Labor-HHS-Education (LHHS) appropriations bill, which funds the agency through 27 separate accounts, including the 24 ICs with research grant-awarding authority. An additional small amount for environmental research and training related to the Superfund program comes from the Interior, Environment, and Related Agencies (Interior-Environment) appropriations bill for the National Institute of Environmental Health Sciences (NIEHS). Those two sources constitute NIH's discretionary budget authority. The NIH \"program level\" takes into account other funds that are added to or transferred from the agency. In FY2019, NIH received mandatory funds ($150 million in FY2019) for Special Diabetes Programs for Type 1 Diabetes under PHSA Section 330B (42 U.S.C §254c-2). The type 1 diabetes program was most recently reauthorized by the Bipartisan Budget Act of 2018 ( P.L. 115-123 ), which provided $150 million for each of FY2018 and FY2019 for the Special Diabetes Program for type I diabetes to the NIH. NIH also receives funds from a \"program evaluation\" transfer authorized by PHSA Section 241 (42 U.S.C. §238j). NIH and other PHS agencies (funded through LHHS appropriations) are subject to this budget \"tap,\" which has been used to fund not only program evaluation activities, but also programs such as NLM, the National Center for Health Statistics in CDC, and the entire discretionary budget of the Agency for Healthcare Research and Quality. These and other uses of the evaluation tap by the appropriators have the effect of redistributing appropriated funds among PHS agencies. Although the PHSA provision limits the tap to no more than 1% of eligible appropriations, in recent years annual LHHS appropriations bills have specified a higher amount (2.5% for FY2019 in P.L. 115-245 ), and have typically directed specific amounts of funding from the tap for transfer to a number of HHS programs. The assessment has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. NIH, with the largest budget among the PHS agencies, has historically been the largest \"donor\" of program evaluation funds. Until recently, it had been a relatively minor recipient. In FY2019, NIH received $1.15 billion in funds subject to the evaluation tap through P.L. 115-245 . Under President Trump's FY2020 budget request, NIH would receive $741 million in funding subject to the evaluation tap. The NIH budget request that Congress receives from the President each February for the next fiscal year reflects both recent history and professional judgments about the future, because it needs to support both ongoing research commitments and new initiatives. The request is formulated through a lengthy process that starts more than a year before in the ICs. The budget then evolves over a number of months as it moves from the ICs to NIH, then to HHS, and finally to the Office of Management and Budget (OMB). At each stage, IC and NIH needs are weighed in the context of the larger budget. Eventually, Congress is called upon to make similar judgments. As a continuing process, IC leaders, with input from the scientific community, define the most important and promising areas in their respective fields. They consider whether their existing research portfolio needs rebalancing, and they decide on possible new initiatives for the coming budget year. An annual budget retreat in May brings together the IC leaders with top NIH management to discuss policies and priorities under various budget scenarios. They might consider, for example, what the different emphases in their programs would be if the appropriation turned out to be a certain percentage decrease, a flat budget, or an increase. The presentations and discussions allow NIH management to develop the budget request it will submit to HHS, taking into account the estimated funding amount needed to support the \"commitment base\" of continuing awards, the funding desired for unsolicited new research proposals, the new initiatives that the Director wants to incorporate, and guidance from the department about the request (e.g., there might be an instruction to pay no inflation increases on grants). At the HHS level, NIH's request is considered in the context of the overall department budget, resulting in a notice back to NIH on the department's allowance. There are usually appeals and adjustments made before the final HHS budget goes to OMB. The process of submission, passback, and appeals is repeated as OMB considers the entire federal budget and tells HHS what amounts and policy approaches are approved for incorporation into the President's final budget that will be sent to Congress. Once the budget is made public, all agency comments about the request are expected to support the President's proposed levels. The Foundation for the National Institutes of Health (FNIH) is a 501(c)(3) charitable organization that raises private funding and manages public-private partnerships to support NIH's mission. FNIH was established in 1990 by P.L. 101-613 and began operations in 1996. FNIH supports research projects and programs, education and training, conferences and events, and other support activities for NIH, such as drug donations to the clinical center. Pursuant to PHSA Section 499 (42 U.S.C. §290b), there are terms and restrictions on activities, requirements for the board of directors, reporting requirements, and other requirements for FNIH. In its history, FNIH has raised over $1 billion in support of NIH's mission. By the end of 2017, FNIH had raised over $555 million in multiyear funding commitments for over 100 programs: $541 million for research projects, $8.7 million for education and seminars, $3.2 million for capital projects, and $2.8 million for events. NIH funds research on hundreds of diseases, conditions, and areas of human health. NIH funding is highly competitive—20.9% of all grant applications were funded in FY2018. NIH and Congress face trade-offs in allocating funding in a fair manner that balances the scientific merit of proposals with meeting the diverse health needs of the population. Funding decisions are especially difficult because science is a process of discovery—even experts cannot always predict which proposals will lead to breakthroughs. Historic tensions have included whether to designate funding for specific diseases and areas of research or to allow untargeted funding for the most meritorious proposals identified through the peer review process; balancing funding for basic scientific research with applied research; whether funding should go to certain ethically contentious research areas, such as embryonic stem cell research; how to fund research on the most pervasive diseases and conditions while also funding research on rare diseases; and how to allocate funding among established and successful scientists while enabling new scientists to enter the field. Historically, Congress allowed NIH ICs, for the most part, to fund research based on their own internal prioritization process, which involves scientific experts, patient advocates, and others. In recent years, Congress has provided more direction to NIH funding in both appropriations report language and legislation. The following sections summarize (1) congressional involvement in NIH research priorities, including recent major efforts, legislation, and research restrictions, and (2) NIH internal processes for setting research priorities through strategic planning and advisory groups. NIH is not the only federal agency that supports biomedical and health-related research. The Department of Defense (DOD) and the Department of Veterans Affairs (VA) and others also support medical research programs. In FY2019, the NIH program level was $39.3 billion, the VA appropriation for medical research was $779 million, and the DOD's Defense Health Program's Research, Development, Test, and Evaluation (RDT&E) account received $2.18 billion, including $1.47 billion for the Congressionally Directed Medical Research program (CDMRP). A 2016 National Academies of Sciences, Engineering, and Medicine (NASEM) report examined duplication and coordination of research funded by NIH, DOD, and VA. The report found that some formal mechanisms helped reduce duplication, such as interagency coordinating committees, common grant portals, and assessing other funding sources in grant application review. However, the agencies each lack comprehensive information about the other agencies' activities, which \"limits their ability to identify potential areas of duplication.\" In addition, other agencies support health-related research, such as the Centers for Disease Control and Prevention (CDC) and the Agency for Healthcare Quality and Research (AHRQ). Although the below discussion focuses on research priorities at NIH, Congress may consider how to prioritize and coordinate funding for medical and health-related research across the federal government. Congress's primary role in NIH research priorities is through annual appropriations to the IC accounts. From time to time, Congress addresses NIH research priorities through legislation authorizing specific programs, such as the 21 st Century Cures Act ( P.L. 114-255 ) and through restrictions and other requirements for research. Appropriators have traditionally avoided specifying dollar amounts for particular disease areas, fields of research, or mechanisms of funding in both report and bill text, aside from the level of the IC accounts. Generally, specific amounts are appropriated to each IC, and then funding is awarded through competitive grants, contracts, or to intramural researchers. In recent years, report language accompanying appropriations acts and laws such as the 21 st Century Cures Act ( P.L. 114-255 ) have included more specified funding amounts for research areas and programs. For example, the report accompanying the FY2019 LHHS conference appropriations bill ( H.Rept. 115-952 , pp. 529-530) directed specific funding increases for the following at NIH: Alzheimer's disease research, antibiotic resistant bacteria research, universal flu vaccine development, opioids-related research, and the Institutional Development Awards (IDeA) program. The 21 st Century Cures Act, passed in 2016, authorized specific appropriations for four innovation projects (as described in the \" 21 st Century Cures Act \" section of this report). Other laws that have directed funding to specific research areas include the Gabriella Miller Kids First Research Act ( P.L. 113-94 ), which authorizes $12.6 million for each of FY2014-FY2023 for pediatric research, and mandatory appropriations of $150 million for research on type 1 diabetes, authorized by PHS Act §330B and extended most recently by the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) for FY2018 and FY2019. Changes in congressional practice have occurred most notably with research funding for Alzheimer's disease. From FY2001 through FY2014, Congress provided broad directives to NIH in report language, encouraging the agency to prioritize Alzheimer's disease and to increase resources toward its research through the National Institute on Aging (NIA). The explanatory statement accompanying the FY2014 omnibus included the following language: In keeping with longstanding practice, the House and Senate Appropriations Committees do not recommend a specific amount of NIH funding for this purpose or for any other individual disease. Doing so would establish a dangerous precedent that could politicize the NIH peer review system. Nevertheless, in recognition that Alzheimer's disease poses a serious threat to the Nation's long-term health and economic stability, the agreement expects that a significant portion of the recommended increase for NIA should be directed to research on Alzheimer's. The exact amount should be determined by the scientific opportunity of additional research on this disease and the quality of grant applications that are submitted for Alzheimer's relative to those submitted for other diseases. The explanatory statement for the FY2015 omnibus included similar language but noted that the agreement provided a $25 million increase for Alzheimer's disease research at NIA; still, it did not direct NIH to reserve a specific total dollar amount. Then, in a significant departure from past precedent, the explanatory statements to the appropriations measures for each of FY2016 through FY2018 directed NIH to reserve a specific amount for Alzheimer's disease research. The conference report accompanying the FY2019 LHHS Appropriations Act continues this trend. The change in congressional practice was driven by the National Plan to Address Alzheimer's Disease, first announced in 2012. Established by the National Alzheimer's Project Act (NAPA; P.L. 111-375 ), the National Plan includes \"Prevent and Effectively Treat Alzheimer's Disease and Related Dementias by 2025\" as the first of five key goals. To help meet this goal, NIH began to publish an annual bypass budget in FY2015 to estimate funding needs for Alzheimer's disease research, starting for FY2017. A bypass budget, also known as a professional judgement budget, is a budget proposal submitted directly by NIH to Congress to estimate research funding needs based on scientific opportunity, rather than as determined by the regular budget and appropriations process (detailed in \" Budget Formulation \"). The bypass budget was mandated by the Consolidated and Further Continuing Appropriations Act, of 2015 ( P.L. 113-235 ), which specified that the NIH Director submit an annual independent Alzheimer's research budget request directly to Congress, pursuant to the National Alzheimer's Plan. To determine its bypass budget proposal, NIH has convened research summits starting in 2012, and has worked across its ICs to determine recommendations and funding needs for Alzheimer's disease research. To meet its research goals, NIH has used targeted FOAs to solicit research proposals related to Alzheimer's disease from scientists. Alzheimer's disease research represents an area of major congressional involvement in directing large amounts of research funding toward a specific disease. A Science magazine article from August 2018, asserts that the large increase in funding for Alzheimer's disease research has affected the NIH and the scientific community in an unprecedented way: Such a dramatic increase in research funding for a disease has no precedent at NIH aside from the War on Cancer, an effort launched in 1971, and an explosion of AIDS funding in the late 1980s. With the largesse come logistical challenges. Overworked NIH staff are scrambling to review and process thousands of grant proposals, including those for this year's [FY2018] $414 million bolus—a sum that equals the entire budget of some smaller NIH institutes—which Congress approved in March. NIA, which oversees the new funds, doesn't just want to plump up existing Alzheimer's labs, says Director Richard Hodes. The institute is also luring investigators ... from other fields to bring in fresh ideas. Many are answering the call. \"Nearly everyone I know is putting the words 'Alzheimer's disease' in their grants in an effort to tap into the money,\" says Matt Kaeberlein of the University of Washington in Seattle, who studies aging. Even with the windfall of funding, many in the scientific community are skeptical of meeting the goal to prevent and treat Alzheimer's disease by 2025. Many potential cures for Alzheimer's diseases have failed in recent clinical trials. According to a 2016 study, a few drugs have been approved that help relieve some of the symptoms of Alzheimer's disease, but they have a \"modest\" clinical effect. The authors determined that only a few drug candidates in the clinical trial pipeline could potentially meet the 2025 deadline. While the funding has helped accelerate the scientific understanding of Alzheimer's disease, some members of the scientific community worry that the attention on Alzheimer's disease research may detract from research on other diseases like cancer. Others argue that accelerating Alzheimer's disease research and drug development is ultimately beneficial, regardless of whether the 2025 goal is met. From time to time, Congress has placed restrictions on NIH research. Current restrictions for FY2019 relate to research advocating or promoting gun control, payment for abortions, human embryo research, promoting legalization of controlled substances, and others. In the past, members of the research community have been unsettled by congressional attempts to cancel funding for specific existing peer-reviewed grants. The targeted studies have tended to be in fields of behavioral research, including some in mental health and human sexuality research. Sponsors and supporters of such amendments to the LHHS appropriations bills say that NIH should not be devoting scarce resources to research studies whose value they question. Researchers, however, including NIH leadership, have expressed alarm at what they view as an assault on the peer review system, saying that such studies were funded because of their technical merit and the important research questions they addressed. Perhaps the most prominent example is the restriction on federal funding of research on human embryonic stem cells. Although President Barack Obama signed an executive order in March 2009 that reversed the nearly eight-year-old George W. Bush Administration restriction on federal funding for human embryonic stem cell research, funding for some aspects of such research is still limited by a provision in the annual LHHS appropriations bill—the so-called Dickey-Wicker amendment. The Cures Acceleration Network (CAN) allows NIH to award large grants of up to $15 million per year (that require a 1:3 matching ratio), and other flexible awards, to \"advance the development of high-need cures and reduce significant barriers between research discovery and clinical trials.\" CAN grant recipients can be public or private entities, including institutions of higher education, pharmaceutical companies, and disease advocacy organizations. Authorizing language for the Cures Acceleration Network was provided in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ), enacted in March 2010. Subsequent legislation ( P.L. 112-74 ) assigned CAN to NIH's National Center for Advancing Translational Science (NCATS). ACA authorized $500 million for CAN in FY2010 and such sums as necessary for subsequent fiscal years; however, CAN is to be funded via a specific appropriation and cannot be funded using the general NIH appropriation or other funds appropriated under the PHSA. Congress has designated up to the following amounts for CAN in its appropriations to NCATS: $10 million in FY2012; $40 million in FY2013; $9.8 million in FY2014; $9.8 million in FY2015; $25.8 million in each of FY2016, FY2017, and FY2018, respectively; and $80 million in FY2019. The actual program level for CAN may be lower than the maximum amount authorized by Congress for each fiscal year, though actual funding levels are available only for some, but not all, fiscal years. CAN authorizing language states that the NIH Director determines which medical products (drugs, devices, biological products, or combination products) are \"high need cures,\" based on (1) their ability to diagnose, prevent, or treat harm from a disease or condition, and (2) the lack of market incentives for their adequate or timely development. NIH then makes awards to public or private research entities, including medical centers, biotechnology or pharmaceutical companies, and patient advocacy groups in order to accelerate the development of such high-need cures. CAN is directed to conduct and support revolutionary advances in basic research and to facilitate FDA review for CAN-funded cures, as specified. A CAN Review Board advises the Director on the activities of CAN and on significant barriers to the translation of basic science into clinical applications. The CAN Review Board submits reports to HHS regarding any barrier identified. The Director is required to respond to such recommendations in writing. Advocacy groups, such as the Parkinson's Action Network and the Council for American Medical Innovation, have voiced strong support for the creation of CAN. Others, however, have concerns about providing federal funds to industry without measures to ensure that taxpayers receive a return on the investment, such as through reasonable prices on resulting products. In the summer of 2018, the Cures Acceleration Network was actively supporting three programs: (1) tissue chip for drug screening, (2) biomedical data translator, and (3) 3-D tissue bioprinting. The programs are aimed at using emerging technology, such as modelling human organs on microchips or using novel computational methods with patient biomedical data, for innovating either drug development or disease diagnosis. The 21 st Century Cures Act ( P.L. 114-255 ; hereinafter referred to as the \"Cures Act\") was signed into law on December 13, 2016. This law authorizes $4.8 billion for NIH over a 10-year period (FY2017-FY2026), with varying amounts allocated each fiscal year (see Table 1 ). The following is a summary of provisions in Title I of the Cures Act that authorized funding for new programs at NIH, and provisions in Title II that established or amended other programs. Title I of the Cures Act, Section 1001 establishes the \"NIH Innovation Account\" to which specified amounts are authorized to be transferred for each of FY2017 through FY2026 (see Table 1 ) for the purpose of carrying out the following four NIH Innovation Projects: The Precision Medicine Initiative (PMI) All of Us Research Program ($1.5 billion for FY2017 through FY2026), which is collecting clinical, environmental, lifestyle, and genetic data from more than 1 million participants over many years. The Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative ($1.5 billion for FY2017 through FY2026), which uses new technology to understand how individual cells and the neural circuits they form interact in time and space—scientific understanding that may help treat, cure, or prevent brain-related disorders. The Beau Biden Cancer Moonshot ($1.8 billion for FY2017 through FY2023), which aims to accelerate progress in cancer research by enhancing data access and facilitating collaborations. The Regenerative Medicine project ($30 million for FY2017 through FY2020), which supports clinical research using adult stem cells, in coordination with FDA. To date, amounts authorized for the Innovation Projects have been fully appropriated. The first round of funding was provided by Section 194 of the Further Continuing and Security Assistance Appropriations Act, 2017 (CR, P.L. 114-254). The CR appropriated $352 million in the NIH Innovation account for necessary expenses to carry out the four NIH Innovation Projects as described in Section 1001(b)(4) of the Cures Act. The second round of funding ($496 million) was provided by the FY2018 omnibus (P.L. 115-141). The third round of funding ($711 million) is provided by the FY2019 Consolidated Defense, LHHS, and Continuing Resolution Appropriations Act (P.L. 115-245). Under President Trump's FY2020 budget request, NIH would be provided the full $492 million authorized by the Cures Act for FY2020. Title II of the Cures Act addresses the NIH in numerous ways, including administrative reforms and new programs. Among new programs in Title II, the Next Generation Initiative (NGI) was established to coordinate NIH programs related to retaining and recruiting new researchers. As a part of NGI, NIH is required to use findings from a National Academies report to make reforms to existing programs (see \" NIH Initiatives to Recruit and Retain a Research Workforce \"). Title II also includes reforms to ensure inclusion in biomedical research, as related to race/ethnicity, gender, sexual orientation, and age. Finally, Title II extends NCATS's authority to support clinical trial activities, consolidates existing NIH intramural loan repayment programs, specifies administrative requirements for PMI and ClinicalTrials.gov, and establishes a working group to make recommendations to enhance the rigor and reproducibility of NIH-funded scientific research, among other provisions. Each NIH IC has separate research priorities, which are specified in statutory authority in varying levels of detail. IC research priorities are broadly captured by their mission statements. ICs establish research priorities through strategic planning, annual planning, and periodically reviewing and assessing their research portfolios. Each IC has an advisory council that makes recommendations for IC research priorities and funding decisions. The IC advisory councils are made up of both scientific and public representatives, who may have expertise, interest, and other affiliations relevant to the IC's mission. According to the agency, decision-makers at NIH seek advice from many groups when setting research priorities, including scientific researchers and professional science societies; patient organizations and voluntary health associations; IC Advisory Councils; Congress and the Administration; the Advisory Committee to the NIH Director; the SMRB; and NIH staff. For many years, each IC has undergone a periodic strategic planning process to determine its funding priorities among the research areas in its broadly defined mission. The IC strategic planning processes are conducted pursuant to PHSA Section 402(b)(5), which specifies that the NIH Director \"shall ensure that scientifically based strategic planning is implemented in support of research priorities as determined by the agencies of the National Institutes of Health.\"  The Cures Act ( P.L. 114-255 ) amended PHSA Section 402 to require an NIH-Wide Strategic Plan, in part to facilitate IC collaboration and coordination. In the first NIH-Wide Strategic Plan 2016-2020, the NIH specifies its agency-wide process for setting research priorities. As stated in the Strategic Plan, \"The process of setting NIH's research priorities must balance the opportunities presented by the best science, public health needs, and the unique ability of NIH to address challenges in human health that would otherwise go unmet.\" In its Strategic Plan, the NIH reaffirmed its commitment to a transparent and evidence-based process for funding decisions that prioritized the four principles listed below. NIH does not specify percentages or funding amounts for any of the four principles: Enhance the nimbleness needed to meet public health needs and capitalize upon scientific opportunity, using new portfolio analysis tools. Incorporate burden of disease as an important, but not sole, factor. Take advantage of opportunities presented by rare diseases to advance research. Consider the value of permanently eradicating a disease. The NIH-Wide Strategic Plan is designed to complement the strategic plans of the individual ICs. The agency seeks to better identify areas of research overlap and gaps across its portfolios, including by comparing the portfolio of each IC with another to assess if resources are optimally allocated. In addition, the Strategic Plan also stated that NIH would take leadership in \"developing and validating the methodologies that are needed to evaluate scientific investments.\" According to NIH, the Strategic Plan was developed with \"input from hundreds of stakeholders and scientific advisers, and in collaboration with leadership and staff of NIH's Institutes, Centers, and Offices.\" The NIH Reform Act of 2006 ( P.L. 109-482 ) enhanced the authority of the NIH Director's Office to perform strategic planning, especially facilitating and funding transdisciplinary, cross-institute research initiatives. The Reform Act also created a special office, the Division of Program Coordination, Planning, and Strategic Initiatives (DPCPSI). It \"identifies important areas of emerging scientific opportunity or rising public health challenges to assist in the acceleration of research investments in these areas.\" The Office of Strategic Coordination within DPCPSI manages the NIH Common Fund, which supports large complex research efforts that involve the collaboration of two or more research institutes or centers. The Office of Strategic Coordination works with staff and leadership across NIH to identify and promote NIH-wide scientific opportunities that receive Common Fund support. Because of variation in annual appropriations, NIH cannot support the same number of research projects from year to year. In years of large funding increases, the agency may proportionally increase research awards. When funding is cut the agency may limit the number of research grants awarded. Given that most grants are multiyear grants that have \"non-competing\" status during the duration of the project, much of NIH funding is committed even before appropriations are finalized (though these grant renewals remain \"subject to appropriations\"). Reductions in NIH purchasing power may lead to reductions in \"competing\" grants awarded, or grants for new research projects—potentially creating a more competitive environment for new NIH awards. Figure 5 shows NIH research project grant (RPG) numbers and success rates for new grant applications annually from FY2003 to FY2018. NIH supported about the same total number of RPGs each year from FY2003 to FY2008, but it supported fewer RPGs after FY2008 and has only started to increase the annual number of RPGs awarded in FY2016. Concurrently, the average cost of an RPG has increased from $337.8 thousand in 2003 to $518.0 thousand in 2018. To maintain existing funding commitments, NIH mostly maintained the number of noncompeting grants from year to year, while cutting back on awarding competing project grants from FY2009 to FY2015—grants that fund new research projects. Success rates for grant applications, or the percentage of applications that received funding, has also varied from year to year—likely due to a combination of decreased purchasing power as well as an increasing pool of applicants. As shown in Figure 5 , the success rate for new grant applications was 30% in FY2003, fell to a low of 17% in FY2013, and rose to 21% in FY2018. The decrease in purchasing power—22% lower in FY2013 than in FY2003—may have curtailed NIH's ability to support new projects, and therefore reduced the proportion of grant applicants who received funding. In addition, though the number of competing grants awarded by NIH in FY2016 returned to above FY2007 levels, the success rate for applicants was lower in FY2016-FY2018 than prior to FY2007. The decline in success rates therefore also reflects a growing pool of investigators who are competing for NIH funding. In FY2003, NIH received 34,710 applications for RPGs, which rose to 49,581 applications in FY2013 and then to 54,834 in FY2018. The number of applications rose by 58% between FY2003 and FY2018. The average success rate at NIH reflects varying success rates for applications to different ICs. Success rates for the various ICs in FY2018 range from 10.3% for the National Institute of Nursing Research (NINR) and 10.7% for the National Institute on Minority Health and Health Disparities (NIMHD), at the low end, to 34.8% for the National Center for Advancing Translational Sciences (NCATS) and 33.3% for the National Institute on Drug Abuse (NIDA), at the high end. Science editor-in-chief, Jeremy Berg argues that variation in funding from year to year may affect scientific progress: Such fluctuations have important consequences. Outstanding applications that would have been funded one year go unsupported the next year, so that potentially ground-breaking research may be missed for arbitrary reasons of timing. Low success rates result in scientists spending more time writing and reviewing proposals instead of conducting research. Investigators, particularly those at vulnerable career stages, can become demoralized by the apparently capricious nature of funding decisions. Members of the scientific community have called for steady, predictable annual growth in NIH funding; a long-term strategy for federal research investment; and greater increases in federal funding for biomedical research. Some argue that research institutions and universities have become too reliant on NIH funding. In 2017, federal dollars made up about 60% of all funding to higher education institutions for \"biological and biomedical sciences research,\" and 53% of all funding for \"health sciences\" research. One commentary, published in 2018, explored how universities rely on NIH funding for researchers' salaries and laboratory facilities. During the doubling period of NIH funding from 2000 to 2004, universities rapidly increased square footage of laboratory space and hired more scientists—possibly assuming future increases in NIH funds to support their growth. The growth in laboratories heightened the need and competition for NIH grants. According to the author, universities have switched to mostly financing researchers' salaries with grant funds in the past few decades. In the 1970s, universities paid about 75% of researchers' salaries; in 2014, many researchers received, on average, 65% of their salary from grants (based on available evidence; many universities do not share salary data). As a result of reliance on competitive grant funding, researchers are spending increasing amounts of their time writing grant applications rather than conducting science. The author argues that universities should commit more of their \"hard money,\" or institutional funds, for research salaries and facilities to ensure the sustainability of biomedical research. NIH Director Francis Collins alluded to this issue in a January 2010 interview, stating that universities are \"becoming too reliant on NIH money, allowing faculty members to obtain all their income from federal research grants.\" Dr. Collins indicated that when faculty members run multiple research projects at the same time, \"that turns that investigator into a grant-writing machine perhaps more than a doing-of-science machine.\" However, he said, any new restrictions on NIH grants \"would have to be phased in over a fairly long period of time because many universities and faculty members would find that quite disruptive.\" President Trump's FY2018, FY2019, and FY2020 budget proposals have included initiatives designed to \"stretch available grant dollars.\" The FY2018 budget proposal would cap the indirect costs that could be covered by NIH grants (facilities and administrative—or F&A—costs) at 10% of the total grant award to reduce the overall cost of an RPG. Over the previous 10 years, approximately 28% of grants were used to cover F&A costs. Both the House and Senate Appropriations Committees rejected the proposal to cap F&A costs. The report accompanying H.R. 3358 ( H.Rept. 115-244 ) stated that the Trump Administration's proposed cap on indirect (F&A) costs was \"misguided and would have a devastating impact on biomedical research across the country.\" The FY2019 budget request proposed capping the percentage of an investigator's salary that can be paid with grant funds at 90%. It also proposed capping investigator salaries at $152,000, a 19% reduction from the current $187,000 limit. In the report accompanying H.R. 6470 , the House Appropriations Committee stated that it did not include the general provision in the budget request to limit the percentage of a researcher's salary that may be paid for using NIH grant funds, as the impact of such a change is unclear. The report stated, \"The Committee requests an analysis of the projected impact of such a policy change on the number and average cost of NIH grants, as well as on academic institutions, in the fiscal year 2020 Congressional Justification\" The FY2020 budget request, again, included the proposal to cap the percentage of an investigator's salary that can be paid with grant funds at 90%. In the requested analysis published in the FY2020 Congressional Justification, NIH stated that \"no previous research examines the impact of reducing the salary cap on the number of grants and the average cost per grant.\" NIH noted that a salary cap reduction in FY2011 did not reduce the average cost of NIH grants and that the number of NIH grants awarded decreased, though other factors may have affected grant numbers and average costs. NIH also noted that an unintended consequence of the policy could be that institutions will have to make up for the rest of researchers' salaries, which \"may limit the number of applicants with sufficient resources to participate in Federally-funded research.\" NIH is concerned about retaining and attracting new scientists for biomedical research careers. In the past two decades, early-stage scientists have received a declining percentage of NIH grants and have spent more time in low-paid postdoctoral training positions. The number of traditional faculty positions in biomedical research has declined, while the number of postdoctoral positions has increased, creating a highly competitive and pessimistic outlook for obtaining traditional academic research positions. A 2018 National Academies of Sciences, Engineering and Medicine (NASEM) report stated that, \"these obstacles to success have created a research career path that is increasingly unattractive in terms of pay, duration, culture, risk-taking, and future job prospects.\" A relatively large portion of NIH funding goes to older and more established researchers. Between 1998 and 2014, the proportion of NIH-funded investigators over the age of 65 increased from 5% to 12%, while those younger than 50 declined from 54% to 39%. The average age at which an investigator first obtained an independent grant increased by more than five years between 1990 and 2016. During that time, the average age at which a new investigator first obtained a R01 grant (independent research project grant) increased from 36 years for PhDs and 38 years for MDs, to 42 years for PhDs and 45 years for MDs, respectively. Another analysis from the NIH Office of Extramural Research also found that the percentage of the NIH workforce made up of new investigators and early-stage investigators had declined between 2009 and 2016. In addition, the success rate for new investigators fell from 40% in 1962 to 27% in 2013. A 2018 GAO analysis found that \"extramural investigators who had received at least one large NIH research grant during fiscal years 2013 through 2017 were more likely to receive such grants in subsequent application cycles than investigators who had not yet received such grants.\" According to a 2017 study, a minority of highly funded researchers have received an increasing percentage of NIH grants in recent years. In 2015, the top 10% of NIH grant winners by total award received 37% of NIH funding, an increase from the 32% received in 1985, but down from a peak of 40% of total funding in 2010. In contrast, the bottom 40% of principal investigators received 12% of total funding in 2015, down from 16% in 1985. Of note, 2010 and 2015 were years of low funding growth, and therefore NIH might have been expected to make fewer new grant commitments to new investigators in these years, in order to sustain funding for ongoing research. In addition, the authors of the study described a lack of mobility for investigators. They concluded that researchers who start at the top tend to remain there, while researchers receiving a lower portion of funding remain poorly funded. Scientists in the top 20% of funding have more publications and citations, which may help explain grant success. As previously mentioned, the 21 st Century Cures Act ( P.L. 114-255 ) established the Next Generation of Researchers Initiative (NGRI) within the office of the NIH Director. This initiative is intended to provide opportunities for earlier independence while enhancing workforce diversity. Superseding previous policy on early-stage investigators, it requires the NIH Director to develop new policies and programs that promote opportunities for new researchers to receive funding, enhance training, and encourage workforce diversity. NIH has faced challenges in attempting to implement NGRI. In May 2017, NIH proposed to cap funding for highly funded investigators through a measure termed the Grant Support Index (GSI) to free up funding to early-stage investigators and others who receive less funding. Some members of the scientific community strongly opposed the GSI, arguing that it represented a move away from a merit-based system of allocating funding, would discourage collaboration and training, and was based on flawed analysis. Others argued that the highly funded researchers and institutions who would be affected by the policy could afford to diversify their funding sources. Ultimately, NIH cancelled the proposal after facing criticism at a Council of Councils meeting. As an alternative to GSI, in August 2017 NIH announced the official policy for the NGRI, which called on ICs to prioritize awards that fund early stage investigators (ESI) and early established investigators (EEIs). The policy defined ESIs as those who had completed training within 10 years and were gaining their first independent research award, and EEIs as those who had completed training within 10 years and who were at risk of losing NIH support or were supported only one active award. Through NGRI, NIH would free up \"substantial funds\" from its base budget to support ESIs and EEIs. NIH announced the program would start with $210 million in FY2017 and increase to $1.1 billion in five years, pending funding availability. NGRI was established to complement existing grant award opportunities that support ESIs and EEIs, such as the New Innovator Award and the Early Independence Award. Under NGRI, ICs would develop evidence-based strategies to increase and retain ESIs/EEIs, and NIH would track their outcomes. NIH again faced criticism that the program would prioritize ESIs and EEIs at the expense of established investigators, and that the rules for who qualified to be an ESI or EEI were too strict. NIH revised the policy to eliminate the EEI category, instead prioritizing investigators at risk of losing funding regardless of age, and to be \"flexible\" in designating who qualified for ESI status. NIH has established a working group to advise NIH on NGRI policy development. Despite apparent challenges, NIH Director Francis Collins stated at an August 2018 congressional hearing that the agency expects to fund more early-stage investigators than ever—1,100 researchers—with their first grant in 2018 as a result of NGRI. The FY2020 budget request included further details about NIH plans for NGRI. NIH stated that it regularly collects data and evaluates outcomes on NIH-funded trainees and their transition to an independent career. In addition, the FY2020 budget request would provide $100 million in dedicated funding for NGRI, and the request stated: in response to an advisory committee recommendation and a recent report from the National Academy of Sciences, NIH is creating a new pathway for applications from early-stage investigators that does not require preliminary data and continues to provide a separate review of applications. NIH is also lengthening the window for early-stage eligibility to 11 years with additional flexibility due to significant life events. As referred to in the above quote, in 2018, NASEM published a report that identified policy reforms to better support the next generation of biomedical researchers. NIH was directed to fund the report through the FY2016 LHHS Appropriations Act ( P.L. 114-113 , Division H), and is required by the Cures Act to consider its recommendations and submit a report on actions taken to Congress in 2020. In the 2018 report, the NASEM committee found that while reductions in NIH purchasing power have constrained grant funding available to early-stage investigators, universities and research institutions have been slower to make reforms and less responsive to the needs of early-stage investigators than NIH. For instance, many universities and research institutions may provide inadequate career counseling or job opportunities for new researchers. The NASEM committee therefore recommended policies that hold universities and research institutions accountable alongside the NIH in supporting ESIs, and preparing them for diverse and nonacademic careers. The committee also made recommendations for Congress to create a council on ongoing challenges in biomedical research, and for NIH to strengthen its programs for ESIs, among many others. Apart from age and experience, other inequalities also persist in grant funding, such as by gender and race/ethnicity. NIH has found that women and racial and ethnic minorities make up a larger portion of new and early-stage investigators than experienced investigators, and generally make up a larger portion of the applicant pool than the awardee pool for grants. There is also less representation of women and minorities among faculty positions in the biomedical sciences. On average, women scientists are awarded smaller grant sizes than those awarded to men. One study found that from 1991 to 2010, while women made up half of all PhDs awarded in the biomedical sciences, one-third of first-time NIH research grants were awarded to women investigators. However, after winning their first grant, women were as likely as male scientists to win another grant. The researchers attributed these findings to women dropping out of an academic research career at a higher rate than men in early stages of their career. NIH has found that women tend to get their first grant award at a later age than men; however, the age differences between genders appears to have narrowed in recent years. From 2002 to 2016, there was a 7.5% to 10.5% gap in funding rates between scientists from underrepresented minority groups compared to those from majority groups. A 2018 GAO analysis of NIH data from 2013 to 2017 found that 17% of investigators from underrepresented racial groups—African Americans, American Indians/Alaska Natives, and Native Hawaiian/Pacific Islanders combined—who applied for large grants received them, compared to 24% of Hispanic or Latino applicants, 24% of Asian applicants, and 27% of white applicants. In addition, the percentage of underrepresented minorities in the NIH grant applicant pool increased from 2002 to 2016. GAO noted that NIH has taken steps to support a diverse workforce, such as by hiring a Chief Officer of Scientific Workforce Diversity, who then created a workforce diversity strategic plan. GAO found that although NIH has developed initiatives for diversity, these programs have not been evaluated and that the programs do not have adequate performance measures to track their success. NIH diversity initiatives have included bias training for the intramural hiring committees, training and fellowship opportunities targeted at underrepresented groups, and ongoing career development, such as mentoring and conferences, for scientists from underrepresented groups. While the United States remains the lead funder of research and development, other countries—particularly China—have increased public funding for research in recent years. A 2015 study compared investment in biomedical research in the United States and in other developed countries. It found that U.S. government research funding declined from 57% (2004) to 49% (2011) of the global total, as did that of U.S. companies (50% to 41%), with the total U.S. (public plus private) share of global research funding declining from 57% to 44%. Asian countries (China, Japan, South Korea, India and, Singapore) increased investment from $28 billion (2004) to $52.4 billion (2011). China, in particular, almost quadrupled funding on medical research, from $2 billion in 2007 to $8.4 billion in 2012. Globally, the United States continues to be the top supporter of research and development. NIH is the top nonindustry (governmental or philanthropic) single funder of health research in the world. The growth in international biomedical research can lead to certain benefits shared globally—such as a larger pool of scientists across the world contributing to new knowledge and medical innovations. However, more research and development in other countries also means more competition for U.S. industries. In 2011, the United States led the world in publication of biomedical research articles—accounting for 33% of articles published. However, in 2011, China was the leader in life science patent applications—filing 30% of such patents globally. The United States followed with 24% of life science patents. Academic scientists often seek partnerships with colleagues or recruit students from other countries to advance their work. Yet, as new discoveries are translated to commercial products, such partnerships could complicate the economic development goals of public investment in research. Some Members of Congress have expressed concern over the investments being made by other countries in biomedical research. In Section 809, \"Policy Statement on Medical Discovery, Development, Delivery and Innovation,\" H.Con.Res. 27 found that the \"United States leadership role is being threatened, however, as other countries contribute more to basic research from both public and private sources\" and that the \"Organisation for Economic Development and Cooperation [sic] predicts that China, for example, will outspend the United States in total research and development by the end of the decade.\" The growth in global biomedical research funding has contributed to a surge in research produced outside of the United States, as well as increasing collaboration between U.S. and international institutions. A study of articles published from 2004 to 2013 in PubMed (a database of biomedical research literature based at the U.S. National Library of Medicine) found that published research funded by non-U.S. government sources had increased significantly during that period. Publications authored by European and Asian authors had increased at a higher rate than those by American authors. Collaboration between U.S. and international institutions has also grown in the past few decades. A study of cardiovascular research publications found that cross-border collaboration increased from 1992 to 2012, with the United States having the highest number of cross-border collaborations. NIH actively encourages international collaboration through some of its grant opportunities. A congressional hearing in August 2018 raised the issue of undue foreign influence in U.S. biomedical research. NIH Director Francis Collins announced an investigation of research institutions for undue foreign influence in three key areas: First, failure by some researchers at NIH-funded institutions to disclose substantial contributions of resources from other organizations, including foreign governments, which threatens to distort decisions about the appropriate use of NIH funds. Second, diversion of intellectual property and grant applications [that] are produced by NIH-supported biomedical research to other entities, including other countries. And third, failure by some peer reviewers to keep information on grant applications confidential, including in some instances disclosure to foreign entities or other attempts to influence funding decisions. Dr. Collins also announced a working group of university leaders to develop methods and policies that mitigate undue foreign influence. Despite the presence of bad actors, Collins stressed the important role that foreign scientists have played in U.S.-funded research and reasserted the NIH's commitment to \"preserve the vibrancy of the diverse workforce.\" In a December 2018 report, the working group identified a Chinese research training program that facilitates the transfer of U.S. intellectual property to the Chinese government. Some participants from the program have received NIH funding, though they represent a small portion of foreign researchers in the United States. The report makes recommendations to educate institutions about disclosing and monitoring international ties, and to enhance cybersecurity to prevent information breaches. Other federal agencies, such as the Department of State, Department of Justice (DOJ), and Federal Bureau of Investigation (FBI), are also actively monitoring, investigating, and issuing guidance and/or new policies related to foreign theft of intellectual property from U.S. academic and research institutions. NIH basic research is valued as a source of new and improved treatment and prevention measures, but it may also be used as a basis for policy decisions, economic development, and potentially new commercial products. The primary rationale for a federal government role in funding basic research is that private firms do not perform enough such research relative to the needs of society. The federal government may also invest in research to advance national and economic security for the nation. There are competing views about what roles the federal government and private industry should play in biomedical research and development (R&D). In traditional economics terms, science—especially basic science—is viewed as a public good: scientific knowledge may have widespread benefits that are difficult for an individual firm to \"capture,\" and society may not produce enough of it through industry alone. In the traditional economic view, the public sector should fund basic research, while private firms will concentrate on applied research and product development. However, the line between basic and applied research is blurred. There is some concern that, given the size of federal research funding, some of the federal funding could possibly \"crowd out private-sector investment in R&D\"—meaning that absent public investment, industry would fund more research. On the other hand, one 2019 economic analysis found no evidence that NIH funding crowded out private sector R&D funding. Economist Mariana Mazzucato argues that the U.S. government has played a more directive role in strategically accelerating innovation in technologies and industries through research and development, including in pharmaceuticals and biotechnologies. Mazzucato argues that federal efforts have been a driving force behind \"high risk\" innovation. Others view the public and private sector's respective roles in pharmaceutical research and development as a necessary collaboration, given the scientific complexity of current medical innovations. Academic and industry partnerships are increasingly common, with public sector institutions contributing to the early discovery phases of new medical advancements, and the private sector conducting more late-stage product development and clinical trials. The correct balance of federal and industry contributions to biomedical innovation is difficult to determine, and a source of debate. In recent years, both NIH and industry have shifted their allocation of R&D investments. A 2015 study showed that industry shifted from funding less basic and translational research to spending more on clinical trials. From 2004 to 2011, the pharmaceutical industry increased spending by 36% for phase 3 clinical trials (late-stage clinical trials required to prove drug safety and efficacy), while it decreased spending by 4% for preclinical research activities (prehuman research; includes basic and applied) in the same period. According to the authors, \"[t]his shift toward clinical research and development reflects increasing costs, complexity, and length of clinical trials but may also reflect a de-emphasis of early discovery efforts by the U.S. pharmaceutical industry.\" In recent years, NIH has also shifted to spending a slightly larger percentage on applied research compared to basic research—in FY2017, NIH allocated 48.8% of its research budget authority for applied research (as opposed to basic research), compared to 41.2% in FY2002. Thus, NIH may be shifting to spending more on research than was previously funded by the industry. One analysis found that in 2015, industry accounted for 67.4% of all U.S. expenditures on medical and health research, followed by the federal government (27%) and universities (5%). Some argue that federal support of basic research not only stimulates industry spending on applied research and development (R&D) through scientific discoveries that expand industry R&D opportunities, but also stimulates industry R&D by training many of the researchers that are hired by industry. The training provided by NIH programs \"enhances the productivity and profitability of the companies' R&D investments.\" In contrast, NIH funding may indirectly affect the number of researchers available for the private sector, which can indirectly affect the salaries of these researchers. Many refer to the combination of federal and industry support for biomedical research as a \"biomedical ecosystem,\" or the \"biomedical research enterprise.\" One approach that the NIH has taken to stretch funding dollars and boost innovative research is to engage in public-private partnerships. Such partnerships include the Accelerating Medicines Partnership between the NIH, the FDA, 12 biopharmaceutical companies, and 13 nonprofit organizations to transform the way diagnostics and therapeutics are developed \"by jointly identifying and validating promising biological targets for therapeutics.\" Another partnership, the Biomarkers Consortium, aims to identify promising biomarkers for disease and treatment and includes the NIH, FDA, Centers for Medicare and Medicaid Services (CMS), the Pharmaceutical Research and Manufacturers of America (PhRMA), the Biotechnology Industry Organization (BIO), and over 30 other companies and nonprofit organizations. Public-private partnerships are facilitated by the Foundation for the National Institutes of Health (FNIH). Two recent controversies have invoked scrutiny of NIH's public-private partnerships. In March 2018, the New York Times published an investigative report about scientists and NIH officials who solicited funding from members of the alcohol industry to support a large clinical trial about the health benefits of moderate alcohol consumption. The industry's donations to the study would have been channeled through the FNIH. After the article was published, NIH conducted an investigation and subsequently shut down the study in June 2018. In addition, in April 2018, NIH cancelled a planned opioids research partnership with dozens of pharmaceutical companies aimed at finding new therapies for addiction and pain as a part of the Helping to End Addiction Long-term (HEAL) Initiative. The cancellation occurred after NIH faced criticism and a working group subsequently recommended to avoid \"reputational and ethical risks\" created by receiving funds from certain drug makers, who were involved in litigation for their role in the opioid crisis. NIH has continued to fund the initiative with federal dollars only, and without cash contributions from industry members. As a result of the controversies, members of the biomedical research community have called for the NIH to change its practices around public-private partnerships. In the Journal of the American Medical Association , two observers argued that NIH should issue standard guiding principles for public-private partnerships and should have full transparency about funding sources on all relevant webpages and materials. They also argued that NIH should limit undue influence and bias of the industry in research design and protocols. Another observer argued that NIH should broadly limit industry involvement in research because of the subtle ways industry may influence research—by funding certain types of studies or researchers that may favor their industry. In a December 2018 New York Times editorial, one medical researcher argued that while industry bias in scientific research is important to address, many forms of bias exist in science and therefore advocated for \"open science,\" where researchers' methods, data, funding, and affiliations are maximally transparent. At an August 2018 Senate hearing, NIH Director Francis Collins defended NIH's use of public-private partnerships: \"It brings around the same table scientists from both public and private sectors who design together what the research ought to be, building on the strengths of both groups and it advances the cause of science more rapidly than might otherwise have been.\" He noted, however, that NIH should be careful when the funder has a \"vested interest in a particular outcome of the study.\" The FNIH is small in the context of NIH's large portfolio. In FY2017, the total revenues for FNIH were $64 million, including in-kind contributions. Federal funding of over $30 billion per year therefore dwarfs private contributions to the FNIH. However, private sector funding and influence has increased in the larger biomedical research context. A study found that from 1988 to 2008, the proportion of industry-funded studies in three prominent American medical journals had doubled, from 17% to 40% of all studies. Moving forward, NIH may continue to define its relationship with the private sector in advancing biomedical research. NIH is involved, both directly and indirectly, in pharmaceutical drug development. NIH funding directly contributes to pharmaceutical development when NIH-funded scientists develop a chemical compound or other invention that is patented and then licensed to the pharmaceutical industry. NIH also funds a limited amount of clinical research on new or existing pharmaceuticals to assess drug safety and effectiveness for FDA approval. Since over 50% of NIH funding supports basic research, NIH funded research is, to a greater extent, indirectly involved—by generating scientific knowledge and innovations that aid in pharmaceutical development. For example, important basic advances in research, such as recombinant DNA, can lead to the development of whole new classes of drugs. NIH also supports the education and training of biomedical scientists, some of whom then work for the pharmaceutical industry. It is therefore difficult to quantify and assign credit for the role of NIH funding in the development of a given drug. Drugs with a patent held by NIH or NIH-funded researchers represent a small portion of all FDA-approved drugs. An invention may be patented if it is \"any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof\" that is novel, useful, and nonobvious, and the inventor is the first person to file a patent application. NIH-funded researchers may discover drug candidates that are then patented by or licensed to the pharmaceutical industry. According to a 2011 study by Sampat and Lichtenberg, 9% of the new drugs (i.e., new molecular entities) approved by the FDA from 1988 to 2005 were based on a patent held by either a government agency or a nongovernmental institution that had received government support. NIH makes up a large portion of all government funding for medical research in the United States; therefore many of the drugs in the Sampat and Lichtenberg study were likely developed with NIH funding (although the authors did not specify whether NIH funded the research). However, in 2012, Rai and Sampat noted that federal funding can go unreported on patent applications, despite requirements to report such information. Therefore more drugs may have been developed with federal funding than is accounted for through patent information. A study by Ashley J. Stevens et al. published in 2011 explored the contribution of publicly funded research to the discovery of new drugs. The Stevens study found that of the 1,541 drugs approved by FDA from 1990 through 2007, 143, or 9.3%, resulted from work conducted in public sector research institutions, including all universities, research hospitals, nonprofit research institutes, and federal laboratories in the United States. Of the 1,541 total drug applications, FDA granted priority review to 348 applications, and 66 of these (19%) resulted from publicly funded research. The authors stated that \"viewed from another perspective, 46.2% of the new-drug applications from PSRIs [public-sector research institutions] received priority reviews, as compared with 20.0% of applications that were based purely on private-sector research, an increase by a factor of 2.3.\" An FDA designation of priority review is for \"the evaluation of applications for drugs that, if approved, would be significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions when compared to standard applications.\" According to the authors, their data \"suggest that PSRIs tend to discover drugs that are expected to have a disproportionately important clinical effect.\" Some studies have focused on the public sector's role in developing the most innovative drugs. A 2015 study focused solely on the public sector's role in \"transformative\" drug development from 1984 to 2009. The researchers defined a transformative drug as both innovative and having a groundbreaking effect on patient care. They identified transformative drugs by surveying physicians from the top 30 U.S. academic medical centers. The researchers then focused on 21 transformative drugs and 5 drug classes and followed their development history through FDA documentation and interviews with scientists and drug developers. They found that most of these transformative drugs originated in academic and/or publicly funded institutions that conceptualized therapeutic approaches through basic research, and were then further developed by industry partners for clinical testing. Another study analyzing case histories of the same set of transformative drugs, published in 2016, concluded that only 4 out of 26 transformative drugs identified were developed by one sector alone—either public or private. Although the public sector conducted most of the basic science activities to develop the drugs, the private sector accounted for most of the drug development activities in bringing the drugs to market. The authors estimated that total NIH funding would need to increase by 2.5 times to maintain the current level of drug development without industry support. However, the authors did not appear to account for potential revenues to NIH if the agency produced the drugs. Rather than directly leading to a new drug, NIH-funded researchers are more often indirectly involved in drug development by producing scientific research and innovations that contribute to the knowledge base and available methods for the pharmaceutical industry. For instance, the methodology used by the Stevens et al. 2011 study \"excluded the role of PSRIs in the development of platform technologies that have contributed to the development of whole new classes of drugs.\" These platform technologies enabled the development of many of the products approved by FDA during the period evaluated in the study. The platform technologies were excluded \"because the PSRI scientists who developed the platforms generally did not use them to develop specific drug candidates.\" For example, the following platform technologies were developed with public funds and were excluded from the study: recombinant DNA technology (Cohen-Boyer patents); bacterial production methods for recombinant DNA (Riggs-Itakura patents); production and chimerization methods for antibodies (Cabilly patents); methods to produce glycosylated recombinant proteins in mammalian cells (Axel patents); and methods of gene silencing with the use of small interfering RNAs (Mello-Fire patents). These platform technologies have enabled the development of entirely new classes of drugs, such as the production of synthetic insulin and growth hormones using recombinant DNA technology, and antibody drugs using Cabilly patents. Without these underlying scientific innovations, the result may have been a vastly different economic outlook for the pharmaceutical industry. A few studies have aimed to ascertain the total impact of NIH funding on drug development. A 2018 study by Cleary et al. on the broad impact of NIH funding on drug development found that public funding contributed to every new molecular entity (NME) approved by the FDA from 2010 to 2016. The study, which looked at peer-reviewed literature and public data on NIH grant funding, determined that funding from NIH was \"directly or indirectly associated with every one of 210 NMEs approved from 2010-2016.\" Almost a third (29%) of the publications identified were directly associated with NIH-funded projects. The analysis in this study captured basic research, in addition to applied research on NMEs. The study found that up to 20% of the NIH budget allocation from 2000 to 2016, or about $100 billion, \"was associated with published research that directly or indirectly contributed to NMEs approved from 2010-2016.\" The authors concluded that their results suggest that \"the NIH contribution to research associated with new drug approvals is greater than previously appreciated.\" A 2019 study by Azoulay et al. used a new economic method to measure the impact of NIH research funding on private industry, particularly on patenting by private-sector firms. The study determined that NIH investments in a particular research area increase subsequent private sector patenting in that area—a $10 million increase in NIH funding for a research area results in 2.7 additional patents. Alternatively phrased, one private sector patent results from every two to three NIH grants. Though the authors faced difficulty measuring the economic value of such patents, they stated that, \"one rough calculation suggests that $1 dollar in NIH funding generates around $2.34 in drug sales.\" NIH-funded research has contributed to the development of new pharmaceutical drugs, largely by supporting and conducting the science that underpins the industry. In light of high list prices for certain branded drugs, some question whether the American public is getting an adequate return on taxpayer investment in biomedical research. Others argue that pharmaceutical drug development is an increasingly expensive endeavor, and therefore requires significant research and development contributions from both the public and private sector. NIH contributions to drug development is one component of a larger debate about the role of federal funding and policies (including health care finance, regulatory, and tax policy) in the development, price, and profitability of pharmaceutical drugs. With over $39 billion in funding for FY2019, NIH is a significant contributor to the U.S. and global biomedical research enterprise. Congress may consider how to allocate funding, introduce reforms, and provide oversight to NIH in a way that maximizes benefits to taxpayers through science-driven improvements to health, quality of life, and medical care. NIH has well-established internal processes for allocating research funding through scientific peer review and advisory committees. Congress may consider how to oversee these internal mechanisms; address gaps, duplication, and needs in the research portfolio; and provide funding in a manner that maintains the sustainability and productivity of research. Finally, Congress may consider how to help NIH support new and early-stage scientists, maintain its role as a global leader in biomedical research, and balance the public and private sector's role in research and innovation.", "summary": "The National Institutes of Health (NIH), under the Department of Health and Human Services (HHS), is the primary federal agency charged with performing and supporting biomedical and behavioral research. In FY2018, NIH used its over $34 billion budget to support more than 300,000 scientists and research personnel working at over 2,500 institutions across the United States and abroad, as well as to conduct biomedical and behavioral research and research training at its own facilities. The agency consists of the Office of the Director, in charge of overall policy and program coordination, and 27 institutes and centers, each of which focuses on particular diseases or research areas in human health. A broad range of research is funded through a highly competitive system of peer-reviewed grants and contracts. The Public Health Service Act (PHSA) provides the statutory basis for NIH programs, and funding levels are mostly provided through the annual appropriations process. In December 2016, Congress introduced major reforms and programs at the NIH through the 21st Century Cures Act (P.L. 114-255). Prior to 2016, the last time Congress addressed NIH with comprehensive legislation was in December 2006, when it passed the NIH Reform Act (P.L. 109-482). Congress also gives direction to NIH through appropriations report language, but usually not through budget line items or earmarks. Historically, Congress has accepted, for the most part, the scientific and public health priorities established by the agency through its planning and grant-making activities that involve members of the scientific community and the general public. NIH has seen periods of both low and high funding growth. From FY1998 to FY2003, Congress doubled the NIH budget from $13.7 billion to $27.1 billion. The agency then saw low funding growth or cuts from FY2004 to FY2015. Starting in FY2016, Congress provided NIH with funding increases of over 5% each year, raising the program level from $30.3 billion in FY2015 to $39.3 billion in FY2019. Under President Trump's budget request for FY2020, NIH would be provided a program level of $34.3 billion—a 12.6% reduction from the FY2019 program level. NIH officials and scientific observers have cited funding variability and uncertainty as a challenge for the agency. Along with funding uncertainty, other challenges facing the agency and the research enterprise include allocating funding across disease types, areas of human health, and types of research; addressing congressional priorities and concerns, while ensuring the scientific merit and quality of NIH-funded research; helping new and early-stage scientists obtain their first independent research grants; balancing the public and private sectors' relative roles in biomedical research. NIH is the largest single public funder of biomedical research in the world, yet other countries—particularly China—have increased their funding levels for such research. Some Members of Congress have voiced concern about the position of U.S. biomedical research compared with other countries. A January 2015 study found that the total U.S. (public and private) share of global biomedical research funding declined from 57% in 2004 to 44% in 2011, while countries in Asia increased investment into biomedical research from $28 billion (2004) to $52.4 billion (2011), with especially large increases in China (analysis included Japan, China, India, Singapore and South Korea). Globally, the United States continues to be the top supporter of both public and industry medical research.", "document_type": "crs"}
{"report": "Tariffs or duties are taxes assessed on imports of foreign goods, paid by the importer to the U.S. government, and collected by U.S. Customs and Border Protection (CBP). Current U.S. tariff rates may be found in the Harmonized Tariff Schedule (HTS) maintained by the U.S. International Trade Commission (ITC). The U.S. Constitution grants Congress the sole authority to regulate foreign commerce and therefore impose tariffs, but, through various trade laws, Congress has delegated authority to the President to modify tariffs and other trade restrictions under certain circumstances. To date, President Trump has proclaimed increased tariffs under three different authorities. The President has also proclaimed other import restrictions, including quotas and tariff-rate quotas under these authorities, but the majority of the actions are in the form of ad-valorem tariff increases. The United States played a prominent role in establishing the global trading system after World War II and has generally led and supported global efforts to reduce and eliminate tariffs since that time. Through both negotiated reciprocal trade agreements and unilateral action, countries around the world, including the United States, have reduced their tariff rates over the past several decades, some by considerable margins. According to the World Trade Organization (WTO), U.S. most-favored-nation (MFN) applied tariffs, the tariff rates the United States applies to members of the WTO—nearly all U.S. trading partners—averaged 3.4% in 2017. Globally tariff rates vary, but are also generally low. For example, the top five U.S. trading partners all have average tariff rates below 10%: the European Union (EU) (5.1%), China (9.8%), Canada (4.0%), Mexico (6.9%), and Japan (4.0%). Despite these low averages, most countries apply higher rates on a limited number of imports, often agricultural goods. As discussed below (see \" What are Section 201, Section 232, and Section 301? \") the authorities under which President Trump has increased tariffs on certain imports allow for import restrictions to address specific concerns. Namely, these authorities allow the President to take action to temporarily protect domestic industries from a surge in fairly traded imports (Section 201), to protect against threats to national security (Section 232), and to respond to unfair trade practices by U.S. trading partners (Section 301). In addition to addressing these specific concerns, the President also states he is using the tariffs to pressure affected countries into broader trade negotiations to reduce tariff and nontariff barriers, such as the announced trade agreement negotiations with the EU and Japan, and to lower the U.S. trade deficit. President Trump's recently imposed tariff increases are of note because they are significantly higher than average U.S. tariffs (most of the increases are in the range of 10-25%), and have resulted in retaliation of a similar magnitude by some of the countries whose exports to the United States have been subject to the tariff increases; they affect approximately 12% of annual U.S. imports and 8% of U.S. exports, magnitudes that could grow if additional proposed or pending actions are carried out, or decrease if additional negotiated solutions are achieved; they represent a significant shift from recent U.S. trade policy as no President has imposed tariffs under these authorities in nearly two decades; and they have potentially significant implications for U.S. economic activity, the U.S. role in the global trading system, and future U.S. trade negotiations. Section 201, Section 232, and Section 301 refer to U.S. trade laws that allow presidential action, based on agency investigations and other criteria. Each allows the President to restrict imports to address specific concerns. The focus of these laws generally is not to provide additional sources of revenue, but rather to alter trading patterns and address specific trade practices. The issues the laws seek to address are noted in italics below. The Trump Administration has imposed import restrictions under the three authorities noted above, affecting approximately $282 billion in U.S. annual imports, based on 2017 import values ( Figure 1 ). In addition, the President has initiated Section 232 investigations on U.S. imports of motor vehicles and uranium, which could result in increased tariffs on up to $361 billion and $2 billion of U.S. imports, respectively. The President has also suggested he may increase tariffs under Section 301 authorities on an additional $267 billion of U.S. imports from China, depending on the results of ongoing bilateral talks. The import restrictions imposed under Section 201 and Section 232 apply to U.S. imports from most countries. The Section 301 tariffs apply exclusively to U.S. imports from China. China is a major focus of a Section 301 investigation and related tariff measures largely due to concerns over its intellectual property rights (IPR) and forced technology transfer practices, and the size of its bilateral trade deficit with the United States. China's government policies on technology and IPR have been longstanding U.S. concerns and are cited by U.S. firms as among the most challenging issues they face in doing business in China. Moreover, China is considered to be the largest global source of IP theft. On March 22, 2018, President Trump signed a presidential memorandum on U.S. actions related to the Section 301 investigation. Described by the White House as a response to China's \"economic aggression,\" the memorandum identified four broad Chinese IP-related policies to justify U.S. action under Section 301, stating China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies; China uses discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies; China directs and facilitates investments and acquisitions, which generate large-scale technology transfer; and China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information. The USTR estimated that such policies cost the U.S. economy at least $50 billion annually. During his announcement of the Section 301 action, President Trump also stated that China should reduce the bilateral trade imbalance (which at $376 billion in 2017 for goods trade was the largest U.S. bilateral trade imbalance) and afford U.S. \"reciprocal\" tariff rates. Yes. The Administration negotiated quota arrangements rather than imposing Section 232 tariffs on steel imports from Brazil and South Korea, and Section 232 tariffs on both steel and aluminum imports from Argentina. Although the steel and aluminum tariffs were not addressed in the proposed modifications to the North American Free Trade Agreement (NAFTA), renamed the U.S.-Mexico-Canada Agreement (USMCA), USTR Robert Lighthizer stated the three countries are discussing alternative measures. Side agreements to the USMCA include specific language exempting light trucks and 2.6 million passenger vehicle imports annually each from Canada and Mexico from future U.S. import restrictions under Section 232, as well as $32.4 billion and $108 billion of auto parts imports, respectively. The Administration also informally agreed not to move forward with additional Section 232 import duties on U.S. motor vehicle and parts imports from the European Union (EU) and Japan while broader bilateral trade negotiations are ongoing. Discussions on the steel and aluminum tariffs are also to be part of both negotiations. Additionally, the Administration has participated in talks with China regarding the trade practices that are the subject of the Section 301 tariffs. Negotiations in May 2018 initially appeared to resolve the trade conflict, but were ultimately unsuccessful. After further tariff actions by both sides, on December 1, 2018, Presidents Trump and Xi met at a private dinner during the G-20 Summit in Argentina. According to a White House statement, the two leaders agreed to begin negotiations immediately on \"structural changes\" with regard to IP and technology issues (related to the Section 301 case). The leaders also agreed to address agriculture and services issues. The parties set a goal of achieving an agreement in 90 days. In addition, the White House reported that President Xi agreed to make \"very substantial\" purchases of U.S. agricultural, energy, and industrial products. In exchange, President Trump agreed to suspend the planned Stage 3 Section 301 tariff rate increases that were scheduled to take effect on January 1, 2019, but stated that the increases would be implemented if no agreement was reached in 90 days (by March 1, 2019). High level talks continue, and on January 30-31, 2019, Chinese Vice Premier Liu met with President Trump and other U.S. officials, during which China pledged to purchase 5 million metric tons of U.S. soybeans. On January 31, President Trump indicated that a final resolution of the trade dispute would not be achieved until he met with President Xi. Reports suggest the trade talks may be extended beyond the March deadline. President Trump has made clear that the Administration is using these various import restrictions as a tool to get countries to negotiate on other issues. At the announcement of the proposed USMCA, the President stated \"without tariffs, we wouldn't be talking about a deal, just for those babies out there that keep talking about tariffs. That includes Congress—'Oh, please don't charge tariffs.' Without tariffs, you wouldn't be standing here.\" The United States has also engaged or will engage in consultations at the WTO with some trading partners affected by the tariffs. Such consultations are a required first step in dispute settlement proceedings, which U.S. trading parties and the United States in turn, have initiated in response to the U.S. actions and trading partner retaliations. (See \" What dispute-settlement actions have U.S. trading partners taken? \" and \" What dispute-settlement actions has the United States taken? \") Yes. Some U.S. trading partners subject to the additional U.S. import restrictions have taken or announced proposed retaliations against each of the three U.S. actions. Since April 2018, a number of retaliatory tariffs have been imposed on U.S. goods accounting for $126 billion of U.S. annual exports, using 2017 export values ( Figure 2 ). Yes. The tariffs impact various stakeholders in the U.S. economy, prompting both support and concern from different Members of Congress. To date, Congress has conducted oversight hearings on the Section 232 and 301 investigations and examined the potential economic and broader policy effects of the tariffs. Many Members have expressed concern over what they view as an expansive use of the delegated tariff authority under Section 232, and some Members have introduced legislation in the 115 th and 116 th Congresses that would amend the current authority in a number of ways, including requiring a greater congressional role before tariffs may be imposed. All actions continue to be actively debated, as some other Members see a need for expanded presidential authority to ensure more reciprocal tariff treatment by U.S. trading partners and have introduced legislation in the 116 th Congress to that effect. Senator Grassley, chairman of the Senate Finance Committee announced that he intends to \"review the President's use of power under Section 232 of the Trade Act of 1962\" during the 116 th Congress. There is no set definition of what may constitute a trade war. Beginning in 2017, the United States and some of its major trading partners imposed escalating import restrictions, particularly tariffs, on certain traded products. Some contend that with these actions—or threat thereof—the United States has embarked upon a full-scale \"trade war.\" Although the scale and scope of these recent unilateral U.S. tariff increases are unprecedented in modern times, tensions in international trade relations are not uncommon. Over the last 100 years, the United States has been involved in a number of significant or \"controversial\" trade disputes. Past disputes, however, were more narrowly focused across products and trading partners, and generally temporary. Most were settled, and when unresolved, they were contained or defused through bilateral and multilateral negotiations. From the early 20 th century until this year, one dispute resulted in a worldwide tit-for-tat escalation of tariffs: the trade dispute ignited by the U.S. Tariff Act of 1930, commonly known as the \"Smoot-Hawley\" Tariff Act. The United States has imposed unilateral, restrictive trade measures in the past, but rarely before attempting to resolve its trade-related concerns through negotiations. The United States has, for the most part, engaged with trading partners in bilateral and multilateral fora to manage frictions over such issues and to achieve expanded market access for U.S. firms and farms and their workers. In particular, the United States has generally sought dispute resolution through the multilateral forum provided by the General Agreement on Tariffs and Trade (GATT) and its successor, the WTO. As part of the dispute settlement process, WTO members may seek authorization to retaliate if trading partners maintain measures determined to be inconsistent with WTO rules. Presidential action under these trade laws has varied since Congress enacted them in the 1960s and 1970s, but since 2002 past Presidents generally declined to impose trade restrictions under these laws. The use of Sections 201 and 301, which address some issues also covered by trade rules established at the WTO, has decreased since the creation of that institution in 1995 and its dispute-settlement system, considered more rigorous and effective than the dispute-settlement system under its predecessor, the GATT. The use of Section 232, which focuses on national security concerns and was created during the Cold War, has also declined and has been infrequently used over several decades. Yes. The President's actions have resulted in legal challenges in the U.S. domestic court system and in the dispute settlement system at the WTO. Specifically, the Section 232 actions on steel and aluminum have been challenged in cases before the U.S. Court of International Trade. Severstal Export Gmbh, a U.S. subsidiary of a Russian steel producer, has challenged whether the Administration's actions were appropriately based on national security considerations, as required by statute. The American Institute for International Steel (AIIS), a trade association opposed to tariffs, has challenged the constitutionality of Congress' delegation of authority to the President under Section 232. Most recently, U.S. importers of Turkish steel have initiated a case arguing that the President's increase of the Section 232 steel tariffs from 25% to 50% on U.S. imports from Turkey did not have a sufficient national security rationale, did not follow statutory procedural mandates, and violates a due process law. At the WTO, U.S. trading partners have initiated dispute settlement proceedings with regard to the President's actions under Section 201, Section 232, and Section 301. For more information, see the section on \" What dispute-settlement actions have U.S. trading partners taken? \" Many analysts are concerned that the U.S. measures threaten the rules-based global trading system that the United States helped to establish following World War II. The Trump Administration argues that the unilateral measures are justified under existing multilateral trade rules and as a response to violations of existing commitments under the WTO by other trading partners, particularly China. In contrast, U.S. trading partners contend that the Administration's unilateral actions undermine these existing commitments. They argue that the United States should make use of existing multilateral dispute settlement procedures to address concerns in the trading system rather than resorting to unilateral action. Supporters of the Administration's tariff actions argue that the tariffs and other import restrictions are a useful tool to protect domestic U.S. industries and incentivize U.S. trading partners to enter negotiations, in which they would otherwise have little interest in engaging. Some, including the Administration, also argue that the Section 301 actions address issues not adequately covered by existing WTO rules. Some observers also raise concerns over the scale of the Administration's actions, which have led to import restrictions imposed on nearly all U.S. trading partners, including some close allies such as Canada, Japan, Mexico, South Korea, and the EU. These groups agree with the U.S. concerns over specific trade practices by China, but support a more targeted approach that includes cooperation between the United States and other countries that share U.S. concerns over violations to and shortcomings of the existing international trading system. While the United States is involved in multilateral discussions at various levels on potential reforms to the global trading system, specifically the WTO, some analysts argue ongoing tension resulting from the U.S. unilateral actions could hamper these efforts. The complex nature of international commerce, including its highly integrated global supply chains, makes difficult the accurate prediction of the effects of broad tariff actions on specific industrial sectors or individual companies. For example, the Administration imposed Section 201 safeguard tariffs on washing machines to support domestic manufacturers of washing machines, but these same domestic manufacturers now argue that subsequent Section 232 tariffs on steel and aluminum have led to increases in their input costs and caused further economic harm. U.S. domestic auto production, which the Trump Administration may seek to encourage through additional Section 232 tariffs now under investigation, is similarly negatively affected by the existing steel and aluminum tariffs. Retaliation in the form of increased tariffs on U.S. exports further complicates the economic outcome of the unilateral U.S. actions. Many companies also report that uncertainty resulting from the unpredictable nature of the U.S. and retaliatory actions has made long-term planning difficult; this may be putting a drag on U.S. and global economic activity. Others, including some domestic producers, argue that action was needed to prevent more injurious trade practices from occurring and to eventually achieve broader agreement on reducing tariff barriers and establishing new trading rules. Yes. Two pending Section 232 investigations on U.S. motor vehicle and parts imports and uranium are underway, which could lead to future import restrictions. Additionally, the scheduled increase in the tariff rate on the third tranche of Section 301 tariffs on U.S. imports from China could occur in the near future, as well as potential new tariffs on additional U.S. imports from China, absent a trade agreement to resolve the core issues that are the subject of current bilateral trade discussions. U.S. motor vehicle and parts imports totaled $361 billion in 2017, according to the U.S. Census Bureau. These goods are among the top U.S. imports supplied by a number of U.S. trading partners, including Canada, Mexico, Japan, South Korea, and the EU, making an increase in U.S. tariffs that applies to these countries economically significant and likely to result in retaliatory action. Canada and Mexico are currently exempt from future auto 232 tariffs for a limited amount of imports under the proposed USMCA agreement. With respect to the EU and Japan, the Administration has notified Congress of its intent to negotiate bilateral trade agreements and informally agreed to refrain from imposing new auto tariffs while those talks progress. South Korea is the only major U.S. auto supplier without a formal or informal assurance from the Trump Administration that it will be exempt from Section 232 auto tariffs, despite recently implemented modifications to the U.S.-South Korea (KORUS) free trade agreement (FTA). A delay in ratification and implementation of the proposed USMCA, or a breakdown in talks with the EU and Japan could make an escalation on this front more likely. As noted, President Trump has warned that he will follow through with his threat to increase Section 301 tariffs on $200 billion worth of products from China from 10% to 25% if a trade agreement is not reached by March 1, 2019, or potentially soon thereafter. He has also threatened increased tariffs on an additional $267 billion worth of imported Chinese products. China imports far less from the United States than it exports and therefore could not match U.S. tariffs on a comparable level of U.S. products, but it could increase the level of the tariffs on products that have already been impacted by retaliatory Section 301 tariffs, in addition to raising tariffs on U.S. products that have not yet been subject to retaliatory tariffs. Further, the Chinese government could take other retaliatory action, calling on its citizens to boycott the purchase of American goods and services in China, curtailing the operations of U.S. manufacturing firms in China, ordering Chinese firms to halt purchases of certain high-value U.S. products (e.g., Boeing aircraft) or restricting its citizens from traveling to, or investing in, the United States. The Chinese government could also choose to halt purchases of U.S. Treasury securities and possibly sell off some of its holdings. The Administration has imposed tariffs on U.S. goods accounting for $282 billion of U.S. annual imports, using 2017 trade values. Section 301 actions currently account for the greatest share (83%) of affected imports. U.S. annual imports of products covered under the Section 301 actions currently total $235 billion, compared with $40 billion (14%) under Section 232, and $7 billion (3%) under Section 201 ( Figure 3 ). The potential Section 232 actions on motor vehicles and uranium could cover an additional $361 billion and $2 billion, respectively in U.S. imports, depending on the countries and products included. The scope of U.S. imports affected vary across the three different actions. Section 201 actions cover U.S. imports of washers, washing machine parts, and solar cells and modules. Section 232 actions cover U.S. imports of steel and aluminum products. Section 301 actions cover a broad range of U.S. imports from China. To date, the Administration has imposed increased tariffs under Section 301 on nearly 7,000 products at the 8-digit harmonized tariff schedule (HTS) level. Figure 4 below lists the top 15 products subject to the Section 301 import tariffs classified according to 5-digit U.S. end-use import codes. The major categories are telecommunications equipment, computer accessories, furniture, and vehicle parts. To date, U.S. trading partners have retaliated against U.S. Section 232 and Section 301 actions. China, Japan, and South Korea have also announced planned retaliation to U.S. Section 201 actions, but in line with WTO commitments on safeguard retaliations, they are not to be imposed until 2021. The total actions to date affect approximately $126 billion of annual U.S. exports, using 2017 trade values. The retaliations against U.S. Section 232 actions affect U.S. exports to six trade partners: Canada, Mexico, the EU, China, Turkey, and Russia. The retaliation is similar to the U.S. actions both in terms of the tariff rates (most are in the range of 10%-25%) and the products covered (steel or aluminum are among the top products targeted). Other major products targeted include food preparations and agricultural products, yachts, motorcycles, whiskies, and some heavy machinery ( Figure 5 ). In total, approximately $25 billion of U.S. annual exports are potentially affected by trade partner retaliations against the U.S. Section 232 actions. Retaliatory tariffs imposed by China in response to U.S. Section 301 actions affect approximately $101 billion of U.S. annual exports, accounting for about 80% of U.S. exports subject to retaliatory tariffs currently in effect ( Figure 6 ). Like the retaliation in response to U.S. Section 232 actions, agricultural products are a main target. Soybeans, which accounted for $14 billion of U.S. exports to China in 2017, are the top overall export affected. Motor vehicles were the second-largest category of exports under the Section 301 retaliation, but these retaliatory tariffs have been temporarily suspended as part of the recent efforts at bilateral U.S.-China negotiations to resolve the trade conflict. The Chinese retaliatory tariffs, like the U.S. Section 301 tariffs, range from 10%-25% and cover thousands of tariff lines. U.S. and retaliatory tariffs differ in both scale and scope of products covered. The United States has placed increased tariffs on products accounting for approximately $282 billion of annual U.S. imports, while retaliatory tariffs cover approximately $126 billion of annual U.S. exports, using 2017 trade values. China, which is subject to the largest share of new U.S. tariffs and has imposed the largest share of new retaliatory tariffs, imports far less from the United States than the United States imports from China, limiting the amount of retaliatory tariffs China can impose on U.S. exports. (See discussion on \" Is further escalation and retaliation possible? \") In terms of the products covered, the largest categories of U.S. imports affected by the tariffs are capital goods and industrial supplies ( Figure 7 ). This suggests that, to date, U.S. tariffs are concentrated on products primarily used as inputs in the production of other goods rather than on final consumption goods; therefore the effects of the tariffs may be most pronounced in increased costs for U.S. producers. Among U.S. exports, food and beverages is the second-largest category of goods facing retaliatory tariffs, suggesting that U.S. agriculture producers are among the groups most negatively affected by the retaliatory actions. As a share of overall U.S. trade, approximately 12% of annual U.S. goods imports ($282 billion of $2,342 billion total imports) are subject to increased U.S. tariffs under the Trump Administration's actions ( Figure 8 ). Approximately 8% of annual U.S. goods exports ($126 billion of $1,546 billion total exports) are subject to increased tariffs under partner country retaliatory actions. If the United States moves forward with additional tariffs under the two pending Section 232 investigations on U.S. imports of motor vehicles/parts and uranium, the share of affected U.S. imports could increase up to nearly 30%. U.S. motor vehicle and parts imports totaled $361 billion in 2017. A variety of factors likely go into a country's decision regarding which products to target for retaliation. Retaliatory tariffs are explicitly targeted to encourage the United States to remove its Section 232 and Section 301 tariffs, whereas the Trump Administration's enacted and proposed tariffs aim both to alter U.S. trading partners' practices more broadly, including reducing existing tariff and nontariff barriers, and to protect domestic industries. Retaliatory tariffs can have negative effects on both the exporting country (the United States) and the importing country imposing the retaliation. Therefore, retaliating countries are likely to target products that create the most pressure on the United States to change its policy while minimizing any negative effects on themselves. Some factors that may create greater pressure for U.S. policy change include (1) demand for the targeted product is price sensitive (i.e., demand is price elastic), therefore a small tariff increase will lead to a sharper decline in exports; (2) the retaliating country is a major world market for the product, in which case the exports may not be easily diverted to other markets; and (3) the producers of the targeted products in the United States (i.e., those negatively affected by the tariffs) have high levels of political influence (e.g., the product is made in congressional districts with Members on key committees). Factors that would decrease the negative effects on the importer (retaliating country) include (1) other countries competitively produce the product allowing for alternate sourcing; and (2) importers can easily substitute a different product for the targeted import (e.g., substituting wheat for corn for animal feed). Retaliating countries might also seek to impose similar tariffs as those against which they are retaliating (e.g., steel and aluminum are the top products subject to retaliation in response to the Administration's Section 232 steel and aluminum tariffs). Retaliating countries may also seek to lessen the negative impacts of the tariffs on certain segments of the population (e.g., a country might target luxury goods consumed by higher income groups rather than basic food and apparel products that account for a larger share of low-income household consumption). Yes. The President has the authority to reduce, modify, or terminate import restrictions imposed under Sections 201, 232, and 301. Certain limitations on the President's authority to modify the tariffs apply as specified in the relevant statutes. The President has adjusted several tariff increases since they were initially proclaimed. For example, the President increased the tariff on U.S. steel imports from Turkey under Section 232 from 25% to 50%. However, certain U.S. importers of Turkish steel have brought a challenge to this tariff increase at the U.S. Court of International Trade. Similarly, the President has modified actions taken under Section 301 by increasing the scope of imports from China that are subject to new tariffs. Some products have also received exemptions from the tariff measures, explained below. In Presidential Proclamation 9693, announcing the Section 201 action on solar products, the President gave the USTR 30 days to develop procedures for exclusion of particular products from the safeguard measure. On February 14, 2018, the USTR published a notice establishing procedures to consider requests for the exclusion of particular products. Based on that notice, the USTR received 48 product exclusion requests and 213 subsequent comments responding to these requests by the deadline, March 16, 2018. On September 19, 2018, the USTR announced a limited number of solar product exclusions, and indicated that additional requests received by the March 16, 2018 deadline remained under evaluation. Canada is excluded from the additional duties on washers. Certain developing countries were excluded, provided that they account for less than 3% individually or 9% collectively of U.S. imports of solar cells or large residential washers, respectively. All other countries are covered by the Section 201 trade actions. Individual countries and products may be exempted from the Section 232 tariffs. According to the initial presidential proclamation, countries with which the United States has a \"security relationship\" may discuss \"alternative ways\" to address the national security threat posed by imports of steel and aluminum and gain an exemption from the tariffs. To date four countries have reached agreements with the United States exempting them from part or all of the Section 232 tariffs: 1. South Korea agreed to an absolute annual quota for 54 separate subcategories of steel in place of the steel tariffs. South Korea did not negotiate an agreement on aluminum and has been subject to the aluminum tariffs since May 1, 2018. 2. Brazil was permanently exempted from the steel tariffs, having reached final quota agreements with the United States on steel imports. Brazil, like South Korea, did not negotiate an agreement on aluminum and has been subject to the aluminum tariffs since June 1, 2018. 3. Argentina was permanently exempted from the steel and aluminum tariffs and agreed to absolute quotas for each. 4. Australia gained a permanent exemption from the tariffs without any quantitative restrictions. The 232 product exclusion process is administered by the Department of Commerce's Bureau of Industry and Security (BIS). Thousands of requests have been filed to date and the exclusion process has been the subject of criticism and scrutiny by several Members of Congress and other affected stakeholders. To limit potential negative domestic impacts of the tariffs on U.S. consumers and consuming industries, Commerce published an interim final rule for how parties located in the United States may request exclusions for items that are not \"produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.\" The rule went into effect the same day as publication to allow for immediate submissions. Requesters must complete the official response form spreadsheets for each steel and aluminum exclusion and submit the forms on regulations.gov, where both requests for exclusions and objections to requests are posted. There is no time limit for submitting an exclusion request. Each requester must complete a separate application for each product to be considered for exclusion. Exclusion determinations are to be based on national security considerations, but the specific nature of these considerations remain undefined. To minimize the impact of any exclusion, the interim rule allows only \"individuals or organizations using steel articles ... in business activities ... in the United States to submit exclusion requests,\" eliminating the ability of larger umbrella groups or trade associations to submit petitions on behalf of member companies. A parallel requirement applies for aluminum requests. Any approved product exclusion will be limited to the individual or organization that submitted the specific exclusion request. Parties may also submit objections to any exclusion within 30 days after the exclusion request is posted. The review of exclusion requests and objections will not exceed 90 days. Exclusions will generally last for one year. Companies and some Members of Congress have criticized the intensive, time-consuming process to submit exclusion requests, the lengthy waiting period for a response from Commerce, what some view as an arbitrary nature of acceptances and denials, and the fact that all exclusion requests to date have been rejected when a U.S. steel or aluminum producer has objected to it. (See \" Have Members of Congress and other stakeholders raised issues regarding the product exclusion process? \") In response, Commerce announced a new rule to allow companies to rebut objections to petitions. The new rule, published September 11, 2018, includes new rebuttal mechanisms, more information about the exclusion submission requirements and process, and the criteria Commerce uses in deciding whether to grant an exclusion request. In September, Commerce provided revised estimates of the anticipated number of exclusion requests (96,954) and objections (38,781). To streamline and increase the transparency of the process, Commerce developed an online portal for users to submit requests for exclusions, objections, rebuttals, or surrebuttals. Commerce began testing the portal in December 2018 with the goal of implementing it in early 2019. During the Section 301 notice and comment period on proposed Section 301 tariff increases, the USTR heard from a number of U.S. stakeholders who expressed opposition and/or concern about how such measures could impact their businesses, as well as U.S. consumers. In response, the USTR created a product exclusion process, whereby firms could petition for an exemption from the Section 301 tariff increases for specific imports. The USTR stated that product exclusion determinations would be made on a case-by-case basis, based on information provided by requesters that showed Whether the particular product is available only from China; Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests; and Whether the particular product is strategically important or related to ''Made in China 2025'' or other Chinese industrial programs. To date, USTR has only created this product exclusion process for the first two stages of tariff increases under Section 301. Several Members of Congress have sent letters to the USTR calling for an exclusion process for stage three tariffs as well. The joint explanatory statement to the FY2019 appropriations law ( P.L. 116-6 ), enacted February 15, 2019, directs USTR to establish a product exclusion process for stage three tariffs within 30 days. Several Members of Congress have raised concerns about the Section 232 exclusion process. For example, in a letter to Commerce Secretary Wilbur Ross, and at a June 2018 hearing, then-Chairman of the Senate Finance Committee Chairman Orrin Hatch and Ranking Member Ron Wyden urged improvements to the product exclusion procedures on the basis that the detailed data required placed an undue burden on petitioners and objectors. They also suggested that the process appeared to bar small businesses from relying on trade associations to consolidate data and make submissions on behalf of multiple businesses. The letter further stated that Commerce had not instituted a clear process for protecting business proprietary information. In a follow-up letter to the Secretary of Commerce in December, Senators Hatch and Wyden recognized that some improvements had been made to the exclusion process but identified further issues raised by stakeholders and U.S. businesses. They asked Commerce to address the concerns by adhering to the published timelines for reviewing requests and making specific changes to how the agency handles requests with technical defects. Some Members have used multiple channels to continue to raise issues. A bipartisan group of House Members articulated concerns about the speed of the review process and the significant burden it places on manufacturers, especially small businesses. The Members' letter included specific recommendations, such as allowing for broader product ranges to be included in a single request, allowing trade associations to petition, grandfathering existing contracts to avoid disruptions, and regularly reviewing the tariffs' effects and sunsetting them if they have a \"significant negative impact.\" In September 2018, during an oversight hearing, multiple Senators raised concerns directly to the Assistant Secretary for Export Administration, Bureau of Industry and Security at Commerce, about agency management of the Section 232 exclusion process, including staffing and funding levels, and the need for greater transparency, among other issues. Some Members have questioned the Administration's processes and ability to pick winners and losers through granting or denying exclusion requests. On August 9, 2018, Senator Ron Johnson requested that Commerce provide specific statistics and information on the exclusion requests and process and provide a briefing to the Committee on Homeland Security and Governmental Affairs. Senator Elizabeth Warren requested that the Commerce Inspector General investigate the implementation of the exclusion process, including a review of the processes and procedures Commerce has established, how they are being followed, and if exclusion decisions are made on a transparent, individual basis, free from political interference. She also requested evidence that the exclusions granted meet Commerce's stated goal of \"protecting national security while also minimizing undue impact on downstream American industries,\" as well as evidence that the exclusions granted to date strengthen the national security of the United States. In response to a formal request by Senators Pat Toomey and Tom Carper, the Government Accountability Office (GAO) announced on December 12, 2018, it will investigate the Section 232 product exclusion process in early 2019. Congress authorized additional funds for the Section 232 product exclusion process in the FY2019 appropriations law ( P.L. 116-6 ), and in the accompanying joint explanatory statement, stipulated that Commerce provide quarterly reports to Congress on its administration of the process. The Section 301 exclusion process managed by USTR and effective for the first two tranches of Section 301 tariffs has not attracted the same level of attention from Congress as the Section 232 exclusion process. A bipartisan group of more than 160 Representatives, however, have urged the Administration to allow product exclusions on the third and largest tranche of Section 301 tariffs, and the joint explanatory statement to P.L. 116-6 , directs USTR to establish such an exclusion process within 30 days of the law's enactment. Changes in tariffs affect economic activity directly by influencing the price of imported goods and indirectly through changes in exchange rates and real incomes. The extent of the price change and its impact on trade flows, employment, and production in the United States and abroad depend on resource constraints and how various economic actors (foreign producers of the goods subject to the tariffs, producers of domestic substitutes, producers in downstream industries, and consumers) respond as the effects of the increased tariffs reverberate throughout the economy. Retaliatory tariffs, which U.S. trading partners have imposed in response to U.S. Section 232 and Section 301 tariffs, also affect U.S. exporters. The following outcomes (summarized in Table 1 ) are generally expected at the level of individual firms and consumers: U.S. consumers: Higher tariff rates generally lead to price increases for consumers of the goods subject to the tariffs and for consumers of downstream products as input costs rise. Higher prices in turn lead to decreased consumption depending on consumers' price sensitivity for a particular product. As one example, the monthly price of washing machines in the United States, which are currently subject to tariff increases under Section 201, has increased by as much as 12% compared to January 2018 before the tariffs became effective ( Figure 9 ). U.S. producers of domestic substitutes: U.S. producers competing with the imported goods subject to the tariffs (e.g., domestic steel and aluminum producers) may benefit to the degree they are able to charge higher prices for their domestic goods. However, in the short run, U.S. producers' ability to increase production may be limited. A broad index of U.S. steel producer prices was up 14% in December relative to March, when the Section 232 tariffs first took effect. A similar price indicator for aluminum refining and primary aluminum production shows more volatile prices, with the index down 6.2% between March 2018 and December 2018. U.S. producers in downstream industries: U.S. producers using goods subject to the additional tariffs as inputs may be harmed because the tariffs may cause their costs to increase. U.S. motor vehicle producers may be among the industries most hurt since they face: (1) higher input costs for steel; (2) tariffs on parts accounting for $20 billion of annual imports; and (3) retaliatory tariffs on assembled motor vehicle exports to China accounting for $13 billion of annual exports ( Figure 10 ). U.S. exporters subject to retaliatory tariffs: U.S. exporters facing retaliatory tariffs may be at a price disadvantage in export markets relative to competitors from other countries, which may decrease demand for U.S. exports to those markets. Since Section 232 retaliatory tariffs took effect in the EU, Canada, and Mexico in July, U.S. average monthly exports of the products subject to retaliation have been below their pre-tariff monthly 2018 average by 37%, 23%, and 10%, respectively ( Figure 11 ). China purchases such a large share of certain U.S. agricultural exports—China accounted for 57% of all U.S. soybean exports in 2017—its retaliatory tariffs and the subsequent decline in export sales may have contributed to depressed U.S. prices for some commodities. Foreign producers of the goods subject to the tariffs: Foreign producers can also be affected by tariff increases if consumer demand falls in response to rising prices. In some instances, typically when demand is very price sensitive, or highly elastic, foreign producers may choose to lower their prices and absorb a portion of the tariff increase. The degree to which foreign producers change their prices in response to tariff changes is known as the tariff pass-through rate. Over a longer time horizon, production may shift to other countries to avoid the increased tariffs imposed on products manufactured in the countries affected. In addition to these microeconomic effects, tariffs can also affect macroeconomic variables. With regard to the value of the U.S. dollar, as demand for foreign goods may fall in response to higher tariffs, U.S. demand for foreign currency may also fall, putting upward pressure on the relative exchange value of the dollar. This in turn would reduce demand for U.S. exports and increase demand for foreign imports, partly offsetting the effects of the tariffs. Tariffs may also affect national consumption patterns, depending on how the shift to higher cost domestic substitutes affects consumers' discretionary income and therefore aggregate demand. In the current tight labor environment tariffs may have less impact on overall U.S. employment levels, but may result in some movement of workers between industries and potential industry-specific unemployment as labor demand rises in domestic industries benefitting from the tariffs and falls in industries harmed by increased input costs or retaliatory tariffs. Economists generally agree that a reallocation of resources, including capital and labor, based on price distortions such as tariffs reduces efficiency and productivity over the long run. U.S. government and international institutions, think tanks, and consulting groups have prepared estimates of the potential impacts of the tariffs by projecting trade values using historical trade data and various modeling techniques ( Table 2 ). These studies have produced a range of estimates, but generally suggest a moderately negative impact. The Congressional Budget Office, for example, estimates a 0.1% decline in the annual U.S. GDP growth rate resulting from the tariffs currently in place, while the International Monetary Fund (IMF) estimates approximately a 0.2% decline in the annual U.S. GDP growth rate. Most studies show slight employment gains and production increases in U.S. industries competing with the imports subject to additional tariffs and declines in sectors facing retaliation and heavily reliant on inputs subject to additional tariffs. The net estimated effects are relatively modest, because approximately 10.5% of U.S. annual trade (12% of imports and 8% of exports) is affected by the tariff actions to date and trade represents a moderate share of total U.S. economic activity (27% of U.S. GDP in 2017). However, the effects may be substantial for individual firms reliant either on imports subject to the U.S. tariffs or exports facing retaliatory measures, as well as consumers for whom the affected products account for a large share of consumption. The effects could grow if U.S. tariff actions and retaliation escalates. The IMF, for example, estimates that U.S. GDP growth could fall by approximately 1% and global growth could fall by 0.8% if the United States goes forward with an additional 25% tariff on imports from China and on motor vehicle imports from a number of countries, and partner countries retaliate. For context, in 2017 U.S. GDP was $19.5 trillion, making a 1% decline equivalent to a reduction in GDP of $195 billion. Staff from the Federal Reserve Board of Governors, recently noted that \"trade policies and foreign economic developments could move in directions that have significant negative effects on U.S. economic growth.\" Part of this decline in economic growth reflects concern that the tariff escalation also creates a general environment of uncertainty. Economic research on uncertainty suggests it may lead to lower investment and generally restrain economic activity, including trade . These estimates, however, should be interpreted with caution because (1) they require various assumptions that can affect the predicted outcomes; (2) the extent of the U.S. tariffs and retaliation has fluctuated significantly in recent months and is subject to change; and (3) some of the studies were produced or sponsored by stakeholders advancing specific interests. Economists from the Federal Reserve Bank of Atlanta also note that because tariffs have decreased significantly over the past several decades, there is a dearth of recent empirical evidence to inform models on tariff increases. Most economists agree that the U.S. and global economies have benefitted significantly from the major reduction in global tariff rates that has taken place since the 1940s. If tariff rates were to increase for a significant period of time it could insulate domestic producers from foreign competition, and potentially lead to less efficient and competitive production. This in turn could lead to lower overall economic growth in the United States and abroad, since more closed economies are generally less dynamic, with less innovation and productivity growth. Furthermore, retaliatory tariffs are particularly damaging to U.S. exporters in foreign markets because, unlike multilateral tariffs, the retaliatory tariffs only target U.S. imports. Therefore, exporters from other countries that compete with U.S. firms are likely to be more competitive in the retaliatory markets. Recent trade agreements involving major U.S. trade partners, but not the United States, such as the new EU-Japan FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11) agreement, which consists of the 11 countries remaining in the TPP following the U.S. withdrawal, may likely compound this competitive disadvantage for U.S. exporters. Some argue it may be difficult for U.S. exporters to regain lost export opportunities in the future once importers establish relationships with suppliers from other countries. Another potential long-term effect of the tariffs is a shift in the U.S. role in international economic policymaking. While some stakeholders question the benefits of the dominant U.S. role in global rules-setting, others argue this has generally been of benefit to the United States, allowing U.S. priorities to feature prominently in existing international trade obligations. There are also concerns over the potential geopolitical aspects of tariff escalation. Some argue that the highly integrated nature of the global economy today acts as a deterrent to military conflict. Conversely, if tariff escalation creates a more fragmented global economy or imposes significant costs on a particular economy, it may lessen this deterrent. In addition to studies on the potential macroeconomic effects of the tariffs, a variety of anecdotal information on the tariffs' impact on specific businesses can be found in press reports or quarterly or annual company reporting. The President's tariff actions and subsequent retaliatory tariffs are only one of many factors influencing economic conditions for U.S. companies, making it difficult to assess the tariffs' direct effects. In general, this anecdotal information largely conforms to the theoretical effects of the tariffs outlined in this report. Companies stating they have benefitted from the tariffs are producers competing with the imported products subject to the tariffs, while many downstream manufacturers and retailers assert they have been harmed. Many U.S. exporters subject to retaliatory tariffs also argue that these trade policy actions have negatively affected their operations. For some U.S. producers, the effects of the tariffs have been more complex, including companies that are both benefitting from higher domestic prices due to the tariffs while also being harmed by higher input costs. Companies with major overseas operations argue they have been indirectly harmed through lower sales abroad resulting from an economic slowdown in the countries subject to the Administration's tariff actions. The text box below provides selected examples of companies in each of these four broad categories. China plays an important role for many U.S. multinational firms that rely on global supply chains to manufacture their products. In some cases, U.S. firms source production of parts and components around the world and use China as a final point of assembly for products (e.g., Apple Corporation's iPhone), which are then largely exported. In other instances, firms import parts and components from China to use them in manufacturing products domestically. The use of global supply chains often enables firms to concentrate more of their activities on higher value-added activities. Such factors enable firms to lower costs (making them more globally competitive) and reduce prices for consumers (increasing their purchasing power), which should boost economic growth. The extensive use of global supply chains also result in U.S. imports from China containing foreign-made intermediates, including from the United States. A study by the Organization for Economic Cooperation and Development (OECD) estimated that 40.2% of the value of China's manufactured gross exports in 2011 came from foreign inputs. Many U.S. firms have argued that imposing increased tariffs on imports from China will disrupt global supply chains and could undermine the competitiveness of U.S. firms. To illustrate in a July 27, 2018, letter to USTR Robert Lighthizer, forty-nine members of the Congressional Semiconductor Caucus stated that while the signers supported the Administration's goals of improving China's practices on intellectual property rights, forced technology transfer, and innovation, they opposed using tariff increases to obtain such results: Tariffs on semiconductors will not impact Chinese companies since they export almost no semiconductors to the U.S. market. Instead these tariffs would harm U.S. companies and innovators. Most U.S. imports of semiconductors from China are designed and manufactured by U.S. firms, largely in the United States, then shipped to China for final assembly, test, and packaging. This step in the semiconductor manufacturing process comprises approximately 10 percent of the final value of the product and does not result in the transfer of valuable IP. Similarly, imports of finished semiconductor tools are essentially non-existent. Rather, imports of relatively low-value/low-IP components are incorporated into the high value-added tools made by the U.S. equipment makers and sold around the world. The U.S. Chamber of Commerce and the Brookings Institut ion have examined how the retaliatory tariffs could affect state and metropolitan economies by tallying the total exports subject to retaliation by location. The Chamber's website allows users to select a specific state for more information, while Brookings' website includes a downloadable dataset searchable by specific metropolitan area. According to Brookings, although major metropolitan areas Houston, Chicago, Los Angeles, Dallas, Seattle, and Detroit export the largest overall value of products subject to retaliatory tariffs, with over $2 billion of annual exports affected from each metropolitan area, some rural communities have a much larger share of their total exports subject to retaliation as their exports may be concentrated in certain industries. State-level trade data are also accessible directly from the Census Bureau at usatrade.census.gov. The U.S. Department of Agriculture (USDA) is making available about $12 billion in financial assistance to farmers and ranchers affected by the retaliatory tariffs in the form of direct payments, food purchases, and export promotion assistance. USDA expects that about $9.6 billion will be used for direct payments to qualifying agricultural producers of soybeans, corn, cotton, sorghum, wheat, hogs, dairy, fresh sweet cherries, and shelled almonds. Of those funds, more than three-fourths ($7.3 billion) of the payments are likely to go to soybean producers. To be eligible, a producer must have an ownership share in the commodity, be actively engaged in farming, and be in compliance with adjusted gross income restrictions and conservation provisions. Payments are capped on a per-person or per-legal-entity basis. The sign-up period to request assistance ended on February 14, 2019. The Administration has also created a Food Purchase and Distribution Program that is to undertake $1.2 billion in government purchases of excess food supplies. USDA has targeted an initial 29 commodities for purchase and distribution through domestic nutrition assistance programs. Purchasing orders and distribution activities are to be adjusted based on the demand by the recipient food assistance programs geographically. The smallest piece of the trade aid package is an allocation of $200 million to boost the trade promotion efforts at USDA. U.S. trade partners have reportedly raised questions over the overall U.S. aid package at WTO Agriculture Committee meetings and are closely monitoring U.S. compliance with related WTO obligations on subsidies. President Trump has repeatedly raised concerns over the size of the U.S. goods trade deficit (i.e., the amount by which total U.S. goods imports exceed total U.S. goods exports), including making trade deficit reduction a stated objective in new U.S. trade agreement negotiations. While tariffs are expected to reduce imports initially, they are unlikely to reduce the overall trade deficit due to at least two indirect effects that counteract the initial reduction in imports. One indirect effect is a potential change in the value of the U.S. dollar relative to foreign currencies. A reduction in imports reduces demand for foreign currency, putting upward pressure on the foreign exchange value of the U.S. dollar, thereby making U.S. exports more expensive abroad and imports less expensive in the United States. Another potential effect of U.S. import tariffs is retaliatory tariffs, which are likely to reduce demand for U.S. exports. Recent empirical research studying tariff adjustments in a panel of countries supports this theoretical framework and finds no significant evidence of tariffs improving a country's trade balance. Economists generally also argue that while tariffs placed on imports from a limited number of trading partners may reduce the bilateral U.S. trade deficit with those specific countries, this is likely to be offset by an increase in the trade deficit or reduction in the trade surplus with other countries, leaving the total U.S. trade deficit largely unchanged. This is because the trade deficit generally reflects a shortfall in national saving relative to investment, which tariffs do not address. The U.S. goods trade deficit grew in 2018. From January to November 2018, the latest month for which trade data are available, the U.S. goods trade deficit totaled $806 billion, increasing from $731 billion for the same period in 2017. In every month except May, the goods trade deficit was larger in 2018 compared to the same month in 2017 ( Figure 12 ). This may reflect broader positive economic conditions: when the U.S. economy grows demand for both domestic and imported goods rises. It may also, in part, be a result of importers front-loading purchases of foreign goods in an attempt to avoid potentially higher tariffs in the future. Meanwhile, a trade-weighted index of the exchange value of the U.S. dollar against the currencies of a broad group of major trading partners increased by about 10% throughout 2018. The strengthening dollar counteracts the effect of the tariffs by making imports less costly in the United States and U.S. exports more costly in foreign markets. Through Section 201, 232, and 301, Congress has delegated to the President some of its constitutional authority to enact import restrictions, including certain tariff changes. Each of the authorities require an investigation and recommendations of appropriate actions by a key agency; the Department of Commerce and USTR have primary roles in Section 232 and 301 investigations, respectively, while the International Trade Commission (ITC), an independent agency with an equal number of Democratic and Republican commissioners, oversees Section 201 investigations. Multiple proposals have been introduced in both the 115 th and 116 th Congress to amend the President's trade authorities, particularly with respect to Section 232. The majority of these proposals would expand the role of Congress in determining whether or not to impose tariffs. In the 116 th Congress, debate over congressional and executive powers to regulate tariffs has generated multiple proposals to limit the President's trade authorities, along with other reforms (see Table 3 ). Examples include measures that would 1. Require congressional approval before certain Presidential trade actions would go into effect; 2. For the purposes of Section 232 investigations, explicitly define national security and related imports, and task the independent ITC with administering a product exclusion request process; 3. Transfer primary responsibility for Section 232 investigations to the Secretary of Defense from the Secretary of Commerce; 4. Provide an option for Congress to nullify Section 232 actions, by passing a joint disapproval resolution; and 5. Stall the current Section 232 investigation into auto imports. In contrast to proposals to limit the President's trade authority, the White House is actively supporting a measure introduced by Representative Sean Duffy ( H.R. 764 ), that seeks to expand the President's authorities. H.R. 764 would grant the President additional authority to increase tariff rates to match the rates of foreign trading partners, on a country-by-country and product-by-product basis. In the 115 th Congress, proposals to amend trade authorities varied, though most focused on potential modifications to Section 232. Some proposals sought to require additional consultations with Congress or require congressional approval or disapproval of certain trade actions. Other proposals sought to override or suspend specific trade actions by the Trump Administration. A nonbinding motion calling for a congressional role in Section 232 actions passed the Senate, but no other bills to amend the President's trade authorities passed in the 115 th Congress. U.S. Customs and Border Protection (CBP) assesses and collects duties on U.S. imports, including the additional duties imposed as a result of the President's tariff actions. According to information provided by CBP, the following revenue was assessed from the additional duties imposed by the President's tariff actions as of February 21, 2019 (note the tariffs were imposed at different times during 2018 and therefore the collected revenue does not represent a full calendar year): The tariffs collected are put in the general fund of the U.S. Treasury and are not allocated to a specific fund, but are available for appropriations. In other more historical cases, revenue from duties on U.S. imports has been dedicated to specific uses. Examples include Section 32 of The Agriculture Adjustment Act provides for a permanent annual fiscal year appropriation to the U.S. Department of Agriculture (USDA) equal to 30% of \"the gross receipts from [all] duties collected under the customs laws\" during the calendar year preceding the beginning of the fiscal year for which they were appropriated. Section 203 of the Emergency Wetlands Resources Act of 1985 requires that quarterly payments of an amount equal to the amount of all import duties collected on arms and ammunition (HTSUS chapter 93) be used to partially fund a Migratory Bird Conservation Fund (MBCF), administered by the Department of the Interior. Section 3 of the Recreational Boating Safety and Facilities Act of 1980, as amended ( P.L. 96-451 ; 16 U.S.C. § 1606a), requires the Secretary of the Treasury to transfer, \"at least quarterly,\" to the Reforestation Trust Fund (RT) \"an amount equal to the sum of the tariffs received\" on imports of forest and wood articles classified under specified headings of the HTSUS, subject to a cap of $30 million each fiscal year. The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, (Title X of P.L. 106-387 ) known as the \"Byrd Amendment,\" amended existing antidumping and countervailing duty (CVD) laws by requiring that duties assessed pursuant to an AD or CVD order were to be deposited by CBP into special accounts and then distributed to \"affected parties\" (defined as a manufacturer, producer, farmer, rancher, worker representative, or association involved in or in support of an AD or CVD investigation) for certain \"qualifying expenditures\" (such as manufacturing facilities and equipment), as outlined in the act. In 2003, however, WTO dispute settlement and Appellate Body panels determined that the law violated U.S. obligations under the WTO Antidumping and Subsidies Agreements. Congress repealed CDSOA on February 8, 2006. On August 5, 2018, President Trump announced that the increased tariffs his Administration has imposed on steel, aluminum, washing machines, solar panels, and a variety of imported Chinese goods will begin to generate sufficient revenue to reduce the federal debt. The U.S. federal debt represents an accumulation of government borrowing over time, including as a result of annual budget deficits (i.e., when federal government outlays exceed revenue). In FY2018, the federal budget deficit was $779 billion and is projected by the Congressional Budget Office (CBO) to total $897 billion in FY2019, thus contributing to an increasing federal debt. The cumulative publicly held federal debt totaled $15.8 trillion at the end of FY2018, and is projected to increase to $16.6 trillion by the end of FY2019. To reduce the federal debt, the President's tariff actions would have to generate enough revenue to turn the projected budget deficit into a surplus, which could then be used to pay down the federal debt. Accounting for the additional tariffs imposed by the Administration to date, CBO projects that customs duties could generate additional revenue of approximately $34 billion in FY2019, or less than 4% of the projected FY2019 budget deficit. This suggests that at current levels, the President's tariff actions may slightly reduce the annual U.S. budget deficit, but will not generate a budget surplus and therefore will not reduce the annual U.S. debt, though they may result in the debt increasing at a slightly slower rate than would otherwise occur. Moreover, dynamic effects of the tariffs would be likely to reduce these revenues over time as price increases resulting from the tariffs are likely to shift consumption patterns toward less expensive alternatives (i.e. goods not subject to the tariffs). If the tariffs have a negative effect on economic growth, as most economists and CBO predict, they could also result in lower tax revenues more broadly as economic activity declines. In recent history, customs duties resulting from tariffs have not been a significant source of U.S. government revenue. In FY2018, individual income taxes generated more than half (50.6%) of U.S. government revenue, while tariffs or custom duties accounted for less than 2% of total receipts. Taxes create a distortion from market-based signals by altering the price of various economic activities. These altered prices can in turn alter economic outcomes more broadly as market actors make consumption and production decisions in response. Economists generally argue in favor of policies that minimize market distortions as much as possible, especially when they affect production and the allocation of resources. Tariffs or duties are a tax on imports, which raise the price of imports relative to domestic goods, encouraging consumption of domestic goods relative to foreign goods, and thereby potentially shifting production and diverting resources away from relatively efficient economic activities towards less efficient ones. Although there are instances in which economic theory suggests markets may not produce an optimal outcome, economists generally assert that tariffs are not the best tool to address these market failures. Governments, however, must collect revenue in order to fund their services. From an economist's viewpoint, the best source of revenue is one that creates the least distortion of economic activity. Tariffs are generally not viewed as the least distortionary tax. A potential benefit of tariffs as a source of revenue for some countries is the relative simplicity of their collection, which may explain why they remain significant as a share of government revenue in some least developed countries. Economists, however, generally urge developing countries to lessen their reliance on tariffs as a revenue source due to concerns that tariffs may lead to an inefficient allocation of resources. Until the 1910s, custom duties or tariffs were the main source of revenue for the U.S. government; since the creation of the current federal income tax system in 1913, tariff revenue has become an increasingly smaller share of the federal government's total budget receipts, accounting for less than 2% of total receipts in FY2018. In addition to tariffs possibly distorting the allocation of resources, they may also represent a less progressive form of taxation. As with other taxes, the burden of tariffs does not fall uniformly across goods or demographic groups; instead, it falls more heavily on traded goods and the populations that purchase them. Studies generally have found that, in the United States, tariffs harm low- and middle-income households more than high-income households, in large part because lower-income households spend more—as a proportion of their total expenditures—on tradable goods like food and apparel. Through multilateral (WTO) and bilateral and regional trade (FTA) agreements, the United States and its trading partners have committed not to raise tariffs above certain levels with limited exceptions. These exceptions include specific tariffs in response to unfairly traded goods that may cause or threaten to cause material injury, such as imports dumped on U.S. markets at below-production prices (anti-dumping duties) or imports benefitting from government subsidies (countervailing duties) as well as time-limited safeguard actions when a surge in fairly traded imports injures or threatens to injure a domestic industry. U.S. trade agreements also generally include broad exceptions for actions deemed necessary for \"essential security interests.\" The United States argues that its recent tariff actions are allowed under WTO and FTA rules, while U.S. trading partners allege the U.S. actions are inconsistent with these rules and have responded with retaliatory tariffs and initiated dispute settlement actions to resolve their concerns. The United States meanwhile alleges that these retaliatory tariffs are likewise inconsistent with WTO and FTA rules and has similarly initiated WTO dispute settlement procedures in response. Several countries allege that U.S. actions are inconsistent with WTO rules and have initiated complaints under the WTO dispute settlement system, over tariffs imposed under Section 201 (safeguards), Section 232 (national security), and Section 301 (\"unfair\" trading practices) ( Table 4 ). The first step in the dispute settlement process is to request consultations, which provides WTO parties the opportunity to discuss the complaint and seek to reach a negotiated resolution without proceeding to litigation. If consultations fail to resolve the dispute (or if a party denies the request for consultations), the complainant country may request adjudication of the dispute by a WTO panel. The panel issues a ruling on whether the offending measure is consistent with the relevant provisions under WTO agreements; panel decisions can be appealed. On July 16, 2018, the United States filed its own WTO complaints over the retaliatory tariffs imposed by five countries (Canada, China, the EU, Mexico, and Turkey) in response to U.S. tariffs on steel and aluminum imports under Section 232. In late August, the United States filed a similar case against Russia. The United States has invoked the so-called national security exception in GATT Article XXI in defense of the tariffs, stating that the tariffs are not safeguards as claimed by the other WTO members in their consultation requests. As of the end of January 2019, all of the disputes are in the panel phase ( Table 5 ). The Administration's tariff actions have likely affected U.S. trade agreement negotiations in a number of ways. On one hand, existing and threatened tariffs may have adverse economic implications for certain U.S. trading partners (e.g., new motor vehicle tariffs on the EU and Japan) and may have encouraged those countries to enter negotiations with the United States to remove this threat of new tariffs as part of broader FTA negotiations. The tariffs, however, may have created a more contentious and unpredictable environment for U.S. trade agreement negotiations, since trade agreement partners may be concerned new tariffs could be imposed after they have entered into new agreements with the United States. Perhaps as a result, the Administration has begun negotiating specific language in its trade agreements regarding exemptions from new potential tariffs. For example, the proposed USMCA (renegotiated NAFTA) provides a specific exemption from potential new Section 232 motor vehicle tariffs for a limited amount of auto trade among the parties. Other countries may seek similar assurances in future U.S. FTA negotiations, including the proposed U.S. FTA negotiations with the EU, Japan, and the United Kingdom. Such language is unprecedented in U.S. FTAs. Concerns over the Section 232 steel and aluminum tariffs, which were not addressed in the USCMA, may also affect congressional approval of the renegotiated agreement. The United States was a chief architect of the post-World War II global trading system, including the WTO's dispute settlement mechanism. Critics have expressed concerns that the unilateral tariff actions will cause the United States to lose its standing as the predominant global leader of an open and rules-based trading system and chief supporter of more liberalized trade. With regard to the Section 301 actions, China, in particular, may see this shift in U.S. approach as an opportunity to take a more prominent role in setting global trade rules and standards that benefit or promote its interests and that may undermine those of the United States. China's media increasingly touts its economic system as a model for other countries to follow. In addition, U.S. Section 301 tariffs could harm a number of economies that depend on trade with China, either directly or as part of global supply chains, thus damaging relations with the United States. Retaliatory actions may also heighten concerns over the potential strain the Section 232 tariffs place on the international trading system. Many U.S. trading partners view the Section 232 actions as protectionist and in violation of U.S. commitments at the WTO and in U.S. FTAs, while the Trump Administration views the actions within its rights under those same commitments. Others have followed suit with retaliatory actions, which may violate their WTO commitments. If the dispute settlement process in those agreements cannot satisfactorily resolve this conflict, it could lead to further unilateral actions and a tit-for-tat process of increasing retaliation. This potential strain comes at a time when the United States has called for broader reforms of the WTO dispute settlement process, specifically with regard to the appellate body mechanism. Official sources of information regarding the U.S. tariff actions are publicly available through the government agencies responsible for investigating imports or enforcing tariff laws. The following resources include embedded links to agency documents as well as footnotes with official links. The Department of Commerce is the agency responsible for investigating Section 232 cases. Commerce's Bureau of Industry and Security (BIS) has published investigation reports and relevant FAQs on its website. Notices and submitted public comments are available in the Federal Register and on Regulations.gov . Final Investigation Reports on Section 232 Investigations (1981-2018) Compilation of BIS documents related to the steel and aluminum investigations and imposed tariffs FAQ on Product Exclusions for Section 232 Steel and Aluminum Tariffs Find Objections, Rebuttals, and Surrebuttals for Section 232 Product Exclusion Requests Commerce has published Federal Register notices announcing investigations, requesting public comment, and outline product exclusion procedures. Commerce has solicited and published public comments and product exclusion requests through Regulations.gov. The following dockets compile comments and related documents: Aluminum (Docket: BIS-2018-0002 ) Steel (Docket: BIS-2018-0006 ) Auto and auto parts (Docket: DOC-2018-0002 ) Uranium (Docket: BIS-2018-0011 ) ITC, the agency responsible for investigating Section 201 cases, has compiled lists of relevant documents concerning the investigations into imports of solar panels and washing machines . These resources include investigation documents, final reports by the Commission, and the primary Federal Register notices. ITC also maintains the U.S. Harmonized Tariff Schedule (HTS), which provides tariff rates for all merchandise imported into the United States. The tariff actions currently imposed under Section 201, Section 232, and Section 301 are noted within Chapter 99 of the HTS, which documents temporary modifications to the tariff schedule. ITC documents on safeguard investigation into solar panels ITC documents on safeguard investigation into washing machinesThe U.S. Harmonized Tariff Schedule (HTS) : Chapter 99 USTR , the agency responsible for investigating Section 301 cases, has compiled relevant documents about the Section 301 tariffs against Chin ese intellectual property practices on its website. The following USTR resources include the official notices, hearing transcripts, final lists of products subject to additional tariffs, and information on product exclusions. Findings of the Investigation into China's Acts, Policy, and Practices (March 22, 2018) Section 301 Investigations and Related Documents Section 301 Hearings into Proposed Tariffs Section 301: How to Request an Exclusion USTR has solicited and published public comments and product exclusion requests on Regulations.gov . The following dockets compile comments on proposed regulations and related documents, by trade action: Stage 1 Tariffs Notice and comments ( Docket: USTR-2018-0005 )Product exclusions ( Docket: USTR-2018-0025 ) Stage 2 Tariffs Notice and comments ( Docket: USTR-2018-0018 )Product exclusions ( Docket: USTR-2018-0032 ) Stage 3 Tariffs Notice and comments ( Docket: USTR-2018-0026 ) The President has announced these tariff actions through proclamation and presidential memorandum. Presidential documents are published in the Federal Register: Presidential proclamations on Section 201 (Donald J. Trump) Presidential proclamations on Section 232 (Donald J. Trump) Presidential documents on Section 301 (Donald J. Trump) Other presidential statements regarding tariff actions are posted on WhiteHouse.gov. CBP is the agency responsible for enforcing customs laws and collecting tariff revenue. The CBP website includes guidance on recent tariff actions for importers. Duty on Imports of Steel and Aluminum Articles under Section 232 of the Trade Expansion Act of 1962Section 301 Trade Remedies – Frequently Asked QuestionsQuota Bulletins , which track certain imports that are subject to quotas or quantitative limits.", "summary": "The Constitution grants Congress the sole authority over the regulation of foreign commerce. Over the past several decades, Congress has authorized the President to adjust tariffs and other trade restrictions in certain circumstances through specific trade laws. Using these delegated authorities under three trade laws, President Trump has imposed increased tariffs, largely in the range of 10% - 25%, on a variety of U.S. imports to address concerns related to national security, injury to competing industries, and China's trade practices on forced technology transfer and intellectual property rights, among other issues. Several U.S. trade partners argue that these tariff actions violate existing U.S. commitments under multilateral and bilateral or regional trade agreements and have imposed tariffs on U.S. exports in retaliation. Congress continues to actively examine and debate these tariffs, and several bills have been introduced either to expand, limit, or revise existing authorities. U.S. Trade Laws Authorizing the President's Tariff Actions The President's recent tariff actions raise a number of significant issues for Congress. These issues include the economic effects of tariffs on firms, farmers, and workers, and the overall U.S. economy, the appropriate use of delegated authorities in line with congressional intent, and the potential implications and impact of these measures for broader U.S. trade policy, particularly with respect to the U.S. role in the global trading system. The products affected by the tariff increases include washing machines, solar products, steel, aluminum, and numerous imports from China. Retaliatory tariffs are affecting several U.S. exports, including agricultural products such as soybeans and pork, motor vehicles, steel, and aluminum. Using 2017 values, U.S. imports subject to the increased tariffs accounted for 12% of annual U.S. imports, while exports subject to retaliatory tariffs accounted for 8% of annual U.S. exports. A pending Section 232 investigation on motor vehicle and parts imports could result in increased tariffs on more than $360 billion of imports, and the President has stated that additional tariffs could be imposed on imports from China absent a negotiated agreement to address certain Chinese trade practices of longstanding concern to the United States. Although the consensus among most economists is that the tariffs are likely to have a negative effect on the U.S. economy overall, they may have both costs and benefits across different market sectors and actors. Import tariffs are effectively a tax on domestic consumption and thus increase costs for U.S. consumers and downstream industries that use products subject to tariffs. Retaliatory tariffs create disadvantages for U.S. exports in foreign markets, and can lead to fewer sales of U.S. products abroad and depressed prices. However, domestic producers who compete with affected imports can benefit by being able to charge higher prices for their goods. The Administration also argues the tariffs may have an indirect benefit if they result in tariff reductions by U.S. trading partners and lead to resolution of U.S. trade concerns affecting key sectors of the U.S. economy. Economic analyses of the tariff actions estimate a range of potential effects, but generally suggest a 0.1%-0.2% reduction in U.S. gross domestic product (GDP) growth annually owing to the actions to date. The economic effects of the President's actions are likely to be central to ongoing congressional debate on legislation to alter the President's tariff authority.", "document_type": "crs"}
{"report": "The U.S. corporate income tax is based on worldwide economic activity. If all of a corporation's economic activity is in the United States, then tax administration and compliance is relatively straightforward. Many corporations, however, operate in several jurisdictions, which creates complications for tax administration and compliance. Further, corporations may actively choose where and how to organize to reduce their U.S. and worldwide tax liabilities. Some of these strategies have been referred to as expatriation, inversions, and mergers. This report begins with a brief discussion of relevant portions of the U.S. corporate income tax system before examining how inversions were commonly structured. The report then looks at how Congress and the Department of the Treasury have reduced the benefits of inversions. The report concludes with an examination of remaining methods for inverting and policy options available to prevent or limit these inversions. Achieving tax savings using an inversion became more difficult with the enactment of the American Jobs Creation Act of 2004 (JOBS Act; P.L. 108-357 ). The JOBS Act denied or restricted the tax benefits of an inversion if the owners of the new company were not substantially different from the owners of the original company. The act also allowed a firm to invert only if it had substantial business operations in the country where the new headquarters was to be located. Although the 2004 legislation largely prevented the types of inversions that drew attention prior to its adoption, several companies have successfully inverted in the past few years by using the substantive business operations mechanism or merging. Treasury regulations have subsequently limited the former mechanism. In spring 2014, several high-profile companies indicated an interest in merging or plans to merge with a non-U.S. firm, including Pfizer, Chiquita, and Omnicom (an advertising firm). News reports indicated that a group of Walgreens investors was also urging such a move. Although the Pfizer and Omnicon mergers and Walgreens headquarters shifts ultimately did not take place, other firms announced mergers in the late spring and early summer. A number of firms in the medical device or pharmaceuticals fields announced mergers or proposed mergers with a shift of headquarters: Medtronics, Salix, AbbVie, Mylan, and Hospira. In August 2014, concern about inversions increased with the announcement that Burger King was in talks to merge with Tim Hortons, a Canadian firm, with the merged firm's headquarters in Canada. An agreement was announced on August 26. Although Burger King is a smaller firm than AbbVie, for example, it is a household name and this proposed inversion garnered much attention. In September 2014, the Treasury Department released a notice of regulatory changes that would restrict some aspects of inversions or their benefits and indicated that other actions may follow. AbbVie, Chiquita, and some other firms canceled their plans in the wake of these Treasury regulations, although new merger proposals were also announced. In November 2015, the Treasury announced additional regulatory restrictions. Although new inversions slowed significantly, others continued but in many cases have been structured to avoid the regulations by reducing ownership below 60%. Most notable of these is the proposed merger of Pfizer with Allergan in November 2015. Pfizer terminated the merger after the release of the April 4, 2016, regulations. This \"second wave\" of inversions again raised concerns about an erosion of the U.S. tax base. While the substantial business avenue appears to have been largely eliminated by Treasury regulations that increased the required share of activity, the option of merging with a smaller foreign company remains. U.S. firms may also merge with larger firms, although in this case the tax benefits are less likely to be key factors in the decision to merge. Data released by the Bureau of Economic Analysis indicated that acquisitions by foreigners, which rose substantially in 2015, fell by 15% in 2016, and by 32% in 2017. Some of the largest declines were in countries associated with inversions, such as Ireland, where acquisitions fell from $176 billion in 2015, to $35 billion in 2016, and to $7 billion in 2017. In December 2017, a tax revision ( P.L. 115-97 ), often called the Tax Cuts and Jobs Act (TCJA), and subsequently referred to as the \"Act,\" made major changes to the corporate tax and the international tax rules, along with some specific revisions aimed at discouraging inversions. Although data for 2018 are not yet available, one planned inversion, by Assurant, Inc., was revised to retain the headquarters in the United States. Ohio-based Dana, Inc. announced plans to merge and move the headquarters to the U.K., although the merger would leave the U.S. shareholders with less than 60% ownership, and therefore not make them subject to anti-inversion penalties. The United States uses a system that taxes both the worldwide income of U.S. corporations and the income of foreign firms earned within U.S. borders. All income earned within U.S. borders is taxed the same—in the year earned and at statutory tax rates of 21% (reduced from 35% by the Act). Under pre-Act law, U.S. corporate income earned outside the United States was also subject to U.S. taxation, though not necessarily in the year earned. This treatment occurred because U.S. corporations could defer U.S. tax on active income earned abroad in foreign subsidiaries until it was paid, or repatriated, to the U.S. parent company as a dividend. To mitigate double taxation, tax due on repatriated income was reduced by the amount of foreign taxes already paid. The Act substituted a new system (Global Intangible Low-Taxed Income, or GILTI) that taxed foreign source income of U.S. subsidiaries currently but with an exemption for a deemed return of 10% on tangible assets and a deduction from the remaining income (for 50% of income through 2025 and 37.5% afterward). It allows a credit for 80% of foreign taxes. The new system also allows U.S. firms a deduction for foreign derived intangible income, or FDII, which was designed to reduce tax rates on foreign earnings from the use of intangible assets held in the United States. The deduction is 37.5% of this estimated income through 2025 and 21.875% afterward. Income from certain foreign sources earned by subsidiaries—which generally includes passive types of income, such as interest, dividends, annuities, rents, and royalties, and is referred to as Subpart F income—is generally taxed in the year it is earned and was retained by the Act. Subpart F applies only to shareholders who may be able to influence location decisions at the corporate level. These subsidiaries are referred to as controlled foreign corporations (CFCs). The Act also adopted the Base Erosion and Anti-Abuse tax (BEAT), an alternative minimum tax with the tax based increased by certain payments to related foreign parties. Its primary focus was to address profit shifting between foreign parents and U.S. subsidiaries, but it applies in general. Notably, it excludes payments for costs of goods sold and for costs of services under some pricing rules. One way of shifting profits was to locate debt in high-tax countries. Preexisting thin capitalization rules limited interest to 50% of earnings before the deduction of interest, taxes, and amortization, deprec iation, and depletion (EBITA), although firms with a debt-to-asset rate of 1.5 or less were exempt. The new law adopted much stricter thin capitalization rules to prevent firms from deducting large amounts of interest. The new law lowers the cap to 30% of profits, eliminates the exemption based on the debt-to-asset ratio and, after 2021, measures the cap as a share of profits after amortization, depreciation, and depletion deductions. The Act also adopted some tax provisions targeted at discouraging inversions, which are discussed subsequently. A corporate inversion is a process by which an existing U.S. corporation changes its country of residence. After the inversion, the original U.S. corporation becomes a subsidiary of a foreign parent corporation. Corporate inversions occur through three different paths: the substantial activity test, merger with a larger foreign firm, and merger with a smaller foreign firm. Regardless of the form of the inversion, the typical result is that the new foreign parent company faces a lower home country tax rate and no tax on the company's foreign-source income. The U.S. firm can use inversions to reduce taxes using various techniques. Foreign operations in the future can be formed as subsidiaries of the new foreign parent in a country with a territorial tax, so that future foreign income can be exempt from tax. Accumulated and future foreign income from the U.S. company's foreign subsidiaries (which would be taxed by the United States if paid to the parent as a dividend) may be effectively repatriated tax free by lending or otherwise investing in the related foreign firm, such as a low-interest loan to the foreign parent holding company. These borrowed funds could then be used, for example, to pay dividends to shareholders or make loans to the U.S. firm. In addition, the combined firm can engage in \"earnings stripping\": reducing income in the U.S. firm by borrowing from the U.S. company and increasing interest deductions. For example, a foreign parent may lend to its U.S. subsidiary. This intercompany debt does not alter the overall company's debt, but does result in an interest expense in the United States (which reduces U.S. taxes paid) and an increased portion of company income being \"booked\" outside the United States. Royalty payments, management fees, and transfer pricing arrangements are other avenues for earnings stripping, but are thought to be of lesser importance than intercompany debt. In this form of inversion, a U.S. corporation with substantial business activity in a foreign company creates a foreign subsidiary. The U.S. corporation and foreign subsidiary exchange stock—resulting in each entity owning some of the other's stock. After the stock exchange, the new entity is a foreign corporation with a U.S. subsidiary, as the exchange is generally in proportion to the respective company valuations. As this form of inversion does not require any change in the effective control of the corporation, it is referred to as a \"naked inversion.\" In this form of inversion, a U.S. corporation would like to bolster its foreign operations and, perhaps, lower its U.S. tax. To do so, the U.S. corporation merges with a larger foreign corporation, with the U.S. shareholders owning a minority share of the new merged company. This results in the effective control of the new company being outside U.S. borders. While this form of inversion may be driven by business considerations, tax considerations may also be part of the decision. An example of this can be seen in the following statement by the board of directors of a U.S. corporation recommending approval of a merger with a U.K. corporation. The board of directors pursued the merger in part because Ensco was headquartered in a jurisdiction that has a favorable tax regime and an extensive network of tax treaties, which can allow the combined company to achieve a global effective tax rate comparable to Pride's competitors. In this case, a U.S. firm, Pride, merged with a U.K. firm, Ensco, and the headquarters remained in the U.K. In this form of inversion, a U.S. corporation would like to bolster its foreign operations and lower its U.S. tax. To do so, the U.S. corporation merges with a smaller foreign corporation, with the U.S. shareholders owning a majority share of the new merged company. This merger results in the effective control of the new company staying with the shareholders of the U.S. corporations. While this form of inversion may be driven by business considerations, tax considerations may also be part of the decision. An example is the Eaton Cooper merger. The following is an excerpt of a U.S. corporation's (Eaton's) press release announcing the acquisition of an Irish company (Cooper), with the company headquartering in Ireland (with a 12.5% tax rate and a territorial system). At the close of the transaction ... Eaton and Cooper will be combined under a new company incorporated in Ireland, where Cooper is incorporated today. The newly created company, which is expected to be called Eaton Global Corporation Plc or a variant thereof (\"New Eaton\"), will be led by Alexander M. Cutler, Eaton's current chairman and chief executive officer. At the close of the merger, it was expected that the shareholders of the U.S. company would control 73% of the combined company, with the shareholders of the Irish company controlling the remaining 27%. The press release notes expected tax benefits from the merger at $165 million in 2016, out of $535 million of total cost savings. In this case, a U.S. corporation used a merger to achieve an inversion while its shareholders retained a significant majority of shares. In the late 1990s and early 2000s, news reports drew the attention of policymakers and the public to a phenomenon sometimes called corporate \"inversions\" or \"expatriations\": instances where firms that consist of multiple corporations reorganize their structure so that the \"parent\" element of the group is a foreign corporation rather than a corporation chartered in the United States. Among the more high-profile inversions were Ingersoll-Rand, Tyco, the PXRE Group, Foster Wheeler, Nabors Industries, and Coopers Industries. These corporate inversions apparently involved few, if any, shifts in actual economic activity from the United States abroad, at least in the near term. In particular, inverted firms typically continued to maintain headquarters in the United States and did not systematically shift capital or employment abroad post inversion. Further, Bermuda and the Cayman Islands were the location of many of the newly created parent corporations—jurisdictions that have no corporate income tax but that also do have highly developed legal, institutional, and communications infrastructures. A 2002 study by the U.S. Treasury Department concluded that while inversions were not new—the statutory framework making them possible has long been in existence—there had been a \"marked increase\" in their frequency, size, and visibility. Taken together, these facts suggested that tax savings were one goal of the inversion, if not the primary goal. Beyond taxes, firms engaged in the inversions cited a number of reasons for undertaking them, including creating greater \"operational flexibility,\" improved cash management, and an enhanced ability to access international capital markets. The 2002 Treasury report identified three main concerns about corporate inversions: erosion of the U.S. tax base, a cost advantage for foreign-controlled firms, and a reduction in perceived fairness of the tax system. These concerns, along with a growing awareness of inversion transactions, may have resulted in congressional concern and debate about how to address the issues surrounding inversions, culminating with the enactment of an anti-inversion provision (Section 7874) in the American Jobs Creation Act of 2004 (AJCA; P.L. 108-357 ). The AJCA adopted two alternative tax regimes applicable to inversions occurring after March 4, 2003. The AJCA treats the inverted foreign parent company as a domestic corporation if it is owned by at least 80% of the former parent's stockholders. In these cases, the AJCA would deny the firm any tax benefits of the inversion (i.e., it would continue to be taxed on the combined group's worldwide income). The second regime applies when there is at least 60% continuity of ownership but less than 80%. In this case, the new foreign parent is not taxed like a domestic corporation, but any U.S. toll taxes (taxes on gains) that apply to transfers of assets to the new entity are not permitted to be offset by foreign tax credits or net operating losses. The AJCA also exempted corporations with substantial economic activity in the foreign country from the anti-inversion provisions, but it did not define substantial business activity in the statute. Although the 2004 act largely eliminated the generic naked inversions, two alternatives remained that allowed a firm to shift headquarters and retain control of the business: the naked inversion via the business activity exemption, and merger with a smaller company. Using the business activity route would require significant economic operations in the target country. An inversion by merger would require a large firm that would be at least 25% of the size of the U.S. firm. The post-2004 approaches to inversions no longer involved countries such as Bermuda and the Cayman Islands, but larger countries with substantial economic activity such as the U.K., Canada, and Ireland. The U.K., in particular, has become a much more attractive headquarters. Because of freedom of movement rules in the European Union, the U.K. cannot have anti-inversion laws, which may have played a role in both moving to a territorial tax and lowering the corporate tax rate. A 2012 report in the Wall Street Journal highlighted some recent moves abroad. This report claimed 10 companies had inverted since 2009, with 6 within the past year or so. This was a small number of companies, but it is useful to look at the methods involved. The Wall Street Journal article identified by name 5 of the 10 companies that had moved abroad recently: Aon, ENSCO, Rowan, Eaton, and DE Master Blenders 1763. (The article also referred to Transocean and Weatherford International, but these were firms that had inverted before the 2004 legislation: Transocean first to the Cayman Islands, and then Switzerland, and Weatherford first to Bermuda, and then Switzerland.) The remaining firm mentioned in the Wall Street Journal article is Eaton. Eaton's move abroad was a merger; it merged with Coopers, a firm effectively operating its headquarters in the United States, but one that had inverted prior to the 2004 law change. An article by Bret Wells identified Aon, ENSCO, and Rowan as having inverted via the substantial business activity exemption (where the only apparent objective is tax savings). All three moved to the United Kingdom, where a recent move to a territorial tax, as well as decisions in the European Court of Justice that limited their anti-abuse rules, had made their tax system more attractive. The U.K. was also in the process of lowering its own corporate rate. Two of the firms are oil drilling firms; drilling in the North Sea might have affected their ability to use this exemption. Aon is an insurance firm. Wells mentions another firm, Tim Hortons, which also used a naked inversion using the substantial business activity exemption in 2009 to relocate to Canada. In doing so, the firm was returning to its origins, as it was founded in Canada. It became an American company when Wendy's acquired it in 1995, but it was subsequently spun off in 2006. DE Master Blenders 1763, like Tim Hortons, was returning to its origins as well (a Netherlands firm), as it was spun off from Sara Lee, which had acquired it in 1978. In response to increased use of the substantial business activity exemption, Treasury Regulations (T.D. 9592, June 12, 2012) increased the safe harbor for the substantial business activities test from 10% to 25%, effectively closing off this avenue in the future. This action could be done by regulation because the statute did not specify how the substantial business activity test was to be implemented. A number of mergers have either been effectuated or were proposed: Chiquita, Actavis, and Perrigo (the latter two are pharmaceutical firms) moving to Ireland; Valeant Pharmaceuticals and Endo Health Services moving to Canada; and Liberty Global (a cable company) to the U.K. Subsequently, the new Irish firm Actavis (itself the result of two prior mergers) merged with Forest Labs. Omnicom (an advertising firm) planned a move to the U.K. (after proposed merger with a French firm, creating a Netherlands holding company, resident in the U.K. for tax purposes), but has abandoned its merger. Chiquita canceled its plans after Treasury regulations were issued in September 2014. Most of these firms are not household names or industry giants. Thus, perhaps none created as much interest as the attempt by pharmacy giant Pfizer to acquire AstraZeneca with a U.K. headquarters, or the urging of some stockholders of Walgreens to invert to Switzerland. Pfizer represented a significant potential loss of future tax revenue, as much as $1.4 billion per year. According to a study by Martin Sullivan, in 2005, when a temporary tax exclusion of 85% of dividends (the repatriation holiday) was in force, Pfizer repatriated $37 billion, the single largest amount of repatriations of any firm. In 2009, Pfizer repatriated $34 billion (and paid U.S. taxes on that amount) to finance the acquisition of Wyeth, but earnings abroad grew from $42 billion in 2009 (after the repatriation) to $73 billion by 2012. These earnings have not been repatriated and taxed in the United States. An inversion by Pfizer would, however, result in current shareholders paying capital gains taxes on any stock appreciation when they are converted into shares of the new company. Shares held in IRAs and 401(k)s would not typically owe this tax, but shares owned directly by individuals and in mutual funds would owe tax even if they did not sell their stock. Policymakers and the public remained interested in the issue of inversions through 2014. Although the initial Pfizer merger did not occur, the spate of mergers or proposed mergers in the medical device and pharmaceuticals industries continued in 2014. One example included one of the largest proposed mergers yet, AbbVie's acquisition of Shire, an Irish firm. The announcement of a proposed merger between Burger King and Tim Hortons also generated interest in the issue. As is the case with Chiquita, AbbVie canceled its plans after the issuance of Treasury regulations in September 2014, but Burger King planned to complete its merger and did so on December 12, 2014. Treasury continues to regulate inversions where regulations are possible. For example, in 2014 it took action to close a loophole stemming from the coordination of two sets of regulations—the \"Anti-Killer B Regulations\" and the \"Helen of Troy Anti-Inversion Regulations\"—that allowed Liberty Global shareholders to avoid some capital gains taxes. In response to the new wave of inversions, the Treasury Department released a notice of regulatory actions that would restrict inversions and their benefits. Treasury news releases, however, indicated that legislative action is the only way to fully rein in these transactions. Following this notice, several firms announced they were canceling plans to merge, and one firm, Medtronic, announced a change in financing plans (no longer using earnings abroad to pay acquisition costs). Other firms, however, have announced inversion plans. There is no way to know how many unannounced mergers were, or will be, prevented by these regulations. The regulatory actions address two basic aspects of inversions. One set of changes limits the ability to access the accumulated deferred earnings of foreign subsidiaries of U.S. firms. The second regulatory action restricts certain techniques used in inversion transactions that allowed firms to qualify with less than 80% ownership. This regulation is effective for inversions that closed on or after September 22, 2014. The regulations do not prevent inversions via merger and do not address earnings stripping by shifting debt to the U.S. firm, although Treasury has indicated future action in this area. In an inversion, the foreign subsidiaries of the original U.S. firm remain subsidiaries so that any dividends paid to the U.S. parent would be taxed. Regulations also treat other direct investments in U.S. property, such as loans to the U.S. parent, as dividends. Once a firm has inverted and the U.S. firm is now a subsidiary of a foreign parent, there are methods of accessing the earnings of overseas subsidiaries by transactions between the new foreign parent and the U.S. firm's foreign subsidiaries. The regulation is intended to address three such methods. First, the regulation prevents the access to funds by, for example, a loan from the U.S. company's foreign subsidiary to the new foreign parent (called \"hopscotching\"). Before the regulation, funds of this type could have been used to pay dividends to the individual shareholders or for other purposes. Under the regulation, acquiring any obligation (such as a loan) or stock of a foreign related person is treated as U.S. property subject to tax. Second, the regulation addresses \"decontrolling,\" where the foreign acquiring corporation issues a note or transfer of property for stock in the U.S. firm's foreign subsidiaries. If a majority of stock is obtained, the U.S. firm's subsidiary is no longer a controlled foreign corporation (CFC) and not subject to Subpart F, which taxes currently certain passive or easily shifted income. However, even a less than majority share can allow partial access to deferred earnings without a U.S. tax. This regulation prevents this by treating acquisition of foreign subsidiary stock as acquisition of stock in the U.S. parent. Third, the regulation addresses transactions where the foreign acquiring corporation sells stock of the former U.S. parent corporation to that U.S. parent corporation's CFC in exchange for property or cash. If such a transaction is structured properly, some interpretations of the old regulations would have permitted the income to avoid taxation. The new regulations would prevent that and would apply regardless of the firm's inversion status. A firm can realize the tax benefits of an inversion only if the shareholders of the original U.S. firm retain, after the merger, less than 80% of the ownership in the new company. The regulation contains several provisions that limit certain techniques for achieving this goal. The avoidance techniques include inflating the foreign firm, shrinking the U.S. firm, and inverting only part of the U.S. firm. First, it prevents firms from reaching the less than 80% goal by inflating the size of the foreign merger partner (which must have more than 20% ownership subsequent to the merger) by use of passive assets (e.g., an interest bearing bank deposit). This notice disregards passive assets of the foreign firm if more than 50% of its value is in passive assets. (Banks and financial service companies are excluded.) Second, it prevents firms from shrinking the size of the U.S. firm by paying extraordinary dividends before the merger. The notice disregards this reduction in value. Third, it prevents an inversion of part of a U.S. company (a \"spinversion\") by spinning it off to a newly formed foreign corporation, by treating the new \"foreign\" company as a domestic corporation. After the 2014 Treasury regulations were issued, some firms revised their plans, and the pace of inversions slowed. Some mergers were structured to avoid the anti-inversion rules and Treasury regulations, by an ownership share of less than 60%. Among what appear to be inversions is the merger of telecom firm Arris and Pace (a U.K. firm), CF Industries (fertilizer) and OCI NB (a Netherlands firm), Terex with Konecranes (a Finnish firm), and a consolidation of European Coca-Cola bottling firms (one such firm, Coca-Cola Enterprises, was a U.S. headquartered firm). Waste Connections Inc. merged with Progressive Waste Solutions Ltd (a Canadian Firm), with 70% ownership and a headquarters in Canada. Monsanto's proposal to merge with Syngenta (a Swiss firm) was called off. Some mergers that did not qualify as inversions under the tax law also occurred. The most significant in size was the proposed Pfizer merger. On November 23, 2015, Pfizer announced a proposed merger with Allergan, an Irish company, and the move of its headquarters to Ireland. This merger, which would result in the largest pharmaceutical company in the world, is not covered under the anti-inversion rules because Pfizer will own 56% of the value of the new firm. Allergan itself is the product of a merger involving both stock and cash acquisition by Actavis in 2015, with former Allergen shareholders owning a minority of the new company. Thus, this merger as well was not an inversion under the tax law. Actavis, in turn, was a former U.S. firm that inverted by merger with Warner Chillcott, an Irish firm, in 2013 (where the former shareholders of the U.S. firm acquired 77% of the stock). Pfizer terminated its merger with Allergen after the April 4, 2016, regulations (discussed below). Other notable mergers not subject to anti-inversion rules were the acquisition of Salix, a pharmaceutical company, by Valeant (a Canadian company); the acquisition of Auxilium by Endo (after Auxilium backed out of an inversion with Canadian firm QLT); the merger of Cyberonics with Italy's Sorin (to be headquartered in the U.K.); and the merger of Broadcom (a chipmaker) with Avago (a Singapore firm). Information and analytics provider HIS announced a merger with Markit Ltd, a U.K. firm, to be headquartered in the U.K., but the ownership share of HIS would be less than 60% of the firm. Johnson Controls also merged with Tyco, one of the earlier inverted firms. The 2015 Treasury regulations appear to have more limited consequences for inversions than the 2014 regulations did. Three regulatory changes were made by the notice. First, in the case where the foreign parent is a tax resident of a third country, stock issued by that parent to the existing foreign firm will be disregarded for purposes of the ownership requirement. That change will prevent a U.S. firm from merging with a partner and then choosing a tax friendly third country to headquarter in. The second provision would clarify the so called \"anti-stuffing\" rules, where the foreign firm's size is inflated by adding assets to that firm. The notice clarifies that this rule applies to any assets, not just passive assets. Third, the current business activity exception requires 25% of business activity to be in the foreign country where the new parent is created or organized, but does not require it to be a foreign parent. This rule requires the business activity to be in the foreign parent. It prevents inversion based on the business activity test when the foreign parent has a tax residence in another country without substantial business activities. On April 4, 2016, the Treasury Department issued temporary and proposed regulations formalizing rules contained in Notices 2014-52 and 2015-79 limiting corporate tax inversions, as well as adding new rules addressing inversions and earnings-stripping transactions. In response to these new regulations, the proposed merger between Pfizer and Allergen PLC has been terminated. The April 4, 2016, Treasury regulations put in place several anti-inversion rules that target groups that have engaged in a series of inversion or acquisition transactions as well as a rule that restricts postinversion asset dilution. The temporary regulations target inversion transactions involving a new foreign parent that previously acquired one or more U.S. entities in inversions or acquisitions in which the new foreign parent issued stock. These prior acquisitions would generally increase the value of the foreign entity, enabling it to subsequently engage in an inversion transaction with a larger U.S. company while remaining below the 60% or 80% ownership thresholds. The temporary regulations disregard stock of the new foreign parent to the extent the value of such stock is attributable to its prior U.S. entity acquisitions during the prior three years. According to analysis by Americans for Tax Fairness, the implementation of this rule would have increased Pfizer's share of the merged company to roughly 70% from 56% prior to the rule. Similar to the multiple domestic entity acquisition rule, the multiple-step acquisition rule targets certain inversions that are structured as back-to-back foreign acquisitions. Specifically, it targets transactions that are part of a plan in which a foreign corporation acquires substantially all of the assets of a U.S. entity and, subsequent to this first acquisition, a second foreign corporation acquires substantially all of the assets of the first foreign corporation. The temporary regulations, under certain circumstances, treat each acquisition as an acquisition of a U.S. entity that may be subject to anti-inversion rules. Unlike the multiple domestic entity acquisition rule, which has a three-year look-back period, the multiple-step acquisition rule can be applied to all acquisitions that are part of the same plan regardless of time. A third rule modified existing regulations to restrict the ability of inverted companies to avoid paying tax on unrealized gains (under Section 965) through a transfer to a controlled foreign corporation (CFC) (under Section 351). This would address situations where a CFC of an inverted U.S. company engages in a postinversion exchange that could dilute a U.S. shareholder's indirect interest in the exchanged asset, allowing the U.S. shareholder to avoid U.S. tax on any realized gain in the asset that is not recognized at the time of the transfer. The rule requires a CFC of an inverted U.S. group to recognize all realized gain with respect to any such postinversion Section 351 exchange. The earnings-stripping regulations aim to restrict the ability of foreign-parent groups to shift earnings out of the United States through dividends or other economically similar transactions (under Section 385). In these cases certain related-party debt will be characterized as equity for tax purposes. The result of equity classification is that interest deductions will be disallowed, and withholding obligations of 30% (or lower rate based on an applicable income tax treaty) could ensue. The regulations do not normally apply for related-party debt that is incurred to fund actual business investment, such as building or equipping a factory. The regulations also require documentation of debt instruments issued and held by certain members of an expanded group to establish that such instruments are properly characterized as debt. The regulations also allow the IRS on audit to treat an instrument issued to a related party as in part debt and in part equity. The final regulations issued on October 21, 2016, scaled back the original regulations in response to the comment period. The final regulations removed the general bifurcation rule that would have allowed a debt instrument to be classified as part debt and part equity and an exemption for debt for foreign issuers. The rules also provided exemptions for cash pools (a pool of cash to be accessed for short-term needs), short-term loans, regulated financial entities, and pass-throughs (firms not taxed as corporations). The Treasury delayed documentation rules for a year on July 28, 2017. Treasury announced on July 7, 2017, that these debt-equity regulations were to be among eight rules targeted for review. The Treasury issued final regulations for the temporary regulations introduced in April 2016 on July 12, 2018, as TD 9834 with minor changes. Two days after the regulations were issued, Pfizer withdrew from its merger with Allergen, an Irish-based company that was an inverted firm. It appears that this merger was affected by the multiple-entity rule, which has come to be called \"serial inversion.\" Mergers between Shire (Ireland based) and Basalta, and between HIS and Markit Group Inc. (U.K. based) went forward. The CF Industries merger with OCI NV (based in the Netherlands) was also called off; Johnson Controls and Tyco went forward. A merger between Konecranes (a Finnish firm) and Terex was scaled down to an acquisition of a share of Terex with the U.S. firm owning 25%, thus avoiding the effect of regulations. In May 2016 Cardtronics, Inc., an ATM operator, announced a plan to move to the U.K. using the substantial business activities test. Also in May, an oil and gas industry service and technology firm announced a merger with Technip SA (France) to form a U.K. company, with each firm holding about half the stock and thus avoiding any of the recent regulations and establishing a new headquarters in another country. In 2017, Praxaire (a U.S. industrial gas company) announced a merger with Linde AG (a German gas and technology company), also with each owning half of the new company. As noted in the introduction, statistical data suggest a decline in inversions from 2015 to 2016, and again from 2016 to 2017, and these data are consistent with the limited news reports of major inversions. Pfizer's CEO has recently indicated that deals are on hold generally while tax reform is being considered. The 2017 legislation not only made fundamental changes to the overall treatment of corporate income at home and abroad, but also adopted several provisions specifically aimed at inverted corporations (those with 60% to 80% ownership). Under the new law, existing untaxed earnings held abroad are taxed under a deemed repatriation rule, but at a lower rate (8% for earnings reinvested in noncash assets and 15.5% for earnings held as cash or cash equivalents). A special recapture rule applies on deemed repatriations of newly inverted firms. This recapture rule applies if a firm first becomes an expatriated entity at any time during the 10-year period beginning on December 22, 2017. In this case, the tax will be increased from 8% and 15.5% to 35% tax for the entire deemed repatriation, with no foreign tax credit allowed for the increase in tax rate. The additional tax is due on the full amount of the deemed repatriation in the first tax year in which the taxpayer becomes an expatriated entity. BEAT excludes payments which reduce gross receipts with the result that payment for the cost of goods sold is not included under BEAT. An exception applies for firms that invert after November 9, 2017, where payments to a foreign parent or any foreign firm in the affiliated for cost of goods sold is included in BEAT. The constructive ownership rules for purposes of determining 10% U.S. shareholders, whether a corporation is a CFC and whether parties satisfy certain relatedness tests, were expanded in the 2017 tax revision. Specifically, the new law treats stock owned by a foreign person as attributable to a U.S. entity owned by the foreign person (so-called \"downward attribution\"). As a result, stock owned by a foreign person may generally be attributed to (1) a U.S. corporation, 10% of the value of the stock of which is owned, directly or indirectly, by the foreign person; (2) a U.S. partnership in which the foreign person is a partner; and (3) certain U.S. trusts if the foreign person is a beneficiary or, in certain circumstances, a grantor or a substantial owner. The downward attribution rule was originally conceived to deal with inversions. In an inversion, without downward attribution, a subsidiary of the original U.S. parent could lose CFC status if it sold enough stock to the new foreign parent so the U.S. parent no longer had majority ownership. With downward attribution, the ownership of stock by the new foreign parent in the CFC is attributed to the U.S. parent, so that the subsidiary continues its CFC status, making it subject to any tax rules that apply to CFCs (such as Subpart F and repatriation taxes under the old law, and Subpart F and GILTI under the new law). Dividends (like capital gains) are allowed lower tax rates than the rates applied to ordinary income. The rates are 0%, 15%, and 20% depending on the rate bracket that ordinary income falls into. Certain dividends received from foreign firms (those that do not have tax treaties and PFICs ) are not eligible for these lower rates. Dividends paid by firms that inverted after the date of enactment of P.L. 115-97 are added to the list of those not eligible for the lower rates. In 2004, an excise tax of 15% was imposed on stock compensation received by insiders in an expatriated corporation; the new law increases it to 20%, effective on the date of enactment for corporations that first become expatriated after that date. As noted earlier, there are no aggregate data available yet for 2018, but there are also indications that most tax-motivated inversions had already been discouraged by the 2016 regulations. Considering announcements of individual companies, one planned inversion, by Assurant, Inc. was revised to retain the headquarters in the United States. Ohio-based Dana, Inc. announced plans to merge and move the headquarters to the U.K., although the merger would leave the U.S. shareholders with less than 60% ownership, and therefore not make them subject to anti-inversion penalties. A recent announcement indicated that the Dana merger was called off. Some firms may be considering reversing their headquarters decisions. The AJCA was successful at limiting a form of inversions, at least initially. In particular, the AJCA stopped the practice of basic \"naked inversions,\" in which little activity or presence in the new jurisdiction is required and the new parent is domiciled in a tax haven. Further, through regulation, Treasury has limited the use of the substantial business activity test safe harbor to invert. Recent activity (as noted above), however, suggests that mergers continued to be used as a vehicle for corporate inversions after these changes. These more recent mergers have increasingly resulted in a U.K. parent company (e.g., FMC-Technip, HIS-Markit), due to policy decisions by the U.K. government. Specifically, the U.K. lowered its corporate tax rate and adopted a territorial tax system. In addition, anti-abuse provisions for foreign source income were weakened by the European Union courts. The U.K. has also proposed taxing certain intangible income at a 10% rate. (This is referred to as a patent box.) To restrict the occurrence of tax-motivated inversions, both a general reform of the U.S. corporate tax and specific provisions to deal with tax-motivated international mergers were discussed. Some important changes were made in 2017; other options remain. Interest in reforming the corporate income tax was long-standing, including calling for explicit accommodation of international concerns. As noted earlier, two aspects of the U.S. corporate tax system are particularly relevant to corporate location decisions: the corporate tax rate and the taxation of foreign-source earnings. Taken together, these factors, under prior law, could yield a substantial reduction in taxes paid. In the case of the proposed merger of Forest Laboratories Inc. (a U.S. company) and Actavis (an Irish company) in 2014, the tax reduction was estimated to be roughly $100 million per year. Prior to the 2017 changes, the U.S. corporate statutory tax rate was higher than both the average statutory rates of the other Organisation for Economic Co-operation and Development (OECD) countries and that of the 15 largest economies in the world. Many asserted that the U.S. statutory tax rate needed to be lowered to reduce the incentive for inversion transactions. With the rate lowered from 35% to 21%, the combined central and subnational corporate tax rates are similar to most rates in the OECD. While lowering the corporate tax rate would reduce the incentive to invert, there are reasons to suggest that it would be impractical to reduce the rate to the level needed to stop inversions. Namely, to stop inversions through a reduction in the corporate tax rate would require a U.S. corporate tax rate set equal to the lowest tax rate of a destination company, or zero. A lower corporate tax rate alone reduced the incentive for corporate inversions, primarily by reducing the tax rate applied to repatriated earnings. For a company like Pfizer, with large foreign earnings, a rate reduction could yield significantly lower taxes paid. However, as discussed below, the benefit of a lowered rate is negligible relative to the benefit to corporate taxpayers afforded by territorial tax systems, when income earned in low- or no-tax foreign jurisdictions is never subject to U.S. tax. Two factors present challenges for lowering the corporate tax rate further. First, if revenue neutrality is a goal, there may not be enough base-broadening provisions with revenue offsets to provide deep cuts in the corporate tax; and, if such offsets were found, they might have their own consequences for investment. Reducing the corporate tax without corresponding base broadening would likely reduce corporate tax revenue, adding to chronic budget deficits. Prior to the 2017 revision, the United States was one of the few countries that had a worldwide tax system and levied a tax on the foreign-source income of domestic corporations. Changing corporate tax residence to a country with a territorial tax system (where foreign earnings would not be taxed at all) was thought to drive inversion decisions. This issue led to proposals for the United States to adopt a territorial tax system to stop inversion transactions. One concern about adopting a territorial tax system is the strain it would likely place on the current transfer pricing system. From this perspective, the worldwide tax system provided a backstop on the amount of profit shifting or base erosion possible, because shifted profits will eventually be repatriated. Under a territorial tax system, this is not the case. Research has found evidence of significant profit shifting, especially related to mobile intellectual property, suggesting a lot of income from foreign sources is really U.S. income in disguise. Numerous other issues surround the adoption of a U.S. territorial tax. For example, while some supported a territorial tax to eliminate the incentive to keep earnings abroad, others opposed it because it likely discourages domestic investment and activity in the United States. The revisions in 2017 maintained a worldwide system, but with some changes. Income from U.S. subsidiaries is taxed on a current basis but at a lower rate and with an exemption for a deemed return on tangible assets. It also provided a subsidy for locating intangible assets with earnings from abroad in the United States. Many of the inverting firms had significant intangible assets, and it is not clear whether this new regime (a lower tax rate but on a current basis) is more or less generous to firms considering inverting. Moving closer to a pure territorial tax, as in the case of a rate reduction, would likely reduce corporate tax revenue and add to current budget pressures unless it is offset by other tax increases, although this effect would be less costly at the lower 21% tax rate. In 2027, GILTI is projected to raise $21 billion. GILTI could be retained and the rate lowered or the temporarily lower rate could be made permanent. There has been some agreement that adopting a territorial tax without some significant anti-abuse provisions could be problematic, as it would likely increase profit shifting abroad by U.S. firms. Evidence suggests that administrative remedies were successful at dramatically slowing inversions; the targeted legislative changes in the 2017 Act may have had some impact as well. There are further changes that could be made to discourage inversions. This section discusses the history of these proposals, both legislative and administrative. One approach would be to extend the rate recapture enacted in the 2017 Act for a period longer than 10 years, or to make it apply indefinitely to future inversions. A second alternative is to directly restrict the ability of U.S. firms to invert by merger. The President's FY2015, FY2016, and FY2017 budget proposals contained a provision that would have further restricted the use of inversions. The proposal would modify the 80% test enacted in the AJCA to a 50% test and eliminate the 60% test. In effect, this proposal would reduce the percentage of shareholders that are owners of the \"old U.S. company\" and the \"new foreign merged company.\" The proposal would also require that the new foreign corporation be managed and controlled from outside the United States and prohibit transactions where the new foreign company has substantial business activities in the United States. In November 2015, then-Senate Finance Committee Chairman Hatch indicated the possibility of adding an anti-inversion provision to legislation to extend expired provisions. Many of these bills were introduced in the 115 th Congress. H.R. 1931 (Doggett), the Corporate EXIT Fairness Act, and H.R. 3434 (Levin) and S. 1636 (Durbin, along with a number of cosponsors), the Stop Corporate Inversions Act, would have treated all mergers as U.S. firms when the U.S. firm's shareholders hold more than 50% or when management and control primarily takes place in the United States. H.R. 1932 (Doggett) and S. 851 (Whitehouse), as with bills introduced in the 114 th Congress, would have included anti-inversion provisions as part of a broader proposal to address tax havens and deferral. H.R. 3603 (Levin) would have addressed earnings stripping of inverted corporations. H.R. 3424 (DeLauro) would disallow federal contracts for inverted firms. H.R. 1451 (Schakowsky) and S. 586 (Sanders) would make major changes in the tax treatment of foreign source income and include anti-inversion rules. Following the change in the international system adopted at the end of 2017, Representative Doggett and Senator Whitehouse introduced the \"No Tax Break for Outsourcing Act\" ( H.R. 5108 , S. 2459 ) which, in addition to other changes, would have treated foreign corporations that are managed and controlled in the United States as domestic corporations and treated inverted firms as U.S. firms when the shareholders of the former U.S. company own more than 50% of the shares. These bills would have also limited interest deductions in the United States to the proportionate share of the firm's assets. The last proposal (to allocate worldwide interest) was in both the House and Senate versions of the legislation ( H.R. 1 ; 115 th Congress) in somewhat different form but was not retained in the final legislation. While this proposal was not specifically targeted at inverted firms it would have increased the restrictions that limit earnings stripping. Former President Obama had encouraged Congress to act directly to limit inversions, but had also indicated on August 6, 2014, that administrative changes to limit inversions were under examination. Prior to that announcement, Steve Shay, a Harvard professor and former practitioner and Treasury official, outlined two regulatory actions that he believed could be taken. The first would limit earnings stripping by reclassifying debt as equity due to excessive related party debt in an inversion. (The second provision is no longer relevant under the new international tax regime.) A number of other administrative proposals that have been suggested (such as provisions relating to taxing accumulated deferred earnings) are no longer relevant and others have been adopted in the regulatory changes discussed above. Expanding the scope of Section 7874 (which treats inverted firms as U.S. firms) by combining multiple transactions into single ones, or vice versa. The scope of Section 7874 could also be expanded by treating certain stock as disqualified (because it is expected to be held temporarily or because it is accompanied by restrictions on voting rights); this provision was adopted in Treasury regulations; Potentially recognizing accumulated deferred earnings as currently taxable under authority such as Subpart F, Section 367, or other rules (this provision is no longer relevant with the end of deferral, but it may have influenced the decision to tax deferred earnings of newly inverted firms at the full 35% rate for the next 10 years); Issuing regulations that would generally tighten restrictions on interest deductions under the thin capitalization rules of Section 163(j). These changes would probably apply to corporations in general, and not just to inverted corporations (this change was made in the 2017 tax revision); Stricter regulations under Section 367 to immediately include foreign earnings in the case of actions that attempt to move foreign operations out from under the U.S. parent. This would make future earnings of these operations nontaxable; Strengthening and modernizing the effectively connected income rules that determined whether trade or business activity is taking place in the United States by foreign firms; and Closely monitoring the creation of non-U.S. subsidiaries owned by the foreign parent after inversion, and ensuring that assets (including intangibles such as inventions, knowhow, etc.) transferred from the U.S. firm are transferred at arms-length prices. There is disagreement among experts about whether the types of regulatory changes discussed in this section are feasible or desirable. A number of legislative proposals were advanced in 2014, when the wave of inversions through merger began. Representative Levin, the ranking member of the House Ways and Means Committee, introduced the Stop Corporate Inversions Act of 2014 ( H.R. 4679 ), which would have reflected the Administration's proposed changes, retroactive to May 8, 2014. The inversion would have not been recognized if the U.S. stockholders had 50% of the shares or if 25% of the business activity is in the United States. A companion bill, which would have sunset in two years to provide time for tax reform, was introduced in the Senate by Senator Levin in 2014 ( S. 2360 ). The Joint Committee on Taxation estimated the permanent proposal to gain $19.5 billion in revenue over FY2015-FY2024. The two-year proposal would have raise $0.8 billion over the same period. In the 114 th Congress, these legislative proposals were introduced as H.R. 415 (Levin) and S. 198 (Durbin). Senator Casey proposed an anti-inversion amendment to an education bill ( S. 1177 ). In the 114 th Congress, H.R. 297 (Doggett) and S. 174 (Whitehouse) included anti-inversion provisions as part of a broader proposal to address tax haven abuses and restrict the benefits of deferral. S. 922 (Sanders) and H.R. 1790 (Schakowsky) also included anti-inversion provisions, as well as earnings-stripping provisions (discussed below) and broader provisions, including the repeal of deferral. In 2014 a number of legislative proposals were introduced that would limit the tax benefits associated with inversions for certain corporations. For example, H.R. 1554 (Doggett), H.R. 3666 (DeLauro), H.R. 3793 (Maffei), S. 268 (Levin), S. 1533 (Levin), and S. 1844 (Shaheen) would each treat corporations managed and controlled from the United States as domestic corporations regardless of their legal tax home or status as an inverted company. This provision was also included in S. 922 (Sanders) and H.R. 1790 (Schakowsky). Other proposals in 2014, H.R. 694 (Schakowsky) and S. 250 (Sanders), would have eliminated deferral (taxing foreign source income currently), in addition to limiting the benefits of inversions when management and control continues to reside in the United States. Legislative proposals were also under discussion in 2014 by Representative Levin (announced July 31, 2014) and by Senator Schumer (announced August 14, 2014) to address earnings stripping, where foreign parent companies borrow from the U.S. subsidiary to increase interest deductions and reduce taxable income in the United States. Both of these proposals would have tightened the rules allowing interest deductions by reducing the current limit on interest deductions relative to adjusted income from 50% to 25% and repealing an alternative safe-harbor debt-to-equity test. Both proposals would have also eliminated or limited interest carryforwards. The Schumer proposal was intended to apparently apply to inverted firms while the Levin proposal would have applied generally. The Levin proposal would have also limited other transactions between related parties within the firm that allow untaxed investment of funds in the United States. The restrictions on interest in the Levin bill were the same as those initially proposed in the House in 2004. Senator Schumer introduced his proposal, S. 2786 , the Corporate Inverters Earnings Stripping Reform Act of 2014. Its limits on interest deductions would have applied to inverted firms where U.S. shareholders own more than 50% of the firm. The restriction also would have applied to firms that inverted using the substantial business activities test. The bill had nine Democratic cosponsors; five of them were on the Senate Finance Committee. In the 114 th Congress, S. 922 (Sanders) and H.R. 1790 (Schakowsky) included general earnings-stripping provisions for firms with a foreign parent. Earnings stripping provisions were also addressed in the report of the Senate Finance Committee's working group on Tax Reform. H.R. 5278 (DeLauro) and S. 2704 (Levin), introduced May 30, 2014, would have disallowed awarding federal contracts to inverted firms. These proposals were introduced in the 114 th Congress as H.R. 1809 (DeLauro) and S. 975 (Durbin). In 2014, Senators Brown and Durbin proposed S. 2895 , and Representative Doggett introduced H.R. 5549 , the Pay What You Owe Before You Go Act, that would have taxed the accumulated deferred earnings of inverting firms. Then Senate Finance Committee Chairman Ron Wyden had proposed having draft legislation in place in September 2014, and also referred to Schumer's earnings-stripping proposal. Senator Wyden had previously announced that any changes would be retroactive to May 8, 2014.", "summary": "News reports in the late 1990s and early 2000s drew attention to a phenomenon sometimes called corporate \"inversions\" or \"expatriations\": instances where U.S. firms reorganize their structure so that the \"parent\" element of the group is a foreign corporation rather than a corporation chartered in the United States. The main objective of these transactions was tax savings, and they involved little to no shift in actual economic activity. Bermuda and the Cayman Islands (countries with no corporate income tax) were the locations of many of the newly created parent corporations. These types of inversions largely ended with the enactment of the American Jobs Creation Act of 2004 (JOBS Act; P.L. 108-357), which denied the tax benefits of an inversion if the original U.S. stockholders owned 80% or more of the new firm. The act effectively ended shifts to tax havens where no real business activity took place. However, two avenues for inverting remained. The act allowed a firm to invert if it has substantial business operations in the country where the new parent was to be located; the regulations at one point set a 10% level of these business operations. Several inversions using the business activity test resulted in Treasury regulations in 2012 that increased the activity requirement to 25%, effectively closing off this method. Firms could also invert by merging with a foreign company if the original U.S. stockholders owned less than 80% of the new firm. If the original U.S. shareholders owned less than 60%, the firm was not considered as inverting. Two features made a country an attractive destination: a low corporate tax rate and a territorial tax system that did not tax foreign source income. The U.K. joined countries such as Ireland, Switzerland, and Canada as targets for inverting when it adopted a territorial tax in 2009. At the same time, the U.K. also lowered its rate (from 25% to 20% by 2015). Inverted firms could reduce worldwide taxes by stripping taxable earnings out of the new U.S. subsidiary, largely through allocating debt to that subsidiary. Soon after, several high-profile companies indicated an interest in merging with a non-U.S. headquartered company, including Pfizer, Chiquita, AbbVie, and Burger King. This \"second wave\" of inversions again raised concerns about an erosion of the U.S. tax base. Chiquita and AbbVie canceled their plans in the wake of 2014 Treasury regulations, but Burger King and other firms completed merger plans. Pfizer subsequently terminated its planned merger with Allergan after Treasury regulations issued in 2016. Evidence suggests that these Treasury regulations have been an important factor in subsequently decreasing these merger-related inversions. Two policy options had been discussed in response: a general reform of the U.S. corporate tax and specific provisions to deal with tax-motivated international mergers. In December 2017, P.L. 115-97 (popularly known as the Tax Cuts and Jobs Act) lowered the corporate tax rate as part of broader tax reform which some argued would slow the rate of inversions. Other tax reform proposals suggested that if the United States moved to a territorial tax, the incentive to invert would be eliminated. There were concerns that a territorial tax could worsen the profit-shifting that already exists among multinational firms. P.L. 115-97, while moving in some ways to a territorial tax, also instituted a number of measures aimed at combatting profit shifting, including a global minimum tax on intangible income that limited the tax benefits of a territorial tax. The second option is to directly target inversions. The 2017 act included several provisions that discouraged inversions. In addition, further anti-inversion provisions have been introduced, most recently H.R. 5108 and S. 2459 in the 115th Congress, to treat all firms in which former U.S. shareholders have more than 50% ownership (or in which management and control is in the United States) as U.S. firms. These bills also provided that debt could also be allocated to the U.S. member of a worldwide operation in proportion to the U.S. ownership of assets.", "document_type": "crs"}
{"report": "Since the 1950s and the creation of the first federal student aid programs, one aim of federal higher education policy has been to promote access to postsecondary education, particularly for students with financial need. In recent years, the federal government has annually made available more than $100 billion in federal grants, loans, and work-study funds to millions of students to help cover the cost of higher education. As Congress continues to focus on expanding access to postsecondary education through federal student aid policies, understanding various characteristics of the population enrolling in postsecondary education may be helpful in informing policy deliberations. In academic year (AY) 2015-2016, there were approximately 19.3 million students enrolled as undergraduates in postsecondary education in the 50 states and the District of Columbia. In AY2007-2008, around the time of the last reauthorization of the Higher Education Act (HEA), there were approximately 20.5 million undergraduate students enrolled in postsecondary education. The composition of the current undergraduate population, how the composition has changed over time, and the types of institutions in which students enroll are issues that are likely to be of interest to Congress as it considers the reauthorization of the HEA. This report focuses on the income of the undergraduate student population. The report will explore the relationship between student income and certain student demographics such as race and dependency status, and explore how the income distribution of the undergraduate population compares with that of the national population of persons who do not have a postsecondary degree. The analysis presented in this report relies on two data sources: the National Postsecondary Student Aid Study (NPSAS) and the Current Population Survey Annual Social and Economic Supplement (CPS ASEC). This section describes each data source, along with some of the limitations of the data. The data used in this report were primarily derived from NPSAS. NPSAS is a nationally representative study of students enrolled in postsecondary education that focuses on how students finance their education. NPSAS is conducted by the U.S. Department of Education's National Center for Education Statistics (NCES) and is administered every four years. The most recent study available covers AY2015-2016, which ran from July 1, 2015, to June 30, 2016. To provide an illustration of how postsecondary student characteristics have changed over time, this report uses data from the last six administrations of NPSAS that are available—AY1995-1996, AY1999-2000, AY2003-2004, AY2007-2008, AY2011-2012, and AY2015-2016—covering a period of 20 years. The NPSAS data are used in this report to explore the income characteristics of the postsecondary population and the extent to which income is related to other student demographics, such as race and dependency status. The report also explores the relationship between income and type of institution(s) attended. To establish a student's income, the NPSAS variable for income as a percentage of the poverty guidelines is used. The poverty guidelines are based on family size and total income (more discussion on the poverty guidelines is provided in the subsequent section of this report). One advantage of using the poverty guidelines is that they provide income relative to the level of poverty at a certain point in time. Therefore, when looking at trends in income over time, no adjustments need be made for inflation. The individual(s) (i.e., a student, student's parents, or student's spouse) whose income is represented by the income as a percentage of the poverty level varies by the student's dependency status. For dependent students, the measure reflects the family size and income of the student's parents; for independent students, it reflects the family size and income of the student and, if applicable, the student's spouse. For simplicity, when this report refers to a student's income in the context of the NPSAS data, it is referring to the income of applicable family members. There are several studies that have explored the income characteristics of the postsecondary population. For example, NCES publishes an annual report on the income characteristics of students who enroll in college immediately after completing high school. Data from the most recent report suggest that for the past few years, low-income students have started to enroll in postsecondary education at a higher rate than middle-income students, but they also continue to enroll at a much lower rate than high-income students. However, in looking only at recent high school completers, the data exclude a large portion of the postsecondary population who are not recent high school graduates. Thus, one advantage of using NPSAS is that the data provide a representative sample of all types of students across all types of Title IV schools. One limitation of using NPSAS is that while much of the data are derived from information that students report on the Free Application for Federal Student Aid (FAFSA), the remaining data, for students who did not apply for aid, are collected through interview and/or are produced through stochastic imputation. As such, the data for non-FAFSA filers are likely considerably less precise than the data for FAFSA filers. For context, in the AY2015-2016 NPSAS study 70% of student respondents completed the FAFSA. The CPS ASEC is sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics and is the official source of annual estimates of poverty in the United States. The CPS is a monthly labor force survey that is used to compute monthly labor statistics, such as the unemployment rate. The ASEC, a supplementary set of questions asked after the basic CPS monthly questionnaire, is administered to about 100,000 addresses and asks the respondent to report information for the previous full calendar year. As a result, the income data obtained from the ASEC are annual measures. Respondents are asked about 18 types of income by a professional interviewer using a computerized questionnaire. The level of income detail is generally considered to be higher and more accurate than it is from surveys that rely on paper forms and are filled out by the respondents themselves. However, like all surveys based on a sample, the ASEC is subject to both sampling error and nonsampling error. Despite these limitations, the CPS ASEC is a widely used survey for analyzing household income. The CPS ASEC data are used in this report to explore the income of the national population relative to the postsecondary population. For consistency with the three most recent NPSAS studies, this report uses the CPS ASEC data from 2007, 2011, and 2015. To draw valid comparisons between the national and the postsecondary population groups, CRS created an income variable in CPS ASEC that closely resembles the NPSAS variable for income as a percentage of the poverty guidelines. However, CPS ASEC uses household and family definitions that are different from NPSAS. To create units of analysis that were most similar to those in NPSAS, it was necessary to make some assumptions and intermediate calculations. Further, the definitions of income in CPS ASEC and NPSAS are not identical. Despite the limitations of CRS's approach, the derived family income variable allowed for some valuable comparisons. An outline of CRS's approach to creating the family income variable in CPS ASEC and the assumptions embedded in this approach is provided in the Appendix . The amount of federal student aid that is made available to a student is largely determined by the student's income. Individuals who are interested in applying for federal student financial aid are required to complete the FAFSA. Information reported on the FAFSA is shared with state agencies and institutions of higher education to help determine federal and nonfederal student aid. Thus, an important characteristic of postsecondary students with regard to federal policy is their income. This section of the report explores changes in the income distribution of students enrolled in postsecondary education over time using the NPSAS variable for income as a percentage of the poverty guidelines. The poverty guidelines are issued by the Department of Health and Human Services (HHS) every year, and many social programs such as the Supplemental Nutrition Assistance Program (SNAP), the Children's Health Insurance Program, the National School Lunch Program, and certain parts of Medicaid use poverty guidelines to determine participant eligibility for benefits. The poverty guidelines are also used to determine monthly payment amounts under the student loan income-driven repayment plans and in student loan rehabilitation agreements. Table 1 provides the 2014 HHS poverty guidelines and multiples that were used in NPSAS: 2016. Using these guidelines, CRS created the following five poverty bands for its analysis: below 100%, 100% to 199.99%, 200% to 299.99%, 300% to 499.99%, and 500% and above. For purposes of this report, \"low-income students\" are considered to have income that falls within the first two poverty bands (below 200% of the poverty guidelines). This characterization of low-income status is consistent with standards used in some education and social service programs that use the poverty guidelines to determine eligibility for assistance. It is used here primarily as a descriptor of lower-income categories in the populations being examined, and no suggestion is being made with regard to whether the first two poverty bands should be used as thresholds in \"low-income\" determinations for the receipt of means tested assistance. As previously mentioned, one advantage of using the poverty guidelines is that they are indexed for inflation, which is useful when looking at trends in income over time. Another advantage is that they account for families of different sizes. For example, 200% of the poverty threshold for a family of four is $47,700. This same income level represents more than 300% of the poverty threshold for a single individual and for a family of two. Table 2 provides the number of undergraduate students enrolled by poverty bands during the period covered by the last six administrations of NPSAS that are available. Figure 1 provides a graphical illustration of the data presented in Table 2 . Postsecondary student enrollment has generally increased over the past two decades. In AY1995-1996 and AY1999-2000, there were about 16.3 million undergraduates. Enrollment increased to 18.9 million in AY2003-2004 and to 20.5 million in AY2007-2008, and reached a peak of 23.0 million in AY2011-2012. In AY2015-2016, enrollment dropped to 19.3 million undergraduates. There were also changes in the income composition of the undergraduate population that appear to coincide with the 2008 recession. Specifically, the number of students with income below 100% of the poverty guidelines grew from approximately 4 million in AY2007-2008 to 6.7 million in AY2011-2012, an increase of nearly 70%. Students with income below 100% of the poverty guidelines also constituted a larger portion of the undergraduate population (29%) in AY2011-2012 than in any prior study. While overall enrollment decreased in AY2015-2016, the proportion of students in the lowest poverty band increased to 31% of the undergraduate population. More than 50% of undergraduate students enrolled in AY2011-2012 and AY2015-2016 had incomes below 200% of the poverty guideline. The trend in enrollment of students in the upper and middle income categories differs from that of low-income students. From AY2007-2008 to AY2011-2012, the number of students in the upper poverty band (500% of the poverty guidelines and above) dropped by 17% while overall enrollment increased by 12%. In AY2015-2016, enrollment of upper-income students was 25% below the AY2007-2008 level. Similarly, enrollment of students with income between 200% and 499% of the poverty guidelines dropped by 25% between AY2007-2008 and AY2015-2016. Overall, the data suggest that low-income students are enrolling at higher levels than previously observed. Several conclusions could be drawn from this. For instance, it could suggest that institutions of higher education have become more effective at enrolling low-income students. It could also suggest a lack of opportunities in the labor market and that more low-income students are becoming convinced that they may realize economic benefits with higher educational credentials. At the same time, enrollment of students in the middle and upper income categories has declined. It is possible that the trend in the income composition of undergraduate students could be a reflection of changes in income of the national population. As is explored in more depth in a later section of this report, these changes in the composition of the student population in the higher and lower poverty bands do not seem to map closely with broader income trends in the general population, although there is some alignment with income trends for those of ages similar to traditional college students during this period. The data presented thus far suggest differences in the trends in enrollment of undergraduate students from different income groups. To further explore the current population of students, CRS examined certain demographic characteristics of the undergraduate student population and how those characteristics are related to income using the most recent NPSAS. Figure 2 illustrates the racial composition of students by poverty bands in AY2015-2016. The data suggest that minority students accounted for nearly 50% of the enrolled undergraduate population, and these students tended to have lower incomes than white students. More specifically, white students constituted about 53% of all enrolled undergraduate students, Hispanic students constituted 19%, black students constituted 16%, and Asian students and students from other racial groups constituted 12%.While white students made up the majority of students in any income category, they were overrepresented in the higher income bands. For example, white students constituted 73% of students with income of 500% and above of the poverty guidelines. Black and Hispanic students, on the other hand, were overrepresented in the lower income bands. For example, while black and Hispanic students combined accounted for 35% of the total undergraduate population, they accounted for 45% of students with income below 100% of the poverty guideline. The proportionate share of Asian and other students was relatively stable across the different poverty bands. As Figure 1 illustrates, the majority of the undergraduate population has income below 200% of the poverty guidelines. Using counts presented in Figure 2 , it is possible to examine the concentration of these low-income students within racial groups in AY2015-2016. This reveals that 70% of black students, 64% of Hispanic students, 58% of \"other\" students, 55% of Asian students, and 42% of white students had income below 200% of the poverty guidelines. When considering the postsecondary population, there is typically a distinction made between traditional and non-traditional students. While there is no consensus on the characteristics that distinguish traditional from non-traditional students at the undergraduate level, students identified as \"independent\" are often considered to be non-traditional students. An independent student is defined in the HEA as one who meets any of the following criteria: is 24 years of age or older by December 31 of the award year; is an orphan, in foster care, or a ward of the court; or was an orphan, in foster care, or a ward of the court at any time when the individual was 13 years of age or older; is, or was immediately prior to attaining the age of majority, an emancipated minor or in legal guardianship as determined by a court of competent jurisdiction in the individual's state of legal residence; is a veteran of the Armed Forces of the United States or is currently serving on active duty in the Armed Forces for other than training purposes; is a graduate or professional student; is a married individual; has legal dependents other than a spouse; or has been verified, by a qualified authority during the school year in which the application is submitted, as either an unaccompanied youth who is a homeless child or youth, or as unaccompanied, at risk of homelessness, and self-supporting. Under the HEA, a student who does not meet the criteria for an independent student is treated as a dependent student. Figure 3 illustrates dependency status of enrolled undergraduate students by poverty bands in AY2015-2016 and suggests that independent students constituted a large portion of this population. These \"non-traditional students\" also tended to be low income. More specifically, while independent students constituted 50% of the undergraduate population, they constituted nearly 70% of students in the lowest poverty band. Dependent students, on the other hand, were largely overrepresented in the upper income bands. For example, dependent students constituted 76% of students with income of 500% and above of the poverty guidelines and 33% of students with income below 100% of the poverty guidelines. The counts presented in Figure 3 can be used to examine the concentration of low-income students within each dependency group, showing that 44% of dependent students, 74% of independent students without dependents, and 80% of independent students with dependents had income below 200% of the poverty guidelines. In discourse about which students are enrolling in postsecondary education, questions often surface regarding where students are enrolling. Figure 4 and Figure 5 explore types of institutions attended by students in different income categories and suggest some variation in the type of institutions attended by students with different income levels. As shown in Figure 4 , 40% of undergraduates attended public two-year institutions, 35% attended public four-year institutions, 15% attended private nonprofit institutions, and 10% attended private for-profit institutions in AY2015-2016. Low-income students are more likely to attend public two-year institutions (or community colleges). The likelihood of attending a private for-profit institution decreases as income increases. The counts presented in Figure 4 can be used to examine the concentration of low-income students within each type of institution, showing that 57% of students attending public two-year institutions, 46% of students attending public four-year institutions, 42% of students attending private nonprofit institutions, and 73% of students attending for-profit institutions had income below 200% of the poverty guidelines. Figure 5 illustrates the selectivity of four-year institutions attended by undergraduate students across the poverty bands. Twenty percent of all four-year students attended very selective institutions, 57% attended moderately selective institutions, and 23% attended open admission or minimally selective institutions. Within the lowest poverty band, 18% of students attended a very selective institution. In the second lowest poverty band, 14% attended a very selective institution. Thus, there was a larger percentage of students in the lowest poverty band attending highly selective institutions than there was in the second lowest poverty band. Generally, the proportion of students that attend open admission or minimally selective institutions decreases as income increases. The counts presented in Figure 5 can be used to examine the concentration of low-income students within four-year institutions based on their selectivity, showing that 36% of students at very selective institutions, 43% at moderately selective institutions, and 54% at open admission or minimally selective institutions have income below 200% of the poverty guidelines. The NPSAS data suggest that low-income students have enrolled in postsecondary education at higher levels in more recent years. To explore the extent to which the influx of students is related to changes in the income distribution of the national population, this section uses the CPS ASEC to compare the income distribution of the national population with that of the undergraduate population. Given that the data suggest noteworthy trends for low-income students, the discussion in this section generally focuses on persons with income below 200% of the poverty guideline. Figure 6 provides a comparison of the income distribution of the national population aged 15 to 65 and the postsecondary population over three time periods. The data suggest that while the low-income national population grew from 2007 to 2011, the population of low-income undergraduate students grew at a higher rate than the national population of low-income persons. Specifically, from 2007 to 2011 the number of persons with income below 200% of the poverty guidelines grew from 58.5 million to 71.0 million, an increase of 22%.During the same time, the number of low-income students enrolled as undergraduates grew from 8.2 million to 11.7 million, an increase of 44%. Between 2011 and 2015, there was a slight increase in the number of low-income persons (about 2 million) in the national population, while the number of low-income students dropped (by about 1 million). However, the drop in low-income students seems to be associated with the overall drop in postsecondary enrollment. In terms of proportion, low-income persons constitute a much smaller portion of the national population than of the undergraduate postsecondary population. Specifically, low-income persons constituted 29% of the national population in 2007, and 34% of the national population in 2011 and 2015. Among the enrolled undergraduate population, low-income persons accounted for 40% in 2007 and more than 50% in 2011 and 2015. Figure 7 illustrates the income distribution of the population aged 15-23 who did not have a postsecondary degree and were not enrolled in postsecondary education. This population could have been considered \"potential enrollees\" and thus may have had characteristics similar to the enrolled population. Due to data limitations, \"potential enrollees\" who were aged 24 and older could not be considered. The data suggest that from 2007 to 2011, the number of low-income students aged 15-23 grew at a faster rate than the national population of persons in this age range. Specifically, from 2007 to 2011 the number of low-income potential enrollees grew from 10.8 million to 12.2 million, an increase of 13%, while the number of low-income enrolled students aged 15-23 grew from 4.0 million to 5.5 million, an increase of 37%. In 2015, the number of low-income persons aged 15-23 enrolled as undergraduates decreased by 6%, while the national population of the same age range decreased by 4%. Again, the drop in enrollment of low-income students appears to be related to the large decrease in total student enrollment. In terms of proportion, low-income persons aged 15-23 constituted a smaller portion of the undergraduate population than of the national population in 2007. However, in 2011 and 2015 low-income persons in this age range constituted similar shares of the national and undergraduate populations. Since the last reauthorization of the Higher Education Act, the number and proportion of low-income undergraduate students (defined in this report as students with income below 200% of the poverty guidelines) has increased, even as total enrollment has decreased in more recent years. Low-income students now constitute more than 50% of the postsecondary undergraduate population. This report's analysis also found the following: Certain student characteristics such as race, age, and dependency status show trends that tend to be associated with income. Independent undergraduate students who have historically been labeled as \"non-traditional\" constitute a large portion of enrolled postsecondary students. These \"non-traditional\" students generally tend to have lower incomes than more traditional students. Nonwhite students account for nearly 50% of the undergraduate population, and they tend to have lower income than white students. The majority of low-income students attend community colleges and a disproportionately high share attend private for-profit institutions. Low-income students were more likely to attend open admission or minimally selective institutions. The changing composition of the student population could have implications for policies designed to promote access to postsecondary education. One historical aim of student aid programs has been to increase postsecondary access for those students who demonstrate financial need. The findings in this report suggest that there has been an influx of low-income students enrolling in postsecondary education since the last HEA reauthorization. When compared with national income data, low-income individuals are overrepresented in the postsecondary population. This could suggest that federal policies have been effective at promoting access for low-income persons. Data also show that the number of students in the middle- and upper-income categories has declined somewhat in recent years. This finding could imply that there are challenges that these students face in enrolling in postsecondary education that may not be addressed in current federal policies. Related to access, there is growing interest in the extent to which students who enroll are completing a postsecondary credential. Research suggests that private nonprofit and public four-year institutions tend to have higher completion rates than public two-year institutions and private for-profit institutions. Data show that low-income students tend to be overrepresented at public two-year and for-profit institutions and less represented at public and private nonprofit four-year institutions. Policymakers face consideration of whether federal policies could play a role in encouraging students at various income levels to enroll at the highest performing types of schools. Data also show that undergraduate students historically labeled as \"non-traditional\" and minority students constitute about 50% of the undergraduate population. Some research suggests that non-traditional and minority students face a unique set of challenges when enrolling and completing postsecondary education. Policymakers face consideration of the extent to which HEA programs are designed to support the success of non-traditional and minority students. Another way in which the analyses presented here may be relevant to policy discussions is in identifying the distribution of students across poverty bands. When designing programs that provide assistance to lower-income individuals, poverty bands are often employed as a mechanism for targeting. Family units in NPSAS correspond with HEA dependency definitions and reflect the individuals whose assets and income are considered in calculating an expected family contribution (EFC). These family units may differ from a family unit in CPS ASEC. To facilitate the analysis in this report, CRS used person-level data in the CPS ASEC data set to create new family units that are more comparable to the family units considered in calculating the EFC. This appendix briefly describes the methodology CRS used for dividing CPS ASEC larger \"family household\" units into smaller family units that resemble the family members and corresponding income reported on the FAFSA for the purposes of calculating a student's EFC. Family Units: CPS ASEC and the EFC Formulas A family household in CPS ASEC is a household maintained by a family and may include a related subfamily and unrelated subfamilies who live in the household. A family generally consists of \"a group of two persons or more residing together and related by birth, marriage, or adoption.\" A related subfamily is \"a married couple with or without children, or one parent with one or more of their own single (never married) children under 18 years old, living in a household and related to, but not including, the householder or spouse.\" An unrelated subfamily is \"a family that does not include among its members the householder and relatives of the householder.\" Generally, when calculating a student's EFC, determining the relevant family members whose income would be included depends on the student's personal characteristics. The various aspects of the CPS make it possible to \"separate\" household members that would be a distinct family for the purposes of calculating a student's EFC. For example, a married person without children would be considered \"independent\" using the EFC formula, and the family would include the person and his or her spouse. An unrelated subfamily would also most likely be treated as a separate family by the EFC formula. As such, related subfamilies and unrelated subfamilies in CPS ASEC were treated as separate family units from the primary family for purposes of this report's analysis. The EFC formula considers several criteria for identifying a person as \"independent.\" To capture a large portion of potentially independent students in CPS ASEC who were not addressed through the separation of subfamilies from families, all unmarried persons age 24 and older who do not have children were treated as a separate family unit in this report's analysis. While students can qualify as independent on the basis of characteristics other than age, marital status, and having dependents, it was assumed that any remaining independent students not captured in the analysis would constitute a small portion of the population and thus would not have a substantial impact. Income: CPS ASEC and EFC Formula Using the newly created EFC family unit described above, family income was calculated by taking the sum of each person's income in the unit. In some cases, this calculation of family income would likely include persons whose income would not be included under the EFC formula (e.g., the income of a student who is a dependent, the income of a student's siblings who live in the household with the student's parents). To facilitate the analysis, it was assumed that the income of the additional persons would be a negligible amount and would not greatly affect the family income. The definition of income for the purposes of the EFC formula is somewhat different from income reported in the CPS ASEC. Total income under the EFC formula considers adjusted gross income and several forms of untaxed income but excludes some forms of taxable income. The CPS ASEC measure of income includes money income before taxes or tax credits and excludes capital gains or noncash benefits. To facilitate the analysis, it was assumed that the two measures of income are comparable. ", "summary": "Since the 1950s and the creation of the first federal student aid programs, one aim of federal higher education policy has been to promote access to postsecondary education, particularly for students with financial need. In recent years, the federal government has annually made available more than $100 billion in federal grants, loans, and work-study funds to millions of students to help cover the cost of higher education. As Congress continues to focus on expanding access to postsecondary education through federal student aid policies, understanding various characteristics of the population enrolling in postsecondary education may be useful for policy deliberations. This report focuses on the income of the undergraduate student population. It analyzes (1) how the income distribution of the undergraduate population has changed over time; (2) the relationship between student income and certain student demographics, such as race and dependency status; and (3) how the income distribution of the undergraduate population compares with that of the population of persons who do not have a postsecondary degree. Major findings presented in this report include the following: The number and proportion of low-income students has increased in more recent years, even as total enrollment has decreased. Low-income student enrollment has increased at a faster pace than the nation's population of low-income persons. The majority of students enrolling in postsecondary education have incomes below 200% of the poverty guidelines. Independent undergraduate students who have sometimes been labeled as \"non-traditional\" constitute a large portion of enrolled postsecondary students and tend to have lower income than more \"traditional\" students. Nonwhite students account for nearly 50% of the undergraduate student population, and they tend to have lower income than white students. The majority of low-income students attend community colleges and a disproportionately high share attend private for-profit institutions. The changing composition of the student population could have implications for federal policies designed to promote access to postsecondary education. In particular, policymakers face consideration of whether federal policies could play a role in encouraging students at various income levels to enroll at the highest performing types of schools. Policymakers also face consideration of the extent to which Higher Education Act programs are designed to support the success of non-traditional and minority students.", "document_type": "crs"}
{"report": "Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65. The program is administered by the Centers for Medicare & Medicaid Services (CMS), within the U.S. Department of Health and Human Services (HHS). Medicare consists of four distinct parts: Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, hospice care, and some home health services. The HI trust fund is mainly funded by a dedicated payroll tax of 2.9% of earnings, shared equally between employers and workers. Since 2013, workers with income of more than $200,000 per year for single tax filers (or more than $250,000 for joint tax filers) pay an additional 0.9% on income over those amounts. Part B (Supplementary Medical Insurance, or SMI) covers physician services, outpatient services, and some home health and preventive services. The SMI trust fund is funded through beneficiary premiums (set at 25% of estimated program costs for the aged) and general revenues (the remaining amount, approximately 75%). Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries that covers all Parts A and B services, except hospice. Individuals choosing to enroll in Part C must also enroll in Part B. Part C is funded through the HI and SMI trust funds. Part D covers outpatient prescription drug benefits. Funding is included in the SMI trust fund and is financed through beneficiary premiums, general revenues, and state transfer payments. Medicare serves approximately one in six Americans and virtually all of the population aged 65 and older. In 2019, the program will cover an estimated 61 million persons (52 million aged and 9 million disabled). The Congressional Budget Office (CBO) estimates that total Medicare spending in 2019 will be about $772 billion; of this amount, approximately $749 billion will be spent on benefits. About 28% of Medicare benefit spending is for hospital inpatient and hospital outpatient services (see Figure 1 ). CBO also estimates that federal Medicare spending (after deduction of beneficiary premiums and other offsetting receipts) will be about $637 billion in 2019, accounting for about 14% of total federal spending and 3% of GDP. Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met. Spending under the program (except for a portion of administrative costs) is considered mandatory spending and is not subject to the appropriations process. Medicare is expected to be a high-priority issue in the current Congress. The program has a significant impact on beneficiaries and other stakeholders as well as on the economy in general through its coverage of important health care benefits for the aged and disabled, the payment of premiums and other cost sharing by those beneficiaries, its payments to providers who supply those health care services, and its interaction with other insurance coverage. Projections of future Medicare expenditures and funding indicate that the program will place increasing financial demands on the federal budget and on beneficiaries. In response to these concerns, Congress may consider a range of Medicare reform options, from making changes within the current structure, including modifying provider payments and revising existing oversight and regulatory mechanisms, to restructuring the entire program. The committees of jurisdiction for the mandatory spending (benefits) portion of Medicare are the Senate Committee on Finance, the House Committee on Ways and Means, and the House Committee on Energy and Commerce. The House and Senate Committees on Appropriations have jurisdiction over the discretionary spending used to administer and oversee the program. Medicare was enacted in 1965 (P.L. 89-97) in response to the concern that only about half of the nation's seniors had health insurance, and most of those had coverage only for inpatient hospital costs. The new program, which became effective July 1, 1966, included Part A coverage for hospital and posthospital services and Part B coverage for doctors and other medical services. As is the case for the Social Security program, Part A is financed by payroll taxes levied on current workers and their employers; persons must pay into the system for 40 quarters to become entitled to premium-free benefits. Medicare Part B is voluntary, with a monthly premium required of beneficiaries who choose to enroll. Payments to health care providers under both Part A and Part B were originally based on the most common form of payment at the time, namely \"reasonable costs\" for hospital and other institutional services or \"usual, customary and reasonable charges\" for physicians and other medical services. Medicare is considered a social insurance program and is the second-largest such federal program, after Social Security. The 1965 law also established Medicaid, the federal/state health insurance program for the poor; this was an expansion of previous welfare-based assistance programs. Some low-income individuals qualify for both Medicare and Medicaid. In the ensuing years, Medicare has undergone considerable change. P.L. 92-603, enacted in 1972, expanded program coverage to certain individuals under 65 (the disabled and persons with end-stage renal disease (ESRD)), and introduced managed care into Medicare by allowing private insurance entities to provide Medicare benefits in exchange for a monthly capitated payment. This law also began to place limitations on the definitions of reasonable costs and charges in order to gain some control over program spending which, even initially, exceeded original projections. During the 1980s and 1990s, a number of laws were enacted that included provisions designed to further stem the rapid increase in program spending through modifications to the way payments to providers were determined, and to postpone the insolvency of the Medicare Part A trust fund. This was typically achieved through tightening rules governing payments to providers of services and limiting the annual updates in such payments. The program moved from payments based on reasonable costs and reasonable charges to payment systems under which a predetermined payment amount was established for a specified unit of service. At the same time, beneficiaries were given expanded options to obtain covered services through private managed care arrangements, typically health maintenance organizations (HMOs). Most Medicare payment provisions were incorporated into larger budget reconciliation bills designed to control overall federal spending. This effort culminated in the enactment of the Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ). This law slowed the rate of growth in payments to providers and established new payment systems for certain categories of providers, including establishing the sustainable growth rate (SGR) methodology for determining the annual update to Medicare physician payments. It also established the Medicare+Choice program, which expanded private plan options for beneficiaries and changed the way most of these plans were paid. BBA 97 further expanded preventive services covered by the program. Subsequently, Congress became concerned that the BBA 97 cuts in payments to providers were somewhat larger than originally anticipated. Therefore, legislation was enacted in both 1999 (Balanced Budget Refinement Act of 1999, or BBRA; P.L. 106-113 ) and 2000 (Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, or BIPA; P.L. 106-554 ) to mitigate the impact of BBA 97 on providers. In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173 ), which included a major benefit expansion and placed increasing emphasis on the private sector to deliver and manage benefits. The MMA included provisions that (1) created a new voluntary outpatient prescription drug benefit to be administered by private entities; (2) replaced the Medicare+Choice program with the Medicare Advantage (MA) program and raised payments to plans in order to increase their availability for beneficiaries; (3) introduced the concept of income testing into Medicare, with higher-income persons paying larger Part B premiums beginning in 2007; (4) modified some provider payment rules; (5) expanded covered preventive services; and (6) created a specific process for overall program review if general revenue spending exceeded a specified threshold. During the 109 th Congress, two laws were enacted that incorporated minor modifications to Medicare's payment rules. These were the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) and the Tax Relief and Health Care Act of 2006 (TRHCA; P.L. 109-432 ). In the 110 th Congress, additional changes were incorporated in the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA; P.L. 110-173 ) and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P.L. 110-275 ). In the 111 th Congress, comprehensive health reform legislation was enacted that, among other things, made statutory changes to the Medicare program. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ), enacted on March 23, 2010, included numerous provisions affecting Medicare payments, payment rules, covered benefits, and the delivery of care. The Health Care and Education Affordability Reconciliation Act of 2010 (the Reconciliation Act, or HCERA; P.L. 111-152 ), enacted on March 30, 2010, made changes to a number of Medicare-related provisions in the ACA and added several new provisions. Included in the ACA, as amended, are provisions that (1) constrain Medicare's annual payment increases for certain providers; (2) change payment rates in the MA program so that they more closely resemble those in fee-for-service; (3) reduce payments to hospitals that serve a large number of low-income patients; (4) create an Independent Payment Advisory Board (IPAB) to make recommendations to adjust Medicare payment rates; (5) phase out the Part D prescription drug benefit \"doughnut hole\"; (6) increase resources and enhance activities to prevent fraud and abuse; and (7) provide incentives to increase the quality and efficiency of care, such as creating value-based purchasing programs for certain types of providers, allowing accountable care organizations (ACOs) that meet certain quality and efficiency standards to share in the savings, creating a voluntary pilot program that bundles payments for physician, hospital, and post-acute care services, and adjusting payments to hospitals for readmissions related to certain potentially preventable conditions. In the 112 th and 113 th Congresses, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ), the Continuing Appropriations Resolution of 2014 ( P.L. 113-67 ), and the Protecting Access to Medicare Act of 2014 (PAMA; P.L. 113-93 ) primarily made short-term modifications to physician payment updates and payment adjustments for certain types of providers. PAMA also established a new skilled nursing facility (SNF) value-based purchasing program and a new system for determining payments for clinical diagnostic laboratory tests. The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT; P.L. 113-185 ) required that post-acute care providers—defined in the law as long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), SNFs, and home health agencies (HHAs)—report standardized patient assessment data and data on quality measures and resource use. IMPACT also modified the annual update to the hospice aggregate payment cap and required that hospices be reviewed every three years to ensure that they are compliant with existing regulations related to patient health and safety and quality of care. In the 114 th Congress, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ) repealed the SGR formula for calculating updates to Medicare payment rates to physicians and other practitioners and established an alternative set of methods for determining the annual updates . MACRA also introduced alternatives to the current fee-for-service (FFS) based physician payments by creating a new merit-based incentive payment system (MIPS) and put in place processes for developing, evaluating, and adopting alternative payment models (APMs). Additionally, MACRA reduced updates to hospital and post-acute care provider payments, extended several expiring provider payment adjustments, made adjustments to income-related premiums in Parts B and D, and prohibited using Social Security numbers on beneficiaries' Medicare cards. Among other changes, the Increasing Choice, Access, and Quality in Health Care for Americans Act (Division C of the 21 st Century Cures Act; P.L. 114-255 ) made adjustments to LTCH reimbursement and modified the average length of stay criteria, which determines whether a hospital qualifies as an LTCH. It also delayed payment reductions and required the Secretary of Health and Human Services (the Secretary) to make changes to how payments are determined for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). Lastly, it allowed beneficiaries with ESRD to enroll in MA beginning January 1, 2021. In the 115 th Congress, the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123 ) made a number of changes to federal health care programs, including Medicare. For example, BBA 18 included provisions designed to expand care for beneficiaries with chronic health conditions, such as promoting team-based care by providers, increasing the use of telehealth services, and expanding certain MA supplemental benefits. In addition, BBA 18 extended for five years a number of existing Medicare provisions that were set to expire (or that had temporarily expired), including the Medicare dependent hospital program and add-on payments for low-volume hospitals, rural home health services, and certain ambulance services. BBA 18 also specified payment updates for the Medicare physician fee schedule, SNFs, and home health services; reduced payments for non-emergency ambulance transports; and required modification of the home health prospective payment system starting in 2020. In addition, the act provided for indefinite authority for MA special needs plans, repealed limits on outpatient therapy services, and eliminated the IPAB. Starting in 2019, the act will require that pharmaceutical manufacturers participating in Medicare Part D provide a larger discount on brand-name drugs purchased by enrollees in the coverage gap and will create a new high-income premium category under Parts B and D. Most persons aged 65 or older are automatically entitled to premium-free Part A because they or their spouse paid Medicare payroll taxes for at least 40 quarters (about 10 years) on earnings covered by either the Social Security or the Railroad Retirement systems. Persons under the age of 65 who receive cash disability benefits from Social Security or the Railroad Retirement systems for at least 24 months are also entitled to Part A. (Since there is a five-month waiting period for cash payments, the Medicare waiting period is effectively 29 months.) The 24-month waiting period is waived for persons with amyotrophic lateral sclerosis (ALS, \"Lou Gehrig's disease\"). Individuals of any age with ESRD who receive dialysis on a regular basis or a kidney transplant are generally eligible for Medicare. Medicare coverage for individuals with ESRD usually starts the first day of the fourth month of dialysis treatments. In addition, individuals with one or more specified lung diseases or types of cancer who lived for six months during a certain period prior to diagnosis in an area subject to a public health emergency declaration by the Environmental Protection Agency (EPA) as of June 17, 2009, are also deemed entitled to benefits under Part A and eligible to enroll in Part B. Persons over the age of 65 who are not entitled to premium-free Part A may obtain coverage by paying a monthly premium ($437 in 2019) or, for persons with at least 30 quarters of covered employment, a reduced monthly premium ($240 in 2019). In addition, disabled persons who lose their cash benefits solely because of higher earnings, and subsequently lose their extended Medicare coverage, may continue their Medicare enrollment by paying a premium, subject to limitations. Generally, enrollment in Medicare Part B is voluntary. All persons entitled to Part A (and persons over the age of 65 who are not entitled to premium-free Part A) may enroll in Part B by paying a monthly premium. In 2019, the monthly premium is $135.50; however, about 3.5% of Part B enrollees pay less, due to a \"hold-harmless\" provision in the Social Security Act. Since 2007, higher-income Part B enrollees pay higher premiums. (See \" Part B Financing .\") Although enrollment in Part B is voluntary for most individuals, in most cases, those who enroll in Part A by paying a premium also must enroll in Part B. Additionally, ESRD beneficiaries and Medicare Advantage enrollees (discussed below) also must enroll in Part B. Together, Parts A and B of Medicare comprise \"original Medicare,\" which covers benefits on a fee-for-service basis. Beneficiaries have another option for coverage through private plans, called the Medicare Advantage (MA or Part C) program. When beneficiaries first become eligible for Medicare, they may choose either original Medicare or they may enroll in a private MA plan. Each fall, there is an annual open enrollment period during which time Medicare beneficiaries may choose a different MA plan, or leave or join the MA program. Beneficiaries are to receive information about their options to help them make informed decisions. In 2019, the annual open enrollment period runs from October 15 to December 7 for plan choices starting the following January. Since 2012, MA plans with a 5-star quality rating have been allowed to enroll Medicare beneficiaries who are either in traditional Medicare or in an MA plan with a lower quality rating at any time. Finally, each individual enrolled in either Part A or Part B is also entitled to obtain qualified prescription drug coverage through enrollment in a Part D prescription drug plan. Similar to Part B, enrollment in Part D is voluntary and the beneficiary pays a monthly premium. Since 2011, some higher-income enrollees pay higher premiums, similar to enrollees in Part B. Generally, beneficiaries enrolled in an MA plan providing qualified prescription drug coverage (MA-PD plan) must obtain their prescription drug coverage through that plan. In general, individuals who do not enroll in Part B or Part D during an initial enrollment period (when they first become eligible for Medicare) must pay a permanent penalty of increased monthly premiums if they choose to enroll at a later date. Individuals who do not enroll in Part B during their initial enrollment period may enroll only during the annual general enrollment period, which occurs from January 1 to March 31 each year. Coverage begins the following July 1. However, the law waives the Part B late enrollment penalty for current workers who have primary coverage through their own or a spouse's employer-sponsored plan. These individuals have a special enrollment period once their employment ends; as long as they enroll in Part B during this time, they will not be subject to penalty. Individuals who do not enroll in Part D during their initial enrollment period may enroll during the annual open enrollment period, which corresponds with the Part C annual enrollment period—from October 15 to December 7, with coverage effective the following January. Individuals are not subject to the Part D penalty if they have maintained \"creditable\" drug coverage through another source, such as retiree health coverage offered by a former employer or union. However, once employees retire or have no access to \"creditable\" Part D coverage, a penalty will apply unless they sign up for coverage during a special enrollment period. Finally, for persons who qualify for the low-income subsidy for Part D, the delayed-enrollment penalty does not apply. Medicare Parts A, B, and D each cover different services, with Part C providing a private plan alternative for all Medicare services covered under Parts A and B, except hospice. The Parts A-D covered services are described below, along with a description of Medicare's payments. Part A provides coverage for inpatient hospital services, posthospital skilled nursing facility (SNF) services, hospice care, and some home health services, subject to certain conditions and limitations. Approximately 20% of fee-for-service enrollees use Part A services during a year. Medicare inpatient hospital services include (1) bed and board; (2) nursing services; (3) use of hospital facilities; (4) drugs, biologics, supplies, appliances, and equipment; and (5) diagnostic and therapeutic items and services. (Physicians' services provided during an inpatient stay are paid under the physician fee schedule and discussed below in the \" Physicians and Nonphysician Practitioner Services \" section.) Coverage for inpatient services is linked to an individual's benefit period or \"spell of illness\" (defined as beginning on the day a patient enters a hospital and ending when he or she has not been in a hospital or skilled nursing facility for 60 days). An individual admitted to a hospital more than 60 days after the last discharge from a hospital or SNF begins a new benefit period. Coverage in each benefit period is subject to the following conditions: Days 1-60. Beneficiary pays a deductible ($1,364 in 2019). Days 61-90. Beneficiary pays a daily co-payment charge ($341 in 2019). Days 91-150. After 90 days, the beneficiary may draw on one or more of 60 lifetime reserve days, provided they have not been previously used. (Each of the 60 lifetime reserve days can be used only once during an individual's lifetime.) For lifetime reserve days, the beneficiary pays a daily co-payment charge ($682 in 2019); otherwise the beneficiary pays all costs. Days 151 and over. Beneficiary pays for all costs for these days. Inpatient mental health care in a psychiatric facility is limited to 190 days during a patient's lifetime. Cost sharing is structured similarly to that for stays in a general hospital (above). Medicare makes payments to most acute care hospitals under the inpatient prospective payment system (IPPS), using a prospectively determined amount for each discharge. Medicare's payments to hospitals is the product of two components: (1) a discharge payment amount adjusted by a wage index for the area where the hospital is located or where it has been reclassified, and (2) the weight associated with the Medicare severity-diagnosis related group (MS-DRG) to which the patient is assigned. This weight reflects the relative costliness of the average patient in that MS-DRG, which is revised annually, generally effective October 1 st of each year. Additional payments are made to hospitals for cases with extraordinary costs (outliers), for indirect costs incurred by teaching hospitals for graduate medical education, and to disproportionate share hospitals (DSH) which provide a certain volume of care to low-income patients. Additional payments may also be made for qualified new technologies that have been approved for special add-on payments. Medicare also makes payments outside the IPPS system for direct costs associated with graduate medical education (GME) for hospital residents, subject to certain limits. In addition, Medicare pays hospitals for 65% of the allowable costs associated with beneficiaries' unpaid deductible and co-payment amounts as well as for the costs for certain other services. IPPS payments may be reduced by certain quality-related programs based on a hospital's quality performance. These quality-related programs include the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition Reduction Program, and the Hospital Value-Based Purchasing Program. Further, hospitals may receive Medicare payment reductions for failing to demonstrate meaningful use of certified electronic health record (EHR) technology. Additional payment adjustments or special treatment under the IPPS may apply for hospitals meeting one of the following designations: (1) sole community hospitals (SCHs), (2) Medicare dependent hospitals, (3) rural referral centers, and (4) low-volume hospitals. Certain hospitals or distinct hospital units are exempt from IPPS and paid on an alternative basis, including (1) inpatient rehabilitation facilities, (2) long-term care hospitals, (3) psychiatric facilities including hospitals and distinct part units, (4) children's hospitals, (5) cancer hospitals, and (6) critical access hospitals. Medicare covers up to 100 days of posthospital care for persons needing skilled nursing or rehabilitation services on a daily basis. The SNF stay must be preceded by an inpatient hospital stay of at least 3 consecutive calendar days, and the transfer to the SNF typically must occur within 30 days of the hospital discharge. Medicare requires SNFs to provide services for a condition the beneficiary was receiving treatment for during his or her qualifying hospital stay (or for an additional condition that arose while in the SNF). There is no beneficiary cost sharing for the first 20 days of a Medicare-covered SNF stay. For days 21 to 100, beneficiaries are subject to daily co-payment charges ($170.50 in 2019). The 100-day limit begins again with a new spell of illness. SNF services are paid under a prospective payment system (PPS), which is based on a per diem urban or rural base payment rate, adjusted for case mix (average severity of illness) and area wages. The per diem rate generally covers all services, including room and board, provided to the patient that day. The case-mix adjustment is made using the resource utilization groups (RUGs) classification system, which uses patient assessments to assign a beneficiary to one of 66 groups that reflect the beneficiary's expected use of services. Patient assessments are done at various times during a patient's stay and a beneficiary's designated RUG category can change with changes in the beneficiary's condition. Extra payments are not made for extraordinarily costly cases (\"outliers\"). The Medicare hospice benefit covers services designed to provide palliative care and management of a terminal illness; the benefit includes drugs and medical and support services. These services are provided to Medicare beneficiaries with a life expectancy of six months or less for two 90-day periods, followed by an unlimited number of 60-day periods. The individual's attending physician and the hospice physician must certify the need for the first benefit period, but only the hospice physician needs to recertify for subsequent periods. Since January 1, 2011, a hospice physician or nurse practitioner must have a face-to-face encounter with the individual to determine continued eligibility prior to the 180 th day recertification, and for each subsequent recertification. Hospice care is provided in lieu of most other Medicare services related to the curative treatment of the terminal illness. Beneficiaries electing hospice care from a hospice program may receive curative services for illnesses or injuries unrelated to their terminal illness, and they may disenroll from the hospice at any time. Nominal cost sharing is required for drugs and respite care. Payment for hospice care is based on one of four prospectively determined rates (which correspond to four different levels of care) for each day a beneficiary is under the care of the hospice. The four rate categories are routine home care, continuous home care, inpatient respite care, and general inpatient care. Payment rates are adjusted to reflect differences in area wage levels, using the hospital wage index. Payments to a hospice are limited by two caps; the first limits the number of days of inpatient care to 20% or less of total patient care days, and the second limits the average annual payment per beneficiary. Home health services and services for individuals with end-stage renal disease are covered under both Parts A and B of Medicare. Medicare covers visits by participating home health agencies for beneficiaries who (1) are confined to home and (2) need either skilled nursing care on an intermittent basis or physical or speech language therapy. After establishing such eligibility, the continuing need for occupational therapy services may extend the eligibility period. Covered services include part-time or intermittent nursing care, physical or occupational therapy or speech language pathology services, medical social services, home health aide services, and medical supplies and durable medical equipment. The services must be provided under a plan of care established by a physician, and the plan must be reviewed by the physician at least every 60 days. There is no beneficiary cost sharing for home health services (though some other Part B services provided in connection with the visit, such as durable medical equipment, may be subject to cost-sharing charges). Home health services are covered under both Medicare Parts A and B. There are special eligibility requirements and benefit limits for home health services furnished under Part A to beneficiaries who are enrolled in both Parts A and B. For such a beneficiary, Part A pays for only postinstitutional home health services furnished for up to 100 visits during a spell of illness, while Part B covers any medically necessary home health services that exceed the 100-visit limit, as well as medically necessary home health services that do not qualify as \"postinstitutional.\" For beneficiaries enrolled in only Part A or only Part B, the requirements described above do not apply. Part A or Part B, as applicable, covers all medically necessary episodes of home health care, without a visit limit, regardless of whether the episode follows a hospitalization. Regardless of whether the beneficiary is enrolled in Part A only, in Part B only, or in both parts, the scope of the Medicare home health benefit is the same, Medicare's payments to HHAs are calculated using the same methods, and beneficiaries have no cost-sharing. Home health services are paid under a home health PPS, based on 60-day episodes of care; a patient may have an unlimited number of episodes. The physician's certification of an initial 60-day episode of home health must be supported by a face-to-face encounter with the patient related to the primary reason that the patient needs home health services. Under the PPS, for episodes with five or greater visits, a nationwide base payment amount is adjusted by differences in wages (using the hospital wage index). This amount is then adjusted for case mix using the applicable Home Health Resource Group (HHRG) to which the beneficiary has been assigned. The HHRG applicable to a beneficiary is determined following an assessment of the patient's condition and care needs using the Outcome and Assessment Information Set (OASIS); there are 153 HHRGs. For episodes with four or fewer visits, the PPS reimburses the provider for each visit performed. Further payment adjustments may be made for services provided in rural areas, outlier visits (for extremely costly patients), a partial episode for beneficiaries that have an intervening event during their episode, or an agency's failure to submit quality data to CMS. Since January 1, 2016, home health agencies in nine states are being reimbursed under a home health value-based purchasing (HHVBP) model. These home health agencies can receive increased or decreased home health reimbursements depending on their performance across certain quality measures. Individuals with end-stage renal disease (ESRD) are eligible for all services covered under Parts A and B. Kidney transplantation services, to the extent they are inpatient hospital services, are subject to the inpatient hospital PPS and are reimbursed by both Parts A and B. However, kidney acquisition costs are paid on a reasonable cost basis under Part A. Dialysis treatments, when an individual is admitted to a hospital, are covered under Part A. Part B covers their dialysis services, drugs, biologicals (including erythropoiesis stimulating agents used in treating anemia as a result of ESRD), diagnostic laboratory tests, and other items and services furnished to individuals for the treatment of ESRD. In effect since January 1, 2011, the ESRD prospective payment system (PPS) makes no payment distinction as to the site where renal dialysis services are provided. With the implementation of the ESRD PPS, Medicare dialysis payments provide a single \"bundled\" payment for Medicare renal dialysis services that includes (1) items and services included in the former payment system's base rate as of December 31, 2010; (2) erythropoiesis stimulating agents (ESAs) for the treatment of ESRD; (3) other drugs and biologicals for which payment was made separately (before bundling); and (4) diagnostic laboratory tests and other items and services furnished to individuals for the treatment of ESRD. The system is case-mix adjusted based on factors such as patient weight, body mass index, comorbidities, length of time on dialysis, age, race, ethnicity, and other appropriate factors as determined by the Secretary. Under the ESRD Quality Incentive Program, dialysis facilities that fail to meet certain performance standards receive reduced payments. Medicare Part B covers physicians' services, outpatient hospital services, durable medical equipment, and other medical services. Initially, over 98% of the eligible population voluntarily enrolled in Part B, but in recent years the percentage has fallen to about 91%. About 89% of enrollees in original (FFS) Medicare use Part B services during a year. The program generally pays 80% of the approved amount (most commonly, a fee schedule or other predetermined amount) for covered services in excess of the annual deductible ($185 in 2019). The beneficiary is liable for the remaining 20%. Most providers and practitioners are subject to limits on amounts they can bill beneficiaries for covered services. For example, physicians and some other practitioners may choose whether or not to accept \"assignment\" on a claim. When a physician signs a binding agreement to accept assignment for all Medicare patients, the physician accepts the Medicare payment amount as payment in full and can bill the beneficiary only the 20% coinsurance plus any unmet deductible. The physician agrees to accept assignment on all Medicare claims in a given year and is referred to as a \"participating physician.\" There are several advantages to being a participating provider, including higher payment under the Medicare fee schedule, a lower beneficiary co-payment, and automatic forwarding of Medigap claims. Physicians who do not agree to accept assignment on all Medicare claims in a given year are referred to as nonparticipating physicians. Nonparticipating physicians may or may not accept assignment for a given service. If they do not, they may charge beneficiaries more than the fee schedule amount on nonassigned claims; however, these \"balance billing\" charges are subject to certain limits. Alternatively, physicians may choose not to accept any Medicare payment and enter into private contracts with their patients where no Medicare restrictions on payment or balance billing apply; however, this requires that physicians \"opt out\" of Medicare for two years. For some providers, such as nurse practitioners and physician assistants, assignment is mandatory; these providers can only bill the beneficiary the 20% coinsurance and any unmet deductible. For other Part B services, such as durable medical equipment, assignment is optional; for these services, applicable providers may bill beneficiaries for amounts above Medicare's recognized payment level and may do so without limit. Medicare Part B covers medically necessary physician services and medical services provided by some nonphysician practitioners. Covered nonphysician practitioner services include, but are not limited to, those provided by physician assistants, nurse practitioners, certified registered nurse anesthetists, and clinical social workers. Certain limitations apply for services provided by chiropractors and podiatrists. Beneficiary cost sharing is typically 20% of the approved amount, although most preventive services require no coinsurance from the beneficiary. A number of Part B services are paid under the Medicare physician fee schedule (MPFS), including services of physicians, nonphysician practitioners, and therapists. There are over 7,000 service codes under the MPFS. The fee schedule assigns relative values to each service code. These relative values reflect physician work (based on time, skill, and intensity involved), practice expenses (e.g., overhead and nonphysician labor), and malpractice expenses. The relative values are adjusted for geographic variations in the costs of practicing medicine. These geographically adjusted relative values are converted into a dollar payment amount by a national conversion factor. Annual updates to payments are determined through changes in the conversion factor. MACRA made several fundamental changes to how Medicare pays for physician and practitioner services by (1) changing the methodology for determining the annual updates to the conversion factor, (2) establishing a merit-based incentive payment system (MIPS) to consolidate and replace several existing incentive programs and to apply value and quality adjustments to the MPFS, and (3) establishing the development of, and participation in, alternative payment models (APMs). Prior to MACRA, the SGR system, which had been in place since BBA 97, tied annual updates to the Medicare fee schedule to cumulative Part B expenditure targets. MACRA repealed the SGR methodology, established annual fee schedule updates in the short term, and put in place a new method for determining updates thereafter. As a result of the MACRA changes, the update to physician payments under the MPFS was 0% from January 2015 through June 2015; for the remainder of that year—July 2015 through December 2015—the payments were increased by 0.5%. In each of the next four years, 2016 through 2019, the payments were to increase by 0.5% each year; however, the BBA 18 reduced the 2019 update to 0.25%. For the next six years, from 2020 through 2025, the payment update will be 0%. In addition to changes to the annual update, MACRA established two pathways for payment reform, collectively referred to as the Quality Payment Program (QPP). Medicare payment to all physicians and other practitioners will be determined by which conditions of the QPP, either MIPS or APM, the participant satisfies. The MIPS is a new program that remains based on FFS rates but combines four categories of performance measures (quality of care, cost/resource use, clinical practice improvement activities, and promoting interoperability) into a single adjustment to the base MPFS payment. Following several years of data collection and feedback on measures, the MIPS adjustments will affect actual payments for the first time in 2019. In contrast, qualified advanced APMs are intended to be alternatives to FFS, incorporating new approaches to paying for medical care that reward quality and efficiency while de-emphasizing the number of services billed (volume of care). Proposed advanced APMs are evaluated by an ad hoc committee (the Physician-Focused Payment Models Technical Advisory Committee), which provides comments and recommendations to the Secretary as to whether new payment models meet the criteria of APMs. For 2019, there are 13 advanced APMs under the QPP, though not all are available to all physicians and practitioners, as some are restricted to certain special services (e.g., oncology care, joint replacement) or geographic locations (e.g., Vermont's Medicare ACO Initiative, Maryland's Total Cost of Care Model). MACRA established incentives to make APMs more attractive than MIPS. First, qualifying participants in advanced APMs are eligible for an annual prepaid bonus (paid 2019-2024). Second, beginning in 2026, there will be two update factors, one for items and services furnished by a participant in an advanced APM and another for those electing to remain in the modified FFS payment system (MIPS) that do not participate in an advanced APM. The update factor for the advanced APM participants will be 0.75%, and the update factor for MIPS will be 0.25%, causing a difference between the payment levels that will grow over time. Medicare covers medically necessary outpatient physical and occupational therapy and speech-language pathology services. Beginning in 1997 and for many years subsequently but intermittently, beneficiaries faced limits ( therapy caps ) on how much Medicare would pay for outpatient therapy services in a calendar year. BBA 18 permanently repealed the outpatient therapy caps beginning January 1, 2018, and established a requirement that therapy services exceeding $3,000 would trigger a manual medical review (MMR) of the medical necessity of these services, in years 2018-2028. Beginning with 2029, the annual MMR threshold limit is to be increased by the percentage increase in the MEI, and it is to be applied separately for (1) physical therapy services and speech-language pathology services combined and (2) occupational therapy services. Medicare statute prohibits payments for covered items and services that are \"not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member,\" which would effectively exclude the coverage of preventive and screening services. However, Congress has explicitly added and expanded Medicare coverage for a number of such services through legislation, including through MMA, MIPPA, and ACA. Under current law, if a preventive service is recommended for use by the U.S. Preventive Services Task Force (USPSTF, an independent evidence-review panel) and Medicare covers the service, all cost sharing must be waived. Also, the Secretary may add coverage of a USPSTF-recommended service that is not already covered. Coverage for preventive and screening services currently includes, among other services, (1) a \"welcome to Medicare\" physical exam during the first year of enrollment in Part B and an annual visit and prevention plan thereafter; (2) flu vaccine (annual), pneumococcal vaccine, and hepatitis B vaccine (for persons at high risk); (3) screening tests for breast, cervical, prostate, and colorectal cancers; (4) screening for other conditions such as depression, alcohol misuse, heart disease, glaucoma, and osteoporosis; and (5) intensive behavioral therapy for heart disease and for obesity. Payments for these services are provided under the physician fee schedule and/or the clinical laboratory fee schedule. Part B covers outpatient clinical laboratory tests, such as certain blood tests, urinalysis, and some screening tests, provided by Medicare-participating laboratories. These services may be furnished by labs located in hospitals and physician offices, as well as by independent labs. Beneficiaries have no co-payments or deductibles for covered clinical lab services. From 1984 until recently, payments for outpatient clinical laboratory services were made on the basis of the Medicare clinical laboratory fee schedule (CLFS), which set payment amounts as the lesser of the amount billed, the local fee for a geographic area, or a national limit amount. Most clinical lab services were paid at the national limit amount. The national limits were set at a percentage (74%) of the median of all local fee schedule amounts for each laboratory test code; therefore, fee schedule amounts may differ by region. In general, annual increases in clinical lab fees have been based on the percentage change in the CPI-U. However, since 1987, Congress has specified lower updates. Beginning in 2014, with certain exceptions, laboratory tests provided in hospital outpatient departments are no longer paid separately under the CLFS and are instead included in the OPPS payments. PAMA introduced a new method for determining clinical laboratory payments and required CMS to base Medicare CLFS reimbursement on reported private insurance payment amounts. Medicare has been using weighted median private insurer rates to calculate Medicare payment rates for laboratory tests paid under the CLFS since January 1, 2018. These payment rates are national and do not vary by geographic area. Part B also covers diagnostic nonlaboratory x-ray tests and other diagnostic tests, as well as x-ray, radium, and radioisotope therapy. Generally, these services are paid for under the physician fee schedule, with beneficiaries responsible for a 20% coinsurance payment. Medicare covers a wide variety of equipment and devices under the heading of durable medical equipment (DME), prosthetics, and orthotics (PO) if they are medically necessary and are prescribed by a physician. DME is defined as equipment that (1) can withstand repeated use, (2) has an expected life of at least three years (effective for items classified as DME after January 1, 2012), (3) is used primarily to serve a medical purpose, (4) is not generally useful in the absence of an illness or injury, and (5) is appropriate for use in the home. DME includes such items as hospital beds, wheelchairs, blood glucose monitors, and oxygen and oxygen equipment. It also includes related supplies (S), such as drugs and biologics that are necessary for the effective use of the product. Prosthetics (P) are items that replace all or part of a body organ or its function, such as colostomy bags, pacemakers, and artificial eyes, arms, or legs. Orthotics (O) are braces that support a weak or deformed body member, such as leg or back braces. Except in competitive bidding areas (CBAs, described below), Medicare pays for most durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) based on fee schedules. Medicare pays 80% of the lower of the supplier's charge for the item or the fee schedule amount. The beneficiary is responsible for the remaining 20%. In general, fee schedule amounts are updated each year by a (1) measure of price inflation, and (2) a measure of economy-wide productivity, which may result in lower fee schedule amounts from one year to the next. Since 2016, the fee schedule rates that applied outside of competitive bidding areas for certain DMEPOS have been reduced based on price information from the competitive bidding program. The reductions were phased in during 2016, and fully phased in starting in January 2017. In response to concerns that the adjusted rates were too low, the Secretary again applied the phase-in rate for rural and noncontiguous areas not subject to competitive bidding starting in June 2018. Currently, two different fee schedules apply outside of CBAs. First, in rural or noncontiguous areas, the fee schedule is a 50/50 blend of the fee schedule with and without the reductions based on information from competitive bidding (i.e., the phase-in methodology). Second, in nonrural and contiguous areas, the fee schedule amounts are fully adjusted by information from the competitive bidding program. Numerous studies and investigations indicated that Medicare paid more for certain items of DME and PO than some other health insurers and some retail outlets. Such overpayments were attributed, in part, to the fee schedule mechanism of payment. MMA required the Secretary to establish a Competitive Acquisition Program for certain DMEPOS in specified areas. Instead of paying for medical equipment based on a fee schedule established by law, payment for items in competitive bidding areas was based on the supplier bids. The program started in 9 metropolitan areas in January 2011 and had expanded to 130 competitive bidding areas in 2018. However, the program has been suspended while a new bidding methodology is established. During the gap, the payments for previously competitively bid items in competitive bidding areas will be the amounts that applied on December 31, 2018, increased, yearly, by a measure of inflation. Certain specified outpatient prescription drugs and biologics are covered under Medicare Part B. (However, most outpatient prescription drugs are covered under Part D, discussed below.) Covered Part B drugs and biologics include drugs furnished incident to physician services, immunosuppressive drugs following a Medicare-covered organ transplant, erythropoietin for treatment of anemia for individuals with ESRD when not part of the ESRD composite rate, oral anticancer drugs (provided they have the same active ingredients and are used for the same indications as chemotherapy drugs that would be covered if furnished incident to physician services), certain vaccines under selected conditions, and drugs administered through DME. Generally, Medicare reimburses physicians and other providers, such as hospital outpatient clinics, for covered Part B drugs and biologics at 106% of the volume weighted average sales price of all drugs billed under the same billing code, although some Part B drugs, such as those administered through DME, are reimbursed at 95% of the drug's average wholesale price. Health care providers also are paid separately for administering Medicare Part B drugs. Medicare pays 80% of the amount paid to providers, and beneficiaries are responsible for the remaining 20%. A hospital outpatient is a person who has not been admitted by the hospital as an inpatient but is registered on the hospital records as an outpatient. Generally, payments under the hospital outpatient prospective payment system (OPPS) cover the operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis. These payments cover services such as the use of an operating suite, treatment, procedure, or recovery room; use of an observation bed as well as anesthesia; certain drugs or pharmaceuticals; incidental services; and other necessary or implantable supplies or services. Payments for services such as those provided by physicians and other professionals as well as therapy and clinical diagnostic laboratory services, among others, are separate. Under the OPPS, the unit of payment for acute care hospitals is the individual service or procedure as assigned to an ambulatory payment classification (APC). To the extent possible, integral services and items (excluding physician services paid under the physician fee schedule) are bundled within each APC. Specified new technologies are assigned to \"new technology APCs\" until clinical and cost data are available to permit assignment into a \"clinical APC.\" Medicare's hospital outpatient payment is calculated by multiplying the relative weight associated with an APC by a conversion factor. For most APCs, 60% of the conversion factor is geographically adjusted by the wage index used for the inpatient prospective payment system. Except for new technology APCs, each APC has a relative weight that is based on the median cost of services in that APC. The OPPS also includes pass-through payments for new technologies (specific drugs, biologicals, and devices) and payments for outliers. The Medicare Payment Advisory Commission (MedPAC) has recommended site-neutral payment policies that base payments on the resources needed to provide high-quality care in the most efficient setting. The Bipartisan Budget Act of 2015 (BBA 15; P.L. 114-74 ) gave CMS the authority to add new restrictions on Medicare payments for services furnished in provider-based off-campus hospital outpatient departments (HOPDs) to address discrepancies between payments under the MPFS and the OPPS for similar services. In its 2019 OPPS Final Rule, CMS explicitly applies the site-neutral policy to clinic visits, the most commonly billed service in hospital outpatient departments. An ambulatory surgical center (ASC) is a distinct entity that furnishes outpatient surgical procedures to patients who do not require an overnight stay after the procedure. According to MedPAC, most ASCs are freestanding facilities rather than part of a larger facility, such as a hospital. Medicare covers surgical and medical services performed in an ambulatory surgical center that are (1) commonly performed on an inpatient basis but may be safely performed in an ASC; (2) not of a type that are commonly performed or that may be safely performed in physicians' offices; (3) limited to procedures requiring a dedicated operating room or suite and generally requiring a postoperative recovery room or short-term (not overnight) convalescent room; and (4) not otherwise excluded from Medicare coverage. Medicare pays for surgery-related facility services provided in ASCs using a prospective payment system based on the OPPS. (Associated physician fees are paid for separately under the physician fee schedule.) Each of the approximately 3,500 procedures approved for payment in an ASC is classified into an APC group on the basis of clinical and cost similarity. The ASC system primarily uses the same payment groups as the OPPS; however, ASC payment rates are generally lower. The ASC weights are scaled (reduced) to account for the different mix of services in an ASC, and the ASC conversion factor (the base payment amount) is lower. A different payment method is used to set ASC payment for office-based procedures, separately payable radiology services, separately payable drugs, and device-intensive procedures. In addition, separate payments are made for certain ancillary items and services when they are integral to surgical procedures, including corneal tissue acquisition, brachytherapy sources, certain radiology services, many drugs, and certain implantable devices. The application of the site-neutral payment policy to clinic visits also affects such payments to ASCs (see discussion above). Medicare Part B covers emergency and nonemergency ambulance services to or from a hospital, a critical access hospital, a skilled nursing facility, or a dialysis facility for End-Stage Renal Disease (ESRD) beneficiaries who require dialysis when other modes of transportation could endanger the Medicare beneficiary's health. In most cases, the program covers 80% of the allowed amount for the service, and the beneficiary is responsible for the remaining 20%. Generally, ambulance services are covered if (1) transportation of the beneficiary occurs; (2) the beneficiary is taken to an appropriate location (generally, the closest appropriate facility); (3) the ambulance service is medically necessary (other forms of transportation are contraindicated); (4) the ambulance provider or supplier meets state licensing requirements; and (5) the transportation is not part of a Medicare Part A covered stay. Medicare covers both scheduled and nonscheduled nonemergency transports if the beneficiary is bed-confined or meets other medical necessity criteria. Medicare may also cover emergency ambulance transportation by airplane or helicopter if the beneficiary's location is not easily reached by ground transportation or if long distance or obstacles, such as heavy traffic, would prevent the individual from obtaining needed care. Medicare pays for ambulance services according to a national fee schedule. The fee schedule establishes seven categories of ground ambulance services and two categories of air ambulance services. Medicare pays for different levels of ambulance services, which reflect the staff training and equipment required to meet the patient's medical condition or health needs. Generally, basic life support is provided by emergency medical technicians (EMTs). Advanced life support is provided by EMTs with advanced training or by paramedics. Some rural ground and air ambulance services may qualify for increased payments. Also, ambulance providers that are CAHs, or that are entities that are owned and operated by a CAH, are paid on a reasonable-cost basis rather than the fee schedule if they are the only ambulance provider within a 35-mile radius. Medicare covers Part B services in rural health clinics (RHCs) and federally qualified health centers (FQHCs) provided by (1) physicians and specified nonphysician practitioners; (2) visiting nurses for homebound patients in home health shortage areas; (3) registered dieticians or nutritional professionals for diabetes training and medical nutrition therapy; and (4) others, as well as certain drugs administered by a physician or nonphysician practitioner. RHCs are paid based on an \"all-inclusive\" cost-based rate per beneficiary visit subject to a per visit upper limit, adjusted annually for inflation. For cost-reporting periods that began on or after October 1, 2014, FQHCs are paid a base payment rate per visit (with a limit, in most cases, of one billable visit per day) under a PPS methodology. Each FQHC's PPS rate is adjusted based on the location where the service is furnished using geographic adjustment factors, which are the geographic practice cost indices (GPCI) used in Medicare's physician fee schedule (MPFS). This rate is increased by 34% for new patients (those not seen in the FQHC organization within the past three years). The 34% increase also applies when a beneficiary receives a comprehensive initial Medicare visit (an initial preventive physician examination or an initial annual wellness visit) or a subsequent annual wellness visit. Effective January 1, 2017, the FQHC PPS base rate is updated annually using an FQHC-specific market basket. Medicare's payment to the FQHC is equal to 80% of the lesser of the adjusted PPS rate or the FQHC's actual charges associated with the visit, and the beneficiary is responsible for a 20% coinsurance. Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits. Under MA, private health plans are paid a per-person amount to provide all Medicare covered benefits (except hospice) to beneficiaries who enroll in their plan. Medicare beneficiaries who are eligible for Part A, enrolled in Part B, and do not have ESRD are eligible to enroll in an MA plan if one is available in their area. Some MA plans may choose their service area (local MA plans), while others agree to serve one or more regions defined by the Secretary (regional MA plans). In 2019, nearly all Medicare beneficiaries have access to an MA plan and approximately a third of beneficiaries are enrolled in one. Private plans may use different techniques to influence the medical care used by enrollees. Some plans, such as health maintenance organizations (HMOs), may require enrollees to receive care from a restricted network of medical providers; enrollees may be required to see a primary care physician who will coordinate their care and refer them to specialists as necessary. Other types of private plans, such as private fee-for-service (PFFS) plans, may look more like original Medicare, with fewer restrictions on the providers an enrollee can see and minimal coordination of care. In general, MA plans offer additional benefits or require smaller co-payments or deductibles than original Medicare. Sometimes beneficiaries pay for these additional benefits through a higher monthly premium, but sometimes they are financed through plan savings. The extent of extra benefits and reduced cost sharing varies by plan type and geography. However, MA plans are seen by some beneficiaries as an attractive alternative to more expensive supplemental insurance policies found in the private market. By contract with CMS, a plan agrees to provide all required services covered in return for a capitated monthly payment adjusted for the demographics and health history of their enrollees. The same monthly payment is made regardless of how many or few services a beneficiary actually uses. In general, the plan is at-risk if costs, in the aggregate, exceed program payments; conversely, the plan can retain savings if aggregate costs are less than payments. Payments to MA plans are based on a comparison of each plan's estimated cost of providing Medicare covered services (a bid) relative to the maximum amount the federal government will pay for providing those services in the plan's service area (a benchmark). If a plan's bid is less than the benchmark, its payment equals its bid plus a rebate. The size of the rebate is dependent on plan quality and ranges from 50% to 70% of the difference between the bid and the benchmark. The rebate must be returned to enrollees in the form of additional benefits, reduced cost sharing, reduced Part B or Part D premiums, or some combination of these options. If a plan's bid is equal to or above the benchmark, its payment will be the benchmark amount and each enrollee in that plan will pay an additional premium, equal to the amount by which the bid exceeds the benchmark. The MA benchmarks are determined through statutorily specified formulas that have changed over time. Since BBA 97, formulas have increased the benchmark amounts, in part, to encourage plan participation in all areas of the country. As a result, however, the benchmark amounts (and plan payments) in some areas have been higher than the average cost of original FFS Medicare. The ACA changed the way benchmarks are calculated by tying them closer to (or below) spending in FFS Medicare, and adjusting them based on plan quality. In a recent analysis, MedPAC found that \"over the past few years, plan bids and payments have come down in relation to FFS spending while MA enrollment continues to grow. The pressure of lower benchmarks has led to improved efficiencies and more competitive bids that enable MA plans to continue to increase enrollment by offering benefits that beneficiaries find attractive.\" In 2006, the MA program began to offer MA regional plans. Regional MA plans must agree to serve one or more regions designated by the Secretary. There are 26 MA regions consisting of states or groups of states. Regional plan benchmarks include two components: (1) a statutorily determined amount (comparable to benchmarks described above) and (2) a weighted average of plan bids. Thus, a portion of the benchmark is competitively determined. Similar to local plans, plans with bids below the benchmark are given a rebate, while plans with bids above the benchmark require an additional enrollee premium. In general, MA eligible individuals may enroll in any MA plan that serves their area. However, some MA plans may restrict their enrollment to beneficiaries who meet additional criteria. For example, employer-sponsored MA plans are generally only available to the retirees of the company sponsoring the plan. In addition, Medicare Special Needs Plans (SNPs) are a type of coordinated care MA plan that exclusively enrolls, or enrolls a disproportionate percentage of, special needs individuals. Special needs individuals are any MA eligible individuals who are either institutionalized as defined by the Secretary, eligible for both Medicare and Medicaid, or have a severe or disabling chronic condition and would benefit from enrollment in a specialized MA plan. Medicare Part D provides coverage of outpatient prescription drugs to Medicare beneficiaries who choose to enroll in this optional benefit. (As previously discussed, Part B provides limited coverage of some outpatient prescription drugs.) In 2019, about 47 million (about 77%) of eligible Medicare beneficiaries are estimated to be enrolled in a Part D plan. Prescription drug coverage is provided through private prescription drug plans (PDPs), which offer only prescription drug coverage, or through Medicare Advantage prescription drug plans (MA-PDs), which offer prescription drug coverage that is integrated with the health care coverage they provide to Medicare beneficiaries under Part C. Plans must meet certain minimum requirements; however, there are significant variations among them in benefit design, including differences in premiums, drugs included on plan formularies, and cost sharing for particular drugs. Part D prescription drug plans are required to offer either \"standard coverage\" or alternative coverage that has actuarially equivalent benefits. In 2019, \"standard coverage\" has a $415 deductible and a 25% coinsurance for costs between $415 and $3,820. From this point, there is reduced coverage until the beneficiary has out-of-pocket costs of $5,100 (an estimated $8,139.54 in total spending); this coverage gap has been labeled the \"doughnut hole.\" Once the beneficiary reaches the catastrophic limit, the program pays all costs except for the greater of 5% coinsurance or $3.40 for a generic drug and $8.50 for a brand-name drug. As required by the ACA, in 2010, Medicare sent a tax-free, one-time $250 rebate check to each Part D enrollee who reached the doughnut hole. Additionally, starting in 2011, the coverage gap is being gradually reduced each year. Under the ACA, the coverage gap for both brand-name and generic drugs was to be eliminated in 2020, but Congress moved up the date to 2019 for brand-name drugs as part of BBA 18. In 2019, a 70% discount is provided by drug manufacturers and Medicare pays an additional 5% of the cost of brand-name drugs dispensed during the coverage gap. In 2019, Medicare also pays 63% of the cost of generic drugs dispensed during the coverage gap and enrollees pay 37%. (See Figure 2 .) By 2020, through a combination of manufacturer discounts and increased Medicare coverage, Part D enrollees will be responsible for 25% of the costs for brand-name and generic drugs in the coverage gap (the same as during the initial coverage period). Most plans offer actuarially equivalent benefits rather than the standard package, including alternatives such as reducing or eliminating the deductible, or using tiered cost sharing with lower cost sharing for generic drugs. Medicare's payments to plans are determined through a competitive bidding process, and enrollee premiums are tied to plan bids. Plans are paid a risk-adjusted monthly per capita amount based on their bids during a given plan year. Part D plan sponsors determine payments for drugs and are expected to negotiate prices. The federal government is prohibited from interfering in the price negotiations between drug manufacturers, pharmacies, and plans (the so-called \"non-interference clause\"). Part D also provides enhanced coverage for low-income enrolled individuals, such as persons who previously received drug benefits under Medicaid (known as \"dual eligibles\"—enrollees in both Medicare and Medicaid). Additionally, certain persons who do not qualify for Medicaid, but whose incomes are below 150% of poverty, may also receive assistance for some portion of their premium and cost-sharing charges. The MMA included significant incentives for employers to continue to offer coverage to their retirees by providing a 28% federal subsidy. In 2019, the maximum potential subsidy per covered retiree is $2,264 for employers or unions offering drug coverage that is at least actuarially equivalent (called \"creditable\" coverage) to standard coverage. Employers or unions may select an alternative option (instead of taking the subsidy) with respect to Part D, such as electing to pay a portion of the Part D premiums. They may also elect to provide enhanced coverage, though this has some financial consequences for the employer or union. Alternatively, employers or unions may contract with a PDP or MA-PD to offer the coverage or become a Part D plan sponsor themselves for their retirees. A variety of public and private entities are involved in carrying out Medicare administrative and oversight functions. CMS, an agency within HHS, has primary operational responsibilities. Such responsibilities include managing program finances, developing policies and regulations, setting payment rates, and developing the program's information-technology infrastructure. CMS conducts its activities through its headquarters and 10 regional offices. The Social Security Administration, however, enrolls beneficiaries into the program and issues Medicare beneficiary cards. CMS also contracts with various private entities, including private health insurance companies, to help administer the program. For example, Medicare Administrative Contractors (MACs) process and pay Parts A and B reimbursement claims, enroll providers and suppliers, educate providers and suppliers on billing requirements, support appeal processes, and answer provider and supplier inquiries through call centers, as well as other activities. Qualified Independent Contractors (QICs) perform second-level reviews on appeals initially reviewed by MACs. Medicare's quality assurance activities are primarily handled by State Survey Agencies and Quality Improvement Organizations (QIOs), which operate in all states and the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The State Survey Agencies are responsible for inspecting Medicare provider facilities (e.g., nursing homes, home health agencies, and hospitals) to ensure that they are in compliance with federal safety and quality standards referred to as Conditions (or Requirements) of Participation. Alternatively, some types of providers, including hospitals, may receive certification through private accrediting agencies, such as the Joint Commission. QIOs are mostly private, not-for-profit organizations that monitor the quality of care delivered to Medicare beneficiaries and educate providers on the latest quality-improvement techniques. Medicare program integrity activities, such as audits, provider education, medical review, and predictive data analysis, also are carried out by a variety of government and private entities. For example, the Center for Program Integrity within CMS works together with the U.S. Department of Justice (DOJ) and the HHS Office of Inspector General (OIG) to identify and prevent fraud, waste, and abuse in Medicare. CMS also works with private contractors to carry out certain program-integrity functions. Unified Program Integrity Contractors (UPICs) perform integrity-related activities including data analysis to identify potentially fraudulent claims (bills) for Medicare Parts A and B, home health and hospice services, and DME. Similarly, the National Benefit Integrity Medicare Drug Integrity Contractor (MEDIC) is responsible for identifying and investigating fraud, waste, and abuse in Medicare Advantage and Part D. When appropriate, the UPICs and MEDIC work with and refer cases to law enforcement, including OIG and DOJ. In addition, Recovery Audit Contractors (RACs) are responsible for identifying improper Medicare payments, including both underpayments and overpayments, and for recouping any overpayments made to providers. Each year, the Comprehensive Error Rate Testing (CERT) program quantifies a national improper Medicare payment rate by examining a random sample of claims. In turn, the Supplemental Medical Review Contractor targets medical reviews in areas where OIG, RACs, and CERT have identified vulnerabilities and/or questionable billing patterns to identify ways to lower improper payment rates. As required by the ACA, the Center for Medicare and Medicaid Innovation (CMMI) was established in January 2011 to test and evaluate innovative payment and service delivery models to reduce program expenditures under Medicare. Examples of these models include providing payment incentives for groups of doctors, hospitals, and other health care providers (Accountable Care Organizations, or ACOs) to coordinate the services they provide to Medicare beneficiaries; bundling payments for services provided in different settings during a beneficiary's episode of care; and reimbursing health providers based on the quality of care rather than on the volume of services. CMMI also plays an important role in developing and implementing the new physician payment models required by MACRA. Medicare beneficiary education and outreach duties are shared between CMS and the Social Security Administration. Each year, CMS mails out a \"Medicare and You\" handbook to beneficiaries, which provides information on their benefits for the upcoming year. Additional educational materials and responses to frequently asked questions may be found on the CMS-maintained \"Medicare.gov\" website, and beneficiaries may call a CMS-operated 1-800 number for assistance with specific questions and help with selecting and enrolling in a Medicare Advantage and/or Part D plan. A Medicare beneficiary ombudsman is also available to provide assistance to Medicare consumers with their complaints, grievances, and requests. The Social Security Administration is responsible for notifying low-income Medicare beneficiaries about programs that may be able to assist them with their medical and prescription drug expenses. The Social Security Administration also provides general Medicare eligibility and enrollment information on its webpage and on Social Security benefit statements. Finally, CMS partners with community-based organizations, such as State Health Insurance Assistance Programs, in every state to provide educational resources and personalized assistance to Medicare beneficiaries. Medicare's financial operations are accounted for through two trust funds maintained by the Department of the Treasury—the Hospital Insurance (HI) trust fund for Part A and the Supplementary Medical Insurance (SMI) trust fund for Parts B and D. For beneficiaries enrolled in Medicare Advantage (Part C), payments are made on their behalf in appropriate portions from the HI and SMI trust funds. HI is primarily funded by payroll taxes, while SMI is primarily funded through general revenue transfers and premiums. (See Figure 3 .) The HI and SMI trust funds are overseen by a Board of Trustees that provides annual reports to Congress. The trust funds are accounting mechanisms. Income to the trust funds is credited to the fund in the form of interest-bearing government securities. Expenditures for services and administrative costs are recorded against the fund. These securities represent obligations that the government has issued to itself. As long as a trust fund has a balance, the Department of the Treasury is authorized to make payments for it from the U.S. Treasury. Medicare expenditures are primarily paid for through mandatory spending—generally Medicare pays for all covered health care services provided to beneficiaries. Aside from certain constraints in HI described below, the program is not subject to spending limits. Additionally, most Medicare expenditures (aside from premiums paid by beneficiaries) are paid for by current workers through income taxes and dedicated Medicare payroll taxes, that is, current income is used to pay current expenditures. Medicare taxes paid by current workers are not set aside to cover their future Medicare expenses. The primary source of funding for Part A is payroll taxes paid by employees and employers. Each pays a tax of 1.45% on the employee's earnings; the self-employed pay 2.9%. Beginning in 2013, some higher-income employees pay higher payroll taxes. Unlike Social Security, there is no upper limit on earnings subject to the tax. Other sources of income include (1) interest on federal securities held by the trust fund, (2) a portion of federal income taxes that individuals pay on their Social Security benefits, and (3) premiums paid by voluntary enrollees who are not automatically entitled to Medicare Part A. Income for Part A is credited to the HI trust fund. Part A expenditures for CY2019 are estimated to reach approximately $330 billion. Revenue to the trust fund is expected to consist of about $285 billion in payroll tax income and another $38 billion in interest and other income. The Medicare Trustees project that in CY2019, the HI trust fund will incur a deficit of approximately $7 billion. As long as the HI trust fund has a balance, the Treasury Department is authorized to make payments for Medicare Part A services. To date, the HI trust fund has never run out of money (i.e., become insolvent), and there are no provisions in the Social Security Act that govern what would happen if that were to occur. Part A expenditures exceeded HI income each year from 2008 through 2015, and the assets credited to the trust fund were drawn down to make up the deficit in those years. Although the HI trust fund accumulated small surpluses in 2016 and 2017, the Medicare Trustees estimate that, beginning in 2018, expenditures will outpace income in all future years, and project that the HI trust fund will become insolvent in 2026 (i.e., the balance of the trust fund will reach $0). At that time there would no longer be sufficient funds to fully cover Part A expenditures. Medicare Part B is financed primarily from federal general revenues and from beneficiary premiums, which are set at 25% of estimated per capita program costs for the aged. (The disabled pay the same premium as the aged.) Income for Part B is credited to the SMI trust fund. Total spending for Part B is estimated to reach about $368 billion in CY2019, with premiums financing about $98 billion of that amount and general revenues financing most of the rest. Most beneficiaries who enroll in Medicare Part B pay a monthly premium. Individuals receiving Social Security benefits have their Part B premium payments automatically deducted from their Social Security benefit checks. Due to a \"hold-harmless\" provision in the Social Security Act, an individual's Social Security check cannot decrease from one year to the next as a result of the annual Part B premium increase (except in the case of higher-income individuals subject to income-related premiums). The 2019 monthly Part B premium is $135.50. However, about 3.5% of Medicare enrollees are protected by the hold-harmless provision and pay lower premium amounts because the dollar amount of the 2019 cost-of-living increase in their Social Security benefits was not sufficient to cover the full premium increase. Since 2007, higher-income Part B enrollees have paid higher premiums. In 2019, individuals whose modified adjusted gross income (AGI) exceeds $85,000 and each member of a couple filing jointly whose modified AGI exceeds $170,000 are subject to higher premium amounts. These higher-income premiums range from 35% to 85% of the value of Part B and affect about 5% of Medicare enrollees. (See Appendix B for 2019 Part B premiums and high-income thresholds.) Payments for spending under the Medicare Advantage program are made in appropriate portions from the HI and SMI trust funds. There is no separate trust fund for Part C. Medicare Part D is financed through a combination of beneficiary premiums and federal general revenues. In addition, certain transfers are made from the states. These transfers, referred to as \"clawback payments,\" represent a portion of the amounts states could otherwise have been expected to pay for drugs under Medicaid if drug coverage for the dual eligible population had not been transferred to Part D. Part D revenues are credited to a separate Part D account within the SMI trust fund. In CY2019, total spending for Part D is estimated to reach approximately $98 billion, with about $71 billion of that amount paid for by general revenues, $16 billion from beneficiary premiums, and $12 billion from state transfers. In 2019, the base beneficiary premium is $33.19; however, beneficiaries pay different premiums depending on the plan they have selected and whether they are entitled to low-income premium subsidies. Additionally, beginning in 2011, higher income Part D enrollees pay higher premiums. (The income thresholds are the same as for Part B, as described above.) On average, beneficiary premiums are set at 25.5% of expected total Part D costs for basic coverage. The Budget Control Act of 2011 (BCA; P.L. 112-25 ) provided for increases in the debt limit and established procedures designed to reduce the federal budget deficit, including the creation of a Joint Select Committee on Deficit Reduction. The failure of the Joint Committee to propose deficit reduction legislation by its mandated deadline triggered automatic spending reductions (\"sequestration\" of mandatory spending and reductions in discretionary spending) in fiscal years 2013 through 2021. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) delayed the automatic reductions by two months, while the Bipartisan Budget Act of 2013 (BBA; P.L. 113-67 ) extended sequestration for mandatory spending for an additional two years—through FY2023. In 2014, the President signed into law an amended version of S. 25 ( P.L. 113-82 ), which included a provision to extend BCA's sequester of mandatory spending through FY2024. BBA 15 extended the sequestration of mandatory spending another year, through FY2025. Most recently, BBA 18 extended the BCA mandatory spending sequester through FY2027. Section 256(d) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177 ) contains special rules for the Medicare program in the event of a sequestration. Among other things, it specifies that for Medicare, sequestration is to begin the month after the sequestration order has been issued. Therefore, as the sequestration order was issued March 2013, Medicare sequestration began April 1, 2013, and will continue through March 31, 2028. Under sequestration, Medicare's benefit structure generally remains unchanged; however, benefit related payments are subject to 2% reductions. In other words, most Medicare payments to health care providers, as well as to MA and Part D plans, are being reduced by 2%. Certain Medicare payments are exempt from sequestration and therefore not reduced. These exemptions include (1) Part D low-income subsidies, (2) the Part D catastrophic subsidy, and (3) Qualified Individual (QI) premiums. Some non-benefit related Medicare expenses, such as administrative and operational spending, are subject to higher reductions, 6.2% in 2019. While Medicare provides broad protection against the costs of many, primarily acute care, services, the program does not cover all services that may be used by its aged and disabled beneficiaries. In general, Medicare does not cover eyeglasses, hearing aids, dentures, or most long-term care services. Further, unlike most private insurance policies, it does not include an annual \"catastrophic\" cap on out-of-pocket spending on cost-sharing charges for services covered under Parts A and B (except for persons enrolled in Medicare Advantage plans). Most Medicare beneficiaries have some coverage in addition to Medicare. The following are the main sources of additional coverage for Medicare enrollees: Medicare Advantage. Many MA plans offer services in addition to those covered under original Medicare, reduced cost sharing, or reduced Part B or D premiums. All MA plans have a catastrophic cap. Employer Coverage. Coverage may be provided through a current or former employer. In recent years, a number of employers have cut back on the scope of retiree coverage. Some have dropped such coverage entirely, particularly for future retirees. As noted earlier, the MMA attempted to stem this trend, at least for prescription drug coverage, by offering subsidies to employers who offer drug coverage, at least as good as that available under Part D. Medigap. Individual insurance policies that supplement fee-for-service Medicare are referred to as Medigap policies. Beneficiaries with Medigap insurance typically have coverage for a portion of Medicare's deductibles and coinsurance; they may also have coverage for some items and services not covered by Medicare. Individuals select from a set of standardized plans, though not all plans are offered in all states. Medicaid. Certain low-income Medicare beneficiaries also may be eligible for full or partial benefits under their state's Medicaid program. Individuals eligible for both Medicare and Medicaid are referred to as dual eligibles. The lowest-income dual eligibles qualify for full Medicaid benefits, so that the majority of their health care expenses are paid by either Medicare or Medicaid; Medicare pays first, with Medicaid picking up most of the remaining costs. In addition to full-benefit dual eligibles, state Medicaid programs pay Medicare premiums and some cost sharing for other partial dual eligibles, who have higher income than full-benefit dual eligibles but are still considered to have low income. Other Public Sources. Individuals may have additional coverage through the Department of Veterans Affairs, or TRICARE for military retirees eligible for Medicare (and enrolled in Part B). In 2015, about 87% of Medicare beneficiaries had some form of additional coverage. Some persons may have had more than one type of additional coverage. Appendix A. Abbreviations Appendix B. 2019 Medicare Beneficiary Costs", "summary": "Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under the age of 65. Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services. Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals may also qualify for coverage if they are a younger person who cannot work because they have a medical condition that is expected to last at least one year or result in death, or have end-stage renal disease (permanent kidney failure requiring dialysis or transplant). The program is administered by the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) and by private entities that contract with CMS to provide claims processing, auditing, and quality oversight services. In FY2019, the program is expected to cover approximately 61 million persons (52 million aged and 9 million disabled) at a total cost of about $772 billion. Spending under the program (except for a portion of administrative costs) is considered mandatory spending and is not subject to the annual appropriations process. Services provided under Parts A and B (also referred to as \"original\" or \"traditional\" Medicare) are generally paid directly by the government on a \"fee-for-service\" basis, using different prospective payment systems or fee schedules. Under Parts C and D, private insurers are paid a monthly \"capitated\" amount to provide enrollees with required benefits. Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met. Since 1965, the Medicare program has undergone considerable change. For example, during the 111th Congress, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 and P.L. 111-152) made numerous changes to the Medicare program that modified provider reimbursements, provided incentives to increase the quality and efficiency of care, and enhanced certain Medicare benefits. In the 114th Congress, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10) changed the method for calculating updates to Medicare payment rates to physicians and altered how physicians and other practitioners will be paid in the future. Projections of future Medicare expenditures and funding indicate that the program will place increasing financial demands on the federal budget and on beneficiaries. For example, the Hospital Insurance (Part A) trust fund is projected to become insolvent in 2026. Additionally, although the Supplementary Medical Insurance (Parts B and D) trust fund is financed in large part through federal general revenues and cannot become insolvent, associated spending growth is expected to put increasing strains on the country's competing spending priorities. As such, Medicare is expected to be a high-priority issue in the current Congress, and Congress may consider a variety of Medicare reform options ranging from further modifications of provider payment mechanisms to redesigning the entire program. This report provides a general overview of the Medicare program including descriptions of the program's history, eligibility criteria, covered services, provider payment systems, and program administration and financing. A list of commonly used acronyms, as well as information on beneficiary cost sharing, may be found in the appendixes.", "document_type": "crs"}
{"report": "I n 1994, Congress passed and President Clinton signed the Violent Crime Control and Law Enforcement Act of 1994 ( P.L. 103-322 ). The act, among other things, made federal and state prisoners ineligible to receive Pell Grants. The Pell Grant program is the single largest source of federal grant aid supporting postsecondary education students. The Violent Crime Control and Law Enforcement Act of 1994 was passed during a period when federal and state policymakers were adopting increasingly punitive measures―such as establishing new crimes, increasing penalties for certain offenses, requiring convicted offenders to serve a greater proportion of their sentences before being eligible for release, and making convicted offenders ineligible for certain government assistance programs―as a means to combat violent crime. However, concerns about the financial and social costs of an increasing prison population and what prisons are doing to rehabilitate prisoners and prevent recidivism have led some policymakers to consider whether some of the \"tough on crime\" policies of the 1980s and 1990s need to be changed. Policymakers have started to reconsider whether prisoners should be prohibited from utilizing Pell Grants to participate in postsecondary education programs while they are incarcerated. Legislation was introduced in the 115 th and 116 th Congresses that would have allowed incarcerated individuals to receive Pell Grants. As Senator Lamar Alexander noted \"most prisoners, sooner or later, are released from prison, and no one is helped when they do not have the skills to find a job. Making Pell grants available to them in the right circumstances is a good idea.\" In addition, both the Obama Administration and Trump Administration recommended expanding Pell Grants or other targeted federal financial aid to prisoners who are eligible for release after serving a period of incarceration. However, reestablishing prisoners' eligibility for Pell Grants is not without controversy. Legislation was introduced in the 115 th Congress that would have ended the Second Chance Pell Experiment, a program begun under the Obama Administration that evaluates the effects of granting prisoners access to Pell Grants. Opposition to allowing prisoners to receive Pell Grants stems from the belief that taxpayer money should not be used to finance the education of prisoners, especially if it might compromise assistance to non-prisoners. Of note, under current Pell Grant program rules, expanding Pell Grant eligibility to prisoners would not affect the eligibility of non-prisoners or award levels of non-prisoners. This report provides a discussion of issues policymakers might consider if Congress takes up legislation to allow individuals incarcerated in federal and state facilities to receive Pell Grants. Before discussing these issues, the report offers a brief examination of relevant data on the prison population and the educational participation and attainment of incarcerated adults. This is followed by an overview of the history of the prohibition on allowing incarcerated individuals to receive Pell Grants, and a brief discussion of who is eligible for Pell Grants. This section provides information on the number of prisoners in the United States from 1980 to 2018 and an overview of the latest recidivism data from the Department of Justice's Bureau of Justice Statistics (BJS). It also describes the educational attainment of prisoners, and their participation in and completion of educational programs offered to them. The recent debate over prisoners' eligibility for Pell Grants is driven, in part, by concerns that the prohibition on prisoners receiving Pell Grants is hampering access to postsecondary education that could aid prisoners' rehabilitation, assist their efforts to find employment after being released, and help them become productive and law-abiding members of their communities. These concerns are combined with an acknowledgment that \"tough on crime\" policies contributed to a prison population that grew throughout the 1980s, 1990s, and the early 2000s and, because most offenders sentenced to prison will eventually be released, more people returning to their communities after serving a period of incarceration. The growth in the prison population combined with the Pell Grant ban means that an increasing number of prisoners are unable to participate in postsecondary education and large numbers of ex-prisoners are potentially returning to their communities without having enhanced skills or education while in prison that could aid them in becoming law-abiding citizens. The prison population in the United States increased steadily from 1980 to 2009 before decreasing somewhat from 2010 to 2018 (the most recent year for which prison population data are available). There were approximately 1,471,000 prisoners under the jurisdiction of state and federal correctional authorities in 2018, compared to 330,000 prisoners in 1980. Increased prison populations are a function of increases in prison admissions, among other things, but growth in the prison population absent large increases in the percentage of convicted offenders who were sentenced to death or life in prison without the possibility of parole means that there has also been an increase in the number of people released from prison annually. Approximately 626,000 prisoners were released by state and federal correctional authorities in 2016, up from approximately 158,000 prisoners released in 1980. A recent study by the Bureau of Justice Statistics (BJS) found that 44% of prisoners released from custody in 2005 were rearrested in the first year after their release and 83% of released prisoners had been rearrested after nine years. A review of research on corrections-based educational programming suggests that prisoners who participate in postsecondary education while incarcerated recidivate at lower rates than prisoners who do not participate. However, methodological limitations in many of the studies mean that alternative explanations for the results―for example, that prisoners who took postsecondary coursework had a greater desire to reform themselves―cannot be excluded. Employment and educational attainment have also been linked. Data from the Census Bureau's American Community Survey (ACS) indicate that the employment rate of adults ages 25-64 increases as their level of educational attainment increases. Sixty percent of adults without a high school diploma were in the labor force in 2017 compared to 87% of adults with at least a bachelor's degree. ACS data further indicate that incarcerated individuals have lower levels of educational attainment than the general population. Figure 1 shows that approximately one-third (31%) of incarcerated adults (age 25 or older) have less than a high school diploma, while 12% of non-incarcerated adults have not completed high school. While incarcerated individuals have relatively low levels of educational attainment, data suggests that a large percentage of prisoners are not advancing their education while they are incarcerated. Based on a survey of 1,546 inmates in state, federal, and private prisons, the Department of Education's National Center for Education Statistics (NCES) reported that more than half (58%) did not further their education during their current period of incarceration. The NCES study did not ask prisoners whether the cost of postsecondary education prevented them from participating, but the Institute for Higher Education Policy notes that self-financing can be a barrier for prisoners who want to participate in postsecondary education while they are incarcerated. Prior to 1992, all incarcerated individuals were eligible to receive aid under Title IV of the Higher Education Act of 1965 (HEA; P.L. 89-329, as amended), including Pell Grants and loans. Pell Grants are need-based aid that is intended to be the foundation for all federal need-based student aid awarded to undergraduates. A 1982 report by the General Accounting Office (now known as the Government Accountability Office; GAO) estimated that approximately 11,000 federal and state prisoners received Pell Grants in academic year (AY) 1979-1980. ED's Office of the Inspector General (OIG) estimated that about 25,000 prisoners each year received Pell Grants during the period from 1988 to 1992. The 1982 GAO report noted that some states and schools also provided considerable financial assistance to prisoners. The 1980s and 1990s were marked by several policy initiatives at the state and federal level to augment penalties for convicted offenders. In addition, Congress was concerned about schools established solely to take advantage of the HEA Title IV funds provided to incarcerated students, and the possibility of high student loan default rates among individuals formerly or currently incarcerated. Some financial aid administrators questioned whether Pell Grants were the most appropriate source of rehabilitative aid for incarcerated students. The Higher Education Amendments of 1992 ( P.L. 102-325 ) limited the eligibility of incarcerated students to HEA Title IV aid in several ways: Individuals who were sentenced to life in prison without the possibility of parole and those who were sentenced to death were prohibited from receiving a Pell Grant. Pell Grant aid provided to incarcerated students in each fiscal year had to supplement and not supplant the level of postsecondary education assistance provided by the state to incarcerated individuals in FY1988. No incarcerated student was eligible to receive a loan (this remains current law). The cost of attendance for incarcerated students was limited to tuition and fees, and required books and supplies (this remains current law). An institution of higher education (IHE) became ineligible to participate in the HEA Title IV programs if more than 25% of its enrolled students were incarcerated (this remains current law). GAO published a report in 1994 in response to remaining congressional concerns regarding the use of Pell Grants by incarcerated individuals. The report provided data on the number of inmates receiving Pell Grants, described the effect of allowing incarcerated individuals to receive Pell Grants on grants for other needy students, and reviewed the research at that time on the effect of correctional education on recidivism rates. Using ED data for AY1993-1994, GAO reported that approximately 23,000 Pell Grant recipients were incarcerated (less than 1% of all recipients), and the average amount of the Pell Grant was the same regardless of whether individuals were incarcerated or not. Of Pell Grant recipients who were incarcerated, 39% were enrolled in public two-year IHEs, 35% were enrolled in private nonprofit four-year IHEs, and 12% were enrolled in public four-year IHEs. The remaining 14% of incarcerated students were enrolled in public, private nonprofit, or private for-profit programs that granted certificates (10%) or private nonprofit or private for-profit two-year IHEs (4%). GAO indicated that because the Pell Grant program operates as an entitlement for students, the number and amount of Pell Grants for incarcerated individuals had no effect on Pell Grant availability for individuals who were not incarcerated. Finally, GAO concluded that the studies on incarcerated students' participation in educational programming and recidivism \"have resulted in conflicting findings\" because isolating the effect of correctional education on recidivism was not possible in existing studies for two primary reasons: many interrelated factors affecting recidivism are difficult to define and measure, and an experimental design that randomly assigns prisoners to treatment and control groups would be necessary to eliminate the effect of motivated prisoners self-selecting into correctional education programs. The culmination of the \"tough on crime\" approach in setting federal policy was the enactment of the Violent Crime Control and Law Enforcement Act of 1994 (VCCLEA, P.L. 103-322 ). The act, among other things, authorized grants to assist states that enacted \"truth in sentencing\" laws with building new prisons, expanded the number of offenses for which the federal death penalty applies, and established a series of new federal crimes. With respect to the HEA, the VCCLEA eliminated the supplement not supplant provision relating to Pell Grant funds made available to incarcerated individuals and the prohibition on Pell Grant receipt by individuals sentenced to life in prison or the death penalty. The VCCLEA also established the current prohibition against any individuals incarcerated in federal and state penal institutions receiving Pell Grants. As a likely consequence of the newly enacted prohibition on prisoners receiving Pell Grants, combined with previously enacted prohibitions on the receipt of HEA Title IV student loans, the availability of postsecondary education programs to state prisoners and their enrollment in such programs declined. After prisoners were prohibited from receiving Pell Grants, approximately half of the postsecondary correctional education programs closed and those that remained were reduced in size. In addition, from 1991 to 2004 the percentage of state prison inmates enrolling in college courses declined from 14% to 7%. In 2008, Congress passed and President George W. Bush signed into law the Higher Education Opportunity Act ( P.L. 110-315 ), which prohibited those individuals who upon completion of a period of incarceration for a forcible or nonforcible sexual offense were subject to an involuntary civil commitment from receiving Pell Grants. This prohibition was partially in response to the fact that 54 individuals who were civilly committed sex offenders in Florida had received Pell Grants in 2004. Under Department of Education (ED) regulations for HEA Title IV, an incarcerated student is defined as any \"student who is serving a criminal sentence in a federal, state, or local penitentiary, prison, jail, reformatory, work farm, or other similar correctional institution.\" The definition does not include an individual who is confined in a correctional facility prior to the imposition of any criminal sentence or juvenile disposition, such as an individual confined in a local jail while awaiting trial. Similarly, it does not include students confined or housed in less restrictive settings such as halfway houses or home detention, or who are serving their sentences only on weekends. To be eligible for a Pell Grant, a student must meet requirements established by Title IV of the HEA. Some requirements apply to all of the HEA Title IV student aid programs, and some are specific to the Pell Grant program. Among the requirements generally applicable to the HEA Title IV student aid programs for AY2018-2019 are the following: Students must have a high school diploma or a general educational development (GED) certificate; must have completed an eligible homeschool program; or must have shown an \"ability to benefit\" from postsecondary education and either be enrolled in an eligible career pathway program or have been initially enrolled in an eligible postsecondary program prior to July 1, 2012. Males who are subject to registration with the Selective Service System (SSS) must be registered with the Selective Service. Students must not be in default on any HEA Title IV student loan. Specific eligibility requirements for the Pell Grant program that may be germane to criminal justice involved individuals include, but are not limited to, the following: Students must not be incarcerated in a federal or state penal institution. Students must not be subject to an involuntary civil commitment following incarceration for a sexual offense (as determined under the Federal Bureau of Investigation's (FBI's) Uniform Crime Reporting (UCR) Program). Therefore, students serving a sentence in a federal or state penal institution, operated by a federal or state government or a contractor, are ineligible for Pell Grants. Other alleged and convicted offenders, however, may be eligible for a Pell Grant. Those incarcerated in a juvenile justice facility or a local or county jail may be eligible. Individuals in a halfway house or home detention, serving a jail sentence only on weekends, or confined prior to the imposition of any criminal sentence or juvenile disposition are eligible for Pell Grants. The other HEA Title IV student aid programs also have eligibility rules for incarcerated students (see regulatory definition above). No incarcerated individual is eligible for any of the loan programs. Incarcerated students are eligible for the Federal Supplemental Educational Opportunity Grant (FSEOG) program and the Federal Work-Study (FWS) program. Despite statutory eligibility, it is unlikely that incarcerated individuals would receive FSEOG or FWS aid because such funds are limited, the aid is subject to additional eligibility requirements established by each IHE, and offering FWS jobs in a correctional setting would be difficult. In 2015, ED initiated the Second Chance Pell Experiment to determine if access to Pell Grants would increase the enrollment of incarcerated individuals in high-quality postsecondary education programs. The initiative was part of the \"Obama Administration's commitment to create a fairer, more effective criminal justice system, reduce recidivism, and combat the impact of mass incarceration on communities.\" HEA Section 487A authorizes the Secretary of Education to waive certain HEA Title IV statutory or regulatory requirements, except for requirements related to award rules, at a limited number of IHEs in order to provide recommendations for proposed regulations and initiatives. The Secretary used this waiver authority to implement the Second Chance Pell Grant Experiment. In promoting the experiment, ED highlighted research finding that making postsecondary education and training opportunities available to incarcerated individuals increases educational attainment, reduces recidivism, and improves post-release employment opportunities and earnings. Under the Second Chance Pell Experiment, participating IHEs, in partnership with federal and/or state prisons, award Pell Grants to individuals who are otherwise Pell-eligible except that they are incarcerated in a federal or state prison. Priority is given to students who are likely to be released from prison within five years. Incarcerated students must enroll in educational programs that lead to high-demand occupations from which such individuals are not legally barred. Education programs may not be offered through correspondence, but may be offered online. In addition, students must be able to complete such programs either while incarcerated or after being released. Participating IHEs must offer academic and career guidance, as well as transition services. Finally, the Pell Grant aid offered under the experiment must supplement and not supplant such postsecondary education assistance provided by the IHE, the prison, or another source. There are 65 IHEs participating in the experiment, enrolling approximately 8,500 inmates in the first year, 11,000 in the second year, and 10,000 in the third year of the experiment. More than one-half of the participating IHEs are public two-year colleges. Approximately two-thirds of participating IHEs already provided postsecondary correctional education prior to joining the experiment. Some IHEs experienced start-up difficulties related to accreditation approvals, the availability of adequate facilities and space, recruiting eligible prisoners, and enrolling a sufficient number of prisoners to make the program financially viable. Of the programs originally planned, approximately 35% were designed to award a postsecondary certificate, 47% were designed to award an associate's degree, and 18% were designed to award a bachelor's degree. ED generally issues reports of experiments that analyze and summarize IHE-reported outcomes and \"address how the experiment: reduced administrative burden; avoided creating additional costs to taxpayers; and improved aid delivery services or otherwise benefited students.\" The reports are intended to inform federal legislative decisionmaking. In February 2019, ED announced that the experiment would be extended an additional year but did not provide an estimate of the release of any data or an evaluation of the program. In April 2019, GAO reported on the status of the Second Chance Pell Experiment (hereafter referred to as the 2019 GAO report ). According to the report, in AY2017-2018, 59 schools disbursed $22.3 million in Pell Grants to over 6,000 prisoners under the experiment. Schools reported various challenges implementing the experiment including, but not limited to, prisoners not being registered for Selective Service, prisoners being in default on a HEA Title IV student loan, and prisoners and school staff having difficulty proving prisoner income and financial need. Many prisoners are interested in participating in postsecondary education, but one of the most significant barriers to prisoners taking college-level classes is their lack of resources. Providing access to Pell Grants could help reduce this barrier. However, there are several issues policymakers might consider before expanding access to Pell Grants, including overall program costs, whether the federal government should support more research on the effects of postsecondary education in correctional institutions, obstacles to providing access to postsecondary education in a correctional environment, and barriers returning prisoners might face when trying to find post-release employment related to their education. Expanding Pell Grant eligibility to some or all federal and state prisoners will increase Pell Grant program costs. The Pell Grant program is funded by a mix of annual discretionary appropriations and permanent mandatory appropriations. Expanding eligibility would increase both discretionary and mandatory costs. The Pell Grant program is often referred to as a quasi-entitlement because, since AY1990-1991, eligible students receive the Pell Grant award level calculated for them without regard to available appropriations. Expanding eligibility without instituting other provisions would not reduce awards for any otherwise eligible individuals and would only expand the pool of eligible individuals. The increase in program costs that would result from making federal and state prisoners eligible for Pell Grants who are currently ineligible would be limited by several provisions under current law: Students must have a high school diploma (or equivalent) or be enrolled in an eligible career pathway program that leads to high school completion and postsecondary credential attainment. As discussed above, 31% of incarcerated individuals do not have a high school diploma (or equivalent) and thus would only be eligible for a Pell Grant if enrolled in an eligible career pathway program. Students must not have already completed the curriculum requirements of a bachelor's or higher degree. As discussed above, 3% of incarcerated individuals have a bachelor's or higher degree. The Pell Grant award for incarcerated students may not exceed the cost of tuition and fees and, if required, books and supplies. The average AY2017-2018 Pell Grant was $4,032 for all undergraduates and $3,541 for students participating in the Second Chance Pell Experiment. The following sections describe subgroups of individuals that may require additional consideration when extending Pell Grant eligibility. If policymakers choose to reinstate prisoners' eligibility for Pell Grants, part of the justification for doing so is that taking college coursework might help prisoners obtain post-release employment and reduce their risk of recidivism. However, this reasoning raises a question about whether prisoners who might never be released should be eligible to receive Pell Grants. The current Second Chance Pell Experiment excludes individuals who are unlikely to be released and gives priority to students who are expected to be released within five years. Prisoners who might never be released include those who have been sentenced to periods of incarceration that would realistically exceed their natural life spans and those convicted of sex offenses who could be civilly committed to a secure psychiatric facility after serving their sentences because they are at high risk of committing a violent sex offense. A study conducted by the Sentencing Project found that in 2016, a total of 161,957 state and federal prisoners were serving life sentences. This includes 108,667 prisoners sentenced to life with the possibility of parole (LWP) and 53,290 prisoners sentenced to life without parole (LWOP). Prisoners serving life sentences accounted for one out of every nine prisoners in 2016. The Sentencing Project also found that another 44,311 prisoners were serving virtual life sentences, which were defined as sentences where a prisoner would have to serve at least 50 years of incarceration before being eligible for release. Virtual lifers , while still technically eligible for release (i.e., they were not sentenced to LWOP), are prisoners whose sentences are so long they will most likely spend the rest of their lives in prison. Of note, the Sentencing Project's definition of virtual lifers does not include older prisoners who are sentenced to incarceration and might serve less than 50 years, but because of their advanced age are likely to die in prison. The number of prisoners serving life and virtual life sentences accounted for 14% of all inmates in 2016. The Sentencing Project's research found that a handful of states accounted for the majority of prisoners with LWP, LWOP, and virtual life sentences. Four states (California, Georgia, New York, and Texas) accounted for 55% of all prisoners serving LWP. Four states (California, Florida, Louisiana, and Pennsylvania) and the Bureau of Prisons (BOP) accounted for 53% of all prisoners serving LWOP. Five states (Illinois, Indiana, Louisiana, Pennsylvania, and Texas) accounted for 55% of prisoners with virtual life sentences. The Sentencing Project also found that from 2003 to 2016 there was a 27% increase in the number of prisoners serving any type of life sentence, though the number of prisoners sentenced to LWOP increased by 59% while the number of prisoners sentenced to LWP increased by 18%. When debating about possibly expanding eligibility for Pell Grants, policymakers might also consider whether civilly committed sex offenders, who might never be released, should be allowed to participate in the program. Laws regarding the civil commitment of sex offenders (also known as sexually violent predator or sexually dangerous persons statutes) allow for the involuntary civil commitment of certain sex offenders at the conclusion of their prison sentences. As of 2015, 20 states, the District of Columbia, and the federal government had laws that allowed for the civil commitment of sexually violent predators and sexually dangerous persons. Individuals who are civilly committed are held until courts deem that they no longer meet the criteria for civil commitment. These individuals are held in secure treatment facilities. In general, for someone to be civilly committed the individual must have committed a qualifying sex offense, have a qualifying mental condition (e.g., a personality disorder or a paraphilia ), and be identified as high risk to commit another sexual offense as a result of the disorder. The Prison Policy Initiative reported that 5,430 offenders were civilly committed in 2016 in 15 states. Unlike most prison sentences, there is no set period of time for when someone who is civilly committed will be released. For example, Minnesota has yet to release any civilly committed sex offenders committed to its custody since the mid-1980s, and 40 individuals have died in custody. Congress may consider whether to amend the HEA Title IV and Pell Grant eligibility requirement for Selective Service registration because it is an obstacle for some men who have been involved in the criminal justice system. Most men aged 18–25 are required to register with the SSS. Men who are required to register and do not do so are ineligible for Pell Grants, unless they did not knowingly and willfully fail to register. Men ages 18-25 who are incarcerated are not required to register with the Selective Service while they are in prison. Some research shows that men who have been involved in the criminal justice system are at a higher risk for failing to register due to misunderstandings and misinformation. Under current regulations, a man who did not register may still achieve eligibility through one of several processes. If he was not required to register, he can provide evidence of his exception. If he is age 25 or younger, he can register. If he was unable to register for reasons beyond his control, he can provide evidence of the circumstances that prevented him from registering. If he has already served on active duty in the Armed Forces, he can provide evidence of such. If he did not knowingly and willfully fail to register, he may submit to his school an advisory opinion from the SSS that does not dispute his claim that he did not knowingly and willfully fail to register, and the school must not have evidence to the contrary. For incarcerated or previously incarcerated men 26 and older who failed to register, proving Pell Grant eligibility may be cumbersome. Some IHEs in the Second Chance Pell Experiment have advocated waiving the Selective Service registration requirement for incarcerated individuals in order to increase enrollments. The waiver could potentially reduce or eliminate the burden of proving eligibility or establishing eligibility for men 26 and older who were incarcerated at any time during the ages of 18 to 25. If postsecondary education completion by prisoners is a policy objective, the large proportion of prisoners who have not completed a secondary school education may also need to be addressed. As shown previously in Figure 1 , approximately one-third of incarcerated individuals have not completed high school. There are two primary federal approaches for educating adults who have not completed secondary school: supporting elementary and secondary education and supporting postsecondary career pathways. Many correctional systems spend a significant proportion of available funding on providing Adult Basic Education (ABE) and GED preparation courses. Even in cases where prisoners have a high school diploma or GED, they might still need remedial education in order to complete and pass college-level courses. Congress might consider whether there is a need for additional funding or a restructuring of programs to support ABE and GED preparation courses in prisons, or to diagnose learning disabilities in prisoners. There are several federal programs that provide some support that can be used for the secondary education of prisoners: The Adult Education and Family Literacy Act (AEFLA; P.L. 113-128 ), which provides grants to states for basic education for out-of-school adults, specifies that each state must subgrant funds to support educational activities for individuals in correctional institutions and for other institutionalized individuals. AEFLA provides formula grants to states that award competitive grants and contracts to local providers. States may award up to 20% of the funds made available to local providers for programs for corrections education and the education of other institutionalized individuals. The Strengthening Career and Technical Education for the 21 st Century Act ( P.L. 115-224 ) supports the development of career and technical education (CTE) programs that impart technical or occupational skills at the secondary and postsecondary levels. The majority of funding is awarded as formula grants to states, which are authorized to spend up to 2% of their allocation to serve individuals in state institutions, such as state correctional institutions, juvenile justice facilities, and educational institutions that serve individuals with disabilities. The Second Chance Act of 2007, as amended ( P.L. 110-199 ), authorized a series of competitive grants to support offender reentry programs operated by state, local, and tribal governments and nonprofit organizations. These programs include the Adult and Juvenile State and Local Offender Demonstration Program, which may support adult education and training, among several allowable uses. Another of these programs is the Grant Program to Evaluate and Improve Educational Methods at Prisons, Jails, and Juvenile Facilities, which authorizes grants to evaluate and improve academic and vocational education in prisons, jails, and juvenile facilities. Under current provisions in the HEA, schools may establish career pathway programs for students who are not high school graduates but can demonstrate an ability to benefit from postsecondary education. Students enrolled in career pathway programs may be eligible for Pell Grants and other HEA Title IV aid. A career pathway program combines occupational skills training, counseling, workforce preparation, high school completion, postsecondary education, and postsecondary credential attainment. The ability to benefit may be demonstrated by the student passing an examination approved by ED to be eligible for federal student aid, or by successfully completing six credit hours or 225 clock hours of college work applicable to a certificate or degree offered by a postsecondary institution. Ability to benefit tests must be proctored by a certified test administrator and given at an assessment center facility. Administering ability to benefit tests to incarcerated individuals might be challenging. If incarcerated individuals do not take the ability to benefit test, they would have to successfully complete six credit hours or 225 clock hours of college work to become eligible for HEA Title IV aid. Should Congress want to take additional steps to promote postsecondary educational pursuits of incarcerated individuals, it might consider encouraging the development of career pathway programs in correctional environments such that prisoners who have not completed high school may pursue postsecondary education with the aid of a Pell Grant. As outlined above, there is a lack of regular, comprehensive data on postsecondary education in correctional facilities. The evaluation literature on the effect of postsecondary education on recidivism would benefit from more routinely collected and complete data on postsecondary education that allows for methodologically rigorous studies. This suggests that there might be a role for the federal government to play in collecting and reporting data on postsecondary education in correctional institutions and supporting more rigorous evaluations of postsecondary education for prisoners. BJS collects data on the prison population through its annual National Prisoner Statistics (NPS) program and its Survey of Prison Inmates (SPI). The First Step Act of 2018 ( P.L. 115-391 ) requires BJS to collect data through the NPS on the number of federal prisoners who have a high school diploma or GED prior to entering prison, the number who obtain a GED while incarcerated, and the number of BOP facilities with remote learning capabilities. The SPI collects data related to prisoner participation in education and job training, but the data are collected sporadically. The most recent iteration was conducted in 2016. Prior to that, BJS conducted the SPI in 1974, 1979, 1986, 1991, 1997, and 2004, when it was known as the Survey of Inmates in State and Federal Correctional Facilities. Neither the NPS or the SPI collects data on the types of degrees prisoners seek, how many receive a postsecondary certificate or degree, how much time they spend taking courses, how instruction is provided (e.g., onsite, through correspondence courses, online), or how postsecondary education programs are funded. Nonetheless, BJS has decades of experience collecting data on prison inmates from state correctional agencies and BOP. Congress could consider expanding BJS's mandate under 34 U.S.C. Section 10132 to require the collection and reporting of more detailed data on postsecondary education in correctional facilities. However, states participate in the NPS program voluntarily, so if data collection efforts become too burdensome there is the possibility that some state correctional systems will decline to participate. As a way of promoting state participation in data collection efforts, policymakers might also consider whether to make participation a condition of receiving grant funds under a program such as the Edward Byrne Memorial Justice Assistance Grant (JAG) program. One limitation of both of the NPS program and the SPI is that they only collect data on prisoners while they are incarcerated. Variables that are necessary to evaluate the effectiveness of postsecondary correctional education programs―such as rearrest, reconviction, and reincarceration; post-release educational attainment; post-release employment, and the nature of post-release employment; to just name a few―can only be collected after prisoners have been released, and sometimes several years after they have been released. Even though there are existing data sources that could be used to measure recidivism (e.g., criminal history records data maintained by the Federal Bureau of Investigation (FBI) or in state criminal history repositories), a new federally sponsored longitudinal data collection effort to track whether prisoners attain education credentials post-release or find employment post-release would enable additional research on the relationship between education and post-incarceration success. In addition, policymakers might consider whether to authorize the FBI to share criminal history records with non-governmental research organizations for the purpose of promoting and conducting recidivism research. Congress might also consider other ways to promote research on prisoners' postsecondary education and its impact on recidivism and employment. The literature on postsecondary correctional education lacks studies that utilized randomized controlled trials, which are regarded as the gold standard of social science research. While randomized controlled trials could help draw more definitive conclusions about whether participation in postsecondary education reduces recidivism, it might also undermine the aims of the proposed policy change. A randomized controlled trial would require prisoners to be randomly assigned to a treatment group (postsecondary education programming) or a control group (no postsecondary education programming). This means that some prisoners who might have otherwise enrolled in postsecondary education programming would not be allowed to access it while incarcerated. Although, there are ethical considerations when conducting randomized controlled trials on prisoners and they are afforded additional protections as subjects of behavioral science research studies. Congress could also promote more rigorous evaluations of postsecondary correctional education by providing funding to the National Institute of Justice―the research, development, and evaluation agency of the Department of Justice―that is specifically dedicated for this purpose. It has been argued that evaluations of correctional education programs and other prison-based programming should focus on outcomes other than just recidivism and employment. Cessation of criminal activity is considered an important marker of rehabilitation. However, the emphasis on evaluating how correctional education programs affect recidivism means that little is known about the process whereby education programs help shape how released prisoners re-integrate into their communities. As noted previously, correctional education is believed to help prisoners improve their cognitive skills and abilities, which, in turn, enables them to continue their education and/or training upon release and secure gainful employment. While there is value in improving the quality of evaluations that assess the effect of correctional education on recidivism and employment, there might be value as well in better understanding how the availability of, and participation in, correctional education programs affect changes in motivation, literacy gains, development of concrete skills, disciplinary actions, postsecondary credits earned, and completion of educational programs. Policymakers might also consider whether the federal government should support research into ways to improve the delivery of postsecondary correctional education programs. There is a dearth of methodologically rigorous research on the best way to deliver postsecondary education in prison. For example, prior research seldom accounted for differences in the initial educational level of prisoners. Additionally, there is little research on the effectiveness of different modalities of providing postsecondary education (e.g., in-person instruction, correspondence courses, online learning) or whether the amount of time spent engaging in postsecondary education (i.e., the dosage ) has an effect on recidivism. The following sections describe considerations unique to providing and delivering postsecondary education in a correctional environment. Even if Congress were to provide access to Pell Grants for certain prisoners, factors related to the correctional environment might limit the ability of prisoners to participate in postsecondary education programs. Three recurring resource challenges identified by ED and GAO are space, access to educational equipment or supplies, and trained staff. In 2016, 14 states and BOP held more inmates than their maximum capacity. Correctional systems and institutions that are over capacity might not be able to provide sufficient classroom space to meet an increase in demand for postsecondary instruction. Prisons in rural areas might also have problems finding instructors who are nearby or are willing to commute to the prison in order to teach college courses. Additionally, even trained educators will require training on effective teaching strategies for correctional students and techniques and procedures for working in restrictive prison environments. It is not unusual for prisoners to be moved from one prison facility to another within the same state or within the federal prison system. Common reasons for the transfer of federal prisoners include security reclassification, medical treatment, and program participation. A prisoner who is transferred from one facility to another would be unable to complete a college course he or she is currently enrolled in if it is an in-person-only class not offered at the facility to which the prisoner is transferred. Programs that are accessible, integrated, and transferrable in every prison in a state or across the federal prison system may reduce the need for transferred prisoners to restart their postsecondary education in a new facility. The Institute for Higher Education Policy (IHEP) argued that many of the resource problems that limit access to postsecondary education could be addressed by providing more access to online courses. However, many correctional agencies limit the ability of prisoners to access the internet. Congress might consider whether there are steps that could be taken to promote online postsecondary courses for prisoners. For example, Congress could support a program to develop and test security protocols for prisoner internet access that allows them access to specific, but not all, web content. There are a variety of arrangements through which educational programming is provided to prisoners. In some states, correctional education is the responsibility of the correctional agency; in other states, a separate entity is responsible for providing it, either through a correctional school district or through the state's education department. Having separate agencies responsible for confining prisoners and providing prisoner education can add additional layers of bureaucracy and the agencies' missions might, at times, conflict. Beyond this, in many states the warden of each correctional institution is the one who makes the decision about whether postsecondary education courses will be offered at the prison. Also, the warden can cancel postsecondary courses if he or she objects to them. A 2019 GAO report described the importance of schools coordinating with prison staff and state corrections agencies. This suggests that for an effective expansion of educational activities to occur, there might be a need for states and BOP to have a uniform or coordinated curriculum across all correctional facilities in their respective systems. Policymakers might consider whether there is a need to promote more consistent policies in how states provide correctional education. For example, Congress could place conditions on federal funds to require state correctional departments to determine what type of postsecondary education courses will be available at each facility. The educational programs accessed by prisoners may not be designed to increase their academic and post-release success given the unique attributes of the prison population. ED provides a research-based guide for developing education programs to help incarcerated adults transition successfully to their communities. For example, incarcerated individuals may benefit from supportive services. Support services may include assistance selecting academic programs, tutoring, assistance with study skills, assistance with financial literacy, academic and employment counseling, or other academic supports to help them succeed in individual courses and their program of study. For example, some individuals may require advice and assistance in choosing courses, educational programs, and careers that will transfer more easily to practical employment in their post-release communities of choice. Practical employment options for former prisoners are those that provide earnings that permit self-sufficiency, are open to individuals with a criminal record, and are available despite any possible residential or transportation constraints. Some individuals may want to complete their program of study post-release. An incarcerated student who begins a postsecondary degree program through a postsecondary correctional education program may not be able to complete such degree before release and would benefit from the postsecondary correctional education program credits being fully transferrable or articulated to an educational program available to noninstitutionalized students. Strategic partnerships that ensure institutional courses are fully transferrable and articulated to multiple academic programs may increase the program completion rate. In addition to issues related to providing greater access to postsecondary education in prisons, policymakers might also consider issues related to prisoners being able to utilize the education and skills they learned during their coursework to secure post-release employment. Vocational certificates are a form of postsecondary credential that is popular with prisoners. One study found that approximately one in three prisoners (29%) would like to enroll in courses where they could obtain certificates from colleges or trade schools, which is greater than the proportion of prisoners who reported that they would like to enroll in courses that offer an associate's degree (18%), bachelor's degree (14%), master's degree (5%), professional degree (1%), or doctorate degree (2%). However, it is important that the vocational training inmates receive while incarcerated is aligned with employment opportunities that are available in the local job markets to which inmates will return. As IHEP notes, \"learning vocational skills that are quickly made obsolete by technological advances or that are irrelevant to local employment opportunities is a waste of money by funders and effort by students.\" Policymakers might consider whether there should there be mandated coordination between correctional agencies, state departments of labor, and business organizations to ensure that inmates are using Pell Grants to participate in postsecondary education programs that provide the skills needed to secure meaningful employment when they are released. A criminal history can be a barrier to securing employment in a variety of fields, either because formerly incarcerated individuals are prohibited from working in the field due to a provision in law or regulation, or because employers are wary of hiring someone with a criminal history. One estimate suggested that in 2010, 12% of noninstitutionalized men had a felony conviction, and in 2014, 34% of unemployed working-age men had a criminal record. Increasing access to Pell Grants might be for naught if prisoners cannot get hired because of their criminal histories. Policymakers might consider whether there is a need to undertake efforts to reduce the collateral consequences of a criminal history on post-release employment. For example, Congress could consider expanding the Department of Labor's Federal Bonding Program for employers that hire recently released prisoners. ", "summary": "In 1994, Congress passed and President Clinton signed the Violent Crime Control and Law Enforcement Act of 1994 (P.L. 103-322), which, among other things, made prisoners ineligible for Pell Grants. However, concerns about the financial and social costs of the growing prison population combined with concerns about the recidivism rate of released prisoners have led some policymakers to reconsider whether prisoners should be allowed to use Pell Grants to help cover the cost of postsecondary coursework. Pell Grants are intended to assist in making the benefits of postsecondary education available to eligible students who demonstrate financial need. Under Department of Education (ED) regulations, any student who is \"serving a criminal sentence in a federal or state penitentiary, prison, jail, reformatory, work farm, or other similar correctional institution\" is not eligible to receive a Pell Grant. However, in 2015 ED used its authority under the Higher Education Act (HEA) to create the Second Chance Pell Experiment to determine if access to Pell Grants would increase the enrollment of incarcerated individuals in high-quality postsecondary correctional education programs. Under the experiment, participating institutions of higher education, in partnership with federal and/or state correctional institutions, award Pell Grants to students who are otherwise Pell-eligible except for being incarcerated in a federal or state institution. The experiment is expected to conclude in 2020. There are several issues policymakers might consider if Congress chooses to take up legislation to reinstate prisoners' eligibility for Pell Grants, including the following: The Pell Grant program is a need based program that provides funds to all that qualify. Thus, restoring Pell Grant eligibility to all federal and state prisoners will increase Pell Grant program costs. Should tax dollars be used to educate convicted offenders before they are released from prison? There are some prisoners who have been sentenced to death, whose sentences exceed their life expectancy, or who might be civilly committed indefinitely under sexually dangerous persons statutes after they have served their prison sentences. Should these prisoners be eligible to receive Pell Grants? Educational attainment is lower among incarcerated adults than non-incarcerated adults and even prisoners with high school diplomas or general education development (GED) certificates might need additional assistance to help them prepare for the rigors of postsecondary education. Is there a need for additional investment in remedial education or adult basic education for prisoners to help them prepare for postsecondary education classes? Under current law and regulation, to be eligible for a Pell Grant males who are subject to registration with the Selective Service System (SSS) must register or prove they were either not required by SSS to register or failed to register for an ED-qualifying reason. There is a higher incidence of not registering among men who have been incarcerated during some or all of the period between ages 18 to 25. Should this requirement be retained for incarcerated men, or should the process for proving exceptions be modified to facilitate Pell Grant eligibility for incarcerated men? There is a lack of rigorous evaluations that have isolated the effects postsecondary education has on recidivism, and little research on the best way to deliver postsecondary education in prisons. Should Congress take steps to promote data collection on the availability of, and participation in, postsecondary education to advance research on the effects of postsecondary education on recidivism? There can be barriers to providing educational programming in a correctional environment (e.g., lack of classroom space and trained instructors, limitations on internet access) regardless of Pell Grant receipt. Are there steps Congress could take to mitigate these barriers? A criminal history can be a barrier to securing employment in a variety of fields, either because some convicted offenders are prohibited from working in certain jobs due to a provision in law or regulation, or because employers are wary of hiring someone with a criminal history. Is there interest in undertaking any efforts to reduce the collateral consequences of a criminal history on post-release employment to allow the incarcerated student to fully realize the benefits of postsecondary education?", "document_type": "crs"}
{"report": "F ederal agricultural conservation assistance began in the 1930s with a focus on soil and water issues ass ociated with production and environmental concerns on the farm. During the 1980s, agricultural conservation policies were broadened to include environmental issues beyond soil and water concerns, especially issues related to production, such as erosion and wetlands loss that had effects beyond the farm. Many of the current agricultural conservation programs were enacted as part of the Food Security Act of 1985 (1985 farm bill; P.L. 99-198 , Title XII). These programs have been reauthorized, modified, and expanded, and several new programs have been created, particularly in subsequent omnibus farm bills. While the number of programs has increased and new techniques to address resource challenges continue to emerge, the basic federal approach has remained unchanged—voluntary farmer participation encouraged by financial and technical assistance, education, and basic and applied research. The U.S. Department of Agriculture (USDA) administers the suite of agricultural conservation programs through two primary agencies—the Natural Resources Conservation Service (NRCS) and the Farm Service Agency (FSA). Figure 1. Common Conservation Program AbbreviationsSource: CRS. The conservation title of the Agriculture Improvement Act of 2018 (2018 farm bill; P.L. 115-334 , Title II) reauthorized and amended many of the largest conservation programs and created a number of new pilot programs, carve-outs, and initiatives. The House- and Senate-passed farm bills ( H.R. 2 ) each included a number of amendments to existing conservation programs, many of which did not overlap. This generally resulted in the inclusion of a mix of amendments from each chamber being in the enacted bill. The Congressional Budget Office (CBO) projects that total mandatory spending for the title will increase by $555 million during the first five years of the 2018 farm bill (FY2019-FY2023), compared to a continuation of funding levels authorized in the Agricultural Act of 2014 (2014 farm bill; P.L. 113-79 ). Mandatory spending for the title over 10 years (FY2019-FY2028) is projected by CBO to be reduced by $6 billion, relative to the 2014 farm bill authorized levels . Generally, the bill reallocates funding within the conservation title among the larger programs and pays for increases in the short term with reductions in the long term. The 2018 farm bill reauthorized and amended all of the major USDA agricultural conservation programs. Generally, farm bill conservation programs can be grouped into the following types based on similarities: working lands, land retirement, easement, conservation compliance, and partnership and grants (see Figure 1 and Figure 2 for a list of conservation programs). Most of these programs are authorized to receive mandatory funding (i.e., they do not require an annual appropriation), and include funding authorities that expire with most other farm bill programs at the end of FY2023. Other types of conservation programs—such as watershed programs, emergency programs, and technical assistance—are authorized in legislation other than the farm bill. Most of these programs have permanent authorities and receive appropriations annually through the discretionary appropriations process. These programs are not generally addressed in the context of a farm bill and are not covered in detail in this report, except for cases where the 2018 farm bill made amendments to the program. This section provides a general discussion of programmatic-specific amendments made to various conservation programs and subprograms. For a detailed section-by-section analysis of amendments in the 2018 farm bill, including statutory and U.S. Code citations, see Appendix . Unless otherwise noted, conservation programs discussed in this section are authorized to receive mandatory funding through the borrowing authority of the Commodity Credit Corporation (CCC). For additional analysis of conservation program funding, see the \" Budget and Baseline \" section. Land retirement programs authorize USDA to make payments to private landowners to voluntarily retire land from production for less-resource intensive uses. The primary land retirement program is the Conservation Reserve Program (CRP). CRP includes a number of subprograms, many of which were codified or reauthorized in the 2018 farm bill. The farm bill also authorizes a number of initiatives and pilot programs. CRP was originally authorized in the 1985 farm bill and has been reauthorized and amended a number of times since. The program provides financial compensation for landowners, through an annual rental rate, to voluntarily remove land from agricultural production for an extended period (typically 10 to 15 years) to improve soil and water quality and wildlife habitat. CRP operates under two types of enrollment—general and continuous. General enrollment provides an opportunity for landowners to enroll in CRP through a nationwide competition during a specific period of time. Continuous enrollment is designed to enroll the most environmentally desirable land into CRP through specific conservation practices or resource needs. Unlike general enrollment, under continuous enrollment, land is typically enrolled at any time and is not subject to competitive bidding. Many of the 2018 farm bill amendments apply to continuous enrollment contracts, including the creation of new pilot programs and amendments to existing subprograms. A detailed analysis of amendments to CRP may be found in Table A-2 . Congressional debate over CRP in the 2018 farm bill centered on how to increase enrollment limits, while not increasing overall cost. As such, the enacted bill incrementally increases the enrollment cap while reducing various rental rates, cost-share payments, and incentive payments. The 2018 farm bill increases the enrollment limit in annual increments from 24 million acres in FY2019 to 27 million acres in FY2023. This increase in enrollment is partly offset by reducing rental rates for general contracts to 85% of the county average rental rate and to 90% of the county average rental rate for continuous contracts. Cost-share payments are limited to the actual cost of establishing the approved practices, including not more than 50% for seed mix costs. The enacted bill also establishes minimum enrollment levels for continuous contracts (8.6 million acres by FY2022) and grassland contracts (2 million acres by FY2021). CREP was originally created as a CRP initiative in 1997, but was not codified into statute as a CRP subprogram until the 2018 farm bill. The provision in the 2018 farm bill is similar to the original version of CREP in that it authorizes USDA to enter into agreements with states to target designated project areas with continuous CRP enrollment contracts. Projects are designed to address specific environmental objectives through targeted continuous, noncompetitive, CRP enrollment that typically provides additional financial incentives beyond annual rental payments and cost-share assistance. The new language in the 2018 farm bill allows existing CREP agreements to remain in force, but allows them to be modified if mutually agreed upon. CREP agreements are generally with states, but the 2018 farm bill expands eligible partners to include nongovernmental organizations (NGO). The enacted bill formalizes agreement requirements with partners, including matching fund contributions (previously not less than 20% of the project cost) and possible waiver of such contributions. The enacted bill requires the matching fund contribution to be a negotiated part of the agreement, or not less than 30% if most of the funds are provided by an NGO. Payments from an eligible partner may be in cash, in-kind, or through technical assistance. Additional requirements for select cost-share payments, incentive payments, and maintenance payments are also included. Specific requirements are included related to grazing, forested riparian buffers, and drought and water conservation agreements. The FW program was created in the Farm Security and Rural Investment Act of 2002 (2002 farm bill; P.L. 107-171 ) as a pilot within CRP to enroll farmable or prior converted wetlands into CRP in exchange for additional financial incentives. The 2018 farm bill reauthorized FW program at the current 750,000 acre enrollment limit. The 2014 farm bill authorized grassland contracts under CRP, which enrolls grassland, rangeland, and pastureland into 14 to 15 year CRP contracts. Only select grazing practices are allowed under the contract in exchange for annual and cost-share payments. The 2018 farm bill reauthorizes the contracts and increases the enrollment limit to not less than 2 million acres by FY2021 from the previous limit of not more than 2 million acres. USDA may not use unenrolled grassland acres for other types of CRP enrollment. The enacted bill also prioritizes the enrollment of expiring CRP land, land at risk of development, or land of ecological significance. The 2018 farm bill creates a new pilot program referred to as CLEAR 30, which enrolls expiring CRP land into 30-year contracts devoted to practices that improve water quality. CLEAR refers to the Clean Lakes, Estuaries, And Rivers initiative that is authorized to enroll land in continuous contracts that would reduce sediment and nutrient loading, and harmful algal blooms. Under a CLEAR 30 contract, the landowner must maintain the land in accordance with an approved plan and adhere with the terms and conditions of the contract. Contract holders receive compensation in thirty annual cash payments similar to those calculated under general CRP contracts. Technical assistance is required for each contract and agreement. USDA must create the CRP plan for a contract, but management, monitoring, and enforcement may be delegated to another federal agency, state, or local government, or to a conservation organization. The 2018 farm bill also creates a new SHIPP pilot program under CRP to remove less productive farm land from production in exchange for annual rental payments and to plant low-cost perennial cover crops. Eligible land is limited to (1) land in states selected by the Secretary within the prairie pothole region, (2) land that has a cropping history in the three years prior to enrollment, but which was not enrolled in CRP during that time period, and (3) land that is considered to be less productive than other land on the farm. No more than 15% of a farm may be enrolled in the pilot and no more than 50,000 acres of the CRP may be used for the pilot. Under a SHIPP contract, a participant would be required to plant a USDA-approved, low-cost, perennial, conserving-use cover crop at the participant's expense. In return the participant would receive an annual rental payment that is 50% of the general CRP annual rental payment, or higher for beginning, limited-resource, socially disadvantaged or veteran participants. Contracts are three to five years in duration, but can be terminated early if considered necessary by USDA; or if the participant agrees to pay back the annual rental payments. Harvesting, haying, and grazing are allowed outside of the local nesting and brood-rearing period, subject to additional conditions. Working lands conservation programs allow private land to remain in production, while implementing various conservation practices to address natural resource concerns specific to the area. Program participants receive some form of conservation planning and technical assistance to guide the decision on the most appropriate practices to apply, given the natural resource concerns and land condition. Participants receive federal financial support to defray a portion of the cost to install or maintain the vegetative, structural, or management practices agreed to in the terms of the contract. The two main working lands programs are the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP). Combined, both programs account for more than half of all conservation program funding. The 2018 farm bill amended both programs, but in different ways and to different degrees. A detailed analysis of amendments to EQIP and CSP is provided in Table A-3 and Table A-4 , respectively. EQIP is reauthorized and expanded in the enacted bill. The program provides financial and technical assistance to producers and private landowners to plan and install structural, vegetative, and land management practices on eligible lands to alleviate natural resource problems. Eligible producers enter into contracts with USDA to receive payment for implementing conservation practices. Approved activities are carried out according to an EQIP plan approved by USDA and developed with the producer that identifies the appropriate conservation practice(s) to address identified resource concerns on the eligible land. The program is reauthorized through FY2023 with a graduating level of mandatory funding—$1.75 billion in FY2019 and FY2020; $1.8 billion in FY2021; $1.85 billion in FY2022; and $2.025 billion in FY2023. The new law includes a number of amendments to EQIP that focus on water quality and quantity-related practices, soil health improvement, and wildlife habitat improvement. The law also reduces the funding allocation for livestock-related practices from 60% to 50%, and increases the allocation for wildlife-related practices from 5% to 10%. One of the larger changes the 2018 farm bill makes to EQIP is that water conservation system payments are expanded to include irrigation and drainage entities that were previously ineligible. Eligible entities may be states, irrigation districts, groundwater management districts, acequias, land-grant mercedes, or similar entities. Practices must be implemented on eligible land of the producer, land adjacent to a producer's eligible land, or land under the control of the eligible entity. Adjusted Gross Income (AGI) and payment limits may be waived for eligible entities, but USDA may impose additional payment and eligibility limits. Priority is given to applications that reduce water use. It is unclear how this expansion in eligibility, compared with the previous producer-only policy, may affect implementation of the program. CSP provides financial and technical assistance to producers to maintain and improve existing conservation systems and to adopt additional conservation activities in a comprehensive manner on a producer's entire operation. CSP contracts must meet or exceed a stewardship threshold for at least two priority resource concern at the time of application and meet or exceed at least one additional priority resource concern by the end of the contract. The House-passed bill would have repealed CSP and created a stewardship contract within EQIP, whereas the Senate-passed bill would have reauthorized CSP and reduced program enrollment. The enacted 2018 farm bill creates a mix of both the House- and Senate-passed bills with amendments. The enacted bill reauthorizes CSP, but amends how the program limits future enrollment. The new law shifts CSP from a program limited by acres (10 million acres annually under prior law; approximately $1.4 billion in FY2018) to one limited by total funding ($700 million in FY2019 in mandatory funding, increasing to $1 billion in FY2023). CBO projects this change from prior law will reduce the program by more than $12.4 billion total over ten years (see Table 2 ) for a total cost of $5.1 billion. Reduced spending from this reduction offset increased mandatory spending in other conservation programs (see Figure 3 ). In addition to the amended funding structure of CSP, the enacted bill also made a number of amendments to the program. CSP's ranking criteria is amended to focus on an application's actual and expected increase of conservation benefits, and to add a cost competitive selection criteria for similar applications. Contract renewal options are amended to require renewal applicants to compete with new applications, whereas previously their acceptance was guaranteed. Additionally, payments for adopting cover crops, grazing management, and comprehensive conservation plan development are amended to include higher and more comprehensive payment options. CIG is a subprogram under EQIP that awards competitive grants to state and local agencies, nongovernmental organizations, tribes, and individuals to implement innovative conservation techniques and practices. The 2018 farm bill expands project eligibility to include community colleges, urban farming, and monitoring practices. A new on-farm conservation innovation trial is authorized at $25 million annually from total EQIP funding. The new on-farm trial funds projects through producers or eligible entities that test new or innovative conservation approaches, such as those related to precision agriculture technologies, nutrient management, soil health, water management, crop rotations, cover crops, irrigation systems, and other USDA approved approaches. The House-passed farm bill would have repealed CSP and created a stewardship contract within EQIP. While the 2018 farm bill retained CSP and also authorized a new Conservation Incentive Contract under EQIP. The new EQIP incentive contracts are limited to select priority resource concerns within specific geographic regions. No more than three priority resource concerns may be identified in each geographic region. EQIP incentive contracts extend for five to ten years and provide annual payments to incentivize increased conservation stewardship and the adoption, installation, management, and maintenance of conservation practices. In determining payment amounts, USDA is required to consider the level and extent of the practice being adopted, the cost of adoption, income forgone due to adoption, and compensation ensuring the longevity of the practice. The new EQIP incentive contracts exhibit some similarities with CSP contracts, including addressing priority resource concerns; and providing annual payments for adopting, maintaining, and improving practices. The EQIP incentive contracts also include notable differences from CSP, including a no stewardship threshold for entry; no comprehensive requirement for addressing resource concerns; no whole-farm enrollment; and no limit on payments. Pending implementation of EQIP incentive contracts, it is unclear what impact they may have on CSP enrollment or on general EQIP contracts. Amendments under the commodities title (Title I) of the 2018 farm bill changed how base acres are used to calculate eligibility for certain commodity support programs. Base acres not planted to a commodity program-eligible crop within the last ten years are ineligible for select commodity support programs. Under the 2018 farm bill, these acres are now eligible for a one-time enrollment into a new Grassland Conservation Initiative under CSP. While the new grassland initiative is within CSP, it has separate requirements from other CSP contracts. Unlike CSP, the grassland initiative would not require whole-farm enrollment. The initiative has no required stewardship threshold for entry, requiring the participant to only meet or exceed one priority resource concern by the end of the contract. Whereas CSP contracts must meet or exceed a stewardship threshold for at least two priority resource concern at the time of application and meet or exceed at least one additional priority resource concern by the end of the contracts. Grassland initiative contracts are short term—five years with no renewal or reenrollment option, and a participant may terminate the contract without penalty at any time. Payments under the initiative are not subject to the CSP payment limit, but cannot provide more than $18 per acre. Easement programs impose a permanent land-use restriction that is voluntarily placed on the land in exchange for a government payment. The primary conservation easement program is the Agricultural Conservation Easement Program, which provides financial and technical assistance through two types of easements (1) agricultural land easements (ALE) that limit nonagricultural uses on productive farm or grass lands, and (2) wetland reserve easements (WRE) that protect and restore wetlands. The other conservation easement program—the Healthy Forests Reserve Program (HFRP)—was reauthorized in the forestry title (Title VIII) of the 2018 farm bill and is not covered in this report. The 2018 farm bill reauthorizes and amends ACEP. Most of the changes made to ACEP in the 2018 farm bill focus on the ALE. Under ALE, USDA enters into partnership agreements with eligible entities to purchase agricultural land easements from willing landowners to protect the agricultural use and conservation values of the land. The enacted bill provides additional flexibilities to ACEP-eligible entities, including the eligibility of \"buy-protect-sell\" transactions in which an eligible entity purchases land prior to the acquisition of an ALE, agrees to hold an ALE on the land, and then transfer the land within a select time period to a farmer or rancher. The bill also amends the nonfederal cost share requirements by removing the requirement that an eligible entity's contribution be equal to the federal share, or at least 50% of the federal share if the entity includes contributions from the private landowner. The nonfederal portion contributed by the eligible entity may include cash, a landowner's donation, costs associated with the easement, or other costs as determined by USDA. Other flexibilities provided eligible entities include the consideration of geographical differences, terms and conditions of easements, and certification criteria of eligible entities. Several amendments reduce the roll of USDA in the administration of ALE, including amendments to the certification of eligible entities, the right of easement enforcement, and planning requirements. For a detailed analysis of amendments to ACEP see Table A-7 . By comparison, the 2018 farm bill made fewer changes to WRE. Most of the amendments to WRE center on compatible use and vegetative cover requirements. Compatible use authorization is expanded to include consultation with the state technical committee, consideration of land management requirements, and improving the functions and values of the easement. Requirements for a WRE plan were amended to allow for the establishment or restoration of an alternative vegetative community that is hydraulically appropriate on the entirety of the WRE if it would benefit wildlife or meet local resource needs. In other amendments to ACEP, Congress specified new directions regarding USDA's handling of the subordination, exchange, modification, or termination of any ACEP easement. The enacted farm bill increases mandatory funding for ACEP from the FY2018 authorized level to $450 million annually for FY2019 through FY2023. The 2014 farm bill created RCPP from four repealed programs. The 2018 farm bill reauthorized RCPP and made a number of amendments to the program (see Table A-8 for a detailed analysis of RCPP amendments). Prior the 2018 farm bill, RCPP utilized 7% of existing conservation programs (referred to as covered programs ) through RCPP projects that were defined by eligible partners. Eligible partners would define the project's area, goals, and resource concerns to be addressed through the use of covered programs. Partners would enter into project agreements with USDA, in which they would provide a \"significant portion\" of the overall cost of the project. USDA issued no regulations for RCPP and instead utilized funding notices and operated it with the regulations of the covered programs. Amendments enacted in the 2018 farm bill shift RCPP away from using contracts from covered programs to establishing RCPP as a stand-alone program with its own contracts. Prior to the 2018 farm bill, USDA would enter into agreements with a partner on a project that would target covered program contracts in an agreed upon area for a defined resource goal. The actual contract with the farmer or rancher, however, would be an EQIP, CSP, ACEP, or HFRP contract. The enacted bill no longer uses this framework; instead it requires USDA to use a contract specific to RCPP that will fund eligible activities similar to those available under covered programs, but not using the funds of those programs. The list of covered programs is also expanded under the bill to include EQIP, ACEP, CSP, HFRP, CRP, and Watershed and Flood Prevention Operations (WFPO). The 2018 farm bill maintains RCPP's broad partner-focused goal of creating opportunities to leverage federal conservation funding for partner-defined projects. Additionally, the revised program provides additional flexibilities to partners, including the make-up of a partner's project contribution, guidance and reporting requirements, agreement renewals, and in the application process. Mandatory funding for the program is increased to $300 million annually for FY2019 through FY2023 from $100 million annually under prior law. However, RCPP no longer receives a percentage of funding from covered programs, which could change the overall scale of RCPP depending on how this change is implemented. The allocation of funding is also amended to provide 50% to state and multi-state projects and 50% to projects in critical conservation areas (CCA) as selected by USDA. The WFPO program provides technical and financial assistance to state and local organizations to plan and install measures to prevent erosion, sedimentation, and flood damage and to conserve, develop, and utilize land and water resources. Project costs are shared with local partners. Smaller projects may be authorized by the Chief of the NRCS, whereas larger projects must be approved by Congress. The 2018 farm bill made few amendments to WFPO, the most substantial being the authorization of permanent mandatory funding of $50 million annually. Historically, the program received discretionary funding through the annual appropriations process—most recently $150 million in FY2018. Two farm bill provisions require that in exchange for certain USDA program benefits, a producer agrees to maintain a minimum level of conservation on highly erodible land and not to convert wetlands to crop production. These provisions were originally authorized in the 1985 farm bill as highly erodible land conservation ( Sodbuster ) and wetland conservation ( Swampbuster ). They are collectively referred to as conservation compliance . The 2018 farm bill amends wetland conservation provisions to specify that (1) benefits cannot be denied if an exemption applies and (2) affected landowners must have the opportunity to be present during an on-site inspection. The enacted bill also authorizes annual discretionary appropriations for wetland mitigation banking. For a detailed analysis of amendments to the wetland conservation provisions, see Table A-1 . A third type of compliance requirement introduced in the Food, Conservation, and Energy Act of 2008 (2008 farm bill; P.L. 110-246 ) addressed crop production on native sod ( Sodsaver ). While Sodsaver is not included in the conservation title of the farm bill, it operates in a manner similar to conservation compliance requirements in that benefits are reduced if production occurs on native sod. Beginning with the Agriculture and Food Act of 1981 (1981 farm bill; P.L. 97-98 ), agricultural conservation has been a stand-alone title in all farm bills. The breadth of the conservation title has grown with each passing omnibus farm bill. Debate over the 2018 farm bill focused on the differences within the conservation title of the House- and Senate-passed bills ( H.R. 2 ). The conference agreement resolved these differences to create a final version of the title in the enacted law that represents a mix of proposals from the two versions. Overarching themes of the conservation title include (1) targeting of funds or acres in existing programs, (2) a shifting of funds among the different types of conservation programs, including a continued emphasis on working lands programs, and (3) provisions that address environmental regulations through voluntary conservation measures. The 2014 farm bill focused on simplifying and consolidating programs within the conservation title. Conversely, the 2018 farm bill does not create new programs, but it does require that a number of existing programs direct a specific level of funding or acres, or percentage of a program's funding, to a resource- or interest-specific issue, initiative, or subprogram. Table 1 highlights some of the directed policies created by the 2018 farm bill and compares them with prior law. Some of these policies existed prior to the 2018 farm bill, but did not include a specified funding or acreage level. Through these directed policies Congress has specified a level of support or required investment that USDA is to achieve through program implementation. One potential consequence of these directed policies may be reduced flexibility of the implementing agency to allocate funding based on need, as well as reduced total funds or acres available for activities of the larger program that may not meet a resource-specific provision. Most of the conservation programs in the 2018 farm bill are authorized to receive mandatory funding, so these directed policies also have funding, unless Congress subsequently directs otherwise. Most farm bill conservation programs are authorized to receive mandatory funding. According to CBO, the conservation title makes up 7% of the total projected 2018 farm bill spending over 10 years, which is $60 billion of the total $867 billion (see Table 2 and Figure 3 ). Historically, funding for the conservation title has experienced both increases and decreases within farm bills. The 2018 farm bill conservation title is budget neutral over the 10-year baseline; however, it is projected to increase funding in the first five years (+$555 million over FY2019-FY2023) and decrease funding in the last five years (-$561 million over FY2024-FY2028). While most titles received an increase in authorized mandatory funding over the projected 10-year baseline, three titles, including conservation, did not. The bulk of mandatory spending for conservation is authorized for working lands and land retirement activities. While recent farm bills have increased funding for easement and partnership programs, they remain relatively small compared to three main programs—EQIP, CSP, and CRP (see Table 2 and Figure 4 ). The 2018 farm bill conservation title is considered budget neutral over the ten-year baseline and generally reallocates funding among the larger existing programs. Over time, periods of high commodity prices, changing land rental rates, and new conservation technologies have led to a shift in farm bill conservation policy away from land retirement and toward an increased focus on working lands programs. Much of this shift occurred following the 2008 farm bill and continued in the 2014 farm bill as the level of total mandatory program funding for land retirement programs declined relative to working lands programs (see Figure 4 ). Increasingly, the separation between land retirement programs and working lands programs has become blurred by an increase in compatible use allowances for grazing and pasture use under land retirement programs. Most conservation and wildlife organizations support both land retirement and working lands programs; however, the appropriate \"mix\" continues to be a subject of debate. Additionally, some conservation program supporters are divided over the relative benefits of shorter-term land retirement programs (CRP) versus longer-term easement programs (ACEP). Unlike land retirement programs, easement programs impose a permanent or longer-term land-use restriction that the land owner voluntarily places on the land in exchange for a government payment. Supporters of easement programs cite a more cost-effective investment in sustainable ecosystems for long-term wildlife and land preservation benefits. Supporters of short-term land retirement programs cite the increased flexibility and broader participation compared with permanent or long-term easement programs. The 2018 farm bill did not amend the duration of ACEP easements, but did create two new subprograms under CRP that would provide additional options for longer-term CRP contracts (30 years under CLEAR30) and shorter-term CRP contracts (3-5 years under SHIPP). In recent years, Congress has placed greater emphasis on programs that partner with state and local communities to target conservation funding to local resource concerns. These partnership programs leverage private funding with federal funding to multiply the level of assistance in a selected area. The 2014 farm bill repealed a number of these partnership programs and replaced them with RCPP. The 2018 farm bill amends and expands the number of partnering opportunities under RCPP, CREP, and CIG. However, based on available funding, these programs remain relatively small compared to others in the conservation title. USDA has cited voluntary conservation practices as a way to address environmental concerns and potentially reduce the need for traditional regulatory programs. A number of provisions in the conservation title speak to the relationship between voluntary conservation measures and environmental regulation. One such provision is regulatory certainty. Regulatory certainty refers to using voluntary measures to address a specific resource concern in exchange for the \"certainty\" that additional measures will not be required under future regulations. A new regulatory certainty section in the 2018 farm bill (§2503(f)) authorizes USDA to provide technical assistance under the farm bill conservation programs to support regulatory assurances for producers and landowners, under select conditions. The 2018 farm bill also makes existing regulatory certainty measures permanent, including the Working Lands for Wildlife Initiative, which was created in 2012 as a partnership between NRCS and the U.S. Fish and Wildlife Service (FWS). Under this partnership agreement, private landowners who voluntarily make wildlife habitat improvements on their land through NRCS conservation programs, and agree to maintain them for 15-30 years, receive in return a level of certainty they will be exempted from potential future regulatory actions related to at-risk species under the Endangered Species Act. The 2018 farm bill makes this partnership agreement permanent and allows for the initiative to be expanded to include CRP. Another environmental regulatory-related provision in the enacted 2018 farm bill (§2410) is a sense of Congress statement encouraging watershed-level partnerships between nonpoint sources and regulated point sources to advance the goals of the Federal Water Pollution Control Act (Clean Water Act, 33 U.S.C. §1251 et seq.). This appendix includes a series of tables, arranged by subtitle, included in Title II of the Agriculture Improvement Act of 2018 ( P.L. 115-334 ). U.S. Code citations are included in brackets in the \"Prior Law\" column. Corresponding section numbers in the 2018 farm bill are included in brackets in the \"Enacted 2018 Farm Bill\" column. Funding for most Title II programs is covered in the \"Funding and Administration\" subtitle (Subtitle E, see Table A-6 ). Where appropriate, funding levels are repeated within a program's corresponding subtitle table. Tables are generally organized by section number of the 2018 farm bill, except where it is appropriate to cross-references relevant amendments to provide a complete picture of the program. ", "summary": "The Agriculture Improvement Act of 2018 (2018 farm bill, P.L. 115-334, Title II) included a number of changes to agricultural conservation programs, including reauthorizing and amending existing programs, directing existing program activities to specific resource concerns, shifting funds within the title, and authorizing a budget-neutral level of funding. Debate over the conservation title in the 2018 farm bill focused on a number of issues in the different versions in the House- and Senate-passed bills (H.R. 2). These differences were resolved in a House-Senate conference to create the enacted bill, which is a mix of both versions that were passed by both chambers. The enacted bill reauthorizes and amends portions of most all conservation programs; however, the general focus is on the larger programs, namely the Conservation Reserve Program (CRP), Environmental Quality Incentives Program (EQIP), and Conservation Stewardship Program (CSP). Most farm bill conservation programs are authorized to receive mandatory funding and are not subject to appropriation. According to the Congressional Budget Office (CBO), the conservation title of the 2018 farm bill makes up 7% of the bill's total projected mandatory spending over 10 years, which is $60 billion of the total $867 billion. The conservation title is budget neutral over the 10-year baseline; however, the 2018 farm bill is projected to increase funding in the first five years (+$555 million over FY2019-FY2023) and decrease funding in the last five years (-$561 million over FY2024-FY2028). Generally, the 2018 farm bill reallocates mandatory funding within the conservation title among the larger programs. The two largest working lands programs—EQIP and CSP—were reauthorized and amended under the enacted bill, but in different ways. The House-passed bill would have repealed CSP and created a stewardship contract within EQIP, whereas the Senate-passed bill would have reauthorized CSP and reduced program enrollment. The enacted bill creates a mix of both the House- and Senate-passed bills by reauthorizing CSP and reducing program enrollment, as well as creating a new incentive contract within EQIP. Funding for CSP is shifted away from an acreage limitation under prior law to limits based on funding. EQIP is expanded and reauthorized with increased funding levels. The largest land retirement program—CRP—is reauthorized and expanded by increasing the CRP enrollment limit in annual increments from 24 million acres in FY2019 to 27 million by FY2023. To offset this increased enrollment level, the enacted bill reduces payments to participants, including cost-share payments, annual rental payments, and incentive payments. The 2018 farm bill also reauthorized and amended the Agricultural Conservation Easement Program (ACEP). Most of the changes to ACEP focus on the agricultural land easements by providing additional flexibilities to ACEP-eligible entities and authorize an increase in overall funding. The Regional Conservation Partnership Program (RCPP) is reauthorized and amended by shifting the program away from enrolling land through existing conservation programs to a standalone program with separate contracts and agreements. Under the revised program, USDA is to continue to enter into agreements with eligible partners, and these partners are to continue to define the scope and location of a project, provide a portion of the project cost, and work with eligible landowners to enroll in RCPP contracts. While the 2018 farm bill does not create new conservation programs, it does require that a number of existing programs direct a dollar amount or percentage of a program's funding to a resource-specific issue, initiative, or subprogram. Through these directed policies Congress has established a level of support, or required investment, to be carried out through implementation to target specific issues such as nutrient runoff or groundwater protection. The directed policy may also reduce the implementing agency's flexibility to allocate funding based on need, as well as reducing the amount available for activities under the larger program that may not meet a resource-specific provision. High commodity prices in years past, changing land rental rates, and new conservation technologies have led over time to a shift in farm bill conservation policy away from programs that retire land from production (CRP) toward programs that provide assistance to lands still in production (EQIP and CSP). Much of this shift occurred following the 2008 farm bill (FY2009-FY2013) and continued under the 2014 farm bill (FY2014-FY2018) as the level of total mandatory program funding for CRP was reduced relative to EQIP and CSP. Funding for easement programs (ACEP) also declined somewhat under the 2014 farm bill, but is projected to level off under the 2018 farm bill. Partnership program (RCPP) funding has also increased in recent farm bills, but remains relatively small compared to the other categories of programs.", "document_type": "crs"}
{"report": "B anks play a critical role in the United States economy, channeling money from savers to borrowers and facilitating productive investment. Among other things, banks provide loans to businesses, help individuals finance purchases of cars and homes, and offer services such as checking and savings accounts, debit cards, and ATMs. In addition to occupying a central role in the American economy, the banking industry is a perennial subject of political interest. While the nature of lawmakers' interest in bank regulation has shifted over time, most bank regulations fall into one of three general categories. First, banks must abide by a variety of safety-and-soundness requirements designed to minimize the risk of their failure and maintain macroeconomic stability. Second, banks must comply with consumer protection rules intended to deter abusive practices and provide consumers with complete information about financial products and services. Third, banks are subject to various reporting , recordkeeping , and anti-money laundering requirements designed to assist law enforcement in investigating criminal activity. The substantive content of these requirements remains the subject of intense debate. However, the division of regulatory authority over banks between the federal government and the states plays a key role in shaping that content. In some cases, federal law displaces (or \"preempts\") state bank regulations. In other cases, states are permitted to supplement federal regulations with different, sometimes stricter requirements. Because of its substantive implications, federal preemption has recently become a \"flashpoint\" in debates surrounding bank regulation, with one commentator observing that preemption is \"[t]he issue at the center of most disputes between state and federal banking regulators.\" This report provides an overview of banking preemption. First, the report discusses general principles of federal preemption. Second, the report provides a brief history of the American \"dual banking system.\" Third, the report discusses the Supreme Court's decision in Barnett Bank of Marion County, N.A. v. Nelson , where the Court held that federal law preempts state laws that \"significantly interfere\" with the powers of national banks. Fourth, the report reviews two Supreme Court decisions concerning the extent to which states may exercise \"visitorial powers\" over national banks. Fifth, the report discusses the Office of the Comptroller of the Currency's (OCC's) preemption rules and provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning the preemption of state consumer protection laws. Finally, the report outlines a number of current issues in banking preemption, including (1) the extent to which non-banks can benefit from federal preemption of state usury laws, (2) the OCC's decision to grant special purpose national bank charters to financial technology (FinTech) companies, and (3) proposals to provide legal protections to banks serving marijuana businesses that comply with state law. The doctrine of federal preemption is grounded in the Supremacy Clause of Article VI of the Constitution, which provides that \"the Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.\" The Supreme Court has explained that \"under the Supremacy Clause . . . any state law, however clearly within a State's acknowledged power, which interferes with or is contrary to federal law, must yield.\" The Court has identified two general ways in which federal law can preempt state law. Federal law can expressly preempt state law when a federal statute or regulation contains explicit preemptive language—that is, where a clause in the relevant federal statute or regulation explicitly provides that federal law displaces certain categories of state law. The Employee Retirement Income Security Act, for example, contains a preemption clause providing that some of the Act's provisions \"shall supersede any and all State laws insofar as they may now or hereafter relate to any [regulated] employee benefit plan.\" Federal law can also impliedly preempt state law \"when Congress' command is . . . implicitly contained in\" the relevant federal law's \"structure and purpose.\" The Supreme Court has identified two subcategories of implied preemption. First, \"field preemption\" occurs \"where [a] scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.\" Second, \"conflict preemption\" occurs where \"compliance with both federal and state regulations is a physical impossibility,\" or where state law \"stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.\" In Crosby v. National Foreign Trade Council , for example, the Court held that a federal law imposing sanctions on Burma impliedly preempted a Massachusetts law that prohibited state entities from doing business with Burma. The Court reached this conclusion after determining that the state statute posed an obstacle to the federal statute's purposes of (1) providing the President with \"flexible\" authority over sanctions policy, (2) limiting economic pressure against the Burmese government to the specific range reflected in the federal statute, and (3) granting the President the ability to speak for the country \"with one voice.\" Some federal banking laws expressly preempt state law. Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980, for example, expressly grants federally insured state banks the right to charge the highest interest rate allowed by the states in which they are located, even when lending to borrowers in other states with stricter usury laws. Other federal banking laws impliedly preempt state law. Specifically, the Supreme Court has held that the National Bank Act impliedly preempts state laws that \"significantly interfere\" with the powers of national banks. However, all banking preemption issues are heavily influenced by the regulatory architecture surrounding the banking system. The following section of the report accordingly outlines the development of the American \"dual banking system.\" Disputes over the federal government's role in regulating the financial system have been a feature of American politics since the country's inception. In 1791, Congress approved the creation of the First Bank of the United States over fierce opposition from many of the nation's leaders, including James Madison and Thomas Jefferson. In addition to accepting deposits and making loans to the public, the First Bank acted as the federal government's fiscal agent by collecting tax revenues, securing the government's funds, and paying the government's bills. The First Bank's proponents argued that the Bank would facilitate economic growth by extending credit to private businesses and establishing a uniform national currency in the form of the Bank's notes. By contrast, the First Bank's critics argued that the concentration of financial power in a single federal institution threatened state sovereignty and undermined the operations of state-chartered banks. This debate culminated in a victory for the First Bank's critics when Congress refused to renew the Bank's charter by a single vote in 1811. But disputes over the federal government's role in the banking system did not end with the demise of the First Bank. After the War of 1812 generated significant economic turmoil, Congress chartered the Second Bank of the United States for a twenty-year term in 1816. The Second Bank performed many of the same functions as the First Bank and attracted similar criticism, eventually becoming the target of populist fury led by President Andrew Jackson. In 1832, President Jackson vetoed legislation to extend the Second Bank's charter, leading to its demise in 1836. After the Second Bank's charter expired, bank regulation was wholly entrusted to the states. Inspired by the Jacksonian attack on concentrated economic power, a number of states dispensed with the requirement that banks obtain a charter via a special act of the state legislature. Instead, banks in these states could obtain charters from state banking authorities as long as they met certain general conditions. During this \"Free Banking era,\" the country lacked a uniform national currency and relied instead on notes issued by state banks, which circulated at a discount from their face value that reflected the issuing bank's location and credit quality. In some states, so-called \"wildcat banks\" in remote areas issued notes back by minimal specie (gold or silver), assuming that noteholders would be unlikely to travel long distances to redeem them. These wildcat banks failed at a far higher rate than their urban rivals. Economic historians continue to debate the merits and drawbacks of the Free Banking era. According to the standard narrative, Free Banking was largely a failure, resulting in a large number of bank failures, financial instability, and inefficiencies that accompanied a heterogeneous currency. However, a number of revisionist scholars have questioned this assessment, arguing that despite the high rate of bank failures during the Free Banking Era, total losses to bank noteholders during the period were in fact relatively small. Whatever its virtues and vices, the Free Banking Era came to an end during the Civil War. After the Treasury Department's efforts to finance the war by borrowing from Northern banks led to a shortage in specie, Congress enacted the National Currency Act in 1863 and the National Bank Act (NBA) in 1864. Under the Acts, banks were offered the opportunity to apply for a national charter from the newly created OCC, creating a \"dual banking system\" in which both the federal government and the states chartered and regulated banks. As a condition of obtaining a national charter, the Acts required banks to purchase United States government bonds, giving the federal government a new source of revenue to fight the war. Once national banks deposited those bonds with the federal government, they were allowed to issue national banknotes up to 90 percent of the market value of their bonds. These national banknotes functioned as a uniform national currency and gave the federal government significant control over the nation's money supply. The creation of a dual banking system was not intended by the proponents of the NBA, who assumed that all state-chartered banks would convert to national charters. In order to incentivize state-chartered banks to make this switch, Congress enacted a ten percent tax on state banknotes in 1865. But the tax did not accomplish its intended purpose. While the number of state-chartered banks fell significantly after the enactment of the NBA, state banks eventually skirted this tax by issuing paper checks in lieu of banknotes. And in the late 19th century, state banking authorities contributed to this regulatory arbitrage by offering their banks laxer regulations than the OCC. As a result, state-chartered banks have outnumbered national banks since 1895, and the dual banking system has survived to this day. Under the contemporary dual banking system, the OCC serves as the primary regulator of national banks and has broad powers to regulate their organization, examination, and operations. Section 24 of the NBA grants national banks a number of powers, including: (1) \"discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt,\" (2) \"receiving deposits,\" (3) \"buying and selling exchange, coin, and bullion,\" (4) \"loaning money on personal security,\" and (5) \"obtaining, issuing, and circulating notes.\" Section 24 also grants national banks \"all such incidental powers as shall be necessary to carry on the business of banking.\" Federal court and OCC decisions have identified roughly 80 activities that fall within the \"incidental powers\" of national banks, including the ability to broker annuities charge customers non-interest fees. By contrast, state banking authorities are the primary regulators of state-chartered banks. While state banking laws are by no means uniform, they typically provide state-chartered banks with the power to engage in activities similar to those listed in the NBA and activities that are \"incidental to the business of banking.\" While the OCC and state banking authorities figure prominently in the dual banking system, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) also play important roles in the bank regulatory regime. Congress created the Federal Reserve in 1913 in response to a 1907 banking panic that highlighted the need for a \"lender of last resort\" to replenish banks' reserves when they experience liquidity shortfalls. Today, the Federal Reserve also conducts the nation's monetary policy, manages certain elements of the country's payment systems, and regulates bank holding companies, financial market utilities, and banks that join the Federal Reserve System (FRS). The Federal Reserve Act requires all national banks to join the FRS and gives state banks the option of joining. The Federal Reserve accordingly serves as the principal federal regulator of state-chartered banks that become members of the FRS. The FDIC serves as the principal federal regulator of state-chartered banks that do not join the FRS. Congress created the FDIC in 1933 after a wave of bank failures generated a self-reinforcing cycle of \"contagion,\" leading depositors to \"run\" from other banks and cause additional failures. In order to minimize the risk of these types of bank runs, the FDIC insures deposits at regulated institutions up to certain limits and regulates those institutions to ensure their safety and soundness. Because federal law requires national banks to obtain FDIC insurance and all states impose that same requirement on the banks they charter, the FDIC plays a key role in regulating the banking system. This complex regulatory architecture has resulted in \"symbiotic system\" with both state regulation of national banks and federal regulation of state banks. In the modern dual banking system, national banks are not wholly immune from generally applicable state laws, and state banks are not wholly immune from generally applicable federal laws. The Supreme Court has explained that \"general state laws\" concerning \"the dealings and contracts of national banks\" are valid as long as they do not \"expressly conflict\" with federal law, \"frustrate the purpose for which national banks were created,\" or impair the ability of national banks to \"discharge the duties imposed upon them\" by federal law. National banks are accordingly \"governed in their daily course of business far more by the laws of the State than of the nation\" because their contracts, ability to acquire and transfer property, rights to collect debts, and liability to be sued for debts \"are all based on State law.\" The OCC has attempted to synthesize the relevant case law as establishing a general principle that state regulations of national banks are valid as long as they \"do not regulate the manner, content or extent of the activities authorized for national banks under federal law, but rather establish the legal infrastructure around the conduct of that business.\" Similarly, state-chartered banks are not wholly immune from federal law. Rather, state banks are subject to certain federal consumer protection, tax, and antidiscrimination laws, in addition to a range of Federal Reserve and FDIC regulations. A number of other legal developments have caused the regulatory treatment of national banks and state banks to converge. Beginning in the 1960s, many states passed so-called \"wild card\" statutes granting their banks the power to engage in any activities permitted for national banks. Statutes extending the powers of the Federal Reserve and the FDIC have also ensured competitive equality in the opposite direction. In 1980, Congress enacted legislation requiring all state-chartered banks—including those that do not join the FRS—to abide by reserve requirements set by the Federal Reserve, eliminating the competitive advantage conferred by lower state-law reserve requirements. Similarly, in 1991, Congress enacted legislation prohibiting FDIC-insured state banks from engaging as a principal in activities that are not permitted for national banks absent permission from the FDIC. Because all states require the banks they charter to obtain FDIC insurance, the legislation \"had the ultimate effect of unifying the state and the federal banking systems.\" Finally, some federal statutes either explicitly or implicitly preempt state laws in ways that eliminate unequal regulatory treatment for national and state banks. In Marquette National Bank of Minneapolis v. First Omaha Services Corporation , the Supreme Court held that the NBA grants national banks the power to \"export\" the maximum interest rates allowed by their \"home\" states, even when lending to borrowers in other states with stricter usury laws. In that decision, the Court considered whether a national bank headquartered in Nebraska—which permitted banks to charge credit-card holders up to 18 percent interest per year on certain unpaid balances—could charge its Minnesota customers more than the 12 percent maximum interest allowable under Minnesota law. Specifically, the Court evaluated whether an NBA provision allowing national banks to charge interest rates allowed by the states \"where the bank[s] [are] located\" applies even when national banks extend credit to customers in other states with stricter usury laws. The Court held that the NBA provision indeed afforded national banks this power, concluding that the national bank was permitted to charge the maximum interest rate allowable under Nebraska law even when lending to Minnesota customers. Two years after the Marquette decision, Congress enacted legislation to extend the same power to federally insured state banks, preempting contrary state law and equalizing the regulatory treatment of national and state banks vis-à-vis \"interest rate exportation.\" While the regulatory treatment of national and state banks has accordingly converged, federal preemption nevertheless confers certain unique benefits on national banks. Under the Supreme Court's decision in Barnett Bank of Marion County, N.A. v. Nelson , federal laws that grant national banks the power to engage in specific activities impliedly preempt state laws that \"significantly interfere\" with the ability of national banks to engage in those activities. In Barnett Bank , the Court held that a federal law granting national banks the authority to sell insurance impliedly preempted a state law that prohibited banks from selling insurance, subject to certain exceptions. In reaching this conclusion, the Court explained that the state law posed an obstacle to the federal statute's purpose of granting national banks the authority to sell insurance \"whether or not a State grants . . . similar approval.\" The Court inferred this purpose from the principle that \"normally Congress would not want States to forbid, or to impair significantly, the exercise of a power that Congress explicitly granted.\" Lower courts have followed Barnett Bank 's rule that absent indications to the contrary, federal statutes and regulations that grant national banks the power to engage in specific activities preempt state laws that prohibit or \"significantly interfere\" with those activities. In Wells Fargo Bank of Texas N.A. v. James , for example, the Fifth Circuit held that an OCC rule granting national banks the power to \"charge [their] customers non-interest charges and fees\" preempted a state statute prohibiting banks from charging a fee for cashing checks in certain circumstances. Similarly, in Monroe Retail, Inc. v. RBS Citizens, N.A. , the Sixth Circuit held that this rule preempted state law conversion claims brought against a class of national banks based on fees they charged for processing garnishment orders. Specifically, the Sixth Circuit reasoned that under Barnett Bank , \"the level of 'interference' that gives rise to preemption under the NBA is not very high,\" and that the relevant conversion claims \"significantly interfere[d]\" with national banks' ability to collect fees. Finally, the Ninth Circuit employed similar reasoning in Rose v. Chase Bank USA, N.A. , where it held that an NBA provision granting national banks the power to \"loan money on personal security\" preempted a state statute imposing various disclosure requirements on credit card issuers. In arriving at this conclusion, the Ninth Circuit reasoned that \"[w]here . . . Congress has explicitly granted a power to a national bank without any indication that Congress intended for that power to be subject to local restriction, Congress is presumed to have intended to preempt state laws.\" Federal courts have also adopted broad interpretations of an NBA provision authorizing national banks to dismiss officers \"at pleasure.\" In Schweikert v. Bank of America , N.A. , the Fourth Circuit held that this provision preempted a state law claim for wrongful discharge brought by a former officer of a national bank. Similarly, the Ninth Circuit has held that this provision preempted a claim brought by a former officer of a national bank for breach of an employment agreement, reasoning that \"[a]n agreement which attempts to circumvent the complete discretion of a national bank's board of directors to terminate an officer at will is void as against [federal] public policy.\" Finally, in Wiersum v. U.S. Bank, N.A. , the Eleventh Circuit relied on Barnett Bank and the Fourth Circuit's reasoning in Schweikert to conclude that this \"at pleasure\" provision preempted a wrongful-termination claim brought by a former officer of a national bank under a state whistleblower statute. While federal courts have accordingly adopted expansive views of the circumstances in which state laws \"significantly interfere\" with national banks' powers, they have also recognized certain general limits on the preemptive scope of federal banking statutes and regulations. In Gutierrez v. Wells Fargo Bank, NA , for example, the Ninth Circuit held that federal banking regulations did not preempt a generally applicable state law prohibiting certain types of fraud. The Gutierrez litigation involved a national bank's use of a bookkeeping method known as \"high-to-low\" posting for debit-card transactions, whereby the bank posted large transactions to customers' accounts before small transactions. In Gutierrez , customers of the bank brought a variety of state law claims based on the theory that the bank adopted high-to-low posting for the sole purpose of maximizing the overdraft fees it could charge customers. In response, the bank argued that OCC regulations preempted the state law claims. The Ninth Circuit held that the OCC regulations preempted some, but not all, of the customers' claims. Specifically, the court held that an OCC regulation authorizing national banks to establish the method of calculating noninterest charges and fees \"in [their] discretion\" preempted claims premised on the theory that high-to-low posting was an unfair business practice. The court also held an OCC regulation providing that national banks may exercise their deposit-taking powers \"without regard to state law limitations concerning . . . disclosure requirements\" preempted the customers' claims that the bank failed to affirmatively disclose its use of high-to-low posting. However, the court held that federal law did not preempt claims that the bank defrauded its customers by making misleading statements about its posting method. Specifically, the court reasoned that these claims survived preemption because they were based on \"a non-discriminating state law of general applicability that does not conflict with federal law, frustrate the purposes of the [NBA], or impair the efficiency of national banks to discharge their duties.\" In reaching this conclusion, the court rejected the argument that federal law preempted the customers' fraud claims because those claims \"necessarily touche[d] on\" national banks' authority to provide checking accounts. The court rejected this argument on the grounds that such an expansive preemption standard \"would swallow all laws.\" The Ninth Circuit accordingly allowed the customers' fraud claims to proceed because they did not \"significantly interfere\" with national banks' ability to offer checking accounts. While the implications of Barnett Bank have been fleshed out most thoroughly in the lower federal courts, the Supreme Court has also applied that decision's reasoning in two cases concerning an NBA provision prohibiting states from exercising \"visitorial powers\" over national banks. In Watters v. Wachovia Bank, N.A. , the Court held that this provision—together with an OCC regulation providing that national banks may conduct authorized activities through operating subsidiaries—preempted state licensing, reporting, and visitation requirements for the operating subsidiaries of national banks. Specifically, the Court reasoned that the proper inquiry in analyzing whether state law interferes with federally permitted bank activities \"focuse[s] on the exercise of a national bank's powers , not on its corporate structure.\" The Court accordingly concluded that the operating subsidiaries of national banks should be treated \"as equivalent to national banks with respect to powers exercised under federal law.\" And because \"duplicative state examination, supervision, and regulation would significantly burden\" national banks' ability to engage in authorized activities, the Court held that those same regulatory burdens also unacceptably interfere with the ability of national bank subsidiaries to engage in those activities. However, as discussed later in this report, Congress has abrogated Watters 's holding that states may not examine or regulate the activities of national bank subsidiaries. While the Court adopted a broad view of preemption in Watters , it cabined the preemptive effect of the relevant NBA provision two years later in Cuomo v. C learing House Association, LLC. In that decision, the Court held that this NBA provision did not preempt an information request that the New York Attorney General (NYAG) sent to several national banks. Specifically, the NYAG had sent letters to several national banks requesting nonpublic information about their lending practices in order to determine whether the banks had violated state fair lending laws. In response, a banking trade group and the OCC argued that the relevant NBA provision—together with an OCC regulation interpreting that provision to mean that \"[s]tate officials may not . . . prosecut[e] enforcement actions\" against national banks, \"except in limited circumstances authorized by federal law\"—preempted the information request. The Supreme Court rejected this interpretation of the NBA's visitorial powers provision, drawing a distinction between (1) \"supervision,\" or \"the right to oversee corporate affairs,\" which qualify as \"visitorial powers,\" and (2) \"law enforcement.\" Because the Court concluded that the NYAG had issued the information requests in his \"law enforcement\" capacity—as opposed to \"acting in the role of sovereign-as-supervisor\"—it held that the NBA did not preempt the requests. As the above discussion makes clear, OCC regulations have figured prominently in litigation over the preemptive scope of federal banking law. While some commentators have contended that the NBA's text and legislature history implicitly provides the OCC with the authority to promulgate preemption rules, Congress formally recognized that the OCC has such authority in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Riegle-Neal Act). Specifically, Section 114 of the Riegle-Neal Act provides that \"[b]efore issuing any opinion letter or interpretive rule . . . that concludes that Federal law preempts the application to a national bank of any State law\" concerning certain specified subjects, the OCC must give the public notice and an opportunity submit written comments. In the 1990s and early 2000s, the OCC exercised this authority in a number of interpretive letters and legal opinions. In these documents, the OCC took the position that federal law preempted state laws that limited the ability of national banks to: advertise; operate offices within a certain distance from state-chartered bank home offices; operate ATM machines; engage in fiduciary activities; finance automobile purchases; sell annuities; sell repossessed automobiles without an automobile dealer license; and conduct Internet auctions of certificates of deposit. In 2004, the OCC expanded upon these interpretive letters and legal opinions by issuing what one commentator has described as \"sweeping\" preemption rules. The OCC's 2004 preemption rules articulated a general preemption standard according to which \"state laws that obstruct, impair, or condition a national bank's ability to fully exercise\" its federally authorized powers \"are not applicable to national banks\" except \"where made applicable by Federal law.\" This general standard accordingly expanded on Barnett Bank 's \"significant interference\" test in two ways. First, the OCC's 2004 standard omitted the intensifying phrase \"significantly\" from the Barnett Bank test. Second, the 2004 standard by its terms required that national banks be able to \"fully\" exercise their authorized powers—a phrase that does not appear in Barnett Bank . However, despite these facial differences with the Barnett Bank test, the OCC explained that it intended the phrase \"obstruct, impair, or condition\" to function \"as the distillation of the various preemption constructs articulated by the Supreme Court, as recognized in Hines [ v. Davidowitz ] and Barnett Bank , and not as a replacement construct that is in any way inconsistent with those standards.\" Beyond this general preemption standard, the OCC's 2004 rules concluded that the NBA preempted certain categories of state laws. First, the rules provided that national banks \"may make real estate loans . . . without regard to state law limitations concerning\": licensing and registration (except for purposes of service of process); \"[t]he ability of a creditor to require or obtain private mortgage insurance, insurance for other collateral, or other credit enhancements or risk mitigants, in furtherance of safe and sound banking practices\"; loan-to-value ratios; terms of credit; \"[t]he aggregate amount of funds that may be loaned upon the security of real estate\"; escrow accounts; security property; access to and use of credit reports; disclosure and advertising; processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages; disbursements and repayments; rates of interest on loans; due-on-sale clauses, with certain exceptions; and \"[c]ovenants and restrictions that must be contained in a lease to qualify the leasehold as acceptable security for a real estate loan.\" Second, the rules provided that national banks \"may make non-real estate loans without regard to state law limitations concerning\" many of the same matters identified in the regulation concerning real estate lending. Finally, the rules provided that national banks \"may exercise [their] deposit-taking powers without regard to state law limitations concerning\": (1) abandoned and dormant accounts, (2) checking accounts, (3) disclosure requirements, (3) funds availability, (4) savings account orders of withdrawal, (5) state licensing or registration requirements (except for purposes of service of process), and (6) special purpose savings services. The OCC's 2004 rules also identified general categories of state law that the agency interpreted as surviving preemption. Specifically, the rules provided that the NBA does not preempt state laws that are consistent with federal law and involve (1) contracts, (2) torts, (3) criminal law, (4) rights to collect debts, (5) the acquisition and transfer of property, (5) taxation, (6) zoning, and, with respect to real estate lending, (7) certain homestead laws. According to the OCC's 2004 rules, such laws survive preemption so long as they \"do not regulate the manner, content or extent of the activities authorized for national banks under federal law.\" The OCC's 2004 preemption rules proved controversial. In 2008, the United States experienced a financial crisis caused in part by reckless subprime mortgage lending and a collapse in the real estate market. In the wake of the crisis, commentators debated the role that federal preemption of state predatory lending laws played in generating the pre-2008 housing bubble. Some commentators contended that national banks played a significant role in the predatory lending that preceded the crisis, and that federal preemption \"effectively gut[ted] states' ability to legislate against predatory lending practices.\" By contrast, others rejected the contention that preemption played a significant role in causing the crisis, arguing that national banks and their subsidiaries accounted for only a small share of subprime mortgage lending. In 2010, Congress responded to concerns over federal preemption of state consumer protection laws in Section 1044 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Section 1044 provides that federal law preempts such laws only if: (A) application of a State consumer financial law would have a discriminatory effect on national banks, in comparison with the effect of the law on a bank chartered by that State; (B) in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in [ Barnett Bank ], the State consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers; and any preemption determination under this subparagraph may be made by a court, or by regulation or order of the Comptroller of the Currency on a case-by-case basis, in accordance with applicable law; or (C) the State consumer financial law is preempted by a provision of Federal law other than title 62 of the Revised Statutes. Beyond this general preemption standard, Section 1044 contains a number of other provisions narrowing the OCC's preemption authority. First, Section 1044 provides that courts reviewing OCC preemption determinations should accord those determinations only Skidmore deference, under which courts assess an agency's interpretation of a statute \"depending upon the thoroughness evident in the consideration of the agency, the validity of the reasoning of the agency, the consistency with other valid determinations made by the agency, and other factors which the court finds persuasive and relevant to its decision.\" Before the enactment of Dodd-Frank, certain courts had afforded OCC preemption determinations a more permissive form of deference known as Chevron deference, according to which courts defer to agency interpretations as long as they are reasonable. Section 1044 accordingly requires that courts take a less deferential posture toward OCC preemption determinations. Second, Section 1044 provides that no OCC preemption determination \"shall be interpreted or applied so as to invalidate, or otherwise declare inapplicable to a national bank, the provision of the State consumer financial law, unless substantial evidence, made on the record of the proceeding, supports the specific finding regarding the preemption of such provision in accordance with the legal standard\" established by Barnett Bank . This \"substantial evidence\" standard is often used in cases involving the Administrative Procedure Act, which provides that courts shall hold unlawful an agency's formal rules and other determinations made on the basis of a formal hearing when they are \"unsupported by substantial evidence.\" The Supreme Court has explained that \"substantial evidence\" entails \"more than a mere scintilla\" of evidence, and requires \"such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.\" Third, Section 1044 provides that the OCC shall (1) \"periodically conduct a review, through public notice and comment, of each determination that a provision of Federal law preempts a State consumer financial law,\" (2) \"conduct such review within the 5-year period after prescribing or otherwise issuing such determination, and at least once during each 5-year period thereafter,\" and (3) \"[a]fter conducting the review of, and inspecting the comments made on, the determination, . . . publish a notice in the Federal Register announcing the decision to continue or rescind the determination or a proposal to amend the determination.\" Fourth, Section 1044 provides that the OCC must submit to Congress a report addressing its decision to continue, rescind, or propose an amendment to any preemption determination. Finally, Section 1044 abrogated the Supreme Court's decision in Watters , providing that \"State consumer financial laws\" apply to the subsidiaries and affiliates of national banks \"to the same extent\" that they apply \"to any person, corporation, or other entity subject to such State law.\" After Dodd-Frank's enactment, commentators debated the meaning of Section 1044's general preemption standard. As discussed, Section 1044's preemption standard provides that federal law preempts \"State consumer financial laws\" that \"prevent[] or significantly interfere[]\" with the powers of national banks \"in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in [ Barnett Bank ].\" Some commentators have argued that this language simply codifies the Barnett Bank standard and was not intended to significantly modify pre-existing law. However, others have argued that Section 1044 was intended to pare back the OCC's 2004 preemption rules, which interpreted the NBA as preempting state laws that \"obstruct, impair, or condition\" the powers of national banks. According to this latter group of commentators, the OCC's \"obstruct, impair, or condition\" standard was more expansive than Barnett Bank 's \"significant interference\" test, meaning that a codification of that test would modify pre-existing law. In 2011, the OCC responded to the enactment of Section 1044 by issuing a notice of proposed rulemaking that reaffirmed its pre-Dodd-Frank preemption decisions while deleting the \"obstruct, impair, or condition\" language from its preemption rules. While the OCC acknowledged that this language \"created ambiguities and misunderstandings regarding the preemption standard that it was intended to convey,\" it maintained that the specific preemption determinations reflected in its 2004 rules were nevertheless consistent with Barnett Bank . The OCC accordingly proposed reaffirming the specific preemption determinations in its 2004 rules while removing the \"obstruct, impair, or condition\" standard. The OCC's proposal quickly generated controversy. After the OCC issued the notice, the Treasury Department's General Counsel wrote a letter to the Comptroller of the Currency arguing that the OCC's proposed rule was \"inconsistent with the plain language of [Dodd-Frank] and its legislative history.\" Specifically, the Treasury Department argued that interpreting Section 1044 as making no significant changes to existing preemption law conflicted with \"basic canons of statutory construction\" and legislative history indicating that the provision was intended to \"revise[]\" the OCC's preemption standard. Senator Carl Levin also expressed disagreement with the proposed rules in a letter to the Comptroller, arguing that \"[i]f [Congress] had wanted to leave the OCC's purported federal preemptive powers unchanged, [it] could have engaged in a very simple exercise—do nothing.\" Other Senators expressed support for the OCC's proposed rules. Senators Tom Carper and Mark Warner criticized the Treasury Department's letter for \"ignor[ing] the clear legislative history indicating that [Section 1044] is intended to codify the Barnett case.\" In responding to the Treasury Department's argument that Section 1044 was intended to \"revise\" the OCC's preemption standards, Senators Carper and Warner argued that the OCC's proposed rules would effectuate the contemplated revision by removing the potentially troublesome \"obstruct, impair, or condition\" language from the agency's 2004 rules. The OCC ultimately agreed with Senators Carper and Warner. In July 2011, the OCC published a final regulation revising its preemption rules. In the final rule, the OCC concluded that \"the Dodd-Frank Act does not create a new, stand-alone 'prevents or significantly interferes' preemption standard, but, rather, incorporates the conflict preemption legal standard and the reasoning that supports it in the Supreme Court's Barnett decision.\" The OCC's 2011 rule also deleted the phrase \"obstruct, impair, or condition\" from the relevant preemption standard, noting that preemption determinations based \"exclusively\" on that language \"would need to be reexamined to ascertain whether the determination is consistent with the Barnett conflict preemption analysis.\" However, the rule indicated that the OCC had not identified any preemption determinations that in fact relied \"exclusively\" on the relevant language. The final rule also noted that all future OCC preemption determinations would be subject to Section 1044's requirement concerning \"case-by-case\" determinations. Since the enactment of Dodd-Frank, a number of courts have interpreted Section 1044 as codifying the Barnett Bank standard. Some courts have accordingly concluded that Barnett Bank demarcates the boundaries of the OCC's 2011 preemption rules, reasoning that those rules do not preempt any state laws that would survive preemption under the Barnett Bank test. One court has also addressed the appropriate level of judicial deference towards the OCC's 2011 preemption determinations. As discussed, Section 1044 provides that courts \"shall\" assess OCC preemption determinations \"depending upon the thoroughness evident in the consideration of the agency, the validity of the reasoning of the agency, the consistency with other valid determinations made by the agency, and other factors which the court finds persuasive and relevant to its decision\"—a standard commonly known as \" Skidmore deference.\" In 2018, the Ninth Circuit concluded that the OCC's 2011 preemption determinations are \"entitled to little, if any, deference\" under Skidmore . Specifically, the Ninth Circuit reasoned that because the OCC's 2011 preemption determinations represent the agency's \"articulation of its legal analysis\" under Barnett Bank (as opposed to being grounded in expert factual findings), those determinations would not warrant significant deference even in the absence of Section 1044. Whether other federal circuit courts will follow the Ninth Circuit in affording minimal deference to the OCC's 2011 preemption rules remains to be seen. As the debates over Section 1044 of Dodd-Frank make clear, a number of banking preemption issues remain the subject of active debate. This final section of the report discusses three additional current issues involving banking preemption and related federalism questions. A number of recent judicial decisions have generated debate over the circumstances in which non-bank financial companies can benefit from banks' ability to \"export\" the maximum interest rates of their \"home\" states. As discussed, the Supreme Court has held that national banks may charge any interest rate allowable under the laws of their home states even when lending to borrowers in other states with stricter usury laws. After this decision, Congress extended the power to export maximum interest rates to federally insured state banks. Recently, courts have grappled with whether this exportation power extends to non-bank financial companies and debt collectors that purchase loans originated by federally insured banks. That is, courts have addressed the circumstances in which loans originated by federally insured banks remain subject to the usury laws of the banks' home states even when the loans are (1) made to borrowers in other states with stricter usury laws, and (2) subsequently purchased by non-banks, which do not possess the exportation power when they originate loans themselves. A number of courts have concluded that in certain contexts, a loan that is non-usurious when originated remains non-usurious irrespective of the identity of its subsequent purchasers—a principle that some commentators have labeled the \"valid when made\" doctrine. However, in 2015, the Second Circuit rejected the application of this rule in Madden v. Midland Funding , holding that non-bank debt collectors that had purchased debt originated by a national bank could not benefit from the bank's exportation power. In Madden , a New York resident brought a putative class action under New York usury law against debt collectors that had purchased her credit card debt from a Delaware-based national bank. In response, the debt collectors argued that federal law preempted the New York usury claims because the credit card debt had been originated by a Delaware-based national bank and was not usurious under Delaware law. The Second Circuit rejected this argument, reasoning that the application of New York usury law to the debt collectors did not \"significantly interfere\" with the national bank's powers under Barnett Bank . Specifically, the court reasoned that because the debt collectors were not national banks and were not acting \"on behalf of\" a national bank, the New York usury claims did not interfere with the national bank's power to export the maximum interest rates of its home state. The Second Circuit's decision in Madden has generated significant debate. In an amicus brief supporting the debt collectors' petition for re-hearing before the Second Circuit, industry groups argued that the decision threatened to seriously disrupt lending markets. Specifically, these groups argued that the court's decision would \"significantly impair\" banks' ability to manage their risk by selling loans in secondary credit markets—a result that would ultimately inhibit their capacity to originate loans. Similarly, in an amicus brief submitted to the Supreme Court, the OCC and the Office of the Solicitor General (OSG) argued that the Second Circuit's decision was \"incorrect,\" reasoning that \"[a] national bank's federal right to charge interest up to the rate allowed by [the NBA] would be significantly impaired if [a] national bank's assignee could not continue to charge that rate.\" In response, the plaintiff in Madden argued that the Second Circuit's decision is unlikely to significantly affect credit markets. Specifically, the Madden plaintiff argued that the court's decision will not disrupt credit markets because non-banks that purchase loans originated by banks retain the right to collect the balances of those loans within applicable state law usury limits. While the Second Circuit ultimately denied the debt collectors' petition for re-hearing and the Supreme Court denied their petition for a writ of certiorari, the Madden decision has attracted congressional interest. The Financial CHOICE Act—comprehensive regulatory reform legislation that passed the House of Representatives in June 2017 but did not become law—would have codified the \"valid when made\" doctrine and abrogated Madden . A more limited bill directed solely at codifying the \"valid when made\" doctrine ( H.R. 3299 ) also passed the House in February 2018 but did not become law. Echoing the arguments made by industry groups, the bill's sponsor contended that the Second Circuit's decision will harm credit markets and impede financial innovation. By contrast, the bill's critics argued that it would facilitate predatory lending by allowing non-banks to evade state usury laws. These proposals have not been re-introduced in the 116th Congress. In a number of cases involving the scope of the exportation doctrine, non-bank financial companies have played a more active role in the origination process than the debt collectors in Madden . Specifically, a number of these cases have involved arrangements in which a non-bank financial company solicits borrowers, directs a partner bank to originate a high-interest loan, and purchases the loan from the bank shortly after origination in order to benefit from the bank's exportation power. Some courts have held that non-banks employing these so-called \"rent-a-charter\" schemes are not eligible for federal preemption, reasoning that preemption depends on a transaction's economic realities rather than its formal characteristics. Specifically, these courts have concluded that non-banks do not assume their partner banks' exportation power when the economic realities surrounding a transaction indicate that the non-banks are the \"true lenders.\" According to this \"true lender\" doctrine, non-banks that have established these types of relationships qualify as the \"true lenders\" when they possess the \"predominant economic interest\" in the relevant loans when the loans are originated. In these circumstances, some courts have concluded that the non-banks are not entitled to the benefits of federal preemption. Like the Second Circuit's decision in Madden , these \"true lender\" decisions have attracted Congress's attention. In the 115th Congress, H.R. 4439 would have abrogated this line of decisions by making clear that a loan's originator is always the \"true lender\" for purposes of the exportation doctrine. The bill's supporters argued that the \"true lender\" decisions threaten to undermine partnerships between banks and FinTech companies —a broad category of businesses offering digital financial products that some commentators have hailed for their innovative potential. The bill's opponents, by contrast, contended that the legislation would allow non-banks to circumvent state usury laws and questioned the value of bank-FinTech partnerships designed with that purpose in mind. H.R. 4439 was referred to the House Committee on Financial Services during the 115th Congress but has not been re-introduced in the 116th Congress. Congress is not alone in considering whether to extend the benefits of federal preemption to FinTech companies. In July 2018, the OCC issued a Policy Statement announcing that it will begin accepting applications for \"special purpose national bank charters\" (SPNB charters) from FinTech companies that are engaged in \"the business of banking\" but do not take deposits. In the Policy Statement, the OCC explained that the NBA provides it \"broad authority\" to grant national bank charters to institutions that engage in the \"business of banking\"—a category that includes paying checks and lending money. The OCC accordingly concluded that it has the statutory authority to grant national bank charters to FinTech companies that engage in these core banking activities. According to the OCC, SPNB charters will help foster responsible innovation and promote regulatory consistency between FinTech companies and traditional banks. The OCC further explained that it will use its existing chartering standards and procedures to evaluate applications for SPNB charters, and that FinTech companies that receive such charters \"will be supervised like similarly situated national banks, including with respect to capital, liquidity, and risk management.\" While the OCC touted the ability of SPNB charters to \"level the playing field with regulated institutions\" without explicitly mentioning federal preemption, commentators have observed that preemption represents \"the central benefit\" offered by such charters. The OCC's decision to accept applications for national bank charters from FinTech companies has generated debate. Critics of the policy have contended that FinTech companies' interest in such charters \"is virtually entirely about avoiding state consumer protection laws,\" and that \"[f]ederal chartering should not be a move to eviscerate\" such laws. State regulators have also filed lawsuits challenging the OCC's authority to charter non-depository FinTech companies. In the spring of 2017, the Conference of State Bank Supervisors (CSBS) and the New York Department of Financial Services (NYDFS) responded to an early OCC proposal to charter FinTech companies by filing suits in the U.S. District Court for the District of Columbia and the U.S. District Court for the Southern District of New York, respectively. The CSBS and NYDFS made substantially similar claims, arguing that (1) the NBA does not give the OCC the authority to charter non-depository institutions, (2) the Administrative Procedure Act requires the OCC to follow notice-and-comment rulemaking procedures before issuing SPNBs, (3) the OCC's decision was arbitrary and capricious, and (4) the OCC's decision violated the Tenth Amendment by invading states' sovereign powers. Both district courts dismissed the lawsuits on jurisdictional grounds, reasoning that the organizations failed to identify any imminent injuries to their members and that the case was not ripe for resolution because the OCC had not issued any SPNBs. However, after the OCC issued its Policy Statement in July 2018, both organizations filed new lawsuits that remain pending. Policymakers have also turned their attention to how federal law affects traditional banks' responses to changes in state law—namely, state-level efforts to legalize marijuana. While a number of states have legalized marijuana for medical or recreational use, federal law criminalizes the drug's sale, distribution, and possession, in addition to the aiding and abetting of such activities. Federal law also criminalizes money laundering, making it unlawful to: conduct a financial transaction involving the proceeds of a specified unlawful activity —a category that includes the sale or distribution of marijuana—\"knowing that the transaction is designed . . . to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds . . . or to avoid a transaction reporting requirement under State or Federal law\"; or knowingly engage in a monetary transaction in criminally derived property of a value greater than $10,000 that is derived from specified unlawful activity . Finally, the Bank Secrecy Act (BSA) and associated regulations require that financial institutions report illegal and suspicious activities to the Financial Crimes Enforcement Network (FinCEN) and maintain programs designed to prevent money laundering. Federal banking regulators have broad powers to discipline banks for violations of these laws. The Federal Reserve regularly conducts examinations of member banks that include evaluations of BSA compliance, and the FDIC has the authority to terminate a bank's deposit insurance for violations of law. Because of marijuana's status under federal law, many banks have refused to serve marijuana businesses even when those businesses operate in compliance with state law. While some small banks have offered accounts to marijuana businesses, an estimated 70 percent of marijuana businesses remain unbanked. Because of this inability to access the banking system, many marijuana businesses reportedly operate entirely in cash, raising concerns about tax collection and public safety. These perceived problems have attracted congressional interest. In March 2019, the House Committee on Financial Services approved legislation intended to minimize the legal risks associated with banking the marijuana industry. The proposed bill— H.R. 1595 , the SAFE Banking Act of 2019—would create a \"safe harbor\" under which federal banking regulators could not take various adverse actions against depository institutions for serving marijuana businesses that comply with applicable state laws (\"cannabis-related legitimate businesses\"). The legislation would also provide that for purposes of federal anti-money laundering law, the proceeds from transactions conducted by cannabis-related legitimate businesses shall not qualify as the proceeds of unlawful activity \"solely because the transaction[s] [were] conducted by a cannabis-related legitimate business.\" Finally, H.R. 1595 would require FinCEN to issue guidance concerning the preparation of suspicious activity reports for cannabis-related legitimate businesses that is \"consistent with the purpose and intent\" of the bill and \"does not significantly inhibit the provision of financial services\" to cannabis-related legitimate businesses. Variations on some of the SAFE Banking Act's provisions have been incorporated into broader marijuana-related legislation. The Responsibly Addressing Marijuana Policy Gap Act of 2019 ( S. 421 and H.R. 1119 ) would eliminate federal criminal penalties for persons who engage in various marijuana-related activities in compliance with state law and create a \"safe harbor\" from adverse regulatory action for depository institutions that serve marijuana businesses. Another Senate bill— S. 1028 , the STATES Act—would provide that the Controlled Substances Act's (CSA's) marijuana-related provisions do not apply to persons acting in compliance with state marijuana regulation s, subject to certain exceptions. While the bill does not have the type of \"safe harbor\" for depository institutions in H.R. 1595 , S. 421 , or H.R. 1119 , it contains a \"Rule of Construction\" clarifying that conduct in compliance with the legislation shall not serve as the basis for federal money laundering charges or criminal forfeiture under the CSA.", "summary": "Banks play a critical role in the United States economy, channeling money from savers to borrowers and facilitating productive investment. While the nature of lawmakers' interest in bank regulation has shifted over time, most bank regulations fall into one of three general categories. First, banks must abide by a variety of safety-and-soundness requirements designed to minimize the risk of their failure and maintain macroeconomic stability. Second, banks must comply with consumer protection rules intended to deter abusive practices and provide consumers with complete information about financial products and services. Third, banks are subject to various reporting, recordkeeping, and anti-money laundering requirements designed to assist law enforcement in investigating criminal activity. The substantive content of these requirements remains the subject of intense debate. However, the division of regulatory authority over banks between the federal government and the states plays a key role in shaping that content. In some cases, federal law displaces (or \"preempts\") state bank regulations. In other cases, states are permitted to supplement federal regulations with different, sometimes stricter requirements. Because of its substantive implications, federal preemption has recently become a flashpoint in debates surrounding bank regulation. In the American \"dual banking system,\" banks can apply for a national charter from the Office of the Comptroller of the Currency (OCC) or a state charter from a state's banking authority. A bank's choice of chartering authority is also a choice of primary regulator, as the OCC serves as the primary regulator of national banks and state regulatory agencies serve as the primary regulators of state-chartered banks. However, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) also play an important role in bank regulation. The Federal Reserve supervises all national banks and state-chartered banks that become members of the Federal Reserve System (FRS), while the FDIC supervises all state banks that do not become members of the FRS. This complex regulatory architecture has resulted in a \"symbiotic system\" with both federal regulation of state banks and state regulation of national banks. In the modern dual banking system, national banks are often subject to generally applicable state laws, and state banks are subject to both generally applicable federal laws and regulations imposed by their federal regulators. The evolution of this system during the 20th century caused the regulation of national banks and state banks to converge in a number of important ways. However, despite this convergence, federal preemption provides national banks with certain unique advantages. In Barnett Bank of Marion County, N.A. v. Nelson, the Supreme Court held that the National Bank Act (NBA) preempts state laws that \"significantly interfere\" with the powers of national banks. The Court has also issued two decisions on the preemptive scope of a provision of the NBA limiting states' \"visitorial powers\" over national banks. Finally, OCC rules have taken a broad view of the preemptive effects of the NBA, limiting the ways in which states can regulate national banks. Courts, regulators, and legislators have recently confronted a number of issues involving banking preemption and related federalism questions. Specifically, Congress has considered legislation that would overturn a line of judicial decisions concerning the circumstances in which non-banks can benefit from federal preemption of state usury laws. The OCC has also announced its intention to grant national bank charters to certain financial technology (FinTech) companies—a decision that is currently being litigated. Finally, Congress has recently turned its attention to the banking industry's response to state efforts to legalize and regulate marijuana.", "document_type": "crs"}
{"report": "This report focuses on FY2019 discretionary appropriations for Interior, Environment, and Related Agencies. At issue for Congress were determining the amount of funding for agencies and programs in the bill, and the terms and conditions of such funding. This report first presents a short overview of the agencies and other entities funded in the bill. It then describes the appropriations requested by President Trump for FY2019 for Interior, Environment, and Related Agencies. Next, it briefly compares the appropriations enacted for FY2018 with the FY2019 appropriations requested by the President; passed by the House in H.R. 6147 (115 th Congress) on July 19, 2018; passed by the Senate, also in H.R. 6147 (115 th Congress) on August 1, 2018; and enacted in Division E of P.L. 116-6 on February 15, 2019. Finally, this report compares FY2018 and FY2019 funding for several agencies and issues that have been among those of interest to Congress. They include the Bureau of Land Management, Environmental Protection Agency (EPA), U.S. Fish and Wildlife Service, Forest Service, Indian Affairs, Indian Health Service, Land and Water Conservation Fund, National Park Service, Payments in Lieu of Taxes Program, Smithsonian Institution, U.S. Geological Survey, and Wildland Fire Management. For FY2019, the enacted appropriation for Interior, Environment, and Related Agencies was $35.61 billion. This total was composed of $13.02 billion for DOI agencies in Title I, $8.06 billion for EPA in Title II, $13.74 billion for \"Related Agencies\" in Title III, and $791.0 million in Title IV for certain activities of EPA. The FY2019 appropriation was $300.0 million (0.8%) more than the FY2018 regular appropriation of $35.31 billion, but $975.4 million (2.7%) less than the FY2018 total appropriation of $36.59 billion, including $1.28 billion in emergency supplemental appropriations for disaster relief. The FY2019 appropriation was $7.28 billion (25.7%) more than the President's request ($28.34 billion), $305.5 million (0.9%) more than the level passed by the House ($35.31 billion), and $301.0 million (0.8%) less than the level passed by the Senate ($35.91 billion). Because the FY2019 appropriation was not enacted until February 15, 2019, Interior, Environment, and Related Agencies received continuing appropriations for certain periods before that date. Specifically, from the start of the fiscal year on October 1, 2018, through December 21, 2018, continuing appropriations were provided at the FY2018 level (in Division G of P.L. 115-141 ). The continuing resolution (CR) generally provided funds for continuing projects and activities under the same authority and conditions and to the same extent and manner as for FY2018. However, the CR included certain exceptions (\"anomalies\") that changed the purposes or amounts of funds, extended expiring provisions of law, or made other changes to existing law. The CR expired after December 21, 2018, before being extended on January 25, 2019, through February 15, 2019. As a result of the lapse in funds, a partial government shutdown went into effect between December 22, 2018, and January 25, 2019. During that time, agencies in the Interior bill generally operated under \"contingency\" plans that summarize activities that would cease and activities that would continue during a lapse in appropriations. In the 116 th Congress, the House and Senate considered a variety of measures to provide FY2019 funding to Interior, Environment, and Related Agencies. Other than H.J.Res. 31 , enacted as P.L. 116-6 and containing regular FY2019 appropriations, these measures are not discussed in this report. They included proposals for relatively short-term as well as full-year funding, and are identified on the CRS Appropriations Status Table at http://www.crs.gov/AppropriationsStatusTable/Index . Appropriations are complex. Budget justifications for some agencies are large, often several hundred pages long and containing numerous funding, programmatic, and legislative changes for congressional consideration. Further, appropriations laws provide funds for numerous accounts, activities, and subactivities, and the accompanying explanatory statements provide additional directives and other important information. This report generally does not provide in-depth information at the account and subaccount levels, nor does it detail budgetary reorganizations or legislative changes enacted in law or proposed for FY2019. For information on a particular agency or on individual accounts, programs, or activities administered by a particular agency, contact the key policy staff listed at the end of this report. In addition, for selected reports related to appropriations for Interior, Environment, and Related Agencies, such as individual agencies (e.g., National Park Service) or cross-cutting programs (e.g., Wildland Fire Management), see the \"Interior & Environment Appropriations\" subissue under the \"Appropriations\" Issue Area page on the Congressional Research Service (CRS) website. The annual Interior, Environment, and Related Agencies appropriations bill includes funding and other provisions for agencies and programs in three separate federal departments and for numerous related agencies. The Interior bill typically contains three primary appropriations titles and a fourth title with general provisions. Title I provides funding for most Department of the Interior (DOI) agencies, many of which manage land and other natural resource or regulatory programs. Title I also typically includes general provisions related to DOI agencies. Title II contains appropriations and administrative provisions for EPA. Title III, Related Agencies, currently funds 23 agencies in other departments, such as the Forest Service in the Department of Agriculture and the Indian Health Service in the Department of Health and Human Services; arts and cultural agencies, including the Smithsonian Institution; and various other organizations and entities. Title III also contains administrative provisions for some agencies funded therein. A fourth title of the bill, General Provisions, typically contains additional guidance and direction for agencies in the bill. In addition, in the FY2018 appropriations law and the House-passed, Senate-passed, and enacted measures for FY2019, Title IV also included appropriations, primarily for EPA. Selected major agencies in the Interior bill are briefly described below. DOI's mission is to protect and manage the nation's natural resources and cultural heritage; provide scientific and other information about those resources and natural hazards; and exercise trust responsibilities and other commitments to American Indians, Alaska Natives, and affiliated island communities. There are eight DOI agencies and two other broad accounts funded in the Interior bill that carry out this mission. Hereinafter, these agencies and broad accounts are referred to collectively as the 10 DOI \"agencies.\" Not including the two broad accounts, the DOI agencies funded in the Interior bill include the following: The Bureau of Land Management administers about 246 million acres of public land, mostly in the West, for diverse uses such as energy and mineral development, livestock grazing, recreation, and preservation. The agency also is responsible for about 700 million acres of federal onshore subsurface mineral estate throughout the nation and supervises the mineral operations on about 56 million acres of Indian trust lands. The U.S. F ish and Wildlife Service administers 89 million acres of federal land within the National Wildlife Refuge System and other areas, including 77 million acres in Alaska. It also manages several large marine refuges and marine national monuments, sometimes jointly with other federal agencies. In addition, the U.S. Fish and Wildlife Service is the primary agency responsible for implementing the Endangered Species Act (16 U.S.C. §§1531 et seq.) through listing of species; consulting with other federal agencies; collaborating with private entities and state, tribal, and local governments; and other measures. It is also the primary agency responsible for promoting wildlife habitat; enforcing federal wildlife laws; supporting wildlife and ecosystem science; conserving migratory birds; administering grants to aid state fish and wildlife programs; and coordinating with state, international, and other federal agencies on fish and wildlife issues. The National Park Service administers 80 million acres of federal land within the National Park System, including 419 separate units in the 50 states, District of Columbia, and U.S. territories. Roughly two-thirds of the system's lands are in Alaska. The National Park Service has a dual mission—to preserve unique resources and to provide for their enjoyment by the public. The agency also supports and promotes some resource conservation activities outside the National Park System through grant and technical assistance programs and cooperation with partners. The U.S. Geological Survey is a science agency that provides physical and biological information related to geological resources; climate and land use change; natural hazards; and energy, mineral, water, and biological sciences and resources. In addition, it is the federal government's principal civilian mapping agency and a primary source of data on the quality of the nation's water resources. The Bureau of Ocean Energy Management manages development of the nation's offshore conventional and renewable energy resources in the Atlantic, the Pacific, the Gulf of Mexico, and the Arctic. These resources are located in areas covering approximately 1.7 billion acres located beyond state waters, mostly in the Alaska region (more than 1 billion acres) but also off all coastal states. The Bureau of Safety and Environmental Enforcement provides regulatory and safety oversight for resource development in the outer continental shelf. Among its responsibilities are oil and gas permitting, facility inspections, environmental compliance, and oil spill response planning. The Office of Surface Mining Reclamation and Enforcement works with states and tribes to reclaim abandoned coal mining sites. The agency also regulates active coal mining sites to minimize environmental impacts during mining and to reclaim affected lands and waters after mining. Indian Affairs agencies provide and fund a variety of services to federally recognized American Indian and Alaska Native tribes and their members. Historically, these agencies have taken the lead in federal dealings with tribes. The Bureau of Indian Affairs is responsible for programs that include government operations, courts, law enforcement, fire protection, social programs, roads, economic development, employment assistance, housing repair, irrigation, dams, Indian rights protection, implementation of land and water settlements, and management of trust assets (real estate and natural resources). The Bureau of Indian Education funds an elementary and secondary school system, institutions of higher education, and other educational programs. EPA has no organic statute establishing an overall mission; rather, the agency administers various environmental statutes, which have an express or general objective to protect human health and the environment. Primary responsibilities include the implementation of federal statutes regulating air quality, water quality, drinking water safety, pesticides, toxic substances, management and disposal of solid and hazardous wastes, and cleanup of environmental contamination. EPA also awards grants to assist states and local governments in implementing federal law and complying with federal requirements to control pollution. The agency also administers programs that provide financial assistance for public wastewater and drinking water infrastructure projects. Title III of the Interior bill currently funds 23 agencies, organizations, and other entities, which are collectively referred to hereinafter as the \"Related Agencies.\" Among the Related Agencies funded in the Interior bill, roughly 95% of the funding is typically provided to the following: The Forest Service in the Department of Agriculture manages 193 million acres of federal land within the National Forest System—consisting of national forests, national grasslands, and other areas—in 43 states, the Commonwealth of Puerto Rico, and the Virgin Islands. It also provides technical and financial assistance to states, tribes, and private forest landowners and conducts research on sustaining forest resources for future generations. The Indian Health Service in the Department of Health and Human Services provides medical and environmental health services for more than 2 million American Indians and Alaska Natives. Health care is provided through a system of facilities and programs operated by the agency, tribes and tribal organizations, and urban Indian organizations. The agency operates 26 hospitals, 57 health centers, and 21 health stations. Tribes and tribal organizations, through Indian Health Service contracts and compacts, operate another 22 hospitals, 286 health centers, 62 health stations, and 134 Alaska Native village clinics. The Smithsonian Institution is a museum and research complex consisting of 19 museums and galleries, the National Zoo, and 9 research facilities throughout the United States and around the world. Established by federal legislation in 1846 with the acceptance of a trust donation by the institution's namesake benefactor, the Smithsonian is funded by both federal appropriations and a private trust. The National Endowment for the Arts and the National Endowment for the Humanities make up the National Foundation on the Arts and the Humanities. The National Endowment for the Arts is a major federal source of support for all arts disciplines. Since 1965, it has awarded more than 145,000 grants, which have been distributed to all states. The National Endowment for the Humanities generally supports grants for humanities education, research, preservation, and public humanities programs; creation of regional humanities centers; and development of humanities programs under the jurisdiction of state humanities councils. Since 1965, it has awarded approximately 63,000 grants. It also supports a Challenge Grant program to stimulate and match private donations in support of humanities institutions. For FY2019, President Trump requested $28.34 billion for the more than 30 agencies and entities in the Interior, Environment, and Related Agencies appropriations bill. The President also requested the establishment of a new adjustment to the discretionary spending limits for certain wildland fire suppression activities, and he requested $1.52 billion to be made available through the cap adjustment for FY2019. Budget authority designated for those activities would cause the spending limits to be adjusted, making it effectively not subject to the limits. For the 10 major DOI agencies in Title I of the bill, the request was $10.59 billion, or 37.4% of the $28.34 billion total requested. For EPA, funded in Title II of the bill, the request was $6.19 billion, or 21.8% of the total. For the 23 agencies and other entities funded in Title III of the bill, the request was $11.56 billion, or 40.8% of the total. Appropriations for agencies vary widely for reasons relating to the number, breadth, and complexity of agency responsibilities; alternative sources of funding (e.g., mandatory appropriations); and Administration and congressional priorities, among other factors. Thus, although the President's FY2019 request covered more than 30 agencies, funding for a small subset of these agencies accounted for most of the total. For example, the requested appropriations for three agencies—EPA, Forest Service, and Indian Health Service—were more than half (57.4%) of the total request. Further, three-quarters (75.5%) of the request was for these three agencies and two others, National Park Service and Indian Affairs. For DOI agencies, the FY2019 requests ranged from $121.7 million for the Office of Surface Mining Reclamation and Enforcement to $2.70 billion for the National Park Service. The requests for 5 of the 10 agencies exceeded $1 billion. Nearly half (48.3%) of the $10.59 billion requested for DOI agencies was for two agencies—the National Park Service ($2.70 billion) and Indian Affairs ($2.41 billion). For Related Agencies in Title III, the requested funding levels exhibited even more variation. The President sought amounts ranging from no funding for two entities—grants under National Capital Arts and Cultural Affairs and the Women's Suffrage Centennial Commission—to $5.42 billion for the Indian Health Service. The Forest Service was the only other agency for which more than $4 billion was requested. The next-largest request was for the Smithsonian Institution, at $957.4 million. By contrast, 19 entities each had requests of $62 million or less, including 12 with requests of less than $10 million each. Figure 1 identifies the share of the President's FY2019 request for particular agencies in the Interior bill. For FY2018, the total enacted appropriation for Interior, Environment, and Related Agencies was $36.59 billion. This total included $35.31 billion in regular appropriations and $1.28 billion in emergency supplemental appropriations for disaster relief. As noted, for FY2019, the President sought $28.34 billion for agencies in the Interior bill and a discretionary cap adjustment of $1.52 billion for wildland fire suppression. Neither the House nor the Senate version of H.R. 6147 , as passed during the 115 th Congress, nor the FY2019 enacted legislation, contained the cap adjustment. H.R. 6147 , as passed by the House on July 19, 2018, would have provided $35.31 billion for FY2019. H.R. 6147 , as passed by the Senate on August 1, 2018, would have provided $35.91 billion for FY2019. For FY2019, the enacted appropriation for Interior, Environment, and Related Agencies in P.L. 116-6 was $35.61 billion. Thus, when including the supplemental disaster funding for FY2018, the President's request, House-passed bill, Senate-passed bill, and FY2019 enacted appropriation contained less overall funding for FY2019 as compared to the FY2018 total of $36.59 billion, as follows: $8.25 billion (22.5%) less under the President's request, $1.28 billion (3.5%) less under the House-passed bill, $674.4 million (1.8%) less under the Senate-passed bill, and $975.4 million (2.7%) less under the FY2019 enacted appropriation. However, relative to the regular FY2018 appropriation of $35.31 billion (excluding the supplemental disaster funding), for FY2019: the President's request would have reduced funding by $6.98 billion (19.8%), the House-passed bill would have provided nearly level appropriations, with a decrease of $5.5 million (<0.1%), the Senate-passed bill would have increased funding by $601.0 million (1.7%), and the FY2019 enacted appropriation provided an increase of $300.0 million (0.8%). Figure 2 depicts the regular appropriations enacted for FY2018, requested by the President for FY2019, in H.R. 6147 (115 th Congress) as passed by the House for FY2019, in H.R. 6147 (115 th Congress) as passed by the Senate for FY2019, and enacted for FY2019 in Division E of P.L. 116-6 . It shows the appropriations contained in each of the three main appropriations titles of the Interior bill—Title I (DOI), Title II (EPA), and Title III (Related Agencies)—and in the general provisions in Title IV. For FY2018 enacted appropriations, it also depicts the emergency supplemental appropriations for disaster relief. Table 1 , at the end of this report, lists the appropriations for each agency that were enacted for FY2018, requested by the President for FY2019, passed by the House in H.R. 6147 (115 th Congress) for FY2019, passed by the Senate in H.R. 6147 (115 th Congress) for FY2019, and enacted for FY2019 in Division E of P.L. 116-6 . It also contains the percentage changes between FY2018 enacted appropriations and FY2019 enacted appropriations. There are many differences among the FY2018 enacted appropriations and the FY2019 funding requested by the President, passed by the House, passed by the Senate, and enacted. Selected agencies and programs are highlighted below, among the many of interest to Members of Congress, stakeholders, and the public. For the selected agencies and programs, the discussions below briefly compare FY2018 regular annual funding with FY2019 levels requested by the Administration, approved by the House in H.R. 6147 (115 th Congress), approved by the Senate in H.R. 6147 (115 th Congress), and enacted for FY2019 in Division E of P.L. 116-6 . Including FY2018 emergency supplemental appropriations would result in different comparisons for some of the agencies and programs covered below. The Administration sought a decrease of 23.2% from the FY2018 appropriation ($1.33 billion) for the Bureau of Land Management (BLM). The request contained lower funding for many BLM accounts and programs, including those for overall Management of Lands and Resources, and Land Acquisition by the agency. The House and Senate versions of the bill included increased appropriations for BLM for FY2019, of 4.1% and 0.9% respectively, with additional funds for the Management of Lands and Resources. The Senate also would have provided an increase for Land Acquisition, but the House would have reduced funds for that purpose. Further, the Administration proposed a budget restructuring within the Management of Lands and Resources account, to increase flexibility, cost savings, and program integration. The Senate, but not the House, would have adopted this restructuring. The FY2019 enacted appropriation of $1.35 billion was a $14.3 million (1.1%) increase over the FY2018 appropriation. It reflected the President's proposed restructuring in the Management of Lands and Resources account, and increased funds for that account and for Land Acquisition, with level funding for other accounts. For FY2018, EPA received $8.06 billion in Title II of the regular appropriations law, and another $766.0 million in Title IV of that law, for an FY2018 regular appropriation of $8.82 billion. This discussion generally reflects funding in Title II only. Relative to the FY2018 appropriations in Title II only ($8.06 billion), the EPA would have received a decrease under the Administration's request (23.2%) and under the House-passed bill (1.6%), but it would have received level funding under the Senate-passed bill. The request contained lower funding for several accounts, among them Science and Technology, Environmental Programs and Management (including geographic programs), and State and Tribal Assistance Grants (STAG, including categorical grants). However, the Administration sought level funding in the STAG account for capitalization grants to states for wastewater infrastructure projects through the Clean Water State Revolving Fund (SRF) and for drinking water infrastructure grants to states through the Drinking Water SRF. Moreover, the Administration asked for increased appropriations for two accounts, Buildings and Facilities and the Water Infrastructure Finance and Innovation Program. The House and Senate versions of the bill both supported level (or nearly level) funding for some accounts and programs (e.g., the Clean Water SRF and the Drinking Water SRF). However, whereas the Senate would have provided level funding for many accounts, the House more often supported decreases (e.g., Science and Technology, and Environmental Programs and Management) or increases (e.g., Water Infrastructure Finance and Innovation Program, and Hazardous Substance Superfund). For FY2019, EPA received $8.06 billion in Title II of the regular appropriations law, and another $791.0 million in Title IV of that law, for an FY2019 regular appropriation of $8.85 billion. This was a $25.0 million (0.3%) increase over the FY2018 total appropriation. The $8.06 billion enacted for FY2019 in Title II was equal to the FY2018 appropriation for Title II (and the Senate-passed level for FY2019). The FY2019 enacted appropriation included funding at the FY2018 level for each EPA account except for STAG, which increased by $42.9 million (1.2%) over FY2018. There was a corresponding change in rescissions, with $42.9 million more in (account-specific) rescissions enacted in FY2019 than in FY2018. For the U.S. Fish and Wildlife Service (FWS), differing amounts of reductions from the FY2018 level ($1.59 billion) were proposed for FY2019 by the Administration (23.1%), House (0.9%), and Senate (1.2%). The Administration sought to reduce funding for the Resource Management account overall, with cuts in programs such as ecological services, habitat conservation, and fish and aquatic conservation, and to eliminate funding for programs including cooperative landscape conservation and science support. The House and Senate versions of the bill would have increased funding for Resource Management, with little change for many programs relative to FY2018, and would have retained funding for cooperative landscape conservation and science support. Citing \"higher priorities,\" the Administration also proposed eliminating discretionary appropriations for two other FWS accounts—the Cooperative Endangered Species Conservation Fund and the National Wildlife Refuge Fund. The House- and Senate-passed bills retained discretionary funding for these accounts. Further, the Administration proposed relatively large reductions from the FY2018 level for the Land Acquisition (89.1%) and Construction (79.3%) accounts. The House and Senate supported smaller reductions for both accounts. The FY2019 enacted appropriation of $1.58 billion was $17.0 million (1.1%) less than the FY2018 appropriation. Like the House-passed and Senate-passed bills, the FY2019 appropriation increased funding for Resource Management, and retained funding for the cooperative landscape conservation and science support programs funded by this account. Similarly, the enacted appropriation included funding for the Cooperative Endangered Species Conservation Fund and the National Wildlife Refuge Fund. It also increased Land Acquisition, reduced Construction, and rescinded $15.0 million from Coastal Impact Assistance Program Grants. For FY2019, the Administration requested 21.5% less for the Forest Service (FS) than was enacted for FY2018 ($5.93 billion). Within the overall reduction, the President proposed decreases for each FS account, including 81.6% less for Capital Improvement and Maintenance, 47.7% less for State and Private Forestry, and 10.6% less for the National Forest System. The Administration also sought to eliminate funding for some programs, including Land Acquisition (from the Land and Water Conservation Fund), Collaborative Forest Landscape Restoration, and certain cooperative forestry programs such as Forest Legacy. For FY2019, the House and Senate bills would have provided overall increases for the FS of 3.3% and 6.1% respectively, with increases for some FS accounts and retention of programs the Administration sought to eliminate. The House and Senate supported differing levels of appropriations for major FS accounts, with the House approving higher amounts than the Senate for the National Forest System and Capital Improvement and Maintenance and the Senate approving higher amounts than the House for Land Acquisition and Wildland Fire Management, among other differences. For FY2019, the FS enacted appropriation of $6.09 billion was $152.5 million (2.6%) higher than the FY2018 appropriation. It included higher funding than enacted for FY2018 for all major accounts except Capital Improvement and Maintenance (which decreased by 0.7%). For Wildland Fire Management, the FY2019 appropriation of $3.00 billion was 4.3% higher than the FY2018 appropriation, nearly the same as the House-passed level, and 7.0% less than the Senate-passed amount. The FS total FY2019 appropriation also included funding for programs the Administration had sought to eliminate, as noted above. The Administration's FY2019 requested appropriation for Indian Affairs (IA) was 21.2% less than the FY2018 enacted amount ($3.06 billion). Most Indian programs would have been funded at lower levels, including human services, natural resources management, and public safety and justice. Education and construction (including construction of educational facilities) were among the largest dollar decreases in the budget request. The House- and Senate-passed measures contained overall increases of 1.3% and 0.4% respectively for IA, with relatively stable funding for many programs and activities as compared with FY2018 enacted amounts. Enacted appropriations of $3.08 billion for FY2019 were a $17.5 million (0.6%) increase over FY2018 appropriations. For FY2019, most programs received relatively small dollar increases or stable funding as compared with FY2018. Changes relative to FY2018 included an increase of 1.5% for public safety and justice and of 2.3% for contract support costs, and a decrease of 9.7% for Indian Land and Water Claim Settlements and Miscellaneous Payments to Indians. The appropriation for education programs declined 1.1% from FY2018 to FY2019. This was primarily due to the inclusion of a one-time increase of $16.9 million for FY2018 for the Haskell Indian Nations University and the Southwestern Indian Polytechnic Institute, to convert these postsecondary institutions to forward funding to align with the school year funding cycle. Under the Administration's FY2019 request, the Indian Health Service (IHS) would have received 2.1% less than the FY2018 appropriation ($5.54 billion). The overall decrease was composed of a variety of program reductions and increases. For example, the Administration proposed cutting the Indian Health Facilities account (41.7%), including for maintenance and improvement of facilities and construction of both health care and sanitation facilities, and proposed no funding for programs including the Indian Health Care Improvement Fund, health education, and community health representatives. However, the Administration requested additional monies for clinical services including hospital and health clinics, mental health, and alcohol and substance abuse, and for contract support costs (to help tribes pay the costs of administering IHS-funded programs). The Administration also sought to fund the Special Diabetes Program for Indians through discretionary appropriations; currently the program has a direct appropriation. The House and Senate bills would have approved increases of 6.7% and 4.2% respectively over FY2018 appropriations for IHS. Both chambers included higher funding for clinical services than enacted for FY2018 and requested by the Administration for FY2019, and both agreed with the Administration's proposed level for contract support costs. The House, but not the Senate, included appropriations for the Indian Health Care Improvement Fund and would have provided more than the FY2018 appropriation for the fund. Both chambers sought to retain funding for health education and community health representatives. Both chambers also supported level funding for most Indian Health Facilities programs but provided additional funds for facilities and environmental health support. Neither chamber sought to fund the Special Diabetes Program for Indians through discretionary appropriations. The FY2019 enacted appropriation of $5.80 billion was an increase of $266.5 million (4.8%) for IHS over FY2018 appropriations. The total included level or increased funds for most programs and activities, for instance, with increases for clinical services and contract support costs. The enacted total included funding for programs the President sought to eliminate, including the Indian Health Care Improvement Fund, health education, and community health representatives. Similar to the House-passed and Senate-passed bills, the FY2019 enacted appropriation did not fund the Special Diabetes Program for Indians through discretionary appropriations, and provided level funding for most Indian Health Facilities programs except for facilities and environmental health support, which received an increase. The Land and Water Conservation Fund (LWCF) has funded land acquisition for the four main federal land management agencies, a matching grant program to states to support outdoor recreation, and other purposes. For FY2019, the Administration did not seek discretionary appropriations for most programs that received appropriations from the LWCF in FY2018, and proposed an overall reduction of $12.9 million due to rescisssions of prior-year funds for some program components. In contrast, the House and Senate would have provided LWCF funding for the same programs as in FY2018, including land acquisition by the federal land management agencies. However, both the House and the Senate versions of the bill contained reductions from the FY2018 level ($425.0 million), of 15.2% and 3.8% respectively. In contrast, the FY2019 enacted appropriation of $435.0 million was a $10.0 million (2.4%) increase over FY2018. For FY2019, the Administration requested 15.6% less for the National Park Service (NPS) than was enacted for FY2018 ($3.20 billion). Within the overall reduction, the President proposed cuts for each NPS account and many programs, including Construction, the Historic Preservation Fund, facility operations and maintenance, and heritage partnership programs. The President proposed the elimination of discretionary funding for other programs, including grants to states for outdoor recreation, line item acquisitions by the NPS, and the Centennial Challenge Program (a matching grant program to encourage donations). The House and Senate would have approved overall increases of 1.9% and 0.5% respectively for the NPS for FY2019. Their bills sought to fund many accounts and programs at levels similar to those enacted for FY2018. However, both chambers included increases for some programs (e.g., facility operations and maintenance) and reductions for other programs (e.g., line-item acquisitions). In still other cases, the chambers differed as to the direction of the change, for instance, with the House supporting an increase for the Historic Preservation Fund and the Senate approving a decrease. For FY2019, the enacted appropriation was $3.22 billion, which was $20.5 million (0.6%) more than the FY2018 appropriation. The total reflected various increases for several accounts, namely the Operation of the National Park System, National Recreation and Preservation, Historic Preservation Fund, and Construction. However, FY2019 funds were lower than FY2018 appropriations for two other accounts: the Centennial Challenge, and Land Acquisition and State Assistance account, due to a decrease for land acquisition by the NPS. The Payments in Lieu of Taxes Program (PILT) would have been reduced from the FY2018 level ($553.2 million) under the President's request ($465.0 million, a 15.9% reduction). For FY2019, the House-passed bill and the Senate-passed bill both contained $500.0 million, a reduction of 9.6% from the FY2018 amount. In earlier action, the Senate Appropriations Committee had reported that $500.0 million was the estimate of full funding for PILT for FY2019. PILT compensates counties and local governments for nontaxable lands within their jurisdictions. The authorized level for the program is calculated under a formula that considers various factors and varies from year to year. The authorized payment is currently subject to annual appropriations. The FY2019 appropriation for PILT was $500.0 million, a decrease of $53.2 million (9.6%) from the FY2018 level. As noted, this was the level that had been approved in the House-passed and Senate-passed bills. For FY2019, the Smithsonian Institution (SI) would have received a decrease (8.2%) under the Administration's request, an increase (1.2%) under the House-passed bill, and essentially level funding under the Senate-passed bill as compared with the FY2018 appropriation ($1.04 billion). However, the Administration, House, and Senate all supported funding at or near the FY2018 level for most SI museums, research institutes, and other programs. A key difference was in funding for the Facilities Capital account, which includes revitalization, planning and design, and construction of facilities. The Administration requested a 29.6% decrease for this account, the Senate approved a smaller decrease of 2.7%, and the House approved an increase of 1.8%. In addition, the Administration, House, and Senate all supported an increase of 2.2% over the FY2018 level for Facilities Services, which encompasses maintenance, operation, security, and support of facilities. For FY2019, the enacted appropriation of $1.04 billion was essentially level with the FY2018 appropriation. The FY2019 total included funding at or near the FY2018 level for most SI museums, research institutes, and other programs. An exception was an increase of 2.2% over the FY2018 level for Facilities Services, as had been recommended by the President and approved by the House and Senate. Another exception was the Facilities Capital account, which received a 2.7% overall decrease; this comprised reduced funding for planning and design, the elimination of construction monies, and additional funds for revitalization. Relative to FY2018 appropriations ($1.15 billion), the U.S. Geological Survey (USGS) would have received a decrease (25.1%) under the Administration's request, an increase (2.1%) under the House-passed bill, and level funding under the Senate-passed bill. The request proposed reduced funding for all eight major USGS program areas, including ecosystems, land resources, natural hazards, and water resources. The request also would have cut most subprograms, although in a few cases it contained additional funds (e.g., for mineral and energy resources). In contrast, both chambers would have maintained level funding or would have increased appropriations for all USGS program areas except natural hazards, which would have declined by 4.8% in the House-passed bill and by 12.0% in the Senate-passed bill. For FY2019, USGS received an appropriation of $1.16 billion, an increase of $12.1 million (1.1%) over FY2018. Of the eight major USGS program areas, five received increases, two received decreases, and one received level funding. The largest dollar and percentage increase was for energy, minerals, and environmental health, which gained $8.9 million (8.7%), primarily for mineral resources. The largest dollar and percentage decrease was for natural hazards, which was cut by $12.4 million (6.9%) for the volcano hazards subprogram. For FY2019, the Administration proposed $3.79 billion in discretionary appropriations for Wildland Fire Management (WFM) of DOI and the FS, a 12.9% decrease from the FY2018 enacted level ($4.35 billion). However, the President also sought a $1.52 billion cap adjustment to the discretionary spending limits in law, so that funding for certain wildland fire suppression activities would not be subject to the limits. Including those funds, the total FY2019 request was $5.31 billion. This would be an increase of 22.0% over the FY2018 appropriation. The House and Senate bills contained increases of 3.1% and 12.0% respectively over the FY2018 appropriation. Neither chamber's FY2019 bill included a discretionary cap adjustment for wildland fire suppression for FY2019. However, a cap adjustment was enacted as part of the Consolidated Appropriations Act, 2018, and is scheduled to go into effect in FY2020. Further, the Administration, House, and Senate did not support appropriations for FY2019 for the FS or DOI FLAME accounts. The FLAME account received $342.0 million in emergency supplemental appropriations in FY2018. For FY2019, the total appropriation for Wildland Fire Management for DOI and FS was $4.48 billion; this was $124.8 million (2.9%) more than the FY2018 appropriation. The increase over FY2018 was primarily for the FS, for suppression operations. The total appropriation consisted of $941.2 million for DOI and $3.54 for FS. The FY2019 appropriations law did not include a discretionary cap adjustment for wildland fire suppression for FY2019, as sought by the President, or funding for the DOI or FS FLAME accounts. ", "summary": "The Interior, Environment, and Related Agencies appropriations bill contains funding for more than 30 agencies and entities. They include most of the Department of the Interior (DOI) as well as agencies within other departments, such as the Forest Service within the Department of Agriculture and the Indian Health Service within the Department of Health and Human Services. The bill also provides funding for the Environmental Protection Agency (EPA), arts and cultural agencies, and other organizations and entities. Issues for Congress included determining the amount, terms, and conditions of funding for agencies and programs. For FY2019, the enacted appropriation for Interior, Environment, and Related Agencies was $35.61 billion. This total was composed of $13.02 billion for DOI agencies in Title I, $8.06 billion for EPA in Title II, $13.74 billion for the 23 \"related agencies\" in Title III, and $791.0 million in Title IV for certain EPA activities. The FY2019 appropriation was $300.0 million (0.8%) more than the FY2018 regular appropriation of $35.31 billion (in P.L. 115-141), but $975.4 million (2.7%) less than the FY2018 total appropriation of $36.59 billion, including $1.28 billion in emergency supplemental appropriations for disaster relief (in P.L. 115-72 and P.L. 115-123). The FY2019 appropriation was $7.28 billion (25.7%) more than the President's request ($28.34 billion), $305.5 million (0.9%) more than the House-passed level ($35.31 billion), and $301.0 million (0.8%) less than the Senate-passed amount ($35.91 billion). Because the FY2019 appropriation was not enacted until February 15, 2019, agencies received continuing appropriations for certain periods before that date. Specifically, from October 1, 2018, through December 21, 2018, and again from January 25, 2019, through February 15, 2019, appropriations were provided under a continuing resolution (CR) at the FY2018 level (in Division G of P.L. 115-141). Due to a lapse in funds after December 21, 2018, until January 25, 2019, a partial government shutdown went into effect. Agencies in the Interior bill generally operated under \"contingency\" plans that summarize activities that would cease and activities that would continue during a lapse in appropriations. In earlier action, President Trump's request of $28.34 billion for FY2019 for Interior, Environment, and Related Agencies included $10.59 billion for DOI agencies, $6.19 billion for EPA, and $11.56 billion for related agencies. The versions of H.R. 6147 (115th Congress) passed by the House on July 19, 2018, and by the Senate on August 1, 2018, contained higher FY2019 appropriations overall, and for each title of the bill, than requested. The President's request also contained a legislative proposal for a $1.52 billion cap adjustment to the discretionary spending limits in law for certain wildland fire suppression activities. This cap adjustment was not approved by the chambers or enacted for FY2019. However, Congress enacted a similar proposal (in P.L. 115-141), under which the adjustment becomes available in FY2020. The President, House, and Senate each proposed less funding for FY2019 relative to the FY2018 total of $36.59 billion (including emergency supplemental appropriations), proposing 22.5%, 3.5%, and 1.8% less, respectively. In contrast, relative to the regular FY2018 appropriation of $35.31 billion, the President would have reduced funding (19.8%), the House would have provided nearly level appropriations (<0.1% decrease), and the Senate would have increased funding (1.7%) for FY2019. For individual agencies and programs in the bill, there are many differences among the funding levels enacted for FY2019 and those supported by the President, House, and Senate for FY2019 and enacted for FY2018. This report highlights funding for selected agencies and programs that have been among the many of interest to Congress, stakeholders, and the public.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on the Virginia-class nuclear-powered attack submarine (SSN) program. The Navy's proposed FY2020 budget requests $9,925.5 million (i.e., about $9.9 billion) in procurement and advance procurement (AP) funding for the program. Decisions that Congress makes on procurement of Virginia-class boats could substantially affect U.S. Navy capabilities and funding requirements, and the U.S. shipbuilding industrial base. The Navy's Columbia (SSBN-826) class ballistic missile submarine program is discussed in another CRS report—CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke. For an overview of the strategic and budgetary context in which the Virginia-class program and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. The U.S. Navy operates three types of submarines—nuclear-powered ballistic missile submarines (SSBNs), nuclear-powered cruise missile and special operations forces (SOF) submarines (SSGNs), and nuclear-powered attack submarines (SSNs). The SSNs are general-purpose submarines that can (when appropriately equipped and armed) perform a variety of peacetime and wartime missions, including the following: covert intelligence, surveillance, and reconnaissance (ISR), much of it done for national-level (as opposed to purely Navy) purposes; covert insertion and recovery of SOF (on a smaller scale than possible with the SSGNs); covert strikes against land targets with the Tomahawk cruise missiles (again on a smaller scale than possible with the SSGNs); covert offensive and defensive mine warfare; anti-submarine warfare (ASW); and anti-surface ship warfare. During the Cold War, ASW against Soviet submarines was the primary stated mission of U.S. SSNs, although covert ISR and covert SOF insertion/recovery operations were reportedly important on a day-to-day basis as well. In the post-Cold War era, although anti-submarine warfare remained a mission, the SSN force focused more on performing the other missions noted on the list above. Due to the shift in the strategic environment in recent years from the post-Cold War era to a new situation featuring renewed great power competition, ASW against Russian and Chinese submarines has once again become a more prominent mission for U.S. Navy SSNs. The Navy's force-level goal, released in December 2016, is to achieve and maintain a 355-ship fleet, including 66 SSNs. For a review of SSN force-level goals since the Reagan Administration, see Appendix A . The SSN force included more than 90 boats during most of the 1980s, when plans called for achieving a 600-ship Navy including 100 SSNs. The number of SSNs peaked at 98 boats at the end of FY1987 and declined after that in a manner that roughly paralleled the decline in the total size of the Navy over the same time period. The 51 SSNs in service at the end of FY2018 included the following: 31 Los Angeles (SSN-688) class boats; 3 Seawolf (SSN-21) class boats; and 17 Virginia (SSN-774) class boats. A total of 62 Los Angeles-class submarines, commonly called 688s, were procured between FY1970 and FY1990 and entered service between 1976 and 1996. They are equipped with four 21-inch diameter torpedo tubes and can carry a total of 26 torpedoes or Tomahawk cruise missiles in their torpedo tubes and internal magazines. The final 31 boats in the class (SSN-719 and higher) were built with an additional 12 vertical launch system (VLS) tubes in their bows for carrying and launching another 12 Tomahawk cruise missiles. The final 23 boats in the class (SSN-751 and higher) incorporate further improvements and are referred to as Improved Los Angeles class boats or 688Is. As of the end of FY2018, 31 of the 62 boats in the class had been retired. The Seawolf class was originally intended to include about 30 boats, but Seawolf-class procurement was stopped after three boats as a result of the end of the Cold War and associated changes in military requirements and defense spending levels. The three Seawolf-class submarines are the Seawolf (SSN-21), the Connecticut (SSN-22), and the Jimmy Carter (SSN-23). SSN-21 and SSN-22 were procured in FY1989 and FY1991 and entered service in 1997 and 1998, respectively. SSN-23 was originally procured in FY1992. Its procurement was suspended in 1992 and then reinstated in FY1996. It entered service in 2005. Seawolf-class submarines are larger than Los Angeles-class boats or previous U.S. Navy SSNs. They are equipped with eight 30-inch-diameter torpedo tubes and can carry a total of 50 torpedoes or cruise missiles. SSN-23 was built to a lengthened configuration compared to the other two ships in the class. The Virginia-class attack submarine (see Figure 1 ) was designed to be less expensive and better optimized for post-Cold War submarine missions than the Seawolf-class design. The Virginia-class design is slightly larger than the Los Angeles-class design, but incorporates newer technologies. Virginia-class boats procured in recent years cost roughly $2.8 billion each to procure, but Virginia-class boats to be procured in coming years will be built to a lengthened configuration that includes the Virginia Payload Module (see discussion below) and have an estimated unit procurement cost of roughly $3.2 billion. The first Virginia-class boat entered service in October 2004. Table 1 shows annual numbers of Virginia-class boats procured from FY1998 (the lead boat) through FY2019, the number requested for procurement in FY2020, and the numbers projected for procurement in FY2021-FY2024 under the FY2020-FY2024 Future Years Defense Plan (FYDP). Navy plans previously called for procuring two Virginia-class boats in FY2020. The third boat requested for FY2020 was added to the budget request as part of the FY2020 budget-planning cycle. The Navy states that since this third boat has not received any prior-year advance procurement (AP) funding, it would execute (i.e., be constructed) on a schedule similar to that of a boat procured in FY2023. The Virginia-class submarines shown in Table 1 for FY2019-FY2023, which are referred to as the Block V boats, are being procured under a multiyear procurement (MYP) contract covering those years. This is the fourth consecutive MYP contract used by the Virginia-class program—three earlier MYP contracts were used to procure the 10 Virginia-class boats shown in the table for the period FY2014-FY2018 (the Block IV boats), the 8 Virginia-class boats shown in the table for the period FY2009-FY2013 (the Block III boats), and the 5 Virginia-class boats shown in the table for the period FY2004-FY2008 (the Block II boats). The four boats shown in the table for the period FY1998-FY2002 (the Block I boats) were procured under a block buy contract, which is an arrangement somewhat similar to an MYP contract. The boat procured in FY2003 fell between the FY1998-FY2002 block buy contract and the FY2004-FY2008 MYP contract, and was contracted for separately. Virginia-class boats are built jointly by General Dynamics' Electric Boat Division (GD/EB) of Groton, CT, and Quonset Point, RI, and Huntington Ingalls Industries' Newport News Shipbuilding (HII/NNS), of Newport News, VA. The arrangement for jointly building Virginia-class boats was proposed to Congress by GD/EB, HII/NNS, and the Navy, and agreed to by Congress in 1997, as part of Congress's action on the Navy's budget for FY1998, the year that the first Virginia-class boat was procured. A primary aim of the arrangement is to minimize the cost of building Virginia-class boats at a relatively low annual rate in two shipyards (rather than entirely in a single shipyard) while preserving key submarine-construction skills at both shipyards. Under the arrangement, GD/EB builds certain parts of each boat, HII/NNS builds certain other parts of each boat, and the yards have taken turns building the reactor compartments and performing final assembly of the boats. The arrangement has resulted in a roughly 50-50 division of Virginia-class profits between the two yards and preserves both yards' ability to build submarine reactor compartments (a key capability for a submarine-construction yard) and perform submarine final-assembly work. Under a plan it calls the Submarine Unified Build Strategy (SUBS), the Navy plans to build Columbia-class ballistic missile submarines jointly at GD/EB and HII/NNS, with most of the work going to GD/EB. As part of this plan, the Navy plans to adjust the division of work on the Virginia-class attack submarine program so that HII/NNS would receive a larger share of the work for that program than it has received in the past. The Navy states that it achieved a goal of reducing the procurement cost of Virginia-class submarines so that two boats could be procured in FY2012 for a combined cost of $4.0 billion in constant FY2005 dollars—a goal referred to as \"2 for 4 in 12.\" Achieving this goal involved removing about $400 million (in constant FY2005 dollars) from the cost of each submarine. (The Navy calculated that the unit target cost of $2.0 billion in constant FY2005 dollars for each submarine translated into about $2.6 billion for a boat procured in FY2012.) As noted in CRS testimony in 2014, the Virginia (SSN-774) class attack program has been cited as an example of a successful acquisition program. The program received a David Packard Excellence in Acquisition Award from the Department of Defense (DOD) in 2008. Although the program experienced cost growth in its early years that was due in part to annual procurement rates that were lower than initially envisaged and challenges in restarting submarine production at Newport News Shipbuilding, the lead ship in the program was delivered within four months of the target date that had been established about a decade earlier, and until recently, ships had been delivered largely on cost and ahead of schedule. In March and April 2019, it was reported that GD/EB, HII/NNS, and their supplier firms were experiencing challenges in meeting scheduled delivery times as the Virginia-class program transitions over time from production of two \"regular\" Virginia-class boats per year to two VPM-equipped boats per year. As a result of these challenges, it was reported, the program has experienced months-long delays in efforts to build boats relative to their targeted delivery dates. The Navy plans to build the second of the two boats procured in FY2019, the second and third boats requested for procurement in FY2020, the second of the two boats planned for procurement in FY2021, and all subsequent Virginia-class boats with the Virginia Payload Module (VPM), an additional, 84-foot-long, mid-body section equipped with four large-diameter, vertical launch tubes for storing and launching additional Tomahawk missiles or other payloads. The VPM's vertical launch tubes are to be used to store and fire additional Tomahawk cruise missiles or other payloads, such as large-diameter unmanned underwater vehicles (UUVs). The four additional launch tubes in the VPM could carry a total of 28 additional Tomahawk cruise missiles (7 per tube), which would increase the total number of torpedo-sized weapons (such as Tomahawks) carried by the Virginia class design from about 37 to about 65—an increase of about 76%. Building Virginia-class boats with the VPM is intended to compensate for a sharp loss in submarine force weapon-carrying capacity that will occur with the retirement in FY2026-FY2028 of the Navy's four Ohio-class cruise missile/special operations forces support submarines (SSGNs). Each SSGN is equipped with 24 large-diameter vertical launch tubes, of which 22 can be used to carry up to 7 Tomahawks each, for a maximum of 154 vertically launched Tomahawks per boat, or 616 vertically launched Tomahawks for the four boats. Twenty-two Virginia-class boats built with VPMs could carry 616 Tomahawks in their VPMs. The Navy's FY2020 budget submission shows that Virginia-class boats with and without the VPM have estimated recurring unit procurement costs of roughly $3.2 billion and $2.8 billion, respectively. The joint explanatory statement for the FY2014 DOD Appropriations Act (Division C of H.R. 3547 / P.L. 113-76 of January 17, 2014) required the Navy to submit biannual reports to the congressional defense committees describing the actions the Navy is taking to minimize costs for the VPM. In addition to the VPM, the Navy is introducing acoustic and other improvements to the Virginia-class design that are intended to help maintain the design's superiority over Russian and Chinese submarines. The Navy estimates the combined procurement cost of the three Virginia-class boats requested for procurement in FY2020 at $9.274.4 (i.e., about $9.3 billion). The boats have received $1,756.9 million in prior-year \"regular\" advance procurement (AP) funding and $361.6 million in additional Economic Order Quantity (EOQ) AP funding for components of boats being procured under the FY2019-FY2023 MYP contract. The Navy's proposed FY2020 budget requests the remaining $7,155.9 million in procurement funding needed to complete the boats' estimated combined procurement cost, as well as $1,887.6 million in \"regular\" AP funding for Virginia-class boats to be procured in future fiscal years and $882.0 million in additional EOQ AP funding for components of boats to be procured under the FY2019-FY2023 MYP contract, bringing the total amount of procurement and AP funding requested for the program in FY2020 to $9,925.5 million (i.e., about $9.9 billion), excluding outfitting and post-delivery costs. U.S. Navy submarines are built by GD/EB and HII/NNS. These are the only two shipyards in the country capable of building nuclear-powered ships. GD/EB builds submarines only, while HII/NNS also builds nuclear-powered aircraft carriers and is capable of building other types of surface ships. In addition to GD/EB and HII/NNS, the submarine construction industrial base includes hundreds of supplier firms, as well as laboratories and research facilities, in numerous states. Much of the total material procured from supplier firms for the construction of submarines comes from sole-source suppliers. For nuclear-propulsion component suppliers, an additional source of stabilizing work is the Navy's nuclear-powered aircraft carrier construction program. In terms of work provided to these firms, a carrier nuclear propulsion plant is roughly equivalent to five submarine propulsion plants. Much of the design and engineering portion of the submarine construction industrial base is resident at GD/EB; smaller portions are resident at HII/NNS and some of the component makers. Table 2 shows the Navy's projection of the number of SSNs over time if the Navy's FY2020 30-year shipbuilding plan were fully implemented. As can be seen in the table, the FY2020 30-year shipbuilding plan would achieve the Navy's 66-boat SSN force-level goal by FY2048. As also shown in the table, the number of SSNs is projected to experience (relative to a previous Navy SSN force-level goal of 48 boats) a valley or trough from the mid-2020s through the early 2030s, reaching a minimum of 42 boats (i.e., 24 boats, or about 36%, less than the current 66-boat force-level goal) in FY2027-FY2028. This projected valley is a consequence of having procured a relatively small number of SSNs during the 1990s, in the early years of the post-Cold War era. Some observers are concerned that this projected valley in SSN force levels could lead to a period of heightened operational strain for the SSN force, and perhaps also a period of weakened conventional deterrence against potential adversaries such as China. The projected SSN valley was first identified by CRS in 1995 and has been discussed in CRS reports and testimony every year since then. As one measure for mitigating this valley, the Navy's FY2020 budget submission proposes to refuel and extend the service life of two older Los Angeles (SSN-688) class submarines. The Navy states that this could be followed by refuelings and service life extensions for up to five more Los Angeles-class SSNs that would be funded in fiscal years beyond the FY2020-FY2024 Future Year Defense Plan (FYDP). In recent years, a number of the Navy's SSNs have had their deployments delayed due to maintenance backlogs at the Navy's four government-operated shipyards, which are the primary facilities for conducting depot-level maintenance work on Navy SSNs. Delays in deploying SSNs can put added operational pressure on other SSNs that are available for deployment. A November 2018 Government Accountability Office (GAO) report on the issue stated: The Navy has been unable to begin or complete the vast majority of its attack submarine maintenance periods on time resulting in significant maintenance delays and operating and support cost expenditures. GAO's analysis of Navy maintenance data shows that between fiscal year 2008 and 2018, attack submarines have incurred 10,363 days of idle time and maintenance delays as a result of delays in getting into and out of the shipyards. For example, the Navy originally scheduled the USS Boise to enter a shipyard for an extended maintenance period in 2013 but, due to heavy shipyard workload, the Navy delayed the start of the maintenance period. In June 2016, the USS Boise could no longer conduct normal operations and the boat has remained idle, pierside for over two years since then waiting to enter a shipyard…. GAO estimated that since fiscal year 2008 the Navy has spent more than $1.5 billion in fiscal year 2018 constant dollars to support attack submarines that provide no operational capability—those sitting idle while waiting to enter the shipyards, and those delayed in completing their maintenance at the shipyards. The Navy has started to address challenges related to workforce shortages and facilities needs at the public shipyards. However, it has not effectively allocated maintenance periods among public shipyards and private shipyards that may also be available to help minimize attack submarine idle time. GAO's analysis found that while the public shipyards have operated above capacity for the past several years, attack submarine maintenance delays are getting longer and idle time is increasing. The Navy may have options to mitigate this idle time and maintenance delays by leveraging private shipyard capacity for repair work. But the Navy has not completed a comprehensive business case analysis as recommended by Department of Defense guidelines to inform maintenance workload allocation across public and private shipyards. Navy leadership has acknowledged that they need to be more proactive in leveraging potential private shipyard repair capacity. Without addressing this challenge, the Navy risks continued expenditure of operating and support funding to crew, maintain, and support attack submarines that provide no operational capability because they are delayed in getting into and out of maintenance. The House Appropriations Committee, in its report ( H.Rept. 115-769 of June 20, 2018) on the FY2019 DOD Appropriations Act ( H.R. 6157 ) stated: SUBMARINE MAINTENANCE SHORTFALLS The Committee recognizes that the nuclear-capable public naval shipyards are backlogged with submarine maintenance work, while private nuclear-capable shipyards have underutilized capacity. The Los Angeles (SSN–688) class submarines are especially impacted by this backlog, which significantly reduces their operational availability for missions in support of combatant commanders. The Committee directs the Secretary of the Navy to submit a report to the congressional defense committees not later than 90 days after the enactment of this Act that outlines a comprehensive, five-year submarine maintenance plan that restores submarine operational availability and fully utilizes both public and private nuclear-capable shipyards in accordance with all applicable laws. The plan should strive to provide both private and public shipyards with predictable frequency of maintenance availabilities and estimate any potential cost savings that distributing the workload may deliver. (Page 71) A March 2019 Navy report to Congress states that in response to the above committee report language, The Navy submitted an initial [submarine maintenance] plan in December 2018, that reflected FY 2019 budget information. The Navy has [now] updated this plan to incorporate data from the President's FY 2020 budget submitted on March 11, 2019…. … In the post-Cold War and post 9/11 era, there have been decades of decision making associated with the re-posturing of defense strategies, such as: the reduction in maintenance capacity and flexibility though Baes Realignment and Closures (BRAC), increased Operational Tempo (OPTEMPO), evolution of submarine life cycle maintenance plans, budget reductions, and budget uncertainties that have contributed to the current challenges facing the submarine fleet. The root cause of submarine idle time and associated loss of operational availability, as discussed in the recent Government Accountability Office (GAO) report 19-229, \"Actions Needed to Address Costly Maintenance Delays Facing the Attack Submarine Fleet\" (issued November 2018), is largely due to public shipyard capacity not keeping pace with growing maintenance requirements that have been building for a number of years prior to the USS BOISE (SSN 764) FY 2016 Engineered Overhaul (EOH). The workload to capacity mismatch resulted in lower priority attack submarine (SSN) availabilities (as compared to ballistic missile submarines and nuclear-powered aircraft carriers) being delivered late and a bow-waving of workload from one fiscal year to the next that could not be executed. The workload backlog exacerbated the public shipyard workload-to-capacity mismatch and contributed to an increasing trend in late SSN [maintenance] deliveries. The Navy has taken several actions to improve the workload-to-capacity balance at the public shipyards. Notably, over 20,600 workers were hired from FY 2013 through FY 2018, which after accounting for attrition, increased total end strength from 29,400 to 36,700. However, the accelerated hiring resulted in 56 percent of the production workforce having less than five years of experience. The less experienced workforce requires a greater investment in training, as described in the Navy's Report to Congress on the Naval Shipyard Development Plan (issued March 2018), which offers some near term productivity gains. The Navy has also taken additional actions to balance workload at our public shipyards by outsourcing four submarine maintenance availabilities to the private sector and plans to outsource another two submarine availabilities to the private shipyards starting in FY 2020 and FY 2021. Additionally, to ensure on-time delivery from maintenance availabilities, availability inductions have been rescheduled to occur when the shipyards have the capacity to accomplish the availability(s) within programmed schedule durations. This necessary action to improve the on-time delivery of current maintenance availabilities has resulted in some additional submarine maintenance backlog and some accumulation of idle time. Based on actions and initiatives the Navy is currently pursuing to improve submarine operational availability and the outsourcing of two additional submarine availabilities to the private sector, the Navy assesses that the submarine idle time will be eliminated by the end of FY 2023 and the submarine maintenance backlog will be worked off by the end of FY 2023. One issue for Congress is whether to approve, reject, or modify the Navy's FY2020 procurement and advance procurement (AP) funding requests for the Virginia-class program. In considering this issue, Congress may consider several factors, including the amount of work the Navy is proposing to fund for the program in FY2020 and whether the Navy has accurately priced the work it is proposing to do in FY2020. Another element of this issue concerns the funding profile for the third Virginia-class boat requested for procurement in FY2020. This issue is discussed separately in the next section. Another issue for Congress concerns the funding profile for the third Virginia-class boat that the Navy has requested for procurement in FY2020. As discussed earlier, Navy plans previously called for procuring two Virginia-class boats in FY2020. The third boat requested for FY2020 was added to the budget request as part of the FY2020 budget-planning cycle. The Navy states that since this third boat has not received any prior-year advance procurement (AP) funding, it would execute (i.e., be constructed) on a schedule similar to that of a boat procured in FY2023. The Navy is proposing to fully fund the procurement of the third boat in FY2020. As discussed in Appendix B , Congress in the past has fully funded the procurement of nuclear-powered ships (specifically, aircraft carriers) for which no prior-year AP funding had been provided. Given the anticipated schedule for executing a third Virginia-class boat procured in FY2020, one alternative funding profile for this boat would be to provide AP funding for the boat in FY2020-FY2022, followed by full funding (i.e., the remainder of the boat's procurement cost, in the form of regular procurement funding) for the boat in FY2023 (or perhaps AP funding in FY2020-FY2021, followed by full funding in FY2022). Supporters of providing only AP funding for the boat in FY2020 could argue that it would reduce FY2020 funding requirements for the Virginia-class program, which could make more FY2020 funding available for other programs, such as, for example, the LPD-17 Flight II amphibious ship program, the LHA-9 amphibious assault ship program, the Expeditionary Support Base (ESB) ship program, the Littoral Combat Ship (LCS) program, Navy aircraft or weapon acquisition programs, Navy maintenance and readiness initiatives, or other DOD programs. Supporters of fully funding a third Virginia-class boat in FY2020 could argue that it would reduce FY2021-FY2023 funding requirements for the Virginia-class program, which could make available more funding in those years for other programs, including most of those mentioned above, as well as the Virginia-class program itself (where it could, for example, support the procurement of a third Virginia-class boat in FY2022 and/or a third Virginia-class boat in FY2023). They could also argue that fully funding the procurement of a third Virginia-class boat in FY2020 would send a signal of resolve to potential adversaries such as China, particularly since it would make FY2020 the first year since FY1989 in which three SSNs were procured in a single year. Another potential issue for Congress concerns the potential industrial-base challenges of building both Columbia-class boats and Virginia-class attack submarines (SSNs) at the same time. Along with continued production of Virginia-class SSNs, the Navy in FY2021 is to also begin building Columbia-class ballistic missile submarines (SSBNs). Observers have expressed concern about the industrial base's capacity for building both Virginia- and Columbia-class boats without encountering bottlenecks or other production problems in one or both of these programs. Concerns about the ability of the submarine construction industrial base to execute an eventual procurement rate of two VPM-equipped Virginia-class boats and one Columbia-class boat per year have been heightened by recent reports of challenges faced by the two submarine-construction shipyards (GD/EB and HII/NNS), as well as submarine component supplier firms in meeting scheduled delivery times for Virginia-class boats as the Virginia-class program transitions over time from production of two \"regular\" Virginia-class boats per year to two VPM-equipped boats per year. Another potential issue for Congress concerns technical risk in the design for the Block V version of the Virginia-class program—the version being procured in FY2019-2023. A May 2019 GAO report—the 2019 edition of GAO's annual report surveying DOD major acquisition programs—stated the following regarding the Block V version of the Virginia-class design: Current Status In 2019, the Navy plans to award a multibillion dollar, multiyear contract for construction of 10 Block V submarines. Under the Navy's plan, all Block V ships will include acoustic superiority improvements, while the VPM will be added starting with the second Block V submarine. According to program officials, the design of Block V submarines will differ from Block IV by approximately 20 percent. Of this 20 percent, the program office considers 70 percent to constitute major changes. The program office plans to complete basic and functional designs for VPM by construction start—an approach consistent with best practices. However, the shipbuilder is currently behind schedule in completing detail design work, where (1) the design advances to the highest level of fidelity, (2) specific fabrication and installation instructions for the shipyard are developed, and (3) required production materials are identified. The program now plans to complete 76 percent of this work by construction start, compared to the 86 percent it initially planned, in part due to the shipbuilder's challenges in using a new design tool. Going forward, the Navy and shipbuilder will need to balance staffing levels for the remaining Block V design work with design efforts for the new Columbia class ballistic missile submarine. Construction of Block V and the Columbia class will coincide beginning in fiscal year 2021.This will require the Navy and its shipbuilder to manage staffing demands and other resources across both programs. In addition, program officials said vendor quality issues with welding on VPM have caused a 3.5-month delay in the schedule for the payload tubes for the first two submarines with VPM. The Navy plans to recover some time by accelerating tube manufacturing with a second vendor, but this approach may increase program costs. The Block V effort is subsumed under the SSN 774 major defense acquisition program, and is not managed as a separate program. In 2015, the Office of the Secretary of Defense shifted the program's oversight to the Navy. SSN 774 had already completed its required defense acquisition system milestone reviews before Block V started, but program officials said the Navy continues to conduct regular oversight of the Block V. Program Office Comments In commenting on a draft of this assessment, the program office provided technical comments, which we incorporated where appropriate. Another oversight issue for Congress concerns Virginia-class program issues raised in a January 2018 report from DOD's Director, Operational Test and Evaluation (DOT&E)—DOT&E's annual report for FY2017. Another issue for Congress concerns a problem with the hull coating used on Virginia-class boats that was reported in 2017. Another issue for Congress concerns three Virginia-class boats that were reported in 2016 to have been built with defective parts, and the operational and cost implications of this situation. Table 3 summarizes congressional action on the Navy's FY2020 funding request for the Virginia-class program. Appendix A. Past SSN Force-Level Goals This appendix summarizes attack submarine force-level goals since the Reagan Administration (1981-1989). The Reagan-era plan for a 600-ship Navy included an objective of achieving and maintaining a force of 100 SSNs. The George H. W. Bush Administration's proposed Base Force plan of 1991-1992 originally called for a Navy of more than 400 ships, including 80 SSNs. In 1992, however, the SSN goal was reduced to about 55 boats as a result of a 1992 Joint Staff force-level requirement study (updated in 1993) that called for a force of 51 to 67 SSNs, including 10 to 12 with Seawolf-level acoustic quieting, by the year 2012. The Clinton Administration, as part of its 1993 Bottom-Up Review (BUR) of U.S. defense policy, established a goal of maintaining a Navy of about 346 ships, including 45 to 55 SSNs. The Clinton Administration's 1997 QDR supported a requirement for a Navy of about 305 ships and established a tentative SSN force-level goal of 50 boats, \"contingent on a reevaluation of peacetime operational requirements.\" The Clinton Administration later amended the SSN figure to 55 boats (and therefore a total of about 310 ships). The reevaluation called for in the 1997 QDR was carried out as part of a Joint Chiefs of Staff (JCS) study on future requirements for SSNs that was completed in December 1999. The study had three main conclusions: \"that a force structure below 55 SSNs in the 2015 [time frame] and 62 [SSNs] in the 2025 time frame would leave the CINC's [the regional military commanders-in-chief] with insufficient capability to respond to urgent crucial demands without gapping other requirements of higher national interest. Additionally, this force structure [55 SSNs in 2015 and 62 in 2025] would be sufficient to meet the modeled war fighting requirements\"; \"that to counter the technologically pacing threat would require 18 Virginia class SSNs in the 2015 time frame\"; and \"that 68 SSNs in the 2015 [time frame] and 76 [SSNs] in the 2025 time frame would meet all of the CINCs' and national intelligence community's highest operational and collection requirements.\" The conclusions of the 1999 JCS study were mentioned in discussions of required SSN force levels, but the figures of 68 and 76 submarines were not translated into official DOD force-level goals. The George W. Bush Administration's report on the 2001 QDR revalidated the amended requirement from the 1997 QDR for a fleet of about 310 ships, including 55 SSNs. In revalidating this and other U.S. military force-structure goals, the report cautioned that as DOD's \"transformation effort matures—and as it produces significantly higher output of military value from each element of the force—DOD will explore additional opportunities to restructure and reorganize the Armed Forces.\" DOD and the Navy conducted studies on undersea warfare requirements in 2003-2004. One of the Navy studies—an internal Navy study done in 2004—reportedly recommended reducing the attack submarine force level requirement to as few as 37 boats. The study reportedly recommended homeporting a total of nine attack submarines at Guam and using satellites and unmanned underwater vehicles (UUVs) to perform ISR missions now performed by attack submarines. In March 2005, the Navy submitted to Congress a report projecting Navy force levels out to FY2035. The report presented two alternatives for FY2035—a 260-ship fleet including 37 SSNs and 4 SSGNs, and a 325-ship fleet including 41 SSNs and 4 SSGNs. In May 2005, it was reported that a newly completed DOD study on attack submarine requirements called for maintaining a force of 45 to 50 boats. In February 2006, the Navy proposed to maintain in coming years a fleet of 313 ships, including 48 SSNs. Although the Navy's ship force-level goals have changed repeatedly in subsequent years, the figure of 48 SSNs remained unchanged until December 2016, when the Navy released a force-level objective for achieving and maintaining a force of 355 ships, including 66 SSNs. Appendix B. Options for Funding SSNs This appendix presents information on some alternative profiles for funding the procurement of SSNs. These alternatives include but are not necessarily limited to the following: two years of advance procurement (AP) funding followed by full funding —the traditional approach, under which there are two years of AP funding for the SSN's long-leadtime components, followed by the remainder of the boat's procurement funding in the year of procurement; one year of AP funding followed by full funding —one year of AP funding for the SSN's long-leadtime components, followed by the remainder of the boat's procurement funding in the year of procurement; full funding with no AP funding (single-year full funding , aka point-blank full funding ) —full funding of the SSN in the year of procurement, with no AP funding in prior years; incremental funding —partial funding of the SSN in the year of procurement, followed by one or more years of additional funding increments needed to complete the procurement cost of the ship; and advance appropriations —a form of full funding that can be viewed as a legislatively locked in form of incremental funding. Navy testimony to Congress in early 2007, when Congress was considering the FY2008 budget, suggested that two years of AP funding are required to fund the procurement of an SSN, and consequently that additional SSNs could not be procured until FY2010 at the earliest. This testimony understated Congress's options regarding the procurement of additional SSNs in the near term. Although SSNs are normally procured with two years of AP funding (which is used primarily for financing long-leadtime nuclear propulsion components), Congress can procure an SSN without prior-year AP funding, or with only one year of AP funding. Consequently, Congress at that time had the option of procuring an additional SSN in FY2009 and/or FY2010. Single-year full funding has been used in the past by Congress to procure nuclear-powered ships for which no prior-year AP funding had been provided. Specifically, Congress used single-year full funding in FY1980 to procure the nuclear-powered aircraft carrier CVN-71, and again in FY1988 to procure the CVNs 74 and 75. In the case of the FY1988 procurement, under the Administration's proposed FY1988 budget, CVNs 74 and 75 were to be procured in FY1990 and FY1993, respectively, and the FY1988 budget was to make the initial AP payment for CVN-74. Congress, in acting on the FY1988 budget, decided to accelerate the procurement of both ships to FY1988, and fully funded the two ships that year at a combined cost of $6.325 billion. The ships entered service in 1995 and 1998, respectively. The existence in both FY1980 and FY1988 of a spare set of Nimitz-class reactor components was not what made it possible for Congress to fund CVNs 71, 74, and 75 with single-year full funding; it simply permitted the ships to be built more quickly. What made it possible for Congress to fund the carriers with single-year full funding was Congress's constitutional authority to appropriate funding for that purpose. Procuring an SSN with one year of AP funding or no AP funding would not materially change the way the SSN would be built—the process would still encompass two or three years of advance work on long-leadtime components, and an additional five or six years or so of construction work on the ship itself. The outlay rate for the SSN could be slower, as outlays for construction of the ship itself would begin one or two years later than normal, and the interval between the recorded year of full funding and the year that the ship enters service would be longer than normal. Congress in the past has procured certain ships in the knowledge that those ships would not begin construction for some time and consequently would take longer to enter service than a ship of that kind would normally require. When Congress procured two nuclear-powered aircraft carriers (CVNs 72 and 73) in FY1983, and another two (CVNs 74 and 75) in FY1988, it did so in both cases in the knowledge that the second ship in each case would not begin construction until some time after the first. Appendix C. 2006 Navy Study on Options for Mitigating Projected Valley in SSN Force Level This appendix presents background information on a study initiated by the Navy in 2006 for mitigating the valley in the SSN force levels projected for the 2020s and 2030s. The study was completed in early 2007 and briefed to CRS and CBO on May 22, 2007. At the time of the study, the SSN force was projected to bottom out at 40 boats and then recover to 48 boats by the early 2030s. Principal points in the Navy study (which cite SSN force-level projections as understood at that time) include the following: The day-to-day requirement for deployed SSNs is 10.0, meaning that, on average, a total of 10 SSNs are to be deployed on a day-to-day basis. The peak projected wartime demand is about 35 SSNs deployed within a certain amount of time. This figure includes both the 10.0 SSNs that are to be deployed on a day-to-day basis and 25 additional SSNs surged from the United States within a certain amount of time. Reducing Virginia-class shipyard construction time to 60 months—something that the Navy already plans to do as part of its strategy for meeting the Virginia-class cost-reduction goal (see earlier discussion on cost-reduction goal)—will increase the size of the SSN force by two boats, so that the force would bottom out at 42 boats rather than 40. If, in addition to reducing Virginia-class shipyard construction time to 60 months, the Navy also lengthens the service lives of 16 existing SSNs by periods ranging from 3 months to 24 months (with many falling in the range of 9 to 15 months), this would increase the size of the SSN force by another two boats, so that the force would bottom out at 44 boats rather than 40 boats. The total cost of extending the lives of the 16 boats would be roughly $500 million in constant FY2005 dollars. The resulting force that bottoms out at 44 boats could meet the 10.0 requirement for day-to-day deployed SSNs throughout the 2020-2033 period if, as an additional option, about 40 SSN deployments occurring in the eight-year period 2025-2032 were lengthened from six months to seven months. These 40 or so lengthened deployments would represent about one-quarter of all the SSN deployments that would take place during the eight-year period. The resulting force that bottoms out at 44 boats could not meet the peak projected wartime demand of about 35 SSNs deployed within a certain amount of time. The force could generate a total deployment of 32 SSNs within the time in question—3 boats (or about 8.6%) less than the 35-boat figure. Lengthening SSN deployments from six months to seven months would not improve the force's ability to meet the peak projected wartime demand of about 35 SSNs deployed within a certain amount of time. To meet the 35-boat figure, an additional four SSNs beyond those planned by the Navy would need to be procured. Procuring four additional SSNs would permit the resulting 48-boat force to surge an additional three SSNs within the time in question, so that the force could meet the peak projected wartime demand of about 35 SSNs deployed within a certain amount of time. Procuring one to four additional SSNs could also reduce the number of seven-month deployments that would be required to meet the 10.0 requirement for day-to-day deployed SSNs during the period 2025-2032. Procuring one additional SSN would reduce the number of seven-month deployments during this period to about 29; procuring two additional SSNs would reduce it to about 17, procuring three additional SSNs would reduce it to about 7, and procuring four additional SSNs would reduce it to 2. The Navy added a number of caveats to these results, including but not limited to the following: The requirement for 10.0 SSNs deployed on a day-to-day basis is a current requirement that could change in the future. The peak projected wartime demand of about 35 SSNs deployed within a certain amount of time is an internal Navy figure that reflects recent analyses of potential future wartime requirements for SSNs. Subsequent analyses of this issue could result in a different figure. The identification of 19 SSNs as candidates for service life extension reflects current evaluations of the material condition of these boats and projected use rates for their nuclear fuel cores. If the material condition of these boats years from now turns out to be worse than the Navy currently projects, some of them might no longer be suitable for service life extension. In addition, if world conditions over the next several years require these submarines to use up their nuclear fuel cores more quickly than the Navy now projects, then the amounts of time that their service lives might be extended could be reduced partially, to zero, or to less than zero (i.e., the service lives of the boats, rather than being extended, might need to be shortened). The analysis does not take into account potential rare events, such as accidents, that might force the removal of an SSN from service before the end of its expected service life. Seven-month deployments might affect retention rates for submarine personnel.", "summary": "The Navy has been procuring Virginia (SSN-774) class nuclear-powered attack submarines (SSNs) since FY1998. The three Virginia-class boats that the Navy has requested for procurement in FY2020 would be the 31st, 32nd, and 33rd boats in the class. Virginia-class submarines are being procured under a multiyear procurement (MYP) contract covering at least 10 boats to be procured in FY2019-FY2023. Navy plans previously called for procuring two Virginia-class boats in FY2020. The third boat requested for FY2020 was added to the budget request as part of the FY2020 budget-planning cycle. The Navy states that since this third boat has not received any prior-year advance procurement (AP) funding, it would execute (i.e., be constructed) on a schedule similar to that of a boat procured in FY2023. The Navy plans to build the second of the two boats procured in FY2019, the second and third boats requested for procurement in FY2020, the second of the two boats planned for procurement in FY2021, and all subsequent Virginia-class boats with the Virginia Payload Module (VPM), an additional, 84-foot-long, mid-body section equipped with four large-diameter, vertical launch tubes for storing and launching additional Tomahawk missiles or other payloads. The Navy's FY2020 budget submission shows that Virginia-class boats with and without the VPM have estimated recurring unit procurement costs of roughly $3.2 billion and $2.8 billion, respectively. The Navy estimates the combined procurement cost of the three Virginia-class boats requested for procurement in FY2020 at $9.274.4 (i.e., about $9.3 billion). The boats have received $1,756.9 million in prior-year \"regular\" advance procurement (AP) funding and $361.6 million in additional Economic Order Quantity (EOQ) AP funding for components of boats being procured under the FY2019-FY2023 MYP contract. The Navy's proposed FY2020 budget requests the remaining $7,155.9 million in procurement funding needed to complete the boats' estimated combined procurement cost, as well as $1,887.6 million in \"regular\" AP funding for Virginia-class boats to be procured in future fiscal years and $882.0 million in additional EOQ AP funding for components of boats to be procured under the FY2019-FY2023 MYP contract, bringing the total amount of procurement and AP funding requested for the program in FY2020 to $9,925.5 million (i.e., about $9.9 billion), excluding outfitting and post-delivery costs. The Navy's SSN force included 51 boats at the end of FY2018. The Navy's force-level goal for SSNs is to achieve and maintain a force of 66 boats. From the mid-2020s through the early 2030s, the number of SSNs is projected to experience a valley or trough, reaching a minimum of 42 boats in FY2027-FY2028. Some observers are concerned that this projected valley—a consequence of having procured a relatively small number of SSNs during the 1990s, in the early years of the post-Cold War era—could lead to a period of heightened operational strain for the SSN force, and perhaps a period of weakened conventional deterrence against potential adversaries such as China. The projected SSN valley was first identified by CRS in 1995 and has been discussed in CRS reports and testimony every year since then. The Navy's 30-year shipbuilding plan projects that, after reaching its projected 42-boat minimum, the SSN force will increase to 66 boats by FY2048. Issues for Congress regarding the Virginia-class program include whether to approve, reject, or modify the Navy's FY2020 procurement and advance procurement (AP) funding requests for the Virginia-class program; the funding profile for the third Virginia-class boat requested for procurement in FY2020; the potential industrial-base challenges of building both Columbia-class boats and Virginia-class attack submarines (SSNs) at the same time; and technical risk in the design for the Block V version of the Virginia-class program.", "document_type": "crs"}
{"report": "L aw enforcement officials have described money laundering—the process of making illegally obtained proceeds appear legitimate—as the \"lifeblood\" of organized crime. According to one estimate, criminals launder roughly $1 trillion to $2 trillion annually worldwide, a sum that represents between 2% and 5% of global gross domestic product. Without the ability to conceal and spend these large sums of \"dirty\" money, criminal organizations \"could operate only at a small fraction of current levels, and with far less flexibility.\" Over the past decade, money launderers have turned to a new technology to conceal the origins of illegally obtained proceeds: virtual currency. Virtual currencies like Bitcoin, Ether, and Ripple are digital representations of value that, like ordinary currency, function as media of exchange, units of account, and stores of value. However, unlike ordinary currency, virtual currencies are not legal tender, meaning they cannot be used to pay taxes and creditors need not accept them as payments for debt. According to their proponents, virtual currencies (1) have the potential to offer cheaper and faster transactions than traditional bank-centric payment networks, (2) provide inflation-resistant alternatives to traditional fiat currencies, and (3) often involve promising new technologies (such as blockchain technology) that will spur innovation across a variety of fields. However, other commentators have argued that the anonymity offered by certain decentralized virtual currencies—that is, virtual currencies that are not issued or maintained by a central organization—makes them an attractive vehicle for money laundering. These observers have contended that criminals often use such virtual currencies not only to buy and sell illicit goods and services, but also to launder illegally obtained fiat currencies. While it is difficult to definitively assess the volume of money laundered through virtual currencies, the virtual currency security firm CipherTrace has estimated that criminals laundered roughly $2.5 billion of Bitcoin on major exchanges between January 9, 2009, and September 20, 2018. An official from the Treasury Department's Financial Crimes Enforcement Network (FinCEN) has similarly indicated that virtual currencies have been \"exploited to support billions of dollars of . . . suspicious activity.\" While such figures represent only a fraction of both global money laundering and virtual currency transaction volume, government officials have identified virtual currencies as a growth industry for money launderers that presents regulators and law enforcement with unique challenges. This report provides a general overview of the application of federal anti-money laundering (AML) law to virtual currencies. First, the report outlines the basic architecture of federal AML law. Second, the report discusses administrative guidance concerning the application of federal AML law to virtual currencies. Third, the report reviews a number of prominent criminal prosecutions and administrative enforcement actions involving federal AML law and virtual currencies. Finally, the report discusses a number of legislative proposals to reform certain elements of the federal AML regime surrounding virtual currencies and further investigate the use of virtual currencies in criminal activities. The federal AML regime consists of two general categories of laws and regulations. First, federal law requires a range of \"financial institutions\" to abide by a variety of AML compliance program, reporting, and recordkeeping requirements. Second, federal law criminalizes money laundering and various forms of related conduct. The Bank Secrecy Act (BSA) and its various amendments represent the centerpiece of the federal AML regime for \"financial institutions\"—a category that includes federally insured banks, securities brokers and dealers, currency exchanges, and money services businesses. Under the BSA and associated regulations, covered \"financial institutions\" must, among other things, establish AML programs that meet certain minimum standards, report certain types of transactions to the Treasury Department, and maintain certain financial records. Specifically, the BSA requires \"financial institutions\" to establish AML programs that include, at a minimum, (1) the development of internal policies, procedures, and controls, (2) the designation of a compliance officer, (3) an ongoing employee training program, and (4) an independent audit function to test the program. \"Financial institutions\" must also report certain large currency transactions and suspicious activities to FinCEN—the bureau within the Treasury Department responsible for administering the BSA. Finally, the BSA and associated regulations require \"financial institutions\" to maintain certain types of records. FinCEN regulations require banks, for example, to retain records related to certain large transactions involving foreign banks and the taxpayer identification numbers associated with certain accounts. Money services businesses (MSBs) represent one category of \"financial institution\" that must register with FinCEN and, like other \"financial institutions,\" abide by AML program, reporting, and recordkeeping requirements. Under FinCEN's regulations, MSBs include a variety of specific categories of businesses, including \"money transmitters\"—that is, (1) persons who accept \"currency, funds, or other value that substitutes for currency from one person\" and transmit those items \"to another location or person by any means,\" and (2) \"[a]ny other person engaged in the transfer or funds.\" In addition to imposing regulatory requirements on MSBs, federal law makes it a crime to knowingly operate an \"unlicensed money transmitting business.\" An entity qualifies as an \"unlicensed money transmitting business\" under this provision (Section 1960 of Title 18) if it 1. is \"operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony\"; 2. fails to comply with the BSA's federal registration requirement for \"money transmitting businesses\"; or 3. \"otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity.\" In addition to imposing various AML requirements on \"financial institutions,\" federal law also criminalizes money laundering and certain related conduct. Specifically, 18 U.S.C. § 1956(a)(1) (Section 1956) makes it unlawful for a person who \"know[s] that the property involved in a financial transaction represents the proceeds of some form of unlawful activity\" to \"conduct[] or attempt[] to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity\" — (A) (i) with the intent to promote the carrying on of specified unlawful activity; or (ii) with intent to engage in conduct constituting [tax evasion or tax fraud]; or (B) knowing that the transaction is designed in whole or in part— (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law. For purposes of this prohibition, the term \"financial transaction\" includes transactions \"involving the movement of funds\" and transactions \"involving one or more monetary instruments.\" Similarly, 18 U.S.C. § 1957(a) (the so-called \"Spending Statute\") prohibits monetary transactions in criminally derived property. Specifically, Section 1957(a) makes it unlawful to \"knowingly engage[] or attempt[] to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity.\" In other words, unlike Section 1956, Section 1957 makes it a crime to knowingly spend the proceeds of specified unlawful activity, even if such spending does not promote such activity and is not designed to conceal the origins of the proceeds. Because neither Congress nor FinCEN has formally amended the BSA regulatory regime in response to the advent of virtual currencies, prosecutors and regulators have been required to analyze whether virtual currency transactions and business models fall within some of the preexisting legal categories discussed above. In 2013, FinCEN attempted to clarify certain aspects of this analysis by issuing administrative guidance addressing the circumstances in which participants in virtual currency transactions qualify as MSBs. In its 2013 guidance, FinCEN took the position that \"users\" of virtual currencies do not qualify as MSBs subject to federal registration requirements, while \"administrators\" and \"exchangers\" of virtual currencies may qualify as MSBs. Specifically, the guidance explained that users of virtual currencies—that is, persons who obtain virtual currencies to purchase goods or services—are not MSBs because they are not involved in money transmission. By contrast, FinCEN indicated that virtual currency administrators (persons \"engaged as a business\" in putting a virtual currency into circulation and who have the authority to withdraw such currency from circulation) and exchangers (persons \"engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency\") may be \"money transmitters\" and, by extension, MSBs. Specifically, FinCEN explained that virtual currency administrators and exchangers qualify as MSBs (unless they fall within a specific exemption) when they (1) \"accept[] or transmit[] a convertible virtual currency,\" or (2) \"buy[] or sell[] convertible virtual currency for any reason.\" Accordingly, under FinCEN's guidance, virtual currency issuers and exchangers will generally qualify as MSBs unless they fall within a specific statutory or regulatory exemption. Over the past decade, federal prosecutors and regulators have pursued a number of cases involving the application of federal AML law to virtual currencies. In a number of criminal cases, federal prosecutors have brought money-laundering and certain related charges against the operators of online marketplaces and virtual currency payment systems used to disguise the proceeds of illicit activities. FinCEN has also brought civil enforcement actions against virtual currency exchangers for failure to comply with the BSA's AML program, reporting, and recordkeeping requirements. Federal prosecutors have brought money-laundering charges against the creators of online marketplaces that allowed their users to exchange virtual currency for a range of illicit goods and services. In one of these prosecutions, a federal district court held that transactions involving Bitcoin can serve as the predicate for money-laundering charges. In 2013, federal authorities shut down Silk Road, which they alleged was \"the most sophisticated and extensive criminal marketplace on the Internet,\" enabling tens of thousands of users to anonymously buy and sell illegal drugs, malicious software, and other illicit goods and services. Federal prosecutors charged the site's creator with, among other things, conspiracy to commit money laundering under Section 1956. The prosecutors alleged that the site's creator conspired to conduct \"financial transactions\" involving the proceeds of unlawful activity—namely, narcotics trafficking and computer hacking—with the intent to promote the carrying on of such activity. In defending this charge, Silk Road's creator argued that his alleged conduct—facilitating the exchange of Bitcoin for illegal goods and services—did not involve \"financial transactions\" within the meaning of Section 1956, which defines that term to include (among other things) transactions \"involving one or more monetary instruments.\" Specifically, the site's creator contended that because Bitcoin does not qualify as a \"monetary instrument\"—which Section 1956 defines to mean the currency of a country, personal checks, bank checks, money orders, investment securities, or negotiable instruments—transactions involving Bitcoin do not represent \"financial transactions\" under Section 1956. The U.S. District Court for the Southern District of New York rejected this argument, holding that transactions involving Bitcoin can qualify as \"financial transactions\" under Section 1956 because they fall under a separate category of transactions identified by the relevant statutory definition: transactions involving \"the movement of funds .\" Specifically, the court reasoned that Bitcoin transactions involve \"the movement of funds\" because the term \"funds\" includes \"money,\" which in turn refers to \"an object used to buy things.\" Because Bitcoin can be used to buy things, the court reasoned that Bitcoin transactions involve \"the movement of funds\" and therefore qualify as \"financial transactions\" under Section 1956. As a result, the court explained, \"[o]ne can money launder using Bitcoin.\" Similarly, in 2017, federal prosecutors brought money-laundering conspiracy charges against the creator of AlphaBay, another online marketplace that allowed its users to exchange virtual currency for illicit goods and services. The prosecutors alleged that by facilitating the exchange of virtual currencies (including Bitcoin, Monero, and Ether) for illegal narcotics and other illicit goods and services, the site's creator had conspired to conduct \"financial transactions\" involving the proceeds of unlawful activities. However, the federal government dismissed these charges after AlphaBay's creator died in July 2017. Federal prosecutors have also pursued charges against the developers of certain virtual currency payment systems allegedly designed to facilitate illicit transactions and launder the proceeds of criminal activity. Specifically, prosecutors have charged these developers with conspiring to commit money laundering and operating unlicensed money transmitting businesses under Sections 1956 and 1960, respectively. In adjudicating the second category of charges, courts have concluded that the relevant virtual currency payment systems were \"unlicensed money transmitting businesses\" under Section 1960, rejecting the argument that the provision applies only to money transmitters that facilitate cash transactions. In 2007, federal prosecutors charged e-Gold—an \"alternative payment system\" and virtual currency purportedly backed by stored physical gold—and its founders and director with money laundering and operating an unlicensed money transmitting business. The prosecutors alleged that e-Gold \"was widely accepted as a payment mechanism for transactions involving credit card and identification fraud, high yield investment programs and other investment scams, and child exploitation\" because of the anonymity it offered its users. In charging the defendants for failing to register their business, prosecutors alleged that e-Gold operated as an \"unlicensed money transmitting business\" in each of the three ways identified by Section 1960—the provision criminalizing the operation of \"unlicensed money transmitting businesses.\" Specifically, the prosecutors alleged that e-Gold (1) lacked a required state money transmitter license, (2) failed to comply with the BSA's federal registration requirements for \"money transmitting businesses\" (requirements set forth in Section 5330 of Title 31), and (3) was involved in the transmission of funds that were \"known to have been derived from a criminal offense\" or that were \"intended to be used to promote and support unlawful activity.\" In defending these charges, the defendants presented an intricate argument for the proposition that Section 1960 applies only to businesses that facilitate cash (as opposed to virtual currency) transactions. Specifically, the defendants argued that because Section 1960 does not define the term \"money transmitting business,\" it must \"borrow\" the definition of that term in Section 5330—the BSA provision establishing federal registration requirements for \"money transmitting businesses.\" The defendants further reasoned that (1) Section 5330 provides that an entity is a \"money transmitting business\" only if it must file currency transaction reports (CTRs), and (2) businesses that do not facilitate cash transactions need not file CTRs. Accordingly, under the defendants' theory, a business like e-Gold that does not facilitate cash transactions does not qualify as a \"money transmitting business\" under Section 5330 and (by extension) Section 1960. The U.S. District Court for the District of Columbia rejected this argument, holding that e-Gold was indeed a \"money transmitting business\" under Section 1960 for two reasons. First, the court rejected the defendants' contention that Section 1960 must \"borrow\" Section 5330's definition of \"money transmitting business.\" The court rejected this argument on the grounds that Section 1960 contains its own definition of the term \"money transmitting\" and does not reflect an intent to \"borrow\" the definition of \"money transmitting business\" from Section 5330. The court further explained that because e-Gold was a business engaged in \"money transmitting\" as defined by Section 1960—that is, \"transferring funds on behalf of the public\"—it was a \"money transmitting business\" under Section 1960. Second, the court evaluated whether e-Gold also qualified as a \"money transmitting business\" under Section 5330—an issue that remained relevant because of the federal government's charge that the defendants violated Section 1960 by violating Section 5330's registration requirements . The court concluded that e-Gold was indeed a \"money transmitting business\" under Section 5330, rejecting the defendants' argument that e-Gold did not fall within that category because it was not required to file CTRs. Specifically, the court rejected the argument that a business is required to file CTRs only if it facilitates cash transactions. Instead, the court explained that because the statute imposing CTR obligations imposes such obligations when money transmitting businesses facilitate cash transactions (as opposed to if they facilitate such transactions), all money transmitting businesses have a continuing obligation to file CTRs \"in the eventuality that they ever are involved\" in a reportable cash transaction. The court accordingly concluded that because e-Gold was required to file CTRs and satisfied the other elements of the relevant statutory definition, e-Gold was a \"money transmitting business\" under Section 5330 even though it did not process cash transactions. After the court denied the defendants' motion to dismiss the charges for operating an unlicensed money transmitting business, the defendants pleaded guilty to those charges and money laundering. Similarly, in May 2013, federal prosecutors charged the founder of Liberty Reserve—a Costa Rica-based virtual currency service—with conspiracy to commit money laundering, conspiracy to commit international money laundering, and operating an unlicensed money transmitting business. Liberty Reserve administered a virtual currency known as \"LR\" and described itself as a \"payment processor and money transfer system.\" According to prosecutors, Liberty Reserve's founder \"intentionally created, structured, and operated\" the service \"as a business venture designed to help criminals conduct illegal transactions and launder the proceeds of their crimes,\" facilitating a broad range of criminal activity that included identity theft, credit card fraud, computer hacking, child pornography, and narcotics trafficking. Specifically, Liberty Reserve allegedly facilitated such activity by allowing its users to set up accounts using fake names and, for an additional fee, hide their account numbers when sending funds within the system. Because of this anonymity, prosecutors alleged, Liberty Reserve became the \"bank of choice for the criminal underworld,\" laundering over $6 billion between 2006 and 2013. In defending the charge for operating an unlicensed money transmitting business, Liberty Reserve's founder argued that Liberty Reserve was not an \"unlicensed money transmitting business\" under Section 1960 because it did not transfer \"funds\" within the meaning of that provision. However, the U.S. District Court for the Southern District of New York rejected this argument, relying on an earlier case from the same district to conclude that virtual currencies are \"funds\" under Section 1960 because they can be \"easily purchased in exchange for ordinary currency, act[] as a denominator of value, and [are] used to conduct financial transactions.\" Liberty Reserve's founder was ultimately convicted of operating an unlicensed money transmitting business and pleaded guilty to conspiring to commit money laundering. Consistent with its 2013 guidance, FinCEN has pursued a number of administrative enforcement actions against virtual currency exchangers, assessing civil penalties for failure to implement sufficient AML programs and report suspicious transactions. In 2015, FinCEN brought an enforcement action against California-based virtual currency developer and exchanger Ripple Labs, Inc. (Ripple), assessing a $700,000 civil penalty for failure to register as a MSB and failure to implement and maintain an effective AML program. At the time of the enforcement action, Ripple's virtual currency (XRP) was the second-largest virtual currency by market capitalization, trailing only Bitcoin. Ripple sold XRP in exchange for fiat currency without registering as a MSB until 2013, when it incorporated a subsidiary to engage in the relevant sales and transfers. While Ripple's subsidiary ultimately registered with FinCEN, it allegedly failed to fulfill its AML obligations under the BSA. Specifically, FinCEN alleged that Ripple's subsidiary failed to timely establish an AML program that met the BSA's requirements and lacked sufficient controls for implementing the program. Because of this absence of necessary controls, Ripple's subsidiary negotiated an approximately $250,000 transaction with a felon without adhering to its know-your-customer requirements and rejected a number of suspicious transactions without filing suspicious activity reports (SARs) with FinCEN. In response to FinCEN's allegations, Ripple and its subsidiary entered into a settlement agreement, committing to undertake a series of remedial measures and pay a $700,000 civil penalty. In 2017, FinCEN brought another major enforcement action against BTC-e, one of the largest virtual currency exchanges in the world. FinCEN alleged that BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking. FinCEN further contended that BTC-e willfully violated MSB registration requirements, failed to maintain an effective AML program, and failed to file required SARs. Specifically, FinCEN alleged that BTC-e did not verify basic information about its customers and failed to file SARs on thousands of suspicious transactions, including transactions involving Liberty Reserve and other entities that were widely known to be violating U.S. law. Because of this conduct, FinCEN assessed a $110 million civil money penalty against BTC-e and its founder. As these prosecutions and enforcement actions demonstrate, virtual currencies have a number of features that make them attractive to criminals. Specifically, commentators have noted that money launderers have been attracted by the anonymity, lack of clear regulations, and settlement finality that accompanies virtual currency transactions. The ease of transferring virtual currencies across international borders further complicates AML efforts, as AML regulations \"are not widely applied internationally to virtual currency despite increasing evidence of misuse.\" The Treasury Department's 2018 Money Laundering Risk Assessment accordingly identified virtual currencies as a vulnerability in U.S. AML efforts. Several bills introduced in the 116th Congress aim to address to these challenges. These bills would, among other things, commission agency analyses of the use of virtual currencies for illicit activities and clarify that FinCEN's statutory powers and duties include international coordination on issues related to virtual currencies. Commentators have also identified legal uncertainty as an additional challenge facing prosecutors, regulators, and participants in virtual currency transactions. Specifically, these observers have noted that applying the BSA's regulatory regime to virtual currencies requires analyzing novel business models using legal categories developed primarily for traditional financial institutions. While the weight of legal authority supports the application of some of these categories to certain virtual currency business models, at least one anomalous decision indicates that some judges demand more explicit indicia of congressional intent to apply existing law in this relatively new field. Moreover, a number of commentators have argued that providing greater legal certainty to legitimate virtual currency activities is necessary to preserve the United States' position as a \"global leader\" in encouraging technological innovation. This interest in legal clarity—in addition to a desire to shield certain virtual currency innovators from \"expensive and onerous\" AML requirements —has generated a legislative proposal to exempt certain blockchain developers from various money transmitter requirements. In January 2019, the House passed three bills that would commission studies concerning the use of virtual currencies for illicit purposes. H.R. 56 , the Financial Technology Protection Act, would establish an Independent Financial Technology Task Force to Combat Terrorism and Illicit Financing (Task Force) led by the Treasury Secretary. The bill would direct the Task Force to (1) \"conduct independent research on terrorist and illicit use of new financial technologies, including digital currencies,\" and (2) \"develop legislative and regulatory proposals to improve counter-terrorist and counter-illicit financing efforts.\" H.R. 56 would further require the Task Force to annually report its findings to Congress. The bill would also establish two programs to incentivize members of the public to assist the federal government's efforts to combat the illicit use of virtual currencies. First, the bill would direct the Treasury Secretary to establish a reward of up to $450,000 for persons who \"provide[] information leading to the conviction of an individual involved with terrorist use of digital currencies.\" Second, the bill would direct the Treasury Secretary to create a grant program \"for the development of tools and programs to detect terrorist and illicit use of digital currencies.\" After passing the House in January 2019, H.R. 56 was referred to the Senate Committee on Banking, Housing, and Urban Affairs. A second bill, H.R. 428 , the Homeland Security Assessment of Terrorists' Use of Virtual Currencies Act, would similarly commission an analysis of the use of virtual currencies by terrorists. Specifically, H.R. 428 would direct the Under Secretary of Homeland Security for Intelligence and Analysis to conduct a \"threat assessment\" analyzing \"the actual and potential threat posed by individuals using virtual currency to carry out activities in furtherance of an act of terrorism, including the provision of material support or resources to a foreign terrorist organization.\" After passing the House in January 2019, H.R. 428 was referred to the Senate Committee on Homeland Security and Governmental Affairs. Finally, H.R. 502 , the Fight Illicit Networks and Detect Trafficking Act (the FIND Trafficking Act), would direct the Government Accountability Office (GAO) to conduct a study \"on how virtual currencies and online marketplaces are used to facilitate sex and drug trafficking.\" The bill would require GAO to provide Congress with a report summarizing the results of the study, together with any recommendations for legislative or regulatory action that would assist the federal government in combatting the use of virtual currencies to facilitate sex and drug trafficking. After passing the House in January 2019, H.R. 56 was referred to the Senate Committee on Banking, Housing, and Urban Affairs. In March 2019, the House passed H.R. 1414 , the FinCEN Improvement Act of 2019. The bill would, among other things, clarify that FinCEN's statutory power to coordinate with foreign financial intelligence units on antiterrorism and AML initiatives \"includ[es] matters involving emerging technologies or value that substitutes for currency.\" After passing the House in March 2019, H.R. 1414 was referred to the Senate Committee on Banking, Housing, and Urban Affairs. In January 2019, H.R. 528 , the Blockchain Regulatory Certainty Act, was introduced in the House of Representatives. The bill would create a safe harbor from federal and state money transmitter licensing and registration requirements for certain blockchain developers. Specifically, the bill would provide that non controlling \"blockchain developers\" and providers of a \"blockchain service\" shall not be treated as \"money transmitters,\" MSBs, \"or any other State or Federal legal designation[s] requiring licensing or registration as a condition to acting as a blockchain developer or provider of a blockchain service.\" A blockchain developer or provider of a blockchain service would qualify as a noncontrolling developer or provider as long as it does not have control over users' digital currency in the regular course of business. Some commentators have argued that such a safe harbor is necessary to provide legal certainty to actors in the virtual currency space, including persons who contribute code to virtual currency platforms or develop blockchain-related software but do not take custody of others' virtual currency. However, another commentator has noted that it is \"debat[able]\" whether federal registration requirements apply to such persons. H.R. 528 was referred to the House Committee on Financial Services and the House Committee on the Judiciary in January 2019.", "summary": "Law enforcement officials have described money laundering—the process of making illegally obtained proceeds appear legitimate—as the \"lifeblood\" of organized crime. Recently, money launderers have increasingly turned to a new technology to conceal the origins of illegally obtained proceeds: virtual currency. Virtual currencies like Bitcoin, Ether, and Ripple are digital representations of value that, like ordinary currency, function as media of exchange, units of account, and stores of value. However, unlike ordinary currencies, virtual currencies are not legal tender, meaning they cannot be used to pay taxes and creditors need not accept them as payments for debt. While virtual currency enthusiasts tout their technological promise, a number of commentators have contended that the anonymity offered by these new financial instruments makes them an attractive vehicle for money laundering. Law enforcement officials, regulators, and courts have accordingly grappled with how virtual currencies fit into a federal anti-money laundering (AML) regime designed principally for traditional financial institutions. The federal AML regime consists of two general categories of laws and regulations. First, federal law requires a range of \"financial institutions\" to abide by a variety of AML program, reporting, and recordkeeping requirements. Second, federal law criminalizes money laundering and various forms of related conduct. Over the past decade, federal prosecutors and regulators have pursued a number of cases involving the application of these laws to virtual currencies. Specifically, federal prosecutors have brought money laundering charges against the creators of online marketplaces that allowed their users to exchange virtual currency for illicit goods and services. In one of these prosecutions, a federal district court held that transactions involving Bitcoin can serve as the predicate for money laundering charges. Federal prosecutors have also pursued charges against the developers of certain virtual currency payment systems allegedly designed to facilitate illicit transactions and launder the proceeds of criminal activity. Specifically, prosecutors charged these developers with conspiring to commit money laundering and operating unlicensed money transmitting businesses. In adjudicating the second category of charges, courts have concluded that the relevant virtual currency payment systems were \"unlicensed money transmitting businesses,\" rejecting the argument that the relevant criminal prohibition applies only to money transmitters that facilitate cash transactions. Finally, the Financial Crimes Enforcement Network (FinCEN)—the bureau within the Treasury Department responsible for administering the principal federal AML statute—has pursued a number of administrative enforcement actions against virtual currency exchangers, assessing civil penalties for failure to implement sufficient AML programs and report suspicious transactions. As these prosecutions and enforcement actions demonstrate, virtual currencies have a number of features that make them attractive to criminals. Specifically, commentators have noted that money launderers are attracted to the anonymity, ease of cross-border transfer, lack of clear regulations, and settlement finality that accompanies virtual currency transactions. Several bills introduced in the 116th Congress are aimed at addressing these challenges. These bills would, among other things, commission agency analyses of the use of virtual currencies for illicit activities and clarify FinCEN's statutory powers and duties. Commentators have also identified legal uncertainty as an additional challenge facing prosecutors, regulators, and participants in virtual currency transactions. Moreover, a number of observers have argued that existing AML regulations are likely to stifle innovation by virtual currency developers. In response to these concerns about legal clarity and burdensome regulation, at least one legislative proposal contemplates exempting certain blockchain developers from various AML requirements.", "document_type": "crs"}
{"report": "Between 1819 and 1857, the room currently called Statuary Hall served as the Hall of the House of Representatives. Upon the completion of the current House chamber in 1857, the fate of the old \"Hall of the House\" was debated for many years. Perhaps the simplest was that it be converted into additional space for the Library of Congress, which was still housed in the Capitol. More drastic was the suggestion that the entire Hall be dismantled and replaced by two floors of committee rooms. Eventually, the idea of using the chamber as an art gallery was approved, and works intended for the Capitol extensions were put on exhibit; among these was the plaster model for the Statue of Freedom, which was later cast in bronze for the Capitol dome. The lack of wall space effectively prevented the hanging of large paintings, but the room seemed well suited to the display of statuary. Beginning in November 1879, Statuary Hall was first used for events. The first two events were a reception and dinner for the Society of the Army of the Cumberland on November 20, 1879, and a ceremony to close the Centennial Safe on November 22, 1879. Today, Statuary Hall is the home to many of the statues in the National Statuary Hall collection, which consists of two statues from each state. A room in the House Wing of the Capitol may be reserved in one of two ways: through a chamber resolution or pursuant to the Speaker's authority. House Rule I, clause 3 provides the Speaker with the authority to assign unappropriated rooms (i.e., not already assigned to a committee, House leadership, or an officer of the House). House Rule I, clause 3 states Except as otherwise provided by rule or law, the Speaker shall have general control of the Hall of the House, the corridors and passages in the part of the Capitol assigned to the use of the House, and the disposal of unappropriated rooms in that part of the Capitol. For rooms jointly controlled by the House and Senate (e.g., the Rotunda and Emancipation Hall), a concurrent resolution is generally required to authorize use. Initially adopted in 1811 to provide the Speaker with approval authority over events in the House chamber, clause 3 was last amended in 1911, to provide the Speaker with control over unappropriated rooms elsewhere in the House Wing of the Capitol. Since 1911, the Speaker has generally authorized use of rooms in the House Wing of the Capitol not otherwise appropriated. Since 2005, 170 events have been held in Statuary Hall. The House Sergeant at Arms, whose office provided data for this report, defines an event as activity that prevents public access to Statuary Hall for a period of time. As a result, activities such as a brief wreath laying at a particular statue are not included. Table 1 reports the total number of events held in Statuary Hall since 2005. The Appendix provides the date of each event and a brief description. Following receipt of the data from the House Sergeant at Arms, the Congressional Research Service (CRS) examined the events and divided them into four categories: (1) receptions and dinners, (2) ceremonies, (3) media events, and (4) memorial services. The following sections provide a brief explanation of each category and examples of activities. Table 2 reports the number of events since 2005, by category. The largest percentage of events held in Statuary Hall (57.6%) were receptions or dinners, hosted by both official congressional entities and private groups. For example, the Joint Congressional Committee on the Inaugural Ceremonies held the Inaugural Luncheon in Statuary Hall in 2005, 2009, and 2013; and the Capitol Historical Society held a reception for new Members of Congress in the Hall in 2005 and 2013. Ceremonies account for 28.8% of the events held in Statuary Hall since 2005. These ceremonies include presentations of awards, unveiling of official portraits, commemorations of event anniversaries, formal wreath layings, and prayer services. For example, the annual National Moment of Remembrance is held in Statuary Hall. In addition, prior to moving the statue to Emancipation Hall in the Capitol Visitor Center, an annual lei draping ceremony at King Kamehameha statue was held in Statuary Hall. Statuary Hall has also been occasionally used as the location for media availability, primarily after a presidential address to a joint session of Congress in the House chamber. Media events represent 5.9% of the events held in Statuary Hall. Since 2005, 13 memorial services (7.6%) for current or former Members of Congress have been held in Statuary Hall: for Representatives Robert Matsui (January 5, 2005); Juanita Millender-McDonald (May 17, 2007); Tom Lantos (February 14, 2008); Stephanie Tubbs Jones (September 10, 2008); John P. Murtha (March 30, 2010); Donald M. Payne (April 25, 2012); Speaker Thomas Foley (October 29, 2013); Mark Takai (September 14, 2016); Robert Michel (March 9, 2017); Louise Slaughter (April 18, 2018); and since 2016, an annual U.S. Association of Former Members of Congress memorial service to honor former Members who died in the past year. Since January 1, 2005, 170 events have been held in Statuary Hall. Table A-1 contains a chronological list of these events, the date of the event, and the event type.", "summary": "Statuary Hall has been used as the setting for a variety of events, including memorial ceremonies and receptions for new Members of Congress, award presentations, and as media space after presidential addresses. This report identifies and categorizes uses of Statuary Hall since 2005. Use of Statuary Hall is at the discretion of the Speaker of the House of Representatives. Under House Rule I, clause 3, the Speaker has the authority to assign unappropriated rooms on the House of Representatives side of the Capitol, including Statuary Hall. Use of Statuary Hall could also be authorized by House resolution, but no events since 2005 have been held in Statuary Hall on such authority. Since 2005, 170 events have been held in Statuary Hall. Events held in Statuary Hall can be divided into four categories: (1) receptions and dinners, (2) ceremonies, (3) media events, and (4) memorial services. The report provides a brief explanation of each category and examples of activities in each category.", "document_type": "crs"}
{"report": "In March 2015, Saudi Arabia established a coalition of nations (hereinafter referred to as the Saudi-led coalition or the coalition) to engage in military operations in Yemen against the Ansar Allah/Houthi movement and loyalists of the previous president of Yemen, the late Ali Abdullah Saleh. During 2014, the United States joined Saudi Arabia in demanding that Houthi forces reverse their campaign to occupy the Yemeni capital of Sanaa, but the rapid onset of hostilities in March 2015 forced the Obama Administration to react quickly. At the start of the Saudi-led intervention on March 25, 2015, the Administration announced that the United States would provide \"logistical and intelligence support\" to the coalition's operations without taking \"direct military action in Yemen in support of this effort.\" Soon thereafter, a joint U.S.-Saudi planning cell was established to coordinate military and intelligence support for the campaign. At the United Nations Security Council, the United States supported the passage of Resolution 2216 (April 2015), which, among other things, required member states to impose an arms embargo against the Houthi-Saleh forces and demanded that the Houthis withdraw from all areas seized during the current conflict. Since the March 2015 Saudi-led coalition intervention in Yemen, Congress has taken an active role in debating and overseeing U.S. policy in the Arabian Peninsula. Members have considered legislative proposals seeking to reduce Yemeni civilian casualties resulting from the coalition's operations; improve deteriorating humanitarian conditions; end restrictions on the flow of goods and humanitarian aid; combat Iranian support for the Houthis; preserve maritime security in the Bab al Mandab Strait; and/or support continued Saudi-led coalition and U.S. efforts to counter Al Qaeda and Islamic State forces in Yemen. Beyond Yemen, many Members have appeared to view the conflict through the prism of a broader regional rivalry between Saudi Arabia and Iran, and the U.S. effort to limit Iran's malign regional influence. Others lawmakers have viewed the Yemen conflict as indicative of what they perceive as problems in the U.S.-Saudi relationship, a concern that deepened after the killing of Saudi journalist Jamal Khashoggi by Saudi government personnel in October 2018. Congress has considered but has not enacted proposals to curtail or condition U.S. defense sales to Saudi Arabia. Responding to the Saudi-led intervention in Yemen also appears to be reinvigorating some Members' interest in strengthening the role of Congress in foreign policy vis-à-vis the executive branch. Debate in Congress over Yemen has featured bipartisan statements of interest in asserting the prerogatives of the legislative branch to limit executive branch power, specifically using war powers legislation and the appropriations and authorization processes to curb U.S. military involvement in support of coalition operations. Congressional scrutiny of U.S. policy in Yemen also has led to legislative changes to global authorities, such as the Department of Defense's authority to enter into and use acquisition and cross servicing agreements with partner militaries. Congressional interest in the Yemen conflict has evolved and grown gradually and was not widespread at the outset of the coalition's March 2015 intervention in Yemen. In early to mid-2015, congressional interest in U.S. foreign policy in the Middle East centered on the Iran nuclear deal and Operation Inherent Resolve against the Islamic State in Iraq and Syria. Several months after the March 2015 intervention, the Saudi-led coalition had not achieved a conclusive victory and what modest gains had been made on the ground were offset by mounting international criticism of growing civilian casualties from coalition air strikes. In Congress, several lawmakers began to express concern about the deteriorating humanitarian situation in Yemen. In late September 2015, Representative Ted W. Lieu wrote a letter to the Joint Chiefs of Staff advocating for a halt to U.S. support for the Saudi-led coalition until it instituted safeguards to prevent civilian casualties. In October 2015, 10 Members of Congress wrote a letter to President Obama urging him to \"work with our Saudi partners to limit civilian casualties to the fullest extent possible.\" In October 2015, Senator Markey stated that \"I fear that our failure to strongly advocate diplomacy in Yemen over the past two years, coupled with our failure to urge restraint in the face of the crisis last spring, may put the viability of this critical [U.S.-Saudi] partnership at risk.\" By the fall of 2015, as the Obama Administration tried to balance its concern for adhering to the laws of armed conflict with its support for Gulf partners, lawmakers began to express their concern over U.S. involvement in the coalition's intervention by scrutinizing U.S. arms sales to Saudi Arabia. When the Administration informally notified Congress of a proposed sale of precision guided munitions (PGMs) to Saudi Arabia, some Senators sought to delay its formal notification. After the formal notification in November 2015, Senate Foreign Relations Committee (SFRC) leaders jointly requested that the Administration notify Congress 30 days prior to associated shipments, marking the first use of this prior notification request authority. At that time, no related joint resolutions of disapproval on proposed sales of PGMs to the kingdom were introduced, but the delay and additional notification request demonstrated congressional concern. By the one-year anniversary of the Saudi-led intervention in Yemen, a more defined opposition to U.S. support for the coalition had begun to coalesce amid repeated international documentation of human rights abuses and errant coalition airstrikes. In April 2016, legislation was introduced that sought to place conditions on future proposed sale notifications, previously approved sales, or transfers of PGMs to Saudi Arabia. Proposed amendments to FY2017 defense legislation would have added some similar conditions on the use of funds to implement sales of PGMs or prohibited the transfer of cluster munitions to Saudi Arabia. The PGM amendment was not considered, but the cluster munitions amendment was narrowly defeated in a June 2016 House floor vote. In the spring and summer of 2016, the United Nations held multiple rounds of peace talks in Kuwait aimed at brokering an end to the conflict. From April 2016 to August 2016, the Saudi-led coalition had largely spared Yemen's capital Sanaa from aerial strikes as part of its commitment to the cessation of hostilities. When U.N.-mediated peace talks collapsed in August 2016, the Saudi-led coalition resumed bombing and the war intensified. During the summer of 2016, the Obama Administration reduced some U.S. support for Saudi Arabia's air campaign in Yemen by withdrawing U.S. personnel assigned to a joint U.S.-Saudi planning cell. Nevertheless, overall U.S.-Saudi cooperation continued and, in August 2016, the Obama Administration notified Congress of a proposed sale of M1A2S tanks to Saudi Arabia. In response, some lawmakers wrote to request that President Obama withdraw the proposal, citing concerns about Yemen. In September 2016, joint resolutions of disapproval of the proposed tank sale were introduced in the Senate ( S.J.Res. 39 ) and House ( H.J.Res. 98 ). On September 21, 2016, the Senate voted to table a motion to discharge the SFRC from further consideration of S.J.Res. 39 (71-27, Record Vote 145). During debate over the motion, many Senators argued in favor of continued U.S. support for Saudi Arabia, with Senator Lindsey Graham remarking \"To those who want to vote today to suspend this aid to Saudi Arabia, people in Iran will cheer you on.\" In the wake of an October 2016 Saudi airstrike on a funeral hall in Sanaa that killed 140 people, the Obama Administration initiated a review of U.S. security assistance to Saudi Arabia. Based on that review, it put a hold on a planned sale of precision guided munitions (PGMs) to Saudi Arabia and limited intelligence sharing, but maintained counterterrorism cooperation and refueling for coalition aircraft. In the final months of the Obama Administration, U.S. Armed Forces briefly exchanged fire with forces party to the conflict. In October 2016, Houthi-Saleh forces launched anti-ship missiles at U.S. Navy vessels on patrol off the coast of Yemen. The attacks against the U.S. ships marked the first time U.S. Armed Forces had come under direct fire in the war. The Obama Administration responded to the attacks against U.S. naval vessels by directing the Armed Forces to fire cruise missiles against Houthi-Saleh radar installations. The Obama Administration described the U.S. strikes as self-defense and indicated that it did not want to deepen its direct involvement in the conflict. In August and November 2016, then-Secretary of State John Kerry made several attempts to broker a peace initiative in Oman, but his efforts were rejected by the parties themselves. By the end of 114 th Congress, the war in Yemen was becoming a more significant foreign policy issue for lawmakers. While a growing number of Members were becoming critical of the U.S. role in supporting the Saudi-led coalition amid a deteriorating humanitarian situation in Yemen, more lawmakers still viewed the conflict through a regional lens rather than as a localized affair. Amid significant congressional opposition to the 2015 nuclear agreement with Iran (Joint Comprehensive Plan of Action or JCPOA), some Members viewed Iran's support for the Houthi movement and the broader conflict in Yemen as an example of Iran's malign regional activities not directly addressed by the JCPOA. As the Houthis targeted Gulf state infrastructure on land and vessels at sea, their behavior was touted as evidence of Iran's growing capabilities to threaten U.S. and Gulf security. Just as some Members considered the Yemen conflict primarily a proxy war between the Iran-backed Houthis and the Saudi-led coalition, others viewed it as a test of long-standing U.S. commitments to supporting Saudi Arabian security. Supporters of the relationship, while acknowledging that Saudi Arabia's conduct of the war was at times problematic, argued that to curtail U.S. arms sales or other defense support to the kingdom would weaken a vital partner that was under threat from a hostile nonstate actor on its southern border. Others lawmakers charged that continued U.S. support for the coalition was not improving coalition behavior but damaging the U.S. reputation for upholding commitments to international law and human rights. Legislation seeking to limit U.S. arms sales to Saudi Arabia was not enacted in the 114 th Congress, but marked the beginning of the broader congressional debate that has continued. As the Trump Administration prepared to assume office, human rights organizations and aid groups were pressing Congress to become more attuned to the growing humanitarian crisis in Yemen. Though the Obama Administration had taken some steps, particularly in late 2016, to limit U.S.-coalition cooperation and restrict deliveries of PGMs to Saudi Arabia, nongovernmental groups deemed such action as insufficient. According to Human Rights Watch, \"Whatever conditionality the Obama administration thought it had created—in holding up the transfer of precision munitions near the tail end of Obama's term and suspending cluster munition transfers earlier—ultimately did not have meaningful impact in reining in the continued Saudi-led coalition attacks on civilians.\" From the beginning of his Administration, President Donald Trump has signaled strong support for the Saudi-led coalition's operations in Yemen as a bulwark against Iranian regional interference. He initiated a review of U.S. policy toward Yemen, including President Obama's October 2016 restrictions on U.S. arms sales and intelligence sharing to the coalition. On March 19, 2017, just prior to his visit to Saudi Arabia, President Trump notified Congress that he was proceeding with three proposed direct commercial sales of precision guided munitions technology deferred by the Obama Administration, subject to congressional review. In May 2017, the Administration officially notified Congress of its intention to proceed with proposed sales of precision guided munitions technologies that the Obama Administration had deferred, while announcing plans to increase training for Saudi Arabia's air force on both targeting and the Law of Armed Conflict. Congress debated another resolution of disapproval ( S.J.Res. 42 ) of these proposed PGM sales in June 2017 (see below). After completing the policy review in July 2017, President Trump directed his Administration \"to focus on ending the war and avoiding a regional conflict, mitigating the humanitarian crisis, and defending Saudi Arabia's territorial integrity and commerce in the Red Sea.\" As President Trump entered office, the dynamics of the conflict in Yemen were changing, and the coalition launched a new offensive along Yemen's 280-mile western coastal plain ultimately aimed at taking the strategic Houthi-held port city of Hudaydah. In early 2017, the coalition's gradual advance toward Hudaydah, coupled with an ongoing deterioration in humanitarian conditions, sparked some Members of Congress to implore the Administration to improve aid access and negotiate a cease-fire. In March 2017, several House Members wrote a letter to then-Secretary of State Rex Tillerson urging him to \"use all U.S. diplomatic tools to help open the Yemeni port of Hodeida [Hudaydah] to international humanitarian aid organizations.\" A month later, another group of House Members wrote to President Trump stating that Congress should approve any new U.S. support to the coalition amid its offensive against Hudaydah. On June 13, 2017, the Senate debated another resolution ( S.J.Res. 42 ) to disapprove of three direct commercial sales of PGMs to Saudi Arabia. During Senate floor consideration over the motion to discharge the Senate Foreign Relations Committee from further consideration of S.J.Res. 42 , Members once again weighed various issues, such as the U.S.-Saudi bilateral relationship, countering Iran, and limiting U.S. involvement in the war in Yemen. Some lawmakers suggested that U.S. arms sales and military support to the coalition had enabled alleged violations of international humanitarian law, while others argued that U.S. support to the coalition improved its effectiveness and helps minimize civilian casualties. For example, during floor debate, Senator Graham argued that \"If we are worried about collateral damage in Yemen, I understand the concern. Precision weapons would help that cause, not hurt it.\" Senator Murphy retorted, saying \"What we are asking for is to hold off on selling these precision-guided munitions until we get some clear promise—some clear assurance—from the Saudis that they are going to use these munitions only for military purposes and that they are going to start taking steps—real steps, tangible steps—to address the humanitarian crisis.\" On June 13, 2017, the Senate voted to reject the motion to discharge the Senate Foreign Relations Committee from further consideration (47-53, Record Vote 143), and a companion resolution was not taken up in the House ( H.J.Res. 102 ). Representative Ro Khanna introduced a concurrent resolution ( H.Con.Res. 81 ) pursuant to the War Powers Resolution ( P.L. 93-148 ) in a bid to end U.S. support for the coalition's military intervention. After consultation between House leaders and supporters of the resolution on a compromise approach, the House agreed to delay expedited consideration of the resolution until after the November 2016 election and then adopted a nonbinding alternative ( H.Res. 599 , 366-30, 1 Present, Roll no. 623). In his first year in office, while President Trump sought to improve relations with Saudi Arabia, counter Iran, and increase U.S. counterterrorism activity in Yemen, his Administration also at times took strong positions on the need for members of the coalition to improve humanitarian access, pursue a settlement to the conflict, and take measures to prevent civilian casualties. After a Houthi-fired missile with alleged Iranian origins landed deep inside Saudi Arabia in November 2017, the coalition instituted a full blockade of all of Yemen's ports, including the main port of Hudaydah, exacerbating the country's humanitarian crisis. The White House issued four press statements on the conflict between November 8 and December 8, including a statement on December 6 in which President Trump called on Saudi Arabia to \"completely allow food, fuel, water, and medicine to reach the Yemeni people who desperately need it. This must be done for humanitarian reasons immediately.\" On December 20, 2017, the Saudi-led coalition announced that it would end its blockade of Hudaydah port for a 30-day period and permit the delivery of four U.S.-funded cranes to Yemen to increase the port's capability to off-load commercial and humanitarian goods. The next day, the White House issued a statement welcoming \"Saudi Arabia's announcement of these humanitarian actions in the face of this major conflict.\" As the Saudi-led coalition intervention entered its fourth year, some in the Senate also proposed use of the War Powers Resolution as a tool for ending U.S. support for the coalition's military intervention. On February 28, 2018, Senator Bernie Sanders introduced S.J.Res. 54 , a joint resolution to \"direct the removal of United States Armed Forces from hostilities in the Republic of Yemen that have not been authorized by Congress (except for those U.S. forces engaged in counterterrorism operations directed at al Qaeda or associated forces).\" Efforts in the Senate followed a late 2017 attempt in the House (see Table 1 below), in which a concurrent resolution directing the President to remove U.S. forces from Yemen was tabled in favor of a House-passed nonbinding resolution. Throughout 2018, between Congress and the Trump Administration and within Congress itself, there was disagreement as to whether U.S. forces assisting the Saudi-led coalition have been introduced into active or imminent hostilities for purposes of the War Powers Resolution. Some Members claimed that by providing support to the Saudi-led coalition, U.S. forces have been introduced into a \"situation where imminent involvement in hostilities is clearly indicated\" based on the criteria of the War Powers Resolution. The Trump Administration disagreed. In February 2018, the Acting Department of Defense General Counsel wrote to Senate leaders describing the extent of current U.S. support , and reported that \"the United States provides the KSA-led coalition defense articles and services, including air-to-air refueling; certain intelligence support; and military advice, including advice regarding compliance with the law of armed conflict and best practices for reducing the risk of civilian casualties.\" On March 20, 2018, the Senate considered S.J.Res. 54 on the floor. During debate, arguments centered on a number of issues, ranging from concern over exacerbating Yemen's humanitarian crisis to reasserting the role of Congress in authorizing the use of armed force abroad. After then-Foreign Relations Committee Chairman Senator Bob Corker promised to propose new legislation and hold hearings scrutinizing U.S. policy in Yemen, a majority of Senators voted to table a motion to discharge the Foreign Relations committee from further consideration of S.J.Res. 54 . Senator Robert Menendez made remarks expressing conditional support for Senator Corker's approach, a view shared by some other Senators who voted to table the motion. The Foreign Relations Committee held a hearing on Yemen a month later. In parallel testimony before Congress, U.S. defense officials stated that while the United States refueled Saudi aircraft and provided advice on targeting techniques, CENTCOM did not track coalition aircraft after they were refueled and did not provide advice on specific targets. Then-Assistant Secretary of Defense for International Security Affairs Robert S. Karem testified that \"It's correct that we do not monitor and track all of the Saudi aircraft aloft over Yemen.\" During the same hearing, U.S. officials acknowledged that pressure from Congress has altered how the Administration deals with the coalition over the Yemen conflict. Acting Assistant Secretary of State for Near Eastern Affairs David Satterfield told Senator Todd Young and the SFRC the following: Senator, your efforts, the efforts of your colleagues in this body and on this Committee have been exceedingly helpful in allowing the Administration to send a message from whole of government regarding the very specific concerns we have over any limitations, restrictions, constraints on the ability of both humanitarian and commercial goods specifically to include fuel to have unrestricted and expeditious entry into Yemen. And that messaging which comes from us, the Executive Branch, also comes from this body is extremely important. After the promised hearing, the Senate Foreign Relations Committee also proposed new legislation to place conditions on U.S. assistance to the coalition. In May, the committee reported S.J.Res. 58 to the Senate; it would have prohibited the obligation or expenditure of U.S. funds for in-flight refueling operations of Saudi and Saudi-led coalition aircraft that were not conducting select types of operations if certain certifications cannot be made and maintained. The Senate Armed Services Committee incorporated the provisions of the SFRC-reported text of S.J.Res. 58 as Section 1266 of the version of the FY2019 National Defense Authorization Act (NDAA) that it reported to the Senate on June 5, 2018 ( S. 2987 ). The provision was modified further and passed by both the House and Senate as Section 1290 of the conference version of the FY2019 NDAA ( H.R. 5515 ). It was signed into law as P.L. 115-232 in mid-August, giving the Administration until mid-September 2018 to make certain certifications. In a statement accompanying the President's signing of P.L. 115-232 into law, President Trump objected to provisions such as Section 1290, stating the Administration's view that such provisions \"encompass only actions for which such advance certification or notification is feasible and consistent\" with \"[his] exclusive constitutional authorities as Commander in Chief and as the sole representative of the Nation in foreign affairs.\" As Congress continued to question the role of the United States in supporting coalition operations in Yemen, the pace and scale of fighting on the ground increased dramatically by the summer of 2018. On June 12, 2018, the Saudi-led coalition launched \"Operation Golden Victory,\" aimed at retaking the Red Sea port city of Hudaydah. As coalition forces engaged Houthi militants in and around Hudaydah, humanitarian organizations warned that if port operation ceased, famine could become widespread throughout northern Yemen. On June 12, nine Senators wrote a letter to Secretary of State Pompeo and then-Secretary of Defense Mattis saying, \"We are concerned that pending military operations by the UAE and its Yemeni partners will exacerbate the humanitarian crisis by interrupting delivery of humanitarian aid and damaging critical infrastructure. We are also deeply concerned that these operations jeopardize prospects for a near-term political resolution to the conflict.\" Several weeks later, Senator Robert Menendez, the ranking member on the Senate Foreign Relations Committee, placed a hold on a potential U.S. sale of precision guided munitions to Saudi Arabia and the United Arab Emirates. In a June 28 letter to Secretary of State Pompeo and Secretary of Defense Mattis, Senator Menendez said, I am not confident that these weapons sales will be utilized strategically as effective leverage to push back on Iran's actions in Yemen, assist our partners in their own self-defense, or drive the parties toward a political settlement that saves lives and mitigates humanitarian suffering…. Even worse, I am concerned that our policies are enabling perpetuation of a conflict that has resulted in the world's worst humanitarian crisis. On August 9, the coalition conducted an airstrike that hit a bus in a market near Dahyan, Yemen, in the northern Sa'ada governorate adjacent to the Saudi border. The strike reportedly killed 51 people, 40 of whom were children. The coalition claims that its airstrike was a \"legitimate military operation\" and conducted in response to a Houthi missile attack on the Saudi city of Jizan a day earlier that killed a Yemeni national in the kingdom. The U.S. State Department called on the Saudi-led coalition to conduct a \"thorough and transparent investigation into the incident.\" Several Members of Congress wrote to the Administration seeking additional information regarding U.S. operations in the wake of the August 2018 coalition strike at Dahyan. Several Senators also submitted an amendment to the FY2019 Defense Department appropriations act ( H.R. 6157 ) that would have prohibited the use of funds made available by the act to support the Saudi-led coalition operations in Yemen until the Secretary of Defense certifies in writing to Congress that the coalition air campaign \"does not violate the principles of distinction and proportionality within the rules for the protection of civilians.\" The provision did not apply to support for ongoing counterterrorism operations against Al Qaeda and the Islamic State in Yemen. On September 12, Secretary of State Mike Pompeo issued a certification that would allow the use of FY2019 defense funds to support in-flight refueling of coalition aircraft to continue, per the terms of Section 1290 (see discussion above) of the FY2019 National Defense Authorization Act (NDAA, P.L. 115-232 ). Some Members of Congress criticized the Administration's actions, asserting that the coalition has not met the act's specified benchmarks for avoiding civilian casualties in Yemen. On September 26, several House Members introduced H.Con.Res. 138 , which sought to direct the President to remove U.S. Armed Forces from hostilities in Yemen, except for Armed Forces engaged in operations authorized under the 2001 Authorization for Use of Military Force, within 30 days unless and until a declaration of war or specific authorization for such use has been enacted into law. In response to a similar initiative in the Senate, the Administration submitted a detailed argument expressing its view that U.S. forces supporting Saudi-led coalition operations are not engaged in hostilities in Yemen. By late 2018, the prospect of widespread famine in Yemen coupled with international reprobation over the killing of Jamal Khashoggi pressured the Administration and the coalition to accelerate moves toward peace talks. On October 30, then-Secretary of Defense James Mattis and Secretary of State Mike Pompeo called for all parties to reach a cease-fire and resume negotiations. On November 9, Secretary Mattis further announced that effective immediately, the coalition would use its own military capabilities—rather than U.S. capabilities—to conduct in-flight refueling in support of its operations in Yemen. Though fighting continued along several fronts, on December 13, 2018, Special Envoy of the United Nations Secretary-General for Yemen Martin Griffiths brokered a cease-fire centered on the besieged Red Sea port city of Hudaydah (Yemen's largest port). As part of the U.N.-brokered deal (known as the Stockholm Agreement), the coalition and the Houthis agreed to redeploy their forces outside Hudaydah city and port. The United Nations agreed to chair a Redeployment Coordination Committee (RCC) to monitor the cease-fire and redeployment. The international community praised the Stockholm Agreement as a first step toward broader de-escalation and a possible road map to a comprehensive peace settlement. Also on December 13, 2018, the Senate amended and passed S.J.Res. 54 (56-41), which, among other things, directed the President to remove U.S. forces from hostilities in Yemen, except U.S. forces engaged in operations directed at Al Qaeda or associated forces. In the House, lawmakers twice narrowly approved rules resolutions containing provisions that made similar resolutions directing the President to remove U.S. forces from hostilities in Yemen ineligible for expedited consideration ( H.Res. 1142 and H.Res. 1176 ). On December 13, the Senate also passed S.J.Res. 69 , which, among other things, expresses the sense of the Senate that Saudi Crown Prince Mohammed bin Salman is responsible for the murder of the journalist Jamal Khashoggi and that there is no statutory authorization for United States involvement in hostilities in the Yemen civil war. The 115th Congress frequently debated the extent and terms of the United States' involvement in the ongoing conflict in Yemen. Lawmakers questioned the extent to which successive Administrations have adhered to existing law related to providing security assistance, including sales or transfers of defense goods and defense services, while upholding international human rights standards (e.g., 22 U.S.C. §2754 or 22 U.S.C. §2304). They also enacted new legislation that would condition or prohibit the use of U.S. funds for some activities related to Yemen and extend legislative oversight over the executive branch's policy toward the war in Yemen. While the House and its Rules Committee voted to make resolutions with respect to war powers and Yemen ineligible for expedited consideration, the Senate passage of S.J.Res. 54 at the conclusion of the 115 th Congress demonstrated growth in congressional opposition to U.S. involvement in the Saudi-led coalition intervention in Yemen relative to previous years. Over time, the balance of votes shifted in favor of measures that could be described as critical or restrictive of U.S. support for Saudi-led coalition operations with regard to arms sales, oversight measures, and war powers measures. Nevertheless, after nearly four years of conflict, it remains difficult to identify the locus of congressional consensus about Yemen. Many in the House and Senate state that they seek to preserve cooperative U.S.-Saudi relations in broad terms and express concern about Iranian activities in Yemen, while also expressing support for expanded humanitarian access and efforts to bring the conflict to a close. Some lawmakers express opposition to the intervention and U.S. involvement on moral grounds, citing errant coalition airstrikes and the prospect of a looming famine. Others argue the conflict's continuation creates opportunities for Iran and Sunni Islamist extremist groups to expand their influence and operations in Yemen. Still others may have come to oppose continued U.S. support for the intervention based on factors not directly related to Yemen itself, including the opaque mechanisms used by the executive branch to support the coalition and/or anger with the Saudi government over the killing of Jamal Khashoggi. It remains to be seen whether recent congressional consideration of Yemen legislation is a harbinger of broader efforts by Members of Congress to reassert congressional prerogatives toward U.S. foreign policy writ large. Measures to enhance oversight over U.S. support to the Saudi-led coalition and U.S. strategy toward Yemen have received broad bipartisan support, while proponents of other recently considered arms sales and war powers measures have used mechanisms to ensure privileged consideration of their proposals. The 116 th Congress may continue to debate U.S. support for the Saudi-led coalition and Saudi Arabia's conduct of the war in Yemen. It is uncertain whether lawmakers may also broaden the scope of their oversight activities beyond the current conflict to more fully address the root causes of Yemen's chronic instability. Even if the United States is no longer an active supporter of coalition military efforts, Yemen itself has been devastated by years of war and remains the world's worst humanitarian crisis. Experts expect Yemen to require sustained international attention and financial assistance in order to help local actors reach and sustain a political settlement. This suggests that Congress may grapple with questions about the conduct of U.S. diplomacy, the provision of U.S. security support, and the investment of U.S. assistance and defense funds for years to come.", "summary": "This product provides an overview of the role Congress has played in shaping U.S. policy toward the conflict in Yemen. Summary tables provide information on legislative proposals considered in the 115th and 116th Congresses. Various legislative proposals have reflected a range of congressional perspectives and priorities, including with regard to the authorization of the activities of the U.S. Armed Forces related to the conflict; the extent of U.S. logistical, material, advisory, and intelligence support for the coalition led by Saudi Arabia; the approval, disapproval, or conditioning of U.S. arms sales to Saudi Arabia; the appropriation of funds for U.S. operations in support of the Saudi-led coalition; the conduct of the Saudi-led coalition's air campaign and its adherence to international humanitarian law and the laws of armed conflict; the demand for greater humanitarian access to Yemen; the call for a wider government assessment of U.S. policy toward Yemen and U.S. support to parties to the conflict; the nature and extent of U.S.-Saudi counterterrorism and border security cooperation; and the role of Iran in supplying missile technology and other weapons to the forces of the Houthi movement. The 116th Congress may continue to debate U.S. support for the Saudi-led coalition and Saudi Arabia's conduct of the war in Yemen, where fighting has continued since March 2015. The war has exacerbated a humanitarian crisis in Yemen that began in 2011; presently, the World Food Program reports that 20 million Yemenis face hunger in the absence of sustained food assistance. The difficulty of accessing certain areas of Yemen has made it hard for governments and aid agencies to count the war's casualties. Data collected by the U.S. and European-funded Armed Conflict Location & Event Data Project (ACLED) suggest that 60,000 Yemenis have been killed since January 2016. The Trump Administration has opposed various congressional proposals, including initiatives to reject or condition proposed U.S. arms sales or to require an end to U.S. military support to Saudi-led coalition operations in Yemen. Many in Congress have condemned the October 2018 murder of Saudi journalist Jamal Khashoggi by Saudi government personnel, and in general, the incident appears to have exacerbated existing congressional concerns about Saudi leaders and the pace, scope, and direction of change in the kingdom's policies. This product includes legislative proposals considered during the 115th and 116th Congresses. It does not include references to Yemen in Iran sanctions legislation, which are covered in CRS Report RS20871, Iran Sanctions. For additional information on the war in Yemen and Saudi Arabia, please see the following CRS products. CRS Report R43960, Yemen: Civil War and Regional Intervention. CRS Report RL33533, Saudi Arabia: Background and U.S. Relations. CRS Insight IN10729, Yemen: Cholera Outbreak.", "document_type": "crs"}
{"report": "T he unemployment insurance (UI) system has two primary objectives: (1) to provide temporary, partial wage replacement for involuntarily unemployed workers and (2) to stabilize the economy during recessions. In support of these goals, several UI programs provide benefits for eligible unemployed workers. In general, when eligible workers lose their jobs, the joint federal-state Unemployment Compensation (UC) program may provide up to 26 weeks of income support through regular UC benefit payments. UC benefits may be extended for up to 13 weeks or 20 weeks by the Extended Benefit (EB) program if certain economic situations exist within the state. As of the date of this publication, although both the UC and EB programs are authorized, no state is in an active EB period. For an overview of EB, see the Appendix . The Social Security Act of 1935 (P.L. 74-271) authorizes the joint federal-state UC program to provide unemployment benefits. Most states provide up to a maximum of 26 weeks of UC benefits. Former federal workers may be eligible for unemployment benefits through the Unemployment Compensation for Federal Employees (UCFE) program. Former U.S. military servicemembers may be eligible for unemployment benefits through the Unemployment Compensation for Ex-Servicemembers (UCX) program. The Emergency Unemployment Compensation Act of 1991 ( P.L. 102-164 ) provides that ex-servicemembers be treated the same as other unemployed workers with respect to benefit levels, the waiting period for benefits, and benefit duration. Although federal laws and regulations provide broad guidelines on UC benefit coverage, eligibility, and determination, the specifics regarding UC benefits are determined by each state. This results in essentially 53 different programs. Generally, UC eligibility is based on attaining qualified wages and employment in covered work over a 12-month period (called a base period) prior to unemployment. All states require a worker to have earned a certain amount of wages or to have worked for a certain period of time (or both) within the base period to be eligible to receive any UC benefits. The methods states use to determine eligibility vary greatly. Most state benefit formulas replace approximately half of a claimant's average weekly wage up to a weekly maximum. Additionally, each state's UC law requires individuals to have lost their jobs through no fault of their own, and recipients must be able to work, available for work, and actively seeking work. These eligibility requirements help ensure that UC benefits are directed toward workers with significant labor market experience and who are unemployed because of economic conditions. The UC program is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under each state's State Unemployment Tax Act (SUTA). The 0.6% effective net FUTA tax paid by employers on the first $7,000 of each employee's earnings (equaling no more than $42 per worker per year) funds federal and state administrative costs, loans to insolvent state UC accounts, the federal share (50%) of EB payments, and state employment services. SUTA taxes on employers are limited by federal law to funding regular UC benefits and the state share (50%) of EB payments. Federal law requires that the state tax be on at least the first $7,000 of each employee's earnings and that the maximum state tax rate be at least 5.4%. Federal law also requires each employer's state tax rate to be based on the amount of UC paid to former employees (known as \"experience rating\"). Within these broad requirements, each state has great flexibility in determining its SUTA structure. Generally, the more UC benefits paid out to its former employees, the higher the tax rate of the employer, up to a maximum established by state law. Funds from FUTA and SUTA are deposited in the appropriate accounts within the Unemployment Trust Fund (UTF). The sequester order required by the Budget Control Act of 2011 (BCA; P.L. 112-25 ) and implemented on March 1, 2013 (after being delayed by P.L. 112-240 ), affected some but not all types of UI expenditures. Regular UC, UCX, and UCFE payments are not subject to the sequester reductions. EB and most forms of administrative funding are subject to the sequester reductions. The FY2019 sequestration order requires a 6.2% reduction in all nonexempt nondefense mandatory expenditures, but no sequestration reductions are applicable to discretionary programs, projects, and activities. As a result, EB expenditures are required to be reduced 6.2% (only on the federal share of EB benefits) for weeks of unemployment during FY2019. As of January 22, 2019, EB has not been activated in any state during FY2019. The lapse in federal appropriations that occurred from December 22, 2018, until January 25, 2019, caused a partial government shutdown. As a result, during this lapse in appropriations, agencies without funding furloughed federal employees, and many federal employees excepted from furlough were working without pay. Furloughed federal employees may be eligible for UCFE benefits. States are required to operate the UCFE program under the same terms and conditions that apply to regular state UC. Therefore, UCFE eligibility is determined under the laws of the state in which an individual's official duty station in federal civilian service is located. Federal employees who are in furlough status on account of a government shutdown are generally treated by state law as laid off with an expectation of recall. Depending on state laws and regulations, the state may have an option to not require federal employees to search for work given an expected recall. However, according to guidance from U.S. Department of Labor (DOL), excepted federal employees who are performing services (but working without pay) would generally be ineligible for UCFE benefits based on states' definitions of \"unemployment.\" Private-sector workers who are furloughed or laid off due to the partial government shutdown because they were employed by government contractors or other businesses may be eligible for regular UC benefits. UC eligibility for these workers would be based on the requirements set out under the state laws in the state where they had worked. In this climate, there has been congressional interest in assisting furloughed and excepted federal employees through the UI system. For example, as described below in the section on \" Unemployment Compensation for Excepted Federal Employees During a Government Shutdown ,\" there are proposals to provide new authority to pay UCFE benefits to excepted federal workers who are working without pay. The most recent lapse in federal appropriations began December 22, 2018, and ended on January 25, 2019, with the enactment of H.J.Res. 28 . Because retroactive pay for furloughed and excepted federal employees was authorized under S. 24 , the Government Employee Fair Treatment Act of 2019 (enacted January 16, 2019), UCFE payments made to federal employee claimants during this lapse in appropriations may be deemed an overpayment, subject to state UC laws regarding overpayment recovery. According to guidance from the Office of Personnel Management on this issue The state UI agency will determine whether or not an overpayment exists and, generally, the recovery of the UCFE overpayment is a matter for state action under its law; however, some state UI laws require the employer to recover such overpayment by collecting the overpayment amount from the employee. The Federal and state agencies will need to coordinate to determine the required action in accordance with the individual state UI law. Federal agencies are encouraged to develop lists or spreadsheets that can be provided to the state(s) containing the employees' names, social security numbers, and the amounts and periods of time covered by the retroactive payment. If a recession is deep enough and if state unemployment tax (SUTA) revenue is inadequate for long periods of time, states may have insufficient funds to pay for UC benefits. Federal law, which requires states to pay these benefits, provides a loan mechanism within the UTF framework that an insolvent state may use to meet its UC benefit payment obligations. States must pay back these loans. If the loans are not paid back quickly (depending on the timing of the beginning of the loan period), states may face interest charges, and states' employers may face increased net FUTA rates until the loans are repaid. The U.S. Virgin Islands is the only jurisdiction with an outstanding loan. As of January 18, 2019, it had an outstanding loan of $68.4 million from the federal accounts within the UTF. At the end of 2017, fewer than half of states (24) had accrued enough funds in their accounts to meet or exceed the minimally solvent standard of an average high cost multiple (AHCM) of 1.0 in order to be prepared for a recession. Beginning in FY2015, DOL funded state efforts \"addressing individual reemployment needs of UI claimants, and working to prevent and detect UI overpayments\" through the voluntary Reemployment Services and Eligibility Assessment (RESEA) program. RESEA provides funding to states to conduct in-person interviews with selected UI claimants to (1) assure that claimants are complying with the eligibility rules, (2) determine if reemployment services are needed for the claimant to secure future employment, (3) refer the individual to reemployment services as necessary, and (4) provide labor market information that addresses the claimant's specific needs. Section 30206 of P.L. 115-123 codified the authority for DOL to administer a RESEA program. It also set out various requirements for states to use certain types of evidence-based interventions for UI claimants under RESEA and allocated discretionary funding for RESEA across three categories (base funding, outcome payments, and research and technical assistance). State RESEA programs must include reasonable notice and accommodations to participating UI beneficiaries. On April 4, 2019, DOL published a proposed methodology to allocate base RESEA funds and outcome payments. DOL requested state and public comments on this proposal by May 6, 2019. The President's budget for FY2020 proposes changes to several aspects of the UI system. It would create a new required standard for state account balances within the UTF and a new benefit entitlement for paid parental leave financed through state unemployment taxes. The President's FY2020 budget also proposes a set of additional integrity measures, including the required use of certain databases to confirm UC eligibility and requiring Social Security Disability Insurance (SSDI) benefits offset UI benefits. The President's budget proposal for FY2020 would require states to maintain a minimum level of solvency in their UTF account balances to be at least half (0.5) of the state's AHCM. The proposal would alter the rules for calculating the net FUTA rate, requiring a higher net FUTA rate on a state's employers if that state maintained an AHCM of less than 0.5 on January 1 of two or more consecutive years. The additional FUTA revenue would be deposited into the state UTF account and would be terminated once the state met the 0.5 AHCM criteria. The President's budget proposal for FY2020 would require states to establish a paid parental leave benefit by 2020, using the UC program as its base for an administrative framework. States would be required to provide six weeks of benefits to a worker on leave or otherwise absent from work for the birth or adoption of the worker's child. States would have discretion to determine the parameters of eligibility and financing for this new paid parental leave benefit. The President's 2020 budget would require states to use three specific data sources to confirm an individual's eligibility for UC benefits: the State Information Data Exchange System (SIDES, administered by Information Technology Support Center [ITSC] and DOL); the National Directory for New Hires (NDNH, administered by the Department of Health and Human Services); and the Prisoner Update Processing System (PUPS, administered by the Social Security Administration). The proposal would create several additional integrity measures, including giving the Secretary of Labor the authority to implement new corrective action measures in response to poor state administrative performance within the program; allowing states to retain a percentage of UC overpayments for program integrity use; requiring states to deposit all UC penalty and interest payments into a special state fund, with these funds required to be used for improving state UI administration as well as providing reemployment services for UI claimants; and offsetting SSDI benefits to account for concurrent receipt of UI benefits. Section 2105 of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ; February 22, 2012) amended federal law to allow states to conduct two types of drug testing. First, it expanded the long-standing state option to disqualify UC applicants who were discharged from employment with their most recent employer (as defined under state law) for unlawful drug use by allowing states to drug test these applicants to determine UC benefit eligibility or disqualification. Second, it allowed states to drug test UC applicants for whom suitable work (as defined under state law) is available only in an occupation that regularly conducts drug testing, to be determined under new regulations issued by the Secretary of Labor. As required by  P.L. 112-96 , on August 1, 2016, DOL promulgated  20 C.F.R. Part 620 ,  a new rule to implement the provisions of the law relating to the drug testing of UC applicants for whom suitable work (as defined under state law) is available only in an occupation that regularly conducts drug testing. Amid concerns voiced by stakeholders about the 2016 DOL rule, Congress repealed this UC drug testing rule using the Congressional Review Act (CRA) via H.J.Res. 42 / P.L. 115-17 . On November 5, 2018, DOL published a Notice of Proposed Rulemaking (NPRM) to reissue the rule identifying occupations that regularly conduct drug testing for purposes of Section 2105 of  P.L. 112-96 . The CRA prohibits an agency from reissuing the rule in \"substantially the same form\" or issuing a \"new rule that is substantially the same\" as the disapproved rule, \"unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.\" Notably, this is the first time an agency has proposed to reissue a rule after the original version was disapproved under the CRA. According to the 2018 NPRM, DOL has addressed the reissue requirements of the CRA by proposing a substantially different and more flexible approach to the statutory requirements than the 2016 Rule, enabling states to enact legislation to require drug testing for a far larger group of UC applicants than the previous rule permitted. This flexibility is intended to respect the diversity of states' economies and the different roles played by employment drug testing in those economies. Comments on the proposed 2018 rule were required to be submitted by January 4, 2019. On January 16, 2019, Senator Richard Blumenthal introduced S. 165 , the Federal Unemployment Compensation Equity Act of 2019. This proposal would amend UCFE law and create a new permanent UCFE eligibility category for excepted federal employees who are unpaid but required to work during a government shutdown due to a lapse in appropriations. During any shutdown beginning on or after December 22, 2018, all excepted federal workers would be deemed eligible for UCFE benefits. Additionally, these employees would not be subject to a one-week waiting period (otherwise often required under state laws) before UCFE benefits were to be paid. On January 23, 2019, Representative Debbie Dingell introduced H.R. 725 , the Pay Federal Workers Act. This proposal would also provide UCFE benefits in a similar manner to S. 165 , including permanently amending 5 U.S.C. Chapter 85 to provide federal authority for these benefits. On January 23, 2019, Representative Anthony Brown introduced H.R. 720 . This proposal would deem excepted federal employees during a government shutdown to be eligible for UCFE during FY2019. The authority to provide UCFE to these excepted workers would expire at the end of FY2019. On February 8, 2019, Representative Katie Hill introduced H.R. 1117 , the Shutdown Fairness Act of 2019. This proposal would deem excepted federal employees and unpaid military servicemembers during a government shutdown to be eligible for UCFE or UCX during FY2019. The authority to provide UCFE to these excepted workers would expire at the end of FY2019. On January 15, 2019, Senator Ron Wyden and Representative Danny Davis introduced S. 136 and H.R. 556 , the Economic Ladders to End Volatility and Advance Training and Employment Act of 2019 (the ELEVATE Act) . Among other provisions, this proposal would establish new self-employment and relocation assistance benefits for unemployed workers to be administered by the Social Security Administration, in consultation with DOL. The self-employment assistance benefits would provide weekly income replacement (half of prior earnings up to the maximum weekly benefit amount in the state) for up to of 26 weeks to individuals. They would be available to individuals who are (1) eligible for any type of UI benefit; or ineligible for any type of UI benefit, but became involuntarily unemployed over the previous 12 weeks; or were previously self-employed, but lost a hiring contract, and (2) have a viable business plan approved by their state department of labor, workforce board, or the Small Business Administration. Additionally, Section 3 of S. 136 and H.R. 556 would provide up to $2,000 (or more, depending on family size) to fund to up to 90% of certain relocation expenses for eligible individuals and their families. In order to be eligible for this relocation assistance, an individual must be a (1) dislocated worker, (2) long-term unemployed individual, or (3) underemployed individual and also have filed a claim for relocation assistance and obtained suitable work with an expectation of obtaining such work in a new geographic region. On March 7, 2019, Representative Karen Bass introduced H.R. 1585 , the Violence Against Women Reauthorization Act of 2019. Among many other provisions, Section 703 of H.R. 1585 would require states to consider an individual who quit employment because of sexual harassment, domestic violence, sexual assault, or stalking to be eligible for UC benefits. The House passed H.R. 1585 on April 4, 2019. On March 14, 2019, Representative Stephanie Murphy introduced H.R. 1759 , the Building on Reemployment Improvements to Deliver Good Employment (BRIDGE) for Workers Act. This proposal would extend eligibility to any claimant of unemployment benefits, including those profiled as likely to exhaust benefits (rather than limiting eligibility to those who were profiled as likely to exhaust benefits). The House passed H.R. 1759 on April 9, 2019. The Extended Benefit (EB) program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA; P.L. 91-373) (26 U.S.C. §3304, note). EUCA may extend receipt of unemployment benefits (extended benefits) at the state level if certain economic conditions exist within the state. As of the date of this publication, EB is not active in any state. Extended Benefit Triggers The EB program is triggered when a state's insured unemployment rate (IUR) or total unemployment rate (TUR) reaches certain levels. All states must pay up to 13 weeks of EB if the IUR for the previous 13 weeks is at least 5% and is 120% of the average of the rates for the same 13-week period in each of the two previous years. States may choose to enact two other optional thresholds. (States may choose one, two, or none.) If the state has chosen one or more of the EB trigger options, it would provide the following: Option 1—up to an additional 13 weeks of benefits if the state's IUR is at least 6%, regardless of previous years' averages. Option 2—up to an additional 13 weeks of benefits if the state's TUR is at least 6.5% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years; up to an additional 20 weeks of benefits if the state's TUR is at least 8% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years. EB benefits are not \"grandfathered\" (phased out) when a state triggers \"off\" the program. When a state triggers \"off\" of an EB period, all EB benefit payments in the state cease immediately regardless of individual entitlement. The EB benefit amount is equal to the eligible individual's weekly regular UC benefits. Under permanent law, FUTA finances half (50%) of the EB payments and 100% of EB administrative costs. States fund the other half (50%) of EB benefit costs through their SUTA. On March 7, 2019, Representative Karen Bass introduced H.R. 1585 , the Violence Against Women Reauthorization Act of 2019. Among many other provisions, Section 703 of H.R. 1585 would require states to consider an individual who quit employment because of sexual harassment, domestic violence, sexual assault, or stalking to be eligible for UC benefits. The House passed H.R. 1585 on April 4, 2019. On March 14, 2019, Representative Stephanie Murphy introduced H.R. 1759 , the Building on Reemployment Improvements to Deliver Good Employment (BRIDGE) for Workers Act. This proposal would extend eligibility to any claimant of unemployment benefits, including those profiled as likely to exhaust benefits (rather than limiting eligibility to those who were profiled as likely to exhaust benefits). The House passed H.R. 1759 on April 9, 2019.", "summary": "The 116th Congress has begun to consider several issues related to two programs in the unemployment insurance (UI) system: Unemployment Compensation (UC) and Unemployment Compensation for Federal Employees (UCFE). The lapse in federal appropriations that occurred from December 22, 2018, to January 25, 2019, created a partial government shutdown. As a result, agencies without funding furloughed many federal employees, and many federal employees excepted from furlough were working without pay during the lapse in appropriations. Furloughed federal employees may be eligible for UCFE benefits. Private-sector workers who are furloughed or laid off due to the partial government shutdown because they were employed by government contractors may be eligible for regular UC benefits. But, according to guidance from the U.S. Department of Labor (DOL), excepted federal employees who are performing services (without pay) would generally be ineligible for UCFE benefits based on states' definitions of \"unemployment.\" In this climate, there has been congressional interest in assisting furloughed and excepted federal employees through the UI system. UI legislative issues currently facing the 116th Congress include the following: the effects of the FY2019 sequester order on UI programs and benefits, the role of UI in providing temporary income replacement during a government shutdown, state fiscal concerns related to financing UC benefits, reemployment services and eligibility assessments (RESEA), potential consideration of the UI proposals included in the President's FY2020 budget, and congressional oversight related to a proposed UC drug testing rule reissued by DOL after previously being disapproved using the Congressional Review Act. In the 116th Congress, policymakers have introduced legislation related to UCFE benefits in response to the recent partial government shutdown (S. 165, H.R. 720, H.R. 725, and H.R. 1117), legislation to provide self-employment and relocation assistance benefits (S. 136 and H.R. 556), legislation to require that states consider an individual who quit employment because of sexual harassment, domestic violence, sexual assault, or stalking to be eligible for UC benefits (H.R. 1585), and legislation to amend Title III of the Social Security Act to extend RESEA to all UC claimants (H.R. 1759). For a brief overview of UC, see CRS In Focus IF10336, The Fundamentals of Unemployment Compensation.", "document_type": "crs"}
{"report": "A variety of issues related to housing were active during the 115 th Congress, including issues related to housing finance, housing-related tax provisions, housing assistance and grant programs (including in response to presidentially declared major disasters), and actions undertaken by the Department of Housing and Urban Development (HUD) as part of its efforts to review existing department regulations. This report provides a high-level overview of the most prominent housing-related issues during the Congress, including brief background on each and discussion of legislative or other relevant activity. This report is meant to provide a broad overview of major issues and is not intended to provide detailed information or analysis. However, it includes references to more in-depth CRS reports on the issues where possible. This section provides background on housing and mortgage market conditions to provide context for the housing policy issues discussed later in the report. This discussion of market conditions is at the national level; however, it is important to be aware that local housing market conditions can vary dramatically, and national housing market trends may not reflect the conditions in a specific area. Nevertheless, national housing market indicators can provide an overall sense of general trends in housing. For several years since the housing and financial market turmoil of the late 2000s, housing markets have been recovering from house price declines, high rates of mortgage foreclosures, and other symptoms of the housing crisis. While some areas of the country have not fully recovered, most housing market indicators have rebounded. For example, house prices have been increasing for several years, and in many areas have passed their pre-crisis peaks in nominal terms; foreclosure rates have generally declined to levels similar to the years preceding the housing market turmoil; and housing market activity in general is increasing. As many communities have recovered, other housing market conditions have received increased attention. Some of the most prominent considerations that are often discussed in relation to current housing markets include the following: Affordability of Both Owner-Occupied and Rental Housing: In many areas of the country, housing affordability has been an ongoing issue for both homebuyers and renters. House prices and rental costs have increased in recent years and have generally increased faster than incomes. Despite concerns about the affordability of owner-occupied housing, many metrics suggest that homeownership is currently relatively affordable by historical standards; however, such measures generally focus on the ability of households to afford monthly mortgage payments and do not consider other costs of purchasing a home, such as saving for a down payment. Housing Inventory: The available housing inventory is one factor that affects housing affordability, as too few homes available for sale or rent can increase home prices or rents. Limited inventory, particularly of modestly priced housing, appears to be impacting affordability and home sales in many housing markets. Relatively low levels of new home construction is one of the factors contributing to lower levels of housing inventory. Mortgage Access: The availability of mortgage credit tightened in the aftermath of the housing crisis, for a variety of reasons. While credit is not currently as tight as it was at the peak, some argue that it is still too difficult for some creditworthy households to obtain affordable mortgages. Others, however, argue that mortgage standards are loosening too much for certain types of mortgages. The following subsections provide an overview of selected indicators reflecting conditions in owner-occupied housing markets and the mortgage market, and rental markets, respectively, during the 115 th Congress. Some of the included graphics show housing market indicators over time; these graphics highlight the time period of the 115 th Congress to allow readers easily to see the levels and trends in these indicators during the Congress. In some cases, these graphics include data for the entire 115 th Congress (2017-2018), while in other cases data covering the full time period of the 115 th Congress were not available as of the date of the final update of this report. Over the past few years, on a national level, markets for owner-occupied housing have generally been characterized by rising home prices, low inventory levels, housing starts that are increasing but remain relatively low by historical standards, and home buying activity that is beginning to return to pre-crisis levels. Housing starts remain below the levels seen in the mid-1990s and early 2000s. For the most part, mortgage foreclosures and negative equity, which characterized the housing and economic turmoil that began around 2007, have eased. However, national statistics can mask the experience of local housing markets, and not all communities have recovered equally from the effects of the housing crisis. Most homebuyers take out a mortgage to purchase a home. Therefore, owner-occupied housing markets are closely linked to the mortgage market, although they are not the same. The ability of prospective homebuyers to obtain mortgages and the costs of those mortgages impact housing demand and affordability. As shown in Figure 1 , on a national basis, nominal house prices have been increasing on a year-over-year basis in each quarter since the beginning of 2012. Year-over-year house price changes have been above 5% in each quarter since the second quarter of 2015 and over 6% since mid-2017. These increases follow almost five years of house price declines in the years during and surrounding the economic recession of 2007-2009 and associated housing market turmoil. House prices vary greatly across local housing markets. In some areas of the country, prices have fully regained or even exceeded their pre-recession levels in nominal terms, while in other areas prices remain below those levels. Furthermore, house price increases affect participants in the housing market differently. Rising prices reduce affordability for prospective homebuyers, but they are generally beneficial for current homeowners, who benefit from the increased home equity that accompanies them (although rising house prices also have the potential to negatively impact affordability for current homeowners through increased property taxes). For several years, mortgage interest rates have been low by historical standards. As shown in Figure 2 , average mortgage interest rates have been consistently below 5% since May 2010 and have been below 4% for several stretches during that time. Lower interest rates increase mortgage affordability and make it easier for some households to purchase homes or refinance their existing mortgages. Mortgage interest rates have generally increased since the start of 2018, though they decreased somewhat in December 2018, ending the year at 4.64%. Rising interest rates may make mortgages less affordable for some households, contributing to homeownership affordability pressures. As house prices have been rising for several years on a national basis, and as mortgage interest rates have also begun to rise, concerns about the affordability of owner-occupied housing have increased. Incomes have also been rising in recent years, helping to mitigate some affordability pressures, but in general incomes have not been rising as quickly as house prices. Despite rising house prices, many metrics of housing affordability suggest that owner-occupied housing is currently relatively affordable. These metrics generally measure the share of income that a median-income family would need to qualify for a mortgage to purchase a median-priced home, subject to certain assumptions. Therefore, rising incomes and, especially, interest rates that are still low by historical standards contribute to homes, and borrowers' monthly mortgage payments in particular, being considered affordable despite recent house price increases. Some factors that affect housing affordability may not be captured by these metrics, however. For example, many of the metrics are based on certain assumptions (such as a borrower making a 20% down payment) that may not apply to many households. Furthermore, since they typically measure the affordability of monthly mortgage payments, they often do not take into account other affordability challenges that homebuyers may face, such as affording a down payment and other upfront costs of purchasing a home (costs that generally increase as home prices rise). Other factors—such as the ability to qualify for a mortgage, the availability of homes on the market, and regional differences in house prices and income—may also make homeownership less attainable for some households. Finally, some of these factors may have a bigger impact on affordability for certain specific demographic groups, as income trends and housing preferences are not uniform across all segments of the population. To the extent that house prices and interest rates continue to increase, housing affordability could become more of an issue going forward. Many market observers have pointed to low levels of housing inventory as being a key contributor to rising house prices. One measure of the housing inventory is the months' supply of new and existing homes for sale—that is, how many months it would take for all of the homes that are currently on the market to sell based on the current pace of home sales, assuming no additional homes were placed on the market. According to HUD, using data from the National Association of Realtors and the U.S. Census Bureau, the months' supply of homes for sale has generally been below the historical average of six months of late, and the inventory of homes for sale has been low for several years. One factor that affects housing inventory is the decision of existing homeowners to put their homes on the market. A number of considerations may be impacting owners' decisions about whether to sell their homes, including concerns about being able to find a suitable new home to purchase. Another factor that affects the housing inventory is the amount of new construction. In recent years, levels of new construction have been relatively low by historical standards, reflecting a variety of considerations including labor shortages and the cost of building. One measure of the amount of new construction is housing starts. Housing starts are the number of new housing units on which construction is started in a given period and are typically reported monthly as a \"seasonally adjusted annual rate.\" This means that the number of housing starts reported for a given month (1) has been adjusted to account for seasonal factors and (2) has been multiplied by 12 to reflect what the total number of housing starts would be if the current month's pace continued for an entire year. That is, the number reported for a given month is the annual number of housing starts that would result if the number of starts per month continued at the current month's rate for 12 months. Figure 3 shows the seasonally adjusted annual rate of starts on one-unit homes for each month from January 1995 through November 2018. Housing starts for single-family homes fell during the housing market turmoil, reflecting decreased home purchase demand. In recent years, as demand has increased, housing starts have been mostly increasing as well, though they remain below the levels seen in the late 1990s and early 2000s. From 2000 through 2007, the seasonally adjusted annual rate of housing starts in one-unit residential buildings was generally between 1.2 million and 1.8 million each month, before falling to a rate of between 400,000 and 600,000 for each month until about 2013. More recently, housing starts have been trending upward, and the seasonally adjusted annual rate averaged about 850,000 during 2017. In November 2018, the seasonally adjusted annual rate of housing starts was 824,000. Despite limited inventory and rising home prices, home sales have been increasing in recent years. Home sales include sales of both existing and newly built homes. Existing home sales generally number in the millions each year, while new home sales are usually in the hundreds of thousands.  Figure 4 shows the annual number of existing and new home sales for each year from 1995 through 2017. Existing home sales numbered about 5.5 million in 2017, representing the third straight year of increases and the highest level since 2006. New home sales numbered about 614,000 in 2017. This was the highest level since 2007, but the number of new home sales remains appreciably lower than in the late 1990s and early 2000s, when they tended to be between 800,000 and 1 million per year. Some prospective homebuyers may find themselves unable to obtain mortgages due to their credit histories, other financial characteristics, the cost of obtaining a mortgage (such as down payments and closing costs), or other factors. In general, it is beneficial to the housing market when creditworthy homebuyers are able to obtain mortgages to purchase homes. However, access to mortgages must be balanced against the risk of offering them to people who will not be willing or able to repay the money they borrowed. Striking the right balance of credit access and risk management and the question of who is considered to be \"creditworthy\" are subjects of ongoing debate. A variety of organizations attempt to measure the availability of mortgage credit. While their methods vary, many experts agree that access to mortgage credit is tighter than it was in the early 2000s, prior to the housing bubble that preceded the housing market turmoil later in the decade, although it has eased somewhat of late. Despite this easing, some have argued that access to mortgage credit is still too tight, and that the mortgage market is taking on less default risk than it did in the years prior to the loosening of credit standards during the housing bubble. Others have argued that mortgage credit standards are easing too much, focusing on the fact that credit standards for certain types of mortgages, such as those insured by the Federal Housing Administration (FHA), have appeared to loosen somewhat in recent years compared to the immediate aftermath of the housing market turmoil when standards tightened across the board. They argue that easing credit standards unsustainably increases the risk of certain types of mortgages and contributes to higher house prices by allowing households to leverage higher amounts of mortgage debt. FHA itself has noted that it is monitoring certain trends, such as a larger share of new FHA-insured mortgages with higher debt-to-income ratios and the performance of loans with certain types of down payment assistance, that have the potential to increase risk to FHA. When a lender originates a mortgage, it can choose to hold that mortgage in its own portfolio, sell it to a private company, or sell it to Fannie Mae or Freddie Mac, two congressionally chartered government-sponsored enterprises (GSEs). Fannie Mae and Freddie Mac bundle mortgages into securities and guarantee investors payments on those securities. Furthermore, a mortgage might be insured by a federal government agency, such as the FHA or the Department of Veterans Affairs (VA). Most FHA-insured or VA-guaranteed mortgages are included in mortgage-backed securities that are guaranteed by Ginnie Mae, another government agency. In the years after the housing bubble burst, there was an increase in the share of mortgages that either had mortgage insurance from a government agency or were guaranteed by Fannie Mae or Freddie Mac, leading some to express concern about increased government exposure to risk and a lack of private capital in the mortgage market. As shown in Figure 5 , about two-thirds of the total dollar volume of mortgages originated during the first three-quarters of 2018 were either guaranteed by a federal agency such as FHA or VA (22%) or backed by Fannie Mae or Freddie Mac (45%). Close to one-third of the dollar volume of mortgages originated was held in bank portfolios (31%), while about 2% was securitized in the private market. The share of new mortgage originations, by dollar volume, insured by a federal agency or guaranteed by Fannie Mae or Freddie Mac has fallen from a high of nearly 90% in 2009, during the housing market turmoil. Nevertheless, the share of mortgage originations with federal mortgage insurance or a Fannie Mae or Freddie Mac guarantee remains elevated compared to the 2002-2007 period, when FHA and VA mortgages constituted a small share of the mortgage market and the GSE share ranged from about 30% to 50%. The FHA and VA share of mortgages during the 2002-2007 period was low by historical standards, however, as many households opted for other types of mortgages, including subprime mortgages, during that time. In the years since the housing market turmoil began, the homeownership rate has decreased while the percentage of renter households has correspondingly increased. Although new rental housing units have also been created, both through new construction and as some formerly owner-occupied homes are converted to rentals, in many markets the rise in the number of renters increased competition for rental housing, leading to lower rental vacancy rates and higher rents in recent years. This, in turn, has resulted in more renter households being considered cost-burdened, commonly defined as paying more than 30% of income toward housing costs. As shown in Figure 6 , the share of renters has generally been increasing for the last decade, reaching close to 37% of all occupied housing units in 2016. This was the highest share of renters since the early 1990s. The homeownership rate has correspondingly decreased, falling from a high of 69% in 2004 to just over 63% in 2016. Most recently, in 2017, the share of renters decreased slightly, to about 36%, and the homeownership rate increased slightly, to nearly 64%. In addition to an increase in the share of households who rent, the overall number of renter households has been increasing as well. In 2016, there were nearly 43.3 million occupied rental housing units, compared to 40 million in 2013 and 35.9 million in 2008. The number of renter households decreased in 2017, to 43.1 million. (In comparison, the number of housing units occupied by an owner decreased somewhat after 2008 before beginning to rise again in recent years. The number of housing units occupied by owners was 76.6 million in 2017, compared to about 75.7 million in 2008. ) In general, the increase in renters has led to a decrease in rental vacancy rates in many, though not all, areas of the country. This has been the case in many areas despite the creation of new rental units through both new construction and the conversion of some previously owner-occupied single-family units to rental housing. In many cases, the increase in the rental housing supply has not kept up with the increase in rental housing demand. As shown in Figure 7 , on a national basis the rental vacancy rate was over 10% in most quarters from 2008 through 2010. Since then, the rate has mostly declined, reaching about 8% at the end of 2013 and 7% at the end of each year from 2014 through 2017. The rental vacancy rate did increase somewhat throughout much of 2017, reaching 7.5% in the third quarter, before decreasing back to about 7% for most of 2018. Furthermore, the market for affordable rental units has been particularly tight, as many of the rental units that have been constructed in recent years have been at the higher end of the market. Rental housing affordability is impacted by a variety of factors, including the supply of rental housing units available, the characteristics of those units (e.g., age and amenities), and the demand for available units. As noted previously, new housing units have been added to the rental stock in recent years through both construction of new rental units and conversions of existing owner-occupied units to rental housing. At the same time, however, the demand for rental housing has increased as more households have become renters. Furthermore, much of the new rental housing construction in recent years has been higher-end construction rather than lower-cost units. The increased demand for rental housing, as well as the concentration of new rental construction in higher-cost units, has led to increases in rents in recent years. Median renter incomes have also been increasing for the last several years, at times outpacing increases in rents. However, over the longer term, median rents have increased faster than renter incomes. For example, between 2001 and 2017, in real terms the median rent (less utilities) for recent movers has risen over 25% while the median renter income has increased about 6%, reducing rental affordability over that time period. Rising rental costs and renter incomes that are not keeping up with rent increases over the long term can contribute to housing affordability problems, particularly for households with lower incomes. Under one common definition, housing is considered to be affordable if a household is paying no more than 30% of its income in housing costs. Under this definition, households that pay more than 30% are considered to be cost-burdened, and those that pay more than 50% are considered to be severely cost-burdened. The overall number of cost-burdened renter households has generally increased in recent years, from 15.7 million in 2003 to 20.8 million in 2016, although the number of cost-burdened renter households in 2016 represented a decrease from over 21 million in both 2014 and 2015. (Over this time period, the overall number of renter households has increased as well.) As shown in Figure 8 , cost burdens are most prevalent among lower-income renter households. Among renter households with incomes below $30,000, 80% are cost-burdened, with over half experiencing severe cost burdens. However, cost burdens affect households of all incomes: half of renter households with incomes of at least $30,000 but less than $45,000, and over 20% of renter households with incomes of at least $45,000 but less than $75,000, were cost burdened in 2016. Moderate-income renter households have experienced some of the greatest increases in cost burdens since the early 2000s. Furthermore, according to HUD, 8.3 million renter households were considered to have \"worst-case housing needs\" in 2015 (the most recent data available). Households with worst-case housing needs are defined as renter households with incomes at or below 50% of area median income who do not receive federal housing assistance and who pay more than half of their incomes for rent, live in severely inadequate conditions, or both. The 8.3 million renter households with worst-case housing needs in 2015 represented an increase from 7.7 million in 2013 and was similar to 2011 (8.5 million households). In comparison, the number of renter households with worst-case housing needs in 2005 and 2007 was about 6 million. Several of the issues that were of interest during the 115 th Congress are related to the financing of housing. In some cases, these issues can impact the financing of both owner-occupied housing and rental housing, though in other cases they are primarily relevant to one or the other. The financial crisis of 2007-2009 led to a variety of legislative and regulatory responses intended to address its perceived causes. These responses included new requirements on financial institutions, some of which were related to mortgages. Many of these requirements were enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ) in 2010. In the years since, there has been ongoing debate about the extent to which the new requirements achieve the right balance of protecting consumers and the financial system from potentially risky mortgage features without unduly restricting access to credit for creditworthy households. During the 115 th Congress, a variety of bills were considered to amend certain financial regulatory requirements, including requirements related to mortgages. Most notable among these for housing was the Economic Growth, Regulatory Relief, and Consumer Protection Act ( P.L. 115-174 ), which became law in May 2018. The act includes a variety of provisions related to financial regulatory requirements, including some mortgage-related requirements. In general, it modifies these mortgage-related requirements rather than eliminating them entirely. The act also includes some additional provisions related to housing. Provisions of the act that modify mortgage-related requirements that were put in place after the housing market turmoil include the following: allowing certain mortgages originated and held in portfolio by small depository institutions to be considered \"qualified mortgages\" for the purposes of complying with the ability-to-repay rule; making changes to requirements related to certain property appraisals; exempting some banks and credit unions that make fewer than a particular number of mortgage loans from specified new reporting requirements under the Home Mortgage Disclosure Act (HMDA); providing grace periods for individuals working as mortgage originators to obtain the proper licensing to originate mortgages in their new positions when they move from banks to nonbanks or across state lines; expanding the circumstances under which manufactured home retailers and their employees can be excluded from the definition of mortgage originators, and therefore exempt from certain requirements that apply to mortgage originators, subject to specified conditions; and waiving the waiting period between receipt of particular mortgage-related disclosures and the mortgage closing when a borrower is offered a lower interest rate after initial receipt of the disclosures. While supporters of the act argued that these are targeted changes that will help to ease unnecessarily burdensome regulations and increase the availability of mortgage credit, opponents argued that they weaken or eliminate certain protections that were put in place in response to practices that harmed consumers and ultimately the broader mortgage market. The act also includes several other mortgage- or housing-related provisions. These include the following: requirements intended to address concerns about certain refinancing practices related to some mortgages guaranteed by the Department of Veterans Affairs; making permanent specified protections for renters in foreclosed properties that had been put in place by the Protecting Tenants at Foreclosure Act (Title VII of the Helping Families Save Their Homes Act, P.L. 111-22 ) in 2009 but had since expired; making permanent a one-year protection against foreclosure for active duty servicemembers under particular circumstances; requiring Fannie Mae and Freddie Mac to consider alternative credit scoring models for mortgages purchased by those institutions; making Property Assessed Clean Energy (PACE) loans, which allow some homeowners to finance specified energy improvements through property tax assessments, subject to the ability-to-repay requirements that apply to most mortgages; certain changes related to small public housing agencies; changes to HUD's Family Self-Sufficiency program, an asset-building program for residents of public and assisted housing; and requiring certain reports, including a report by HUD on lead paint hazards and abatement and a Government Accountability Office (GAO) report on foreclosures in Puerto Rico in the aftermath of Hurricane Maria. A dditional information: For an expanded discussion of the provisions of P.L. 115-174 , see CRS Report R45073, Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174) and Selected Policy Issues . The U.S. housing finance system supports about $10 trillion in outstanding single-family residential mortgage debt and over $1 trillion in multifamily residential mortgage debt. Two major players in the housing finance system are Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) that were created by Congress to provide liquidity to the mortgage market. By law, Fannie Mae and Freddie Mac cannot make mortgages; rather, they are restricted to purchasing mortgages that meet certain requirements from lenders. Once the GSEs purchase a mortgage, they either package it with others into a mortgage-backed security (MBS), which they guarantee and sell to institutional investors, or retain it as a portfolio investment. Fannie Mae and Freddie Mac are involved in both single-family and multifamily housing, though their single-family businesses are much larger. In 2008, during the housing and mortgage market turmoil, Fannie Mae and Freddie Mac entered voluntary conservatorship overseen by their regulator, the Federal Housing Finance Agency (FHFA). As part of the legal arrangements of this conservatorship, the Department of the Treasury contracted to purchase over $200 billion of new senior preferred stock from each of the GSEs; in return for this support, Fannie Mae and Freddie Mac pay dividends on this stock to Treasury. To date, Treasury has purchased a total of over $191 billion of senior preferred stock from the two GSEs and has received a total of nearly $280 billion in dividends. These funds become general revenues. Since the first quarter of 2012, the only time Fannie Mae and Freddie Mac have drawn on their lines of credit with Treasury was in the fourth quarter of 2017; this draw was attributed to changes in the value of deferred tax assets as a result of the tax revision law that was enacted in late 2017 ( P.L. 115-97 ). Since Fannie Mae and Freddie Mac were placed in conservatorship in 2008, policymakers have largely agreed on the need for comprehensive housing finance reform legislation that would transform or eliminate the GSEs' role in the housing finance system. While there is broad agreement on certain principles of housing finance reform—such as increasing the private sector's role in the mortgage market and maintaining access to affordable mortgages for creditworthy households—there is disagreement over how best to achieve these objectives and over the technical details of how a restructured housing finance system should operate. The 113 th Congress considered, but did not enact, housing finance reform legislation. The 114 th Congress considered a number of more-targeted reforms to Fannie Mae and Freddie Mac, but did not actively consider comprehensive housing finance reform legislation. During the 115 th Congress, Members on the House and Senate committees of jurisdiction and Administration officials indicated that housing finance reform would be a priority. However, little formal legislative action on the issue took place, and in July 2018, Treasury Secretary Steven Mnuchin suggested at a House Financial Services Committee hearing that housing finance reform would be a focus in the 116 th Congress. In September 2018, House Financial Services Committee Chairman Jeb Hensarling released a discussion draft of a comprehensive housing finance reform bill with some bipartisan support. Chairman Hensarling also indicated plans to reintroduce the Protecting American Taxpayers and Homeowners Act (PATH Act) from the 113 th Congress, which takes a different approach to housing finance reform. However, noting that the reintroduced PATH Act ( H.R. 6746 ) was considered unlikely to pass, he said that he would pursue the discussion draft bill as an alternative. The Financial Services Committee held a hearing on the discussion draft bill in December 2018. In addition to considering the role of the GSEs in the housing finance system, any future housing finance reform legislation could also consider changes to the Federal Housing Administration (FHA). FHA is a part of the Department of Housing and Urban Development (HUD) and insures certain mortgages made by private lenders against the possibility of borrower default. By insuring these mortgages, FHA helps to make affordable mortgages more available to borrowers who might otherwise not be well-served by the private mortgage market, such as borrowers with low down payments. Apart from comprehensive reform of the housing finance system, several additional issues related to Fannie Mae and Freddie Mac received attention during the 115 th Congress. These included (1) an FHFA decision to allow Fannie Mae and Freddie Mac to each retain $3 billion in capital (under the terms of the Treasury support agreements, the amount of capital they are allowed to retain was scheduled to fall to zero at the beginning of 2018), (2) the need for both Fannie Mae and Freddie Mac to draw on their lines of credit with Treasury in the fourth quarter of 2017 due to a reduction in the value of deferred tax assets as a result of the tax revision law passed in late 2017, and (3) FHFA directing Fannie Mae and Freddie Mac to continue to make required contributions to certain affordable housing funds despite the draw from Treasury. For more information on these issues in particular, see CRS In Focus IF10851, Housing Finance: Recent Policy Developments . A dditional information: For background on the housing finance system in general, see CRS Report R42995, An Overview of the Housing Finance System in the United States . For information on Fannie Mae and Freddie Mac and their conservatorship, see CRS Report R44525, Fannie Mae and Freddie Mac in Conservatorship: Frequently Asked Questions . For background on FHA, see CRS Report RS20530, FHA-Insured Home Loans: An Overview . The Federal Housing Administration (FHA), part of HUD, insures certain mortgages made by private lenders against the possibility of the borrower defaulting. FHA insurance protects the lender in the event of borrower default, which is intended to increase the availability of affordable mortgage credit to households who might otherwise be underserved by the private mortgage market. FHA charges borrowers both upfront and annual fees, referred to as mortgage insurance premiums, in exchange for this insurance. These fees are supposed to cover the costs of paying a claim to a lender if an FHA-insured mortgage defaults and goes to foreclosure. By law, the HUD Secretary has a responsibility to ensure that the FHA single-family mortgage insurance fund remains financially sound and that the fund is in compliance with a requirement that it maintain a capital ratio of at least 2%. FHA raised the premiums it charges several times in the years during and following the housing market turmoil in response to concerns about rising mortgage delinquency rates and FHA's ability to maintain compliance with the capital ratio requirement. It then lowered the annual premiums in 2015 as mortgage delinquency rates began to decrease and its financial position stabilized. The level of the premiums charged by FHA is often a topic of interest. The premiums have implications for the affordability and availability of FHA-insured mortgages for certain homebuyers, on the one hand, and for the financial health of the FHA insurance fund, on the other; setting the appropriate premium level involves balancing these considerations. Early in January 2017, HUD announced that it planned to decrease the annual mortgage insurance premium it charged for new mortgages that closed on or after January 27, 2017. However, on January 20, 2017, the first day of the Trump Administration, HUD suspended the planned decrease before it went into effect, citing a need to further analyze the potential impact that a mortgage insurance premium decrease could have on the FHA insurance fund. In its Annual Report to Congress on the Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund) in November 2017, FHA stated that had the planned premium decrease gone into effect, the estimated capital ratio for the MMI Fund would have fallen below the statutorily mandated capital ratio requirement of 2% for FY2017. (The actual estimated capital ratio for FY2017 was lower than FY2016, but remained above 2%.) The estimated lower capital ratio would have been due to a combination of (1) less premium revenue coming into the fund as a result of the lower premiums and (2) an increase in the total dollar amount of mortgages that would have been insured as a result of more borrowers obtaining FHA-insured mortgages due to the lower premiums. The report also suggests, however, that reverse mortgages insured by FHA are having a disproportionately negative impact on the insurance fund, raising questions about the extent to which the performance of the reverse mortgage portfolio may, or should, impact decisions about the premiums charged to forward-mortgage borrowers. A dditional information: For more information on FHA-insured mortgages in general, including the current premium levels, see CRS Report RS20530, FHA-Insured Home Loans: An Overview . For more information on the financial status of FHA's single-family mortgage insurance fund, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund) . FHA-insured mortgages can be used to purchase condominium units as well as other types of single-family homes. However, HUD places specific requirements on FHA-insured mortgages for condominiums that may affect the eligibility of a condominium mortgage for the insurance. In order for FHA to insure a mortgage on a condominium unit, HUD requires that the entire condominium project where the unit is located have FHA approval. In order for the condominium project to be approved, it must meet a variety of requirements. These include, among others, a minimum percentage of units that must be owner-occupied, and limits on the amount of nonresidential space and the percentage of units that are behind on their association dues. Condominium buildings seeking FHA approval must go through a certification process and a periodic recertification process to maintain FHA approval. In 2009, HUD made a number of changes related to condominium mortgage insurance. In addition to tightening several requirements, it ended a practice known as \"spot approval,\" in which a mortgage on a condominium located in a project that did not have FHA approval could qualify for FHA insurance on a case-by-case basis. Requirements placed on condominium projects seeking FHA approval are intended to ensure that the buildings themselves are well-managed and financially stable, which in turn is thought to make mortgages on individual units in the building less risky. However, some industry groups and others have argued that many of the changes that FHA made are too strict and unnecessarily reduce access to FHA-insured mortgages for prospective condominium buyers and for condominium owners who seek FHA-insured reverse mortgages. While the specifics of debates around individual requirements related to FHA approval of condominium buildings may vary, in general the debate around these requirements is usually framed as a question of how to balance access to FHA-insured mortgages with making sure that insured mortgages do not pose an undue risk to the financial health of the FHA insurance fund. In July 2016, towards the end of the 114 th Congress, the Housing Opportunity Through Modernization Act (HOTMA, P.L. 114-201 ) was enacted. While most of the provisions of HOTMA affected HUD rental assistance programs, there were four provisions related to FHA's requirements for insuring mortgages on condominium units. These provisions directed the HUD Secretary to (1) streamline the recertification process for FHA approval of condominium buildings to make it less burdensome, (2) make changes to the process for granting exceptions for exceeding FHA's limits on commercial space, (3) adopt Federal Housing Finance Agency (FHFA) regulations related to transfer fees and condominiums, and (4) issue new guidance, and a justification, addressing the required percentage of owner-occupied units in the building. In September 2016, during the 114 th Congress, HUD issued a comprehensive proposed rule related to approval of condominium projects. While this rulemaking takes the HOTMA provisions into account, it is broader than just the areas addressed by HOTMA and had been in the development stages prior to the passage of the act. Among other things, it proposed a single-unit approval process, similar to the previous spot approval process, to provide a way for FHA-insured mortgages to be approved for condominiums in buildings that are not FHA-approved, subject to certain conditions. In June 2018, over a hundred Members of Congress signed a letter to HUD urging it to finalize the rule. As of the end of the 115 th Congress, HUD had not yet issued a final rule. A dditional information: For more information on the condominium-related provisions included in HOTMA, see CRS Report R44358, Housing Opportunity Through Modernization Act (H.R. 3700) . During the 115 th Congress, a number of housing-related tax provisions were modified or extended through different pieces of enacted legislation: a broad tax revision law that included changes to housing-related tax provisions, tax extenders legislation that extended temporary tax provisions related to housing, and an appropriations law that included changes to the low-income housing tax credit. Two of the largest and most well-known tax incentives available to homeowners are the mortgage interest deduction and the deduction for property taxes. Homeowners are allowed to deduct interest paid on a mortgage that finances the acquisition of a primary or secondary residence as long as the homeowner itemizes their tax deductions. Historically, the amount of interest that was allowed to be deducted was limited to the interest incurred on the first $1 million of combined mortgage debt and the first $100,000 of home equity debt ($1.1 million total). If a taxpayer's mortgage debt exceeded $1 million, they were still allowed to claim a deduction for a percentage of interest paid. Homeowners also benefit from the ability to deduct state and local property taxes. Historically, homeowners were allowed to claim an itemized deduction equal to the full amount of state and local property taxes paid. Not all homeowners claim these deductions. Some have no mortgage, and hence no interest to deduct. Others may be toward the end of their mortgage repayment period, and thus paying relatively little interest, so the deduction for interest is not worth much. Some homeowners live in states with low state and local taxes, and may find the standard deduction to be more valuable. Some may also live in low-cost areas and therefore have a relatively small mortgage and property taxes. There may also be interactions with other drivers of itemization. For example, itemization rates tend to be lower in states with an income tax, which can also lead to fewer homeowners claiming the deductions for mortgage interest and property taxes. Among households that do claim the deductions, the majority of their advantages tend to benefit those with higher income. This is in part because these households are more likely to have a financial incentive to itemize their taxes and claim the deductions. It is also because higher-income households are more likely to have more expensive homes with larger mortgages, and therefore more likely to have higher property taxes and larger amounts of mortgage interest to deduct, and because the tax benefits increase with higher marginal tax rates in higher income brackets. Some have argued that the ability to deduct mortgage interest and property taxes incentivize homeownership and have pointed to several perceived benefits of homeownership as a rationale for these tax benefits. However, some researchers have suggested that these deductions have little effect on the homeownership rate, in part because they do not reduce the upfront cost of buying a home, which is one of the biggest barriers to homeownership for many households. This research suggests that the tax benefits may incentivize homebuyers to purchase larger homes than they otherwise would, however, because they increase households' purchasing power and the benefit of the deductions increases with more expensive homes and larger mortgages. The above discussion draws from CRS Report R41596, The Mortgage Interest and Property Tax Deductions: Analysis and Options . Readers can refer to that report for a fuller exploration of these tax benefits, including the rationales put forward for them, an economic analysis of their effects, and a discussion of research related to their impact. In late 2017, a broad tax revision law ( P.L. 115-97 ) that substantively changed the federal tax system was signed into law by President Trump. The legislation temporarily reduced the maximum amount of mortgage debt for which interest can be deducted to $750,000 ($375,000 for married filing separately) for debt incurred after December 15, 2017. For mortgage debt incurred on or before December 15, 2017, the combined mortgage limit remains $1 million ($500,000 for married filing separately). Refinanced mortgage debt will be treated as having been incurred on the date of the original mortgage for purposes of determining which mortgage limit applies ($750,000 or $1 million). The interest on a home equity loan that is secured by a principal or second residence and is used to buy, build, or substantially improve a taxpayer's home is still deductible, but the home equity loan amount counts towards the maximum eligible mortgage amount ($750,000 or $1 million). After 2025, the mortgage limit for all new and existing qualifying mortgage interest will revert to $1 million, plus $100,000 in home equity indebtedness (regardless of its use). The 2017 tax revision also limits the deduction for state and local property and income taxes to $10,000 until the end of 2025. Additionally, P.L. 115-97 increased the standard deduction to $12,000 (single) or $24,000 (married), which is expected to further reduce the number of taxpayers who itemize deductions generally. The increase in the standard deduction will mitigate the impact of the changes to the mortgage interest and property tax deductions for many households, though some will pay more in taxes as a result of these changes. The limit to the deduction for property taxes could have implications for some states and localities with high property taxes, and to the extent that the value of the mortgage interest deduction has been capitalized into home prices, the lower limits on the amount of mortgage interest that can be deducted could exert downward pressure on home prices in some areas. However, at this point the size and scope of any effects these changes may have is unclear. A dditional information: For more on how the tax revision law affected the mortgage interest deduction, see CRS Insight IN10845, P.L. 115-97: The Mortgage Interest Deduction . In the past, Congress has regularly extended a number of temporary tax provisions that address a variety of policy issues, including housing. This set of temporary provisions is commonly referred to as \"tax extenders.\" Two housing-related provisions that have been included in tax extenders packages in the recent past are the exclusion for canceled mortgage debt, and the deduction for mortgage insurance premiums. Historically, when all or part of a taxpayer's mortgage debt has been forgiven, the forgiven amount has been included in the taxpayer's gross income for tax purposes. This income is typically referred to as canceled mortgage debt income. During the housing market turmoil of the late 2000s, some efforts to help troubled borrowers avoid foreclosure resulted in canceled mortgage debt. The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ), signed into law in December 2007, temporarily excluded qualified canceled mortgage debt income that is associated with a primary residence from taxation. The provision was originally effective for debt discharged before January 1, 2010, and was subsequently extended several times. Rationales put forward for extending the exclusion have included minimizing hardship for distressed households, lessening the risk that nontax homeownership retention efforts will be thwarted by tax policy, and assisting in the recoveries of the housing market and overall economy. Arguments against the exclusion have included concerns that it makes debt forgiveness more attractive for homeowners, which could encourage homeowners to be less responsible about fulfilling debt obligations, and concerns about fairness as the ability to realize the benefits depends on a variety of factors. Furthermore, to the extent that housing markets and the economy have improved in recent years, and foreclosure rates have returned to more typical levels, some may argue that the exclusion is less necessary now than it may have been during the height of the housing and mortgage market turmoil. As described earlier, homeowners traditionally have been able to deduct the interest paid on their mortgage, as well as property taxes they pay, as long as they itemize their tax deductions. Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a result of the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). Specifically, homeowners could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making the premiums deductible if homeowners itemized and their adjusted gross incomes were below a specified threshold ($55,000 for single, $110,000 for married filing jointly). Originally, the deduction was to be available only for 2007, but it was subsequently extended several times. Two rationales that have been put forward for allowing the deduction of mortgage insurance premiums are the promotion of homeownership and the recovery of the housing market. However, it is not clear that the deduction has an effect on the homeownership rate, nor is it clear that the deduction is still needed to assist in the recovery of the housing market, given that housing market indicators suggest that it is stronger as a whole than when the provision was originally enacted (although some areas have not fully recovered from the housing market turmoil). Furthermore, to the degree that owner-occupied housing is over subsidized, extending the deduction could lead to a greater misallocation of resources that are directed toward the housing industry. Extending the deduction, however, may assist some households who are in financial distress because of burdensome housing payments. Congress most recently enacted tax extenders legislation in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ). The legislation extended the exclusion for canceled mortgage debt and the ability to deduct mortgage insurance premiums, each of which had previously expired at the end of 2016, through the end of 2017. No additional tax extenders legislation was enacted during the 115 th Congress. A dditional information: For more on the tax extenders in the Bipartisan Budget Act, see CRS Report R44925, Recently Expired Individual Tax Provisions (\"Tax Extenders\"): In Brief . For background on the tax exclusion for canceled mortgage debt, see CRS Report RL34212, Analysis of the Tax Exclusion for Canceled Mortgage Debt Income . The low-income housing tax credit (LIHTC) is one of the primary sources of federal funding that is used for affordable rental housing development, which it incentivizes with federal tax credits administered through the Internal Revenue Service. The tax credits are provided to states based on population, and states award the credits to housing developers that agree to build or rehabilitate housing where a certain percentage of units will be affordable to low-income households. Housing developers then sell the credits to investors and use the proceeds to help finance the housing developments. Historically, LIHTC-assisted developments have had to meet one of two income tests: either a \"20-50\" test or a \"40-60\" test. Under the former, at least 20% of units have to be occupied by households with incomes at or below 50% of the area's median gross income (area median income, or AMI), adjusted for family size. Under the latter, at least 40% of the units have to be occupied by individuals with incomes at or below 60% of the area's median gross income, adjusted for family size. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) made two changes to the LIHTC program. The first change added a third option for complying with the income test for LIHTC developments in addition to the 20-50 or 40-60 tests. This option allows for income averaging, and the income test is satisfied if at least 40% of the units are occupied by tenants with an average income of no greater than 60% of AMI, and no individual tenant has an income exceeding 80% of AMI. Thus, for example, renting to someone with an income equal to 80% of AMI would also require renting to someone with an income no greater than 40% of AMI, so the tenants would have an average income equal to 60% of AMI. Proponents of income averaging have argued that it will have a variety of benefits, including potentially making it easier for LIHTC developments to include more deeply income-targeted units for households with the lowest incomes, increasing the number of households that are eligible to live in LIHTC properties, and making it easier to use LIHTC for mixed-income housing. The second change made by P.L. 115-141 increased the amount of LIHTC credits available to states by 12.5% per year for each of FY2018-FY2021. The broader tax revision law ( P.L. 115-97 ) did not make any changes directly to the LIHTC program. However, certain changes that were included in the law—such as reductions in corporate tax rates—could affect the demand for LIHTCs and the price that investors are willing to pay for them. If investors pay less for tax credits, then the credits would generate less money for affordable housing development, all else equal. The increase in tax credits included in P.L. 115-141 may help to alleviate concerns about the potential impact of the tax revision law on the price for LIHTCs. A dditional information: For more information on the low-income housing tax credit in general, and these recent changes to the program, see CRS Report RS22389, An Introduction to the Low-Income Housing Tax Credit . Some of the housing-related issues that were active in the 115 th Congress have to do with federal programs or activities that provide housing assistance to low-income households or other households with particular housing needs. For several years, concern in Congress about federal budget deficits has led to increased interest in reducing the amount of discretionary funding provided each year through the annual appropriations process. This interest was most manifest by the enactment of the Budget Control Act of 2011 ( P.L. 112-25 ), which set enforceable limits for both mandatory and discretionary spending. The limits on discretionary spending, which have been amended and adjusted since they were first enacted, have implications for HUD's budget, the largest source of funding for direct housing assistance, because it is made up almost entirely of discretionary appropriations. More than three-quarters of HUD's appropriations are devoted to three rental assistance programs serving more than 4 million families: the Section 8 Housing Choice Voucher (HCV) program, Section 8 project-based rental assistance, and the public housing program. Funding for the HCV program and project-based rental assistance has been increasing in recent years, largely because of the increased costs of maintaining assistance for households that are currently served by the programs. Public housing has, arguably, been underfunded (based on studies undertaken by HUD of what it should cost to operate and maintain it) for many years. Despite the large share of total HUD funding these rental assistance programs command, their combined funding levels only permit them to serve an estimated one in four eligible families, which creates long waiting lists for assistance in most communities. In a budget environment featuring limits on discretionary spending, the pressure to provide increased funding to maintain current services for HUD's largest programs must be balanced against the pressure from states, localities, and advocates to maintain or increase funding for other HUD programs, such as the Community Development Block Grant (CDBG) program, grants for homelessness assistance, and funding for Native American housing. The Trump Administration's budget requests for FY2018 and FY2019 each proposed decreases in funding for HUD as compared to the prior year. Both budget requests proposed to eliminate funding for several programs, including multiple HUD block grants (CDBG, the HOME Investment Partnerships Program, and the Self-Help and Assisted Homeownership Opportunity Program (SHOP)), and to decrease funding for most other HUD programs. In proposing to eliminate the block grant programs, the Administration cited budget constraints and proposed that state and local governments should take on more of a role in the housing and community development activities funded by these programs. In February 2018, Congress enacted the Bipartisan Budget Act of FY2018 (BBA;  P.L. 115-123 ), which, among other things, increased the statutory limits on discretionary spending for FY2018 and FY2019. Following passage of the BBA, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) was enacted in March 2018, providing final FY2018 appropriations for HUD. The enacted legislation increased overall funding for HUD by nearly 10% compared to FY2017 and did not adopt the program eliminations proposed in the President's budget request. Most HUD funding accounts saw increases in FY2018 compared to FY2017. As of the end of the 115 th Congress, final FY2019 appropriations for HUD had not yet been enacted. HUD programs and activities were funded under continuing resolutions through December 21, 2018, at which point funding lapsed. This funding lapse was still underway when the 115 th Congress ended. A dditional information: For more on HUD appropriations trends in general, see CRS Report R42542, Department of Housing and Urban Development (HUD): Funding Trends Since FY2002 . For more on FY2018 HUD appropriations, see CRS Report R44931, HUD FY2018 Appropriations: In Brief . For more on the FY2019 HUD budget request, see CRS Report R45166, Department of Housing and Urban Development (HUD): FY2019 Budget Request Fact Sheet . As noted, HUD administers three primary direct rental assistance programs: the Housing Choice Voucher program, the public housing program, and project-based rental assistance (including project-based Section 8). Combined, these programs serve more than 4 million families at a cost of nearly $40 billion per year, accounting for the vast majority of HUD's total budget. While the three programs provide different forms of assistance—rental vouchers, publicly owned subsidized apartments, and privately owned subsidized apartments—they all allow low-income individuals and families to pay rent considered affordable (generally 30% of adjusted family income). About half of the families served by the combined programs are headed by persons who are elderly or have disabilities and the other half are primarily other families with children. Although these are the largest federal housing assistance programs for low-income families, they are estimated to serve only approximately one in four eligible families due to funding limitations, and most communities have long waiting lists for assistance. The size and scope of HUD's rental assistance programs mean they are often of interest to policymakers. Specifically in the 115 th Congress, cost considerations, interest in broader welfare reform ideas such as work requirements, and concerns about administrative efficiencies led to various policy proposals and debates. In April 2018, HUD Secretary Carson announced the Administration's Making Affordable Housing Work Act of 2018 (MAHWA) legislative proposal. If enacted, the proposal would have made a number of changes to the way tenant rents are calculated in HUD rental assistance programs. These changes would have resulted in rent increases for assisted housing recipients, and corresponding decreases in the cost of federal subsidies. Specifically, MAHWA proposed to eliminate the current income deductions used when calculating tenant rent and establish two rent structures: one for elderly and disabled households, based on 30% of gross income; and one for other families, based on 35% of gross income, with a mandatory minimum rent based on part-time work at the minimum wage. While these changes would have resulted in rent increases for tenants, the language would have allowed the Secretary to phase in the increases. Additionally, the proposal would have authorized the Secretary to establish other rent structures, and would have authorized local program administrators to establish still other rent structures, with the Secretary's authorization. Further, the proposal would have permitted local program administrators or property owners to institute work requirements for recipients. Given the variation that would have resulted from these last two elements permitting local discretion, it is difficult to estimate what the consequences of the changes would have been for any given family. In announcing the proposal, HUD described it as setting the programs on \"a more fiscally sustainable path,\" creating administrative efficiency, and promoting self-sufficiency. Low-income housing advocates have been critical of the proposal, particularly the effect increased rent payments may have on families. Legislation to implement the Administration's proposal was not introduced in the 115 th Congress. The Rental Assistance Demonstration (RAD) was an Obama Administration initiative initially designed to test the feasibility of addressing the estimated $25.6 billion backlog in unmet capital needs in the public housing program by allowing local public housing authorities (PHAs) to convert their public housing properties to either Section 8 Housing Choice Vouchers or Section 8 project-based rental assistance. PHAs are limited in their ability to mortgage, and thus raise private capital for, their public housing properties because of a federal deed restriction placed on the properties as a condition of federal assistance. When public housing properties are converted under RAD, that deed restriction is removed. As currently authorized, RAD conversions must be cost-neutral, meaning that the Section 8 rents the converted properties may receive must not result in higher subsidies than would have been received under the public housing program. Given this restriction, and without additional subsidy, not all public housing properties can use a conversion to raise private capital, potentially limiting the usefulness of a conversion for some properties. RAD was first authorized by Congress in the FY2012 HUD appropriations law and was originally limited to 60,000 units of public housing (out of roughly 1 million units). However, Congress has since expanded the demonstration. Most recently, in FY2018, Congress raised the cap so that up to 455,000 units of public housing will be permitted to convert to Section 8 under RAD. Given the most recent expansion, nearly half of all public housing units could ultimately convert. While RAD conversions have been popular with PHAs, and HUD's initial evaluations of the program have been favorable, a recent GAO study has raised questions about HUD's oversight of it, as well as how much private funding is actually being raised for public housing through the conversions. In the FY2016 HUD appropriations law, Congress mandated that HUD expand the Moving to Work (MTW) demonstration by 100 PHAs. MTW is a waiver program that allows a limited number of participating PHAs to get exceptions from HUD for most of the rules and regulations governing the public housing and voucher programs. MTW has been controversial for many years, with PHAs supporting the flexibility the demonstration provides (e.g., allowing PHAs to move funding between programs), and low-income housing advocates criticizing some of the policies being adopted by PHAs (e.g., work requirements and time limits). Most recently, GAO issued a report raising concerns about HUD's oversight of MTW, including the lack of monitoring of the effects of policy changes under MTW on tenants. The FY2016 expansion required that HUD phase in the expansion and that it evaluate any new policies adopted by participating PHAs. Following a series of listening sessions, and at the very end of the Obama Administration, HUD published a notice in the Federal Register in January 2017 soliciting comments on the expansion process for MTW. In May 2017, HUD issued several revisions and reopened the comment period for that notice. In October 2018, HUD published a notice to select the first expansion cohort and a final expansion operations notice for comment, reflecting the comments it had received on the earlier versions. Thus, while actions were taken to expand MTW, no additional agencies were selected for participation in the demonstration before the end of the 115 th Congress. A number of more narrowly targeted housing assistance bills were approved by committee, considered on the floor, or enacted into law during the 115 th Congress. These include the following: P.L. 115-174 , the Economic Growth, Regulatory Relief, and Consumer Protection Act, signed into law in May 2018, contained two assisted housing provisions: one making changes to the Family Self Sufficiency program that largely mirrors H.R. 4258 , the Family Self Sufficiency Act, which was reported by the House Financial Services Committee in December 2017 and approved by the House in January 2018; and one offering various regulatory streamlining provisions for small PHAs. H.R. 5793 , the Housing Choice Voucher Mobility Demonstration Act of 2018, ordered reported by the House Financial Services Committee in May 2018 and passed by the House in July 2018 (on a vote of 412-5, Roll no. 22) , would have authorize d HUD to conduct a mobility demonstration to test regional administrati on of the Housing Choice Voucher program and its effects on encouraging and supporting moves by voucher hold ers to lower-poverty and higher- opportunity areas. The text of H.R. 5793 was also incorporated as Section 238 of the House Appropriations Committee- reported FY2019 HUD ap propriations bill ( H.R. 6072 ). Neither form of this legislation was enacted before the end of the 115th Congress.H.R. 5735 , the THRIVE Act, ordered reported by the House Financial Services Committee in May 2018 and passed by the House in June 2018 (on a vote of 230-173, Roll no. 266), would have required HUD to undertake a demonstration program, setting aside up to 10,000 existing Housing Choice Vouchers, to test temporary supportive housing approaches for individuals recovering from opioid and other substance use disorders. This legislation was not enacted before the end of the 115 th Congress.H.R. 2069 , the Fostering Stable Housing Opportunities Act of 2017, ordered to be reported by the House Financial Services Committee in July 2018 (on a vote of 34-23), would have created a new federal preference for youth aging out of foster care and at risk of homelessness across most federal housing assistance programs and required that youth accessing assistance via the preference be subject to education, training, or work requirements as set by local program administrators. This legislation was not enacted before the end of the 115 th Congress.H.R. 1511 , the Homeless Children and Youth Act of 2017, ordered to be reported by the House Financial Services Committee in July 2018 (on a vote of 39-18), would have expanded the definition of homelessness governing the HUD homeless programs, while maintaining existing resources for the programs, to include homeless families with children and youth certified as homeless under other federal programs that have less-restrictive definitions. This legislation was not enacted before the end of the 115 th Congress. Native Americans living in tribal areas experience a variety of housing challenges. Housing conditions in tribal areas are generally worse than those for the United States as a whole, and factors such as the legal status of trust lands present additional complications. The main federal program that provides housing assistance to Native American tribes and Alaska Native villages is the Native American Housing Block Grant (NAHBG), which was authorized by the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA, P.L. 104-330 ). NAHASDA reorganized the federal system of housing assistance for tribes while recognizing the rights of tribal self-governance and self-determination. The NAHBG provides formula funding to tribes for a range of affordable housing activities that benefit primarily low-income Native Americans or Alaska Natives living in tribal areas. A separate block grant program authorized by NAHASDA, the Native Hawaiian Housing Block Grant (NHHBG), provides funding for affordable housing activities that benefit Native Hawaiians eligible to reside on the Hawaiian Home Lands. Although the NAHBG is the largest source of federal housing assistance to tribes, other federal housing programs also provide tribal housing assistance. One of these is the Tribal HUD-Veterans Affairs Supportive Housing (Tribal HUD-VASH) program, which provides rental assistance and supportive services to Native American veterans who are homeless or at risk of homelessness. Tribal HUD-VASH was initially created and funded through the FY2015 HUD appropriations act ( P.L. 113-235 ), and funds to renew rental assistance were provided in FY2017 and FY2018. No separate authorizing legislation for the program currently exists. The most recent authorization for most NAHASDA programs expired at the end of FY2013, although these programs have generally continued to be funded in annual appropriations laws. (The NHHBG has not been reauthorized since its original authorization expired in FY2005, though it has continued to receive funding in most years. ) Both the 113 th and 114 th Congresses considered NAHASDA reauthorization legislation, though none was enacted. In the 115 th Congress, NAHASDA reauthorization bills were again introduced in both the House and the Senate; these bills were similar, but not identical, to one another. In the House, H.R. 3864 was reported by the Financial Services Committee in March 2018, while in the Senate S. 1895 was referred to the Committee on Indian Affairs. NAHASDA reauthorization legislation was not enacted by the end of the 115 th Congress. As introduced, both the House and the Senate bills would have reauthorized the NAHBG and the NHHBG as well as two home loan guarantee programs that benefit Native Americans and Native Hawaiians, respectively. However, as reported by the House Financial Services Committee, H.R. 3864 did not include reauthorization of the Native Hawaiian programs. Both bills would have also made certain changes to NAHBG program requirements, authorized a demonstration program intended to allow participating tribes to use their NAHBG funds in specified ways to support more private financing for housing activities in tribal areas, and required the HUD Secretary to set aside at least 5% of HUD-VASH funding for the Tribal HUD-VASH program. In response to concerns about certain tribes not spending their NAHBG funds in a timely fashion, both bills also included a provision to reduce funding to tribes with annual allocations of $5 million or more who have large balances of unexpended NAHBG funds. (The vast majority of tribes receive annual allocations below $5 million.) While tribes and Congress are generally supportive of NAHASDA, there has been some disagreement in Congress over specific provisions or policy proposals that have been included in reauthorization bills, such as a provision that would allow tribes to set maximum rents for NAHASDA-assisted housing units that exceed 30% of tenant incomes. There has also been disagreement over the Native Hawaiian housing programs for many years. This disagreement reflects a broader debate about the appropriate relationship of the federal government to Native Hawaiians and whether programs that solely benefit Native Hawaiians could be construed to provide benefits based on race. Supporters of the Native Hawaiian housing programs argue that the funding is necessary due to housing conditions on the Hawaiian Home Lands and the history of the federal government's involvement with Native Hawaiians. Separately from NAHASDA, a stand-alone Senate bill ( S. 1333 ) would have codified the Tribal HUD-VASH program. The Senate passed S. 1333 in May 2018, but the House did not consider the bill. A dditional information: For more on NAHASDA and the NAHBG, see CRS Report R43307, The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA): Background and Funding . During the 115 th Congress, several major disasters struck the United States (including Hurricanes Harvey, Irma, and Maria and significant wildfires in California) that resulted in presidential disaster declarations. These declarations trigger aid that protects property, public health, and safety, primarily provided through the Federal Emergency Management Agency (FEMA). FEMA's housing-related assistance may include, depending on the needs created by the specific disaster, emergency shelter, temporary housing assistance, and assistance with long-term housing recovery. In many cases, Congress will also provide supplemental funding, often through HUD's Community Development Block Grant-Disaster Recovery (CDBG-DR) grant program, to further support long-term recovery efforts following major disasters. The 115 th Congress provided substantial supplemental appropriations, including $37 billion in total supplemental CDBG-DR funding in FY2017, FY2018, and FY2019 combined, to aid disaster-affected communities with long-term recovery, including the restoration of housing, infrastructure, and economic activity. While CDBG-DR has had a significant role in funding recovery efforts from past disasters, and is slated to play a major role in the recovery from the 2017 hurricanes, the program is not formally authorized, meaning the rules that govern the funding use and oversight vary with HUD guidance accompanying each allocation. Some Members of the 115 th Congress expressed interest in formally authorizing the CDBG-DR program, in part in response to concerns about HUD's oversight of CDBG-DR funding. The House Financial Services Committee's Subcommittee on Oversight and Investigations held a hearing on CDBG-DR oversight and potential for future reforms, including authorization of the program. The House Financial Services Committee later ordered to be reported H.R. 4557 , the Reforming Disaster Recovery Act of 2017. The bill would have authorized the CDBG-DR program and included a number of provisions to codify financial controls over program funds. Advocates for low-income housing and some Members of Congress have been critical of FEMA's housing response to the 2017 hurricanes, and they have called for HUD to play a larger role, particularly for residents of Puerto Rico displaced as a result of Hurricane Maria. Specifically, they have called for FEMA to enter into an interagency agreement with HUD to provide longer-term temporary rental assistance. This was done after Hurricanes Katrina and Ike in 2005 and 2008, and to a more limited extent after Hurricane Sandy in 2012. The program of assistance to residents resulting from those interagency agreements was referred to as the Disaster Housing Assistance Program (DHAP). DHAP was structured somewhat differently after each of those past disasters (in terms of who was eligible, how long they received rental assistance, how they were transitioned off of assistance, etc.), but it generally featured FEMA-funded rental assistance administered by local PHAs and modeled after Section 8 Housing Choice Vouchers. The structure of a future DHAP would depend on what was negotiated between FEMA and HUD, unless otherwise specified by Congress. Although the governor of Puerto Rico explicitly requested in December 2017 that FEMA initiate a DHAP in response to Hurricane Maria, FEMA denied that request in May of 2018, arguing DHAP was neither necessary nor cost effective. Instead, FEMA has made various forms of temporary housing assistance available for Puerto Ricans displaced to the mainland United States, primarily funding extended hotel and motel stays through the Transitional Sheltering Assistance (TSA) program, which was repeatedly extended, including by court order, but expired in September, 2018. A dditional information: For more information on 2017 disaster supplemental funding, see CRS Report R45084, 2017 Disaster Supplemental Appropriations: Overview . As noted earlier in this report, housing affordability challenges have been increasing, particularly for lower-income families. The share of families with significant cost burdens has been growing and a number of research and media reports have highlighted growing concerns about housing costs outpacing income growth. In response to concerns about housing affordability, several bills were introduced in the 115 th Congress that focused on addressing the issue of housing affordability broadly, but through different approaches. Some proposals were focused on demand-side solutions, in the form of new or increased subsidies for certain renters or homeowners meant to make it easier for those households to afford housing. For example, several bills— S. 3250 / H.R. 6671 , S. 3342 , H.R. 4074 , and H.R. 3670 —would have created a renter credit through changes to the tax code. (Some of these bills included other housing-related provisions as well.) Other proposals were focused on supply-side solutions, such as in the form of additional resources for existing affordable housing programs that focus on the production or preservation of affordable housing units. For example, Representative Waters introduced H.R. 3160 and H.R. 2076 , which would have authorized significant increases in resources for the public housing program and homeless assistance programs, respectively. Another bill, S. 3231 , took a different approach by proposing to authorize a task force to study the effect of a shortage of affordable housing on life outcomes as well as the impact such a shortage has on other federal, state, and local programs, and make recommendations to Congress. The most sweeping affordable housing proposal in the 115 th Congress, and arguably in the last several Congresses, was S. 3503 , the American Housing and Economic Mobility Act of 2018, introduced by Senator Warren. It would have authorized new funding for affordable housing programs and activities at a level greater than HUD's entire budget, with both supply-side and demand-side investments, among other changes. Specifically, the bill included the following: authorizations of $44.5 billion per year for 10 years for affordable housing development through HUD's Housing Trust Fund, $2.5 billion per year for 10 years for Treasury's Capital Magnet Fund, and $2.5 billion for FY2019 for HUD's Native American Housing Block Grant, as well as additional funding for certain USDA rural housing programs; creation of a new $4 billion middle class housing emergency fund; a new authorization of $2 billion per year for five years for local governments that agree to reform local land use polices in support of affordable housing development; the creation of a new down payment assistance grant program for first-time homebuyers in low-income communities that were affected by historical redlining practices; an authorization of $2 billion for new one-time grants for states to assist homeowners with negative equity; modifications and expansions to the Community Reinvestment Act; amendments to the Fair Housing Act to add sexual orientation, gender identity, marital status, and source of income to the categories protected from discrimination, among other changes; and modifications to the Housing Choice Voucher program to promote regional mobility. These changes were to be paid for, at least in part, by changes to the estate tax designed to increase revenue. While none of these bills was the subject of legislative action during the 115 th Congress, they received attention among industry and advocacy groups and the media as part of a larger conversation about how to address housing affordability. The Trump Administration took office in January 2017, at the beginning of the 115 th Congress. In February 2017, President Trump issued Executive Order 13777 directing agencies to establish a Regulatory Reform Task Force to evaluate existing agency regulations and identify regulations that should potentially be modified or repealed. In accordance with the order, in May 2017 HUD issued a Federal Register notice requesting public comments \"to assist in identifying existing regulations that may be outdated, ineffective, or excessively burdensome.\" HUD has since suspended, withdrawn, or considered modifying a variety of regulations and policy decisions. Not all of these actions have been directly related to the regulatory review required by Executive Order 13777, though HUD has often described its actions as consistent with that review or noted public comments received as part of that review in explaining its decisions. The regulations and policy decisions that have been withdrawn or suspended or that are under review impact a range of HUD programs and policies. Some of the more high-profile actions that HUD has taken are discussed in the following sections. Fair Market Rents (FMRs) are estimated annually by HUD for use in various HUD programs, including for setting subsidy levels in the Section 8 Housing Choice Voucher (HCV) program. FMRs are set at the 40 th percentile gross rent of standard-quality housing in a community. HUD uses Census data and inflation estimates to establish FMRs for the geographies of metropolitan areas and nonmetropolitan counties. It has long been understood that housing markets are often more localized than metropolitan areas or counties, but given data limitations these were the smallest geographies for which HUD would produce regular estimates. With the introduction of the American Community Survey to replace the decennial Census long form, more-frequently updated data became available at smaller geographies. Thus, HUD is now able to calculate FMRs for smaller geographic areas. HUD released its first hypothetical Small Area FMRs (SAFMRs), with FMRs at the zip code level, in FY2011 and has published them annually since. With the release of the SAFMRs, HUD also announced a demonstration to test the use of SAFMRs on the HCV program in selected communities. In June 2016, during the 114 th Congress, HUD published a notice in the Federal Register proposing to require certain PHAs to use SAFMRs in the administration of their HCV programs if they had high levels of vouchers concentrated in high-poverty areas. Some commenters expressed support, citing the opportunity SAFMRs present to promote mobility and accuracy in subsidy determination, among other reasons; other commenters opposed the change, expressing concern about the potential for cost increases in the program resulting in fewer families being served, among other reasons. The rule was finalized in November 2016, at the end of the Obama Administration. Under the final rule, 24 communities would be mandated to use SAFMRs for their HCV programs and any other PHA could choose to use them, beginning on October 1, 2017. Following the transition to the Trump Administration, HUD Secretary Carson announced in the summer of 2017 that he was suspending the mandatory use of SAFMRs for two fiscal years, citing interim findings from the SAFMR demonstration that raised concerns about the availability of units for voucher holders, negative public comments during the rulemaking process, and the need for more guidance and technical assistance for PHAs. In response to the suspension, fair housing advocates sued HUD, and in December 2017 the U.S. District Court for the District of Columbia entered a preliminary injunction voiding the suspension, thus putting the mandatory use of SAFMRs into effect. In light of the injunction, HUD issued a notice for the 24 mandatory communities to begin using SAFMRs \"as expeditiously as possible and no later than April 1, 2018.\" Other PHAs may also voluntarily begin using SAFMRs to administer their HCV programs. Manufactured housing—housing that is assembled in a factory setting and transported to a home site on a permanent chassis—is required to be built in accordance with HUD's Manufactured Housing Construction and Safety Standards. HUD issues regulations governing the standards, with the input of the Manufactured Housing Consensus Committee. HUD also develops model manufactured home installation standards; states that implement their own manufactured home installation programs must have standards that at least meet the HUD model standards. In January 2018, HUD issued a Federal Register notice stating that, consistent with Executive Order 13777 and the Regulatory Reform Task Force, it was undertaking a broad review of HUD's regulations related to manufactured housing and inviting public comment on regulations that may warrant review. While HUD rules are generally intended to ensure that manufactured housing is high quality and safe, some have argued that certain HUD rules are unnecessary or too inflexible and that they therefore drive up the cost of manufactured housing and reduce access to it as an affordable housing option. Rules or guidance that have attracted particular attention in recent years include a final rule related to on-site completions of manufactured homes, a memorandum related to the construction of certain add-on features (such as attached garages) at the home site and the applicability of HUD alternative construction procedures in those circumstances, and an interpretative bulletin related to foundation requirements in areas subject to ground freezing. HUD specifically requested comments on these and other selected topics, in addition to requesting comments generally on any of its manufactured housing regulations. The House-passed FY2018 consolidated appropriations bill that included HUD appropriations would have prohibited funds provided in that bill from being used for the three HUD directives mentioned above. While that provision was not included in the enacted FY2018 appropriations law, the explanatory statement directed HUD to review those specific directives, develop a solution that balances consumer safety with costs and burdens placed on both manufacturers and consumers, and report on whether state and local agencies should have jurisdiction over on-site completion of manufactured homes. The Fair Housing Act requires HUD to administer its programs in a way that affirmatively furthers fair housing, and statutes or regulations governing specific HUD programs also require that funding recipients affirmatively further fair housing (AFFH). For many years, public housing authorities and state and local governments that receive HUD block grant funds satisfied their obligation to affirmatively further fair housing by certifying to HUD that they conducted an Analysis of Impediments (AI) to fair housing and were taking appropriate actions to overcome impediments. However, both HUD and GAO had identified certain weaknesses in the AI process. In July 2015, during the 114 th Congress, HUD published a final rule (AFFH rule) that more specifically defines what it means to affirmatively further fair housing and requires that program participants submit a new Assessment of Fair Housing (AFH) to HUD rather than an AI. The rule also provides that HUD will supply data for program participants to use in preparing their AFHs and will publish tools that help them through the process. On January 5, 2018, HUD issued a notice stating that it would extend the deadline for local governments receiving more than $500,000 in CDBG funding to submit their AFHs until after October 31, 2020.  Under the AFFH rule, these local governments had begun submitting AFHs starting in 2016. In extending the deadline, HUD stated that, based on reviews of AFHs that had been submitted so far, it believed that program participants needed more time and technical assistance to produce acceptable AFHs. On May 23, 2018, HUD issued three more notices that effectively suspend indefinitely the implementation of the AFFH rule and return to the previous AI process. The three notices (1) withdrew the January 2018 notice that delayed implementation of the AFFH rule for local governments, (2) withdrew the final assessment tool that had been released to assist local governments in preparing their AFHs, and (3) directed program participants that have not already submitted an AFH under the AFFH rule to comply with the previous AI requirements. Withdrawing the local government assessment tool delays the AFH submission dates for local governments because the AFFH rule provides for at least nine months between publication of the final assessment tool and the AFH due date. HUD states that it withdrew the assessment tool because it had identified \"significant deficiencies\" that made the tool \"unduly burdensome\" for program participants to use, and that it does not have the personnel to provide technical assistance that the jurisdictions would need. The notice provides that HUD will produce a \"more effective and less burdensome\" tool in the future and that it will accept public input on improving the tool. In the 115 th Congress, the Restoring Fair Housing Protections Eliminated by HUD Act of 2018 ( H.R. 6220 ) would have required HUD to reinstate the assessment tool for local governments and require them to submit AFHs. The bill was referred to committee but no further action was taken during the 115 th Congress. Most recently, on August 13, 2018, HUD announced an Advance Notice of Proposed Rulemaking (ANPR) stating that it \"has determined that a new approach towards AFFH is required\" and requesting public comments on potential changes to the AFFH regulations. The ANPR states that \"HUD is committed to its mission of achieving fair housing opportunity for all,\" but that it believes that the current rule \"is not fulfilling its purpose to be an efficient means for guiding meaningful action by program participants.\" A dditional information: For more on HUD and fair housing, including HUD's obligation to affirmatively further fair housing, see CRS Report R44557, The Fair Housing Act: HUD Oversight, Programs, and Activities . The Fair Housing Act (FHA) was enacted \"to provide, within constitutional limitations, for fair housing throughout the United States.\" It prohibits discrimination on the basis of race, color, religion, national origin, sex, physical and mental handicap, and familial status. Subject to certain exemptions, the FHA applies to all sorts of private and public housing, including single family homes, apartments, condominiums, and manufactured homes. It also applies to \"residential real estate-related transactions,\" which include both the \"making [and] purchasing of loans … secured by residential real estate [and] the selling, brokering, or appraising of residential real property.\" In June 2015, the Supreme Court, in Texas Department of Housing Community Affairs v. Inclusive Communities Project , confirmed the long-held interpretation that, in addition to outlawing intentional discrimination, the FHA prohibits certain housing-related decisions that have a disparate impact on a protected class. Historically, courts have generally recognized two types of disparate impacts resulting from \"facially neutral decision[s]\" that can result in liability under the FHA. First, courts have recognized disparate impact when a \"decision has a greater adverse impact on one [protected] group than on another.\" Second, courts consider the \"effect which the decision has on the community involved; if it perpetuates segregation and thereby prevents interracial association it will be considered invidious under the Fair Housing Act independently of the extent to which it produces a disparate effect on different racial groups.\" The Supreme Court's holding in Inclusive Communities that \"disparate-impact claims are cognizable under the [FHA]\" mirrors previous interpretations of HUD and all 11 federal courts of appeals that had ruled on the issue as of June 2015. However, HUD and these courts had not all applied the same criteria for determining when a neutral policy that causes a disparate impact violates the FHA. In a stated attempt to harmonize disparate impact analysis across the country, HUD finalized regulations in 2013 that established uniform standards for determining when such practices violate the act. The Inclusive Communities Court did not expressly adopt the standards established in HUD's disparate impact regulations, but instead embraced a similar, but not identical, three-step burden-shifting test for assessing disparate impact liability under the FHA. At step one, the plaintiff has the burden of establishing evidence that a housing decision or policy caused a disparate impact on a protected class. At step two, defendants can counter the plaintiff's prima facie showing by establishing that the challenged policy or decision is \"necessary to achieve a valid interest.\" The defendant will not be liable for the disparate impact resulting from a \"valid interest\" unless, at step three, the plaintiff proves \"that there is an available alternative … practice that has less disparate impact and serves the entity's legitimate needs.\" In addition, the Supreme Court outlined a number of limiting factors that lower courts and HUD should apply when assessing disparate impact claims. The Court stressed that lower courts and HUD should rigorously evaluate plaintiffs' claims to ensure that evidence has been provided to support not only a statistical disparity, but also causality. Additionally, the Court emphasized that claims should be disposed of swiftly in the preliminary stages of litigation if plaintiffs have failed to establish a prima facie case of disparate impact. On June 20, 2018, HUD published an Advance Notice of Proposed Rulemaking in the Federal Register seeking public comment on whether the 2013 disparate impact regulations should be amended in light of the Inclusive Communities decision. The Advance Notice of Proposed Rulemaking noted that the request for comments was \"consistent with HUD's efforts to carry out the Administration's regulatory reform efforts\" and that HUD had received \"numerous\" comments related to this rule in response to its May 2017 Federal Register notice seeking comment on its regulatory reform agenda. With the June 2018 Advance Notice of Proposed Rulemaking, HUD specifically sought public feedback on, among other issues, whether the regulations \"strike the proper balance in encouraging legal action for legitimate disparate impact cases while avoiding unmeritorious claims\"; sufficiently detail the causality requirements for establishing a prima facie disparate impact case; should establish safe harbors from or defenses to disparate impact claims; and could be amended to \"add [] clarity, reduce uncertainty, decrease regulatory burden, or otherwise assist the regulated entities and other members of the public in determining what is lawful.\" The public comment period closed on August 20, 2018.", "summary": "A variety of housing-related issues were active during the 115th Congress. These issues included topics related to housing finance, tax provisions related to housing, housing assistance and grant programs administered by the Department of Housing and Urban Development (HUD), and regulatory review efforts underway at HUD. In some cases, the 115th Congress considered or passed legislation related to certain housing issues, such as mortgage-related provisions enacted as part of broader financial \"regulatory relief\" legislation and particular housing-related tax provisions. In other cases, Congress conducted oversight or otherwise expressed interest in actions taken by HUD or other entities involved in housing, such as Fannie Mae and Freddie Mac. Many of the housing-related topics that were of interest during the 115th Congress are ongoing issues, though some involved particular actions that took place during the 115th Congress. Issues of interest during the Congress included the following: Housing finance issues included changes to certain mortgage-related requirements and other housing provisions included in broader financial legislation that became law in May 2018. Congress also expressed ongoing interest in certain issues related to the Federal Housing Administration (FHA): (1) a forthcoming final rule on FHA's requirements for insuring mortgages on condominiums and (2) the level of the mortgage insurance premiums charged by FHA. Comprehensive housing finance reform that would address the status of Fannie Mae and Freddie Mac is also an ongoing topic of interest, although the 115th Congress did not actively consider comprehensive housing finance reform legislation. Tax issues included changes to housing-related tax provisions in the tax revision law enacted at the end of 2017 (P.L. 115-97); extensions of other, temporary housing-related tax provisions through 2017 by the Bipartisan Budget Act of 2018 (P.L. 115-123); and changes to the low-income housing tax credit in the Consolidated Appropriations Act, 2018 (P.L. 115-141). Housing assistance issues included considerations related to HUD appropriations, ongoing initiatives or proposed changes to HUD rental assistance programs, committee consideration of legislation to reauthorize the Native American Housing Assistance and Self-Determination Act (NAHASDA), issues related to the housing response to presidentially declared major disasters, and a variety of introduced bills that were meant to address housing affordability issues in various ways. HUD began a variety of regulatory review efforts in keeping with Executive Order 13777, which directed federal agencies to evaluate existing regulations and identify opportunities for reform. Specific HUD actions included suspending a rule related to small-area fair market rents (the suspension has since been voided by a preliminary court injunction); initiating a broad review of manufactured housing regulations; suspending certain regulations governing how HUD funding recipients must comply with the requirement to affirmatively further fair housing; and publishing an Advanced Notice of Proposed Rulemaking seeking public comment on whether its regulations related to disparate impact and the Fair Housing Act should be amended. Housing and mortgage market conditions provide important context for these issues, although housing markets are generally local in nature and national housing market indicators do not necessarily accurately reflect conditions in specific communities. Generally speaking, owner-occupied housing markets in recent years have been characterized by rising house prices, relatively low levels of housing starts and housing inventory, and relatively strong home sales. Rising house prices combined with rising mortgage interest rates have raised concerns about the affordability of buying a home, although interest rates remain low by historical standards. Rental housing markets have also raised affordability concerns. Nearly 21 million renter households are considered to be cost burdened, meaning they spend more than 30% of their incomes on rent. The share of households who rent, rather than own, their homes has increased in the years since the housing market turmoil that began around 2007, contributing to lower rental vacancy rates and increasing rents. Increases in household income in recent years have generally not kept pace with increases in house prices or rents, contributing to affordability concerns.", "document_type": "crs"}
{"report": "Federal policymakers statutorily established the U.S. Department of Education (ED) as a Cabinet-level agency in 1980. Its mission is to \"promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access.\" Like most federal agencies, ED receives funds in support of its mission through various federal budget and appropriations processes. These processes are complex. For example, ED receives both mandatory and discretionary appropriations; ED is annually provided forward funds and advance appropriations for some—but not all—discretionary programs; ED awards both formula and competitive grants; and a portion of ED's budget subsidizes student loan costs (through both direct loans and loan guarantees). Because of this complexity, analyzing ED's budget requires an understanding of a broad range of federal budget and appropriations concepts. This report provides an introduction to these concepts as they are used specifically in the context of the congressional appropriations process for ED. It was designed for readers who are new or returning to the topic of ED budget and appropriations. The first section of this report provides an introduction to key terms and concepts in the federal budget and appropriations process with special relevance for ED. The second section answers frequently asked questions (FAQs) about federal funding for the department, as well as closely related questions about education funding in general. The third section includes a brief description of, and links to, reports and documents that provide more information about budget and appropriations concepts. The scope of this report is generally (but not exclusively) limited to concepts associated with funding provided to ED through the annual appropriations process. It does not address all possible sources of federal funding for education, training, or related activities. For example, it does not seek to address education tax credits, student loans, or education and training programs at agencies other than ED. Where this report does address such topics, it does so in order to provide broad context for questions and key terms related to the appropriations process for ED. This report also addresses some frequently asked questions about education funding in general. The following section provides an introduction to selected key terms and concepts used in the congressional debate about federal funding for ED . In the federal budget process, the concept of spending is broken down into three related but distinct phases—budget authority, obligation, and outlay. Budget authority is the authority provided by federal law to enter into financial obligations that will result in immediate or future expenditures (or outlays ) involving federal government funds. For reasons that are explained below, the amounts of budget authority, obligations, and outlays in a fiscal year are rarely the same for a budget account (or activity in that account). For example, ED's Education for the Disadvantaged account in FY2017 had $16.805 billion in total budget authority. That is, ED had legal authority to spend up to $16.805 billion in federal funds for the purposes associated with this account (which consists primarily of grants allocated to local educational agencies). During that same fiscal year, ED newly obligated (i.e., committed to spend) $16.789 billion of that available budget authority. Total outlays during FY2017 in the Education for the Disadvantaged account were $16.237 billion. Budget authority can only be provided through the enactment of law, and generally its amount, purpose, and the time period in which it may be used is specified. Budget authority may be for a broad set of purposes (e.g., improving the academic achievement of disadvantaged children) or for a particular purpose (e.g., obtaining annually updated local educational agency-level census poverty data from the Bureau of the Census). The amount of the budget authority is usually defined in specific terms (e.g., $10 billion) but sometimes is indefinite (e.g., \"such sums as may be necessary\"). The time element of budget authority provides a deadline as to when the funds must be obligated—one fiscal year, multiple fiscal years, or without fiscal year restriction (referred to as \"no year\" budget authority). Once an agency receives its budget authority, it may take actions to obligate it legally, for example, by signing contracts or grant agreements. Over the course of a fiscal year, an agency may obligate budget authority that was first provided during that year or was provided in a prior fiscal year with a multiyear or no-year period of availability. Generally, all obligations must occur prior to the deadline associated with the budget authority. It is not until those obligations are due to be paid (i.e., become outlays) that federal funds from the Treasury are used to make the payments. In addition to the amount of budget authority that is available to be obligated, the primary factor that affects the total amount of obligations in a fiscal year is when they are due. For example, outlays to pay salaries usually occur over the course of the year that the budget authority is made available because those payments must occur regularly (e.g., every two weeks). In contrast, outlay s for a construction project may be structured to occur over several years as various stages of the project are completed. Outlays are reported in the fiscal year in which they occur, even those outlays that result from budget authority that first became available in previous fiscal years. Budget authority that reaches the end of its period of availability is considered to have \"expired.\" At this point, no new obligations may be incurred, although outlays to liquidate existing obligations are generally allowable, usually up to five fiscal years after the budget authority expired. Once that liquidation period has ended, it is generally the case that no further outlays may occur and the agency is to take administrative steps to cancel any remaining budget authority. Rescissions are generally provisions of law that repeal unobligated budget authority prior to its expiration. Such provisions may be used to eliminate budget authority for purposes that are considered to be outdated or no longer desirable. Rescissions also may be used to offset increases in budget authority for higher-priority activities. The congressional budget process generally distinguishes between two types of measures— authorizations , which create or modify federal government programs or activities, and appropriations , which fund those activities. The provisions within authorization measures may be further distinguished as either enabling or organic provisions (e.g., statutory language or acts that authorize certain programs, policies, or activities) or express authorizations of appropriations provisions (e.g., statutory language or acts that recommend a future funding level for authorized programs, policies, or activities). These distinctions between authorizations and appropriations, and between the types of authorization provisions, are important for understanding why programs with \"expired\" authorizations can continue to function. This section focuses on the distinction between appropriations and enabling or organic authorizations; the section titled \"Authorization of Appropriations \" addresses the authorization of funding levels. Enabling or organic authorizations may be generally described as statutory provisions that define the authority of the government to act. These acts establish, alter, or terminate federal agencies, programs, policies, and activities. For example, the Economic Opportunity Act of 1964 (P.L. 88-452) contained statutory provisions that established the Federal Work-Study (FWS) program. The Higher Education Opportunity Act of 2008 (HEOA, P.L. 110-315 ) contained statutory provisions that altered and continued (e.g., \"reauthorized\") FWS. Authorization measures may also address organizational and administrative matters, such as the number or composition of offices within a department. Authorization measures are under the jurisdiction of legislative committees, such as the House Committee on Education and Labor and the Senate Committee on Health, Education, Labor and Pensions. Authorizations may be permanent or limited-term. Permanent authorizations remain in place until Congress and the President enact a law or laws to amend or repeal the authorization. Most ED authorizations are permanent. For example, Title I-A of the Elementary and Secondary Education Act of 1965, as amended and reauthorized by the Every Student Succeeds Act (ESSA, P.L. 114-95 ), gives ED the authority to provide aid to local educational agencies (LEAs) for the education of disadvantaged children. In general, unless Congress and the President enacted legislation to repeal provisions of Title I-A, ED may distribute any budget authority it receives for such aid in accordance with the program parameters defined in such statutory language. Limited-term authorizations end after a specified period of time, typically without requiring further legislative action. (These are sometimes called sunset provisions .) For example, the statute authorizing the Advisory Committee for Student Financial Assistance (ACSFA, 20 U.S.C. 1098(k)) specifies that ACSFA was authorized from the date of enactment until October 1, 2015. At that point, ACSFA was disbanded. The authorizations for some programs are intended to receive legislative action on a regular basis, as the authorities for those programs expire, while others are expected to receive legislative action as needed and not on a regular schedule. Appropriations measures, on the other hand, are typically enacted annually and provide new budget authority for agencies, programs, policies, and activities that are already authorized and are under the jurisdiction of the House Appropriations Committee and the Senate Appropriations Committee. That is, appropriations give federal agencies the authority to use a certain amount of federal funds for program purposes that are usually specified in authorization acts. For example, the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 ( P.L. 115-245 ) appropriated $71.4 billion in discretionary budget authority to ED, of which $22.5 billion was specifically for the Pell Grant program. Budget authority that is provided in appropriations measures may be available for a single fiscal year, multiple fiscal years (or portions thereof), or an indefinite period of time. For example, P.L. 115-245 provided budget authority that was available for one year for ED's Indian Education account, a year-and-a-quarter for Special Education, and two years for Impact Aid. In general, during a calendar year Congress may consider the following: 12 regular appropriations bills for the fiscal year that begins on October 1 (often referred to as the budget year) to provide the annual funding for the agencies, projects, and activities funded therein; one or more continuing resolutions for that same fiscal year, to provide temporary funding if all 12 regular appropriations bills are not enacted by the start of the fiscal year; and one or more supplemental appropriations measures for the current fiscal year, to provide additional funding for selected activities over and above the amount provided through annual or continuing appropriations. Congress typically includes most regular annual ED appropriations in the Departments of Labor, Health and Human Services, and Education, and Related Agencies appropriations bill. In addition to enabling or organic authorizations that establish the authority for federal government activities and appropriations that provide the authority to actually expend federal funds on those activities, laws may include provisions that provide an explicit authorization of appropriations . An authorization of appropriations (or, alternatively, appropriations authorization) is a provision of law that essentially recommends a funding level for a program or agency in a given fiscal year. Appropriations authorizations may include a range of fiscal years and a specific funding level for each fiscal year within that range (e.g., $10 million in FY2007, $12 million in FY2008, etc.); may be indefinite (e.g., \"such sums as may be necessary\"); or may not be provided at all. For example, Section 1002 of the Elementary and Secondary Education Act of 1965, as amended and reauthorized by the Every Student Succeeds Act (ESSA, P.L. 114-95 ), includes an authorization of appropriations provision effectively recommending a specific funding level ($15.9 billion) for the Title I-A program in a certain fiscal year (FY2019). Contrary to common misconception, an authorization of appropriations does not convey actual budget authority. Further, a lapse or gap in the fiscal years covered by an authorization of appropriations (its \"expiration\") does not usually affect the underlying organic authorization, which provides authority to the federal government to engage in the programs or activities to which the authorization of appropriations relates. If appropriations are provided for programs with an expired authorization of appropriations, federal agencies generally would have sufficient legal authority to implement and operate these programs. This is because an authorization of appropriations is \"basically a directive to Congress itself, which Congress is free to follow or alter (up or down) in the subsequent appropriation act.\" Authorizations of appropriations, however, are significant for the purposes of congressional rules. House and Senate rules require that a purpose must have been \"authorized\" prior to when discretionary appropriations are provided. While simply establishing an entity, program, or activity in law generally satisfies that authorization requirement, sometimes provisions are enacted that explicitly authorize future appropriations (\"authorizations of appropriations\"). If the period of time for which an authorization of appropriations has been provided lapses and is not renewed—for example, at the start of FY2010, if the authorization of appropriations ended in FY2009—then subsequent appropriations for those purposes are sometimes described as being \"unauthorized\" from the perspective of House and Senate rules and could be subject to a point of order during floor consideration. However, such points of order are frequently waived. There are two broad categories of budget authority in the federal budget and appropriations process: discretionary spending and mandatory spending . ED receives both kinds of spending, but there are important distinctions between them that are relevant to understanding both how ED receives federal funding and how much it receives. Discretionary spending is budget authority that is provided and controlled by appropriations acts. This spending is for programs and activities that are authorized by law, but the amount of budget authority for those programs and activities is determined through the annual appropriations process. Even if a discretionary spending program has been authorized previously, Congress is not required to provide appropriations for it or to provide appropriations at authorized levels. For example, Section 399 of the Higher Education Act, as amended (HEA), authorized discretionary appropriations of $75 million in FY2010 for the Predominantly Black Institutions (PBIs) program authorized under HEA, Section 318. However, actual discretionary appropriations for the Section 318 PBI program in FY2010 were $10.8 million. Mandatory spending is budget authority that is controlled by authorizing acts. Such spending includes \"entitlements,\" which are programs that require payments to persons, state or local governments, or other entities if those entities meet specific eligibility criteria established in the authorizing law. This budget authority may be provided through a one-step process in which the authorizing act sets the program parameters (usually eligibility criteria and a payment formula) and provides the budget authority for that program. Such funding remains available automatically each year for which it is provided, without the need for further legislative action by Congress. For example, HEA, Section 420R provides mandatory appropriations for Iraq and Afghanistan Service Grants (IASG). Sometimes, however, the authorizing statute for an entitlement does not include language providing authority to make the payment to fulfill the legal obligation that it creates. Under this approach to mandatory spending, the budget authority is provided in appropriations measures. Such spending is referred to as appropriated mandatory spending or an \"appropriated entitlement\" and occurs through a two-step process. First, authorizing legislation becomes law that sets program parameters (through eligibility requirements and benefit levels, for example), then the appropriations process is used to provide the budget authority needed to finance the commitment. As with mandatory spending, congressional appropriations committees have limited control over the amount of budget authority provided for appropriated mandatory spending because the amount needed is the result of previously enacted commitments in law. In other words, the authorizing statute for appropriated mandatory spending establishes a legal obligation to make payments (such as an entitlement) and the funding in annual appropriations acts is provided to fulfill that legal financial obligation. Because the cost of appropriated mandatory programs may vary from year to year, the funding that is provided through the annual appropriations process is based on a projection of costs for the relevant fiscal year. Most ED line items included in regular annual appropriations acts are discretionary. One exception to this is the Vocational Rehabilitation State Grants program, which is appropriated mandatory spending. The concepts in this section relate to how Congress decides the amount of discretionary and mandatory funding to appropriate each fiscal year, which ultimately impacts how much funding ED is provided. Generally speaking, Congress does not start by estimating the cost of every ED program and adding those amounts to reach a total. What happens instead (typically) is that the House and the Senate agree on a total for all federal spending through a budget resolution. That amount is then divided between appropriations and authorizing committees. The appropriations committees then divide their portions among each of their subcommittees. Each subcommittee then determines funding levels for the agencies within its jurisdiction. This is called the 302(a) and 302(b) allocation process. More specifically, the Congressional Budget and Impoundment Control Act of 1974 (CBA) requires that Congress adopt a concurrent resolution on the budget each fiscal year. This budget resolution constitutes a procedural agreement between the House and the Senate that establishes overall budgetary and fiscal policy to be carried out through subsequent legislation. The spending elements of the agreement establish total new budget authority and outlay levels for each fiscal year covered by the resolution. The agreement also allocates federal spending among 20 functional categories (such as national defense; transportation; and education, training, employment, and social services), setting budget authority and outlay levels for each function. Within each chamber, the total new budget authority and outlays for each fiscal year are also allocated among committees with jurisdiction over spending, thereby setting spending ceilings for each committee. These ceilings are referred to as the 302(a) allocations . The 302(a) allocation to each of the authorizing committees (such as the Senate Health, Education, Labor and Pensions Committee) establishes spending ceilings on the mandatory spending under each committee's jurisdiction. The 302(a) allocations to the House and the Senate appropriations committees include discretionary spending and also appropriated mandatory spending. Once the appropriations committees receive their spending ceilings, they separately subdivide the amount among their respective subcommittees, providing spending ceilings for each subcommittee. These spending ceilings are referred to as 302(b) suballocations . For example, for FY2019 the amount of the initial 302(a) allocation to the House Appropriations Committee was $1.2 trillion for discretionary budget authority and $955 billion for appropriated mandatory budget authority. The appropriations subcommittee that is responsible for funding ED is the Labor, Health and Human Services, Education, and Related Agencies (LHHS) subcommittee. When the committee apportioned that allocation among its 12 subcommittees, the initial suballocation for the LHHS subcommittee was $177 billion for discretionary budget authority and $783 billion for appropriated mandatory budget authority. The congressional allocations are of budget authority for the upcoming fiscal year. Budget authority enacted in previous fiscal years that first becomes available for obligation in the upcoming fiscal year counts against the congressional allocations for the upcoming fiscal year. (This type of budget authority is referred to as \"advance appropriations\" and is discussed further in the section \" \"Carry Forward,\" Advance Appropriations, and Forward Funding .\") Department of Education budget, appropriations, and program-related data may be reported using a variety of different \"years\" or units of time. These units of time include the fiscal year, calendar year, academic or school year, and the award year. Readers are cautioned to remain alert to the unit of time when considering and comparing various funding levels reported for ED activities. To be strictly comparable, the units of time must be the same. When the federal government accounts for the funds it has budgeted, appropriated, or spent, the unit of time it uses is the fiscal year (FY). The federal fiscal year is generally the 12-month period between October 1 and the following September 30. The current year is the fiscal year that is in progress; the prior year is the fiscal year immediately preceding the current year. Outyears are any future fiscal years beyond the current year. The fiscal year is the standard unit of time used in the congressional appropriations process; most funding levels in appropriations bills and committee documents are reported by fiscal year. The federal fiscal year differs from the calendar year (January 1 to December 31), the typical academic or school year (fall to spring), and the federal student aid award year (July 1 through the following June 30). Annual funding levels reported in ED budget and program-related documents may use one or more of these different units of time. For example, ED's FY2019 congressional budget justification includes both fiscal year and award year funding levels for the Pell Grant program. These funding levels are not strictly comparable. Funding for federal programs that is provided in regular appropriations acts is usually available for obligation at the start of the fiscal year and may only be obligated during that fiscal year unless otherwise specified. Budget authority also may be provided for more than one fiscal year (\"multiyear\") or without fiscal year limitation (\"no-year\"). (See section on \" Authorizations and Appropriations .\") In other words, in some cases, budget authority may be obligated over multiple fiscal years or may be available to be obligated indefinitely (until it is exhausted). The concept of carry forward (or carry over ) applies to budget authority that was enacted and became available in a previous fiscal year and is still available for obligation in the next fiscal year. (If a federal agency has not entirely obligated its multi- or no-year budget authority by the end of the fiscal year, any unexpired multiyear budget authority and all remaining no-year budget authority may continue to be available for obligation in the next fiscal year.) Such carry forward budget authority is typically notated as \"unobligated balances brought forward\" in the OMB Appendix to the annual budget. For example, the FY2019 OMB Appendix reports that budgetary resources available to the Education for the Disadvantaged account in FY2017 included $660 million in unobligated balances brought forward (of $16.805 billion, total). The concepts of advance appropriations and forward funding relate to when such funding first becomes available to be obligated relative to the timing of its enactment and thus differ significantly from carry forward. With advance appropriations and forward funding, the budget authority becomes available for obligation at a point in time that is delayed beyond the start of the fiscal year. Advance appropriations become available for obligation starting at least one fiscal year after the budget year. Forward funding becomes available beginning late in the budget year and is carried into at least one following fiscal year. Federal accounts and programs may receive annual appropriations, advance appropriations, forward funding, or a mixed approach. The most common mixed approach used in ED appropriations combines advance appropriations and forward funding. Figure 1 illustrates the period of availability for annual appropriations, forward funding, and advance appropriations. It also includes an illustration of the default (or typical) period of availability for annual appropriations. The period of availability for budget authority in ED's accounts does not usually follow a single rule. In a typical appropriations act, some ED accounts and programs will receive annual appropriations (e.g., Indian Education), while others will receive appropriations under a mixed approach including advance appropriations and forward funding (e.g., ESEA Title I). In general, the advance appropriations-forward funding combination is used for accounts that provide funds to recipients (such as elementary and secondary schools) who might experience service disruptions if they received funds aligned with the federal fiscal year and not the academic or school year. One advantage of this approach is that it allows schools to obligate funds prior to the start of the school year. It also gives schools time to plan for, and adjust to, changes in federal funding levels. The Budget Control Act of 2011 (BCA, P.L. 112-25 ) sought to reduce the federal budget deficit through a variety of budgetary mechanisms, including the establishment of limits (or caps ) on discretionary spending and automatic spending reductions (known as sequestration ) for both discretionary and mandatory spending. The BCA only places limits on discretionary spending, and the purpose and triggers for budgetary reductions through sequestration differ significantly between discretionary and mandatory spending. In addition to describing how the BCA operates in light of these key distinctions, the following sections discuss the implications of the BCA for ED. The BCA imposes separate limits on \"defense\" and \"nondefense\" discretionary spending each fiscal year from FY2012 to FY2021. The defense category includes all discretionary spending under budget function 050 (defense). The nondefense category includes discretionary spending in all the other budget functions. In general, discretionary budget authority for ED is subject to the nondefense limit. If discretionary spending is enacted in excess of the statutory limits, enforcement primarily occurs through sequestration, which is the automatic cancelation of budget authority through largely across-the-board reductions of nonexempt programs and activities. The purpose of sequestration is to reduce the level of spending subject to the discretionary spending limit so that it no longer exceeds that limit. Any across-the-board reductions through sequestration affect only nonexempt spending subject to the breached limit, and they are in the amount necessary to reduce spending so that it complies with the limit. Pursuant to procedures under the BCA, the discretionary spending limits initially established by that act are to be further lowered each fiscal year to achieve certain additional budgetary savings. The amount of the revised limits for the upcoming fiscal year is calculated by OMB and reported with the President's budget submission each year. The timing of this calculation, which occurs many months prior to the beginning of the fiscal year, is intended to allow time for congressional consideration of appropriations measures that comply with the revised limits. Since the enactment of the BCA, however, a series of laws have been enacted that supersede the spending limit level that otherwise would have been established by the OMB calculation. The effect of these laws in most cases has been to increase the limits above what they otherwise would have been. The most recent such law, which increased the spending limits for FY2018 and FY2019, was the Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-123 ). In addition to the lowered discretionary spending limits, the BCA provides for reductions to mandatory spending each fiscal year, which are also achieved through sequestration. (Some mandatory spending is exempt from these automatic reductions.) However, mandatory spending sequestration differs from discretionary spending sequestration in that it occurs automatically each fiscal year, and is not triggered by spending levels or other budgetary factors. In other words, mandatory spending sequestration in the BCA context is used as a means to automatically reduce that type of spending each fiscal year on a largely across-the-board basis. The amount of the reduction to defense and nondefense mandatory spending is calculated by OMB and announced at the same time as the reductions to the statutory discretionary spending limits each fiscal year (with the President's budget submission). Nonexempt mandatory budget authority at ED is subject to the nondefense reduction. The BCA affects funding levels at ED in several ways. In establishing caps on total federal discretionary budget authority—caps which are the basis for the allocations of both total federal spending and the division of that amount to each of the appropriations subcommittees through the 302(a) and 302(b) processes (discussed above)—the BCA can impact total discretionary funding at ED. Further, if those caps are exceeded, ED's discretionary budget authority may be subject to sequestration. Since the BCA has been in effect, a discretionary spending sequestration has only occurred once—in FY2013. For ED programs that receive nonexempt mandatory funding, the BCA requires an annual sequester in an amount calculated by OMB. The dollar amount of the reduction for a particular ED account is based on the percentage by which nonexempt mandatory spending in the nondefense category needs to be cut to achieve the total required savings. For example, in FY2018 mandatory funds in the Rehabilitation Services and Disability Research, Higher Education, TEACH Grant Program, IASG, and Student Financial Assistance Debt Collection accounts were subject to the nondefense mandatory sequestration that was calculated based on a reduction of 6.6%. For FY2019, this reduction is 6.2%. For both mandatory and discretionary spending sequestration, the dollar amount that is canceled in each account differs depending on the amount of sequesterable budgetary resources in that account. For example, for the FY2013 sequester, OMB calculated that nondefense discretionary spending would need to be reduced by 5%. The English Language Learner account, which had total sequesterable budgetary resources of $737 million, would thus be reduced by $37 million (5% of $737 million). Likewise, Impact Aid had sequesterable budgetary resources of $1.299 billion and was reduced by $65 million (5% of $1.3 billion). Some ED programs, such as the Pell Grant program, are exempt from sequestration or follow special rules. For example, during periods when a sequestration order is in effect for mandatory spending, the BCA directs that origination fees charged on federal student loans made under the William D. Ford Federal Direct Loan program must be increased by the nondefense, mandatory sequestration percentage. For more information, see CRS Report R42050, Budget \"Sequestration\" and Selected Program Exemptions and Special Rules . Readers are cautioned, when comparing or analyzing funding levels for ED accounts and programs, to assess whether such funding levels reflect pre- or post-sequestration funding levels. Administration and congressional budget and appropriations materials may use pre- or post-sequestration amounts, or both. Both authorization and appropriations measures may also provide transfer authority. Transfers shift budget authority from one account or fund to another or allow agencies to make such shifts. Agencies are prohibited from making transfers between accounts without statutory authority. For example, in FY2019 the appropriations act that funded ED provided that up to 1% of any discretionary budget authority appropriated to the department could be transferred between accounts, subject to certain restrictions. Agencies may, however, generally shift budget authority from one activity or program to another within an account without additional statutory authority. This is referred to as reprogramming . For example, in FY2016 ED shifted $158,336 from the Strengthening Native American-serving Nontribal Institutions program that would have otherwise lapsed to the Fund for the Improvement of Postsecondary Education/First in the World (FIPSE/FITW) program using reprogramming authority. The appropriations subcommittees have established notification and other oversight procedures for various agencies to follow regarding reprogramming actions. Generally, these procedures differ with each subcommittee. For instance, in FY2019 reprogramming requirements applicable to ED were carried in the appropriations act that funded the department. Those requirements included consultation with the House and the Senate appropriations committees, as well as written notification, ahead of reprogramming actions that met certain criteria. The Department of Education uses one of two processes to distribute the funds it receives for grant making. It may distribute such funds by mathematical formula —usually such formulas are predetermined and established in statute—or through merit-based competitions . ED's Title I, Part A program, for example, is a formula grant program. It provides funding to local educational agencies (through state educational agencies) using various mathematical formulas that consider the number of school-age children in poverty, state average per-pupil expenditures, and similar variables. The Innovative Approaches to Literacy program, on the other hand, is a merit-based competitive grant program. Applicants must meet certain criteria (such as whether they promote science, technology, engineering, and math education) and are awarded points based on how well they meet those criteria. Applicants with the highest weighted scores receive grants. Policy debates about education funding sometimes focus on whether funds ought to be provided through block grants or categorical grants . Block grants are general or multipurpose grants that, in the federal education context, are typically awarded to states through a formula-based process. Block grant funding may be used for a wide variety of purposes. Awardees (not federal officials) determine how to use such funds within a broad set of options. For example, the Elementary and Secondary Education Act, as amended by ESSA ( P.L. 114-95 ), authorized a new block grant program at ED called \"Student Support and Academic Enrichment Grants.\" Formula funding provided through this block grant could serve a variety of purposes. Such purposes include providing all students with access to a well-rounded education, improving school conditions for student learning, and improving the use of technology in order to improve the academic achievement and digital learning of all students. Categorical grants, on the other hand, are typically available for a more narrow and defined set of purposes or program activities. They may be distributed by formula or competition. ED's Carol M. White Physical Education program, which provides funds to schools and community-based organizations to initiate, expand, or enhance physical education programs, is an example of a competitively awarded categorical grant. (ESSA incorporated this program into the Student Support and Academic Enrichment block grant.) Some federal grants include what are known as matching requirements. In such scenarios, federal funds or assistance are granted to awardees who are willing and able to \"match\" federal funds with a nonfederal contribution (such as funding from state government or private sources). This nonfederal contribution is called the \"nonfederal share.\" Typically, matching fund requirements specify that the nonfederal share must meet or exceed a certain percentage of the federal award amount (such as 20% or 50%). Depending on the grant requirements, nonfederal matching contributions may be in cash or what is known as \"in-kind\" (such as computer equipment or staff time), or a combination of the two. For example, the maximum federal share of compensation in the Federal Work-Study program (which provides funding to support part-time employment of needy college and university students) is 75% (with certain exceptions). Institutions participating in the Work-Study program are required to provide the remaining 25%. The following section includes frequently asked questions about the budget and appropriations process for ED (and closely related topics). ED's annual budget includes two types of spending: discretionary and mandatory. In FY2019, ED received approximately $71 billion in budget authority through the annual discretionary appropriations process. About three-quarters of these funds ($52 billion) were distributed to local educational agencies to provide supplementary educational and related services for disadvantaged and disabled children or to low-income postsecondary students (in the form of Pell Grants, which provide financial assistance for college). ED also has programs that receive mandatory funding directly through their authorizing statutes. These programs received about $2.5 billion in net funding in FY2019. However, most of ED's mandatory funding is for student loan subsidies. In some years, the net cost of student loan subsidies is positive (i.e., there is a cost to the government for providing the subsidy); in other years the net cost of student loan subsidies is negative (i.e., the government received fees and other receipts in excess of subsidy costs). Because of this dynamic, ED's \"total\" budget can vary widely from year to year. (See Table 1 .) In short, the answer depends on what federal accounts or activities are defined as \"education spending,\" on the point in the fiscal year when budget authority is estimated, and which federal agency is reporting. Any aggregation of federal funding provided for educational purposes across agencies or accounts requires judgements about which activities should be counted (in whole or in part) and about how such activities should be grouped (e.g., higher education, K-12, etc.). Moreover, any such exercise may be limited by the granularity of information available about the use of the funds. Complicating the situation is the fact that federal funding for education overlaps with (but is not the same as) funding for ED. The following sections explore and describe two commonly referenced ways that the federal government accounts for the funds it spends on education: by Treasury Department function code and as calculated and tracked in ED's Digest of Education Statistics . The Treasury Department classifies all federal funding according to certain numbered functions (e.g., Health (550) and Transportation (400)) and by numbered subfunctions (e.g., Health Care Services (551) and Health Research and Training (552)). The Congressional Budget Office (CBO), Office of Management and Budget (OMB), and congressional budget process also use this same taxonomy. Federal education funding is included in function 500 (Education, Training, Employment, and Social Services). Within function 500, subfunction 501 includes elementary, secondary, and vocational education; and subfunction 502 includes higher education. While these are two of the primary areas in which federal education funding is concentrated, simply adding the totals for these two subfunctions does not capture all federal funding for education. For example, other subfunctions, such as 503 (research and general education aids) and 504 (training and employment), could be considered federal education spending as well. Additionally, subfunction 506 (social services) includes ED's Rehabilitation Services and Disability Research Account. Furthermore, only a portion of total outlays for subfunctions 501 and 502 were spent by ED, and not all ED funding is classified as function 500. For example, other agencies (such as the National Science Foundation and National Institutes of Health) provide federal funds for educational programs and activities that may be captured in the totals for subfunctions 501 and 502. In addition, some ED programs and activities are classified under other functional categories, such as the Office for Civil Rights (subfunction 751, federal law enforcement activities). ED's National Center for Education Statistics (NCES) tracks federal funding for education and related activities in the periodically updated Digest of Education Statistics ( Digest ). Funding data in Digest tables may represent appropriations or outlays. Major Digest federal education funding tables present data on federal support for education broken down by program, agency, state, education level, and other facets. As per Table 401.10, \"Federal support and estimated federal tax expenditures for education, by category,\" the federal government provided $228.4 billion in direct budget authority (measured primarily as outlays, but sometimes as obligations) for education (broadly defined to include research grants to universities) in FY2017. If nonfederal funds generated by federal legislation are included, the amount was $322.6 billion. The ED congressional budget justifications, which provide details about the President's budget request for the department, are published on the department's website. Appropriations for many (but not all) ED accounts are typically included in annual Departments of Labor, Health and Human Services, and Education, and Related Agencies appropriations acts. The Congressional Research Service (CRS) tracks these acts—including related bills and committee reports—each year. As discussed in the \" 302(a) and 302(b) Allocations \" section of this report, the budget resolution sets procedural parameters for the consideration of mandatory and discretionary spending legislation; those parameters are enforceable by points of order. The budget resolution does not provide actual funding for ED or any other purpose. While the procedural parameters in the budget resolution do involve underlying assumptions about levels of funding for particular purposes, there are two general reasons why the amount of funding assumed for ED (or education-related purposes) in the annual congressional budget resolution cannot be determined by CRS. First, the procedural parameters in the budget resolution allocate funding by congressional committee and not by department. Because the jurisdiction of the relevant authorizing committees and appropriations subcommittees encompasses more than ED, it is not possible to determine the assumed amount of funding for ED through those allocations. Second, although the basis of those authorizing committee and appropriations subcommittee allocations is a distribution of funding based on \"functional categories,\" those functional categories do not neatly correspond to ED or education-related purposes. (Functional categories are discussed in the section \" How much does the federal government spend on education? \") As a result, absent specific information with regard to the budget resolution from the House or the Senate budget committees, it is not possible for CRS to determine amounts of funding for ED or education-related purposes that are assumed by the budget resolution. The answer to this question centers on the force of law. Funding levels included in House and Senate appropriations bills are proposed until enacted. That is to say, until an appropriations bill is signed by the President (i.e., it is enacted), the funding levels included therein simply represent what each appropriations committee or subcommittee—or if the bill has passed the House or the Senate, that chamber—proposes to appropriate for the various programs and agencies included in that bill. Once Congress and the President enact an appropriations measure, the funding levels included in that act are statutorily established and provide a legal basis for agencies to obligate and expend that funding. Appropriations acts, therefore, carry the force of law. Funding levels and program directives included in House and Senate appropriations committee reports are committee recommendations and are not usually legally binding. (In some cases, report language is enacted by reference in the appropriations act that it accompanies, giving it statutory effect.) However, while report language itself generally is not law, agencies usually seek to comply with it because it represents congressional intent. Typically, report language is used to supplement legislative text at either of two stages in the congressional appropriations process. First, as noted, reports may accompany annual appropriations bills reported by the House or the Senate appropriations committees. If these committee reports differ with respect to a particular funding level or program directive (e.g., the House Appropriations Committee report recommends setting the maximum discretionary portion of Pell Grants at $5,035 and the Senate report recommends setting it at $5,135), a joint explanatory statement (JES) may be used to reconcile conflicting language and also provide additional instructions. (The JES is sometimes referred to colloquially as a conference report , though from a technical standpoint, it is not. The JES accompanies the conference report, which contains only legislative text.) For appropriations measures that are not reported from an appropriations committee but still receive congressional consideration—or when differences are resolved through an amendment exchange and not a conference committee process—an explanatory statement from an appropriations committee is sometimes entered into the Congressional Record . This language may be regarded similarly to report language. When this text is used during the resolving differences phase of the legislative process, such statements can serve the same purposes and function as a JES. It depends. First, Congress and the President may provide partial-year funding through a temporary appropriations law, often referred to as a \"continuing resolution\" (CR), while they negotiate agreement on annual appropriations that have yet to be enacted. CRs typically (but not always) provide appropriations at a rate based on the previous fiscal year's appropriations acts and for the same purposes as those provided in the previous fiscal year. (Adjustments in funding levels or allowable activities must be specified in the CR.) The typical effect, then, of providing federal education funding through a continuing resolution is that planned or proposed changes to federal education programs may not occur or may be delayed. In addition, while a CR is in effect, ED makes limited obligations until budget authority for the entire fiscal year is enacted. If appropriations actually lapse, the effects of that lapse—including whether a shutdown of agency operations commences—will depend on a variety of factors. Several factors that might mitigate the effects of a lapse include the extent to which unexpired budget authority is available for ED to obligate during the period of the lapse (generally, such funding would be multiyear or no-year budget authority enacted in prior fiscal years, including as forward funds or advance appropriations); the extent to which ED staff who would regularly administer programs or funds are furloughed as a consequence of the lapse; the timing of the grant cycle for individual grant programs and the type of funds that are typically awarded and distributed; and the availability of alternative sources of funding that can be used (temporarily or on an ongoing basis) to sustain supported activities. As discussed in the sections titled \" Authorizations and Appropriations \" and \"Authorization of Appropriations,\" most of ED's enabling or organic program authorizations are permanent. Therefore, unless the program's enabling authorization specifically includes a sunset provision, or Congress and the President enact legislation repealing the enabling authorization, the program can continue so long as Congress continues to fund it through the appropriations process. This remains true, in general (but not always), even if the program's authorization of appropriations has expired and the GEPA extension has lapsed. (See text box titled, \"GEPA and Appropriations Authorizations at ED.\") This is because an authorization of appropriations is a directive from Congress to itself and does not typically function as a sunset provision for the program or purpose to which it relates. An expired authorization of appropriations may, however, lead to a point of order during floor consideration against an appropriations measure or amendment under certain circumstances. They are, therefore, significant from the perspective of congressional procedure. Readers seeking additional information on any of the key terms, concepts, and answers to the FAQs included in this report are referred to the authors of this report and to CRS reports on budget and appropriations in general and on education funding in particular. Such reports have been footnoted and linked in the relevant sections of this report. Additionally, readers may wish to consult glossary and budget concepts documents produced by ED, the Congressional Budget Office (CBO), Government Accountability Office (GAO), and Office of Management and Budget (OMB). These include the following: Department of Education, Budget Process in the U.S. Department of Education , last modified January 19, 2017, http://www2.ed.gov/about/overview/budget/process.html ; Congressional Budget Office, Glossary , updated July 2016, https://www.cbo.gov/publication/42904 ; U.S. Government Accountability Office, A Glossary of Terms Used in the Federal Budget Progress , GAO-05-734SP, September 1, 2005, http://www.gao.gov/products/GAO-05-734SP ; and Executive Office of the President, Office of Management and Budget, \"Budget Concepts,\" Fiscal Year 2019 Analytical Perspectives of the U.S. Government , https://www.govinfo.gov/content/pkg/BUDGET-2019-PER/pdf/BUDGET-2019-PER-5-1.pdf .", "summary": "Like most federal agencies, the Department of Education (ED) receives funds in support of its mission through various federal budget and appropriations processes. While not unique, the mechanisms by which ED receives, obligates, and expends funds can be complex. For example, ED receives both mandatory and discretionary appropriations; ED is annually provided forward funds and advance appropriations for some—but not all—discretionary programs; ED awards both formula and competitive grants; and a portion of ED's budget subsidizes student loan costs (direct loans and loan guarantees). As such, analyzing ED's budget requires an understanding of a broad range of federal budget and appropriations concepts. This report provides an introduction to these concepts as they are used specifically in the context of the congressional appropriations process for ED. The first section of this report provides an introduction to key terms and concepts in the federal budget and appropriations process for ED. In addition to those mentioned above, the report includes explanations of terms and concepts such as authorizations versus appropriations; budgetary allocations, discretionary spending caps, and sequestration; transfers and reprogramming; and matching requirements. The second section answers frequently asked questions about federal funding for ED or education in general. These are as follows: How much funding does ED receive annually? How much does the federal government spend on education? Where can information be found about the President's budget request and congressional appropriations for ED? How much ED funding is in the congressional budget resolution? What is the difference between the amounts in appropriations bills and report language? What happens to education funding if annual appropriations are not enacted before the start of the federal fiscal year? What happens if an ED program authorization \"expires\"? The third section includes a brief description of, and links to, reports and documents that provide more information about budget and appropriations concepts.", "document_type": "crs"}
{"report": "The 116 th Congress may conduct oversight and deliberate on authorizations and appropriations legislation related to water resource development, management, and protection. Demands on available water supplies have heightened local and regional water-use conflicts throughout the country, particularly in the West and Southeast. Development pressures, droughts and floods, and concerns about changing hydrology fro m land-use change and climate change engender nonfederal interest in federal financial and technical assistance for water resource science and projects. There is interest in new water resource infrastructure (e.g., storm surge gates, water storage) and new kinds of projects (e.g., groundwater recharge projects, nature-based flood risk reduction). In addition, there is interest in reinvestment in aging water resource infrastructure and in improved management of available supplies through water science, monitoring, and operational changes. Water resource policy questions relevant to the 116 th Congress include the following: What will be the federal role in maintaining the performance and safety of existing water resource infrastructure? Under what conditions and how should the federal government be involved in planning and constructing water resource projects? How may federal and nonfederal water resource science, observation, and monitoring be performed and used to inform water resource management and project design and operation? Congress historically has played a role in water resources through authorization of and appropriations for regional and site-specific projects and activities. Some of the projects are for facilitating navigation and expanding water supplies for irrigation and other uses. Other projects are aimed at reducing flood and drought losses and restoring aquatic ecosystems. Congress principally has directed either the Bureau of Reclamation (Reclamation) in the Department of the Interior (DOI) or the U.S. Army Corps of Engineers (USACE) in the Department of Defense to plan and construct the existing stock of large federal water resource projects. Historically, Reclamation constructed projects in the 17 arid states west of the Mississippi River; these projects were designed principally to provide reliable supplies of water for irrigation and some municipal and industrial uses. USACE constructs projects nationwide that primarily seek to improve navigation, reduce flood damages, and restore aquatic ecosystems. For more on the federal water resource infrastructure, see the Appendix . In addition, Congress authorizes and funds selected water resource science and monitoring activities at multiple federal agencies. DOI's U.S. Geological Survey (USGS) has a prominent role in federal water resource science and observation (e.g., streamgages, groundwater information, and other water resource data). In addition to USACE, Reclamation, and USGS, other federal agencies have water-related programs and activities; these other agencies are largely beyond the scope of this report. This report also does not address municipal water systems, municipal wastewater infrastructure, or environmental protections, such as water quality and wetlands regulations. This report first discusses some broad categories of water resource topics relevant to the 116 th Congress—projects and activities of USACE, western water and Reclamation, Indian water rights settlements, international waters shared with Canada and Mexico, and water resource science at USGS. The report next covers the following crosscutting topics: funding and financing aging and new water resource projects, changing from federal infrastructure projects to federal partnerships, protecting and restoring the environment, flood resilience and natural and nature-based infrastructure, and recharging groundwater. Congress generally authorizes USACE water resource activities and makes changes to the agency's policies in an omnibus authorization bill. Congress typically appropriates funds for USACE activities in annual Energy and Water Development appropriations acts ($7 billion in FY2019). At times, Congress uses supplemental appropriations bills to fund USACE emergency activities. Supplemental appropriations for USACE response and recovery for coastal and riverine floods surpassed $17 billion during the 115 th Congress. The 116 th Congress may consider questions raised about this supplemental spending/appropriations. For example, how do trends in annual and supplemental appropriations amounts, processes, and requirements influence the effective, efficient, and accountable use of federal funding provided to USACE? For a more detailed discussion of USACE annual and supplemental appropriations and related policy questions, see CRS Report R45326, Army Corps of Engineers Annual and Supplemental Appropriations: Issues for Congress , by Nicole T. Carter. An omnibus USACE authorization bill (typically titled a Water Resources Development Act and called WRDA) usually is considered biennially. The most recent omnibus USACE authorization acts are America's Water Infrastructure Act (AWIA; P.L. 115-270 ), enacted in October 2018; the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322 ), enacted in December 2016; and the Water Resources Reform and Development Act of 2014 (WRRDA 2014; P.L. 113-121 ), enacted in June 2014. The 116 th Congress may follow the tradition of biennial consideration of legislation that authorizes USACE studies and projects. Some USACE-related issues that the 116 th Congress may address include the following: Funding and financing issues, such as the use of the Harbor Maintenance Trust Fund, investments in projects to deepen coastal harbors, USACE budgeting priorities, and oversight of USACE efforts to implement public-private partnerships and to develop alternative financing opportunities. Project operations topics, such as USACE policies on pricing for water storage; updates to operation manuals for USACE projects; recreational policies (including firearms regulations) at USACE projects and associated lands; and security of USACE facilities, including cybersecurity. Decisionmaking and planning practices, such as USACE tribal consultation policies and practices; inclusion of nonstructural alternatives, including nature-based measures; consideration of future hydrologic conditions; and approvals for modification to USACE projects. A persistent challenge for USACE is how to manage its $96 billion (according to a USACE estimate in early 2018) in authorized construction activities that are eligible for federal appropriations, often referred to as its construction backlog . For FY2019, annual USACE construction appropriations total $2.18 billion. Policymakers may consider whether—and, if so, how—to advance projects in the backlog. In addition, USACE currently is studying multiple projects that are larger in scale than most past USACE projects. These include the Coastal Texas Protection and Restoration feasibility study for a project with an estimated cost between $23 billion and $32 billion. Other studies of large-scale projects include the Great Lakes and Mississippi River Interbasin Study to control aquatic nuisance species (principally the Asian carp) and the New York/New Jersey Harbor and Tributaries study to reduce coastal storm risk for New York City and nearby areas. Given the scale of federal and nonfederal investments that would be needed to construct these USACE projects and other projects in the current construction backlog, policymakers and project sponsors are exploring options for construction financing and contracting and for sharing costs and responsibilities among project sponsors and beneficiaries. Since the early 1900s, Reclamation has constructed and operated a variety of multipurpose water projects in the 17 states west of the Mississippi River. These projects include the California Central Valley Project (CVP) and major dams on the Colorado River (e.g., Hoover Dam) and Columbia River (e.g., Grand Coulee Dam) systems, among others. This water storage and conveyance infrastructure historically was important for regional development and remains important today. Water supplies from these projects have been used primarily for irrigation; however, some municipalities also receive water from Reclamation projects. Many of the largest facilities produce hydropower and provide other benefits, such as flood damage reduction, recreation, and water for fish and wildlife purposes. However, the operations of some facilities are also controversial for the effects on the environment. Over time, Reclamation's historical focus on building new projects has shifted to new mission areas. Construction authorizations for Reclamation slowed during the 1970s and 1980s. In 1987, Reclamation announced a new mission recognizing the agency's transition from a water resource development and construction organization to one primarily occupied with managing water resources in an environmentally and economically sound manner. Since then, increased population; prolonged drought; fiscal constraints; and water demands for fish and wildlife, recreation, and scenic enjoyment have resulted in increased pressure to alter the operation of many Reclamation projects. Alterations to operations, project deliveries, and allocations often have been controversial because of potential impacts on water rights, contractual obligations, and local economies. Previous Congresses have expressed interest in both the management and operations of individual Reclamation projects and the broader policies and procedures that guide the agency's activities. In recent years, Congress has expanded Reclamation's authorities and increased its funding support for alternative technologies to increase water supplies in the West. These technologies include water recycling and reuse, aquifer storage and recovery, and desalination, among others. Some support expanded authority and funding for these programs as critical to future efforts to address water shortages in the West. Others prefer that the agency focus its priorities on more traditional mission areas, including new and expanded water storage construction projects and maintenance of existing infrastructure. In contrast to USACE, there is no tradition of a regularly scheduled authorization vehicle (e.g., a WRDA) for Reclamation projects. Instead, Congress generally has considered Reclamation projects individually. However, occasionally individual project authorizations are rolled into an omnibus bill. Reclamation project authorizations have slowed considerably over time, in part due to the onset of congressional earmark moratoria beginning in the 112 th Congress. Several Reclamation-related water project and management issues may be the subject of legislation or oversight during the 116 th Congress. Such issues may include, for example, the status of new and proposed water storage projects; dam safety issues at existing federal reclamation projects; and efforts to address the agency's aging infrastructure and transition projects to nonfederal ownership. In addition, Congress may address drought mitigation assistance, planning, and preparedness through oversight hearings and legislation (e.g., Energy and Water Development appropriations), especially if dry conditions persist or intensify in the Colorado River basin and in other western states. Ongoing issues associated with the CVP and Reclamation's operation of pumps in the San Francisco Bay/San Joaquin and Sacramento Rivers' Delta (Bay-Delta), including the pumps' effects on water users and on threatened and endangered species, have been particularly controversial in recent years. Provisions enacted in 2016 under Title II, Subtitle J, of the WIIN Act addressed some of these controversies. The bill also authorized a new process and structure for authorizing Reclamation water storage projects. Many of the WIIN Act's Reclamation authorities are scheduled to sunset at the end of 2020; thus, the 116 th Congress may discuss these authorities in its oversight capacity and/or propose them for reauthorization or modification. Other river basins generating regular congressional interest include the Colorado River, Columbia River, Klamath River (California and Oregon), and Rio Grande River basins. In the second half of the 19 th century, the federal government pursued a policy of confining Indian tribes to reservations. The federal statutes and treaties reserving land for Indian reservations typically did not address the water needs of these reservations, a fact that has given rise to questions and disputes regarding Indian reserved water rights. Tribes have pursued quantification of their water rights through both litigation and negotiated settlements with the federal government and other stakeholders. Over the last 50 years, negotiated settlements have been the preferred course for most tribes, because they are often less lengthy and costly than litigation. The 116 th Congress may consider under what circumstances (if any) Congress should approve new Indian water rights settlements and whether Congress should fund (and in some cases amend) existing settlements. Some support the resolution of Indian water rights settlements as a mutually beneficial means to resolve long-standing legal issues, provide certainty of water deliveries, and reduce the federal government's liability. Others may argue against authorization and funding of new settlements, either broadly (e.g., on the principle that new settlements are overly expensive or unjustified) or with regard to specific individual settlements and activities. After Indian water rights settlements are negotiated, federal action is necessary for their approval and implementation. As of 2018, 36 Indian water rights settlements had been federally approved, with total costs in excess of $5.8 billion. Of these, 32 settlements were approved and enacted by Congress and 4 were administratively approved by the U.S. Departments of Justice and the Interior. After approval, any federal projects associated with approved Indian water rights settlements generally have been implemented by Reclamation or the Bureau of Indian Affairs (both within the Department of the Interior), pursuant to congressional directions. Congress has appropriated discretionary and mandatory funding (and, in some cases, both) for these activities, including in recent appropriations bills. One of the primary mandatory funding mechanisms for Indian water rights settlements, the Reclamation Water Settlements Fund, is currently authorized to provide $120 million per year in appropriations for qualifying tribal water settlement projects through FY2029. The 115 th Congress considered but did not enact legislation proposing congressional approval of new settlement agreements. The primary challenge facing new settlements is the availability of federal funds to implement ongoing and future agreements that require federal resources (not all settlements require these resources). Indian water rights settlements often involve the construction of major new water infrastructure to allow tribal communities to access water to which they hold rights, and obtaining federal funding for these projects can be difficult. Some settlements also are controversial for their potential to affect existing water rights and allocations. For more on Indian water rights settlements, see CRS Report R44148, Indian Water Rights Settlements , by Charles V. Stern. Federal, state, provincial, local, and tribal governments in the United States and Canada have sought to work together to address environmental challenges and restore the Great Lakes ecosystem. In 2012, the United States and Canada amended the Great Lakes Water Quality Agreement (GLWQA), a commitment originally signed in 1972 that provides a framework for identifying binational priorities and implementing actions that improve water quality. The revised agreement is intended to help the United States and Canada better anticipate and prevent ecological harm. It includes new provisions to address aquatic invasive species; habitat degradation and the effects of climate change; and continued threats to people's health and the environment, such as harmful algae, toxic chemicals, and discharge from vessels. The United States and Canada both have provided funding to advance the goals of the GLWQA. In 2016, for example, Congress authorized appropriations of $300 million annually from FY2017 to FY2021 for the Great Lakes Restoration Initiative under Title IV of the WIIN Act. Although the Trump Administration sought to eliminate funding for the initiative in FY2018, Congress appropriated $300 million to continue restoration efforts in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). The Trump Administration requested $30 million for Great Lakes restoration in FY2019. The International Joint Commission, a binational organization established by the 1909 Boundary Waters Treaty to investigate and recommend solutions to transboundary water issues, issued the First Triennial Assessment of Progress on Great Lakes Water Quality in November 2017. The report found that the United States and Canada had made progress toward meeting many of the GLWQA's objectives, including accelerated restoration of contaminated areas of concern, development of binational habitat conservation strategies, the absence of newly introduced aquatic invasive species (such as Asian carp), and comprehensive reporting on groundwater science. It also identified significant challenges, such as the increase in harmful algal blooms in Lake Erie, the slow pace in addressing chemicals of mutual concern, the spread of previously introduced invasive species, and insufficient investments in infrastructure to prevent the discharge of untreated or insufficiently treated waste into the Great Lakes. In addition to the ongoing challenges identified in the 2017 report, Congress has expressed concerns about a proposed deep geologic repository for nuclear waste by the Bruce nuclear power facility in Kincardine, Ontario. The proposed site, located about 1 kilometer inland from Lake Huron, would hold low- to mid-level waste materials currently being stored above ground in warehouses. The explanatory statement accompanying the Consolidated Appropriations Act, 2018, directed the U.S. Secretary of State to submit a report to the Committees on Appropriations detailing the actions taken to date, and planned for the future, to engage the government of Canada to jointly refer the proposed repository to the International Joint Commission for research and study. It further directed the Secretary to report on the diplomatic and legal steps the Department of State plans to take to address concerns about the protection of the Great Lakes water basin and to review alternatives for the proposed repository that will not risk the health, safety, and economic security of residents of the Great Lakes basin. The Columbia River crosses the boundary between southwest Canada and the northwest United States. The Columbia River Treaty (CRT) is an international agreement between the United States and Canada for the cooperative development and operation of the water resources of the Columbia River basin to provide for flood control and power. The CRT resulted from more than 20 years of negotiations between the two countries, both of which ratified the treaty in 1961. Implementation began in 1964. The CRT has no specific end date, and most of its provisions continue indefinitely in the absence of action by the United States or Canada, with the exception of certain flood control operations that will change after 2024. Beginning in September 2024, either nation can terminate most CRT provisions with at least 10 years' written notice (i.e., as early as 2014). To date, neither country has given notice of termination, but both countries have indicated a preliminary interest in modifying the CRT. Future operation of USACE facilities on the Columbia River and its tributaries is central to CRT discussions. USACE and the Bonneville Power Administration (BPA, a self-funded entity within the U.S. Department of Energy that markets the hydropower from the federal facilities in the U.S. portion of the basin), in their joint role as the U.S. Entity overseeing the CRT, undertook a review of the CRT from 2009 to 2013. Based on studies and stakeholder input, USACE and BPA provided a regional recommendation to the U.S. Department of State in December 2013. The recommendation was to continue the treaty after 2024, with modifications. For its part, the Canadian entity overseeing the CRT (the Province of British Columbia) released in March 2013 a recommendation to continue the CRT with modifications \"within the Treaty framework.\" The U.S. Department of State finalized its negotiating parameters and authorized talks with Canada in October 2016. Negotiations began in May 2018; four rounds of negotiation had concluded by the end of 2018. If the executive branch comes to an agreement regarding modification of the CRT, the Senate may be asked to weigh in on future versions of the treaty, pursuant to its advice and consent role. In addition, both houses of Congress may weigh in on CRT review and negotiation activities through their oversight roles. For more information on the CRT, see CRS Report R43287, Columbia River Treaty Review , by Charles V. Stern. The United States and Mexico share the waters of multiple rivers, including the Colorado River and the Rio Grande. These shared surface waters are important to many border community economies and water supplies. In 1944, the United States and Mexico entered into the Treaty on Utilization of Waters of the Colorado and Tijuana Rivers and of the Rio Grande (hereinafter 1944 Water Treaty) to establish the International Boundary and Water Commission (IBWC) to oversee the U.S.-Mexico border and water treaties. Congress has been involved in recent U.S.-Mexico water sharing issues primarily through oversight. This involvement includes oversight of IBWC's actions to manage the Colorado River's water and infrastructure to improve water availability during drought and to restore and protect riverine ecosystems. Hydrologic conditions and U.S. state and congressional action on a drought contingency plan for the three U.S. Colorado River lower basin states (California, Arizona, and Nevada) may shape what actions are taken under an agreement with Mexico. The agreement is Minute 323, \"Extension of Cooperative Measures and Adoption of a Binational Water Scarcity Contingency Plan in the Colorado River Basin,\" which is in effect from September 2017 through December 2026. For Congress, binational Colorado River oversight topics may encompass Minute 323 implementation and operations and deliveries during shortage conditions. On multiple occasions since 1994, Mexico has not met its Rio Grande water delivery obligations to the United States within the five-year period prescribed by the 1944 Water Treaty. Since 2014, Congress has directed the U.S. Department of State to report annually on Mexico's deliveries and on efforts to improve Mexico's treaty compliance. The IBWC is working to identify opportunities to improve the predictability and reliability of Mexico's water deliveries to the United States. For more information on binational Rio Grande and Colorado River water sharing, see CRS Report R45430, Sharing the Colorado River and the Rio Grande: Cooperation and Conflict with Mexico , by Nicole T. Carter, Stephen P. Mulligan, and Charles V. Stern. The USGS has conducted water resource science since 1889. It is a primary agency for conducting large- and small-scale studies of water resources throughout the country, addressing both water quality and water quantity. These activities assist decisionmakers and federal agencies in managing water resources at all levels of government. The USGS is divided into seven mission areas, including the Water Resources Mission Area (also referred to as the USGS water mission). The USGS water mission covers scientific activities that involve collecting, assessing, and disseminating hydrological data and analysis and research on hydrological systems. The USGS water mission focuses on several water-related conditions, such as streamflow, groundwater, water quality, and water use and availability. The agency's current scientific plan for the USGS water mission centers on several focus areas. The focus areas include collection and dissemination of water data and monitoring for the country, flood inundation science and information, and modeling linkages between human activities and the water cycle, among others. The implementation and operation of streamgages by the USGS is a perennial issue for Congress. The USGS, under its Water Resources Mission Area, makes publicly available real-time monitoring data from approximately 8,200 streamgages, 1,900 water quality-sampling stations, and 1,800 groundwater observation wells across the nation. These observations support disaster responses by the Federal Emergency Management Agency, water infrastructure operations by USACE and Reclamation, flood forecasting by the National Oceanic and Atmospheric Association's (NOAA's) National Water Service, and drinking water and ecosystem management by state and federal regulatory agencies (e.g., U.S. Environmental Protection Agency). Over the years, the demand for streamgages has exceeded the available resources. Some streamgages in the program are implemented and operated with cooperative partners. USGS has the authority to match the cost of a streamgage by up to 50%; however, in practice, the cooperative partners' cost share is often greater than 50%. Relying on cooperative partners to maintain or expand observations is a persistent challenge for USGS. Congress traditionally has focused its attention on the National Streamflow Information subprogram and the Cooperative Water subprogram under the Water Resources Mission Area, both of which fund streamgages throughout the nation. The 116 th Congress may conduct oversight of USGS water observation programs and their funding. The 116 th Congress also may address the recommendations in the 2018 report by the National Academy of Sciences (NAS) on how the USGS water mission area may address expected challenges over the next 25 years. Many recommendations focused on water data collection, delivery, standards, and incorporation into comprehensive models. The NAS report also highlighted potential integration of advanced observation capabilities and data informatics and recommended that USGS develop a robust water accounting system that incorporates human activities affecting water. U.S. water infrastructure is aging; the majority of the nation's dams, locks, and levees are more than 50 years old. Failure of these structures could have significant effects on local communities as well as regional and national impacts. Major capital investments for the repair and rehabilitation of these facilities would cost billions of dollars. To date, no comprehensive federal funding solutions for aging water resource infrastructure have been enacted. Some propose funding mechanisms that might be more conducive to major capital investments than the current available funding options, such as the authorization or modification of loan programs for some water resource infrastructure types or the inclusion of water resource infrastructure among the eligible recipients of funding from an infrastructure bank or broad infrastructure initiative. Other proposals include using revenues from project beneficiaries (e.g., hydropower revenues, increased user fees) to fund project repairs and upgrades, or de-authorizing and/or transferring projects to nonfederal entities, such as state or local governments. Still others think Congress requires more uniform information on the extent of this issue before it considers major funding solutions. In the 115 th Congress, proposed legislation would have required increased reporting by Reclamation on the agency's aging infrastructure backlog ( H.R. 660 , Bureau of Reclamation Transparency Act , which passed the House ). (See also discussion below on \" Changing from Federal Infrastructure Projects to Federal Partnerships .\") Some stakeholders have expressed frustration with the pace of authorization and federal funding of water resource projects, which has resulted in some local sponsors pursuing projects with limited federal support or with expectations of future federal reimbursement or credit. Language authorizing increased nonfederal contributions to Reclamation project costs (as well as federal contributions to nonfederal projects) was enacted in Section 4007 of the WIIN Act. Congress in WRRDA 2014, the WIIN Act, and AWIA expanded nonfederal entities' ability to use their funds to advance USACE projects and to receive up-front or be reimbursed for the federal portion of project study and construction costs. Such new partnership models present opportunities for advancing projects more quickly than the status quo, but they also raise concerns regarding federal oversight in planning decisions and the use of federal funds. Other related questions include what the appropriate federal amount of investment and use of these new authorities should be and whether these authorities allow nonfederal sponsors to exert influence over the use of limited federal water resource infrastructure funds. The 113 th Congress initiated another approach through the authorization of Title X of WRRDA 2014, the Water Infrastructure Finance and Innovation Act (WIFIA). The title authorized a pilot program, to be administered by USACE and the Environmental Protection Agency (EPA), for loans and loan guarantees for certain flood damage reduction, public water supply, and wastewater projects. WIFIA was modeled after a similar program that assists transportation projects, the Transportation Infrastructure Finance and Innovation Act, or TIFIA, program. To date, only the EPA portion of the WIFIA program is operational. Although the WIIN Act and AWIA amended and extended the EPA's WIFIA authority, no similar legislative changes were made to the USACE WIFIA program. In FY2019, USACE continues to develop its policies to implement its WIFIA authority. The 116 th Congress may engage in discussions of how threatened and endangered species designations and related critical habitat and environmental mitigation requirements affect water resource project construction and operations. The 116 th Congress also may choose to engage in other environmental topics related to water resources, such as habitat restoration and aquatic species conservation in the Sacramento and San Joaquin Rivers' Delta, the reduction of harmful algal blooms associated with federal water resource projects, and opportunities for public-private partnerships for conservation and restoration of estuaries and rivers. The 116 th Congress may consider the status and priority of federal efforts to restore large-scale aquatic ecosystems that have been altered or impaired by development, habitat loss, and federal water resource projects. Congress has authorized restoration activities in the Everglades, Great Lakes, Gulf Coast, and elsewhere. Other restoration efforts that may receive attention include the Bay-Delta, Chesapeake Bay, Salton Sea, Klamath Basin, and elsewhere. Numerous issues pertaining to these ecosystems have emerged. For example, Congress might consider legislation to authorize a framework for governance and a comprehensive restoration plan for the Salton Sea; it also may conduct oversight over the implementation of restoration activities in the Everglades and Gulf Coast region. Funding for existing and newly authorized restoration initiatives could face challenges in the 116 th Congress as decisionmakers evaluate investment priorities. Congress may look at the funding and performance of existing restoration efforts. Decisionmakers also may evaluate restoration initiatives on how well they balance demands for water resources and species' conservation needs. The 116 th Congress may consider responses to flood disasters, including improving flood resilience, which is the ability to adapt to, withstand, and rapidly recover from floods. In the United States, flood-related responsibilities are shared between the federal and state governments. Congress has established various federal programs that may be available to assist U.S. state, local, and territorial entities and tribes in reducing flood risks, including structural and nonstructural measures. States and local governments have significant discretion in land use and development decisions (e.g., building codes, subdivision ordinances). Congress has been and may continue to be concerned about the nation's and the federal government's financial exposure to flood losses, as well as the economic, social, and public health impacts on individuals and communities. Congress may consider the costs and benefits of protecting and restoring natural features that provide flood control and erosion benefits. Natural features, such as coral reefs, mangroves, dune systems, coastal wetlands, and the like, can dampen wave energy, slow erosion, and absorb floodwaters, among other benefits. Congress has established several programs across a number of agencies to conserve and restore these types of areas. For example, the Coastal Barrier Resources Act ( P.L. 97-348 ) established the Coastal Barrier Resources System in coastal areas with low development. The program aims not only to limit future federal expenditures and protect habitat but also to preserve naturally dynamic areas that may absorb flooding and erosion impacts. Approaches that mimic nature and are \"nature-based\" are used as part of flood management and risk reduction. These features sometimes are referred to as living shorelines or green infrastructure . Some local, state, and federal agencies and programs support nature-based infrastructure, especially if there are multiple benefits (e.g., erosion reduction, habitat restoration, and water quality benefits). Federal agencies such as the Fish and Wildlife Service, NOAA, USACE, and EPA may be involved in the restoration, protection, or construction of these nature-based features. The WIIN Act required USACE to consider \"natural features\" and \"nature-based features\" in addition to structural and nonstructural measures when studying the feasibility of flood risk management, hurricane and storm damage reduction, and ecosystem restoration projects. Interest in the nation's infrastructure and changes in environmental conditions (e.g., hydrologic conditions associated with a changing climate) may prompt the 116 th Congress to examine the implementation and funding of nature-based infrastructure, and protection of natural features that reduce flood risk. Groundwater, the water in aquifers accessible by wells, is a critical component of the U.S. water supply. It is important for both domestic and agricultural water needs, among other uses. Nearly half of the nation's population uses groundwater to meet daily needs; in 2015, about 149 million people (46% of the nation's population) relied on groundwater for their domestic indoor and outdoor water supply. The greatest volume of groundwater used every day is for agriculture, specifically for irrigation. In 2015, irrigation accounted for 69% of the total fresh groundwater withdrawals in the United States. Congress generally has deferred management of U.S. groundwater resources to the states, and there is little indication that this practice will change. However, Congress, various states, and other stakeholders recently have focused on the potential for using surface water to recharge aquifers and the ability to recover the stored groundwater when needed. Some see aquifer recharge, storage, and recovery as a replacement or complement to surface water reservoirs, and there is interest in how federal agencies can support these efforts. In the congressional context, there is interest in the potential for federal efforts to facilitate state, local, and private groundwater management efforts (e.g., management of federal reservoir releases to allow for groundwater recharge by local utilities). Although Congress has authorized aquifer storage, recharge, and/or recovery for some individual projects, general congressional guidance in this area has been limited. Under the WIIN Act, Congress provided general authority for Reclamation to support new and enhanced federal and state surface and groundwater storage projects under certain, limited circumstances. A connection between federal water projects and groundwater enhancement already exists in Arizona, as part of the Central Arizona Project, and is implemented via state law. More recently, California enacted three groundwater laws known collectively as the Sustainable Groundwater Management Act (SGMA), which directed the California Department of Water Resources to identify water available for replenishing groundwater in the state. Because the California Central Valley Project is integral to the water supply and delivery infrastructure of the state, that project is also recognized as part of the surface water resources potentially important for recharging aquifers as the SGMA is implemented. Other western states with significant Reclamation water infrastructure also may look to enhance their sources of water for aquifer recharge by using water from federal projects. A number of bills introduced in the 115 th Congress would have addressed groundwater recharge, storage, and recovery in various ways. Whereas some bills addressed the concept broadly, others attempted to facilitate and, in some cases, add requirements for groundwater storage projects in specific locations. Similar legislation may be introduced in the 116 th Congress, particularly if drought trends continue in the western United States and more groundwater is pumped in lieu of surface water supplies, potentially leading to the broad and long-term drawdown of aquifers. Many factors shape the water resource issues before the 116 th Congress. These factors include demand for reliable water supplies; hydrologic conditions, such as droughts, floods, and effects of climate change; issues regarding safety and performance of existing infrastructure, and interests and concerns about alternative financing and public-private partnerships. The 116 th Congress may consider some measures proposed but not enacted in the 115 th Congress, as well as new legislative proposals. In the water resource area, legislative activity often is specific to the federal water resource management agencies or to water use by particular sectors, including energy, agriculture, navigation, recreation, and municipal and industrial use. Occasionally, Congress takes up broader water resource policy issues, such as coordination of federal water resource activities, programs, science, and research. Congress and other decisionmakers often make water resource decisions within a complicated context. These decisions may involve existing federal infrastructure and their beneficiaries, multiple or conflicting objectives, various legal decisions, multiple environmental and natural resource statutes, and long-established institutional mechanisms (e.g., water rights and contractual obligations). These decisions also occur within a federalist framework in which water resource responsibilities are shared with state, local, and tribal governments and the private sector. Broad water resource questions for the 116 th Congress described herein include the following: For existing water resource facilities, including aging dams, levees, and navigation channels, what will be the federal role and level of investment in maintaining performance and safety? For planning and construction of new or expanded water resource projects, what will be the circumstances, conditions, and nature of federal involvement? For water resource project design and operations, how may federal and nonfederal science, observation, and monitoring be used to improve performance? Most of the large dams and water diversion structures in the United States were built by, or with the assistance of, the Bureau of Reclamation (Reclamation) or the U.S. Army Corps of Engineers (USACE). The two agencies' projects differed in that Reclamation projects historically were designed principally to provide reliable supplies of water for irrigation and some municipal and industrial uses. USACE projects have been planned primarily to improve navigation and reduce flood damages; power generation, water supply, and recreation often have been included as secondary or incidental benefits. Reclamation currently manages hundreds of dams and reservoirs in the 17 arid states west of the Mississippi River. These projects provide water to approximately 10 million acres of farmland and 31 million people. Reclamation also operates 58 power plants capable of producing 40 billion kilowatt-hours of electricity annually (enough for approximately 3.5 million homes), which generate more than $1 billion in revenues annually. USACE operates nationwide, and its activities are diverse. USACE has constructed thousands of flood damage reduction and navigation projects throughout the country, involving nearly 12,000 miles of commercially active waterways and nearly 1,000 harbors and including 702 dam and reservoir projects (with 75 hydroelectric plants generating 68 billion kilowatt-hours annually). USACE is responsible for maintaining these projects. Additionally, USACE constructed, usually with nonfederal participation, roughly 9,000 miles of the estimated 100,000 miles of the nation's levees, but the agency operates and maintains only 900 miles. The remaining levees are operated by nonfederal entities, often local governments or special districts. The number of federal water resource construction activities decreased during the last decades of the 20 th century, marking the end of earlier expansionist policies that had supported large federal up-front investments in dams and hydropower facilities, navigation locks and channels, irrigation diversions, and flood control levees, as well as basin-wide planning and development efforts. Fiscal constraints, changes in national priorities and local needs, few remaining prime construction locations, and environmental and species impacts of the construction and operation of federal projects all contributed to this shift. ", "summary": "The 116th Congress may conduct oversight and deliberate on authorization and funding of water resource development, management, and protection. Congress engages in authorization and appropriations for water resource projects and activities of the U.S. Army Corps of Engineers (USACE) and the Bureau of Reclamation (Reclamation). USACE constructs projects nationwide, primarily to improve navigation, reduce flood damage, and restore aquatic ecosystems. Reclamation constructs projects in the 17 arid states west of the Mississippi River; these projects primarily provide water supply benefits, often to agricultural irrigation users. The 116th Congress, like earlier Congresses, also may consider Indian water rights settlements and may evaluate the focus of and funding for the water resource science activities of the U.S. Geological Survey (USGS). Development pressures, droughts and floods, and concerns about changing hydrology from land-use change and climate change have engendered nonfederal interest in federal financial and technical assistance for water resource science and projects. Stakeholders are interested in a range of water resource issues, including new water resource infrastructure (e.g., storm surge gates, water storage) and new kinds of projects (e.g., groundwater recharge, nature-based flood risk reduction); reinvestment in aging water resource infrastructure and use of water science and real-time monitoring and forecasting to improve infrastructure operations; funding and financing of projects, and whether and how to shift from federally led projects to federal partnerships with state and/or local entities; and activities to protect and restore aquatic ecosystems and enhance flood resilience (including the use of nature-based approaches). Some topics arise within the context of specific agencies. USACE-related topics for the 116th Congress may include funding and financing issues, such as use of the Harbor Maintenance Trust Fund; the status of investments in projects to deepen coastal harbors; USACE budgeting priorities; and oversight of USACE efforts to implement public-private partnerships and develop alternative financing opportunities. Some Reclamation-related water project and management issues during the 116th Congress may include the status of proposed new and augmented water storage projects, as well as efforts to address the agency's aging infrastructure and transition certain qualifying projects to nonfederal ownership. Congress also may address Reclamation drought mitigation activities in the Colorado River basin and other areas. In addition, Congress may explore ongoing issues associated with Reclamation's project operations in California and other areas. It may address how these issues affect water deliveries to irrigation districts and municipalities and threatened and endangered species, among others. Some topics are international in character. Regarding freshwater bodies shared with Canada, potential topics for the 116th Congress include federal funding for activities supporting Great Lakes restoration and negotiations (and any resulting agreements) with Canada to modify the Columbia River Treaty. Potential topics related to Mexico include oversight of a binational agreement on water sharing during dry conditions in the Colorado River basin and Mexico's deliveries to the United States in the Rio Grande basin. Crosscutting topics (i.e., topics relevant to multiple agencies and programs) also are part of congressional water resource deliberations. For example, the 116th Congress may consider the status and priority of new and ongoing federal efforts to restore large-scale aquatic ecosystems that have been altered or impaired by changes to their natural conditions (e.g., Florida Everglades, Chesapeake Bay). Congress may explore the funding and performance of existing restoration efforts, including what changes (if any) may be necessary to improve project delivery and evaluation. The 116th Congress may consider its guidance to multiple federal agencies on how to respond to flood hazards, including efforts related to enhancing the resilience of infrastructure and communities to flooding. There is interest in developing and evaluating approaches that protect natural elements that reduce flood risk (e.g., natural dunes) or are \"nature-based\" in comprehensive flood risk management (e.g., constructed dunes). Congress also may consider legislation and oversight on USACE supplemental appropriations for response to and recovery from floods.", "document_type": "crs"}
{"report": "Congress has been active in establishing federal policy for the agricultural sector on an ongoing basis since the 1930s. Over the years, as economic conditions and technology have evolved, Congress has regularly revisited agricultural policy through periodic farm legislation. Across these decades, the breadth of policy areas addressed through such farm bills has expanded beyond providing support for a limited number of agricultural commodities to include establishing programs and policies that address a broad spectrum of related areas. These include agricultural conservation, credit, rural development, domestic nutrition assistance, trade and international food aid, organic agriculture, forestry, and support for beginning and veteran farmers and ranchers, among others. The Agriculture Improvement Act of 2018 ( P.L. 115-334 ), known as the \"2018 farm bill,\" was enacted on December 20, 2018, approximately eight months after the bill was introduced ( Table 1 ). In the House, the Agriculture Committee reported the bill on April 18, 2018, by a vote of 26-20. An initial floor vote on May 18, 2018, failed in the House by a vote of 198-213, but floor procedures allowed that vote to be reconsidered ( H.Res. 905 ). The House passed H.R. 2 in a second vote of 213-211 on June 21, 2018. In the Senate, the Agriculture Committee reported its bill ( S. 3042 ) on June 13, 2018, by a vote of 20-1. The Senate passed its bill as an amendment to H.R. 2 by a vote of 86-11 on June 28, 2018. Conference proceedings to resolve the differences between the House- and Senate-passed versions of H.R. 2 officially began on September 5, 2018, and concluded in December 2018 with Senate passage of H.R. 2 on a vote of 87-13 and House passage by a vote of 369-47 ( H.Rept. 115-1072 ). The enacted 2018 farm bill continues a tradition of multi-year farm bills that would establish policy for a broad array of agriculture and nutrition assistance programs. To this end, P.L. 115-334 addresses agriculture and food policy across 12 titles. These titles cover commodity support programs, agricultural conservation, trade and international food aid, domestic nutrition assistance, credit, rural development, research and extension, forestry, horticulture, crop insurance, and a variety of other policies and initiatives. The Congressional Budget Office (CBO) projected at enactment that outlays of the 2018 farm bill will amount to $428 billion over the five-year life of the law (FY2019-FY2023). Most of this projected spending—$326 million, or 76%—is in the nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining 24%—$102 billion of projected outlays—stems primarily from agricultural programs, including crop insurance, farm commodity programs, and conservation. CBO estimated that the conference agreement for the 2018 farm bill will be budget neutral over a 10-year period (FY2019-FY2028). CBO estimated that in its first five years, the enacted 2018 farm bill will increase spending by $1.8 billion, compared with a simple extension of the 2014 farm bill, but that this initial increase will be entirely offset in the second five years of the budget window. The \" Budgetary Impact \" section of this report provides additional detail at the level of individual titles and major programs. The policymaking environment for the 2018 farm bill differed materially from that of the 2014 farm bill, reflecting lower farm income levels in recent years and disruptions to agricultural exports beginning in 2018. The U.S. Department of Agriculture (USDA) forecasts that for 2018, net cash farm income—a measure of the profitability of farming—will be about one-third below the levels of 2012 and 2013, which were the highest in the last 40 years adjusted for inflation. The decline in net cash farm income over this period reflects lower farm prices for many commodities. U.S. farm exports, which provide critical support to U.S. agricultural commodity prices and farm profitability, have been disrupted since early 2018 by a series of trade disputes involving major U.S. agricultural export markets—including China, Canada, Mexico, and the European Union—that has led to the imposition of tariffs by these trading partners on a range of U.S. farm product exports. The decline in farm income, coupled with uncertainty about prospects for agricultural exports, may well have played a role in shaping a set of policies in the enacted farm bill that provide farmers and ranchers with a degree of continuity for the next five years. This report provides an analysis of the budgetary implications of both bills, followed by summaries identifying some of the changes contained in the enacted 2018 farm bill compared with prior law. These summaries are followed by tables containing a title-by-title analysis of all of the policies and provisions in the enacted 2018 farm bill compared to the House- and Senate-passed versions of H.R. 2 and with the expired 2014 farm bill . The allocation of federal spending is one way to measure the activities covered by a farm bill, both by how much is spent in total and by how a new law changes policy. CBO estimates are the official measures when bills are considered and are based on long-standing budget laws and rules. A farm bill authorizes funding in two ways: It authorizes and pays for mandatory outlays with multi-year budget estimates when the law is enacted. It also sets the parameters for discretionary programs and authorizes them to receive future appropriations but does not provide funding. Mandatory programs often dominate farm bill policy and the debate over the farm bill budget. Figure 1 illustrates the $428 billion, five-year total of projected mandatory outlays at enactment for the life of the 2018 farm bill (FY2019-FY2023). Figure 2 shows program-level detail for agriculture-specific programs, particularly the farm commodity and conservation titles. The nutrition title is the largest component of the farm bill budget, followed by crop insurance, farm commodity programs, and conservation. The budgetary impact of mandatory spending proposals is measured relative to an assumption that certain programs continue beyond the end of the farm bill. The benchmark is the CBO baseline —a projection at a particular point in time of future federal spending on mandatory programs under current law. The baseline provides funding for reauthorization, reallocation to other programs, or offsets for deficit reduction. Generally, many programs (such as the farm commodity programs or supplemental nutrition assistance) are assumed to continue in the baseline as if there were no change in policy and the program did not expire. However, some programs are not assumed to continue beyond the end of a farm bill. The CBO baseline used to develop the 2018 farm bill was released in April 2018. It projected that if the 2014 farm bill, as amended as of April 2018, were extended, farm bill programs would cost $867 billion over the next 10 years, FY2019-FY2028. Most of that amount, 77%, was in the nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining 23%, $203 billion baseline (the first and fourth data columns in Table 3 ), was for agricultural programs, mostly in crop insurance, farm commodity programs, and conservation. Other titles of the farm bill contributed about 1% of the baseline, some of which are funded primarily with discretionary spending. When a new bill is proposed that would affect mandatory spending, CBO estimates the score (cost impact) in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Budget enforcement rules use these baselines and scores to follow \"PayGo\" and other budget rules (that in part may require no increase to the federal deficit). The score (change) of the enacted 2018 farm bill is shown by title in the second and fifth columns in Table 3 . Figure 3 shows the title-level scores that are made by the enacted 2018 farm bill and the House and Senate bills that preceded the conference agreement. Table 4 contains the more detailed section-by-section CBO score of the enacted 2018 farm bill. Relative to the baseline, the overall score of the 2018 farm bill is budget neutral over a 10-year period. The farm bill increases spending in the first five years by $1.8 billion ( Table 3 ). The House-passed bill would have decreased 10-year outlays by $1.8 billion; the Senate-passed bill was budget neutral ( Figure 3 ). Scores of separate titles show both increases and decreases. Generally, the enacted farm bill follows the score of the Senate bill more closely than the House bill ( Figure 3 ). In the enacted law, most of the reductions are from changes in the Rural Development title. Six titles have increased outlays over the 10-year period, including farm Commodities, Trade, Research, Energy, Horticulture, and Miscellaneous. The Conservation and Nutrition titles have increases over the first five years but are budget neutral over the 10-year period ( Table 3 ). Within some titles, the net score may be a combination of increases and decreases across provisions. This is particularly notable in the Conservation title, which reallocates spending across programs more than in other titles ( Table 4 ). For several of the \"programs without baseline\" from the 2014 farm bill, the 2018 farm bill provides continuing funding and, in some cases, permanent baseline. Twenty-three of the 39 such programs received continued mandatory funding in the 2018 farm bill (see footnotes in Table 4 ). Fourteen of the programs without baseline received mandatory funding during FY2019-FY2023 but no baseline beyond the end of the farm bill. Nine of the programs without baseline received mandatory funding and permanent baseline beyond the end of the farm bill. Three of these programs were combined with six others into six provisions in the 2018 farm bill. In addition, five provisions in the 2018 farm bill created new programs without baseline for the next farm bill. When a new law is passed, the projected cost at enactment equals the baseline plus the score (the third and sixth columns of Table 3 ). This sum becomes the foundation of the new law and may be compared to future CBO baselines as an indicator of how actual costs transpire as the law is implemented and market conditions change. As presented above, Figure 1 illustrates the projected outlays at enactment for the life of the 2018 farm bill (FY2019-FY2023). Figure 2 shows program-level detail for agriculture-specific programs, particularly the Farm Commodity and Conservation titles. Most of $428 billion five-year total amount (76%) is in the Nutrition title for SNAP. The remaining 24%, $102 billion of projected outlays, is for agricultural programs, mostly in crop insurance (8.9%), farm commodity programs (7.3%), and conservation (6.8%). Title I of the 2018 farm bill authorize support programs for dairy, sugar, and covered commodities—including major grain, oilseed, and pulse crops—as well as agricultural disaster assistance. Major field-crop programs include the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs and the Marketing Assistance Loan (MAL) program (see Table 5 ). The dairy program involves protecting a portion of the margin between milk and feed prices. The sugar program provides a combination of price support, limits on imports, and processor/refiner marketing allotments. Four disaster assistance programs that focus primarily on livestock and tree crops were permanently authorized in the 2014 farm bill. These disaster assistance programs provide federal assistance to help farmers recover financially from natural disasters, including drought and floods. Title I also includes several administrative provisions that suspend permanent farm law from 1938 and 1949 that would otherwise impose antiquated and potentially disruptive price support programs; assign payment limits for individuals, joint ventures or partnerships, and corporations; specify the adjusted gross income (AGI) threshold for program payment eligibility; and identify other details regarding payment attribution and eligibility. The 2018 farm bill extends authority for most current commodity programs but with some modifications to the ARC, PLC, and MAL programs; dairy; sugar; and agricultural disaster assistance. Under the 2014 farm bill, producers were allowed a one-time choice between ARC and PLC on a commodity-by-commodity basis, with payments made on 85% of each commodity's base acres (i.e., historical program acres that are eligible for ARC and PLC payments). To increase producer flexibility, the 2018 farm bill provides producers the option in 2019 of switching between ARC and PLC coverage, on a commodity-by-commodity basis, effective for both 2019 and 2020. Beginning in 2021, producers again have the option to switch between ARC and PLC but on an annual basis for each of 2021, 2022, and 2023. Producers may remotely and electronically sign annual contracts for ARC and PLC. Producers also have the option to sign a multi-year contract for the ARC and PLC programs. If no initial choice is made, then the program defaults to whichever program was in effect under the 2014 farm bill. Base acres that have not been planted to a commodity eligible to participate in these programs during the 2009-2017 period are not eligible to receive ARC and PLC payments under the 2018 farm bill. However, as a concession to the affected farms, these base acres may be enrolled in the Conservation Stewardship Program for five years at an annual program payment rate of $18 per acre. Two changes to the PLC program include the option for producers to update their program yields (used in the PLC payment formula) based on 90% of the average yield for 2013-2017, using a yield plug of 75% of the county average for each year where the farm program yield is less, excluding any years with zero yields, and adjusting downward for any national trend yield growth. In addition, an escalator provision was added that could potentially raise a covered commodity's effective reference price (used to determine the PLC per-unit payment rate) by as much as 115% of the statutory PLC reference price based on 85% of the five-year Olympic average of farm prices. The 2018 farm bill also specifies several changes to the ARC program. Under the 2014 farm bill, USDA's National Agricultural Statistics Service (NASS) data for county average yields was used for calculating both ARC benchmark and actual revenues. Under the 2018 farm bill, data from USDA's Risk Management Agency (RMA) will be the primary source for county average yield data. Where RMA data is not available, USDA will determine the data source considering data from NASS or the yield history of representative farms in the state, region, or crop-reporting district. This data reprioritization is intended to improve the integrity of the ARC program and avoid the disparity in ARC payments that some neighboring counties experienced in recent years. Also, up to 25 counties nationwide that meet certain criteria—larger than 1,400 square miles and with more than 190,000 base acres—may subdivide for purposes of calculating the ARC benchmark and actual revenue. This change is expected to allow ARC calculations to better reflect significant yield deviations within a county. Also, ARC will use a trend-adjusted yield, as is done by RMA for the federal crop insurance program. This has the potential to raise ARC revenue guarantees for producers. Finally, the five-year Olympic average county yield calculations will increase the yield floor (substituted into the formula for each year where the actual county yield is lower) to 80%, up from 70%, of the transitional county yield. This yield calculation is used to calculate the ARC benchmark county revenue guarantee. Marketing assistance loan rates are increased for several program crops, including barley, corn, grain sorghum, oats, extra-long-staple cotton, rice, soybeans, dry peas, lentils, and small and large chickpeas. Commodities excluded from the loan rate increase are upland cotton, peanuts, minor oilseeds, nongraded wool, mohair, and honey. Marketing assistance loan rates are used to establish the maximum payment under PLC. Thus, raising the loan rate for a commodity lowers its potential PLC program payment rate. No changes were made to the \"actively engaged in farming\" criteria used to determine whether an individual is eligible for farm program payments. With respect to payment limits and the AGI limit, the 2018 farm bill leaves both the payment limit of $125,000 per individual ($250,000 per married couple) and the AGI limit of $900,000 unchanged, but it modifies the eligibility criteria for commodity program payment eligibility. However, MAL program benefits are exempted from inclusion under payment limits. Thus, payment limits apply only to combined ARC and PLC payments. Also, the definition of family farm is expanded to include first cousins, nieces, and nephews, thus increasing the potential pool of individuals eligible for individual payment limits on family farming operations. The enacted bill also amends the permanent agricultural disaster assistance programs. The law expands payments for livestock losses caused by disease and for losses of unweaned livestock that occur before vaccination. The law also expands the definition of eligible producer to include Indian tribes or tribal organizations and increases replanting and rehabilitation payment rates for beginning and veteran orchardists. The law amends the limits on payments received under select disaster assistance programs—of the four disaster assistance programs, only the livestock Forage Program (LFP) is not subject to the $125,000/person payment limit. The AGI requirements are left unchanged. The Noninsured Crop Disaster Assistance Program (NAP) is also amended. The enacted bill amends crop eligibility to include crops that may be covered by select forms of crop insurance but only under whole farm plans or weather index policies. It also amends the payment calculation to consider the producer's share of the crop, raises the service fees and creates separate payment limits for catastrophic ($125,000/person) and buy-up ($300,000/person) coverage. The law makes buy-up coverage permanent, and adds data collection and program coordination requirements. The 2018 farm bill significantly revises the Margin Protection Program (MPP) for milk producers that was established in the 2014 farm bill. The new dairy program—Dairy Margin Coverage (DMC)—provides lower producer-paid premium rates for milk coverage of 5 million pounds or less (Tier I), adds margin coverage at higher levels of coverage, and allows producers to cover a larger quantity of milk production. DMC is authorized through December 31, 2023. The DMC program will pay participating dairy producers the difference (when positive) between a producer-selected margin and the national milk margin (calculated as the all-milk price minus an average feed cost ration). The feed ration formula is unchanged from MPP. For a $100 administrative fee, participating dairy producers are automatically covered at the $4.00 per hundredweight (cwt) margin level. Producers may buy additional margin coverage from $4.50/cwt to $9.50/cwt on the first 5 million pounds of production, compared with $5.50/cwt to $8.00/cwt under MPP. Also, producers may now cover from 5% to 95% of their production history, compared with 25% to 90% under MPP. Under DMC, premiums for Tier I coverage above $4.00/cwt are significantly reduced from MPP to incentivize dairy producers to buy higher levels of margin coverage. For example, under MPP, an $8.00 margin cost $0.142/cwt, but under DMC, the cost is $0.10/cwt. The premiums for the newly available coverage for margins of $8.50, $9.00, and $9.50 are established at $0.105/cwt, $0.11/cwt, and $0.15/cwt, respectively. For production of over 5 million pounds (Tier II coverage), the premium rates for $4.50 and $5.00 margins are also reduced compared with MPP, but margin coverage is only available up to $8.00, and the premium rates are generally higher than under MPP. Another change under the 2018 farm bill is that dairy producers will receive a 25% discount on premiums if they select and lock in their margin and production coverage levels for the entire five years of the DMC program. Otherwise, producers may continue to select coverage levels annually. Also under DMC, dairy producers may apply for repayment of the premiums, less any payments received, that were paid under MPP during 2014-2017. If dairy producers opt to apply repayments to future DMC premiums, they are to receive credit for 75% of the eligible repayment. Otherwise, they may opt for a direct cash payment of 50% of the eligible repayment. Unlike MPP, the DMC program allows dairy producers to participate in both margin coverage and the Livestock Gross Margin-Dairy (LGM-D) insurance program that insures the margin between feed costs and a designated milk price. In addition, producers who were excluded from participating in MPP in 2018 because their milk production was enrolled in LGM-D may retroactively participate in MPP. The 2018 farm bill reauthorizes the Dairy Forward Pricing Program, the Dairy Indemnity Program, and the Dairy Promotion and Research Program through FY2023. The act repeals the Dairy Product Donation Program enacted in the 2014 farm bill. It also establishes a milk donation program designed to simplify donations of fluid milk that producers, processors, and cooperatives make to food banks and feeding organizations. The donation program is funded at $9 million for FY2019 and $5 million in each following fiscal years. Also, the act amends the formula for the Class I skim milk price used for calculating the Class I price under Federal Milk Marketing Orders. The farm bill requires USDA to conduct studies on whether the national feed cost ration is representative of actual feed costs used in the margin calculation and on the cost of corn silage versus the feed cost of corn, and it directs USDA to report alfalfa hay prices in the top five milk-producing states. USDA administers a number of agricultural conservation programs that assist private landowners with natural resource concerns. These can be broadly grouped into working lands programs, land retirement and easement programs, watershed programs, emergency programs, technical assistance, and other programs. The enacted bill amends portions of programs in all of these categories (see Table 6 ). However, the general focus of the enacted 2018 farm bill is on the larger working lands, land retirement, and easement programs. All major conservation programs were reauthorized with varying degrees of amendments. Farm bill conservation programs are authorized to receive mandatory funding through the Commodity Credit Corporations (CCC). Generally, the law reallocates mandatory funding within the title among the larger programs and pays for increases in the short term with reductions in the long term. CBO projects that the enacted bill would increase funding for conservation by $555 million in the short term (FY2019-FY2023) and reduce funding by $6 million in the long term (FY2019-FY2028). In general, working lands programs provide technical and financial assistance to help farmers improve land management practices. The two largest working lands programs—Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP)—account for more than half of all conservation program funding. Total funding for both programs is reduced under the enacted bill, compared with prior law, but in different ways and to different degrees. CSP provides financial and technical assistance to producers to maintain and improve existing conservation systems and to adopt additional conservation activities in a comprehensive manner on a producer's entire operation. The House bill would have repealed CSP and created a stewardship contract within EQIP, whereas the Senate bill would have reauthorized CSP and reduce program enrollment. The enacted bill creates a mix of both the House and Senate proposals with amendments. The law reauthorizes CSP but amends how the program limits future enrollment. The program is shifted away from an acreage limitation under prior law (10 million acres annually) to limits based on funding ($700 million in FY2019 increasing to $1 billion in FY2023), a reduction from prior law. The savings from limiting CSP in this manner are redistributed to EQIP and other farm bill conservation programs within the title. The enacted bill also amends CSP's ranking criteria; contract renewal requirements; payments for cover crops, grazing management, and comprehensive conservation plan development; and organic certification allocations. A new grassland conservation initiative is also added to CSP. EQIP is reauthorized and expanded in the enacted bill. EQIP provides financial and technical assistance to producers and land owners to plan and install structural, vegetative, and land management practices on eligible lands to alleviate natural resource problems. The enacted bill increases EQIP funding in annual increments from $1.75 billion in FY2019 to $2.025 billion in FY2023. A number of amendments to EQIP focus on water quality and quantity-related practices, soil health improvement, and wildlife habitat improvement. The bill reduces the allocation for livestock-related practices from 60% to 50% and increases the allocation for wildlife-related practices from 5% to 10%. Water conservation system payments are expanded to irrigation and drainage entities with limitations. Conservation Innovation Grants, a subprogram under EQIP, is expanded to include community colleges, on-farm innovation, and soil health trials. Land retirement and easement programs provide federal payments to private agricultural landowners for accepting permanent or long-term land-use restrictions. The largest land retirement program—the Conservation Reserve Program—is reauthorized and expanded under the enacted 2018 farm bill. CRP provides annual rental payments to producers to replace crops on highly erodible and environmentally sensitive land with long-term resource-conserving plantings. Under the new law, annual CRP enrollment is increased incrementally from 24 million acres in FY2019 to 27 million by FY2023. Within this limit, CRP is required to enroll up to 2 million acres in grasslands contracts and up to 8.6 million acres in continuous contracts. To offset this increased enrollment level, the enacted bill reduces payments to participants, including cost-share payments, annual rental payments, and incentive payments. Annual rental payments are limited to 85% of the county average for general enrollment and 90% for continuous enrollment. The enacted bill also makes a number of other changes that would further expand grazing and commercial uses on CRP acres as well as transition options for new and limited resource producers. Under CRP, new pilot programs are created, such as CLEAR 30 (Clean Lakes, Estuaries, and Rivers and Soil Health and Income Protection Pilot), while existing subprograms are reauthorized and codified (e.g., Conservation Reserve Enhancement Program and Farmable Wetlands Program). The Agricultural Conservation Easement Program (ACEP) is reauthorized and amended in the 2018 farm bill. ACEP provides financial and technical assistance through two types of easements: (1) agricultural land easements that limit nonagricultural uses on productive farm or grasslands and (2) wetland reserve easements that protect and restore wetlands. Most of the changes to ACEP focus on the agricultural land easements in which USDA enters into partnership agreements with eligible entities to purchase agricultural land easements from willing landowners. Additional flexibilities are provided to ACEP-eligible entities, including amendments to nonfederal cost share requirements, consideration of geographical differences, terms and conditions of easements, and certification criteria of eligible entities. Several amendments reduce the roll of USDA in the administration of ACEP agricultural land easements, including amendments to the certification of eligible entities, the right of easement enforcement, and planning requirements. Changes to wetland reserve easements center on compatible use and vegetative cover requirements. The enacted bill increases overall funding from $250 million in FY2018 to $450 million annually for FY2019-FY2023. The new farm bill reauthorizes and amends the Regional Conservation Partnership Program (RCPP) by shifting the program away from enrolling land through existing conservation programs to a standalone program with separate contracts and agreements. The program is to continue to enter into agreements with eligible partners, and these partners are to continue to define the scope and location of the project, provide a portion of the project cost, and work with eligible landowners to enroll in RCPP contracts. The scope of eligible activities under RCCP is expanded to include activities that may be carried out under additional covered programs. RCPP funding is increased to $300 million annually for FY2019-FY2023 from $100 million annually under prior law. The enacted bill provides additional flexibilities to partners, including the makeup of a partner's project contribution, guidance and reporting requirements, agreement renewals, and the application process. The enacted bill also includes amendments to conservation programs and provisions with originating authorities outside of farm bill legislation, primarily various watershed and emergency conservation programs. The law also requires reports be provided to Congress on natural resources and on various pilot programs and trials. The trade title—Title III of the enacted 2018 farm bill—addresses statutes concerning U.S. international food aid and agricultural export programs (see Table 7 ). Under the farm bill authority, U.S. international food assistance is distributed through three main programs: (1) Food for Peace (emergency and nonemergency food aid), (2) Food for Progress (agricultural development programs), and (3) the McGovern-Dole International Food for Education and Child Nutrition program (school lunch and feeding programs). The largest of these, the Food for Peace (FFP) program, receives about $1.5 billion in annual appropriations. Traditionally, these three programs have relied on donated U.S. agricultural commodities as the basis for their activities. However, recent farm bills have increasingly added flexibility to purchase food in local markets or to directly transfer cash or vouchers to needy recipients. The U.S. Agency for International Development administers FFP, while the Foreign Agricultural Service of USDA administers the other two programs. The bill reauthorizes all international food aid programs as well as certain operational details such as prepositioning of agricultural commodities and micronutrient fortification programs. P.L. 115-334 also adds a provision requiring that food vouchers, cash transfers, and local and regional procurement of non-U.S. foods avoid market disruption in the recipient country. Under prior law, this requirement applied only to U.S. commodities. The enacted law amends FFP by eliminating the requirement to monetize —sell on local markets to fund development projects—at least 15% of FFP commodities. It also increases the minimum level of FFP funds allocated for nonemergency assistance from $350 million to $365 million each year while maintaining the maximum annual allocation of 30% of FFP funds. P.L. 115-334 amends the McGovern-Dole program by authorizing up to 10% of annual appropriated funds to be used to purchase food in the country or region where it will be distributed. Prior law required all commodities provided under the program be produced in the United States. The bill also extends authority for several related international programs, including the Farmer-to-Farmer program, Bill Emerson Humanitarian Trust, and Global Crop Diversity Trust, as well as two associated fellowship programs: Cochran Fellowships and Borlaug Fellowships. P.L. 115-334 consolidates the existing U.S. export promotion programs—the Market Access Program (MAP), the Foreign Market Development Program (FMDP), the Emerging Markets Program (EMP), and Technical Assistance for Specialty Crops (TASC)—into one section, establishing permanent mandatory funding for those programs. It also establishes a Priority Trade Fund, from which the Secretary can provide additional funding to the export promotion programs. The programs are authorized to receive $255 million in annual mandatory CCC funds for FY2019-FY2023. Of that money, not less than $200 million is to be spent on MAP, not less than $34.5 million on FMDP, not more than $8 million on EMP, not more than $9 million on TASC, and $3.5 million on the Priority Trade Fund. While the MAP and FMDP funding reflects 2014 farm bill funding levels for those programs, EMP and TASC are each authorized at $1 million less than in the 2014 farm bill. Another change is that MAP and FMDP funds can now also be spent on authorized programs in Cuba. The law also reauthorizes direct credits or export credit guarantees for the promotion of agricultural exports to emerging markets of not less than $1 billion in each fiscal year through 2023. Further, the new law authorizes the appropriation of up to $2 million annually through 2023 to assist with the removal of nontariff and other trade barriers to U.S. agricultural products produced with biotechnology and other agricultural technologies. And the law adds a requirement that USDA facilitate the inclusion of more tribal food and agricultural products in federal trade-related activities and international trade missions. The enacted farm bill's Nutrition title amends a variety of aspects of SNAP and related nutrition assistance programs (see Table 8 ). While the enacted provisions incorporate some of the SNAP policies included in the House- and/or Senate-passed bills, the Nutrition title does not include the House-passed bill's expansion of work requirements and SNAP employment and training (E&T) programs. The law reauthorizes SNAP and related programs for five years through the end of FY2023. CBO estimates the Nutrition title's impact on direct spending (in outlays) is cost-neutral over the 10-year period (FY2019-FY2028). While certain policies are estimated to increase spending by approximately $1.1 billion, all others total to an estimated decrease in spending by approximately $1.1 billion. SNAP Eligibility and Benefit Calculation. The enacted 2018 farm bill's Nutrition title largely maintains current SNAP eligibility and benefit calculation rules. After debate over work requirements for SNAP, the enacted conference report maintains both the existing general work requirements and the time limit for nondisabled adults without dependents to receive SNAP, with a few amendments While prior law allowed states to exempt up to 15% of those subject to the time limit from the time limit, the 2018 farm bill reduces such exemptions to 12%. The conference report expands the SNAP E&T activities that a state may provide and emphasizes supervised job search over unsupervised job search programs. The new law increases one stream of mandatory E&T funding by approximately $14 million and prioritizes specified E&T activities for receiving any reallocated funding. On benefit calculation, the new law requires states to conduct a simplified calculation for homeless households and also requires certain updates or studies of certain aspects of benefit calculation. Among other eligibility-related provisions that were not adopted, the House-passed bill would have limited categorical eligibility while amending asset limits, limited how utilities may have been calculated in benefit calculation, expanded work requirements to include individuals 50-59 years old and individuals with children over the age of six, made it more difficult for states to qualify for waivers from work requirements, and increased the earned income deduction. ( Table 8 expands upon the eligibility and benefit calculation differences between the bills.) SNAP fraud, errors, and related state administration . The enacted 2018 farm bill includes policies intended to reduce errors and fraud in SNAP. The enacted farm bill establishes a nationwide National Accuracy Clearinghouse to identify concurrent enrollment in multiple states and requires state action on information that could change benefit amounts. It increases USDA's oversight of state systems and the quality control system. The enacted bill also repeals funding for state performance awards. Electronic Benefit Transfer (EBT) and retailers . The enacted Nutrition title contains policy changes for SNAP's EBT system and benefit redemption. It places limits on the fees EBT processors may charge, shortens the time frame for storing and expunging unused benefits, changes the authorization requirements for farmers' market operators with multiple locations, and requires USDA to conduct other specified retailer and EBT system oversight. The new law requires the nationwide implementation of the online acceptance of SNAP benefits and authorizes a pilot project to test SNAP recipients' use of mobile technology to redeem their SNAP benefits. Other SNAP- related grants . The enacted 2018 farm bill makes changes to other SNAP-related funding (E&T, a type of SNAP-related grants, is discussed above). The enacted Nutrition title reauthorizes the Food Insecurity Nutrition Incentive (FINI) grant program, renaming it the Gus Schumacher FINI, and provides for evaluation, training, and technical assistance. As added by the 2014 farm bill, this program funds projects that incentivize participants to purchase fruits and vegetables. The 2018 farm bill expands these SNAP incentive programs, increasing mandatory funding, and, within FINI's funding, establishes grants for produce prescription projects to serve individuals eligible for SNAP or Medicaid in households with or at risk of developing a diet-related health condition. The new law increases FINI funding by $417 million over 10 years. In addition to FINI's fruit and vegetable incentives or prescriptions, the Nutrition title also includes policies—but not federal funding—for retailer incentive programs and authorizes, with discretionary funding, pilot projects to focus on milk consumption. On nutrition education (SNAP-Ed), the new law makes some policy changes, such as requiring an electronic reporting system, but it does not change the program's funding. Food distribution programs . The Nutrition title reauthorizes and makes some policy changes to the nutrition assistance programs that distribute USDA foods to low-income households. The law includes changes to the Food Distribution Program on Indian Reservations, including requiring the federal government to pay at least 80% of administrative costs and creating a demonstration project for tribes to purchase their own commodities. The Nutrition title reauthorizes the Commodity Supplemental Food Program and increases the length of certification periods. The enacted bill also increases funding for The Emergency Food Assistance Program. CBO estimates that the increases will amount to an additional $206 million over 10 years. Included in this cost estimate is $4 million for each of FY2019-FY2023 for newly authorized projects to facilitate the donation of raw/unprocessed commodities by agricultural producers, processors, and distributors to emergency feeding organizations. Other nutrition programs and policies . The enacted 2018 farm bill also continues the Senior Farmers' Market Nutrition Program and its mandatory funding. The enacted bill reduces funding for the Community Food Projects competitive grant program, providing $5 million per year instead of $9 million. Though generally the school meals programs are reauthorized outside of the farm bill, the 2018 farm bill continues the $50 million set-aside for USDA's fresh fruit and vegetable purchases for schools and requires USDA to take certain actions to enforce school meals' Buy American requirements. The enacted bill also authorizes new programs and discretionary funding for Public-Private Partnerships and Micro-Grants for Food Security. The Credit title (Title V) of the 2018 farm bill reauthorizes and makes several changes to provisions in the Consolidated Farm and Rural Development Act that governs the USDA farm loan programs (7 U.S.C. 1921 et seq. ). It also modifies the Farm Credit Act that governs the Farm Credit System (12 U.S.C. 2001 et seq. ) and reauthorizes the State Agricultural Loan Mediation Program (7 U.S.C. 5101; see Table 9 ). For the USDA farm loan programs, the 2018 farm bill adds specific criteria (e.g., coursework, military service, mentoring) that the Secretary may use to reduce the requirement for three years of farming experience in order for beginning farmers to qualify for loans. It also raises the maximum loan size for guaranteed loans (both farm ownership and farm operating) to $1.75 million per borrower in 2019, adjusted for inflation thereafter, from a lower statutory base of $700,000 established in 1996 ($1.4 million in 2018 after adjusting for inflation). For direct loans, the new farm bill increases the farm ownership loan limit to $600,000 and the farm operating loan limit to $400,000, both from $300,000 under prior law. For beginning and socially disadvantaged farmers, it increases the percentage of loans that may be guaranteed to 95%, generally from 80%-90%. The State Agricultural Loan Mediation Program is reauthorized through FY2023, and the range of issues covered by the program is expanded. For the government-chartered cooperative Farm Credit System (FCS), the 2018 farm bill eliminates obsolete references to outdated names and transition periods from the 1980s and 1990s. It clarifies that FCS entities may share privileged information with the Farm Credit Administration (FCA) for regulatory purposes without altering the privileged status elsewhere, and it expands FCA's jurisdiction to hold accountable \"institution-affiliated parties\" (including agents and independent contractors). It also repeals a compensation limit for FCS bank boards of directors. For the Federal Agricultural Mortgage Corporation (FarmerMac), the new farm bill increases the acreage exception—subject to a study by FCA—from 1,000 acres to 2,000 acres for the dollar limit to remain a qualified loan. For the Farm Credit System Insurance Corporation (FCSIC), which insures repayment of certain FCS debt obligations, the 2018 farm bill provides greater statutory guidance regarding the powers and duties of the FCSIC when acting as a conservator or receiver of a troubled FCS institution and the rights and duties of parties affected by an FCS institution being placed into a conservatorship or receivership. These are largely modeled after provisions that apply to depository institutions that are insured by the Federal Deposit Insurance Corporation. The enacted 2018 farm bill also directs four studies about agricultural credit: (1) an annual FSA report about its farm loan program that includes various performance characteristics, demographics, and participation by beginning and socially disadvantaged farmers; (2) an FCA study about the risks and capitalization of loans in the portfolios of FCS and FarmerMac and the feasibility of increasing the acreage for FarmerMac qualified loans; (3) a Government Accountability Office (GAO) study about credit availability for socially disadvantaged farmers; and (4) a GAO study about the credit needs of Indian tribes and members of Indian tribes. The Rural Development title of the enacted 2018 farm bill ( P.L. 115-334 ) addresses rural development policies including broadband deployment, opioid abuse and rural health, and business and infrastructure development (see Table 10 ). The law adds a new section to the Rural Development Act of 1972 authorizing the Secretary to temporarily prioritize assistance under certain USDA Rural Development loan and grant programs to respond to a public health emergency. P.L. 115-334 also directs the Secretary to prioritize assistance under certain programs between FY2019 and FY2025 to combat substance use disorder. It directs the Secretary to make available 20% of Distance Learning and Telemedicine Program funds for telemedicine projects that provide substance use disorder treatment services. It also gives priority for assistance under the Community Facilities Program and Rural Health and Safety Education Program to entities providing substance use prevention, treatment, and recovery services. The new law also allows loans or loan guarantees provided to a community facility or rural entity to be used to refinance a rural hospital's debt obligation. P.L. 115-334 includes provisions that address access to broadband in rural communities. The law amends the Rural Broadband Access Loan and Loan Guarantee Program to allow USDA to provide grants, in addition to loans and loan guarantees, to fund broadband deployment projects. It increases authorized appropriations for broadband projects from $25 million to $350 million annually for FY2019-FY2023. Prior law established minimum acceptable levels of broadband service for a rural area for the purposes of this program as 4 megabits per second (Mbps) download and 1 Mbps upload. P.L. 115-334 increases these minimum acceptable levels to 25 Mbps download and 3 Mbps upload. The new law also reauthorizes the Rural Gigabit Network Pilot Program established in the 2014 farm bill ( P.L. 113-79 ) and renames the program Broadband Innovative Advancement. It also codifies the Community Connect Grant Program and authorizes discretionary funding for the program of $50 million annually for FY2019-FY2023. The new law also establishes a Rural Broadband Integration Working Group to identify barriers and opportunities for broadband deployment in rural areas. The enacted 2018 farm bill directs the Northern Border Regional Commission to establish a new State Capacity Building Grant Program to provide grants to support economic and infrastructure development in commission states. P.L. 115-334 also establishes a Council on Rural Community Innovation and Economic Development to enhance federal efforts to address the needs of rural areas by creating working groups within the council to focus on job acceleration and integration of smart technologies in rural communities and making recommendations to the Secretary of Agriculture. P.L. 115-334 reauthorizes the Rural Energy Savings Program and amends the program to allow financing of off-grid and renewable energy and energy storage systems. It increases authorized discretionary funding for the Emergency and Imminent Community Assistance Water Program from $35 million per year to $50 million per year for FY2019-FY2023. It also decreases authorized discretionary funding to capitalize revolving water and wastewater loan funds from $30 million per year to $15 million per year for FY2019-FY2023. P.L. 115-334 amends the definition of rural in the ConAct (P.L. 92-419) to exclude from population-based criteria individuals incarcerated on a \"long-term or regional basis\" and to exclude the first 1,500 individuals who reside in housing located on military bases. It also amends the Housing Act of 1949 to allow any area defined as a rural area between 1990 and 2020 to remain classified as such until receipt of the 2030 decennial census. Among its other changes, the enacted 2018 farm bill establishes a new technical assistance and training program to assist communities in accessing programs offered through the Rural Business-Cooperative Service. In addition, it amends the Cushion of Credit Payments Program to cease new deposits and modify the interest rate structure that borrowers receive. It also allows borrowers to withdraw deposits from cushion of credit accounts to prepay loans under USDA's Rural Utilities Service without a prepayment penalty through FY2020. The new law amends the Rural Economic Development Loan and Grant Program to authorize $10 million per year in discretionary funding for FY2019-FY2023 and $5 million per year in mandatory funding for FY2022-FY2023. The law also repeals several unfunded programs, including the Rural Telephone Bank, the Rural Collaborative Investment Program, and the Delta Region Agricultural Development Grants Program. USDA is authorized under four major laws to conduct agricultural research at the federal level and to provide support for cooperative research, extension, and postsecondary agricultural education programs in the states through formula funds and competitive grants to land-grant universities (see Table 11 ). The enacted Agriculture Improvement Act of 2018 ( P.L. 115-334 , Title VII) reauthorizes funding for these activities through FY2023 with either mandatory funding or discretionary funding that is subject to annual appropriations. Several new research areas in the High Priority Research and Extension program are designated as high priorities: macadamia tree health, national turfgrass research, fertilizer management, cattle fever ticks, and laying hen and turkey research. The law also reauthorizes the Organic Agriculture Research and Extension Initiative (OREI) and increases mandatory funding levels to $30 million annually for FY2019-FY2023. The Specialty Crop Research Initiative (SCRI) is reauthorized through FY2023 and will continue to include carve-out funding for the Emergency Citrus Disease Research and Extension Program. SCRI also expands program eligibility to include \"size-controlling rootstock systems for perennial crops\" and \"emerging and invasive species,\" among other production practices and technologies. The enacted law provides new programs for the 1890 land-grant institutions and 1994 tribal colleges of agriculture, authorizes new support for urban and indoor agricultural production, authorizes new funding for industrial hemp research and development, and authorizes an initiative supporting advanced agricultural research. Other provisions reauthorize and extend national genetic resources programs, OREI, and SCRI. The research title also makes changes to the Foundation for Food and Agriculture Research and reauthorizes several programs relating to agricultural biosecurity. The law creates a new scholarship program for students attending 1890 land-grant universities (Historically Black Colleges and Universities). Authorized grants are for young African American students who commit to pursuing a career in the food and agricultural sciences. Another provision of the law also establishes at least three Centers of Excellence, each to be led by an 1890 institution. The centers are to concentrate research and extension activities in one or more defined areas, including nutrition, wellness and health, farming systems and rural prosperity, global food security and defense, natural resources, energy and the environment, and emerging technologies. A similar program, New Beginnings for Tribal Students, is to offer competitive grants to 1994 tribal agriculture colleges to support recruiting, tuition, experiential learning, student services, counseling, and academic advising to increase the retention and graduation rates of tribal students at 1994 land-grant colleges. Another provision will make 1994 tribal colleges that offer an associate's degree or a baccalaureate eligible to participate in McIntire-Stennis forestry research support. Several provisions authorize research and development funding for industrial hemp production. Under the Critical Agricultural Materials Act, hemp will now be included as an industrial product eligible for support. In amending and expanding a provision in the 2014 farm bill (Section 7606, P.L. 113-79 ), the Secretary is directed to conduct a study of hemp production pilot programs to determine the economic viability of domestic production and sale of hemp. A new provision creates a \"Hemp Production\" subtitle under the Agricultural Marketing Act of 1946, expanding the existing statutory definition of hemp and expanding eligibility to other producers and groups, including tribes and territories. States or Indian tribes wanting primary regulatory authority over hemp production will be required to implement a plan with specific requirements to further monitor and regulate their production of hemp. A provision of the research title creates new programs supporting advanced agricultural research and urban, indoor, and emerging agricultural production systems. A new Agriculture Advanced Research and Development Authority (AGARDA) is established as a component of the Office of the Chief Scientist to examine the applicability for advanced research and development in food and agriculture through a pilot program that targets long-term and high-risk research. Focal areas include acceleration of novel, early-stage innovative agricultural research; prototype testing; and licensing and product approval under the Plant Protection Act and the Animal Health Protection Act, among other innovative research tools that might be used in the discovery, development, or manufacture of a food or agricultural product. The Secretary is to develop and make publicly available a strategic plan setting forth the agenda that AGARDA will follow and provide for consultation with other federal research agencies; the National Academies of Sciences, Engineering, and Medicine; and others. There are provisions in the AGARDA program to expedite contract and grant awards and the appointments of highly qualified scientists and research program managers without regard to certain statutes governing appointments in the competitive federal service. The fund will have an authorized appropriation of $50 million each year for FY2019-FY2023. The program terminates at the end of FY2023. The enacted bill also authorizes a new Urban, Indoor, and Emerging Agricultural Production, Research, Education, and Extension Initiative. The provision authorizes the Secretary to make competitive grants to facilitate development of urban and indoor agricultural production systems and emerging harvesting, packaging, and distribution systems and new markets. The grants could also support methods of remediating contaminated urban sites (e.g., brownfields); determining best practices in pest management; exploring new technologies to minimize energy, lighting systems, water, and other inputs for increased food production; and studying new crop varieties and agricultural products to connect to new markets. The provision provides mandatory and discretionary spending of $4 million and $10 million, respectively, for each year for FY2019-FY2023. In addition, there is authorization of $14 million for a study of urban and indoor agriculture production under the 2017 Census of Agriculture, including data on community gardens, rooftop gardens, urban farms, and hydroponic and aquaponic farm facilities. Similar to previous farm bills, the forestry title in the enacted 2018 farm bill ( P.L. 115-334 , Title VIII) includes provisions related to forestry research and establishes, modifies, or repeals several programs to provide financial and technical assistance to nonfederal forest landowners (see Table 12 ). The forestry title also includes several provisions addressing management of the National Forest System (NFS) lands managed by the USDA Forest Service and the public lands managed by the Bureau of Land Management (BLM) in the Department of the Interior. Forestry assistance and research programs are primarily authorized under three main laws: the Cooperative Forestry Assistance Act, the Forest and Rangeland Renewable Resources Research Act, and the Healthy Forests Restoration Act. Many forestry programs are permanently authorized to receive such sums as necessary in annual discretionary appropriations and thus do not require reauthorization in the farm bill. Some programs, however, are not permanently authorized and expired at the end of FY2018. The 2018 farm bill reauthorizes, through FY2023, four such programs: the Healthy Forests Reserve Program, Rural Revitalization Technology, National Forest Foundation, and funding for implementing statewide forest resource assessments. The 2018 farm bill also provides explicit statutory authorization and congressional direction for current programs that were operating under existing, but broad, authorizations. For example, the farm bill authorizes the Landscape Scale Restoration program to provide financial assistance for large restoration projects that cross landownership boundaries, providing statutory direction for an assistance program that has been operating since FY2015 based on authorities provided in the 2014 farm bill. The 2018 farm bill also modifies or repeals some existing assistance programs. For example, the bill amends the permanent authorization for the Semiarid Agroforestry Research Center and establishes an FY2023 expiration. The forestry title also addresses issues related to the accumulation of biomass in many forests and the associated increased risk for uncharacteristic wildfires on both federal and nonfederal land. In Part III of Subtitle F, the Timber Innovation Act incorporates provisions from both the House- and Senate-passed bills to establish, reauthorize, and modify assistance programs to promote wood innovation for energy use and building construction and to facilitate the removal of forest biomass. The law also authorizes up to $20 million in annual appropriations to provide financial assistance to states for hazardous fuel reduction projects that cross landownership boundaries. The law also reduces the annual authorization for the Forest Service's hazardous fuels management program from $760 million annually to $660 million annually and adds a sunset date of FY2023 to the authorization. In addition, the law repeals other biomass-related programs, such as the Biomass Commercial Utilization Program, a biomass energy demonstration project, and a wood fiber recycling research program. The 2018 farm bill contains a provision that changes how the Forest Service and BLM comply with the requirements under the National Environmental Policy Act for management activities involving sage grouse and/or mule deer habitat. The law establishes a categorical exclusion for specified activities under which projects up to 4,500 acres would not be subject to the requirements to prepare an environmental assessment or environmental impact statement. This provision was in the Senate-passed version of the bill. The House-passed version would have established 10 other categorical exclusions for various activities and would have also changed some of the consultation requirements under the Endangered Species Act. The enacted farm bill also includes provisions from the House bill related to the Forest Service's authority to designate insect and disease treatment areas on NFS lands and procedures intended to expedite the environmental analysis for specified priority projects within those areas. Specifically, the enacted farm bill adds hazardous fuels reduction as a priority project category and authorizes larger projects. The enacted farm bill also addresses miscellaneous federal and tribal forest management issues. For example, the law expands the availability of Good Neighbor Agreements to include federally recognized Indian tribes and county governments and authorizes tribes to enter into contracts to perform specified forest management activities on tribal land. The enacted bill also reauthorizes the Collaborative Forest Landscape Restoration Program to receive appropriations through FY2023, raises the authorized level to $80 million, and authorizes the Secretary to issue waivers to extend projects beyond the initial 10 years. In addition, the enacted farm bill also authorizes the conveyance of NFS land through lease, sale, or exchange. The enacted bill expands the Small Tracts Act, reauthorizes the Facility Realignment and Enhancement program, authorizes the Forest Service to lease administrative sites, and includes provisions for specific parcels. The law also establishes two watershed protection programs on NFS lands and authorizes the Secretary to accept cash or in-kind donations from specified nonfederal partners to implement projects associated with one of those programs. The Energy title (Title IX) supports agriculture-based renewable energy. In the 2018 farm bill, the energy title extends eight programs and one initiative through FY2023 (see Table 13 ). It repeals one program and one initiative—the Repowering Assistance Program and the Rural Energy Self-Sufficiency Initiative. It establishes one new grant program, the Carbon Utilization and Biogas Education Program, which is focused on the education and utilization of carbon sequestration as well as biogas systems. The title also amends the eligible material definition for the Biomass Crop Assistance Program to include algae. Further, the law modifies the definitions of biobased product (to include renewable chemicals), biorefinery (to include the conversion of an intermediate ingredient or feedstock), and renewable energy systems (to include ancillary infrastructure such as a storage system). Mandatory program funding is less than what was provided in earlier farm bills. The 2018 farm bill authorizes a total of $375 million in mandatory funding for FY2019-FY2023. The 2014 farm bill authorized a total of $694 million in mandatory funding over its five-year life. Mandatory funding is provided for the Biobased Markets Program ($15 million over five years), the Biorefinery Assistance Program ($75 million over five years), the Bioenergy Program for Advanced Biofuels ($35 million over five years), the Rural Energy for America Program ($250 million over five years), and the Feedstock Flexibility Program for Bioenergy Producers, which is authorized for such sums as necessary for five years but with outlays projected to amount to $0 according to CBO. Mandatory funding is not provided for the Biodiesel Fuel Education Program, the Biomass Research and Development Initiative, the Biomass Crop Assistance Program, or the new Carbon Utilization and Biogas Education Program. The farm bill also authorizes discretionary appropriations, subject to annual appropriations action. The 2018 farm bill reauthorizes many of the existing farm bill provisions supporting farming operations in the specialty crop, certified organic agriculture, and local foods sectors. These provisions cover several programs and policies benefitting these sectors, including block grants to states, support for farmers markets, data and information collection, education on food safety and biotechnology, and organic certification, among other market development and promotion initiatives (see Table 14 ). Provisions affecting the specialty crop and certified organic sectors are not limited to the Horticulture title (Title X) but are contained within several other titles. Among these are programs in the Research, Nutrition, and Trade titles, among others. Related programs outside the Horticulture title include SCRI and OREI in the research title, as well as the Fresh Fruit and Vegetable Program and Section 32 purchases for fruits and vegetables under the Nutrition title, among other farm bill programs. The new law makes changes both to farmers markets and local foods promotion programs, combining and expanding the Farmers Market Promotion Program and Local Food Promotion Program, along with the Value-Added Agricultural Product Market Development Grants program, to create a new \"Local Agriculture Market Program\" with an expanded mission and mandatory funding of $50 million for FY2019 and each year thereafter, plus authorized appropriations. The law also includes several provisions from S. 3005 (Urban Agriculture Act of 2018) supporting urban agriculture development (including new programs and authorization for both mandatory and discretionary funding in the Miscellaneous, Research, Conservation, and Crop Insurance titles). The new law also makes changes to USDA's National Organic Program (NOP) and related programs, addressing concerns about organic import integrity by including provisions that strengthen the tracking, data collection, and investigation of organic product imports, including certain provisions in H.R. 3871 (Organic Farmer and Consumer Protection Act of 2017). It also amends the eligibility and consultation requirements of the National Organic Standards Board, among other changes. The law reauthorizes NOP appropriations above current levels while reauthorizing current funding for the Organic Production and Market Data Initiatives and for technology upgrades to improve tracking and verification of organic imports. It also expands mandatory funding for the National Organic Certification Cost Share Program. The new law also includes a number of provisions that further facilitate the commercial cultivation, processing, and marketing of industrial hemp in the United States. These provisions were in the Senate-passed bill and contained within the Horticulture title as well as the Research, Crop Insurance, and Miscellaneous titles of the enacted farm bill. Many of these provisions originated from introduced versions of the Hemp Farming Act of 2018 ( S. 2667 ; H.R. 5485 ). Chief among these provisions is an amendment to the Controlled Substances Act (21 U.S.C. 802(16)) to exclude hemp from the statutory definition of marijuana as redefined in the 2018 farm bill, provided it contains not more than a 0.3% concentration of delta-9 tetrahydrocannabinol—marijuana's primary psychoactive chemical. The law also creates a new hemp program under the Agricultural Marketing Act of 1946 (7 U.S.C. Section 1621 et seq. ) establishing a regulatory framework for hemp production (under USDA's oversight), expands the statutory definition of hemp , and expands eligibility to produce hemp to a broader set of producers and groups, including tribes and territories. States or Indian tribes that seek primary regulatory authority over hemp production would be required to implement a \"plan\" to further monitor and regulate hemp production. States and tribal governments without USDA-approved plans would be subject to plans established by USDA to monitor and regulate hemp production. Without a license issued by USDA, it is unlawful to produce hemp in a state or tribal domain. Other provisions in the law's crop insurance title make hemp producers eligible to participate in federal crop insurance programs, while provisions in the Research title of the law make hemp production eligible for certain USDA research and development programs. The federal crop insurance program offers subsidized crop insurance policies to farmers. Farmers can purchase policies that pay indemnities when their yields or revenues fall below guaranteed levels. While the majority of federal crop insurance policies cover yield or revenue losses, the program also offers policies with other types of guarantees, such as index policies that trigger an indemnity payment based on weather conditions. The Federal Crop Insurance Corporation (FCIC), a government corporation within USDA, pays part of the premium (about 63% on average in crop year 2017) while policy holders—farmers and ranchers—pay the balance. Private insurance companies, known as Approved Insurance Providers, deliver the policies in return for administrative and operating subsidies from FCIC. Approved Insurance Providers also share underwriting risk with FCIC through a mutually negotiated Standard Reinsurance Agreement. The USDA Risk Management Agency administers the federal crop insurance program. The Crop Insurance title (Title XI) of the enacted 2018 farm bill ( P.L. 115-334 ) makes several modifications to the existing federal crop insurance program ( Table 15 ). CBO projects that the 2018 farm bill will decrease outlays for crop insurance relative to baseline levels by $104 million during the FY2019-FY2028 period. This projected reduction represents around 0.1% of projected crop insurance outlays over the same time period, during which outlays are projected to total about $78 billion. Within the 2018 farm bill's Crop Insurance title, the section with the highest projected increase in outlays ($90 million increase over FY2019-FY2028, Section 11109) expands coverage for forage and grazing by authorizing catastrophic level coverage for insurance plans covering grazing crops and grasses It also allows producers to purchase separate crop insurance policies for crops that can be both grazed and mechanically harvested on the same acres during the same growing season and to receive independent indemnities for each intended use. Two other sections of the 2018 farm bill have projected outlay increases compared with prior law. One modifies the FCIC board's research and development authority in several ways, including redefining beginning farmer or rancher as an individual having actively operated and managed a farm or ranch for less than 10 years, thus making these individuals eligible for federal subsidy benefits available for the purposes of research, development, and implementation of whole-farm insurance plans ($13 million increase over FY2019-FY2028, Section 11122). The other section that is projected to result in higher outlays authorizes FCIC to waive certain viability and marketability requirements in considering proposals from private submitters to develop a policy or pilot program relating to the production of hemp ($8 million increase over FY2019-FY2028, Section 11113). The 2018 farm bill adds hemp to the definition of eligible crops for federal crop insurance subsidies (Sections 11101 and 11119) and also adds hemp to the list of crops whose policies may cover post-harvest losses (Section 11106). Most federal crop insurance policies do not cover post-harvest losses. Prior to the 2018 farm bill, coverage of post-harvest losses was limited to potatoes, sweet potatoes, and tobacco. The section in the 2018 farm bill with the highest projected reduction in outlays ($125 million over FY2019-FY2028, Section 11110) raises the administrative fee for catastrophic level coverage from $300 to $655 per crop per county. Four other sections also scored projected reductions in outlays, according to CBO. These sections relate to consolidation and reduction of funding for certain research and development contracts and partnerships ($40 million over FY2019-FY2028, Section 11123); the expansion of enterprise units across county lines ($27 million over FY2019-FY2028, Section 11111); the reduction of funds available for review, compliance, and program integrity ($18 million over FY2019-FY2028, Section 11118); and modifications to how producer benefits are reduced when producing crops on native sod ($4 million over FY2019-FY2028, Section 11114). The Miscellaneous title (Title XII) of the Agriculture Improvement Act of 2018 covers a wide array of issues across six subtitles, including livestock, agriculture and food defense, historically underserved producers, Department of Agriculture Reorganization Act of 1994 Amendments, other miscellaneous provisions, and general provisions. The enacted provisions are organized by subtitle in Table 16 . Those provisions that were located in the Miscellaneous titles of the House- and Senate-passed bills but were moved to other titles in the enacted bill, along with those provisions that were not enacted, are listed at the end of Table 16 . The livestock subtitle of the enacted 2018 farm bill establishes the National Animal Disease Preparedness Response Program (NADPRP) and the National Animal Vaccine and Veterinary Countermeasures Bank (NAVVCB), both under the National Animal Health Laboratory Network (NAHLN) in the Animal Health Protection Act (7 U.S.C. Section 8308a). The NADPRP is to address risks to U.S. livestock associated with the introduction of animal diseases and pests. The new law directs the NAVVCB to maintain significant quantities of vaccine and diagnostic products to respond to animal disease outbreaks. It also directs the NAVVCB is to prioritize foot-and-mouth disease. The act authorizes mandatory funding of $120 million for FY2019-FY2022 and $30 million for FY2023 and for each fiscal year thereafter. In addition, $30 million is authorized to be appropriated annually for FY2019-FY2023 for NAHLN, with as such sums as necessary appropriated for the NADPRP and NAVVCB. Among other livestock provisions, the act authorizes appropriations for the Sheep Production and Marketing Grant Program; provides for a study on a livestock dealer statutory trust; adds llamas, alpacas, live fish, and crawfish to the list of covered animals under the Emergency Livestock Feed Assistance Act; calls for a report on the guidance and outreach USDA's Food Safety and Inspection Service provides to small meat processors; and establishes regional cattle and carcass grading centers. Within the Agriculture and Food Defense subtitle of the enacted bill, the USDA Office of Homeland Security, as authorized in the 2008 farm bill ( P.L. 110-246 ), is repealed and reestablished under the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. Section 6901 et seq. ). Under the new authorities, USDA is required to conduct Disease and Pest of Concern Response Planning, establish a National Plant Diagnostic Network to monitor threats to plant health, and establish a National Plant Disease Recovery System for long-term planning. The section also amends the criteria for considering the impact on research performance when biological agents or toxins are added to the Biological Agents and Toxins List. The Historically Underserved Producers subtitle expands USDA activities for beginning, socially disadvantaged, and veteran farmers and ranchers. It prioritizes youth agricultural employment and volunteer programs and promotes the role of youth-serving organizations and school-based agricultural education programs. It also establishes a Tribal Advisory Committee to advise USDA on tribal and Indian affairs. The new law authorizes $50 million in discretionary funding for FY2019-FY2023 for the Farming Opportunities Training and Outreach program and provides mandatory funding for the program that increases from $30 million in FY2019 to $50 million in FY2023. The act also establishes within USDA an Office of Urban Agriculture and Innovative Production to promote urban, indoor, and emerging agricultural practices. The 2018 farm bill includes conforming amendments that address USDA reorganizational changes that created the Under Secretary for Trade and Foreign Agricultural Affairs, the Under Secretary for Farm Production and Conservation, and the Assistant to the Secretary for Rural Development. For one, the act requires USDA to re-establish the position of Under Secretary of Agriculture for Rural Development that USDA abolished and replaced with an Assistant to the Secretary for Rural Development in its May 2017 reorganization. The new law amends the duties and provisions of the USDA Military Veterans Agricultural Liaison and the Office of Chief Scientist and creates a Rural Health Liaison. It further requires USDA to conduct a civil rights analysis on actions, policies, or decisions that may impact employees, contractors, or beneficiaries of USDA programs based on membership in a federally protected group. The Other Miscellaneous Provisions and General Provisions subtitles contain 40 provisions that address a wide variety of issues. For example, the Protecting Animals with Shelter provision authorizes USDA—in consultation with the Departments of Justice, Housing and Urban Development, and Health and Human Services—to provide grants for emergency and transitional shelter for victims of domestic and dating violence, sexual assault, and stalking and their pets. Other animal-related provisions ban the slaughter of dogs and cats, impose a ban on animal fighting in U.S. territories, and require a report on the importation of dogs. The enacted 2018 farm bill reauthorizes the Pima Cotton; the Wool Apparel Manufacturers; and the Wool Research, Development, and Promotion trust funds. It also establishes the Emergency Citrus Disease Research and Development Trust Fund to address invasive citrus diseases and pests. The act extends for 10 years the National Oilheat Research Alliance. It further establishes a Commission on Farm Transition to study issues affecting transitioning farms to the next generation and establishes a Century Farms program to recognize farms that have been owned by the same family and in operation for at least 100 years. In addition, the enacted bill requires USDA to conduct and issue various studies and reports on a variety of topics, among which are food waste; the business centers of the Natural Resources Conservation Service, the Farm Service Agency, and the Risk Management Agency; the number of personnel in USDA agencies each year; the effect of absentee landlords; the level of funding that would allow the National Institute of Food and Agriculture to address evolving research and extension needs in rural and farming communities; an FDA food labeling regulation (81 Fed. Reg. 33742); and the impact of rice ratooning and post-disaster flooding on migratory birds. The enacted 2018 farm bill directs USDA to restore exemptions for weighing and inspection services that were included in the United States Grain Standards Act (USGSA) in 2003 that were revoked when the USGSA was reauthorized in 2015. The act requires the U.S. Fish and Wildlife Service to clarify that the green sea urchin is exempt from the export permission requirements of the Endangered Species Act (16 U.S.C. Section 1538(d)(1) and its licensing regulations. The act also amends the Controlled Substance Act (21 U.S.C. Section 802(16)) to exclude industrial hemp from the statutory definition of marijuana .", "summary": "Congress sets national food and agriculture policy through periodic omnibus farm bills that address a broad range of farm and food programs and policies. The 115th Congress established the direction of farm and food policy for five years through 2023 by enacting the Agricultural Improvement Act of 2018, which the President signed into law on December 20, 2018, as P.L. 115-334. The Congressional Budget Office (CBO) has scored the cost of programs with mandatory spending—such as nutrition programs, commodity support programs, major conservation programs, and crop insurance—in the enacted 2018 farm bill at $867 billion over a 10-year budget window of FY2019-FY2028. This amount is budget neutral compared with CBO's baseline scenario of an extension of 2014 farm bill (P.L. 113-79) programs with no changes. CBO estimates that over the five-year life of the law (FY2019-FY2023), outlays will amount to $428 billion, or $1.8 billion above the baseline scenario. In general, the new law largely extends many major programs through FY2023, thereby providing an overlay of continuity with the existing framework of agriculture and nutrition programs even as it modifies numerous programs, alters the amount and type of program funding that certain programs receive, and exercises discretion not to reauthorize some others. The enacted 2018 farm bill extends agricultural commodity support programs largely along existing lines while modifying them in various ways. For instance, producers acquire greater flexibility, compared with prior law, to switch between the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) revenue support programs. Producers may update program yields that factor into payments under PLC, while a newly added escalator could raise a commodity's reference price under the program. The law also makes several modifications to ARC, including introducing a trend-adjusted yield that has the potential to raise ARC revenue guarantees for producers. Other changes include an increase in marketing assistance loan rates for a number of crops and revising the definition of family farm to include nephews, nieces, and cousins, making these individuals eligible for farm program payments. The law modifies dairy programs, including renaming the Margin Protection Program as Dairy Margin Coverage (DMC) and revising it to expand the margin protection between milk prices and feed costs that milk producers may purchase, as well as lowering the cost of this coverage for the first 5 million pounds of milk produced. Loan rates under the sugar program are increased. The Supplemental Nutrition Assistance Program (SNAP), the largest domestic nutrition assistance program, is reauthorized through FY2023. The law amends SNAP in a number of ways, including making changes to policies intended to reduced errors and fraud in SNAP, limiting fees that electronic benefit transfer processors may charge, and requiring nationwide online acceptance of SNAP benefits. Not included in the enacted bill are provisions in the House-passed bill that would have expanded work requirements and SNAP employment and training programs. The enacted bill does make certain modifications to these elements of the program, such as expanding the employment and training activities that a state may provide. Beyond SNAP, the law amends programs that distribute U.S. Department of Agriculture foods to low-income households, and it increases funding for The Emergency Food Assistance Program (TEFAP). The enacted farm bill addresses agricultural conservation on several fronts. For one, it reauthorizes the two largest working lands programs—the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP)—while reducing the overall funding allocated for these two programs. It also reauthorizes the primary land retirement program, the Conservation Reserve Program (CRP), allowing it to expand from a maximum of 24 million acres in FY2019 to 27 million acres in FY2023 while offsetting the added cost of any enrollment increase through lower payments to participants. The law also expands grazing and commercial uses on CRP acres and provides options for new and limited resource producers for transitioning CRP land. The enacted 2018 farm bill addresses a range of issues of importance to rural America, including combatting substance abuse by prioritizing assistance under certain programs, by expanding broadband access and providing additional authorized appropriations to that end and by amending the definition of rural by excluding certain groups of individuals from population-based criteria. The credit title increases the maximum loan amount for guaranteed loans, and these amounts are adjusted for inflation thereafter. The ceiling for direct loans is also raised, among other changes. Among the broad and diverse array of other provisions in the law are provisions intended to facilitate the commercial cultivation, processing, and marketing of hemp. Among these, hemp with low levels of the psychoactive ingredient in marijuana is excluded from the statutory definition of marijuana. The law creates a new hemp program under USDA oversight and makes hemp an eligible crop under the federal crop insurance program. The enacted 2018 farm bill also strengthens the National Organic Program and increases funding for organic agricultural research. Within the Miscellaneous title, the livestock industry is the object of several initiatives to guard against disease outbreaks and strengthen the response to such events. These include the establishment of the National Animal Disease Preparedness Response Program and the National Animal Vaccine and Veterinary Countermeasures Bank. The law also addresses USDA organizational changes in recent years, requiring USDA to reestablish the position of Under Secretary for Rural Development and creating a Rural Health Liaison, among other changes. Among its provisions, the Forestry title addresses the accumulation of biomass in many forests and the consequent risk of wildfires by establishing, reauthorizing, and modifying various assistance programs to promote wood use and biomass removal. With these programs, policies, and initiatives codified into law, the job that remains is for USDA, other federal agencies, and entities designated by the enacted farm law to implement the will of Congress through regulatory actions and other administrative measures. As implementation of the farm law proceeds, Congress may find it prudent to monitor this process and to provide direction and feedback through the exercise of its oversight responsibilities.", "document_type": "crs"}
{"report": "T he Constitution gives no direct role to Congress in conducting federal law enforcement. While Congress enjoys the legislative power under Article I of the Constitution, which includes substantial authority to investigate the executive branch pursuant to its oversight function, criminal investigations and prosecutions are generally considered core executive functions entrusted with the executive branch un der Article II. Because of the potential conflicts of interest that may arise when the executive branch investigates itself, however, there have often been calls for prosecutors with independence from the executive branch. In response, Congress and the U.S. Department of Justice (DOJ) have used both statutory and regulatory mechanisms to establish a process for such inquiries. These responses have attempted, in different ways, to balance the competing goals of independence and accountability with respect to inquiries of executive branch officials. This report first analyzes the use of special prosecutors and independent counsels that were authorized under now-expired provisions of the Ethics in Government Act of 1978, as well as the use of special counsels that are currently authorized by DOJ regulations. A glossary of terms at the beginning of the report briefly defines these italicized terms (see Table 1 ). The report continues with an examination of various legal questions relevant to these efforts. As a threshold matter, some have challenged the appointment of a special counsel under the current regulations as unconstitutional under the Appointments Clause. More broadly, designing a statutory framework for criminal investigations and prosecutions with independence from the executive branch raises questions about how this can be achieved consistent with the requirements of the Constitution. For instance, the Supreme Court upheld the constitutionality of the since-expired independent counsel statute in the 1988 case of Morrison v. Olson , but has not applied the reasoning of Morrison in subsequent cases raising related issues. The constitutional status of a statutory framework analogous to the independent counsel statute is thus subject to debate. Several bills introduced in the 116 th Congress (including S. 71 and H.R. 197 , which merge aspects of two preceding bills introduced in the 115 th Congress, S. 1735 and S. 1741 ) statutorily insulate a special counsel from removal, echoing aspects of the independent counsel statute's provisions. Whether such proposals would withstand constitutional challenge today might ultimately turn on the continued vitality of the analysis applied in Morrison . In part to counter perceptions that executive officials suspected of criminal wrongdoing may be subject to different standards than individuals outside the government, independent investigations have sometimes been used to determine whether officials have violated the law. The government has used a range of options to conduct these types of inquiries: special prosecutors, independent counsels, and special counsels. Executive branch officials have noted, however, that \"there is no perfect solution\" to achieving the goal of avoiding potential conflicts or the appearance thereof that may arise as a result of the executive branch investigating its own officials. While special prosecutors investigated executive officials prior to the 1970s, the events commonly known as Watergate led to perhaps the most famous use of an independent investigation in U.S. history. Specifically, the break-in and burglary of the Democratic National Committee Headquarters at the Watergate Hotel in 1972 led to widespread allegations of wrongdoing by senior officials in the executive branch and calls for the appointment of a prosecutor who could conduct an investigation independent of political interference. In the midst of the Watergate controversy, Elliot Richardson, whose nomination to be Attorney General was being considered by the Senate Committee on the Judiciary, agreed to name an independent special prosecutor to pursue the Watergate allegations. Once confirmed by the Senate, the Attorney General, under his own authority, appointed Archibald Cox as special prosecutor for the Watergate investigation in 1973. The President subsequently ordered DOJ officials to fire the special prosecutor later that year, leading to public outcry, the appointment of another special prosecutor, and, ultimately, the initiation of impeachment proceedings by Congress. Following these events, Congress enacted a new mechanism—discussed in the following section—for the use of special prosecutors who would be appointed by a three-judge panel upon the request of the Attorney General. Congress enacted the Ethics in Government Act of 1978 out of a broad intent \"to preserve and promote the integrity of public officials and institutions.\" The statute addressed a number of concerns about the ethical behavior of some public officials in the wake of the Watergate scandal. Title VI of the statute (hereinafter \"the independent counsel statute\") established a mechanism for the appointment of individuals to lead independent investigations and prosecutions in certain circumstances. The statute originally designated these individuals as \"special prosecutors\" and later renamed them as \"independent counsels.\" Two of the most commonly known examples of appointments of independent counsels under the statute involved incidents known generally as Iran-Contra and Whitewater. In 1986, Lawrence E. Walsh was appointed as independent counsel to investigate potential criminal misconduct of government officials related to the sale of arms to Iran and alleged diversion of profits from the sale to support the \"the military activities of the Nicaraguan contra rebels\" in violation of federal law. That investigation resulted in criminal charges for 14 individuals, most of whom were convicted, though some convictions were overturned on various grounds. In 1994, Kenneth Starr was appointed as independent counsel to investigate potential violations of federal criminal or civil law related to President Clinton or First Lady Hillary Rodham Clinton's relationship with Madison Guaranty Savings and Loan Association, Whitewater Development Corporation, or Capital Management Services, as well as any allegations arising out of that investigation. That investigation led to a myriad of charges for a number of individuals, but did not include indictments of the President or First Lady. Appointment of independent counsels under the statute occurred in two steps, requiring the involvement of both the Attorney General and a panel of federal judges. The independent counsel statute generally directed the Attorney General to conduct a preliminary investigation upon receiving information about potential wrongdoing by certain officials in the executive branch or from presidential campaign committees. If, within 30 days of receiving such information, the Attorney General determined that the information was specific and from a credible source, the Attorney General was required to conduct a preliminary investigation for a period of up to 90 days. The statute did not require the Attorney General to acknowledge or notify any other parties that such information had come to his attention, but did require that the Attorney General inform the court that he had commenced a preliminary investigation. The conclusions reached in that initial investigation determined whether an independent counsel would be appointed to investigate the underlying allegations further. The statute required that the Attorney General request appointment of a special prosecutor by the special division of a federal court (discussed below) under three sets of circumstances. First, if the 90-day window for the preliminary investigation passed without a determination that further investigation or prosecution was not warranted, the Attorney General was required to request the appointment by the court. Second, if the Attorney General's initial investigation determined that further investigation or prosecution was warranted, the Attorney General was also required to request the appointment by the court. Finally, if the preliminary investigation indicated that further action was not warranted, but additional information was subsequently revealed which led the Attorney General to determine that further investigation or prosecution was indeed warranted, the Attorney General was mandated to conduct a preliminary investigation based on that information. Following that investigation, the statute required the Attorney General to seek appointment of an independent counsel under the same circumstances— i.e. , if no determination had been made within 90 days or if the Attorney General determined further investigation was warranted. The Attorney General's decision to request an appointment under the statute was not subject to judicial review. While the Attorney General was not authorized under the statute to appoint the independent counsel, he was required to provide the court with \"sufficient information to assist\" the court in the selection of the appointed individual and to define the jurisdiction of the inquiry. While the Attorney General conducted the initial investigation to determine whether an independent investigation was warranted, the independent counsel statute required that a special division of the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit), composed of three federal judges or Justices, appoint the independent counsel. The Chief Justice of the U.S. Supreme Court assigned three federal judges or Justices to that division for two-year assignments. The statute's provisions regarding assignment of the three-judge panel required that the panel include a judge from the D.C. Circuit and that not more than one judge or Justice be from any single court. Any judge or Justice serving in the special division of the court that appointed the independent counsel was barred from participating in any judicial proceeding involving the independent counsel while he or she was still serving in that position or any proceeding involving the exercise of the independent counsel's official duties. Based on recommendations from the Attorney General regarding the selection and jurisdiction of the independent counsel, the three-judge panel had the final authority to make the appointment and define the prosecutorial jurisdiction. The court was expressly barred from appointing \"any person who holds or recently held any office of profit or trust under the United States.\" \"[W]ith respect to all matters in [the] independent counsel's prosecutorial jurisdiction,\" Congress granted the independent counsel \"full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice, the Attorney General, and any other officer or employee of the Department of Justice . . . .\" Examples of the independent counsel's enumerated authorities included conducting investigations and grand jury proceedings; engaging in judicial proceedings, including litigation and appeals of court decisions; reviewing documentary evidence; determining whether to challenge the use of testimonial privileges; receiving national security clearances, if appropriate; seeking immunity for witnesses, warrants, subpoenas, and other court orders; obtaining and reviewing any tax return; and carrying out prosecutions in court, including filing indictments. The independent counsel could request DOJ assistance in the course of his or her investigation, including access to materials relevant to the jurisdiction of the inquiry and the necessary resources and personnel to perform his or her assigned duties. Other than impeachment, the independent counsel could be subject to removal \"only by the personal action of the Attorney General and only for good cause, physical or mental disability . . ., or any other condition that substantially impairs the performance of such independent counsel's duties.\" In other words, the independent counsel was generally not subject to the control and oversight of any other official within the executive branch. If the Attorney General exercised his removal authority, he or she was required to notify the special division of the court responsible for the initial appointment and the Committees on the Judiciary of both the House of Representatives and the Senate, identifying the reasons for removal. The inquiry led by the independent counsel under the statute could be terminated under two methods. First, the statute directed that the office of the independent counsel would terminate upon notification by the independent counsel to the Attorney General that the investigation and any subsequent prosecutions had been completed. Second, the statute permitted the special division of the court—by its own choice or by the recommendation of the Attorney General—to terminate the office at any time if the investigation had been completed or sufficiently completed, allowing DOJ to formally complete the inquiry under its own processes. In either case, the independent counsel was required to submit a report to the special division of the court detailing the work completed. The report was required to include \"a description of the work of the independent counsel, including the disposition of all cases brought.\" When the independent counsel statute was originally enacted in 1978, Congress provided that its authority would lapse five years after enactment. Investigations that had already started pursuant to the provisions were permitted to continue, but no new investigations could be initiated at that time. Rather than allow the statute to lapse, Congress reauthorized the law, with some amendments, several times. It was reauthorized in 1983 and 1987, and remained in effect until 1992, when Congress allowed the law to expire. The statute was again reauthorized in 1994, following concerns related to the investigation of the Whitewater controversy during the interim years. However, concerns over whether the independent counsel possessed too much power, which arose after the extensive independent counsel investigations of the Iran-Contra affair and the Whitewater controversy, resulted in the law's ultimate expiration and nonrenewal in 1999. Following the expiration of the independent counsel statute, DOJ promulgated regulations in 1999, which are currently still in effect, to establish procedures for the appointment of special counsels pursuant to the Attorney General's general administrative hiring authority. DOJ described these regulations as \"strik[ing] a balance between independence and accountability in certain sensitive investigations.\" DOJ acknowledged at the time the regulations were promulgated, however, that \"there is no perfect solution\" to achieving that goal. Thus far, it appears the special counsel regulations have been invoked infrequently. In 1999, shortly after the regulations were promulgated, the Attorney General appointed former U.S. Senator John Danforth as special counsel to investigate events related to the government actions that occurred six years earlier at the Branch Davidian compound in Waco, Texas. The special counsel's investigation found no wrongdoing on the part of federal law enforcement officials. In May 2017, Deputy Attorney General Rod Rosenstein—acting in place of Attorney General Jeff Sessions, who had recused himself from the investigation—issued a publicly-available order (public order) appointing former Federal Bureau of Investigation Director Robert S. Mueller III as special counsel. Rosenstein indicated in the public order that the appointment had been made pursuant to general statutory authority to manage DOJ investigations, but directed that the investigation would be subject to the agency's regulations governing the scope and administration of special counsel investigations. Specifically, the public order directed the special counsel to investigate efforts of the Russian government \"to influence the 2016 election and related matters.\" DOJ later issued a non-public memorandum that set forth in more detail the scope of the investigation and definition of the special counsel's authority. That memorandum explained that the public order \"was worded categorically in order to permit its public release without confirming specific investigations involving specific individuals.\" It should be noted that the Attorney General also possesses general statutory authority to appoint DOJ staff to conduct or coordinate particular investigations. DOJ has used this authority previously to appoint individuals who were referred to as \"special counsels\" to investigate particular matters. This authority differs from the special counsel regulations because it involves assignment of an internal agency official rather than an individual from outside the government. For example, in 2003, then-Deputy Attorney General James Comey (acting in place of then-Attorney General John Ashcroft, who had recused himself from the investigation) used this statutory authority to appoint Patrick Fitzgerald to lead an investigation of whether White House or other federal officials unlawfully leaked the identity of a Central Intelligence Agency officer to a reporter. While referred to as a special counsel, Fitzgerald was serving as a U.S. Attorney when named to lead the investigation, precluding an appointment under the special counsel regulations. While an individual referred to as a \"special counsel\" thus may be appointed under either the general statutory authority or under the specific special counsel regulations, those named under the regulations might be viewed as possessing more independence, as they are appointed from outside the agency and are insulated by the regulations from removal except for cause. DOJ may also task other arms of the Justice Department—such as the Office of the Inspector General—to investigate high-profile, sensitive, and resource-intensive matters regarding \"the Department's compliance with certain legal requirements and [internal] policies and procedures.\" For example, recently, in response to concerns raised by some Members of Congress with respect to \"certain prosecutorial and investigative determinations made by the [Department of Justice] in 2016 and 2017,\" Attorney General Sessions considered, but declined to pursue, a separate special counsel inquiry related to allegations of potential misconduct within the Department, noting that special counsel appointments are \"by design, . . . reserved for use in only the most 'extraordinary circumstances.'\" Such circumstances, according to Sessions, require the Attorney General to determine that \"'the public interest would be served by removing a large degree of responsibility for the matter from the Department of Justice.'\" Instead, the Attorney General indicated that DOJ's Inspector General has been tasked with reviewing the actions that the Members had suggested be the subject of the second special counsel inquiry, including allegations about DOJ's compliance with legal requirements and internal policies. Instead, the Attorney General announced that he had tasked John W. Huber, U.S. Attorney for the District of Utah, to lead the investigation into those allegations, emphasizing that Huber would be working \"from outside the Washington, D.C. area and in cooperation with the Inspector General.\" Under the DOJ regulations that supplanted the independent counsel provisions, the authority to appoint and select a special counsel resides solely with the Attorney General (or his surrogate, if the Attorney General has recused himself from the matter), rather than with the judicial branch. The regulations generally state that the Attorney General \"will appoint a Special Counsel\" to conduct certain investigations or prosecutions. To make such an appointment, the Attorney General must determine that (1) a criminal investigation is warranted; (2) the normal processes of investigation or prosecution would present a conflict of interest for DOJ, or other extraordinary circumstances exist; and (3) public interest requires a special counsel to assume those responsibilities. When DOJ promulgated the special counsel regulations, it explained the type of conflicts that might lead to the appointment of a special counsel: \"[t]here are occasions when the facts create a conflict so substantial or the exigencies of the situation are such that any initial investigation might taint the subsequent investigation, so that it is appropriate for the Attorney General to immediately appoint a Special Counsel.\" After receiving information that could warrant consideration of an independent investigation, the Attorney General generally has discretion under the regulations to determine whether and when the appointment of a special counsel would be appropriate. The Attorney General may appoint a special counsel immediately; may require an initial investigation to inform his decision about whether to appoint a special counsel; or \"may direct that appropriate steps be taken to mitigate any conflicts of interest, such as recusal of particular officials,\" to permit the investigation to be concluded within \"the normal processes.\" In the event that the Attorney General has recused himself from a particular matter upon which a special counsel appointment might be appropriate, the regulations contemplate that the Acting Attorney General will take responsibility for the appointment process. Federal law provides that the Deputy Attorney General would serve as the Acting Attorney General. Individuals appointed as special counsels under these regulations must be chosen from outside the federal government. Such individuals must be \"a lawyer with a reputation for integrity and impartial decisionmaking, and with appropriate experience to ensure both that the investigation will be conducted ably, expeditiously and thoroughly, and that investigative and prosecutorial decisions will be supported by an informed understanding of the criminal law and Department of Justice policies.\" The special counsel may hold other professional roles during his or her service, but is required to agree that the duties of the appointment will take \"first precedence.\" Like the appointment and selection process, the sole authority to determine the scope of the special counsel's inquiry rests with the Attorney General. The jurisdiction of the inquiry is determined by \"a specific factual statement\" about the matter to be investigated, which is provided by the Attorney General to the special counsel at the outset of the appointment. Beyond that general jurisdiction, the special counsel is also authorized \"to investigate and prosecute federal crimes committed in the course of, and with intent to interfere with, the Special Counsel's investigation, such as perjury, obstruction of justice, destruction of evidence, and intimidation of witnesses.\" While these are the original parameters of a special counsel's jurisdiction, additional matters may be assigned to the special counsel as the inquiry proceeds. To expand the jurisdiction, the special counsel must find such an expansion is necessary to complete the original assignment or necessary \"to investigate new matters that come to light in the course of his or her investigation.\" Upon such finding, the special counsel's jurisdiction may be expanded only after consultation with the Attorney General, who then has the authority to determine whether to assign the additional matters to the special counsel or \"elsewhere.\" Within the jurisdiction identified by the Attorney General, the special counsel has relatively broad authority to carry out his or her inquiry. According to the regulations, \"the Special Counsel shall exercise, within the scope of his or her jurisdiction, the full power and independent authority to exercise all investigative and prosecutorial functions of any United States Attorney.\" The scope of the special counsel's authority under DOJ regulations has been the subject of legal challenge in the course of Special Counsel Robert Mueller III's investigation that began in 2017. That inquiry resulted in several indictments, including against Paul Manafort, the former chairman of President Trump's 2016 campaign, for crimes such as conspiracy to launder money; tax fraud; obstruction of justice and witness tampering; failure to register as an agent of a foreign principal; false statements; and failure to file reports of foreign bank and financial accounts. Manafort filed a motion to dismiss the criminal indictment lodged against him, challenging the indictment as an unlawful exercise of the special counsel's authority. Specifically Manafort argued that the factual matter named as the special counsel's original jurisdiction in the May 2017 public appointment order (i.e., \"any links and/or coordination between the Russian government and individuals associated with the campaign of President Donald Trump,\" as well as \"any matters that arose or may arise directly from the investigation, and any other matters within the scope of 28 C.F.R. § 600.4(a)\" ) would preclude the charges made against him. According to Manafort, because the charges made against him do not relate to links with the Russian government or actions taken during his time as a campaign manager in 2016 and because the public order's general authority does not grant authority on sufficiently specific matters as required by DOJ regulations, the special counsel cannot pursue the charges filed against him without seeking additional authority under the regulations. The government's response to these claims disclosed and explained additional documents outlining the scope of the investigation. DOJ acknowledged that the applicable regulations require the special counsel to be provided a \"'specific factual statement of the matter to be investigated,'\" but emphasized that \"the regulations do not provide that the factual statement must be in an appointment order or otherwise made public.\" According to a subsequent memorandum from Acting Attorney General Rosenstein that was partially released with the government's filing, while the initial order \"was worded categorically in order to permit its public release without confirming specific investigations involving specific individuals,\" a subsequent memorandum provided \"a more specific description\" of allegations deemed to be authorized as part of the special counsel investigation. Such development of the parameters of jurisdiction during the course of an investigation, according to DOJ, are necessary for \"an effective investigation [which] must have some latitude to extend beyond the known facts at the time of [the appointment].\" Ultimately, the courts that considered Manafort's motion to dismiss his indictments rejected his challenge to the special counsel's authority. For example, a federal district court in Virginia considering Manafort's motion concluded that while many of the charges pursued against Manafort \"on their face, appear unrelated to the 2016 Presidential election,\" the investigation and issues charged in the particular case fell \"squarely within the jurisdiction outlined\" under the appointment order. The court emphasized that the appointment order's broad grant of authority to investigate \"any links\" between campaign officials and the Russian government permitted investigation into relationships with individuals supported by, even if not members of, the Russian government, such as members of a pro-Russia Ukrainian political party. Moreover, with respect to charges filed by the special counsel that did not pertain directly to the campaign and Russia, a D.C. federal court held such charges, such as tax evasion with regard to proceeds resulting from Manafort's relationship with pro-Russian entities, fell within the special counsel's jurisdiction as \"'matters that arose or may arise directly from the investigation.'\" A federal district court in Virginia further relied upon the later DOJ memorandum that clarified the scope of the special counsel's original appointment as a source of the special counsel's authority, explaining that the original appointment order was worded categorically so that it could be publicly released and noting that the clarifying memorandum specifically authorized the special counsel to investigate crimes related to these other charges. Accordingly, the D.C. federal court rejected Manafort's argument that the special counsel's authority amounted to a \"'blank check'\" for limitless investigation, reading the appointment order's language as \"tightly drafted\" to give \"the Special Counsel flexibility from the start to manage the investigation and pursue matters that arose 'directly' from the issues within his purview.\" The DOJ special counsel regulations limit the special counsel's relatively broad authority to conduct an inquiry by first subjecting his or her conduct to DOJ rules, regulations, procedures, practices, and policies. Special counsels are directed to consult with the appropriate offices within DOJ or the Attorney General directly if necessary. Additionally, special counsels are subject to discipline for misconduct and breach of ethical duties that are generally applicable to DOJ employees. Second, the DOJ regulations contemplate some oversight of the special counsel by the Attorney General. Specifically, they direct the special counsel to \"determine whether and to what extent to inform or consult with the Attorney General or others within the Department about the conduct of his or her duties and responsibilities.\" The regulations expressly require the special counsel to \"notify the Attorney General of events in the course of his or her investigation in conformity with the Departmental guidelines with respect to Urgent Reports.\" Under DOJ internal guidance, attorneys must inform DOJ leadership of certain events, including \"major developments in significant investigations and litigation\" such as the filing of criminal charges. DOJ has explained that conformance with this notification requirement \"guarantees a 'resulting opportunity for consultation' between the Attorney General and the Special Counsel about the anticipated action, which 'is a critical part of the mechanism through which the Attorney General can discharge his or her responsibilities with respect to the investigation.'\" While the regulations indicate that special counsels \"shall not be subject to the day-to-day supervision of any official,\" the rules authorize the Attorney General to \"request that the Special Counsel provide an explanation for any investigative or prosecutorial step.\" If, after giving the views of the special counsel \"great weight,\" the Attorney General's review of such actions leads him to \"conclude that the action is so inappropriate or unwarranted under established Departmental practices that it should not be pursued,\" the Attorney General must notify the Chairman and Ranking Members of the Judiciary Committees in Congress of that decision with an explanation. Aside from review of particular actions, the regulations also grant the Attorney General authority to discipline or remove the special counsel. This authority may be exercised \"only by the personal action of the Attorney General.\" In other words, to comply with the regulations, the Attorney General himself must remove the special counsel, not the President or a surrogate (unless, as noted previously in this report, the Attorney General has recused himself in the matter under investigation). A decision to remove the special counsel must be made with \"good cause,\" such as misconduct, a dereliction of duty, incapacity, the existence of conflicts of interest, or violation of departmental policies. The Attorney General must report his decision to remove the special counsel, with an explanation of that decision, to both the Chairman and Ranking Members of the Judiciary Committees of Congress. Although the special counsel regulations do not provide an explicit timeline for inquiries or a special counsel's tenure, they do require the special counsel to report to DOJ periodically about the budget of operations for the inquiry as well as with status updates in some circumstances. Specifically, the special counsel must provide a proposed budget within 60 days of the appointment. The special counsel must also provide annual reports regarding the status of the investigation and budget requests 90 days prior to the beginning of the fiscal year. The Attorney General is required to review the special counsel's annual report and determine whether the investigation should continue and with what budget. When the special counsel's inquiry concludes, the special counsel must provide a confidential report to the Attorney General with explanations of the decisions made in the course of the inquiry in favor of or declining to prosecute any charges. The regulations do not expressly provide for disclosure of this report to any other parties, nor do they further identify the parameters of the content of that report. The regulations do, however, require the Attorney General to make certain reports to the Chairs and Ranking Members of the Judiciary Committees of each house of Congress, including upon the conclusion of the investigation. The regulations' only guidance regarding the Attorney General's concluding report's content is that the report must include \"an explanation for [the] action,\" \"including, to the extent consistent with applicable law, a description and explanation of instances (if any) in which the Attorney General concluded that a proposed action by a Special Counsel was so inappropriate or unwarranted under established Departmental practices that it should not be pursued.\" The regulation's use of the word \"including,\" which generally denotes that the terms that follow are illustrative and not definitional, may suggest that the Attorney General's report to Congress is not necessarily limited to explanations of the Special Counsel's prosecutorial decisions. None of the reporting requirements mandate public release of any information shared either between DOJ officials or between DOJ and congressional committees. Instead, the regulations provide the Attorney General with the discretion to \"determine that public release of [his reports to Congress] would be in the public interest.\" Moreover, the report's contents need to be \"consistent with applicable law,\" which may suggest that legal doctrines such as executive privilege and the rules governing the release of grand jury information could restrict what can be included in the report. Designing a mechanism to provide for criminal inquiries of executive branch officials by officers independent from the executive branch has raised questions about whether this goal can be accomplished in harmony with the requirements of the Constitution. Under the doctrine of separation of powers, the Constitution assigns each branch of government particular functions that generally may not be delegated to, nor usurped by, another branch. In this vein, Congress is entrusted with the legislative power, and may establish executive branch agencies and conduct oversight of those entities. Congress may not, however, engage in criminal prosecutions on behalf of the United States—a function generally reserved for the executive branch. A crucial bulwark in preserving this separation of powers is the Appointments Clause of Article II. That provision requires \"Officers of the United States\" to be appointed by the President \"with the Advice and Consent of the Senate,\" although Congress may vest the appointment of \"inferior\" officers \"in the President alone, in the Courts of Law, or in the Heads of Departments.\" Crucially, Article II also empowers the President to hold executive branch officers accountable, through removal if necessary, which the Supreme Court in Myers v. United States explained was essential in order to \"maintain administrative control of those executing the laws.\" The Court has, however, recognized that Congress may in certain situations restrict the President's power of removal over certain discrete offices. The powers of appointment and removal are key to understanding Congress's authority to create independent investigative offices and define their contours. While introduced legislation aimed to insulate a special counsel from executive control raises questions (addressed below) about the President's ability to oversee the executive branch, some have questioned whether the appointment of a special counsel under the current regulations violates the Constitution. Such challenges have been unsuccessful, however, as exemplified by the D.C. Circuit's recent ruling in In re: Grand Jury Investigation . In that case, the recipient of multiple grand jury subpoenas issued by Special Counsel Robert Mueller moved to quash those subpoenas on the grounds that the appointment of the special counsel was unlawful under the Appointments Clause. The D.C. Circuit's panel decision held that the Appointments Clause did not require Special Counsel to be nominated by the President and confirmed by the Senate because the special counsel is not a principal officer. Applying the Supreme Court's test in Edmond v. United States , the D.C. Circuit ruled that, because he is subject to the control of a superior who was nominated by the President and confirmed by the Senate (i.e., a principal officer), the special counsel is an inferior officer who may be appointed by a department head. While acknowledging that the special counsel regulations bestowed a measure of independence on the special counsel, the court reasoned that because the Attorney General could rescind these regulations at any time, the special counsel is an inferior officer who \"effectively serves at the pleasure\" of a principal officer. Additionally, the court rejected the argument that Congress had not \"by law\" granted the Attorney General the authority to appoint a special counsel as required by the Appointments Clause. In so doing, the panel relied on the Supreme Court's opinion in United States v. Nixon , in which the Court concluded that, because Congress had by statute vested general authority in the Attorney General to appoint subordinate officers, the Attorney General's delegation of power to a special prosecutor was valid. Finally, the D.C. Circuit panel concluded that a department head properly appointed Special Counsel Mueller in accordance with the Appointments Clause, notwithstanding his appointment by Rod Rosenstein, the Deputy and Acting Attorney General. The panel observed that the relevant statutory scheme provided that, in the case of a \"disability\" of the Attorney General, the Deputy Attorney General \"may exercise all the duties of that office.\" The D.C. Circuit reasoned that when Attorney General Sessions recused himself from matters concerning presidential campaigns, he had a \"disability\" under the statute on that issue. Accordingly, Deputy Attorney General Rosenstein became the acting Attorney General—and was therefore the head of the Department of Justice—on such matters. Acting Attorney General Rosenstein's appointment of Special Counsel Mueller, therefore, was an appointment by the head of a department. While the legal questions surrounding the appointment of a special counsel under the regulations have largely been resolved, the circumstances in which a special counsel may be removed by a superior have not been settled by the courts. Consideration of the authority to remove a special counsel under current regulations poses several legal questions. As discussed above, Department of Justice regulations provide that a special counsel may be removed only (1) by the Attorney General; (2) \"for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies\"; and (3) in writing provided to the special counsel specifying the reason(s) for removal. As a preliminary matter, the specific type of behavior that would constitute grounds for removal under the regulations is largely undetermined. For instance, terms such as \"misconduct\" and \"good cause\" are not defined in the regulations or by reference to an accompanying statute, and case law addressing the definition of similar statutory removal restrictions is sparse. More broadly, the manner in which a special counsel might be removed without new legislation itself poses difficult legal issues, including the ultimate efficacy of the regulations in constraining the discretion of the executive branch. The Attorney General (or his surrogate if recused) may, consistent with the governing regulations, remove a special counsel \"for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies.\" Conceivably, the Attorney General's decision could be the result of an order from the President, as the Attorney General serves at the pleasure of the President and, as the Court has recognized, the President's power to appoint executive branch officials is tied to the power of removal. A decision to remove a special counsel under current regulations could be difficult to challenge in court. Importantly, the current regulations explicitly disclaim the creation of any legal rights. Even without that disclaimer, internal agency rules and guidelines, including those of the Justice Department, have generally not been recognized as creating judicially enforceable rights. Instead, an individual seeking judicial relief against the United States in federal court must usually rely on a cause of action that asserts violation of a recognized legal right or requirement. Consequently, at least under current DOJ regulations, obtaining judicial review of a special counsel's removal by a federal court may be difficult. More broadly, it is uncertain to what extent the regulations ultimately constrain the executive branch. Because no statute appears to require the Department to promulgate regulations concerning a special counsel, the Department likely enjoys discretion to rescind them. The special counsel regulations also were not promulgated according to the notice and comment procedures that are typically required by the Administrative Procedure Act (APA) when agencies issue legislative rules. Instead, the Department considered the regulations to be exempt from these requirements, as they concerned agency management or personnel. The Department could thus likely rescind the special counsel regulations without going through notice and comment procedures, meaning that the regulations could likely be repealed immediately. Once repealed, a special counsel would no longer be protected by a for-cause removal provision. While DOJ has noted its adherence to the current special counsel regulations, assuming for the sake of argument a situation where the regulations were left in place, a decision by the Attorney General or President to simply ignore the regulations raises unresolved legal questions. Generally, regulations in force typically bind the executive branch with the force of law. In fact, in Nixon v. United States , which concerned a claim of executive privilege by President Nixon against a subpoena issued by a special prosecutor, the Court opined on the regulation in force that insulated the special prosecutor from removal. The Court remarked in dicta that So long as this regulation is extant it has the force of law. . . . [I]t is theoretically possible for the Attorney General to amend or revoke the regulation defining the Special Prosecutor's authority. But he has not done so. So long as this regulation remains in force the Executive Branch is bound by it, and indeed the United States as the sovereign composed of the three branches is bound to respect and to enforce it. In other words, insofar as this reading continues to characterize the Court's approach to the matter, both the President and Attorney General must comply with the special counsel regulations until they are repealed. However, the concrete result of an order removing a special counsel in violation of applicable regulations is difficult to predict. For instance, there might not be a private right of action authorizing judicial review in this situation, leaving the legal remedy available for violation of the regulations in question. On the other hand, the matter raises open legal issues regarding the scope of the President's authority to supervise the executive branch. It is unclear to what extent agency regulations restricting the grounds for removal of a constitutional officer engaged in core executive functions can bind the President. One might argue that the special counsel regulations, while binding on the Department of Justice, do not ultimately restrict the President's powers. Article II vests the executive power of the United States in the President; and criminal investigations and prosecutions lie at the very core of this constitutional authority. An argument in favor of a more robust view of the President's authority might be that regulations issued by an executive branch agency nearly 20 years ago that restrict the President's power to remove a high-level officer of the United States who is charged with enforcing the law intrude on the President's authority under Article II. DOJ has in the past asserted authority to decline to follow statutes it deems unconstitutional intrusions on the executive branch's power, and this argument might be extended to the context of similarly viewed regulations, particularly those issued by a prior Administration. Given the questions regarding the scope and effect of the current DOJ special counsel regulations, a number of legislative proposals aim to impose statutory restrictions on the executive branch's ability to remove a special counsel. Consideration of these proposals requires examination of the Supreme Court's decisions regarding statutory restriction on the removal of certain officers. However, because Congress has not enacted any such bill, analysis of these efforts is necessarily preliminary. As discussed above, current Department of Justice regulations authorize the Attorney General to appoint a special counsel and determine the ultimate scope of his jurisdiction, but limit the Attorney General's discretion to remove a special counsel to certain specified reasons. A number of bills proposed during the 116 th and 115 th Congresses aim to codify aspects of these regulations. Notably, some would statutorily insulate a special counsel from removal and authorize a federal court to review the removal of a special counsel. For instance, S. 1735 , introduced in the 115 th Congress, would have provided that in order to remove a special counsel, the Attorney General must first file an action with a three-judge court; if that panel issues a finding of \"misconduct, dereliction of duty, incapacity, conflict of interest, or other good cause, including violation of policies of the Department of Justice,\" then a special counsel may be removed. Similarly, S. 1741 , the Special Counsel Integrity Act, would have provided that any special counsel appointed on or after May 17, 2017, may only be removed by the Attorney General, or the highest ranking Justice Department official if the Attorney General is recused, for good cause. S. 1741 further provided that a special counsel who has been removed may challenge this action before a three-judge panel, which is authorized to immediately reinstate the individual if the court finds that the removal violated the legislation's terms. Both bills were introduced in the 115 th Congress. Finally, S. 71 and H.R. 197 , introduced in the 116 th Congress, merge aspects of both of these proposals. They would similarly require good cause in order for the Attorney General to remove a special counsel, but provide a 10-day window in which the special counsel can challenge a removal decision in federal court. If the court determines that the removal violates that good cause standard, then the removal shall not take effect. Understanding these proposals requires an examination of the significant—and oft-debated—constitutional questions concerning Congress's power to establish executive functions outside the direct control of the President. Article II of the Constitution vests the executive power of the United States in the President. As mentioned above, the Supreme Court has made clear that this power includes authority to hold executive branch officers accountable, through removal if necessary. However, the Court has upheld statutory restrictions on the President's removal power for certain offices. In one such case, Morrison v. Olson , the Court upheld restrictions on the removal of an independent counsel, although, as discussed below, the Court has not always followed aspects of that decision in subsequent years. The constitutionality of legislative efforts to statutorily insulate a special counsel from removal will thus likely turn on the continuing vitality of the Court's opinion in Morrison and, more generally, whether a court would apply a more formalist or functionalist methodology in considering such legislation. Definitive conclusions about such efforts are thus difficult absent further guidance from the Court. In the 1988 case of Morrison v. Olson , the Supreme Court addressed the issue of whether a federal prosecutor can be insulated from executive control in the context of the now-expired Independent Counsel Act. Morrison upheld the independent counsel statute, which, as discussed above, vested the appointment of an independent counsel outside of the executive branch and limited the removal authority of the President. Writing for the Court, Chief Justice Rehnquist concluded that the independent counsel was an inferior, rather than a principal, officer, whose appointment was not required to be made by the President subject to Senate confirmation. The appointment of such officers was permissible because they (1) were removable by the Attorney General for cause; (2) had a limited scope of duties; and (3) possessed limited jurisdiction. The Court also held that the Independent Counsel Act's provision limiting the authority of the Attorney General to remove the independent counsel for good cause did not impermissibly intrude on the President's power under Article II. The Court rejected a formalistic rule that would bar statutory for-cause removal protections for an individual tasked with \"purely executive\" functions; instead, it applied a functional test and asked whether Congress has \"interfere[d] with the President's\" executive power and his \"duty to 'take care that the laws be faithfully executed.'\" The Court recognized that the independent counsel operated with a measure of independence from the President, but concluded that the statute gave \"the Executive Branch sufficient control over the independent counsel to ensure that the President is able to perform his constitutionally assigned duties.\" Morrison was decided 7-1, with Justice Scalia dissenting from the Court's opinion and Justice Kennedy not participating in the case. In dissent, Justice Scalia argued that the independent counsel statute violated the separation of powers because the Constitution vested authority for criminal investigations and prosecutions exclusively in the executive branch and the statute deprived the President of exclusive control of that power. Under this rationale, he warned that the Court must be very careful to guard against the \"'gradual concentration of the several powers in the same department'\" that can be likely to occur as one branch seeks to infringe upon another's distinct constitutional authorities. Justice Scalia emphasized the power and discretion typically vested in prosecutors and noted that the key check on prosecutorial abuse is political—prosecutors are accountable to, and can be removed by, the President, who is likewise accountable to the people. But operation of the independent counsel statute, for Justice Scalia, eliminated that constitutional feature by creating an unaccountable prosecutor outside of presidential control. In the years since Morrison , especially in the wake of the Whitewater investigation into President Clinton by an independent counsel that culminated in the President's impeachment on grounds that were tangential to the impetus for the investigation, a number of legal scholars criticized the independent counsel statute on both policy and constitutional grounds. Additionally, members of both political parties have since noted opposition to the law, resulting in relatively widespread agreement to let the Independent Counsel Act expire in 1999. The Supreme Court in the 1997 case of Edmond v. United States applied a different standard than that enunciated in Morrison in the context of a challenge to the appointment of certain \"inferior\" officers. The opinion, authored by Justice Scalia, adopted the reasoning he applied in dissent in Morrison for determining whether an individual is an inferior officer. In that case, the Court did not apply the functional test used in Morrison for determining whether an individual was an inferior officer. Instead, it adopted a formal rule—an inferior officer is one who is \"directed and supervised\" by a principal officer (officers appointed by the President and confirmed by the Senate). Applying this rule, the Court concluded that the appointment of members of the Coast Guard Court of Criminal Appeals by the Secretary of Transportation was consistent with Article II. Specifically, the Court reasoned that because Members of the Coast Guard Court of Criminal Appeals are removable at will and lack power to render a final decision of the United States unless permitted to do so by a superior in the executive branch they are directed and supervised by principal officers. The appointment of the members of the Coast Guard Court of Criminal Appeals by the Secretary of Transportation was thus constitutional because the members constituted inferior officers and the Secretary was a principal officer. More recently, in the 2010 case of Free Enterprise Fund v. P ublic Company Accounting Oversight Board , the Court invalidated statutory structural provisions providing that members of the Public Company Accounting Oversight Board could be removed only \"for cause\" by the Securities and Exchange Commission, whose members, in turn, appeared to also be protected from removal by for-cause removal protections. The Court again applied a rather formalist rule in analyzing Congress's attempt to shield executive branch officers from removal, rather than the functional approach followed in Morrison . The Court concluded that, while the early 20 th century case of Humphrey ' s Executor v. United States had approved such protections for the heads of independent agencies and Morrison did the same for certain inferior officers, the combination of dual \"for cause\" removal protections flatly contradicted the vestment of executive power in the President under Article II. Further, the Court then applied the test it used in Edmund , rather than the functional analysis of Morrison , in concluding that members of the regulatory board were now—after invalidation of statutory removal protections by the Court—inferior officers because the Securities and Exchange Commission, composed of principal officers, possessed oversight authority over the board and the power to remove its members at will. However, the Court has not gone so far as to overrule or even explicitly question Morrison . As a result, that opinion's holding regarding the constitutionality of for-cause restrictions for an independent counsel binds the lower courts. Moreover, while the Court's decisions in Edmund and Free Enterprise Fund have not applied the reasoning in Morrison concerning the test for who qualifies as an inferior officer, it is not necessarily clear what removal restrictions are appropriate for principal officers or how the determinations about the appointment power concern determinations about the scope of the removal power. Nonetheless, it appears that the Edmond test, rather than the Morrison analysis, for determining whether an individual is an inferior officer is what will guide the Court going forward. Furthermore, Free Enterprise Fund represents a movement toward a more formalist, and possibly more expansive, view of the Presidential power of removal than was expressed in Morrison . More fundamentally, no member of the Morrison Court sits on the Supreme Court today. Because of this apparent shift in the Court's general approach to separation-of-powers matters related to appointment and removal, and the current Court's relative silence on Morrison's import, whether today's Court would necessarily view a reauthorization of the independent counsel statute or a similar statute in the same manner as it did in Morrison is subject to debate . Assuming that the Supreme Court were to follow the functional approach reflected in its Morrison decision, efforts to statutorily require good cause to remove a special counsel would likely pass constitutional muster. As noted above, in Morrison , the Court examined whether Congress had impermissibly interfered with the President's constitutional duties; it approved of the independent counsel statute's provisions that, among other things, (1) required good cause to remove the independent counsel; (2) largely restricted the Attorney General's discretion in deciding to request the appointment of an independent counsel; and (3) placed the actual power of appointment with a panel of Article III judges. Legislation that would statutorily insulate a future special counsel from removal except for good cause appears roughly analogous to the for-cause removal provisions upheld in Morrison . In fact, some proposals appear to be less restrictive of the President's power relative to the independent counsel statute. For instance, S. 1741 (115 th Congress) and S. 71 (116 th Congress) appear to contemplate the appointment of a special counsel at the discretion of the AG, and they provide that only the Attorney General—or the most senior Justice official who has been confirmed by the Senate if the Attorney General is recused—may remove a special counsel. Under both bills, an executive branch official would retain discretion to appoint and remove a special counsel for cause. Under Morrison ' s functional balancing approach, which examines whether Congress has unduly interfered with the President's executive power and duty to take care that the law is executed faithfully, this framework is less intrusive of executive branch power than was the independent counsel statute because the executive branch would retain control over a special counsel's appointment. Likewise, insulating a special counsel from removal by the Attorney General except for those reasons outlined in current Justice regulations—\"for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies\" —would likely permit removal of a special counsel for a broader range of reasons than did the now-expired independent counsel statute, which limited the basis for removal to \"good cause, physical disability, mental incapacity, or any other condition that substantially impairs the performance of such independent counsel's duties.\" Specifically, several bills would add misconduct, dereliction of duty, and conflict of interest as grounds for removal, and specifically define good cause to include violation of departmental policies. At least considered in isolation, such a provision would be less intrusive into the executive branch's authority under Article II than the statute at issue in Morrison , as the proposal would grant the Attorney General—a principal officer directly accountable to the President—greater control of the special counsel than he had under the independent counsel statute. Accordingly, if the Court were to embrace a functionalist balancing approach in a challenge to such a provision, it would likely affirm its constitutionality as the executive branch could remove a special counsel for a broader range of reasons than was permitted in the independent counsel statute. Nevertheless, bills that aim to insulate a special counsel from removal might be constitutionally suspect if the Court chose to overrule Morrison or limit the reach of that case to its facts. In particular, were the Court to face a challenge to a special counsel entrusted with wide-ranging investigative authority who statutorily could not be removed except for cause, application of the approach in Edm o nd , rather than Morrison , might result in the Court concluding that a special counsel is a principal officer. As noted above, Edmond 's test for inferior officer status is that the individual be directed and supervised by a principal officer. And that test was satisfied because Coast Guard Court of Appeals judges were removable at will and lacked power to render final decisions of the executive branch. A special counsel with statutory removal protection would obviously not be removable at will. As to whether a special counsel renders final decisions, any analysis would likely depend on the scope of authority granted to a special counsel. Were the Court to conclude that a special counsel does constitute a principal officer, his or her appointment must be made by the President with Senate confirmation, rather than by the Attorney General. Further, any removal restrictions might be questioned as well, as the Court has never approved such restrictions for a principal officer charged with core executive functions. Nonetheless, the Court has not reconciled its holding on the appointments question in Morrison with its holding in Edmond, meaning that the limits on Congress's power to insulate executive branch officials from removal are subject to debate. More broadly, a departure from Morrison and an application of the Court's more recent formalist approach to separation of powers disputes, as evidenced in Free Enterprise Fund , might cast for-cause removal protections for a special counsel in an unfavorable light. The Court's emphasis in that case on the importance of presidential control over executive branch officers and the ability to hold them accountable in order to preserve the constitutional structure envisioned by the Framers could be read to conflict with statutory removal restrictions for government officers carrying out core executive functions. That said, a middle road is possible. Were Congress to pass legislation insulating a special counsel from removal except for cause, one option might be for the Court to narrowly construe the scope of for-cause removal protections, interpreting them to permit removal for a broad range of reasons. This would avoid overruling Morrison , but arguably preserve substantial executive branch authority over the special counsel. Nonetheless, such a reading might authorize more significant control of a special counsel's decisions, ultimately restricting the independence of the office, at least compared to that envisioned by the independent counsel statute. Certain bills authorizing a judicial role in the removal of a special counsel may raise distinct constitutional questions. As an initial matter, proposals to authorize judicial review of a decision by the Attorney General to remove a special counsel, such as S. 1741 (115 th Congress), as well as S. 71 and H.R. 197 (116 th Congress), appear somewhat similar to provisions considered by the Court in Morrison . And the Supreme Court has otherwise adjudicated suits from government officers who have been removed from their position. It bears mention, however, that the traditional remedy in such situations has been for back pay, rather than reinstatement. Bills that limit available remedies to reinstatement, or require this result, depart from the independent counsel statute's provisions, which provided a reviewing court with the option to order reinstatement or issue \"other appropriate relief.\" One might distinguish between, on the one hand, a court's undisputed power to determine compliance with the law and award damages for violations, and, on the other, a potential judicial order directing an executive branch official to reappoint an individual to an office. In this vein, injunctive relief of this type could be viewed as inserting the judiciary into a role assigned by Article II to the executive branch. In addition, at least one proposal, S. 1735 , might authorize the judiciary to play a more substantial role in the removal of a special counsel. That bill would bar the removal of a special counsel unless the Attorney General first files a petition with a three-judge court, and that court itself finds \"misconduct, dereliction of duty, incapacity, conflict of interest, or other good cause, including violation of policies of the Department of Justice.\" Inserting the judiciary into a removal decision, by requiring a court to determine in the first instance the grounds for the dismissal of an executive branch official before he may be removed, appears to go beyond the restrictions on the President's removal power previously approved by the Supreme Court in Humphrey ' s Executor and Morrison . As the Free Enterprise Fund Court explained, even in the prior cases that \"upheld limited restrictions on the President's removal power, it was the President—or a subordinate he could remove at will—who decided whether the officer's conduct merited removal under the good-cause standard.\" The body charged with determining whether good cause exists to remove a special counsel would not be one that is subordinate to or accountable to the President; indeed, that body is not located in the executive branch at all. Moreover, Free Enterprise Fund invalidated two layers of removal protection for executive branch officers as violating Article II. Here, a special counsel could not be removed unless permitted by Article III judges—judicial officers who may not be removed except through the impeachment process. As such, with regards to this proposal, not only would two layers of removal protection shield a special counsel from dismissal, but one layer would be significantly more stringent than the for-cause protection in Free Enterprise Fund . Further, while the Court in Morrison saw no issue with the independent counsel statute's provision authorizing ex post judicial review (i.e., after the fact) of a removal decision, that conclusion rested on the understanding that the executive branch retained discretion over the decision to remove an independent counsel. Judicial review in that situation was limited to ensuring compliance with the law. Indeed, the Morrison Court narrowly construed that statute to preclude any role for the judicial panel that was entrusted with appointing an independent counsel in removing him during an investigation or judicial proceeding. The Court explained that this move avoided an unconstitutional \"intrusion into matters that are more properly within the Executive's authority.\" Proposals that require an initial judicial finding of good cause in order to authorize removal arguably insert the judiciary into an executive branch function in a manner the Morrison Court appeared to consider questionable. On the other hand, application of a functional approach akin to Morrison , which examined a variety of factors in adjudicating the separation of powers dispute, might nevertheless conclude that a requirement of an initial judicial finding of good cause in order to remove a special counsel does not impair the President's core Article II responsibilities. First, under S. 1735 , the Attorney General retains discretion to initiate a removal in the first place by petitioning the three-judge panel; that body would lack authority to remove a special counsel independently. Second, the previously upheld independent counsel statute authorized judicial review of a removal of the independent counsel and authorized reinstatement as a remedy. The bill's provision would shift the sequence of the judicial role from an ex post review to an ex ante (i.e., beforehand) authorization. Viewed in this light, it is unclear why that shift would necessarily make a substantive difference, because even if the executive branch ignored the provision allowing for ex ante review and removed a special counsel unilaterally, the special counsel could sue for reinstatement, which would leave the court in largely the same position. Finally, while requiring judicial authorization to remove a special counsel might intrude somewhat on the executive branch's Article II authority other aspects of the bill are less intrusive. For instance, the bill leaves discretion to appoint the special counsel with the Attorney General, and appears to permit removal for a wider range of conduct than did the independent counsel statute. Because the Morrison Court balanced a variety of factors and concluded that the independent counsel statute did not impermissibly interfere with the President's duty to execute the law, an application of Morrison might mean that these features ameliorate concerns about a judicial body first approving of a removal. Leaving aside issues arising under Article II of the Constitution, legislation requiring the Attorney General to first petition a federal court for a good cause finding before removing a special counsel might raise questions under Article III. The Constitution defines the proper scope of the federal courts' jurisdiction as limited to adjudicating \"cases\" and \"controversies.\" The Supreme Court has articulated several legal doctrines emanating from Article III that limit the circumstances under which the federal courts will adjudicate disputes. The Court has interpreted Article III to require adversity between the parties, or a live dispute that is \"definite and concrete, touching the legal relations of parties having adverse legal interests.\" Further, the Court has made clear that duties of an administrative or executive nature generally may not be vested in Article III judges. Article III courts are permitted to exercise certain non-adjudicatory functions, but these exceptions are generally limited to duties incident to the judicial function, such as supervising grand juries and participating in the issuance of search warrants. With respect to a suit by the Attorney General seeking ex ante judicial authorization to remove a special counsel, these requirements might not necessarily be met. For instance, given this procedural posture, it is not obvious who the adverse party would be as the legislation does not explicitly authorize the special counsel to participate in the proceedings. Likewise, the supervision of executive branch officers, including discretion to remove them, is traditionally an executive or administrative function, rather than a judicial one. Finally, certain bills that aim to insulate a special counsel from removal might raise unresolved questions concerning their retroactivity. For instance, S. 1741 (115 th Congress) would have provided that a special counsel may not be removed except for cause and that this provision retroactively applies to any special counsel appointed on or after May 17, 2017. Likewise, S. 71 and H.R. 197 (116 th Congress) contain a similar provision, although it applies to any special counsel appointed on or after January 1, 2017. One might argue that statutorily insulating a currently serving special counsel from removal improperly inserts Congress into the appointments process. The Supreme Court has invalidated legislation that explicitly authorized Members of Congress to appoint executive branch officers and has done the same to legislation authorizing Congress to remove an executive branch officer through a joint resolution. Insulating a currently serving executive branch officer from removal via statute might be seen as an attempt by Congress to subvert the purposes of the Appointments Clause, effectively transforming a particular prosecutor's office from one that is subject to executive branch control into one that is statutorily independent without allowing for a new appointment consistent with the Constitution. In particular, if such a bill were passed immediately, it might be seen to apply exclusively to a single individual in the executive branch, effectively appointing a particular executive branch officer for an indefinite time period. To the extent that this provision is viewed as a legislative aggrandizement of the executive's appointment power, it might raise separation-of-powers concerns. That said, it does not appear that a Supreme Court case has directly addressed such a statutory provision. In Myers v. United States , the Court invalidated a statutory restriction on the removal of an executive branch officer. The pertinent statute in that case bestowed removal protection retroactively on executive branch officers, but the Court's opinion did not hinge on this feature of the statute. Further, such a provision would only codify requirements that already exist in regulations, which might be seen as a relatively minor adjustment to a special counsel's office that does not require a new appointment. Given the lack of preexisting case law relevant to such a provision, firm conclusions about its merit are likely premature. Both Congress and the executive branch have employed a variety of means to establish independence for certain criminal investigations and prosecutions. The use of special prosecutors, independent counsels, and special counsels all have allowed for the investigation of executive branch misconduct. Nonetheless, efforts to provide independence for prosecutors from executive branch control often raise constitutional questions. In turn, proposals to statutorily protect a special counsel from removal thus raise important, but unresolved, constitutional questions about the separation of powers. As a general matter, simply insulating a future special counsel from removal except for specified reasons appears consistent with the Court's opinion in Morrison . To the extent the current Court might depart from the functional reasoning of that case and apply a more formal approach to the question, however, such proposals might raise constitutional objections. Likewise, constitutional objections might arise against proposals aimed to insulate a special counsel in a manner beyond the framework approved in Morrison .", "summary": "The Constitution vests Congress with the legislative power, which includes authority to establish federal agencies and conduct oversight of those entities. Criminal investigations and prosecutions, however, are generally regarded as core executive functions assigned to the executive branch. Because of the potential conflicts of interest that may arise when the executive branch investigates itself, there have often been calls for criminal investigations by prosecutors with independence from the executive branch. In response, Congress and the U.S. Department of Justice (DOJ) have used both statutory and regulatory mechanisms to establish a process for such inquiries. These frameworks have aimed to balance the competing goals of independence and accountability with respect to inquiries of executive branch officials. Under the Ethics in Government Act of 1978, for example, Congress authorized the appointment of \"special prosecutors,\" who later were known as \"independent counsels.\" Under this statutory scheme, the Attorney General could request that a specially appointed three-judge panel appoint an outside individual to investigate and prosecute alleged violations of criminal law. These individuals were vested with \"full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice\" with respect to matters within their jurisdiction. Ultimately, debate over the scope, cost, and effect of the investigations (perhaps most notably the Iran-Contra and the Whitewater investigations) resulted in the law's expiration and nonrenewal in 1999. Following the lapse of these statutory provisions, DOJ promulgated regulations authorizing the Attorney General (or, if the Attorney General is recused from a matter, the Acting Attorney General) to appoint a \"special counsel\" from outside the federal government to conduct specific investigations or prosecutions that may be deemed to present a conflict of interest if pursued under the normal procedures of the agency. Special counsels are not subject to \"day-to-day supervision\" by any official and are vested \"within the scope of his or her jurisdiction, the full power and independent authority to exercise all investigative and prosecutorial functions of any United States Attorney.\" The independent nature of these investigations has raised constitutional questions about the propriety of the appointment and removal mechanisms provided for the officials leading the inquiries. These concerns were addressed by the Supreme Court in the 1988 case of Morrison v. Olson, which upheld the constitutionality of the independent counsel statute. The reasoning of that opinion has been challenged, however, and the Court's subsequent analysis of related issues in the 1997 case of Edmond v. United States and the 2010 case Free Enterprise Fund v. Public Accounting Oversight Board did not apply the standard enunciated in Morrison. The constitutional status of a statutory framework similar to the independent counsel statute is thus subject to debate. Several bills introduced in the 116th Congress (including S. 71 and H.R. 197, which merge aspects of two preceding bills introduced in the 115th Congress, S. 1735 and S. 1741) would statutorily insulate a special counsel from removal, echoing aspects of the independent counsel statute's provisions. Whether such proposals would withstand constitutional challenge today might ultimately turn on the continued vitality of the analysis applied in Morrison.", "document_type": "crs"}
{"report": "Political and economic developments in Cuba and U.S. policy toward the island nation, located 90 miles from the United States, have been significant congressional concerns for many years. Especially since the end of the Cold War, Congress has played an active role in shaping U.S. policy toward Cuba, first with the enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII) and then with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ). Both measures tightened U.S. economic sanctions on Cuba that had first been imposed in the early 1960s; however, both measures also provided road maps for normalization of relations, dependent on significant political and economic changes in Cuba. Congress partially modified its sanctions-based policy toward Cuba when it enacted the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX) allowing for U.S. agricultural exports to Cuba. Over the past decade, much of the debate in Congress over U.S. policy has focused on U.S. sanctions. In 2009, Congress took legislative action in an appropriations measure ( P.L. 111-8 ) to ease restrictions on family travel and travel for the marketing of agricultural exports, marking the first congressional action easing Cuba sanctions in almost a decade. The Obama Administration took further action in 2009 by lifting restrictions on family travel and family remittances and in 2011 by further easing restrictions on educational and religious travel and remittances to other than family members. President Obama announced a major shift in U.S. policy toward Cuba in December 2014 that moved away from a sanctions-based policy aimed at isolating Cuba toward a policy of engagement and a normalization of relations. The policy shift led to the restoration of diplomatic relations, the rescission of Cuba's designation as a state sponsor of international terrorism, and the easing of some restrictions on travel and commerce with Cuba. There was mixed reaction in Congress, with some Members of Congress supporting the change and others opposing it. Legislative initiatives in the 114 th Congress in 2015-2016 reflected this policy divide, with some bills introduced that would have further eased U.S. economic sanctions and others that would have blocked the policy shift and introduced new sanctions; ultimately no action was taken on either policy approach. President Trump announced a new policy approach toward Cuba in June 2017 that partially rolled back efforts to normalize relations and imposed new sanctions on Cuba, including restrictions on the permissible category of people-to-people educational travel to Cuba and on transactions with companies controlled by the Cuban military. Again, reaction in the 115 th Congress in 2017-2018 was mixed, with legislative initiatives reflecting the policy divide between those wanting to tighten sanctions and those wanting to ease them. Ultimately the only legislative action taken with regard to sanctions was a provision in the 2018 farm bill ( P.L. 115-334 ) that permits funding for two U.S. agricultural exports promotion programs in Cuba. This marked the first time Congress had eased Cuba sanctions, albeit slightly, in almost a decade. This report examines U.S. policy toward Cuba in the 116 th Congress. It is divided into three major sections analyzing: (1) Cuba's political and economic environment; (2) U.S. policy toward Cuba; and (3) selected issues in U.S.-Cuban relations, including restrictions on travel and trade, democracy and human rights funding for Cuba, U.S. government-sponsored radio and television broadcasting to Cuba (Radio and T Martí), migration issues, antidrug cooperation, property claims, and U.S. fugitives from justice in Cuba. Relevant legislative initiatives in the 116 th Congress are noted throughout the report, and Appendix A lists enacted measures and other bills and resolutions. Appendix B provides links to U.S. government information and reports on Cuba. For more on Cuba from CRS, see the following: CRS In Focus IF10045, Cuba: U.S. Policy Overview , by Mark P. Sullivan; CRS Report R43888, Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations , by Dianne E. Rennack and Mark P. Sullivan; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by Mark P. Sullivan; and CRS Report R44137, Naval Station Guantanamo Bay: History and Legal Issues Regarding Its Lease Agreements , by Jennifer K. Elsea and Daniel H. Else. Cuba became an independent nation in 1902. From its discovery by Columbus in 1492 until the Spanish-American War in 1898, Cuba was a Spanish colony. In the 19 th century, the country became a major sugar producer, with slaves from Africa brought in increasing numbers to work the sugar plantations. The drive for independence from Spain grew stronger in the second half of the 19 th century, but independence came about only after the United States entered the conflict, when the USS Maine sank in Havana Harbor after an explosion of undetermined origin. In the aftermath of the Spanish-American War, the United States ruled Cuba for four years until Cuba was granted its independence in 1902. Nevertheless, the United States retained the right to intervene in Cuba to preserve Cuban independence and maintain stability in accordance with the Platt Amendment, which became part of the Cuban Constitution of 1901; the United States established a naval station at Guantanamo Bay, Cuba, in 1903, which continues in operation today. The United States subsequently intervened militarily three times between 1906 and 1921 to restore order, but in 1934, the Platt Amendment was repealed. Cuba's political system as an independent nation often was dominated by authoritarian figures. Gerardo Machado (1925-1933), who served two terms as president, became increasingly dictatorial until he was ousted by the military. A short-lived reformist government gave way to a series of governments that were dominated behind the scenes by military leader Fulgencio Batista until he was elected president in 1940. Batista was voted out of office in 1944 and was followed by two successive presidents in a democratic era that ultimately became characterized by corruption and increasing political violence. Batista seized power in a bloodless coup in 1952, and his rule progressed into a brutal dictatorship that fueled popular unrest and set the stage for Fidel Castro's rise to power. Castro led an unsuccessful attack on military barracks in Santiago, Cuba, on July 26, 1953. After a brief jail term, he went into exile in Mexico, where he formed the 26 th of July Movement. Castro returned to Cuba in 1956 with the goal of overthrowing the Batista dictatorship. His revolutionary movement was based in the Sierra Maestra Mountains in eastern Cuba, and it joined with other resistance groups seeking Batista's ouster. Batista ultimately fled the country on January 1, 1959, leading to 47 years of rule under Fidel Castro until he stepped down from power provisionally in 2006 because of poor health and ceded power to his brother Raúl Castro. Although Fidel Castro had promised a return to democratic constitutional rule when he first took power, he instead moved to consolidate his rule, repress dissent, and imprison or execute thousands of opponents. Under the new revolutionary government, Castro's supporters gradually displaced members of less radical groups. Castro moved toward close relations with the Soviet Union, and relations with the United States deteriorated rapidly as the Cuban government expropriated U.S. properties. In April 1961, Castro declared that the Cuban revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. Over the next 30 years, Cuba was a close ally of the Soviet Union and depended on it for significant assistance until the dissolution of the Soviet Union in 1991. Castro ruled by decree until 1976 when he became the country's president (technically, president of the Council of State) under a new constitution that set forth the Cuban Communist Party (PCC), which Castro headed, as the leading force in state and society. When Fidel stepped down in July 2006 because of poor health, his brother Raúl, Cuba's long-time defense minister and first vice president, became provisional president. In 2008, after Fidel announced that he would not be returning to government, Cuba's National Assembly chose Raúl as president and he went on to serve two five-year terms until April 2018. More than 10 years after stepping down from power, Fidel Castro died in November 2016 at 90 years of age. While out of power, Fidel continued to author essays published in Cuban media that cast a shadow on Raúl Castro's rule, and many observers believe that the former leader encouraged so-called hard-liners in the party and government bureaucracy to slow the pace of economic reforms advanced by Raúl. Raúl Castro's government (2006-2018) stands out for two significant policy developments. First the government implemented a series of gradual market-oriented economic policy changes including authorization for limited private sector activity, the legalization of property rights, and an opening to further foreign investment. Critics, however, maintain that the government did not go far enough toward enacting deeper reforms needed to stimulate the Cuban economy and foster sustainable economic growth. The second notable policy development was the rapprochement in bilateral relations with the Obama Administration; this rapprochement led to the reestablishment of diplomatic relations and government-to-government engagement and cooperation on a wide range of issues. Current President Miguel Díaz-Canel Bermúdez succeeded Raúl Castro in April 2018 after Castro completed his second five-year term. Cuba does not have direct elections for president; instead, Cuba's legislature, the National Assembly of People's Power, selected Díaz-Canel as president of the country's 31-member Council of State, which, pursuant to Cuba's constitution (Article 74), makes Díaz-Canel Cuba's head of state and government. Most observers saw Díaz-Canel, who had been serving as first vice president since 2013, as the \"heir apparent,\" although Raúl is continuing in his position as first secretary of the PCC until 2021. Díaz-Canel, who turned 58 a day after becoming president, is an engineer by training. His appointment as first vice president in 2013 made him the official constitutional successor in case Castro died or could not fulfill his duties. His appointment also represented a move toward bringing about generational change in Cuba's political system; Raúl Castro was 86 years old when he stepped down as president. Díaz-Canel became a member of the Politburo in 2003 (the PCC's highest decisionmaking body), held top PCC positions in two provinces, and was higher education minister from 2009 until 2012, when he was tapped to become a vice president on the Council of State. Cuba's 2018 political transition is notable because it is the first time since the 1959 Cuban revolution that a Castro is not in charge of the government. A majority of Cubans today have only lived under the rule of the Castros. Raúl's departure can be viewed as a culmination of the generational leadership change that began several years ago in the government's lower ranks. It is also the first time that Cuba's head of government is not leader of the PCC. Raúl Castro, however, has indicated that he expects Díaz-Canel to take over as first secretary of the PCC when his term as party leader ends. Another element of the transition is the composition of the 31-member Council of State. The National Assembly selected 72-year-old Salvador Valdés Mesa as first vice president, not from the younger generation, but also not from the historical revolutionary period. Valdés Mesa, who already had been serving as one of five vice presidents and is on the PCC's Politburo, is the first Afro-Cuban to hold such a high government position. Of the Council of State's members, 45% are new, 48% are women, and 45% are Afro-Cuban or mixed race. Several older revolutionary-era leaders remained on the Council, including Ramiro Valdés, 86 years old, who continues as a vice president. Nevertheless, the average age of Council of State members is 54, with 77% born after the 1959 Cuban revolution. President Díaz-Canel faces two enormous challenges—reforming the economy and responding to citizens' desires for greater freedom. As noted above, Raúl Castro had managed the opening of Cuba's economy to the world, with diversified trade relations, increased foreign investment, and a growing private sector, but the slow pace of economic reform stunted economic growth and disheartened Cubans yearning for more economic freedom. The liberalization of some individual freedoms that occurred under Raúl Castro (such as legalization of cell phones and personal computers, expansion of internet connectivity, and the elimination of an exit permit to travel abroad) has increased Cubans' appetite for access to information and the desire for more social and political expression. Most observers did not anticipate immediate major policy changes under Díaz-Canel, and after the new president marked his first 100 days in office in July 2018, observers maintained that little had changed politically or economically. In December 2018, however, President Díaz-Canel made several decisions that appeared to demonstrate his independence from the previous government and indicate that he was more responsive to public concerns and criticisms. Díaz-Canel eased forthcoming harsh regulations that were about to be implemented on the private sector; many observers believed these regulations would have shrunk the sector (see \" Economic Conditions \" section below). His government also backed away from full implementation of controversial Decree 349 that had been issued in July 2018 to regulate artistic expression. After the unpopular decree triggered a flood of criticism from Cuba's artistic community, the government announced that the measure would be implemented gradually and applied with consensus. It remains to be seen, however, whether the government's action will satisfy those working in Cuba's vibrant arts community. In a third action, the government eliminated a proposed constitutional change that could have paved the way for same-sex marriage after strong public criticisms of the provision (see discussion below on constitutional changes). Looking ahead, another important question may be the extent of influence that Castro and other revolutionary figures might have on current government policy. As noted, Raúl will head the PCC until 2021. The former president also headed a commission drafting proposed changes to Cuba's 1976 constitution (see discussion below). In July 2018, President Díaz-Canel named his Council of Ministers or Cabinet, but a majority of ministers were holdovers from the Castro government, including those occupying key ministries such as defense, interior, and foreign relations; 9 of 26 ministers were new, as well as 2 vice presidents. In January 2019, however, Díaz-Canel replaced the ministers of finance and transportation that had been holdovers from the previous government. Constitutional Changes. On February 24, 2019, almost 87% of Cubans approved a new constitution in a national referendum. Originally drafted by a commission headed by Raúl Castro and approved by the National Assembly in July 2018, the proposed overhaul of the 1976 constitution was subject to public debate in thousands of workplaces and community meetings into November. After considering public suggestions, the National Assembly made additional changes to the draft constitution, and the National Assembly approved a new version in December 2018. One of the more controversial changes made by the commission was the elimination of a provision that would have redefined matrimony as gender neutral compared to the current constitution, which refers to marriage as the union between a man and a woman. Cuba's evangelical churches orchestrated a campaign against the provision, and Cuban Catholic bishops issued a pastoral message against it. The commission chose to eliminate the proposed provision altogether, with the proposed constitution remaining silent on defining matrimony, and maintained that the issue would be addressed in future legislation within two years. Among the provisions of the new constitution are the addition of an appointed prime minster as head of government to oversee government operations—to be proposed by the President and designated by the National Assembly (Articles 140 and 141); an age limit of 60 to become president (Article 127) with a limit of two five-year terms (Article 126); the right to own private property (Article 22); and the acknowledgement of foreign investment as an important element of the country's economic development (Article 28). The new constitution still ensures the state's control over the economy and the role of centralized planning (Article 19), and the Communist Party still would be the only recognized party (Article 5). The Cuban government has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights since the early years of the Cuban revolution. The government has continued to harass members of human rights and other dissident organizations. These organizations include the Ladies in White ( Las Damas de Blanco ), currently led by Berta Soler, formed in 2003 by the female relatives of the \"group of 75\" dissidents arrested that year. Another is the Patriotic Union of Cuba (UNPACU), led by José Daniel Ferrer, established in 2011 by several dissident groups with the goal of working peacefully for civil liberties and human rights. In August 2018, the Cuban government imprisoned Ferrer arbitrarily for 11 days with no access to his family, according to Amnesty International. In past years, several political prisoners conducted hunger strikes, including two who died, Orlando Zapata Tamayo in 2010 and Wilman Villar Mendoza in 2012. In 2017, Hamel Santiago Maz Hernández, a member of UNPACU, died in prison; he had been imprisoned in 2016 after being accused of descato (lack of respect for the government). Although the human rights situation in Cuba remains poor, the country has made some advances in recent years. In 2008, Cuba lifted a ban on Cubans staying in hotels that previously had been restricted to foreign tourists in a policy that had been pejoratively referred to as \"tourist apartheid.\" In recent years, as the government has enacted limited economic reforms, it has been much more open to debate on economic issues. In 2013, Cuba eliminated its long-standing policy of requiring an exit permit and letter of invitation for Cubans to travel abroad. The change has allowed prominent dissidents and human rights activists to travel abroad and return to Cuba. In recent years, the Cuban government has moved to expand internet connectivity through \"hotspots\" first begun in 2015 and through the launching of internet capability on cellphones in late 2018. As noted below, short-term detentions for political reasons declined significantly in 2017 and 2018, although there were still almost 2,900 such detentions in 2018. Political Prisoners. In October 2018, the State Department's U.S. Mission to the United Nations launched a campaign to call attention to the plight of Cuba's \"estimated 130 political prisoners.\" Secretary of State Mike Pompeo wrote an open letter to Cuban Foreign Minister Bruno Rodriguez in December 2018, asking for a substantive explanation for the continued detention of eight specific political prisoners and an explanation of the charges and evidence against other individuals held as political prisoners. In January 2019, the Havana-based Cuban Commission for Human Rights and National Reconciliation (CCDHRN) estimated that Cuba held some 130-140 political prisoners. In June 2018, the CCDHRN made public a list with 120 who are prisoners for political reasons, consisting of 96 opponents or those disaffected toward the regime (more than 40 are members of UNPACU) and 24 accused of employing or planning some form of force or violence. According to the State Department's human rights report on Cuba covering 2018, issued in March 2019, the government refused international humanitarian organizations and the United Nations access to its prisons and detention centers, and closely monitored and often harassed domestic human rights organizations. The report noted the lack of governmental transparency, along with its systematic violations of due process rights, which masked the nature of criminal charges and prosecutions and allowed the government to prosecute peaceful human rights activists for criminal violations or \"pre-criminal dangerousness.\" Political activist Dr. Eduardo Cardet, designated by Amnesty International (AI) as a \"prisoner of conscience,\" has been imprisoned since November 2016 for publicly criticizing Fidel Castro and was sentenced to three years in prison. AI maintains that Cardet, a leader in the dissident Christian Liberation Movement, was sent to prison solely for peacefully exercising his right to freedom of expression and has called for his immediate release. In 2018, the Cuban government released two political prisoners after hunger strikes: in July, AI-designated prisoner of conscience Dr. Ariel Ruiz Urquiola, who had been sentenced to a year in prison in May 2018 for the crime of disrespecting authority ( desacato ); and in October, UNPACU activist Tomás Núñez Magdariaga who had been sentenced to a year in jail for allegedly making threats to a security agent. Short- T erm Detentions. Short-term detentions for political reasons increased significantly from 2010 through 2016, a reflection of the government's change of tactics in repressing dissent away from long-term imprisonment. The CCDHRN reports that the number of such detentions grew annually from at least 2,074 in 2010 to at least 8,899 in 2014. The CCDHRN reported a slight decrease to 8,616 short-term detentions in 2015, but this figure increased again to at least 9,940 detentions for political reasons in 2016, the highest level recorded by the human rights organization. Since 2017, however, the CCDHRN has reported a significant decline in short-term detentions. In 2017, the number of short-term detentions fell to 5,155, almost half the number detained in 2016 and the lowest level since 2011. The decline in short-term detentions continued in 2018, with 2,873 reported short-term detentions, almost a 45% decline from 2017 and the lowest level since 2010. Bloggers, Civil Society Groups , and Independent Media . Numerous independent Cuban blogs have been established over the past dozen years. Cuban blogger Yoani Sánchez has received considerable international attention since 2007 for her website, Generación Y , which includes commentary critical of the Cuban government. In May 2014, Sánchez launched an independent digital newspaper in Cuba, 14 y medio , available on the internet, but distributed through a variety of methods in Cuba, including CDs, USB flash drives, and DVDs. Estado de SATS , a forum founded in 2010 by human rights activist Antonio Rodiles, has had the goal of encouraging open debate on cultural, social, and political issues. The group has hosted numerous events and human rights activities over the years, but it and its founder have also been the target of government harassment. Other notable online forums and independent or alternative media that have developed include Cuba Posible (founded by two former editors of the Catholic publication Espacio Laical ) , Periodismo del Barrio (focusing especially on environmental issues), El Toque , O nCuba (a Miami-based digital magazine with a news bureau in Havana), and Tremenda Nota (focusing on the LGBT community). Trafficking in Persons. The State Department released its 2018 Trafficking in Persons (TIP) Report in June 2018, and for the fourth consecutive year Cuba was placed on the Tier 2 Watch List (in prior years, Cuba had Tier 3 status). Tier 3 status refers to countries whose governments do not fully comply with the minimum standards for combatting trafficking and are not making significant efforts to do so. In contrast, Tier 2 Watch List status refers to countries whose governments, despite making significant efforts, do not fully comply with the minimum standards and still have some specific problems (e.g., an increasing number of victims or failure to provide evidence of increasing antitrafficking efforts) or whose governments have made commitments to take additional antitrafficking steps over the next year. Normally, a country is automatically downgraded to Tier 3 status if it is on the Tier 2 Watch List for three consecutive years unless the Secretary of State authorizes a waiver. The State Department issued such a waiver for Cuba in 2017 because the government had devoted sufficient resources to a written plan that, if implemented, would constitute significant efforts to meet the minimum standards for the elimination of trafficking. In the 2018 TIP report, the State Department again issued a waiver for Cuba allowing it to remain on the Tier 2 Watch List for the fourth consecutive year. Such a waiver, however, is only permitted for two years. After the third year, the country must either go up to Tier 2 or down to Tier 3. In its 2018 TIP report, the State Department noted the Cuban government's significant efforts to prosecute and convict more traffickers, create a directorate to provide specialized attention to child victims of crime and violence, including trafficking, and publish its antitrafficking plan for 2017-2020. The State Department also noted, however, that the Cuban government did not demonstrate increasing efforts compared to the previous reporting period. It maintained that the government did not criminalize most forms of forced labor or sex trafficking for children ages 16 or 17, and did not report providing specialized services to identified victims. The State Department also made several recommendations for Cuba to improve its antitrafficking efforts, including the enactment of a comprehensive antitrafficking law that prohibits and sufficiently punishes all forms of trafficking. (Also see discussions of Cuba's medical missions, which some observer consider forced labor, in the \" Foreign Relations \" and \" Migration Issues \" sections below.) Engagement between U.S. and Cuban officials on antitrafficking issues has increased in recent years. In January 2017, U.S. officials met with Cuban counterparts in their fourth such exchange to discuss bilateral efforts to address human trafficking. Subsequently, in January 2017, the United States and Cuba signed a broad memorandum of understanding on law enforcement cooperation in which the two countries stated their intention to collaborate on the prevention, interdiction, monitoring, and prosecution of transnational or serious crimes, including trafficking in persons. In February 2018, the State Department and the Department of Homeland Security hosted meetings in Washington, DC, with Cuban officials on efforts to combat trafficking in persons. Cuba's economy continues to be largely state-controlled, with the government owning most means of production and employing a majority of the workforce. Key sectors of the economy that generate foreign exchange include the export of professional services (largely medical personnel to Venezuela); tourism, which has grown significantly since the mid-1990s, with an estimated 4.75 million tourists visiting Cuba in 2018; nickel mining, with the Canadian mining company Sherritt International involved in a joint investment project; and a biotechnology and pharmaceutical sector that supplies the domestic health care system and has fostered a significant export industry. Remittances from relatives living abroad, especially from the United States, also have become an important source of hard currency, amounting to some $3.5 billion in 2017. The once-dominant sugar industry has declined significantly over the past 20 years. Because of drought, damage from Hurricane Irma, and subsequent months of heavy rains, the 2017-2018 sugar harvest dropped by almost 44% to just over 1 million metric tons (MT), compared to 1.8 million MT the previous year. The outlook for the 2018-2019 harvest is 1.5 million MT, almost a 50% improvement; for comparison, in 1990, Cuba produced 8.4 million MT of sugar. For almost 20 years, Cuba has depended heavily on Venezuela for its oil needs. In 2000, the two countries signed a preferential oil agreement (essentially an oil-for-medical-personnel barter arrangement) that provided Cuba with some 90,000-100,000 barrels of oil per day, about two-thirds of its consumption. Cuba's goal of becoming a net oil exporter with the development of its offshore deepwater oil reserves was set back in 2012, when the drilling of three exploratory oil wells was unsuccessful. This setback, combined with Venezuela's economic difficulties, has raised Cuban concerns about the security of the support received from Venezuela. Since 2015, Venezuela has cut the amount of oil that it sends to Cuba, and Cuba has increasingly turned to other suppliers for its oil needs, such as Algeria and Russia. Cuba now reportedly receives between 40,000-50,000 barrels of oil per day from Venezuela, about one-third of its consumption. The government of Raúl Castro implemented a number of economic policy changes, but economists were generally disappointed that more far-reaching reforms were not undertaken. At the PCC's seventh party congress, held in April 2016, Raúl Castro reasserted that Cuba would move forward with updating its economic model \"without haste, but without pause.\" A number of Cuba's economists have pressed the government to enact more far-reaching reforms and embrace competition for key parts of the economy and state-run enterprises. These economists criticize the government's continued reliance on central planning and its monopoly on foreign trade. Economic Growth. The Cuban government reports that the economy grew 1.8% in 2017 and an estimated 1.2% in 2018. President Díaz-Canel has said that austerity measures begun in 2016 will continue in 2019. The economy has been hurt by reduced support from Venezuela over the past several years and the unexpected December 2018 ending of Cuba's program sending medical professionals to Brazil, which had provided Cuba with some $400 million a year. The Economist Intelligence Unit (EIU) predicts economic growth will slow to 0.7% in 2019 and 0.3% in 2020 because of reduced aid and oil shipments from Venezuela. Private Sector. The Cuban government employs a majority of the labor force, but the government has been allowing more private-sector activities. In 2010, the government opened up a wide range of activities for self-employment and small businesses to almost 200 categories of work. The number of self-employed or cuentapropistas rose from 144,000 in 2009 to about 591,000 in May 2018, but declined to almost 581,000 at the end of 2018. Analysts contend that the government needs to do more to aid the development of the private sector, including an expansion of authorized activities to include more white-collar occupations and state support for credit to support small businesses. Beginning in mid-2017, the government took several steps that restricted private-sector development. It temporarily stopped issuing new licenses for 27 private-sector occupations, including for private restaurants and for renting private residences, closed a fast-growing cooperative that had provided accounting and business consultancy services, and put restrictions on construction cooperatives. The government maintains that it took the actions to \"perfect\" the functioning of the private sector and curb illicit activities, such as the sale of stolen state property, tax evasion, and labor violations. In July 2018, the government released regulations that were to take effect in December 2018 that would have limited an individual to one business license, reduced and consolidated the permissible 200 categories of work to 123 categories, and limited the size of private restaurants. The aims of the new regulations were to increase taxation oversight of the private sector and to control the concentration of wealth and rising inequality, but many observers believed the regulations were aimed at stifling private-sector growth because of the government's concerns regarding that sector's independence from the government. Two days before the regulations were to go into effect, President Díaz-Canel did an about-face and announced that some aspects of the regulations viewed as especially egregious by the private sector would be eliminated or eased. Most significantly, individuals would not be limited to one licensed activity; restaurants, bars, and cafeterias would not be subject to a limit of 50 seats; and requirements for maintaining a minimum balance in bank accounts would be reduced from the equivalent of three months of tax payments to two months and would apply to just six of the 123 categories of employment. Analysts generally view the backtracking as an indication that President Díaz-Canel is willing to make policy changes in response to public opinion and as a sign that the government does not want to shrink the private sector. Foreign Investment. The Cuban government adopted a new foreign investment law in 2014 with the goal of attracting increased levels of foreign capital to the country. The law cut taxes on profits by half, to 15%, and exempts companies from paying taxes for the first eight years of operation. It also eliminated employment or labor taxes, although companies still must hire labor through state-run companies, with agreed wages. A fast-track procedure for small projects reportedly streamlines the approval process, and the government agreed to improve the transparency and time of the approval process for larger investments. A Mariel Special Development Zone (ZED Mariel) was established in 2014 near the port of Mariel to attract foreign investment. To date, ZED Mariel has approved some 43 investment projects, which are at various stages of development. In November 2017, Cuba approved a project for Rimco (the exclusive dealer for Caterpillar in Puerto Rico, the U.S. Virgin Islands, and the Eastern Caribbean) to become the first U.S. company to be located in the ZED Mariel. Rimco plans to set up a warehouse and distribution center to distribute Caterpillar equipment. In September 2018, the Roswell Park Comprehensive Cancer Center of Buffalo, NY, announced it was entering into a joint venture with Cuba's Center for Molecular Immunology focused on the development of cancer therapies; the joint venture will be located in the ZED Mariel. According to Cuba's Minister of Foreign Trade and Investment Rodrigo Malmierca, Cuba has signed more than 200 investment projects valued at $5.5 billion since it made changes to its investment law in 2014, with $1.5 billion of that in 2018. The actual amount invested reportedly is much less, estimated at $500 million annually. In November 2018, the Cuban government updated its wish list for foreign investment, which includes 525 projects representing potential investment of $11.6 billion in such high-priority areas as tourism, agriculture and food production, oil, the industrial sector, and biotechnology. During the Cold War, Cuba had extensive relations with, and support from, the Soviet Union, which provided billions of dollars in annual subsidies to sustain the Cuban economy. This subsidy system helped to fund an activist foreign policy and support for guerrilla movements and revolutionary governments in Latin America and Africa. With an end to the Cold War, the dissolution of the Soviet Union, and the loss of Soviet financial support, Cuba was forced to abandon its revolutionary activities abroad. As its economy reeled from the loss of Soviet support, Cuba was forced to open up its economy and engage in economic relations with countries worldwide. In ensuing years, Cuba diversified its trading partners, although Venezuela under populist leftist President Hugo Chávez (1999-2013) became one of Cuba's most important partners, leading to Cuba's dependence on Venezuela for oil imports. In 2017, the leading sources of Cuba's imports in terms of value were Venezuela (18.1%, down from 40% in 2014), China (16.3%), and Spain (10.8%); the leading destinations of Cuban exports were Canada (19.4%), Venezuela (15.6%), Spain (8.6%), and China (5.2%). Russia. Relations with Russia, which had diminished significantly in the aftermath of the Cold War, have strengthened somewhat over the past several years. In 2014, Russia agreed to write off 90% of Cuba's $32 billion Soviet-era debt, with some $3.5 billion to be paid back by Cuba over a 10-year period that would fund Russian investment projects in Cuba. Trade relations between Russia and Cuba have not been significant, although Russian exports to Cuba have grown over the past three years, amounting to almost $373 million in 2018, led by motor vehicles (and parts) and oil. Russian energy companies Zarubezhneft and Rosneft are currently involved in oil exploration in Cuba, and in 2017, Rosneft began shipping oil to Cuba amid Cuba's efforts to diversify its foreign oil sources because of Venezuela's diminished capacity. Russian officials publicly welcomed the improvement in U.S.-Cuban relations under the Obama Administration, although some analysts viewed the change in U.S. policy as a setback for Russian overtures in the region. As U.S.-Cuban normalization talks were beginning in Havana in January 2015, a Russian intelligence ship docked in Havana (the ship also docked in Havana in 2014, 2017, and 2018). In December 2016, Russia and Cuba signed a bilateral cooperation agreement for Russia's support to help Cuba modernize its defense sector until 2020. Some reports indicate that as U.S. relations with Cuba have deteriorated under the Trump Administration, Russia has been attempting to increase its ties, including high-level meetings between government officials and increased economic, military, and cultural engagement. For Cuba, a deepening of relations with Russia could help economically, especially regarding oil, and also could serve as a counterbalance to the partial rollback of U.S. engagement policy by the Trump Administration. However, President Díaz-Canel's three-day trip to Russia in November 2018 reportedly did not yield significant results. Press reports indicate that Cuba received a $50 million credit line for purchases of Russian military weapons and spare parts and contracts to modernize three power plants and a metal processing plant and upgrade Cuba's railway system. There has been concern in Congress about the role of Russia in Latin America, including in Cuba. The conference report to the John S. McCain National Defense Authorization Act for FY2019, P.L. 115-232 ( H.R. 5515 ) required the Defense Intelligence Agency to submit a report to Congress on security cooperation between Russia and Cuba (as well as between Russia and Nicaragua and Venezuela). Among the areas of cooperation noted in the report, which was submitted to Congress in February 2019, was a Russian-Cuban announcement in 2017 of a plan to construct a GLONASS satellite navigation station in Cuba, and a 2013 Russia-Cuba agreement permitting Russian military vessels to refuel and resupply in Cuban ports. According to the report, the Russian Navy currently uses Cuban ports for maintenance, minor repairs, and refueling, and may seek to establish a permanent naval logistics facility in the country. China. During the Cold War, Cuba and China did not have close relations because of Sino-Soviet tensions, but bilateral relations with China have grown closer over the past 15 years, resulting in a notable increase in trade. Since 2004, Chinese leaders have made a series of visits to Cuba and Cuban officials in turn have visited China, including a November 2018 visit by President Díaz-Canel. During the visit, Chinese President Xi Jinping called for a long-term plan to promote the development of China-Cuba ties. He said that China would welcome Cuba's participation in the Belt and Road Initiative, which is focused on infrastructure development around the world. President Xi called on both countries to enhance cooperation on trade, energy, agriculture, tourism, and biopharmaceutical manufacturing. While Cuba's relationship with China undoubtedly has an ideological component since both are the among the world's remaining communist regimes, economic linkages and cooperation appear to be the most significant component of bilateral relations. According to Cuban trade statistics, total Cuba-China trade in 2017 was valued at almost $2 billion (accounting for 16.1% of Cuba's trade worldwide), with Cuba exporting $364 million to China and importing almost $1.7 billion. This was a 21% drop from 2016, when total Cuba-China trade almost reached $2.6 billion, and an almost 30% drop in Cuba's imports from China compared to 2016. The fall in imports from China reflects Cuba's difficult economic situation as Venezuelan support has diminished. In response to a cash crunch, the Cuban government has cut imports and reduced the use of fuel and electricity. China reportedly had been reluctant to invest in Cuba because of the uninviting business environment, but recently that has begun to change. In 2015, the Chinese cellphone company Huawei reached an agreement with the Cuban telecommunications company ETECSA to set up Wi-Fi hotspots at public locations, and is helping to wire homes. In 2016, the Chinese company Haier set up a plant assembling laptops and tablets in Cuba. Over the past two years, Chinese financing has been supporting the modernization of a port in Santiago. Other planned Chinese investment projects reportedly include pharmaceuticals as well as the tourism sector involving two hotels and a golf course. European Union. After two years of talks, the European Union (EU) and Cuba reached a Political Dialogue and Cooperation Agreement in 2016 covering political, trade, and development issues. The agreement was submitted to the European Parliament, which overwhelmingly endorsed the agreement in July 2017, welcoming it as a framework for relations and emphasizing the importance of the human rights dialogue between the EU and Cuba. Although the agreement will enter into force in full after it has been ratified in all EU member states, the provisional application of the agreement began in November 2017. The new cooperation agreement replaces the EU's 1996 Common Position on Cuba, which stated that the objective of EU relations with Cuba included encouraging \"a process of transition to pluralist democracy and respect for human rights and fundamental freedoms.\" The position also had stipulated that full EU economic cooperation with Cuba would depend upon improvements in human rights and political freedom. Nevertheless, the new agreement states that a human rights dialogue will be established within the framework of the overall political dialogue and has numerous provisions related to democracy, human rights, and good governance. In October 2018, the EU and Cuba held their first human rights dialogue under the agreement, with the meeting addressing issues related to civil, political, economic, social and cultural rights, and multilateral cooperation. Venezuela . For more than 15 years, Venezuela has been a significant source of support for Cuba. Dating back to 2000 under populist President Hugo Chávez, Venezuela began providing subsidized oil and investment to Cuba. For its part, Cuba has sent thousands of professional personnel to Venezuela. Estimates of the number of Cuban personnel in Venezuela vary, but a 2014 Brookings study estimated that there were some 40,000 Cuban professionals in Venezuela, with 75% of those being healthcare workers. The roughly 30,000 healthcare personnel included doctors and nurses, while the balance of Cuban personnel in Venezuela reportedly included teachers, sports instructors, military advisers, and intelligence operatives. According to the Brookings study, various sources estimate that the number of Cuban military and intelligence advisers in Venezuela ranged from hundreds to thousands, coordinated by Cuba's military attaché in Venezuela. Some Cuban medical personnel in Venezuela allege that their services were used to secure votes for the Maduro regime. The extent to which the level of Cuban personnel in Venezuela has declined because of the drop in Venezuelan oil exports to Cuba and Venezuela's deepening economic crisis is uncertain. Since the death of Chávez in 2013, Cuba has been concerned about the future of Venezuelan financial support. Cuba's concerns have intensified since 2014 as Venezuela's mounting economic and political challenges have grown under the authoritarian regime of President Nicolás Maduro. As noted above, oil imports from Venezuela have declined, leading to Cuba's imposition of austerity measures and sluggish economic growth. Brazil . For many years, Cuba and Brazil had friendly relations. Brazil helped finance development of the port of Mariel, west of Havana, from 2009 to 2014, although beginning in 2018, Cuba has missed payments to Brazil's development bank on loans for the project. In 2013, Cuba began deploying thousands of doctors to rural Brazil in a program known as Mais Médicos , with Cuba earning hard currency for supplying the medical personnel. Relations have taken a turn for the worse under new right-wing populist Brazilian President Jair Bolsonaro, inaugurated in January 2019. Even before his inauguration, Bolsonaro espoused a more confrontational policy approach toward Cuba by warning that he may break diplomatic relations with Cuba and abolish the medical assistance program. Bolsonaro strongly criticized the medical program, maintaining that Cuban doctors should be able to receive 100% of the money Brazil pays Cuba for them (instead of the 25% they receive) and should be able to bring their families with them to Brazil. Cuba responded by ending the program and bringing its more than 8,000 medical personnel home by late December 2018. Although Bolsonaro and other critics have labeled the medical workers as \"slave labor,\" others contend that the Cuban medical personnel understand the conditions they will be working in and sign contracts for the work. Cuba has a long history of providing medical personnel overseas. International and Regional Organizations. Cuba is an active participant in international forums, including the United Nations (U.N.) and has received support over the years from the United Nations Development Programme and the United Nations Educational, Scientific, and Cultural Organization, both of which have offices in Havana. Cuba is also a member of the U.N. Economic Commission for Latin America and the Caribbean (ECLAC, also known by its Spanish acronym, CEPAL), one of the five regional commissions of the U.N., and hosted ECLAC's 37 th session in May 2018. U.N. Secretary-General António Guterres attended the opening of the conference, and ECLAC's Executive Secretary reaffirmed the organization's commitment to help Cuba in its efforts toward achieving sustainable development. Since 1991, the U.N. General Assembly (UNGA) has approved a resolution annually criticizing the U.S. embargo and urging the United States to lift it. In 2016, for the first time, the United States abstained instead of voting against the resolution, but in 2017, the United States returned to opposing the resolution. On November 1, 2018, the UNGA again approved the resolution by a vote of 189-2, with Israel again joining the United States in opposing it. The United States also proposed eight amendments to the 2018 resolution criticizing Cuba's human rights record, but the amendments were defeated by wide margins. Among other international organizations, Cuba was a founding member of the World Trade Organization, but it is not a member of the International Monetary Fund, the World Bank, or the Inter-American Development Bank. Cuba is a member of the Community of Latin American and Caribbean States (CELAC), officially established in December 2011 to boost regional cooperation, but without the participation of the United States or Canada. Cuba was excluded from participation in the Organization of American States (OAS) in 1962 because of its identification with Marxism-Leninism. In 2009, however, the OAS overturned that policy in a move that eventually could lead to Cuba's reentry into the regional organization in accordance with the practices, purposes, and principles of the OAS. Although the Cuban government welcomed the OAS vote to overturn the 1962 resolution suspending Cuba's OAS participation, it asserted that it would not return to the OAS. In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis, in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantanamo Bay, Cuba, and Panama; and the 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban-American group Brothers to the Rescue, which resulted in the deaths of four U.S. crew members. Beginning in the early 1960s, U.S. policy toward Cuba consisted largely of seeking to isolate the island nation through comprehensive economic sanctions, including an embargo on trade and financial transactions. President Kennedy proclaimed an embargo on trade between the United States and Cuba in February 1962, citing Section 620(a) of the Foreign Assistance Act of 1961 (FAA), which authorizes the President \"to establish and maintain a total embargo upon all trade between the United States and Cuba.\" At the same time, the Treasury Department issued the Cuban Import Regulations to deny the importation into the United States of all goods imported from or through Cuba. The authority for the embargo was later expanded in March 1962 to include the Trading with the Enemy Act (TWEA). In July 1963, the Treasury Department revoked the Cuban Import Regulations and replaced them with the more comprehensive Cuban Assets Control Regulations (CACR)—31 C.F.R. Part 515—under the authority of TWEA and Section 620(a) of the FAA. The CACR, which include a prohibition on most financial transactions with Cuba and a freeze of Cuban government assets in the United States, remain the main body of Cuba embargo regulations and have been amended many times over the years to reflect changes in policy. They are administered by the Treasury Department's Office of Foreign Assets Control (OFAC) and prohibit financial transactions as well as trade transactions with Cuba. The CACR also require that all exports to Cuba be licensed or otherwise authorized by the Department of Commerce, Bureau of Industry and Security (BIS), under the provisions of the Export Administration Act of 1979, as amended ( P.L. 96-72 ; 50 U.S.C. Appendix 2405(j)). The Export Administration Regulations (EAR) are found at 15 C.F.R. Sections 730-774. Congress subsequently strengthened sanctions on Cuba with enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX). Among its provisions, the CDA prohibits U.S. foreign subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any seaborne vessel to load or unload freight if it has been involved in trade with Cuba within the previous 180 days unless licensed by the Treasury Department. The LIBERTAD Act, enacted in the aftermath of Cuba's shooting down two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Most significantly, the act codified the Cuban embargo as permanent law, including all restrictions imposed by the executive branch under the CACR. This provision is noteworthy because of its long-lasting effect on U.S. policy options toward Cuba. The executive branch is prevented from lifting the economic embargo without congressional concurrence through legislation until certain democratic conditions set forth in the law are met, although the President retains broad authority to amend the regulations therein. Another significant sanction in Title III of the law holds any person or government that traffics in property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Until recently, all Administrations, acting under provisions of the law, had suspended the implementation of Title III at six-month intervals, but in early March, the Trump Administration provided a limited opening for the right to file lawsuits. (For additional information, see section on \" Property Claims and Title III of the LIBERTAD Act \" below.) TSRA authorizes U.S. commercial agricultural exports to Cuba, but it also includes prohibitions on U.S. assistance and private financing and requires \"payment of cash in advance\" or third-country financing for the exports. The act also prohibits tourist travel to Cuba. In addition to these acts, Congress enacted numerous other provisions of law over the years that imposed sanctions on Cuba, including restrictions on trade, foreign aid, and support from international financial institutions. The State Department also designated the government of Cuba as a state sponsor of international terrorism in 1982 under Section 6(j) of the Export Administration Act and other laws because of the country's alleged ties to international terrorism, although as noted below, the Obama Administration rescinded Cuba's designation in 2015. Beyond sanctions, another component of U.S. policy has consisted of support measures for the Cuban people. This support includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the CDA, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. The enactment of TSRA by the 106 th Congress also led to the United States becoming one of Cuba's largest commercial suppliers of agricultural products. Authorization for purposeful travel to Cuba and cash remittances to Cuba has constituted an important means to support the Cuban people, although significant congressional debate has occurred over these issues for many years. Despite the poor state of U.S.-Cuban relations, several examples of bilateral cooperation took place over the years in areas of shared national interest. Three areas that stand out are alien migrant interdiction (with migration accords negotiated in 1994 and 1995), counternarcotics cooperation (with increased cooperation dating back to 1999), and cooperation on oil spill preparedness and prevention (since 2011). In December 2014, the Obama Administration initiated a major policy shift in U.S. policy toward Cuba, moving away from sanctions toward a policy of engagement and the normalization of relations. President Obama said that his Administration would \"end an outdated approach that, for decades, has failed to advance our interests.\" He maintained that the United States would continue to raise concerns about democracy and human rights in Cuba but stated that \"we can do more to support the Cuban people and promote our values through engagement.\" The policy change included three major steps: (1) the rescission of Cuba's designation as a state sponsor of international terrorism in May 2015; (2) the restoration of diplomatic relations in July 2015 (relations had been severed in January 1961 by the Eisenhower Administration); and (3) steps to increase travel, commerce, and the flow of information to Cuba. The third step required the Treasury and Commerce Departments to amend the CACR and EAR respectively; the two agencies issued five rounds of amendments to the regulations in 2015-2016 that eased restrictions on travel, remittances, trade, telecommunications, and banking and financial services. They also authorized certain U.S. companies or other entities to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. After the restoration of relations, U.S. and Cuban officials negotiated numerous bilateral agreements, including in the following areas: marine protected areas (November 2015); environmental cooperation on a range of issues (November 2015); direct mail service (December 2015); civil aviation (February 2016); maritime issues related to hydrography and maritime navigation (February 2016); agriculture (March 2016); health cooperation (June 2016); counternarcotics cooperation (July 2016); federal air marshals (September 2016); cancer research (October 2016); seismology (December 2016); meteorology (December 2016); wildlife conservation (December 2016); animal and plant health (January 2017); oil spill preparedness and response (January 2017); law enforcement cooperation (January 2017); and search and rescue (January 2017). The United States and Cuba also signed a bilateral treaty in January 2017 delimiting their maritime boundary in the eastern Gulf of Mexico. Bilateral dialogues were held on all of these issues as well as on other issues including counterterrorism, claims (U.S. property, unsatisfied court judgments, and U.S. government claims), economic and regulatory issues, human rights, renewable energy and efficiency, trafficking in persons, and migration. President Obama visited Cuba in March 2016 with the goals of building on progress toward normalizing relations and expressing support for human rights. In a press conference with Raúl Castro, President Obama said that the United States would \"continue to speak up on behalf of democracy, including the right of the Cuban people to decide their own future.\" During a speech that was televised to the Cuban nation, President Obama spoke out for advancing human rights, stating his belief that citizens should be free to speak their minds without fear and that the rule of law should not include arbitrary detentions. In October 2016, President Obama issued a presidential policy directive on the normalization of relations with Cuba. The directive set forth the Administration's vision for normalization of relations and laid out six medium-term objectives: (1) government-to-government interaction; (2) engagement and connectivity; (3) expanded commerce; (4) economic reform; (5) respect for universal human rights, fundamental freedoms, and democratic values; and (6) Cuba's integration into international and regional systems. In January 2017, the Obama Administration also announced another significant policy change toward Cuba. The Administration ended the so-called wet foot/dry foot policy, under which thousands of undocumented Cuban migrants had entered the United States since the mid-1990s. Pursuant to a 1995 bilateral migration accord, Cuban migrants intercepted at sea attempting to reach the United States were returned to Cuba, whereas those who successfully reached U.S. shore were generally permitted to stay in the United States. Under the 2017 change in policy, Cuban nationals who attempt to enter the United States illegally and do not qualify for humanitarian relief are now subject to removal. (For more, see \" Migration Issues \" below.) President Trump unveiled his Administration's policy on Cuba in June 2017. The policy partially rolls back some of the Obama Administration's efforts to normalize relations with Cuba, and also includes new sanctions. The President set forth his Administration's policy in a speech in Miami, FL, where he signed a national security presidential memorandum (NSPM) on Cuba replacing President Obama's October 2016 presidential policy directive that had laid out objectives for the normalization process. President Trump called for the Cuban government to end the abuse of dissidents, release political prisoners, stop jailing innocent people, and return U.S. fugitives from justice in Cuba. He stated that \"any changes to the relationship between the United States and Cuba will depend on real progress toward these and other goals.\" Once Cuba takes concrete steps in these areas, President Trump said \"we will be ready, willing and able to come to the table to negotiate that much better deal for Cubans, for Americans.\" The new policy leaves many of the Obama-era policy changes in place, including the reestablishment of diplomatic relations and a variety of eased sanctions to increase travel and commerce with Cuba. The new policy also keeps in place the Obama Administration's action ending the so-called wet foot/dry foot policy toward Cuban migrants, which, according to the NSPM, had \"encouraged untold thousands of Cuban nationals to risk their lives to travel unlawfully to the United States.\" The most significant policy changes set forth in President Trump's NSPM include (1) restrictions on financial transactions with companies controlled by the Cuban military, intelligence, or security services or personnel and (2) the elimination of people-to-people educational travel by individuals. In November 2017, the Treasury and Commerce Departments issued amended regulations to implement the new policy. As expected, the Cuban government's reaction to President Trump's June 2017 speech announcing Cuba policy changes was critical, but the government also reiterated its willingness to continue a respectful and cooperative dialogue on issues of mutual interest and the negotiation of outstanding issues, although it maintained that Cuba would not make concessions to its sovereignty and independence. Restrictions on Transactions with the Cuban Military. Pursuant to the NSPM, the State Department was tasked with identifying entities controlled by the Cuban military, intelligence, or security services or personnel and publishing a list of those entities with which direct financial transactions would disproportionately benefit those services or personnel at the expense of the Cuban people or private enterprise in Cuba. The NSPM specifically identified the Grupo de Administración Empresarial S.A . (GAESA), a holding company of the Cuban military involved in most sectors of the Cuban economy, particularly the tourism sector. The State Department issued a list of \"restricted entities\" in November 2017 and updated the list with additional entries in November 2018 and March 2019. Currently, there are 210 entities on the list, including two ministries, five holding companies (including GAESA) and 47 of their subentities (including the Mariel Special Development Zone), 99 hotels (with 28 in Havana), two tourist agencies, five marinas, 10 stores in Old Havana, and 40 entities serving the defense and security sectors. The Treasury Department forbids financial transactions with those entities, with certain exceptions, including transactions related to air or sea operations supporting permissible travel, cargo, or trade; the sale of agricultural and medical commodities; direct telecommunications or internet access for the Cuban people; and authorized remittances. The new prohibitions limit U.S. economic engagement with Cuba, particularly in travel-related transactions and potential investment opportunities. Restrictions on People-to-People Travel. With regard to people-to-people educational travel, the Treasury Department amended the CACR to require that such travel take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization. Individuals are no longer authorized to engage in such travel on their own. The Obama Administration had authorized such individual travel in March 2016, which, combined with the beginning of regular commercial flights and cruise ship service, led to an increase in Americans visiting Cuba. With the new Treasury Department regulations issued, the level of U.S. travel to Cuba has fallen. (Also see \" U.S. Travel to Cuba ,\" below.) Internet Task Force. Pursuant to the NSPM, in January 2018, the State Department announced the establishment of a Cuba Internet Task Force, composed of U.S. government and non-U.S. government representatives, to examine the technological challenges and opportunities for expanding internet access and independent media in Cuba. The task force held its first meeting in February 2018, with two subcommittees formed to develop recommendations—one to explore the role of media and freedom of information in Cuba and the other to explore internet access in Cuba. Continued Engagement in Some Areas. In a demonstration of continuity in policy between the Trump and Obama Administrations, the U.S. and Cuban governments have continued to engage on various bilateral issues through meetings and dialogues. The two countries have continued to hold semiannual migration talks, which, since 1995, have provided a forum to review and coordinate efforts to ensure safe, legal, and orderly migration between Cuba and the United States; talks were held in April and December 2017, and most recently in July 2018. The United States and Cuba also have continued to hold Bilateral Commission meetings that began under the Obama Administration in which the two governments review priorities and areas for engagement. Officials held a sixth Bilateral Commission meeting in September 2017 and a seventh meeting in June 2018. According to the State Department, at the June 2018 meeting, the two countries reviewed such areas for engagement as trafficking in persons, civil aviation safety, law enforcement matters, agriculture, maritime safety and search and rescue, certified claims, and environmental challenges. The State Department maintained that the United States reiterated the urgent need to identify the source of the \"attacks\" on U.S. diplomats and to ensure they cease (see discussion below), expressed continued concerns about the arbitrary detention of independent journalists and human rights defenders, and acknowledged Cuba's progress in repatriating Cubans with final removal orders while also emphasizing that Cuba needs to accept greater numbers of returnees. Cuba's Ministry of Foreign Affairs maintained the meeting provided an opportunity to review areas of exchange and cooperation, but it also criticized several aspects of U.S. policy, including the \"intensification\" of the U.S. embargo and what Cuba viewed as the \"political manipulation of the alleged health cases\" that became a \"pretext\" to reduce staff and therefore affect embassy operations in both countries. Both countries also have continued engagement on other bilateral issues. The U.S. Coast Guard and the Cuban Border Guard participated in professional exchanges in July 2017 and January 2018 covering a variety of topics, including search and rescue. The U.S. Departments of State, Justice, and Homeland Security participated in law enforcement dialogues with Cuban counterparts in September 2017 and July 2018; the 2018 dialogue included such topics as fugitives and the return of Cuban nationals with final orders of removal. Additional bilateral meetings and exchanges were held in 2018 on such topics as cybersecurity and cybercrime, counternarcotics efforts, and counterterrorism in January; anti-money laundering efforts and trafficking in persons in February; search and rescue in March; and agriculture and scientific cooperation related to environmental disaster in April. Health Injuries of U.S. Personnel in Havana. According to the Department of State, from November 2016 to May 2018, 26 U.S. Embassy community members suffered a series of unexplained injuries, including hearing loss and cognitive issues. The State Department maintains that the U.S. investigation has not reached a definitive conclusion regarding possible causes, sources, or technologies that might have been used. In response to the number of injuries, the State Department ordered the departure of nonemergency personnel from the U.S. Embassy in September 2017 to minimize the risk of their exposure to harm; embassy staff was reduced by about two-thirds. In October 2017, the State Department ordered the departure of 15 diplomats from the Cuban Embassy in Washington, DC. According to then-Secretary of State Rex Tillerson, the action was taken because of Cuba's failure to protect U.S. diplomats in Havana and to ensure equity in the impact on diplomatic operations. Cuba strongly denies responsibility for the injuries. The staff reduction at the U.S. Embassy has affected embassy operations, especially visa processing, and has made bilateral engagement more difficult. (For further background, see \" U.S. Response to Health Injuries of U.S. Personnel in Havana \" below.) \"Troika of Tyranny.\" In a November 2018 address in Miami, FL, National Security Adviser John Bolton strongly criticized the Cuban government on human rights, stating that \"we will only engage with a Cuban government that is willing to undertake necessary and tangible reforms—a government that respects the interests of the Cuban people.\" Bolton's speech, full of anti-communist political discourse reminiscent of the Cold War era, referred to Cuba, Venezuela, and Nicaragua as a \"troika of tyranny\" and the \"cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere.\" He referred to the three countries' leaders as \"three stooges of socialism\" and as \"clownish pitiful figures.\" Bolton asserted that the Venezuelan regime's repression has been \"enabled by the Cuban dictatorship.\" In 2019, as the political situation in Venezuela has deteriorated and the United States has ramped up sanctions on the Maduro regime, the Trump Administration has increased its criticism of Cuba's support for the regime. In a March 11, 2019, press briefing, Secretary of State Pompeo asserted that \"Cuban military and intelligence services are deeply entrenched in the Venezuelan state\", and provide physical protection and other support to President Maduro and those around him. Pompeo maintained that Cuba has trained Venezuela's secret police \"torture tactics, domestic spying techniques, and mechanisms of repression that Cuban authorities have wielded against their own people for decades.\" Title III of the LIBERTAD Act. The Trump Administration ratcheted up U.S. sanctions on Cuba on March 4, 2019, when Secretary of State Pompeo, pursuant to Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), allowed certain lawsuits to go forward against those trafficking in confiscated property in Cuba. Since 1996, pursuant to the provisions of Title III, all Administrations have suspended, at six-month intervals, the right to file such lawsuits. The next six-month suspension was due by February 1, 2019, but on January 16, Secretary Pompeo suspended the right to file lawsuits for an additional 45 days, maintaining that the extension would permit a careful review taking into account U.S. national interests and efforts to expedite a transition to democracy in Cuba. Then, on March 4, Secretary Pompeo partially suspended the right to file lawsuits for an additional 30 days (through April 17) but allowed lawsuits, beginning March 19, against an entity or subentity on the State Department's \"Cuba Restricted List\" controlled by the Cuban military, intelligence, or security services. Lawsuits can be brought by any U.S. national, including those who were not U.S. nationals at the time of the confiscation. However, lawsuits may not be brought against third-country foreign investors in Cuba. (For more, see \" Property Claims and Title III of the LIBERTAD Act \" below.) Over the years, although U.S. policymakers have agreed on the overall objectives of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there have been different schools of thought about how to achieve those objectives. Some have advocated a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing efforts to support the Cuban people. Others have argued for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people and would move toward engaging Cuba in dialogue. Still others have called for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. In light of Fidel Castro's departure as head of government in 2006 and the gradual economic changes made by Raúl Castro, some observers had called for a reexamination of U.S. policy toward Cuba. In this new context, two broad policy approaches were advanced to contend with change in Cuba: an approach that called for maintaining the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people and an approach aimed at influencing the attitudes of the Cuban government and Cuban society through increased contact and engagement. The Obama Administration's change of U.S. policy from isolation to engagement and movement toward the normalization of relations highlighted divisions in Congress over Cuba policy. Some Members of Congress lauded the Administration's actions as in the best interests of the United States and a better way to support change in Cuba, whereas other Members strongly criticized the President for not obtaining concessions from Cuba to advance human rights. Some Members vowed to oppose the Administration's efforts toward normalization, whereas others introduced legislation to normalize relations with Cuba by lifting the embargo in its entirety or in part by easing some aspects of it. The Trump Administration's policy of rolling back some of the Obama-era changes and introducing new sanctions on Cuba also has highlighted divisions in Congress over Cuba policy, with some Members supporting the President's action because of Cuba's lack of progress on human rights and others opposing it because of the potential negative effect on the Cuban people and U.S. business interests. Public opinion polls have shown a majority of Americans support normalizing relations with Cuba. Among the Cuban American community in South Florida, however, a 2018 poll by Florida International University showed an increase in those supporting a continuation of the U.S. embargo compared to a 2016 poll. In the 2018 poll, although a majority of Cuban Americans in South Florida supported diplomatic relations and unrestricted travel to Cuba by all Americans, 51% polled favored continuing the embargo and 49% opposed it. This contrasts with 2016, when 63% of Cuban Americans in South Florida favored ending the embargo and 37% supported it. In general, those who advocate easing U.S. sanctions on Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba—through increased travel, trade, and dialogue—then the seeds of reform would be planted, which would stimulate forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States. They argue that since the demise of Cuba's communist government does not appear imminent (despite more than 50 years of sanctions), the United States should espouse a more pragmatic approach in trying to bring about change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities for U.S. businesses because of the unilateral nature of the embargo, and to the increased suffering of the Cuban people because of the embargo. Proponents of change also argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China and Vietnam. On the other side, opponents of lifting U.S. sanctions maintain that the policy of isolating Cuba but reaching out to the Cuban people through measures of support is the best means for realizing political change in Cuba. They point out that the LIBERTAD Act sets forth the steps that Cuba must take for the United States to normalize relations. They argue that softening U.S. policy without concrete Cuban reforms boosts Cuba's communist regime, politically and economically, and facilitates its survival. Opponents of softening U.S. policy argue that the United States should stay the course in its commitment to democracy and human rights in Cuba and that sustained sanctions can work. Critics of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of Cuba's difficult living conditions. More recently, those supporting stronger sanctions on Cuba point to the Cuban government's strong support for the Maduro regime in Venezuela, particularly military advisers and intelligence assistance. Restrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate Cuba's communist government for more than 50 years. The embargo regulations set forth in the CACR do not ban travel itself, but place restrictions on financial transactions related to Cuba. Numerous changes to the restrictions have occurred over time, and for five years, from 1977 until 1982, there were no restrictions on travel. Under the George W. Bush Administration, enforcement of U.S. restrictions on Cuba travel increased and restrictions on travel were tightened. Congress took legislative action in March 2009 to ease restrictions on family travel and on travel related to U.S. agricultural and medical sales to Cuba ( P.L. 111-8 , Sections 620 and 621 of Division D). In April 2009, the Obama Administration went further when the President announced that he was lifting all restrictions on family travel. In 2011, the Obama Administration further eased travel related to religious, journalistic and educational activities, including people-to-people travel exchanges, and allowed U.S. international airports to become eligible for licensed charter flights to and from Cuba. The Obama Administration's December 2014 shift in U.S. policy toward Cuba included an easing of U.S. restrictions on travel to Cuba. As part of the change in policy, the Treasury Department amended the CACR in 2015 to include general licenses for the 12 existing categories of permissible travel to Cuba set forth in the regulations (see text box above). Before the policy change, travelers under several of these categories had to apply for a specific license. Under the regulations, both travel agents and airlines are able to provide services for travel to Cuba without the need to obtain a specific license. Authorized travelers no longer have a per diem limit for expenditures, as in the past, and can bring back goods from Cuba as accompanied baggage for personal use, including alcohol and tobacco. In January 2016, the Treasury Department made additional changes to the travel regulations. Among the changes, authorization for travel and related transactions now include professional media or artistic productions in Cuba (movies, television, music recordings, and creation of artworks). Authorization for travel and other transactions for professional meetings, public performances, clinics, workshops, athletic and nonathletic competitions, and exhibitions now includes permission to organize these events, not just participate in them. In March 2016, the Treasury Department had amended the travel regulations to permit travel to Cuba for individual people-to-people educational travel, but as noted above, President Trump directed the Treasury Department in June 2017 to eliminate the authorization for such travel for individuals. As set forth in amended regulations issued in November 2017, people-to-people educational travel must take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization. Regular air service between the United States and Cuba began in November 2016 following the signing of a U.S.-Cuba bilateral arrangement earlier in that year permitting regularly scheduled air flights as opposed to charter flights. Cruise ship service to Cuba from the United States also began in 2016, and since then has expanded significantly with 10 companies now offering cruises. Travel to Cuba solely for tourist activities, however, remains prohibited. Section 910(b) of TSRA prohibits travel-related transaction for tourist activities, which are defined as any activity not expressly authorized in the 12 categories of travel in the CACR. U.S. Travelers to Cuba. According to Cuban government statistics, the number of U.S. travelers increased from 91,254 in 2014 to 619,523 in 2017. This figure is in addition to thousands of Cuban Americans who visit family in Cuba each year; in 2017, almost 454,000 Cubans living outside the country visited Cuba, the majority from the United States. The number of U.S. visitors began to slow in the latter half of 2017 in the aftermath of Hurricane Irma, which struck in September, the Trump Administration's tighter restrictions on people-to-people travel and restrictions on transactions with the Cuban military (which keeps a number of hotels off limits to U.S. visitors), and the U.S. travel warning issued in September 2017 related to the unexplained health injuries to U.S. diplomatic personnel in Cuba. In the first half of 2018, the number of U.S. visitors to Cuba, not including Cuban Americans, reportedly declined by 24% compared to the same period in 2017. By the end of 2018, however, U.S. travel to Cuba reportedly had recovered, with a growth of 1% over 2017. The recovery was spurred by a 48% increase in cruise ship arrivals (which bring in less revenue than land-based travelers). Another factor in the recovery in travel could be the August 2018 change in the U.S. travel advisory for Cuba from Level 3 (reconsider travel) to Level 2 (exercise increased caution). Some U.S. schools with academic exchange programs reportedly do not allow travel to a country with a Level 3 advisory, so the easing of the advisory to Level 2 allows schools to once again include Cuba as part of their exchange programs. U.S. commercial medical exports to Cuba have been authorized since the early 1990s pursuant to the Cuban Democracy Act of 1992 (CDA), and commercial agricultural exports have been authorized since 2001 pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), but with numerous restrictions and licensing requirements. For medical exports to Cuba, the CDA requires on-site verification that the exported item is to be used for the purpose for which it was intended and only for the use and benefit of the Cuban people. TSRA allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA also denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. The 2018 farm bill, P.L. 115-334 ( H.R. 2 ) permits funding for two U.S. agricultural export promotion programs—the Market Access Program and the Foreign Market Development Cooperation Program—for U.S. agricultural products in Cuba. Regulatory changes made to the CACR and EAR in 2015-2016 include several actions designed to facilitate commercial exports to Cuba: U.S. financial institutions are permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions. U.S. private export financing is permitted for all authorized export trade to Cuba, except for agricultural goods exported pursuant to TSRA. The definition of the term cash in advance for payment for U.S. exports to Cuba was revised to specify that it means cash before transfer of title . The change means that payment can occur before an export shipment is offloaded in Cuba rather than before the shipment leaves a U.S. port. Commercial exports to Cuba of certain goods and services to empower Cuba's nascent private sector are authorized, including for certain building materials for private residential construction, goods for use by private-sector Cuban entrepreneurs, and agricultural equipment for small farmers. Licenses for certain categories of exports are included under a \"general policy of approval.\" These categories include exports for civil aviation and commercial aircraft safety, telecommunications, U.S. news bureaus, human rights organizations and nongovernmental organizations, environmental protection of U.S. and international air quality, waters, and coastlines, and agricultural inputs (such as insecticides, pesticides, and herbicides) that fall outside the scope of those exports already allowed under TSRA. Licenses for exports that will be considered on a case-by-case basis include certain items exported to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of the Cuban people. In November 2017, however, the Commerce Department amended the EAR to stipulate that export licenses for exports to state-owned enterprises will generally be denied to export items for use by entities or subentities on the State Department's list of restricted entities associated with the Cuban military, police, intelligence, or security services. The commercial export of certain consumer communication devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems is authorized; previously such exports were limited to donations. The export of items for telecommunications, including access to the internet, use of internet services, infrastructure creation, and upgrades, also is authorized. Companies exporting authorized goods to Cuba are authorized to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. Persons subject to U.S. jurisdiction generally are authorized to enter into certain contingent contracts for transactions currently prohibited by the embargo. Certain consumer goods sold directly to eligible individuals in Cuba for their personal use generally are authorized. Cuba purchased about $6 billion in U.S. products from 2001 to 2018, largely agricultural products. For many of those years, the United States was Cuba's largest supplier of agricultural products. U.S. exports to Cuba rose from about $7 million in 2001 to a high of $712 million in 2008, far higher than in previous years. This increase was in part because of the rise in food prices and because of Cuba's increased food needs in the aftermath of several hurricanes and tropical storms that severely damaged the country's agricultural sector. U.S. exports to Cuba declined considerably from 2009 through 2011, rose again in 2012, and fell every year through 2015, when U.S. exports amounted to $180 million. Reversing that trend, U.S. exports to Cuba increased to $245 million in 2016 and $283 million in 2017. In 2018, U.S. exports to Cuba amounted to almost $276 million, about a 5% decrease from 2017. (See Figure 2 .) Looking at the composition of U.S. exports to Cuba from 2012 to 2018, the leading products were poultry, soybean oilcake and other solid residue, soybeans, corn, and soybean oil. Poultry has been the leading U.S. export to Cuba since 2012; in 2018, for example, it accounted for about 56% of U.S. exports. Beyond agricultural products, other categories of products that have increased over the past several years are parts for steam turbines, civilian aircraft engines and parts, pesticides, calcium phosphates, and electrical apparatus and parts for telephone lines. U.S. International Trade Commission (USTIC) Reports. The USITC has issued three studies since 2007 examining the effects of U.S. restrictions on trade with Cuba, with its most recent report issued in April 2016. According to the findings of its 2016 report, U.S. restrictions on trade and travel reportedly have shut U.S. suppliers out of a market in which they could be competitive on price, quality, and proximity. The most problematic U.S. restrictions cited are the inability to offer credit, travel to or invest in Cuba, and use funds sourced and administered by the U.S. government. Cuban nontariff measures and other factors also may limit U.S. exports to and investment in Cuba if U.S. restrictions are lifted, according to the report. These factors include Cuban government control of trade and distribution, legal limits on foreign investment and property ownership, and politically motivated decisionmaking regarding trade and investment. Absent U.S. restrictions, U.S. exports in several sectors likely would increase somewhat in the short term, with prospects for larger increases in the longer term, subject to changes in Cuban policy and economic growth. U.S. exports could increase further if Cuban import barriers were lowered. If U.S. restrictions were removed, U.S. agricultural and manufactured exports to Cuba could increase to almost $1.8 billion annually; if both U.S. restrictions were removed and Cuban barriers were lowered, U.S. exports could approach $2.2 billion annually. Legislative Initiatives . To date in the 116 th Congress, two bills have been introduced related to restrictions on exports to Cuba. S. 428 (Klobuchar) would repeal certain provisions in the CDA, the LIBERTAD Act, and TSRA as well as regulatory provisions in the CACR and EAR that restrict trade with Cuba. H.R. 1898 (Crawford) would modify the prohibition on U.S. assistance and financing for certain exports to Cuba under TSRA. Since 1996, the United States has provided assistance—through the U.S. Agency for International Development (USAID), the State Department, and the National Endowment for Democracy (NED)—to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID and State Department efforts are funded largely through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. From FY1996 to FY2019, Congress appropriated some $364 million in funding for Cuba democracy efforts. In recent years, this funding included $20 million in each fiscal year from FY2014 through FY2019. For FY2018, the Trump Administration, as part of its attempt to cut foreign assistance levels, did not request any democracy and human rights assistance funding for Cuba, but Congress ultimately provided $20 million. For FY2019, the Trump Administration requested $10 million to provide democracy and civil society assistance for Cuba, but Congress again provided $20 million. Although USAID received the majority of this funding for many years, the State Department began to receive a portion of the funding in FY2004 and in recent years has been allocated more funding than USAID. The State Department generally has transferred a portion of the Cuba assistance that it administers to NED. USAID's Cuba program has supported a variety of U.S.-based nongovernmental organizations with the goals of promoting a rapid, peaceful transition to democracy, helping to develop civil society, and building solidarity with Cuba's human rights activists. NED is not a U.S. government agency but an independent nongovernmental organization that receives U.S. government funding. Its Cuba program is funded by the organization's regular appropriations by Congress as well as by funding from the State Department. According to information provided by NED on its website, its Cuba funding from FY2014 through FY2017 amounted to $15.9 million. FY2019 Appropriations. For FY2019, the Trump Administration requested $10 million for democracy and civil society assistance in support of the Administration's Cuba policy. In the 115 th Congress, the House Appropriations Committee's State Department and Foreign Operations appropriations bill, H.R. 6385 ( H.Rept. 115-829 ), would have provided $30 million to promote democracy and strengthen civil society in Cuba, with not less than $8 million for the National Endowment for Democracy. The report to the bill would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building. It also stipulated that grants exceeding $1 million, or grants to be implemented over a period of 12 months, would be awarded only to organizations with experience promoting democracy inside Cuba. The Senate Appropriations version of the bill, S. 3108 , would have provided $15 million for democracy programs in Cuba. Since the 115 th Congress did not complete action on FY2019 appropriations, the task was left to the 116 th Congress, which in February 2019, enacted the Consolidated Appropriations Act, 2019 ( P.L. 116-6 , H.J.Res. 31 , conference report H.Rept. 116-9 ), which ultimately provided $20 million for Cuba democracy funding. FY2020 Appropr i ations. For 2020, the Trump Administration has requested $6 million for Cuba democracy funding, which would be a 70% cut from the $20 million amount provided annually since FY2014. U.S.-government-sponsored radio and television broadcasting to Cuba—Radio and TV Martí—began in 1985 and 1990, respectively. Until October 1999, U.S.-government-funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions merged into the Department of State at the beginning of FY2000, the Broadcasting Board of Governors (BBG) became an independent agency that included such entities as the Voice of America, Radio Free Europe/Radio Liberty, Radio Free Asia, and the Office of Cuba Broadcasting (OCB). In August 2018, the BBG officially changed its name to the U.S. Agency for Global Media (USAGM). Today, OCB, which has been headquartered in Miami, FL, since 1998, manages Radio and TV Martí and the Martínoticiaas.com website and its social media platforms on YouTube, Google, and Facebook. According to the BBG's 2019 Congressional Budget Justification , the Martís reach 11.1% of Cubans on a weekly basis with audio, video, and digital content delivered by radio, satellite TV, online, and on distinctly Cuban digital \"packages\" ( paquetes ). The largest audiences reportedly are for Radio Martí and TV Martí, with weekly audiences respectively reaching 8% and 6.8% of Cubans, while online content reaches a smaller audience of 5.3%. OCB also administers a shortwave transmitting station in Greenville, NC. Additional newer transmitters at Greenville reportedly have helped increase Radio Martí's presence in Cuba, and the increase in the number of frequencies has made it harder for the Cuban government to interfere with the radio broadcasts. Funding. From FY1984 through FY2019, Congress appropriated about $911 million for broadcasting to Cuba. In recent years, funding has amounted to some $27-$29 million in each fiscal year from FY2014 to FY2019. For FY2018, Congress provided $28.936 million for Cuba broadcasting, $5.28 million more than requested, in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ; explanatory statement, Division K). For FY2019, the Trump Administration requested $13.656 million for the OCB, $15.3 million less than the amount provided in FY2017. The rationale for the proposed cut was to find efficiencies between OCB and the Voice of America's Latin American division. Congress ultimately took final action on FY2019 appropriations in February 2019 by enacting the Consolidated Appropriations Act, 2019 ( P.L. 116-6 , H.J.Res. 31 , conference report H.Rept. 116-9 ) that provided $29.1 million for Cuba broadcasting. Concerns About TV Martí Program in 2018. In October 2018, media reports highlighted a disturbing TV Martí program originally aired in May 2018 (which remained on Radio and Television Martí's website) that referred to U.S. businessman and philanthropist George Soros as \"the multimillionaire Jew of Hungarian origin\" and as a \"non-believing Jew of flexible morals.\" The program espoused a number of conspiracy theories about Soros, including that he was the architect of the 2008 financial crisis. Then-Senator Jeff Flake spoke out against the TV Martí program, which he referred to as \"taxpayer-funded anti-Semitism.\" He sent a letter to John Lansing, chief executive officer (CEO) of the USAGM, asking for an investigation into the program, including its evolution from initial inception to final approval, who produced the program, and what review process was in place to ensure it met VOA journalistic standards. Flake also called for those approving anti-Semitic content to be removed from their positions immediately, asserting that \"lack of action on this matter will further denigrate the United States as a credible voice overseas, the repercussion of which will be severe.\" OCB Director Tomás Regalado responded by pulling the original program and related shorter segments from the OCB's online website and acknowledging that the program \"did not have the required balance.\" USAGM's CEO Lansing took further action by issuing a statement that the program about Soros \"is inconsistent with our professional standards and ethics.\" He stated that those deemed responsible for the production would be immediately placed on administrative leave pending an investigation into their apparent misconduct. Lansing also directed \"an immediate, full content audit to identify any patterns of unethical reporting at the network\" and asked Regalado to \"require ethics and standards refresher training for all OCB journalists. \" Lansing wrote a letter of apology to Soros in November 2018 in which he said that the program \"was based on extremely poor and unprofessional journalism,\" and \"was utterly offensive in its anti-Semitism and clear bias.\" Lansing also stated in the letter that he had instructed OCB Director Regalado \"to remove the offensive story from the TV Martí website and social media\" and \"to hire a full time 'standards and practices' editor to oversee all outgoing content with strict adherence to the highest professional standards of journalism.\" The audit of reporting at the network reportedly uncovered an earlier story about Soros that included anti-Semitic language as well as an anti-Muslim opinion piece published in September 2018, that were also removed from the website. At the end of February 2019, Lansing reported that one employee and three contractors had been terminated because of the anti-Semitic video segment, and that the agency had initiated the standard disciplinary process for four additional OCB employees. Lansing stated that USAGM commissioned a team of independent experts to conduct an objective third-party-audit of OCB's coverage in Spanish across all platform. He said that a final report is expected in three months and would be made public. The TV Martí program raised significant concerns about the OCB's adherence to broadcast standards and questions about the program's intended audience. TV Martí's authorizing legislation, the Television Broadcasting to Cuba Act ( P.L. 101-246 , Title II, Part D, 22 U.S.C. 1465bb ) has a provision stating that television broadcasting to Cuba \"shall be in accordance with all Voice of America standards to ensure the broadcast of programs which are objective, accurate, balanced, and which present a variety of views.\" U.S. law sets forth the following principles for VOA broadcasts: (1) VOA will serve as a consistently reliable and authoritative source of news. VOA news will be accurate, objective, and comprehensive; (2) VOA will represent America, not any single segment of American society, and will therefore present a balanced and comprehensive projection of significant American thought and institutions; and (3) VOA will present the polices of the United States clearly and effectively and also will present responsible discussion and opinion on these policies. These VOA principles and broader U.S. international broadcasting standards and principles are set forth in 22 U.S.C. 6202 ( P.L. 103-236 , Title III, Section 303, and P.L. 103-415 ). As noted above, the State Department reported that 26 members of the U.S. diplomatic community in Havana suffered a series of unexplained health injuries, including hearing loss and cognitive issues, from November 2016 to May 2018. Twenty-four of the cases occurred from November 2016 to August 2017, and in June 2018, two new cases stemming from occurrences in May 2018 were confirmed after medical evaluations. According to the State Department, the U.S. government personnel suffered from \"attacks of an unknown nature,\" at U.S. diplomatic residences and hotels where temporary duty staff were staying, with symptoms including \"ear complaints, hearing loss, dizziness, headache, fatigue, cognitive issues, and difficulty sleeping.\" U.S. officials maintain that they do not know the mechanism used to cause the health injuries, the source, who is responsible, or the motive behind the alleged \"attacks.\" In response to the health incidents, in September 2017, the U.S. Department of State ordered the departure of nonemergency personnel assigned to the U.S. Embassy in Havana, as well as their families, to minimize the risk of their exposure to harm. As a result, the embassy's U.S. staffing level, which numbered over 50, was reduced by about two-thirds. In March 2018, the State Department began a permanent staffing plan at the U.S. Embassy in Havana, operating it as an \"unaccompanied post\" without family members. The change took place because the temporary \"ordered departure\" status for the embassy had reached its maximum allowable days. According to the State Department, \"the embassy will continue to operate with the minimum personnel necessary to perform core diplomatic and consular functions, similar to the level of emergency staffing maintained during ordered departure.\" The staff reduction at the U.S. Embassy in Havana has had implications for bilateral relations. Most visa processing at the U.S. Embassy in Havana has been suspended. Most Cubans applying for nonimmigrant visas must go to a U.S. embassy or consulate in another country, and applications and interviews for immigrant visas are currently being handled at the U.S. Embassy in Georgetown, Guyana. (For additional information, see \" Migration Issues \" below.) In addition to downsizing U.S. Embassy Havana operations, in October 2017, the State Department ordered the departure of 15 Cuban diplomats from the Cuban Embassy in Washington, DC. According to then-Secretary of State Rex Tillerson, the decision was made because of Cuba's failure to protect U.S. diplomats in Havana and to ensure equity in the impact on respective diplomatic operations. State Department officials maintained that the United States would need full assurances from the Cuban government that the \"attacks\" will not continue before contemplating the return of diplomatic personnel. The State Department initially issued a travel warning in September 2017 advising U.S. citizens to avoid travel to Cuba because of the potential risk of being subject to injury; in January 2018, when the State Department revamped its travel advisory system, it set the advisory for Cuba at Level 3, recommending that travelers reconsider travel to Cuba. By August 2018, however, the State Department eased its travel advisory to Level 2, recommending that travelers exercise increased caution. In May 2018, the State Department announced that a U.S. government employee serving in Guangzhou, China, experienced a health incident similar to that experienced by members of the U.S. diplomatic community in Havana. In response, Secretary of State Pompeo announced the establishment of a multiagency Health Incidents Response Task Force to serve as a coordinating body for State Department and interagency activities, including identification and treatment of affected personnel and family members abroad, investigation and risk mitigation, messaging, and diplomatic outreach. Since 2017, 14 Canadians diplomats and their family members in Havana also have experienced similar health symptoms such as dizziness, headaches, nausea, and difficulty concentrating, with the most recent case confirmed in January 2019 after medical testing. In April 2018, the Canadian government changed the designation of its embassy in Havana to an \"unaccompanied post,\" similar to the status of the U.S. embassy, and in January 2019, the government announced that it would reduce by half its diplomatic staff in Havana. Cause of the Health Incidents Unknown. When the incidents were first made public by the State Department in August 2017, numerous press reports referred to them as being caused by some type of sonic device. Yet scientists and experts in acoustics have cast doubt on this possibility, arguing that the laws of physics render it unlikely that the use of ultrasound, which they see as the most plausible type of acoustic employed, could be effectively used to harm personnel. They add that some of the reported symptoms individuals have encountered would not have resulted from the use of such a device. Some point to other possible scenarios, such as personnel coming into contact with toxins that damage hearing, or even the spread of anxiety or other psychogenic contributors capable of triggering symptoms. Some scientists assert that data regarding the potential effects of an ultrasound weapon on human health is currently slim. An article in the Journal of the American Medical Association ( JAMA ), published in February 2018, reported that University of Pennsylvania physicians who evaluated individuals from the U.S. Embassy community in Havana maintained that the individuals \"appeared to have sustained injury to widespread brain networks without an associated history of head trauma.\" The study, however, found no conclusive evidence of the cause of the brain injuries. An accompanying editorial in JAMA cautioned about drawing conclusions from the study, noting that the evaluations were conducted an average of 203 days after the onset of the symptoms and that it was unclear whether individuals who developed symptoms were aware of earlier reports by others. In August 2018, JAMA published several letters that raised additional questions concerning the February 2018 study, including one that asserted mass psychogenic illness could not be discounted; the study's authors, however, pushed back against the criticism, maintaining that a complex constellation of neurological symptoms was consistent across the cohort that was studied. A March 2018 University of Michigan report by three computer scientists concluded that the sounds recorded in Cuba could have been caused by two eavesdropping devices placed in close proximity to each other. The study concluded that the sounds could have been inadvertently produced without malicious intent. In December 2018, a group of doctors from the University of Miami and the University of Pittsburgh published a study maintaining that those diplomats exhibiting symptoms suffered from ear damage as opposed to brain injury. In January 2019, a group of biologists from the University of California Berkeley and the U.K's University of Lincoln issued a study on a recording of the alleged sounds heard by some U.S. Embassy employees that had been released by the Associated Press in October 2017. The study maintains that the sound matched the echoing call of a Caribbean cricket. Even though the cause of the health injuries to U.S. personnel in Cuba is unknown, there has been widespread speculation regarding potential responsibility. These include such possibilities as a rogue faction of Cuba's security services or a third country, such as Russia, with the apparent motivation of wanting to disrupt U.S.-Cuban relations. Some maintain that Cuba's strong security apparatus makes it unlikely that a third country would be involved without the Cuban government's acquiescence. Others stress that there has been no evidence implicating a third country and that it would be highly unusual for a rogue Cuban security faction to operate contrary to the interests of the Cuban government. Cuba's Response. The Cuban government denies responsibility for the injuries of U.S. personnel, maintaining that it would never allow its territory to be used for any action against accredited diplomats or their families. In the aftermath of the order expelling its diplomats, Cuba's Ministry of Foreign Affairs issued a statement strongly protesting the U.S. action, asserting that it was motivated by politics and arguing that ongoing investigations have reached no conclusion regarding the incidents or the causes of the health problems. The statement noted that Cuba had permitted U.S. investigators to visit Cuba and reiterated the government's willingness to continue cooperating on the issue. In September 2018, a delegation of Cuban scientists visited the United States to have meetings with the State Department, the National Academy of Sciences, and on Capitol Hill. The director of the Cuban Neuroscience Center, Dr. Mitchell Joseph Valdés-Sosa, maintains that there could be various reasons why the diplomats became sick (such as hypertension, stress, other preexisting conditions, and psychogenesis) but that Cuban scientists have not seen any credible evidence that some type of high-tech weapon was used. The Cuban delegation expressed disappointment that U.S. officials have not shared more medical and clinical data on the illnesses experienced by the U.S. diplomats. In November 2018, Dr. Valdés-Sosa coauthored a letter in Science magazine with a professor from the University of Pennsylvania's Department of Bioengineering maintaining that some \"scientists have allowed speculation about the causes of these health issue to outpace the evidence\" and that \"there is insufficient evidence to guess about the cause of the sounds.\" In January 2017, the Obama Administration ended the so-called \"wet foot/dry foot\" policy under which thousands of undocumented Cuban migrants entered the United States since the mid-1990s. Under that policy, Cuban migrants interdicted at sea generally were returned to Cuba whereas those reaching U.S. land were allowed entrance into the United States and generally permitted to stay. Under the new policy, Cuban nationals who attempt to enter the United States illegally and do not qualify for humanitarian relief are now subject to removal. The Cuban government agreed to begin accepting the return of Cuban migrants who have been ordered removed. President Trump's NSPM on Cuba stated that the Administration would not reinstate the \"wet foot/dry foot\" policy, maintaining that the policy had \"encouraged untold thousands of Cuban nationals to risk their lives to travel unlawfully to the United States.\" Background on the 1994 and 1995 Migration Accords . Cuba and the United States reached two migration accords in 1994 and 1995 designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift, in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Fidel Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, in August 1994, President Clinton abruptly changed U.S. immigration policy, under which Cubans attempting to flee their homeland were allowed into the United States; he announced that the U.S. Coast Guard and Navy would take Cubans rescued at sea to the U.S. Naval Station at Guantanamo Bay, Cuba. Despite the change in policy, Cubans continued to flee in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminated in a bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. In May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States but would intercept future Cuban migrants attempting to enter the United States by sea and return them to Cuba. In January 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S. naval station, most having been paroled into the United States. Maritime Interdictions. Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country. Until the change in U.S. policy toward Cuban migrants in January 2017, those Cubans who reached the U.S. shore were allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). In short, under the wet foot/dry foot policy, most interdictions resulted in a return to Cuba, even those in U.S. coastal waters, whereas those Cubans who touched shore were allowed to stay in the United States. Some had criticized this policy as encouraging Cubans to risk their lives to make it to the United States and as encouraging alien smuggling. Over the years, the number of Cubans interdicted at sea by the U.S. Coast Guard has fluctuated annually, influenced by several factors, including the economic situations in Cuba and the United States. From FY2010 through FY2016, the number of Cubans interdicted by the Coast Guard increased each year, from 422 in FY2010 to an all-time high of 5,230 in FY2016. The increase in the flow of maritime migrants in 2015 and 2016 was driven by concerns among Cubans that the favorable treatment granted to Cuban migrants would end. With the change in U.S. immigration policy toward Cuba in January 2017, the number of Cubans interdicted by the Coast Guard dropped to a trickle. For FY2017, the Coast Guard interdicted 2,109 Cubans, with the majority of these interdictions occurring before the policy change, and for FY2018, the Coast Guard interdicted 384 Cubans at sea. (See Figure 3 .) Arrival of Undocumented Cuban Migrants. Beginning around FY2013, according to the State Department, undocumented Cuban migrants began to favor land-based routes to enter the United States, especially via U.S. ports of entry from Mexico. Since that time and until the change in U.S. immigration policy in January 2017, the number of undocumented Cubans entering by land increased significantly, with a majority entering through the Southwest border. According to statistics from the Department of Homeland Security, the number of undocumented Cubans entering the United States both at U.S. ports of entry and between ports of entry rose from almost 8,170 in FY2010 to a high of 58,269 in FY2016. In FY2017, that number declined to 20,955, with the majority entering before the change in U.S. immigration policy. In FY2018, as of August 21, 2018, 6,044 undocumented Cubans arrived in the United States at or between ports of entry, about a 70% decline from FY2017. Cuban Medical Professional Parole Program. In January 2017, at the same time that it ended the \"wet foot/dry foot policy,\" the Obama Administration announced that it was ending the special Cuban Medical Professional Parole (CMPP) program. Established in 2006 and administered by U.S. Citizenship and Immigration Services (USCIS) of the Department of Homeland Security (DHS), the CMPP program allowed Cuban medical professionals in third countries to be approved for entry into the United States. The program reportedly benefitted more than 8,000 Cuban medical professionals who defected from Cuba's medical missions in third countries. Some Members of Congress have called on the Trump Administration to reestablish the CMPP program. In the 116 th Congress, two resolutions, S.Res. 14 (Menendez) and H.Res. 136 (Sires), would express the sense of the Senate and House, respectively, that the CMPP program should be reestablished. They also call on the State Department to downgrade Cuba to Tier 3 status in its annual Trafficking in Persons (TIP) Report because of its treatment of Cuban medical professionals in the country's foreign medical missions and because the Cuban government has not criminalized most forms of forced labor. In its 2018 TIP report, the State Department included mixed information on the CMPP program. It noted that some participants in Cuba's foreign medical missions alleged that Cuban officials forced or coerced participation in the program, and that some observers alleged that Cuban authorities coerced some participants to remain in the program through various tactics, including the withholding of passports. On the other hand, the report also noted that the Cuban government and some of the program's participants maintained that postings were voluntary and well paid compared to jobs within Cuba. (Also see discussion of trafficking in persons in the \" Human Rights \" section above.) Effect of Downsizing of U.S. E mbassy . As noted above, most visa processing at the U.S. Embassy in Havana was suspended because of the U.S. Embassy staff reduction in 2017. USCIS suspended operations at its field office at the embassy in 2017, and then permanently closed its offices in Havana in December 2018. Most Cubans applying for nonimmigrant visas must go to a U.S. embassy or consulate in another country, and all applications and interviews for immigrant visas are currently being handled at the U.S. Embassy in Georgetown, Guyana. The suspension of most nonimmigrant visa processing in Havana has made it more difficult and expensive for Cubans visiting family in the United States and for Cuban cuentapropistas (private sector workers) traveling to the United States to bring back inputs for their businesses. In 2013, the United States had begun granting multiple entry visas, good for five years, for Cubans visiting the United States. As those visas expire, Cubans will need to travel to a third country to request a new visa if they want to visit the United States. In addition, the State Department announced that as of March 18, 2019, it would no longer issue multiple entry B2 visas (for tourism, family visit medical treatment, and similar travel purposes) for Cuban nationals, but instead would only issue single entry B2 visas for a stay of two months, with the possibility of a 30-day extension. The action will likely have a significant effect on family travel from Cuba and those traveling from Cuba to support their private sector businesses, and could also negatively affect U.S.-Cuban academic, cultural, and civil society engagement. The embassy staff reduction has negatively affected the United States' ability to meet its commitment under the 1994 bilateral migration accord to issue travel documents for 20,000 Cubans annually (not including immediate relatives). While the United States met its commitment in FY2017, the State Department issued travel documents for just 4,060 Cubans in FY2018 in categories under the migration accord. In past years, around 75% of the immigrant travel documents issued annually for Cuban nationals pursuant to the 1994 accord were issued under the Cuban Family Reunification Parole Program (CFRP), a program established in 2007 by USCIS to help the United States meet its annual obligation of travel documents. Since the embassy staff reduction, information posted on the website of the U.S. Embassy in Havana has stated that the State Department and DHS are determining arrangements for processing applications under the CFRP. Cuba is not a major producer or consumer of illicit drugs, but its location and extensive shoreline make it susceptible to narcotics-smuggling operations. Drugs that enter the Cuban market are largely the result of onshore wash-ups from smuggling by high-speed boats moving drugs from Jamaica to the Bahamas, Haiti, and the United States, or by small aircraft from clandestine airfields in Jamaica. For a number of years, Cuban officials have expressed concerns about the use of their waters and airspace for drug transit and about increased domestic drug use. The Cuban government has taken a number of measures to deal with the drug problem, including legislation to stiffen penalties for traffickers, increased training for counternarcotics personnel, and cooperation with a number of countries on antidrug efforts. Since 1999, Cuba's Operation Hatchet has focused on maritime and air interdiction and the recovery of narcotics washed up on Cuban shores. Since 2003, Cuba has aggressively pursued an internal enforcement and investigation program against its incipient drug market with an effective nationwide drug prevention and awareness campaign. Over the years, there have been varying levels of U.S.-Cuban cooperation on antidrug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of almost six metric tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of two defendants in the case in the United States. Cooperation has increased since 1999, when U.S. and Cuban officials met in Havana to discuss ways of improving antidrug cooperation. Cuba accepted an upgrading of the communications link between the Cuban Border Guard and the U.S. Coast Guard as well as the stationing of a U.S. Coast Guard drug interdiction specialist at the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000. Since the reestablishment of diplomatic relations with Cuba in 2015, U.S. antidrug cooperation has increased further, with several dialogues and exchanges on counternarcotics issues. In December 2015, U.S. and Cuban officials held talks at the headquarters of the Drug Enforcement Administration (DEA) in Washington, DC, with delegations discussing ways to stop the illegal flow of narcotics and exploring ways to cooperate on the issue. In April 2016, Cuban security officials toured the U.S. Joint Interagency Task Force South (JIATF-South) based in Key West, FL. JIATF-South has responsibility for detecting and monitoring illicit drug trafficking in the region and for facilitating international and interagency interdiction efforts. At a July 2016 dialogue in Havana with U.S. officials from the State Department, DEA, the U.S. Coast Guard, and Immigration and Customs Enforcement/Homeland Security Investigations, Cuba and the United States signed a counternarcotics arrangement to facilitate cooperation and information sharing. Technical exchanges between the U.S. Coast Guard and Cuba's Border Guard on antidrug efforts and other areas of cooperation occur periodically. According to the State Department's 2019 International Narcotics Control Strategy Report (INCSR), issued in March 2019, Cuba has 40 bilateral agreements for antidrug cooperation with countries worldwide, including the 2016 U.S.-Cuban agreement noted above. The report also stated that Cuban authorities and the U.S. Coast Guard share tactical information related to vessels transiting through Cuban territorial waters suspected of trafficking and coordinate responses. In addition, as noted in the report, direct communications were established in July 2016 between the U.S. DEA and Cuban counterparts within the Ministry of Interior's National Anti-Drug Directorate. Since then, according to the INCSR, the DEA has received approximately 20 requests for information related to drug investigations in addition to cooperation leading to Cuba's arrest of a fugitive wanted in the United States. More broadly, the INCSR reports that Cuba has provided assistance to U.S. state and federal prosecutions by providing evidence and information, and has demonstrated a willingness to cooperate on law enforcement matters. The report noted that the United States and Cuba continue to hold bilateral discussion on law enforcement and drug control cooperation. An important issue in the process of normalizing relations is Cuba's compensation for the expropriation of thousands of properties of U.S. companies and citizens in Cuba dating back to the 1960s. The Foreign Claim Settlement Commission (FCSC), an independent agency within the Department of Justice, has certified 5,913 claims for expropriated U.S. properties in Cuba valued at $1.9 billion in two different claims programs; with accrued interest, the properties' value would be some $8 billion. In 1972, the FCSC certified 5,911 claims of U.S. citizens and companies that had their property confiscated by the Cuban government through April 1967, with 30 U.S. companies accounting for almost 60% of the claims. In 2006, the FCSC certified two additional claims in a second claims program covering property confiscated after April 1967. Many of the companies that originally filed claims have been bought and sold numerous times. There are a variety of potential alternatives for restitution or compensation schemes to resolve the outstanding claims, but resolving the issue likely would entail considerable negotiation and cooperation between the two governments. Although Cuba has maintained that it would negotiate compensation for the U.S. claims, it does not recognize the FCSC valuation of the claims or accrued interest. Instead, Cuba has emphasized using declared taxable value as an appraisal basis for expropriated U.S. properties, which would amount to almost $1 billion, instead of the $1.9 billion certified by the FCSC. Moreover, Cuba generally has maintained that any negotiation should consider losses that Cuba has accrued from U.S. economic sanctions. Cuba estimates cumulative damages of the U.S. embargo at $134.5 billion in current prices as of 2018. U.S. and Cuban officials held three meetings on claims issues between December 2015 and January 2017. The first meeting took place in December 2015 in Havana, with talks including discussions of the FCSC-certified claims of U.S. nationals, claims related to unsatisfied U.S. court judgments against Cuba (reportedly 10 U.S. state and federal judgments totaling about $2 billion), and some claims of the U.S. government. The Cuban delegation raised the issue of claims against the United States related to the U.S. embargo. A second claims meeting was held in July 2016, in Washington, DC. According to the State Department, the talks allowed for an exchange of views on historical claims-settlement practices and processes going forward. A third claims meeting was held in Havana in January 2017. As noted above, Title III of the LIBERTAD Act holds any person or government that traffics in property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Until January 2019, pursuant to provisions of the law, all Administrations have suspended the right to file law suits at six-month intervals. For the suspension, the President (since 2013, the Secretary of State) must determine that it is necessary to the national interests of the United States and will expedite a transition to democracy in Cuba. In June 2018, Secretary of State Pompeo made a determination effective from August 1, 2018, through January 2019. On January, 16, 2019, however, Secretary Pompeo issued another determination suspending the right to file lawsuits for only an additional 45 days (as opposed to six months, as provided in the law), maintaining that the extension would permit a careful review that would include such factors as \"the Cuban regime's brutal oppression of human rights and fundamental freedoms and its indefensible support for increasingly authoritarian and corrupt regimes in Venezuela and Nicaragua.\" Then, on March 4, 2019, Secretary Pompeo partially suspended the right to file lawsuits for an additional 30 days (through April 17) but allowed lawsuits, beginning March 19, against an entity or subentity on the State Department's \"Cuba Restricted List\" controlled by the Cuban military, intelligence, or security service. In its announcement, the State Department stated that they would continue to study the impact of the suspension on the human rights situation in Cuba. Lawsuits can be brought by any U.S. national, including those who were not U.S. nationals at the time of the confiscation. However, lawsuits may not be brought against third-country foreign investors in Cuba. State Department officials acknowledged that they engaged with allies in the European Union, Canada, and elsewhere, and that these countries' concerns were a factor in Secretary Pompeo's decision-making process. At this juncture, it is unclear how many lawsuits will go forward against entities on the \"Cuba Restricted List.\" Looking ahead, some in the U.S. business community and foreign companies abroad that have invested in Cuba have concerns about the potential for Title III being fully implemented in the future. When the LIBERTAD Act was enacted in 1996, the intent of Title III was to prevent foreign investment in properties confiscated by the Cuban government. However, since some U.S. companies have entered into transactions or investment projects with Cuban companies in recent years as a result of the U.S. engagement process with Cuba, some could be susceptible to legal action if the Administration did not continue to suspend the right to file lawsuits. Fully lifting the suspension of the right to file lawsuits under Title III could have a significant effect on foreign companies conducting business in Cuba because of the potential risk emanating from such lawsuits. When the LIBERTAD Act was passed in 1996, several foreign governments strongly objected, and some (Canada, EU, and Mexico) enacted countermeasures to block enforcement of the U.S. sanctions. The EU also could revive a WTO dispute against the LIBERTAD Act, which it suspended in 1998 when it reached an understanding on the issue with the United States that included the presumption of continued suspension of Title III. Some observers also have expressed concerns about U.S. federal courts being flooded with lawsuits if Title III were fully allowed to be implemented. In addition to the claims of thousands of certified U.S. claimants, a 1996 report to Congress by the State Department required by the LIBERTAD Act estimated that there could be some 75,000 to 200,000 claims by Cuban Americans with the value running into the tens of billions of dollars. As defined in the LIBERTAD Act, however, the term trafficking does not include \"transactions and uses of property incident to lawful travel to Cuba,\" the term property does not include \"real property used for residential purposes\" (unless the claim is a certified claim held by a U.S national), and there is a $50,000 threshold for the amount in controversy for the right to file a lawsuit under Title III. An issue that had been mentioned for many years in the State Department's annual terrorism report was Cuba's harboring of fugitives wanted in the United States. The most recent mention of the issue was in the 2014 terrorism report (issued in April 2015), which stated that Cuba \"does continue to harbor fugitives wanted to stand trial or to serve sentences in the United States for committing serious violations of U.S. criminal laws, and provides some of these individuals limited support, such as housing, food ration books, and medical care.\" With the resumption of diplomatic relations with Cuba, the United States have held several law enforcement dialogues that reportedly have included discussion of the issue of fugitives from justice. U.S. fugitives from justice in Cuba include convicted murderers and numerous hijackers, most of whom entered Cuba in the 1970s and early 1980s. For example, Joanne Chesimard, also known as Assata Shakur, was added to the Federal Bureau of Investigation's (FBI's) Most Wanted Terrorist list in May 2013. Chesimard was part of militant group known as the Black Liberation Army. In 1977, she was convicted for the 1973 murder of a New Jersey State Police officer and sentenced to life in prison. Chesimard escaped from prison in 1979 and, according to the FBI, lived underground before fleeing to Cuba in 1984. Another fugitive, William \"Guillermo\" Morales, who was a member of the Puerto Rican militant group known as the Armed Forces of National Liberation, reportedly has been in Cuba since 1988 after being imprisoned in Mexico for several years. In 1978, both of his hands were maimed by a bomb he was making. He was convicted in New York on weapons charges in 1979 and sentenced to 10 years in prison and 5 years' probation, but he escaped from prison the same year. In addition to Chesimard and other fugitives from the past, a number of U.S. fugitives from justice wanted for Medicare and other types of insurance fraud have fled to Cuba in recent years. Although the United States and Cuba have an extradition treaty in place dating to 1905, in practice the treaty has not been used. Instead, for more than a decade, Cuba has returned wanted fugitives to the United States on a case-by-case basis. For example, in 2011, U.S. Marshals picked up a husband and wife in Cuba who were wanted for a 2010 murder in New Jersey, and in April 2013, Cuba returned a Florida couple who allegedly had kidnapped their own children (who were in the custody of the mother's parents) and fled to Havana. In August 2018, Cuba arrested and returned to the United States a long-sought U.S. fugitive from justice wanted in connection with ecoterrorism who had stopped in Cuba on his way to Russia. In November 2018, Cuba returned to the United States a New Jersey man wanted on murder charges. In another case demonstrating U.S.-Cuban law enforcement cooperation, Cuba successfully prosecuted a Cuban national in February 2018 who had fled to Cuba after murdering a doctor in Florida in 2015—the main witness was a Palm Beach detective. Cuba generally, however, has refused to render to U.S. justice any fugitive judged by Cuba to be \"political,\" such as Chesimard, who they believe could not receive a fair trial in the United States. Moreover, in the past Cuba has responded to U.S. extradition requests by stating that approval would be contingent upon the United States returning wanted Cuban criminals from the United States. In the 116 th Congress, H.Res. 92 (King) would call for the immediate extradition or rendering to the United States of convicted felons William Morales, Joanne Chesimard, and all other fugitives from justice who are receiving safe harbor in Cuba in order to escape prosecution or confinement for criminal offenses committed in the United States When Miguel Díaz-Canel succeeded Raúl Castro as president in April 2018, a leader from a new generation came to power—Díaz-Canel is 58 years old. Nevertheless, Raúl Castro, currently 87 years old, is continuing as first secretary of Cuba's Communist Party until 2021, and he headed the commission that drafted Cuba's new constitution approved by a public referendum in February 2019. Although the new constitution locks in some market-oriented economic reforms that have been introduced in recent years (private property, private sector, and foreign investment), it also ensures the state sector's dominance over the economy and the predominate role of the Communist Party in Cuba's political system. In late 2018, Díaz-Canel took actions that appeared to demonstrate his independence from the previous Castro government and his responsiveness to public concerns, but his government faces a difficult economic outlook, one that could become bleaker if oil supplies from Venezuela are cut. Looking ahead, President Díaz-Canel faces two major challenges—moving forward with economic reforms that produce results and responding to desires for greater freedom. President Trump's partial rollback of the Obama engagement policy and the introduction of new economic sanctions has limited opportunities for U.S. business engagement in Cuba and increased tensions in bilateral relations. The U.S. decision to downsize the diplomatic staff of the U.S. Embassy in Havana in response to unexplained injuries to U.S. diplomatic personnel in Cuba resulted in the suspension of most visa processing at the embassy and reduced other embassy operations, which has made bilateral engagement and existing areas of government-to-government cooperation more difficult. The Administration's decision in March 2019 to partially implement Title III of the LIBERTAD Act along with its use of strong Cold War-era political rhetoric toward Cuba has provoked a change in Cuba's own political rhetoric toward the United States. The current outlook for positive government-to-government engagement appears dim. Just as there were diverse opinions in the 115 th Congress over U.S. policy toward Cuba, debate over Cuba policy is likely to continue in the 116 th Congress, especially with regard to U.S. economic sanctions. The human rights situation likely will remain a key concern in the future, although there are diverse views regarding the best approach to influence the Cuban government. Appendix A. Legislative Initiatives in the 116 th  Congress Enacted Measures P.L. 116-6 ( H.J.Res. 31 ). Consolidated Appropriations Act, 2019. Introduced January 22, 2019. House passed (231-180) January 24; Senate passed, amended, by voice vote January 25. Conference report ( H.Rept. 116-9 ) filed February 13, 2019. House approved conference (300-128) February 14; Senate approved conference (83-16) February 14. Signed into law February 15, 2019. The conference report provided $20 million in Cuba democracy assistance ($10 million more than requested) and $29.1 million for Cuba broadcasting ($15.4 million more than requested). In Division F (State, Foreign Operations, and Related Programs), the measure continues two longstanding Cuba provisions: Section 7007 prohibits direct funding for the government of Cuba, including direct loans, credits, insurance, and guarantees of the Export-Import Bank or its agents; Section 7015(f) prohibits the obligation or expending of assistance for Cuba except through the regular notification procedures of the Committees on Appropriations. Bills H.R. 213 (Serrano). Baseball Diplomacy Act. The bill would waive certain prohibitions with respect to nationals of Cuba coming to the United States to play organized professional baseball. Introduced January 3, 2019; referred to the Committee on Foreign Affairs, and in addition to the Committee on the Judiciary. H.R. 1898 (Crawford). The bill would modify the prohibition on U.S. assistance and financing for certain exports to Cuba under TSRA. Introduced March 27, 2019; referred to the Committee on Foreign Affairs and in additional to the Committees on Financial Services and Agriculture. S. 428 (Klobuchar). Freedom to Export to Cuba Act of 2019. The bill would repeal or amend many provisions of law restricting trade and other relations with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. Introduced February 7, 2019; referred to the Committee on Banking, Housing, and Urban Affairs. Resolutions H.Res. 92 (King). The resolution would call for the immediate extradition or rendering to the United States of convicted felons William Morales, Joanne Chesimard, and all other fugitives from justices who are receiving safe harbor in Cuba to escape prosecution or confinement for criminal offenses committed in the United States. Introduced January 30, 2019; referred to the Committee on Foreign Affairs. S.Res. 14 (Menendez)/ H.Res. 136 (Sires). Similar resolutions would affirm that Cuba's medical missions constitute human trafficking. The resolutions express the sense of each respective body that the State Department should downgrade Cuba to Tier 3 in its annual Trafficking in Persons Re port and should reestablish the Cuban Medical Professional Parole program. S.Res. 14 introduced January 10, 2019; referred to the Committee on Foreign Relations. H.Res. 136 introduced February 14; referred to the Committee on Foreign Affairs. Appendix B. Links to U.S. Government Reports U.S. Relations with Cuba, Fact Sheet , Department of State Date: February 8, 2019 Full Text: https://www.state.gov/r/pa/ei/bgn/2886.htm Congressional Budget Justificati on for Foreign Operations FY2019 , Appendix 2 , pp. 474-475, Department of State Date: March 14, 2018 Full Text: https://www.state.gov/documents/organization/279517.pdf Country Report s on Human Rights Practices fo r 2018 , Cuba , Department of State Date: March 13, 2019 Full Text: https://www.state.gov/documents/organization/289532.pdf Cuba web page, Department of State Link: https://www.state.gov/p/wha/ci/cu/index.htm Cuba web page, Department of Commerce, Bureau of Industry and Security Link: https://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/cuba Cuba web page, Department of Agriculture, Foreign Agricultural Service Link: https://www.fas.usda.gov/regions/cuba Cuba Sanctions web page, Department of the Treasury, Office of Foreign Assets Control Link: https://www.treasury.gov/resource-center/sanctions/Programs/Pages/cuba.aspx International R eligious Freedom Report for 2017 , Cuba , Department of State Date: May 29, 2018 Full Text: https://www.state.gov/documents/organization/281308.pdf International Narcotics Control Strategy Report 2019 , Volume I, Drug and Chemical Control, p. 146, Department of State Date: March 2019 Link: http://www.state.gov/documents/organization/290501.pdf International Narcotics Control Strategy Report 2018, Volume II , Money Laundering, pp. 85-87, Department of State Date: March 2018 Link: http://www.state.gov/documents/organization/278760.pdf Overview of Cuban Imports of Goods and Services and Effects of U.S. Restrictions , U.S. International Trade Commission, Publication 4597 Date: March 2016 Link: https://www.usitc.gov/sites/default/files/publications/332/pub4597_0.pdf Trafficking in Persons Report 2018 , Cuba, Department of State Date: June 2018 Link: https://www.state.gov/j/tip/rls/tiprpt/countries/2018/282640.htm", "summary": "Political and economic developments in Cuba, a one-party authoritarian state with a poor human rights record, frequently have been the subject of intense congressional concern since the Cuban revolution in 1959. Current Cuban President Miguel Díaz-Canel succeeded Raúl Castro in April 2018, but Castro continues to head Cuba's Communist Party. Over the past decade, Cuba has implemented gradual market-oriented economic policy changes, although it has not taken enough action to foster sustainable economic growth. Most observers do not anticipate major policy changes under Díaz-Canel, at least in the short term; the president faces the enormous challenges of reforming the economy and responding to citizens' desires for greater freedom. U.S. Policy Since the early 1960s, the centerpiece of U.S. policy toward Cuba has consisted of economic sanctions aimed at isolating the Cuban government. Congress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening, and at times easing, U.S. economic sanctions. In 2014, however, the Obama Administration initiated a policy shift moving away from sanctions toward a policy of engagement. This included the restoration of diplomatic relations (July 2015), the rescission of Cuba's designation as a state sponsor of international terrorism (May 2015), and an increase in travel, commerce, and the flow of information to Cuba implemented through regulatory changes. President Trump unveiled a new policy toward Cuba in 2017 that increased sanctions and partially rolled back some of the Obama Administration's efforts to normalize relations. In 2017, the State Department reduced the staff of the U.S. Embassy by about two-thirds in response to unexplained injuries of members of the U.S. diplomatic community in Havana; 26 individuals have been affected. The reduction has affected embassy operations, especially visa processing, and has made bilateral engagement more difficult. The most significant Trump Administration policy changes include restrictions on transactions with over 200 entities controlled by the Cuban military, intelligence, and security services (on a \"restricted list\" maintained by the State Department) and the elimination of people-to-people educational travel for individuals (such travel with a group specializing in educational tours is still permitted). In March 2019, the Administration ratcheted up economic pressure on Cuba by allowing certain lawsuits to go forward against those entities on the \"restricted list\" for trafficking in confiscated property in Cuba. In light of increased U.S. sanctions against the regime of Nicolás Maduro in Venezuela, the Administration has increased its criticism of Cuba's military and intelligence support for the regime in Caracas. Legislative Activity in the 116th Congress In the Consolidated Appropriations Act, 2019 (P.L. 116-6, H.J.Res. 31) enacted in February 2019, Congress provided $20 million in Cuba democracy assistance ($10 million more than requested) and $29.1 million for Cuba broadcasting ($15.4 million more than requested). Several legislative initiatives on Cuba have been introduced in the 116th Congress: H.R. 213 would waive certain prohibitions to allows nationals of Cuba to come to the United States to play organized professional baseball; S. 428 would repeal or amend many provisions of law restricting trade and other relations with Cuba; and H.R. 1898 would authorize private financing for U.S. agricultural sales to Cuba. S.Res. 14 and H.Res. 136 would express the sense of the Senate and House, respectively, that Cuba's foreign medical missions constitute human trafficking; and H.Res. 92 would call for the extradition or rendering to the United States all fugitives from U.S. justice receiving safe harbor in Cuba. For more on legislative initiatives in the 116th Congress, see Appendix A.", "document_type": "crs"}
{"report": "Rwanda has achieved a rare degree of political stability, public safety, and economic growth in a sub-region plagued by armed conflicts and humanitarian crises. Government programs to improve health, agricultural output, private investment, and gender equality have received international plaudits and donor support. Rw anda's development and security gains are particularly remarkable in the wake of the 1994 genocide, in which extremist members of the ethnic Hutu majority orchestrated a three-month killing spree targeting the minority Tutsi community, along with members of the tiny indigenous Twa ethnic group and Hutus who opposed the massacres. The ruling Rwandan Patriotic Front (RPF) seized power in mid-1994, stopping the genocide. Since then, President Paul Kagame has been widely viewed as the architect of Rwanda's development \"miracle\" and of its autocratic political model. He has repeatedly won reelection by wide margins, most recently in 2017 (see \" Politics \"). The United States and Rwanda have cultivated close ties since the mid-1990s, underpinned by U.S. aid in support of Rwanda's ambitious socioeconomic development initiatives and participation in international peacekeeping. Over the past decade, U.S. officials and some Members of Congress have continued to promote U.S.-Rwanda partnership on shared objectives, while voicing concerns regarding Rwanda's authoritarian political system and its periodic support for rebel groups in neighboring countries. Congress has held multiple hearings examining these and related issues, and has enacted restrictions on aid to Rwanda if it is found to be supporting rebel groups (see \" U.S. Relations and Aid \" ). In late 2017, then Acting Assistant Secretary of State for Africa Donald Yamamoto testified to Congress that U.S.-Rwandan relations were \"close but complex,\" acknowledging democracy shortfalls and human rights concerns. President Trump met with President Kagame at the World Economic Forum in Davos, Switzerland, in January 2018, and expressed appreciation for bilateral economic ties, Rwanda's contributions to peacekeeping operations, and Kagame's pursuit of African Union (AU) institutional reforms as then-chairman of the institution. In line with the Administration's broad proposals to decrease foreign aid worldwide, it has advocated cuts to funding for Rwanda, including health and development aid. In 2018, President Trump also suspended Rwanda's trade benefits under the African Growth and Opportunity Act (AGOA, reauthorized via P.L. 114-27 ) in response to Rwanda's allegedly protectionist policies, in the context of the Administration's skepticism toward nonreciprocal trade preference programs. International perspectives on Rwanda tend to be polarized. Kagame's supporters assert that he is a visionary and that Rwanda represents an extraordinary post-conflict success story. To some, Rwandan voters' support for Kagame is easily explained: \"he has kept them from killing each other ... [and] has also given them a sense of hope and pride.\" Others argue that restrictions on political and civil rights may ultimately undermine Rwanda's hard-won stability, and that limits on civil liberties may mask ethnic, political, and social tensions. Given evident constraints on free expression, some observers argue that \"we simply don't know ... what Rwandans want from their political leaders.\" Some critics separately have questioned the reliability of Rwanda's development statistics—a key justification for donor aid. Critics also posit that the ruling party's reportedly extensive involvement in the economy may be stifling independent private sector growth. Kagame has dismissed external criticism as inaccurate, irrelevant, neocolonialist, and/or morally vacuous given the international community's failure to halt the genocide. The RPF-led government has pursued rapid economic development and social transformation while effectively suppressing political dissent and public discussion of ethnic identity. President Kagame, leader of the RPF and a former military intelligence figure and rebel commander, is widely viewed as the country's preeminent decision-maker. He first ascended to the presidency in an internal party election in 2000, and has won reelection with over 90% of the popular vote in every subsequent contest (in 2003, 2010, and 2017). An RPF-led coalition holds the majority of seats in parliament; nearly all remaining seats are held by parties that refrain from directly criticizing the RPF or Kagame. The State Department has noted concerns with aspects of each election conducted under RPF rule, such as apparent procedural irregularities, a lack of transparency in vote tabulation, media restrictions, and legal challenges, threats, or criminal prosecutions targeting opposition candidates and parties. Public criticism of the government is rare; human rights advocates assert that \"years of state intimidation and interference\" have weakened the capacity of local civil society or media outlets to act as a check on state power. Over the years, political opponents have been jailed, fled the country, or died under murky circumstances. Laws criminalizing genocide ideology and denial, along with state security charges, have been wielded against opposition figures, journalists, and other government critics. Some researchers have described pervasive official surveillance and involvement in citizens' daily lives, part of an apparent effort to ensure rapid implementation of development initiatives, mobilize support for the RPF, suppress criminal activity, and monitor potential opposition activity, ethnic tensions, or security threats. Kagame has defended Rwanda's political system as rooted in popular support, asserting that \"imposing a style of democracy without understanding the context, culture or norm of a country is ignorant.\" Rwandan officials generally reject allegations of abusing human rights, while asserting that restrictions on civil liberties are necessary to prevent ethnic violence in a fragile post-conflict setting. Some Rwandans, including journalists and civil society actors, agree. Kagame would have been subject to a constitutional two-term limit on the presidency in 2017, but a new constitution approved in 2015 via referendum—with a reported 98% of the vote—exempted the sitting president, allowing him to run for a third term. He won with 99% of the vote. After Kagame's current term expires, the presidential term is to be shortened to five years per the new constitution; Kagame could then run for two more consecutive terms, thus potentially remaining in office until 2034. He has denied any intention to do so, stating that he is preparing Rwanda for an unspecified future leadership transition. Tolerance of opposition voices seems to have increased slightly since Kagame's reelection in 2017, although a significant shift in the contours of Rwandan politics appears unlikely. Two prominent opposition figures were released from jail in 2018. Diane Rwigara, a vocal Kagame critic (and daughter of a well-known businessman and Tutsi genocide survivor) who was jailed on charges of forgery and inciting insurrection shortly after seeking to run for president in 2017, was acquitted following international advocacy on her behalf, including from some Members of Congress. Victoire Ingabire, who had sought to run against Kagame in 2010 and was serving a prison sentence for alleged genocide denial and seeking to form an armed group, received a presidential pardon. So did several other members of Ingabire's FDU-Inkingi party (\"United Democratic Forces-Pillar\"), which remains illegal. Several other FDU-Inkingi supporters remain in prison; others have been killed in unclear circumstances. Also in 2018, the Democratic Green party, a relatively independent opposition movement (and not affiliated with Rwigara or Ingabire), won two seats in parliament after competing for the first time in legislative elections. The Green party was not granted legal registration in time to run candidates in the 2013 legislative vote; its presidential candidate, Frank Habineza, won less than 1% in the 2017 presidential vote. The party's deputy leader was killed in unclear circumstances prior to the 2010 presidential election, soon after the party was founded in 2009. The RPF's political leadership appears to have narrowed from a diverse set of actors in the 1990s to an apparently small circle around the president. Over the years, various top RPF officials and military officers have faced criminal charges, some on national security grounds, or have fled the country. In 2010, several prominent RFP defectors formed an exiled opposition movement, the Rwandan National Congress (RNC). Some members have been the target of armed attacks or apparent assassinations in foreign countries, including several in South Africa. President Kagame has denied state involvement, while assailing the individuals in question as traitors. The State Department's 2018 human rights report on Rwanda cites forced disappearances, alleged extrajudicial killings, arbitrary detention, and torture by state security forces (\"including asphyxiation, electric shocks, mock executions\"), noting \"impunity\" involving civilian officials and some members of the security forces. The report also documents political prisoners, threats and violence against journalists, censorship, and \"substantial interference\" with freedoms of assembly and association, along with \"restrictions on political participation.\" It further finds that \"the government continued to monitor homes, movements, telephone calls, email, other private communications, and personal and institutional data,\" often using extrajudicial means and/or embedded informants. Human Rights Watch has reported patterns of arbitrary detention and torture of Rwandans accused or suspected of supporting the RNC, Ingabire's political movement, or the Democratic Forces for the Liberation of Rwanda (FDLR), a militia founded in DRC by perpetrators of the genocide. The organization also has accused Rwandan security forces of killing petty criminals extra-judicially, allegations that Rwanda's National Commission for Human Rights (NCHR) has rejected. Rwanda has expelled international researchers working for Human Rights Watch; in 2018, a local employee was temporarily detained incommunicado. In 2018, the government shuttered thousands of churches and dozens of mosques, citing safety violations or other regulatory concerns, and proposed stricter registration requirements for religious groups. One expert asserted that these moves targeted non-denominational places of worship (i.e., not affiliated with Roman Catholicism or established Protestant denominations) because they \"are harder to control because they don't report to a central hierarchy.\" Rwanda is a top peacekeeping troop contributor in Africa; U.N. officials and donors value its military professionalism and commitment to civilian protection. As chair of the AU in 2018, President Kagame also sought to bolster the financial sustainability of African-led stability operations. At the same time, Rwanda has a history of unilateral military intervention in DRC, and reportedly has periodically provided support to rebel groups in DRC and Burundi. Its reasons for doing so may reflect a mix of national security concerns (e.g., a desire to counter DRC-based armed groups led by individuals implicated in the 1994 genocide), ethnic solidarity with the Tutsi minority in Burundi and persecuted communities of Rwandan descent in DRC, and economic motivations linked to resource smuggling in DRC. In 2012-2013, Rwanda faced acute international criticism and cuts to donor aid—including from the United States and European countries—for providing support to a DRC-based insurgent group known as the M23. The M23 originated as a rebellion among members of a previous Rwandan-backed armed group, and was the latest in a series of Rwandan-backed rebellions originating among communities of Rwandan descent in eastern DRC since in the late 1990s. In 2015 and 2016, reports suggested Rwandan involvement in the recruitment and training of Burundian refugees for a rebellion against the government of Burundi, again prompting donor criticism. Credible reports of direct Rwandan involvement in regional conflicts have since diminished, although the country's relations with DRC remain volatile. Tensions with Burundi also have endured, with Rwanda accusing Burundian authorities of stoking ethnic tensions while Burundi has accused Rwanda of espionage and interference. Relations with sometimes-ally Uganda also have soured in recent years. Rwandan officials, including President Kagame, have openly accused Uganda of backing Rwandan armed dissidents (apparently referring to the RNC) as well as the FDLR, while Ugandan officials have accused Rwanda of espionage. Ongoing insecurity and illicit resource extraction in eastern DRC remain flashpoints for regional tensions and spillover of conflicts. In late 2018, U.N. DRC sanctions monitors reported that the RNC was mobilizing armed combatants in DRC's South Kivu province, with apparent Burundian support. Some researchers posit that Rwanda-Uganda friction is rooted in competition over access to DRC minerals; U.N. DRC sanctions investigators reported in 2018 that \"gold sourced in high-risk and conflict areas [of DRC] was exported illegally to Uganda and Rwanda.\" Donor aid, political stability, low corruption, and pro-investor policies have enabled high economic growth rates (4-9% annually) over the past decade. Rwanda remains one of the world's poorest countries, although it ranks higher than many other sub-Saharan African countries on the 2018 U.N. Human Development Index (at 158 out of 189 countries assessed). About 75% of Rwandans are engaged in agriculture, many for subsistence; the country is nonetheless reliant on food imports, in part due to having the highest population density in continental Africa. The government seeks to transform the economy into one that is services-oriented and middle-income, launching programs to expand internet access, improve education, and increase domestic energy production. Key growth sectors include tourism, coffee, tea, tin mining, construction, and an emerging financial services sector. The government also aims to turn Rwanda into a regional trade, logistics, and conference hub. It has invested in the construction of new business class hotels and a convention center in Kigali, a planned new airport, and an expansion of the national airline RwandAir—which is pursuing U.S. federal approval for direct flights between Kigali and the United States. Much investment has been concentrated in Kigali, which has received international plaudits for its clean and safe streets. Rwanda was ranked 29 out of 190 on the World Bank's 2019 Doing Business report, the only low-income country and one of only two African countries (along with Mauritius) in the top 50. Rwanda's continual improvements in the annual rankings reflect its efforts to reduce bureaucratic red-tape, protect property rights, improve access to credit, expand the supply of reliable electricity, and ensure contract enforcement. The State Department has nonetheless documented various challenges for foreign investors, including \"payment delays with government contracts,\" inconsistent adherence to incentives offered by the Rwanda Development Board, infringements on property rights, and \"competition from state-owned and ruling party-aligned businesses.\" Human development gains since the genocide have been dramatic in relative terms. According to the World Health Organization (WHO), from 1990 and 2016, life expectancy increased from 48 to 66 years; the child (under five) mortality rate fell from 152 to 42 deaths per 1,000 live births; and the maternal mortality rate decreased from 1,300 to 290 deaths per 100,000 live births. Through a donor-backed national community-based health insurance system, Rwanda provides near-universal health coverage for basic primary care, with the cost fully or partially subsidized based on income level. As of 2015, about 39% of Rwandans reportedly lived below the poverty line, compared to 56% in 2006 and 78% in 1994. Some researchers have questioned the reliability of Rwanda's poverty statistics, noting that they are based on household-level survey data and may be subject to interference; the World Bank has rejected some of this criticism, asserting that Rwanda's official statistical methodology \"is technically sound.\" In 1998, President Bill Clinton delivered a speech in Kigali in which he expressed remorse for not having intervened more forcefully to end mass killings in 1994, and pledged that the United States would do better in the future. Those remarks arguably set the tone for a relationship defined, in part, by a sense of guilt among U.S. policymakers about the genocide and admiration for the RPF's role in stopping it. U.S. support for the RPF-led government has continued across successive Administrations and across partisan lines, with the executive branch and Congress working together to provide substantial aid to support Rwanda's development efforts and peacekeeper deployments. Yet, over the past decade, executive branch officials and some Members of Congress increasingly have criticized Rwanda's involvement in regional conflicts and expressed concern with its domestic political and human rights conditions. After meeting with President Kagame in Davos in January 2018, President Trump praised the United States' \"great relationships\" with Rwanda, including bilateral trade, and stated that \"the job they've done is absolutely terrific.\" In September 2017 congressional testimony, then Acting Assistant Secretary of State for Africa Yamamoto praised Rwanda's \"remarkable gains\" in health and development and characterized the country as \"a major contributor to regional peace and security,\" while asserting that \"Rwanda's record in the areas of human rights and democracy, while improved in some areas, remains a concern.\" He called on the government \"to take steps toward a democratic transition of power.\" Regarding Rwanda's 2017 presidential election, the State Department stated that \"we are disturbed by irregularities observed during voting and reiterate long-standing concerns over the integrity of the vote-tabulation process.\" In response to Member questions at the September 2017 hearing, Ambassador Yamamoto affirmed that \"we are unable to assess this election as free and fair.\" At his Senate confirmation hearing in late 2017, the U.S. Ambassador-designate to Rwanda described his four top policy goals as the following: continuing the United States' \"development partnership\" with Rwanda, promoting U.S. business and economic ties, supporting Rwanda's continued peacekeeping role, and advancing \"democratic ideals.\" President Trump suspended duty-free treatment of Rwandan apparel exports to the United States under AGOA in 2018, as noted above, citing Rwandan protectionist policies. The suspension came after the Administration initiated an out-of-cycle review of Rwanda's eligibility in 2017. In addition to concerns about trade barriers, Ambassador Yamamoto testified in 2017 that U.S. officials had also \"raised concerns ... regarding harassment of political opposition leaders and [non-governmental organizations] as well as restrictions on media freedom with the context of AGOA eligibility.\" The impact may be largely symbolic: in 2017, U.S. imports from Rwanda totaled $44 million, of which $5 million were under AGOA. U.S. exports to Rwanda totaled $64 million that year. U.S. bilateral aid to Rwanda aims to promote economic growth, food security, health, and military professionalism. The State Department has drawn on additional regionally- and centrally-managed funds to provide military aid to build Rwanda's peacekeeping capabilities, including under the African Peacekeeping Rapid Response Partnership (APRRP) initiative, launched under President Obama in 2014. (The Trump Administration has not requested new appropriations in support of APRRP, but has continued to implement funds allocated in prior years.) APRRP was conceived to complement the State Department's Global Peace Operations Initiative (GPOI), in which Rwanda also participates. The United States also provides humanitarian assistance for international organizations caring for Congolese and Burundian refugees in Rwanda. Successive Congresses have enacted foreign aid appropriations measures restricting certain types of U.S. military aid to Rwanda if it is found to be supporting rebel movements in neighboring countries. Citing such provisions, as well as the Child Soldiers Prevention Act of 2008 (CSPA, Title IV of P.L. 110-457 ), the Obama Administration suspended certain types of military aid—namely, Foreign Military Financing (FMF) and International Military Education and Training (IMET)—citing Rwandan support for rebels in DRC and, later, Burundi. Military aid in support of Rwanda's peacekeeping capabilities was exempted from such restrictions via a combination of legislative provisions (e.g., §1208[f] of P.L. 113-4 , the Violence Against Women Reauthorization Act of 2013, which excepts peacekeeping aid from child soldiers-related restrictions) and executive branch waivers. The executive-legislative branch interplay under the Obama and Trump Administrations (to date) is detailed below. FY2012-FY2013: The Obama Administration invoked a provision of the FY2012 appropriations act ( P.L. 112-74 , §7043(a) of Division I), extended into FY2013 via continuing resolutions, to suspend FMF for Rwanda, citing its support for the M23 rebellion in DRC. The provision stated that FMF could be made available for Rwanda or Uganda \"unless\" the Secretary of State had \"credible information\" that either government was supporting armed groups in DRC. FY2014: The Obama Administration continued to suspend FMF, consistent with a provision in that year's appropriations act ( P.L. 113-76 , §7042(l) of Division K) restricting such funds unless Rwanda was \"taking steps to cease\" support to certain armed groups in DRC. It also designated Rwanda under CSPA in connection with the M23's reported use of child soldiers, and applied that act's prohibition on various other forms of military aid, including IMET. FY2015: The appropriations act prohibited FMF for Rwanda unless the Secretary of State certified to Congress that the government was \"implementing a policy to cease\" support to armed groups in DRC ( P.L. 113-235 , §7042[l] of Division J). The Obama Administration had not requested FMF for Rwanda in its budget proposal, and none was provided. The State Department again designated Rwanda under CSPA, but President Obama waived the act's aid prohibitions, citing the end of the M23 insurgency—thus allowing IMET, for example, to resume. FY2016: The State Department did not designate Rwanda under CSPA, and that year's appropriations act ( P.L. 114-113 ) did not restrict security assistance for Rwanda. The Obama Administration did not request or provide FMF funds for Rwanda, in any case. IMET continued. FY2017: The Obama Administration (in mid-2016) designated Rwanda under CSPA in connection with its reported support for Burundian rebel groups' recruitment of child soldiers. President Obama waived CSPA restrictions on IMET and several other types of security aid, however, and no FMF funding was requested for Rwanda or provided. The appropriations act restricted certain types of IMET programs for any country in Africa's Great Lakes region unless the Secretary of State certified that it was \"not facilitating or otherwise participating in destabilizing activities in a neighboring country\" ( P.L. 115-31 , §7042(a) of Division J). The State Department provided some IMET funds for Rwanda, but once the act passed into law, did not support activities that would have been prohibited in such a scenario. FY2018 -FY2019 to date : Appropriations measures have continued to restrict certain types of IMET programs for any country in the Great Lakes region until the Secretary of State determines and reports that it is \"not facilitating or otherwise participating in destabilizing activities in a neighboring country, including aiding and abetting armed groups\" (most recently, P.L. 116-6 §7042(a) of Division F). The Trump Administration has not designated Rwanda under CSPA. It also has not requested or provided FMF for Rwanda. Congress has shaped U.S. policy and assistance to Rwanda through its authorization and appropriation of U.S. assistance, and through oversight and Member engagement. In 2012-2013, and again in 2015-2016, the application of legislative restrictions on U.S. security assistance—along with other donor criticism and aid suspensions—appeared to contribute to a decrease in Rwandan support for the M23 in DRC and may conceivably have dissuaded Rwanda from intervening more heavily in Burundi. Members may seek to derive lessons from this sequence of events as they consider pending appropriations bills and/or any future legislative proposals regarding U.S. aid to Rwanda. With regard to Rwanda's domestic conditions, questions remain around how the United States can best support the country's continued stability and growth, including whether continued U.S. support for Rwanda's development efforts can or should be premised on evidence of greater respect for political pluralism or individual liberties.", "summary": "Rwanda, a small landlocked country in central Africa's Great Lakes region, has seen rapid development and security gains since about 800,000 people—mostly members of the ethnic Tutsi minority—were killed in the 1994 genocide. The ruling Rwandan Patriotic Front (RPF) ended the genocide by seizing power in mid-1994 and has been the dominant force in Rwandan politics ever since. The Rwandan government has won donor plaudits for its efforts to improve health, boost agricultural output, encourage foreign investment, and promote women's empowerment. Yet, analysts debate whether Rwanda's authoritarian political system—and periodic support for rebel groups in neighboring countries—could jeopardize the country's stability in the long-run, or undermine the case for donor support. President Paul Kagame, in office since 2000, won reelection to another seven-year term in 2017 with nearly 99% of the vote, after the adoption of a new constitution that effectively exempted him from term limits through 2034. Kagame's overwhelming margin of victory may reflect popular support for his efforts to stabilize and transform Rwandan society, as well as a political system that involves constraints on opposition activity and close government scrutiny of citizen behavior. In response to external criticism, Kagame has generally denied specific allegations of abusing human rights while asserting that restrictions on civil and political rights are necessary to prevent the return of ethnic violence. The United States and Rwanda have cultivated close ties since the mid-1990s, underpinned by U.S. development aid and support for Rwanda's robust participation in international peacekeeping. Congress has helped shape U.S. engagement through its appropriation of foreign aid and other legislative initiatives, along with oversight and direct Member outreach to Rwandan officials. Over the past decade, successive Administrations and Congress have continued to support U.S. partnership with Rwanda on development and peacekeeping, while criticizing the government's human rights record and periodic role in regional conflicts. Congress has notably enacted provisions in aid appropriations legislation restricting U.S. military aid to Rwanda if it is found to be supporting rebel groups in neighboring countries. The Obama Administration temporarily applied such restrictions, along with others pursuant to separate child soldiers legislation, citing Rwandan support for rebels in the Democratic Republic of Congo (DRC) and Burundi. There have been fewer reports of Rwandan support for rebel groups in recent years. After meeting with President Kagame in early 2018, President Trump expressed appreciation for U.S.-Rwandan economic ties, Rwanda's contributions to peacekeeping, and Kagame's pursuit of African Union institutional reforms. In line with the Administration's proposals to decrease foreign aid worldwide, its FY2020 budget request would provide $117 million in bilateral aid to Rwanda, a 28% decrease from FY2018 levels. U.S. peacekeeping-related military assistance for Rwanda has drawn on regionally- and centrally-managed funds, and is not reflected in these totals. The Administration has also suspended Rwanda's eligibility for trade benefits under the African Growth and Opportunity Act (AGOA, reauthorized under P.L. 114-27), in response to alleged market barriers to U.S. exports of used clothing.", "document_type": "crs"}
{"report": "Prior to the September 2001 terrorist attacks on the United States, insurers generally did not exclude or separately charge for coverage of terrorism risk. The events of September 11, 2001, changed this as insurers realized the extent of possible terrorism losses. Estimates of insured losses from the 9/11 attacks are more than $45 billion in current dollars, the largest insured losses from a nonnatural disaster on record. These losses were concentrated in business interruption insurance (34% of the losses), property insurance (30%), and liability insurance (23%). Although primary insurance companies—those that actually sell and service the insurance policies bought by consumers—suffered losses from the terrorist attacks, the heaviest insured losses were absorbed by foreign and domestic reinsurers, the insurers of insurance companies. Because of the lack of public data on, or modeling of, the scope and nature of the terrorism risk, reinsurers felt unable to accurately price for such risks and largely withdrew from the market for terrorism risk insurance in the months following September 11, 2001. Once reinsurers stopped offering coverage for terrorism risk, primary insurers, suffering equally from a lack of public data and models, also withdrew, or tried to withdraw, from the market. In most states, state regulators must approve policy form changes. Most state regulators agreed to insurer requests to exclude terrorism risks from commercial policies, just as these policies had long excluded war risks. Terrorism risk insurance was soon unavailable or extremely expensive, and many businesses were no longer able to purchase insurance that would protect them in future terrorist attacks. In some cases, such insurance is required to consummate various transactions, particularly in the real estate, transportation, construction, energy, and utility sectors. Although the evidence is largely anecdotal, some were concerned that the lack of coverage posed a threat of serious harm—such as job loss—to these industries, in turn threatening the broader economy. In November 2002, Congress responded to the fears of economic damage due to the absence of commercially available coverage for terrorism with passage of the Terrorism Risk Insurance Act (TRIA). TRIA created a three-year Terrorism Insurance Program to provide a government reinsurance backstop in the case of terrorist attacks. The TRIA program was amended and extended in 2005, 2007, and 2015. Following the 2015 amendments, the TRIA program is set to expire at the end of 2020. (A side-by-side of the original law and the three reauthorization acts is in Table 1 .) The executive branch has been skeptical about the TRIA program in the past. Bills to expand TRIA were resisted by then-President George W. Bush's Administration, and previous presidential budgets under then-President Obama called for changes in the program that would have had the effect of scaling back the TRIA coverage. The current Administration has not called for specific changes to TRIA, but has indicated that it is \"evaluating reforms…to further decrease taxpayer exposure.\" The insurance industry largely continues to support TRIA, as do commercial insurance consumers in the real estate and other industries that have formed a \"Coalition to Insure Against Terrorism\" (CIAT). However, not all insurance consumers have consistently supported the renewal of TRIA. For example, the Consumer Federation of America has questioned the need for the program in the past. Although the United States has suffered attacks deemed \"terrorism\" since the passage of TRIA, no acts of terrorism have been certified and no payments have occurred under TRIA. For example, although the April 2013 bombing in Boston was termed an \"act of terror,\" by the President, the insured losses in TRIA-eligible insurance from that bombing did not cross the $5 million statutory threshold to be certified under TRIA. (See precise criteria under the TRIA program below.) The original TRIA legislation's stated goals were to (1) create a temporary federal program of shared public and private compensation for insured terrorism losses to allow the private market to stabilize; (2) protect consumers by ensuring the availability and affordability of insurance for terrorism risks; and (3) preserve state regulation of insurance. Although Congress has amended specific aspects of the original act, the operation of the program generally usually follows the original statute. The changes to the program have largely reduced the government coverage for terrorism losses, except that the 2007 amendments expanded coverage to domestic terrorism losses, rather than limiting the program to foreign terrorism. To meet the first goal, the TRIA program creates a mechanism through which the federal government could share insured commercial property and casualty losses with the private insurance market. The role of federal loss sharing depends on the size of the insured loss. For a relatively small loss, there is no federal sharing. For a medium-sized loss, the federal role is to spread the loss over time and over the entire insurance industry. The federal government provides assistance up front but then recoups the payments it made through a broad levy on insurance policies afterwards. For a large loss, the federal government is to pay most of the losses, although recoupment is possible (but not mandatory) in these circumstances as well. The precise dollar values where losses cross these small, medium, and large thresholds are uncertain and will depend on how the losses are distributed among insurers. For example, for loss sharing to occur, an attack must meet a certain aggregate dollar value and each insurer must pay out a certain amount in claims—known as its deductible. For some large insurers, this individual deductible might be higher than the aggregate threshold set in statute, meaning that loss sharing might not actually occur until a higher level than the figure set in statute. The criteria under the TRIA program in 2019 are as follows: 1. An individual act of terrorism must be certified by the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and Attorney General; losses must exceed $5 million in the United States or to U.S. air carriers or sea vessels for an act of terrorism to be certified. 2. The federal government shares in an insurer's losses due to a certified act of terrorism only if \"the aggregate industry insured losses resulting from such certified act of terrorism\" exceed $180 million (increasing to $200 million in 2020). 3. The federal program covers only commercial property and casualty insurance, and it excludes by statute several specific lines of insurance. 4. Each insurer is responsible for paying a deductible before receiving federal coverage. An insurer's deductible is proportionate to its size, equaling 20% of an insurer's annual direct earned premiums for the commercial property and casualty lines of insurance specified in TRIA. 5. Once the $180 million aggregate loss threshold and 20% deductible are met, the federal government would cover 81% of each insurer's losses above its deductible until the amount of losses totals $100 billion. 6. After $100 billion in aggregate losses, there is no federal government coverage and no requirement that insurers provide coverage. 7. In the years following the federal sharing of insurer losses, but prior to September 30, 2024, the Secretary of the Treasury is required to establish surcharges on TRIA-eligible property and casualty insurance policies to recoup 140% of some or all of the outlays to insurers under the program. If losses are high, the Secretary has the authority to assess surcharges, but is not required to do so. (See \" Recoupment Provisions \" below for more detail.) The initial loss sharing under TRIA can be seen in Figure 1 , adapted from a Congressional Budget Office (CBO) report. The exact amount of the 20% deductible at which TRIA coverage would begin depends on how the losses are distributed among insurance companies. In the aggregate, 20% of the direct-earned premiums for all of the property and casualty lines specified in TRIA totaled approximately $42 billion in 2017, according to the latest data collected by the Treasury Department. TRIA coverage is likely, however, to begin well under this amount as the losses from an attack are unlikely to be equally distributed among insurance companies. The precise amount TRIA requires the Treasury to recoup after the initial loss sharing is determined by the interplay between a number of different factors in the law and insurance marketplace. The general result of the recoupment provisions is that, for attacks that result in under $37.5 billion in insured losses, the Treasury Secretary is required to recoup 140% of the government outlays through surcharges on property and casualty insurance policies. For events with insured losses over $37.5 billion, the Secretary has discretionary authority to recoup all the government outlays and may be required to partially recoup the government outlays depending on the size of the attacks and the amount of uncompensated losses paid by the insurance industry. (See the Appendix for more information on exact recoupment calculations.) If the requirement for recoupment is triggered, TRIA requires the government to recoup all payments prior to the end of FY2024. Because the last reauthorization of TRIA occurred in January 2015, such recoupment would be completed within a 10-year timeframe following the previous reauthorization. For an attack causing significant insured loses, however, this requirement could result in high surcharges being applied for a relatively short time. The recoupment surcharges are to be imposed as a percentage of premiums paid on all TRIA-eligible property and casualty insurance policies, but the Secretary has the authority to adjust the amount of the premiums taking into consideration differences between rural and urban areas and the terrorism exposures of different lines of insurance. The administration of the TRIA program was originally left generally to the Treasury Secretary. This was changed somewhat in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The act created a new Federal Insurance Office (FIO) to be located within the Department of the Treasury. Among the duties specified for the FIO in the legislation was to assist the Secretary in the administration of the Terrorism Insurance Program. TRIA addresses the second goal—to protect consumers—by requiring insurers that offer TRIA-covered lines of insurance to make terrorism insurance available prospectively to their commercial policyholders. This coverage may not differ materially from coverage for other types of losses. Each terrorism insurance offer must reveal both the premium charged for terrorism insurance and the possible federal share of compensation. Policyholders are not, however, required to purchase coverage under TRIA. If a policyholder declines to purchase terrorism coverage, the insurer may exclude terrorism losses. Federal law does not limit what insurers can charge for terrorism risk insurance, although state regulators typically have the authority under state law to modify excessive, inadequate, or unfairly discriminatory rates. TRIA's third goal—to preserve state regulation of insurance—is expressly accomplished in Section 106(a), which provides that \"Nothing in this title shall affect the jurisdiction or regulatory authority of the insurance commissioner [of a state].\" The Section 106(a) provision has two exceptions, one permanent and one temporary (and expired): (1) the federal statute preempts any state definition of an \"act of terrorism\" in favor of the federal definition and (2) the statute briefly preempted state rate and form approval laws for terrorism insurance from enactment to the end of 2003. In addition to these exceptions, Section 105 of the law also preempts state laws with respect to insurance policy exclusions for acts of terrorism. The TRIA statute does not specifically include or exclude property and casualty insurance coverage for terrorist attacks according to the particular methods used in the attacks, such as nuclear, biological, chemical, and radiological (NBCR) and cyber terrorism risks. Such nonconventional means, however, have the potential to cause losses that may or may not end up being covered by TRIA and have been a source of particular concern and attention in the past. Some observers consider a terrorist attack with some form of NBCR weapon to be the most likely type of attack causing large scale losses. The current TRIA statute does not specifically include or exclude NBCR events; thus, the TRIA program in general would cover insured losses from terrorist actions due to NCBR as it would for an attack by conventional means. The term insured losses , however, is a meaningful distinction. Except for workers' compensation insurance, most insurance policies that would fall under the TRIA umbrella include exclusions that would likely limit insurer coverage of an NCBR event, whether it was due to terrorism or to some sort of accident, although these exclusions have never been legally tested in the United States after a terrorist event. If these exclusions are invoked and do indeed limit the insurer losses due to NBCR terrorism, they would also limit the TRIA coverage of such losses. Language that would have specifically extended TRIA coverage to NBCR events was offered in the past, but was not included in legislation as enacted. In 2007, the Government Accountability Office (GAO) was directed to study the issue and a GAO report was issued in 2008, finding that \"insurers generally remain unwilling to offer NBCR coverage because of uncertainties about the risk and the potential for catastrophic losses.\" In the past, legislation (e.g., H.R. 4871 in the 113 th Congress) would have provided for differential treatment of NBCR attacks under TRIA, but such legislation has not been enacted. Concern regarding potential damage from cyber terrorism has grown as increasing amounts of economic activity occur online. The TRIA statute does not specifically address the potential for cyber terrorism, thus, there was uncertainty about such attacks would be covered in the same manner as terrorist attacks using conventional means. In 2016, state insurance regulators introduced a new Cyber Liability line of insurance, raising questions as to whether coverage under this line would be covered under TRIA, or whether it would not be covered under the law's exclusion of \"professional liability\" insurance. The Department of the Treasury released guidance in December 2016 clarifying that \"stand-alone cyber insurance policies reported under the 'Cyber Liability' line are included in the definition of 'property and casualty insurance' under TRIA.\" Despite Treasury's guidance, cyber terrorism coverage remains a particular concern. The Treasury Department devoted a specific section of the latest report on TRIA to cyber coverage, reporting that 50% of standalone cyber insurance policies (based on premium value) included terrorism coverage. The take-up rate for those choosing cyber coverage that is embedded in policies covering additional perils was 54%. These rates are similar to, but slightly lower than, the 62% take-up rate for general terrorism coverage found across all TRIA-eligible lines. Stripped to its most basic elements, insurance is a fairly straightforward operation. An insurer agrees to assume an indefinite future risk in exchange for a definite current premium. The insurer pools a large number of risks such that, at any given point in time, the ongoing losses will not be larger than the current premiums being paid, plus the residual amount of past premiums that the insurer retains and invests, plus, in a last resort, any borrowing against future profits if this is possible. For the insurer to operate successfully and avoid failure, it is critical to accurately estimate the probability of a loss and the severity of that loss so that a sufficient premium can be charged. Insurers generally depend upon huge databases of past loss information in setting these rates. Everyday occurrences, such as automobile accidents or natural deaths, can be estimated with great accuracy. Extraordinary events, such as large hurricanes, are more difficult, but insurers have many years of weather data, coupled with sophisticated computer models, with which to make predictions. Many see terrorism risk as fundamentally different from other risks, and thus it is often perceived as uninsurable by the private insurance market without government support for the most catastrophic risk. The argument that catastrophic terrorism risk is uninsurable typically focuses on lack of public data about both the probability and severity of terrorist acts. The reason for the lack of historical data is generally seen as a good thing—few terrorist attacks are attempted and fewer have succeeded. Nevertheless, the insurer needs some type of measurable data to determine which terrorism risks it can take on without putting the company at risk of failure. As a replacement for large amounts of historical data, insurers turn to various forms of terrorism models similar to those used to assess future hurricane losses. Even the best model, however, can only partly replace good data, and terrorism models are still relatively new compared with hurricane models. One prominent insurance textbook identifies four ideal elements of an insurable risk: (1) a sufficiently large number of insureds to make losses reasonably predictable; (2) losses must be definite and measurable; (3) losses must be fortuitous or accidental; and (4) losses must not be catastrophic (i.e., it must be unlikely to produce losses to a large percentage of the risks at the same time). Terrorism risk in the United States would appear to fail the first criterion as terrorism losses have not proved predictable over time. Losses to terrorism, when they occur, are generally definite and measurable, so terrorism risk could pass under criteria two. Such risk, however, also likely fails the third criterion due to the malevolent human actors behind terrorist attacks, whose motives, means, and targets of attack are constantly in flux. Whether it fails the fourth criterion is largely decided by the underwriting actions of insurers themselves (i.e., whether the insurers insure a large number of risks in a single geographic area that would be affected by a terrorist strike). Unsurprisingly, insurers generally have sought to limit their exposures in particular geographic locations with a conceptually higher risk for terrorist attacks, making terrorism insurance more difficult to find in those areas. Although the U.S. experience with terrorism is relatively limited, other countries have dealt with the issue more extensively and have developed their own responses to the challenges presented by terrorism risk. Spain, which has seen significant terrorist activity by Basque separatist movements, insures against acts of terrorism via a broader government-owned reinsurer that has provided coverage for catastrophes since 1954. The United Kingdom, responding to the Irish Republican Army attacks in the 1980s, created Pool Re, a privately owned mutual insurance company with government backing, specifically to insure terrorism risk. In the aftermath of the September 11, 2001, attacks, many foreign countries reassessed their terrorism risks and created a variety of approaches to deal with the risks. The UK greatly expanded Pool Re, whereas Germany created a private insurer with government backing to offer terrorism insurance policies. Germany's plan, like the United States' TRIA, was created as a temporary measure. It has been extended since its inception, most recently until the end of 2019. Not all countries, however, concluded that some sort of government backing for terrorism insurance was necessary. Canada specifically considered, and rejected, creating a government program following September 11, 2001. Terrorism risk post-2001 is not the first time the United States has faced a risk perceived as uninsurable in private markets that Congress chooses to address through government action. During World War II, for example, Congress created a \"war damage\" insurance program and it expanded a program insuring against aviation war risk following September 11, 2002. Since 1968, the National Flood Insurance Program has covered most of the insured flooding losses in the United States. The closest previous analog to the situation with terrorism risk may be the federal riot reinsurance program created in the late 1960s. Following large scale riots in American cities in the late 1960s, insurers generally pulled back from insuring in those markets, either adding policy exclusions to limit their exposure to damage from riots or ceasing to sell property damage insurance altogether. In response, Congress created a riot reinsurance program as part of the Housing and Urban Development Act of 1968. The federal riot reinsurance program offered reinsurance contracts similar to commercial excess reinsurance. The government agreed to cover some percentage of an insurance company's losses above a certain deductible in exchange for a premium paid by that insurance company. Private reinsurers eventually returned to the market, and the federal riot reinsurance program was terminated in 1985. The September 2001 terrorist attacks, and the resulting billions of dollars in insured losses, caused significant upheaval in the insurance market. Even before the attacks, the insurance market was showing signs of a cyclical \"hardening\" of the market in which prices typically rise and availability is somewhat limited. The unexpectedly large losses caused by terrorist acts exacerbated this trend, especially with respect to the commercial lines of insurance most at risk for terrorism losses. Post-September 11, insurers and reinsurers started including substantial surcharges for terrorism risk, or, more commonly, they excluded coverage for terrorist attacks altogether. Reinsurers could make such rapid adjustments because reinsurance contracts and rates are generally unregulated. Primary insurance contracts and rates are more closely regulated by the individual states, and the exclusion of terrorism coverage for the individual insurance purchaser required regulatory approval at the state level in most cases. States acted fairly quickly, and, by early 2002, 45 states had approved insurance policy language prepared by the Insurance Services Office, Inc. (ISO, an insurance consulting firm), excluding terrorism damage in standard commercial policies. The lack of readily available terrorism insurance caused fears of a larger economic impact, particularly on the real estate market. In most cases, lenders prefer or require that a borrower maintain insurance coverage on a property. Lack of terrorism insurance coverage could lead to defaults on existing loans and a downturn in future lending, causing economic ripple effects as buildings are not built and construction workers remain idle. The 14-month period after the September 2001 terrorist attacks and before the November 2002 passage of TRIA provides some insight into the effects of a lack of terrorism insurance. Some examples in September 2002 include the Real Estate Roundtable releasing a survey finding that \"$15.5 billion of real estate projects in 17 states were stalled or cancelled because of a continuing scarcity of terrorism insurance\" and Moody's Investors Service downgrading $4.5 billion in commercial mortgage-backed securities. This picture, however, was not uniform. For example, in July 2002, The Wall Street Journal reported that \"despite concerns over landlords' ability to get terrorism insurance, trophy properties were in demand.\" CBO concluded in 2005 that \"[TRIA] appears to have had little measurable effect on office construction, employment in the construction industry, or the volume of commercial construction loans made by large commercial banks,\" but CBO also noted that a variety of economic factors at the time \"could be masking positive macroeconomic effects of TRIA.\" TRIA's \"make available\" provisions addressed the availability problem in the terrorism insurance market, as insurers were required by law to offer commercial terrorism coverage. However, significant uncertainty existed as to how businesses would react, because there was no general requirement to purchase terrorism coverage and the pricing of terrorism coverage was initially high. Analyzing the terrorism insurance market in the aftermath of TRIA is challenging as well since there was no consistent regulatory reporting by insurers until P.L. 114-1 required detailed reporting, which Treasury began in 2016. Before this time, data on terrorism insurance typically stemmed from insurance industry surveys or rating bureaus. In examining the terrorism insurance market since TRIA, it is also important to note that no terrorist attacks have occurred that reached TRIA thresholds, thus property and casualty insurance has not made any large scale payouts for terrorism damages. The initial consumer reaction to the terrorism coverage offers was relatively subdued. Marsh, Inc., a large insurance broker, reported that 27% of their clients bought terrorism insurance in 2003. This take-up rate, however, climbed relatively quickly to 49% in 2004 and 58% in 2005. Marsh reported that, since 2005, the overall take-up rate has remained near 60%, with Marsh reporting a rate of 62% in 2017. The Treasury reports based on industry data calls have found similar or higher take-up rates. For 2017, Treasury found that the take-up rate based on premium volumes was 62%, whereas based on policy counts, the rate was 78%. The price for terrorism insurance has appeared to decline over time, although the level of pricing reported may not always be comparable between sources. The 2013 report by the President's Working Group on Financial Markets, based on survey data by insurance broker Aon, showed a high of above 7% for the median terrorism premium as a percentage of the total property premium in 2003, with a generally downward trend, and more recent values around 3%. The trend may be downward, but there has been variability, particularly across industries. For example, Marsh reported rates in 2009 as high as 24% of the property premium for financial institutions and as low as 2% in the food and beverage industry. In the 2013 Marsh report, this variability was lower as 2012 rates varied from 7% in the transportation industry and the hospitality and gaming industry to 1% in the energy and mining industry. In 2017, Marsh found rates varying from 10% in hospitality and gaming to 2% in energy and mining and construction industries. The 2018 Treasury report, based on lines of insurance, not on industry category, found premiums varying from 6.1% in excess workers' compensation to 1.4% in ocean marine in 2017. Treasury found that the total premium amount paid for terrorism coverage in 2017 was approximately $3.65 billion, or 1.75%, of the $209.15 billion in total premiums for TRIA-eligible lines of insurance. Since the passage of TRIA, Treasury estimates that a total of approximately $38 billion was earned for terrorism coverage by non-related insurers, with another $7.4 billion earned by captive insurers (which are insurers who are owned by the insureds). In general, the capacity of insurers to bear terrorism risk has increased over the life of the TRIA program. The combined policyholder surplus among all U.S. property and casualty insurers was $686.9 billion at the end of 2017 compared to $408.6 billion (inflation adjusted) at the start of 2002. This $686.9 billion has been bolstered by the estimated $38 billion in premiums paid for terrorism coverage over the years without significant claims payments. The policyholder surplus, however, backs all property and casualty insurance policies in the United States and is subject to depletion in a wide variety of events. For example, extreme weather losses could particularly draw capital away from the terrorism insurance market, because events such as hurricanes share some characteristics—low frequency and the possibility of catastrophic levels of loss—with terrorism risk. Table 1 presents a side-by-side comparison of selected provisions from the original TRIA law, along with the reauthorizing laws of 2005, 2007, and 2015. Table A-1 contains illustrative examples of how the recoupment for the government portion of terrorism losses under TRIA might be calculated in the aggregate for various sizes of losses. The total amount of the combined deductibles in the table is simply assumed to be 30% of the insured losses for illustrative purposes. (The actual deductible amount is, as detailed above, based on the total amount of premiums collected by each insurer.) Without knowing the actual distribution of losses due to a terrorist attack, it is impossible to know what the actual total combined deductible amount would be. Table conclusions with regard to recoupment, however, hold across different actual deductible amounts. The specific provisions of the law define the \"insurance marketplace aggregate retention amount\" (Column F) for 2019 as the lesser of $37.5 billion or the total amount of insured losses (Column A). The \"mandatory recoupment amount\" (Column G) is defined as the difference between $37.5 billion and the aggregate insurer losses that were not compensated for by the program (i.e., the total of the insurers' deductible (Column B) and their 19% loss share (Column C)). If the aggregate insured loss is less than $37.5 billion, the law requires recoupment of 140% of the government outlays (Column H). For insured losses over $37.5 billion, the mandatory recoupment amount decreases, thus the Secretary would be required to recoup less than 133% of the outlays. Depending on the precise deductible amounts, the uncompensated industry losses (Column D) may eventually rise to be greater than $37.5 billion, which would then mean that the mandatory recoupment provisions would not apply. The Secretary would still retain discretionary authority to apply recoupment surcharges no matter what level uncompensated losses reached.", "summary": "Prior to the September 11, 2001, terrorist attacks, coverage for losses from such attacks was normally included in general insurance policies without additional cost to the policyholders. Following the attacks, such coverage became expensive, if offered at all. Moreover, some observers feared that the absence of insurance against terrorism loss would have a wider economic impact, because insurance is required to consummate a variety of transactions (e.g., real estate). For example, if real estate deals were not completed due to lack of insurance, this could have ripple effects—such as job loss—on related industries like the construction industry. Terrorism insurance was largely unavailable for most of 2002, and some have argued that this adversely affected parts of the economy, while others suggest the evidence is inconclusive. Congress responded to the disruption in the insurance market by passing the Terrorism Risk Insurance Act of 2002 (TRIA; P.L. 107-297), which created a temporary three-year Terrorism Insurance Program. Under TRIA, the government would share the losses on commercial property and casualty insurance should a foreign terrorist attack occur, with potential recoupment of this loss sharing after the fact. In addition, TRIA requires insurers to make terrorism coverage available to commercial policyholders, but does not require policyholders to purchase the coverage. The program expiration date was extended in 2005 (P.L. 109-144), 2007 (P.L. 110-160), and 2015 (P.L. 114-1). Over the course of such reauthorizations, the prospective government share of losses has been reduced and the recoupment amount increased, although the 2007 reauthorization also expanded the program to cover losses from acts of domestic terrorism. The TRIA program is currently slated to expire at the end of 2020. In general terms, if a terrorist attack occurs under TRIA, the insurance industry covers the entire amount for relatively small losses. For a medium-sized loss, the government assists insurers initially but is then required to recoup the payments it made to insurers through a broad levy on insurance policies afterwards—the federal role is to spread the losses over time and over the entire insurance industry and insurance policyholders. As the size of losses grows larger, the federal government covers more of the losses without this mandatory recoupment. Ultimately, for the largest losses, the government is not required to recoup the payments it has made, although discretionary recoupment remains possible. The precise dollar values where losses cross these small, medium, and large thresholds are uncertain and will depend on how the losses are distributed among insurers. The specifics of the current program are as follows: (1) a terrorist act must cause $5 million in insured losses to be certified for TRIA coverage; (2) the aggregate insured losses from certified acts of terrorism must be $180 million in a year for the government coverage to begin (this amount increases to $200 million in 2020); and (3) an individual insurer must meet a deductible of 20% of its annual premiums for the government coverage to begin. Once these thresholds are met, the government covers 81% of insured losses due to terrorism (this amount decreases to 80% in 2020). If the insured losses are less than $37.5 billion, the Secretary of the Treasury is required to recoup 140% of government outlays through surcharges on TRIA-eligible property and casualty insurance policies. As insured losses rise above $37.5 billion, the Secretary is required to recoup a progressively reduced amount of the outlays. At some high insured loss level, which will depend on the exact distribution of losses, the Secretary would no longer be required to recoup outlays. Since TRIA's passage, the private industry's willingness and ability to cover terrorism risk have increased. According to data collected by the Treasury, in 2017, approximately 78% of insureds purchased the optional terrorism coverage, paying $3.65 billion in premiums. Over the life of the program, premiums earned by unrelated insurers have totaled $38 billion. This relative market calm has been under the umbrella of TRIA coverage and in a period in which no terrorist attacks have occurred that resulted in government payments under TRIA. It is unclear how the insurance market would react to the expiration of the federal program, although at least some instability might be expected were this to occur. With the upcoming 2020 expiration of the program, the 116th Congress may consider legislation to extend TRIA; to date, no such legislation has been introduced.", "document_type": "crs"}
{"report": "(William L. Painter; February 28, 2019) Congress at times has sought to ascertain how much the government spends on securing the homeland, either in current terms or historically. Several factors compromise the authoritativeness of any answer to this question. One such complication is the lack of a consensus definition of what constitutes home land security, and another is that homeland security activities are carried out across the federal government, in partnership with other public and private sector entities. This insight examines those two complicating factors, and presents what information is available on historical homeland security budget authority and current DHS appropriations. No statutory definition of homeland security reflects the breadth of the current enterprise. The Department of Homeland Security is not solely dedicated to homeland security missions, nor is it the only part of the federal government with homeland security responsibilities. The concept of homeland security in U.S. policy evolved over the last two decades. Homeland security as a policy concept was discussed before the terrorist attacks of September 11, 2001. Entities like the Gilmore Commission and the Hart-Rudman Commission discussed the need to evolve national security thinking in response to the increasing relative risks posed by nonstate actors, including terrorist groups. After 9/11, policymakers concluded that a new approach was needed to address these risks. A presidential council and department were established, and a series of presidential directives were issued in the name of \"homeland security.\" These efforts defined homeland security as a response to terrorism. Later, multilevel government responses to disasters such as Hurricane Katrina expanded the concept of homeland security to include disasters, public health emergencies, and other events that threaten the United States, its economy, the rule of law, and government operations. Some criminal justice elements could arguably be included in a broad definition of homeland security. This evolution of the concept of homeland security made it distinct from other federal government security operations such as homeland defense. Homeland defense is primarily a Department of Defense (DOD) activity and is defined by DOD as \"... the protection of U.S. sovereignty, territory, domestic population, and critical defense infrastructure against external threats and aggression, or other threats as directed by the President.\" Homeland security, on the other hand, is a more broadly coordinated effort, involving not only military activities, but the operations of civilian agencies at all levels of government. The Homeland Security Act of 2002 established the Department of Homeland Security (DHS). The department was assembled from components pulled from 22 different government agencies and began official operations on March 1, 2003. Since then, DHS has undergone a series of restructurings and reorganizations to improve its effectiveness. Although DHS does include many of the homeland security functions of the federal government, several of these functions or parts of these functions remain at their original executive branch agencies and departments, including the Departments of Justice, State, Defense, and Transportation. Not all of the missions of DHS are officially \"homeland security\" missions. Some DHS components have legacy missions that do not directly relate to conventional homeland security definitions, such as the Coast Guard, and Congress has in the past debated whether FEMA and its disaster relief and recovery missions belong in the department. Section 889 of the Homeland Security Act of 2002 required the President's annual budget request to include an analysis of homeland security funding across the federal government—not just DHS. This requirement remained in effect through the FY2017 funding cycle. The resulting data series, which included agency-reported data on spending in three categories—preventing and disrupting terrorist attacks; protecting the American people, critical infrastructure, and key resources; and responding to and recovering from incidents—provides a limited snapshot of the scope of the federal government's investment in homeland security. According to these data, from FY2003 through FY2017, the entire U.S. government directed roughly $878 billion (in nominal dollars of budget authority) to those three mission sets. Annual budget authority rose from roughly $41 billion in FY2003 to a peak in FY2009 of almost $74 billion. After that peak, reported annual homeland security budget authority hovered between $66 billion and $73 billion. Thirty different agencies reported having some amount of homeland security budget authority. One can compare this growth in homeland security budget authority to the budget authority provided to DHS. The enacted budget for DHS rose from an Administration-projected $31.2 billion in FY2003, to almost $68.4 billion in FY2017. For FY2019, the Trump Administration initially requested almost $75 billion in budget authority for DHS, including over $47 billion in adjusted net discretionary budget authority through the appropriations process. This included almost $7 billion to pay for the costs of major disasters under the Stafford Act. The Administration requested additional Overseas Contingency Operations (OCO) funding for the Coast Guard as a transfer from the U.S. Navy. Neither the Senate nor the House bill reported out of their respective appropriations committees in response to that request received floor consideration. Continuing appropriations expired on December 21, 2018, leading to a 35-day partial shutdown of federal government components without enacted annual appropriations—including DHS. This was the longest such shutdown in the history of the U.S. government. On February 15, the President signed into law P.L. 116-5 , which included the FY2019 DHS annual appropriations act. The act included almost $56 billion in adjusted net discretionary budget authority, including $12 billion for the costs of major disasters, and $165 million for Coast Guard OCO funding. The current budget environment may present challenges to homeland security programs and DHS going forward. The funding demands of ongoing capital investment efforts, such as the proposed border wall and ongoing recapitalization efforts, and staffing needs for cybersecurity, border security, and immigration enforcement, may compete with one another for limited funding across the government and within DHS. (Michael E. DeVine; February 1, 2019) Intelligence support of homeland security is a primary mission of the entire Intelligence Community (IC). In fulfilling this mission, changes to IC organization and process, since 9/11, have enabled more integrated and effective support than witnessed or envisioned since its inception. The terrorist attacks of 9/11 revealed how barriers between intelligence and law enforcement, which originally had been created to protect civil liberties, had become too rigid, thus preventing efficient, effective coordination against threats. In its final report, the Commission on Terrorist Attacks upon the United States (the 9/11 Commission ) identified how these barriers contributed to degrading U.S. national security. The findings resulted in Congress and the executive branch enacting legislation and providing policies and regulations designed to enhance information sharing across the U.S. government. The Homeland Security Act of 2002 ( P.L. 107-296 ) gave the Department of Homeland Security (DHS) responsibility for integrating law enforcement and intelligence information relating to terrorist threats to the homeland. Provisions in the Intelligence Reform and Terrorist Prevention Act (IRTPA) of 2004 ( P.L. 108-458 ) established the National Counterterrorism Center (NCTC) as the coordinator at the federal level for terrorism information and assessment and created the position of Director of National Intelligence (DNI) to provide strategic management across the 17 organizational elements of the IC. New legal authorities accompanied these organizational changes. At the federal, state, and local levels, initiatives to improve collaboration across the federal government include the FBI-led Joint Terrorism Task Forces (JTTFs) and, more recently, the DHS National Network of Fusion Centers (NNFC). Within the IC, the FBI Intelligence Branch (FBI/IB), and DHS's Office of Intelligence and Analysis (OIA), and the Coast Guard Intelligence (CG-2) enterprise, are most closely associated with homeland security. OIA combines information collected by DHS components as part of their operational activities (i.e., those conducted at airports, seaports, and the border) with foreign intelligence from the IC; law enforcement information from federal, state, local, territorial and tribal sources; and private sector data about critical infrastructure and strategic resources. OIA analytical products focus on a wide range of threats to the homeland to include foreign and domestic terrorism, border security, human trafficking, and public health. OIA's customers range from the U.S. President to border patrol agents, Coast Guard personnel, airport screeners, and local first responders. Much of the information sharing is done through the NNFC—with OIA providing personnel, systems, and training. The Coast Guard Intelligence (CG-2) enterprise is the intelligence component of the United States Coast Guard (USCG). It serves as the primary USCG interface with the IC on intelligence policy, planning, budgeting and oversight matters related to maritime security and border protection. CG-2 has a component Counterintelligence Service, a Cryptologic Group, and an Intelligence Coordination Center to provide analysis and supporting products on maritime border security. CG-2 also receives support from field operational intelligence components including the Atlantic and Pacific Area Intelligence Divisions, Maritime Intelligence Fusion Centers for the Atlantic and Pacific, and intelligence staffs supporting Coast Guard districts and sectors. FBI/IB includes four component organizations: The Directorate of Intelligence has responsibility for all FBI intelligence functions, and includes intelligence elements and personnel at FBI Headquarters in field divisions. The Office of Partner Engagement develops and maintains intelligence sharing relationships across the IC, and with state, local, tribal, territorial, and international partners. The Office of Private Sector conducts outreach to businesses impacted by threats to vulnerable sectors of the economy such as critical infrastructure, the supply chain, and financial institutions. Finally, the Bureau Intelligence Council provides internal to the FBI a forum for senior-level dialogue on integrated assessments of domestic threats. While the intelligence organizations of FBI and DHS are the only IC elements solely dedicated to intelligence support of homeland security, all IC elements, to varying degrees, have some level of responsibility for the overarching mission of homeland security. For example, in addition to NCTC, the Office of the DNI (ODNI) includes the Cyber Threat Intelligence Integration Center (CTIIC). It was established in 2015 and is responsible at the federal level for providing all - source analysis of intelligence relating to cyber threats to the United States. Much like NCTC for terrorism, CTIIC provides outreach to other intelligence organizations across the federal government and at the state, and local levels to facilitate intelligence sharing and provide an integrated effort for assessing and providing warning of cyber threats to the homeland. IC organizational developments since 9/11 underscore the importance of adhering to privacy and civil liberties protections that many feared might be compromised by the more integrated approach to intelligence and law enforcement. This is particularly true considering the changing nature of the threat: The focus of intelligence support of homeland security has evolved from state-centric to increasingly focusing on nonstate actors, often individuals acting alone or as part of a group not associated with any state. Collecting against these threats, therefore, requires strict adherence to intelligence oversight rules and regulations, and annual training by the IC workforce for the protection of privacy and civil liberties. (Daniel Morgan; January 22, 2019) In the Department of Homeland Security (DHS), the Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating research and development (R&D) activities. The Domestic Nuclear Detection Office (DNDO) is responsible for R&D relating to nuclear and radiological threats. Several other DHS components, such as the Coast Guard, also fund R&D and R&D-related activities associated with their missions. The Common Appropriations Structure that DHS introduced in its FY2017 budget includes an account titled Research and Development in seven different DHS components. Issues for DHS R&D in the 116 th Congress may include coordination, organization, and impact. The Under Secretary for S&T, who leads the S&T Directorate, has statutory responsibility for coordinating homeland security R&D both within DHS and across the federal government (6 U.S.C. §182). The Director of DNDO also has an interagency coordination role with respect to nuclear detection R&D (6 U.S.C. §592). Both internal and external coordination are long-standing congressional interests. Regarding internal coordination, the Government Accountability Office (GAO) concluded in a 2012 report that because so many components of the department are involved, it is difficult for DHS to oversee R&D department-wide. In January 2014, the joint explanatory statement for the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) directed DHS to implement and report on new policies for R&D prioritization. It also directed DHS to review and implement policies and guidance for defining and overseeing R&D department-wide. In July 2014, GAO reported that DHS had updated its guidance to include a definition of R&D and was conducting R&D portfolio reviews across the department, but that it had not yet developed policy guidance for DHS-wide R&D oversight, coordination, and tracking. In December 2015, the joint explanatory statement for the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) stated that DHS \"lacks a mechanism for capturing and understanding research and development (R&D) activities conducted across DHS, as well as coordinating R&D to reflect departmental priorities.\" A challenge for external coordination is that the majority of homeland security-related R&D is conducted by other agencies, most notably the Department of Defense and the Department of Health and Human Services. The Homeland Security Act of 2002 directs the Under Secretary for S&T, \"in consultation with other appropriate executive agencies,\" to develop a government-wide national policy and strategic plan for homeland security R&D (6 U.S.C. §182), but no such plan has ever been issued. Instead, the S&T Directorate has developed R&D plans with selected individual agencies, and the National Science and Technology Council (a coordinating entity in the Executive Office of the President) has issued government-wide R&D strategies in selected topical areas, such as biosurveillance. DHS has reorganized its R&D-related activities several times. In December 2017, it established a new Countering Weapons of Mass Destruction Office (CWMDO), consolidating DNDO, most functions of the Office of Health Affairs (OHA), and some other elements. DNDO and OHA were themselves both created, more than a decade ago, largely by reorganizing elements of the S&T Directorate. The Countering Weapons of Mass Destruction Act of 2018 ( P.L. 115-387 ) expressly authorized the establishment and activities of CWMDO. The 116 th Congress may examine the implementation of that act. The organization of DHS laboratory facilities may also be a focus of attention in the 116 th Congress. At its establishment, the S&T Directorate acquired laboratories from other departments, including the Plum Island Animal Disease Center (from the Department of Agriculture) and the National Urban Security Technology Laboratory, then known as the Environmental Measurements Laboratory (from the Department of Energy). It subsequently absorbed some laboratory facilities from other DHS components (such as the Transportation Security Laboratory from the Transportation Security Administration), but other DHS components retained their own laboratories (such as the U.S. Coast Guard Research and Development Center). During the 115 th Congress, the Federal Bureau of Investigation agreed to assume some of the operational costs of the S&T Directorate's National Biodefense Analysis and Countermeasures Center, and DHS proposed to transfer operational responsibility for the National Bio and Agro-Defense Facility—a biocontainment laboratory currently being built by the S&T Directorate in Manhattan, Kansas—to the Department of Agriculture. In testimony at a Senate hearing in 2018, the Administration's nominee to be Under Secretary for S&T described the S&T Directorate's mission as \"to deliver results\" and referred to \"timely delivery and solid return on investment.\" Members of Congress and other stakeholders have sometimes questioned the impact of DHS R&D programs and whether enough of their results are ultimately implemented in products actually used in the U.S. homeland security enterprise. Part of the debate has been about finding the right balance between near-term and long-term goals. In testimony at House hearing in 2017, a former Under Secretary for S&T stated that the directorate \"has worked hard to focus on being highly relevant—shifting from the past focus on long-term basic research to near-term operational impact.\" Yet testimony from an industry witness at the same House hearing stated that \"there is a perception among some in the industry that S&T programs only infrequently significantly impact the operational or procurement activities of the DHS components.\" The 116 th Congress may continue to examine the effectiveness and impact of DHS R&D. (John W. Rollins, January 29, 2019) On October 4, 2018, President Trump released his Administration's first National Strategy for Counterterrorism. The overarching goal of the strategy is to \"defeat the terrorists who threaten America's safety, prevent future attacks, and protect our national interests.\" In describing the need for this strategy, National Security Advisor John Bolton stated that the terrorist \"landscape is more fluid and complex than ever\" and that the strategy will not \"focus on a single organization but will counter all terrorists with the ability and intent to harm the United States, its citizens and our interests.\" The strategy states that a \" new approach \" will be implemented containing six primary thematic areas of focus: (1) pursuing terrorists to their source; (2) isolating terrorists from their sources of support; (3) modernizing and integrating the United States' counterterrorism authorities and tools; (4) protecting American infrastructure and enhancing resilience; (5) countering terrorist radicalization and recruitment; and (6) strengthening the counterterrorism abilities of U.S. international partners. In announcing the strategy, President Trump stated, \"When it comes to terrorism, we will do whatever is necessary to protect our Nation.\" In contrast, former President Obama's final National Strategy for Counterterrorism, published on June 28, 2011, primarily focused on global terrorist threats emanating from Al Qaeda and associated entities. The overarching goal of this strategy was to \"disrupt, dismantle, and eventually defeat Al Qaeda and its affiliates and adherents to ensure the security of our citizens and interests.\" This strategy stated that the \"preeminent security threat to the United States continues to be from Al Qaeda and its affiliates and adherents.\" The strategy focused on the threats posed by geographic dispersal of Al Qaeda, its affiliates, and adherents, and identified principles that would guide United States counterterrorism efforts: Adhering to Core Values, Building Security Partnerships, Applying Tools and Capabilities Appropriately, and Building a Culture of Resilience. In announcing the release of this strategy, President Obama included a quote from the speech he gave announcing the killing of Osama Bin Laden, \"As a country, we will never tolerate our security being threatened, nor stand idly by when our people have been killed. We will be relentless in defense of our citizens and our friends and allies. We will be true to the values that make us who we are. And on nights like this one, we can say to those families who have lost loved ones to Al Qaeda's terror: Justice has been done.\" Since President Trump's Counterterrorism Strategy was published, many security observers have pointed to the similarities and differences between the two Administration's approaches to counterterrorism. Table 1 , below, presents the language contained in each strategy identifying major thematic aspects of the two counterterrorism strategies. (Paul Parfomak; March 1, 2019) Ongoing threats against the nation's natural gas, oil, and refined product pipelines have heightened concerns about the security risks to these pipelines, their linkage to the electric power sector, and federal programs to protect them. In a December 2018 study, the Government Accountability Office (GAO) stated that, since the terrorist attacks of September 11, 2001, \"new threats to the nation's pipeline systems have evolved to include sabotage by environmental activists and cyber attack or intrusion by nations.\" In a 2018 Federal Register notice, the Transportation Security Administration stated that it expects pipeline companies will report approximately 32 \"security incidents\" annually—both physical and cyber. The Pipeline and LNG Facility Cybersecurity Preparedness Act ( H.R. 370 , S. 300 ) would require the Secretary of Energy to enhance coordination among government agencies and the energy sector in pipeline security; coordinate incident response and recovery; support the development of pipeline cybersecurity applications, technologies, demonstration projects, and training curricula; and provide technical tools for pipeline security. Congress and federal agencies have raised concerns since at least 2010 about the physical security of energy pipelines, especially cross-border oil pipelines. These security concerns were heightened in 2016 after environmentalists in the United States disrupted five pipelines transporting oil from Canada. In 2018, the Transportation Security Administration's Surface Security Plan identified improvised explosive devices as key risks to energy pipelines, which \"are vulnerable to terrorist attacks largely due to their stationary nature, the volatility of transported products, and [their] dispersed nature.\" Among these risks, according to some analysts, are the possibility of multiple, coordinated attacks with explosives on the natural gas pipeline system, which potentially could \"create unprecedented challenges for restoring gas flows.\" As with any internet-enabled technology, the computer systems used to operate much of the pipeline system are vulnerable to outside manipulation. An attacker can exploit a pipeline control system in a number of ways to disrupt or damage pipelines. Such cybersecurity risks came to the fore in 2012 after reports of a series of cyber intrusions among U.S. natural gas pipeline operators. In April 2018, new cyberattacks reportedly caused the shutdown of the customer communications systems (separate from operation systems) at four of the nation's largest natural gas pipeline companies. Most recently, in January 2019, congressional testimony by the Director of National Intelligence singled out gas pipelines as critical infrastructure vulnerable to cyberattacks which could cause disruption \"for days to weeks.\" Pipeline cybersecurity concerns are exacerbated by growing interdependency between the pipeline and electric power sectors. A 2017 Department of Energy (DOE) staff report highlighted the electric power sector's growing reliance upon natural gas-fired generation and, as a result, security vulnerabilities associated with pipeline gas supplies. These concerns were echoed in a June 2018 op-ed by two commissioners on the Federal Energy Regulatory Commission (FERC) who wrote, \"as … natural gas has become a major part of the fuel mix, the cybersecurity threats to that supply have taken on new urgency.\" A November 2018 report by the PJM regional transmission organization concluded that \"while there is no imminent threat,\" the security of generation fuel supplies, especially natural gas and fuel oil, \"has become an increasing area of focus.\" In a February 2019 congressional hearing on electric grid security, the head of the North American Electric Reliability Corporation (NERC) testified that pipeline and electric grid interdependency \"is fundamental\" to security. The Transportation Security Administration (TSA) within the Department of Homeland Security (DHS) administers the federal program for pipeline security. The Aviation and Transportation Security Act of 2001 ( P.L. 107-71 ), which established TSA, authorized the agency \"to issue, rescind, and revise such regulations as are necessary\" to carry out its functions (§101). The Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) directs TSA to promulgate pipeline security regulations and carry out necessary inspection and enforcement if the agency determines that regulations are appropriate (§1557(d)). However, to date, TSA has not issued such regulations, relying instead upon industry compliance with voluntary guidelines for pipeline physical and cybersecurity. The pipeline industry maintains that regulations are unnecessary because pipeline operators have voluntarily implemented effective physical and cybersecurity programs. The 2018 GAO study identified a number of weaknesses in the TSA program, including inadequate staffing, outdated risk assessments, and uncertainty about the content and effectiveness of its security standards. In fulfilling its responsibilities, TSA cooperates with the Department of Transportation's (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA)—the federal regulator of pipeline safety—under the terms of a 2004 memorandum of understanding (MOU) and a 2006 annex to facilitate transportation security collaboration. TSA also cooperates with DOE's recently established Office of Cybersecurity, Energy Security, and Emergency Response (CESER), whose mission includes \"emergency preparedness and coordinated response to disruptions to the energy sector, including physical and cyber-attacks.\" TSA also collaborates with the Office of Energy Infrastructure Security at the Federal Energy Regulatory Commission—the agency which regulates the reliability and security of the bulk power electric grid. Over the last few years, most debate about the federal pipeline security program has revolved around four principal issues. Some in Congress have suggested that TSA's current pipeline security authority and voluntary standards approach may be appropriate, but that the agency may require greater resources to more effectively carry out its mission. Others stakeholders have debated whether security standards in the pipeline sector should be mandatory—as they are in the electric power sector—especially given their growing interdependency. Still others have questioned whether any of TSA's regulatory authority over pipeline security should move to another agency, such as the DOE, DOT, or FERC, which they believe could be better positioned to execute it. Concern about the quality, specificity, and sharing of information about pipeline threats also has been an issue. (Shawn Reese; March 6, 2019) Congress has historically legislated and conducted oversight on the U.S. Secret Service (USSS) because of USSS' public mission of protecting individuals such as the President and his family, and the USSS mission of investigating financial crimes. Most recently, the 115 th Congress conducted oversight on challenges facing the Service and held hearings on legislation that addressed costs associated with USSS protective detail operations and special agents' pay. These two issues remain pertinent in the 116 th Congress due to recent, but failed, attacks on USSS protectees, and the media's and public's attention on the cost the USSS incurs while protecting President Donald Trump and his family. In October 2018, attempted bombings targeted former President Barack Obama, former Vice President Joe Biden, and former First Lady Hillary Clinton. Prior to these attempted attacks, the media reported other USSS security breaches, including two intruders (March and October 2017) climbing the White House fence, and the USSS losing a government laptop that contained blueprints and security plans for the Trump Tower in New York City. Various security breaches during President Obama's Administration resulted in several congressional committee hearings. Presidential safety is and has been a concern throughout the nation's history. For example, fears of kidnapping and assassination threats to Abraham Lincoln began with his journey to Washington, DC, for the inauguration in 1861. Ten Presidents have been victims of direct assaults by assassins, with four resulting in death. Since the USSS started protecting Presidents in 1906, seven assaults have occurred, with one resulting in death (President John F. Kennedy). 18 U.S.C. Section 3056(a) explicitly identifies the following individuals authorized for USSS protection: President, Vice President, President- and Vice President-elect; immediate families of those listed above; former Presidents, their spouses, and their children under the age of 16; former Vice Presidents, their spouses, and their children under the age of 16; visiting heads of foreign states or governments; distinguished foreign visitors and official U.S. representatives on special missions abroad; and major presidential and vice presidential candidates within 120 days of the general presidential elections, and their spouses. Regardless of the location of protectees or costs associated with protective detail operations, the USSS is statutorily required to provide full-time security. Congress has reinforced this requirement in the past. In 1976, Congress required the USSS to not only secure the White House, but also the personal residences of the President and Vice President. However, the costs incurred by the USSS during the Trump Administration have generated interest and scrutiny. This includes the USSS leasing property from President Trump, and the frequency with which President Trump and his family have traveled. Reportedly, the USSS leased property in Trump Tower in New York City. The USSS informed CRS that leasing property from a protectee is not a new requirement with the Trump Administration, but the USSS would neither confirm nor deny leasing Trump Tower property. The USSS stated that it has leased a structure in the past at former Vice President Joe Biden's personal home in Delaware to conduct security operations. The USSS will not confirm if it is still leasing this property. Another protection cost issue other than leasing property from protectees is the overall cost of protective detail operations. One aspect of protective detail operations that has garnered attention from the media and the public is President Trump's and his family's travel. Some question whether the President and his family have traveled more than other Presidents and their families and what, if any, impact that has on security costs. The security cost of this travel is difficult to assess, because the USSS is required to provide only annual budget justification information on \"Protection of Persons and Facilities.\" The USSS does not provide specific costs related to individual presidential, or immediate family travel. The USSS states that it does not provide specific costs associated with protectee protection due to the information being a security concern. USSS security operations and the costs associated with these operations represent consistent issues of congressional concern. USSS protectees have been—and may continue to be—targeted by assassins. Congress may wish to consider USSS protection issues within this broader context as it conducts oversight and considers funding for the ever-evolving threats to USSS protectees and the rapidly changing technology used in USSS security operations. (Shawn Reese; February 19, 2019) Due to the October 2018 attempted bombing attacks on current and former government officials (and others), there may be congressional interest in policy issues surrounding protective details for government officials. Attacks against political leaders and other public figures have been a consistent security issue in the United States. According to a 1998 U.S. Marshals Service (USMS) report, data on assassinations and assassination attempts against federal officials suggest that elected officials are more likely to be targeted than those holding senior appointed positions. Congress also may be interested due to media reports of costs or budgetary requests associated with funding security details for the heads of some departments and agencies, including the Department of Education, the Department of Labor, and the Environmental Protection Agency. In a 2000 report, the Government Accountability Office (GAO) stated that it was able to identify only one instance when a Cabinet Secretary was physically harmed as a result of an assassination attempt. This occurred when one of the Lincoln assassination conspirators attacked then-Secretary of State William Seward in his home in 1865. Even with few attempted attacks against appointed officials, GAO reported that federal law enforcement entities have provided personal protection details (PPDs) to selected executive branch officials since at least the late 1960s. In total, GAO reported that from FY1997 through FY1999, 42 officials at 31 executive branch agencies received security protection. Personnel from 27 different agencies protected the 42 officials: personnel from their own agencies or departments protected 36 officials, and personnel from other agencies or departments, such as the U.S. Secret Service (USSS) and the USMS, protected the remaining 6 officials. This Insight provides a summary of the statutory authority for executive branch official security, a Trump Administration proposal to consolidate this security under the USMS, and issues for congressional consideration. The USSS and the State Department are the only two agencies that have specific statutory authority to protect executive branch officials. The USSS is authorized to protect specific individuals under 18 U.S.C. §3056(a); the State Department's Diplomatic Security Service special agents are authorized to protect specific individuals under 22 U.S.C. §2709(a)(3). In 2000, GAO reported that other agencies providing protective security details to executive branch officials cited various other legal authorities. These authorities included the Inspector General Act of 1978 (5 U.S.C., App. 3), a specific delegation of authority set forth in 7 C.F.R. §2.33(a)(2), and a 1970 memorandum from the White House Counsel to Cabinet departments. The Trump Administration proposed consolidating protective details at certain civilian executive branch agencies under the USMS to more effectively and efficiently monitor and respond to potential threats. This proposal was made in an attempt to standardize executive branch official protection in agencies that currently have USMS security details or have their own employees deputized by the USMS. This proposal would not affect any law enforcement or military agencies with explicit statutory authority to protect executive branch officials, such as the USSS or the Department of State's Diplomatic Security Service. Threat assessments would be conducted with support from the USSS. Specifically, the Trump Administration proposed that the USMS be given the authority to manage protective security details of specified executive branch officials. These officials include the Secretaries of Education, Labor, Energy, Commerce, Veterans Affairs, Agriculture, Transportation, Housing and Urban Development, and the Interior; the Deputy Attorney General; and the Administrator of the Environmental Protection Agency. The Trump Administration proposed that Deputy U.S. Marshals would protect all of these Cabinet officials. Currently, the USMS provides Deputy U.S. Marshals only for the Secretary of Education and the Deputy Attorney General's protective details. These two departments, however, do not have explicit statutory authority for protective details. The Administration's proposal appears to authorize the USMS to staff all protective details of executive branch officials (excluding the USSS and the Departments of State and Defense) deemed to need security, even protective security details that presently are staffed by agencies' employees. Even though the USMS implements or oversees the protection of certain executive branch officials, there appears to be no current study or research to assess the number of additional U.S. Marshals that would be needed to expand protective details to identified executive branch officials under this proposal. Additionally, the proposal does not address the funding that may be needed for USMS protection of executive branch officials. The proposal, however, does state that the Office of Management and Budget would coordinate with the Department of Justice and affected agencies on the budgetary implications. (Kristin Finklea; January 31, 2019) The United States sustains a multi-billion dollar illegal drug market. An estimated 28.6 million Americans, or 10.6% of the population age 12 or older, had used illicit drugs at least once in the past month in 2016. The 2018 National Drug Threat Assessment indicates that Mexican transnational criminal organizations (TCOs) continue to dominate the U.S. drug market. They \"remain the greatest criminal drug threat to the United States; no other group is currently positioned to challenge them.\" The Drug Enforcement Administration (DEA) indicates that these TCOs maintain and expand their influence by controlling lucrative smuggling corridors along the Southwest border and by engaging in business alliances with other criminal networks, transnational gangs, and U.S.-based gangs. TCOs either transport or produce and transport illicit drugs north across the U.S.-Mexico border. Traffickers move drugs through ports of entry, concealing them in passenger vehicles or comingling them with licit goods on tractor trailers. Traffickers also rely on cross-border subterranean tunnels and ultralight aircraft to smuggle drugs, as well as other transit methods such as cargo trains, passenger busses, maritime vessels, or backpackers/\"mules.\" While drugs are the primary goods trafficked by TCOs, they also generate income from other illegal activities such as the smuggling of humans and weapons, counterfeiting and piracy, kidnapping for ransom, and extortion. After being smuggled across the border, the drugs are distributed and sold within the United States. The illicit proceeds may then be laundered or smuggled as bulk cash back across the border. While the amount of bulk cash seized has declined over the past decade, it remains a preferred method of moving illicit proceeds—along with money or value transfer systems and trade-based money laundering. More recently, traffickers have relied on virtual currencies like Bitcoin to move money more securely. To facilitate the distribution and local sale of drugs in the United States, Mexican drug traffickers have sometimes formed relationships with U.S. gangs. Trafficking and distribution of illicit drugs is a primary source of revenue for these U.S.-based gangs and is among the most common of their criminal activities. Gangs may work with a variety of drug trafficking organizations, and are often involved in selling multiple types of drugs. Current domestic drug threats, fueled in part by Mexican traffickers, include opioids such as heroin, fentanyl, and diverted or counterfeit controlled prescription drugs; marijuana; methamphetamine; cocaine; and synthetic psychoactive drugs. While marijuana remains the most commonly used illicit drug, officials are increasingly concerned about the U.S. opioid epidemic. As part of this, the most recent data show an elevated level of heroin use in the United States, including elevated overdose deaths linked to heroin and other opioids, and there has been a simultaneous increase in its availability, fueled by a number of factors including increased production and trafficking of heroin by Mexican criminal networks. Increases in Mexican heroin production and its availability in the United States have been coupled with increased heroin seizures at the Southwest border. According to the DEA, the amount of heroin seized in the United States, including at the Southwest border, has generally increased over the past decade; nationwide heroin seizures reached 7,979 kg in 2017, with 3,090 kg (39%) seized at the Southwest border, up from about 2,000 kg seized at the Southwest border a decade earlier. In addition to heroin, officials have become increasingly concerned with the trafficking of fentanyl, particularly nonpharmaceutical, illicit fentanyl. Fentanyl can be mixed with heroin and/or other drugs, sometimes without the consumer's knowledge, and has been involved in an increasing number of opioid overdoses. Nonpharmaceutical fentanyl found in the United States is manufactured in China and Mexico. It is trafficked into the United States across the Southwest border or delivered through mail couriers directly from China, or from China through Canada. Federal law enforcement has a number of enforcement initiatives aimed at countering drug trafficking, both generally and at the Southwest border. For example, the Organized Crime Drug Enforcement Task Force (OCDETF) program targets major drug trafficking and money laundering organizations, with the intent to disrupt and dismantle them. The OCDETFs target organizations that have been identified on the Consolidated Priority Organization Targets (CPOT) List, the \"most wanted\" list of drug trafficking and money laundering organizations. In addition, the High Intensity Drug Trafficking Areas (HIDTA) program provides financial assistance to federal, state, local, and tribal law enforcement agencies operating in regions of the United States that have been deemed critical drug trafficking areas. There are 29 designated HIDTAs throughout the United States and its territories, including a Southwest border HIDTA that is a partnership of the New Mexico, West Texas, South Texas, Arizona, and San Diego-Imperial HIDTAs. Several existing strategies may also be leveraged to counter Southwest border drug trafficking. For instance, the National Southwest Border Counternarcotics Strategy (NSBCS), first launched in 2009, outlines domestic and transnational efforts to reduce the flow of illegal drugs, money, and contraband across the Southwest border. In addition, the 2011 Strategy to Combat Transnational Organized Crime provided the federal government's first broad conceptualization of transnational organized crime, highlighting it as a national security concern and outlining threats posed by TCOs—one being the expansion of drug trafficking. The 116 th Congress may consider a number of options in attempting to reduce drug trafficking from Mexico to the United States. For instance, Congress may question whether the Trump Administration will continue or alter priorities set forth by existing strategies. Policymakers may also be interested in examining various federal drug control agencies' roles in reducing Southwest border trafficking. This could involve oversight of federal law enforcement and initiatives such as the OCDETF program, as well as the Office of National Drug Control Policy (ONDCP) and its role in establishing a National Drug Control Strategy and Budget, among other efforts. (Audrey Singer; February 11, 2019) The United States' southern border with Mexico runs for approximately 2,000 miles over diverse terrain, varied population densities, and discontinuous sections of public, private, and tribal land ownership. The Department of Homeland Security (DHS) Customs and Border Protection (CBP) is primarily responsible for border security, including the construction and maintenance of tactical infrastructure, installation and monitoring of surveillance technology, and the deployment of border patrol agents to prevent unlawful entries of people and contraband into the United States (including unauthorized migrants, terrorists, firearms, narcotics, etc.). CBP's border management and control responsibilities also include facilitating legitimate travel and commerce. Existing statute pertaining to border security confers broad authority to DHS to construct barriers along the U.S. border to deter unlawful crossings, and more specifically directs DHS to deploy fencing along \"at least 700 miles\" of the southern border with Mexico. The primary statute is the Illegal Immigration and Immigrant Responsibility ACT (IIRIRA) as amended by the REAL ID Act of 2005 , the Secure Fence Act of 2006 , and the Consolidated Appropriations Act of 2008 . On January 25, 2017, President Trump issued Executive Order 13767 \"Border Security and Immigration Enforcement Improvements,\" which addresses, in part, the physical security of the southern border and instructed the DHS Secretary to \"take all appropriate steps to immediately plan, design, and construct a physical wall along the southern border, using appropriate materials and technology to most effectively achieve complete operational control.\" The order did not identify the expected mileage of barriers to be constructed. The three main dimensions of border security are tactical infrastructure, surveillance technology, and personnel. Tactical Infrastructure. Physical barriers between ports of entry (POE) on the southern border vary in age, purpose, form, and location. GAO reports that at the end of FY2015, about one-third of the southern border, or 654 miles, had a primary layer of fencing: approximately 350 miles designed to keep out pedestrians, and 300 miles to prevent vehicles from entering. Approximately 90% of the 654 miles of primary fencing is located in the five contiguous Border Patrol sectors located in California, Arizona, and New Mexico, while the remaining 10% is in the four eastern sectors (largely in Texas) where the Rio Grande River delineates most of the border. About 82% of primary pedestrian fencing and 75% of primary vehicle fencing are considered \"modern\" and were constructed between 2006 and 2011. Across 37 discontinuous miles, the primary layer is backed by a secondary layer (pedestrian) as well as an additional 14 miles of tertiary fencing (typically to delineate property lines). No new miles of primary fencing have been constructed since the 654 miles were completed in 2015, but sections of legacy fencing and breached areas have been replaced. Additional tactical infrastructure includes roads, gates, bridges, and lighting designed to support border enforcement, and to disrupt and impede illicit activity. Surveillance Technology. To assist in the detection, identification, and apprehension of individuals illegally entering the United States between POEs, CBP also maintains border surveillance technology. Ground technology includes sensors, cameras, and radar tailored to fit specific terrain and population densities. Aerial and marine surveillance vessels, manned and unmanned, patrol inaccessible regions. Personnel. Approximately 19,500 Border Patrol agents were stationed nationwide, with most (16,600) at the southern border in FY2017. Subject to available appropriations, Executive Order 13767 calls on CBP to take appropriate action to hire an additional 5,000 Border Patrol agents. However, CBP continues to face challenges attaining statutorily established minimum staffing levels for its Border Patrol positions despite increased recruitment and retention efforts. Southern border security may be improved by changes to tactical infrastructure, surveillance technology, and personnel. A challenge facing policymakers is in determining the optimal mix of border security strategies given the difficulty of measuring the effectiveness of current efforts. While the number of apprehensions of illegal entrants has long been used to measure U.S. Border Patrol performance, it does not measure illegal border crossers who evade detection by the Border Patrol. When apprehensions decline, whether it is due to fewer illegal entrants getting caught or fewer attempting to enter illegally is not known. Other difficulties include measuring the contribution of any single border security component in isolation from the others, assessing the extent to which enforcement actions deter illegal crossing attempts, and evaluating ongoing enforcement efforts outside of border-specific actions and their impact on border security. Section 1092 of the FY2017 National Defense Authorization Act (NDAA) directs the Secretary of Homeland Security to provide annual metrics on border security that are intended to help address some of the challenges of measuring the impact of border security efforts. DHS has produced baseline estimates that go beyond apprehensions statistics to measure progress towards meeting the goals contained in Executive Order 13767. Congress, through CBP appropriations—and appropriations to its predecessor agency, the Immigration and Naturalization Service (INS)—has invested in tactical infrastructure, surveillance technology, and personnel since the 1980s. Given the changing level of detail and structure of appropriations for border infrastructure over time, it is not possible to develop a consistent history of congressional appropriations specifically for border infrastructure. However, CBP has provided the Congressional Research Service (CRS) with some historical information on how it has allocated funding for border barrier planning, construction, and operations and support. Between FY2007 and FY2018, CBP allocated just over $5.0 billion to these activities, including almost $1.4 billion specifically for border barrier construction and improvement through a new \"Wall Program\" activity in its FY2018 budget. The 116 th Congress is considering a mix of tactical infrastructure, including fencing, surveillance technologies, and personnel to enhance border security between U.S. POEs. Some experts have warned that the northern border may need more resources and oversight than it is currently receiving in light of potential national security risks. Other border security priorities that may be considered during the 116 th Congress include improvements to existing facilities and screening and detection capacity at U.S. POEs. (Shawn Reese; February 19, 2019) The United States is threatened by a wide array of hazards, including natural disasters, acts of terrorism, viral pandemics, and man-made disasters, such as the Deepwater Horizon oil spill. The way the nation strategically prioritizes and allocates resources to prepare for all hazards can significantly influence the ultimate cost to society, both in the number of human casualties and the scope and magnitude of economic damage. As authorized in part by the Post-Katrina Emergency Reform Act of 2006 (PKEMRA; P.L. 109-295 ), the President, acting through the Federal Emergency Management Agency (FEMA) Administrator, is directed to create a \"national preparedness goal\" (NPG) and develop a \"national preparedness system\" (NPS) that will help \"ensure the Nation's ability to prevent, respond to, recover from, and mitigate against natural disasters, acts of terrorism, and other man-made disasters\" (6 U.S.C. §§743-744). Currently, NPG and NPS implementation is guided by Presidential Policy Directive 8: National Preparedness (PPD-8), issued by then-President Barack Obama on March 30, 2011. PPD-8 rescinded the existing Homeland Security Presidential Directive 8: National Preparedness (HSPD-8), which was released and signed by then-President George W. Bush on December 17, 2003. As directed by PPD-8, the NPS is supported by numerous strategic component policies, national planning frameworks (e.g., the National Response Framework), and federal interagency operational plans (e.g., the Protection Federal Interagency Operational Plan). In brief, the NPS and its many component policies represent the federal government's strategic vision and planning, with input from the whole community, as it relates to preparing the nation for all hazards. The NPS also establishes methods for achieving the nation's desired level of preparedness for both federal and nonfederal partners by identifying the core capabilities necessary to achieve the NPG. A capability is defined in law as \"the ability to provide the means to accomplish one or more tasks under specific conditions and to specific performance standards. A capability may be achieved with any combination of properly planned, organized, equipped, trained, and exercised personnel that achieves the intended outcome.\" A core capability is defined in PPD-8 as a capability that is \"necessary to prepare for the specific types of incidents that pose the greatest risk to the security of the Nation.\" Furthermore, the NPS includes annual National Preparedness Reports that document progress made toward achieving national preparedness objectives. The reports rely heavily on self-assessment processes, called the Threat and Hazard Identification and Risk Assessment (THIRA) and Stakeholder Preparedness Review (SPR), to incorporate the perceived risks and capabilities of the whole community into the NPS. In this respect, the NPS's influence may extend to federal, state, and local budgetary decisions, the assignment of duties and responsibilities across the nation, and the creation of long-term policy objectives for disaster preparedness. It is within the Administration's discretion to retain, revise, or replace the overarching guidance of PPD-8, and the 116 th Congress may provide oversight of the NPS. Congress may have interest in overseeing a variety of factors related to the NPS, such as whether the NPS conforms to the objectives of Congress, as outlined in the PKEMRA statute; the NPS is properly informed by quantitative and qualitative data and outcome metrics, such as those gathered by the THIRA and SPR, as has been regularly recommended by the Government Accountability Office; federal roles and responsibilities have, in Congress's opinion, been properly assigned and resourced to execute the core capabilities needed to prevent, protect against, mitigate the effects of, respond to, and recover from the greatest risks; nonfederal resources and stakeholders are efficiently incorporated into NPS policies; and federal, state, and local government officials are allocating the appropriate amount of resources to the disaster preparedness mission relative to other homeland security missions. Ultimately, if the NPS is determined not to fulfill the objectives of the 116 th Congress, Congress could consider amending the PKEMRA statute to create new requirements, or revise existing provisions, to manage the amount of discretion afforded to the President in NPS implementation. This could mean, for example, the 116 th Congress directly assigning certain preparedness responsibilities to federal agencies through authorizing legislation different than those indicated by national preparedness frameworks. As a hypothetical example, Congress could decide that certain federal agencies, such as the Department of Commerce or Housing and Urban Development, should take more or less of a role in the leadership of disaster recovery efforts following major incidents than is prescribed by the National Disaster Recovery Framework. Congress also may consider prioritizing the amount of budget authority provided to some core capabilities relative to others. As a hypothetical example, Congress may prioritize resourcing those federal programs needed to support the nation's core capability of \"Screening, Search, and Detection\" versus resourcing those federal programs needed to support \"Fatality Management Services.\" (Elizabeth M. Webster; February 26, 2019) After the President issues an emergency or major disaster declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act, 42 U.S.C. §§5121 et seq.), the Federal Emergency Management Agency (FEMA) may provide various temporary housing assistance programs to meet disaster survivors' needs. However, limitations on these programs may make it difficult to transition disaster survivors into permanent housing. This Insight provides an overview of the primary housing assistance programs available under the Stafford Act, and potential considerations for Congress. FEMA-provided housing assistance may include short-term, emergency sheltering accommodations under Section 403 of the Stafford Act (42 U.S.C. §5170b), including the Transitional Sheltering Assistance (TSA) program, which received significant attention as it was coming to an end for disaster survivors of Hurricane Maria from Puerto Rico. This transition process highlighted challenges to helping individuals and families obtain interim and permanent housing following a disaster. TSA is intended to provide short-term hotel/motel accommodations to individuals and families who are unable to return to their pre-disaster primary residence because a declared disaster rendered it uninhabitable or inaccessible. The initial period of TSA assistance is 5-14 days, and it can be extended in 14-day intervals for up to 6 months from the date of the disaster declaration. However, some Hurricane Maria disaster survivors from Puerto Rico remained in the TSA program for nearly one year due to extensions of the program (including by court order). Hurricane Maria is not the only incident that has received multiple TSA program extensions; disaster survivors of Hurricanes Harvey, Irma, and Sandy also received extensions for nearly a year. Research suggests that housing-instable individuals and families may have an \"increased risk of adverse mental health outcomes,\" which may reveal a drawback to using an emergency sheltering solution, such as TSA, to house individuals and families in hotels/motels for extended periods of time. Interim housing needs may be better met through FEMA's Individuals and Households Program (IHP) under Section 408 of the Stafford Act (42 U.S.C. §5174). Financial (e.g., assistance to reimburse temporary lodging expenses and rent alternate housing accommodations) and/or direct (e.g., multi-family lease and repair and manufactured housing units (MHUs)) assistance may be available to eligible individuals and households who, as a result of a disaster, have uninsured or under-insured necessary expenses and serious needs that cannot be met through other means or forms of assistance. IHP assistance is intended to be temporary, and is generally limited to a period of 18 months from the date of the declaration, but may be extended by FEMA. Although IHP provides various assistance options, eligibility and programmatic limitations exist on their receipt and use. For example, disaster survivors whose primary residence is determined to be habitable or who have access to adequate rent-free housing may be ineligible to receive assistance, even if they are unable to return for other reasons (e.g., lack of employment). Challenges to providing financial assistance, such as rental assistance, may include lack of available, affordable housing stock. Additionally, regulations and policies may not permit FEMA to immediately adjust rental payment rates to reflect the location where a disaster survivor has relocated . So even if housing stock is available, the difference in cost may result in the inability of some eligible applicants to secure a housing unit. Challenges to providing direct assistance, such as MHUs, may include restrictions on the placement of MHUs. Additionally, FEMA's direct lease assistance program is usually only offered if rental resources are scarce, and the area where direct lease assistance is available may be limited. Further, following a catastrophic incident additional challenges include the need to restore infrastructure, community services, and employment opportunities, which may impact where disaster survivors decide to locate following a disaster. This decision may impact the benefits for which they may be eligible. Following Hurricanes Katrina and Rita, Ike and Gustav, and Sandy, FEMA executed Interagency Agreements with the U.S. Department of Housing and Urban Development (HUD) to administer the Disaster Housing Assistance Program (DHAP) in order to provide rental assistance and case management services. Although DHAP fell under Section 408 of the Stafford Act and was funded through the Disaster Relief Fund, it was not subject to some of the limitations of the IHP, and it may have allowed families to receive more assistance for longer periods of time than they may have received under IHP. Despite being identified as a promising interim housing strategy and potential solution to the challenge of meeting long-term housing needs in the National Disaster Housing Strategy, FEMA has not implemented DHAP following more recent disasters. Most recently, in response to the Governor of Puerto Rico's request to authorize DHAP, FEMA stated DHAP would not be implemented, because FEMA and HUD \"offered multiple housing solutions that are better able to meet the current housing needs of impacted survivors.\" FEMA also noted that the Office of Inspector General (OIG) had raised concerns about DHAP's cost effectiveness; the OIG recommended that, before FEMA activates DHAP again, it \"[c]onduct a cost-benefit analysis.... \" FEMA provides temporary housing assistance to meet short-term and interim disaster housing needs; however, clearly defining the use of these programs and identifying a process to assist some disaster survivors with attaining permanent housing may be needed to comprehensively address disaster housing needs throughout all phases of recovery. Congress may request an evaluation of FEMA's capacity to adequately and cost-effectively meet the needs of disaster survivors. Congress may also evaluate the roles of government and private/nonprofit entities in providing disaster housing assistance; require FEMA to collaborate with disaster housing partners to identify and outline short, interim, and long-term disaster housing solutions; and require an update to the National Disaster Housing Strategy to reflect the roles and responsibilities of housing partners, current practices and solutions, and the findings of any such evaluations. Congress may also pursue legislative solutions, including by consolidating, eliminating, or revising existing authorities and programs, or creating new programs that address unmet needs. (Elizabeth M. Webster; February 26, 2019) The Disaster Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254 ), which became law on October 5, 2018, is the most comprehensive legislation on the Federal Emergency Management Agency's (FEMA's) disaster assistance programs since the passage of the Sandy Recovery Improvement Act of 2013 (SRIA, Division B of P.L. 113-2 ) and, previous to that, the Post-Katrina Emergency Management Reform Act of 2006 (PKEMRA, P.L. 109-295 ). The legislation focuses on improving predisaster planning and mitigation, response, and recovery, and increasing FEMA accountability. As such, it amends many sections of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act, 42 U.S.C. §§5121 et seq. ). Generally, DRRA's amendments to the Stafford Act apply to major disasters and emergencies declared on or after August 1, 2017. Other new authorities apply to major disasters and emergencies declared on or after January 1, 2016. Congress may consider tracking the implementation of DRRA's requirements, which include \"more than 50 provisions that require FEMA policy or regulation changes for full implementation.... \" In addition to its reporting and rulemaking requirements—many of which include 2019 deadlines—much of DRRA's implementation is at FEMA's discretion. This Insight provides an overview of some of DRRA's broad impacts with a few significant, illustrative provisions, and potential considerations for Congress. DRRA includes provisions that have the potential to improve disaster preparedness, response, and recovery, but also to increase federal spending. For example, under the revised authority under Section 203 of the Stafford Act (42 U.S.C. §5133)—Predisaster Hazard Mitigation—the President may provide financial and technical assistance by setting aside up to 6% of the estimated aggregated amount of certain federal grant assistance from the Disaster Relief Fund (DRF), including grants made pursuant to awards of Public Assistance (PA) and Individual Assistance (IA) under the Stafford Act. Previously, predisaster mitigation was funded by discretionary annual appropriations, and financial assistance was limited by the amount available in the National Predisaster Mitigation Fund, which was separate from the DRF. Post-DRRA, predisaster mitigation has the potential to have significantly higher funding through the new set-aside from the DRF, but how this will be implemented and managed by FEMA remains uncertain. Additionally, DRRA may significantly increase the amount of financial assistance provided under Section 408 of the Stafford Act (42 U.S.C. §5174)—Federal Assistance to Individuals and Households. Prior to DRRA, an individual or household could receive up to $33,300 (FY2017; adjusted annually) in financial assistance, including both housing assistance and other needs assistance (ONA). Post-DRRA, financial assistance for repairs and replacement of housing may not exceed $34,900 (FY2019; adjusted annually), and separate from that, financial assistance for ONA may not exceed $34,900 (FY2019; adjusted annually). Financial assistance to rent alternate housing accommodations is not subject to the cap. In the past, the maximum amount of financial assistance may have resulted in applicants with significant home damage and/or other needs having little to no remaining funding available to pay for rental assistance. Changes post-DRRA may result in increased spending on temporary disaster housing assistance and ONA. FEMA may also pilot some provisions of the DRRA, as it has done with regard to management costs incurred in the administration of the PA Program and the Hazard Mitigation Grant Program (HMGP). Following the passage of DRRA, the PA management cost reimbursement rate increased to 12% of the total grant award; 7% may be used by the grantee, and 5% by the subgrantee. Previously, PA management costs were capped at 3.34% for major disasters and 3.90% for emergency declarations. Additionally, the HMGP management cost reimbursement rate increased to 15% of the total grant award; 10% may be used by the grantee, and 5% by the subgrantee. Previously, HMGP management costs were capped at 4.89% for major disasters. In addition, prior to DRRA, there was not a pass-through requirement for subgrantees to receive a percentage of management costs. A number of DRRA provisions may restrict FEMA's ability to recoup assistance, and the retroactive implementation of these provisions may be of interest to Congress. For example, FEMA may waive a debt owed by an individual or household if distributed in error by FEMA and if its collection would be inequitable, provided there was no fault on behalf of the debtor. Additionally, with regard to Section 705 of the Stafford Act (42 U.S.C. §5205)—Disaster Grant Closeout Procedures—DRRA amends the statute of limitations on FEMA's ability to recover assistance. No administrative action to recover payments may be initiated \"after the date that is 3 years after the date of transmission of the final expenditure report for project completion as certified by the grantee.\" Prior to the passage of DRRA, the statute of limitations applied to the final expenditure report for the disaster or emergency. This is a significant change because it may take years to close all of the projects associated with a disaster. Previously, it was possible to recoup funding from projects that may have been completed and closed years prior to FEMA's pursuit of funding because the disaster was still open. DRRA includes reporting requirements that may influence decisionmaking regarding future disaster response and recovery. The earliest reports were due not later than 90 days after DRRA's enactment (thus a deadline of January 3, 2019). Some provisions also include briefings ahead of the reporting deadline. In addition to FEMA, other federal entities are assigned responsibilities (e.g., the Office of Inspector General for the Department of Homeland Security, which was required to initiate an audit of certain FEMA contracts by November 4, 2018). In general, among other options, Congress may consider whether to evaluate if FEMA's implementation of provisions fulfills congressional intent; review the effectiveness and impacts of FEMA's DRRA-related regulations and policy guidance; or assess the effects of DRRA-related changes to federal assistance for past and future disasters. (Diane P. Horn; February 19, 2019) The National Flood Insurance Program (NFIP) is authorized by the National Flood Insurance Act of 1968 (Title XIII of P.L. 90-448, as amended, 42 U.S.C. §§4001 et seq.) and is the primary source of flood insurance coverage for residential properties in the United States. The NFIP has two main policy goals: (1) to provide access to primary flood insurance, thereby allowing for the transfer of some of the financial risk from property owners to the federal government, and (2) to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP engages in many \"noninsurance\" activities in the public interest: it identifies and maps flood hazards, disseminates flood-risk information through flood maps, requires community land-use and building-code standards, contributes to community resilience by providing a mechanism to fund rebuilding after a flood, and offers grants and incentive programs for household- and community-level investments in flood-risk reduction. Over 22,000 communities participate in the NFIP, with more than 5.1 million policies providing over $1.3 trillion in coverage. The program collects more than $4.7 billion in annual revenue from policyholders' premiums, fees, and surcharges. Floods are the most common natural disaster in the United States, and all 50 states have experienced floods in recent years. The NFIP is managed by the Federal Emergency Management Agency (FEMA) through its subcomponent, the Federal Insurance and Mitigation Administration (FIMA). Communities are not legally required to participate in the program; they participate voluntarily to obtain access to NFIP flood insurance. Communities choosing to participate in the NFIP are required to adopt land-use and control measures with effective enforcement provisions and to regulate development in the floodplain. FEMA has set forth in federal regulations the minimum standards required for participation in the NFIP; however, these standards have the force of law only if they are adopted and enforced by a state or local government. Legal enforcement of floodplain management standards is the responsibility of participating NFIP communities, which also can elect to adopt higher standards to mitigate flood risk. The NFIP approaches the goal of reducing comprehensive flood risk primarily by requiring participating communities to collaborate with FEMA to develop and adopt flood maps called Flood Insurance Rate Maps (FIRMs). Property owners in the mapped Special Flood Hazard Area (SFHA), defined as an area with a 1% annual chance of flooding, are required to purchase flood insurance as a condition of receiving a federally backed mortgage. This mandatory purchase requirement is enforced by the lender rather than FEMA. Property owners who do not obtain flood insurance when required may find that they are not eligible for certain types of disaster assistance after a flood. The NFIP is funded from (1) premiums, fees, and surcharges paid by NFIP policyholders; (2) annual appropriations for flood-hazard mapping and risk analysis; (3) borrowing from the Treasury when the balance of the National Flood Insurance Fund is insufficient to pay the NFIP's obligations (e.g., insurance claims); and (4) reinsurance proceeds if NFIP losses are sufficiently large. The NFIP was not designed to retain funding to cover claims for truly extreme events; instead, the statute allows the program to borrow money from the Treasury for such events. For most of the NFIP's history, the program was able to borrow relatively small amounts from the Treasury to pay claims and then repay the loans with interest. However, this changed when Congress increased the borrowing limit to $20.775 billion to pay claims in the aftermath of the 2005 hurricane season (particularly Hurricanes Katrina, Rita, and Wilma). Congress increased the borrowing limit again in 2013, after Hurricane Sandy, to the current limit of $30.425 billion. The 2017 hurricane season was the second-largest claims year in the NFIP's history, with approximately $10.5 billion currently paid in response to Hurricanes Harvey, Irma, and Maria. At the beginning of the 2017 hurricane season, the NFIP owed $24.6 billion. On September 22, 2017, the NFIP borrowed the remaining $5.825 billion from the Treasury to cover claims from Hurricane Harvey, reaching the NFIP's borrowing limit. On October 26, 2017, Congress canceled $16 billion of NFIP debt in order to pay claims for Hurricanes Harvey, Irma, and Maria. FEMA borrowed another $6.1 billion on November 9, 2017, bringing the debt back up to $20.525 billion. For the 2018 hurricane season, as of November 2018, the NFIP had paid $117 million in claims for Hurricanes Florence and Michael. As of January 2019, the NFIP has $9.9 billion of remaining borrowing authority. The NFIP's debt is conceptually owed by current and future participants in the NFIP, as the insurance program itself owes the debt to the Treasury and pays for accruing interest on that debt through the premium revenues of policyholders. Since 2005, the NFIP has paid $2.82 billion in principal repayments and $4.2 billion in interest to service the debt through the premiums collected on insurance policies. The October 2017 cancellation of $16 billion of NFIP debt represents the first time that NFIP debt has been canceled. Since the end of FY2017, Congress has enacted 10 short-term NFIP reauthorizations. The NFIP is currently authorized until May 31, 2019. The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key components of the program. Unless reauthorized or amended by Congress, the following will occur on May 31, 2019: (1) the authority to provide new flood insurance contracts will expire; however, insurance contracts entered into before the expiration would continue until the end of their policy term and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. (Diane P. Horn; February 19, 2019) The National Flood Insurance Program (NFIP) is the primary source of flood insurance for residential properties in the United States, with more than 5.1 million policies providing over $1.3 trillion in coverage in over 22,000 communities. Since the end of FY2017, 10 short-term NFIP reauthorizations have been enacted, and the NFIP is currently authorized until May 31, 2019. Unless reauthorized or amended by Congress, on May 31, 2019, (1) the authority to provide new flood insurance contracts will expire and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion . A number of bills were introduced in the 115 th Congress to provide longer-term reauthorization of the NFIP and numerous other changes to the program. The House passed H.R. 2874 on November 14, 2017. Three reauthorization bills were introduced in the Senate, S. 1313 , S. 1368 , and S. 1571 ; however, none of these were considered by the Senate in the 115 th Congress. Historically, Congress has asked the Federal Emergency Management Agency (FEMA) to set NFIP premiums that are simultaneously \"risk-based\" and \"reasonable.\" Except for certain subsidies, statute directs that NFIP flood insurance rates should reflect the true flood risk to the property. Properties paying less than the full risk-based rate are determined by the date when the structure was built relative to the date of the community's Flood Insurance Rate Map (FIRM), rather than the flood risk or the policyholder's ability to pay. Congress has directed FEMA to subsidize flood insurance for properties built before the community's first FIRM (the pre-FIRM subsidy ). When FIRMs are updated, FEMA also \"grandfathers\" properties at their rate from past FIRMs through a cross-subsidy. Under existing law, pre-FIRM subsidies are being phased out, whereas grandfathering is retained indefinitely. Reforming the premium structure to reflect full risk-based rates could place the NFIP on a more financially sustainable path, risk-based price signals could give policyholders a clearer understanding of their true flood risk, and a reformed rate structure could encourage more private insurers to enter the market. However, charging risk-based premiums may mean that insurance for some properties becomes unaffordable. FEMA currently does not have the authority or funding to implement an affordability program. An NFIP-funded affordability program would require either raising flood insurance rates for NFIP policyholders or diverting resources from another existing use. An area of controversy involves NFIP coverage of properties that have suffered multiple flood losses. One concern is the cost to the program; another is whether the NFIP should continue to insure properties that are likely to have further losses. According to FEMA, claims on repetitive loss (RL) and severe repetitive loss (SRL) properties since 1968 amount to approximately $17 billion, or approximately 30% of claims paid. Reducing the number of RL and SRL properties, through mitigation or relocation, could reduce claims and improve the NFIP's financial position. Under current statute, the NFIP cannot refuse to insure any property; however, from April 1, 2019, FEMA will introduce an SRL premium equal to 5% of the annual premium for SRL properties. Private insurers play a major role in administering the NFIP through the Write-Your-Own (WYO) program, where private insurance companies are paid to issue and service NFIP policies. WYO companies take on little flood risk themselves; instead, the NFIP retains the financial risk of paying claims for these policies. Few private insurers compete with the NFIP in the primary residential flood insurance market. However, private insurer interest in providing flood coverage has increased recently, and many see private insurance as a way of transferring flood risk from the federal government to the private sector. For example, FEMA has transferred $4.322 billion of its flood risk to the capital markets through reinsurance in 2017, 2018, and 2019. Private flood insurance may offer some potential advantages over the NFIP, including more flexible policies, broader coverage, integrated coverage with homeowners' insurance, business interruption insurance, or lower-cost coverage for some consumers. Private marketing also might increase the overall amount of flood coverage purchased. More people purchasing flood insurance, either NFIP or private, could help to reduce the amount of disaster assistance provided by the federal government. Increasing private insurance, however, may have some disadvantages compared to the NFIP. Unlike the NFIP, private coverage availability would not be guaranteed to all floodplain residents, and consumer protections could vary in different states. In addition, private sector competition might increase the financial exposure and volatility of the NFIP, as private markets likely will seek out policies that offer the greatest likelihood of profit. In the most extreme case, the private market might \"cherry-pick\" (i.e., adversely select) the profitable, lower-risk NFIP policies that are \"overpriced\" either due to cross-subsidization or imprecise rate structures. This could leave the NFIP with a higher density of actuarially unsound policies that are directly subsidized or benefit from cross-subsidization. An increase in private flood insurance policies that \"depopulates\" the NFIP also may undermine the NFIP's ability to generate revenue, reducing the ability or extending the time required to repay previously incurred debt. The NFIP's role has historically been broader than just providing insurance. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to those who otherwise would not be able to obtain it and to reduce the government's cost after floods. The NFIP has tried to reduce the impact of floods through flood-mapping and mitigation efforts. It is unclear how effectively the NFIP could play this broader role if private insurance became a large part of the flood marketplace. The majority of funding for flood mapping and floodplain management comes from the Federal Policy Fee (FPF), paid by all NFIP policyholders. To the extent that the private flood insurance market grows and policies move from the NFIP to private insurers, FEMA would no longer collect the FPF on those policies and less money would be available for floodplain mapping and management. (Michael H. Cecire; April 24, 2019) The Community Disaster Loan (CDL) program was developed to help local governments manage tax and other revenue shortages following a disaster. Administered by the Federal Emergency Management Agency (FEMA), CDLs provide financial liquidity to local governments through a structured loan that may be converted to grants when certain financial conditions are met . CDLs are codified in Section 417 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( 42 U.S.C. §5184 , as amended). Modified \"non-traditional\" CDL programs were developed in response to Hurricanes Rita and Katrina in 2005, and CDL-type programs for Puerto Rico and the U.S. Virgin Islands (USVI) were developed following 2017's Hurricanes Harvey, Irma, and Maria. This Insight provides an overview of traditional and non-traditional CDLs and the policy issues they may raise in the 116th Congress, particularly with regard to CDL-type instruments developed for Puerto Rico and USVI. The CDL program may be of interest to Congress given observed increases in frequency and severity of disaster events and apparent congressional interest in oversight issues related to federal disaster response in Puerto Rico and USVI. CDLs were first authorized in the Disaster Relief Act of 1974 ( P.L. 93-288 ) but are defined and established in the Stafford Act (which amended the Disaster Relief Act) to help local governments manage acute tax and other revenue loss after a disaster, which could inhibit their ability to adequately serve their communities during recovery. To qualify for a traditional CDL, an applicant must be located in a presidentially declared disaster area; show substantial loss (greater than 5%) of tax and other revenues; not be in arrears on any other previous CDL loans; and be permitted to take federal loans under their respective state law. CDLs are statutorily capped at $5 million ( P.L. 106-390 ); and are structured around underwriting criteria that account for estimated revenue losses, the local government's annual operating budget, and a disaster's economic effects. CDLs are five-year loans, extendable to 10 years at FEMA's discretion (44 C.F.R. §206.367(c)), with interest rates determined by the Treasury Secretary. FEMA also issues guidance on how a CDL can be canceled, which involves submitting evidence of disaster-related operating deficits and associated revenue analyses to FEMA. In special circumstances, Congress has authorized FEMA to administer non-traditional CDLs and CDL-type programs with different eligibility and technical requirements. Unlike traditional CDLs, these loans are not subject to the $5 million cap, and eligible areas are more geographically concentrated. For example, as part of the federal response to extensive economic damage caused by Hurricanes Katrina and Rita, Congress passed legislation in 2005 ( P.L. 109-88 ) and 2006 ( P.L. 109-234 ) to make approximately $1 billion available to support nearly $1.4 billion of non-traditional CDLs. While these non-traditional CDLs initially prohibited cancelation, subsequent 2007 legislation ( P.L. 110-28 ) mandated that cancelation be allowed. Following Hurricanes Harvey, Irma, and Maria, Congress passed legislation ( P.L. 115-72 ) providing funding for CDL-type loan instruments for Puerto Rico and USVI. This was not the first time territories received CDLs, with USVI receiving nearly $180 million in CDL funding after Hurricanes Hugo (1989) and Marilyn (1995) prior to the $5 million cap's enactment. However, while the 2017 loan instruments were based on CDLs defined in the Stafford Act, and appropriations were made to the same fund drawn for CDLs, the resulting program was functionally different due to significant exceptions and modifications, including: Territorial governments were considered municipalities for the purposes of the program; The $5 million cap was lifted; Loan recipients were allowed to receive more than one loan; Loans could only be canceled at the discretion of the Secretary of Homeland Security in consultation with the Secretary of the Treasury; and The Secretary of Homeland Security, in consultation with the Secretary of the Treasury, solely determined the \"terms, conditions, eligible uses, and timing and amount\" of such loans. The CDL-type instrument's statutory ambiguities related to loan cancelation and terms were further complicated by Puerto Rico's broader fiscal crisis and the existence of a federal oversight board, as established by the Puerto Rico Oversight, Management, and Economic Stability Act of 2016 (PROMESA; P.L. 114-187 ; see CRS Report R44532, The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; H.R. 5278, S. 2328) , coordinated by D. Andrew Austin). Subsequent legislation in February 2018 ( P.L. 115-123 ) required the Puerto Rican government to establish oversight board-approved recovery plans with monthly reports as a requirement for the CDL-type loan disbursement. Given this CDL-type instrument's statutory ambiguities, the constitutional limitations of territories, and the extent of disaster across the entirety of both territories, the CDL-type program raises potential questions of equity compared to federal disaster response to states, such as in the aftermath of Hurricanes Katrina and Rita, where CDL-type disaster assistance was more comprehensive and less restricted. Should the rate and severity of disaster-related damages continue along recent trends or accelerate, traditional CDLs or their non-traditional analogues may be increasingly utilized for disaster response or recovery purposes. However, due to their relatively low funding cap and specialized nature, traditional CDLs may be inadequately suited to widespread and severe disaster events. However, non-traditional CDLs or CDL-type instruments may lack sufficiently defined disbursement and cancelation criteria, which potentially contribute to concerns over equity and utility. With respect to Puerto Rico and USVI, Congress may seek to specify program terms and cancelation criteria to bring these instruments more in line with traditional CDLs, or the types used following Hurricanes Katrina and Rita. Considering the CDL program in broader terms, Congress may consider structuring CDLs more expansively to account for a wider universe of disaster and emergency scenarios, such as state- or executive agency-based disaster declarations, expanding or lifting the $5 million cap, or simplifying the loan forgiveness process. One potential alternative would be to restructure CDLs with automatic forgiveness thresholds based on predetermined triggering criteria. Congress could also develop disaster assistance instruments that separately address immediate governmental liquidity, disaster response, and long-term recovery needs. (Lennard P. Kruger; March 27, 2019) Structural firefighting—which typically refers to fighting fires in residential, commercial, and other types of buildings—is primarily the responsibility of local governments. During the 1990s, shortfalls in state and local budgets, coupled with increased responsibilities of local fire departments, led many in the fire service community to call for additional financial support from the federal government. In response, Congress established firefighter assistance grant programs within the Federal Emergency Management Agency (FEMA) to provide additional support for local fire departments. In 2000, the 106 th Congress established the Assistance to Firefighters Grant Program (AFG), which provides grants directly to local fire departments and unaffiliated Emergency Medical Services (EMS) organizations to help address a variety of equipment, vehicle, training, and other firefighter-related and EMS needs. AFG also supports fire prevention projects and firefighter health and safety research and development through the Firefighter Prevention and Safety (FP&S) grant program. Subsequently, in 2003, the 108 th Congress established the Staffing for Adequate Fire and Emergency Response (SAFER) Program, which provides grants to fund firefighter hiring by career and combination fire departments, and recruitment and retention by volunteer and combination fire departments. Firefighter assistance grants are distributed nationwide to career, volunteer, combination, and paid-on-call fire departments serving urban, suburban, and rural areas. There is no set geographical formula for the distribution of AFG or SAFER grants. Award decisions are made by a peer panel based on the merits of the application and the needs of the community. The majority of AFG funding goes to rural (mostly volunteer) fire departments, while the majority of SAFER funding goes to urban (mostly career) fire departments. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) appropriated $700 million for firefighter assistance grants, consisting of $350 million for AFG and $350 million for SAFER, with funds to remain available through September 30, 2020. Dating back to the programs' establishment, Congress has appropriated a total of $8.325 billion to AFG (since FY2001), and $4.235 billion to SAFER (since FY2005). On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 ( P.L. 115-98 ). P.L. 115-98 extended the AFG and SAFER authorization through FY2023 at a level of $750 million for each program (plus additional annual increases based on the Consumer Price Index); extended sunset provisions for AFG and SAFER through September 30, 2024; provided that the U.S. Fire Administration (USFA) may develop and make widely available an online training course on AFG and SAFER grant administration; expanded SAFER hiring grant eligibility to cover the conversion of part-time or paid-on-call firefighters to full-time firefighters; directed FEMA, acting through the Administrator of USFA, to develop and implement a grant monitoring and oversight framework to mitigate and minimize risks of fraud, waste, abuse, and mismanagement related to the AFG and SAFER grant programs; and made various technical corrections to the AFG and SAFER statute. Firefighter assistance grants were impacted by the partial government shutdown. For all three grant programs (AFG, SAFER, and FP&S) the application and awards process was delayed. For the 2018 round, the application windows for AFG and FP&S closed in October and December, respectively, but the processing of those applications could not move forward until the shutdown ended. The opening of the 2018 round application window for SAFER grants was also delayed, and subsequently opened on February 15, 2019. For grants already awarded (in the 2017 and previous rounds), grant recipients were unable to draw down funds during the shutdown, which may have disrupted the ability of the grantees to continue grant-funded activities, including personnel costs covered by SAFER grants. This disruption may continue after the government shutdown due to a backlog of payment requests that will need to be processed once furloughed FEMA grant personnel return to work. For additional discussion on the impact of delayed grant payments due to a government shutdown, see CRS In Focus IF11020, Introduction to the U.S. Economy: Business Investment . An issue for the 116 th Congress is how equitably and effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. Another issue is annual appropriations for AFG and SAFER. As is the case with many federal programs, concerns over the federal budget deficit could impact funding levels for AFG and SAFER. At the same time, firefighter assistance budgets will likely receive heightened scrutiny from the fire service community, given the local budgetary shortfalls that many fire departments may face. Additionally, a continuing issue related to SAFER hiring grants has been whether SAFER statutory restrictions should be waived to permit grantees to use SAFER funds for retention and rehiring. Division F, Title III, Section 307 of the Consolidated Appropriations Act, 2018 states that FEMA \"may\" grant SAFER waiver authority. However, for the 2018 round of SAFER awards, FEMA has chosen not to exercise that authority, and thus will not provide SAFER hiring grants for retaining or rehiring firefighters. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) (Division A, Title III, Section 307) also includes SAFER waiver authority for the FY2019 round of SAFER awards. (Jill C. Gallagher; January 29, 2019) First responders and other emergency personnel use emergency communications systems to communicate with each other during day-to-day operations and large-scale disasters. Emergency communication systems are also used to enable communications between the public and response agencies. Emergency communication systems include 911 systems that receive calls from the public, requesting assistance or reporting an emergency, and that relay those calls to response agencies (e.g., local police and fire departments); land mobile radio (LMR) systems that allow police, firefighters, and emergency medical service (EMS) workers to communicate with each other during day-to-day operations and disasters; the First Responder Network (FirstNet), the nationwide public safety broadband network, which is currently under deployment and scheduled for completion in 2022, will enable response agencies at all levels of government to communicate via voice and data (e.g., text, videos); and alerting systems that notify people of emergencies and warn people of danger. These systems often rely on different technologies that can inhibit interoperability and response. For example, 911 systems are not able to send 911 text messages to first responders in the field. State and local police and fire agencies use various radio technologies that can connect responders within their agency, but may not be interoperable with surrounding systems. Federal, state, and local public safety agencies are investing in Internet Protocol (IP)-based technologies to improve communications, coordination, and response. The federal government has created an IP-based national alerting system that allows authorized agencies to send a single alert through multiple alerting systems. The federal government has also invested in FirstNet, a nationwide seamless, IP-based, high-speed mobile communications network that will enable public safety users to communicate via voice and data with other public safety agencies. There is also interest at all levels of government in upgrading 911 systems to next generation, IP-based systems, to enable callers to share data and to interconnect systems. As emergency communications systems converge toward a common IP-based platform, there are opportunities and challenges. Advancements in geo-location technologies present opportunities to find 911 callers more easily; however, integration of these technologies into legacy 911 systems is challenging. Advancements in alerting have enabled officials to send alerts to mobile phones, yet some people still rely on landline phones for communications. Interconnecting systems could improve information sharing but presents challenges in terms of privacy and security of data flowing across multiple networks. IP-based technologies enable emergency communications systems to interconnect, creating the potential for nationwide systems. The emergence of nationwide systems may create a need for new policies that integrate these new technologies into response plans and protocols, and policies that support collaborative planning, training, and exercises across all levels of government to improve response. Further, migration to new technologies is costly. Not all jurisdictions may be able to fund technology upgrades. Adoption of new technologies may also require upgrades to and investments in emergency communications systems and private telecommunications networks. The 116 th Congress may continue its oversight of the effectiveness of emergency communications before, during, and after natural or man-made disasters (e.g., hurricanes, wildfires), and the roles and responsibilities of federal, state, and local agencies, and private telecommunications providers during response. Congress may also to examine the effectiveness of federal programs established to promote and support emergency communications, including National 9-1-1 Program administered by the National Highway and Traffic Safety Administration (NHTSA) in the U.S. Department of Transportation, which provides federal leadership and coordination in supporting and promoting optimal 911 services; First Responder Network Authority (FirstNet), the federal authority within the National Telecommunications and Information Administration (NTIA) in the U.S. Department of Commerce established to create the nationwide public safety broadband network; Integrated Public Alert and Warning System (IPAWS), the national alerting system administered by the Federal Emergency Management Agency (FEMA); Emergency Communications Division in the U.S. Department of Homeland Security's Cybersecurity and Infrastructure Security Agency (CISA), which is responsible for promoting interoperable and coordinated communications across all levels of government; and federal grant programs that fund emergency communications. Congress may also focus on the activities of the Federal Communications Commission (FCC) Public Safety and Homeland Security Bureau (PSHSB), which administers FCC policies related to emergency communications, including rules for carriers supporting 911 services; state and local use of 911 fees; public safety spectrum; public alerts, including rules for carriers delivering wireless alerts to mobile phones; disaster management and reporting of private network outages; and restoration efforts. (Sarah A. Lister, February 11, 2019) In its quadrennial National Health Security Strategy , the U.S. Department of Health and Human Services (HHS) states: U.S. National Health Security actions protect the nation's physical and psychological health, limit economic losses, and preserve confidence in government and the national will to pursue its interests when threatened by incidents that result in serious health consequences whether natural, accidental, or deliberate. The strategy aims to ensure the resilience of the nation's public health and health care systems against potential threats, including natural disasters and human-caused incidents, emerging and pandemic infectious diseases, acts of terrorism, and potentially catastrophic risks posed by nation-state actors. By law, the HHS Secretary \"shall lead all Federal public health and medical response to public health emergencies and incidents covered by the [ National Response Framework ],\" and the HHS Assistant Secretary for Preparedness and Response (ASPR) shall \"[s]erve as the principal advisor to the Secretary on all matters related to Federal public health and medical preparedness and response for public health emergencies.\" However, under the nation's federal system of government, state and local agencies and private entities are principally responsible for ensuring health security and responding to threats. The federal government's ability to affect national health security, through funding assistance and other policies, is relatively limited. The nation's public health emergency management laws have expanded considerably following the terrorist attacks in 2001. Since then, a number of public health emergencies revealed both improvements in the nation's readiness, and persistent gaps. The National Health Security Preparedness Index (NHSPI, or the Index), a public-private partnership begun in 2013, currently assesses preparedness, using 140 measures, across all 50 states and the District of Columbia. In its latest comprehensive report, for 2017, NHSPI found overall incremental improvements over earlier years. However, the report highlighted differing preparedness levels among states, stating: Large differences in preparedness persisted across states, and those in the Deep South and Mountain West regions lagged significantly behind the rest of the nation. If current trends continue, the average state will require 9 more years to reach health security levels currently found in the best-prepared states. In addition, measures of health care delivery—for example, the number of certain types of health care providers (including mental health providers) per unit of population, access to trauma centers, the extent of preparedness planning in long-term care facilities, and uptake of electronic health record systems—continued to yield the lowest scores. The readiness of individual health care facilities and services to respond to a mass casualty incident or other public health emergency has been a persistent health security challenge. Aiming to address this, the HHS Centers for Medicare & Medicaid Services (CMS) has implemented a rule that requires 17 different types of health care facilities and service providers to meet a suite of preparedness benchmarks in order to participate in (i.e., receive payments from) the Medicare and Medicaid programs. The Emergency Preparedness (EP) Rule became effective in November 2017. Policymakers may be interested to see, in NHSPI results and through other studies, the extent to which the EP Rule yields meaningful improvements in national health system preparedness in the future. For incidents declared by the President as major disasters or emergencies under the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , as amended), public assistance is available to help federal, state, and local agencies with the costs of some public health emergency response activities, such as ensuring food and water safety. However, no federal assistance program is designed specifically to cover the uninsured costs of individual health care services that may be needed as a consequence of a disaster. There is no consensus that this should be a federal responsibility. Nonetheless, during mass casualty incidents, hospitals and health care providers may face expectations to deliver care without a clear payment source of reimbursement. Also, the response to an incident could necessitate activities that begin before Stafford Act reimbursement to HHS has been approved, or that are not eligible for reimbursement under the act. (For example, there is no precedent for a major disaster declaration under the Stafford Act for an outbreak of infectious disease, and only one declaration of emergency, for West Nile virus in 2000.) Although the HHS Secretary has authority for a no-year Public Health Emergency Fund (PHEF), Congress has not appropriated monies to it for many years, and no funds are currently available. On several occasions Congress has provided supplemental appropriations to address uncompensated disaster-related health care costs and otherwise unreimbursed state and local response costs flowing from a public health emergency. These incidents include Hurricane Katrina and Hurricane Sandy, the 2009 H1N1 influenza pandemic, and the Ebola and Zika virus outbreaks. Supplemental appropriations for hurricane relief were provided for costs (such as uncompensated care) that were not reimbursed under the Stafford Act. The act was not invoked for the three infectious disease incidents, and supplemental appropriations were therefore needed to fund most aspects of the federal response to those outbreaks. Some policymakers, concerned about the inherent uncertainty in supplemental appropriations, have proposed dedicated funding approaches for public health emergency response. Two proposals in the 115 th Congress ( S. 196 , H.R. 3579 ) would have appropriated funds to the PHEF. These measures did not advance. In appropriations for FY2019 ( P.L. 115-245 ), Congress established and appropriated $50 million (to remain available until expended) to an Infectious Diseases Rapid Response Reserve Fund , to be administered by the Director of the HHS Centers for Disease Control and Prevention (CDC) \"to prevent, prepare for, or respond to an infectious disease emergency.\" The 116 th Congress may choose to examine any uses of this new fund by CDC, and to consider appropriations to the PHEF, as well as other options to improve national health security preparedness. (Chris Jaikaran; March 29, 2019) For policymaking purposes, cybersecurity can be considered the security of cyberspace . Taking this broad view allows policymakers to examine discrete elements of cybersecurity and determine which parts to address through the legislative process. Cyberspace, itself, includes the infrastructure necessary for the internet to work (e.g., wires, modems, and servers), the services used via the internet (e.g., web applications and websites), the devices on the network (e.g., computers and Internet-of-Things devices), and the users of those devices. Cybersecurity involves many interrelated issues, such as education; workforce management; research and development; intelligence; law enforcement; and defense. Recent congressional activity and Member statements suggest that five specific cybersecurity topics with an intersection to homeland security may arise during the 116 th Congress. This Insight first discusses the importance of risk management for cybersecurity, then introduces each of those topics: Information Sharing, Critical Infrastructure Protection and Cybersecurity, Cyber Supply Chain Risk Management, Federal Agency Oversight, and Data Protection and Privacy. When computer scientists refer to cybersecurity, they are generally not talking about security as an absolute and achievable state of safety. Rather, they refer to cybersecurity as a process of risk management. Risk can be managed in four ways: it can be avoided, transferred, controlled, and accepted. To know the appropriate course of action, an organization must first understand which risks they face. Risks can be understood as the threats an organization faces, the vulnerabilities they have to their systems, and the consequences or impacts of a successful attack against them. Risks can be managed against systems, networks, and data. In managing those risks, managers employ an information security model to understand risk areas and tools to address risks. Policymakers could choose to examine these risk management factors holistically, or to consider specific elements and ways to address specific risk factors. Policymakers could choose to examine information sharing as a tool that may strengthen an organization's cybersecurity. The need to maintain current awareness of the relationships between technologies and attacks is a reason that information sharing is frequently included in the cybersecurity discussion. Through information sharing, one party seeks to bolster the knowledge of its partners. Information may provide opportunities for organizations to learn from one another, reduce their vulnerability to hacking, and quickly adapt to changing conditions. Successful information sharing occurs when an organization receives information, has the capability to process it, knows how to use it, and makes a change to its practices to better secure itself. However, the advantage to sharing information is only realized when the result is a valuable change in behavior because of the information shared. Some organizations may miss critical information, lack the expertise to understand it, lack the resources to take action, or otherwise not change their behavior. The National Infrastructure Protection Plan directs the owners and operators of facilities under the nation's 16 critical infrastructure sectors and the sector-governing bodies to consider cybersecurity risks to their sectors. However, their ability to understand risk and to provide resources to manage risk for their sectors varies. In an effort to bolster cybersecurity risk management, policymakers could choose to direct federal agencies to provide assistance to a sector or sectors; to engage in rulemaking; or to otherwise incentivize cybersecurity activities (e.g., expediting security clearances or prioritizing federal contracting opportunities). To assist a sector, some agencies have specific programs designed to provide information, technical assistance, or capabilities for critical infrastructure. DHS can provide assistance to all sectors. The National Institute of Standards and Technology (NIST) has published a cybersecurity framework to assist those responsible for critical infrastructure. Recent news articles and government reports have focused attention on cyber supply chain issues. Managing risks associated with a global and complex product supply chain for information technology (IT) is known as cyber supply chain risk management (C-SCRM). C-SCRM refers to addressing both the risks that foreign adversaries may introduce to products and unintentional risks, such as poor quality control and vendor management. Policymakers could choose to pursue legislative options to clarify agency responsibilities relative to C-SCRM, such as increasing awareness, providing oversight, prohibiting certain companies from supplying components or services, or requiring an entity to evaluate products for cyber supply chain risks. Federal agencies collect, process, store, and transmit sensitive information such as personally identifiable information and national security information. Agencies rely on IT to use this information and requested over $17 billion in cybersecurity funding for FY2020. Yet, the Government Accountability Office (GAO) bi-annually highlights that agencies face various challenges in IT management. This is despite existing statutes, guidance, and resources agencies have to assist in managing their IT. Congress could choose to pursue investigations, hearings, or legislation to improve oversight of the government's overall IT program(s), or could focus on an individual agency's cybersecurity efforts. In pursuing this oversight, Congress may review agency spending on IT and cybersecurity, and follow up on GAO and Inspector General (IG) recommendations related to improving agency IT management. The Equifax breach and multiple Facebook incidents have highlighted data security and privacy issues. While these concepts may be interrelated, and certain technologies, like encryption, can help achieve both, for policymaking and operational purposes they are distinct. Data security refers to strategies to keep out unauthorized users, while privacy refers to using data regardless of where it is stored or who accessed it. In keeping with the concept of risk management, it is important to consider \"from what\" one is seeking to secure their data or seek to keep it private when designing policies or strategies for security and privacy. Policymakers could choose to pursue comprehensive (such as the General Data Protection Regulation) or sectoral (such as the Health Insurance Portability and Accountability Act, HIPAA , standards) approaches to data security and privacy. In the past, the federal government has addressed these issues sectorally . But recent state and federal discussions have focused on more comprehensive approaches. (Barbara L. Schwemle; February 8, 2019) Human resources management (HRM) underlies the Department of Homeland Security's (DHS) mission and performance. DHS's Chief Human Capital Officer (CHCO) \"is responsible for the Department's human capital program,\" which is described as including such elements as \"human resources policy, systems, and programs for strategic workforce planning, recruitment and hiring, pay and leave, performance management, employee development, executive resources, labor relations, work/life and safety and health.\" Under Title 5, Section 1402, of the United States Code , a CHCO's functions include \"setting the workforce development strategy\" and aligning HRM with \"organization mission, strategic goals, and performance outcomes.\" DHS's Management Directorate web page includes the CHCO position under the Under Secretary for Management (USM). The Organizational Chart and Leadership web pages do not include the position under the USM nor explain that difference. At DHS, the CHCO is a career Senior Executive Service position. The incumbent CHCO assumed the position in January 2016. The 116 th Congress may decide to conduct oversight of DHS CHCO operations—including placement, role, and functions within the department—and DHS human resources management. Such reviews could focus on the department's plans for, and performance of, HRM. These plans are set forth in a Strategic Plan and an Annual Performance Report. The latter report for FY2020 is expected to be published along with the release of the department's budget request. Congress may also examine DHS activities related to the President's Management Agenda (PMA), particularly the agenda's Cross-Agency Priority Goal (CAP) to develop the federal workforce. These topics are briefly discussed below. Hearings, roundtables, and meetings with officials and employees could inform congressional oversight on DHS appropriations, administration, and management as they relate to HRM. Annually, on or about the anniversary of DHS's official inception, which occurred on March 1, 2003, Congress could consider conducting a review that focuses specifically on the CHCO operations and HRM policies and programs. The DHS FY2020 budget request, anticipated in March 2019, may enable Congress to conduct such a review within the context of the department's Strategic Plan, Performance Report, and PMA activities. Section 2 of the GPRA Modernization Act of 2010 ( P.L. 111-352 ) requires agency heads to submit a strategic plan that provides, among other things, \"a description of how the goals and objectives are to be achieved,\" including a description of the \"human, capital … resources required to achieve those goals and objectives.\" Section 230 of the Office of Management and Budget's (OMB) Circular No. A-11 (2018), \"Preparation, Submission and Execution of the Budget,\" stated: An agency's Strategic Plan should provide the context for decisions about performance goals, priorities, strategic human capital planning and budget planning. It should provide the framework for the detail published in agency Annual Performance Plans, Annual Performance Reports and on Performance.gov. DHS published its most recent publicly available Strategic Plan, covering FY2014-FY2018, in September 2015. The plan briefly mentioned HRM. To \"strengthen service delivery and manage DHS resources,\" the plan stated that the department would \"[r]ecruit, hire, retain, and develop a highly qualified, diverse, effective, mission-focused, and resilient workforce.\" Specific objectives identified to accomplish this were \"1) building an effective, mission-focused, diverse, and inspiring cadre of leaders; 2) recruiting a highly qualified and diverse workforce; 3) retaining an engaged workforce; and 4) solidifying a DHS culture of mission performance, adaptability, accountability, equity, and results.\" To obtain an understanding of progress on the plan's HRM components to date, Congress could ask the department to document the specific framework for these four objectives and the conditions and factors related to each being fulfilled. Congress could also ask DHS to include a statement about the expected publication of an updated Strategic Plan on the Strategic Planning page of its website. A Performance Report, required by Section 3 of P.L. 111-352 , is to be published by the first Monday in February each year and cover \"each program activity set forth in the budget.\" Among the other requirements that are specified at Title 31, Section 1115(b), of the United States Code , the plan must \"provide a description of how the performance goals are to be achieved,\" including \"the operation processes, training, skills and technology, and the human, capital, information, and other resources and strategies required to meet those performance goals.\" DHS published its most recent Performance Report, covering FY2017-FY2019, in February 2018. The report noted that the Human Capital Operating Plan (HCOP) identifies \"goals, objectives, and performance measures linked to DHS strategy\" and \"emphasizes management integration, accountability tracking, and the use of human capital data analysis to meet DHS mission needs.\" According to the department, the HCOP is used to \"identify and address critical skills gaps.\" The Performance Report stated that Component Recruitment and Outreach Plans specify \"recruitment strategies\" as \"a key element to sustain progress in skill gap closure.\" The HCOP and the Component Recruitment and Outreach Plans do not appear to be publicly available on the department's website. Congress could suggest that the department include a link to these documents on DHS.gov to facilitate consultation and oversight about measurable results for performance goals. The President Donald Trump Administration describes the PMA as setting forth \"a long-term vision for modernizing the Federal Government.\" The PMA is to be implemented through CAPs that address \"critical government-wide challenges.\" One such CAP—led by the Office of Personnel Management, OMB, and the Department of Defense—is \"Developing a Workforce for the 21 st Century.\" It seeks a strategic human capital management framework that enables managers to \"hire the best employees, remove the worst employees, and engage employees.\" Three CAP subgoals under this objective are \"Improve Employee Performance Management and Engagement,\" \"Reskill and Redeploy Human Capital Resources,\" and \"Simple and Strategic Hiring.\" The DHS CHCO is the leader for the third CAP subgoal, which includes strategies to reduce hiring times; \"better differentiate applicants' qualifications, competencies, and experience;\" and \"eliminate burdensome policies and procedures.\" Congressional oversight of PMA activities at DHS could focus on such matters as key initiatives, measureable results, and anticipated timelines for accomplishing subgoals. (William L. Painter; March 8, 2019) An unresolved debate dating from the origin of the Department of Homeland Security (DHS) is the extent of department management involvement in the functioning of departmental components. Some policy experts supported a strong management function, which would replace the leadership of the components, while others supported a limited management function that allowed DHS components to function freely in their areas of expertise, much as they had before. Once the department was established in 2003, it became clear that a small management cadre could not provide adequate coordination of policy or oversight of the department. The benefits of coordinated action by a large organization, including setting operational and budgetary priorities, were being lost due to the lack of a capable management cadre with the capacity to manage the department's diverse missions. As its components continued to perform their missions, the department undertook efforts to establish a unified identity and way of doing business. The term \"One DHS\" was used to describe these initiatives under Tom Ridge, the first Secretary of DHS, and the efforts continued through secretaries Michael Chertoff and Janet Napolitano. On April 22, 2014, Jeh Johnson, the fourth secretary of DHS, issued a memorandum to DHS leadership, entitled \"Strengthening Departmental Unity of Effort.\" This now-widely circulated memorandum set out an agenda to reform the Department of Homeland Security's way of doing business by implementing new analytical and decisionmaking processes to develop strategy, plan, and identify joint requirements across multiple department components. These would bring component leadership together above the component level to ensure unity of effort across the department. Secretary Johnson described it this way in a Federal Times interview: We've embarked on a unity of effort initiative that promotes greater coordination among departments, greater centralized decision-making at headquarters, a more strategic approach to our budget building process, a more strategic departmentwide approach to our acquisition strategy. It is clearly a balance. Within the Department of Homeland Security there are components that long predated the Department of Homeland Security. And so what we are not asking components to do is to all act and behave together. They are distinct cultures.... But what we are asking and expecting our component leadership to do is participate with us in a more strategic approach to promote greater efficiency in how we operate, how we conduct ourselves, particularly in our budget process and in our acquisitions. The memorandum laid out four areas of initial focus. 1. The first was to bring together senior leaders of the department in two groups: a Senior Leaders Council to discuss \"overall policy, strategy, operations and Departmental guidance,\" and a Deputies Management Action Group (DMAG) to \"advance joint requirements development, program and budget review, acquisition reform, operational planning, and joint operations.\" 2. The second area was to make improvements to the departmental management processes for investments. Specifically, incorporating strategic analysis and joint requirements planning into the annual budget development process, directing the DMAG to develop and facilitate a component-driven joint requirements process, and reviewing and updating the DHS acquisition oversight framework. 3. The third was developing a stronger strategy, planning, and analytic capability within the Office of Policy. 4. The fourth was to improve coordination of cross-component operations. Bipartisan and bicameral support for these reforms was shown in several hearings during the 113 th and 114 th Congresses. Both House and Senate Appropriations Committee reports have included language supportive of the department's managerial reorganization, although there has been concern expressed about keeping Congress informed about progress and consequences of reorganizations in the field. Several of the action items included in the memorandum were completed in 2014, such as the establishment of a Cost Analysis Division in the Office of the Chief Financial Officer in May 2014. The role of this division is to ensure life-cycle cost estimates are part of major acquisition plans. DHS also completed development of a Southern Border and Approaches Campaign Plan—a four-year strategic framework for joint operations securing the southern border of the United States. In 2015, DHS implemented a Unity of Effort Award, presented by the Secretary, recognizing \"outstanding efforts to significantly improve efficiency and effectiveness across the U.S. Department of Homeland Security,\" specifically noting contributions to the unity of effort initiative. At the end of the 114 th Congress, Title XIX of the FY2017 National Defense Authorization Act provided specific statutory authority to DHS for certain activities connected with the Unity of Effort initiative, including authorizing joint task forces and redefining the role of the former Office of Policy and renaming it the Office of Strategy, Policy, and Plans. At the confirmation hearing for General John Kelly, interest in management reform and the future of Johnson's Unity of Effort initiative was apparent, with both General Kelly and some Senators praising the progress that had been made. However, Secretary Kelly's six-month tenure at the department was largely devoted to other issues. Then-Deputy Secretary Elaine Duke, after a six-month tenure as Acting Secretary, noted in early 2018 that the border security mission at DHS was one where the unity of effort initiative was maturing, as components worked together to accomplish their missions. Secretary Kirstjen Nielsen, who assumed the post in December 2017, indicated in her pre-confirmation questionnaire that she intended \"to assess the effectiveness of current unity of effort programs and processes and strengthen them where needed,\" highlighting interest in \"integrating and leveraging\" capabilities and promoting joint education and training. Congress may debate the appropriate role of departmental management at DHS, the extent of engagement Congress should have as reforms go forward, and the progress of management reforms, including whether they are having the desired effect. Congress may wish to follow up on the Secretary's priorities as outlined in her questionnaire.", "summary": "In 2001, in the wake of the terrorist attacks of September 11, \"homeland security\" went from being a concept discussed among a relatively small cadre of policymakers and strategic thinkers to one broadly discussed among policymakers, including a broad swath of those in Congress. Debates over how to implement coordinated homeland security policy led to the passage of the Homeland Security Act of 2002 (P.L. 107-296), the establishment of the Department of Homeland Security (DHS), and extensive legislative activity in the ensuing years. Initially, homeland security was largely seen as counterterrorism activities. Today, homeland security is a broad and complex network of interrelated issues, in policymaking terms. For example, in its executive summary, the Quadrennial Homeland Security Review issued in 2014 delineated the missions of the homeland security enterprise as follows: prevent terrorism and enhance security; secure and manage the borders; enforce and administer immigration laws; safeguard and secure cyberspace; and strengthen national preparedness and resilience. This report compiles a series of Insights by CRS experts across an array of homeland security issues that may come before the 116th Congress. Several homeland security topics are also covered in CRS Report R45500, Transportation Security: Issues for the 116th Congress. The information contained in the Insights only scratches the surface of these selected issues. Congressional clients may obtain more detailed information on these topic and others by contacting the relevant CRS expert listed in CRS Report R45684, Selected Homeland Security Issues in the 116th Congress: CRS Experts.", "document_type": "crs"}
{"report": "In January 2019, the House agreed to H.Res. 6 , a resolution \"Adopting the Rules of the House of Representatives for the One Hundred Sixteenth Congress.\" This report summarizes amendments to House rules affecting committee procedure in the 116 th Congress (2019-2020) as provided for in H.Res. 6 . The report also describes separate orders contained in the resolution that relate to committee procedure, including the establishment of the Select Committee on the Climate Crisis and the Select Committee on the Modernization of Congress. Separate orders have the same force and effect as House rules and are commonly included in the House rules package resolution. In the 116 th Congress, rules changes that affect all House committees concern committee membership and organization, hearings and markups, and committee oversight and investigations. Changes that affect specific committees include modifications to the names, jurisdiction, or procedure of certain House committees. In the 116 th Congress, H.Res. 6 struck clause 5(c)(2) of Rule X, which stated that a Member could not serve as chair of the same standing committee or subcommittee for more than three consecutive Congresses (disregarding any service of less than a full session), except on the Committee on Rules. This amendment enables Members to serve an unrestricted number of terms as chairs, as was the case before the 104 th Congress (1995-1996) and during the 111 th Congress (2009-2010). H.Res. 6 amended clause 3(b) of Rule III to make clear that the Delegates and the Resident Commissioner from Puerto Rico may be appointed to joint committees. The rule previously mentioned only service by the Delegates and the Resident Commissioner on select and conference committees. House rules first afforded membership to standing committees to Delegates in 1871 and to the Resident Commissioner in 1904. House rules were amended in the 93 rd Congress (1973-1974) to allow the Delegates and Resident Commissioner, effective in the subsequent Congress, to be appointed to conference committees on legislation reported from committees on which they served. Chamber rules were amended in 1979 (96 th Congress) to authorize their appointment to select committees. In the 103 rd Congress (1993-1994), the House expanded eligibility to encompass all conference committees. The 116 th Congress rules provide the Delegates and the Resident Commissioner with equal status as Members on standing, select, joint, and conference committees. H.Res. 6 amended clause 10 of Rule XXIII, adding a provision that calls on any Member, Delegate, or the Resident Commissioner who has been indicted or formally charged with a felony offense that is punishable by at least two years in prison to resign from committee assignments and party caucus or conference leadership positions. Such individuals should submit their resignations from any party leadership position and any type of House or joint committee or subcommittee thereof \"unless or until\" they are acquitted or the charges are dismissed or reduced to less than a felony. Rule XXIII comprises the House's Code of Official Conduct, which was first adopted in 1968 by H.Res. 1099 (90 th Congress). In the 116 th Congress, the new language added to clause 10, subparagraph (b), supplements an existing provision written into the rule in 1975 (94 th Congress) that states that a Member, Delegate, or Resident Commissioner should refrain from committee business if the individual is convicted of a crime and may be sentenced to imprisonment. Note that clause 10 language uses the word should as opposed to shall or must . The Democratic Caucus and Republican Conference could recommend the removal of a party member from a committee assignment if the Member does not voluntarily resign. The House could then vote on a privileged resolution to remove the member. The rules package gave committees a longer period in which to adopt and publish committee rules of procedure. In the 116 th Congress, each committee has 60 days, rather than 30 days, to \"make its rules publicly available in electronic form and submit such rules for publication in the Congressional Record \" after the chair is elected in an even-numbered year. H.Res. 6 amended clause 2(a)(2) of Rule XI, striking the number 30 and replacing it with 60. According to the Rules Committee's summary of H.Res. 6, the \"change is intended to grant committees adequate time to organize, as some committees do not have a full complement of members at the start of a Congress.\" In a separate order, the rules package requires that, during the 116 th Congress, after March 1, 2019, certain lawmaking measures must be reported and be subject to related committee hearings and a markup prior to floor consideration. Otherwise, \"it shall not be in order\" to consider them on the House floor. This requirement applies to bills and joint resolutions considered under the terms of a special rule reported by the Rules Committee—excluding measures that continue appropriations, contain an emergency designation, or are listed on the Consensus Calendar and are designated for consideration. According to the separate order, a lawmaking measure is not to be considered \"pursuant to a special order of business [special rule] reported by the Committee on Rules\" if it has not been reported by a committee. If it has been reported, the committee report accompanying the bill or joint resolution is to include a list of related committee and subcommittee hearings and a designation of at least one such hearing that was used to develop or consider the measure. Bills and joint resolutions brought to the House floor under the terms of a rule from the Rules Committee are generally measures that Members want to debate at length or amend on the floor due to their complexity, controversy, or policy importance. Measures considered under special rules include appropriations bills, tax legislation, and significant reauthorization bills. Under the separate order, these types of bills and joint resolutions are to go through the committee hearing and markup process before being considered by the full chamber. However, special rules often include \"waivers\" for all or certain types of points of order against consideration of a bill. H.Res. 6 includes a separate order that requires standing committees to hold a \"Member Day Hearing\" during the first session of the 116 th Congress. This new requirement does not apply to the Committee on Ethics, and it allows the Committee on Rules to hold its Member Day Hearing in the second session of the Congress \"in order to receive testimony on proposed changes to the standing rules for the next Congress.\" According to the Rules Committee summary of H.Res. 6, Member Day Hearings allow Members, Delegates, and the Resident Commissioner, \"whether or not they are a member of the committee,\" to speak before a committee on proposed legislation within the committee's jurisdiction. H.Res. 6 amended clause 2(g) of Rule XI to modify the three-day notification requirement for committee markup meetings. Under paragraph (3)(A) of this clause, the chairs of committees \"shall announce the date, place, and subject matter\" to consider and markup legislation. As in previous Congresses, markups may not occur earlier than the third day on which Members have been given notice thereof. In the 116 th Congress, subparagraph (3)(A)(ii) specifies that the third day is the \"third calendar day,\" rather than the \"third day,\" and that the notification period excludes \"Saturdays, Sundays, or legal holidays except when the House is in session on such a day.\" Thus, the revised provision is designed to guarantee Members at least three workdays' notice before a committee meets to mark up legislation. Oversight plans include a committee's intentions, during a Congress, to review federal laws, regulations, court decisions, programs, and agencies within their jurisdictions. From the 104 th through the 114 th Congresses (1995-2016), standing committees were required to adopt and submit an oversight plan. In the 115 th Congress, House rules required committees to submit authorization and oversight plans. H.Res. 6 amended clause 2(d) of Rule X to restore the previous requirement for committee oversight plans. The amendment also altered some procedures regarding oversight plans. In the 115 th Congress, each standing committee—except Appropriations, Ethics, and Rules—was required to hold an open meeting, not later than February 15 th in odd-number years, in which the committee marked up and adopted an authorization and oversight plan. Each committee had to submit its plan to the Committees on Oversight and Government Reform (now Oversight and Reform), House Administration, and Appropriations. By March 31, the Committee on Oversight and Government Reform was to report the various plans to the House as well as any recommendations about them. Under the rules change adopted in the 116 th Congress, the same standing committees are required to submit oversight plans. In contrast to the 115 th Congress, however, full committees do not mark up and adopt the plans in open meetings. Instead, the chair prepares the plan \"in consultation with the ranking member.\" The chair then provides a copy to committee members \"at least seven calendar days\" before submitting it to the Committee on Oversight and Reform and the Committee on House Administration by March 1 of the first session of Congress, along with any \"supplemental, minority, additional, or dissenting views submitted by a member of the committee.\" The completed plans no longer must be submitted to the Appropriations Committee. Pursuant to clause 2(d), the House Committee on Oversight and Reform shall, after consulting with the majority leader and the minority leader, \"report to the House,\" by not later than April 15 in the first session, the various oversight plans. As in earlier Congresses, the Committee on Oversight and Reform is to also include \"any recommendations ... to ensure the most effective coordination of oversight plans.\" In sum, in the 116 th Congress, chairs are given the prerogative to develop oversight plans, as opposed to the full standing committee, but are to include any dissenting views of committee members. The deadline is extended for submitting the plans to the Committee on Oversight and Reform and the Committee on House Administration (from February 15 to March 1) and for Oversight and Reform to report the plans to the full House (from March 1 to April 15). The resolution removed the role of the Appropriations Committee in the review of such plans. The 116 th rules package made a technical change to the list of items required to be included in the activity reports that committees must adopt by January 2 of each odd-numbered year. H.Res. 6 amended clause 1(d)(2) of Rule XI to remove authorization from the phrase authorization and oversight plans . In the 115 th Congress, committee activity reports were required to summarize the authorization and oversight plans previously submitted by the committees. The amended clause brought the committee activity reports requirement in line with the 116 th Congress requirement for oversight plans described in the previous section of this report. The rules package included a separate order that authorized the chairs of all standing House committees, except for the Rules Committee, and the chair of the Select Intelligence Committee to order the \"taking of depositions, including pursuant to subpoena, by a member or counsel of such committee.\" D epositions are to be ordered in consultation w ith the ranking minority member and are subject to regulations issued by the Committee on Rules and printed in the Congressional Record . These provisions are identical to those of a separate order adopted in the 115 th Congress, except the 116 th Congress version does not include the requirement that \"at least one member of the committee shall be present at each deposition\" unless the witness or the committee waived the requirement. Thus, according to the Rules Committee summary of H.Res. 6, \"Members, Delegates, and the Resident Commissioner may participate in all such depositions, but their presence is not required.\" The 116 th Congress r ules package amended House rules to re - designate the Committee on Oversight and Government Reform as the Committee on Oversight and Reform. H.Res. 6 struck each occurrence of \"Committee on Oversight and Government Reform\" in the Rules and replaced it with \"Committee on Oversight and Reform.\" In previous Congresses, the committee operated under different names. In 1927, the committee was established as the Committee on Expenditures in the Executive Departments, consolidating 11 separate committees that investigated such expenditures. In 1953, the House changed its name to the Committee on Government Operations. Following a change in House majority to the Republican Party in 1995, the committee assumed the jurisdictions of the Committee on the Post Office and Civil Service and the Committee on the District of Columbia, which were abolished, and was designated the Committee on Government Reform and Oversight. Since then, it has also operated under the name Government Reform (106 th -111 th Congresses), Oversight and Government Reform (112 th -115 th Congresses), and now Oversight and Reform (116 th Congress). Clause 3 of Rule X assigns special oversight functions to some House committees. H.Res. 6 amended clause 3 of Rule X to include language emphasiz ing the Commi ttee on Oversight and Reform's responsibility to oversee presidential activities. Clause 3(i) provides the committee' s oversight mandate : \"The Commi ttee on Oversight and Reform shall review and study on a continuing basis the operation of Government activities at all levels.\" Previously, 3(i) concluded, \"with a view to determining their economy and efficiency.\" As amended by H.Res. 6, the clause 3 provision states that the committee is to review and study \"Government activities at all levels, including the Executive Office of the President.\" According to the summary of the rules package issued by the Rules Committee, the amendment \"clarifies the Committee on Oversight and Reform's existing special oversight authority over all operations of government.\" H.Res. 6 s truck an existing provision from clause 4 of Rule X that required a member of the Committee on Oversight and Reform to be present when the committee t akes a dep osition unless the deponent waived the requirement. As amended, c lause 4 (c) , now authorize s committee counsel to take a de position without a committee member in attendance , a standard that was previously in force during the 111 th Congress (2009-2010) . The deposition rules change is similar to the separate order described in the \"Deposition Authority\" section of this report. The separate order, however, applies to several committees, while the rules amendment affects only the Committee on Oversight and Reform. The amended rule will be printed in the House Manual for the 116 th Congress. Separate orders are not printed in the House Manual . The 116 th rules package re-designated the Committee on Education and the Workforce, changing the committee's name to the Committee on Education and the Labor. H.Res. 6 strikes Workforce from clauses 1 and 3 of Rule X and inserts Labor . Since its establishment in 1867 (40 th Congress), the committee has operated under several names: Education and Labor (40 th -47 th , 80 th -103 rd , 110 th -111 th , and 116 th -present); Education (48 th -79 th ); Economic and Educational Opportunities (104 th ); and Education and the Workforce (105 th -109 th and 112 th -115 th ). In its recent history, the committee has been designated the Committee on Education and the Workforce under Republican leadership and the Committee on Education and Labor under Democratic leadership. H.Res. 6 a dded two subparagraphs to clause 1(e) of Rule X to specify that the Committee on Education and Labor's jurisdiction includes the \"organization, administration, and general management\" of the Department of Education and the Department of Labor. These subparagraphs were added to the existing provisions establishing the committee's jurisdiction over federal education and labor programs, standards, and disputes. According to the Rules Committee , t he amendment clarifies the committee' s \"existing jurisdiction\" concerning the departments' general management. The 116 th rules package includes a separate order directing the Committee on Ethics to form an investigative subcommittee in cases where a Member, Delegate, or the Resident Commissioner is indicted on a criminal charge. This separate order stated that the text of H.Res. 451 (110 th Congress, 2007-2008) will apply in the 116 th Congress. H.Res. 451 instructed the Ethics Committee (then called the Committee on Standards of Official Conduct) to empanel an investigative subcommittee to review the allegations whenever a Member of the House of Representatives, including a Delegate or Resident Commissioner to the Congress, is indicted or otherwise formally charged with criminal conduct in a court of the United States or any state not later than 30 days after the date of such indictment or charge. If the committee chooses not to empanel, it is to submit a report to the House describing the reasons for not empaneling an investigative subcommittee as well as the actions, if any, the committee took in response to the allegations. H.Res. 6 amended clause 3(p) of Rule XI to allow the Committee on Ethics to consider certain criminal trial evidence in ethics investigations of Members, Delegates, and the Resident Commissioner. The new language authorizes the full committee or an investigative subcommittee thereof, if the respondent is convicted for a crime that \"is related to the subject of the investigation,\" to \"take into evidence the trial transcript or exhibits admitted into evidence at a criminal trial.\" As referenced in the previous section of this report, \"Empaneling Investigative Subcommittees of the Committee on Ethics,\" a 116 th Congress separate order instructed the Committee on Ethics to form an investigative subcommittee in response to the criminal indictment or charging of a Member, Delegate, or the Resident Commissioner in federal or state court. As amended, clause 3(p) enables investigative subcommittees formed under the terms of this separate order, or established in another manner, to consider trial evidence following a conviction. The full Ethics Committee may also receive trial evidence regarding a Member, Delegate, or Resident Commissioner under investigation. H.Res. 6 removed term limits for members of the Committee of the Budget. In previous Congresses, committee members could serve for a set number of terms as specified in clause 5 of Rule X. In the 115 th Congress, the limit was no more than \"four Congresses in a period of six successive Congresses.\" That number could be extended if the Member served as the chair or ranking member of the committee. Now, under House rules, Members, Delegates, and the Resident Commissioner may serve as committee members or as the chair or ranking member regardless of the number of terms they have previously served in those positions. However, the rules of the Democratic Caucus, 116 th Congress, state that no members of the caucus, with some exceptions, may serve as a member of the Budget Committee during more than three out of five successive Congresses. The 116 th r ules package allow s the Committee on Rules to file its committee reports without the inclusion of record ed votes taken in the committee . As stated in c lause 3 of Rule XIII , committee reports are to include \"the total number of votes cast for and against, and the names of members voting for and against\" reporting a measure or amendments offered to a measure. In previous Congres ses, clause 3(b) clarified that this requirement did not apply to the Committee on Ethics. H.Res. 6 inserted an additional exception for the Committee on Rules: The requirement to include recorded vote information applies \"only to the maximum extent practicable to a report by the Committee on Rules on a rule, joint rule, or the order of business.\" According to the Rules Committee, the change reflects that committee's \"constricted timeframe\" for preparing written reports. Prior to the rules change, the reporting requirement in clause 3 could potentially delay the floor consideration of special orders of business (special rules) reported by the Rules Committee and, consequently, lead to the delay of the consideration of measures considered under the terms of special rules. H.Res. 6 included a separate order that provided the Committee on Financial Services with more flexibility to establish subcommittees. The separate order states that the committee can have \"not more than seven subcommittees\" during the 116 th Congress. Clause 5(d) of Rule X limits each committee to establishing not more than five subcommittees. Subsequent subdivisions of the rule, however, provide exceptions to this limit. For instance, a committee that has a Subcommittee on Oversight may have six subcommittees, the Appropriations Committee may have 13 subcommittees, and other named committees may have not more than seven subcommittees. Separate orders may provide additional exceptions for specific Congresses. The H.Res. 6 separate order also stated that the Committee on Agriculture may not have more six subcommittees. The Agriculture exception, however, existed in the previous two Congresses. The Financial Services exception is new to the 116 th Congress. In the 115 th Congress, the Financial Services had six subcommittees, including one on Oversight and Investigations. At the start of the 116 th Congress, the committee re-established a Subcommittee on Oversight and Investigations, and it established a new Subcommittee on Diversity and Inclusion. Had it reestablished the five other subcommittees from the 115 th Congress, Financial Services would have had seven subcommittees, necessitating an exception to clause 5 of Rule X. However, the committee combined the jurisdiction of two subcommittees from the previous Congress (Monetary Policy and Trade; Terrorism and Illicit Finance) to form a National Security, International Development and Monetary Policy Subcommittee. Accordingly, as of this writing, in the 116 th Congress, Financial Services has established six subcommittees, although it is allowed seven subcommittees pursuant to the separate order. H.Res. 6 e stablished a Select Committee on the Climate Crisis . The select committee's \"sole authority\" is to \"investigate, study, make findings, and develop recommendations on policies, strategies, and innovations\" to reduce pollution and \"other activities that contribute to the climate crisis.\" The select committee does not have the legislative authority to report bills or resolutions or the legal authorit y to issue subpoena s or take depositions . However, it c an submit subpoena and deposition recommendations to relevant standing committees , hold public hearings in support of its investigative functions , and otherwise function under the r ules governing standing committees . The select committee shall be composed of 15 Members, Delegates, or the Resident Commissioner. The Speaker is to appoint the members, with six members selected at the recommendation of the minority leader. The Speaker is to designate a chair and, upon the minority leader's recommendation, a vice chair. The membership must possess certain attributes: At least two members are to be serving their first terms in Congress, at least two are to be members of the Committee on Rules, and at least two are to be members of the Committee on House Administration. H.Res. 6 requires the select committee to submit policy recommendations to the relevant standing committees by March 31, 2020, and report to the House its investigations, detailed findings, and policy recommendations by December 31, 2020. The policy recommendations and report are to be made publicly available in \"widely accessible formats\" not later than 30 days following the March 31 and December 31, 2020, dates of completion. Title II of H.Res. 6 establishes a Select Committee on the Modernization of Congress to recommend improvements to the work and operation of Congress. The select committee's \"sole authority\" is to \"investigate, study, make findings, hold public hearings, and develop recommendations on modernizing Congress.\" Such recommendations could include new rules to \"promote a more modern and efficient Congress;\" new scheduling procedures; policies to \"develop the next generation of leaders;\" policies to recruit, retain, and provide for a diverse staff; policies to make congressional administration more efficient; policies on technology and innovation; and new procedures regarding the House Commission on Congressional Mailing Standards (commonly known as the \"Franking Commission\"). The select committee's membership is to include two Members, Delegates, or the Resident Commissioner appointed by the Speaker. At least two members must be serving in their first term, at least two members must be members of the Committee on Rules, and at least two members must be members on the Committee of House Administration. The select committee is bipartisan in composition. Half of the members are appointed on the recommendation of the minority leader. The Speaker designates the chair and, on the recommendation of the minority leader, the vice chair. The select committee does not have legislative jurisdiction or authority to take legislative action on bills or resolutions, and it does not have subpoena or deposition authority. However, it may submit legislative, subpoena, and deposition recommendations to the relevant standing committees. And, like standing committees, the committee was required to have a Member Day hearing at the start of 116 th Congress. H.Res. 6 requires the select committee to provide an interim status report every 90 days. This interim report must include transcripts of committee proceedings, itemized expenditures, and a proposed plan of activity for the next 90 days. With the \"votes of not fewer than 2/3 of its members,\" the select committee is also authorized to submit additional reports from \"time to time\" that provide the results of investigations, detailed findings, and policy recommendations. The select committee is to submit its final report, with the \"votes of not fewer than 2/3 of its members,\" at the end of the first session of the 116 th Congress. This report is to include detailed findings and policy recommendations. The select committee is also to submit policy recommendations to the relevant standing committees. All committee reports are to be made available to the general public within 30 calendar days of their submittal to Congress or a committee. The select committee is to terminate on February 1, 2020. Upon its termination, the select committee's records are to be transferred to relevant standing committees, as determined by the Speaker.", "summary": "As agreed to in the House, H.Res. 6, a resolution adopting the rules of the House of Representatives, provided amendments to the rules, as well as separate orders, that affect committee procedure in the 116th Congress (2019-2020). Several of these changes apply to general committee procedure, while others concern specific committees, such as modifications to the names, jurisdiction, or procedures of certain House committees. The rules package also established, during the 116th Congress, two new select committees. H.Res. 6 made several changes to committee membership and organization. Most significantly, it removed the committee chair term limits that were in effect during each Congress from the 104th through the 115th Congresses (1995-2018), excluding the 111th Congress (2009-2010). H.Res. 6 added a provision to Rule XXIII that calls on any Member, Delegate, or the Resident Commissioner who has been indicted or formally charged with certain felony offenses to refrain from committee business. It clarified that Delegates and the Resident Commissioner may serve on joint committees, and it lengthened from 30 days to 60 days the period in which to adopt and publish committee rules at the start of a Congress. In a separate order, the 116th Congress rules package established a requirement that certain legislative measures must be reported and be subject to a committee hearing and markup prior to their consideration on the floor. This requirement applies, with some exceptions, to measures that are raised under the terms of a special rule reported from the Rules Committee. Another separate order requires most standing committees to hold a Member Day Hearing during the first session of the 116th Congress, affording any Member the opportunity to speak on proposed legislation within the committee's jurisdiction. H.Res. 6 clarified the notification requirement for committee markup meetings. As amended, clause 2 of Rule XI provides Members at least three workdays to prepare for an upcoming markup, as opposed to the less specific requirement that markups may not occur before the \"third day\" after a chair announces the meeting. H.Res. 6 altered procedures concerning committee oversight. The 115th Congress House rules requirement that committees prepare and submit \"authorization and oversight plans\" was replaced with the requirement that chairs develop oversight plans in consultation with the ranking member. In addition, a separate order now allows committee counsel to take depositions without the presence of a committee member. Amendments to the House standing rules changed two committees' names and clarified their jurisdictions. The Committee on Education and the Workforce became the Committee on Education and Labor, a name it held in some previous Congresses. As amended, Rule X specified that the committee's jurisdiction includes the general management of the Department of Education and the Department of Labor. The Committee on Oversight and Government Reform was re-designated the Committee on Oversight and Reform. The rules changes clarified that the Committee on Oversight and Reform's existing jurisdiction over the review and study of all government activities includes \"the Executive Office of the President.\" A separate order directed the Committee on Ethics to empanel an investigative subcommittee to review allegations whenever a Member, Delegate, or the Resident Commissioner is indicted on a criminal charge. H.Res. 6 amended clause 3 of Rule XI to allow the Committee on Ethics, or an investigative subcommittee thereof, to consider trial evidence in ethics investigations of Members, Delegates, and the Resident Commissioner. Another separate order enabled the Committee on Financial Services to establish as many as seven subcommittees, as opposed to the six subcommittees allowed under the rules, while an amendment to clause 3 of Rule XIII exempted the Rules Committee from the requirement that committee reports must include recorded votes taken in committee. The rules changes also removed membership term limits to the Committee on the Budget. However, the rules of the Democratic Caucus and Republican Conference may continue to limit the number of terms that Members may serve on the Budget Committee. Finally, the rules package established, for the 116th Congress, the Select Committee on the Climate Crisis and the Select Committee on the Modernization of Congress. The committees are to \"investigate, study, make findings, hold public hearings, and develop recommendations.\" By the end of the 116th Congress, they are to report their findings and policy recommendations to the relevant standing committees and publish them in a publicly available format.", "document_type": "crs"}
{"report": "This report provides background information and potential oversight issues for Congress on the Gerald R. Ford (CVN-78) class aircraft carrier program. The Navy's proposed FY2019 budget requests a total of $2,347 million (i.e., about $2.3 billion) in procurement funding for the CVN-78 program. Congress's decisions on the CVN-78 program could substantially affect Navy capabilities and funding requirements and the shipbuilding industrial base. The Navy's FY2020 budget submission also proposed to not fund the mid-life nuclear refueling overhaul (called a Refueling Complex Overhaul, or RCOH) for the aircraft carrier CVN-75 ( Harry S. Truman ), and to instead retire the ship around FY2024 and also deactivate one of the Navy's carrier air wings at about the same time. On April 30, 2019, however, the Administration announced that it was effectively withdrawing this proposal from the Navy's FY2020 budget submission. The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 (and by implication its associated air wing) in service past FY2024. For additional discussion of this withdrawn budget proposal, see Appendix A . For an overview of the strategic and budgetary context in which the CVN-78 class program and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. The Navy's current aircraft carrier force consists of 11 nuclear-powered ships, including 10 Nimitz-class ships (CVNs 68 through 77) that entered service between 1975 and 2009, and one Gerald R. Ford (CVN-78) class ship that was commissioned into service on July 22, 2017. 10 U.S.C. 8062(b) requires the Navy to maintain a force of not less than 11 operational aircraft carriers. The requirement for the Navy to maintain not less than a certain number of operational aircraft carriers was established by Section 126 of the FY2006 National Defense Authorization Act ( H.R. 1815 / P.L. 109-163 of January 6, 2006), which set the number at 12 carriers. The requirement was changed from 12 carriers to 11 carriers by Section 1011(a) of the FY2007 John Warner National Defense Authorization Act ( H.R. 5122 / P.L. 109-364 of October 17, 2006). 10 U.S.C. 8062(e), which was added by Section 1042 of the FY2017 National Defense Authorization Act ( S. 2943 / P.L. 114-328 of December 23, 2016), requires the Navy to maintain a minimum of nine carrier air wings. In December 2016, the Navy released a force-level goal for achieving and maintaining a fleet of 355 ships, including 12 aircraft carriers —one more than the minimum of 11 carriers required by 10 U.S.C. 8062(b). This was the first Navy force-level goal to call for 12 (rather than 11) carriers since a 2002-2004 Navy force-level goal for a fleet of 375 ships. Given the time needed to build a carrier and the projected retirement dates of existing carriers, increasing the carrier force from 11 ships to 12 ships on a sustained basis would take a number of years: Procuring carriers on 3-year centers—that is, procuring one carrier every three years—would achieve a 12-carrier force on a sustained basis by about 2030, unless the service lives of one or more existing carriers were substantially extended. Procuring carriers on 3.5-year centers (i.e., a combination of 3- and 4-year centers) would achieve a 12-carrier force on a sustained basis no earlier than about 2034, unless the service lives of one or more existing carriers were substantially extended. Procuring carriers on 4-year centers would achieve a 12-carrier force on a sustained basis by about 2063—almost 30 years later than under 3.5-year centers—unless the service lives of one or more existing carriers were substantially extended. Under the Navy's FY2020 30-year shipbuilding plan, as under the Navy's FY2019 30-year shipbuilding plan, carrier procurement would shift from 5-year centers to 4-year centers after the procurement of CVN-82 in FY2028, and a 12-carrier force would be achieved on a sustained basis in the 2060s. The projected size of the carrier force in the Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan reflected the Navy's now-withdrawn FY2020 budget proposal to not fund the RCOH for the aircraft carrier CVN-75 ( Harry S. Truman ), and to instead retire the ship around FY2024. With the withdrawal of this budget proposal, the projected size of the carrier force is now, for the period FY2022-FY2047, one ship higher than what is shown in the Navy's FY2020 budget submission. The newly adjusted force-level projection, reflecting the withdrawal of the proposal to retire CVN-75 around FY2024, is as follows: The force is projected to include 11 ships in FY2020-FY2021, 12 ships in FY2022-FY2024, 11 ships in FY2025-FY2026, 10 ships in FY2027, 11 ships in FY2028-FY2039, 10 ships in FY2040, 11 ships in FY2041, 10 ships in FY2042-FY2044, 11 ships in FY2045, 10 ships in FY2046-FY2047, 9 ships in FY2048, and 10 ships in FY2049. Under incremental funding, some of the funding needed to fully fund a ship is provided in one or more years after the year in which the ship is procured. In recent years, Congress has authorized DOD to use incremental funding for procuring certain Navy ships, most notably aircraft carriers: Section 121 of the FY2007 John Warner National Defense Authorization Act ( H.R. 5122 / P.L. 109-364 of October 17, 2006) granted the Navy the authority to use four-year incremental funding for CVNs 78, 79, and 80. Under this authority, the Navy could fully fund each of these ships over a four-year period that includes the ship's year of procurement and three subsequent years. Section 124 of the FY2012 National Defense Authorization Act ( H.R. 1540 / P.L. 112-81 of December 31, 2011) amended Section 121 of P.L. 109-364 to grant the Navy the authority to use five-year incremental funding for CVNs 78, 79, and 80. Since CVN-78 was fully funded in FY2008-FY2011, the provision in practice applied to CVNs 79 and 80. Section 121 of the FY2013 National Defense Authorization Act ( H.R. 4310 / P.L. 112-239 of January 2, 2013) amended Section 121 of P.L. 109-364 to grant the Navy the authority to use six-year incremental funding for CVNs 78, 79, and 80. Since CVN-78 was fully funded in FY2008-FY2011, the provision in practice applies to CVNs 79 and 80. Section 121(c) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( H.R. 5515 / P.L. 115-232 of August 13, 2018) authorized incremental funding to be used for making payments under the two-ship block buy contract for the construction of CVN-80 and CVN-81. This provision does not limit the total number of years across which incremental funding may be used to procure either ship. All U.S. aircraft carriers procured since FY1958 have been built by Huntington Ingalls Industries/Newport News Shipbuilding (HII/NNS), of Newport News, VA. HII/NNS is the only U.S. shipyard that can build large-deck, nuclear-powered aircraft carriers. The aircraft carrier construction industrial base also includes roughly 2,000 supplier firms in 46 states. The Gerald R. Ford (CVN-78) class carrier design ( Figure 1 ) is the successor to the Nimitz -class carrier design. The Ford -class design uses the basic Nimitz -class hull form but incorporates several improvements, including features permitting the ship to generate more aircraft sorties per day, more electrical power for supporting ship systems, and features permitting the ship to be operated by several hundred fewer sailors than a Nimitz -class ship, reducing 50-year life-cycle operating and support (O&S) costs for each ship by about $4 billion compared to the Nimitz -class design, the Navy estimates. Navy plans call for procuring at least four Ford-class carriers—CVN-78, CVN-79, CVN-80, and CVN-81. CVN-78, which was named Gerald R. Ford in 2007, was procured in FY2008. The Navy's proposed FY2020 budget estimates the ship's procurement cost at $13,084.0 million (i.e., about $13.1 billion) in then-year dollars. The ship received advance procurement (AP) funding in FY2001-FY2007 and was fully funded in FY2008-FY2011 using congressionally authorized four-year incremental funding. To help cover cost growth on the ship, the ship received an additional $1,394.9 million in FY2014-FY2016 and FY2018 cost-to-complete procurement funding. (This $1,394.9 million is included in the above-mentioned estimated procurement cost of $13,084.0 million.) The ship was delivered to the Navy on May 31, 2017, and was commissioned into service on July 22, 2017. The Navy is currently working to complete construction, testing, and certification of the ship's 11 weapons elevators. CVN-79, which was named John F. Kennedy on May 29, 2011, was procured in FY2013. The Navy's proposed FY2020 budget estimates the ship's procurement cost at $11,327.4 million (i.e., about $11.3 billion) in then-year dollars. The ship received AP funding in FY2007-FY2012, and was fully funded in FY2013-FY2018 using congressionally authorized six-year incremental funding. The ship is being built with an improved shipyard fabrication and assembly process that incorporates lessons learned from the construction of CVN-78. A key aim of this improved process is to substantially reduce the real (i.e., inflation-adjusted) construction cost of CVN-79 compared to that of CVN-78. CVN-79 is scheduled for delivery to the Navy in September 2024. CVN-80 ( Enterprise ) and CVN-81 (not yet named) are being procured under a two-ship block buy contract that was authorized by Section 121(a)(2) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( H.R. 5515 / P.L. 115-232 of August 13, 2018). The provision permitted the Navy to add CVN-81 to the existing contract for building CVN-80 after the Department of Defense (DOD) made certain certifications to Congress. DOD made the certifications on December 31, 2018, and the Navy announced the award of the contract on January 31, 2019. Compared to the estimated procurement costs for CVN-80 and CVN-81 in the Navy's FY2019 budget submission, the Navy estimates under its FY2020 budget submission that the two-ship block buy contract will reduce the cost of CVN-80 by $246.6 million and the cost of CVN-81 by $2,637.3 million, for a combined reduction of $2,883.9 million (i.e., about $2.9 billion). (DOD characterizes the combined reduction as \"nearly $3 billion.\" ) Using higher estimated baseline costs for CVN-80 and CVN-81 taken from a December 2017 Navy business case analysis, the Navy estimates under its FY2020 budget submission that the two-ship contract will reduce the cost of CVN-80 by $770.9 million and the cost of CVN-81 by $3,086.3 million, for a combined reduction of $3,857.2 million (i.e., about $3.9 billion). (DOD characterizes the combined reduction as $4 billion.) These figures are all expressed in then-year dollars, meaning dollars that are not adjusted for inflation. Regarding the difference between a savings of about $2.9 billion from the figures in the Navy's FY2019 budget submission and a savings of about $3.9 billion from the December 2017 Navy business case analysis, a February 5, 2019, press report quoted a Navy spokesman as stating that the Navy's FY2019 budget submission \"already accounted for at least $1B [$1 billion] of potential savings, a two-CVN buy would save an additional $3B [$3 billion].\" This suggests that the Navy, in preparing its FY2019 budget submission, may have anticipated that it would receive from Congress authority for implementing some kind of combined purchase (such as, perhaps, a combined purchase of materials) for CVN-80 and CVN-81. For additional background information on the two-ship block buy contract, see Appendix B . CVN-80, which was named Enterprise on December 1, 2012, was procured in FY2018. The Navy's proposed FY2020 budget estimates the ship's procurement cost at $12,335.1 million (i.e., about $12.3 billion) in then-year dollars. The ship received AP funding in FY2016 and FY2017, and the Navy plans to fully fund the ship in FY2018-FY2025 using incremental funding authorized by Section 121(c) of P.L. 115-232 . The Navy's proposed FY2020 budget requests $1,062.0 million in procurement funding for the ship. The ship is scheduled for delivery to the Navy in March 2028. Prior to the awarding of the two-ship block buy contract, CVN-81, which has not yet been named, was scheduled to be procured in FY2023. Following the awarding of the two-ship block buy contract, the Navy has chosen to show CVN-81 in its FY2020 budget submission as a ship to be procured in FY2020 (as opposed to a ship that was procured in FY2019). The Navy's FY2020 budget submission estimates the ship's procurement cost at $12,450.7 million (i.e., about $12.5 billion) in then-year dollars. The Navy plans to fully fund the ship beginning in FY2019 and extending beyond FY2026 using incremental funding authorized by Section 121(c) of P.L. 115-232 . The Navy's proposed FY2020 budget requests $1,285.0 million in procurement funding for the ship. The ship is scheduled for delivery to the Navy in February 2032. Table 1 shows procurement funding for CVNs 78, 79, 80, and 81 through FY2026+ (meaning FY2026 and some number of years after FY2026). Congress has established procurement cost caps for CVN-78 class aircraft carriers: Section 122 of the FY2007 John Warner National Defense Authorization Act ( H.R. 5122 / P.L. 109-364 of October 17, 2006) established a procurement cost cap for CVN-78 of $10.5 billion, plus adjustments for inflation and other factors, and a procurement cost cap for subsequent Ford-class carriers of $8.1 billion each, plus adjustments for inflation and other factors. The conference report ( H.Rept. 109-702 of September 29, 2006) on P.L. 109-364 discusses Section 122 on pages 551-552. Section 121 of the FY2014 National Defense Authorization Act ( H.R. 3304 / P.L. 113-66 of December 26, 2013) amended the procurement cost cap for the CVN-78 program to provide a revised cap of $12,887.0 million for CVN-78 and a revised cap of $11,498.0 million for each follow-on ship in the program, plus adjustments for inflation and other factors (including an additional factor not included in original cost cap). Section 122 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015) further amended the cost cap for the CVN-78 program to provide a revised cap of $11,398.0 million for each follow-on ship in the program, plus adjustment for inflation and other factors, and with a new provision stating that, if during construction of CVN-79, the Chief of Naval Operations determines that measures required to complete the ship within the revised cost cap shall result in an unacceptable reduction to the ship's operational capability, the Secretary of the Navy may increase the CVN-79 cost cap by up to $100 million (i.e., to $11.498 billion). If such an action is taken, the Navy is to adhere to the notification requirements specified in the cost cap legislation. Section 121(a) of the FY2018 National Defense Authorization Act ( H.R. 2810 / P.L. 115-91 of December 12, 2017) further amended the cost cap for the CVN-78 program to provide a revised cap of $12,568.0 million for CVN-80 and subsequent ships in the program, plus adjustment for inflation and other factors. (The cap for CVN-79 was kept at $11,398.0 million, plus adjustment for inflation and other factors.) The provision also amended the basis for adjusting the caps for inflation, and excluded certain costs from being counted against the caps. In an August 2, 2017, letter to the congressional defense committees, then-Acting Secretary of the Navy Sean Stackley notified the committees that under subsection (b)(7) of Section 122 of P.L. 114-92 as amended by Section 121 of P.L. 113-66 —a subsection allowing increases to the cost cap for CVN-78 for \"the amounts of increases or decreases in costs of that ship that are attributable solely to an urgent and unforeseen requirement identified as a result of the shipboard test program\"—he had increased the cost cap for CVN-78 by $20 million, to $12,907.0 million. In a May 8, 2018, letter to the congressional defense committees, Secretary of the Navy Richard Spencer notified the committees that under subsections (b)(6) and (b)(7) of Section 122 of P.L. 114-92 as amended by Section 121 of P.L. 113-66 —subsections allowing increases to the cost cap for CVN-78 for \"the amounts of increases or decreases to cost required to correct deficiencies that may affect the safety of the ship and personnel or otherwise preclude the ship from safe operation and crew certification\" and for \"the amounts of increases or decreases in costs of CVN 78 that are attributable solely to an urgent and unforeseen requirement identified as a result of the shipboard test program,\" respectively—he had increased the cost cap for CVN-78 by $120 million, to $13,027 million. Table 2 shows changes in the estimated procurement costs of CVNs 78, 79, 80, and 81 since the budget submission for FY2008—the year of procurement for CVN-78. The Navy's FY2020 budget submission proposed to not fund the mid-life nuclear refueling overhaul (called a Refueling Complex Overhaul, or RCOH) for the aircraft carrier CVN-75 ( Harry S. Truman ), and to instead retire the ship around FY2024 and also deactivate one of the Navy's carrier air wings at about the same time. On April 30, 2019, however, the Administration announced that it was effectively withdrawing this proposal from the Navy's FY2020 budget submission. The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 (and by implication its associated air wing) in service past FY2024. For additional discussion of this withdrawn budget proposal, see Appendix A . One issue for Congress concerns DOD's decision to show CVN-81 in its FY2020 budget submission as a ship to be procured in FY2020, instead of a ship that was procured in FY2019. Grounds for showing CVN-81 as a ship that was procured in FY2019 would include the following: Within Section 121 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( H.R. 5515 / P.L. 115-232 of August 13, 2018)—the provision that authorized the two-ship block buy contract for CVN-80 and CVN-81—subsection (a)(1) specifically authorizes a contract for the procurement of CVN-81 \"beginning with the fiscal year 2019 program year.\" The header for subsection (a)(1) is \"Procurement Authorized.\" Consistent with Section 121(a)(1), the funding table for the Navy's shipbuilding account in the conference report ( H.Rept. 115-874 of July 25, 2018) on H.R. 5515 shows a quantity of \"1\" in line 002 of the FY2019 SCN (Shipbuilding and Conversion, Navy) appropriation account. Line 002 is the line item for procurement (not advance procurement [AP]) funding for the CVN-78 program. A notation in the table for line 002 states that the procurement funding authorized for this line item is for \"Authorize CVN81—One ship.\" The funding table does not authorize any funding for line 003 of the FY2019 SCN account—the line item for AP funding for the CVN-78 program. (AP funding is funding for the procurement of a ship to be procured in a future fiscal year.) Consistent with the two above points, the paragraph in the FY2019 DOD appropriations act (Division A of H.R. 6157 / P.L. 115-245 of September 28, 2018) that makes appropriations for the SCN account makes procurement (not AP) appropriations for the CVN-78 program. This paragraph also states that \"the funds made available by this Act for the Carrier Replacement Program (CVN-80) may be available to modify or enter into a new contract for the procurement of a Ford-class aircraft carrier designated CVN–81 pursuant to section 121 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019.\" Consistent with this bill language, the funding table for the SCN account in the joint explanatory statement for H.R. 6157 shows that this funding was provided for line 2 of the FY2019 SCN account (CVN-78 program procurement funding), not line 3 of the FY2019 SCN account (CVN-78 program AP funding). Consistent with all of the above points (and as reflected in Table 1 of this CRS report), the Navy's FY2020 budget submission shows the $618 million in FY2019 funding for CVN-81 as full funding (meaning funding for a procured ship), rather than AP funding (meaning funding for a ship to be procured in a future fiscal year). DOD's decision to show CVN-81 in its FY2020 budget submission as a ship to be procured in FY2020, instead of a ship that was procured in FY2019, affects the comparison of numbers of ships procured in FY2019 and FY2020. If DOD had decided to show CVN-81 in its FY2020 budget submission as a ship that was procured in FY2019, then the total number of ships procured in FY2019 would be 14, and the total number requested for FY2020 would be 11—3 ships, or 21%, fewer than the FY2019 total of 14. Showing CVN-81 in the FY2020 budget submission as an FY2020 ship changes the FY2019 and FY2020 totals to 13 ships and 12 ships, respectively, making number FY2020 closer to the FY2019 number. DOD's decision to show CVN-81 in its FY2020 budget submission as a ship to be procured in FY2020, instead of a ship that was procured in FY2019, also affects the aircraft carrier procurement profile shown in the Navy's FY2020 30-year (FY2020-FY2049) 30-year shipbuilding plan. If DOD had decided to show CVN-81 in its FY2020 budget submission as a ship that was procured in FY2019, the ship-procurement table in the 30-year plan would show the procurement of no carriers for the first eight years (FY2020-FY2027) of the 30-year period. Showing CVN-81 in the FY2020 budget submission as an FY2020 ship changes the presentation to show the procurement of an aircraft carrier in the first year of the 30-year period. Potential oversight questions for Congress include the following: Compliance with c ongressional intent . Is DOD's decision to show CVN-81 as a ship to be procured in FY2020, rather than as a ship that was procured in FY2019, consistent with congressional intent as shown in bill and report language for P.L. 115-232 and P.L. 115-245 ? Can DOD's decision be viewed as a challenge to Congress's Article 1 power to authorize and appropriate funds for the construction of Navy ships? If DOD's decision regarding the year of procurement for CVN-81 is accepted, would this set a precedent for the executive branch regarding its future compliance with Congressional decisions for authorizing and funding of other federal programs? Executability of FY2019 procurement funds for CVN-81. FY2019 SCN-account funding for the CVN-78 program was appropriated by Congress, and shows in the Navy's FY2020 budget-justification books, as procurement funding (meaning funding for one or more procured ships) rather than AP funding (meaning funding for one or more ships to be procured in a future fiscal year). If CVN-81 is accepted as a ship to be procured in FY2020, what implications, if any, might that have for the executability of the $618 million in FY2019 procurement (as opposed to AP) funds for CVN-81 shown in the Navy's FY2020 budget submission (as reflected in Table 1 of this CRS report)? Executability of CVN-81 during portion of FY2020 under a CR. Navy officials have testified that if the Navy operates under a continuing resolution (CR) for some part of FY2020, then absent a special legislative provision in the CR known as an anomaly, the Navy during that period likely would not be able to proceed with CVN-81, because CRs typically prevent year-to-year quantity increases in procurement programs, and treating CVN-81 as a ship to be procured in FY2020 would mean that the CVN-78 program would have a year-to-year quantity increase of zero ships in FY2019 followed by one ship in FY2020. If work on CVN-81 were to not proceed for some part of FY2020 because the Navy during that period were to operate under a CR, what impact would that have on the implementation and status of the two-ship contract for building CVN-80 and CVN-81? FY2019 and FY2020 numbers of ships procured and 30-year shipbuilding plan. What effect, if any, did considerations regarding the comparison of numbers of ships procured in FY2019 and FY2020 and the aircraft carrier procurement profile during the initial years of the 30-year shipbuilding plan have on DOD's decision to show CVN-81 in its FY2020 budget submission as a ship to be procured in FY2020, instead of a ship that was procured in FY2019? Treatment in FY2020 legislation. Since P.L. 115-232 shows CVN-81 as authorized in FY2019, how should the House and Senate Armed Services committees act on the request in the Navy's FY2020 budget submission to authorize an aircraft carrier in FY2020? If the FY2020 national defense authorization act authorizes the procurement of an aircraft carrier in FY2020, and the authorization for the procurement of an aircraft carrier in FY2019 were not rescinded, would that create confusion as to whether the ship being authorized in FY2020 was CVN-81 or CVN-82, the latter being a ship currently planned for procurement in FY2028? If the FY2019 authorization for CVN-81 were rescinded, what implications, if any, would that have for the implementation of Section 121 of P.L. 115-232 , including the award of the two-carrier contract on January 31, 2019 (i.e., during FY2019)? Another issue for Congress concerns the Navy's decision, as part of its FY2020 budget submission, to not accelerate the scheduled procurement of CVN-82 from FY2028 to an earlier fiscal year. The Navy's FY2020 budget submission shows that, as a result of the two-carrier contract, the scheduled delivery date for CVN-81 has been accelerated by seven months, to February 2032, compared to September 2032 in the Navy's FY2019 budget submission. The scheduled year of procurement for CVN-82 has not been changed—in the Navy's FY2020 budget submission, it shows as a ship to be procured in FY2028, as it did in the Navy's FY2019 budget submission. The accelerated delivery date for CVN-81, combined with the unchanged year of procurement for CVN-82, suggests that the interval between the construction of CVN-81 and construction of CVN-82 has been increased by something like seven months. Other things held equal, this increased interval could result in increased loss of learning in shifting from construction of CVN-81 to construction of CVN-82, and possibly in reduced spreading of shipyard fixed overhead costs during the construction of CVN-82. Both of these effects could increase the procurement cost of CVN-82. Potential oversight questions for Congress include the following: What impact, if any, will the accelerated delivery of CVN-81 under the two-carrier contract, combined with the unchanged year of procurement for CVN-82, have on the procurement cost of CVN-82? How might the procurement cost of CVN-82 change in real (i.e., inflation-adjusted) terms if its year of procurement were accelerated to an earlier year, such as FY2027? Another issue for Congress is whether to approve, reject, or modify the Navy's FY2020 procurement funding requests for CVN-78 program. In assessing this question, Congress could consider various factors, including whether the Navy has properly scheduled and accurately priced the work it is proposing to do on the CVN-78 program in FY2020, particularly in the context of implementing the two-carrier contract for CVN-80 and CVN-81. Another issue for Congress concerns the date for achieving the Navy's 12-ship force-level goal for aircraft carriers. As noted earlier, under the Navy's FY2020 30-year shipbuilding plan, carrier procurement would shift from 5-year centers to 4-year centers after the procurement of CVN-82 in FY2028, and a 12-carrier force would be achieved on a sustained basis in the 2060s. As also noted earlier, shifting carrier procurement to 3- or 3.5-year centers could achieve a 12-carrier fleet as soon as the 2030s, unless the service lives of one or more existing carriers were substantially extended. Other things held equal, procuring carriers on 3- or 3.5-year centers rather than 4-year centers would increase Navy funding requirements during the period of the 30-year shipbuilding plan for procuring aircraft carriers and for operating and supporting a 12-carrier force rather than a force of 11 or fewer carriers. For the past several years, cost growth in the CVN-78 program, Navy efforts to stem that growth, and Navy efforts to manage costs so as to stay within the program's cost caps have been continuing oversight issues for Congress on the CVN-78 program. As shown in Table 2 , the estimated procurement costs of CVN-78, CVN-79, and CVN-80 have grown 24.7%, 23.2%, and 15.1%, respectively, since the submission of the FY2008 budget. Cost growth on CVN-78 required the Navy to program $1,394.9 million in cost-to-complete procurement funding for the ship in FY2014-FY2016 and FY2018 (see Table 1 ). As also shown in Table 2 , however, cost growth on CVN-78, CVN-79, and CVN-80 more or less stopped in FY2013 and FY2014: while the estimated cost of CVN-78 grew considerably between the FY2008 budget (the budget in which CVN-78 was procured) and the FY2014 budget, since the FY2014 budget, it has grown by only a small amount (about 2%); while the estimated cost of CVN-79 grew considerably between the FY2008 budget and the FY2013 budget (in part because the procurement date for the ship was deferred by one year in the FY2010 budget), since the FY2013 budget it has declined by a small amount (less than 1%); and while the estimated cost of CVN-80 grew considerably between the FY2008 budget and the FY2013 budget (in part because the procurement date for the ship was deferred by two years in the FY2010 budget), since the FY2013 budget it has declined by about 11%. Section 128 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015) states the following: SEC. 128. Limitation on availability of funds for U.S.S. John F. Kennedy (CVN–79). (a) Limitation.—Of the funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2016 for procurement for the U.S.S. John F. Kennedy (CVN–79), $100,000,000 may not be obligated or expended until the date on which the Secretary of the Navy submits to the congressional defense committees the certification under subsection (b)(1) or the notification under paragraph (2) of such subsection, as the case may be, and the reports under subsections (c) and (d).... (c) Report on costs relating to CVN–79 and CVN–80.— (1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act, the Secretary of the Navy shall submit to the congressional defense committees a report that evaluates cost issues related to the U.S.S. John F. Kennedy (CVN–79) and the U.S.S. Enterprise (CVN–80). (2) ELEMENTS.—The report under paragraph (1) shall include the following: (A) Options to achieve ship end cost of no more than $10,000,000,000. (B) Options to freeze the design of CVN–79 for CVN–80, with exceptions only for changes due to full ship shock trials or other significant test and evaluation results. (C) Options to reduce the plans cost for CVN–80 to less than 50 percent of the CVN–79 plans cost. (D) Options to transition all non-nuclear Government-furnished equipment, including launch and arresting equipment, to contractor-furnished equipment. (E) Options to build the ships at the most economic pace, such as four years between ships. (F) A business case analysis for the Enterprise Air Search Radar modification to CVN–79 and CVN–80. (G) A business case analysis for the two-phase CVN–79 delivery proposal and impact on fleet deployments. Section 126 of the FY2017 National Defense Authorization Act ( S. 2943 / P.L. 114-328 of December 23, 2016) states the following: SEC. 126. Limitation on availability of funds for procurement of U.S.S. Enterprise (CVN–80). (a) Limitation.—Of the funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2017 for advance procurement or procurement for the U.S.S. Enterprise (CVN–80), not more than 25 percent may be obligated or expended until the date on which the Secretary of the Navy and the Chief of Naval Operations jointly submit to the congressional defense committees the report under subsection (b). (b) Initial report on CVN–79 and CVN–80.—Not later than December 1, 2016, the Secretary of the Navy and the Chief of Naval Operations shall jointly submit to the congressional defense committees a report that includes a description of actions that may be carried out (including de-scoping requirements, if necessary) to achieve a ship end cost of— (1) not more than $12,000,000,000 for the CVN–80; and (2) not more than $11,000,000,000 for the U.S.S. John F. Kennedy (CVN–79). (c) Annual report on CVN–79 and CVN–80.— (1) IN GENERAL.—Together with the budget of the President for each fiscal year through fiscal year 2021 (as submitted to Congress under section 1105(a) of title 31, United States Code) the Secretary of the Navy and the Chief of Naval Operations shall submit a report on the efforts of the Navy to achieve the ship end costs described in subsection (b) for the CVN–79 and CVN–80. (2) ELEMENTS.—The report under paragraph (1) shall include, with respect to the procurement of the CVN–79 and the CVN–80, the following: (A) A description of the progress made toward achieving the ship end costs described in subsection (b), including realized cost savings. (B) A description of low value-added or unnecessary elements of program cost that have been reduced or eliminated. (C) Cost savings estimates for current and planned initiatives. (D) A schedule that includes— (i) a plan for spending with phasing of key obligations and outlays; (ii) decision points describing when savings may be realized; and (iii) key events that must occur to execute initiatives and achieve savings. (E) Instances of lower Government estimates used in contract negotiations. (F) A description of risks that may result from achieving the procurement end costs specified in subsection (b). (G) A description of incentives or rewards provided or planned to be provided to prime contractors for meeting the procurement end costs specified in subsection (b). Section 121(b) of the FY2018 National Defense Authorization Act ( H.R. 2810 / P.L. 115-91 of December 12, 2017) states the following: SEC. 121. Aircraft carriers. ... (b) Waiver on limitation of availability of funds for CVN–79.—The Secretary of Defense may waive subsections (a) and (b) of section 128 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92; 129 Stat. 751) after a period of 60 days has elapsed following the date on which the Secretary submits to the congressional defense committees a written notification of the intent of the Secretary to issue such a waiver. The Secretary shall include in any such notification the following: (1) The rationale of the Secretary for issuing the waiver. (2) The revised test and evaluation master plan that describes when full ship shock trials will be held on Ford-class aircraft carriers. (3) A certification that the Secretary has analyzed and accepted the operational risk of the U.S.S. Gerald R. Ford deploying without having conducted full ship shock trials, and that the Secretary has not delegated the decision to issue such waiver. Sources of risk of cost growth on CVN-78 included, among other things, certain new systems to be installed on CVN-78 whose development, if delayed, could delay the completion of the ship. These systems included a new type of aircraft catapult called the Electromagnetic Launch System (EMALS), a new aircraft arresting system called the Advanced Arresting Gear (AAG), and the ship's primary radar, called the Dual Band Radar (DBR). Congress has followed these and other sources of risk of cost growth for years. In July 2016, the DOD Inspector General issued a report critical of the Navy's management of the AAG development effort. In January 2017, it was reported that after conducting a review of potential alternative systems, the Navy had decided to continue stay with its plan to install EMALs and AAG on the first three Ford-class carriers. Section 125 of the FY2017 National Defense Authorization Act ( S. 2943 / P.L. 114-328 of December 23, 2016) limited the availability of funds for the AAG program until certain conditions are met. Navy officials have stated that they are working to control the cost of CVN-79 by equipping the ship with a less expensive primary radar, by turning down opportunities to add features to the ship that would have made the ship more capable than CVN-78 but would also have increased CVN-79's cost, and by using a build strategy for the ship that incorporates improvements over the build strategy that was used for CVN-78. These build-strategy improvements, Navy officials have said, include the following items, among others: achieving a higher percentage of outfitting of ship modules before modules are stacked together to form the ship; achieving \"learning inside the ship,\" which means producing similar-looking ship modules in an assembly line-like series, so as to achieve improved production learning curve benefits in the production of these modules; and more economical ordering of parts and materials including greater use of batch ordering of parts and materials, as opposed to ordering parts and materials on an individual basis as each is needed. For additional background information on cost growth in the CVN-78 program, Navy efforts to stem that growth, and Navy efforts to manage costs so as to stay within the program's cost caps, see Appendix C and Appendix D . Another oversight issue for Congress concerns Navy efforts to complete the construction, testing, and certification of the weapons elevators on CVN-78. (The ship's weapons elevators transport missiles and bombs from the ship's weapon magazines to the ship's flight deck, so that they can be loaded onto aircraft that are getting ready to take off from the ship.) A November 2, 2018, press report states the following: The $13 billion Gerald R. Ford aircraft carrier, the U.S. Navy's costliest warship, was delivered last year without elevators needed to lift bombs from below deck magazines for loading on fighter jets. Previously undisclosed problems with the 11 elevators for the ship built by Huntington Ingalls Industries Inc. add to long-standing reliability and technical problems with two other core systems—the electromagnetic system to launch planes and the arresting gear to catch them when they land. The Advanced Weapons Elevators, which are moved by magnets rather than cables, were supposed to be installed by the vessel's original delivery date in May 2017. Instead, final installation was delayed by problems including four instances of unsafe \"uncommanded movements\" since 2015, according to the Navy. While progress was being made on the carrier's other flawed systems, the elevator is \"our Achilles heel,\" Navy Secretary Richard Spencer told reporters in August without providing details.... The Navy says that the first carrier will be fully combat-capable, including the elevators, by July—the end of its current 12-month pier-side shakedown period in Virginia. Navy weapons buyer James Geurts cited what he called \"considerable progress\" on the Ford, including on the elevators, in a July 6 memo to Pentagon acquisition head Ellen Lord. The Navy in May requested permission from Congress in May to increase the Ford's cost cap by $120 million, partly to fix elevator issues \"to preclude any effect on the safety of the ship and personnel.\" The safety issues related to the uncommanded movements, the Navy said in an email.... Beci Brenton, a spokeswoman for Newport News, Virginia-based Huntington Ingalls, said \"all the elevators are installed.\" She said the weapons elevator is among \"the most advanced technologies being incorporated into\" the carrier and \"its completion has been delayed due to a number of first-in-class issues,\" Brenton said. \"We are committed to working through the remaining technical challenges,\" she said. William Couch, a spokesman for the Naval Sea Systems Command, said the elevators are \"in varying levels of construction and testing.\" Six are far enough along to be operated by the shipbuilder, and testing has started on two of those, he said. All 11 \"should have been completed and delivered with the ship delivery,\" according to Couch. He said the contractor has corrected \"all issues,\" including the \"four uncommanded movements over the last three years that were discovered during the building, operational grooming, or testing phases.\"... A November 2010 program on PBS's \"Nova\" science series extolled the \"Elevator of Tomorrow\" being developed by Federal Equipment Co., a Cincinnati-based subcontractor to Huntington Ingalls. Doug Ridenour, president of Federal Equipment Co., said the elevator's key technologies \"have been consistently demonstrated for years\" in a test unit in the company's plant and any programming or software-related issues have been fixed. But \"shipboard integration involves many other technology insertions not controlled by\" his company, he said. At a November 27, 2018, hearing on Navy shipbuilding programs before the Seapower subcommittee of the Senate Armed Services Committee, the following exchange occurred: SENATOR TIM KAINE (continuing): There have been challenges with the advanced weapons elevators on the CVN, some of the technical difficult[ies] seem similar to those that were experienced earlier on both the [aircraft] launch and arresting systems. I think that the Navy put together independent review teams to tackle those issues and provide solutions. Are we at a point where that may be needed on the weapons elevators or are we in a position where we think the progress on the weapons elevators is satisfactory? JAMES F. GEURTS, ASSISTANT SECRETARY OF THE NAVY FOR RESEARCH, DEVELOPMENT AND ACQUISITION: Yes, sir. So there are 11 weapons elevators [and] each one of them we have to produce, test and then certify. The first two of those have been produced, the first one's been through test and certification. The second one is about 94 percent through test. We are making progress to get through all of the elevators during this availability. I am likely to do an independent review team not on the immediate construction for CVN-78 but looking at the longer-term sustainability, resilience, reliability to make sure we are in a position to support those elevators for the long term, that we've got all of the training and all of the reliability built into those. We've done so many independent reviews for the [CVN-]78 elevator design as they are so we won't do one on the current efforts on [CVN-]78. We've got a dedicated team working our way through those issues. KAINE: And is your timing on that testing and certification on [CVN-]78—you have this 12-month period where you are testing—[do] you think you will get through the testing and certification of all of the 11 elevators in that year one? GEURTS: My current assessment is we will get through all of the production and much of the testing. We may have some of the certification issues to go. I am watching it very closely and we will keep you and your staff informed on progress there. A December 5, 2018, press report stated the following: The Navy plans to complete installation and testing of the 11 elevators before the Ford completes its post-delivery shakedown phase in July, Captain Danny Hernandez, a Navy spokesman, said in an email. Six will also be certified for use by then, but five won't be completed until after July, he said. \"A dedicated team is engaged on these efforts and will accelerate this certification work and schedule where feasible,\" he said. Huntington spokeswoman Beci Brenton said via email that company officials had a \"very productive meeting\" with Inhofe that included both the elevators and benefits of a two-carrier contract. The elevator's completion \"has been delayed due to a number of first-in-class issues associated with the first-time installation, integration and test of this new technology,\" she said. \"However, we are making substantial substantial progress in resolving the remaining technical challenges.\" A January 6, 2019, press report stated the following: The Navy Secretary has committed that the service and its industry partners will have working weapons elevators on aircraft carrier USS Gerald R. Ford (CVN-78) by the end of the summer—and the secretary's job is now on the line over that issue. The Navy accepted delivery of the first-in-class carrier and commissioned it into the fleet without any functioning weapons elevators. The carrier is now in its post-shakedown availability at builder Newport News Shipbuilding, after spending a year at sea running the ship to discover any potential flaws. Though the Navy already said the elevators would be addressed during this PSA period, the stakes are now higher: Navy Secretary Richard V. Spencer told President Donald Trump that the elevators would be installed and working by the time the carrier returns to sea, or else the president can use his famous \"you're fired\" line on the service secretary. Spencer said this morning at an event hosted by the Center for a New American Security that he spoke to Trump at length last month at the Army-Navy football game in Philadelphia. \"I asked him to stick his hand out; he stuck his hand out. I said, let's do this like corporate America. I shook his hand and said, the elevators will be ready to go when she pulls out or you can fire me,\" Spencer said, adding that someone had to take accountability over the ongoing elevator challenges. \"We're going to get it done. I know I'm going to get it done. I haven't been fired yet by anyone; being fired by the president really isn't on the top of my list.\"... The elevator issue has plagued the carrier for years, even if it garnered less attention than other high-profile new technologies on the carrier, such as the new Electromagnetic Aircraft Launch System (EMALS) and the Advanced Arresting Gear, both of which had their own fair share of technical problems. In 2016, the late Sen. John McCain (R-Ariz.), who then chaired the Senate Armed Services Committee, railed against the Ford-class program, noting that Ford was already overdue to be delivered to the Navy and still was facing ongoing technical difficulties. \"The Navy's announcement of another two-month delay in the delivery of CVN-78 further demonstrates that key systems still have not demonstrated expected performance. The advanced arresting gear (AAG) cannot recover airplanes. Advanced weapons elevators cannot lift munitions. The dual-band radar cannot integrate two radar bands. Even if everything goes according to the Navy's plan, CVN-78 will be delivered with multiple systems unproven,\" McCain said in a July 2016 hearing. A month later the Pentagon announced a 60-day review of the Ford program, with a specific focus on five technology areas, including the elevators. Ford ultimately delivered to the Navy in June 2017 and commissioned a month later, still without working weapons elevators. In July 2018, when Ford entered PSA, the Navy said the maintenance availability had been extended from a planned eight months to a full year, to accommodate both the typical work that arises in PSA but also deferred work such as the construction and installation of weapons elevators and an upgrade to the AAG, whose technical challenges greatly contributed to the delayed delivery and commissioning of the ship. A January 16, 2019, press report stated the following: The Navy's newest aircraft carrier, USS Gerald R. Ford (CVN 78), closed out 2018 on a high note with the acceptance of the ship's first advanced weapons elevator (AWE), setting the tone for more positive developments in the year ahead. AWE Upper Stage #1 was turned over to the ship on Dec. 21, following testing and certification by engineers at Huntington Ingalls Industries-Newport News Shipbuilding, where the ship is currently working through its post-shakedown availability (PSA). The acceptance marks a major milestone for the ship and the Ford-class of aircraft carriers to follow.... Though the first elevator has been accepted, work still remains on the remaining 10. Currently, all shipboard installation and testing activities of the AWEs are due to be completed prior to the end of Ford's PSA, scheduled for July. However, some remaining certification documentation will be performed for five of the 11 elevators after PSA completion. A March 6, 2019, press report stated the following: Nearly one month following the acceptance of its first advanced weapons elevator (AWE), the Navy's newest aircraft carrier, USS Gerald R. Ford (CVN 78), has accepted its second. AWE Upper Stage #3 was turned over to the ship February 14, following testing and certification by engineers at Huntington Ingalls Industries-Newport News Shipbuilding (NNS), where the ship is currently working through its post-shakedown availability (PSA). According to Ford's Weapons Officer, Cmdr. Joe Thompson, acceptance of the second AWE offers an opportunity for Ford Sailors to become acquainted with the equipment during the PSA. \"This gives us more time to learn and become subject matter experts,\" explained Thompson. \"All of us are learning on brand new systems and brand new concepts. This acceptance gives us the opportunity to have that 'run time' on the physical aspects of the elevator, but also in evaluating the technical manuals, and learning the maintenance required to keep them operational.\" With two elevators in hand, Thompson explained that Sailors training on these new systems will be able to apply the lessons learned from the first elevator, Upper Stage #1, and apply them to Upper Stage #3, thereby streamlining the learning process and lessening the learning curve. \"This is going to allow us to progress faster,\" he explained. \"As we get smarter on one, we move on to the next and apply the lessons learned not only with regard to elevator operation, but also in the testing and certification, and maintenance processes.\"… Acceptance of the elevator was accelerated due to a merging of the test programs between NNS and the Naval Surface Warfare Center (NSWC), which removed redundant steps and moved certification up by 10 days. The team has identified other areas where redundancy can be removed to make the acceptance timelines more efficient. Another oversight issue for Congress concerns CVN-78 program issues raised in a December 2018 report from DOD's Director, Operational Test and Evaluation (DOT&E)—DOT&E's annual report for FY2018. Regarding the CVN-78 program, the report stated the following in part: Assessment • The delays in the ship development and initial trials pushed both phases of initial operational testing until FY21 and FY22. The delay in the ship's delivery and development added approximately 2 years to the timeline. As noted in previous annual reports, the CVN 78 test schedule has been aggressive, and the development of EMALS [Electromagnetic Aircraft Launch System], AAG [Advanced Arresting gear], AWE [Advanced Weapons Elevator], DBR [Dual Band Radar], and the Integrated Warfare System delayed the ship's first deployment to FY22. Reliability • Four of CVN 78's new systems stand out as being critical to flight operations: EMALS, AAG, DBR, and AWEs. Overall, the poor reliability demonstrated by AAG and EMALS and the uncertain reliability of DBR and AWEs could delay CVN 78 IOT&E [Initial Operational Test and Evaluation]. The Navy continues to test all four of these systems in their shipboard configurations aboard CVN 78. Reliability estimates derived from test data for EMALS and AAG are discussed in following subsections. For DBR and AWE, only engineering reliability estimates have been provided. EMALS • Testing to date involved 747 shipboard launches and demonstrated EMALS capability to launch aircraft planned for the CVN 78 Air Wing. • Through the first 747 shipboard launches, EMALS suffered 10 critical failures. This is well below the requirement of 4,166 Mean Cycles Between Critical Failures, where a cycle represents the launch of one aircraft. • The reliability concerns are exacerbated by the fact that the crew cannot readily electrically isolate EMALS components during flight operations due to the shared nature of the Energy Storage Groups and Power Conversion Subsystem inverters onboard CVN 78. The process for electrically isolating equipment is time-consuming; spinning down the EMALS motor/generators takes 1.5 hours by itself. The inability to readily electrically isolate equipment precludes EMALS maintenance during flight operations. AAG • Testing to date included 763 attempted shipboard landings and demonstrated AAG capability to recover aircraft planned for the CVN 78 air wing. • The Program Office redesigned major components that did not meet system specifications during land-based testing. Through the first 763 attempted shipboard landings, AAG suffered 10 operational mission failures (which includes one failure of the barricade system). This reliability estimate falls well below the re-baselined reliability growth curve and well below the requirement of 16,500 Mean Cycles Between Operational Mission Failures, where a cycle represents the recovery of one aircraft. • The reliability concerns are magnified by the current AAG design that does not allow electrical isolation of the Power Conditioning Subsystem equipment from high power buses, limiting corrective maintenance on below-deck equipment during flight operations. Combat System • Results of SBDT [sea-based developmental testing] events indicate good SSDS [ship self-defense system] performance in scheduling and launching simulated RAMs [Rolling Airframe Missiles] and ESSMs [Evolved Sea Sparrow Missiles], as well as scheduling DBR directives for ESSM acquisition and target illumination. Insufficient interoperability testing with a CEC [Cooperative Engagement Capability] network and Link 16 prevents an estimate of performance in this area. It is unknown if the integration problems between SSDS and Surface Electronic Warfare Improvement Program (SEWIP) Block 2 identified during engineering testing at Wallops Island have been resolved because SEWIP Block 2 was not installed on the ship during these SBDT events. • CVN 78's combat system testing on the SDTS [self-defense test ship] is at risk due to schedule constraints, lack of funding, and insufficient planned developmental testing. DBR • Throughout the five CVN 78 SBDTs, DBR was plagued by extraneous false and close-in dual tracks adversely affecting its performance. • Integration of the DBR electronic protection capabilities remains incomplete and unfunded. With modern threats, a lack of electronic protection places the ship in a high-risk scenario if deployed to combat. • The Navy analysis noted that DBR performance needs to be improved to support carrier air traffic control center certification. Sortie Generation Rate • CVN 78 is unlikely to achieve its SGR [sortie generation rate] requirement. The target threshold is based on unrealistic assumptions including fair weather and unlimited visibility, and that aircraft emergencies, failures of shipboard equipment, ship maneuvers, and manning shortfalls will not affect flight operations. During the 2013 operational assessment, DOT&E conducted an analysis of past aircraft carrier operations in major conflicts. The analysis concludes that the CVN 78 SGR requirement is well above historical levels. • DOT&E plans to assess CVN 78 performance during IOT&E by comparing it to the SGR requirement as well as to the demonstrated performance of the Nimitz-class carriers. • Poor reliability of key systems that support sortie generation on CVN 78 could cause a cascading series of delays during flight operations that would affect CVN 78's ability to generate sorties. The poor or unknown reliability of these critical subsystems represents the most risk to the successful completion of CVN 78 IOT&E. Manning • Based on current expected manning, the berthing capacity for officers and enlisted will be exceeded by approximately 100 personnel with some variability in the estimates. This also leaves no room for extra personnel during inspections, exercises, or routine face-to-face turnovers. • Planned ship manning requires filling 100 percent of the billets. This is not the Navy's standard practice on other ships, and the personnel and training systems may not be able to support 100 percent manning. Additionally, workload estimates for the many new technologies such as catapults, arresting gear, radar, and weapons and aircraft elevators are not yet well understood. Electromagnetic Compatibility • Developmental testing identified significant EMI [electromagnetic interference] and radiation hazard problems. The Navy continues to characterize and develop mitigation plans for the problems, but some operational limitations and restrictions are expected to persist into IOT&E and deployment. The Navy will need to develop capability assessments at differring levels of system utilization in order for commanders to make informed decisions on system employment. Live Fire Test & Evaluation • The vulnerability of CVN 78's many new critical systems to underwater threat-induced shock is unknown. The program plans to complete shock testing on EMALS, AAG, and the AWE components during CY19, but because of a scarcity of systems, shock testing of DBR components lags and will likely not be completed before the FSSTs [full ship shock trials]. • The Vulnerability Assessment Report provides an assessment of the ship's survivability to air-delivered threat engagements. The classified findings in the report identify the specific equipment that most frequently would lead to mission capability loss. In FY19, the Navy is scheduled to deliver additional report volumes that will assess vulnerability to underwater threats and compliance with Operational Requirements Document survivability criteria. Recommendations The Navy should: 1. Provide schedule, funding, and an execution strategy for assessing SGR. This strategy should specify which testing will be accomplished live, a process for accrediting the Seabasing/Seastrike Aviation Model for operational testing, and a method for comparing CVN 78 performance with that of the Nimitz class. 2. Continue to characterize the electromagnetic environment onboard CVN 78 and develop operating procedures to maximize system effectiveness and maintain safety. As applicable, the Navy should utilize the lessons learned from CVN 78 to inform design modifications for CVN 79 and future carriers. 3. Develop and implement DBR electronic protection to enhance ship survivability against modern threats. 4. Submit an updated TEMP. Another oversight issue for Congress concerns CVN-78 program issues raised in the 2019 edition of the Government Accountability Office's (GAO's) annual report surveying selected DOD weapon acquisition programs. Some of these issues raised by GAO overlap with issues discussed in previous sections of this CRS report. Regarding the CVN-78 program, the report stated the following: Technology Maturity, Design Stability, and Production Readiness The Navy accepted delivery of the lead ship, CVN 78, in May 2017 despite challenges related to immature technologies and struggles to demonstrate the reliability of mature systems. The Navy reports that 10 of the Ford Class's 12 critical technologies are fully mature—the advanced arresting gear (AAG) and one of the ship's missile systems are not yet mature. The advanced weapons elevators are among the systems deemed mature by the Navy; however, according to Navy officials, only 2 of the 11 elevators installed on the ship can bring munitions to the flight deck—a key element of operational flights. The shipbuilder is working to correct the system during its first post-delivery maintenance period, now scheduled to end in October 2019, and the Navy plans to create a land-based site to test the elevators, which will come at an additional cost. Shipboard testing is ongoing for several critical systems and could delay future operational testing. Those systems include the electromagnetic aircraft launch system (EMALS), AAG, and dual band radar (DBR). Although the Navy is testing EMALS and AAG on the ship with aircraft, the reliability of those systems remains a concern. If these systems cannot function safely, CVN 78 will not demonstrate it can rapidly deploy aircraft—a key requirement for these carriers. Recent shipboard testing revealed that the Navy is struggling to get DBR to operate as planned. Moreover, DBR poses a greater radiation hazard to personnel and systems on an aircraft carrier than the Navy anticipated, which could restrict certain types of flight operations. The remaining challenges the Navy faces in maturing CVN 78's critical technologies could lead to their redesign or replacement on later ships. This would include CVN 79, which is currently 55 percent complete, as well as the third and fourth ships, CVNs 80 and 81. CVN 79 repeats the CVN 78 design with some modifications and replaces DBR with the Enterprise Air Surveillance Radar (EASR), which is in development. The Navy does not identify this new system as a critical technology in the Ford Class program because it derives from the pre-existing Air and Missile Defense Radar (AMDR) program. However, EASR is a different size and performs a different mission than the AMDR systems, which are designed for destroyers. Therefore, EASR may still require design and development efforts to function on the carrier. The Navy plans to procure two EASR units for CVNs 79 and 80 and install the CVN 79 unit during that ship's second phase of delivery. CVNs 80 and 81 will repeat the design of CVN 79. Other Program Issues CVN 78's procurement costs increased by 23 percent over its initial cost cap and as a result of continuing technical deficiencies, the Navy may still require more funding to complete this ship. The Navy increased the current $12.9 billion cost cap for CVN 78 by $120 million in May 2018 to account for additional post-delivery work, but added work and cost changes may result in an additional cost increase. Costs for CVN 79 are also likely to increase as a result of optimistic cost and labor targets, putting the ship at risk of exceeding its $11.4 billion cost cap. The CVN 79 cost estimate assumes unprecedented construction efficiency—labor hours will be 18 percent lower than CVN 78. However, our analysis shows the shipbuilder is not meeting this goal and is unlikely to improve performance enough to meet cost and labor targets. Congress raised the cost cap for CVN 80 and later ships to $12.6 billion and approved the Navy's plans to buy two carriers—CVNs 80 and 81—at the same time, based on the shipbuilder's estimate that this strategy will save the Navy over $2 billion. However, it is unclear whether the Navy can meet this cost cap, even with the estimated savings from a two-ship buy, because it assumes further reductions in subsystem costs, construction change orders, and labor hours. The Navy projects a further reduction in labor hours compared to CVN 79—about 25 percent fewer labor hours than CVN 78—will contribute to cost savings for these ships. The program office indicated that it does not separately track or report information on software development to integrate the various subsystems of the ship. These subsystems include CVN 78's combat control systems, which rely on integrating systems through software intensive development. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office stated that, in July 2018, CVN 78 entered a year-long maintenance period. It also said that, as of February 2019, two advanced weapons elevators are operating, and it continues to improve developmental system reliability. The program also stated that, with CVN 79 construction 55 percent complete, shipbuilder cost performance remains stable, but slightly below the level needed to achieve production labor hour reduction targets. The program stated that the shipbuilder continues to work through the effects of material shortfalls that disrupted performance. The program said that the Navy plans to deliver a complete, deployable ship as scheduled and within the cost cap to maintain an 11-carrier fleet. The program office also stated that the Navy awarded the CVN 80/81 procurement contract in January 2019 and expects to save $4 billion, compared to if it had purchased each ship individually. According to the program, the contract limits the Navy's liability and incentivizes the shipyard's best performance. Another oversight issue for Congress is whether the Navy should shift at some point from procuring large-deck, nuclear-powered carriers like the CVN-78 class to procuring smaller aircraft carriers. The issue has been studied periodically by the Navy and other observers over the years. To cite one example, the Navy studied the question in deciding on the aircraft carrier design that would follow the Nimitz (CVN-68) class. Advocates of smaller carriers argue that they are individually less expensive to procure, that the Navy might be able to employ competition between shipyards in their procurement (something that the Navy cannot do with large-deck, nuclear-powered carriers like the CVN-78 class, because only one U.S. shipyard, HII/NNS, can build aircraft carriers of that size), and that today's aircraft carriers concentrate much of the Navy's striking power into a relatively small number of expensive platforms that adversaries could focus on attacking in time of war. Supporters of large-deck, nuclear-powered carriers argue that smaller carriers, though individually less expensive to procure, are less cost-effective in terms of dollars spent per aircraft embarked or aircraft sorties that can be generated, that it might be possible to use competition in procuring certain materials and components for large-deck, nuclear-powered aircraft carriers, and that smaller carriers, though perhaps affordable in larger numbers, would be individually less survivable in time of war than large-deck, nuclear-powered carriers. At a March 18, 2015, hearing on Navy shipbuilding programs before the Seapower subcommittee of the Senate Armed Services Committee, the Navy testified that it had initiated a new study on the question. At the hearing, the following exchange occurred: SENATOR JOHN MCCAIN, CHAIRMAN, SENATE ARMED SERVICES COMMITTEE, ATTENDING EX OFFICIO: And you are looking at additional options to the large aircraft carrier as we know it. SEAN STACKLEY, ASSISTANT SECRETARY OF THE NAVY FOR RESEARCH, DEVELOPMENT,AND ACQUISITION: We've initiated a study and I think you've discussed this with the CNO [Chief of Naval Operations] and that's with the frontend of that study. Yes, sir. Later in the hearing, the following exchange occurred: SENATOR ROGER WICKER, CHAIRMAN, SEAPOWER SUBCOMMITTEE: Well, Senator McCain expressed concern about competition [in Navy shipbuilding programs]. And I think that was with, in regard to aircraft carriers. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE NAVY FOR RESEARCH, DEVELOPMENT,AND ACQUISITION: Yes, Sir. WICKER: Would you care to respond to that? STACKLEY: He made a generic comment that we need competition to help control cost in our programs and we are absolutely in agreement there. With specific regards to the aircraft carrier, we have been asked and we are following suit to conduct a study to look at alternatives to the Nimitz and Ford class size and type of aircraft carriers, to see if it make sense. We've done this in the past. We're not going to simply break out prior studies, dust them off and resubmit it. We're taking a hard look to see is there—is there a sweet spot, something different other than today's 100,000 ton carrier that would make sense to provide the power projection that we need, that we get today from our aircraft carriers, but at the same time put us in a more affordable position for providing that capability. WICKER: OK. But right now, he's—he's made a correct factual statement with regard to the lack of competition. STACKLEY: Yes, Sir. There is—yes, there is no other shipyard in the world that has the ability to construct a Ford or a Nimitz nuclear aircraft carrier other than what we have in Newport News and the capital investment to do that is prohibitive to set up a second source, so obviously we are—we are content, not with the lack of competition, but we are content with knowing that we're only going to have one builder for our aircraft carriers. On March 20, 2015, the Navy provided the following additional statement to the press: As indicated in testimony, the Navy has an ongoing study to explore the possible composition of our future large deck aviation ship force, including carriers. There is a historical precedent for these type[s] of exploratory studies as we look for efficiencies and ways to improve our war fighting capabilities. This study will reflect our continued commitment to reducing costs across all platforms by matching capabilities to projected threats and Also [sic] seeks to identify acquisition strategies that promote competition in naval ship construction. While I can't comment on an ongoing study, what I can tell you is that the results will be used to inform future shipbuilding budget submissions and efforts, beyond what is currently planned. Section 128 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015) states the following: SEC. 128. Limitation on availability of funds for U.S.S. John F. Kennedy (CVN–79). (a) Limitation.—Of the funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2016 for procurement for the U.S.S. John F. Kennedy (CVN–79), $100,000,000 may not be obligated or expended until the date on which the Secretary of the Navy submits to the congressional defense committees the certification under subsection (b)(1) or the notification under paragraph (2) of such subsection, as the case may be, and the reports under subsections (c) and (d).... (d) Report on future development.— (1) IN GENERAL.—Not later than April 1, 2016, the Secretary of the Navy shall submit to the congressional defense committees a report on potential requirements, capabilities, and alternatives for the future development of aircraft carriers that would replace or supplement the CVN–78 class aircraft carrier. (2) ELEMENTS.—The report under paragraph (1) shall include the following: (A) A description of fleet, sea-based tactical aviation capability requirements for a range of operational scenarios beginning in the 2025 timeframe. (B) A description of alternative aircraft carrier designs that meet the requirements described under subparagraph (A). (C) A description of nuclear and non-nuclear propulsion options. (D) A description of tonnage options ranging from less than 20,000 tons to greater than 100,000 tons. (E) Requirements for unmanned systems integration from inception. (F) Developmental, procurement, and lifecycle cost assessment of alternatives. (G) A notional acquisition strategy for the development and construction of alternatives. (H) A description of shipbuilding industrial base considerations and a plan to ensure opportunity for competition among alternatives. (I) A description of funding and timing considerations related to developing the Annual Long-Range Plan for Construction of Naval Vessels required under section 231 of title 10, United States Code. The report required by Section 128(d) of P.L. 114-92 , which was conducted for the Navy by the RAND Corporation, was delivered to the congressional defense committees in classified form in July 2016. An unclassified version of the report was then prepared and issued in 2017 as a publicly released RAND report. The executive summary of that report states the following (emphasis as in original): We analyzed the feasibility of adopting four aircraft carrier concept variants as follow-ons to the Ford-class carrier following USS Enterprise (CVN 80) or the as-yet-unnamed CVN 81. Among these options are two large-deck carrier platforms that would retain the capability to launch and recover fixed-wing aircraft using an on-deck catapult and arresting gear system and two smaller carrier platforms capable of supporting only short takeoff and vertical landing (STVOL) aircraft. Specifically, the four concept variants are as follows: • a follow-on variant continuing the current 100,000-ton Ford-class carrier but with two life-of-the-ship reactors and other equipment and system changes to reduce cost (we refer to this design concept as CVN 8X) • a 70,000-ton USS Forrestal–size carrier with an updated flight deck and hybrid nuclear-powered integrated propulsion plant with capability to embark the current large integrated air wing but with reduced sortie generation capability, survivability, and endurance compared with the Ford class (we refer to this design concept as CVN LX) • a 43,000-ton variant of the USS America–class, fossil fuel–powered and arranged to support only STOVL operations but at a higher tempo than the current LHA 6 (USS America) (we refer to this design concept as CV LX). This variant would incorporate the larger ship's beam excursion the Navy examined in the LHA 8–class flight 1 studies. • a 20,000-ton variant that will resemble escort carriers that some allied navies currently operate (we refer to this design concept as CV EX). Similar to the 43,000-ton variant, it will be conventionally powered and will operate STOVL aircraft.... Our analyses of the carrier variants illuminated capability shortfalls in some instances. Our overall findings are as follows: • The CVN 8X, the descoped Ford-class carrier, offers similar warfighting capability to that of the Ford-class carrier today. There might be opportunities to reduce costs by eliminating costly features that only marginally improve capability, but similar tradeoffs are likely to be made in the current program as well. • The CVN LX concept variant offers an integrated, current air wing with capabilities near current levels but with less organic mission endurance for weapons and aviation fuel. It will not generate the same SGR as the Ford-class carrier, but this is not a significant limitation for stressing warfighting scenarios. It will be less survivable in some environments and have less redundancy than the Ford program-of-record ship, and these factors might drive different operation concepts. Although we do not characterize the impact of decreased survivability, this is an important limitation that will have to be weighed against the potential cost savings. The major means of reducing cost is through engineering redundancy, speed, and air wing fuel capacity, and these could affect mobility and theater closure. • The concept variant CV LX, which is a version of the LHA 6 platforms, might be a low-risk, alternative pathway for the Navy to reduce carrier costs if such a variant were procured in greater numbers than the current carrier shipbuilding plan; our analysis suggests a two-to-one replacement. Over the long term, however, as the current carrier force is retired, the CV LX would not be a viable option for the eventual carrier force unless displaced capabilities were reassigned to new aircraft or platforms in the joint force, which would be costly. This platform would be feasible for a subset of carrier missions but, even for those missions, could require an increase in the number of platforms. This concept variant might, if procured in sufficient numbers, eventually enable the Navy to reduce the number of Ford-class carriers in the overall force structure, but more-extensive analysis of missions, operations, and basing of such a variant and the supported air combat element is required. • The smallest concept variants reviewed, the CV EX 20,000-ton sea-based platforms, do not provide either a significant capacity or an integrated air wing and, thus, force reliance on other legacy platforms or land-based assets to provide key elements of capability—in particular, AEW. As a result, this concept variant is not really a replacement for current aircraft carrier capability and would require other platforms, aircraft, weapons, and capabilities in the joint force. These platforms would be a viable pathway only in broad fleet architecture transformation providing a narrow mission set, perhaps regionally, and would require extensive analysis. Given that such a concept variant is not a viable replacement for an aircraft carrier, such analysis would be required to see whether any adjustment on the current aircraft carrier program would be feasible.... The overall results of our cost comparison are as follows: • The descoped Ford-class carrier, the CVN 8X, might generate fewer sorties than the current key performance parameter values for the Ford class and might have only incremental reduction in overall platform cost . The analysis examining cost reduction with transition to a life-of-the-ship reactor, such that being done on submarine programs, does not appear to be cost effective. Between the developmental costs and a reduced service life, there is little cost advantage in this variant. • The CVN LX concept would allow considerable savings across the ship's service life and appears to be a viable alternative to consider for further concept exploration . Construction costs would be lower; design changes and life-cycle costs would reflect the lessons already applied in the Ford class. The reliance on hybrid drive with fewer mechanical parts than legacy platforms is likely to further reduce maintenance cost. However, CVN LX would be a new design that would require a significant investment in nonrecurring engineering in the near term to allow timely delivery in the 2030s. • CV LX, although it requires a larger force structure to maintain air capabilities, might still reduce overall construction costs if large carrier numbers were reduced. But, as described in the report, reducing carrier numbers with the resulting loss of capability should not be pursued without extensive further analysis for all displaced missions in the joint force execution of warfighting scenarios and, potentially, regional basing and narrowly focused missions for these platforms. Any cost savings would likely be offset to an unknown degree by requirements for additional systems to mitigate loss of capability associated with this variant. • CV EX, the smallest variant, is not a practical variant at all without considerable revision of the Navy warfighting concept of operations. Although the same is to a degree true with CV LX, the impact of an even larger number of low-sortie ships with small and limited air wings is even more pronounced with this variant. CV EX has all of the shortfalls of CV LX and will pose even greater issues of mutual support and logistics sustainment.... Conclusions Our analysis points to potential options for replacing the Nimitz-class carrier as these ships reach expected service life that have lower procurement costs than the Ford-class carriers. However, most of these options come with reduced capability that might require changes in the concept of operations to deliver sea-based aircraft capability comparable to that of carriers in the fleet today. If a new platform is introduced in the mid-2030s, the Navy's force structure will still contain a large legacy force of Nimitz- and Ford-class carriers, at least until the mid-2050 time frame, which might lower the risks of introducing a new carrier for some period of time. But, ultimately, if a new carrier variant is selected, it will define the carrier force and constitute the supported capability available to the Navy. Capability shortfalls can be mitigated, to some degree, with changes in operational concepts or by adding additional platforms to the force structure—which introduces additional cost that might offset anticipated cost savings. In addition, if the Navy stops procuring large-deck nuclear carriers, the ability to reconstitute the industrial base at some time in the future comes with substantial risk. Although SGR [sortie generation rate] was a central variable in comparing the carrier variants, our analysis suggests that there is room to make trade-offs in aircraft sortie rate capacity between the Ford-class carrier and a lower-cost platform. However, it is important to consider that, whatever threats complicate carrier operations, they might even more significantly affect land-based tactical air operations. Carriers can move; have defensive support from escorts; can readily replenish; and might, in fact, be more survivable than their land-based counterparts. This is an important factor for Congress and the Department of Defense to consider before a trade-off is made to give up the supported air wing sortie generation capacity in the overall sea-based force. The question of whether to shift to smaller aircraft carriers was also addressed in three studies on future fleet architecture that were required by Section 1067 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015). These three studies are discussed in more detail in another CRS report. A February 15, 2019, press report stated the following: Under Secretary of the Navy Thomas Modly said now that the Navy found a way to build two new Gerald R. Ford-class aircraft carriers while saving money it is starting to look at future carrier procurement, which might be very different.… Modly said Secretary of the Navy Richard Spencer sees $13 billion carriers as not sustainable going forward and the service will be looking at ways to further reduce costs or keep the carrier capabilities more affordable in future ship procurements. \"There was general conclusion that those two for sure would be built\" and once that was determined \"that was going to happen,\" Modly said during the AFCEA West 2019 conference here [in San Diego].… After the CVN-80 and -81 [procurement] decision was made, \"I think a lot of derivative decisions still need to be made. So the secretary [Spencer] would like to take a look at 'O.K. now that we made that decision, and that second one that comes will be in quite a few years from now, we need to start thinking now about what's the next one look like.'\" Modly told reporters they are asking questions like \"Is it going to be advanced as this one? Or is it going to be smaller or are we going to buy two smaller ones or maybe shift air power to other forms of delivery. And we don't know the answers of that but we're looking at this.\" An earlier oversight issue for Congress for the CVN-78 program was whether to conduct the shock trial for the CVN-78 class in the near term, on the lead ship in the class, or years later, on the second ship in the class. For background information on that issue, see Appendix E . Table 3 summarizes congressional action on the FY2020 procurement funding request for the CVN-78 program. As shown in Table 1 , of the $2,347.0 million requested for FY2020, $1,062 million is for CVN-80 and $1,285 million is for CVN-81. Appendix A. Withdrawn Proposal to Not Fund CVN-75 RCOH The Navy's FY2020 budget submission proposed to not fund the mid-life nuclear refueling overhaul (called a Refueling Complex Overhaul, or RCOH) for the aircraft carrier CVN-75 ( Harry S. Truman ), and to instead retire the ship around FY2024 and also deactivate one of the Navy's carrier air wings at about the same time. On April 30, 2019, however, the Administration announced that it was effectively withdrawing this proposal from the Navy's FY2020 budget submission. The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 (and by implication its associated air wing) in service past FY2024. This appendix presents, for reference purposes, additional background information on this withdrawn budget proposal. Following the Administration's April 30 withdrawal of its proposal to not fund the CVN-75 RCOH, the Navy states that the CVN-75 RCOH can no longer begin in FY2024, as planned prior to the Navy's FY2020 budget submission, because the Navy spent the months prior to April 30 planning for the ship's deactivation rather than for giving it an RCOH. As a result, the Navy states, the CVN-75 will now begin a year later, in FY2025. As a consequence of this one-year shift in the schedule for the RCOH, the Navy states, the funding stream for the CVN-75 shown in Table A-1 will also now shift one year to the right, and the CVN-75 RCOH can be reinstated without any funding in FY2020, because FY2020 is now effectively the same as FY2019 in Table A-1 . Performing an RCOH on a carrier is needed for the carrier to be able to operate for the second half of its intended 50-year service life. Not performing an RCOH on CVN-75 would mean that, instead of remaining in service for the second half of its intended 50-year service life, the ship would be decommissioned, permanently removed from service, and eventually dismantled. (CVN-75 was commissioned into service on July 25, 1998, and will be 26 years old in 2024.) The Navy's FY2020 budget submission shows that, for the period FY2022-FY2047, this would have reduced the size of the carrier force by one ship compared to what it would otherwise be. More specifically, the Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan, reflecting the proposal to not fund the CVN-75 RCOH, projected that the carrier force would remain at 11 ships through FY2024, decline to 10 ships in FY2025, and remain at 10 ships for the remainder of the 30-year period, except for a few years (FY2027, FY2040, FY2042-FY2044, and FY2046-FY2048) when it would temporarily decline to 9 ships. Consequently, beginning in FY2025 and extending through the end of the 30-year period, the carrier force would not be in compliance with the requirement under 10 U.S.C. 8062(b) for the Navy to maintain a force of not less than 11 operational aircraft carriers. As an associated action, the Navy's FY2020 budget submission also proposed deactivating one of the Navy's carrier air wings around FY2024. This would reduce the number of carrier air wings from nine to eight, meaning that the Navy beginning around FY2024 would no longer be in compliance with the requirement under 10 U.S.C. 8062(e) to maintain a minimum of nine carrier air wings. Table A-1 shows funding for the CVN-75 RCOH in the Navy's FY2019 budget submission. As shown in the table, the estimated total cost of the CVN-75 RCOH in the FY2019 budget submission was $5,578 million (i.e., about $5.6 billion). The figure of about $5.6 billion shown in Table A-1 does not include the cost of the two nuclear fuel cores that would be installed as part of the RCOH. (CVN-75, like all Nimitz-class carriers, has two nuclear reactors, each of which would receive a new fuel core as part of an RCOH.) Fuel cores for aircraft carrier RCOHs are procured through the Other Procurement, Navy (OPN) appropriation account. The Navy states that it procured the cores for the CVN-75 RCOH—one of them in FY2008 and the other in FY2011—for a total cost of about $538 million. Adding this $538 million cost to the total cost shown in Table A-1 would increase the total estimated cost of the CVN-75 RCOH to about $6.1 billion. The fuel cores for the planned future RCOHs for CVN-76 and CVN-77 (the final two Nimitz-class carriers) have also been procured—the CVN-76 RCOH cores were funded in FY2012 and FY2013, and the CVN-77 RCOH cores were funded in FY2015 and FY2019. Thus, if CVN-75 were to not receive an RCOH, and if it were not possible or cost effective to rescind the funding for the core funded in FY2019, then two of the six Nimitz-class fuel cores that have been procured since FY2008 for anticipated use in RCOHs would not in the end be used in an RCOH and would in effect become surplus to the RCOH effort. The Navy indicated that if that were to occur, these two cores would be placed in storage for potential future use as emergency replacement cores for a Nimitz-class ship until all Nimitz-class ships complete their service lives. If CVN-75 were to not receive an RCOH and is instead be decommissioned, the savings from not funding the RCOH would be partially offset by the cost to deactivate and dismantle CVN-75. The Navy estimated the cost to deactivate and dismantle CVN-75 at about $1.5 billion. The initial increments of this approximate $1.5-billion cost would have occurred in FY2023 ($130.3 million) and FY2024 ($247.2 million). The estimated net savings from not funding the RCOH and instead deactivating and dismantling the ship would thus have been about $4.1 billion (i.e., about $5.6 billion less about $1.5 billion). The Navy stated that there would also be 20 to 25 years of additional annual savings of about $1 billion per year in the form of avoided annual operation and support (O&S) costs for CVN-75 and the deactivated carrier air wing. DOD officials reportedly wanted to redirect the estimated net RCOH-related savings of about $4.1 billion and the estimated recurring savings of about $1 billion per year to Navy investments for technologies that will add to future Navy capabilities. RCOHs are done primarily by Huntington Ingalls Industries/Newport News Shipbuilding (HII/NNS) in Newport News, VA, and form a significant part of HII/NNS's business base, along with construction of new nuclear-powered aircraft carriers and construction of new nuclear-powered submarines. RCOHs in recent years have been scheduled in a more-or-less heel-to-toe fashion at HII/NNS—when one RCOH is done, the next one is scheduled to begin soon thereafter. RCOHs are done in a particular dry dock at HII/NNS, so a carrier undergoing an RCOH in that dry dock must be ready to depart the dry dock before the following carrier can be moved into the dry dock for its RCOH. Until it was withdrawn, the proposal in the Navy's FY2020 budget submission to not fund CVN-75's RCOH and instead decommission the ship (and a carrier air wing) raised a number of potential oversight issues for Congress, including the following: Compliance with congressional direction. The central purposes of 10 U.S.C. 8062(b) and 8062(e) are to act as mandates to the executive branch to support a force of not less than 11 carriers and a minimum of 9 carrier air wings in executive branch planning. They represent directions from Congress for the Navy to provide the funding needed to maintain an 11-carrier, 9-carrier-air-wing force, regardless of limitations on the Navy's overall budget or other considerations. A proposed budget from the Navy that is inconsistent with these provisions might thus be viewed as a challenge to Congress's Article 1 power to set policy and to determine the composition of federal spending (i.e., Congress's constitutional power of the purse). If DOD were to treat the requirements in 10 U.S.C. 8062(b) and 8062(e) as optional matters rather than mandates, would this create a precedent for the executive branch to treat similar provisions in the U.S. Code as optional matters rather than mandates? For example, would it create a precedent for DOD, if it so desired, to begin treating as an optional matter the long-standing requirement in 10 U.S.C. 8063(a) that the Marine Corps \"shall be so organized as to include not less than three combat divisions and three air wings, and such other land combat, aviation, and other services as may be organic therein?\" If the executive branch were to begin treating statutory provisions like 10 U.S.C. 8062(b) and 8062(e) as optional matters rather than mandates, what implications might this have for policy and program execution, for Congress's power to legislatively establish policy and program goals, and for Congress's power of the purse? Alternative capabilities to be funded ; net impact on Navy capabilities . What were OSD's plans for redirecting the savings associated with deactivating CVN-75 and a carrier air wing around FY2024? What types of capabilities would have been created or maintained by these redirected funds? How would these capabilities compare in nature and timing to the capabilities that are to be provided by the continued operation of CVN-75 and the carrier air wing? Taking these factors into account, what would have been the net operational impact for the Navy of deactivating CVN-75 and a carrier air wing around FY2024 and redirecting the resulting savings toward these other investments? Requirement for 12-carrier force. The Navy's 2016 Force Structure Assessment (FSA) led to a Navy force-level requirement for a fleet of 355 ships that includes 12 aircraft carriers. OSD allowed the Navy to present that FSA to the Congress, and to program shipbuilding and other actions in support of achieving the 355-ship force-level goal. OSD did not publicly object to the FSA's 12-carrier requirement (or any other part of the 355-ship force-level goal). What was the analytical basis for an action that would reduce the size of the carrier from 11 to 10, instead of helping it to eventually increase from 11 to 12? Next Force Structure Assessment (FSA). The Navy states that it is currently conducting a new FSA as the successor to the 2016 FSA, and that this new FSA is to be completed by the end of 2019. This new FSA could change the 355-ship figure, the planned mix of ships, or both. Did the Navy's proposal to not fund the CVN-75 RCOH, and thereby reduce the carrier force from 11 ships to 10 ships, prejudge the outcome of the new FSA? Would the new FSA be tainted by the knowledge that the Navy had already proposed reducing the carrier force to 10 ships? How well could the analysts performing the new FSA have avoided being influenced by the Navy's proposed action? Was the Navy prepared to go ahead with the CVN-75 RCOH if the new FSA concludes that there is a requirement for 11 or more carriers? Likelihood of need for emergency replacement cores. How likely was it that the Nimitz-class program would need to use an emergency replacement set of fuel cores during the remainder of the Nimitz-class life cycle? What set of circumstances might lead to a need for an emergency replacement set of fuel cores? How often have such circumstances previously arisen for a nuclear-powered U.S. Navy ship whose fuel cores are intended to be sufficient for powering the ship for at least one-half of its expected service life? Given the assessed likelihood of the Nimitz-class program needing to use an emergency replacement set of fuel cores during the remainder of the Nimitz-class life cycle, what would have been the government's resulting return on investment of the several hundred million dollars used to procure the two fuel cores that would be placed in storage? Acting Secretary of Defense. The proposal to not fund the CVN-75 RCOH and to deactivate a carrier air wing represented a notable change from prior DOD force-structure planning and budgeting. Was it appropriate for such a change to be proposed by DOD during a time when DOD has an acting Secretary of Defense rather than a Secretary who was confirmed specifically for that position? Impact on industrial base and cost of other work. What would have been the impact on HII/NNS and the other parts of the aircraft carrier industrial base if CVN-75 were inactivated rather than given an RCOH? What impact, if any, would this have had on the cost of other work performed at HII/NNS and other parts of the aircraft carrier industrial base during these years, and on the eventual cost of the CVN-76 RCOH? For further reference, it can be noted that the Navy's FY2015 budget submission proposed not funding the RCOH for the aircraft carrier CVN-73 ( George Washington ). The proposal raised oversight issues for Congress broadly similar to those listed above. Congress, in acting on the Navy's proposed FY2015 budget, rejected the proposal to not fund CVN-73's RCOH. The RCOH was funded and is currently underway. Appendix B. Background Information on Two-Ship Block Buy for CVN-80 and CVN-81 This appendix presents additional background information on the two-ship block buy contract for CVN-80 and CVN-81. The option for procuring two CVN-78 class carriers under a two-ship block buy contract had been discussed in this CRS report since April 2012. In earlier years, the discussion focused on the option of using a block buy contract for procuring CVN-79 and CVN-80. In more recent years, interest among policymakers focused on the option of using a block buy contract for procuring CVN-80 and CVN-81. On March 19, 2018, the Navy released a request for proposal (RFP) to Huntington Ingalls Industries/Newport News Shipbuilding (HII/NNS) regarding a two-ship buy of some kind for CVN-80 and CVN-81. A March 20, 2018, Navy News Service report stated the following: The Navy released a CVN 80/81 two-ship buy Request for Proposal (RFP) to Huntington Ingalls Industries—Newport News Shipbuilding (HII-NNS) March 19 to further define the cost savings achievable with a two-ship buy. With lethality and affordability a top priority, the Navy has been working with HII-NNS over the last several months to estimate the total savings associated with procuring CVN 80 and CVN 81 as a two-ship buy. \"In keeping with the National Defense Strategy, the Navy developed an acquisition strategy to combine the CVN 80 and CVN 81 procurements to better achieve the Department's objectives of building a more lethal force with greater performance and affordability,\" said James F. Geurts, Assistant Secretary of the Navy, Research Development and Acquisition. \"This opportunity for a two-ship contract is dependent on significant savings that the shipbuilding industry and government must demonstrate. The Navy is requesting a proposal from HII-NNS in order to evaluate whether we can achieve significant savings.\" The two-ship buy is a contracting strategy the Navy has effectively used in the 1980s to procure Nimitz-class aircraft carriers and achieved significant acquisition cost savings compared to contracting for the ships individually. While the CVN 80/81 two-ship buy negotiations transpire, the Navy is pursuing contracting actions necessary to continue CVN 80 fabrication in fiscal year (FY) 2018 and preserve the current schedule. The Navy plans to award the CVN 80 construction contract in early FY 2019 as a two-ship buy pending Congressional approval and achieving significant savings. Section 121(a)(2) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( H.R. 5515 / P.L. 115-232 of August 13, 2018) permitted the Navy, after the Department of Defense (DOD) made certain certifications to Congress, to add CVN-81 to the existing contract for building CVN-80. DOD provided the required certification on December 31, 2018. On January 31, 2019, the Navy announced that it had awarded a two-ship fixed-price incentive (firm target) (FPIF) contract for CVN-80 and CVN-81 to HII/NNS. The two-ship contract for CVN-80 and CVN-81 can be viewed as a block buy contract because the two ships are being procured in different fiscal years (CVN-80 was procured in FY2018 and CVN-81 is shown in the Navy's FY2020 budget submission as a ship procured in FY2020). The Navy's previous two-ship aircraft carrier procurements occurred in FY1983 (for CVN-72 and CVN-73) and FY1988 (for CVN-74 and CVN-75). In each of those two earlier cases, however, the two ships were fully funded within a single fiscal year, making each of these cases a simple two-ship purchase (akin, for example, to procuring two Virginia-class attack submarines or two DDG-51 class destroyers in a given fiscal year) rather than a two-ship block buy (i.e., a contract spanning the procurement of end items procured across more than one fiscal year). Compared to DOD's estimate that the two-ship block buy contract for CVN-80 and CVN-81 would produce savings of $3.9 billion (as measured from estimated costs for the two ships in the December 2017 Navy business case analysis), DOD states that \"the Department of Defense's Office of Cost Assessment and Program Evaluation (CAPE) developed an Independent Estimate of Savings for the two-ship procurement and forecast savings of $3.1 billion ([in] Then-Year [dollars]), or approximately 11 percent.... The primary differences between [the] CAPE and Navy estimates of savings are in Government Furnished Equipment and production change orders.\" Within the total estimated combined reduction in cost, HII/NNS reportedly expects to save up to $1.6 billion in contractor-furnished equipment. A November 2018 DOD report to Congress that was submitted as an attachment to DOD's December 31, 2018, certification stated the following regarding the sources of cost reduction for the two-ship contract: The CVN 80 and CVN 81 two-ship buy expands and improves upon the affordability initiatives identified in the Annual Report on Cost Reduction Efforts for JOHN F. KENNEDY (CVN 79) and ENTERPRISE (CVN 80) as required by section 126(c) of the National Defense Authorization Act for Fiscal Year 2017 ( P.L. 114-328 ). Production saving initiatives for single-ship buys included use of unit families in construction, pre-outfitting and complex assemblies which move work to a more efficient workspace environment, reduction in the number of superlifts, and facility investments which improve the shipbuilder trade effectiveness. A two-ship buy assumes four years between ship deliveries which allows more schedule overlap, and therefore more shop-level and assembly-level production efficiencies than two single-ship buys. Procuring two ships to a single technical baseline reduces the requirement for engineering labor hours when compared to single-ship estimates. The ability to rollover production support engineering and planning products maximizes savings while recognizing the minimum amount of engineering labor necessary to address obsolescence and regulatory changes on CVN 81. The two-ship agreement with the shipbuilder achieves a 55 percent reduction in construction support engineering hours on CVN 81 and greater than 18 percent reduction in production support and planning hours compared to single ship procurements. The two-ship procurement strategy allows for serial production opportunities that promote tangible learning and reduced shop and machine set-up times. It allows for efficient use of production facilities, re-use of production jigs and fixtures, and level loading of key trades. The continuity of work allows for reductions in supervision, services and support costs. The result of these efficiencies is a production man-hours step down that is equivalent to an 82 percent learning curve since CVN 79. Key to achieving these production efficiencies is Integrated Digital Shipbuilding (iDS). The Navy's Research, Development, Test, and Evaluation (RDT&E) and the shipbuilder's investment in iDS, totaling $631 million, will reduce the amount of production effort required to build FORD Class carriers. The two-ship buy will accelerate the benefits of this approach. The ability to immediately use the capability on CVN 81 would lead to a further reduction in touch labor and services in affected value streams. The two-ship agreement with the shipbuilder represents a production man-hours reduction of over seven percent based on iDS efficiencies. Contractual authority for two ships allows the shipbuilder to maximize economic order quantity material procurement. This allows more efficient ordering and scheduling of material deliveries and will promote efficiencies through earlier ordering, single negotiations, vendor quotes, and cross program purchase orders. These efficiencies are expected to reduce material costs by about six percent more when compared to single-ship estimates. Improved material management and flexibility will prevent costly production delays. Furthermore, this provides stability within the nuclear industrial base, de-risking the COLUMBIA and VIRGINIA Class programs. The two-ship buy would provide economic stability to approximately 130,000 workers across 46 States within the industrial base. Change order requirements are likewise reduced as Government Furnished Equipment (GFE) providers will employ planning and procurement strategies based on the common technical baseline that minimize configuration changes that must be incorporated on the follow ship. Change order budget allocations have been reduced over 25 percent based on two-ship strategies. In addition to the discrete savings achieved with the shipbuilder, the two-ship procurement authority provides our partner GFE providers a similar opportunity to negotiate economic order quantity savings and achieve cross program savings when compared to single-ship estimates. An April 16, 2018, press report stated the following: If the Navy decides to buy aircraft carriers CVN-80 and 81 together, Newport News Shipbuilding will be able to maintain a steady workload that supports between 23,000 and 25,000 workers at the Virginia yard for the next decade or so, the shipyard president told reporters last week. Part of the appeal of buying the two carriers together is that the Navy would also buy them a bit closer together: the ships would be centered about three-and-a-half or four years apart, instead of the five-year centers for recent carrier acquisition, Newport News Shipbuilding President Jennifer Boykin told reporters. Boykin said the closer ship construction centers would allow her to avoid a \"labor valley\" where the workforce levels would dip down after one ship and then have to come back up, which is disruptive for employees and costly for the company. If this two-carrier buy goes through, the company would avoid the labor valley altogether and ensure stability in its workforce, Boykin said in a company media briefing at the Navy League's Sea Air Space 2018 symposium. That workforce stability contributes to an expected $1.6 billion in savings on the two-carrier buy from Newport News Shipbuilding's portion of the work alone, not including government-furnished equipment.... Boykin said four main things contribute to the expected $1.6 billion in savings from the two-carrier buy. First, \"if you don't have the workforce valley, there's a labor efficiency that represents savings.\" Second, \"if you buy two at once, my engineering team doesn't have to produce two technical baselines, two sets of technical products; they only have to produce one, and the applicability is to both, so there's savings there. When we come through the planning, the build plan of how we plan to build the ship, the planning organization only has to put out one plan and the applicability is to both, so there's savings there.\" The third savings is a value of money over time issue, she said, and fourth is economic order quantity savings throughout the entire supply chain. Discussions of the option of using a block buy contract for procuring carriers have focused on using it to procure two carriers in part because carriers have been procured on five-year centers, meaning that two carriers could be included in a block-buy contract spanning six years—the same number of years originally planned for the two block buy contracts that were used to procure mnay of the Navy's Littoral Combat Ships. It can be noted, however, that there is no statutory limit on the number of years that a block buy contract can cover, and that the LCS block buy contracts were subsequently amended to cover LCSs procured in a seventh year. This, and the possibility of procuring carriers on 3- or 3.5-year centers, raises the possibility of using a block buy contract to procure three aircraft carriers: For example, if procurement of aircraft carriers were shifted to 3- or 3.5-year centers, a block buy contract for procuring CVN-80, CVN-81, and CVN-82 could span seven years (with the first ship procured in FY2018, and the third ship procured in FY2024) or eight years (with the first ship procured in FY2018 and the third ship procured in FY2025). The percentage cost reduction possible under a three-ship block buy contract could be greater than that possible under a two-ship block buy contract, but the offsetting issue of reducing congressional flexibility for changing aircraft carrier procurement plans in coming years in response to changing strategic or budgetary circumstances could also be greater. Appendix C. Cost Growth and Managing Costs Within Program Cost Caps This appendix presents additional background information on cost growth in the CVN-78 program, Navy efforts to stem that growth, and Navy efforts to manage costs so as to stay within the program's cost caps. October 2018 CBO Report An October 2018 CBO report on the potential cost of the Navy's 30-year shipbuilding plan states the following regarding the CVN-78 program: The Navy's current estimate of the total cost of the Gerald R. Ford , the lead ship of the CVN-78 class, is $13.0 billion in nominal dollars appropriated over the period from 2001 to 2018, an amount that is equal to the cost cap set in law. CBO used the Navy's inflation index for naval shipbuilding to convert that figure to $15.5 billion in 2018 dollars, or 23 percent more than the corresponding estimate when the ship was first authorized in 2008. Neither the Navy's nor CBO's estimate includes the $5 billion in research and development costs that apply to the entire class. Because construction of the lead ship is finished, CBO used the Navy's estimate for that ship to estimate the cost of successive ships in the class. But not all of the cost risk has been eliminated; in particular, the ship's power systems and advanced arresting gear (the system used to recover fixed-wing aircraft landing on the ship) are not yet working properly. It is not clear how much those problems will cost to fix, but current Navy estimates suggest that it will be several tens of millions of dollars or more. CBO does not have enough information to estimate those final repair costs. The next carrier after the CVN-78 will be the CVN-79, the John F. Kennedy . Funding for that ship began in 2007, the Congress officially authorized its construction in 2013, and the planned appropriations for it were completed in 2018. The shipbuilder expects to complete construction of the CVN-79 in 2024 and deploy it for the first time in 2026. The Navy estimates that the ship will cost $11.3 billion in nominal dollars (or $11.6 billion in 2018 dollars). The Navy's selected acquisition report on the CVN-79 states that \"the Navy and shipbuilder have made fundamental changes in the manner in which the CVN 79 will be built to incorporate lessons learned from CVN 78 and eliminate the key contributors to cost performance challenges realized in the construction of CVN 78.\" Nevertheless, the Navy informed CBO that there is a greater than 60 percent chance that the ship's final cost will be more than the current estimate. Although CBO expects the Navy to achieve a considerable cost reduction in the CVN-79 compared with the CVN-78, as is typical with the second ship of a class, CBO's estimate is higher than the Navy's. Specifically, CBO estimates that the ship will cost $11.7 billion in nominal dollars (or $12.0 billion in 2018 dollars), about 4 percent more than the Navy's estimate. In 2018, the Congress authorized the third carrier of the class, the Enterprise (CVN-80). Appropriations for that ship began in 2016 and are expected to be complete by 2023. The Navy estimates that the ship will cost $12.6 billion in nominal dollars (or $11.5 billion in 2018 dollars). However, as with CVN-79, the Navy told CBO that there is a greater than 60 percent chance that the ship's final cost will be more than the current estimate. CBO estimates that the ship will cost $13.0 billion in nominal dollars (or $11.8 billion in 2018 dollars), about 3 percent more than the Navy's estimate. The Navy estimates an average cost of $12.4 billion (in 2018 dollars) for the 7 carriers (CVN-81 through CVN-87) in the 2019 shipbuilding plan. CBO's estimate is $12.8 billion per ship.... The gap between the estimates has narrowed since the 2017 plan: The Navy's has increased by $500 million per ship, and CBO's has dropped by $200 million per ship. It is not clear why the Navy's estimates increased, but CBO's estimates fell mainly because the agency projects somewhat less growth in real costs of the shipbuilding industry in future years. August 2018 Press Report An August 17, 2018, press report states the following: Huntington Ingalls Industries Inc., the sole U.S. builder of aircraft carriers, continues to fall short of the Navy's demand to cut labor expenses to stay within an $11.39 billion cost cap mandated by Congress on the second in a new class of warships. With about 47 percent of construction complete on the USS John F. Kennedy, Navy figures show the contractor isn't yet meeting the goal it negotiated with the service: reducing labor hours by 18 percent from the first carrier, the USS Gerald Ford.... It took about 49 million hours of labor to build the Ford, according to the U.S. Government Accountability Office. The Navy's goal for the Kennedy is to reduce that to about 40 million hours. Huntington Ingalls's performance \"remains stable at approximately 16 percent\" less, William Couch, spokesman for the Naval Sea Systems Command, said in an email. He said \"key production milestones and the ship's preliminary acceptance date remain on track\" and there are \"ample opportunities\" for improvement \"with nearly four years until contract delivery and over 70 percent of assembly work\" remaining on the vessel's superstructure. But the Pentagon's naval warfare division, which reports to Ellen Lord, the Defense Department's chief weapons buyer, is less sanguine. It said in a July assessment that Huntington Ingalls \"is unlikely to fully recover the needed 18 percent\" reduction.... On the effort to meet the 18 percent labor-hour reduction for the Kennedy, the Navy's program manager \"assesses that although difficult, the shipbuilder can still attain\" it, Couch said. Beci Brenton, a spokeswoman for Newport News, Virginia-based Huntington Ingalls, said \"we are seeing the benefits associated with significant build strategy changes and incorporation of lessons learned\" from the first vessel. Brenton said \"the current production performance\" is 16 percent less than the Ford's estimate at the time of contract award for the second vessel but the reduction is 17 percent when compared with the first vessel's current cost.... But Shelby Oakley, a director with the GAO who monitors Navy shipbuilding, said \"with so much of the program underway, it is unlikely that the Navy will regain efficiency.\" In later phases of a shipbuilding contract, she said, \"performance typically degrades, not improves.\" It's also \"unclear how the lessons learned\" from the first ship \"could help regain efficiency when they are already baked in to the Navy's overly optimistic estimate for the program,\" she said. June 2018 Press Report A June 19, 2018, press report stated the following: Huntington Ingalls Industries Inc. is asking General Electric Co. to compensate it for damage caused by flawed workmanship during installation of propulsion system components on the U.S. Navy's $13 billion aircraft carrier Gerald R. Ford. The problem, which forced the most expensive U.S. warship back to port in January, has yet to be fully resolved although the carrier is once again at sea.... Huntington Ingalls, a shipbuilder based in Newport News, Virginia, \"has notified the original manufacturer of the shipyard's intent to seek compensation,\" Naval Sea Systems Command spokesman William Couch said in an email. Beci Brenton, a spokeswoman for Huntington said, \"We continue to work with appropriate stakeholders to support resolution of this situation.\" Perry Bradley, a spokesman for Boston-based GE, said \"we're not going to comment on specifics other than to say\" that \"GE is working closely with\" Huntington's Newport News Shipyard unit and \"the U.S. Navy to resolve the issue.\"... The episode in January was the second failure in less than a year with a \"main thrust bearing\" that's part of the carrier's propulsion system. The first occurred in April 2017, during sea trials a month before the vessel's delivery. The ship has been sailing in a shakedown period to test systems and work out bugs. It's now scheduled to be ready for initial combat duty in 2022. The Navy's carrier program office said in an assessment that an inspection of the carrier's four main thrust bearings after the January failure revealed \"machining errors\" by GE workers at a Lynn, Massachusetts, facility during the original manufacturing as \"the actual root cause.\" The bearing overheated, the Navy said in a March 8 memo to Congress, and \"after securing the equipment to prevent damage, the ship safely returned to port.\" A failure review board is identifying \"modifications required to preclude recurrence,\" it said. The bearing is one of four that transfers thrust from the ship's four propeller shafts. \"The costs associated with repairing\" the thrust bearings \"are currently being assessed\" and \"this will include recovery of costs from the manufacturer of the Main Reduction Gear, General Electric (Lynn), as appropriate,\" the Navy said in the memo. Couch said the Navy doesn't expect similar propulsion problems with the next vessel in the class, the John F. Kennedy, because a different manufacturer made that carrier's propulsion train components. \"Any propulsion train deficiencies identified\" with the Ford \"will be corrected and implemented\" in \"future ships of the class as necessary,\" he said. May 2018 Press Report A May 11, 2018, press report stated the following: The Navy's costliest vessel ever just got pricer, breaching a $12.9 billion cap set by Congress by $120 million, the service told lawmakers this week. The extra money for the U.S.S. Gerald R. Ford built by Huntington Ingalls Industries Inc. is needed to replace faulty propulsion components damaged in a January failure, extend the vessel's post-delivery repair phase to 12 months from the original eight months and correct deficiencies with the \"Advanced Weapons Elevators\" used to move munitions from deep in the ship to the deck. The elevators on the ship, designated CVN 78, need to be fixed \"to preclude any effect on the safety of the ship and personnel,\" the Naval Sea Systems Command said in a statement to Bloomberg News on Friday. \"Once the adjustment is executed, the cost for CVN 78 will stand at $13.027\" billion, the Navy said. In addition to informing Congress that the spending lid has been breached, the Navy will have to let lawmakers know how it will shift funds to make up the difference. Navy officials didn't disclose the propulsion failure or elevator problems during budget hearings before Congress in recent weeks, and House and Senate lawmakers didn't ask about it.... The Ford's propulsion system and elevator flaws are separate from reliability issues on its troubled aircraft launch and recovery systems. After its delivery last May, the ship operated for 70 days and completed 747 shipboard aircraft launches and recoveries, exceeding the goal of about 400, the Navy said. None of the 11 weapons elevators are operational but at least two are being used for testing \"to identify many of the remaining developmental issues for this first-of-class system,\" the Navy has said. The command said all 11 elevators \"should have been complete and delivered with the ship delivery\" in May 2017. April 2018 Press Report An April 16, 2018, press report stated the following: Huntington Ingalls Industries' Newport News Shipbuilding President Jennifer Boykin provided an update on the various stages of construction on several major Navy shipbuilding programs during the Navy League's Sea Air Space Expo last week. The future USS John F. Kennedy (CVN-79) is about 43 percent complete, with launch planned for the fourth quarter of 2019 and delivery set for 2022. Boykin said the company has achieved about 75 percent of the ship erected and they are on track for an 18 percent man-hour budget reduction. Boykin provided these updates during a press briefing at the conference. Boykin revealed that undocking of CVN-79 in the fourth quarter of 2019 will occur three months earlier than originally planned. September 2017 Press Report A September 26, 2017, press report states the following: Huntington Ingalls Industries Inc. is falling short of a U.S. Navy goal to reduce hours of labor on the second ship in the new Ford class of aircraft carriers in a drive to reduce costs, according to service documents. With 34 percent of construction complete on the USS John F. Kennedy, Huntington Ingalls estimates it will be able to reduce labor hours by 16 percent from the hours needed to construct the first vessel, the Gerald R. Ford. That's less than the 17 percent reduction reported at the end of last year and the 18 percent goal the Navy negotiated in the primary construction contract for the carrier. The \"recent degradation in cost performance stems largely from the delayed availability of certain categories of material,\" such as pipe fittings, controllers, actuators and valves, according to the Navy's annual report on the program and updated figures obtained by Bloomberg News.... \"We acknowledge that the cost reduction target for CVN-79,\" relative to the first carrier, \"is challenging,\" Huntington Ingalls spokeswoman Beci Brenton said in an email, referring to the Kennedy by its Navy designation. \"While it is still early in the ship's schedule, we are seeing positive results from\" new initiatives to keep costs in check, she said.... Navy Secretary Richard Spencer told reporters last week that he will stay involved in monitoring the CVN-79's construction trends. \"This is my personal approach—the CEO has to be involved.\" A close watch is required \"because there are so many moving parts and so many opportunities to do things in a more efficient manner,\" Spencer said. The Navy has been working with the contractors \"to mitigate technical risks and impacts of late material,\" Navy spokesman Victor Chen in an email. \"The overall volume of late material items and associated impact to construction performance is declining. The Navy has hired third-party experts who are working collaboratively with the shipbuilder to identify manufacturing opportunities for efficiency gains\" and to assist in implementing improvements.... The 18 percent reduction in labor hours was \"quite optimistic\" from the start, Michele Mackin, a Government Accountability Office director who oversees its shipbuilding assessments, said in an email. \"Even based on that assumption, the $11.4 billion cost cap was unlikely to be met,\" she said. \"If those labor-hour efficiencies are in fact not materializing, costs will go higher. Also, \"with the ship being over 30 percent complete, it's unlikely the shipbuilder can get back enough efficiencies to further reduce labor hours—the more complicated work is yet to come,\" she said. June 2017 Navy Testimony At a June 15, 2017, hearing before the Senate Armed Services Committee on the Department of the Navy's proposed FY2018 budget, the following exchange occurred: SENATOR JOHN MCCAIN (CHAIRMAN) (continuing): Secretary Stackley, the Navy broached a cost cap for CVN-78. Do you believe that it has? SEAN STACKLEY, ACTING SECRETARY OF THE NAVY: Sir, right now our estimate for CVN-78, we're trying to hold it within the $12.887 billion number that was established several years ago. We have included a $20 million [procurement funding] request in this budget pending our determination regarding repairs that required for the... MCCAIN: Is that a breach of Nunn-McCurdy? STACKLEY: Not at this point in time, sir, we're continuing to evaluate whether that additional funding will be required. We're doing everything we can to stay within the existing cap and we'll keep Congress informed as we complete our post-delivery assessment. MCCAIN: Problem is we haven't been informed. So either you bust the cap and breach Nunn-McCurdy—Nunn-McCurdy or you notify us. You haven't done either one. STACKLEY: Sir, we've been submitting monthly reports regarding the carrier, we've alerted the concern regarding the repairs that are being required for the motor turbine generator set and we've acknowledged the risk associated with those repairs. However, what we're trying to do is not incur those costs, avoid cost by other means, and as of right now we're not ready to trip that cost cap. MCCAIN: Well, it's either not allowable or it's allowable. It's not allowable, then you take a certain course of action. If it's allowable then you're required to notify Congress. You have done neither. STACKLEY: If we need to incur those costs, they will be allowable costs. We're trying to avoid that at this stage of time, sir. MCCAIN: I agree, but we were supposed to be notified—OK. I can tell you that you are either in violation of Nunn-McCurdy or you are in violation of the requirement that we be notified. You have done neither. There's two scenarios. STACKLEY: Sir, we have not broached the cost cap. If it becomes apparent that we'll need to go above the cost cap, we will notify Congress within—within the terms that you all have established. MCCAIN: OK. Well, I'll get it to you in writing but you still haven't answered the question because when there's a $20 million cost overrun, it's either allowable and then we have to be notified in one way. If it's not allowable, Nunn-McCurdy is—is reached. But anyway, maybe you can give us a more satisfactory explanation in writing, Mr. Secretary. June 2017 GAO Report A June 2017 GAO report states the following: The cost estimate for the second Ford-Class aircraft carrier, CVN 79, is not reliable and does not address lessons learned from the performance of the lead ship, CVN 78. As a result, the estimate does not demonstrate that the program can meet its $11.4 billion cost cap. Cost growth for the lead ship was driven by challenges with technology development, design, and construction, compounded by an optimistic budget estimate. Instead of learning from the mistakes of CVN 78, the Navy developed an estimate for CVN 79 that assumes a reduction in labor hours needed to construct the ship that is unprecedented in the past 50 years of aircraft carrier construction.... After developing the program estimate, the Navy negotiated 18 percent fewer labor hours for CVN 79 than were required for CVN 78. CVN 79's estimate is optimistic compared to the labor hour reductions calculated in independent cost reviews conducted in 2015 by the Naval Center for Cost Analysis and the Office of Cost Assessment and Program Evaluation. Navy analysis shows that the CVN 79 cost estimate may not sufficiently account for program risks, with the current budget likely insufficient to complete ship construction. The Navy's current reporting mechanisms, such as budget requests and annual acquisition reports to Congress, provide limited insight into the overall Ford Class program and individual ship costs. For example, the program requests funding for each ship before that ship obtains an independent cost estimate. During an 11-year period prior to 2015, no independent cost estimate was conducted for any of the Ford class ships; however, the program received over $15 billion in funding. In addition, the program's Selected Acquisition Reports (SAR)—annual cost, status, and performance reports to Congress—provide only aggregate program cost for all three ships currently in the class, a practice that limits transparency into individual ship costs. As a result, Congress has diminished ability to oversee one of the most expensive programs in the defense portfolio. February 2016 Navy Testimony The Navy testified in 2016 that The Navy is committed to delivering the lead ship of the class, Gerald R Ford (CVN 78) within the $12.887 billion congressional cost cap. Sustained efforts to identify cost reductions and drive improved cost and schedule performance on this first-of-class aircraft carrier have resulted in highly stable cost performance since 2011. Based on lessons learned on CVN 78, the approach to carrier construction has undergone an extensive affordability review and the Navy and the shipbuilder have made significant changes on CVN 79 to reduce the cost to build the ship. The benefits of these changes in build strategy and resolution of first-of-class impacts experienced on CVN 78 are evident in early production labor metrics on CVN 79. These efforts are ongoing and additional process improvements continue to be identified. Alongside the Navy's efforts to reduce the cost to build CVN 79, the FY 2016 National Defense Authorization Act reduced the cost cap for follow ships in the CVN 78 class from $11,498 million to $11,398 million. To this end, the Navy has further emphasized stability in requirements, design, schedule, and budget, in order to drive further improvement to CVN 79 cost. The FY 2017 President's Budget requests funding for the most efficient build strategy for this ship and we look for Congress' full support of this request to enable CVN 79 procurement at the lowest possible cost.... ... The Navy will deliver the CVN 79 within the cost cap using a two-phased strategy wherein select ship systems and compartments that are more efficiently completed at a later stage of construction - to avoid obsolescence or to leverage competition or the use of experienced installation teams - will be scheduled for completion in the ship's second phase of production and test. Enterprise (CVN 80) began construction planning and long lead time material procurement in January 2016 and construction is scheduled to begin in 2018. The FY 2017 President's Budget request re-phases CVN 80 funding to support a more efficient production profile, critical to performance, below the cost cap. CVN 80 planning and construction will continue to leverage class lessons learned to achieve cost and risk reduction, including efforts to accelerate production work to earlier phases of construction, where work is more cost efficient. October 2015 Senate Armed Services Committee Hearing Cost growth and other issues in the CVN-78 program were reviewed at an October 1, 2015, hearing before the Senate Armed Services Committee. Below are excerpts from the prepared statements of the witnesses at the hearing. OSD ASD Testimony The prepared statement of the Assistant Secretary of Defense (Acquisition) within the Office of the Secretary of Defense (OSD) states the following in part: By 2000, the CVN(X) Acquisition Strategy that had been proposed by the Navy was an evolutionary, three-step development of the capabilities planned for the CVN. This evolutionary strategy intending to mature technology and align risk with affordability originally involved using the last ship of the CVN 68 NIMITZ Class, USS GEORGE H. W. BUSH (CVN 77), as the starting point for insertion of some near term technology improvements including information network technology and the new Dual Band Radar (DBR) system from the DD(X) (now DDG 1000) program, to create an integrated warfare system that combined the ship's combat system and air wing mission planning functions. However, the then incoming Secretary of Defense Donald Rumsfeld in 2002 directed re-examination of the CVN program, among others, to reduce the overall spend of the department and increase the speed of delivery to the warfighters. As a result of the SECDEF's direction, the Navy proposed to remove the evolutionary approach and included a new and enlarged flight deck, an increased allowance for future technologies (including electric weapons), and an additional manpower reduction of 500 to 800 fewer sailors to operate. On December 12, 2002, a Program Decision Memorandum approved by then Deputy Secretary of Defense Paul Wolfowitz codified this Navy proposal and gave this direction back to the DOD enterprise. The ship was renamed the CVN-21 to highlight these changes. By Milestone B in April 2004, the Navy had evaluated the technologies intended for three ships, removed some of them, and consolidated the remaining ones into a single step of capability improvement on the lead ship. The new plan acknowledged technological, cost, and schedule challenges were being put on a single ship, but assessed this was achievable. The Acting USD AT&L (Michael Wynne) at that milestone also directed the Navy to use a hybrid of the Service Cost Position and Independent Cost Estimate (ICE) to baseline the program funding in lieu of the ICE, (although one can easily argue even the ICE was optimistic given these imposed circumstances). By 2004, DOD and Congressional leadership had lost confidence in the acquisition system, and Deputy Secretary of Defense Gordon England established the Defense Acquisition Performance Assessment (DAPA) panel to conduct a sweeping and integrated assessment of \"every aspect\" of acquisition. The result was the discovery that the Industrial Base had consolidated, that excessive oversight and complex acquisition processes were cost and schedule drivers, and a focus on requirements stability was key to containing costs. From this, a review of the requirements of the CVN resulted in a revised and solidified \"single ship\" Operational Requirements Document (ORD) for the FORD Class as defined today, with the CVN 78 as lead ship. On the heels of a delay because of the budgetary constraints in 2006, the start of the construction of CVN 78 was delayed until 2008, but the schedule for delivery was held constant, further compounding risks and costs. The Navy's testimony covers these technical and schedule risks and concurrency challenges well. By 2009, this Committee had issued a floor statement in support of the Weapon Systems Acquisition Reform Act (WSARA). Congress was now united in its pursuit of acquisition reform and, in concert, USD AT&L re-issued and updated the Department of Defense's acquisition instruction (DoDI 5000.2) in 2008. WSARA included strengthening of the 'Nunn-McCurdy\" process with requires DOD to report to Congress when cost growth on a major program breaches a critical cost growth threshold. This legislation required a root-cause assessment of the program and assumed program termination within 60 days of notification unless DOD certified in writing that the program remained essential to national security. WSARA had real impact on the CVN 78, as by 2008 and 2009 the results of all the previous decisions were instantiated in growth of cost and schedule. Then USD AT&L John Young required the Navy to provide a list of descoping efforts and directed the Navy to have an off-ramp back to steam catapults if the Electromagnetic Aircraft Launching System (EMALS) remained a problem for the program. He also directed an independent review of all of the CVN 78 technologies by a Defense Support Team (DST). Prior to the DST, the Navy had chartered a Program Assessment Review (PAR) with USD (AT&L) participation of EMALS/Advanced Arresting Gear (AAG) versus steam. One of the key PAR findings was converting the EMALS and AAG production contracts to firm, fixed price contracts to cap cost growth and imposed negative incentives for late delivery. The Dual Band Radar (DBR) cost and risk growth was a decision by-product of the DDG 1000 program Nunn-McCurdy critical unit cost breach in 2010. Faced with a need to reduce cost on the DDG 1000 program and the resultant curtailment of the program, the expectation of development costs being borne by the DDG 1000 program was no longer the case and all of the costs associated with the S-band element development and a higher share of the X-band element then had to be supported by the CVN 78 program. The design problems encountered with AAG development have had the most deleterious effects on CVN 78 construction of any of the three major advanced technologies including EMALS and DBR. Our view of AAG is that these engineering design problems are now in the past and although delivery of several critical components have been delayed, the system will achieve its needed capabilities before undergoing final operational testing prior to deployment of the ship. Again, reliability growth is a concern, but this cannot be improved until a fully functional system is installed and operating at the Lakehurst, New Jersey land based test site, and on board CVN 78. With the 2010 introduction by then USD AT&L Ashton Carter (now in its third iteration by under USD AT&L Frank Kendall) of the continuous process improvement initiative that was founded in best business practices and WSARA called \"Better Buying Power,\" the CVN underwent affordability, \"Should Cost,\" and requirements assessment. Navy's use of the \"Gate\" process has stabilized the cost growth and reset good business practices. However, there is still much to do. We are in the testing phase of program execution prior to deployment and we had been concerned about the timing of the Full Ship Shock Trial (FSST). After balancing the operational and technical risks, the Department decided to execute FSST on CVN 78 prior to deployment. EMALS and AAG are also a concern with regard to final operational testing stemming from the development difficulties that each experienced. The Navy still needs to complete a significant amount of land-based testing to enable certification of the systems to launch and recover the full range of aircraft that it is required to operate under both normal and emergency conditions. This land-based testing is planned to complete before the final at-sea operational testing for these systems begins.... USD AT&L continues to work with Navy to tailor the program and ensure appropriate oversight at both the Navy Staff level as well as OSD. Our review of the Navy's plan for maintaining control of the cost for CVN 79 included an understanding of the application of lessons learned from the construction of CVN 78 along with the application of a more efficient construction plan for the ship including introduction of competition where possible. We have established an excellent relationship with the Navy to work together to change process and policies that have impacted the ability of the program to succeed, to include revitalizing the acquisition workforce and their skills. We are confident in the Navy's plan for CVN 79 and CVN 80 and, as such, Under Secretary Kendall recently authorized the Navy to enter into the detail design and construction phase for CVN 79 and to enter into advanced procurement for long lead time materials for CVN 80 construction. OSD and the Navy are committed to delivering CVN 79 within the limits of the cost cap legislated for this ship. OSD DOT&E Testimony The prepared statement of the Director, Operational Test & Evaluation (DOT&E), within OSD states the following in part: The Navy intends to deliver CVN 78 early in calendar year 2016, and to begin initial operational test and evaluation (IOT&E) in late calendar year 2017. However, the Navy is in the process of developing a new schedule, so some dates may change. Based on the current schedule, between now and the beginning of IOT&E, the CVN 78 program is proceeding on an aggressive schedule to finish development, testing, troubleshooting, and correction of deficiencies for a number of new, complex systems critical to the warfighting capabilities of the ship. Low or unknown reliability and performance of the Advanced Arresting Gear (AAG), the Electromagnetic Aircraft Launch System (EMALS), the Dual Band Radar (DBR), and the Advanced Weapons Elevators (AWE) are significant risks to a successful IOT&E and first deployment, as well as to achieving the life-cycle cost reductions the Navy has estimated will accrue for the Ford-class carriers. The maturity of these systems is generally not at the level that would be desired at this stage in the program; for example, the CVN 78 test program is revealing problems with the DBR typical of discoveries in early developmental testing. Nonetheless, AAG, EMALS, DBR, and AWE equipment is being installed on CVN 78, and in some cases, is undergoing shipboard checkout. Consequently, any significant issues that testing discovers before CVN 78's schedule-driven IOT&E and deployment will be difficult, or perhaps impossible, to address. Resolving the uncertainties in the reliability and performance of these systems is critical to CVN 78's primary function of conducting combat operations. CVN 78 has design features intended to enhance its ability to launch, recover, and service aircraft. EMALS and AAG are key systems planned to provide new capabilities for launching and recovering aircraft that are heavier and lighter than typically operated on Nimitz-class carriers. DBR is intended to enhance radar coverage on CVN 78 in support of air traffic control and ship self-defense. DBR is planned to reduce some of the known sensor limitations on Nimitz-class carriers that utilize legacy radars. The data currently available to my office indicate EMALS is unlikely to achieve the Navy's reliability requirements. (The Navy indicates EMALS reliability is above its current growth curve, which is true; however, that growth curve was revised in 2013, based on poor demonstrated performance, to achieve EMALS reliability on CVN 78 a factor of 15 below the Navy's goal.) I have no current data regarding DBR or AWE reliability, and data regarding the reliability of the re-designed AAG are also not available. (Poor AAG reliability in developmental testing led to the need to re-design components of that system.) In addition, performance problems with these systems are continuing to be discovered. If the current schedule for conducting the ship's IOT&E and first deployment remain unchanged, reliability and performance shortfalls could degrade CVN 78's ability to conduct flight operations. Due to known problems with current aircraft carrier combat systems, there is significant risk CVN 78 will not achieve its self-defense requirements. Although the CVN 78 design incorporates several combat system improvements relative to the Nimitz-class, these improvements (if achieved) are unlikely to correct all of the known shortfalls. Testing on other ships with similar combat systems has highlighted deficiencies in weapon employment timelines, sensor coverage, system track management, and deficiencies with the recommended engagement tactics. Most of these limitations are likely to affect CVN 78 and I continue to view this as a significant risk to the CVN 78's ability to defend itself against attacks by the challenging anti-ship cruise missile and other threats proliferating worldwide. The Navy's previous decision to renege on its original commitment to conduct the Full Ship Shock Trial (FSST) on CVN 78 before her first deployment would have put CVN 78 at risk in combat operations. This decision was reversed in August 2015 by the Deputy Secretary of Defense. Historically, FSSTs for new ship classes have identified for the first time numerous mission-critical failures the Navy had to address to ensure the new ships were survivable in combat. We can expect that CVN 78's FSST results will have significant and substantial implications on future carriers in the Ford-class and any subsequent new class of carriers. I also have concerns with manning and berthing on CVN 78. The Navy designed CVN 78 to have reduced manning to reduce life-cycle costs, but Navy analyses of manning on CVN 78 have identified problems in manning and berthing. These problems are similar to those seen on other recent ship classes such as DDG 1000 and the Littoral Combat Ship (LCS).... There are significant risks to the successful completion of the CVN 78 IOT&E and the ship's subsequent deployment due to known performance problems and the low or unknown reliability of key systems. For AAG, EMALS, AWE and DBR, systems that are essential to the primary missions of the ship, these problems, if uncorrected, are likely to affect CVN 78's ability to conduct effective flight operations and to defend itself in combat. The CVN 78 test schedule leaves little or no time to fix problems discovered in developmental testing before IOT&E begins that could cause program delays. In the current program schedule, major developmental test events overlap IOT&E. This overlap increases the likelihood problems will be discovered during CVN 78's IOT&E, with the attendant risk to the successful completion of that testing and to the ship's first deployment. The inevitable lessons we will learn from the CVN 78 FSST will have significant implications for CVN 78 combat operations, as well as for the construction of future carriers incorporating the ship's advanced systems; therefore, the FSST should be conducted on CVN 78 as soon as it is feasible to do so. Navy Testimony The prepared statement of the Navy witnesses at the hearing states the following in part: In June 2000, the Department of Defense (DOD) approved a three-ship evolutionary acquisition approach starting with the last NIMITZ Class carrier (CVN 77) and the next two carriers CVNX1 (later CVN 78) and CVNX2 (later CVN 79). This approach recognized the significant risk of concurrently developing and integrating new technologies into a new ship design incrementally as follows: • The design focus for the evolutionary CVN 77 was to combine information network technology with a new suite of multifunction radars from the DDG 1000 program to transform the ship's combat systems and the air wing's mission planning process into an integrated warfare system. • The design focus for the evolutionary CVNX1 (future CVN 78) was a new Hull, Mechanical and Electrical (HM&E) architecture within a NIMITZ Class hull that included a new reactor plant design, increased electrical generating capacity, new zonal electrical distribution, and new electrical systems to replace steam auxiliaries under a redesigned flight deck employing new Electromagnetic Aircraft Launch System (EMALS) catapults together with aircraft ordnance and fueling \"pit-stops\". Design goals for achieving reduced manning and improved maintainability were also defined. • The design focus for the evolutionary CVNX2 (future CVN 79) was a potential \"clean-sheet\" design to \"open the aperture\" for capturing new but immature technologies such as the Advanced Arresting Gear (AAG) and Advanced Weapons Elevators (AWE) that would be ready in time for the third ship in the series; and thereby permit the experience gained from design and construction of the first two ships (CVN 77 and CVN 78) to be applied to the third ship (CVN 79). Early in the last decade, however, a significant push was made within DOD for a more transformational approach to delivering warfighting capability. As a result, in 2002, DOD altered the program acquisition strategy by transitioning to the new aircraft carrier class in a single transformational leap vice an incremental three ship strategy. Under the revised strategy, CVN 77 reverted back to a \"modified-repeat\" NIMITZ Class design to minimize risk and construction costs, while delaying the integrated warfare system to CVN 78. Further, due to budget constraints, CVN 78 would start construction a year later (in 2007) with a NIMITZ Class hull form but would entail a major re-design to accommodate all the new technologies from the three ship evolutionary technology insertion plan. This leap ahead in a single ship was captured in a revised Operational Requirements Document (ORD) in 2004, which defined a new baseline that is the FORD Class today, with CVN 78 as the lead ship. The program entered system development and demonstration, containing the shift to a single ship acquisition strategy. The start of CVN 78 construction was then delayed by an additional year until 2008 due to budget constraints. As a result, the traditional serial evolution of technology development, ship concept design, detail design, and construction – including a total of 23 developmental systems incorporating new technologies originally planned across CVN 77, CVNX1, CVNX2 - were compressed and overlapped within the program baseline for the CVN 78. Today, the Navy is confronting the impacts of this compression and concurrency, as well as changes to assumptions made in the program planning more than a decade ago.... Given the lengthy design, development, and build span associated with major warships, there is a certain amount of overlap or concurrency that occurs between the development of new systems to be delivered with the first ship, the design information for those new systems, and actual construction. Since this overlap poses cost and schedule risk for the lead ship of the class, program management activities are directed at mitigating this overlap to the maximum extent practicable. In the case of the FORD Class, the incorporation of 23 developmental systems at various levels of technical maturity (including EMALS, AAG, DBR, AWE, new propulsion plant, integrated control systems) significantly compounded the inherent challenges associated with accomplishing the first new aircraft carrier design in 40-years. The cumulative impact of this high degree of concurrency significantly exceeded the risk attributed to any single new system or risk issue and ultimately manifested itself in terms of delay and cost growth in each element of program execution; development, design, material procurement (government and contractor), and construction.... Shipbuilder actions to resolve first-of-class issues retired much of the schedule risks to launch, but at an unstable cost. First-of-class construction and material delays led the Navy to revise the launch date in March 2013 from July 2013 to November 2013. Nevertheless, the four-month delay in launch allowed increased outfitting and ship construction that were most economically done prior to ship launch, such as completion of blasting and coating operations for all tanks and voids, installation of the six DBR arrays, and increased installations of cable piping, ventilation, electrical boxes, bulkheads and equipment foundations. As a result, CVN 78 launched at 70 percent complete and 77,000 tons displacement – the highest levels yet achieved in aircraft carrier construction. This high state of completion at launch enabled improved outfitting, compartment completion, an efficient transition into the shipboard test program, and the on-time completion of key milestones such as crew move aboard. With the advent of the shipboard test program, first time energization and grooming of new systems have required more time than originally planned. As a result, the Navy expects the sea trial schedule to be delayed about six to eight weeks. The exact impact on ship delivery will be determined based on the results of these trials. The Navy expects no schedule delays to CVN 78 operational testing and deployability due to the sea trials delay and is managing schedule delays within the $12.887 billion cost cap. Additionally, at delivery, AAG will not have completed its shipboard test program. The program has not been able to fully mitigate the effect of a two-year delay in AAG equipment deliveries to the ship. All AAG equipment has been delivered to the ship and will be fully installed on CVN 78 at delivery. The AAG shipboard test and certification program will complete in time to support aircraft launch and recovery operations in summer 2016.... The Navy, in coordination with the shipbuilder and major component providers, implemented a series of actions and initiatives in the management and oversight of CVN 78 that crossed the full span of contracting, design, material procurement, GFE, production planning, production management and oversight. The Secretary of the Navy directed a detailed review of the CVN 78 program build plan to improve end-to-end aircraft carrier design, material procurement, production planning, build and test, the results of which are providing benefit across all carriers. These corrective measures include: • CVN 78 design was converted from a 'level of effort, fixed fee' contract to a completion contract with a firm target and incentive fee. Shipbuilder cost performance has been on-target or better since this contract change. • CVN 78 construction fee was reduced, consistent with contract provisions. However, the shipbuilder remains incentivized by the contract shareline to improve upon current cost performance. • Contract design changes are under strict control; authorized only for safety, damage control, and mission-degrading deficiencies. • Following a detailed \"Nunn-McCurdy-like\" review in 2008-2009, the Navy converted the EMALS and AAG production contract to a firm, fixed price contract, capping cost growth to each system. • In 2011, Naval Sea Systems Command completed a review of carrier specifications with the shipbuilder, removing or improving upon overly burdensome or unneeded specifications that impose unnecessary cost on the program. Periodic reviews continue. Much of the impact to cost performance was attributable to shipbuilder and government material cost overruns. The Navy and shipbuilder have made significant improvements upon material ordering and delivery to the shipyard to mitigate the significant impact of material delays on production performance. These actions include: • The Navy and shipbuilder instituted optimal material procurement strategies and best practices (structuring procurements to achieve quantity discounts, dual-sourcing to improve schedule performance and leveraging competitive opportunities) from outside supply chain management experts. • The shipbuilder assigned engineering and material sourcing personnel to each of their key vendors to expedite component qualifications and delivery to the shipyard. • The shipbuilder inventoried all excess material procured on CVN 78 for transfer to CVN 79. • The Program Executive Officer (Carriers) has conducted quarterly Flag-level GFE summits to drive cost reduction opportunities and ensure on-time delivery of required equipment and design information to the shipbuilder. The CVN 78 build plan, consistent with the NIMITZ Class, had focused foremost on completion of structural and critical path work to support launching the ship on-schedule. Achieving the program's cost improvement targets required that CVN 78 increase its level of completion at launch, from 60 percent to 70 percent. To achieve this and drive greater focus on system completion: • The Navy fostered a collaborative build process review by the shipbuilder with other Tier 1 private shipyards in order to benchmark its performance and identify fundamental changes that are yielding marked improvement. • The shipbuilder established specific launch metrics by system and increased staffing for waterfront engineering and material expediters to support meeting those metrics. This ultimately delayed launch, but drove up pre-outfitting to the highest levels for CVN new construction which has helped stabilize cost and improve test program and compartment completion performance relative to CVN 77. • The shipbuilder linked all of these processes within a detailed integrated master schedule that has provided greater visibility to performance and greater ability to control cost and schedule performance across the shipbuilding disciplines. These initiatives, which summarize a more detailed list of actions being implemented and tracked as a result of the end-to-end review, were accompanied by important management changes. • In 2011, the Navy assigned a second tour Flag Officer with considerable carrier operations, construction, and program management experience as the new Program Executive Officer (PEO). • The new PEO established a separate Program Office, PMS 379, to focus exclusively on CVN 79 and CVN 80, which enables the lead ship Program Office, PMS 378, to focus on cost control, schedule performance and the delivery of CVN 78. • In 2012, the shipbuilder assigned a new Vice President in charge of CVN 78, a new Vice President in charge of material management and purchasing, and a number of new general ship foremen to strengthen CVN 78 performance. • The new PEO and shipyard president began conducting bi-weekly launch readiness reviews focused on cost performance, critical path issues and accomplishment of the targets for launch completion. These bi-weekly reviews will continue through delivery. • Assistant Secretary of the Navy (Research, Development, and Acquisition) (ASN (RD&A)) conducts quarterly reviews of program progress and performance with the PEO and shipbuilder to ensure that all that can be done to improve on cost performance is being done. The series of actions taken by the Navy and the shipbuilder are achieving the desired effect of arresting cost growth, establishing stability, and have resulted in no changes in the Government's estimate at completion over the past four years. The Department of the Navy is continuing efforts to identify cost reductions, drive improved cost and schedule performance, and manage change. The Navy has established a rigorous process with the shipbuilder that analyzes each contract change request to approve only those change categories allowed within the 2010 ASN(RD&A) change order management guidance. This guidance only allows changes for safety, contractual defects, testing and trial deficiencies, statutory and regulatory changes that are accompanied by funding and value engineering change proposals with instant contract savings. While the historical average for contractual change level is approximately 10 percent of the construction cost for the lead ship of a new class, CVN 78 has maintained a change order budget of less than four percent to date despite the high degree of concurrent design and development. Finally, the Navy has identified certain areas of the ship whose completion is not required for delivery, such as berthing spaces for the aviation detachment, and has removed this work from the shipbuilder's contract. This deferred work will be completed within the ship's budgeted end cost and is included within the $12,887 million cost estimate. By performing this deferred work in the post-delivery period using CVN 78 end cost funding, it can be competed and accomplished at lower cost and risk to the overall ship delivery schedule.... The CVN 79 cost cap was established in 2006 and adjusted by the Secretary of the Navy in 2013, primarily to address inflation between 2006 and 2013 plus $325 million of the allowed increase for non-recurring engineering to incorporate design improvements for the CVN 78 Class construction. The Navy and the shipbuilder conducted an extensive affordability review of carrier construction and made significant changes to deliver CVN 79 at the lowest possible cost. These changes are focused on eliminating the largest impacts to cost performance identified during the construction of CVN 78 as well as furthering improvements in future carrier construction. The Navy outlined cost savings initiatives in its Report to Congress in May, 2013, and is executing according to plan. Stability in requirements, design, schedule, and budget, are essential to controlling and improving CVN 79 cost, and therefore is of highest priority for the program. Requirements for CVN 79 were \"locked down\" prior to the commencement of CVN 79 construction. The technical baseline and allocated budget for these requirements were agreed to by the Chief of Naval Operations and ASN(RD&A) and further changes to the baseline require their approval, which ensures design stability and increases effectiveness during production. At the time of construction contract award, CVN 79 has 100 percent of the design product model complete (compared to 65 percent for CVN 78) and 80 percent of initial drawings released. Further, CVN 79 construction benefits from the maturation of virtually all new technologies inserted on CVN 78. In the case of EMALS and AAG, the system design and procurement costs are understood, and CVN 79 leverages CVN 78 lessons learned.... A completed FORD Class design enabled the shipbuilder to fully understand the \"whole ship\" bill of materials for CVN 79 construction and to more effectively manage the procurement of those materials with the knowledge of material lead times and qualified sources accrued from CVN 78 construction. The shipbuilder is able to order ship-set quantities of material, with attendant cost benefits, and to ensure CVN 79 material will arrive on time to support construction need. Extensive improvements have been put in place for CVN 79 material procurement to drive both cost reductions associated with more efficient procurement strategies and production labor improvements associated with improved material availability. Improved material availability is also a critical enabler to many construction efficiency improvements in CVN 79. The shipbuilder has developed an entirely new material procurement and management strategy for CVN 79. This new strategy consists of eight separate initiatives.... The shipbuilder and the Navy have performed a comprehensive review of the build strategy and processes used in construction of CVN 78 Class aircraft carriers as well as consulted with other Navy shipbuilders on best practices. As a result, the shipbuilder has identified and implemented a number of changes in the way they build aircraft carriers, with a dedicated focus on executing construction activities where they can most efficiently be performed. The CVN 79 build sequence installs 20 percent more parts in shop, and 30 percent more parts on the final assembly platen, as compared to CVN 78. This work will result in an increase in pre-outfitting and work being pulled to earlier stages in the construction process where it is most efficiently accomplished.... In conjunction with the Navy and the shipbuilder's comprehensive review of the build strategy and processes used in construction of CVN 78 Class aircraft carriers, a number of design changes were identified that would result in more affordable construction. Some of these design changes were derived from lessons learned in the construction of CVN 78 and others seek to further simplify the construction process and drive cost down.... In addition to the major focus discussed above, the shipbuilder continues to implement capital improvements to facilities that serve to reduce risk and improve productivity.... To enhance CVN 79 build efficiency and affordability, the Navy is implementing a two-phase delivery plan. The two-phase strategy will allow the basic ship to be constructed and tested in the most efficient manner by the shipbuilder (Phase I) while enabling select ship systems and compartments to be completed in Phase II, where the work can be completed more affordably through competition or the use of skilled installation teams.... The CVN 80 planning and construction will continue to leverage class lessons learned in the effort to achieve cost and risk reduction for remaining FORD Class ships. The CVN 80 strategy seeks to improve on CVN 79 efforts to frontload as much work as possible to the earliest phases of construction, where work is both predictable and more cost efficient.... While delivery of the first-of-class FORD has involved challenges, those challenges are being addressed and this aircraft carrier class will provide great value to our Nation with unprecedented and greatly needed warfighting capability at overall lower total ownership cost than a NIMITZ Class CVN. The Navy has taken major steps to stem the tide of increasing costs and drive affordability into carrier acquisition. GAO Testimony The prepared statement of the GAO witness at the hearing states the following in part: The Ford-class aircraft carrier's lead ship began construction with an unrealistic business case. A sound business case balances the necessary resources and knowledge needed to transform a chosen concept into a product. Yet in 2007, GAO found that CVN 78 costs were underestimated and critical technologies were immature—key risks that would impair delivering CVN 78 at cost, on-time, and with its planned capabilities. The ship and its business case were nonetheless approved. Over the past 8 years, the business case has predictably decayed in the form of cost growth, testing delays, and reduced capability—in essence, getting less for more. Today, CVN 78 is more than $2 billion over its initial budget. Land-based tests of key technologies have been deferred by years while the ship's construction schedule has largely held fast. The CVN 78 is unlikely to achieve promised aircraft launch and recovery rates as key systems are unreliable. The ship must complete its final, more complex, construction phase concurrent with key test events. While problems are likely to be encountered, there is no margin for the unexpected. Additional costs are likely. Similarly, the business case for CVN 79 is not realistic. The Navy recently awarded a construction contract for CVN 79 which it believes will allow the program to achieve the current $11.5 billion legislative cost cap. Clearly, CVN 79 should cost less than CVN 78, as it will incorporate lessons learned on construction sequencing and other efficiencies. While it may cost less than its predecessor, CVN 79 is likely to cost more than estimated. As GAO found in November 2014, the Navy's strategy to achieve the cost cap relies on optimistic assumptions of construction efficiencies and cost savings—including unprecedented reductions in labor hours, shifting work until after ship delivery, and delivering the ship with the same baseline capability as CVN 78 by postponing planned mission system upgrades and modernizations until future maintenance periods. Today, with CVN 78 over 92 percent complete as it reaches delivery in May 2016, and the CVN 79 on contract, the ability to exercise oversight and make course corrections is limited. Yet, it is not too late to examine the carrier's acquisition history to illustrate the dynamics of shipbuilding—and weapon system—acquisition and the challenges they pose to acquisition reform. The carrier's problems are by no means unique; rather, they are quite typical of weapon systems. Such outcomes persist despite acquisition reforms the Department of Defense and Congress have put forward—such as realistic estimating and \"fly before buy.\" Competition with other programs for funding creates pressures to overpromise performance at unrealistic costs and schedules. These incentives are more powerful than policies to follow best acquisition practices and oversight tools. Moreover, the budget process provides incentives for programs to be funded before sufficient knowledge is available to make key decisions. Complementing these incentives is a marketplace characterized by a single buyer, low volume, and limited number of major sources. The decades-old culture of undue optimism when starting programs is not the consequence of a broken process, but rather of a process in equilibrium that rewards unrealistic business cases and, thus, devalues sound practices. July 2015 Press Report A July 2, 2015, press report states the following: The Navy plans to spend $25 million per year beginning in 2017 as a way to invest in lowering the cost of building the services' new Ford-class aircraft carriers, service officials said. \"We will use this design for affordability to make new improvements in cost cutting technologies that will go into our ships,\" said Rear Adm. Michael Manazir, Director, Air Warfare.... \"We just awarded a contract to buy long lead item materials [for CVN-79] and lay out an allocated budget for each of the components of that ship. We want to build the ship in the most efficient manner possible,\" Rear Adm. Thomas Moore, Program Executive Officer, Carriers, said. Navy leaders say the service is making positive strides regarding the cost of construction for the USS Kennedy and plans to stay within the congressional cost cap of $11.498 billion.... The $25 million design for affordability initiative is aimed at helping to uncover innovative shipbuilding techniques and strategies that will accomplish this and lower costs. Moore said the goal of the program is to, among other things, remove $500 million from the cost of the third Ford-class carrier, the USS Enterprise, CVN 80. \"It is finding a million here and a million there and eventually that is how you get a billion dollars out of the ship from (CVN) 78 to (CVN) 79. The goal is to get another $500 million out of CVN 80. The $25 million dollars is a pretty prudent investment if we can continue to drive the cost of this class of ship down,\" Moore told reporters recently. Moore explained that part of the goal is to get to the point where a Ford-class carrier can be built for the same amount of man-hours it took to build their predecessor ships, the Nimitz-class carriers. \"We want to get back to the goal of being able to build it for historical Nimitz class levels in terms of man hours for a ship that is significantly more capable and more complex to build,\" Moore added. The money will invest in new approaches and explore the processes that a shipyard can use to build the ship, Moore added. \"They've made a significant investment in these new welding machines. These new welding machines allow the welder to use different configurations. This has significantly improved the throughput that the shipyard has,\" Moore said, citing an example of the kind of thing the funds would be used for. The funds will also look into whether new coatings for the ship or welding techniques can be used and whether millions of feet of electrical cabling can be installed in a more efficient manner, Moore added. Other cost saving efforts assisted by the funding include the increased use of complex assemblies, common integrated work packages, automated plate marking, weapons elevator door re-design and vertical build strategies, Navy officials said. Shipbuilders could also use a new strategy of having work crews stay on the same kind of work for several weeks at a time in order to increase efficiency, Moore said. Also, some of the construction work done on the USS Ford while it was in dry dock is now being done in workshops and other areas to improve the building process, he added. June 2015 Press Reports A June 29, 2015, press report states the following: Newport News Shipbuilding will see cost reduction on the order of 18 percent fewer man hours overall from the first Ford-class aircraft carrier to the second, according to a company representative. Ken Mahler, Newport News vice president of Navy programs, touted the shipyard's cost savings on the John F. Kennedy (CVN-79) during a June 15 interview with Inside the Navy . This reduction was facilitated by the investments the shipyard is making in carrier construction, as well as lessons learned from the first ship, the Gerald R. Ford (CVN-78), which will deliver next year. A June 23, 2015, press report states the following: The Pentagon's cost-assessment office now says the Navy's second aircraft carrier in a new class will exceed a congressionally mandated cost cap by $235 million. That's down from an April estimate that the USS John F. Kennedy, the second warship in the new Ford class, would bust a $11.498 billion cap set by lawmakers by $370 million. The Navy maintains that it can deliver the ship within the congressional limit. \"The original figure was a draft based on preliminary information,\" Navy Commander Bill Urban, a spokesman for the Pentagon's Cost Assessment and Program Evaluation office, said in an e-mail. As better information, such as updated labor rates, became available, the office \"revised its estimate to a more accurate number,\" he said. A June 15, 2015, press report states the following: [Rear Admiral Tom] Moore [program executive officer for aircraft carriers]. said the program would save a billion dollars by decreasing the man hours needed to construct the ship by 18 percent from CVN-78 to 79—down to about 44 million manhours. He said this reduction is only a first step in taking cost ouot of the carrier program. The future Enterprise (CVN-80) will take about 4 million manhours out, or another 10 percent reduction, for a savings of about $500 million. But beyond seeking ways to take cost out, the contract itself reduces the risk to the government, Moore said. \"The main construction of the ship is now in a fixed price environment, so that switchover really limits the government's liability,\" he said. Without getting into specific dollar amounts due to business sensitivities, Moore explained that \"this is the lowest target fee we've ever had on any CVN new construction. Look at tghe shape of the share [government-contractor cost] share lines, because the share lines at the end of the day are a measure of risk. So where we'd like to get quickly to [a] 50/50 [share line], in past carrier contracts we've been out at 85/15, 90/10—which basically means for every dollar over [the target cost figure, up to the ceiling cost figure], the government picks up 85 cents on the dollar. And this contract very quickly gets to 50/50. The other thing is ceiling price—on a fixed-price contract, the ceiling price is the government's maximum liability. And on this particular contract, again, it is the lowest ceiling price we've ever had [for a CVN].\" February 2015 Navy Testimony At a February 25, 2015, hearing on Department of the Navy acquisition programs, Department of the Navy officials testified the following: The Navy is committed to delivering CVN 78 within the $12.887 billion Congressional cost cap. Sustained efforts to identify cost reductions and drive improved cost and schedule on this first-of-class aircraft carrier have resulted in highly stable performance since 2011. Parallel efforts by the Navy and shipbuilder are driving down and stabilizing aircraft carrier construction costs for the future John F Kennedy (CVN 79) and estimates for the future Enterprise (CVN 80). As a result of the lessons learned on CVN 78, the approach to carrier construction has undergone an extensive affordability review. The Navy and the shipbuilder have made significant changes on CVN 79 to reduce the cost to build the ship as detailed in the 2013 CVN 79 report to Congress. The benefits of these changes in build strategy and resolution of first-of-class impacts on CVN 79 are evident in metrics showing significantly reduced man-hours for completed work from CVN 78. These efforts are ongoing and additional process improvements continue to be identified. The Navy extended the CVN 79 construction preparation contract into 2015 to enable continuation of ongoing planning, construction, and material procurement while capturing lessons learned associated with lead ship construction and early test results. The continued negotiations of the detail design and construction (DD&C) contract afford an opportunity to incorporate further construction process improvements and cost reduction efforts. Award of the DD&C contract is expected in third quarter FY 2015. This will be a fixed price-type contract. Additionally, the Navy will deliver the CVN 79 using a two-phased strategy. This enables select ship systems and compartments to be completed in a second phase, wherein the work can be completed more efficiently through competition or the use of skilled installation teams responsible for these activities. This approach, key to delivering CVN 79 at the lowest cost, also enables the Navy to procure and install shipboard electronic systems at the latest date possible. The FY 2014 NDAA adjusted the CVN 79 and follow ships cost cap to $11,498 million to account for economic inflation and non-recurring engineering for incorporation of lead ship lessons learned and design changes to improve affordability. In transitioning from first-of-class to first follow ships, the Navy has maintained Ford class requirements and the design is highly stable. Similarly, we have imposed strict interval controls to drive changes to the way we do business in order to ensure CVN 79 is delivered below the cost cap. To this same end, the FY 2016 President's Budget request aligns funding to the most efficient build strategy for this ship and we look for Congress' full support of this request to enable CVN 79 to be procured at the lowest possible cost. Enterprise (CVN 80) will begin long lead time material procurement in FY 2016. The FY 2016 request re-phases CVN 80 closer to the optimal profile, therefore reducing the overall ship cost. The Navy will continue to investigate and will incorporate further cost reduction initiatives, engineering efficiencies, and lessons learned from CVN 78 and CVN 79. Future cost estimates for CVN 80 will be updated for these future efficiencies as they are identified. May 2013 Navy Testimony In its prepared statement for a May 8, 2013, hearing on Navy shipbuilding programs before the Seapower subcommittee of the Senate Armed Services Committee, the Navy stated that In 2011, the Navy identified spiraling cost growth [on CVN-78] associated with first of class non-recurring design, contractor and government furnished equipment, and ship production issues on the lead ship. The Navy completed an end-to-end review of CVN 78 construction in December 2011 and, with the shipbuilder, implemented a series of corrective actions to stem, and to the extent possible, reverse these trends. While cost performance has stabilized, incurred cost growth is irreversible.... As a result of lessons learned on CVN 78, the approach to carrier construction has undergone an extensive affordability review; and the Navy and the shipbuilder have made significant changes on CVN 79 that will reduce the cost to build the ship. CVN 79 construction will start with a complete design, firm requirements, and material economically procured and on hand in support of production need. The ship's build schedule also provides for increased completion levels at each stage of construction with resulting improved production efficiencies.... Inarguably, this new class of aircraft carrier brings forward tremendous capability and life-cycle cost advantages compared to the NIMITZ-class it will replace. However, the design, development and construction efforts required to overcome the technical challenges inherent to these advanced capabilities have significantly impacted cost performance on the lead ship. The Navy continues implementing actions from the 2012 detailed review of the FORD-Class build plan to control cost and improve performance across lead and follow ship contracts. This effort, taken in conjunction with a series of corrective actions with the shipbuilder on the lead ship, will not recover costs to original targets for GERALD R. FORD [CVN-78], but should improve performance on the lead ship while fully benefitting CVN 79 and following ships of the class. In the discussion portion of the hearing, Sean Stackley, the Assistant Secretary of the Navy for Research, Development and Acquisition (i.e., the Navy's acquisition executive), testified that First, the cost growth on the CVN-78 is unacceptable. The cost growth dates back in time to the very basic concepts that went into take in the Nimitz-class and doing a total redesign of the Nimitz class to get to a level of capability and to reduce operating and support cost for the future carrier. Far too much risk was carried into the design of the first of the Ford-class. Cost growth stems to the design was moving at the time production started. The vendor base that was responsible for delivering new components and material to support the ship production was (inaudible) with new developments in the vendor base and production plan do not account for the material ordering difficulties, the material delivery difficulties and some of the challenges associated with building a whole new design compared to the Nimitz.... Sir, for CVN-79, we have—we have held up the expenditures on CVN-79 as we go through the details of—one, ensuring that the design of the 78 is complete and repeated for the 79s [sic] that we start with a clean design. Two, we're going through the material procurement. We brought a third party into assessment material-buying practices at Newport News to bring down the cost of material. And we're metering out the dollars for buying material until it hits the objectives that we're setting for CVN-79 through rewriting the build plan on CVN-79. If you take a look at how the 78 is being constructed, far too much work is being accomplished late in the build cycle. So we are rewriting the build plan for CVN-79, do more work in the shops where it's more efficient, more work in the buildings where it's more efficient, less work in the dry dock, less work on the water. And then we're going after the rates—the labor rates and the investments needed by the shipbuilder to achieve these efficiencies. Later in the hearing, Stackley testified that the history in shipbuilding is since you don't have a prototype for a new ship, the first of class referred to as the lead ship is your prototype. And so you carry a lot of risk into the construction of that first of class. Also, given the nature that there's a lengthy design development and build span associated with ships, so there is a certain amount of overlap or concurrency that occurs between the development of new systems that need to be delivered with the first ship, the incorporation of the design of those new systems and the actual construction. And so to the extent that there is change in a new ship class then the risk goes up accordingly. In the case of the CVN-78, the degree of change compared to the Nimitz was fairly extraordinary all for good reasons, good intentions, increased capability, increased survivability, significant reduction in operating and support costs. So there was a determination that will take on this risk in order to get those benefits, and the case of the CVN-78, those risks are driving a lot of the cost growth on the lead ship. When you think about the follow ships, now you've got a stable design, now your vendor base has got a production line going to support the production. Now you've got a build plan and a workforce that has climbed up on the learning curve to drive cost down. So you can look at—you can look at virtually every shipbuilding program and you'll see a significant drop-off in cost from that first of class to the follow ships. And then you look for a stable learning curve to take over in the longer term production of a ship class. Carriers are unique for a number of reasons, one of which we don't have an annual procurement of carriers. They're spread out over a five and, in fact, in the case of 78 as much as seven-year period. So in order to achieve that learning, there are additional challenges associated with achieving that learning. And so we're going at it very deliberately on the CVN-79 through the build plan with the shipbuilder to hit the line that we've got to have—the cost reductions that we've got to have on the follow ships of the class. March 2013 Navy Report A March 2013 report to Congress on the Navy's plan for building CVN-79 that was released to the public on May 16, 2013, states the following in its executive summary: As a result of the lessons learned on CVN 78, the approach to carrier construction has undergone an extensive affordability review and the Navy and the shipbuilder have made significant changes on CVN 79 that will significantly reduce the cost to build the ship. These include four key construction areas: —CVN 79 construction will start with a complete design and a complete bill of material —CVN 79 construction will start with a firm set of stable requirements —CVN 79 construction will start with the development complete on a host of new technologies inserted on CVN 78 ranging from the Electromagnetic Aircraft Launch System (EMALS), the Dual Band Radar, and the reactor plant, to key valves in systems throughout the ship —CVN 79 construction will start with an 'optimal build' plan that emphasizes the completion of work and ship outfitting as early as possible in the construction process to optimize cost and ultimately schedule performance. In addition to these fundamentals, the Navy and the shipbuilder are tackling cost through a series of other changes that when taken over the entire carrier will have a significant impact on construction costs. The Navy has also imposed cost targets and is aggressively pursuing cost reduction initiatives in its government furnished systems. A detailed accounting of these actions is included in this report. The actions discussed in this report are expected to reduce the material cost of CVN 79 by 10-20% in real terms from CVN 78, to reduce the number of man-hours required to build the CVN 79 by 15-25% from CVN 78, and to reduce the cost of government furnished systems by 5-10% in real terms from CVN 78. For the full text of the Navy's report, see the Appendix D . March 2012 Navy Letter to Senator McCain Secretary of the Navy Ray Mabus, in a letter with attachment sent in late March 2012 to Senator John McCain on controlling cost growth in CVN-78, stated the following: Dear Senator McCain: Thank you for your letter of March 21, 2012, regarding the first-of-class aircraft carrier, GERALD R. FORD (CVN 78). Few major programs carry greater importance or greater impact on national security, and no other major program comprises greater scale and complexity than the Navy's nuclear aircraft carrier program. Accordingly, successful execution of this program carries the highest priority within the Department of the Navy. I have shared in the past my concern when I took office and learned the full magnitude of new technologies and design change being brought to the FORD. Requirements drawn up more than a decade prior for this capital ship drove development of a new reactor plant, propulsion system, electric plant and power distribution system, first of kind electromagnetic aircraft launching system, advanced arresting gear, integrated warfare system including a new radar and communications suite, air conditioning plant, weapons elevators, topside design, survivability improvements, and all new interior arrangements. CVN 78 is a near-total redesign of the NIMITZ Class she replaces. Further, these major developments, which were to be incrementally introduced in the program, were directed in 2002 to be integrated into CVN 78 in a single step. Today we are confronting the cost impacts of these decisions made more than a decade ago. In my August 29, 2011 letter, I provided details regarding these cost impacts. At that time, I reported the current estimate for the Navy's share of the shipbuilder's construction overrun, $690 million, and described that I had directed an end-to-end review to identify the changes necessary to improve cost for carrier design, material procurement, planning, build and test. The attached white paper provides the findings of that review and the steps we are taking to drive affordability into the remaining CVN 78 construction effort. Pending the results of these efforts, the Navy has included the 'fact of life' portion of the stated overrun in the Fiscal Year 2013 President's Budget request. The review also highlighted the compounding effects of applying traditional carrier build planning to a radically new design; the challenges inherent to low-rate, sole-source carrier procurement; and the impact of external economic factors accrued over 15 years of CVN 78 procurement—all within the framework of cost-plus contracts. The outlined approach for ensuring CVN 79 and follow ship affordability focuses equally upon tackling these issues while applying the many lessons learned in the course of CVN 78 procurement. As always, if I may be of further assistance, please let me know. Sincerely, [signed] Ray Mabus Attachment: As stated Copy to: The Honorable Carl Levin, Chairman [Attachment] Improving Cost Performance on CVN 78 CVN 78 is nearing 40 percent completion. Cost growth to-date is attributable to increases in design, contractor furnished material, government furnished material (notably, the Electromagnetic Aircraft Launching System (EMALS), Advanced Arresting Gear (AAG), and the Dual Band Radar (DBR)), and production labor performance. To achieve the best case outcome, the program must execute with zero additional cost growth in design and material procurement, and must improve production performance. The Navy and the shipbuilder have implemented a series of actions and initiatives in the management and oversight of CVN 78 that cross the full span of contracting, design, material procurement, government furnished equipment, production planning, production, management and oversight. CVN 78 is being procured within a framework of cost-plus contracts. Within this framework, however, the recent series of action taken by the Navy to improve contract effectiveness are achieving the desired effect of incentivizing improved cost performance and reducing government exposure to further cost growth. CVN 78 design has been converted from a 'level of effort, fixed fee' contract to a completion contract with a firm target and incentive fee. Shipbuilder cost performance has been on-target or better since this contract was changed. CVN 78 construction fee has been retracted, consistent with contract performance. However, the shipbuilder is incentivized by the contract shareline to improve upon current performance to meet agreed-to cost goals. Contract design changes are under strict control; authorized only for safety, damage control, mission-degrading deficiencies, or similar. Adjudicated changes have been contained to less than 1 percent of contract target price. The Navy converted the EMALS and AAG production contract to a firm, fixed price contract, capping cost growth to that system and imposing negative incentives for late delivery. Naval Sea Systems Command is performing a review of carrier specifications with the shipbuilder, removing or improving upon overly burdensome or unneeded specifications that impose unnecessary cost on the program. The single largest impact to cost performance to-date has been contractor and government material cost overruns. These issues trace to lead ship complexity and CVN 78 concurrency, but they also point to inadequate accountability for carrier material procurement, primarily during the ship's advance procurement period (2002-2008). These effects cannot be reversed on CVN 78, but it is essential to improve upon material delivery to the shipyard to mitigate the significant impact of material delays on production performance. Equally important, the systemic material procurement deficiencies must be corrected for CVN 79. To this end, the Navy and shipbuilder have taken the following actions. The Navy has employed outside supply chain management experts to develop optimal material procurement strategies. The Navy and the shipbuilder are reviewing remaining material requirements to employ these best practices (structuring procurements to achieve quantity discounts, dual-sourcing to improve schedule performance and leverage competitive opportunities, etc.). The shipbuilder has assigned engineering and material sourcing personnel to each of their key vendors to expedite component qualifications and delivery to the shipyard. The shipbuilder is inventorying all excess material procured on CVN 78 for transfer to CVN 79 (cost reduction to CVN 78), as applicable. The Program Executive Officer (Carriers) is conducting quarterly flag-level government furnished equipment summits to drive cost reduction opportunities and ensure on-time delivery of required equipment and design information to the shipbuilder. The most important finding regarding CVN 78 remaining cost is that the CVN 78 build plan, consistent with the NIMITZ class, focuses foremost on completion of structural and critical path work to support launching the ship on-schedule. This emphasis on structure comes at the expense of completing ship systems, outfitting, and furnishing early in the build process and results in costly, labor-intensive system completion activity during later; more costly stages of production. Achieving the program's cost improvement targets will require that CVN 78 increase its level of completion at launch, from current estimate of 60 percent to no less than 65 percent. To achieve this goal and drive greater focus on system completion: the Navy fostered a collaborative build process review by the shipbuilder with other Tier 1 private shipyards in order to benchmark its performance arid identify fundamental changes that would yield marked improvement; the shipbuilder has established specific launch metrics by system (foundations, machinery, piping, power panels, vent duct, lighting, etc.) and increased staffing for waterfront engineering and material expediters to support meeting these metrics; the shipbuilder has linked all of these processes within a detailed integrated master schedule, providing greater visibility to current performance and greater ability to control future cost and schedule performance across the shipbuilding disciplines; the Navy and shipbuilder are conducting Unit Readiness Reviews of CVN 78 erection units to ensure that the outfitted condition of each hull unit being lifted into the dry-dock contains the proper level of outfitting. These initiatives, which summarize a more detailed list of actions being implemented and tracked as result of the end-to-end review, are accompanied by important management changes. The shipbuilder has assigned a new Vice President in charge of CVN 78, a new Vice President in charge of material management and purchasing, and a number of new general shop foreman to strengthen CVN 78 performance. The Navy has assigned a second tour Flag Officer with considerable carrier operations, construction, and program management experience as the new Program-Executive Officer (PEO). The PEO and shipyard president conduct bi-weekly launch readiness reviews focusing on cost performance, critical path issues and accomplishment of the target for launch completion. The Assistant Secretary of the Navy (Research, Development, and Acquisition) conducts a monthly review of program progress and performance with the PEO and shipbuilder, bringing to bear the full weight of the Department, as needed, to ensure that all that can be done to improve on cost performance is being done. Early production performance improvements can be traced directly to these actions, however, significant further improvement is required. To this end, the Navy is conducting a line-by-line review of all 'cost to-go' on CVN 78 to identify further opportunity to reduce cost and to mitigate risk. Improving Cost Performance on CVN 79 CVN 79 Advance Procurement commenced in 2007 with early construction activities following in 2011. Authorization for CVN 79 procurement is requested in Fiscal Year 2013 President's Budget request with the first year of incremental funding. Two years have been added to the CVN 79 production schedule in this budget request, afforded by the fact that CVN 79 will replace CVN 68 when she inactivates. To improve affordability for CVN 79, the Navy plans to leverage this added time by introducing a fundamental change to the carrier procurement approach and a corresponding shift to the carrier build plan, while incorporating CVN 78 lessons learned. The two principal 'documents' which the Navy and shipbuilder must ensure are correct and complete at the outset of CVN 79 procurement are the design and the build plan. Design is governed by rules in place that no changes will be considered for the follow ship except changes necessary to correct design deficiencies on the lead ship, fact of life changes to correct obsolescence issues, or changes that will result in reduced cost for the follow ship. Exceptions to these rules must be approved by the JROC, or designee. Accordingly, the Navy is requesting procurement authority for CVN 79 with the Design Product Model complete and construction drawings approximately 95 percent complete (compared to approximately 30 percent complete at time of lead ship authorization). As well, first article testing and certification will be complete for virtually all major new equipments introduced in the FORD Class. At this point in time, the shipbuilder has developed a complete bill of material for CVN 79. The Navy is working with the shipbuilder to ensure that the contractor's material estimates are in-line with Navy 'should cost' estimates; eliminating non-recurring costs embedded in lead ship material, validating quantities, validating escalation indices, incorporating lead ship lessons learned. The Navy has increased its oversight of contractor furnished material procurement, ensuring that material procurement is competed (where competition is available); that it is fixed priced; that commodities are bundled to leverage economic order quantity opportunities; and that the vendor base capacity and schedule for receipt supports the optimal build plan being developed for production. In total, the high level of design maturity and material certification provides a stable technical baseline for material procurement cost and schedule performance, which are critical to developing and executing an improved, reliable build plan. In order to significantly improve production labor performance, based on timely receipt of design and material, the Navy and shipbuilder are reviewing and implementing changes to the CVN 79 build plan and affected facilities. The guiding principles are: maximize planned work in the shops and early stages of construction; revise sequence of structural unit construction to maximize learning curve performance through 'families of units' and work cells; incorporate design changes to improve FORD Class producibility; increase the size of erection units to eliminate disruptive unit breaks and improve unit alignment and fairness; increase outfitting levels for assembled units prior to erection in the dry-dock; increase overall ship completion levels at each key event. The shipbuilder is working on detailed plans for facility improvements that will improve productivity, and the Navy will consider incentives for capital improvements that would provide targeted return on investment, such as: increasing the amount of temporary and permanent covered work areas; adding ramps and service towers for improved access to work sites and the dry-dock; increasing lift capacity to enable construction of larger, more fully outfitted super-lifts: An incremental improvement to carrier construction cost will fall short of the improvement necessary to ensure affordability for CVN 79 and follow ships. Accordingly, the shipbuilder has established aggressive targets for CVN 79 to drive the game-changing improvements needed for carrier construction. These targets include: 75 percent Complete at Launch (15 percent> [i.e., 15 percent greater than] FORD); 85-90 percent of cable pulled prior to Launch (25-30 percent> FORD); 30 percent increase in front-end shop work (piping details, foundations, etc); All structural unit hot work complete prior to blast and paint; 25 percent increase to work package throughput; 100 percent of material available for all work packages in accordance with the integrated master schedule; zero delinquent engineering and planning products; resolution of engineering problems in < 8 [i.e., less than 8] hours. In parallel with efforts to improve shipbuilder costs, the PEO is establishing equally aggressive targets to reduce the cost of government furnished equipment for CVN 79; working equipment item by equipment item with an objective to reduce overall GFE costs by ~$500 million. Likewise, the Naval Sea Systems Command is committed to continuing its ongoing effort to identify specification changes that could significantly reduce cost without compromising safety and technical rigor. The output of these efforts comprises the optimal build plan for CVN 79 and follow, and will be incorporated in the detail design and construction baseline for CVN 79. CVN 79 will be procured using a fixed price incentive contract. Appendix D. March 2013 Navy Report to Congress on Construction Plan for CVN-79 This appendix reprints a March 2013 Navy report to Congress on the Navy's construction plan for CVN-79. Appendix E. Shock Trial An earlier oversight issue for Congress for the CVN-78 program was whether to conduct the shock trial for the CVN-78 class in the near term, on the lead ship in the class, or years later, on the second ship in the class. This appendix presents background information on that issue. A shock trial, known formally as a full ship shock trial (FSST) and sometimes called a shock test, is a test of the combat survivability of the design of a new class of ships. A shock trial involves setting off one or more controlled underwater charges near the ship being tested, and then measuring the ship's response to the underwater shock caused by the explosions. The test is intended to verify the ability of the ship's structure and internal systems to withstand shocks caused by enemy weapons, and to reveal any changes that need to be made to the design of the ship's structure or its internal systems to meet the ship's intended survivability standard. Shock trials are nominally to be performed on the lead ship in a new class of ships, but there have also been cases where the shock trial for a new class was done on one of the subsequent ships in the class. The question of whether to conduct the shock trial for the CVN-78 class in the near term, on the lead ship in the class, or years later, on the second ship in the class, has been a matter of disagreement at times between the Navy and the office of the Secretary of Defense (OSD). The Navy has wanted to perform the shock trial on the second ship in the class, because performing it on the lead ship in the class, the Navy has argued, will cause a significant delay in the first deployment of the lead ship, effectively delaying the return of the carrier force to an 11-ship force level and increasing the operational strain on the other 10 carriers. The Navy has argued that the risks of delaying the shock trial on the CVN-78 to the second ship in the class are acceptable, because the CVN-78 class hull design is based on the Nimitz (CVN-68) class aircraft carrier hull design, whose survivability against shocks is understood, because systems incorporated into the CVN-78 design have been shock tested at the individual component level, and because computer modeling can simulate how the CVN-78 design as a whole will respond to shocks. OSD has argued that the risks of delaying the CVN-78 class shock trial to the second ship in the class are not acceptable, because the CVN-78 design is the first new U.S. aircraft carrier design in four decades; because the CVN-78 design has many internal design differences compared to the CVN-68 design, including new systems not present in the CVN-68 class design; and because computer modeling can only do so much to confirm how a complex new platform, such as an aircraft carrier and all its internal systems, will respond to shocks. The risk of delaying the shock trial, OSD has argued, outweighs the desire to avoid a delay in the first deployment of the lead ship in the class. OSD in 2015 directed the Navy to plan for conducting a shock trial on the lead ship. The Navy complied with this direction but has also sought to revisit the issue with OSD. The issue of the shock trial for the CVN-78 class has been a matter of legislative activity—see the provisions shown earlier in \" Recent Related Legislative Provisions ,\" particularly the most recent such provision, Section 121(b) of the FY2018 National Defense Authorization Act ( H.R. 2810 / P.L. 115-91 of December 12, 2017). An April 5, 2018, press report states the following: The Pentagon's No. 2 civilian has said the Navy should perform shock-testing soon to determine how well its new $12.9 billion aircraft carrier—the costliest warship ever—could withstand an attack, affirming the service's recent decision to back down from a plan for delay. \"We agree with your view that a test in normal sequence is more prudent and pragmatic,\" Deputy Defense Secretary Patrick Shanahan said in a newly released March 26 letter to Senate Armed Services Committee Chairman John McCain. The Arizona Republican and Senator Jack Reed, the panel's top Democrat, pressed for the shock-testing to go ahead as originally planned. James Guerts, the Navy's chiefs weapons buyer, told reporters last month that the Navy was acquiescing to the testing after initially asking Defense Secretary James Mattis to delay it for at least six years. In its push to maintain an 11-carrier fleet, the Navy wanted to wait and perform the test on a second carrier in the class rather than on the USS Gerald Ford.", "summary": "CVN-78, CVN-79, CVN-80, and CVN-81 are the first four ships in the Navy's new Gerald R. Ford (CVN-78) class of nuclear-powered aircraft carriers (CVNs). CVN-78 (Gerald R. Ford) was procured in FY2008. The Navy's proposed FY2020 budget estimates the ship's procurement cost at $13,084.0 million (i.e., about $13.1 billion) in then-year dollars. The ship received advance procurement (AP) funding in FY2001-FY2007 and was fully funded in FY2008-FY2011 using congressionally authorized four-year incremental funding. To help cover cost growth on the ship, the ship received an additional $1,394.9 million in FY2014-FY2016 and FY2018 cost-to-complete procurement funding. The ship was delivered to the Navy on May 31, 2017, and was commissioned into service on July 22, 2017. The Navy is currently working to complete construction, testing, and certification of the ship's 11 weapons elevators. CVN-79 (John F. Kennedy) was procured in FY2013. The Navy's proposed FY2020 budget estimates the ship's procurement cost at $11,327.4 million (i.e., about $11.3 billion) in then-year dollars. The ship received AP funding in FY2007-FY2012, and was fully funded in FY2013-FY2018 using congressionally authorized six-year incremental funding. The ship is scheduled for delivery to the Navy in September 2024. CVN-80 (Enterprise) and CVN-81 (not yet named) are being procured under a two-ship block buy contract that was authorized by Section 121(a)(2) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (H.R. 5515/P.L. 115-232 of August 13, 2018). The provision permitted the Navy to add CVN-81 to the existing contract for building CVN-80 after the Department of Defense (DOD) made certain certifications to Congress. DOD made the certifications on December 31, 2018, and the Navy announced the award of the contract on January 31, 2019. Compared to the estimated procurement costs for CVN-80 and CVN-81 in the Navy's FY2019 budget submission, the Navy estimates under its FY2020 budget submission that the two-ship block buy contract will reduce the cost of CVN-80 by $246.6 million and the cost of CVN-81 by $2,637.3 million, for a combined reduction of $2,883.9 million (i.e., about $2.9 billion). Using higher estimated baseline costs for CVN-80 and CVN-81 taken from a December 2017 Navy business case analysis, the Navy estimates under its FY2020 budget submission that the two-ship contract will reduce the cost of CVN-80 by $770.9 million and the cost of CVN-81 by $3,086.3 million, for a combined reduction of $3,857.2 million (i.e., about $3.9 billion). CVN-80 was procured in FY2018. The Navy's proposed FY2020 budget estimates the ship's procurement cost at $12,335.1 million (i.e., about $12.3 billion) in then-year dollars. The ship received AP funding in FY2016 and FY2017, and the Navy plans to fully fund the ship in FY2018-FY2025 using incremental funding authorized by Section 121(c) of P.L. 115-232. The Navy's proposed FY2020 budget requests $1,062.0 million in procurement funding for the ship. The ship is scheduled for delivery to the Navy in March 2028. Prior to the awarding of the two-ship block buy contract, CVN-81 was scheduled to be procured in FY2023. Following the awarding of the two-ship block buy contract, the Navy has chosen to show CVN-81 in its FY2020 budget submission as a ship to be procured in FY2020 (as opposed to a ship that was procured in FY2019). The Navy's FY2020 budget submission estimates the ship's procurement cost at $12,450.7 million (i.e., about $12.5 billion) in then-year dollars. The Navy plans to fully fund the ship beginning in FY2019 and extending beyond FY2026 using incremental funding authorized by Section 121(c) of P.L. 115-232. The Navy's proposed FY2020 budget requests $1,285.0 million in procurement funding for the ship. The ship is scheduled for delivery to the Navy in February 2032. The Navy's FY2020 budget submission proposed to not fund the mid-life nuclear refueling overhaul (called a Refueling Complex Overhaul, or RCOH) for the aircraft carrier CVN-75 (Harry S. Truman), and to instead retire the ship around FY2024 and also deactivate one of the Navy's carrier air wings at about the same time. On April 30, 2019, however, the Administration announced that it was effectively withdrawing this proposal from the Navy's FY2020 budget submission. The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 (and by implication its associated air wing) in service past FY2024. Oversight issues for Congress for the CVN-78 program include the following: DOD's decision to show CVN-81 in its FY2020 budget submission as a ship to be procured in FY2020, instead of a ship that was procured in FY2019; the Navy's decision, as part of its FY2020 budget submission, to not accelerate the scheduled procurement of CVN-82 from FY2028 to an earlier fiscal year; whether to approve, reject, or modify the Navy's FY2020 procurement funding request for the CVN-78 program; the date for achieving the Navy's 12-ship force-level goal for aircraft carriers; cost growth in the CVN-78 program, Navy efforts to stem that growth, and Navy efforts to manage costs so as to stay within the program's cost caps; Navy efforts to complete the construction, testing, and certification of the weapons elevators on CVN-78; additional CVN-78 program issues that were raised in a December 2018 report from the Department of Defense's (DOD's) Director of Operational Test and Evaluation (DOT&E); additional CVN-78 program issues that were raised in a May 2019 Government Accountability Office (GAO) report on DOD weapon systems; whether the Navy should shift at some point from procuring large-deck, nuclear-powered carriers like the CVN-78 class to procuring smaller aircraft carriers.", "document_type": "crs"}
{"report": "The issue of the President and Vice President's term of office is generally regarded as an accepted constitutional norm that arouses little controversy in the 21 st century. Both the four-year term and the venerable two-term tradition, initiated by George Washington and ultimately incorporated in the Constitution in 1951 by the Twenty-Second Amendment, appear to be fixed elements in the nation's political landscape. In marked comparison, the issues of tenure and reelection of the President, and of the Vice President (an office added almost as an afterthought during the Constitutional Convention of 1787), were the subject of intense and prolonged debate during the Philadelphia gathering. Delegates argued for three months over the length of the presidential term and whether the chief executive should be eligible for reelection before reaching a compromise package of provisions—a four-year term, and eligibility for reelection—several days before the convention adjourned. Since that time, a wide range of changes to these conditions has been proposed as constitutional amendments, but relatively few conditions have been added to the original provisions governing the President's term of office. In addition to the Twenty-Second Amendment cited above, the Twelfth, ratified in 1804, set the same qualifications for the Vice President; the Twentieth, ratified in 1933, set January 20 of every year following a presidential election as the date on which the chief executive's term begins; and the Twenty-Fifth Amendment clarified the question of vice-presidential succession to the presidency and authorized the President to nominate persons to fill vacancies in the vice presidency, subject to approval by vote of both houses of Congress. Proposals for a single term were popular in the 19 th century, and for several decades before the Civil War, the concept of a voluntary limit of one presidential term in office drew wide support. Beginning in 1808, constitutional amendments were introduced that would have changed the presidential term to five, six, seven, and even eight years. By the 20 th century, the single six-year term for Presidents had become a preferred option for such amendments, with multiple amendment proposals introduced in successive Congresses as late as the 1990s, while amendments to repeal the Twenty-Second Amendment to allow unlimited reelection were regularly introduced as recently as the 113 th Congress. In the past two decades, however, public and congressional interest in these issues has arguably declined. In contrast to proceedings at the Constitutional Convention and widespread congressional interest in the past, the questions of presidential term and tenure appear to be relatively settled issues in the contemporary context. Nevertheless, the potential for renewed interest in change, which has emerged as a force to be contended with in the past, remains a possibility in both the present and future. The conditions of terms and tenure for the President and Vice President of the United States have evolved over nearly two centuries, from the earliest provisions in Article II, Section 1, of the U.S. Constitution, set by the Constitutional Convention in 1787, to provisions governing vacancies in the office of Vice President established in the Twenty-Fifth Amendment, ratified in 1967. The Constitution, in its original text and four subsequent amendments, provides the basic conditions of presidential and vice presidential terms and tenure. Constitution : Article II, Section 1, of the Constitution, ratified in 1788, sets a four-year term of office for the President and Vice President. Twelfth Amendment: This amendment extended the same qualifications for the President to the office of Vice President. Twentieth Amendment : Section 1 of this amendment, ratified in 1933, sets the expiration date for these terms at noon on January 20 of each year following a presidential election. Twenty- S econd Amendment : Section 1 of this amendment, ratified in 1951, states that no person shall be elected to the office of President more than twice. It also limits the number of times a Vice President who becomes President may subsequently be elected to that office, depending on when the Vice President succeeds to the presidency. Twenty- F ifth Amendment : Sections 1 and 2 of this amendment, ratified in 1967, do not directly affect terms and tenure of the President and Vice President, but provide for succession of the Vice President and the filling of vice-presidential vacancies. Proposals to change the length of the President's term of office, or to limit the number of terms to which a President could be elected, were introduced in Congress beginning in the early 19 th century. The first category included constitutional amendments for a five-, six-, seven-, or eight-year term of office, usually coupled with limitation to a single term in office. By the 20 th century, a six-year single term of office had become the preferred alternative. The Twenty-Second Amendment, ratified in 1951, achieved the goal of limiting the number of times a person could be elected President, but did not alter the four-year term set in Article II. Since that time, most proposed amendments related to the President's term and tenure have (1) called either for a six-year presidential term, usually without the possibility of reelection; or (2) proposed repeal of the Twenty-Second Amendment, allowing individuals to be elected President more than twice. The idea of a six-year term for the President and Vice President has a long history: the first amendment to this effect was introduced in 1826, in the 19 th Congress (1825-1826). According to earlier CRS research, a total of 181 such amendments had been introduced through the 96 th Congress (1979-1980). Thirty-one more amendments that would have established the six-year term, either as \"stand-alone\" proposals, or as part of more inclusive plans that included changes in congressional terms and term limits, were introduced between the 97 th (1981-1982) and 104 th (1995-1996) Congresses, for a total of 212. Since then, up through and including the 116 th Congress (2019-) however, no amendment proposing a six-year term has been introduced. The basic provisions of most of these proposals called for a six-year term for the President and Vice President, with each limited to a single term. In addition, most contained a variant of the existing Twenty-Second Amendment provision for Vice Presidents who succeed to the highest office: they would be eligible for election in their own right to a term as President provided they had served less than three years of the term to which their predecessor was elected. Additionally, in the interest of constitutional consistency, most of these proposed amendments would also have specifically repealed the Twenty-Second Amendment. Over the years, proponents of the single six-year term have deployed a range of arguments in support of their position. Perhaps most prominent, they assert that it would end the \"permanent campaign\" for reelection, which is said to begin as soon as a newly elected President is inaugurated for a first term. According to this theory, the chief executive would be freed from the distraction of partisan political concerns associated with planning and campaigning for reelection, and would be able to concentrate on legislation, administration, and development of a program of public policy. Decisions on major issues would, proponents claim, be less likely to be judged by their impact on the President's reelection prospects. They maintain that this, in turn, would promote greater consistency in foreign and domestic policy, as the President would be able to focus exclusively on the value and utility of policy proposals, rather than on their political implications. A six-year term would have additional substance, they assert, because it would give the President more time to advocate for and implement these policies, to adjust them as necessary, and to monitor their success; this would give the President's initiatives \"a fair chance to work.\" Former President Jimmy Carter (1977-1981) endorsed the longer single presidential term, adding another dimension when he suggested that a President who had no prospect of reelection might enjoy greater moral authority and credibility, and perhaps greater influence on the course of policy formulation, since he could not be accused of political motivation (i.e., his interest in securing a second term). Similarly, another commentator, noting the length of contemporary presidential election campaigns, suggested that a President who serves a single six-year term would not need to focus two or more years on renomination and reelection. Instead of turning to reelection almost immediately after assembling an administration \"team,\" he or she could devote greater energy to the demands of office as chief executive, a process that could lead to greater stability and continuity in policy formation and administration. Critics of the proposal suggest that, at its most basic, restricting the President to a single term is fundamentally undemocratic because it deprives voters of the right to choose their preferred candidate for the office. They rebut the arguments of those who claim a single term will help a President concentrate on policy issues, noting that Presidents in their second terms have often struggled to implement their programs because, as \"lame ducks,\" they have lost influence in Congress and the larger political arena. A one-term chief executive who did not enjoy the prospect of reelection would, they claim, be a lame duck the day he or she took office. Far from being more devoted to questions of policy, opponents suggest that a one-term President might be too well insulated from the give and take of political discourse, and less responsive to the will of the people. As one commentator notes: \"a [P]resident protected from public opinion is also a [P]resident unrestrained by it. If he is free to act in the national interest ... that national interest will be as he defines it. And will his definition be superior to the one that is hammered out, under the current system, in the heat of a reelection contest?\" In the final analysis, opponents maintain that the single, but longer, term would extend the tenure of failed or simply inadequate Presidents two years beyond their current termination date, while reducing the possible tenure of more capable chief executives by the same length of time: six years in office is too long for a failed President, they say, and too short for a successful one. As noted earlier, the proposal to establish a single six-year term for the President and Vice President was a hardy perennial from the early days of the republic: 212 such amendments were introduced between the 19 th through 104 th Congresses. The format varied: most of these amendments, particularly those introduced before the 1950s, proposed only a single six-year term for the President and Vice President, while others introduced since ratification of the Twenty-Second Amendment included provisions for its repeal. Some versions also prohibited a person elected President from being subsequently elected Vice President. In earlier years, the frequency of these proposals tended to cluster during periods in which an incumbent President was known or suspected to be seeking a third term; they were generally introduced in reaction to such prospects. These periods include the 1870s, when President Ulysses Grant contemplated a third term in both 1876 and 1880; between 1905 and 1916, presumably in response to President Theodore Roosevelt's consideration of a third term; and the 1930s through the late 1940s, first in anticipation of, and later in response to, President Franklin Roosevelt's election to a third and fourth term. The most recent substantial legislative activity took place during the 92 nd (1971-1972) and 93 rd (1973-1974) Congresses. Proposals for a six-year term were arguably connected to congressional concern during the Vietnam War era of the 1960s and 1970s about the perceived growing imbalance of power and authority in favor of the President and at the expense of Congress—an \"imperial presidency\" —and later in the context of the Watergate scandal of 1972-1974. In the 92 nd Congress, the Senate Judiciary Committee's Subcommittee on Constitutional Amendments held two days of hearings, on October 28 and 29, 1971, on S.J.Res. 77. A hearing in the House Judiciary Committee's Subcommittee on Crime on H.J.Res. 76 and H.J.Res. 127 , held on September 26, 1973, in the 93 rd Congress, were the last congressional activity (beyond the introduction and committee referral of proposed amendments) dealing with this question through the time of the present writing. Beginning in the late 1970s, the volume of amendment proposals declined, so that the most recent stand-alone amendments were offered in the 101 st Congress (1989-1990), including H.J.Res. 6 , introduced by Representative Jack Brooks; H.J.Res. 52 , introduced by Representative Bill Frenzel; and H.J.Res. 176 , introduced by Representative Frank Guarini. These proposals received no action beyond committee referral. In subsequent Congresses, the six-year presidential term was incorporated into several proposals that sought to establish a comprehensive system of term limits for both Congress and the President. In the 102 nd Congress, for instance, H.J.Res. 28 , introduced by Representative Richard Schulze, sought to establish a single six-year presidential and vice presidential term, but retained the two-term limit. This resolution also proposed a three-year term for Representatives and a rotation in office requirement that effectively limited Representatives to six consecutive three-year terms and Senators to three consecutive six-year terms, or 18 consecutive years in either case. In the 104 th Congress, Representative Frank Mascara introduced H.J.Res. 28 , which proposed a single six-year term for the President and Vice President, within the context of a four-year term for Representatives and an absolute limit of 12 years of service in one house for Members of both chambers of Congress. No action beyond committee referral occurred on either of these two most recent proposals. The first efforts to repeal the Twenty-Second Amendment began in 1956, within five years of the amendment's ratification. Since that time, 46 proposed amendments that would eliminate the two-term presidential election limit have been introduced in Congress, most in the House of Representatives, and most recently in the 113 th Congress. Several early proposals to repeal the Twenty-Second Amendment were the subject of congressional interest in the 1950s, but after this period, congressional interest in repeal of the amendment, as measured by the introduction of relevant proposed amendments, receded for some years. Among many other contributing factors, the lack of congressional activity could arguably be attributed to the fact that, with time, the amendment and its effective two-term limit came to be accepted as an increasingly settled element of the constitutional order. Another factor that may have contributed to lack of support for eliminating the two-term restriction may be found in the turbulent history of the 1960s and 1970s. Public sentiment for repeal of the Twenty-Second Amendment is arguably associated with support for extending the tenure of popular two-term chief executives whose presidencies are perceived at the time as having been successful. If so, then this era, during which five Presidents held office in a period of 20 years, notably lacked this catalyst. During the two decades between the end of Eisenhower's second term in 1961 and the election of President Ronald Reagan in 1980, two presidencies ended prematurely, John Kennedy's by assassination in 1963 and Richard Nixon's by resignation in 1974. Two other Presidents were defeated for election: Gerald Ford, who succeeded as President when Richard Nixon resigned in 1974, lost his bid for election in 1976, while his successor, Jimmy Carter, failed to win reelection in 1980. The fifth President to serve during this period, Lyndon Johnson, withdrew as a candidate for reelection in 1968 due in large part to widespread opposition to U.S. military action in Vietnam. Beyond the immediate ambit of legislative proposals, the idea, if not the reality, of repealing the Twenty-Second Amendment does appear to gain publicity and a level of at least theoretical support when term-limited Presidents approach the end of their time in office. As noted earlier in this report, there was some interest in the possibility of a third term by President Eisenhower in 1960, notwithstanding the President's documented health problems. In 1973, following his reelection to a second term, supporters of President Richard Nixon established an organization to promote repeal of the Twenty-Second Amendment as the President brought an end to conflict in Vietnam, pursued arms control and détente with the Soviet Union, and successfully opened informal U.S. relations with China after 24 years of hostility. As the President was increasingly implicated in the events stemming from the Watergate break-in, however, this effort was abruptly abandoned. Again in 1985, as Ronald Reagan entered his second term, suggestions emerged that repeal of the Twenty-Second Amendment might enable a third term for the popular President. Although Reagan himself indicated his support, he maintained only future Presidents should be eligible for additional terms in office. Supporters in Congress and elsewhere, however, mounted a public campaign to repeal the amendment in time for a third Reagan term in 1989. Although greeted enthusiastically by the President's supporters, the proposal met with mixed reviews in the press and among the general public. Substantial Republican losses in the 1986 congressional elections, followed almost immediately by revelation of the Iran-Contra events, largely dampened further enthusiasm for repeal. The question of repeal regained support early in President Bill Clinton's second term in office, when five relevant amendments were introduced in the 105 th Congress (1997-1998), while more recently, in 2014, Change.org, a petition website, sponsored an \"Obama-for-3\" Political Action Committee that circulated an online petition to repeal the amendment and thus enable President Barack Obama to run for a third term. In contrast to these occasional surges in support for repeal that have tended to emerge during the second term of a popular President, the Roper Center reports that at no time since ratification of the Twenty-Second Amendment has public opinion favored its repeal. In 2013, the most recent findings reported by Roper, 17% of respondents favored \"changing the Constitution and removing the limitation so a President could be elected to more than two terms,\" while 81% were opposed, and 1% had no opinion. Many of the arguments raised in favor of and opposition to repeal of the Twenty-Second Amendment were cited earlier in this report. Briefly, proponents assert that the amendment is inherently undemocratic, in that it prohibits the voters from electing a qualified candidate they favor. In most instances, they suggest that Presidents would continue to limit themselves to two terms, or be limited by external constraints, such as political considerations, health, or other reasons, unless there were pressing need and demand for a third term. In periods of national or international crisis, they maintain that the Twenty-Second Amendment is a straightjacket that prevents the nation from retaining an experienced and trusted leader at a time when continuity in presidential leadership may be essential. As journalist John B. Judis asserted in The New Republic , The 22 nd Amendment deprives the United States of the possibility of successful second acts. It has also made a virtue of inexperience among American presidents. The practice of having an entirely new president every four or eight years has led to flailing and mistakes during a president's first year or two in office…. Repealing the 22 nd Amendment would not eliminate the possibility of presidential stumbles, but might lessen them, particularly if the country faced the prospect of electing an untutored new executive in the midst of a foreign policy crisis. Finally, as is the case with arguments against the single six-year term, proponents of repeal suggest that every President who is reelected becomes a lame duck the day he takes the oath for his second term, handicapped by diminished influence and authority. The prospect of a third term, they argue, would help avoid the slow diminution of influence most Presidents experience during their second terms. Supporters of presidential term limits in general and the Twenty-Second Amendment in particular argue that eight years is time enough for any individual in a position of such great power as the presidency of the United States. The intent of the founders for a time-limited presidency, they assert, was clearly expressed at the Constitutional Convention, where the delegates accepted the prospect that Presidents might serve an additional term of office only after lengthy debate. Moreover, they suggest that temptation to accrue excessive power to the executive, even with the best of intentions, is a constant danger to the constitutional model of a balanced federal government embracing a system of checks and balances within a framework of separation of powers. They note that recent history provides what they regard as troubling examples of this impulse to concentration (e.g., the \"imperial presidency,\" as noted earlier in this report), and the \"unitary presidency.\" Presidential term limits, they conclude, are an essential check to any possibility of a \"cult of personality\" and the potential for excessive presidential power. Amendment proposals that call for the repeal of the Twenty-Second Amendment have generally incorporated simple language and the single requirement of repeal. The legislative language used most frequently has been, \"[t]he twenty-second article of amendment to the Constitution of the United States is hereby repealed.\" As was noted earlier in this report, repeal of the Twenty-Second Amendment appeared in some proposals to establish a single six-year term for President. Unlike the single six-year term approach, which was last introduced in the 94 th Congress, simple repeal continued to be a live option until comparatively recently. As noted previously in this report, the first joint resolutions to repeal the Twenty-Second Amendment were introduced in the 84 th Congress (1955-1956), in 1956, less than five years after the amendment had been ratified. Several early proposals to repeal the amendment were the subject of congressional interest in the 1950s, most notably S.J.Res. 11 in the 86 th Congress (1959-1960). This measure was accorded hearings in 1959 by the Senate Judiciary Committee's Subcommittee on Constitutional Amendments, the highlight of which was former President Harry Truman's testimony in its support. The subcommittee's vote to approve the proposal and report it to the full committee on September 1 of that year ultimately proved to be the high water mark of the repeal movement in the 1950s. Following this period, congressional interest in repeal of the amendment, as measured by the introduction of relevant proposed amendments, receded for some years, but revived in the 1970s. From that time forward, proposals to repeal the Twenty-Second Amendment continued to be introduced in almost every Congress through the first decade of the 21 st century. The most recent was H.J.Res. 15 in the 113 th Congress (2013-2014), which was introduced on January 4, 2013, by Representative Jose Serrano. The language of H.J.Res. 15 was typical of many repeal proposals, stating that \"[t]he twenty-second article of amendment to the Constitution of the United States is hereby repealed.\" The resolution was referred to the House Committee on the Judiciary's Subcommittee on the Constitution and Civil Justice, but no further action was taken. The terms of the President and Vice President were originally established at four years, with eligibility for reelection, by the Philadelphia Convention of 1787, which drafted the U.S. Constitution. The questions of presidential term length and reeligibility—whether the executive would be eligible to run for more than one term—were the subject of considerable discussion at the Constitutional Convention, which met in Philadelphia from May 28 through September 17, 1787. The delegates were generally divided between two factions—\"federalists\" and \"anti-federalists.\" Federalists generally sought to establish a robust federal government vested with the power to tax, exercise authority over interstate commerce and relations, and manage the nation's international trade, foreign relations, and defense policy with a stronger hand. An executive who possessed considerable independence and authority was a key element in the federalist vision. Although considerable overlap existed between the two groups or tendencies, \"anti-federalists\" generally opposed a stronger central government. They tended to fear greater concentration of authority as a threat to individual liberty and states' rights, preferring a less powerful executive who possessed limited authority and more closely resembled the President of Congress under the Articles of Confederation, or a plural executive that would include up to three members who could check each other. Early in its deliberations, the convention rejected the concept of a plural executive, however, settling on a single President. It then moved to address two fundamental issues concerning tenure: The first centered on duration of the executive's term. Most state governors at that time served terms of one or two years. There appears to have been agreement among most of the delegates that whatever view they took of the federal executive, the office should have a longer term to guarantee stability and continuity in the conduct of government. During the convention, nothing shorter than a three-year term received serious consideration. The second was the issue of reelection: should the executive be limited to a single term or be permitted to run for reelection to additional terms, and, if so, how many? Here, the convention delegates sought to balance the potential advantages of continuity and perspective provided by a long-serving executive with their still-fresh memories of domineering colonial governors and pervasive concern that an infinitely reelectable executive might lead to dictatorship or monarchy. Both these questions were influenced by the question of who should elect the President: from the beginning, many delegates assumed the executive would be chosen by the \"legislature\" (Congress). It was widely held that in these circumstances a single term would be necessary to avoid excessive congressional influence over the presidency, or worse, the unseemly spectacle of the executive scrambling to ensure congressional support for reelection to a second term. At least a solid minority of delegates, which occasionally expanded to a majority, also opposed eligibility for reelection for the executive on general principle. They feared this provision might result in lengthy or even indefinite tenure for Presidents, providing them the opportunity to accrue overweening power in the executive branch. Other delegates, however, were more concerned about the need, as they saw it, to establish an independent, energetic executive; the fact that the President might be eligible for reelection presented less difficulty for them. Debate over these issues continued off and on for two months, with the convention changing position several times before it reached a final compromise. As the convention opened, the delegates initially debated a three-year and a seven-year term, both in the context of election by Congress. In early June, they agreed to seven years without eligibility for reelection. Two weeks later, they revisited this decision, at the same time voting to move election from the national legislature to electors chosen in the states. The option for choice by electors was seen by some delegates as eliminating congressional influence over, or control of, the presidential election, which was regarded as an important element of separation of powers. This first hint of what ultimately emerged as the electoral college was followed by a vote to eliminate the prohibition on reelection. At the same time, the delegates voted to shorten the executive's term to six years, but the issue was not yet settled. On July 24, dissatisfied with their earlier choices, the convention voted to restore election by Congress, and followed up immediately with a heated debate on a proposal to reinstate the one-term requirement. The record suggests that tempers had grown short by this time, and even James Madison's restrained style as recorder of the proceedings does not conceal the apparent passion of the debate that followed. Supporters of independent election, still smarting from the recent reversion to congressional election, vehemently opposed the motion, while partisans of the single term and legislative supremacy countered, perhaps facetiously, with various proposals, including an indefinite term (i.e., the executive would serve \"during good behavior\") and terms of 11, 15, and even 20 years. After two days of further debate, the Convention referred the following resolution to the Committee on Detail by a vote of six states to three: \"that a National Executive be instituted—to consist of a single person—to be chosen by the Natl. legislature—for the term of seven years—to be ineligible a 2d time.\" The Committee on Detail, which was charged with organizing and fleshing out the convention's decisions, returned its draft to the full convention on August 6; as instructed, the report provided a seven-year term, without a provision for reelection. The matter was still not settled, however. The delegates continued to debate over who should elect the President, with term length and reelection now recognized as a subset of the greater question. By this time, proposals for election of the President by the state legislatures, by electors chosen by lot from among the Members of Congress, and even popular election, had been considered and rejected, but agreement still eluded the delegates. One modern account of the convention notes that some delegates had left the convention to attend to personal business and professional matters after almost three months of nearly continuous, six-day-a-week sessions, while those who remained shared a growing inclination to finish the project. Debates grew shorter and members were quicker to accept compromise solutions to persistent disagreements. In this context, recognizing they were at an impasse, the delegates voted on August 31 to refer the presidency question, along with other unresolved issues, to a Committee on Postponed Matters (also known as The Committee of Eleven, for the number of its members). As active participants, the committee members were fully aware of the protracted struggle over presidential election, term, and reelection that had continued since early June. They chose to offer a fresh take on the issue: their report on the presidency, submitted on September 4, provided a four-year term, eligibility for reelection, and, key to the issue, a reworked method of election, by an electoral college appointed in each state \"in such manner as its Legislature may direct.\" The committee's novel solution ultimately resolved the impasse. Although several die-hard opponents continued to argue in favor of legislative election, a single term, or shorter terms, all such motions were defeated by wide margins. The convention had finally reached agreement on term and tenure for the President and the recently conceived office of Vice President. The Committee on Style and Arrangement reworked the various decisions into a form recognizable as the Constitution, and, after some final revisions, the document was approved and proposed to the states for ratification on September 17, 1787, with its now-familiar wording: The executive Power shall be vested in a President of the United States of America. He shall hold his Office during the Term of four Years, and, together with the Vice President, chosen for the same Term, be elected as follows. In the ensuing campaign for its approval in the states, the federalists cited \"energy in the executive,\" stability in government, and separation of powers in defense of the presidential term and tenure. Conversely, opponents warned that reeligibility and the potential for lengthy or even indefinite terms of office would lead to an excess concentration of power in the presidency, and a tendency to dictatorship or even monarchy. In the final analysis, however, it is arguable that many doubts about these arrangements were mitigated, at least in the short run, by the near certainty that the universally respected George Washington would serve as first President under the Constitution. The Constitution addressed the question of presidential vacancies in the following language in Article II, Section 1, clause 6: In case of the Removal of the President from Office, or of his Death, Resignation, or Inability to discharge the Powers and Duties of the said Office, the same shall devolve on the Vice President, and the Congress may by Law provide for the Case of Removal, Death, Resignation or Inability, both of the President and Vice President, declaring what Officer shall then act as President. It did not, however, make similar provision for vacancies in the vice presidency, so that office became vacant whenever the Vice President succeeded as President, or left office for any other reason, and remained so for the balance of the presidential term. The lack of such a provision was eventually addressed by the 25 th Amendment, which also provided more explicitly for cases of presidential disability. As the nation's first President, George Washington set many precedents. One of the most enduring is the tradition that he limited himself, and future chief executives by his example, to not more than two terms in office. His action was frequently cited and generally emulated until Franklin Roosevelt was elected to a third term in 1940. Further, Roosevelt's unprecedented four-term presidency then spurred the subsequent ratification of the Twenty-Second Amendment, which conferred constitutional force on the practice. The two-term tradition is thus widely regarded as the norm, but the record of presidential tenure is more complex: only 12 of the 44 Presidents who served between 1789 and 2017 were elected to, and served, two full consecutive terms, or 96 months, in office. When deaths in office and the vicissitudes of electoral politics are taken into account, average presidential tenure declines to 62 months for the nation's 227 years and 9 months of government under the Constitution between Washington's inauguration on April 30, 1789 and that of Donald J. Trump on January 20, 2017. The average tenure in office of Presidents has fluctuated over time. This is attributable in part to presidential mortality and the renomination and reelection rates of incumbents. In addition, the average length of presidential terms arguably reflects the prevailing levels of political disquiet and/or socioeconomic volatility in the nation during given periods. Moreover, the two-term tradition was persistently challenged during the nation's first century of constitutional government, while proposals that would have extended the executive's term to six years and/or limit Presidents to a single term continued to be offered into the late 20 th century and beyond in the case of the latter. Although the presidential election of 1800 was among the most bitterly contested in American history, the period between 1789 and 1825 was characterized by stability in presidential tenure: four of the nation's first five Presidents—Washington (1789-1797), Jefferson (1801-1809), Madison (1809-1817), and Monroe (1817-1825)—served two consecutive terms. John Adams (1797-1801) was the outlier, defeated in the 1800 presidential election by his Vice President and longtime rival. Presidents during this period served an average of 86 months, a length of tenure matched in a comparable period only recently, between 1981 and 2017. This stability can be attributed to several factors, notably the triumph of the Jeffersonian Republican Party and the demise of the Federalists, which led to the nation's only period of de facto one-party government, at least on the federal level. Presidential nominees were generally selected by the Jeffersonian caucus (later known as the Democratic-Republicans) in Congress during this period, which settled on the incumbent Secretary of State for the succession elections of 1808 and 1816. The latter part of this period was widely referred to at the time as \"the Era of Good Feelings,\" particularly at its zenith during the administration of James Monroe (1817-1825). The Era of Good Feelings came to an abrupt end with the contentious election of 1824, which coincided roughly with the death or retirement from public life of the last of the generation of the Founders. George Washington, the \"indispensable man,\" set a precedent for presidential tenure in 1796 when he announced his retirement after two terms (1789-1797), but there is little evidence he based the decision on a personal understanding that the Constitution implicitly limited his tenure. Washington's announcement, which was incorporated in his renowned 1796 Farewell Address, actually gave no indication that he considered his action to set a precedent for his successors. Rather, he cited his own weariness, and particularly the growing infirmities of age, as primary factors in his decision: \"every day the encreasing [ sic ] weight of years admonishes me more and more, that the shade of retirement is as necessary to me as it will be welcome.\" Washington's immediate successor, John Adams (1797-1801), was defeated in the tumultuous election of 1800, and never faced the question of how many terms he would serve. According to some modern scholars, the two-term tradition is more accurately attributed to Thomas Jefferson (1801-1809), who had expressed concern about \"perpetual reeligibility\" in the presidency as early as 1788. As his own second term drew to a close, he was petitioned by the Vermont legislature to consider another run. Jefferson declined, stating in his reply his belief that [i]f some termination to the services of the Chief Magistrate be not fixed by the Constitution, or supplied by practice, his office, nominally four years, will in fact become for life, and history shows how easily that degenerates into an inheritance. Believing that a representative Government responsible at short periods is that which produces the greatest sum of happiness to mankind, I feel it a duty to do no act which shall essentially impair that principle, and I should unwillingly be the person who, disregarding the sound precedent set by an illustrious predecessor [George Washington], should furnish the first example of prolongation beyond the second term of office. Jefferson's decision acquired the force of tradition, at least in the short run, and was frequently attributed to Washington. Three of Jefferson's four immediate successors, Madison, Monroe, and Andrew Jackson (1829-1837), who, arguably, would have been able to secure reelection, retired at the close of their second terms, while the fourth, John Quincy Adams (1825-1829), was defeated for reelection in 1828 by Jackson. The vice presidency during this period had a similar pattern of stability, with the eight incumbents serving an average tenure of 67 months. In contrast to the relative stability of presidential tenure during the first decades of government under the Constitution, the balance of the 19 th century was more volatile, reflecting the contentious political, social, and economic developments experienced by the nation during this period. With the retirement of James Monroe in 1824, the \"Era of Good Feelings\" Democratic-Republican coalition fractured under sectional pressure, perhaps most notably due to the candidacy of Andrew Jackson, who epitomized the rise of the west and its challenge to the settled order of the previous decades. Four candidates contested the presidency, but none of them gained the requisite majority of electoral votes. In the only contingent election to date under the provisions of the Twelfth Amendment, the House of Representatives picked Secretary of State John Quincy Adams, one of the \"establishment\" candidates, despite the fact that Jackson had gained more popular and electoral votes. Jackson denounced the House's action as a \"corrupt bargain,\" and although his charge was never proved, he used it in his successful campaign to defeat Adams in the election of 1828. Between 1837, when Andrew Jackson left office, and 1901, when William McKinley was inaugurated for a second term, only Abraham Lincoln (1861-1865) and Ulysses Grant (1869-1877) were reelected, and only Grant served two full consecutive terms. During these 64 years, 18 Presidents held office for an average of 43 months each, less than a single complete term. Throughout much of this period, the concept of a single term for Presidents, rather than the two-term tradition, enjoyed support as an appropriate norm for executive tenure, both by design and circumstance. From the standpoint of amending the Constitution to limit Presidents to a single term, Jackson himself recommended that Congress consider an amendment that would establish a single four- or six-year presidential term in his Annual Messages to Congress every year between 1830 and 1835. William Henry Harrison (1841) recommended a constitutional amendment to prohibit \"the eligibility of the same individual to a second term of the Presidency\" in his 1841 inaugural address, while his Whig Party called for \"a single term for the presidency\" three years later in 1844, in its first published presidential platform. Although similar declarations do not appear in the Democratic platforms of the time, historian Michael Nelson notes that many Democrats supported the proposal; moreover, Democratic Presidents James Polk (1845-1849) and James Buchanan (1857-1861) announced their intention to serve only one term before they entered office. In fact, none of the eight Presidents who served between Jackson and Lincoln was elected to a second term. While such events indicate the acceptance of the single-term presidency during this period, the short tenures of these chief executives are arguably also due to the vagaries of political life: electoral defeat or rejection by their parties, and, in two instances, death in office. Throughout the balance of the 19 th century, the ideal of the two-term presidency, while often deferred to, actually remained the exception, rather than the rule, arguably, both by design and circumstance. At the same time, proposals for a single-term amendment to the Constitution continued to be offered in Congress. As noted previously, in 1864 Abraham Lincoln became the first President elected to a second term since Jackson, while Ulysses S. Grant (1869-1877) was the only chief executive between Jackson and Woodrow Wilson (1913-1921) to serve two full consecutive terms in office. In 1876, Republican Party leaders, with Grant's tacit approval, explored the possibility of a third term for the incumbent, but the force of tradition, combined with the record of his tenure in office, led to a public outcry, and this trial balloon was eventually deflated. Of the other chief executives holding office during this period, Rutherford B. Hayes (1877-1881) declined to seek a second term; moreover, he also proposed a single-term amendment in his inaugural address. Grant sought the GOP nomination again in 1880, permitting his name to be placed in nomination at the Republican National Convention. While he gained a plurality of delegate votes in the first ballot, Grant was unable to attain a majority. Instead, James A. Garfield (1881), a \"dark horse\" reform candidate won the nomination on the 36 th ballot and the subsequent general election. Garfield was shot on July 2, 1881, less than four months after his inauguration, and lingered into September of that year before succumbing to his wound. He was succeeded by his Vice President, Chester Arthur (1881-1885), who was denied nomination for a second term by his Republican Party. Arthur's successor, Democrat Grover Cleveland, advocated a single-term amendment in his acceptance message to the Democratic National Convention in 1884, but ultimately became unique among American Presidents. Cleveland served two nonconsecutive terms, 1885-1889 and 1893-1897; his tenure was interrupted when he was defeated for reelection by Benjamin Harrison (1889-1893). He accomplished the unique feat of beating his successor four years later, in 1892, and returning for a second term. William McKinley (1897-1901) won election in 1896, and with his 1900 victory, became the first President elected to a second term since Grant. Three months into his second term, McKinley notified his Cabinet that he would respect the two-term tradition, but three months after making that announcement, he was assassinated, and was succeeded by Vice President Theodore Roosevelt. The period between 1825 and 1901 thus presents a contrast in presidential tenure to the era of the founders. A wide range of factors arguably contributed to the change: the death of five incumbent Presidents, two due to natural causes and three to assassination; chronic political volatility; the occurrence of the Civil War and its aftermath; recurrent financial crises and subsequent economic downturns. All these events, as well as continued support for a one-term limit, could be cited as contributing to shorter average presidential tenure between 1837 and 1901. After Jackson, the 18 chief executives who served during this period spent an average of 43 months in office, considerably less than the overall historical mean of 61 months. Presidential tenure during the earlier part of the era, between 1837 and 1861, serves to highlight the comparative political instability of the post-Jackson period, when the nation seemed to move inevitably toward disunion. During these tumultuous 24 years, presidential tenure reached a low point: the eight chief executives from Van Buren to Buchanan served an average of 36 months, less than one full term each. The period between 1861 and 1901, which began with Lincoln's inauguration and the onset of the Civil War, and concluded with the death of William McKinley, was only marginally less volatile: the 10 Presidents from Lincoln through McKinley averaged 48 months in office, a single term. The assassination and death of William McKinley in September 1901, and the accession of Vice President Theodore Roosevelt, provides a break with the conditions of presidential tenure that prevailed in the 19 th century. Average presidential tenure lengthened between 1901 and 1945, growing to more than 74 months, due largely to the record time in office of Franklin D. Roosevelt (1933-1945), and the terms served by Theodore Roosevelt (1901-1909) and Woodrow Wilson (1913-1921). This was substantially longer than the mean of 61 months for all chief executives, especially when compared with the 43-month average time in office of Presidents who served between 1837 and 1901. Most early 20 th century Presidents prior to Franklin Roosevelt observed the two-term tradition, although several considered the prospect of a third. After serving most of McKinley's second term, Theodore Roosevelt was elected President in his own right in 1904. He declared his adherence to the two-term tradition in a statement issued on the night of his election victory: On the 4 th of March next I shall have served three and a half years and this ... constitutes my first term. The wise caution which limits the President to two terms regards the substance and not the form; and under no circumstances will I be a candidate for or accept another nomination. Roosevelt kept his promise, retiring in 1908, but dissatisfaction with his chosen successor, William Howard Taft (1909-1913), led the former President to run again in 1912, explaining that in 1904 he had meant to say he would not seek a third consecutive term. Denied the Republican nomination, Roosevelt ran as the Progressive Party candidate, thus dividing the Republican vote and guaranteeing the election of Democratic nominee Woodrow Wilson. The Democratic National Convention responded to Theodore Roosevelt's third-party bid by adopting a plank in its 1912 platform that called for \"an amendment to the Constitution making the President of the United States ineligible to reelection.\" Following the election, the Democratic-controlled 62 nd Congress moved to implement the proposal, and a single-term amendment passed the Senate by the requisite two-thirds majority in February 1913, even before Wilson's inauguration. The Senate resolution was referred to the House Judiciary Committee, but no further action was taken on it, despite suggestions that it enjoyed substantial support in the House of Representatives, and it expired with the end of the 62 nd Congress on March 4, 1913. The reason the amendment stalled was not explained until 1916, when it was revealed Wilson himself had written to a trusted Representative in February relating his opposition to the single-term amendment. When the House Democratic leadership learned of the President-elect's opinion, they bowed to his wishes and shelved the amendment. According to one historian, Wilson himself contemplated running for a third term eight years later, in 1920. Although crippled by a stroke suffered in October 1919, the President may have envisioned his third-term candidacy as an opportunity for a national referendum on his plan for the League of Nations, which had been stalled in the Senate for more than a year. Beyond discussion among Democratic Party leaders, nothing came of these suggestions. The lack of follow-through is attributed variously to rumors of Wilson's ill health, the influence of the two-term tradition, a robust succession struggle within the Democratic Party, and anxieties that a referendum on the League would lead to repudiation of the party by the voters. Although the 1920 Democratic National Convention required 44 ballots before it picked James M. Cox as the party's standard-bearer, President Wilson's name was never placed in nomination. None of Wilson's three immediate successors served two full terms. Warren Harding (1921-1923) died in office in 1923; he was succeeded by Calvin Coolidge (1923-1929), who was elected in his own right in 1924, but declined to seek a second term in 1928, and ultimately by Herbert Hoover (1929-1933), who was defeated for reelection in 1932. One account asserts, however, that Coolidge (1923-1929) was actively interested in the Republican nomination in 1928, had it been offered to him. He continued to enjoy broad popularity as the election approached, and a substantial number of party leaders and journalists continued to suggest his candidacy. According to Charles Stein, writing in The Third - Term Tradition , the President refused to commit himself unless he was sure of an overwhelming demand. As the level of support for an additional Coolidge candidacy stalled, the President ended speculation with a characteristically laconic statement, which he issued without additional comment on August 2, 1927: \"I do not choose to run for President in 1928.\" The two-term mold was finally broken by President Franklin D. Roosevelt in 1940. Following his 1936 landslide reelection to a second term, it seemed likely that he would retire in 1940. Although some supporters urged him to seek a third term, the President refused to commit himself, and, according to some historians, he may have been undecided at the time. In September 1939, the political landscape was transformed by the outbreak of war in Europe. The conflict erupted into a world crisis in the spring and summer of 1940, as Germany first overwhelmed Denmark and Norway in April, and then attacked France, Belgium, the Netherlands, and Luxembourg in May, crushing resistance in less than six weeks. By the time the Democratic National Convention opened on July 15, the President had decided to accept his party's nomination, but only if it came in the form of a draft. With characteristic indirection, Roosevelt authorized Senator Alben Barkley to declare from the convention platform that \"[h]e (President Roosevelt) wishes in all earnestness and sincerity to make it clear that all the delegates to this Convention are free to vote for any candidate.\" The President's ambiguous statement was taken, as he intended it would be, as a signal that he would accept the nomination. The convention erupted in boisterous pro-Roosevelt demonstrations, and the President was duly nominated on July 17 by an overwhelming margin. Little more than a year after President Roosevelt's 1940 reelection, the United States was thrust into the war following a surprise Japanese attack on U.S. military installations at Pearl Harbor in Hawaii, as well as on other American possessions in the Pacific. As the election of 1944 approached, the nation was deeply involved in World War II, and the injunction \"don't change horses in the middle of a stream\" seemed even more compelling than in 1940. Roosevelt, whose coronary artery disease and failing general health were concealed from the public, was elected to a fourth term in November. Exhausted by years of stress and overwork, however, he succumbed to what was believed to be a cerebral hemorrhage on April 12, 1945, less than three months after his fourth inaugural. President Roosevelt was succeeded in 1945 by his Vice President, Harry S. Truman. Within two years, in 1947, the 80 th Congress had proposed the Twenty-Second Amendment to the states, and in 1951, the states completed the ratification process. The amendment, examined in detail later in this report, provides that no person shall be elected more than twice to the presidency and also sets additional conditions of service for Presidents who succeed to the unfinished terms of their predecessors. While Truman was not covered by the amendment, all 12 Presidents who have served since the amendment took effect have been subject to its provisions. Of these, five—Dwight Eisenhower (1953-1961), Ronald Reagan (1981-1989), William (Bill) Clinton (1993-2001), George W. Bush (2001-2009), and Barack Obama (2009-2017)—each served two full consecutive terms, while Truman's time in office was just three months short of a full eight years. These \"standard\" two-term presidencies contributed to lengthening the average tenure in office to just under 74 months for the period between the accession of Truman in 1945 and the inauguration of Donald Trump in 2017, making this the longest average tenure for any of the periods covered in this report since the early days under the Constitution. Embedded within this period, however, were two volatile decades: the years between 1961 and 1981, which witnessed a rate of presidential turnover comparable to that of the 1840s and the 1850s. Five Presidents served in the space of 20 years: John Kennedy (1961-1963), Lyndon Johnson (1963-1969), Richard Nixon (1969-1974), Gerald Ford (1974-1977), and Jimmy Carter (1977-1981). The reasons for their rapid succession in office tend to mirror those experienced by the chief executives of the similarly turbulent 1840s and 1850s: Kennedy was assassinated, but his four immediate successors arguably experienced the consequences of a series of adverse political and economic developments. More than a century after the Twelfth Amendment set qualifications for the vice presidency, the Twentieth, Twenty-Second, and Twenty-Fifth Amendments altered some of the original constitutional and early legislative provisions governing presidential and vice presidential terms and tenure. The Twentieth Amendment was proposed by Congress in 1932, and its ratification by the states was completed in 1933. It provided the first change in any aspect of presidential or vice presidential term and tenure since the Twelfth Amendment, in 1804, extended qualifications for the President to the Vice President, which was arguably only a technical adjustment made necessary by the amendment's establishment of separate votes for the two offices. From 1789 until 1937, presidential and vice presidential terms ended on March 4 of every year following a presidential election. This date, which originally applied to the opening day of the First Congress, was confirmed and extended to presidential and vice presidential terms of office by the Second Congress in 1792. This arrangement led to a four-month interval between the choice of presidential electors, which was set by Congress in 1845 for Tuesday after the first Monday in November \"of the year in which they are to be appointed….\" and the opening of the new Congress and the presidential inauguration, both of which, as noted above, occurred on March 4 of the following year. Congressional sessions were also connected with the presidential term of office. Article I, Section 4, clause 2 of the Constitution required Congress to assemble \"at least once in every Year, and such meeting shall be on the first Monday in December, unless they shall by Law appoint a different Day.\" As a result, the first session of most Congresses did not convene until more than a year after election day, and the second session, also known as the short session, usually convened after elections for its successor had been held, and continued through March 4. These \"lame duck\" sessions were increasingly criticized in the 20 th century, as they included Members of both chambers who had retired or had been defeated for reelection, and occasionally were dominated by political parties that had been repudiated at the November elections. Similarly, as the powers and responsibilities of the presidency expanded, there was increasing demand that the four-month presidential transition be shortened. Although the Senate passed an amendment resolution ending the lame duck session as early as 1923, efforts to change the dates for congressional and presidential terms of office were stalled in the House of Representatives throughout the decade of the 1920s. In addition to the lame duck session arguments noted above, proponents of the amendment favored elimination of time limits on the short session on the grounds that it promoted obstructionism in both chambers, and particularly, filibusters in the Senate. Opposition to the measure centered on the congressional term: opponents of both parties feared it would eliminate what they regarded as a politically salubrious \"cooling off period\" after the elections. By convening the new Congress just two months after elections, rather than 13 months, as under the then-current system, the passions generated during the election campaign would, they suggested, still be fresh, and might negatively affect the flow of legislative business. Further, they opposed longer, or continuous, congressional sessions on the grounds that these would present opportunities for the abuse of legislative power. House Speaker Nicholas Longworth spoke for many opponents when he stated the following (in the lame duck third session of the 71 st Congress): Under this resolution ... it will be entirely possible for Congress to be in session perpetually from the time it convenes.... It seems to me obvious that great and serious danger might follow a perpetual two years' session of the Congress. I am not one of those who says the country is better off when Congress goes home, I do not think so, but I do think that the Congress and the country ought to have a breathing space at least once every two years. By 1932, however, party control of the House in the 75 th Congress had shifted, and a bipartisan coalition was able to bring a proposal to the floor in both chambers. The amendment, which was proposed to the states on March 2, 1932, included the following provisions: Terms of the President and Vice President would end on January 20 of the year following a presidential election. Terms of Representatives and Senators would end at \"noon on the 3d day of January.\" Congress would meet at least once annually, at \"noon on the 3d day of January,\" unless Congress appointed a different day by law. If the President elect died, the Vice President elect would become the President-elect. Congress was empowered to provide by law for cases of vacancy or deadlock connected with the contingent election process. In addition, although not included in the amendment's text, one of its intended effects was that the counting of electoral votes cast in presidential elections, declaration of the election results, and contingent election of the President and Vice President, if necessary, would be conducted by the newly elected Congress, rather than by the lame duck session. The ratification process proceeded with considerable speed, and was completed on January 23, 1933, when the 36 th state approved it. By May of the same year, the 48 th , and last, state legislature added its approval. The Twentieth Amendment became effective for the legislative branch in 1935, when the 74 th Congress convened on January 4, and for the President and Vice President in 1937, when President Roosevelt and Vice President John Garner were inaugurated on January 20. In 1946, the Republican Party regained control of both houses of Congress for the first time in 16 years. The GOP had previously committed itself to term limitations on the presidency \"[t]o insure against the overthrow of our American system of government\" in its 1940 national convention platform, while the party's 1944 manifesto called for a single six-year term for the chief executive. The question of presidential tenure was thus high on the agenda of the 80 th Congress when it convened on January 3, 1947, and resolutions proposing constitutional amendments that would impose term limitations on future Presidents were introduced in both chambers when Congress assembled. Debate on the amendment proceeded generally on partisan lines. Clearly the most important factor in consideration of the amendment was the unprecedented example of President Roosevelt's 12 years in office. Between the successive crises of the depression and World War II, and President Roosevelt's activist conception of the office, the power and authority of the presidency had expanded well beyond its traditional boundaries. Supporters claimed their goal was the prevention of excessive concentration of power in the hands of future Presidents. Opponents argued that the proposal was a case of overkill: the informal two-term limit had been set aside by the President (with the approval of a substantial majority of the voters, they noted) only because of the extraordinary circumstances surrounding World War II. It was, they asserted, a restriction of democracy, depriving the people of their right to elect any qualified candidate they chose. One nationally prominent journalist of the era described the amendment as \"'an act of retroactive vindictiveness' [against Franklin Roosevelt]. They could never beat him while he was alive, [Elmer] Davis said, so they beat him after he was dead.\" On the other hand, one scholar of the presidency noted that the idea of presidential term limits was not new at that time: more than 270 amendments to circumscribe presidential tenure had been introduced between 1789 and 1947. The House took the lead on the question, moving quickly after the new Congress assembled. Two approaches to the question of presidential term limitations emerged: H.J.Res. 25, introduced by Representative Everett M. Dirksen, sought a single six-year term, while H.J.Res. 27, offered by Representative Earl C. Michener, proposed a limit of two four-year terms. On February 5, the Judiciary Committee reported H.J.Res. 27 favorably, and the proposal was taken up by the full House on February 6. Debate on the resolution itself was limited to two hours, and to five minutes each on proposed amendments, after which the House voted to approve H.J.Res. 27 on February 6, 1947, by a vote of 285 to 121. House debate fell largely along party lines; the amendment has largely been characterized as a \"Republican\" measure, and it is worth noting that the Republican caucus in the House was united in support of the resolution. On the other hand, one historian points out that the votes of 47 mostly southern Democrats provided the resolution the necessary two-thirds majority required by the Constitution, so there was, in fact, a level of bipartisan support; most Democratic \"yes\" votes came from southern or border states. Senate consideration of the amendment proceeded at a more measured pace than in the House. The House measure, H.J.Res. 27, which the Senate used as the vehicle for its deliberation, was reported from the Senate Judiciary Committee on February 21; it differed from the House resolution by requiring that the amendment be submitted to ad hoc state conventions for ratification, rather than to the state legislatures—Article V of the Constitution provides for either method of ratification, at the discretion of Congress. The argument was that ad hoc conventions, elected for the single purpose of considering the amendment, would be more familiar with, and responsive to, public opinion on the proposal. Secondly, the committee version included a prohibition on further presidential service of any person who had served more than 365 days in each of two terms. When the full Senate took up the amendment, both these provisions were stripped out, but the Senate approved an amendment by Senator Robert Taft that clarified procedures governing the number of times a Vice President who succeeded to the presidency might be elected. Taft's amendment included the now-familiar provision that if a Vice President becomes President in the latter two years of a predecessor's term, he or she is eligible to be elected to two full terms, for a total of 10 years' service. If, however, the Vice President serves more than two years of a predecessor's term, he or she may be elected only to a single subsequent term. The Senate passed the resolution, as amended, by a vote of 59 to 23 on March 12. As with the House, there was substantial Democratic support for the measure: 16 Democratic Senators, mostly from southern and border states, joined all 43 Republicans present and voting to produce the necessary two-thirds majority. The 23 \"no\" votes were cast by Democrats. Although the Senate appointed conferees to resolve differences between the two versions of the bill, there is no evidence a conference committee met. On March 21, the House took up the Senate version, which, according to Representative Michener, had been \"considered informally before the full Judiciary Committee.\" The House, after additional debate, accepted the Senate's amendments to H.J.Res. 27 on March 21. The Senate version of the amendment, as agreed to in the House and proposed to the states, included the following provisions: No person could be elected to the office of President more than twice. Persons who had been President or acted as President for more than two years of their predecessor's term could be elected once. Persons who had been President or acted as President for less than two years of their predecessor's term could be elected twice. The amendment did not apply to any person serving as President when it was proposed, or when it was ratified. The amendment was proposed to the states for ratification by their legislatures on March 24, 1947. Minnesota became the 36 th state to ratify the proposal on February 27, 1951, and it was declared to be ratified and effective on March 1 of the same year. Since its ratification in 1951, the Twenty-Second Amendment has applied to six Presidents who have been elected twice to the Presidency: Dwight D. Eisenhower (1953-1961), Ronald W. Reagan (1981-1989), William (Bill) J. Clinton (1993-2001), George W. Bush (2001-2009), and Barack H. Obama (2009-2017). In addition, Richard M. Nixon (1969-1974), who resigned from office under the threat of impeachment, was technically covered by the amendment's provisions, having been elected twice to the presidency. To date, two Presidents who succeeded to the presidency have been covered under the Amendment's provisions that govern succession to their predecessors' uncompleted terms: … and no person who has held the office of President, or acted as President, for more than two years of a term to which some other person was elected President shall be elected to the office of the President more than once. The first, Lyndon B. Johnson (1963-1969), succeeded to the presidency when John F. Kennedy was assassinated in November 1963. Under the provisions of the Twentieth Amendment, Johnson would have been eligible to be elected to two full terms, because he entered office more than halfway through his predecessor's term. On the other hand, Gerald R. Ford (1974-1977), the second Vice President to succeed to the presidency during this period, was eligible to be elected to only one full term in his own right, since he served more than two years of the term to which President Nixon had been elected. The Twenty-Second Amendment prohibits anyone from being elected President more than twice. The question has been asked, however, whether a President who was elected to two terms as chief executive could subsequently be elected Vice President and then succeed to the presidency as a result of the incumbent's death, resignation, or removal from office. Another version of this scenario questions whether a former President who had been elected twice could succeed to the office of chief executive from other positions in the line of presidential succession, such as the offices of Speaker of the House of Representatives, President pro tempore of the Senate, or positions in the Cabinet, as provided for in the Presidential Succession Act. This issue was raised initially during discussions of the Twenty-Second Amendment in 1960, when President Eisenhower was about to become the first President covered by its limitations. While the question may have been largely academic with respect to Eisenhower, due to his age and condition of his health, it was also raised again concerning former President Barack Obama, who left office in 2017 at the age of 55. Some commentators argue that the Twelfth Amendment's statement that \"no person constitutionally ineligible to the office of President shall be eligible to that of Vice-President\" ipso facto bars any former chief executive covered by the Twenty-Second Amendment from serving either as Vice President or succeeding to the presidency from any other line of succession position (i.e., the Speaker of the House, President pro tempore of the Senate, or the Cabinet). Others maintain, however, that the original intent of the Twelfth Amendment's language was only to apply the same qualifications of age, residence, and \"natural born\" citizenship to the Vice President as apply to the President, and that it has no bearing on eligibility to serve as President. Moreover, they maintain that the Twenty-Second Amendment's prohibition can be interpreted as extending only to eligibility for election , not service ; by this reasoning, a term-limited President could be elected Vice President, and then succeed to the presidency to serve out the balance of the term. Adherents of both positions, however, generally agree that anyone becoming President under any of these scenarios would be prohibited from running for election to an additional term. Assessing a related question, legal scholars Bruce Peabody and Scott Gant asserted in a 1999 article that a former President could also succeed to the presidency, or be \"acting President\" from the wide range of positions covered in the Presidential Succession Act. By their reasoning, a former President serving as Speaker of the House, President pro tempore of the Senate, or as a Cabinet officer would also be able to assume the office of President or act as President under the \"service vs. election\" interpretation of the Twenty-Second Amendment. The Constitution Annotated tends to support some version of this interpretation, but notes that many issues would need to be addressed if this situation ever occurred: The Twenty-Second Amendment has yet to be tested or applied. Commentary suggests, however, that a number of issues could be raised as to the Amendment's meaning and application, especially in relation to the Twelfth Amendment. By its terms, the Twenty-Second Amendment bars only the election of two-term Presidents, and this prohibition would not prevent someone who had twice been elected President from succeeding to the office after having been elected or appointed Vice-President. Broader language providing that no such person \"shall be chosen or serve as President ... or be eligible to hold the office\" was rejected in favor of the Ame ndment's ban merely on election (H.J.Res. 27, 80 th Cong., 1 st Sess. (1947)), (as introduced). As the House Judiciary Committee reported the measure, it would have made the covered category of former presidents \"ineligible to hold the office of President.\" (H.R. Rep. No. 17, 80 th Cong., 1 st Sess. at 1 (1947)). Whether a two-term President could be elected or appointed Vice President depends upon the meaning of the Twelfth Amendment, which provides that \"no person constitutionally ineligible to the office of President shall be eligible to that of Vice-President.\" Is someone prohibited by the Twenty-Second Amendment from being \"elected\" to the office of President thereby \"constitutionally ineligible to the office\"? Note also that neither Amendment addresses the eligibility of a former two-term President to serve as Speaker of the House or as one of the other officers who could serve as President through operation of the Succession Act. It seems unlikely that this question will be answered conclusively barring an actual occurrence of the as-yet hypothetical situation cited above. As former Secretary of State Dean Acheson commented when the issue was first raised in 1960, \"it may be more unlikely than unconstitutional.\" The Twenty-Fifth Amendment, which provides for several aspects of presidential succession and disability, also filled a gap in constitutional procedures that had existed since 1789. The amendment established procedures for filling vacancies in the vice presidency that have been implemented twice since the amendment's ratification in 1967. As noted previously in this report, the Constitution originally made no provision for filling vacancies in the vice presidency, but authorized Congress to provide for simultaneous vacancies in both executive offices. The Succession Act of 1792 (1 Stat. 240), passed by the Second Congress (1791-1793), addressed the issue, authorizing the President pro tempore of the Senate and the Speaker of the House, in that order, to act as President until a special election could be held to fill a presidential vacancy, unless the vacancy occurred late in the last full year of the incumbent's term of office. The act made no provision for vacancies in the vice presidency, an omission that continued in its subsequent revisions, the succession acts of 1881 (24 Stat. 1) and 1947 (61 Stat. 380). Consequently, the office of Vice President was vacant on 14 different occasions between 1809 and 1965, due to the death or resignation of various incumbents. These vacancies ranged in duration from 67 days, following John C. Calhoun's resignation to assume a Senate seat in December 1832, to 47 months, when John Tyler became President following the death of William Henry Harrison in 1841. During the 1950s, Congress considered proposals concerning presidential disability that were largely generated by concern over illnesses suffered by President Dwight Eisenhower during his two terms in office (1953-1961). These included a moderate heart attack, a mild stroke, and surgery for a partial obstruction of the President's intestine. Hearings on an amendment to provide for instances of presidential disability were held by the Senate Judiciary Committee's Subcommittee on Constitutional Amendments, chaired by Senator Estes Kefauver, in 1958 and 1959. No floor action was taken in either chamber on the question during this period. When Senator Kefauver, the chief advocate for constitutional action, died in August 1963, Senator Birch Bayh assumed leadership of succession and disability reform proponents in the Senate, in cooperation with Representative Emanuel Celler, chairman of the House Judiciary Committee. The assassination of President John F. Kennedy on November 22, 1963, shocked and traumatized the nation. In Congress, the President's death provided fresh impetus to congressional action on presidential succession and disability leading to proposal of the Twenty-Fifth Amendment to the Constitution. Although Vice President Lyndon B. Johnson succeeded without incident after Kennedy's death, the office of Vice President remained vacant for 14 months, until Senator Hubert Humphrey was elected in 1964 and inaugurated on January 20, 1965. Following President Johnson's November 27, 1963, address to a joint session of Congress, contemporary observers noted that his potential immediate successor, House Speaker John W. McCormack, was 71 years old, and that Senate President pro tempore Carl T. Hayden, second in the order of succession, was 86 and visibly frail. A consensus emerged that a vice presidential vacancy for any length of time constituted a dangerous gap in the nation's leadership during the Cold War, an era of international tensions and the threat of nuclear war. Senator Bayh introduced a constitutional amendment shortly after President Kennedy's death that provided new procedures for (1) presidential succession, (2) vice presidential vacancies, and (3) instances of presidential disability. Although the House did not act on the proposal in 1964, it was reintroduced the following year in both chambers early in the first session of the 89 th Congress. The proposal included in its nearly identical House and Senate versions (H.J.Res. 1 and S.J.Res. 1, respectively) the following provisions: Section 1 provided that the Vice President becomes President in \"case of the removal of the President from office or of his death or resignation.\" Section 2 provided that whenever the office of Vice President is vacant, the President nominates a successor \"who shall take office upon confirmation by a majority vote of both Houses of Congress.\" Section 3 provided that whenever the President declares he is disabled and unable to discharge his duties, the Vice President serves as Acting President. Section 4 provided that whenever the Vice President and a majority of the Cabinet, or, alternatively, the Vice President and a disability review body established by law, transmits to the Speaker of the House of Representatives and the President pro tempore of the Senate a declaration that the President is incapacitated, the Vice President becomes Acting President. When the President transmits a message to the same officers declaring that no inability exists, the President resumes the powers and duties of the office. If, however, the Vice President and a majority of either the Cabinet or the Vice President and the disability review body, if one has been established, disputes the President's message, then Congress decides the issue within a limited period of time. A two-thirds vote of both houses of Congress is necessary to sustain the Vice President's judgment that the President remains impaired; otherwise the President resumes the powers and duties of the office. The proposed amendment moved through the relevant committees and came to the floor of both chambers early during the first session of the new Congress. A bipartisan consensus emerged in favor of Sections 1 through 3; Section 4, however, generated controversy that centered on its provisions governing disputed presidential disability. Opponents asserted that these procedures were too detailed to be included in a constitutional amendment, and that the question of disability would be better addressed in the proposed amendment by authorizing Congress to provide by law for such instances. Defenders responded by noting that leaving the disability review function to legislation, and dependent on a simple majority in both houses of Congress, might subject this critical issue to political manipulation: better to \"set it in stone\" in the Constitution. Senator Everett Dirksen was the chief proponent of the legislative route for disability procedures, but his amendment to the resolution was rejected by a substantial margin. The Senate ultimately passed S.J.Res. 1 without the Dirksen amendment on February 13, 1965, by a vote of 72 to 0, followed by House passage of H.J.Res. 1 on April 13, by a vote of 368 to 29. A conference reconciled minor differences between the two versions, and the amendment was officially proposed to the states on July 6. Ratification proceeded quickly in the states; Nevada became the 38 th state to ratify on February 10, 1967, and the Administrator of General Services declared the amendment to be in effect on February 23 of the same year. Both Sections 1 and 2 of the Twenty-Fifth Amendment, which relate to presidential and vice presidential term and tenure, have been implemented since its ratification in 1967. In the case of Section 1, no direct action beyond swearing in the new President was necessary on August 9, 1974, when President Richard Nixon resigned while facing almost certain impeachment resulting from the revelation of his involvement in events connected with the Watergate break-in and subsequent cover-up. The Vice President, former Representative Gerald R. Ford, became President, and was inaugurated without incident when he took the oath of office the same day. Section 2 of the Twenty-Fifth Amendment has been implemented twice since its ratification, in 1973, with the nomination and confirmation of Representative Gerald R. Ford as Vice President, and in 1974, with the nomination and confirmation of New York Governor Nelson A. Rockefeller as Vice President. The provisions of Section 2 of the Twenty-Fifth Amendment were invoked twice within a few years of the amendment's ratification. Between 1973 and 1974, the circumstances surrounding the Watergate break-in of 1972 resulted in what amounted to back-to-back implementations of the section within the space of 16 months, as the vice presidency became vacant twice, first due to resignation, and second, due to succession of the Vice President to the presidency. As the events resulting from the Watergate break-in unfolded in June 1973, an unrelated federal investigation of political corruption in Baltimore County, Maryland, uncovered evidence of illegal activities by Vice President Spiro T. Agnew during and after his service both as county executive and as Governor of Maryland from 1967 to 1969. After a grand jury was convened, the Vice President entered into negotiations with the Justice Department and President Nixon's counsel, as a result of which he agreed to resign and plead \"no contest\" to one count of tax evasion, in return for a fine and three years of probation. Agnew resigned the vice presidency on October 10, 1973. On October 12, the President nominated the House Republican Leader, Representative Gerald Ford, to be Vice President, thus activating Section 2 of the amendment. The nomination was referred in the House to the Committee on the Judiciary, and in the Senate to the Committee on Rules and Administration; the two chambers agreed on consecutive hearings, with the Senate proceeding first. The Senate Rules Committee hearings began on November 1, 1973, and continued in both public and executive sessions until the committee voted unanimously to report the nomination favorably to the full Senate on November 20. The House Judiciary Committee opened its first session on November 15, immediately following the Senate's last public hearings session. House hearings continued until November 26, and on November 29, the committee voted 30-8 to report the nomination favorably to the full House. After two days of floor debate, the Senate voted on November 27 by a margin of 93 to 2 to confirm Ford as Vice President. The House voted to confirm Ford on December 6, after one day of debate, by a vote of 387 to 35. Representative Ford took the oath as Vice President before a joint session of Congress in the House chamber the same day. The second, and to date the only other, implementation of Section 2 occurred less than a year later. On August 9, 1974, Richard Nixon resigned the presidency, after being confronted with the near certainty of impeachment and possible removal from office due to his role in the events associated with the Watergate break-in. Gerald Ford was immediately sworn in as President, thus creating a vacancy in the vice presidency, for which he nominated former New York Governor Nelson Rockefeller on August 20. Congress adopted the procedures used in consideration of the Ford nomination, but the hearing schedules were complicated by the press of legislative business and the fact that 33 members of the House Judiciary Committee and 2 members of the Senate Committee on Rules and Administration were running for reelection in the midterm congressional elections held November 2, 1974. An additional factor in the delay was the fact that, as a scion of one of America's wealthiest families, Governor Rockefeller's personal finances were extremely complex and required a lengthy investigation. Given these factors, the Senate hearings were conducted in two widely separated installments, from September 23 to 26, and again between November 13 and 15. The Rules Committee voted unanimously to report the nomination to the full Senate on November 22. The House again scheduled consecutive hearings, convening the Judiciary Committee from November 21 to 26, and again between December 2 and 4. The committee voted 26 to 12 to report the nomination favorably on December 12. As was the case with the Ford nomination, floor debate on the confirmation of Nelson Rockefeller to be Vice President was somewhat anticlimactic. Most of the substantive points in favor of, or in opposition to, the nominee had been thoroughly examined in the hearings process and were largely disposed of in the Rules and Judiciary Committee reports. The Senate voted 90 to 7 to confirm Rockefeller on December 10, while the House confirmed the nomination by a closer margin, 287 to 128, on December 19. Vice President Rockefeller was inaugurated in the Senate, with House Members in attendance, the same day. The question of presidential and vice presidential terms and tenure has had a sometimes-dramatic history in the more than two centuries that have passed since the Constitutional Convention settled on the basic questions of term length and reelection. As this report documents, various circumstances contributed to what approached a de facto one-term presidential tradition for much of the 19 th century, while during this same period a durable body of opinion favored a constitutional amendment to formalize the single term. In the 20 th century, three constitutional amendments made incremental changes in certain conditions of presidential tenure, most notably the Twenty-Second Amendment's establishment of limits on the number of times a person could be elected President of the United States. In recent years, however, these issues have not been the subject of much debate. Certain questions do occasionally rise to command some degree of public attention, including speculation on the applicability of the Twenty-Second Amendment to Presidents who have been elected twice, or proposals for constitutional changes that would repeal the amendment or establish a single six-year presidential and vice presidential term. By design, however, constitutional amendments must pass a number of demanding tests before they can be incorporated in the nation's fundamental charter. Those few of the many hundreds of amendments proposed that were successful arguably owe their success to one or more of the following developments: They incorporate a reform that has been considered and debated over a period of time, and has gradually gained the approval of a contemporaneous majority of the public that includes a wide range of social, cultural, and political support from diverse elements around the nation. They have been viewed as a remedy to a sudden and traumatic event in the nation's life that requires a swift and definitive solution. They have received the steady support of generally bipartisan leadership in both houses of Congress over the extended periods generally necessary for the legislature to consider and propose amendments for consideration by the states. Until or unless any proposals to change the existing conditions of presidential terms and tenure meet one or more of these requirements, there is arguably little momentum for their moving beyond the realm of advocacy and speculation.", "summary": "The President and Vice President's terms of office are prescribed by the Constitution and four of its amendments. Article II, Section 1, of the Constitution, which came into effect with the convening of the First Congress and inauguration of the first President and Vice President in 1789, sets the terms of these two officers at four years, and does not prohibit their reelection. Four amendments to the Constitution, ratified between 1804 and 1967, have added further conditions to presidential terms and tenure. The Twelfth Amendment, ratified in 1804, extended the qualifications for Presidents to the vice presidency. Section 1 of the Twentieth Amendment, ratified in 1933, sets the expiration date for these terms at noon on January 20 of each year following a presidential election. The Twenty-Second Amendment, ratified in 1951, limits presidential tenure: no person may be elected President more than twice. It also specifies that Vice Presidents who succeed to the office may be elected to two full terms if they served less than two years of the term of the President they succeeded. If they served more than two years of the predecessor's term, they are eligible for election to only one additional term. The Twenty-Fifth Amendment, ratified in 1967, does not directly affect terms and tenure of the President and Vice President, but provides in Section 1 that the Vice President \"shall become President\" on the death, resignation, or removal from office of the President. This section clarifies original constitutional language on the status of a Vice President who succeeds to the presidency. Section 2 authorizes the President to make nominations to fill vacancies in the office of Vice President, subject to approval by a majority vote of both houses of Congress, a contingency not covered in the original language of the Constitution. The length of the President's term and the question of whether Presidents should be eligible for reelection were extensively debated in 1787 at the Constitutional Convention. Late in the proceedings, the delegates settled on a four-year term for both President and Vice President but did not place a limit on the number of terms a President could serve. Following a precedent set by President George Washington (1789-1797), and reinforced by Thomas Jefferson (1801-1809), however, U.S. Presidents adhered to a self-imposed limit of two terms, a precedent that was observed for over 140 years. Although several Presidents during this period who had served two terms considered running for a third, Franklin Roosevelt (1933-1945) was the first to seek and be elected to both a third term, in 1940, and a fourth, in 1944. Following ratification of the four amendments cited above, additional amendment proposals to change the conditions of presidential terms and tenure were regularly introduced during the second half of the 20th century, but much less frequently to date in the 21st. Two categories of amendment predominated during this period: one variant proposed repeal of the Twenty-Second Amendment, thus permitting Presidents to be elected an unlimited number of times. Another category of proposed amendment would have extended the presidential and vice-presidential terms to six years, often in combination with a requirement limiting Presidents to one term. No measure to repeal the Twenty-Second Amendment or otherwise change the presidential term of office has been introduced to date in the 116th Congress. This report will be updated if events warrant.", "document_type": "crs"}
{"report": "This report addresses frequently asked questions related to the overtime provisions in the Fair Labor Standards Act (FLSA) for executive, administrative, and professional employees (the \"EAP\" or \"white collar\" exemptions). For a history of DOL regulations on the EAP exemptions, see CRS Report R45007, Overtime Exemptions in the Fair Labor Standards Act for Executive, Administrative, and Professional Employees , by David H. Bradley. For a broader overview of the FLSA, see CRS Report R42713, The Fair Labor Standards Act (FLSA): An Overview . This report proceeds in three sections. First, there is an overview of the main federal statute on overtime pay—the FLSA—and of defining and delimiting the EAP exemptions. Second, there is a discussion of the applicability of the EAP exemptions. Finally, there is information on the EAP exemptions in the 2019 proposed rule and the 2016 final rule (which was finalized but invalidated before it took effect). The FLSA, enacted in 1938, is the main federal law that establishes minimum wage and overtime pay requirements for most, but not all, private and public sector employees. Section 7(a) of the FLSA specifies that unless an employee is specifically exempted in the FLSA, he or she is considered to be a covered \"nonexempt\" employee and must receive pay at the rate of one-and-a-half times (\"time and a half\") the employee's regular rate for any hours worked in excess of 40 hours in a workweek. When the FLSA was enacted, Section 13(a)(1) provided an exemption, from both the minimum wage (Section 6) and overtime (Section 7) provisions of the act, for \"any employee employed in a bona fide executive, administrative, and professional capacity.\" Rather than define the terms executive, administrative, or professional employee, the FLSA authorizes the Secretary of Labor to define and delimit these terms \"from time to time\" by regulations . The general rationale for including the EAP exemption in the FLSA at the time of enactment was twofold. One, the nature of the work performed by EAP employees seemed to make standardization difficult and thus output of EAP employees was not as clearly associated with hours of work per day as it was for typical nonexempt workers. Two, bona fide EAP employees were considered to have other forms of compensation (e.g., above-average benefits, greater opportunities for advancement) not available to nonexempt workers. As mentioned, the Secretary of Labor is authorized to define and delimit the EAP exemptions. Including the first rulemaking on EAP exemptions in 1938, DOL has finalized nine rules. Although the determinations have changed over time, to qualify for an exemption currently under Section 13(a)(1) of the FLSA (i.e., not to be entitled to overtime pay), an employee generally has to meet three criteria: 1. The \"salary basis\" test: the employee must be paid a predetermined and fixed salary. 2. The \"duties\" test: the employee must perform executive, administrative, or professional duties. 3. The \"salary level\" test: the employee must be paid above the threshold established in the rulemaking process, typically expressed as a per week rate. To qualify for the EAP exemption, an employee must be paid on a \"salary basis,\" rather than on a per hour basis. That is, an EAP employee must receive a predetermined and fixed payment that is not subject to reduction due to variations in the quantity or quality of work. The salary must be paid on a weekly or less-frequent basis. Job titles alone do not determine exemption status for an employee. Rather, the Secretary of Labor, through issuance of regulations, specifies the duties that EAP employees must perform to be exempt from the overtime pay requirements of the FLSA. To qualify for the exemption for executive employees , all of the following job duties tests must be met: the employee's primary duty \"is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof\"; the employee \"customarily and regularly directs the work of two or more other employees\"; and the employee \"has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.\" To qualify for the exemption for administrative employees , both of the following job duties tests must be met: the employee's primary duty \"is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers\"; and the employee's primary duty \"includes the exercise of discretion and independent judgment with respect to matters of significance.\" To qualify for the exemption for professional employees , the following job duties test must be met: The employee's primary duty is the performance of work requiring \"knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction\"; or work \"requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.\" In addition to the duties test, an employee must earn above a certain salary in order to qualify for the EAP exemption. Since the FLSA was enacted and the first salary thresholds were established in 1938, the standard salary level thresholds have been raised nine times. Prior to 2004, the salary level for exemption varied by the type of employee and the type of duty test. In addition to the standard salary level, in 2004 DOL created a \"highly compensated employee\" (HCE) exemption in which employees earning an amount above the standard EAP salary threshold annually are exempt from overtime requirements if they perform at least one (among many) of the duties of an EAP employee. Because the FLSA applies to \"employees,\" individuals who are classified as independent contractors are not covered by the FLSA provisions. Yes. There is no general exemption for nonprofits in the FLSA or the EAP overtime regulations. Coverage for workers in nonprofits, like other entities, is determined by the enterprise and individual coverage tests. It is important to note, however, that charitable activities often associated with nonprofits do not count as ordinary commercial activities and thus do not count toward the $500,000 threshold for enterprise coverage under the FLSA. Only the commercial activities of nonprofits (e.g., gift shops, fee for service activities) count toward that threshold. On the other hand, even if a nonprofit does not meet the enterprise test for coverage, individual employees in an otherwise exempt nonprofit may be covered by the FLSA and the overtime rules if they engage in interstate commerce (e.g., regularly making out of state phone calls, processing credit card transactions). Yes. Both the FLSA and the EAP overtime regulations apply to institutions of higher education (IHEs). Due to other provisions of the FLSA, however, many personnel at IHEs are not eligible for overtime on the basis of the duties test alone and thus are unaffected by changes in the EAP standard salary level for exemption. For example, in general, bona fide teachers are exempt regardless of salary level and thus are not eligible for overtime. Similarly, academic administrative personnel are exempt from overtime pay if they are paid at least the EAP salary level threshold or are paid at least equal to the entrance salary for teachers at the same institution. On the other hand, some IHE workers would be affected by changes in the EAP salary level for exemption, including postdoctoral researchers who are employees, nonacademic administrative employees, and other salaried workers who are not covered by another exemption. Finally, like some public sector employers, but unlike private sectors employers, public IHEs may have the option of using compensatory time (i.e., a rate of 1.5 hours for each hour of overtime), rather than cash payment, to meet the obligation of providing overtime compensation. Yes. There is no blanket exemption from FLSA and overtime rule coverage for state and local governments. In general, employees of state and local governments are covered by the overtime provisions of the FLSA and thus are affected by EAP rulemaking updating the salary level threshold for the EAP exemptions. That said, other FLSA provisions apply to state and local governments that affect the applicability of overtime rules to these public sector employees. One way in which FLSA overtime rules apply differently in the public sector relates to the mode of compensation. State and local governments may have the option of using compensatory time, at a rate of 1.5 hours for each hour of overtime, rather than cash payment to meet the obligation of providing overtime compensation—an alternative not available to private sector employers. Additionally, some public sector employees are not covered by the FLSA. For instance, certain state and local employees—elected officials, their appointees and staff who are not subject to civil service laws, and legislative branch employees not subject to civil service laws—are not covered and will not be affected by changes to the EAP exemptions. The FLSA provides partial exemptions from the overtime requirements for fire protection and law enforcement employees. Specifically, fire protection and law enforcement employees are exempt from overtime pay requirements if they are employed by an agency with fewer than five fire protection or law enforcement employees. In addition, the FLSA allows overtime for all fire protection and law enforcement employees (not just those in small agencies) to be calculated on a \"work period\" (i.e., 7 to 28 consecutive days) rather than the standard \"workweek\" period (i.e., 7 consecutive 24-hour periods). Yes. The FLSA overtime provisions apply to employees in the U.S. territories—American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands. While the exemption for American Samoa has traditionally been set at 84% of the standard salary level, the other territories have been subject to the standard level. The application of the provisions of the FLSA is determined by the Congressional Accountability Act (CAA, P.L. 104-1 ), which was enacted in 1995 and extends some FLSA provisions, including overtime provisions, and other labor and workplace laws to congressional employees. In addition, the CAA created the Office of Compliance (now the Office of Congressional Workplace Rights), headed by a five-member Board of Directors (Board), to enforce the CAA. Rulemaking on the EAP exemptions would apply to congressional staff if the Board adopts them and Congress approves the Board's regulations, pursuant to the process established in the CAA. In other words, regulations adopted by the Board do not have legal effect until they are approved by Congress. When the Secretary of Labor issued new regulations to update the EAP exemptions in 2004, the Board adopted them; but thus far, Congress has apparently not approved the 2004 overtime regulations. Thus, overtime regulations that were adopted by the Board and approved by Congress in 1996, based on DOL regulations originally promulgated in 1975, currently apply to congressional staff. In the absence of action by the Board and by Congress, the provisions in any future final rules would not change the status quo. Congress can pass legislation to repeal rules or compel new rules. For example, prior to the publication of the 2016 final rule, legislation was introduced that would have prohibited the Secretary of Labor from enforcing the final rule and would have required additional analysis from the Secretary before the issuance of any substantially similar rule in the future. Given that rulemaking on the EAP exemptions typically includes increases in the salary level threshold for the EAP exemption, a greater number of employees become eligible for overtime pay with each upward adjustment of the salary level. To comply with the proposed regulations, employers would have several options, including the following: pay overtime to newly covered EAP employees if they work more than 40 hours in a workweek; increase the weekly pay for workers near the salary threshold to a level above it so that the EAP employees would become exempt and thus not be eligible for overtime pay; reduce work hours of nonexempt (covered) employees to 40 or fewer so that overtime pay would not be triggered; hire additional workers to offset the reduction in hours from nonexempt employees; or reduce base pay of nonexempt workers and maintain overtime hours so that base pay plus overtime pay would not exceed, or would remain close to, previous employer costs of base pay plus overtime. This section provides an overview of the main provisions of the 2019 proposed rule on EAP exemptions. For context, some provisions of the 2016 final rule are discussed. A final rule updating the EAP exemptions was published in the Federal Register on May 23, 2016, with an effective date of December 1, 2016. However, on November 22, 2016, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction blocking the implementation of the rule. On August 31, 2017, the U.S. District Court for the Eastern District of Texas ruled that DOL exceeded its authority by setting the threshold at the salary level in the 2016 final rule ($913 per week) and thus invalidated it. Subsequently, DOJ appealed that decision to the U.S. Court of Appeals for the Fifth Circuit, which granted DOJ's motion to hold the appeal in abeyance until DOL issued new rulemaking on the EAP salary level. Thus, DOL is currently enforcing the EAP regulations in effect on November 30, 2016, which include a standard salary level of $455 per week. DOL issued a request for information (RFI) related to the EAP exemptions on July 26, 2017, seeking information from the public to assist in formulating a proposal to revise the exemptions. On March 22, 2019, a Notice of Proposed Rulemaking (NPRM) was published in the Federal Register to define and delimit EAP exemptions. The proposed rule would not only revise the regulations on the EAP exemptions but would also formally rescind the 2016 final rule. Such a rescission would provide that if any or all of the substantive provisions of the 2019 rule were invalidated or not put into effect, the EAP regulations would revert to those promulgated in the 2004 final rule. Due to the invalidation of the 2016 final rule (discussed above), DOL currently enforces the provisions of the 2004 final rule. The main changes to the EAP exemptions in the 2019 proposed rule, as summarized in Table 1 , include the following: an increase in the salary level test from the current $455 per week ($23,660 annually) to $679 per week ($35,308 annually); an increase in the annual salary threshold for the HCE exemption from $100,000 to $147,414; an allowance that up to 10% of the standard salary level may be comprised of nondiscretionary bonuses, incentive payments, and commissions; a salary level of $455 per week for the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands, and of $380 in American Samoa; and an increase in the \"base rate\" weekly salary level for employees in the motion picture industry from $695 per week to $1,036 per week. Since the FLSA was enacted in 1938, the salary level threshold has been increased eight times, including the proposed 2019 increase. Each of the previous increases have occurred through intermittent rulemaking by the Secretary of Labor, with periods between adjustments ranging from 2 years (1938–1940) to 29 years (1975–2004). Since 1938, measures of the salary level have fluctuated according to DOL's identification of data sources most suitable for studying wage distributions and the department's determinations of the proportion and types of workers who should be below salary thresholds, as well as its determinations of whether regional, industry, or cost-of-living considerations should be factored into salary tests. Starting with the 2004 final rule, DOL has used survey data from the Current Population Survey (CPS) in determining the salary level for the EAP exemptions, albeit with different methodological choices. Effective January 2020 (approximately), the standard salary level threshold would equal the 20 th percentile of weekly earnings of full-time non-hourly workers in the lowest-wage Census region, which in 2019 is the South, and/or in the retail sector nationwide. In 2020, about 20% of full-time salaried workers in the South region and/or the retail sector nationwide are estimated to earn at or below $679 per week ($35,308 annually). Effective January 2020 (approximately), the HCE salary level for the EAP exemptions would equal the annual earnings equivalent of the 90 th percentile of the weekly earnings of full-time non-hourly workers nationally. In 2020, 90% of full-time non-hourly workers are estimated to earn at or below $147,414 per year. Effective January 2020 (approximately), the salary level for the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands would be $455 per week, and in American Samoa it would be $380 per week. Except for American Samoa, this would depart from past regulations by establishing a salary threshold for the territories below the standard level. Effective January 2020 (approximately), the motion picture industry employee salary level for the EAP exemption would be $1,036 per week. This level was derived by increasing the previous threshold ($695 per week) proportionally to the increase in the standard salary level. This would continue a special salary test created in 1953 for the motion picture industry that provides an exception to the \"salary basis\" test. Specifically, employees in the motion picture industry may be classified as exempt if they meet the duties tests for EAP exemption and are paid a \"base rate\" (rather than on a \"salary basis\") equal to the salary level for this exemption. The 2019 proposed rule would implement a commitment by DOL to update the EAP salary level thresholds every four years by submitting an NPRM for comment. If the 2019 proposed rule is finalized, DOL would publish its first proposed update on January 1, 2023, and subsequent updates every four years thereafter. The future salary level updates would be based on the same data source (CPS) and methodology of the salary levels established in the 2019 proposed rule: the standard salary level would be adjusted to the 20 th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census region and/or in the retail sector, the HCE salary level threshold would be adjusted to the 90 th percentile of annual earnings of full-time non-hourly workers nationally, and the quadrennial NPRM would seek comment on whether to update the salary level for the territories established in the 2019 proposed rule. The 2019 proposed rule would expand overtime coverage to EAP employees through a higher salary level threshold rather than through additional classes of employees. As such, EAP employees making between $455 per week (the current effective level) and the new rate of $679 per week in 2019 would likely become nonexempt (i.e., covered) by the overtime provisions and entitled to overtime pay for hours worked in excess of 40 per workweek. It is difficult to project the number of employees currently exempt under the EAP exemptions who would no longer be exempt under the 2019 proposed rule. This is due in part to uncertainty about potential employer responses, such as increasing salaries above the new threshold to maintain exemption for EAP employees. DOL estimates, with caveats, that approximately 4.9 million workers would be affected by the proposed rule. DOL identifies two groups in particular that would be affected—newly covered workers and workers with strengthened protections. Specifically, DOL estimates the following: In the first year under the provisions of the 2019 proposed rule, about 1.3 million EAP employees would become newly entitled to overtime pay due to the increase in the salary threshold: about 1.1 million employees in this group meet the duties test for the EAP exemption but earn between the current standard salary threshold ($455 per week) and the proposed threshold ($679 per week); and an additional 201,000 employees in this group meet the HCE duties test for exemption, but not the standard test, and earn at least the current HCE salary threshold ($100,000 per year) but less than the proposed threshold ($147,414 per year). An additional 3.6 million workers would receive \"strengthened\" overtime protections, including the following: An additional 2.0 million white collar workers who are paid on a salary basis and earn between the current salary threshold of $455 per week and the proposed threshold of $679 per week but do not meet the EAP duties test (i.e., they perform nonexempt work but might be misclassified) would gain overtime protections because their exemption status would not depend on the duties test. In other words, this group of workers would gain overtime coverage because the higher salary threshold would create a clearer line exemption test and reduce misclassification for exemption purposes. About 1.6 million salaried workers in blue collar occupations whose overtime coverage would have been clearer with the higher salary threshold. As DOL notes, this group of workers should currently be covered by overtime provisions but may not be due to worker classification. By comparison, DOL estimated that in the first year under the provisions of the 2016 final rule, approximately 13.1 million workers would have been affected. This total would have included about 4.2 million EAP employees who would have become newly entitled to overtime pay due to the increase in the salary threshold and an additional 8.9 million workers who would have received \"strengthened\" overtime protections. The data in Table 2 provide a summary of the estimated numbers of affected workers under the 2019 proposed rule and the 2016 final rule.", "summary": "The Fair Labor Standards Act (FLSA), enacted in 1938, is the main federal law that establishes general wage and hour standards for most, but not all, private and public sector employees. Among other protections, the FLSA establishes that covered nonexempt employees must be compensated at one-and-a-half times their regular rate of pay for each hour worked over 40 hours in a workweek. The FLSA also establishes certain exemptions from its general labor market standards. One of the major exemptions to the overtime provisions in the FLSA is for bona fide \"executive, administrative, and professional\" employees (the \"EAP\" or \"white collar\" exemptions). The FLSA grants authority to the Secretary of Labor to define and delimit the EAP exemption \"from time to time.\" To qualify for this exemption from the FLSA's overtime pay requirement, an employee must be salaried (the \"salary basis\" test); perform specified executive, administrative, or professional duties (the \"duties\" test); and earn above an established salary level threshold (the \"salary level\" test). In March 2019, the Secretary of Labor published a Notice of Proposed Rulemaking (NPRM) to make changes to the EAP exemptions. The 2019 proposed rule would become effective around January 2020. The major changes in the 2019 proposed rule include increasing the standard salary level threshold from the previous level of $455 per week to $679 per week and committing the Department of Labor (DOL) to updating the EAP exemptions every four years through the rulemaking process. The 2019 proposed rule does not change the duties and responsibilities that employees must perform to be exempt. Thus, the 2019 proposed rule would affect EAP employees at salary levels between $455 and $679 per week in 2020. DOL estimates that about 4.9 million workers would be affected in the first year, including about 1.3 million EAP employees who would become newly entitled to overtime pay and an additional 3.6 million workers who would have overtime protection clarified and thereby strengthened. This report answers frequently asked questions about the overtime provisions of the FLSA, the EAP exemptions, and the 2019 proposed rule that would define and delimit the EAP exemptions.", "document_type": "crs"}
{"report": "This report provides background information on the types of water supply and wastewater treatment projects traditionally funded by the federal government and the several existing programs to assist communities with water supply and wastewater treatment. For more than four decades, Congress has authorized and refined several programs to help communities address water supply and wastewater problems. The agencies that administer these programs differ in multiple ways. For example, in terms of funding mechanisms, projects developed by the Bureau of Reclamation (Reclamation) and the U.S. Army Corps of Engineers (USACE) typically require direct, individual project authorizations from Congress. In contrast, standing program authorizations provide project funding for other agencies, including the Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the Department of Commerce, and the Department of Housing and Urban Development (HUD). The key practical difference is that with the individual project authorizations there is no predictable assistance, or even guarantee of funding after a project is authorized, because funding must be secured each year in the congressional appropriations process. The programs, on the other hand, have set program criteria, are generally funded from year to year, and provide a process under which project sponsors compete for funding. In terms of scope and mission, the primary responsibilities of USACE are to maintain inland navigation, provide for flood and storm damage reduction, and restore aquatic ecosystems, while EPA's mission relates to protecting public health and the environment. Further, the Department of Commerce and HUD focus on community and economic development. Likewise, the specific programs discussed in this report—while all address water supply and wastewater treatment to some degree—differ in important respects. Some are national in scope (those of USDA, EPA, and the Department of Commerce, for example), while others are regionally focused (Reclamation's programs and projects). Some focus primarily on urban areas (HUD), some on rural areas (USDA). For each of the projects and programs discussed, this report describes purposes, financing mechanisms, eligibility requirements, recent funding, and statutory/regulatory authority. The report does not address special projects and programs aimed specifically at assisting Indian Tribes, Alaskan Native Villages, and c olonias , or other regional programs such as those associated with the Appalachian region or U.S. Territories. This report focuses on municipal and industrial (M&I) water and wastewater activities. This report does not address projects and programs that involve irrigation, flood control, power supply, and recreation. However, in some cases (noted below), a federal program (e.g., Reclamation) may primarily support one or more of these other objectives while providing some support for M&I activities, even if only incidentally. Other federal authorities of USDA's Rural Utilities Service, Reclamation, and USACE may be available to assist with the provision of emergency water and wastewater needs, such as improving access to water supplies during a drought. These authorities are not discussed in this report. Table 1 summarizes financial and other key elements of the projects and program activities discussed in this report. As indicated in the table, federal funding for the programs and projects discussed in this report varies greatly. Collectively, congressional funding for these programs in recent years has been somewhat eroded by overall competition among the many programs that are supported by discretionary spending, despite the continuing pressure from stakeholders and others for increased funding. While federal support for some traditional financing tools—project grants, formula grants, capitalization grants, direct and guaranteed loans—has declined, policymakers have begun to consider alternative financing approaches, such as trust funds, new types of federal loans, and options to encourage private sector investments in water infrastructure through public-private partnerships. Supporters of some of these newer ideas (e.g., the \" Water Infrastructure Finance and Innovation Act Program \") see them as options to supplement or complement, but not replace, traditional financing tools. State and local contributions are the most significant source of total funds available to communities for drinking water and wastewater treatment improvements. According to the Congressional Budget Office, spending by state and local governments on drinking water and wastewater has increased much faster than spending by the federal government, especially since the mid-1970s. In 2017, the state and local share of such projects (both capital and operation and maintenance spending) was 96%, while the federal share was 4%. The Bureau of Reclamation (Reclamation) was established to implement the Reclamation Act of 1902, which authorized the construction of water works to provide water for irrigation in arid western states. Reclamation owns and manages 475 dams and 337 reservoirs, which are capable of storing 245 million acre-feet of water. The agency's inventory of 4,000 \"constructed real property assets\" has a current replacement value of nearly $100 billion. Overall, these facilities serve approximately 31 million people, delivering a total of approximately 28.5 million acre-feet of water (an acre-foot is enough to cover one acre of land one foot deep, or 325,851 gallons) annually in nondrought years. Reclamation-funded municipal and industrial (M&I) water deliveries total approximately 2.8 million acre-feet and have more than doubled since 1970. Reclamation primarily manages M&I water supply facilities as part of larger, multipurpose reclamation projects serving irrigation, flood control, power supply, and recreation purposes. However, since 1980, Congress has individually authorized construction of \"rural water supply\" projects, as well as reclamation wastewater and reuse/recycling projects. This title also authorized Reclamation to undertake specific and general feasibility studies for reclamation wastewater and reuse projects and to research, construct, and operate demonstration projects. Even so, these projects remain a small part of the overall Reclamation portfolio. Historically, Reclamation constructed projects with federal funds, then established a repayment schedule based on the amount of total construction costs allocated to specific project purposes. Reclamation project authorizations typically require 100% repayment, with interest, for the M&I portion of water supply facilities, which makes Reclamation assistance a de facto long-term loan. However, for M&I projects under rural water and Title XVI authorities, Congress has authorized terms providing some or all federal funding for projects on a nonreimbursable basis (i.e. a de facto grant). For example, the federal government fully funds rural water projects serving Indian populations. For non-Indian rural water supply projects, Congress has authorized nonreimbursable federal funding of as much as 75%-85% of project costs. The federal share of costs for Title XVI projects is generally much lower than for rural water projects; it is limited to a maximum of 25% of total project costs or, for projects authorized since 1996, a maximum of $20 million per project authorization. Unlike many other programs described in this report, Reclamation undertakes projects largely at the explicit direction of Congress. Local project sponsors may approach Reclamation or Congress with proposals for project construction and funding; however, except where blanket feasibility study authorizations exist—for example, for certain program areas described below—specific project feasibility studies must be first authorized by Congress. Once a feasibility study is completed, congressional authorization is typically sought prior to construction. Because there is no \"program\" per se, there are no clear and concise eligibility or program criteria for selecting large, multipurpose projects. Rather, Congress relies on information provided in feasibility studies, including cost-benefit, engineering, and environmental analyses, and political considerations. Individual authorization statutes establish project purposes. Generally, M&I projects are part of larger, multipurpose projects such as those built for irrigation water supply, flood control, and hydro power purposes, or are authorized under the rural water supply or Title XVI water reuse programs described below. Projects are financed and constructed up front by the federal government, and costs for M&I portions of such projects are generally scheduled to be repaid 100%, with interest, via \"repayment\" or \"water service\" contracts. Irrigation districts must also repay their share of project benefits, but such payments are not subject to interest charges. Generally, local governments and organizations such as irrigation, water, or conservation districts may approach Reclamation and/or Congress for project support. All construction project funding must be appropriated by Congress. As noted earlier, Reclamation only works on projects located in the 17 western states (32 Stat. 388; 43 U.S.C. §391 et seq. ), unless otherwise specifically authorized. Funding information for the M&I portions of multipurpose projects is not readily available. Total regular Reclamation appropriations (gross current authority; not including permanent funding) for FY2019 were $1.571 billion. The total FY2020 budget request for Reclamation was $1.109 billion. Reclamation generally carries out its water supply activities in 17 western states as authorized by the Reclamation Act of 1902, as amended (32 Stat. 388; 43 U.S.C. §391 et seq. ), as well as through hundreds of individual project authorization statutes. Similar to its traditional multipurpose projects, Reclamation has undertaken individual rural water projects largely at the explicit direction of Congress. Generally speaking, Congress has in most cases prioritized appropriation of funding for already authorized projects rather than funds for new rural water construction projects. In lieu of the project-based approach to authorizing new rural water projects, in 2006 Congress authorized a rural water supply program ( P.L. 109-451 ). Under the program, Reclamation was authorized to work with rural communities and Indian tribes to identify municipal and industrial water needs and options to address such needs through appraisal investigations, and in some cases feasibility studies. In 2008, Reclamation published an interim final rule establishing future program criteria. According to the bureau, between 2006 and 2016, it used this authority to study approximately 26 projects to varying extents, although no projects were recommended for construction and authorized by Congress. This authority expired at the end of FY2016 and has not been renewed since. However, Reclamation continues to pursue authorized rural water projects that were previously authorized at the project level. As of early 2019, Reclamation reported that $1.3 billion was still needed to construct authorized, ongoing rural water projects. Historically, individual authorization statutes established rural water project purposes. Nearly half of the rural water supply projects authorized to date are somehow connected to previously authorized irrigation facilities under the Pick-Sloan Missouri Basin Program (PSMBP), or otherwise related to water service anticipated but not received under earlier PSMBP authorizations. Many rural water project authorizations are also linked to Indian water settlements or otherwise provide benefits to Indian tribes. Projects are generally cost-shared between the federal government and local sponsors. In the past, the federal cost-share for these projects has averaged 64%, and ranged from 15% to 80% for non-Indian rural water supply projects. As previously noted, the federal government pays up to 100% of the cost of Indian rural water supply projects. Assistance is generally provided on a competitive basis under the interim final rule's financial criteria. In accordance with the programmatic criteria provided in the rule, a nonfederal cost-share would be required, consistent with any future construction authorization for those projects. Local governments and organizations such as water and conservation districts or associations, including Indian tribes, may approach Reclamation and/or Congress for project support. Currently, all construction project funding must be authorized at the project level and appropriated by Congress. As noted earlier, Reclamation only works on projects located in the 17 western states (32 Stat. 388; 43 U.S.C. §391 et seq. ), unless specifically authorized by Congress. Reclamation previously published an interim final rule (43 C.F.R. Part 404) that established criteria for developing new rural supply projects, but the authority for the program has since expired. The rule does not apply to previously authorized projects. As previously stated, ongoing rural water construction activities are limited to ongoing, previously authorized projects. Enacted funding for rural water supply projects in FY2019 was $132.7 million. This included $98 million in additional funding above the Administration's FY2019 budget request to be allocated at the project level by Reclamation in a subsequent work plan for FY2019. For FY2020, the Administration's budget proposal requested $27.7 million for five ongoing authorized rural water projects. The Rural Water Supply Program was authorized by the Rural Water Supply Act of 2006 ( P.L. 109-451 , Title I; 120 Stat. 3345; 43 U.S.C. 2401 note). This programmatic authority expired at the end of FY2016 and has yet to be renewed. Construction and operations and maintenance is ongoing for several geographically specific projects that were previously authorized under various individual acts. Title XVI of P.L. 102-575 directs the Secretary of the Interior to develop a program to \"investigate and identify\" opportunities to reclaim and reuse wastewater and naturally impaired ground and surface water. Generally speaking, water reclaimed via Title XVI projects may be used for M&I water supply (nonpotable and indirect potable purposes only), irrigation supply, groundwater recharge, fish and wildlife enhancement, or outdoor recreation. The original Title XVI legislation authorized construction of five reclamation wastewater projects and six wastewater and groundwater recycling/reclamation studies. The act was amended in 1996 ( P.L. 104-266 ) to authorize another 18 construction projects and an additional study, and has been amended several times since, resulting in a total of 53 projects individually authorized for construction. Most recently, amendments to Title XVI enacted in December 2016 in the Water Infrastructure Improvements for the Nation Act (WIIN Act, P.L. 114-322 ) made changes to the program, including authorizing the Secretary of the Interior to accept and review nonfederal feasibility studies for potential planning, design, and construction projects. As of February 2019, 47 projects had been authorized under the WIIN Act authority. The WIIN Act also authorized a competitive grant program for construction of projects approved under this authority, including an authorization of $50 million in appropriations. Based on agency data, CRS estimates that as of early 2018, the backlog of remaining federal funding for the 94 authorized Title XVI projects (i.e., both \"traditional\" and WIIN Act authorized projects) was over $1 billion. The general purpose of Title XVI projects is to provide supplemental water supplies by recycling/reusing agricultural drainage water, wastewater, brackish surface and groundwater, and other sources of contaminated water. Projects may be permanent or for demonstration purposes. Title XVI projects are funded through partial de facto grants. The funding is part of the larger Reclamation WaterSMART program, which also provides grants for water conservation and river basin studies under separate authority granted in the Secure Water Act ( P.L. 111-11 , subtitle B). Title XVI project construction costs are shared by the federal government and a local project sponsor or sponsors. The federal share is generally limited to a maximum of 25% of total project costs and is nonreimbursable, resulting in a de facto grant to the local project sponsor(s). In 1996, Congress limited the federal share of individual projects to $20 million in 1996 dollars ( P.L. 104-266 ). The federal share of feasibility studies is limited to 50% of the total, except in cases of \"financial hardship\"; however, the federal share must be reimbursed. The Secretary may also accept in-kind services that are determined to positively contribute to the study. Similar to other Reclamation activities, the Title XVI water reclamation and wastewater recycling program is limited to projects and studies in the 17 western states unless otherwise specified. Authorized recipients of program assistance include \"legally organized non-federal entities,\" such as irrigation districts, water districts, municipalities, and Indian tribes. Prior to enactment of the WIIN Act, Administration requests for construction funding have generally been limited to projects where (1) an appraisal investigation and feasibility study have been completed and approved by the Secretary; (2) the Secretary determined that the project sponsor was capable of funding the nonfederal share of project costs; and (3) the local sponsor entered into a cost-share agreement with Reclamation. The WIIN Act provided DOI with additional authority to accept nonfederal feasibility studies and approve and consider these projects for construction funding if they meet Title XVI program criteria, including that (1) the study complies with federal laws and regulations applicable to water reuse and recycling studies, and (2) the project is technically and financially feasible and provides a federal benefit in accordance with Reclamation laws. The WIIN Act authority has essentially rendered unnecessary the prior practice of obtaining geographically specific authorizations for individual Title XVI projects before they can pursue funding. Over time, Reclamation has issued and revised multiple documents outlining evaluation criteria for prioritizing Title XVI projects. The most recent evaluation criteria for Title XVI projects (for FY2018 funding) was posted for review and comment in March 2018. The total regular appropriation for the Title XVI program in FY2019 was $58.6 million, with $20 million of this funding designated as being available for WIIN Act–authorized projects. The Administration's FY2020 request for Title XVI was $3.0 million. Projects authorized prior to 1996 ranged in size from $152 million ($38 million for Reclamation's share), to $690 million ($172 million for Reclamation's share). Post-1996 project authorizations have been smaller in size, ranging from $6.6 million ($1.65 million for Reclamation's share) to $319 million ($20 million for Reclamation's share). The original statutory authority for the reclamation wastewater and reuse program is the Reclamation Wastewater and Groundwater Study and Facilities Act, Title XVI of P.L. 102-575 , as amended (43 U.S.C. 390h et. seq.). Other statutes that authorized Title XVI projects include the Reclamation Recycling and Water Conservation Act of 1996 ( P.L. 104-266 ); the Oregon Public Land Transfer and Protection Act of 1998 ( P.L. 105-321 ); the 1999 Water Resources Development Act ( P.L. 106-53 , Section 595); the Consolidated Appropriations Act for FY2001 ( P.L. 106-554 , Division B, Section 106); a bill amending the Reclamation Wastewater and Groundwater Study and Facilities Act ( P.L. 107-344 ); the Consolidated Appropriations Act for FY2003 ( P.L. 108-7 , Division D, Section 211); the Emergency Wartime Supplementals Act of 2003 ( P.L. 108-11 ); the Irvine Basin Surface and Groundwater Improvement Act of 2003 ( P.L. 108-233 ); a bill amending the Reclamation Wastewater and Groundwater Study and Facilities Act ( P.L. 108-316 ); the Hawaii Water Resources Act of 2005 ( P.L. 109-70 ); the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ); the Consolidated Natural Resources Act of 2009 ( P.L. 110-229 ); the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ; Title IX, Subtitle B); and the Water Infrastructure Improvements for the Nations Act ( P.L. 114-322 , Title III, Subtitle J). [This section was prepared by Charles V. Stern, Specialist in Natural Resources Policy, Resources, Science, and Industry Division.] Under its civil works program, USACE operates water resource projects throughout the country. USACE civil works activities are concentrated on three principal missions—navigation, flood damage reduction, and aquatic ecosystem restoration. Many USACE activities also support municipal and industrial (M&I) water supply, environmental infrastructure, hydroelectric generation, fish and wildlife, and recreation. A total of 136 USACE reservoirs have roughly 9.8 million acre-feet of storage designated for M&I water. Most of this water was allocated to M&I purposes when the projects were constructed; around 0.9 million acre-feet of this storage space has been allocated to M&I use from existing USACE reservoirs using USACE's general water supply authorities. The provision of M&I water from USACE reservoirs, as discussed below, is subject to availability, and the associated costs are 100% a local, nonfederal responsibility. Additionally Congress has chosen to authorize a small number of USACE projects primarily for water supply. In the WIIN Act, Congress expanded the agency's authorities related to \"water conservation\" at its projects. USACE also has authorities related to water supply provision as part of emergency and disaster relief, including during droughts. For all of its projects, USACE policy is that it does not acquire water rights for these water supply and conservation uses; the water user is responsible for securing water rights. Congress has given USACE limited general authority for M&I water supply. A 1958 authority is for permanent allocation of water storage for M&I applications, and a 1944 authority provides for temporary contracts for surplus water from USACE reservoirs. The Water Supply Act of 1958 authorized USACE (and Reclamation) to recommend economically justified M&I water supply storage space in new or existing reservoirs. USACE also has authority for the short-term provision of surplus water as specified in the Flood Control Act of 1944; surplus water contracts have generally been limited to five-year terms, with options to extend. As previously noted, Congress authorized USACE to allocate a portion of its multipurpose reservoirs for permanent M&I storage, or to provide M&I water from USACE reservoirs under temporary contacts for surplus water. Neither authority allows USACE to significantly modify its projects or to seriously affect the authorized purposes for which the project operates in order to provide for M&I water supply, nor allows USACE to sell or allocate quantities of water. Instead, USACE M&I contracts are for space in a reservoir and provide no guarantee of a fixed quantity of water to be delivered in a given year. Under these authorities, USACE delivers water if it is available in the storage space and if delivery does not seriously affect other authorized purposes. No federal money is provided to nonfederal entities through USACE for this work; instead, it is nonfederal entities that pay USACE for M&I water storage. USACE construction projects are financed up front by the federal government, and costs for M&I project purposes are repaid 100%, with interest, via long-term (typically 30-50 years) repayment contracts, unless specified otherwise in law. Through annual contract payments, nonfederal entities pay for the M&I water supply storage services provided. Most agreements for new M&I water supply storage are associated with existing USACE reservoirs and are managed through agreements requiring annual payments. For new USACE projects with M&I water supply, existing law and agency policy require that (1) water supply benefits and costs be equitably allocated among multiple purposes; (2) repayment by state or local interests be agreed to before construction; (3) the water supply allocation for anticipated demand at any project not exceed 30% of the total estimated cost; (4) repayment shall be either during construction (without interest), or over 30 years (with adjustable interest rates); and (5) users reimburse USACE annually for all operation and maintenance or replacement costs. Occasional exceptions to USACE's general authority have been enacted by Congress. Allocation of water supply at existing projects is limited to actions that do not seriously affect project purposes. The fees collected from nonfederal entities pursuant to water supply agreements are deposited into a general account at the U.S. Treasury. The agency uses the federal funds primarily for administration of its water supply authorities. From FY2018 appropriations, USACE used $8 million to implement its water supply authorities and $1 million for two authorized USACE water supply construction projects to address groundwater depletion in Arkansas. From FY2019 annual appropriations, USACE planned to use $7 million for its water supply authorities, $3 million for the ground water depletion projects in Arkansas, and $2 million a water supply reservoir reallocation study as part of an expansion of a USACE reservoir in Colorado. The Administration's FY2020 budget request included $7 million for USACE's water supply storage activities. Water Supply Act of 1958 (Title III, 72 Stat. 320, as amended; 43 U.S.C. §390b); Flood Control Act of 1944 (Section 6, 58 Stat. 890, as amended, 33 U.S.C. §708); and project specific authorities in Water Resources Development Acts or similar legislation. Federal policy generally is that community water supply is a local and state responsibility. However, communities, particularly rural and small communities, increasingly have sought federal water supply assistance. Since 1992, Congress has enacted more than 400 authorizations allowing USACE to provide designated communities, counties, and states with design and construction assistance for drinking water and wastewater infrastructure (including treatment, and distribution/collection facilities) and source water protection and development; these activities are known as environmental infrastructure projects. The authorizations of federal appropriations for these activities vary widely from $0.5 million to $25 million for planning and design assistance, to $0.2 million to $435 million for construction assistance. As with Reclamation's rural water supply and Title XVI projects, congressional funding of these authorizations has enlarged the scope of the agency's activities. Like many USACE activities, congressional support for specific environmental infrastructure assistance authorizations and appropriations is complicated by the authorities' geographic specificity, which is problematic under congressional earmark bans and moratoria. Under most USACE environmental infrastructure assistance authorizations, federal assistance typically requires a 75% federal and 25% nonfederal cost-share. The federal portion typically is provided by Congress to USACE in annual Energy and Water Development Act appropriations legislation. How USACE and nonfederal financing is managed varies according to the specifics of the authorization. Sometimes USACE is responsible for performing the assistance or for contracting out the work; under other authorizations, USACE uses appropriated funds to financially assist by reimbursing nonfederal sponsors for their work. Because environmental infrastructure assistance activities are not part of a national USACE program per se, there are no clear and/or consistent general eligibility criteria. Most of USACE environmental infrastructure authorities specify a specific geographic location (e.g., a city, county, or state) and types of projects (e.g., municipal drinking water) as the principal eligibility requirements. Consequently, an activity's eligibility is evaluated by identifying whether there is an authorization for the geographic area of the activity, and whether the type of activity is eligible under that authorization. Because this assistance is not associated with a traditional USACE water resources projects, it is not subject to USACE planning requirements (e.g., a benefit-cost analysis is not performed). Only a subset of authorized USACE environmental infrastructure activities has received appropriations. Since 1992, Congress has provided USACE roughly $2 billion in funds for environmental infrastructure assistance. Congress provided USACE with $70 million for environmental infrastructure assistance activities in FY2018 and $77 million in FY2019. These funds are part of the \"additional funding\" provided by Congress in enacted appropriations bills. After enactment of an appropriations bill, the Administration follows guidance provided in the bill and accompanying reports to guide its use of these funds on authorized environmental infrastructure assistance activities. The selected environmental infrastructure assistance activities are identified in the agency's Work Plan for the fiscal year, which is typically available within two months after enactment of appropriations. Recent funds have been used to continue ongoing environmental infrastructure assistance. Interpretation of limitations on initiating new USACE activities in appropriations bills and accompanying reports appear to be limiting initiation of USACE funding for the environmental infrastructure activities that do not have a broad geographic scope. The Trump Administration requested no funding for these activities in its FY2020 request. Since the first authorization for environmental infrastructure assistance in 1992, no administration has asked for funding for USACE environmental infrastructure assistance. Prior to 1992, USACE generally was not widely involved with municipal drinking water treatment and distribution and wastewater collection and treatment; the agency is now authorized to contribute to more than 400 environmental infrastructure projects and programs. A Water Resources Development Act or similar legislation is the typical legislative vehicle for USACE authorizations. Beginning with Sections 219 and 313 of WRDA 1992 ( P.L. 102-580 ), Congress has authorized USACE to assist local interests with planning, design, and construction assistance for environmental infrastructure projects. Subsequent USACE authorization bills included new environmental infrastructure assistance activities, and raised the authorized funding ceilings for previously authorized projects. Policies limiting congressionally directed spending have limited recent congressional authorizing activity of environmental infrastructure assistance. In December 2016, Congress expanded a process for nonfederal entities to propose modifications to existing authorities for environmental infrastructure assistance. For those proposals that meet the criteria established by Congress, the Administration transmits those proposals to Congress for its consideration as part of deliberations regarding USACE authorization legislation. [This section was prepared by Anna E. Normand, Analyst in Natural Resources Policy, Resources, Science and Industry Division.] The USDA has a variety of water and waste disposal programs to provide loans and grants for drinking water, sanitary sewer, and storm drainage facilities in rural communities. Eligibility is limited to rural communities of 10,000 population or less. These programs are administered at the national level by the Rural Utilities Service (RUS) at USDA. RUS allocates program funds to the USDA State Rural Development Offices through an allocation formula based on rural population, poverty, and unemployment. Loans originate at the USDA's State Rural Development offices. Between 2009 and 2016, RUS had funded $13.9 billion for nearly 5,825 projects for water supply and wastewater facilities. According to an RUS FY2016 annual report, 46% of $1.8 billion in investments in that year were for water supply, 49% were for wastewater systems, and the remaining 5% were for combined projects. There is heavy demand for water supply and wastewater disposal funds for small rural communities. At the end of FY2016, USDA reported a $2.5 billion backlog of requests for water and wastewater projects. The purpose of these programs is to provide basic human amenities, alleviate health hazards, and promote the orderly growth of the nation's rural areas by meeting the need for new and improved rural water and waste disposal facilities. Eligible projects can include drinking water facilities, sanitary sewers, and stormwater drainage and disposal facilities. Funds may be used for installation, repair, improvement, or expansion of rural water facilities, including costs of distribution lines and well-pumping facilities. The law directs that USDA make grants of 1% to 3% of total grant funding to qualified nonprofits to provide technical assistance and training to help communities in preparing applications for grants and loans and to help problem solving operation and maintenance of existing water and waste disposal facilities in rural areas. This has totaled $18 million to $20 million annually in recent years. For FY2018, technical assistance for water and waste disposal facilities will increase to $40 million. Direct loans, guaranteed loans, and grants provide USDA support for water and waste disposal projects. USDA prefers making direct loans. Grants are made only when necessary to reduce average annual user charges to a reasonable level, particularly for lower-income communities. The split between loans and grants distributed from the regular infrastructure program, which is the large majority of spending, was about 75-25 in 2015 and 2016. There is no statutory distribution formula. Funds are allocated to states based upon rural population, number of households in poverty, and unemployment. There are no matching requirements for states. Water and Waste Disposal Loans. The Rural Development Act of 1972 authorized establishment of the Rural Development Insurance Fund under the Consolidated Farm and Rural Development Act. Among other activities, this fund is used for loans (direct and guaranteed) to develop storage, treatment, purification, or distribution of water or collection, treatment, or disposal of waste in low-income rural areas. Loans are repayable in not more than 40 years or the useful life of the facilities, whichever is less. USDA makes either direct loans to applicants or guarantees up to 90% of loans made by third-party lenders such as banks and savings and loan associations. Loan interest rates are based on the community's economic and health environment and are designated poverty, market, or intermediate. Poverty interest rate loans are made in areas where the median household income (MHI) falls below the higher of 80% of the statewide nonurban MHI, or the poverty level, and the project is needed to meet health or sanitary standards; by law, this rate is set at 60% of the market rate. The market rate is adjusted quarterly and is set using the average of a specified 11-bond index. It applies to loans to applicants where the MHI of the service area exceeds the statewide nonurban MHI. The intermediate rate applies to loans that do not meet the criteria for the poverty rate and which do not have to pay the market rate; by law, this rate is set at 80% of the market rate. Interest rates on guaranteed loans are negotiated between the borrower and the lender. The 2014 farm bill ( P.L. 113-79 ) amended the water and waste disposal direct and guaranteed loan programs to encourage financing by private or cooperative lenders to the maximum extent possible, use of loan guarantees where the population exceeds 5,500, and use of direct loans where the impact of a guaranteed loan on rate payers would be significant. Water and Waste Disposal Grants . Grants for the development costs of water supply and waste disposal projects in rural areas also are authorized under the Consolidated Farm and Rural Development Act. Only communities with poverty and intermediate rate incomes qualify for USDA grants. An eligible project must serve a rural area that is not likely to decline in population below the level for which the project was designed and constructed so that adequate capacity will or can be made available to serve the reasonably foreseeable growth needs of the area. The 2014 farm bill ( P.L. 113-79 ) authorized appropriations at $30 million annually through FY2018 for these grants. The appropriation for water and waste water grants is $400 million. Grant funds may be available for up to 75% of the development cost of a project and should only be used to reduce user costs to a reasonable level. Grants are only made after a determination of the maximum amount of loan that a community can afford and still have reasonable user rates. Grants, which typically provide 35%-45% of project costs, may be used to supplement other funds borrowed or furnished by applicants for project costs, and may be combined with USDA loans when the applicant is able to repay part, but not all, of the project costs. Priority is given to projects serving populations of less than 5,500. Emergency Community Water Assistance Grants . RUS is also authorized to help eligible communities prepare, or recover from, an emergency that threatens the availability of safe, reliable drinking water. Grants, ranging from $10,000 to a maximum of $500,000, are provided for projects to serve a rural area with a population of 10,000 or less that has a median household income not in excess of the statewide nonmetropolitan median household income. Grants for repairs, partial replacement, or significant maintenance of an established system cannot exceed $150,000. Communities use the funds for new systems, waterline extensions, construction of water source and treatment facilities, and repairs or renovation of existing systems and may be awarded for 100% of project cost. Applicants compete on a national basis for available funding. Funding for this program is mandatory through reservation of 3% to 5% of appropriated water and waste disposal grant funds. Of the amounts appropriated for water and waste disposal grants, 3% to 5% is reserved for grants for the Emergency and Imminent Water Assistance program. The 2014 farm bill ( P.L. 113-79 ) also authorized an additional $35 million per year through FY2018 for this program. Amounts provided through this program have been quite variable over time, depending on need. In FY2014, $14.7 million was distributed in 14 states; in FY2015, $2.5 million was distributed in 14 states. No funds were appropriated for the program in FY2017 and FY2018. Eligible entities are municipalities, counties, and other political subdivisions of a state; associations, cooperatives, and organizations operated on a not-for-profit basis; Indian tribes on federal and state reservations; and other federally recognized tribes. USDA's loan and grant programs are limited to community service areas (including areas in cities or towns) with population of 10,000 or less. To be eligible for assistance, communities must be unable to get reasonable credit through normal commercial channels. Also, communities must be below certain income levels. Loans and grants are made for projects needed to meet health or sanitary standards, including Clean Water Act and Safe Drinking Water Act standards and requirements. The 2014 farm bill ( P.L. 113-79 ) authorized $5 million per year through FY2018 for USDA to make grants to private nonprofit organizations for the purpose of providing loans to eligible individuals for construction, refurbishing, and servicing of individually owned household water well systems. Loans are limited to $11,000 per water well system. Authorized appropriations for the program were $993,000 in both FY2017 and FY2018. Funds available through FY2018 appropriations for USDA's water and waste disposal programs were included in two titles of P.L. 115-141 . Title III provided $560.3 million in total for FY2018, including $400.0 million in grants, $2.0 million in direct loan subsidies ($1.2 billion in loan authority), and $230,000 in subsidy to support guaranteed loans ($50.0 million in loan authority). Title VII (Section 780) provided an additional $500 million for the grant and loan program \"of which not to exceed $495,000,000 shall be for grants.\" Out of the total FY2018 funds, USDA has appropriations of $1.0 million for grants to capitalize revolving loans for water and waste disposal systems and $68 million to support water and waste disposal projects in the colonias, Alaskan Native communities, and Hawaiian Native communities. For FY2019, the President's budget requested $1.20 billion in direct loan authority and $0 for guaranteed loans and water and waste disposal grants. Statutory authority for the water and waste disposal loan and grant programs is the Consolidated Farm and Rural Development Act, as amended, Section 306, 7 U.S.C. 1926. Regulations for these programs are codified at 7 C.F.R. Parts 1778-1780. [This section was prepared by Tadlock Cowan, Analyst in Natural Resources and Rural Development Policy, Resources, Science and Industry Division.] The USDA provides assistance to watershed activities under four closely related authorities that are administered by the Natural Resources Conservation Service (NRCS). The Watershed and Flood Prevention Operations Program (WFPO) consists of two authorities—referred to as P.L. 566 and P.L. 534 projects. These authorize NRCS to provide technical and financial assistance to state and local organizations to plan and install measures to prevent erosion, sedimentation, and flood damage and to conserve, develop, and utilize land and water resources. Dams constructed under the WFPO program are eligible to receive assistance under the Small Watershed Rehabilitation Program, authorized by Congress in 2000. The fourth watershed authority is an emergency program that is not discussed in this report. The WFPO program consists of projects built under two authorities—the Watershed Protection and Flood Prevention Act of 1954 (P.L. 83-566) and the Flood Control Act of 1944 (P.L. 78-534). The vast majority of the projects have been built pursuant to the authority of P.L. 83-566 (referred to as P.L. 566 projects), under which smaller projects (discussed below) authorized by the Chief of the NRCS are constructed. Larger projects must be approved by Congress. Eleven projects were specifically authorized under P.L. 78-534 (referred to as P.L. 534 projects); they are much larger and more expensive than P.L. 566 projects. Under P.L. 566, over 2,100 projects have been authorized through FY2018. In FY2018, NRCS funded 23 new projects, 19 existing projects, and five remedial projects. The 11 projects that were specifically authorized under P.L. 534 encompass a total of almost 37.9 million acres and are divided into component projects in subwatersheds. Approximately 90% of the work on the P.L. 534 projects is complete. With the exception of the two smallest projects, the estimated federal costs for each of these projects range from $40 million to more than $275 million. Three of the projects have been completed, and work on the remainder continues in one or more subwatersheds. The FY2019 Consolidated Appropriations Act ( P.L. 116-6 , FY2019 appropriations) appropriated $150 million in FY2019. Recent amendments in the Agriculture Improvement Act of 2018 (2018 farm bill, P.L. 115-334 ) permanently authorized an additional $50 million annually from mandatory sources to the WFPO program. The purpose of the program is to provide technical and financial assistance to states and local organizations to plan and install watershed projects. Both P.L. 566 and P.L. 534 have similar objectives and are implemented following similar procedures. Both programs fund land treatment, and nonstructural and structural facilities for flood prevention, erosion reduction, agricultural water management, public recreation development, fish and wildlife habitat development, and municipal or industrial water supplies. Structural measures can include dams, levees, canals, and pumping stations. Local sponsors agree to operate and maintain completed projects. Partial project grants, plus provision of technical advisory services are provided. Financing for water projects under the WFPO program varies depending on project purposes. The federal government pays all costs related to construction for flood control purposes only. Costs for nonagricultural water supply must be repaid by local organizations; however, up to 50% of costs for land, easements, and rights-of-way allocated to public fish and wildlife and recreational developments may be paid with program funds. Additionally, sponsors may apply for USDA Rural Utilities Service (RUS) Water and Waste Program loans to finance the local share of project costs. Participating state and local organizations pay all operation and maintenance costs. P.L. 566 has been called the small watershed program because no project may exceed 250,000 acres, and no structure may exceed more than 12,500 acre-feet of floodwater detention capacity, or 25,000 acre-feet of total capacity. The Senate and House Agriculture Committees must approve projects that need an estimated federal contribution of more than $25 million for construction or include a storage structure with a capacity in excess of 2,500 acre feet. If the storage structure will have a capacity in excess of 4,000 acre feet, approval is also required from the Senate Environment and Public Works Committee and the House Transportation and Infrastructure Committee. There are no population or community income-level limits on applications for P.L. 566 projects, but at least 20% of the total benefits of the project must directly relate to agriculture (including rural communities). The enacted FY2019 appropriation provided WFPO with $150 million. Of the $150 million, $50 million is required to be allocated to projects and activities that can \"commence promptly;\" address regional priorities for flood prevention, agricultural water management, inefficient irrigation systems, fish and wildlife habitat, or watershed protection; or watershed protection projects authorized under P.L. 534. The FY2020 Administration's request proposes no funding for the program. Beginning in FY2014, when no funding was appropriated for WFPO, Congress directed funding from another conservation account—Conservation Operations, which funds general conservation technical assistance offered by NRCS—to fund projects authorized under the WFPO authority. The use of Conservation Operation funding for WFPO activities has continued each fiscal year through the FY2019 appropriations. This congressionally directed amount is in addition to the $150 million made available for the program as a whole in FY2019. In addition to discretionary funding provided through appropriations, the 2018 farm bill permanently authorized $50 million annually from mandatory sources. This mandatory funding will be available unless otherwise amended by Congress. Mandatory funds are authorized for P.L. 566 projects as well as rehabilitation work under the Small Watershed Rehabilitation Program. The Watershed and Flood Prevention Operations (WFPO) program consists of two authorities: the Flood Control Act of 1944, P.L. 78-534, as amended, 58 Stat. 905 (33 U.S.C. 701b-1); and the Watershed Protection and Flood Prevention Act of 1954, P.L. 83-566, as amended, 68 Stat. 666 (16 U.S.C. 1001-1008). Regulations are codified at 7 C.F.R. Part 622. As part of its lending responsibilities, the Rural Utilities Service (RUS) at USDA (see discussion above) makes loans to local organizations to finance the local share of the cost of installing, repairing, or improving facilities, purchasing sites and easements, and related costs for P.L. 566 and P.L. 534 projects. Loans are limited to $10 million; they must be repaid within 50 years; and the cost-share assistance may not exceed the rate of assistance for similar projects under other USDA conservation programs. NRCS and the local organization must also agree on a plan of work before a loan is obligated. Over the life of the program, 495 RUS loans have been made at a value of almost $176 million. Some of the oldest P.L. 566 projects that have exceeded their design life (dams were constructed starting in 1948) need rehabilitation work to continue to protect public health and safety by reducing any possibility of dam failure, and to meet changing resource needs. By December 2018, approximately 6,245 watershed dams have reached the end of their originally designed life spans. By the end of 2019, more than half of the 11,847 watershed dams will have reached the end of their designed life spans. In response to this concern, Congress created a rehabilitation program, known as the Small Watershed Rehabilitation Program, in Section 313 of the Grain Standards and Warehouse Improvement Act of 2000 ( P.L. 106-472 ), which revised the WFPO program. From 2000 to 2018, the program authorized the rehabilitation of 288 dams in 31 states. Of this total, 150 projects are complete, and the remaining projects are waiting for funding. The purpose of rehabilitation is to extend the service life of the dams and bring them into compliance with applicable safety and performance standards or to decommission the dams so they no longer pose a threat to life and property. Partial project grants, plus provision of technical advisory services are provided. NRCS may provide 65% of the total rehabilitation costs but no more than 100% of the actual construction cost, and is prohibited from funding operation and maintenance expense. Rehabilitation projects also provide an opportunity to modify projects to provide additional benefits, including municipal water supplies. Local watershed project sponsors provide 35% of the cost of a rehabilitation project and obtain needed land rights and permits. The source of these funds varies from state to state and may include bonds, local taxing authority, state appropriations, or in-kind technical services. Only dams constructed under the P.L. 566 authority, the Resource Conservation and Development (RC&D) program, and pilot watershed projects authorized in the Agriculture Appropriations Act of 1953 are eligible for assistance under the Small Watershed Rehabilitation Program. Since FY2000, Congress has appropriated more than $700 million for rehabilitation projects. The Trump Administration is seeking no funding for the Small Watershed Rehabilitation program for FY2020, citing the Administration's position that the maintenance, repair, and operation of these dams are the responsibility of local project sponsors. Similar positions were cited under the George W. Bush and Obama Administrations. The Small Watershed Rehabilitation Program has discretionary funding authority of up to $85 million annually. The program has received an average annual appropriation of $11.2 million over the last five years, including $10 million in FY2019. In the past, the program was authorized through omnibus farm bills to receive mandatory funding to remain available until expended. This funding was frequently restricted through annual appropriations to generate annual savings. The FY2018 appropriations act was the first to not restrict the remaining mandatory carryover, thereby making approximately $55 million available for obligation. The 2018 farm bill reauthorized discretionary funding authority for the program, but no additional mandatory funding authority was provided. The Small Watershed Rehabilitation Program is authorized by the Watershed Protection and Flood Prevention Act of 1954, P.L. 83-566, as amended by §313 of the Grain Standards and Warehouse Improvement Act of 2000, P.L. 106-472 , 114 Stat. 2077 (16 U.S.C. 1012). Regulations are codified at 7 C.F.R. Part 622. [This section was prepared by Megan Stubbs, Specialist in Agricultural Conservation and Natural Resources Policy, Resources, Science and Industry Division.] The Clean Water Act (CWA) establishes performance levels (e.g., secondary treatment) to be attained by municipal sewage treatment plants in order to prevent the discharge of harmful wastes into surface waters. The act also provides financial assistance, so that communities can construct treatment facilities in compliance with the law, which has the overall objective of restoring and maintaining the chemical, physical, and biological integrity of the nation's waters. Since 1973, Congress has appropriated approximately $98 billion in program grants that support wastewater projects. Funds are distributed to states under a statutory allocation formula and are used to assist qualified projects on priority lists that are determined by individual states. These funds are used to assist localities in meeting wastewater infrastructure needs most recently estimated (in 2016) by EPA and states at $271 billion nationally (over the next 20 years) for all categories of projects eligible for federal assistance under the law. In 1987, Congress amended the CWA ( P.L. 100-4 ) and initiated a new program of federal capitalization grants to support Clean Water State Revolving Funds (CWSRFs). Prior to 1989 (when the CWSRF program became effective), states used their annual allocations to make grants to cities and other eligible recipients. Since 1989, federal funds (grants of appropriated funds) have been used to capitalize state loan programs with states providing matching funds equal to 20% of the federal funds to capitalize the CWSRF. All 50 states, plus Puerto Rico, participate in the CWSRF program. Over the long term, the loan programs are intended to be sustained through repayment of loans to states, thus creating a continuing source of assistance for other communities. EPA data indicate that since 1987, 67% of all loans and other assistance have gone to assist communities with 10,000 people or fewer. These loans and assistance have comprised 22% of total CWSRF funding. The CWSRF program provides assistance in constructing and upgrading publicly owned municipal wastewater treatment plants, implementing nonpoint pollution management programs, developing and implementing management plans under the National Estuary Program, and supporting other eligible activities. EPA grants (from appropriated funds) and state matching funds help capitalize state CWSRF programs. These programs may provide seven general types of financial assistance: making loans; buying or refinancing existing local debt obligations; guaranteeing or purchasing insurance for local debt obligations; guaranteeing CWSRF debt obligations (i.e., to be used as security for leveraging the assets in the CWSRF); providing loan guarantees for local government revolving funds; earning interest on fund accounts; and supporting reasonable costs of administering the CWSRF. Loans are made at or below market interest rates, including zero interest loans, as determined by the state in negotiation with the applicant. Although the CWSRF program is generally a loan program, states may (under certain conditions) provide \"additional subsidization\"—such as principal forgiveness, negative interest loans, or a combination—to municipalities that meet the state's affordability criteria and for particular projects, such as those that implement water or energy efficiency goals or mitigate stormwater runoff. In addition, appropriations acts in recent years have required states to use minimum percentages of their allotted funds to provide additional subsidization. This trend began with the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), which required states to use at least 50% of their funds for this purpose. Recent appropriations acts included an identical condition, requiring 10% of the CWSRF grants be used \"to provide additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest loans, or grants (or any combination of these).\" All principal and interest payments on loans must be credited directly to the SRF, and loans are to be repaid within 30 years of a project's completion, not to exceed the project's useful life. States are required to ensure that CWSRF-funded projects use American iron and steel products and apply the prevailing wage requirements of the Davis-Bacon Act. Eligible loan recipients for CWSRF assistance are any municipality, intermunicipal, interstate, or state agency. Private utilities are not eligible to receive funds for construction of wastewater treatment works and most other eligible activities, but in some cases, privately owned projects are eligible for certain types of activities (e.g., decentralized wastewater treatment projects; projects to manage, reduce or treat stormwater; or development of watershed management projects). Projects or activities eligible for funding were, initially, those needed for constructing or upgrading (and planning and designing) publicly owned municipal wastewater treatment plans. As defined in Clean Water Act Section 212, devices and systems used in the storage, treatment, recycling, and reclamation of municipal sewage are eligible. These include construction or upgrading of secondary or advanced treatment plants; construction of new collector sewers, interceptor sewers, or storm sewers; and projects to correct existing problems of sewer system rehabilitation, infiltration/inflow of sewer lines, and combined sewer overflows. Operation and maintenance are not eligible activities. All funds in the clean water SRF resulting from federal capitalization grants are first to be used to assure compliance with enforceable deadlines, goals, and requirements of the act, including municipal compliance. After satisfying the \"first use\" requirement, funds may be used to implement other eligible uses, which initially included nonpoint source management programs and estuary activities in approved State Nonpoint Management Programs and estuarine Comprehensive Conservation and Management Plans, respectively. In 2000, Congress authorized separate CWA grant funding for projects to address overflows from municipal combined sewer systems and from municipal separate sanitary sewers (\"wet weather\" projects). Overflows from these portions of municipal sewerage systems can occur especially during rainfall or other wet weather events and can result in discharges of untreated sewage into local waterways. This program, contained in the FY2001 Consolidated Appropriations Act ( P.L. 106-554 , Division B, Section 112), authorized $750 million per year in FY2002 and FY2003. No funds were appropriated for this program. America's Water Infrastructure Act of 2018 (AWIA, P.L. 115-270 ), enacted on October 23, 2018, reauthorized appropriations for the grant program (and expanded it to include certain stormwater activities) for $225 million for FY2019 and FY2020. The FY2019 appropriations act did not provide funding for this program. In 2014, the Water Resources Reform and Development Act of 2014 (WRRDA; P.L. 113-121 ) amended the list of eligible projects by adding several projects and activities, including replacement of decentralized treatment systems (e.g., septic tanks), energy-efficiency improvements at treatment works, reuse and recycling of wastewater or stormwater, and security improvements at treatment works. In 2018, AWIA amended the list of eligible activities to allow qualified nonprofits to provide assistance to certain individuals for the repair or replacement of existing decentralized wastewater treatment systems or for the connection of an individual household to a centralized publicly owned treatment works. Since the first appropriations for the clean water SRF program in FY1989, Congress has provided more than $46 billion in grants to states and Puerto Rico to capitalize their CWSRFs. Through March 2018, federal funds, together with state matching contributions, repaid loans, and other funds, have been used for $126 billion in SRF assistance to support more than 39,000 SRF loans and debt refinance agreements. In both FY2016 and FY2017, Congress provided $1.394 billion for the CWSRF program. In FY2018, Congress increased the appropriation to the CWSRF program, providing $1.694 billion ( P.L. 115-141 ). In FY2019, Congress maintained the same level as the previous fiscal year, $1.694 billion ( P.L. 116-6 ). For FY2020, the President requested $1.120 billion for the CWSRF program. Through a separate process, EPA provides direct grants for the District of Columbia, the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of Northern Marianas. EPA also provides direct grants to Indian tribes (33 U.S.C. §1377). The funding for the District of Columbia, U.S. territories, and Indian tribes is part of the SRF appropriation to EPA. Statutory authority for the clean water SRF program is the Clean Water Act, as amended, Sections 601-607, 33 U.S.C. §§1381-1387. Regulations are codified at 40 C.F.R. §35.3100. [This section was prepared by Jonathan Ramseur, Specialist in Resources and Environmental Policy, Resources, Science and Industry Division.] The Safe Drinking Water Act (SDWA) requires public water systems to comply with federal drinking water regulations promulgated by EPA. Through these regulations, EPA has set standards to control the levels of approximately 90 contaminants in drinking water, and more regulations are under development. To help communities meet these federal mandates and to meet the act's public health objectives, Congress amended the SDWA in 1996 to establish a drinking water state revolving fund (DWSRF) loan program. The program is patterned closely after the clean water SRF, and authorizes EPA to make grants to states to capitalize drinking water state revolving loan funds. States use their DWSRFs to provide assistance to public water systems for infrastructure and other drinking water projects. States must match 20% of the federal capitalization grant. Each year, states must develop an \"intended use plan\" that includes a list of projects the state intends to fund through the DWSRF (referred to as the project priority list). The law generally directs states to give funding priority to projects that (1) address the most serious health risks; (2) are needed to ensure compliance with SDWA regulations; and (3) assist systems most in need on a per household basis, according to state affordability criteria. The law also directs states to make available at least 15% of their annual allotment to public water systems that serve 10,000 or fewer persons (to the extent the funds can be obligated to eligible projects). Over the life of the program, roughly 71% of DWSRF assistance agreements and 38% of funds have gone to these smaller systems. Capitalization grants are allotted among the states according to the results of the most recent quadrennial survey of the capital improvements needs of eligible water systems. Needs surveys are prepared by EPA and the states, and the most recent survey indicates that public water systems need to invest at least $$472.6 billion on infrastructure improvements over 20 years ($23.63 billion annually) to ensure the provision of safe drinking water and compliance with federal standards. This state-administered program provides assistance for infrastructure projects and other expenditures that facilitate compliance with federal drinking water regulations or that promote public health protection. The SDWA directs states to give funding priority to infrastructure projects that are needed to achieve or maintain compliance with SDWA requirements, protect public health, and assist systems with economic need. Further, states may use a portion of the capitalization grant for specified purposes, including programs for protecting sources of drinking water and improving the managerial and technical capacity of water systems. States may use the DWSRF to make low- or zero-interest loans to public water systems, and loan recipients generally must repay the entire loan plus any interest to the state. DWSRFs may also be used to buy or refinance local debt obligations, to guarantee or purchase insurance for a local obligation, as a source of revenue or security for payment of principal and interest on state revenue or general obligation bonds if the proceeds of the sale of the bonds are deposited into the DWSRF, and to earn interest on DWSRF accounts. The statute authorizes states to use up to 35% of their annual DWSRF grants to provide additional subsidies (e.g., principal forgiveness and negative interest rate loans) to help economically disadvantaged communities of any size. (A disadvantaged community is one in which the service area of a public water system meets state-established affordability criteria.) As with recent appropriations acts, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) requires states to use 20% of their DWSRF capitalization grants \"to provide additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest loans, or grants (or any combination of these).\" Drinking water systems that are eligible to receive DWSRF assistance include community water systems, whether publicly or privately owned, and not-for-profit noncommunity water systems. Federally owned systems are not eligible to receive assistance from this program. Projects eligible for DWSRF assistance include (1) capital investments to rehabilitate or replace infrastructure in order to continue providing the public with safe drinking water (e.g., storage facilities, and transmission and distribution pipes); (2) projects needed to address violations of SDWA regulations (e.g., treatment facilities); and (3) project design and planning and associated preconstruction activities. Assistance may also be available for construction of new wells to replace contaminated wells, source water protection, land acquisition, security measures (including infrastructure improvements), and consolidation of water supplies (e.g., in cases where individual homes or public water systems have a water supply that is contaminated, or a system is unable to maintain compliance for financial or managerial reasons). Projects and activities not eligible for funding include projects primarily intended to serve future growth or to provide fire protection, construction of dams or reservoirs (except reservoirs for treated water), monitoring, and operation and maintenance. Ineligible systems include those that lack the financial, technical or managerial capacity to maintain SDWA compliance and systems in significant noncompliance with any SDWA regulation (unless the project is likely to ensure compliance). For FY2018, the President requested $863.2 million for the state DWSRF capitalization grants, and Congress appropriated $1,163.2 million ( P.L. 115-141 ). For FY2019, the President requested $863 million, and Congress provided $1,164.0 million ( P.L. 116-6 ). AWIA reauthorized DWSRF appropriations for FY2019 through FY2021. In recent years, the estimated average state grant has been roughly $17.16 million per fiscal year. The estimated average grant to territories was $3.40 million per fiscal year. From FY1997 through FY2018, cumulative appropriations for the DWSRF program reached $22.11 billion. Adjusted for set-asides, cumulative net federal contributions totaled $21.52 billion. When combined with the 20% state match ($3.91 billion), bond proceeds, loan principal repayments, and other funds, the total DWSRF investment through FY2018 had reached $39.86 billion, and the program had provided more than $38.22 billion in assistance. Over the same period, more than 14,577 projects had received assistance, and 10,441 had been completed. The statutory authority for the DWSRF program is the Safe Drinking Water Act Amendments of 1996 ( P.L. 104-182 , Section 1452, 42 U.S.C. 300j-12). Regulations are codified at 40 C.F.R. §35.3500. [This section was prepared by Mary Tiemann, Specialist in Environmental Policy, and Elena Humphreys, Analyst in Environmental Policy, Resources, Science, and Industry Division.] Localities are the entities that are primarily responsible for providing water infrastructure services, which include both drinking water and wastewater infrastructure. According to the most recent estimates by states and EPA, funding needs for projects eligible for CWSRF or DWSRF funding—described in the sections above (i.e., projects needed to address water quality and public health-related problems or regulations)—total $655 billion over a 20-year period. However, many water infrastructure capital needs are ineligible for assistance through the SRF programs or are too large or otherwise not suited for those programs. In 2014, WRRDA established a five-year Water Infrastructure Finance and Innovation Act (WIFIA) pilot program. WIFIA authorizes EPA to provide credit assistance—secured (direct) loans or loan guarantees—for a broad range of drinking water and wastewater projects. In contrast to SRF programs, EPA will provide the credit assistance directly to an eligible recipient. Most of the credit assistance will likely be secured loans, as the agency stated that it does not expect much demand for loan guarantees. To be eligible for WIFIA assistance, projects must generally have costs of $20 million or more. WRRDA also authorizes the Corps to provide similar assistance under the WIFIA for water resource projects, such as flood control or hurricane and storm damage reduction. Although Congress has provided funds to EPA to implement WIFIA, as of the date of this report, Congress has not yet appropriated funds (nor have any been requested) that would enable the Corps to begin preparations or begin making WIFIA loans under the authority in WRRDA. WIFIA provides an additional source of funding for water infrastructure projects. Some stakeholders have argued that the clean water and drinking water SRF programs are structured in a way that makes them useful primarily for smaller communities and smaller projects. The WIFIA program can provide credit assistance to large water infrastructure projects that otherwise have difficulty obtaining financing. WIFIA can provide capital at a low cost to the borrower, because even though the interest on 30-year Treasury securities is taxable, Treasury rates can be less expensive than rates on traditional tax-exempt municipal debt. In federal budgetary terms, WIFIA assistance has much less of an impact than a grant, which is not repaid to the U.S. Treasury. The volume of loans and other types of credit assistance that the programs can provide is determined by the size of congressional appropriations and calculation of the subsidy amount. WIFIA defines the subsidy amount as follows: The amount of budget authority sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, as calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq. ). Although subsidy rates are project-specific, in the Trump Administration's FY2019 budget proposal, OMB estimated a 0.98% subsidy rate for WIFIA. This equates to a 1:102 ratio. At this subsidy rate, a $10 million appropriation could support a direct loan (or loans) totaling $1.02 billion. Thus, one advantage of the WIFIA program is that it can provide a large amount of credit assistance relative to the amount of budget authority provided. WIFIA credit assistance is available to state infrastructure financing authorities for a group of projects and individual project sponsors, which may include the following: a corporation; a partnership; a joint venture; a trust; or a federal, state, local, or tribal government (or consortium of tribal governments). Categories eligible for assistance by EPA include the following: wastewater treatment and community drinking water facilities; enhanced energy efficiency of a public water system or wastewater treatment works; repair or rehabilitation of aging wastewater and drinking water systems; desalination, water recycling, aquifer recharge, or development of alternative water supplies to reduce aquifer depletion; prevention, reduction, or mitigation of the effects of drought; or a combination of eligible projects. The act, among other provisions, authorizes EPA to provide credit assistance for a range of wastewater and drinking water projects. Project costs must be $20 million or larger to be eligible for credit assistance. In rural areas (defined as populations of 25,000 or less), project costs must be $5 million or more. For FY2019, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $68 million for the WIFIA program (including $5 million for administrative costs). To receive funding, a prospective borrower submits a letter of interest to EPA. The letter includes project eligibility, financial creditworthiness, engineering feasibility, and alignment with EPA's policy priorities. From these submittals, the agency selects projects for funding. On March 29, 2019, EPA announced a third round of WIFIA funding. EPA estimated that its budget authority ($63 million) would provide approximately $6 billion in credit assistance. The statutory authority for the WIFIA program is WRRDA ( P.L. 113-121 , Title V, codified in 33 U.S.C. §§3901-3914). EPA promulgated an interim final rule for the program on December 19, 2016 (81 F ederal Register 91822). Regulations are codified at 40 C.F.R. §35.10000. [This section was prepared by Jonathan Ramseur, Specialist in Environmental Policy, Resources, Science and Industry Division.] HUD administers assistance in support of state and local government neighborhood revitalization and related community and economic development activities, including infrastructure improvements, primarily under the Community Development Block Grant (CDBG) program. The program's primary objective is to develop viable communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for persons of low and moderate income. CDBG funds are used by state and local governments for a broad range of neighborhood revitalization and community and economic development activities intended to meet one of three national objectives. Specifically, eligible activities must 1. principally benefit low- or moderate-income persons; 2. aid in preventing or eliminating slums and blight; or 3. address an imminent threat to the health and safety of residents. Program policy requires that at least 70% of funds must benefit low- and moderate-income persons. The block nature of the CDBG program provides local government discretion in selecting the eligible activities to be undertaken in pursuit of national objectives. Water and waste disposal needs compete with many other eligible activities for this assistance, including historical preservation, energy conservation, economic development, lead-based paint abatement, public facilities and public service activities. Since it began in 1974, the CDBG program has invested $150 billion in communities nationwide. Congress has also used the program to provide supplemental appropriations to assist communities and states in response to natural disasters, the mortgage foreclosure crisis of 2008, economic recessions, and terrorist attacks. Since 1992, Congress has appropriated approximately $50 billion in supplemental CDBG funding to assist targeted states and local governments in their recovery efforts. Funds from the regular CDBG program have been disbursed across several broad categories, including the acquisition and demolition of real property, planning and administrative activities, housing, public services, and public improvements such as water and wastewater treatment facilities. During the five-year period from FY2012 to FY2016, CDBG expenditures for public improvement—including water and sewer improvements—accounted for approximately 33% of all CDBG funds expended. Water and sewer improvements accounted for 10% of total CDBG expenditures during the same five-year span. After subtracting amounts specified in appropriations acts for special-purpose activities, 70% of CDBG funds are allocated by formula to approximately 1,224 entitlement communities nationwide. These communities are defined as central cities of metropolitan areas, metropolitan cities with populations of 50,000 or more, and statutorily defined urban counties (the entitlement program). These funds are not available for projects in rural communities. The remaining 30% of CDBG funding is allocated by formula to the states for distribution to nonentitlement communities (the state program) for use in areas that are not part of a CDBG entitlement community allocation. These funds, which are administered by each state, may be available for rural community water projects. The 70/30 split and allocation formulas are provided for in law. Between FY2012 and FY2016, disbursements by CDBG recipients for water and sewer improvements have averaged $370 million per year. The primary goal of this program is the development of viable communities by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for low- and moderate-income persons. Funds may also be used to aid in preventing or eliminating slums and blight or to address an imminent threat to residents of the impacted area. CDBG program funds are allocated by formula. After amounts specified in an appropriations act are allocated to Section 107 special-purpose activities, 70% of the remaining funds are allocated by formula to entitlement communities and 30% to the states for distribution to nonentitlement communities. Funds are awarded to entitlement communities based on the higher yield from one of two weighted formulas. The first of two formulas uses population, overcrowded housing, and poverty data, while the second formula allocates funds based on an entitlement community's relative share of poverty, housing built before 1940, and the lag in population growth rate relative to the total for all entitlement communities. Similar formulas are used to allocate nonentitlement funds to states. As a condition of receiving CDBG funds, an entitlement community must submit a consolidated plan at least 45 days before the beginning of its program year detailing the proposed use of funds over a five-year period. Each entitlement community's multiyear consolidated plan (ConPlan) must include a citizen participation plan, a housing needs assessment, and an annual community development plan. In addition to an annual action plan, each jurisdiction must annually submit to HUD a Comprehensive Annual Performance Evaluation Report (CAPER) detailing progress it has made in meeting the goals and objectives outlined in its action plans. States do not actually undertake eligible CDBG activities but act as pass-through agents charged with three distinct responsibilities: (1) determining the method or methods to be used to distribute funds to nonentitlement communities, including seeking the input of affected local governments; (2) selecting local governments that will receive funds; and (3) monitoring local government grant recipient project implementation to ensure compliance with rules governing the program. In addition, each state is required to submit to HUD a ConPlan that includes a five-year housing and homeless needs assessment, a housing market analysis, a strategic plan that includes proposed housing and nonhousing community development activities, and a one-year action plan. Also, each state must submit to HUD a CAPER detailing progress it has made in meeting the goals and objectives outlined in its action plans. There are three categories of recipients eligible for direct allocations of CDBG program funds: entitlement communities (including insular areas), states, and Section 107 special project grants. Entitlement communities include central cities of metropolitan areas, metropolitan-based cities with populations of 50,000 or more, and statutorily defined urban counties. As of 2017, there were 1,224 entitlement communities, including the District of Columbia. States include the 50 states and Puerto Rico. Before funds are allocated to states and entitlement communities, a specific amount established by Congress is set aside annually for the United States territories or insular area of Guam, the Virgin Islands, American Samoa, and the Commonwealth of the Northern Marianas. These funds are awarded annually based on each insular area's relative share of aggregate population for all insular areas. Eligible activities include a wide range of projects such as public facilities and improvements, housing, public services, economic development, and brownfields redevelopment. State grantees must ensure that each activity meets one of the program's three national objectives: benefitting low- and moderate-income persons (the primary objective), aiding in the prevention or elimination of slums or blight, or assisting other community development needs that present a serious and immediate threat to the health or welfare of the community. Under the state program that assists smaller communities, states develop their own program and funding priorities and have considerable latitude to define community eligibility and criteria, within general criteria in law and regulations. For FY2017, Congress provided $3.0 billion for CDBG entitlement/nonentitlement formula funds, of which approximately $2.095 billion was available for entitlement communities, $898 million for smaller communities under the state nonentitlement program, and $7 million for insular areas. For FY2018, the President's budget requested $0 in funds for this program, the same as the FY2017 request level. On March 23, 2018, the President signed into law the Consolidated Appropriations Act of 2018, P.L. 115-141 . Division L of the act appropriated $3.365 billion for the HUD-administered Community Development Fund, including $3.3 billion for the CDBG entitlement/nonentitlement formula funds. Of the amount appropriated for CDBG formula grants, $2.305 billion was allocated to entitlement communities, $988 million to states for distribution to nonentitlement communities, and $7 million for insular areas. The act also appropriated $65 million for Indian tribes. For FY2019, the Administration again requested $0 in funds for the CDBG program. On February 15, 2019, Congress, passed and the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act left the program's funding level unchanged from the previous year, appropriating $3.365 billion—including $2.305 for entitlement communities, $988 billion for states to distribute to nonentitlement communities, $7 million for insular areas, and $65 million for Indian tribes. The Administration's budget request for FY2020, released on March 11, 2019, does not include funding for the CDBG program. In proposing termination of the program in FY2020, the Administration cited its intent to redefine the proper role of the federal government in support of community and economic development by devolving responsibility to state and local governments. Statutory authority for the CDBG program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq. ). Regulations are codified at 24 C.F.R. Part 570. Regulations covering the CDBG state program for nonentitlement communities are codified at 24 C.F.R. Part 570, Subpart I (§570.480). Authorized under the same title (Title I of the Housing and Community Development Act of 1974) as the formula-based CDBG program, the Section 108 loan guarantees allow an entitlement community or a state, on behalf of a nonentitlement community, to leverage its annual CDBG allocation in support of large-scale economic development and housing rehabilitation projects and the construction, reconstruction, or installation of public facilities. Consistent with the goals and objectives of the CDBG program, Section 108 loan guarantees are intended to supplement CDBG program activities. The program allows entitlement communities and states to extend the reach of the formula-based CDBG program, giving them access to additional financial resources to undertake large-scale, transformative neighborhood revitalization efforts. Eligible activities include acquiring and rehabilitating publicly owned real property; housing rehabilitation; economic development activities, including those carried out by for-profit and nonprofit entities; debt service reserves; payment of interest on the guaranteed loan; issuance cost of the public offering; and the acquisition, construction, reconstruction, and installation of public facilities, including water and sewer improvements. Section 108 loan guarantees are financed through public offerings. Under the program, states and communities are allowed to float bonds, notes, or debentures worth up to five times their annual CDBG allocation, minus any existing Section108 commitments or outstanding principal balances, with a repayment period of up to 20 years. States and entitlement communities must pledge their current and future CDBG allocations as security against default of the bonds or notes. Section 108 funds are made available on an ongoing basis, allowing communities to apply for funds any time during the year. It should be noted that Section 108 loan funds are made available to eligible public entities that may reloan the funds to private participants in a redevelopment project. Applicants are encouraged to meet with HUD staff prior to submitting a formal application. Section 108 loan guarantees may be accessed only by CDBG entitlement communities and states on behalf of a CDBG nonentitlement community. All eligible activities must meet one of the three national objectives of the regular CDBG program: principally benefit low- and moderate-income persons, aid in eliminating or preventing slums and blight, or address an imminent threat to the health and safety of residents. The program has an open application process, allowing entitlement communities and states to submit applications anytime during the year. The application process governing the Section 108 program can be grouped into several distinct stages: application presubmission, citizen participation, application submission, application review and notification, award allocation, and reporting. When submitting formal applications, states and entitlement communities must include a description of activities to be carried out, financing structure, source of loan repayment, citizen participation plan, anti-displacement strategy, and a pledge of the applicant's CDBG allocation as security for the Section 108 guaranteed loan. In general, HUD attempts to review an application within 90 days. HUD field offices are encouraged to complete applications within 45 days, with HUD headquarters attempting to complete its review within 45 days. Recipients receiving Section 108 funds are required to file annual performance reports with HUD detailing progress made in meeting the objectives of their community development plans, including Section 108 activities. Between FY2014 and FY2016, HUD issued loan guarantee commitments totaling $314.4 million to 47 projects, including $110.4 million to 17 projects in FY2014, $123.3 million in loan guarantees to 20 projects in FY2015, and $80.7 million to support 10 projects in FY2016. For FY2017, Congress authorized a loan commitment ceiling of $300 million and directed HUD to collect fees from borrowers that results in a credit subsidy cost of zero for guaranteeing Section 108 loans. Until FY2015, Congress appropriated an amount necessary to cover the estimated long-term liability to the federal government of a Section 108 loan guarantee (credit subsidy). The Department of Housing and Urban Development Appropriations Act for FY2014 changed that arrangement, allowing HUD to collect a fee from the borrower to cover the cost of the credit subsidy. The amount of the fee will be determined annually by HUD based on a percentage of the principal amount of the Section 108 guaranteed loan. For FY2018, the Trump Administration did not request any new loan guarantee authority. The Consolidated Appropriations Act of 2018, P.L. 115-141 , signed by the President on March 3, 2018, included $300 million in Section 108 loan guarantee authority. For FY2019, the again requested no new loan guarantee authority. However, Congress, in passing the Consolidated Appropriations Act of 2019, P.L. 116-6 , provided $300 million in loan guarantee authority for Section 108 financed projects. For FY2020, the Administration has requested no new loan guarantee authority for the Section 108 program. Statutory authority for the Section 108 program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5308). Regulations are codified at 24 C.F.R. Part 570, Subpart M. [This section was prepared by Eugene Boyd, Analyst in Federalism and Economic Development Policy, Government and Finance Division.] HUD administers assistance in support of state and local government neighborhood revitalization and related community and economic development activities, including infrastructure improvements, primarily under the Community Development Block Grant (CDBG) program. The program's primary objective is to develop viable communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for persons of low and moderate income. CDBG funds are used by state and local governments for a broad range of neighborhood revitalization and community and economic development activities intended to meet one of three national objectives. Specifically, eligible activities must 1. principally benefit low- or moderate-income persons, 2. aid in preventing or eliminating slums and blight, or 3. address an imminent threat to the health and safety of residents. Program policy requires that at least 70% of funds must benefit low- and moderate-income persons. The block nature of the CDBG program provides local government discretion in selecting the eligible activities to be undertaken in pursuit of national objectives. Water and waste disposal needs compete with many other eligible activities for this assistance, including historical preservation, energy conservation, economic development, lead-based paint abatement, public facilities, and public service activities. Since it began in 1974, the CDBG program has invested $150 billion in communities nationwide. Congress has also used the program to provide supplemental appropriations to assist communities and states in response to natural disasters, the mortgage foreclosure crisis of 2008, economic recessions, and terrorist attacks. Since 1992, Congress has appropriated approximately $50 billion in supplemental CDBG funding to assist targeted states and local governments in their recovery efforts. Funds from the regular CDBG program have been disbursed across several broad categories, including the acquisition and demolition of real property, planning and administrative activities, housing, public services, and public improvements such as water and wastewater treatment facilities. During the five-year period from FY2012 to FY2016, CDBG expenditures for public improvement—including water and sewer improvements—accounted for approximately 33% of all CDBG funds expended. Water and sewer improvements accounted for 10% of total CDBG expenditures during the same five-year span. After subtracting amounts specified in appropriations acts for special-purpose activities, 70% of CDBG funds are allocated by formula to approximately 1,224 entitlement communities nationwide. These communities are defined as central cities of metropolitan areas, metropolitan cities with populations of 50,000 or more, and statutorily defined urban counties (the entitlement program). These funds are not available for projects in rural communities. The remaining 30% of CDBG funding is allocated by formula to the states for distribution to nonentitlement communities (the state program) for use in areas that are not part of a CDBG entitlement community allocation. These funds, which are administered by each state, may be available for rural community water projects. The 70/30 split and allocation formulas are provided for in law. Between FY2012 and FY2016, disbursements by CDBG recipients for water and sewer improvements have averaged $370 million per year. The primary goal of this program is the development of viable communities by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for low- and moderate-income persons. Funds may also be used to aid in preventing or eliminating slums and blight or to address an imminent threat to residents of the impacted area. CDBG program funds are allocated by formula. After amounts specified in an appropriations act are allocated to Section 107 special purpose activities, 70% of the remaining funds are allocated by formula to entitlement communities and 30% to the states for distribution to nonentitlement communities. Funds are awarded to entitlement communities based on the higher yield from one of two weighted formulas. The first of two formulas uses population, overcrowded housing, and poverty data, while the second formula allocates funds based on an entitlement community's relative share of poverty, housing built before 1940, and the lag in population growth rate relative to the total for all entitlement communities. Similar formulas are used to allocate nonentitlement funds to states. As a condition of receiving CDBG funds, an entitlement community must submit a consolidated plan at least 45 days before the beginning of its program year detailing the proposed use of funds over a five-year period. Each entitlement community's multiyear consolidated plan (ConPlan) must include a citizen participation plan, a housing needs assessment, and an annual community development plan. In addition to an annual action plan, each jurisdiction must annually submit to HUD a Comprehensive Annual Performance Evaluation Report (CAPER) detailing progress it has made in meeting the goals and objectives outlined in its action plans. States do not actually undertake eligible CDBG activities but act as pass-through agents charged with three distinct responsibilities: (1) determining the method or methods to be used to distribute funds to nonentitlement communities, including seeking the input of affected local governments; (2) selecting local governments that will receive funds; and (3) monitoring local government grant recipient project implementation to ensure compliance with rules governing the program. In addition, each state is required to submit to HUD a ConPlan that includes a five-year housing and homeless needs assessment, a housing market analysis, a strategic plan that includes proposed housing and nonhousing community development activities, and a one-year action plan. Also, each state must submit to HUD a CAPER detailing progress it has made in meeting the goals and objectives outlined in its action plans. There are three categories of recipients eligible for direct allocations of CDBG program funds: entitlement communities (including insular areas), states, and Section 107 special project grants. Entitlement communities include central cities of metropolitan areas, metropolitan-based cities with populations of 50,000 or more, and statutorily defined urban counties. As of 2017, there were 1,224 entitlement communities, including the District of Columbia. States include the 50 states and Puerto Rico. Before funds are allocated to states and entitlement communities, a specific amount established by Congress is set aside annually for the United States territories or insular area of Guam, the Virgin Islands, American Samoa, and the Commonwealth of the Northern Marianas. These funds are awarded annually based on each insular area's relative share of aggregate population for all insular areas. Eligible activities include a wide range of projects such as public facilities and improvements, housing, public services, economic development, and brownfields redevelopment. State grantees must ensure that each activity meets one of the program's three national objectives: benefitting low- and moderate-income persons (the primary objective), aiding in the prevention or elimination of slums or blight, or assisting other community development needs that present a serious and immediate threat to the health or welfare of the community. Under the state program that assists smaller communities, states develop their own program and funding priorities and have considerable latitude to define community eligibility and criteria, within general criteria in law and regulations. For FY2017, Congress provided $3.0 billion for CDBG entitlement/nonentitlement formula funds, of which approximately $2.095 billion was available for entitlement communities, $898 million for smaller communities under the state nonentitlement program, and $7 million for insular areas. For FY2018, the President's budget requested $0 in funds for this program, the same as the FY2017 request level. On March 23, 2018, the President signed into law the Consolidated Appropriations Act of 2018, P.L. 115-141 . Division L of the act appropriated $3.365 billion for the HUD-administered Community Development Fund, including $3.3 billion for the CDBG entitlement/nonentitlement formula funds. Of the amount appropriated for CDBG formula grants, $2.305 billion was allocated to entitlement communities, $988 million to states for distribution to nonentitlement communities, and $7 million for insular areas. The act also appropriated $65 million for Indian tribes. For FY2019, the Administration again requested $0 in funds for the CDBG program. On February 15, 2019, Congress, passed and the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act left the program's funding level unchanged from the previous year, appropriating $3.365 billion—including $2.305 for entitlement communities, $988 billion for states to distribute to nonentitlement communities, $7 million for insular areas, and $65 million Indian tribes. The Administration's budget request for FY2020, released on March 11, 2019, does not include funding for the CDBG program. In proposing termination of the program in FY2020, the Administration cited its intent to redefine the proper role of the federal government in support of community and economic development by devolving responsibility to state and local governments. Statutory authority for the CDBG program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq. ). Regulations are codified at 24 C.F.R. Part 570. Regulations covering the CDBG state program for nonentitlement communities are codified at 24 C.F.R. Part 570, Subpart I (§570.480). Authorized under the same title (Title I of the Housing and Community Development Act of 1974) as the formula-based CDBG program, the Section 108 loan guarantees allow an entitlement community or a state, on behalf of a nonentitlement community, to leverage its annual CDBG allocation in support of large-scale economic development and housing rehabilitation projects and the construction, reconstruction, or installation of public facilities. Consistent with the goals and objectives of the CDBG program, Section 108 loan guarantees are intended to supplement CDBG program activities. The program allows entitlement communities and states to extend the reach of the formula-based CDBG program, giving them access to additional financial resources to undertake large-scale, transformative neighborhood revitalization efforts. Eligible activities include acquiring and rehabilitating publicly owned real property; housing rehabilitation; economic development activities, including those carried out by for-profit and nonprofit entities; debt service reserves; payment of interest on the guaranteed loan; issuance cost of the public offering; and the acquisition, construction, reconstruction, and installation of public facilities, including water and sewer improvements. Section 108 loan guarantees are financed through public offerings. Under the program, states and communities are allowed to float bonds, notes, or debentures worth up to five times their annual CDBG allocation, minus any existing Section108 commitments or outstanding principal balances, with a repayment period of up to 20 years. States and entitlement communities must pledge their current and future CDBG allocations as security against default of the bonds or notes. Section 108 funds are made available on an ongoing basis, allowing communities to apply for funds anytime during the year. It should be noted that Section 108 loan funds are made available to eligible public entities that may reloan the funds to private participants in a redevelopment project. Applicants are encouraged to meet with HUD staff prior to submitting a formal application. Section 108 loan guarantees may be accessed only by CDBG entitlement communities and states on behalf of a CDBG nonentitlement community. All eligible activities must meet one of the three national objectives of the regular CDBG program: principally benefit low- and moderate-income persons, aid in eliminating or preventing slums and blight, or address an imminent threat to the health and safety of residents. The program has an open application process, allowing entitlement communities and states to submit applications anytime during the year. The application process governing the Section 108 program can be grouped into several distinct stages: application presubmission, citizen participation, application submission, application review and notification, award allocation, and reporting. When submitting formal applications, states and entitlement communities must include a description of activities to be carried out, financing structure, source of loan repayment, citizen participation plan, anti-displacement strategy, and a pledge of the applicant's CDBG allocation as security for the Section 108 guaranteed loan. In general, HUD attempts to review an application within 90 days. HUD field offices are encouraged to complete applications within 45 days, with HUD headquarters attempting to complete its review within 45 days. Recipients receiving Section 108 funds are required to file annual performance reports with HUD detailing progress made in meeting the objectives of their community development plans, including Section 108 activities. Between FY2014 and FY2016, HUD issued loan guarantee commitments totaling $314.4 million to 47 projects, including $110.4 million to 17 projects in FY2014, $123.3 million in loan guarantees to 20 projects in FY2015, and $80.7 million to support 10 projects in FY2016. For FY2017, Congress authorized a loan commitment ceiling of $300 million and directed HUD to collect fees from borrowers that results in a credit subsidy cost of zero for guaranteeing Section 108 loans. Until FY2015, Congress appropriated an amount necessary to cover the estimated long-term liability to the federal government of a Section 108 loan guarantee (credit subsidy). The Department of Housing and Urban Development Appropriations Act for FY2014 changed that arrangement, allowing HUD to collect a fee from the borrower to cover the cost of the credit subsidy. The amount of the fee will be determined annually by HUD based on a percentage of the principal amount of the Section 108 guaranteed loan. For FY2018, the Trump Administration did not request any new loan guarantee authority. The Consolidated Appropriations Act of 2018, P.L. 115-141 , signed by the President on March 3, 2018, included $300 million in Section 108 loan guarantee authority. For FY2019, the Administration again requested no new loan guarantee authority. However, Congress, in passing the Consolidated Appropriations Act of 2019, P.L. 116-6 , provided $300 million in loan guarantee authority for Section 108 financed projects. For FY2020, the Administration has requested no new loan guarantee authority for the Section 108 program. Statutory authority for the Section 108 program is Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5308). Regulations are codified at 24 C.F.R. Part 570, Subpart M. [This section was prepared by Eugene Boyd, Analyst in Federalism and Economic Development Policy, Government and Finance Division.] The Department of Commerce's Economic Development Administration (EDA) is authorized to provide development assistance to areas experiencing substantial economic distress. EDA grants for community water and sewer projects are available through its Public Works and Economic Development Facilities program (PWED). Such assistance is also available under the agency's Economic Adjustment Assistance program. Under the PWED program public works grants are awarded competitively to eligible applicants to revitalize, expand, and upgrade their physical infrastructure. These investments in public works improvements must be linked to projects intended to enable communities to attract new industry, encourage business expansion and retention, diversify local economies, and generate or retain private sector jobs in EDA-designated distressed regions. Grants may be used for a wide range of purposes but frequently have a sewer or water supply element. The types of projects funded include industrial parks, expansion of port and harbor facilities, redevelopment of brownfields, and water and wastewater facilities primarily serving industry and commerce. Federal law requires that units of government retain ownership of EDA-funded projects. Because EDA grants must directly encourage employment generation, these grants generally are not available for rural residential sewer and water supply development. The purpose of the program is to promote long-term economic development and assist in the construction of public works and development facilities needed to initiate and support the creation or retention of permanent private sector jobs in areas experiencing long-term economic deterioration and distress. EDA's public works program supports investments that will help distressed areas address their competitive disadvantages. Funded projects must be part of an EDA-certified Comprehensive Economic Development Strategy (CEDS). EDA competitively awards public works grants directly to approved applicants. Generally, EDA investment assistance may not exceed 50% of the project cost. Projects may receive an additional amount, not to exceed 30%, based on the relative needs of the region in which the project will be located, as determined by EDA. In the case of certain Indian tribes, nonprofit organizations that have exhausted their effective borrowing capacity, or a state or political subdivision of a state that has exhausted its effective taxing and borrowing capacity, grants totaling 100% of a project's cost may be awarded. Credit may be given toward the nonfederal share for in-kind contributions, including contributions of space, equipment, and services. No minimum or maximum project amount is specified in law. Public works grants may be made to states, cities, counties and other political subdivisions of states, an institution of higher education or a consortium of such institutions, and private or public not-for-profit organizations acting in cooperation with officials of a political subdivision of a state. Under this program, the term \"state\" includes the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. For-profit, private sector entities do not qualify. Qualified projects must fill a pressing need of the area and must (1) be intended to improve the opportunities for the successful establishment of businesses, (2) assist in the creation of additional long-term private sector employment, and (3) benefit long-term unemployed or underemployed persons and low-income families. Projects must also be consistent with the area's CEDS and have an adequate share of local funds. In addition, eligible projects must be located in areas that meet at least one of the following criteria: low per-capita income, unemployment above the national average, or an actual or anticipated abrupt rise in unemployment. For FY2017, Congress provided appropriations totaling $100 million for EDA's public works grant program. For FY2018, the President's budget requested no funding for the public works program. On March 23, 2018, the President signed the Consolidated Appropriations Act of 2018, P.L. 115-141 . Division B of the act appropriated $262.5 million for EDA programs and additional $39 million for salaries and expenses. Of the amount appropriated for EDA programs, $117.5 million is allocated for the public works program. On February 15, 2019, the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act appropriated $265 million for EDA programs, including $117 million for the public works program. The act also appropriated an additional $39 million for EDA salaries and expenses. This is the same amount appropriated for FY2018. The Administration's FY2020 budget requests no new funding for EDA program activities but does request $30 million to cover the costs associated with closing down the agency. The statutory authority for the public works program is the Public Works and Economic Development Act of 1965, as amended, P.L. 89-136 (42 U.S.C. 3121 et seq. ). Regulations are codified at 13 C.F.R. Chapter III, Part 302, 305, 316, and 317. EDA, through its Economic Adjustment Assistance (EAA) grant program, awards development assistance to areas experiencing long-term economic deterioration and distress or sudden and substantial economic dislocation. This may include assisting communities/regions affected by natural disasters, natural resource depletion, mass layoffs, and other severe economic shocks that communities experience in restructuring and diversifying their regional economies. Funds have also been made available to aid communities experiencing chronic unemployment and underinvestment and communities impacted by military Base Realignments and Closures (BRAC). EAA funds are competitively awarded to qualified applicants to assist them in developing and implementing a five-year CEDS. EAA may be used to fund four types of activities: 1. strategic planning activities that include the creation of short-term action plans intended to stabilize a distressed community and regionally oriented long-term development strategies (CEDS) intended to assess and redirect the region's economic future; 2. technical assistance, including feasibility studies; 3. capitalization of revolving loan funds, which would allow qualifying businesses to borrow funds at favorable interest rates; and 4. financing of physical infrastructure projects, including water and sewer facilities, industrial parks, and business incubators. The purpose of the program is to promote long-term economic development in areas experiencing sudden economic dislocation or long-term economic distress. EDA's EAA program supports investments that will help distressed areas address their competitive disadvantages and rethink their economic futures. In general, funds may be used to develop CEDS, and funded projects must be part of EDA-certified CEDS. EDA competitively awards EAA grants directly to approved applicants. Generally, EAA investment assistance may not exceed 50% of the project cost. Projects may receive an additional amount, not to exceed 30%, based on the relative needs of the region in which the project will be located, as determined by EDA. In the case of certain Indian tribes and nonprofit organizations that have exhausted their effective borrowing capacity, or a state or political subdivision of a state that has exhausted its effective taxing and borrowing capacity, grants totaling 100% may be awarded. Credit may be given toward the nonfederal share for in-kind contributions, including contributions of space, equipment, and services. No minimum or maximum project amount is specified in law. EAA grants may be made to states, cities, counties and other political subdivisions of states, institutions of higher education or consortia of such institutions, and private or public nonprofit organizations acting in cooperation with officials of political subdivisions of a state. Under this program, the term state includes the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. For-profit, private sector entities do not qualify. Qualified projects must fill a pressing need of the area and must (1) be intended to improve the opportunities for the successful establishment of businesses, (2) assist in the creation of additional long-term private sector employment, and (3) benefit long-term unemployed or underemployed persons and low-income families. Projects must also be consistent with the area's CEDS and have an adequate share of local funds. In addition, eligible projects must be located in areas that meet at least one of the following criteria: low per-capita income, unemployment above the national average, or an actual or anticipated abrupt rise in unemployment. For FY2017, Congress provided appropriations totaling $35 million for EDA's EAA grant program. For FY2018, the President's budget requested $0 for the EAA program. On March 23, 2018, the President signed the Consolidated Appropriations Act of 2018, P.L. 115-141 , which included $262.5 million for EDA programs and additional $39 million for salaries and expenses. Of the amount appropriated for EDA programs, $37 million was allocated for the EAA program. On February 15, 2019, the President signed the Consolidated Appropriations Act of 2019, P.L. 116-6 . The act appropriated $265 million for EDA programs, including $37 million for the EAA program. For FY2020, the Administration seeks to terminate EDA and its programs, citing changing national priorities, including prioritizing rebuilding the military and making critical investments in the nation's security. The Administration is requesting $30 million for salaries and expenses to cover the cost of shutting down the agency. The statutory authority for the public works program is the Public Works and Economic Development Act of 1965, as amended, P.L. 89-136 (42 U.S.C. 3121 et seq. ). Regulations are codified at 13 C.F.R. Chapter III, Part 302, 305, 316, and 317. [This section was prepared by Eugene Boyd, Analyst in Federalism and Economic Development Policy, Government and Finance Division.]", "summary": "For more than four decades, Congress has authorized and refined several programs to help communities address water supply and wastewater problems. The agencies that administer these programs differ in multiple ways. In terms of funding mechanisms, projects developed by the Bureau of Reclamation (Reclamation) and the U.S. Army Corps of Engineers (USACE) typically require direct, individual project authorizations from Congress. In contrast, standing program authorizations provide project funding for other agencies, including the Department of Agriculture (USDA), the U.S. Environmental Protection Agency (EPA), the Department of Commerce, and the Department of Housing and Urban Development (HUD). The key practical difference is that with the individual project authorizations, there is no predictable assistance or even guarantee of funding after a project is authorized, because funding must be secured each year in the congressional appropriations process. The programs, on the other hand, have set program criteria, are generally funded from year to year, and provide a process under which project sponsors compete for funding. In terms of scope and mission, the primary responsibilities of USACE are to maintain inland navigation, provide for flood and storm damage reduction, and restore aquatic ecosystems, while EPA's mission relates to protecting public health and the environment. The Department of Commerce and HUD focus on community and economic development. Likewise, the specific programs—while all address water supply and wastewater treatment to some degree—differ in important respects. Some are national in scope (those of USDA, EPA, and the Department of Commerce, for example), while others are regionally focused (Reclamation's programs and projects). Some focus primarily on urban areas (HUD) and some on rural areas (USDA), and others do not distinguish based on community size (e.g., EPA, USACE). Federal funding for the programs and projects discussed in this report varies greatly. Collectively, congressional funding for these programs in recent years has been somewhat eroded by overall competition among the many programs that are supported by discretionary spending, despite the continuing pressure from stakeholders and others for increased funding. FY2019 appropriations highlights include the following: $1.164 billion for capitalization grants to states under EPA's State Revolving Fund (SRF) loan program for drinking water systems and $1.694 billion for EPA's SRF program for wastewater projects; $60 million in subsidy costs for the EPA-administered Water Infrastructure Finance and Innovation Act (WIFIA) program, allowing the agency to provide approximately $5.5 billion in credit assistance for drinking water and wastewater infrastructure projects; $400 million for USDA's rural water and waste disposal grant program and direct loan authority of approximately $1.4 billion; $3.4 billion for HUD Community Development Block Grant (CDBG) funds (water and wastewater projects are among many eligible uses); and $58.6 million for Reclamation's Title XVI reclamation/recycling projects.", "document_type": "crs"}
{"report": "The House of Representatives has standing rules that govern how bills and resolutions are to be taken up and considered on the floor. However, to expedite legislation receiving floor action, the House may temporarily set aside these rules for measures that are not otherwise privileged for consideration. This can be done by agreeing to a special order of business resolution (special rule) or by adopting a motion to suspend the rules and pass the underlying measure. In general, special rules enable the consideration of complex or contentious legislation, such as major appropriations or reauthorizations, while the suspension of the rules procedure is usually applied to broadly supported legislation that can be approved without floor amendments or extensive debate in the chamber. Most bills and resolutions that receive floor action in the House are called up and considered under suspension of the rules. The suspension procedure allows nonprivileged measures to be raised without a special rule, waives points of order, limits debate, and prohibits floor amendments. Motions to suspend the rules and pass the measure require a two-thirds vote, so the procedure is typically reserved for bills and resolutions that can meet a supermajority threshold. Decisions to schedule bills for consideration under suspension are generally based on how widely supported the measures are, how long Members wish to debate them, and whether they want to propose floor amendments. These decisions are not necessarily related to the subject matter of the measure. Accordingly, measures brought up under suspension cover a wide range of policy areas but most often address government operations, such as the designation of federal facilities. This report describes the suspension procedure, which is defined in clause 1 of House Rule XV, and provides an analysis of measures considered under suspension during the 114 th Congress (2015-2016). Figures 1- 8 display statistical data, including the prevalence and form of suspension measures, sponsors of measures, committee consideration, length of floor debate, voting, and resolution of differences between the chambers. Table 1 summarizes the final legislative status of measures initially considered in the House under the suspension of the rules. Finally, Figure A-1 depicts the use of the suspension procedure from the 110 th through the 114 th Congresses (2007-2016). The suspension of the rules procedure is established by clause 1 of House Rule XV. Bills, resolutions, House amendments to Senate bills, amendments to the Constitution, conference reports, and other types of business may be considered under suspension, even those \"that would otherwise be subject to a point of order … [or have] not been reported or referred to any calendar or previously introduced.\" Suspension motions are in order on designated days. As Rule XV states, \"the Speaker may not entertain a motion that the House suspend the rules except on Mondays, Tuesdays, and Wednesdays and during the last six days of a session of Congress.\" Suspension measures, however, may be considered on other days by unanimous consent or under the terms of a special order of business (special rule) reported by the Committee on Rules and agreed to by the House. A motion to suspend the rules is a compound motion to suspend the House rules and pass a bill or agree to a resolution. When considering such a motion, the House is voting on the two questions simultaneously. Once recognized, the Member making the motion will say, \"Mr. [or Madam] Speaker, I move to suspend the rules and pass___.\" The House rules that are suspended under this procedure include those that \"would impede an immediate vote on passage of a measure … such as ordering the previous question, third reading, recommittal, or division of the question.\" A measure considered under the suspension procedure is not subject to floor amendment. The motion to suspend and pass the measure, though, may provide for passage of the measure in an amended form. That is, the text to be approved may be presented in a form altered by committee amendments or by informal negotiations. Suspension measures that are passed with changes incorporated into the text are passed \"as amended.\" There are no separate votes on the floor approving such amendments. Suspension motions are \"debatable for 40 minutes, one-half in favor of the motion and one-half in opposition thereto.\" However, in most instances, a true opponent never claims half the time, and most speakers come to the floor to express support for the measure. Debate time is controlled by two floor managers, one from each party, who sit on a committee of jurisdiction. Each manager makes an opening statement and may yield increments of the 20 minutes they control to other Members to debate the measure. Once debate has concluded, a single vote is held on the motion to suspend the rules and pass the measure. The motion requires approval by \"two-thirds of the Members voting, a quorum being present.\" Should the vote fall short of the two-thirds required for passage (290, if all Members vote), the measure is not permanently rejected. Before the end of the Congress, the House may consider the measure again under suspension, or the Committee on Rules may report a special rule that provides for floor consideration of the measure. As illustrated in Figure 1 , the majority of measures considered on the House floor during the 114 th Congress were called up under the suspension of the rules procedure. Sixty-two percent of all measures that received floor action were considered under suspension (743 out of the 1,200), compared to those under the terms of a special rule (14%), unanimous consent (7%), or privileged business (16%). Figure 2 displays the form of suspension measures. Most of the measures considered under suspension during the 114 th Congress (94%) were bills. House bills made up 83% of the suspension total, Senate bills 11%. As represented in Figure 3 , most suspension measures were sponsored by members of the majority party during the 114 th Congress. House or Senate majority-party members sponsored 69% of all bills and resolutions initially considered in the House under suspension, while House majority-party members sponsored 467 (71%) of the 660 House-originated measures (designated with an H.R., H.Res., H.Con.Res. or H.J.Res. prefix). Suspension is, however, the most common procedure used to consider minority-sponsored legislation in the House by a wide margin. In the 114 th Congress, 85% of the minority-sponsored measures that were considered on the House floor were raised under the suspension procedure. Members of the House or Senate minority parties sponsored 31% of all suspension measures originating in either chamber, compared to 9% of legislation subject to different procedures, including privileged business (17 measures), unanimous consent (21 measures), and special rules (one Senate bill). Minority-party House Members sponsored 193 (29%) of the 660 House measures considered under suspension. No minority-party House Member sponsored a House-originated measure that was considered under a special rule. Most suspension measures are referred to at least one House committee before their consideration on the chamber floor. In the 114 th Congress, 710 out of the 743 suspension measures considered (96%) were previously referred to a House committee. Of the 33 measures that were considered without a referral, 31 were Senate bills that were \"held at the desk,\" and two were House resolutions that provided concurrence to Senate amendments. Measures may be referred to multiple House committees before receiving floor action. When a bill or resolution is referred to more than one House committee, the Speaker will designate one committee as primary, meaning it is the committee exercising jurisdiction over the largest part of the measure. Generally, the chair of the committee of primary jurisdiction works with majority party leadership to determine if and when a measure should be considered under suspension. Figure 4 shows the number and percentage of measures brought up under suspension from each House committee of primary jurisdiction. The House Committee on Oversight and Government Reform (now Oversight and Reform) was the committee of primary jurisdiction for the plurality of measures considered under suspension in the 114 th Congress: 106, or 14%, of the total number of suspension measures considered. Many of these bills designated names for post offices or other federal properties. For most House committees, the majority of their referred measures that reached the floor were raised under the suspension procedure. In the 114 th Congress, the four exceptions were the Committee on House Administration—which had several measures considered by unanimous consent—and the Committees on Appropriations, the Budget, and Armed Services, which had at least half of their measures considered pursuant to special rules. For the other committees, suspension measures ranged from 57% to 100% of the total number of the committee's measures receiving floor action ( Figure 5 ). Since suspension motions require a two-thirds majority for passage, House committees that handle less contentious subjects tend to have more of their measures considered under the suspension procedure in comparison to other committees. In the 114 th Congress, high-suspension committees included Small Business (100% of measures receiving floor action) and Veterans' Affairs (92%). The Small Business Committee's measures sought to authorize new business development programs. Veterans' Affairs measures included authorizations, reauthorizations, and bills designating federal facilities. While suspension measures are not subject to floor amendments, committees may recommend amendments to legislative texts during markup meetings or through informal negotiations. The motion to suspend the rules can include these proposed changes when a Member moves to suspend the rules and pass the measure \"as amended.\" In the 114 th Congress, 396 suspension measures (53% of the total) were considered \"as amended,\" meaning that the text to be approved differed from the measure's introduced text. Clause 2 of House Rule XIII requires that measures reported by House committees must be accompanied by a written report. Otherwise, they are not placed on a calendar of measures eligible for floor consideration. However, the written report requirement is among those rules suspended under the suspension procedure. Thus, measures may be called up on the floor under suspension of the rules even if a committee never ordered them to be reported or wrote an accompanying committee report. Instead, the motion to suspend the rules discharges the committee and moves the legislation directly to the House floor. In the 114 th Congress, 517 (70%) suspension measures were ordered to be reported by a House committee. Of this number, 398 were reported with an accompanying House committee report. Twenty measures that did not have a House report did have a Senate report, while 325 measures had no written report from either chamber (43% of the total number of suspension measures). Pursuant to Rule XV, motions to suspend the rules are regularly in order on Mondays, Tuesdays, and Wednesdays or on the last six days of a session of Congress. However, suspension motions may be considered on other days by unanimous consent or under the terms of a special rule reported by the Committee on Rules and agreed to by the House. As displayed in Figure 6 , in the 114 th Congress, the plurality of suspension measures were considered on Tuesdays (312, 42% of the total number considered), followed by Mondays (291, 39%) and Wednesdays (114, 15%). In addition, 25 suspension measures were considered on Thursdays and one on a Friday. Of these, one was considered by unanimous consent, while 25 were called up under suspension pursuant to permission included in a special rule reported by the Rules Committee and agreed to by the full House. Such special rules included a provision stating, \"It shall be in order at any time on the legislative day of ___ for the Speaker to entertain motions that the House suspend the rules as though under clause 1 of rule XV.\" Pursuant to Rule XV, suspension measures are \"debatable for 40 minutes, one-half in favor of the motion and one-half in opposition thereto.\" In practice, there is rarely a true opponent to a motion to suspend the rules, and the time is divided between two floor managers, usually one from each party, who both favor the motion. The floor managers each control 20 minutes of debate. The managers may be their parties' sole representative for or against the motion, or they may yield increments of the 20-minute allotment to other Members. Typically, the relevant committee chairs and ranking members select the majority and minority floor managers for particular bills and resolutions. These managers may be the measure's sponsor, the chair or ranking member of the measure's committee of primary jurisdiction, or another committee member. In the 114 th Congress, the measure's sponsor served as the majority manager on 26% of the suspension measures receiving floor action. The committee chair managed 29% of the measures. The minority manager was the measure's sponsor for 11% of the measures and the committee's ranking member for 26% of the measures considered. Occasionally, floor managers controlling time on a motion to suspend the rules ceded their control to other Members during debate. In two identified cases, both the majority and minority floor managers favored the measure, and another Member claimed the time in true opposition during the initial floor consideration of the measure. In at least one other instance, the minority manager asked unanimous consent to yield managerial control to another Member. A majority floor manager makes the motion to suspend the rules by stating, \"Mr. [Madam] Speaker, I move to suspend the rules and pass the bill [or resolution] ____.\" The Speaker [or Speaker pro tempore] responds, \"Pursuant to the rule, the gentleman[woman] from [state] and the gentleman[woman] from [state] each will control twenty minutes.\" The majority and minority managers then, in turn, make opening statements regarding the measure using the 20 minutes each controls. If the majority and minority managers have secured additional speakers, the speakers generally alternate between the parties within the 40-minute limit. During the 114 th Congress, on a motion to suspend the rules, the average number of speakers in addition to the floor managers was fewer than two. On 83% of the measures (620) considered, there were one or two additional speakers. On 27% of the measures (199) considered, there were no additional speakers, and in 16% of the measures (120) considered, there were 3 to 12 additional speakers. Three measures had 20, 21, and 25 additional speakers, respectively. At the start of the debate period, the majority manager may request \"unanimous consent that all Members may have five legislative days in which to revise and extend their remarks and add extraneous materials on this bill [resolution].\" This request enables general leave statements to be inserted into the Congressional Record . In 29% of the suspension measures considered in the 114 th Congress, a written general leave statement appeared in the Record following in-person remarks, indicating that the remarks were submitted on the day the legislation was considered. General leave statements submitted on a day other than the day of consideration appear in the Extension of Remarks section of the Congressional Record . Suspension measures are limited to a maximum of 40 minutes of debate under Rule XV. However, if there are time gaps between speakers or procedural interruptions, such as a vote on a motion to adjourn, the time period between the start of the first speaker's remarks and the conclusion of debate may exceed 40 minutes. The statistics displayed in Figure 7 show the length of consideration of suspension measures as documented in Congress.gov, not the accumulated length of statements, as kept by official timekeepers in the chamber. In the 114 th Congress, the average length of consideration on a motion to suspend the rules was 13 minutes and 10 seconds, and half of the measures considered had a debate period of 10 minutes or less. Thus, while overall debate is limited to 40 minutes under the rule, on most suspension measures, only a fraction of that time was actually expended during consideration. Seventeen measures, however, had consideration periods that exceeded 40 minutes due to procedural delays or, in the case of one measure, a request for unanimous consent to extend debate by 10 minutes to each side. House leaders generally choose measures for suspension that are likely to achieve the two-thirds majority threshold for passage. Thus, almost all suspension measures were passed by the House in the 114 th Congress. The full House approved all House resolutions (28), concurrent resolutions (12), joint resolutions (2), and Senate bills (82) that were considered under suspension. The House also passed, via motions to suspend the rules, 612 of the 619 House bills that were initially considered under suspension. Seven bills did not receive the requisite supermajority. Two of these bills were later considered and approved under the terms of a special rule. The remaining five bills did not return to the floor and therefore did not pass the House. Most suspension motions are agreed to in the House by voice vote, which is the chamber's default method of voting on most questions. In 2015 and 2016, this method of voting led to the final approval of 72% (531) of the motions to suspend the rules and pass the measures (see Figure 8 ). After the initial voice vote, Members triggered an eventual record vote (often called a roll call vote) on 212 (28%) of the suspension measures considered in the 114 th Congress. This was done by demanding the \"yeas and nays,\" objecting to the vote \"on the grounds that a quorum is not present,\" or, in one case, demanding a recorded vote. In most instances, the chair elected to postpone the vote to a later period, within two additional legislative days, pursuant to clause 8 of House Rule XX. Of the 212 record votes, 3 immediately followed debate on the measure. The remaining 209 votes were postponed to another time on the legislative schedule, usually later the same day. In the 114 th Congress, 205 suspension motions were adopted by record vote, and 7 motions to suspend the rules were defeated by record votes. The defeat of a motion to suspend the rules, however, does not necessarily kill the legislation. The Speaker may choose to recognize a Member at a later time to make another motion to suspend the rules and pass the bill, or the House may consider the measure pursuant to a special rule reported by the Committee on Rules. Accordingly, two of the initially unsuccessful measures were later called up and passed under the terms of a special rule. Five measures were not considered again, via any House floor procedure, before the end of the 114 th Congress. Although suspension measures generally receive broad support, measures that receive the requisite two-thirds majority in the House are not guaranteed passage in the Senate. As noted in Table 1 , in the 114 th Congress, the Senate passed 197 of the 619 House bills initially considered under suspension (32%). Additionally, the Senate agreed to 1 of the 2 House joint resolutions and 5 of the 11 House concurrent resolutions considered under suspension of the rules. Of the number of suspension measures that passed the House and Senate, 60 required a resolution of differences between the chambers. Forty-four House measures and 15 Senate bills were subject to an amendment exchange process, and on one occasion, a conference committee was used to resolve the differences between the House and Senate versions of a House bill. The Senate passed three House bills, initially approved in the House under suspension, that did not become public law because the House did not agree to the final bill text, as amended by the Senate. In those instances, the House did not reconsider the bills once the Senate returned the Senate-amended versions to the House chamber. Thus, 194 House bills were presented to the President for signature. Of the measures initially considered under suspension during the 114 th Congress, President Obama was presented with 194 House bills, 82 Senate bills, and 1 House joint resolution for signature or veto. The President vetoed H.R. 1777 (Presidential Allowance Modernization Act of 2016) and S. 2040 (Justice Against Sponsors of Terrorism Act). The House chose not to attempt a veto override on H.R. 1777 , so the measure did not become public law. Both the Senate and House voted to override the veto of S. 2040 , enabling it to become law without the President's signature ( P.L. 114-222 ). Thus, of the 703 law-making measures (bills and joint resolutions) initially considered under suspension of the rules, 193 House bills, 82 Senate bills, and 1 House joint resolution became public law (see Table 1 ).", "summary": "Suspension of the rules is the most commonly used procedure to call up measures on the floor of the House of Representatives. As the name suggests, the procedure allows the House to suspend its standing and statutory rules in order to consider broadly supported legislation in an expedited manner. More specifically, the House temporarily sets aside its rules that govern the raising and consideration of measures and assumes a new set of constraints particular to the suspension procedure. The suspension of the rules procedure has several parliamentary advantages: (1) it allows nonprivileged measures to be raised on the House floor without the need for a special rule, (2) it enables the consideration of measures that would otherwise be subject to a point of order, and (3) it streamlines floor action by limiting debate and prohibiting floor amendments. Given these features, as well as the required two-thirds supermajority vote for passage, suspension motions are generally used to process less controversial legislation. In the 114th Congress (2015-2016), measures considered under suspension made up 62% of the bills and resolutions that received floor action in the House (743 out of 1,200 measures). The majority of suspension measures were House bills (83%), followed by Senate bills (11%) and House resolutions (4%). The measures covered a variety of policy areas but most often addressed government operations, such as the designation of federal facilities or amending administrative policies. Most measures that are considered in the House under the suspension procedure are sponsored by a House or Senate majority party member. However, suspension is the most common House procedure used to consider minority-party-sponsored legislation regardless of whether the legislation originated in the House or Senate. In 2015 and 2016, minority-party members sponsored 31% of suspension measures, compared to 9% of legislation subject to different procedures, including privileged business (17 measures), unanimous consent (21 measures), and under the terms of a special rule (one Senate bill). Most suspension measures are referred to at least one House committee before their consideration on the floor. The House Committee on Oversight and Government Reform (now called the Committee on Oversight and Reform) was the committee of primary jurisdiction for the plurality of suspension measures considered in the 114th Congress. Additional committees—such as Energy and Commerce, Homeland Security, Natural Resources, Foreign Affairs, and Veterans' Affairs—also served as the primary committee for a large number of suspension measures. Suspension motions are debatable for up to 40 minutes. In most cases, only a fraction of that debate time is actually used. In the 114th Congress, the average amount of time spent considering a motion to suspend the rules was 13 minutes and 10 seconds. The House adopted nearly every suspension motion considered in 2015 and 2016. Approval by the House, however, did not guarantee final approval in the 114th Congress. The Senate passed or agreed to 40% of the bills, joint resolutions, and concurrent resolutions initially considered in the House under suspension of the rules, and 276 measures were signed into law. This report briefly describes the suspension of the rules procedure, which is defined in House Rule XV, and provides an analysis of measures considered under this procedure during the 114th Congress. Figures and one table display statistics on the use of the procedure, including the prevalence and form of suspension measures, sponsorship of measures by party, committee consideration, length of debate, voting, resolution of differences between the chambers, and the final status of legislation. In addition, an Appendix illustrates trends in the use of the suspension procedure from the 110th to the 114th Congress (2007-2016).", "document_type": "crs"}
{"report": "The growth of the national debt, which is considered unsustainable under current policies, continues to be one of the central issues of domestic federal policymaking. This report examines alternative approaches to reducing annual budget deficits and decisions about how to bring the national debt under control over the long term. To do this, the report first examines historical trends in federal spending and revenue policy to illustrate both the challenges and trade-offs inherent to making choices between (1) limiting the provision of defense and domestic public goods, (2) reducing transfers to persons including entitlements for the elderly and those with low income, (3) reducing support for state and local governments, and (4) raising taxes. Using projections of the debt and deficit, the report then addresses how limiting reliance on one source of deficit reduction creates pressure on other sources. The federal government incurs a budget deficit when total spending exceeds revenues over the course of a fiscal year. Over the past 50 years, the federal government has, on average, run budget deficits of 2.9% of gross domestic product (GDP), though as seen in Figure 1 , the amount has fluctuated from a surplus of 2.3% of GDP in 2000 to a deficit of 9.8% of GDP in 2009. A portion of the budget outcomes is a function of general economic conditions, and the remainder is a function of policy choices. For example, deficits tend to rise during recessions (through a combination of decreased revenues and increased spending on programs like unemployment), whereas the opposite is generally true during economic expansions. Policy choices, such as the decline in defense spending after the dissolution of the Soviet Union in 1991, may change the budget situation due to changes in national priorities. The accumulation of net deficits over time results in the federal debt. As shown in Table 1 , the cumulative federal debt in 2018 was 78% of GDP. Of concern is that the federal budget deficit has resulted in the growth of the federal debt that has regularly exceeded the growth rate of the economy. The debt can grow without increasing the ratio of debt to GDP as long as it rises at a rate less than or equal to GDP growth. For example, if the debt is 80% of GDP and the economy is growing at 1.6%, a deficit of 1.28% of GDP (1.6% of 80%) will maintain the debt-to-GDP ratio. The FY2018 deficit is 4% of GDP—a situation viewed by most economists as unsustainable. Addressing a federal budget deficit that is unsustainable over the long run involves strategic choices. Fundamentally, the issues require deciding what government goods, services, and transfers are worth paying taxes for. Most people would agree that the country benefits from a wide range of government services—air traffic controllers, border security, courts and corrections, and so forth—provided by the federal government. Yet, as shown below, in 2007, the federal government provision of goods and services, outside of defense, constituted 10% of federal spending and 2% of GDP. Transfers, including interest payments, accounted for around 70% of the federal budget. Finding budget savings by reducing nondefense federal government services alone would fall short of what is needed to address the deficit. In 2018, transfers, including interest payments, accounted for 76% of the federal budget, up from 70% in 2007. Outside of the 9% provision for domestic goods, defense spending for goods and services constitutes about 15% of federal spending. In this area as well, there are limits to the savings that might be found without compromising national security. Therefore, to address the budget shortfalls facing the country over the long run, it is likely that (1) transfer payments, such as Social Security, Medicare, and Medicaid, to or on behalf of individuals (which already account for half of federal spending and are growing) must be reduced; (2) transfers to state and local governments must be reduced (which would shift the budget decisions to a different level of government); (3) taxes must be raised; or some combination of the three. The next section of this report examines the government's spending allocation, the method of its financing, and how these shares and sources have changed over time. It demonstrates that the surge in the debt is a recent phenomenon that has occurred with the recession and is inherently transitory. Going forward, however, as shown in the subsequent section, the growth in transfers to the elderly and spending for health care—a trend that has been under way for some time but was offset by a decline in spending for other purposes, relative to GDP—will increasingly contribute to unsustainable deficits. The following section addresses philosophies for approaching deficit reduction, as embodied in a number of proposals. It discusses how different approaches to and constraints imposed on deficit reduction will have consequences for the menus of other available choices. For example, if deficit reduction begins with a constraint that taxes will not rise, policy would almost certainly require significant cutbacks in Social Security and Medicare. If the benefits of these programs are to be maintained, an increase in taxes would likely be required. Central findings of this analysis include the following: A comparatively small share of federal spending is for the direct provision of domestic government goods and services. Transfers and payments to persons and to state and local governments constitute most of federal spending, about 75% of all federal spending. Defense spending, accounting for about 15% of federal spending, has declined as a share of output over the past 35 years, but it also tends to vary depending, in part, on the presence and magnitude of international conflicts. The problem with the debt lies not in the past but in the future, as spending growth for health and Social Security is projected to continue faster than the economy as a whole. The increase in debt, in turn, leads to a significant increase in interest payments. Because much of the pressure on future spending arises from imbalances in Social Security and Medicare Part A (Hospital Insurance) trust funds, keeping these funds and their sources of financing intact is a concern that could constrain choices. Preserving entitlements would likely require significant increases in taxes, such as raising rates, reducing tax expenditures, increasing other taxes, or introducing new revenue sources. Reductions in discretionary spending are insufficient to reduce the deficit to a sustainable level; thus, limiting taxes as a percentage of output or constraining the overall size of the government to current levels would likely require significant cuts in mandatory spending, including entitlement programs such as Social Security, Medicare, and Medicaid. Because the federal government provides about one-fifth of the revenue for state and local governments, cutbacks in transfers to these governments may, in part, shift the burden of providing services from the national to subnational governments rather than altering the overall size of government services. The objectives of government spending and taxes are generally viewed as providing for public and quasi-public goods, such as defense, law enforcement, infrastructure, and education; correcting market failures, including externalities (both negative, such as pollution, and positive, such as research and development); achieving distributive justice; and managing business cycles. Measured by the amount of spending, defense is the most important pure public good the federal government provides. Many public and quasi-public goods, as well as income-support programs, are provided by state and local governments, and some federal spending is through grants to state and local governments for these programs. For example, in FY2016, state governments received 29.1% of total revenues from federal transfers, and local governments received 3.8%. States also provide transfers to local governments, and local governments provide transfers among themselves as well. These intergovernmental transfers are important in evaluating budget proposals, because a reduction in transfers to state and local governments may in large part shift the burden to these governments rather than reduce the overall government role. Spending in the U.S. budget can be divided in various ways that are relevant to considering deficit reduction. In the discussion that follows, government spending is divided by whether the spending is to provide public goods or transfers, whether it is discretionary or mandatory (and the major categories within those divisions), and by function. The first approach to presenting spending distinguishes between the provision of goods and services (defense and nondefense) and transfers to persons or to state and local governments. This approach is not a typical way of presenting budget data. It is important to divide spending in this way, however, to address concerns about potential inefficiency in federal government operations, especially outside of defense, as it indicates the scope for cutbacks relative to the deficit. The second approach divides spending into discretionary (provided in annual appropriations acts) and mandatory (controlled by permanent laws, and including entitlements to benefits). It is associated with the procedures needed to alter spending. The third, a common way of presenting budget data, divides spending by function (defense, education, energy, health, etc.). Later, this section also discusses trends in federal taxes by source, tax structure, tax expenditures, and receipts and payments in the major trust funds. One way to look at spending is to examine the extent to which spending involves actual government consumption or production (that is, spending on the direct provision of goods and services) as compared with transfers, subsidies, and interest. The discussion in this section indicates that although total spending as a percentage of GDP fluctuated around 20% of GDP between 1973 and 2007, government involvement in the economy—narrowly defined as using resources to provide public goods directly—had fallen by a third and outside of defense had remained roughly constant and small (at around 2% of GDP). At the same time, transfers to persons increased by more than 40%, and transfers to state and local governments increased by less than 5%. Spending rose nearly 2% of GDP by 2018, primarily due to transfers to persons, whereas consumption continued to decline. Figure 2 shows how the economic form of federal spending has shifted since 1968. In calendar year 2007, 28% of government spending was categorized as consumption and involved the direct provision of goods and services. Of the remaining amount, 44% were transfers to persons, 13% transfers to state and local governments, 14% interest payments, and 2% subsidies. Although federal government spending amounted to 19.9% of output in 2007, federal government spending on the provision of public and quasi-public goods was 5.5% of output. Based on budget data reported subsequently, 3.8% was for defense, leaving 1.7% for nondefense. Because total nondefense discretionary spending was 3.4% of GDP, half of this amount was transfers. By 2018, with the economy at or near full employment, federal government consumption spending had declined to 5% of output, whereas transfers had increased. Government spending on nondefense goods and services was 1.9% of GDP, and defense spending was 3.2% of GDP. Budget data for FY2017 indicate that discretionary spending was 6.3% of GDP, with defense spending at 3.1% of GDP and nondefense at 3.2% of GDP. Thus, roughly 60% of nondefense spending, about 1.9% of GDP, was transfers at that time. State and local government spending (netting out transfers between these remaining two levels of government spending) in 2007 was 14% of output, and total spending by all forms of government (after netting out federal transfers) was 31.5% of output. A larger share of state and local spending (which includes federal government transfers), 69%, was in government provision of goods and services (consumption), with 21% in transfers to persons, 9% in interest payments, and less than 1% in subsidies. In the third quarter of 2018, state and local spending net of federal transfers was 14%, for a total of 32.5% for all government spending. Provision of goods and services was 64%; transfers were 26%; and interest was 9%. Combining all levels of government, in 2007, government production of goods and services was 15.2% of output, thus the federal government share (5.5%) was about one-third of the total provided by all levels of government. Subtracting 3.8% from the federal government share and the total share to eliminate national defense spending (shown subsequently), the federal share of nondefense provision of goods and services by all levels of government was 11%. In 2018, the nondefense share had risen to 14%, with the federal share (5% of output) remaining at 36%. Similar results are found when examining employment levels. Total government civilian employment in 2007 was 16% of total nonagricultural employment, with the federal government accounting for 2%, the state government accounting for 3.7%, and local government accounting for the remaining 10.4%. By September 2018, the employment share remained at about 15%, and each level of government maintained approximately the same shares (with local government falling to 9.6%). The share of federal government spending that goes to the direct provision of public or quasi-public goods (consumption) has declined over time, as shown in Table 2 , which compares 1980 with 2007 and 2018. The decline from 7.2% of GDP in 1980 to 5.5% of GDP in 2007 is largely due to a reduction in defense spending. The discussion in this section indicates that although total spending as a percentage of GDP fluctuated around 20% of GDP between 1973 and 2007, government involvement in the economy—narrowly defined as using resources to provide public goods directly—had fallen by a third and outside of defense had remained roughly constant and small (at around 2% of output). At the same time, transfers to persons increased by more than 40% and transfers to state and local governments increased by less than 5%. Spending rose nearly 2% of GDP by 2018, primarily due to transfers to persons, whereas consumption continued to decline. Budget accounts often classify spending in budget documents as mandatory or discretionary spending, along with subcategories of spending. Though technically classified as mandatory spending, interest payments tend to be listed separately because they are a consequence of past spending and tax policies. Discretionary spending is controlled by the annual appropriations process and is normally divided into defense and nondefense categories. Discretionary spending is where most of the public provision of goods and services occurs, but some discretionary spending is in the form of transfers. Mandatory spending is generally governed by a set of permanent statutory provisions, and some of these programs (such as Social Security and Medicare) are referred to as entitlements. Since the late 1960s, as shown in Figure 3 , defense spending has declined as a share of output, first as a result of the ending of the Vietnam War (by FY1981, defense spending was 5.2% of output). It rose in the 1980s and then fell, reaching 3.0% by 2001, before rising again with the Afghanistan and (second) Iraq wars. This pattern suggests that although defense spending may generally grow with the economy and be affected by other factors (such as moving to an all-volunteer force or the peacetime buildup in the 1980s), it also fluctuates depending on whether the United States is engaged in prolonged international conflicts. Nondefense discretionary spending has fluctuated much less, although it rose in the late 1970s, then reverted to historical levels. Nondefense discretionary funding, although small as a share of the budget and of GDP, is largely the spending that many people think of when they think of the direct provision of goods and services by the federal government. Mandatory spending, although it varies over time, has generally increased as a share of the economy since the 1960s. The increase is most pronounced for health spending and has grown relative to GDP due to rising health care costs, certain other benefit changes, aging, and increased life spans. Table 3 further disaggregates mandatory spending for selected years since the FY1980 (FY1980, FY2007, and FY2018). Overall discretionary spending over this time period declined from 9.9% of GDP to 6.2% of GDP, or a change of 36.9% (with declines of 35.4% for defense and 37.3% for nondefense discretionary spending), whereas total mandatory spending has increased by 35.9% over the same time period. Within mandatory spending, health spending (Medicare and Medicaid)—which has increased 223.5% since FY1980—primarily drives the overall increase in mandatory spending. This increase is attributed to changes in demographics from an aging population and medical cost growth primarily, although benefit changes also contribute to the increase. Spending for Social Security also rose 16.7% over this period—primarily due to number of Social Security beneficiaries and increased life expectancies. Other mandatory programs that provide benefits for low-income individuals, the unemployed, retirement programs for federal workers, and other purposes (such as agricultural support payments) have remained relatively constant or declined since FY1980. Another traditional way of viewing the budget is by budget function relating to the purpose of spending (education, health, etc.). Figure 4 shows federal spending by budget function since 1969. These comparisons, shown in Table 4 , provide a similar picture to the previous allocation: although total spending as a share of output has fluctuated somewhat from FY1980 to FY2018, the federal government has an increasing share of output in health and programs for the elderly, with declining shares for almost every other functional category. In FY2007, 64% of spending was for human resources, with 20% for defense, 9% for interest, and 5% for all other functions. In FY2018, the share devoted to human resources had further risen, whereas the share spent on national defense had declined. Table 4 presents these categories as a percentage of GDP and illustrates that the subcategories for many types of spending, which are those that represent direct provision of government goods and services, are small as a percentage of GDP. This section discusses four issues related to taxes: (1) the sources of tax revenue and their growth over time; (2) the differences in structure and distribution of revenue sources; (3) the size and distribution of tax expenditures (special income tax provisions such as exclusions, deductions, and credits); and (4) taxes that are specified as the revenue source for certain spending. The federal income tax system has several components. The largest component, in terms of revenue generated, is the individual income tax. For FY2018, an estimated $1.7 trillion, or 50% of the federal government's revenue, came from the individual income tax. The corporate income tax was estimated to generate another $218 billion in revenue in FY2018, or just under 7% of total revenue. Social insurance or payroll taxes generated an estimated $1.2 trillion, or 35% of revenue in FY2018. Estimates indicate that the remainder of federal revenue collected in FY2018 came from excise taxes (3%) or other sources (6%). The relative importance of these components can change over time, as seen in Figure 5 . The individual income tax, the largest single source of revenue as a percentage of GDP, has fluctuated considerably over time. Individual income tax revenues grew in the late 1970s due to bracket creep, reaching 9.4% in FY1981. The tax cuts in the Reagan Administration are the major reason revenues declined, falling to 7.9% in FY1990. Revenues increased slightly with the 1993 Clinton Administration tax increase ( P.L. 103-66 ), but the more significant growth occurred with the strong economic performance in the late 1990s, leading to a ratio of 9.9% in FY2000. They declined during the first decade of the 21 st century following the George W. Bush Administration tax cuts ( P.L. 107-16 ) and JGTRRA ( P.L. 108-27 ). Along with the individual income tax, total taxes have also fluctuated. Prior to the Bush tax cuts, total taxes dropped as low as 17.1% in FY1977 and rose as high as 20.6% in FY2001. During the 2007-2009 recession taxes fell to less than 15% of GDP. Corporate taxes have fluctuated as well, although largely due to economic conditions, whereas payroll taxes rose to around their current levels as a percentage of GDP by the mid-1980s, reached a peak of 6.8% in 2001, and have since declined slightly. Excise taxes have declined by two-thirds, and other revenue sources have remained about the same. Part of the decline in excise taxes is because these taxes are imposed on a per-unit basis and not indexed for inflation and, with the exception of tobacco taxes, have generally not been increased. These revenue sources differ in some important ways. Individual income taxes are progressive, have graduated rates, and can be revised in a variety of ways, including changing rates, deductions, exclusions, and credits. Income taxes are the main source of revenue for most federal spending outside of Social Security and Medicare Hospital Insurance (HI, whose benefits are less than half of Medicare spending). Corporate income taxes are levied at a flat rate after allowing for various deductions and credits. Estate taxes are also progressive, but they are a small share of government revenues and have been declining in magnitude over the past 20 years. Payroll taxes tend to fall more heavily on middle- and lower-income individuals. Payroll taxes, the next-largest source of revenue after individual income taxes, have flat rates (except for the Additional Medicare Tax) with an earnings cap for Social Security (but not Medicare). These taxes tend to be proportional, with a reduced burden on high-income taxpayers. Because of their simple structure, the main options for increasing revenues from this source are increasing rates and raising or eliminating the earnings cap. Social Security payroll taxes are the basic source of finance for Social Security, and they are linked to benefits so that larger taxes lead eventually to larger benefits, although there are progressive elements in the benefit formula. Medicare payroll taxes qualify individuals for Medicare HI coverage, but the Medicare benefits are the same for all recipients. Excise taxes , which largely apply to alcohol, tobacco, and transportation fuels, tend to be regressive and fall more heavily on middle- and lower-income individuals, but are also a smaller revenue source. Transportation fuel taxes are a major source of finance for highways, airports, and other transportation needs. Tax expenditures are revenue losses attributable to federal income tax laws that allow a special exclusion, exemption, deduction, credit, preferential tax rate, or deferred tax liability. The special tax credits and deductions in the income tax can also be viewed as a form of spending through the tax code. That is, one can view revenues as receipts without the special benefits and the special benefits from tax expenditures as spending. According to an FY1974-FY2004 Government Accountability Office (GAO) study, tax expenditures averaged 7.5% of GDP during that period. In FY2007, tax expenditures were 7.2% of GDP and about 36% of total government direct spending. In FY2018, tax expenditures were 7.2% of GDP and about 35% of government spending. From the perspective of dividing government activity between transfers and direct provision of public goods, as in Table 2 , tax expenditures are transfers and subsidies that go to persons, as is the case with the bulk of federal spending. From the perspective of discretionary versus mandatory spending, as in Table 3 , they are similar to a mandatory form of spending. Finally, from the perspective of budget function, as in Table 4 and as shown in Table 5 , which compares spending and tax expenditures by budget function for FY2018, the pattern of tax expenditures is quite different from that of spending. A much larger share of tax expenditures is for physical resources. For specific subcategories, the largest share of tax expenditures is for commerce and housing, a category that attracts a small share of spending. The size of this category reflects special benefits for earnings from capital income. It also reflects benefits for housing in the form of mortgage interest and property tax deductions and, to a lesser extent, exemption from capital gains tax on owner-occupied housing and the low-income housing credit. The relatively large share for general government reflects tax-exempt bonds and itemized deductions for state and local income and sales taxes. (These amounts could also be distributed across the functional categories of state spending and thus would be more broadly distributed.) Much of the benefit for tax-exempt bonds goes to education and highways, where funds are borrowed for capital improvements.) Tax expenditures also provide significant benefits for health through the exemption of employer-provided health insurance and for income security, largely through benefits for pensions and other retirement savings. As noted above, dedicated revenues finance spending on certain categories of services, some of which are termed trust funds and some special federal funds. There are about 200 trust funds, but only a few of them are important in terms of magnitude or for considering budgetary reform. In some cases, the trust funds lead to questions about addressing the deficit. Although some of these funds rely on contributions from general revenues, the Social Security and the Medicare HI trust funds primarily rely on payroll taxes. The largest trust funds relate to Social Security, which is divided into Old Age and Survivors Insurance (OASI) and Disability Insurance (DI), and Medicare, which is divided into Hospital Insurance Part A and Supplementary Medical Insurance (SMI) Parts B and D. Payroll taxes are the primary source of finance for Social Security and Medicare HI (also known as Medicare Part A). The funding of these programs is organized through trust funds that can also hold assets and earn interest. Medicare SMI, which pays for physician services and outpatient drugs, is financed primarily by a combination of premiums and general revenues. Table 6 shows the inflow of revenues and the payment of benefits in the three trust funds financed by payroll taxes. (This table does not include earnings from interest on government securities held by the funds and transfers of income taxes collected on Social Security benefits; it also does not reflect administrative costs.) As indicated in the table, OASI payroll tax revenue (as a percentage of GDP) has declined over the past 11 years, while payments have increased substantially. In contrast, DI and HI payroll tax revenues have been flat or increasing (as a percentage of GDP) over the same time period, while payments have been flat or increasing more modestly than OASI. By FY2018, payments for Social Security and Medicare benefits exceeded payroll tax collections. Because initial Social Security benefits are indexed to wages (and subsequently to prices), they tend to be a relatively constant share of output. Benefits have grown because of increasing longevity and an aging population. Revenues also tend to be a relatively constant share of output but were increased in the mid-1980s. Table 7 provides information on the income and outflow for the SMI trust fund. In FY1971, this fund was nearly equally financed by premiums paid by beneficiaries and federal contributions from general revenues. Although premiums have increased as a percentage of output, the vast majority of financing is now from general revenues. The premium share for Medicare Part B (physicians) fluctuated over time, but it is now set by law at 25% of the cost of funding Medicare Part B; the premiums share for Medicare Part D (drug) program is set at 25.5% of the estimated cost of the standard benefit. As these tables indicate, the size of these programs, particularly Medicare, has grown over time. SMI has grown faster than HI, and general revenue contributions have grown at a similar pace. SMI currently accounts for more than half the cost of Medicare. One open question surrounding the formulation of a long-run budget policy is whether to continue financing Social Security and Medicare HI from payroll taxes. In this case, both programs' future benefits are expected to outstrip future receipts and eventually draw down all the assets. The Social Security (OASI) trust fund is projected to run out of accumulated assets in 2034, and the HI trust fund is predicted to run out in 2026. Since its implementation in 1935, Social Security has been treated as a separate program, similar to a retirement plan, in which contributions (e.g., payroll taxes) during the working years create an entitlement to benefits in old age. A similar approach has been used for the more recently established Medicare HI. If these programs are to be kept separate, then they must be brought into balance separately and, to maintain the historic source of financing, any shortfall not addressed through benefit cuts or delayed eligibility must be addressed through increases in a specific tax—the payroll tax. Federal debt may be divided into two major categories: (1) debt held by the public, which is the sum of accrued net deficits and outstanding money from federal credit programs; and (2) intragovernmental debt, which is the amount of federal debt held by other federal agencies. As of February 28, 2019, the amount of federal debt outstanding was $22.116 trillion, with 73.5% of that debt held by the public and 26.5% held as intragovernmental debt. Figure 6 shows the federal debt as a share of the economy from FY1969 projected through FY2023. Individuals, firms, the Federal Reserve, state and local governments, and foreign governments are eligible to purchase publicly held debt. Such debt may be acquired directly through the auction process from which most publicly held debt is initially sold or on the secondary market if the debt is deemed \"marketable,\" or eligible for resale. As of February 28, 2019, the total amount of publicly held debt outstanding was $16.251 trillion. Publicly held debt is the measure of concern for the sustainability of the debt since it measures debt owned outside of the government. This debt grew rapidly as a percent of GDP during the 2007-2009 recession and afterward and has continued to grow (while intergovernmental debt relative to GDP has declined). The majority of publicly held debt is marketable, and it includes all Treasury notes, bonds, bills, Treasury Inflation Protected Securities (TIPS), and Treasury-issued Floating Rate Notes (FRNs). Nonmarketable debt held by the public is composed of U.S. savings bonds, State and Local Government Securities (SLGS), and other, smaller issues. As of February 28, 2019, 96.6% of publicly held issues, or $15.741 trillion, was marketable. Unlike publicly held debt, intragovernmental debt issuances are almost exclusively nonmarketable. As of February 28, 2019, of the $5.865 trillion in total intragovernmental debt, $0.029 trillion (0.5%) was marketable debt. Intragovernmental debt is held by components of the federal government, with the majority of nonmarketable debt held by trust funds devoted to Social Security and military and federal worker retirements and marketable debt held by the Federal Financing Bank (a government corporation created to reduce the cost of federal borrowing). Intragovernmental debt has declined in recent years as major trust funds have begun to finance benefits from assets. Because intragovernmental debt is held only in federal government accounts, such debt cannot be accessed by the outside institutions. Conversely, the bonds that finance publicly held debt activity may compete for assets in private and financial markets. Public debt issues may be a particularly attractive collateral option on the secondary market if the federal government is perceived as a safe credit risk. The CBO budget baseline projects that over the next 10 years, the deficit will average roughly 4.4% of GDP. This is 1.5% of GDP more than the average deficit (i.e., 2.9% of GDP) over the preceding 50 years. Figure 7 shows the federal budget deficit (surplus) from FY1968 through projected deficits in FY2048. Most economists agree that deficits are sustainable as long as the deficits as a share of the economy are less than the growth rate of the economy. The CBO budget baseline assumes that economic growth will be just under 1.8% over the next 10 years. This growth rate is less than both the average deficit over the preceding 50 years (2.9% of GDP) and the projected federal deficits over the next 10 years (4.4% of GDP). Although the budget situation over the next 10 years is challenging, the long-term outlook is even more daunting—with the budget deficit estimated to be an average of 8.4% of GDP from FY2039 to FY2048. As deficits are a result of the combination of spending and tax decisions, examining them separately may offer some insights. Figure 8 shows CBO's analysis of federal spending projected for FY2028 and FY2048 compared with the selected historical level of spending—showing total spending growing by 14.6% as a percentage of GDP in FY2028 and 42.2% in FY2048 compared with FY2018. Breaking down the categories shows projected spending increases on Social Security of 28.6% (1.4% of GDP), health programs of 76.9% (4.0% of GDP), and interest payments of 293.8% (4.7% of GDP) over the next 30 years. During the same period, other projected spending (including both defense and nondefense discretionary spending) is projected to decrease 14.6% (1.3% of GDP). The trend in the share of spending going toward Social Security and major health care programs and away from discretionary spending choices seen in Figure 8 is a continuation of the trend seen in Figure 3 . In FY1988, 30.6% of federal spending went to Social Security and major health program spending. By FY2018, the share was 49.0% of the federal budget and is estimated to be 52.9% of the federal budget in FY2048. In addition, there is significant growth in the share of federal spending used to pay interest on the debt due to the continuing deficits and growing debt. Similar to projected federal spending, federal revenue over the next 10 years is projected to grow above its 50-year average of 17.4% of GDP—assuming that the temporary provisions contained in P.L. 115-97 are allowed to expire as scheduled. As Figure 9 shows, CBO's projections of total federal revenue are projected to grow by 11.4% as a percentage of GDP in FY2028 and 19.3% in FY2048 compared with FY2018. The increasing reliance on personal income taxes as a revenue source, seen in Figure 9 , is a continuation of the trend seen in Figure 5 . In FY1988, 44.3% of federal revenue (8.2% of GDP) came from individual income taxes, and 10.2% of federal revenue (1.2% of GDP) came from corporate income taxes. By FY2018, the shares were 49.4% (9.8% of GDP) and 7.2% (1.5% of GDP) of federal revenue, respectively, and are estimated to be 55.1% (10.9% of GDP) and 7.1% (1.4% of GDP) of federal revenue in FY2048, respectively. How much should be done to address the budget issues, and how quickly, is a topic of debate. The relative strength of the current U.S. economy makes a case for addressing the deficit in the near term. The faster the debt-to-GDP ratio grows, the more burdensome interest payments become and the more the debt compounds. CBO also projects that a sustained reduction in the deficit to 1.9% of GDP would be required to stabilize debt at 78% of GDP, its current level, under the standard baseline, whereas a 3.0% cut would be required to bring debt to the average of the past 50 years (41% of GDP). If the reduction is delayed for 5 years, the required decreases would be 2.3% and 3.6% of GDP; if delayed for 10 years, 2.9% and 4.6% of GDP. However, addressing the deficit quickly may temporarily dampen economic activity. In addition, if the measures to address the deficit are implemented too quickly, some people may not have sufficient time to plan or adjust to the new set of rules. The need to not move too slowly or quickly can also affect the optimal approaches to deficit reduction. For example, it is difficult to change current entitlements for the elderly (such as Social Security, Medicare, and part of Medicaid, which funds nursing home care). Many retired individuals have little leeway to adjust to such changes and could be particularly burdened by benefit reductions, which suggests that benefit changes be adopted in the near term but applicable to the future. Changing discretionary spending or increasing taxes can be achieved more quickly, although, as discussed below, the long-run gap between spending and taxes is too large to be addressed with discretionary spending revisions alone. In addition to its standard budget baseline, CBO also regularly analyzes the budgetary effects of different alternative baselines. One regularly estimated baseline maintains the current policies in place at the time of the estimate—referred to as a current policy baseline. This baseline is presented in Table 8 along with the standard—or current law—extended baseline. These baselines differ in a number of ways. Revenues are lower under the alternative baseline as it assumes an extension of the individual income tax provisions of P.L. 115-97 , which are scheduled to expire in 2026 under current law. In addition, noninterest spending is higher under the alternative baseline, which assumes limits on discretionary spending are not to take effect and the base for emergency spending is set at historical levels. Under the alternative baseline, deficit reduction becomes more difficult because debt and interest payments have grown more quickly. The Peter G. Peterson Foundation's 2015 Fiscal Summit (Solutions Initiative III) brought together the American Action Forum, the American Enterprise Institute, the Bipartisan Budget Center, the Center for American Progress, and the Economic Policy Institute to develop specific, \"scoreable\" policy proposals that would place the federal budget on a sustainable long-term path. Each plan provided a roadmap to reduce budget deficits and stabilize the debt, although they differed in the details. All of the plans aimed at reducing the debt-to-GDP ratio, but they varied in spending, taxes, and the deficit relative to output. For those plans in which measures were reported (for 2040), spending-to-GDP ratios ranged from 17.8% to 24.3%, whereas taxes-to-GDP ratios varied from 21.2% to 23.5%. The resulting fiscal outcomes ranged from a surplus of 4.5% to a deficit of 1.9%. A debt level can still be sustainable with some continuing deficit. The deficit causes the debt to grow, but as long as it is not large enough to cause debt to grow faster than GDP, the debt-to-GDP ratio will be stable or in decline. Although summarizing the plans is beyond the scope of this report, Table 9 shows the five plans along with the contemporaneous (2015) CBO baseline projections and the most recent (2018) CBO baseline projection. All of the proposed plans would have increased revenue collections relative to both CBO projections and reduced spending relative to the most recent CBO baseline. Discussions on how to reduce the budget deficit often begin narrowly, then expand to broader proposals. This section examines several of these more narrow beginnings to illustrate the challenges of reducing the deficit sufficiently to address the long-term challenge. Discretionary spending, as discussed above, whether for defense or nondefense purposes, does not cause long-run growth in spending and has historically been relatively constant or in decline as a percentage of GDP. Discretionary spending, however, is targeted as a source of budget savings in the proposals and, because it is easier to change in the short run, may be a source of initial savings. Caps on discretionary spending were the main source of projected deficit reduction enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The CBO baseline incorporates the reductions from the BCA through FY2021 and then assumes that discretionary spending will grow at the rate of inflation going forward. As shown in the historical analysis from Table 3 and Figure 3 , defense and nondefense discretionary spending has been higher in the past, and hence cuts would lead to a lower level of government services than has traditionally been the case. (Defense spending, as noted above, also fluctuates depending on international conflicts, although it has increased to respond to perceived threats or other changes such as an all-volunteer force.) At the same time, proposals presented in the Solutions Initiative III did not spell out the specific cuts proposed, an important issue given the diversity in the types of programs in defense and nondefense discretionary spending. That is, these plans generally directed agencies to cut spending without outlining the specifics. Thus, the plans did not indicate, for example, whether fewer prisons will exist, grants for special-needs children will be reduced, a smaller military was to be maintained, fewer highways will be built or repaired, etc. However, these reductions might have needed to be significant. For example, Solutions Initiative III plans proposed cuts to total discretionary spending that were on average 19% below the CBO baseline. Nevertheless, it is unlikely that reductions in discretionary spending could close much of the long-run deficit gap. The Solutions Initiative III plans' proposed cuts in discretionary spending would have reduced overall discretionary spending by about 1.4 percentage points of GDP on average. Yet, as seen in Table 9 , CBO estimated the gap between spending and taxes by FY2040 to be 5.9% of GDP, and it has subsequently grown to an estimated 7.6% of GDP. Thus, closing this gap is likely to require cuts in other spending, including entitlements, increases in tax revenues, or a combination thereof. CBO's 2018 study on budget options contained some specific options for cuts in discretionary spending, which might suggest the types of cuts that might be considered in these proposals, although most of these were small. For example, implementing the 10 largest discretionary options listed in the CBO report would reduce spending by up to $148.1 billion per year, or 0.7% of GDP. Doing so would, however, require reducing defense spending by 10%, eliminating the Section 8 housing voucher and the Head Start programs, and reducing federal highway funding by roughly 25% along with other program reductions. In contrast, the Solutions Initiative III plans would have on average required reductions twice as large. Since its inception in the 1930s, Social Security has been financed through a trust fund mechanism in which benefits were financed from payroll tax contributions. Payroll taxes are imposed at a flat rate fixed in statute, with a cap on income covered that is indexed to wages. Because of increasing disparities in income, this ceiling falls lower in the income distribution than it has in the past. Benefits, although they are linked to contributions (e.g., lifetime payroll taxes), are progressive in that the replacement rate for wages falls as wages rise. Because of the link between wages and benefits, many view Social Security like a pension, with income in retirement earned through contributions. With Social Security, there is a link between contributions and benefits. Because the trust fund does not accumulate retirement contributions in the same way as a pension plan (but rather pays most benefits out of current contributions), the trust fund's financing was affected by demographics. Currently, the trust fund is spending more in benefits than it collects in payroll taxes and uses interest earnings to fill the gap. Benefits, as shown in Table 6 , are growing faster than payroll taxes. As a result, under current policy, the Social Security (OASI) trust fund has been using its assets and will become insolvent by 2034, at which point it will have income sufficient to pay about three-fourths of benefits. Moreover, if a position is taken that taxes cannot be increased (as discussed below) or that payroll tax collections are not to be increased, then either the close link between payroll contributions and earnings will have to be abandoned or the burden of restoring solvency will fall on cutting benefits (by roughly 25%). The plans presented in the Solutions Initiative III provide a range of alternatives. On average, they would have decreased Social Security spending by 3.2%, or 0.2% of GDP. While not quantified in the report, three of the five plans presented would have increased payroll taxes on higher earners. CBO's 2018 report identifies several options related to Social Security benefits and payroll taxes. The two largest options to reduce Social Security spending—lower initial benefit amounts and grow the benefits more slowly over time—were estimated to reduce Social Security spending by up to an average of 0.2% of GDP per year over the next 10 years. The two largest options to increase payroll tax collections—raise payroll tax rates and increase the contributions cap—were estimated to raise up to 1.2% of GDP per year of payroll tax revenue over the next 10 years. The Medicare HI trust fund has been affected over time (as has Medicare in general) by demographics and, more importantly, by the growth in health care expenditures per capita due to technical advances and cultural expectations. The plans presented in the Solutions Initiative III provide a varied selection of options—though all advocated for various forms of cost containment. CBO's 2018 report identifies several options related to Medicare benefits and payroll taxes. The largest option to reduce Medicare spending—by increasing cost sharing and restricting Medigap insurance—was estimated to reduce Medicare spending by up to an average of 0.05% of GDP per year over the next 10 years. The two largest options to raise revenue associated with Medicare—raising payroll tax rates and increasing premiums on Medicare Part B and D—were estimated to collectively raise up to 1.0% of GDP per year of payroll tax revenue over the next 10 years. One philosophy behind the viewpoint of keeping revenues fixed relative to GDP is that government spending takes away from private choices and creates inefficiency and that taxes impose distortions, inhibiting economic activity. (This viewpoint depends on strong assumptions about benefits generated by federal spending.) By limiting revenues available, the scope of the federal government would be constrained. An argument is also sometimes made that tax increases would inhibit economic activity so much that revenues would decline rather than rise. However, empirical evidence does not generally support this view. If revenues are limited, significant pressure would be placed on major entitlements. For example, Social Security, health spending, and interest alone are projected to total 19.2% of GDP in FY2040. If revenues are around 19.4% of GDP, 0.2% of GDP is left for everything else. (In the CBO 2018 baseline, this amount was 0.1% of GDP.) The budget situation would be more constrained if current policies scheduled to expire are extended. Defense, nondefense discretionary, and other mandatory programs are projected to amount to 6.9% of GDP in FY2040 (7.6% of GDP in the CBO 2018 baseline). Thus, it would appear that major reductions in Social Security and health spending would be required to constrain tax levels at current percentages of GDP. The Solutions Initiative III proposals all choose to raise additional revenue, which reduces the required cutbacks in Social Security and health spending to address the long-run deficit. As seen in Table 9 , the proposals would have increased taxes as a percentage of output relative to the CBO 2015 baseline to an average of 22.0% of GDP (an increase of 2.3% of GDP relative to the 2015 CBO baseline). This additional revenue allows the Solutions Initiative III proposals to achieve their policy goal with reductions in Social Security and health care spending of 0.9% of GDP. Although the Solutions Initiative III plans and their approaches are illustrative, they are also suggestive of what would likely be necessary to hold the tax revenues fixed and address the long-run deficit: major changes to government programs for health care and other entitlements. To examine the other side of this coin, consider what would be required to protect entitlements. Protecting entitlements reflects the view that government should maintain its social safety net for lower-income persons and programs for the elderly, including provisions for health care, because they are important components of maintaining a reasonable standard of living. The Social Security trust funds hold sizable assets, accumulated from prior years of cash surpluses that can be used to support the payment of future benefits. Medicare HI also has accumulated surpluses that will maintain benefits for some years to come. Nevertheless, neither of these plans is sustainable in its current formulation, and the shortfall in revenues relative to payments contributes to the overall deficit. If maintaining these programs is the policy goal, taxes would need to be increased—as it is unlikely that discretionary spending or other non-entitlement spending alone would fully address the long-run deficit. Is there a justification for increasing the size of government to continue the present Social Security and health benefit payments? It is useful to consider separately Social Security, whose issues arise from demographics, and health care, whose issues arise from a combination of demographics and health care costs. Social Security benefits are expected to rise from the current 4.95% of output to 6.29% in FY2035. The problem with Social Security funding did not arise from the baby boom; it arose from the increase in life span whose pressures on the system were masked for a time by the growth in the labor force (both from the baby boom and the entry of women into the labor force). Unlike health care, Social Security benefits are not expected to grow continuously but to stabilize over time so that benefits and costs are relatively constant (with benefits around 6.3% and revenues about 4.4% of GDP). Therefore, a range of tax increases, as well as benefit cuts, could bring the program into permanent balance. Social Security has been justified due to a number of market failures, and given these justifications, a case can be made that solutions that raise taxes are more equitable than those that reduce benefits. A mixed option, which affects both taxes and benefits, would be to increase the retirement age, although such an increase would put pressure on the disability-insurance program because some individuals will find it more difficult to work longer and would disproportionally affect low-income workers. This assessment considers outcomes in the steady state. There is also the issue of which generation bears the burden during the transition. The more the system relies on tax increases as opposed to benefit cuts in the short and medium term, the more the burden is shifted to younger generations. Similar life-cycle arguments could be applied to any program for the elderly—including Medicare and nursing home costs under Medicaid—to the extent that the program's costs increase because of longevity. These programs are financed by a combination of payroll taxes and general revenues, but most of these taxes would be collected during most individuals' working years. Cost increases for health care are a different matter, in part because they seem to be growing continuously and in part because they can be viewed in different ways. To the extent that rising costs reflect better medical care that extends and improves the quality of life, spending more money on health care may appropriately reflect preferences of individuals whose higher incomes permit them to spend more of their resources in this area. However, to the extent that rising medical costs reflect serious inefficiencies in the system arising from failure to allocate resources by price and causing patients and their physicians to consume large and inefficient amounts of health care, then increased benefits may not be justified. If benefits are to be largely maintained, and because it is relatively clear that cutting other forms of spending will probably not be adequate, what are the tax options? Basically, these options, some of which are discussed in a number of the budget proposals, are raising income tax rates, broadening the income tax base through reductions in tax expenditures, increasing other taxes (such as payroll and excise taxes), and introducing new taxes (such as a value-added tax or a carbon tax). Rates can easily be varied, and several of the proposals included in the CBO Budget Options incorporate rate changes. The barriers for rate increases might be viewed as largely political rather than technical, and top tax rates in the past have been much higher than they are today. Although tax expenditures have received much attention and eliminating or curtailing them have been included in various budget proposals, policymakers face significant political and technical barriers to implementing changes. Some tax expenditures are technically difficult to eliminate (especially employer fringe benefits), some are valued as part of the social safety net (such as the earned income credit or exclusion of transfers), some are desirable for other reasons, and some are so politically popular (e.g., the home mortgage interest deduction) that eliminating them or scaling them back could be difficult. For example, considering technical challenges alone, four of the Solutions Initiative III proposals would have eliminated or limited the exclusion of employer health insurance, the largest individual tax expenditure, which accounts for 11.9% of the total revenue forgone. If including these expenditures as income, fairly designing an inclusion is very difficult because the value of insurance varies, for example, with the employee's age and other characteristics. If not allowed to vary by age, young employees who work for firms with higher average employee ages will be imputed more income than employees working for firms with younger employees. Potentially more serious imputation problems arise with valuing the tax expenditure associated with defined benefit pension plans, which accounts for 7.2% of the total. Problems arise with regard to this tax expenditure because of defined benefit pension plans, whose benefits are difficult to allocate because they ultimately depend on future work history with the firm. At the same time, the Solutions Initiative III proposals also envision eliminating a broad array of tax expenditures. If used to generate additional revenue, reducing tax expenditures could result in significant progress toward reducing the deficit. One study, for example, suggests that a more realistic appraisal of tax expenditure options, taking into account technical barriers, political barriers, and justification for some provisions, would increase income-tax revenues by about 15%. Two other types of taxes that might be altered are the payroll and excise taxes. For example, some of the Solution Initiative III proposals would have raised or eliminated the cap on earnings for payroll taxes. Other options include raising rates and expanding the base to include fringe benefits, such as pension contributions and health care. (Imputing income, however, as noted above, may be problematic.) A number of options could significantly extend solvency to the Social Security trust fund. Revenue could also be raised by taxing Social Security benefits in the same way as pensions, and this revenue, although considered as part of tax expenditures, could be designated to finance Social Security benefits. In addition, proposals have included increases in gasoline taxes to provide additional funding for highways and increases in alcohol taxes, whose real value has been declining since 1991. Finally, there are options for additional types of taxes. Three new tax sources that have been included in the proposals are value-added taxes and carbon taxes (revenue could also be collected through an auction of carbon rights through a cap-and-trade system). Both value-added taxes and carbon taxes could raise significant amounts of additional revenues—$1.9 trillion and $1.1 trillion, respectively, over 10 years, according to CBO. These revenue sources differ in the incentives they create and also in their progressivity. Because income taxes tend to fall more heavily than other taxes on high-income individuals and tax expenditures tend to benefit higher-income individuals, these changes would likely add to the progressivity of the system. Changes in payroll rates would tend to be proportional and affect higher-income individuals less, although raising the wage cap would concentrate the effect on higher-income workers. Flat-rate consumption taxes, including value-added taxes, carbon taxes, and specific excise taxes (such as those on gasoline, alcohol, and sugared beverages) tend to be regressive. A combination of changes could, however, achieve approximately the same distribution as current revenues. To what extent, if any, the Solutions Initiative III proposals would have reduced transfers to state and local governments was not generally specified. This is because the details of discretionary spending (other than caps and limits) was done at a highly aggregated level. As these were not generally spelled out, some of these reductions could have reduced transfers to state and local governments in areas such as education, transportation, and community development where states directly provide the services. In addition, the state and local governments administer many entitlements, for both health and income security, with federal transfers. Two of the Solutions Initiative III proposals would have reduced federal transfers to the state for Medicaid. As noted above, federal transfers to state and local governments are 2.8% of output and constitute 33% of the receipts of these governments. State and local governments also benefit from tax expenditures that allow itemized deductions for state and local taxes and exclusions for interest on state and local bonds. Depending on how these governments respond, restrictions that affect state and local transfers could largely shift the burden of spending from federal to subnational governments.", "summary": "The growth of the national debt, which is considered unsustainable under current policies, continues to be one of the central issues of domestic federal policymaking. Addressing a federal budget deficit that is unsustainable over the long run involves choices. Fundamentally, the issues require deciding what government goods, services, and transfers are worth paying taxes for. Most people would agree that the country benefits from a wide range of government services—air traffic controllers, border security, courts and corrections, and so forth—provided by the federal government. Yet federal government provision of goods and services comprises only a modest portion of the federal budget. Transfers, including interest payments, accounted for around 75% of the federal budget. Central findings of this analysis include the following: A comparatively small share of federal spending is for the direct provision of domestic government goods and services. Transfers and payments to persons and to state and local governments constitute most of federal spending, about 75% of all federal spending. Defense spending, accounting for about 15% of federal spending, has declined as a share of output over the past 35 years, but it also tends to vary depending, in part, on the presence and magnitude of international conflicts. The problem with the debt lies not in the past but in the future, as growth in spending for health and Social Security is projected to continue faster than the economy as a whole. The increase in deficits and debt, in turn, leads to a significant increase in interest payments. Because much of the pressure on future spending arises from imbalances in Social Security and Medicare Part A (Hospital Insurance) trust funds, keeping these funds and their sources of financing intact is a concern that could constrain choices. Preserving entitlements would likely require significant increases in taxes, such as raising rates, reducing tax expenditures, increasing other taxes, or introducing new revenue sources. Reductions in discretionary spending are insufficient to reduce the deficit to a sustainable level, so limiting taxes as a percentage of output or constraining the overall size of the government to current levels would likely require significant cuts in mandatory spending, including entitlement programs such as Social Security, Medicare, and Medicaid. Because the federal government provides about one-fifth of the revenue for state and local governments, cutbacks in transfers to these governments may, in part, shift the burden of providing services from the national to subnational governments rather than altering the overall size of government services.", "document_type": "crs"}
{"report": "The Federal Communications Commission (FCC) is an independent federal agency, with its five members appointed by the President, subject to confirmation by the Senate. It was established by the Communications Act of 1934 (1934 Act, or \"Communications Act\") and is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. The mission of the FCC is to ensure that the American people have available, \"without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges.\" The 1934 Act is divided into titles and sections that describe various powers and concerns of the commission. Title I—FCC Administration and Powers. The 1934 Act originally called for a commission consisting of seven members, but that number was reduced to five in 1983. Commissioners are appointed by the President and approved by the Senate to serve five-year terms; the President designates one member to serve as chairman. Title II—Common carrier regulation, primarily telephone regulation, including circuit-switched telephone services offered by cable companies. Common carriers are communication companies that provide facilities for transmission but do not originate messages, such as telephone and microwave providers. The 1934 Act limits FCC regulation to interstate and international common carriers, although a joint federal-state board coordinates regulation between the FCC and state regulatory commissions. Title III—Broadcast station requirements. Much existing broadcast regulation was established prior to 1934 by the Federal Radio Commission, and most provisions of the Radio Act of 1927 were subsumed into Title III of the 1934 Act. Title IV—Procedural and administrative provisions, such as hearings, joint boards, judicial review of the FCC's orders, petitions, and inquiries. Title V—Penal provisions and forfeitures, such as violations of rules and regulations. Title VI—Cable communications, such as the use of cable channels and cable ownership restrictions, franchising, and video programming services provided by telephone companies. Title VII—Miscellaneous provisions and powers, such as war powers of the President, closed captioning of public service announcements, and telecommunications development fund. The FCC is directed by five commissioners appointed by the President and confirmed by the Senate for five-year terms (except when filling an unexpired term). The President designates one of the commissioners to serve as chairperson. Three commissioners may be members of the same political party as the President and none can have a financial interest in any commission-related business. Ajit Pai, Chair (originally sworn in on May 14, 2012; designated chairman by President Trump in January 2017 and confirmed by the Senate for a second term on October 2, 2017); Michael O'Rielly (sworn in for a second term on January 29, 2015); Brendan Carr (sworn in on August 11, 2017); Jessica Rosenworcel (sworn in on August 11, 2017); and Geoffrey Starks (sworn in on January 30, 2019). The day-to-day functions of the FCC are carried out by 7 bureaus and 10 offices. The current basic structure of the FCC was established in 2002 as part of the agency's effort to better reflect the industries it regulates. The seventh bureau, the Public Safety and Homeland Security Bureau, was established in 2006, largely in response to Hurricane Katrina. The bureaus process applications for licenses and other filings, analyze complaints, conduct investigations, develop and implement regulatory programs, and participate in hearings, among other things. The offices provide support services. Bureaus and offices often collaborate when addressing FCC issues. The bureaus hold the following responsibilities: Consumer and Governmental Affairs Bureau—Develops and implements consumer policies, including disability access and policies affecting Tribal nations. The Bureau serves as the public face of the Commission through outreach and education, as well as responding to consumer inquiries and informal complaints. The Bureau also maintains collaborative partnerships with state, local, and tribal governments in such critical areas as emergency preparedness and implementation of new technologies. In addition, the Bureau's Disability Rights Office provides expert policy and compliance advice on accessibility with respect to various forms of communications for persons with disabilities. Enforcement Bureau—Enforces the Communications Act and the FCC's rules. It protects consumers, ensures efficient use of spectrum, furthers public safety, promotes competition, resolves intercarrier disputes, and protects the integrity of FCC programs and activities from fraud, waste, and abuse. International Bureau—Administers the FCC's international telecommunications and satellite programs and policies, including licensing and regulatory functions. The Bureau promotes pro-competitive policies abroad, coordinating the FCC's global spectrum activities and advocating U.S. interests in international communications and competition. The Bureau works to promote high-quality, reliable, interconnected, and interoperable communications infrastructure on a global scale. Media Bureau—Recommends, develops, and administers the policy and licensing programs relating to electronic media, including broadcast, cable, and satellite television in the United States and its territories. Public Safety and Homeland Security Bureau—Develops and implements policies and programs to strengthen public safety communications, homeland security, national security, emergency management and preparedness, disaster management, and network reliability. These efforts include rulemaking proceedings that promote more efficient use of public safety spectrum, improve public alerting mechanisms, enhance the nation's 911 emergency calling system, and establish frameworks for communications prioritization during crisis. The Bureau also maintains 24/7 operations capability and promotes Commission preparedness to assist the public, first responders, the communications industry, and all levels of government in responding to emergencies and major disasters where reliable public safety communications are essential. Wireless Telecommunications Bureau—Responsible for wireless telecommunications programs and policies in the United States and its territories, including licensing and regulatory functions. Wireless communications services include cellular, paging, personal communications, mobile broadband, and other radio services used by businesses and private citizens. Wireline Competition Bureau—Develops, recommends, and implements policies and programs for wireline telecommunications, including fixed (as opposed to mobile) broadband and telephone landlines, striving to promote the widespread development and availability of these services. The Bureau has primary responsibility for the Universal Service Fund which helps connect all Americans to communications networks. The offices hold the following responsibilities: Administrative Law Judges—Composed of one judge (and associated staff) who presides over hearings and issues decisions on matters referred by the FCC. Communications Business Opportunities—Promotes competition and innovation in the provision and ownership of telecommunications services by supporting opportunities for small businesses as well as women and minority-owned communications businesses. Economics and Analytics—Responsible for expanding and deepening the use of economic analysis into Commission policymaking, for enhancing the development and use of auctions, and for implementing consistent and effective agency-wide data practices and policies. The Office also manages the FCC's auctions in support of and in coordination with the FCC's Bureaus and Offices. In January 2019, the FCC voted along party lines to eliminate the Office of Strategic Planning and Policy Analysis and replace it with the Office of Economics and Analytics. Engineering and Technology—Advises the FCC on technical and engineering matters. This Office develops and administers FCC decisions regarding spectrum allocations and grants equipment authorizations and experimental licenses. General Counsel—Serves as the FCC's chief legal advisor and representative. Inspector General—Conducts and supervises audits and investigations relating to FCC programs and operations. Legislative Affairs—Serves as the liaison between the FCC and Congress, as well as other federal agencies. Managing Director—Administers and manages the FCC. Media Relations—Informs the media of FCC decisions and serves as the FCC's main point of contact with the media. Workplace Diversity—Ensures that FCC provides employment opportunities for all persons regardless of race, color, sex, national origin, religion, age, disability, or sexual orientation. Additionally, an FCC Secretary serves to preserve the integrity of the FCC's records, oversee the receipt and distribution of documents filed by the public through electronic and paper filing systems, and give effective legal notice of FCC decisions by publishing them in the Federal Register and the FCC Record . The current FCC Strategic Plan covers the five-year period FY2018-FY2022. The plan outlines four goals: Closing the Digital Divide—Broadband is acknowledged as being critical to economic opportunity, but broadband is unavailable or unaffordable in many parts of the country. The FCC is to seek to help close the digital divide, bring down the cost of broadband deployment, and create incentives for providers to connect consumers in hard-to-serve areas. Promoting Innovation—Fostering a competitive, dynamic, and innovative market for communications services is a key priority for the FCC. The FCC plans to promote entrepreneurship, expand economic opportunity, and remove barriers to entry and investment. Protecting Consumers and Public Safety—Serving the broader public interest is the FCC's core mission. The FCC plans to work to combat unwanted and unlawful robocalls, make communications accessible for people with disabilities, and protect public safety (e.g., ensuring delivery of 9-1-1 calls, restoring communications after disasters). Reforming the FCC's Processes—One of the chairman's top priorities has been to implement process reforms to make the work of the FCC more transparent, open, and accountable to the public. The FCC plans to modernize and streamline its operations and programs to improve decisionmaking, build consensus, and reduce regulatory burdens. The FCC has identified performance objectives associated with each strategic goal. Commission management annually develops targets and measures related to each performance goal to provide direction toward accomplishing those goals. Targets and measures are published in the FCC's Performance Plan, and submitted with the commission's annual budget request to Congress. Results of the commission's efforts to meet its goals, targets, and measures are found in the FCC's Annual Performance Report published each February. The FCC also issues a Summary of Performance and Financial Results every February, providing a concise, citizen-focused review of the agency's accomplishments. Since the 110 th Congress, the FCC has been funded through the House and Senate Financial Services and General Government (FSGG) appropriations bill as a single line item. Previously, it was funded through what is now the Commerce, Justice, Science appropriations bill, also as a single line item. The FCC annually collects and retains regulatory fees to offset costs incurred by the agency and to carry out its functions. Since 2009 the FCC's budget has been derived from regulatory fees collected by the agency rather than through a direct appropriation. The fees, often referred to as \"Section (9) fees,\" are collected from license holders and certain other entities (e.g., cable television systems). The regulatory fees do not apply to governmental entities, amateur radio operator licensees, nonprofit entities, and certain other non-commercial entities. The FCC is authorized to review the regulatory fees each year and adjust them to reflect changes in its appropriation from year to year. The Commission originally implemented the Regulatory Fee Collection Program by rulemaking on July 18, 1994. The most recent regulatory fee order was released by the Commission on August 29, 2018. The FCC's budgets from FY2010 to FY2020 are in Figure 1 . On March 23, 2018, the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (the \"RAY BAUM'S Act\" or \"2018 Act\") became law as part of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). The 2018 Act requires the FCC to transfer all excess collections for FY2018 and prior years to the General Fund of the U.S. Treasury for the sole purpose of deficit reduction. The 2018 Act also requires the Commission to transfer any excess collections in FY2019 and in subsequent years to the General Fund of the U.S. Treasury for the sole purpose of deficit reduction. On October 1, 2018, the Commission transferred over $9 million in excess collections from FY2018 as well as approximately $112 million in excess collections from FY2017 and prior years to the General Fund of the U.S. Treasury. For FY2020, the FCC has requested $335,660,000 in budget authority from regulatory fee offsetting collections. This is $3,950,000 less than the authorization level of $339,610,000 included in the 2018 FCC Reauthorization in the Consolidated Appropriations Act, 2018. The FY2020 FCC request also represents a decrease of $3,340,000, or about 1.0%, from the FY2019 appropriated level of $339,000,000. The FCC requested $132,538,680 in budget authority for the spectrum auctions program. For FY2019, Congress appropriated a cap of $130,284,000 for the spectrum auctions program, which included additional funds to implement the requirements of the 2018 Act that mandated significant additional work for the FCC related to the TV Broadcaster Relocation Fund. The Commission's FY2020 budget request of $132,538,680 for this program would be an increase of $2,254,680, or 1.7%, over the FY2019 appropriation. This level of funding is intended to enable the Commission to continue its efforts to: reimburse full power and Class A stations, multichannel video programming distributors, Low Power TV, TV translator, and FM stations for reasonable costs incurred as a result of the Commission's incentive auction; make more spectrum available for 5G; and educate consumers affected by the reorganization of broadcast television spectrum. To date, the Commission's spectrum auctions program has generated over $114.6 billion for government use; at the same time, the total cost of the auctions program has been less than $2.0 billion, or less than 1.7% of the total auctions' revenue. Through the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), the FCC was reauthorized for the first time since 1990 (FCC Authorization Act of 1990, P.L. 101-396 ). The FCC publishes four periodic reports for Congress. Strategic Plan. The Strategic Plan is the framework around which the FCC develops its yearly Performance Plan and Performance Budget. The FCC submitted its current four-year Strategic Plan for 2018-2022 in February 2018, in accordance with the Government Performance and Results Modernization Act of 2010, P.L. 111-352 . Performance Budget. The annual Performance Budget includes performance targets based on the FCC's strategic goals and objectives, and serves as the guide for implementing the Strategic Plan. The Performance Budget becomes part of the President's annual budget request. Agency Financial Report. The annual Agency Financial Report contains financial and other information, such as a financial discussion and analysis of the agency's status, financial statements, and audit reports. Annual Performance Report. At the end of the fiscal year, the FCC publishes an Annual Performance Report that compares the agency's actual performance with its targets. All of these reports are available on the FCC website, https://www.fcc.gov/about/strategic-plans-budget . One FCC-related hearing has been held in the 116 th Congress. On April 3, 2019, the House Committee on Appropriations Subcommittee on Financial Services and General Government held a hearing on the FY2020 FCC budget. The hearing addressed issues including 5G deployment, federal preemption of state and local tower siting requirements, merger reviews, robocalls, and net neutrality. No bills that would affect the operation of the FCC have been introduced in the 116 th Congress. The FCC operates under a public interest mandate first laid out in the 1927 Radio Act (P.L. 632, 69 th Congress), but how this mandate is applied depends on which of two regulatory philosophies is relied upon to interpret it. The first seeks to protect and benefit the public at large through regulation, while the second seeks to achieve the same goals through the promotion of market efficiency. Additionally, Congress granted the FCC wide latitude and flexibility to revise its interpretation of the public interest standard to reflect changing circumstances, and the agency has not defined it in more concrete terms. These circumstances, paired with changes in FCC leadership, have led to significant changes over time in how the FCC regulates the broadcast and telecommunications industries. This evolution can be illustrated in changes to the agency's strategic goals under former Chairman Tom Wheeler to current Chairman Ajit Pai, which, in turn, led to the repeal in 2017 of the FCC's 2015 net neutrality rules and to changes in the agency's structure in 2019. The FCC's strategic goals are set forth in its quadrennial Strategic Plan. How these goals change from one plan to the next can illustrate how the priorities of the commission change over time, especially when there is a change in the political majority of the commission and therefore, the political party of the chairman. Table 1 outlines the strategic goals of Chairman Wheeler in the FY2015-FY2018 Strategic Plan compared to those of Chairman Pai in the FY2018-FY2022 Strategic Plan. Chairman Wheeler was a proponent of protecting and benefitting the public through regulation. His support of this regulatory philosophy can be seen in the language used in the strategic goals, such as the \"rights of users\" and the \"responsibilities of network providers.\" Another example can be seen in the following language: \"The FCC has a responsibility to promote the expansion of these networks and to ensure they have the incentive and the ability to compete fairly with one another in providing broadband services.\" On the other hand, Chairman Pai speaks about protecting and benefitting the public through the promotion of market incentives and efficiency. His support of this regulatory philosophy can be seen in the language used in the strategic goals, such as \"reducing regulatory burdens\" and ensuring that \"regulations reflect the realities of the current marketplace, promote entrepreneurship, expand economic opportunity, and remove barriers to entry and investment.\" The use of this particular language may seem somewhat vague, but within the context of the net neutrality debate, discussed below, and the replacement of the Office of Strategic Planning and Policy Analysis with the Office of Economics and Analytics, those words take on more specific meaning, each intending to support the policy agenda of the Chairman. Net neutrality is arguably the highest profile issue illustrating the two regulatory philosophies described above. Chairman Pai had long maintained that the FCC under Chairman Wheeler had overstepped its bounds, expressing confidence that the 2015 Wheeler-era net neutrality rules would be undone, calling them \"unnecessary regulations that hold back investment and innovation.\" Although the net neutrality debate originated in 2005, the 2015 Open Internet Order, implemented under the leadership of Chairman Wheeler, and the 2017 Order overturning those rules, promulgated under Chairman Pai, are the most recent. These two orders can be used to illustrate the contrast between the regulatory philosophies of the two chairmen: Some policymakers contend that more proscriptive regulations, such as those contained in the FCC's 2015 Open Internet Order (2015 Order), are necessary to protect the marketplace from potential abuses which could threaten the net neutrality concept. Others contend that existing laws and the current, less restrictive approach, contained in the FCC's 2017 Restoring Internet Freedom Order (2017 Order), provide a more suitable framework. Net neutrality continues to be a highly politicized issue, with most FCC action being approved along party lines. In January 2019, the FCC voted along party lines to eliminate the Office of Strategic Planning and Policy Analysis and replace it with a new Office of Economics and Analytics. The Office of Strategic Planning and Policy Analysis (OSP) was created in 2005, replacing the Office of Plans and Policy. OSP had been charged with \"providing advice to the chairman, commissioners, bureaus, and offices; developing strategic plans; identifying the agency's policy objectives; and providing research, advice, and analysis of advanced, novel, and nontraditional communications issues.\" It had also been the home of the Chief Economist and Chief Technologist. The new Office of Economics and Analytics is \"responsible for expanding and deepening the use of economic analysis into FCC policy making, for enhancing the development and use of auctions, and for implementing consistent and effective agency-wide data practices and policies.\" This new office reflects the goals in the current strategic plan: We will modernize and streamline the FCC's operations and programs to … reduce regulatory burdens…. A key priority [is to] … ensure that the FCC's actions and regulations reflect the realities of the current marketplace … and remove barriers to entry and investment. As the FCC continues to conduct its business into the future, the changing regulatory philosophies of the FCC chairmen may continue to drive how the FCC defines its long-term, strategic goals. This, in turn, may affect how the agency structures (and restructures) itself and how it decides regulatory questions, including a continued review of net neutrality. Congress may determine that the public interest standard should remain more static, rather than fluctuating dramatically depending on the regulatory philosophy of the chairman. No legislation on this topic has been introduced in Congress, signaling to some observers that it intends to continue allowing the FCC to define it. Table A-1 . Senate and House hearings in the 115 th Congress regarding the operation of the FCC are detailed in Table A-2 and Table A-3 , respectively. Links to individual hearing pages are included in these tables.", "summary": "The Federal Communications Commission (FCC) is an independent federal agency established by the Communications Act of 1934 (1934 Act, or \"Communications Act\"). The agency is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. The mission of the FCC is to make available for all people of the United States, \"without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges.\" The FCC operates under a public interest mandate first laid out in the 1927 Radio Act (P.L. 632, 69th Congress), but how this mandate is applied depends on how \"the public interest\" is interpreted. Some regulators seek to protect and benefit the public at large through regulation, while others seek to achieve the same goals through the promotion of market efficiency. Additionally, Congress granted the FCC wide latitude and flexibility to revise its interpretation of the public interest standard to reflect changing circumstances and the agency has not defined it in more concrete terms. These circumstances, paired with changes in FCC leadership, have led to significant changes over time in how the FCC regulates the broadcast and telecommunications industries. The FCC is directed by five commissioners appointed by the President and confirmed by the Senate for five-year terms. The President designates one of the commissioners as chairperson. Three commissioners may be members of the same political party of the President and none can have a financial interest in any commission-related business. The current commissioners are Ajit Pai (Chair), Michael O'Rielly, Brendan Carr, Jessica Rosenworcel, and Geoffrey Starks. The day-to-day functions of the FCC are carried out by 7 bureaus and 10 offices. The current basic structure of the FCC was established in 2002 as part of the agency's effort to better reflect the industries it regulates. The seventh bureau, the Public Safety and Homeland Security Bureau, was established in 2006. The bureaus process applications for licenses and other filings, manage non-federal spectrum, analyze complaints, conduct investigations, develop and implement regulatory programs, and participate in hearings, among other things. The offices provide support services. Bureaus and offices often collaborate when addressing FCC issues. Beginning in the 110th Congress, the FCC has been funded through the House and Senate Financial Services and General Government (FSGG) appropriations bill as a single line item. Previously, it was funded through what is now the Commerce, Justice, Science appropriations bill, also as a single line item. Since 2009 the FCC's budget has been derived from regulatory fees collected by the agency rather than through a direct appropriation. The fees, often referred to as \"Section (9) fees,\" are collected from license holders and certain other entities. The FCC is authorized to review the regulatory fees each year and adjust them to reflect changes in its appropriation from year to year. Most years, appropriations language prohibits the use by the commission of any excess collections received in the current fiscal year or any prior years. For FY2020, the FCC has requested $335,660,000 in budget authority from regulatory fee offsetting collections. The FCC also requested $132,538,680 in budget authority for the spectrum auctions program.", "document_type": "crs"}
{"report": "Cluster munitions are weapons that open in mid-air and disperse smaller submunitions—anywhere from a few dozen to hundreds—into an area. They can be delivered by aircraft or from ground systems such as artillery, rockets, and missiles. Cluster munitions are valued militarily because one munition can kill or destroy many targets within its impact area, and fewer weapons systems are needed to deliver fewer munitions to attack multiple targets. Cluster munitions also permit a smaller force to engage a larger adversary and are considered by some an \"economy of force\" weapon. Many cluster munitions rely on simple mechanical fuzes that arm the submunition based on its rate of spin and explode on impact or after a time delay. A newer generation of sensor-fuzed submunitions is being introduced by a number of nations to improve the munitions' and submunitions' accuracy and to reduce the large number of residual unexploded submunitions. These sensor-fuzed submunitions are designed to sense and destroy vehicles without creating an extensive hazard area of unexploded submunitions. Cluster bombs were first used in World War II, and inclusive of their debut, cluster munitions have been used in at least 21 states by at least 13 different countries. Cluster munitions were used extensively in Southeast Asia by the United States in the 1960s and 1970s, and the International Committee of the Red Cross (ICRC) estimates that in Laos alone, 9 million to 27 million unexploded submunitions remained after the conflict, resulting in over 10,000 civilian casualties to date. Cluster munitions were used by the Soviets in Afghanistan, by the British in the Falklands, by the Coalition in the Gulf War, and by the warring factions in Yugoslavia. In Kosovo and Yugoslavia in 1999, NATO forces dropped 1,765 cluster bombs containing approximately 295,000 submunitions. From 2001 through 2002, the United States dropped 1,228 cluster bombs containing 248,056 submunitions in Afghanistan, and U.S. and British forces used almost 13,000 cluster munitions containing an estimated 1.8 million to 2 million submunitions during the first three weeks of combat in Iraq in 2003. Senior U.S. government officials have stated that the United States has not used cluster munitions since 2003, during the intervention in Iraq. It is widely believed that confusion over U.S. cluster submunitions (BLU-97/B) that were the same color and size as air-dropped humanitarian food packets played a major role in the U.S. decision to suspend cluster munitions use in Afghanistan but not before using them in Iraq. In 2006, Israeli use of cluster munitions against Hezbollah forces in Lebanon resulted in widespread international criticism. Israel was said to have fired significant quantities of cluster munitions—primarily during the last 3 days of the 34-day war after a U.N. cease-fire deal had been agreed to —resulting in almost 1 million unexploded cluster bomblets to which the U.N. attributed 14 deaths during the conflict. Reports maintain that Hezbollah fired about 113 \"cluster rockets\" at northern Israel and, in turn, Israel's use of cluster munitions supposedly affected 26% of southern Lebanon's arable land and contaminated about 13 square miles with unexploded submunitions. One report states that there was a failure rate of upward of 70% of Israel's cluster weapons. The fundamental criticisms of cluster munitions are that they disperse large numbers of submunitions imprecisely over an extended area, that they frequently fail to detonate and are difficult to detect, and that submunitions can remain explosive hazards for decades. Civilian casualties are primarily caused by munitions being fired into areas where soldiers and civilians are intermixed, inaccurate cluster munitions landing in populated areas, or civilians traversing areas where cluster munitions have been employed but failed to explode. Two technical characteristics of submunitions—failure rate and lack of a self-destruct capability—have received a great deal of attention. There appear to be significant discrepancies among failure rate estimates. Some manufacturers claim a submunition failure rate of 2% to 5%, whereas mine clearance specialists have frequently reported failure rates of 10% to 30%. A number of factors influence submunition reliability. These include delivery technique, age of the submunition, air temperature, landing in soft or muddy ground, getting caught in trees and vegetation, and submunitions being damaged after dispersal, or landing in such a manner that their impact fuzes fail to initiate. Submunitions lacking a self-destruct capability—referred to as \"dumb\" munitions—are of particular concern because they can remain a hazard for decades, thereby increasing the potential for civilian casualties. Some nations are developing \"smart\" or sensor-fuzed weapons with greater reliability and a variety of self-destruct mechanisms intended to address the residual hazard of submunitions. Experts maintain that self-destruct features reduce—but do not eliminate—the unexploded ordnance problem caused by cluster munitions and that the advantage gained by using \"smart\" cluster munitions is negated when high-failure rate and/or \"dumb\" cluster munitions are used in the same area. For some nations, replacing \"dumb\" and high-failure rate cluster munitions may not be an option—China, Russia, and the Republic of Korea maintain that they cannot afford to replace all current submunitions with \"smart\" submunitions. In an effort to restrict or ban specific types of weapons used in armed conflicts, 51 states negotiated the CCW in 1980. When the treaty entered into force in December 1983, it applied only to incendiary weapons, mines and booby-traps, and weapons intended to cause casualties through very small fragments. Since then, some states-parties have added provisions through additional protocols to address other types of weapons. Acting in accordance with the recommendation of a group of experts established during the 2006 CCW review conference, states-parties to the convention decided in 2007 to \"negotiate a proposal to address urgently the humanitarian impact of cluster munitions.\" Negotiations took place in 2008 and 2009, but the parties have not reached agreement on a new proposal. The experts group continued negotiations in 2011 \"informed by\" a Draft Protocol on Cluster Munitions. However, the CCW states-parties were unable to reach agreement on a protocol during their November 2011 review conference. Described as \"frustrated with the CCW process,\" a number of CCW members—led by Norway—initiated negotiations in 2007 outside of the CCW to ban cluster munitions. On May 30, 2008, they reached an agreement to ban cluster munitions. The United States, Russia, China, Israel, Egypt, India, and Pakistan did not participate in the talks or sign the agreement. During the Signing Conference in Oslo on December 3-4, 2008, 94 states signed the convention and 4 of the signatories ratified the convention at the same time. China, Russia, and the United States did not sign the convention, but France, Germany, and the United Kingdom were among the 18 NATO members to do so. The convention was to enter into force six months after the deposit of the 30 th ratification. The United Nations received the 30 th ratification on February 16, 2010, and the convention entered into force on August 1, 2010. As of January 2, 2019, 105 states were party to the convention. The Convention on Cluster Munitions (CCM), inter alia, bans the use of cluster munitions, as well as their development, production, acquisition, transfer, and stockpiling. The convention does not prohibit cluster munitions that can detect and engage a single target or explosive submunitions equipped with an electronic self-destruction or self-deactivating feature —an exemption that seemingly permits sensor-fuzed or \"smart\" cluster submunitions. U.S. officials were concerned that early versions of the CCM would prevent military forces from non-states-parties from providing humanitarian and peacekeeping support and significantly affect NATO military operations, but the version signed May 30, 2008, does permit states-parties to engage in military cooperation and operations with non-states-parties (Article 21, Paragraph 3). Then-Acting Assistant Secretary for Political-Military Affairs Stephen Mull stated in May 2008 that the United States relies on cluster munitions \"as an important part of our own defense strategy,\" and that Washington's preferred alternative to a ban is \"to pursue technological fixes that will make sure that these weapons are no longer viable once the conflict is over.\" U.S. officials note that Cluster munitions are available for use by every combat aircraft in the U.S. inventory, they are integral to every Army or Marine maneuver element and in some cases constitute up to 50 percent of tactical indirect fire support. U.S. forces simply can not fight by design or by doctrine without holding out at least the possibility of using cluster munitions. The United States also maintains that using cluster munitions reduces the number of aircraft and artillery systems needed to support military operations, and that if cluster munitions were eliminated, significantly more money would need to be spent on new weapons systems, ammunition, and logistical resources. Officials further suggest that if cluster munitions were eliminated, most militaries would increase their use of massed artillery and rocket barrages, which would likely increase destruction of key infrastructure. Then-Department of State Legal Adviser Harold Koh stated November 9, 2009, that the United States has determined that its \"national security interests cannot be fully ensured consistent with the terms\" of the CCM. The Barack Obama Administration announced on November 25, 2011, that the United States would continue to implement the DOD policy on cluster munitions issued June 19, 2008, which recognized the need to minimize harm to civilians and infrastructure but also reaffirmed that \"cluster munitions are legitimate weapons with clear military utility.\" The central directive in the Pentagon's policy was the unwaiverable requirement that cluster munitions used after 2018 must leave less than 1% of unexploded submunitions on the battlefield. Prior to that deadline, U.S. use of cluster munitions that did not meet this criterion required combatant commander approval. On November 30, 2017, then-Deputy Secretary of Defense Patrick Shanahan issued a revised policy on cluster munitions. The memorandum describing the policy noted that [c]luster munitions provide the Joint Force with an effective and necessary capability to engage area targets, including massed formations of enemy forces, individual targets dispersed over a defined area, targets whose precise location are not known, and time-sensitive or moving targets. Cluster munitions are legitimate weapons with clear military utility, as they provide distinct advantages against a range of threats in the operating environment. Additionally, the use of cluster munitions may result in less collateral damage than the collateral damage that results from use of unitary munitions alone. Since the inception of the 2008 policy, in the midst of extended combat operations in Iraq and Afghanistan, we have witnessed important changes in the global security environment and experienced several years of budgets that under-invested in replacement systems and the modernization of the Joint Force more broadly. Our adversaries and our potential adversaries have developed advanced capabilities and operational approaches specifically designed to limit our ability to project power. Both Shanahan and Admiral Harry Harris Jr. have also argued that sustaining the current U.S. cluster munitions arsenal is necessary to prepare for a potential conflict with North Korea. The revised policy reverses the 2008 policy that established an unwaiverable requirement that cluster munitions used after 2018 must leave less than 1% of unexploded submunitions on the battlefield. Combatant commanders can use cluster munitions that do not meet the 1% or less unexploded submunitions standard in extreme situations to meet immediate warfighting demands. Furthermore, the new policy does not establish a deadline to replace cluster munitions exceeding the 1% rate, and these munitions will be removed only after new munitions that meet the 1% or less unexploded submunitions standard are fielded in sufficient quantities to meet combatant commander requirements. However, the new DOD policy stipulates that the department \"will only procure cluster munitions containing submunitions or submunition warheads\" meeting the 2008 UXO requirement or possessing \"advanced features to minimize the risks posed by unexploded submunitions.\" Specifically, DOD's revised policy stipulates the following: Continuing or beginning with their respective FY2019 budgets, the military departments will program for capabilities to replace cluster munitions currently in active inventories that do not meet the above-described standards for procuring new cluster munitions. The department's annual Program and Budget Review will be used to assess the sufficiency of the replacement efforts. The department's operational planners should plan for the availability of cluster munitions. The approval authority to employ cluster munitions that do not meet the standards prescribed by this policy for procuring new cluster munitions, however, rests with the combatant commanders. In accordance with their existing authorities, commanders may use cluster munitions that meet the standards prescribed by this policy for procuring new cluster munitions. The military departments and combatant commands, in keeping with U.S. legal obligations under CCW Protocol V on Explosive Remnants of War and consistent with past practices, will continue to record and retain information on the use of cluster munitions and provide relevant information to facilitate the removal or destruction of unexploded submunitions. The military departments and combatant commands will maintain sufficient inventories and a robust stockpile surveillance program to ensure operational quality and reliability of cluster munitions. In extremis, to meet immediate warfighting demand, combatant commanders may accept transfers of cluster munitions that do not meet the above-described cluster-munition procurement standards. Cluster munitions that do not meet the standards prescribed by this policy for procuring new cluster munitions will be removed from active inventories and demilitarized after their capabilities have been replaced by sufficient quantities of munitions that meet the standards in this policy. The department will not transfer cluster munitions except as provided for under U.S. law. The operational use of cluster munitions that include Anti-Personnel Landmines (APL) submunitions shall comply with presidential policy. Furthermore, the Deputy Secretary of Defense Expect(s) the Department to achieve the goals in this policy as rapidly as industry can support. Combatant Commanders will continue to ensure that the employment of cluster munitions is consistent with the law of war and applicable international agreements in order to minimize their harmful effects on civilian populations and infrastructure. In developing a new generation of cluster munitions less dangerous to civilians, DOD will need to determine whether such a high level of performance is achievable under both controlled laboratory conditions and real-world conditions. Factors such as delivery technique, landing in soft or muddy ground, getting caught in trees and vegetation, and submunitions being damaged after dispersal or landing could result in an appreciable number of dud submunitions, even if they have a self-deactivation feature. DOD and the services have been and are currently involved in efforts to reduce cluster munitions failure rates. The Army's Alternative Warhead Program (AWP) is intended to assess and recommend new technologies to reduce or eliminate cluster munitions failure rates. The AWP program is viewed as particularly relevant, as the Pentagon estimates that \"upward of 80 percent of U.S. cluster munitions reside in the Army artillery stockpile.\" In December 2008, the Army decided to cease procurement of a Guided Multiple Launch Rocket System (GMLRS) warhead—the Dual-Purpose Improved Conventional Munition (DPICM) warhead—because its submunitions had a dud rate up to 5%. The Air Force has also acquired cluster munitions that comply with the less than 1% failure rate—the CBU-97 Sensor Fuzed Weapon (SFW) and the CBU-105 WCMD/SFW. While DOD's new 2017 cluster munitions policy calls for DOD to continue its efforts to meet the 1% or less unexploded submunitions standard \"as rapidly as industry can support,\" it is not yet known how this policy will affect the aforementioned programs or how it could result in the establishment of new programs. It may be argued that even with advances in \"sensor-fuzed\" type submunitions that seek out and destroy certain targets, cluster munitions are still essentially an indiscriminate area weapon in an era where precision weapons are increasingly becoming the military norm. In Operation Desert Storm in 1991, only about 10% of ordnance used were precision-guided, but by the time of the Iraq invasion in 2003, \"the ratio of 'smart' to dumb weapons was nearly reversed.\" Since then, this trend toward greater precision has continued, if not accelerated with the development of precision rocket, artillery, mortar munitions, and smaller precision aerial bombs designed to reduce collateral damage. Given current and predicted future precision weaponry trends, cluster munitions might be losing their military relevance—much as chemical weapons did between World War I and World War II. According to the State Department, the U.S. military suspended its use of cluster munitions in Iraq and Afghanistan in 2003. For subsequent military operations, where cluster munitions would otherwise have been the weapon of choice, Congress might review what types of weapons were substituted in place of cluster munitions and how effective they were in achieving the desired tactical results. Also worth considering are effects-based weapons systems and operations, which seek to achieve the same or similar effect against a potential target without applying a \"kinetic solution\" such as a cluster munition. Such insights could prove valuable in analyzing U.S. policy options on the future of cluster munitions. DOD's November 2017 revised policy on cluster munitions potentially raises a number of issues for possible congressional consideration. With limits on cluster munition use after 2018 rescinded, how does this affect combatant commanders' operational plans in their respective theaters? Does this mean a lesser degree of military risk because combatant commanders can employ cluster munitions to meet warfighting demands, possibly translating into fewer forces needed to achieve the same result when the 2008 policy was in effect? Despite DOD emphasis on achieving a 1% or less unexploded submunitions standard \"as rapidly as industry can support,\" will DOD funding restrictions slow or stall programs previously intended to replace those systems that exceeded 1% because there no longer is an urgent operational need to replace those systems? In a similar manner, will defense industry view this as a renewed opportunity to develop systems with a 1% or less unexploded submunitions standard or take a more sanguine view that since DOD is no longer time constrained to develop and field 1% or less weapons that funding these programs will be less of a priority and, therefore, an unprofitable venture? Another possible issue for consideration is how this U.S. policy reversal on the military use of cluster munitions will be perceived by the international community and how this might affect future U.S. and international military treaty initiatives. Consolidated Appropriations Acts The Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), which the President signed into law December 16, 2009, prohibits the provision of military assistance for cluster munitions, the issuing of defense export licenses for cluster munitions, or the sale or transfer of cluster munitions or cluster munitions technology unless \"the submunitions of the cluster munitions, after arming, do not result in more than 1 percent unexploded ordnance across the range of intended operational environments.\" Moreover, any agreement \"applicable to the assistance, transfer, or sale of such cluster munitions or cluster munitions technology\" must specify that the munitions \"will only be used against clearly defined military targets and will not be used where civilians are known to be present or in areas normally inhabited by civilians.\" Subsequent appropriations laws have included similar provisions; the most recent is the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), which the President signed into law on February 15, 2019. ", "summary": "Cluster munitions are air-dropped or ground-launched weapons that release a number of smaller submunitions intended to kill enemy personnel or destroy vehicles. Cluster munitions were developed in World War II and are part of many nations' weapons stockpiles. Cluster munitions have been used frequently in combat, including the early phases of the current conflicts in Iraq and Afghanistan. Cluster munitions have been highly criticized internationally for causing a significant number of civilian deaths, and efforts have been undertaken to ban and regulate their use. The Department of Defense (DOD) continues to view cluster munitions as a military necessity but in 2008 instituted a policy to reduce the failure rate of cluster munitions to 1% or less after 2018. In November 2017, a new DOD policy was issued that essentially reversed the 2008 policy. Under the new policy, combatant commanders can use cluster munitions that do not meet the 1% or less unexploded submunitions standard in extreme situations to meet immediate warfighting demands. In addition, the new policy does not establish a deadline to replace cluster munitions exceeding the 1% rate and states that DOD \"will retain cluster munitions currently in active inventories until the capabilities they provide are replaced with enhanced and more reliable munitions.\" Potential issues for Congress include cluster munitions in an era of precision weapons, other weapons in lieu of cluster munitions, and the potential impact of DOD's 2017 revised cluster munitions policy.", "document_type": "crs"}
{"report": "U.S. foreign intelligence relations are a component of U.S. international relations that involve cooperation between a U.S. and a foreign state or non-state intelligence service over an area of mutual interest. This cooperation may include simple liaison to discuss or exchange information, raw data, or finished intelligence. Intelligence liaison leverages the relative strengths of the interested intelligence services to provide tactical, operational, or strategic insight and perspective to provide warning of attack, corroboration of national sources, or additional, possibly unique, intelligence that the other service lacks. Other forms of cooperation include basing rights to enhance the range of U.S. collection coverage, joint operations and collection from the sovereign territory of a foreign state, and training to improve the capacity and professionalism of a foreign intelligence service. In areas of the world where the U.S. Intelligence Community (IC) has few national intelligence assets, cooperative relations with a foreign intelligence service based in the region can effectively increase the range of U.S. intelligence coverage by using the partner's source network and linguistic, political, and cultural expertise. Although the Director of National Intelligence (DNI) provides the policy and criteria, and conducts oversight for all IC element intelligence relationships with foreign intelligence services, the IC elements themselves have the statutory authority to enter into agreements with foreign counterparts. Normally every relationship is formalized through a memorandum of understanding (MOU) or other written agreement. This report provides a historic perspective of traditional and nontraditional foreign intelligence partnerships with the U.S. It also discusses their risks and benefits in the context of the broader public discussion over the sorts of relationships the United States should have with various actors in the international community. In many—but not all—instances, intelligence relations with a foreign partner may be viewed as an approximate reflection of the strategic condition of the relationship between the U.S. and that partner generally. They indicate shared interests and a degree of trust in the professional ability of the partner to provide credible intelligence while protecting sources and maintaining security about the nature and extent of the relationship. In discussing risk, this report emphasizes the risk to the United States. However, foreign partners also bear risk (e.g., relying too heavily on U.S. intelligence, or having their sensitive sources compromised). Congress has a vested interest in understanding the nature and scope of the IC's relations with foreign intelligence services. Congress has expressed both confidence in the value of these relationships and reservations. When the IC reduced national intelligence collection resources in the 1970s and the 1990s and the IC became heavily dependent upon intelligence obtained from foreign partners, Congress intervened to rebalance national intelligence collection with collection from foreign partners. Congress was also critical of deficiencies in the IC's ability to assess independently the credibility of foreign intelligence sources, one of whom fabricated reporting on Iraqi weapons of mass destruction, one reason cited by the Bush Administration for invading Iraq in 2003. Most recently, Congress has expressed interest in the vulnerability of foreign intelligence partners' telecommunications technology to penetration by hostile intelligence services. The United States has cultivated intelligence liaison relations with foreign partners through (1) the exchange of information, raw data, or finished intelligence; (2) basing rights for conducting intelligence operations, or privileges to host technical intelligence equipment; (3) burden sharing in the collection and reporting on issues of mutual interest; (4) joint covert action, collection, or exploitation operations; and (5) training. Most are bilateral. The relationship with the United Kingdom is among the oldest and the best known. The IC also has multilateral relationships, with NATO member states, Five Eyes partners (United States, United Kingdom, Canada, Australia, and New Zealand), and the intelligence organizations supporting coalition partners in operational theaters such as Iraq and Afghanistan. U.S. IC relationships with foreign intelligence partners have developed in parallel with global IC coverage, as well as the growing number of interests the U.S. shares with foreign partners; it is also generally recognized that intelligence partnerships can provide mutual benefits for national security. IC foreign partnerships have developed as consequences of the most pressing challenges for U.S. national security over the past century: two world wars, the Cold War, and post-9/11 counter-terrorism operations. Although the U.S. has periodically shared intelligence with adversaries involving a narrow range of mutual interests, this type of exchange represents the exception to the norm. More typically, most intelligence sharing takes place with allied countries or U.S. affiliated non-state actors within relationships that have been shaped by decades of shared experience in war and peace. U.S. intelligence exchange relationships with foreign partners, therefore, often reflect the high level of trust and professional confidence the U.S. IC places in partnerships with particular foreign allies' intelligence services, involving a broad range of overlapping national security, political, and economic interests. A fundamental assumption, supported by decades of experience, is that building and maintaining these partnerships enhances U.S. national security by providing some benefit that the U.S. would otherwise lack: access to otherwise inaccessible or hostile targets, corroboration of sources, cultural or linguistic expertise, the capacity to conduct joint assessments, providing indications and warning of an attack, obtaining basing rights, or jointly planning and conducting covert operations or intelligence collection. The earliest efforts by the United States to formally cooperate with foreign partners in intelligence took place during World War I, when the British and French provided training, advice, and tactical intelligence exchanges with the American Expeditionary Force (AEF) under General John Pershing. At the time, the United States had only an incipient intelligence capability. The British, in contrast, had had a national intelligence service since 1909 when the Secret Service Bureau was established to address growing concerns about a perceived threat posed by imperial Germany. The United States forged closer intelligence ties with allied governments in the years leading up to World War II and during the war itself. The UK and U.S. navies began sharing naval intelligence in the 1930s. The first formal arrangement, involving signals intelligence, was reached in October 1942 when the U.S. Navy and British Government Code and Cypher School (GC & CS) at Bletchley Park signed the Holden Agreement. That agreement enabled collaboration on Japanese, German, and Italian signals intelligence targets that included a division of labor between each side for more streamlined, integrated technical collection and analysis. The British-U.S. communication intelligence agreement (BRUSA Agreement) signed in 1943 between GC & CS and the U.S. War Department—representing the Army as well as the Navy signals intelligence capabilities—superseded the Holden Agreement. This agreement also provided for a division of labor similar to the Holden Agreement, whereby the United States had responsibility for collection of signals intelligence targeting the Japanese (an operation called Magic), and the British had responsibility for collection of signals intelligence on German and Italian targets (referred to as Ultra). This collaboration proved pivotal in the Allies establishing information dominance during the war. Shared interests during the Cold War influenced the next period in the evolution of U.S. foreign intelligence partnerships. U.S. intelligence relations with traditional allies solidified as one of multiple areas of security cooperation based on a shared perception of the threat posed by the Soviet Union. The UKUSA Agreement of March 1946 superseded the BRUSA Agreement and other U.S.-UK signals intelligence agreements from WWII that had focused exclusively on targeting the Axis powers. The UKUSA Agreement added the State Department, the Army, and Navy on the U.S. side of the board overseeing the partnership. The agreement provided for an expanded exchange of signals intelligence-related products and services concerning targets involving \"any country … excluding only the U.S., the British Commonwealth of Nations, and the British Empire.\" Canada, Australia, and New Zealand were formally included as \"collaborating\" partners in the late 1940s and early 1950s. Subsequently, in a separate agreement, the United States and United Kingdom formally established standards for the protection of classified information involved in exchanges. Before the establishment of the Office of Strategic Services (OSS) in 1942 with the encouragement and assistance of the United Kingdom, the United States had no foreign intelligence collection or covert action capability to compare to the capabilities of Britain's Secret Intelligence Service (MI6). The WWII experience of OSS personnel and the investment the United States made in national intelligence (including establishing the CIA in 1947), enabled the U.S. to influence the organization and development of other nations' intelligence agencies; these agencies have since become close bilateral partners. One example is the establishment of the West German Federal Intelligence Service, the Bundesnachrichtendienst (BND). In 1946 the former head of the eastern branch of the Nazi German intelligence, Reinhard Gehlen, who was responsible for intelligence targeting the Soviet Union, negotiated terms for establishing an intelligence organization in occupied postwar Germany with the United States. During the war, Gehlen had developed extensive agent networks, and had later copied and concealed for safekeeping voluminous amounts of intelligence on the Soviet Union that he knew would be valuable to the United States. Using this leverage, Gehlen, following his surrender, was able to obtain U.S. support for an autonomous German intelligence organization for collecting and analyzing intelligence on the Soviet Union and other communist states that would become part of a reconstituted German government. The Gehlen Organization, as it was known, became the BND in 1956 and has remained a close, albeit independent, partner of the United States IC. Similarly, the United States was influential in the early years of the Mossad, Israel's human intelligence agency. The Mossad, like the Gehlen organization, provided the United States a means to acquire information on the Soviet Union that the United States could not otherwise collect through national sources, as Israel was able to draw upon its eastern European émigré population's extensive contacts in the Soviet Union. The CIA, in turn, was able to offer training to Mossad agents. U.S. relations with the intelligence organizations of Japan, Egypt, pre-revolutionary Iran, Saudi Arabia, and Pakistan were also influenced by mutual concern over the threat from the Soviet Union. The Soviet invasion of Afghanistan in 1979, in particular, contributed to the CIA's forming closer ties to Saudi Arabia's General Intelligence Directorate (GID) and Pakistan's Inter-Services Intelligence (ISI) agency in an effort to provide funding and other covert assistance to the Mujahideen. After the Cold War, former communist countries that had long been allied with the Soviet Union became NATO allies and intelligence partners of the United States (i.e., Poland, Hungary, Czechoslovakia (now the Czech Republic and Slovakia), Bulgaria, Romania, and the Baltic states of Estonia, Latvia, and Lithuania). Initially, there was some ambivalence about these new partnerships. On one hand, the history of Soviet influence over Warsaw Pact intelligence organizations suggested the reconstituted intelligence agencies of the eastern European NATO states could pose a counterintelligence risk of Russian penetration and result in greater restraint in intelligence sharing. On the other hand, by virtue of these services' extensive experience with the Soviets Union, they might prove more capable of providing for themselves protections against Russian penetration. These services offered not only a presumable wealth of perspective on and access to post-communist Russia, but also support for the U.S. in other areas of the world where they had had operational experience, extensive contacts, or were commitment to supporting NATO or U.S.-led military coalition operations. In some cases (e.g., the Polish presence in Iraq), part of the motivation may have been simply to gain western or NATO experience and prove their worth as a reliable ally and intelligence partner. In the aftermath of the terrorist attacks of 9/11, the U.S. IC expanded its foreign intelligence liaison relationships as a major component of counterterrorist strategy. Working with intelligence partners in the war on terror is broadly viewed as essential to protecting the U.S. homeland and the allied states who share western values that make them attractive targets for al Qa'ida, and the so-called Islamic State. These relationships include nontraditional partners, in addition to allies: non-state organizations (such as Kurdish groups in northern Iraq and Syria) and traditional adversaries such as Russia. The CIA has solidified many of these partnerships through the establishment of a network of Counterterrorist Intelligence Centers (CTIC) around the world to facilitate sharing intelligence on terrorism, such as indications and warning of an attack, with a host-nation government to effect the killing or capture of high-value targets. The Counterterrorist Center (CTC) at CIA headquarters manages the CTICs overseas. The National Security Agency (NSA) is also represented in the CTICs, underscoring the importance of signals intelligence (and the corresponding foreign partnerships) to counterterrorist operations. Simultaneously, the U.S. IC has found that nontraditional partners remain loyal to their own interests and internal dynamics despite heavy inducement by the U.S. While these partnerships have proven valuable in certain circumstances, they are not all completely beneficial to the U.S. Each period in the evolution of U.S. intelligence relations with foreign partners—Pre-World War II, World War II, the Cold War, Post-Cold war —has enabled the United States to strengthen ties to traditional allies, while presenting challenges from necessary yet incompletely reliable partners. The post-Cold War has been marked by a concerted effort to forge or strengthen ties with allies old and new, and to expand the scope of counterterrorism coverage by initiating or increasing the frequency of intelligence exchanges with nontraditional intelligence partners. Policy and authorities for initiating and managing ties between the IC and foreign intelligence services, and specifying the roles and responsibilities of personnel supporting these relationships, are found in statute, executive orders, and intelligence directives. Intelligence Community Directive (ICD)-403, Foreign Disclosure and Release of Classified National Intelligence, states U.S. Government policy on disclosure of U.S. intelligence to foreign state or non-state intelligence entities: U.S. intelligence is a national asset to be conserved and protected and will be shared with foreign entities only when consistent with U.S. national security and foreign policy objectives and when an identifiable benefit can be expected to accrue to the U.S. It is the policy of the U.S. Government to share intelligence with foreign governments whenever it is consistent with U.S. law and clearly in the national interest to do so, and when it is intended for a specific purpose and general limited in duration. ICD-403 also requires that determinations to disclose or release U.S. intelligence should take into account the professional ability of a foreign intelligence service to protect the classified intelligence from subsequent compromise posing a risk to U.S. national security. However, In exceptional cases, there may be a benefit to U.S. interests to disclose or release intelligence to foreign entities under conditions where the recipient's safeguards are likely to be inadequate. In such cases, the anticipated benefits must outweigh the potential damage of a likely compromise. Intelligence Community Policy Guidance 403.1 (ICPG-403.1) further expounds policy in ICD-403 by providing criteria for disclosing or releasing classified intelligence to a foreign intelligence entity. Its guidance pertains to classified U.S. intelligence only, which does not include other classified information , such as defense, military, or diplomatic information that is not intelligence. Disclosure or release of classified intelligence is appropriate when it: is consistent with U.S. foreign policy and national security objectives; can be expected to result in an identifiable, commensurate benefit to the U.S.; supports a U.S. diplomatic, political, economic, military, or security policy or treaties; and aids U.S. intelligence or counterintelligence activities. An intelligence sharing agreement is often formalized in a memorandum of understanding (MOU) between the U.S. IC element and its foreign intelligence counterpart. There are hundreds of these agreements between the IC and foreign intelligence services. They are not legally binding and are generally classified. This can present challenges for congressional oversight. As one observer of the Intelligence Community remarked, \"The near invisibility of liaison arrangements to oversight by elected officials is problematic. Oversight mechanisms have not kept pace with global issues.\" For military exchanges that include other types of classified information as well as intelligence, the Department of Defense (DOD) uses General Security of Military Information Agreements (GSOMIA) that detail the level of classification for the exchange and the categories of information that can be exchanged. Whether an MOU or GSOMIA, these agreements provide formal frameworks for intelligence relationships that can be fundamental to broader security relationships (legal enforceability notwithstanding). The DNI has the statutory authority to \"oversee the coordination between elements of the Intelligence Community and the intelligence or security services of foreign governments or international organizations on all matters involving intelligence related to the national security or involving intelligence acquired through clandestine means.\" Assistant DNI for Partner Engagement (ADNI/PE) supports the DNI in carrying out his/her statutory responsibilities, which include: Entering into intelligence and counterintelligence arrangements with foreign governments and international organizations; Formulating policies concerning these arrangements; Aligning and synchronizing foreign intelligence and counterintelligence relationships among IC elements \"to further United States national security, policy, and intelligence objectives;\" Establishing, with the concurrence of departments and agencies concerned, joint procedures to coordinate and synchronize intelligence activities conducted by an IC element or funded by the National Intelligence Program (NIP), with activities that involve foreign intelligence and security services. The Director of the CIA (D/CIA) is responsible for implementing the DNI's foreign intelligence engagement policy and coordinating foreign intelligence relationships. These responsibilities are specified in Executive Order (EO) 12333, United States Intelligence Activities : CIA has the authority \"under the direction and guidance of the DNI … to coordinate the implementation of intelligence and counterintelligence relationships between elements of the IC and the intelligence or security services of foreign governments or international organizations.\" This authority is reiterated in ICD-310, Coordination of Clandestine Human Source and Human-Enabled Foreign Intelligence Collection and Counterintelligence Activities o utside the United States . Overseas, the U.S. ambassador or Chief of Mission is responsible for \"the direction, coordination, and supervision of all Government executive branch employees\" in a country … who shall be kept \"fully and currently informed with respect to all activities and operations of the Government within that country.\" In other words, the U.S. ambassador has authority over United States intelligence activities within that country. The actual management of intelligence programs and activities in a U.S. embassy, however, falls to the CIA Chief of Station (COS), who is to ensure the Chief of Mission is kept appropriately informed. ICD-402, Director of National Intelligence Representatives , buttresses the CIA's responsibility to coordinate the implementation of policy for the IC's foreign intelligence relationships by assigning to the CIA's Chiefs of Station responsibility as the DNI's representatives in the locations or organizations where they are assigned. In each foreign country, therefore, the COS has day-to-day management and oversight of not only CIA but all liaison relationships by any IC element, with state or non-state foreign intelligence organizations. Subject to DNI policy and DCI/COS management and guidance, each element of the IC has the statutory authority to conduct relations with foreign intelligence services particular to the element's capability and operational or analytical focus. The National Security Agency (NSA), for example, has the statutory authority to conduct foreign cryptologic liaison relations; the Defense Intelligence Agency (DIA) and military service intelligence organizations have the authority to conduct defense intelligence liaison relationships with their foreign defense or military intelligence counterparts. ICD-403 specifies the roles and responsibilities of officials making decisions involving the disclosure or release of classified intelligence to a foreign intelligence entity. Each IC element has a Senior Foreign Disclosure and Release Authority (SFDRA), who is a senior official with responsibility for the organization's foreign disclosure and release program. The SFDRA, in turn, designates Foreign Disclosure and Release Officer(s) (FDRO) with the authority to approve or deny requests for disclosure or release of intelligence that originated with that IC element, or coordinate with the FDROs of another organization to request disclosure or release of intelligence that originated with that other IC element and has dissemination control markings. Under ICD-403, the DNI may authorize disclosures or releases of classified intelligence requested by the National Security Council or under circumstances that are not otherwise provided for in policy. The DNI is also the final arbiter in resolving any disputes on what can be disclosed or released. Among the more sensitive aspects of U.S. relations with any given foreign intelligence partner—and of interest to Congress—are instances of any such partner providing to the IC information on U.S. persons. This may occur unprompted as a result of routine collection or a bulk data transfer, or at the request of the United States, subject to approval by specifically designated, trained individuals. In instances when the United States requests intelligence on U.S. persons from a foreign intelligence service, there must be probable cause to believe that U.S. persons are involved in terrorism, espionage, other illicit activities, or are themselves the target of hostile foreign intelligence services that may threaten U.S. national security. Counterintelligence collected by a foreign intelligence partner (to support its own internal national security) and shared with the United States that includes information on U.S. persons requires special handling. In these instances, the IC must follow the A ttorney General Guidelines for implementing Executive Order (EO) 12333 on properly requesting, obtaining, and handling the information in order to adhere to privacy and civil liberties protections. Information is authorized and handled according to whether it was obtained by standard or special collection techniques. Standard collection techniques involve authorization for an IC element to request, receive, and document routinely acquired information or records on a U.S. person. This can include requests made of a foreign intelligence service for information on U.S. persons abroad that exists in their files, or requests of a foreign intelligence service to use their assets to collect information targeting a U.S. person abroad using standard collection techniqu es . Officials with the authority to authorize standard collection techniques include a Chief of Station, Chief of Installation, or Chief of Base, the Deputy Director of the CIA for Operations (DDO), the Associate Deputy Director of CIA for Operations (ADDO), the Chief or Deputy Chiefs of Operations in a CIA Mission Center, a first, second, or third in command of a DO Division or DO Center, or supervisory personnel who are designed by these officials. Standard collection techniques may also include occasions when an IC element obtains unevaluated bulk data, such as a hard drive, from a foreign intelligence service that may contain information on U.S. persons collected by routine, unexceptional means. In these instances, \"specifically designated officials must document the purpose of the collection activity, how the data was acquired, what steps were taken to limit the collection to the smallest subset containing the information necessary to achieve the purpose of the collection, and further determine how sensitive the acquired data is so that appropriate controls regarding access, querying, and retention may be imposed.\" Special collection techniques are defined as techniques conducted outside the United States targeting a U.S. person that would require a warrant for the same techniques conducted by the FBI inside the United States. They include, for example, physical search, search of nonpublic telephone records, and electronic surveillance. Both the authorization and handling of this kind of information is more restricted than for standard collection techniques . Special collection techniques require exceptional handling as outlined in the A ttorney General Guidelines implementing EO 12333 . For authorization of special collection techniques —including requests for special collection on U.S. persons by a foreign intelligence service—requests must be forwarded through the agency's General Counsel for concurrence and approval by the Director of the CIA or a designee, the U.S. Attorney General, and, where applicable, the Foreign Intelligence Surveillance Court. A foreign intelligence partner may provide to its counterpart(s) in the United States intelligence on U.S. persons acquired by special collection techniques without it being specifically requested by the U.S. counterpart. This would involve occasions where the foreign partner may want to alert U.S. IC or law enforcement officials of serious counterintelligence concerns in the course of a collection activity employing special collection techniques targeting a mutual adversary such as Russia or China. Exceptional handling is required when information is collected by special collection techniques that involves U.S. persons, and subsequently shared with the U.S., whether or not it is specifically requested by the United States. A former member of the Senate Select Committee on Intelligence remarked recently that foreign intelligence services provide the United States some of its most significant intelligence. Two examples are readily apparent. Following 9/11, then-French President Jacques Chirac directed the French intelligence services (the DGSE and DGSI) to share counterterrorist intelligence with the United States \"as if they were your own service.\" Similarly, on September 12, 2001, the day after the attacks, the senior leadership of the British intelligence services (MI5 and MI6) visited their counterparts in Washington, DC, to offer their assistance. The U.S. IC also benefits from intelligence liaison with traditional adversaries, and non-state actors (e.g., Kurdish organizations), on areas of mutual interest. Intelligence sharing or collaboration can be defined as \"the liaison or collaboration between [intelligence] bodies responsible for the collection, analysis and/or dissemination of information in the field of national security and defense.\" Sharing finished intelligence derived from multiple sources provides less risk of revealing information of any particular source and is thus more typical of many bilateral or multilateral intelligence relationships. The sharing or exchange of raw data or unfinished intelligence takes place either where there is sufficient trust between partners to provide the necessary security from compromise of collection sources and methods (as there is between the U.S. and Five Eyes partners, plus France, Germany, Norway, and Japan, among others), or it can also occur in situations where there is an immediate need to provide perishable information—such as indications and warning of an impending terrorist attack—that may take precedence over the risk of revealing a source. The exchange of intelligence or information among the United States and intelligence partners is a daily occurrence treated with great sensitivity. Intelligence sharing may help to corroborate U.S. national sources in addition to possibly providing unique information. Intelligence and information exchanges may involve secure conferencing, phone calls, or, among the closest partnerships, automated data exchange. Attachés belonging to the Defense Attaché Service (DAS) of the Department of Defense or attachés representing other departments, such as the Departments of Justice and Homeland Security, also regularly conduct exchanges with their host-country counterparts. Foreign intelligence relationships that provide indications and warning (I&W) of an impending attack or serious threat to the national security of the partner country may take place by means of sharing proprietary intelligence of a partner agency, or collecting intelligence through a joint operation. Among the instances that have become part of the public record are these. In 1962, a human intelligence asset of the CIA and British Secret Intelligence Service (SIS, also known as MI6), Soviet GRU Colonel Oleg Penkovsky, provided details of the Soviet nuclear weapons capabilities and nuclear missile sites in Cuba. The information Penkovsky provided during the Cuban Missile Crisis enabled President Kennedy to understand he had three days before the Soviet intermediate range nuclear missiles would be fully operational. It was a warning that the CIA credited as \"altering the course of the Cold War.\" In February 2006, GCHQ (the UK signals intelligence counterpart of the U.S. National Security Agency) shared with the United States information from intercepted communications between two Al Qa'ida operatives in Pakistan and the United Kingdom, respectively, indicating their plans to bomb civilian aircraft. Subsequently, the CIA was able to share this information with Pakistan's Inter-Service Intelligence agency leading to the ISI's apprehension of the lead Al Qa'ida planner. In 2010, Saudi Arabia, once reluctant to share intelligence with the United States on Al Qa'ida, obtained perishable indications of a sophisticated Al Qa'ida plot to attack cargo planes en route to the United States. The Saudis provided the information to U.S., British, German, and Emirati officials who were able to intercept the bombs and prevent the attack. In December 2017, acting on a tip from the CIA, Russia's Federal Security Service (FSB) was able to break up a plot by an Islamic State-linked terrorist cell to bomb Kazan Cathedral and other prominent sites in St. Petersburg, Russia. Burden sharing, or a division of labor between the personnel and resources of the IC and foreign intelligence partners, is possible with the most trusted, most capable allied intelligence services. The early collaboration between the United States and United Kingdom during the Second World War, which resulted in the success of the Magic and Ultra operations, has continued to the present day with the integration of personnel and burden sharing or \"divisions of effort\" involving signals intelligence (SIGINT) target areas. The integration is so close that U.S. and British customers/consumers of their products often do not know which country generated the intelligence they are reading/reviewing/consuming. Similarly, U.S. reliance on Japanese signals intelligence coverage of the western Pacific enabled the United States, through receipt of Japanese intercepts of communications between Russian ground controllers and fighter pilots, to pinpoint the cause of the shoot-down of Korean Air Lines Flight 007 in 1983. Following the end of the Cold War, the United States embarked on a deliberate strategy to benefit from a perceived peace dividend . This amounted to relying on foreign partners for intelligence coverage of areas of the world where the United States either did not have access or did not want to expend the resources and effort to establish coverage. Foreign intelligence relationships can provide the benefit of second-hand understanding of issues and areas of the world where the United States may lack national intelligence assets. Moreover, since 9/11, the IC has had to rapidly expand its liaison relationships with state and non-state foreign intelligence organizations for time-sensitive contingency support of fluid counterterrorism operations. Yet there is a risk of over-reliance on foreign partnerships, as a joint congressional inquiry found, when they are not balanced by national intelligence capabilities. Joint operations may be conducted when the United States and a foreign partner intelligence service contribute complementary abilities in intelligence collection or covert action to achieve a common objective. For example, one partner may be able to provide access to a source of information, and the other the technical capacity to exploit the information for intelligence value. In 1949, at the beginning of the Cold War, the British Secret Intelligence Service was able to tap the communications cables of the Soviet command center during its post-war occupation of Austria. The CIA joined the operation due to its technical ability to read the enciphered messages that the SIS intercepted. Because of the close link of covert action to national security policy, deliberations over conducting joint covert action operations with a foreign partner may affect U.S. policy decisions and outcomes. In 1953 the British lobbied the Eisenhower Administration for a joint covert action operation that resulted in the overthrow of the elected Iranian government of Prime Minister Mohammad Mosaddegh. Similarly, the British argued against the United States embarking upon covert action in the 1950s to destabilize Soviet bloc governments in Europe. Intelligence relations are often part of broader security arrangements with U.S. partners who may provide privileges to base operational and intelligence personnel and equipment in geographic proximity to both the target area and intelligence personnel and facilities of the allied partner. Host-country partners provide political clearance that enables the United States to establish intelligence facilities, and may also provide various degrees of infrastructure support. This has been true of many close U.S. allies, such as Germany, the United Kingdom, Japan, Italy, Spain, Portugal, and South Korea. Other partners that have provided basing rights have risked more politically in doing so (e.g., Turkey, Pakistan, Iran [under the Shah], Iraq, and Afghanistan). During the Cold War, Pakistan permitted the United States to maintain a signals intelligence site in the country, and permitted the CIA to conduct reconnaissance flights from Pakistani airfields. In Iran, in return for significant amounts of military aid, the Shah's government permitted two U.S. signals intelligence sites in the north of the country that enabled the IC to collect missile telemetry from the Soviet missile test facility at Tyuratam. U.S. intelligence liaison relationships, which expanded significantly after 9/11, included a multilateral facility in France for collaboration on counterterrorist intelligence. Multilateral intelligence sharing—Five Eyes excepted—can sometimes be cited as providing products and services at a level of the least trusted member of the multilateral arrangement. The facility in France, however, which also included representation from the United States, United Kingdom, Canada, Germany, and Australia, underscored the significant level of cooperation by the French in orchestrating counterterrorist collaboration among allied intelligence services to successfully target terrorists outside of Iraq and Afghanistan. U.S. drone facilities in Djibouti, Pakistan, and elsewhere, have contributed to elimination of certain terrorist threats, and have benefited from support from the host-country intelligence services, despite—in the case of Pakistan—opposition to the U.S. presence by many of the local population. The CIA drone operations in Pakistan successfully targeted members of the Haqqani Network, the Afghan Taliban, and the Pakistani Taliban, among others. From Djibouti, drone strikes have been conducted over Yemen and Somalia with the assistance of the French and permission of the Djiboutian government. The IC has been used for a diplomatic back channel to foreign governments when there may be few alternatives to reliably communicate important information between heads of state. Generally this involves countries with which the United States does not have diplomatic relations. In these situations, the foreign intelligence services are often closely linked to the head of state and exercise influence similar to that of the foreign ministry. Using intelligence services as a diplomatic back channel may be necessary to convey a personal message, clarify intentions, or diffuse tension. One instance that has become public involves the intelligence ties between the CIA, North Korea's Reconnaissance General Bureau, and South Korea's National Intelligence Service. This channel between IC counterparts, begun in 2009 during the Obama Administration, has been used by senior IC officials to send or receive personal communications between the U.S. President and the North Korean leader. There is a variety of risks and obstacles to U.S. intelligence relationships with foreign partners. They result from policy differences, differences in assumptions about a threat, failure to respect human rights, lapses in security, espionage, and legal and informal limits each side may place upon the other. The strongest, most enduring relationships have weathered differences in policy or lapses in security that have led to temporary setbacks in intelligence cooperation. More formidable to overcome are obstacles to intelligence sharing resulting from fundamental differences in values. Bilateral intelligence training of foreign partners' intelligence services can provide certain advantages to the United States, but can also create noteworthy risks. In its earliest years, the United States, as has been noted, benefited from the assistance of British and French mentors of the fledgling U.S. Military Intelligence Division (MID) during the First World War. Since the CIA's creation, training in intelligence collection and analysis has become a means by which the agency and other IC elements have established and maintained ties to foreign partners. This report cites elsewhere the efforts by the United States to build the German and Israeli intelligence services. Among many other examples of the IC reinforcing strategic ties to foreign partners through intelligence training are U.S. support in training Iran's Ministry of State Security (SAVAK) and Egypt's General Intelligence Directorate (GID). Yet subsequent problems in U.S. relations with these countries and others like them underscore the inherent risks of anticipating the second- and third-order effects of establishing close intelligence ties to fragile and unstable foreign governments. The Iraqi National Intelligence Service (INIS) provides a similar example of both the benefits and risks of intelligence-training relationships with foreign partners. This organization, established with the CIA's support, was one factor—among others—in turning the tide against the Sunni insurgency of 2004-2008. However, it also became caught up in Iraq's Shia-Sunni sectarian conflict and linked to a proxy fight for influence in Iraq between the United States and Iran. Iran reportedly was involved in an assassination campaign against the Sunni-dominant INIS, 209 of whose officers were reportedly killed from 2004-2009. This was partly a consequence of a rivalry with Iraq's Shia-dominant—and unofficial—intelligence organization within the Ministry of State for National Security, operating under Iran's influence and aligned with Iraq's then-Prime Minister Nouri al-Maliki. Historically, adhering to internationally sanctioned standards for ethics and human rights has challenged the United States IC and its foreign intelligence partners, especially in times of crisis. While the United States can benefit from intelligence shared by authoritarian regimes in the Middle East and elsewhere, these regimes have relatively few restraints against obtaining information by harsh interrogation, or even torture. As articulated by one scholar, Authoritarian regimes can employ, among other things, relatively extensive population control measures and invasive intelligence collection methods, can readily obtain information superiority, and are under relatively little pressure to use minimum force. A lack of control and accountability over an authoritarian foreign intelligence partner employing such methods can undermine the credibility of the information obtained. Political backing for such methods can also produce the same effect. For the U.S., even the perception of engaging in an intelligence liaison relationship with a foreign partner with a poor human rights record can leave the United States vulnerable to criticism. The policy of the IC, as described by a former director of the CIA, is to refrain from exchanging intelligence with regimes that abuse human rights: We, the U.S. government, and we, CIA, are very, very clear in terms of the types of behaviors and actions that we will not tolerate …. We, CIA, have not only threatened to cut off relations with some of those liaison partners [when] we have information that they practice [abuses of human rights], we have cut off relations. So I think we need to keep the pressure on them …. The navigation of the shoals that stand between these governments today and a thriving democracy are significant. And I think we have to help them navigate it. However, the U.S. IC itself has leveraged foreign intelligence partnerships to commit ethical abuses, including the well-documented use of so-called black sites overseas. Six days after the 9/11 terrorist attacks, President George W. Bush signed a memorandum of notification (MON) that granted the CIA a number of counterterrorism authorities, including to \"undertake operations designed to capture and detain persons who pose a continuing, serious threat of violence of death to U.S. persons and interests or who are planning terrorist activities.\" Subsequently, DCI George Tenant ordered the agency's Deputy Director of Operations and the Director of the Counterterrorism Center to assume authority for the capture and detention of terrorists. The CIA conducted detentions and interrogations at various secret black sites abroad where CIA personnel, including contract interrogators, employed what has been termed \"enhanced interrogation techniques\" as authorized by the Department of Justice. In its study of the program, the Senate Select Committee on Intelligence (SSCI) reported ten detention sites abroad. Media sources have indicated as many as nine more sites. Although the landmark 2006 Supreme Court ruling Hamdan vs Rumsfeld effectively ended the \"enhanced interrogation techniques\" the CIA employed at the time, and contributed ultimately to the closure of the black sites by 2009, the program proved an embarrassment to the CIA, and complicated the IC's counterterrorism intelligence engagements with foreign partners. U.S. intelligence agencies' often long-standing ties to foreign intelligence services have been tested by sharing of uncorroborated information and improper source vetting. Germany and Jordan are close intelligence partners of the United States. Both, however, provide examples of the risk of accepting information or intelligence from partner-controlled, improperly vetted sources. The now-discredited information of a German Federal Intelligence Service (Bundesnachrichtendienst or BND) source codenamed Curveball, alleging Iraq was in possession of weapons of mass destruction, influenced the 2003 U.S. decision to invade Iraq. Although the lessons learned from this historic failure to properly vet a foreign intelligence source have reduced the risk of repetition, any intelligence organization can fall victim to accepting unreliable information from an otherwise trusted foreign partner. Further, some foreign partners could render their controlled sources' information unreliable through use of duress or torture. In December 2009, a source under control of Jordan's General Intelligence Directorate (GID), Humam Khalil al-Balawi, blew himself up at a CIA facility at Forward Operating Base Chapman in Khost, Afghanistan, killing seven CIA agents. Al-Balawi, who had claimed to be the physician to Ayman al-Zawahiri, then-deputy to Osama bin Laden, was in fact working for al-Qa'ida. At the time, however, he offered the prospect that he could assist the CIA in locating al-Qa'ida's senior leadership. A subsequent CIA assessment of the circumstances that led to the attack concluded that al-Balawi \"was not fully vetted\" despite having previously provided information to the U.S. and Jordan that had been verified. In a statement outlining corrective measures resulting from the attack, then-CIA Director Leon Panetta determined, in part, that the agency needed to \"more carefully manage information sharing with other intelligence services.\" The intelligence partnership with Britain has also proven vulnerable to the problems of vetting employees or sources of a foreign intelligence agency. The most notorious instance involved five British graduates of Cambridge University (the Cambridge Five ), serving in senior positions in MI6 while engaging in espionage as agents of the Soviet Union in the 1940s and 1950s. One of the five, Kim Philby, served for a time as First Secretary (Chief of Station-equivalent) of the British embassy in Washington, DC. Problems with espionage and violations of security have also affected the U.S. IC. Some close partners have brought U.S. citizens under control as sources for intelligence on the U.S. These include the cases of Jonathan Pollard and Robert Kim spying on behalf of Israel and South Korea, respectively. Another dimension of the risk to intelligence sharing with foreign partners involves advances in technology. Recently, the Trump Administration expressed concern over the potential decision of a foreign intelligence partner to purchase 5G telecommunications infrastructure that could be vulnerable to penetration by a hostile foreign intelligence service or a company controlled by a hostile foreign intelligence service. The United States Ambassador to Germany, in a letter to the German Minister for Economic Affairs, reportedly warned against Germany purchasing 5 th -generation technology (5G) telecommunications equipment from China's Huawei Technologies Co., suggesting that doing so might require the United States, out of concern for security, to cut back on intelligence sharing between the United States and its long-standing ally. The proposed Intelligence Authorization Act of Fiscal Years 2018 and 2019 ( S. 245 ) would require the head of an IC element entering into an agreement with a foreign intelligence service to consider the vulnerability of the foreign service's telecommunications infrastructure to an adversary of the United States. Limited cooperation or a lack of reciprocation can occasionally afflict even the closest intelligence foreign intelligence relationships. Close partners generally work through these challenges. Policy differences may create more persistent obstacles. Intelligence sharing may be more limited with foreign intelligence services that do not share western democratic values or that have a fundamentally different perspective of the global environment. Non-Five Eyes allies have occasionally expressed frustration with bilateral intelligence ties that are evidently not as close as those of each of the Five Eye countries to the United States. Sometimes these limitations are structural; intelligence sharing agreements (MOUs and GSOMIAs) generally define the limits of what can be disclosed or released. This may result in either partner placing restrictions on what is shared on an issue of mutual national security interest. These structured exchanges may result in overly-general assessments that contribute little to policy-makers' understanding of an issue. Another limitation affecting cooperation on counterterrorist-related intelligence involves the more restrictive privacy protections of some countries compared to those of the United States. This was true in Europe prior to the terrorist attacks in Paris and Brussels in 2015 and 2016, respectively. European allies' stricter privacy laws prevented their processing and sharing with the United States air passenger name request (PNR) data that could be important to preventing a terrorist attack. Since the attacks in Paris and Brussels, however, the U.N. Security Council (UNSC) and European Union (EU) have partially addressed U.S. concerns by adopting measures to improve tracking and interception of PNR data; these measures are intended to facilitate the sharing of perishable intelligence indicators of terrorist travel. In situations involving fundamentally different values and assumptions about the global environment, the United States and a foreign partner may limit the intelligence they are willing to share. Describing the long-standing U.S. strategic intelligence relationship with Saudi Arabia, for example, one scholar noted, The [Saudi] Kingdom in general was often slow to recognize the threat of terrorism and reluctant to cooperate with the United States. After the 1996 Khobar Towers bombing, the Saudi government did not share vital information with U.S. intelligence. Many of the causes linked to the global jihadist movement, like the fighting in Kashmir and Chechnya, enjoyed wide legitimacy within the Kingdom, and citizen support for these conflicts seemed to pose no direct threat to Saudi security. In instances where intelligence relations with foreign entities are part of a larger relationship, the benefit to each side might not be directly reciprocated. A foreign partner, for example, may leverage a capability in intelligence, such as human intelligence access to a difficult target, in order to extract benefits from the United States in other areas of the bilateral relationship, such as military assistance. In one example, Pakistan for years benefited from a relationship with U.S. intelligence that was part of a broader cooperative relationship in defense, counterterrorism, governance, and development. This relationship survived despite strong American objections to indications of Pakistan's support for the Afghan Taliban, Haqqani Network, and other Islamist militant groups, and Pakistan's objections to alleged U.S. violations of its sovereignty. In January 2018 the Trump Administration announced a major policy decision to suspend security aid to Pakistan. Pakistan retaliated by terminating its counterterrorism intelligence cooperation with the United States. The IC also has (or has had) intelligence liaison relationships with adversaries such as Russia, China, Syria, and Libya. There has been benefit in doing so over a relatively narrow range of mutual interests. However, the apparent benefit of exchanging intelligence with adversaries, such as on counterterrorism, is typically weighed alongside the risks. There is a danger of exposing U.S. intelligence sources and methods to a traditional adversary. Furthermore, intelligence liaison about a particular issue—over time—may risk exposing U.S. sources and methods to the foreign agency, as well as exposing knowledge of corruption connected to that government. Serious policy differences also can reduce or negate the benefits of sharing intelligence. In the case of Syria, both Russia and the U.S. have an interest in resolving the conflict. However, Russia's broader strategic objectives oppose those of the United States. Although foreign intelligence partnerships may have the benefit of expanding the reach of U.S. intelligence in areas where the U.S. lacks collection assets, they also may pose a risk of the IC relying too heavily on a partner's unique access and capabilities. In the 1970s, the IC's reliance on Iran's SAVAK intelligence organization contributed to the U.S. failure to comprehend developments leading up to the overthrow of the Shah. More recently, Congress, in a Joint Inquiry into the conditions leading up to 9/11, the congressional intelligence committees cited the \"excessive reliance on foreign liaison services,\" as a factor contributing to the failure of the IC to develop its own human intelligence sources that could penetrate Al Qa'ida. Lacking access to senior, high level al-Qa'ida leadership, the [Intelligence] Community relied on secondhand, fragmented and often questionable human intelligence information, a great deal of which was obtained from volunteers or sources obtained through the efforts of foreign liaison. The dispersed character of terrorists and terrorist organizations is such that it would be difficult to expect the IC to have an optimal number of U.S.-recruited human intelligence sources in place everywhere they might be needed. There will always be an inherent risk in relying on foreign partners in areas where the United States has not had the time, resources, or capacity to develop its own assets. However, a greater risk was arguably incurred by the U.S. intelligence community in its deliberate, resource-driven strategy of leveraging foreign partnerships during the 1990s. U.S. foreign intelligence relationships may be easily overlooked in discussions of the importance and inherent risks of cooperation with state and non-state actors in the international community. Little is publicly known about them, in particular how they are structured and how they contribute to U.S. national security. The benefits of these relationships to the United States are weighed against their potential hazards, including outright failure. Congress's role in providing oversight here is different than its oversight of intelligence in other respects. With the exception of covert action with foreign partners (which is covered by oversight provisions in statute), congressional oversight of U.S. foreign intelligence relationships can be especially challenging due to the passive, low-profile character of sharing intelligence, and Congress's inability to penetrate the internal dynamics of a foreign intelligence service. Nonetheless, these relationships will remain an integral, daily aspect of intelligence activities supporting U.S. national security objectives, and thus Congress has a vested interest in conducting oversight of them.", "summary": "From its inception, the United States Intelligence Community (IC) has relied on close relations with foreign partners. These relationships often reflect mutual security interests and the trust each side has of the other's credibility and professionalism. They are generally strategic and cover a range of national security priorities involving national defense, emerging threats, counterterrorism, counter-proliferation, treaty compliance, cybersecurity, economic and financial security, counter-narcotics, and piracy. U.S. intelligence relations with foreign counterparts offer a number of benefits: indications and warning of an attack, expanded geographic coverage, corroboration of national sources, accelerated access to a contingency area, and a diplomatic backchannel. They also present risks of compromise due to poor security, espionage, geopolitical turmoil, manipulation to influence policy, incomplete vetting of foreign sources, over-reliance on a foreign partner's intelligence capabilities, and concern over a partner's potentially illegal or unethical tradecraft. Because intelligence failures involving a foreign partner sometimes become public, the risks to the IC of cooperating with a foreign intelligence service are more easily understood. Nevertheless, the persistent cultivation of intelligence relations with foreign partners suggests that the IC remains confident that the benefits outweigh the risks. These benefits are not always widely recognized due to their sensitivity and the potential for compromising the scope and details of what amounts to intelligence collection. The best known of these intelligence relationships are the decades-long ties to America's closest allies, who have shared history, values, and similar perspectives on national security threats. Such ties are often one component of a broader security cooperation arrangement. Less well known are liaison relationships with U.S. adversaries over a particular issue of mutual concern, or relations with non-state foreign intelligence organizations such as Kurdish groups. Regardless of the partner, the U.S. Intelligence Community's aim is to enhance national intelligence resources and capabilities and to further U.S. national security by better understanding the threat environment and thereby enabling informed strategic planning, better policy decisions, and successful military operations. Thus, U.S. foreign intelligence relationships can be an overlooked component of public discussion of various aspects of international cooperation. Foreign intelligence agencies with ties to U.S. intelligence have often escaped the reach of congressional oversight. Yet Congress, at various times, has been interested in both the benefits and the risks of foreign intelligence relationships to U.S. national security. While sometimes extolling the value intelligence foreign partners can provide, Congress has also been critical of occasions when the IC has become too dependent on such partners at the expense of IC investment in its own intelligence capabilities. Congress has also been concerned with the IC's ability to independently assess the credibility of foreign intelligence sources, as well as the vulnerability of a foreign intelligence partner's telecommunications infrastructure to compromise by a hostile foreign intelligence service. Of particular sensitivity to Congress has been the poor record of human rights by certain foreign intelligence agencies and the potential for foreign intelligence partners to collect and share with the United States information on U.S. persons. This report uses publicly available, unclassified sources as the basis of its research, and does not reference information in the public domain that was unlawfully disclosed.", "document_type": "crs"}
{"report": "The National Voter Registration Act of 1993 (NVRA) requires that states follow certain voter registration requirements for federal elections. NVRA does not set requirements for state or local elections. The stated purposes of NVRA are to establish procedures to increase the number of eligible citizens registered to vote in federal elections; enable enhanced voter participation in federal elections; protect the integrity of the electoral process; and ensure accurate voter registration records. NVRA was not the first piece of federal legislation addressing state electoral activities, but it did create a more significant federal presence in voter registration activities. NVRA may be viewed as an extension of the Voting Rights Act of 1965 (VRA) and other federal legislation that sought to create uniformity across state electoral processes in order to expand voter enfranchisement and ensure constitutionally protected voter rights. NVRA is sometimes referred to as the motor-voter bill, since one of its provisions requires that eligible citizens must be able to simultaneously apply for voter registration when they apply within a state for a motor vehicle driver's license or other personal identification document issued by a state department of motor vehicles. In addition to these motor-voter registration opportunities, NVRA requires that states establish mail-based voter registration processes and accept a federal mail-in registration form. States must also provide in-person voter registration opportunities at the designated, residence-based voter registration sites, in accordance with state law, and at designated federal, state, or nongovernmental offices, including state agencies providing public assistance or services to persons with disabilities. In addition to voter registration methods, NVRA included procedural requirements for states to follow when performing voter registration list maintenance or when adding, removing, or modifying records for registered voters. NVRA further required that the Federal Election Commission (FEC) provide guidance to the states for implementing NVRA. NVRA also directed the FEC to publish a biennial election report assessing the impact of the act on federal election administration and offering recommendations for improvements to federal and state procedures, forms, and other matters affected by NVRA. These FEC responsibilities were transferred to the U.S. Election Assistance Commission (EAC) following enactment of the Help America Vote Act (HAVA) in 2002. NVRA, as amended by HAVA, provides much of the framework for federal voter registration policy. The first portion of this report provides a brief background on the federal role in voter registration and the passage of NVRA, followed by a discussion of the key components of NVRA. The implementation of NVRA, subsequent modifications to its provisions, and ongoing considerations related to federal voter registration are also discussed. The final sections of this report provide descriptions of types of common legislative proposals addressing voter registration, with a full list of related bills introduced in the 115 th Congress provided in the Appendix . Many elements of election administration remain under the domain of state and local governments, but the federal government has become more involved in some election aspects since the 1960s. The Voting Rights Act of 1965 (VRA) and several subsequent federal laws, including NVRA, reflect congressional initiatives to increase voter participation across the states. Various proposals were introduced in the 1970s and 1980s to create national standards for voter registration, but the enactment of NVRA in 1993 marked the first comprehensive federal policy addressing voter registration. The House and Senate considered measures during multiple Congresses in the 1970s, for example, that would have created a postcard-based national voter registration form administered by the Census Bureau. In the 95 th Congress (1977-1978), congressional attention turned toward creating national standards for same-day voter registration, but neither chamber passed related legislation. Congress considered other voter registration measures between 1983 and 1988, but no proposals appear to have reached the floor in either the House or Senate. Previous versions of NVRA were introduced in the 101 st Congress (1989-1990) and 102 nd Congress (1991-1992) before similar legislation was ultimately signed into law on May 20, 1993. Two laws enacted prior to NVRA, the Voting Accessibility for the Elderly and Handicapped Act of 1984 (VAEHA) and the Uniformed and Overseas Citizens Absentee Voting Act of 1986 (UOCAVA), may be viewed as legislative predecessors to NVRA. Primarily, these laws focused on voting access, but they also contained provisions that addressed voter registration. VAEHA and UOCAVA represented extensions of the federal government's role in some electoral activities that had traditionally been the domain of state and local governments. VAEHA required that states make polling places more accessible for persons who are elderly or disabled; provide absentee ballots for handicapped voters with no notarization or medical certification required; and offer voting aids for elderly or disabled individuals to use in federal elections. With regards to voter registration, VAEHA also required that states establish \"a reasonable number of accessible permanent registration facilities,\" and offer registration aids for elderly or handicapped individuals to use in federal elections. UOCAVA required each state to permit uniformed servicemembers, their spouses and dependents, and overseas citizens who do not maintain a residence in the United States to vote absentee in federal elections using a federal write-in absentee ballot or a state absentee ballot approved by the presidential designee and made available at least 60 days before an election. UOCAVA also required states to accept and process any valid voter registration applications received at least 30 days prior to a federal election from military or overseas voters and created an official postcard form states would accept for these individuals containing both a voter registration application and an absentee ballot application. NVRA's shorthand name, the motor-voter bill, refers to one of its more well-known provisions—the requirement that states establish procedures for eligible individuals to register to vote in federal elections, or to update their voter registration records, simultaneously with their applications for motor vehicle driver's licenses or for any other form of personal identification provided by the state's department of motor vehicles (DMVs). Under NVRA, states must also establish other in-person voter registration locations, including at federal, state, or nongovernmental offices that primarily provide public assistance or services to persons with disabilities, and at other locations as described in Section 7 of NVRA. In addition to specifying locations for voter registration opportunities, NVRA also contains criteria for states' voter registration forms and requires states to accept a national mail-based registration form created by the FEC. States must also meet certain procedural requirements when adding, removing, or modifying records in their voter registration lists. Today, the EAC provides states with guidance for implementing NVRA and publishes a biennial election report assessing the impact of NVRA on federal election administration and providing recommendations, if necessary, for improvements to federal and state procedures, forms, and other matters affected by NVRA. Section 5 of NVRA provides that \"Each State motor vehicle driver's license application (including any renewal application) submitted to the appropriate State motor vehicle authority under State law shall serve as an application for voter registration with respect to elections for Federal office unless the applicant fails to sign the voter registration application.\" An applicant submitting a change of address to a state DMV can also designate that the change should be relayed to election officials as an update to his or her voter registration. Voter registration information collected by DMVs must be relayed to election officials no later than 10 days after it is received. If the DMV receives voter registration information within 5 days of the state's voter registration deadline, it must be relayed to election officials no later than 5 days after its receipt. This is the same timeline for application turnaround that NVRA requires for the other voter registration agencies it covers, as discussed in the following section, \" Other Voter Registration Agencies .\" Proponents of NVRA expected that most voter registration would eventually occur through this type of application. In the years since NVRA was enacted, DMVs have become a popular source for voter registrations. Among the voter registration methods denoted in NVRA and tracked in the biennial NVRA reports, DMVs are consistently the most common source of voter registration applications. The EAC reports that between 2014 and 2016, departments of motor vehicles accounted for a higher proportion of voter registration applications received than any other source of voter registrations designated under NVRA. Table 1 provides information on DMV-based registration and other sources for selected years. In addition to DMVs, under NVRA, states are required to provide opportunities for individuals to register to vote in-person at other locations. These include \"the appropriate registration site designated with respect to the residence of the applicant in accordance with state law,\" as well as at certain federal, state, or nongovernmental offices. Section 7 of NVRA identifies these additional locations as \"voter registration agencies.\" Any office in a state that provides public assistance or administers state-funded programs primarily designed to provide services to persons with disabilities must be designated as voter registration agencies. Recruitment offices for the U.S. armed services are also designated as voter registration agencies. Beyond these required designations, states are also directed to designate other locations, such as public libraries, schools, city or county government offices, unemployment compensation offices, and fishing and hunting license bureaus. The Higher Education Amendments of 1998 further required that colleges and universities in states exempt from NVRA \"make a good faith effort\" to request and distribute mail-based voter registration forms to enrolled students. Each designated voter registration agency must distribute mail-based voter registration forms; provide assistance to applicants completing the form, unless such assistance is refused by the applicant; and transmit completed applications to the appropriate state election official no later than 10 days after they are received or within 5 days of their receipt if received within 5 days of the state's voter registration deadline. This timeline is the same as NVRA requires for state DMVs that receive voter registration forms. Individuals assisting with registration applications cannot seek to influence the applicant's political preference or party registration; display a political preference or party allegiance; or make any statement or take any action that has the intent or effect of discouraging an applicant from registering to vote or leading the applicant to believe that the availability of other services provided by the agencies is dependent upon the decision to register or not register. Section 6 of NVRA further directs states to make available mail-based voter registration applications for federal elections. These mail-based applications can also be used for voters to update a change of address. Section 6 requires states to accept and make available a mail-based application created by the federal government, but also permits states to use a mail-based form of their own creation. NVRA directed the FEC to develop and maintain the mail-based federal voter registration application, but this function was transferred to the EAC following the passage of HAVA, effective in 2004. Mail-based voter registration applications created by the states were required to meet all the criteria specified by Section 9 of NVRA, which are described in the subsequent section, \" Voter Registration Form Requirements .\" States were required to make mail registration forms available to governmental and private entities for distribution, with an emphasis on making forms available for organized voter registration programs. Under NVRA, state laws could require that voters new to a jurisdiction who registered by mail vote in-person for their first election. If a registrar sends a notice to an individual regarding the disposition of a mail-based voter registration application via nonforwardable postal mail and the notice is returned as undeliverable, the registrar may begin the process of removing the individual from the state's voter list, as detailed in Section 8(d). In addition to how and where states are required to provide voter registration opportunities, NVRA contains requirements for the information presented on and collected by voter registration forms for federal elections. These requirements are presented in Section 9(b) of NVRA, and also serve as the criteria used for the federal, mail-based voter registration application created under NVRA. States are also required to make the FEC mail-based registration form available at governmental and private entities for distribution, with a particular focus on distributing forms to nongovernmental voter registration programs. Instead of listing a number of information fields that must be included on voter registration forms, NVRA minimizes the amount of information an applicant needs to provide by utilizing personal information the applicant provides elsewhere. At state DMVs, for example, the application for registering to vote must be incorporated into the application form for a driver's license and cannot require the applicant to duplicate any information already provided on the driver's license portion of the form. For voter registration on driver's license applications and for state mail-in applications, a form may only request the minimum amount of information necessary to prevent duplicate registrations and enable state election officials to determine the eligibility of the applicant and administer voter registration laws. Voter registration applications under NVRA must include statements listing federal voting eligibility requirements (including citizenship) and require a signature from the applicant, attesting that he or she meets the eligibility criteria. Voter registration forms may not include \"any requirement for notarization or other formal authentication.\" In recent years, the EAC and U.S. Supreme Court have interpreted this to preclude states from requiring proof of U.S. citizenship in order to submit an application for federal voter registration. The forms also include a statement about penalties for submitting a false voter registration application, and a statement asserting that information about declining to register or the office where a citizen registered would be kept confidential. As noted above, agencies providing voter registration forms, including DMVs, are required by NVRA to accept completed forms from applicants and transmit the forms to the appropriate state election official within 10 days of receipt. If the completed form is collected by an agency within 5 days of the state's voter registration deadline, the form must be transmitted to state election officials within 5 days of receipt. Under NVRA, once state election officials have received and approved or denied an application, they are required to send each applicant a notice regarding the disposition of his or her application. State election officials are also directed to ensure that any eligible applicant is registered to vote in time for a federal election, as long as the applicant's information was submitted to a voter registration agency or postmarked no later than 30 days before a federal election (or the state's registration deadline, if that is less than 30 days before Election Day). Once a voter is registered, his or her name is not to be removed from the list or roster of eligible voters unless the voter requests removal; has died; has moved out of the jurisdiction; or, as provided by state law, has received a disqualifying criminal conviction or is found to be mentally incapacitated. Voters may not be removed from the registration rolls solely due to nonvoting, or for moving within the same electoral jurisdiction. States may \"conduct a general program that makes a reasonable effort\" to remove voters from the list due to death or a change of residence. States may also remove a voter from the registration rolls if the registrant has notified the election office that he or she has moved. States may also remove voters from the registration rolls if the registrant does not respond to a notice sent by the registrar (containing a forwardable mail response card with prepaid postage) and fails to vote or appear to vote in two consecutive general elections for federal office. The processes states use to maintain accurate, up-to-date voter registration lists for use in federal elections must be undertaken in a \"uniform, nondiscriminatory\" fashion and in compliance with the Voting Rights Act of 1965. States could use the U.S. Postal Service (USPS) \"National Change of Address\" program as one way to help maintain their voter registration rolls. Removal of ineligible voters from the registration rolls must be completed at least 90 days prior to the date of any federal election (general or primary). Beyond these guidelines, NVRA does not specify any particular process states must follow when removing individuals from their registered voter lists. NVRA includes \"fail-safe\" voting provisions, enabling voters who have moved within a jurisdiction but lack updated registrations to vote on Election Day and to update the state's records. These \"fail-safe\" provisions are limited to registrants who move within the same election jurisdiction, under the principle that \"once registered, a voter should remain on the list of voters so long as the individual remains eligible to vote in that jurisdiction.\" This situation could arise because voters did not realize their information required an update, or because of technical or bureaucratic mistakes in processing a registrant's updated application. A voter whose residence was formerly covered by one polling place but whose residence is currently covered by another polling place in the same jurisdiction must be allowed to update his or her voting records and vote, either at the voter's former polling place, current polling place, or at a central location within the jurisdiction. Section 12 of NVRA establishes criminal penalties for federal election fraud and voter intimidation. No individual may \"knowingly and willfully\" attempt to intimidate, threaten, or coerce anyone who is attempting to register to vote, assisting with voter registration, voting, or exercising any right under NVRA. Individuals may also be charged for attempting to deprive state residents of a \"fair and impartially conducted election process\" by procuring or submitting voter registration applications or ballots that are known to be fraudulent according to state law. Individuals committing these acts could be fined in accordance with Title 18 of the U.S. Code and/or imprisoned for up to five years. Under NVRA, states are required to keep records pertaining to voter registration list maintenance and to make these records publicly available. NVRA also required the FEC to produce a biennial report \"assessing the impact of this Act on the administration of elections for federal office ... including recommendations for improvements in Federal and State procedures, forms, and other matters affected by this Act.\" Since 2003, these NVRA reports have been produced by the EAC. The biennial NVRA reports are submitted to Congress by June 30 of each odd-numbered year. No further instructions on the content of the reports were provided by NVRA; in practice, the FEC/EAC has chosen to conduct surveys of the states to collect information that it deems necessary to carry out its statutory requirement. The biennial NVRA reports provide statistics and detailed discussion on the voter registration activities of the states for the preceding two-year period under study. This includes information on the total number of registered voters, new registrants, and sources of registrations covered by NVRA (i.e., motor vehicle agencies, in-person, by mail, or other designated state office). The NVRA reports also provide information on the removal of voters from registration lists and reasons for removals. Issues with list maintenance have at times been discussed in these reports, as have recommendations for improvements. Many of NVRA's requirements were designed to be implemented through state-level policy changes, if existing state laws were not already in compliance with its provisions. Six states were exempt from NVRA at the time of its enactment because they either had no voter registration requirement or provided voter registration at polling places on Election Day. The other 44 states were tasked with implementing NVRA by January 1, 1995; however, if something in a state's constitution precluded compliance, NVRA allowed for a later enactment date to allow for the state's constitutional amendment process. NVRA provided no federal funding to the states to carry out any of its prescribed requirements. States are, however, eligible to use reduced mailing rates from USPS for voter registration mailings. Each state was required to designate a state officer or employee to serve as the chief state election official and coordinate state responsibilities related to NVRA. NVRA also created specific roles for the FEC and made the Department of Justice (DOJ) responsible for civil enforcement of its provisions. The FEC was responsible for providing information to states about their responsibilities under NVRA; developing a mail-based federal voter registration form; and producing a biennial report to Congress, in consultation with states' chief election officers. Within the FEC, the Office of Election Administration (OEA) carried out its NVRA responsibilities, until the passage of HAVA in 2002 transferred these responsibilities to the EAC. The initial NVRA report from the FEC noted that \"[NVRA] is something of an experiment in governance in that the federal responsibilities for its proper implementation are divided between two separate federal agencies,\" meaning the FEC and DOJ. In early guidance to states regarding NVRA implementation, the FEC stated it \"does not have legal authority either to interpret the Act or to determine whether this or that procedure meets the requirements of the Act,\" noting that such activities would fall under the DOJ's civil enforcement responsibilities. While NVRA was under consideration by Congress, some were concerned about the costs it could impose upon states, since the bill contained a number of requirements for state election officials and other state agencies but no funding to carry them out. As states began to implement NVRA, however, costs were not cited in the FEC reports as a significant impediment, and implementation generally proceeded without many reported complications. In the 1995-1996 NVRA report, for example, the FEC said that the motor vehicle provisions \"appeared to be the easiest for States to implement,\" and that states reported \"relatively few problems\" with implementing the mail registration provisions. The FEC attributed this, in part, to the fact that 26 of the 43 states responding to the survey had already enacted some form of motor voter registration prior to NVRA, and that 25 of the responding states already had voter registration by mail prior to NVRA. Voter registration rates did increase in the years following the passage of NVRA, as compared to the years immediately preceding its passage. Some have suggested, however, that it is difficult to isolate the particular effect NVRA had on this increase, due to a number of other factors that could lead voters to register or to not register. In its 1993-1994 NVRA report, the FEC noted that statewide computerization of voter registration \"greatly facilitates the implementation of NVRA,\" and that \"even larger networks linking motor vehicle, public assistance, vital statistics, and courts to the voter registration system\" could further assist with intake and verification of voter records. At the time, FEC found varying degrees of computerized record systems across states, and noted that in some states, the record systems used by different local jurisdictions were incompatible with one another. States were granted some latitude to comply with other provisions in NVRA that were not as strictly specified by the legislation, such as the designation of voter registration agencies and state procedures for voter list maintenance; as a result, the ways in which they approached these provisions varied. As one example, for NVRA's requirement that states designate other offices as voter registration agencies, the FEC's 1995-1996 report found four states had not designated any agencies, and the 21 other states that responded had selected \"a wide variety of agencies.\" Regarding voter list maintenance, the FEC stated that \"[a]s one might expect, [the] States covered by this report approached the rather technical and detailed problems of list maintenance quite differently and unevenly.\" The Help America Vote Act (HAVA) was enacted in 2002 and serves as another key piece of federal election policy, addressing a number of election administration elements in light of issues revealed during the 2000 presidential election. This section focuses only on the parts of HAVA that affected NVRA or voter registration in federal elections, namely, the computerization of state voter lists; changes to the federal mail-based voter registration form; and transferring the FEC's role to a newly created Election Assistance Commission (EAC). HAVA has many additional components, however, and more comprehensive information on it can be found in CRS Report RS20898, The Help America Vote Act and Election Administration: Overview and Selected Issues for the 2016 Election . In the years preceding HAVA, the FEC's biennial NVRA reports contained a number of recommendations related to the voter registration and list maintenance requirements set forth by NVRA. HAVA incorporated several of these recommendations, some as its own provisions and others as amendments to NVRA. Notably, HAVA established requirements for states to utilize computerized statewide voter registration lists, which the FEC had frequently suggested in its NVRA reports. HAVA also provided funding to help states carry out this requirement and its other objectives, many of which were related to modernizing voting equipment and generally improving federal election administration across all the states. HAVA required four specific additions to the NVRA mail-based voter registration form: (1) a question asking whether the registrant was a citizen, with corresponding answer check boxes; (2) a question asking whether the registrant would be 18 years of age or older by the next election, with corresponding answer check boxes; (3) a statement that if the registrant had answered \"no\" to either of the preceding questions, that he or she was to stop filling out the form and not register; and (4) a statement alerting the registrant to submit copies of appropriate documentation with his or her application, if he or she is a first-time registrant, and the completed forms are submitted through the mail, or else he or she may be required to provide such documentation when voting for the first time. Prior to HAVA, the FEC's Office of Election Administration (OEA) carried out federal activities related to election administration. HAVA created the Election Assistance Commission, an independent, bipartisan agency, which absorbed the OEA's responsibilities in addition to carrying out other new requirements. The EAC's responsibilities included carrying out payment and grant programs related to federal elections; testing and certifying voting systems; studying election issues; and issuing guidelines and other guidance related to voting systems and implementation of HAVA's requirements, in consultation with election officials and other stakeholders. Since the passage of HAVA in 2002, the biennial EAC reports have often contained further recommendations related to voter registration and election administration. Many of these recent recommendations pertain to modernizing data collection and improving data sharing practices within and among states. The recommendations are typically broad-based and use generalized language; they serve only as suggestions to the states, or possibly to Congress, since the EAC lacks the authority to require states to take any action related to voter registration. Table 2 presents a summary of NVRA recommendations contained in the EAC reports since 2004. Table 1 (earlier in report) provides information on the sources of voter registration applications for states covered by NVRA during 1995-1996, 2005-2006, and 2015-2016. These data include new voter registration applications and applications requesting an update or modification for an existing registered voter. Nationwide, DMV offices have remained the most common source among those covered by NVRA for voter registration applications received by state election officials. Mail-based forms are consistently the second-most common source for voter registration applications. The EAC notes that online voter registration has grown in recent years, accounting for 17.4% of new voter registration applications for the 2016 election. For the 2014 election, 6.5% of voter registration applications were submitted online, and for the 2012 election, 5.3% of voter registration applications were submitted online. Bills that address voter registration are routinely introduced in Congress. Table A-1 in the Appendix lists 66 pieces of legislation that were introduced in the 115 th Congress related to voter registration or to other elements of election administration covered by NVRA. Often, these bills sought to expand the ways in which individuals can register to vote or to update the technologies states use to share and store voter registration data. Some of these bills were narrowly tailored to address a particular part of voter registration, whereas other bills proposed broader policies affecting a number of components of election administration. The sections below categorize some of the common types of policy proposals related to NVRA and federal voter registration. Given the variety and quantity of measures typically before Congress, this is not meant to be a comprehensive discussion of all available voter registration policy options. Under NVRA, federal voter registration opportunities are made available at a number of state and local government offices and are presented alongside state driver's license applications. Currently, an individual must indicate that he or she wishes to register to vote when applying for a driver's license, or complete a separate voter registration form at other agencies. Some have proposed changing this to an \"opt-out\" system, where an individual is automatically registered to vote when submitting a driver's license application or other eligible agency form, rather than being given the opportunity to opt in to register to vote through an additional selection. An option for declining to register to vote could be presented on the form itself, or provided to the individual at a later time through a notice mailed by election officials. Automatic voter registration currently occurs in 17 states and the District of Columbia. Proponents argue that automatic voter registration could increase the number of registered voters, particularly among demographic groups that are less likely to be registered, and decrease registration costs. Others have raised concerns that the government should not require citizens to register to vote, and that \"opt-out\" forms, if sent by mail, may not sufficiently ensure that an individual who wishes not to register can decline registration. Similarly, automatic registration may require more work for state election officials who must sort out eligible and ineligible voter registration applicants. In the 115 th Congress, 14 bills proposed some form of automatic voter registration requirement. Another bill would have provided grants to states for implementing automatic voter registration. Nine bills introduced in the 115 th Congress would have required states to provide for same-day voter registration, which would enable a qualified individual to register to vote and cast a ballot simultaneously at a designated polling place. Seventeen states and the District of Columbia currently have some form of same-day voter registration. By combining these two steps, proponents believe same-day voter registration simplifies the process for citizens and can increase registration rates and turnout. The month before an election is often a peak time for political campaigning, but unregistered individuals who are mobilized to participate during this period may be unable to vote if the voter registration deadline has passed; in many jurisdictions, the registration cut-off can be 30 days before Election Day. Others believe that preelection registration deadlines remain necessary for state election officials to sufficiently process individuals' applications. In some places with same-day registration, voters who register on Election Day cast provisional ballots until their information can be verified, but this may create a delay in determining election results. A number of government forms and applications can be submitted on the internet, and some have proposed a federal requirement for online (or electronic) voter registration applications. Currently, 38 states and the District of Columbia allow for online voter registration. Seven bills introduced in the 115 th Congress proposed requiring nationwide availability of online voter registration for federal elections. Proponents believe that online voter registration could increase registration rates, particularly among younger voters, and could serve as an extension of existing accessibility accommodations for individuals with disabilities. Proponents note that online forms can include required fields, which could reduce the number of errors on submitted voter registration applications. Although there are some upfront costs to implement online registration, proponents believe it may be a relatively inexpensive way for state election officials to maintain up-to-date and accurate voter lists. Others, however, have concerns about the ability to confirm applicants' identities and the overall security of online voter registration systems. Without accurate checks on the voter registration process, some believe that it could be easier for individuals to vote illegally. Under the Twenty-sixth Amendment, individuals must be 18 years old to vote in federal elections, but some proposals related to voter registration seek to reach younger teenagers, usually 16 or 17 years old. Five bills introduced in the 115 th Congress, for example, proposed a preregistration program in which younger individuals could submit, in advance, an application to register to vote; five bills also proposed voter education or participation outreach programs for minors. Currently, each state that requires voter registration and the District of Columbia let individuals under 18 preregister to vote, using a variety of age criteria. Proponents consider these measures a means to help improve the turnout rate for younger voters, which is typically lower than for older voters. By encouraging 18-year-olds to vote in the first election in which they are eligible, some believe that there will be longer-term effects of these policies on voter turnout, as voting becomes a lifelong habit for these individuals. Others, however, are concerned that preregistered individuals are likely to move between the time of their application and the first election they are qualified to vote in, which could render a number of the preregistrations invalid. This could cause some young voters who have moved to mistakenly believe they are eligible to vote in their new jurisdiction without updating their registration information, or create extra costs for state election officials as they seek to update these individuals' records and maintain accurate voter lists. Verification of voter registration data is a continual challenge for state election officials seeking to prevent fraudulent voting. An initial check on a prospective voter's identity occurs when election officials confirm the identity and eligibility of an individual at the time he or she first submits a voter registration application, based on criteria set by state law. Laws requiring individuals to show a form of identification when voting exist in a number of states to prevent ineligible individuals from voting, individuals voting twice, or other forms of voting fraud. Some have proposed requiring photo identification earlier in the process, at the time of a voter's application for registration, to help verify the individual's identity. One bill introduced in the 115 th Congress, for example, proposed that photo identification must accompany any voter registration application. Others believe that voter identification laws may prevent some individuals who are otherwise qualified to vote from participating in elections, if these individuals cannot or do not wish to obtain the necessary identification. A different bill introduced in the 115 th Congress would have prohibited states from requiring photo identification when an individual submits a voter registration application. After an individual's initial application, there are a number of reasons why his or her voter registration information may subsequently change. These reasons may include a name change, moving to a new address, a criminal conviction, mental incapacity, or death. NVRA sets out some processes states must follow for performing voter list maintenance, and one bill introduced in the 115 th Congress would have added criteria to NVRA's voter removal requirements. In the years since NVRA's passage, technological advancements have made it possible for agencies and officials to share and cross-reference records, which can help improve list accuracy but has also raised some concerns about protecting voters' personal information. Three bills in the 115 th Congress, for example, addressed how voter registration information can be used; one of these bills would have also required a record of all requests submitted to voter registration databases. Personally identifiable information, such as full names, addresses, and birthdays, is commonly stored in state voter registration databases, and in related state or federal databases that election officials use to help update their voter registration records within the state. Interstate information sharing systems, such as the Electronic Registration Information Center (ERIC) or the Interstate Voter Registration Crosscheck Program (Crosscheck), are used by some states to compare voter registration records with one another. These systems, proponents argue, can help states identify ineligible voters or individuals who are registered in more than one state. These data-sharing practices, however, raise concerns among some about information security and appropriate use of voters' data, particularly if states choose to use matching systems as the basis for their voter removal processes. Some of the cross-referencing systems states use to identify and remove voters from their registration lists have been criticized for the methodologies they use to create matches. Matches created using voters' names and birthdays, for example, may falsely identify multiple, unique individuals as a single voter registered in different states. ERIC and Crosscheck, however, both request additional data from voter registration files that, if available, states could utilize to better ensure that duplicate registrants are accurately identified. The enactment of HAVA in 2002 led to a number of election technology upgrades for states, but in many of its subsequent reports, the EAC has continued to recommend that states further modernize and improve the ways in which they collect voter data and maintain their registered voter lists, as summarized in Table 2 . States increasingly use electronic methods to register voters, maintain voter lists, administer voting, and track election results, making cybersecurity an important consideration for election officials. Some considerations involve protecting the personal information of applicants and registered voters from those who seek to use it for other purposes. Additional considerations involve ensuring system reliability during periods of high usage, or near critical statutory deadlines for voter registration or Election Day vote counting. These are familiar cybersecurity concerns, similar to those faced by any government agencies, businesses, or other organizations that store individuals' personal data. Other considerations, however, are more specific to election integrity, such as the concern that voter databases or other election systems may be targeted in attempts to manipulate election results. The Department of Homeland Security (DHS) designated federal election infrastructure as a component of U.S. critical infrastructure in January 2017, following a series of cyberattacks on state and local election systems prior to the 2016 election. After evidence of these cyberattacks was discovered in August 2016, DHS and the EAC provided some assistance to state election officials to address security concerns. In September 2017, the Department of Homeland Security notified 21 states that hackers had targeted their election systems ahead of the 2016 election. In many cases, the systems may have been targeted but not successfully breached. Some observers, however, have raised concerns that a successful hack may be difficult to detect. Several bills during the 115 th Congress included measures to protect election systems (including voter registration websites and databases) from hackers or foreign interference. Often, legislative proposals in this area involve technology or cybersecurity upgrades to the software or equipment used by state election officials. For voter registration, these upgrades could involve the websites used for online applications, the databases and/or servers used to store voter list data, and the means by which voter applicant data are shared between agencies or jurisdictions. Establishing best practices or required standards for equipment and data systems used in federal elections are possible ways to initiate technology improvements. The decentralized nature of election administration and the variety of software and database systems in use may present challenges if uniform federal requirements are introduced. Twelve bills introduced in the 115 th Congress proposed improvements to the technology systems states use for voter registration and records. Some proposals included grant programs or other funding to help offset costs to states for implementing these upgrades. Voter registration has remained a subject of interest to Congress in the years since the enactment of NVRA. Many proposals addressing federal voter registration have been introduced in Congress, but federal policies have remained largely unchanged, with the notable exception of revisions made by HAVA in 2002. Many individuals believe that providing widespread access to voter registration opportunities is a worthy objective and in keeping with protecting the constitutional right to vote. In addition to providing voters with access to registration, state election officials face the continuing challenges of updating and maintaining accurate voter registration lists. Technological advancements in the years since NVRA have made it somewhat easier for election officials to keep up-to-date voter records, but the increased reliance on computer systems has also introduced new challenges regarding data security. Some individuals may also question whether it is necessary to expand existing federal voter registration requirements for states, believing that existing provisions are sufficient, or that the perceived benefits of voter registration policy changes must be weighed against other considerations. It can be challenging, for example, to impose uniform regulations across states, which have each developed their own system of election laws. Many federal policy proposals regarding voter registration tend to mirror initiatives that have already been enacted across several states, which may provide lessons for broader implementation, if enacted. Other proposals may prioritize measures to protect election integrity or other areas of election administration, outside of voter registration. ", "summary": "Historically, most aspects of election administration have been left to state and local governments, resulting in a variety of practices across jurisdictions with respect to voter registration. States can vary on a number of elements of the voter registration process, including whether or not to require voter registration; where or when voter registration occurs; and how voters may be removed from registration lists. The right of citizens to vote, however, is presented in the U.S. Constitution in the Fifteenth, Nineteenth, and Twenty-sixth Amendments. Beginning with the Voting Rights Act (VRA) in 1965, Congress has sometimes passed legislation requiring certain uniform practices for federal elections, intended to prevent any state policies that may result in the disenfranchisement of eligible voters. The National Voter Registration Act (NVRA) was enacted in 1993 and set forth a number of voter registration requirements for states to follow regarding voter registration processes for federal elections. NVRA is commonly referred to as the motor-voter bill, as it required states to provide voter registration opportunities alongside services provided by departments of motor vehicles (DMVs), although NVRA required other state and local offices providing public services to provide voter registration opportunities as well. NVRA also created a federal mail-based voter registration form that all states are required to accept and created criteria for state voter registration forms. Certain procedures states must follow for performing voter registration list maintenance or removing voters from registration lists are also set forth in NVRA. The Federal Election Commission (FEC) provided guidance to state election officials and issued biennial reports to Congress on NVRA implementation and voter registration in each state until these roles were transferred to the Election Assistance Commission (EAC) in 2002. NVRA remains a fundamental component of federal voter registration policy and has not undergone many significant revisions since its enactment, though voter registration remains a subject of interest to Congress. The Help America Vote Act (HAVA) of 2002 enacted a number of election administration measures, several of which were based on recommendations from the FEC's biennial NVRA reports, and affected federal voter registration. These included the computerization of state voter lists; grants to states for election technology upgrades; changes to the federal mail-based voter registration form; and the transfer of the FEC's role in administering NVRA to the newly created EAC. More comprehensive information on HAVA can be found in CRS Report RS20898, The Help America Vote Act and Election Administration: Overview and Selected Issues for the 2016 Election. In the 115th Congress, 66 bills were introduced related to federal voter registration or NVRA. Some of these measures were narrow in scope, whereas others were more comprehensive electoral reforms. Many of these bills sought to expand the ways in which states must allow individuals to register to vote. This can include adding other public service agencies to the list of NVRA voter registration agencies, or requiring online voter registration, same-day voter registration, preregistration of teenagers not yet eligible to vote, or automatic voter registration. A number of other bills reflected ongoing concerns about the technology used to maintain voter registration data and about balancing the efficiency technology provides for citizens and election officials with sufficient cybersecurity protections.", "document_type": "crs"}
{"report": "For much of the past century, U.S. national security strategy focused on several core, interrelated objectives. These include enhancing U.S. security at home and abroad; promoting U.S. economic prosperity; and promoting free markets and democracy around the world. The United States has used both unilateral and multilateral mechanisms to achieve these objectives, with varying amounts of emphasis at different times. These mechanisms have included a range of military, diplomatic, and economic tools. One of these core objectives—enhancing U.S. security—generally is interpreted as the effort to protect the nation's interests and includes, for instance, protecting the lives and safety of Americans; maintaining U.S. sovereignty over its values, territory, and institutions; and promoting the nation's well-being. The United States has wielded a deep and wide range of military, diplomatic, and economic tools to protect and advance its security interests. These include, for instance, the deployment of military forces to deter, dissuade, persuade, or compel others; the formation of alliances and coalitions to advance U.S. interests and counter aggression; and the use of U.S. economic power to advance its agenda or promote democratization, or to impose sanctions or withhold U.S. economic support to condemn or punish states hostile to U.S. interests. In this context, arms control and nonproliferation efforts are two of the tools that have occasionally been used to implement the U.S. national security strategy. They generally are not pursued as ends in and of themselves, and many argue that they should not become more important than the strategy behind them. But many believe their effective employment can be critical to the success of that broader strategy. Many analysts see them as a complement to, rather than a substitute for, military or economic efforts. Effective arms control measures are thought to enhance U.S. national security in a number of ways. For example, many arms control and nonproliferation tools include monitoring mechanisms that can provide early warning of efforts to evade or ignore the obligations. These mechanisms also promote transparency in a way that might increase U.S. knowledge about and understanding of the size, makeup, and operations of an opposing military force. This might not only ease U.S. military planning, but it might also reduce an opponent's incentives for and opportunities to attack U.S. forces, or the forces of its friends and allies. Transparency measures can also build confidence among wary adversaries. Effective arms control measures can also be designed to complement U.S. force structure objectives by limiting or restraining U.S. and other nations' forces. During times of declining defense budget resources, arms control measures may also help ensure reciprocity in force reductions. Indeed, some analysts consider such arms control measures essential to the success of our national military objectives. Similarly, U.S. officials from several Administrations have identified efforts to prevent the further spread of weapons of mass destruction and their means of delivery to be an essential element of U.S. national security. For one reason, proliferation can exacerbate regional tensions that might escalate to conflict and involve or threaten U.S. forces or those of its friends and allies. Proliferation might also introduce new and unexpected threats to U.S. allies or the U.S. homeland. Furthermore, proliferation can greatly complicate U.S. national military strategy, force structure design, and conduct of operations. And these weapons could pose a threat to the U.S. homeland if they were acquired by terrorists or subnational groups. Hence, the United States employs diplomatic, economic, and military tools to restrain these threats and enhance its national security. This view is not universal, however, as critics of arms control and nonproliferation arrangements often argue that the United States should not limit its own forces or flexibility in exchange for the promise that others might do so as well. They often argue that, absent stringent enforcement mechanisms that force other nations to comply with their obligations, these agreements can become unbalanced, with the United States abiding by the terms while others fail to do so. During the Cold War, arms control played a key role in the relationship between the United States and Soviet Union. Although the agreements rarely forced either side to accept significant changes in i ts planned nuclear forces, the arms control process, and the formal negotiations, were often one of the few channels for communication between the United States and Soviet Union. Further, the United States participated in many multilateral regimes that sought to limit the spread of nuclear, chemical, and biological weapons and their means of delivery. Beginning in the early 1990s, it also extended assistance to Russia and other former Soviet states in an effort to reduce the threat that these weapons might fall into the hands of hostile states or nonstate actors. It has explored the possible use of similar tools to provide other nations with assistance in containing and controlling weapons and weapons-grade materials. During the George W. Bush Administration, the President and many in his Administration questioned the degree to which arms control negotiations and formal treaties could enhance U.S. security objectives. They argued that the United States did not need formal treaties to reduce or restrain its strategic nuclear forces. As a result, President Bush initially intended to reduce U.S. nuclear forces without signing a treaty that would require Russia to do the same. The Bush Administration only incorporated these reductions into a formal treaty after Russia insisted on such a document. Similarly, some in the Bush Administration argued that some formal, multilateral arms control regimes went too far in restraining U.S. options without limiting the forces of potential adversaries. Instead, the Administration preferred, when necessary, that the United States take unilateral military action or join in ad hoc coalitions to stem the proliferation of weapons of mass destruction. The absence of confidence in arms control during the George W. Bush Administration extended to the State Department, where the Administration removed the phrase \"arms control\" from all bureaus that were responsible for this policy area. The focus remained on nonproliferation, but it was seen as a policy area that no longer required formal treaties to meet its objectives. This changed with the Obama Administration. The State Department restored the phrase \"arms control\" to some bureau titles, and \"arms control\" was again listed as a central issue on the State Department website. The Obama Administration sought to enhance the role of arms control and nonproliferation agreements in U.S. national security policy. In a speech in Prague in April 2009, the President outlined an agenda that included the pursuit of a new strategic arms control treaty with Russia, efforts to secure the ratification and entry into force of the Comprehensive Test Ban Treaty, and the eventual negotiation of a Fissile Material Control Treaty. President Obama also convened an international nuclear security summit, in April 2010, in an effort to win global cooperation in efforts to contain and eliminate vulnerable nuclear materials. The United States has participated in three additional nuclear security summits, with the fourth and final summit occurring in early April 2016 in Washington. President Obama also pledged to take a number of steps to strengthen the Nuclear Nonproliferation Treaty in conjunction with its review conference in May 2010. President Obama's embrace of arms control and nonproliferation tools to address U.S. national security needs led many to expect wide-ranging agreements and activities in pursuit of these goals. However, efforts on this agenda produced limited results during President Obama's first term. The United States and Russia signed the 2010 New START Treaty, and have completed the implementation of its modest reductions, but there was little evidence of progress toward discussions on further reductions on nuclear weapons. President Obama also did not seek Senate advice and consent on the Comprehensive Test Ban Treaty, and the Fissile Material Control Treaty remained stalled in the U.N. Conference on Disarmament. Progress was also scant in President Obama's second term. Not only did the United States and Russia fail to negotiate further reductions in their offensive nuclear weapons, the United States highlighted concerns with Russia's compliance with past agreements. Specifically, the United States accused Russia of violating the 1987 Intermediate-range Nuclear Forces (INF) Treaty and the 1992 Open Skies Treaty. Some have argued that these actions, when combined with Russia's annexation of Crimea and invasion of Ukraine in early 2014, indicate that Russia may be rejecting the web of arms control and security agreements that have contributed to U.S., Russian, and European security for the past two decades. On the other hand, in 2015, the United States, Russia, and other nations reached an agreement with Iran that restricted Iran's nuclear program and introduced new, extensive international monitoring mechanisms to ensure that Iran does not acquire a nuclear weapon. The debate in Congress over its provisions and implications revealed broad disagreement about the role and value of arms control and nonproliferation agreements in supporting U.S. national security. The Trump Administration, like the Bush Administration, has voiced skepticism about the role that arms control and nonproliferation agreements can play in strengthening U.S. national security. This view reflects growing concerns about Russian compliance with existing arms control agreements, but also derives from the view that arms control does too much to restrict U.S. flexibility and too little to limit the capabilities of others. Moreover, while some would argue that growing tensions between the United States and Russia strengthen the case for further negotiated limits on U.S. and Russian forces, the Trump Administration, and the Obama Administration in its later years, notes that Russia is not, at this time, willing to pursue such agreements. In response to these views, and after years of trying to convince Russia to return to compliance with the INF Treaty, the Trump Administration announced on February 1, 2019, that the United States was suspending its participation in INF and would withdraw on August 2, 2019, following the treaty-mandated six-month withdrawal period. Moreover, while President Trump's approach to diplomatic engagement with North Korea has raised hope for some resolution to the nuclear crisis with that country, the Trump Administration has withdrawn U.S. support for the agreement with Iran. The United States has participated in numerous arms control and nonproliferation efforts over the past 60 years. These efforts have produced formal treaties and agreements that impose restrictions on U.S. military forces and activities, informal arrangements and guidelines that the United States has agreed to observe, and unilateral restraints on military forces and activities that the United States has adopted either on its own, or in conjunction with reciprocal restraints on other nations' forces and activities. Because these arms control arrangements affect U.S. national security, military programs, force levels, and defense spending, Congress has shown a continuing interest in the implementation of existing agreements and the prospects for further negotiations. The changing international environment in the 1990s led many analysts to believe that the United States and other nations could enter a new era of restraint in weapons deployments, weapons transfers, and military operations. These hopes were codified in several treaties signed between 1991 and 1996, such as the Strategic Arms Reduction Treaties (START I and START II), the Chemical Weapons Convention, and the Comprehensive Nuclear Test Ban Treaty. Yet, for many, hopes for a new era were clouded by the slow pace of ratification and implementation for many agreements. The 1991 START I Treaty did not enter into force until late 1994; the 1993 START II Treaty never entered into force and was replaced by a new, less detailed Strategic Offensive Reductions Treaty in 2002. The 1996 Comprehensive Test Ban Treaty (CTBT), in spite of widespread international support, failed to win approval from the U.S. Senate in October 1999. Furthermore, India, Pakistan, Iran, and North Korea raised new questions about the viability of the Nuclear Nonproliferation Treaty and its role in stemming nuclear proliferation. Some progress did occur in the latter years of the decade. In 1997, the United States and Russia, the two nations with the largest stockpiles of chemical weapons, both ratified the Chemical Weapons Convention. In December 1997, more than 120 nations signed an international agreement banning the use of antipersonnel land mines; however, a number of major nations, including the United States, have so far declined to sign. However, the U.S. Senate's rejection of the CTBT, the Bush Administration's withdrawal from the ABM Treaty in 2002, and the U.S. rejection of a verification protocol for the Biological Weapons Convention led many nations to question the U.S. commitment to the arms control process. During the Bush Administration, the United States outlined new initiatives in nonproliferation policy that took a far less formal approach, with voluntary guidelines and voluntary participation replacing treaties and multilateral conventions. The Bush Administration also signaled a change in the focus of U.S. nonproliferation policy. Instead of offering its support to international regimes that sought to establish nonproliferation norms that apply to all nations, the Bush Administration turned to arrangements that sought, instead, to prevent proliferation only to those nations and groups that the United States believed could threaten U.S. or international security. In essence, nonproliferation became a tool of antiterrorism policy. The Obama Administration also viewed nonproliferation policy as a tool of antiterrorism policy, and highlighted the importance of keeping nuclear, chemical, and biological weapons away from nonstate actors who might threaten the United States or its allies. But it also viewed nonproliferation as a more general tool of U.S. national security policy. And, where the Bush Administration focused its efforts on denying these weapons to specific nations or groups who might threaten the United States, the Obama Administration adopted the more general goals of establishing and supporting international norms and regimes to control these weapons, regardless of which nations might seek them. For example, in a speech in Moscow in July 2009, President Obama noted that \"the notion that prestige comes from holding these weapons, or that we can protect ourselves by picking and choosing which nations can have these weapons, is an illusion.\" He went on to state that stopping the spread of nuclear weapons \"is not about singling out individual nations—it's about the responsibilities of all nations.\" The Trump Administration has offered some support for existing arms control and nonproliferation tools; it noted, in the 2018 Nuclear Posture Review, that the United States continues to support the goals of the 1968 Nuclear Nonproliferation Treaty and that it would continue to abide by the terms of the 2010 New START Treaty, although it had not decided whether to extend it past 2021. At the same time, the Administration has noted that, in the current international security environment, the United States might be better served by bolstering its military capabilities than by negotiating additional limits or reductions. This report provides an overview of many of the key arms control and nonproliferation agreements and endeavors of the past 40 years. It is divided into three sections. The first describes arms control efforts between the United States and the states of the former Soviet Union, covering both formal, bilateral treaties, and the cooperative threat reduction process. The second section describes multilateral nuclear nonproliferation efforts, covering both formal treaties and less formal accommodations that have been initiated in recent years. The final section reviews treaties and agreements that address chemical, biological, and conventional weapons. The report concludes with several appendices. These provide a list of treaties and agreements that the United States is a party to, a description of the treaty ratification process, and a list of the bilateral and international organizations tasked with implementation of arms control efforts. The United States and Soviet Union signed their first formal agreements limiting nuclear offensive and defensive weapons in May 1972. The Strategic Arms Limitation Talks, known as SALT, produced two agreements—the Interim Agreement ... on Certain Measures with Respect to the Limitation of Strategic Offensive Arms and the Treaty ... on the Limitation of Anti-Ballistic Missile Systems. These were followed, in 1979, by the Strategic Arms Limitation Treaty, known as SALT II, which sought to codify equal limits on U.S. and Soviet strategic offensive nuclear forces. The Interim Agreement on Offensive Arms imposed a freeze on the number of launchers for intercontinental ballistic missiles (ICBMs) and submarine-launched ballistic missiles (SLBMs) that the United States and Soviet Union could deploy. The parties agreed that they would not begin construction of new ICBM launchers after July 1, 1972; at the time the United States had 1,054 ICBM launchers and the Soviet Union had 1,618 ICBM launchers. They also agreed to freeze their number of SLBM launchers and modern ballistic missile submarines, although they could add SLBM launchers if they retired old ICBM launchers. A protocol to the Treaty indicated that the United States could deploy up to 710 SLBM launchers on 44 submarines, and the Soviet Union could deploy up to 950 SLBM launchers on 62 submarines. The inequality in these numbers raised serious concerns both in Congress and in the policy community in Washington. When approving the agreement, Congress adopted a provision, known as the Jackson amendment, that mandated that all future arms control agreements would have to contain equal limits for the United States and Soviet Union. The Interim Agreement was to remain in force for five years, unless the parties replaced it with a more comprehensive agreement limiting strategic offensive weapons. In 1977, both nations agreed to observe the agreement until the completed the SALT II Treaty. The United States and Soviet Union completed the SALT II Treaty in June 1979, after seven years of negotiations. During these negotiations, the United States sought limits on quantitative and qualitative changes in Soviet forces. The U.S. negotiating position also reflected the congressional mandate for numerically equal limits on both nations' forces. As a result, the treaty limited each nation to a total of 2,400 ICBM launchers, SLBM launchers, and heavy bombers, with this number declining to 2,250 by January 1, 1981. Within this total, the Treaty contained sublimits for the numbers launchers that could be deployed for ICBMs with multiple independent reentry vehicles (MIRVed ICBMs); MIRVed ICBMs and MIRVed SLBMs; and MIRVed ICBMs, MIRVed SLBMs, MIRVed air-to-surface ballistic missiles (ASBMs), and heavy bombers. The Treaty would not have limited the total number of warheads that could be carried on these delivery vehicles, which was a growing concern with the deployment of large numbers of multiple-warhead missiles, but the nations did agree that they would not increase the numbers of warheads on existing types of missiles and would not test new types of ICBMs with more than 10 warheads and new types of SLBMs with more than 14 warheads. They also agreed to provisions that were designed to limit missile modernization programs, in an effort to restrain qualitative improvements in their strategic forces. Although it contained equal limits on U.S. and Soviet forces, the SALT II Treaty still proved to be highly controversial. Some analysts argued that the Treaty would fail to curb the arms race because the limits on forces were equal to the numbers already deployed by the United States and Soviet Union; they argued for lower limits and actual reductions. Other analysts argued that the Treaty would allow the Soviet Union to maintain strategic superiority over the United States because the Soviet force of large, land-based ballistic missiles would be able to carry far greater numbers of warheads, even within the equal limits on delivery vehicles, than U.S. ballistic missiles. Some argued that, with this advantage, the Soviet Union would be able to target all U.S. land-based ICBMs in a first strike, which created a \"window of vulnerability\" for the United States. The Treaty's supporters argued that the Soviet advantage in large MIRVed ICBMs was more than offset by the U.S. advantage in SLBM warheads, which could not be destroyed in a first strike and could retaliate against Soviet targets, and the U.S. advantage in heavy bombers. The continuing Soviet build-up of strategic nuclear forces, along with the taking of U.S. hostages in Iran and other challenges to the U.S. international position in the late 1970s, combined with the perceived weaknesses to the Treaty to raise questions about whether the Senate would muster the votes needed to consent to the Treaty's ratification. Shortly after the Soviet Union invaded Afghanistan in December 1979, President Carter withdrew the Treaty from the Senate's consideration. The 1972 ABM Treaty permitted the United States and Soviet Union to deploy ABM interceptors at two sites, one centered on the nation's capital and one containing ICBM silo launchers. Each site could contain up to 100 ground-based launchers for ABM interceptor missiles, along with specified radars and sensors. The ABM Treaty also obligated each nation not to develop, test, or deploy ABM systems for the \"defense of the territory of its country\" and not to provide a base for such a defense. It forbade testing and deployment of space-based, sea-based, or air-based ABM systems or components and it imposed a number of qualitative limits on missile defense programs. The Treaty, however, imposed no restrictions on defenses against aircraft, cruise missiles, or theater ballistic missiles. In a Protocol signed in 1974, each side agreed that it would deploy an ABM system at only one site, either around the nation's capital or around an ICBM deployment area. The Soviet Union deployed its site around Moscow; this system has been maintained and upgraded over the years, and remains operational today. The United States deployed its ABM system around ICBM silo launchers located near Grand Forks, ND; it operated this facility briefly in 1974 before closing it down when it proved to be not cost effective. The ABM Treaty was the source of considerable controversy and debate for most of its history. Presidents Reagan, George H. W. Bush, and Clinton all wrestled with the conflicting goals of defending the United States against ballistic missile attack while living within the confines of the ABM Treaty. President George W. Bush resolved this conflict in 2002, when he announced that the United States would withdraw from the ABM Treaty so that it could deploy ballistic missile defenses. The substance of this debate during the Clinton and Bush years is described in more detail below. During the election campaign of 1980, and after taking office in January 1981, President Ronald Reagan pledged to restore U.S. military capabilities, in general, and nuclear capabilities, in particular. He planned to expand U.S. nuclear forces and capabilities in an effort to counter the perceived Soviet advantages in nuclear weapons. Initially, at least, he rejected the use of arms control agreements to contain the Soviet threat. However, in 1982, after Congress and many analysts pressed for more diplomatic initiatives, the Reagan Administration outlined negotiating positions to address intermediate-range missiles, long-range strategic weapons, and ballistic missile defenses. These negotiations began to bear fruit in the latter half of President Reagan's second term, with the signing of the Intermediate-Range Nuclear Forces Treaty in 1987. President George H. W. Bush continued to pursue the first Strategic Arms Reduction Treaty (START), with the United States and Soviet Union, signing this Treaty in July 1991. The collapse of the Soviet Union later that year led to calls for deeper reductions in strategic offensive arms. As a result, the United States and Russia signed START II in January 1993, weeks before the end of the Bush Administration. In December 1979, NATO decided upon a \"two track\" approach to intermediate-range nuclear forces (INF) in Europe: it would seek negotiations with the Soviets to limit such systems, and at the same time schedule deployments as a spur to such negotiations. Negotiating sessions began in the fall of 1980 and continued until November 1983, when the Soviets left the talks upon deployment of the first U.S. INF systems in Europe. The negotiations resumed in January 1985. At the negotiations, the Reagan Administration initially called for a \"double zero\" option, which would eliminate all short- as well as long-range INF systems, a position at the time viewed by most observers to be unattractive to the Soviets. The negotiations proceeded to discuss possible limits on the systems, with progress slowed by the Soviet refusal to consider limits on its systems in Asia. Nevertheless, significant progress began to occur during the Gorbachev regime. At the Reykjavik summit in October 1986, Gorbachev agreed to include reductions of Soviet INF systems in Asia. Then, in June 1987, the Soviets proposed a global ban on short- and long-range INF systems, which was similar to the U.S. proposal for a double zero. Gorbachev also accepted the U.S. proposal for an intrusive verification regime. The United States and the Soviet Union signed the Treaty on Intermediate-Range Nuclear Forces (INF) on December 8, 1987. The INF Treaty was seen as a significant milestone in arms control because it established an intrusive verification regime and because it eliminated entire classes of weapons that both sides regarded as modern and effective. The United States and Soviet Union agreed to destroy all intermediate-range and shorter-range nuclear-armed ballistic missiles and ground-launched cruise missiles, which are those missiles with a range between 300 and 3,400 miles. The launchers associated with the controlled missiles were also to be destroyed. The signatories agreed that the warheads and guidance systems of the missiles need not be destroyed; they could be used or reconfigured for other systems not controlled by the Treaty. The Soviets agreed to destroy approximately 1,750 missiles and the United States agreed to destroy 846 missiles, establishing a principle that asymmetrical reductions were acceptable in order to achieve a goal of greater stability. On the U.S. side, the principal systems destroyed were the Pershing II ballistic missile and the ground-launched cruise missile (GLCM), both single-warhead systems. On the Soviet side, the principal system was the SS-20 ballistic missile, which carried three warheads. These systems, on both sides, were highly mobile and able to strike such high-value targets as command-and-control centers, staging areas, airfields, depots, and ports. The Soviets also agreed to destroy a range of older nuclear missiles, as well as the mobile, short-range SS-23, a system developed and deployed in the early 1980s. The parties had eliminated all their weapons by May 1991. The verification regime of the INF Treaty permitted on-site inspections of selected missile assembly facilities and all storage centers, deployment zones, and repair, test, and elimination facilities. Although it did not permit \"anywhere, anytime\" inspections, it did allow up to 20 short-notice inspections of sites designated in the Treaty. The two sides agreed to an extensive data exchange, intended to account for all systems covered by the agreement. The Treaty also established a continuous portal monitoring procedure at one assembly facility in each country. Inspections under the INF Treaty continued until May 2001, however, the United States continues to operate its site at Russia's Votkinsk Missile Assembly facility under the terms of the 1991 START Treaty. The INF Treaty returned to the news in 2007. Russia, partly in response to U.S. plans to deploy a missile defense radar in the Czech Republic and interceptor missiles in Poland, stated that it might withdraw from the INF Treaty. Some Russian officials claimed this would allow Russia to deploy missiles with the range needed to threaten the missile defense system, in case it were capable of threatening Russia's strategic nuclear forces. Analysts outside Russia also noted that Russia might be responding to concerns about the growing capabilities of China's missiles, or of those in other countries surrounding Russia. During the Obama Administration, the United States grew concerned about Russia's testing and development of a new ground-launched cruise missile of INF range. Since 2014, the United States has expressed these concerns in the State Department's annual report on Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments . This report has stated that the United States has determined that \"the Russian Federation is in violation of its obligations under the [1987 Intermediate-range Nuclear Forces] INF Treaty not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles.\" In the 2018 version of the report, it identified the missile's designation as the 9M729. The United States addressed its concerns about this missile repeatedly with Russia in a number of diplomatic meetings, including in 2016 and 2017 meetings of the Treaty's Special Verification Commission (SVC). Russia first denied that any such cruise missile existed, and after the United States identified the specific missile, Russia denied that it had been tested to INF range. It responded with its own accusations of U.S. noncompliance, noting, particularly, that U.S. missile defense launchers located in Romania could be equipped with offensive ground-launched cruise missiles. The United States has denied this accusation. According to U.S. officials, Russia began to deploy the new cruise missile in late 2016. The Trump Administration conducted an extensive review of the INF Treaty during 2017 to assess the potential security implications of Russia's violation and to determine how the United States would respond going forward. On December 8, 2017—the 30 th anniversary of date when the Treaty was signed—the Administration announced that the United States would implement an integrated response that included diplomatic, military, and economic measures. This includes establishing a new program in the Pentagon that will fund research into a possible new ground-launched cruise missile. However, in October 2018, then-Secretary of Defense Mattis informed U.S. allies in NATO that the situation had become \"untenable\" because Russia refused to acknowledge and address its violation. On October 20, 2018, President Trump announced that the United States would withdraw from the Treaty, and Secretary of State Pompeo announced that the United States had submitted its formal notice of withdrawal to Russia on February 1, 2019. Russia followed suit by suspending its participation in the Treaty, leading to the near certainty that the Treaty will lapse on August 2, 2019. Like INF, START negotiations began in 1982, but stopped between 1983 and 1985 after a Soviet walk-out in response to the U.S. deployment of intermediate-range missiles in Europe. They resumed later in the Reagan Administration, and were concluded in the first Bush Administration. The United States and Soviet Union signed the first Strategic Arms Reduction Treaty (START) on July 31, 1991. The demise of the Soviet Union in December 1991 immediately raised questions about the future of the Treaty. At that time, about 70% of the strategic nuclear weapons covered by START were deployed at bases in Russia; the other 30% were deployed in Ukraine, Kazakhstan, and Belarus. Russia initially sought to be the sole successor to the Soviet Union for the Treaty, but the other three republics did not want to cede all responsibility for the Soviet Union's nuclear status and treaty obligations to Russia. In May 1992, the four republics and the United States signed a Protocol that made all four republics parties to the Treaty. At the same time, the leaders of Belarus, Ukraine, and Kazakhstan agreed to eliminate all of their nuclear weapons during the seven-year reduction period outlined in START. They also agreed to sign the Nuclear Non-Proliferation Treaty (NPT) as non-nuclear weapons states. The U.S. Senate gave its consent to the ratification of START on October 1, 1992. The Russian parliament consented to the ratification of START on November 4, 1992, but it stated that Russia would not exchange the instruments of ratification for the Treaty until all three of the other republics adhered to the NPT as non-nuclear states. Kazakhstan completed the ratification process in June 1992 and joined the NPT as a non-nuclear weapon state on February 14, 1994. Belarus approved START and the NPT on February 4, 1993, and formally joined the NPT as a non-nuclear weapon state on July 22, 1993. Ukraine's parliament approved START in November 1993, but its approval was conditioned on Ukraine's retention of some of the weapons based on its territory and the provision of security guarantees by the other nuclear weapons states. In early 1994, after the United States, Russia, and Ukraine agreed that Ukraine should receive compensation and security assurances in exchange for the weapons based on its soil, the parliament removed the conditions from its resolution of ratification. But it still did not approve Ukraine's accession to the NPT. The Ukrainian parliament took this final step on November 16, 1994, after insisting on and apparently receiving additional security assurances from the United States, Russia, and Great Britain. START officially entered into force with the exchange of the instruments of ratification on December 5, 1994. START limited long-range nuclear forces—land-based intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs), and heavy bombers—in the United States and the newly independent states of the former Soviet Union. Each side could deploy up to 6,000 attributed warheads on 1,600 ballistic missiles and bombers. (Some weapons carried on bombers do not count against the Treaty's limits, so each side could deploy 8,000 or 9,000 actual weapons.) Each side could deploy up to 4,900 warheads on ICBMs and SLBMs. Throughout the START negotiations, the United States placed a high priority on reductions in heavy ICBMs because they were thought to be able to threaten a first strike against U.S. ICBMs. Therefore, START also limits each side to 1,540 warheads on \"heavy\" ICBMs, a 50% reduction in the number of warheads deployed on the SS-18 ICBMs in the former Soviet republics. START did not require the elimination of most of the missiles removed from service. The nations had to eliminate launchers for missiles that exceeded the permitted totals, but, in most cases, missiles could be placed in storage and warheads could either be stored or reused on missiles remaining in the force. START contained a complex verification regime. Both sides collect most of the information needed to verify compliance with their own satellites and remote sensing equipment—the National Technical Means of Verification (NTM). But the parties also used data exchanges, notifications, and on-site inspections to gather information about forces and activities limited by the Treaty. Taken together, these measures are designed to provide each nation with the ability to deter and detect militarily significant violations. (No verification regime can ensure the detection of all violations. A determined cheater could probably find a way to conceal some types of violations.) Many also believe that the intrusiveness mandated by the START verification regime and the cooperation needed to implement many of these measures built confidence and encouraged openness among the signatories. The United States and Russia completed the reductions in their forces by the designated date of December 5, 2001. All the warheads from 104 SS-18 ICBMs in Kazakhstan were removed and returned to Russia and all the launchers in that nation have been destroyed. Ukraine has destroyed all the SS-19 ICBM and SS-24 ICBM launchers on its territory and returned all the warheads from those missiles to Russia. Belarus had also returned to Russia all 81 SS-25 missiles and warheads based on its territory by late November 1996. The START Treaty expired in December 2009. According to the terms of the Treaty, the parties could allow START to lapse, extend it without modification for another five years, or seek to modify the Treaty before extending it for five-year intervals. The United States and Russia began, in 2006, to hold a series of discussions about the future of START, but, through the latter years of the Bush Administration, the two sides held sharply different views on what that future should be. Russian officials believed that the two nations should replace START with a new Treaty that would reduce the numbers of deployed warheads but contain many of the definitions, counting rules, and monitoring provisions of START. The Bush Administration rejected that approach; it noted that the new Moscow Treaty (described below) called for further reductions in offensive nuclear weapons and it argued that many of the detailed provisions in START were no longer needed because the United States and Russia were no longer enemies. The United States suggested that the two sides reaffirm their commitment to the Moscow Treaty, and add to it an informal monitoring regime that would extend some of the monitoring and verification provisions in START. Analysts outside government also suggested that the nations extend the monitoring provisions, at least through 2012, as the Moscow Treaty did not have its own verification regime. Some in the United States, however, objected to this approach because some of the monitoring provisions had begun to impinge on U.S. strategic weapons and missile defense programs. The Obama Administration altered the U.S. approach and decided to negotiate a new Treaty that would replace START (this is discussed in more detail below). The United States and Russia began these discussions in April 2009, but were unable to complete them before START expired on December 5, 2009. As is noted, below, they did complete a New START Treaty in April 2010. The United States and Russia signed the second START Treaty, START II, on January 3, 1993, after less than a year of negotiations. The Treaty never entered into force. Its consideration was delayed for several years during the 1990s, but it eventually received approval from both the U.S. Senate and Russian parliament. Nevertheless, it was overcome by events in 2002. START II would have limited each side to between 3,000 and 3,500 warheads; reductions initially were to occur by the year 2003 and would have been extended until 2007 if the nations had approved a new Protocol. It would have banned all MIRVed ICBMs and would have limited each side to 1,750 warheads on SLBMs. To comply with these limits the United States would have removed two warheads (a process known as \"downloading\") from each of its 500 3-warhead Minuteman III missiles and eliminated all launchers for its 50 10-warhead MX missiles. The United States also stated that it would reduce its SLBM warheads by eliminating 4 Trident submarines and deploying the missiles on the 14 remaining Trident submarines with 5, rather than 8, warheads. Russia would have eliminated all launchers for its 10-warhead SS-24 missiles and 10-warhead SS-18 missiles. It would also have downloaded to a single warhead 105 6-warhead SS-19 missiles, if it retained those missiles. It would also have eliminated a significant number of ballistic missile submarines, both for budget reasons and to reduce to START II limits. These changes would have brought Russian forces below the 3,500 limit because so many of Russia's warheads are deployed on MIRVed ICBMs. As a result, many Russian officials and Duma members insisted that the United States and Russia negotiate a START III Treaty, with lower warhead numbers, so that Russia would not have to produce hundreds of new missiles to maintain START II levels. START II implementation would have accomplished the long-standing U.S. objective of eliminating the Soviet SS-18 heavy ICBMs. The Soviet Union and Russia had resisted limits on these missiles in the past. Russia would have achieved its long-standing objective of limiting U.S. SLBM warheads, although the reductions would not have been as great as those for MIRVed ICBMs. The United States had long resisted limits on these missiles, but apparently believed a 50% reduction was a fair trade for the complete elimination of Russia's SS-18 heavy ICBMs. START II would have relied on the verification regime established by START, with a few new provisions. For example, U.S. inspectors would be allowed to watch Russia pour concrete into the SS-18 silos and to measure the depth of the concrete when Russia converted the silos to hold smaller missiles. In addition, Russian inspectors could have viewed the weapons carriage areas on U.S. heavy bombers to confirm that the number of weapons the bombers are equipped to carry did not exceed the number attributed to that type of bomber. Although START II was signed in early January 1993, its full consideration was delayed until START entered into force at the end of 1994. The U.S. Senate further delayed its consideration during a Senate dispute over the future of the Arms Control and Disarmament Agency. The Senate eventually approved ratification of START II, by a vote of 87-4, on January 26, 1996. The Russian Duma also delayed its consideration of START II. Many members of the Duma disapproved of the way the Treaty would affect Russian strategic offensive forces and many objected to the economic costs Russia would bear when implementing the treaty. The United States sought to address the Duma's concerns during 1997, by negotiating a Protocol that would extend the elimination deadlines in START II, and, therefore, reduce the annual costs of implementation, and by agreeing to negotiate a START III Treaty after START II entered into force. But this did not break the deadlock; the Duma again delayed its debate after the United States and Great Britain launched air strikes against Iraq in December 1998. The Treaty's future clouded again after the United States announced its plans in January 1999 to negotiate amendments to the 1972 ABM Treaty, and after NATO forces began their air campaign in Yugoslavia in April 1999. President Putin offered his support to START II and pressed the Duma for action in early 2000. He succeeded in winning approval for the treaty on April 14 after promising, among other things, that Russia would withdraw from the Treaty if the United States withdrew from the 1972 ABM Treaty. However, the Federal Law on Ratification said the Treaty could not enter into force until the United States approved ratification of several 1997 agreements related to the 1972 ABM Treaty. President Clinton never submitted these to the Senate, for fear they would be defeated. The Bush Administration also never submitted these to the Senate, announcing, instead, in June 2002, that the United States would withdraw from the ABM Treaty. Russia responded by announcing that it had withdrawn from START II and would not implement the Treaty's reductions. The arms control process between the United States and Russia essentially stalled during the 1990s, as efforts to ratify and implement START II dragged on. In 1997, in an effort to move the agenda forward, Presidents Clinton and Yeltsin agreed to a framework for a START III Treaty. But these negotiations never produced a Treaty, as the U.S.-Russian arms control agenda came to be dominated by U.S. plans for ballistic missile defenses and issues related to the ABM Treaty. When President Bush took office in 2001, he had little interest in pursuing formal arms control agreements with Russia. He signed the Strategic Offensive Reductions Treaty (known as the Moscow Treaty) in 2002, even though he would have preferred that the United States and Russia each set their force levels without any formal limits. Many in Russia argued the United States and Russia should bypass START II and negotiate deeper reductions in nuclear warheads that were more consistent with the levels Russia was likely to retain by the end of the 1990s. The Clinton Administration did not want to set START II aside, in part because it wanted to be sure Russia eliminated its MIRVed ICBMS. However, many in the Administration eventually concluded that Russia would not ratify START II without some assurances that the warhead levels would decline further. So the United States agreed to proceed to START III, but only after START II entered into force; Presidents Clinton and Yeltsin agreed to this timeline in March 1997. The START III framework called for reductions to between 2,000 and 2,500 warheads for strategic offensive nuclear weapons on each side. The United States and Russia held several rounds of discussions on START III, but they did not resolve their differences before the end of the Clinton Administration. President Bush did not pursue the negotiations after taking office in 2001. The demise of these discussions left many issues that had been central to the U.S.-Russian arms control process unresolved. For example, Presidents Clinton and Yeltsin had agreed to explore possible measures for limiting long-range, nuclear-armed, sea-launched cruise missiles and other tactical nuclear weapons in the START III framework. These weapons systems are not limited by existing treaties. Many in Congress have joined analysts outside the government in expressing concerns about the safety and security of Russia's stored nuclear weapons and about the numerical discrepancy between U.S. and Russian nonstrategic nuclear weapons. In addition, when establishing the START III framework, the United States and Russia agreed that they would explore proposals to enhance transparency and promote the irreversibility of warhead reductions. Many analysts viewed this step as critical to lasting, predictable reductions in nuclear weapons. The Bush Administration, however, rejected this approach. Although it pledged to eliminate some warheads removed from deployment, and implemented deep reductions in the U.S. stockpile of stored nuclear weapons, it did not offer any measures promoting the transparency or irreversibility of this process. It wanted to retain U.S. flexibility and the ability to restore warheads to deployed forces. Many critics of the Bush Administration opposed this policy, in part, because they argued it would undermine U.S. efforts to encourage Russia to eliminate warheads that might be at risk of loss or theft. As was noted above, the 1972 Anti-Ballistic Missile (ABM) Treaty and 1974 Protocol allowed the United States and Soviet Union to deploy limited defenses against long-range ballistic missiles. The United States completed, then quickly abandoned a treaty-compliant ABM system near Grand Forks, ND, in 1974. The Soviet Union deployed, and Russia continues to operate, a treaty-compliant system around Moscow. During the 1980s and early 1990s, the United States conducted research on a variety of ballistic missile defense technologies. In 1983 President Reagan collected and expanded these programs in the Strategic Defense Initiative (SDI), which sought to develop and deploy comprehensive missile defenses that would defend the United States against a deliberate, massive attack from the Soviet Union. The first Bush Administration changed this focus, seeking instead to provide a defense against possible limited missile attacks that might arise from any number of countries throughout the world. After the Persian Gulf War in 1991, with Iraq's attacks with Scud missiles alerting many to the dangers of missile proliferation and the threats posed by short- and medium-range theater ballistic missiles, the United States began developing several advanced theater missile defense (TMD) systems. At the same time, the Clinton Administration pursued research and technology development for national missile defenses (NMD). The Department of Defense concluded that there was no military requirement for the deployment of such a system after intelligence estimates found that no additional nations (beyond China, Russia, France, and Great Britain) were likely to develop missiles that could threaten the continental United States for at least the next 10-15 years. However, after a congressionally mandated commission raised concerns about the proliferation of long-range missiles in July 1998 and North Korea tested a three-stage missile in August 1998, the Clinton Administration began to consider the deployment of an NMD, with a program structured to achieve that objective in 2005. On September 1, 2000, after disappointing test results, President Clinton announced that he would not authorize construction needed to begin deployment of an NMD. President George W. Bush altered U.S. policy on missile defenses. His Administration sought to develop a layered defense, with land-based, sea-based, and space-based components, that could protect the United States, its allies, and its forces overseas from short-, medium-, and long-range ballistic missiles. It deployed land-based missile interceptors for defense against long-range missiles in Alaska and California, and pursued the deployment of defenses against shorter-range missiles on naval ships. The Bush Administration declared the interceptors in Alaska to be operational in late 2004, but their status and capabilities remain uncertain. The missile defense systems advocated by the Reagan Administration and first Bush Administration would not have been permitted under the ABM Treaty. In 1985, the United States proposed, in negotiations with the Soviet Union, that the two sides replace the ABM Treaty with an agreement that would permit deployment of more extensive defenses. These negotiations failed, and, in 1993, the Clinton Administration altered their focus. It sought a demarcation agreement to clarify the difference between theater missile defenses and strategic missile defenses so the United States could proceed with theater missile defense (TMD) programs without raising questions about compliance with the Treaty. The United States and Russia signed two joint statements on ABM/TMD Demarcation in September 1997. As amendments to the ABM Treaty, these agreements required the advice and consent of the Senate before they entered into force. But President Clinton never submitted them to the Senate, knowing that the required 67 votes would prove elusive as many of the Senators in the Republican majority believed the ABM Treaty, even if modified, would stand in the way of the deployment of robust missile defenses. In February 1999, the United States and Russia began to discuss ABM Treaty modifications that would permit deployment of a U.S. national missile defense (NMD) system. The United States sought to reassure Russia that the planned NMD would not interfere with Russia's strategic nuclear forces and that the United States still viewed the ABM Treaty as central to the U.S.-Russian strategic balance. The Russians were reportedly unconvinced, noting that the United States could expand its system so that it could intercept a significant portion of Russia's forces. They also argued that the United States had overstated the threat from rogue nations. Furthermore, after Russia approved START II, President Putin noted that U.S. withdrawal from the ABM Treaty would lead not only to Russian withdrawal from START II, but also Russian withdrawal from a wider range of arms control agreements. Through the end of the Clinton Administration, Russia refused to consider U.S. proposals for modifications to the ABM Treaty. Some argued that Russia's position reflected its belief that the United States would not withdraw from the ABM Treaty and, therefore, if Russia refused to amend it, the United States would not deploy national missile defenses. Officials in the George W. Bush Administration referred to the ABM Treaty as a relic of the Cold War and the President stated that the United States would need to move beyond the limits in the Treaty to deploy robust missile defenses. In discussions that began in the middle of 2001, the Bush Administration sought to convince Russia to accept a U.S. proposal for the nations to \"set aside\" the Treaty together. The Administration also offered Russia extensive briefings to demonstrate that its missile defense program would not threaten Russia but that the ABM Treaty would interfere with the program. Russia would not agree to set the Treaty aside, and, instead, suggested that the United States identify modifications to the Treaty that would allow it to pursue the more robust testing program contained in its proposals. But, according to some reports, Russia would have insisted on the right to determine whether proposed tests were consistent with the Treaty. The Bush Administration would not accept these conditions and President Bush announced, on December 13, 2001, that the United States would withdraw from the ABM Treaty. This withdrawal took effect on June 13, 2002. Russia's President Putin stated that this action was \"mistaken.\" Russia responded by withdrawing from the START II Treaty, but this action was largely symbolic as the Treaty seemed likely to never enter into force. In addition to deploying long-range missile defense interceptors in Alaska and California, the George W. Bush Administration proposed that the United States deploy a third missile defense site in Europe to defend against a potential Iranian missile threat. The system was to include 10 interceptors based in Poland and a radar in the Czech Republic. Russia's President Putin and his successor, Vladimir Medvedev, argued that the proposal would reignite the arms race and upset U.S.-Russian-European security relations. U.S. officials disputed Russia's objections, noting that the interceptors would not be able to intercept Russian missiles or undermine Russia's deterrent capabilities. In mid-2007, Russia offered to cooperate on missile defense, proposing the use of a Russian-leased radar in Azerbaijan, but urging that U.S. facilities not be built in Eastern Europe. President Bush welcomed the idea in principle, but insisted upon the need for the European sites. Despite ongoing discussions over the issue, sharp Russian criticism of the program continued. Medvedev said that Russia might deploy Iskander tactical missiles to Kaliningrad, but later stated that Moscow would not do so if the United States reversed its plan to emplace GMD facilities in Poland and the Czech Republic. Congress resisted the Bush Administration's request for funding for this system. It withheld much of the funding, pending at least two successful tests and the completion of agreements with the Polish and Czech governments. It also requested further reports on the need for and capabilities of the proposed system. The Obama Administration reviewed and restructured U.S. plans for a missile defense site in Europe. On September 17, 2009, the Administration announced it would cancel the system proposed by the Bush Administration. Instead, Defense Secretary Gates announced U.S. plans to develop and deploy a regional BMD capability that could be deployed around the world on relatively short notice during crises or as the situation may demand. Gates argued this new capability, based primarily around current BMD sensors and interceptors, would be more responsive and adaptable to growing concern over the direction of Iranian short- and medium-range ballistic missile proliferation. This capability would continue to evolve and expand as the United States moved forward with the concept known as the \"Phased Adaptive Approach.\" As missile threats matured during the next decade, the missile defense system would include interceptors that could respond against more numerous and more sophisticated threats. The United States and its NATO allies have moved forward with the deployment of components of this missile defense system; ships armed with the Aegis missile defense system are deployed at Rota, Spain, and patrol regularly in the Mediterranean. The United States has also deployed missile defense assets on land in Europe, in an effort known as Aegis Ashore. The United States completed deployment of the site in Romania on December 1, 2015, and plans to complete the deployment in Poland in the 2018-2019 time frame. While the United States insists that these systems do not have the range or capability to threaten Russian ballistic missiles, Russia continues to object to these deployments and to insist that it is unwilling to discuss further limits on offensive weapons until the United States agrees to limit the numbers and capabilities of its missile defense systems. The Trump Administration is conducting a new Missile Defense Review that will chart a path forward for U.S. missile defense systems. While this review is likely to continue to support the deployment of missile defenses in Europe and Asia to address regional missile threats from nations such as North Korea and Iran, it may also outline plans to move toward the deployment of more robust sensors, and possibly interceptors, that could address threats from other nations. During a summit meeting with President Putin in November 2001, President George W. Bush announced that the United States would reduce its \"operationally deployed\" strategic nuclear warheads to a level between 1,700 and 2,200 warheads during the next decade. He stated that the United States would reduce its forces unilaterally, without signing a formal agreement. President Putin indicated that Russia wanted to use the formal arms control process, emphasizing that the two sides should focus on \"reaching a reliable and verifiable agreement.\" Russia sought a \"legally binding document\" that would provide \"predictability and transparency\" and ensure for the \"irreversibilty of the reduction of nuclear forces.\" The United States wanted to maintain the flexibility to size and structure its nuclear forces in response to its own needs. It preferred a less formal process, such as an exchange of letters and, possibly, new transparency measures that would allow each side to understand the force structure plans of the other side. Within the Bush Administration, Secretary of State Powell supported the conclusion of a \"legally binding\" agreement because he believed it would help President Putin's standing with his domestic critics. He apparently prevailed over the objections of officials in the Pentagon. Although the eventual outcome did differ from the initial approach of the Bush Administration, most observers agree that it did not undermine the fundamental U.S. objectives in the negotiations because the Treaty's provisions would not impede the Bush Administration's plans for U.S. strategic nuclear forces. The United States and Russia signed the Strategic Offensive Reductions Treaty on May 24, 2002. The U.S. Senate gave its advice and consent to the ratification of the Treaty on March 6, 2003. The Russian Duma approved the Federal Law on Ratification for the Treaty on May 14, 2003. The Treaty entered into force on June 1, 2003. The Treaty was due to remain in force until December 31, 2012, after which it could be extended or replaced by another agreement. It lapsed, however, on February 5, 2011, when the New START Treaty (see below) entered into force. Article I contained the only limit in the Treaty, stating that the United States and Russia will reduce their \"strategic nuclear warheads\" to between 1,700 and 2,200 warheads by December 31, 2012. The text did not define \"strategic nuclear warheads\" and, therefore, did not indicate whether the parties would count only those warheads that are \"operationally deployed,\" all warheads that would count under the START counting rules, or some other quantity of nuclear warheads. The text did refer to statements made by Presidents Bush and Putin in November and December 2001, when each outlined their own reduction plans. This reference may have indicated that the United States and Russia could each use their own definition when counting strategic nuclear warheads. The Treaty did not limit delivery vehicles or impose sublimits on specific types of weapons systems. Each party could determine its own \"composition and structure of its strategic offensive arms.\" The Strategic Offensive Reductions Treaty did not contain any monitoring or verification provisions. The Bush Administration noted that the United States and Russia already collected information about strategic nuclear forces under START I and during implementation of the Nunn-Lugar Cooperative Threat Reduction Program. Some in Congress questioned, however, whether this information would be sufficient for the duration of the Treaty, since START I was due to expire in 2009, three years before the end of implementation under the new Treaty. The Strategic Offensive Reductions Treaty also did not contain any limits or restrictions on nonstrategic nuclear weapons. Yet, as was noted above, many Members of Congress had argued that these weapons pose a greater threat to the United States and its allies than strategic nuclear weapons. During hearings before the Senate Foreign Relations Committee, Secretary of Defense Rumsfeld and Secretary of State Powell both agreed that the disposition of nonstrategic nuclear weapons should be on the agenda for future meetings between the United States and Russia, although neither supported a formal arms control regime to limit or contain these weapons. These discussions did not occur, and many analysts outside government have renewed their calls for reductions in nonstrategic nuclear weapons. The United States and Russia began to discuss their options for arms control after START in mid-2006. During the Bush Administration, they were unable to agree on a path forward. Neither side wanted to extend START in its original form, as some of the Treaty's provisions had begun to interfere with some military programs on both sides. Russia wanted to replace START with a new Treaty that would further reduce deployed forces while using many of the same definitions and counting rules in START. The United States initially did not want to negotiate a new treaty, but, under the Bush Administration, would have been willing to extend, informally, some of START's monitoring provisions. In 2008, the Bush Administration agreed to conclude a new Treaty, with monitoring provisions attached, but this Treaty would have resembled the far less formal Strategic Offensive Reductions Treaty. In December 2008, the two sides agreed that they wanted to replace START before it expired, but acknowledged that this task would have to be left to negotiations between Russia and the Obama Administration. The United States and Russia began to hold talks on a new treaty during the first few months of the Obama Administration. In early March 2009, Secretary of State Hillary Clinton and Russia's Foreign Minister Sergey Lavrov agreed that the two nations would seek to reach an agreement that would replace START by the end of 2009. In April, after their meeting in London prior to the G-20 summit, Presidents Obama and Medvedev endorsed these negotiations and their goal of reaching an agreement by the end of 2009. When Presidents Obama and Medvedev met in Moscow on July 6-7, 2009, they signed a Joint Understanding for the START follow-on Treaty. This statement contained a range for the numerical limits that would be in the Treaty—between 500 and 1,100 of strategic delivery vehicles and between 1,500 and 1,675 for their associated warheads. It also included a list of other issues—such as provisions for calculating the limits, provisions on definitions, and a provision on the relationship between strategic offensive and strategic defensive weapons—that would be addressed in the Treaty. START expired on December 5, 2009. At the time, the negotiating teams continued to meet in Geneva, but the negotiations concluded shortly before the end of 2009 without reaching a final agreement. The formal talks resumed in late January 2010, and the parties concluded the New START Treaty in early April 2010. Presidents Obama and Medvedev signed the Treaty in Prague on April 8, 2010; it entered into force on February 5, 2011. The two parties completed their required reductions by the treaty's seven-year deadline of February 5, 2018. The New START Treaty contains three central limits on U.S. and Russian strategic offensive nuclear forces. First, it limits each side to no more than 800 deployed and nondeployed ICBM and SLBM launchers and deployed and nondeployed heavy bombers equipped to carry nuclear armaments. Second, within that total, it limits each side to no more than 700 deployed ICBMs, deployed SLBMs, and deployed heavy bombers equipped to carry nuclear armaments. Third, the treaty limits each side to no more than 1,550 deployed warheads. Deployed warheads include the actual number of warheads carried by deployed ICBMs and SLBMs, and one warhead for each deployed heavy bomber equipped for nuclear armaments. According to New START's Protocol, a deployed ICBM launcher is \"an ICBM launcher that contains an ICBM and is not an ICBM test launcher, an ICBM training launcher, or an ICBM launcher located at a space launch facility.\" A deployed SLBM launcher is a launcher installed on an operational submarine that contains an SLBM and is not intended for testing or training. A deployed mobile launcher of ICBMs is one that contains an ICBM and is not a mobile test launcher or a mobile launcher of ICBMs located at a space launch facility. These deployed launchers can be based only at ICBM bases. A deployed ICBM or SLBM is one that is contained in a deployed launcher. A deployed heavy bomber is one that is equipped for nuclear armaments but is not a \"test heavy bomber or a heavy bomber located at a repair facility or at a production facility.\" Moreover, a heavy bomber is equipped for nuclear armaments if it is \"equipped for long-range nuclear ALCMs, nuclear air-to-surface missiles, or nuclear bombs.\" Nondeployed launchers are, therefore, those that are used for testing or training, those that are located at space launch facilities, or those that are located at deployment areas or on submarines but do not contain a deployed ICBM or SLBM. The warhead limits in New START differ from those in the original START Treaty. First, the original START Treaty contained several sublimits on warheads attributed to different types of strategic weapons, in part because the United States wanted the treaty to impose specific limits on elements of the Soviet force that were deemed to be \"destabilizing.\" New START, in contrast, contains only a single limit on the aggregate number of deployed warheads. This provides each nation with the freedom to mix their forces as they see fit. This change reflects, in part, a lesser concern with Cold War models of strategic and crisis stability. It also derives from the U.S. desire to maintain flexibility in determining the structure of its own nuclear forces. Second, under START, to calculate the number of warheads that counted against the treaty limits, the United States and Russia counted deployed launchers, assumed launcher contained an operational missile, and assumed each missile carried an \"attributed\" number of warheads. The number of warheads attributed to each missile or bomber was the same for all missiles and bombers of that type. The parties then multiplied these warhead numbers by the number of deployed ballistic missiles and heavy bombers to determine the number of warheads that counted under the treaty's limits. Under New START, the United States and Russia will also count the number of deployed launchers. But they will not calculate the number of deployed warheads by multiplying the number of launchers by a warhead attribution number. Instead, each side will simply declare the total number of warheads deployed across their force. This counting method will provide the United States with the flexibility to reduce its forces without eliminating launchers and to structure its deployed forces to meet evolving operational needs. The New START Treaty contains a monitoring and verification regime that resembles the regime in START, in that its text contains detailed definitions of items limited by the treaty; provisions governing the use of NTM to gather data on each side's forces and activities; an extensive database that identifies the numbers, types, and locations of items limited by the treaty; provisions requiring notifications about items limited by the treaty; and inspections allowing the parties to confirm information shared during data exchanges. At the same time, the verification regime has been streamlined to make it less costly and complex than the regime in START. It also has been adjusted to reflect the limits in New START and the current circumstances in the relationship between the United States in Russia. In particular, it focuses on maintaining transparency, cooperation, and openness, as well as on deterring and detecting potential violations. Under New START, the United States and Russia continue to rely on their NTM to collect information about the numbers and locations of their strategic forces. They may also broadcast and exchange telemetry—the data generated during missile flight tests—up to five times each year. They do not need these data to monitor compliance with any particular limits in New START, but the telemetry exchange will provide some transparency into the capabilities of their systems. The parties will also exchange a vast amount of data about those forces, specifying not only their distinguishing characteristics, but also their precise locations and the number of warheads deployed on each deployed delivery vehicle. They will notify each other, and update the database, whenever they move forces between declared facilities. The treaty also requires the parties to display their forces, and allows each side to participate in exhibitions, to confirm information listed in the database. Under New START, each party can conduct up to 18 short-notice, on-site inspections each year; both sides used this full quota of inspections during the three years of the treaty's implementation. The treaty divides these into Type One inspections and Type Two inspections. Each side can conduct up to 10 Type One inspections and up to 8 Type Two inspections. Moreover, during each Type One inspection, the parties will be able to perform two different types of inspection activities—these are essentially equivalent to the data update inspections and reentry vehicle inspections in the original START Treaty. As a result, the 18 short-notice inspections permitted under New START are essentially equivalent to the 28 short-notice inspections permitted under START. In the Joint Understanding signed at the Moscow summit in July 2009, the United States and Russia agreed that the new treaty would contain a \"provision on the interrelationship of strategic offensive arms and strategic defensive arms.\" This statement, which appears in the preamble to New START, states that the parties recognize \"the existence of the interrelationship between strategic offensive arms and strategic defensive arms, that this interrelationship will become more important as strategic nuclear arms are reduced, and that current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the parties.\" Russia and the United States each issued unilateral statements when they signed New START that clarified their positions on the relationship between New START and missile defenses. Russia indicated that it might exercise its right to withdraw from the treaty if the United States increased the capabilities of its missile defenses \"in such a way that threatens the potential of the strategic nuclear forces of the Russian Federation. \" The United States responded by noting that its \"missile defense systems are not intended to affect the strategic balance with Russia. The United States missile defense systems would be employed to defend the United States against limited missile launches, and to defend its deployed forces, allies and partners against regional threats.\" Officials from the Obama Administration testified to the Senate and repeatedly emphasized that these statements did not impose any obligations on either the United States or Russia and would not result in any limits on U.S. missile defense programs. These statements also did not provide Russia with \"veto power\" over U.S. missile defense systems. Although Russia has said it may withdraw from the treaty if the U.S. missile defenses threaten \"the potential of the strategic nuclear forces of the Russian Federation,\" the United States has no obligation to consult with Russia to confirm that its planned defenses do not cross this threshold. It may develop and deploy whatever defenses it chooses; Russia can then determine, for itself, whether those defenses affect its strategic nuclear forces and whether it thinks the threat to those forces justifies withdrawal from the treaty. New START has been in force for eight years. According to the U.S. State Department, the United States and Russia have successfully cooperated in implementing the treaty, and both have completed their required reductions. Russia, however, has raised concerns about the method that the United States has used to eliminate some of its accountable weapons, and has, therefore, been unwilling to agree, unequivocally that the United States is in compliance with the Treaty. According to the latest data exchange, with data current as of September 1, 2018, the United States had met its New START levels with 1,398 warheads on 659 deployed launchers, within a total of 800 deployed and nondeployed launchers. On February 5, 2018, Russia reported that it had met the New START limits with 1,420 warheads on 517 deployed launchers, within a total of 775 deployed and nondeployed launchers. The two sides have shared more than 17,375 notifications, and each has conducted its full allotment of 18 onsite inspections each year. New START is scheduled to expire on February 5, 2021. According to the terms of the Treaty, the parties can extend it for a period not to exceed five years, which would extend it through February 2026. Press reports indicate that President Putin proposed that the parties pursue this extension, but the United States has not yet announced its position on this issue. Administration officials have stated that the possible extension is under review in the interagency process. Some, including General John Hyten, the Chairman of U.S. Strategic Command (STRATCOM), have noted that the limits on Russian forces and the transparency afforded by the verification regime continue to serve U.S. national security interests. However, he and others have noted that Russia appears to be developing new kinds of long-range nuclear delivery systems that may not be captured by the Treaty limits. While some have argued that the United States and Russia should extend New START first, then discuss measures to bring these weapons into the Treaty framework, others have suggested that the United States withhold approval of an extension unless Russia first agrees to count these weapons under the Treaty limits. As the Soviet Union collapsed in late 1991, many Members of Congress grew concerned that deteriorating social and economic conditions in Russia would affect control over Soviet weapons of mass destruction. In December 1991, Congress authorized the transfer of $400 million from the FY1992 Department of Defense (DOD) budget to help the republics that inherited the Soviet nuclear and chemical weapons stockpile—Russia, Kazakhstan, Ukraine, and Belarus—transport and dismantle these weapons. This effort grew substantially, with Congress appropriating more than $1 billion each year for nonproliferation and threat reduction programs administered by the Department of Defense (DOD), the State Department, and the Department of Energy (DOE). Funding for programs in the former Soviet Union has declined sharply in recent years, while funding for programs in other nations around the world has increased. At its inception, DOD's CTR program sought to provide Russia, Ukraine, Belarus, and Kazakhstan with assistance in the safe and secure transportation, storage, and dismantlement of nuclear weapons. The initial Nunn-Lugar legislation, which established the program in 1991, was tightly focused on the transport, storage, and destruction of weapons of mass destruction. But the focus of CTR funding has changed as the program has evolved. As the work on strategic offensive arms reductions was completed, a growing proportion of the funding focused on securing and eliminating chemical and biological weapons. Over the past decade, the United States has also viewed the CTR program, and other U.S. nonproliferation assistance to the former Soviet states, as a part of its efforts to keep weapons of mass destruction away from terrorists. Moreover, an increasing proportion of CTR funding has been allocated to projects outside the former Soviet Union, as the United States seeks to engage a greater number of nations as partners in the effort to secure vulnerable nuclear materials and other weapons of mass destruction. The United States has provided Russia and the other former Soviet states with extensive assistance with projects designed to help with the elimination of nuclear, chemical, and other weapons and their delivery vehicles. These projects helped Russia, Ukraine, Belarus, and Kazakhstan remove warheads, deactivate missiles, and eliminate launch facilities for nuclear weapons covered by the START Treaty. Several projects were also designed to enhance the safety, security, and control over nuclear weapons and fissile materials. The CTR program also funded several projects at storage facilities for nuclear weapons and materials, to improve security and accounting systems and to provide storage space for plutonium removed from nuclear warheads when they are dismantled. The United States and Russia also used CTR funds to construct a chemical weapons destruction facility at Shchuch'ye that was intended to help Russia comply with its obligations under the Chemical Weapons convention and to prevent the loss or theft of Soviet-era chemical weapons by ensuring their safe and secure destruction. The United States also helped install equipment at the destruction facility and to train the operating personnel. Operations at the facility began in March 2009, and it was officially dedicated in late May 2009. At the end of 2012, Russia had used it to eliminate over 3,321.5 metric tons of nerve agent. In the late 1990s, Congress added funds to the CTR budget for biological weapons proliferation prevention; this effort has expanded substantially in recent years. The Soviet Union had reportedly developed the world's largest biological weapons program and reportedly continued to pursue research and development of biological agents in the 1990s, even as the security systems and supporting infrastructure at its facilities began to deteriorate. The United State began to provide Russia with CTR assistance to improve safety and security at its biological weapons sites and to help employ biological weapons scientists during the late 1990s. Much of the work in Russia and other states of the former Soviet Union focused on safe and secure storage and handling of biological pathogen collections. Biological proliferation prevention programs in Russia lapsed after the expiration of the memorandum of understanding in June 2013, but the United States has expanded its biological engagement programs beyond the former Soviet Union, and now works globally to secure pathogen collections, train scientists on security issues, and improve disease surveillance. The Obama Administration stated that the goal of the CBE program is to counter the \"threat of state and non-state actors acquiring biological materials and expertise that could be used to develop or deploy a biological weapon.\" In recent years, biological weapons engagement programs have accounted for more than 70% of the CTR budget. The United States and Russia initially signed the Memorandum of Understanding, known as the Umbrella Agreement, that governs implementation of CTR projects in 1992. This agreement had an initial seven-year duration and was renewed in 1999 and 2006. It expired in June 2013. The United States and Russia replaced it with a bilateral protocol under the Multilateral Nuclear Environmental Program in the Russian Federation Agreement (MNEPR). Russia's Ministry of Defense no longer participates in these cooperative programs. As a result, many of the CTR projects in Russia have ended, although the two countries will continue to cooperate on some areas of nuclear security. The United States will also continue to fund cooperative engagement programs in countries around the world. The Department of Energy has contributed to U.S. threat reduction and nonproliferation assistance to the former Soviet states from the start, when CTR included a small amount of funding for materials control and protection. Since then, the United States and Russia have cooperated, through several programs, to secure and eliminate many of the materials that could help terrorists or rogue nations acquire their own nuclear capabilities. In late 2014, however, Russia indicated that it would no longer cooperate in programs funded by DOE. When the United States began to provide Russia with assistance securing its nuclear weapons and materials in the mid-1990s, concerns about the safety and security of nuclear materials located at civilian research facilities were paramount. Through the Material Protection, Control and Accounting (MPC&A) program, the United States has provided upgrades to security at more than 50 facilities in the former Soviet Union to security to reduce the risk of a loss of materials. The United States also funded upgrades at nuclear weapons storage facilities and at research facilities that store nuclear materials. These upgrades include the installation of improved security systems that use modern technology and strict material control and accounting systems. The program has also provided security training for Russian nuclear specialists and helped Russia improve border security and monitoring to discourage and detect illicit efforts to transfer these materials. On May 26, 2004, Secretary of Energy Spencer Abraham announced the Global Threat Reduction Initiative (GTRI). Over the years, GTRI has worked to secure, protect, and, in some cases, remove vulnerable nuclear and radiological materials at civilian facilities worldwide, in an effort to mitigate the risk of terrorists obtaining nuclear material that could be used in a nuclear or radiological device. Specifically, GTRI repatriates U.S.- and Russian-origin highly enriched uranium (HEU) spent and fresh nuclear fuel from research reactors located in countries around the world. In some cases, the United States converts those reactors to operate with low-enriched uranium (LEU) fuel, which is not useful for a nuclear weapon. In addition, GTRI installs physical security upgrades at nuclear and radiological sites, and recovers disused and unwanted radioactive sources at home and abroad. In its FY2016 budget request, the Department of Energy outlined a reorganization of its nonproliferation programs. It identified two new program areas—Material Management and Minimization, and Global Material Security—that would incorporate most of the nonproliferation programs described above. In the Plutonium Management and Disposition Agreement (PMDA), which was signed in 2000 and amended in 2010, the United States and Russia each agreed to dispose of 34 metric tons of weapons-grade plutonium, and to do so at roughly the same time. The parties agreed they could either convert the plutonium to mixed oxide fuel (MOX) for nuclear power reactors or immobilize it and dispose of it in a way that would preclude its use in nuclear weapons. Russia expressed little interest in the permanent disposal of plutonium, noting that the material could have great value for its civilian power program. The agreement was amended in 2010 to allow Russia to convert its plutonium to MOX fuel. The United States initially outlined a plan to convert almost all its surplus plutonium to MOX fuel. However, partially due to escalating costs of the U.S. MOX facility, both the Obama Administration and Trump Administration have sought to cancel the MOX program and instead pursue a dilute and dispose method. In October 2016, Russia announced that it was suspending its participation in the agreement due to what it called \"hostile actions\" by the United States. Nevertheless, both countries have said they were committed to keeping the 34 tons out of weapons and appear to be continuing their plans for surplus plutonium disposition. The United States, Japan, the European Union, and Russia established the International Science and Technology Center (ISTC) in Moscow. A similar center began operating in Kiev in 1993. In subsequent years, several other former Soviet states have joined and other nations have added their financial support. These centers responded to concerns that scientists from Russia's nuclear weapons complex might sell their knowledge to other nations seeking nuclear weapons. Most of these scientists spent fewer than 50 days per year on projects funded by the science centers and continued to work at their primary jobs. The Russian government announced in August 2010 that it would withdraw from the science centers, but other member states reaffirmed their commitment to their countries' participation. The State Department's Export Control and Related Border Security Assistance (EXBS) program helps the former Soviet states and other nations improve their ability to interdict nuclear smuggling and their ability to stop the illicit trafficking of all materials for weapons of mass destruction, along with dual-use goods and technologies. The EXBS program currently has projects underway in more than 30 nations, and is expanding its reach around the globe. The United States is a leader of an international regime that attempts to limit the spread of nuclear weapons through treaties, export control coordination and enforcement, and U.N. Security Council resolutions. Much of the focus of U.S. nonproliferation policy in the past decade has focused on the cases of Iran and North Korea. Moreover, increased awareness of the need to keep sensitive materials and technologies out of terrorist hands has reinvigorated efforts to control not just nuclear weapons and weapons-usable materials, but also radioactive materials that could be used in radiological dispersal devices. Key issues in this area that the 116 th Congress might consider include preventing Iran from developing nuclear weapons in the long term; North Korea's nuclear weapons program; U.S. civilian nuclear cooperation agreements; and tensions between India and Pakistan as amplified by their nuclear weapons programs, among other issues. Congress may also consider how cooperation under the international nonproliferation regimes can be leveraged to prevent nuclear terrorism. The Nuclear Nonproliferation Treaty (NPT), which entered into force in 1970 and was extended indefinitely in 1995, is the centerpiece of the nuclear nonproliferation regime. The treaty currently has 191 states parties. It is complemented by International Atomic Energy Agency (IAEA) safeguards, national export control laws, coordinated export control policies under the Nuclear Suppliers Group, U.N. Security Council resolutions, and ad hoc initiatives. The NPT recognizes five nations (the United States, Russia, France, Britain, and China) as nuclear weapon states—a distinction that is carried over in other parts of the regime and in national laws. Three nations that have not signed the NPT—India, Israel, and Pakistan—possess significant nuclear weapon capabilities. North Korea, which had signed the NPT but withdrew in 2003, is now thought to possess a small number of nuclear weapons. Several countries, including Argentina, Brazil, and South Africa, suspended their nuclear weapons programs and joined the NPT in the 1990s. Others—Ukraine, Belarus, and Kazakhstan—gave up former Soviet weapons on their territories and joined the NPT as non-nuclear weapon states in the 1990s. The Nuclear Nonproliferation Treaty is unique in its near universality—only India, Pakistan, Israel, and North Korea are now outside the treaty. In signing the NPT, non-nuclear weapon states (NNWS) pledge not to acquire nuclear weapons in exchange for a pledge by the nuclear weapon states (NWS) not to assist the development of nuclear weapons by any NNWS and to facilitate \"the fullest possible exchange of equipment, materials and scientific and technological information for the peaceful uses of nuclear energy\" (NPT, Article IV-2). The NWS, defined as any state that tested a nuclear explosive before 1967, also agree to \"pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament\" (NPT, Article VI). A P-5 Dialogue, led by the United States, meets to coordinate and advance transparency and disarmament steps by all five nuclear weapon states. Many NNWS have often expressed dissatisfaction with the apparent lack of progress toward disarmament. Nuclear proliferation often has significant regional security repercussions, but there is also a growing realization that the current constellation of proliferation risks may require further improvements to the system itself. Concern has shifted from keeping technology from the states outside the NPT to stemming potential further proliferation, either from those states outside the regime or through black markets, such as the Pakistani A. Q. Khan network. The International Atomic Energy Agency was established in 1957 to assist nations in their peaceful nuclear programs (primarily research and nuclear power programs) and to safeguard nuclear materials from these peaceful programs to ensure that they are not diverted to nuclear weapons uses. As of February 2019, it has 171 member states. The IAEA safeguards system relies on data collection, review, and periodic inspections at declared facilities. The IAEA may also inspect other facilities if it suspects undeclared nuclear materials or weapons-related activities are present. Non-nuclear weapon NPT members are required to declare and submit all nuclear materials in their possession to regular IAEA inspections to ensure that sensitive nuclear materials and technologies are not diverted from civilian to military purposes. Some states who are not parties to the NPT (India, Israel, Pakistan) are members of the IAEA and allow inspections of some, but not all, of their nuclear activities. The IAEA also provides technical assistance for peaceful applications of nuclear technology for energy, medicine, agriculture, and research. After the 1991 Persian Gulf War, IAEA inspection teams working with the U.N. Special Commission on Iraq (UNSCOM) revealed an extensive covert nuclear weapons program that had been virtually undetected by annual inspections of Baghdad's declared facilities. This knowledge inspired efforts to strengthen the IAEA's authority to conduct more intrusive inspections of a wider variety of installations, to provide the agency with intelligence information about suspected covert nuclear activities, and to provide the agency with the resources and political support needed to increase confidence in its safeguards system. In 1998, the IAEA adopted an \"Additional Protocol\" that would give the agency greater authority and access to verify nuclear declarations. The protocol enters into force for individual NPT states upon ratification. For the United States, the Senate gave its advice and consent to the protocol on March 31, 2004 (Treaty Doc. 107-7, Senate Executive Report 108-12), and it entered into force on January 6, 2009. As of February 2019, 148 countries have signed an Additional Protocol and 134 have entered into force. The IAEA has had an expanded mission in recent years, increasingly called upon to implement nuclear security-related activities. The IAEA also faces a potential worldwide expansion in the number of nuclear power plants it will need to monitor. Congress may consider U.S. support for the IAEA in light of these challenges. The Department of Energy's National Nuclear Security Administration is studying the future of international safeguards through its Next Generation Safeguards Initiative, which includes how to better share U.S. expertise and new safeguards technologies with the IAEA. Several regions of the world have treaties in force that ban the development, deployment, and use of nuclear weapons, known as nuclear-weapon-free zones, including Latin America (Treaty of Tlatelolco), Central Asia (Treaty on a Nuclear-Weapon-Free Zone in Central Asia), the South Pacific (Treaty of Rarotonga), Africa (Treaty of Pelindaba), and Southeast Asia (Treaty of Bangkok). Mongolia has declared itself a single-state Nuclear-Weapon-Free Zone. Also, the Treaty of Antarctica established that Antarctica will be used for peaceful uses only. Nuclear weapons are also banned on the seabed, in outer space, and on the moon by international treaties. The nuclear-weapon-free zones (NWFZs) reinforce the undertakings of NPT non-nuclear-weapon state members and give confidence at a regional level that states are not seeking nuclear weapons. Each treaty has protocols for nuclear weapon states to ratify. These protocols are pledges that the nuclear weapon states will not base nuclear weapons in the zone, test nuclear weapons in the zone, or use or threaten to use nuclear weapons against the countries in the zone. The \"negative security assurance\" provided to members of the zone through the nuclear weapon state protocol is considered one of the key benefits of membership for non-nuclear weapon states. The United States ratified the protocols to the Latin American NWFZ. The Obama Administration, as pledged at the 2010 NPT Review Conference, submitted the Protocols to the Treaties of Pelindaba (Africa) and Rarotonga (South Pacific) to the Senate for advice and consent for ratification on May 2, 2011. The United States signed the protocols at the time these treaties were open for signature (April 11, 1996, for the Treaty of Pelindaba and August 6, 1985, for the Treaty of Rarotonga). The other four nuclear weapon states besides the United States (China, France, Russia, United Kingdom) have ratified those protocols. The Obama Administration has also said it would work with parties to the Southeast Asian Nuclear-Weapon-Free Zone and the Central Asian Nuclear-Weapon-Free Zone to resolve outstanding issues related to the protocols in order to \"sign the protocols to those treaties as soon as possible.\" In August 2011, the United States along with the other four NPT nuclear weapon states began consultations with the SEANWFZ countries regarding the NWS protocols to that agreement. Those consultations reportedly continue. The five nuclear-weapon states announced their signature of the CANWFZ Protocol at the NPT Preparatory Committee meeting in May 2014. The Obama Administration submitted the CANFWZ Protocol to the Senate for its advice and consent to ratification on April 27, 2015. The presidential letter says that the protocol would require \"no changes in U.S. law, policy or practice.\" The five nuclear weapon states recognized Mongolia as a single-state nuclear-weapon-free zone in September 2012 by signing parallel declarations formally acknowledging this status. Talks have been held to discuss the establishment of a Middle East WMD-free zone. The United States has been a leader in establishing export controls, a key component of the nuclear nonproliferation regime. The Atomic Energy Act of 1954 and Nuclear Nonproliferation Act of 1978 established controls on nuclear exports that gradually gained acceptance by other nuclear suppliers. The Export Administration Act of 1979 (EAA) authorized controls on dual-use technology that could contribute to foreign weapons. Export controls require exporters to get a license before selling sensitive technology to foreign buyers and, in some cases, ban certain exports to some countries. International nuclear controls are coordinated by an informal association of 48 nuclear exporters called the Nuclear Suppliers Group (NSG), founded in 1975. NSG members voluntarily agree to coordinate exports of civilian nuclear material and nuclear-related equipment and technology to non-nuclear weapon states. The Group agreed to guidelines for export that include lists of materials and equipment that are to be subject to export control. NSG guidelines require that the recipient country offer assurances that the importing items will not be used for a weapons program, will have proper physical security, and will not be transferred to a third party without the permission of the exporter. Recipient countries' nuclear programs must also have full-scope IAEA safeguards. In September 2008, the NSG agreed to exempt India from the full-scope safeguards requirement, although it retained a policy of restraint on the transfer of enrichment and reprocessing equipment. NSG members in June 2011 adopted additional guidelines that define eligibility criteria for the transfer of enrichment and reprocessing technologies to new states. The NSG's effectiveness is limited by its voluntary nature. Countries such as Iraq and Pakistan, and individuals like A. Q. Khan and others, have exploited weaknesses in the national export control systems of many countries to acquire a wide range of nuclear items. The Convention on the Physical Protection of Nuclear Material (CPPNM), adopted in 1987, sets international standards for nuclear trade and commerce. The Convention established security requirements for the protection of nuclear materials against terrorism; parties to the treaty agree to report to the IAEA on the disposition of nuclear materials being transported and agree to provide appropriate security during such transport. As of June 2018, 157 countries are party to the CPPNM. The United States had advocated strengthening the treaty by extending controls to domestic security. In July 2005, states parties convened to extend the convention's scope in an amendment that covers not only nuclear material in international transport, but also nuclear material in domestic use, storage, and transport, as well as the protection of nuclear material and facilities from sabotage. President George W. Bush submitted the amendment to the Senate in September 2007 (Treaty Doc. 110-6), and the Senate approved a resolution of advice and consent to ratification on September 25, 2008. The new rules come into effect once two-thirds of the states parties of the convention have ratified the amendment. The United States submitted its instrument of ratification to the Amendment on July 31, 2015. As of July 2018, 118 states had deposited their instruments of ratification, acceptance, or approval of the amendment with the depositary. The amendment entered into force on May 8, 2016, following the deposit of the instrument of ratification by Nicaragua, the 102 nd state. Congress needed to also approve implementing legislation before the United States could deposit its instrument of ratification to the Amendment. In the 112 th Congress, the Obama Administration submitted draft implementing legislation to the Senate Judiciary Committee in April 2011. The House passed implementing legislation in the 112 th Congress, but the Senate did not take action. In the 113 th Congress, the House passed the Nuclear Terrorism Conventions Implementation and Safety of Maritime Navigation Act of 2013 ( H.R. 1073 ) in May 2013, which approved implementing legislation for the CPPNM Amendment and the Nuclear Terrorism Convention (as well as agreements on maritime security). The Senate did not take action. In the 114 th Congress, implementing legislation for three nuclear terrorism-related conventions, called the Nuclear Terrorism Conventions Implementation and Safety of Maritime Navigation Act ( H.R. 1056 ), was incorporated into Title VIII of the USA Freedom Act of 2015 ( P.L. 114-23 ), which became law on June 2, 2015 ( H.R. 2048 ). The U.N. General Assembly adopted the International Convention for the Suppression of Acts of Nuclear Terrorism (also known as the Nuclear Terrorism Convention) in 2005 after eight years of debating a draft treaty proposed by Russia in 1997. Disputes over the definition of terrorism, omitted in the final version, and over the issue of nuclear weapons use by states, complicated the discussions for many years. After September 11, 2001, states revisited the draft treaty and the necessary compromises were made. The Convention entered into force in July 2007. There were 115 states parties and 115 signatories as of March 2019. The United States has strongly supported the Convention, and President Bush was the second to sign it (after Russian President Putin) on September 14, 2005. The Senate recommended advice and consent on September 25, 2008 (Treaty Doc. 110-4). Congress needed to also approve implementing legislation before the United States could deposit its instrument of ratification to the Convention. In the 112 th Congress, the Obama Administration submitted draft legislation to the Senate Judiciary Committee in April 2011. The House passed implementing legislation in the 112 th Congress, but the Senate did not take action. In the 113 th Congress, the House passed the Nuclear Terrorism Conventions Implementation and Safety of Maritime Navigation Act of 2013 ( H.R. 1073 ) in May 2013, which approved implementing legislation for the CPPNM Amendment and the Nuclear Terrorism Convention (as well as agreements on maritime security). The Senate did not take action. In the 114 th Congress, implementing legislation for three conventions— H.R. 1056 , called the Nuclear Terrorism Conventions Implementation and Safety of Maritime Navigation Act—was incorporated into Title VIII of the USA Freedom Act of 2015 ( P.L. 114-23 ), which became law on June 2, 2015. The United States deposited its instrument of ratification with the United Nations on September 30, 2015. The Convention defines offenses related to the unlawful possession and use of radioactive or nuclear material or devices, and the use of or damage to nuclear facilities. The Convention commits each party to adopt measures in its national law to criminalize these offenses and make them punishable. It covers acts by individuals, not states, and does not govern the actions of armed forces during an armed conflict. The Convention also does not address \"the issue of legality of the use or threat of use of nuclear weapons by States.\" It also commits states parties to exchange information and cooperate to \"detect, prevent, suppress and investigate\" those suspected of committing nuclear terrorism, including extraditions. The Comprehensive Test Ban Treaty (CTBT) would ban all nuclear explosions. It opened for signature in 1996 but has not yet entered into force. Previous treaties have restricted nuclear testing: the 1963 Limited Test Ban Treaty barred explosions in the atmosphere, in space, and under water, and the 1974 U.S.-U.S.S.R. Threshold Test Ban Treaty and the 1976 Peaceful Nuclear Explosions Treaty limited the explosive yield of underground nuclear explosions. In the debate on the indefinite extension of the NPT in 1995, many non-nuclear weapon states saw the early conclusion of the CTBT as a key step by the nuclear weapon states to comply with their obligations under Article VI of the NPT; critics argue that the United States has taken many steps in support of these obligations. President Clinton signed the CTBT when it opened for signature and submitted the treaty to the Senate for advice and consent in 1997. The Senate rejected the treaty by a vote of 48 for, 51 against, and 1 present, on October 13, 1999. Parties to the treaty agree \"not to carry out any nuclear weapon test explosion or any other nuclear explosion.\" The treaty establishes a Comprehensive Nuclear-Test-Ban Treaty Organization (CTBTO) of all member states to implement the treaty. The CTBTO oversees a Conference of States Parties, an Executive Council, and a Provisional Technical Secretariat. The latter would operate an International Data Center to process and report on data from an International Monitoring System (IMS), a global network that, when completed, would consist of 321 monitoring stations and 16 laboratories. A Protocol details the monitoring system and inspection procedures. The CTBTO would come into effect if the treaty entered into force; until that time, the CTBTO Preparatory Commission conducts work to prepare for entry into force, such as building and operating the IMS. For the treaty to enter into force, 44 specified states must ratify it. As of April 11, 2018, 184 states had signed the CTBT and 168 had ratified. Of the 44 required nations, 36 have ratified, 3 have not signed (India, North Korea, and Pakistan), and another 5 have not ratified (China, Egypt, Iran, Israel, and the United States). States that have ratified the treaty have held conferences every two years since 1999 to discuss how to accelerate entry into force. The CTBT remains on the calendar of the Senate Foreign Relations Committee. The Bush Administration opposed U.S. ratification of the CTBT but continued a U.S. nuclear test moratorium in effect since October 1992. In contrast, President Obama stated his support for the CTBT. For example, he said, \"As president, I will reach out to the Senate to secure the ratification of the CTBT at the earliest practical date and will then launch a diplomatic effort to bring onboard other states whose ratifications are required for the treaty to enter into force.\" Senator Hillary Clinton, as nominee for Secretary of State, previewed the Administration's approach to securing the Senate's advice and consent: \"A lesson learned from [the treaty's defeat in] 1999 is that we need to ensure that the administration work intensively with Senators so they are fully briefed on key technical issues on which their CTBT votes will depend.... Substantial progress has been made in the last decade in our ability to verify a CTBT and ensure stockpile reliability.\" Critics responded that confidence in the nuclear stockpile requires nuclear testing, and that certain techniques would enable a determined cheater to avoid detection or attribution of its tests. The Obama Administration decided not to submit the treaty to the Senate for its advice and consent before the end of its term. In a March 2016 speech, Ambassador Adam Scheinman said that \"we are realistic about prospects for U.S. ratification and have no set timeframe for pursuing the Senate's advice and consent. Instead, our aim is to re-introduce CTBT to the American public and generate discussion on the treaty and its merits.\" The Trump Administration's February 2018 Nuclear Posture Review said that \"although the United States will not seek ratification of the Comprehensive Nuclear Test Ban treaty, it will continue to support the Comprehensive Nuclear Test Ban Treaty Organization Preparatory Committee as well as the International Monitoring System and International Data Center.\" The United States first proposed that the international community negotiate a ban on the production of fissile material (plutonium and enriched uranium) that could be used in nuclear weapons over 50 years ago. Negotiators of the NPT realized that fissile material usable for nuclear weapons could still be produced under the guise of peaceful nuclear activities within the Treaty. Consequently, a fissile material production ban, or FMCT, has remained on the long-term negotiating agenda at the Conference on Disarmament (CD) in Geneva. These negotiations have been largely stalled since 1993. In 1995, the CD agreed to the \"Shannon Mandate,\" which called for an \"non-discriminatory, multilateral and internationally and effectively verifiable treaty banning the production of fissile material for nuclear weapons or other nuclear explosive devices.\" The Bush Administration undertook a comprehensive review of the U.S. position on the FMCT in 2004 and concluded that such a ban would be useful in creating \"an observed norm against the production of fissile material intended for weapons,\" but argued that such a ban is inherently unverifiable. The Bush Administration proposed a draft treaty in May 2006 that contained no verification measures. In contrast, the Obama Administration supported the negotiation of an FMCT with verification measures on the basis of the Shannon mandate. The Trump Administration \"will continue to support the commencement of negotiations on an FMCT,\" Assistant Secretary of State Christopher Ford stated on April 25, 2018. One key issue is whether or not such a treaty would seek to include existing stocks of fissile material. The United States has strongly objected to such an approach, but it is supported by some non-nuclear weapon states. The Shannon Mandate states that it \"does not preclude any delegation\" from proposing the inclusion of existing stocks in the negotiations. Many observers believed that negotiations at the CD were preferable to other fora because they would establish a global norm and would not have the appearance of conferring nuclear weapons status upon India, Pakistan, and Israel. As of March 2019, such CD negotiations had not begun. Pakistan, which is widely regarded as the main opponent to the start of negotiations (the CD operates on the basis of consensus), argues that a treaty on fissile material should not only prohibit the production of new material, but should also require states with such material to reduce their stocks. A 2012 U.N. General Assembly resolution requested the U.N. Secretary-General to \"establish a group of governmental experts\" to make recommendations on \"possible aspects [of] ... a treaty banning the production of fissile material for nuclear weapons or other nuclear explosive devices.\" The group began its work in March 2014 and completed its work in 2015. The General Assembly resolution called upon the Secretary-General to transmit the group's report to the General Assembly and the CD. A 2016 U.N. General Assembly resolution requested the Secretary-General to establish a \"high-level fissile material cut-off treaty (FMCT) expert preparatory group,\" to \"examine\" the experts' group report, as well as \"consider and make recommendations on substantial elements of a future non-discriminatory, multilateral and internationally and effectively verifiable treaty banning the production of fissile material for nuclear weapons or other nuclear explosive devices, on the basis\" of the Shannon Mandate. The resolution required the group to meet for two-week sessions in both 2017 and 2018. The group presented its final report in June 2018. In April 2004, the U.N. Security Council adopted Resolution 1540, which requires all states to \"criminalize proliferation, enact strict export controls and secure all sensitive materials within their borders.\" UNSCR 1540 called on states to enforce effective domestic controls over WMD and WMD-related materials in production, use, storage, and transport; to maintain effective border controls; and to develop national export and trans-shipment controls over such items, all of which should help interdiction efforts. The resolution did not, however, provide any enforcement authority, nor did it specifically mention interdiction. About two-thirds of all states have reported to the U.N. on their efforts to strengthen defenses against WMD trafficking. U.N. Security Council Resolutions 1673 (2006), 1810 (2008), 1977 (2011) (which extended the duration of the 1540 Committee), 2055 (2012), and 2325 (2016) all modified the original resolution. The 2011 resolution extended the committee's mandate for 10 years and called for a review after 5 years and for another before the end of the mandate. The 2012 resolution increased the number of members of the Group of Experts from eight to nine and the 2016 resolution reasserts the importance of full implementation of resolution 1540. The committee is currently focused on identifying assistance projects for states in need and matching donors to improve these WMD controls. Congress may consider how the United States is contributing to this international effort. UNGA Resolution A/71/258 ( 2016) called on U.N. member states to negotiate in 2017 a legally binding Treaty on the Prohibition of Nuclear Weapons, also known as the nuclear \"ban treaty.\" Negotiations were held in New York, February 27-March 31, and June 15-July 7, 2017. At the end of the conference, 122 countries voted to approve the treaty. Singapore abstained, and the Netherlands voted against it, citing conflicts between the treaty and the Netherlands' commitments as a member of NATO. Article 1 says that adherents would never \"develop, produce, manufacture, otherwise acquire, possess or stockpile nuclear weapons or other nuclear explosive devices.\" This includes a prohibition on hosting nuclear weapons that are owned or controlled by another state. Nor would states parties transfer, receive control over, or assist others in developing nuclear weapons. They also would not use or threaten to use nuclear weapons or other nuclear explosive devices. Article 7 requires states to give assistance to individuals affected by the use or testing of nuclear weapons and provide for environmental remediation. As of March 2019, the treaty had 22 states parties and 70 signatories. Treaty supporters seek to establish an international norm against the possession and use of nuclear weapons, which they argue would strengthen nonproliferation norms and raise awareness of the humanitarian consequences of developing and using nuclear weapons. Some critics of the ban treaty are concerned that a new agreement would undermine the NPT and its verification system of International Atomic Energy Agency (IAEA) safeguards. The Obama and Trump Administrations have opposed a ban treaty and, along with 40 other states, did not participate in negotiations. In response to the conclusion of the treaty, a joint press release from the United States, UK, and French Permanent Representatives said, \"A purported ban on nuclear weapons that does not address the security concerns that continue to make nuclear deterrence necessary cannot result in the elimination of a single nuclear weapon and will not enhance any country's security, nor international peace and security.\" At their June 2002 summit at Kananaskis, Canada, the Group of Eight (United States, Canada, UK, France, Germany, Italy, Japan [G-7] plus Russia [G-8]) formed the Global Partnership (GP) Against the Spread of Weapons and Materials of Mass Destruction. Under this partnership, the United States, other members of the G-7, and the European Union agreed to raise up to $20 billion over 10 years for projects related to disarmament, nonproliferation, counterterrorism, and nuclear safety. These projects were initially focused on programs in Russia. The Global Partnership spurred Russia to take on a greater portion of the financial burden for these projects, and increased donor funds from countries other than the United States. The United States promised an additional $10 billion in Global Partnership funds in the 2012-2022 time frame, subject to congressional appropriations. Over the past decade, the Global Partnership has expanded its donors and its recipients. The G8 Global Partnership Working Group provides a coordinating mechanism for nonproliferation assistance globally, and sub-working groups concentrate on specific nonproliferation areas. Recent priorities have included biological threat reduction and radiological security. Since the 2013 invasion of Crimea, Russia has not participated in the G-8 or the Global Partnership. Canada chaired the G-7 in 2018, and placed priority on the Global Partnership. In the April 2018 communique, the G-7 reaffirmed their \"strong commitment\" to the GP and recognized the importance of continuing this joint effort to reduce WMD threats. France holds the G-7 Presidency in 2019. President Bush announced the Proliferation Security Initiative (PSI) on May 31, 2003. This Initiative is primarily a diplomatic tool developed by the United States to gain support for interdicting shipments of weapons of mass destruction-related (WMD) equipment and materials. Through the PSI, the Bush Administration sought to \"create a web of counterproliferation partnerships through which proliferators will have difficulty carrying out their trade in WMD and missile-related technology.\" The states involved in PSI have agreed to review their national legal authorities for interdiction, provide consent for other states to board and search their own flag vessels, and conclude ship-boarding agreements. The Proliferation Security Initiative has no budget, no formal offices supporting it, no international secretariat, and no formal mechanism for measuring its effectiveness (like a database of cases). To many, these attributes are positive, allowing the United States to respond swiftly to changing developments. Others question whether the international community can sustain this effort over the longer term. Obama Administration officials have pledged to \"institutionalize\" PSI, although how they will carry this out is not yet clear. As of April 2018, 105 countries have committed formally to PSI participation. Sixteen \"core\" nations have pledged their cooperation in interdicting shipments of WMD materials, agreeing in Paris in 2003 on a set of interdiction principles. The 9/11 Commission Act of 2007 recommended that PSI be expanded and coordination within the U.S. government improved. The United States has prioritized the conclusion of ship-boarding agreements with key states that have high volumes of international shipping. The United States has signed 11 agreements with Antigua and Barbuda, the Bahamas, Belize, Croatia, Cyprus, Liberia, Malta, the Marshall Islands, Mongolia, Panama, and Saint Vincent and the Grenadines. Since PSI is an activity rather than an organization, and has no budget or internal U.S. government organization, it may be difficult for Congress to track PSI's progress. Several intelligence resource issues may be of interest to Congress, including whether intelligence information is good enough for effective implementation and whether intelligence-sharing requirements have been established with non-NATO allies. Another issue may be how PSI is coordinated with other federal interdiction-related programs, like export control assistance. Reporting and coordination requirements now in public law may result in more information and better interagency coordination than in the past. In July 2006, Russia and the United States announced the creation of the Global Initiative to Combat Nuclear Terrorism before the G-8 Summit in St. Petersburg. Like PSI, this initiative is nonbinding, and requires agreement on a statement of principles. Thirteen nations—Australia, Canada, China, France, Germany, Italy, Japan, Kazakhstan, Morocco, Turkey, the United Kingdom, the United States, and Russia—endorsed a Statement of Principles at the initiative's first meeting in October 2006. The International Atomic Energy Agency (IAEA), European Union (EU), Interpol, U.N. Office on Drugs and Crime (UNODC), and the United Nations Interregional Crime and Justice Research Institute (UNICRI) have observer status. As of April 2018, 88 states have agreed to the statement of principles and are Global Initiative partner nations. U.S. officials have described the Initiative as a \"flexible framework\" to prevent, detect, and respond to the threat of nuclear terrorism. It is meant to enhance information sharing and build capacity worldwide. The Statement of Principles pledges to improve each nation's ability to secure radioactive and nuclear material, prevent illicit trafficking by improving detection of such material, respond to a terrorist attack, prevent safe haven to potential nuclear terrorists and financial resources, and ensure liability for acts of nuclear terrorism. Participating states share a common goal to improve national capabilities to combat nuclear terrorism by sharing best practices through multinational exercises and expert level meetings. Without dues or a secretariat, actions under the Initiative will take legal guidance from the International Convention on the Suppression of Acts of Nuclear Terrorism, the Convention on the Physical Protection of Nuclear Materials, and U.N. Security Council Resolutions 1540 and 1373. Global Initiative partner nations periodically hold exercises and workshops to improve coordination and exchange best practices. These are the primary activities held under the initiative. The Global Initiative does not have program funding of its own in the U.S. budget, and therefore Congress may consider whether its goals can be achieved within these constraints. Other efforts—such as economic, military, or security assistance—may also help slow the proliferation of nuclear weapons. These cooperative measures have been effective in some cases (South Korea, Taiwan, Belarus, Kazakhstan, Ukraine), but failed in others (Iraq, Israel, Pakistan). Some favor greater use of sanctions against countries that violate international nonproliferation standards, while others view sanctions as self-defeating. Most observers conclude that a mix of positive and negative incentives, including diplomacy to address underlying regional security problems, provides the best opportunity for controlling the spread of nuclear weapons. However, when diplomacy fails, some policymakers have argued that military measures may be necessary to attack nuclear and other weapons of mass destruction and related facilities in states hostile to the United States or its allies. For example, the Bush Administration claimed that the overthrow of the Saddam Hussein regime in Iraq was justified, in part, on the basis of claims that Iraq possessed chemical and biological weapons and might resume efforts to develop nuclear weapons. As developments revealed, however, accurate intelligence is a key component of both diplomatic and military approaches to nonproliferation. The international community has concluded a number of arms control agreements, conventions, and arrangements that affect non-nuclear weapons. Two of these, the Conventional Armed Forces in Europe Treaty (CFE) and the Open Skies Treaty, were a part of the late-Cold War effort to enhance stability and predictability in Europe. Others seek to control the spread of technologies that might contribute to developing conventional or unconventional weapons programs. Finally, several seek to ban whole classes of weapons through international conventions. In late 1990, 22 members of NATO and the Warsaw Pact signed the Conventional Armed Forces in Europe (CFE) Treaty, agreeing to limit NATO and Warsaw Pact non-nuclear forces in an area from the Atlantic Ocean to the Ural Mountains. The CFE treaty did not anticipate the dissolution of the Soviet Union and the Warsaw Pact. Consequently, the participants signed the so-called \"Tashkent Agreement\" in May 1992, allocating responsibility for the Soviet Union's Treaty-Limited items of Equipment (TLEs) among Azerbaijan, Armenia, Belarus, Kazakhstan, Moldova, Russia, Ukraine, and Georgia. It also established equipment ceilings for each nation and the implied responsibility for the destruction/transfer of equipment necessary to meet these national ceilings. In 1999, the CFE Adaptation Agreement was signed to further adjust to the dissolution of the Warsaw Pact and the expansion of NATO. As discussed below, this agreement has not entered into force pending its ratification by NATO members, and Russia has suspended its participation in the CFE Treaty. CFE placed alliance-wide, regional (zonal), and national ceilings on specific major items of military equipment. It sought to promote stability not only by reducing armaments, but also by reducing the possibility of surprise attack by preventing large concentrations of forces. The CFE treaty also provides for (1) very detailed data exchanges on equipment, force structure, and training maneuvers; (2) specific procedures for the destruction or redistribution of excess equipment; and (3) verification of compliance through on-site inspections. Its implementation has resulted in an unprecedented reduction of conventional arms in Europe, with over 50,000 (TLEs) removed or destroyed; almost all agree it has achieved most of its initial objectives. Under the CFE treaty all equipment reductions needed to comply with overall, national, and zonal ceilings were to have been completed by November 1995. As this deadline approached, it was evident that Russia would not meet those requirements, particularly in the so-called \"flank zones,\" which include the Leningrad Military District in the north, and more importantly, the North Caucasus Military District in the south. The outbreak of armed ethnic conflicts in and around the Caucasus, most notably in Chechnya, led Russia to claim it needed to deploy equipment in excess of treaty limits in that zone. Russia placed this claim in the context of broader assertions that some CFE provisions reflected Cold War assumptions and did not fairly address its new national security concerns. Further, it argued that economic hardship was making the movement of forces unaffordable in some cases. To address these concerns, the CFE parties negotiated a Flank Agreement, in early 1996. This agreement removed several Russian (and one Ukrainian) administrative districts from the old \"flank zone,\" thus permitting existing flank equipment ceilings to apply to a smaller area. To provide some counterbalance to these adjustments, reporting requirements were enhanced, inspection rights in the zone increased, and district ceilings were placed on armored combat vehicles to prevent their concentration. The 1996 CFE Review Conference opened negotiations to modify the treaty to account for the absence of the USSR and the Warsaw Pact, and the expansion of NATO into the Czech Republic, Poland, and Hungary. Most CFE signatories did not want to completely renegotiate the treaty. Russia, however, sought broader revisions, and, ironically, it sought to maintain the alliance-wide equipment ceilings. An alliance-wide cap on NATO would presumably force adjustments of national holdings as the NATO alliance expanded; such adjustments probably would not favor new member nations close to Russia's borders. The CFE parties did not adopt Russia's position and Russia ultimately agreed to a largely NATO-drafted document. This agreement called for, among other things, lower equipment levels throughout the \"Atlantic to the Urals\" area; enhanced verification procedures; and the replacement of NATO-Warsaw Pact \"bloc to bloc\" ceilings with national limits on all categories of TLEs. It also stated that the Flank Agreement was to remain in effect. The Adaptation Agreement reiterates that NATO has \"no plan, no intention, and no reason\" to deploy nuclear weapons on new members' territory; and seeks to improve new members' defensive capabilities through interoperability and capability for reinforcement, rather than by stationing additional combat forces on new members' territory. Russia's most serious focus has been, however, on NATO enlargement and how CFE could adapt to mitigate what many Russians see as an encroaching threat. Russia has called for the new members of NATO, particularly the Baltic states of Latvia, Lithuania, and Estonia, to become CFE state parties. These countries have indicated a willingness to join, however, they cannot do so until the Adaptation Agreement is ratified and the new CFE regime comes into force. At the Istanbul Summit in 1999, where the Adaptation Agreement was concluded, Russia undertook the so-called Istanbul Commitments to remove its troops from both the Republic of Georgia and the \"breakaway\" province of Transdniestra in Moldova. Though not part of the CFE Adaptation Agreement document, NATO members considered Russian fulfillment of these commitments a prerequisite for the ratification of the Agreement. Consequently, of the CFE signatories only Russia, Belarus, Ukraine, and Kazakhstan ratified the adapted treaty. In past compliance reports, the State Department asserted that Russian equipment holdings \"continue to exceed most of the legally binding limits for both the original and revised flank zones.\" It also cited Russia for relatively minor reporting violations and for its failure to complete withdrawals of its troops from Georgia and Moldova. It also cited Armenia, Azerbaijan, Belarus, and Ukraine for noncompliance. Armenia and Azerbaijan, engaged in a conflict over the Nagorno-Karabakh territory, have not completed equipment reductions; nor provided complete equipment declarations; nor provided timely notification of new equipment acquisition. Belarus was also cited for questionable equipment declarations and its refusal to allow inspectors access to an equipment storage site. The State Department deems Ukraine to have substantially complied with CFE requirements, but notes that it retained several hundred equipment items in excess of treaty limits. The State Department has raised significant issues with Russia's compliance, particularly in the years since Russia suspended its participation in the treaty. On April 26, 2007, Russian President Putin announced a \"moratorium\" on Russian CFE compliance, pointing to, among other things, the NATO nations' not having ratified the treaty as adapted. Subsequently, in statements to the press and diplomatic conferences, Russian officials elucidated the Russian position and its concerns. Among the major points are the following: During its CFE \"moratorium\" Russia will not allow CFE inspections nor will it report on its military movements. The Istanbul Commitments regarding troop withdrawals in Georgia and Moldova are not an integral part of the CFE Adaptation Agreement document, and consequently not legally binding and should not stand in the way of NATO members' ratification of the Agreement. The Baltic States and Slovakia are not bound by the CFE and their NATO membership, coupled with the new U.S. basing agreements with Poland, Bulgaria, and Romania, constitute an unacceptable encroachment on Russian national security. If the NATO nations do not ratify the CFE Adaptation Agreement within a year, Russia will consider complete withdrawal from the treaty. Russian officials, military leaders, and political commentators increasingly referred to the CFE treaty as a \"Cold War agreement,\" which no longer reflected the realities of the European security environment. Russian military officials' consultations at NATO Headquarters on May 10 brought no softening of the Russian position. A Russian request to the Organization for Security and Cooperation in Europe for a special conference of CFE signatories in June was granted. The conference failed to resolve any of the outstanding issues, and the State Parties were unable to find sufficient common ground to issue a final joint statement. The European and U.S. governments reacted with some surprise at the harshness of Russian statements, and urged Russia to address its concerns within the consultative framework of the treaty rather than pursue a withdrawal. However, then-Secretary of State Rice and Secretary of Defense Gates, in conversations with President Putin and Russian Foreign Minister Lavrov, and the Assistant Secretary of State for European and Eurasian Affairs, in testimony before the U.S. Commission on Security and Cooperation in Europe, reiterated the U.S. position that ratification of the CFE Adaptation Agreement still remained contingent upon Russia fulfilling its commitment to withdraw its military forces from Georgia and Moldova. On November 30, 2007, President Putin signed legislation from the Duma that suspended Russian compliance with CFE, effective December 12, 2007. This action came during the Madrid OSCE summit meeting and evoked an expression of regret on the part of NATO officials, who noted that Russia's military posture would be under discussion at the NATO foreign ministers meeting in December. Under Secretary of State Nicholas Burns characterized the Russian action as a \"mistake\" and urged Russia to negotiate its concerns within the CFE framework. Russian officials emphasized that this action was not a withdrawal from the treaty, and that they were willing to participate in further discussions if they perceived a greater willingness on the part of the NATO allies to address their concerns. However, in recent years, it has become clear that Russia does not intend to return to the CFE Treaty; it would prefer the negotiation of a new agreement that reflected the new security environment in Europe. Moreover, in March 2015, Russia suspended its participation in the Joint Consultative Group of the CFE Treaty, leaving little room for continued dialogue or cooperation. Russian officials indicated, in 2007, that Russia did not plan to conduct any significant redeployment of forces outside the treaty limits. However, in August 2008, Russia sent military forces into Georgia without the consent of the Georgian government and recognized two provinces of Georgia, Abkhazia and South Ossetia, as independent states. U.S. officials have noted that these steps are inconsistent with Russia's obligation under the CFE Treaty \"to refrain ... from the threat or use of force against the territorial integrity or political independence of any State.\" In addition, because Russia has suspended its participation in the treaty, it has not allowed any on-site inspections and has not provided any data mandated by the treaty. Some observers, and Russian spokesmen, portrayed the Russian moves regarding CFE as an asymmetrical response to the Bush Administration's proposed deployment of a U.S. ground-based missile defense system in Poland and the Czech Republic. Others, including Chief of the Russian General Staff Baluyevsky, discounted a specific linkage, seeing the missile defense controversy as merely one element of a more broadly ranged dissatisfaction with changes in the European security environment, which, from the Russian perspective, have favored the NATO allies. In November 2011, the United States announced that it would stop implementing its data exchange obligations under the CFE Treaty with respect to Russia. The United States would continue to share data with other treaty partners, and would not exceed the numerical limits on conventional armaments and equipment established by the treaty. But it would withhold data from Russia because Russia has refused to accept inspections and ceased to provide information to other CFE Treaty parties since its 2007 decision. The U.S. State Department, in its statement on the treaty, indicated that the United States remained committed to revitalizing conventional arms control in Europe. It also indicated that, in order to increase transparency and promote stability in the region, the United States would voluntarily inform Russia of any significant change in the U.S. force posture in Europe. Open Skies was originally proposed by President Eisenhower in 1955. In the years before satellites began to collect intelligence data, aerial overflights were seen as a way to gain information needed for both intelligence and confidence-building purposes. The Soviet Union rejected President Eisenhower's proposal because it considered the overflights equal to espionage. President George H. W. Bush revived the Open Skies proposal in May 1989. By this time, both the United States and Soviet Union employed satellites and remote sensors for intelligence collection, so aircraft overflights would add little for that objective. But, at the time when Europe was emerging from the East-West divide of the Cold War, the United States supported increased transparency throughout Europe as a way to reduce the chances of military confrontation and to build confidence among the participants. On March 24, 1992, the United States, Canada, and 22 European nations signed the Treaty on Open Skies. The U.S. Senate gave its advice and consent to the ratification of the Open Skies Treaty in August 1993, but Russia and Belarus delayed their ratification until May 2001. The Treaty entered into force on January 1, 2002. It currently has 34 participating member states that have conducted more than 1,000 observation flights since the treaty entered into force. Under the Open Skies Treaty, the parties agreed to permit unarmed aircraft to conduct observation flights over their territories. Although the flights often focus on military activities, the information they gather was not intended to be used to verify compliance with limits in other arms control agreements. Instead, Open Skies is designed as a confidence-building measure, to promote openness and enhance mutual understanding about military activities. It was designed to allow all nations, including those without access to satellites, to collect information on military forces and activities of other parties to the treaty and to gain an improved understanding of military activities in other nations. Overflights may provide early signs of efforts to build up military forces or, conversely, assurances that an adversary or neighbor is not preparing its military for a possible conflict. In addition, in recent years, it has helped nations in Europe observe and monitor Russian forces in areas near its border with Ukraine, where Russian forces are supporting an insurgency. The parties to the Open Skies Treaty have agreed to make all of their territory accessible to overflights by unarmed fixed wing observation aircraft. They can restrict flights over areas, such as nuclear power plants, where safety is a concern, but they cannot impede or prohibit flights over any area, including military installations that are considered secret or otherwise off-limits. In most cases, the nation conducting the observation flight will provide the aircraft and sensors for the flight. However, Russia insisted that the Treaty permit the observed country to provide the aircraft if it chose to do so. Nations can also team up to conduct overflights to share the costs of the effort or use aircraft and sensor suites provided by other nations. Each nation is assigned a quota of overflights that it can conduct and must be willing to receive each year. The quota is determined, generally, by the size of the nation's territory. For the United States, this quota is equal to 42 observation flights per year. The treaty permits the nations to use several types of sensors—including photographic cameras, infrared cameras, and synthetic aperture radars—during their observation flights. The permitted equipment allows the nations to collect basic information on military forces and activities, but it is not intended to provide them with detailed technical intelligence. For example, the resolution on the sensors would allow the nations to identify vehicles and distinguish between tanks and trucks, but probably will not allow them to tell one type of tank from another. Each observation flight produces two sets of data—one for the observing nation and one for the observed nation. This allows the nation under observation to know what information was collected during the flight. Other parties to the treaty can purchase copies of the data, so all parties can share in the information collected during all flights. Each nation is responsible for its own analysis of the data. The participants to the treaty have revisited the agreement's list of permitted sensors as technology has moved forward. For example, the permitted cameras use film that is no longer available, and parts that are no longer supported by most manufacturers, leading several countries to pursue a transition to digital cameras. Russia, in particular, has petitioned the Open Skies Consultative Commission to use digital cameras in flights over the United States. Russia has also asked the Open Skies Consultative Commission for permission to use high-powered digital cameras on flights over the United States. The capabilities of these cameras are within the scope permitted by the treaty and they use commercially available, unclassified technology. Russia already uses them on flights over Europe. However, some officials in the Pentagon and U.S. intelligence community have expressed concern about the quality of data that Russia may collect with these cameras, noting that the information could help Russia fill in gaps in its satellite surveillance capabilities. Although several of the participating nations conducted practice missions in the years before the Treaty entered into force, the first official overflight mission occurred in 2002. The parties conduct approximately 100 observation flights each year. In recent years, the United States has received 4-9 observation flights from Russia and has conducted 14-16 flights over Russia each year, although there were no flights in 2018. The United States also, occasionally, uses its open skies aircraft to monitor natural disasters, such as the recent earthquake in Haiti. It has also joined with Ukraine and other participants to conduct flights over Ukraine that can monitor Russian military forces across the border in Russia. In recent years, the United States has raised concerns about Russia's compliance with the Open Skies Treaty. For example, according to the U.S. State Department's annual report on compliance with arms control agreements, Russia has refused access for Open Skies observation over Chechnya and nearby areas of southwestern Russia. It has also limited access to a region over Moscow, and along the border of Russia with the Georgian regions of South Ossetia and Abkhazia. Moreover, according to the State Department, Russia has failed to provide priority flight clearance for Open Skies flights on a few occasions. The United States has responded to limitations imposed by Russia by restricting Russian flights over the United States. In late 2017, it limited the length of flights over Hawaii and removed access to two U.S. air force bases the Russians used to overnight during their missions over the United States. In 2018, the United States also blocked approval of Russia's use of new cameras on its Open Skies Aircraft, although this decision was quickly reversed and flights have resumed in 2019. The United States, Canada, France, Germany, Italy, Japan, and the United Kingdom established the Missile Technology Control Regime (MTCR) on April 16, 1987. Designed to slow the proliferation of ballistic and cruise missiles, rockets, and unmanned air vehicles (UAV) capable of delivering weapons of mass destruction, the MTCR is an informal, voluntary arrangement in which participants agree to adhere to common export policy guidelines applied to an \"annex\" that lists controlled items. Partner-countries adopt the guidelines as national policy and are responsible for restraining their own missile-related transfers. In addition, partners regularly exchange information on relevant export licensing issues, including denials of technology transfers. The MTCR has neither an independent means to verify whether states are adhering to its guidelines nor a mechanism to penalize states if they violate them. The MTCR is based on the premise that foreign acquisition or development of delivery systems can be delayed and made more difficult and expensive if major producers restrict exports. Analysts credit the MTCR with slowing missile development in Brazil and India, blocking a cooperative missile program of Argentina, Egypt, and Iraq, and eliminating missile programs in South Africa and Hungary. Moreover, partner countries have tightened their export control laws and procedures, and several have taken legal action against alleged missile-technology smugglers. On the other hand, some analysts note that the MTCR does not regulate countries' acquisition or production of missiles and cannot prevent nonpartners from exporting missiles and technology. It has also been difficult to restrain exports of ballistic and cruise missile technology from some partners—Russia has exported technology to Iran and Great Britain has done so to the United Arab Emirates. In addition, many analysts have argued that advances in missile-related technology will challenge the MTCR's future ability to check missile proliferation. Analysts and experts in the international community have also discussed the possibility that the \"supply side\" approach of the MTCR has outlived its usefulness and that a \"demand side\" approach to proliferation, on a regional or global basis, might prove more effective. Since 1987, the number of MTCR partners has grown from 7 to 35, with India joining the regime in 2016. Several nonpartners, including China, Israel, Romania, Slovakia, and India, have said they will restrict their transfers of missile equipment and technology according to the MTCR. Membership in the regime is decided by consensus. According to former MTCR Chairman Per Fischer, \"[p]otential members are reviewed on a case-by case basis, and decisions regarding applications are based on the effectiveness of a state's export controls … its potential contribution to the regime and its proliferation record.\" The United States supports new requests for membership to the regime only if the country in question agrees not to develop or acquire missiles (excluding space launch vehicles) that exceed MTCR guidelines. The MTCR guidelines call on each partner country to exercise restraint when considering transfers of equipment or technology, as well as \"intangible\" transfers, that would provide, or help a recipient country build, a missile capable of delivering a 500 kilogram (1,100 pound) warhead to a range of 300 kilometers (186 miles) or more. The 500 kilogram weight threshold was intended to limit transfers of missiles that could carry a relatively crude nuclear warhead. A 1993 addition to the guidelines calls for particular restraint in the export of any missiles or related technology if the nation controlling the export judges that the missiles are intended to be used for the delivery of weapons of mass destruction (nuclear, chemical, or biological). Thus some missiles with warheads weighing less than 500 kilograms also fall under MTCR guidelines. From time to time, regime partners update the MTCR guidelines and annex. The MTCR annex contains two categories of controlled items. Category I items are the most sensitive. There is \"a strong presumption to deny such transfers,\" according to the MTCR guidelines. Regime partners have greater flexibility in exports of Category II items. Category I items include complete rocket systems (including ballistic missiles, space launch vehicles, and sounding rockets), UAV systems (including cruise missiles systems, target and reconnaissance drones), production facilities for such systems, and major subsystems (including rocket stages, reentry vehicles, rocket engines, guidance systems, and warhead mechanisms). Transfers of Category I production facilities are not to be authorized. Category II items are other less sensitive and dual-use missile-related components that could be used to develop a Category I system, and complete missiles and major subsystems of missiles capable of delivering a payload of any size to a range of 300 km. The Hague Code of Conduct Against Ballistic Missile Proliferation (HCOC) was inaugurated on November 25, 2002. The HCOC is not a treaty but instead a set of \"fundamental behavioral norms and a framework for cooperation to address missile proliferation.\" It focuses on the possession of ballistic missiles, as a complement to the supply-side-oriented MTCR. Subscribing states have held regular conferences since the code came into effect. The code intends to \"prevent and curb the proliferation of Ballistic Missile systems capable of delivering weapons of mass destruction.\" It calls on subscribing states \"to exercise maximum possible restraint in the development, testing and deployment of Ballistic Missiles capable of delivering weapons of mass destruction [WMD], including, where possible, to reduce national holdings of such missiles.\" Subscribing states also agree not to assist ballistic missile programs in countries suspected of developing WMD. The HCOC also calls for subscribing states to \"exercise the necessary vigilance\" in assisting other countries' space-launch programs, which could serve as covers for ballistic missile programs. Additionally, subscribing states \"resolve to implement\" several transparency measures, such as producing annual declarations that provide outlines of their ballistic missile policies, as well as \"information on the number and generic class\" of such missiles launched during the preceding year. The code also calls on subscribing states to provide similar annual declarations regarding their \"expendable Space Launch Vehicle\" programs. Furthermore, the HCOC calls on states to \"exchange pre-launch notifications on their Ballistic Missile and Space Launch Vehicle launches and test flights.\" Signatories are required to provide such notifications to Austria, which serves as the Immediate Central Contact and Executive Secretariat for the HCOC. The United States and Russia each provide such notifications and the annual declarations described above. In July 1996, 33 nations approved the Wassenaar Arrangement (formally titled the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies) on export controls for conventional arms and dual-use goods and technologies. This agreement replaces the Coordinating Committee for Multilateral Export Controls (CoCom)—the Cold War organization that controlled sensitive exports of technologies to Communist nations. According to its Guidelines and Procedures, the Wassenaar Arrangement is not formally targeted at \"any state or group of states.\" But it is \"intended to enhance co-operation to prevent the acquisition of armaments and sensitive dual-use items for military end-uses, if the situation in a region or the behaviour of a state is, or becomes, a cause for serious concern.\" The arrangement is designed \"to contribute to regional and international security and stability, by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies, thus preventing destabilizing accumulations.\" Member decisions are made by consensus. This group has a broader membership but smaller lists of controlled goods than did CoCom. Its control regime is also less rigorous. Under Wassenaar, each national government regulates its own exports, whereas under CoCom, any member could disapprove any other members' export by of a controlled item to a proscribed destination. There is also no mechanism to punish a participating state for violating Wassenaar guidelines. The arrangement's guidelines specify that several factors must be considered when deciding on a potential new member's eligibility. These include whether the state has adopted the arrangement's control lists \"as a reference in its national export controls,\" the government's \"adherence to fully effective export controls,\" and whether the state adheres to several other multilateral agreements. Participating states agree to control exports and retransfers of items on a Munitions List and a List of Dual-Use Goods and Technologies. The decision to allow or deny transfer of an item is the sole responsibility of each participating state. The control lists are updated frequently. Twice a year participating states report all transfers or licenses issued for sensitive dual-use goods or technology and all deliveries of items on the Munitions List. The data exchange identifies the supplier, recipient, and items transferred. Participating states also report denials of licenses to transfer items on the dual-use list to nonmember states. The arrangement does not prohibit a participating country from making an export that has been denied by another participant (this practice is called \"undercutting\"). But participants are required to report soon after they approve a license for an export of dual-use goods that are essentially identical to those that have been denied by another participant during the previous three years. During plenary and working group discussions, participating states voluntarily share information on potential threats to peace and stability and examine dangerous acquisition trends. The participants review the scope of reporting and coordinating national control policies and develop further guidelines and procedures. Twice a year, the group reviews the Munitions List with a view to extending information and notifications. The Chemical Weapons Convention (CWC) bans the development, production, transfer, stockpiling, and use of chemical and toxin weapons, mandates the destruction of all chemical weapons production facilities, and seeks to control the production and international transfer of the key chemical components of these weapons. Negotiations began in 1968, but made little progress for many years. Verification issues, in particular, stalled the talks until the Soviet Union accepted challenge inspections. In September 1992, the Conference on Disarmament's 40 member-nations agreed on the final draft for the Convention, and it opened for signature in January 1993. As of November 30, 2015, 192 nations were party to the treaty, which entered into force on April 29, 1997. Israel has signed but not ratified the Convention. Egypt, North Korea, and South Sudan have not signed the CWC. Under the convention, states-parties provide declarations, which detail chemical weapons-related activities or materials and relevant industrial activities, to the Organization for the Prohibition of Chemical Weapons (OPCW). The OPCW inspects and monitors states-parties' facilities and activities that are relevant to the convention. The U.S. Senate held hearings and debated the CWC for more than four years before consenting to its ratification on April 24, 1997. Congress passed the CWC implementing legislation, as a part of the FY1999 Omnibus Appropriations Act ( P.L. 105-277 ), in late October 1998. This legislation provides the statutory authority for U.S. domestic compliance with the convention's provisions. The legislation also provides detailed procedures to be used for on-site inspections by the OPCW, including limitations on access and search warrant procedures, should they be required. Parties to the convention have agreed to cease all offensive chemical weapons research and production and close all relevant facilities. They agreed to declare all chemical weapons stockpiles, allow an inventory by international inspectors, and seal their stocks. They must also destroy their weapons within 10 years, unless the OPCW approves an extension. They must also destroy all chemical weapons production facilities within 10 years. In \"exceptional cases of compelling need,\" the OPCW may approve the conversion of these facilities to peaceful purposes. The CWC contains a complex verification regime, with different obligations applying to different types of chemical facilities. The convention establishes three schedules of chemicals, grouped by relevance to chemical weapons production and extent of legitimate peaceful uses. Some facilities are subject to systematic on-site verification; others are subject to periodic verification inspections. Facilities for a third class of chemicals are subject to random or \"ad hoc\" inspections. Signatories may also request challenge inspections at facilities suspected to be in violation of the convention. The OPCW will carry out these inspections on short notice. Inspected nations will have the right to negotiate the extent of inspectors' access to any facility, but must make every reasonable effort to confirm compliance. According to the OPCW, all of the member-states' declared chemical weapons production facilities have been inactivated and, as of March 13, 2018, approximately 96% of declared chemical weapons agent stockpiles had been destroyed. This amount does not include the chemical stockpiles declared by Syria (see below). Six countries declared possession of chemical weapons, but none destroyed their stocks by the original April 29, 2007, deadline. In July 2007, Albania became the first country to have destroyed its declared chemical weapons. South Korea became the second on July 10, 2008. India became the third on March 16, 2009. Five other states—Iraq, Libya, Russia, Syria, and the United States—have declared possession of such weapons. Libya joined the CWC in January 2004. At that time, Libya declared nearly 25 metric tonnes of bulk sulfur mustard agent, several thousand unloaded aerial munitions designed for use with chemical warfare agents, and several chemical weapons production facilities. The declared aerial munitions were destroyed in March 2004. Production facilities were destroyed or converted under OPCW supervision. Libya had said that it would destroy its Category One weapons by December 31, 2010, and its Category Two weapons by December 31, 2011. However, Tripoli was given until May 15, 2011, to destroy all of its Category One weapons. As of October 31, 2010, Libya had destroyed approximately 4% of its Category One weapons and over 39% of its Category Two weapons. These weapons, which included some undeclared stocks of mustard gas, remained on Libyan territory after the 2011 revolution and fall of the Muammar al Qadhafi regime. Libya's Permanent Representative to the OPCW stated March 11, 2011, that the country's \"situation regarding the chemical weapons to be destroyed remains unchanged and under control.\" In January 2012, OPCW inspectors returned to Libya to verify the status of Libya's chemical weapons stockpiles. In 2013, Libya completed the destruction of its stock of bulk mustard agent. Libya announced in January 2014 that it had completed destruction of the CW-filled munitions it had discovered and declared in 2011 and 2012. Libya was to have destroyed its stocks of Category 2 (precursor) chemicals by the end of 2016, but stated in a February 2016 letter to the OPCW Director-General that \"it is not realistic to expect that the destruction of these chemical weapons will be completed within the set time frame without an effective international assistance.\" Libya had informed the OPCW Executive Council in September 2015 that Tripoli lacked the appropriate technology for destroying its remaining stockpile. On February 24, 2016, the council requested the OPCW Director-General \"to identify and evaluate the technical, operational, security, financial, and legal factors relevant to all the options for addressing the destruction of the remaining Libyan chemical weapons, including the removal of some or all the chemicals from Libya and destruction outside Libya, and options for in-country destruction.\" The U.N. Security Council endorsed this in July (UNSC Resolution 2298 [2016]). In August 2016, Denmark led a maritime operation that removed all 500 metric tons of precursor chemicals from Libya to a destruction facility in Germany. According to the OPCW, Canada, Denmark, Finland, France, Germany, Italy, Malta, Spain, United Kingdom, and the United States contributed financial and technical assistance. The OPCW confirmed the complete destruction of all of Libya's chemical weapons in January 2018. Syria acceded to the CWC as part of a diplomatic effort in the fall of 2013. The United States threatened military action against Syria in response to chemical weapons use against civilians in August 2013. The United States withdrew the threat, and Syria agreed to join the CWC and declare and destroy all of its chemical weapons stocks and production facilities. U.N. Security Council Resolution 2118 (2013) mandated that Syria give up all its chemical weapons under Chapter VII provisions of the U.N. Charter and created a mechanism for verifying this process, with a primary role for the OPCW Secretariat. At the start of its civil war, Syria had more than 1,000 metric tons of chemical warfare agents and precursor chemicals, including several hundred metric tons of the nerve agent sarin, several hundred metric tons of mustard agent in ready-to-use form, and several metric tons of the nerve agent VX. A U.N. and OPCW Joint Mission oversaw the removal and destruction of these chemical weapons agents from Syria, and all Category 1 and 2 declared chemicals were destroyed as of June 2014. Destruction of chemical weapons facilities is still underway, and serious questions remain over whether Syria has declared all of its chemical weapons stocks. The OPCW's Declaration Assessment Team (DAT) continues to investigate these outstanding issues through interviews and lab analysis of samples from site visits. The State Department's 2018 report assessing CWC compliance says that the United States cannot certify that Syria is in compliance with the CWC, that Syria has been using chemical weapons systematically for years, and that Syria has not declared \"all the elements of its chemical weapons program\" and has retained some chemical weapons. The Syrian government continues to deny categorically that it has used chemical weapons or toxic chemicals, while accusing opposition forces of doing so. The U.N. representatives of the United States, France, and the United Kingdom continue to cite information they believe suggests Syrian government complicity in conducting ongoing chemical attacks, particularly with chlorine. Expert teams affiliated with the Joint U.N. Mission to Investigate Allegations of the Use of Chemical Weapons in the Syrian Arab Republic (JIM) and the OPCW Fact Finding Mission (FFM) in Syria have investigated some of these allegations and have found evidence that in some cases confirms and in others suggests that chemical weapons (such as sarin) and/or toxic chemicals have been used in attacks. The CWC Conference of States-Parties gave Russia until December 31, 2009, to destroy 45% of its Category One stockpiles and until April 29, 2012, to destroy the rest. Russia did not meet the 2012 deadline but stated that it planned to destroy its stockpiles by December 31, 2020. In September 2017, the OPCW confirmed that the Russian Federation had totally destroyed its declared chemical weapons stockpile. The OPCW had verified the destruction of 39,967 metric tons of Category One chemical weapons at seven facilities. Moscow had previously destroyed its Category Two and Category Three chemical weapons stockpiles. Under DOD's Cooperative Threat Reduction Program, the United States and other partner countries provided Russia with considerable financial assistance for chemical weapons destruction. In congressionally mandated annual reports to Congress, the State Department has said it could not certify that the Russian Federation was in compliance with the CWC because its required declarations of stockpile and development and production facilities were incomplete. In addition, the 2018 report said that due to \"Russia's March 4, 2018, use of a military-grade nerve agent to attack two individuals in the United Kingdom, the United States certifies that the Russian Federation is in non-compliance with its obligations under the CWC.\" The United States has also encountered difficulties in destroying its Category One chemical weapons stockpile and did not meet its 2007 deadline for doing so. Washington has already destroyed its Category Three stockpile and has declared no Category Two weapons. In April 2006, the United States submitted its formal request to the OPCW Chairman and Director-General to extend the United States' final chemical weapons destruction deadline from April 2007 to April 29, 2012, the latest possible date allowed under the CWC. However, Ambassador Eric Javits, then-U.S. Permanent Representative to the OPCW, added that the United States did \"not expect to be able to meet that deadline\" because Washington had encountered \"delays and difficulties\" in destroying its stockpile. These delays have generally resulted from the need to meet state and federal environmental requirements and from both local and congressional concerns over the means of destruction. The 2008 Defense Appropriations Act ( P.L. 110-116 ) required the Defense Department to \"complete work on the destruction\" of the U.S. chemical weapons stockpile by the 2012 deadline \"and in no circumstances later than December 31, 2017.\" The National Defense Authorization Act for Fiscal Year 2016 ( P.L. 114-92 ) changed this deadline to December 31, 2023. The OPCW reported in April 2018 that the organization had verified the destruction of about 90.5% of the U.S. Category One stockpile. The United States projects that the Colorado and Kentucky facilities will destroy the remaining chemical agents stockpiles. According to a 2017 Defense Department report, these stockpiles are to be destroyed by November 2019 and September 2023, respectively. Iraq used chemical weapons during its 1980-1988 war with Iran and against Iraqi Kurds in 1988. Following the 1991 Persian Gulf War, the U.N. Security Council adopted Resolution 687 on April 3, 1991. This resolution was the first in a series of resolutions that required Iraq to declare its programs for nuclear, chemical, and biological weapons, as well as missiles with ranges exceeding 150 kilometers, and to destroy the weapons and related materials under U.N. monitoring. Regarding chemical weapons, Resolution 687 required Iraq to \"unconditionally accept the destruction, removal, or rendering harmless, under international supervision of ... [a]ll chemical and biological weapons and all stocks of agents and all related subsystems and components and all research, development, support and manufacturing facilities.\" The resolutions also required Baghdad to accept an ongoing U.N. monitoring regime to prevent Iraqi reconstitution of its prohibited weapons programs. The U.N. Secretary-General subsequently formed the United Nations Special Commission (UNSCOM) to verify Iraq's compliance with the resolution. Iraq's chemical weapons generally met one of four fates: they were used during the Iran-Iraq war; they were destroyed by Iraq under UNSCOM supervision; they were secretly destroyed by Iraq outside UNSCOM supervision; or they were destroyed by coalition forces during the 1991 Persian Gulf War. Although \"a number of issues relating to Iraq's chemical weapons programme remain unresolved,\" according to a 2006 U.N. report, the inspectors \"were able to identify the major parameters of this programme, its scope and the results achieved.\" Moreover, the \"vast majority\" of chemical agents and munitions which Iraq possessed in 1991 were \"declared by Iraq, identified by the inspectors and destroyed under international supervision,\" according to the report. Iraq's legacy chemical weapons were \"contained in two sealed bunkers\" at an old Iraqi chemical weapons production facility, according to a July 31, 2012, British Ministry of Defense statement. These weapons were \"left over after being rendered unusable by the UN inspection teams,\" OPCW Director-General Ambassador Ahmet Üzümcü said in a June 6, 2013, speech. Iraq acceded to the CWC in 2009 and worked with the OCPW and several countries to devise an appropriate disposal method for these weapons. Permanent Representative of Iraq Mohamed Alhakim stated in a June 30, 2014, letter to U.N. Secretary–General Ban Ki-moon that Iraq is currently \"unable to fulfill its obligations to destroy chemical weapons\" and will resume these \"obligations as soon as the security situation has improved and control of the facility has been regained.\" Iraq reiterated its \"commitment to continue implementing the destruction plan for the remnants of the former regime's chemical programme, as early as possible,\" according to a March 17, 2015, statement. \"Due to the ongoing security situation, no further action has been taken,\" Üzümcü stated on November 30, 2015. However, Iraq began to destroy the weapons in 2017, \"once the on-going security situation had been addressed.\" The OPCW confirmed in November 2017 and February 2018 that the four former chemical weapons production facilities in Iraq were completely destroyed. Üzümcü stated in March 2018 that Iraq had completed destroying its \"chemical weapons remnants.\" On June 11, 2014, the Islamic State of Iraq and the Levant (ISIL) invaded the al-Muthanna chemical weapons facility. The Iraqi government has stated that \"the relevant Iraqi authorities saw to it that all sensitive equipment and instruments\" at the site \"were transferred to safe locations.\" Iraqi armed forces regained control of the site on October 28, 2014. An Iraqi assessment \"confirmed the integrity\" of the bunkers' \"walls and entries.\" However, ISIL has apparently been using chemical weapons in Iraq. The group \"was likely responsible\" for some attacks in Iraq with mustard agent, State Department spokesperson Elizabeth Trudeau told reporters on April 1, 2016. Director-General Üzümcü stated on March 23, 2016, that the OPCW has helped Iraq confirm \"the use of sulfur mustard in an attack in the Kurdistan Region of Iraq.\" Experts and government officials have argued that ISIL probably did not obtain chemical agents from Iraqi stockpiles. A State Department report covering 2014 raised some additional compliance questions, but did not conclude that any other CWC state-party had a chemical weapons program in violation of the Convention. In 1969, the Nixon Administration unilaterally renounced U.S. biological weapons (BW). Offensive BW development and production ceased, and destruction of the U.S. BW stockpile began. Simultaneously, the United States pressed the Soviet Union to follow its example. After some delay, agreement was reached, and the Biological Weapons Convention (BWC) was signed in 1972. The United States, after lengthy Senate consultations, ratified the convention in 1975, the same year that the convention entered into force. The BWC bans the development, production, stockpiling, and transfer of biological weapons, as well as biological agents and toxins. It also bans \"equipment or means of delivery designed to use such agents or toxins for hostile purposes or in armed conflict.\" In addition, the convention requires states-parties to destroy all relevant \"agents, toxins, weapons, equipment and means of delivery.\" The BWC permits only defensive biological warfare research (e.g., vaccines, protective equipment) and allows production and stockpiling of BW agents only in amounts justifiable for protective or peaceful purposes. Unlike the Chemical Weapons Convention (CWC), the BWC does not specify particular biological agents, but generically defines them as \"microbial or other biological agents or toxins whatever their origin or method of production, of types and in quantities that have no justification for prophylactic or peaceful purposes.\" The convention does not contain any independent verification or enforcement mechanisms. The Fifth Review Conference of the BWC, which took place in November 2001, ended in disarray, with the parties unable to agree upon a final declaration. The primary deadlock was the issue of an adaptive protocol to the convention, intended to enhance its enforcement. In July 2001, after almost seven years of negotiations, the United States declared the 200-page protocol unacceptable as basis for further negotiation. A Bush Administration review concluded that the draft protocol would not provide adequate security against covert violations, yet could endanger the security of U.S. biodefense programs and U.S. commercial proprietary information. Alone in its complete rejection of the draft protocol, the United States came under widespread international criticism, including from close allies, for \"jeopardizing\" the future of biological arms control. In response, the Administration put forward several proposals at the 2001 Review Conference, urging their adoption by BWC State Parties at the national level. These included the following: Criminalization of BWC violations and expedited extradition procedures for violators. United Nations investigation of suspicious disease outbreaks or alleged BW use. Procedures for addressing BWC compliance concerns. Improved international disease control. Improved security over research on pathogenic organisms. The Review Conference was unable to reach a compromise final declaration on future activities satisfactory to all state parties, and adjourned until November 2002. The United States has continued to oppose further negotiations on verification. Confronted with the U.S. position, the chairman of the 2002 Review Conference presented a minimal program emphasizing only annual meetings to discuss strengthening national laws and ways to respond to BW attacks. These were endorsed by the United States and accepted by the conference. The 6 th BWC Review Conference, held in December 2006, could not reach consensus on a comprehensive set of guidelines for national implementation of the convention owing to differences between the United States and the nonaligned nations group over technology transfer control issues. The assumption of U.S. opposition also precluded consideration of enhanced verification or enforcement provisions for the convention. The conference, however, did establish a new program of work for annual meetings, which took place before the 7 th Review Conference in December 2011. The meetings included discussion and information exchanges on a variety of issues, including domestic enforcement of BWC provisions, pathogen security, and oversight of potentially dual-use research. The United States required, however, that these sessions be prohibited from reaching binding decisions. Beginning in 2007, the BWC states-parties have met annually. The Obama Administration chose not to support revival of the negotiations on a BWC verification protocol, Under Secretary for Arms Control and International Security Ellen Tauscher announced in a December 9, 2009, address to the BWC states-parties. The Administration has \"determined that a legally binding protocol would not achieve meaningful verification or greater security,\" she explained, adding [t]he ease with which a biological weapons program could be disguised within legitimate activities and the rapid advances in biological research make it very difficult to detect violations. We believe that a protocol would not be able to keep pace with the rapidly changing nature of the biological weapons threat. Instead, Tauscher stated, the United States believes that \"confidence in BWC compliance should be promoted by enhanced transparency about activities and pursuing compliance diplomacy to address concerns.\" Pointing out that part of the November 2009 U.S. National Strategy for Countering Biological Threats is to \"reinvigorate\" the BWC, Tauscher exhorted the convention's states-parties to join the United States in \"increasing transparency, improving confidence building measures and engaging in more robust bilateral compliance discussions.\" She proposed such measures as increasing participation in the convention's confidence-building measures, as well as bilateral and multilateral cooperation in such areas as pathogen security and disease surveillance and response. The 7 th Review Conference took place from December 5 to 22, 2011. The conference participants decided to continue the intersessional process with some changes. The annual meetings will address three standing agenda items: cooperation and assistance, review of relevant scientific and technological developments, and strengthening national implementation. In addition, during the intersessional program, the states-parties were to discuss enabling fuller participation in BWC-related confidence-building measures and strengthening implementation of Article VII of the convention. After the most recent review conference, which took place from November 7 to 25, 2016, the conference participants decided that the states-parties are to meet annually. The first meeting was to \"seek to make progress on issues of substance and process for the period before the next Review Conference, with a view to reaching consensus on an intersessional process,\" according to the final conference document. During that meeting, w hich took place from December 4 to 8, 2017, the participants decided that a group of experts meeting would also take place annually. Groups of experts have met annually in the past as part of the intersessional process. The Arms Trade Treaty (ATT) is a multilateral treaty of unlimited duration. Its stated objectives are to \"[e]stablish the highest possible common international standards for regulating or improving the regulation of the international trade in conventional arms ...\" and to \"[p]revent and eradicate the illicit trade in conventional arms and prevent their diversion.\" Though various concepts similar to the ATT have been discussed in international circles for decades, a speech by the UK Foreign Secretary backing the concept in 2004 is widely credited as giving critical momentum to the movement by adding a major conventional arms exporter to it. Beginning in 2006, the treaty was negotiated in the U.N. General Assembly (UNGA) and specialized fora. A UNGA vote in early April 2013 approved the treaty in its negotiated form. The ATT opened for signature on June 3, 2013, and entered into force on December 24, 2014. The United States participated in drafting the ATT and voted for it in the UNGA on April 2, 2013. The United States signed the ATT on September 25, 2013, but has not ratified it. Because the United States already has strong export control laws in place, the ATT would likely require no significant changes to policy, regulations, or law. The ATT regulates trade in conventional weapons between and among countries. It does not affect sales or trade in weapons among private citizens within a country. The treaty obligates states parties engaged in the international arms trade to establish national control systems to review, authorize, and document the import, export, brokerage, transit, and transshipment of conventional weapons, their parts, and ammunition. The treaty also requires that states parties report on their treaty-specified transfers to other nations on an annual basis to the Secretariat. The scope of the weapons covered by the treaty includes the following, though states parties may voluntarily include other conventional weapons as well: battle tanks, armored combat vehicles, large-caliber artillery systems, combat aircraft, attack helicopters, warships, missiles and missile launchers, and small arms and light weapons. The ATT also binds states parties to certain preexport review processes that take into account various criteria related to possible destabilizing effects on international security, terrorism, transnational crime, human rights, and other factors in determining whether or not a transfer should be approved. A state party is specifically prohibited from approving a transfer to another nation that violates a United Nations Security Council Resolution adopted under Chapter VII of the United Nations Charter, especially an arms embargo. Also explicitly prohibited is any transfer where a state party \"has knowledge\" when reviewing the proposed transfer that the treaty-specified arms, parts, or ammunition would be used in the \"commission of genocide, crimes against humanity, grave breaches of the Geneva Conventions of 1949, attacks directed against civilian objects or civilians protected as such, or other war crimes as defined by international agreements to which it is a party.\" Parties to the treaty are obligated to take measures to prevent the illegal diversion of covered arms and ammunition, to mitigate risks of diversion occurring by cooperating with each other and exchanging information, and to \"take appropriate measures\" if a diversion is detected. States parties are also encouraged to exchange relevant information about effectively addressing illicit diversion. Finally, the ATT encourages cooperation between states parties in the development of implementing legislation, institutional capacity building, and other pertinent areas. According to the treaty text, the ATT's Secretariat will have a \"minimized structure\" and shall receive, make available and distribute the reports as mandated by this Treaty; maintain and make available to States Parties the list of national points of contact; facilitate the matching of offers of and requests for assistance for Treaty implementation and promote international cooperation as requested; facilitate the work of the Conference of States Parties, including making arrangements and providing the necessary services for meetings under this Treaty; and perform other duties as decided by the Conferences of States Parties. Antipersonnel landmines (APL) are small, inexpensive weapons that kill or maim people upon contact. Abandoned, unmarked minefields can remain dangerous to both soldiers and civilians for an indefinite time. Mines were addressed in The Convention on Prohibitions or Restrictions on the Use of Certain Conventional Weapons Which May Be Deemed To Be Excessively Injurious or To Have Indiscriminate Effects , also known as the Convention on Conventional Weapons (CCW). Protocol II of this contains rules for marking, registering, and removing minefields. The CCW was concluded in 1980 and entered into force in 1993. The United States signed it in 1982 and the U.S. Senate gave its advice and consent to ratification on March 24, 1995. In 1992, Congress established a one year moratorium on U.S. exports of APL ( P.L. 102-484 ) and subsequently extended it for 15 more years (see P.L. 107-115 ). H.R. 948 , introduced in the first session, 107 th Congress, sought to make the ban permanent but was not brought to a vote. Many nations have followed the U.S. example and imposed their own moratoria. In the FY1996 Foreign Operations Appropriations Act ( P.L. 104-107 ), Congress established a one-year ban on the use of APL by U.S. personnel to begin in 1999, but the 105 th Congress repealed the moratorium in the FY1999 Defense Authorization Act ( P.L. 105-261 ). In 1996, President Clinton announced a policy that immediately discontinued U.S. use of \"dumb\" APL (except in the DMZ of Korea); supported negotiation of a worldwide ban on APL in the United Nations; and supported development of alternative technologies to perform landmine functions without endangering civilians and expanded mine detection and clearing technology efforts and assistance to mine-plagued countries. This initiative temporarily retained the possible use of \"smart\" mines that render themselves harmless after a certain period of time, either through self-destruction, self-neutralization, or self-deactivation. Clinton subsequently set a goal of 2003 to replace even smart mines everywhere except Korea, and of 2006 in Korea. In November 1996, the United States introduced a resolution to the U.N. General Assembly to pursue an international agreement that would ban use, stockpiling, production, and transfer of APL—there were 84 cosponsors. Some countries, such as Canada, already abided by the intent of the proposed agreement and pushed for an early deadline to reach agreement. Others, however, were concerned that verifying such an agreement would be difficult, or that AP landmines still have a useful and legitimate role in their security planning. Landmine control, specifically a ban on exports, was briefly on the agenda of the Conference on Disarmament (CD) in Geneva for 1999. During 2000, however, that body could not agree on its program of work and the landmine issue was not addressed again. During 1997, the government of Canada and a number of nongovernmental organizations, such as the International Campaign to Ban Landmines, sponsored conferences to craft a treaty outside the CD process. Over 100 nations signed the Ottawa Treaty, formally titled the Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-personnel Mines and on Their Destruction, which entered into force for its parties on March 1, 1999. The Clinton Administration participated in the Ottawa Process, but declined to sign the treaty after failing to gain certain temporary exceptions to treaty language. Specifically, the United States wanted to continue to use APL in the defense of South Korea until 2006 if necessary, and the ability to include smart APL (or \"devices\") within antitank landmine munitions. President Clinton suggested that the United States would sign the Ottawa Treaty in 2006 if effective alternatives to APL were available. The Ottawa Convention requires states parties to stop the production, use, and transfer of APL, as well as destroy all stockpiled APL, except for the \"minimum number absolutely necessary\" for training purposes, within four years. As of April 8, 2016, 162 countries had become states-parties to the treaty. Belarus, Greece, Turkey, and Ukraine all missed their stockpile destruction deadlines. Turkey completed destroying its APL in June 2011. Poland must also destroy APL stockpiles. States parties are also required to clear APL within 10 years of becoming party to the convention, but can request extensions of up to 10 years to complete this task. Thirty-one states-parties have not yet met their clearance obligations. The Convention does not include a verification body, but states parties may submit allegations of noncompliance, as well as requests for \"clarification\" from relevant governments, to the U.N. Secretary-General. A State-Party may also request that a special meeting of other treaty members address the compliance matters. States parties can initiate fact-finding missions and also request relevant governments to address compliance issues. In February 2004, the Bush Administration announced that, after 2010, the United States would not use any type of persistent landmines, whether antipersonnel or—a new policy—antivehicle. Self-destruct and self-deactivating landmines will be used and will meet or exceed specifications of the Amended Mines Protocol, CCW. It also indicated that alternatives to persistent landmines would be developed that incorporate enhanced technologies. This policy did not include a date to join the Ottawa Treaty. Richard Kidd, then-Director of the State Department's Office of Weapons Removal and Abatement, said in a November 21, 2007, speech that the United States would not sign the Ottawa Convention. If needed, U.S. forces will use nonpersistent mines. Various U.S. landmine systems were reportedly prepositioned in the Middle East in preparation for the 2003 war in Iraq, but were not used. The Obama Administration conducted a review of U.S. policy regarding landmines. On June 27, 2014, during the Third Review Conference of the Ottawa Convention, the United States announced that it \"will not produce or otherwise acquire any anti-personnel landmines in the future,\" including for the purpose of replacing expiring stockpiles. Moreover, the United States is \"conducting a high fidelity modeling and simulation effort to ascertain how to mitigate the risks associated with the loss\" of such mines. On September 23, 2014, the Obama Administration stated that the United States is aligning its \"APL policy outside the Korean Peninsula with the key requirements of the Ottawa Convention.\" Specifically, the United States will \"not use APL outside the Korean Peninsula; not assist, encourage, or induce anyone outside the Korean Peninsula to engage in activity prohibited by the Ottawa Convention; and undertake to destroy APL stockpiles not required for the defense of the Republic of Korea.\" Puneet Talwar, Assistant Secretary of State for the Bureau of Political-Military Affairs, stated on December 9, 2014, that the United States is \"pursuing solutions that would be compliant with the convention and that would ultimately allow us to accede to the convention while ensuring that we are still able to meet our alliance commitments\" to South Korea. Tina Kaidanow, Principal Deputy Assistant Secretary of State for Political-Military Affairs, stated during a December 13, 2017, press conference that \"[t]here is no current review\" of U.S. policy regarding landmines, adding that \"in most places we have hewn to those standards [of the Ottawa Convention], with an exception, for an example, in the Korean Peninsula, where we cannot make that commitment.\" Cluster munitions are weapons that open in midair and dispense smaller submunitions—anywhere from a few dozen to hundreds—into an area. They can be delivered by aircraft or from ground systems such as artillery, rockets, and missiles. Cluster munitions are valued militarily because one munition can kill or destroy many targets within its impact area, and fewer weapons systems are needed to deliver fewer munitions to attack multiple targets. They also permit a smaller force to engage a larger adversary and are considered by some an \"economy of force\" weapon. On the other hand, critics note that cluster munitions disperse their large numbers of submunitions imprecisely over an extended area, that they frequently fail to detonate and are difficult to detect, and that the submunitions can remain explosive hazards for decades. They can also produce high civilian casualties if they are fired into areas where soldiers and civilians are intermixed or if inaccurate cluster munitions land in populated areas. A number of CCW members, led by Norway, initiated negotiations in 2007 outside of the CCW to ban cluster munitions. On May 30, 2008, they reached an agreement to ban cluster munitions. The United States, Russia, China, Israel, Egypt, India, and Pakistan did not participate in the talks or sign the agreement. During the Signing Conference in Oslo on December 3-4, 2008, 94 states signed the convention and 4 of the signatories ratified the convention at the same time. China, Russia, and the United States abstained, but France, Germany, and the United Kingdom were among the 18 NATO members to sign the convention. The convention entered into force on August 1, 2010. The Convention on Cluster Munitions (CCM), inter alia, bans the use of cluster munitions, as well as their development, production, acquisition, transfer, and stockpiling. The convention does not prohibit cluster munitions that can detect and engage a single target or explosive submunitions equipped with an electronic self-destruction or self-deactivating feature —an exemption that seemingly permits sensor-fuzed or \"smart\" cluster submunitions. Appendix A. List of Treaties and Agreements This appendix lists a wide range of arms control treaties and agreements. The date listed in each entry indicates the year in which the negotiations were completed. In some cases, entry into force occurred in a subsequent year. The Geneva Protocol, 1925: Bans the use of poison gas and bacteriological weapons in warfare. The Antarctic Treaty, 1959: Demilitarizes the Antarctic continent and provides for scientific cooperation on Antarctica. Memorandum of Understanding ... Regarding the Establishment of a Direct Communications Link (The Hot Line Agreement), 1963: Provides for a secure, reliable communications link between Washington and Moscow. Modified in 1971, 1984, and 1988 to improve the method of communications. Limited Test Ban Treaty, 1963: Bans nuclear weapons tests or any nuclear explosions in the atmosphere, outer space, and under water. Outer Space Treaty, 1967: Bans the orbiting or stationing on celestial bodies (including the moon) of nuclear weapons or other weapons of mass destruction. Treaty for the Prohibition of Nuclear Weapons in Latin America (Treaty of Tlatelolco), 1967: Obligates nations in Latin America not to acquire, possess, or store nuclear weapons on their territory. Treaty on the Non-Proliferation of Nuclear Weapons, 1968: Non-nuclear signatories agree not to acquire nuclear weapons; nuclear signatories agree to cooperate with non-nuclear signatories in peaceful uses of nuclear energy. Seabed Arms Control Treaty, 1971: Bans emplacement of military installations, including those capable of launching weapons, on the seabed. Agreement on Measures to Reduce the Risk of Outbreak of Nuclear War (Accident Measures Agreement), 1971: Outlines measures designed to reduce the risk that technical malfunction, human failure, misinterpreted incident, or unauthorized action could start a nuclear exchange. Biological Weapons Convention, 1972: Bans the development, production, stockpile, or acquisition of biological agents or toxins for warfare. Agreement ... on the Prevention of Incidents On and Over the High Seas, 1972: Establishes \"rules of the road\" to reduce the risk that accident, miscalculation, or failure of communication could escalate into a conflict at sea. Interim Agreement ... on Certain Measures with Respect to the Limitation of Strategic Offensive Arms (SALT I Interim Agreement), 1972: Limits numbers of some types of U.S. and Soviet strategic offensive nuclear weapons. Treaty ... on the Limitation of Anti-Ballistic Missile Systems (ABM Treaty), 1972: Limits United States and Soviet Union to two ABM sites each; limits the number of interceptor missiles and radars at each site to preclude nationwide defense. Modified in 1974 to permit one ABM site in each nation. U.S. withdrew in June 2002. Agreement ... on the Prevention of Nuclear War, 1973: United States and Soviet Union agreed to adopt an \"attitude of international cooperation\" to prevent the development of situations that might lead to nuclear war. Treaty ... on the Limitation of Underground Nuclear Weapons Tests (Threshold Test Ban Treaty), 1974: Prohibits nuclear weapons tests with yields of more than 150 kilotons. Ratified and entered into force in 1990. Treaty ... on Underground Nuclear Explosions for Peaceful Purposes (Peaceful Nuclear Explosions Treaty), 1976: Extends the limit of 150 kilotons to nuclear explosions occurring outside weapons test sites. Ratified and entered into force in 1990. Concluding Document of the Conference on Security and Cooperation in Europe (Helsinki Final Act), 1975: Outlines notifications and confidence-building measures with respect to military activities in Europe. Convention on the Prohibition of Military or any other Hostile Use of Environmental Modification Techniques, 1978: Bans the hostile use of environmental modification techniques that have lasting or widespread effects. Treaty ... on the Limitation of Strategic Offensive Arms (SALT II), 1979: Places quantitative and qualitative limits on some types of U.S. and Soviet strategic offensive nuclear weapons. Never ratified. The Convention on Prohibitions or Restrictions on the Use of Certain Conventional Weapons Which May Be Deemed To Be Excessively Injurious or To Have Indiscriminate Effects: This Convention, also known as the Convention on Conventional Weapons (CCW), was concluded in Geneva in 1980 and entered into force in 1993. Protocol II (Protocol on Prohibitions or Restrictions on the Use of Mines, Booby-traps and Other Devices) contains rules for marking, registering, and removing minefields, in an effort to reduce indiscriminate casualties caused by antipersonnel landmines. Protocol IV prohibits laser weapons designed to cause blindness. Document of the Stockholm Conference on Confidence- and Security-Building Measures and Disarmament in Europe (Stockholm Document), 1986: Expands on the notifications and confidence-building measures in the Helsinki Final Act. Provides for ground and aerial inspection of military activities. Treaty of Rarotonga, 1986: Establishes a Nuclear Weapons Free Zone in the South Pacific. The United States signed the Protocols in 1996; the Senate has not yet provided its advice and consent to ratification. Agreement ... on the Establishment of Nuclear Risk Reduction Centers, 1987: Establishes communications centers in Washington and Moscow and improves communications links between the two. Treaty ... on the Elimination of their Intermediate-Range and Shorter-Range Missiles, 1987: Bans all U.S. and Soviet ground-launched ballistic and cruise missiles with ranges between 300 and 3,400 miles. U.S. announced withdrawal on February 1, 2019. Agreement ... on Notifications of Launches of Intercontinental Ballistic Missiles and Submarine Launched Ballistic Missiles, 1988: Obligates United States and Soviet Union to provide at least 24 hours' notice before the launch of an ICBM or SLBM. Agreement on the Prevention of Dangerous Military Activities, 1989: Outlines cooperative procedures that are designed to prevent and resolve peacetime incidents between the armed forces of the United States and Soviet Union. U.S.-U.S.S.R. Chemical Weapons Destruction Agreement, 1990: Mandates the destruction of the bulk of the U.S. and Soviet chemical weapons stockpiles. Vienna Document of the Negotiations on Confidence- and Security-Building Measures, 1990: Expands on the measures in the 1986 Stockholm Document. Treaty on Conventional Armed Forces in Europe (CFE Treaty), 1990: Limits and reduces the numbers of certain types of conventional armaments deployed from the \"Atlantic to the Urals.\" Treaty ... on the Reduction and Limitation of Strategic Offensive Arms (START), 1991: Limits and reduces the numbers of strategic offensive nuclear weapons. Modified by the Lisbon Protocol of 1992 to provide for Belarus, Ukraine, Kazakhstan, and Russia to succeed to Soviet Union's obligations under the Treaty. Entered into force on December 5, 1994. Vienna Document of the Negotiations on Confidence- and Security-Building Measures, 1992: Expands on the measures in the 1990 Vienna Document. Treaty on Open Skies, 1992: Provides for overflights by unarmed observation aircraft to build confidence and increase transparency of military activities. Agreement ... Concerning the Safe and Secure Transportation, Storage, and Destruction of Weapons and Prevention of Weapons Proliferation, 1992: Provides for U.S. assistance to Russia for the safe and secure transportation, storage, and destruction of nuclear, chemical, and other weapons. Agreement Between the United States and Republic of Belarus Concerning Emergency Response and the Prevention of Proliferation of Weapons of Mass Destruction, 1992: Provides for U.S. assistance to Belarus in eliminating nuclear weapons and responding to nuclear emergencies in Belarus. Treaty ... on the Further Reduction and Limitation of Strategic Offensive Arms (START II) 1993: Would have further reduced the number of U.S. and Russian strategic offensive nuclear weapons. Would have banned the deployment of all land-based multiple-warhead missiles (MIRVed ICBMs), including the Soviet SS-18 \"heavy\" ICBM. Signed on January 3, 1993; U.S. Senate consented to ratification in January 1996; Russian Duma approved ratification in April 2000. Treaty never entered into force. Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction: Bans chemical weapons and requires elimination of their production facilities. Opened for signature on January 13, 1993; entered into force in April 1997. Agreement ... Concerning the Disposition of Highly Enriched Uranium Resulting from the Dismantlement of Nuclear Weapons in Russia, 1993: Provides for U.S. purchase of highly enriched uranium removed from Russian nuclear weapons; uranium to be blended into low enriched uranium for fuel in commercial nuclear reactors. Signed and entered into force on February 18, 1993. Agreement Between the United States and Ukraine Concerning Assistance to Ukraine in the Elimination of Strategic Nuclear Arms, and the Prevention of Proliferation of Weapons of Mass Destruction: Provides for U.S. assistance to Ukraine to eliminate nuclear weapons and implement provisions of START I. Signed in late 1993, entered into force in 1994. Agreement Between the United States and Republic of Kazakhstan Concerning the Destruction of Silo Launchers of Intercontinental Ballistic Missiles, Emergency Response, and the Prevention of Proliferation of Weapons of Mass Destruction, 1993: Provides for U.S. assistance to Kazakhstan to eliminate nuclear weapons and implement provisions of START I. Trilateral Statement by the Presidents of the United States, Russia, and Ukraine, 1994: Statement in which Ukraine agreed to transfer all nuclear warheads on its territory to Russia in exchange for security assurances and financial compensation. Some compensation will be in the form of fuel for Ukraine's nuclear reactors. The United States will help finance the compensation by purchasing low enriched uranium derived from dismantled weapons from Russia. Treaty of Pelindaba, 1996: Establishes a nuclear weapons free zone in Africa. The United States has signed, but not yet ratified Protocols to the Treaty. Comprehensive Nuclear Test Ban Treaty (CTBT), 1996: Bans all nuclear explosions, for any purpose. The United States and more than 130 other nations had signed the Treaty by late 1996. The U.S. Senate voted against ratification in October, 1999. Ottawa Treaty, 1997: Convention for universal ban against the use of antipersonnel landmines, signed in 1997 and entered into force in 1999. The United States and other significant military powers are not signatories. Strategic Offensive Reductions Treaty (Moscow Treaty), 2002: Obligates the United States and Russia to reduce strategic nuclear forces to between 1,700 and 2,200 warheads. Does not define weapons to be reduced or provide monitoring and verification provisions. Reductions must be completed by December 31, 2012. Treaty lapsed upon entry into force of New START. Signed in May 2002, entered into force June 1, 2003. Treaty … On Measures for the Further Reduction and Limitation of Strategic Offensive Arms (New START), 2010: Obligates the United States and Russia to reduce strategic nuclear forces to 1,550 warheads on up to 700 deployed delivery vehicles, within a total of 800 deployed and nondeployed delivery vehicles. Reductions must occur within 7 years, treaty remains in force for 10 years. Signed on April 10, 2010, entered into force on February 5, 2011. Treaty On the Prohibition of Nuclear Weapons , 2017: Obligates the parties to never \"develop, produce, manufacture, otherwise acquire, possess or stockpile nuclear weapons or other nuclear explosive devices.\" Parties agree not to host nuclear weapons that are owned or controlled by another state or to transfer, receive control over, or assist others in developing nuclear weapons. The United States has not signed this treaty and does not support its entry into force. Appendix B. The U.S. Treaty Ratification Process Article II, Section 2, Clause 2 of the U.S. Constitution establishes responsibilities for treaty ratification. It provides that the President \"shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur.\" Contrary to common perceptions, the Senate does not ratify treaties; it provides its advice and consent to ratification by passing a resolution of ratification. The President then \"ratifies\" a treaty by signing the instrument of ratification and either exchanging it with the other parties to the treaty or depositing it at a central repository (such as the United Nations). In Section 33 of the Arms Control and Disarmament Act (P.L. 87-297, as amended), Congress outlined the relationship between arms control agreements and the treaty ratification process. This law provides that \"no action shall be taken under this or any other law that will obligate the United States to disarm or to reduce or to limit the Armed Forces or armaments of the United States, except pursuant to the treaty-making power of the President under the Constitution or unless authorized by further affirmative legislation by the Congress of the United States.\" In practice, most U.S. arms control agreements have been submitted as treaties, a word reserved in U.S. usage for international agreements submitted to the Senate for its approval in accordance with Article II, Section 2 of the Constitution. The Senate clearly expects future arms control obligations would be made only pursuant to treaty in one of its declarations in the resolution of ratification of the START Treaty. The declaration stated: \"The Senate declares its intention to consider for approval international agreements that would obligate the United States to reduce or limit the Armed Forces or armaments of the United States in a militarily significant manner only pursuant to the treaty power set forth in Article II, Section 2, Clause 2 of the Constitution.\" Nonetheless, some arms control agreements have been made by other means. Several \"confidence building\" measures have been concluded as legally binding international agreements, called executive agreements in the United States, without approval by Congress. These include the Hot Line Agreement of June 20, 1963, the Agreement on Prevention of Nuclear War of June 22, 1973, and agreements concluded in the Standing Consultative Commission established by the Anti-ballistic Missile Treaty. In another category that might be called statutory or congressional-executive agreements, the SALT I Interim Agreement was approved by a joint resolution of Congress in 1972. In a third category, the executive branch has entered some arms control agreements that it did not submit to Congress on grounds that they were \"politically binding\" but not \"legally binding.\" Such agreements include several measures agreed to through the Conference on Security and Cooperation in Europe, such as the Stockholm Document on Confidence- and Security-Building Measures and Disarmament in Europe, signed September 19, 1986. Senate Consideration The conclusion or signing of a treaty is only the first step toward making the agreement legally binding on the parties. First, the parties decide whether to ratify, that is, express their consent to be bound by, the treaty that the negotiators have signed. Each party follows its own constitutional process to approve the treaty. In the United States, after a treaty has been signed, the President at a time of his choice submits to the Senate the treaty and any documents that are to be considered an integral part of the treaty and requests the Senate's advice and consent to ratification. The President's message is accompanied by a letter from the Secretary of State to the President which contains an analysis of the treaty. After submittal, the Senate may approve the agreement, approve it with various conditions, or not approve it. Senate consideration of a treaty is governed by Senate Rule XXX, which was amended in 1986 to simplify the procedure. The treaty is read a first time and the injunction of secrecy is removed by unanimous consent, although normally the text of a treaty has already been made public. The treaty is then referred to the Senate Committee on Foreign Relations under Senate Rule XXV on jurisdiction. After consideration, the committee reports the treaty to the Senate with a proposed resolution of ratification that may contain any of the conditions described below. If the committee objects to a treaty, or believes the treaty would not receive the necessary majority in the Senate, it usually simply does not report the treaty to the Senate and the treaty remains pending indefinitely on the committee calendar. After it is reported from the committee, a treaty is required to lie over for one calendar day before Senate consideration. The Senate considers the treaty after adoption of a nondebatable motion to go into executive session for that purpose. Rule XXX provides that the treaty then be read a second time, after which amendments to the treaty may be proposed. The majority leader typically asks unanimous consent that the treaty be considered to have passed through all the parliamentary stages up to and including the presentation of the resolution of ratification. After the resolution of ratification is presented, amendments to the treaty itself, which are rare, may not be proposed. The resolution of ratification is then \"open to amendment in the form of reservations, declarations, statements, or understandings.\" Decisions on amendments and conditions are made by a majority vote. Final approval of the resolution of ratification with any conditions that have been approved requires a two-thirds majority of those Senators present. After approving the treaty, the Senate returns it to the President with the resolution of ratification. If he accepts the conditions of the Senate, the President then ratifies the treaty by signing a document referred to as an instrument of ratification. Included in the instrument of ratification are any of the Senate conditions that State Department officials consider require tacit or explicit approval by the other party. The ratification is then complete at the national level and ready for exchange or deposit. The treaty enters into force in the case of a bilateral treaty upon exchange of instruments of ratification and in the case of a multilateral treaty with the deposit of the number of ratifications specified in the treaty. The President then signs a document called a proclamation which publicizes the treaty domestically as in force and the law of the land. If the President objects to any of the Senate conditions, or if the other party to a treaty objects to any of the conditions and further negotiations occur, the President may resubmit the treaty to the Senate for further consideration or simply not ratify it. Approval with Conditions The Senate may stipulate various conditions on its approval of a treaty. Major types of Senate conditions include amendments, reservations, understandings, and declarations or other statements or provisos. Sometimes the executive branch recommends the conditions, such as the December 16, 1974, reservation to the 1925 Geneva Protocol prohibiting the use of poison gas and the understandings on the protocols to the Treaty for the Prohibition of Nuclear Weapons in Latin America. An amendment to a treaty proposes a change to the language of the treaty itself, and Senate adoption of amendments to the text of a treaty is infrequent. A formal amendment to a treaty after it has entered into force is made through an additional treaty often called a protocol. An example is the ABM (Anti-Ballistic Missile) Protocol, signed July 3, 1974, which limited the United States and the Soviet Union to one ABM site each instead of two as in the original 1972 ABM Treaty. While the Senate did not formally attach amendments to the 1974 Threshold Test Ban and 1976 Peaceful Nuclear Explosion treaties, it was not until Protocols relating to verification were concluded in 1990 that the Senate approved these two Treaties. A reservation is a limitation or qualification that changes the obligations of one or more of the parties. A reservation must be communicated to the other parties and, in a bilateral treaty, explicitly agreed to by the other party. President Nixon requested a reservation to the Geneva Protocol on the use of poison gases stating that the protocol would cease to be binding on the United States in regard to an enemy state if that state or any of its allies failed to respect the prohibition. One of the conditions attached to the INF treaty might be considered a reservation although it was not called that. On the floor the sponsors referred to it as a Category III condition. The condition was that the President obtain Soviet consent that a U.S.-Soviet agreement concluded on May 12, 1988, be of the same effect as the provisions of the treaty. An understanding is an interpretation or elaboration ordinarily considered consistent with the treaty. In 1980, the Senate added five understandings to the agreement with the International Atomic Energy Agency (IAEA) for the Application of Safeguards in the United States. The understandings concerned implementation of the agreement within the United States. A condition added to the INF treaty resolution, requiring a presidential certification of a common understanding on ground-launched ballistic missiles, might be considered an understanding. The sponsor of the condition, Senator Robert Dole, said, \"this condition requires absolutely nothing more from the Soviets, but it does require something from our President.\" A declaration states policy or positions related to the treaty but not necessarily affecting its provisions. Frequently, like some of the understandings mentioned above, declarations and other statements concern internal procedures of the United States rather than international obligations and are intended to assure that Congress or the Senate participate in subsequent policy. The resolution of ratification of the Threshold Test Ban Treaty adopted in 1990 made approval subject to declarations (1) that to preserve a viable deterrent a series of specified safeguards should be an ingredient in decisions on national security programs and the allocation of resources, and (2) the United States shared a special responsibility with the Soviet Union to continue talks seeking a verifiable comprehensive test ban. In a somewhat different step, in 1963 the Senate attached a preamble to the resolution of ratification of the limited nuclear test ban treaty. The preamble contained three \"Whereas\" clauses of which the core one stated that amendments to treaties are subject to the constitutional process. The important distinction among the various conditions concerns their content or effect. Whatever designation the Senate applies to a condition, if the President determines that it may alter an international obligation under the treaty, he transmits it to the other party or parties and further negotiations or abandonment of the treaty may result. During its consideration of the SALT II Treaty, the Senate Foreign Relations Committee grouped conditions into three categories to clarify their intended legal effect; (I) those that need not be formally communicated to or agreed to by the Soviet Union, (II) those that would be formally communicated to the Soviet Union, but not necessarily agreed to by them, and (III) those that would require the explicit agreement of the Soviet Union. In the resolution of ratification of the START Treaty, the Senate made explicit that some of the conditions were to be communicated to the other parties. The Senate approves most treaties without formally attaching conditions. Ten arms control treaties were adopted without conditions: the Antarctic, Outer Space, Nuclear Non-Proliferation, Seabed, ABM, Environmental Modification, and Peaceful Nuclear Explosions Treaties, the Biological Weapons and the Nuclear Materials Conventions, and the ABM Protocol. In some of these cases, however, the Senate Foreign Relations Committee included significant understandings in its report. Even when it does not place formal conditions in the resolution of ratification, the Senate may make its views known or establish requirements on the executive branch in the report of the Foreign Relations Committee or through other vehicles. Such statements become part of the legislative history but are not formally transmitted to other parties. In considering the Limited Nuclear Test Ban Treaty in 1963, the Senate turned down a reservation that \"the treaty does not inhibit the use of nuclear weapons in armed conflict,\" but Senate leaders insisted upon a written assurance on this issue, among others, from President Kennedy. In reporting the Nuclear Non-Proliferation Treaty, the committee stated that its support of the Treaty was not to be construed as approving security assurances given to the non-nuclear-weapon parties by a U.N. Security Council resolution and declarations by the United States, the Soviet Union, and the United Kingdom. The security assurances resolution and declarations were, the committee reported, \"solely executive measures.\" Appendix C. Arms Control Organizations", "summary": "Arms control and nonproliferation efforts are two of the tools that have occasionally been used to implement U.S. national security strategy. Although some believe these tools do little to restrain the behavior of U.S. adversaries, while doing too much to restrain U.S. military forces and operations, many other analysts see them as an effective means to promote transparency, ease military planning, limit forces, and protect against uncertainty and surprise. Arms control and nonproliferation efforts have produced formal treaties and agreements, informal arrangements, and cooperative threat reduction and monitoring mechanisms. The pace of implementation for many of these agreements slowed during the Clinton Administration, and the Bush Administration usually preferred unilateral or ad hoc measures to formal treaties and agreements to address U.S. security concerns. The Obama Administration resumed bilateral negotiations with Russia and pledged its support for a number of multilateral arms control and nonproliferation efforts, but succeeded in negotiating only a few of its priority agreements. The Trump Administration has offered some support for existing agreements, but has announced the U.S. withdrawal from the INF Treaty, citing Russia's violation of that agreement, and has not yet determined whether it will support the extension of the 2010 New START Treaty through 2026. It shows little interest in pursuing further agreements. The United States and Soviet Union began to sign agreements limiting their strategic offensive nuclear weapons in the early 1970s. Progress in negotiating and implementing these agreements was often slow, and subject to the tenor of the broader U.S.-Soviet relationship. As the Cold War drew to a close in the late 1980s, the pace of negotiations quickened, with the two sides signing treaties limiting intermediate-range and long-range weapons. But progress again slowed in the 1990s, as U.S. missile defense plans and a range of other policy conflicts intervened in the U.S.-Russian relationship. At the same time, however, the two sides began to cooperate on securing and eliminating Soviet-era nuclear, chemical, and biological weapons. Through these efforts, the United States has allocated more than $1 billion each year to threat reduction programs in the former Soviet Union. These programs have recently reached their conclusion. The United States is also a prominent actor in an international regime that attempts to limit the spread of nuclear weapons. This regime, although suffering from some setbacks in recent years in Iran and North Korea, includes formal treaties, export control coordination and enforcement, U.N. resolutions, and organizational controls. The Nuclear Nonproliferation Treaty (NPT) serves as the cornerstone of this regime, with all but four nations participating in it. The International Atomic Energy Agency not only monitors nuclear programs to make sure they remain peaceful, but also helps nations develop and advance those programs. Other measures, such as sanctions, interdiction efforts, and informal cooperative endeavors, also seek to slow or stop the spread of nuclear materials and weapons. The international community has also adopted a number of agreements that address non-nuclear weapons. The CFE Treaty and Open Skies Treaty sought to stabilize the conventional balance in Europe in the waning years of the Cold War. Other arrangements seek to slow the spread of technologies that nations could use to develop advanced conventional weapons. The Chemical Weapons and Biological Weapons Conventions sought to eliminate both of these types of weapons completely. This report will be updated annually or as needed.", "document_type": "crs"}
{"report": "The U.S. merchandise trade deficit with the People's Republic of China (China) remains a major source of bilateral tension. Some Members of Congress and other U.S. government officials often point to the bilateral trade imbalance as evidence that China is not competing fairly in the global market. In March 2018, the Trump Administration reportedly asked China to develop a plan to reduce the bilateral trade deficit by $100 billion. On March 31, 2017, President Trump issued Executive Order 13786, which states: Within 90 days of the date of this order, the Secretary of Commerce and the United States Trade Representative (USTR), in consultation with the Secretaries of State, the Treasury, Defense, Agriculture, and Homeland Security, and the heads of any other executive departments or agencies with relevant expertise, as determined by the Secretary of Commerce and the USTR, shall prepare and submit to the President an Omnibus Report on Significant Trade Deficits (Report). President Trump also issued Executive Order 13796, \"Addressing Trade Agreement Violations and Abuses,\" on April 29, 2017, which, among other things, requires the Secretary of Commerce and the USTR to \"conduct comprehensive performance reviews\" of \"all trade relations with countries governed by the rules of the World Trade Organization with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.\" China is one such country. Despite the priority the Trump Administration has placed on reducing bilateral trade deficits in general, and with China in particular, according to official U.S. trade statistics, the overall U.S. merchandise trade deficit and the bilateral deficit with China increased in 2017 and 2018. The overall deficit rose from $736.6 billion in 2016 to $795.7 billion in 2017, and $878.7 billion in 2018. The bilateral deficit with China accounted for 47.1%, 47.2%, and 47.7% of the total merchandise trade deficit for the last three years, respectively. Debate over this trade deficit is hampered by disagreement between the two countries on how large the deficit actually is. According to official U.S. figures, China has surpassed Canada as the largest supplier of U.S. imports, running up a bilateral merchandise trade surplus in 2018 of $419.2 billion. However, according to official Chinese figures, China's trade surplus with the United States in 2018 was $323.9 billion—$95.9 billion less than the U.S. figure (see Table 1 ). The U.S. trade deficit with China plays a role, directly and indirectly, in proposed legislation addressing bilateral trade relations. The Fair Trade with China Enforcement Act ( H.R. 704 and S. 2 ), for example, refers to \"a severely imbalanced trading relationship\" with China, and would impose restrictions on Chinese investment in the United States \"due to its negative effect on the United States trade deficit and wages of workers in the United States.\" The United States Reciprocal Trade Act ( H.R. 764 ) finds, \"The lack of reciprocity in tariff levels and nontariff barriers contributes to the large and growing United States trade deficit in goods, which is a drag on economic growth and undermines economic prosperity.\" The act would authorize the President to negotiate an agreement with a country that has higher tariff or nontariff barriers than the United States, or impose additional duties on that country's exports to the United States. Table 1 lists the official trade statistics from the United States and China for the years 2001 to 2018, using official trade data. From the U.S. perspective, its bilateral trade deficit with China more than quintupled in value over the last 18 years, from just over $83 billion in 2001 to over $419 billion in 2018. However, from the Chinese view, its bilateral trade surplus with the United States increased more than 11-fold, from about $28 billion in 2001 to more than $323 billion in 2018. Table 1 reveals that most of the discrepancy between the trade data from the two nations stems from significantly different figures for China's exports to the United States. The difference between the U.S. and Chinese figures for U.S. exports to China was generally less than $10 billion until 2011, but the discrepancy has been rising in recent years. China's figures for its exports to the United States differed from U.S. figures by $48.3 billion in 2001 and $61.1 billion in 2018. The most widely used international system for classifying traded goods is the Harmonized Commodity Description and Coding System, commonly referred to as the Harmonized System or simply HS Code. Every product traded is classified into a 10-digit code. The first two digits of the product's code correspond to one of the 98 HS \"chapters,\" that classify all goods in general categories. The U.S. International Trade Commission maintains the U.S. version of the HS Code, officially called the \"Harmonized Tariff Schedule of the United States,\" or HTS. Since both the United States and China use the same HS chapters, it is possible to compare the trade data at this level. Table 2 lists in rank order the top five HS chapters where the value of U.S. imports from China exceeds the value of Chinese exports to the United States for 2018. The top five HS chapters—footwear (64), machinery (84), electrical machinery (85), optical and medical instruments (90), and toys and sporting goods (95)—account for more than 94% of the difference between the U.S. and Chinese figures for U.S. imports from China (or Chinese exports to the United States). All five of these chapters also ranked high according to both countries in terms of their absolute value of trade. Machinery (84), electrical machinery (85), and toys and sporting goods (95) were among the top five ranked chapters in terms of the value of imports from China, according to the United States, and accounted for 54.7% of the total value of imports in 2018. The same three chapters were among the top five sources of exports to the United States, according to China, and accounted for 50.5% of the total value of exports in 2018. In addition, China's export value for four chapters exceeded U.S. import value by more than $1 billion (in order): Railway equipment (86) - $2.856 billion; knit apparel (61) - $2.840 billion; woven apparel (62) - $1.618 billion; and non-railway vehicles (87) - $1.130 billion. On the other side of the trade equation, there were 10 chapters where China's imports exceeded U.S. exports by more than $1 billion: miscellaneous grains (12); mineral fuel (27); pharmaceutical products (30); miscellaneous chemical products (38); plastic (39); precious stones and metals (71); machinery (84); electrical machinery (85); non-railway vehicles (87); and optical and medical equipment (90). In one chapter—railway equipment (86)—U.S. exports exceeded Chinese imports by more than $1 billion. On both sides of the trade balance equation, two of the greatest differences in the official trade statistics of the two nations occurred in the same HS chapters—machinery (84) and electrical machinery (85). The discrepancies between the official trade statistics for these two types of goods have been consistently large for flows in both directions since 2001, indicating a systemic difference in the evaluation of the bilateral trade of these goods. The question as to why China's official statistics (on trade flows) are routinely much lower in value than the official U.S. trade statistics has been and continues to be the subject of analysis by scholars, government officials, and other interested parties. Nor is the issue unique to the United States; Canada also reports bilateral trade statistics that differ significantly from China's reported figures, and has investigated the reasons for those differences. The following is a short review of some of the key explanations provided in this literature, categorized into \"technical\" and \"non-technical\" explanations. \"Technical\" explanations refer to procedural or administrative causes for the discrepancies; \"non-technical\" explanations include causes arising from non-procedural or non-administrative sources. In its official statistics, China evaluates exports using the more commonly used \"free on board\" (F.O.B.) terms, and evaluates imports using \"cost, insurance, and freight\" (C.I.F.) terms. The use of F.O.B. for exports and C.I.F. for imports is a common, but not universal, international practice. The United States, however, reports its exports using \"free alongside\" (F.A.S.) terms and values imports using a customs definition. As a result, official U.S. trade data place a lower value on both U.S. exports to China and imports from China than the official Chinese data. In addition, direct comparisons of the official U.S. and Chinese trade balances reported in the media are potentially misleading, because the goods trades are being evaluated using different methods. For more accurate direct comparisons, the trade data for both nations should be evaluated using the same terms. The United States includes Puerto Rico and the U.S. Virgin Islands in its trade data; China does not. China treats Puerto Rico and the U.S. Virgin Islands as separate customs territories. According to most studies, this is a comparatively minor source of difference in the trade figures. Because of the distance between China and the United States, it takes time between the export of the goods from China and their import in the United States. Goods in transit at the end of the year are counted as exports by China, but not as imports by the United States. However, the lag between shipments occurs at the beginning and the end of the year, thus minimizing the effect of timing on the overall trade balance difference. The current practice of U.S. Customs is to rely on the declaration of the importer to determine the country of origin. Some analysts believe that importers are misidentifying a significant amount of imports as Chinese. Because China's currency, the renminbi (RMB), is allowed to fluctuate within a small range, the exchange rate between the renminbi and the U.S. dollar changes over time. The value of a shipment may change between the date it leaves China and the date it arrives in the United States due to changes in the exchange rate. Although the renminbi has appreciated against the U.S. dollar over the last decade, exchange rate changes are generally not considered a major factor in the discrepancy in the trade figures. According to two joint China-U.S. studies (see \" Joint China-U.S. Studies of Discrepancies \" below), about half of the merchandise trade discrepancy between U.S. imports from China and Chinese exports to the United States—or eastbound trade—is attributable to changes in the values of the export price in China and the import value in the United States for goods shipped directly between the two countries. Part of the difference may be caused by mid-shipment transfers in ownership resulting in the new owner adding a markup in the price. Another possible explanation is intentional under-invoicing of exports (see below). Some analysts believe that Chinese importers may intentionally under-value imports from the United States to lower the import tariff due on the shipment. In addition, some analysts believe that Chinese exporters may intentionally under-value exports to the United States to maximize their net proceeds overseas for various tax and regulatory reasons. More recently, bilateral trade figures may have been distorted by \"phantom goods\" shipments from China to the United States (and other locations) used to disguise attempts to move financial capital offshore. Due to the \"hidden nature\" of under-invoicing, it is difficult to assess how much, if at all, this may be contributing to the differences in the trade data. Although estimates vary, many analysts agree that a large portion of China's exports arrive in the United States via a third party, Hong Kong being the most commonly identified location. The intermediation of shipments raises two sources of discrepancies. First, the exporter from China may not know that the goods eventually will be shipped to the United States, and may therefore list the third party (e.g., Hong Kong) as its destination, but U.S. Customs may list the source of shipment as being China, based on U.S. laws and regulations. Second, the value of the shipment may change—with or without any actual change in the goods—between its arrival in and departure from the third location. The joint China-U.S. study of discrepancies in merchandise trade statistics determined that value differences account for about half of the differences between Chinese and U.S. trade statistics. In April 2004, the 15 th JCCT established a statistical working group, with representatives of China's Ministry of Commerce and General Administration of Customs, and the U.S. Department of Commerce and Office of the USTR. The initial focus of the working group was to examine the \"unusually large and growing statistical discrepancies in the bilateral merchandise trade data officially published by [the] two countries.\" The Working Group subsequently decided to conduct a reconciliation study to determine the causes of the discrepancies. However, the Working Group stated that the results of the study were not intended to imply errors in either nation's statistical systems and/or methods of calculating official merchandise trade data. Under the auspices of the U.S.-China Joint Commission on Commerce and Trade (JCCT), China's Ministry of Commerce and the U.S. Department of Commerce and Office of the U.S. Trade Representative (USTR) have conducted two studies to determine the causes of the statistical discrepancies in the official merchandise trade data reported by both nations. The first report was released in October 2009; the second in December 2012. The main conclusions of the two studies are largely the same. The greatest discrepancy is in the \"eastbound trade\" data, which accounts for 80%-90% of the overall difference in annual trade balance. Roughly half of the \"eastbound trade\" data discrepancy can be attributed to goods that \"leave China, enter the commerce of intermediate countries or regions, and then [are] re-exported to the United States.\" The release of the official U.S. annual trade figures has been frequently followed by expressions of concern about the size of U.S. bilateral trade deficit with China. According to official U.S. trade figures, the bilateral trade deficit with China in 2017 was more than five times the size of the next largest bilateral trade deficit (Mexico, $71.1 billion) and greater than the sum of the next eight largest bilateral trade deficits. China has not accepted the \"accuracy\" of the official U.S. figure for the Sino-U.S. trade balance for at least two decades. A 1997 White Paper issued by China's State Council, \"On Sino-US Trade Balance,\" states, \"Statistics and analyses prove it true that Sino-US trade has been in favour of China in recent years, but it is obvious that the size of the US deficit has been largely exaggerated by the US side.\" In 2007, China's Foreign Ministry spokeswoman, Jiang Yu, said, \"imbalances in China-U.S. trade are an objective fact, but this is also related to the two sides' different statistical methods.\" Also, when considering means or actions designed to reduce the U.S. trade deficit with China, it is useful to know which goods are the main sources of discrepancies between Chinese and U.S. trade figures, and how important they are in the overall trade flow between the two nations, so that \"trade remedies\" may be better targeted at the perceived problem. According to this report, the main problems appear to be in the trade figures for electrical machinery, machinery, and toys and sporting goods. For those causes of the differences resulting from data compilation—such as misidentification of value or country of origin of imports—Congress may choose through oversight or other means to encourage the responsible U.S. agency to examine and adjust its procedures for compiling trade data. In addition, Congress may decide to press or otherwise encourage China's customs services to conduct a similar review of its trade compilation procedures. In other cases, more detailed analysis of the trade data may be helpful in persuading China to amend or alter its laws, regulations, and policies pertaining to the import or export of goods to the United States. \"Accounting for Discrepancies in Bilateral Trade: The Case of China, Hong Kong, and the United States,\" by Michael J. Ferrantino and Zhi Wang, China Economic Review , vol. 19 (2008), pp. 502-520. Adjusted Estimates of United States-China Bilateral Trade Balances—An Update . K.C. Fung, Lawrence J. Lau and Yangyan Xiong. June 2006. Stanford Center for International Development, Working Paper No. 278. Comparing Canada's and China's Bilateral Trade Data . China-Canada Joint Working Group on Trade Statistics Reconciliation. August 29, 2018. Methodology of U.S.-China-Hong Kong Triangular Merchandise Trade Statistic Reconciliation . Alexander Hammer, Lin Jones, and Zhi Wang. August 2013. Office of Economics Research Note, U.S. International Trade Commission, No. RN-2013-08A. Report on the Statistical Discrepancy of Merchandise Trade Between the United States and China, Report by the Joint Commission on Commerce and Trade Statistical Working Group, October 2009. The Second Phase Report on the Statistical Discrepancy of Merchandise Trade between the United States and China , Report by the Joint Commission on Commerce and Trade Statistical Working Group, December 2012. Statistical Differences in Sino-US Trade Balance . February 12, 2007. China Online. http://chinaculture.about.com/library/china/whitepaper/blstrade2.htm . The U.S.-China Bilateral Trade Balance: Its Size and Determinants . Robert C. Feenstra, Wen Hai, Wing T. Woo, and Shunli Yao. May 1998. Paper presented at the UNDP-HIID Conference on China's Integration in the Global Economy, January 17, 1998. The U.S.-China Trade Imbalance: How Big Is It Really? Sarah Y. Tong. March 2005. China: An International Journal. Volume 3, No. 1, pp. 131-154.", "summary": "The size of the U.S. bilateral trade deficit with China has been and continues to be an important issue in bilateral trade relations. President Trump and some Members of Congress view the deficit as a sign of unfair economic policies in China. The Trump Administration has reportedly asked China to develop a plan to reduce the bilateral trade deficit by $100 billion. In the 116th Congress, the Fair Trade with China Enforcement Act (H.R. 704 and S. 2) and the United States Reciprocal Trade Act (H.R. 764) mention U.S. trade deficits as a reason for the proposed legislation. There is a large and growing difference between the official trade statistics released by the United States and the People's Republic of China. According to the United States, the 2018 bilateral merchandise trade deficit with China was $419.2 billion. According to China, its trade surplus with the United States was $323.3 billion—a $95.9 billion difference. This report examines the differences in the trade data from the two nations in two ways. First, it compares the trade figures using the Harmonized Commodity Description and Coding System (Harmonized System) to discern any patterns in the discrepancies between the U.S. and Chinese data. This comparison reveals that more than 94% of the difference in the value of China's exports to the United States in 2018 was attributable to five types of goods. Those five types of goods, in order of the size of the discrepancy, were electrical machinery, machinery, toys and sporting goods, optical and medical equipment, and footwear. The second approach to examining the differing trade data involves a review of the existing literature on the technical and non-technical sources of the trade data discrepancies. The literature reveals that the leading sources of the discrepancies are differences in the list value of shipments when they leave China and when they enter the United States, and differing attributions of origin and destination of Chinese exports that are transshipped through a third location (such as Hong Kong) before arriving in the United States. In light of the differences in the official bilateral merchandise trade data, the U.S.-China Joint Commission on Commerce and Trade (JCCT) established a statistical working group in 2004. The working group has released two reconciliation studies (in 2009 and 2012) to identify the causes of the statistical discrepancies. The Working Group stated that the adjustments contained in the two studies are not meant to imply errors in the official statistics of either country. This report is updated annually, after the release of official trade data by China and the United States.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers several programs to support small businesses, including venture capital programs to provide \"long-term loans and equity capital to small businesses, especially those with potential for substantial job growth and economic impact\" and loan guaranty programs to encourage lenders to provide loans to small businesses \"that might not otherwise obtain financing on reasonable terms and conditions.\" Historically, one of the justifications presented for funding the SBA's access to capital programs has been that small businesses can be at a disadvantage, compared with other businesses, when trying to obtain sufficient capital and credit. As an economist explained Growing firms need resources, but many small firms may have a hard time obtaining loans because they are young and have little credit history. Lenders may also be reluctant to lend to small firms with innovative products because it might be difficult to collect enough reliable information to correctly estimate the risk for such products. If it's true that the lending process leaves worthy projects unfunded, some suggest that it would be good to fix this \"market failure\" with government programs aimed at improving small businesses' access to credit. Congressional interest in the SBA's access to capital programs has increased in recent years, primarily because assisting small business in accessing capital is viewed as a means to enhance job creation and economic growth. Some have argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small business economic growth and job creation. Economists generally do not view job creation as a justification for providing federal assistance to small businesses. They argue that in the long term such assistance will likely reallocate jobs within the economy, not increase them. In their view, jobs arise primarily from the size of the labor force, which depends largely on population, demographics, and factors that affect the choice of home versus market production (e.g., the entry of women in the workforce). However, economic theory does suggest that increased federal spending may result in additional jobs in the short term. For example, the SBA reported in September 2010 that the $730 million in additional funding provided to the agency by P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), created or retained 785,955 jobs. As will be discussed, the tightening of private-sector lending standards and the disruption of credit markets in 2008 and 2009 led to increased concern in Congress that small businesses might be prevented from accessing sufficient capital to start, continue, or expand their operations—actions that were expected to lead to higher levels of employment. As the SBA indicated in its FY2010 congressional budget justification report Over the last decade, small businesses across this country have been responsible for the majority of new private sector jobs, leaving little doubt that they are a vital engine for the nation's economic growth. However, with the United States facing the most severe economic crisis in more than 70 years, small businesses are confronted with a frozen lending market and limited access to the capital they need to survive and grow at this critical time. Since then credit markets have improved and lending standards have moderated, but congressional concern about the economy and disagreements concerning the best means to enhance job creation and economic growth remain. During the 111 th Congress, several laws were enacted to enhance small business access to capital. For example P.L. 111-5 , provided the SBA an additional $730 million, including $375 million to temporarily subsidize SBA fees and increase the 7(a) loan guaranty program's maximum loan guaranty percentage from 85% on loans of $150,000 or less and 75% on loans exceeding $150,000 to 90% for all regular 7(a) loans. P.L. 111-240 , the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) ($4.0 billion was issued) to encourage community banks with less than $10 billion in assets to increase their lending to small businesses; $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs; numerous changes to the SBA's loan guaranty and contracting programs; funding to continue the fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010; and about $12 billion in tax relief for small businesses (see Table A-1 in the Appendix for a list of its key provisions). P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. According to the SBA, the temporary fee subsidies and 90% maximum loan guaranty for the 7(a) program \"engineered a significant turnaround in SBA lending.... The end result is that the agency helped put more than $42 billion in the hands of small businesses through the Recovery Act and Jobs Act combined.\" During the 112 th Congress, several bills were introduced to enhance small business access to capital through the SBA, including bills to extend the SBA's temporary fee subsidies and increase the 7(a) program's loan guaranty percentage to 90%. Congress did not adopt these legislative efforts. Instead, Congress passed legislation designed to enhance small business contracting opportunities, expand access to the SBA's surety bond guarantee program, amend the SBA's size standard practices, require a review and reassessment of the federal procurement small business goaling program, and expand small business mentor-protégé programs. Congress also adopted the Jumpstart Our Business Startups Act ( P.L. 112-106 ) that established a regulatory structure for startups and small businesses to raise capital through securities offerings using the Internet through crowdfunding (discussed later). During the 113 th Congress, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased the SBA's Small Business Investment Company (SBIC) venture capital program's authorization amount to $4 billion from $3 billion as a means to provide small businesses additional access to venture capital. During the 114 th Congress P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made permanent the SBA's waiving of the SBAExpress loan program's one-time, up-front loan guaranty fee for veterans (and their spouse). The act also increased the 7(a) loan program's FY2015 authorization limit from $18.75 billion to $23.5 billion; and P.L. 114-113 , the Consolidated Appropriations Act, 2016, expanded the projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs; generally limited refinancing under this provision to no more than 50% of the dollars loaned under the 504/CDC program during the previous fiscal year; and increased the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million. The act also increased the 7(a) loan program's authorization limit to $26.5 billion for FY2016. During the 115 th Congress P.L. 115-31 , the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion for FY2017 and P.L. 115-141 , the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion for FY2018. This report addresses a core issue facing the 116 th Congress: What, if any, additional action should the federal government take to enhance small business access to capital? It discusses the role of small business in job creation and retention, provides an assessment of the supply and demand for small business loans, and discusses recently enacted laws designed to enhance small business access to capital by increasing the supply of small business loans, the demand for small business loans, or both. It also examines recent actions concerning the SBA's budget and concludes with a brief overview of three legislative options available to address small business access to capital issues during the 116 th Congress: wait-and-see, enact additional programs, or reduce and consolidate existing programs. Each quarter, the Federal Reserve Board surveys senior loan officers concerning their bank's lending practices. The survey includes a question concerning their bank's credit standards for small business loans: \"Over the past three months, how have your bank's credit standards for approving applications for C&I [commercial and industrial] loans or credit lines—other than those to be used to finance mergers and acquisitions—for small firms (annual sales of less than $50 million) changed?\" The senior loan officers are asked to indicate if their bank's credit standards have \"Tightened considerably,\" \"Tightened somewhat,\" \"Remained basically unchanged,\" \"Eased somewhat,\" or \"Eased considerably.\" Subtracting the percentage of respondents reporting \"Eased somewhat\" and \"Eased considerably\" from the percentage of respondents reporting \"Tightened considerably\" and \"Tightened somewhat\" provides an indication of the market's supply of small business loans. As shown in Figure 1 , senior loan officers reported that they generally tightened small business loan credit standards from 2007 through late 2009. Since 2009, small business credit markets have generally improved, with some tightening in 2016. The survey also includes a question concerning the demand for small business loans: \"Apart from normal seasonal variation, how has demand for C&I loans changed over the past three months for small firms (annual sales of less than $50 million)?\" Senior loan officers are asked to indicate if demand was \"Substantially stronger,\" \"Moderately stronger,\" \"About the same,\" \"Moderately weaker,\" or \"Substantially weaker.\" Subtracting the percentage of respondents reporting \"Moderately weaker\" and \"Substantially weaker\" from the percentage of respondents reporting \"Substantially stronger\" and \"Moderately stronger\" provides an indication of the market's demand for small business loans. As shown in Figure 1 , senior loan officers reported that the demand for small business loans declined somewhat in 2007 and 2008 and declined significantly in 2009. Demand then leveled off (at a relatively reduced level) during 2010, increased somewhat during the first half of 2011, declined somewhat during the latter half of 2011, generally increased in 2012 through 2015, and has varied somewhat—increasing in some quarters and declining in others—since then. The Federal Deposit Insurance Corporation (FDIC) reports bank lending statistics on a quarterly basis drawn from the banks' Consolidated Reports of Condition and Income (Call Report). The FDIC has maintained comparable small business lending data for the second quarter (June 30) of each year since 2002. Figure 2 shows the amount of outstanding small business loans (defined by the FDIC as commercial and industrial loans of $1 million or less) for non-agricultural purposes as of June 30 of each year since 2006. As shown in Figure 2 , the amount of outstanding small business loans for non-agricultural purposes increased at a relatively steady pace from June 30, 2006, to June 30, 2008, declined over the next several years, and has increased since June 30, 2013. Although changes in small business outstanding debt are not necessarily a result of changes in the supply of small business loans, many, including the SBA, view a decline in small business outstanding debt as a signal that small businesses might be experiencing difficulty accessing sufficient capital to enable them to lead job growth. Table 1 shows selected financial statistics for the SBA from FY2005 to FY2018. It provides an overview of the extent of the SBA's various programs to enhance small business access to capital. The first column reports the total face value of non-disaster business loans that were disbursed by the SBA from FY2005 to FY2018. The second column indicates the number of non-disaster business loans approved by the SBA (after full cancellations) from FY2005 to FY2018. Each year, 7% to 10% of the loans approved by the SBA are subsequently canceled for a variety of reasons, typically by the borrower. The third column reports the contract value of bonds guaranteed under the SBA's surety bond guarantee program. A surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract's terms and conditions. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. It is designed to reduce the risk of contracting with small businesses that may not have the credit history or prior experience of larger businesses. The SBA does not issue surety bonds. Instead, it provides and manages surety bond guarantees for qualified small and emerging businesses through its Surety Bond Guarantee (SBG) Program. The SBA reimburses a participating surety (within specified limits) for losses incurred due to a contractor's default on a bond. The fourth column shows the outstanding principal balance for the SBA's 7(a) secondary market guarantee program, which is discussed later in this report. The final column reports the SBA's outstanding principal balance of loans that have not been charged off as of the end of the fiscal year. It provides a measure of the SBA's scope of lending. As shown in Table 1 , the amount of non-disaster small business loans disbursed by the SBA declined in FY2008 and FY2009; increased, but remained below pre-recession levels in FY2010; and has generally exceeded pre-recession levels since FY2011. The decline in the amount of small business loans guaranteed by the SBA during FY2008 and FY2009 was, at least in part, due to the following three interrelated factors: many lending institutions become increasingly reluctant to lend to small businesses, even with an SBA loan guarantee, as loan defaults increased due to the recession, earnings fell, and an increasing number of lending institutions failed; the secondary market for small business loans, as with other secondary markets, began to contract in October 2008, reached its nadir in January 2009, and then began a relatively prolonged recovery. The SBA estimates that about half of the lenders that make SBA guaranteed loans resell them to obtain additional capital to make additional loans; and the demand for small business loans declined as many small business owners (and entrepreneurs considering starting a new small business) became more risk adverse during the recession. In 2009, the number and amount of small business loans guaranteed by the SBA declined sharply early in the year, followed by modest increases during the second and third quarters, and briefly surpassed pre-recession levels in the fourth quarter as small business owners took advantage of ARRA funded fee subsidies for the SBA's 7(a) and 504/CDC loan guaranty programs and an increase in the 7(a) program's maximum loan guaranty percentage to 90%, which were expected to end by the end of the year. The SBA argued that the increase in the number and amount of small business loans it guaranteed during FY2010 was primarily due to fee subsidies and loan enhancements first put in place under ARRA and later extended by law to cover most of the fiscal year. The SBA noted that its average weekly loan volume for FY2010 ($333 million) was 29% higher than its average weekly loan volume for FY2009 ($258 million). Another likely factor contributing to the higher loan volume was a general improvement in the economy as the recession ended (officially in June 2009) and the economic recovery began, albeit slowly in many parts of the nation. The demand for SBA loans increased significantly during the first quarter of FY2011 (October-December 2010), as borrowers took advantage of SBA fee subsidies that were expected to expire at the end of the calendar year. The SBA announced, on January 3, 2011, that it \"approved nearly 22,000 small business loans for $10.47 billion, supporting a total of $12.16 billion in lending\" during the first quarter of FY2011, which \"was the highest volume in a fiscal year's first quarter than at any time in the agency's history.\" After the fee subsidies ended, SBA lending declined during the second quarter of FY2011, and then increased somewhat during the final two quarters of FY2011. As mentioned previously, the amount of non-disaster small business loans disbursed by the SBA has continued at or above pre-recession levels since FY2011. As mentioned previously, several laws were enacted during the 110 th and 111 th Congresses to enhance small business access to capital. The following laws were enacted largely in response to the contraction of financial credit markets which started in 2008, and reached its nadir in early 2009. P.L. 110-343 , the Emergency Economic Stabilization Act of 2008, was designed to enhance the supply of loans to businesses of all sizes. The act authorized the Troubled Asset Relief Program (TARP) to \"restore liquidity and stability to the financial system of the United States\" by purchasing or insuring up to $700 billion in troubled assets from banks and other financial institutions. TARP's purchase authority was later reduced from $700 billion to $475 billion by P.L. 111-203 , the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Department of the Treasury has disbursed $389 billion in TARP funds, including $337 million to purchase SBA 7(a) loan guaranty program securities. The authority to make new TARP commitments expired on October 3, 2010. P.L. 111-5 (ARRA) included several provisions to enhance the supply of loans to small businesses. It authorized the SBA to establish a temporary secondary market guarantee authority to provide a federal guarantee for pools of first lien 504/CDC program loans that are to be sold to third-party investors. The SBA was granted emergency rulemaking authority to issue regulations for the program within 15 days after enactment (by March 4, 2009). After experiencing unanticipated delays in implementing the program due to \"limited staff resources\" and determining how to meet ARRA reporting requirements, the SBA issued regulations for its 504/CDC First Mortgage Loan Pooling program on October 30, 2009, and it became operational in June 2010. The program was scheduled to end on February 16, 2011, or until $3 billion in new pools are created, whichever occurred first. As will be discussed, the Small Business Jobs Act of 2010 extended the program. authorized the SBA to use emergency rulemaking authority to issue regulations within 30 days after enactment (by March 19, 2009), to make below market interest rate direct loans to SBA-designated \"Systemically Important Secondary Market (SISM) Broker-Dealers.\" These broker-dealers would use the loan funds to purchase SBA-guaranteed loans from commercial lenders, assemble them into pools, and sell them to investors in the secondary loan market. The SBA experienced unanticipated delays in implementing the program primarily due to the need to determine \"the extent to which broker-dealers, and perhaps small business lenders, would be required to share in the potential losses associated with extending the guarantee in the 504 loan program.\" The SBA issued regulations to establish the Direct Loan Program for Systemically Important Secondary Market Broker-Dealers on November 19, 2009. provided $255 million for a temporary, two-year small business stabilization program to guarantee loans of $35,000 or less to small businesses for qualified debt consolidation, later named the America's Recovery Capital (ARC) Loan program (the program ceased issuing new loan guarantees on September 30, 2010); $15 million for the SBA's surety bond program, and temporarily increased the maximum bond amount from $2 million to $5 million, and up to $10 million under certain conditions (the higher maximum bond amounts ended on September 30, 2010); $6 million for the SBA's Microloan program's lending program and $24 million for the Microloan program's technical assistance program; and increased the funds (\"leverage\") available to SBA-licensed Small Business Investment Companies (SBICs) to no more than 300% of the company's private capital or $150,000,000, whichever is less. authorized the SBA to guarantee 504/CDC loans used to refinance business expansion projects as long as the existing indebtedness did not exceed 50% of the project cost of the expansion and the borrower met specified requirements. P.L. 111-240 was enacted after the financial credit markets had stabilized. It included several provisions designed to enhance the supply of loans to small businesses. For example, the act authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks to provide small business loans ($4 billion was issued) and a $1.5 billion State Small Business Credit Initiative (SSBCI) to provide funding to participating states with small business capital access programs. extended the SBA's secondary market guarantee authority from two years after the date of ARRA's enactment to two years after the date of the program's first sale of a pool of first lien position 504/CDC loans to a third-party investor (which took place on September 24, 2010). authorized $22.5 million for a temporary, three-year Small Business Intermediary Lending Pilot Program to provide direct loans to intermediaries which provide loans to small business startups, newly established small businesses, and growing small businesses. On August 4, 2011, the SBA announced the first 20 community lenders which were selected to participate in the program. authorized $15 million in additional funding for the SBA's 7(a) loan guaranty program. increased the loan guarantee limits for the SBA's 7(a) program from $2 million to $5 million, and for the 504/CDC program from $1.5 million to $5 million for \"regular\" borrowers, from $2 million to $5 million if the loan proceeds are directed toward one or more specified public policy goals, and from $4 million to $5.5 million for manufacturers. increased the SBA's Microloan program's loan limit for borrowers from $35,000 to $50,000 and for microlender intermediaries after their first year in the program from $3.5 million to $5 million. temporarily increased for one year the SBA 7(a) Express Program's loan limit from $350,000 to $1 million (the temporary increase expired on September 26, 2011). required the SBA to establish an on-line lending platform listing all SBA lenders and information concerning their loan rates. authorized the SBA to temporarily guarantee for two years, under specified circumstances, 504/CDC loans that refinance existing business debt even if the project does not involve the expansion of the business. For additional details concerning provisions in the Small Business Jobs Act of 2010, see Table A-1 in the Appendix . During the 112 th Congress, P.L. 112-106 , the Jumpstart Our Business Startups Act (JOBS Act), established \"a regulatory structure for startups and small businesses to raise capital through securities offerings using the Internet through crowdfunding.\" The JOBS Act's crowdfunding provisions \"were intended to help provide startups and small businesses with capital by making relatively low dollar offerings of securities, featuring relatively low dollar investments by the 'crowd,' less costly.\" On November 16, 2015, the Securities and Exchange Commission (SEC) published a final rule, effective May 16, 2016, to implement the JOBS Act's crowdfunding provisions (e.g., the SEC established limits on the amount of money an issuer can raise and individual investors can invest over a 12-month period under the crowdfunding exemption to the securities laws, imposed disclosure requirements on the issuer's business and securities offering, and created a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions). During the 113 th Congress, P.L. 113-76 , the Consolidated Appropriations Act, 2014, included a provision increasing the annual authorization amount for the SBA's Small Business Investment Company (SBIC) program to $4 billion from $3 billion. The SBIC program provides privately owned and managed SBA-licensed SBICs loans at favorable rates (called leverage), and, in exchange, the SBICs provide equity capital to small businesses in various ways, including by purchasing small business equity securities (e.g., stock, stock options, warrants), making loans to small businesses, purchasing debt securities from small businesses, and providing small businesses, subject to limitations, a guarantee of their monetary obligations to creditors not associated with the SBIC. The SBIC program is designed to stimulate and supplement \"the flow of private equity capital and long term loan funds which small business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply.\" In FY2013, the SBA committed to guarantee $2.15 billion in SBIC small business investments, and SBICs invested another $1.34 billion from private capital, for almost $3.5 billion in financing for 1,068 small businesses. Although the SBA's commitment of $2.15 billion in SBIC leverage in FY2013 was well below the new $4 billion threshold amount, advocates of the higher threshold argued that the increase would enable the program to grow, providing more capital to a larger number of small businesses in the future. Subsequently, the SBA committed to guarantee $2.55 billion in SBIC small business investments in FY2014, $2.55 billion in FY2015, $2.51 billion in FY2016, $1.96 billion in FY2017, and $2.52 billion in FY2018. During the 114 th Congress, P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, increased the supply of 7(a) loans by increasing the program's FY2015 authorization limit of $18.75 billion (on disbursements) to $23.5 billion. The increased authorization amount was necessary to accommodate an unexpected increase in the demand for SBA loans. In addition, P.L. 114-113 , the Consolidated Appropriations Act, 2016, further increased the 7(a) program's authorization limit to $26.5 billion for FY2016. The act also increased the supply of 504/CDC loans by expanding the projects eligible for refinancing under the program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs. The act generally limited the expanded refinancing to no more than 50% of the dollars loaned under the 504/CDC program during the previous fiscal year. The act also increased the supply of SBIC financings by increasing the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million. During the 115 th Congress, P.L. 115-31 , the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion for FY2017 from $26.5 billion in FY2016 and P.L. 115-141 , the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion for FY2018. ARRA provided the SBA $375 million to subsidize fees for the SBA's 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all regular 7(a) loans through September 30, 2010, or when appropriated funding for the subsidies and loan modification was exhausted. The fee subsidies were designed to increase the demand for SBA loans by reducing loan costs. ARRA's funding for the fee subsidies and 90% maximum loan guaranty percentage was about to be exhausted in November 2009, when Congress passed the first of six laws to extend the loan subsidies and 90% maximum loan guaranty percentage: P.L. 111-118 , the Department of Defense Appropriations Act, 2010, provided the SBA $125 million to continue the fee subsides and 90% maximum loan guaranty percentage through February 28, 2010. P.L. 111-144 , the Temporary Extension Act of 2010, provided the SBA $60 million to continue the fee subsides and 90% maximum loan guaranty percentage through March 28, 2010. P.L. 111-150 , an act to extend the Small Business Loan Guarantee Program, and for other purposes, provided the SBA authority to reprogram $40 million in previously appropriated funds to continue the fee subsides and 90% maximum loan guaranty percentage through April 30, 2010. P.L. 111-157 , the Continuing Extension Act of 2010, provided the SBA $80 million to continue the SBA's fee subsides and 90% maximum loan guaranty percentage through May 31, 2010. P.L. 111-240 , the Small Business Jobs Act of 2010, provided $505 million (plus an additional $5 million for administrative expenses) to continue the SBA's fee subsides and 90% maximum loan guaranty percentage from the act's date of enactment (September 27, 2010) through December 31, 2010. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorizes the SBA to use funds provided under the Small Business Jobs Act of 2010 to continue the SBA's fee subsides and 90% maximum loan guaranty percentage through March 4, 2011, or until available funding is exhausted. On January 3, 2011, the SBA announced that funding for the fee subsidies and 90% maximum loan guaranty percentage had been exhausted. ARRA also included 11 tax relief provisions that have the potential to benefit small businesses in a broad range of industries. By reducing costs, it could be argued that providing tax relief for small businesses may lead to increased demand for small business loans because small business owners have additional resources available to invest in their business. The following five ARRA tax provisions provided about $5.7 billion in tax relief and were targeted at small businesses, whereas the other ARRA tax provisions were available to businesses of all sizes: allowed businesses with $15 million or less in average annual gross receipts in the past three years to carry back net operating losses from 2008 for up to five years instead of two years. extended through 2009 the enhanced expensing allowance, which allows businesses to deduct up to $250,000 of the cost of eligible assets placed in service in 2009, within certain limits. increased the exclusion of the gain on the sale of small business stock to 75% (instead of 50%) of any gain realized on the sale of eligible small business stock acquired between February 18, 2009, and December 31, 2010. reduced the recognition period from 10 years to seven years for corporate tax on sale of appreciated assets in 2009 or 2010 by S corporations that once were organized as C corporations. allowed individuals who had an adjusted gross income in 2008 of less than $500,000 and can prove that over half their income came from a small business to base their estimated tax payments for 2009 on 90% of their tax liability for 2008. P.L. 111-240 was designed to increase the demand for SBA loans by providing $505 million (plus an additional $5 million for related administrative expenses) to temporarily subsidize SBA's fees and increase the 7(a) program's maximum loan guaranty percentage to 90%. The act also required the SBA to establish an alternative size standard for the SBA's 7(a) and 504/CDC loan guaranty programs that uses maximum net worth and average net income as an alternative to the use of industry standards. It also established the following interim alternative size standard for both the 7(a) and 504/CDC programs: the business qualifies as small if it does not have a tangible net worth in excess of $15 million and does not have an average net income after federal taxes (excluding any carry-over losses) in excess of $5 million for two full fiscal years before the date of application. These changes were designed to increase the demand for small business loans by increasing the number of small businesses that are eligible for SBA assistance. P.L. 111-240 also provided small businesses with about $12 billion in tax relief. The act raised the exclusion of gains on the sale or exchange of qualified small business stock from the federal income tax to 100%, with the full exclusion applying only to stock acquired the day after the date of enactment through the end of 2010; increased the deduction for qualified start-up expenditures from $5,000 to $10,000 in 2010, and raised the phaseout threshold from $50,000 to $60,000 for 2010; placed limitations on the penalty for failure to disclose reportable transactions based on resulting tax benefits; allowed general business credits of eligible small businesses for 2010 to be carried back five years; exempted general business credits of eligible small businesses in 2010 from the alternative minimum tax; allowed a temporary reduction in the recognition period for built-in gains tax; increased expensing limitations for 2010 and 2011 and allowed certain real property to be treated as Section 179 property; allowed additional first-year depreciation for 50% of the basis of certain qualified property; and removed cellular telephones and similar telecommunications equipment from listed property so their cost can be deducted or depreciated like other business property. As mentioned earlier, P.L. 114-38 authorized and made permanent the Obama Administration's waiver of the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress loan guaranty program beginning on or after October 1, 2015, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a credit subsidy cost for the 7(a) program, in its entirety, that is above zero. The fee waiver is designed to encourage veterans to apply for a small business loan. As mentioned previously, congressional interest in the SBA's access to capital programs has increased in recent years, primarily because assisting small business in accessing capital is viewed as a means to enhance job creation and economic growth. Some have argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They also point to surveys of small business firms conducted by the National Federation of Independent Business (NFIB) which suggest that small business owners consistently place financing issues near the bottom of their most pressing concerns. Instead of increasing federal funding for the SBA, they advocate small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small business and foster increased levels of economic growth and job creation. Some advocates of providing additional resources to the SBA have argued that the federal government should enhance small business access to capital by creating a SBA direct lending program for small businesses. During the 111 th Congress, H.R. 3854 , the Small Business Financing and Investment Act of 2009, was passed by the House on October 29, 2009, by a vote of 389-32. It would have authorized a temporary SBA direct lending program. Also, during the 112 th Congress, H.R. 3007 , the Give Credit to Main Street Act of 2011, introduced on September 21, 2011, and referred to the House Committee on Small Business, would have authorized the SBA to provide direct loans to small businesses that have been in operation as a small business for at least two years prior to its application for a direct loan. The maximum loan amount would have been the lesser of 10% of the firm's annual revenues or $500,000. Also, H.R. 5835 , the Veterans Access to Capital Act of 2012, introduced on May 18, 2012, and referred to the House Committee on Small Business, would have authorized the SBA to provide up to 20% of the annual amount available for guaranteed loans under the 7(a) and 504/CDC loan guaranty programs, respectively, in direct loans to veteran-owned and -controlled small businesses. During the 113 th Congress, H.R. 2451 , the Strengthening Entrepreneurs' Economic Development Act of 2013, introduced on June 20, 2013, and referred to the House Committee on Small Business, would have authorized the SBA to establish a direct lending program for small businesses that have fewer than 20 employees. Under the bill, each loan would be limited to $150,000 and have a term of six years or less. Before issuing a direct loan, the SBA would be required to make the loan available to eligible lenders within 50 miles of the applicant's principal office. If no local lenders agree to originate, underwrite, close, and service the loan within five business days, the SBA would make the loan available to lenders in the Preferred Lender program. If still no lenders agree to originate, underwrite, close, and service the loan, the SBA shall, within 10 business days, consider the application for a direct loan. The SBA has authority to make direct loans, both for disaster relief and for business purposes. The SBA limited the eligibility for direct business loans in 1984, 1994, and 1996 as a means to reduce costs. Until October 1, 1985, the SBA provided direct business loans to qualified small businesses. From October 1, 1985, to September 30, 1994, SBA direct business loan eligibility was limited to qualified small businesses owned by individuals with low income or located in an area of high unemployment, owned by Vietnam-era or disabled veterans, owned by the handicapped or certain organizations employing them, or certified under the minority small business capital ownership development program. Microloan program intermediaries were also eligible. On October 1, 1994, SBA direct loan eligibility was limited to Microloan program intermediaries and to small businesses owned by the handicapped. Funding to support direct loans to the handicapped through the Handicapped Assistance (renamed the Disabled Assistance) Loan program ended in 1996. The last loan issued under the Disabled Assistance Loan program took place in FY1998. The SBA currently offers direct business loans only to Microloan program intermediaries. Advocates for a small business direct lending program have argued that such a program would provide \"rapid access to much-needed capital without having to face the administrative delays posed by the current Small Business Administration lending process.\" Advocates of a temporary SBA direct lending program argued that such a program was necessary during periods of economic difficulty because In prosperous times, small businesses are able to shop around to different lenders to find the best available terms and conditions for a loan. But in times of economic downturns, those same lenders aren't as willing to lend to small businesses. More than ever during these times, it's the government's responsibility to step in to help small businesses access the loans they need to keep their businesses running and workers employed. Opponents of a small business direct lending program argue that the SBA's mission is to augment the private sector by guaranteeing loans, not compete with it by providing direct loans to small businesses. They also argue that these loans hold greater risk than most; otherwise the private sector would accept them. They worry that SBA defaults may increase, resulting in added expense, either to taxpayers in the form of additional appropriations or to other small business borrowers in the form of higher fees, to cover the defaults. They argue that the SBA stopped offering direct loans in 1995, primarily because the subsidy rate was \"10 to 15 times higher than that of our guaranty programs.\" They also assert that providing direct loans to small businesses might invite corruption. They note that the Reconstruction Finance Corporation (RFC), the SBA's predecessor, made direct loans to business and was accused of awarding loans based on the applicant's political connections or personal ties with RFC loan officers. Opponents also argue that the SBA does not have the human, physical, and technical resources to make direct loans. Still others argue that providing additional funding for SBA programs is largely a symbolic gesture because the SBA's guaranteed loan programs account for a relatively small fraction of small business lending. They argue that, in a typical year, no more than 1% of small businesses receive an SBA-guaranteed loan, and those loans account for less than 3% or 4% of the total amount loaned to small businesses. They assert that \"these numbers show that the private banking system finances most loans and that the SBA is therefore largely irrelevant in the capital market.\" As mentioned previously, some have argued that the SBA should be provided additional funding to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate fiscal restraint as the best means to assist small business and foster increased levels of economic growth and job creation. Both of these views have been reflected in recent SBA budget discussions as Congress has focused on ways to reduce the SBA's budget while not compromising the SBA's ability to assist small businesses access capital and assist individuals and businesses of all sizes cope with damages caused by natural disasters. As shown in Table 2 , the SBA's appropriations have varied significantly since FY2005, ranging from a high of $2.360 billion in FY2018 to a low of $571.8 million in FY2007. Much of this volatility has resulted from significant increases in appropriations for disaster assistance in response to major hurricanes; increases in appropriations for business loan credit subsidies following recessions; and significant, temporary increases in appropriations for the SBA's other programs in FY2009 ($724.0 million) and FY2010 ($962.5 million) that were designed to enhance small businesses' access to capital following the Great Recession. The SBA's appropriations are separated into four categories in Table 2 (disaster assistance, disaster assistance supplemental, business loan credit subsidies, and other programs) because the need for disaster assistance is largely beyond congressional control and expenditures for business loan credit subsidies tend to vary with changes in the national economy. As a result, it could be argued that comparisons of SBA appropriations over time can be made more meaningful if those comparisons include appropriations for all four categories of spending. For example, the SBA's appropriation of $2.360 billion in FY2018 was nearly double its appropriation of $1.337 billion in FY2017 and nearly three times its appropriation of $871.0 million in FY2016. However, most of this increase was due to increased supplemental funding for disaster assistance. As shown in Table 2 , the SBA's FY2018 appropriation of $2.360 billion includes $1.659 billion in supplemental funding for disaster assistance, $3.4 million for business loan credit subsidies (for the Microloan program), and $697.4 million for all other SBA programs ($268.5 million for salaries and expenses; $247.1 million for entrepreneurial development programs, such as SCORE, Small Business Development Centers, and Women Business Centers; $152.8 million for administrative expenses related to the SBA's business loan programs; $19.9 million of the Office of Inspector General; and $9.1 million for the Office of Advocacy). Congress approved many changes during the 111 th Congress to enhance small business access to capital. For example, P.L. 111-240 authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to make capital investments in eligible community banks ($4 billion was issued). It authorized a $1.5 billion State Small Business Credit Initiative Program to be administered by the Department of the Treasury. It made numerous changes to SBA programs in an attempt to make them more accessible to small businesses, such as increasing maximum loan amounts, creating an alternative size standard so more businesses can qualify for assistance, waiving some matching requirements, and temporarily expanding refinancing options under the 504/CDC program. It provided funding to extend SBA fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage, passed legislation to increase small business contracting opportunities, and provided about $12 billion in tax relief for small businesses. In addition, Congress approved legislation to temporarily reduce, for calendar years 2011 and 2012, payroll taxes by two percentage points for workers (including self-employed small business owners) who pay into Social Security. The NFIB has long advocated a reduction of federal payroll taxes as a means to reduce small business expenses. During the 112 th Congress, Congress passed legislation to expand access to the SBA's surety bond guarantee program, amend the SBA's size standard practices, require a review of the federal procurement small business goaling program, expand small business mentor-protégé programs, and establish a regulatory structure for startups and small businesses to raise capital through securities offerings using the Internet through crowdfunding. During the 113 th and 114 th Congresses, Congress approved legislation that increased the annual authorization amount for the SBA's SBIC program to $4 billion from $3 billion, authorized and made permanent the Obama Administration's waiver of the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress loan guaranty program, expanded the projects eligible for refinancing under the 504/CDC loan guarantee program, and increased the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million. The question for the 116 th Congress is what, if any, additional action should the federal government take to enhance small business access to capital? Should Congress decide to take further action, three not necessarily mutually exclusive options are readily apparent. First, Congress could adopt a wait-and-see strategy that focuses on congressional oversight of the programmatic changes to the SBA's programs that were enacted during recent Congresses. Advocates of this approach could argue that small business credit markets have generally improved over the past several years, the SBA's lending now exceeds pre-recession levels, and the demand for small business loans is increasing. Therefore, it could be argued that evaluating the impact of the programmatic changes to the SBA's programs that have been enacted over the past several years, especially given that economic conditions appear to be improving, should take place before taking further congressional action to improve small business access to capital. Second, Congress could consider additional changes to the SBA's programs in an effort to enhance small business access to capital, such as considering a direct lending program, providing additional funding for SBA fee subsidies and loan modifications, modifying the Microloan program, or increasing funding for SBA programs. Advocates of this approach could argue that although small business credit markets have generally improved over the past several years, job growth is still a concern. In their view, assisting small businesses access capital would help to create and retain jobs. Third, Congress could consider the repeal of portions of the Small Business Jobs Act of 2010, or other SBA programs. For example, on March 15, 2011, the House Committee on Small Business approved its views and estimates for the concurrent resolution on the budget for FY2012. The committee recommended that the SBA's budget be \"cut nearly $100 million.\" The committee recommended that 14 programs, including several management and technical assistance training programs, be defunded \"because they duplicate existing programs at the SBA or at other agencies\" or \"where there is an absence of any evidence that they will help small businesses create new jobs.\" In its views and estimates letter for the FY2013 budget, the House Committee on Small Business recommended, on March 7, 2012, that funding be reduced for several SBA programs, including funding for 7(j) technical assistance, microloan technical assistance, and the National Women's Business Council. It also recommended that funding be eliminated for Women's Business Centers, Veterans Business Centers, Prime Technical Assistance, HUBZone outreach, the Office of Native American Affairs, and the Office of International Trade. It also recommended that funding be eliminated for several SBA initiatives, including the Drug-Free Workplace, Clusters, and National Veterans Entrepreneurial Training Program. Advocates of this option argue that instead of increasing federal funding for the SBA, the federal government should focus on small business tax reduction and federal fiscal restraint as the best means to assist small business and foster increased levels of economic growth and job creation.", "summary": "The U.S. Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in these programs has increased in recent years, primarily because assisting small business is viewed as a means to enhance economic growth. Some have argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small business economic growth and job creation. Over the past several Congresses, several laws were enacted to assist small businesses, including P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), provided the SBA an additional $730 million, including $375 million to temporarily subsidize SBA fees and increase the 7(a) loan guaranty program's maximum loan guaranty percentage to 90%. P.L. 111-240, the Small Business Jobs Act of 2010, authorized numerous changes to the SBA's loan guaranty and contracting programs; provided $510 million to continue the SBA's fee subsidies and 90% maximum loan guaranty percentage through December 31, 2010; and provided about $12 billion in tax relief for small businesses. P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, continued the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. P.L. 112-106, the Jumpstart Our Business Startups Act, established a regulatory structure for startups and small businesses to raise capital through securities offerings using the Internet through crowdfunding. P.L. 113-76, the Consolidated Appropriations Act, 2014, increased the annual authorization amount for the SBA's Small Business Investment Company (SBIC) venture capital program to $4 billion from $3 billion. P.L. 114-38, the Veterans Entrepreneurship Act of 2015, authorized and made permanent the SBA's practice of waiving the SBAExpress loan program's one-time, up-front loan guaranty fee for veterans and increased the 7(a) loan program's FY2015 authorization limit from $18.75 billion to $23.5 billion. P.L. 114-113, the Consolidated Appropriations Act, 2016, expanded the projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs, increased the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million, and increased the 7(a) loan program's authorization limit to $26.5 billion for FY2016. P.L. 115-31, the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion for FY2017. P.L. 115-141, the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion for FY2018. This report addresses a core issue facing the 116th Congress: What, if any, additional action should the federal government take to enhance small business access to capital? It discusses the role of small business in job creation and retention, then provides an assessment of the supply and demand for small business loans and recently enacted laws designed to enhance small business access to capital by increasing either the supply of small business loans or the demand for small business loans, or both. It also examines recent actions concerning the SBA's budget and concludes with a brief overview of three legislative options available to address small business access to capital issues during the 116th Congress: wait-and-see, enact additional programs, or reduce and consolidate existing programs.", "document_type": "crs"}
{"report": "FY2019 is the fourth year in a row that Congress has enacted a special provision to allow for the issuance of H-2B visas beyond the annual statutory cap of 66,000 in response to high levels of demand for the visa. For FY2016, Congress exempted certain H-2B workers from the statutory cap. For the three past fiscal years, Congress has authorized the Department of Homeland Security (DHS) to make additional H-2B visas available subject to certain conditions. For FY2017 and FY2018, DHS used this authority to make an additional 15,000 H-2B visas available each year. For FY2019, DHS is making an additional 30,000 H-2B visas available. The Immigration and Nationality Act (INA) of 1952, as amended, enumerates categories of aliens, known as nonimmigrants, who are admitted to the United States for a temporary period of time and a specific purpose. Nonimmigrant visa categories are identified by letters and numbers, based on the sections of the INA that established them. Among the major nonimmigrant visa categories is the \"H\" category for temporary workers. Included in this category is the H-2B visa for temporary nonagricultural workers. The H-2B program allows for the temporary admission of foreign workers to the United States to perform nonagricultural labor or services of a temporary nature if unemployed U.S. workers are not available. H-2B workers perform a wide variety of jobs. Top H-2B occupations in recent years have included landscape laborer, groundskeeper, forest worker, housekeeper, and amusement park worker. By regulation, participation in the H-2B program is limited to designated countries, and DHS publishes a list of eligible countries each year. Bringing workers into the United States under the H-2B program is a multiagency process involving the U.S. Department of Labor (DOL), DHS, and the Department of State (DOS). The program itself is administered by DHS's U.S. Citizenship and Immigration Services (USCIS) and DOL's Employment and Training Administration (ETA). DOL's Wage and Hour Division (WHD) also has certain concurrent enforcement responsibilities. The H-2B program currently operates under regulations issued by DHS in 2008 on H-2B requirements, DHS and DOL jointly in 2015 on H-2B employment, and DHS and DOL jointly in 2015 on H-2B wages. For work to qualify as temporary under the H-2B visa, the employer's need for the duties to be performed by the worker must \"end in the near, definable future\" and must be a one-time occurrence, a seasonal need, a peak load need, or an intermittent need. The employer's need for workers generally must be for a period of one year or less, but in the case of a one-time occurrence, can be for up to three years. In order to bring H-2B workers into the United States, an employer must first receive labor certification from DOL. An interim final rule on H-2B employment that was issued jointly by DHS and DOL in April 2015 establishes a new registration requirement as a preliminary step in the labor certification process; once it is implemented, prospective H-2B employers would demonstrate their temporary need to DOL through this registration process before submitting a labor certification application. (As of the date of this report, however, DOL continues to make determinations about temporary need during the processing of labor certification applications.) At the same time that the employer submits the labor certification application to DOL, the employer must submit a job order to the state workforce agency (SWA) serving the area of intended employment. The job order is used to recruit U.S. workers. The employer also must conduct its own recruitment. In order to grant labor certification to an employer, DOL must determine that (1) there are not sufficient U.S. workers who are qualified and available to perform the work, and (2) the employment of foreign workers will not adversely affect the wages and working conditions of U.S. workers who are similarly employed. To prevent an adverse effect on U.S. workers, H-2B employers must offer and provide required wages and benefits to H-2B workers and workers in \"corresponding employment.\" H-2B employers must pay their workers the highest of the prevailing wage rate or the federal, state, or local minimum wage. They must provide a \"three-fourths guarantee\"; that is, they must guarantee to offer workers employment for at least three-fourths of the contract period. H-2B employers also must pay worker visa fees and certain worker transportation costs. H-2B employers are not required to provide health insurance coverage. After receiving labor certification, a prospective H-2B employer can submit an application, known as a petition, to DHS to bring in foreign workers. If the foreign workers are already in the United States, the employer can request a change of status to H-2B status on the petition. In the typical case, however, the workers are abroad. If the petition is approved, they can visit a U.S. embassy or consulate to apply for H-2B nonimmigrant visas from DOS. If the visa applications are approved, the workers are issued visas that they can use to apply for admission to the United States at a port of entry. H-2B workers can be accompanied by eligible spouses and children, who are issued H-4 visas. An alien's total period of stay as an H-2B worker may not exceed three consecutive years. An H-2B alien who has spent three years in the United States may not seek an extension of stay or be readmitted to the United States as an H-2B worker until he or she has been outside the country for at least three months. The INA grants enforcement authority with respect to the H-2B program to DHS, but allows for the delegation of that authority to DOL. DHS has delegated that authority to DOL, and now DOL's WHD has responsibility for enforcing compliance with the conditions of an H‐2B petition and temporary labor certification. As part of the labor certification process, prospective H-2B employers must accurately indicate the starting and ending dates of their period of need for H-2B workers. According to the supplementary information to the 2015 DHS-DOL interim final rule on H-2B employment: \"An application with an accurate date of need will be more likely to attract qualified U.S. workers to fill those open positions, especially when the employer conducts recruitment closer to the actual date of need.\" If within a season an employer has more than one date of need for workers to perform the same job, the employer must file a separate labor certification application for each date of need. The employer is not allowed to stagger the entry of H-2B workers based on one date of need. There is an exception to this prohibition on the staggered entry of H-2B workers, however, that applies to employers in the seafood industry. First enacted as part of the Consolidated Appropriations Act, 2014, and subsequently incorporated into the 2015 DHS-DOL interim final rule on H-2B employment, this provision permits an employer with an approved H-2B petition to bring in the H-2B workers under that petition any time during the 120 days beginning on the employer's starting date of need. In order to bring in the workers between day 90 and day 120, though, the employer must conduct additional U.S. worker recruitment. This provision has been reenacted in DOL appropriations acts for each year from FY2015 through FY2019. The H-2B program is subject to an annual statutory numerical limit. Under the INA, as amended by the Immigration Act of 1990, the total number of aliens who may be issued H-2B visas or otherwise provided with H-2B nonimmigrant status in any fiscal year may not exceed 66,000. Also, since FY2006 there has been a cap of 33,000 on the number of aliens subject to H-2B numerical limits who may enter the United States on an H-2B visa or be granted H-2B status during the first six months of a fiscal year. This INA amendment, enacted as part of the REAL ID Act of 2005, effectively divided the annual H-2B cap of 66,000 into two semiannual caps of 33,000, respectively covering work in the first and second halves of the fiscal year. Certain categories of H-2B workers are exempt from the cap, including the following: current H-2B workers seeking an extension of stay, change of employer, or change in the terms of employment; H-2B workers previously counted toward the cap in the same fiscal year; fish roe processors, fish roe technicians, and/or supervisors of fish roe processing; and H-2B workers performing labor in the U.S. territories of the Commonwealth of the Northern Mariana Islands (CNMI) and/or Guam until December 31, 2029. As noted, spouses and children who are accompanying H-2B workers are issued H-4 visas and, as such, are not counted against the H-2B cap. Legislation has been regularly introduced in Congress concerning the H-2B cap. Several measures have been enacted since 2005 to provide for the issuance of H-2B visas, or the granting of H-2B status, beyond the statutory cap. The enacted provisions have been of two main types. The INA was amended during the 109 th Congress to add a provision establishing a temporary exemption from the H-2B statutory cap for certain H-2B returning workers. The provision, initially in effect for FY2005 and FY2006, exempted from the cap H-2B returning workers who had been counted against the cap in any one of the three prior fiscal years. This H-2B returning worker provision was subsequently extended for FY2007, and expired at the end of that fiscal year. An H-2B returning worker exemption of the same type was reinstated for FY2016. It provided that an H-2B returning worker who had been counted against the statutory cap in FY2013, FY2014, or FY2015 would not be counted again in FY2016. Multiple bills were introduced in the 115 th Congress to enact temporary or permanent H-2B returning worker exemptions from the statutory cap. At least one H-2B returning worker bill has been introduced in the 116 th Congress as of the date of this report. For FY2017 and FY2018, a different type of H-2B cap-related provision was enacted by the 115 th Congress. For each of these years, provisions in year-end omnibus appropriations laws authorized DHS to make additional H-2B visas available beyond the statutory cap after consultation with DOL and \"upon the determination that the needs of American businesses cannot be satisfied\" with available U.S. workers. Under these provisions, the number of additional aliens who could receive H-2B visas each year was limited to \"not more than the highest number of H–2B nonimmigrants who participated in the H–2B returning worker program in any fiscal year in which returning workers were exempt from such numerical limitation.\" The FY2019 Consolidated Appropriations Act includes a provision of the same type for FY2019. Using the same language as the FY2017 and FY2018 provisions, the FY2019 provision authorizes DHS, after consultation with DOL and \"upon the determination that the needs of American businesses cannot be satisfied\" with available U.S. workers, to make additional H-2B visas available for FY2019 up to a maximum of \"the highest number of H–2B nonimmigrants who participated in the H–2B returning worker program in any fiscal year in which returning workers were exempt from such numerical limitation.\" As discussed below, the DHS-DOL rule implementing this provision limits the additional visas to H-2B returning workers. In July 2017, DHS and DOL jointly published a final rule to implement the FY2017 provision. The rule temporarily amended DHS regulations on the H-2B visa to state that for FY2017, DHS \"has authorized up to an additional 15,000 aliens who may receive H–2B nonimmigrant visas.\" In the supplementary information to the rule, DHS explained that the statutory provision applied only to H-2B workers entering the United States on visas and not to aliens in the United States who were seeking a change of status to H-2B status. The statutory definition of the maximum authorized number (i.e., \"the highest number of H–2B nonimmigrants who participated in the H–2B returning worker program in any fiscal year\") can be interpreted in different ways, as DHS acknowledged in the supplementary information to the rule. However, the agency determined that 64,716 was the most appropriate maximum number of additional H-2B visas authorized under the special FY2017 provision, this being \"the number of beneficiaries covered by H–2B returning worker petitions that were approved for FY 2007.\" The supplementary information to the rule included the following explanation for limiting the FY2017 numerical increase to 15,000: Most recently, in FY 2016, 18,090 returning workers were approved for H–2B petitions, despite Congress having reauthorized the returning worker program with more than three-quarters of the fiscal year remaining. Of those 18,090 workers authorized for admission, 13,382 were admitted into the United States or otherwise acquired H–2B status.... [T]he Secretary, in consideration of the statute's reference to returning workers, determined that it would be appropriate to use these recent figures as a basis for the maximum numerical limitation under section 543. This rule therefore authorizes up to 15,000 additional H–2B visas (rounded up from 13,382) for FY 2017. In addition, in implementing the statutory provision, DHS decided to limit eligibility for the additional H-2B workers to certain U.S. businesses. Under the FY2017 rule, the prospective H-2B employer must submit to DHS, along with the H-2B petition, a new attestation form evidencing that without the ability to employ all of the H–2B workers requested on the petition ... its business is likely to suffer irreparable harm (that is, permanent and severe financial loss). In May 2018, DHS and DOL jointly published a final rule to implement the FY2018 H-2B cap-related provision. The FY2018 rule, which is similar to the FY2017 rule, temporarily amended DHS H-2B regulations to state that for FY2018, DHS had authorized the issuance of up to 15,000 additional H–2B visas. In supplementary information to the FY2018 rule, DHS explained its decision to authorize up to 15,000 additional visas despite the fact that all 15,000 additional visas authorized in FY2017 were not used. Out of a maximum of 15,000 supplemental H–2B visas for FY 2017, a total of 12,294 beneficiaries were approved for H–2B classification.... [T]he Secretary has determined that it is appropriate to authorize 15,000 additional visas again, as employers will have a longer period in which to submit their petitions due to the earlier publication date of this rule, thereby allowing for the possibility of more petitions being filed this fiscal year than in FY 2017. The FY2018 rule also included the same language as the FY2017 rule requiring an employer petitioning for supplemental visas to submit an attestation along with the H-2B petition evidencing that without the ability to employ all the requested H–2B workers the employer's business would likely suffer irreparable harm. In May 2019, DHS and DOL jointly published a final rule to implement the FY2019 provision. The FY2019 rule temporarily amends DHS H-2B regulations to state that for FY2019, DHS has authorized the issuance of up to 30,000 additional H–2B visas. As it did in the supplementary information to the FY2017 and FY2018 rules, DHS clarifies in the supplementary information to the FY2019 rule that the FY2019 provision only authorizes DHS to increase the number of H-2B visas; it does not cover individuals in the United States who change to H-2B status. As a result, DHS states that the supplemental cap is limited to workers who obtain visas abroad and then seek admission to the United States. The supplementary information to the FY2019 rule, consistent with the supplementary information to the FY2017 and FY2018 rules, indicates that the most appropriate maximum number of additional H-2B visas authorized under the statutory provision is 64,716. DHS explains its decision to allow 30,000 supplemental visas as follows: In setting the number of additional H–2B visas to be made available during FY 2019, DHS considered this number [i.e., 64,716], overall indications of increased need, and the time remaining in FY 2019, and determined that it would be appropriate to limit the supplemental cap to approximately half of the highest number for returning workers, or up to 30,000. Like its FY2017 and FY2018 predecessors, the FY2019 rule requires an employer petitioning for supplemental visas to submit an attestation along with the H-2B petition evidencing that without the ability to employ all the requested H–2B workers the employer's business would likely suffer irreparable harm. In addition, the FY2019 rule imposes a limitation not applicable under the FY2017 and FY2018 rules. Under the FY2019 rule, an employer may request supplemental visas only for H-2B workers \"who have been issued an H–2B visa or otherwise granted H–2B status in Fiscal Years 2016, 2017, or 2018.\" DHS offers the following rationale for limiting the additional visas to H-2B returning workers: Such workers (i.e., those who recently participated in the H–2B program) have previously obtained H– 2B visas and therefore been vetted by DOS, would have departed the United States after their authorized period of stay as generally required by the terms of their nonimmigrant admission, and therefore may obtain their new visas through DOS and begin work more expeditiously. The supplementary information to the rule highlights the importance, in particular, of returning workers' proven \"willingness to return home after they have completed their temporary labor or services or their period of authorized stay.\" It states: The returning workers condition therefore provides a basis to believe that H–2B workers under this cap increase will likely return home again after another temporary stay in the United States. That same basis does not exist for non-returning workers, not all of whom have a track record of returning home. Although the returning worker requirement limits the flexibility of employers, the requirement provides an important safeguard, which DHS deems paramount. USCIS is responsible for implementing numerical limits on temporary worker visas (including the H-2B visa), which it does at the petition receipt stage. Under DHS regulations: When calculating the numerical limitations ... USCIS will make numbers available to petitions in the order in which the petitions are filed. USCIS will make projections of the number of petitions necessary to achieve the numerical limit of approvals, taking into account historical data related to approvals, denials, revocations, and other relevant factors. USCIS will monitor the number of petitions (including the number of beneficiaries requested when necessary) received and will notify the public of the date that USCIS has received the necessary number of petitions (the \"final receipt date\").... If the final receipt date is any of the first five business days on which petitions subject to the applicable numerical limit may be received (i.e., if the numerical limit is reached on any one of the first five business days that filings can be made), USCIS will randomly apply all of the numbers among the petitions received on any of those five business days. In one recent fiscal year, the final receipt date announced by USCIS ended up being too early. For FY2015, USCIS announced on April 2, 2015, that March 26, 2015, was the final receipt date for new H-2B petitions. The agency had accepted about 3,900 H-2B petitions for FY2015 through March 26, 2015, which it believed was sufficient to reach the annual 66,000 cap. In early June 2015, however, USCIS announced that it would reopen the H-2B cap for the second half of FY2015 and accept additional petitions for new H-2B workers. It offered the following public explanation: USCIS continues to work in collaboration with DOS to monitor the issuance of H-2B visas and has determined that as of June 5, 2015, DOS received fewer than the expected number of requests for H-2B visas. A recent analysis of DOS H-2B visa issuance and USCIS petition data reveals that the number of actual H-2B visas issued by DOS is substantially less than the number of H-2B beneficiaries seeking consular notification listed on cap-subject H-2B petitions approved by USCIS. In light of this new information, USCIS has determined that there are still available H-2B visa numbers remaining for the second half of the FY15 cap. Following a brief reopening, USCIS announced that June 11, 2015, was the final receipt date for new H-2B worker petitions for FY2015. Until FY2018, the final receipt date for H-2B petitions had never fallen within the first five days of filing and, thus, the random selection process (lottery) described in the regulatory provision in the preceding section had never been required. As described below, that changed with petition filings by employers seeking to hire H-2B workers for the second half of FY2018, which began on April 1, 2018. DOL was also impacted by the high level of employer demand for H-2B workers for the second half of FY2018 since an employer must receive labor certification from DOL before filing an H-2B petition. In accordance with H-2B regulations, January 1, 2018, was the first date that employers could submit H-2B temporary labor certifications to DOL requesting a work start date of April 1, 2018. On January 1, 2018, DOL received about 4,498 applications requesting an April 1, 2018, start date; those applications covered 81,008 workers. In response, DOL announced a process change. It indicated in a Federal Register notice that it would not begin releasing certified H–2B applications, which employers need in order to petition USCIS for H-2B workers (see \" H-2B Nonagricultural Worker Visa \"), until February 20, 2018, and on that date, it would issue such certified applications in order of receipt. DOL offered the following explanation for adopting this procedure: This process change will allow employers who filed promptly on January 1, 2018, sufficient time to meet regulatory requirements, including the recruitment and hiring of qualified and available U.S. workers, thus preserving the sequential order of filing that took place on January 1, 2018, to the extent possible. On March 1, 2018, USCIS announced that in the first five business days of accepting H-2B petitions for the second half of FY2018, it had received petitions requesting about 47,000 H-2B workers subject to the statutory cap. It further reported that it had conducted a lottery on February 28, 2018, to randomly select a sufficient number of these petitions to meet the statutory cap. As discussed, on May 31, 2018, USCIS published a final rule authorizing the issuance of up to 15,000 additional H–2B visas for FY2018. In the first five business days of accepting petitions under this supplemental cap, USCIS received petitions for more beneficiaries than the number of H-2B visas available. As a result, it conducted a second FY2018 H-2B lottery on June 7, 2018, to randomly select a sufficient number of petitions to meet the supplemental cap. Employer demand for H-2B visas and associated temporary labor certifications for the second half of FY2019 reached new heights. January 1, 2019, was the first day that employers could file H-2B labor certification applications for the second half of FY2019. On January 2, 2019, DOL announced that due to high demand its iCERT online application filing system had \"experienced a system disruption\" on January 1, 2019, that prevented some employers from submitting their H-2B certification applications: \"Within the first five minutes of opening the semi-annual H-2B certification process on January 1, 2019, the U.S. Department of Labor iCERT system had an unprecedented demand for H-2B certifications with more than 97,800 workers requested in pending applications for the 33,000 available visas.\" When the system re-opened on January 7, 2019, it \"handled the submission of approximately 4,749 H-2B applications covering more than 87,900 workers positions for an April 1, 2019, start date of work within the first one hour of operation.\" This experience led DOL to announce additional process changes for FY2020, as described below. On February 19, 2019, the first day of accepting H-2B petitions for the second half of FY2019, USCIS announced that it had received petitions for more H-2B workers than there were remaining H-2B numbers under the FY2019 cap. On February 21, 2019, USCIS conducted a lottery to randomly select a sufficient number of petitions to meet the cap. In February 2019, in light of its experience with H-2B submissions in January 2019 and the unanticipated \"burdens\" placed on \"its electronic filing system, network infrastructure, and staff resources,\" DOL announced new H-2B temporary labor certification application processing changes for FY2020. It indicated that beginning with H-2B certification applications for the first half of FY2020, it would randomly order and assign for processing all applications submitted within designated groups. The first group would consist of applications requesting the earliest start date of work (e.g., October 1, 2019, for the first half of FY2020) and filed during the first three calendar days of the filing period (which begins on July 3, 2019, for the first half of FY2020). DOL maintains that this new process \"balances employers' interest in utilizing the H-2B program with OFLC's [DOL's Office of Foreign Labor Certification's] interest in ensuring that access to its filing system is equitable and occurs with no user disruption.\" DOL is seeking comments on these changes and plans for the new procedures to take effect on July 3, 2019. In any year, most, but not all, foreign nationals who obtain H-2B status acquire that status through admission to the United States on H-2B visas. Those who obtain H-2B status but are not issued visas include H-2B workers who are admitted to the United States without visas (mostly Canadians) and individuals who change to H-2B status while in the United States. USCIS data are available on the latter group. These data show that between FY2009 and FY2017, the number of individuals who were approved for a change of status to H-2B status ranged from about 110 (in FY2017) to about 470 (in FY2010). Figure 1 provides data on H-2B visa issuances from FY1992 through FY2018. These data offer one way to measure the growth of the H-2B program over the years. As explained above, the visa application and issuance process occurs after DOL has granted labor certification and DHS has approved the visa petition. As illustrated in Figure 1 , the number of H-2B visas issued generally increased from FY1992 until FY2007, when H-2B visa issuances reached a highpoint of 129,547 (see the Appendix for yearly visa issuance data). H-2B visa issuances fell after FY2007 with the start of the economic recession, but, as shown in Figure 1 , they have generally been increasing since FY2009. In FY2005-FY2007 and FY2016-FY2018, as discussed, temporary provisions established exceptions to the statutory annual cap of 66,000. In some other years in which visa issuances surpassed 66,000, it seems reasonable to assume that the H-2B cap was exceeded given the magnitude of the numbers. With employer demand for H-2B visas exceeding supply, H-2B admissions and the statutory cap are once again receiving attention from policymakers. While previous Congresses considered broad immigration reform bills that included proposals for new temporary worker programs to address any perceived shortfalls in the supply of foreign workers, any legislative efforts to address the numerical limitations on nonagricultural guest workers in the near term seem likely to be focused on the existing H-2B program.", "summary": "The Immigration and Nationality Act (INA) of 1952, as amended, enumerates categories of foreign nationals, known as nonimmigrants, who are admitted to the United States for a temporary period of time and a specific purpose. One of these nonimmigrant visa categories—known as the H-2B visa—is for temporary nonagricultural workers. The H-2B visa allows for the temporary admission of foreign workers to the United States to perform nonagricultural labor or services of a temporary nature if unemployed U.S. workers are not available. Common H-2B occupations include landscape laborer, housekeeper, and amusement park worker. The H-2B program is administered by the U.S. Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS) and the U.S. Department of Labor's (DOL's) Employment and Training Administration. DOL's Wage and Hour Division also has certain concurrent enforcement responsibilities. The H-2B program currently operates under regulations issued by DHS in 2008 on H-2B requirements, by DHS and DOL jointly in 2015 on H-2B employment, and by DHS and DOL jointly in 2015 on H-2B wages. Bringing workers into the United States under the H-2B program is a multiagency process involving DOL, DHS, and the Department of State (DOS). A prospective H-2B employer must apply to DOL for labor certification. Approval of a labor certification application reflects a finding by DOL that there are not sufficient U.S. workers who are qualified and available to perform the work and that the employment of foreign workers will not adversely affect the wages and working conditions of U.S. workers who are similarly employed. If granted labor certification, an employer can file a petition with DHS to bring in the approved number of H-2B workers. If the petition is approved, a foreign worker overseas who the employer wants to employ can go to a U.S. embassy or consulate to apply for an H-2B nonimmigrant visa from DOS. If the visa application is approved, the worker is issued a visa that he or she can use to apply for admission to the United States at a port of entry. H-2B workers can be accompanied by eligible spouses and children. By law, the H-2B visa is subject to an annual numerical cap. Under the INA, the total number of individuals who may be issued H-2B visas or otherwise provided with H-2B nonimmigrant status in any fiscal year may not exceed 66,000. USCIS is responsible for implementing the H-2B cap, which it does at the petition receipt stage. Spouses and children accompanying H-2B workers are not counted against the H-2B cap. In addition, certain categories of H-2B workers are exempt from the cap. Among these categories are current H-2B workers who are seeking an extension of stay, change of employer, or change in the terms of their employment. Employer demand for H-2B workers has varied over the years. In recent years, demand has exceeded supply, and special provisions have been enacted to make additional H-2B visas available. For FY2016, a temporary statutory provision exempted certain H-2B workers from the cap. It applied to H-2B workers who had been counted against the cap in any one of the three prior fiscal years and would be returning as H-2B workers in FY2016. For FY2017, FY2018, and FY2019, a different type of H-2B cap-related provision authorized DHS to issue additional H-2B visas (above the cap) subject to specified conditions.", "document_type": "crs"}
{"report": "Between 1969 and 1999, almost 3,500 people died as a result of political violence in Northern Ireland, which is a part of the United Kingdom (UK). The conflict, which has its origins in the 1921 division of Ireland and is often referred to as \"the Troubles,\" has reflected a struggle between different national, cultural, and religious identities. Protestants in Northern Ireland (48%) largely define themselves as British and support continued incorporation in the UK ( unionists ). Catholics in Northern Ireland (45%) consider themselves Irish, and many Catholics desire a united Ireland ( nationalists ). More militant unionists are often termed loyalists , while more militant nationalists are referred to as republicans ; in the past, loyalists and republicans have been willing to use force to achieve their goals. The latest version of the Troubles was sparked in late 1968, when a civil rights movement was launched in Northern Ireland mostly by Catholics, who had long faced discrimination in areas such as electoral rights, housing, and employment. This civil rights movement was met with violence by some unionists, loyalists, and the police, which in turn prompted armed action by nationalists and republicans. Increasing chaos and escalating violence led the UK government to deploy the British Army on the streets of Northern Ireland in 1969 and to impose direct rule from London in 1972 (between 1920 and 1972, Northern Ireland had its own regional government at Stormont, outside Belfast). For years, the British and Irish governments sought to facilitate a negotiated political settlement to the conflict in Northern Ireland. After many ups and downs, the two governments and the Northern Ireland political parties participating in the peace talks announced an agreement on April 10, 1998. This accord became known as the Good Friday Agreement (for the day on which it was concluded); it is also known as the Belfast Agreement. At the core of the Good Friday Agreement is the \"consent principle\"—that is, a change in Northern Ireland's status can come about only with the consent of the majority of its people (as well as with the consent of a majority in Ireland). While the agreement acknowledged that a substantial section of the population in Northern Ireland and a majority on the island desired a united Ireland, it recognized that the majority of people in Northern Ireland wished to remain part of the UK. If the preferences of these majorities were to change, the agreement asserted that both the British and Irish governments would have a binding obligation to bring about the wish of the people; thus, the agreement included provisions for future polls to be held in Northern Ireland on its constitutional status should events warrant. The Good Friday Agreement set out a framework for devolved government—the transfer of specified powers over local governance from London to Belfast—and called for establishing a Northern Ireland Assembly and Executive Committee in which unionist and nationalist parties would share power. To ensure that neither unionists nor nationalists could dominate the Assembly, the agreement specified that \"key decisions\" must receive cross-community support. The Executive Committee would be composed of a first minister, deputy first minister, and other ministers with departmental responsibilities (e.g., health, education, employment). In addition, the Good Friday Agreement contained provisions on several issues viewed as central to the peace process: decommissioning (disarmament) of paramilitary weapons; policing; human rights; UK security normalization (demilitarization); and the status of prisoners. Negotiations on many of these areas had been extremely contentious. Experts assert that the final agreed text thus reflected some degree of \"constructive ambiguity\" on such issues. Finally, the Good Friday Agreement created new \"North-South\" and \"East-West\" institutions. A North-South Ministerial Council was established to allow leaders in the northern and southern parts of the island of Ireland to consult and cooperate on cross-border issues. A British-Irish Council also was formed, composed of representatives of the two governments and the devolved administrations of Northern Ireland, Scotland, Wales, the Channel Islands, and the Isle of Man to discuss matters of regional interest. Voters in Northern Ireland and the Republic of Ireland approved the Good Friday Agreement in separate referendums on May 22, 1998. Elections to the new Northern Ireland Assembly, which had 108 seats at that time, took place on June 25, 1998. The two biggest and mainstream unionist and nationalist parties at the time—the Ulster Unionist Party (UUP) and the Social Democratic and Labour Party (SDLP)—won 28 and 24 seats respectively. The harder-line Democratic Unionist Party (DUP), despite its continued opposition to many parts of the Good Friday Agreement, won 20 seats; Sinn Fein, the associated political party of the Irish Republican Army (IRA), won 18; and a number of smaller parties claimed the rest of the Assembly seats. Despite a much-improved security situation since the signing of the Good Friday Agreement in 1998, full implementation has been difficult. For years, decommissioning and police reforms were key sticking points. Sporadic violence from dissident republican and loyalist paramilitary groups that refused to accept the peace process and sectarian strife between Protestants and Catholics also helped to feed ongoing mistrust between the unionist and nationalist communities. Although Assembly elections were held in June 1998, devolution of power from London to Belfast did not follow promptly because of unionist concerns about decommissioning, or the surrender of paramilitary weapons. The text of the agreement states \"those who hold office should use only democratic, non-violent means, and those who do not should be excluded or removed from office.\" Unionists argued, however, that Sinn Fein could not assume its ministerial posts on the Executive Committee until the IRA had surrendered at least some of its weapons. Sinn Fein countered that the Good Friday Agreement did not specify a start date for decommissioning. The IRA had been observing a cease-fire since 1997, but it viewed decommissioning as tantamount to surrender and had long resisted such calls. In the fall of 1999, former U.S. Senator George Mitchell (who had chaired the peace talks) led a review of the Good Friday Agreement's implementation. This review succeeded in getting unionists to drop their precondition that the IRA had to decommission first, before Sinn Fein representatives could assume their ministerial posts. After 27 years of direct rule from London, authority over local affairs was transferred to the Northern Ireland Assembly and Executive on December 1, 1999. David Trimble, the leader of the UUP at the time, was elected First Minister; Seamus Mallon of the SDLP was elected Deputy First Minister. On February 11, 2000, however, London suspended Northern Ireland's devolved government because First Minister Trimble was poised to resign to protest the continued absence of IRA decommissioning. British officials feared that Trimble would have been replaced as UUP party leader by someone less supportive of, if not opposed to, the peace agreement. After the IRA pledged to initiate a process to put its arms \"beyond use,\" Northern Ireland's power-sharing institutions were reinstated in June 2000. For the next 12 months, unionists remained frustrated by the ongoing lack of actual IRA decommissioning. As a result, Trimble resigned as First Minister on July 1, 2001. Negotiations led by the British and Irish governments to restore the devolved government proved difficult. Finally, in late October 2001, the IRA announced that it had put a quantity of arms, ammunition, and explosives \"beyond use\" to \"save the peace process.\" The UUP agreed to rejoin the Executive, and the Assembly reconvened in November 2001. Trimble was reelected First Minister, and Mark Durkan, the new leader of the SDLP, was elected Deputy First Minister. In April 2002, the IRA carried out a second act of decommissioning. Still, unionists continued to worry about the IRA's long-term commitment to the peace process. In early October 2002, police raided Sinn Fein's Assembly offices and arrested four officials as part of an investigation into a suspected IRA spy ring. Both the UUP and the DUP threatened to withdraw from the government unless Sinn Fein was expelled. With the political process in turmoil, London once again suspended the devolved government and reinstated direct rule on October 14, 2002. Despite the suspension of the devolved government, Assembly elections took place in November 2003. The elections produced a significant shift in the balance of power in Northern Ireland politics in favor of perceived hard-liners on both sides of the conflict. The DUP—led by the Reverend Ian Paisley—overtook the UUP as the dominant unionist party. Sinn Fein surpassed the more moderate SDLP to become the largest nationalist party. Immediately after the elections, the DUP asserted that it would not enter into government with Sinn Fein until the IRA disarmed and disbanded; the DUP also refused to talk directly to Sinn Fein. For much of 2004, negotiations to restore the devolved government continued but remained stalemated. Talks were further complicated by a December 2004 bank robbery in Belfast, which police believed was carried out by the IRA, and the January 2005 murder of a Belfast man, Robert McCartney, during a bar brawl involving IRA members. These incidents increased pressure on the IRA and Sinn Fein to address the additional issue of IRA criminality. In April 2005, Sinn Fein leader Gerry Adams effectively called on the IRA to abandon violence and pursue politics as an \"alternative\" to \"armed struggle.\" In July 2005, the IRA ordered an end to its armed campaign. It instructed all members to pursue objectives through \"exclusively peaceful means\" and to \"not engage in any other activities whatsoever.\" All IRA units were ordered to \"dump arms.\" Although many analysts asserted that the IRA's statement was the least ambiguous one ever, unionists were wary, noting that it did not explicitly address the issue of IRA criminality or whether the IRA would disband. The DUP and other unionists also wanted Sinn Fein to support Northern Ireland's new police service. In September 2005, Northern Ireland's Independent International Commission on Decommissioning (IICD) announced that the IRA had put all of its arms beyond use, asserting that the IRA weaponry dismantled or made inoperable matched estimates provided by the security forces. With no real progress on restoring Northern Ireland's devolved government, then-UK Prime Minister Tony Blair and then-Irish Prime Minister Bertie Ahern called an all-party meeting in Scotland in October 2006. Blair and Ahern put forth a road map, known as the St. Andrews Agreement, intended to break the political stalemate. It called for negotiations between November 2006 and March 2007 on forming a new devolved government; during this time, the DUP would agree to share power with Sinn Fein and Sinn Fein would agree to support the police service and join the Policing Board. In January 2007, Sinn Fein members voted to support Northern Ireland's police and the criminal justice system in the context of the reestablishment of the political institutions. Many experts viewed Sinn Fein's resolution as historic, given the IRA's traditional view of the police as a legitimate target. On March 26, 2007, Paisley and Adams met for the first time ever and announced a deal to form a power-sharing government on May 8, 2007. Observers contended that the image of Paisley and Adams sitting at the same table was unprecedented, as were the statements of both leaders pledging to work toward a better future for \"all\" the people of Northern Ireland. On May 8, 2007, Paisley and Sinn Fein's chief negotiator, Martin McGuinness, were sworn in as First Minister and Deputy First Minister, respectively, and the power-sharing Assembly and Executive began work. Many experts believed that unlike past efforts, this deal would stick, given that it was reached by the DUP and Sinn Fein, viewed as the two most polarized forces in Northern Ireland politics. At the same time, tensions continued to persist within the devolved government and between the unionist and nationalist communities. At the time of the Good Friday Agreement's signing, the parties had been unable to reach an accord on the devolution of the sensitive matters of policing, prisons, and the criminal justice system. Consequently, the parties agreed to postpone the devolution of policing and justice powers until an undetermined point in the future. The 2006 St. Andrews Agreement called for the devolution of policing and justice powers by May 2008, but the DUP and Sinn Fein remained at odds over this timeline. The DUP maintained that May 2008 was merely an aspirational date to which it was not committed. In July 2008, the lack of progress on devolving police and justice powers from London to Belfast prompted Sinn Fein to block the regular meetings of the Executive Committee, essentially bringing the formal work of the Assembly to a standstill. Executive Committee meetings resumed in late November 2008 following a DUP-Sinn Fein agreement on a road map for devolving authority for policing and justice affairs. As part of the road map, the DUP and Sinn Fein agreed that a Northern Ireland Justice Department would be established, as well as an independent attorney general for Northern Ireland. In addition, the parties agreed on a system for choosing a justice minister. Although Executive Committee ministerial portfolios are normally allocated based on party strength, the two sides asserted that given the sensitive nature of this position, the new justice minister would be elected by a cross-community vote in the Assembly. Nevertheless, progress on transferring police and justice powers to the devolved government remained slow. Nationalists increasingly warned that the failure to do so could lead to renewed political instability. In late January 2010, then-British Prime Minister Gordon Brown and then-Irish Prime Minister Brian Cowen convened a summit with the parties to try to hammer out a deal and set a date for the devolution of authority for policing and justice affairs. On February 4, 2010, the DUP and Sinn Fein announced that they had reached the Hillsborough Agreement, setting April 12, 2010, as the date for the devolution of policing and justice authority from London to Belfast. As part of the deal, the Hillsborough Agreement also established a timeline for developing a new mechanism to address how contentious sectarian parades in the region were managed. On March 9, 2010, the Northern Ireland Assembly approved the Hillsborough Agreement. On April 12, as agreed and for the first time in 38 years, London transferred power over policing and justice affairs to Belfast. That same day, David Ford, of the smaller, cross-community Alliance Party, was elected as Northern Ireland's new Justice Minister. Police reforms have long been recognized as a key element in achieving a comprehensive peace in Northern Ireland. The Royal Ulster Constabulary (RUC)—Northern Ireland's former, 92% Protestant police force—was long viewed by Catholics as an enforcer of Protestant domination. Human rights organizations accused the RUC of brutality and collusion with loyalist paramilitary groups. Defenders of the RUC pointed to its tradition of loyalty and discipline and its record in fighting terrorism. The Good Friday Agreement called for an independent commission to make recommendations to help \"ensure policing arrangements, including composition, recruitment, training, culture, ethos and symbols, are such that ... Northern Ireland has a police service that can enjoy widespread support from ... the community as a whole.\" In September 1999, this independent commission (the so-called Patten Commission) released a report with 175 recommendations. It proposed a new name for the RUC, a new badge, and new symbols free of the British or Irish states. Other key measures included reducing the size of the force from 11,400 to 7,500, and increasing the proportion of Catholic officers (from 8% to 30% in 10 years). Unionists responded negatively, but nationalists were mostly positive. In May 2000, the Blair government introduced the Police Bill in the UK House of Commons, and maintained that the reform bill was faithful to the Patten report's \"broad intention\" and \"detailed recommendations.\" Nationalists were critical, arguing that Patten's proposals had been gutted. London responded that amendments would deal with human rights training, promoting 50-50 recruitment of Catholics and Protestants, and oversight responsibilities. The Police (Northern Ireland) Bill became law in November 2000. Recruitment for the future Police Service of Northern Ireland (PSNI) began in March 2001, but it was unclear whether the SDLP or Sinn Fein would support it or join the 19-member Policing Board, a new democratic oversight body. To help ensure nationalist support, London proposed further concessions in July 2001, including halving the antiterrorist \"Special Branch\" and prohibiting new recruits from using plastic bullets. In August 2001, the SDLP broke with Sinn Fein and accepted the British government's additional concessions on policing. The SDLP agreed to nominate representatives to the Policing Board and urged young Catholics to join the new police service. The UUP and the DUP also agreed to join the Policing Board, which came into being on November 4, 2001. That same day, the RUC was renamed the PSNI, and the first class of recruits drawn 50-50 from both Catholic and Protestant communities began their training. Sinn Fein maintained that the changes in the police service were largely cosmetic and continued to charge that the new PSNI—like the RUC before it—would be unduly influenced by elements of the security services opposed to the peace process. Some say that Sinn Fein's absence from the Policing Board discouraged more Catholics from joining the PSNI, and prevented the PSNI's full acceptance by the nationalist community. Following the suspension of Northern Ireland's devolved institutions in October 2002, Sinn Fein asserted that its acceptance of the PSNI and the Policing Board hinged on a deal to revive the devolved government and the transfer of policing and justice powers from London to a restored Assembly and Executive. As noted previously, in January 2007, Sinn Fein members voted to support the police and join the Policing Board. Sinn Fein members assumed their places on the Policing Board in late May 2007, following the reestablishment of the devolved government. In March 2011, the 50-50 recruitment process for Catholic and Protestant PSNI officers was brought to a close. In making this decision, UK officials asserted that Catholic officers now made up almost 30% of the PSNI, and as such, the 50-50 process had fulfilled the goal set out by the Patten Commission. Although some nationalists viewed this decision as premature, many unionists applauded it, viewing the 50-50 rule as unfairly discriminating against Protestants. In recent years, concerns have increased that not enough Catholics have been seeking to join the PSNI, partly because of lingering suspicions about the police within the Catholic/nationalist community but also because of fears that Catholic police recruits may be key targets of dissident republicans. According to one news report, of the 401 new officers recruited to join the PSNI between 2013 and 2015, only 77 were Catholic. Following a PSNI review of the recruitment process in 2016, the PSNI introduced a number of procedural changes in 2017 to help attract more Catholics (and more women). In July 2007, the British army ended its 38-year-long military operation in Northern Ireland in the context of the peace process and the improved security situation. Although a regular garrison of 5,000 British troops remains based in Northern Ireland, they no longer have a role in policing and may be deployed worldwide. Policing in Northern Ireland is now the responsibility of the PSNI. In light of the 2007 political agreement to restore Northern Ireland's devolved government, the transfer of policing and justice powers in 2010, and the extensive police reforms, many analysts view the implementation of the most important aspects of the Good Friday Agreement as having been completed. In March 2011, the Northern Ireland Assembly and Executive concluded its first full term in office in 40 years. The regularly scheduled Assembly elections in May 2011 and May 2016 produced successive power-sharing governments led by the DUP and Sinn Fein. Nevertheless, deep distrust persists between unionists and nationalists and their respective political parties. A series of events over the past few years—including protests over the use of flags and emblems, a crisis over implementing welfare reform, a controversy over a past deal for republican \"on the runs,\" and the arrest of a Sinn Fein leader in connection with the murder of a former IRA member—have highlighted the fragility of community relations and periodically threatened the stability of the devolved government. In January 2017, after only 10 months in office, the devolved government led by First Minister Arlene Foster of the DUP and Deputy First Minister Martin McGuinness of Sinn Fein collapsed, prompting snap Assembly elections. The immediate cause of the devolved government's collapse in January 2017 was a scandal over flaws in a renewable energy program (the Renewable Heat Incentive, or RHI), initially overseen by First Minister Foster when she served as Northern Ireland's Enterprise Minister in 2012. The problems in the RHI, which sought to increase consumption of heat from renewable energy sources by offering businesses financial incentives to do so, are expected to cost Northern Ireland taxpayers £490 million (roughly $600 million). Sinn Fein called for Foster to temporarily stand aside as First Minister while an investigation was conducted into the energy scheme; she refused, and McGuinness resigned as Deputy First Minister in protest. Under the rules governing Northern Ireland's power-sharing arrangements, if either the First Minister or the Deputy First Minister resigns (without a replacement being nominated), the government cannot continue and new elections must be held. New elections were called for March 2, 2017. Arlene Foster led the DUP's campaign, but McGuinness stepped down as Sinn Fein's northern leader due to health reasons (he passed away a few weeks after the election). Michelle O'Neill succeeded McGuinness as Sinn Fein's leader in Northern Ireland. Tensions with the DUP on several issues besides the RHI scandal likely contributed to Sinn Fein's decision to force snap Assembly elections. The elections were called amid continued uncertainty over the implications for Northern Ireland of \"Brexit\"—the UK's pending exit from the European Union (EU). The DUP was the only major Northern Ireland political party to back Brexit ahead of the June 2016 referendum on EU membership, and Northern Ireland voted 56% to 44% against leaving the EU (the UK overall voted in favor, 52% to 48%). Other points of contention included the introduction of a potential Irish Language Act—a long-standing nationalist demand to give the Irish language the same official status as English in Northern Ireland—and legalizing same-sex marriage. Both measures are supported by Sinn Fein but opposed by the DUP. As seen in Table 1 , the number of Northern Ireland Assembly seats contested in 2017 was 90 rather than 108 because of previously agreed reforms to reduce the size of the Assembly. The DUP retained the largest number of seats, but Sinn Fein was widely regarded as the biggest winner given its success in reducing the previous gap between the two parties from 10 seats to 1. A high voter turnout of almost 65%—fueled by anger over the energy scandal and a perceived lack of concern from London about Brexit's impact on Northern Ireland—appears to have favored Sinn Fein and the cross-community Alliance Party. For the first time in the Assembly, unionist parties will not have an overall majority (a largely symbolic status because of the power-sharing rules but highly emblematic for the unionist community). With fewer than 30 seats, the DUP also lost its unilateral ability to trigger a \"petition of concern,\" a procedure used by the DUP to block legislation on various social policy issues, including same-sex marriage. At the same time, the election results reinforced the DUP and Sinn Fein as the dominant voices for their respective communities, suggesting continued and possibly increased polarization in Northern Ireland's politics. Two years after Assembly elections, Northern Ireland remains without a devolved government. Negotiations have proceeded in fits and starts but appear to be stalemated at present. Press reports indicate that the biggest sticking point is Sinn Fein's demand for a stand-alone Irish Language Act, which the DUP continues to oppose. Some analysts suggest that the June 2017 UK general election, which resulted in Prime Minister Theresa May's Conservative Party losing its majority in the House of Commons and forming a minority government that relies on support from the DUP, has hardened the positions of the DUP and Sinn Fein and made reaching an agreement on a new devolved government more difficult. In February 2018, media reports signaled that the DUP and Sinn Fein were close to reaching a deal to restore the devolved government. No deal materialized, however. DUP leaders apparently judged that the party's base would not support a possible \"package deal\" addressing both the Irish and Ulster Scots languages (and other cultural matters). Arlene Foster contended that it was not a \"fair and balanced package\" and there was \"no current prospect\" for reestablishing Northern Ireland's power-sharing institutions; she also urged the UK government to \"start making policy decisions.\" While Foster maintained that the DUP was committed to restoring devolved government, some nationalists interpreted her statements as calling for a return to direct rule. Sinn Fein's new leader, Mary Lou McDonald (who replaced Gerry Adams in early 2018), asserted that \"direct rule is not acceptable.\" London does not appear eager to reinstate direct rule or call new elections. Secretary of State for Northern Ireland Karen Bradley has stated that \"devolved government is in the best interests of everyone in Northern Ireland.\" In February 2019, Secretary of State Bradley and Irish Foreign Minister Simon Coveney met with Northern Ireland's five main political parties; news reports indicate that both Bradley and Coveney pledged to present proposals to restart negotiations. Some observers contend that the ongoing internal debate within the UK on Brexit—and in particular, the \"backstop\" designed to ensure no \"hard\" land border between Northern Ireland and Ireland following the UK's departure from the EU—has consumed UK and Northern Ireland politicians' time and attention and largely overshadowed discussions on a new devolved government. Analysts suggest that any significant progress on reestablishing the devolved government likely will only occur after Brexit and the backstop issue are resolved (see \"Possible Implications of Brexit\" for more information). Several commentators have speculated that the British and Irish governments might seek to establish some sort of joint authority if a devolved government cannot be formed, but this approach is largely viewed as a nonstarter for the DUP and other unionists who would be leery of giving Dublin a formal role in Northern Ireland affairs. In the continued absence of a devolved government, Sinn Fein has called for the British-Irish Intergovernmental Conference—provided for in the Good Friday Agreement to promote bilateral cooperation between British and Irish government ministers—to be reconvened (it has not met since the DUP-Sinn Fein power-sharing agreement of 2007). In late 2017, Irish Prime Minister Leo Varadkar appeared to support this idea, but also noted that reviving the intergovernmental conference should not be construed as \"joint rule.\" Over the past few years, the Northern Ireland political parties and the British and Irish governments have made several attempts to resolve outstanding issues related to the peace process, reduce tensions between the unionist and nationalist communities, and promote reconciliation. Such efforts also have sought to address concerns such as ongoing sectarian strife, paramilitary and dissident activity, and Northern Ireland's legacy of violence (often termed \"dealing with the past\"). Major endeavors include the 2013 Haass initiative, the 2014 Stormont House Agreement, and the 2015 Fresh Start Agreement. In July 2013, the Northern Ireland Executive appointed former U.S. diplomat and special envoy for Northern Ireland Richard Haass as the independent chair of interparty talks aimed at tackling some of the most divisive issues in Northern Ireland society. In particular, Haass was tasked with setting out recommendations by the end of 2013 on dealing with the past and the sectarian issues of parading, protests, and the use of flags and emblems. At the end of December 2013, Haass released a draft proposal outlining the way forward in these areas, but was unable to broker a final agreement among the Northern Ireland political parties participating in the talks. (The specifics of the Haass proposals are discussed below in \" Ongoing Challenges .\") During the summer of 2014, the devolved government was tested by financial pressures and disagreement over UK-wide welfare reforms (passed by the UK parliament in February 2013 but which Sinn Fein and the SDLP opposed implementing in Northern Ireland). Northern Ireland also faced significant spending cuts given the imposition of austerity measures throughout the UK. Analysts contend that the welfare and budgetary disputes decreased public confidence in the devolved government's effectiveness and raised broader questions about its stability. In September 2014, then-First Minister Peter Robinson asserted that the current governing arrangements were \"no longer fit for purpose\" and called for new interparty discussions to improve Northern Ireland's institutions and decisionmaking processes. A few weeks later, the UK government announced it would convene talks with Northern Ireland's main political parties (the DUP, Sinn Fein, the UUP, the SDLP, and the Alliance) on government stability and finances. The talks also would address the issues previously tackled by Richard Haass in 2013 (managing parades and protests, the use of flags and emblems, and dealing with the past). On December 23, 2014, the Northern Ireland political parties and the British and Irish governments announced that a broad, multifaceted agreement had been reached on financial and welfare reform; governing structures; and the contentious issues of parades, flags, and the past (see \" Ongoing Challenges \" for more information on these latter provisions). As part of the resulting \"Stormont House Agreement,\" the five main political parties agreed to support welfare reform (with certain mitigating measures), balance the budget, address Northern Ireland's heavy economic reliance on the public sector, and reduce the number of Executive departments and Assembly members over the next few years to improve efficiency and cut costs. London and Dublin hailed the Stormont House Agreement as a welcome step forward. The five main Northern Ireland political parties also appeared largely satisfied with the new agreement, despite some reservations. Some Alliance and UUP members worried that the accord did not make greater progress toward resolving the parades issue, while Sinn Fein and the SDLP expressed disappointment that the deal did not call for an Irish Language Act, a bill of rights for Northern Ireland, or a public inquiry into the 1989 murder of Belfast lawyer Patrick Finucane. In early 2015, as promised in the Stormont House Agreement, the devolved government brought forward a welfare reform bill to enact the required changes. In March 2015, however, as the bill was nearing completion in the Assembly, Sinn Fein announced it would block the bill. Sinn Fein accused the DUP of reneging on commitments to fully protect current and future welfare claimants and argued that the UK government must provide more money to assist welfare recipients negatively affected by the reforms. The DUP responded that Sinn Fein's behavior was \"dishonorable and ham-fisted.\" The failure to resolve the welfare reform issue also stalled implementation of the other aspects of the Stormont House Agreement, including measures aimed at dealing with sectarian issues and the past. Some observers and analysts worried that the continued impasse was increasingly threatening to collapse the devolved government. On September 3, 2015, the UK and Irish governments decided to convene a new round of cross-party talks. On September 9, 2015, the devolved government was further rocked by the arrest of Bobby Storey, a senior Sinn Fein leader (and former IRA commander). Storey was arrested in connection with the August 2015 murder of ex-IRA member Kevin McGuigan (believed to be a revenge killing for the murder of another former IRA commander in May). Shortly after the McGuigan murder, PSNI Police Chief George Hamilton claimed that the IRA continued to exist (with some of its structures and operatives still \"broadly in place\") but that McGuigan's murder did not appear to have been sanctioned or directed by the IRA. Sinn Fein asserted that the IRA had \"gone away\" and no longer existed. Storey and two others (described as \"senior republicans\") arrested as part of the McGuigan investigation ultimately were released without charge. Nevertheless, the McGuigan killing and Storey's arrest renewed lingering unionist concerns about continuing IRA activities and further complicated efforts to implement the Stormont House Agreement. After 10 weeks of talks in the fall of 2015 on the implementation of the Stormont House Agreement and the legacy of paramilitary activity, the British and Irish governments, the DUP, and Sinn Fein reached a new \"Fresh Start Agreement\" on November 17, 2015. The deal was broadly welcomed in Northern Ireland, although the other main Northern Ireland political parties—the SDLP, the UUP, and the Alliance Party—reportedly objected to some elements. Many Northern Ireland political leaders and human rights groups were dismayed that negotiators failed to reach final agreement on establishing new institutions to deal with the past, as called for in the Stormont House Agreement. A key part of the Fresh Start Agreement focused on welfare reform and improving the stability and sustainability of Northern Ireland's budget and governing institutions. The DUP and Sinn Fein agreed to allow the UK parliament to implement changes to the welfare system in Northern Ireland and on a financial package worth £585 million (roughly $832 million) to soften the effects of the welfare and tax credit cuts (funded from the Northern Ireland budget). In exchange, the UK government pledged up to £500 million (about $711 million) in new funding to tackle issues \"unique to Northern Ireland,\" such as addressing security concerns and removing Northern Ireland's \"peace walls\" (physical barriers that separate Protestant and Catholic neighborhoods). The new accord also confirmed institutional reforms originally outlined in the Stormont House Agreement. These reforms included reducing the size of the Assembly from 108 to 90 members, which would have effect from the first Assembly election after the May 2016 election (and was thus implemented in the March 2017 snap elections). The Stormont House Agreement also decreased the number of government departments from 12 to 9 and made provision for an official opposition in the Assembly. Paramilitary activity was the other main issue addressed in the Fresh Start Agreement. The new accord established \"fresh obligations\" on Northern Ireland's elected representatives to work together toward ending all forms of paramilitary activity and disbanding paramilitary structures. It also called for enhanced efforts to combat organized crime and cross-border crime. (See \" Ongoing Challenges \" for more information on these provisions in the Fresh Start Agreement.) Although Northern Ireland has made considerable progress in the years since the 1998 Good Friday Agreement, the search for peace and reconciliation remains challenging. Controversial issues include bridging sectarian divisions and managing key sticking points (especially parading, protests, and the use of flags and emblems); dealing with the past; curbing remaining paramilitary and dissident activity; and furthering economic development. As noted, the 2013 Haass initiative, the 2014 Stormont House Agreement, and the 2015 Fresh Start Agreement all attempted to tackle at least some aspects of these long-standing challenges. Some measures agreed in these successive accords have been delayed amid the current absence of a devolved government. Significant concerns also exist about the possible implications of Brexit for Northern Ireland. Observers suggest that Northern Ireland remains a largely divided society, with Protestant and Catholic communities existing in parallel. Peace walls that separate Protestant and Catholic neighborhoods are perhaps the most tangible sign of such divisions. Estimates of the number of peace walls vary depending on the definition used. Northern Ireland's Department of Justice recognizes around 50 peace walls for which it has responsibility; when other types of \"interfaces\" are included—such as fences, gates, and closed roads—the number of physical barriers separating Protestant and Catholic communities is over 100. Northern Ireland's Executive is working to remove the peace walls, but a 2015 survey of public attitudes toward the walls found that 30% of those interviewed want the walls to remain in place; it also found that more than 4 in 10 people have never interacted with anyone from the community living on the other side of the nearest peace wall. Furthermore, experts note that schools and housing estates in Northern Ireland remain mostly single-identity communities. Some analysts contend that sectarian divisions are particularly evident during the annual summer \"marching season,\" when many unionist parades commemorating Protestant history are held. Although the vast majority of these annual parades by unionist cultural and religious organizations are not contentious, some are held through or close to areas populated mainly by Catholics (some of whom perceive such parades as triumphalist and intimidating). During the Troubles, the marching season often provoked fierce violence. Many Protestant organizations view the existing Parades Commission that arbitrates disputes over parade routes as largely biased in favor of Catholics and have repeatedly urged its abolition. Although the Hillsborough Agreement called for a new parading structure to be established by the end of 2010, this process quickly stalled. The DUP-Sinn Fein-led Northern Ireland Executive proposed new parades legislation in mid-2010 that would have abolished the Parades Commission and promoted local solutions to disputed marches. However, the Protestant Orange Order—a group at the center of many contentious parades in the past—opposed several elements of the plan. The DUP asserted that it a new parading structure would not succeed without the support of the Orange Order. Frictions between the unionist and nationalist communities were also highlighted by a series of protests in late 2012-early 2013 following a decision to fly the union (UK) flag at Belfast City Hall only on designated days, rather than year-round (nationalist city councilors had originally wanted the flag removed completely but agreed to a compromise plan to fly it on certain specified days instead). The protests, mostly by unionists and loyalists, occurred in Belfast and elsewhere in Northern Ireland, and some turned violent. Northern Ireland leaders on both sides of the sectarian divide received death threats, and some political party offices were vandalized. As mentioned previously, parading, protests, and the use of flags and emblems were discussed during the talks led by Richard Haass in the fall of 2013. According to Haass, dealing with flags and symbols was the \"toughest area of negotiations,\" and the draft agreement proposed at the end of December 2013 noted that the parties had been unable to reach consensus on any new policies surrounding the display of flags or emblems. Instead, the Haass proposals called for establishing a commission to hold public discussions throughout Northern Ireland on the use of flags and emblems (among other issues) to try to find a way forward. The December 2014 Stormont House Agreement essentially endorsed this idea and asserted that a new Commission on Flags, Identity, Culture and Tradition would be set up, composed of 15 members (with 7 to be appointed by Northern Ireland's main political parties and 8 drawn from outside the government). As for parading, the Haass proposals recommended transferring authority over parading from the Parades Commission to the devolved government and establishing two new institutions: one to receive all event notifications and promote community dialogue and mediation; and another to make decisions in cases where parading and protest disputes remained. The Haass proposals also called for establishing in law a code of conduct for both marchers and protesters. In the Stormont House Agreement, the parties agreed that responsibility for parades and related protests should, in principle, be devolved to the Northern Ireland Assembly and that new legislation should be introduced. The Stormont House Agreement, however, did not provide further specifics and did not reference the parading institutions proposed by Haass. As noted above, the crisis over welfare reform and paramilitary activity largely stalled implementation of the Stormont House Agreement. According to the Fresh Start Agreement of November 2015, the measures outlined in the Stormont House Agreement on the issues of flags and parades would move forward. The Commission on Flags, Identity, Culture and Tradition began work in June 2016. As for legislation on parading and related protests, the Fresh Start Agreement called for a discussion paper to be prepared for Northern Ireland's Executive Committee. This paper is expected to outline options for the regulation of parades and related protests and evaluate how key outstanding issues, such as a code of conduct, could be addressed in new legislation. To date, the discussion paper on parading has not yet been presented given the impasse in the devolved government. Fully addressing the legacy of violence in Northern Ireland remains controversial. The Good Friday Agreement asserted that \"it is essential to acknowledge and address the suffering of the victims of violence as a necessary element of reconciliation.\" In 2008, the Northern Ireland Assembly established a Commission for Victims and Survivors aimed at supporting victims and their families. Several legal processes for examining crimes stemming from the Troubles also exist. These include police investigations into deaths related to the conflict; investigations by the Police Ombudsman for Northern Ireland (PONI) of historical cases involving allegations of police misconduct; and public inquiries, such as the Saville inquiry (concluded in 2010) into the 1972 Bloody Sunday incident. Critics argue that these various legal processes represent a \"piecemeal\" approach and give some deaths or incidents priority over others. Some observers point out that more than 3,000 conflict-related deaths have never been solved. In 2005, a Historical Enquiries Team (HET) was established within the PSNI to review over 3,200 deaths relating to the conflict between 1968 and 1998, but, despite the HET's efforts, progress was slow; the HET was wound down at the end of 2014, and its work was taken over by another, smaller unit within the PSNI. Others note the expense and time involved with some of these processes; for example, the Bloody Sunday inquiry cost £195 million (more than $300 million) and took 12 years to complete. Some analysts and human rights advocates argue that Northern Ireland needs a comprehensive mechanism for dealing with its past, both to meet the needs of all victims and survivors and to contain costs. At the same time, many commentators assert that there is no consensus in Northern Ireland on the best way to deal with the past. This is in large part because many unionists and nationalists continue to view the conflict differently and retain competing narratives. Recommendations issued in 2009 by the Consultative Group on the Past (set up by the UK government) were widely criticized for a variety of reasons by nearly all segments of Northern Ireland society. Dealing with the past was a key focus of the talks chaired by Richard Haass in December 2013. Among other recommendations related to the past, the draft proposals put forward by Haass called for establishing new mechanisms to consolidate police investigations and better address the needs of victims and survivors. The December 2014 Stormont House Agreement largely endorsed the proposals suggested by Haass. Among other measures for dealing with the past, the Stormont House Agreement called for setting up four bodies: Historical Investigations Unit (HIU) . This body would take forward outstanding cases from the HET process and the historical unit of the Police Ombudsman dealing with past police misconduct cases. The HIU would be overseen by the Northern Ireland Policing Board and would aim to complete its work within five years of its establishment. The HIU would be established through UK legislation, and the UK government pledged to make \"full disclosure\" to the HIU. Independent Commission for Information Retrieval (ICIR) . The ICIR would enable victims and survivors to seek and privately receive information about conflict-related violence. It would be established by the British and Irish governments with a five-year mandate and would be entirely separate from the justice systems in each jurisdiction. The ICIR would not disclose the identities of those coming forward with information to law enforcement authorities, and any information provided to it would be inadmissible in criminal and civil proceedings; individuals who provide information, however, would not be immune to prosecution for any crime committed should evidentiary requirements be met by other means. Oral History Archive. The Northern Ireland Executive would establish this archive by 2016 to provide a central place for people from all backgrounds to share experiences and narratives related to the Troubles. Implementation and Reconciliation Group (IRG) . This body would be set up to oversee work on themes, archives, and information recovery in an effort to promote reconciliation and reduce sectarianism. In September 2015, the Secretary of State for Northern Ireland published a policy paper outlining the UK government's proposal for the legislation required to establish the HIU, the ICIR, and the Oral History Archive. Amid the crisis in the devolved government in the fall of 2015, however, work on setting up these new bodies largely came to a standstill. Controversy also arose over the UK government's assertion in its policy paper that \"the HIU must protect information that, if [publicly] disclosed, would or would be likely to prejudice national security\" and that \"where the HIU proposes to disclose information of this nature, it will be required to refer the matter to the UK government, which may prevent disclosure, if necessary.\" Victims groups and many nationalists strongly objected to such \"national security caveats,\" viewing them as essentially providing the UK government with a veto over the release of information by the proposed HIU. Divisions over such \"national security caveats\" appear to be a key reason that a final deal on establishing the HIU (and the other bodies to deal with the past) was not possible in the Fresh Start Agreement. In February 2016, then-Secretary of State for Northern Ireland Theresa Villiers stated that the proposed national security provisions have \"led some to assume that the government will be constantly seeking to block the onward disclosure by the HIU of information to victims' families and the public. This is simply not the case.\" She went on to note that during the Fresh Start talks, the UK government offered a \"significant compromise,\" in which families would be told whether the government had required the HIU to withhold certain sensitive information, and that the families or the HIU director would have the right to challenge this decision in Northern Ireland's High Court. Press reports indicate that victims groups and nationalists remained concerned that \"national security\" could be used to cover up criminal wrongdoing by state agents. Sinn Fein reportedly argued that an international panel of judges should be appointed to hear any appeals, rather than the High Court. Despite continued discussions in 2016 between the UK government, Sinn Fein, the DUP, and other stakeholders, the \"national security caveats\" continued to pose a stumbling block to implementing the \"dealing with the past\" provisions in the Stormont House Agreement. The stalemate since 2017 in reestablishing a devolved government further stalled work on mechanisms to address Northern Ireland's legacy of violence. In May 2018, the UK government launched a public consultation process on a draft bill to establish the four legacy institutions called for in the Stormont House Agreement—the HIU, the ICIR, the Oral History Archive, and the IRG. The government envisions that the HIU would have a caseload of about 1,700 Troubles-related deaths. \"National security caveats\" for the HIU would remain, but, as described by former Secretary of State Villiers, families or the HIU director would be able to appeal government decisions to withhold information to Northern Ireland's High Court. At the same time, unionists have voiced concerns that the HIU could unfairly target former soldiers and police officers, and many argue that any measures to deal with the past in Northern Ireland should contain a statute of limitation on the prosecution of former soldiers. Nationalists strongly reject any such statute of limitations or amnesty to prosecutions. Human rights groups have complained that the government's proposals largely neglect the right of individuals injured during the Troubles to have their cases investigated. The public consultation process concluded in October 2018, but its findings have yet to be released. Experts contend that the major paramilitary organizations active during the Troubles are now committed to the political process and remain on cease-fire. However, the apparent continued existence of such groups and their engagement in criminality worries many in both the unionist and nationalist communities. In response to the heightened concerns about paramilitary activity in Northern Ireland in 2015, former Secretary of State for Northern Ireland Villiers commissioned a study on the status of republican and loyalist paramilitary groups. This review was drafted jointly by the PSNI and MI5 (the UK's domestic intelligence service) and reviewed by three independent observers. Published in October 2015, the assessment found that all the main paramilitary groups operating during the Troubles still existed, but they remained on cease-fire, and the leadership of each group, \"to different degrees,\" is \"committed to peaceful means to achieve their political objectives.\" although such paramilitary groups continue to \"organize themselves along militaristic lines,\" none are planning or conducting terrorist attacks and they do not have significant capabilities to do so. at the same time, individual members of paramilitary groups still represent a threat to national security. Some have committed murders or other violence, and many are engaged in organized crime. None of the leaderships have complete control over the activities of their members, and \"there is regular unsanctioned activity including behavior in direct contravention of leadership instruction.\" The Fresh Start Agreement sought to address some of the most pressing concerns about the main paramilitary groups in Northern Ireland. Among the measures, the accord established a new set of principles for members of the Executive and Assembly that commits them to work toward the disbandment of all paramilitary organizations and their structures, to challenge paramilitary attempts to control communities, and to take no instructions from such groups; an independent three-member panel tasked with recommending a strategy for disbanding paramilitary groups; a new, four-member international body to monitor paramilitary activity and to report annually on progress toward ending paramilitary activity; and a cross-border Joint Agency Task Force to bring together officials from the PSNI and UK and Irish police, intelligence, and tax agencies to tackle paramilitarism and organized crime throughout the island of Ireland. Some Northern Ireland politicians and analysts suggested that some of these proposals did not go far enough. Press reports indicated that some unionists were unhappy that the new international paramilitary monitoring body—unlike the former Independent Monitoring Commission (IMC)—would not have the power to recommend the exclusion of political parties from the Assembly should it be determined that the parties are not living up to their commitments to exclusively peaceful means. As part of the Fresh Start Agreement, the UK government pledged a total of £188 million (roughly $267 million) more in security-related spending, with the bulk of this amount (£160 million, or $228 million) going to the PSNI to improve its ability to tackle dissident groups, remaining paramilitarism, and organized crime. In June 2016, the so-called Three Person Panel published its report with 43 recommendations for disbanding paramilitary groups; in July 2016, Northern Ireland's Executive set out an action plan on tackling paramilitary activity, criminality, and organized crime based on the panel's work. In September 2016, the British and Irish governments agreed to establish the four-person Independent Reporting Commission (IRC), tasked with monitoring progress on ending paramilitary activity, including the Executive's new action plan. In December 2016, the British and Irish governments named one representative each to the IRC and the Northern Ireland Executive named two. The IRC released its first annual report in October 2018; the IRC assessed that although some progress has been made, paramilitarism remains a \"stark reality of life in Northern Ireland\" and that the lack of political decisionmaking institutions since January 2017 has negatively affected efforts to tackle paramilitarism. Security assessments indicate that the threat posed by dissident republican and loyalist groups not on cease-fire and opposed to the 1998 peace agreement remains serious. The aforementioned October 2015 review of paramilitary groups maintained that the most significant terrorist threat in Northern Ireland was posed not by the groups evaluated in that report but rather by dissident republicans. The review described dissident loyalist groups as posing another, albeit \"smaller,\" threat. Some loyalists are heavily engaged in a wide range of serious crimes. At the same time, experts note that dissident groups do not have the same capacity to mount a sustained terror campaign as the IRA did between the 1970s and the 1990s. Most of the dissident republican groups are small in comparison to the IRA during the height of the Troubles. Moreover, the actual number of individuals actively involved has not grown significantly in recent years, although such dissident republican groups have proliferated. UK security services assert that there are currently four main dissident republican groups: the Continuity IRA (CIRA); Óglaigh na hÉireann (ÓNH); Arm na Poblachta (ANP), and the New IRA (which reportedly was formed in 2012 and brought together the Real IRA, the Republican Action Against Drugs, or RAAD, and a number of independent republicans). These groups have sought to target police officers, prison officers, and other members of the security services in particular. Between 2009 and 2017, dissident republicans were responsible for the deaths of two PSNI officers, two British soldiers, and two prison officers. In January 2018, ÓNH declared itself on cease-fire. However, the other groups remain active, and authorities warn that the threat posed by the New IRA in particular is severe. The New IRA has carried out about 40 attacks since 2012. Police believe the New IRA may have been responsible for the January 2019 car bomb that exploded in Londonderry (or Derry). Some experts are concerned that dissident republicans could seek to step up attacks in an effort to exploit the divisions due to Brexit. Many assert that one of the best ways to ensure a lasting peace in Northern Ireland and deny dissident groups new recruits is to promote continued economic development and equal opportunity for Catholics and Protestants. Northern Ireland's economy has made significant advances since the 1990s. Between 1997 and 2007, Northern Ireland's economy grew an average of 5.6% annually (marginally above the UK average of 5.4%). Unemployment decreased from over 17% in the late 1980s to 4.3% by 2007. The 2008-2009 global recession, however, significantly affected Northern Ireland. Economic recovery has been slow in Northern Ireland, although it appears to have gained momentum since 2017. In the four quarters ending September 2018, Northern Ireland's economic activity grew by approximately 2.1%, as compared to 1.5% growth for the UK overall. Unemployment in Northern Ireland is currently 3.8%, lower than the UK average (4.0%), and that in the Republic of Ireland (5.3%) and the EU (6.7%). Income earned and living standards in Northern Ireland remain below the UK average. Of the UK's 12 economic regions, Northern Ireland had the third-lowest gross value added per capita in 2017 (£21,172), considerably below the UK's average (£27,555). Northern Ireland also has both a high rate of economic inactivity (27%) and a high proportion of working-age individuals with no qualifications. Studies indicate that the historically poorest areas in Northern Ireland (many of which bore the brunt of the Troubles) remain so and that many of the areas considered to be the most deprived are predominantly Catholic. At the same time, Northern Ireland has made strides in promoting equality in its workforce. The gap in economic activity rates between Protestants and Catholics has shrunk considerably since 1992 (when there was a 10 percentage point difference) and has largely converged in recent years (in 2017, the economic activity rate was 70% for Protestants and 67% for Catholics). In addition, the percentage point gap in unemployment rates between the two communities has decreased from 9% in 1992 to 0% in 2017. To improve Northern Ireland's economic recovery and strengthen its long-term performance, Northern Ireland leaders are seeking to promote export-led growth, decrease Northern Ireland's economic dependency on the public sector by growing the private sector, and attract more foreign direct investment. Reducing Northern Ireland's economic dependency on the public sector (which accounts for about 70% of the region's GDP and employs roughly 30% of its workforce) and devolving power over corporation tax from London to Belfast to help increase foreign investment were key issues addressed in the cross-party negotiations in both 2014 and 2015. In 2015, the UK passed legislation to permit the devolution of corporation tax-setting power to the Northern Ireland Assembly (subject to certain financial conditions). The Fresh Start Agreement set April 2018 as the target date for introducing a devolved corporate tax rate of 12.5% in Northern Ireland (the same rate as in the Republic of Ireland). In the absence of devolved government, however, reducing Northern Ireland's corporate tax rate is on hold. The UK is scheduled to exit the EU on March 29, 2019. Many officials and analysts are concerned about Brexit's possible implications for Northern Ireland's peace process, economy, and, in the longer term, constitutional status. At the time of the 1998 Good Friday Agreement, the EU membership of both the United Kingdom and the Republic of Ireland was viewed as essential to underpinning the peace process by providing a common European identity for both unionists and nationalists. In the years since, as security checkpoints were removed in accordance with the peace agreement, and because both the UK and Ireland belonged to the EU's single market and customs union, the circuitous 300-mile land border between Northern Ireland and Ireland effectively disappeared. This served as an important political symbol on both sides of the sectarian divide and helped produce a dynamic cross-border economy. Preventing a \"hard\" land border (with customs checks and physical infrastructure) on the island of Ireland has been a key goal, as well as a major stumbling block, in negotiating and finalizing the UK's withdrawal agreement with the EU. Many on both sides of Northern Ireland's sectarian divide have expressed concerns that Brexit could lead to a return of a hard border with the Republic of Ireland and destabilize the fragile peace in Northern Ireland, in part because it could pose a considerable security risk. During the Troubles, the border regions were considered \"bandit country,\" with smugglers and gunrunners, and checkpoints were frequently the site of sectarian conflict, especially between British soldiers and the IRA. PSNI Police Chief George Hamilton warns that if physical border posts were reinstated as a result of Brexit, they would be seen as \"fair game\" by violent dissident republicans opposed to the peace process, endangering the lives of police and customs officers. Such renewed violence not only would threaten the security and stability of the border regions but also could put the entire peace process at risk. In addition, establishing checkpoints would pose logistical difficulties given that estimates suggest there are upward of 275 crossing points along the Northern Ireland-Ireland border. UK, Irish, and EU leaders have asserted repeatedly that they do not want a hard border and have sought to prevent such a possibility. Resolving the border issue, however, has presented one of the most difficult challenges in UK-EU negotiations on Brexit. Analysts contend that ensuring an open border has been complicated by the UK government's pursuit of a largely \"hard Brexit\" that would keep the UK outside of the EU's single market and customs union. In December 2017, the UK and the EU reached an agreement in principle on main aspects of three priority issues in the withdrawal negotiations (citizens' rights, financial settlement, and Ireland/Northern Ireland). Among other measures related to Northern Ireland, the UK pledged to uphold the Good Friday Agreement, avoid a hard border (and any physical infrastructure), and protect North-South cooperation on the island of Ireland. Crucially, the UK also committed to the so-called backstop—a mechanism designed to guarantee that the border would remain invisible under all circumstances. Finding agreement on precisely how this backstop would function, however, did not prove easy for UK and EU negotiators. In November 2018, the UK and the EU concluded a draft withdrawal agreement (outlining the terms of the \"divorce\") and a draft political declaration (setting out the broad contours of the future UK-EU relationship). The withdrawal agreement contains a 21-month transition period (in which the UK would cease to be an EU member but would continue to apply EU rules while negotiations continue on the details of the UK's future political and economic relationship with the EU). The backstop arrangement ultimately reached in the withdrawal agreement essentially would keep all of the UK in a customs union with the EU (with areas of deeper regulatory alignment between Northern Ireland and the EU) pending agreement on a more preferable solution in forthcoming negotiations on the future UK-EU relationship. Various elements of the withdrawal agreement have faced opposition in the UK Parliament, but the backstop has emerged as the primary sticking point. Many critics argued that the backstop, if triggered, would tie the UK to an EU customs union indefinitely, prohibit the UK from concluding its own free trade deals with other countries, and leave the UK in the position of having to accept EU rules without having a say in EU decisionmaking. The DUP warned that the backstop would create regulatory divergence between Northern Ireland and the rest of the UK and thus would threaten the constitutional integrity of the United Kingdom. UK officials maintain that it will never be necessary to implement the backstop. On January 15, 2019, the UK Parliament decisively rejected the withdrawal agreement by a vote of 432 to 202. This has intensified fears about a disorderly \"no deal\" scenario in which the UK would \"crash out\" of the EU at the end of March without a transition period and settled arrangements in place. Prime Minister May has approached the EU about devising \"alternative arrangements\" to the backstop or modifying it in an effort to secure the UK Parliament's approval. UK officials have proposed possibly imposing a time limit on the backstop or a mechanism by which the UK could withdraw from the backstop. The EU insists that the backstop and the withdrawal agreement are not open for renegotiation, and press reports suggest that the UK government has been unsuccessful to date in gaining any EU concessions. Prime Minister May intends to put the withdrawal agreement to another vote in the UK Parliament on March 12, 2019. If Parliament again fails to approve the withdrawal agreement, it is then expected to consider whether to back \"no deal\" or direct the government to seek to extend the March 29 deadline. Extending the deadline for the UK's departure from the EU would require the unanimous agreement of the other 27 EU member states. Although the UK, the EU, and Ireland have escalated contingency planning for a \"no deal\" Brexit, the Irish government continues to resist making any plans for physical infrastructure on the Irish border. The Irish government maintains that there will be no hardening of the Irish border under any circumstances and insists that an arrangement similar to the backstop would have to be negotiated even if there is no approved UK withdrawal agreement. Irish Prime Minister Varadkar admits that a \"no deal\" scenario would entail \"difficult discussions\" with the EU and the UK. Some analysts assert, however, that in the event of a \"no deal\" Brexit, protecting the integrity of the single market will be an EU priority, which will necessitate customs checks and some sort of border infrastructure. Some \"Brexiteers\"—or those in the UK who strongly favor a \"hard Brexit\"—contend that the border issue is being exploited by the EU and those in the UK who would prefer a \"soft Brexit\" (in which the UK remains inside the EU single market and/or customs union). Some Brexiteers have ruminated whether the Good Friday Agreement has outlived its usefulness, especially in light of the stalemate in reestablishing Northern Ireland's devolved government. The Prime Minister's office responded that the UK government remains \"fully committed\" to the Good Friday Agreement. Brexit also has revived questions about Northern Ireland's constitutional status within the UK in the longer term. Sinn Fein argues that \"Brexit changes everything\" and could generate greater support for a united Ireland. At the same time, most experts believe that the conditions required to hold a \"border poll\" on Northern Ireland's constitutional status do not currently exist. Opinion polls indicate that a majority of people in Northern Ireland continue to support Northern Ireland's position within the UK, although some surveys suggest that a \"damaging Brexit\" could increase support for a united Ireland. According to one recent press report, concerns appear to be growing within the UK government that a \"no deal\" Brexit could change the dynamics and lead to a border poll on Irish unification. Many experts contend that Brexit could have serious negative economic consequences for Northern Ireland. According to a UK parliamentary report, Northern Ireland depends more on the EU market (and especially that of the Republic of Ireland) for its exports than does the rest of the UK. Approximately 52% of Northern Ireland exports go to the EU, including 38% to the Republic of Ireland. UK government statistics indicate that Ireland is the top external export and import partner for Northern Ireland. Analysts worry in particular that a \"hard Brexit\" outside of the EU's single market and customs union could jeopardize Northern Ireland's extensive cross-border trade with Ireland, as well as integrated labor markets and industries that operate on an all-island basis. Some analysts note that access to the EU single market has been one reason for Northern Ireland's success in attracting foreign direct investment, and they suggest that Brexit could deter future investment. Post-Brexit, Northern Ireland also stands to lose EU regional funding (roughly $1.3 billion between 2014 and 2020) and agricultural aid (direct EU farm subsidies to Northern Ireland are nearly $375 million annually). UK officials assert that the government is determined to safeguard Northern Ireland's interests and \"make a success of Brexit\" for Northern Ireland. UK and DUP leaders maintain that the rest of the UK is more important economically, historically, and culturally to Northern Ireland than the EU. They note, for example, that the UK is the most significant market for businesses in Northern Ireland, with sales to other parts of the UK worth one and a third times the value of all Northern Ireland exports and nearly four times the value of exports to Ireland (in 2016). UK and DUP officials insist that Northern Ireland will continue to trade with the EU (including Ireland) and that Brexit offers new economic opportunities for Northern Ireland outside the EU. Successive U.S. Administrations have viewed the Good Friday Agreement as the best framework for a lasting peace in Northern Ireland. The Clinton Administration was instrumental in helping the parties forge the agreement, and the George W. Bush Administration strongly backed its full implementation. U.S. officials welcomed the end to the IRA's armed campaign in 2005 and the restoration of the devolved government in 2007. The Obama Administration remained engaged in the peace process. In October 2009, then-U.S. Secretary of State Hillary Clinton visited Northern Ireland, addressed the Assembly, and urged Northern Ireland's leaders to reach an agreement on devolving policing and justice powers. In February 2010, President Obama welcomed the resulting Hillsborough Agreement. In June 2013, President Obama visited Northern Ireland in the context of a G8 summit meeting and noted that the United States would always \"stand by\" Northern Ireland. The Obama Administration welcomed the conclusion of both the December 2014 Stormont House Agreement and the November 2015 Fresh Start Agreement. Like its predecessors, the Trump Administration has offered support and encouragement to Northern Ireland. In March 2017, Vice President Mike Pence noted that, \"the advance of peace and prosperity in Northern Ireland is one of the great success stories of the past 20 years\" and paid tribute to Senator Mitchell and his role in the peace process. In November 2017, the State Department spokesperson expressed regret at the impasse in discussions to restore Northern Ireland's power-sharing institutions, urged continued dialogue, and asserted that the United States remained \"ready to support efforts that ensure full implementation of the Good Friday Agreement and subsequent follow-on cross-party agreements.\" Many Members of Congress have actively supported the peace process for decades. Encouraged by progress on police reforms, several Members prompted the Bush Administration in December 2001 to lift a ban on contacts between the Federal Bureau of Investigation and the new PSNI. Congress had initiated this prohibition in 1999 because of the former RUC's human rights record. More recently, congressional hearings have focused on the peace process, policing reforms, human rights, and the status of public inquiries into several past murders in Northern Ireland in which collusion between the security forces and paramilitary groups is suspected; these murders have included the 1989 slaying of Belfast attorney Patrick Finucane and the 1997 killing of Raymond McCord, Jr. Some Members of Congress have urged the Trump Administration to name a special envoy for Northern Ireland to signal that the United States remains committed to the region, especially in light of the stalemate in reestablishing the devolved government. On the economic front, the United States is an important source of investment for Northern Ireland. According to one study, foreign direct investment by U.S.-based companies in Northern Ireland totaled £1.48 billion (nearly $2.1 billion) between 2003-2004 and 2015-2016 and was responsible for creating 13,875 jobs. Between 2009 and 2011, a special U.S. economic envoy to Northern Ireland worked to further economic ties between the United States and Northern Ireland and to underpin the peace process by promoting economic prosperity. The United States has provided aid to the region through the International Fund for Ireland (IFI), which was created in 1986. Although the IFI was established by the British and Irish governments based on objectives in the Anglo-Irish Agreement of 1985, the IFI is an independent entity. The IFI supports economic regeneration and social development projects in areas most affected by the civil unrest in Northern Ireland and in the border areas of the Republic of Ireland; in doing so, it has also sought to foster contact, dialogue, and reconciliation between nationalists and unionists. The United States has contributed more than $540 million since the IFI's establishment, roughly half of total IFI funding. The EU, Canada, Australia, and New Zealand also have provided funding for the IFI. During the 1980s and 1990s, U.S. appropriations for the IFI averaged around $23 million annually; in the 2000s, U.S. appropriations averaged $18 million each year. According to the fund, the vast majority of projects that it has supported with seed funding have been located in disadvantaged areas that have suffered from high unemployment, a lack of facilities, and little private sector investment. In its first two decades, IFI projects in Northern Ireland and the southern border counties focused on economic and business development and sectors such as tourism, agriculture, and technology. In 2006, amid an improved economic situation, the IFI released a five-year \"Sharing this Space\" program, in which the IFI announced that it would began shifting its strategic emphasis away from economic development and toward projects aimed at promoting community reconciliation and overcoming past divisions. Successive U.S. Administrations and many Members of Congress have backed the IFI as a means to promote economic development and encourage divided communities to work together. Support for paramilitary groups in Northern Ireland has traditionally been strongest in communities with high levels of unemployment and economic deprivation. Thus, many observers have long viewed the creation of jobs and economic opportunity as a key part of resolving the conflict in Northern Ireland and have supported the IFI as part of the peace process. Many U.S. officials and Members of Congress also encouraged the IFI to place greater focus on reconciliation activities, and were pleased with the IFI's decision to do so in 2006. However, critics have questioned the IFI's effectiveness, viewing some IFI projects as largely wasteful and unlikely to bridge community divides in any significant way. Others suggest that the IFI was never intended to continue in perpetuity. Some also argue that it is time to move the U.S. relationship with Ireland and Northern Ireland onto a more mature and equal footing, and that U.S. development assistance undermines this goal. Between FY2006 and FY2011, neither the Bush nor the Obama Administration requested funding for the IFI in the President's annual budget request. Administration officials maintained that the lack of a funding request for the IFI did not signal a decreased U.S. commitment to Northern Ireland; rather, they asserted that the IFI was expected to begin winding down as an organization. The 2006 \"Sharing this Space\" program was intended as the \"last phase\" of the IFI, and in its 2009 Annual Report, the IFI stated that it would no longer be seeking contributions from its donors. Despite the lack of an Administration request, Congress continued to appropriate funding for the IFI between FY2006 and FY2010 ($17 million for FY2010), viewing these contributions as an important and tangible sign of the ongoing U.S. commitment to the peace process. In FY2011, however, amid the U.S. economic and budget crisis, some Members of Congress began to call for an end to U.S. funding for the IFI as part of a raft of budget-cutting measures. Many asserted that U.S. contributions to the IFI were no longer necessary given Ireland and Northern Ireland's improved political and economic situation (relative to what it was in the 1980s). The sixth FY2011 continuing resolution ( P.L. 112-6 ) did not specify an allocation for the IFI, nor did the final FY2011 continuing resolution ( P.L. 112-10 , the Department of Defense and Full-Year Continuing Appropriation Act of 2011). Other Members of Congress continued to support U.S. funding for the IFI, noting the financial woes in Ireland and Northern Ireland stemming from the 2008-2009 global recession and increasing concerns about the possibility of dissident violence, and ongoing sectarian tensions in the region. They pointed out that in light of these evolved circumstances, the IFI itself reversed course, announcing it would continue functioning for the near term. Press reports indicated that the British and Irish governments also supported the IFI's continuation, as did Northern Ireland's Executive. Subsequent to the FY2011 budget deliberations, the Obama Administration allocated $2.5 million from FY2011 Economic Support Fund (ESF) resources to the IFI in the form of a grant for specific IFI activities to support peace and security in Ireland and Northern Ireland. For FY2012, the Obama Administration requested $2.5 million in ESF funding for the IFI in its annual budget request, asserting that \"a permanent political settlement in Northern Ireland remains a priority foreign policy goal of the United States\" and that \"cross-community relations continue to be hampered by a lack of economic development and high unemployment.\" The FY2012 budget request also noted an increase in sectarian-driven hate crimes and paramilitary-style shootings and assaults in Northern Ireland, and that U.S. assistance would seek to counter these negative trends \"by addressing the root causes of violence and intolerance.\" For similar reasons, in its FY2013 and FY2014 budget requests the Administration proposed $2.5 million for the IFI, as part of its ESF request for the Europe and Eurasia region aimed at promoting peace and reconciliation programs. The Obama Administration did not request funding for the IFI in its subsequent annual budget requests. According to the U.S. Agency for International Development (USAID), U.S. funding provided between FY2011 and FY2014 enabled the United States to meet an existing $7.5 million commitment to the IFI's Peace Impact Program, targeting those communities in Ireland and Northern Ireland most prone to dissident recruitment and activity. In June 2016, the Obama Administration allocated $750,000 from FY2015 ESF resources to the IFI in the form of a grant to support activities aimed at promoting a sustained peace in Northern Ireland and the border counties of Ireland; examples of programs to be supported included cross-community workshops on violence prevention and job training for unemployed youth in communities with high rates of joblessness and sectarian violence. For similar purposes as described for FY2015, the Obama Administration allocated $750,000 from FY2016 ESF funds to the IFI in the form of a grant in December 2016, and the Trump Administration allocated $750,000 from FY2017 ESF funds to the IFI in August 2018, also in the form of a grant. The Trump Administration did not request funding for the IFI in its FY2018 or FY2019 budget requests.", "summary": "Between 1969 and 1999, almost 3,500 people died as a result of political violence in Northern Ireland, which is one of four component \"nations\" of the United Kingdom (UK). The conflict, often referred to as \"the Troubles,\" has its origins in the 1921 division of Ireland and has reflected a struggle between different national, cultural, and religious identities. Protestants in Northern Ireland (48%) largely define themselves as British and support remaining part of the UK (unionists). Most Catholics in Northern Ireland (45%) consider themselves Irish, and many desire a united Ireland (nationalists). On April 10, 1998, the UK and Irish governments and key Northern Ireland political parties reached a negotiated political settlement. The resulting Good Friday Agreement (also known as the Belfast Agreement) recognized the \"consent principle\" (i.e., a change in Northern Ireland's status can come about only with the consent of a majority of its people). It called for devolved government—the transfer of power from London to Belfast—with a Northern Ireland Assembly and Executive Committee in which unionist and nationalist parties would share power; it also contained provisions on decommissioning (disarmament) of paramilitary weapons, policing, human rights, UK security normalization (demilitarization), and the status of prisoners. Despite a much-improved security situation since 1998, full implementation of the peace accord has been challenging. For many years, decommissioning and police reforms were key sticking points that generated instability in the devolved government. In 2007, however, the hard-line Democratic Unionist Party (DUP) and Sinn Fein, the associated political party of the Irish Republican Army (IRA), reached a landmark power-sharing deal. Although many analysts view implementation of the most important aspects of the Good Friday Agreement as having been completed, tensions remain in Northern Ireland and distrust persists between the unionist and nationalist communities and their respective political parties. In January 2017, the devolved government led by the DUP and Sinn Fein collapsed, prompting snap Assembly elections in March 2017. Amid a renewable energy scandal involving DUP leader Arlene Foster and unease in much of Northern Ireland about \"Brexit\"—the UK's expected exit from the European Union (EU)—Sinn Fein made significant electoral gains. Negotiations to form a new power-sharing government have been unsuccessful to date. Northern Ireland continues to face a number of broader challenges in its search for peace and reconciliation. These challenges include reducing sectarian strife, fully grappling with Northern Ireland's legacy of violence (often termed dealing with the past); addressing lingering concerns about paramilitary and dissident activity; and promoting further economic development. Brexit also may have significant political and economic repercussions for Northern Ireland. The future of the border between Northern Ireland and the Republic of Ireland was a central issue in the UK's withdrawal negotiations with the EU and has posed a key stumbling block to approving the withdrawal agreement in the UK Parliament. Brexit also has renewed questions about Northern Ireland's status within the UK in the longer term. Successive U.S. Administrations and many Members of Congress have actively supported the Northern Ireland peace process. For decades, the United States provided development aid through the International Fund for Ireland (IFI). In recent years, congressional hearings have focused on the peace process, police reforms, and the status of public inquiries into several murders in Northern Ireland in which collusion between the security forces and paramilitary groups is suspected. Such issues may continue to be of interest in the 116th Congress.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; contracting programs to increase small business opportunities in securing federal contracts; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in these programs has increased in recent years, primarily because assisting small business is viewed as a means to enhance economic growth. The SBA's Surety Bond Guarantee Program has been operational since April 1971. It is designed to increase small business' access to federal, state, and local government contracting, as well as private-sector contracting, by guaranteeing bid, performance, payment, and specified ancillary bonds \"on contracts … for small and emerging contractors who cannot obtain bonding through regular commercial channels.\" The program guarantees individual contracts of up to $6.5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The $6.5 million limit is periodically adjusted for inflation. The SBA's guarantee currently ranges from 80% to 90% of the surety's loss if a default occurs. In FY2018, the SBA guaranteed 10,800 bid and final surety bonds (a payment bond, performance bond, or both a payment and performance bond) with a total contract value of nearly $6.5 billion. Although the surety industry does not report the total value of the bonds it issues each year, estimates based on the total amount of premiums collected by the private sector in recent years suggest that the SBA's Surety Bond Guarantee Program represents, by design, a relatively small percentage of the market for surety bonds (from about 1.1% to 6.7% of the value of surety bonds issued by the private sector). A surety bond is a three-party instrument between a surety (that agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract's terms and conditions. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. The surety bond reduces the risk of contracting. Surety bonds are viewed as a means to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and are considered to be at greater risk of failing to comply with the contract's terms and conditions. The four general types of surety bonds are bid bonds guarantee that the bidder on a contract will enter into the contract and furnish the required payment and performance bonds if awarded the contract, payment bonds guarantee that suppliers and subcontractors will be paid for work performed under the contract, performance bonds guarantee that the contractor will perform the contract in accordance with its terms and conditions, and ancillary bonds ensure completion of requirements outside of performance or payment, such as maintenance. Surety bonds are important to small businesses interested in competing for a federal contract because the federal government requires prime contractors, prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States, to furnish a performance bond issued by a surety satisfactory to the officer awarding the contract, and in an amount the contracting officer considers adequate, to protect the government. Prime contractors are also required to post a payment bond with a surety satisfactory to the contracting officer for the protection of all persons supplying labor and material in carrying out the work provided for in the contract. Both bonds become legally binding upon award of the contract and their \"penal amounts,\" or the maximum amount of the surety's obligation, must generally be 100% of the original contract price plus 100% of any price increases. Most state and local governments have adopted similar legislation, often called \"Little Miller Acts,\" referencing the Miller Act of 1935 that established the federal requirement. Many private project owners also require contractors to furnish a surety bond before awarding them a contract. This report opens with an examination of the SBA's Surety Bond Guarantee Program's legislative origin and provides a historical summary of the major issues that have influenced the program's development, including the decision to supplement the original Prior Approval Program with a Preferred Surety Bond Guarantee Program (PSB program) that initially provided SBA-approved sureties a lower guarantee rate (not to exceed 70%) than those participating in the Prior Approval Program (not to exceed 80% or 90%, depending on the size of the contract and the type of small business) in exchange for allowing preferred sureties to issue SBA-guaranteed bonds to small businesses without the SBA's prior approval; P.L. 114-92 , the National Defense Authorization Act for Fiscal Year 2016, which increased the PSB program's guarantee rate from not to exceed 70% to not to exceed 90% of losses; and the decision to increase the program's bond limit. It then examines the program's current eligibility standards and requirements, and provides performance statistics, including the number and amount of bond guarantees issued annually. In addition, it provides data concerning the number and amount of final bonds guaranteed from FY1971 through FY2017 (see Table A-1 ) and for bid and final bonds combined from FY2000 through FY2017 (see Table A-2 ). P.L. 91-609, the Housing and Urban Development Act of 1970, authorized the SBA's Surety Bond Guarantee Program. The act amended Title IV of the Small Business Investment Act of 1958 (P.L. 85-699, as amended) to provide the SBA authority to guarantee any surety against loss as the result of a breach of the terms of a bid bond, payment bond, or performance bond by a principal on any contract up to $500,000. The act specified that (1) the principal of the bond is a small business, (2) the bond is required as a condition of bidding on the contract or serving as a prime contractor or subcontractor on the project, (3) the small business is not able to obtain such bond on reasonable terms and conditions without the guarantee, (4) the SBA determines that there is a reasonable expectation that the small business will perform the covenants and conditions of the contract, (5) the contact meets SBA requirements concerning the feasibility of the contract being completed successfully and at a reasonable cost, and (6) the bond's terms and conditions are reasonable in light of the risks involved and the extent of the surety's participation. The act also required that the SBA's guarantee not exceed 90% of the loss incurred by the surety in the event of a breach of the bond's terms and conditions by the small business. The SBA was authorized to finance the program through the Leasing Guarantee Revolving Loan Fund within the Department of the Treasury, which renamed that fund the Lease and Surety Bond Guarantee Revolving Fund. The act authorized the transfer of $5 million from the SBA's Business Loan and Investment Revolving Fund to the Lease and Surety Bond Guarantee Revolving Fund, raising that fund's capital to $10 million available without fiscal year limitation, to support both the lease guarantee program and the surety bond guarantee program. The act also recommended that the program be appropriated up to $1.5 million each fiscal year for three fiscal years after its date of enactment (December 31, 1970) if additional funding were needed to offset the program's expenses. The SBA was directed to administer the program \"on a prudent and economically justifiable basis.\" It was authorized to offset the program's administrative costs by charging a uniform annual fee, subject to periodic review to ensure that the fee is the \"lowest fee that experience under the program shows to be justified,\" and uniform fees for the processing of applications for guarantees. The SBA also was authorized to \"obligate the surety to pay the Administration such portions of the bond fee as the Administration determines to be reasonable in light of the relative risks and costs involved.\" The program's sponsors argued in 1970 that \"there is widespread evidence that a significant number of construction contracting organizations find varying degrees of difficulty in obtaining surety bonds\" and that \"the major share of these organizations are small businesses, and many of them are headed by minority groups.\" They argued that the Surety Bond Guarantee Program would \"facilitate the entry and advancement of small and minority contractors in the construction business.\" At that time, witnesses at congressional hearings testified that surety bonds were not necessarily required for most private sector construction contracts, but they were required for most public sector construction contracts. The SBA implemented the program on a pilot basis on April 5, 1971, in Kansas City. The program later was expanded to Los Angeles and became nationwide on September 2, 1971. Initially, the SBA guaranteed 90% of the amount of all of the surety bonds in the program and charged sureties 10% of the bond premium paid to the surety company by the contractor. It also charged small business applicants for payment and performance bonds 0.2% of the contract price upon their obtaining the contract. It did not charge for the processing of bid bonds, rejected applications, or applications that did not result in a contract award. Contractors wishing to participate in the program were required to have less than $750,000 in gross annual receipts for the past fiscal year or to have averaged less than $750,000 in gross annual receipts over the past three fiscal years. This size standard was more stringent than for other SBA programs, and it was designed \"to reach that segment of small business which was obviously intended to benefit from the legislation as evidenced by the limit of $500,000 on any one contract.\" Demand for the program exceeded the SBA's expectations. In 1971, the SBA estimated that it would guarantee about 8,000 contracts amounting to about $540 million from FY1972 through FY1974. Instead, it guaranteed 16,118 contracts amounting to nearly $1.1 billion (see Table A-1 in the Appendix). Because the demand for the program exceeded expectations and the initial fees proved to be insufficient to recoup the program's expenses, in 1974, the SBA requested an additional $25 million for the program. The SBA argued that the additional funds were necessary to take into account the program's projected growth and to establish a reserve fund \"to protect against having to suspend [the] program in the fact of more rapid growth than is projected.\" In response to the SBA's request for additional funding for the program, Congress held congressional hearings to reassess the need for the program and to explore options concerning how to finance the program's proposed expansion. The financing discussions focused on the relative merits of relying primarily on higher fees to increase the program's revenue, reductions in the guarantee percentage to reduce the program's expenses, or additional appropriations to finance the program's proposed expansion. Although the SBA has periodically increased the program's fees and later instituted a tiered system of guarantee percentages, historically, the SBA has tried to keep the program's fees as low as economically feasible and the guarantee percentage as high as economically feasible to encourage the program's use. As an SBA official testified before Congress in 1975: SBA's loss exposure could be reduced by a decrease in the guarantee extended to sureties from 90% to 80%. Before proceeding with this recommendation, a thorough analysis will have to be made of the adverse effect on the willingness of sureties to participate in the program which would result from the increase from 10% to 20% of the sureties' share of the loss potential. An increase in contractor's fees would obviously be beneficial to the operating income of the program, but would also increase the bids which small business-contractors would have to make, thus placing them at a competitive disadvantage with contractors with more ready access to bonding. Moreover, as mentioned previously, the SBA is required by statute to ensure that the fees are the lowest \"that experience under the program shows to be justified.\" Determining the program's appropriate size became a recurring theme at congressional hearings, and continues to be of congressional interest today. For example, Congress has regularly requested testimony from representatives of the surety bond industry and various construction organizations concerning the extent to which the program is necessary to assist small businesses generally, and minority-owned small businesses in particular, in gaining access to surety bonds. Congress has also periodically asked the Government Accountability Office (GAO) to examine the need for the SBA's surety bond guarantee program and to recommend ways to improve the program's management. That testimony and GAO's reports have supported a need for the program, but, as will be discussed, have had somewhat limited usefulness in helping Congress determine the program's appropriate size. In 1974, Congress responded to the SBA's request for additional funding by passing P.L. 93-386 , the Small Business Amendments of 1974. It established a separate Surety Bond Guarantees Revolving Fund account (hereinafter Revolving Fund) within the Department of the Treasury to support the program. The act also increased the total contract amount that could be guaranteed to $1 million from $500,000 and recommended that the Revolving Fund receive $35 million in additional funding. The Ford Administration objected to providing additional appropriations for the Revolving Fund. Instead, the Administration recommended that the Revolving Fund receive a $20 million transfer from the SBA's Business Loan and Investment Revolving Fund. The transfer would provide the program access to additional capital without affecting the federal budget deficit. Congress approved the Administration's proposal. As shown in Table 1 , the Revolving Fund received $130.5 million in additional appropriations for FY1976 through FY1979 and continued to receive additional appropriations during the 1980s and 1990s. In addition, the program's bond limit was increased to $1.25 million from $1 million in 1986. As discussed below, the increased appropriations and bond limit were not sufficient to continue the program's growth. Instead, both the number and amount of final surety bonds guaranteed by the SBA began to slowly diminish. This general trend continued until the maximum individual surety contract amount was increased, first on a temporary basis by P.L. 111-5 , the American Recovery and Reinvestment Act of 2009, and later, on a permanent statutory basis, by P.L. 112-239 , the National Defense Authorization Act for Fiscal Year 2013. As shown in Table 1 , Congress did not appropriate funding for the Revolving Fund from FY2000 to FY2004, allowing the program to cover the cost of claim defaults through its reserve. Congress also increased the program's bond limit to $2 million from $1.25 million in 2000. Congress provided the Revolving Fund $2.9 million in FY2005, $2.86 million in FY2006, $2.86 million in FY2007, and $3 million in FY2008. During the 111 th Congress, P.L. 111-5 provided the Revolving Fund a separate appropriation of $15 million to support a temporary increase in the program's bond limit to $5 million, and up to $10 million if a federal contracting officer certified in writing that a guarantee in excess of $5 million was necessary, from $2 million. Those funds were in addition to the $2 million appropriation that had already been approved for FY2009. In FY2010, the Revolving Fund received $1 million. Congress has not approved appropriations for the Revolving Fund since then, noting that there have been sufficient funds in the program's reserve to cover the cost of anticipated claim defaults. As mentioned previously, the SBA relied primarily on increased appropriations to finance the program's expansion during the 1970s, but it also increased the program's fees charged to applicants and sureties. For example, in 1976, the SBA increased its fees to sureties to 20% from 10% of the bond premium, instituted a deductible clause on bond claims, and generally limited its approval for bid, participation, and performance bonds to $250,000 unless specified circumstances were met. In 1977, it increased the contractor applicant fee for payment and performance bonds to 0.5% from 0.2% of the contract price upon obtaining the contract. The program's current fee structure is discussed later in this report. Both the number and amount of final surety bonds guaranteed by the SBA increased relatively rapidly during the 1970s (see Table A-1 in the Appendix). The number of final surety bonds guaranteed by the SBA increased from 1,339 in FY1972 to 20,095 in FY1979, and the amount guaranteed by the SBA increased from $94.4 million in FY1972 to $1.39 billion in FY1979. During the 1980s and 1990s, both the number and amount of final surety bonds guaranteed by the SBA generally declined, in both nominal and inflation-adjusted dollars. A review of congressional testimony during that period suggests that there was no single, discernible factor to account for the program's slow contraction. Because the demand for surety bonds tends to fluctuate with changes in the economy, the program might have been expected to contract somewhat during recessions, but the economy experienced periods of both economic growth and decline during the 1980s and 1990s. There also was no indication that the ability of small businesses to access surety bonds in the private marketplace without the SBA's assistance had materially improved, which, if that had been the case, might have contributed to the decline by reducing the number of small businesses applying for assistance. One possible contributing factor to the decline in SBA-guaranteed surety bonds during that period was the continuing reluctance of many surety companies to participate in the program, either because they did not view the program as particularly profitable or they \"had developed alternative methods to the program, such as requiring collateral or funds controls and underwriting programs based in part on credit scores, in order to write small and emerging contractors.\" Another possible contributing factor was a change in the way the program was perceived by congressional leaders and their reluctance to provide additional resources to continue the program's expansion. During the 1970s, at congressional hearings, witnesses praised the program as a great success in helping small businesses access surety bonds and compete for government contracts. During the 1980s and 1990s, congressional hearings focused less on the program's successes and more on its shortcomings. For example, in 1982, the chair of the Senate Committee on Small Business indicted that the program was subject to \"the most insidious types of fraud,\" including \"evidence of involvement of organized crime figures.\" In addition, reports by both GAO and the SBA's inspector general questioned the SBA's management of the program, arguing, among other things, that the SBA lacked useful underwriting guidelines for surety companies and adequate procedures for verifying applicants' information. During the 1980s, the SBA guaranteed, on average, 11,840 final surety bonds each fiscal year, with the SBA's share of those bonds' value averaging $1.0 billion. During the 1990s, the SBA guaranteed, on average, 5,859 final surety bonds each fiscal year, with the SBA's share of those bonds' value averaging $823 million. During the first decade of the 2000s, the SBA guaranteed, on average, about 1,802 final surety bonds each fiscal year, with the SBA's share of those bonds' value averaging about $385 million. Since then, as indicated in Table 2 and Table A-1 , the number and amount of final surety bonds guaranteed by the SBA has generally increased. This increase is likely due to generally improving economic conditions and the increase in 2013 of the maximum individual contract amount that could be guaranteed from $2 million to $6.5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The surety bonding process begins when a contractor applies for a bond. As GAO has reported Surety companies are generally corporations that are licensed under various insurance laws and, under their charters, have legal power to act as a surety (making themselves responsible for another's obligations) for others. Most surety companies accept business only through independent agents and brokers. In screening a bond applicant, a surety attempts to measure the contractor's ability to undertake and complete the job. When the surety's evaluation of the contractor's acceptability to perform the contract is favorable, the surety underwrites the bond. If the surety does not provide a bond to the bond applicant, the appropriate forms are forwarded to SBA for consideration of a surety bond guarantee. Initially, the SBA surety guaranteed program's bonds were underwritten and issued by large, \"standard\" surety companies. However, these companies' participation in the program soon began to decline, reportedly because of the administrative burdens associated with the program, such as the SBA's requirement that sureties submit all bond applications to the SBA for review and approval. In addition, the administrative costs of dealing with relatively small bonds versus relatively large ones may have also played a role in the larger, standard surety companies leaving the program. As a congressional witness testified in 1976: You have a professional underwriter, who ... is going to be asked to spend 3 or 4 days looking into a $25,000 first-time application. There are many expenses involved. That same underwriter could very easily be writing four or five bonds for $10 million for contractors that everyone knows can perform. And it becomes a matter of how much time and resources can the surety industry devote to this type of business. Another reason may have been the outbreak of the Israeli-Egyptian War in 1973, which was followed by a tripling of oil prices and double-digit inflation. This led to the failure of many smaller contracting companies. In response to the economic downturn, many surety companies enhanced their underwriting standards to protect themselves from rising defaults. As a result, many of the larger surety companies became increasingly reluctant to participate in a program in which the profit margins were relatively small given the required paperwork and the program's limitation on the bond amount, and when the risk of defaults was at a historically high level. As standard sureties left the program, \"specialty\" surety companies filled the void. Initially, specialty sureties devoted almost all their business exclusively to SBA-guaranteed surety bonds. These companies later expanded their business into offering other high-risk bonds not normally handled by standard sureties. Specialty sureties typically required the contractor to provide collateral for the projects they bonded, and, in most cases, charged higher premiums than standard sureties. In 1982, the SBA invited officials from the Surety Association of America, representing the standard surety companies, to recommend ways to encourage their participation in the program. As mentioned previously, at that time, some specialty surety companies had been accused of associating with organized crime and GAO and the SBA's inspector general had reported fraud and mismanagement in the program. This may help to explain why the SBA was interested in encouraging the larger, more established surety companies to return to the program. The SBA also hoped that greater participation by the larger sureties would lead to lower premiums for small business contractors. During this outreach period, standard surety companies indicated a willingness to increase their participation in the program if the SBA would create a second special program, similar to the SBA's 7(a) loan guarantee program's Preferred Lenders Program. Under the proposal, a surety meeting specified qualification standards would be designed as a \"preferred surety\" and would be allowed to issue SBA-guaranteed surety bonds prior to receiving the SBA's approval. To participate in the preferred program, the surety's underwriting and administrative standards and procedures would be pre-approved by the SBA, and the surety's decisions would be subject to regular, annual audits. In addition, the SBA's reporting and access to records requirements would be retained. As a measure of their confidence in their own underwriting standards and claims decisions, the standard surety firms indicated that they would accept a 70% guarantee against losses as opposed to the then-allowed 80% or 90% guarantee against losses, as long as firms would not be required to seek the SBA's prior approval for underwriting decisions, bond administration, and claims procedures. Congress subsequently authorized the proposed Preferred Surety Bond Guarantee Program in P.L. 100-590 , the Small Business Administration Reauthorization and Amendment Act of 1988 (Title II, the Preferred Surety Bond Guarantee Program Act of 1988). The program was initially authorized on a three-year trial basis, and it was provided permanent statutory authority by P.L. 108-447 , the Consolidated Appropriations Act, 2005. As discussed in \" 114th Congress: Preferred Surety Bond Guarantee Rates \" below, P.L. 114-92 , the National Defense Authorization Act for Fiscal Year 2016, increased the SBA's guarantee for preferred sureties from not less than 70% to not less than 90% of losses. The SBA is authorized to guarantee surety bonds issued to contractors or subcontractors when the business, together with its affiliates, meets the SBA's size standard for the primary industry in which it is engaged; the bond is required; the applicant is not able to obtain such bond on reasonable terms and conditions without a guarantee; and there is a reasonable expectation that the applicant will perform the covenants and conditions of the contract, and the terms and conditions of the bond are reasonable in light of the risks involved and the extent of the surety's participation. The applicant must also \"possess good character and reputation,\" as demonstrated by (1) not being under indictment, being convicted of a felony, or having a final civil judgment stating that the applicant has committed a breach of trust or has violated a law or regulation protecting the integrity of business transactions or business relationships; (2) not having a regulatory authority revoke, cancel, or suspend a license held by the applicant, which is necessary to perform the contract; and (3) never having obtained a bond guarantee by fraud or material misrepresentation or failing to keep the surety informed of unbonded contracts or of a contract bonded by another surety. Applicants must also certify the percentage of work under the contract to be subcontracted. The SBA does not guarantee bonds for applicants that are primarily brokers or have effectively transferred control over the project to one or more subcontractors. Applicants must also certify that they are not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from transactions with any federal department or agency. In addition, the SBA will not guarantee a bond issued by a particular surety if that surety, an affiliate of that surety, or a close relative or member of the household of that surety or affiliate owns, directly or indirectly, 10% or more of the business applying for the guarantee. This conflict of interest prohibition also applies to ownership interests in any of the applicant's affiliates. As mentioned previously, the SBA guarantees contracts up to $6.5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. There is no limit to the number of bonds that can be guaranteed for any one contractor. The SBA guarantees up to 90% of the loss incurred and paid by a surety if the contract is $100,000 or less, or if the bond is issued on behalf of a socially and economically disadvantaged-owned and controlled small business, a qualified HUBZone small business, a veteran-owned and controlled small business, or a service-disabled veteran-owned and controlled small business. The guarantee rate is 80% if the contract is greater than $100,000, and the business is not owned and controlled by socially and economically disadvantaged individuals, a qualified HUBZone small business, or a veteran-owned or service-disabled veteran-owned small business. The SBA does not charge principals (small business applicants) application or bid bond guarantee fees. If the SBA guarantees a final bond, the principal must pay a contractor fee equal to a percentage of the contract amount, which is determined by the SBA and published in the Federal Register . The FY2019 contractor fee is 0.6% of the contract price for a final bond. The contractor fee is rounded to the nearest dollar, paid to the surety, and the surety remits the fee to the SBA. Sureties also charge principals a premium for issuing and servicing the bond. Sureties are not allowed to charge principals a premium that is more than the amount permitted under applicable state law. Premiums vary depending on the surety's assessment of the risk involved and job size; typically ranging from 1.5% to 3.0% of the contract amount. Sureties interested in participating in the Prior Approval Program or the Preferred Surety Bond Guarantee Program (PSB program) must apply in writing to the SBA. Applicants must be a corporation listed by the U.S. Treasury as eligible to issue bonds in connection with federal procurement contracts. The SBA considers several factors when evaluating sureties for the PSB program: the surety must have an underwriting limitation of at least $6.5 million on the Department of the Treasury's list of acceptable sureties; the surety must agree that it will neither charge a bond premium in excess of that authorized by the appropriate state insurance department nor impose any non-premium fee unless such fee is permitted by applicable state law and approved by the SBA; the surety's premium income from contract bonds guaranteed by any government agency (federal, state, or local) can account for no more than one-quarter of the surety's total contract bond premium income; and the surety must vest the underwriting authority for SBA guaranteed bonds to its own employees and final settlement authority for claims and recovery to employees in the surety's permanent claims department. The SBA also considers the surety's rating or ranking designation assigned by a recognized authority. Sureties participating in the PSB program are not eligible to participate in the Prior Approval Program. However, this prohibition does not apply to the surety's affiliates provided that the affiliate is not a participant in the PSB program, their affiliation has been fully disclosed to the SBA, and the affiliate has been approved to participate in the Prior Approval Program. Sureties in the Prior Approval Program must obtain the SBA's approval before issuing a guaranteed bond. Sureties in the PSB program may issue, monitor, and service SBA-guaranteed bonds without prior approval. However, these sureties must notify the SBA electronically of all bonds issued and, for final bonds, they must report and submit to the SBA on a monthly basis all contractor and surety fees that are due. These sureties are also subject to a periodic maximum guarantee authority amount set by the SBA. In addition, effective August 21, 2017, sureties are required, during their initial nine months in the PSB program, to obtain the SBA's prior written approval before executing a bond greater than $2 million. The SBA argued that it was in the taxpayer's interest to require newer sureties to \"demonstrate an understanding of the program before being allowed to issue bonds larger than $2 million without SBA's oversight.\" The terms and conditions of the SBA's bond guarantee agreements with the surety, including the guarantee percentage, may vary from surety to surety, depending on past experience with the SBA. The SBA may take into consideration, among other things, the rating or ranking assigned to the surety by recognized authorities, the surety's loss rate, average contract amount, average bond penalty per guaranteed bond, and the ratio of bid bonds to final bonds, all in comparison with other sureties participating in the same SBA Surety Bond Guarantee Program (Prior Approval or PSB programs). Sureties are required, among other things, to evaluate the credit, capacity, and character of a principal using standards generally accepted by the surety industry and in accordance with the SBA's standard operating procedures on underwriting and the surety's principles and practices on unguaranteed bonds; reasonably expect that the principal will successfully perform the contract to be bonded; provide bond terms and conditions that are reasonable in light of the risks involved and the extent of the surety's participation; be satisfied as to the reasonableness of cost and the feasibility of successful completion of the contract; ensure that the principal remains viable and eligible for the program; monitor the principal's progress on guaranteed contracts; maintain documentation of job status requests; take all reasonable action to minimize risk of loss, including, but not limited to, obtaining from each principal a written indemnity agreement, secured by such collateral as the surety or the SBA finds appropriate, which covers actual losses under the contract and imminent breach payments; and in the case of loss, pursue all possible sources of salvage and recovery. Participating sureties are subject to audits by SBA-selected and -approved examiners. Prior Approval Program sureties are audited at least once each year and PSB sureties are audited at least once every three years. The SBA does not charge sureties (or small businesses) application or bid bond guarantee fees. It does require sureties to pay a guarantee fee on each SBA-guaranteed bond (other than bid bonds). The surety fee, which is determined by the SBA and published in the Federal Register , is a percentage of the bond premium. The FY2019 surety fee is 20% of the bond premium that the surety charges the small business, rounded to the nearest dollar. The surety fee is due within 60 days after the SBA's approval of the prior approval payment or performance bond. The SBA does not receive any portion of a surety's non-premium charges. As shown in Table 2 , the number and amount of bid bonds guaranteed by the SBA has generally increased in recent years. For example, in FY2007, the SBA guaranteed 4,192 bid bonds totaling $1.7 billion. In FY2018, the SBA guaranteed 7,354 bid bonds totaling $4.7 billion. Table 2 also shows that the number and amount of SBA-guaranteed final bonds declined somewhat from FY2007 through FY2009 (coinciding with the 2007-2009 recession), and has generally increased since then. Recent increases are likely due to generally improving economic conditions and legislation that temporarily ( P.L. 111-5 ) and then permanently ( P.L. 112-239 ) raised the program's maximum individual contract amount from $2 million to $5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. As shown in Table 3 , excluding program costs of about $4 million annually, the program has experienced a net positive cash flow in each of the past 12 fiscal years. There is about $97 million in the Surety Bond Guarantee Program Revolving Fund. Historically, the program's default rate has averaged about 3% to 5%. According to the SBA, on average, the default rate on larger contracts tends to be lower than for smaller contracts and the recovery rate for larger contract defaults tends to be greater than for smaller contract defaults. Currently, 28 sureties participate in the Prior Approval Program and 6 participate in the PSB program. Agents empowered to represent a participating surety company are located, or licensed, in all 50 states, American Samoa, the District of Columbia, Guam, the Marshall Islands, Micronesia, the Northern Mariana Islands, Palau, Puerto Rico, and the Virgin Islands. About 80% of the SBA's surety bonds are issued through the Prior Approval Program and 20% through the PSB program. P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided the program an additional appropriation of $15 million and temporarily increased, from February 17, 2009, through September 30, 2010, the maximum bond amount from $2 million to $5 million. The act also authorized the SBA to guarantee a bond of up to $10 million if a federal contracting officer certified in writing that a guarantee in excess of $5 million was necessary. It also revised the program's size standard to \"the size standard for the primary industry in which such business concern, and the affiliates of such business concern, is engaged, as determined by the Administrator in accordance with the North American Industry Classification System.\" The new size standard (e.g., up to $36.5 million in average annual receipts over the previous three years for most heavy construction contractors, and up to $15 million in average annual receipts over the previous three years for specialty trade contractors) increased the number of businesses that qualified for the program. Using its rulemaking authority, the SBA made ARRA's temporary size standard permanent on August 11, 2010. Proponents argued that the increased bond limit and size were necessary to \"ensure that small businesses are able to secure the surety bonds they need to compete for contracts, grow, and hire more employees.\" They also argued that \"in our current economic recession, small businesses are finding it even more difficult to secure the credit lines necessary to get bonds in the private sector.\" In their view, the temporary changes would create \"significant opportunities to create jobs now in which small businesses will participate and be the driving engine for creation of new jobs in our country.\" There was no apparent organized opposition to these specific temporary changes to the Surety Bond Guarantee Program. However, there was opposition to ARRA's package of program enhancements for the SBA as a whole, which among other things, provided the SBA $730 million in additional funding, including $255 million for a temporary, two-year small business stabilization program to guarantee loans of $35,000 or less to small businesses for qualified debt consolidation, later named the America's Recovery Capital (ARC) Loan program and $375 million to temporarily subsidize fees for the SBA's 7(a) and 504/CDC loan guaranty programs and increase the 7(a) program's maximum loan guaranty percentage to 90%. Instead of modifying the SBA's program requirements and increasing the SBA's appropriation, opponents advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses, generate economic growth, and create jobs. On September 12, 2011, the Obama Administration advocated, as part of its proposed American Jobs Act, a temporary increase in the SBA surety bond limit to $5 million until the end of FY2012. The Administration argued that raising the program's bond limit \"will make it easier for small businesses to take advantage of contracting opportunities generated by the American Jobs Act's proposed infrastructure investments.\" On December 7, 2012, the Administration also recommended, as part of its request for an additional $60.4 billion in federal resources to address damage caused by Hurricane Sandy, that the SBA surety bond limit be increased to $5 million to enable \"more small businesses to participate in the recovery efforts.\" There were several legislative efforts during the 112 th Congress to increase the program's bond limit. S. 1334 , the Expanding Opportunities for Main Street Act of 2011, and its companion bill in the House, H.R. 2424 , would have reinstated and made permanent ARRA's higher limits (up to $5 million and up to $10 million if a federal contracting officer certifies in writing that a guarantee in excess of $5 million is necessary). Neither of these bills was reported by a committee for consideration by the House or the Senate. S. 1660 , the American Jobs Act of 2011, and its companion bill in the House, H.R. 12 , would have provided $3 million in additional funding to pay for the cost of temporarily increasing the program's bond limit to $5 million from $2 million until the end of FY2012. Cloture on a motion to proceed to S. 1660 was not invoked in the Senate on October 11, 2011, by a vote of 50 to 49. H.R. 12 was not reported by a committee for consideration in the House. On December 12, 2012, the Senate Committee on Appropriations released its draft of the Hurricane Sandy Emergency Assistance Supplemental bill. It included a provision to increase the program's bond limit to $5 million. This provision was later removed following congressional approval of H.R. 4310 , the National Defense Authorization Act for Fiscal Year 2013, which became law ( P.L. 112-239 ) on January 2, 2013. It increased the program's bond limit to $6.5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. There was relatively little discussion in the legislative record concerning the reasons for increasing the surety bond program's bond limits, and even less discussion of the reasons for not increasing the limits. Hearings were not held on S. 1334 and H.R. 2424 . Also, only one witness during hearings on H.R. 4310 addressed the SBA surety bond program. That witness supported an increase in the surety bond limit to $5 million, and up to $10 million if a contracting officer certifies its necessity. Advocates argued that bond limits should be raised to bring them more in line with the contracting amounts for other small business programs, such as the 8(a) Minority Small Business and Capital Ownership Development Program, the Historically Underutilized Business Zone (HUBZone) program, the Women-Owned Small Business Federal Contract program, and the Service-Disabled Veteran-Owned Small Business Concerns Program. For example, under 8(a) Minority Small Business and Capital Ownership Development Program, federal contracting officials, at that time, could provide a sole source award to a 8(a) small business if the anticipated award price of the contract did not exceed $6.5 million for manufacturing contracts (now $7.0 million) or $4 million for other contract opportunities, and the contracting officer believed that the award could be made at a fair and reasonable price. Advocates argued that raising the program's bond limit would provide more consistency across small business contracting programs and make it easier for agencies experiencing difficulty issuing contracts in increments of $2 million or less (e.g., the Department of Defense [DOD], the General Services Administration, and the Department of State) to participate in the program. Advocates also argued that small businesses awarded contracts exceeding $2 million under the other small business contracting programs are at risk of not being able to complete those contracts due to difficulties in securing a surety bond. For example, the House Committee on Armed Services' Panel on Business Challenges in the Defense Industry argued that the SBA surety bond program's limit should be increased to $6.5 million to match the 8(a) program's $6.5 million threshold for manufacturing contracts and to \"increase the opportunities for small businesses to compete for federal contracts, especially in those departments, such as the Department of Defense, where the average size of construction contracts awarded to small businesses for FY2010 exceeded $5.9 million—nearly triple the size for which SBA can provide bonding support.\" There was no organized opposition to raising the program's bond limits. One possible argument that could have been raised is that higher limits could lead to higher amounts being guaranteed by the SBA and, as a result, increase the risk of program losses. However, the SBA's experience with Recovery Act bonds (over $2 million) suggested that raising the limit may not lead to an increased risk of program losses. The SBA reported that the program's default rate on Recovery Act bonds was lower, in 2009 and 2010, than for its other bonds. The SBA guaranteed 166 Recovery Act bid bonds valued at $518 million and 52 Recovery Act final bonds valued at $145.4 million. There were two defaults, with a bond value of $2.7 million and $2.2 million, respectively. In an effort to enhance surety participation in the SBA's program, H.R. 776 , the Security in Bonding Act of 2013, introduced and referred to the House Committee on the Judiciary and the House Committee on Small Business on February 15, 2013, would have increased the PSB program's guarantee rate from not to exceed 70% to not to exceed 90% of losses. The bill was reported favorably by both committees on May 21, 2014, and included in H.R. 4435 , the Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015, which was passed by the House on May 22, 2014. This provision was not included in the final version of the bill which was subsequently passed by Congress. Advocates of increasing the PSB program's guarantee rate argued that Despite the different guarantee amounts and the differing levels of review, both the PAP [Prior Approval Program] and PSBP [Preferred Surety Bond Guarantee Program] have similar levels of default. However, over the years, the PSBP program has become less effective for small businesses since only four sureties currently participate in the program because the guarantee rates are no longer competitive enough to encourage commercial sureties to participate. Therefore, since the PSBP is the more efficient program and … does not expose taxpayers to any risk, this legislation amends the SBIA [Small Business Investment Act] to standardize the guarantee rate at 90 percent. The SBA did not formally endorse the proposed guarantee rate increase. However, in its FY2015 and FY2016 congressional budget justification documents, the SBA indicated that it \"will investigate establishing a single guaranty percentage in the Prior Approval and PSB programs and restructuring the Prior Approval program.\" Also, when asked at a congressional hearing held on May 23, 2013, about the proposed guarantee rate increase, an SBA official testified that We are looking very closely at the program. We have seen a decline in the preferred sureties going down from 50% to 14% of our program, which is a very small number. We would like to see more participation in that program. Because of the additional cash flow we have, we do not expect it to increase our costs. And we have some history in our other programs that demonstrate that having the same guarantee level is not a disincentive. There was no discussion in the legislative record during the 113 th Congress opposing an increase in the guarantee rate for the PSB program. One possible objection might have been that increasing the guarantee rate could increase the risk of program losses and result in higher program fees. Higher fees, in turn, could cause hardship for some companies seeking a surety bond. H.R. 838 , the Security in Bonding Act of 2015, was introduced and referred to the House Committee on the Judiciary and the House Committee on Small Business on February 10, 2015. The bill would have increased the PSB program's guarantee rate from not to exceed 70% to not to exceed 90%, specify requirements concerning the pledge of assets by individual sureties, and require GAO to examine the effects of these changes on small businesses. The House-passed version of H.R. 1735 , the National Defense Authorization Act for Fiscal Year 2016, included H.R. 838 's provisions. The Senate-passed version of the bill did not. The conference agreement for H.R. 1735 , which became P.L. 114-92 , included H.R. 838 's provision to increase the PSB program's guarantee rate from not to exceed 70% to not to exceed 90% of losses and its provision to specify requirements concerning the pledge of assets by individual sureties, subject to a one-year delay \"to allow for the necessary rulemaking.\" Congress specified additional requirements concerning the pledge of assets by individual sureties as a means to ensure that \"individual sureties have sufficient assets to redeem the bonds.\" The SBA's final rule implementing the increased PSB program's guarantee rate was effective as of September 20, 2017. The SBA has reported that it is focusing on \"strengthening relationships with individual surety companies and the large network of bond agents and producers across the country in order to reach more small businesses in need of bonding.\" As part of this outreach effort, the SBA has reported that it will continue to emphasize \"process improvements that will streamline the application requirements for small businesses and surety companies and their agents.\" For example, in August 2012, the SBA announced a \"Quick APP\" for surety bonds up to $250,000 that provides a streamlined underwriting and application process by combining \"two applications into one to make it easier and faster for small businesses and contractors, including veteran-owned small businesses, to compete for contracts.\" The SBA increased the Quick APP (now called the Quick Bond Program) eligibility threshold to $400,000 in 2017. In addition, the SBA reported in 2016 that it was also considering combing the Prior Approval Program and PSB program into a single program featuring the streamlined bond approval and monitoring processes under the PSB program. Several industry groups, including the National Association of Surety Bond Producers and The Surety & Fidelity Association of America, have recommended that the programs be merged, the emphasis on reduced regulatory burdens under the PSB program be maintained, and the program's fees kept as low as economically feasible as a means to encourage more sureties to participate in the program. Perhaps because the proposal has not been formally introduced as a bill, there are no public statements opposing the merger of the two programs. Opposition might come from (1) those who are not convinced that the Surety Bond Guarantee Program is necessary to supplement the private market for surety bonds and would prefer that the program be eliminated rather than reformed or (2) those who believe that a federal program is necessary to supplement the private market for surety bonds, but the existing program is sufficient to meet that need and does not require changes to encourage its expansion. Still other opponents might argue that providing additional authority to sureties to approve and monitor bonds could increase the risk of defaults and program losses. Throughout the program's history, both congressional testimony and GAO examinations have indicated that smaller contracting firms, and especially minority-owned and women-owned small business contracting firms, often have a more difficult time accessing surety bonds in the private marketplace than larger firms. For example, in 1995, GAO reported that \"it is not unusual for a small construction company to have some difficulty in obtaining a surety bond.\" GAO found that about one in three of the smallest contracting firms it surveyed, compared with about one in six of the larger contracting firms it surveyed, reported that they were required to provide collateral. GAO also reported The experiences of the minority-owned firms differed from those of the firms not owned by minorities in several areas. For example, these firms were more likely to be asked to provide certain types of financial documentation, as well as to provide collateral or to meet other conditions; were more likely to be denied a bond and to report losing an opportunity to bid because of delays in processing their request for a bond; and were more likely to depend on jobs requiring bonds for a higher proportion of their revenues. The women-owned firms differed from the firms not owned by women in a few key respects. For example, they … were more likely to be asked to provide more types of financial or other documentation to obtain a bond. In addition, the minority-owned firms reported more often than the firms not owned by minorities that they had to (1) establish an escrow account controlled by the surety company, (2) hire a CPA or a management or consulting firm selected by the surety company to manage the contract, and (3) enter into an arrangement that allows the surety company to manage the job even when the firm is not in default. Although congressional testimony and GAO examinations have supported the need for a program such as the SBA's Surety Bond Guarantee Program, that testimony and GAO's surveys of businesses have been somewhat less useful in helping Congress determine the appropriate size for the program. For example, a review of congressional hearings since the program's inception suggests that congressional witnesses representing the surety companies and various construction organizations, including minority-owned small contracting businesses, have focused their testimony on the need to reduce the SBA's paperwork requirements, which are designed to prevent fraud but increase the sureties' costs; keep the program's fees as low as possible; and keep the program's guarantee rates as high as possible. The SBA's testimony has tended to focus on the need to attract more sureties to the program so that it can reverse the slow downward trajectory the program has experienced over the past two decades in the number and amount of final bonds guaranteed. There has been relatively little testimony provided concerning the broader issue of how large the program should be in comparison with the private sector and what measures or metrics could be used to help make that determination. One possible starting point for determining the program's size in comparison with the private sector is to examine congressional testimony concerning the supply and demand for sureties in the private sector. That testimony suggests that the supply and demand for sureties tends to fluctuate with changes in the overall economy, with the supply of sureties contracting during economic recessions and expanding during economic expansions and the demand for sureties slowing during economic recessions and increasing during economic expansions. Arguably, federal policies could take these fluctuations into account—enacting policies that expand federal support for surety guarantees when supply is tight and reducing federal support for surety guarantees when supply is more plentiful. Of course, when making these decisions, it is necessary to first establish measures or metrics to determine current market conditions. In addition, this line of reasoning assumes that having a federal presence in the surety marketplace is desirable, an assumption not held by all. Ultimately, although having established measures or metrics concerning the supply and demand for surety bonds might be helpful in determining the appropriate size for the SBA's Surety Bond Guarantee Program, that decision will largely rest on personal views concerning the role of the federal government in the private marketplace and the level of acceptable risk in assisting small businesses to gain greater access to surety bonds.", "summary": "The Small Business Administration's (SBA's) Surety Bond Guarantee Program is designed to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. The program guarantees individual contracts of up to $6.5 million, and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee currently ranges from 80% to 90% of the surety's loss if a default occurs. In FY2018, the SBA guaranteed 10,800 bid and final surety bonds with a total contract value of nearly $6.5 billion. A surety bond is a three-party instrument between a surety (who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract's terms and conditions. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. Surety bonds encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract's terms and conditions. Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors—prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States—to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government. P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, increased the program's bond limit to $6.5 million, or up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The limit had been $2 million since 2000, with a temporary increase from February 17, 2009, through September 30, 2010, to $5 million, and up to $10 million if a federal contracting officer certified in writing that such a guarantee was necessary. Advocates of raising the program's bond limit argued that doing so would increase contracting opportunities for small businesses and bring the limit more in line with limits of other small business programs, such as the 8(a) Minority Small Business and Capital Ownership Development Program and the Historically Underutilized Business Zone (HUBZone) Program. Opponents argued that raising the limit could lead to higher amounts being guaranteed by the SBA and, as a result, increase the risk of program losses. This report examines the program's origin and development, including (1) the decision to supplement the original Prior Approval Program with the Preferred Surety Bond Guarantee Program that initially provided a lower guarantee rate (not to exceed 70%) than the Prior Approval Program (not to exceed 80% or 90%, depending on the size of the contract and the type of small business) in exchange for allowing preferred sureties to issue SBA-guaranteed surety bonds without the SBA's prior approval; (2) P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, which increased the Preferred Surety Bond Guarantee Program's guarantee rate from not to exceed 70% to not to exceed 90% of losses; and (3) the decision to increase the program's bond limit.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) currently administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small businesses' access to capital; contracting programs to increase small businesses' opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to aid in their recovery from natural disasters; and small business management and technical assistance training programs to assist in business formation and expansion. Congressional interest in these programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs. This report examines appropriations for the SBA (new budget authority, minus rescissions and sequestration) over time, focusing on developments and trends since FY2000. This report also provides total available funding (which includes carryover from the prior fiscal year, carryover into the next fiscal year, account transfers, rescissions, and sequestration) and, for comparative purposes, actual and anticipated expenditures for the SBA's entrepreneurial development noncredit programs. SBA appropriations, as a whole, have varied significantly from year to year since FY2000 and across all three major SBA spending categories: appropriations for disaster assistance, business loan credit subsidies, and \"other programs,\" a spending category that includes appropriations for salaries and expenses, business loan administration, the Office of Inspector General, the Office of Advocacy, and entrepreneurial development noncredit programs. The variation in appropriations for disaster assistance since FY2000 is largely due to supplemental appropriations provided to address disaster needs arising from the impact of major hurricanes. Business loan credit subsidies represent the net present value of cash flows to and from the SBA over the life of the agency's loan portfolios. For guaranteed loans, the net present value of cash flows is affected by several factors, but it is primarily the difference between the cost of purchasing loans that have defaulted and the revenue generated from fees and collateral liquidation. For direct (Microloan) lending, it is primarily the cost of offering below-market interest rates to Microloan intermediaries. The variation in appropriations for SBA business loan credit subsidies since FY2000 is primarily due to the impact of changing economic conditions on the SBA's guaranteed loan portfolios. During good economic times, revenue from SBA fees and collateral liquidation is typically sufficient to cover the SBA's cost of purchasing guaranteed loans that have defaulted. During and immediately following economic slowdowns, however, revenue from SBA fees and collateral liquidation is typically insufficient to cover the SBA's cost of purchasing guaranteed loans that have defaulted. The shortfall occurs because the SBA's cost of purchasing guaranteed loans tends to increase when the economy slows (primarily because guaranteed loans are more likely to default during and immediately following recessions) and revenue from loan liquidation tends to be constrained during slow economic times (primarily because commercial real estate values typically fall during and immediately following recessions). As a result, additional appropriations are needed to cover these expenses, which are guaranteed by the \"full faith and credit of the United States.\" Since FY2000, the variation in appropriations for the other programs spending category is attributable primarily to congressional response to changing economic conditions. As the report will discuss, appropriations for this spending category have generally increased at a pace that exceeds inflation. In addition, Congress approved significant, temporary increases in appropriations for SBA programs in the other programs spending category in FY2009 and FY2010. It approved these temporary increases primarily as a means to enhance small businesses' access to capital, which had become constrained during and immediately following the Great Recession (December 2007 to June 2009). The SBA's appropriations for FY1954 through FY1999 are provided in the Appendix . As shown in Table 1 , the SBA's appropriations have varied significantly since FY2000, ranging from a high of $2.359 billion in FY2018 to a low of $571.8 million in FY2007. Much of this volatility is due to significant variation in appropriations for disaster assistance, which ranged from a high of $1.7 billion in FY2006 to a low of $0 in FY2009. This variation is attributable primarily to supplemental appropriations provided to address disaster needs arising from the impact of major hurricanes, such as Hurricanes Katrina, Sandy, Harvey, Irma, and Maria. In addition, as shown in Table 1 , appropriations for business loan credit subsidies have varied significantly since FY2000, ranging from a high of $319.7 million in FY2013 ($337.3 million before sequestration and rescission) to a low of $1.3 million in FY2006 and FY2007. As mentioned previously, the variation in appropriations for business loan credit subsidies results primarily from the impact of changing economic conditions on the SBA's loan portfolios. During good economic times, revenue from fees and collateral liquidation is typically sufficient to cover the costs of purchasing defaulted loans. During and immediately following recessions, revenue from fees and collateral liquidation is typically not sufficient to cover those costs. As shown in Table 1 , appropriations for the all other programs category have also varied since FY2000, ranging from a high of $1.6253 billion in FY2010 to a low of $455.6 million in FY2007. Much of this variation resulted from significant, temporary increases in appropriations for the SBA's other programs in FY2009 ($724.0 million) and FY2010 ($962.5 million). These additional appropriations were approved primarily as a means to enhance small businesses' access to capital, which had become constrained during and immediately following the Great Recession. As mentioned previously, from FY2000 to FY2019, appropriations for the SBA's other programs spending category, as a whole, have exceeded the rate of inflation. For comparative purposes, Table 1 also presents the SBA's total available funds. As indicated in the table, the SBA's carryovers and account transfers tend to reduce variation in its budget from one fiscal year to the next. Much of this \"evening out\" process is due to disaster assistance appropriations, which are provided in one fiscal year and then typically spent over several fiscal years. The following section examines appropriations and total available funding for FY2000-FY2019 for the five main components of the SBA's other programs spending category: (1) salaries and expenses, (2) business loan administration, (3) the Office of Inspector General (OIG), (4) the Office of Advocacy (Advocacy), and (5) entrepreneurial development (ED) noncredit programs. The SBA's salaries and expenses account currently provides funding for the following: office operating budgets, which are used by program and administrative offices for daily operations, such as travel, supplies, and contracted services; agency-wide costs, such as rent and telecommunications, which are managed centrally; employee compensation and benefits, which are also managed centrally; and reimbursable expenses for programs for which the SBA receives reimbursable budget authority from other federal government agencies. Several adjustments were made to the SBA's reported appropriations for its salaries and expenses account to enable meaningful comparisons over time. For example, prior to FY2014, appropriations for the SBA's ED programs were included in the salaries and expenses account. They now have their own, separate appropriations account. Therefore, to allow for meaningful comparisons with current appropriations, Table 2 lists and deducts the reported appropriations for ED programs prior to FY2014 from the reported appropriations for salaries and expenses. In addition, the SBA previously included appropriations for congressional initiatives (earmarks) under the salaries and expenses account. Therefore, to allow for meaningful comparisons with current appropriations and focus the comparison on administrative expenses, appropriations for earmarks are deducted from the reported appropriations for salaries and expenses. Prior to FY2012, Advocacy was funded through the salaries and expenses' executive direction subaccount. Advocacy now has its own, separate appropriations account. To allow for meaningful comparisons with current appropriations, Table 2 lists Advocacy's funding provided through the salaries and expenses' executive direction subaccount prior to FY2012 and deducts that amount from the reported appropriation s for salaries and expenses . As discussed in greater detail below (see \"Office of Advocacy\"), data concerning Advocacy's funding provided through the salaries and expenses' executive direction subaccount are not available for FY2006-FY2010. However, in FY2003, FY2004, and FY2005, Advocacy's funding provided through the salaries and expenses' executive direction subaccount was 79% of its reported total cost. The estimates provided in the table for FY2006-FY2010 were derived by multiplying Advocacy's total program cost reported for each of those fiscal years by 79%. As shown in Table 2 , the SBA's appropriations for salaries and expenses have varied from year to year, with increases in some years and decreases in others. Overall, appropriations for the SBA's salaries and expenses have increased from $176.490 million in FY2000 to $267.500 million in FY2019. This increase has exceeded the rate of inflation. The SBA has statutory authorization to transfer appropriations from the business loan administration account into the salaries and expenses account. As evidenced by the amounts listed in the total available funds column in the table, the SBA exercised that authority in every fiscal year from FY2000 to FY2018 (and is expected to do so again in FY2019), transferring the entire appropriation for business loan administration into the salaries and expenses account in each of those fiscal years. Appropriations for the SBA's business loan administration account have varied since FY2000, increasing in some years and decreasing in others (see Table 3 ). Overall, appropriations for SBA business loan administration increased from $129 million in FY2000 to $155.150 million in FY2019. The program's recommended appropriations have not kept pace with inflation. As evidenced by the $0.0 balance in the total funds available column for the business loan administration account, the SBA has routinely transferred all business loan administration appropriations to the salaries and expenses account. The combined appropriations for SBA salaries and expenses and business loan administration increased from $305.490 million in FY2000 to $422.650 million in FY2019. This increase has not kept pace with inflation. According to the SBA, the OIG's mission is to \"provide independent, objective oversight to improve the integrity, accountability, and performance of the SBA and its programs for the benefit of the American people.\" The office was created within the SBA by the Inspector General Act of 1978 ( P.L. 95-452 , as amended). The inspector general, who is nominated by the President and confirmed by the Senate, directs the office. The Inspector General Act provides the OIG with the following responsibilities: promote economy, efficiency, and effectiveness in the management of SBA programs and supporting operations; conduct and supervise audits, investigations, and reviews relating to the SBA's programs and support operations; detect and prevent fraud, waste, and abuse; review existing and proposed legislation and regulations and make appropriate recommendations; maintain effective working relationships with other governmental agencies and nongovernmental entities regarding the inspector general's mandated duties; keep the SBA administrator and Congress informed of serious problems and recommend corrective actions and implementation measures; comply with the comptroller general's audit standards; avoid duplication of Government Accountability Office activities; and report violations of federal criminal law to the U.S. attorney general. As shown in Table 4 , the OIG's appropriations have increased from $11.405 million in FY2000 to $21.900 million in FY2019. This increase has exceeded the rate of inflation. The OIG typically receives a transfer of appropriations from the disaster assistance account for auditing expenses. It was also provided additional appropriations in FY2006, FY2013, and FY2018 for expenses related to the review of SBA disaster loans following major hurricanes (e.g., Hurricanes Katrina, Rita, and Wilma in 2005, Hurricane Sandy in 2012, and Hurricanes Harvey, Irma, and Maria in 2018) and in FY2009 to conduct reviews and audits of $730 million provided to the SBA by P.L. 111-5 , the American Recovery and Reinvestment Act of 2009. The SBA indicates that its Office of Advocacy is \"an independent voice for small business within the federal government.\" The chief counsel for Advocacy, who is nominated by the President and confirmed by the Senate, directs the office. Advocacy's mission is to \"encourage policies that support the development and growth of American small businesses\" by intervening early in federal agencies' regulatory development processes on proposals that affect small businesses and providing Regulatory Flexibility Act compliance training to federal agency policymakers and regulatory development officials; producing research to inform policymakers and other stakeholders on the impact of federal regulatory burdens on small businesses, document the vital role of small businesses in the economy, and explore and explain the wide variety of issues of concern to the small business community; and fostering two-way communication between federal agencies and the small business community. As shown in Table 5 , Advocacy's funding has increased from $5.620 million in FY2000 to $9.120 million in FY2019. This increase has exceeded the rate of inflation. P.L. 111-240 , the Small Business Jobs Act of 2010, enhanced Advocacy's independence by ending the practice of funding Advocacy through the SBA's salaries and expenses' executive direction subaccount. Instead, P.L. 111-240 requires the President to provide a separate statement of the appropriations request for Advocacy, \"which shall be designated in a separate account in the General Fund of the Treasury.\" The act also requires the SBA administrator to provide Advocacy with \"appropriate and adequate office space at central and field office locations, together with such equipment, operating budget, and communications facilities and services as may be necessary, and ... necessary maintenance services for such offices and the equipment and facilities located in such offices.\" In addition, Congress has provided Advocacy its own, separate appropriations amount since FY2012. As mentioned previously, prior to FY2012, the SBA reported Advocacy's total program cost, which includes funding provided through the salaries and expenses' executive direction subaccount, agency-wide overhead costs (rent, telecommunications, etc.), and other support costs (e.g., management and administrative support, including human resources support). From FY2000 to FY2005, the SBA provided relatively detailed information concerning Advocacy's budget, including the amount of funding Advocacy received through the salaries and expenses' executive direction subaccount. Also, Advocacy's FY2013 congressional budget justification document included the amount of funding Advocacy received through the salaries and expenses' executive direction subaccount in FY2011. However, those data are not available for FY2006-FY2010, and it was therefore necessary to estimate Advocacy's funding from the salaries and expenses' executive direction subaccount for those years. The estimates provided in the table were derived by multiplying Advocacy's total program cost for each of those fiscal years by 79%, which was the proportion of Advocacy's total program costs provided from the salaries and expenses' executive direction subaccount in FY2003, FY2004, and FY2005. The SBA's entrepreneurial development (ED) noncredit programs provide a variety of management and training services to small businesses. Congress provides appropriations for eight management and technical assistance training programs: Small Business Development Centers, the Microloan Technical Assistance Program, Women Business Centers, SCORE, the Program for Investment in Microentrepreneurs (PRIME), Veterans Programs (including Veterans Business Outreach Centers, Boots to Business, Boots to Business: Reboot, Veteran Women Igniting the Spirit of Entrepreneurship [VWISE], and Entrepreneurship Bootcamp for Veterans with Disabilities), the 7(j) Technical Assistance Program, and the Native American Outreach Program; two relatively long-standing nontraining programs: the National Women's Business Council and HUBZone administration; three initiatives: the Entrepreneurial Development Initiative (Clusters), the Entrepreneurship Education Initiative, and Growth Accelerators; and the Step Trade and Export Promotion (STEP) Pilot Grant program. Initially, the SBA provided its own management and technical assistance training programs. Over time, however, the SBA has increasingly relied on third parties to provide that training. The SBA reports that more than 1 million aspiring entrepreneurs and small business owners receive training from an SBA-supported resource partner each year. Congress specifies appropriations in appropriations acts for the Small Business Development Center (SBDC) program, the Microloan Technical Assistance program, and the STEP program. Congress provides an overall appropriation for the SBA's ED programs and recommends appropriations for the SBA's other ED programs, typically in the conference agreement or \"Explanatory Statement\" accompanying the appropriations act. As a result, the following tables refer to appropriations for the SBDC and Microloan Technical Assistance programs and recommended appropriations for other ED programs. Although not legally binding, the SBA has traditionally adhered to these recommended funding amounts. SBDCs provide free or low-cost assistance to small businesses using programs customized to local conditions. SBDCs support small business in marketing and business strategy, finance, technology transfer, government contracting, management, manufacturing, engineering, sales, accounting, exporting, and other topics. They are funded by grants from the SBA and matching funds. There are 63 lead SBDC service centers, at least one in each state (with four in Texas and six in California), the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and American Samoa. These lead SBDC service centers manage more than 900 SBDC outreach locations. As shown in Table 6 , appropriations for SBDCs have increased from $84.179 million in FY2000 to $131.000 million in FY2019. This increase has exceeded the rate of inflation. In addition, as shown in the table, SBDCs received an additional $50 million in temporary funding in FY2010, which was spent over two fiscal years. The SBA reports actual and anticipated expenditures for its ED programs in its annual budget justification document. SBDC expenditures in FY2000-FY2018 and anticipated SBDC expenditures in FY2019 are presented in the table's last column for comparative purposes. The SBA's Microloan lending program is designed to address the perceived disadvantages faced by women, low-income, veteran, and minority entrepreneurs and business owners in gaining access to capital for starting or expanding their business (see P.L. 102-140 , the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1992). Under the Microloan program, the SBA provides direct loans to qualified nonprofit intermediary Microloan lenders who, in turn, provide \"microloans\" of up to $50,000 to small business owners, entrepreneurs, and nonprofit child care centers. The SBA's Microloan Technical Assistance program is part of the SBA's Microloan program but receives a separate appropriation. It provides grants to Microloan intermediaries to offer management and technical training assistance to Microloan program borrowers and prospective borrowers. There are currently 147 active Microloan intermediaries, serving 49 states, the District of Columbia, and Puerto Rico. As shown in Table 7 , the Microloan Technical Assistance program's appropriations have varied over the years. Overall, Microloan Technical Assistance Program appropriations have increased from $23.112 million in FY2000 to $31.000 million in FY2019. This increase has been less than the rate of inflation. Microloan Technical Assistance expenditures in FY2000-FY2018 and anticipated Microloan Technical Assistance expenditures in FY2019 are presented in the table's last column for comparative purposes. Women Business Centers (WBCs) provide financial, management, and marketing assistance to small businesses, including start-up businesses, owned and controlled by women. Since its inception, the program has targeted the needs of socially and economically disadvantaged women (see P.L. 100-533 , the Women's Business Ownership Act of 1988). Currently, there are 121 WBCs located throughout most of the United States and the territories. As shown in Table 8 , WBC's recommended appropriations have increased from $8.966 million in FY2000 to $18.500 million in FY2019. This increase has exceeded the rate of inflation. WBC expenditures in FY2000-FY2018 and anticipated WBC expenditures in FY2019 are presented in the table's last column for comparative purposes. The SBA provides financial assistance to SCORE (formerly the Service Corps of Retired Executives) to provide in-person mentoring and online training to small business owners and prospective owners. SCORE's 320 chapters and more than 800 branch offices are located throughout the United States and partner with more than 11,000 volunteer counselors, who are working or retired business owners, executives and corporate leaders, to provide management and training assistance to small businesses \"at no charge or at very low cost.\" As shown in Table 9 , SCORE's recommended appropriations have increased from $3.487 million in FY2000 to $11.700 in FY2019. This increase has exceeded the rate of inflation. SCORE expenditures in FY2000-FY2018 and anticipated SCORE expenditures in FY2019 are presented in the table's last column for comparative purposes. The Program for Investment in Microentrepreneurs (PRIME) provides grants to nonprofit microenterprise development organizations or programs that have \"a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; an intermediary; a microenterprise development organization or program that is accountable to a local community, working in conjunction with a state or local government or Indian tribe; or an Indian tribe acting on its own, if the Indian tribe can certify that no private organization or program referred to in this paragraph exists within its jurisdiction.\" As shown in Table 10 , PRIME's recommended appropriations have varied, starting at $14.964 million in FY2001 (the program's first recommended appropriation) and falling to $2 million in FY2006 and FY2007. PRIME has received $5.0 million since FY2015. PRIME expenditures in FY2001-FY2018 and anticipated PRIME expenditures in FY2019 are presented in the table's last column for comparative purposes. The Obama Administration argued that PRIME overlaps and duplicates the SBA's Microloan Technical Assistance program and recommended in its FY2012-FY2017 budget requests that PRIME receive no appropriations. As shown in the table, in FY2013, the Obama Administration eliminated PRIME's appropriation as part of the SBA's sequestration process. The Trump Administration recommended in its FY2018 and FY2019 budget requests that the PRIME program receive no appropriations. The SBA's Office of Veterans Business Development (OVBD) administers several management and training programs to assist veteran-owned businesses, including the Entrepreneurship Bootcamp for Veterans with Disabilities Consortium of Universities, which provides \"experiential training in entrepreneurship and small business management to post-9/11 veterans with disabilities\" at eight universities; the Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE) program, which is administered through a cooperative agreement with Syracuse University, offers women veterans a 15-day, online course focused on entrepreneurship skills and the \"language of business,\" followed by a 3-day conference (offered twice a year at varying locations) in which participants \"are exposed to successful entrepreneurs and CEOs of Fortune 500 companies and leaders in government\" and participate in courses on business planning, marketing, accounting and finance, operations and production, human resources, and work-life balance; the Operation Endure and Grow Program, which is administered through a cooperative agreement with Syracuse University, offers an eight-week online training program \"focused on the fundamentals of launching and/or growing a small business\" and is available to National Guard and reservists and their family members; the Boots to Business program (started in 2012), which is \"an elective track within the Department of Defense's revised Training Assistance Program called Transition Goals, Plans, Success (Transition GPS) and has three parts: the Entrepreneurship Track Overview—a 10-minute introductory video shown during the mandatory five-day Transition GPS course which introduces entrepreneurship as a post-service career option; Introduction to Entrepreneurship—a two-day classroom course on entrepreneurship and business fundamentals offered as one of the three Transition GPS elective tracks; and Foundations of Entrepreneurship—an eight-week, instructor-led online course that offers in-depth instruction on the elements of a business plan and tips and techniques for starting a business\"; the Boots to Business Reboot program (started in 2014), which assists veterans who have already transitioned to civilian life; and the Veterans Business Outreach Centers (VBOC) program, which provides veterans and their spouses management and technical assistance training at 15 locations, including assistance with the Boots to Business program, the development and maintenance of a five-year business plan, and referrals to other SBA resource partners when appropriate for additional training or mentoring services. Prior to FY2016, Congress recommended appropriations for VBOCs and, in FY2014 and FY2015, for the Boots to Business initiative ($7.0 million in FY2014 and $7.5 million in FY2015). Funding for the OVBD's other veterans assistance programs were provided through the SBA's salaries and expenses account. Starting in FY2016, Congress has recommended appropriations for OVBD's programs as a whole: $12.3 million in FY2016, FY2017, and FY2018, and $12.7 million in FY2019. This increase has not kept pace with inflation. OVBD expenditures in FY2015-FY2018 and anticipated OVBD expenditures in FY2019 are presented in the table's last column for comparative purposes. Recommended appropriations for VBOCs from FY2000-FY2015 are presented in Table 12 for historical comparisons. As the data indicate, recommended appropriations for VBOCs increased from $0.613 million in FY2000 to $3.000 million in FY2015. This increase has exceeded the rate of inflation. OVBD expenditures in FY2000-FY2015 are presented in the table's last column for comparative purposes. The SBA's 7(j) Technical Assistance Program provides \"a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities.\" Eligible individuals and businesses include \"8(a) certified firms, small disadvantaged businesses, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals.\" As shown in Table 13 , recommended appropriations for the 7(j) Technical Assistance Program have varied since FY2000, with increases in some years and decreases in others. Overall, the SBA's 7(j) Technical Assistance Program's recommended appropriations have decreased from $3.584 million in FY2000 to $2.800 million in FY2019. 7(j) Technical Assistance Program expenditures in FY2000-FY2018 and anticipated 7(j) Technical Assistance Program expenditures in FY2019 are presented in the table's last column for comparative purposes. The SBA's Native American Outreach (NAO) program provides management and technical educational assistance to American Indians, Alaska natives, native Hawaiians, and \"the indigenous people of Guam and American Samoa … to promote entity-owned and individual 8(a) certification, government contracting, entrepreneurial education, and capital access.\" The program's management and technical assistance services are available to members of these groups living in most areas of the nation. As shown in Table 14 , the NAO program's recommended appropriations have varied somewhat since FY2003 (the first year it received recommended appropriations), ranging from $1.0 million to $2.0 million. The program's recommended appropriations have not kept pace with inflation. NAO program expenditures in FY2003-FY2018 and anticipated NAO expenditures in FY2019 are presented in the table's last column for comparative purposes. The National Women's Business Council (NWBC) is a bipartisan federal advisory council created to serve as an independent source of advice and counsel to the President, Congress, and the SBA on economic issues of importance to women business owners. The council's mission \"is to promote bold initiatives, policies, and programs designed to support women's business enterprises at all stages of development in the public and private sector marketplaces—from start-up to success to significance.\" As shown in Table 15 , the recommended appropriation for the NWBC has increased from $0.598 million in FY2000 to $1.500 million in FY2019. This increase has exceeded the rate of inflation. NWBC expenditures in FY2000-FY2018 and NWBC anticipated expenditures in FY2019 are presented in the table's last column for comparative purposes. The HUBZone program helps small businesses located in designated Historically Underutilized Business Zones (HUBZones) to compete for federal contracts. Federal agencies may award contracts directly to HUBZone-certified small businesses through a sole-source contract, limit contact competitions to HUBZone-certified firms through a contract set-aside, or provide HUBZone-certified firms a price evaluation preference in full and open competitions. The HUBZone program was initially funded through the SBA's salary and expenses account. As shown in Table 16 , Congress started recommending an appropriation for the program in FY2004. This recommended appropriation remained relatively stable until FY2015, when it increased to $3.0 million. With this increase, the HUBZone program's recommended appropriations have exceeded inflation. The HUBZone program's expenditures in FY2000-FY2018 and the HUBZone program's anticipated expenditures in FY2019 are presented in the table's last column for comparative purposes. The SBA reports that \"regional innovation clusters are on-the-ground collaborations between business, research, education, financing and government institutions that work to develop and grow a particular industry or related set of industries in a particular geographic region.\" The SBA has supported regional innovative clusters since FY2009, and the initiative has received recommended appropriations from Congress since FY2010. As shown in Table 17 , funding for the Entrepreneurial Development Initiative (Regional Innovation Clusters) has been reduced from a recommended appropriation of $10.0 million in FY2010 to $5.0 million in FY2019. The table's last column indicates that the SBA's expenditures for the initiative have often been less than the amount appropriated. The Trump Administration recommended in its FY2018 and FY2019 budget requests that the Entrepreneurial Development Initiative receive no appropriations. The SBA's Entrepreneurship Education initiative offers high‐growth small businesses in underserved communities \"a seven‐month executive leader education series\" consisting of \"more than 100 hours of specialized training, technical resources, a professional networking system, and other resources to strengthen their business model and promote economic development within urban communities.\" At the conclusion of the training, \"participants produce a three‐year strategic growth action plan with benchmarks and performance targets that help them access the necessary support and resources to move forward for the next stage of business growth.\" As shown in Table 18 , the Entrepreneurship Education initiative received its first recommended appropriation from Congress in FY2014 ($5.0 million), $7.0 million in FY2015, $10.0 million in FY2016, FY2017, and FY2018, and $3.5 million in FY2019. The SBA describes growth accelerators as \"organizations that help entrepreneurs start and scale their businesses.\" Growth accelerators are typically run by experienced entrepreneurs and help small businesses access seed capital and mentors. The SBA claims that growth accelerators \"help accelerate a startup company's path towards success with targeted advice on revenue growth, employee growth, sourcing outside funding and avoiding pitfalls.\" As shown in Table 19 , the Growth Accelerator initiative received its first recommended appropriation from Congress in FY2014 ($2.5 million), $4.0 million in FY2015, $1.0 million in FY2016, FY2017, and FY2018, and $2 million in FY2019. It provides $50,000 matching grants each year to universities and private sector accelerators \"to support the development of accelerators and their support of startups in parts of the country where there are fewer conventional sources of access to capital (i.e., venture capital and other investors).\" The Trump Administration recommended in its FY2018 and FY2019 budget requests that the Growth Accelerator Initiative receive no appropriations.", "summary": "This report examines the Small Business Administration's (SBA's) appropriations (new budget authority, minus rescissions and sequestration) over time, focusing on developments and trends since FY2000. It also provides total available funding (which includes carryover from the prior fiscal year, carryover into the next fiscal year, account transfers, rescissions, and sequestration) and, for entrepreneurial development noncredit programs, actual and anticipated expenditures for comparative purposes. SBA appropriations, as a whole, have varied significantly from year to year since FY2000 and across all three of the agency's major spending categories: disaster assistance, business loan credit subsidies, and \"other programs,\" a category that includes salaries and expenses, business loan administration, the Office of Inspector General, the Office of Advocacy, and entrepreneurial development programs. Overall, the SBA's appropriations have ranged from a high of $2.359 billion in FY2018 to a low of $571.8 million in FY2007. Much of this volatility is due to significant variation in appropriations for disaster assistance, which ranged from a high of $1.7 billion in FY2006 to a low of $0 in FY2009. This variation can be attributed primarily to supplemental appropriations provided to address disaster needs arising from the impact of major hurricanes, such as Hurricanes Katrina and Sandy, and more recently, Hurricanes Harvey, Irma, and Maria. The SBA's appropriations for business loan credit subsidies have also varied since FY2000, ranging from a high of $319.7 million in FY2013 ($337.3 million before sequestration and rescission) to a low of $1.3 million in FY2006 and FY2007. This variation is due to the impact of changing economic conditions on the SBA's guaranteed loan portfolios. During good economic times, revenue from SBA fees and collateral liquidation is typically sufficient to cover the costs of purchasing guaranteed loans that have defaulted. During and immediately following recessions, however, that revenue is typically insufficient to cover the costs of purchasing guaranteed loans that have defaulted. The SBA's appropriations for other programs, as a collective, have also varied since FY2000, ranging from a high of $1.6253 billion in FY2010 to a low of $455.6 million in FY2007. This variation is primarily due to congressional response to changing economic conditions. For example, Congress approved significant, temporary increases in appropriations for the SBA's other programs spending category in FY2009 and FY2010. Overall, since FY2000, appropriations for other programs have increased at a pace that exceeds inflation. This report provides appropriations for all five major components of the other programs spending category, including the SBA's entrepreneurial development programs. The SBA's appropriations for FY1954 through FY1999 are provided in the Appendix.", "document_type": "crs"}
{"report": "Because of technological advances in digitization and data processing, electronic forms of payment have become increasingly available, convenient, and cost efficient. Established technologies, such as credit and debit cards, have long been a popular payment option. In addition, new payment methods (e.g., PayPal's Venmo app and Square's point-of-sale hardware, among others) use underlying traditional banking and payments systems to make electronic payments less expensive and more available to individuals and small businesses. Newer digital currencies, such as cryptocurrencies, offer alternative (though not yet widely adopted) options that have a high degree of independence from traditional systems. Although cash remains an important method of payment in the United States (see Figure 1 ), anecdotal reporting suggests that various electronic payment systems have become so effective and inexpensive relative to cash payments that some U.S. businesses—even those at which sales generally have a low dollar value—are increasingly choosing not to accept cash. In some developed countries, such as Sweden, cash payments are becoming relatively scarce. In addition, a number of central banks worldwide are examining the possibility of issuing government-backed digital currencies that exist only electronically. These trends suggest that due to buyer or seller preference or government policy, the role of cash in the payment system may continue to decline, perhaps significantly, in coming years. Some observers have examined the consequences of an evolution away from cash. Proponents of reducing the use of physical currency (or even eliminating it all together and becoming a cashless society ) argue that it will generate important benefits, including potentially improved efficiency of the payment system, a reduction of crime, and less constrained monetary policy. Proponents of maintaining cash as a payment option argue that significant reductions in cash usage and acceptance would further marginalize people with limited access to the financial system, increase the financial system's vulnerability to cyberattack, and reduce personal privacy. Given developments and debate in this area, Congress may consider policy issues related to the declining use of cash relative to electronic forms of payment. This report is divided into two parts. The first part analyzes cash and noncash payment systems, and the second analyzes potential outcomes if cash were to be significantly displaced as a commonly accepted form of payment. Part I describes the characteristics of cash and the various electronic payment systems that could potentially supplant cash. The noncash payment systems include traditional electronic payment systems (such as credit cards or payment apps) and alternative electronic payment systems, focusing on private systems using distributed ledger technology (such as cryptocurrencies) and central bank digital currencies (which are only under consideration by central banks at this time). Part I also examines the advantages and costs specific to each payment system and the potential obstacles to the adoption of alternative electronic payment systems. Part II of this report analyzes the potential implications of a reduced role of cash payments in the economy, including potential benefits, costs, and risks. The report also includes an Appendix that presents two international case studies of economies in which noncash payment systems rapidly expanded. This section provides analysis of cash, traditional noncash payment systems, and potential alternative payment systems. It describes the characteristics, presents usage data, and analyzes the advantages and costs of each system. It also includes a discussion on the potential decline in cash usage and a short inset on the legality of businesses' refusing to accept cash. How well something serves as money in a payment system depends on how well it serves as (1) a medium of exchange, (2) a unit of account, and (3) a store of value. To function as a medium of exchange , the thing must be tradable and agreed to have value. To function as a unit of account , the thing must act as a good measurement system. To function as a store of value , the thing must be able to purchase approximately the same value of goods and services at some future date as it can purchase now. Currently, cash continues to serve the three functions of money well as part of a robust, physical payment system. Physical currency can be carried easily in a pocket and thus is tradeable. Each unit of currency (e.g., a dollar) is identical and can be divided into fractions (e.g., cents) of the whole, making dollars effective units of account. A bill or coin, when well cared for, will not degrade substantively for years, meaning it can function as a store of value. In the United States, paper currency and coins are produced by the Bureau of Engraving and Printing (BEP) and the United States Mint, respectively, both of which are units within the Department of the Treasury (Treasury). The Federal Reserve (the Fed) distributes the currency and coin to banks, savings associations, and credit unions upon request, and the banks in turn make the cash available to their customers. When a bank orders cash, the Fed deducts the amount from the bank's Fed account. The revenues and costs to the government from this system are examined in the \" Cash Effects on Government \" section below. Data suggests that the demand for cash in the United States has continued to grow despite the introduction of new payment services and systems. Fed data indicates that the amount of currency in circulation has increased steadily over at least the past 20 years (see Figure 2 ). As of December 31, 2018, there were more than 43 billion notes (more commonly called bills ) worth over $1.67 trillion in circulation. The Fed determines how many new notes \"are needed to meet the public's demand [, which]…reflects the Board's assessment of the expected growth rates for payments of currency to and receipts of currency from circulation.\" This growth in demand is not wholly surprising, because demand for cash would be expected to grow as does the economy, the population, and price levels. In addition, the demand for cash is growing because certain people may be increasingly using it solely as a store of value or safe investment (imagine the proverbial risk-averse saver keeping money under the mattress), rather than to make purchases. In addition, there remains a high demand for U.S. currency abroad, both as a store of value and medium of exchange. Some evidence suggests people are using cash for payments less often. For example, according to preliminary findings of a Fed survey, cash transactions in the United States fell from 40.7% of all transactions in 2012 to 32.5% in 2015. Taken together with data from the triennial Federal Reserve Payment S tudy , these survey results suggest the number of cash transactions during that time fell from roughly 84.8 billion per year to 69.4 billion. However, Fed economists have subsequently noted that significant changes in the survey methodology and unaccounted for effects from economic conditions means the eight-point decline in the share of transactions \"almost surely does not accurately reflect actual changes in consumer preferences for cash.\" After making adjustments to account for these factors, those economists estimated the decline in the percentage of transactions that were in cash was roughly half of the initially estimated decline in the share of cash transactions. The most recent data indicates that Americans used cash for 31% of their transactions in 2016, with stronger cash preference for small, in-person transactions (60% of in-person transactions under $10). One of the main benefits of cash is that it is a simple, easy, robust payment mechanism that requires no ancillary technologies. Payers and payees validate and settle transactions simply by physically exchanging the currency; the consumer needs no magnetic-stripe card or mobile device, and the seller does not need a card-reading machine or other payment-receiving device. Relatedly, some observers assert cash provides a security against potential disruptions to electronic payment systems. For example, in the event of a significant cyberattack or extended power outage, cash could continue to serve the functions of money while electronic payment systems could not. Cash also acts as a safe asset in which to invest savings and its usage can involve a high degree of privacy, features that will be examined in more detail in the \" Potential Costs and Risks of a Reduced Role for Cash \" section below. In addition, holding cash might impart other psychological benefits to a consumer, such as feelings of greater control over budgeting and associations with wealth. Using and accepting cash involves certain costs to consumers and businesses. For example, consumers may have to pay fees to withdraw cash from automatic teller machines (ATMs). Banks with more than $1 billion in assets are required to report their revenue from ATM fees, and a Congressional Research Service (CRS) analysis indicates those banks collected at least $1.9 billion in ATM fees in 2018. Other costs—including consumer losses through theft, misplacement, or accidental destruction of cash—are more difficult to estimate. Businesses must pay for cash management services, such as cash delivery with armored trucks (an industry with estimated annual U.S. revenues of $2.8 billion) and security systems to dissuade thieves or robbers from attempting to steal cash kept on the retailer's premises. Despite these efforts, U.S. businesses lose about $40 billion in employee cash thefts per year. Similar to consumer's costs, quantifying all the costs of cash to businesses presents challenges, as certain costs are not straightforward and easily measurable. For example, some portion of retail staff and managers' paid time is spent counting cash and reconciling tills. In addition to its impacts on consumers and businesses, cash directly affects government revenues through three main mechanisms: (1) seigniorage (i.e., the \"profit\" the government makes by producing cash), (2) Federal Reserve remittances to the Treasury, and (3) tax evasion. Two of these mechanisms—seigniorage and remittances—increase government revenues. The third mechanism—tax evasion, facilitated by the anonymous and difficult-to-trace nature of cash transactions—decreases government revenue. Revenue Generating: Seignoriage . In general, the value of the physical currency produced by the government exceeds the cost incurred to produce it. For example, a $100 bill costs about 14 cents to print, generating revenues $99.86 greater than cost. The profit generated by this difference is called seigniorage, and this income would decrease if demand for cash were to fall. In FY2017, the U.S. Mint generated $391.5 million in net income from circulating coins and the U.S. Bureau of Engraving and Printing generated revenues $693 million greater than expenses. Revenue Generating: Fed Remittances . The second source of cash-generating revenue is remittances, which are transferred from the Fed to the U.S. Treasury. Any income the Fed earns after expenses and dividends paid to member banks, it remits to the Treasury (in 2017, the amount was $80.6 billion), and hence becomes a source of revenue for the federal government. A significant expense for the Fed is the interest it pays on depository institutions' deposits held in their Fed accounts. Such payments accounted for $28.9 billion of the Fed's $35.4 billion total expenses in 2017. However, currency is a Fed liability on which it pays no interest. Recall that when a bank orders cash from the Fed, the Fed deducts the amount from the bank's account. Thus, the more cash that is in circulation, the less interest the Fed must pay, and the greater its remittances to Treasury. In January 2019, there was approximately $1.7 trillion of currency in circulation, and the Fed (as of this publication) paid an annual interest rate of 2.4% on reserve balances. By these measures, if all currency were instead bank reserve balances held at the Fed, it could increase Fed expenses (and thus reduce government revenues) by more than $40 billion a year. If interest rates on reserves (which change when the Fed alters monetary policy) rose or fell, then expenses would increase or decrease, respectively, in this scenario. Revenue Reducing: Tax Evasion . Because cash leaves no electronic record, wage earners and businesses are able to underreport (in general, illegally) how much cash they receive in order to reduce their tax payments. Thus, cash contributes to the tax gap —the difference between what the government is owed and what is actually paid. The most recent Internal Revenue Service estimate released in 2016 examined the tax gap for the years 2008-2010, and found that the gap due to underreporting averaged $387 billion a year. This estimate does not directly measure how much underreporting is facilitated by cash payments, and the figure for recent years is likely to be different. However, it provides a general context for how much tax revenue the government does not collect due to underreporting that is at least in part made possible by cash transactions. Businesses have long set conditions under which they would not accept cash. For example, certain businesses refuse to accept high-denomination bills. However, according to anecdotal reporting, retail businesses are increasingly deciding that the costs of transacting in cash are high enough that they would rather not accept it at all. Notably, this is occurring at businesses at which transactions are typically in-person for small dollar amounts—traditionally viewed as the type of transactions for which cash is the least costly option. If these stories are in fact indicative of a sustained trend, widespread non-acceptance of cash could have a variety of effects on consumers, businesses, as well as society and the economy at large. One particular effect that has drawn significant attention, as well as litigation, is that non-acceptance of cash could potentially marginalize those that have limited access to the financial system or mobile technological devices. This issue is examined in the \" Lack of Financial Access for Certain Groups \" section later in the report. Were cash to decline as a payment system, the most likely replacement—at least at the current time—would appear to be traditional noncash, electronic payment systems, such as debit cards, credit cards, or payment mobile apps. In traditional noncash payment systems like those that are prevalent today, participants hold their money in an account at a bank or other financial intermediary that maintains accurate ledgers of how much money each customer has available. To make a payment, the payer instructs (using a physical check or an electronic message) the intermediary to transfer money to the recipient's account. If the recipient holds an account at a different intermediary, those intermediaries will send messages to each other via messaging networks connecting them, instructing each to make the necessary changes to their ledgers. The intermediaries validate the transaction, ensure the payer has sufficient funds for the payment, deduct the appropriate amount from the payer's account, and add that amount to the payee's account. For example, in the United States, a retail consumer may initiate an electronic payment by swiping a debit card, at which time an electronic message is sent over a network instructing the purchaser's bank to send payment to the seller's bank. Those banks then make the appropriate changes to their account ledgers (possibly using the Fed's payment system) reflecting that value has been transferred from the purchaser's account to the seller's account. As with physical currency, digital entries in account ledgers can serve the three functions of money well for use in payments. Instructions to change entries in a ledger can easily be sent, making the values in the ledger easily tradable. Numerical entries can be denominated in identical and divisible units, making them good units of account. Because numbers in a ledger can remain unchanged during periods when no transactions are made, they can serve as a store of value. According to the most recent complete Federal Reserve Payment S tudy on noncash payments, the number of traditional noncash payments made in the U.S. totaled more than 144 billion transactions with a value of almost $178 trillion in 2015. These included payments via debit cards (69.5 billion transactions worth $2.56 trillion), credit cards (33.8 billion transactions worth $3.16 trillion), automated clearing house payments (ACH; 23.5 billion transactions worth $26.83 trillion), and check payments (17.3 billion payments worth $26.83 trillion). Between 2012 and 2015, the number of transactions of the three electronic systems, debit, credit, and ACH, grew at annual rates of 7.1%, 8.0%, and 4.9%, respectively. Their values grew by 6.8%, 7.4%, and 4.0%, respectively. Check payments declined by an annual rate of 4.4% by number and 0.5% by value. According to a recent supplement to that study, both the growth of electronic payments and the decline of check payments accelerated in 2017. Payment based on physically exchanging currency has some notable shortcomings that can be addressed by a payment system based on maintaining account ledgers. One is that physical currency requires both the payer and the payee to either (1) be physically near each other, allowing the physical currency to pass from the possession of the former into the possession of the latter; or (2) have a sufficient trust in each other that the payee believes an assurance that he or she will receive the currency later. Another shortcoming is that holders of physical currency may have little recourse if it is lost, stolen, or accidentally destroyed. If, instead, money is exchanged by making valid changes in ledgers maintained by trusted intermediaries, the exchange can be accomplished without the risk of lost, stolen, or damaged currency. In addition, noncash systems can make payments fast, easy, and convenient. Using them decreases the need for people to make regular estimations of how much cash they need to have on a particular day, the frequency of trips to the bank or ATM to get cash, and the amount of time waiting for cashiers to make change. Instead, a plastic card or an app on a mobile device can replace those activities with a card swipe or button push. As information technology has progressed, the convenience has increased and the option to use electronic payments has become nearly ubiquitous. Until fairly recently, it was not uncommon for a retail establishment to reject card payments. Now, services such as Venmo, Apple Pay, and Google Pay, and card-reading devices, such as those made by Square, have made electronic payment options increasingly available, even for individuals to accept electronic payments from other individuals. The previously mentioned anecdotal reporting suggests there is a growing number of establishments that only accept electronic payments. For these systems to work well, participants must trust that banks and other intermediaries are keeping accurate ledgers that are changed only for valid transfers. Otherwise, an individual's money could be lost or stolen if a bank records the account as having an inaccurately low amount or transfers value without his or her permission. Another advantage of systems using traditional intermediaries is that they have a number of features that generate a high degree of trust and accuracy. Banks and other intermediaries have both a market and governmental incentive to be accurate. A bank or financial intermediary that does not have a good reputation for protecting a customer's money and processing transactions accurately would likely lose customers. In addition, governments typically subject banks to laws and regulations designed in part to ensure that banks are well run and that the money they hold is safe. As such, banks take substantial measures to ensure security and accuracy. In addition, intermediaries generally are required to provide certain protections to consumers involved in electronic transactions, in part to protect them from losses resulting from unauthorized transfers. For example, the Electronic Fund Transfer Act ( P.L. 95-630 ) limits consumers' liability for unauthorized transfers made using their accounts. Similarly, the Fair Credit Billing Act ( P.L. 93-495 ) requires credit card companies to take certain steps to correct billing errors, including when the goods or services a consumer purchased are not delivered as agreed. Both laws also require financial institutions to make certain disclosures to consumers related to the costs and terms of using an institution's services. Significant costs and physical infrastructure underlie systems for electronic money transfers to ensure the systems' integrity, performance, and availability. For example, payment system providers operate and maintain robust digital networks to connect retail locations with banks. The Fed operates and maintains electronics networks to connect banks to itself and each other. These intermediaries store and protect huge amounts of data. Because these intermediaries are generally highly regulated, they incur regulatory compliance costs. Intermediaries recoup the costs associated with these systems and regulations and earn profits by charging fees directly when the system is used (such as the fees a merchant pays to have a card reading machine and \"swipe fees\" on each card transaction) or by charging fees for related services (such as checking account fees). It is difficult to quantify how much traditional noncash payment systems cost and what portion of those costs is passed on to consumers and businesses. Performing a quantitative analysis is beyond the scope of this report. What bears mentioning here is that certain costs of traditional payment systems—and, in particular, the fees intermediaries in those systems charge—have at times been high enough to raise policymakers' concern and elicit policy responses. For example, in response to businesses' assertions that Visa and MasterCard had exercised market power in setting debit card swipe fees at unfairly high levels, Congress included Section 1075 in the Dodd-Frank Consumer Protection and Wall Street Reform Act (Dodd-Frank Act; P.L. 111-203 )—sometimes called the Durbin Amendment. Section 1075 directs the Fed to limit debit card swipe fees charged by banks with assets of more than $10 billion. In addition, studies on unbanked and underbanked populations cite the fees associated with traditional bank accounts, a portion of which may be the result of providing payment services, as a possible cause for those populations' limited interaction with the traditional banking system. Although electronic payment systems protect customers from physical theft and are subject to a complex and sometimes overlapping array of state and federal laws, regulators, and regulations related to cybersecurity, they could nevertheless expose individuals to cyber-theft and identity theft. In addition, the systems themselves could be susceptible to disruption from cyberattacks. The occurrence of successful hacks of banks and other financial institutions, wherein huge amounts of individuals' personal information are stolen or compromised, illustrates cyber-related risks. For example, in 2014, JPMorgan Chase, the largest U.S. bank, experienced a data breach that exposed financial records of 76 million households. However, no consensus exists on how best to reduce the occurrence of such incidents, and whether current cybersecurity measures and regulatory frameworks are effective and efficient in mitigating cybersecurity risk is an open question. For a more detailed examination of cybersecurity at financial institutions, see CRS Report R44429, Financial Services and Cybersecurity: The Federal Role , by N. Eric Weiss and M. Maureen Murphy. In addition, although the traditional electronic payment system is sufficiently fast and convenient to complete many transactions, other transactions can involve problematic delays. One such delay that can be particularly costly for consumers is the lag between when a payment (such as a paycheck) is deposited and when the full amount of the funds are available to the individual. Depending on factors related to which networks the payer's and payee's bank uses to process payments, it can take up to two business days (or more under certain circumstances) after a deposit is made for banks to fully validate, process, and settle the deposit. Settlement delays can create a situation in which an individual has made a deposit that would give sufficient funds to pay a bill that is due, but nevertheless may overdraw the account because the deposit is awaiting processing. In such a situation, the individual faces a choice between costly outcomes—a late payment penalty on the bill, an overdraft fee on the bank account, or a fee from a check cashing or payday lending service. These costs are likely disproportionately borne by low- or moderate-income individuals who typically have low balances in their bank accounts. Faster or immediate payment processing could potentially reduce or eliminate costs incurred by individuals facing this situation. While delays in the payment system may seem anachronistic at a time when digital messages can be sent and data processed nearly instantaneously, the fact remains that aspects of the systems, networks, and infrastructures used today (including those operated by the Fed) were developed and deployed decades ago. Both the Fed and private institutions are working to increase system speed and efforts are underway to make real-time payments in the United States the norm. However, payment system operators arguably have little incentive to achieve faster or real-time payments because (1) they are in compliance with the current requirement facing banks pursuant to the Expedited Funds Availability Act of 1987 ( P.L. 108-100 ) to generally make most types of deposits available by the second business day, (2) updating legacy systems is costly for the institutions that operate them, and (3) banks are generating revenue through overdraft fees. Currently, it appears that the traditional noncash payment systems described above likely would replace cash payments should cash usage significantly decline. However some observers, citing the various costs and disadvantages associated with those systems—including delays in processing as well as reliance on traditional financial intermediaries—point to alternative electronic payment systems as potential dominant payment systems of the future. Cryptocurrenc y , such as Bitcoin , is the most well-known of these alternatives. Described in more detail below, cryptocurrencies use blockchain technology and public or \"distributed\" ledgers to achieve validated transfers of digital representations of value. The use of these systems to make payments is quite rare relative to cash and traditional systems, and the role they will play in the future is speculative. Nevertheless, their potential to significantly affect the usage of cash and traditional systems for payments has drawn the attention of central banks. Some central banks are examining whether they should create a comparable payment system of digital currencies to offer the advantages of those systems themselves and to avoid being bypassed in the future. This section briefly describes (1) existing private alternative electronic payment systems and (2) possible future central bank-run systems. With respect to alternative electronic payment systems, the section examines their potential advantages, costs, and obstacles to their widespread adoption. With respect to a potential central bank-run system, which is more speculative at this time, the section examines potential advantages and obstacles to their widespread adoption and uncertainties they present. In general, private electronic payment systems using distributed ledgers allow individuals to establish an account identified by a string of numbers and characters (often called an address or public key ) that is paired with a password or private key known only to the account holder. A transaction occurs when two parties agree to transfer digital currency (perhaps in payment for a good or service) from one account to another. The buying party will \"unlock\" the currency used as payment with her private key, allowing some amount to be transferred from her account to the seller's. The seller then \"locks\" the currency in her account using her own private key. From the perspective of the individuals using the system, the mechanics are similar to authorizing payment on any website that requires an individual to enter a username and password. In addition, companies offer applications or interfaces that users can download onto a device to make transacting in cryptocurrencies more user-friendly. Many digital currency platforms use blockchain technology to validate changes to the ledgers. In a blockchain-enabled system, payments are validated on a public or \"distributed\" ledger by a decentralized network of system users and cryptographic protocols. In these systems, parties that otherwise do not know each other can exchange something of value (i.e., a digital currency) not because they trust each other but because they trust the platform and its protocols to prevent invalid changes to the ledger. A notable feature of transfers using blockchain is that they require no centralized, trusted intermediary such as a bank, government central bank, or other financial or government institution. Proponents envision these systems could achieve instantaneous transfers, although they currently require minutes or hours to finalize transfers. The decentralized nature of digital currencies and their recent proliferation poses challenges to performing industry-wide analysis of their use in payments. For example, as of August 27, 2018, one industry group purported to track trading prices of 1,890 cryptocurrencies alone. For brevity and clarity, this report uses statistics on Bitcoin—the first and most well-known cryptocurrency, the total value of which accounts for more than half of the industry as a whole —as an illustrative example of a digital currency's use in payments. In January 2017, the price of a Bitcoin on an exchange was about $993. The price surged during the year, peaking at about $19,650 in December 2017, an almost 1,880% increase. However, the price then dramatically declined. Overall, the price of Bitcoin has experienced a high degree of volatility. On March 12, 2018, the price of Bitcoin was $3,860, down 80% from its peak. More recently, the price rebounded and was $5,948 on May 8, 2019. Although price data on Bitcoin illustrates the public interest in and overall demand for this cryptocurrency, it is a poor indicator of how often it is being exchanged for goods and services (i.e., how often it is being used as money). Certain analyses appear to show that digital currencies are not being widely used and accepted as payment for goods and services, but rather as investment vehicles. The number of Bitcoin transactions may serve as a better indicator—though a flawed one—of the use of Bitcoin as a payment system. This number reveals how many times Bitcoins are transferred between accounts each day, and data indicates the number of transactions is miniscule compared with those of traditional systems. For example, in 2019 through March 12, the Bitcoin system averaged about 310,000 transactions per day globally, a pace that would result in about 113 million transactions per year. Recall that in the United States alone, more than 144 billion traditional (nearly 1,275 times as many) noncash payments were made in 2015. Moreover, one problem with this measure it that it is a count of how many times two parties have exchanged Bitcoin, not a count of how many times Bitcoin has been used to buy something. Some portion of those exchanges, possibly a significantly large portion, is driven by investors giving fiat currency to an exchange to buy and hold the Bitcoin as an investment. In those transfers, Bitcoin is not acting as money (i.e., not being exchanged for a good or service). Advantages of Private Payment Systems Using Distributed Ledgers . As discussed in an earlier section, traditional electronic payment systems involve a number of intermediaries, such as government central banks and private financial institutions. To carry out transactions, these institutions operate and maintain extensive electronic networks and other infrastructure, employ workers, and require time to finalize transactions. To meet costs and earn profits, these institutions charge various user fees. Cryptocurrency advocates anticipate that a decentralized payment system operated through the internet could be less costly than traditional payment systems and existing infrastructures. However, whether such efficiencies can or will be achieved remains an open question. In addition, opening a bank account or otherwise using traditional electronic payment systems generally requires an individual to divulge to a financial institution certain basic personal information, such as name, Social Security number, and birthdate. Financial institutions store and may analyze or share this information. In some instances hackers have stolen personal information from financial institutions, causing concerns over how well these institutions can protect sensitive data. Individuals seeking a higher degree of privacy or control over their personal data than that afforded by traditional systems may choose to use an alternative digital currency system that provides a degree of pseudonymity or anonymity. Although inflation in the United States and other developed economies has been low in recent decades, some individuals may nevertheless believe that nontraditional digital money may maintain its value better than government-backed money in traditional systems. The dollar and most modern currencies are fiat money—that is, money that derives value based solely on government decree. Historically, incidents of hyperinflation in certain countries have seen government-backed currencies lose most or nearly all of their value. Thus, some individuals may judge the probability of their fiat money losing a significant portion of its value to be undesirably high. These individuals may place greater trust in the ability of a decentralized network using cryptographic protocols that limit the creation of new money to maintain stable value of money than in the ability of government institutions to do so. Obstacles to Widespread Adoption of Private Payment Systems Using Distributed Ledgers . Several characteristics of cryptocurrency undermine its ability to serve the functions of money in a payment system. Currently, a relatively small number of businesses and individuals use or accept cryptocurrency for payment. As discussed above, Bitcoin transactions have averaged about 310,000 per day globally. Cryptocurrency may be used as a medium of exchange less frequently than traditional money for several reasons. Unlike the dollar and most other government-backed currencies, cryptocurrencies are not legal tender, meaning creditors are not legally required to accept them to settle debts. Consumers and businesses also may be hesitant to place their trust in these systems because they have limited understanding of them. Relatedly, consumers and businesses may have sufficient trust in and be generally satisfied with traditional payment systems. The recent high volatility in the price of many cryptocurrencies undermines their ability to serve as a unit of account and a store of value. Cryptocurrencies can have significant value fluctuations within short periods of time; as a result, pricing goods and services in units of cryptocurrency would require frequent repricing and likely would cause confusion among buyers and sellers. Whether cryptocurrency systems are scalable —meaning their capacity can be increased in a cost-effective way without loss of functionality—is uncertain. At present, the systems underlying cryptocurrencies do not appear capable of processing the number of transactions that would be required of a widely adopted, global payment system. One concern involves the significant energy consumption required to run and cool the computers that validate the transactions on these platforms. Costs of Private Payment Systems Using Distributed Ledgers . As the energy consumption of a digital currency system demonstrates, these systems are not costless. In addition to energy, they require computer hardware and facilities. Often making payments on these platforms involves paying fees. Whether these direct economic costs of using the system are fixed or—as they develop and mature—become less than existing systems is an open question. Digital currency systems, at least as currently designed and regulated, also might impose other costs on society. Some critics of these systems fear their pseudonymous, decentralized nature may provide a new avenue for criminals to launder money, evade taxes, or sidestep financial sanctions. For example, Bitcoin was the currency used on the internet-based, illegal drug marketplace and Bitcoin escrow service called Silk Road. This marketplace facilitated more than 100,000 illegal drug sales from approximately January 2011 to October 2013, at which time the government shut down the website and arrested the individuals running the site. Consumer groups and other observers are also concerned that digital currency users are inadequately protected against unfair, deceptive, and abusive acts and practices. The way cryptocurrencies are sold, exchanged, or marketed can subject cryptocurrency exchanges or other cryptocurrency-related businesses to generally applicable consumer protection laws, and certain state laws and regulations are being applied to cryptocurrency-related businesses. However, other laws and regulations aimed at protecting consumers engaged in electronic financial transactions may not apply. For example, the Electronic Fund Transfer Act of 1978 (EFTA; P.L. 95-630 ) requires traditional financial institutions engaging in electronic fund transfers to make certain disclosures about fees, correct errors when identified by the consumer, and limit consumer liability in the event of unauthorized transfers. Because no bank or other centralized financial institution is involved in digital currency transactions, EFTA generally has not been applied to these transactions. In addition, the laws and regulations that do apply generally have not been implemented specifically to address digital currencies or related businesses. Whether the current regulatory regime applied to digital currency transactions, but originally implemented for different financial activities (e.g., traditional money transmission), is effective and efficient is a debated issue. Finally, some central bankers and other experts and observers have speculated that the widespread adoption of cryptocurrencies could affect the ability of the Fed and other central banks to implement and transmit monetary policy. The Fed conducts monetary policy with the goals of achieving price stability and low unemployment. Like other central banks it achieves its goals by, putting it simply, controlling the amount of money in circulation in the economy. If one or more additional currencies that the government did not control the supply of were also prevalent and viable payment options, it could limit central banks' ability to transmit monetary policy to financial markets and the real economy. In this scenario, central banks likely would have to make larger adjustments to the fiat currency they do control to have the same effect as previous adjustments. Another possibility is that they would have to start buying and selling the digital currencies themselves in an effort to affect the availability of these currencies. These risks have led some central banks and other observers to suggest that perhaps central banks could issue their own digital currencies. The risks and challenges posed by private digital currencies have led some observers to suggest that perhaps central banks should offer their own central bank digital currencies (CBDCs) to realize certain hoped-for efficiencies in the payment system in a way that would be \"safe, robust, and convenient.\" To date, no country has successfully created a CBDC for payment use by the general public. The extent to which a central bank could or would want to create a new, digital-only payment system likely would be weighed against the consideration that these government institutions already have trusted digital payment systems in place. Because of such considerations, the exact form that CBDCs would take could vary across a number of features and characteristics. Nevertheless, some central banks are examining the idea of CBDCs and the possible benefits and issues they may present. For the purposes of this discussion, this report examines a CBDC that would be available to consumers for retail payments. Some proposals would limit CBDCs to wholesale payments between banks and other financial institutions. Potential Advantages of CBDCs . Proponents of CBDCs generally argue they could provide efficiency gains over traditional legacy systems and contend that central banks could use the technologies underlying digital currencies to deploy a faster, less costly government-supported payment system. Observers have speculated that a CBDC could take the form of a central bank allowing individuals to hold accounts directly at the central bank. Advocates argue that a CBDC created in this way could increase systemic stability by imposing additional discipline on commercial banks. Because consumers would have the alternative of safe deposits made directly with the central bank, commercial banks likely would have to offer interest rates and limit risks at levels necessary to attract deposits above any deposit insurance limit. In addition, CBDCs could increase government revenue through a seignoriage-like mechanism. A more expansive definition of seignoriage is the income government obtains from having government liabilities act as money. Physical money—because it is liquid and low-risk—earns no interest rate and carries a cost to produce. Money—both physical and electronic in the traditional system—is also a balance sheet liability to the issuing authority, such as the Fed or other central banks. If the Fed allowed individuals to hold accounts directly with the Fed, the Fed would issue low- or no-interest liabilities to individuals (as electronic entries in a ledger produced at less cost than physical currency). Then, as happens now, the Fed would use those liabilities to fund purchases of assets that earn a higher interest rate than what the Fed pays on liabilities. This would produce income, perhaps greater income than is earned through traditional seignoriage. Potential Obstacles to Creation of CBDCs . One of the main arguments critics—including various central bank officials—make against CBDCs is that there is no \"compelling demonstrated need\" for such a currency, because central banks and private banks already operate trusted electronic payment systems that generally offer fast, easy, and inexpensive transfers of value. Opponents also argue that a CBDC in the form of individual direct accounts at the central bank would reduce the role of private banks in financial intermediation and potentially expand the role of government central banks inappropriately. A portion of consumers likely would shift their deposits away from private banks toward central bank digital money, which would be a safe, government-backed liquid asset. Deprived of this funding, private banks likely would have to reduce their lending, leaving central banks to decide whether or how they should support lending markets to avoid a reduction in credit availability. In addition, skeptics of CBDCs object to the assertion that these currencies would increase systemic stability, arguing that CBDCs would create a less-stable system because they would facilitate runs on private banks. These critics argue that at the first signs of distress at an individual institution or the bank industry, depositors would transfer their funds to this alternative liquid, government-backed asset. Uncertaint y : CBDCs' Potential Effects on Monetary Policy . Observers also disagree over whether CBDCs would have a desirable effect on central banks' role and abilities in carrying out monetary policy. Proponents argue that, if individuals held a CBDC on which the central bank set interest rates, the central bank could directly transmit a policy rate to the macroeconomy, rather than achieving transmission through the rates the central bank charges banks and the indirect influence of rates in particular markets. In addition, if holding cash (which in effect has a 0% interest rate) were not an option for consumers, central banks potentially would be less constrained by the zero lower bound . The zero lower bound is the idea that the ability of individuals and businesses to hold cash and thus avoid negative interest rates limits central banks' ability to transmit negative interest rates to the economy. Critics argue that taking on such a direct and influential role in private financial markets is an inappropriately expansive role for a central bank. They assert that if CBDCs were to displace cash and private bank deposits, central banks would have to increase asset holdings, support lending markets, and otherwise provide a number of credit intermediation activities that private institutions currently perform in response to market conditions. As discussed above, although cash remains a frequently used payment system, other payment systems continue to develop that offer their own advantages and costs. Various trends suggest that due to market preference or government policy, the role of cash in the payment system has begun to decline and may continue to decline, perhaps significantly, in coming years. If the relative benefits and costs of cash and the various other payment methods evolve in such a way that cash is significantly displaced as a commonly accepted form of payment, that evolution could have a number of effects, both positive and negative, on the economy and society. This section of the report describes a number of potential benefits of a reduced role for cash in the U.S. economy and the various risks and costs that may occur. Many of the factors discussed below may not occur wholly as a benefit, risk, or cost; rather, a potential benefit may bring with it a risk, and vice versa. Some observers argue that reducing or eliminating cash payments in the U.S. economy will produce certain beneficial outcomes, including improved efficiency in payments, reduced criminality, and improved ability for the Fed to implement certain monetary policy. As discussed below, although these outcomes generally may be beneficial, that does not mean that there are not certain costs, or drawbacks, that may counterbalance these positive effects. Proponents of noncash payment systems assert that net economic benefits from the use and maintenance of a cash payment system are (or will become as technology advances) less than the net benefits of using and maintaining noncash systems. Put another way, they argue that the resources, labor, and capital that go into the cash system—for example, producing currency; stocking and maintaining ATMs; safely transporting cash; protecting businesses from theft and robbery—make it less efficient than noncash systems. If true—and absent policy interventions—market forces likely will result in the displacement of cash by other payment methods as businesses increasingly choose not to accept cash and consumers increasingly prefer not to use it. Under this scenario, although the payment system on net may be more efficient, it would not necessarily be true that all people would benefit, as is discussed in the \" Potential Costs and Risks of a Reduced Role for Cash \" section. Proponents of cashless societies assert that the elimination of cash would reduce crime by making operating an illegal enterprise more difficult and certain crimes, such as robbery and burglary, less remunerative. These proponents argue that criminals are more likely to conduct business in cash and to hold cash as an asset, in large part because cash is anonymous and allows them to avoid establishing relationships with and generating records at financial institutions that may be subject to anti-money laundering reporting and compliance requirements. Accordingly, they assert that the elimination of cash would be beneficial on net, because operating a criminal enterprise would become more difficult. Certain studies have shown that the prevalence of cash is correlated with the incidence of crime. In addition, the amount of \"strong\" currencies (i.e., highly valuable and highly stable currencies) in circulation exceeds what many people would consider a reasonable amount needed for typical consumer transactions. For example, with the U.S. population at approximately 329 million, the $1.6 trillion of currency in circulation equates to about $4,900 per person. Proponents of a cashless society assert that this number is inflated due in part to the cash demand of criminals (although part is also due to demand for the U.S. dollar from abroad). Although a robust analysis of this question is beyond the scope of this report, arguments that cash facilitates crime and even that reducing cash may reduce crime appear in certain cases to be well founded. However, when analyzing the net benefit to society of going cashless, reduced crime should be weighed against any cost that a reduction in cash would impose on legitimate cash users. One such legitimate group is examined in more detail in the \" Lack of Financial Access for Certain Groups \" section below. The effect a reduction in cash payments would have on crime should not be overstated, as criminals likely would seek other ways to commit and hide their crimes. For example, the prevalence of cybercrime may increase. Another benefit (from a macroeconomic perspective) of a cashless society cited by economists would be the potential elimination of the practical inability of central banks, such as the Fed, to implement negative interest rates. When an economy is in recession or otherwise performing poorly, one monetary policy response is to lower interest rates. Lower interest rates can spur companies to borrow in order to invest and spur consumers to borrow in order to make additional purchases, thus boosting economic activity and mitigating the impact of recessions. However, many economists believe that policymakers are constrained by a zero lower bound—that whatever policy rate they may set, interest rates in many markets will not fall below zero. The reason is that holding cash offers a zero interest rate. Thus, if the Fed attempted to implement negative interest rates, individuals could avoid those rates by transferring their funds into cash. If holding cash was not an available option, it would be easier for negative interest rates to be transmitted to more financial markets. However, any benefit provided by increasing policymakers' ability to affect the macroeconomy with negative interest rates should be weighed against the cost it would impose on the individual savers whose account balances would decrease in value during a period of negative interest rates. Skeptics of reducing or eliminating the role of cash in the economy assert that cash serves a number of beneficial purposes, and argue that eliminating it would have adverse effects on certain financially vulnerable groups, eliminate an asset that provides safety against cyber vulnerabilities and financial crises, and reduce individuals' privacy. As with potential benefits to a reduction in cash, many of the factors discussed below may not occur wholly as a risk or cost, and they must be weighed against potential benefits when considering their overall impact. If the United States were to move toward becoming a cashless society that required consumers to use noncash, electronic payment services, it could present difficulties for those segments of the population who lack access to the financial system or to an electronic network. Access to electronic payments typically requires an account with some financial institution, usually a bank. Often—and increasingly—it also involves using or accessing a device connected to the internet. However, these factors can present hardships and obstacles for certain vulnerable groups. The Federal Deposit Insurance Corporation reported that in the United States in 2015, 9 million households were unbanked, meaning that no member had a bank account. Of these, 37.8% reported that the main reason was that they do not have enough money to keep in an account, 9.4% reported that fees were too high, and 1.9% reported fees were unpredictable. In total, this indicates almost half of the total unbanked, or roughly 4.5 million households, do not access banking services due to economic obstacles. Sweden has been at the forefront of the move away from cash (see Appendix ), and observers there, including Stefan Ingves, governor of Sweden's central bank, have voiced some of these concerns about going cashless. In addition, anecdotal reporting indicates that retirees in Sweden are finding the change difficult and costly. In the United States, many assert that it would be beneficial to bring the unbanked into the banking system. Nevertheless, if the unbanked engaged with the banking system at a relatively high cost only because cash (which was a less expensive option for them) was no longer available, it would likely be a detrimental outcome for this group. Conversely, if the move to a cashless system led to less costly financial access for this group, they may stand to benefit. Proponents of cash often cite the robustness of physical currency as a payment system. Once in an individual's possession, cash does not rely on financial institutions or information technology (IT) based payment networks. These proponents argue that if payments became entirely electronic, events such as power outages, hacker attacks, or (in the event of future cyber war) a state-sponsored attack would be capable of shutting down the most simple financial transaction—the exchange of money for goods and services. The financial system is already exposed to these threats to varying degrees, but the argument is that the elimination of cash amplifies those risks. Because it functions well as a store of value, cash is a relatively safe asset in which to invest savings with no risk of losses resulting from a decline in a securities value or the failure of financial institutions or other entities. The perceived safety of cash and its non-reliance on financial institutions also makes it desirable in times of financial turmoil or distress, when confidence in such institutions decreases. During these periods, many people prefer assets that are free from credit risk. For some of these individuals, deposit insurance guarantees may not wholly eliminate their fear of losses, whereas the safety of physical currency would. Holding cash, then, could also provide a sense of security to risk-adverse people that may mistrust the financial system. Opening a bank account or otherwise using traditional noncash payment systems generally requires an individual to divulge certain basic personal information, such as name, Social Security number, and birthdate, to a financial institution. Financial institutions store this information and information about the transactions linked to this identity. Under certain circumstances, they may analyze or share this information, such as with a credit-reporting agency. In some instances hackers have stolen personal information from financial institutions, causing concerns over how well these institutions can protect sensitive data. Finally, provided it follows proper legal procedures, the government also can access this information under certain circumstances. Similarly, although new alternative payment systems may offer a degree of anonymity or pseudonymity, these systems still generate an unalterable record of transactions between parties. Cash, by contrast, can be used anonymously, and people may wish to use cash for legitimate purposes to ensure their privacy. Certain consumers who are uncomfortable divulging and generating private information—even basic information that a transaction occurred—may prefer cash to any electronic payment methods. Cash has a number of advantageous features that has made it a simple and robust payment system throughout most of human history. It is difficult to imagine conditions under which cash would be replaced entirely, and disappear from the economy, at least in the near future. Nevertheless, its hegemony as a payment system appears to have come to an end, as electronic payment systems have gained popularity, and the ubiquity of cash acceptance for in-person purchases also seems precarious. If noncash payment systems significantly displace cash and cash usage and acceptance significantly declines, there would be a number of effects (both positive and negative) on the economy and society. Now or in the near future, policymakers may face decisions about whether to impede or hasten the decline of cash and consider the implications of doing so. Two countries provide interesting case studies of market forces drastically changing the way a society makes payments. Sweden In recent years, the use of cash in Sweden has quickly and substantially declined, dropping from 40% to 13% of transactions between 2010 and 2018. In many cases, businesses no longer accept cash, and one survey indicated that two-thirds of small businesses planned to stop accepting cash. Anecdotal reporting indicates that about 5% of bank branches accept cash deposits or offer cash withdrawals. Furthermore, Sweden's central bank is examining the possibility of creating registered accounts for the purpose of issuing currency electronically. Reportedly, many Swedes are generally in favor of the trend (the displacement of cash is due largely to consumer preference), though some have voiced concerns about financial access issues that the change causes for certain groups, such as the elderly. Observers have put forward a number of explanations for the Sweden's growing preference for electronic payment methods such as cards and mobile app enabled payments. One argument asserts that Sweden is an especially technology savvy country. As such, Swedes are comfortable using electronic payment systems, and Swedish companies have developed fast and easy payment technologies, such as iZettle and Swish. Some observers also have suggested that Swedes are especially trusting of institutions and thus have fewer privacy concerns. Some have noted that the timing of the start of the decline in cash use among Swedes coincided with the start of a transition to new Swedish banknotes and coins. They suggest that this spurred people and businesses to make a switch not to the new bills and coins but instead to electronic payment methods. Kenya In 2007, a company named Safaricom—Kenya's largest mobile phone network operator—introduced a \"mobile money\" service called M-Pesa (\"M\" stands for \"mobile\" and \"pesa\" is the Swahili word for money). Users of the service download a phone application and deposit cash with M-Pesa employees called \"agents.\" They can then transfer money into any other M-Pesa account using their phone. Originally intended as a service for Kenyans who had moved to a city to earn money to send back home to rural areas, the service became tremendously popular as a general use payment system. By 2016, there were approximately 31.6 million mobile money accounts in Kenya, which had a total population of 47.6 million in 2017. Many observers identify the combination of lack of access to traditional banking services and the proliferation of mobile phones in Kenya as a driving factor for the expansion of M-Pesa and subsequent mobile money services. These observers argue that in Kenya, as with many developing and largely rural nations, both consumers and banks view financial and bank services as a business need of the rich. In 2006, before the introduction of M-Pesa, just 19% of Kenyans had bank accounts and there was 1.5 bank branches for every 100,000 people. However, 54% of Kenyans had their own mobile phone or access to one. Another explanation for the rise of mobile money is that Safaricom successfully identified a large, profitable, and previously untapped market in Kenya. Available mobile technology and its proliferation among the population meant low-cost money transfers could be profitably offered to lower-income consumers. Certain observers assert that the success of M-Pesa has caused Kenyan financial institutions to reevaluate their business models, shifting their focus to offering services to lower-income groups than they previously targeted, and cite the increase in bank accounts and the decline of the average account balances as evidence of this change. As a result, the portion of the Kenyan population with access to some type of formal financial services has grown from 27% in 2006 to 75% in 2017. Although mobile money appears to have filled a market need, the degree to which it has displaced cash should not be overstated. An official at Safaricom estimated in February 2018 that as many as 8 out of 10 transactions are still cash transactions, as Kenyans still reportedly prefer cash for small, in-person purchases because of convenience and using M-Pesa generally involves fees. In addition, workers are still generally paid in cash.", "summary": "Electronic forms of payment have become increasingly available, convenient, and cost efficient due to technological advances in digitization and data processing. Anecdotal reporting and certain analyses suggest that businesses and consumers are increasingly eschewing cash payments in favor of electronic payment methods. Such trends have led analysts and policymakers to examine the possibility that the use and acceptance of cash will significantly decline in coming years and to consider the effects of such an evolution. Cash is still a common and widely accepted payment system in the United States. Cash's advantages include its simplicity and robustness as a payment system that requires no ancillary technologies. In addition, it provides privacy in transactions and protection from cyber threats or financial institution failures. However, using cash involves costs to businesses and consumers who pay fees to obtain, manage, and protect cash and exposes its users to loss through misplacement, theft, or accidental destruction of physical currency. Cash also concurrently generates government revenues through \"profits\" earned by producing it and by acting as interest-free liabilities to the Federal Reserve (in contrast to reserve balances on which the Federal Reserve pays interest), while reducing government revenues by facilitating some tax avoidance. The relative advantages and costs of various payment methods will largely determine whether and to what degree electronic payment systems will displace cash. Traditional noncash payment systems (such as credit and debit cards and interbank clearing systems) involving intermediaries such as banks and central banks address some of the shortcomings of cash payments. These systems can execute payments over physical distance, allow businesses and consumers to avoid some of the costs and risks of using cash, and are run by generally trusted and closely regulated intermediaries. However, the maintenance and operation of legacy noncash systems involve their own costs, and the intermediaries charge fees to recoup those costs and earn profits. The time it takes to finalize certain transactions—including crediting customer accounts for check or electronic deposits—can lead to consumers incurring additional costs. In addition, these systems involve cybersecurity risks and generally require customers to divulge their private personal information to gain system access, which raises privacy concerns. To date, the migration away from cash has largely been in favor of traditional noncash payment systems; however, some observers predict new alternative systems will play a larger role in the future. Such alternative systems aim to address some of the inefficiencies and risks of traditional noncash systems, but face obstacles to achieving that aim and involve costs of their own. Private systems using distributed ledger technology, such as cryptocurrencies, may not serve the main functions of money well and face challenges to widespread acceptance and technological scalability. These systems also raise concerns among certain observers related to whether these systems could facilitate crime, provide inadequate protections to consumers, and may adversely affect governments' ability to implement or transmit monetary policy. The potential for increased payment efficiency from these systems is promising enough that certain central banks have investigated the possibility of issuing government-backed, electronic-only currencies—called central bank digital currencies (CBDCs)—in such a way that the benefits of certain alternative payment systems could be realized with appropriately mitigated risk. How CBDCs would be created and function are still matters of speculation at this time, and the possibility of their introduction raises questions about the appropriate role of a central bank in the financial system and the economy. If the relative benefits and costs of cash and the various other payment methods evolve in such a way that cash is significantly displaced as a commonly accepted form of payment, that evolution could have a number of effects, both positive and negative, on the economy and society. Proponents of reducing cash usage (or even eliminating it all together and becoming a cashless society) argue that doing so will generate important benefits, including potentially improved efficiency of the payment system, a reduction of crime, and less constrained monetary policy. Proponents of maintaining cash as a payment option argue that significant reductions in cash usage and acceptance would further marginalize people with limited access to the financial system, increase the financial system's vulnerability to cyberattack, and reduce personal privacy. Based on their assessment of the magnitude of these benefits and costs and the likelihood that market forces will displace cash as a payment system, policymakers may choose to encourage or discourage this trend.", "document_type": "crs"}
{"report": "Water infrastructure issues, particularly regarding funding, continue to receive attention from some Members of Congress and a wide array of stakeholders. Localities are primarily responsible for providing wastewater and drinking water infrastructure services. According to the most recent estimates by states and the U.S. Environmental Protection Agency (EPA), expected capital costs for such facilities total $744 billion over a 20-year period. While some analysts and stakeholders debate whether these estimates understate or overstate capital needs, most agree that the affected communities face formidable challenges in providing adequate and reliable water infrastructure services. Capital investments in water infrastructure are necessary to maintain high quality service that protects public health and the environment, and capital facilities are a major investment for local governments. The vast majority of public capital projects are debt-financed (i.e., they are not financed on a pay-as-you-go basis from ongoing revenues to the water utility). The principal financing tool that local governments use is the issuance of tax-exempt municipal bonds. At least 70% of U.S. water utilities rely on municipal bonds and other debt to some degree to finance capital investments. Beyond municipal bonds, federal assistance through grants and loans is available for some projects but is insufficient to meet all needs. Finally, public-private partnerships (P3s), which are long-term contractual arrangements between a public utility and a private company, currently provide only limited capital financing in the water sector. Although they are increasingly used in transportation and some other infrastructure sectors, especially P3s that involve private sector debt or equity investment in a project, most P3s for water infrastructure involve contract operations for operation and maintenance. Numerous drinking water utilities are privately owned and make significant private capital investments in water infrastructure, unlike the wastewater sector, in which facilities are generally owned by municipalities. In recent years, Congress has considered several legislative options to help finance water infrastructure projects, including projects to build and upgrade wastewater and drinking water treatment facilities. Some Members have offered proposals that would amend, supplement, and/or complement the existing clean water and drinking water State Revolving Fund (SRF) programs. Other proposals would address water infrastructure issues outside the framework of the SRF programs. In 2014, Congress established the Water Infrastructure Finance and Innovation Act (WIFIA) program, which creates a new mechanism of providing financial assistance for water infrastructure projects. The first section of this report provides an overview of the WIFIA program, including its origins, scope, and applicability. The second section describes WIFIA program appropriation levels and estimates of the amount of credit assistance the federal funding would provide. The third section discusses EPA's implementation of the WIFIA program, including recent developments. The fourth section identifies selected issues that may be of interest to policymakers. The WIFIA approach for supporting investment in water infrastructure is modeled after the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which was established in 1998 (see textbox below for further details). As the name suggests, only transportation projects are eligible for TIFIA assistance. The TIFIA program generated interest in creating a similar program for water infrastructure. As discussed below, the Water Resources Reform and Development Act of 2014 (WRRDA 2014) established and authorized appropriations for the WIFIA program. Congress provided the first appropriations for EPA to offer credit assistance, such as direct loans, under the WIFIA program in FY2017. In 2018, America's Water Infrastructure Act of 2018 (AWIA) reauthorized appropriations for the program and amended certain WIFIA provisions. WRRDA 2014 established a five-year WIFIA pilot program. The act authorized (1) EPA to provide credit assistance (loans or loan guarantees) for a range of drinking water and wastewater projects and (2) the U.S. Army Corps of Engineers to provide similar assistance for water resource projects, such as flood control or hurricane and storm damage reduction. Congress provided appropriations to EPA to administer the WIFIA program in FY2014. Congress has not appropriated analogous funds to the Corps (nor has the Administration requested funds for a Corps WIFIA program) that would enable the Corps to implement a WIFIA program as laid out in WRRDA 2014. Regardless, this section identifies WIFIA provisions relating to both EPA and the Corps. To implement the program, the act authorized appropriations of $175 million over five years to both EPA and the Corps (beginning with $20 million for each agency in FY2015 and increasing to $50 million in FY2019). Project costs must generally be $20 million or larger to be eligible for credit assistance. For projects in less populous communities (defined by WIFIA as populations of 25,000 or less), project costs must be $5 million or more. WIFIA credit assistance is available to state infrastructure financing authorities; a corporation; a partnership; a joint venture; a trust; or a federal, state, local, or tribal government (or consortium of tribal governments). In the case of projects carried out by private entities, such projects must be publicly sponsored. To meet this requirement, WIFIA allows a project applicant to demonstrate to the EPA or the Corps that the affected state, local, or tribal government supports the project. The maximum amount of a loan is 49% of eligible project costs, but the act authorizes EPA or the Corps to make available up to 25% of available funds each year for credit assistance in excess of 49% of project costs. Except for certain projects in rural areas, the total amount of federal assistance (i.e., WIFIA and other sources combined) may not exceed 80% of a project's cost. Activities eligible for assistance under the WIFIA pilot program include project development and planning, construction, acquisition of real property, and carrying costs during construction. Categories eligible for assistance by EPA include projects eligible for assistance through the clean water state revolving fund (CWSRF) and drinking water state revolving fund (DWSRF) programs (i.e., wastewater treatment and community drinking water facilities); enhanced energy efficiency of a public water system or wastewater treatment works; repair or rehabilitation of aging wastewater and drinking water systems; desalination, water recycling, aquifer recharge, or development of alternative water supplies to reduce aquifer depletion; prevention, reduction, or mitigation of the effects of drought; or a combination of eligible projects. Categories eligible for assistance by the Corps include flood control or hurricane and storm damage reduction projects, environmental restoration, coastal or inland harbor navigation improvement, or inland and intracoastal waterways navigation improvement. The EPA Administrator or Secretary of the Army, as appropriate, determines project eligibility based on creditworthiness and dedicated revenue sources for repayment. Selection criteria include the national or regional significance of the project, extent of public or private financing in addition to WIFIA assistance, use of new or innovative approaches, the amount of budget authority required to fund the WIFIA assistance, the extent to which a project serves regions with significant energy development or production areas, and the extent to which a project serves regions with significant water resources challenges. Responding to concerns from some groups that WIFIA could impair and diminish support for clean water and drinking water SRF programs under the Clean Water Act and Safe Drinking Water Act (see discussion below), the act requires the EPA Administrator, when the agency receives applications for WIFIA assistance, to notify state infrastructure financing authorities and give them the opportunity to commit funds to the project. WIFIA-assisted projects must use American-made iron and steel products. Projects must also comply with the prevailing wage requirements of the Davis-Bacon Act in the same manner that they would under the SRF provisions of the Clean Water Act. In addition, the act directed EPA and the Corps to provide information on a website concerning applications and projects that have received assistance, and the Government Accountability Office must report to Congress (four years after enactment, i.e., June 10, 2018) on the program and provide recommendations for continuing, changing, or terminating the WIFIA program. As discussed below, AWIA extended the deadline for this report. AWIA, enacted on October 23, 2018, amended WIFIA in several ways: It removed WIFIA's designation as a pilot program. It authorized appropriations of $50.0 million for each of FY2020 and FY2021 for EPA program implementation. It authorized EPA to administer the WIFIA program for relevant agencies (through an interagency agreement), specifically directing EPA to enter into such an agreement with the commissioner of the Bureau of Reclamation within the Department of the Interior. It required the Government Accountability Office to prepare a report for Congress by October 23, 2021. In addition, AWIA authorized an additional $5 million in WIFIA appropriations to provide credit assistance to state finance authorities to support combined projects eligible for assistance from the CWSRF and DWSRF. This additional appropriation authority is available for FY2020 and FY2021 and is available only if (1) Congress appropriates funding for both the CWSRF and the DWSRF at FY2018 levels or 105% or more of the previous year's funding, whichever is greater, and (2) EPA receives at least $50.0 million in WIFIA appropriations. State financing authorities may use funding from WIFIA appropriations to cover 100% of project costs, in contrast to the 80% federal financial assistance cap that applies to most WIFIA-financed projects. For each of FY2015 and FY2016, Congress provided $2.2 million for EPA to hire staff and design the new water infrastructure assistance program. In FY2017, Congress provided the first appropriations to cover the subsidy cost of the program, thus allowing implementation of WIFIA (i.e., making project loans). Congress provided a total of $30 million for the WIFIA program for FY2017 through two appropriations acts: The Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ), enacted on December 10, 2016, provided the first appropriation of funds to cover the subsidy cost of the program. P.L. 114-254 appropriated $20 million to EPA to begin making loans and allowed the agency to use up to $3 million of the total for administrative purposes. The act authorized EPA to use these appropriations to subsidize costs to provide credit assistance not to exceed $2.1 billion. The Consolidated and Further Continuing Appropriations Act, 2017 ( P.L. 115-31 ), enacted on May 5, 2017, provided an additional $8 million for EPA to apply toward loan subsidy costs and $2 million for EPA's administrative expenses. The act authorized EPA to use funds to guarantee as much as $976 million in direct loans. For FY2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), provided $63 million for the WIFIA program (including $8 million for administrative costs). The act authorized EPA to use funds to guarantee as much as $6.71 billion in direct loans. EPA estimated that its budget authority ($55 million) would provide approximately $5.5 billion in credit assistance. For FY2019, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $68 million for the WIFIA program, including $8 million for administrative costs. The act authorized EPA to use funds to guarantee as much as $7.31 billion in direct loans. EPA estimated that its budget authority ($60 million) would provide approximately $6 billion in credit assistance. Figure 1 illustrates the WIFIA appropriations for administrative purposes and for loan subsidy costs between FY2017 and FY2019. The appropriations acts for FY2017 through FY2019 state that the appropriations for the subsidy costs would be available until expended. In contrast, fiscal year appropriations for WIFIA administrative costs are not available after specific dates. As discussed above, WRRDA 2014 authorized a parallel program for water resources projects to be administered by the Corps. Congress has not yet appropriated funds (nor has the Administration requested funds for a Corps WIFIA program) that would enable the Corps to begin preparations or begin making WIFIA loans under the authority in the 2014 statute. EPA began preparing for implementation of the WIFIA program, including through a series of public listening sessions in several U.S. cities, in 2014. The intended audience was municipal, state, and regional water utility officials; private sector financing professionals; and other interested organizations and parties. The purpose was to discuss project ideas, potential selection and evaluation criteria, and numerous other implementation issues. In 2016, EPA issued two rules intended to explain and clarify some provisions of the program and establish guidelines for the application process. One was an interim final rule that sets guidelines for the application and selection of projects, defines the requirements for credit assistance, and defines reporting requirements and a fee collection structure. In this rule, EPA said that it would initially give funding priority to four types of projects: 1. adaptation to extreme weather and climate change; 2. enhanced energy efficiency of wastewater treatment works and public water systems; 3. green infrastructure; and 4. repair, rehabilitation, and replacement of infrastructure and conveyance systems. Through the second rulemaking, EPA proposed a fee structure for WIFIA (application fee, credit processing fee, and servicing fee). EPA finalized this rule in June 2017. WIFIA authorizes EPA to charge fees to recover all or a portion of the agency's costs administering the program. EPA's final rule requires a nonrefundable fee for each project that is invited to submit a full WIFIA application. The application fee is $100,000, or $25,000 for projects serving small communities. The fees are not required in connection with submission of letters of interest but would be required for projects that EPA expects might reasonably proceed to closing on a credit assistance agreement. Enacted December 16, 2016, the Water Infrastructure Improvements for the Nation (WIIN) Act ( P.L. 114-322 , Section 5008(c)) amended WIFIA to allow fees to be financed as part of the loan at the request of an applicant. In 2018, AWIA amended WIFIA to clarify that state financing authorities cannot pass along application fees on to the parties that utilize WIFIA assistance. After EPA received its first appropriations to cover loan subsidy costs, it announced its first round of funding for the WIFIA program in January 2017. Additional rounds of funding have followed with each fiscal year's enacted appropriations. Table 1 provides details for each of EPA's funding rounds, including the project priorities EPA listed in its annual funding notices, the number of letters of interest submitted, selected projects, and loans closed. From the federal perspective, an advantage of the WIFIA program is that it can provide a large amount of credit assistance relative to the amount of budget authority provided. In federal budgetary terms, WIFIA assistance has less of an impact than a grant, which is not repaid to the U.S. Treasury. The volume of loans and other types of credit assistance that the program can provide is determined by the size of congressional appropriations and calculation of the subsidy amount. WIFIA defines the \"subsidy amount\" as follows: The amount of budget authority sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, as calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.). The subsidy amount, which is often expressed in percentage terms or as a ratio (i.e., subsidy rate), largely determines the amount of credit assistance that can be made available to project sponsors. For example, if a project's subsidy rate is 10% and is the only charge against available budget authority, a $20 million budgetary allocation could theoretically support a $200 million loan. A lower subsidy rate would support a larger loan amount. As a reference point, the Office of Management and Budget (OMB) identified a TIFIA subsidy rate of 6.30% for direct loans in FY2020. Proponents of WIFIA have argued that loans for water projects are likely to be less risky than transportation projects, because water utility collections for services (i.e., water rates) provide an established revenue stream and repayment mechanism; thus the subsidy cost would be lower and the amount of credit assistance higher (per dollar of budget authority). Adding caution, however, analysts note that, even with stable revenue mechanisms, some communities and water utilities have recently experienced problems with borrowing and bond repayments, so repayment of a WIFIA loan is not a certainty. In the Trump Administration's FY2020 budget proposal, OMB estimated a 0.91% subsidy rate for WIFIA. This equates to a 1:110 ratio. At this subsidy rate, a $10 million appropriation could support a direct loan (or loans) totaling $1.10 billion. However, this subsidy rate is an estimate for budgetary purposes. In the context of WIFIA implementation, subsidy rates are project-specific. EPA stated that the subsidy rate is used for budgetary purposes and provides an estimate for what will be available for loans each year based on the anticipated riskiness of the future loan portfolio. The actual ratio will be determined for each project at the time of loan obligation. Project A with a higher credit quality would consume less of the credit subsidy than Project B with a lower credit quality, even if the projects are otherwise identical. Each applicant will be scored independently. The WIFIA program provides capital at a low cost to the borrower, because even though the interest on 30-year Treasury securities is taxable, Treasury rates can be less expensive than rates on traditional tax-exempt municipal debt. Moreover, WIFIA financing may be characterized as patient capital, because loan repayment does not need to begin until five years after substantial completion of a project, the loan can be for up to 35 years from substantial completion, and the amortization schedule can be flexible. In addition, there is less perceived investment risk, because the project has been determined to be creditworthy (i.e., there is a revenue stream for repayment). Additionally, the WIFIA program has the potential to limit the federal government's exposure to default by relying on market discipline through creditworthiness standards and encouraging private capital investment. On the other hand, the Congressional Budget Office (CBO) has argued that the federal government underestimates the cost of providing credit assistance under such programs because it excludes the cost of market risk—the compensation that investors require for the uncertainty of expected but risky cash flows. The reason is that the [Federal Credit Reform Act] requires analysts to calculate present values by discounting expected cash flows at the interest rate on risk-free Treasury securities (the rate at which the government borrows money). In contrast, private financial institutions use risk-adjusted discount rates to calculate present values. In an effort to encourage nonfederal and private sector financing, WIFIA funding assistance generally cannot exceed 49% of project costs. In addition, WIFIA limits all sources of federal assistance to no more than 80% of a project's cost. In general, the WIFIA program is designed to support larger infrastructure projects with eligible costs exceeding $20 million. For this reason, some have argued that the WIFIA program complements existing water infrastructure financing tools—SRF programs under the Clean Water Act and Safe Drinking Water Act—which are often used for smaller-scale projects. Policymakers set a lower minimum threshold for project costs ($5 million) for WIFIA projects in communities with populations less than 25,000. One of 12 projects selected in the FY2017 funding round is located in a less populous community (Morro Bay, CA). Two of the 39 projects in the FY2018 funding round are located in less populous communities (Frontenac, KS, and Cortland, NY). Generally, the level of interest from less populous communities in WIFIA financing is uncertain, particularly considering the other financing options that may be available. The U.S. Department of Agriculture has a variety of water and waste disposal programs to provide loans and grants for wastewater and drinking water infrastructure in rural communities (10,000 people or fewer). In addition, both of the SRF programs authorize states to provide subsidized financial assistance—such as principal forgiveness, negative interest loans, or a combination—under certain conditions. Appropriations acts in recent years have required states to use minimum percentages of their federal grant amounts to provide additional subsidization. The FY2019 appropriations act requires 10% of the CWSRF grants and 20% of the DWSRF grants to be used \"to provide additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest loans, or grants (or any combination of these).\" WIFIA financing can potentially support smaller projects by grouping, or aggregating, them through a single application for financial assistance. For example, during the first round of WIFIA funding (FY2017), one of the 12 entities selected to submit a loan application was the Indiana Finance Authority, which administers the clean water and drinking water SRF programs in Indiana. Indiana's prospective WIFIA loan would provide $436 million to support multiple projects in the state. A major source of debate among opponents and proponents has been and continues to be potential impacts of WIFIA on funds for the Clean Water Act and Safe Drinking Water Act SRF programs. Several groups representing state environmental officials opposed the establishment of a WIFIA program (in the 113 th Congress). They argued that WIFIA funding could result in reduced spending on the SRF programs, which are capitalized by federal appropriations. States are concerned that WIFIA would likely be funded (through congressional appropriations) to the detriment of the SRF programs. On the other hand, water utility groups that support WIFIA have argued that it would complement, not harm, existing SRF programs. In their view, WIFIA will provide a new funding opportunity for large water infrastructure projects that are unlikely to receive SRF assistance. As described above, in part to address concerns about impacts of WIFIA on the SRF programs, WIFIA requires EPA to notify state infrastructure financing authorities about WIFIA application and gives state infrastructure financing authorities an opportunity to commit funds to the project. Nevertheless, some states and environmental advocacy groups remain concerned that WIFIA will compete with SRFs for congressional funding and that WIFIA will not prioritize public health or affordability, as the SRFs can. The 2016 Water Infrastructure Improvements for the Nation Act includes a \"sense of the Congress\" that WIFIA funding should be in addition to robust funding for the SRFs. Enacting the WIFIA program raised a federal budgetary and revenue issue. Legislation reported by congressional committees is typically scored by the CBO for the effects on discretionary and mandatory, or direct, spending and by the Joint Committee on Taxation (JCT) for effects on revenue. The initial CBO cost estimate for S. 601 , as approved by the Environment and Public Works Committee in April 2013, concluded that the WIFIA provisions would cost $260 million over five years. In addition, it would result in certain revenue loss to the U.S. Treasury; thus, pay-as-you-go procedures would have applied to the bill. CBO cited the JCT estimate that enactment of the bill would reduce revenues by $135 million over 10 years, because states would be expected to issue tax-exempt bonds for water projects in order to acquire additional funds not covered by WIFIA assistance. To avoid the pay-as-you-go requirement in the bill, the committee added a provision to S. 601 to prohibit recipients of WIFIA assistance from issuing tax-exempt bonds for the non-WIFIA portions of project costs. CBO re-estimated the bill and concluded that, because the change would make the WIFIA program less attractive to entities, most of which rely on tax-exempt bonds for project financing, the cost of the bill would be $200 million less over five years. CBO also said that the bill would have no impact on revenues, because the demand for federal credit would be lower without the option of using tax-exempt financing. WRRDA 2014 retained the bar on tax-exempt financing for WIFIA-assisted projects. Thus, the apparent solution to one issue in the legislation—potential revenue loss to the U.S. Treasury—raised a different kind of issue for entities seeking WIFIA credit assistance, because tax-exempt municipal bonds are the principal mechanism used by local governments to finance water infrastructure projects. The restriction was widely criticized by potential users of WIFIA assistance. In their view, the bond financing restriction in WRRDA 2014, together with the provision that caps WIFIA assistance at 49% of project costs, would make it very difficult to finance needed projects. Congressional interest in addressing the tax-exempt bond restriction was soon evident. For example, H.R. 1710 in the 114 th Congress proposed to make an exception from the limitation on use of tax-exempt bonds for WIFIA loans made to finance water infrastructure projects in states in which the governor has issued a state of drought emergency declaration. More generally, in July 2015, the Senate passed H.R. 22 , a bill to reauthorize highway and transportation programs for six years. It included repeal of the provision in P.L. 113-121 that limits any project receiving federal credit assistance under the WIFIA program from being financed with tax-exempt bonds. However, repeal of the provision raised similar revenue questions to those that arose in connection with P.L. 113-121 . CBO's report on S. 1647 (the Senate Environment and Public Works Committee's bill, which was the basis of Senate-passed H.R. 22 ) stated that the Joint Committee on Taxation (JCT) estimated that repealing the WIFIA limitation would increase states' issuance of tax-exempt bonds for water projects and would decrease federal revenues by $17 million over the FY2016-FY2025 period. Further, CBO estimated that the change would increase demand for federal credit under the WIFIA program, resulting in additional spending stemming from the appropriation levels authorized in P.L. 113-121 . Consequently, CBO estimated that implementing the WIFIA program would cost $146 million over the FY2016-FY2025 period. The issue of identifying offsets, or \"pay-fors,\" for the estimated federal revenue loss was addressed in the conference agreement on H.R. 22 , the FAST Act ( P.L. 114-94 ). CBO estimated that the conference agreement included offsets to fully cover the cost of the bill by reducing spending or raising revenues. Thus, the enacted bill retained the provision repealing the tax-exempt bond financing restriction on WIFIA assistance.", "summary": "The Water Infrastructure Finance and Innovation Act (WIFIA) program provides financial assistance for water infrastructure projects, including projects to build and upgrade wastewater and drinking water treatment systems. Congress established the WIFIA program in the Water Resources Reform and Development Act of 2014 (WRRDA 2014, P.L. 113-121). The WIFIA concept is modeled after a similar program that finances transportation projects, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. Proponents of the WIFIA approach, including water utility organizations, cite several potential benefits: WIFIA provides credit assistance to large water infrastructure projects that may otherwise have difficulty obtaining financing. WIFIA provides credit assistance, namely direct loans, at U.S. Treasury rates, potentially lowering the cost of capital for borrowers. WIFIA assistance has less of a federal budgetary effect than conventional project grants that are not repaid, because only the subsidy cost of a loan (representing the presumed default rate on loans) is required to be appropriated. WIFIA support limits the federal government's exposure to default, because projects must be found creditworthy with a revenue stream for repayment to be eligible for assistance. On the other hand, opponents of the WIFIA approach, including organizations that represent state environmental agency officials, have cited several concerns: Federal funding for a WIFIA program could have a detrimental effect on federal support for established State Revolving Fund (SRF) programs that provide the largest source of water infrastructure assistance today. If WIFIA funding resulted in a decrease in SRF assistance, smaller projects may face financing challenges. The Congressional Budget Office has warned that the future costs of a WIFIA program to the federal budget may be underestimated. America's Water Infrastructure Act of 2018 (AWIA; P.L. 115-270), enacted on October 23, 2018, removed the pilot designation from the WIFIA program, reauthorized appropriations, and revised provisions related to program administration. Appropriations for the WIFIA program have increased since its inception, allowing EPA to provide increasing amounts of credit assistance each year: FY2017 appropriations totaled $30 million. FY2018 appropriations totaled $63 million. FY2019 appropriations totaled $68 million. On April 5, 2019, EPA announced a third round of WIFIA funding, inviting prospective borrowers to submit letters of interest to EPA. From these submittals, the agency will select projects for funding. EPA estimated that its budget authority would provide approximately $6 billion in credit assistance.", "document_type": "crs"}
{"report": "The Renewable Fuel Standard (RFS) requires that the nation's transportation fuel supply contains renewable fuels. This mandate—established in the Energy Policy Act of 2005 (EPAct05; P.L. 109-58 ) and expanded in the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140 )—requires the use of renewable fuel, although it does not explicitly require the production of that fuel. Obligated parties, such as refiners or importers of gasoline or diesel fuel, are responsible for complying with the RFS requirements. The Environmental Protection Agency (EPA) administers the mandate, which is an amendment to Clean Air Act (CAA) provisions governing the regulation of fuels. The statutory renewable fuel volume increases annually until 2022, with EPA determining the volume after 2022 within certain limitations. In general, EPA has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail. The RFS is a complex and highly technical policy initiative. It deals with multiple sectors of the economy and requires the use of some advanced renewable fuel production technologies that have yet to reach maturity. The RFS also incorporates thresholds for greenhouse gas emission reduction. This complexity is exacerbated by multiple stakeholders with differing perspectives on what the RFS should accomplish, how it should be implemented, and whether it should exist, which leads to debate about the RFS and its future. Congressional debate about the RFS is expected to continue with special attention to how EPA administers the program. As Congress continues its oversight of the RFS, it may be useful to understand the RFS waiver authority granted to EPA. This report discusses the waiver provisions of the RFS, including the modification-of-applicable-volumes (\"reset\") section. EPAct05 established a renewable fuel program requiring that transportation fuel sold or introduced into commerce in the United States, on an annual average basis, contain a specified amount of renewable fuel. The RFS mandate, as amended by EISA, calls for the consumption of 9 billion gallons of total renewable fuel in 2008, ascending to 36 billion gallons in 2022, with EPA determining the annual volume after 2022. The statute identifies four categories of renewable fuels that must be used to meet the mandate. However, these four categories can be aggregated into two major categories: unspecified biofuel (mainly cornstarch ethanol) and advanced biofuel (e.g., cellulosic biofuel, biomass-based diesel, and other advanced biofuels), shown in Figure 1 . Over time, the growth in the RFS transitions from biofuels that, in practice, are made mostly from food and feed crops to biofuels made from nonfood and nonfeed crops. For instance, in 2022, the statute requires that advanced biofuels constitute close to 60% of the 36 billion gallon mandate and unspecified biofuels constitute about 40%. Congress gave the EPA Administrator waiver authority to adjust the renewable fuel volumes specified in statute given certain conditions (e.g., inadequate domestic renewable fuel supply). The EPA Administrator is required to set the standards by November 30 of the preceding year (e.g., under statute the 2020 standard is required to be finalized by November 30, 2019). Further, when the EPA Administrator reduces the cellulosic biofuel volume, the Administrator also may reduce the total renewable fuel and total advanced biofuel volumes by the same or a lesser volume. For biomass-based diesel, the statute specifies volumes for four years (2009-2012) and requires EPA to announce the remaining annual biomass-based diesel volume \"14 months before the first year for which such applicable volume will apply\" (e.g., the 2021 biomass-based diesel standard is required to be finalized by November 2019). EPA issued the final 2019 standards (and the 2020 standard for biomass-based diesel) in November 2018. The RFS statutory requirements and the EPA requirements for 2014 through 2019 are provided in Table 1 . The RFS provisions of the CAA contains a set of waiver provisions. The provisions contain three separate waivers—a general waiver, a cellulosic biofuel waiver, and a biomass-based diesel waiver—that the EPA Administrator may use to waive, in whole or in part, the volume of renewable fuel mandated by statute. The waivers referred to in this report should not be confused with small refinery exemptions. If a waiver is issued, it expires after one year (60 days for the biomass-based diesel waiver), unless the Administrator renews the waiver. Additionally, starting in 2016, the waiver provision allows for a modification of applicable volumes. The waivers and the modification of applicable volumes are described in further detail in the following sections of this report. The RFS statute gives the EPA Administrator the authority to waive the overall RFS requirements, in whole or in part, if domestic renewable fuel supply is inadequate to meet the mandate, or implementation of the requirement would severely harm the economy or environment of a state, a region, or the United States. The Administrator may issue the general waiver at his or her discretion or if petitioned by a state or fuel provider. In those instances in which the Administrator receives a petition for a waiver, the Administrator has 90 days after receipt of the petition to approve or disapprove it. Prior to making a decision, the Administrator is required to consult with the Secretary of Agriculture and Secretary of Energy and to allow for public notice and the opportunity for comment. If a general waiver is granted, any adjustment applies to the total national renewable fuel requirement. Thus, EPA may not issue a general waiver for an individual state or supplier within a state. CAA Section 211(o) obligates the EPA Administrator to reduce the cellulosic biofuel mandate when the projected production capacity for a given year is less than what is identified in statute. The law does not require the EPA Administrator to consult with the Secretary of Agriculture or the Secretary of Energy when issuing a cellulosic biofuel waiver, or to give public notice and opportunity for comment. However, the Administrator must base the projection on the U.S. Energy Information Administration estimate provided under the applicable percentages provision. Although it is not required by the statute to do so, EPA has consulted with federal agencies, industry, and others when the agency has considered issuance of a cellulosic biofuel waiver. EPA also has provided opportunity for public comment. The Administrator must set the new required amount at the \"projected available volume during that calendar year\" by November 30 of the preceding year. Should the Administrator reduce the cellulosic biofuel volume, the Administrator also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume. When the Administrator issues a cellulosic biofuel waiver, the Administrator must offer cellulosic biofuel waiver credits for obligated parties to purchase for that compliance year in lieu of using actual cellulosic biofuel. The RFS statutory provisions give the EPA Administrator authority to reduce the amount of biomass-based diesel required for up to 60 days if the Administrator determines that there are significant market circumstances (including feedstock disruptions) \"that would make the price of biomass-based diesel fuel increase significantly.\" If these market circumstances continue past the initial 60-day period, the Administrator may issue another waiver for an additional 60 days. The Administrator is to consult with the Secretaries of Energy and Agriculture prior to issuing such a waiver. If the Administrator issues a biomass-based diesel waiver, the Administrator also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume. To date, EPA has not used the biomass-based diesel waiver authority. The last section of the waiver provision is the modification-of-applicable-volumes section, referred to by some as the \"reset\" section for the RFS. This section requires that the EPA Administrator modify the applicable volumes of the RFS in future years starting in 2016 if certain conditions are met. Specifically, it provides that, starting in 2016, the EPA Administrator shall modify the applicable volumes of the RFS for subsequent years if the Administrator waives the renewable fuel mandate, the advanced biofuel mandate, the cellulosic biofuel mandate, or the biomass-based diesel mandate by at least 20% for two consecutive years or by at least 50% for a single year. This reset section does not state what the modified amount must be. Rather, it requires that the Administrator determine the applicable volumes—in coordination with the Secretaries of Energy and Agriculture—based on a review of program implementation thus far and analysis of certain factors (e.g., the impact of the production and use of renewable fuels on the environment). EPA has repeatedly used its cellulosic biofuel waiver authority to reduce the cellulosic biofuel volume required, and, since 2014, to also reduce both the advanced biofuel and total renewable fuel volume required. In November 2018, EPA announced that it used the cellulosic biofuel waiver to reduce the applicable total renewable fuel, advanced biofuel, and cellulosic biofuel volume requirements for 2019. According to the agency, the \"13.0 billion gallons specified in the statute for advanced biofuel cannot be reached in 2019 … primarily due to the expected continued shortfall in cellulosic biofuel.\" The EPA Administrator issued a general waiver for prior final rules (which covered 2014 through 2016) and repeatedly issued cellulosic biofuel waivers for 2010 through 2018. The Administrator used the waivers for 2014, 2015, and 2016 to reduce the total renewable fuel (including a lowering of the unspecified biofuel mandate), advanced biofuel, and cellulosic biofuel volume requirements. The Administrator has not granted a biomass-based diesel waiver. Waiver authority is intended, in part, to assist EPA with implementation of the RFS. One of EPA's program tasks is to use the waiver authority, when required, to determine the annual final standard, and to announce that final standard by the statutory deadline. The challenge of projecting advanced biofuel production, political pressure from some stakeholders, and other factors may have contributed to past delays in issuing final standards under the waiver authority. Such delays could lead to difficulty for obligated parties who have to demonstrate program compliance and for renewable fuel producers who are interested in producing the required fuel. For 2016 through 2019, EPA has issued the final rule according to the statutory schedule. There are three stakeholders that generally have had distinct views about the impacts of the waiver authority: the advanced biofuel industry, the conventional biofuel industry, and the petroleum industry. Some advanced biofuel advocates assert that granting of waivers, in conjunction with other factors, could weaken confidence in renewable fuel markets and the chosen technologies, specifically cellulosic biofuel. Advanced biofuel production, particularly cellulosic biofuel production, has not been produced at the levels called for in the statutory provisions by relatively large margins. Some conventional biofuel advocates have not always been content with EPA's proposals to use the waiver authority to reduce conventional biofuel volumes. Conventional biofuel production has remained in line with what the statutory provisions require. Some in the petroleum industry assert that the waiver authority is an option that addresses the use of more ethanol than can be used by certain vehicles (i.e., the blend wall) or supported by existing infrastructure. While perspectives about EPA's use of the waiver authority vary among stakeholders, the waivers have provided EPA with the flexibility to establish volume requirements that have been attained. The 2019 final rule has triggered the reset section of the waiver provision for total renewable fuel. Previous final rules had already triggered a reset for both advanced biofuels and cellulosic biofuels. EPA reports that in early 2019 it will issue a rulemaking that proposes to \"reset\" the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020-2022. Many have questions and concerns about how EPA may implement the reset section (the modification-of-applicable-volumes section of the RFS). This section requires the EPA Administrator to modify the applicable volumes of the RFS in its entirety starting in 2016 if certain conditions are met. It is not clear how EPA may carry out this action . The Administrator has the discretion to set the modified amounts. Depending on how the reset is applied, there could be interest in its impact on public and private investment for biofuels. There might also be interest in the reset's potential impact on the transition of the program from mostly conventional biofuel to mostly advanced biofuel by 2022. Additionally, there may be interest about whether a reset could address the concerns expressed by some obligated parties (i.e., refiners) about high compliance costs. Going forward, reset implementation could have implications for the entire fuel industry, given the potential for EPA to reduce the applicable volumes or maintain ambitious targets.", "summary": "The Clean Air Act requires that transportation fuels contain a minimum volume of renewable fuel. This renewable fuel standard (RFS) was established by the Energy Policy Act of 2005 (EPAct05; P.L. 109-58) and amended by the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140). The RFS includes scheduled volume mandates that grow each year (starting with 9 billion gallons in 2008 and ascending to 36 billion gallons in 2022). The U.S. Environmental Protection Agency (EPA), which is responsible for administering the RFS, determines the annual volume after 2022. Within the overall RFS, there are submandates for advanced biofuels, including cellulosic biofuel, biomass-based diesel, and other advanced biofuels. EPA has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail. More specifically, the statute identifies a general waiver for the overall RFS and waivers for two types of advanced biofuel: cellulosic biofuel and biomass-based diesel. Statute requires EPA to announce each year's standards by November 30 of the previous year, except for biomass-based diesel, which must be announced 14 months before the year for which the applicable volume is to apply. Further, the final section of the waiver provision—which some refer to as the \"reset\" section—requires a permanent modification of applicable volumes of the RFS starting in 2016 and carried forward, if certain conditions are met. In several instances, EPA has used, has proposed to use, or has been petitioned to use its waiver authority when implementing the RFS. In November 2018, EPA announced in its final rule for 2019 for the RFS that it was using the cellulosic biofuel waiver authority to reduce the cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements. EPA's use of the cellulosic biofuel waiver authority is not new. EPA has repeatedly issued a waiver, reducing the volume required for cellulosic biofuel. For the last few years, the use of the cellulosic biofuel waiver led EPA to also reduce the total advanced biofuel volume requirement. For various reasons (e.g., technology issues, financial support, policy uncertainty), the U.S. cellulosic biofuel industry has been unable, by a wide margin, to produce the volume amounts identified in statute. The 2019 final RFS program rule issued by EPA triggers the RFS \"reset\" section of the waiver provision for total renewable fuel. The reset was triggered in previous final rules for both advanced biofuel and cellulosic biofuel. It is unclear what impact the use of the reset section will have on RFS standards in future years. EPA reports it will issue a rulemaking in early 2019 that proposes to reset the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020-2022. A possible issue for Congress is whether the waiver authority and the reset provisions are sufficient options for EPA to address the statutory advanced biofuel volume shortfalls—shortfalls that may have been more than what Congress envisioned when it expanded the RFS in 2007. Another issue is how the Administration might apply the reset provision, and if it would contribute to uncertainty for industry, financiers, and other interested parties.", "document_type": "crs"}
{"report": "Special operations are military operations requiring unique modes of employment, tactical techniques, equipment, and training. These operations are often conducted in hostile, denied, or politically sensitive environments and are characterized by one or more of the following elements: time sensitive, clandestine, low visibility, conducted with and/or through indigenous forces, requiring regional expertise, and/or a high degree of risk. Special Operations Forces (SOF) are those active and reserve component forces of the services designated by the Secretary of Defense and specifically organized, trained, and equipped to conduct and support special operations. The U.S. Special Operations Command (USSOCOM), headquartered at MacDill Air Force Base in Tampa, FL, is a functional combatant command responsible for training, doctrine, and equipping for all U.S. SOF units. In 1986, Congress, concerned about the status of SOF within overall U.S. defense planning, passed legislation ( P.L. 99-661 ) to strengthen special operations' position within the defense community and to strengthen interoperability among the branches of U.S. SOF. These actions included the establishment of USSOCOM as a new unified command. USSOCOM headquarters currently consists of approximately 2,500 military and Department of Defense (DOD) civilians (not including government contractors). As stipulated by U.S.C. Title X, Section 167, the commander of USSOCOM is a four-star officer who may be from any military service. U.S. Army General Raymond A. Thomas III is the current USSOCOM Commander. Army Lieutenant General Richard Clarke has been approved to replace General Thomas when he retires in March 2019. The USSOCOM Commander reports directly to the Secretary of Defense. The Assistant Secretary of Defense for Special Operations and Low Intensity Conflict (ASD SOLIC), a member of the Office of the Secretary of Defense for Policy (OSD-P), provides civilian oversight over USSOCOM activities and is chain of supervision between the Secretary of Defense and USSOCOM Commander. The current ASD SOLIC is Owen West. As of 2019, USSOCOM consists of over 70,000 active duty, reserve, National Guard, and civilian personnel assigned to its headquarters (about 2,500 personnel), its four components, and sub-unified commands. USSOCOM's components are the U.S. Army Special Operations Command (USASOC); the Naval Special Warfare Command (NSWC); the Air Force Special Operations Command (AFSOC); and the Marine Corps Forces Special Operations Command (MARSOC). The Joint Special Operations Command (JSOC) is a USSOCOM sub-unified command. Theater-level command and control responsibilities are vested in Theater Special Operations Commands (TSOCs). TSOCs are sub-unified commands under their respective Geographic Combatant Commanders (GCCs). TSOCs are special operational headquarters elements designed to support a GCC's special operations logistics, planning, and operational command and control requirements, and are normally commanded by a general officer. In February 2013, based on a request from USSOCOM and with the concurrence of every geographic and functional combatant commander and military service chiefs and Secretaries, the Secretary of Defense transferred combatant command of the TSOCs from the GCCs to USSOCOM. This means USSOCOM has the responsibility to organize, train, and equip TSOCs, as it previously had for all assigned SOF units as specified in U.S. Code, Title 10, Section 167. This change is intended to enable USSOCOM to standardize, to the extent possible, TSOC capabilities and manpower requirements. While USSOCOM is now responsible for the organizing, training, and equipping of TSOCs, the GCCs continue to have operational control over the TSOCs and all special operations in their respective theaters. TSOC commanders are the senior SOF advisors for their respective GCCs. Each TSOC is capable of forming the core of a joint task force headquarters for short-term operations, and can provide command and control for all SOF in theater on a continuous basis. The services have what the DOD calls \"Combatant Command Service Agency (CCSA)\" responsibilities for providing manpower, non-SOF peculiar equipment, and logistic support to the TSOCs. The current TSOCs, the GCCs they support, and the CCSA responsibility for those TSOCs are as follows. Special Operations Command South (SOCSOUTH), Homestead Air Force Base, FL; supports U.S. Southern Command; its CCSA is the Army. Special Operations Command Africa (SOCAFRICA), Stuttgart, Germany; supports U.S. Africa Command; its CCSA is the Army. Special Operations Command Europe (SOCEUR), Stuttgart, Germany; supports U.S. European Command; its CCSA is the Army. Special Operations Command Central (SOCCENT), MacDill Air Force Base, FL; supports U.S. Central Command; its CCSA is the Air Force. Special Operations Command Pacific (SOCPAC), Camp Smith, HI; supports U.S. Pacific Command; its CCSA is the Navy. Special Operations Command Korea (SOCKOR), Yongsang, Korea; supports U.S. Forces Korea; its CCSA is the Army. Special Operations Command U.S. Northern Command (SOCNORTH), Peterson Air Force Base, CO; supports U.S. Northern Command; its CCSA is the Air Force. In addition to Title 10 authorities and responsibilities, USSOCOM has been given additional responsibilities. In the 2004 Unified Command Plan (UCP), USSOCOM was given the responsibility for synchronizing DOD planning against global terrorist networks and, as directed, conducting global operations against those networks. In this regard, USSOCOM \"receives, reviews, coordinates and prioritizes all DOD plans that support the global campaign against terror, and then makes recommendations to the Joint Staff regarding force and resource allocations to meet global requirements.\" In October 2008, USSOCOM was designated the DOD proponent for Security Force Assistance (SFA). In this role, USSOCOM performs a synchronizing function in global training and assistance planning similar to the previously described role of planning against terrorist networks. In 2018, USSOCOM was also assigned the mission to field a transregional Military Information Support Operations (MISO) capability intended to \"address the opportunities and risks of global information space.\" By April of 2019, a Joint MISO WebOps Center (JMWC) is planned to be operating with the Interagency and Combatant Command teams to provide joint messaging capabilities. U.S. Army SOF (ARSOF) includes approximately 33,000 soldiers from the active Army, National Guard, and Army Reserve organized into Special Forces, Ranger, and special operations aviation units, along with civil affairs units, military information units, and special operations support units. ARSOF Headquarters and other resources, such as the John F. Kennedy Special Warfare Center and School, are located at Fort Bragg, NC. Five active Special Forces (SF) Groups (Airborne), consisting of about 1,400 soldiers each, are stationed at Fort Bragg and at Fort Lewis, WA; Fort Campbell, KY; Fort Carson, CO; and Eglin Air Force Base, FL. Special Forces soldiers—also known as the Green Berets—are trained in various skills, including foreign languages, that allow teams to operate independently throughout the world. Two Army National Guard Special Forces groups are headquartered in Utah and Alabama. In addition, an elite airborne light infantry unit specializing in direct action operations, the 75 th Ranger Regiment, is headquartered at Fort Benning, GA, and consists of three battalions of about 800 soldiers each and a regimental special troops battalion providing support to the three Ranger battalions. The Army's special operations aviation unit, the 160 th Special Operations Aviation Regiment (Airborne) (SOAR), consists of five battalions and is headquartered at Fort Campbell, KY. The 160 th SOAR features pilots trained to fly the most sophisticated Army rotary-wing aircraft in the harshest environments, day or night, and in adverse weather and supports all USSOCOM components, not just exclusively Army units. Some of the most frequently deployed SOF assets are Civil Affairs (CA) units, which provide experts in every area of civil government to help administer civilian affairs in operational theaters. The 95 th Civil Affairs Brigade (Airborne) is the only active CA unit that exclusively supports USSOCOM. In September 2011 the 85 th Civil Affairs Brigade was activated to support U.S. Army General Purpose Forces (GPFs). All other CA units reside in the Reserves and are affiliated with Army GPF units. Military Information Support Operations (formerly known as psychological operations) units disseminate information to large foreign audiences through mass media. Two active duty Military Information Support Groups (MISGs)—the 4 th Military Information Support Group (MISG) (Airborne) and 8 th Military Information Support Group (MISG) (Airborne)—are stationed at Fort Bragg, and their subordinate units are aligned with Geographic Combatant Commands. The Air Force Special Operations Command (AFSOC) is one of the Air Force's 10 major commands, with approximately 19,500 active, reserve, and civilian personnel. AFSOC units operate out of four major continental United States (CONUS) locations and two overseas locations. The headquarters for AFSOC, the 1 st Special Operations Wing (1 st SOW), 24 th Special Operations Wing (24 th SOW), and the Air Force Special Operations Air Warfare Center (AFSOAWC) are located at Hurlburt Field, FL. The AFSOAWC is responsible for training, education, irregular warfare program, innovation development, and operational testing. From AFSOAWC's fact sheet: The AFSOAWC's mission includes non-standard aviation in support of Army, Navy, Air Force, Marine and allied special operations forces. The following units are consolidated under the Air Warfare Center [AFSOAWC]: ■ U.S. Air Force Special Operations School, Hurlburt Field, FL ■ 6 th Special Operations Squadron, Duke Field, FL ■ 19 th Special Operations Squadron, Hurlburt Field, FL ■ 551 st Special Operations Squadron, Cannon Air Force Base, NM ■ 5 th Special Operations Squadron, a reserve unit from the 919 th Special Operations Wing, Duke Field, FL ■ 371 st Special Operations Combat Training Squadron, Hurlburt Field, FL ■ 18 th Flight Test Squadron, Hurlburt Field, FL ■ 592 nd Special Operations Maintenance Squadron, Duke Field, FL ■ 209 th Civil Engineer Squadron, a guard unit from Gulfport, MS ■ 280 th Special Operations Communications Squadron, a guard unit from Dothan, AL The Air Warfare Center provides mission qualification training in SOF aviation platforms to include AC-130U, AC-130W, U-28, MQ-1, MQ-9, C-145, C-146 as well as small unmanned aerial systems (SUAS), Combat Aviation Advisors, medical element personnel, and AFSOC Security Forces. In addition to AFSOC personnel, AFSOAWC is responsible for educating and training other USSOCOM components and joint/interagency/coalition partners. The 27 th SOW is at Cannon AFB, NM. The 352 nd and 353 rd Special Operations Wings provide forward presence in Europe (RAF Mildenhall, England) and in the Pacific (Kadena Air Base, Japan), respectively. The 6 th SOS's mission is to assess, train, and advise partner nation aviation units with the intent to raise their capability and capacity to interdict threats to their nation. The 6 th SOS provides aviation expertise to U.S. foreign internal defense (FID) missions. The Air National Guard's 193 rd SOW at Harrisburg, PA, and the Air Force Reserve Command's 919 th SOW at Duke Field, FL, complete AFSOC's major flying units. The 24 th Special Operations Wing is one of three Air Force active duty special operations wings assigned to Air Force Special Operations Command. The 24 th SOW is based at Hurlburt Field, Fla. The 24 th SOW is the only Special Tactics wing in the Air Force. From the Air Force's Special Tactics fact sheet: The primary mission of the 24 SOW is to provide Special Tactics forces for rapid global employment to enable airpower success. The 24 SOW is U.S. Special Operation Command's tactical air and ground integration force, and the Air Force's special operations ground force to enable global access, precision strike, and personnel recovery operations. Core capabilities encompass: airfield reconnaissance, assessment, and control; personnel recovery; joint terminal attack control and environmental reconnaissance. Special Tactics is comprised of Special Tactics Officers, Combat Controllers, Combat Rescue Officers, Pararescuemen, Special Operations Weather Officers and Airmen, Air Liaison Officers, Tactical Air Control Party operators, and a number of combat support Airmen which compromise 58 Air Force specialties. These unique skills provide a full-spectrum, air-focused special operations capability to the combatant commander in order to ensure airpower success. With their unique skill sets, Special Tactics operators are often the first special operations elements deployed into crisis situations. Special Tactics Airmen often embed with Navy SEALs, Army Green Berets and Rangers to provide everything from combat air support to medical aid and personnel recovery, depending on their specialty. AFSOC's Special Tactics experts include Combat Controllers, Pararescuemen, Special Operations Weather Teams, Combat Aviation Advisors, and Tactical Air Control Party (TACPs). As a collective group, they are known as Special Tactics and have also been referred to as \"Battlefield Airmen.\" Their basic role is to provide an interface between air and ground forces, and these airmen have highly developed skill sets. Usually embedded with Army, Navy, or Marine SOF units, they provide control of air fire support, medical and rescue expertise, or weather support, depending on the mission requirements. AFSOC's active duty and reserve component flying units operate fixed and rotary-wing aircraft, including the CV-22B, AC-130, C-130, EC-130, MC-130, MQ-1, MQ-9, U-28A, C-145A, C-146A, and PC-12. The Naval Special Warfare Command (NSWC) is composed of approximately 10,000 personnel, including active-duty Special Warfare Operators, known as SEALs; Special Warfare Boat Operators, known as Special Warfare Combatant-craft Crewmen (SWCC); reserve personnel; support personnel; and civilians. NSWC is organized around 10 SEAL Teams, 2 SEAL Delivery Vehicle (SDV) Teams, and 3 Special Boat Teams. SEAL Teams consist of six SEAL platoons each, consisting of 2 officers and 16 enlisted personnel. The major operational components of NSWC include Naval Special Warfare Groups One, Three, and Eleven, stationed in Coronado, CA, and Naval Special Warfare Groups Two, Four, and Ten and the Naval Special Warfare Development Group in Little Creek, VA. These components deploy SEAL Teams, SEAL Delivery Vehicle Teams, and Special Boat Teams worldwide to meet the training, exercise, contingency, and wartime requirements of theater commanders. Because SEALs are considered experts in special reconnaissance and direct action missions—primary counterterrorism skills—NSWC is viewed as well postured to fight a globally dispersed enemy ashore or afloat. NSWC forces can operate in small groups and have the ability to quickly deploy from Navy ships, submarines and aircraft, overseas bases, and forward-based units. On November 1, 2005, DOD announced the creation of the Marine Special Operations Command (MARSOC) as a component of USSOCOM. Now referred to as the U.S. Marine Corps Forces Special Operations Command, MARSOC consists of the Marine Raider Regiment, which includes 1 st , 2 nd , and 3 rd Marine Raider Battalions; the Marine Raider Support Group; 1 st , 2 nd , and 3 rd Marine Raider Support Battalions; and the Marine Special Operations School. MARSOC headquarters, the 2 nd and 3 rd Marine Raider Battalions, the Marine Special Operations School, and the Marine Raider Support Group are stationed at Camp Lejeune, NC. The 1 st Marine Raider Battalion is stationed at Camp Pendleton, CA. MARSOC forces have been deployed worldwide to conduct a full range of special operations activities. MARSOC missions include direct action, special reconnaissance, foreign internal defense, counterterrorism, and information operations. MARSOC currently has approximately 3,000 personnel assigned. From USSOCOM's 2019 Factbook: The Joint Special Operations Command, located at Fort Bragg, North Carolina, is a sub-unified command of the U.S. Special Operations Command. It is charged to study special operations requirements and techniques, ensure interoperability and equipment standardization, plan and conduct Special Operations exercises and training, and develop joint Special Operations tactics. USSOCOM's FY2020 budget request of $13.8 billion represents an increase of $381 million (2.8%) from the FY2019-enacted position. USSOCOM's FY2020 base budget request totals $9.6 billion, a $435 million (5%) increase from the FY2019-enacted position of $9.2 billion, while overall FY2020 personnel increases by 1,358 (increases military personnel by 1,407 and reduces civilian personnel by 49). The FY2020 Overseas Contingency Operations (OCO) request totals $4.2 billion, a $54 million decrease (-1%) from the FY2019-enacted position. USSOCOM's FY2020 budget request seeks a 2.2% manpower increase, from 71,612 personnel in FY2019 to 73,204 in FY2020. After 17 years at the forefront of the global military campaign against terrorism, policymakers, defense officials, and academics are questioning the future role of USSOCOM and U.S. SOF. Three legislative provisions in the FY2019 National Defense Authorization Act ( P.L. 115-232 ) suggest growing congressional concern with misconduct, ethics, and professionalism; roles and responsibilities for ASD SOLIC; and SOF's ability to counter future threats across the spectrum of conflict. SEC. 1066. COMPREHENSIVE REVIEW OF PROFESSIONALISM AND ETH ICS PROGRAM S FOR SPECIAL OPERATIONS FORCES (a) REVIEW REQUIRED.—The Secretary of Defense shall conduct a comprehensive review of the ethics programs and professionalism programs of the United States Special Operations Command and of the military departments for officers and other military personnel serving in special operations forces. (b) ELEMENTS OF THE REVIEW.—The review conducted under subsection (a) shall specifically include a description and assessment of each of the following: (1) The professionalism and ethics standards of the United States Special Operations Command and affiliated component commands. (2) The ethics programs and professionalism programs of the military departments available for special operations forces. (3) The ethics programs and professionalism programs of the United States Special Operations Command and affiliated component commands. (4) The roles and responsibilities of the military departments and the United States Special Operations Command and affiliated component commands in administering, overseeing, managing, and ensuring compliance and participation of special operations forces in ethics programs and professionalism programs, including an identification of— (A) Any gaps in the administration, oversight, and management of such programs and in ensuring the compliance and participation in such programs; and (B) Any additional guidance that may be required for a systematic, integrated approach in administering, over- seeing, and managing such programs and in ensuring compliance with and participation in such programs in order to address issues and improve adherence to professionalism and ethics standards. (5) The adequacy of the existing management and oversight framework for ensuring that all ethics programs and professionalism programs available to special operations forces meet Department standards. (6) Tools and metrics for identifying and assessing individual and organizational ethics and professionalism issues with respect to special operations forces. (7) Tools and metrics for assessing the effectiveness of existing ethics programs and professionalism programs in improving or addressing individual and organizational ethics-related and professionalism issues with respect to special operations forces. (8) Any additional actions that may be required to address or improve individual and organizational ethics and professionalism issues with respect to special operations forces. (9) Any additional actions that may be required to improve the oversight and accountability by senior leaders of ethics and professionalism-related issues with respect to special operations forces. (c) LIMITATION ON DELEGATION.—The Secretary of Defense may only delegate responsibility for any element of the review required by subsection (a) to the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict, in coordination with other appropriate offices of the Secretary of Defense and the secretaries of the military departments. (d) DEADLINE FOR SUBMITTAL OF REVIEW.—The Secretary of Defense shall submit the review required by subsection (a) to the Committees on Armed Services of the Senate and the House of Representatives by not later than March 1, 2019. (e) DEFINITIONS.—In this section: (1) The term ''ethics program'' means a program that includes— (A) Compliance-based ethics training, education, initiative, or other activity that focuses on adherence to rules and regulations; and (B) Values-based ethics training, education, initiative, or other activity that focuses on upholding a set of ethical principles in order to achieve high standards of conduct and incorporate guiding principles to help foster an ethical culture and inform decision-making where rules are not clear. (2) The term ''professionalism program'' means a program that includes training education, initiative, or other activity that focuses on values, ethics, standards, code of conduct, and skills as related to the military profession. SEC. 917. DEADLINE FOR COMPLETION OF FULL IMPLEMENTATION OF REQUIREMENTS IN CONNECTION WITH ORGANIZATION OF THE DEPARTMENT OF DEFENSE FOR MANAGEMENT OF SPECIAL OPERATIONS FORCES AND SPECIAL OPERATIONS The Secretary of Defense shall ensure that the implementation of Section 922 of the National Defense Authorization Act for Fiscal Year 2017 ( P.L. 114-114 –328; 130 Stat. 2354) and the amendments made by that section is fully complete by not later than 90 days after the date of the enactment of this Act. SEC. 914. ASSISTANT SECRETARY OF DEFENSE FOR SPECIAL OPERATIONS AND LOW INTENSITY CONFLICT REVIEW OF UNITED STATES SPECIAL OPERATIONS COMMAND (a) REVIEW REQUIRED.—The Assistant Secretary of Defense for Special Operations and Low Intensity Conflict shall, in coordination with the Commander of the United States Special Operations Command, conduct a comprehensive review of the United States Special Operations Command for purposes of ensuring that the institutional and operational capabilities of special operations forces are appropriate to counter anticipated future threats across the spectrum of conflict. (b) SCOPE OF REVIEW.—The review required by subsection (a) shall include, at a minimum, the following: (1) An assessment of the adequacy of special operations forces doctrine, organization, training, materiel, education, personnel, and facilities to implement the 2018 National Defense Strategy, and recommendations, if any, for modifications for that purpose. (2) An assessment of the roles and responsibilities of special operations forces as assigned by law, Department of Defense guidance, or other formal designation, and recommendations, if any, for additions to or divestitures of such roles or responsibilities. (3) An assessment of the adequacy of the processes through which the United States Special Operations Command evaluates and prioritizes the requirements at the geographic combatant commands for special operations forces and special operations-unique capabilities and makes recommendations on the allocation of special operations forces and special operations unique capabilities to meet such requirements, and recommendations, if any, for modifications of such processes. (4) Any other matters the Assistant Secretary considers appropriate. (c) DEADLINES.— (1) COMPLETION OF REVIEW.—The review required by subsection (a) shall be completed by not later than 270 days after the date of the enactment of this Act. (2) REPORT.—Not later than 30 days after completion of the review, the Assistant Secretary shall submit to the congressional defense committees a report on the review, including the findings and any recommendations of the Assistant Secretary as a result of the review. These three legislative provisions, in addition to directing the Secretary of Defense to fully implement directed changes in ASD SOLIC, call for ASD SOLIC and USSOCOM to take an introspective look at U.S. SOF's culture, roles and responsibilities, adequacy of resources, organizational structure, and the adequacy of train ing, education, and personnel. Some have suggested these provisions are a precursor for congressional and DOD actions to \"rein in and reorient\" U.S. SOF from fighting terrorists to taking on nation-states instead. Others, citing reportedly nonsanctioned military combat operations in Africa, where U.S. SOF are said to have strayed from their train and assist mandate, have questioned whether or not U.S. SOF was involved in direct combat in Niger. Some believe this situation calls into question the adequacy of civilian oversight and control of U.S. SOF. Others assert that the size of U.S. SOF and the scope of their missions have expanded beyond the ability of USSOCOM to handle them and that congressional actions to increase ASD SOLIC oversight and control of U.S. SOF are necessary to improve the current state of affairs. Aware that U.S. SOF are overburdened and that there is a need to find the right balance between continuing to challenge terrorist organizations while simultaneously addressing growing irregular warfare threats posed by nation-states, policymakers will likely make good use of the two forthcoming congressionally mandated reviews. It is possible that over the next few years, significant public policy debates on the future of USSOCOM and U.S. SOF will be undertaken, potentially resulting in a number of changes for ASD SOLIC, USSOCOM, and U.S. SOF. ", "summary": "Special Operations Forces (SOF) play a significant role in U.S. military operations and, in recent years, have been given greater responsibility for planning and conducting worldwide counterterrorism operations. U.S. Special Operations Command (USSOCOM) has about 70,000 Active Duty, National Guard, and reserve personnel from all four services and Department of Defense (DOD) civilians assigned to its headquarters, its four service component commands, and eight sub-unified commands. In 2013, based on a request from USSOCOM (with the concurrence of Geographic and Functional Combatant Commanders and the Military Service Chiefs and Secretaries), the Secretary of Defense assigned command of the Theater Special Operations Commands (TSOCs) to USSOCOM. USSOCOM now has the responsibility to organize, train, and equip TSOCs. While USSOCOM is now responsible for the organizing, training, and equipping of TSOCs, the Geographic Combatant Commands will continue to have operational control over the TSOCs. Because the TSOCs are now classified as sub-unified commands, the services are responsible to provide non-SOF support to the TSOCs in the same manner in which they provide support to the Geographic Combatant Command headquarters. The current Unified Command Plan (UCP) stipulates USSOCOM responsibility for synchronizing planning for global operations to combat terrorist networks. This focus on planning limits its ability to conduct activities designed to deter emerging threats, build relationships with foreign militaries, and potentially develop greater access to foreign militaries. USSOCOM is proposing changes that would, in addition to current responsibilities, include the responsibility for synchronizing the planning, coordination, deployment, and, when directed, the employment of special operations forces globally and will do so with the approval of the Geographic Combatant Commanders, the services, and, as directed, appropriate U.S. government agencies. Further, the proposed changes would give broader responsibility to USSOCOM beyond counterterrorism activities, to include activities against other threat networks. In August 2016, the Obama Administration assigned USSOCOM the leading role in coordinating DOD's efforts to counter WMDs, a mission previously assigned to U.S. Strategic Command (USSTRATCOM). USSOCOM is also the DOD proponent for Security Force Assistance and recently was assigned the mission to field a transregional Military Information Support Operations (MISO) capability. USSOCOM's FY2020 budget request is for $13.8 billion, and USSOCOM has requested a force structure of 66,553 military and 6,651 civilian personnel. A potential issue for Congress is the future of USSOCOM and U.S. SOF.", "document_type": "crs"}
{"report": "This report provides an introduction to select issues related to sub-Saharan Africa (henceforth, \"Africa,\" unless oth erwise noted) and U.S. policy toward the region. It includes general information concerning Africa's economic and development challenges, governance and human rights trends on the continent, and key issues related to peace and security. It also provides an overview of U.S. engagement in Africa and current U.S. policy approaches toward the region. This report is intended to serve as a primer to help inform deliberations on key enduring issues for Congress, which include the authorization and appropriation of funding for U.S. foreign aid programs and U.S. military activities in the region and oversight of U.S. programs and policies. Other CRS products address in greater depth many of the topics considered in this report; several are cited in footnotes. Starting in the early 2000s, many countries in Africa exhibited high rates of economic growth. Buoyed by high commodity prices and strong domestic demand, some countries experienced middle class expansion, rapid growth in access to digital communications, and progress toward some of the U.N. Millennium Development Goals (MDGs), albeit starting from a low base by global standards. Outcomes varied widely across the region, however. Resource-rich states broadly recorded higher growth but achieved smaller declines in poverty and poorer progress toward human development than their resource-poor counterparts, although poverty alleviation was generally limited across the region. Many African countries have confronted economic headwinds since 2014, as weak global commodity prices and poor agricultural conditions have hampered economic activity. Regional average gross domestic product (GDP) growth dropped from 5% in 2013 to 2.7% in 2016, before recovering slightly to 3.3% in 2017, according to the International Monetary Fund (IMF). Africa's economic outlook has since improved moderately, owing to accelerating global growth, which spurred rising demand for commodities and a resulting rise in some commodity prices. The IMF predicted in October 2018 that regional growth would gradually rise to 4.5% by 2023, while noting considerable variance between countries. Seven countries—Ethiopia, Côte d'Ivoire, Rwanda, Senegal, Djibouti, Ghana, and Benin—were projected to exceed 6% growth in 2018. Meanwhile, Nigeria, Africa's largest economy, is recovering from a 2016 recession, while South Africa entered recession in 2018. Some countries likely recorded declines in per capita income in 2018, including Equatorial Guinea, South Sudan, Angola, Burundi, South Africa, and Nigeria. Many African economies remain undiversified and rely on raw or minimally processed commodity exports, especially in the energy, mining, and agricultural sectors. Meanwhile, public debt-to-GDP levels, which fell sharply in the 2000s due to concerted debt relief efforts by international lenders, are rising in multiple countries. In early 2018, the World Bank classified 18 African countries as being \"at high risk of debt distress,\" up from eight in 2013. The World Bank attributed the trend to rising fiscal deficits and weak exchange rates, notably in commodity exporting states. Tax collection remains weak across the region, limiting fiscal policy options. On a per-capita basis and by other measures, Africa remains among the poorest global regions. Despite modest reductions in extreme poverty between 1990 and 2010, 41% of Africans lived under the international poverty line of $1.90 per day as of 2015 (latest data), and 21% were undernourished as of 2016. Only one sub-Saharan African country (the Seychelles) qualifies as \"high income\" as defined by the World Bank. Six more (Botswana, Equatorial Guinea, Gabon, Mauritius, Namibia, and South Africa) qualify as \"upper-middle-income\" economies, although wealth is unequally distributed and human development indicators remain poor in several of these countries. All other countries in the region are either \"lower-middle-income\" or \"low-income.\" Since 2013, economic turbulence, poor agricultural conditions, and violent conflict have hindered human development progress in much of the region. Many countries lack the institutional capacity to facilitate sustained growth and human development. Corruption and insecurity further hinder progress toward socioeconomic improvements in many countries. By several measures, Africa has lagged behind other developing regions in its pursuit of human development. Its maternal mortality rates remain the highest of any region; in 2015 (latest data), Africa accounted for almost two-thirds of all global deaths due to maternal causes. As a region, Africa's child mortality and stunted growth prevalence rates are also the highest in the world, as are rates of HIV/AIDS, tuberculosis, and malaria. Lack of access to safe drinking water—which was available to only 24% of Africans in 2015—and unsafe sanitation facilities also impair health in the region: the World Health Organization (WHO) reports that as of 2016, Africa's mortality rate due to exposure to unsafe drinking water and sanitation was four times the global average. Africa also lags behind other regions with regard to primary education. Nearly one-third of African children aged six to seventeen do not attend school. African girls are disproportionately excluded, despite progress toward inclusion. Africa's labor market has struggled to absorb a growing working age population. Roughly 79% of Africans are unemployed or in vulnerable employment (such as self-employment), which are often associated with low earnings and insecurity. In 2017, 61% of African workers were in poverty (24%) or extreme poverty (37%). Africa has a disproportionately youthful population. Sixty-two percent of sub-Saharan Africans were aged 24 or younger in 2018, although youth population shares vary across the region. Population growth projections reflect these rates; by one estimate, roughly 5.3 billion people will live in Africa (including North Africa) by 2050—roughly a quarter of the world's population. While youthful populaces hold notable economic promise, realizing their potential presents governments with profound challenges related to the delivery of social services, political enfranchisement, and jobs. The risk associated with not meeting such demands is high. In many countries, youth are a key source of dissent. Since the early 1990s, nearly all African countries have transitioned from military or single-party rule to at least nominally multiparty political systems in which elections are held regularly. Some (such as Senegal, Cabo Verde, Benin, and Ghana) have experienced multiple peaceful electoral transfers of power, while others (such as Rwanda, Eritrea, Equatorial Guinea, South Sudan, and Sudan) exhibit autocratic regimes that limit civil society and opposition activity. In parts of Africa, leaders have abolished, altered, or circumvented constitutional term limits to remain in power. The departures of long-serving leaders in The Gambia and Angola in 2017 may present opportunities for greater openness, as may Ethiopia's inauguration of a reformist prime minister in 2018—though entrenched elites could threaten attempts at reform in each country. Meanwhile, a military crackdown after disputed 2018 elections in Zimbabwe diminished hopes of a democratic transition after the historic 2017 ouster of longtime president Robert Mugabe. According to Freedom House's annual Freedom in the World index, which charts global trends related to political rights and civil liberties, Africa has seen subregional divergence since the mid-1990s. Broadly, while states in Southern and coastal West Africa have seen substantial improvements in democratic governance, East and Central Africa \"have suffered major setbacks.\" Civil liberties trends generally follow this pattern. Progress in West and Southern Africa, however, remains fragile. Several Southern African states with relatively strong institutions (e.g., South Africa, Botswana, and Namibia) remain dominated by single parties born during liberation struggles against colonial or white-minority rule. In much of Africa, the development of accountable, functional democratic institutions remains limited. Even some countries that regularly hold democratic elections exhibit few effective internal checks and balances. Accountability for high-level crimes, such as the resignation of President Jacob Zuma of South Africa in early 2018 due to multiple corruption scandals, remains the exception rather than the rule in Africa. In many conflict-affected countries, state weakness and violence impede the development of institutions and the provision of even basic services. State institutions in Africa often fail to respond adequately to citizens' needs because they lack human and financial capacity or are beset by corruption and mismanagement. Countries such as Somalia, South Sudan, Sudan, Guinea-Bissau, and Equatorial Guinea rank near the bottom of Transparency International's Corruption Perceptions Index . Endemic corruption also corrodes state effectiveness in regional economic powerhouses such as Nigeria, Kenya, and Angola. Justice systems in many African countries are often weak and subject to political influence; this can weaken public trust in justice and law enforcement systems and has spurred incidents of vigilante justice in some states. Frustrations over a perceived lack of access to justice and protection also may drive Islamist extremist recruitment in some areas, such as central Mali. Like governance trends, human rights conditions vary widely across Africa. Several countries have maintained generally positive human rights records in recent years but continue to face challenges such as security abuses, poor prison conditions, violence against women and children, discrimination against vulnerable groups, and human trafficking. Multiple states (such as Togo, Cameroon, the Democratic Republic of Congo [DRC], and Zimbabwe) actively restrict citizens' right to dissent through protest bans and/or violent repression. Media and civil society in Africa's most authoritarian countries (such as Sudan, Rwanda, Eritrea, and Equatorial Guinea) face state intimidation and barriers to operation. Violence against civilians, including by state security forces, is a major concern in a number of countries. Police in Ghana, Liberia, Kenya, Nigeria, Sierra Leone, Uganda, and Zambia, among others, have been accused of using excessive force and mistreating detainees, often with impunity. In Burkina Faso, Cameroon, Mali, and Nigeria, local populations have faced attacks by Islamist extremist groups as well as abuses by national militaries. Internal conflicts and/or state repression in Burundi, DRC, and South Sudan have featured high levels of violence and widespread abuses that may amount to war crimes or crimes against humanity. Armed conflict and instability continue to threaten regional security, impede development, and contribute to human suffering in parts of Africa. Beyond internal conflicts, the region faces diverse transnational threats, including from terrorist groups, illicit trafficking, wildlife crime, and maritime piracy. Key threats to African peace and security are outlined below. Internal Conflicts. Violent political crises, civil wars, and/or intercommunal violence have broken out in several African states in the past decade, reversing a previous trend toward greater stability. These crises have triggered mass population displacement and created widespread humanitarian need; multiple African countries rank among the most fragile states globally, according to the Fragile States Index (see Figure 2 ). Islamist Armed Groups . Violent Islamist extremist groups in Northwest and East Africa have spurred humanitarian crises and threaten stability in their areas of operation. Since 2013, mass casualty attacks on targets such as hotels, malls, peacekeeping facilities, government buildings, and restaurants popular with Westerners in such countries as Kenya, Mali, Burkina Faso, and Côte d'Ivoire have underscored the capacity of some groups to mount complex operations. In a 2017 study of extremist recruitment in Africa, the United Nations Development Program (UNDP) identifies several factors that may encourage radicalization, including family circumstances, religious ideology, economic pressures, and perceptions of government. Seventy-one percent of respondents named state actions, such as the killing or arrest of a relative or friend, as a key factor in their decision to join violent extremist organizations. Maritime Security. Africa's coastal waters, particularly along the Gulf of Guinea, the Gulf of Aden, and the western Indian Ocean, have been highly susceptible to illegal fishing, trafficking, and piracy. Criminal elements smuggle people, drugs, and weapons, and dump hazardous waste. Maritime commerce and offshore oil production facilities in some zones have faced high rates of piracy, theft, kidnapping for ransom, and sabotage. The Gulf of Guinea has among the highest global rates of piracy and armed robbery, which surged in the first half of 2018 as compared to past years. International antipiracy efforts have sharply reduced pirate attacks in waters off the Somali coast since 2013, but analysts warn of a continued threat of piracy in the region. Other Transnational Threats. In parts of the continent, porous borders, corruption, and weak justice and law enforcement mechanisms have allowed transnational crime networks to operate with relative impunity. U.S. policymakers have expressed concern over potential links between transnational drug traffickers and Africa-based armed groups. Illegal poaching and wildlife trafficking are also concerns for U.S. policymakers. Some African countries have made significant progress toward curbing such activities, while others have had limited success due to inadequate capacity and/or political will. International Peacekeeping. Six U.N. peacekeeping operations are underway in sub-Saharan Africa. Under the U.N. system of assessed contributions, the United States is the top source of funding for U.N. peacekeeping. The United States also provides training and equipment to peacekeeping personnel contributors through bilateral programs, funded largely via the State Department's Peacekeeping Operations (PKO) and International Narcotics Control and Law Enforcement (INCLE) accounts. The United States has also provided extensive support to the African Union Mission in Somalia (AMISOM), which was authorized by the U.N. Security Council but is not U.N.-conducted. AMISOM carries out peacekeeping activities and stabilization and counterterrorist operations, primarily against Al Shabaab, an Al Qaeda-linked group. African states play a growing role in stability operations: Ethiopia was the world's top troop contributor to U.N. peacekeeping missions in 2018, and Rwanda, Ghana, and Tanzania ranked in the top 10. In the Lake Chad Basin region, attacks by Boko Haram and its splinter faction, an Islamic State affiliate known as IS-West Africa (IS-WA, aka ISIS-WA) have caused a spiraling humanitarian crisis. Civilians in Nigeria's impoverished, predominately Muslim northeast have borne the brunt of the violence, with border areas of neighboring Cameroon, Chad, and Niger also hard-hit. By some estimates the violence has killed more than 15,500 people since 2011. As of mid-2018, 2.4 million people were internally displaced across the region, and 220,000 more were refugees. A U.S.-backed regional force, led by Nigeria, has curtailed Boko Haram's territorial control but struggled to subdue the groups. Separately, violence between herders and farmers in Nigeria has escalated in recent years, with some 2,500 killed in such clashes in 2016 alone. In Mali, Islamist armed groups have expanded their reach, leveraging the shortfalls of a 2015 peace accord between the government and northern separatists. International interventions, including a U.N. peacekeeping mission and French military operations, have failed to contain extremist violence, which has spread south and east into neighboring countries. In 2017, regional states launched a \"joint force\" to counter terrorism and other threats. The force has drawn pledges of significant donor support, including from the United States, but it is not yet fully operational. The war in South Sudan, which erupted in late 2013, has also been of significant concern for U.S. policymakers. Successive attempts to negotiate an end to the crisis have failed to bring sustainable peace, amid reports of widespread atrocities during the conflict. A regionally backed peace deal signed in September 2018 has quieted some areas, but violence continues in others. According to one estimate, nearly 400,000 South Sudanese (including combatants) have died as a result of the war. The conflict has displaced over 4 million people, including nearly 2.5 million refugees. Acute food insecurity threatened more than 6 million South Sudanese in late 2018—including an estimated 47,000 facing famine-like conditions. The United States is South Sudan's largest humanitarian aid donor. Conflict and insecurity persist in parts of Sudan, notably the western Darfur region and Southern Kordofan and Blue Nile states, despite an official cessation of hostilities by the government and some armed groups. Over a decade since the United States declared a genocide in Darfur, the conflict eludes resolution: the peace process remains stalled and insecurity and access restrictions continue to aggravate dire humanitarian needs. Beyond Darfur, rising political unrest, spurred by a severe economic crisis, could ignite a broader conflict. As of mid-2018, 7.1 million Sudanese were in need of humanitarian assistance. In Somalia, Al Shabaab continues to wage an asymmetric campaign against the Somali state, AMISOM, and international targets. It has killed thousands of Somali civilians since the mid-2000s and has demonstrated the capacity to conduct attacks against targets in the broader East Africa region—most notably Kenya, which has faced violence in part for its role in AMISOM. A small Islamic State faction based in northern Somalia also poses a threat. More than a decade of violence has generated a protracted humanitarian emergency: as of late 2018, 2.6 million Somalis were displaced internally, while 1.1 million were refugees. Some 4.6 million are food insecure, including 1.5 million in crisis- or emergency-level food insecurity. Instability has endured in DRC since the mid-1990s despite extensive international stabilization efforts, contributing to a protracted humanitarian crisis and posing a threat to the broader Great Lakes region. There were 4.5 million internally displaced people (IDPs) in DRC as of early 2018, according to U.N. agencies, twice as many as in 2015. Another 800,000 Congolese are refugees; 13.1 million Congolese are estimated to need humanitarian assistance. CAR has struggled to emerge from conflict and state collapse since 2013, when rebels overthrew the government. The ensuing instability has featured widespread violence against civilians, much of it along ethnic and religious lines, and the disintegration of state institutions. Prospects for stabilization and socioeconomic development appear dim, as 2.5 million Central Africans—including nearly 1.2 million IDPs and refugees—require humanitarian aid as of late 2018. In Cameroon, protests over the perceived marginalization of English speakers in the majority Francophone country have, since 2017, escalated into a separatist insurgency amid a harsh state crackdown. Government forces and a fractious array of rebel groups have reportedly committed widespread abuses against civilians, resulting in a budding displacement crisis. In Burundi, President Pierre Nkurunziza's reelection to a third term in 2015, which many viewed as unconstitutional, sparked an ongoing violent political crisis. As of mid-2018, nearly 400,000 Burundians were refugees, while 160,000 were displaced internally. Civil society and perceived regime opponents face violence from security forces and the ruling party's youth wing. In a December 2018 public address, National Security Advisor John Bolton unveiled the Trump Administration's policy approach toward Africa. He identified three core U.S. interests in Africa: expanding U.S. trade and commercial ties with African countries, \"countering the threat from Radical Islamic Terrorism and violent conflict,\" and imposing more stringent conditions on U.S. aid and U.N. peacekeeping missions in the region. Bolton indicated that the Administration would prioritize efforts to counter \"Great power competitors, namely China and Russia, [which] are rapidly expanding their financial and political influence across Africa.\" The new policy framework appears to respond to criticism from some observers suggesting that the United States seems less engaged on the continent than in previous years, at a time when other foreign actors, including China and Russia, are seeking to expand their roles. In his remarks, Bolton emphasized the Administration's intention to pursue such goals largely through bilateral engagement with African countries as opposed to via multilateral mechanisms. He further stressed the Administration's aim to pursue \"fair and reciprocal\" U.S.-African trade, including through comprehensive bilateral trade agreements, and the promotion of private sector-centered economic deregulation. He also announced that the Administration would seek to \"streamline, reconfigure, or terminate\" U.N. peacekeeping missions that it deems ineffective. An accompanying White House fact sheet echoed such aims while emphasizing, among other ends, the Administration's intention to promote the use of nonreciprocal U.S. trade preferences provided under the African Growth and Opportunity Act (AGOA, discussed below), respond to deadly infectious diseases, advance democracy in the region, \"strengthen states where failure to do so would threaten our homeland,\" and take unilateral action when doing so is in the interest of U.S. national security. Goals identified in other Administration statements and policy documents include the continued normalization of U.S. relations with Sudan, conflict resolution in South Sudan, a peaceful electoral transition in DRC, and reforms in Ethiopia. Officials also have pressed African states to sever ties with North Korea, in line with multilateral sanctions regimes. The Trump Administration has proposed one new Africa-focused trade and investment initiative, \"Prosper Africa,\" and has otherwise maintained most existing Africa-focused initiatives launched by its predecessors—while in some cases seeking to fund them at far lower levels. Among the most notable are the global President's Emergency Plan for AIDS Relief (PEPFAR) and Feed the Future (FTF) initiatives, and the Africa-specific Young African Leaders Initiative (YALI) and Power Africa. PEPFAR, a global effort to counter HIV/AIDS, was first authorized by Congress during the George W. Bush Administration. FTF, launched by the Obama Administration and broadly backed by Congress under the Global Food Security Act ( P.L. 114-195 ), seeks to improve food access and agricultural development in developing countries. The Obama Administration also launched Power Africa, which seeks to expand electricity access in Africa, and YALI, which aims to foster the professional development of emergent African business and civic leaders. While maintaining such initiatives, the Trump Administration has proposed changes to foreign assistance, including aid cuts, that could significantly affect U.S.-Africa relations. In addition to the Administration's proposals to reduce overall aid to Africa (discussed below), National Security Advisor Bolton suggested in his December 2018 remarks that the Administration would curtail aid to countries whose governments are \"corrupt,\" or \"repeatedly vote against the United States in international forums, or take action counter to U.S. interests.\" He also noted that the Administration would direct U.S. assistance to governments that pursue democratic, accountable, and transparent governance, as well as fiscal transparency, the rule of law, and growth-centered economic reforms. How this policy might affect aid programs implemented, for example, by nongovernmental organizations in conflict-affected or authoritarian countries remains to be seen. The Administration's immigration policies have affected U.S.-Africa policy. It has used executive orders to prohibit nationals from several African countries (Sudan, Chad, and Somalia) from entry to the United States, subject to certain exceptions, citing terrorism concerns—although as of late 2018, only Somalia remained subject to such prohibitions. Implementing a decision made by the Obama Administration, it ended \"temporary protected status\" (TPS) for nationals of three West African countries (Sierra Leone, Guinea, and Liberia) affected by the 2014-2016 Ebola outbreak. A subsequent decision to end TPS for nationals of Sudan was stayed by a court injunction. The Administration has restricted visas, or threatened to do so, for nationals of some African countries whose governments do not cooperate with U.S. court-ordered immigration removals. Some African leaders reacted negatively to a derogatory remark about African countries that was attributed to President Trump in early 2018. Since taking office in July 2018, Assistant Secretary of State for African Affairs Tibor Nagy has sought to challenge perceptions of U.S. indifference or disdain—as did Bolton during his December remarks. National Security Advisor Bolton has placed a high priority on countering Chinese and Russian influence in Africa. In his December remarks, Bolton accused both countries of \"targeting their investments in the region to gain a competitive advantage over the United States\" and of engaging in \"predatory practices\" on the continent, including corrupt and opaque deal-making, exploitative lending, and self-interested extractive industry activity. Such comments align with the Administration's National Security Strategy, which portrays Chinese influence as undermining African development \"by corrupting elites, dominating extractive industries, and locking countries into unsustainable and opaque debts and commitments.\" Executive branch policy documents and statements also cite rising \"great power competition\" globally, including in Africa. Limited interest by many U.S. firms in African markets has restricted the scope for direct competition with Chinese or Russian actors to date, but the region's long-term potential as a growth market could make concerns over competition more significant in the future. China replaced the United States as Africa's largest trading partner in 2009. Chinese firms have constructed infrastructure projects across Africa, often using Chinese state financing tied to the substantial use of Chinese goods or services and, in some cases, Chinese access to African natural resources. These activities, which may expand under China's global \"One Belt, One Road\" initiative, help to fill infrastructure gaps, but their linkage to broader Chinese commercial and strategic interests raises challenging questions for the United States. In 2017, China established its first overseas military base, in Djibouti, at a maritime chokepoint on the Red Sea, a key global trade route. In a 2018 report to Congress, DOD stated that the base extends \"the reach of China's armed forces, reflecting China's growing influence.\" The proximity of the Chinese and U.S. bases in Djibouti adds to U.S. concerns: in 2018, the Pentagon reported several instances in which Chinese lasers from the base were directed at U.S. aircraft; two U.S. pilots suffered eye injuries. Russia also has shown increasing interest in expanding its presence in Africa; by one estimate, Russia has signed at least 19 military cooperation deals with African states since 2014. Russian engagement is generally centered on arms sales, military training, intelligence exchanges, and access to minerals, notably uranium. One country that has drawn particular attention is the Central African Republic, where more than 200 Russian military and private security personnel have deployed since 2017. Russia and Sudan also have reportedly expanded cooperation. The Horn of Africa appears to be of increasing strategic importance to international actors. Several of the Arab Gulf countries, namely the United Arab Emirates (UAE), Saudi Arabia, and Qatar, as well as Turkey, Russia, and China, have increased their involvement, and some have established military bases in the region. As noted above, China maintains a military base in Djibouti; Russia, for its part, has announced plans to build a logistics center in Eritrea. Gulf actors appear to have helped facilitate reconciliation between Ethiopia and Eritrea. Whether growing foreign interests in that subregion prove to be a more stabilizing or destabilizing force remains to be seen. Africa accounts for a small share of overall U.S. trade and investment activity, making up less than 1% of such U.S. global transactions in 2017. As it has over the past several years, the United States ran a goods trade deficit with the region in 2017 (totaling $10.8 billion), importing $24.9 billion and exporting $14.1 billion. U.S. exports are diverse while imports are mostly in primary products (oil alone accounts for over 40% but has declined significantly in recent years). Motor vehicles (exclusively from South Africa) and apparel are the region's only significant manufactured exports to the United States. Over half of U.S. trade with the region is with the two largest economies, Nigeria and South Africa. U.S. foreign direct investment (FDI) in the region is also concentrated in a few countries, including Mauritius ($10.4 billion in 2017), South Africa ($7.3 billion), Nigeria ($5.8 billion), Ghana ($1.7 billion), and Tanzania ($1.4). The small stock of sub-Saharan African FDI in the United States comes almost exclusively from South Africa ($4.1 billion in 2017). See Figure 3 for a snapshot of U.S.-Africa trade and investment. U.S. trade and investment policy toward Africa is focused on encouraging economic growth and development through trade within the region, with the United States, and internationally. The U.S. government also seeks to facilitate U.S. firms' access to opportunities for trade with and investment in Africa. A growing number of Members of Congress have supported expanded efforts to pursue such goals, and multiple committees have held hearings on these topics in recent years. A major increase in African trade and investment ties with other countries, particularly China, has been a growing concern of U.S. policymakers due to questions about both lost U.S. export opportunities and potential foreign policy influence associated with such ties. Total China-Africa trade surpassed U.S.-Africa trade in 2009, and in 2017, at $137 billion, was 3.5 times as large as U.S.-Africa trade. Improving economic and political climates in some African countries have led to increasing interest in the region as a destination for U.S. goods, services, and investment. Despite these trends, many U.S. businesses remain skeptical of the region's investment and trade potential and focus their investments in other regions thought to offer more opportunity and less risk. Many avoid engaging in business in Africa due to economic governance challenges in many countries, the relative difficulty of doing business, and, in some instances, political instability. Given development challenges in the region, U.S. efforts to boost trade and investment ties with Africa have historically focused largely on improving local economic conditions. U.S. trade preferences, or nonreciprocal duty-free treatment designed to encourage exports to the United States, are a central component of that policy, particularly as embodied in the African Growth and Opportunity Act (AGOA) passed by Congress in 2000 (see below). The United States also provides aid for trade capacity building (TCB, see text box) in order to help countries better engage in international trade and take advantage of the benefits of U.S. trade preferences, as well as to encourage trade-led growth. TCB funds to the region totaled $826.5 million in FY2016. Three African trade hubs, established under the George W. Bush Administration, are a pillar of U.S. TCB in the region and work to increase regional export competitiveness, intraregional trade, and AGOA use. The Trump Administration has continued the Obama Administration's effort to expand these mandates by turning the hubs into two-way U.S.-Africa trade and investment centers aimed at boosting U.S. business activity in the region. U.S. efforts have increasingly focused on advancing U.S. business opportunities in the region. The Trump Administration has continued several initiatives established by the Obama Administration, including the Trade Africa Initiative and the President's Advisory Council on Africa. The private-sector-led Advisory Council provides recommendations to the Administration to help facilitate U.S. commercial engagement in the region. To bolster U.S. commercial engagement and general economic development in the region, the Overseas Private Investment Corporation (OPIC) provides loans, guarantees, and political risk insurance for U.S. private investment in developing and emerging economies in order to advance U.S. development and foreign policy goals. As of September 2018, 25% of OPIC's portfolio exposure was in Africa, the second largest share of any region. The Better Utilization of Investments Leading to Development Act (BUILD Act, P.L. 115-254 ), signed by the President on October 5, 2018, creates a new U.S. International Development Finance Corporation (IDFC) that will combine OPIC together with certain components of USAID, including its Development Credit Authority (DCA). The reorganization received strong bipartisan support in Congress and is viewed by many as a tool for countering China's \"One Belt, One Road\" initiative and growing economic influence in developing countries, including in Africa. The new IDFC, by statute, has expanded authority and capacity compared to current U.S. development finance activities; its $60 billion exposure cap, however, is arguably dwarfed by finance from China, which in September 2018 offered $50 billion in finance to Africa alone. Other agencies that promote U.S. exports to the region include the Export-Import Bank (Ex-Im Bank) and the U.S. Trade and Development Agency (USTDA). Ex-Im Bank provides direct loans, loan guarantees, and export credit insurance to help finance U.S. exports to support U.S. jobs and includes a statutory requirement to target African export opportunities. USTDA seeks to advance economic growth in Africa by promoting export opportunities for U.S. businesses. It facilitates access to finance through such activities as funding project preparation and feasibility studies, and by supporting other trade-expanding efforts. As a region, Africa typically accounts for the largest share of USTDA funding. Other U.S. trade and investment policy tools in place with African countries include Trade and Investment Framework Agreements (TIFAs)—intergovernmental forums for dialogue on trade and investment issues—and bilateral investment treaties, which advance reciprocal commitments to facilitate and protect foreign investment. The United States has a Free Trade Agreement (FTA) with Morocco, but there are no existing U.S. FTAs with sub-Saharan African countries. The United States also encourages and provides TCB support aimed at fostering African participation in broader multilateral efforts to reduce trade barriers. This includes support to facilitate African accession to, and implementation of, WTO and other multilateral trade agreements, particularly the WTO Trade Facilitation Agreement. AGOA (Title I, P.L. 106-200 , as amended) is a nonreciprocal U.S. trade preference program that provides duty-free tariff treatment on certain imports from eligible sub-Saharan African countries. Congress first passed AGOA in 2000 as part of a U.S. effort to promote African development, deepen economic integration within the region, and strengthen U.S.-African trade and investment ties. The program builds on the Generalized System of Preferences (GSP), which provides similar duty-free treatment on U.S. imports from developing countries worldwide. AGOA covers a wider range of products and has typically been authorized over longer periods than GSP. The Trade Preferences Extension Act of 2015 ( P.L. 114-27 ) extended AGOA's authorization for an unprecedented 10 years, to September 2025, and amended some aspects of the program. Thirty-nine countries in sub-Saharan Africa were eligible for AGOA benefits in 2018. AGOA also requires the President, in consultation with Congress and AGOA beneficiary governments, to hold an annual U.S.-Africa Trade and Economic Cooperation Forum (typically referred to as the \"AGOA Forum\"). The 18 th AGOA Forum, themed \"Forging New Strategies for U.S.-Africa Trade and Investment,\" was held in July 2018 in Washington, DC, where U.S. Trade Representative (USTR) Robert Lighthizer focused his remarks on U.S. interest in reciprocal trade agreements in the region. When it established AGOA in 2000, Congress directed the executive branch to pursue reciprocal trade agreements, where feasible, with interested countries in sub-Saharan Africa. Negotiations on a potential U.S.-Southern African Customs Union (SACU) FTA were initiated in 2003 but suspended in 2006 due to divergent views on the scope. During the 2015 AGOA reauthorization debate this issue resurfaced, in part due to concerns that AGOA countries' reciprocal trade agreements with other advanced economies, such as South Africa's agreement with the European Union (EU), place U.S. exporters at a disadvantage in certain African markets. Congress ultimately reauthorized AGOA for 10 years for all countries but again directed the executive branch to seek reciprocal agreements in Africa. It also mandated reporting requirements on a strategy and progress to that end, as well as on the status of countries' AGOA eligibility and other developments in U.S.-Africa trade relations. Total U.S. imports under AGOA were $13.5 billion in 2017, and despite the decline in recent years, energy products, mostly crude oil, remain the top import under the program (see Figure 4 ). Most analysts, however, focus on AGOA and its relation to nonenergy trade as a potential catalyst for African development. U.S. imports of such products from beneficiary countries have grown three-fold between 2001 and 2017, signaling success in achieving some of the program's goals, but a handful of countries and products continue to account for the bulk of these imports. In 2017, more than half of the $4.3 billion in nonenergy imports under AGOA were from South Africa alone, which exports the broadest range of products, including motor vehicles. Kenya, Lesotho, Mauritius, and Madagascar are the other major beneficiaries of the program and primarily export apparel products under AGOA. U.S. trade policy has been a key focus of the Trump Administration, particularly with regard to the U.S. trade deficit, foreign trade barriers, and the effects of import competition on U.S. manufacturing. While U.S. trade with Africa may be of less concern to the Administration, as such trade is minimal and U.S. imports mostly consist of primary products, U.S. trade policy changes could significantly affect U.S. trade with some African countries, notably South Africa. Tariff a ctions. Increased tariffs on steel (25%) and aluminum (10%) imposed under Section 232 of the Trade Expansion Act of 1962 are of particular concern for South Africa. In 2017, South Africa was the 14 th ($279 million) and 9 th ($340 million) largest supplier of affected U.S. steel and aluminum imports, respectively. The Administration has granted product exclusions for a limited number of steel and aluminum imports from South Africa. A Section 232 investigation on U.S. motor vehicle imports remains pending, however, and could result in increased tariffs on such products, South Africa's second-largest category of exports to the United States. U.S. imports of motor vehicles from South Africa totaled $1.1 billion in 2017. Eligibility for U.S. p reference p rograms. The statutes authorizing U.S. preference programs, including AGOA, give the Administration considerable discretion in determining country eligibility. The Administration's focus on the U.S. trade deficit suggests it may look skeptically at nonreciprocal preference programs such as AGOA, which have a direct and immediate effect on U.S. imports and an indirect and longer-term effect on U.S. exports. To date, the Administration has ended AGOA eligibility for two African countries, Rwanda and Mauritania, citing (respectively) protectionism and human rights concerns. Previous Administrations similarly revoked AGOA eligibility for a variety of issues, including related to governance and labor rights. Congress may seek to consult with the Administration over its enforcement of eligibility criteria to ensure adherence to congressional objectives. Focus on reciprocal trade agreements. The Administration has made reciprocal trade negotiations a top priority of its trade policy with Africa. It is likely, however, to confront the same challenges that have dogged previous U.S. pursuit of an FTA in the region, including concern among African countries over the extensive nature of U.S. FTA commitments and concern over how an agreement with select countries may negatively affect African efforts toward regional integration. On the first issue, the Trump Administration may be more flexible in its approach than previous Administrations, as evidenced by announcements for limited-scope bilateral U.S. negotiations with the EU and Japan. The Administration's stated preference for bilateral agreements rather than agreements with larger regional blocs, however, appears at odds with the push among many African states for more regionally integrated trade policy, including via the African Continental Free Trade Area, signed by 44 African states in March. Congress is also expected to play a role in determining the scope of any new U.S. agreements in the region and would have to approve such agreements through implementing legislation. U.S. policymakers use several tools to promote democracy and human rights in Africa, including: Diplomacy and r eporting. U.S. diplomats often publicly criticize or condemn undemocratic actions and human rights violations in Africa, and raise concerns in private meetings with African leaders. Some Members of Congress likewise raise concerns directly with African leaders, with U.S. executive branch officials, or through legislation. The State Department publishes annual congressionally mandated reports on human rights conditions globally, and on other issues of concern, such as religious freedom and trafficking in persons. Such reports document violations and, in some cases, provide the basis for U.S. policy actions, such as restrictions on assistance. Congress also has imposed certain human rights-related legal restrictions on aid, as discussed below. The State Department and USAID also finance international and domestic election observer missions in Africa that produce reports on the relative credibility of electoral contests. Foreign a id. Multiple U.S. aid programs support African electoral institutions; train African political parties, civil society organizations, parliaments, and journalists; and assist local government officials in improving service delivery. They also provide capacity-building support and technical assistance focused on issues such as legal changes and governance reforms. Some U.S. security assistance programs are designed to improve the human rights records of African security forces and/or advance the rule of law by building the capacity of judicial and law enforcement bodies. U.S. programs also provide legal and medical aid to foreign human rights defenders, and fund ad hoc programs to address particular human rights challenges. Foreign a id r estrictions. Congress has imposed human rights-related restrictions or conditions on aid to specific African countries (e.g., Ethiopia, South Sudan, Sudan, and Zimbabwe), often through the enactment of foreign aid appropriations measures. Aid to multiple African governments may also be restricted by legislation curtailing or denying certain types of aid to countries that fail to observe human rights norms. These norms include: religious freedom, under the International Religious Freedom Act of 1998 ( P.L. 105-292 ), with Sudan and Eritrea listed in 2018 as countries of particular concern subject to potential restrictions or other sanctions; the recruitment and use of child soldiers, under the Child Soldiers Prevention Act ( P.L. 110-457 ) and related legislation, with DRC, Mali, Niger, Nigeria, Somalia, and South Sudan listed in 2018 for potential security assistance restrictions; and trafficking in persons (TIP), under the Trafficking Victims Protection Act ( P.L. 106-386 , as amended) and related legislation, with Burundi, Comoros, DRC, Equatorial Guinea, Eritrea, Gabon, Mauritania, the Republic of Congo, and South Sudan listed in 2018 for potential foreign aid restrictions. Sanctions. Executive orders issued under previous Administrations permit U.S. sanctions on designated persons implicated in human rights violations and/or undermining democratic transitions or peace processes in several countries, including Burundi, CAR, DRC, Somalia, Sudan, South Sudan, and Zimbabwe. In 2017, citing progress by the Sudanese government toward key U.S. priorities, the Trump Administration permanently lifted economic sanctions on Sudan that the Obama Administration had eased, though some restrictions remain in place. Also in 2017, the Trump Administration issued a new Executive Order pertaining to global human rights abuses and corruption, which it has invoked to impose targeted financial sanctions on a key financier of DRC president Joseph Kabila, as well as on former Gambian leader Yahya Jammeh, and associated businesses. Prosecutions. The United States has helped fund special tribunals that investigated and prosecuted human rights violations in Sierra Leone, Rwanda, and Chad. The United States is not a state party to the International Criminal Court (ICC), which in practice has prioritized human rights cases in Africa; the American Servicemembers' Protection Act of 2002 (ASPA, Title II of P.L. 107-206 ) prohibits various forms of U.S. material cooperation with the Court. The Trump Administration has pledged to end a previous policy of providing legally permissible diplomatic, informational, and logistical support to ICC prosecutions on a case-by-case basis. U.S. federal prosecutors have sought charges against some alleged perpetrators of human rights abuses in African countries, notably Rwanda and Liberia, often on the basis of violations of U.S. immigration laws. The United States has been a proponent of the establishment by the African Union of a hybrid court to investigate abuses in South Sudan. The vast majority of U.S. bilateral aid for Africa aims to address health challenges, notably relating to HIV/AIDS, malaria, maternal and child health, and nutrition. U.S. aid programs also seek to encourage economic growth and development, meet urgent humanitarian needs, promote good governance, and improve security. The U.S. Agency for International Development (USAID) administers much of this aid, typically under country strategies that target specific development needs, as well as under multiple global and Africa-specific presidential development initiatives. The State Department administers various programs aimed at bolstering health, fostering the rule of law, countering trafficking, and improving military and police professionalism, often in coordination with other executive branch agencies. The Millennium Challenge Corporation (MCC) separately supports large-scale, multiyear development projects targeting impediments to economic growth (e.g., building roads or other infrastructure) in countries that meet various governance and development benchmarks. The Department of Defense (DOD) implements some State Department-funded security assistance programs and has been authorized by Congress to provide its own assistance to foreign militaries and internal security forces. DOD also carries out military-to-military cooperation in many African countries. In recent years, sub-Saharan Africa has generally received between 20% and 25% of total U.S. bilateral aid administered by the State Department and USAID. In FY2017, $7.03 billion in total bilateral State Department- and USAID-administered funds were allocated specifically to African countries, not including Food for Peace (FFP) assistance under P.L. 480 Title II. Top recipients (in descending order) were Kenya, Nigeria, South Africa, Tanzania, Mozambique, Zambia, Uganda, Ethiopia, Somalia, and DRC. Many countries receive additional globally or functionally allocated funding (such as humanitarian or counterterrorism aid), MCC assistance, and/or other ad hoc executive branch agency aid, which is not included in these totals. The United States also channels substantial aid to Africa through multilateral bodies, such as the World Bank. The Administration proposed $5.28 billion specifically for Africa in FY2019, a 25% decrease compared to FY2017 (not counting FFP), but a slight increase compared to the FY2018 request of $5.24 billion. The Administration also proposed in both years to eliminate FFP funding under P.L. 480 Title II, most of which has gone to African countries in recent years. (USAID administers the program, for which Congress provides funding via agriculture appropriations measures. ) FFP funding for Africa reached $1.32 billion in FY2017, of which $1.02 billion was for emergency humanitarian purposes and the remainder for development programs. Administration officials asserted that International Disaster Assistance (IDA) funding would provide greater flexibility and efficiency than FFP, leaving the precise impact of the proposals uncertain. Congress appropriated FY2018 foreign aid under the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), in which it largely did not adopt the Administration's 2018 proposals; final country-level FY2018 allocations are not yet available. FY2019 foreign aid appropriations measures reported during the 115 th Congress in the House ( H.R. 6385 ) and Senate ( S. 3108 ) would have largely not adopted the Administration's global proposals. The Trump Administration contends that its proposals to reduce and reallocate U.S. aid funding for Africa are intended to reduce spending, enhance efficiency, and prioritize U.S. national security interests. In March 2018, USAID Administrator Mark Green testified that USAID's FY2019 budget request reflected efforts to \"balance fiscal needs here at home with our leadership role on the world stage.\" As noted above, the Trump Administration has requested annual bilateral State Department- and USAID-administered assistance funding at levels far below those requested by the Obama Administration or appropriated by Congress in recent years. Additionally, the Trump Administration's FY2018 and FY2019 budget proposals would have ended Food for Peace (FFP) aid under P.L. 480 Title II, most of which has gone to African countries in recent years. The Administration also has proposed merging the Development Assistance (DA) and Economic Support Fund (ESF) accounts—through which African countries received roughly $1.33 billion in FY2017—with several smaller accounts under a new Economic Support and Development Fund (ESDF), and requested funding far below FY2018 levels for the accounts it would replace. Congress did not adopt these proposals in enacting the FY2018 omnibus appropriations act ( P.L. 115-141 ). FY2019 Department of State, Foreign Operations, and Related Programs appropriations bills pending during the 115 th Congress in the House and the Senate ( H.R. 6385 and S. 3108 , respectively), as well as agriculture appropriations measures ( H.R. 5961 and S. 2976 ) would have likewise retained the traditional account structure and maintained global DA, ESF, and FFP funding roughly at FY2018 levels. U.S. security assistance in Africa comprises a range of activities, including programs to train and provide equipment to foreign security forces, professionalization and education initiatives, and law enforcement assistance. A large portion of such assistance seeks to help counter terrorism; the largest cumulative share in the past decade (over $2 billion) has supported African forces fighting Al Shabaab and pursuing stabilization in Somalia. The State Department and DOD each administer some types of security assistance, as authorized and appropriated by Congress. In addition to peacekeeper support, the Peacekeeping Operations (PKO) account is the primary funding vehicle for State Department-administered military aid in Africa, including for counterterrorism, maritime security, and security sector reform. It is the primary vehicle for, inter alia, U.S. support to AMISOM, bilateral military aid to DRC, and two multiyear interagency counterterrorism programs in Africa: the Trans-Sahara Counter-Terrorism Partnership (TSCTP, in North-West Africa), and the Partnership for Regional East Africa Counterterrorism (PREACT, in East Africa). H.R. 6018 , which the House passed during the 115 th Congress, would have formally established TSCTP in law while imposing new notification and reporting requirements under the program. The State Department also administers programs to improve African law enforcement entities, enhance military professionalization through training and technical instruction, bolster security forces' capacity to conduct internal, border, and maritime security operations, and support antitrafficking and counternarcotics activities. While some of these programs are funded through the PKO account, those involving internal security forces are generally funded through the International Narcotics Control and Law Enforcement (INCLE) or Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR) accounts. DOD implements some State Department-administered programs, such as the International Military Education and Training (IMET) program. DOD also funds and administers certain congressionally authorized security cooperation programs to help build the capacity of foreign partner states. These include DOD's \"global train and equip\" program, which Congress codified under 10 U.S.C. 333 (\"Section 333\") in the FY2017 National Defense Authorization Act. Section 333 consolidated and superseded various \"partner capacity-building\" authorities that Congress had granted to DOD on a temporary or otherwise limited basis, related to counterterrorism, counterproliferation, maritime security, counternarcotics, and countering transnational organized crime. Top African recipients of DOD global train-and-equip assistance over the past decade include Kenya, Uganda, Niger, Chad, Somalia, Mauritania, and Cameroon. DOD is also authorized to carry out certain assistance related to activities such as countering wildlife crime and cooperative threat reduction. An October 2017 attack that killed four U.S. Special Operations Forces (SOF) soldiers in Niger, followed by a June 2018 attack on SOF personnel in Somalia that killed one U.S. soldier and injured four others, have drawn attention to the expanding U.S. military presence in Africa. Public statements by DOD officials suggest that there are up to 7,200 DOD personnel in Africa at any one time, presumably including personnel charged with guarding U.S. diplomatic facilities. The majority are stationed in Djibouti, which hosts Camp Lemonnier—the only enduring U.S. military base in Africa. The second-largest number, as of mid-2018, were deployed in Niger, with about 730 troops engaged in a range of activities, including construction of a new airfield in the northern town of Agadez. News reports, citing DOD sources, indicate that DOD's presence in Africa includes an estimated 1,200 SOF members, including those involved in train, equip, advise, and/or accompany missions. In November 2018, DOD announced plans to reduce and \"realign\" the U.S. military presence in Africa in the coming years (see below). U.S. Africa Command (AFRICOM)'s 2018 Posture Statement noted five lines of effort: 1. Develop security and stability in East Africa, 2. Degrade violent extremist organizations in the Sahel and Maghreb regions and contain instability in Libya, 3. Contain Boko Haram and degrade Boko Haram and ISIS-West Africa, 4. Interdict illicit activity in the Gulf of Guinea and Central Africa, and 5. Build African peacekeeping, humanitarian assistance, and disaster response capacities. The 2018 Posture Statement also identified three enduring tasks of the U.S. military in Africa: protecting U.S. personnel and facilities, maintaining U.S. access, and building partner capacity. The last is conducted under AFRICOM's \"By, With, and Through\" framework, which \"emphasizes U.S. military capabilities employed in a supporting role, not as principal participants in an armed conflict.\" This approach aligns with DOD's 2018 National Defense Strategy , which sets out the U.S. military's goals in Africa of \"working by, with, and through local partners and the European Union to degrade terrorists\" and helping to \"build the capability required to counter violent extremism, human trafficking, trans-national criminal activity, and illegal arms trade with limited outside assistance; and limit the malign influence of non-African powers.\" Under this framework, the U.S. military provides training, equipment, intelligence, logistical support, and, in some cases, advisory support to various African partner forces, as well as logistical and intelligence support to French forces operating in the Sahel, as authorized by Congress. Other major DOD activities in Africa include the deployment, since 2013, of hundreds of U.S. military personnel to sites in Niger and Cameroon to conduct intelligence, surveillance, and reconnaissance (ISR) activities in the Sahel and Lake Chad Basin. Separately, in Somalia, the number of U.S. military personnel increased significantly in 2017—from roughly 200 to more than 500—as the United States deployed more special operations advisers across the country to \"advise, assist, and accompany\" Somali and AU counterterrorism missions. The U.S. military also has taken direct action (such as air strikes) against terrorist threats in Africa, notably in Somalia. U.S. strikes in Somalia were initiated under the George W. Bush Administration and have since expanded and accelerated. In 2015, President Obama notified Congress that military operations in Somalia were carried out not only \"to counter Al Qaeda and associated elements of Al Shabaab\" but also \"in support of Somali forces, AMISOM forces, and U.S. forces in Somalia.\" In 2016, the Obama Administration publicly referred to Al Shabaab as an \"associated force\" of Al Qaeda, in the context of the 2001 Authorization for Use of Military Force (AUMF). President Trump has further broadened the scope of U.S. military involvement in Somalia, authorizing DOD to conduct lethal action against Al Shabaab within a geographically defined \"area of active hostilities\" in support of partner forces in Somalia (such as AMISOM and elements of the Somali security forces). U.S. officials have described some airstrikes in Somalia as conducted in \"self-defense\" of U.S., Somali, or AMISOM forces. In 2017, AFRICOM announced that it would end Operation Observant Compass (OOC), a U.S. military advisory mission deployed in 2011 to support African-led efforts to counter the Lord's Resistance Army (LRA) rebel group then active in CAR, South Sudan, and DRC. Citing progress made in degrading the LRA, AFRICOM stated that some U.S. military personnel would transition to \"broader scope security and stability activities\" in Central Africa. The U.S. military also conducts exercises with African militaries and shares skills related to goals such as disaster and humanitarian response and maritime security. In the Sahel, these include a large multinational annual exercise known as Flintlock. A small number of U.S. military personnel (49 as of September 2018) are deployed as staff officers in U.N. peacekeeping operations in the region. Nearly every U.S. Embassy in Africa also hosts some U.S. military personnel, for example as part of the Defense Attaché Office, Office of Security Cooperation, and/or Marine Security Detachment. As noted above, the Administration has broadened the scope of U.S. military involvement in Somalia—to comprise lethal action against Al Shabaab within a geographically defined \"area of active hostilities\" in support of partner forces—and has overseen a continued increase in the tempo of U.S. air strikes there. Reportedly, the Trump Administration also initially expanded the use of U.S. military advisors in several countries in Africa, including missions in which U.S. personnel were embedded with local security forces in the context of counterterrorism operations. Military commanders, however, have more recently signaled that they are reexamining or curtailing some such missions in the aftermath of the October 2017 deadly ambush in Niger. More broadly, the Trump Administration has signaled that \"inter-state strategic competition, not terrorism, is now the primary concern in U.S. national security\" In this regard, DOD has announced \"force optimization\" plans, to be implemented over several years, entailing \"a reduction of about 10 percent of the 7,200 military forces serving in Africa Command\" and a reorientation of missions to emphasize great power competition. Precisely how the downsizing will be implemented, and its implications for specific missions, remain unclear. DOD's announcement suggested that counterterrorism activities would be de-emphasized overall, although operations in Somalia, Djibouti, and Libya would \"largely remain the same.\" In January 2019, however, conflicting reports citing DOD sources suggested a drawdown of U.S. military personnel in Somalia was under consideration. The 115 th Congress shaped U.S. engagement with Africa through its appropriations, authorization, and oversight roles. It enacted several pieces of legislation that have influenced U.S.-Africa policy and programs, including the African Growth and Opportunity Act and Millennium Challenge Act Modernization Act ( P.L. 115-167 ), the Zimbabwe Democracy and Economic Recovery Amendment Act of 2018 ( P.L. 115-231 ); the BUILD Act ( P.L. 115-254 ); the Global Food Security Reauthorization Act ( P.L. 115-266 ), annual National Defense Authorization Acts (most recently, P.L. 115-232 ), and foreign aid and defense appropriations measures (most recently, P.L. 115-141 ). The House and Senate also considered bills and resolutions responding to emerging developments in specific countries. As in past Congresses, legislative engagement by the 115 th Congress on Africa-related issues often centered on responding to humanitarian crises (e.g., S.Res. 114 , expressing the sense of the Senate regarding humanitarian crises in Nigeria, Somalia, South Sudan, and Yemen, and H.Res. 187 , on famine response efforts in South Sudan) and condemning human rights violations and undemocratic governance (e.g., H.Res. 128 , supporting respect for human rights and inclusive governance in Ethiopia, S.Res. 386 , urging the government of DRC to proceed with planned elections, and H.R. 6207 , which would have codified into law certain sanctions relating to DRC and require that the President submit to Congress a list of senior DRC political figures suitable for sanction). In addition, as noted above, H.R. 6018 would have established in law a long-running regional counterterrorism program in North-West Africa. Hearings in the House Foreign Affairs Committee and Senate Foreign Relations Committee attended to developments in Ethiopia, Cameroon, DRC, Zimbabwe, and South Sudan; humanitarian crises in Africa; human and civil rights issues on the continent; China's role in Africa; and U.S. military engagement in the region. Significant challenges and opportunities on the African continent, as well as shifts in U.S.-Africa policy under the Trump Administration, may continue to shape Congress' consideration of U.S. policy and programs in Africa. As it debates budgetary, policy, and oversight priorities, the Congress may consider issues such as Rapidly shifting politics and international engagement in the Horn of Africa, where a new government in Ethiopia has initiated sweeping changes at home and pursued peace with erstwhile rival Eritrea. Ongoing conflicts and humanitarian crises in South Sudan, Somalia, DRC, the Lake Chad Basin, CAR, and Mali, among others. The evolution of armed Islamist extremist threats in Africa, along with other transnational security issues, such as maritime piracy and narcotics smuggling in parts of the region. The prospects for expanding democracy in Africa, amid rising repression in Tanzania, leadership changes in Southern Africa, and enduring authoritarianism in countries such as Sudan, Rwanda, Eritrea, and Equatorial Guinea. Forthcoming presidential elections in several countries, including Nigeria (February 2019), Senegal (February 2019), Mauritania, Malawi, and South Africa (all in May 2019), and Mozambique (October 2019). U.S.-Africa trade and investment issues, including the effects of the Administration's tariff actions, possible reciprocal trade agreement negotiations, and the implementation of the BUILD Act as it affects the region. The scope, status, and operational goals of U.S. military deployments in Africa, following DOD's announcement of a proposed realignment that would reduce U.S. troop levels in the region. The scale and programmatic focus of U.S. foreign assistance to African countries in the context of the Trump Administration's forthcoming FY2020 aid budget proposal and FY2019 country allocations decisions. The involvement in Africa of foreign powers such as China, Russia, and Gulf states, and the implications for U.S. interests and policy. Congress may draw on a number of tools to shape U.S.-Africa policy, including foreign aid and defense authorization and appropriation legislation, other legislation, direct engagement with the Administration and African leaders, and oversight activities. While the 115 th Congress did not adopt many of the Administration's proposals regarding aid to Africa, it maintained a focus on areas of enduring congressional interest, including U.S. trade and investment, humanitarian crisis and response, human rights and democracy, and U.S. military activities. Congress may continue to consider similar issues as it weighs the appropriate balance between U.S. diplomacy, development and economic engagement, and defense priorities in Africa and responds to emerging developments in the region.", "summary": "Congress may review existing U.S. policies and programs in sub-Saharan Africa (henceforth, \"Africa\") as it establishes its budgetary and policy priorities and responds to developments in the region. Key enduring issues for Congress include the authorization and appropriation of funding for U.S. foreign aid programs and U.S. military activities in the region, and oversight of U.S. programs and policies. Economic and Development Issues. Much of Africa experienced rapid economic growth starting in the early 2000s, reducing poverty and expanding the middle class in some countries. Since 2014, however, growth has slowed in many countries—and almost all continue to face high poverty rates and long-standing development challenges such as food insecurity and malnutrition, ineffective health and education institutions, and infrastructure deficiencies. Other factors hindering socioeconomic development in Africa include low domestic buying power, a shortage of skilled labor, limited access to capital and other inputs, poor governance, and political instability and insecurity. Governance, Democracy, and Human Rights. Since the early 1990s, nearly all African countries have transitioned from military or single-party rule to at least nominally multiparty political systems in which elections are held regularly. Nonetheless, the development of accountable, functional democratic institutions remains limited in many countries. Corruption and mismanagement are pervasive across much of the region, and state services are limited. Authoritarian governments and armed belligerents in Africa commit serious human rights violations. Peace and Security. Civil wars and crises have broken out in multiple African countries since 2010, reversing the previous decade's trend of stabilization. Newer crises have unfolded in the Lake Chad Basin, the Central African Republic (CAR), Mali, Burkina Faso, Cameroon, Burundi, and South Sudan, while long-running conflicts continue to affect the Democratic Republic of Congo (DRC), Sudan, and Somalia. Porous borders, weak institutions, and corruption have created permissive environments for transnational threats such as terrorism, trafficking, and maritime piracy. Two conflict-affected African countries, South Sudan and Nigeria, face a credible risk of famine in early 2019; in both, insecurity has hindered aid access to affected zones. U.S.-Africa Policy under the Trump Administration. The Trump Administration has maintained several Africa-focused initiatives launched by its predecessors, but it also has proposed changes to U.S. trade policy and foreign assistance, including aid cuts, that could significantly affect U.S. engagement with Africa if implemented. The Administration's policy approach toward Africa, unveiled in late 2018, identifies three broad U.S. interests in the region: expanding U.S. trade and commercial ties with African countries, countering Islamist extremism and other forms of violent conflict, and imposing more stringent conditions on U.S. aid and U.N. peacekeeping missions in the region. Administration officials also have placed a high priority on countering Chinese and Russian influence in Africa, with the Department of Defense announcing in late 2018 that it would reorient its personnel and footprint in parts of Africa to align with that objective in the coming years. Country-specific goals identified in other Trump Administration statements and policy documents include the continued normalization of U.S. relations with Sudan, conflict resolution in South Sudan, an electoral transition in DRC, and democratic reforms in Ethiopia. The Administration also has signaled greater focus on reciprocity in trade relations, imposed tariffs affecting trade with some African countries, pressed African states to join efforts to put pressure on North Korea, and enacted immigration policies that have affected U.S.-Africa policy, among other initiatives.", "document_type": "crs"}
{"report": "The President's budget for FY2020 consists of a multivolume set of materials issued by the Office of Management and Budget (OMB). The materials contain information on new budget proposals, summ ary tables, detailed financial information on individual programs and accounts, economic analysis, historical data, explanations of the budget processes, and supporting documents. Every year the President submits these materials to Congress at the start of the budget cycle for the next fiscal year. The President's submission is required on or after the first Monday in January, but no later than the first Monday in February (31 U.S.C. §1105(a)). However, incoming presidential Administrations do not generally release multivolume budget sets in February. This year the President released the budget submission, in two installments, on March 11, and March 18, 2019. Other budget-related documents include the annual Economic Report of the President , issued by the Council of Economic Advisors, and the Budget and Economic Outlook , an annual publication issued by the Congressional Budget Office (CBO). Details on these publications are included in this report. Both OMB and the Government Publishing Office (GPO) provide internet access to the main and supporting budget documents, spreadsheet files, the public budget database, and budget amendments and supplementals proposed by the President; see http://www.whitehouse.gov/omb/budget and https://www.govinfo.gov/app/collection/BUDGET , respectively. OMB provides additional summary table information on agency budgets and key issues in the form of fact sheets, available at https://www.whitehouse.gov/omb/fact-sheets/ . Information on purchasing print copies of these documents appears below, along with a brief description of the contents of each document. The annual budget volume contains information, charts, and graphs pertaining to the President's new budget proposals and overviews of government activities by topic (e.g., \"Modernizing Government\" and \"A Budget for a Better American\") within the FY2020 Budget volume. Summary Tables (pp. 105-139) contain projections of budget baselines, receipts, and outlays; deficits; debt; discretionary spending; and economic projections from FY2019 to FY2029. Federal programs that have been recommended by the Administration for termination or reduction are detailed in the document entitled Major Savings and Reforms , available at https://www.whitehouse.gov/wp-content/uploads/2019/03/msar-fy2020.pdf . (GPO stock number 041-001-00731-8, 150 pages, $22) The FY20 20 Budget CD-ROM contains the full content of the budget documents and most supporting documents for the budget in PDF files. Some data files are also included in spreadsheet format. The CD-ROM provides software to search, display, and print. (GPO stock number and ordering information not yet available) This volume includes economic, accounting, and crosscutting analyses of government programs and activities designed to highlight specific subject areas. It also includes information on federal receipts and collections, analysis of federal spending, detailed information on federal borrowing and debt, baseline or current service estimates, and other technical presentations. Chapter 17, \"Aid to State and Local Governments,\" contains a series of tables (pp. 231-247) that provide selected grant and other federal assistance data by state. The FY2020 Analytical Perspectives volume contains supplemental materials including tables showing the budget by agency and account and by function, subfunction, and program. The supplemental materials also include data on direct and guaranteed loan transactions of the federal government. The supplemental material is available on a CD-ROM, in the printed document, or on the GPO website at https://www.govinfo.gov/app/collection/BUDGET . (GPO stock number 041-001-00732-6, $52, 360 pages) Designed primarily for the use of the House and Senate appropriations committees, the Appendix contains more detailed financial information on individual programs and appropriations accounts than any of the other budget documents submitted by the President. In many presidential budget submissions, the volume often provides the following information for agencies: proposed text of the appropriation language, budget schedules for each account, new legislative proposals, explanations of the work to be performed and the funds needed, and proposed general provisions applicable to the appropriations of entire agencies or groups of agencies. Typically, elements within this information are distinguished by varying font, so that, for example, proposed appropriations (italics) and prior year funding (brackets and no italics) can be compared at a glance: For expenses necessary for the administration of the Department of Justice, [$111,500,000] $125,896,000 , of which not to exceed $4,000,000 for security and construction of Department of Justice facilities shall remain available until expended. ( Department of Justice Appropriations Act, 2016 ) Note that the FY2020 budget appendix does not pair prior year funding figures with proposed appropriations. (GPO stock number 041-001-00733-4, $82, 1,3 20 pages) These detailed tables cover budget deficit/surplus, outlays, receipts, discretionary and mandatory spending, federal debt, federal employment, payments for individuals, spending by function and agency, and grants to states and local governments. These tables provide some data from 1940 (or earlier) and estimates through FY2024. Historical data are adjusted by OMB to be consistent with data in the FY2020 budget and to provide comparability over time. This year the Historical Tables are available online in spreadsheet and PDF instead of print. The Historical Tables are available at https://www.whitehouse.gov/omb/historical-tables/ . This year's annual Economic Report of the President was submitted by the Council of Economic Advisers and transmitted to Congress in March 2019. It presents the Administration's economic policies and contains the annual report of the Council of Economic Advisers. It also presents an overview of the nation's economic progress using text and extensive data appendices. Appendix B of the Economic Report includes current and historical statistics on major aspects of economic activity (pp. 625-705). Statistics include national income and expenditures, government finance, population, employment, wages, productivity, prices, debt measures, corporate finance, and international statistics. The report is also available from the GPO website at https://www.govinfo.gov/app/collection/ERP/ . A searchable database of the Economic Report of the President for each year from 1995 to the present is also available at this site. Spreadsheet files from Appendix B of the report can be accessed at the link above . (GPO stock number and ordering information not yet available) OMB issues revised estimates of budget receipts, outlays, and budget authority in the Mid-Session Review . This annual document is typically released in the summer following the President's budget submission. The FY2020 document is not currently available, but should be available in the summer on the OMB website . (GPO stock number and ordering information not yet available) After the President's budget documents are released, Congress begins to hold hearings on agency budget requests. Agencies must submit their budget justifications to the appropriations subcommittees holding the hearings. Budget justifications generally contain more detailed descriptions of an agency's proposals and programs than are provided in the President's budget documents. As mandated by OMB in Section 22.6 of the 2006 edition of Circular A-11 and subsequent editions, executive agencies are required to post their congressional budget justification materials on the internet within two weeks of transmittal to Congress. Typically, Administration budget requests appear along with actual numbers for the previous fiscal year. The content and structure of these submissions may vary and some materials may not correspond exactly with the data and information provided to Congress in other fiscal years. A short overview on the agency budget justification request can be found within CRS Report RS20268, Agency Justification of the President's Budget , by Michelle D. Christensen. OMB produces a number of additional documents that further examines certain budgetary categories, including the Federal Credit Supplement , which provides summary information on certain federal loan and loan guarantee programs through a series of detailed tables; Object Class Analysis , a report on the federal government's obligations as broken out by object classifications; and Balances of Budget Authority , which provides data on unobligated balances carried forward to the start of the next fiscal year. All three documents are available online at https://www.whitehouse.gov/omb/supplemental-materials/ . OMB also maintains a publicly accessible database in Excel and comma delimited format called the Public Budget Database . This resource provides account level detail data on budget authority for the years FY1976 to FY2024, and budget outlays and budget receipts for FY1962 to FY2024. This resource is available on the GPO FY2020 budget website at https://www.govinfo.gov/app/collection/BUDGET/ . A user's guide in PDF format is also available on this site by clicking on the expandable tab for the document. This report provides an analysis of the President's budgetary proposals and CBO's updated baseline budget projections. The FY2020 report should be forthcoming. (GPO ordering information is currently not available.) CBO's baseline budget projections typically span 11 fiscal years in its reports. The Budget and Economic Outlook includes separate chapters on the economic outlook, outlays, and receipts. This document is typically released in January, and it usually includes discussions on current economic conditions. The FY2019 report is available on the CBO website at https://www.cbo.gov/publication/54918 . CBO issues an annual summer update of the Budget and Economic Outlook with adjusted projections. This document and other budget and economic information, including CBO's monthly budget review are available at http://www.cbo.gov/topics/budget . (GPO stock number 052-070-07759-0, $30, 176 pages) Printed copies of budget documents are available for purchase from GPO by the following methods: online at the GPO website, at http://bookstore.gpo.gov/catalog/budget-economy/federal-budgets-year ; by telephone, [phone number scrubbed] or [phone number scrubbed]; by fax, [phone number scrubbed]; or, by mail using the GPO order form (check or money order), addressed to U.S. Government Publishing Office, P.O. Box 979050, St. Louis, MO 63197-9000. Budget documents are often available for reference use at large public or university libraries, or any library participating in the Federal Library Depository Program. Addresses of the depository libraries can be obtained through a local library; from GPO's Customer Services department, [phone number scrubbed] or [phone number scrubbed]; or online from the GPO website at https://www.gpo.gov/askgpo/ . The Congressional Research Service (CRS) has developed (for Members of Congress and their staffs) web pages covering the budget and appropriations process. Appropriations and Budget Analysis. For CRS products on appropriations status, jurisdictions, processes, current appropriations bills, and other budget-related resources, Members and congressional staff can access the CRS website http://www.crs.gov/iap/appropriations . The CRS Appropriations Status Table, a table which tracks the progress of major actions related to appropriations bills, is available at http://www.crs.gov/AppropriationsStatusTable/Index . CRS Products on the Federal Budget Process. Explanations of budget concepts, terminology, congressional and executive budget process, congressional budget timetable, budget resolutions and reconciliation, the authorization and appropriations process, entitlements and discretionary spending, the Budget Enforcement Act, sequestration, and surpluses/deficits are available from the CRS website . The public may access Congress.gov, the legislative website produced by the Library of Congress . The site includes a Status of Appropriations Legislation for the current year and several previous fiscal years, which include links to bills, committee and conference reports, and votes for the 12 regular, and any supplemental, appropriations bills. The Congress.gov Status Table of Appropriations is available at https://www.congress.gov/resources/display/content/Appropriations+and+Budget . A public version of the CRS Appropriations Status Table is available at https://crsreports.congress.gov/AppropriationsStatusTable . ", "summary": "Every year the President submits a series of volumes to Congress containing the President's proposed budget for the coming fiscal year. The President's submission is required on or after the first Monday in January, but no later than the first Monday in February (31 U.S.C. §1105(a)). This year the President released the budget submission, in two installments, on March 11, and March 18, 2019. This report provides brief descriptions of the FY2020 budget volumes and related documents, together with internet addresses, Government Publishing Office (GPO) stock numbers, and prices for obtaining print copies of these publications. It also explains how to find the locations of government depository libraries, which can provide both printed copies for reference use and internet access to the online versions. This report will be updated as events warrant. Please note that neither the Congressional Research Service (CRS) nor the Library of Congress (LOC) distributes print copies of the budget documents.", "document_type": "crs"}
{"report": "The Social Security full retirement age (FRA) is the age at which workers can first claim full Social Security retired-worker benefits. Among other factors, the age at which an individual begins receiving Social Security benefits has an impact on the size of the monthly benefits. Claiming benefits before the FRA can substantially reduce monthly benefits, whereas claiming benefits after the FRA can lead to a substantial increase in monthly benefits. Benefit adjustments are made based on the number of months before or after the FRA the worker claims benefits. The adjustments are intended to result in roughly the same total lifetime benefits, regardless of when the worker claims benefits, based on average life expectancy. The FRA was 65 at the inception of Social Security in the 1930s. As part of legislation enacted in 1983, the FRA is increasing gradually from 65 to 67 over a 22-year period that started for those who turned age 62 in 2000. The increase in the FRA will be fully phased in (the FRA will reach 67) for workers born in 1960 or later (i.e., for workers who become eligible for retirement benefits at age 62 in 2022). For workers who become eligible for retirement benefits in 2019 (i.e., workers born in 1957), the FRA is 66 and 6 months. Workers can claim Social Security retired-worker benefits as early as age 62, the early eligibility age (EEA). However, workers who claim benefits before the FRA are subject to a permanent reduction in their benefits. Spouses can also claim reduced retirement benefits as early as age 62. Other types of dependents can claim benefits before the age of 62. Workers who claim benefits after the FRA receive a delayed retirement credit that results in a permanent increase in their monthly benefits. The credit applies up to the age of 70. Claiming benefits after attainment of age 70 does not result in any further increase in monthly benefits. The FRA was 65 at the inception of Social Security. According to Robert Myers, who worked on the creation of the Social Security program in 1934 and later served in various senior and appointed capacities at the Social Security Administration (SSA), \"[a]ge 65 was picked because 60 was too young and 70 was too old. So we split the difference.\" On the other hand, SSA suggests that the Committee on Economic Security (CES) made the proposal of 65 as the retirement age due to the prevalence of private and state pension systems using 65 as the retirement age and the favorable actuarial outcomes for 65 as the retirement age. In 1983, Congress increased the FRA as part of the Social Security Amendments of 1983, which made major changes to Social Security's financing and benefit structure to address the system's financial imbalance at the time. Among other changes, the FRA was increased gradually from 65 to 67 for workers born in 1938 or later. Under the scheduled increases enacted in 1983, the FRA increases to 65 and 2 months for workers born in 1938. The FRA continues to increase by two months every birth year until the FRA reaches 66 for workers born in 1943 to 1954. Starting with workers born in 1955, the FRA increases again in two-month increments until the FRA reaches 67 for workers born in 1960 or later. The increase in the FRA, one of many provisions in the 1983 amendments designed to improve the system's financial outlook, was based on the rationale that it would reflect increases in longevity and improvements in the health status of workers. The 1983 amendments did not change the early eligibility age of 62 (discussed below); however, the increase in the FRA results in larger benefit reductions for workers who claim benefits between the age of 62 and the FRA. Table 1 shows the FRA by worker's year of birth under current law. Currently, the EEA is 62 for workers and spouses; this is the earliest age at which they can claim retirement benefits. Benefits claimed between age 62 and the FRA, however, are subject to a permanent reduction for \"early retirement.\" When the original Social Security Act was enacted in 1935, the earliest age to receive retirement benefits was the FRA (age 65). In 1956, the eligibility age was lowered from 65 to 62 for female workers, wives, widows, and female dependent parents. This was to allow wives, who traditionally were younger than their husbands, to qualify for benefits at the same time as their husbands. Benefits for female workers and wives were subject to reduction if claimed between the ages of 62 and 65; the reduction did not apply to benefits for widows and female dependent parents. In 1961, the eligibility age was lowered from 65 to 62 for men as well. Benefits for male workers and husbands were subject to reduction if claimed between the ages of 62 and 65; the reduction did not apply to widowers and male dependent parents. Although the eligibility age was made consistent for male and female workers, an inconsistency remained in the calculation of benefits. A man the same age as a woman needed more Social Security credits to qualify for benefits, and, if his earnings were identical to hers, usually received a lower benefit because his earnings were averaged over a longer period. This inconsistency was addressed in legislation enacted in 1972 which provided that retirement benefits would be computed the same way for men and women (the provision was fully effective for men reaching age 62 in 1975 or later). In subsequent years, further adjustments were made to the eligibility age for surviving spouses. The eligibility age was lowered to age 60 for widows (1965), age 50 for disabled widow(er)s (1967), and age 60 for widowers (1972). Benefits are adjusted based on the age at which a person claims benefits to provide roughly the same total lifetime benefits regardless of when a person begins receiving benefits, based on average life expectancy. The earlier a worker begins receiving benefits (before the FRA), the lower the monthly benefit will be, to offset the longer expected period of benefit receipt. Conversely, the longer a worker delays claiming benefits (past the FRA), the higher the monthly benefit will be, to take into account the shorter expected period of benefit receipt. The benefit adjustment is based on the number of months between the month the worker attains the FRA and the month he or she claims benefits. The day of birth is ignored for adjustment purposes, except for those born on the first of the month. Workers born on the first of the month base their FRA as if their birthday was in the previous month (e.g., someone born on February 1, 1980, who has an FRA of 67, can apply for full retirement benefits in January 2047). A calculator on SSA's website allows the user to enter his or her date of birth and the expected month of initial benefit receipt to see the effect of early or delayed retirement; the effect is shown as a percentage of the full benefit payable at the FRA. When a worker claims benefits before the FRA, there is an actuarial reduction in monthly benefits. The reduction for claiming benefits before the FRA can be sizable and it is permanent; all future monthly benefits are payable at the actuarially reduced amount. For each of the 36 months immediately preceding the FRA, the monthly rate of reduction from the full retirement benefit is five-ninths of 1%. This equals a 6⅔% reduction each year. For each month earlier than three years (36 months) before the FRA, the monthly rate of reduction is five-twelfths of 1%. This equals a 5% reduction each year. The earliest a worker can claim retirement benefits is age 62. For a worker with an FRA of 67, claiming benefits at 62 results in a 30% reduction in their monthly benefit. Table 2 shows the actuarial reduction applied to retired-worker benefits based on the FRA and the age at which benefits are claimed. Workers who claim benefits after the FRA receive a delayed retirement credit (DRC). As with the actuarial reduction for early retirement, the delayed retirement credit is permanent. The DRC has been modified over the years. Initially, the Social Security Amendments of 1972 provided a delayed retirement credit that increased benefits by one-twelfth of 1% for each month between ages 65 and 72 that a worker did not claim benefits (i.e., 1% per year). The credit, which was effective after 1970, applied only to the worker's benefit; it did not apply to a widow(er)'s benefit payable on the worker's record. The Social Security Amendments of 1977 increased the credit to 3% per year and included the credit in the computation of a widow(er)'s benefit. The credit was further increased under the Social Security Amendments of 1983. As shown in Table 3 , under current law, the amount of the credit varies based on the worker's year of birth (i.e., when the worker becomes eligible for benefits at age 62). The credit increases gradually until it reaches 8% per year (two-thirds of 1% per month) for workers born in 1943 or later (i.e., workers who became eligible for retirement benefits in 2005 or later). In addition, the maximum age at which the DRC applies was lowered from 72 to 70. Any further delay in claiming benefits past age 70 does not result in a higher benefit. The increase in the DRC was intended to ensure that workers who claim benefits after the FRA receive roughly the same total lifetime benefits as if they had claimed benefits earlier (based on average life expectancy). A worker with an FRA of 66, for example, receives a 32% benefit increase if he or she claims benefits at age 70; a worker with an FRA of 67 receives a 24% benefit increase. Figure 1 illustrates the effect of claiming age on benefit levels based on an FRA of 66. If the worker claims retirement benefits at age 62, for example, his or her benefit would be equal to 75% of the full benefit amount—a 25% permanent reduction based on claiming retirement benefits four years before attaining the FRA. If the worker delays claiming retirement benefits until age 70, however, his or her benefit would be equal to 132% of the full benefit amount—a 32% permanent increase for claiming benefits four years after the FRA. The decision to claim Social Security benefits before the FRA results in a permanent reduction in monthly benefits for early retirement. In addition, if a Social Security beneficiary is below the FRA and has current earnings, he or she is subject to the retirement earnings test (RET). Stated generally, Social Security benefits are withheld partially or fully, for one or more months, if current earnings exceed specified thresholds. There are two separate earnings thresholds (or exempt amounts ) under the RET. The first (lower) threshold applies to beneficiaries who are below the FRA and w ill not attain the FRA during the year. In 2019, the lower earnings threshold is $17,640. If a beneficiary has earnings that exceed the lower threshold, SSA withholds $1 of benefits for every $2 of earnings above the threshold. The second (higher) threshold applies to beneficiaries who are below the FRA and will attain the FRA during the year. In 2019, the higher earnings threshold is $46,920. If a beneficiary has earnings that exceed the higher threshold, SSA withholds $1 of benefits for every $3 of earnings above the threshold. The RET no longer applies beginning with the month the beneficiary attains the FRA. In other words, once the beneficiary attains the FRA, his or her benefits are no longer subject to withholding based on earnings. During the first year of benefit receipt, a special monthly earnings test applies. Regardless of the amount of annual earnings in the first year of benefit receipt, benefits are not withheld for any month in which earnings do not exceed a monthly exempt amount (the monthly exempt amount is equal to 1/12 of the annual exempt amount). In 2019, the monthly exempt amounts are $1,470 ($17,640/12) and $3,910 ($46,920/12). For example, consider a worker who claims benefits at age 62 in January 2019 and has no earnings during the year except for a consulting project that pays $20,000 in July. Although the beneficiary's annual earnings ($20,000) exceed the annual exempt amount ($17,640), benefits are withheld only for the month of July. The beneficiary has $0 earnings in all other months; July is the only month in which earnings exceed the monthly exempt amount ($1,470). Benefits withheld under the RET are not \"lost\" on a permanent basis. When a beneficiary attains the FRA and is no longer subject to the RET, SSA automatically recalculates the benefit, taking into account any months for which benefits were partially or fully withheld under the RET. Stated generally, there is no actuarial reduction for early retirement for any month in which benefits were partially or fully withheld under the RET. The recalculation results in a higher monthly benefit going forward. Starting at the FRA, the beneficiary begins to recoup the value of benefits withheld under the RET; the beneficiary recoups the full value of those benefits if he or she lives to average life expectancy. Statistics published by SSA show that a majority of retired-worker beneficiaries claim benefits before the FRA. Figure 2 shows the age distribution of new retired-worker beneficiaries in 2017. Among nearly 2.5 million new retired-worker beneficiaries that year, 37% claimed benefits at age 62 (the first year of eligibility) and 64% were under the age of 66. About one-fourth (23%) of new retired-worker beneficiaries claimed benefits at age 66, while 12% were age 67 or older. The percentage of retired-worker beneficiaries who claim benefits at earlier ages has declined in recent years. In 2010, for example, more than one-half (52%) of new retired-worker beneficiaries were age 62 and 81% were under the age of 66. The Social Security full retirement age was 65 when the program was established in the 1930s. It remained 65 until 1983, when Congress included an increase in the FRA among many provisions in the Social Security Amendments of 1983, which were designed to address serious near-term and long-range financing problems. The 1983 Amendments became law on April 20, 1983 . Without legislative action, it was anticipated that Social Security benefits could not be paid on time beginning in July 1983 . The 1983 provision that increased the FRA from 65 to 67 continues to be phased in; it will be fully phased in by 2022. The Social Security system once again faces projected long-range funding shortfalls. The Social Security Board of Trustees (the Trustees) projects that full Social Security benefits can be paid on time until 2034 with a combination of annual Social Security tax revenues and asset reserves held by the Social Security trust funds. After the projected depletion of trust fund reserves in 2034, however, annual tax revenues are projected to cover about three-fourths of benefits scheduled under current law. Over the years, many proposals have been designed to improve Social Security's financial outlook as well as achieve other policy goals. A common proposal is to increase the early eligibility age or further increase the full retirement age. As in the past, lawmakers who support increasing the retirement age point to gains in average life expectancy as an indicator that people can work until older ages. Those who oppose this type of policy change, however, point out that gains in life expectancy have not been shared equally across different segments of the population. They cite research showing that life expectancy is lower for individuals with lower socioeconomic status (SES) compared to those with higher SES, and that the gap in life expectancy by SES has been growing over time. Differential gains in life expectancy are important in the context of Social Security. The actuarial adjustments to benefits for early or delayed retirement (i.e., for claiming benefits before or after the FRA) are based on average life expectancy. That is, the actuarial adjustments are designed to provide a person with roughly the same total lifetime benefits, regardless of the age at which he or she claims benefits, assuming the person lives to average life expectancy. Research has shown that differential gains in life expectancy have resulted in a widening gap in the value of lifetime Social Security retirement benefits between low earners and high earners. Over the years, deficit reduction commissions and other policymakers have recommended an increase in the Social Security retirement age. The recent proposals, for example, included the S.O.S. Act of 2016 ( H.R. 5747 , the 114 th Congress), which proposed increasing the FRA among other changes. Under the proposal, after the FRA reaches 67 for those attaining 62 in 2022, the FRA would increase by two months per year until the FRA reaches 69 for those attaining 62 in 2034. Thereafter, the FRA would increase one month every year. SSA's Office of the Chief Actuary (OCACT) projects that this option would improve the Social Security trust fund outlook by eliminating 39% of the system's projected long-range funding shortfall (based on the 2018 Annual Report of the Social Security Board of Trustees, intermediate assumptions). Another recent proposal from the Bipartisan Policy Center in 2016 recommended, among other changes, to increase the FRA by one month every two years after the FRA reaches 67 for those attaining age 62 in 2022 until the FRA reaches 69, and also increase the age up to which the DRC may be earned at the same rate (from 70 to 72). This option contains no change in the EEA. OCACT estimates that this option would improve the Social Security trust fund outlook by eliminating 19% of the system's projected long-range funding shortfall (based on the 2018 Annual Report of the Social Security Board of Trustees, intermediate assumptions). In 2010, the National Commission on Fiscal Responsibility and Reform (also called the Simpson-Bowles Commission after co-chairs Alan Simpson and Erskine Bowles) recommended increasing both the EEA and the FRA, among other Social Security changes. Under the commission's recommendations, after the FRA reaches 67 in 2027, both the EEA and the FRA would be indexed to increases in life expectancy. The commission estimated that the FRA would reach 68 by about 2050, and 69 by about 2075. The EEA would increase to 63 and 64 in step with increases in the FRA. OCACT estimates that this option would improve the Social Security trust fund outlook by eliminating 15% of the system's projected long-range funding shortfall. In conjunction with proposed increases in the EEA and FRA, the commission recommended policies that would provide people with more flexibility in claiming benefits. Specifically, the commission recommended allowing people to claim up to half of their benefits at age 62 (with an actuarial reduction) and the other half at a later age (with a smaller actuarial reduction). This option was intended to provide a smoother transition for those interested in phased retirement or for households where one member has retired and another continues to work. In general, it could provide a stream of income for those with financial difficulties by allowing them to claim a portion of their benefits early and avoid taking a permanent reduction on the full benefit amount. Recognizing that some workers may be physically unable to work beyond the current EEA (62) and may not qualify for Social Security disability benefits, the commission also recommended a hardship exemption for up to 20% of retirees. Under the proposal, as the EEA and FRA increase, certain beneficiaries could continue to claim benefits at age 62 and their benefits would not be subject to additional actuarial reductions. The commission specified that SSA would design the policy taking into consideration factors such as the physical demands of labor and lifetime earnings in developing eligibility criteria. Concerns regarding the effects of increasing the retirement age, especially on certain segments of the population, are not new. The Social Security Amendments of 1983, which increased the retirement age gradually from 65 to 67, mandated a study to examine the effects of increasing the retirement age on workers in physically demanding jobs or ill health. ", "summary": "The Social Security full retirement age (FRA) is the age at which workers can first claim full Social Security retired-worker benefits. Among other factors, a worker's monthly benefit amount is affected by the age at which he or she claims benefits relative to the FRA. Benefit adjustments are made based on the number of months before or after the FRA the worker claims benefits. The adjustments are intended to provide the worker with roughly the same total lifetime benefits, regardless of when he or she claims benefits, based on average life expectancy. Claiming benefits before the FRA results in a permanent reduction in monthly benefits (to take into account the longer expected period of benefit receipt); claiming benefits after the FRA results in a permanent increase in monthly benefits (to take into account the shorter expected period of benefit receipt). The FRA was 65 at the inception of Social Security in the 1930s. Under legislation enacted in 1983, the FRA is increasing gradually from 65 to 67 over a 22-year period (for those reaching age 62 between 2000 and 2022). The FRA will reach 67 for workers born in 1960 or later (i.e., for workers who become eligible for retirement benefits at age 62 in 2022). Currently, the FRA is 66 and 6 months for workers who become eligible for retirement benefits in 2019 (i.e., workers born in 1957). Workers can claim reduced retirement benefits as early as age 62 (the early eligibility age). Spouses can also claim reduced retirement benefits starting at age 62. Other dependents, such as widow(er)s, can claim benefits at earlier ages. For workers with an FRA of 66, for example, claiming benefits at age 62 results in a 25% reduction in monthly benefits. For workers with an FRA of 67, claiming benefits at age 62 results in a 30% benefit reduction. A majority of retired-worker beneficiaries claim benefits before the FRA. In 2017, 37% of new retired-worker beneficiaries were age 62; almost two-thirds (64%) were under the age of 66. Workers who delay claiming benefits until after the FRA receive a delayed retirement credit, which applies up to the age of 70. For workers with an FRA of 66, for example, claiming benefits at age 70 results in a 32% increase in monthly benefits. For workers with an FRA of 67, claiming benefits at age 70 results in a 24% benefit increase. In 2017, almost one-fourth (23%) of new retired-worker beneficiaries were age 66; 12% were over the age of 66. Some lawmakers have called for increasing the Social Security retirement age in response to the system's projected financial imbalance, citing gains in life expectancy for the population overall. Other lawmakers, however, express concern that increasing the retirement age would disproportionately affect certain groups within the population, citing differences in life expectancy by socioeconomic groups. Differential gains in life expectancy are important in the context of Social Security because the actuarial adjustments for claiming benefits before or after the full retirement age are based on average life expectancy. Proposals to increase the retirement age are also met with concerns about the resulting hardship for certain workers, such as those in physically demanding occupations, who may be unable to work until older ages and may not qualify for Social Security disability benefits. For an in-depth discussion of potential changes in the Social Security retirement age in the context of life expectancy trends, see CRS Report R44846, The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age.", "document_type": "crs"}
{"report": "Section 420 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , hereinafter the Stafford Act) authorizes the President to \"declare\" a Fire Management Assistance Grant (FMAG). The current FMAG system was established by regulation in October of 2001. These grants provide federal assistance for fire suppression activities. This authority has been delegated to the Federal Emergency Management Agency's (FEMA's) Regional Administrators. Once issued, the FMAG declaration authorizes various forms of federal assistance such as the provision of equipment, personnel, and grants to state, local, and tribal governments for the control, management, and mitigation of any fire on certain public or private forest land or grassland that might become a major disaster. This federal assistance requires a cost-sharing component such that state, local, and tribal governments are responsible for 25% of the expenses. This report discusses the most frequently asked questions received by the Congressional Research Service on FMAGs. It addresses questions regarding how FMAGs are requested, how requests are evaluated using thresholds, and the types of assistance provided under an FMAG declaration. FMAGs can be requested by a state when the governor determines that a fire is burning out of control and threatens to become a major disaster. At that point, a request for assistance can be submitted to FEMA. Typically, requests are submitted to the FEMA Regional Administrator. Requests can be submitted any time—day or night—and can be submitted by telephone to expedite the process. Telephone requests must be followed by written confirmation within 14 days of the phone request. Under the Sandy Recovery Improvement Act of 2013 (SRIA, Division B of P.L. 113-2 ), tribes are equivalent to states in their ability to request a major disaster declaration, an emergency declaration, or a request for an FMAG declaration. Note that some tribal land holdings are administered by the federal government and, therefore, receive fire suppression support through the National Interagency Fire Center (NIFC). The NIFC supports interagency \"wildland\" firefighting efforts on federal lands by the U.S. Forest Service, National Weather Service, National Park Service, Bureau of Indian Affairs (BIA), U.S. Fish and Wildlife Service and FEMA's U.S. Fire Administration. Unlike FMAGs, such support generally does not require tribes to reimburse firefighting costs (FMAGs require the state to pay a 25% cost-share). In addition, tribes with their own fire suppression resources may receive reimbursement from BIA for their costs related to fire suppression on tribal lands. The FMAG request should include cost estimates to support the request as well as information about the fire including the size of the fire(s) in acres or square miles, the population of the community (or communities) threatened, the number of persons evacuated (if applicable), weather conditions, and the degree to which state and local resources are committed to this fire and other fires in federal, state, and/or local jurisdictions. The verbal request must be followed up with a completed \"Request for Fire Management Assistance Declaration\" (FEMA form 078-0-1) and the \"Principal Advisor's Report\" (FEMA form 078-0-2). The following criteria are used to evaluate wildfires and make a determination whether to issue an FMAG: the threat to lives and property including critical facilities, infrastructures, and watershed areas; the availability of state and local fire resources; high fire danger conditions based on nationally accepted indices such as the National Fire Danger Ratings System; and the potential economic impacts of the fire. In addition, FEMA has developed fire cost thresholds that are typically updated on an annual basis. There are two types of fire cost thresholds used to help determine if a state or tribal nation is eligible for fire assistance: (1) individual thresholds for a single fire, and (2) cumulative thresholds for multiple fires. Cumulative thresholds are applied to multiple fires burning simultaneously, or the accumulation of multiple fires in a single fire season. Threshold amounts vary by state (see Table 1 ). Taking Pennsylvania as an example, generally, a single fire would need to meet or exceed $927,274 in damages for Pennsylvania to be eligible for an FMAG declaration. In contrast, the formula for the cumulative fire threshold for a given state is one of two amounts—$500,000 or the amount of that state's individual fire threshold multiplied by three, whichever is greater. Returning to the Pennsylvania example, the sum of three individual fire thresholds equals $2,781,822. Since that amount is larger than $500,000, cumulative fire damages in Pennsylvania must meet or exceed $2,781,822 to be eligible for assistance. In contrast, the individual fire threshold for Alaska is $100,000, but the cumulative threshold is $500,000, not the sum of three individual fire thresholds ($300,000). If FEMA denies the request for assistance, the state has one opportunity to appeal the denial. The appeal must be submitted in writing to the Regional Administrator no later than 30 days from the date of the denial letter. The appeal should contain any additional information that strengthens the original request for assistance. The Regional Administrator will review the appeal, prepare a recommendation, and forward the appeal package to the FEMA Headquarters Office. The FEMA Headquarters Office will notify the state of its determination in writing within 90 days of receipt of the appeal (or receipt of additional requested information). The state may request a time extension to submit the appeal. The request for an extension must be submitted in writing to the Regional Administrator no later than 30 days from the date of the denial letter. The request for an extension must include a justification for the need for an extension. The FEMA Headquarters Office will notify the state in writing whether the extension request is granted or denied. No, an emergency or major disaster can be declared after an FMAG declaration has been issued. However, the emergency or major disaster declaration must be initiated by a separate request for assistance by the state or tribal government. FMAGs are funded through FEMA's Disaster Relief Fund (DRF), the main account FEMA uses to provide disaster assistance. The DRF is a no-year account—unused funds from the previous fiscal year are carried over to the next fiscal year. Funds in the DRF fall into two categories. The first category is for disaster relief costs associated with major disasters under the Stafford Act. This category reflects the impact of the Budget Control Act ( P.L. 112-25 , BCA), which allows appropriations to cover the costs incurred as a result of major disasters to be paid through an \"allowable adjustment\" to the discretionary spending limits. The second category is colloquially known as \"base funding.\" Base funding includes activities not tied to major disasters under the Stafford Act. Base funding is scored as discretionary spending that counts against the discretionary spending limits, whereas FMAGs are funded through the DRF's base funding category. The decision to issue a FMAG declaration is not contingent on the DRF balance. Similarly, FMAGs do not reduce the amount of funding available for major disasters. When the DRF balance was low in the past, FEMA used its \"immediate needs funding\" (INF) policy until supplemental appropriations were passed to replenish the DRF. Under INF, long-term projects (such as mitigation work) are put on hold and only activities deemed urgent are funded. FMAGs would most likely fall into the category of events with an \"urgent\" need. Under the INF policy, FEMA also delays interagency reimbursements, and recovers funds from previous years in order to stretch its available funds. As with many other Stafford Act disaster assistance grant programs (Public Assistance, Hazard Mitigation Grant assistance, Other Needs Assistance) the cost-share for FMAGs is based on a federal share of 75% of eligible expenses. The grantee (the state) and subgrantees (local communities) assume the remaining 25% of eligible costs. Under the FMAG process, FEMA reimburses grantees for eligible activities they have undertaken. The state application for specific grant funds must be submitted within 90 days after the FMAG is granted. That time frame permits the state to gather all information and supporting data on potentially eligible spending to include in their grant application package. The package must also stipulate that the fire cost threshold was met. Following submission of the grant application FEMA has 45 days to approve or deny the application. FMAG assistance is similar in some basic respects to other FEMA assistance. For example, FMAGs will not replicate or displace the work of other federal agencies, nor will FEMA pay straight-time salaries for public safety forces, though it will reimburse overtime expenses for the event. Other eligible expenses can include costs for equipment and supplies (less insurance proceeds); mobilization and demobilization; emergency work (evacuations and sheltering, police barricading and traffic control, arson investigation); prepositioning federal, out-of-state, and international resources for up to 21 days when approved by the FEMA Regional Administrator; personal comfort and safety items for firefighter health and safety; field camps and meals in lieu of per diem; and/or the mitigation, management, and control of declared fires burning on comingled federal land, when such costs are not reimbursable by another federal agency. Until recently, only major disaster declarations made statewide hazard mitigation grants available. Division D of P.L. 115-254 (Disaster Recovery Reform Act, hereinafter DRRA) amended the Stafford Act to make hazard mitigation available for FMAG declarations as well. Under Section 404 of the Stafford Act as amended by DRRA, mitigation grants from the Hazard Mitigation Grant Program (HMGP) are provided to states and tribes on a sliding scale based on the percentage of funds spent for FMAG assistance. For states and federally recognized tribes with a FEMA-approved Standard State or Tribal Mitigation Plan, the formula provides for up to 15% of the first $2 billion of estimated aggregate amounts of disaster assistance, up to 10% for amounts between $2 billion and $10 billion, and 7.5% for amounts between $10 billion and $35.333 billion. FEMA assistance through FMAGs is a direct relationship with the states to assist the state in fighting the fire on state lands. FMAGs are employed so a disaster declaration may not be necessary. The Forest Service and other federal agencies do provide other types of assistance related to wildfire management, such as postfire recovery assistance, or assistance planning and mitigating the potential risk from future wildfires. Most of these programs provide financial and technical assistance to state partners. In addition, other USDA agencies administer various other programs to provide disaster recovery assistance to nonfederal forest landowners, including the Emergency Forest Restoration Program and the Emergency Watershed Program. This depends on the type of assistance being provided by the Forest Service. FMAG assistance is not generally available in conjunction with emergency suppression assistance from the Forest Service, or any other federal agency engaged in suppression operations. FMAGs provide assistance for suppression operations on nonfederal lands, whereas suppression operations on federal lands are the responsibility of the federal agency with jurisdiction. Limited exceptions may occur for declared fires on lands in which the ownership is comingled federal and nonfederal, and the costs incurred by the eligible entity are not entitled to any other type of federal reimbursement. However, FMAGs may be provided in conjunction with other Forest Service assistance programs, such as any technical and financial assistance provided through the agency's state and volunteer fire assistance programs or state and private forestry office. FMAG and other federal assistance may potentially occur in conjunction when there is a cooperative agreement between federal, state, and other governmental or tribal partners to coordinate emergency wildfire protection and response activities. The cooperative agreement often delineates different geographic areas where the state government is responsible for initial suppression operations, regardless of land ownership, and vice versa, where the federal government may be responsible for providing suppression operations in lands under nonfederal ownership. The cooperative agreements (sometimes referred to as \"fire compacts\") specify how costs are to be apportioned among the partners, including provisions allowing for reimbursement, in accordance with applicable federal and state statutes. In the circumstance where a state (or other eligible entity) conducted suppression operations on federal land and the costs were not reimbursable, an FMAG may potentially be applied for and used to cover eligible costs. No, most fires that begin on federal land are the responsibility of the federal agency that owns or manages the land, and are not eligible to receive FMAG assistance. There are some exceptions, however. For example, FMAGs may be available to assist with declared fires that occur in areas with a mix of federal and nonfederal land, if the state has a responsibility for suppression activities under a cooperative agreement with the applicable federal agency, and those costs are not reimbursable under another federal statute.", "summary": "Section 420 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (P.L. 93-288, hereinafter the Stafford Act) authorizes the President to \"declare\" a Fire Management Assistance Grant (FMAG). In the interest of saving time, the authority to make the declaration has been delegated to the Federal Emergency Management Agency's (FEMA's) Regional Administrators. Once issued, the FMAG declaration authorizes various forms of federal fire suppression assistance such as the provision of equipment, personnel, and grants to state, local, and tribal governments for the control, management, and mitigation of any fire on certain public or private forest land or grassland that might become a major disaster. This federal assistance requires a cost-sharing component such that state, local, and tribal governments are responsible for 25% of the expenses. This report answers frequently asked questions about FMAGs. This report will be updated as events warrant.", "document_type": "crs"}
{"report": "The diminishment of Arctic sea ice has led to increased human activities in the Arctic, and has heightened interest in, and concerns about, the region's future. Issues such as Arctic territorial disputes; commercial shipping through the Arctic; Arctic oil, gas, and mineral exploration; endangered Arctic species; and increased military operations in the Arctic could cause the region in coming years to become an arena of international cooperation or competition. The United States, by virtue of Alaska, is an Arctic country and has substantial political, economic, energy, environmental, and other interests in the region. Decisions that Congress makes on Arctic-related issues could significantly affect these interests. This report provides an overview of Arctic-related issues for Congress, and refers readers to more in-depth CRS reports on specific Arctic-related issues. Congressional readers with questions about an issue discussed in this report should contact the author or authors of the section discussing that issue. The authors are identified by footnote at the start of each section. This report does not track legislation on specific Arctic-related issues. For tracking of legislative activity, see the CRS reports relating to specific Arctic-related issues that are listed at the end of this report, just prior to Appendix A . There are multiple definitions of the Arctic that result in differing descriptions of the land and sea areas encompassed by the term. Policy discussions of the Arctic can employ varying definitions of the region, and readers should bear in mind that the definition used in one discussion may differ from that used in another. This CRS report does not rely on any one definition. The most common and basic definition of the Arctic defines the region as the land and sea area north of the Arctic Circle (a circle of latitude at about 66.34 o North). For surface locations within this zone, the sun is generally above the horizon for 24 continuous hours at least once per year (at the summer solstice) and below the horizon for 24 continuous hours at least once per year (at the winter solstice). The Arctic Circle definition includes the northernmost third or so of Alaska, as well as the Chukchi Sea, which separates that part of Alaska from Russia, and U.S. territorial and Exclusive Economic Zone (EEZ) waters north of Alaska. It does not include the lower two-thirds or so of Alaska or the Bering Sea, which separates that lower part of the state from Russia. The area within the Arctic Circle is about 14.5 million square kilometers, or about 5.6 million square miles. This equates to about 2.8%, or about 1/36 th , of the world's surface. About 4 million people, or about 0.05% of the world's population, live in the Arctic, of which roughly half (roughly 2 million) live in Russia's part of the Arctic. Eight countries have territory north of the Arctic Circle: the United States (Alaska), Canada, Russia, Norway, Denmark (by virtue of Greenland, a member country of the Kingdom of Denmark), Finland, Sweden, and Iceland. These eight countries are often referred to as the Arctic countries, and they are the member states of the Arctic Council, which is discussed further below. A subset of the eight Arctic countries are the five countries that are considered Arctic coastal states: the United States, Canada, Russia, Norway, and Denmark (by virtue of Greenland). Section 112 of the Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 of July 31, 1984) defines the Arctic as follows: As used in this title, the term \"Arctic\" means all United States and foreign territory north of the Arctic Circle and all United States territory north and west of the boundary formed by the Porcupine, Yukon, and Kuskokwim Rivers [in Alaska]; all contiguous seas, including the Arctic Ocean and the Beaufort, Bering, and Chukchi Seas; and the Aleutian chain. This definition, which is codified at 15 U.S.C. 4111, includes certain parts of Alaska below the Arctic Circle, including the Aleutian Islands and portions of central and western mainland Alaska, such as the Seward Peninsula and the Yukon Delta. Figure 1 below shows the Arctic area of Alaska as defined by ARPA; Figure 2 shows the entire Arctic area as defined by ARPA. Other definitions of the Arctic are based on factors such as average temperature, the northern tree line, the extent of permafrost on land, the extent of sea ice on the ocean, or jurisdictional or administrative boundaries. A definition based on a climate-related factor could circumscribe differing areas over time as a result of climate change. The 10 o C isotherm definition of the Arctic defines the region as the land and sea area in the northern hemisphere where the average temperature for the warmest month (July) is below 10 o Celsius, or 50 o Fahrenheit. This definition results in an irregularly shaped Arctic region that excludes some land and sea areas north of the Arctic Circle but includes some land and sea areas south of the Arctic Circle. This definition currently excludes all of Finland and Sweden, as well as some of Alaska above the Arctic Circle, while including virtually all of the Bering Sea and Alaska's Aleutian Islands. The definition of the Arctic adopted by the Arctic Monitoring and Assessment Programme (AMAP)—a working group of the Arctic Council—\"essentially includes the terrestrial and marine areas north of the Arctic Circle (66°32' N), and north of 62° N in Asia and 60° N in North America, modified to include the marine areas north of the Aleutian chain, Hudson Bay, and parts of the North Atlantic, including the Labrador Sea.\" The AMAP website includes a map showing the Arctic Circle, 10o C isotherm, tree line, and AMAP definitions of the Arctic. Some observers use the term \"high north\" as a way of referring to the Arctic. Some observers make a distinction between the \"high Arctic\"—meaning, in general, the colder portions of the Arctic that are closer to the North Pole—and other areas of the Arctic that are generally less cold and further away from the North Pole, which are sometimes described as the low Arctic or the subarctic. As mentioned earlier, the United States, by virtue of Alaska, is an Arctic country and has substantial political, economic, energy, environmental, and other interests in the region. Even so, Alaska is geographically separated and somewhat distant from the other 49 states, and relatively few Americans—fewer than 68,000 as of July 1, 2017—live in the Arctic part of Alaska as shown in Figure 2 . A November 8, 2018, research paper on the Arctic in U.S. national identity, based on data collected in online surveys conducted in October and December 2017, stated the following: We found that Americans on average continue mildly to disagree with the canonical assertion of U.S. Arctic identity and interests as articulated in government policy. On a scale from 1 to 7, with higher numbers indicating stronger agreement, Americans' average rating was 3.51, up slightly from 3.16 in 2015, but still below the scale midpoint [of 4.0]. A plurality of respondents (27%) answered with a score of one, indicating the strongest disagreement. Men and older individuals showed greater inclination to agree with the assertion of Arctic identity and interests than women or younger respondents, a pattern also observed in 2015. No region of the country showed particularly greater inclination to agree or disagree, except Alaskans[, who] showed substantially greater agreement. We also conducted a series of comparative surveys and found that Canadians, with an average rating of 4.87, had a much greater sense of being an Arctic nation than did Americans. American respondents, however, did register somewhat higher agreement than British and Australians in judging their country an Arctic nation with strong Arctic interests. In a separate comparative survey, Americans indicated a stronger sense of being a Pacific nation than an Arctic one. The Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 of July 31, 1984) \"provide[s] for a comprehensive national policy dealing with national research needs and objectives in the Arctic.\" The act, among other things made a series of findings concerning the importance of the Arctic and Arctic research; established the U.S. Arctic Research Commission (USARC) to promote Arctic research and recommend Arctic research policy; designated the National Science Foundation (NSF) as the lead federal agency for implementing Arctic research policy; established the Interagency Arctic Research Policy Committee (IARPC) to develop a national Arctic research policy and a five-year plan to implement that policy, and designated the NSF representative on the IARPC as its chairperson; and defined the term \"Arctic\" for purposes of the act. The Arctic Research and Policy Act of 1984 was amended by P.L. 101-609 of November 16, 1990. For the texts of the Arctic Research and Policy Act of 1984 and P.L. 101-609 , see Appendix A and Appendix B , respectively. NSF—the lead federal agency for implementing Arctic research policy—carries out Arctic research activities through its Office of Polar Programs (OPP), which operates as part of the Directorate for Geosciences (GEO). NSF is requesting a total of $534.5 million for OPP for FY2019, an increase of 30.6% over the $409.18 million requested for FY2018, and an increase of 14.3% over the $467.85 million actual for FY2017. Within the $534.54 million requested for OPP for FY2019 is $113.56 million for research in both the Arctic and Antarctic, an increase of 2.7% over the $110.58 million requested for FY2018, and a reduction of 4.6% from the $119.05 million actual for FY2017. Also within the $534.54 million requested for OPP for FY2019 is $39.33 million for Arctic research and support logistics, an increase of 8.9% over the $36.11 million requested for FY2018, and a reduction of 12.7% from the $45.06 actual for FY2017. NSF states in the overview of its FY2019 budget request that In 2019, NSF will support 10 Big Ideas, which are bold ideas that identify areas for future, long-term investment at the frontiers of science and engineering. With its broad portfolio of investments, NSF is uniquely suited to advance this set of cutting-edge research agendas and processes that will require collaborations with industry, private foundations, other agencies, science academies and societies, and universities and other education institutions. The Big Ideas represent unique opportunities to position our Nation at the frontiers—indeed to define the frontiers—of global science and engineering leadership and to invest in fundamental research that advances America's economic competitiveness and security. Among the 10 big ideas, NSF states in its overview that number 6 is Navigating the New Arctic (NNA) —Establishing an observing network of mobile and fixed platforms and tools across the Arctic to document and understand the Arctic's rapid biological, physical, chemical, and social changes. For FY2019, NSF is requesting $30.0 million for NNA under Integrative & Collaborative Education and Research (ICER) effort of GEO. NSF states that a number of GEO programs contribute directly to NSF's overarching theme of Navigating the New Arctic (NNA).... As part of NNA, and in partnership with the other research directorates and offices, GEO will invest funds in its ICER division to support convergent activities that transcend the traditional disciplinary boundaries of individual NSF directorates and offices. These activities will enable pursuit of fundamental research in Arctic regions. While budget management and reporting for this investment will be the responsibility of GEO, the convergent activities will be overseen and managed collaboratively by the multi-directorate/office NNA leadership team. Regarding its FY2019 budget request for OPP, NSF states that The Office of Polar Programs (OPP) is the primary U.S. supporter of fundamental research in the polar regions. In the Arctic, NSF helps coordinate research planning as directed by the Arctic Research Policy Act of 1984, and the NSF Director chairs the Interagency Arctic Research Policy Committee (IARPC) created for this purpose.... OPP supports investments in research and education and provides support for research infrastructure, such as permanent stations and temporary field camps in the Antarctic and the Arctic. OPP's FY 2019 Budget Request is influenced by three key priorities: (1) supporting critical facilities that enable frontier research in the Earth's polar regions; (2) maintaining strong disciplinary programs that provide a base for our investments in cross-disciplinary system science programs and; (3) maintaining U.S. research community activities in polar system science. As part of priority one, OPP will start the construction phase of the multi-year Antarctic Infrastructure Modernization for Science (AIMS) project. OPP will also prioritize investment in two of the Big Ideas: Navigating the New Arctic where OPP leads NSF efforts, and Windows on the Universe where OPP invests in underpinning activities. All of these priorities reflect opportunities for fundamental scientific discovery uniquely possible in polar regions, as well as studies to investigate the causes and future trajectory of environmental and ecosystem changes now being observed at the poles that could impact global systems. This work will implement the Foundation's lead-agency role in facilitating the Nation's investment in polar science. In addition to shared cross-directorate basic research objectives, OPP investments will be guided by recent sponsored studies to identify priority areas and ensure effective polar research programs: • For the Arctic, IARPC's Arctic Research Plan: FY 2017-20211 , and the World Meteorological Organization's Year of Polar Prediction Implementation Plan inform science investment priorities. Efforts to build an integrated research capacity to address the potential opportunities and challenges of Arctic change for the Nation's security and economics and well-being of Arctic residents will continue. Regarding the $39.33 million requested for FY2019 for Arctic Research Support and Logistics within OPP, NSF states the following: The Research Support and Logistics program in the Arctic Sciences section of OPP responds to science supported by the section. Funding is provided directly to grantees or to key organizations that provide or manage Arctic research support and logistics. A contractor provides research support and logistics services for NSF-sponsored activities in the Arctic. Additional major support components include: access to USCG and other icebreakers, University-National Oceanographic Laboratory (UNOLS) vessels and coastal boats; access to fixed- and rotary-wing airlift support; assets at Toolik Field Station, University of Alaska Fairbanks' field station for ecological research on Alaska's North Slope; safety training for field researchers and funding for field safety experts; global satellite telephones for emergency response and improved logistics coordination; and development of a network of strategically placed U.S. observatories linked to similar efforts in Europe and Canada.... Arctic Sciences personnel support merit-reviewed research proposals in social, earth systems, and a broad range of natural sciences; its Research Support & Logistics program responds to research by assisting researchers with access to the Arctic and sharing of plans and results with local Arctic communities. On January 12, 2009, the George W. Bush Administration released a presidential directive establishing a new U.S. policy for the Arctic region. The directive, dated January 9, 2009, was issued as National Security Presidential Directive 66/Homeland Security Presidential Directive 25 (NSPD 66/HSPD 25). The directive was the result of an interagency review, and it superseded for the Arctic (but not the Antarctic) a 1994 presidential directive on Arctic and Antarctic policy. The directive, among other things, states that the United States is an Arctic nation, with varied and compelling interests in the region; sets forth a six-element overall U.S. policy for the region; describes U.S. national security and homeland security interests in the Arctic; and discusses a number of issues as they relate to the Arctic, including international governance; the extended continental shelf and boundary issues; promotion of international scientific cooperation; maritime transportation; economic issues, including energy; and environmental protection and conservation of natural resources. For the text of NSPD 66/HSPD 25, see Appendix C . In May 2010, the Obama Administration released a national security strategy document that states the following: The United States is an Arctic Nation with broad and fundamental interests in the Arctic region, where we seek to meet our national security needs, protect the environment, responsibly manage resources, account for indigenous communities, support scientific research, and strengthen international cooperation on a wide range of issues. On May 10, 2013, the Obama Administration released a document entitled National Strategy for the Arctic Region . The document appears to supplement rather than supersede the January 2009 Arctic policy directive (NSPD 66/HSPD 25) discussed above. The executive summary of National Strategy for the Arctic Region begins by quoting the above statement from the May 2010 national security strategy document, and then states the following: The National Strategy for the Arctic Region sets forth the United States Government's strategic priorities for the Arctic region. This strategy is intended to position the United States to respond effectively to challenges and emerging opportunities arising from significant increases in Arctic activity due to the diminishment of sea ice and the emergence of a new Arctic environment. It defines U.S. national security interests in the Arctic region and identifies prioritized lines of effort, building upon existing initiatives by Federal, state, local, and tribal authorities, the private sector, and international partners, and aims to focus efforts where opportunities exist and action is needed. It is designed to meet the reality of a changing Arctic environment, while we simultaneously pursue our global objective of combating the climatic changes that are driving these environmental conditions. Our strategy is built on three lines of effort: 1. Advance United States Security Interests – We will enable our vessels and aircraft to operate, consistent with international law, through, under, and over the airspace and waters of the Arctic, support lawful commerce, achieve a greater awareness of activity in the region, and intelligently evolve our Arctic infrastructure and capabilities, including ice-capable platforms as needed. U.S. security in the Arctic encompasses a broad spectrum of activities, ranging from those supporting safe commercial and scientific operations to national defense. 2. Pursue Responsible Arctic Region Stewardship – We will continue to protect the Arctic environment and conserve its resources; establish and institutionalize an integrated Arctic management framework; chart the Arctic region; and employ scientific research and traditional knowledge to increase understanding of the Arctic. 3. Strengthen International Cooperation – Working through bilateral relationships and multilateral bodies, including the Arctic Council, we will pursue arrangements that advance collective interests, promote shared Arctic state prosperity, protect the Arctic environment, and enhance regional security, and we will work toward U.S. accession to the United Nations Convention on the Law of the Sea (Law of the Sea Convention). Our approach will be informed by the following guiding principles: • Safeguard Peace and Stability – Seek to maintain and preserve the Arctic region as an area free of conflict, acting in concert with allies, partners, and other interested parties. Support and preserve: international legal principles of freedom of navigation and overflight and other uses of the sea and airspace related to these freedoms, unimpeded lawful commerce, and the peaceful resolution of disputes for all nations. • Make Decisions Using the Best Available Information – Across all lines of effort, decisions need to be based on the most current science and traditional knowledge. • Pursue Innovative Arrangements – Foster partnerships with the state of Alaska, Arctic states, other international partners, and the private sector to more efficiently develop, resource, and manage capabilities, where appropriate and feasible, to better advance our strategic priorities in this austere fiscal environment. • Consult and Coordinate with Alaska Natives – Engage in a consultation process with Alaska Natives, recognizing tribal governments' unique legal relationship with the United States and providing for meaningful and timely opportunity to inform Federal policy affecting Alaskan Native communities. For the main text of the document, see Appendix D . On January 30, 2014, the Obama Administration released an implementation plan for the May 2013 national strategy for the Arctic region. The plan states that it complements and builds upon existing initiatives by Federal, State, local, and tribal authorities, the private sector, and international partners, and focuses efforts where opportunities exist and action is most needed. The Implementation Plan reflects the reality of a changing Arctic environment and upholds national interests in safety, security, and environmental protection, and works with international partners to pursue global objectives of addressing climatic changes. This Implementation Plan follows the structure and objectives of the Strategy's three lines of effort and is consistent with the guiding principles. The lines of effort of the Strategy and the Implementation Plan are as follows: • Advance United States Security Interests • Pursue Responsible Arctic Region Stewardship • Strengthen International Cooperation These lines of effort and guiding principles are meant to be implemented as a coherent whole. The plan also states the following: Climate change is already affecting the entire global population, and Alaska residents are experiencing the impacts in the Arctic. To ensure a cohesive Federal approach, implementation activities must be aligned with the Executive Order on Preparing the United States for the Impacts of Climate Change while executing the Strategy. In addition to the guiding principles, the following approaches are important in implementing the activities across all of the lines of effort: • Foster Partnerships with Arctic Stakeholders. As outlined in the Strategy, all lines of effort must involve Arctic partners, particularly the State of Alaska and Alaska Natives in the Arctic region. Federal agencies, the State of Alaska, tribal communities, local governments, and academia will work with other nations, industry stakeholders, non-governmental organizations, and research partners to address emerging challenges and opportunities in the Arctic environment. The Federal Government should strive to maintain the free flow of communication and cooperation with the State of Alaska to support national priorities. • Coordinate and Integrate Activities across the Federal Government. Multiple Federal bodies currently have authority for Arctic policy (e.g., the National Ocean Council (NOC), Arctic Policy Group, and Interagency Arctic Research Policy Committee (IARPC)). The National Security Council Staff will develop an Executive Order through the interagency process to maximize efficiency, align interagency initiatives, and create unity of effort among all Federal entities conducting activities in the Arctic. The plan outlines about 36 specific initiatives. For each, it presents a brief statement of the objective, a list of next steps to be taken, a brief statement about measuring progress in achieving the objective, and the names of the lead and supporting federal agencies to be involved. On March 9, 2016, the Obama Administration released three documents discussing the implementation of the national strategy for the Arctic: (1) a report entitled 2015 Year in Review—Progress Report on the Implementation of the National Strategy for the Arctic Region ; (2) an appendix to that report entitled Appendix A, Implementation Framework for the National Strategy for the Arctic Region : and (3) another appendix to that report entitled Appendix B, Interagency Arctic Research Policy Committee 5-Year Plan Collaboration Teams: 2015 Summary of Accomplishments and 2016 Priorities . On January 21, 2015, then-President Obama issued Executive Order 13689, entitled \"Enhancing Coordination of National Efforts in the Arctic.\" The order states the following in part: As the United States assumes the Chairmanship of the Arctic Council, it is more important than ever that we have a coordinated national effort that takes advantage of our combined expertise and efforts in the Arctic region to promote our shared values and priorities. As the Arctic has changed, the number of Federal working groups created to address the growing strategic importance and accessibility of this critical region has increased. Although these groups have made significant progress and achieved important milestones, managing the broad range of interagency activity in the Arctic requires coordinated planning by the Federal Government, with input by partners and stakeholders, to facilitate Federal, State, local, and Alaska Native tribal government and similar Alaska Native organization, as well as private and nonprofit sector, efforts in the Arctic.... There is established an Arctic Executive Steering Committee (Steering Committee), which shall provide guidance to executive departments and agencies (agencies) and enhance coordination of Federal Arctic policies across agencies and offices, and, where applicable, with State, local, and Alaska Native tribal governments and similar Alaska Native organizations, academic and research institutions, and the private and nonprofit sectors.... ... the Steering Committee will meet quarterly, or as appropriate, to shape priorities, establish strategic direction, oversee implementation, and ensure coordination of Federal activities in the Arctic.... The Steering Committee, in coordination with the heads of relevant agencies and under the direction of the Chair, shall: (a) provide guidance and coordinate efforts to implement the priorities, objectives, activities, and responsibilities identified in National Security Presidential Directive 66/Homeland Security Presidential Directive 25, Arctic Region Policy, the National Strategy for the Arctic Region and its Implementation Plan, and related agency plans; (b) provide guidance on prioritizing Federal activities, consistent with agency authorities, while the United States is Chair of the Arctic Council, including, where appropriate, recommendations for resources to use in carrying out those activities; and (c) establish a working group to provide a report to the Steering Committee by May 1, 2015, that: (i) identifies potential areas of overlap between and within agencies with respect to implementation of Arctic policy and strategic priorities and provides recommendations to increase coordination and reduce any duplication of effort, which may include ways to increase the effectiveness of existing groups; and (ii) provides recommendations to address any potential gaps in implementation.... It is in the best interest of the Nation for the Federal Government to maximize transparency and promote collaboration where possible with the State of Alaska, Alaska Native tribal governments and similar Alaska Native organizations, and local, private-sector, and nonprofit-sector stakeholders. To facilitate consultation and partnerships with the State of Alaska and Alaska Native tribal governments and similar Alaska Native organizations, the Steering Committee shall: (a) develop a process to improve coordination and the sharing of information and knowledge among Federal, State, local, and Alaska Native tribal governments and similar Alaska Native organizations, and private-sector and nonprofit-sector groups on Arctic issues; (b) establish a process to ensure tribal consultation and collaboration, consistent with my memorandum of November 5, 2009 (Tribal Consultation). This process shall ensure meaningful consultation and collaboration with Alaska Native tribal governments and similar Alaska Native organizations in the development of Federal policies that have Alaska Native implications, as applicable, and provide feedback and recommendations to the Steering Committee; (c) identify an appropriate Federal entity to be the point of contact for Arctic matters with the State of Alaska and with Alaska Native tribal governments and similar Alaska Native organizations to support collaboration and communication; and (d) invite members of State, local, and Alaska Native tribal governments and similar Alaska Native organizations, and academic and research institutions to consult on issues or participate in discussions, as appropriate and consistent with applicable law. As stated in the above-quoted passage, Executive Order 13689, among other things, established an Arctic Executive Steering Committee (AESC) to \"provide guidance to executive departments and agencies (agencies) and enhance coordination of Federal Arctic policies across agencies and offices, and, where applicable, with State, local, and Alaska Native tribal governments and similar Alaska Native organizations, academic and research institutions, and the private and nonprofit sectors.\" Regarding the AESC, a February 28, 2019, press report states the following: \"Although the [executive] order has not been rescinded, the Trump administration has left the committee dormant for the past two years.\" On July 16, 2014, during the Obama Administration, then-Secretary of State John Kerry announced the appointment of retired Coast Guard Admiral Robert J. Papp Jr., who served as Commandant of the Coast Guard from May 2010 to May 2014, as the first U.S. Special Representative for the Arctic. Under the Obama Administration, the duties of this position involved, among other things, interacting with ambassadors to the Arctic region from other countries. Papp served as the U.S. Special Representative until January 20, 2017, the final day of the Obama Administration and the first day of the Trump Administration; the position has gone unfilled since then. A series of meetings initiated by Finland in 1989 led in 1996 to the creation of the Arctic Council via the Ottawa Declaration of September 19, 1996. The council is \"the leading intergovernmental forum promoting cooperation, coordination and interaction among the Arctic States, Arctic indigenous communities and other Arctic inhabitants on common Arctic issues, in particular on issues of sustainable development and environmental protection in the Arctic.\" Specific issues addressed by the council include regional development, the environment, emergency response, climate change, and natural resource extraction. The council states that its mandate, \"as articulated in the Ottawa Declaration, explicitly excludes military security.\" The council's standing Secretariat formally became operational in 2013 in Tromsø, Norway. The Arctic Council's membership consists of the eight countries that have sovereign territory within the Arctic Circle: the United States, Canada, Russia, Iceland, Norway, Sweden, Finland, and Denmark (by virtue of its territory Greenland). The council states that \"decisions at all levels in the Arctic Council are the exclusive right and responsibility\" of these eight states. In addition to the eight member states, \"six organizations representing Arctic indigenous peoples have status as Permanent Participants. The category of Permanent Participant was created to provide for active participation and full consultation with the Arctic indigenous peoples within the council. They include: the Aleut International Association, the Arctic Athabaskan Council, Gwich'in Council International, the Inuit Circumpolar Council, Russian Association of Indigenous Peoples of the North and the Saami Council.\" Thirteen states have been approved as observers to the Arctic Council: Germany, the Netherlands, Poland, and the United Kingdom (approved in 1998); France (2000); Spain (2006); China, India, Italy, Japan, Singapore, and South Korea (2013); and Switzerland (2017). In addition, 13 intergovernmental and interparliamentary organizations and 13 nongovernmental organizations have been approved as observers, making for a total of 39 observer states or organizations. The Arctic Council's work is carried out primarily in six working groups that focus on Arctic contaminants; Arctic monitoring and assessment; conservation of Arctic flora and fauna; emergency prevention, preparedness and response; protection of the Arctic marine environment; and sustainable development. The council may also establish task forces or expert groups for specific projects. The council has a two-year chairmanship that rotates among the eight member states. The United States held the chairmanship from April 24, 2015, to May 11, 2017, a period which began during the Obama Administration and continued into the first 16 weeks of the Trump Administration. The United States had previously held the chairmanship from 1998 to 2000, and will next hold it in 2031-2033. During the Obama Administration's portion of the period of U.S. chairmanship, the U.S. chairmanship team was led by then-Secretary of State John Kerry. For a statement from the Obama Administration regarding U.S. goals for the Obama Administration's portion of the U.S. period of chairmanship, see Appendix E . On May 11, 2017, the chairmanship of the Arctic Council was transferred from the United States to Finland. A May 11, 2017, press report states the following: \"Finland's chairmanship program emphasizes climate change and ways the Paris emissions targets can mitigate it, said Timo Soini, Finland's foreign minister. 'We recognize that global warming is the main driver of change in the Arctic,' Soini said.\" Each member state is represented by a Senior Arctic Official (SAO), who is usually drawn from that country's foreign ministry. The SAOs hold meetings every six months. The council convenes ministerial-level meetings every two years, at the end of each chairmanship, while the working groups meet more frequently. Regarding the limits of the Arctic Council as a governing body, the council states that it \"does not and cannot implement or enforce its guidelines, assessments or recommendations. That responsibility belongs to each individual Arctic State.\" In addition, as mentioned earlier, the council states that \"the Arctic Council's mandate, as articulated in the [1996] Ottawa Declaration [establishing the Council], explicitly excludes military security.\" In November 1994, the United Nations Convention on the Law of the Sea (UNCLOS) entered into force. UNCLOS establishes a treaty regime to govern activities on, over, and under the world's oceans. It builds on four 1958 law of the sea conventions to which the United States is a party, and sets forth a framework for future activities in parts of the oceans that are beyond national jurisdiction. As of December 13, 2018, 168 nations were party to the treaty. The 1982 Convention and its 1994 Agreement relating to Implementation of Part XI of the Convention were transmitted to the Senate on October 6, 1994. In the absence of Senate advice and consent to adherence, the United States is not a party to the convention and agreement. Part VI of the convention, dealing with the Continental Shelf, and Annex II, which established a Commission on the Limits of the Continental Shelf, are most pertinent to the Arctic as it becomes more accessible ocean space, bordered by five coastal states. The convention gives a coastal state sovereign jurisdiction over the resources, including oil and gas, of its continental shelf. Under Article 76 of the convention, a coastal state with a broad continental margin may establish a shelf limit beyond 200 nautical miles. This jurisdiction is subject to the submission of the particulars of the intended limit and supporting scientific and technical data by the coastal state to the commission for review and recommendation. The commission reviews the documentation and, by a two-thirds majority, approves its recommendations to the submitting state. Coastal states agree to establish the outer limits of their continental shelf, in accordance with this process and with their national laws. In instances of disagreement with the commission's recommendations, the coastal state may make a revised or new submission. The actions of the commission \"shall not prejudice matters relating to delimitation of boundaries between States with opposite or adjacent coasts.\" The \"limits established by a coastal State on the basis of these recommendations shall be final and binding.\" The U.S. government's State Department-led interagency Extended Continental Shelf Project makes the following points regarding the extended continental shelf and the United States as a nonparty to UNCLOS: As a nonparty to UNCLOS, U.S. nationals may not serve as members of the Commission on the Limits of the Continental Shelf. The question of whether nonparties may make a submission to the commission has not been resolved. Becoming a party to UNCLOS would help the United States maximize international recognition and legal certainty regarding the outer limits of the U.S. continental shelf. Even for nonparties to UNCLOS, however, customary international law, as reflected in UNCLOS, confers on coastal states rights and obligations relating to the continental shelf. This view is well supported in international law. The International Court of Justice, for example, has already declared Article 76(1) to have the status of customary international law (Nicaragua v. Colombia, 2012). Article 76(1) provides that the continental shelf extends to \"the outer edge of the continental margin or to a distance of 200 nautical miles,\" whichever is further. Paragraphs 2 through 7 of Article 76 set forth the detailed rules for determining the precise outer limits of the continental shelf in those areas where the continental margin extends beyond 200 nautical miles from shore. The United States, like other countries, is using these provisions to determine its continental shelf limits. As a matter of customary international law, the United States also respects the continental shelf limits of other countries that abide by Article 76. The commission is not a claims process, and continental shelf entitlement does not depend on going through this procedure. The mandate of the commission is instead to make \"recommendations\" on the \"outer limits\" of the continental shelf. The word \"claim\" does not appear in Article 76, Annex II, or the commission's rules. Article 77(3) and the case law of the International Court of Justice indicate that continental shelf rights exist as a matter of fact and do not need to be expressly claimed. Delineating the continental shelf is a very complex and technical exercise, and the commission's process is important for obtaining international recognition and legal certainty of the outer limits of the continental shelf. The United States has potentially overlapping extended continental shelf areas with two countries in the Arctic—Russia and Canada. The United States and the Soviet Union (now Russia) agreed to a maritime boundary, including in the Arctic, in 1990. The treaty was approved by the U.S. Senate in 1991; it has not been approved by Russia's Duma. Pending the treaty's entry into force, the two countries continue to provisionally apply the terms of the treaty. In determining its extended continental shelf limits, Russia has respected this agreement. Russia has not asserted an extended continental shelf in any areas that might be considered part of the U.S. extended continental shelf. The Russian submission to the commission respects the U.S.-Russia maritime boundary. Canada and the United States have not yet established a maritime boundary in the Arctic. The United States and Canada have cooperated extensively to collect the data necessary to define the continental shelf in the Arctic Ocean. The areas where the continental shelf of the United States and Canada overlap will not be fully known until both countries determine the extent of their extended continental shelf in the Arctic Ocean. Once those areas are identified, the United States and Canada will address the maritime boundary on a bilateral basis at an appropriate time. Over the years, the United States has submitted observations on submissions to the commission made by other states, requesting that those observations be made available online and to the commission. In addition, since 2001, the United States has gathered and analyzed data to determine the outer limits of its extended continental shelf. Starting in 2007, this effort became the Extended Continental Shelf Project. Some observers have suggested that a separate international legal regime be negotiated to address the changing circumstances in the Arctic. They maintain that these changing circumstances were not envisioned at the time UNCLOS was negotiated. Other observers suggest that the Arctic region above a certain parallel be designated a wilderness area. As precedent, they cite Article 4 of the Antarctic Treaty, under which any current claims to sovereign territory are frozen and No acts or activities taking place while the present Treaty is in force shall constitute a basis for asserting, supporting or denying a claim to territorial sovereignty in Antarctica or create any rights of sovereignty in Antarctica. No new claim, or enlargement of an existing claim, to territorial sovereignty in Antarctica shall be asserted while the present Treaty is in force. Supporters of UNCLOS maintain that changing circumstances in the Arctic strengthen their argument that the United States should become a party to the convention. In this way, they argue, the United States can be best situated to protect and serve its national interests, under both Article 76 and other parts of UNCLOS. The Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see discussion above) includes, as one of its 36 or so initiatives, one entitled \"Accede to the Law of the Sea Convention.\" Under this initiative, the State Department and other federal agencies are to \"continue to seek the Senate's advice and consent to accede to the Law of the Sea Convention.\" The document states that \"the [Obama] Administration is committed, like the last three Administrations, to pursuing accession to the Convention on the Law of the Sea and will continue to place a priority on attaining Senate advice and consent to accession.\" On March 4 and 5, 2015, Senator Lisa Murkowski and Senator Angus King announced the formation of a Senate Arctic Caucus \"to spotlight this region and open up a wider conversation about the nation's future in the region as America prepares to accede to the Chair of the Arctic Council.\" Record low extents of Arctic sea ice in 2012 and 2007 have focused scientific and policy attention on climate changes in the high north, and on the implications of projected ice-free seasons in the Arctic within decades. The Arctic has been projected by several scientists to be ice-free in most late summers as soon as the 2030s. This opens opportunities for transport through the Northwest Passage and the Northern Sea Route, extraction of potential oil and gas resources, and expanded fishing and tourism ( Figure 3 ). More broadly, physical changes in the Arctic include warming ocean, soil, and air temperatures; melting permafrost; shifting vegetation and animal abundances; and altered characteristics of Arctic cyclones. All these changes are expected to affect traditional livelihoods and cultures in the region and survival of polar bear and other animal populations, and raise risks of pollution, food supply, safety, cultural losses, and national security. Moreover, linkages (\"teleconnections\") between warming Arctic conditions and extreme events in the mid-latitude continents are increasingly evident, identified in such extreme events as the heat waves and fires in Russia in 2010; severe winters in the eastern United States and Europe in 2009/2010 and in Europe in 2011/2012; and Indian summer monsoons and droughts. Hence, changing climate in the Arctic suggests important implications both locally and across the Hemisphere. Like the rest of the globe, temperatures in the Arctic have varied but show a significant warming trend since the 1970s, and particularly since 1995. The annual average temperature for the Arctic region (from 60 o to 90 o N) is now about 1.8 o F warmer than the \"climate normal\" (the average from 1961 to 1990). Temperatures in October-November are now about 9 o F above the seasonal normal. Scientists have concluded that most of the global warming of the last three decades is very likely caused by human-related emissions of greenhouse gases (GHG, mostly carbon dioxide); they expect the GHG-induced warming to continue for decades, even if, and after, GHG concentrations in the atmosphere have been stabilized. The extra heat in the Arctic is amplified by processes there (the \"polar amplification\") and may result in irreversible changes on human timescales. The observed warmer temperatures along with rising cyclone size and strength in the Arctic have reduced sea ice extent, thickness, and ice that persists year-round (\"perennial ice\"); natural climate variability has likely contributed to the record low ice extents of 2007 and 2012. The 2007 minimum sea ice extent was influenced by warm Arctic temperatures and warm, moist winds blowing from the North Pacific into the central Arctic, contributing to melting and pushing ice toward and into the Atlantic past Greenland. Warm winds did not account for the near-record sea ice minimum in 2008. In early August 2012, an unusually large storm with low pressure developed over the Arctic, helping to disperse the already weak ice into warmer waters and accelerating its melt rate. By August 24, 2012, sea ice extent had shrunk below the previous observed minimum of late September 2007. Modeling of GHG-induced climate change is particularly challenging for the Arctic, but it consistently projects warming through the 21 st century, with annual average Arctic temperature increases ranging from +1° to +9.0° C (+2° to +19.0° F), depending on the GHG scenario and model used. While such warming is projected by most models throughout the Arctic, some models project slight cooling localized in the North Atlantic Ocean just south of Greenland and Iceland. Most warming would occur in autumn and winter, \"with very little temperature change projected over the Arctic Ocean\" in summer months. Due to observed and projected climate change, scientists have concluded that the Arctic will have changed from an ice-covered environment to a recurrent ice-free ocean (in summers) as soon as the late 2030s. The character of ice cover is expected to change as well, with the ice being thinner, more fragile, and more regionally variable. The variability in recent years of both ice quantity and location could be expected to continue. Motivated in part by a desire to exercise sovereign control over the Arctic region's increasingly accessible oil and gas reserves (see \" Oil, Gas, and Mineral Exploration \"), the four Arctic coastal states other than the United States—Canada, Russia, Norway, and Denmark (of which Greenland is a territory)—have made or are in the process of preparing submissions to the Commission on the Limits of the Continental Shelf regarding the outer limits of their extended continental shelves. (For further discussion of the commission, see \" Extended Continental Shelf and United States as a Nonparty to UNCLOS .\") Russia has been attempting to chart the Arctic Ocean's enormous underwater Lomonosov Ridge in an attempt to show that it is an extension of Russia's continental margin. The ridge spans a considerable distance across the Arctic Ocean. A 2001 submission by Russia was rejected as insufficiently documented. Canada views a portion of the ridge as part of its own continental shelf. In August 2007, a Russian submersible on a research expedition deposited an encased Russian Federation flag on the seabed of the presumed site of the North Pole. The action captured worldwide attention, but analysts note that it did not constitute an official claim to the Arctic seabed or the waters above it, that it has no legal effect, and that it therefore was a purely symbolic act. At a May 2008 meeting in Ilulissat, Greenland, the five Arctic coastal states reaffirmed their commitment to the UNCLOS legal framework for the establishment of extended continental shelf limits in the Arctic. (For further discussion, see \" Extent of the Continental Margin \" in \" Oil, Gas, and Mineral Exploration .\") In addition to this process, there are four unresolved Arctic territorial disputes: Scientists have forecast that in coming decades, global warming will reduce the ice pack in Canada's northern archipelago sufficiently to permit ships to use the trans-Arctic shipping route known as the Northwest Passage during the summer months (see \" Commercial Sea Transportation \"). The prospect of such traffic raises a major jurisdictional question. Ottawa maintains that such a passage would be an inland waterway, and would therefore be sovereign Canadian territory subject to Ottawa's surveillance, regulation, and control. The United States, the European Union, and others assert that the passage would constitute an international strait between two high seas. The United States and Canada are negotiating over a binational boundary in the Beaufort Sea. The United States and Russia in 1990 signed an agreement regarding a disputed area of the Bering Sea; the U.S. Senate ratified the pact the following year, but the Russian Duma has yet to approve the accord. Denmark and Canada disagree over which country has the territorial right to Hans Island, a tiny, barren piece of rock between Greenland and Canada's Ellesmere Island. Some analysts believe the two countries are vying for control over a future sea lane that might be created if the Arctic ice were to melt sufficiently to create a Northwest Passage. Others claim that the governments are staking out territorial claims in the event that future natural resource discoveries make the region economically valuable. In addition to these disputes, Norway and Russia had been at odds for decades over the boundary between the two in the so-called \"Grey Zone\" in the Barents Sea, an area believed to hold rich undersea deposits of petroleum. On September 15, 2010, Norwegian Prime Minister Jens Stoltenberg and Russian President Dmitry Medvedev signed an agreement in Murmansk, a Russian city near the Norwegian border. The accord awards roughly half of the 175,000-square-kilometer area to each country; it spells out fishing rights, and provides for the joint development of future oil and gas finds that straddle the boundary line. Some observers believe it is noteworthy that Russia would concede sovereignty over such a large, resource-rich area to a small, neighboring country. But others have noted that Moscow may be hoping for Norwegian cooperation in developing offshore resources, and eventually in winning approval when Russia makes its Article 76 UNCLOS submission. In August 2010, Canadian Foreign Minister Lawrence Cannon announced a new \"Statement of Canada's Arctic Policy,\" which reaffirmed the government's commitment to Canada's sovereignty in the region, to economic and social development, to environmental protection, and to empowerment of the peoples in the north. The statement also emphasized the government's intention to negotiate settlements to its disputes with the United States over the Beaufort Sea boundary, and with Denmark over Hans Island. Minister Cannon declared that \"making progress on outstanding boundary issues will be a top priority.\" Also, despite their dispute over Hans Island, Canada and Denmark have been working together on Arctic issues. In May 2010, the two countries' military chiefs of staffs signed a memorandum of understanding on Arctic Defense, Security, and Operational Cooperation, committing the two countries to \"enhanced consultation, information exchange, visits, and exercises.\" The search for a shorter route from the Atlantic to Asia has been the quest of maritime powers since the Middle Ages. The melting of Arctic ice raises the possibility of saving several thousands of miles and several days of sailing between major trading blocs. If the Arctic were to become a viable shipping route, the ramifications could extend far beyond the Arctic. For example, lower shipping costs could be advantageous for China (at least its northeast region), Japan, and South Korea because their manufactured products exported to Europe or North America could become less expensive relative to other emerging manufacturing centers in Southeast Asia, such as India. Melting ice could potentially open up two trans-Arctic routes (see Figure 3 ): The Northern Sea Route (NSR, a.k.a. the \"Northeast Passage\"), along Russia's northern border from Murmansk to Provideniya, is about 2,600 nautical miles in length. It was opened by the Soviet Union to domestic shipping in 1931 and to transit by foreign vessels in 1991. This route would be applicable for trade between northeast Asia (north of Singapore) and northern Europe. In recent summers, less than a handful of large, non-Russian-flagged cargo ships have transited the NSR. Russia reportedly seeks to reserve carriage of oil and gas extracted along the NSR to Russian-flagged ships. The Northwest Passage (NWP) runs through the Canadian Arctic Islands. The NWP actually consists of several potential routes. The southern route is through Peel Sound in Nunavut, which has been open in recent summers and contains mostly one-year ice. However, this route is circuitous, contains some narrow channels, and is shallow enough to impose draft restrictions on ships. The more northern route, through McClure Strait from Baffin Bay to the Beaufort Sea north of Alaska, is much more direct and therefore more appealing to ocean carriers, but more prone to ice blockage. The NWP is potentially applicable for trade between northeast Asia (north of Shanghai) and the northeast of North America, but it is less commercially viable than the NSR. Cargo ship transits have been extremely rare but cruise vessel excursions and research vessels are more common. Most cargo ship activity currently taking place in the Arctic is to transport natural resources from the Arctic or to deliver general cargo and supplies to communities and natural resource extraction facilities. Thus, cargo ship traffic in the Arctic presently is mostly regional, not trans-Arctic. While there has been a recent uptick in Arctic shipping activity, this activity has more to do with a spike in commodity prices than it does with the melting of Arctic ice. Even so, fewer ships ply the Arctic seas now than in the past. The NSR continues to account for the bulk of Arctic shipping activity. Arctic waters do not necessarily have to be ice free to be open to shipping. Multiyear ice can be over 10 feet thick and problematic even for icebreakers, but one-year ice is typically 3 feet thick or less. This thinner ice can be more readily broken up by icebreakers or ice-class ships (cargo ships with reinforced hulls and other features for navigating in ice-infested waters). However, more open water in the Arctic has resulted in another potential obstacle to shipping: unpredictable ice flows. In the NWP, melting ice and the opening of waters that were once covered with one-year ice has allowed blocks of multiyear ice from farther north and icebergs from Greenland to flow into potential sea lanes. The source of this multiyear ice is not predicted to dissipate in spite of climate change. Moreover, the flow patterns of these ice blocks are very difficult to forecast. Thus, the lack of ice in potential sea lanes during the summer months can add even greater unpredictability to Arctic shipping. This is in addition to the extent of ice versus open water, which is also highly variable from one year to the next and seasonally. The unpredictability of ice conditions is a major hindrance for trans-Arctic shipping in general, but can be more of a concern for some types of ships than it is for others. For instance, it would be less of a concern for cruise ships, which may have the objective of merely visiting the Arctic rather than passing through and could change their route and itinerary depending on ice conditions. On the other hand, unpredictability is of the utmost concern for container ships that carry thousands of containers from hundreds of different customers, all of whom expect to unload or load their cargo upon the ship's arrival at various ports as indicated on the ship's advertised schedule. The presence of even small blocks of ice or icebergs from a melting Greenland ice sheet requires slow sailing and could play havoc with schedules. Ships carrying a single commodity in bulk from one port to another for just one customer have more flexibility in terms of delivery windows, but would not likely risk an Arctic passage under prevailing conditions. Ice is not the sole impediment to Arctic shipping. The region frequently experiences adverse weather, including not only severe storms, but also intense cold, which can impair deck machinery. During the summer months when sea lanes are open, heavy fog is common in the Arctic. Commercial ships would face higher operating costs on Arctic routes than elsewhere. Ship size is an important factor in reducing freight costs. Many ships currently used in other waters would require two icebreakers to break a path wide enough for them to sail through; ship owners could reduce that cost by using smaller vessels in the Arctic, but this would raise the cost per container or per ton of freight. Also, icebreakers or ice-class cargo vessels burn more fuel than ships designed for more temperate waters and would have to sail at slower speeds. The shipping season in the Arctic only lasts for a few weeks, so icebreakers and other special required equipment would sit idle the remainder of the year. None of these impediments by themselves may be enough to discourage Arctic passage but they do raise costs, perhaps enough to negate the savings of a shorter route. Thus, from the perspective of a shipper or a ship owner, shorter via the Arctic does not necessarily mean cheaper and faster. Considerable investment in navigation-related infrastructure would be required if trans-Arctic shipping were to become a reality. Channel marking buoys and other floating visual aids are not possible in Arctic waters because moving ice sheets will continuously shift their positions. Therefore, vessel captains would need to rely on marine surveys and ice charts. For some areas in the Arctic, however, these surveys and charts are out of date or not sufficiently accurate. To remedy this problem, aviation reconnaissance of ice conditions and satellite images would need to become readily available for ship operators. Ship-to-shore communication infrastructure would need to be installed where possible. Refueling stations may be needed, as well as, perhaps, transshipment ports where cargo could be transferred to and from ice-capable vessels at both ends of Arctic routes. Shipping lines would need to develop a larger pool of mariners with ice navigation experience. Marine insurers would need to calculate the proper level of risk premium for polar routes, which would require more detailed information about Arctic accidents and incidents in the past. The U.S. Army Corps of Engineers, along with the state of Alaska, has studied the feasibility of a \"deep-draft\" port in the Arctic (accommodating ships with a draft of up to 35 feet). The northern and northwestern coastlines of Alaska are exceptionally shallow, generally limiting harbor and near-shore traffic to shallow-draft barges. Coast Guard cutters and icebreakers have drafts of 35 to 40 feet while NOAA research vessels have drafts of 16 to 28 feet, so at present these vessels are based outside the Arctic and must sail considerable distances to reach Arctic duty stations. Supply vessels supporting offshore oil rigs typically have drafts over 20 feet. A deep-draft port could serve as a base of operations for larger vessels, facilitating commercial maritime traffic in the Arctic. The study concluded that the existing harbors of Nome or Port Clarence on Alaska's west coast may be the most suitable for deepening because of their proximity to the Bering Strait and deeper water. However, at a July 2016 hearing, the Coast Guard indicated its preferred strategy was to rely on mobile assets (vessels and aircraft) and seasonal bases of operation rather than pursue a permanent port in the Arctic. The U.S. Committee on the Marine Transportation System, a Cabinet-level committee of federal agencies with responsibilities for marine transportation, identified a list of infrastructure improvements for Arctic navigation in a 2013 report. The report prioritizes improvements to information infrastructure (weather forecasting, nautical charting, ship tracking) and emergency response capabilities for ships in distress. Due to the international nature of the shipping industry, maritime trading nations have adopted international treaties that establish standards for ocean carriers in terms of safety, pollution prevention, and security. These standards are agreed upon by shipping nations through the International Maritime Organization (IMO), a United Nations agency that first met in 1959. Key conventions that the 168 IMO member nations have adopted include the Safety of Life at Sea Convention (SOLAS), which was originally adopted in response to the Titanic disaster in 1912 but has since been revised several times; the Prevention of Pollution from Ships (MARPOL), which was adopted in 1973 and modified in 1978; and the Standards for Training, Certification, and Watchkeeping for Seafarers (SCTW), which was adopted in 1978 and amended in 1995. It is up to ratifying nations to enforce these standards. The United States is a party to these conventions, and the U.S. Coast Guard enforces them when it boards and inspects ships and crews arriving at U.S. ports and the very few ships engaged in international trade that sail under the U.S. flag. Like the United States, most of the other major maritime trading nations lack the ability to enforce these regulations as a \"flag state\" because much of the world's merchant fleet is registered under so-called \"flags of convenience.\" While most ship owners and operators are headquartered in major economies, they often register their ships in Panama, Liberia, the Bahamas, the Marshall Islands, Malta, and Cyprus, among other \"open registries,\" because these nations offer more attractive tax and employment regulatory regimes. Because of this development, most maritime trading nations enforce shipping regulations under a \"port state control\" regime—that is, they require compliance with these regulations as a condition of calling at their ports. The fragmented nature of ship ownership and operation can be a further hurdle to regulatory enforcement. It is common for cargo ships to be owned by one company, operated by a second company (which markets the ship's space), and managed by a third (which may supply the crew and other services a ship requires to sail), each of which could be headquartered in different countries. While SOLAS and other IMO conventions include provisions regarding the operation of ships in ice-infested waters, they were not specific to the polar regions. To supplement these requirements, a new IMO polar code went into effect on January 1, 2017. The code applies to passenger and cargo ships of 500 gross tons or more engaged in international voyages. It does not apply to fishing vessels, military vessels, pleasure yachts, or smaller cargo ships. The polar requirements are intended to improve safety and prevent pollution in the Arctic, and they include provisions on ship construction, ship equipment related to navigation, and crew training and ship operation. The code requires ships to carry fully or partially enclosed lifeboats. The code requires that the crew have training in ice navigation. Nations can enforce additional requirements on ships arriving at their ports or sailing through their coastal waters. For instance, U.S. Coast Guard regulations largely follow IMO conventions but mandate additional requirements in some areas. U.S. coastal states can require ships calling at their ports to take additional safety and pollution prevention safeguards. Canada and Russia have additional pollution regulations for Arctic waters exceeding MARPOL. The U.S. Coast Guard has studied and has recommended a specific vessel traffic separation scheme for the Bering Strait between Alaska and Russia, which experiences over 400 transits per year. The U.S. Coast Guard is seeking IMO approval of this routing scheme. Decreases in summer polar ice may alter options for oil, gas, and mineral exploration in Arctic offshore or onshore areas. Offshore of Alaska, the U.S. outer continental shelf (OCS) covers more than 1 billion acres, including some areas with high oil and gas potential. Even with warmer temperatures, exploration and development in the Arctic are still subject to harsh conditions, especially in winter. This makes it costly and challenging to develop the infrastructure necessary to produce, store, and transport oil, gas, and minerals from newly discovered deposits. Severe weather poses challenges to several ongoing offshore operations as well as to new exploration. Offshore oil and gas exploration is affected by efforts to map the margins of the U.S. OCS. Shrinking sea ice cover in the Arctic has intensified interest in surveying and mapping the continental margins of multiple countries with lands in the Arctic. Delineating the extent of the continental margins beyond the 200 nautical mile Exclusive Economic Zone (EEZ) could lead to consideration of development on substantial amounts of submerged lands. Mapping projects are underway, by individual countries and through cooperative government studies, to support submissions to the Commission on the Limits of the Continental Shelf, including for areas that may contain large amounts of oil, natural gas, methane hydrates, or minerals. With respect to onshore development, shrinking glaciers could expose land containing economic deposits of gold, iron ore, or other minerals previously covered by glacial ice. At the same time, warming that causes permafrost to melt could pose challenges to oil, gas, and mineral activities because ground structures, such as pipelines and other infrastructure that depend on footings sunk into the permafrost for support, could be compromised. In addition, warmer temperatures shorten the ice road transport seasons for oil, gas, and mineral development, creating transportation challenges. The shrinking Arctic ice cap, or conversely, the growing amount of ice-free ocean in the summertime, has increased interest in exploring for offshore oil and gas in the Arctic. Reduced sea ice in the summer means that ships towing seismic arrays can explore regions of the Arctic Ocean, Chukchi Sea, Beaufort Sea, and other offshore regions for longer periods of time with less risk of colliding with floating sea ice. Less sea ice over longer periods compared to previous decades also means that the seasonal window for offshore Arctic drilling remains open longer in the summer, increasing the chances for making a discovery. In addition to the improved access to larger portions of the Arctic afforded by shrinking sea ice, interest in Arctic oil and gas was fueled by a 2008 U.S. Geological Survey (USGS) appraisal of undiscovered oil and gas north of the Arctic Circle. The USGS stated that the \"extensive Arctic continental shelves may constitute the geographically largest unexplored prospective area for petroleum remaining on Earth.\" In the report, the USGS estimated that 90 billion barrels of oil, nearly 1,700 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids may remain to be discovered in the Arctic (including both U.S. and international resources north of the Arctic Circle). A 2009 article in Science magazine indicated that 30% of the world's undiscovered natural gas and 13% of the world's undiscovered oil may be found north of the Arctic Circle. In terms of U.S. resources specifically, DOI's Bureau of Ocean Energy Management (BOEM) estimated in 2016 that the Alaska portions of the U.S. OCS contain undiscovered, technically recoverable resources of approximately 27 billion barrels of oil and 131 trillion cubic feet of natural gas (although not all of these resources may be economically viable to recover). A 2015 report by the National Petroleum Council stated that U.S. offshore oil and gas exploration in the Arctic over the next 35 years \"would help sustain domestic supplies as production of U.S. shale oil and tight oil may decline.\" Despite the warming trend in the Arctic, severe weather and sea ice continue to pose challenges to exploration. In addition, any discovery of new oil and gas deposits far from existing storage, pipelines, and shipping facilities could not be developed until infrastructure is built to extract and transport the petroleum. Some have expressed interest in expanding America's ocean energy portfolio in the region. Currently, among 15 federal planning areas in the region, the Beaufort Sea and Cook Inlet are the only two areas with active federal leases, and only the Beaufort Sea has any producing wells in federal waters (from a joint federal-state unit). The Trump Administration has stated its interest in promoting offshore development in the region. In January 2018, the Administration issued a draft five-year offshore oil and gas leasing program for 2019-2024 that would schedule lease sales in all 15 Alaska planning areas, including three sales in the Beaufort Sea and three in the Chukchi Sea. Current lease sales on the Alaska OCS are governed by the Obama Administration's leasing program for 2017-2022, which includes one lease sale in the Cook Inlet (scheduled for 2021) and none in other Alaska planning areas. Activities on existing federal leases in the region have fluctuated as industry weighs changing oil prices, development costs, and regulations. For example, in 2015, Shell Oil Company announced its decision to cease exploration in offshore Alaska for the foreseeable future. Shell cited several reasons for the decision, including insufficient indications of oil and gas at its Burger J well in the Chukchi Sea, the high costs associated with Arctic exploration, and the \"challenging and unpredictable\" federal regulatory environment for offshore Alaska. BOEM also reported that, between February and November 2016, companies relinquished more than 90% of leases they had held in the Beaufort and Chukchi Sea planning areas, in the midst of a slump in oil prices. While there were 450 active leases in the Chukchi Sea planning area at the end of 2015, at the end of 2018 there were none. More recently, some activities have indicated stronger industry interest in the region. For example, in November 2017, the Trump Administration approved an application for permit to drill (APD) on a lease in the Beaufort Sea held by the Eni U.S. Operating Company. In October 2018, BOEM issued conditional approval to Hilcorp Alaska LLC for an oil and gas development and production plan in the Beaufort Sea, which would be the region's first production facility entirely in federal waters. The evolving federal regulatory environment for Arctic offshore activities has been shaped by concerns about industry's ability to respond to potential oil spills, given the region's remoteness and harsh conditions. The section of this report on \" Oil Pollution Implications of Arctic Change \" discusses this issue in greater detail. In July 2016, BOEM and the Bureau of Safety and Environmental Enforcement (BSEE) released final safety regulations for Arctic exploratory drilling that include multiple requirements for companies to reduce the risks of potential oil spills—for example, the requirement that companies have a separate rig available at drill sites to drill a relief well in case of a loss of well control. Some Members of Congress and industry stakeholders opposed the regulations as overly prescriptive and unnecessarily burdensome, while other Members and environmental organizations asserted that the rules did not go far enough in protecting the region from potential environmental damage and addressing the potential contributions of Arctic oil and gas activities to climate change. In a 2017 executive order, President Trump directed the Secretary of the Interior to review the Arctic regulations, and in 2018 the Department of the Interior announced work on rule revisions. Legislation was introduced in the 115 th Congress both to repeal the Obama Administration's version of the Arctic rule and, conversely, to codify it in law. Concerns about the impacts of oil and gas activities have led in the past to bans by both Congress and the President on leasing in certain Arctic Ocean areas deemed especially sensitive. For example, congressional and presidential moratoria since the 1980s effectively banned federally regulated planning and permitting in the Bristol Bay area of the North Aleutian Basin. Congress allowed most statutory bans in the region to expire in 2004. President Obama reinstated the moratorium in the North Aleutian Basin, indefinitely withdrawing acreage located in Bristol Bay from eligibility for oil and gas leasing. Also, in December 2016, President Obama indefinitely withdrew from leasing disposition other large portions of the U.S. Arctic, including the entire Chukchi Sea planning area and almost all of the Beaufort Sea planning area. President Obama separately withdrew from leasing consideration planning areas in the North Bering Sea. In April 2017, President Trump issued Executive Order 13795, which modified President Obama's withdrawals so as to open all of these areas for leasing consideration except for the North Aleutian Basin. Increased interest in developing offshore resources in the Arctic has sparked efforts by nations bordering the Arctic Ocean to map the extent of their continental margins beyond the 200-mile EEZ limit. As discussed earlier (see \" Extended Continental Shelf and United States as a Nonparty to UNCLOS \"), under Article 76 of UNCLOS, nations can make a submission to the Commission on the Limits of the Continental Shelf (hereinafter referred to as the Commission) concerning the extent of their continental shelves. Under Article 76, the extent of the continental margin beyond the 200-mile limit depends on the position of the foot of the continental slope, the thickness of sediments, and the depth of water. Also, the continental margin could include geologic features that extend from the continent out to sea, which may include undersea ridges continuing for hundreds of miles offshore. Arctic border countries have conducted complex investigations needed to support submissions to the Commission for an extended continental shelf in the Arctic. Submissions have been made by several countries, including the Russian Federation, which made its initial UNCLOS submission to a portion of the Arctic continental shelf in 2001. Russia's 2001 submission included the Lomonosov Ridge, an undersea feature spanning the Arctic from Russia to Canada, as an extension of its continental margin. The submission demonstrated Russia's bid to extend activities in Arctic regions. The Russian Federation presented a revised submission in 2015 to the Commission that included not only the Lomonosov Ridge but also the Mendeleev Rise—another subsea feature claimed by Russia to be a natural part of their continental margin—as components of the extended Russian continental shelf. The Commission has not rendered a decision on the revised Russian Federation submission as of early 2018. The United States has started to gather and analyze data for a potential submission through an initiative called the Extended Continental Shelf (ECS) Project. The U.S. ECS project has also assisted more than 30 countries with their efforts to delineate their extended continental shelves worldwide. Canada and the United States share overlapping regions of the seabed as part of the extended continental margin of both nations. Much of the data to delineate the ECS for both countries was collected in a two-ship operation involving the U.S. Coast Guard Cutter Healy and the Canadian Coast Guard ship Louis S. Saint Laurent . The two-ship operation collected more than 13,000 linear kilometers (about 8,078 miles) of seismic data over four field seasons in the Arctic beginning in 2007. The data collected will help each country delineate the extent of their own ECS, which should then enable the countries to determine the amount of overlap in the seabed and ultimately establish a maritime boundary in the Arctic. The United States also has potentially overlapping ECS areas with Russia. Russia (then the Soviet Union) and the United States agreed to a maritime boundary in 1990, and so far Russia has not asserted its ECS in any areas that might be considered part of the U.S. ECS. A warming Arctic means new opportunities and challenges for mineral exploration and development onshore. Receding glaciers expose previously ice-covered land that could host economic mineral deposits that were previously undetectable and unmineable below the ice. Longer summers would also extend exploration seasons for areas that are not currently ice-covered but are only accessible for ground surveys during the warmer months. In some parts of the Arctic, such as Baffin Island, Canada, less sea ice allows ships to transport heavy equipment to remote locations, and to convey ore from mines to the market further south. Some railway and mining operators are considering developing railroads and other infrastructure to transport ore year-round. As with onshore oil and gas development, however, mining infrastructure that depends on footings sunk into permafrost could become unstable if the permafrost melts in response to warmer temperatures. Also, as with oil and gas development, mineral deposits that may be technically recoverable with current technology may not be economically profitable. Some industry commentators suggest that mining might offer better long-term economic development opportunities compared to oil and gas development because of a larger permanent workforce and project lifetimes of several decades. Similar to oil and gas, however, industry observers note that uncertainties and knowledge gaps exist in the understanding of environmental change in the Arctic, and how to deal with the risks associated with significant Arctic industrial activity. One important part of the current infrastructure in the Arctic that supports oil, gas, and mineral development is the construction and use of ice roads—built and used during the winter, but not passable during the warmer months. Warmer temperatures are shortening the ice road transport seasons and creating transportation challenges. For example, the opening date for tundra roads in northern Alaska usually occurred in early November prior to 1991 and has shifted to January in recent years. Climate change impacts in the Arctic, particularly the decline of sea ice and retreating glaciers, have stimulated human activities in the region, many of which have the potential to create oil pollution. A primary concern is the threat of a large oil spill in the area. Although a major oil spill has not occurred in the Arctic region, recent economic activity, such as oil and gas exploration and tourism (cruise ships), increases the risk of oil pollution (and other kinds of pollution) in the Arctic. Significant spills in high northern latitudes (e.g., the 1989 Exxon Valdez spill in Alaska and spills in the North Sea) suggest that the \"potential impacts of an Arctic spill are likely to be severe for Arctic species and ecosystems.\" A primary factor determining the risk of oil pollution in the Arctic is the level and type of human activity being conducted in the region. Although climate changes in the Arctic are expected to increase access to natural resources and shipping lanes, the region will continue to present logistical challenges that may hinder human activity in the region. For example (as discussed in another section of this report), the unpredictable ice conditions may discourage trans-Arctic shipping. If trans-Arctic shipping were to occur on a frequent basis, it would represent a considerable portion of the overall risk of oil pollution in the region. In recent decades, many of the world's largest oil spills have been from oil tankers, which can carry millions of gallons of oil. Although the level of trans-Arctic shipping is uncertain, many expect oil exploration and extraction activities to intensify in the region. Oil well blowouts from offshore oil extraction operations have been a source of major oil spills, eclipsing the largest tanker spills. The largest unintentional oil spill in recent history was from the 2010 Deepwater Horizon incident in the Gulf of Mexico. During that incident, the uncontrolled well released (over an 87-day period) approximately 200 million gallons of crude oil. The second-largest unintentional oil spill in recent history—the IXTOC I , estimated at 140 million gallons—was due to an oil well blowout in Mexican Gulf Coast waters in 1979. Until the 2010 Deepwater Horizon incident, the spill record for offshore platforms in U.S. federal waters had shown improvement from prior years. A 2003 National Research Council (NRC) study of oil and gas activities on Alaska's North Slope stated \"blowouts that result in large spills are unlikely.\" Similar conclusions were made in federal agency documents regarding deepwater drilling in the Gulf of Mexico before the 2010 Deepwater Horizon event. Some would likely contend that the underlying analyses behind these conclusions should be adjusted to account for the 2010 Gulf oil spill. However, others may argue that the proposed activities in U.S. Arctic waters present less risk of an oil well blowout than was encountered by the Deepwater Horizon drill rig, because the proposed U.S. Arctic operations would be in shallower waters (150 feet) than the deepwater well (approximately 5,000 feet) that was involved in the 2010 Gulf oil spill. In addition, Shell Oil has stated that the pressures in the Chukchi Sea (the location of Shell's recent interest) would be two to three times less than they were in well involved in the 2010 Gulf oil spill. Regardless of these differences, even under the most stringent control systems, some oil spills and other accidents are likely to occur from equipment failure or human error. No oil spill is entirely benign. Even a relatively minor spill, depending on the timing and location, can cause significant harm to individual organisms and entire populations. Regarding aquatic spills, marine mammals, birds, bottom-dwelling and intertidal species, and organisms in early developmental stages—eggs or larvae—are especially vulnerable. However, the effects of oil spills can vary greatly. Oil spills can cause impacts over a range of time scales, from only a few days to several years, or even decades in some cases. Conditions in the Arctic may have implications for toxicological effects that are not yet understood. For example, oil spills on permafrost may persist in an ecosystem for relatively long periods of time, potentially harming plant life through their root systems. Moreover, little is known about the effects of oil spills on species that are unique to the Arctic, particularly, species' abilities to thrive in a cold environment and the effect temperature has on toxicity. The effects of oil spills in high-latitude, cold-ocean environments may last longer and cause greater damage than expected. Some recent studies have found that oil spills in lower latitudes have persisted for longer than initially expected, thus raising the concern that the persistence of oil in the Arctic may be understated. In terms of wildlife, population recovery may take longer in the Arctic because many of the species have longer life spans and reproduce at a slower rate. Climate changes in the Arctic are expected to increase human activities in the region, many of which impose a risk of oil pollution, particularly from oil spills. Conditions in the Arctic region impose unique challenges for personnel charged with (1) oil spill response, the process of getting people and equipment to the incident, and (2) cleanup duties, either recovering the spilled oil or mitigating the contamination so that it poses less harm to the ecosystem. These challenges may play a role in the policy development for economic activities in the Arctic. Response time is a critical factor for oil spill recovery. With each hour, spilled oil becomes more difficult to track, contain, and recover, particularly in icy conditions, where oil can migrate under or mix with surrounding ice. Most response techniques call for quick action, which may pose logistical challenges in areas without prior staging equipment or trained response professionals. Many stakeholders are concerned about a \"response gap\" for oil spills in the Arctic region. A response gap is a period of time in which oil spill response activities would be unsafe or infeasible. The response gap for the northern Arctic latitudes is likely to be extremely high compared to other regions. According to a 2014 National Research Council (NRC) report, \"the lack of infrastructure in the Arctic would be a significant liability in the event of a large oil.\" The Coast Guard has no designated air stations north of Kodiak, AK, which is almost 1,000 miles from the northernmost point of land along the Alaskan coast in Point Barrow, AK. Although some of the communities have airstrips capable of landing cargo planes, no roads connect these communities. Vessel infrastructure is also limited. The nearest major port is in the Aleutian Islands, approximately 1,300 miles from Point Barrow. Two of the major nonmechanical recovery methods—in situ burning and dispersant application—may be limited (or \"precluded\") by the Arctic conditions and lack of logistical support: aircraft, vessels, and other infrastructure. A 2010 Government Accountability Office (GAO) report identified further logistical obstacles that would hinder an oil spill response in the region, including \"inadequate\" ocean and weather information for the Arctic and technological problems with communications. A 2014 GAO report highlighted steps taken by some groups (e.g., the National Oceanic and Atmospheric Administration) to improve some of these logistical elements. The history of oil spill response in the Aleutian Islands highlights the challenges and concerns for potential spills in the Arctic region: The past 20 years of data on response to spills in the Aleutians has also shown that almost no oil has been recovered during events where attempts have been made by the responsible parties or government agencies, and that in many cases, weather and other conditions have prevented any response at all. The behavior of oil spills in cold and icy waters is not as well understood as oil spills in more temperate climates. The 2014 NRC report highlights some recent advancements in understanding oil spill behavior in arctic climates. At the same time, the report recommends further study in multiple areas. The 2014 NRC report states that in colder water temperatures or sea ice, \"the processes that control oil weathering—such as spreading, evaporation, photo-oxidation, emulsification, and natural dispersion—are slowed down or eliminated for extended periods of time.\" In some respects, the slower weathering processes may provide more time for response strategies, such as in situ burning or skimming. On the other hand, the longer the oil remains in an ecosystem, the more opportunity there is for exposure. In addition, the 2014 report states the following: Arctic conditions impose many challenges for oil spill response—low temperatures and extended periods of darkness in the winter, oil that is encapsulated under ice or trapped in ridges and leads, oil spreading due to sea ice drift and surface currents, reduced effectiveness of conventional containment and recovery systems in measurable ice concentrations, and issues of life and safety of responders. Considering both the recent increase in human activity in the region (and expectation of further interest) and the response and recovery challenges that an oil spill would impose in Arctic waters, many would assert that the region warrants particular attention in terms of governance. However, the existing framework for international governance of maritime operations in the Arctic region lacks legally binding requirements. While the Safety of Life at Sea Convention (SOLAS) and other International Maritime Organization (IMO) conventions include provisions regarding ships in icy waters, the provisions are not specific to the polar regions. Although the IMO has \"Guidelines for Ships Operating in Arctic,\" a 2009 NOAA report described the nonbinding IMO provisions as \"inconsistent with the hazards of Arctic navigation and the potential for environmental damage from such an incident.\" In 2013, the member states of the Arctic Council signed an Agreement on Cooperation on Marine Oil Pollution Preparedness and Response in the Arctic. The agreement's objective is to \"strengthen cooperation, coordination, and mutual assistance ... on oil pollution preparedness and response in the Arctic.\" In addition, the United States has separate bilateral agreements with Canada and Russia that address oil spill response operations. The agreement with Canada was established in 1974 for the Great Lakes and has been amended several times to add more geographic areas, including Arctic waters. According to the 2014 NRC report: \"Formal contingency planning and exercises with Canada have enabled both the United States and Canada to refine procedures and legal requirements for cross-border movement of technical experts and equipment in the event of an emergency.\" The U.S.-Russian agreement was made in 1989 and applies to oil spills in Arctic waters. However, the 2014 NRC report asserts that the agreement has not been tested to the same extent as the U.S.-Canada agreement. The effects of climate change such as increasing sea surface temperatures and decreasing permanent sea ice are altering the composition of marine ecosystems in the Arctic. These changes are likely to affect the ranges and productivity of living marine resources including species that support marine fisheries. Furthermore, as a greater portion of the waters in the central Arctic Ocean become open for longer periods, the region's resources will become more accessible to commercial fishing. Large commercial fisheries already exist in the Arctic, including in the Barents and Norwegian Seas north of Europe, the Central North Atlantic off Greenland and Iceland, the Bering Sea off Russia and the United States (Alaska), and the Newfoundland and Labrador Seas off northeastern Canada. As environmental changes occur, fisheries managers will be challenged to adjust management measures for existing fisheries. Uncertainties related to these changes and potential new fisheries in the central Arctic Ocean have prompted many fishery managers to support precautionary approaches to fisheries management in the region. On June 1, 2008, Congress passed a joint resolution ( P.L. 110-243 ) that directed \"the United States to initiate international discussions and take necessary steps with other nations to negotiate an agreement for managing migratory and transboundary fish stocks in the Arctic Ocean.\" The joint resolution also supported establishment of a new international fisheries management organization or organizations for the region. International cooperation is necessary to manage Arctic resources because fish stocks are shared to some degree among the five adjacent jurisdictional zones of the Arctic rim nations. Further, a large portion of the central Arctic Ocean lies outside the Exclusive Economic Zones (EEZ) of these nations. Ideally, regional management would recognize the need to coordinate management for those fish populations that move among these national jurisdictional zones and high seas. For waters under U.S. jurisdiction, in 2009, the National Marine Fisheries Service in the Department of Commerce's National Oceanic and Atmospheric Administration implemented the North Pacific Council's Fishery Management Plan for Fish Resources of the Arctic Management Area. The management area includes marine waters in the U.S. EEZ of the Chukchi and Beaufort Seas. The plan initially prohibits commercial fishing in the Arctic Management Area and moves the northern boundary of the Bering Sea/Aleutian Islands king and tanner crab fishery management plan out of the Arctic Management Area south to the Bering Strait. The plan takes a precautionary approach by requiring the collection of more information before developing commercial fisheries in the region. On July 16, 2015, the five nations that surround the Arctic Ocean signed a declaration to prevent unregulated commercial fishing in the high seas portion of the central Arctic Ocean. The five nations agree that a precautionary approach to fishing is needed because there is limited scientific knowledge of marine resources in the region. Currently, there is no commercial fishing in central Arctic Ocean and it is questionable whether existing fisheries resources could sustain a fishery. The declaration includes the following interim measures: to authorize our vessels to conduct commercial fishing in the high seas area only pursuant to one or more marine regional or subregional fisheries management organizations or arrangements that are or may be established to manage such fishing in accordance with recognized international standards; to establish a joint program of scientific research with the aim of improving understanding of the ecosystems of this area and promote cooperation with relevant scientific bodies; to promote compliance with these interim measures and with relevant international law, including by coordinating our monitoring, control, and surveillance activities in this area; and to ensure that any noncommercial fishing in this area does not undermine the purpose of the interim measures, is based on scientific advice and is monitored, and that data obtained through any such fishing is shared. The declaration also recognizes the interests of indigenous peoples and the need to encourage other countries to take actions that are consistent with the interim measures. It appears that future management arrangements may include China, the EU, Iceland, Japan, and South Korea. Iceland has stated it regrets that although it has repeatedly asked to participate in the collaboration, the five states decided to keep Iceland outside consultations on the declaration. It remains an open question as to whether an Arctic Ocean regional fishery management organization will be established, which countries would be included in such an arrangement, and if commercial fisheries will be developed in the central Arctic Ocean. Concern over development of the Arctic relates to how such development might affect threatened and endangered species. Under the Endangered Species Act (ESA, 16 U.S.C. §§1531-1543), the polar bear was listed as threatened on May 15, 2008. The failure by the Fish and Wildlife Service (FWS) to make a 90-day finding on a 2008 petition to list Pacific walrus led to submission of 60-days' notice of a future citizen suit. However, eventually walruses were listed as candidate species under ESA; this status means that federal agencies carrying out actions that may affect the species must confer with FWS though they are not necessarily obliged to modify their actions. Both polar bears and walruses are heavily dependent during their life cycles on thick sea ice, making them especially susceptible to the shrinking Arctic ice cap. On December 30, 2008, the National Marine Fisheries Service (NMFS) determined that a listing of ribbon seal as threatened or endangered was not warranted. On October 22, 2010, NMFS listed the southern distinct population segment (DPS) of spotted seals as threatened. Listing of two other DPS (Okhotsk and Bering Sea) had earlier been determined to not be warranted. On December 10, 2010, NMFS proposed that (1) four subspecies of ringed seal be listed as threatened, and (2) that two DPS of one subspecies of bearded seal be listed as threatened. In either terrestrial or marine environments, the extreme pace of change makes a biological response many times more difficult. For species with adaptations for a specific optimum temperature for egg development, or production of young timed to match the availability of a favored prey species, or seed dispersal in predictable fire regimes, etc., evolutionary responses may well not keep pace with the rate of change. While species of plants and animals farther south might migrate, drift, or be transplanted from warming habitats to more northerly sites that may continue to be suitable, once a terrestrial species reaches the Arctic Ocean, it is very literally at the end of the line. No more northern or colder habitat is available. The Marine Mammal Protection Act (MMPA; 16 U.S.C. §§1361 et seq.) protects whales, seals, walruses, and polar bears. The MMPA established a moratorium on the \"taking\" of marine mammals in U.S. waters and by U.S. nationals on the high seas, including the Arctic. The MMPA protects marine mammals from \"clubbing, mutilation, poisoning, capture in nets, and other human actions that lead to extinction.\" Under the MMPA, the Secretary of Commerce, acting through National Marine Fisheries Service, is responsible for the conservation and management of whales and seals. The Secretary of the Interior, acting through the Fish and Wildlife Service, is responsible for walruses and polar bears. Despite the MMPA's general moratorium on taking, the MMPA allows U.S. citizens to apply for and obtain authorization for taking small numbers of mammals incidental to activities other than commercial fishing (e.g., offshore oil and gas exploration and development) if the taking would have only a negligible impact on any marine mammal species or stock, provided that monitoring requirements and other conditions are met. People have been living in the Arctic for thousands of years, and indigenous peoples developed highly specialized cultures and economies based on the physical and biological conditions of the long-isolated region. However, with trade, the influx of additional populations especially since the 19 th century, and ongoing physical changes in the Arctic, indigenous populations have already experienced substantial change in their lifestyles and economies. Over the past two decades, greater political organization across indigenous populations has increased their demands for international recognition and broader rights, as well as attention to the economic, health, and safety implications of climate change in the North. Seven of the eight Arctic nations have indigenous peoples, whose predecessors were present in parts of the Arctic over 10,000 years ago, well before the arrival of peoples with European backgrounds. Current Arctic indigenous peoples comprise dozens of diverse cultures and speak dozens of languages from eight or more non-Indo-European language families. Before the arrival of Europeans, Arctic indigenous peoples lived in economies that were chiefly dependent, in varying proportions, on hunting land and marine mammals, catching salt- and fresh-water fish, herding reindeer (in Eurasia), and gathering, for their food, clothing, and other products. Indigenous peoples' interaction with and knowledge of Arctic wildlife and environments has developed over millennia and is the foundation of their cultures. The length of time that Arctic indigenous peoples were in contact with Europeans varied across the Arctic. As recorded by Europeans, contact began as early as the 9 th century CE, if not before, in Fennoscandia and northwestern Russia, chiefly for reasons of commerce (especially furs); it progressed mostly west-to-east across northern Asia, reaching northeastern Arctic Asia by the 17 th century. North American Arctic indigenous peoples' contact with Europeans started in Labrador in the 16 th century and in Alaska in the 18 th century, and was not completed until the early 20 th century. Greenland's indigenous peoples first saw European-origin peoples in the late 10 th century, but those Europeans died out during the 15 th or 16 th century and Europeans did not return permanently until the 18 th century. Contact led to significant changes in Arctic indigenous economies, political structures, foods, cultures, and populations, starting especially in the 20 th century. For example, life expectancy among Alaska Natives has increased from 47 years in 1950 to over 69 years in 2000 (though it still lags behind that of U.S. residents overall, at 77 years). Also, at present, most Arctic indigenous peoples have become minorities in their countries' Arctic areas, except in Greenland and Canada. (One source estimates that, around 2003, about 10% of an estimated 3.7 million people in the Arctic were indigenous.) While many Arctic indigenous communities remain heavily dependent on hunting, fishing, and herding and are more likely to depend on traditional foods than nonindigenous Arctic inhabitants, there is much variation. Most Arctic indigenous people may no longer consume traditional foods as their chief sources of energy and nutrition. Major economic change is also relatively recent but ongoing. Many Arctic indigenous communities have developed a mixture of traditional economic activities and wage employment. The economics of subsistence and globalization will be key factors in the effects of climate change on Arctic indigenous peoples, and on their reactions to Arctic climate change. Arctic indigenous peoples' current political structures vary, as do their relationships with their national governments. Some indigenous groups govern their own unique land areas within the national structure, as in the United States and Canada; others have special representative bodies, such as the Saami parliaments in Norway, Finland, and Sweden; a few areas have general governments with indigenous majorities, such as Greenland (a member country of Denmark), Nunavut territory in Canada, and the North Slope and Northwest Arctic boroughs in Alaska. Control of land, through claims and ownership, also varies among Arctic indigenous peoples, as do rights to fishing, hunting, and resources. Arctic indigenous peoples' political relationships to their national and local governments, and their ownership or claims regarding land, are also significant factors in the responses to Arctic climate change by the indigenous peoples and by Arctic nations' governments. Arctic climate change is expected to affect the economies, population, subsistence, health, infrastructure, societies, and cultures of Arctic indigenous peoples. Changes in sea ice and sea level, permafrost, tundra, weather, and vegetation distributions, as well as increased commercial shipping, mineral extraction, and tourism, will affect the distribution of land and sea mammals, of freshwater and marine fish, and of forage for reindeer. These will in turn affect traditional subsistence activities and related indigenous lifestyles. Arctic indigenous peoples' harvesting of animals is likely to become riskier and less predictable, which may increase food insecurity, change diets, and increase dependency on outside, nontraditional foods. Food cellars in many locations have thawed during summers, threatening food safety. Related health risks of diabetes, obesity, and mental illness have been associated with these changes. Sea, shoreline ice, and permafrost changes have damaged infrastructure and increased coastal and inland erosion, especially in Alaska, where GAO found in 2003 that \"coastal villages are becoming more susceptible to flooding and erosion caused in part by rising temperatures.\" In response, Congress funded the U.S. Army Corps of Engineers to conduct a Baseline Erosion Assessment that identified and prioritized among the 178 communities identified at risk from erosion. (Risks from flooding were not examined.) GAO concluded in 2009 that many Native villages must relocate, but even those facing imminent threats have been impeded by various barriers, including difficulties identifying appropriate new sites, piecemeal programs for state and federal assistance, and obstacles to eligibility for certain federal programs. The Alaska Federation of Natives placed among its 2010 federal priorities a request to Congress to mitigate flooding and erosion in Alaska Native villages and to fund relocation of villages where necessary. However, \"the cost is extraordinary,\" acknowledges Senator Lisa Murkowski. Oil, gas, and mineral exploration and development are expected to increase, as are other economic activities, such as forestry and tourism, and these are expected to increase economic opportunities for all Arctic residents, including indigenous peoples. Pressures to increase participation in the wage economy, however, may speed up changes in indigenous cultures. Increased economic opportunities may also lead to a rise in the nonindigenous population, which may further change the circumstances of indigenous cultures. Some representatives of Arctic indigenous people have related a \"conflicting desire between combating climate change and embracing the potential for economic growth through foreign investment.\" Although important advances in public health have occurred in indigenous communities over past decades, some health problems may increase with continued Arctic climate change. Economic development may exacerbate Arctic pollution problems, including higher exposure to mercury, air pollution, and food contamination. The influx and redistribution of contaminants in the air, oceans, and land may change in ways that are now poorly understood. Warmer temperatures and longer warm seasons may increase insect- and wildlife-borne diseases. Climate change may lead to damage to water and sanitation systems, reducing protection against waterborne diseases. Changes in Arctic indigenous cultures may increase mental stress and behavioral problems. The response to climate change by Arctic indigenous peoples has included international activities by Arctic indigenous organizations and advocacy before their national governments. As one report noted, \"the rise of solidarity among indigenous peoples organizations in the region is surely a development to be reckoned with by all those interested in policy issues in the Arctic.\" Six national or international indigenous organizations are permanent participants of the Arctic Council, the regional intergovernmental forum. Due in part to advocacy by Arctic indigenous people, the United Nations General Assembly adopted in 2007 the Declaration on the Rights of Indigenous Peoples. In April 2009, the Inuit Circumpolar Council (an organization of Inuit in the Arctic regions of Alaska, Canada, Greenland, and Russia) hosted in Alaska the worldwide \"Indigenous Peoples Global Summit on Climate Change.\" The conference report, forwarded to the Copenhagen Conference of the Parties of the U.N. Framework Convention on Climate Change (December 2009), noted \"accelerating\" climate change caused by \"unsustainable development\" and, among several recommendations, called for a greater indigenous role in national and international decisions on climate change, including a greater role for indigenous knowledge in climate change research, monitoring, and mitigation. Within the U.S. government, the Coast Guard is the U.S. agency responsible for polar icebreaking. U.S. polar ice operations conducted in large part by the Coast Guard's polar icebreakers support nine of the Coast Guard's 11 statutory missions. The roles of U.S. polar icebreakers can be summarized as follows: conducting and supporting scientific research in the Arctic and Antarctic; defending U.S. sovereignty in the Arctic by helping to maintain a U.S. presence in U.S. territorial waters in the region; defending other U.S. interests in polar regions, including economic interests in waters that are within the U.S. exclusive economic zone (EEZ) north of Alaska; monitoring sea traffic in the Arctic, including ships bound for the United States; and conducting other typical Coast Guard missions (such as search and rescue, law enforcement, and protection of marine resources) in Arctic waters, including U.S. territorial waters north of Alaska. The Coast Guard's large icebreakers are called polar icebreakers rather than Arctic icebreakers because they perform missions in both the Arctic and Antarctic. Operations to support National Science Foundation (NSF) research activities in both polar regions account for a significant portion of U.S. polar icebreaker operations. Supporting NSF research in the Antarctic focuses on performing an annual mission, called Operation Deep Freeze (ODF), to break through Antarctic sea ice so as to reach and resupply McMurdo Station, the large U.S. Antarctic research station located on the shore of McMurdo Sound, near the Ross Ice Shelf. The Coast Guard states that Polar Star , the Coast Guard's only currently operational heavy polar icebreaker, \"spends the [northern hemisphere] winter [i.e., the southern hemisphere summer] breaking ice near Antarctica in order to refuel and resupply McMurdo Station. When the mission is complete, the Polar Star returns to dry dock [in Seattle] in order to complete critical maintenance and prepare it for the next ODF mission. Once out of dry dock, it's back to Antarctica, and the cycle repeats itself.\" In terms of the maximum thickness of the ice to be broken, the annual McMurdo resupply mission generally poses the greatest icebreaking challenge for U.S. polar icebreakers, though Arctic ice can frequently pose its own significant icebreaking challenges for U.S. polar icebreakers. The Coast Guard's medium polar icebreaker, Healy , spends most of its operational time in the Arctic supporting NSF research activities and performing other operations. Although polar ice is diminishing due to climate change, observers generally expect that this development will not eliminate the need for U.S. polar icebreakers, and in some respects might increase mission demands for them. Even with the diminishment of polar ice, there are still significant ice-covered areas in the polar regions, and diminishment of polar ice could lead in coming years to increased commercial ship, cruise ship, and naval surface ship operations, as well as increased exploration for oil and other resources, in the Arctic—activities that could require increased levels of support from polar icebreakers, particularly since waters described as \"ice free\" can actually still have some amount of ice. Changing ice conditions in Antarctic waters have made the McMurdo resupply mission more challenging since 2000. The operational U.S. polar icebreaking fleet currently consists of one heavy polar icebreaker, Polar Star , and one medium polar icebreaker, Healy . In addition to Polar Star , the Coast Guard has a second heavy polar icebreaker, Polar Sea . Polar Sea , however, suffered an engine casualty in June 2010 and has been nonoperational since then. Polar Star and Polar Sea entered service in 1976 and 1978, respectively, and are now well beyond their originally intended 30-year service lives. The Coast Guard has used Polar Sea as a source of spare parts for keeping Polar Star operational. A Department of Homeland Security (DHS) Mission Need Statement (MNS) approved in June 2013 states that \"current requirements and future projections ... indicate the Coast Guard will need to expand its icebreaking capacity, potentially requiring a fleet of up to six icebreakers (3 heavy and 3 medium) to adequately meet mission demands in the high latitudes....\" The Coast Guard initiated in its FY2013 budget a program to acquire three new heavy polar icebreakers, to be followed by the acquisition of up to three new medium polar icebreakers. The program was originally referred to as the polar icebreaker program but is now referred to as the Polar Security Cutter (PSC) program. The Coast Guard wants to begin construction of the first new heavy polar icebreaker in FY2019 and have it enter service in 2023. The acquisition cost of a new heavy polar icebreaker had earlier been estimated informally at roughly $1 billion, but the Coast Guard and Navy now believe that three heavy polar icebreakers could be acquired for a total cost of about $2.1 billion, or an average of about $700 million per ship. The first ship will cost more than the other two because it will incorporate design costs for the class and be at the start of the production learning curve for the class. The PSC program received about $359.6 million in procurement funding through FY2018, including $300 million provided through the Navy's shipbuilding account (which is part of the Department of Defense's budget) and $59.6 million provided through the Coast Guard's procurement account (which is part of the Department of Homeland Security's [DHS's] budget). The FY2019 DHS appropriations act (Division A of H.J.Res 31 / P.L. 116-6 of February 15, 2019) provides an additional $675 million for the PSC program through the Coast Guard's procurement account, including $20 million for the procurement of long leadtime materials (LLTM) for the second ship in the program. The PSC program has thus received a total of $1,034.6 million (i.e., about $1.0 billion) in procurement funding through FY2019. Excluding the $20 million provided for the procurement of LLTM for the second ship in the program, the remaining total of $1,014.6 million appears to be enough (or perhaps more than enough) to fully fund the design and construction of the first ship in the program while also funding FY2019 and prior-year program administrative expenses. The Coast Guard's FY2019 five-year (FY2019-FY2023) Capital Investment Plan (CIP) projected that the Coast Guard's FY2020 budget would request an additional $125 million in FY2020 procurement funding for the PSC program, most of which would presumably be used as a second increment of procurement funding for the second ship in the class. Issues for Congress for the PSC program include, inter alia, whether to approve, reject, or modify the Coast Guard's annual procurement funding requests for the program; whether to use a contract with options or a block buy contract to procure the ships; whether to continue providing at least some of the procurement funding for the PSC program through the Navy's shipbuilding account; technical, schedule, and cost risk in the PSC program; and whether to procure heavy and medium polar icebreakers to a common basic design. Increasing sea and air traffic through Arctic waters has increased concerns regarding Arctic-area search and rescue (SAR) capabilities. Table 1 presents figures on ship casualties in Arctic Circle waters from 2005 to 2014, as shown in the 2015 edition of an annual report on shipping and safety by the insurance company Allianz Global Corporate & Specialty. Given the location of current U.S. Coast Guard operating bases, it could take Coast Guard aircraft several hours, and Coast Guard cutters days or even weeks, to reach a ship in distress or a downed aircraft in Arctic waters. In addition, the harsh climate complicates SAR operations in the region. Particular concern has been expressed about cruise ships carrying large numbers of civilian passengers that may experience problems and need assistance. There have already been incidents of this kind with cruise ships in recent years in waters off Antarctica, and a Russian-flagged passenger ship with 162 people on board ran aground on Canada's Northwest Passage on August 24, 2018. Coast Guard officials have noted the long times that would be needed to respond to potential emergency situations in certain parts the Arctic. The Coast Guard is participating in exercises focused on improving Arctic SAR capabilities. Increasing U.S. Coast Guard SAR capabilities for the Arctic could require one or more of the following: enhancing or creating new Coast Guard operating bases in the region; procuring additional Arctic-capable aircraft, cutters, and rescue boats for the Coast Guard; and adding systems to improve Arctic maritime communications, navigation, and domain awareness. It may also entail enhanced forms of cooperation with navies and coast guards of other Arctic countries. A 2017 survey of Arctic SAR capabilities conducted as part of the Finnish Border Guard's Arctic Maritime Safety Cooperation project in cooperation with the Arctic Coast Guard Forum stated the following: The key challenges for Arctic search and rescue identified in this survey include long distances, severe weather, ice and cold conditions, a poor communications network, lack of infrastructure and lack of resource presence in the region. In addition, the capacity to host patients, achieving situational awareness, and unsuitable evacuation and survival equipment pose major challenges for maritime safety and SAR in the Arctic. The Arctic SAR authorities have recognized a need to further develop advanced information sharing between coast guards, emergency authorities, and other stakeholders involved in SAR operations. In addition, joint training and systematic sharing of lessons learned, as well as technological innovation in communications networks and connections, navigation, survival and rescue equipment, and healthcare services are being called for in order to improve SAR capabilities in the Arctic. The survey recommends enhancing practical cooperation between various stakeholders involved in Arctic SAR such as coast guards, rescue centers, other authorities, industry groups, private operators, academia and volunteer organizations. It encourages further information sharing on infrastructure projects and resource assets, Automatic Identification System and weather data, emergency plans and standard operating procedures, as well as exercises and lessons learned via a common database. Furthermore, developing joint courses specifically intended for Arctic SAR and establishing a working group that examines new innovations and technological developments, are recommended as potential initiatives for improving practical international cooperation. On May 12, 2011, representatives from the member states of the Arctic Council, meeting in Nuuk, Greenland, signed an agreement on cooperation on aeronautical and maritime SAR in the Arctic. Key features of the agreement include the following: Article 3 and the associated Annex to the agreement essentially divide the Arctic into SAR areas within which each party has primary responsibility for conducting SAR operations, stating that \"the delimitation of search and rescue regions is not related to and shall not prejudice the delimitation of any boundary between States or their sovereignty, sovereign rights or jurisdiction,\" and that \"each Party shall promote the establishment, operation and maintenance of an adequate and effective search and rescue capability within its area.\" Article 4 and the associated Appendix I to the agreement identify the competent authority for each party. For the United States, the competent authority is the Coast Guard. Article 5 and the associated Appendix II to the agreement identify the agencies responsible for aeronautical and maritime SAR for each party. For the United States, those agencies are the Coast Guard and the Department of Defense. Article 6 and the associated Appendix III to the agreement identify the aeronautical and/or maritime rescue coordination centers (RCCs) for each party. For the United States, the RCCs are Joint Rescue Coordination Center Juneau (JRCC Juneau) and Aviation Rescue Coordination Center Elmendorf (ARCC Elmendorf). Article 12 states that \"unless otherwise agreed, each Party shall bear its own costs deriving from its implementation of this Agreement,\" and that \"implementation of this Agreement shall be subject to the availability of relevant resources.\" Figure 4 shows an illustrative map of the national areas of SAR responsibility based on the geographic coordinates listed in the Annex to the agreement. An October 12, 2015, press report states the following: More people are wishing to explore icy environments, says Peter Hellberg, manager responsible for the SAR process at the Swedish Maritime Administration. Hellberg is part of an IMO/International Civil Aviation Organization (ICAO) working group that is re-evaluating search and rescue (SAR) operations in Polar waters as a result of this push. The working group includes both a maritime and aeronautical perspective, and it has identified a need for more detailed guidance for SAR organizations which will be achieved through an update of the International Aeronautical and Maritime Search and Rescue Manual (IAMSAR) planned for 2019. While the IAMSAR manual is not mandatory, it is followed by most SAR organizations around the world. It provides the framework for setting up a multi-national SAR, giving different parties guidance on the necessary arrangements for Arctic areas. The guidance will be expanded on based on the Polar Code and other recent IMO regulatory updates, and from an aeronautical perspective, from lessons learned after the disappearance of Malaysian Airlines' MH370. The Senate Armed Services Committee, in its report ( S.Rept. 115-262 of June 5, 2018) on S. 2987 , states the following: Arctic search and rescue The committee is aware that growing international interest and changing environmental conditions in the Arctic have led to increased commercial and governmental activity in the High North. With this steady surge, the committee remains concerned by the limited capabilities of the United States to conduct search-and-rescue operations throughout the Arctic region. The committee notes that the Department of Defense's Report to Congress on Strategy to Protect United States National Security Interests in the Arctic Region, a report required in section 1068 of the National Defense Authorization Act for Fiscal Year 2016 (Public-Law 114–92), identified the need for additional personnel recovery capability in this region. Specifically, the report calls for \"forward-deployed/based assets in a sustainable location and/or rapidly deployable air drop response/sustainment packages suitable to remote land, cold water, or ice pack operating environments.\" (Pages 139-140) The committee understands that the 176th Wing of the Alaska National Guard is the closest dedicated response force with the only refueling capability to respond to a search-and-rescue incident in the Arctic. The unit currently possesses two air-dropped, palletized Arctic Sustainment Packages (ASPs) to enable the survival of 50 individuals for 3 or more days in extreme Arctic conditions. The ASP is rapidly deployable over varied terrain, and allows personnel to survive and operate in the High North. Each ASP requires considerable resources for sustainability, demanding 500 man-hours to re-pack ASPs after testing and to continually keep contents viable. In light of the increased activity in this region, the committee believes that this capability could benefit from additional sustainment funding to maintain the two existing ASPs, and encourages the Secretary of Defense to prioritize its resourcing. (Pages 139-140) A principal factor affecting the geopolitical environment for the Arctic is the shift that has occurred in recent years from the post-Cold War era that began in the late 1980s and early 1990s, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different international security environment that features, among other things, renewed great power competition with China and Russia and challenges by these two countries and others to elements of the U.S.-led international order that has operated since World War II. This shift in the international security environment, combined with the diminishment of Arctic ice and the resulting increase in human activities in the Arctic, has several potential implications for the geopolitical environment for the Arctic, which are discussed in the following sections. The shift in the international security environment has raised a basic question as to whether the Arctic in coming years will continue to be a region generally characterized by cooperation and low tensions, as it was during the post-Cold War era, or instead become a region characterized at least in part by competition and increased tensions, as it was during the Cold War. In this regard, the shift in the international security environment poses a potential challenge to the tradition of cooperation, low tensions, peaceful resolution of disputes, and respect for international law that has characterized the approach used by the Arctic states, particularly since the founding of the Arctic Council in 1996, for managing Arctic issues. Some observers argue that the Arctic states and other Arctic stakeholders should attempt to maintain the region's tradition of cooperation and low tensions, and work to prevent the competition and tensions that have emerged in Europe, Asia, and elsewhere in recent years from crossing over into the Arctic. These observers argue that the Arctic tradition of cooperation and low tensions has proven successful in promoting the interests of the Arctic states and other Arctic stakeholders on a range of issues, that it has served as a useful model for other parts of the world to follow, and that in light of tensions and competition elsewhere in the world, this model is needed more now than ever. Other observers could argue that, notwithstanding the efforts of Arctic states and other Arctic stakeholders to maintain the Arctic as a region of cooperation and low tensions, it is unreasonable to expect that the Arctic can be kept fully isolated from the competition and tensions that have arisen in other parts of the world. As a consequence, these observers could argue, the Arctic states and other Arctic stakeholders should begin taking steps to prepare for increased competition and higher tensions in the Arctic, precisely so that Arctic issues can continue to be resolved as successfully as conditions may permit, even in a situation of competition and increased tensions. Still other observers might argue that a policy of attempting to maintain the Arctic as a region of cooperation and low tensions, though well-intentioned, could actually help encourage aggressive behavior by Russia or China in other parts of the world by giving those two countries confidence that their aggressive behavior in other parts of the world would not result in punitive costs being imposed on them in the Arctic. These observers might argue that maintaining the Arctic as a region of cooperation and low tensions in spite of aggressive Russian or Chinese actions elsewhere could help legitimize those aggressive actions and provide little support to peaceful countries elsewhere that might be attempting to resist them. This, they could argue, could facilitate a divide-and-conquer strategy by Russia or China in their relations with other countries, which in the long run could leave Arctic states with fewer allies and partners in other parts of the world for resisting unwanted Russian or Chinese actions in the Arctic. Still others might argue that there is merit in some or all of the above perspectives, and that the challenge is to devise an approach that best mixes the potential strengths of each perspective. The shift in the international security environment to a situation of renewed great power competition may put more of a spotlight on the issue of Arctic governance and the limits of the Arctic Council as a governing body. As noted earlier in this report, regarding the limits of the Arctic Council as a governing body, the council states that it \"does not and cannot implement or enforce its guidelines, assessments or recommendations. That responsibility belongs to each individual Arctic State.\" In addition, the council states that \"the Arctic Council's mandate, as articulated in the [1996] Ottawa Declaration [establishing the Council], explicitly excludes military security.\" During the post-Cold War era—the period when the Arctic Council was established and began operating—the limits of the Arctic Council as a governing body may have been less evident or problematic, due to the post-Cold War era's general situation of lower tensions and reduced overt competition between the great powers. In the new situation of renewed great power competition, however, it is possible that these limits could become more evident or problematic, particularly with regard to addressing Arctic-related security issues. If the limits of the Arctic Council as a governing body are judged as having become more evident or problematic, one option might be to amend the rules of the council to provide for some mechanism for enforcing its guidelines, assessments, or recommendations. Another option might be to expand the council's mandate to include an ability to address military security issues. Supporters of such options might argue that they could help the council adapt to the major change in the Arctic's geopolitical environment brought about the shift in the international security environment, and thereby help maintain the council's continued relevance in coming years. They might also argue that continuing to exclude military security from the council's mandate risks either leaving Arctic military security issues unaddressed, or shifting them to a different forum that might have traditions weaker than those of the Arctic Council for resolving disputes peacefully and with respect for international law. Opponents of such options might argue that they could put at risk council's ability to continue addressing successfully nonmilitary security issues pertaining to the Arctic. They might argue that there is little evidence to date that the council's limits as a governing body have become problematic, and that in light of the council's successes since its founding, the council should be viewed as an example of the admonition, \"if it isn't broke, don't fix it.\" Some relatively little-publicized multilateral discussions of Arctic security issues have taken place. For example, in mid-2011, the U.S. European Command (EUCOM), in cooperation with the Norwegian Ministry of Defense, established the Arctic Security Forces Roundtable (ASFR), consisting of high-ranking military officers from the eight members of the Arctic Council, plus France, Germany, the Netherlands, and the UK. Another newly formed venue at which military leaders discuss Arctic issues is the Northern Chiefs of Defense conference, which held its first meeting in May 2012, with military representatives from the eight Arctic Council governments in attendance. A February 9, 2019, blog post stated The function of the Arctic Council has been largely defined by the form imposed upon it in the [1996] Ottawa Declaration on the Establishment of the Arctic Council. Arguably, among its most distinctive features are: • The inheritance of the Working Groups from the 1991 Arctic Environmental Protection Strategy; • A lack of legal personality as an international organisation; • A lack of defined financial contributions; • The inclusion of Indigenous representatives as Permanent Participants; • Its constitution as a consensus based forum; and • The exclusion of military security from its agenda. The Arctic and the global context have evolved substantially since regional cooperation was initiated over two decades ago. Therefore, it is worthwhile to ask what reforms of the Arctic Council are required given the governance needs of the contemporary political situation, yet still practicable given the constraints of path dependence. The Arctic Council itself has recognized the need to reassess its form to allow for improved function. Most recently, the 2017 Fairbanks Declaration saw the Arctic States Recognize that the Arctic Council continues to evolve, responding to new opportunities and challenges in the Arctic, and instruct the Senior Arctic Officials to develop a strategic plan based on the Arctic Council's foundational documents and subsidiary body strategies and guiding documents, for approval by Ministers in 2019. It is in this context that we submit for consideration an analysis of what works well in the Arctic Council, where there are inadequacies, and what role it can most effectively play in Arctic politics…. Although the Arctic Council has a good foundation, it is constrained in significant ways. The first of these is funding. While the Arctic Council Secretariat seems adequately funded (1.24 million USD in 2017, with Norway contributing half), it has very little discretionary funding. Similarly, the Working Groups rely on one or two states to fund a secretariat but have limited ongoing project funds. Almost all activities are funded on an ad hoc basis by the states who advocated for them and by individual experts who secure their own funding through national channels. Thus, all too often it is funding that drives projects, not projects that drive funding…. While the Arctic Council has made good progress on becoming more transparent in recent years through its open access archive, it still struggles to be accountable to stakeholders, northerners, and taxpayers.… There has been perennial confusion about the role and relationship of Observers, especially with regard to non-Arctic states…. Related to this is the rather muted role of northern regional governments such as Alaska, Greenland, the Canadian territories, northern Nordic municipalities, and Russian Arctic okrugs, republics, krais, and oblasts…. Respecting sustainable development, it would be difficult to argue that the Arctic Council has had a broad impact.… in practice environmental protection has received the lion's share of attention, resources and outcomes. Education, health services, and local infrastructure—the fundamentals of developmen—are expensive public services that the Arctic Council has neither the funding nor the mandate to address. Development in the Arctic has a local and subnational nature that any international-level organization is unsuited to address.… With regards to economic development, the very topic was relatively taboo in regional politics until recent years, as it was synonymous in the Arctic with resource exploitation. Efforts to promote economic development have been mostly relegated to the Arctic Economic Council (AEC), an independent organization of business representatives facilitated by the Arctic Council in 2014. The AEC has limited capacity and its relationship with the Arctic Council—participation, reporting, support, etc.—remains ambiguous…. The elephant in the room in regional Arctic politics is climate change.… the Arctic Council has no expert group, no task force, and no working group devoted exclusively to it. The frequent reluctance of American and Russian, and occasionally other, governments to openly accept and commit to mitigating climate change through reducing greenhouse gases, let alone discuss the challenges of adapting to a necessary post-petroleum future, has precluded the Council from addressing one of the major threats to sustainable development and environmental protection in the region…. The Working Group structure was inherited from the 1991 Arctic Environmental Protection Strategy (AEPS)… [it is] a product of the particular challenges and opportunities that were becoming apparent at the time of the fall of the Soviet Union, especially regarding pollution in the Barents region and long-range transport of persistent pollutants…. The Ottawa Declaration called on states to \"oversee and coordinate the programs established under the AEPS\"; nonetheless, as a forum, it proscribed no formal reporting structure or hierarchy. As it happened, the Working Groups have developed unique and divergent organizational designs, largely dependent on the incorporation laws of the states which host their secretariats and the amount of funding they receive. Working Groups conduct many projects and meetings, but it is difficult to measure their relative effectiveness. As mentioned, the category of Task Force was established in 2009 seemingly to provide the Arctic Council with a better means by which to advance time-sensitive, policy-oriented initiatives…. Much has been made about the Arctic Council's lack of legal personality as an international organization; as a condition of US involvement in the 1990s, the Arctic Council was established as a consensus-based forum, not a treaty organization. States have not committed to abide by its decisions nor have they granted the organization any independent law-making authority. Thus, there are no 'votes' because no state is obliged to go along with the will of the majority of the group. The three legally binding agreements to come out of the Arctic Council are described as falling 'under its auspices'. There is an argument to be made that a more formal legal structure would strengthen the Arctic Council, and allow it to be more vigorous in implementing and monitoring policies such as environmental regulations. However, the informal nature of the partnership has allowed it to be flexible, accommodate the interests of different states, and adapt to varying levels of readiness to adopt and enforce new national legislation (e.g. stricter environmental regulations). Importantly, it has also allowed for the full involvement of the Permanent Participants, whereas a legal international institution would by definition exclude them from decision-making, as they have no obligations under international law. It is also worth noting that the Arctic Council's lack of a legal personality as an international organization has not prevented it from being involved in discussions, primarily through its Working Groups, that have led the Arctic states to enter into legally binding agreements outside of the forum's parameters…. The Ottawa Declaration set in place the Arctic Council's two year rotating Chairmanship, which began with Canada in 1998 and ended with Sweden in 2013 before beginning the cycle anew. The short-term length has its detractors, as it has led to a lack of continuity in the Arctic Council's work…. At the same time, the rotating Chairmanship has ensured that every state, at least periodically, becomes heavily invested in the success of the Council, and develops familiarity with the forum and its inner workings. The establishment of the permanent Secretariat in Tromsø in 2013 removed many of the most glaring issues with the rotating Chairmanship…. Based on this assessment of the Arctic Council's strengths and weaknesses, we offer these recommendations to improve the Arctic Council's form and function as it undergoes a strategic planning process: 1. Evaluate, and if warranted overhaul, the Working Group structure…. 2. Ensure that the Arctic Council has the appropriate capacity and resources, through a Working Group, Task Force or some other dedicated mechanism, to take on the key challenge of climate change mitigation. 3. Address capacity issues with more stable core funding and the creation of a substantial project fund to enhance the timeliness, sustainability, and effectiveness of what are determined to be the Council's most vital activities.… 4. Limit the Arctic Council's role to functions which only it can perform, and be more comfortable devolving work and resources to more appropriate bodies as needed (as has been done with e.g. fisheries and shipping). 5. More formally engage with sub-national governments by encouraging states to support their participation in relevant Working Groups projects. 6. Expand the Amarok tracking tool to more comprehensively evaluate, rather than simply track, the performance and outcomes of Arctic Council projects. Avoid having reports as a project outcome in and of themselves. 7. Embrace a knowledge transfer role, as opposed to a policy development role, on relevant issues of sustainable development, such as sanitation, local energy infrastructure, internet connectivity, economic development, cold climate technologies, and adaptation to future changes in climate and the global energy system. 8. Continue to maintain good international relations and compartmentalize global geopolitical issues outside the Council. The shift in the international security environment to a situation of renewed great power competition may put more of a spotlight on differing perspectives between China and the eight member states of the Arctic Council regarding Arctic governance. A July 6, 2018, press report states that Russia and China diverge on the fundamental question of who makes international law in the Arctic. For a long time, admittedly, China wasn't interested: Way back in 1925, the Nationalist government [of China] signed the critical Spitsbergen Treaty granting non-Arctic nations rights in the northern seas, [said Sun Yun, the Stimson's Center's China program director], but his Communist successors didn't actually realize they'd inherited those rights until 1991, [which was] \"a pleasant surprise.\" In the '90s, however, the eight Arctic Council nations—the US, Canada, Iceland, Finland, Russia, Sweden, Norway, and Denmark, which owns Greenland—set up a system of governance that largely sidelined other states. 13 countries do rate observer status on the Council, including China as of 2013 (even stranger bedfellows include Italy, India, and Singapore). But the eight voting members are generally not keen on diluting their control. China, by contrast, sees itself as a rising global superpower with commensurate influence everywhere on earth. It declared itself a near-Arctic state in January [2018]—a term actually coined by Great Britain but not widely recognized. China wants non-Arctic nations, especially \"near-Arctic\" ones, to have greater influence and more rights in the Arctic, with binding international law based on the UN Convention on the Law of the Sea (UNCLOS) rather than the current patchwork of mostly voluntary regional arrangements. Indeed, said Sun, \"what they would like to argue is the format and the content of the Arctic governance system currently is not effective.\" Naturally the Russians, US, Canada, and Nordics disagree. \"The Arctic states would argue there is very little governance gap,\" said Norway-based expert Elana Wilson Rowe, as they did in 2008 when they rejected an Antarctica-style treaty regime. Though the key agreements up north are admittedly non-binding, she said, the Arctic has become \"a fairly heavily governed landscape.\" An October 15, 2018, blog post states that China's interest in the Arctic extends beyond the purely economic: it is also pressing for a greater role in its governance. Compared to the Antarctic—where governance is heavily institutionalized, governance of the Arctic is much less developed, largely due to their distinctly different natures…. The legal framework [for the Arctic] is a patchwork affair, drawn from various treaties of global application (including the UN Charter and the UN Convention on the Law of the Sea), the Svalbard Treaty(recognizing Norway's sovereignty over the eponymous Arctic archipelago), as well as customary international law and general principles of law. So far, the Arctic Council has been the forum for the conclusion of only three legally binding agreements. China sees a gap for new ideas, rules and participants in this space. A white paper released by the government in January [2018] contains sophisticated and detailed analysis of the international legal framework applicable to the Arctic and demonstrates China's increasing knowledge and capability in this area, as reflected in the growing number of Chinese international lawyers specializing in Arctic matters. The white paper seeks to justify China's involvement in Arctic affairs as a 'near Arctic state', noting that the Arctic's climate, environment and ecology are of concern for all states. The white paper uses familiar phrases from China's vision for its foreign policy—such as the 'shared future of mankind' and 'mutual benefit'—to argue for a pluralist (i.e. global, regional and bilateral) approach to Arctic governance…. … As an observer state, China has very limited rights in the council, but has been creatively using other routes to influence Arctic governance, including active engagement within the International Maritime Organization (IMO) and the International Seabed Commission. China participated in the formation of the IMO's Polar Code of January 2017, which sets out rules for ships operating in polar waters. China was also one of ten states involved in the recent adoption of the Agreement to Prevent Unregulated High Seas Fisheries in the Central Arctic Ocean, which took place outside the umbrella of the Arctic Council. At a recent roundtable in Beijing co-hosted by Chatham House, Chinese experts noted China's aspirations to develop the international rule of law in the Arctic through playing an active role in developing new rules in areas currently under (or un-) regulated, for example, through a treaty to strengthen environmental protection in the region. It was also suggested that China may also seek to clarify the meaning of existing rules through its own practice. China also has ambitions to contribute to the research of the Arctic Council's Working Groups, which develop proposals for Arctic Council projects and rules. It remains to be seen to what extent Arctic states, protective of theirown national interests in an increasingly fertile area, will cede space for China to participate. China's push to be a rule shaper in the Arctic fits into a wider pattern of China seeking a more influential role in matters of global governance. This trend is particularly apparent in areas where the rules are still emerging and thus where China feels more confident than in areas traditionally dominated by Western powers. A similar assertiveness by China is increasingly visible in other emerging areas of international law, such as the international legal framework applicable to cyber operations and international dispute settlement mechanisms relating to trade and investment. China's approach to Arctic governance offers an interesting litmus test as to how far China intends to deploy international law to assert itself on governance issues with significant global economic, environmental, and security implications – along with the degree to which it will be perceived as acting in the common interest in doing so. A November 22, 2018, press report states China has become a \"rule maker\" in the global governance of the Arctic, a blue paper said Thursday, calling on the country to \"stay calm\" and respond with action in the face of the hyped-up \"China threat\" theory. Jointly released by Beijing-based Social Sciences Academic Press and Qingdao-based Ocean University of China on Thursday, the blue paper said China's role in promoting global governance in the region cannot be ignored. In terms of global governance of the Arctic, China's role has shifted from a \"rule follower\" to a \"rule maker,\" said the blue paper. China has led the governance philosophy and is taking the initiative in shaping the global governance agenda in the Arctic, it stressed. China is a \"near-Arctic country\" geographically. The natural conditions and changes in the Arctic have a direct impact on China' s climate system and ecological environment, which in turn affects China's economic interests in the fields of agriculture, forestry, fisheries and oceans, the blue paper said. Arctic countries also have concerns, of which China is aware, said the blue paper, stressing that maintaining regional security and promoting world peace has been the basic rule of China's diplomatic policies. The associate editor of the blue paper, Dong Yue, who is the deputy head of the Law School of Ocean University of China, told the Global Times on Thursday that the paper's call for China to \"stay calm\" means China won't take any \"radical\" action. The paper said that China holds the principle of respecting the sovereignty of Arctic states, not hurting their basic rights and guaranteeing the decision-making powers of the Arctic Council. China has been an observer member at the council since 2013. The \"China threat theory\" may mean other countries will unfairly raise the threshold for Chinese enterprises to become involved in the development of the Arctic, Zhang Xia, director of the Shanghai-based Polar Strategy Center at the Polar Research Institute of China, told the Global Times on Thursday. A November 29, 2018, statement to a committee of the Canadian parliament states that China is not the only non-Arctic state to develop an Arctic policy and look for a deeper commitment to the region. Most other observer states to the Arctic Council have an Arctic strategy, a polar strategy, or at least some official guidelines regarding their Arctic policy.… It remains to be seen whether, like China, these non-Arctic nations see themselves as \"near Arctic states\" that cannot leave the leadership of a strategic region to eight nations only; and whether they might find it advantageous to coalesce as a group of like-minded countries to seek more political and decisional weight both within the Arctic Council and in other international fora. So far, the approach of Arctic states has been to coopt non-Arctic states rather than exclude them. Most have been eventually accepted as observer states in the Arctic Council, and they are participating in the development of new rules for the Arctic.… Yet Arctic nations have made clear that the broader legal background for such development should remain the United Nations Convention on the Law of the Sea and other existing principles of international law. As stated in the 2008 Ilulissat Declaration, they reject the development of new international rules specifically for the Arctic—an equivalent of the Antarctica Treaty—as such a treaty would require painful negotiations and would likely be less advantageous for them than the current system. Another potential implication for the Arctic of the shift in the international security environment concerns the new environment's challenges to elements of the U.S.-led international order that has operated since World War II. One element of the U.S.-led international order that has come under challenge is the principle that force or threat of force should not be used as a routine or first-resort measure for settling disputes between countries. Another is the principle of freedom of the seas (i.e., that the world's oceans are to be treated as an international commons). If either of these elements of the U.S.-led international order is weakened or overturned, it could have potentially major implications for the future of the Arctic, given the Arctic's tradition of peaceful resolution of disputes and respect for international law and the nature of the Arctic as a region with an ocean at its center that washes up against most of the Arctic states. More broadly, some observers assess that the U.S.-led international order in general may be eroding or collapsing, and that the nature of the successor international order that could emerge in its wake is uncertain. An erosion or collapse of the U.S.-led international order, and its replacement by a new international order of some kind, could have significant implications for the Arctic, since the Arctic's tradition of cooperation and low tensions, and the Arctic Council itself, can be viewed as outgrowths of the U.S.-led order. The shift in the international security environment has raised a question concerning the priority that should be given to the Arctic in overall U.S. policymaking. During the post-Cold War era, when the Arctic was generally a region of cooperation and low tensions, there may have been less need to devote U.S. policymaker attention and resources to the Arctic. Given how renewed great power competition and challenges to elements of the U.S.-led international order might be expressed in the Arctic in terms of issues like resource exploration, disputes over sovereignty and navigation rights, and military forces and operations, it might be argued that there is now, other things held equal, more need for devoting U.S. policymaker attention and resources to the Arctic. On the other hand, renewed great power competition and challenges to elements of the U.S.-led international order are also being expressed in Europe, the Middle East, the Indo-Pacific, Africa, and Latin America. As a consequence, it might be argued, some or all these other regions might similarly be in need of increased U.S. policymaker attention and resources. In a situation of constraints on total U.S. policymaker attention and resources, the Arctic would need to compete against these other regions for U.S. policymaker attention and resources. The shift in the international security environment to a situation of renewed great power competition raises a question for U.S., Canadian, and Nordic policymakers regarding the mix of cooperation and competition to pursue (or expect to experience) with Russia in the Arctic. In considering this question, geographic points that can be noted include the following: Russia, according to one assessment, \"has at least half of the Arctic in terms of area, coastline, population and probably mineral wealth.\" Russia has numerous cities and towns in its Arctic, uses its coastal Arctic waters as a maritime highway for supporting its Arctic communities, is promoting the Northern Sea Route that runs along Russia's Arctic coast for use by others, and is keen to capitalize on natural resource development in the region, both onshore and offshore. In this sense, of all the Arctic states, Russia might have the most at stake in the Arctic in absolute terms. Arctic ice is diminishing more rapidly or fully on the Russian side of the Arctic than it is on the Canadian side. Consequently, the Northern Sea Route along Russia's coast is opening up more quickly for trans-Arctic shipping than is the Northwest Passage through the Canadian archipelago. On the one hand, the United States, Canada, and the Nordic countries continue cooperate with Russia on a range of issues in the Arctic, including, to cite just one example, search and rescue (SAR) under the May 2011 Arctic Council agreement on Arctic SAR (see \" Search and Rescue (SAR) \"). More recently, the United States and Russia cooperated in creating a scheme for managing two-way shipping traffic through the Bering Strait and Bering Sea. A July 17, 2018, opinion piece states that It's likely that few, if any, of either [President Trump's or President Putin's] advisors, let alone commentators, are looking to the Arctic—yes, the Arctic—as a starting point for common ground and improving relations going forward…. Yet, other than the International Space Station, the Far North is perhaps the only setting in which the United States and the Russian Federation cooperate today on a wide variety of issues. These two practical examples of cooperation might provide a foundation upon which both sides can regain some trust and positive momentum in their bilateral relationship (that is, if there is will on both sides to do so). If such momentum could be sustained over any meaningful period of time, it may create a more functional context to address other pressing and multilateral issues of global importance…. Clearly the recent agreements on Central Arctic Ocean fishing and research provide pathways for cooperation. Perhaps a joint Arctic marine expedition in the remote Central Arctic Ocean in support of the new fisheries agreement could be proposed? The U.S. and Russia could take the lead in the Arctic Coast Guard Forum (now chaired by Finland) in exploring enforcement issues with the new IMO International Code for Ships Operating in Polar Waters. Renewed military-to-military cooperation could be feasible if the joint meetings were to focus on Arctic emergency operations, something more likely as shipping and development activities increase. Presidents Trump and Putin could support renewed friendship flights and cultural exchanges between the indigenous communities that border our shared Bering and Chukchi Seas. On the other hand, as discussed later in this report, a significant increase in Russian military capabilities and operations in the Arctic in recent years has prompted growing concerns among U.S., Canadian, and Nordic observers that the Arctic might once again become a region of military tension and competition, as well as concerns about whether the United States, Canada, and the Nordic countries are adequately prepared militarily to defend their interests in the region. In protest of Russia's forcible occupation and annexation of Crimea and its actions elsewhere in Ukraine, Canada announced that it would not participate in an April 2014 working-level-group Arctic Council meeting in Moscow. In addition, former Secretary of State Hillary Clinton, during whose tenure a \"reset\" in relations with Russia was sought, reportedly stated that Arctic cooperation may be jeopardized if Russia pursues expansionist policies in the high north. More recently, economic sanctions that the United States imposed on Russia in response to Russian actions in Ukraine could affect Russian Arctic offshore oil exploration. Another potential concern for U.S. policymakers in connection with Russia in the Arctic relates to the Northern Sea Route. Russia considers certain parts of the Northern Sea Route to be internal Russian waters—a position that creates a potential source of tension with the United States, which may consider at least some of those waters to be international waters. A dispute over this issue could have implications not only for the Arctic, but for other parts of the world as well, since international law is universal in its application, and a successful challenge to international waters in one part of the world can serve as a precedent for challenging it in other parts of the world. A November 30, 2018, press report states Russia plans to restrict the passage of foreign warships in the Arctic Ocean next year, a top defense official has said…. On Friday [November 30], Defense Ministry spokesman Mikhail Mizintsev said that Russia's ministries were working on amending legislation that would require foreign warships to notify Russia before being able to pass through the Arctic. The work will be completed by the time the waters are navigable in 2019, Mizintsev was cited by Interfax as saying at a conference on Friday. The shift in the international security environment has led to a renewal of NATO interest in NATO's more northerly areas. During the Cold War, NATO member Norway and its adjacent sea areas were considered to be the northern flank of NATO's defensive line against potential aggression by the Soviet-led Warsaw Pact alliance. With the end of the Cold War and the shift to the post-Cold War era, NATO planning efforts shifted away from defending against potential aggression by Russia, which was considered highly unlikely, and toward other concerns, such as the question of how NATO countries might be able to contribute to their own security and that of other countries by participating in out-of-area operations, meaning operations in areas outside Europe. With the ending of the post-Cold War era and the shift in the international security environment to a period of renewed great power competition, NATO is now once again focusing more on the question of how to deter potential Russian aggression against NATO countries. As one consequence of that, Norway and its adjacent sea areas are once again receiving more attention in NATO planning. For example, a NATO exercise called Trident Juncture 18 that was held from October 25 to November 7, 2018, in Norway and adjacent waters of the Baltic and the Norwegian Sea, with participation by all 29 NATO members plus Sweden and Finland, was described as NATO's largest exercise since the Cold War, and featured a strong Arctic element, including the first deployment of a U.S. Navy aircraft carrier above the Arctic Circle since 1991. The question of NATO's overall involvement in the Arctic, however, has been a matter of debate within NATO. A 2012 report stated that \"[t]here is currently no consensus within the alliance that NATO has any role to play in the Arctic, as Canada strongly opposes any NATO involvement on sovereignty grounds and other NATO members are concerned with negative Russian reaction.\" A 2013 NATO Parliamentary Assembly report noted that \"50% of the territory surrounding the Arctic Sea is a territory of a NATO member state,\" and suggested that \"NATO could serve as a forum for dialogue on military issues.... \" The report argued that the alliance is well-equipped to play a key role in addressing security challenges that will likely emerge, particularly those that involve surveillance, search-and-rescue, and environmental cleanup. However, observers stated that the lack of unanimity over a NATO presence in the Arctic was reflected by the fact that the high north was not mentioned in either in NATO's 2010 strategic concept, nor in the final declaration of NATO's 2012 Chicago summit. On May 8, 2013, following a visit to Norway, then-NATO Secretary General Rasmussen stated that \"at the present time,\" the alliance had \"no intention of raising its presence and activities in the High North.\" In May 2017, it was reported that NATO \"may revive a Cold War naval command to counter Moscow's increased submarine activity in the Arctic and protect Atlantic sea lanes in the event of a conflict, according to allied diplomats and officials briefed on the planning work.\" An April 4, 2018, press report states the following: Despite rising tensions with Russia in Eastern Europe, the Baltics and more recently in the United Kingdom, NATO would like to keep the Arctic an area of low tensions, the chief of the North Atlantic Alliance said Wednesday [April 4]. \"We used to say that in the High North we have low tensions,\" NATO Secretary General Jens Stoltenberg told reporters during a joint press conference with Prime Minister Justin Trudeau. \"And I think we should continue to strive for avoiding an arms race and higher tensions in the High North.\" At the same time the alliance needs to respond to the increased Russian military presence in the North Atlantic and the Arctic regions with more of its own naval forces, said Stoltenberg who was in Ottawa for a two-day visit. \"Therefore part of the adaptation of NATO is that we are also increasing our naval capabilities, including the High North,\" Stoltenberg said. Two observers state in a June 27, 2018, policy paper that The North Atlantic Treaty Organization (NATO) summit in Brussels on July 11 and 12 is an opportunity for the Alliance to finally focus on a region it has long ignored: the Arctic…. NATO has no agreed common position on its role in the Arctic region. The [July 2016 NATO] Warsaw Summit Declaration did not mention the word Arctic, and neither does the Alliance's most recent Strategic Concept published in 2010. NATO has been internally divided on the role that the Alliance should play in the High North. Norway is the leading voice inside the Alliance for promoting NATO's role in the Arctic. It is the only country in the world that has its permanent military headquarters above the Arctic Circle, and it has invested extensively in Arctic defense capabilities. Canada has likewise invested heavily in Arctic defense capabilities. However, unlike Norway, Canada has stymied past efforts by NATO to take a larger role in the region. Generally speaking, there is a concern inside Canada that an Alliance role in the Arctic would afford non-Arctic NATO countries influence in an area where they otherwise would have none. A July 2, 2018, opinion piece by another observer stated the following: Since 2014, the alliance has adapted to focus on Russia's actions in eastern Europe, notably in the Baltic region and in Poland…. But strengthening NATO's eastern flank is not enough. Little has been done to work out a coherent vision for how to protect NATO interests in the Arctic or in the Black Sea. This is worrying since Russia is emboldened in both regions, as seen through brinksmanship such as provocative air manoeuvring, an assertive force posture and constant military drilling…. The Kremlin defined its Arctic strategy back in 2008 and named the High North a region of strategic importance in its 2017 naval doctrine…. NATO by contrast lacks any comparable strategy for the High North: its 2010 Strategic Concept does not even mention the region and discussions on the North Atlantic do not automatically include the High North. The creation of a new NATO North Atlantic Joint Force Command this February, without a proper Arctic angle, proves this point. Furthermore, the 'GIUK gap' (Greenland, Iceland and the UK), connecting the North Atlantic to the Arctic region, is often overlooked. The European Union (EU) is also showing increased interest in the Arctic. A February 20, 2019, press report states that Just as it is in Russia and in China, the Arctic is rapidly rising to the top of the political agenda of the European Union. Increased geopolitical focus on the Arctic is creating renewed urgency in Brussels when it comes to securing a proper role for the EU in the Arctic and to increasing European access to Arctic oil, gas, minerals, fish stocks and shipping routes.… The EU has played for a number of years an increasing, if somewhat disjointed role in the Arctic. Sweden and Finland, both members of the EU, embrace large Arctic regions that are subject to EU legislation. The Kingdom of Denmark consists of Denmark, which is a EU member country, and the Faroe Islands and Greenland, both territories that are not part of the EU.… The Faroe Islands and Greenland are both influenced by economic ties to the EU and by a number of international agreements involving the EU. The two non-EU-countries Norway and Iceland, both members of the Arctic Council, are members of the European Economic Area and thus part of the inner market of the European Union and its customs regime. The EU is an important importer of Arctic fish, shrimp, minerals and gas and a central sponsor of Arctic science programs. The EU is a key signatory to the recent moratorium on fishing in the central parts of the Arctic Ocean, the Polar Code of the IMO and several other key international regimes (and European industry contributes significantly to emission of carbon dioxide and black carbon that accelerates climate change in the Arctic). But recently, the EU has taken a more urgent interest in the region, Vilen says. EU Commission President Jean Claude Juncker has personally positioned the Arctic in the very foreground of policy making in Brussels by commissioning a policy paper on the EU's Arctic priorities. The timing of this initiative is a point in itself. The forthcoming policy paper, due in the early part of May [2019], will have the potential to influence not only electoral campaigns prior to the elections to the European Parliament later that month, but also the next EU Commission, which is to be formed most likely late this year, and the next seven-year budget of the European Union, which is currently very much on the table…. \"The Arctic policy importance comes with the change of the geopolitical setting of the Arctic,\" Vilen told me. \"The position of the Arctic is different today due to China's increased interest, Russia's increased interest, increased American policy positions and because of the needs and demand for natural resources, gas, oils, minerals and fishing stocks. The Arctic has changed, but what has not changed is the European positions and assessments on how we should be engaged. I am trying to argue that the European Union should be ready to take a leadership role in the Arctic, because if we don't do it, someone else will try to.\"… After years of preparation, the European Commission and the EU's High Representative for Foreign Affairs and Security Policy adopted in 2016 the European Union's first comprehensive Arctic strategy, the \"Integrated Arctic Policy,\" legally binding for all 28 member states. Such a policy would normally not be overhauled for another four or five years, but Juncker has obviously seen a need for a quicker update. The upcoming policy paper will not be legally binding for the member states, nor will it formally change the policy adopted in 2016, but as Vilen explained it will likely strengthen focus, priorities and overall attention to the Arctic in Brussels at a conspicuous moment in European affairs…. The wish to secure European access to oil, gas, minerals, fishing stocks, shipping routes and other Arctic resources is a main pillar of Vilen's approach…. Traditionally, the EU has not involved itself in Arctic security and Vilen has no intention to change this approach. The EU is engaged in a prolonged and deep sanctions standoff with Russia following Russia's military annexation of Crimea in 2014, but like the Arctic states and the Arctic Council, the EU still treasures its dialogue with Russia on Arctic affairs; this allows for the dialogue that is otherwise missing. Russia is still blocking the EU's admission as a formal observer to the Arctic Council, but Vilen downplays this aspect of the EU's Russia relations: \"In practice, it has not affected the European Union's engagement in any way. We continue to work as a de facto observer in the working groups [of the Arctic Council], and a lot of the material information to the groups come from the European Commission services and also a lot of the financing for the projects. So we are in. The de jure position is not here, but our de facto position is in place,\" he said. China's activities in the Arctic have grown steadily in recent years. As noted earlier in this report, China was one of six non-Arctic states that were approved for observer status by the Arctic Council in 2013. China in recent years has engaged in growing diplomatic activities with the Nordic countries, and has increased the size of its diplomatic presences in some of them. In April 2013, China and Iceland signed a free trade agreement—China's first such pact with a European government—and has pursued the possibility of oil exploration in waters off Iceland. China has also engaged in growing economic discussions with Greenland, a territory of Denmark that might be moving toward eventual independence. China has an Arctic-capable icebreaker, Xue Long (Snow Dragon), that in recent years has made several transits of Arctic waters—operations that China describes as research expeditions. China is completing construction of its second Arctic-capable icebreaker (the first that China has built domestically), to be named Xue Long 2 , and has announced an intention to eventually build a 30,000-ton nuclear-powered icebreaker, which would make China only the second country (along with Russia) to operate a nuclear-powered icebreaker. Like several other nations, China has established a research station in the Svalbard archipelago. China in January 2018 released a white paper on China's Arctic policy that refers to China as a \"near-Arctic state.\" (China's northernmost territory, northeast of Mongolia, is at about the same latitude as the Aleutian Islands in Alaska, which, as noted earlier in this report, the United States includes in its definition of the Arctic for purposes of U.S. law.) The white paper refers to trans-Arctic shipping routes as the Polar Silk Road, and identifies these routes as a third major transportation corridor for the Belt and Road Initiative (BRI), China's major geopolitical initiative, first announced by China in 2013, to knit Eurasia and parts of Africa together in a Chinese-anchored or Chinese-led infrastructure and economic network. China appears to be interested in using the Northern Sea Route (NSR) linking Europe and Asia via waters running along Russia's Arctic coast to shorten commercial shipping times between Europe and China and perhaps also to reduce China's dependence on southern sea routes (including those going to the Persian Gulf) that pass through the Strait of Malacca—a maritime choke point that China appears to regard as vulnerable to being closed off by other parties (such as the United States) in time of crisis or conflict. China reportedly reached an agreement with Russia on July 4, 2017, to create an \"Ice Silk Road,\" and in June 2018, China and Russia agreed to a credit agreement between Russia's Vnesheconombank (VEB) and the China Development Bank that could provide up to $9.5 billion in Chinese funds for the construction of select infrastructure projects, including in particular projects along the NSR. In September 2013, the Yong Shen , a Chinese cargo ship, became the first commercial vessel to complete the voyage from Asia to Rotterdam via the NSR. China is interested in oil and gas exploration in the Arctic, and has made significant investments in Russia's Arctic oil and gas industry. In March 2013, it was announced that Russia and China had signed an agreement under which China would purchase oil from Russia in exchange for exploration licenses in the Arctic. China's investments in Russia's Arctic oil and gas industry include an ownership stake of at least 20% in the Yamal natural gas megaproject located on Russia's Yamal Peninsula in the Arctic. The facility includes onshore and offshore natural gas wells, a deepwater port, liquefied natural gas (LNG) storage and feeder lines, permafrost-resilient support buildings, and rail lines. In July 2018, an LNG shipment reportedly arrived in China from the Yamal LNG facility, via the NSR, for the first time. China is also interested in mining opportunities in the Arctic seabed and in Greenland. Given Greenland's very small population, China may view Greenland as an entity that China can seek to engage using an approach similar to ones that China has used for engaging with small Pacific and Indian Ocean island states. China may also be interested in Arctic fishing grounds. China's growing activities in the Arctic may also reflect a view that as a major world power, China should, like other major world powers, be active in the polar regions for conducting research and other purposes. (Along with its growing activities in the Arctic, China has recently increased the number of research stations in maintains in the Antarctic.) Particularly since China published its Arctic white paper in January 2018, observers have expressed curiosity or concern about China's exact mix of motivations for its growing activities in the Arctic, and about what China's ultimate goals for the Arctic might be. The shift in the international security environment to a situation of renewed great power competition underscores a question for the Arctic states regarding whether and how to respond to China's growing activities in the Arctic. China's growing activities in the Arctic could create new opportunities for cooperation between China and the Arctic states. They also, however, have the potential for posing challenges to the Arctic states in terms of defending their own interests in the Arctic. For U.S. policymakers, a general question is how to integrate China's activities in the Arctic into the overall equation of U.S.-China relations, and whether and how, in U.S. policymaking, to link China's activities in the Arctic to its activities in other parts of the world. One specific question concerns potential areas for U.S.-Chinese cooperation in the Arctic. Another specific question could be whether to impose punitive costs on China in the Arctic for unwanted actions that China takes elsewhere. As one hypothetical example of such a cost-imposing action, U.S. policymakers could consider moving to suspend China's observer status on the Arctic Council as a punitive cost-imposing measure for unwanted Chinese actions in the South China Sea. In February 2019, it was reported that the United States in 2018 had urged Denmark to finance airports that China had offered to build in Greenland, so as to counter China's attempts to increase its presence and influence there. For Russia, the question of whether and how to respond to China's activities in the Arctic may pose particular complexities. On the one hand, Russia is promoting the NSR for use by others, in part because Russia sees significant economic opportunities in offering icebreaker escorts, refueling posts, and supplies to the commercial ships that will ply the waterway. In that regard, Russia presumably would welcome increased use of the route by ships moving between Europe and China. More broadly, Russia and China have increased their cooperation on security and other issues in recent years, in no small part as a means of balancing or countering the United States in international affairs, and Russian-Chinese cooperation in the Arctic can both reflect and contribute to that cooperation. On the other hand, Russian officials are said to be wary of China's continued growth in wealth and power, and of how that might eventually lead to China becoming the dominant power in Eurasia, and to Russia being relegated to a secondary or subordinate status in Eurasian affairs relative to China. Increased use by China of the NSR could accelerate the realization of that scenario: As noted above, the NSR forms part of China's geopolitical Belt and Road Initiative (BRI). Some observers argue that actual levels of Sino-Russian cooperation in the Arctic are not as great as Chinese or Russian announcements about such cooperation might suggest. A July 6, 2018, press report states the following: China and Russia are working together ever more closely in the Arctic, exploiting a policy vacuum in the US, an international panel of experts said here. But Sino-Russian cooperation is almost entirely commercial, focused on trade routes, offshore oil, telecommunications (most satellites don't cover the Arctic), and tourism. A military alliance is unlikely given Russia's deep ambivalence about China's growing influence in general and their very different views on who should run the Arctic in particular: the eight circumpolar countries alone—including both Russia and the US [through the Arctic Council]—or a larger group that includes self-declared \"near-Arctic\" nations like China. A July 12, 2018, press report states the following: China's actions both before and especially since [it published its Arctic white paper in January 2018] suggest that it is actually seeking not equality with others in the global frozen North, but rather a dominant position. And this prospect has already prompted some Russian commentators to suggest China wants to reduce Russia to the status of \"a younger brother\" in the Arctic…. China's expansive moves in the region have, to date, taken three forms. First, it is increasing its share of orders for goods carried across Arctic waters by the ships of other countries—especially those of the Russian Federation—something that gives it clout in Moscow in particular…. Moreover, China is boosting its ownership stake in ships flying the Russian flag. Second, it has launched a program to build both ice breakers and ice-capable ships so that it will be able to carry more of the goods and raw materials it wants with its own vessels rather than having to rely on anyone else's. And third—and perhaps most dramatically in terms of Beijing's long-term goals—Chinese firms are establishing drilling platforms in areas of the Arctic Ocean that Moscow claims as part of its exclusive economic zone (EEZ). Similarly, it is building port facilities on Russian territory that are located far from China and that may soon eclipse Russian ones. All three of these developments merit close attention, both for what they say about China's intentions as well as Beijing's increasing upper hand regarding a region and waterway Moscow has long insisted are exclusively Russian. A November 7, 2018, press report states An article published on October 5 by the Russian International Affairs Council (RIAC) discusses Russia's strategy in the Arctic region and the evolving role of China therein…. It frames the United States and the European Union as Russia's main regional competitor. But China is notably presented as a \"strategic partner\" for whom \"the Arctic region is not a top strategic priority\" and whose efforts to build up its naval strength are related to a desire to challenge the US, not Russia. The sentiments expressed in the above-mentioned RIAC article appear to reflect how Moscow views the prior concrete steps the Russian Federation and People's Republic of China (PRC) have been taking to strengthen bilateral cooperation in the Arctic.… Nonetheless, Chinese ambitions in the Arctic seem to extend beyond the level of such joint initiatives…. … Russia's expectations in this matter are premised on three assumptions: – China will save Russia's stagnant north… – China has no alternatives but to work with Russia …. – China will be unable to \"sideline\" Russia (Topwar.ru, January 30, 2018), given Russia's dominant position in the Arctic and the nature of relations between Beijing and Moscow…. However, these assumptions appear questionable at best: First, the NEP [Northeast Passage, aka Northern Sea Route] still requires a staggering amount of infrastructure investment—realistic estimates run in the trillions of US dollars—before it can start yielding profits…. Moreover, the facts do not bear out the Russian conviction that Beijing can choose only between the NEP and the NWP, with no available alternative…. Second, Russia is not China's only potential partner in the Arctic. The PRC white paper clearly points to the fact that Chinese involvement there will be a multilateral, not a bilateral affair…. Third, China is likely to ultimately sideline Russia. As rightfully pointed out by Dr. Pavel Gudev, a senior research fellow at the Institute of World Economy and International Relations (IMEMO), China's strategy in the Arctic region is dictated by the desire to \"downplay exclusivity in relations between Arctic nations\" and \"internationalize the Arctic as much as possible,\" which \"runs counter to Russia's national interests in the region\"…. And finally, international competition by other Arctic players may further outflank Russian efforts. A November 29, 2018, statement to a committee of the Canadian parliament states So far, Arctic nations have cautiously welcomed China's willingness to play a larger role in the Arctic.… Arctic nations are also setting limits. In 2011, Iceland blocked the sale of a large plot of land to a Chinese investor; in 2016, Denmark declined to sell a vacant naval base in Greenland to a Chinese mining company; and in that same year, a projected Chinese resort in Svalbard, under Norwegian sovereignty, was canceled. Each Arctic state—often under public pressure—is setting its own limits when it comes to welcoming Chinese presence. Russia's approach toward China shows a similar mix of interest and caution. China is a key investor in Russia's Yamal LNG project, and Chinese funds are particularly welcome, as Russia has been shunned by some of its more traditional investors since its annexation of Crimea. Russia also welcomes Chinese interest in developing port infrastructure along the NSR. Yet Russia is also very much intent on keeping the NSR under its control. This may eventually create tensions with China, as China sees the NSR as one element of the Belt and Road Initiative and will resent obstacles to its free use of the route (the alternative route, the Northwestern Passage along the northern shore of Canada, is not considered a viable replacement because of poor navigation conditions and a lack of infrastructure). While Russia and China are formally allies through the Shanghai Cooperation Organization, Russia remains wary of China's military power on its southern border and, as an Arctic nation, is irritated by the intrusion in Arctic affairs of non-Arctic states, as evidenced by its long-standing reluctance to grant observer status to these countries in the Arctic Council. A policy paper released in December 2018 states Since 2017, a series of events have raised optimism about the potential for Sino-Russian cooperation in the Arctic region, including unilateral and bilateral statements between Beijing and Moscow about their shared vision for and commitment to joint development of the Arctic energy resources and shipping lane. China's economic interests in natural resources extractions and alternative transportation routes largely align with Russia's stated goals to revitalize its Arctic territory…. Despite the rhetorical enthusiasm from the two governments, concrete, substantive joint projects on the Northern Sea Route are lacking, especially in key areas such as infrastructure development. A careful examination of Chinese views on joint development of the Northern Sea Route reveals divergent interests, conflicting calculations and vastly different cost-benefit analyses. From the Chinese perspective, the joint development of the Northern Sea Route is a Russian proposal to which China reacted primarily out of strategic and political considerations rather than practical economic ones. While China is in principle interested in the Northern Sea Route, the potential and practicality of this alternative transportation route remains tentative and yet to be realized. For China, their diverging interests, especially over what constitutes mutually beneficial compromises, will be the biggest obstacle to future progress. Moscow needs to demonstrate much more sincerity or flexibility in terms of improving China's cost-benefit spreadsheet. In this sense, expectations and assessments of the impact of Sino-Russian cooperation specifically on the Northern Sea Route should be focused on moderate, concrete plans rather than glorified rhetoric…. Although the Chinese are fond of optimistically discussing the potential for Sino-Russian cooperation on the Northern Sea Route, they have been unable to reach an optimistic conclusion for its viability, feasibility, and practicality. China and Russia have identified their converging interests in such cooperation. However, their diverging interests, especially over what constitutes mutually beneficial compromises, will be the biggest obstacle to future progress. China's view of the economic practicality of the Northern Sea Route remains a lofty future ambition that is steeped in hopes of the project's potential. In the best-case scenario, few Chinese experts see the Northern Sea Route as a viable substitute/alternative to traditional shipping routes. Instead, the Northern Sea Route is seen primarily as a potential supplement. The unfavorable assessment of the economic practicality of the Northern Sea Route underscores the fact that there has been more discussion about development than actual projects on the ground. China has demonstrated greater interest in other areas of infrastructure cooperation, such as on the Primorye International Transportation Corridor and energy development projects. However, interest regarding joint development of the Northern Sea Route has been markedly less impressive or present. China's apparent enthusiasm on Northern Sea Route cooperation with Russia is motivated primarily by political and strategic considerations. Cooperation helps to pave China's entry into the otherwise relatively exclusive Arctic region and affords China an advantaged and prioritized position in the projects for which Russia is accepting or seeking international cooperation. Russia's options for other international partners might expand after international sanctions are lifted and/or if the United States identifies China as the biggest threat and Russia as a partner in the Sino-U.S.-Russian strategic triangle. However, such hypotheticals do not appear to be coming to fruition anytime soon. A 2019 report on China's strategic ambitions stated the following: The Sino-Russian partnership has both supported China's Arctic ambitions and at times acted as a check on them. Broadly speaking, the region serves as a testing ground for key goals of [Chinese leader] Xi Jinping's foreign policy agenda…. Focusing on climate change, sustainable development, and global governance, [China's Arctic] white paper downplays China's security interests in the region, especially the link between the projection of power in the polar region and the development of naval capabilities needed for great-power status. The PLA [People's Liberation Army—China's military], however, has been integral to the development of China's Arctic capabilities, and the changing Arctic (and China's evolving role in it) are becoming a key part of the country's maritime strategy…. China faces several obstacles to fulfilling its Arctic ambitions. At present, the country has limited experience in cold-water navigation and polar research, though the Chinese government has been making substantial investments, particularly in the latter. In the short term, fears about Russia in Northern Europe may contribute to greater receptivity to China's activities in the Arctic, but this may no longer be the case if China seeks to play a more substantial role…. China's ambitions in the Arctic could also complicate its relations with Russia. China's entry into the region has been importantly facilitated by Russia's acceptance of Chinese investments and provision of Arctic navigation training (though… Russia was initially wary of China's quest for observer status in the Arctic Council). Yet China may not need a gatekeeper in the region for much longer if Arctic ice continues to recede. If the NSR [Northern Sea Route] is no longer frozen, then Russia may lose its legal rationale for administering the waterway, potentially leading to tensions with China and other users hoping to avoid Russian oversight and fees…. … China's relationship with Russia is central to its Arctic ambitions, though Russia's positions on Arctic shipping also set limits to the Chinese role…. Although Russia is China's key partner in the Arctic, Chinese officials have sought to improve relations with all the Arctic states. As an observer in the Arctic Council, China depends on members to put forward its proposals and will only be able to participate in Arctic resource development in cooperation with these states…. China's Arctic ambitions have elicited concern among regional states for two sets of reasons. First, countries like Russia that view Arctic coastal waterways as subject to their own jurisdiction are apprehensive about China's position. Second, most of the Arctic states have significant resource deposits or coastal access to such stores and are concerned about the consequences of China's investments and economic power in the region. This is particularly acute for smaller Arctic states such as Iceland, where a large infusion of Chinese funds might have an outsized political and economic impact…. While Canada, which views the Northwest Passage as internal waters, and Russia, with its assertion of administrative rights over the still ice-covered NSR, have had some reservations about China playing a greater role in the Arctic, Nordic countries have largely welcomed its growing interest in the region. Chinese policy toward these states has involved multilateralism, as well as bilateral diplomacy and investments under BRI [the Belt and Road Initiative]…. Chinese investments in Greenland have been especially controversial due to its strategic location and domestic pressures for political independence from Denmark…. While Chinese officials and analysts have been cautiously avoiding discussion of Greenland's political future, China's approach to the Nordic states is in keeping with its general approach to Europe…. China is playing a long game in the Arctic, slowly building up its presence, scientific capacity, and naval capabilities in anticipation of future economic bounties as the ice recedes. China has had to tread carefully as an outsider, however \"near-Arctic\" it claims to be, because even small steps by Chinese investors could have a big impact on small Arctic states. While somewhat wary of China's intentions and protective of its own status as an Arctic littoral state, Russia has provided an important entry point, via transit through the NSR and investment opportunities in the Russian Arctic. Nonetheless, China has to balance its aspirations with the need to be mindful of Russian sensitivities on Arctic issues…. For China, the Arctic is a promised land of untapped resources and an opportunity to exert its influence in global governance, yet these benefits are largely promised to insiders. However loudly China proclaims itself to be a near-Arctic state, it nonetheless has to demonstrate its presence through economic, scientific, and political activities. These same activities raise concerns among Arctic states about China's intentions and willingness to accept the status quo, which for Russia means the authority to administer currently ice-covered waterways. The Arctic is not a static environment, however, and its melting ice will have profound political consequences as well as environmental ones. For Xi, the Arctic and polar regions more broadly are the testing grounds for his global ambitions, both as a maritime power and as a participant in the development of new forms of global governance. Another potential implication of the shift in the international security environment to a situation of great power competition is a linkage that is sometimes made between the Arctic and the South China Sea relating to international law of the sea or the general issue of international cooperation and competition. One aspect of this linkage relates to whether China's degree of compliance with international law of the sea in the South China Sea has any implications for understanding potential Chinese behavior regarding its compliance with international law of the sea (and international law generally) in the Arctic. A second aspect of this linkage, mentioned earlier, is whether the United States should consider the option of moving to suspend China's observer status on the Arctic Council as a punitive cost-imposing measure for unwanted Chinese actions in the South China Sea. A third aspect of this linkage concerns the question of whether the United States should become a party to UNCLOS: Discussions of that issue sometimes mention both the situation in the South China Sea and the extended continental shelf issue in the Arctic (see \" Extended Continental Shelf and United States as a Nonparty to UNCLOS \"). During the Cold War, the Arctic was an arena of military competition between the United States and the Soviet Union, with both countries, for example, operating nuclear-powered submarines, long-range bombers, and tactical aircraft in the region. The end of the Cold War and the collapse of most elements of the Russian military establishment following the dissolution of the Soviet Union in December 1991 greatly reduced this competition and led to a reduced emphasis on the Arctic in U.S. military planning. Renewed tensions with Russia following its seizure and annexation of Crimea in March 2014, combined with a significant increase in Russian military capabilities and operations in the Arctic in recent years, have led to growing concerns among observers that the Arctic is once again becoming a region of military tension and competition, and to concerns about whether the United States is adequately prepared militarily to defend its interests in the region. U.S. military officials, military officials from other Arctic states, and other observers have stressed the cooperative aspects of how the Arctic states have addressed Arctic issues, and have sometimes suggested that the competitive aspects of the situation have been exaggerated in some press accounts. Some observers argue that that Russia's recent military investment in the Arctic is being exaggerated, or reflects normal modernization of aging capabilities, or is intended partly for domestic Russian consumption. Even so, U.S. military forces (and U.S. intelligence agencies) are paying renewed attention to the Arctic. This is particularly true in the case of the Navy and Coast Guard, for whom diminishment of Arctic sea ice is opening up potential new operating areas for their surface ships. The U.S. Air Force, Army, and Marine Corps, too, are now focusing more on Arctic operations. Canada, the UK, and the Nordic countries are taking or contemplating steps to increase their own military presence and operations in the region. DOD's report on the 2010 QDR, submitted to Congress in February 2010, states the following: The effect of changing climate on the Department's operating environment is evident in the maritime commons of the Arctic. The opening of the Arctic waters in the decades ahead[,] which will permit seasonal commerce and transit[,] presents a unique opportunity to work collaboratively in multilateral forums to promote a balanced approach to improving human and environmental security in the region. In that effort, DoD must work with the Coast Guard and the Department of Homeland Security to address gaps in Arctic communications, domain awareness, search and rescue, and environmental observation and forecasting capabilities to support both current and future planning and operations. To support cooperative engagement in the Arctic, DoD strongly supports accession to the United Nations Convention on the Law of the Sea. In April 2011, President Obama assigned responsibility for the Arctic to U.S. Northern Command. Previously, U.S. Northern Command, U.S. European Command, and U.S. Pacific Command had shared responsibility for the Arctic. The April 2011 change in DOD's Unified Command Plan also assigned Alaska to U.S. Northern Command. Previously, U.S. Northern Command and U.S. Pacific Command had shared responsibility for Alaska and adjacent waters. In May 2011, DOD submitted a report to Congress on Arctic operations and the Northwest Passage that was prepared at congressional direction. A January 2012 GAO report reviewed the May 2011 DOD report. On November 22, 2013, DOD released a DOD strategy for the Arctic that was subsequently updated by the December 2016 report to Congress on Arctic strategy discussed below. The Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see \" Background \") makes DOD the lead federal agency for one of the plan's 36 or so specific initiatives, and a supporting agency for 18 others. The initiative for which DOD is designated the lead federal agency is entitled \"Develop a framework of observations and modeling to support forecasting and prediction of sea ice.\" The Department of Defense's (DOD's) report on the 2014 Quadrennial Defense Review (QDR), submitted to Congress in March 2014, states the following: Climate change also creates both a need and an opportunity for nations to work together, which the Department will seize through a range of initiatives. We are developing new policies, strategies, and plans, including the Department's Arctic Strategy and our work in building humanitarian assistance and disaster response capabilities, both within the Department and with our allies and partners. The February 2015 National Security Strategy mentions the Arctic three times, stating that \"the present day effects of climate change are being felt from the Arctic to the Midwest. Increased sea levels and storm surges threaten coastal regions, infrastructure, and property.\" It also states that \"we seek to build on the unprecedented international cooperation of the last few years, especially in the Arctic as well as in combatting piracy off the Horn of Africa and drug-smuggling in the Caribbean Sea and across Southeast Asia,\" and that \"we will also stay engaged with global suppliers and our partners to reduce the potential for energy-related conflict in places like the Arctic and Asia.\" A June 2015 Government Accountability Office (GAO) report states the following: Recent strategic guidance on the Arctic issued by the [Obama] administration and the Department of Defense (DOD) establish a supporting role for the department relative to other federal agencies, based on a low level of military threat expected in the region. In January 2014 the [Obama] administration issued the Implementation Plan to the National Strategy for the Arctic Region that designated DOD as having a largely supporting role for the activities outlined in the plan. Additionally, DOD's Arctic Strategy issued in November 2013 and the Navy's Arctic Roadmap 2014-2030 issued in February 2014 emphasize that, as sea ice diminishes and the Arctic Ocean opens to more activity, the department may be called upon more frequently to support other federal agencies and work with partners to ensure a secure and stable region. To further its role, DOD participates in a number of forums focused on military security cooperation in the Arctic, including the Arctic Security Forces Roundtable, a senior-level event aimed at encouraging discussion among the security forces of Arctic and non-Arctic nations. In addition, DOD leads training exercises focused on building partner capacity in the region, including Arctic Zephyr, a multilateral scenario-based exercise. DOD continues to monitor the security environment in the region and is tracking indicators that could change its threat assessment and affect DOD's future role. DOD has taken actions, along with interagency partners, to address some near-term capabilities needed in the Arctic, such as maritime domain awareness and communications. In recent years, DOD has conducted a number of studies to identify near-term capabilities the department needs to operate in the Arctic. The Implementation Plan to the National Strategy for the Arctic Region created an interagency framework and identified activities to address many of these needed capabilities. For example, as the lead agency for Arctic sea ice forecasting, DOD has established an interagency team to focus on improved sea ice modeling. DOD has also begun other efforts within the department to address capability needs. For example, the Navy's Arctic Roadmap prioritizes near-term actions to enhance its ability to operate in the Arctic and includes an implementation plan and timeline for operations and training, facilities, equipment, and maritime domain awareness, among other capabilities. U.S. Northern Command—the DOD advocate for Arctic capabilities—stated that it is in the process of updating its regional plans for the Arctic and is conducting analysis to determine future capability needs. For example, Northern Command is updating the Commander's Estimate for the Arctic, which establishes the commander's intent and missions in the Arctic and identifies near-, mid-, and long-term goals. Additionally, the command is conducting studies of various Arctic mission areas, such as maritime homeland defense and undersea surveillance, to identify future capability needs. However, according to DOD's Arctic Strategy, uncertainty remains around the pace of change and commercial activity in the region that may affect its planning timelines. Difficulty in developing accurate sea ice models, variability in the Arctic's climate, and the uncertain rate of activity in the region create challenges for DOD to balance the risk of having inadequate capabilities or insufficient capacity when required to operate in the region with the cost of making premature or unnecessary investments. According to its Arctic Strategy, DOD plans to mitigate this risk by monitoring the changing Arctic conditions to determine the appropriate timing for capability investments. A June 2016 DOD report to Congress on resourcing the Arctic Strategy states that DOD is making investments in research, military infrastructure, and capabilities to execute the 2013 Arctic Strategy and support the development of the Arctic as a secure and stable region where U.S. national interests are safeguarded, the U.S. homeland is protected, and nations work cooperatively to address challenges. Fiscal year (FY) 2017 investments focus mainly on capabilities, followed by long-term investments in research and development of next-generation capabilities. The Department's challenge is balancing the risk of being late-to-need with the opportunity cost of making Arctic investments for potential future contingencies at the expense of resourcing other urgent military requirements.... Data provided by the Combatant Commands and Military Departments from the FY 2017 budget identifies about $6 billion of FY 2017 investments.... The report includes a summary table showing that of $6.032 billion requested by DOD for FY2017 for implementing the Arctic strategy, about $461.3 million is for Army, Navy, and Air Force research and development work, $362.2 million is for Air Force military construction (MILCON) work, and about $5.209 billion is for Army, Navy, Air Force, defense-wide, and classified capabilities. Within the $5.209 billion figure, about 85% is accounted for by Air Force operations and maintenance (O&M), with about $2.281 billion, Air Force procurement, with about $1.109 billion, and Army military personnel (MILPERS) costs, with about $1.036 billion. A December 2016 report to Congress on strategy to protect U.S. national security interests in the Arctic region that was required by Section 1068 of FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015) states the following (italics and bold as in original): The Department of Defense (DoD) remains committed to working collaboratively with allies and partners to promote a balanced approach to improving security in the Arctic region. DoD's strategy in the Arctic builds upon the 2009 National Security Presidential Directive 66/Homeland Security Presidential Directive 25, Arctic Region Policy , and the 2013 National Strategy for the Arctic Region (NSAR). DoD's 2013 Arctic Strategy nested under those two overarching national-level guidance documents. DoD's 2016 Arctic Strategy updates DoD's 2013 Arctic Strategy as required by Section 1068 of the National Defense Authorization Act for FY 2016 ( P.L. 114-92 ) in light of significant changes in the international security environment. It refines DoD's desired end-state for the Arctic: a secure and stable region where U.S. national interests are safeguarded, the U.S. homeland is defended, and nations work cooperatively to address challenges. The two main supporting objectives remain unchanged: 1) Ensure security, support safety, promote defense cooperation; and 2) prepare to respond to a wide range of challenges and contingencies—operating in conjunction with like-minded nations when possible and independently if necessary—in order to maintain stability in the region. This update also adds a classified annex. In this strategy, near-term refers to the timeframe from the present to 2023, during which DoD will operate with current forces and execute resources programmed across the Future Years Defense Program (FYDP). The mid-term (2023-2030) and far-term (beyond 2030) are also addressed where relevant to global posture and force development. Timeframes are approximate due to uncertainty about future environmental, economic, and geopolitical conditions and the pace at which human activity in the Arctic region will increase. The 2016 Arctic Strategy also updates the ways and means DoD intends to use to achieve its objectives as it implements the NSAR. These include --Enhance the capability of U.S. forces to defend the homeland and exercise sovereignty; --Strengthen deterrence at home and abroad; --Strengthen alliances and partnerships; --Preserve freedom of the seas in the Arctic; --Engage public, private, and international partners to improve domain awareness in the Arctic; --Evolve DoD Arctic infrastructure and capabilities consistent with changing conditions and needs; --Provide support to civil authorities, as directed; --Partner with other departments, agencies, and nations to support human and environmental security; and --Support international institutions that promote regional cooperation and the rule of law. DoD's strategic approach is guided by its main objectives of ensuring security, supporting safety, and promoting defense cooperation as it prepares to respond to a wide range of challenges and contingencies in the Arctic in the years to come. Alliances and strategic partnerships remain the center of gravity in achieving DoD's desired end-state and ensuring that the Arctic remains a secure and stable region. Wherever possible, DoD will continue to seek innovative, cost-effective, small-footprint ways to achieve its objectives. DoD will also continue to apply the four overarching principles articulated in the NSAR: working with allies and partners to safeguard peace and stability; making decisions using the best available scientific information; pursuing innovative partnerships to develop needed capabilities and capacity over time; and following established Federal and DoD tribal consultation policy as applicable. Section 1054 of the conference version ( H.Rept. 115-404 of November 9, 2017) of H.R. 2810 / P.L. 115-91 of December 12, 2017, requires DOD to submit a report on steps DOD is taking to resolve Arctic security capability and resource gaps, and the requirements and investment plans for military infrastructure required to protect U.S. national security interests in the Arctic region. The December 2017 National Security Strategy mentions the Arctic once, stating that \"a range of international institutions establishes the rules for how states, businesses, and individuals interact with each other, across land and sea, the Arctic, outer space, and the digital realm. It is vital to U.S. prosperity and security that these institutions uphold the rules that help keep these common domains open and free.\" The January 2018 unclassified summary of the 2018 National Defense Strategy does not specifically mention the Arctic. In the conference report ( H.Rept. 115-874 of July 25, 2018) on H.R. 5515 , Section 1071 states the following: SEC. 1071. REPORT ON AN UPDATED ARCTIC STRATEGY. (a) REPORT ON AN UPDATED STRATEGY.—Not later than June 1, 2019, the Secretary of Defense shall submit to the congressional defense committees a report on an updated Arctic strategy to improve and enhance joint operations. (b) ELEMENTS.—The report required by subsection (a) shall include the following: (1) A description of United States national security interests in the Arctic region. (2) An assessment of the threats and security challenges posed by adversaries operating in the Arctic region, including descriptions of such adversaries' intents and investments in Arctic capabilities. (3) A description of the roles and missions of each military service in the Arctic region in the context of joint operations to support the Arctic strategy, including— (A) a description of a joint Arctic strategy for sea operations, including all military and Coast Guard vessels available for Arctic operations; (B) a description of a joint Arctic strategy for air operations, including all rotor and fixed wing military aircraft platforms available for Arctic operations; and (C) a description of a joint Arctic strategy for ground operations, including all military ground forces available for Arctic operations. (4) A description of near-term and long-term training, capability, and resource gaps that must be addressed to fully execute each mission described in the Arctic strategy against an increasing threat environment. (5) A description of the level of cooperation between the Department of Defense, any other departments and agencies of the United States Government, State and local governments, and tribal entities related to the defense of the Arctic region. (c) FORM OF REPORT.—The report required by subsection (a) shall be submitted in unclassified form, but may include a classified annex. H.Rept. 115-874 also states the following: The conferees direct the Secretary of Defense to submit a report to the congressional defense committees not later than 180 days after the date of enactment of this Act on current cold weather capabilities and readiness of the United States Armed Forces. The report shall contain the following elements: (1) A description of current cold weather capabilities and training to support United States military operations in cold climates across the joint force; (2) A description of anticipated requirements for United States military operations in cold and extreme cold weather in the Arctic, Northeast Asia, and Northern and Eastern Europe; (3) A description of the current cold weather readiness of the joint force, the ability to increase cold weather training across the joint force, and any equipment, infrastructure, personnel, or resource limitations or gaps that may exist; (4) An analysis of potential opportunities to expand cold weather training for the Army, the Navy, the Air Force, and the Marine Corps and the resources or infrastructure required for such expansion; and (5) An analysis of potential partnerships with State, local, Tribal, and private entities to maximize training potential and to utilize local expertise, including traditional indigenous knowledge. (Pages 835-836) The Senate Appropriations Committee, in its report ( S.Rept. 115-290 of June 28, 2018) on S. 3159 , states the following: Arctic Broadband Infrastructure .—The Committee is concerned that broadband infrastructure in the Arctic, particularly in northern Alaska and the Aleutian Islands, is not capable of supporting current military operations. Therefore, the Committee directs the Secretary of Defense to conduct an evaluation of broadband infrastructure in the United States Arctic and provide a report to the congressional defense committees not later than 180 days after enactment of this act. The report shall list an inventory of all existing broadband and communications infrastructure in the Aleutian Is land chain and Alaska's northwest and northern slope communities, as well as present limitations and needs for the future. (Pages 35-36) DOD has been taking a number of steps in recent years to strengthen U.S.-Canadian cooperation and coordination regarding military operations in the Arctic. The Navy and Coast Guard are exploring the potential implications that increased human activities in the Arctic may have for Navy and Coast Guard required numbers of ships and aircraft, ship and aircraft characteristics, new or enlarged Arctic bases, and supporting systems, such as navigation and communication systems. The Navy and Coast Guard have sponsored or participated in studies and conferences to explore these implications, the Coast Guard annually deploys cutters and aircraft into the region to perform missions and better understand the implications of operating such units there, and the Navy has deployed ships to the region. Points or themes that have emerged in studies, conferences, and deployments regarding the potential implications for the U.S. Navy and Coast Guard of diminished Arctic sea ice include but are not limited to the following: The diminishment of Arctic ice is creating potential new operating areas in the Arctic for Navy surface ships and Coast Guard cutters. U.S. national security interests in the Arctic include \"such matters as missile defense and early warning; deployment of sea and air systems for strategic sealift, strategic deterrence, maritime presence, and maritime security operations; and ensuring freedom of navigation and overflight.\" SAR in the Arctic is a mission of increasing importance, particularly for the Coast Guard, and one that poses potentially significant operational challenges (see \" Search and Rescue (SAR) \" above). More complete and detailed information on the Arctic is needed to more properly support expanded Navy and Coast Guard ship and aircraft operations in the Arctic. The Navy and the Coast Guard currently have limited infrastructure in place in the Arctic to support expanded ship and aircraft operations in the Arctic. Expanded ship and aircraft operations in the Arctic may require altering ship and aircraft designs and operating methods. Cooperation with other Arctic countries will be valuable in achieving defense and homeland security goals. The Navy issued its first Arctic roadmap on November 10, 2009. The document, dated October 2009, was intended to guide the service's activities regarding the Arctic for the period FY2010-FY2014. The document has now been succeeded by the 2014-2030 Navy Arctic roadmap (see discussion below). In August 2011, the Navy released an Arctic environment assessment and outlook report. The report states the following: As the Arctic environment continues to change and human activity increases, the U.S. Navy must be prepared to operate in this region. It is important to note that even though the Arctic is opening up, it will continue to be a harsh and challenging environment for the foreseeable future due to hazardous sea ice, freezing temperatures and extreme weather. Although the Navy submarine fleet has decades of experience operating in the Arctic, the surface fleet, air assets, and U.S. Marine Corps ground troops have limited experience there. The Navy must now consider the Arctic in terms of future policy, strategy, force structure, and investments. The November 2013 DOD Arctic strategy (see discussion above in the section on DOD) states that \"The Department of the Navy, in its role as DoD Executive Agent for Maritime Domain Awareness, will lead DoD coordination on maritime detection and tracking,\" and that \"DoD will take steps to work with other Federal departments and agencies to improve nautical charts, enhance relevant atmospheric and oceanic models, improve accuracy of estimates of ice extent and thickness, and detect and monitor climate change indicators. In particular, the Department of the Navy will work in partnership with other Federal departments and agencies (e.g., DHS, the Department of Commerce) and international partners to improve hydrographic charting and oceanographic surveys in the Arctic.\" The Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see \" Background \") mentions the Navy by name only once, as one of several agencies that will \"collaborate to improve marine charting in the Arctic (Integrated Ocean and Coastal Mapping) and topographic mapping (Alaska Mapping Executive Committee).\" As noted above in the discussion of DOD in general, however, the January 2014 implementation plan makes DOD the lead federal agency for one of the plan's 36 or so specific initiatives and a supporting agency for 18 others. The Navy will likely be a prominent participant in DOD's activities for a number of these 19 initiatives. On February 24, 2014, the Navy released an updated Arctic roadmap intended to guide Navy activities regarding the Arctic for the period 2014-2030. The document is the successor to the November 2009 Navy Arctic roadmap (see discussion above). The executive summary of the 2014-2030 Navy Arctic roadmap states the following: The United States Navy, as the maritime component of the Department of Defense, has global leadership responsibilities to provide ready forces for current operations and contingency response that include the Arctic Ocean. The Arctic Region remains a challenging operating environment, with a harsh climate, vast distances, and little infrastructure. These issues, coupled with limited operational experience, are just a few substantial challenges the Navy will have to overcome in the Arctic Region. While the Region is expected to remain a low threat security environment where nations resolve differences peacefully, the Navy will be prepared to prevent conflict and ensure national interests are protected.... Navy functions in the Arctic Region are no different from those in other maritime regions; however, the Arctic Region environment makes the execution of many of these functions much more challenging.... In support of National and Department of Defense aims, the Navy will pursue the following strategic objectives: • Ensure United States Arctic sovereignty and provide homeland defense ; • Provide ready naval forces to respond to crisis and contingencies; • Preserve freedom of the seas ; and • Promote partnerships within the United States Government and with international allies and partners.... Resource constraints and competing near-term mission demands require that naval investments be informed, focused, and deliberate. Proactive planning today allows the Navy to prepare its forces for Arctic Region operations. This Roadmap emphasizes low-cost, long-lead activities that position the Navy to meet future demands. In the near to mid-term, the Navy will concentrate on improving operational capabilities, expertise, and capacity, extending reach, and will leverage interagency and international partners to achieve its strategic objectives. The Roadmap recognizes the need to guide investments by prudently balancing regional requirements with national goals.... This Roadmap provides direction to the Navy for the near-term (present-2020), mid-term (2020-2030), and far-term (beyond 2030), placing particular emphasis on near-term actions necessary to enhance Navy's ability to operate in the Arctic Region in the future. In the near-term, there will be low demand for additional naval involvement in the Region. Current Navy capabilities are sufficient to meet near-term operational needs. Navy will refine doctrine, operating procedures, and tactics, techniques, and procedures to guide future potential operations in the Arctic Region. In the mid-term, the Navy will provide support to the Combatant Commanders, United States Coast Guard, and other United States Government agencies. In the far-term, increased periods of ice-free conditions could require the Navy to expand this support on a more routine basis. Regarding \"United States Navy Ways and Means for Near-Term, Mid-Term, and Far-Term Operations,\" the roadmap states the following: Near-term: Present to 2020. The Navy will continue to provide capability and presence primarily through undersea and air assets. Surface ship operations will be limited to open water operations in the near-term. Even in open water conditions, weather factors, including sea ice, must be considered in operational risk assessments. During shoulder seasons, the Navy may employ ice strengthened Military Sealift Command (MSC) ships to conduct Navy missions. By 2020, the Navy will increase the number of personnel trained in Arctic operations. The Navy will grow expertise in all domains by continuing to participate in exercises, scientific missions, and personnel exchanges in Arctic-like conditions. Personnel exchanges will provide Sailors with opportunities to learn best practices from other United States' military services, interagency partners, and international allies and partners. The Navy will refine or develop the necessary strategy, policy, plans, and requirements for the Arctic Region. Additionally, the Navy will continue to study and make informed decisions on pursuing investments to better facilitate Arctic operations. The Navy will emphasize low cost, long-lead time activities to match capability and capacity to future demands. The Navy will update operating requirements and procedures for personnel, ships, and aircraft to operate in the Region with interagency partners and allies. Through ongoing exercises, such as Ice Exercise (ICEX) and Scientific Ice Expeditions (SCICEX) research, and transits through the region by Navy submarines, aircraft and surface vessels, the Navy will continue to learn more about the evolving operating environment. The Navy will focus on areas where it provides unique capabilities and will leverage joint and coalition partners to fill identified gaps and seams. Mid-term: 2020 to 2030. By 2030, the Navy will have the necessary training and personnel to respond to contingencies and emergencies affecting national security. As the Arctic Ocean becomes increasingly ice-free, surface vessels will operate in the expanding open water areas. The Navy will improve its capabilities by participating in increasingly complex exercises and training with regional partners. While primary risks in the mid-term will likely be meeting search and rescue or disaster response mission demands, the Navy may also be called upon to ensure freedom of navigation in Arctic Ocean waters. The Navy will work to mitigate the gaps and seams and transition its Arctic Ocean operations from a capability to provide periodic presence to a capability to operate deliberately for sustained periods when needed. Far-term: Beyond 2030. In the far-term, Navy will be capable of supporting sustained operations in the Arctic Region as needed to meet national policy guidance. The Navy will provide trained and equipped personnel, along with surface, subsurface, and air capabilities, to achieve Combatant Commander's objectives. The high confidence of diminished ice coverage and navigable waterways for much of the year will enable naval forces to operate forward, ready to respond to any potential threat to national security, or to provide contingency response. Far-term risks include increased potential for search and rescue and DSCA [Defense Support of Civil Authorities], but may also require naval forces to have a greater focus on maritime security and freedom of navigation in the Region. In May 2018, the Navy announced that it would reestablish the 2 nd Fleet, which was the Navy's fleet during the Cold War for countering Soviet naval forces in the North Atlantic. The fleet's formal reestablishment occurred in August 2018. The 2 nd Fleet was created in 1950 and disestablished in September 2011. In its newly reestablished form, it is described as focusing on countering Russian naval forces not only in the North Atlantic but in the Arctic as well. In January 2019, the Navy announced that \"in coming months\" it will send a Navy warship through Arctic waters on a freedom of navigation (FON) operation to assert U.S. navigational rights under international law in Arctic waters. The U.S. government's FON program was established in 1979 and annually includes multiple U.S. Navy FON operations conducted in various parts of the world. The upcoming FON operation in the Arctic, however, will reportedly be the Navy's first ever FON operation in the Arctic. At a November 17, 2015, hearing on Arctic operations before two subcommittees of the House Foreign Affairs Committee, the Coast Guard testified that The Coast Guard has been operating in the Arctic Ocean since 1867, when Alaska was purchased from Russia. Then, as now, our mission is to enforce U.S. laws and regulations, conduct search and rescue, assist scientific exploration, and foster navigation safety and environmental stewardship. The Coast Guard uses mobile command and control platforms including large cutters and ocean-going ice-strengthened buoy tenders, as well as seasonal air and communications capabilities to execute these missions within more than 950,000 square miles of ocean off the Alaskan coast. Since 2008, the Coast Guard has conducted operations in the Arctic Region to assess our capabilities and mission requirements as maritime activity and environmental conditions warrant. These operations have included establishing small, temporary Forward Operating Locations along the North Slope to test our capabilities with boats, helicopters, and personnel. Each year from April to November we also fly aerial sorties to evaluate activities in the region. We will continue to deploy a suite of Coast Guard cutters to test our equipment, train our crews, and increase our awareness of Arctic activity. In July 2011, the Coast Guard provided to Congress a study on the Coast Guard's missions and capabilities for operations in high-latitude (i.e., polar) areas. The study, commonly known as the High Latitude Study, is dated July 2010 on its cover. The High Latitude Study concluded the following: [The study] concludes that future [Coast Guard] capability and capacity gaps will significantly impact four [Coast Guard] mission areas in the Arctic: Defense Readiness, Ice Operations, Marine Environmental Protection, and Ports, Waterways, and Coastal Security. These mission areas address the protection of important national interests in a geographic area where other nations are actively pursuing their own national goals. U.S. national policy and laws define the requirements to assert the nation's jurisdiction over its territory and interests; to ensure the security of its people and critical infrastructure; to participate fully in the collection of scientific knowledge; to support commercial enterprises with public utility; and to ensure that the Arctic environment is not degraded by increased human activity. The Coast Guard's ability to support Defense Readiness mission requirements in the Arctic is closely linked to DoD responsibilities. The Coast Guard presently possesses the only surface vessels capable of operating in ice-covered and ice-diminished waters. The Coast Guard supports (1) DoD missions such as the resupply of Thule Air Base in Greenland and logistics support (backup) for McMurdo Station in Antarctica and (2) Department of State (DoS) directed Freedom of Navigation Operations. These unique Coast Guard capabilities have been noted by the Joint Chiefs of Staff, the Navy's Task Force Climate Change, and the recently issued Naval Operations Concept 2010. The common and dominant contributor to these significant mission impacts is the gap in polar icebreaking capability.... Other capability gaps contributing to the impact on Coast Guard ability to carry out its missions in the Arctic include • Communications System Capability – Continuous coverage along Alaska's West Coast, the Bering Strait, and throughout the North Slope is required for exchanging voice and data communications with Coast Guard units and other government and commercial platforms offshore. • Forward Operating Locations - No suitable facilities currently exist on the North Slope or near the Bering Strait with facilities sufficient to support extended aircraft servicing and maintenance. Aircraft must travel long distances and expend significant time transiting to and from adequate facilities. This gap reduces on-scene presence and capability to support sustained operations in the region. • Environmental response in ice-covered waters - The technology and procedures for assessment and mitigation measures for oil spills in ice-covered waters are not fully developed or tested. Capability gaps in the Arctic region have moderate impacts on [the Coast Guard's] Aids to Navigation (AtoN), Search and Rescue (SAR), and Other Law Enforcement (OLE) missions. Both AtoN and SAR involve the safety of mariners and will gain more importance not only as commerce and tourism cause an increase in maritime traffic, but as U.S. citizens in northern Alaska face more unpredictable conditions. Performance of OLE will be increasingly necessary to ensure the integrity of U.S. living marine resources from outside pressures.... In addition to the assessment of polar icebreaking needs, the Arctic mission analysis examined a set of theoretical mixes (force packages) of Coast Guard assets consisting of icebreakers, their embarked helicopters, and deployment alternatives using aviation forward operating locations in Arctic Alaska.... All [six] of the force mixes [considered in the study] add assets to the existing Coast Guard Alaska Patrol consisting of (1) a high-endurance cutter (not an icebreaker) deployed in the Bering Sea carrying a short range recovery helicopter, and (2) medium range recovery helicopters located at Kodiak in the Gulf of Alaska, and seasonally deployed to locations in Cold Bay and St. Paul Island.... These force packages and associated risk assessment provide a framework for acquisition planning as the Coast Guard implements a strategy for closing the capability gaps. By first recapitalizing the aging icebreakers, the Coast Guard provides a foundation for buildout of these force mixes. In addition to the cost of the icebreakers, the force packages require investment in forward operating locations and in medium range helicopters. The mission analysis reports developed rough order-of-magnitude cost estimates for forward operating locations at approximately $36M [million] each and for helicopters at $9M each.... The analysis shows that the current Coast Guard deployment posture is not capable of effective response in northern Alaska and that response may be improved through a mix of deployed cutters, aircraft, and supporting infrastructure including forward operating locations and communications/navigation systems. On May 21, 2013, the Coast Guard released a strategy document for the Arctic. The executive summary of the document states the following in part: The U.S. Coast Guard, as the maritime component of the U.S. Department of Homeland Security (DHS), has specific statutory responsibilities in U.S. Arctic waters. This strategy outlines the ends, ways, and means for achieving strategic objectives in the Arctic over the next 10 years. The Coast Guard is responsible for ensuring safe, secure, and environmentally responsible maritime activity in U.S. Arctic waters. Our efforts must be accomplished in close coordination with DHS components, and involve facilitating commerce, managing borders, and improving resilience to disasters. The Coast Guard's current suite of cutters, boats, aircraft, and shore infrastructure must meet a number of near-term mission demands. The Coast Guard employs mobile command and control platforms such as large cutters and ocean-going ice-strengthened buoy tenders, as well as seasonal air and communications capabilities through leased or deployable assets and facilities. These mobile and seasonal assets and facilities have proven to be important enablers for front-line priorities in the region, including search and rescue operations, securing the maritime border, collecting critical intelligence, responding to potential disasters, and protecting the marine environment.... Although winter sea travel is still severely limited due to extensive ice coverage across the region, recent summer and early autumn sea ice extent record lows have made seasonal maritime navigation more feasible. Economic development, in the forms of resource extraction, adventure tourism, and trans-Arctic shipping drives much of the current maritime activity in the region. [Oil and gas exploration] activities [in the region] bring risk, which can be mitigated through appropriate maritime governance. Additionally, tourism is increasing rapidly in the Arctic. Due to undeveloped shore-based infrastructure, much of the increased tourism is expected to involve transportation via passenger vessel, further increasing near- and offshore activities in Arctic waters. This document outlines three strategic objectives in the Arctic for the U.S. Coast Guard over the next 10 years: • Improving Awareness • Modernizing Governance • Broadening Partnerships Improving Awareness: Coast Guard operations require precise and ongoing awareness of activities in the maritime domain. Maritime awareness in the Arctic is currently restricted due to limited surveillance, monitoring, and information system capabilities. Persistent awareness enables identification of threats, information-sharing with front-line partners, and improved risk management. Improving awareness requires close collaboration within DHS, as well as with the Departments of State, Defense, Interior, the National Science Foundation and other stakeholders to enhance integration, innovation, and fielding of emerging technologies. The Intelligence Community and non-federal partners are also vital stakeholders. Modernizing Governance: The concept of governance involves institutions, structures of authority, and capabilities necessary to oversee maritime activities while safeguarding national interests. Limited awareness and oversight challenge maritime sovereignty, including the protection of natural resources and control of maritime borders. The Coast Guard will work within its authorities to foster collective efforts, both domestically and internationally, to improve Arctic governance. In so doing, the Coast Guard will review its own institutions and regimes of governance to prepare for future missions throughout the Arctic. Broadening Partnerships: Success in the Arctic requires a collective effort across both the public and private sectors. Such a collective effort must be inclusive of domestic regulatory regimes; international collaborative forums such as the Arctic Council, International Maritime Organization (IMO), and Inuit Circumpolar Council; domestic and international partnerships; and local engagements in Arctic communities focusing on training and volunteer service. Success in the Arctic also depends upon close intergovernmental cooperation to support national interests, including working closely within DHS, as well as with the Department of State, Department of Interior and other Federal partners as the U.S. prepares to assume Chairmanship of the Arctic Council in 2015. Beyond these three strategic objectives, there are a number of additional factors that will position the Coast Guard for long-term success. These factors include building national awareness of the Arctic and its opportunities, strengthening maritime regimes, improving public-private relationships through a national concept of operations, seeking necessary authorities, and identifying future requirements and resources to shape trends favorably. This strategy outlines a number of priorities, ranging from capabilities and requirements to advances in science and technology that will facilitate our Nation's success in the region. Specifically, the strategy advocates to leverage the entire DHS enterprise and component capabilities to secure our borders, prevent terrorism, adapt to changing environmental conditions, enable community resilience and inform future policy. Operating in the Arctic is not a new venture for the Coast Guard. However, adapting to changing conditions will require foresight, focus, and clear priorities. This strategy will ensure we attain the aim of safe, secure, and environmentally responsible maritime activity in the Arctic by improving awareness, modernizing governance, and broadening partnerships to ensure long-term success. The Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see \" Background \") makes \"Department of Homeland Security (United States Coast Guard)\" the lead federal agency for 6 of the plan's 36 or so specific initiatives, and a supporting agency for 13 others. The six initiatives where the Coast Guard is designated the lead federal agency include enhance Arctic domain awareness; improve hazardous material spill prevention, containment, and response; promote Arctic oil pollution preparedness, prevention, and response internationally; enhance Arctic SAR; expedite International Maritime Organization (IMO) Polar Code development and adoption; and promote Arctic waterways management. For the second initiative above—\"Improve Hazardous Material Spill Prevention, Containment, and Response\"—the Coast Guard shares lead-agency status with the Environmental Protection Agency (EPA), with the Coast Guard being the lead federal agency for open ocean and coastal spills, and EPA being the lead federal agency for inland spills. The Coast Guard, working with coast guards of other Arctic nations, in October 2015 established an Arctic Coast Guard Forum (ACGF). The Coast Guard states that The Arctic Coast Guard Forum (ACGF), modeled after the successful North Pacific Coast Guard Forum, is a unique maritime governance group where Principals of all eight Arctic countries discuss coordination of exercises, strengthen relationships, and share best practices. Complimentary to the Arctic Council, the chairmanship of the ACGF will reside with the country holding the rotating chair of the Arctic Council. The first \"experts-level\" meetings of the ACGF in 2014 garnered enthusiastic approval of the concept. Representatives of the eight Arctic nations finalized and agreed on a Terms of Reference document, determined working groups (Secretariat and Combined Operations), and drafted a Joint Statement. The first ever \"Heads of Arctic Coast Guards\" meeting took place on October 28-30, 2015 at the U.S. Coast Guard Academy, and the participating nations approved the Terms of Reference and released the Joint Statement. A June 2016 GAO report on Coast Guard Arctic capabilities states the following: The U.S. Coast Guard, within the Department of Homeland Security, reported making progress implementing its Arctic strategy. For example, the Coast Guard reported conducting exercises related to Arctic oil spill response and search and rescue, and facilitating the formation of a safety committee in the Arctic, among other tasks in its strategy. To track the status of these efforts, the Coast Guard is developing a web-based tool and anticipates finalizing the tool in mid-2016. The Coast Guard assessed its capability to perform its Arctic missions and identified various capability gaps—including communications, infrastructure, and icebreaking, and has worked to mitigate these gaps with its Arctic partners, such as other federal agencies. Specifically, Coast Guard officials stated that the agency's actions to implement the various Arctic strategies and carry out annual Arctic operations have helped to mitigate Arctic capability gaps. However, the Coast Guard has not systematically assessed the extent to which its actions agency-wide have helped to mitigate these gaps. Coast Guard officials attributed this, in part, to not being able to unilaterally close the gaps. While mitigating these gaps requires joint efforts among Arctic partners, the Coast Guard has taken actions in the Arctic that are specific to its missions and therefore has responsibility for assessing the extent to which these actions have helped to mitigate capability gaps. By systematically assessing and measuring its progress, the Coast Guard will better understand the status of these gaps and be better positioned to effectively plan its Arctic operations. The Coast Guard has been unable to fulfill some of its polar icebreaking responsibilities with its aging icebreaker fleet, which currently includes two active polar icebreakers. In 2011 and 2012, the Coast Guard was unable to maintain assured, year-round access to the Arctic and did not meet 4 of 11 requests for polar icebreaking services. With its one active heavy icebreaker—which has greater icebreaking capability—nearing the end of its service life, the Coast Guard initiated a program in 2013 to acquire a new one and is working to determine the optimal acquisition strategy. However, the Coast Guard's efforts to acquire an icebreaker, whether by lease or purchase, will be limited by legal and operational requirements. In addition, current projections show that the Coast Guard is likely to have a 3- to 6-year gap in its heavy icebreaking capability before a new icebreaker becomes operational.... The Coast Guard is developing a strategy to determine how to best address this expected gap. A March 24, 2017, press report states the following: Coast guard leaders from the world's eight Arctic nations met in Boston Friday [March 24] to sign a joint statement for cooperation on emergency maritime response and combined operations in the high northern seas. U.S. Coast Guard Commandant Adm. Paul Zukunft joined leaders representing Canada, Denmark, Finland, Iceland, Norway, Sweden and the Russian Federation in the signing, and a ceremony handing off chairmanship of the group from the U.S. to the Finnish Border Guard. Maritime and environmental groups alike have stressed the need for closer international cooperation, as more Arctic shipping routes became navigable with retreating ice, opening access for shipping, energy and mineral exploration and commercial tourism. The statement adopts doctrine, tactics, procedures and information-sharing protocols for emergency maritime response and combined operations in the Arctic. It culminated two years of international collaboration, as working groups established strategies, objectives and tactics aimed towards achieving common operational goals in the region. So far, nation representatives have participated in table top exercises in Reykjavik, Iceland, and the District of Columbia. A live exercise in the Arctic is planned for later this year. Coast Guard officials describe the forum as \"an operationally-focused, consensus-based organization with the purpose of leveraging collective resources to foster safe, secure and environmentally responsible maritime activity in the Arctic.\" \"This forum — one of many ways in which the Coast Guard uses our unique roles to enhance our Nation's diplomacy — has quickly established itself as a premier platform for fostering safe, secure and environmentally responsible maritime activity in the Arctic,\" said Zukunft. In testimony to U.S. senators earlier this week, Zukunft spoke of the need to engage with other Arctic nations, characterizing it as a clear preference for cooperation over competition. Nevertheless, he stressed the need for the U.S. to press forward with building a new fleet of three heavy and three medium icebreakers. The Senate Appropriations Committee, in its report ( S.Rept. 115-283 of June 21, 2108) on S. 3109 , states the following: Arctic Program Office .—Recognizing the growing national security imperatives for an enhanced U.S. presence in the Arctic, the Committee is pleased that the Coast Guard has established an Arctic Strategy, an Arctic Strategy Implementation Plan, and an Arctic Program Office. This office has furthered the Nation's national defense and security interests in the Arctic through its extensive participation, coordination, and collaboration with other international, Federal, and SLTT partners to improve awareness, broaden partnerships, and modernize governance in the Arctic. Most recently, the office supported the completion of the Bering Strait Port Access Route Study, a study that resulted in a joint recommendation by the United States and the Russian Federation to the International Maritime Organization [IMO] to establish a common vessel traffic measure. Recently approved by the IMO, the traffic measure is the first IMO-approved measure for navigation safety in polar waters. The Coast Guard is to report to the Committee if additional resources are needed for the Arctic Program Office to further its important mission. (Pages 61-62) CRS Report RL34266, Climate Change: Science Highlights , by Jane A. Leggett CRS Report RS21890, The U.N. Law of the Sea Convention and the United States: Developments Since October 2003 , by Marjorie Ann Browne CRS Report RL33872, Arctic National Wildlife Refuge (ANWR): An Overview , by M. Lynne Corn, Michael Ratner, and Laura B. Comay CRS Report RL32838, Arctic National Wildlife Refuge (ANWR): Votes and Legislative Actions Since the 95th Congress , by M. Lynne Corn and Beth Cook CRS Report RL34547, Possible Federal Revenue from Oil Development of ANWR and Nearby Areas , by Salvatore Lazzari CRS Report RL33705, Oil Spills: Background and Governance , by Jonathan L. Ramseur CRS Report RL33941, Polar Bears: Listing Under the Endangered Species Act , by Eugene H. Buck, M. Lynne Corn, and Kristina Alexander CRS Report RL34391, Coast Guard Polar Security Cutter (Polar Icebreaker) Program: Background and Issues for Congress , by Ronald O'Rourke CRS Report RL34342, Homeland Security: Roles and Missions for United States Northern Command , by William Knight Appendix A. Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 ) The text of the Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 of July 31, 1984) is as follows: TITLE I – ARCTIC RESEARCH AND POLICY SHORT TITLE SEC. 101. This title may be cited as the \"Arctic Research and Policy Act of 1984\". FINDINGS AND PURPOSES SEC. 102. (a) The Congress finds and declares that- (1) the Arctic, onshore and offshore, contains vital energy resources that can reduce the Nation's dependence on foreign oil and improve the national balance of payments; (2) as the Nation's only common border with the Soviet Union, the Arctic is critical to national defense; (3) the renewable resources of the Arctic, specifically fish and other seafood, represent one of the Nation's greatest commercial assets; (4) Arctic conditions directly affect global weather patterns and must be understood in order to promote better agricultural management throughout the United States; (5) industrial pollution not originating in the Arctic region collects in the polar air mass, has the potential to disrupt global weather patterns, and must be controlled through international cooperation and consultation; (6) the Arctic is a natural laboratory for research into human health and adaptation, physical and psychological, to climates of extreme cold and isolation and may provide information crucial for future defense needs; (7) atmospheric conditions peculiar to the Arctic make the Arctic a unique testing ground for research into high latitude communications, which is likely to be crucial for future defense needs; (8) Arctic marine technology is critical to cost-effective recovery and transportation of energy resources and to the national defense; (9) the United States has important security, economic, and environmental interests in developing and maintaining a fleet of icebreaking vessels capable of operating effectively in the heavy ice regions of the Arctic; (10) most Arctic-rim countries, particularly the Soviet Union, possess Arctic technologies far more advanced than those currently available in the United States; (11) Federal Arctic research is fragmented and uncoordinated at the present time, leading to the neglect of certain areas of research and to unnecessary duplication of effort in other areas of research; (12) improved logistical coordination and support for Arctic research and better dissemination of research data and information is necessary to increase the efficiency and utility of national Arctic research efforts; (13) a comprehensive national policy and program plan to organize and fund currently neglected scientific research with respect to the Arctic is necessary to fulfill national objectives in Arctic research; (14) the Federal Government, in cooperation with State and local governments, should focus its efforts on the collection and characterization of basic data related to biological, materials, geophysical, social, and behavioral phenomena in the Arctic; (15) research into the long-range health, environmental, and social effects of development in the Arctic is necessary to mitigate the adverse consequences of that development to the land and its residents; (16) Arctic research expands knowledge of the Arctic, which can enhance the lives of Arctic residents, increase opportunities for international cooperation among Arctic-rim countries, and facilitate the formulation of national policy for the Arctic; and (17) the Alaskan Arctic provides an essential habitat for marine mammals, migratory waterfowl, and other forms of wildlife which are important to the Nation and which are essential to Arctic residents. (b) The purposes of this title are- (1) to establish national policy, priorities, and goals and to provide a Federal program plan for basic and applied scientific research with respect to the Arctic, including natural resources and materials, physical, biological and health sciences, and social and behavioral sciences; (2) to establish an Arctic Research Commission to promote Arctic research and to recommend Arctic research policy; (3) to designate the National Science Foundation as the lead agency responsible for implementing Arctic research policy; and (4) to establish an Interagency Arctic Research Policy Committee to develop a national Arctic research policy and a five year plan to implement that policy. ARCTIC RESEARCH COMMISSION SEC. 103. (a) The President shall establish an Arctic Research Commission (hereafter referred to as the \"Commission\"). (b)(1) The Commission shall be composed of five members appointed by the President, with the Director of the National Science Foundation serving as a nonvoting, ex officio member. The members appointed by the President shall include- (A) three members appointed from among individuals from academic or other research institutions with expertise in areas of research relating to the Arctic, including the physical, biological, health, environmental, social, and behavioral sciences; (B) one member appointed from among indigenous residents of the Arctic who are representative of the needs and interests of Arctic residents and who live in areas directly affected by Arctic resource development; and (C) one member appointed from among individuals familiar with the Arctic and representative of the needs and interests of private industry undertaking resource development in the Arctic. (2) The President shall designate one of the appointed members of the Commission to be chairperson of the Commission. (c)(1) Except as provided in paragraph (2) of this subsection, the term of office of each member of the Commission appointed under subsection (b)(1) shall be four years. (2) Of the members of the Commission originally appointed under subsection (b)(1)- (A) one shall be appointed for a term of two years; (B) two shall be appointed for a term of three years; and (C) two shall be appointed for a term of four years. (3) Any vacancy occurring in the membership of the Commission shall be filled, after notice of the vacancy is published in the Federal Register, in the manner provided by the preceding provisions of this section, for the remainder of the unexpired term. (4) A member may serve after the expiration of the member's term of office until the President appoints a successor. (5) A member may serve consecutive terms beyond the member's original appointment. (d)(1) Members of the Commission may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by section 5703 of title 5, United States Code. A member of the Commission not presently employed for compensation shall be compensated at a rate equal to the daily equivalent of the rate for GS-16 of the General Schedule under section 5332 of title 5, United States Code, for each day the member is engaged in the actual performance of his duties as a member of the Commission, not to exceed 90 days of service each year. Except for the purposes of chapter 81 of title 5 (relating to compensation for work injuries) and chapter 171 of title 28 (relating to tort claims), a member of the Commission shall not be considered an employee of the United States for any purpose. (2) The Commission shall meet at the call of its Chairman or a majority of its members. (3) Each Federal agency referred to in section 107(b) may designate a representative to participate as an observer with the Commission. These representatives shall report to and advise the Commission on the activities relating to Arctic research of their agencies. (4) The Commission shall conduct at least one public meeting in the State of Alaska annually. DUTIES OF COMMISSION SEC. 104. (a) The Commission shall- (1) develop and recommend an integrated national Arctic research policy; (2) in cooperation with the Interagency Arctic Research Policy Committee established under section 107, assist in establishing a national Arctic research program plan to implement the Arctic research policy; (3) facilitate cooperation between the Federal Government and State and local governments with respect to Arctic research; (4) review Federal research programs in the Arctic and suggest improvements in coordination among programs; (5) recommend methods to improve logistical planning and support for Arctic research as may be appropriate and in accordance with the findings and purposes of this title; (6) suggest methods for improving efficient sharing and dissemination of data and information on the Arctic among interested public and private institutions; (7) offer other recommendations and advice to the Interagency Committee established under section 107 as it may find appropriate; and (8) cooperate with the Governor of the State of Alaska and with agencies and organizations of that State which the Governor may designate with respect to the formulation of Arctic research policy. (b) Not later than January 31 of each year, the Commission shall- (1) publish a statement of goals and objectives with respect to Arctic research to guide the Interagency Committee established under section 107 in the performance of its duties; and (2) submit to the President and to the Congress a report describing the activities and accomplishments of the Commission during the immediately preceding fiscal year. COOPERATION WITH THE COMMISSION SEC. 105. (a)(1) The Commission may acquire from the head of any Federal agency unclassified data, reports, and other nonproprietary information with respect to Arctic research in the possession of the agency which the Commission considers useful in the discharge of its duties. (2) Each agency shall cooperate with the Commission and furnish all data, reports, and other information requested by the Commission to the extent permitted by law; except that no agency need furnish any information which it is permitted to withhold under section 552 of title 5, United States Code. (b) With the consent of the appropriate agency head, the Commission may utilize the facilities and services of any Federal agency to the extent that the facilities and services are needed for the establishment and development of an Arctic research policy, upon reimbursement to be agreed upon by the Commission and the agency head and taking every feasible step to avoid duplication of effort. (c) All Federal agencies shall consult with the Commission before undertaking major Federal actions relating to Arctic research. ADMINISTRATION OF THE COMMISSION SEC. 106. The Commission may- (1) in accordance with the civil service laws and subchapter III of chapter 53 of title 5, United States Code, appoint and fix the compensation of an Executive Director and necessary additional staff personnel, but not to exceed a total of seven compensated personnel; (2) procure temporary and intermittent services as authorized by section 3109 of title 5, United States Code; (3) enter into contracts and procure supplies, services, and personal property; and (4) enter into agreements with the General Services Administration for the procurement of necessary financial and administrative services, for which payment shall be made by reimbursement from funds of the Commission in amounts to be agreed upon by the Commission and the Administrator of the General Services Administration. LEAD AGENCY AND INTERAGENCY ARCTIC RESEARCH POLICY COMMITTEE SEC. 107. (a) The National Science Foundation is designated as the lead agency responsible for implementing Arctic research policy, and the Director of the National Science Foundation shall insure that the requirements of section 108 are fulfilled. (b)(1) The President shall establish an Interagency Arctic Research Policy Committee (hereinafter referred to as the \"Interagency Committee\"). (2) The Interagency Committee shall be composed of representatives of the following Federal agencies or offices: (A) the National Science Foundation; (B) the Department of Commerce; (C) the Department of Defense; (D) the Department of Energy; (E) the Department of the Interior; (F) the Department of State; (G) the Department of Transportation; (H) the Department of Health and Human Services; (I) the National Aeronautics and Space Administration; (J) the Environmental Protection Agency; and (K) any other agency or office deemed appropriate. (3) The representative of the National Science Foundation shall serve as the Chairperson of the Interagency Committee. DUTIES OF THE INTERAGENCY COMMITTEE SEC. 108. (a) The Interagency Committee shall- (1) survey Arctic research conducted by Federal, State, and local agencies, universities, and other public and private institutions to help determine priorities for future Arctic research, including natural resources and materials, physical and biological sciences, and social and behavioral sciences; (2) work with the Commission to develop and establish an integrated national Arctic research policy that will guide Federal agencies in developing and implementing their research programs in the Arctic; (3) consult with the Commission on- (A) the development of the national Arctic research policy and the 5-year plan implementing the policy; (B) Arctic research programs of Federal agencies; (C) recommendations of the Commission on future Arctic research; and (D) guidelines for Federal agencies for awarding and administering Arctic research grants; (4) develop a 5-year plan to implement the national policy, as provided for in section 109; (5) provide the necessary coordination, data, and assistance for the preparation of a single integrated, coherent, and multiagency budget request for Arctic research as provided for in section 110; (6) facilitate cooperation between the Federal Government and State and local governments in Arctic research, and recommend the undertaking of neglected areas of research in accordance with the findings and purposes of this title; (7) coordinate and promote cooperative Arctic scientific research programs with other nations, subject to the foreign policy guidance of the Secretary of State; (8) cooperate with the Governor of the State of Alaska in fulfilling its responsibilities under this title; (9) promote Federal interagency coordination of all Arctic research activities, including- (A) logistical planning and coordination; and (B) the sharing of data and information associated with Arctic research, subject to section 552 of title 5, United States Code; and (10) provide public notice of its meetings and an opportunity for the public to participate in the development and implementation of national Arctic research policy. (b) Not later than January 31, 1986, and biennially thereafter, the Interagency Committee shall submit to the Congress through the President, a brief, concise report containing- (1) a statement of the activities and accomplishments of the Interagency Committee since its last report; and (2) a description of the activities of the Commission, detailing with particularity the recommendations of the Commission with respect to Federal activities in Arctic research. 5-YEAR ARCTIC RESEARCH PLAN SEC. 109. (a) The Interagency Committee, in consultation with the Commission, the Governor of the State of Alaska, the residents of the Arctic, the private sector, and public interest groups, shall prepare a comprehensive 5-year program plan (hereinafter referred to as the \"Plan\") for the overall Federal effort in Arctic research. The Plan shall be prepared and submitted to the President for transmittal to the Congress within one year after the enactment of this Act and shall be revised biennially thereafter. (b) The Plan shall contain but need not be limited to the following elements: (1) an assessment of national needs and problems regarding the Arctic and the research necessary to address those needs or problems; (2) a statement of the goals and objectives of the Interagency Committee for national Arctic research; (3) a detailed listing of all existing Federal programs relating to Arctic research, including the existing goals, funding levels for each of the 5 following fiscal years, and the funds currently being expended to conduct the programs; (4) recommendations for necessary program changes and other proposals to meet the requirements of the policy and goals as set forth by the Commission and in the Plan as currently in effect; and (5) a description of the actions taken by the Interagency Committee to coordinate the budget review process in order to ensure interagency coordination and cooperation in (A) carrying out Federal Arctic research programs, and (B) eliminating unnecessary duplication of effort among these programs. COORDINATION AND REVIEW OF BUDGET REQUESTS SEC. 110. (a) The Office of Science and Technology Policy shall- (1) review all agency and department budget requests related to the Arctic transmitted pursuant to section 108(a)(5), in accordance with the national Arctic research policy and the 5-year program under section 108(a)(2) and section 109, respectively; and (2) consult closely with the Interagency Committee and the Commission to guide the Office of Science and Technology Policy's efforts. (b)(1) The Office of Management and Budget shall consider all Federal agency requests for research related to the Arctic as one integrated, coherent, and multiagency request which shall be reviewed by the Office of Management and Budget prior to submission of the President's annual budget request for its adherence to the Plan. The Commission shall, after submission of the President's annual budget request, review the request and report to Congress on adherence to the Plan. (2) The Office of Management and Budget shall seek to facilitate planning for the design, procurement, maintenance, deployment, and operations of icebreakers needed to provide a platform for Arctic research by allocating all funds necessary to support icebreaking operations, except for recurring incremental costs associated with specific projects, to the Coast Guard. AUTHORIZATION OF APPROPRIATIONS; NEW SPENDING AUTHORITY SEC. 111. (a) There are authorized to be appropriated such sums as may be necessary for carrying out this title. (b) Any new spending authority (within the meaning of section 401 of the Congressional Budget Act of 1974) which is provided under this title shall be effective for any fiscal year only to such extent or in such amounts as may be provided in appropriation Acts. DEFINITION SEC. 112. As used in this title, the term \"Arctic\" means all United States and foreign territory north of the Arctic Circle and all United States territory north and west of the boundary formed by the Porcupine, Yukon, and Kuskokwim Rivers; all contiguous seas, including the Arctic Ocean and the Beaufort, Bering, and Chukchi Seas; and the Aleutian chain. Appendix B. P.L. 101-609 of 1990, Amending Arctic Research and Policy Act (ARPA) of 1984 The Arctic Research and Policy Act (ARPA) of 1984 (see Appendix A ) was amended by P.L. 101-609 of November 16, 1990. The text of P.L. 101-609 is as follows: SECTION 1. Except as specifically provided in this Act, whenever in this Act an amendment or repeal is expressed as an amendment to, or repeal of a provision, the reference shall be deemed to be made to the Arctic Research and Policy Act of 1984. SEC. 2. Section 103(b)(1) (15 U.S.C. 4102(b)(1)) is amended— (1) in the text above clause (A), by striking out `five' and inserting in lieu thereof `seven'; (2) in clause (A), by striking out `three' and inserting in lieu thereof `four'; and (3) in clause (C), by striking out `one member' and inserting in lieu thereof `two members'. SEC. 3. Section 103(d)(1) (15 U.S.C. 4102(d)(1)) is amended by striking out `GS-16' and inserting in lieu thereof `GS-18'. SEC. 4. (a) Section 104(a) (15 U.S.C. 4102(a)) is amended— (1) in paragraph (4), by striking out `suggest' and inserting in lieu thereof `recommend'; (2) in paragraph (6), by striking out `suggest' and inserting in lieu thereof `recommend'; (3) in paragraph (7), by striking out `and' at the end thereof; (4) in paragraph (8), by striking out the period and inserting in lieu thereof a semicolon; and (5) by adding at the end thereof the following new paragraphs: '(9) recommend to the Interagency Committee the means for developing international scientific cooperation in the Arctic; and '(10) not later than January 31, 1991, and every 2 years thereafter, publish a statement of goals and objectives with respect to Arctic research to guide the Interagency Committee established under section 107 in the performance of its duties.'. (b) Section 104(b) is amended to read as follows: '(b) Not later than January 31 of each year, the Commission shall submit to the President and to the Congress a report describing the activities and accomplishments of the Commission during the immediately preceding fiscal year.'. SEC. 5. Section 106 (15 U.S.C. 4105) is amended— (1) in paragraph (3), by striking out 'and' at the end thereof; (2) in paragraph (4), by striking out the period at the end thereof and inserting in lieu thereof; and'; and (3) by adding at the end thereof the following new paragraph: '(5) appoint, and accept without compensation the services of, scientists and engineering specialists to be advisors to the Commission. Each advisor may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by section 5703 of title 5, United States Code. Except for the purposes of chapter 81 of title 5 (relating to compensation for work injuries) and chapter 171 of title 28 (relating to tort claims) of the United States Code, an advisor appointed under this paragraph shall not be considered an employee of the United States for any purpose.' SEC. 6. Subsection (b)(2) of section 108 (15 U.S.C. 4107(b)(2)) is amended to read as follows: '(2) a statement detailing with particularity the recommendations of the Commission with respect to Federal interagency activities in Arctic research and the disposition and responses to those recommendations.' Appendix C. January 2009 Arctic Policy Directive (NSPD 66/HSPD 25) On January 12, 2009, the George W. Bush Administration released a presidential directive establishing a new U.S. policy for the Arctic region. The directive, dated January 9, 2009, was issued as National Security Presidential Directive 66/Homeland Security Presidential Directive 25 (NSPD 66/HSPD 25). The text of NSPD 66/HSPD 25 is as follows: SUBJECT: Arctic Region Policy I. PURPOSE A. This directive establishes the policy of the United States with respect to the Arctic region and directs related implementation actions. This directive supersedes Presidential Decision Directive/NSC-26 (PDD-26; issued 1994) with respect to Arctic policy but not Antarctic policy; PDD-26 remains in effect for Antarctic policy only. B. This directive shall be implemented in a manner consistent with the Constitution and laws of the United States, with the obligations of the United States under the treaties and other international agreements to which the United States is a party, and with customary international law as recognized by the United States, including with respect to the law of the sea. II. BACKGROUND A. The United States is an Arctic nation, with varied and compelling interests in that region. This directive takes into account several developments, including, among others: 1. Altered national policies on homeland security and defense; 2. The effects of climate change and increasing human activity in the Arctic region; 3. The establishment and ongoing work of the Arctic Council; and 4. A growing awareness that the Arctic region is both fragile and rich in resources. III. POLICY A. It is the policy of the United States to: 1. Meet national security and homeland security needs relevant to the Arctic region; 2. Protect the Arctic environment and conserve its biological resources; 3. Ensure that natural resource management and economic development in the region are environmentally sustainable; 4. Strengthen institutions for cooperation among the eight Arctic nations (the United States, Canada, Denmark, Finland, Iceland, Norway, the Russian Federation, and Sweden); 5. Involve the Arctic's indigenous communities in decisions that affect them; and 6. Enhance scientific monitoring and research into local, regional, and global environmental issues. B. National Security and Homeland Security Interests in the Arctic 1. The United States has broad and fundamental national security interests in the Arctic region and is prepared to operate either independently or in conjunction with other states to safeguard these interests. These interests include such matters as missile defense and early warning; deployment of sea and air systems for strategic sealift, strategic deterrence, maritime presence, and maritime security operations; and ensuring freedom of navigation and overflight. 2. The United States also has fundamental homeland security interests in preventing terrorist attacks and mitigating those criminal or hostile acts that could increase the United States vulnerability to terrorism in the Arctic region. 3. The Arctic region is primarily a maritime domain; as such, existing policies and authorities relating to maritime areas continue to apply, including those relating to law enforcement.[1] Human activity in the Arctic region is increasing and is projected to increase further in coming years. This requires the United States to assert a more active and influential national presence to protect its Arctic interests and to project sea power throughout the region. 4. The United States exercises authority in accordance with lawful claims of United States sovereignty, sovereign rights, and jurisdiction in the Arctic region, including sovereignty within the territorial sea, sovereign rights and jurisdiction within the United States exclusive economic zone and on the continental shelf, and appropriate control in the United States contiguous zone. 5. Freedom of the seas is a top national priority. The Northwest Passage is a strait used for international navigation, and the Northern Sea Route includes straits used for international navigation; the regime of transit passage applies to passage through those straits. Preserving the rights and duties relating to navigation and overflight in the Arctic region supports our ability to exercise these rights throughout the world, including through strategic straits. 6. Implementation: In carrying out this policy as it relates to national security and homeland security interests in the Arctic, the Secretaries of State, Defense, and Homeland Security, in coordination with heads of other relevant executive departments and agencies, shall: a. Develop greater capabilities and capacity, as necessary, to protect United States air, land, and sea borders in the Arctic region; b. Increase Arctic maritime domain awareness in order to protect maritime commerce, critical infrastructure, and key resources; c. Preserve the global mobility of United States military and civilian vessels and aircraft throughout the Arctic region; d. Project a sovereign United States maritime presence in the Arctic in support of essential United States interests; and e. Encourage the peaceful resolution of disputes in the Arctic region. C. International Governance 1. The United States participates in a variety of fora, international organizations, and bilateral contacts that promote United States interests in the Arctic. These include the Arctic Council, the International Maritime Organization (IMO), wildlife conservation and management agreements, and many other mechanisms. As the Arctic changes and human activity in the region increases, the United States and other governments should consider, as appropriate, new international arrangements or enhancements to existing arrangements. 2. The Arctic Council has produced positive results for the United States by working within its limited mandate of environmental protection and sustainable development. Its subsidiary bodies, with help from many United States agencies, have developed and undertaken projects on a wide range of topics. The Council also provides a beneficial venue for interaction with indigenous groups. It is the position of the United States that the Arctic Council should remain a high-level forum devoted to issues within its current mandate and not be transformed into a formal international organization, particularly one with assessed contributions. The United States is nevertheless open to updating the structure of the Council, including consolidation of, or making operational changes to, its subsidiary bodies, to the extent such changes can clearly improve the Council's work and are consistent with the general mandate of the Council. 3. The geopolitical circumstances of the Arctic region differ sufficiently from those of the Antarctic region such that an \"Arctic Treaty\" of broad scope—along the lines of the Antarctic Treaty—is not appropriate or necessary. 4. The Senate should act favorably on U.S. accession to the U.N. Convention on the Law of the Sea promptly, to protect and advance U.S. interests, including with respect to the Arctic. Joining will serve the national security interests of the United States, including the maritime mobility of our Armed Forces worldwide. It will secure U.S. sovereign rights over extensive marine areas, including the valuable natural resources they contain. Accession will promote U.S. interests in the environmental health of the oceans. And it will give the United States a seat at the table when the rights that are vital to our interests are debated and interpreted. 5. Implementation: In carrying out this policy as it relates to international governance, the Secretary of State, in coordination with heads of other relevant executive departments and agencies, shall: a. Continue to cooperate with other countries on Arctic issues through the United Nations (U.N.) and its specialized agencies, as well as through treaties such as the U.N. Framework Convention on Climate Change, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, the Convention on Long Range Transboundary Air Pollution and its protocols, and the Montreal Protocol on Substances that Deplete the Ozone Layer; b. Consider, as appropriate, new or enhanced international arrangements for the Arctic to address issues likely to arise from expected increases in human activity in that region, including shipping, local development and subsistence, exploitation of living marine resources, development of energy and other resources, and tourism; c. Review Arctic Council policy recommendations developed within the ambit of the Council's scientific reviews and ensure the policy recommendations are subject to review by Arctic governments; and d. Continue to seek advice and consent of the United States Senate to accede to the 1982 Law of the Sea Convention. D. Extended Continental Shelf and Boundary Issues 1. Defining with certainty the area of the Arctic seabed and subsoil in which the United States may exercise its sovereign rights over natural resources such as oil, natural gas, methane hydrates, minerals, and living marine species is critical to our national interests in energy security, resource management, and environmental protection. The most effective way to achieve international recognition and legal certainty for our extended continental shelf is through the procedure available to States Parties to the U.N. Convention on the Law of the Sea. 2. The United States and Canada have an unresolved boundary in the Beaufort Sea. United States policy recognizes a boundary in this area based on equidistance. The United States recognizes that the boundary area may contain oil, natural gas, and other resources. 3. The United States and Russia are abiding by the terms of a maritime boundary treaty concluded in 1990, pending its entry into force. The United States is prepared to enter the agreement into force once ratified by the Russian Federation. 4. Implementation: In carrying out this policy as it relates to extended continental shelf and boundary issues, the Secretary of State, in coordination with heads of other relevant executive departments and agencies, shall: a. Take all actions necessary to establish the outer limit of the continental shelf appertaining to the United States, in the Arctic and in other regions, to the fullest extent permitted under international law; b. Consider the conservation and management of natural resources during the process of delimiting the extended continental shelf; and c. Continue to urge the Russian Federation to ratify the 1990 United States-Russia maritime boundary agreement. E. Promoting International Scientific Cooperation 1. Scientific research is vital for the promotion of United States interests in the Arctic region. Successful conduct of U.S. research in the Arctic region requires access throughout the Arctic Ocean and to terrestrial sites, as well as viable international mechanisms for sharing access to research platforms and timely exchange of samples, data, and analyses. Better coordination with the Russian Federation, facilitating access to its domain, is particularly important. 2. The United States promotes the sharing of Arctic research platforms with other countries in support of collaborative research that advances fundamental understanding of the Arctic region in general and potential Arctic change in particular. This could include collaboration with bodies such as the Nordic Council and the European Polar Consortium, as well as with individual nations. 3. Accurate prediction of future environmental and climate change on a regional basis, and the delivery of near real-time information to end-users, requires obtaining, analyzing, and disseminating accurate data from the entire Arctic region, including both paleoclimatic data and observational data. The United States has made significant investments in the infrastructure needed to collect environmental data in the Arctic region, including the establishment of portions of an Arctic circumpolar observing network through a partnership among United States agencies, academic collaborators, and Arctic residents. The United States promotes active involvement of all Arctic nations in these efforts in order to advance scientific understanding that could provide the basis for assessing future impacts and proposed response strategies. 4. United States platforms capable of supporting forefront research in the Arctic Ocean, including portions expected to be ice-covered for the foreseeable future, as well as seasonally ice-free regions, should work with those of other nations through the establishment of an Arctic circumpolar observing network. All Arctic nations are members of the Group on Earth Observations partnership, which provides a framework for organizing an international approach to environmental observations in the region. In addition, the United States recognizes that academic and research institutions are vital partners in promoting and conducting Arctic research. 5. Implementation: In carrying out this policy as it relates to promoting scientific international cooperation, the Secretaries of State, the Interior, and Commerce and the Director of the National Science Foundation, in coordination with heads of other relevant executive departments and agencies, shall: a. Continue to play a leadership role in research throughout the Arctic region; b. Actively promote full and appropriate access by scientists to Arctic research sites through bilateral and multilateral measures and by other means; c. Lead the effort to establish an effective Arctic circumpolar observing network with broad partnership from other relevant nations; d. Promote regular meetings of Arctic science ministers or research council heads to share information concerning scientific research opportunities and to improve coordination of international Arctic research programs; e. Work with the Interagency Arctic Research Policy Committee (IARPC) to promote research that is strategically linked to U.S. policies articulated in this directive, with input from the Arctic Research Commission; and f. Strengthen partnerships with academic and research institutions and build upon the relationships these institutions have with their counterparts in other nations. F. Maritime Transportation in the Arctic Region 1. The United States priorities for maritime transportation in the Arctic region are: a. To facilitate safe, secure, and reliable navigation; b. To protect maritime commerce; and c. To protect the environment. 2. Safe, secure, and environmentally sound maritime commerce in the Arctic region depends on infrastructure to support shipping activity, search and rescue capabilities, short- and long-range aids to navigation, high-risk area vessel-traffic management, iceberg warnings and other sea ice information, effective shipping standards, and measures to protect the marine environment. In addition, effective search and rescue in the Arctic will require local, State, Federal, tribal, commercial, volunteer, scientific, and multinational cooperation. 3. Working through the International Maritime Organization (IMO), the United States promotes strengthening existing measures and, as necessary, developing new measures to improve the safety and security of maritime transportation, as well as to protect the marine environment in the Arctic region. These measures may include ship routing and reporting systems, such as traffic separation and vessel traffic management schemes in Arctic chokepoints; updating and strengthening of the Guidelines for Ships Operating in Arctic Ice-Covered Waters; underwater noise standards for commercial shipping; a review of shipping insurance issues; oil and other hazardous material pollution response agreements; and environmental standards. 4. Implementation: In carrying out this policy as it relates to maritime transportation in the Arctic region, the Secretaries of State, Defense, Transportation, Commerce, and Homeland Security, in coordination with heads of other relevant executive departments and agencies, shall: a. Develop additional measures, in cooperation with other nations, to address issues that are likely to arise from expected increases in shipping into, out of, and through the Arctic region; b. Commensurate with the level of human activity in the region, establish a risk-based capability to address hazards in the Arctic environment. Such efforts shall advance work on pollution prevention and response standards; determine basing and logistics support requirements, including necessary airlift and icebreaking capabilities; and improve plans and cooperative agreements for search and rescue; c. Develop Arctic waterways management regimes in accordance with accepted international standards, including vessel traffic-monitoring and routing; safe navigation standards; accurate and standardized charts; and accurate and timely environmental and navigational information; and d. Evaluate the feasibility of using access through the Arctic for strategic sealift and humanitarian aid and disaster relief. G. Economic Issues, Including Energy 1. Sustainable development in the Arctic region poses particular challenges. Stakeholder input will inform key decisions as the United States seeks to promote economic and energy security. Climate change and other factors are significantly affecting the lives of Arctic inhabitants, particularly indigenous communities. The United States affirms the importance to Arctic communities of adapting to climate change, given their particular vulnerabilities. 2. Energy development in the Arctic region will play an important role in meeting growing global energy demand as the area is thought to contain a substantial portion of the world's undiscovered energy resources. The United States seeks to ensure that energy development throughout the Arctic occurs in an environmentally sound manner, taking into account the interests of indigenous and local communities, as well as open and transparent market principles. The United States seeks to balance access to, and development of, energy and other natural resources with the protection of the Arctic environment by ensuring that continental shelf resources are managed in a responsible manner and by continuing to work closely with other Arctic nations. 3. The United States recognizes the value and effectiveness of existing fora, such as the Arctic Council, the International Regulators Forum, and the International Standards Organization. 4. Implementation: In carrying out this policy as it relates to economic issues, including energy, the Secretaries of State, the Interior, Commerce, and Energy, in coordination with heads of other relevant executive departments and agencies, shall: a. Seek to increase efforts, including those in the Arctic Council, to study changing climate conditions, with a view to preserving and enhancing economic opportunity in the Arctic region. Such efforts shall include inventories and assessments of villages, indigenous communities, subsistence opportunities, public facilities, infrastructure, oil and gas development projects, alternative energy development opportunities, forestry, cultural and other sites, living marine resources, and other elements of the Arctic's socioeconomic composition; b. Work with other Arctic nations to ensure that hydrocarbon and other development in the Arctic region is carried out in accordance with accepted best practices and internationally recognized standards and the 2006 Group of Eight (G-8) Global Energy Security Principles; c. Consult with other Arctic nations to discuss issues related to exploration, production, environmental and socioeconomic impacts, including drilling conduct, facility sharing, the sharing of environmental data, impact assessments, compatible monitoring programs, and reservoir management in areas with potentially shared resources; d. Protect United States interests with respect to hydrocarbon reservoirs that may overlap boundaries to mitigate adverse environmental and economic consequences related to their development; e. Identify opportunities for international cooperation on methane hydrate issues, North Slope hydrology, and other matters; f. Explore whether there is a need for additional fora for informing decisions on hydrocarbon leasing, exploration, development, production, and transportation, as well as shared support activities, including infrastructure projects; and g. Continue to emphasize cooperative mechanisms with nations operating in the region to address shared concerns, recognizing that most known Arctic oil and gas resources are located outside of United States jurisdiction. H. Environmental Protection and Conservation of Natural Resources 1. The Arctic environment is unique and changing. Increased human activity is expected to bring additional stressors to the Arctic environment, with potentially serious consequences for Arctic communities and ecosystems. 2. Despite a growing body of research, the Arctic environment remains poorly understood. Sea ice and glaciers are in retreat. Permafrost is thawing and coasts are eroding. Pollutants from within and outside the Arctic are contaminating the region. Basic data are lacking in many fields. High levels of uncertainty remain concerning the effects of climate change and increased human activity in the Arctic. Given the need for decisions to be based on sound scientific and socioeconomic information, Arctic environmental research, monitoring, and vulnerability assessments are top priorities. For example, an understanding of the probable consequences of global climate variability and change on Arctic ecosystems is essential to guide the effective long-term management of Arctic natural resources and to address socioeconomic impacts of changing patterns in the use of natural resources. 3. Taking into account the limitations in existing data, United States efforts to protect the Arctic environment and to conserve its natural resources must be risk-based and proceed on the basis of the best available information. 4. The United States supports the application in the Arctic region of the general principles of international fisheries management outlined in the 1995 Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea of December 10, 1982, relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks and similar instruments. The United States endorses the protection of vulnerable marine ecosystems in the Arctic from destructive fishing practices and seeks to ensure an adequate enforcement presence to safeguard Arctic living marine resources. 5. With temperature increases in the Arctic region, contaminants currently locked in the ice and soils will be released into the air, water, and land. This trend, along with increased human activity within and below the Arctic, will result in increased introduction of contaminants into the Arctic, including both persistent pollutants (e.g., persistent organic pollutants and mercury) and airborne pollutants (e.g., soot). 6. Implementation: In carrying out this policy as it relates to environmental protection and conservation of natural resources, the Secretaries of State, the Interior, Commerce, and Homeland Security and the Administrator of the Environmental Protection Agency, in coordination with heads of other relevant executive departments and agencies, shall: a. In cooperation with other nations, respond effectively to increased pollutants and other environmental challenges; b. Continue to identify ways to conserve, protect, and sustainably manage Arctic species and ensure adequate enforcement presence to safeguard living marine resources, taking account of the changing ranges or distribution of some species in the Arctic. For species whose range includes areas both within and beyond United States jurisdiction, the United States shall continue to collaborate with other governments to ensure effective conservation and management; c. Seek to develop ways to address changing and expanding commercial fisheries in the Arctic, including through consideration of international agreements or organizations to govern future Arctic fisheries; d. Pursue marine ecosystem-based management in the Arctic; and e. Intensify efforts to develop scientific information on the adverse effects of pollutants on human health and the environment and work with other nations to reduce the introduction of key pollutants into the Arctic. IV. Resources and Assets A. Implementing a number of the policy elements directed above will require appropriate resources and assets. These elements shall be implemented consistent with applicable law and authorities of agencies, or heads of agencies, vested by law, and subject to the availability of appropriations. The heads of executive departments and agencies with responsibilities relating to the Arctic region shall work to identify future budget, administrative, personnel, or legislative proposal requirements to implement the elements of this directive. ——————————————————————————— [1] These policies and authorities include Freedom of Navigation (PDD/NSC-32), the U.S. Policy on Protecting the Ocean Environment (PDD/NSC-36), Maritime Security Policy (NSPD-41/HSPD-13), and the National Strategy for Maritime Security (NSMS). Appendix D. May 2013 National Strategy for Arctic Region On May 10, 2013, the Obama Administration released a document entitled National Strategy for the Arctic Region . The executive summary of the document is reprinted earlier in this report (see \" May 2013 National Strategy for Arctic Region \" in \" Background \"). This appendix reprints the main text of the document. The main text states the following: Introduction We seek an Arctic region that is stable and free of conflict, where nations act responsibly in a spirit of trust and cooperation, and where economic and energy resources are developed in a sustainable manner that also respects the fragile environment and the interests and cultures of indigenous peoples. As the United States addresses these opportunities and challenges, we will be guided by our central interests in the Arctic region, which include providing for the security of the United States; protecting the free flow of resources and commerce; protecting the environment; addressing the needs of indigenous communities; and enabling scientific research. In protecting these interests, we draw from our long-standing policy and approach to the global maritime spaces in the 20 th century, including freedom of navigation and overflight and other internationally lawful uses of the sea and airspace related to these freedoms; security on the oceans; maintaining strong relationships with allies and partners; and peaceful resolution of disputes without coercion. To achieve this vision, the United States is establishing an overarching national approach to advance national security interests, pursue responsible stewardship of this precious and unique region, and serve as a basis for cooperation with other Arctic states and the international community as a whole to advance common interests. Even as we work domestically and internationally to minimize the effects of climate change, the effects are already apparent in the Arctic. Ocean resources are more readily accessible as sea ice diminishes, but thawing ground is threatening communities as well as hindering land-based activities, including access to resources. Diminishing land and sea ice is altering ecosystems and the services they provide. As an Arctic nation, the United States must be proactive and disciplined in addressing changing regional conditions and in developing adaptive strategies to protect its interests. An undisciplined approach to exploring new opportunities in this frontier could result in significant harm to the region, to our national security interests, and to the global good. When implementing this strategy, the United States will proceed in a thoughtful, responsible manner that leverages expertise, resources, and cooperation from the State of Alaska, Alaska Natives, and stakeholders across the entire nation and throughout the international community. We will encourage and use science-informed decisionmaking to aid this effort. We will endeavor to do no harm to the sensitive environment or to Alaska native communities and other indigenous populations that rely on Arctic resources. Just as a common spirit and shared vision of peaceful partnership led to the development of an international space station, we believe much can be achieved in the Arctic region through collaborative international efforts, coordinated investments, and public-private partnerships. Structure of the Strategy Through this National Strategy for the Arctic Region, we seek to guide, prioritize, and synchronize efforts to protect U.S. national and homeland security interests, promote responsible stewardship, and foster international cooperation. This strategy articulates three priority lines of effort. It also identifies guiding principles as a foundation for Arctic region activities. Through a deliberate emphasis on the priority lines of effort and objectives, it aims to achieve a national unity of effort that is consistent with our domestic and international legal rights, obligations, and commitments and that is well coordinated with our Arctic neighbors and the international community. These lines of effort identify common themes where specific emphasis and activities will be focused to ensure that strategic priorities are met. The three lines of effort, as well as the guiding principles are meant to be acted upon as a coherent whole. Changing Conditions While the Arctic region has experienced warming and cooling cycles over millennia, the current warming trend is unlike anything previously recorded. The reduction in sea ice has been dramatic, abrupt, and unrelenting. The dense, multi-year ice is giving way to thin layers of seasonal ice, making more of the region navigable year-round. Scientific estimates of technically recoverable conventional oil and gas resources north of the Arctic Circle total approximately 13 percent of the world's undiscovered oil and 30 percent of the world's undiscovered gas deposits, as well as vast quantities of mineral resources, including rare earth elements, iron ore, and nickel. These estimates have inspired fresh ideas for commercial initiatives and infrastructure development in the region. As portions of the Arctic Ocean become more navigable, there is increasing interest in the viability of the Northern Sea Route and other potential routes, including the Northwest Passage, as well as in development of Arctic resources. For all of the opportunities emerging with the increasing accessibility and economic and strategic interests in the Arctic, the opening and rapid development of the Arctic region presents very real challenges. On the environmental front, reduced sea ice is having an immediate impact on indigenous populations as well as on fish and wildlife. Moreover, there may be potentially profound environmental consequences of continued ocean warming and Arctic ice melt. These consequences include altering the climate of lower latitudes, risking the stability of Greenland's ice sheet, and accelerating the thawing of the Arctic permafrost in which large quantities of methane – a potent driver of climate change – as well as pollutants such as mercury are stored. Uncoordinated development – and the consequent increase in pollution such as emissions of black carbon or other substances from fossil fuel combustion – could have unintended consequences on climate trends, fragile ecosystems, and Arctic communities. It is imperative that the United States proactively establish national priorities and objectives for the Arctic region. Lines of Effort To meet the challenges and opportunities in the Arctic region, and in furtherance of established Arctic Region Policy, we will pursue the following lines of effort and supporting objectives in a mutually reinforcing manner that incorporates the broad range of U.S. current activities and interests in the Arctic region. 1. Advance United States Security Interests Our highest priority is to protect the American people, our sovereign territory and rights, natural resources, and interests of the United States. To this end, the United States will identify, develop, and maintain the capacity and capabilities necessary to promote safety, security, and stability in the region through a combination of independent action, bilateral initiatives, and multilateral cooperation. We acknowledge that the protection of our national security interests in the Arctic region must be undertaken with attention to environmental, cultural, and international considerations outlined throughout this strategy. As many nations across the world aspire to expand their role in the Arctic, we encourage Arctic and non-Arctic states to work collaboratively through appropriate fora to address the emerging challenges and opportunities in the Arctic region, while we remain vigilant to protect the security interests of the United States and our allies. To accomplish this line of effort, the United States Government will seek to: • Evolve Arctic Infrastructure and Strategic Capabilities – Working cooperatively with the State of Alaska, local, and tribal authorities, as well as public and private sector partners, we will develop, maintain, and exercise the capacity to execute Federal responsibilities in our Arctic waters, airspace, and coastal regions, including the capacity to respond to natural or man-made disasters. We will carefully tailor this regional infrastructure, as well as our response capacity, to the evolving human and commercial activity in the Arctic region. • Enhance Arctic Domain Awareness – We seek to improve our awareness of activities, conditions, and trends in the Arctic region that may affect our safety, security, environmental, or commercial interests. The United States will endeavor to appropriately enhance sea, air, and space capabilities as Arctic conditions change, and to promote maritime-related information sharing with international, public, and private sector partners, to support implementation of activities such as the search-and-rescue agreement signed by Arctic states. • Preserve Arctic Region Freedom of the Seas – The United States has a national interest in preserving all of the rights, freedoms, and uses of the sea and airspace recognized under international law. We will enable prosperity and safe transit by developing and maintaining sea, under-sea, and air assets and necessary infrastructure. In addition, the United States will support the enhancement of national defense, law enforcement, navigation safety, marine environment response, and search-and-rescue capabilities. Existing international law provides a comprehensive set of rules governing the rights, freedoms, and uses of the world's oceans and airspace, including the Arctic. The law recognizes these rights, freedoms, and uses for commercial and military vessels and aircraft. Within this framework, we shall further develop Arctic waterways management regimes, including traffic separation schemes, vessel tracking, and ship routing, in collaboration with partners. We will also encourage other nations to adhere to internationally accepted principles. This cooperation will facilitate strategic partnerships that promote innovative, low-cost solutions that enhance the Arctic marine transportation system and the safe, secure, efficient and free flow of trade. • Provide for Future United States Energy Security – The Arctic region's energy resources factor into a core component of our national security strategy: energy security. The region holds sizable proved and potential oil and natural gas resources that will likely continue to provide valuable supplies to meet U.S. energy needs. Continuing to responsibly develop Arctic oil and gas resources aligns with the United States \"all of the above\" approach to developing new domestic energy sources, including renewables, expanding oil and gas production, and increasing efficiency and conservation efforts to reduce our reliance on imported oil and strengthen our nation's energy security. Within the context of this broader energy security strategy, including our economic, environmental and climate policy objectives, we are committed to working with stakeholders, industry, and other Arctic states to explore the energy resource base, develop and implement best practices, and share experiences to enable the environmentally responsible production of oil and natural gas as well as renewable energy. 2. Pursue Responsible Arctic Region Stewardship Responsible stewardship requires active conservation of resources, balanced management, and the application of scientific and traditional knowledge of physical and living environments. As Arctic environments change, increased human activity demands precaution, as well as greater knowledge to inform responsible decisions. Together, Arctic nations can responsibly meet new demands – including maintaining open sea lanes for global commerce and scientific research, charting and mapping, providing search-and-rescue services, and developing capabilities to prevent, contain, and respond to oil spills and accidents – by increasing knowledge and integrating Arctic management. We must improve our ability to forecast future conditions in the Arctic while being mindful of the potential for unexpected developments. To realize this line of effort, we will pursue the specific objectives outlined below: • Protect the Arctic Environment and Conserve Arctic Natural Resources – Protecting the unique and changing environment of the Arctic is a central goal of U.S. policy. Supporting actions will promote healthy, sustainable, and resilient ecosystems over the long term, supporting a full range of ecosystem services. This effort will be risk-based and proceed on the basis of best available information. The United States in the Arctic will assess and monitor the status of ecosystems and the risks of climate change and other stressors to prepare for and respond effectively to environmental challenges. • Use Integrated Arctic Management to Balance Economic Development, Environmental Protection, and Cultural Values – Natural resource management will be based on a comprehensive understanding of environmental and cultural sensitivities in the region, and address expectations for future infrastructure needs and other development-related trends. This endeavor can promote unity of effort and provide the basis for sensible infrastructure and other resource management decisions in the Arctic. We will emphasize science-informed decisionmaking and integration of economic, environmental, and cultural values. We will also advance coordination among Federal departments and agencies and collaboration with partners engaged in Arctic stewardship activities. • Increase Understanding of the Arctic through Scientific Research and Traditional Knowledge – Proper stewardship of the Arctic requires understanding of how the environment is changing, and such understanding will be based on a holistic earth system approach. Vast areas of the Arctic Ocean are unexplored, and we lack much of the basic knowledge necessary to understand and address Arctic issues. The changes in the Arctic cannot be understood in isolation and must be viewed in a global context. As we learn more about the region, we have identified several key subcomponents of the Arctic that require urgent attention: land ice and its role in changing sea level; sea-ice and its role in global climate, fostering biodiversity, and supporting Arctic peoples; and, the warming permafrost and its effects on infrastructure and climate. Better earth system-level knowledge will also help us meet operational needs such as weather and ice forecasting. We can make faster progress through a well-coordinated and transparent national and international exploration and research agenda that reduces the potential for duplication of effort and leads to better leveraging of resources. • Chart the Arctic region – We will continue to make progress in charting and mapping the Arctic region's ocean and waterways, so long obscured by perennial ice, and mapping its coastal and interior lands according to reliable, modern standards. Given the vast expanse of territory and water to be charted and mapped, we will need to prioritize and synchronize charting efforts to make more effective use of resources and attain faster progress. In so doing, we will make navigation safer and contribute to the identification of ecologically sensitive areas and reserves of natural resources. 3. Strengthen International Cooperation What happens in one part of the Arctic region can have significant implications for the interests of other Arctic states and the international community as a whole. The remote and complex operating conditions in the Arctic environment make the region well-suited for collaborative efforts by nations seeking to explore emerging opportunities while emphasizing ecological awareness and preservation. We will seek to strengthen partnerships through existing multilateral fora and legal frameworks dedicated to common Arctic issues. We will also pursue new arrangements for cooperating on issues of mutual interest or concern and addressing unique and unprecedented challenges, as appropriate. U.S. efforts to strengthen international cooperation and partnerships will be pursued through four objectives: • Pursue Arrangements that Promote Shared Arctic State Prosperity, Protect the Arctic Environment, and Enhance Security – We will seek opportunities to pursue efficient and effective joint ventures, based on shared values that leverage each Arctic state's strengths. This collaboration will assist in guiding investments and regional activities, addressing dynamic trends, and promoting sustainable development in the Arctic region. Arctic nations have varied commercial, cultural, environmental, safety, and security concerns in the Arctic region. Nevertheless, our common interests make these nations ideal partners in the region. We seek new opportunities to advance our interests by proactive engagement with other Arctic nations through bilateral and multilateral efforts using of a wide array of existing multilateral mechanisms that have responsibilities relating to the Arctic region. As appropriate, we will work with other Arctic nations to develop new coordination mechanisms to keep the Arctic region prosperous, environmentally sustainable, operationally safe, secure, and free of conflict, and will protect U.S., allied, and regional security and economic interests. • Work through the Arctic Council to Advance U.S. Interests in the Arctic Region – In recent years, the Arctic Council has facilitated notable achievements in the promotion of cooperation, coordination, and interaction among Arctic states and Arctic indigenous peoples. Recent successes of the Council include its advancement of public safety and environmental protection issues, as evidenced by the 2011 Arctic Search-and-Rescue Agreement and by the 2013 Arctic Marine Oil Pollution Preparedness and Response Agreement. The United States will continue to emphasize the Arctic Council as a forum for facilitating Arctic states' cooperation on myriad issues of mutual interest within its current mandate. • Accede to the Law of the Sea Convention – Accession to the Convention would protect U.S. rights, freedoms, and uses of the sea and airspace throughout the Arctic region, and strengthen our arguments for freedom of navigation and overflight through the Northwest Passage and the Northern Sea Route. The United States is the only Arctic state that is not party to the Convention. Only by joining the Convention can we maximize legal certainty and best secure international recognition of our sovereign rights with respect to the U.S. extended continental shelf in the Arctic and elsewhere, which may hold vast oil, gas, and other resources. Our extended continental shelf claim in the Arctic region could extend more than 600 nautical miles from the north coast of Alaska. In instances where the maritime zones of coastal nations overlap, Arctic states have already begun the process of negotiating and concluding maritime boundary agreements, consistent with the Law of the Sea Convention and other relevant international law. The United States supports peaceful management and resolution of disputes, in a manner free from coercion. While the United States is not currently a party to the Convention, we will continue to support and observe principles of established customary international law reflected in the Convention. • Cooperate with other Interested Parties – A growing number of non-Arctic states and numerous non-state actors have expressed increased interest in the Arctic region. The United States and other Arctic nations should seek to work with other states and entities to advance common objectives in the Arctic region in a manner that protects Arctic states' national interests and resources. One key example relates to the promotion of safe, secure, and reliable Arctic shipping, a goal that is best pursued through the International Maritime Organization in coordination with other Arctic states, major shipping states, the shipping industry and other relevant interests. Guiding Principles The U.S. approach to the Arctic region must reflect our values as a nation and as a member of the global community. We will approach holistically our interests in promoting safety and security, advancing economic and energy development, protecting the environment, addressing climate change and respecting the needs of indigenous communities and Arctic state interests. To guide our efforts, we have identified the following principles to serve as the foundation for U.S. Arctic engagement and activities. • Safeguard Peace and Stability by working to maintain and preserve the Arctic region as an area free of conflict, acting in concert with allies, partners, and other interested parties. This principle will include United States action, and the actions of other interested countries, in supporting and preserving international legal principles of freedom of navigation and overflight and other uses of the sea related to these freedoms, unimpeded lawful commerce, and the peaceful resolution of disputes. The United States will rely on existing international law, which provides a comprehensive set of rules governing the rights, freedoms, and uses of the world's oceans and airspace, including the Arctic. • Make Decisions Using the Best Available Information by promptly sharing – nationally and internationally – the most current understanding and forecasts based on up-to-date science and traditional knowledge. • Pursue Innovative Arrangements to support the investments in scientific research, marine transportation infrastructure requirements, and other support capability and capacity needs in this region. The harshness of the Arctic climate and the complexity associated with developing, maintaining, and operating infrastructure and capabilities in the region necessitate new thinking on public-private and multinational partnerships. • Consult and Coordinate with Alaska Natives consistent with tribal consultation policy established by Executive Order. This policy emphasizes trust, respect, and shared responsibility. It articulates that tribal governments have a unique legal relationship with the United States and requires Federal departments and agencies to provide for meaningful and timely input by tribal officials in development of regulatory policies that have tribal implications. This guiding principle is also consistent with the Alaska Federation of Natives Guidelines for Research. Conclusion We seek a collaborative and innovative approach to manage a rapidly changing region. We must advance U.S. national security interests, pursue responsible stewardship, and strengthen international collaboration and cooperation, as we work to meet the challenges of rapid climate-driven environmental change. The melting of Arctic ice has the potential to transform global climate and ecosystems as well as global shipping, energy markets, and other commercial interests. To address these challenges and opportunities, we will align Federal activities in accordance with this strategy; partner with the State of Alaska, local, and tribal entities; and work with other Arctic nations to develop complementary approaches to shared challenges. We will proactively coordinate regional development. Our economic development and environmental stewardship must go hand-in-hand. The unique Arctic environment will require a commitment by the United States to make judicious, coordinated infrastructure investment decisions, informed by science. To meet this challenge, we will need bold, innovative thinking that embraces and generates new and creative public-private and multinational cooperative models. Appendix E. Obama Administration Statement Regarding U.S. Chairmanship of Arctic Council This appendix presents the text of a statement from the Obama Administration regarding the two-year period of U.S. chairmanship of the Arctic Council that began in April 2015. The text of the statement is as follows: Given the increased strategic importance of the region, the next two years offers the United States an unprecedented opportunity to make significant progress on our Arctic policy objectives, which were first laid out in the National Strategy for the Arctic Region released by the White House in May 2013 and followed by an Implementation Plan in January 2014. The U.S. will be chairing the Arctic Council at a crucial moment when the effects of climate change are bringing a myriad of new environmental, human and economic opportunities and challenges to the Arctic. During the U.S. Chairmanship, the State Department will focus the Arctic work it carries out through the Arctic Council, various international scientific cooperation mechanisms and, in some cases, domestic initiatives led by U.S. states or other U.S. government agencies. The three thematic areas of the U.S. Chairmanship are: improving economic and living conditions in Arctic communities; Arctic Ocean safety, security and stewardship; and addressing the impacts of climate change. The theme of the U.S. Chairmanship of the Arctic Council is \"One Arctic: Shared Opportunities, Challenges and Responsibilities,\" which recognizes the peaceful and stable nature of the Arctic. The U.S. chairmanship will conclude in spring 2017 with a Ministerial meeting in Alaska, at which point the United States will hand the chairmanship to Finland. To guide U.S. engagement on the Arctic during this crucial period, U.S. Secretary of State John Kerry appointed the former Commandant of the U.S. Coast Guard, Admiral Robert J. Papp, Jr., as the first-ever U.S. Special Representative for the Arctic in July 2014. The U.S. has developed an ambitious and balanced program for its Arctic Council Chairmanship that focuses on three crucial areas: improving economic and living conditions; Arctic Ocean safety, security and stewardship; and addressing the impacts of climate change. 1. Improving Economic and Living Conditions in Arctic Communities Remote Arctic communities face a number of threats to the health and well-being of their citizens, including food and water security, safe water, sewer and sanitation, affordable and renewable energy, adequate mental health services, and the need to ensure the continued economic viability of their communities. Our work in this area will aim to: —Promote the development of renewable energy technology, such as modular micro-grid systems, to spur public-private partnerships and improve energy affordability; —Provide a better understanding of freshwater security in the Arctic, including through the creation of a Water Resources Vulnerability Index; —Coordinate an Arctic-wide telecommunications infrastructure assessment to promote the build-out of commercial infrastructure in the region; —Support mental wellness , including suicide prevention and resilience; —Harness the expertise and resources of the Arctic Economic Council to inform the Arctic Council's work on economic and living conditions; —Mitigate public health risks and reduce black carbon output in Arctic communities; —Promote better community sanitation and public health by facilitation collaboration between industry, researchers and public policy experts to increase access to and reduce the operating costs of in-home running water and sewer in remote communities. 2. Arctic Ocean Safety, Security and Stewardship The acceleration of maritime activity in the Arctic increases risk in an already harsh and challenging environment. U.S. Chairmanship priorities include building upon existing preparedness and response programs; enhancing the ability of Arctic states to execute their search and rescue responsibilities; and emphasizing safe, secure, and environmentally sound shipping as a matter of high priority. To ensure that future maritime development avoids negative impacts, particularly in areas of ecological and cultural significance, the Arctic Council is also continuing its work towards a network of marine protected areas and enhanced international cooperation in the Arctic Ocean. Ocean acidification is one of the most urgent issues facing the world's ocean today and the Arctic Council is responding by supporting research to improve the capability to monitor and track acidification in the Arctic Ocean. Our work in this area will aim to: —Better prepare those responsible to better address search and rescue challenges in the Arctic; —Ensure marine environmental protection, including working toward the establishment of a network of marine protected areas ; —Explore the creation of a Regional Seas Program of the Arctic Ocean; —Create a better understanding of Arctic Ocean acidification and its effects on Arctic organisms and the economies that rely on them; —Encourage all parties take the steps necessary to allow for the proper implementation of the Agreement on Cooperation on Marine Oil Pollution, Preparedness and response in the Arctic . 3. Addressing the Impacts of Climate Change The impacts of climate change affect the Arctic and the many people, wildlife, and plants that depend on the region for survival. The United States recognizes that we need to reduce black carbon (soot) and methane emissions, which disproportionally impact the Arctic. The Arctic Council is addressing the impacts of climate change by facilitating cooperation on action to reduce black carbon and methane emissions. Arctic Council activities to enhance access to adaptation and resilience tools, and promote the development of climate change indicators and high-resolution mapping are also priorities of the U.S. chairmanship that will increase scientists', communities', policymakers' and the public's understanding of the impacts of climate change. Our work in this area will aim to: —Target short-lived climate pollutants through reductions in black carbon and methane emissions; —Support Arctic climate adaptation and resilience efforts including the creation of an Early Warning Indicator System; —Create a Pan-Arctic Digital Elevation Map that will increase our understanding of the impacts of climate change on shorelines and surface areas in the Arctic.", "summary": "The diminishment of Arctic sea ice has led to increased human activities in the Arctic, and has heightened interest in, and concerns about, the region's future. The United States, by virtue of Alaska, is an Arctic country and has substantial interests in the region. Record low extents of Arctic sea ice over the past decade have focused scientific and policy attention on links to global climate change and projected ice-free seasons in the Arctic within decades. These changes have potential consequences for weather in the United States, access to mineral and biological resources in the Arctic, the economies and cultures of peoples in the region, and national security. The five Arctic coastal states—the United States, Canada, Russia, Norway, and Denmark (of which Greenland is a territory)—have made or are in the process of preparing submissions to the Commission on the Limits of the Continental Shelf regarding the outer limits of their extended continental shelves. The Russian submission includes the underwater Lomonosov Ridge, a feature that spans a considerable distance across the center of the Arctic Ocean. The diminishment of Arctic ice could lead in coming years to increased commercial shipping on two trans-Arctic sea routes—the Northern Sea Route close to Russia, and the Northwest Passage—though the rate of increase in the use of these routes might not be as great as sometimes anticipated in press accounts. International guidelines for ships operating in Arctic waters have been recently updated. Changes to the Arctic brought about by warming temperatures will likely allow more exploration for oil, gas, and minerals. Warming that causes permafrost to melt could pose challenges to onshore exploration activities. Increased oil and gas exploration and tourism (cruise ships) in the Arctic increase the risk of pollution in the region. Cleaning up oil spills in ice-covered waters will be more difficult than in other areas, primarily because effective strategies for cleaning up oil spills in ice-covered waters have yet to be developed. Large commercial fisheries exist in the Arctic. The United States is currently meeting with other countries regarding the management of Arctic fish stocks. Changes in the Arctic could affect threatened and endangered species, and could result in migration of fish stocks to new waters. Under the Endangered Species Act, the polar bear was listed as threatened on May 15, 2008. Arctic climate change is also expected to affect the economies, health, and cultures of Arctic indigenous peoples. Two of the Coast Guard's three polar icebreakers—Polar Star and Polar Sea—have exceeded their intended 30-year service lives, and Polar Sea is not operational. The Coast Guard has initiated a project to build up to three new heavy polar icebreakers. On May 12, 2011, representatives from the member states of the Arctic Council signed an agreement on cooperation on search and rescue in the Arctic. Although there is significant international cooperation on Arctic issues, the Arctic is increasingly being viewed by some observers as a potential emerging security issue. Some of the Arctic coastal states, particularly Russia, have announced an intention or taken actions to enhance their military presences in the high north. U.S. military forces, particularly the Navy and Coast Guard, have begun to pay more attention to the region in their planning and operations.", "document_type": "crs"}
{"report": "This report provides background information and potential issues for Congress on the Navy's irregular warfare (IW) and counterterrorism (CT) operations. The Navy's IW and CT activities pose a number of potential oversight issues for Congress, including how much emphasis to place on IW and CT activities in Navy budgets, particularly in a context of constraints on Navy budgets and Navy desires to devote resources to developing \"high end\" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia. Congress's decisions regarding Navy IW and CT operations can affect Navy operations and funding requirements, and the implementation of the nation's overall IW and CT strategies. This report focuses on Navy IW and CT operations. Another CRS report discusses U.S. special operations forces (SOF) across the military services. For an overview of the strategic and budgetary context in which Navy IW and CT operations may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. The Navy has sometimes used the phrase confronting irregular challenges (CIC) instead of the term irregular warfare. For purposes of convenience, this report continues to use the term irregular warfare and the abbreviation IW. In the years following the terrorist attacks of September 11, 2001, the Navy carried out a variety of irregular warfare (IW) and counterterrorism (CT) activities. Among the most readily visible of these were operations carried out by Navy sailors serving ashore in the Middle East and Afghanistan. Regarding current operations in the Middle East, the Department of the Navy (DON) states the following in its FY2020 budget highlights book: The Marine Corps has an active duty force of approximately 1,300 Marines ashore in the U.S. CENTCOM area of operations (AOR) and another roughly 850 Marine Reserve members supporting CENTCOM. Beyond the Marines participating in counterinsurgency, security cooperation, and civil-military operations; on any given day there are about 1,000 Sailors ashore and another roughly 6,500 afloat throughout the CENTCOM AOR. These sailors are conducting activities such as air operations, maritime infrastructure protection, combat construction engineering, cargo handling, combat logistics, maritime security, detainee operations, customs inspections, civil affairs, base operations, and other forward presence activities. In addition to participating in U.S. military operations in the Middle East and Afghanistan, Navy IW operations in the years following the terrorist attacks of September 11, 2011, have also included the following: security force assistance operations , in which forward-deployed Navy ships have exercised and worked with foreign navies, coast guards, and maritime police forces, so as to improve their abilities to conduct maritime security operations; civic assistance operations , in which forward-deployed Navy units, including Navy hospital ships, expeditionary medical teams, fleet surgical teams, and naval construction units have provided medical and construction services in foreign countries as a complement to other U.S. diplomatic and development activities in those countries; disaster relief operations , of which Navy forces have performed several in recent years; and counter-piracy operations , particularly off the Horn of Africa. DON states in its FY2020 budget highlights book that In the past year, the Marine Corps executed 170 operations, eight amphibious operations, 115 theater security cooperation events and participated in 51 exercises and relief operations for Hurricanes Maria, Florence, and Michael. Within the context of these efforts, Amphibious Ready Groups / Marine Expeditionary Units (ARG/MEU) supported Combatant commands along-side regional partners providing a range of deliberate and crisis response options. Major exercises were held in Romania, Israel, Jordan, Malaysia, and off the coast of Djibouti. The Marine Corps also participated in theater security cooperation (TSC) exercises held in Brazil, Latvia, Jordan, Mexico, and Philippines that enhanced military cooperation, capability, and interoperability with partner nations while sustaining a ready, forward presence in support of the Combatant Commander requirements…. The Navy has active and reserve forces continually deployed in support of contingency operations overseas serving as members of Carrier Strike Groups, Expeditionary Strike Groups, Special Operating Forces, Seabee units, Marine forces, and medical units; some also serve as Individual Augmentees (IAs). Some of the Navy's contributions to IW operations around the world in the years following the terrorist attacks of September 11, 2001, were made by Navy individual augmentees (IAs)—individual Navy sailors assigned to various DOD operations. DON stated in 2014 that Navy IAs are providing combat support and combat service support for Army and Marine Corps personnel in Afghanistan. As IAs they are fulfilling vital roles by serving in traditional Navy roles such as USMC support, maritime and port security, cargo handling, airlift support, Seabee units, and as a member of joint task force/Combatant Commanders staffs. Non-traditional roles include detainee operations, custom inspections teams, and civil affairs. Navy CT operations (and anti-terrorism/force protection activities) at various points since the late 1990s, and particularly in the years following the terrorist attacks of September 11, 2001, have included the following: Operations by Navy special operations forces, known as SEALs (an acronym standing for Sea, Air, and Land), that have been directed against terrorists; Tomahawk cruise missile attacks on suspected terrorist training camps and facilities, such as those reportedly conducted in Somalia on March 3 and May 1, 2008, and those conducted in 1998 in response to the 1998 terrorist bombings of U.S. embassies in East Africa; surveillance by Navy ships and aircraft of suspected terrorists overseas; maritime intercept operations (MIO) that were aimed at identifying and intercepting terrorists or weapons of mass destruction at sea, or potentially threatening ships or aircraft that are in or approaching U.S. territorial waters—an activity that has included Navy participation in the multilateral Proliferation Security Initiative (PSI); protection of forward-deployed Navy ships, an activity that was intensified following the terrorist attack on the Navy Aegis destroyer Cole (DDG-67) in October 2000 in the port of Aden, Yemen; protection of domestic and overseas Navy bases and facilities; working with the Coast Guard to build maritime domain awareness (or MDA, meaning a real-time understanding of activities on the world's oceans), and engaging with the U.S. Coast Guard to use the National Strategy for Maritime Security to more rapidly develop capabilities for Homeland Security, particularly in the area of MDA; assisting the Coast Guard in port-security operations; developing Global Maritime Intelligence Integration (GMII) as part of Joint Force Maritime Component Command (JFMCC) and Maritime Domain Awareness (MDA); and operations by the Naval Criminal Investigative Service (NCIS), for which combating terrorism is a core mission area. DON stated in 2014 that While forward, acting as the lead element of our defense-in-depth, naval forces will be positioned for increased roles in combating terrorism.... Expanded Maritime Interdiction Operations are authorized by the President and directed by the Secretary of Defense to intercept vessels identified to be transporting terrorists and/or terrorist-related materiel that poses an imminent threat to the United States and its allies..... We have done small, precise attacks against terrorist cells and missile attacks against extremist sanctuaries. DON stated in 2013 that Our defense efforts are aimed at countering violent extremists and destabilizing threats, as well as upholding our commitments to allies and partner states. These armed adversaries such as terrorists, insurgents, and separatist militias are a principal challenge to U.S. interests in East Africa. An April 8, 2013, press report about U.S. counterterrorism operations stated, regarding one particular operation, that The uncertainties were evident nine months into Mr. Obama's first term, when intelligence agencies tracked down Saleh Ali Saleh Nabhan, a suspect in the attacks on two American embassies in East Africa in 1998. The original plan had been to fire long-range missiles to hit Mr. Nabhan and others as they drove in a convoy from Mogadishu, Somalia, to the seaside town of Baraawe. But that plan was scrubbed at the last minute, and instead a Navy SEALs team helicoptered from a ship and strafed Mr. Nabhan's convoy, killing him and three others. The SEALs landed to collect DNA samples to confirm the identities of the dead. The May 1-2, 2011, U.S. military operation in Abbottabad, Pakistan, that killed Osama bin Laden—reportedly called Operation Neptune's Spear—reportedly was carried out by a team of 23 Navy special operations forces, known as SEALs (an acronym standing for Sea, Air, and Land). The SEALs reportedly belonged to an elite unit known unofficially as Seal Team 6 and officially as the Naval Special Warfare Development Group (DEVGRU). The SEALs reportedly were flown to and from Abbottabad by Army special operations helicopters. Bin Laden's body reportedly was flown by a U.S. military helicopter from Abbottabad to a base in Afghanistan, and from there by a Marine Corps V-22 tilt-rotor aircraft to the aircraft carrier Carl Vinson (CVN-70), which was operating at the time in the Northern Arabian Sea. A few hours later, bin Laden's body reportedly was buried at sea from the ship. Differing accounts have been published regarding certain details of the operation. Press reports in July 2010 stated that U.S. forces in Afghanistan included at that time a special unit called Task Force 373, composed of Navy SEALs and Army Delta Force personnel, whose mission is \"the deactivation of top Taliban and terrorists by either killing or capturing them.\" A July 2015 Government Accountability Office (GAO) report and a separate CRS report provide additional background information on the SEALs. Another CRS report provides further discussion of the operation that killed Osama bin Laden. An August 16, 2015, press report stated the following: After a suspected militant was captured last year to face charges for the deadly 2012 attacks on Americans in Benghazi, Libya, he was brought to the U.S. aboard a Navy transport ship on a 13-day trip that his lawyers say could have taken 13 hours by plane. Ahmed Abu Khattala faced days of questioning aboard the USS New York from separate teams of American interrogators, part of a two-step process designed to obtain both national security intelligence and evidence usable in a criminal prosecution. The case, still in its early stages, is focusing attention on an interrogation strategy that the Obama administration has used in just a few recent terrorism investigations and prosecutions. Abu Khattala's lawyers already have signaled a challenge to the process, setting the stage for a rare court clash over a tactic that has riled civil liberties groups but is seen by the government as a vital and appropriate tool in prosecuting suspected terrorists captured overseas. \"I think they view it as important to show that terrorists can be prosecuted in U.S. courts, and this is an attempt to find a compromise between using people they capture as intelligence assets and prosecuting them in U.S. courts,\" said David Deitch, a former Justice Department terrorism prosecutor. \"It's a very hard balance to strike—and may not be possible.\" The administration has turned to questioning in international waters as an alternative to past practices in which suspects were sent to the U.S. detention facility at Guantanamo Bay, Cuba, or secret CIA prisons. The process ordinarily begins with questioning from a specialized team of interrogators who collect intelligence that can inform government decisions, such as for drone strikes, but cannot be used in court. Then a team of FBI investigators starts from scratch, advising the detainee of his Miranda rights, such as the right to remain silent, and gathering statements that prosecutors can present as evidence in a trial. Some legal experts expect the hybrid interrogation technique to survive legal challenges. But defense lawyers are concerned that such prolonged detention can be used to wrangle a confession or amounts to an end-run around the government's obligation to promptly place a suspect before a judge. \"Basically by holding the suspects on a ship and delaying their presentment in federal court, they're able to get a leg up in interrogations,\" said Seton Hall University law professor Jonathan Hafetz, who has handled terrorism cases. Abu Khattala is facing charges in Washington in the Sept. 11-12, 2012, attack on the U.S. diplomatic mission in Benghazi that killed U.S. Ambassador Chris Stevens and three other Americans. Following his June 2014 capture in Libya by U.S. special forces, he was placed aboard a Navy ship that his lawyers say made its way to the U.S. as slowly as possible to allow maximum time for interrogation. They say Abu Khattala was questioned for days by representatives from the High Value Detainee Interrogation Group, then for another stretch by FBI agents.... One early point of contention in the court case is the onboard interrogation. Abu Khattala's lawyers submitted court filings this month contending that the government held him \"captive on a military ship—without the protection of and in spite of constitutional guarantees—for the explicit purpose of illegally interrogating him for almost two weeks.\" Federal prosecutors have yet to respond. Whatever a judge decides, the case taps into a broader legal debate about the prosecution of terrorist suspects and presents a rare opportunity for a possible ruling on the admissibility of statements gathered aboard a military vessel. For additional background information on detention of terrorist suspects on U.S. Navy ships, see Appendix E . In the years following the terrorist attacks of September 11, 2001, the Navy took certain actions intended to improve its IW and CT capabilities and activities, including those discussed below. Some of the actions the Navy took during those years are described briefly below. The Navy in July 2008 established the Navy Irregular Warfare Office (NIWO) so as to \"institutionalize current ad hoc efforts in IW missions of counterterrorism and counterinsurgency and the supporting missions of information operations, intelligence operations, foreign internal defense and unconventional warfare as they apply to [CT] and [counterinsurgency].\" In January 2013, the Navy directed the establishment of a Navy Warfare Group (NWG) \"to provide a dedicated organization to systematically evaluate, develop, and implement new strategic concepts deemed useful to the service....\" NIWO was disbanded, and its responsibilities were transferred to NWG, which is to \"[s]erve as the Navy lead for irregular warfare (IW) to incorporate IW into Navy capstone documents and to inform the PPBE [Planning, Programming, Budgeting, and Execution] process.\" The Navy in January 2010 published a vision statement for countering irregular challenges, which stated the following in part: The U.S. Navy will meet irregular challenges through a flexible, agile, and broad array of multi-mission capabilities. We will emphasize Cooperative Security as part of a comprehensive government approach to mitigate the causes of insecurity and instability. We will operate in and from the maritime domain with joint and international partners to enhance regional security and stability, and to dissuade, deter, and when necessary, defeat irregular forces. The full text of the vision statement is reproduced in Appendix C . The Navy in December 2010 established \"a community of interest [COI] to develop and advance ideas, collaboration and advocacy related to confronting irregular challenges (CIC).\" The Navy Expeditionary Combat Command (NECC), headquartered at Naval Amphibious Base, Little Creek, VA, was established informally in October 2005 and formally on January 13, 2006. NECC consolidated and facilitated the expansion of a number of Navy organizations that have a role in IW operations. DON stated in 2014 that Navy Expeditionary Combat Command (NECC) is a global force provider of expeditionary combat service support and force protection capabilities to joint warfighting commanders. It is responsible for centrally managing the current and future readiness, resources, manning, training and equipping of a scalable, self-sustaining, integrated expeditionary force of active and reserve sailors. Expeditionary sailors are deployed from around the globe, supporting contingency operations and Combatant Commanders' Theater Security Cooperation Plans, providing a forward presence of waterborne and ashore anti-terrorism force protection; theater security cooperation and engagement; and humanitarian assistance and disaster relief. DON also stated in 2014 that The Reserve Component expeditionary forces are integrated with the Active Component forces to provide a continuum of capabilities unique to the maritime environment within NECC. Blending the AC and RC brings strength to the force and is an important part of the Navy's ability to carry out the Naval Maritime Strategy from blue water into green and brown water and in direct support of the Joint Force. The Navy Reserve trains and equips over half of the Sailors supporting NECC missions, including naval construction and explosive ordnance disposal in the CENTCOM region, as well as maritime expeditionary security, expeditionary logistics (cargo handling battalions), maritime civil affairs, expeditionary intelligence, and other mission capabilities seamlessly integrated with operational forces around the world. In addition, Coastal Riverine Group 2 has taken on a new armed escort mission for High Value Units (HVU) which has traditionally been provided by the U.S. Coast Guard. The escort enhances force protection for HVUs while transiting into and out of CONUS ports during restricted maneuvering. The Global Maritime Partnership was a U.S. Navy initiative to achieve an enhanced degree of cooperation between the U.S. Navy and foreign navies, coast guards, and maritime police forces, for the purpose of ensuring global maritime security against common threats. DON stated in 2014 that \"through partnerships with a growing number of nations, including those in Africa and Latin America, we will strive for a common vision of freedom, stability, and prosperity.\" The Southern Partnership Station (SPS) and the Africa Partnership Station (APS) were Navy ships, such as amphibious ships or high-speed sealift ships, that deployed to the Caribbean and to waters off Africa, respectively, to support U.S. Navy engagement with countries in those regions, particularly for purposes of building security partnerships with those countries, and for increasing the capabilities of those countries for performing maritime-security operations. The SPS and APS can be viewed as specific measures for promoting the above-mentioned global maritime partnership. A July 2010 Government Accountability Office (GAO) report discussed the APS. The Navy in May 2006 reestablished its riverine force by standing up Riverine Group 1 at Naval Amphibious Base, Little Creek, VA (now part of Joint Expeditionary Base Little Creek-Fort Story, or JEBLC-FS). Riverine Group 1 included three active-duty riverine squadrons of 12 boats each that were established in 2006-2007. Operations of the squadrons from 2006 to 2011 included multiple deployments to Iraq for the purpose, among other things, of relieving Marines who until 2006 had been conducting maritime security operations in Iraqi ports and waterways. On June 1, 2012, the Navy merged the riverine force and the Maritime Expeditionary Security Force (MESF) to create Coastal Riverine Force (CORIVFOR). The Navy stated that CORIVFOR \"performs core maritime expeditionary security missions in the green and brown waters, bridging the gap between traditional Navy blue water operations and land-based forces, providing port and harbor security for vital waterways and protection of high value assets and maritime infrastructure.\" The Navy stated that CORIVFOR was scheduled to reach initial operating capability (IOC) in October 2012 and full operational capability (FOC) in October 2014, and that \"all current and scheduled routine deployments will continue as normal.\" A July 14, 2014, news report states the following: In 2012, the Navy merged Riverine Forces and Maritime Expeditionary Security Forces to form the Coastal Riverine Force. There are currently seven squadrons. Squadrons 1, 3 and 11 are home ported on the west coast and Squadrons 2, 4, 8 and 10 are home ported on the east coast. The force currently consists of both active and reserve service members who man and operate more than 100 boats, ranging from rubber combat raiding crafts to 53-foot command boats that can carry up to 26 personnel. A January 18, 2013, Navy news report stated the following: Sailors, former Riverines, and family members attended a disestablishment ceremony for Naval Expeditionary Combat Command's Riverine Squadron (RIVRON) 3 at Naval Weapons Station Yorktown, Jan. 17. The disestablishment marks the merger of offensive Riverine forces with defensive Maritime Expeditionary Security Forces to form the Coastal Riverine Force (CORIVFOR), formally established June 1[, 2012].... CORIVFOR's primary mission is to conduct maritime security operations across all phases of military operations by defending high value assets, critical maritime infrastructure, ports and harbors, both inland and on coastal waterways, and when commanded, conduct offensive combat operations. The budget-initiated merger moved portions of the force to San Diego as part of the National Defense Strategy's rebalance to the Pacific, which will bring Riverine capability to the West coast for the first time since 1974, according to Capt. Eric B. Moss, commander of Coastal Riverine Group 1, formerly Maritime Expeditionary Security Group 1. \"The Riverine forces will do what they've always done, which is continuing to hone their skills and work in brown water and green water areas,\" said Moss. \"There is no abatement of requirements. We continue to get missions and are sourced to meet those requirements. We're doing the same with less.\" The merge cuts the former seven active Maritime Expeditionary Security Force (MESF) squadrons and three active RIVRONs down to three active Coastal Riverine squadrons and four reserve squadrons. \"This is a reduction in capacity, but not in capability,\" said Moss. \"I would say this is a very affordable force. We are light, expeditionary, and bring a lot capability in small packages. We are familiar with disaggregated operations, so immediately we give the combatant commander a tailor-able and scalable force.\"... Commissioned July 6, 2007, RIVRON 3 served two deployments in Iraq, fulfilling a total of 502 combat missions, 268 water security operations and countless U.S./Iraq tactical convoy operations. Other Navy initiatives in recent years for supporting IW and CT operations include establishing a reserve civil affairs battalion, a Navy Foreign Area Officer (FAO) community consisting of officers with specialized knowledge of foreign countries and regions, a maritime interception operation (MIO) intelligence exploitation pilot program, and an intelligence data-mining capability at the National Maritime Intelligence Center (NMIC). For additional information on Navy and Marine Corps special operations forces, see the prepared statements of the Navy and Marine Corps witnesses for an April 1,1 2018, hearing before the Senate Armed Services Committee reprinted in Appendix A . The Navy outlined its IW activities as of 2011 in its prepared statement for a November 3, 2011, hearing on the services' IW activities before the Emerging Threats and Capabilities subcommittee of the House Armed Services Committee. For the text of the Navy's prepared statement, see Appendix B . As noted earlier, for the text of the Navy's January 2010 vision statement for irregular warfare, see Appendix C . A 2012 report on maritime irregular warfare from RAND Corporation, a research firm, provides additional background information on U.S. maritime irregular warfare operations, both historical and more recent (i.e., up to the time of the report's writing). The report also made a series of findings and recommendations relating to U.S. maritime irregular warfare; for a summary of these findings and recommendations, see Appendix D . As noted earlier, for additional background information on detention of terrorist suspects on U.S. Navy ships, see Appendix E . DON states that the proposed FY2020 budget \"continues funding to counter the Islamic State of Iraq and the Levant (ISIL) and for operations in Afghanistan, the Horn of Africa, and other locations in theater, as well as for the European Deterrence Initiative,\" and \"supports building a more experienced, better trained, and more capable force by increasing the number of Marines with special skills, like those required for special operations, intelligence operations, electronic, information, and cyber warfare.\" Special Operations Command's (SOCOM's) proposed FY2020 budget requests, among other things, $72.6 million in the FY2020 Research, Development, Test, and Evaluation, Defense-Wide (RDT&EDW) account for Program Element (PE) 1160483BB, maritime systems (line 263 in the FY2020 RDT&EDW account), including $45.2 million for Project S0417: Underwater Systems, and $27.4 million for S1684: Surface Craft; and $59.0 million in the FY2020 Procurement, Defense-Wide (PDW) appropriation account for procurement of underwater systems for SOCOM (line 63 in the FY2020 PDW account). For additional background information on the FY2020 funding requests for lines 263 and 63, see Appendix F . One potential oversight issue for Congress concerns how much emphasis to place on IW activities in Navy budgets, particularly in a context of constraints on Navy budgets and Navy desires to devote resources to developing \"high end\" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia. Although the Navy, as discussed earlier in this report, took actions in the years following the terrorist attacks of September 11, 2001, that were intended to improve its IW capabilities, the Navy in more recent years has taken other actions that might be viewed as reflecting a reduced Navy emphasis on IW. In that connection, the following points were provided to CRS by the Joint Staff J-7 Irregular Warfare office in August 2016: \"US Navy IW funding and force structure have declined over the last few years.\" \"NIWO's responsibilities now belong to OPNAV N515 [i.e., the office within the Chief of Naval Operations that oversees the NWG], with dedicated IW staff decreasing from 13 government/military personnel along with 6 contractors led by a RDML [rear admiral] to 2 contractors and one O-5 [an officer that in the Navy is a commander] under O-6 [an officer that in the Navy is a captain] oversight.\" In May 2014, the Navy closed its Maritime Civil Affairs and Security Training Command (MCAST), an action \"which reduced civil affairs (CA) and security force assistance (SFA) capacity. The MCAST's mission was to train sailors to perform civil-military affairs and security force assistance missions. It also provided approximately 50 percent of Navy expeditionary training.... MCAST functions are now distributed across the Navy. The Naval Education and Training Security Assistance Field Activity serves as the focal point for security assistance training issues. The Expeditionary Combat Readiness Center processes individual augmentees for deployment. Civil affairs functions were not replaced.\" A July 2015 Navy memo states \"that the Navy does not 'possess dedicated CA units or members.'\" The Navy's FY2017 budget requested funding to preserve Helicopter Sea Combat (HSC) Squadron 85, a unit that \"supports Naval Special Warfare and other SOCOM [Special Operations Command] assets,\" which was \"a positive development.\" On the other hand, the Navy in March 2016 \"disbanded HSC 84, a sister squadron providing similar support.... This action essentially cut experienced, operational capacity in half. Whether the TSUs [i.e., the two Tactical Support Units that are to be stood up under the Navy's proposed FY2017 budget] will meet SOF requirements remains to be seen.\" The Navy Community of Interest (COI) for Countering Irregular Challenges \"does not extend beyond the Navy Analytic Group. This body, tied to the Community of Interest, submits IW program gap, technical demonstration, and study initiatives to N515 for funding. Members include Fleet Forces Command, the NECC, the Navy Undersea Warfare Center, and the Navy War College. The larger COI has not [as of August 2016] had a formal meeting in approximately 3 years.\" A January 17, 2019, press report stated: After spending the better part of the past two decades supporting wars in a desert region, the U.S. Navy is starting to bring the SEALs back into the fold as it faces threats from major powers such as China and Russia. The Navy is incorporating its elite special warfare teams into strategic calculations for every potential major power combat scenario, from China and Russia to Iran and North Korea, said Vice Chief of Naval Operations Adm. Bill Moran in a round-table with reporters at the Surface Navy Association's annual symposium. The movement toward reconnecting with the blue water force (the Navy's regular ships, aircraft and submarine forces) started under former Naval Special Warfare Command head Rear Adm. Brian Losey, who retired in 2016. The effort has continued to grow under subsequent commanders, said Moran. \"It's to the point now where we include them in all of our exercises, our war games, our tabletops — because as much as it is their chance to 're-blue,' it's our chance to reconnect from the blue side,\" he added. \"We've grown used to not having them in a lot of those situations. Now as we've done the tabletops, the exercises and the war games, we see: 'Wow, there is some great capability here that can set the conditions for the kind of operations in every single one of those campaigns.' And that will continue to grow, I think.\" There have been indications that the SEALs are specifically eyeing environments similar to those in the South China Sea. A recent environmental assessment obtained by the Honolulu Star Advertiser revealed that the SEALs were looking to triple the amount of training time spent in the Hawaiian islands, expanding from Oahu and Hawaii island to Kauai, Maui, Molokai and Lanai. A January 30, 2019, press report similarly stated: Having spent 17 years conducting counterinsurgency and counterterrorism operations in the deserts and mountains of the Middle East, the Naval Special Warfare community is shifting its focus to threats from China, Russia and aspiring adversaries. Navy operations planners are including Navy SEALs in all aspects of planning and training, such as war games, exercises and tabletop scenarios, Vice Chief of Naval Operations Adm. Bill Moran told reporters Jan. 16 at the Surface Navy Association's annual conference. The shift began in 2013 when Rear Adm. Brian Losey, then-commander of Naval Special Warfare Command, began making \"a concerted effort to talk to his teams about getting back to the 'blue side,'\" Moran said, referring to the Navy's large fighting forces of ships, submarines and aircraft. That focus has continued since Losey retired in 2016, Moran added. \"[Losey] saw the 'great power competition,' he saw the threats of an emerging Russia, China, North Korea and Iran,\" Moran said. [SEALs] have a very specific and important role to play in all situations.\" Since the U.S. insertion into Afghanistan in 2001, special operations forces, including the SEALs, have focused on a specific selection of their skill sets, including small-scale strikes and offensive actions, counterinsurgency, hostage rescue, counterterrorism and countering weapons of mass destruction. But these forces have other expertise that is relevant to both large-scale military conflicts as well as the type of posturing and competing for regional and global dominance that currently is happening, according to a 2017 report by David Broyles and Brody Blankenship, analysts at CNA, an Arlington, Virginia-based think tank that concentrates on the U.S. Navy. Those skills include preparing an environment for operations, reconnaissance, unconventional operations, military information support operations and foreign humanitarian assistance, according to the report, The Role of Special Operations Forces in Global Competition. \"Special operations forces have a greater role to play in today's global competition through a counteractive approach to adversary maneuvers,\" Broyles and Blankenship wrote. \"The United States has only recently recognized that adversaries are exploiting the U.S. view of 'preparing for future war' vice 'competing in the here and now.' \" Moran agreed that Navy SEALs have a unique talent set that the \"blue side\" had largely forgotten. \"We've grown used to not having them in a lot of situations. ... Wow, there are some great capabilities here that can set the conditions in the world for the kind of operations we are going to need in every single one of our campaigns,\" he said. A draft environmental assessment published by the Navy on Nov. 8 indicated that the SEALs are planning to increase training in Hawaii, asking to increase the number of exercises from the 110 events allowed now on non-federally owned land to as many as 330 training events on non-federal land or waterways and 265 training events on federal property. The proposed training also would expand the area for conducting exercises to include Kauai, Lanai, Maui and Molokai, in addition to Oahu and Hawaii. The training, in a location relatively near to and similar in climate to the South China Sea, where China continues to assert its dominance, is necessary to enhance the Navy Special Warfare Command's traditional skill sets, including diving and swimming; operating with submersibles and unmanned aircraft systems; insertion and extraction; reconnaissance and parachuting; and rope suspension training activities, according to the report. Moran said the SEALs' return to their roots will bolster lethality of the Navy as a whole. \"As much as it's their chance to re-blue, it's our chance to reconnect from the blue side,\" he said. \"That will continue to grow, I think.\" Potential oversight questions for Congress include the following: How do current Navy IW capabilities and capacity compare with those of 5 or 10 years ago? Under proposed Navy budgets, how will Navy IW capabilities and capacity in coming years compare to those of today? In a context of constraints on Navy budgets and Navy desires to devote resources to developing \"high end\" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia, is the Navy striking the right balance between funding for IW capabilities and capacity and funding for other Navy priorities? Does Congress have sufficient visibility into the operations of U.S. SOF, including Navy SEALs, to support congressional oversight over those operations? Another potential oversight issue for Congress concerns the role of Seal Team 6 in Navy CT and IW operations. A June 6, 2015, press report states the following: They have plotted deadly missions from secret bases in the badlands of Somalia. In Afghanistan, they have engaged in combat so intimate that they have emerged soaked in blood that was not their own. On clandestine raids in the dead of the night, their weapons of choice have ranged from customized carbines to primeval tomahawks. Around the world, they have run spying stations disguised as commercial boats, posed as civilian employees of front companies and operated undercover at embassies as male-female pairs, tracking those the United States wants to kill or capture. Those operations are part of the hidden history of the Navy's SEAL Team 6, one of the nation's most mythologized, most secretive and least scrutinized military organizations. Once a small group reserved for specialized but rare missions, the unit best known for killing Osama bin Laden has been transformed by more than a decade of combat into a global manhunting machine. That role reflects America's new way of war, in which conflict is distinguished not by battlefield wins and losses, but by the relentless killing of suspected militants. Almost everything about SEAL Team 6, a classified Special Operations unit, is shrouded in secrecy—the Pentagon does not even publicly acknowledge that name—though some of its exploits have emerged in largely admiring accounts in recent years. But an examination of Team 6's evolution, drawn from dozens of interviews with current and former team members, other military officials and reviews of government documents, reveals a far more complex, provocative tale. While fighting grinding wars of attrition in Afghanistan and Iraq, Team 6 performed missions elsewhere that blurred the traditional lines between soldier and spy. The team's sniper unit was remade to carry out clandestine intelligence operations, and the SEALs joined Central Intelligence Agency operatives in an initiative called the Omega Program, which offered greater latitude in hunting adversaries. Team 6 has successfully carried out thousands of dangerous raids that military leaders credit with weakening militant networks, but its activities have also spurred recurring concerns about excessive killing and civilian deaths.... When suspicions have been raised about misconduct, outside oversight has been limited. Joint Special Operations Command, which oversees SEAL Team 6 missions, conducted its own inquiries into more than a half-dozen episodes, but seldom referred them to Navy investigators. \"JSOC investigates JSOC, and that's part of the problem,\" said one former senior military officer experienced in special operations, who like many others interviewed for this article spoke on the condition of anonymity because Team 6's activities are classified. Even the military's civilian overseers do not regularly examine the unit's operations. \"This is an area where Congress notoriously doesn't want to know too much,\" said Harold Koh, the State Department's former top legal adviser, who provided guidance to the Obama administration on clandestine war.... Like the C.I.A.'s campaign of drone strikes, Special Operations missions offer policy makers an alternative to costly wars of occupation. But the bulwark of secrecy around Team 6 makes it impossible to fully assess its record and the consequences of its actions, including civilian casualties or the deep resentment inside the countries where its members operate. The missions have become embedded in American combat with little public discussion or debate. DOD's proposed FY2020 budget requests, among other things, $72.6 million in the FY2020 Research, Development, Test, and Evaluation, Defense-Wide (RDT&EDW) account for Program Element (PE) 1160483BB, (Special Operations Command [SOCOM]) maritime systems (line 263 in the FY2020 RDT&EDW account), including $45.2 million for Project S0417: Underwater Systems, and $15.6 million for S1684: Surface Craft; and $27.4 million in the FY2020 Procurement, Defense-Wide (PDW) appropriation account for procurement of underwater systems for SOCOM (line 63 in the FY2020 PDW account). Table 1 summarizes congressional action on the above funding requests. Appendix A. April 2018 Navy and Marine Corps Testimony on Special Operations Forces This appendix reprints the prepared statements of Rear Admiral Tim Szymanski, U.S. Navy, Commander, Naval Warfare Special Warfare Command, and Major General Carl E. Mundy, III, U.S. Marine Corps, Commander, U.S. Marine Corps Forces Special Operations Command, for an April 11, 2018, hearing the Special Operations Command's efforts to transform the force for future security challenges. Prepared Statement of Rear Admiral Szymanski The text of Admiral Szymanski's statement is as follows: Chairwoman Ernst, Ranking Member Heinrich and distinguished Members of the Committee, I am honored to appear before you, and proud to provide an update on your Navy's Special Operations Force and the U.S. Special Operations Command's maritime component. As you are aware, the security challenges facing our nation today are numerous, and are made more difficult by adversaries who are exploiting emerging technologies and gaining ground. We will continue to face Violent Extremist Organizations (VEOs), while the battlefield expands and becomes more complex and chaotic. Today, our most pressing security concerns involve the aggressive, coercive, and disruptive actions of near-peer competitors and rogue regimes. Exerting power by fighting below the level of armed conflict favors these players to the point that they are gaining advantages that threaten our national security. We must continue to be smarter, stronger, quicker, and more lethal than our adversaries, in order to protect our nation in a world that grows more complex every day. As an enterprise of nearly 10,000 personnel—2,810 SEALs; 780 Special Warfare Combatant-craft Crewmen; 4,100 support personnel; 780 reservists; 1,240 civilians—your Naval Special Warfare (NSW) Command accounts for only 2.4 percent of the Navy's personnel. Our budget accounts for less than one percent of the Department of the Navy's budget, and approximately 12 percent of U.S. Special Operations Command (USSOCOM) budget. We continue to have a global presence—operating in more than 35 countries on any given day. We are networked with the U.S. Navy and Joint Forces, the interagency, and allies and foreign partners, executing missions in support of USSOCOM, the U.S. Navy, geographic Combatant Commanders, and ultimately, national objectives across a full range of political and operational environments. NSW's ALIGNMENT TO THE NATIONAL DEFENSE STRATEGY The National Defense Strategy (NDS) published earlier this year charged the Department of Defense (DoD) to be more agile, more lethal, and more innovative in order to maintain our competitive advantage. The Chief of Naval Operations, in turn, laid out the maritime responsibilities articulated in the NDS, focusing on increasing Naval Power through balancing capability and capacity with readiness and sustainment. As the Commander, my challenge is to man, train, and equip the Force to be better positioned to support the NDS, the National Military Strategy and the Navy's Strategy for Maintaining Maritime Superiority, while supporting the operational requirements of the theater commanders. Furthermore, the long-term sustainment, health, and well-being of our people remains my highest priority. NSW RESOURCING After nearly 17 years of war in Afghanistan and Iraq, we are focused on reasserting our capabilities as the maritime component to Special Operations, properly postured to meet the threats of the future, enhancing our partnership with the Navy and exploring opportunities for increased integration and interoperability, while building capabilities and capacity with fleet, submarine, aviation and cyber forces. Acknowledging that manpower requirements have outpaced authorized and actual growth, we have spent the last year taking a hard look at our force structure to determine how we can best use the resources we have to optimize the impacts we are making on the battlefield. We looked at how to eliminate redundancy, redirect resources and merge assets to build depth and agility and how to meet transregional threats and provide increased combat lethality to the Theater Special Operation Commands. Optimizing our Force is paramount to meeting current operational requirements and provide greater agility to meet future requirements. We recently collaborated with the Naval Post graduate school to conduct a maritime, multi-thread experiment in Southern California. The exercise allowed us to explore a realistic scenario using unmanned systems in a multi-domain (sea, air and land) environment. We learned a lot and advanced the potential use of artificial intelligence and human-machine teaming in current conflicts which will eventually increase our lethality while reducing risk. We have made necessary investments aimed at increasing our lethality, and refining our capabilities that enable access to contested areas. We have made significant increases in our unmanned aerial vehicle lethality by adding targeting capabilities, increasing the capabilities of current sensor suites, and using algorithms and artificial intelligence to speed up the targeting cycle. We have modernized numerous small arms systems, including procuring a purpose built, full-time suppressed, medium range weapons system; a lighter weight medium machine gun that matches and, in some cases, surpasses the effective range of a .50 caliber machine gun; a sniper weapons system with optics and wind sensing technology; and shoulder-launched munitions that allow for very precise engagements through hardened structures. We have made great strides in modernizing our maritime mobility platforms. In fact, our partnerships with maritime industries has never been stronger. We have introduced high performance surface combatant craft into our fleet to serve across the spectrum of maritime operations. They include our new Combatant Craft Assault which replaced the NSW 11-meter rigid-hull inflatable boat and our Combatant Craft Medium which replaced the Mark V Special Operations Craft and the introduction of the new Combatant Craft Heavy. Special Operations Force (SOF) undersea mobility platforms provide uniquely capable, clandestine means to access peer/near-peer locations. To that end, we expect to introduce two new undersea submersibles this year– the Shallow Water Combat Submersible (SWCS), which will replace our legacy SEAL Delivery Vehicle (SDV), and the Dry Combat Submersible (DCS), a new platform to our inventory. Nearly a year ago, we piloted a deliberate effort to realize the Secretary of Defense's guidance of exploiting Industry's investment in technology to relentlessly pursue innovative and advanced operational capabilities for our warfighters at a greater speed, relevant to the pace of technology in order to outpace our adversaries. This venture allowed us to understand and take advantage of new DoD contracting and procurement authorities as well as maximizing the utilization of DoD and USSOCOM outreach-to-industry platforms such as Defense Innovation Unit Experimental (DIUx) and SOFWERX. NSW has learned and applied how to effectively make use of these and other new and emerging opportunities to rapidly bring future operational concepts to the present: such as our realization of Artificial Intelligence-Autonomy of ISR Drones. This example among others, show promise to have exponential impacts on our capabilities to accomplish our mission in a more agile, lethal and sustainable manner. Our efforts—to rapidly prototype, experiment with and lead in new and emerging technologies are aimed at delivering capabilities at the speed of relevancy to our warfighters. Finally, bottom up, operator-inspired innovation drives experimentation during exercises, and training eventually equates to relevancy and leads to greater success on the battlefield. With our component partners and throughout USSOCOM, innovation is happening at the unit level up and through headquarters. Our focus on innovation is driven by our people – buying down risk to our force while increasing our speed, accuracy, and lethality. PEOPLE: THE FIRST SOF TRUTH Our primary weapons system remains The Operator. We continue to invest heavily in our personnel, whether it's to train, retain or sustain them. We select, train and maintain persons of character, who are mature, highly skilled, culturally attuned and trusted to execute our nation's most sensitive missions. Thank you for your role in the preservation of our Force with the 10-year, $1 billion Silver Strand Training Center-South, the single most important military construction effort impacting the current and future operational readiness of the NSW Force. Once complete, the complex will consolidate the training requirements of today's force, creating efficiencies and synergy of improved operational planning and preparedness, but also allow our operators to spend more time with their families and communities. We remain committed to the physical and mental health of our operators, as we have a moral obligation to ensure their well-being. Preservation of the Force and Families, our Human Performance Program, and our most important initiatives involving Cognitive Health are about keeping our warriors in the fight, extending their service life, and giving them a high quality life post-service. With strong Congressional support, the USSOCOM Preservation of the Force and Family program continues to meet and exceed the intent to build resilience and facilitate the long-term care of our operators and their families, while never forgetting our fallen teammates with ongoing support to our Gold Star Families. Embedded professional care providers working within validated programs have helped turn the corner on many of the negative trends that have impacted those who have been in this long fight. Our usage data shows an increase in service members and families going to see clinical psychologists, licensed clinical social workers, nurse case managers, which speaks directly to de-stigmatization and trust. Similarly, there is a high number of cross referrals among the various care providers that demonstrates mutual support and clinical trust and reliance. In regard to Human Performance, our athletic trainers, strength coaches and physical therapists provide tailored and operationally relevant programs have resulted in injury reduction and increased recovery time from injuries with a direct impact to overall team readiness. Our Warrior and Family Support staff provide hands on, personal touch and connection to our families and children, connecting them to all the Service-provided and SOF-unique programs that are so vital to the strength and resilience of our family members. We have also learned that long-term physical and psychological challenges may result in impacts to one's memory, attention, processing speed, problem-solving, visuospatial function and impulse control which can affect operational performance and mission accomplishment. Given that we are in the longest continuous stretch of armed conflict in our history, learning about the cognitive health of our force is a critical initiative. We have initiated a Cognitive Surveillance Program that will be a more pre-emptive approach to intervention where cognitive impacts are indicated. More broadly, this initiative will seek to identify injuries earlier, track individual trends, and assist in developing comprehensive treatment plans to aid in the recovery of our service members. The end-state is to get NSW operators back into the fight while contributing to their long-term wellness. The Surveillance Program entails an initial baseline screening of all SEAL/SWCC operators within NSW by 30 June 2018; and ongoing re-testing every two years to assess significant change, similar to other routine exams such as dental or audiogram. Aggressive efforts include increasing awareness of potential issues and not waiting for perfect solutions. Therefore, we are actively 'driving the science' through our blast exposure research efforts, ultimately looking to create a 'dive-table-like' approach to heavy weapons/breaching exposure levels and mitigation needs. NSW continues to seek and offer best practices as we develop our cognitive health emphases. We rely on education, informed research efforts, and leadership support across the continuum of care to help mitigate the range of brain injuries and increase recovery rates for our members. Part of that continuum of care focuses on our transitioning veterans, whether at four years or after forty, with a holistic, SOF-unique initiative called Future Former Frogmen, or F3. F3 focuses on ensuring the successful transition of our active duty into civilian life by leveraging our neurocognitive science initiatives, continuum of leadership development efforts, readiness support programs, and veteran's resources. F3 provides structure, process and guidance throughout the complex transition experience giving the service member access to existing programs to ensure NSW veterans remain resilient. SOF for Life, a powerful support network, continues from active duty life to veteran life. Today in Coronado, California, at the Basic Underwater and Demolition / SEAL school, otherwise known as BUD/S, there are approximately 100 of America's best and brightest going through training to be part of the Navy's elite special operations maritime force as part of the most recent class, Class 330. Just like those seeking to be part of my brethren's communities, those seeking to be part of the SEAL community, those who succeed in the 63-week course will earn their Trident. At the end of 63 weeks, each student will have swam 48 miles; hiked or patrolled over 150 miles; and conducted at least 40 dives while spending a minimum of 60 hours, or two and a half days under water. As a class, at the end of those 63 weeks, they will have completed the equivalent of swimming from Cuba to the southern tip of Florida, then running to New York City. And that is just a snapshot of what we ask them to do before they have taken their first step into their first operation in defense of our country. It is precisely because of what we ask them to do, starting in Coronado, then around the world, through operation after operation, that we are focused on their long-term health, and the well-being of our Force and Families. Naval Special Warfare Command will continue to place priority on strengthening, equipping and protecting our people; outpacing our enemies in the employment of new technologies and accelerating trends, enabling us to compete below the threshold of conflict. We will refine and adapt our organizational structure to ensure Naval Special Warfare remains relevant and lethal, and when necessary, stands ready, willing and able to engage in combat to fight and win decisively for many years to come. Thank you for your time, your care for our Naval Special Warfare community, and I welcome the opportunity today to answer your questions. Prepared Statement of Major General Mundy The text of Major General Mundy's statement is as follows: Introduction Marine Raiders are the Marine Corps' contribution to United States Special Operations Command (USSOCOM). Through specialized and advanced training, MARSOC builds upon its unique attributes and ethos as Marines to produce agile, scalable, fully-enabled, and responsive special operations forces (SOF) comprised of operators and special operations-specific combat support and combat service support specialists. MARSOC formations task organize for every assigned mission and leverage their robust command and control capability and their ability to fuse operations with intelligence down to the team level. All of these factors enable our Raiders to succeed in distributed environments and enable partners at the tactical and operational levels of war. MARSOC contributes to the SOF enterprise and US combatant commands by providing full spectrum special operations capabilities to combat complex transregional problems. Established in 2006, our organization continues to address the most immediate threats to our Nation and has become a key participant in the ongoing fight against violent extremist organizations. Accepting this, we are also cognizant that we must work to minimize pressure on our force and our families as we simultaneously prepare for future threats. We ensure preparedness by adapting our training methods using feedback from currently deployed forces to better prepare our Raiders for what they will encounter while deployed. Simultaneously, we minimize pressure on the force by ensuring adequate access to Preservation of the Force and Families (POTFF) resources. We recognize that our operational capability ultimately rests upon a foundation of outstanding individuals and their families. In order to safeguard and sustain MARSOC's human capital, our most valuable resource, we continually strive to balance operational commitments with time Raiders spend at home station. Part of our effort to take care of families involves ensuring that our POTFF program not only delivers responsive and effective support, but that it continues to evolve with changing demands and needs of our force. Background During my tenure as the Commander of MARSOC, I have continually been impressed by the caliber of our individuals, be they Marines, Sailors, or civilians. They are well trained, well equipped, and provide the full spectrum special operations capability that has been crucial to success on the modern battlefield in places as diverse as Mali in West Africa, contested areas of Iraq, and Marawi in the Philippines. Twelve years on, MARSOC is maturing into a full and integral member of the SOF enterprise just as it continues to provide Raiders to counter our Nation's threats. Taking into account where MARSOC is today, we would be remiss if we did not acknowledge some of the formative episodes in the history of our Marine Corps that got us here. The United States Marines Corps' rich history is one that is replete with expeditionary operations against what we know today as irregular threats. These actions serve as the foundation for what is Marine Corps Special Operations today. Although the United States Marine Corps (USMC) did not provide a service component to the United States Special Operations Command (USSOCOM) until 2005, the Marine Corps has demonstrated an ability to conduct and support special operations throughout its history. In the early years of America's involvement in World War II, President Franklin Delano Roosevelt was determined to bring the war to our enemies as rapidly as possible. Because of the Marine Corps' historical successes in small wars and its recent development of amphibious operational concepts, it was considered to be the ideal parent organization for the president's vision for \"commando\" operations. In January 1942 the United States Marine Corps established two Raider battalions. The mission of the new Raider units was to spearhead amphibious landings, conduct raiding expeditions against Japanese held territory, as well as conduct guerilla-type operations behind enemy lines for extended periods. Marine Raiders were intellectually dynamic, morally disciplined, and physically fit with an irrepressible sense of duty, loyalty to one another, and imbued with a \"Gung Ho\" spirit in the face of adversity… much like the Marines and Sailors we select and train as Raiders today. During the Vietnam War and throughout the Cold War era, the Marine Corps did not formally possess a specialized unit. However, many Marines were members of specialized Joint and certain, tailored conventional units, such as force reconnaissance and Marine Expeditionary Units (Special Operations Capable). These units performed some of the types of missions we associate with Special Operations today. The complex global environment produced by the end of the Cold War as well as the world changing events of September 11, 2001, prompted an almost immediate need for additional special operations capacity capable of achieving operational and strategic effects. In light of these events and the pressing need for more SOF, Secretary of Defense Donald Rumsfeld called for the Marines to work more closely with USSOCOM. After validating an initial proof of concept in 2004 known as the Marine Corps Special Operations Command Detachment (DET One), the Secretary of Defense directed the Marine Corps to provide a permanent contribution to USSOCOM – what would become Marine Corps Forces, Special Operations Command – in November 2005. On 24 February 2006, MARSOC activated at Camp Lejeune, North Carolina as a service component assigned to USSOCOM. MARSOC today comprises a headquarters, one Marine Raider Regiment, one Marine Raider Support Group, and the Marine Raider Training Center. The Command has forces on both the east coast at Camp Lejeune, North Carolina, and on the west coast at Camp Pendleton, California. Presiding over a total force of approximately 3,000 Marines, Sailors, and 200 Federal Civilians, the Command is employed across the globe executing special operations missions in support of SOCOM and the geographic combatant commands that span the SOF core activities. With a focus on counterterrorism, direct action, special reconnaissance, foreign internal defense, security force assistance, and counterinsurgency, your modern-day Raiders also have the capability to directly support hostage rescue and recovery, countering of weapons of mass destruction, unconventional warfare, foreign humanitarian assistance, military information, and civil affairs operations. In order to achieve success and provide full spectrum capability across this wide swathe of core activities, we must prioritize our efforts. MARSOC Priorities Understanding our role as a force provider and capability generator within the SOF enterprise, we have taken the SOCOM Commander's priorities of \"Win, Transform, and People,\" and applied them to how we prepare our forces to accomplish assigned missions. To this end, MARSOC currently focuses on four priority areas: the provision of integrated full spectrum SOF, capabilities integration between SOF and Marine Air Ground Task Forces (MAGTF), future force development, and the preservation of the force and families. Priority 1: Force Provider Our first priority is to provide integrated full spectrum SOF that are task organized, trained and equipped to accomplish assigned special operations tasks. At any given point in the year, MARSOC has approximately 400 Raiders deployed across 18 countries carrying out assigned missions. We maintain three, forward task organized Marine Special Operations Companies; one each in Central Command, Africa Command, and the Pacific Command areas of responsibility. In addition to company-level deployments, we maintain one persistent O-5 (Lieutenant Colonel) level Special Operations Task Force in Central Command and a one-third rotational split with Naval Special Warfare Command for an O-6 (Colonel) level Combined/Joint Special Operations Task Force Headquarters, also in Central Command. At every level, these deployed formations bring integrated capabilities across all functional areas and allow us to operate across the full range of special operations missions. We believe that it is these high-end capabilities that provide our forces with a competitive edge against the adversaries we face. Providing our force begins with the recruitment process and continues through our assessment, selection, and individual training pipeline. We are focused on recruiting the best individuals from across the Marine Corps. Based on the results of our deployed forces and feedback from supported commanders, our recruiting and selection methods are working. Our training is progressive. As individuals earn new special operations specialties, they are moved to teams or special skills training environments. This training continues until deployment and covers everything from individual skill sets to high-end, advanced, complex unit collective training. In order to assess and certify Marine Special Operations Companies for deployment, MARSOC has created the RAVEN exercise. Held six times each year, RAVEN emphasizes realistic decision making for company and team commanders and provides a venue to practice the full planning, decision, execution, and assessment cycle. Alternating between Gulfport, Mississippi and Smyrna, Tennessee, RAVEN is a living exercise that enables MARSOC to incorporate the most current lessons from our deployed units as well as anticipated enemy actions inform and support ongoing joint contingency planning. For example, our most recent RAVEN conducted in Tennessee, featured a more robust foreign intelligence threat that undertook both physical and technical surveillance against our Marine Special Operations Teams. During this RAVEN we also exposed our teams to the degraded communications environment we would expect to encounter when facing a near-peer/emerging competitor. The training environments we create are dynamic. Not only do they prepare our Raiders for the current operational challenge, but they also evolve based on emerging threats and our expected participation in support of standing operational plans. Another benefit of the RAVEN exercises is its utility as a venue for integrating conventional Marine Corps resources into what is otherwise a SOF-centric exercise. Priority 2: Capabilities Integration with MAGTFs (Interoperability, Integration, and Interdependence) Second, we provide a bridge for routine capabilities integration with SOF and the deployed Marine Air Ground Task Forces to fully maximize the complimentary capabilities of each formation; especially in light of near-peer/emerging competitors. Given the threats present on contemporary battlefields and considering those we expect to face in the future, it has become increasingly important for SOF to be able to integrate \"seamlessly\" with the conventional forces and vice versa. Conventional forces offer capabilities and a capacity that simply do not exist in our small formations. In today's complex operating environment, the extent to which we, across the Joint Force, are able to leverage one another's strengths, and thereby offset our vulnerabilities, could determine the difference between success and failure. Cyber and space based capabilities, intelligence exploitation, mobility, fire support, logistics and medical support, are all examples of capabilities that we partially rely on conventional forces to provide– especially in scenarios involving high intensity combat. Examples of interoperability and capabilities integration occur every day across the globe from Syria and Iraq, Afghanistan, the Philippines and remote locations in Africa. With deliberate efforts to participate in each other's wargames, exercises, and training, we can institutionalize these efforts to the point that they become routine. Priority 3: Future Force Development As the operating environment evolves and more complex threats emerge, MARSOC must adapt its force to meet these new challenges. Constant and deliberate innovation, and evolution is critical to our success. Our concept for development is based on both a bottom-up driven process that incorporates immediate battlefield feedback into our training curricula, equipment research, testing, procurement; and a top-down approach that combines more traditional capability acquisition processes with longer-term future concept and wargaming efforts. Regarding equipment development and acquisition, we are tightly integrated with SOCOM and the Marine Corps and look forward to benefiting from the ongoing efforts of SOCOM's Acquisition Technology &Logistics, SOFWERX, and the Marine Corps' Rapid Capabilities Office. All of these organizations offer us an expedited procurement process for emerging technology. We have already taken steps to bring our vision to fruition with regard to capability development in particular technology areas. These include freeze dried plasma, semi-autonomous seeing and sensing capability, organic precision fires, counter-UAS rapid self-defense, unmanned cargo UAS and ground systems, rapid fusion of big data analytics and machine assisted learning, broadband tactical edge communications, and specialized insertion capabilities. As we research and improve our warfighting capabilities, we must kept in mind that our near-peer/emerging competitors are also making similar advances and investing in emerging technology. It is critical that we ensure that the technological capabilities we opt for are able to operate, communicate, and self-heal in a signals degraded environment. Likewise from a training perspective, we recognize the need to simulate operations in a degraded/denied communications environment that reflect what we might face when confronting near-peer/emerging competitors. We also plan to continue to improve our proficiency in the critical combined arms skills that both increase our lethality and allow us to maintain a tactical advantage over our adversaries. Last, we acknowledge that we must be able to operate in any clime and place, therefore we are committed to training in environments that replicate the full range of what we may experience on the battlefield. Complementing our near and mid-term efforts at capability development is longer term work on the development of a MARSOC-specific futures concept. Although this concept bears a resemblance to similar initiatives undertaken with the Department, it very much reflects MARSOC's unique place within SOF and interpretation of what the future operating environment might look like. We see a world overwhelmingly influenced by a resurgence of regional competition and instability. As these two themes collide, the complexity of the operating environment will dramatically challenge the ability of leaders at all levels to first, understand what is happening and, second, make sound decisions. This is the very situation in which Raider formations of the future must be prepared to operate; an urgent, volatile, complex, high-stakes problem that comprises multiple actors and defies the application of traditional US strengths and solutions. The results of our futures analysis, conducted over the past 18 months, have provided broad implications for the force as well as options which MARSOC can use to shape future capability to meet the challenges posed by the future operating environment. Throughout our internal wargame series, four discrete concepts or 'themes' consistently emerged. Each theme describes a distinct aspect of a vision for MARSOC, but at the same time each built upon the others such that the four are interconnected and mutually supporting. Together they provide a strong conceptual basis for a future MARSOC force that outpaces changes in the operating environment and remains a reliable force across warfighting and Title X functions. Collectively, these themes have come together to form the four, core pathways of innovation: MARSOF as a Connector, Combined Arms for the Connected Arena, The Cognitive Operator, and Enterprise Level Agility. Our futures vision document, MARSOF 2030 explains each of these innovation pathways in depth and also explores how they interconnect with one another. I will briefly introduce them here for the benefit of the committee. 'MARSOF as a Connector' is intended to capture MARSOC's facility in building cohesive, task organized teams. It is the idea that MARSOC can be the ideal integrator and synchronizer of U.S. Governmental capabilities with USSOF and partner nation actions. It also acknowledges the non-military nature of many of the problems we face and the need to look beyond for more durable solutions that involve tools other than the military. 'Combined Arms for the Connected Arena' aims to get at the requirement to 'sense' and 'make sense of' what is happening in diverse and multi-dimensional environments. This second pathway also speaks to the use of cyber and information 'domains' as potential venues for conflict now, but certainly with increasing relevance as we look toward the future. From our standpoint, we must become as comfortable operating in these 'virtual' domains as we are in the physical. Perhaps the most foundational of all of our innovation pathways is 'the Cognitive Operator'. This pathway touches all others. At its core is the idea that the future requires a SOF operator with an equal amount of brains to match the brawn; foresight in addition to fortitude. Your future Raiders must preside over expanded capabilities that include the ability to influence allies and partners; understand complex problems; apply a broad set of national, theater, and interagency capabilities to those problems; and fight as adeptly in the virtual space as the physical. The last innovation pathway, 'Enterprise Level Agility', leverages MARSOC's relatively small size as an advantage. MARSOC possesses the advantage of being a relatively small force with its own component headquarters – this allows the command to rapidly reorient the organization to confront new challenges as they emerge. In other words, MARSOC's organizational dexterity can provide SOCOM with an agile, adaptable force to meet unexpected or rapidly changing requirements. In this context, MARSOC's small size becomes a strength; one that can provide both institutional and operational agility to the SOCOM Commander. Priority 4: Preservation of the Force and Families Calling to mind the SOF Truth that \"people are more important than hardware,\" our fourth priority is the preservation of our force and families program that provide our Raiders and their families with the access to resources promoting personal resiliency increasing longevity in service. Although listed as my fourth priority, preservation of the force and families is equally as important as the previous three priorities because people are at the heart of all we do. Currently, MARSOF special operators average 1 day overseas for every 1.9 days at home. Our capability specialists that enable communications, intelligence, air support, explosive ordnance disposal, and our canine handlers, vary by occupational specialty but average between 1 to 1.7 and 1 to 1.2 days deployed as opposed to days spent at home station. What these numbers do not reflect is the additional time that is spent away from home while training in CONUS. Although difficult to measure, Personnel Tempo or PERSTEMPO receives significant attention at all leadership levels within the Command such that we aim to balance our service members' schedules between training at and training away from home station. Because of this high operational tempo, POTFF has become an integral tool for maintaining the overall health of our force through programs that are focused on improving human performance, providing resources for behavioral health, developing spiritual fitness, and offering other family-oriented opportunities that are designed to strengthen the family unit. We appreciate the continual support from Congress on providing the funding for programs and specialized capabilities to make these programs effective. Culture of accountability: Closely tied to these efforts, in concert with both SOCOM and the Marine Corps, is our command-wide push to enhance our culture of accountability as it relates to issues such as sexual misconduct, illicit drug use, personal accountability, and unauthorized media release. As an example, our reported number of sexual assault cases remains in the low single digits and we have not had any victim reported incidents in Fiscal Year 18. We attribute this low number of incidents to our constant command level messaging campaign and our strong Sexual Assault Prevention and Response (SAPR) program. While we believe that even a single incident is one too many, we continue to strive to eradicate sexual and other forms of misconduct from our force. We strive each day to provide you SOF personnel that continue to embody the values of accountability, integrity, and commitment in honorable service to our nation. Conclusion: In conclusion, I am committed to providing Marine Raiders that provide the nation with full spectrum special operations capability and whose actions continually demonstrate our motto of Spiritus Invictus, or 'unconquerable spirit'. Your Marine Special Operators will remain always faithful, always forward. I thank the committee for your continued support of our military members and their families and also for your commitment to national security. Appendix B. November 2011 Navy Testimony on Navy IW Activities This appendix presents the text of the Navy's prepared statement for a November 3, 2011, hearing before the Emerging Threats and Capabilities subcommittee of the House Armed Services Committee on the IW activities of the military services. The text of the statement, by Rear Admiral Sinclair Harris, Director, Navy Irregular Warfare Office, is as follows: Chairman Thornberry, Congressman Langevin, and distinguished members of the House Armed Services Emerging Threats and Capabilities Subcommittee, it is an honor for me to be here with you today to address the U.S. Navy's efforts to institutionalize and develop proficiency in irregular warfare mission areas. These efforts are vital to our national interests and, as part of a comprehensive approach for meeting complex global challenges, remain relevant in a time of uncertainty and constant change. To meet these challenges Admiral Greenert, Chief of Naval Operations, recently provided his Sailing Directions to our Navy emphasizing the mission to deter aggression and, if deterrence fails, to win our Nation's wars. Today, the Navy is engaged around the world conducting preventive activities that stabilize, strengthen, and secure our partners and allies providing regional deterrence against state and non-state actors, while at the same time fighting, and winning, our Nation's wars. We expect the demand for these activities to increase in the future security environment as a capacity constrained Navy seeks to maintain access and presence. Emphasis on increased training and education will enable our continued readiness to effectively meet global demand. As demand for our Navy continues to grow, we continue to leverage our Maritime Strategy with our partners, the Marine Corps and Coast Guard. The maritime domain supports 90% of the world's trade and provides offshore options to help friends in need, and to confront and defeat aggression far from our shores as part of a defense in depth approach to secure our homeland. CNO's Sailing Directions, coupled with an enduring Maritime Strategy, underscore the Navy's focus on multi-mission platforms and highly trained Sailors that conduct activities across the operational spectrum. Key tenets of the force are readiness to fight and win today while building the ability to win tomorrow; to provide offshore options to deter, influence, and win; and to harness the teamwork, talent and imagination of our diverse force. While the Maritime Strategy spans the spectrum of warfare, the Navy's Vision for Confronting Irregular Challenges (CIC), released in January 2010, addresses mission areas of irregular warfare as well as maritime activities to prevent, limit, and interdict irregular threats and their influence on regional stability through, insurgency, crime, and violent extremism. The CIC Vision is derived from our Maritime Strategy with the intention to implement steps towards increasing the Navy's proficiency in supporting direct and indirect approaches that dissuade and defeat irregular actors who exploit uncontrolled or ungoverned spaces in order to employ informational, economic, technological, and kinetic means against civilian populations to achieve their objectives. The CIC Vision is guiding the alignment of organizations, investments, innovation, procedures, doctrine, and training needed to mainstream CIC capabilities within the Fleet. These efforts are focused on outcomes of increased effectiveness in stabilizing and strengthening regions, enhancing regional awareness, increasing regional maritime partner capacity, and expanding coordination and interoperability with joint, interagency, and international partners. These outcomes support promoting regional security and stability and advancing the rule of law allowing good governance and promoting prosperity by helping partners better protect their people and resources. In addition to preventive activities, the Vision guides efforts to inhibit the spread of violent extremism and illicit, terrorist, and insurgent activities. To achieve these outcomes, the Navy is actively reorienting doctrine and operational approaches, rebalancing investments and developmental efforts, and refining operations and partnerships to better support a comprehensive approach to U.S. efforts. These efforts will provide a Navy capable of confronting irregular challenges through a broad array of multi-mission capabilities and a force proficient in the CIC missions of security force assistance, maritime security, stability operations, information dominance, and force application necessary to support counterinsurgency, counterterrorism, and foreign internal defense missions. In line with its strategy for confronting irregular challenges the Navy has leveraged key force providers, such as the Navy Expeditionary Combat Command, and established Maritime Partnership Stations, and Maritime Headquarters with Maritime Operations Centers to meet the demands and missions consistent with its strategy and vision. The evolution of intelligence and strike capabilities has enabled the Navy to meet urgent Combatant Commander requirements for counterterrorism and counterinsurgency operations and highlighted further opportunities for the Navy as an important joint partner. While these operational organizations and activities deliver Navy capabilities in theater, the Navy Irregular Warfare Office, established by the CNO in July 2008, has guided the implementation and institutionalization of the CIC Vision. The Navy Irregular Warfare Office, working closely with USSOCOM, other Combatant Commanders, Services, interagency and international partners, has rapidly identified and deployed Navy capabilities to today's fight, and is institutionalizing confronting irregular challenges concepts in the Navy's planning, investment, and capability development. The Navy Irregular Warfare Office operates under three primary imperatives consistent with the Maritime Strategy, CNO's Sailing Directions, and the Navy's Vision for Confronting Irregular Challenges. They provide integration and institutionalization in CIC mission areas and are; (1) improve the level of understanding concerning the maritime contribution to the joint force; (2) increase proficiency of the whole of Navy to confront irregular challenges; and (3) drive maritime and special operations forces to seamless integration in addressing irregular challenges. These three imperatives focus the Navy's implementation efforts and mainstream the concept that preventing wars is as important as winning them. Our Navy must be ready to transition seamlessly between operational environments, with the capability and training inherent in the Fleet. Department of Defense Directive 3000.07 directs the services to \"improve DoD proficiency for irregular warfare, which also enhances its conduct of stability operations\" and directs reporting to the Chairman of the Joint Chiefs of Staff annually. Navy efforts to institutionalize and provide proficiency in confronting irregular challenges, includes proficiency in irregular warfare missions along with missions of maritime security operations and information dominance, a key enabler for CIC. Currently, the Navy leverages its access and persistent presence to both better understand and respond to irregular challenges and is actively evolving its proficiency to prevent and counter irregular threats while maintaining its ability to conduct the full spectrum of naval warfare. Its access, presence, and emphasis on maritime partnerships enable broader government efforts to address underlying conditions of instability that enhance regional security. Through its mix of multi-mission capabilities, the Navy provides political leaders with a range of offshore options for limiting regional conflict through assurance, deterrence, escalation and de-escalation, gaining and maintaining access, and rapid crisis response. In addition to its inherent ability to protect the maritime commons, its effectiveness in building maritime partner capability and capacity contributes to achieving partner security and economic objectives. Operating in and from the maritime domain with joint and international partners, the Navy is enhancing regional security while dissuading, deterring, and when necessary, defeating irregular threats. The Navy acknowledges the complexity of the future security environment and continues to explore balanced approaches. Following are the Navy's current focus areas: Fleet-SOF Integration: Navy's afloat basing support to special operations forces has extended their reach into denied or semi-permissive areas enabling highly successful counterterrorism missions. Navy provides inherent combat capabilities, multi-mission ships and submarines collecting mission critical information, approval for 1052 support billets for Naval Special Warfare, two dedicated HCS squadrons, and shipboard controlled UAV orbits supporting counterterrorism operations. The Navy is aligned to improve this integration through pre-deployment training, mission rehearsals, improvements to fleet bandwidth allocation, shipboard C4I enhancements, and C2 relationships needed to prosecute time sensitive targets. Maritime Partnerships: Establishing enduring maritime partnerships is a long-term strategy for securing the maritime commons. Legal, jurisdictional, and diplomatic considerations often complicate efforts to secure the maritime commons, especially from exploitation by highly adaptive irregular actors. In recognition of these considerations, the Navy is emphasizing partnership engagements with U.S. and international maritime forces to strengthen regional security. Information Sharing Initiatives: In an information dominated environment, initiatives that link joint warfighters, the technology community, and academia are crucial to rapidly fielding solutions to emerging irregular challenges. These initiatives are the basis for longer-term efforts to adapt and improve proficiency of Navy platforms to address irregular challenges. Doctrine: Development of Tri-Service (Navy, Marine Corps, and Coast Guard) Maritime Stability Operations doctrine that will enable a more effective response to instability in the littorals. Organization: Navy Expeditionary Combat Command, which continues to provide in-demand capabilities such as Maritime Civil Affairs Teams, Riverine Forces, Maritime Security Forces, Explosive Ordnance Disposal Teams, and Expeditionary Intelligence Teams. Today, the Navy continues to meet planned global operational commitments and respond to crises as they emerge. Overseas Contingency Operations continue with more than 12,000 active and reserve Sailors serving around the globe and another 15,000 at sea in Central Command. Navy's Carrier Strike Groups provide 30 percent of the close air support for troops on the ground in Afghanistan and our Navy and Marine Corps pilots fly almost 60% of electronic attack missions. Yet, as our national interests extend beyond Iraq and Afghanistan, so do the operations of our Navy. Over the last year, more than 50 percent of our Navy has been underway daily; globally present, and persistently engaged. Last year, our Navy conducted counter-piracy operations in the Indian Ocean and North Arabian Sea with a coalition of several nations, trained local forces in maritime security as part of our Global Maritime Partnership initiatives in Europe, South America, Africa and the Pacific and forces in the Sixth Fleet supported NATO in complex operations in Libya. Navy responded with humanitarian assistance and disaster relief to the earthquake in Haiti, the flooding in Pakistan, and the earthquake and tsunami in Japan; and, conducted the world's largest maritime exercise, Rim of the Pacific (RIMPAC), which brought together 14 nations and more than 20,000 military personnel, to improve coordination and trust in multi-national operations in the Pacific. Our Sailors continue to deploy forward throughout the world, projecting US influence, responding to contingencies, and building international relationships that enable the safe, secure, and free flow of commerce that underpins our economic prosperity and advances the mission areas that address irregular challenges. The future vision of the Navy in meeting the uncertain challenges around the globe remains a force forward, present, and persistent in areas critical to the national interests of the United States. CNO, in previous testimony, stated: Our Navy continues to conduct a high tempo of global operations, which we expect to continue even as forces draw down in Afghanistan. Global trends in economics, demographics, resources, and climate change portend an increased demand for maritime presence, power, and influence. America's prosperity depends on the seas… and as disruption and disorder persist in our security environment, maritime activity will evolve and expand. Seapower allows our nation to maintain U.S. presence and influence globally and, when necessary, project power without a costly, sizeable, or permanent footprint ashore. We will continue to maintain a forward-deployed presence around the world to prevent conflict, increase interoperability with our allies, enhance the maritime security and capacity of our traditional and emerging partners, confront irregular challenges, and respond to crises. To continue as a global force in the preventive and responsive mission areas that confront irregular challenges, including those of irregular warfare, the Navy will be faced with increasing demand in a fiscally induced capacity constrained environment. Constrained capacity requires a prioritization of areas requiring persistent presence, to include those regions of current or forecast instability. Also required is an understanding of the risk incurred to mission, and to force, if we do not get that priority correct. We must ensure our Navy remains the finest, best trained, and most ready in the world to sustain key mission areas that support confronting irregular challenges, and has the ability to face a highly capable adversary. The Navy looks forward to working with Congress to address our future challenges and thank you for your support of the Navy's mission and personnel at this critical crossroads in U.S. history. Appendix C. 2010 Navy Irregular Warfare Vision Statement This appendix reproduces the Navy's January 2010 vision statement for irregular warfare. Appendix D. 2012 RAND Corporation Report Findings and Recommendations This appendix presents findings and recommendations from a 2012 report on maritime regular warfare by RAND Corporation, a research firm. Findings The report made the following findings, among others: The study's main findings span the strategic, operational, and tactical levels. Several are specific to MIW, while others have implications both for MIW [maritime irregular warfare] and for IW operations more broadly. First, the maritime force is generally considered to play a supportive role to ground forces in IW and therefore has the potential to be underutilized even in IW operations conducted in a predominantly maritime environment .... Second, countries that have a prevalent maritime dimension associated with an insurgency could potentially benefit from the enhancement of civil-military operations (CMOs) in the maritime arena .... Third, maritime operations in IW can allow the United States to scale its ground involvement in useful ways .... Fourth, if one assumes that future MIW engagements that entail building a partner's capacity will resemble OEF-P [Operation Enduring Freedom—Philippines], it is important to manage strategic expectations based on realistic assessments of the partner's capabilities .... Fifth, when building partner capacity, either in MIW or land-based IW, the United States should make efforts to provide equipment and technology that the partner will be able to maintain and operate without difficulty .... Sixth, with regard to operational methods, coastal maritime interdiction can play an instrumental role in setting the conditions for success in IW by cutting the supply lines that sustain an insurgency .... Seventh, as the [1980s] Nicaragua case illustrates, U.S. partners in MIW may only have to influence and monitor the sensibilities of a local population, but the legitimacy of U.S. involvement may be tested in worldwide public opinion .... Finally, international cooperation in confronting MIW adversaries is often necessary, and the U.S. Navy should make an effort to ensure that it is tactically and operationally interoperable with partner navies in order to facilitate coordination .... Recommendations The report made the following recommendations, among others: The findings presented here have several direct implications for the U.S. conventional Navy and Naval Special Warfare Command (NSW). First, U.S. naval forces should continue to provide U.S. partners with suitable equipment that they will be able to operate and maintain and should continually strive to increase their interoperability with partner forces. Second, U.S. naval forces may have to continue or expand training of partner forces to confront future MIW threats. Third, when conducting MIW, operating from a sea base offers advantages to NSW. However, due to the costs of such a practice, both NSW and the conventional Navy must also recognize that decisions regarding when and where to support sea basing of this sort need to be made carefully. Fourth, in support of future MIW operations, NSW is likely to have ongoing requirements for maritime interdiction and containment. Fifth, the United States could benefit from maintaining operational and tactical capabilities with which to assist its partners in surveillance, particularly against small submarines and mining threats. Sixth, NSW should consider increasing its capacity to conduct maritime-based CMOs. Conventional U.S. naval forces should similarly consider their role in supporting significant irregular ground operations launched from the sea, as well as their role in interdiction and containment campaigns. In contrast to those of NSW, conventional U.S. Navy capabilities to support IW might entail CMOs and related activities to a greater extent than direct action. Appendix E. Detention of Terrorist Suspects on U.S. Navy Ships This appendix presents additional background information on detention of terrorist suspects on U.S. Navy ships. On July 6, 2011, it was reported that The U.S. military captured a Somali terrorism suspect [named Ahmed Abdulkadir Warsame] in the Gulf of Aden in April and interrogated him for more than two months aboard a U.S. Navy ship before flying him this week to New York, where he has been indicted on federal charges.... Other U.S. officials, interviewed separately, said Warsame and another individual were apprehended aboard a boat traveling from Yemen to Somalia by the U.S. military's Joint Operations Command. The vessel was targeted because the United States had acquired intelligence that potentially significant operatives were on board, the officials said. Court documents said the capture took place April 19. One of the senior administration officials who briefed reporters said that the other suspect was released \"after a very short period of time\" after the military \"determined that Warsame was an individual that we were very much interested in for further interrogation.\" According to court documents, Warsame was interrogated on \"all but a daily basis\" by military and civilian intelligence interrogators. During that time, officials in Washington held a number of meetings to discuss the intelligence being gleaned, Warsame's status and what to do with him. The options, one official said, were to release him, transfer him to a third country, keep him prisoner aboard the ship, subject him to trial by a military commission or allow a federal court to try him. The decision to seek a federal indictment, this official said, was unanimous. Administration officials have argued that military commission jurisdiction is too narrow for some terrorism cases - particularly for a charge of material support for terrorist groups - and the Warsame case appeared to provide an opportunity to try to prove the point. But some human rights and international law experts criticized what they saw as at least a partial return to the discredited \"black site\" prisons the CIA maintained during the Bush administration.... Warsame was questioned aboard the ship because interrogators \"believed that moving him to another facility would interrupt the process and risk ending the intelligence flow,\" one senior administration official said. The official said Warsame \"at all times was treated in a manner consistent with all Department of Defense policies\" - following the Army Field Manual - and the Geneva Conventions. Warsame was not provided access to an attorney during the initial two months of questioning, officials said. But \"thereafter, there was a substantial break from any questioning of the defendant of four days,\" court documents said. \"After this break, the defendant was advised of his Miranda rights\" - including his right to legal representation – \"and, after waiving those rights, spoke to law enforcement agents.\" The four-day break and separate questioning were designed to avoid tainting the court case with information gleaned through un-Mirandized intelligence interrogation, an overlap that has posed a problem in previous cases. The questioning continued for seven days, \"and the defendant waived his Miranda rights at the start of each day,\" the documents said.... U.S. Navy Vice Adm. William H. McRaven alluded to the captures in testimony before a Senate committee last week in which he lamented the lack of clear plans and legal approvals for the handling of terrorism suspects seized beyond the war zones of Iraq and Afghanistan. At one point in the hearing, Sen. Carl Levin (D-Mich.), the chairman of the Senate Armed Services Committee, referred to \"the question of the detention of people\" and noted that McRaven had \"made reference to a couple, I think, that are on a ship.\" McRaven replied affirmatively, saying, \"It depends on the individual case, and I'd be more than happy to discuss the cases that we've dealt with.\" Another press report on July 6, 2011, stated the following: In a telephone briefing with reporters, senior administration officials said Mr. Warsame and another person were captured by American forces somewhere \"in the Gulf region\" on April 19. Another official separately said the two were picked up on a fishing trawler in international waters between Yemen and Somalia. That other person was released. Mr. Warsame was taken to a naval vessel, where he was questioned for the next two months by military interrogators, the officials said. They said his detention was justified by the laws of war, but declined to say whether their theory was that the Shabab are covered by Congress's authorization to use military force against the perpetrators of the Sept. 11, 2001, attacks; whether the detention was justified by his interactions with Al Qaeda's Yemen branch; or something else. The officials also said interrogators used only techniques in the Army Field Manual, which complies with the Geneva Conventions. But they did not deliver a Miranda warning because they were seeking to gather intelligence, not court evidence. One official called those sessions \"very, very productive,\" but declined to say whether his information contributed to a drone attack in Somalia last month. After about two months, Mr. Warsame was given a break for several days. Then a separate group of law enforcement interrogators came in. They delivered a Miranda warning, but he waived his rights to remain silent and have a lawyer present and continued to cooperate, the officials said, meaning that his subsequent statements would likely be admissible in court. Throughout that period, administration officials were engaged in deliberations about what to do with Mr. Warsame's case. Eventually, they \"unanimously\" decided to prosecute him in civilian court. If he is convicted of all the charges against him, he would face life in prison. Last week, Vice Adm. William H. McRaven, who was until recently in charge of the military's Joint Special Operations Command, told a Senate hearing that detainees are sometimes kept on Navy ships until the Justice Department can build a case against them, or they are transferred to other countries for detention. Another senior administration official said Tuesday that such detentions are extremely rare, and that no other detainees are now being held on a Navy ship. A July 7, 2011, press report stated the following: In interrogating a Somali man for months aboard a Navy ship before taking him to New York this week for a civilian trial on terrorism charges, the Obama administration is trying out a new approach for dealing with foreign terrorism suspects. The administration, which was seeking to avoid sending a new prisoner to Guantánamo Bay, Cuba, drew praise and criticism on Wednesday [July 6] for its decisions involving the Somali suspect, Ahmed Abdulkadir Warsame, accused of aiding Al Qaeda's branch in Yemen and the Shabab, the Somali militant group. A July 6, 2011, entry in a blog that reports on naval-related events stated that the U.S. Navy ship to which Warsame was taken was the amphibious assault ship Boxer (LHD-4). An October 24, 2012, press report stated the following: Over the past two years, the Obama administration has been secretly developing a new blueprint for pursuing terrorists, a next-generation targeting list called the \"disposition matrix.\" The matrix contains the names of terrorism suspects arrayed against an accounting of the resources being marshaled to track them down, including sealed indictments and clandestine operations. U.S. officials said the database is designed to go beyond existing kill lists, mapping plans for the \"disposition\" of suspects beyond the reach of American drones. Although the matrix is a work in progress, the effort to create it reflects a reality setting in among the nation's counterterrorism ranks: The United States' conventional wars are winding down, but the government expects to continue adding names to kill or capture lists for years.... The database is meant to map out contingencies, creating an operational menu that spells out each agency's role in case a suspect surfaces in an unexpected spot. \"If he's in Saudi Arabia, pick up with the Saudis,\" the former official said. \"If traveling overseas to al-Shabaab [in Somalia] we can pick him up by ship. If in Yemen, kill or have the Yemenis pick him up.\" Officials declined to disclose the identities of suspects on the matrix. They pointed, however, to the capture last year of alleged al-Qaeda operative Ahmed Abdulkadir Warsame off the coast of Yemen. Warsame was held for two months aboard a U.S. ship before being transferred to the custody of the Justice Department and charged in federal court in New York. \"Warsame was a classic case of 'What are we going to do with him?'\" the former counterterrorism official said. In such cases, the matrix lays out plans, including which U.S. naval vessels are in the vicinity and which charges the Justice Department should prepare. An October 6, 2013, press report stated the following: An accused operative for Al Qaeda seized by United States commandos in Libya over the weekend is being interrogated while in military custody on a Navy ship in the Mediterranean Sea, officials said on Sunday [October 6]. He is expected eventually to be sent to New York for criminal prosecution. The fugitive, known as Abu Anas al-Libi, is seen as a potential intelligence gold mine, possessing perhaps two decades of information about Al Qaeda, from its early days under Osama bin Laden in Sudan to its more scattered elements today. The decision to hold Abu Anas and question him for intelligence purposes without a lawyer present follows a pattern used successfully by the Obama administration with other terrorist suspects, most prominently in the case of Ahmed Abdulkadir Warsame, a former military commander with the Somali terrorist group Shabab.... \"Warsame is the model for this guy,\" one American security official said.... Abu Anas is being held aboard the U.S.S. San Antonio, a vessel brought in specifically for this mission, officials said. A June 27, 2014, press report stated the following: Right now, a suspected terrorist is sitting in the bowels of a U.S. Navy warship somewhere between the Mediterranean Sea and Washington, D.C. Ahmed Abu Khattala, the alleged leader of the September 2012 attack on the U.S. embassy in Benghazi, Libya, is imprisoned aboard the USS New York, likely in a bare cell normally reserved for U.S. military personnel facing disciplinary action at sea. En route to the United States for more than a week, he's being questioned by military and civilian interrogators looking for critical bits of intelligence before he's read his Miranda rights, formally arrested, and transferred to the U.S. District Court in Washington, where he'll face trial. Meanwhile, the sailors aboard are going about the daily business of operating an amphibious transport ship—even as the ship's mission has been redefined by the new passenger in their midst. This isn't the first time the Navy has played such a critical, curious, and largely under-reported role in U.S. counterterrorism efforts. In 2011, Ahmed Abdulkadir Warsame, a military commander for the Somali terrorist group al-Shabab, was captured aboard a fishing boat in the Gulf of Aden and detained by the Navy, on the high seas, for two months. In 2013, Abu Anas al-Libi, the alleged mastermind of the 1998 terrorist attacks on American embassies in Kenya and Tanzania, was held aboard the USS San Antonio—an identical ship to the one being used this week. Both men were interrogated at sea before being flown to the United States to face criminal charges in federal courts.... In many ways, it's not surprising that the U.S. government has been turning Navy assets into floating prisons for these dangerous men. Taking the slow route back to the United States offers interrogators the time and space to gather crucial intelligence from high-value sources like al-Qaeda-linked operatives. During the two months that Warsame was at sea, a select team of FBI, CIA, and Defense Department officials, part of the Obama administration's High-Value Detainee Interrogation Group, questioned the Somali terrorist on \"all but a daily basis.\" He was cooperative throughout and some reports suggest that subsequent U.S. counterterrorism operations, including a drone attack in Somalia shortly after his capture, were a direct result of intelligence Warsame provided to authorities. While al-Libi was only detained at sea for about a week—a chronic medical condition prevented him from being held on a ship for an extended period—reports suggest that similar intelligence-collection efforts were underway in his case as well. The U.S. government has also embraced the approach because it has limited options for holding and interrogating men like Abu Khattala after capture. The Obama administration remains committed to ending detention operations at Guantánamo Bay, Cuba. While the facility is still home to almost 150 alleged terrorists, the United States has not sent any new detainees there since March 2008. Detaining suspected terrorists at other overseas facilities is likewise not an option. For a time, U.S.-run prisons in Afghanistan were a possibility. But the detention facility in Parwan is now an Afghan-run prison, and using facilities in other countries would raise a host of legal, operational, and humanitarian concerns. Even if U.S. officials were willing to forgo the opportunity to question Abu Khattala before he's arraigned in federal court and provided with a lawyer, flying alleged terrorists to the United States immediately presents its own set of problems. Seemingly small operational and political considerations about the ways in which the United States transports terrorists captured abroad have major strategic implications, particularly given lingering questions about U.S. rendition efforts under the Bush administration. In this context, the Navy has taken on the role of high-seas prison warden, even as lawyers continue to debate whether and what international legal rules apply to terrorists captured abroad and detained, temporarily, on a ship. Appendix F. Background Information on FY2020 Funding Requests for Lines 263 and 63 As noted earlier in this report, DOD's proposed FY2020 budget requests, among other things, $72.6 million in the FY2020 Research, Development, Test, and Evaluation, Defense-Wide (RDT&EDW) account for Program Element (PE) 1160483BB, (Special Operations Command [SOCOM]) maritime systems (line 263 in the FY2020 RDT&EDW account), including $45.2 million for Project S0417: Underwater Systems, and $15.6 million for S1684: Surface Craft; and $27.4 million in the FY2020 Procurement, Defense-Wide (PDW) appropriation account for procurement of underwater systems for SOCOM (line 63 in the FY2020 PDW account). Research and Development for Maritime Systems (Line 263) Regarding the FY2020 funding request for line 263, DOD states that This program element provides for engineering and manufacturing development (EMD) of Special Operations Forces (SOF) Surface and Undersea Mobility platforms. This program element also provides for pre-acquisition activities to quickly respond to new requirements for SOF surface and undersea mobility, looking at multiple alternatives to include cross-platform technical solutions, service-common solutions, Commercial-Off-The-Shelf technologies, and new development efforts. Middle-Tier Acquisition (2016 NDAA, Section 804) to accommodate rapid prototyping, may be utilized. The Underwater Systems project provides for EMD of combat submersibles, SOF operator diving systems, underwater support systems, and underwater equipment. This project also provides for pre-acquisition activities (material solutions analysis, advanced component, prototype development, and exploitation of emerging technology opportunities to deliver enhanced capabilities) to respond to emergent requirements. These submersibles, equipment, and diving systems are used by SOF in the conduct of infiltration/extraction, personnel/material recovery, hydrographic/inland reconnaissance, beach obstacle clearance, underwater ship attack, and other missions. The capabilities of the submersible systems, diving systems, and unique equipment provide small, highly trained forces the ability to successfully engage the enemy and conduct clandestine operations associated with SOF maritime missions. The Surface Craft project provides for EMD of medium and heavy surface combatant craft, combatant craft mission equipment, and pre-planned product improvement and technology insertion engineering changes to meet the unique requirements of SOF. This project element also provides for pre-acquisition activities (materiel solutions analysis, advanced component development and prototypes) to quickly respond to new requirements for maritime craft and subsystems. The craft capabilities and unique equipment provide small, highly trained forces the ability to successfully engage the enemy and conduct operations associated with SOF maritime missions…. [S0417: Underwater Systems] provides for engineering and manufacturing development of combat underwater submersibles, Special Operations Forces (SOF) operator diving systems, underwater support systems, and underwater equipment. This project also provides for pre-acquisition activities (materiel solutions analysis, advanced component development and prototypes) to respond to emergent requirements. Middle-Tier acquisitions to accommodate rapid prototyping may be utilized. These submersibles, equipment, and diving systems are used by SOF in the conduct of infiltration/extraction, personnel/material recovery, hydrographic/inland reconnaissance, beach obstacle clearance, underwater ship attack, and other missions. The capabilities of the submersible systems, diving systems, and unique equipment provides small, highly trained forces the ability to successfully engage the enemy and conduct clandestine operations associated with SOF maritime missions…. [Within Project S0417, the subproject for Shallow Water Combat Submersible (SWCS)] provides for the design, development, test, manufacturing and sustainment of one Engineering Development Model (EDM) and ten production units to replace the legacy MK 8 MOD 1 Seal Delivery Vehicle (SDV) system. SWCS is a free-flooding combat submersible mobility platform suitable for transporting and deploying SOF and their payloads for a variety of SOF missions. SWCS will be deployable from a Dry Deck Shelter (DDS), surface ships, and land. The SWCS system includes the SWCS vehicle and SWCS support Equipment, comprised of Mission Support Equipment (MSE), Pack-Up Kit (PUK), and Transportation and Handling (T&H). It also includes integration efforts with the current Dry Deck Shelter (DDS) and development of product improvements accomplished throughout the lifecycle of the system…. [The sub-project for Dry Deck Shelter (DDS) Modernization] provides for the pre-planned product improvements, testing, and integration of specialized underwater systems to meet the unique requirements of SOF, and compatibility with the submarine fleet. The current DDS is a certified diving system which attaches to modified host submarines that provides for insertion of SOF forces and platforms. Funding supports product improvements to the current DDS, as well as associated diver equipment for in-service submarine support systems, unmanned underwater vehicles, and follow on development efforts for future SOF payloads…. [The sub-project for combat diving] is a Middle Tier of Acquisition designated program which provides for the development, testing, and rapid fielding and prototyping of SOF peculiar diving equipment providing the SOF combat diver the ability to engage the enemy and conduct operations. SOF Combat Diving will support the SDV, SWCS, and DCS with the conduct of infiltration/extraction, material recovery, underwater ship attack, beach clearance, and other missions. Technologies include, but are not limited to, commercial and developmental life support, maneuverability and propulsion, diver navigational accuracy and situation awareness, environmental protection, and communications between dive teams as well as between divers and external vessels/craft…. [The sub-project for Undersea Craft Mission Equipment (UCME)] provides a rapid response capability to support SOF underwater craft and diver systems, subsystems, and their emerging requirements. UCME provides technology refresh efforts to correct system deficiencies, improve asset life, and enhance mission capability to leverage and exploit emerging technologies within the maritime Special Operations Forces undersea capability portfolio…. [Project S1684: Surface Craft] provides for engineering and manufacturing development of medium and heavy surface combatant craft, combatant craft mission equipment, and preplanned product improvement (P3I) and technology insertion engineering changes to meet the unique requirements of Special Operations Forces (SOF). This project also provides for pre-acquisition activities (materiel solutions analysis, advanced component development and prototypes) to quickly respond to new requirements for maritime craft and subsystems Middle-Tier acquisition to accommodate rapid prototyping, may be utilized. The craft capabilities and unique equipment provide small, highly trained forces the ability to successfully engage the enemy and conduct operations associated with SOF maritime missions…. [The sub-project for Combatant Craft Medium (CCM) Mk 1] is a semi-enclosed multi-mission combatant craft for platoon-size maritime mobility in maritime denied environments. It is multi-mission capable, including Maritime Interdiction, Insert / Extract, and Visit, Board, Search, and Seizure (VBSS) Operations. CCM is Naval Special Warfare's (NSW) craft-of-choice for long-range, high-payload SOF mobility operations in denied environments up to high threat. CCM has NSW's best Iron Triangle: 40 knot (kt) speed; 4 crew + 19 passengers (pax) / 10,000 pound (lb) payload; and 600 nautical miles (nm) range. CCM Mk 1 payload capacity enables inclusion of shock mitigating seats, which is critical for ride quality, operator tactical readiness, and operator health. At 60 feet long, CCM is C-17 / C5 transportable and can launch/recover by well deck or shore based trailer…. [The sub-project for Combatant Craft Heavy (CCH)] represents a family of solutions that provides platoon-size maritime surface mobility. The current CCH is the Sea, Air, Land Insertion, Observation, and Neutralization (SEALION) craft. SEALION is a fully-enclosed, climate- controlled, semi-submersible craft that operates in denied environments up to high-threat. SEALION is NSW's most versatile and survivable combatant craft and the craft-of-choice for sensitive maritime intelligence, surveillance, and reconnaissance missions. Iron Triangle: 40 kt speed; 7 crew + 12 pax / 3,300 lb payload; and 400 nm range. SEALION payload capacity enables inclusion of shock mitigating seats, which is critical for ride quality, operator tactical readiness, and operator health. At 77+ feet long, SEALION is C-17/C-5 transportable and can launch/recover by well deck or shore based mobile travel lift or crane…. [The sub-project for Combatant Craft Mission Equipment (CCME)] provides a rapid response capability to support SOF combatant craft systems, subsystems, and their emerging requirements. CCME provides technology refresh efforts to correct system deficiencies, improve asset life, and enhance mission capability. Demonstrations and modifications may be made to support emerging capability enhancements such as, but not limited to, conformal antennas, identification friend-or-foe capabilities, enhanced communications, weapon integration, software refresh, and navigation subsystems in support of future missions. Solutions to these emerging requirements may be commercial-off-the-shelf leveraged from other government agencies, or new solutions…. [The sub-project for Combatant Craft Assault (CCA)] is a combatant craft for squad-size maritime mobility operations in maritime denied environments. CCA is NSW's best craft for VBSS in maritime denied environments up to and including medium threat. It is the craft-of-choice for maritime interdiction and boarding operations because of the open deck space, maneuverability, and interoperability with an Afloat Forward Staging Base. Iron Triangle: 40 kt speed; 3 crew + 12 pax / 5,000 lb payload; and 300 nm range. At 41 feet long, CCA is air transportable by C-130 / C-17 / C-5 and can launch/recover by crane, davit, well deck, or shore based trailer…. [The sub-project for Threat Awareness System (TAS)] provides SOF with an Electronic Intelligence capability for enhanced force protection of SOF in Maritime denied environments by allowing them to identify and avoid enemy detection capabilities. TAS will utilize technological advancements to gain significant improvements in capability such as miniaturization and marinization to enable seamless craft integration…. [The sub-project for Maritime Precision Engagement (MPE)] is a family of standoff, loitering, man-in-the-loop weapons systems deployed on combatant craft and capable of targeting individuals, groups, vehicles, high value targets, and small oceangoing craft with low collateral damage. The program consists of combatant craft alterations, launcher systems, and munitions. Procurement of Underwater Systems (Line 63) Regarding the FY2020 funding request for line 63, DOD states that The Underwater Systems line item procures dry and wet combat submersibles, modifications, field changes to the Dry Deck Shelter (DDS), and various systems and components for Special Operations Forces (SOF) Combat Diving. Current acquisition procurement programs of record are the Shallow Water Combat Submersible (SWCS) program, Dry Combat Submersible (DCS), SOF Combat Diving and Dry Deck Shelter (DDS). Middle-Tier Acquisition (2016 NDAA, Section 804) to accommodate rapid fielding, may be utilized. SWCS is the next generation free-flooding combat submersible that transports SOF personnel and their combat equipment in hostile waters for a variety of missions. SOF units require specialized underwater systems that improve their warfighting capability and survivability in harsh operating environments. The DCS will provide the capability to insert and extract SOF and/or payloads into denied areas from strategic distances. The program is structured to minimize technical, cost, and schedule risks by leveraging commercial technologies, procedures, and classing methods to achieve an affordable DCS. SOF Combat Diving supports the unique requirements impacting fully equipped operators while conducting underwater, real-world missions. Examples of underwater systems and maritime equipment include, underwater navigation, diving equipment, and underwater propulsion systems. These systems and equipment are used for infiltration/extraction, reconnaissance, beach obstacle clearance, and other missions. The capabilities of submersible systems and unique equipment provides small, highly trained forces the ability to successfully engage the enemy and conduct operations associated with SOF maritime missions…. Justification: 1. DDS: The DDS is a certified diving system that attaches to modified host submarines and provides for insertion of SOF forces and platforms. SOCOM has a cost share agreement with the Navy to support the modernization of the DDS in order to accommodate current and future Naval Special Warfare payloads as well as large U.S. Navy payloads. FY 2020 PROGRAM JUSTIFICATION: Funding continues the support of the DDS modernization effort, which includes relocation of equipment inside the DDS Hangar to support current and future payloads. Funding also includes field changes for product improvements developed to overcome obsolescence and Diminishing Manufacturing Sources and Material Shortages (DMSMS). 2. SWCS: Shallow Water Combat Submersible (SWCS) is a free-flooding combat submersible mobility platform suitable for transporting and deploying SOF and their payloads for a variety of SOF missions. SWCS will be deployable from a DDS, surface ships, and land. FY 2020 PROGRAM JUSTIFICATION: Purchases two SWCS vehicles and support equipment, Government Furnished Equipment (GFE), engineering change proposals (ECP), detachment deployment packages, and initial spares. 3. DCS: The DCS provides SOF with a dry diver lock-in and lock-out capability that transports personnel and their combat equipment in hostile waters for a variety of missions. FY 2020 PROGRAM JUSTIFICATION: Purchases initial spares, GFE, ECP, system integration lab, and simulator. 4. SOF Combat Diving: This is designated a Middle-tier Acquisition program allowing for rapid fielding which provides the transition of SOF peculiar diving technologies for the SOF combat diver while conducting underwater, real-world missions. FY 2020 PROGRAM JUSTIFICATION: Procures total of 10 divers' maritime environmental protection and diver navigation. Press Reports A November 30, 2016, press report states the following: USSOCOM is currently pursuing two programmes to enhance the sub-surface capabilities of US Navy (USN) SEALs including the Shallow Water Combat Submersible (SWCS) and Dry Combat Submersible (DCS). Both solutions are fully enclosed vehicles for operators, thereby reducing any requirement for teams to wear rebreathing equipment during mission insertions and extractions.... The main difference between SWCS and DCS is range, with the latter solution providing a longer insertion distance with a greater depth capability. The SWCS, for example, is being designed to replace legacy Mk 8 Mod 1 SEAL Swimmer Delivery Vehicles (SDVs), bringing an improved electronic architecture and software on top of the requirements list for NSWC. SOF sources associated with USSOCOM explained to IHS Jane's how the first SWCS could be delivered to the Command in 2017. This would be followed by extensive operational evaluation with NSWC elements ahead of initial and full entry into service, sources added. According to USSOCOM officials, a total of two SWCS platforms will be procured by the DoD in 2017, along with associated batteries, trailers, mission system suites, and spares. Capable of transporting six operators at low-level depths close to the surface, the SWCS can carry a total payload of 10,000 lb (4,535 kg). SWCS contractor Teledyne Brown Engineering was unable to provide further details to IHS Jane's because of operational security reasons. However, industry sources have suggested that the SWCS measures approximately 22 ft (6.7 m) in length and 5 ft in width. The SWCS has yet to be officially designated, but the nomenclature Mk 9 is expected to be granted to the platform type. Teledyne Brown Engineering beat the incumbent manufacturer of the Mk 8 Mod 1, Columbus Group, to the programme in 2011 when it was awarded a USD383 million contract by the DoD. Ahead of SWCS's entry into service, General Dynamics Information Technology (GDIT) continues to assist the NSWC with ongoing support for legacy Mk 8 Mod 1 SDV systems. Work will include projects relating to SDVs as well as other NSWC-specific efforts associated with the Maritime Mission Systems Division. The latest support contract, worth USD4 million, was signed in December 2015. Elsewhere, the DCS solution has been designed as a dry diver lock-in/lock-out solution, capable of inserting and extracting personnel and all associated combat equipment, including in hostile waters, according to USSOCOM sources. The development of this option follows the cancellation of the Advanced SEAL Delivery System (ASDS) in 2006. Designed to carry six operators, the DCS has a larger payload capacity than the SWCS, with the ability to carry up to 40,000 lb at depths as low as 58 m. Sources also informed IHS Jane's that the DCS could have a maximum operating range of 60 n miles. In July 2016, it was announced that Lockheed Martin and Submergence Group would jointly design, develop, and manufacture the DCS for USSOCOM, with industry figures reiterating the vessel's ability to provide improved endurance and operating depths. According to Lockheed Martin, a USD166 million contract will involve the delivery of three DCS vehicles over a five-year period, with the gross weight for each vessel being more than 30 tons. A company spokesperson explained to IHS Jane's how NSWC concepts of operations would see the DCS launched at a stand-off position from surface vessels, before inserting SEAL operators over \"long distances underwater\" onto objectives and target areas.... Details regarding the DCS design remain scarce. However, sources indicated to IHS Jane's that the solution will feature technology drawn from Lockheed Martin's S302 Manned Combat Submersible (MCS) craft, which is capable of carrying six personnel as well as a pilot and navigator. According to Lockheed Martin company literature, \"The dry one-atmosphere environment of these vehicles provides an alternative to traditional wet submersibles being used by the US and international Special Forces communities today, and will deliver operators to their destination in better physical condition to complete a mission.\" Vessels are fitted with standard inertial navigation systems and Doppler velocity logs, as well as a communications suite featuring an underwater telephone and a UHF radio; obstacle avoidance sonar; and fathometer. Additional sensor payloads, dependent upon mission requirements, can also be integrated, Lockeed Martin explained. The S302 MCS measures 31 ft in length, and can operate 100 m below the surface for more than 24 hours. The craft can travel up to 60 n miles at a 5 kt cruising speed, although it has a top speed of more than 7.5 kt for rapid reaction. USSOCOM continues to integrate Dry Deck Shelter (DDS) technology on board a variety of Ohio-class nuclear-powered ballistic missile submarines (SSBNs) and Virginia-class nuclear-powered attack submarines (SSNs) for special operations support.... Although a total of six DDS systems are currently in service with the USN and USSOCOM, by the end of 2016 nine submarines will possess DDS capabilities, enabling them to launch and recover SDVs, sources explained. Featuring automated launch-and-recovery technology, DDS enables combat divers to enter and leave the dry dock individually, as was explained during a press briefing by NSWC officials at the Special Operations Forces Industry Conference (SOFIC) in Tampa, Florida, in May 2016. In 2017, the USN aims to concentrate on a series of modifications to the DDS in order to allow for the integration of DCS and SWCS, including the relocation of equipment stowage in the DDS and upgrades in lighting, cameras, and mechanical noise reduction. Industry sources have noted that DDS solutions are being extended by 50 inches to enable the integration of DCS and SWSC variants, thereby supporting a 'mothership' concept of operations (CONOPS) for maritime special forces. This would enable SOF teams to insert at greater distances from submarines and surface vessels, before entering the water at a suitable stand-off range from target areas and inserting via onboard DCS or SWCS craft. A September 15, 2016, press report states the following: SEALs will soon have new underwater vehicles delivering them to targets that officials say will make a huge difference during missions. SEALs now use a delivery vehicle that one SEAL described as a kind of underwater sled. SEALs ride in the sled in full scuba gear completely exposed to the water, in often freezing cold and in \"pure blackout\" conditions and total silence for eight to 10 hours. Ask a SEAL what that's like, and they'll say it's like being locked in a cold, dark, wet closet for hours.... The new vehicles, which are called dry combat submersibles, will be akin to mini-submarines, and allow SEALs to stay warmer and drier for longer, and more physically ready, as they close in on their target. That's a huge advantage for missions that one retired SEAL who is now a congressman described as \"can't fail.\"... The vehicles will also allow the SEALs to communicate before a mission, compared with \"only seeing your buddy's eyes\" and a glow stick for 10 hours, the SEAL joked. The first submersible is due to arrive in July 2018, and it will be operational as early as the fall. Final testing is to be completed in 2019. As SEALs await the delivery of the first vehicle, they have two \"demonstrator\" vehicles to experiment with.... That demonstrator is about 39 feet long, is about 7 to 8 feet in diameter, and weighs about 30 tons. So far, it has gone up to five knots for 60 nautical miles.... It is also surface-launched, which means it is launched into the water by a crane or from a surface ships with a crane, versus from a submarine. The vehicle is able to hold up to eight SEALs and their gear, in addition to a pilot and navigator. The submersible consists of three compartments: a swimmers' compartment where the SEALs will ride for the duration of the time, a \"line in and line out\" compartment where they exit and enter the submersible, and a compartment for the navigator and pilot. The swimmers' compartment is only about 10 to 12 feet long, which could be a tight squeeze for eight SEALs. Still, officials say it'll be a huge improvement over the current systems. \"The DCS Program is on track to provide a capability that our warfighters have not had in a long time,\" said Navy Capt. Kate Dolloff, who is in charge of all maritime programs for Special Operations Command Acquisition, Technology and Logistics. \"We still have a long way to go, but a stepped approach using technology demonstrators to mitigate risk and a close relationship with the user community has been extremely successful to date and led to contract award,\" she said. The U.S. Special Operations Command (SOCOM) finalized a contract in July with Lockheed Martin for the first submersible to be delivered in July 2018, with the option of two more by 2020—an unusually fast schedule for acquiring new technology. The total cost for the three submersibles is $236 million. The timeline and cost is years shorter and hundreds of millions cheaper than a previous submersible program, which was killed in 2006 after cost overruns and other issues. That program would have cost $1 billion for one submersible and have taken two to three times longer to build, officials said. Officials say the costs are much lower because they're taking off-the-shelf commercial technology developed by Lockheed Martin and modifying it to fit their needs, whereas the previous program started from scratch. Officials say the new vehicles will have 80 to 90 percent of the same capability, but will be delivered much faster at a much lower cost. The new program also comes with a \"fixed price incentive fee\" structure, where the cost of the program is fixed and any overruns are shared with the manufacturer. A July 22, 2016, press report states that ... a new 'missile sub' promises to deliver to battle underwater far more easily—and keep them dry when they travel. Called the Swimmer Delivery Vehicle, it will be built by Lockheed Martin and Submergence Group after winning a US$166 million contract to supply the US Special Operations Command (USSOCOM) with a new class of combat submersibles. According to Lockheed, the three 30-ton (27-tonne) DCS [Dry Combat Submersible] vehicles that it is contracted to build will allow warfighters to travel deeper and farther underwater than today. The craft are dry submersibles that support two operators (pilot and navigator) plus up to six swimmers with the ability to lock them out and in. 'The dry one-atmosphere environment of these vehicles provides an alternative to traditional wet submersibles being used by the U.S. and international Special Forces communities today, and will deliver operators to their destination in better physical condition to complete a mission,' Lockheed Martin says.... It will carry two pilots and six passengers, have a depth rating of 328 ft (100 m), a lock-out depth of 98 ft (30 m), and a top speed of 5 knots (6 mph, 9 km/h). Lockheed says the new DCS will boast improved hydrodynamics and propulsion compared to the previous vehicles. An August 20, 2014, blog post states the following: The U.S. Navy is hard at work developing new underwater transports for its elite commandos. The SEALs expect the new craft—and improvements to large submarine \"motherships\" that will carry them—to be ready by the end of the decade. SEALs have ridden in small submersibles to sneak into hostile territory for decades. For instance, the special operators reportedly used the vehicles to slip into Somalia and spy on terrorists in 2003. Now the sailing branch is looking to buy two new kinds of mini-subs. While details are understandably scarce, the main difference between the two concepts appears to be the maximum range. The Shallow Water Combat Submersible will haul six or more naval commandos across relatively short distances near the surface. The SWCS, which weighs approximately 10,000 pounds, will replace older Mark 8 Seal Delivery Vehicles, or SDVs. The other sub, called the Dry Combat Submersible, will carry six individuals much farther and at greater depths. The most recent DCS prototype weighs almost 40,000 pounds and can travel up to 60 nautical miles while 190 feet below the waves. Commandos could get further into enemy territory or start out a safer distance away with this new vehicle. SEALs could also use this added range to escape any potential pursuers. Both new miniature craft will also be fully enclosed. The current SDVs are open to water and the passengers must wear full scuba gear—seen in the picture above. In addition, the DCS appears to pick up where a previous craft, called the Advanced SEAL Delivery System, left off. The Pentagon canceled that project in 2006 because of significant cost overruns. But the Navy continued experimenting with the sole ASDS prototype for two more years. The whole effort finally came to a halt when the mini-sub was destroyed in an accidental fire. Special Operations Command hopes to have the SWCS ready to go by 2017. SOCOM's plan is to get the DCS in service by the end of the following year. Underwater motherships SOCOM and the sailing branch also want bigger submarines to carry these new mini-subs closer to their targets. For decades now, attack and missile submarines have worked as motherships for the SEALs. Eight Ohio- and Virginia-class subs currently are set up to carry the special Dry-Deck Shelter used to launch SDVs, according to a presentation at the Special Operations Forces Industry Conference in May. The DDS units protect the specialized mini-subs inside an enclosed space. Individual divers also can come and go from the DDS airlocks. The first-in-class USS Ohio—and her sisters Michigan, Florida and Georgia—carried ballistic missiles with nuclear warheads during the Cold War. The Navy had expected to retire the decades-old ships, but instead spent billions of dollars modifying them for new roles. Today they carry Tomahawk cruise missiles and SEALs. The Virginias—Hawaii, Mississippi, New Hampshire, North Carolina and the future North Dakota—are newer. The Navy designed these attack submarines from the keel up to perform a variety of missions. SOCOM projects that nine submersible motherships—including North Carolina as a backup—will be available by the end of the year. The Navy has a pool of six shelters to share between the subs. SOCOM expects the DDS to still be in service in 2050. But prototype DCS mini-subs cannot fit inside the current shelter design. As a result, a modernization program will stretch the DDS units by 50 inches, according to SOCOM's briefing. The project will also try to make it easier to launch undersea vehicles and get them back into the confines of the metal enclosure. Right now, divers must manually open and close the outside hatch to get the SDVs out. Crews then have to drive the craft back into the shelter without any extra help at the end of a mission—underwater and likely in near-total darkness. The sailing branch wants to automate this process. With any luck, the SEALs will have their new undersea chariots and the motherships to carry them ready before 2020.", "summary": "In the years following the terrorist attacks of September 11, 2001, the Navy has carried out a variety of irregular warfare (IW) and counterterrorism (CT) activities. Among the most readily visible of these were operations carried out by Navy sailors serving ashore in the Middle East and Afghanistan, as well as the May 1-2, 2011, U.S. military operation in Abbottabad, Pakistan, that killed Osama bin Laden. During these years, the Navy took certain actions intended to improve its IW capabilities. For example, the Navy established the Navy Expeditionary Combat Command (NECC) informally in October 2005 and formally in January 2006. NECC consolidated and facilitated the expansion of a number of Navy organizations that have a role in IW operations. The Navy also established the Navy Irregular Warfare Office in July 2008, published a vision statement for irregular warfare in January 2010, and established \"a community of interest\" (COI) to develop and advance ideas, collaboration, and advocacy related to IW in December 2010. The Navy during these years also reestablished its riverine force and initiated The Global Maritime Partnership, which was a U.S. Navy initiative to achieve an enhanced degree of cooperation between the U.S. Navy and foreign navies, coast guards, and maritime police forces, for the purpose of ensuring global maritime security against common threats. In addition, the Navy operated the Southern Partnership Station (SPS) and the Africa Partnership Station (APS), which were Navy ships, such as amphibious ships or high-speed sealift ships, that deployed to the Caribbean and to waters off Africa, respectively, to support U.S. Navy engagement with countries in those regions, particularly for purposes of building security partnerships with those countries and for increasing the capabilities of those countries for performing maritime-security operations. The Navy's current IW and CT activities pose a number of potential oversight issues for Congress, including how much emphasis to place on IW and CT activities in Navy budgets, particularly in a context of constraints on Navy budgets and Navy desires to devote resources to developing \"high end\" combat capabilities for countering improved conventional military capabilities of countries such as China and Russia.", "document_type": "crs"}
{"report": "T he U.S. Department of Agriculture (USDA) offers several programs designed to help farmers and ranchers recover from the financial effects of natural disasters, including (1) federal crop insurance, (2) the Noninsured Crop Disaster Assistance Program (NAP), (3) livestock and fruit tree disaster programs, and (4) emergency disaster loans for both crop and livestock producers. All have permanent authorization, while the emergency loan program is the only one requiring a federal disaster designation (see Table 1 ). Most programs receive mandatory funding amounts of \"such sums as necessary\" and are not subject to annual discretionary appropriations. The Agricultural Improvement Act of 2018 (2018 farm bill, P.L. 115-334 ) made a number of amendments to these programs, generally to expand availability and support. Prior to the creation of many of the permanently authorized programs at USDA, Congress had historically provided farmers and ranchers with ad hoc disaster assistance payments authorized through supplemental appropriations. Subsequently, policies shifted away from the temporary forms of assistance in favor of enacting more permanent forms of support. More recently, policies have shifted to supplement permanent programs with ad hoc assistance for select agriculture losses. The Bipartisan Budget Act of 2018 ( P.L. 115-123 ) amended existing disaster assistance programs and authorized $2.36 billion for production losses from hurricanes and wildfires in 2017 that were not covered by existing programs. This report provides an overview of permanently authorized federal disaster assistance programs for agricultural losses as well as discretionary authority that USDA may use to provide assistance. Recent amendments in the 2018 farm bill and ad hoc assistance authorized by Congress in the Bipartisan Budget Act of 2018 are also discussed. The federal crop insurance program is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq. ), and is administered by USDA's Risk Management Agency (RMA). The program is designed to protect crop producers from risks associated with adverse weather, as well as weather-related plant diseases and insect infestations and declines in commodity prices. Crop insurance is available for most major crops and many specialty crops (including fruit, tree nut, vegetable, and nursery crops), as well as forage and pastureland for livestock producers. A producer who chooses to purchase an insurance policy must do so by an administratively determined deadline date, which varies by crop and usually coincides with the planting season. Insurance products that protect against loss in revenue and profit margins are also available. Policies are typically available in major growing regions. The federal crop insurance program was instituted in the 1930s and was subject to major legislative reforms in 1980 and again in 1994 and 2000. The Agriculture Risk Protection Act of 2000 ( P.L. 106-224 ) authorized new federal spending for the program primarily through more generous premium subsidies to help make the program more affordable to farmers and enhance farmer participation levels in an effort to preclude the need for ad hoc emergency disaster payments. Under the current crop insurance program, a producer who grows an insurable crop selects a level of crop yield and price coverage and pays a premium that increases as the levels of yield and price coverage rise. However, all eligible producers can receive catastrophic (CAT) coverage without paying a premium. The premium for this portion of coverage is completely subsidized by the federal government. Under CAT coverage, participating producers can receive a payment equal to 55% of the estimated market price of the commodity on crop losses in excess of 50% of normal yield—referred to as 50/55 coverage. Although eligible producers do not have to pay a premium for CAT coverage, they are required to pay upon enrollment a $655 administrative fee per covered crop for each county where they grow the crop. USDA can waive the fee for financial hardship cases. In addition to the administrative fee, producers can elect to pay a premium, which is partially subsidized by the government, to increase the 50/55 CAT coverage to any equivalent level of coverage between 50/100 and 85/100 (i.e., 85% of yield and 100% of the estimated market price) in increments of 5%. These higher levels of coverage are known as \"buy up\" coverage. For many insurable commodities, an eligible producer can purchase revenue insurance. Under such a policy, a farmer could receive an indemnity payment when actual farm revenue for a crop falls below the target level of revenue, regardless of whether the shortfall in revenue was caused by poor production or low farm commodity prices. Insured producers are also eligible for reduced coverage if they are late or prevented from planting because of flooding. The annual agriculture appropriations bill traditionally makes two separate appropriations for the federal crop insurance program. It provides discretionary funding for the salaries and expenses of the RMA. It also provides \"such sums as are necessary\" for the Federal Crop Insurance Corporation, which finances all other expenses of the program, including premium subsidies, indemnity payments, and reimbursements to the private insurance companies. The total cost of the program varies by year, primarily due to fluctuating levels of indemnity payments from changes in commodity prices, planting decisions, and weather conditions. Across all policies, the average premium subsidy was about 63% of total premiums in 2017. The federal government also subsidizes the costs of selling and servicing the policies (as delivery subsidies to Approved Insurance Providers) and absorbs underwriting losses (indemnities in excess of premiums received) in years when indemnities are high. For a more detailed analysis of the federal crop insurance program, see CRS Report R45193, Federal Crop Insurance: Program Overview for the 115th Congress . Producers who grow a crop that is currently ineligible for crop insurance may apply for NAP. NAP has permanent authority under Section 196 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333) and is administered by USDA's Farm Service Agency (FSA). It was first authorized under the Federal Crop Insurance Reform Act of 1994 ( P.L. 103-354 ). NAP is not subject to annual appropriations. Instead, it receives such sums as are necessary through USDA's Commodity Credit Corporation (CCC), which has a line of credit with the U.S. Treasury to fund an array of farm programs. Eligible crops under NAP include any commercial crops grown for food, fiber, or livestock consumption for which there is no CAT coverage available under the federal crop insurance program, with limited exceptions. These crops include mushrooms, floriculture, ornamental nursery, Christmas trees, turfgrass sod, aquaculture, honey, maple sap, ginseng, and industrial crops used in manufacturing or grown as a feedstock for energy production, among others. Trees grown for wood, paper, or pulp products are not eligible. To be eligible for a NAP payment, a producer first must apply for coverage by the application closing date, which varies by crop but is generally about 30 days prior to the final planting date for an annual crop. Like CAT coverage under crop insurance, NAP applicants must also pay an administrative fee at the time of application. The NAP service fee is the lesser of $325 per crop or $825 per producer per administrative county, not to exceed a total of $1,950 for farms in multiple counties. In order to receive a NAP payment, a producer must experience at least a 50% crop loss caused by a natural disaster or be prevented from planting more than 35% of intended crop acreage. For any losses in excess of the minimum loss threshold, a producer can receive 55% of the average market price for the covered commodity. Hence, NAP is similar to CAT coverage in that it pays 55% of the market price for losses in excess of 50% of normal historical production. Additional coverage (referred to as buy-up coverage) may be purchased at 50% to 65% (in 5% increments) of established yield and 100% of average market price, contract price, or other premium price. The farmer-paid fee for additional coverage is 5.25% times the product of the selected coverage level and value of production (acreage times yield times average market price times the producer's share of the crop). Grazing land is not eligible for buy-up coverage. A producer of a noninsured crop is subject to an annual payment limit of $125,000 per person for catastrophic coverage and $300,000 for buy-up coverage. A producer is ineligible under NAP if the producer's total adjusted gross income (AGI) exceeds $900,000. The total federal cost of NAP was $165 million in FY2014, $125 million in FY2015, $137 million in FY2016, $157 million in FY2017, and $164.3 million in FY2018. Four agricultural disaster assistance programs are permanently authorized for livestock and fruit trees: (1) the Livestock Indemnity Program (LIP); (2) the Livestock Forage Disaster Program (LFP); (3) the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP); and (4) the Tree Assistance Program (TAP). They operate nationwide and are administered by FSA. Producers do not pay fees to participate and can apply at their local FSA offices. All programs receive \"such sums as necessary\" in mandatory funding via the CCC to reimburse eligible producers for their losses. Total payments vary each year based on eligible loss conditions. For FY2018, LFP payments totaled $487.5 million, LIP payments totaled $36.6 million, TAP payments totaled $11.3 million, and ELAP payments totaled $47 million. All payments are reduced by sequestration. For individual producers, payments under LFP may not exceed $125,000 per year. There are no limits on the amount of payments received under LIP, ELAP, and TAP. To be eligible for a payment under any of these programs, a producer's total AGI cannot exceed $900,000. LIP provides payments to eligible livestock owners and contract growers for livestock deaths in excess of normal mortality caused by an eligible loss condition (e.g., adverse weather, disease, or animal attack). Payments may also be made when the animal is injured as a direct result of an eligible loss condition but does not die and is sold at a reduced price. Eligible loss conditions may include (1) extreme or abnormal damaging weather that is not expected to occur during the loss period for which it occurred, (2) disease that is caused or transmitted by a vector and is not susceptible to control by vaccination, and (3) an attack by animals reintroduced into the wild by the federal government or protected by federal law. Eligibility is predicated on not only the occurrence of an eligible loss condition but direct causation to the death of the animal. Eligible livestock include beef and dairy cattle, bison, hogs, chickens, ducks, geese, turkeys, sheep, goats, alpacas, deer, elk, emus, llamas, reindeer, caribou, and equine. The livestock must have been maintained for commercial use and not produced for reasons other than commercial use as part of a farming operation. The program excludes wild free-roaming animals, pets, and animals used for recreational purposes, such as hunting, roping, or for show. Poultry and swine are the only eligible livestock for contract growers. The LIP payment rate is equal to 75% of the average fair market value of the deceased animal type. USDA publishes a payment rate for each type of livestock for each year (e.g., $983.90 per adult beef cow and $4.39 per duck in 2018). For eligible livestock contract growers, the payment rate is based on 75% of the national average input costs for the applicable livestock. For livestock sold at a reduced sale price, payments are calculated by multiplying the national payment rate for the livestock category minus the amount the owner received at sale times the owner's share. LFP makes payments to eligible livestock producers who have suffered grazing losses on drought-affected pastureland (including cropland planted specifically for grazing), or on rangeland managed by a federal agency due to a qualifying fire. Eligible producers must own, cash or share lease, or be a contract grower of covered livestock during the 60 calendar days before the beginning date of a qualifying drought or fire. They must also provide pastureland or grazing land for covered livestock that is either (a) physically located in a county affected by a qualifying drought during the normal grazing period for the county or (b) managed by a federal agency where grazing is not permitted due to fire. Eligible livestock types are livestock that have been grazing on eligible grazing land or pastureland or would have been had a disaster not struck. These include alpacas, beef cattle, buffalo, beefalo, dairy cattle, sheep, deer, elk, emus, equine, goats, llamas, poultry, reindeer, and swine. Livestock must be maintained for commercial use as part of a farming operation. Livestock owned for noncommercial uses, or livestock that is in (or would have been in) feedlots, are excluded. Payments are generally triggered by the drought intensity level for an individual county as published in the U.S. Drought Monitor, a federal report published each week. The number of monthly payments depends on the drought severity and length of time the county has been designated as such ( Table 2 ). For drought, the payment amount is equal to the number of monthly payments times 60% of estimated monthly feed cost. For producers who sold livestock because of drought conditions, the payment rate is equal to 80% of the estimated monthly feed cost. ELAP provides payments to producers of livestock, honey bees, and farm-raised fish as compensation for losses due to disease, adverse weather, feed or water shortages, or other conditions (such as wildfires) that are not covered under LIP or LFP. ELAP specifically provides assistance for the loss of honey bee colonies in excess of normal mortality. In order to meet the eligibility requirements for honey bee colony losses, they must be the direct result of an eligible adverse weather or loss condition such as colony collapse disorder, eligible winter storm, excessive wind, and flood. For livestock losses, ELAP covers four categories: (1) livestock death losses caused by an eligible loss condition, (2) livestock feed and grazing losses that are not due to drought or wildfires on federally managed lands, (3) losses resulting from the additional cost of transporting water to livestock due to an eligible drought, and (4) losses resulting from the additional cost associated with gathering livestock for inspection and treatment related to cattle tick fever. TAP makes payments to qualifying orchardists and nursery tree growers to replant or rehabilitate trees, bushes, and vines damaged by natural disasters. Losses in crop production—as opposed to the tree, bush, or vine itself—are generally covered by federal crop insurance or NAP. Eligible trees, bushes, and vines are those from which an annual crop is produced for commercial purposes. Nursery trees include ornamental, fruit, nut, and Christmas trees produced for commercial sale. Trees used for pulp or timber are ineligible. To be considered an eligible loss, the individual stand must have sustained a mortality loss or damage loss in excess of 15% after adjustment for normal mortality or damage. Normal mortality or damage is determined based on (a) each eligible disaster event, except for losses due to plant disease, or (b) for plant disease, the time period for which the stand is infected. Also, the loss could not have been prevented through reasonable and available measures. For replacement, replanting, and/or rehabilitation of trees, bushes, or vines, the payment calculation is the lesser of (a) 65% of the actual cost of replanting (in excess of 15% mortality) and/or 50% of the actual cost of rehabilitation (in excess of 15% damage), or (b) the maximum eligible amount established for the practice by FSA. The total quantity of acres planted to trees, bushes, or vines for which a producer can receive TAP payments cannot exceed 1,000 acres annually. When either the President or the Secretary of Agriculture declares a county a disaster area or quarantine area, agricultural producers in that county may become eligible for low-interest emergency disaster (EM) loans available through FSA. Producers in counties that are contiguous to a county with a disaster designation also become eligible for EM loans. EM loan funds may be used to help eligible farmers, ranchers, and aquaculture producers recover from production losses (when the producer suffers a significant loss of an annual crop) or from physical losses (such as repairing or replacing damaged or destroyed structures or equipment or for the replanting of permanent crops such as orchards). A qualified applicant can then borrow up to 100% of actual production or physical losses (not to exceed $500,000). Once a county is declared eligible, an individual producer within the county (or a contiguous county) must also meet the following requirements for an EM loan: A producer must (1) be an established family farmer and a citizen or permanent resident of the United States; (2) experience a crop loss of more than 30% or a physical loss of livestock, livestock products, real estate, or property; and (3) be unable to obtain credit from a commercial lender but still show the potential to repay the loan, including having acceptable credit history and collateral to secure the loan. Applications must be received within eight months of the county's disaster designation date. Loans for nonreal-estate purposes must generally be repaid within seven years. Loans for physical losses to real estate have terms up to 20 years. Depending on the repayment ability of the producer and other circumstances, these terms can be extended to 20 years for nonreal-estate losses and up to 40 years for real estate losses. The EM loan program is permanently authorized by Title III of the Consolidated Farm and Rural Development Act (P.L. 87-128), as amended, and is subject to annual appropriations. In FY2018, the program received $25.6 million of new loan authority. Unused funds are carried over and available in the next fiscal year. Therefore, the total loan authority can vary greatly depending on appropriated levels, annual use, and total carryover. In FY2019, the total loan authority is $99.5 million. Also in counties with disaster designations, producers who have existing direct loans with FSA may be eligible for Disaster Set-Aside. If, as a result of disaster, a borrower is unable to pay all expenses and make loan payments that are coming due, up to one full year's payment can be moved to the end of the loan. USDA also has several permanent disaster assistance programs that help producers repair damaged land following natural disasters. It also has authority to issue disaster payments to farmers with \"Section 32\" or \"CCC\" funds and can use a variety of existing programs to address disaster issues as they arise. Several USDA programs offer financial and technical assistance to producers to repair, restore, and mitigate damage by a natural disaster on private land. The Emergency Conservation Program (ECP) and the Emergency Forest Restoration Program (EFRP) are administered by FSA. For both programs, FSA pays participants a percentage of the cost to restore the land to a productive state. ECP also funds water for livestock and installing water conserving measures during times of drought. EFRP was created to assist private forestland owners with losses caused by a natural disaster on nonindustrial private forest land. The Emergency Watershed Protection (EWP) program and the EWP floodplain easement program are administered by USDA's Natural Resources Conservation Service and the U.S. Forest Service. EWP assists sponsors, landowners, and operators in implementing emergency recovery measures for runoff retardation and erosion prevention to relieve imminent hazards to life and property created by a natural disaster. The EWP floodplain easement program is a mitigation program that pays for permanent easements on private land meant to safeguard lives and property from future floods and drought and the products of erosion. For more information on these programs, see CRS Report R42854, Emergency Assistance for Agricultural Land Rehabilitation . USDA has discretionary authority to distribute emergency payments to farmers with \"Section 32\" and CCC funds. While both Section 32 and CCC have broad authority to support U.S. agriculture, the majority of their activities are required under various statutes, such as omnibus farm bills. Beginning in FY2012, annual appropriations acts limited USDA's discretionary use of CCC and Section 32. The FY2018 omnibus appropriation removed this limitation for CCC and allowed for limited carryover funding under Section 32 to be used pending congressional notification. USDA's Section 32 program is funded by a permanent appropriation of 30% of the previous year's customs receipts, and funds are used for a variety of activities, including child nutrition programs, the purchase of commodities for domestic food programs, and farm disaster assistance. The statutory authority is Section 32 of the Agricultural Adjustment Act Amendment of 1935 (P.L. 74-320, 7 U.S.C. 612c). The authority to provide disaster assistance is attributed to clause 3 of Section 32, which provides that funds \"shall be used to re-establish farmers' purchasing power by making payments in connections with the normal production.\" The FY2019 omnibus (§714, P.L. 116-6 ) limits clause 3 to carryover funding of no more than $350 million following a two-week advance notice to Congress. The CCC serves as the funding institution for carrying out federal farm support programs, such as commodity price support and production programs, conservation programs, disaster assistance, agricultural research, and bioenergy development. It is federally chartered by the CCC Charter Act of 1948 (P.L. 80-806), as amended. The authority to provide disaster assistance is attributed to Section 5 of the act (15 U.S.C. 714c), which, among other activities, authorizes the CCC to support the prices of agricultural commodities through loans, purchases, payments, and other operations. In addition to implementing the disaster assistance programs discussed above, USDA can use authority under other existing programs to help producers recover from natural disasters. For example, in response to the major drought affecting a large part of the United States in recent years, USDA took a number of administrative actions to assist producers, including extending emergency grazing and haying on Conservation Reserve Program (CRP) acres; reducing the emergency loan interest rate and making emergency loans available earlier in the season; targeting conservation assistance through the Environmental Quality Incentives Program for the most extreme and exceptional drought areas; additional funding helps farmers and ranchers implement conservation practices that conserve water resources, reduce wind erosion on drought-impacted fields, and improve livestock access to water (farmers and ranchers contribute about half the cost of implementing the practices); and directing Emergency Community Water Assistance Grants for rural water systems experiencing emergencies resulting from a significant decline in quantity or quality of drinking water. Under the Animal Health Protection Act (7 U.S.C. 8301, et seq. ), USDA is authorized to take protective actions against the spread of livestock disease, including seizing, treating, or destroying animals if USDA determines that an extraordinary emergency exists because of the presence of a pest or disease of livestock. As part of its animal health program, USDA's Animal and Plant Health Inspection Service compensates producers for animals that must be euthanized, for their disposition, and for infected materials that must also be destroyed. Funding is provided by annual appropriations or through the CCC for larger amounts. The most recent example of a large-scale outbreak that resulted in payments to producers was in 2015 and 2016 during outbreaks of highly pathogenic avian influenza affecting the U.S. poultry industry. The 2018 farm bill amended the supplemental disaster assistance programs as well as NAP, crop insurance, and emergency loans. The following provides a summary of changes to select programs included in this report. For a more comprehensive review of amendments under the 2018 farm bill, see CRS Report R45525, The 2018 Farm Bill (P.L. 115-334): Summary and Side-by-Side Comparison . The 2018 farm bill generally expands coverage under the federal crop insurance program, including for forage, grazing, and hemp. Amendments authorize catastrophic level coverage for insurance plans covering grazing crops and grasses. It also allows producers to purchase separate crop insurance policies for crops that can be both grazed and mechanically harvested on the same acres during the same growing season and to receive independent indemnities for each intended use. A number of amendments were also made related to hemp, including eligibility, post-harvest losses, and waivers that allow for the development of policies for hemp. For all crops, the administrative fee for catastrophic coverage was increased from $300 to $655 per crop per county. The 2018 farm bill expands crop eligibility to include crops that may be covered by select forms of crop insurance but only under whole farm plans or weather index policies. It also amends the payment calculation to consider the producer's share of the crop, raises the service fees, and creates separate payment limits for catastrophic ($125,000/person) and buy-up ($300,000/person) coverage. Payments under buy-up coverage are also expanded to include other premium prices (e.g., local, organic, or direct market price), which may be higher than the average market price. The law makes buy-up coverage permanent and adds data collection and program coordination requirements. The 2018 farm bill expands payments for livestock losses caused by disease and for losses of unweaned livestock that occur before vaccination. The law also expands the definition of eligible producer to include Indian tribes or tribal organizations and increases replanting and rehabilitation payment rates for beginning and veteran orchardists. The law amends the limits on payments received under select disaster assistance programs: Of the four disaster assistance programs, only LFP is now subject to the $125,000/person payment limit. Eligibility is expanded to allow borrowers who have received a debt write-down or restructuring of a farm loan (due to circumstances beyond the control of the borrower) to maintain eligibility for an emergency loan. The U.S. farm policy mix that provides assistance to agricultural producers for damage and loss following a natural disaster continues to shift between permanent and temporary authorized support. The authorization of permanent disaster assistance programs in the 2008 and 2014 farm bills, as well as expanded crop insurance and NAP policies, were designed to reduce the need for ad hoc disaster assistance. Following enactment of the 2008 farm bill, Congress appropriated little in the way of supplemental disaster assistance for agriculture, most of which was for land rehabilitation efforts under EWP and ECP. This changed in 2018, when an active hurricane and wildfire season in 2017 resulted in the authorization of supplemental assistance in the Bipartisan Budget Act of 2018. In addition to the programmatic changes discussed in the \" Supplemental Agricultural Disaster Assistance Programs \" section of this report, the Bipartisan Budget Act of 2018 also authorized $2.36 billion for production losses not covered under NAP or crop insurance. On July 16, 2018, USDA announced the availability of the bulk of the 2018 Bipartisan Budget Act funding through the Wildfires and Hurricanes Indemnity Program (WHIP). Only crop, tree, bush, and vine losses from a wildfire or hurricane in 2017 are eligible for assistance under WHIP. Payments to producers who purchased crop insurance or NAP coverage range from 70% to 95% of the expected value of the crop, depending on the level of coverage purchased. For producers who did not purchase crop insurance or NAP in advance of the natural disaster, payments under WHIP are limited to 65% of expected value of the crop. All payments are reduced by the value of the crop harvested, if any, and any insurance indemnity paid through crop insurance or NAP. All participants are required to purchase crop insurance or NAP for the next two years. Payments are limited to $125,000 if less than 75% of the participant's AGI is from farming. If more than 75% of the participant's AGI is from farming, then payments are limited to a maximum of $900,000. USDA's initial announcement stated that only 50% of the participant's payment rate will be made up front, with additional payments possible depending on fund availability. USDA used a portion of the 2018 Bipartisan Budget Act funding for a $340 million block grant to the state of Florida. Under the grant, the state is expected to assist the citrus industry with the cost of buying and planting replacement trees—including resetting and grove rehabilitation—and for repairing damage to irrigation systems, among other activities. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), also provided supplemental assistance but through an existing program—TAP. The act authorized $15 million for payments to eligible pecan orchardists or pecan nursery tree growers for mortality losses incurred during calendar year 2017. The act lowers the mortality loss threshold under TAP to cover losses in excess of 7.5% but not more than 15%, adjusted for normal mortality. If losses exceeded 15%, then the loss is already eligible for TAP. If applications for these losses (i.e., between 7.5% and 15%) exceed the available $15 million, then payments would be proportionally reduced.", "summary": "The U.S. Department of Agriculture (USDA) offers several programs to help farmers recover financially from natural disasters, including drought and floods. All the programs have permanent authorization, and one requires a federal disaster designation (the emergency loan program). Most programs receive mandatory funding amounts that are \"such sums as necessary\" and are not subject to annual discretionary appropriations. The federal crop insurance program offers subsidized policies designed to protect crop producers from risks associated with adverse weather, as well as weather-related plant diseases and insect infestations and declines in commodity prices. Policies must be purchased prior to the planting season. Eligible commodities include most major crops and many specialty crops (including fruit, tree nut, vegetable, and nursery crops), as well as forage and pastureland for livestock producers. Producers who grow a crop that is currently ineligible for crop insurance may apply for the Noninsured Crop Disaster Assistance Program (NAP). NAP provides a catastrophic level of coverage, as well as options to purchase additional coverage. Similar to crop insurance, policies must be purchased prior to the planting season. There are four permanently reauthorized disaster programs for livestock and trees. Producers do not pay a fee to participate, and advanced sign-up is not required. The programs are: 1. the Livestock Indemnity Program (LIP), which provides payments to eligible livestock owners and contract growers at a rate of 75% of market value for livestock deaths in excess of normal mortality or sold at a reduced sale price caused by adverse weather, attacks by reintroduced wild animals, and disease; 2. the Livestock Forage Disaster Program (LFP), which makes payments to eligible livestock producers who have suffered grazing losses on drought-affected pasture or grazing land or on rangeland managed by a federal agency due to a qualifying fire; 3. the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP), which provides payments to producers of livestock, honey bees, and farm-raised fish as compensation for losses due to disease, adverse weather, and feed or water shortages; and 4. the Tree Assistance Program (TAP), which makes payments to orchardists/nursery tree growers for losses in excess of 15% to replant trees, bushes, and vines damaged by natural disasters. Separately, for all types of farms and ranches, when a county has been declared a disaster area by either the President or the Secretary of Agriculture, producers in that county may become eligible for low-interest emergency disaster loans. USDA has several permanent disaster assistance programs designed to help producers repair damaged land following natural disasters. It also has authority to issue disaster payments to farmers with funds from \"Section 32,\" or the Commodity Credit Corporation (CCC). Finally, USDA can use a variety of existing programs to address disaster issues as they arise, such as allowing emergency grazing on land enrolled in the Conservation Reserve Program. The Agricultural Improvement Act of 2018 (P.L. 115-334) made a number of amendments to the permanent farm bill disaster assistance programs, NAP, and crop insurance, including changes to payment limits, definitions, eligibility, and coverage.", "document_type": "crs"}
{"report": "The U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output includes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States. Annual U.S. net farm income is the single most watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have prevailed during a specific time period. When national net farm income is reported together with a measure of the national farm debt-to-asset ratio, the two summary statistics provide a quick and widely referenced indicator of the economic well-being of the national farm economy. In the first of three official U.S. farm income outlook releases scheduled for 2019, ERS projects that U.S. net farm income will rise slightly in 2019 to $69.4 billion, up $6.3 billion (+10%) from last year. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+4.7%) to $95.7 billion. However, the initial 2019 net farm income forecast is below (-18%) the 10-year average of $84.8 billion and represents continued agriculture-sector economic weakness since 2013's record high of $123.8 billion. Abundant domestic and international supplies of grains and oilseeds suggest a fourth straight year of relatively weak commodity prices in 2018 ( Figure A-1 through Figure A-4 , and Table A-4 ). However, considerable uncertainty remains concerning whether the United States will achieve a resolution to its trade dispute with China and other major trading partners, what crops U.S. producers will decide to plant across the major growing regions of the United States ( Figure 3 ), whether farmers and ranchers will continue to expand livestock production ( Figure 8 ), what weather and growing conditions will prevail during the principal plant-growth season, and how domestic and international demand will evolve during the year. Since the record highs of 2012 and 2013, net cash income and net farm income have fallen by 29% and 44%, respectively ( Figure 1 ), thus continuing a general downward trend in farm income since 2013—primarily the result of a significant decline in most farm commodity prices since 2013-2014. Cash receipts for most major field crops (feed grains, hay, and wheat), oilseeds ( Figure 12 ), and animal products (beef, pork, broilers, eggs, and milk— Figure 14 ), are projected at $381.5 billion in 2019 (+2.3%) but have declined since their highs in 2012 and 2014 as U.S. and global grain and oilseed stocks and animal herds have rebuilt. Government payments in 2019 are projected down (-17%) from 2018 at $11.5 billion—due largely to lower payments under both the Market Facilitation Program (MFP) and revenue-support programs ( Figure 16 ). Total production expenses for 2019 ( Figure 18 ), at $372 billion, are projected up slightly from 2018 (+0.6%), driven largely by feed, labor, and interest costs. Global demand for U.S. agricultural exports ( Figure 22 ) is projected at $141.5 billion in 2019, down 1% from 2018, due largely to a decline in sales to China. Farm asset values and debt levels are projected to reach record levels in 2019—asset values at $3.1 trillion (+1.5%) and farm debt at $427 billion (+3.9%)—pushing the projected debt-to-asset ratio up to 13.9%, the highest level since 2002 ( Figure 28 ). Farm production choices in 2019 will largely be determined by producers' expectations for relative net returns from both the market and government programs across the various crops and livestock activities. Growing-season weather, yields, and harvest-time market prices are unknown early in the year when producers must lock in their production decisions for the year. Heading into 2019, most of the major growing zones ( Figure 3 ) across the Corn Belt, Plain States, Delta, and Southeast are largely free of drought ( Figure 4 ). Some dryness persists primarily in the mountain states, the Pacific Northwest, and southern Texas. Instead of dryness, excessive precipitation and early spring flooding present potential hindrances to the normal crop-choice and planting routines for 2019, particularly in the western Corn Belt ( Figure 5 ). Corn and soybeans are the two largest U.S. commercial crops in terms of both value and acreage. For the past several years, U.S. corn and soybean crops have experienced strong growth in both productivity and output, thus helping to build stockpiles at the end of the marketing year. This has been particularly true for soybeans, which have seen rapid growth in yield, acres planted, and stocks. This pattern reached a historic point in 2018 when, for the first time in history, U.S. soybean plantings (at 89.196 million acres) narrowly exceeded corn plantings (89.120 million acres). The record soybean plantings, coupled with the second-highest yields on record (51.6 bushels/acres), produced a record U.S. soybean harvest of 4.5 billion bushels and record ending stocks (900 million bushels) in 2018. The record harvest and abundant supply, coupled with the sudden loss of China as the principal buyer of U.S. soybeans in 2018, have pressured soybean farm prices lower (-8%) to a projected $8.60/bushel for the 2018/2019 marketing year—the lowest farm price since 2006 ( Figure 6 ). Like soybeans, USDA estimated the second-highest corn yields on record in 2018 at 176.4 bushels/acre (just behind the previous year's record yield of 176.6 bushels/acre). As a result, the United States produced the third-largest corn harvest on record at 14.4 billion bushels. Despite the near-record production, USDA predicts that record large domestic usage (including for livestock feed, ethanol production, other industrial processing, and seed) plus large exports will result in a small reduction in corn ending stocks, a decline in the ending stocks-to-use ratio to 14.0% (down from 14.5%) and a slightly higher season average farm price of $3.55/bushel. Both wheat and upland cotton farm prices are projected up slightly from 2017 despite relatively abundant stocks-to-use ratios, largely on the strength of international demand. The corn and soybean crops provide important inputs for the domestic livestock, poultry, and biofuels sectors. In addition, the United States is traditionally one of the world's leading exporters of corn, soybeans, and soybean products—vegetable oil and meal. During the recent five-year period from 2013/2014 to 2017/2018, the United States exported 49% of its soybean production and 15% of its corn crop. As a result, the export outlook for these two crops is critical to both farm sector profitability and regional economic activity across large swaths of the United States as well as in international markets. However, a tariff-related trade dispute between the United States and several major trading partners (in particular, China) has cast uncertainty over the corn and soybean markets. The trade dispute has resulted in lower purchases of U.S. agricultural products by China in 2018, with continued diminished prospects for 2019. China was the top export market for U.S. agricultural products in 2017 with $25.9 billion in purchases. With the realization of diminished Chinese purchases, USDA has revised downward its expected export value to China for 2018 to $20.5 billion and for 2019 to $13.6 billion. Similarly, USDA has lowered its U.S. soybean export forecast from its initial estimate of 2.3 billion bushels in May 2018 to 1.875 billion bushels in its March 8, 2019, World Agricultural Supply and Demand Estimates report. The marketing year for corn and soybeans extends through August 2019. Thus, these forecasts depend on whether the trade dispute continues unabated or how the terms of any resolution (if one were to occur) would impact trade in the remaining months of the marketing year in 2019. The rapid expansion of U.S. soybean production has come largely at the expense of the wheat sector, which has been steadily losing acreage over the past several decades ( Figure 7 ). In 2017 U.S. wheat-planted acres were the lowest in over 100 years. Poor planting conditions in the fall of 2018 (for the 2019 winter wheat crop) across several states have resulted in the lowest estimated plantings outlook for winter wheat since 1909. The contraction in area is expected to support wheat prices and possibly lead to expanded spring wheat plantings in the Northern Plains in 2019. USDA's February 2019 Cattle report reported that U.S. cattle herd expansion, which has been growing since 2015, has slowed markedly but is still projected to grow through 2019. Similarly, U.S. hog and poultry flocks have been growing and are expected to continue to expand in 2019. A key uncertainty for the meat-producing sector is whether demand will expand rapidly enough to absorb the continued growth in output or whether surplus production will begin to pressure prices lower. For 2019, expected production of beef (+1.6%), pork (+4.2%), broilers (+1.2%), and eggs (+2.3%) are projected to expand relatively robustly. This growth in protein production was preceded by strong growth rates in 2018: beef (+2.6%), pork (+2.9%), broilers (+2.2%), and eggs (+2.1%). USDA projects that combined domestic and export demand will continue to grow for red meat (+1.7%) and poultry (+0.9%) but at slower rates than projected meat production, thus contributing to the outlook for lower prices and profit margins for livestock in 2019. The changing conditions for the U.S. livestock sector may be tracked by the evolution of the ratios of livestock output prices to feed costs ( Figure 10 ). A higher ratio suggests greater profitability for producers. The cattle-, hog-, and broiler-to-feed margins all moved upward in during 2014 but have exhibited volatility during the 2015-2018 period. The hog, cattle, and broiler sectors remain profitable. However, continued production growth of between 2% and 4% for red meat and poultry suggests that prices are vulnerable to weakness in demand. Both the milk- and hog-to-feed ratios fell during 2018, suggesting eroding profitability. While this result varies widely across the United States, many small or marginally profitable hog and milk producers face continued financial difficulties. In addition, both U.S. and global milk production are projected to continue growing in 2019. As a result, milk prices could come under further pressure in 2019, although USDA is currently projecting milk prices up slightly in 2019. Record profitability among cow-calf producers in 2014, coupled with then-improved forage conditions, helped to trigger the beef cow herd expansion ( Figure 9 ). The continued cattle expansion through 2019—despite weakening profitability—is primarily the result of a lag in the biological response to the strong market price signals of late 2014. During the 2007-2014 period, high feed and forage prices plus widespread drought in the Southern Plains—the largest U.S. cattle production region—had resulted in an 8% contraction of the U.S. cattle inventory ( Figure 9 ). Reduced beef supplies led to higher producer and consumer prices, which in turn triggered the slow rebuilding phase in the cattle cycle that started in 2014 (see the price-to-feed ratio for steers and heifers, Figure 10 ). The resulting continued expansion of beef supplies pressured market prices lower in 2016. The lower price outlook is expected to persist through 2019 despite strong domestic and international demand across all meat categories—beef, pork, and poultry ( Table A-4 ). Projected farm-sector revenue sources in 2019 include crop revenues (47% of sector revenues), livestock receipts (42%), government payments (3%), and other farm-related income (8%), including crop insurance indemnities, machine hire, and custom work. Total farm sector gross cash income for 2019 is projected to be up (+1.4%) to $427.5 billion, driven by increases in both crop (+2%) and livestock (+2.6%) receipts ( Figure 11 ). Cash receipts from direct government payments (-17%) and other farm-related income (-1.2) are down slightly from 2018. Total crop sales peaked in 2012 at $231.6 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2019, crop sales are projected at $201.7 billion, up slightly from 2018 ( Figure 12 ). Projections for 2019 and percentage changes from 2018 include: Feed crops—corn, barley, oats, sorghum, and hay: $58.8 billion (+4.0%); Oil crops—soybeans, peanuts, and other oilseeds: $39.5 billion (-6.6%); Fruits and nuts: $32.9 billion (+8.2%); Vegetables and melons: $18.6 billion (+0.9%); Food grains—wheat and rice: $12.4 billion (+6.2%); Cotton: $8.3 billion (+6.5%); and Other crops including tobacco, sugar, greenhouse, and nursery: $29.8 billion (+2%). The livestock sector includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector grew steadily from 2009 to 2014, when it peaked at a record $212.8 billion. However, the sector turned downward in 2015 (-11.0%) and again in 2016 (-14.1%), driven largely by projected year-over-year price declines across major livestock categories ( Table A-4 and Figure 14 ). In 2017, livestock sector cash receipts recovered with year-to-year growth of 8.1% to $176.0 billion. In 2018, cash receipts were nearly unchanged. In 2019, cash receipts are projected up 2.6% for the sector at $179.9 billion as cattle and dairy sales partially offset declines in hog and poultry. Projections for 2019 (and percentage changes from 2018) include: Cattle and calf sales: $69.2 billion (+4.0%); Poultry and egg sales: $46.0 billion (-0.7%); Dairy sales, valued at $37.8 billion (+7.8%); Hog sales: $19.5 billion (-3.2%); and Miscellaneous livestock, valued at $7.4 billion (+2.7%). Government payments include direct payments (decoupled payments based on historical planted acres), price-contingent payments (program outlays linked to market conditions), conservation payments (including the Conservation Reserve Program and other environmental-based outlays), ad hoc and emergency disaster assistance payments (including emergency supplemental crop and livestock disaster payments and market loss assistance payments for relief of low commodity prices), and other miscellaneous outlays (including market facilitation payments, cotton ginning cost-share, biomass crop assistance program, peanut quota buyout, milk income loss, tobacco transition, and other miscellaneous payments). Total government payments of $11.5 billion still represent a relatively small share (3%) of projected gross cash income of $427.5 billion in 2019. In contrast, government payments are expected to represent 16% of the projected net farm income of $69.4 billion. However, the importance of government payments as a percentage of net farm income varies nationally by crop and livestock sector and by region. Government payments in 2019 are projected down 16.8% from 2018 at $11.5 billion ( Figure 16 and Table A-4 ). Government payments in 2018 were inflated by unexpected payments of approximately $5.2 billion under the MFP initiated by USDA in response to the U.S.-China trade dispute. MFP payments to qualifying agricultural producers were estimated at $5.7 billion in 2018 and are projected at $3.5 billion in 2019, thus accounting for a year-to-year difference of -$2.2 billion. USDA ad hoc disaster assistance, at $1.4 billion, is projected up (+20.4%). MFP and ad hoc disaster assistance payments are expected to add $6.8 billion, or about 12%, to net farm income in 2018 and $4.9 billion, or about 8%, to net farm income in 2019. Payments under the Agricultural Risk Coverage and Price Loss Coverage programs are projected lower in 2019 at $1.7 billion compared with an estimated $3.0 billion in 2018 (see \"Price Contingent\" in Figure 16 ). No payments are forecast under the marketing loan program in 2019, the same as in 2018, as program crop prices are expected to remain above most farm-bill loan rates through 2019. The new Dairy Margin Coverage program is expected to make $600 million in payments in 2019, up from $188 million under the previous milk Margin Protection Program (MPP) in 2018 (see next section for details). Conservation programs include all conservation programs operated by USDA's Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers. Estimated conservation payments of $4.3 billion are forecast for 2019, up slightly from $4.0 billion in 2018. The 2018 farm bill (Agricultural Improvement Act of 2018, P.L. 115-334 ) made several changes to the previous MPP program, including a new name—the Dairy Margin Coverage (DMC) program—and expanded margin coverage choices from the original range of $4.00-$8.00 per hundredweight (cwt.). Under the 2018 farm bill, milk producers have the option of covering the milk-to-feed margin at a $9.50/cwt. threshold on the first 5 million pounds of milk coverage under the program. The DMC margin differs from the USDA-reported milk-to-feed ratio shown in Figure 10 but reflects the same market forces. As of January 2019, the formula-based milk-to-feed margin used to determine government payments was below the newly instituted $9.50/cwt. threshold ( Figure 17 ), thus increasing the likelihood of DMC payments in 2019. Total production expenses for 2019 for the U.S. agricultural sector are projected to be up slightly (+0.6%) from 2018 in nominal dollars at $372.0 billion ( Figure 18 ). Production expenses peaked in both nominal and inflation-adjusted dollars in 2014, then declined for two years before resuming their upward trend in nominal dollars in 2017. But how have production expenses moved relative to revenues? A comparison of the indexes of prices paid (an indicator of expenses) versus prices received (an indicator of revenues) reveals that the prices received index generally declined from 2014 through 2016, rebounded in 2017, then declined again in 2018 ( Figure 19 ). Farm input prices (as reflected by the prices paid index) showed a similar pattern but with a much smaller decline from their 2014 peak, thus suggesting that farm sector profit margins have been squeezed since 2014. Production expenses will affect crop and livestock farms differently. The principal expenses for livestock farms are feed costs, purchases of feeder animals and poultry, and hired labor. Feed costs, labor expenses, interest costs, and property taxes are all projected up in 2019 ( Figure 20 ). In contrast, fuel, land rent, and fertilizer costs are projected lower. Renting or leasing land is a way for young or beginning farmers to enter agriculture without incurring debt associated with land purchases. It is also a means for existing farm operations to adjust production more quickly in response to changing market and production conditions while avoiding risks associated with land ownership. The share of rented farmland varies widely by region and production activity. However, for some farms it constitutes an important component of farm operating expenses. Since 2002, about 38% of agricultural land used in U.S. farming operations has been rented. The majority of rented land in farms is rented from nonoperating landlords. Nationally in 2012, 30% of all land in farms was rented from someone other than a farm operator. Some farmland is rented from other farm operations—nationally about 8% of all land in farms in 2012 (the most recent year for which data are available)—and thus constitutes a source of income for some operator landlords. Total net rent to nonoperator landlords is projected to be down (-2.1%) at $14.3 billion in 2019. Cash rental rates for 2019 are not yet available. Average cash rental rates for 2018 were up year-over-year ($138 per acre versus $136 in 2017). Although rental rates—which for 2019 were set the preceding fall of 2018 or in early spring of 2019—dipped in 2016, they still reflect the high crop prices and large net returns of the preceding several years, especially the 2011-2014 period ( Figure 21 ). The national rental rate for cropland peaked at $144 per acre in 2015. U.S. agricultural exports have been a major contributor to farm income, especially since 2005. As a result, the downturn in those exports that started in 2015 ( Figure 22 ) deepened the downturn in farm income that had started in 2013 ( Figure 1 ). USDA projects U.S. agricultural exports at $141.5 billion in FY2019, down slightly (-1%) from $143.4 billion in FY2018. Export data include processed and unprocessed agricultural products. This downturn masks larger country-level changes that have occurred as a result of ongoing trade disputes (as discussed below). In FY2019, U.S. agricultural imports are projected nearly unchanged at $127.0 billion, but the resultant agricultural trade surplus of $14.5 billion would be the lowest since 2007. A substantial portion of the surge in U.S. agricultural exports that occurred between 2010 and 2014 was due to higher-priced grain and feed shipments, including record oilseed exports to China and growing animal product exports to East Asia. As commodity prices have leveled off, so too have export values (see the commodity price indexes in Figure A-1 and Figure A-2 ). In FY2017, the top three markets for U.S. agricultural exports were China, Canada, and Mexico, in that order. Together, these three countries accounted for 46% of total U.S. agricultural exports during the five-year period FY2014-FY2018 ( Figure 23 ). However, in FY2019 the combined share of U.S. exports taken by China, Canada, and Mexico is projected down to 42% largely due to sharply lower exports to China. The ordering of the top three markets is reordered to Canada, Mexico, and China, as China is projected to barely stay ahead of the European Union and Japan as a destination for U.S. agricultural exports. From FY2014 through FY2017, China imported an average of $26.2 billion of U.S. agricultural products. However, USDA forecasts China's imports of U.S. agricultural products to decline to $20.5 billion in FY2018 and to $13.6 billion in FY2019 as a result of the U.S.-China trade dispute. The fourth- and fifth-largest U.S. export markets are the European Union and Japan, which have accounted for a combined 17% of U.S. agricultural exports during the FY2014-FY2018 period. This same share is projected to continue in FY2019 ( Figure 23 ). These two markets have shown relatively limited growth in recent years when compared with the rest of the world. The \"Rest of World\" (ROW) component of U.S. agricultural trade—South and Central America, the Middle East, Africa, and Southeast Asia—has shown strong import growth in recent years. ROW is expected to account for 41% of U.S. agricultural exports in FY2019. ROW import growth is being driven in part by both population and GDP growth but also from shifting trade patterns as some products previously targeting China have been diverted to new markets. Over the past four decades, U.S. agricultural exports have experienced fairly steady growth in shipments of high-value products—including horticultural products, livestock, poultry, and dairy. High-valued exports are forecast at $94.3 billion for a 66.6% share of U.S. agricultural exports in FY2019 ( Figure 24 ). In contrast, bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a 33.4% share of total U.S. agricultural exports in FY2019 at $47.2 billion. This compares with an average share of over 60% during the 1970s and into the 1980s. As grain and oilseed prices decline, so will the bulk value share of U.S. exports. The share of agricultural production (based on value) sold outside the country indicates the level of U.S. agriculture's dependence on foreign markets, as well as the overall market for U.S. agricultural products. As a share of total farm and manufactured agricultural production, U.S. exports were estimated to account for 19.8% of the overall market for agricultural products from 2008 through 2016—the most recent data year for this calculation ( Figure 25 ). The export share of agricultural production varies by product category. At the upper end of the range for export shares, the bulk food grain export share has varied between 50% and 80% since 2008, while the oilseed export share has ranged between 47% and 58%. The mid-spectrum range of export shares includes the export share for fruit and tree nuts, which has ranged from 37% to 45%, while meat products have ranged from 27% to 41%. At the low end of the spectrum, the export share of vegetable and melon sales has ranged from 15% to 18%, the dairy products export share from 9% to 24%, and the agricultural-based beverage export share between 7% and 13%. The U.S. farm income and asset-value situation and outlook suggest a relatively stable financial position heading into 2019 for the agriculture sector as a whole—but with considerable uncertainty regarding the downward outlook for prices and market conditions for the sector and an increasing dependency on international markets to absorb domestic surpluses Farm asset values—which reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments—are projected to be up 1.5% in 2019 to a nominal $3.1 trillion ( Table A-3 ). In inflation-adjusted terms (using 2017 dollars), farm asset values peaked in 2014 ( Figure 26 ). Nominally higher farm asset values are expected in 2019 due to higher real estate values (+1.8%), which offset a slight decrease in nonreal estate values (-0.1%). Real estate is projected to account for 83% of total farm sector asset value. Crop land values are closely linked to commodity prices. The leveling off of crop land values since 2015 reflects mixed forecasts for commodity prices (corn, soybeans, and cotton lower; wheat, rice, and livestock products higher) and the uncertainty associated with international commodity markets ( Figure 27 ). Total farm debt is forecast to rise to a record $426.7 billion in 2019 (+3.9%) ( Table A-3 ). Farm equity—or net worth, defined as asset value minus debt—is projected to be up slightly (+1.1%) at $2.7 trillion in 2019 ( Table A-3 ). The farm debt-to-asset ratio is forecast up in 2019 at 13.9%, the highest level since 2002 but still relatively low by historical standards ( Figure 28 ). A farm can have both an on-farm and an off-farm component to its income statement and balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because of the inclusion of nonfarm investments, jobs, and other links to the nonfarm economy. Average farm household income (sum of on- and off-farm income) is projected at $115,588 in 2019 ( Table A-2 ), up 4.3% from 2018 and below the record of $134,164 in 2014. About 18% ($20,365) of total farm household income is from farm production activities, and the remaining 82% ($95,223) is earned off the farm (including financial investments). The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2000 ( Figure 29 ). Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 30 ). In 2017 (the last year for which comparable data were available), the average farm household income of $113,495 was about 32% higher than the average U.S. household income of $86,220 ( Table A-2 ). Figure A-1 to Figure A-4 present USDA data on monthly farm prices received for several major farm commodities—corn, soybeans, wheat, upland cotton, rice, milk, cattle, hogs, and chickens. The data are presented in an indexed format where monthly price data for year 2010 = 100 to facilitate comparisons. USDA Farm Income Data Tables Table A-1 to Table A-3 present aggregate farm income variables that summarize the financial situation of U.S. agriculture. In addition, Table A-4 presents the annual average farm price received for several major commodities, including the USDA forecast for the 2018-2019 marketing year.", "summary": "This report uses the U.S. Department of Agriculture's (USDA) farm income projections (as of March 6, 2019) and agricultural trade outlook update (as of February 21, 2019) to describe the U.S. farm economic outlook. According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $69.4 billion in 2019, up $6.3 billion (+10%) from last year. The forecast rise in 2019 net farm income is the result of an increase in gross returns (up $8.5 billion or +2%)—including continued payments under the trade aid package announced by USDA in July 2018—partially offset by slightly higher production expenses (up $2.2 billion or +0.6%). Net farm income is calculated on an accrual basis. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+4.7%) to $95.7 billion. The 2019 net farm income forecast is substantially below (-18%) the 10-year average of $84.8 billion (in nominal dollars)—primarily the result of the outlook for continued weak prices for most major crops. Commodity prices are under pressure from a record soybean and near-record corn harvest in 2018, diminished export prospects due to an ongoing trade dispute with China, and burdensome stocks. Government payments are projected down nearly 17% from 2018 at $11.5 billion—due largely to lower market facilitation payments by USDA. Market facilitation payments to qualifying agricultural producers—in response to the U.S.-China trade dispute—were an estimated $5.2 billion in 2018 and are projected at $3.5 billion in 2019. Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) payments are also projected lower in 2019 ($1.7 billion) versus 2018 ($3.0 billion). Payments to dairy producers under the new Dairy Margin Coverage (DMC) program are projected up over 200% at $600 million, while payments under conservation and disaster assistance are projected up in 2019 at $4.3 billion (+8.6%) and $1.4 billion (+20%). Since 2008, U.S. agricultural exports have accounted for a 20% share of U.S. farm and manufactured or processed agricultural sales. In 2018 total agricultural exports were estimated up 2% at $143.4 billion. However, abundant supplies in international markets, strong competition from major foreign competitors, and the ongoing U.S.-China trade dispute are expected to shift trade patterns and lower U.S. export prospects slightly (-1%) in 2019. In addition to the outlook for slightly higher farm income, farm asset value is also projected up 1.5% from 2018 to $3.1 trillion. However, aggregate farm debt is projected record large at $426.7 billion—up 3.9% from 2018. Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. USDA farmland values are projected to rise 1.8% in 2019, similar to the increases of 1.9% in 2018 and 2.3% in 2017. Because they comprise such a significant portion of the U.S. farm sector's asset base (83%), change in farmland values is a critical barometer of the farm sector's financial performance. At the farm household level, average farm household incomes have been well above average U.S. household incomes since the late 1990s. However, that advantage has narrowed in recent years. In 2014, the average farm household income (including off-farm income sources) was about 77% higher than the average U.S. household income. In 2017 (the last year with comparable data), that advantage is expected to decline to 32%. The outlook for below average net farm income and relatively weak prices for most major program crops signals the likelihood of continued relatively lean times ahead. The U.S. agricultural sector's well-being remains dependent on continued growth in domestic and foreign demand to sustain prices at current modest levels. In addition to commodity prices, the financial picture for the agricultural sector as a whole heading into 2019 will hinge on both domestic and international macroeconomic factors, including interest rates, economic growth, and consumer demand. This report uses the U.S. Department of Agriculture's (USDA) farm income projections (as of March 6, 2019) and agricultural trade outlook update (as of February 21, 2019) to describe the U.S. farm economic outlook. According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $69.4 billion in 2019, up $6.3 billion (+10%) from last year. The forecast rise in 2019 net farm income is the result of an increase in gross returns (up $8.5 billion or +2%)—including continued payments under the trade aid package announced by USDA in July 2018—partially offset by slightly higher production expenses (up $2.2 billion or +0.6%). Net farm income is calculated on an accrual basis. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+4.7%) to $95.7 billion. The 2019 net farm income forecast is substantially below (-18%) the 10-year average of $84.8 billion (in nominal dollars)—primarily the result of the outlook for continued weak prices for most major crops. Commodity prices are under pressure from a record soybean and near-record corn harvest in 2018, diminished export prospects due to an ongoing trade dispute with China, and burdensome stocks. Government payments are projected down nearly 17% from 2018 at $11.5 billion—due largely to lower market facilitation payments by USDA. Market facilitation payments to qualifying agricultural producers—in response to the U.S.-China trade dispute—were an estimated $5.2 billion in 2018 and are projected at $3.5 billion in 2019. Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) payments are also projected lower in 2019 ($1.7 billion) versus 2018 ($3.0 billion). Payments to dairy producers under the new Dairy Margin Coverage (DMC) program are projected up over 200% at $600 million, while payments under conservation and disaster assistance are projected up in 2019 at $4.3 billion (+8.6%) and $1.4 billion (+20%). Since 2008, U.S. agricultural exports have accounted for a 20% share of U.S. farm and manufactured or processed agricultural sales. In 2018 total agricultural exports were estimated up 2% at $143.4 billion. However, abundant supplies in international markets, strong competition from major foreign competitors, and the ongoing U.S.-China trade dispute are expected to shift trade patterns and lower U.S. export prospects slightly (-1%) in 2019. In addition to the outlook for slightly higher farm income, farm asset value is also projected up 1.5% from 2018 to $3.1 trillion. However, aggregate farm debt is projected record large at $426.7 billion—up 3.9% from 2018. Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. USDA farmland values are projected to rise 1.8% in 2019, similar to the increases of 1.9% in 2018 and 2.3% in 2017. Because they comprise such a significant portion of the U.S. farm sector's asset base (83%), change in farmland values is a critical barometer of the farm sector's financial performance. At the farm household level, average farm household incomes have been well above average U.S. household incomes since the late 1990s. However, that advantage has narrowed in recent years. In 2014, the average farm household income (including off-farm income sources) was about 77% higher than the average U.S. household income. In 2017 (the last year with comparable data), that advantage is expected to decline to 32%. The outlook for below average net farm income and relatively weak prices for most major program crops signals the likelihood of continued relatively lean times ahead. The U.S. agricultural sector's well-being remains dependent on continued growth in domestic and foreign demand to sustain prices at current modest levels. In addition to commodity prices, the financial picture for the agricultural sector as a whole heading into 2019 will hinge on both domestic and international macroeconomic factors, including interest rates, economic growth, and consumer demand.", "document_type": "crs"}
{"report": "A t the beginning of each Congress, the House of Representatives must adopt rules to govern its proceedings. The House does this by readopting the rules of the previous Congress along with any changes that will apply in the new Congress. On January 3, 2019, the House considered and adopted H.Res. 5 , a resolution providing for the consideration of H.Res. 6 , including separate votes on each of the three titles comprising H.Res. 6 . Title I, the standing rules for the House of Representatives for the 116 th Congress, was adopted by a vote of 234-197 on January 3, 2019. In addition to the standing rules, H.Res. 6 includes several additional provisions, called separate orders, that also govern proceedings in the House. A number of the provisions adopted both as part of the standing rules of the House and as separate orders might affect the consideration of budgetary legislation. In many cases, these provisions are similar to provisions adopted in previous Congresses. This report provides information on changes to both the standing rules and separate orders that might affect the consideration of budgetary legislation in the House of Representatives during the 116 th Congress. The 104 th Congress (1995-1996) added a provision to clause 2(d) of House Rule X that required that each standing committee adopt (by February 15 of the first session of a Congress) its own oversight plan for the Congress. H.Res. 5 (115 th Congress) added language specifically requesting that committees review authorizations for programs or agencies within their jurisdiction. This language was dropped from Rule X for the 116 th Congress. A provision was added to House rules in the 105 th Congress that authorized the chair of the Committee on Ways and Means to request the Joint Committee on Taxation to prepare a dynamic estimate of revenue changes proposed in a measure designated by the majority leader as major tax legislation. In the 108 th Congress, this provision was modified to establish a point of order against the consideration of a measure reported from the Committee on Ways and Means to amend the Internal Revenue Code of 1986 unless the report included a macroeconomic impact analysis (often referred to as \"dynamic scoring\") or an explanation of why such an analysis was not calculable. In the 114 th Congress, this provision was supplanted by a requirement that any budgetary estimates provided by the Congressional Budget Office (CBO) include, to the extent practicable, a macroeconomic impact analysis as well as a requirement that any estimate provided to CBO by the Joint Committee on Taxation also include a macroeconomic impact analysis. This language was dropped from Rule XIII for the 116 th Congress. A provision was added to House rules in the 104 th Congress that required the vote of a three-fifths majority to approve a federal income tax rate increase. In the 105 th Congress, this provision was modified to clarify its application. This language was dropped from Rule XXI for the 116 th Congress. In addition, a requirement in House Rule XX to automatically order the yeas and nays for a vote of the House on such measures was also dropped for the 116 th Congress. A limit on the public debt is fixed by law and may be changed or suspended by enactment of a bill or joint resolution. A former rule of the House (known as the ''Gephardt rule'' after Representative Richard Gephardt of Missouri) provided for a measure to amend the debt to automatically be engrossed and deemed to have been passed by the House by the same vote as the adoption by the House of a conference report on a concurrent resolution on the budget setting forth a level of the public debt different from the existing statutory limit, thereby avoiding the need for a separate vote on the debt limit. The engrossed measure would then be transmitted to the Senate for further action. This rule was first added to the standing rules of the House as Rule XLIX by P.L. 96-78 , although it was renumbered as Rule XXVIII as part of the recodification of House rules in the 106 th Congress. In several instances in the 104 th -106 th Congresses the rule was suspended so that it did not provide for the automatic engrossment of legislation based on changes in the public debt in concurrent resolutions. The rule was repealed in the 107 th Congress, reinstated in the 108 th Congress, and repealed again in the 112 th Congress. H.Res. 6 established a similar requirement as House Rule XXVIII. This new language provides for a measure to automatically be engrossed and deemed to have been passed by the House by the same vote as the adoption by the House of the concurrent resolution on the budget setting forth a level of the public debt different from the existing statutory limit. Rather than a specific level of debt, this measure would suspend the debt limit through the end of the budget year for the concurrent resolution on the budget (but not through the period covered by any outyears beyond the budget year). As with the earlier version of the rule, the engrossed measure would then be transmitted to the Senate for further action. H.Res. 6 reestablished a PAYGO requirement in the House, which had been in effect during the 110 th and 111 th Congresses. The new PAYGO rule (Rule XXI, clause 10) prohibits the consideration of direct spending or revenue legislation that is projected to increase or cause a deficit in either of two time periods: (1) the period consisting of the current fiscal year, the budget year, and the four ensuing fiscal years following the budget year or (2) the 11-year period consisting of the current year, the budget year, and the ensuing nine fiscal years following the budget year. The rule applies to any bill, joint resolution, amendment, motion, or conference report that affects direct spending or revenues. The House PAYGO rule replaced the House CUTGO rule that was adopted by the House at beginning of the 112 th Congress and was in effect though the end of the 115 th Congress. The CUTGO rule prohibited the consideration of any legislation that would have the net effect of increasing direct spending over the same two time periods noted above. Under the House PAYGO rule, one or more provisions in a measure may be exempted from the rule by being designating as an \"emergency.\" Section (c) of the rule states that the exemption may apply to any legislative text designated as an emergency within a bill or joint resolution, an amendment made in order as original text by a resolution reported from the House Committee on Rules, a conference report, or an amendment between the Houses. The exemption does not apply to other amendments even if the amendment includes an emergency designation. The House PAYGO rule also provides flexibility by allowing two measures that have been combined to \"offset\" one another so long as their net effect would comply with the rule. Specifically, Section (b) of the rule states that in the event that a resolution reported from the House Committee on Rules directs the Clerk of the House to add legislative text (that has already passed the House) as new matter to another piece of legislation, the legislative provisions can be evaluated together for compliance with the rule. Language prohibiting House consideration of legislation that would cause a long-term increase in spending was previously adopted by the House as a separate order in the 112 th and 115 th Congresses and adopted in budget resolutions in the 113 th Congress ( H.Con.Res. 96 ) and 114 th Congress ( S.Con.Res. 11 ). This language generally required CBO to estimate whether certain legislation would cause a net increase in spending in excess of $5 billion in any of the four 10-year periods beginning with the fiscal year 10 years after the current fiscal year and also prohibited the House from considering legislation that would cause such an increase. This language was not included in H.Res. 6 . Although budget authority for most federal programs is provided through annual appropriations actions that allow those funds to be obligated during the ensuing fiscal year, funding for certain programs is provided with a different period of availability. The term advance appropriations is applied to funds that will become available for obligation one or more fiscal years after the budget year covered by the appropriations act. In recent years the House has adopted limits on the level of advance appropriations that may be provided as well as the programs or activities for which it may be provided. In some instances, these limits have been established in a budget resolution, as in S.Con.Res. 13 (111 th Congress) and S.Con.Res. 11 (114 th Congress). In other instances, the House has adopted the limit as a separate order as part of the resolution adopting the chamber's rules, as in H.Res. 5 (112 th Congress) and H.Res. 5 (115 th Congress). In the 116 th Congress, a separate order prohibits advance appropriations that exceed (1) $28,852,000,000 for FY2020 in new budget authority for programs or activities identified in a list submitted to the Congressional Record by the chair of the Budget Committee under the heading \"Accounts Identified for Advance Appropriations\" and (2) $75,550,600,000 for FY2020 in new budget authority for programs and activities identified under the heading \"Veterans Accounts Identified for Advance Appropriations.\" Advance appropriation is defined in the provision to apply to funding provided in FY2019 appropriations acts that are to become available in any fiscal year following FY2019. A point of order under Section 302(f) of the Congressional Budget Act prohibits the consideration of measures or amendments that would cause the measure to exceed an allocation made pursuant to Section 302(a) or, in the case of appropriations bills, a suballocation pursuant to Section 302(b). In addition, as a consequence of this point of order, Members may offer amendments to increase the amount of budget authority in an appropriations bill only if it included budget authority less than the level of the applicable 302(b) suballocation, or if it was accompanied by one (or more) provisions that could serve as an offset. This point of order was previously supplemented by a separate orderâfirst adopted during the 109 th Congress (2005-2006) as a freestanding resolution ( H.Res. 248 )âproviding that a motion that the Committee of the Whole rise and report an appropriations bill to the House is not in order if the bill, as amended, exceeds the applicable 302(b) suballocation. This provision was adopted as a separate order for the 110 th -115 th Congresses, but it is not applicable for the 116 th Congress. The House also previously supplemented enforcement of 302(b) suballocations through language prohibiting amendments to general appropriations bills that would result in a net increase in the level of budget authority in the bill. This did not, however, prohibit amendments that would increase budget authority for an item in the bill if the amendment also included an equal or greater offset. This prohibition was adopted as a separate order in the 112 th , 113 th , and 114 th Congresses and as part of House Rule XXI for the 115 th Congress, but it is not applicable for the 116 th Congress. This provision was previously included as a standing order for the 112 th -115 th Congresses. The order required that any general appropriations bill include a spending reduction account. This \"account\" was a provision in the last section of the bill to function as a temporary deposit box into which amendments could transfer budget authority and not be available as an offset for further amendments during consideration of that bill. This language was not included in Â  H.Res. 6 . Although congressional rules establish a general division of responsibility under which questions of policy are kept separate from questions of funding, House rules provide for exceptions in certain circumstances. One such circumstance allows for the inclusion of legislative language in general appropriations bills or amendments thereto for \"germane provisions that retrench expenditures by the reduction of amounts of money covered by the bill.\" This exception appears in clause 2(b) of House Rule XXI and is known as the \"Holman rule\" (after Representative William Holman of Indiana, who first proposed the exception in 1876). In the 115 th Congress the House adopted a special order to provide that retrenchments of expenditures by a reduction of amounts of money covered by the bill shall be construed as applying to any provision or amendment that retrenches expenditures byâ (1) the reduction of amounts of money in the bill; (2) the reduction of the number and salary of the officers of the United States; or (3) the reduction of the compensation of any person paid out of the Treasury of the United States. This language was initially adopted in H.Res. 5 (115 th Congress) to apply to the first session of the 115 th Congress. Its applicability was extended to the second session of the 115 th Congress by H.Res. 787 (115 th Congress), but this language is not applicable in the 116 th Congress .", "summary": "On January 3, 2019, the House adopted Title I of H.Res. 6 , the standing rules for the House of Representatives for the 116 th Congress. In addition to the standing rules, H.Res. 6 included a separate order related to the consideration of appropriations bills. This report provides information on changes to both the standing rules and separate orders that might affect the consideration of budgetary legislation in the House of Representatives. These include the following: Deleting language in Rule X added in the 115 th Congress providing for committees to include a review of authorizations for programs or agencies within their jurisdiction in their oversight plans. Deleting language in Rule XIII, previously adopted in the 114 th and 115 th Congresses, requiring that any budgetary estimates provided by the Congressional Budget Office (CBO) include, to the extent practicable, a macroeconomic impact analysis (often referred to as \"dynamic scoring\") as well as a requirement that any estimate provided to CBO by the Joint Committee on Taxation also include a macroeconomic impact analysis. Deleting language added to Rule XXI in the 104 th Congress requiring the vote of a three-fifths majority to approve a federal income tax rate increase as well as a requirement in Rule XX to automatically order the yeas and nays for a vote of the House on such measures. Establishing new language as Rule XXVIII providing for certain measures concerning the debt limit to automatically be engrossed and deemed to have been passed by the House. This measure would suspend the debt limit through the end of the budget year in the concurrent resolution on the budget (but not through the period covered by any outyears beyond the budget year). The engrossed measure would then be transmitted to the Senate for further action. This rule is similar to language that was previously part of House rules from the 96 th -107 th Congresses (known as the \"Gephardt Rule\"). Reestablishing a PAYGO requirement in the House, which had previously been in effect during the 110 th and 111 th Congresses. This PAYGO rule (Rule XXI, clause 10) replaces the CUTGO rule that was a part of Rule XXI between the 112 th and 115 th Congresses. The new rule prohibits the consideration of direct spending or revenue legislation that is projected to increase or cause a deficit in either of two time periods: (1) the period consisting of the current fiscal year, the budget year, and the four ensuing fiscal years following the budget year or (2) the 11-year period consisting of the current year, the budget year, and the ensuing nine fiscal years following the budget year. The rule applies to any bill, joint resolution, amendment, motion, or conference report that affects direct spending or revenues. H.Res. 6 also included a separate order establishing a limit on advance appropriations, defined as applying to funding provided in FY2019 appropriations acts that are to become available in any fiscal year following FY2019. In addition, several separate orders from previous congresses are not included in H.Res. 6 for the 116 th Congress. These include language prohibiting House consideration of measures estimated by CBO as causing a net increase in spending in excess of $5 billion in any of the four 10-year periods beginning with the fiscal year 10 years after the current fiscal year, two points of order that previously supplemented the point of order in Section 302(f) of the Congressional Budget Act of 1974 as a means for enforcing 302(b) suballocations, language requiring that appropriations bills include a spending reduction account, and language allowing certain legislative amendments in appropriations bills (known as the \"Holman Rule\").", "document_type": "crs"}
{"report": "Antipoverty interventions that provide resources to local communities, based on the characteristics of those communities, have been of interest to Congress. One such policy, dubbed the \"10-20-30 provision,\" was implemented in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). Title I, Section 105 of ARRA required the Secretary of Agriculture to allocate at least 10% of funds provided in that act from three rural development program accounts to persistent poverty counties; that is, to counties that have had poverty rates of 20% or more for the past 30 years, as measured by the 1980, 1990, and 2000 decennial censuses. One notable characteristic of this provision is that it did not increase spending for the rural development programs addressed in ARRA, but rather targeted existing funds differently. Given Congress's interest both in addressing poverty and being mindful about levels of federal spending, the past four Congresses included 10-20-30 language in multiple appropriations bills, some of which were enacted into law. However, the original language used in ARRA could not be used verbatim, because the data source used by ARRA to define persistent poverty—the decennial census—stopped collecting income information. As a consequence, the appropriations bills varied slightly in their definitions of \"persistent poverty counties\" as it was applied to various programs and departments, sometimes even within different sections of the same bill, if the bill included language on different programs. In turn, because the definitions of \"persistent poverty\" differed, so did the lists of counties identified as persistently poor and subject to the 10-20-30 provision. The bills included legislation for rural development, public works and economic development, technological innovation, and brownfields site assessment and remediation. Most recently, in the 116 th Congress, much of the language used in these previous bills was included in P.L. 116-6 (Consolidated Appropriations Act, 2019). This report discusses how data source selection, and the rounding of poverty estimates, can affect the list of counties identified as persistently poor. After briefly explaining why targeting funds to persistent poverty counties might be of interest, this report explores how \"persistent poverty\" is defined and measured, and how different interpretations of the definition and different data source selections could yield different lists of counties identified as persistently poor. This report does not compare the 10-20-30 provision's advantages and disadvantages against other policy options, nor does it examine the range of programs or policy goals for which the 10-20-30 provision might be an appropriate policy tool. Research has suggested that areas for which the poverty rate (the percentage of the population that is below poverty) reaches 20% experience systemic problems that are more acute than in lower-poverty areas. The poverty rate of 20% as a critical point has been discussed in academic literature as relevant for examining social characteristics of high-poverty versus low-poverty areas. For instance, property values in high-poverty areas do not yield as high a return on investment as in low-poverty areas, and that low return provides a financial disincentive for property owners to spend money on maintaining and improving property. The ill effects of high poverty rates have been documented both for urban and rural areas. Therefore, policy interventions at the community level, and not only at the individual or family level, have been and may continue to be of interest to Congress. Persistent poverty counties are counties that have had poverty rates of 20% or greater for at least 30 years. The county poverty rates for 1999 and previous years are measured using decennial census data, and for more recent years, either the Small Area Income and Poverty Estimates (SAIPE) or the American Community Survey (ACS). The data sources used, and the level of precision of rounding for the poverty rate, affects the list of counties identified as persistent poverty counties, as will be described below. Poverty rates are computed by the Census Bureau for the nation, states, and smaller geographic areas such as counties. The official definition of poverty in the United States is based on the money income of families and unrelated individuals. Income from each family member (if family members are present) is added together and compared against a dollar amount called a poverty threshold, which represents a level of economic hardship and varies according to the size and characteristics of the family (ranging from one person to nine persons or more). Families (or unrelated individuals) whose income is less than their respective poverty threshold are considered to be in poverty. Every person in a family has the same poverty status. Thus, it is possible to compute a poverty rate based on counts of persons (dividing the number of persons below poverty within a county by the county's total population, and multiplying by 100 to express as a percentage). Poverty rates are computed using data from household surveys. Currently, the only data sources that provide poverty estimates for all U.S. counties are the American Community Survey (ACS) and the Small Area Income and Poverty Estimates program (SAIPE). Before the mid-1990s, the only poverty data available at the county level came from the Decennial Census of Population and Housing, which was only collected once every 10 years, and used to be the only source of estimates that could determine whether a county had persistently high poverty rates (ARRA referred explicitly to decennial census poverty estimates for that purpose). However, after Census 2000, the decennial census no longer collects income information, and as a result cannot be used to compute poverty estimates. Therefore, to determine whether an area is persistently poor in a time span that ends after 2000, it must first be decided whether ACS or SAIPE poverty estimates will be used for the later part of that time span. The ACS and the SAIPE program serve different purposes. The ACS was developed to provide continuous measurement of a wide range of topics similar to that formerly provided by the decennial census long form, available down to the local community level. ACS data for all counties are available annually, but are based on responses over the previous five-year time span (e.g., 2013-2017). The SAIPE program was developed specifically for estimating poverty at the county level for school-age children and for the overall population, for use in funding allocations for the Improving America's Schools Act of 1994 ( P.L. 103-382 ). SAIPE data are also available annually, and reflect one calendar year, not five. However, unlike the ACS, SAIPE does not provide estimates for a wide array of topics. For further details about the data sources for county poverty estimates, see the Appendix . Because poverty estimates can be obtained from multiple data sources, the Census Bureau has provided guidance on the most suitable data source to use for various purposes. The Census Bureau recommends using SAIPE poverty estimates when estimates are needed at the county level, especially for counties with small populations, and when additional demographic and economic detail is not needed at that level. When additional detail is required, such as for county-level poverty estimates by race and Hispanic origin, detailed age groups (aside from the elementary and secondary school-age population), housing characteristics, or education level, the ACS is the data source recommended by the Census Bureau. For counties (and school districts) of small population size, SAIPE data have an advantage over ACS data in that the SAIPE model uses administrative data to help reduce the uncertainty of the estimates. However, ACS estimates are available for a wider array of geographic levels, such as ZIP code tabulation areas, census tracts (subcounty areas of roughly 1,200 to 8,000 people), cities and towns, and greater metropolitan areas. While the ACS has greater flexibility in the topics measured and the geographic areas provided, it can only provide estimates in five-year ranges for the smallest geographic areas. Five years of survey responses are needed to obtain a sample large enough to produce meaningful estimates for populations below 65,000 persons. In this sense the SAIPE data, because they are based on a single year, are more current than the data of the ACS. The distinction has to do with the reference period of the data—both data sources release data on an annual basis; the ACS estimates for small areas are based on the prior five years, not the prior year alone. Poverty status is not defined for persons in institutions, such as nursing homes or prisons, nor for persons residing in military barracks. These populations are excluded from totals when computing poverty statistics. Furthermore, the homeless population is not counted explicitly in poverty statistics. The ACS is a household survey, thus homeless individuals who are not in shelters are not counted. SAIPE estimates are partially based on Supplemental Nutrition Assistance Program (SNAP) administrative data and tax data, so the part of the homeless population that either filed tax returns or received SNAP benefits might be reflected in the estimates, but only implicitly. In the decennial census, ACS, and SAIPE estimates, poverty status also is not defined for persons living in college dormitories. However, students who live in off-campus housing are included. Because college students tend to have lower money income (which does not include school loans) than average, counties that have large populations of students living off-campus may exhibit higher poverty rates than one might expect given other economic measures for the area, such as the unemployment rate. Given the ways that the special populations above either are or are not reflected in poverty statistics, it may be worthwhile to consider whether counties that have large numbers of people in those populations would receive an equitable allocation of funds. Other economic measures may be of use, depending on the type of program for which funds are being targeted. The 10-20-30 provision was developed to identify counties with persistently high poverty rates. Therefore, using that funding approach by itself would not allow flexibility to target counties that have recently experienced economic hardship, such as counties that had a large manufacturing plant close within the past three years. Other interventions besides the 10-20-30 provision may be more appropriate for counties that have had a recent spike in the poverty rate. In ARRA, persistent poverty counties were defined as \"any county that has had 20 percent or more of its population living in poverty over the past 30 years, as measured by the 1980, 1990, and 2000 decennial censuses.\" Poverty rates published by the Census Bureau are typically reported to one decimal place. The numeral used in the ARRA language was the whole number 20. Thus, for any collection of poverty data, there are two reasonable approaches to compiling a list of persistent poverty counties: using poverty rates of at least 20.0% in all three years, or using poverty rates that round up to the whole number 20% or greater in all three years (i.e., poverty rates of 19.5% or more in all three years). The former approach is more restrictive and results in a shorter list of counties; the latter approach is more inclusive. Table 1 illustrates the number of counties identified as persistent poverty counties using the 1990 and 2000 decennial censuses, and various ACS and SAIPE datasets for the last data point, under both rounding schemes. The rounding method and data source selection can each have large impacts on the number of counties listed. Approximately 30 more counties appear in SAIPE-based lists compared to ACS-based lists using the same rounding method. Compared to using 20.0% as the cutoff (rounded to one decimal place), rounding up to 20% from 19.5% adds approximately 50 to 60 counties to the list. Taking both the data source and the rounding method together, the list of persistent poverty counties could vary by roughly 70 to 100 counties in a given year depending on the method used. The list of persistent poverty counties below ( Table 2 ) is based on data from the 1990 Census, Census 2000, and the 2017 SAIPE estimates, and included counties with poverty rates of 19.5% or greater (that is, counties with poverty rates that were at least 20% with rounding applied to the whole number). These same counties are mapped in Figure 1 . Decennial Census of Population and Housing, \"Long Form\" Poverty estimates are computed using data from household surveys, which are based on a sample of households. In order to obtain meaningful estimates for any geographic area, the sample has to include enough responses from that area so that selecting a different sample of households from that area would not likely result in a dramatically different estimate. If estimates for smaller geographic areas are desired, a larger sample size is needed. A national-level survey, for instance, could produce reliable estimates for the United States without obtaining any responses from many counties, particularly counties with small populations. In order to produce estimates for all 3,143 county areas in the nation, however, not only are responses needed from every county, but those responses have to be plentiful enough from each county so that the estimates are meaningful (i.e., their margins of error are not unhelpfully wide). Before the mid-1990s, the only data source with a sample size large enough to provide meaningful estimates at the county level (and for other small geographic areas) was the decennial census. The other household surveys available prior to that time did not have a sample size large enough to produce meaningful estimates for small areas such as counties. Income questions were asked on the census long form, which was sent to one-sixth of all U.S. households; the rest received the census short form, which did not ask about income. While technically still a sample, one-sixth of all households was a large enough sample to provide poverty estimates for every county in the nation, and even for smaller areas such as small towns. The long form was discontinued after Census 2000, and therefore poverty data are no longer available from the decennial census. Beginning in the mid-1990s, however, two additional data sources were developed to ensure that poverty estimates for small areas such as counties would still be available: the American Community Survey (ACS), and the Small Area Income and Poverty Estimates program (SAIPE). American Community Survey (ACS) The ACS replaced the decennial census long form. It was developed to accommodate the needs of local government officials and other stakeholders who needed detailed information on small communities on a more frequent basis than once every 10 years. To that end, the ACS questionnaire was designed to reflect the same topics asked in the census long form. In order to produce meaningful estimates for small communities, however, the ACS needs to collect a number of responses comparable to what was collected in the decennial census. In order to collect that many responses while providing information more currently than once every 10 years, the ACS collects information from respondents continuously, in every month, as opposed to at one time of the year, and responses over time are pooled to provide estimates at varying geographic levels. To obtain estimates for geographic areas of 65,000 or more persons, one year's worth of responses are pooled—these are the ACS one-year estimates. For the smallest geographic levels, which include the complete set of U.S. counties, five years of monthly responses are needed: these are the ACS five-year estimates. Even though data collection is ongoing, the publication of the data takes place only once every year, both for the one-year estimates and the estimates that represent the previous five-year span. Small Area Income and Poverty Estimates (SAIPE) The SAIPE program was developed in the 1990s in order to provide state and local government officials with poverty estimates for local areas in between the decennial census years. In the Improving America's Schools Act of 1994 (IASA, P.L. 103-382 ), which amended the Elementary and Secondary Education Act of 1965 (ESEA), Congress recognized that providing funding for children in disadvantaged communities created a need for poverty data for those communities that were more current than the once-a-decade census. In the IASA, Congress provided for the development and evaluation of the SAIPE program for its use in Title I-A funding allocations. SAIPE estimates are model-based, meaning they use a mathematical procedure to compute estimates using both survey data (ACS one-year data) and administrative data (from tax returns and numbers of participants in the Supplemental Nutrition Assistance Program, or SNAP). The modeling procedure produces estimates with less variability than estimates computed from survey data alone, especially for counties with small populations. Guidance from the U.S. Census Bureau, \"Which Data Source to Use\" The CPS ASEC provides the most timely and accurate national data on income and is the source of official national poverty estimates, hence it is the preferred source for national analysis. Because of its large sample size, the ACS is preferred for subnational data on income and poverty by detailed demographic characteristics. The Census Bureau recommends using the ACS for 1-year estimates of income and poverty at the state level. Users looking for consistent, state-level trends before 2006 should use CPS ASEC 2-year averages. For substate areas, like counties, users should consider their specific needs when picking the appropriate data source. The SAIPE program produces overall poverty and household income 1-year estimates with standard errors usually smaller than direct survey estimates. Users looking to compare estimates of the number and percentage of people in poverty for counties or school districts or the median household income for counties should use SAIPE, especially if the population is less than 65,000. Users who need other characteristics such as poverty among Hispanics or median earnings, should use the ACS, where and when available. The SIPP is the only Census Bureau source of longitudinal poverty data. It provides national estimates and since the 2004 Panel, provides reliable state-level estimates for select states. As SIPP collects monthly income over 3 or 4 year panels, it is also a source of poverty estimates for time periods more or less than one year, including monthly poverty rates. Table A-1 below reproduces the Census Bureau's recommendations, summarized for various geographic levels:", "summary": "Antipoverty interventions that provide resources to local communities, based on the characteristics of those communities, have been of interest to Congress. One such policy, dubbed the \"10-20-30 provision,\" was implemented in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5). Title I, Section 105 of ARRA required the Secretary of Agriculture to allocate at least 10% of funds from three rural development program accounts to persistent poverty counties; that is, to counties that have had poverty rates of 20% or more for the past 30 years, as measured by the 1980, 1990, and 2000 decennial censuses. One notable characteristic of this provision is that it did not increase spending for the rural development programs addressed in ARRA, but rather targeted existing funds differently. Research has suggested that areas for which the poverty rate (the percentage of the population that is below poverty) reaches 20% experience systemic problems that are more acute than in lower-poverty areas. Therefore, policy interventions at the community level (such as applying the 10-20-30 provision to other programs besides those cited in ARRA), and not only at the individual or family level, could continue to be of interest to Congress. Poverty rates are computed using data from household surveys. The list of counties identified to be persistently poor may differ by roughly 70 to 100 counties in a particular year, depending on the surveys selected to compile the list and the rounding method used for the poverty rate estimates. Before the mid-1990s, the decennial census was the only source of county poverty estimates. However, currently, the only data sources that provide poverty estimates for all U.S. counties are the American Community Survey (ACS) and the Small Area Income and Poverty Estimates program (SAIPE). Therefore, to determine whether an area is \"persistently\" poor in a time span that ends after the year 2000, it must first be decided whether ACS or SAIPE poverty estimates will be used for the later part of that time span. When determining the rounding method and data source to be used to compile a list of persistent poverty counties, the following may be relevant to consider: Characteristics of interest: SAIPE is suited for poverty or median income alone; ACS for other topics in addition to poverty and income. Geographic areas of interest: SAIPE is recommended for counties and school districts only; ACS produces estimates for other small geographic areas as well. Reference period of estimate: SAIPE for one year; ACS for a five-year span. Rounding method for poverty rates: rounding to 20.0% (one decimal place) yields a shorter list than rounding to 20% (whole number). Poverty status is not defined for all persons: foster children (unrelated individuals under age 15), institutionalized persons, and residents of college dormitories are excluded; the homeless are not targeted by household surveys; and areas with large numbers of students living off-campus may have high poverty rates.", "document_type": "crs"}
{"report": "Economics is largely the study of making the most efficient use of scarce resources. According to mainstream economic theory, trade occurs because it is mutually enriching and can leave both trade partners better off . Through trade, a country can enjoy a higher standard of living by producing those things it does efficiently and trading for things that it produces less efficiently, driven by comparative advantage (see below). This enables a country to produce more from its resources and enjoy a higher level of consumption than would be possible without trade. A major benefit of trade is the ability to import goods and services and boost consumer welfare. The United States imports for several reasons: some goods cannot be produced domestically in sufficient quantities to satisfy demand or would be costly to produce relative to other economic activities; other products and services are imported because they can be produced less expensively or more efficiently by foreign firms. Because of global value chains, many U.S. imports contain U.S.-made components (e.g., semiconductors in a computer) or U.S.-grown raw materials (e.g., cotton used to make t-shirts). Through trade, consumers can access a greater variety of goods at lower cost. Trade improves consumer purchasing power, particularly for lower-income households that spend a greater share of income on imported goods like clothing. These factors also help control the rate of inflation. Through trade, producers can access lower-cost inputs used in production and exports, which can improve global competitiveness. Overseas markets for exports provide opportunities for domestic firms to exploit economies of scale—expanding production to reduce average costs and take advantage of increasing returns to scale. In the long term, trade leads to greater competition and can pressure firms to innovate and invest in research and development (R&D), supporting increased productivity and economic growth. Economist David Ricardo developed the idea of comparative advantage in the early 19 th century, and the theory's insights remain relevant to explaining how countries trade today. Ricardo argued that specialization and trade are mutually beneficial even if a country is more efficient than its trading partners at producing all goods: a country has absolute advantage if it produces a given good at a lower cost than another country. But Ricardo argued that because resources, particularly labor, are (assumed to be) immobile between countries, a comparison of a good's absolute cost of production in each country is less relevant for determining whether specialization and trade should occur. Instead, what matters is the opportunity cost —how much output of good Y must be forgone to produce one more unit of good X. If the opportunity costs of producing the two goods differ in each country, then each has a comparative advantage in one of the goods. Ricardo predicted that a country can realize gains from trade by specializing in goods that it can produce relatively well (and in which it has a comparative advantage) and then trading those for goods that it produces relatively less well (and in which it has a comparative disadvantage). Subsequent economic theories have expanded on and qualified the theory of comparative advantage. Economists continue to examine to what extent comparative advantage explains the increasingly complex trade patterns in the 21 st century with the rise of global value chains—where different stages of production of a single good take place in several countries—and with the rise of services and digital trade, and cross-border flows of data and technology. Differences in comparative advantage between countries may arise and evolve because of differences in the relative abundance of factors of production—so-called factor endowments —such as labor, physical capital (plants and equipment), human capital (skills and knowledge, including entrepreneurial talent), as well as technology. Economic theory predicts that a country will have comparative advantage in activities that make intensive use of the country's relatively abundant factors of production. For example, compared to other countries, the United States has relative abundance of high-skilled labor and relative scarcity of low-skilled labor. Thus, U.S. comparative advantage is expected in the production of goods that use high-skilled labor intensively, such as aircraft rather than apparel. In addition, differences in productive technology among countries can affect relative efficiency and may be a basis for comparative advantage. The information and communications technology (ICT) revolution and new platforms for digital trade have broken down some barriers to technology and knowledge-flows across countries. Governments can potentially influence comparative advantage through certain policies that either indirectly nurture comparative advantage (often by compensating for market failures, but not targeted at a specific industry or activity) or directly nurture advantages in particular industries (often called industrial policy). For example, indirect influence can include policies that aim to eliminate corruption, enforce property rights, liberalize trade and foreign investment barriers, build transport and communication infrastructure, and support mass education. More direct influence can include policies (such as subsidies or tariffs) that promote and protect certain industries considered to have significant strategic and economic potential but that require initial government support to help a country reach its economic targets. There has been a broad debate on the impact and effectiveness of such targeted policies. Some economists contend that protectionist policies that arise through direct policy interventions can potentially distort a country's trade and investment flows, reduce economic efficiency, or undermine the development of competitive industries that do not receive support. A sizable portion of global trade occurs via countries exporting and importing goods within the same industry to each other—called intra-industry trade. This type of trade is particularly characteristic of the large flows of products between advanced economies, which have similar resource endowments and levels of development. These trade patterns suggest that there is another basis for trade, other than comparative advantage: the use of economies of scale or increasing returns to scale . Economies of scale exist when a production process is more efficient (i.e., has lower unit costs) the larger the scale at which it takes place. While the United States and Germany, for example, could be equally proficient at producing a wide array of goods such as autos and pharmaceuticals, neither has the productive capacity to produce the full range of goods optimally. Therefore, a pattern of specialization tends to occur with countries producing and trading some sub-set or \"niche\" of these goods. From a broad perspective of the U.S. economy as a whole, trade is one of a number of forces that drive changes in employment, wages, the distribution of income, and ultimately the standard of living. There is a broad consensus that trade overall has a net positive effect on a country's economic well-being. Trade benefits can include the more efficient use of resources, greater competition, economies of scale, and consumption gains through lower prices and more choices for consumers. Increases in trade can boost GDP because of the increased competition, efficiency gains, and consumer welfare increases. According to the World Bank, liberalizing trade and investment globally has reduced the number of people in extreme poverty by half over the past 25 years. However, the benefits from trade are not necessarily distributed evenly within an economy. Trade can disrupt some sectors, and the costs, such as job losses and stagnant wages, may be concentrated in certain regions and import-sensitive industries. The economic impact of trade on jobs and wages is widely debated because there are numerous factors that impact jobs, including changes to technology. While economic analyses indicate that economy-wide gains from trade generally exceed the costs, the difficult policy issue is how to reap these gains while dealing equitably with those hurt by the process. Economists argue that policies that facilitate the adjustment and compensate for the losses of those harmed by market forces, including trade, are economically less costly than protective policies that insulate workers and industries from trade and greater competition. In addition, from a political standpoint, experts also view adjustment assistance for those who are potentially displaced as an important factor for maintaining political support for free trade. Policymakers continue to debate the effectiveness of existing policies that help communities affected by trade; in the United States, many experts conclude they have been inadequate. Trade \"creates\" and \"destroys\" jobs in the economy—often called \"job churn\"—just as other market forces, such as technological change, do. Trade can have different effects on workers in different occupations, which some economists call \"occupational exposure\" to trade. Such disruptions can also occur through domestic trade when firms relocate from one state to another for various economic reasons. As a result, trade liberalization can have a different effect not only between sectors of the economy, but also within the same industry. Economy-wide, trade causes jobs to shift into industries in which a country has comparative advantage and away from industries with comparative disadvantage. In the process, the composition of employment may change, but there may not be a net loss of jobs. Estimates suggest that job loss attributed to trade is a small share of jobs lost economy-wide each year—one study finds that between 2001 and 2016 more than 150,000 U.S. net jobs were lost annually due to expanded trade in manufactured goods, which accounted for 1% of workers laid off in a typical year. While some jobs might be displaced, some workers are likely to be reemployed elsewhere. On the other hand, some estimates find that the short-run costs to workers attempting to switch occupations or industries to obtain new jobs due to trade liberalization may be \"substantial,\" including reduced wages. Studies suggest that increased import competition from China in particular negatively affected U.S. local labor markets and manufacturing jobs. Most economists argue, however, that equating net imports—or importing more than exporting, known as a trade deficit—with a specific amount of unemployment in the economy is questionable given the underlying drivers of the trade deficit (see \" What is the trade deficit? \"). Historically, during periods of economic growth, U.S. global trade has also expanded. The U.S. trade deficit and unemployment rate have generally moved in tandem (see Figure 1 )—GDP growth reduces the number of unemployed while increasing aggregate demand, including for imports as well as attracting increased capital inflows, which often leads to an increased trade deficit. International trade can positively and negatively affect the wages of workers. Several studies have examined this relationship. There is no overall consensus on the impact of trade and trade agreements on wages of U.S. workers (which have been relatively stagnant for decades) and income inequality in the United States (which has also deepened). Many studies have found that other factors, such as technological change, have had a significantly larger effect on relative wages. In economic theory, trade tends to increase the return to the abundant factors of production—capital and high-skilled workers in the United States—and to decrease the return to less-abundant factors—low-skilled labor in the United States. Therefore, other factors held constant, a large increase in imports, particularly from economies with vast supplies of low-skilled labor such as China, could negatively affect wages of low-skilled U.S. workers in import-sensitive industries (even though they too benefit from lower-priced imports from China). U.S. low-skilled workers have increasingly faced competition from lower-cost producers, largely in developing countries. The growth of global value chains has led some U.S. multinational corporations (MNCs) to shift low-value, labor-intensive production overseas. On the other hand, MNCs may keep or expand production in the United States or retain the high-end services aspects of their businesses; such jobs often require high levels of education and skills. In addition, U.S. workers in export-oriented industries earn, on average, more than workers in non-exporting industries. The U.S. International Trade Commission (ITC) estimated, on average, a 16% earnings premium in export-intensive manufacturing industries and 15.5% premium in services. In general, economic globalization broadly refers to the increasing integration of national economies around the world, particularly through trade and financial flows. Economic globalization involves trade in goods and services, capital flows and trade in assets (e.g., currency, stocks), the transfer of technology and ideas, and international flows of labor or migration. There have been several periods of economic globalization; some experts also contend there have been periods of deglobalization—the slowdown or reverse of globalization. Scholars have dated the start of the most recent period of economic globalization to sometime in decades following World War II. From 1960 to 2017, global trade as a percentage of global GDP increased from 25% to 57%. In the post-World War II period, global trade grew consistently faster than GDP (though this trend has not held in recent years). The stock of global foreign direct investment (FDI) grew from 6% of global GDP in 1980 to 39% in 2017. The growing integration of the world economy has been facilitated by myriad technical advances in transport and communication, which have significantly reduced natural geographic barriers that separate economies. In addition, both domestic and multilateral policies have steadily lowered man-made barriers to international exchange since World War II (such as tariffs, quotas, subsidies, immigration regulations, and capital controls). While most economists argue that globalization has lifted living standards worldwide, an ongoing debate remains regarding the extent to which greater economic integration has been inclusive, benefited some groups more than others, and contributed to inequality within countries. A global value chain (GVC) is the interrelated organizations, resources, and processes that create and deliver a product to the final consumer. GVCs, organized mostly by multinational corporations (MNCs), mean that products once produced in one country may now be produced by assembling parts and components produced in several countries, often traded across borders multiple times. More than half of global manufacturing imports are intermediate goods traveling within supply chains, while over 75% of global services imports are intermediate services. The latest data from the Organization for Economic Cooperation and Development (OECD) suggests that, on average, more than a quarter of the value of national exports included foreign content in the form of imported inputs. For the United States, the foreign value-added share in U.S. exports increased in most industries from 1995 to 2011 (most recent data available) (see Figure 2 ). GVCs have been an important driver of globalization and are considered the \"backbone of the global economy.\" The international fragmentation of production has raised the level of trade associated with a particular final product, as well as trade with advanced economies/emerging markets and developing countries. The growth of GVCs has helped facilitate lower trade barriers and technological advances, making international transport faster and accelerating the flow of information across borders. These linkages have blurred the distinction between exports and imports as strictly domestic or foreign activities. This, in turn, has made it increasingly difficult to understand who benefits from global trade and complicated the interpretation of bilateral trade balances. Trade in intermediates means that imports have become essential inputs into the production of exports; as a result, policies that affect a nation's imports ultimately affect its exports and vice versa. Analysts point to several fundamental shifts in GVCs as they continue to evolve that are likely to shape the latest wave of globalization and future policy challenges. Trade and investment flows are complements, and foreign direct investment (FDI) is considered to be a major driver of trade. FDI is a type of cross-border capital flow, which takes place when a resident of one country (including a company) obtains a lasting interest in—and a degree of influence over—the management of, a business enterprise in another country. FDI has supported the development of global value chains by multinational corporations (MNCs), which source production globally. As a result, the majority of trade takes place within MNCs that send components to and from locations at home and abroad to transform into final products. FDI has thus supported the significant expansion of inter- and intra-firm trade, which represents trade between parent companies and their foreign affiliates, and trade between affiliates of foreign firms and the foreign parent company (see \" Link Between International Investment and Trade \"). A predominant reason U.S. firms make investments abroad is to sell goods and services to foreign markets. Many firms want to maintain operations close to their customers to gauge preferences and tastes that may differ from U.S. consumers (e.g., SUVs preferred in the United States versus small cars in Japan). According to the latest data on activities of U.S. multinationals, in 2016, 11% of the sales of U.S. foreign affiliates went to U.S. parent companies, while 59% of sales went to the local market of the host country and 30% went to other foreign countries (see Figure 3 ). However, some firms may also establish operations abroad to replace exports or production, or to gain access to raw materials or less expensive labor abroad. Foreign firms may invest in the United States to access the U.S. consumer market, high-skilled labor, and other resources. Greater global integration through trade and investment flows, combined with specialization in certain stages of production, can disrupt markets. This disruption may create concerns about \"offshoring\" or \"outsourcing,\" the shift of manufacturing and business functions to countries with lower labor costs. For example, some U.S. multinational corporations (MNCs) focus on high-end activities associated with innovating products, such as research and development (R&D), while outsourcing production of components and final product assembly to suppliers and locations abroad. Although most economists maintain that globalization and trade liberalization are unlikely to affect the overall U.S. employment rate, greater volatility of U.S. worker incomes and employment in some sectors are possible effects. For example, the shifting of manufacturing assembly abroad may reduce the number of U.S. manufacturing jobs in some industries but boost the number of service-related jobs in others. Another issue is the impact of globalization on wealth distribution; for example, through dampening wages for U.S. lower-skilled workers facing greater foreign competition compared to higher-skilled workers, or through higher returns to capital over labor. In one study, the OECD concluded that \"in advanced economies, at least 10% of the decline of the labour share [in total national income] is accounted for by increasing globalisation—and in particular by the pressures from the delocalisation of some parts of the production chain as well as from import competition from firms producing in countries with low labour cost.\" A range of studies suggests that within the United States, globalization has contributed marginally to rising U.S. wage inequality at a factor ranging from 10% to 20%. Most-favored-nation treatment (MFN) is the fundamental principle of nondiscrimination in the multilateral trading system. MFN requires World Trade Organization (WTO) members to grant each other member country treatment at least as favorable as it grants to its most-favored trade partner—in other words, every member must treat all members equally. For example, if a country grants a trade benefit or concession to one country, such as lower tariffs, it would have to extend the same benefit to all other members. There are a number of permitted exceptions to MFN treatment, however. For example, countries can establish trade agreements with one another outside of the WTO, granting additional preferences to those in the agreement, provided certain conditions are met. In addition, more favorable treatment can be given to developing countries, often called \"special and differential treatment.\" National treatment is another fundamental principle of nondiscrimination in the multilateral trading system. It obligates each trading partner not to discriminate between domestic and foreign products. In other words, once an imported product enters a country, it must be treated no less favorably than a \"like\" product produced domestically. The same concept is also applied to foreign and domestic services and intellectual property rights. \"Most-favored nation\" (MFN) trade status, called permanent normal trade relations (PNTR) in U.S. law, denotes nondiscriminatory treatment of a trading partner. According to U.S. Customs and Border Protection, Cuba and North Korea do not have PNTR with the United States. Other countries at times have received temporary or conditional NTR status before graduating to PNTR. In practice, imports from countries with NTR status face lower duty rates than imports from countries without that status. Title IV of the Trade Act of 1974 prohibits the President from granting PNTR status to any country not receiving such treatment at the time of the law's enactment in January 1975 (in effect, the majority of then-communist countries). The so-called, Jackson-Vanik amendment further denies PNTR status for countries that deny citizens freedom of emigration (subject to presidential waiver). As a WTO member, the United States is required to extend MFN treatment \"immediately and unconditionally\" to all WTO members. Thus upon accession to the WTO for countries like China (joined in 2001), Vietnam (2007), and Russia (2012) for example, PNTR had to concurrently be established under U.S. law for the United States to receive the full benefits of their membership. The Harmonized Tariff Schedule of the United States (HTSUS) determines the tariffs (also known as duties) that are imposed on imported goods. The HTS uses a structure of tariff classification, based on standard commodity codes and descriptions developed by the World Customs Organization (WCO), the so-called Harmonized System (HS). The HS groups 1,200 product headings into 96 chapters. Each heading is divided into product subheadings at the four-digit and six-digit levels, for a total of 5,000 separate groups of goods at the 6-digit level, with harmonized digit and category descriptions. In other words, the higher the digits the more detailed the product category. For example, the 2-digit chapter 08 stands for \"edible fruits and nuts.\" Within that chapter, \"citrus fruits\" are identified by the 4-digit HS code 0805; and within that subheading, \"oranges\" are identified by 6-digit HS code 0805.10. HS codes are standard worldwide up to the 6-digit level. The HTSUS further subdivides each product subheading into 8-digit and 10-digit tariff lines that are unique to the United States. The U.S. International Trade Commission publishes the HTS and keeps it up to date. U.S. Customs and Border Protection is responsible for interpreting and enforcing the tariff code. Rules of origin (ROO) determine the \"nationality\" of imported products. ROO are important for several reasons, including determining admissibility of imports, assessing duty rates, and establishing eligibility for preferential trade programs and free trade agreements (FTAs). Determining a product's origin can be relatively straightforward if the product's raw materials and parts are manufactured and assembled in a single country. However, in today's global economy, determining origin can be complex because goods such as autos, computers, and clothing are assembled with parts sourced from many countries. The United States negotiates different ROO within its FTAs to ensure that only eligible trading partners receive the agreement's tariff benefits. But some rules may also be crafted to limit the impact of liberalized trade on import-sensitive industries. For example, the \"yarn-forward\" rule requires that all yarn and fabric used in most apparel must come from FTA partners themselves, in addition to the assembly process. Some in Congress with retailers in their districts argue that the yarn-forward rule is relatively strict compared to the rules negotiated by other countries; others with textile interests maintain that the rule is crucial for the survival of the U.S. industry. Global trade is an important engine of the global economy—trade as a share of global GDP has risen from 25% in 1960 to about 57% in 2017. Greater openness to trade and trade reforms worldwide have been linked to higher growth in productivity and real incomes, as well as reduced poverty worldwide. For decades since World War II, annual real global trade growth outpaced GDP growth, growing on average 1.5 times faster (see Figure 4 ). This trend has not held in recent years as the global economy recovered from the financial crisis in 2008; 2016 marked the slowest pace of trade growth since 2009. Weakened trade growth in previous years had been attributed to several factors, including weak import demand, exchange rate fluctuations, and falling commodity prices. The slowdown in investment and China's rebalancing toward a consumption-driven economy were seen as major structural factors, while others considered growing trade protectionism to be an important factor. Trade growth has since rebounded, increasing from 2% in 2016 to above 5% in 2017—the strongest rate since 2011, driven mainly by cyclical factors, in particular increased investment and consumption expenditure. With the improving global economic outlook, the IMF and the WTO had projected a rebound in trade growth for 2018 and 2019. Amid several downside risks, including rising trade tensions between major economies like the United States and China, and heightened trade policy uncertainty, the IMF and WTO now expect global trade growth to slow. Restrictive trade policy measures imposed by the United States and some of its major trading partners may be affecting trade flows and prices in targeted sectors. Analysts claim that some recent policy announcements also have harmed businesses' outlooks and investment plans, due to heightened concern over possible disruptions to supply chains and the risks of potential increases in the scope or intensity of trade restrictions. In 2017, the top-five largest trading economies (in terms of the value of goods and services trade) were the United States, China, Germany, Japan, and the United Kingdom (see Table 1 ). However, if the 28 EU members are treated as a single trading bloc, the EU would be the largest trading economy, with extra-EU trade of $6.0 trillion. China was the largest exporter, while the United States was the largest importer. In goods trade, the United States was the largest importer and second-largest exporter (behind China). In services trade, the United States was both the largest importer and exporter. The U.S. share of global goods exports fell from 15% in 1960 to 9% in 2017, largely due to the rapid increase of global trade, especially among developing countries and emerging markets. The U.S. export share of global services is 14%. In 2017, U.S. exports and imports of goods and services combined were equivalent to 27% of GDP. Although the United States is a major global trader, the size of trade relative to the size of the U.S. economy is smaller compared to other major trading economies. Various organizations have developed indexes to assess the \"openness\" or \"competitiveness\" of the U.S. economy relative to other economies. The United States ranked first out of 140 economies in the World Economic Forum's (WEF's) latest \"Global Competitiveness Index.\" In 2017, the United States exported $2.4 trillion in goods and services and imported $2.9 trillion. Over the past decade, U.S. exports have grown more than 40%, while U.S. imports have grown more than 20%. Since 1960, trade relative to GDP has risen markedly (see Figure 5 ). U.S. exports as a percent of GDP expanded from 5% in 1960 to 12% of GDP in 2017, while U.S. imports expanded from 4% to 15% of GDP. In 2017, China was the top U.S. trading partner, with $712 billion in total goods and services trade, followed by Canada, Mexico, Japan, and Germany (see Figure 6 ). China was the largest source of U.S. imports, while Canada was the largest destination for U.S. exports. However, considering the 28 EU member states as a single trading partner, the EU is both the largest export destination and source of imports for the United States. The majority of U.S. global trade, about 65%, is with countries with which the United States does not have a free trade agreement. (See \" How many free trade agreements (FTAs) does the United States have? \") Today, multinational corporations (MNCs) produce worldwide, using inputs designed and produced by many countries; as a result, the \"value added\" occurs through multistage production processes and services. The growth of global value chains, intra-firm trade, and trade in intermediate goods has made it increasingly difficult to interpret the implications of trade data for the U.S. economy. Traditional trade statistics, which attribute the value of an import or export to a single country, do not fully reflect the source of resources used in producing goods and services, or who ultimately benefits from that trade. To illustrate, products of the U.S. firm Apple, such as iPhones, are developed in the United States but assembled in China using imported components from several countries. When the United States imports iPhones, it attributes the full value of those imports as occurring in China, even though the value added in China is quite small. Apple is the largest beneficiary in terms of the profits generated by the sale of its products; most of the product design, software development, product management, marketing, and other high-wage functions and employment occur in the United States. In this case and many others, U.S. imports from China in fact comprise imports from many countries, but the full value of the final imported product is attributed to China. This results in what might be considered an inflated bilateral trade deficit between the two countries. \"Trade in value-added\" (or TiVA, a joint initiative by the OECD and WTO) is a broad measure that attempts to identify the origin of the value added of goods and services according to the country where that value was added. According to TiVA estimates, the U.S trade deficit with China would have been reduced by one-third in 2011 if bilateral trade flows had been measured this way. The \"trade deficit\" generally is used to refer to three things: the balance of trade in goods, balance of trade in goods and services, and balance on the current account. The trade balance is the difference between a country's exports and imports of goods and services; this applies to each bilateral trading relationship, as well as to the aggregate across all trading partners. A deficit occurs when a country imports more than it exports. A trade deficit is an indicator that a nation consumes more than it produces and does not save enough domestically to fund its investment needs (see below). The United States has run trade deficits annually for most of the post-WWII period. In 2017, the United States had a global trade deficit in goods and services of $552.3 billion. The deficit is driven by goods trade—the U.S. trade deficit in goods was $807.5 billion (down from a peak of $837.3 billion in 2006) (see Figure 7 ). A large and growing level of U.S. trade is in services, where the United States usually runs annual surpluses, exporting more than it imports. In 2017, the U.S. services trade surplus was $255.2 billion. The broadest measure of a country's trade balance is the current account, which includes trade in goods, services, net income (payments and receipts on foreign investments), and some official, or government, flows. The United States has experienced an annual current account deficit since the mid-1970s. In 2017, the United States had a $449.1 billion current account deficit, down from its historic peak of $806 billion in 2006. The shrinking deficit was largely due to the economic slowdown following the global financial crisis in 2008, which significantly reduced U.S. (and global) demand for imports, and the decline of commodity prices and U.S. oil imports in the wake of the shale oil and gas boom. Put simply, the U.S. global trade deficit reflects that the United States consumes more than it produces and imports more than it exports. Most economists argue that the trade deficit stems largely from U.S. macroeconomic policies, primarily an imbalance between domestic savings and total investment in the economy. The most significant cause of the trade deficit is the low rate of U.S. domestic savings by households, firms, and the government relative to its investment needs. To make up for that shortfall, Americans must borrow from countries abroad (such as China) with excess savings. Such borrowing enables Americans to enjoy a higher rate of economic growth than would be obtained if the United States had to rely solely on domestic savings. This boosts U.S. consumption and demand for imports, producing a trade deficit. A number of other factors can affect the size of the U.S. trade deficit in the short run, such as differences in economic growth between countries. The role of the dollar is also an important factor in sustaining the U.S. trade deficit. As a de facto global reserve currency, the U.S. dollar facilitates the trade deficit by broadening the availability of dollars and dollar-denominated assets. Foreign investors seek dollar-denominated assets as safe-haven assets, especially during times of economic stress. As long as foreigners (both governments and private entities) are willing to loan the United States the funds to finance the lack of savings in the U.S. economy, such as through buying U.S. Treasury securities, the trade deficit can continue. The U.S. trade deficit relative to the size of the economy provides a metric to examine trends over time and compare with other countries. The U.S. current account deficit relative to GDP reached a historic high of 5.8% of GDP in 2006, but it has declined since to 2.3% of GDP in 2017—consistent with the average trend in the mid-1980s (see Figure 8 ). Table 2 shows current account balances as a percentage of GDP for selected economies, as well as ratios of gross domestic savings to total investment. A ratio below 100 indicates savings are not enough to meet investment needs—such countries, including the United States, are net borrowers and typically run current account deficits. Among selected countries, as of 2017, the United Kingdom, Canada, and the United States had the largest current account deficits as a percent of GDP, while the countries with the largest current account surpluses included the Netherlands, Germany, and South Korea. Some policymakers view the size of U.S. bilateral trade deficits with certain countries—such as China, the largest single source of the U.S. overall trade deficit—as an indicator that the trade relationship is \"unfair\" and the result of market-distorting trade policies, such as trade barriers, subsidies, and discriminatory regulations. Such policies may potentially affect the volume of bilateral trade in specific products and with particular countries, but they have less effect on the size of the global U.S. trade deficit, which is largely a reflection of the low level of U.S. savings. The evidence suggests that high tariffs and trade barriers are not correlated with smaller overall trade deficits. If protectionist trade measures were reduced in certain countries, U.S. exporters might sell more products. However, if U.S. overall consumption and savings behavior did not change, increased demand for imports would leave the overall U.S. trade deficit relatively unchanged, all things held equal. Similarly, the reduction or imposition of protectionist trade measures in one country might simply result in trade diversion, the shifting of trade from one country to another, and do little to change the overall trade deficit. Bilateral trade balances provide a useful snapshot of the U.S. trade relationship with a particular country, but they are influenced by various factors beyond trade barriers including: the overall level of economic development and relative rates of economic growth, abundance of raw materials, and rates of technological change. Moreover, bilateral trade deficits with certain trading partners often marks complex supply chain relationships, where one country (such as China) is the final point of assembly for products (such as iPhones) or a supplier of inputs and components, where the added value that occurred in one country is relatively small compared to the value that occurred in other parts of the supply chain. Without sufficient inflows of capital, a trade deficit causes other parts of the economy to adjust, in particular a country's exchange rate (e.g., the value of the dollar relative to the yen or euro). Net imports cause a surplus of U.S. dollars to flow abroad. If converted to other national currencies, the dollar's excess supply tends to lower its value relative to other currencies. In practice, this should make imports more expensive for Americans and exports cheaper for foreign buyers, gradually leading to a smaller trade deficit. However, the dollar holds a special status in global financial markets; countries use the dollar both as a medium of exchange and reserve currency. The U.S. economy is a safe haven for storing wealth and an attractive destination for investments, especially for countries with high savings rates, like China. When foreigners exchange their currency for U.S. dollars to buy U.S. Treasury securities, for example, the dollar appreciates, which makes U.S. exports more expensive. In addition, foreign governments (with large domestic savings) have intervened to keep the value of their currency from appreciating relative to the dollar by buying dollars and investing them back in the United States. Some analysts contend that past intervention in currency markets by China and other countries seeking to hold down the value of their currencies in order to boost exports has hampered the realignment of global trade balances. As discussed, trade deficits reflect the savings/investment shortfall, which means the United States is borrowing from abroad. One major concern is the debt accumulation from sustained trade deficits. Ultimately, whether borrowing to finance imports is worthwhile depends on whether those funds are used for greater investments in productive capital with high returns that raise future standards of living, or whether they are used for current consumption. If U.S. consumers, business, and the government are borrowing to finance new technology, equipment, or other productivity-enhancing products, borrowing results in a deficit and can be paid off because such investments are expected to result in a higher long-run economic growth. However, borrowing to finance consumer purchases (e.g., clothes, household electronics) pushes repayment to future generations, without investments to raise the ability to finance those repayments. Some economists also warn that under certain circumstances, a rising U.S. trade deficit could spark a large and sudden fall in the value of the dollar, risking financial turmoil in the United States and abroad. For example, foreigners could lose faith in U.S. ability to honor its debt or no longer see the United States as an optimal place to invest in. Many economists argue that attempting to reduce the U.S. trade deficit without addressing the underlying macroeconomic imbalances could negatively affect the economy, including reducing economic growth, and do little to affect the trade balance in the long run. The current account deficit could be reduced by boosting domestic savings (i.e., reducing domestic consumption and government budget deficits) or reducing foreign investment (i.e., reducing borrowing from abroad). Realigning exchange rates through the depreciation of the dollar, or ensuring other countries are not intervening in the market to artificially devalue their currencies, is another means. Trade policies are generally not viewed as the most effective policy tools for affecting the overall trade balance. In 2017, the United States exported $1.3 trillion in manufactured goods and imported $2.0 trillion, creating a merchandise trade deficit of $698 billion (see Figure 9 ). U.S. manufactures exports accounted for 56% of total U.S. exports of goods and services and 70% of total U.S. imports of goods and services. Manufactures share of U.S. exports fell 4 percentage points over the past decade, as the services export share expanded; manufactures share of U.S. imports expanded by 4 percentage points. Top U.S. exports and imports by subsector included transportation equipment, computer and electronic products, chemicals, and machinery. The growth of global value chains has transformed U.S. manufacturing in certain industries, with the expansion of production that requires advanced technology but relatively less labor. As a result, for many products, labor-intensive activities like assembly have moved abroad, while activities such as design, product development, and distribution increasingly drive the manufacturing process. Reports of some factory closings and layoffs, such as at the Carrier plant in Indiana and GM factories in the Midwest, and labels indicating merchandise made in China, Mexico, or other countries, have reinforced the perception that the U.S. manufacturing sector is shrinking. Many consider relative changes in output and employment, among other metrics, to examine the health of the sector (see Figure 10 ). Such data paint a mixed picture. The United States has seen a long-term decline in employment in manufacturing. At the same time, manufacturing output has increased, reflecting increased productivity, with fewer workers needed for a given level of production. While the sector's importance relative to the economy and relative to services has declined, manufacturing remains a significant component of the U.S. economy. To summarize: From 1980 to 2017, U.S. manufacturing real output increased more than 80%; since 2009, it increased by about 20%. At the same time, value-added of manufacturing as a share of GDP decreased, accounting for 11% of GDP in 2017 compared to 21% in 1980, just as value-added of services increased from 55% to 70% of GDP. U.S. employment in manufacturing, which peaked at 19.4 million in 1979, fell by more than one-third to 12.4 million in 2017. Despite this long-term trend, the level of employment has risen each year since 2010. In 2017, employment in manufacturing accounted for 8.5% of total nonfarm employment, compared to 20.7% in 1980; the services share expanded by 20 percentage points over the same time period. Business services employment within manufacturing has also increased in recent years. Falling employment and the declining importance of physical production in the manufacturing process are not unique to the United States and have occurred in most advanced economies. Although some changes in the sector may be a result of factors specific to the United States, others may be due to changes related to technology, consumer preferences, or broader macroeconomic factors. The role of trade has been widely debated. Some estimate that increased imports from China contributed to the steep decline in U.S. manufacturing employment in the 2000s; others estimate that job loss in manufacturing was substantially offset by job gains in services due to the expansion of U.S. exports globally. Others contend that trade has played a less dominant role compared to automation and other factors. Taking a broader view, a fundamental restructuring of the U.S. manufacturing sector was underway for more than two decades prior to China joining the World Trade Organization (WTO). Measuring manufacturing activity can be challenging, and existing data may not fully capture how manufacturing has changed, the sources of employment, and how value is created (see above). Manufacturing remains a significant component of the U.S. economy by many measures: U.S. manufacturers account for nearly 70% of all private-sector research and development (R&D), and nearly 60% of U.S. exports. While the U.S. share of global manufacturing value-added has declined, the United States remains a top global manufacturer. In 2017, the United States exported $138 billion in agricultural goods and imported $121 billion, creating a trade surplus of $17 billion (see Figure 9 ). U.S. agricultural exports accounted for 6% of total U.S. exports of goods and services and 4% of total U.S. imports. Agriculture's share of U.S. exports has fallen slightly below the average of 8% over the past decade, while the import share remains on trend. Although small relative to trade in manufactured goods, trade remains a significant component of the U.S. agricultural sector, with exports accounting for about 20% of total farm production by value. Foreign markets are a major outlet for many agricultural goods; for example, wheat and cotton rely on other countries for absorbing over half of U.S. output. According to the U.S. Department of Agriculture, imports of certain products, such as coffee, cocoa and spices, fish, and juices, accounted for a large share of U.S. food consumption in recent years. \"Services\" refers to an expanding range of economic activities, such as audiovisual, construction, computer and related services, energy, express delivery, e-commerce, financial, professional, retail and wholesaling, transportation, tourism, and telecommunications. Services not only function as end-use products, but they also facilitate the rest of the economy. For example, transportation services move intermediate products along global value chains and final products to consumers; telecommunications services open e-commerce channels; and financial services provide credits for the manufacture of goods. Intermediate services embedded within a supply chain can include R&D, design and engineering, and business services. As with trade in goods, foreign barriers may prevent U.S. trade in services from expanding to its full potential, but services barriers are often different from those faced by goods suppliers. Many barriers to goods trade—tariffs and quotas, for example—are at the border. By contrast, restrictions on services trade occur largely within the importing country as \"behind the border\" barriers. Some restrictions are in the form of discriminatory regulations that may favor domestic service providers over foreign service providers. Because services transactions more often require direct contact between the consumer and provider, many of the trade barriers faced by companies relate to the ability to establish a commercial presence in the consumers' country in the form of direct investment or to the temporary movement of providers and consumers across borders. In 2017, the United States exported $798 billion in services and imported $542 billion, creating a trade surplus of $255 billion (see Figure 9 ). U.S. services exports accounted for 34% of total U.S. exports of goods and services, while services imports accounted for 19% of total U.S. imports. Although smaller relative to trade in goods, services trade plays an important role in the U.S. economy, accounting for about 79% of U.S. GDP and 82% of U.S. private sector full-time employment. Unlike trade in goods, each year the United States exports more services than it imports, thus surpluses in services trade have partially offset U.S. trade deficits in goods trade. Conventional trade data may underestimate trade in services because the data are not measured on a value-added basis and do not attribute any portion of the traded value of manufactured and agricultural products to services inputs. Intermediate services embedded within a value chain as inputs include not only transportation and distribution to help move goods along, but also R&D, design and engineering, and business services. The independent value of these services (as opposed to the value of the final product) can be captured in trade in value-added statistics. As manufacturing and agriculture grow more complex and technologically advanced, their consumption of value-added services also grows. Digital trade includes not only end-products such as movies, software, or video games; it also serves as a means to facilitate economic activity, potentially enhancing productivity and competitiveness. Examples of digital trade include online shopping; transmission of information to manage business operations; online health or educational services; communication channels, such as email; and financial services used in e-commerce or electronic trading. Information and communication technologies (ICT) services are outpacing the growth of trade in ICT goods. As with traditional trade barriers, digital trade constraints can be classified as tariff or nontariff barriers. Nontariff barriers establish restrictions that may affect what a firm offers in a market or how it operates. Because digital trade is intangible and does not require direct interaction between individuals, trade barriers are often in the form of localization requirements that restrict the flow of commercial data. Digitally delivered exports and services in particular rely on cross-border data flows. But trade in manufactured goods and agricultural products also increasingly depends on data flows. For example, farmers may use real-time satellite data to optimize the productivity of crops and soil. Data transfer regulations that restrict cross-border data flows or require use of locally based servers or infrastructure, so-called data localization barriers, may limit the type of services that a firm can sell or how it can communicate and share data with subsidiaries or headquarters abroad. Such restrictions may also prevent the ability of providers that offer or rely on cloud-computing from entering a market. The United States was a key architect of the global economic order that evolved after World War II, which established multilateral institutions to advance a rules-based, open trading system. Historically, U.S. trade policy has focused on supporting economic growth and jobs through trade, liberalizing markets by reducing trade and investment barriers through trade agreements and negotiations, enforcing trade commitments and related laws, and providing time-limited relief to companies and workers facing unfair or injurious import competition. Another key objective of U.S. trade policy has been to advance U.S. strategic goals by supporting economic development and integration of developing countries, strengthening regional alliances, and extending U.S. influence abroad. U.S. administrations outline key trade policy objectives in an annual trade policy agenda established by the U.S. Trade Representative (USTR). Based on the latest agenda, objectives of the current Administration include pursuing trade policies that support U.S. national security and preserve national sovereignty; negotiating \"new and better trade deals\"; strictly enforcing U.S. trade laws and protecting U.S. rights under trade agreements; and reforming the multilateral trading system. Key trade functions of the U.S. government include formulating and coordinating trade policy; negotiating trade and investment agreements; enforcing U.S. trade laws and U.S. rights under trade agreements; and administering trade and investment programs, such as export financing, import inspection and safety, and trade adjustment assistance. Congress plays a major role in U.S. trade policy through its legislative and oversight authority, working together with the executive branch to negotiate and implement trade agreements. The USTR and multiple U.S. agencies are generally involved in implementing trade policy, making interagency coordination an important part of the process. By statute, the USTR is the President's principal advisor on trade policy, chief U.S. trade negotiator, and head of the interagency trade policy coordinating process. Certain other agencies have primary roles in specific regards, such as the Commerce Department, which holds operational responsibility over key trade programs, and the Department of Agriculture, which aims to promote and regulate U.S. agricultural trade. Agency roles have evolved over time, both through legislative and administrative actions. The U.S. Constitution designates Congress as the primary authority over trade policy. Article 1, Section 8, of the U.S. Constitution expressly grants Congress the power \"To lay and collect Taxes, Duties, Imposts and Excises\" and \"To regulate Commerce with foreign Nations, and among the several States,\" as well as the general provision \"To make all Laws which shall be necessary and proper\" to carry out these specific authorities. Congress exercises this power in many ways, such as through the enactment of tariff schedules and trade remedy laws, and the approval and implementation of reciprocal trade agreements. U.S. trade policy is based on statutory authorities, as passed by Congress. These include laws authorizing trade programs and governing trade policy generally in areas such as tariffs, nontariff barriers, trade remedies, and import and export policies, as well as trade policy functions of the federal government. Congress also sets trade negotiating objectives in law, through trade promotion authority (TPA, see below); requires formal notification and consultation from the executive branch and opportunity to provide advice on trade negotiations; and conducts oversight hearings on trade programs and agreements to assess their conformity to U.S. law and congressional intent. Congress has delegated certain powers to the President to negotiate reciprocal trade agreements and take certain executive action regarding trade policy. In 1934, Congress enacted the Reciprocal Trade Agreements Act, which authorized the President to enter into reciprocal agreements to reduce tariffs within congressionally preapproved levels, and to implement the new tariffs by proclamation without additional legislation. Congress renewed this authority periodically until the 1960s. Subsequently, Congress enacted the Trade Act of 1974, combining tariff proclamation authority with a broader mandate for the executive branch to open markets and to negotiate nondiscriminatory international trade norms for nontariff barriers as well (see below). Because of the revenue implications inherent in most trade agreements and trade policy changes, the House Ways and Means Committee and Senate Finance Committee have primary responsibility for trade matters. Each committee has a subcommittee dedicated exclusively to trade issues. Other committees may also have a role should trade agreements, policies, and other trade issues include matters under their jurisdiction. For example, the House Foreign Affairs and Senate Banking Committees have jurisdiction over export controls. The foreign affairs committees in both chambers also examine trade relationships as part of their broader oversight of foreign relations. Congressional Advisory Groups on Negotiations (CAGs) consult and provide advice to USTR before and during trade agreement negotiations. Separate CAGs are established for both houses: a House Advisory Group on Negotiations (HAG), chaired by the chair of the Ways and Means Committee, and a Senate Advisory Group on Negotiations (SAG), chaired by the chair of the Finance Committee. CAGs can receive briefings and can access trade negotiating documents. Individual Members affect trade policy first as voting representatives who collectively determine the statutes governing trade matters. They may also exercise influence as sitting members on relevant committees, in testimony before committees whether or not they are members, in written letters to USTR weighing in on trade policy decisions, and in exercising informal influence over other Members through the exercise of the political authority and power invested in them by the electorate. Trade promotion authority (TPA), also at times called \"fast track,\" refers to the process for approving and implementing most trade agreements. If a trade agreement negotiated by the President requires changes in U.S. law, Congress is responsible for implementing the agreement through legislation. TPA ensures expedited consideration of implementing legislation through a guaranteed, up-or-down vote with no amendments, provided the implementing bill and the negotiating process meet certain requirements (see Figure 11 ). To be eligible for expedited consideration, a trade agreement must be negotiated, concluded, and notified to Congress, during the time period in which TPA is in effect, and it must reflect the negotiating objectives specified in the TPA statute. In addition, negotiations must be conducted in conjunction with various notifications and consultations with Congress and other stakeholders. More broadly, TPA defines how Congress is to exercise its constitutional authority over trade policy, while affording the President added negotiating credibility, by giving U.S. trading partners an assurance that the final agreement will be considered by Congress in a timely manner and without amendments. Congress first enacted TPA under the Trade Act of 1974 and has renewed this authority four times. Some aspects of TPA have evolved during these renewals. The most recent legislation was signed into law on June 29, 2015 ( P.L. 114-26 ), and applies to concluded trade agreements, notified to Congress before July 1, 2021. The executive branch executes trade policy in various ways. Under the Constitution, the President has the responsibility for conducting the nation's foreign relations and negotiating treaties with other nations. The executive branch negotiates, implements, and monitors U.S. trade agreements. The executive branch is also responsible for customs enforcement, collection of duties, implementation of trade remedy and other trade laws, budget proposals for trade programs and agencies, and administering export and import policies, among other functions. The President directs overall trade policy in the executive branch and performs specific trade functions granted by statute, such as adjusting tariff rates through delegated authority. The chief adviser on trade policy to the President is the USTR, a Cabinet-level appointment. The USTR has primary responsibility for developing, coordinating, and implementing trade policy, as well as negotiating multilateral, regional, and bilateral trade agreements and enforcing U.S. trade laws. The USTR reports annually on the President's trade policy agenda—due to Congress by March 1 st each year—and on foreign trade barriers. Congress created the USTR in 1962 (originally the Office of the Special Representative for Trade Negotiations) to heighten the profile of trade and provide better balance between competing domestic and international interests in the formulation and implementation of U.S. trade policy and negotiations, previously managed by the State Department. Many trade functions have been delegated by Congress and the President to various departments and agencies within the executive branch. These agencies administer the government's trade functions, coordinating U.S. positions through an interagency process and with input from public and private sector advisory groups. Other key agencies with trade policymaking and enforcement responsibilities include the Departments of Commerce, Agriculture, State and the Treasury. The Departments of Homeland Security and Labor are also involved in trade enforcement. The USTR has primary responsibility for trade negotiations and trade policy decisions. However, such decisions often involve areas of responsibility that fall under other Cabinet-level departments, requiring a multidepartment interagency process. To implement this process, Congress initially established the Trade Policy Committee, chaired by USTR and consisting of the Secretaries of the Treasury, Commerce, State, Agriculture, Labor, and other department heads as USTR deems appropriate. Two sub-Cabinet groups were subsequently established—the Trade Policy Review Group (TPRG, sub-Cabinet or deputies level) and the Trade Policy Staff Committee (TPSC, staff level), composed of some 20 agencies. The executive branch also solicits advice from a three-tier trade advisory committee system mandated by Congress that consists of private sector and nonfederal government representatives (see below). The President is responsible for influencing the direction of trade legislation, signing trade legislation into law, and making other specific decisions on U.S. trade policies and programs when the President deems that the national interest or the political environment requires direct participation. This can take place in many areas of trade policy, such as requesting TPA, initiating critical trade remedy cases and/or deciding whether to impose recommended import restrictions in certain investigations. In addition, the President can influence trade relations through meetings or communications with foreign heads of state, and regarding other trade policy areas subject to or requiring high political visibility. The role of the private sector and other stakeholders in the formulation of U.S. trade policy is embodied in a three-tiered committee system that Congress established in Section 135 of the Trade Act of 1974, as amended. The advisory system consists of 28 committees (with about 700 citizen advisors), which is administered by USTR's Office of Intergovernmental Affairs & Public Engagement (IAPE) in cooperation with other agencies. The three-tier system consists of (1) the President's Advisory Committee for Trade Policy and Negotiations (ACTPN); (2) five general policy advisory committees dealing with environment, labor, agriculture, Africa, and intergovernmental issues; and (3) 20 technical advisory committees in the areas of industry and agriculture. Committees were set up to ensure that U.S. public and private sector views are considered in trade policies and programs. The advisory system provides information and advice on negotiating objectives and bargaining positions for trade agreements, among other issues. The private sector, nongovernment organizations (NGOs), labor groups, and other stakeholders shape U.S. trade policy in a number of other ways. For example, representatives from industry and NGOs may be invited to testify before congressional committees. Private sector representatives are also invited or requested to testify before the U.S. International Trade Commission, USTR, the Department of Commerce, or other government bodies to provide assessments of the potential impact of pending trade negotiations on their industries and sectors. In addition, the executive branch regularly seeks comments from interested stakeholders through Federal Register notices regarding a variety of trade initiatives, including new trade negotiations, eligibility for preferential trading programs, and trade investigations. Private sector, NGOs and labor groups also lobby Congress and the executive branch to promote their interests in U.S. trade policies and trade agreements. Trade is an integral part of the U.S. economy. Virtually all kinds of agricultural and manufactured goods are tradeable—they can be exported and imported. In addition, a growing number of services—once considered non-tradeable because of their intangibility—can be bought and sold across borders because of technological advancements. As a result, implementing trade policy can affect a broad spectrum of interests in the United States. For some industries, firms, and workers, congressional decisions to support a particular trade agreement or rulings on antidumping and other cases could affect both employment and economic growth; those decisions also influence product choices and prices facing U.S. consumers. Such groups are also concerned with obtaining greater market access in various countries. In addition, the increasing focus of trade agreements on nontariff issues, such as intellectual property rights and labor and environmental protections, has broadened the scope of stakeholder interest. Consequently, groups representing businesses, farmers, workers, consumers, and various public interest groups strive to ensure that their views on trade policy decisions are represented. Legal challenges may be brought in federal court by importers, exporters, domestic manufacturers, and other injured parties to appeal governmental actions and decisions concerning trade. Cases may involve, for example, customs classification decisions, agency determinations in antidumping (AD) and countervailing duty (CVD) proceedings, Section 201 safeguards, Section 232 national security investigations (see \" Tariffs and Trade Remedies \"), or the constitutionality of state economic sanctions. The federal government may also initiate legal proceedings against individuals and firms to enforce customs laws or statutory restrictions on particular imports and exports. Some trade statutes may preclude judicial review. For example, most preliminary determinations in AD and CVD proceedings and governmental actions involving the implementation of World Trade Organization (WTO) and free trade agreements may not be challenged in federal court. While most federal cases involving trade laws are heard in the U.S. Court of International Trade (see below), cases may also be filed in other federal courts depending on the nature of the cause of action or proceeding involved. Court decisions may significantly affect U.S. trade policy when they (1) examine whether an agency has properly interpreted its statutory mandate or has acted outside the scope of its statutory authority, (2) decide how much deference courts should accord actions of the executive branch undertaken pursuant to statutory grants of authority, or (3) rule on whether a trade statute violates the U.S. Constitution. The U.S. Court of International Trade (USCIT) is an Article III federal court located in New York City with exclusive jurisdiction over a number of trade-related matters, including customs decisions, trade remedy determinations, import embargoes imposed for reasons other than health and safety, and the recovery of customs duties and penalties. Formerly known as the Customs Court, the USCIT was renamed in the Customs Court Act of 1980, which also significantly enlarged its jurisdiction. The court consists of nine judges, no more than five of whom may be from the same political party. Judges are appointed by the President with the advice and consent of the Senate. USCIT decisions may be appealed by right to the U.S. Court of Appeals for the Federal Circuit and possibly to the U.S. Supreme Court. Statutory provisions related to the USCIT can be found at 28 U.S.C. Sections 251-258 (establishment), 28 U.S.C. Sections 1581-1585 (jurisdiction), and 28 U.S.C. Sections 2631-2647 (procedure). The United States negotiates trade liberalizing agreements for economic and commercial reasons, as well as foreign policy and national security reasons. Objectives include: encourage trade partners to reduce or eliminate tariffs and nontariff barriers and increase market access for U.S. exporters; gain competitive advantages for U.S. firms over foreign competitors in third country markets; increase access to lower-cost imports that offer domestic and industrial consumers a wider choice of products; encourage trading partners, especially developing countries, to liberalize their trade and investment regimes, and thereby improve the efficiency of their economies and their integration with the global economy; and strengthen alliances, forge new strategic relationships, and deepen U.S. presence and influence in a geographic region. The United States participates in three major categories of trade agreements: Multilateral agreements are negotiated in the World Trade Organization (WTO), and include all 164 WTO members. F ree trade agreements (FTAs) are negotiated outside the WTO and can be further divided by the number of participants. Bilateral FTAs involve two countries, while regional FTAs , such as the North American Free Trade Agreement (NAFTA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11) involve three or more countries, typically in a geographic region. Plurilateral agreements involve more than two countries but not all WTO members and typically focus on a specific sector, such as the Information Technology Agreement (ITA) or ongoing Trade in Services Agreement (TiSA) negotiations. The United States currently has 14 FTAs in force, covering 20 countries (see Figure 12 ). Globally, nearly 300 trade agreements have been notified to the WTO and are in force as of late 2018. The majority of U.S. FTA partners are small, developing countries. While U.S. FTAs cover some major U.S. trading partners, like Canada and Mexico, only 35% of total U.S. trade is with FTA partners. More than 99% of U.S. trade is with WTO member countries and thus subject to WTO commitments and provisions—65% of U.S. trade is with WTO members with which the U.S. does not have an FTA. U.S. trade policy under the Trump Administration has brought a shift in approach to trade negotiations. In January 2017, President Trump withdrew the United States from the Trans-Pacific Partnership (TPP)—a regional FTA negotiated during the Obama Administration with 11 other countries in the Asia-Pacific—and committed to negotiate future trade deals bilaterally. President Trump has also renegotiated two U.S. FTAs and proposed a number of new negotiations. The United States signed the proposed renegotiated NAFTA agreement, the U.S.-Mexico-Canada Agreement (USMCA) on November 30, 2018. The renegotiation was conducted under TPA procedures, which potentially allows for expedited consideration by Congress of the implementing legislation required to bring the new agreement into force. The United States also recently negotiated amendments to the U.S.-South Korea FTA (KORUS). These more limited amendments were not negotiated under TPA procedures. The delayed reduction of the U.S. light truck tariff on imports from South Korea, the most significant of the negotiated amendments, took effect through presidential proclamation at the beginning of 2019. In October 2018, under TPA procedures, USTR notified Congress of its intent to negotiate new trade agreements with Japan, the European Union and United Kingdom—the negotiations could begin in early 2019. FTAs negotiated by the United States are often more comprehensive—both in terms of tariff coverage and the overall scope of enforceable commitments—than those negotiated among other countries. In general, U.S. FTA rules and obligations also go beyond those established in the WTO. Nearly all U.S. FTAs include not only the elimination of the majority of tariffs on trade in goods, but also reduction of barriers to services trade, rules on foreign investment, intellectual property rights protection, commitments on opening government procurement markets, and enforceable provisions on labor standards and the environment. The United States has sought to establish new trading rules within recent trade negotiations and agreements on emerging issues like digital trade and state-owned enterprises. A Trade and Investment Framework Agreement (TIFA) is an agreement between the United States and another country or group of countries to consult on issues of mutual economic interest in order to promote trade and investment. The USTR is the U.S. lead representative in TIFA talks. The United States has more than 50 TIFAs, most of which are with developing countries. The United States and its TIFA partners can agree to establish a joint ministerial-level council as the overall mechanism for consultations, as well as issue-oriented working groups. A TIFA is a nonbinding agreement and does not involve changes in U.S. law; therefore, TIFAs do not require congressional approval. In some cases however, TIFAs have led to FTA or bilateral investment treaty (BIT) negotiations. The General Agreement on Tariffs and Trade (GATT) was created in 1947 as a part of the post-WWII effort to build a stable, open international economic framework. The GATT was not a formal international organization, but it became the principal set of rules governing international trade for 47 years, until the creation of the World Trade Organization (WTO) in 1995. With some slight modifications, the GATT continues to be applied today. The core principles and articles of the GATT committed the original 23 signatories, including the United States, to lower tariffs on a range of goods and to apply tariffs in a nondiscriminatory manner—the so-called most-favored nation, or MFN principle. Although the GATT mechanism for the enforcement of these rules or principles was viewed as largely ineffective, the agreement nonetheless brought about a substantial reduction of tariffs and other trade barriers. The WTO is a 164-member international organization that administers the trade rules and agreements negotiated by its members, including the United States, to eliminate barriers and create nondiscriminatory rules to govern trade. It also serves as a forum for trade liberalization negotiations and dispute settlement resolution. The United States was a major force behind the establishment of the WTO on January 1, 1995, as well as the new rules and trade agreements that resulted from multilateral trade negotiations (Uruguay Round, 1986-1994). The WTO succeeded and encompassed the General Agreement on Tariffs and Trade (GATT), established in 1947. The WTO administers a number of agreements and separate commitments including under the GATT (for trade in goods), the General Agreement on Trade in Services (GATS, for trade in services), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and others. It also oversees multilateral and plurilateral negotiations among subsets of WTO members, such as the Government Procurement Agreement (GPA) and Information Technology Agreement (ITA). The last major negotiation—the Doha Development Agenda—began in 2001; however, it was beset with persistent differences among the United States, the EU, and developing countries on major issues, such as agriculture, industrial tariffs and nontariff barriers, services, and trade remedies. It has been in abeyance since the WTO Nairobi Ministerial did not reaffirm its continuation in 2015. At the latest WTO Ministerial Conference in December 2017, no major deliverables were announced. Several members committed to make progress on ongoing talks, such as in fisheries subsidies and e-commerce, and pursue new plurilateral negotiations, while other areas remain stalled. The WTO's effectiveness as a negotiating body for broad-based trade liberalization has come under intensified scrutiny since the collapse of the Doha Round, as has its role in resolving trade disputes. Several members believe the WTO needs to adopt reforms to continue its role as the foundation of the global trading system, and have begun to explore aspects of reform and future negotiations. Proposed reforms also aim to improve the working of the WTO's dispute settlement system. The Trump Administration is currently withholding approval for appointments to the WTO Appellate Body (AB)—the 7-member body that reviews appeals in a dispute case—amid concerns over \"judicial overreach\" and certain procedures. The dispute settlement system could cease to function by late 2019, if new appointments are not approved. A WTO member may initiate dispute settlement proceedings under the WTO to challenge another member's trade practices that allegedly violate a WTO agreement. The dispute settlement process begins with consultations between the two parties. If the consultations fail to resolve the dispute, the member may request a dispute panel to adjudicate the dispute; a panel decision may be appealed to the WTO Appellate Body (AB). If the defending member is found to have violated a WTO obligation, the member will be expected to remove the challenged measure within a compliance period; otherwise, the prevailing member may request authorization from the WTO to take temporary retaliatory action, such as increased tariffs, or seek compensation. Since 1995, 575 dispute settlement complaints have been filed in the WTO, as of January 2019. The United States has been an active user of the WTO dispute settlement system and, among WTO members, has been the complainant or respondent in the most WTO cases (see Figure 13 ). Several pending WTO disputes are of significance to the United States, including challenges by a number of countries to recent tariff measures imposed by the Trump Administration. WTO decisions do not have direct effect in U.S. law. Thus, if a panel finds a U.S. statute, policy or practice to be inconsistent with U.S. WTO obligations, the findings may not be implemented except through U.S. legislative action. Where an administrative action is successfully challenged, USTR decides what, if any, compliance action will be taken. If there is sufficient statutory authority to amend or modify a regulation or practice or to issue a new determination in a challenged administrative proceeding, USTR may direct the agency involved to make the change (provided certain statutory procedures for such actions are followed). In some cases, the United States may pay compensation to the complainant country instead changing U.S. rules or regulations. As a matter of policy, the United States generally seeks to comply with WTO decisions against it. This helps ensure that other WTO members also comply with the rulings in dispute cases initiated by the United States. U.S. FTAs establish procedures to resolve disputes in both state-to-state and investor-state fora. Similar to WTO dispute settlement, U.S. FTAs aim first to resolve disputes through consultations; otherwise, a panel can be requested to adjudicate the dispute. Once a decision is issued by the panel, the offending party is expected to come into compliance or can face possible suspension of trade benefits or other remedies. If a dispute is common to both FTA and WTO rules, a country may choose the forum in which to bring the dispute. State-state dispute settlement has not been frequently used under U.S. FTAs—three cases have been decided under NAFTA—and disputes are usually resolved via consultations. Most other U.S. disputes with FTA partners have been adjudicated under WTO rules. Other than NAFTA, the United States has brought one FTA labor dispute (with Guatemala under CAFTA-DR) to formal dispute settlement. Most U.S. FTAs also contain a separate dispute system for investment-related provisions, called investor-state dispute settlement. (See \" What is investor-state dispute settlement (ISDS)? \"). NAFTA contains (and the proposed USMCA maintains) a unique binational panel system to review an administrative agency application of a country's trade remedy laws. Trade preference programs provide temporary, nonreciprocal, duty-free access to the U.S. market for selected exports from eligible developing countries. Since 1974, Congress has created six programs: (1) Generalized System of Preferences (GSP); (2) Andean Trade Preference Act (APTA; expired July 2013); (3) Caribbean Basin Economic Recovery Act (CBERA; permanent); (4) United States-Caribbean Basin Trade Partnership Act (CBTPA); (5) African Growth and Opportunity Act (AGOA); and (6) Haitian Hemispheric Opportunity Through Partnership Encouragement Act (HOPE). In 2016, Congress also passed country-specific trade preferences for Nepal. GSP is the largest U.S. trade preference program, covering 120 countries and territories. It provides duty-free treatment to about 3,500 products imported from designated beneficiary developing countries and 1,500 additional products from least-developed countries. In 2017, $21 billion imports entered the United States under the program, out of $220 billion total imports from GSP countries. Countries must meet such criteria specified by Congress to be eligible, including protections for intellectual property rights and worker rights. USTR is currently conducting eligibility reviews of several GSP beneficiary countries, including India, Indonesia, Kazakhstan, and Turkey. Trade capacity building (TCB) involves U.S. assistance, such as funding, training, and technical expertise, to support developing countries' integration and participation in international trade. According to USAID, in FY2016, the United States invested about $1.2 billion in 651 TCB activities across 134 countries, regions or trade groups. The U.S. government has viewed TCB as an important way to help developing countries \"negotiate and implement market opening and reform-oriented trade agreements and improve their capacity to benefit from increased trade.\" Examples include U.S. assistance to implement customs reforms required by the WTO Trade Facilitation Agreement, improve labor and environment protections, and meet export standards and phyto-sanitary rules. Currently no single agency is responsible for coordinating U.S. government TCB. USAID typically receives the most funding to implement TCB activities; the Millennium Challenge Corporation (MCC) also comprises a large share of funds related to infrastructure. Other agencies have TCB responsibilities, including the Departments of Agriculture, Labor, and State, and the Trade and Development Agency. The Constitution empowers Congress to set tariffs—a customs duty levied on imports and exports; this power has been partially delegated to the President. While historically tariffs were used as a primary means of collecting government revenue, today developed countries like the United States rely on other means for generating revenue. U.S. Customs and Border Protection (CBP) administers the collection of tariffs at U.S. ports of entry—in 2016, CBP collected $32 billion in tariffs, just 1% of total federal revenue. Over the past 80 years, the United States used its tariff policy to encourage global trade liberalization toward various ends, such as increasing global trade, supporting global peace and economic prosperity, and opening markets for U.S. exports. Toward these ends, the United States has reduced or eliminated many of its tariffs through bilateral and multilateral trade negotiations and agreements (see above). Beginning in 1934, Congress began periodically authorizing the President to negotiate reciprocal reductions in tariffs bilaterally. Following World War II, the United States encouraged tariff reduction globally by supporting a rules-based trading system under the GATT and the WTO. By 2012, global tariffs had fallen to less than 7% on average. As of 2016, the simple mean of U.S. tariffs applied across all products was 3.3% (see Figure 14 ), the lowest among the top five global economies by GDP. Roughly 70% of all products enter the United States duty free. The Trump Administration has been critical of low-tariff policies and has made greater use of its discretionary authority to increase tariffs on certain goods imported from key U.S. trading partners.  U.S. trade laws include trade remedies used by the United States to mitigate the adverse impact of various foreign trade practices on domestic industries and workers. The two most frequently used trade remedies aimed at unfair trade practices are antidumping (AD) and countervailing duty (CVD) laws, found in Title VII or the Trade Act of 1930 (19 U.S.C. 1671-1677n, as amended). These laws are administered primarily through the Department of Commerce's International Trade Administration (ITA), which determines the existence and amount of dumping or subsidies, and the U.S. International Trade Commission (ITC), which determines the injury or threat thereof to U.S. industries. Other trade remedy laws include Section 201 of the Trade Act of 1974, which focuses on import surges of fairly traded goods; Section 301 of the Trade Act of 1974, which focuses on violations of trade agreements or other foreign practices found to be unjustifiable and restrict U.S. commerce; and Section 337 of the Trade Expansion Act of 1962, which focuses on patent and copyright infringements, and counterfeit goods. All laws must comply with U.S. WTO obligations, including articles under the GATT, known as the Antidumping Agreement, Agreement on Subsidies and Countervailing Measures, and the Agreement on Safeguards. Supporters of trade remedies say that they are necessary to shield U.S. industries and workers from unfair competition. Others, including some importers and downstream consuming industries, are concerned that AD/CVD actions can serve as disguised protectionism and create inefficiencies in the world trading system by \"artificially\" raising prices on imported goods. Antidumping (AD) is the most frequently used U.S. trade remedy law. Dumping generally refers to an unfair trade practice in which an exporter sells goods in one export market at lower prices than comparable goods sold in the home market or in other export markets. Companies sometimes dump products to gain market share, deter competition, or get rid of industrial overcapacity. U.S. law provides for the assessment and collection of AD duties when an administrative determination is made by the ITA that foreign goods are being sold at \"less than fair value\" in the United States, and if the ITC determines that such imports cause material injury to a U.S. industry or the threat thereof. AD orders are not permanent and are subject to annual review if requested by an interested party, and a sunset review every five years. As of mid-December 2018, the United States had 354 AD orders in place; more than one-third were against China (see Figure 15 ). After AD laws, countervailing duty (CVD) is the most frequently used U.S. trade remedy law. The purpose of the CVD law is to offset injurious competitive advantage that foreign manufacturers or exporters might enjoy over U.S. producers as a result of receiving a subsidy from the government or another public entity. Countervailing duties are designed to offset the net amount of the foreign subsidy and are levied upon imports of the subsidized goods into the United States. Although AD and CVD laws are intended to remedy fundamentally different kinds of unfair trade, the procedures for both investigations are similar. As of mid-December 2018, the United States had 113 CVD orders in place, nearly half of which were against China (see Figure 15 ). Section 201 of the Trade Act of 1974 (19 U.S.C. §2251, as amended) authorizes the President to restrict temporarily imports that are found to cause or threaten serious injury to domestic industry. So-called \"safeguard\" actions are designed to provide temporary relief—for example, through additional tariffs or quotas—to facilitate \"positive adjustment\" of a domestic industry to import competition. Unlike AD and CVD cases, no allegation of \"unfair\" trade practices is required to trigger a safeguard investigation. The ITC conducts an investigation, generally initiated by petition filed by a trade association, company, or union representing a U.S. industry. If the ITC finds imports are a substantial cause of serious injury, it makes recommendations on temporary relief to the President, who takes the final action on whether or not to implement the recommendations. In 2017, two safeguard investigations were initiated under the Trump Administration. In January 2018, the President decided to impose a four-year safeguard measure on imports of solar cells and a three-year safeguard on large residential washing machines. The last safeguard investigation was in 2001 over steel products. From 1975 to 2001, the ITC conducted 73 investigations; the ITC determined in the negative in 32 cases and in the affirmative in 34 cases (6 cases ended in ties). The President imposed some type of safeguard measure in 19 cases during this time. Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862, as amended) is often called the \"national security clause,\" because it provides the President with the ability to impose restrictions on imports that the Secretary of Commerce determines are being imported in \"such quantities or under such circumstances as to threaten to impair the national security.\" If requested or upon self-initiation, the Commerce Department's Bureau of Industry and Security (BIS) consults with the Secretary of Defense and other agencies, and conducts the investigation. Section 232 specifies the factors that Commerce must consider regarding the impact of the U.S. imports on national security. Depending on the findings, the President has the discretion to impose tariffs, quotas, or other measures to offset the adverse effect, subject to few limits. Section 232 has been invoked infrequently, with about 28 investigations completed since 1963. In February 2018, Commerce completed two Section 232 investigations and determined that U.S. imports of steel and aluminum were a threat to national security. In March 2018, the President decided to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports. The Administration is currently conducting Section 232 investigations of uranium imports and imports of autos and auto parts. Section 301 of the Trade Act of 1974, as amended, is one of the principal statutory means by which the United States can enforce U.S. rights under trade agreements and respond to certain \"unfair\" barriers to U.S. exports, including inadequate protection of intellectual property rights (IPR). Specifically, Section 301 applies to foreign acts, policies, and practices that USTR determines either (1) violate, or are inconsistent with, a trade agreement; or (2) are unjustifiable and burden or restrict U.S. commerce. Section 301 cases can be initiated by petition filed by a company or self-initiated by USTR. USTR must seek a negotiated settlement with the trading partner concerned, through compensation or elimination of the specific trade barrier or practice. For cases involving trade agreements, such as the WTO, USTR is required to use the agreement's formal dispute settlement proceedings. If a resolution is not reached, USTR determines whether or not to retaliate, usually through the imposition of tariffs on selected products. A separate provision, commonly called \"Special 301,\" directs USTR to annually report to Congress on countries that deny adequate protection or market access for U.S. IPR. USTR issues a three-tier list (based on the level of U.S. concern) of countries considered to maintain inadequate IPR regimes. A designation of \"Priority Foreign Country\" indicates countries whose practices are considered to be the most serious or harmful; such countries can also be subject to Section 301 investigations. Since 1974, USTR has initiated 125 Section 301 cases, retaliating in 16 instances. Almost half of Section 301 cases took place during the 1980s. In 2017, USTR launched a new investigation of China's IPR technology policies that may harm U.S. economic interests. In March 2018, USTR found that certain Chinese policies and practices are \"unreasonable or discriminatory and burden or restrict U.S. commerce.\" The Trump Administration subsequently increased tariffs on $250 billion worth of U.S. imports from China and threatened an additional $267 billion in new tariff increases. To date, China has responded by increasing tariffs on $110 billion worth of U.S. products. Both sides have also pursued dispute cases at the WTO. In November 2018, USTR reported that \"China has not fundamentally altered its unfair, unreasonable, and market-distorting practices\" that spurred the Section 301 investigation. On the sidelines of the 2018 G-20 Leaders' Summit, according to a White House statement, President Trump and Chinese President Xi Jinping agreed to immediately begin negotiations on \"structural changes\" in regards to IP and technology issues related to the Section 301 case, along with agriculture and services, with the goal of achieving an agreement in 90 days. China reportedly agreed to make \"very substantial\" purchases of U.S. agricultural, energy, and industrial products. In turn, the United States agreed to suspend the Section 301 tariff increases (from 10% to 25%) that were planned to take effect on January 1, 2019, contingent on an agreement in 90 days. Section 337 of the Tariff Act of 1930, as amended, prohibits unfair acts or unfair methods of competition in importing goods or selling imports in the United States. In recent years, the statute has become increasingly used for IPR enforcement. Section 337 prohibits imports that infringe U.S. patents, copyrights, processes, trademarks, semiconductor products produced by infringing a protected mask work (such as integrated circuit designs), or protected design rights. The import or sale of an infringing product is illegal only if U.S. industry is producing an article covered by the relevant IPR or in the process of establishing such production. Unlike other trade remedies, no proof of injury due to the import is required. The ITC is responsible for Section 337 investigations. If a violation is found, the ITC may issue an exclusion order and/or cease-and-desist order, subject to presidential disapproval. As of 2018, there were 130 active section 337 investigations. Trade Adjustment Assistance (TAA) programs provide federal assistance to workers and firms that have been adversely affected by trade. TAA programs are authorized by the Trade Act of 1974, as amended, and were last reauthorized by the Trade Adjustment Assistance Reauthorization Act of 2015 (Title IV of P.L. 114-27 ). TAA for Workers (TAAW) is the largest program, with appropriations of $790 million in FY2019. TAAW provides assistance to trade-affected workers who have been separated from their jobs due to foreign competition, either through increased imports or because their jobs were relocated abroad. The program is administered at the federal level by the Department of Labor and supports various benefits and services, including funding for career services and training, and income support for workers, formally known as Trade Readjustment Allowance. Table 3 presents program data from FY2017, the most recent year available. Actual benefits are provided to individual workers through state workforce systems and state unemployment insurance systems. Smaller TAA programs are also authorized for firms and farmers affected by foreign competition. While trade liberalization may increase the overall economic welfare of the affected trade partners, it can cause adjustment problems for firms and workers facing import competition. Trade Adjustment Assistance (TAA) has long been justified on the grounds that it is among the least disruptive options for offsetting policy-driven trade liberalization. Justification for TAA rests on arguments for (1) economic efficiency, by facilitating the adjustment process and returning workers to work more quickly; (2) equity, by compensating those who lose out due to liberalized trade and spreading the costs to society as a whole; and (3) generating support for international trade, by defusing domestic opposition to trade agreements and other trade policy measures. TAA skeptics argue that assistance is costly and economically inefficient, reduces worker and firm incentives to relocate and adjust to increased competition, and may not be equitable given that many groups hurt by changing economic circumstances caused by factors other than trade policies are not afforded special economic assistance. Others argue that TAA programs are not extensive enough to be effective. Despite widespread disagreement, Congress has consistently reached compromise to maintain the program in some form over the past five decades. Several federal agencies promote U.S. exports and support U.S. investment. The Export-Import Bank (Ex-Im Bank), the Department of Agriculture, and the Overseas Private Investment Corporation (OPIC) administer various finance programs aimed at helping U.S. firms export and invest in certain developing countries, including through fee-based services. The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), enacted in October 2018, establishes a new successor agency for OPIC . Agency mandates vary in their emphasis on U.S. commercial interests and foreign policy objectives, but their activities can have implications in both areas. In some cases, U.S. trade financing intends to help U.S. firms obtain a \"level playing field\" against foreign firms that may be receiving subsidized financing from their governments. In addition, the Department of Commerce's International Trade Administration (ITA) promotes U.S. exports, particularly by small and medium-sized companies (SMEs), through various support services, such as export counseling. The Ex-Im Bank, the official U.S. export credit agency, provides direct loans, loan guarantees, and export credit insurance, backed by the U.S. government, to help finance U.S. exports to developing economies, in part to counter similar activities by foreign governments. It operates under a renewable general statutory charter (Export-Import Bank Act of 1945, as amended), which was extended by the Export-Import Bank Reform and Reauthorization Act of 2015 (Division E, P.L. 114-94 ) through September 30, 2019. Despite its reauthorization, Ex-Im Bank has not been fully operational as its board of directors lacks a quorum due to unfilled positions, which has constrained the board's approval of medium- and long-term export financing above $10 million. Presidential appointments to the board require Senate approval, and have been part of the broader debate over Ex-Im Bank and the role of government in financing exports. Congress has authorized the President to control the export of various items for national security, foreign policy, and economic reasons. Export controls have been a controversial policy issue due to the difficulty striking a balance between national security goals and maintaining export competitiveness. Through the Arms Export Control Act (AECA), the Export Controls Act of 2018 (ECA), the International Emergency Economic Powers Act (IEEPA), and other authorities, the United States restricts exports of defense items or munitions; dual-use goods and technology; certain nuclear materials and technology; and items that would assist in the proliferation of nuclear, chemical, and biological weapons or related missile technology. U.S. export controls are also used to restrict trade with certain countries on which the United States imposes economic sanctions. The Departments of Commerce, State, Energy, and the Treasury administer export control programs and various types of licenses required before certain exports can be undertaken. The ECA ( P.L. 115-232 , Subtitle B, Part I), which became law on August 13, 2018, provides broad legislative authority for the President to implement dual-use export controls. The law repealed the Export Administration Act of 1979, which had been the underlying statutory authority for such controls until it expired in 2001. Notably, the ECA authorizes the Department of Commerce to establish controls on the export and transfer of so-called \"emerging and foundational technologies\" that are deemed essential to U.S. national security, but, as of yet, are not defined as an existing commodity, software, or technology. Dual-used goods are commodities, software, or technologies that have both civilian and military applications. Examples include product categories like nuclear materials, microorganisms, electronics and computers, and lasers and sensors. Exports of dual-use goods and technologies are licensed by the Commerce Department's Bureau of Industry and Security (BIS). Licenses are issued depending on an item's technical characteristics, destination and end use, and other activities of the end user. Generally, the two main kinds of capital flows are foreign direct investment (FDI) and foreign portfolio investment (FPI). FDI involves the acquisition of real assets such as real estate, a manufacturing plant, or controlling interest in an ongoing enterprise by a person or entity from another country. Foreign portfolio investment involves the purchase of foreign equities or bonds, loans to foreign residents, or the opening of foreign bank accounts. FDI often involves a long-term commitment and can have the advantage of stimulating direct employment for the host country. By contrast, portfolio investments are extremely liquid and can be withdrawn often at the click of a computer mouse. In addition, official capital flows are generated by governments for various purposes, such as humanitarian assistance and other foreign aid. It depends. From 1990 to 2017, global trade in goods and services, as measured by exports, grew more than five times, from about $4 trillion a year to $23 trillion. During the same period, gross capital flows, as measured in the balance of payments accounts (direct, portfolio, and other official investments), expanded from around $1 trillion a year to about $4 trillion—but with a pre-crisis peak of more than $12 trillion in 2007, which showed significant growth since the 1990s. During this time period, there was also an explosion in growth in other types of capital flows, known as foreign exchange and over-the-counter derivatives markets. These markets facilitate trade in foreign exchange and other types of assets. While the capital flows associated with these markets do not directly relate to transactions in the balance of payments, they do affect the international exchange value of the dollar, which in turn affects prices of goods and services and the cost of securities. The latest survey of the world's leading central banks indicated that the total daily trading of foreign currencies was more than $5.1 trillion in 2016. Broadly, firms invest abroad to increase their profits. However, a range of factors can influence a firm's decision to invest. Multinational corporations (MNCs) generally invest abroad because they possess some special process or product knowledge or special managerial abilities, which give them an advantage over foreign firms. Major determinants of FDI include the presence of competitive advantages, resources such as low-cost labor in a host country, and greater commercial benefits through an intra-firm relationship as opposed to an arm's-length relationship between the investor and host country. MNCs are motivated by more than a single factor and likely invest abroad not only to gain access to low-cost resources, but to improve efficiency or market share. FDI has supported the development of global value chains by multinational corporations (MNCs), which source production globally. In addition, many firms find it advantageous to operate close to their customers in foreign countries, where tastes and preferences may differ from the home market. Foreign markets also enable MNCs to access various resources, such as a well-educated work force, which might contribute to a firm's R&D activities. Last, some FDI transactions involve mergers and acquisitions, which can help make a firm become more globally competitive. According to the United Nations Conference on Trade and Development (UNCTAD), the total stock of global outward FDI in 2017 was $31 trillion. The United States remains the largest source of FDI worldwide, followed by Hong Kong, Germany, the Netherlands, the United Kingdom, and Japan, all with individual outward investment positions about one-fourth or less than that of the United States. The United States is also the largest recipient of FDI, followed by Hong Kong, China, the United Kingdom, and Singapore. By region, developing Asia accounted for the largest share of global FDI inflows (33%), followed by Europe (26%), North America (21%), Latin America and the Caribbean (11%), and Africa (3%). The United States is the largest source and the largest recipient of FDI. FDI to and from the United States has increased rapidly over the past few decades. From 1985 to 2017, the stock of U.S. FDI abroad rose from $238 billion to $6.0 trillion, while the stock of FDI in the United States increased from $184 billion to $4.0 trillion (see Figure 16 ). The largest destinations for cumulative (or the stock of) U.S. FDI outflows through 2017 included the Netherlands, United Kingdom, Luxembourg, Ireland, Canada, Singapore, Australia, Germany, and Japan. The largest sources of cumulative FDI inflows included the United Kingdom, Japan, Canada, Luxembourg, the Netherlands, Germany, Switzerland, and France and Ireland. Nearly 60% of U.S. direct investment abroad is in Europe, while 68% of FDI in the United States comes from Europe. By sector, U.S. outward FDI is primarily concentrated in high-technology, finance, and services. The largest share of U.S. inward FDI is in manufacturing sector, primarily chemicals and transport industries. Generally, economists argue for unimpeded international flows of capital, such as FDI, because such flows complement domestic economic activity and positively affect both the domestic (home) and foreign (host) economies. For the home country, direct investment benefits the firms that invest abroad, because they are better able to exploit their competitive advantages and acquire additional skills and other advantages in foreign markets. Direct investment is also associated with a strengthened competitive position, a higher level of skills of the employees, and higher incomes of firms that invest abroad. Host countries benefit from inward FDI because the investment adds permanently to the capital stock and often to the skill set of the economy. Direct investment also brings technological advances, since firms that invest abroad generally possess advanced technology and production processes, boosts capital formation and contributes to a more competitive business environment and productivity growth. More broadly, FDI contributes to international trade and global economic integration, since most firms investing abroad are established MNCs that operate within global value chains. Both inward and outward FDI play a role in U.S. trade, jobs, and production. In 2016, the affiliates of foreign firms in the United States employed 7.1 million workers, exported $369.8 billion in goods, and imported $649.9 billion in goods. Foreign firm affiliates contributed $894.0 billion value-added to U.S. GDP, with larger annual growth in value-added on average compared to other private U.S. firms. Some stakeholders raise concerns that U.S. firms invest abroad to send manufacturing and jobs overseas and that U.S. FDI in operations and production facilities abroad supplants U.S. production and exports, thereby reducing employment and wages in the United States. There have been examples of U.S. firms closing a domestic plant and opening another plant abroad, but no official sources track such activities. As a result, most data on the activity of U.S. firms shifting plants or jobs abroad remain anecdotal. More broadly, most U.S. outward FDI is concentrated in high-income developed countries, where markets and consumer tastes are broadly similar to those in the United States, and most of this production is consumed abroad. Most economists argue there is no conclusive evidence that U.S. direct investment abroad leads to fewer jobs or lower incomes overall for Americans. Instead, they generally argue that the loss of U.S. manufacturing jobs in recent decades reflects a broad restructuring of the sector, responding primarily to improvements in productivity and other domestic economic forces. That said, jobs in particular companies and sectors can be adversely affected when a company makes decisions to produce similar products abroad. International investment agreements (IIAs) establish binding rules on investment protections. While World Trade Organization (WTO) agreements address some investment issues to a limited extent, there are no comprehensive multilateral rules on investment. IIAs have thus become the primary vehicle for promoting investment rules: there are over 2,600 IIAs in force globally. IIAs generally aim to reduce FDI restrictions and ensure nondiscriminatory treatment of investors and investments. The agreements also include provisions to safeguard a government's right to regulate in the public interest and generally provide for national security and prudential exceptions. U.S. IIAs entail reciprocal commitments; in exchange for specific protections offered to foreign investors in the United States, U.S. investors investing in partner countries expect to receive the same protections. The primary forms of U.S. IIAs are bilateral investment treaties (BITs), which must be ratified by the Senate with two-thirds approval, and investment chapters in free trade agreements (FTAs). USTR and the State Department negotiate U.S. IIAs. The United States has bilateral investment treaties (BITs) in force with 40 countries, most of which are with developing countries (see Figure 17 ). The latest BIT ratified by the U.S. Senate, with Rwanda, entered into force in 2012. The United States had been pursuing BIT negotiations with China and India, but both talks have stalled. The United States also has 14 FTAs in force covering 20 countries, most of which include chapters on investment. Investor-state dispute settlement (ISDS) enables private investors to bring claims against host country governments for alleged violations of investment agreements before an international arbitration panel. ISDS provisions are intended to establish a binding and impartial procedure for settling disputes, with proceedings conducted under the auspices of the World Bank-affiliated International Centre for Settlement for Investment Disputes (ICSID) or comparable rules. While a successful claim by an investor can result in monetary penalties, a country cannot be compelled to change its laws over a decision. The number of ISDS cases has expanded significantly with the growth of global FDI in recent decades (see Figure 18 ). U.S. investors account for about one-fifth of investment claims worldwide. Of 16 cases brought by foreign investors against the United States, the U.S. government has yet to lose a case. ISDS provisions are included in the majority of U.S. BITs and FTAs; nearly all ISDS cases brought against the United States were under the North American Free Trade Agreement (NAFTA). The use of ISDS, however, has become a subject of debate within recent U.S. trade negotiations. At the center of the debate is ensuring robust investor protections, while protecting the government's right to regulate in the public interest. The Trump Administration departed from past practice with major changes to ISDS under the NAFTA renegotiation. The proposed U.S.-Mexico-Canada Agreement (USMCA), signed in November 2018 and pending ratification by each country, would eliminate ISDS between the United States and Canada and places specific limits with respect to Mexico. ISDS was also a major point of contention in the Transatlantic Trade and Investment Partnership (T-TIP) talks during the Obama Administration. The EU has been pushing to include an investment court system in place of ISDS in its recent trade agreements and negotiations. Foreign investment, particularly by firms owned or controlled by a foreign government, can raise concerns about national security. CFIUS is an interagency committee that assists the President in overseeing foreign investment transactions that could affect U.S. national security. The committee is composed of nine Cabinet members, two ex officio members, and other members as appointed. CFIUS was originally established by an executive order in 1975 with broad responsibilities and few powers. The authority to review foreign investments, known as the Exon-Florio provision, was formally established in 1988 with the passage of P.L. 100-418 . In 2007, the Foreign Investment and National Security Act ( P.L. 110-49 ) established CFIUS in statute and expanded the committee's role in reviewing FDI transactions that could affect \"homeland security\" and \"critical industries.\" The Secretary of the Treasury serves as chairman of CFIUS, and a designated lead agency conducts a \"risk-based analysis\" of the threat posed by mergers, acquisitions, or takeovers of a U.S. firm by a foreign investor. The President has the authority to block proposed or pending transactions; this authority has been invoked five times since 1988. In some cases, issues and concerns raised by CFIUS have led foreign investors to cancel a planned purchase or to divest if the deal had already been completed. Most recently, President Trump blocked the acquisition of Lattice Semiconductor Corp. by a Chinese investment firm in 2017, and the acquisition of Qualcomm by Singapore-based Broadcom in 2018. The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA, P.L. 115-232 , Title XVII), signed into law on August 13, 2018, amends the current process for investment reviews under CFIUS and expands the scope of transactions subject to review, including any non-controlling investment in U.S. businesses involved in critical technology or critical infrastructure. Some have objected to an expanded role of CFIUS as being counter to the long-standing U.S. position of an open investment climate. The United States promotes both inward and outward FDI. The Overseas Private Investment Corporation (OPIC), which operates under the Foreign Assistance Act of 1961, as amended, provides political risk insurance, financing, and other services to help facilitate U.S. private investments abroad in developing countries and emerging markets. The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), enacted on October 5, 2018 ( P.L. 115-254 , Division F) establishes a new U.S. International Development Finance Corporation (DFC) as a successor to OPIC by both expanding and consolidating the development finance functions of OPIC and USAID. SelectUSA, a Department of Commerce program established in 2011 via executive order, coordinates federal efforts to attract FDI in the United States. Primary functions of SelectUSA include providing information and data on investments to businesses and economic development organizations (EDOs), helping to resolve issues involving federal programs, and advocating at the national level for making investments in the United States over a foreign location.", "summary": "Congress plays a major role in U.S. trade policy through its legislative and oversight authority. Since the end of World War II, U.S. trade policy has focused on fostering an open, rules-based global trading system, liberalizing markets by reducing trade and investment barriers through negotiations and agreements, and enforcing trade commitments and related laws. International trade and investment issues can affect the overall health of the U.S. economy and specific sectors, the success of U.S. businesses, U.S. employment opportunities, and the overall standard of living of Americans. The benefits and costs of international trade and the future direction of trade policy are active areas of interest for many in Congress. This report addresses frequently asked questions regarding U.S. trade policy and is intended to assist Members and staff who may be new to trade issues. The report provides context for basic trade concepts and data on key U.S. trade and investment trends. It also addresses how U.S. trade policy is formulated and describes the trade and investment policy tools used to advance U.S. objectives. The report is divided into five sections: The Basics of Trade explains key economic concepts, including why countries trade, the benefits and costs of trade expansion, and the role of global value chains in international trade. The section also highlights common trade terms and principles. U.S. Trade Trends provides data on key U.S. trade relationships, the U.S. trade deficit, and sector-specific issues related to manufacturing, agriculture, services, and digital trade. Formulation of U.S. Trade Policy describes key objectives and functions of trade policy. The section outlines the roles of Congress, the executive branch, private stakeholders, and the judiciary in the formulation and implementation of U.S. trade policy. U.S. Trade Policy Tools explains some of the key vehicles for advancing U.S. trade policy objectives, including trade negotiations and agreements, special trade programs, tariff policy and trade remedies, trade adjustment assistance, and export promotion programs and controls. Link Between International Investment and Trade explains the motivations of foreign direct investment (FDI) and its relationship to trade. The section provides data on top sources of FDI in the United States as well as destinations of U.S. FDI abroad, and explains the role of investment agreements and the Committee on Foreign Investment in the United States (CFIUS). This report is intended as an introduction to U.S. trade policy and does not provide in-depth coverage of all trade and investment issues. For more detail on U.S. trade policy issues, refer to the following CRS products: CRS Report R45474, International Trade and Finance: Overview and Issues for the 116th Congress, coordinated by Rebecca M. Nelson and Andres B. Schwarzenberg. CRS Report R45420, U.S. Trade Trends and Developments, by Andres B. Schwarzenberg. CRS Report R44546, The Economic Effects of Trade: Overview and Policy Challenges, by James K. Jackson. CRS Report R45243, Trade Deficits and U.S. Trade Policy, by James K. Jackson. CRS In Focus IF10156, U.S. Trade Policy: Background and Current Issues, by Shayerah Ilias Akhtar, Ian F. Fergusson, and Brock R. Williams. CRS In Focus IF11016, U.S. Trade Policy Functions: Who Does What?, by Shayerah Ilias Akhtar.", "document_type": "crs"}
{"report": "On January 2, 2019, for the second year in a row, the Cuban Commission for Human Rights and National Reconciliation (CCDHRN) reported a significant decline in the annual number of short-term detentions for political reasons. In 2018, according to the CCDHRN, there were 2,873 short-term detentions, almost a 45% decline from 2017 and the lowest level since 2010. (See \" Human Rights ,\" below.) On December 22, 2018, Cuba's National Assembly approved a draft constitution that will be subject to a national referendum planned for February 24, 2019. Due to public opposition orchestrated by religious groups, the draft eliminated a provision that eventually could have led to approval of same-sex marriage and instead remained silent on defining matrimony. (See discussion on constitutional changes in \" Cuba's Transition to a New President ,\" below.) On December 20, 2018, President Trump signed into law the 2018 farm bill, P.L. 115-334 ( H.R. 2 ), with a provision that permits funding for two export promotion programs—the Market Access Program and the Foreign Market Development Cooperation Program—for U.S. agricultural products in Cuba. (See \" U.S. Exports and Sanctions ,\" below.) On December 19, 2018, Major League Baseball announced it had reached an agreement with the Cuban Baseball Federation to allow baseball players from Cuba to sign contracts without defecting from Cuba. Some press reports indicate that the Trump Administration might take action to prevent the deal from moving forward. On November 15, 2018, the Trump Administration updated its list of restricted Cuban entities controlled by the Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit those services or personnel at the expense of the Cuban people or private enterprise in Cuba. Currently, there are 205 entities on the list, including 99 hotels. (See \" Partial Rollback of Engagement and Increased Sanctions ,\" below.) On November 1, 2018, National Security Adviser John Bolton made a speech in Miami, FL, strongly criticizing the Cuban government on human rights. In a press interview, Bolton also maintained that the Administration was considering whether to continue to suspend Title III of the Cuban Liberty and Democratic Solidarity Act of 1996 (LIBERTAD Act; P.L. 104-114) to allow lawsuits in U.S. federal court against those \"trafficking\" in confiscated property in Cuba, an action that would significantly ratchet up U.S. sanctions on Cuba. (For more on Title III, see \" U.S. Property Claims ,\" below.) On November 1, 2018, the United Nations General Assembly approved a resolution (as it has annually since 1991) opposing the U.S. embargo on Cuba. The vote was 189-2, with Israel joining the United States in opposing it. The United States also proposed eight amendments to the resolution criticizing Cuba's human rights record, but all these amendments were defeated by wide margins. (See \" Cuba's Foreign Relations ,\" below.) On October 26, 2018, U.S. media reports highlighted a disturbing TV Martí program originally aired in May 2018 that disparaged U.S. businessman George Soros through anti-Semitic language and unfounded conspiracy theories. Subsequently, the Office of Cuba Broadcasting pulled the program from its website and the chief executive officer of the U.S. Agency for Global Media stated that the program was \"inconsistent with our professional standards and ethics.\" (See \" Radio and TV Martí ,\" below.) On October 16, 2018, the State Department's U.S. Mission to the United Nations launched a campaign to call attention to Cuba's estimated 130 political prisoners. (See \" Human Rights ,\" below.) On October 15, 2018, the Cuban government released Cuban political opposition activist Tomás Núñez Magdariaga from prison after a 62-day hunger strike. The State Department had called for his release, maintaining that he was imprisoned on false charges and convicted in a sham trial. (See \" Human Rights ,\" below.) On October 6, 2018, President Trump signed into law the FAA Reauthorization Act of 2018 ( P.L. 115-254 ) with a provision requiring the Transportation Security Administration to brief Congress on certain aspects of Cuban airport security, develop and implement a mechanism to better track public air charter flights between the United States and Cuba, and direct public air charters to provide updated data on such flights. (See \" U.S. Travel to Cuba ,\" below.) Political and economic developments in Cuba and U.S. policy toward the island nation, located just 90 miles from the United States, have been significant congressional concerns for many years. Especially since the end of the Cold War, Congress has played an active role in shaping U.S. policy toward Cuba, first with the enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII) and then with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ). Both measures strengthened U.S. economic sanctions on Cuba that had first been imposed in the early 1960s but also provided road maps for a normalization of relations, dependent upon significant political and economic changes in Cuba. Congress partially modified its sanctions-based policy toward Cuba when it enacted the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX) allowing for U.S. agricultural exports to Cuba. Over the past decade, much of the debate in Congress over U.S. policy has focused on U.S. sanctions. In 2009, Congress took legislative action in an appropriations measure ( P.L. 111-8 ) to ease restrictions on family travel and travel for the marketing of agricultural exports, marking the first congressional action easing Cuba sanctions in almost a decade. The Obama Administration took further action in 2009 by lifting all restrictions on family travel and on cash remittances by family members to their relatives in Cuba. In 2011, the Obama Administration announced the further easing of restrictions on educational and religious travel to Cuba and on donative remittances to other than family members. In December 2014, just after the adjournment of the 113 th Congress, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba toward a policy of engagement and a normalization of relations. The policy shift led to the restoration of diplomatic relations, the rescission of Cuba's designation as a state sponsor of international terrorism, and the easing of some restrictions on travel and commerce with Cuba. There was mixed reaction in Congress, with some Members of Congress supporting the change and others opposing it. Legislative initiatives in the 114 th Congress reflected this policy divide, with some bills introduced that would have further eased U.S. economic sanctions and others that would have blocked the policy shift and introduced new sanctions. This report examines U.S. policy toward Cuba in the 115 th Congress. It is divided into three major sections analyzing Cuba's political and economic environment; U.S. policy toward Cuba; and selected issues in U.S.-Cuban relations, including restrictions on travel and trade, funding for democracy and human rights projects in Cuba and for U.S. government-sponsored radio and television broadcasting, migration, antidrug cooperation, U.S. property claims, and U.S. fugitives from justice in Cuba. Legislative initiatives in the 115 th Congress are noted throughout the report, and Appendix A lists enacted measures and other bills and resolutions. Appendix B provides links to U.S. government information and reports on Cuba. For more on Cuba from CRS, see CRS In Focus IF10045, Cuba: U.S. Policy Overview , by Mark P. Sullivan; CRS Report R43888, Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations , by Dianne E. Rennack and Mark P. Sullivan; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by Mark P. Sullivan; CRS Insight IN10798, U.S. Response to Injuries of U.S. Embassy Personnel in Havana, Cuba , by Mark P. Sullivan and Cory R. Gill; CRS Insight IN10788, Hurricanes Irma and Maria: Impact on Caribbean Countries and Foreign Territories , by Mark P. Sullivan; CRS Insight IN10722, Cuba: President Trump Partially Rolls Back Obama Engagement Policy , by Mark P. Sullivan; CRS Report R44119, U.S. Agricultural Trade with Cuba: Current Limitations and Future Prospects , by Mark A. McMinimy; CRS Report R44137, Naval Station Guantanamo Bay: History and Legal Issues Regarding Its Lease Agreements , by Jennifer K. Elsea and Daniel H. Else; and CRS Report R44714, U.S. Policy on Cuban Migrants: In Brief , by Andorra Bruno. Cuba became an independent nation in 1902. From its discovery by Columbus in 1492 until the Spanish-American War in 1898, Cuba was a Spanish colony. In the 19 th century, the country became a major sugar producer, with slaves from Africa arriving in increasing numbers to work the sugar plantations. The drive for independence from Spain grew stronger in the second half of the 19 th century, but independence came about only after the United States entered the conflict, when the USS Maine sank in Havana Harbor after an explosion of undetermined origin. In the aftermath of the Spanish-American War, the United States ruled Cuba for four years until Cuba was granted its independence in 1902. Nevertheless, the United States retained the right to intervene in Cuba to preserve Cuban independence and maintain stability in accordance with the Platt Amendment, which became part of the Cuban Constitution of 1901. The United States subsequently intervened militarily three times between 1906 and 1921 to restore order, but in 1934, the Platt Amendment was repealed. Cuba's political system as an independent nation often was dominated by authoritarian figures. Gerardo Machado (1925-1933), who served two terms as president, became increasingly dictatorial until he was ousted by the military. A short-lived reformist government gave way to a series of governments that were dominated behind the scenes by military leader Fulgencio Batista until he was elected president in 1940. Batista was voted out of office in 1944 and was followed by two successive presidents in a democratic era that ultimately became characterized by corruption and increasing political violence. Batista seized power in a bloodless coup in 1952, and his rule progressed into a brutal dictatorship that fueled popular unrest and set the stage for Fidel Castro's rise to power. Castro led an unsuccessful attack on military barracks in Santiago, Cuba, on July 26, 1953. He was jailed but subsequently freed. He went into exile in Mexico, where he formed the 26 th of July Movement. Castro returned to Cuba in 1956 with the goal of overthrowing the Batista dictatorship. His revolutionary movement was based in the Sierra Maestra Mountains in eastern Cuba, and it joined with other resistance groups seeking Batista's ouster. Batista ultimately fled the country on January 1, 1959, leading to 47 years of rule under Fidel Castro until he stepped down from power provisionally in July 2006 because of poor health and ceded power to his brother Raúl Castro. Although Fidel Castro had promised a return to democratic constitutional rule when he first took power, he instead moved to consolidate his rule, repress dissent, and imprison or execute thousands of opponents. Under the new revolutionary government, Castro's supporters gradually displaced members of less radical groups. Castro moved toward close relations with the Soviet Union, and relations with the United States deteriorated rapidly as the Cuban government expropriated U.S. properties. In April 1961, Castro declared that the Cuban revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. Over the next 30 years, Cuba was a close ally of the Soviet Union and depended on it for significant assistance until the dissolution of the Soviet Union in 1991. From 1959 until 1976, Castro ruled by decree. In 1976, however, the Cuban government enacted a new Constitution setting forth the Cuban Communist Party (PCC) as the leading force in state and society, with power centered in a Political Bureau headed by Fidel Castro. Cuba's Constitution also outlined national, provincial, and local governmental structures. Since then, legislative authority has been vested in a National Assembly of People's Power that meets twice annually for brief periods, although the Assembly has permanent commissions that work throughout the year. When the Assembly is not in session, a Council of State, elected by the Assembly, acts on its behalf. According to Cuba's Constitution, the president of the Council of State is the country's head of state and government. Executive power in Cuba is vested in a Council of Ministers, also headed by the country's head of state and government, that is, the president of the Council of State. Fidel Castro served as head of state and government through his position as president of the Council of State from 1976 until February 2008. Although he provisionally stepped down from power in July 2006 because of poor health and ceded power to his brother Raúl (who held the position of first vice president), Fidel still officially retained his position as head of state and government. National Assembly elections were held in January 2008, and Fidel was once again among the slate of candidates elected to the legislative body. But as the new Assembly was preparing to select the members of the Council of State from among its ranks in February 2008, Fidel announced that he would not accept the position as president of the Council of State. This announcement confirmed his departure as titular head of the Cuban government, and Raúl was selected as president. More than 10 years after stepping down from power, Fidel Castro died in November 2016 at 90 years of age. While out of power, Fidel had continued to author essays published in Cuban media that cast a shadow on Raúl Castro's rule, and many Cubans reportedly believed that he had encouraged so-called hard-liners in Cuba's Communist Party and government bureaucracy to slow the pace of economic reforms advanced by his brother. His death accentuated the generational change that has already begun in the Cuban government and a passing of the older generation of the 1959 revolution. Current President Miguel Díaz-Canel Bermúdez was selected by Cuba's National Assembly of People's Power to succeed 86-year-old Raúl Castro on April 19, 2018, after Castro completed his second five-year term as president. Most observers saw Díaz-Canel, who had been serving as first vice president since 2013, as the \"heir apparent,\" but Raúl will continue in his position as first secretary of the PCC until 2021. Cuba does not have direct elections for president. Instead, Cuba's legislature, the National Assembly of People's Power, selects the president of the country's 31-member Council of State; the president, pursuant to Cuba's constitution (Article 74), serves as Cuba's head of state and government. Raúl Castro had succeeded his long-ruling brother Fidel Castro in 2006, serving provisionally until 2008 and then officially serving two five-year terms as president. He had announced in 2013 that he would not seek a third term, in line with his government's imposition of a two-term limit in 2012. Under Raúl, Cuba implemented gradual market-oriented economic policy changes over the past decade, but critics maintain that the government did not take enough action to foster sustainable economic growth. Elections for the 605 member-National Assembly (as well as for 15 provincial assemblies) had been expected to be held in January 2018, but the elections were postponed until March 2018. The delay was not unexpected since Cuba's municipal elections, scheduled for September 2017, had been postponed to November 2017 because of significant damage caused by Hurricane Irma. The municipal contests involved the direct election of more than 12,000 officials among 27,000 candidates, but the electoral process was tightly controlled, with the government preventing 175 independent candidates from being nominated. Candidates for the National Assembly and provincial assemblies were also tightly controlled by candidacy commissions, and voters were presented with one candidate for each position. President Díaz-Canel, who turned 58 a day after becoming president, is an engineer by training. His appointment as first vice president in 2013 made him the official constitutional successor in case Castro died or could not fulfill his duties. His appointment also represented a move toward bringing about generational change in Cuba's political system. Díaz-Canel became a member of the Politburo in 2003 (the PCC's highest decisionmaking body), held top PCC positions in two provinces, and was higher education minister from 2009 until 2012, when he was tapped to become a vice president on the Council of State. Although some observers believed Díaz-Canel to be a moderate and more open to reform, a leaked video released in August 2017 appears to contradict that characterization. The video shows him speaking at a closed Communist Party meeting earlier in the year in which he strongly criticized dissidents and independent voices (including those arguing for reform of the socialist system), criticized the expansion of Cuba's private sector, and characterized U.S. efforts toward normalization under President Obama as an attempt to destroy the Cuban revolution. Some observers believe that Díaz-Canel's rhetoric could have been aimed at increasing his acceptance by so-called hard-liners in Cuba's political system who are more resistant to change. Cuba's political transition is notable because it is the first time since the 1959 Cuban revolution that a Castro is not in charge of the government. A majority of Cubans today have lived under the rule only of the Castros. Raúl's departure can be viewed as a culmination of the generational leadership change that began several years ago in the government's lower ranks. It is also the first time that Cuba's head of government is not leader of the PCC. Although separating the roles of government and party leaders could elevate the role of government institutions over the PCC, Raúl Castro has indicated that he expects Díaz-Canel to take over as first secretary of the PCC when his term as party leader ends. Another element of the transition is the composition of the new 31-member Council of State. The National Assembly selected 72-year-old Salvador Valdés Mesa as First Vice President, not from the younger generation, but also not from the historical revolutionary period. Valdés Mesa, who already had been serving as one of five vice presidents and is on the Politburo, is the first Afro-Cuban to hold such a high government position. Of the Council of State's members, 45% are new, 48% are women, and 45% are Afro-Cuban or mixed race. Several older revolutionary-era leaders remained on the Council, including Ramiro Valdés, 86 years old, who continues as a vice president. Nevertheless, the average age of Council of State members was 54, with 77% born after the 1959 Cuban revolution. Challenges for President Díaz-Canel . Although most observers do not anticipate immediate major policy changes under President Díaz-Canel, his government will face two enormous challenges—reforming the economy and responding to desires for greater freedom. Raúl Castro managed the opening of Cuba's economy to the world, with diversified trade relations, increased foreign investment, and a growing private sector. Yet the slow pace of economic reform has stunted economic growth and disheartened Cubans yearning for more economic freedom. From mid-2017 through much of 2018, the government appeared to backtrack by restricting private-sector development and slowing reforms, and for several years the government has delayed a long-anticipated end to its dual-currency system that creates economic distortion (see \" Economic Conditions \" below). A challenge for Díaz-Canel will be moving forward with economic reforms opposed by some conservative elements in the party and state bureaucracy. Few observers expect the Díaz-Canel government to ease tight control over the political system, at least in the short to medium term, but it will need to contend with increasing calls for political reform and freedom of expression. The liberalization of some individual freedoms that occurred under Raúl Castro (such as legalization of cell phones and personal computers, and expansion of internet connectivity) has increased Cubans' appetite for access to information and the desire for more social and political expression. More broadly, if the next government continues to repress political dissidents and human rights activists, it will remain a point of contention in Cuba's foreign relations. An important question looking ahead is the extent of influence that Castro and other revolutionary figures will have on government policy. Some observers assert that Raúl will continue to have a role in the decisionmaking process because he will head the PCC until 2021.The former president also headed up a commission making changes to Cuba's 1976 constitution (see discussion below). In July 2018, President Díaz-Canel named his Council of Ministers or Cabinet, but a majority of ministers were holdovers from the Castro government, including those occupying key ministries such as defense, interior, finance, and foreign relations; just 9 of 26 ministers were new, including 2 vice presidents and 7 new ministers. After Díaz-Canel marked his first 100 days in office in July 2018, some observers maintained that little had changed politically or economically. By the end of 2018, however, President Díaz-Canel made several decisions that appeared to demonstrate his independence from the previous Castro government and indicate that he was more responsive to public concerns and criticisms. In early December, as described below in the section on \" Economic Conditions ,\" Díaz-Canel eased forthcoming harsh regulations that were about to be implemented on the private sector; many observers believed these regulations would have shrunk the sector. Also in December, the Cuban government backed away from full implementation of controversial Decree 349 that had been issued in July 2018 to regulate artistic expression. After the unpopular decree triggered a flood of criticism from Cuba's artistic community, the government announced that the measure would be implemented gradually and applied with consensus (it remains to be seen, however, whether the government's action will satisfy those working in Cuba's vibrant arts community). In a third action in December, the government eliminated a proposed constitutional change that could have paved the way for same-sex marriage after strong public criticisms of the provision (see discussion below on constitutional changes). Constitutional Changes. As noted, Cuba is in the midst of a process to rewrite and update its 1976 constitution that will be subject to a referendum in February 2019. Drafted by a commission headed by Raúl Castro and approved by the National Assembly in July 2018, the proposed changes were subject to public debate in thousands of workplaces and community meetings into November. After considering public suggestions, the National Assembly made additional changes to the draft constitution, and the National Assembly approved this new version on December 22, 2018. Voters are now scheduled to go to the polls to approve the new constitution on February 24, 2019; it would then be approved in April 2019. One of the more controversial changes made by the commission in its new draft in December was the elimination of a provision that would have redefined matrimony as gender neutral compared to the current constitution, which refers to marriage as the union between a man and a woman. Cuba's evangelical churches orchestrated a campaign against the provision, and Cuban bishops issued a pastoral message against it. The commission chose to eliminate the proposed provision altogether, with the proposed constitution remaining silent on defining matrimony, and maintained that the issue would be addressed in future legislation within two years. Among other provisions of the draft constitution are the addition of an appointed prime minster to oversee government operations, an age limit of 60 to become president (Article 127) with a limit of two five-year terms (Article 126), and the right to own private property (Article 22). The draft constitution would still ensure the state's control over the economy and the role of centralized planning (Article 19), and the Communist Party still would be the only recognized party (Article 5). The Cuban government has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights since the early years of the Cuban revolution. The government has continued to harass members of human rights and other dissident organizations. These organizations include the Ladies in White ( Las Damas de Blanco ), currently led by Berta Soler, formed in 2003 by the female relatives of the \"group of 75\" dissidents arrested that year, and the Patriotic Union of Cuba (UNPACU), led by José Daniel Ferrer García, established in 2011 by several dissident groups with the goal of fighting peacefully for civil liberties and human rights; in August 2018, the Cuban government imprisoned Ferrer arbitrarily for 11 days with no access to his family, according to Amnesty International. In recent years, several political prisoners have conducted hunger strikes; two hunger strikers died—Orlando Zapata Tamayo in 2010 and Wilman Villar Mendoza in 2012. In February 2017, Hamel Santiago Maz Hernández, a member of UNPACU who had been imprisoned since June 2016 after being accused of descato (lack of respect for the government), died in prison. Although the human rights situation in Cuba remains poor, the country has made some advances in recent years. In 2008, Cuba lifted a ban on Cubans staying in hotels that previously had been restricted to foreign tourists in a policy that had been pejoratively referred to as \"tourist apartheid.\" In recent years, as the government has enacted limited economic reforms, it has been much more open to debate on economic issues. In 2013, Cuba eliminated its long-standing policy of requiring an exit permit and letter of invitation for Cubans to travel abroad. The change has allowed prominent dissidents and human rights activists to travel abroad and return to Cuba. In recent years, the Cuban government has moved to expand internet connectivity through \"hotspots\" first begun in 2015 and through the launching of internet capability on cellphones in late 2018. As noted below, short-term detentions for political reasons declined significantly in 2017 and 2018, although there were still almost 2,900 such detentions in 2018. Congressional Resolutions. On April 11, 2018, the Senate approved S.Res. 224 (Durbin), which commemorated the legacy of democracy activist Oswaldo Payá, called on the Cuban government to allow an impartial, third-party investigation into the circumstances surrounding Payá's death in a car accident in July 2012, and called on the Cuban government to cease violating human rights and begin providing democratic freedoms to Cuban citizens. In 2012, the Senate had approved S.Res. 525 (Nelson), which honored the life and legacy of Payá and also called for an impartial, third-party investigation. Payá had founded the Christian Liberation Movement in 1988, a civil society group advocating peaceful democratic change and respect for human rights. He founded the Varela Project in 1996, which collected thousands of signatures supporting a national plebiscite for political reform in Cuba. Two similar but not identical resolutions introduced in May 2018, S.Res. 511 (Rubio) and H.Res. 916 (Diaz-Balart), would have honored Las Damas de Blanco as the recipient of the 2018 Milton Friedman Prize for Advancing Liberty. The resolutions also would have expressed solidarity and commitment to the democratic aspirations of the Cuban people and call on the Cuban government to allow members of the group to travel freely. Political Prisoners. On October 16, 2018, the State Department's U.S. Mission to the United Nations launched a campaign to call attention to the plight of Cuba's \"estimated 130 political prisoners.\" Cuban diplomats attempted to disrupt the event by making noise and shouting, although their actions appeared to call more attention to the event and, for some observers, demonstrated the Cuban government's disdain for freedom of expression. Secretary of State Mike Pompeo wrote an open letter to Cuban Foreign Minister Bruno Rodriguez on December 7, 2018, asking for a substantive explanation for the continued detention of eight specific political prisoners and an explanation of the charges and evidence against other individuals held as political prisoners. In January 2019, the Havana-based Cuban Commission for Human Rights and National Reconciliation (CCDHRN) estimated that Cuba held some 130-140 political prisoners in some 150 prisons and internment camps. In June 2018, the CCDHRN made public a list with 120 prisoners for political reasons, consisting of 96 opponents or those disaffected toward the regime (over 40 are members of UNPACU) and 24 accused of employing or planning some form of force or violence. According to the State Department's human rights report on Cuba covering 2017, issued in April 2018, the exact number of political prisoners was difficult to determine, but human rights organizations estimated that there were 65 to 100 political prisoners. The report noted the lack of governmental transparency, along with its systematic violations of due process rights, which masked the nature of criminal charges and prosecutions and allowed the government to prosecute peaceful human rights activists for criminal violations or \"dangerousness.\" As noted in the report, the government refused international humanitarian organizations and the United Nations access to its prisons and detention centers, and closely monitored and often harassed domestic organizations that tracked political prisoner populations. Political activist Dr. Eduardo Cardet, designated by Amnesty International (AI) as a \"prisoner of conscience,\" has been imprisoned since November 2016 for publicly criticizing Fidel Castro and was sentenced to three years in prison. AI maintains that Cardet, a leader in the dissident Christian Liberation Movement, was sent to prison solely for peacefully exercising his right to freedom of expression and has called for his immediate release. The human rights group issued an urgent action notice in January 2018 calling attention to Cardet's case after he was attacked by several prisoners in December 2017. In June 2018, AI issued another urgent action notice for Cardet, maintaining that Cuban authorities suspended family visiting rights for him because of his family's activism on the case. A second AI-designated prisoner of conscience, Cuban biologist Dr. Ariel Ruiz Urquiola, was sentenced to a year in prison in May 2018 for the crime of disrespecting authority ( desacato ). Urquiola reportedly had referred to several Cuban government forest rangers as \"rural guards,\" a derogatory reference to a repressive agency before the Cuban revolution. The rangers had been checking whether Urquiola had proper permits to cut down several trees and build a fence, which reportedly he had. In June 2018, AI issued two urgent action notices on Urquiola calling for his release and for visits while imprisoned. He was conditionally released from prison on July 3, 2018, following a prolonged hunger strike. On October 15, 2018, the Cuban government released UNPACU activist Tomás Núñez Magdariaga from prison after a 62-day hunger strike. Magdariaga had been sentenced to a year in jail for allegedly making threats to a security agent. The State Department had called for his release, maintaining he was falsely charged and convicted in a sham trial. Amnesty International had expressed concern for his health and called on Cuba to make public evidence against him. Over the past decade, the Cuban government has released large numbers of political prisoners at various junctures. In 2010 and 2011, with the intercession of the Cuban Catholic Church, the government released some 125 political prisoners, including the remaining members of the \"group of 75\" arrested in 2003 who were still in prison. In the aftermath of the December 2014 shift in U.S. policy toward Cuba, the Cuban government released another 53 political prisoners, although several were subsequently rearrested. In 2017, the Cuban government released several political prisoners that had been dubbed \"prisoners of conscience\" by Amnesty International. This included graffiti artist Danilo Maldonado Machado (known as El Sexto) who subsequently testified before a Senate Foreign Relations Committee hearing in February 2017. Short- T erm Detentions. Short-term detentions for political reasons increased significantly from 2010 through 2016, a reflection of the government's change of tactics in repressing dissent away from long-term imprisonment. The CCDHRN reports that the number of such detentions grew annually from at least 2,074 in 2010 to at least 8,899 in 2014. The CCDHRN reported a very slight decrease to 8,616 short-term detentions in 2015, but this figure increased again to at least 9,940 detentions for political reasons in 2016, the highest level recorded by the human rights organization. Since 2017, however, the CCDHRN has reported a significant decline in short-term detentions. In 2017, the number of short-term detentions fell to 5,155, almost half the number detained in 2016 and the lowest level since 2011. The decline in short-term detentions continued in 2018, with 2,873 reported short-term detentions, almost a 45% decline from 2017 and the lowest level since 2010. Bloggers and Civil Society Groups. Over the past several years, numerous independent Cuban blogs have been established. Cuban blogger Yoani Sánchez has received considerable international attention since 2007 for her website, Generación Y , which includes commentary critical of the Cuban government. In May 2014, Sánchez launched an independent digital newspaper in Cuba, 14 y medio , available on the internet, distributed through a variety of methods in Cuba, including CDs, USB flash drives, and DVDs. The Catholic Church became active in broadening the debate on social and economic issues through its publications. The Church also has played a role in providing social services, including soup kitchens, services for the elderly and other vulnerable groups, after-school programs, job training, and even college coursework. Estado de SATS , a forum founded in 2010 by human rights activist Antonio Rodiles, has had the goal of encouraging open debate on cultural, social, and political issues. The group has hosted numerous events and human rights activities over the years, but it also has been the target of government harassment, as has its founder. Other notable online forums and independent or alternative media that have developed include Cuba Posible (founded by two former editors of the Catholic publication Espacio Laical ) , Periodismo del Barrio (focusing especially on environmental issues), El Toque , and O nCuba (a Miami-based digital magazine with a news bureau in Havana). Trafficking in Persons. The State Department released its 2018 Trafficking in Persons (TIP) Report on June 28, 2018, and for the fourth consecutive year Cuba was placed on the Tier 2 Watch List (in prior years, Cuba had Tier 3 status). Tier 3 status refers to countries whose governments do not fully comply with the minimum standards for combatting trafficking and are not making significant efforts to do so. In contrast, Tier 2 Watch List status refers to countries whose governments, despite making significant efforts, do not fully comply with the minimum standards and still have some specific problems (e.g., an increasing number of victims or failure to provide evidence of increasing antitrafficking efforts) or whose governments have made commitments to take additional antitrafficking steps over the next year. A country normally is automatically downgraded to Tier 3 status if it is on the Tier 2 Watch List for three consecutive years unless the Secretary of State authorizes a waiver. The State Department issued such a waiver for Cuba in 2017 because the government had devoted sufficient resources to a written plan that, if implemented, would constitute significant efforts to meet the minimum standards for the elimination of trafficking. In the 2018 TIP report, the State Department again issued a waiver for Cuba allowing it to remain on the Tier 2 Watch List for the fourth consecutive year. Such a waiver, however, is only permitted for two years. After the third year, the country must either go up to Tier 2 or down to Tier 3. The State Department initially upgraded Cuba from Tier 3 to Tier 2 Watch List status in its 2015 TIP report because of the country's progress in addressing and prosecuting sex trafficking, including the provision of services to sex-trafficking victims, and its continued efforts to address sex tourism and the demand for commercial sex. In its 2016 TIP report, the State Department maintained that Cuba remained on the Tier 2 Watch List for the second consecutive year because the country did not improve antitrafficking efforts compared to 2015. Nevertheless, the 2016 report noted that the Cuban government continued efforts to address sex trafficking, including prosecution and conviction, and the provision of services to victims. The State Department noted that the Cuban government released a report on its antitrafficking efforts in October 2015; that multiple government ministries were engaged in antitrafficking efforts; and that the government funded child protection centers and guidance centers for women and families, which served crime victims, including trafficking victims. However, the report also noted that the Cuban government did not prohibit forced labor, report efforts to prevent forced labor, or recognize forced labor as a possible issue affecting Cubans in medical missions abroad. In its 2017 TIP report, the State Department maintained that the Cuban government demonstrated significant efforts during the reporting period by prosecuting and convicting sex traffickers, providing services to sex trafficking victims, releasing a written report on its antitrafficking efforts, and coordinating antitrafficking efforts across government ministries. The State Department noted, however, that the Cuban penal code did not criminalize all forms of trafficking and did not prohibit forced labor, report efforts to prevent forced labor domestically, or recognize forced labor as a possible issue affecting Cubans working in medical missions abroad. In its 2018 TIP report, the State Department noted the Cuban government's significant efforts of prosecuting and convicting more traffickers, creating a directorate to provide specialized attention to child victims of crime and violence, including trafficking, and publishing its antitrafficking plan for 2017-2020. The State Department also noted, however, that the Cuban government did not demonstrate increasing efforts compared to the previous reporting period. It maintained that the government did not criminalize most forms of forced labor or sex trafficking for children ages 16 or 17, and did not report providing specialized services to identified victims. The State Department also made several recommendations for Cuba to improve its antitrafficking efforts, including the enactment of a comprehensive antitrafficking law that prohibits and sufficiently punishes all forms of trafficking. Engagement between U.S. and Cuban officials on antitrafficking issues has increased in recent years. In January 2017, U.S. officials met with Cuban counterparts in their fourth such exchange to discuss bilateral efforts to address human trafficking. Subsequently, on January 16, 2017, the United States and Cuba signed a broad memorandum of understanding on law enforcement cooperation in which the two countries stated their intention to collaborate on the prevention, interdiction, monitoring, and prosecution of transnational or serious crimes, including trafficking in persons. In February 2018, the State Department and the Department of Homeland Security hosted meetings in Washington, DC, with Cuban officials on efforts to combat trafficking in persons. Cuba's economy continues to be largely state-controlled, with the government owning most means of production and employing a majority of the workforce. Key sectors of the economy that generate foreign exchange include the export of professional services (largely medical personnel to Venezuela); tourism, which has grown significantly since the mid-1990s, with an estimated 4.75 million tourists visiting Cuba in 2018; nickel mining, with the Canadian mining company Sherritt International involved in a joint investment project; and a biotechnology and pharmaceutical sector that supplies the domestic health care system and has fostered a significant export industry. Remittances from relatives living abroad, especially from the United States, also have become an important source of hard currency, amounting to some $3 billion in 2016. The once-dominant sugar industry has declined significantly over the past 20 years. Because of drought, damage from Hurricane Irma, and subsequent months of heavy rains, the 2017-2018 sugar harvest dropped by almost 44% to just over 1 million metric tons (MT), compared to 1.8 million MT the previous year. The outlook for the 2018-2019 harvest is 1.5 million MT, almost a 50% improvement; for comparison, in 1990, Cuba produced 8.4 million MT of sugar. For more than 15 years, Cuba has depended heavily on Venezuela for its oil needs. In 2000, the two countries signed a preferential oil agreement (essentially an oil-for-medical-personnel barter arrangement) that until recently provided Cuba with some 90,000-100,000 barrels of oil per day, about two-thirds of its consumption. Cuba's goal of becoming a net oil exporter with the development of its offshore deepwater oil reserves was set back in 2012, when the drilling of three exploratory oil wells was unsuccessful. This setback, combined with Venezuela's economic difficulties, has raised Cuban concerns about the security of the support received from Venezuela. Since 2015, Venezuela has cut the amount of oil that it sends to Cuba, and Cuba has increasingly turned to other suppliers for its oil needs, including Russia and Algeria. In the summer of 2018, from June through August, Venezuela reportedly resumed exporting a key crude oil to Venezuela that it had suspended in 2017 due to needs in Venezuela. The government of Raúl Castro implemented a number of economic policy changes, but economists were disappointed that more far-reaching reforms were not implemented. At the PCC's seventh party congress, held in April 2016, Raúl Castro reasserted that Cuba would move forward with updating its economic model \"without haste, but without pause.\" A number of Cuba's economists have pressed the government to enact more far-reaching reforms and embrace competition for key parts of the economy and state-run enterprises. These economists criticize the government's continued reliance on central planning and its monopoly on foreign trade. Economic Growth. Cuba experienced severe economic contraction from 1990 to 1993, with an estimated decline in gross domestic product ranging from 35% to 50% when the Soviet Union collapsed and Russian financial assistance to Cuba practically ended. Growth resumed after that time, as Cuba moved forward with some limited market-oriented economic reforms, and growth was especially strong in the 2004-2007 period, averaging more than 9% annually. The economy benefitted from the growth of the tourism, nickel, and oil sectors and from support from Venezuela and China in terms of investment commitments and credit lines. The economy was hard-hit by several hurricanes and storms in 2008 and the global financial crisis in 2009, with the government forced to implement austerity measures that slowed growth. From 2010 to 2015, Cuba's economy experienced low to moderate economic growth, ranging from a low of 1% in 2014 to a high of 4.4% in 2015. In 2016, however, the economy grew by just 0.5% because of lower export earnings, reduced support from Venezuela, and austerity measures (preliminary Cuban government estimates had forecast an economic contraction of 0.9%, but this was revised to 0.5% growth in January 2018). In September 2017, Hurricane Irma struck in September, killing 10 people in Cuba and affecting more than 2 million people along 300 miles of the northern coast. The storm damaged infrastructure (electric power, water and sanitation systems), the agricultural sector, and tourism facilities, and it flooded low-lying areas of Havana. Nevertheless, the Cuban government reports that the economy grew 1.8% in 2017 and an estimated 1.2% in 2018, and it predicts 1.5% growth in 2019. President Díaz-Canel has said that austerity measures begun in 2016 will continue in 2019. The economy has been hurt by reduced support from Venezuela over the past several years and the unexpected December 2018 ending of Cuba's program sending medical professionals to Brazil, which had provided Cuba with some $400 million a year. The Economist Intelligence Unit (EIU) predicts economic growth will slow to 0.8% in 2019 and 0.4% in 2020, as tourism grows more moderately because of a slowdown in arrivals from the United States. According to the EIU, the biggest risk to Cuba's economic performance is the complete elimination of support from Venezuela. Private Sector. The Cuban government employs a majority of the labor force, but the government has been allowing more private-sector activities. In 2010, the government opened up a wide range of activities for self-employment and small businesses to almost 200 categories of work allowed; the number of self-employed or cuentapropistas rose from 144,000 in 2009 to about 588,000 as of October 2018. Analysts contend that the government needs to do more to aid the development of the private sector, including an expansion of authorized activities to include more white-collar occupations and state support for credit to support small businesses. Beginning in mid-2017, the government took several steps to restrict private-sector development. In August 2017, it stopped issuing new licenses for 27 private-sector occupations, including for private restaurants and for renting private residences; closed a fast-growing cooperative that had provided accounting and business consultancy services; and put restrictions on construction cooperatives. The government maintains that it took the actions to \"perfect\" the functioning of the private sector and curb illicit activities, such as the sale of stolen state property, tax evasion, and labor violations. In February 2018, press reports provided details about draft government regulations being considered that would increase state control over the private sector, limit business licenses to a single activity, reduce and consolidate the current 200 categories of work to 123 categories, and limit the size of private restaurants. The regulations ultimately were released in July 2018 and were to take effect in December, at the same time the government would resume issuing licenses for business activities that had been frozen since August 2017. The objectives of the new regulations were to increase taxation oversight of the private sector and to control the concentration of wealth and rising inequality, but many observers believed the regulations were aimed at stifling private-sector growth because of the government's concerns regarding that sector's independence from the government. Just two days before the regulations were to go into effect, President Díaz-Canel did an about-face and announced on December 5, 2018, that some aspects of the regulations viewed as especially egregious by the private sector would be eliminated or eased. Most significantly, individuals would not be limited to one licensed activity; restaurants, bars, and cafeterias would not be not subject to a limit of 50 seats; and the requirements for maintaining a minimum balance in bank accounts would be reduced from the equivalent of three months of tax payments to two months and would apply to just 6 of the 123 categories of employment. Analysts view the backtracking as an indication that President Díaz-Canel is willing to make policy changes in response to public opinion and as a sign that the government does not want to shrink the private sector. Currency Unification/Reform. A major challenge for the development of the private sector is the lack of money in circulation. Most Cubans do not make enough money to support the development of small businesses. Cuba has two official currencies—Cuban pesos (CUPs) and Cuban convertible pesos (CUCs); for personal transaction, the exchange rate for the two currencies is CUP24/CUC1. Most people are paid CUPs, and the minimum monthly wage in Cuba is 225 CUPs (just over $9), although this minimum wage does not apply to the nonstate sector. According to the State Department, even with other government support such as free education, housing, some food, and subsidized medical care, the average monthly wage of 700 CUPs ($29) does not provide for a reasonable standard of living. For increasing amounts of consumer goods, CUCs are used. Cubans with access to foreign remittances or who work in private-sector activities catering to tourists and foreign diplomats have fared better than those serving the Cuban market. The Cuban government announced in 2013 that it would end its dual-currency system and move toward monetary unification, but the action has been delayed for several years. Currency reform is ultimately expected to lead to productivity gains and improve the business climate, but an adjustment would create winners and losers. At the PCC's April 2016 Congress, Raúl Castro called for moving toward a single currency as soon as possible to resolve economic distortions. In January 2018, EU officials visiting Cuba offered technical assistance regarding currency reform and unification. Some economists assert, however, that Cuba is unlikely to go forward with currency reform this year because of the country's deep structural economic problems and because of the ongoing constitutional reform process. Agricultural Sector. A reform effort under Raúl Castro focused on the agricultural sector, a vital issue because Cuba reportedly imports some 70%-80% of its food needs, according to the World Food Programme. In an effort to boost food production, the government turned over idle land to farmers and given farmers more control over how to use their land and what supplies to buy. Despite these and other efforts, overall food production has been significantly below targets. In addition, as noted above, Hurricane Irma caused damage to the agricultural sector, particularly sugar, in September 2017. As a result, in the first six months of 2018, overall food production reportedly decreased about 10% to 15% compared to the same period in 2017. Foreign Investment. The Cuban government adopted a new foreign investment law in 2014 with the goal of attracting increased levels of foreign capital to the country. The law cuts taxes on profits by half, to 15%, and exempts companies from paying taxes for the first eight years of operation. The law also eliminates employment or labor taxes, although companies still must hire labor through state-run companies, with agreed wages. A fast-track procedure for small projects reportedly streamlines the approval process, and the government agreed to improve the transparency and time of the approval process for larger investments. A Mariel Special Development Zone (ZED Mariel) was established in 2014 near the port of Mariel to attract foreign investment. To date, ZED Mariel has approved some 43 investment projects, which are at various stages of development. In November 2017, Cuba approved a project for Rimco (the exclusive dealer for Caterpillar in Puerto Rico, the U.S. Virgin Islands, and the Eastern Caribbean) to become the first U.S. company to be located in the ZED Mariel. Rimco plans to set up a warehouse and distribution center in 2018 to distribute Caterpillar equipment. In September 2018, the Roswell Park Comprehensive Cancer Center of Buffalo, NY, announced it was entering into a joint venture with Cuba's Center for Molecular Immunology focused on the development of cancer therapies; the joint venture will be located in the ZED Mariel. According to Cuba's Minister of Foreign Trade and Investment Rodrigo Malmierca, Cuba has signed more than 200 investment projects valued at $5.5 billion since it made changes to its investment law in 2014, with $1.5 billion of that in 2018. The actual amount invested reportedly is much less, with about $500 million annually. In November 2018, the Cuban government updated its wish list for foreign investment, which includes 525 projects representing potential investment of $11.6 billion in such high-priority areas as tourism, agriculture and food production, oil, the industrial sector, and biotechnology. During the Cold War, Cuba had extensive relations with, and support from, the Soviet Union, which provided billions of dollars in annual subsidies to sustain the Cuban economy. This subsidy system helped to fund an activist foreign policy and support for guerrilla movements and revolutionary governments abroad in Latin America and Africa. With an end to the Cold War, the dissolution of the Soviet Union, and the loss of Soviet financial support, Cuba was forced to abandon its revolutionary activities abroad. As its economy reeled from the loss of Soviet support, Cuba was forced to open up its economy and engage in economic relations with countries worldwide. In ensuing years, Cuba diversified its trading partners, although Venezuela under populist leftist President Hugo Chávez (1999-2013) became one of Cuba's most important partners, leading to Cuba's dependence on Venezuela for oil imports. In 2017, the leading sources of Cuba's imports in terms of value were Venezuela (18.1%, down from 40% in 2014), China (16.3%), and Spain (10.8%); the leading destinations of Cuban exports were Canada (19.4%), Venezuela (15.6%), China (5.2%), and Spain (8.6%). Russia. Relations with Russia, which had diminished significantly in the aftermath of the Cold War, have strengthened somewhat over the past several years. Cuban President Díaz-Canel visited Russia for three days beginning November 1, 2018, after which he visited North Korea, China, Vietnam, and Laos. Russia's interest in the broader Latin America and Caribbean region appeared to increase in response to U.S. actions taken in the aftermath of Russia's intervention in Georgia in 2008 and Russia's annexation of the Crimea region and military intervention in Ukraine in 2014. For many observers, one of Russia's main objectives in the Latin American and Caribbean region is to demonstrate that it is a global power that can operate in the U.S. neighborhood, or \"backyard.\" Just before a 2014 trip to Cuba, Russian President Vladimir Putin signed into law an agreement writing off 90% of Cuba's $32 billion Soviet-era debt, with some $3.5 billion to be paid back by Cuba over a 10-year period that would fund Russian investment projects in Cuba. In the aftermath of Putin's trip, press reports claimed that Russia would reopen its signals intelligence facility at Lourdes, Cuba, which had closed in 2002, but President Putin denied that his government would reopen the facility. Trade relations between Russia and Cuba have not been significant, although they grew in 2017 because of new Russian oil exports to Cuba. According to Russian trade statistics, total trade between the two countries was valued at $290 million in 2017, an almost 17% increase over 2016. This represented less than 2% of Cuba's trade worldwide. Russia's imports from Cuba amounted to almost $14 million in 2017, led by pharmaceutical products and rum, while Russia's exports to Cuba amounted to almost $277 million, led by motor vehicles (and parts) and oil. Russian energy companies have been involved in oil exploration in Cuba. Gazprom was in a partnership with the Malaysian state oil company, Petronas, which conducted unsuccessful deepwater oil drilling off Cuba's western coast in 2012. The Russian oil company Zarubezhneft began drilling in Cuba's shallow coastal waters east of Havana in late 2012 but stopped work in 2013 because of disappointing results. In 2014, Russian energy companies Zarubezhneft and Rosneft signed an agreement with Cuba's state oil company Unión Cuba- Petróleo (CUPET) for the development of an offshore exploration block, and Rosneft agreed to cooperate with Cuba in studying ways to optimize existing production at mature fields. In 2017, Rosneft began to ship oil to Cuba, a result of Cuba's efforts to diversify its sources of foreign oil because of Venezuela's diminished capacity. Russian officials publicly welcomed the improvement in U.S.-Cuban relations under the Obama Administration, although some viewed the change in U.S. policy as setback for Russian overtures in the region. As U.S.-Cuban normalization talks were beginning in Havana in January 2015, a Russian intelligence ship docked in Havana. In October 2016, a Russian military official maintained that Russia was reconsidering reestablishing a military presence in Cuba (and Vietnam), although there was no indication that Cuba would be open to the return of the Russian military. The two countries signed a bilateral cooperation agreement in December 2016 for Russia's support to help Cuba modernize its defense sector until 2020. In June 2017, when President Trump announced a partial rollback of the U.S. policy of engagement with Cuba, Russia's foreign ministry criticized the president for resorting to \"Cold War\" rhetoric. Some reports indicate that as U.S. relations with Cuba have deteriorated over the past year, Russia has been attempting to further increase its ties to Cuba, with high-level meetings between Cuban and Russian officials and increased economic, military, and cultural engagement. In March 2018, the same Russian intelligence ship noted above again stopped in Havana. For Cuba, a deepening of relations with Russia could help economically, especially regarding oil, and also could serve as a counterbalance to the partial rollback of U.S. engagement policy by the Trump Administration. However, President Díaz-Canel's November 2018 trip to Russia reportedly did not yield significant results. Press reports indicate that Cuba received a $50 million credit line for purchases of Russian military weapons and spare parts and contracts valued at more than $260 million (some that already were in the pipeline) to modernize three power plants and a metal processing plant and upgrade Cuba's railway system. The U.S. Southern Command's February 2018 posture statement presented to Congress expressed concern about Russia's increased role in the Western Hemisphere. It stated that Russia's expanded port and logistics access in Cuba (as well as Nicaragua and Venezuela) provide the country \"with persistent, pernicious presence, including more frequent maritime intelligence collection and visible force projection in the Western Hemisphere.\" It stated that Russia's robust relationships with these three countries provide it \"with a regional platform to target U.S. and partner nation facilities and assets, exert negative influence over undemocratic governments, and employ strategic options in the event of a global contingency.\" Along these lines, there has been concern in Congress about the role of Russia in Latin America, including in Cuba. The conference report to the John S. McCain National Defense Authorization Act for FY2019, P.L. 115-232 ( H.R. 5515 ), requires the Defense Intelligence Agency to submit a report on security cooperation between Russia, and Cuba, Nicaragua, and Venezuela, including a description of any military or intelligence infrastructure, facilities, and assets developed by Russia in the three countries and any associated agreements or understanding between Russia and the three countries. China. During the Cold War, Cuba and China did not have close relations because of Sino-Soviet tensions, but bilateral relations with China have grown closer over the past 15 years, including a notable increase in trade. Since 2004, Chinese leaders have made a series of visits to Cuba: then-President Hu Jintao visited in 2004 and 2008; President Xi Jinping visited in 2014 (and when he was vice president in 2011); and, most recently, Chinese Premier Li Keqiang visited in 2016, reportedly signing some 30 economic cooperation agreements. Raúl Castro also visited China in 2008 and 2012; during the 2012 trip, he signed cooperation agreements focusing on trade and investment issues. In January 2018, Raúl Castro met with Song Tong, a special envoy of President Xi Jinping, with discussion reportedly focused on strengthening ties. Castro noted that the Cuban Communist Party (PCC) would like to promote exchanges with its Chinese counterpart in an effort to help upgrade Cuba's social and economic model. More recently, as noted above, Cuban President Díaz-Canel visited China in early November 2018. According to Chinese state media, President Xi called for a long-term plan to promote the development of China-Cuba ties and said that China would welcome Cuba's participation in the Belt and Road Initiative, which is focused on infrastructure development around the world. President Xi called on both countries to enhance cooperation on trade, energy, agriculture, tourism, and biopharmaceutical manufacturing. While Cuba's relationship with China undoubtedly has an ideological component since both are the among the world's remaining communist regimes, economic linkages and cooperation appear to be the most significant component of bilateral relations. According to Cuban trade statistics, total Cuba-China trade in 2017 was valued at almost $2 billion (accounting for 16.1% of Cuba's trade worldwide), with Cuba exporting $364 million to China and importing almost $1.7 billion. This was a 21% drop from 2016, when total Cuba-China trade almost reached $2.6 billion, and an almost 30% drop in Cuba's imports from China in 2016. The fall in imports from China in reflects Cuba's difficult economic situation as Venezuelan support has diminished. In response to a cash crunch, the Cuban government has cut imports and reduced the use of fuel and electricity. In contrast to declining imports from China, Cuba's exports to China increased by about 42% in 2017, led by increased exports of seafood, nickel, and to a lesser extent cigars. According to Chinese trade statistics, the lion's share of Cuba's exports to China in 2017 were sugar (53%), nickel (35%), and fish (almost 9%), whereas Cuba's imports from China included electrical machinery and equipment (22%), motor vehicles (17%), machinery and appliances (15%), and a wide variety of other industrial and consumer products. China reportedly had been reluctant to invest in Cuba because of the uninviting business environment, but that has begun to change over the past several years. In 2015, the Chinese cellphone company Huawei reached an agreement with the Cuban telecommunications company ETECSA to set up Wi-Fi hotspots at public locations, and is helping to wire homes. In 2016, the Chinese company Haier set up a plant assembling laptops and tablets in Cuba. Over the past two years, Chinese financing has been supporting the modernization of a port in Santiago Cuba. Other planned Chinese investment projects reportedly include pharmaceuticals as well as the tourism sector involving two hotels and a golf course. European Union. The European Union (EU) and Cuba held seven rounds of talks from 2014 to 2016 on a Political Dialogue and Cooperation Agreement covering political, trade, and development issues; ultimately, a cooperation agreement was reached and initialed in Havana in March 2016 and the European Council signed the agreement in December 2016. The agreement was submitted to the European Parliament, which overwhelmingly endorsed the agreement in early July 2017, welcoming it as a framework for relations and emphasizing the importance of the human rights dialogue between the EU and Cuba. The agreement will enter into force in full after it has been ratified in all EU member states, but the provisional application of the agreement began in November 2017. The new cooperation agreement replaces the EU's 1996 Common Position on Cuba, which stated that the objective of EU relations with Cuba included encouraging \"a process of transition to pluralist democracy and respect for human rights and fundamental freedoms.\" The position also had stipulated that full EU economic cooperation with Cuba would depend upon improvements in human rights and political freedom. Nevertheless, the new agreement states that a human rights dialogue will be established within the framework of the overall political dialogue and has numerous provisions related to democracy, human rights, and good governance. In October 2018, the EU and Cuba held their first human rights dialogue under the agreement, with the meeting addressing issues related to civil and political rights, economic, social and cultural rights, and multilateral cooperation. As noted above, EU officials visiting Cuba in January 2018 offered to provide Cuba with technical assistance regarding the country's long-awaited currency unification (see \" Economic Conditions ,\" above). Venezuela and Other Latin American Countries. For more than 15 years, Venezuela has been a significant source of support for Cuba. Dating back to 2000 under populist President Hugo Chávez, Venezuela began providing subsidized oil and investment to Cuba. For its part, Cuba has sent thousands of personnel to Venezuela. Cuba has been concerned about the future of Venezuelan financial support, however, as a result of Chávez's death in 2013 and Venezuela's mounting economic and political challenges since 2014 due to the rapid decline in oil prices and the unpopularity of the increasingly authoritarian regime of President Nicolás Maduro. As noted above, oil imports from Venezuela have declined, leading to Cuba's imposition of austerity measures and contributing to economic contraction. Estimates of the number of Cuban personnel in Venezuela vary, but a 2014 Brookings study reported that \"by most accounts there are 40,000 Cuban professionals in Venezuela,\" with 75% of those healthcare workers. The roughly 30,000 healthcare personnel include doctors and nurses, while the balance of Cuban personnel in Venezuela includes teachers, sports instructors, military advisers, and intelligence operatives. According to the Brookings study, various sources estimate that the number of Cuban military and intelligence advisers in Venezuela range from hundreds to thousands, coordinated by Cuba's military attaché in Venezuela. The extent to which the level of Cuban personnel in Venezuela has declined because of the drop in Venezuelan oil exports to Cuba and Venezuela's deepening economic crisis is uncertain, but Cuba may have withdrawn some personnel. Cuba also is engaged in Latin America beyond its close relations with Venezuela. Cuba is a member of the Bolivarian Alliance for the Americas, a Venezuelan-led integration and cooperation scheme founded in 2004 that has been weakened by Venezuela's economic and political decline. For several years, Cuba also hosted peace talks between the Colombian government and the Revolutionary Armed Forces of Colombia, which culminated in a peace agreement in 2016. Brazil was a major investor in the development of the port of Mariel, west of Havana, from 2009 to 2014, although in 2018 Cuba missed payments to Brazil's development bank on loans for the project. In 2013, Cuba began deploying thousands of doctors to rural Brazil in a program known as Mais Médicos , with Cuba earning hard currency for supplying the medical personnel. Even before his inauguration in January 2019, Brazil's new right-wing president, Jair Bolsonaro, espoused a more confrontational policy approach toward Cuba by warning in November 2018 that he may break diplomatic relations with Cuba and abolish the medical assistance program. Bolsonaro strongly criticized the medical program, maintaining that Cuban doctors should be able to receive 100% of the money Brazil pays Cuba for them (instead of the 25% they receive) and should be able to bring their families with them to Brazil. Cuba responding by ending the program and bringing its more than 8,000 medical personnel home by late December 2018. Although Bolsonaro and other critics have labeled the medical workers as \"slave labor,\" others contend that the Cuban medical personnel understand the conditions they will be working in and sign contracts for the work. Cuba has a long history of providing medical personnel overseas. International and Regional Organizations. Cuba is an active participant in international forums, including the United Nations (U.N.) and the controversial United Nations Human Rights Council. Cuba also has received support over the years from the United Nations Development Programme and the United Nations Educational, Scientific, and Cultural Organization, both of which have offices in Havana. Cuba is also a member of the U.N. Economic Commission for Latin America and the Caribbean (ECLAC, also known by its Spanish acronym, CEPAL), one of the five regional commissions of the U.N., and hosted ECLAC's 37 th session in May 2018. U.N. Secretary-General António Guterres attended the opening of the conference. ECLAC's Executive Secretary Alicia Bárcena reaffirmed the organization's commitment to accompanying Cuba in its efforts toward achieving sustainable development. Bárcena referred to the U.S. embargo on Cuba as costing Cuba more than $130 billion at current prices, the same estimate as the Cuban government. Since 1991, the U.N. General Assembly (UNGA) has approved a resolution annually criticizing the U.S. embargo and urging the United States to lift it (see text box above). Among other international organizations, Cuba was a founding member of the World Trade Organization, but it is not a member of the International Monetary Fund, the World Bank, or the Inter-American Development Bank. In 2016, Cuba signed a memorandum of understanding with the Development Bank of Latin America (CAF) with the objective of supporting technical cooperation programs for Cuba's social and economic development and laying the foundation for Cuba's future membership in the CAF; the CAF's current membership includes 17 Latin American and Caribbean countries as well as Spain and Portugal. Cuba was excluded from participation in the Organization of American States (OAS) in 1962 because of its identification with Marxism-Leninism, but in 2009, the OAS overturned that policy in a move that eventually could lead to Cuba's reentry into the regional organization in accordance with the practices, purposes, and principles of the OAS. Although the Cuban government welcomed the OAS vote to overturn the 1962 resolution suspending Cuba's OAS participation, it asserted that it would not return to the OAS. In February 2017, Cuba denied OAS Secretary-General Luis Almagro entry into the country to accept a democracy award in honor of the late democracy activist Oswaldo Payá. Cuba became a full member of the Rio Group of Latin American and Caribbean nations in November 2008 and a member of the succeeding Community of Latin American and Caribbean States (CELAC) officially established in December 2011 to boost regional cooperation, but without the participation of the United States or Canada. In 2013, Cuba assumed the presidency of the organization for one year. Cuba also hosted the group's second summit in 2014, which was attended by leaders from across the hemisphere as well as by then-U.N. Secretary-General Ban Ki-moon, who reportedly raised human rights issues with Cuban officials. In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis, in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantanamo Bay, Cuba, and Panama; and the 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban-American group Brothers to the Rescue, which resulted in the deaths of four U.S. crew members. Beginning in the early 1960s, U.S. policy toward Cuba consisted largely of isolating the island nation through comprehensive economic sanctions, including an embargo on trade and financial transactions. President Kennedy proclaimed an embargo on trade between the United States and Cuba in February 1962, citing Section 620(a) of the Foreign Assistance Act of 1961 (FAA), which authorizes the President \"to establish and maintain a total embargo upon all trade between the United States and Cuba.\" At the same time, the Department of the Treasury issued the Cuban Import Regulations to deny the importation into the United States of all goods imported from or through Cuba. The authority for the embargo was later expanded in March 1962 to include the Trading with the Enemy Act (TWEA). In July 1963, the Department of the Treasury revoked the Cuban Import Regulations and replaced them with the more comprehensive Cuban Assets Control Regulations (CACR)—31 C.F.R. Part 515—under the authority of TWEA and Section 620(a) of the FAA. The CACR, which include a prohibition on most financial transactions with Cuba and a freeze of Cuban government assets in the United States, remain the main body of Cuba embargo regulations and have been amended many times over the years to reflect changes in policy. They are administered by the Department of the Treasury's Office of Foreign Assets Control (OFAC) and prohibit financial transactions as well as trade transactions with Cuba. The CACR also require that all exports to Cuba be licensed by the Department of Commerce, Bureau of Industry and Security (BIS), under the provisions of the Export Administration Act of 1979, as amended ( P.L. 96-72 ; 50 U.S.C. Appendix 2405(j)). The Export Administration Regulations (EAR) are found at 15 C.F.R. Sections 730-774. Congress subsequently strengthened sanctions on Cuba with enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX). Among its provisions, the CDA prohibits U.S. foreign subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any seaborne vessel to load or unload freight if it has been involved in trade with Cuba within the previous 180 days unless licensed by the Department of the Treasury. (In October 2016, OFAC issued a general license for vessels involved in trade with Cuba.) The LIBERTAD Act, enacted in the aftermath of Cuba's shooting down two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Most significantly, the act codified the Cuban embargo as permanent law, including all restrictions imposed by the executive branch under the CACR. This provision is noteworthy because of its long-lasting effect on U.S. policy options toward Cuba. The executive branch is prevented from lifting the economic embargo without congressional concurrence through legislation until certain democratic conditions set forth in the law are met, although the President retains broad authority to amend the regulations therein. Another significant sanction in Title III of the law holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Acting under provisions of the law, however, all Administrations (including the Trump Administration) have suspended the implementation of Title III at six-month intervals, most recently in June 2018 (effective August 1, 2018 through January 2019). In November 2018, National Security Adviser John Bolton maintained in a press interview that the Administration was exploring whether to continue to suspend Title III or to allow lawsuits to go forward. (For additional information, see section on \" U.S. Property Claims ,\" below.) TSRA authorizes U.S. commercial agricultural exports to Cuba, but it also includes prohibitions on U.S. assistance and private financing and requires \"payment of cash in advance\" or third-country financing for the exports. The act also prohibits tourist travel to Cuba. In addition to these acts, Congress enacted numerous other provisions of law over the years that impose sanctions on Cuba, including restrictions on trade, foreign aid, and support from international financial institutions. The State Department also designated the government of Cuba as a state sponsor of international terrorism in 1982 under Section 6(j) of the Export Administration Act and other laws because of the country's alleged ties to international terrorism. Beyond sanctions, another component of U.S. policy has consisted of support measures for the Cuban people. This support includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the CDA, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. The enactment of TSRA by the 106 th Congress also led to the United States becoming one of Cuba's largest commercial suppliers of agricultural products. Authorization for purposeful travel to Cuba and cash remittances to Cuba has constituted an important means to support the Cuban people, although significant congressional debate has occurred over these issues for many years. Despite the poor state of U.S.-Cuban relations, several examples of bilateral cooperation took place over the years in areas of shared national interest. Three areas that stand out are alien migrant interdiction (with migration accords negotiated in 1994 and 1995), counternarcotics cooperation (with increased cooperation dating back to 1999), and cooperation on oil spill preparedness and prevention (since 2011). During its first six years, the Obama Administration continued the dual-track policy approach toward Cuba that had been in place for many years. It maintained U.S. economic sanctions and continued measures to support the Cuban people, such as U.S. government-sponsored radio and television broadcasting and funding for democracy and human rights projects. At the same time, however, the Obama Administration instituted some changes in policy that advanced support for the Cuban people. In April 2009, at the Summit of the Americas held in Trinidad and Tobago, President Obama fulfilled a campaign pledge by lifting all restrictions on family travel and remittances (for more details, see \" U.S. Travel to Cuba ,\" below). The President said that \"the United States seeks a new beginning with Cuba.\" While recognizing that it would take time to \"overcome decades of mistrust,\" the President said \"there are critical steps we can take toward a new day.\" He stated that he was prepared to have his Administration \"engage with the Cuban government on a wide range of issues—from drugs, migration, and economic issues, to human rights, free speech, and democratic reform.\" In 2011, the Obama Administration introduced new measures to further reach out to the Cuban people through increased purposeful travel (including people-to-people educational travel) and an easing of restrictions on nonfamily remittances. Overall, however, engagement with the Cuban government during the Administration's first six years was stymied because of Cuba's December 2009 imprisonment of an American subcontractor, Alan Gross, who had been working on democracy projects funded by the U.S. Agency for International Development. Securing the release of Alan Gross became a top U.S. priority, and the State Department maintained that it was using every appropriate channel to press for his release. On December 17, 2014, President Obama announced major developments in U.S.-Cuban relations and unveiled a new policy approach toward Cuba. First, he announced that the Cuban government had released Alan Gross on humanitarian grounds after five years of imprisonment. He also announced that, in a separate action, the Cuban government released an individual imprisoned since 1995 who had been an important U.S. intelligence asset in Cuba in exchange for three Cuban intelligence agents who had been imprisoned in the United States since 1998. In the aftermath of these releases, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba toward a policy of engagement. The President said that his Administration would \"end an outdated approach that, for decades, has failed to advance our interests.\" He maintained that the United States would continue to raise concerns about democracy and human rights in Cuba but stated that \"we can do more to support the Cuban people and promote our values through engagement.\" President Obama outlined three major steps to move toward normalization: (1) a review of Cuba's designation by the Department of State as a state sponsor of international terrorism; (2) the reestablishment of diplomatic relations with Cuba; and (3) an increase in travel, commerce, and the flow of information to and from Cuba. Cuba was first added to the so-called terrorism list in 1982 pursuant to Section 6(j) of the Export Administration Act of 1979 and other laws because of its alleged ties to international terrorism and support for terrorist groups in Latin America. President Obama directed the State Department to review Cuba's designation as a state sponsor of terrorism and stated that \"at a time when we are focused on threats from al Qaeda to ISIL, a nation that meets our conditions and renounces the use of terrorism should not face this sanction.\" Following the State Department's review, the President transmitted a report to Congress in April 2015 justifying the rescission, which maintained that Cuba had provided assurances that it would not support acts of international terrorism. No resolutions of disapproval were introduced in Congress to block the rescission, which paved the way for then-Secretary of State John Kerry to rescind Cuba's designation on May 29, 2015, 45 days after the submission of the report to Congress. Subsequently, to reflect the rescission of Cuba's designation as a state sponsor of terrorism in U.S. regulations, the Department of the Treasury's OFAC amended the Cuban Assets Control Regulations (CACR) in June 2015 and the Department of Commerce's BIS amended the Export Administration Regulations (EAR) in July 2015. U.S.-Cuban diplomatic relations were severed by the Eisenhower Administration in January 1961 in response to the Cuban government's demand to decrease the number of U.S. Embassy staff within 48 hours. In 1977, under the Carter Administration, both countries established Interests Sections in each other's capitals to represent each country's interests. Beginning in January 2015, the United States and Cuba conducted four rounds of talks on reestablishing relations. Ultimately, the United States and Cuba reestablished diplomatic relations in July 2015 and embassies were reopened in Havana and Washington. With the restoration of diplomatic relations, government-to-government engagement increased significantly under the Obama Administration. U.S. and Cuban officials held five Bilateral Commission meetings to coordinate efforts to advance the normalization process. Officials negotiated numerous bilateral agreements after the restoration of relations, including those in the following areas: marine protected areas (November 2015); environmental cooperation on range of issues (November 2015); direct mail service (December 2015); civil aviation (February 2016); maritime issues related to hydrography and maritime navigation (February 2016); agriculture (March 2016); health cooperation (June 2016); counternarcotics cooperation (July 2016); federal air marshals (September 2016); cancer research (October 2016); seismology (December 2016); meteorology (December 2016); wildlife conservation (December 2016); animal and plant health (January 2017); oil spill preparedness and response (January 2017); law enforcement cooperation (January 2017); and search and rescue (January 2017). The United States and Cuba also signed a bilateral treaty in January 2017 delimiting their maritime boundary in the eastern Gulf of Mexico. Bilateral dialogues were held on all of these issues as well as on other issues including counterterrorism, claims (U.S. property, unsatisfied court judgments, and U.S. government claims), economic and regulatory issues, human rights, renewable energy and efficiency, trafficking in persons, and migration. In March 2016, President Obama traveled to Cuba, the first presidential visit since 1928, with the goals of building on progress toward normalizing relations and expressing support for human rights. In a press conference with Raúl Castro, President Obama said that the United States would \"continue to speak up on behalf of democracy, including the right of the Cuban people to decide their own future.\" He also spoke out forcefully for advancing human rights during his televised speech to the Cuban nation. He stated his belief that citizens should be free to speak their minds without fear and that the rule of law should not include arbitrary detentions. In October 2016, President Obama issued a presidential policy directive on the normalization of relations with Cuba. The directive set forth the Administration's vision for normalization of relations and laid out six medium-term objectives: (1) government-to-government interaction; (2) engagement and connectivity; (3) expanded commerce; (4) economic reform; (5) respect for universal human rights, fundamental freedoms, and democratic values; and (6) Cuba's integration into international and regional systems. The directive also outlined the roles and responsibilities for various U.S. departments and agencies to move the normalization process forward. It noted that the Administration would seek to build support in Congress to lift the embargo and other statutory provisions constraining efforts to normalize economic relations with Cuba. The directive can be viewed as an attempt to keep up the momentum toward normalizing relations in the next Administration and to protect the changes that have been made to date in U.S. policy toward Cuba. (As noted below, however, President Trump issued a national security presidential memorandum on June 16, 2017, that superseded and replaced the October 2016 policy directive.) The Obama Administration's third step of increasing travel, commerce, and the flow of information to and from Cuba required amendments to U.S. regulations—the CACR and EAR—administered, respectively, by the Department of the Treasury's OFAC and the Commerce Department's BIS. To implement the President's new policy, the two agencies issued five rounds of amendments to the CACR and EAR in January and September 2015 and in January, March, and October 2016. The Treasury and Commerce Department amendments to the regulations eased restrictions on travel, remittances, trade, telecommunications, and banking and financial services. They also authorized certain U.S. companies or other entities to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. These entities include news bureaus, exporters of authorized goods to Cuba, entities providing mail or parcel transmission services, telecommunication or internet-based service providers, entities organizing or conducting certain educational activities, religious organizations, and carrier and travel service providers. (For more on the regulatory changes, see \" U.S. Travel to Cuba \" and \" U.S. Exports and Sanctions ,\" below.) Such changes fall within the scope of the President's discretionary licensing authority to make changes to the embargo regulations. When President Obama unveiled his policy shift, however, he acknowledged that he did not have the authority to lift the embargo because it was codified in permanent law (Section 102(h) of the LIBERTAD Act). As noted above, the LIBERTAD Act ties the lifting of the embargo to conditions in Cuba (including that a democratically elected government is in place). Lifting the overall economic embargo would require amending or repealing the LIBERTAD Act as well as other statutes that have provisions impeding normal economic relations with Cuba, such as the CDA and TSRA. During the electoral campaign, then-candidate Trump said he would cancel or reverse President Obama's policy on Cuba unless Cuba took action to improve political and religious freedom and free political prisoners. After Fidel Castro's death in November 2016, then-President-elect Trump issued a statement referring to Castro as a \"brutal dictator who oppressed his own people for nearly six decades.\" This statement was followed by a longer message maintaining that \"If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate [the] deal.\" In February 2017, the White House maintained that the Trump Administration was conducting a full review of U.S. policy toward Cuba and that human rights would be at the forefront of those policy discussions. In May 2017, then-Acting Assistant Secretary of State for Western Hemisphere Affairs Francisco Palmieri emphasized that \"one of the areas that is going to be a high priority is ensuring that Cuba makes more substantive progress toward a greater respect for human rights inside the country.\" On May 20, 2017, President Trump issued a statement to the Cuban American community and the people of Cuba in celebrating the anniversary of Cuban independence. That date is in commemoration of Cuba's independence from the United States in 1902 in the aftermath of the Spanish-American War in 1898, but is not celebrated in Cuba because of the continued U.S. intervention in Cuba under the Platt Amendment until its repeal in 1935 (see \" Brief Historical Background \" above). In the strongly worded statement, President Trump said, \"The Cuban people deserve a government that peacefully upholds democratic values, economic liberties, religious freedoms, and human rights, and my Administration is committed to achieving that vision.\" Cuba's state television published an \"official note\" describing the statement as \"controversial and ridiculous.\" President Trump unveiled his Administration's policy on Cuba on June 16, 2017, which partially rolls back some of the Obama Administration's efforts to normalize relations with Cuba. President Trump set forth his Administration's policy in a speech in Miami, FL, where he signed a national security presidential memorandum (NSPM) on Cuba replacing President Obama's October 2016 presidential policy directive (discussed above), which had laid out objectives for the normalization process. The new policy leaves most of the Obama-era policy changes in place, including the reestablishment of diplomatic relations and a variety of eased sanctions to increase travel and commerce with Cuba. The new policy also keeps in place the Obama Administration's action ending the so-called wet foot/dry foot policy toward Cuban migrants, which, according to the NSPM, had \"encouraged untold thousands of Cuban nationals to risk their lives to travel unlawfully to the United States.\" The most significant policy changes set forth in President Trump's NSPM included (1) restrictions on financial transactions with companies controlled by the Cuban military, intelligence, or security services or personnel and (2) the elimination of individual people-to-people travel. President Trump's memorandum directed the heads of departments (Treasury and Commerce, in coordination with the State Department) to initiate a process within 30 days to adjust current regulations. On November 8, 2017, the Treasury and Commerce Departments issued amended regulations (effective November 9) to implement the new policy, and, as discussed below, the State Department took complementary action in November 2017 and November 2018. On November 1, 2018, National Security Adviser John Bolton made a speech in Miami, FL, strongly criticizing the Cuban government on human rights and stating that that \"we will only engage with a Cuban government that is willing to undertake necessary and tangible reforms—a government that respects the interests of the Cuban people.\" Bolton's speech was full of anti-communist rhetoric reminiscent of the Cold War era. Bolton referred to Cuba, Venezuela, and Nicaragua as a \"troika of tyranny\" and the \"cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere.\" He referred to the three countries' leaders as \"three stooges of socialism\" and as \"clownish pitiful figures.\" In a press interview before the speech, Bolton also maintained that the Administration was considering whether to continue to suspend Title III of the LIBERTAD Act to allow lawsuits in U.S. federal court against those \"trafficking\" in confiscated property in Cuba, an action that would significantly ratchet up U.S. sanctions on Cuba; since the enactment of the LIBERTAD Act in 1996, all Administrations have suspended, at six month intervals, the right to file such lawsuits. (For more on Title III, see \" U.S. Property Claims ,\" below.) Restrictions on Transactions with the Cuban Military. Pursuant to the NSPM, the State Department was tasked with identifying entities controlled by the Cuban military, intelligence, or security services or personnel and publishing a list of those entities with which direct financial transactions would disproportionately benefit those services or personnel at the expense of the Cuban people or private enterprise in Cuba. The NSPM specifically identified the Grupo de Administración Empresarial S.A . (GAESA), a holding company of the Cuban military involved in most sectors of the Cuban economy, particularly the tourism sector. The State Department issued a list of \"restricted entities\" in November 2017 and updated the list with additional entries in November 2018. Currently, there are 205 entities on the list, including 2 ministries, 5 holding companies (including GAESA) and 43 of their subentities (including the Mariel Special Development Zone), 99 hotels (with 28 in Havana), 2 tourist agencies, 5 marinas, 10 stores in Old Havana, and 39 entities serving the defense and security sectors. The Treasury Department forbids financial transactions with those entities, with certain exceptions, including transactions related to air or sea operations supporting permissible travel, cargo, or trade; the sale of agricultural and medical commodities; direct telecommunications or internet access for the Cuban people; and authorized remittances. The new prohibitions limit U.S. economic engagement with Cuba, particularly in travel-related transactions and potential investment opportunities. Restrictions on People-to-People Travel. With regard to people-to-people travel, the Department of the Treasury amended the CACR to require that people-to-people educational travel take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization. Individuals are no longer authorized to engage in such travel on their own. The Obama Administration had authorized such individual travel in March 2016, which, combined with the beginning of regular commercial flights and cruise ship service, led to an increase in Americans visiting Cuba. With the new Treasury Department regulations issued, the level of U.S. travel to Cuba has fallen. (Also see \" U.S. Travel to Cuba ,\" below.) Cuban Government Reaction. As expected, the Cuban government's reaction to President Trump's June 2017 speech announcing Cuba policy changes was critical. Foreign Minister Bruno Rodríguez asserted that the speech \"was a grotesque spectacle straight from the Cold War.\" Nevertheless, the Cuban government also reiterated its willingness to continue a respectful and cooperative dialogue on issues of mutual interest and the negotiation of outstanding issues, although it maintained that Cuba would not make concessions to its sovereignty and independence. At a meeting of Cuba's National Assembly in July 2017, then-Cuban President Raúl Castro criticized the Trump Administration's new policy toward Cuba as a setback to bilateral relations and reaffirmed that any strategy with the goal of destroying the Cuban revolution would fail. Nevertheless, Castro also reiterated that Cuba has the will to continue negotiating outstanding bilateral issues with the United States. He maintained that \"Cuba and the United States can cooperate and live side by side, respecting differences and promoting all that can benefit both countries and peoples,\" but he also asserted that no one should expect Cuba to make concessions inherent to its sovereignty and independence. When President Trump announced his Cuba policy, he asserted that he was \"canceling the last administration's policy change with Cuba,\" which he labeled as \"a terrible and misguided deal with the Castro regime.\" The President maintained that \"the outcome of the last administration's executive action has been only more repression and a move to crush the peaceful democratic movement.\" Although the Cuban government's human rights record remained poor after the Obama Administration's policy of engagement was initiated in December 2014, President Obama continued to speak out strongly about human rights conditions in Cuba, including during his March 2016 visit to Havana; the two countries subsequently engaged in a bilateral human rights dialogue in October 2016. In his June 2017 Miami speech, President Trump called for the Cuban government to end the abuse of dissidents, release political prisoners, stop jailing innocent people, and return U.S. fugitives from justice in Cuba, all issues that the Obama Administration had raised with the Cuban government. The President stated that \"any changes to the relationship between the United States and Cuba will depend on real progress toward these and other goals.\" Once Cuba takes concrete steps in these areas, President Trump said \"we will be ready, willing and able to come to the table to negotiate that much better deal for Cubans, for Americans.\" The Trump Administration also cited concern about human rights for its November 1, 2017, vote against the annual UNGA resolution condemning the U.S. embargo. In October 2016, under the Obama Administration, the United States abstained for the first time on the resolution, but U.S. officials also took the opportunity to express profound concerns about the Cuban government's Cuba's poor human rights record. (For more on the U.N. votes, see \" Cuba's Foreign Relations \" above.) Trump Administration officials continued to speak out on Cuba's human rights situation in 2018. Vice President Mike Pence spoke out on the human rights situation in Cuba during an address to the OAS in May. Pence stated that \"the longest-surviving dictatorship in the Western Hemisphere still clings to power\" and that even though \"the Castro name is now fading, the oppression and police state they imposed is as powerful as ever.\" He asserted, \"Today, the United States once again stands with the Cuban people in their stand for freedom.\" As noted above, National Security Adviser John Bolton also spoke out on Cuba's poor human rights record in a November 1, 2018, speech in Miami, The State Department has continued to call attention to the plight of political prisoners in Cuba. In April 2018, then-Acting Secretary of State John Sullivan and USAID Administrator Mark Green met with members of Cuba's independent civil society on the margins of the Summit of the Americas held in Peru. According to the State Department, Sullivan called \"for democratic reforms to Cuba's flawed electoral process and an end to arbitrary detention and intimidation of independent civil society.\" In June 2018, the State Department reiterated the U.S. call for the release of all political prisoners in Cuba and highlighted U.S. concern for two Cuban political prisoners declared \"prisoners of conscience\" by Amnesty International—Dr. Eduardo Cardet and Dr. Ariel Ruiz Urquiola, who was subsequently released in July 2018. In October 2018, the State Department called for the release of UNPACU activist Tomás Núñez Magdariaga, who had been on a hunger strike since August; the Cuban government subsequently released him on October 15, 2018. A day later, the U.S. Mission to the United Nations launched a campaign to call attention to Cuba's \"estimated 130 political prisoners.\" Cuban diplomats attempted to disrupt the event by making noise, an action that Secretary of State Mike Pompeo dubbed \"a childish tantrum.\" Secretary of State Pompeo subsequently wrote an open letter to Cuban Foreign Minister Bruno Rodriguez in early December 2018 asking for evidence against those held as political prisoners. (For more details, see \" Human Rights \" section, above.) Internet Task Force. In January 2018, the State Department announced the establishment of a Cuba Internet Task Force, composed of U.S. government and non-U.S. government representatives, to examine the technological challenges and opportunities for expanding internet access and independent media in Cuba. The task force was convened pursuant to President Trump's NSPM on Cuba and held its first meeting on February 7, 2018, with two subcommittees formed to develop recommendations—one to explore the role of media and freedom of information in Cuba and the other to explore internet access in Cuba. According to the State Department, the task force will review the subcommittees' recommendations and prepare a final report for the Secretary of State within a year. Cuban state media criticized the State Department's establishment of the task force, maintaining that the move \"was aimed at subverting Cuba's internal order.\" Cuba's foreign ministry issued a note of diplomatic protest to the U.S. Embassy in Havana and called upon the U.S. government to respect Cuba sovereignty. In a demonstration of continuity in U.S. policy between the Trump and Obama Administrations, the U.S. and Cuban governments have continued to engage on various bilateral issues through meetings and dialogues. The two countries have continued to hold semiannual migration talks, which, since 1995, have provided a forum to review and coordinate efforts to ensure safe, legal, and orderly migration between Cuba and the United States; talks were held in April and December 2017, and most recently in July 2018. The United States and Cuba also have continued to hold Bilateral Commission meetings that began under the Obama Administration in which the two government review priorities and areas for engagement. Officials held a sixth Bilateral Commission meeting in September 2017 and a seventh meeting in June 2018. According to the State Department, at the June 2018 meeting, the two countries reviewed such areas for engagement as trafficking in persons, civil aviation safety, law enforcement matters, agriculture, maritime safety and search and rescue, certified claims, and environmental challenges. The State Department maintained that the United States reiterated the urgent need to identify the source of the \"attacks\" on U.S. diplomats and to ensure they cease, expressed continued concerns about the arbitrary detention of independent journalists and human rights defenders, and acknowledged Cuba's progress in repatriating Cubans with final orders while also emphasizing that Cuba needs to accept greater numbers of returnees. Cuba's Ministry of Foreign Affairs maintained the meeting provided an opportunity to review areas of exchange and cooperation, but it also criticized several aspects of U.S. policy, including the \"intensification\" of the U.S. embargo and what Cuba viewed as the \"political manipulation of the alleged health cases\" that became a \"pretext\" to reduce staff and therefore affect embassy operations in both countries. Both countries also have continued engagement on other bilateral issues. The U.S. Coast Guard and the Cuban Border Guard participated in professional exchanges in July 2017 and January 2018 covering a variety of topics, including search and rescue. The U.S. Departments of State, Justice, and Homeland Security participated in law enforcement dialogues with Cuban counterparts in September 2017 and July 2018; the 2018 dialogue included such topics as fugitives and the return of Cuban nationals with final orders of removal. Additional bilateral meetings and exchanges have been held in 2018 on such topics as cybersecurity and cybercrime, counternarcotics efforts, and counterterrorism in January; anti-money laundering efforts and trafficking in persons in February; search and rescue in March; and agriculture and scientific cooperation related to environmental disaster in April. As noted below, for more than a decade, Cuba has returned some wanted fugitives to the United States on a case-by case basin. In 2018, this included the return of a man wanted on charges related to ecoterrorism in August and the return in November of a fugitive from New Jersey wanted for murder. In February, with assistance from U.S. law enforcement, Cuba prosecuted a Cuban national for the 2015 murder of a Florida doctor. (See \" U.S. Fugitives from Justice ,\" below.) On September 29, 2017, the U.S. Department of State ordered the departure of nonemergency personnel assigned to the U.S. Embassy in Havana, as well as their families, to minimize the risk of their exposure to harm because of a series of unexplained injuries suffered by embassy personnel since November 2016. As a result, the embassy's U.S. staffing level, which numbered over 50, was reduced by about two-thirds. According to the State Department, the U.S. government personnel suffered from \"attacks of an unknown nature,\" at U.S. diplomatic residences and hotels where temporary duty staff were staying, with symptoms including \"ear complaints, hearing loss, dizziness, headache, fatigue, cognitive issues, and difficulty sleeping.\" U.S. officials maintain that they do not know the mechanism used to cause the health injuries, the source, who is responsible, or the motive behind the alleged \"attacks.\" The State Department reports that 26 Americans have experienced health effects from the incidents. Twenty-four of the incidents occurred from as early as November 2016 to August 2017. In June 2018, two new cases stemming from occurrences in May 2018 were confirmed after medical evaluations, bringing the total to 26 cases. On October 3, 2017, the State Department ordered the departure of 15 Cuban diplomats from the Cuban Embassy in Washington, DC. According to then-Secretary of State Rex Tillerson, the decision was made because of Cuba's failure to protect U.S. diplomats in Havana and to ensure equity in the impact on respective diplomatic operations. Previously, in May 2017, the State Department had asked two Cuban diplomats to depart the United States because some U.S. diplomats in Cuba had returned to the United States for medical reasons. State Department officials maintain that the United States would need full assurances from the Cuban government that the \"attacks\" will not continue before contemplating the return of diplomatic personnel. On March 5, 2018, the State Department began a permanent staffing plan at the U.S. Embassy in Havana, operating it as an \"unaccompanied post\" without family members. The change took place because the temporary \"ordered departure\" status for the embassy had reached its maximum allowable days. According to the State Department, \"the embassy will continue to operate with the minimum personnel necessary to perform core diplomatic and consular functions, similar to the level of emergency staffing maintained during ordered departure.\" Although responsibility for injuries to U.S. personnel in Cuba is unknown, speculation by some observers has focused on such possibilities as a rogue faction of Cuba's security services or a third country, such as Russia, with the apparent motivation of wanting to disrupt U.S.-Cuban relations. Some maintain that Cuba's strong security apparatus makes it unlikely that a third country would be involved without the Cuban government's acquiescence. Others stress that there has been no evidence implicating a third country and that it would be highly unusual for a rogue Cuban security faction to operate contrary to the interests of the Cuban government. Questions have revolved around what might cause such a variety of symptoms, including whether a faulty surveillance device could be responsible for some of the incidents. Since the incidents were first made public by the State Department in August 2017, numerous press reports have referred to them as being caused by some type of sonic device. Yet some scientists and experts in acoustics have cast doubt on this possibility, arguing that the laws of physics render it unlikely that the use of ultrasound, which they see as the most plausible type of acoustic employed, could be effectively used to harm personnel. They add that some of the reported symptoms individuals have encountered would not have resulted from the use of such a device. Some point to other possible scenarios, such as personnel coming into contact with toxins that damage hearing, or even the spread of anxiety or other psychogenic contributors capable of triggering symptoms. Some scientists assert that data regarding the potential effects of an ultrasound weapon on human health is currently slim. An article in the Journal of the American Medical Association ( JAMA ), published February 15, 2018, reported that University of Pennsylvania physicians who evaluated individuals from the U.S. Embassy community in Havana maintained that the individuals \"appeared to have sustained injury to widespread brain networks without an associated history of head trauma.\" The study, however, found no conclusive evidence of the cause of the brain injuries. An accompanying editorial in JAMA cautioned about drawing conclusions from the study, noting that the evaluations were conducted an average of 203 days after the onset of the symptoms and that it was unclear whether individuals who developed symptoms were aware of earlier reports by others. In August 2018, JAMA published several letters that raised additional questions concerning the February 2018 study, including one that asserted mass psychogenic illness could not be discounted; the study's authors, however, pushed back against the criticism, maintaining that a complex constellation of neurological symptoms was consistent across the cohort that was studied. A March 2018 University of Michigan report by three computer scientists concluded that the sounds recorded in Cuba could have been caused by two eavesdropping devices placed in close proximity to each other. The study concluded that the sounds could have been inadvertently produced without malicious intent. In December 2018, a group of doctors from the University of Miami and the University of Pittsburgh published a study maintaining that those diplomats exhibiting symptoms suffered from ear damage as opposed to brain injury. In January 2019, a group of biologists from the University of California Berkeley and the U.K's University of Lincoln issued a study on a recording of the alleged sounds heard by some U.S. Embassy employees that had been released by the Associated Press in October 2017. The study maintains that the sound matched the echoing call of a Caribbean cricket. The Canadian government announced in April 2018, that it also was changing the designation of its embassy in Havana as an \"unaccompanied post,\" meaning that diplomatic staff will not be accompanied by their family members. Since 2017, 13 Canadians reportedly experienced symptoms such as headaches, dizziness, nausea, and difficulty concentrating, with the most case confirmed in November 2018. Canadian medical specialists raised concerns about a possible new type of acquired brain injury, the cause of which is unknown, but the Canadian government maintains that there is no evidence to suggest that Canadian travelers to Cuba are at risk. The State Department convened an Accountability Review Board (ARB) in January 2018 to examine the circumstances regarding unexplained injuries in Cuba. The State Department submitted a report to Congress on August 30, 2018, and at the same time released a fact sheet on its website. The ARB's mandate, according to the State Department, was not to determine the cause of the incidents but rather to examine the State Department's response and the adequacy of security and other related procedures. The ARB found that the department's security systems and procedures were adequate and properly implemented overall but that there were significant vacancies in security staffing and some challenges with information sharing and communication. The ARB issued 30 recommendations to the State Department concerning accountability, interagency coordination, medical issues, internal communication and information sharing, risk/benefit analysis, and diplomatic security. The State Department maintains that it accepted all of the recommendations. In May 2018, the State Department announced that a U.S. government employee serving in Guangzhou, China, experienced a health incident similar to that experienced by members of the U.S. diplomatic community in Havana. Secretary of State Michael Pompeo noted the incident in testimony before the House Foreign Affairs Committee on May 23. Subsequently, on June 5, Pompeo announced the establishment of a multiagency Health Incidents Response Task Force to serve as a coordinating body for State Department and interagency activities, including identification and treatment of affected personnel and family members abroad, investigation and risk mitigation, messaging, and diplomatic outreach. Under the 1961 Vienna Convention on Diplomatic Relations and the 1963 Vienna Convention on Consular Relations, nearly all countries worldwide participate in reciprocal obligations regarding the diplomatic facilities of other countries in their territory. The United States and Cuba are both party to these conventions. U.S. officials have repeatedly noted the Cuban government's obligations under the Vienna Convention to protect U.S. diplomats in Cuba. Under the 1961 convention, the safety of diplomatic agents (Article 29), the private residences of diplomatic agents (Article 30), and the premises of diplomatic missions (Article 22) are protected, with the receiving state under special duty to guarantee such protection. Similarly, under the 1963 convention (Article 40), the receiving state is responsible for treating consular officers with due respect and taking \"all appropriate steps to prevent any attack on their person, freedom or dignity.\" The Cuban government denies responsibility for the injuries of U.S. personnel, maintaining that it would never allow its territory to be used for any action against accredited diplomats or their families. In the aftermath of the order expelling its diplomats, Cuba's Ministry of Foreign Affairs issued a statement strongly protesting the U.S. action, asserting that it was motivated by politics and arguing that ongoing investigations have reached no conclusion regarding the incidents or the causes of the health problems. The statement noted that Cuba had permitted U.S. investigators to visit Cuba and reiterated the government's willingness to continue cooperating on the issue. At a November 2, 2017, press conference in Washington, DC, Cuban Foreign Minister Rodríguez called for the U.S. government to \"stop politicizing the issue,\" maintaining that it could \"take bilateral relations further back\" with \"harmful consequences for both peoples and countries.\" Rodríguez reiterated that Cuban authorities \"preliminarily concluded there is no evidence whatsoever of the occurrence of the alleged incidents or the cause and the origin of these ailments reported by U.S. diplomats and their relatives.\" The foreign minister also maintained that U.S. cooperation on the investigation has been very limited and raised a series of questions regarding the adequacy and timeliness of information provided to Cuban experts and medical personnel. In September 2018, a delegation of Cuban scientists visited the United States to have meetings with the State Department, the National Academy of Sciences, and on Capitol Hill. The director of the Cuban Neuroscience Center, Dr. Mitchell Joseph Valdés-Sosa, maintains that there could be various reasons why the diplomats became sick (such as hypertension, stress, other preexisting conditions, and psychogenesis) but that Cuban scientists have not seen any credible evidence that some type of high-tech weapon was used. The Cuban delegation expressed disappointment that U.S. officials have not shared more medical and clinical data on the illnesses experienced by the U.S. diplomats. In November 2018, Dr. Valdés-Sosa coauthored a letter in Science magazine with a professor from the University of Pennsylvania's Department of Bioengineering maintaining that some \"scientists have allowed speculation about the causes of these health issue to outpace the evidence\" and that \"there is insufficient evidence to guess about the cause of the sounds.\" The State Department issued a travel warning in September 2017, stating that due to the drawdown in staff, the U.S. Embassy in Havana had limited ability to assist U.S. citizens in Cuba. The warning advised U.S. citizens to avoid travel to Cuba because of the risk of being subject to injury, since some of the incidents occurred at hotels frequented by U.S. citizens. In January 2018, the State Department revamped its travel advisory system to include four advisory levels: Level 1, exercise normal precautions; Level 2, exercise increased caution; Level 3, reconsider travel; and Level 4, do not travel. At the time, the advisory for Cuba was set at Level 3, recommending that travelers should reconsider travel to Cuba but indicating that if the decision to travel was made, travelers should avoid the Hotel Nacional and Hotel Capri, where some of the injuries occurred. On August 23, 2018, however, the State Department eased its travel advisory for Cuba to Level 2, exercise increased caution, with a spokesman maintaining that the agency \"undertook a thorough review of the risks to private U.S. citizens in Cuba and decided a Level 2 travel advisory was appropriate.\" According to the advisory, travelers are still advised to avoid the Hotel Nacional and the Hotel Capri and to immediately move to another area if they experience any acute auditory or sensory phenomena. Travel agencies and organizations sponsoring travel to Cuba lauded the State Department's easing of the travel advisory. The two-thirds staff reduction at the U.S. Embassy in Havana has had implications for bilateral relations. Most visa processing at the U.S. Embassy in Havana has been suspended. Most Cubans applying for nonimmigrant visas must go to a U.S. embassy or consulate in another country, and applications and interviews for immigrant visas are currently being handled at the U.S. Embassy in Georgetown, Guyana. The suspension of nonimmigrant visa processing has made it more difficult and increased costs for Cubans visiting family in the United States and for Cuban cuentapropistas (private sector workers) traveling to the United States to bring back inputs for their businesses. The suspension also has increased the costs for Cuban musicians, dancers, and other artists who now face a decision whether to travel to a third country to apply for a nonimmigrant visa if they want to perform in the United States; as a result, some have canceled tours in the United States. In 2013, the United States had begun granting multiple entry visas, good for five years, for Cubans visiting the United States. As those visas expire, Cubans will need to travel to a third country to request a new visa if they want to visit the United States. In a 1994 bilateral migration accord with Cuba, the United States committed to issue 20,000 travel documents annually. It met that commitment in FY2017, but the embassy staff reduction has negatively affected the United States' ability to meet its commitment in FY2018. The State Department acknowledged in April 2018 that it would not be able to issue 20,000 travel documents for this fiscal year. Ultimately in FY2018, according to the Department of State, the Department issued 4,060 travel documents in the categories specified under the migration accord. Since the staff reduction at the U.S. Embassy in Havana, information posted on the website of the U.S. Embassy in Havana has stated that the State Department and the Department of Homeland Security (DHS) are determining arrangements for continuing to process applications under the Cuban Family Reunification Parole Program (CFRP), a program administered by DHS's U.S. Citizenship and Immigration Services (USCIS). The CFRP was established in 2007 by USCIS to help the United States meet its annual obligation under the 1994 U.S.-Cuba migration accord. Staff reductions led USCIS to suspend operations at its field office in Havana in 2017 due to the drawdown in staff; USCIS permanently closed its offices in Havana on December 10, 2018. In past years, around 75% of the immigrant travel documents issued for Cuban nationals annually were issued under the CFRP. In October 2017, State Department officials indicated that they would work with DHS to ensure continued operation of the CFRP, but no plans have been announced since then. Given that a majority of immigrant travel documents issued for Cubans are from the CFRP program, it could be difficult for the United States to reach the annual 20,000 target level without the CFRP program being reactivated and without USCIS reestablishing its presence at the embassy. The staff reduction at the U.S. Embassy in Havana also led to the closure of the Refugee Section which had administered the U.S. Refugees Admission Program in Cuba. The embassy is not accepting any new applications or processing refugee cases. The section was run by the State Department's Bureau of Population, Refugees and Migration in conjunction with USCIS and the Office of Refugee Resettlement of the Department of Health and Human Services. In FY2017, at least 177 Cubans were admitted to the United States as refugees, whereas in FY2018, through August 4, 2018, no Cubans were admitted as refugees. The embassy staff reduction likely also has made it more difficult to cover significant economic and political developments in Cuba, including outreach to civil society and human rights activists. The Political Section used to have several officers covering economic and political issues, including human rights; due to the staff reduction, there is one U.S. official in the section. Over the years, although U.S. policymakers have agreed on the overall objectives of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there have been several schools of thought about how to achieve those objectives. Some have advocated a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing efforts to support the Cuban people. Others have argued for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people and would move toward engaging Cuba in dialogue. Still others have called for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. Legislative initiatives introduced over the past decade have reflected these three policy approaches. Dating back to 2000, there have been efforts in Congress to ease U.S. sanctions, with one or both houses at times approving amendments to appropriations measures that would have eased U.S. sanctions on Cuba. Until 2009, these provisions were stripped out of final enacted measures, in part because of presidential veto threats. In 2009, Congress took action to ease some restrictions on travel to Cuba, marking the first time that Congress had eased Cuba sanctions since the approval of the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX). In light of Fidel Castro's departure as head of government in 2006 and the gradual economic changes made by Raúl Castro, some observers had called for a reexamination of U.S. policy toward Cuba. In this new context, two broad policy approaches were advanced to contend with change in Cuba: an approach that called for maintaining the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people and an approach aimed at influencing the attitudes of the Cuban government and Cuban society through increased contact and engagement. The Obama Administration's December 2014 change of U.S. policy from one of isolation to one of engagement and movement toward the normalization of relations has highlighted divisions in Congress over Cuba policy. Some Members of Congress lauded the Administration's actions as in the best interests of the United States and a better way to support change in Cuba, whereas other Members strongly criticized the President for not obtaining concessions from Cuba to advance human rights. Some Members vowed to oppose the Administration's efforts toward normalization, whereas others have, as in the past, introduced legislation to normalize relations with Cuba by lifting the embargo in its entirety or in part by easing some aspects of it. The Trump Administration's policy of rolling back some of the Obama-era changes also highlights divisions in Congress over Cuba policy, with some Members supporting the President's action because of Cuba's lack of progress on human rights and others opposing it because of the potential negative effect on the Cuban people and U.S. business interests. Public opinion polls have showed a majority of Americans support normalizing relations with Cuba. Among the Cuban American community in South Florida, however, a 2018 poll by Florida International University showed an increase in those supporting a continuation of the U.S. embargo compared to a 2016 poll. In the 2018 poll, although a majority of Cuban Americans in South Florida supported diplomatic relations and unrestricted travel to Cuba by all Americans, 51% polled favored continuing the embargo and 49% opposed it. This contrasts with 2016, when 63% of Cuban Americans in South Florida favored ending the embargo and 37% opposed it. In general, those who advocate easing U.S. sanctions on Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba—through increased travel, trade, and dialogue—then the seeds of reform would be planted, which would stimulate forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States. They argue that since the demise of Cuba's communist government does not appear imminent (despite more than 50 years of sanctions), the United States should espouse a more pragmatic approach in trying to bring about change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities for U.S. businesses because of the unilateral nature of the embargo, and to the increased suffering of the Cuban people because of the embargo. In addition, proponents of change argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China and Vietnam. On the other side, opponents of lifting U.S. sanctions maintain that the two-track policy of isolating Cuba but reaching out to the Cuban people through measures of support is the best means for realizing political change in Cuba. They point out that the LIBERTAD Act sets forth the steps that Cuba must take for the United States to normalize relations. They argue that softening U.S. policy without concrete Cuban reforms boosts Cuba's communist regime, politically and economically, and facilitates its survival. Opponents of softening U.S. policy argue that the United States should stay the course in its commitment to democracy and human rights in Cuba and that sustained sanctions can work. Critics of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of Cuba's difficult living conditions. For many years, Congress has played an active role in U.S. policy toward Cuba through the enactment of legislative initiatives and oversight on numerous issues. These issues include U.S. economic sanctions on Cuba, such as restrictions on travel, remittances, and agricultural and medical exports; terrorism issues, including Cuba's designation as a state sponsor of international terrorism; human rights issues, including funding and oversight of U.S.-government sponsored democracy and human rights projects; funding and oversight for U.S.-government sponsored broadcasting to Cuba (Radio and TV Martí); migration issues; bilateral antidrug cooperation; and U.S. claims for property confiscated by the Cuban government. Restrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate Cuba's communist government for more than 50 years. Numerous changes to the restrictions have occurred over time, and for five years, from 1977 until 1982, there were no restrictions on travel. Restrictions on travel are part of the CACR, the embargo regulations administered by the Department of the Treasury's OFAC. Under the George W. Bush Administration, enforcement of U.S. restrictions on Cuba travel increased and restrictions on travel were tightened. Under the Obama Administration, Congress took legislative action in March 2009 to ease restrictions on family travel and on travel related to U.S. agricultural and medical sales to Cuba ( P.L. 111-8 , Sections 620 and 621 of Division D). In April 2009, the Obama Administration went further when the President announced that he was lifting all restrictions on family travel. In January 2011, the Obama Administration made a series of changes further easing restrictions on travel. The measures increased purposeful travel to Cuba related to religious, educational, and journalistic activities, including people-to-people travel exchanges, and allowed U.S. international airports to become eligible to provide services to licensed charter flights to and from Cuba. In most respects, these new measures were similar to policies that were undertaken by the Clinton Administration in 1999 but subsequently curtailed by the George W. Bush Administration in 2003 and 2004. As discussed above, President Obama announced a major shift in U.S. policy toward Cuba in December 2014 that included an easing of U.S. restrictions on travel to Cuba. As part of the change in policy, OFAC amended the CACR in 2015 to include general licenses for the 12 existing categories of travel to Cuba set forth in the regulations: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities, including people-to-people travel; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects (now including microfinancing projects); (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or information materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines.  Before the policy change, travelers under several of these categories had to apply for a specific license from the Department of the Treasury before traveling. Under the new regulations, both travel agents and airlines are able to provide services for travel to Cuba without the need to obtain a specific license. Authorized travelers no longer have a per diem limit for expenditures, as in the past, and can bring back goods from Cuba as accompanied baggage for personal use, including alcohol and tobacco. Despite the easing of travel restrictions, travel to Cuba solely for tourist activities remains prohibited. Section 910(b) of TSRA prohibits travel-related transaction for tourist activities, which are defined as any activity not expressly authorized in the 12 categories of travel in the CACR (31 C.F.R. 515.560). In January 2016, the Department of the Treasury made additional changes to the travel regulations. Among the changes, authorization for travel and other transactions for transmission of informational materials now include professional media or artistic productions in Cuba (movies, television, music recordings, and creation of artworks). Authorization for travel and other transactions for professional meetings, public performances, clinics, workshops, athletic and nonathletic competitions, and exhibitions now includes permission to organize these events, not just participate in them. The Department of the Treasury amended the travel regulations in March 2016 to permit travel to Cuba for individual people-to-people educational travel, but as discussed above, President Trump, as part of his partial rollback of engagement with Cuba, directed the Department of the Treasury in June 2017 to eliminate the authorization for such travel for individuals. As set forth in amended regulations issued on November 9, 2017, people-to-people educational travel is required to take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization. U.S. Travelers to Cuba. According to Cuban government statistics, the number of U.S. travelers increased from 91,254 in 2014 to 619,523 in 2017. This figure is in addition to thousands of Cuban Americans who visit family in Cuba each year; in 2017, almost 454,000 Cubans living outside the country visited Cuba, the majority from the United States. The number of U.S. visitors began to slow in the latter half of 2017 in the aftermath of Hurricane Irma, which struck in September, the Trump Administration's tighter restrictions on people-to-people travel and restrictions on transactions with the Cuban military (which keeps a number of hotels off limits to U.S. visitors), and the U.S. travel warning issued in September 2017 related to the unexplained health injuries to U.S. diplomatic personnel in Cuba (see discussion above on \" Cuba Travel Advisory \"). In the first half of 2018, the number of U.S. visitors to Cuba, not including Cuban Americans, reportedly declined by 24% compared to the same period in 2017. By the end of 2018, however, U.S. travel to Cuba reportedly had recovered, with a growth of 1% over 2017. The recovery was spurred by a 48% increase in cruise ship arrivals (which bring in less revenue compared to land-based travelers). Another factor in the recovery in travel could be the August 2018 change in the U.S. travel advisory for Cuba from Level 3 (reconsider travel) to Level 2 (exercise increased caution) (see \" Cuba Travel Advisory ,\" above). Some U.S. schools with academic exchange programs reportedly do not allow travel to a country with a Level 3 advisory, so the easing of the advisory to Level 2 allows schools to once again include Cuba as part of their exchange programs. Regular Air Service. U.S. and Cuban officials signed a bilateral arrangement (in a memorandum of understanding) in February 2016 permitting regularly scheduled air flights as opposed to charter flights, which have operated between the two countries for many years. The arrangement provided an opportunity for U.S. carriers to operate up to a total of 110 daily round-trip flights between the United States and Cuba, including up to 20 daily round-trip flights to and from Havana. In June 2016, the Department of Transportation announced that six U.S. airlines were authorized to provide air service for up to 90 daily flights between five U.S. cities (Miami, Fort Lauderdale, Chicago, Philadelphia, and Minneapolis-St. Paul) and nine Cuban cities other than Havana. JetBlue became the first U.S. airline to begin regularly scheduled flights in August 2016. In August 2016, the Department of Transportation announced a final decision for eight U.S. airlines to provide up to 20 regularly scheduled round-trip flights between Havana and 10 U.S. cities (Atlanta, Charlotte, Fort Lauderdale, Houston, Los Angeles, Miami, Newark, New York [JFK], Orlando, and Tampa). American Airlines became the first airline to begin regular direct flights to Havana from Miami in November 2016. Four U.S. airlines that had been awarded flights to Cuba—Silver Airways, Frontier Airlines, Spirit Airlines, and Alaska Airlines—have ended their air service to Cuba, citing competition from other airlines and low demand. In March 2018, the Department of Transportation awarded flights to Havana that had been given up (as well as a flight from Boston) to five U.S. airlines already serving Cuba—American Airlines, Delta Air Lines, JetBlue, Airways, Southwest Airlines, and United Airlines. The U.S. air cargo company FedEx was supposed to begin operations to Cuba in April 2017, but the company requested and granted several extensions to begin service until it finally canceled its plans in December 2018. In May 2016, the House Committee on Homeland Security, Subcommittee on Transportation Security, held a hearing on potential security risks from the resumption of regularly scheduled flights from Cuba. Some Members of Congress expressed concerns that Cuba's airport security equipment and practices were insufficient and that the Administration was rushing plans to establish regular air service to Cuba; other Members viewed such concerns as a pretext to slow down or block the Administration's efforts to normalize relations with Cuba. Officials from the Department of Homeland Security (including Customs and Border Protection and the Transportation Security Administration) testified at the hearing regarding their work to facilitate and ensure security of the increased volume of commercial air travelers from Cuba. Subsequently, in September 2016, the United States and Cuba finalized an aviation-security agreement for the deployment of U.S. In-Flight Security Officers, more commonly known as Federal Air Marshals, on board certain regularly scheduled flights to and from Cuba. Cruise Ship Service. The Carnival cruise ship company began direct cruises to Cuba from the United States in May 2016 using smaller ships, accommodating about 700 passengers, under its cruise brand Fathom, which targeted people-to-people educational travel. The Fathom cruises stopped in May 2017, but Carnival began using a larger ship for cruises to Cuba in June 2017. Since then, numerous other cruise ship companies—Royal Caribbean, Norwegian, Azamara Club Cruises, Oceania Cruises, Regent Seven Seas Cruises, Pearl Seas Cruises, Holland America Line, Viking, and Seabourn—began offering cruises to Cuba from the United States. Several companies began looking to establish ferry services between the United States and Cuba in 2015, but the services still require Cuban approval, and Cuban facilities need to be developed to handle the services. Pro/Con Arguments. Major arguments made for lifting the Cuba travel ban altogether are that the ban abridges the rights of ordinary Americans to travel, hinders efforts to influence conditions in Cuba, and may be aiding the Cuban government by helping restrict the flow of information. In addition, supporters of lifting the ban point to the fact that Americans can travel to other countries with communist or authoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are that more American travel would support the Cuban government with potentially millions of dollars in hard currency; that legal provisions allowing travel to Cuba for humanitarian purposes exist and are used by thousands of Americans each year; and that the President should be free to restrict travel for foreign policy reasons. Legislative Activity. In the 115 th Congress, six bills were introduced that would have lifted remaining restrictions on travel. H.R. 351 (Sanford) would have prohibited restrictions on travel to Cuba, directly or indirectly, or any transactions incident to such travel. S. 1287 (Flake) would have prohibited the President from restricting travel to Cuba or any transactions incident to Cuba. H.R. 572 (Serrano) would have facilitated the export of U.S. agricultural exports to Cuba and would have lifted travel restrictions. H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden) would have lifted the economic embargo on Cuba and prohibited restrictions on travel. In October 2017, the House approved (by voice vote) H.R. 3328 (Katko), the Cuban Airport Security Act of 2017. The bill would have required a congressional briefing regarding certain security measures and equipment at each of Cuba's 10 international airports. The measure also would have prohibited a U.S. air carrier from employing a Cuban national in Cuba unless the carrier had publicly disclosed the full text of the formal agreement between the air carrier and the Empresa Cubana de Aeropuertos y Servicios Aeronauticos or any other entity associated with the Cuban government. The bill would also have, to the extent practicable, prohibited U.S. air carriers from hiring Cuban nationals if they had been recruited, hired, or trained by entities owned, operated, or controlled in whole or in part by Cuba's Council of State, Council of Ministers, Communist Party, Ministry of the Revolutionary Armed Forces, Ministry of Foreign Affairs, or Ministry of the Interior. An identical bill, S. 2023 (Rubio), was introduced in the Senate on October 26, 2017. In October 2018, Congress completed action on the FAA Reauthorization Act of 2018, signed into law as P.L. 115-254 ( H.R. 302 ), which includes a provision in Section 1957 (similar, although not identical, to a provision in H.R. 3328 noted above) requiring the Transportation Security Administration (TSA) to provide Congress a briefing on certain aspects of security measures at airports in Cuba that have air service to the United States. The law also requires the TSA Administrator (1) to direct all public charters to provide updated flight data to more reliably track the public charter operations of air carriers between the United States and Cuba and (2) to develop and implement a mechanism that corroborates and validates flight schedule data to more reliably track the public charter operations of air carries between the United States and Cuba. This requirement relating to public air charters to and from Cuba stems from a recommendation made by the Government Accountability Office (GAO) in a July 2018 report examining TSA's assessments of Cuban aviation security. U.S. commercial medical exports to Cuba have been authorized since the early 1990s pursuant to the Cuban Democracy Act of 1992 (CDA), and commercial agricultural exports have been authorized since 2001 pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), but with numerous restrictions and licensing requirements. For medical exports to Cuba, the CDA requires on-site verification that the exported item is to be used for the purpose for which it was intended and only for the use and benefit of the Cuban people. TSRA allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA also denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. Cuba purchased almost $5.8 billion in U.S. products from 2001 to 2017, largely agricultural products. For many of those years, the United States was Cuba's largest supplier of agricultural products. U.S. exports to Cuba rose from about $7 million in 2001 to a high of $712 million in 2008, far higher than in previous years. This increase was in part because of the rise in food prices and because of Cuba's increased food needs in the aftermath of several hurricanes and tropical storms that severely damaged the country's agricultural sector. U.S. exports to Cuba declined considerably from 2009 through 2011, rose again in 2012, and fell every year through 2015, when U.S. exports amounted to just $180 million. (See Figure 3 .) Reversing that trend, however, U.S. exports to Cuba increased to $245 million in 2016 and $283 million in 2017. In 2017, U.S. exports to Cuba increased by 15% over the previous year. In the first three quarters of 2018, through September, U.S. exports to Cuba amounted to almost $229 million, about the same amount over the same period in 2017. Looking at the composition of U.S. exports to Cuba from 2012 to 2017, the leading products were poultry, soybean oilcake and other solid residue, soybeans, corn, and soybean oil. Poultry has been the leading U.S. export to Cuba since 2012; in 2017, for example, it accounted for about 57% % of U.S. exports. Beyond agricultural products, other categories of products that have increased over the past several years are parts for steam turbines, pesticides, pharmaceutical products, and civilian aircraft, engines, and parts. President Obama's policy changes, as set forth in regulatory changes made to the CACR and EAR, included several measures designed to facilitate commercial exports to Cuba: U.S. financial institutions are permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions. U.S. private export financing is permitted for all authorized export trade to Cuba, except for agricultural goods exported pursuant to TSRA. The definition of the term cash in advance for payment for U.S. exports to Cuba was revised to specify that it means cash before transfer of title . In 2005, OFAC had clarified that payment of cash in advance meant that the payment for the goods had to be received prior to the shipment of the goods from the port at which they were loaded in the United States. The regulatory change means that payment can once again occur before an export shipment is offloaded in Cuba rather than before the shipment leaves a U.S. port. Commercial exports to Cuba of certain goods and services to empower Cuba's nascent private sector are authorized, including for certain building materials for private residential construction, goods for use by private-sector Cuban entrepreneurs, and agricultural equipment for small farmers. Licenses for certain categories of exports are included under a \"general policy of approval.\" These categories include exports for civil aviation and commercial aircraft safety; telecommunications; U.S. news bureaus; human rights organizations and nongovernmental organizations; environmental protection of U.S. and international air quality, waters, and coastlines; and agricultural inputs (such as insecticides, pesticides, and herbicides) that fall outside the scope of those exports already allowed under TSRA. Licenses for exports that will be considered on a case-by-case basis include certain items exported to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of the Cuban people. These items include exports for agricultural production, artistic endeavors, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation, public transportation, wholesale and retail distribution for domestic consumption by the Cuban people, construction of facilities for treating public water supplies, facilities for supplying electricity or other energy to the Cuban people, sports and recreation facilities, and other infrastructure that directly benefits the Cuban people. Note: The Trump Administration's policy changes on Cuba, as set forth by amended Commerce Department regulations issued in November 2017, stipulate that export licenses for exports to state-owned enterprises will generally be denied to export items for use by entities or subentities on the State Department's list of restricted entities associated with the Cuban military, police, intelligence, or security services. The commercial export of certain consumer communication devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems is authorized; previously such exports were limited to donations. The export of items for telecommunications, including access to the internet, use of internet services, infrastructure creation, and upgrades, also is authorized. Companies exporting authorized goods to Cuba are authorized to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. Persons subject to U.S. jurisdiction generally are authorized to enter into certain contingent contracts for transactions currently prohibited by the embargo. Certain consumer goods sold directly to eligible individuals in Cuba for their personal use generally are authorized. USDA Reports. In a June 2015 report, the U.S. Department of Agriculture's (USDA's) Foreign Agricultural Service noted that \"the U.S. share of the Cuban market has slipped dramatically, from a high of 42% in FY2009 to only 16% in FY2014.\" The report contended that the decline in U.S. market share in Cuba \"is largely attributable to a decrease in bulk commodity exports from the United States in light of favorable credit terms offered by key competitors.\" It maintained that the United States had lost market share to those countries able to provide export credits to Cuba. The report concluded that lifting U.S. restrictions on travel and capital flow to Cuba and enabling USDA to conduct market development and credit guarantee programs in Cuba would help the United States recapture its market share in Cuba. Another USDA report published in June 2015 by its Economic Research Service maintained that a more normal economic relationship between the United States and Cuba would allow \"U.S. agricultural exports to develop commercial ties in Cuba that approximate their business relationship in other parts of the world\" (such as the Dominican Republic) and could \"feature a much larger level of U.S. agricultural exports to Cuba.\" According to the report, increased U.S. exports could include such commodities as milk, wheat, rice, and dried beans, as well as intermediate and consumer-oriented commodities. U .S. International Trade Commission (U STIC ) Reports. The USITC has issued three studies since 2007 examining the effects of U.S. restrictions on trade with Cuba, with its most recent report issued in April 2016. According to the findings of its 2016 report, U.S. restrictions on trade and travel reportedly have shut U.S. suppliers out of a market in which they could be competitive on price, quality, and proximity. The most problematic U.S. restrictions cited are the inability to offer credit, travel to or invest in Cuba, and use funds sourced and administered by the U.S. government. Cuban nontariff measures and other factors also may limit U.S. exports to and investment in Cuba if U.S. restrictions are lifted, according to the report. These factors include Cuban government control of trade and distribution, legal limits on foreign investment and property ownership, and politically motivated decisionmaking regarding trade and investment. Absent U.S. restrictions, U.S. exports in several sectors likely would increase somewhat in the short term, with prospects for larger increases in the longer term, subject to changes in Cuban policy and economic growth. U.S. exports could increase further if Cuban import barriers were lowered. If U.S. restrictions were removed, U.S. agricultural and manufactured exports to Cuba could increase to almost $1.8 billion annually; if both U.S. restrictions were removed and Cuban barriers were lowered, U.S. exports could approach $2.2 billion annually. Legislative Activity. In the 115 th Congress, the 2018 farm bill, P.L. 115-334 ( H.R. 2 ) has a provision permitting funding for two U.S. agricultural export promotion programs. Several other introduced bills would have lifted or eased restrictions on U.S. exports to Cuba. In December 2018, both houses approved the conference report ( H.Rept. 115-1072 ) to the 2018 farm bill, P.L. 115-334 ( H.R. 2 ), which retains a Senate provision that permits funding for certain U.S. export promotion programs (Market Access Program and Foreign Market Development Cooperation Program) for U.S. agricultural products in Cuba. As stipulated, the funds cannot be used in contravention with directives set forth under the National Security Presidential Memorandum issued by President Trump in June 2017 that prohibits transactions with entities owned, controlled, or operated by or on behalf of military, intelligence, or security services of Cuba. The provision originated from a Heitkamp amendment to the original Senate version of the farm bill, S. 3042 , approved during markup of the bill by the Senate Committee on Agriculture, Nutrition, and Forestry. H.R. 442 (Emmer)/ S. 472 (Moran) would have repealed or amended various provisions of law restricting trade with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. The bills would have repealed restrictions on private financing for Cuba in TSRA but would have continued to prohibit U.S. government support for foreign assistance or financial assistance, loans, loan guarantees, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. The federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would have been allowed. H.R. 525 (Crawford) would have permitted U.S. government assistance for U.S. agricultural exports to Cuba as long as the recipient of the assistance was not controlled by the Cuban government; authorized the private financing by U.S. entities of sales of agricultural commodities; and authorized investment for the development of an agricultural business in Cuba as long as the business was not controlled by the Cuban government and did not traffic in property of U.S. nationals confiscated by the Cuban government. S. 275 (Heitkamp) would have amended TSRA to allow for the private financing by U.S. entities of agricultural commodities to Cuba. H.R. 572 (Serrano), among its various provisions, had the goal of facilitating the export of U.S. agricultural and medical exports to Cuba by permanently redefining the term payment of cash in advance to mean that payment is received before the transfer of title and release and control of the commodity to the purchaser; authorizing direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; establishing an export-promotion program for U.S. agricultural exports to Cuba; and repealing the on-site verification requirement for medical exports to Cuba under the CDA. H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden) would have lifted the overall economic embargo on Cuba, including restrictions on exports to Cuba in the CDA and TSRA. S. 1286 (Klobuchar) would have repealed or amended various provisions of law restricting trade with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. For more than 15 years, the United States has imposed a trademark sanction specifically related to Cuba. A provision in the FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 , signed into law October 21, 1998) prevents the United States from accepting payment from Cuban nationals for trademark registrations and renewals that were used in connection with a business or assets in Cuba that were confiscated, unless the original owner of the trademark has consented. U.S. officials maintain that the sanction prohibits a general license under the CACR for transactions or payments for such trademarks. The provision also prohibits U.S. courts from recognizing such trademarks without the consent of the original owner. The measure was enacted because of a dispute between the French spirits company Pernod Ricard and the Bermuda-based Bacardi Limited. Pernod Ricard entered into a joint venture in 1993 with Cubaexport, a Cuban state company, to produce and export Havana Club rum. Bacardi maintains that it holds the rights to the Havana Club name because in 1995 it entered into an agreement for the Havana Club trademark with the Arechabala family, who had originally produced the rum until its assets and property were confiscated by the Cuban government in 1960. The Arechabala family had let the trademark registration lapse in the United States in 1973, and Cubaexport successfully registered it in 1976. Although Pernod Ricard cannot market Havana Club in the United States because of the trade embargo, it wants to protect its future distribution rights should the embargo be lifted. The European Union initiated World Trade Organization (WTO) dispute settlement proceedings in June 2000, maintaining that the U.S. law violates the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In January 2002, the WTO ultimately found that the trademark sanction violated WTO provisions on national treatment and most-favored-nation obligations in the TRIPS agreement. In March 2002, the United States agreed that it would come into compliance with the WTO ruling through legislative action by January 2003. That deadline was extended several times because no legislative action had been taken to bring Section 211 into compliance with the WTO ruling. In July 2005, however, in an EU-U.S. understanding, the EU agreed that it would not request authorization to retaliate at that time, but reserved the right to do so at a future date, and the United States agreed not to block a future EU request. The U.S. Patent and Trademark Office (USPTO) did not process Cubaexport's 10-year renewal of the Havana Club trademark when it was due in 2006 because the Department of the Treasury's OFAC denied the company the specific license that it needed to pay the fee for renewing the trademark registration. In providing foreign policy guidance to OFAC at the time, the State Department recommended denial of the license, maintaining that doing so would be consistent with \"the U.S. approach toward non-recognition of trademark rights associated with confiscated property\" and consistent with U.S. policy to deny resources to the Cuban government to hasten a transition to democracy. Almost a decade later, in January 2016, OFAC issued a specific license to Cubaexport, allowing the company to pay fees to the USPTO for the renewal of the Havana Club trademark registration for the 2006-2016 period. Subsequently, in February 2016, USPTO renewed the trademark registration for 10 additional years, until 2026. OFAC had requested foreign policy guidance from the State Department in November 2015 for Cubaexport's request for a specific license. According to the State Department, in evaluating the case, it took into account the \"landmark shift\" in U.S. policy toward Cuba, U.S. foreign policy with respect to its key allies in Europe, and U.S. policy with regard to trademark rights associated with confiscated property. State Department and USPTO officials maintain that the renewal of the Havana Club trademark registration does not resolve the trademark dispute. The State Department notes that federal court proceedings are pending in which Bacardi has filed suit against Cubaexport to contest the Havana Club trademark ownership in the United States and that OFAC's issuance of a license permitting USPTO to renew the trademark registration will allow the two parties to proceed toward adjudication of the case. Legislative Activity. In Congress, two different approaches have been advocated for a number of years to bring Section 211 into compliance with the WTO ruling. Some Members want a narrow fix in which Section 211 would be amended so that it applies to all persons claiming rights in trademarks confiscated by Cuba, whatever their nationality, instead of being limited to designated nationals, meaning Cuban nationals. Advocates of this approach argue that it would treat all holders of U.S. trademarks equally. Other Members want Section 211 repealed altogether. They argue that the law endangers more than 5,000 trademarks of more than 400 U.S. companies registered in Cuba. The House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing in February 2016 on the trademark issue and on the issue of confiscated property, but this did not lead to any legislative action. In the 115 th Congress, S. 259 (Nelson)/ H.R. 1450 (Issa) would have applied the narrow fix so that the trademark sanction applied to all nationals, whereas four broader bills on Cuba sanctions, H.R. 572 (Serrano), H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden), had provisions that would have repealed Section 211. Two FY2018 House appropriations bills, H.R. 3267 (Commerce) and H.R. 3280 (Financial Services), had provisions that would have introduced new sanctions related to Cuba and trademarks, but neither of these were included in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). H.R. 3267 had a provision that would have prohibited funds to approve the registration or renewal, or the maintenance of the registration, of a mark, trade name, or commercial name used in connection with a business or assets that were confiscated by the Cuban government unless the original owner has expressly consented. H.R. 3280 had a provision that would have prohibited funding to approve or otherwise allow the licensing (general or specific) of a mark, trade name, or commercial name used in connection with a business or assets that were confiscated by the Cuban government unless the original owner has expressly consented. These provisions had also been included in the House-passed version of a FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017. Likewise for FY2019, two House Appropriations bill, H.R. 5952 (Commerce) and H.R. 6258 / H.R. 6147 (Financial Services), had provisions related to Cuba and trademarks similar to those that had been included in House bills for FY2018. H.R. 5952 had a provision that would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. H.R. 6258 / H.R. 6147 had a provision that would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that was substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The 115 th Congress did not complete action on either appropriations measure. Since 1996, the United States has provided assistance—through the U.S. Agency for International Development (USAID), the State Department, and the National Endowment for Democracy (NED)—to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID and State Department efforts are funded largely through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. From FY1996 to FY2018, Congress appropriated some $344 million in funding for Cuba democracy efforts. In recent years, this funding included $20 million in each fiscal year from FY2014 through FY2018. For FY2018, however, the Trump Administration, as part of its attempt to cut foreign assistance levels, did not request any democracy and human rights assistance funding for Cuba, but Congress ultimately provided $20 million. For FY2019, the Trump Administration requested $10 million to provide democracy and civil society assistance for Cuba. Although USAID received the majority of this funding for many years, the State Department began to receive a portion of the funding in FY2004 and in recent years has been allocated more funding than USAID. The State Department generally has transferred a portion of the Cuba assistance that it administers to NED. USAID's Cuba program has supported a variety of U.S.-based nongovernmental organizations with the goals of promoting a rapid, peaceful transition to democracy, helping to develop civil society, and building solidarity with Cuba's human rights activists. NED is not a U.S. government agency but an independent nongovernmental organization that receives U.S. government funding. Its Cuba program is funded by the organization's regular appropriations by Congress as well as by funding from the State Department. Until FY2008, NED's democratization assistance for Cuba had been funded largely through the annual Commerce, Justice, and State appropriations measure, but it is now funded through the State Department, Foreign Operations and Related Programs appropriations measure. According to information provided by NED on its website, its Cuba funding from FY2014 through FY2017 amounted to $15.9 million. FY2017 Appropriations. For FY2017, the Obama Administration had requested $15 million in ESF for Cuba democracy and human rights programs, a 25% reduction from FY2016. According to the request, the assistance would support civil society initiatives that promote democracy, human rights, and fundamental freedoms, particularly freedoms of expression and association. The programs would \"provide humanitarian assistance to victims of political repression and their families, strengthen independent civil society, support the Cuban people's desire to freely determine their future, reduce their dependence on the Cuban state, and promote the flow of uncensored information to, from and within the island.\" In the 114 th Congress, the House version of the FY2017 State Department, Foreign Operations, and Related Programs appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), reported July 15, 2016, would have provided $30 million for democracy promotion in Cuba, double the Administration's request. The bill also would have prohibited funding for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy building authorized by the LIBERTAD Act of 1996. In contrast, the Senate version of the FY2017 foreign operations appropriations bill, S. 3117 ( S.Rept. 114-290 ), reported June 29, 2016, would have recommended fully funding the Administration's request of $15 million. However, it also would have provided that $3 million be made available for USAID to support free enterprise and private business organizations and people-to-people educational and cultural activities. Because the 114 th Congress did not complete action on FY2017 appropriations, the 115 th Congress took final action in early May 2017 through enactment of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The explanatory statement to the measure provided $20 million in democracy assistance for Cuba, $5 million more than requested, and did not include any of the directives noted above in the House and Senate appropriations bills in the 114 th Congress. FY2018 Appropriations. For FY2018 appropriations, given the strong congressional record of appropriating such aid for many years, some Members of Congress strongly opposed the Trump Administration's proposal to cut all democracy and human rights funding for Cuba. The House Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, H.R. 3362 ( H.Rept. 115-253 ), would have provided $30 million in democracy assistance for Cuba but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. These provisions were included in the House-passed version of the FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017. The Senate Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, S. 1780 ( S.Rept. 115-152 ), would have provided $15 million for democracy programs in Cuba, with not less than $3 million to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. In final action in March 2018, Congress provided $20 million for democracy programs in Cuba in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ; explanatory statement, Division K) without any of the directives in the House and Senate appropriations bills and reports noted above. FY2019 Appropriations. For FY2019, the Trump Administration requested $10 million for democracy and civil society assistance in support of the Administration's Cuba policy. The House Appropriations Committee's State Department and Foreign Operations appropriations bill, H.R. 6385 , would have provided $30 million to promote democracy and strengthen civil society in Cuba, with, according to the report to the bill ( H.Rept. 115-829 ), not less than $8 million for the National Endowment for Democracy; the report would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building and stipulated that grants exceeding $1 million, or grants to be implemented over a period of 12 months, would be awarded only to organizations with experience promoting democracy inside Cuba. The Senate Appropriations version of the bill, S. 3108 , would have provided $15 million for democracy programs in Cuba. A series of continuing resolutions ( P.L. 115-245 and P.L. 115-298 ) continued FY2019 funding at FY2018 levels through December 21, 2018, but the 115 th Congress did not complete action on FY2019 appropriations, leaving the task to the 116 th Congress. Oversight of U.S. Democracy Assistance to Cuba. The GAO has issued three major reports since 2006 examining USAID and State Department democracy programs for Cuba. In the most recent report, issued in 2013, GAO concluded that USAID had improved its performance and financial monitoring of implementing partners' use of program funds, but found that the State Department's financial monitoring had gaps. Both agencies were reported to be taking steps to improve financial monitoring. In 2014, two investigative news reports alleged significant problems with U.S. democracy promotion efforts in Cuba. In April, an Associated Press (AP) investigative report alleged that USAID, as part of its democracy promotion efforts for Cuba, had established a \"Cuban Twitter\" known as ZunZuneo, a communications network designed as a \"covert\" program \"to undermine\" Cuba's communist government built with \"secret shell companies\" and financed through foreign banks. According to the press report, the project, which was used by thousands of Cubans, lasted more than two years until it ended in 2012. USAID, which strongly contested the report, issued a fact sheet about the ZunZuneo program. It maintained that program was not \"covert\" but rather that, just as in other places where USAID is not always welcome, the agency maintained a \"discreet profile\" on the project to minimize risk to staff and partners and to work safely. Some Members of Congress strongly criticized USAID for not providing sufficient information to Congress about the program when funding was appropriated, whereas other Members staunchly defended the agency and the program. In August 2014, the AP reported on another U.S.-funded democracy program for Cuba in which a USAID contractor sent about a dozen youth from several Latin American countries (Costa Rica, Peru, and Venezuela) in 2010 and 2011 to Cuba to participate in civic programs, including an HIV-prevention workshop, with the alleged goal to \"identify potential social-change actors\" in Cuba. The AP report alleged that \"the assignment was to recruit young Cubans to anti-government activism under the guise of civic programs.\" USAID responded in a statement maintaining that the AP report \"made sensational claims against aid workers for supporting civil society programs and striving to give voice to these democratic aspirations.\" In December 2015, USAID's Office of Inspector General issued a report on USAID's Cuban Civil Society Support Program that examined both the ZunZuneo and HIV-prevention projects. The report cited a number of problems with USAID's management controls of the civil society program and made a number of recommendations, including that USAID conduct an agency-wide analysis to determine whether a screening policy is needed to address intelligence and subversion threats and, if so, develop and implement one. U.S.-government-sponsored radio and television broadcasting to Cuba—Radio and TV Martí—began in 1985 and 1990, respectively. Until October 1999, U.S.-government-funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions were merged into the Department of State at the beginning of FY2000, the Broadcasting Board of Governors (BBG) became an independent agency that included such entities as the Voice of America, Radio Free Europe/Radio Liberty, Radio Free Asia, and the Office of Cuba Broadcasting (OCB). In August 2018, the BBG officially changed its name to the U.S. Agency for Global Media (USAGM). Today, OCB, which has been headquartered in Miami, FL, since 1998, manages Radio and TV Martí and the Martínoticiaas.com website and its social media platforms on YouTube, Google, and Facebook. According to the BBG's 2019 Congressional Budget Justification , the Martís reach 11.1% of Cubans on a weekly basis with audio, video, and digital content delivered by radio, satellite TV, online, and on distinctly Cuban digital \"packages\" ( paquetes ). The largest audiences reportedly are for Radio Martí and TV Martí, with weekly audiences respectively reaching 8% and 6.8% of Cubans, while online content reaches a smaller audience of 5.3%. OCB also administers a shortwave transmitting station in Greenville, NC. Additional newer transmitters at Greenville reportedly have helped increase Radio Martí's presence in Cuba, and the increase in the number of frequencies has made it harder for the Cuban government to interfere with the radio broadcasts. Funding. From FY1984 through FY2018, Congress appropriated about $882 million for broadcasting to Cuba. In recent years, funding has amounted to some $27-$29 million in each fiscal year from FY2014 to FY2018. The Trump Administration's FY2019 request is for almost $13.7 million. For FY2017, the Obama Administration requested $27.1 million for the OCB, about the same amount appropriated in FY2016. The Administration also requested authority for the BBG to establish a new Spanish-language, nonfederal media organization that would receive a BBG grant and perform the functions of the current OCB. The House version of the FY2017 State Department, Foreign Operations, and Related Programs appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), had a provision that would have blocked the Administration's request by prohibiting funding to establish an independent grantee organization to carry out any and all broadcasting and related programs to the Latin American and Caribbean region or otherwise substantially alter the structure of the OCB unless specifically authorized by a subsequent act of Congress. The funding prohibition pertained to the merger of the OCB and the Voice of America Latin America Division. The Senate version of the bill, S. 3117 ( S.Rept. 114-290 ), would have provided $27.4 million for the OCB, $300,000 more than the Administration's request. The report to the bill stated that the committee did not support the proposed contractor reduction of $300,000 at the OCB. The 115 th Congress completed final action on FY2017 appropriations in early May 2017 through enactment of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The explanatory statement to the measure provided $28.056 million for the Office of Cuba Broadcasting, $1 million more than requested. According to the BBG, the actual amount provided for the OCB in FY2017 was $28.938 million. For FY2018, the Trump Administration requested $23.656 million for the OCB, $4.4 million less than the amount Congress appropriated for FY2017. According to the BBG's request, the funding reduction would be covered by a reduction in contractor support, elimination of most vacant staff positions and reduction of other government positions through attrition, elimination of ineffective leased broadcast transmissions, and a reduction of administrative costs. The report to the House Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill ( H.Rept. 115-253 to H.R. 3362 ) would have provided $28.1 million for broadcasting to Cuba, $4.4 million above the request; this also was included in the House-passed version of the FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017. The Senate Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, S. 1780 ( S.Rept. 115-152 ), would have provided not less than $28.6 million for broadcasting to Cuba. In final action Congress provided $28.936 million for Cuba broadcasting, $5.28 million more than requested, in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ; explanatory statement, Division K), signed into law in March 2018. For FY2019, the Trump Administration requested $13.656 million for the OCB, $10 less than the Administration's FY2018 request and $15.3 million less than the amount provided in FY2017. The rationale for the proposed cut in funding for the OCB was to find efficiencies between OCB and the Voice of America's Latin American division. The House Appropriations Committee's FY2019 State Department and Foreign Operations bill, H.R. 6385 , would have provided $29.1 million for Cuba broadcasting, while the Senate Appropriations Committee's bill, S. 3108 , would have provided $29.2 million. The report to the Senate bill, S.Rept. 115-282 , would also have called for a State Department Cuba report on Internet access, the use of cell phones to access data, the impact of access to telecommunications technology on increased political and economic opportunities, and the impact of telecommunications development on human rights. The 115 th Congress did not complete action on FY2019 appropriations, leaving the task to the 116 th Congress. Nevertheless, the 115 th Congress approved a series of continuing resolutions ( P.L. 115-245 and P.L. 115-298 ) that continued FY2019 funding at FY2018 levels through December 21, 2018. Oversight Issues. Both Radio and TV Martí have at times been the focus of controversies, including questions about adherence to broadcast standards. From 1990 through 2011, there were almost dozen government studies and audits of the OCB, including investigations by the GAO, by a 1994 congressionally established Advisory Panel on Radio and TV Martí, by the State Department Office Inspector General, and by the combined State Department/BBG Office Inspector General. In 2009, GAO issued a report on the issue of small audience levels for both Radio and TV Martí as well as concerns with adherence to relevant domestic laws and international standards, including the domestic dissemination of OCB programming, inappropriate advertisements during OCB programming, and TV Martí's interference with Cuban broadcasts. In 2010, the Senate Foreign Relations Committee majority issued a staff report that cited problems with adherence to broadcast standards, audience size, and Cuban government jamming. Among its recommendations, the report called for OCB to be moved to Washington, DC, and integrated fully into the Voice of America. A 2011 GAO report recommended that the BBG provide an analysis on the estimated costs and savings of sharing resources between OCB and the Voice of America's Latin America Division. Concerns About TV Martí Program in 2018. On October 26, 2018, media reports highlighted a disturbing TV Martí program originally aired in May 2018 (which remained on Radio and Television Martí's website) that referred to U.S. businessman and philanthropist George Soros as \"the multimillionaire Jew of Hungarian origin\" and as a \"non-believing Jew of flexible morals.\" The program espoused a number of conspiracy theories about Soros, including that he was the architect of the 2008 financial crisis. Senator Jeff Flake spoke out against the TV Martí program, which he referred to as \"taxpayer-funded anti-Semitism.\" He sent a letter to John Lansing, chief executive officer (CEO) of the USAGM, on October 29, 2018, asking for an investigation into the program, including its evolution, from initial inception to final approval; who produced the program; and what review process was in place to ensure it met VOA journalistic standards. Senator Flake also called for those approving anti-Semitic content to be removed from their positions immediately, asserting that \"lack of action on this matter will further denigrate the United States as a credible voice overseas, the repercussion of which will be severe.\" Initially, OCB Director Tomás Regalado, who began his appointment in early June 2018, responded by pulling the original program and related shorter segments from the OCB's online website and acknowledging that the program \"did not have the required balance.\" USAGM's CEO Lansing took further action on October 29, 2018, by issuing a statement that the program about Soros \"is inconsistent with our professional standards and ethics.\" He stated that those deemed responsible for the production would be immediately placed on administrative leave pending an investigation into their apparent misconduct. Lansing also directed \"an immediate, full content audit to identify any patterns of unethical reporting at the network\" and asked Regalado to \"require ethics and standards refresher training for all OCB journalists. \" Lansing wrote a letter of apology to Soros in early November 2018 in which he said that the program \"was based on extremely poor and unprofessional journalism,\" and \"was utterly offensive in its anti-Semitism and clear bias.\" Lansing also stated in the letter that he had instructed OCB Director Regalado \"to remove the offensive story from the TV Martí website and social media\" and \"to hire a full time \"standards and practices\" editor to oversee all outgoing content with strict adherence to the highest professional standards of journalism.\" The audit of reporting at the network reportedly uncovered an earlier story about Soros that included anti-Semitic language as well as an anti-Muslim opinion piece published in September 2018, that were also removed from the website. As of mid-December 2018, press reports maintain that four OCB employees have been placed on leave and two contract staffers have been fired because of the offensive programming. The TV Martí program raises significant concerns about the OCB's adherence to broadcast standards and questions about the program's intended audience. TV Martí's authorizing legislation, the Television Broadcasting to Cuba Act ( P.L. 101-246 , Title II, Part D, 22 U.S.C. 1465bb ) has a provision stating that television broadcasting to Cuba \"shall be in accordance with all Voice of America standards to ensure the broadcast of programs which are objective, accurate, balance, and which present a variety of views.\" U.S. law sets forth the following principles for VOA broadcasts: (1) VOA will serve as a consistently reliable and authoritative source of news. VOA news will be accurate, objective, and comprehensive; (2) VOA will represent America, not any single segment of American society, and will therefore present a balanced and comprehensive projection of significant American thought and institutions; and (3) VOA will present the polices of the United States clearly and effectively and also will present responsible discussion and opinion on these policies. These VOA principles and broader U.S. international broadcasting standards and principles are set forth in 22 U.S.C. 6202 ( P.L. 103-236 , Title III, Section 303, and P.L. 103-415 ). The anti-Semitic program broadcast by TV Martí prompted the Senate Foreign Relations Committee to approve an amendment to S. 3654 , the U.S. Agency for Global Media Reform Act, during committee consideration of the bill on November 28, 2018. Offered by Senator Jeff Flake, the amendment was aimed at holding USAGM accountable for the incident. The provision would have required USAGM's CEO to brief or report to the appropriate congressional committees on any employee of the agency or an agency grantee network who has been suspended or placed on administrative leave without a formal disciplinary determination for writing or approving content in programming inconsistent with the agency's mission to \"inform, engage, and connect people around the world in support of freedom and democracy.\" The briefing or report would have been required to include information on the employment status of the suspended employee and the \"reasons for the Agency's failure to made a formal disciplinary determination.\" The Senate Foreign Relations Committee reported the bill on November 28, 2018, but no further action was taken on the measure before the end of the 115 th Congress. In its final days in office, the Obama Administration announced another major Cuba policy shift. On January 12, 2017, the United States ended the so-called \"wet foot/dry foot\" policy under which thousands of undocumented Cuban migrants entered the United States in recent years. (Under that policy, those Cuban migrants interdicted at sea generally were returned to Cuba whereas those reaching U.S. land were allowed entrance into the United States and generally permitted to stay.) Under the new policy, as announced by President Obama and then-Secretary of Homeland Security Jeh Johnson, Cuban nationals who attempt to enter the United States illegally and do not qualify for humanitarian relief are now subject to removal. The Cuban government also agreed to begin accepting the return of Cuban migrants who have been ordered removed. At the same time, the Obama Administration announced that it was ending the special Cuban Medical Professional Parole program, a 10-year-old program allowing Cuban medical professionals in third countries to be approved for entry into the United States. Background. Cuba and the United States reached two migration accords in 1994 and 1995 designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift, in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Fidel Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, on August 19, 1994, President Clinton abruptly changed U.S. immigration policy, under which Cubans attempting to flee their homeland were allowed into the United States, and announced that the U.S. Coast Guard and Navy would take Cubans rescued at sea to the U.S. Naval Station at Guantanamo Bay, Cuba. Despite the change in policy, Cubans continued to flee in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminated in a September 9, 1994, bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. (For information on the effect of the staff reduction at the U.S. Embassy in Havana on visa processing, see \" Effect of Staff Reduction on U.S. Embassy Havana Operations \" above.) In May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States but would intercept future Cuban migrants attempting to enter the United States by sea and would return them to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledged to ensure that no action would be taken against those migrants returned to Cuba as a consequence of their attempt to immigrate illegally. In January 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S. naval station, most having been paroled into the United States. Maritime Interdictions. Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country. Until early January 2017, those Cubans who reached the U.S. shore were allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). In short, most interdictions, even in U.S. coastal waters, resulted in a return to Cuba, whereas those Cubans who touched shore were allowed to stay in the United States. Some had criticized this so-called wet foot/dry foot policy as encouraging Cubans to risk their lives to make it to the United States and as encouraging alien smuggling. Cuba had long opposed the policy, which it viewed as encouraging illegal, unsafe, and disorderly migration, alien smuggling, and Cubans' irregular entry into the United States from third countries. Over the years, the number of Cubans interdicted at sea by the U.S. Coast Guard has fluctuated annually, influenced by several factors, including the economic situations in Cuba and the United States. The number of interdictions rose from 666 in FY2002 to 2,868 in FY2007 (see Figure 4 ). In the three subsequent years, maritime interdictions declined significantly to 422 by FY2010. Major reasons for the decline were reported to include the U.S. economic downturn, more efficient coastal patrolling, and more aggressive prosecution of migrant smugglers by both the United States and Cuba. From FY2011 through FY2016, however, the number of Cubans interdicted by the Coast Guard increased each year, from 1,047 in FY2011 to 5,230 in FY2016. The increase in the flow of maritime migrants in 2015 and 2016 was driven by concerns among Cubans that the favorable treatment granted to Cuban migrants would end. With the change in U.S. immigration policy toward Cuba in January 2017, the number of Cubans interdicted by the Coast Guard dropped to a trickle. For FY2017, the Coast Guard interdicted 2,109 Cubans, with the majority of these interdictions occurring before the policy change. For FY2018, as of August 14, 2018, the Coast Guard interdicted 200 Cubans at sea. Arrival of Undocumented Cuban Migrants. According to statistics from the Department of Homeland Security, the number of undocumented Cubans entering the United States both at U.S. ports of entry and between ports of entry rose from almost 8,170 in FY2010 to 58,269 in FY2016 (see Table 1 ). Beginning around FY2013, according to the State Department, undocumented Cuban migrants began to favor land-based routes to enter the United States, especially via ports of entry from Mexico. Since that time and the change in U.S. immigration policy in early 2017, the number of undocumented Cubans entering by land increased significantly, with a majority entering through the southwestern border. Just as the number of Cubans interdicted by the U.S. Coast Guard at sea has dropped precipitously since the change in U.S. immigration policy toward Cuba, the number of undocumented Cuban migrants entering the United States at ports of entry and between ports of entry has fallen considerably. In FY2017, 20,955 undocumented Cubans entered the United States at and between ports of entry, with the majority of these, almost 18,000, entering before the change in U.S. immigration policy. In FY2018, as of August 21, 2018, 6,044 undocumented Cubans arrived in the United States at or between ports of entry, about a 70% decline from all of FY2017. Cuba is not a major producer or consumer of illicit drugs, but its extensive shoreline and geographic location make it susceptible to narcotics-smuggling operations. Drugs that enter the Cuban market are largely the result of onshore wash-ups from smuggling by high-speed boats moving drugs from Jamaica to the Bahamas, Haiti, and the United States or by small aircraft from clandestine airfields in Jamaica. For a number of years, Cuban officials have expressed concerns about the use of their waters and airspace for drug transit and about increased domestic drug use. The Cuban government has taken a number of measures to deal with the drug problem, including legislation to stiffen penalties for traffickers, increased training for counternarcotics personnel, and cooperation with a number of countries on antidrug efforts. Since 1999, Cuba's Operation Hatchet has focused on maritime and air interdiction and the recovery of narcotics washed up on Cuban shores. Since 2003, Cuba has aggressively pursued an internal enforcement and investigation program against its incipient drug market with an effective nationwide drug prevention and awareness campaign. Over the years, there have been varying levels of U.S.-Cuban cooperation on antidrug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of almost 6 metric tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of two defendants in the case in the United States. Cooperation has increased since 1999, when U.S. and Cuban officials met in Havana to discuss ways of improving antidrug cooperation. Cuba accepted an upgrading of the communications link between the Cuban Border Guard and the U.S. Coast Guard as well as the stationing of a U.S. Coast Guard drug interdiction specialist at the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000. Since the reestablishment of diplomatic relations with Cuba in 2015, U.S. antidrug cooperation has increased further, with several dialogues and exchanges on counternarcotics issues. In December 2015, U.S. and Cuban officials held talks at the headquarters of the Drug Enforcement Administration (DEA) in Washington, DC, with delegations discussing ways to stop the illegal flow of narcotics and exploring ways to cooperate on the issue. In April 2016, Cuban security officials toured the U.S. Joint Interagency Task Force South (JIATF-South) based in Key West, FL. JIATF-South has responsibility for detecting and monitoring illicit drug trafficking in the region and for facilitating international and interagency interdiction efforts. At a July 2016 dialogue in Havana with U.S. officials from the State Department, DEA, the U.S. Coast Guard, and Immigration and Customs Enforcement/Homeland Security Investigations, Cuba and the United States signed a counternarcotics arrangement to facilitate cooperation and information sharing. Technical exchanges between the U.S. Coast Guard and Cuba's Border Guard on antidrug efforts and other areas of cooperation occur periodically. According to the State Department's 2018 International Narcotics Control Strategy Report (INCSR), issued in March 2018, Cuba has 40 bilateral agreements for antidrug cooperation with countries worldwide, including the 2016 U.S.-Cuban agreement noted above. The report also stated that Cuban authorities and the U.S. Coast Guard share tactical information related to vessels transiting through Cuban territorial waters suspected of trafficking and coordinate responses. In addition, as noted in the report, direct communications were established in July 2016 between the U.S. DEA and Cuban counterparts within the Ministry of Interior's National Anti-Drug Directorate. Since then, according to the INCSR, the DEA has received approximately 20 requests for information related to drug investigations in addition to cooperation leading to Cuba's arrest of a fugitive wanted in the United States. More broadly, the INCR reports that Cuba has provided assistance to U.S. state and federal prosecutions by providing evidence and information, and has demonstrated a willingness to cooperate on law enforcement matters. As in the past, the State Department contended in the 2018 INCSR that \"enhanced communication and cooperation between the United States, international partners, and Cuba, particularly in terms of real-time information-sharing, would likely lead to increased interdictions and disruptions of illegal drug trafficking.\" As noted in the INCSR, Cuba reported maritime seizures of 2.72 metric tons (MT) of illicit drugs in 2016 (2.5 MT of marijuana and 225 kilograms of cocaine). This compares to 906 kilograms of maritime seizures in 2015. An issue in the process of normalizing relations is Cuba's compensation for the expropriation of thousands of properties of U.S. companies and citizens in Cuba. The Foreign Claim Settlement Commission (FCSC), an independent agency within the Department of Justice, has certified 5,913 claims for expropriated U.S. properties in Cuba valued at $1.9 billion in two different claims programs; with accrued interest, the properties' value would be some $8 billion. In 1972, the FCSC certified 5,911 claims of U.S. citizens and companies that had their property confiscated by the Cuban government through April 1967, with 30 U.S. companies accounting for almost 60% of the claims. In 2006, the FCSC certified two additional claims in a second claims program covering property confiscated after April 1967. Many of the companies that originally filed claims have been bought and sold numerous times. There are a variety of potential alternatives for restitution or compensation schemes to resolve the outstanding claims, but resolving the issue likely would entail considerable negotiation and cooperation between the two governments. Although Cuba has maintained that it would negotiate compensation for the U.S. claims, it does not recognize the FCSC valuation of the claims or accrued interest. Instead, Cuba has emphasized using declared taxable value as an appraisal basis for expropriated U.S. properties, which would amount to almost $1 billion, instead of the $1.9 billion certified by the FCSC. Moreover, Cuba generally has maintained that any negotiation should consider losses that Cuba has accrued from U.S. economic sanctions. Cuba estimates cumulative damages of the U.S. embargo at $134.5 billion in current prices as of 2018. Several provisions in U.S. law specifically address the issue of compensation for properties expropriated by the Cuban government. Section 620(a)(2) of the Foreign Assistance Act of 1961 prohibits foreign assistance, a sugar quota authorizing the importation of Cuban sugar into the United States, or any other benefit under U.S. law until the President determines that the Cuban government has taken appropriate steps to return properties expropriated by the Cuban government to U.S. citizens and entities not less than 50% owned by U.S. citizens, or to provide equitable compensation for the properties. The provision, however, authorizes the President to waive its restrictions if he deems it necessary in the interest of the United States. The LIBERTAD Act includes the property claims issue as one of the many factors that the President needs to consider in determining when a transition government is in power in Cuba and when a democratically elected government is in power. These determinations are linked, respectively, to the suspension and termination of the economic embargo on Cuba. For a transition government, as set forth in Section 205(b)(2) of the law, the President shall take into account the extent to which the government has made public commitments and is making demonstrable progress in taking steps to return property taken by the Cuban government on or after January 1, 1959, to U.S. citizens (and entities that are 50% or more beneficially owned by U.S. citizens) or to provide equitable compensation for such property. A democratically elected government, as set forth in Section 206 of the law, is one that, among other conditions, has made demonstrable progress in returning such property or providing full compensation for such property, in accordance with international law standards and practice. Section 103 of the LIBERTAD Act also prohibits a U.S. person or entity from financing any transaction that involves confiscated property in Cuba where the claim is owned by a U.S. national. The sanction may be suspended once the President makes a determination that a transition government is in power and shall be terminated when the President makes a determination that a democratically elected government is in power. In the 114 th Congress, two House hearings focused on the property claims issue. The House Western Hemisphere Subcommittee of the Committee on Foreign Affairs held a hearing in June 2015, and the House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing in February 2016. Since the reestablishment of diplomatic relations with Cuba in 2015, U.S. and Cuban officials have held three meetings on claims issues. The first meeting took place in December 2015 in Havana, with talks including discussions of the FCSC-certified claims of U.S. nationals, claims related to unsatisfied U.S. court judgments against Cuba (reportedly 10 U.S. state and federal judgments totaling about $2 billion), and some claims of the U.S. government. The Cuban delegation raised the issue of claims against the United States related to the U.S. embargo. A second claims meeting was held in July 2016, in Washington, DC. According to the State Department, the talks allowed for an exchange of views on historical claims-settlement practices and processes going forward. A third claims meeting was held in Havana in January 2017. As noted above, Title III of the LIBERTAD Act holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. To date, however, pursuant to provisions of the law, all Administrations have suspended the right to file law suits at six-month intervals, For the suspension, the President (since 2013, the Secretary of State) must determine that it is necessary to the national interests of the United States and will expedite a transition to democracy in Cuba. Secretary of State Pompeo made the most recent determination in June 2018, which is effective from August 1, 2018, through January 2019. In November 2018, National Security Adviser John Bolton maintained in a press interview that the Administration was exploring whether to continue to suspend Title III or to allow lawsuits to go forward. If the right to file lawsuits was not suspended, Title III would permit those U.S. nationals with claims certified by the FCSC to file suit against those trafficking in confiscated property. Significantly, Title III also would permit U.S. nationals who were not U.S. nationals at the time of the confiscation to file suit. A 1996 report to Congress by the State Department required by the LIBERTAD Act estimated that there could be some 75,000 to 200,000 claims by Cuban Americans with the value running into the tens of billions of dollars. When the LIBERTAD Act was enacted in 1996, the intent of Title III was to prevent foreign investment in properties confiscated by the Cuban government. However, since some U.S. companies have entered into transactions or investment projects with Cuban companies in recent years as a result of the U.S. engagement process with Cuba, some potentially could be susceptible to legal action if the Administration did not continue to suspend the right to file lawsuits. Lifting the suspension of the right to file lawsuits under Title III could have a significant effect on foreign companies conducting business in Cuba because of the potential risk emanating from such lawsuits. When the LIBERTAD Act was passed in 1996, several foreign governments strongly objected, and some (Canada, EU, and Mexico) enacted countermeasures to block enforcement of the U.S. sanctions. The EU could revive a WTO dispute against the LIBERTAD Act, which it suspended in 1998 when it reached an understanding on the issue with the United States that included the presumption of continued suspension of Title III. An issue that had been mentioned for many years in the State Department's annual terrorism report was Cuba's harboring of fugitives wanted in the United States. The most recent mention of the issue was in the 2014 terrorism report (issued in April 2015), which stated that Cuba \"does continue to harbor fugitives wanted to stand trial or to serve sentences in the United States for committing serious violations of U.S. criminal laws, and provides some of these individuals limited support, such as housing, food ration books, and medical care.\" With the resumption of diplomatic relations with Cuba, the United States have held several law enforcement dialogues in that reportedly has included the issue of fugitives from justice. U.S. fugitives from justice in Cuba include convicted murderers and numerous hijackers, most of whom entered Cuba in the 1970s and early 1980s. For example, Joanne Chesimard, also known as Assata Shakur, was added to the Federal Bureau of Investigation's (FBI's) Most Wanted Terrorist list in May 2013. Chesimard was part of militant group known as the Black Liberation Army. In 1977, she was convicted for the 1973 murder of a New Jersey State Police officer and sentenced to life in prison. Chesimard escaped from prison in 1979 and, according to the FBI, lived underground before fleeing to Cuba in 1984. Another fugitive, William \"Guillermo\" Morales, who was a member of the Puerto Rican militant group known as the Armed Forces of National Liberation, reportedly has been in Cuba since 1988 after being imprisoned in Mexico for several years. In 1978, both of his hands were maimed by a bomb he was making. He was convicted in New York on weapons charges in 1979 and sentenced to 10 years in prison and 5 years' probation, but he escaped from prison the same year. In addition to Chesimard and other fugitives from the past, a number of U.S. fugitives from justice wanted for Medicare and other types of insurance fraud have fled to Cuba in recent years. Although the United States and Cuba have an extradition treaty in place dating to 1905, in practice the treaty has not been utilized. Instead, for more than a decade, Cuba has returned wanted fugitives to the United States on a case-by-case basis. For example, in 2011, U.S. Marshals picked up a husband and wife in Cuba who were wanted for a 2010 murder in New Jersey, and in April 2013, Cuba returned a Florida couple who allegedly had kidnapped their own children (who were in the custody of the mother's parents) and fled to Havana. In August 2018, Cuba arrested and returned to the United States a long-sought U.S. fugitive from justice wanted in connection with ecoterrorism who had stopped in Cuba on his way to Russia. In November 2018, Cuba returned to the United States a New Jersey man wanted on murder charges. In another case demonstrating U.S.-Cuban law enforcement cooperation, Cuba successfully prosecuted a Cuban national in February 2018 who had fled to Cuba after murdering a doctor in Florida in 2015—the main witness was a Palm Beach detective. Cuba generally, however, has refused to render to U.S. justice any fugitive judged by Cuba to be \"political,\" such as Chesimard, who they believe could not receive a fair trial in the United States. Moreover, in the past Cuba has responded to U.S. extradition requests by stating that approval would be contingent upon the United States returning wanted Cuban criminals from the United States. When President Trump announced his policy toward Cuba on June 16, 2017, he called for Cuba to return to the United States U.S. fugitives from justice and specifically called for the return of Joanne Chesimard. Cuban Foreign Minister Rodríguez rejected the return of certain political refugees, such as Chesimard, who had received asylum from the Cuban government. In the 115 th Congress, the explanatory statement (Division K) to the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) directed the Secretary of State to engage the government of Cuba \"to resolve cases of fugitives from justice, including persons sought by the United States Department of Justice for such crimes committed in the United States, such as Joanne Chesimard.\" Two resolutions also were introduced, H.Res. 664 (King) and S.Res. 391 (Menendez), that would have called for the immediate extradition or rendering to the United States of all fugitives from justice in Cuba receiving safe harbor to escape prosecution or confinement for criminal offenses committed in the United States. Another initiative, H.R. 1744 (Smith, New Jersey), would have require a report on fugitives from U.S. justice in Cuba and U.S. efforts to secure the return of such fugitives. No further action was taken on these measures. First Vice President Miguel Díaz-Canel succeeded Raúl Castro as president in April 2018, but any near-term change to the government's one-party communist political system is unlikely. Cuba is now in the midst of rewriting its 1976 constitution, with a planned national referendum on February 24, 2019. Among the changes are the addition of a new appointed prime minister to oversee government operations, age and term limits on the president, and some market-oriented economic reforms, including the right to private property. However, the new constitution still would ensure the state sector's dominance over the economy and the role of the Communist Party in the political system as the only official party. Raúl Castro is continuing as first secretary of the party until 2021, and he played a key role heading the commission rewriting the constitution. Nevertheless, the government of Díaz-Canel, who is 58 years of age, brings to power a leader from a new generation and can be viewed as the culmination of generational change in Cuba's governmental institutions that began several years ago. The government of Raúl Castro began the implementation of significant economic policy changes, moving toward a more mixed economy with a stronger private sector, but its slow gradualist approach did not produce major improvements to the Cuban economy. In December 2018, President Díaz-Canel backtracked on implementing regulations that likely would have shrunk the private sector, and he slowed down implementation of a controversial decree regulating artistic expression, actions that appeared to demonstrate his responsiveness to public criticism and concerns and his independence from the previous Castro government. Looking ahead, President Díaz-Canel continues to faces two significant challenges—moving forward with economic reforms that produce results and responding to desires for greater freedom. The Obama Administration's shift in U.S. policy toward Cuba opened up engagement with the Cuban government in a variety of areas. Economic linkages with Cuba increased because of the policy changes, although to what extent they will continue to increase is uncertain given that the overall embargo and numerous other sanctions against Cuba remain in place. President Trump's partial rollback of Obama-era changes and introduction of new economic sanctions has limited opportunities for U.S. business engagement and contributed to a downturn in American travel to Cuba in the second half of 2017 and first part of 2018, although reports indicate that travel increased in the second part of the year because of a large increase in those visiting via cruise ships. The U.S. decision to downsize the diplomatic staff of the U.S. Embassy in Havana in response to unexplained injuries to U.S. diplomatic personnel in Cuba resulted in the suspension of most visa processing at the embassy and reduced other embassy operations, which has made bilateral engagement and existing areas of government-to-government cooperation more difficult. Just as there were diverse opinions in the 114 th Congress over U.S. policy toward Cuba, debate over Cuba policy continued in the 115 th Congress, especially with regard to U.S. economic sanctions. Most significantly, in the 2018 farm bill, P.L. 115-334 , enacted in December 2018, Congress approved a provision permitting funding for two U.S. agricultural export promotion programs in Cuba. Although any such future funding likely would be small, this was the first congressional action easing U.S. economic sanctions on Cuba in almost a decade. The human rights situation in Cuba remained a key congressional concern in the 115 th Congress and likely will remain a key concern in the future, although there are diverse views regarding the best approach to influence the Cuban government. Appendix A. Legislative Initiatives in the 115 th Congress Enacted Legislation and Approved Resolutions P.L. 115-31 ( H.R. 244 ). Consolidated Appropriations Act, 2017. Introduced January 4, 2017, as the Honoring Investments in Recruiting and Employing American Military Veterans Act of 2017; subsequently, the bill became the vehicle for the FY2017 appropriations measure known as the Consolidated Appropriations Act, 2017. House agreed to Senate amendments (309-118) May 3, 2017; Senate agreed to House amendment to Senate amendments (79-18) May 4, 2017. President signed into law May 5, 2017. Division C (Department of Defense), Section 8127, provided that none of the funds made available in the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division J (State Department and Foreign Operations), Section 7007, continued a long-standing provision prohibiting direct funding for the government of Cuba (including direct loans, credits, insurance, and guarantees of the Export-Import Bank). Section 7015(f) continues to require that foreign aid for Cuba not be obligated or expended except as provided through the regular notification procedures of the Committees on Appropriations. The explanatory statement to the measure provided $20 million in democracy assistance for Cuba ($5 million more than requested) and $28.056 million for the Office of Cuba Broadcasting ($1 million more than requested). P.L. 115-91 ( H.R. 2810 ) . National Defense Authorization Act (NDAA) for Fiscal Year 2018. H.R. 2810 introduced June 7, 2017; reported ( H.Rept. 115-200 ) by House Committee on Armed Services July 6, 2017. S. 1519 introduced and reported ( S.Rept. 115-125 ) by the Senate Committee on Armed Services July 10, 2017. House passed H.R. 2810 , amended, July 14, 2017. Senate passed H.R. 2810 , amended, September 18, 2017. Section 1026 of the House-approved version H.R. 2810 would continue a provision in the FY2017 NDAA ( P.L. 114-328 , Section 1035) prohibiting funds made available for the Department of Defense (DOD) for FY2018 from being used to close or abandon the U.S. Naval Station at Guantanamo Bay, Cuba, relinquish control of Guantanamo Bay to Cuba, or implement a material modification to a 1934 treaty between the United States and Cuba that constructively closes the naval station. Section 1034 of the Senate-approved version of H.R. 2810 would have extended the provision regarding the realignment or closure of the U.S. naval station in P.L. 114-328 from FY2017 through FY2021. Conference report ( H.Rept. 115-404 ) filed November 9, 2017. In the conference report, the Senate receded and accepted the House language on the provision regarding the U.S. Naval Station. Section 1036 continues to prohibit funds made available for DOD for FY2018 from being used to close or abandon the U.S. Naval Station at Guantanamo Bay, Cuba, relinquish control of Guantanamo Bay to Cuba, or implement a material modification to a 1934 treaty between the United States and Cuba that constructively closes the naval station. The House agreed (356-70) to the conference report November 14, and the Senate agreed (voice vote) to it on November 16, 2017. Signed into law December 12, 2017. P.L. 115-141 ( H.R. 1625 ). Consolidated Appropriations Act, 2018. Originally introduced March 20, 2017, as the Targeted Rewards for the Global Eradication of Human Trafficking Act, in March 2018, the bill became the vehicle for the FY2018 omnibus appropriations measure known as the Consolidated Appropriations Act, 2018. House agreed (256-167) to an amendment to the Senate amendment March 22, 2018; Senate agreed (65-32) to the House amendment to the Senate amendment March 23, 2018. President signed into law March 23, 2018. The measure did not include policy provisions tightening sanctions or limiting funding for a U.S. diplomatic presence that had been included in several FY2018 House appropriations bills (Commerce, H.R. 3267 ; Financial Services, H.R. 3280 ; Homeland Security, H.R. 3355 ; and State Department and Foreign Operations, H.R. 3362 —all of which had been incorporated into House-passed H.R. 3354 ). Division C (Department of Defense), Section 8123, carries over a prior-year provision providing that none of the funds made available by the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division J (Military Construction, Veterans Affairs, and Related Agencies), Section 128, provides that none of the funds made available by the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division K (State, Foreign Operations, and Related Programs), Section 7007, continues a long-standing provision prohibiting direct funding for the government of Cuba, including direct loans, credits, insurance, and guarantees of the Export-Import Bank or its agents. Section 7015(f) continues a long-standing provision prohibiting the obligation or expending of assistance for Cuba except through the regular notification procedures of the Committees on Appropriations. The explanatory statement to H.R. 1625 , Division K, provided $28.936 million for Cuba broadcasting, $5.28 million more than requested. This compared to $28.1 million recommended by the House appropriations bill ( H.R. 3362 , H.Rept. 115-253 ) and not less than $28.6 million recommended by the Senate appropriations bill ( S. 1780 , S.Rept. 115-152 ). The explanatory statement provided $20 million for democracy programs in Cuba, compared to the Administration's zeroing out of the assistance. The House appropriations bill would have provided $30 million in democracy assistance and the Senate bill would have provided $15 million, with not less than $3 million to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. In the explanatory statement, the Secretary of State is directed to engage with foreign governments, such as the government of Cuba, not covered by Section 7067 of the act, \"to resolve cases of fugitives from justice, including persons sought by the United States Department of Justice for such crimes committed in the United States, such as Joanne Chesimard.\" P.L. 115-232 ( H.R. 5515 ). John S. McCain National Defense Authorization Act for Fiscal Year 2019. Introduced April 13, 2018. House passed (351-66) May 24, 2018. Senate passed (85-10) June 18, 2018, substituting the language of S. 2987 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019. As approved by the Senate, H.R. 5515 had two Cuba-related provisions: Section 1024 would extend the prohibition on the use of funds in FY2019 to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba; Section 1027 would require the Defense Intelligence Agency to submit a report to the appropriate congressional committees within 180 days on security cooperation between Russia and Cuba, Nicaragua, and Venezuela. Conference report ( H.Rept. 115-874 ) filed July 25, 2018; House agreed (359-54) to the conference July 26 and Senate agreed (86-10) August 1, 2018. Signed into law August 13, 2018. As signed into law, Section 1032 extends the prohibition on the use of funds in FY2019 to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba. In the conference report, the conferees expressed concern about Russian military and intelligence activity in the Western Hemisphere, urged the Department of Defense to engage in dialogue and cooperation on security partners and allies in the region, and directed the Director of the Defense Intelligence Agency to submit a report to several key committees on security cooperation between the Russian Federation and Cuba, Nicaragua, and Venezuela. P.L. 115-244 ( H.R. 5895 ). Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019. Originally introduced as the Energy and Water Appropriations bill on May 21, 2018, the bill subsequently also became the vehicle for the Legislative Branch and Military Construction appropriations bills. House passed (235-179) June 8, 2018. Senate passed (235-179) June 25, 2018. Section 128 (Division C) of the House version and Section 127 (Division C) of the Senate version would continue a provision prohibiting funding to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. Conference report, H.Rept. 115-929 , filed September 10, 2018; Senate agreed to the conference report September 12, and House agreed September 13. Signed into law September 21, 2018. In the final acted measure, Section 128 (Division C) would continue the funding prohibition for FY2019 to carry out the closure or realignment of the naval station. (Also see H.R. 5786 and S. 3024 below.) P.L. 115-245 ( H.R. 6157 ). Department of Defense and Labor, Health, and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019. H.R. 6157 introduced and reported by House Committee on Appropriations ( H.Rept. 115-769 ) June 20, 2018, as the Department of Defense Appropriations Act, 2019. House passed (359-49) June 28, 2018. S. 3159 introduced and reported ( S.Rept. 115-290 ) by the Senate Appropriations Committee June 28, 2018. Senate passed (85-7) H.R. 6157 on August 23, 2018, substituting the language of S. 3159 (defense) and S. 3158 , covering the Departments of Labor, Health and Human Services, and Education. Both the House and Senate versions of H.R. 6157 (Section 8115 in the House version and Section 8109 in the Senate version) had a provision to continue a prohibition against FY2019 funds being used to carry out the closure or realignment of the U.S. Naval Station, Guantánamo Bay, Cuba. Conference report, H.Rept. 115-952 , filed September 13, 2018; Senate agreed to the conference September 18, and House agreed on September 26. Signed into law September 28, 2018. In the final enacted measure, Section 8125 of Division A continues the prohibition against FY2019 funds from being used to carry out the closure or realignment of the naval station. P.L. 115-254 ( H.R. 302 ). FAA Reauthorization Act of 2018. Originally introduced as the Sports Medicine Licensure Clarity Act of 2017 in January 2017, the bill became the legislative vehicle for the FAA Reauthorization Act of 2018 in September 2018. As signed into law October 5, 2018, the measure includes a provision in section 1957 requiring the Administrator of the Transportation Security Administration (1) to direct all public charters to provide updated flight data to more reliably track the public charter operations of air carriers between the United States and Cuba and (2) to develop and implement a mechanism that corroborates and validates flight schedule data to more reliably track the public charter operations of air carries between the United States and Cuba. The provision also requires the TSA Administrator to provide to Congress a confidential briefing on certain aspects of security measure at airports in Cuba that have air service to the United States. P.L. 115-334 ( H.R. 2 ) . 2018 Farm bill, Agriculture Improvement Act of 2018. H.R. 2 introduced May 3, 2018. S. 3042 introduced June 11, 2018; reported by Senate Committee on Agriculture, Nutrition, and Forestry June 18, 2018. House passed H.R. 2 (213-211) June 21, 2018. Senate passed (86-11) June 28, 2018, substituting the language of S. 3042 , as amended. As approved by the Senate, H.R. 2 had a provision, as amended by S.Amdt. 3364 (Rubio), that would permit funding for certain U.S. export promotion programs (Market Access Program and Foreign Market Development Cooperation Program) for U.S. agricultural products in Cuba, with the caveat that funds could not be used in contravention with directives under the National Security Presidential Memorandum issued by President Trump in June 2017 that prohibits transactions with entities owned, controlled, or operated by or on behalf of military, intelligence, or security services of Cuba. The conference report ( H.Rept. 115-1072 ) to the bill, filed December 10, 2018, retained the Senate provision on Cuba and appears in Title III, Subtitle B, Section 3201(a) of the bill. Senate agreed (87-13) to the conference report December 11, 2018, and the House agreed (369-47) December 12. Signed into law December 20, 2018. S.Res. 224 ( Durbin). The resolution recognizes the sixth anniversary of the death of Oswaldo Payá Sardiñas (July 2012) and commemorates his legacy and commitment to democratic values and principles. The resolution also calls on the Cuban government to allow an impartial, third-party investigation into the circumstances of Payá's death and to cease violating human rights, begin providing democratic freedoms to Cuban citizens, and provide amnesty for political prisoners. It urges the Inter-American Commission on Human Rights to continue reporting on human rights issues in Cuba and to request a visit to Cuba in order to investigate the circumstances surrounding the death of Oswaldo Payá. It also urges the United States to continue to support policies and programs that promote respect for human rights and democratic principles in Cuba in a manner consistent with the aspirations of the Cuban people. Introduced July 19, 2017; reported by the Senate Foreign Relations Committee, amended, March 21, 2018. Senate agreed to the resolution by Unanimous Consent on April 11, 2018. Additional Legislative Initiatives H.Res. 664 (King)/ S.Res. 391 (Menendez). Similar resolutions would have called for the immediate extradition or rendering to the United States of convicted felons William Morales, Joanne Chesimard, and all other fugitives from justices who are receiving safe harbor in Cuba to escape prosecution or confinement for criminal offenses committed in the United States. H.Res. 664 introduced December 13, 2017; referred to the House Committee on Foreign Affairs. S.Res. 391 introduced February 5, 2018; referred to the Senate Committee on Foreign Relations. H.R. 351 (Sanford). Freedom to Travel Act of 2017. The bill would have prohibited the President from prohibiting or regulating travel to or from Cuba by U.S. citizens or legal residents. Introduced January 6, 2017; referred to House Committee on Foreign Affairs. H.R. 442 (Emmer)/ S. 472 (Moran). Cuba Trade Act of 2017. Among its provisions, the initiative would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including in the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX). It would have repealed restrictions on private financing for Cuba but would have continued to prohibit U.S. government foreign assistance or financial assistance, loans, loan guarantees, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. The federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would be allowed. H.R. 442 introduced January 11, 2017; referred to House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Financial Services, and Agriculture. S. 472 introduced February 28, 2017; referred to the Senate Committee on Banking, Housing, and Urban Affairs. H.R. 498 (Cramer). Cuba Digital and Telecommunications Advancement Act of 2017, or the Cuba DATA Act. Among its provisions, the bill would have authorized the exportation of consumer communications devices to Cuba and the provision of telecommunications services to Cuba and would have repealed certain provisions of the CDA and the LIBERTAD Act. Introduced January 12, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committee on Energy and Commerce. H.R. 525 (Crawford). Cuba Agricultural Exports Act. The bill would have amended TSRA to permit U.S. government assistance for agricultural exports under TSRA, but not if the recipient would be an entity controlled by the Cuban government. The bill also would have authorized both the private financing of sales of agricultural commodities and investment for the development of an agricultural business in Cuba as long as the business was not controlled by the Cuban government or did not traffic in property of U.S. nationals confiscated by the Cuban government. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committees on Financial Services and Agriculture. H.R. 572 (Serrano). Promoting American Agricultural and Medical Exports to Cuba Act of 2017. Among its provisions, the bill would have permanently redefined the term payment of cash in advance to mean that payment is received before the transfer of title and release and control of the commodity to the purchaser; authorized direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; established an export promotion program for U.S. agricultural exports to Cuba; permitted nonimmigrant visas for Cuban nationals for activities related to purchasing U.S. agricultural goods; repealed a trademark sanction related to Cuba in a FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 ); prohibited restrictions on travel to Cuba; repealed the on-site verification requirement for medical exports to Cuba under the CDA; and established an agricultural export promotion trust fund. Introduced January 13, 2017; referred to House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Judiciary, Agriculture, and Financial Services. H.R. 573 (Serrano). Baseball Diplomacy Act. The bill would have waived certain prohibitions with respect to nationals of Cuba coming to the United States to play organized professional baseball. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committee on the Judiciary. H.R. 574 (Serrano). Cuba Reconciliation Act. Among its provisions, the bill would have lifted the trade embargo on Cuba by removing provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba and otherwise provide telecommunications services between the United States and Cuba; and prohibited restrictions on travel to and from Cuba. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Energy and Commerce, Financial Services, Judiciary, Oversight and Government Reform, and Agriculture. H.R. 1301 (Frelinghuysen). Department of Defense Appropriations Act, 2017. Introduced March 2, 2017; referred to the House Committee on Appropriations and in addition to the Committee on the Budget. House passed (371-48) March 8, 2017. As passed, Section 8127 provides that no funds in the act may be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (For further action, see P.L. 115-31 above.) H.R. 1744 (Smith, New Jersey) . Walter Patterson and Werner Foerster Justice and Extradition Act. The bill would have called for a report on fugitives from U.S. justice in Cuba, U.S. efforts to secure the return of such fugitives, and other information on those cases. Introduced March 27, 2017; referred to Committee on Foreign Affairs. H.R. 2966 (Rush). United States-Cuba Normalization Act of 2017. The bill would have removed provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba, and otherwise provide telecommunications services between the United States and Cuba; prohibited restrictions on travel to and from Cuba and on transactions incident to such travel; called on the President to continue discussions with Cuba for the purpose of settling claims of U.S. nationals for the taking of property by the Cuban government and securing the protection of internationally recognized human rights; extended nondiscriminatory trade treatment to the products of Cuba; and prohibited limits on remittances to Cuba. Introduced June 20, 2017; referred to House Committee on Foreign Affairs, and in addition to the Committees on Ways and Means, Energy and Commerce, the Judiciary, Agriculture, and Financial Services. H.R. 2998 (Dent) / S. 1557 (Moran) . Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018. H.R. 2998 introduced and reported ( H.Rept. 115-188 ) by the House Appropriations Committee on Appropriations June 22, 2017. S. 1557 introduced and reported ( S.Rept. 115-130 ) by the Senate Committee on Appropriations July 13, 2017. Section 128 of the House bill and Section 127 of the Senate bill would provide that none of the funds made available by this act may be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. The provision would extend the current similar provision for FY2017 set forth in P.L. 115-31 (Division C, Section 8127). As stated in the House and Senate committee reports to the respective bills, \"the provision is intended to prevent the closure or realignment of the installation out of the possession of the United States, and maintain the Naval Station's longstanding regional security and migrant operations missions.\" The bill became a part of a \"minibus\" appropriations package, H.R. 3219 , approved by the House in July 2017, and a full-year FY2018 omnibus appropriations bill, H.R. 3354 , approved by the House in September 2017. For final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3180 (Nunes). Intelligence Authorization Act for Fiscal Year 2018. Introduced July 11, 2017, and reported by the House Committee on Intelligence July 24, 2017 ( H.Rept. 115-251 ). House passed (380-35) July 28, 2017. As approved, Section 609 would have expressed the sense of Congress that, pursuant to the statutory requirement for the intelligence community (IC) to keep the congressional intelligence committees \"fully and currently informed,\" about all \"intelligence activities\" of the United States, IC agencies must submit prompt written notification after becoming aware that an individual in the executive branch has disclosed certain classified information outside established intelligence channels to adversary foreign governments, which are defined in the provision as the governments of North Korea, Iran, China, Russia, and Cuba. The Senate companion bill, S. 1761 (Burr), did not include a similar provision. For additional action, see H.R. 6237 below. H.R. 3219 (Granger). Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018, or the Make America Secure Appropriations Act, 2018. Introduced and reported ( H.Rept. 115-219 ) July 13, 2017, by the House Committee on Appropriations as the Department of Defense Appropriations Act, 2018, the bill subsequently became the vehicle for four other appropriations measures. House approved (235-192) July 27, 2017. As approved, Section 8116 of Division A (Defense appropriations) would provide that no funds made available by the act could be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. The provision would extend the current similar provision for FY2017 set forth in P.L. 115-31 (Division C, Section 8127). Section 128 of Division C (Military Construction appropriations) also would provide that none of the funds made available by the act may be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3267 (Culberson). Commerce, Justice, Science, and Related Agencies Appropriations, 2018. Introduced and reported ( H.Rept. 115-231 ) July 17, 2017, by the House Committee on Appropriations. Section 536 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner has expressly consented. In the report to the bill, the minority expressed the view that the provision was an inappropriate rider that did not belong in the bill, which would place restrictions on the U.S. Patent and Trademark Office (USPTO's) ability to issue trademarks to Cuban nationals, even in cases in which a specific license has been issued by the Department of the Treasury's Office of Foreign Assets Control. The minority stated that the provision would meddle in foreign policy, harm diplomatic efforts with Cuba, and create a significant burden, and set an impossible standard for the USPTO. The Senate companion bill, S. 1662 , did not have a comparable provision. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3280 (Graves). Financial Services and General Government Appropriations Act, 2018. Introduced and reported ( H.Rept. 115-234 ) July 18, 2017, by the House Committee on Appropriations. Section 130 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 131 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above. H.R. 3328 ( Katko ) / S. 2023 (Rubio) . Cuban Airport Security Act of 2017. Identical bills would have required, among other provisions, a briefing for the House Committee on Homeland Security, Senate Committee on Commerce, Science, and Transportation, and the Comptroller General of the United States regarding certain security measures and equipment at each of Cuba's 10 international airports. The bill also would have prohibited a U.S. air carrier from employing a Cuban national in Cuba (pursuant to 31 CFR 515.573) unless the air carrier has publicly disclosed the full text of the formal agreement between the air carrier and the Empresa Cubana de Aeropuertos y Servicios Aeronauticos or any other entity associated with the Cuban government. The bill would also, to the extent practicable, have prohibited U.S. air carriers from hiring Cuban nationals if they had been recruited, hired, or trained by entities that are owned, operated, or controlled in whole or in part by Cuba's Council of State, Council of Ministers, Communist Party, Ministry of the Revolutionary Armed Forces, Ministry of Foreign Affairs, or Ministry of the Interior. H.R. 3328 introduced July 20, 2017; reported by the Committee on Homeland Security ( H.Rept. 115-308 ) and discharged by Committees on Foreign Affairs and Transportation September 13, 2017. House passed (voice vote) October 23, 2017. S. 2023 introduced October 26, 2017; referred to the Committee on Commerce, Science, and Transportation. Also see action above on P.L. 115-254 , FAA Reauthorization Act of 2018. H.R. 3354 ( Calvert ). Make America Sure and Prosperous Appropriations Act, 2018. Introduced as the Department of the Interior, Environment, and Related Agencies Appropriation Act on July 21, 2017, the bill subsequently became the vehicle for the FY2018 omnibus appropriations measure covering 12 FY2018 appropriations bills. House passed (211-198) September 14, 2017. As approved by the House, the measure had numerous provisions on Cuba that were included in individual House Appropriations Committee-reported appropriations bills. For final action on FY2018 appropriations, see P.L. 115-141 above. Division C (Commerce, Justice, Science). Section 536 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. (See H.R. 3267 above.) Division D (Financial Services and General Government). Section 130 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 131 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. (See H.R. 3280 above.) Division E (Homeland Security). Section 208 would have prohibited funds from being used to approve, license, facilitate, authorize, or allow the trafficking or import of property confiscated by the Cuban government. (See H.R. 3355 below.) Division G (State Department and Foreign Operations). Section 7007 would have continued to prohibit direct funding for the government of Cuba. Section 7015(f) would have continued to require notification to the Committees on Appropriations for funds for assistance to Cuba. Section 7045(c)(1) would have prohibited funding in the act and prior appropriation measures for the establishment or operation of a U.S. diplomatic presence in Cuba beyond that which was in existence prior to December 17, 2014. Section 7045(c)(2) would have provided $30 million in Economic Support Fund assistance to promote democracy and strengthen civil society but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. (See H.R. 3362 below.) Division I (Defense). Section 8116 would have continued to provide that no funds made available by the act could be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (See H.R. 3219 above.) Division K (Military Construction). Section 128 would have continued to provide that none of the funds made available by this act could be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. (See H.R. 2998 and H.R. 3219 above.) H.R. 3355 (Carter). Department of Homeland Security Appropriations, 2018. Introduced and reported ( H.Rept. 115-239 ) July 21, 2017, by the House Committee on Appropriations. Section 208 would have prohibited funds from being used to approve, license, facilitate, authorize, or allow the trafficking or import of property confiscated by the Cuban government. Also see H.R. 3354 above, and for final action on FY2018 appropriations see P.L. 115-141 above. H.R. 3362 (Rogers) / S. 1780 ( Graham) . Department of State, Foreign Operations, and Related Programs Appropriations, 2018. H.R. 3362 introduced and reported ( H.Rept. 115-253 ) by the House Committee on Appropriations on July 24, 2017. S. 1780 introduced and reported ( S.Rept. 115-152 ) by the Senate Appropriations Committee September 7, 2017. Also see H.R. 3354 above, and for final action on FY2018 appropriations, see P.L. 115-141 above. Both bills would continue two long-standing provisions: Section 7007 would prohibit direct funding for the government of Cuba, and Section 7015(f) would require notification to the Committees on Appropriations for funds for assistance to Cuba. Section 7045(c)(1) of the House bill would have prohibited funding in the act and prior appropriation measures for the establishment or operation of a U.S. diplomatic presence in Cuba beyond that which was in existence prior to December 17, 2014, including the hiring of additional staff, unless such staff were necessary for protecting the health, safety, or security of diplomatic personnel or facilities in Cuba; the prohibition would not have applied to support for democracy-building efforts for Cuba or if the President determined that Cuba had met the requirements and factors specified in Section 205 of the LIBERTAD Act of 1996 for determining when a transition government is in power in Cuba. Section 7045(c)(2) of the House bill would have provided $30 million in Economic Support Funds (ESF) assistance to promote democracy and strengthen civil society but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. In the Senate bill, Section 7045(c) would have provided $15 million in ESF for democracy programs in Cuba; of this, the provision would have provided that not less than $3 million be made available to USAID to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. The report to the House bill would have provided not less than $28.056 million for the Office of Cuba Broadcasting, whereas the report to the Senate bill would have provided $28.569 million. H.R. 4583 (Wilson , Joe ). Ensuring Diplomats' Safety Act. The bill would have suspended all U.S. diplomatic presence in Cuba until the conclusion of any U.S. law enforcement investigation relating to \"the attacks on 17 United States diplomats.\" Introduced December 7, 2017; referred to the House Committee on Foreign Affairs. H.R. 5786 (Dent ) / S. 3024 (Boozman). Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2019. H.R. 5786 introduced and reported ( H.Rept. 115-673 ) by the House Committee on Appropriations May 11, 2018. S. 3024 introduced and reported ( H.Rept. 115-269 ) by the Senate Appropriations Committee June 7, 2018. Section 128 of the House bill and Section 127 of the Senate bill would continue a provision prohibiting funding to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (For further action, see P.L. 115-244 above) H.R. 5952 (Culberson). Commerce, Justice, Science, and Related Agencies Appropriations, 2019. Introduced and reported ( H.Rept. 115-704 ) by the House Appropriations Committee May 24, 2018). Section 535 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. In the report to the bill, the minority expressed the view that the provision was an inappropriate rider that did not belong in the bill, which would place restrictions on the U.S. Patent and Trademark Office (USPTO's) ability to issue trademarks to Cuban nationals, even in cases in which a specific license has been issued by the Department of the Treasury's Office of Foreign Assets Control. The minority stated that the provision would meddle in foreign policy, harm diplomatic efforts with Cuba, and create a significant burden, and set an impossible standard for the USPTO. The Senate companion bill, S. 3072 , did not have a comparable provision. H.R. 6147 (Calvert). Interior, Environment, and Financial Services and General Government Appropriations, 2019. Originally introduced as the FY2019 Department of the Interior, Environment, and Related Agencies appropriations bill, the measure also became the House vehicle for Financial Services and General Government appropriations and incorporated the House version of H.R. 6258 as Division B; House passed (217-199) July 19, 2018. As approved by the House: Section 128 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government; Section 129 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The Senate version of the bill, approved (92-6) August 1, 2018, also became the vehicle for Financial Services and General Government, Agriculture, and Transportation, Housing and Urban Development appropriations; it did not include the two Cuba-related provisions in the House version. Also see H.R. 6258 below. H.R. 6237 (Nunes). Matthew Young Pollard Intelligence Authorization for Fiscal Years 2018 and 2019. Introduced June 27, 2018; reported ( H.Rept. 115-805 ) by the House Committee on Intelligence July 3, 2018. House passed (363-54) July 12, 2018. As approved, the bill included a provision that would have expressed the sense of Congress that, pursuant to the statutory requirement for the intelligence community (IC) to keep the congressional intelligence committees \"fully and currently informed,\" about all \"intelligence activities\" of the United States, IC agencies must submit prompt written notification after becoming aware that an individual in the executive branch has disclosed certain classified information outside established intelligence channels to adversary foreign governments, which were defined in the provision as the governments of North Korea, Iran, China, Russia, and Cuba. The Senate companion bill, S. 3153 (Burr), did not include a similar provision. H.R. 6258 (Graves) . Financial Services and General Government Appropriations Act, 2019. Introduced and reported ( H.Rept. 115-792 ) by the House Committee on Appropriations June 28, 2018. Section 128 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 129 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that was substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The Senate companion bill, S. 3107 , did not have similar provisions. Also see H.R. 6147 for additional legislative action. H.R. 6385 (Rogers) / S. 3108 (Graham) . Department of State, Foreign Operations, and Related Programs Appropriations, 2019. House Appropriations Committee introduced and reported H.R. 6385 ( H.Rept. 115-829 ) on July 16, 2018. Senate Appropriations Committee introduced and reported S. 3108 ( S.Rept. 115-282 ) June 21, 2018. Both bills would continue long-standing provisions prohibiting direct funding for the government of Cuba and prohibiting the obligation or expending of assistance for Cuba except through the regular notification procedures of the Committees on Appropriations. The House bill would have provided $30 million to promote democracy and strengthen civil society in Cuba, with, according to the report to the bill ( H.Rept. 115-829 ), not less than $8 million for the National Endowment for Democracy; the report would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building and stipulate that grants exceeding $1 million or to be implemented over a period of 12 months would be awarded only to organizations with experience promoting democracy inside Cuba. In the Senate bill, Section 7045(c) would have provided $15 million for democracy programs in Cuba. With regard to Cuba broadcasting, the House report would have provided $29.1 million and the Senate report ( S.Rept. 115-282 ) would have provided $29.2 million. The report to the Senate bill would also have called for a State Department Cuba report on Internet access, the use of cell phones to access data, the impact of access to telecommunications technology on increased political and economic opportunities, and the impact of telecommunications development on human rights. S.Res. 511 (Rubio)/ H.Res. 916 (Diaz-Balart). Similar but not identical resolutions would have honored Las Damas de Blanco as the recipient of the 2018 Milton Friedman Prize for Advancing Liberty. S.Res. 511 introduced May 16, 2018; referred to the Committee on Foreign Relations. H.Res. 916 introduced May 25, 2018; referred to the Committee on Foreign Affairs. S. 259 (Nelson)/ H.R. 1450 (Issa). No Stolen Trademarks Honored in America Act. The initiative would have modified a 1998 prohibition (§211 of Division A, Tile II, P.L. 105-277 ) on recognition by U.S. courts of certain rights to certain marks, trade names, or commercial names. The bill would have applied a fix so that the sanction would apply to all nationals and would bring the sanction into compliance with a 2002 World Trade Organization dispute settlement ruling. S. 259 introduced February 1, 2017; referred to the Senate Committee on the Judiciary. H.R. 1450 introduced March 9, 2017; referred to House Committee on the Judiciary. S. 275 (Heitkamp). Agricultural Export Expansion Act of 2017. The bill would have amended TSRA to allow private financing by U.S. persons of sales of agricultural commodities to Cuba. Introduced February 2, 2017; referred to Senate Committee on Banking, Housing, and Urban Affairs. S. 539 (Cruz). The bill would have designated the area between the intersections of 16 th Street, Northwest and Fuller Street, Northwest, and 16 th Street, Northwest, and Euclid Street, Northwest, in Washington, DC, as \"Oswaldo Paya Way.\" Introduced March 7, 2017; referred to the Committee on Homeland Security and Governmental Affairs. S. 1286 (Klobuchar). Freedom to Export to Cuba Act of 2017. The bill would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. Introduced May 25, 2016; referred to the Senate Committee on Banking, Housing, and Urban Affairs. S. 1287 (Flake). Freedom for Americans to Travel Act of 2017. The bill would have prohibited the President from regulating travel to or from Cuba by U.S. citizens or legal residents, or any of the transactions incident to such travel, including banking transactions. It would have provided for the President to regulate such travel or restrictions on a case-by-case basis if the President determined that such restriction was necessary to protect the national security of the United States or was necessary to protect the health or safety of U.S. citizens or legal residents resulting from traveling to or from Cuba; to implement such a restriction, the President would have been required to submit a written justification not later than seven days to several congressional committees. Introduced May 25, 2017; referred to the Committee on Foreign Relations. S. 1655 (Collins). Transportation, Housing, and Urban Development, and Related Agencies Appropriations Act, 2018. Introduced and reported ( S.Rept. 115-138 ) July 27, 2017. Section 119E would have allowed foreign air carriers traveling to or from Cuba to make transit stops in the United States for refueling and other technical services. S. 1699 (Wyden). United States-Cuba Trade Act of 2017. The bill, among its provisions, would have repealed or amended provisions of law restricting trade and other relations with Cuba; authorized common carriers to install, maintain, and repair telecommunications equipment and facilities in Cuba and provided telecommunications services between the United States and Cuba; prohibited restrictions on travel to Cuba; called for the President to take all necessary steps to advance negotiations with the Cuban government for settling property claims of U.S. nationals and for securing the protection of internationally recognized human rights; extended nondiscriminatory trade treatment to Cuba; prohibited restrictions on remittances to Cuba; and required a presidential report to Congress prior to the denial of foreign tax credit with respect to certain foreign countries. Introduced August 1, 2017; referred to the Senate Committee on Finance. S. 3654 (Menendez). U.S. Agency for Global Media Reform Act. Introduced November 15, 2018 and referred to the Senate Committee on Foreign Relations; reported by Senator Corker November 28, 2018, with an amendment in the nature of a substitute and without written report. As reported, Section 8(b), included a requirement for a briefing or report from the CEO of the United States Agency for Global Media on any employee of the agency or an agency grantee network who has been suspended or placed on administrative leave without a formal disciplinary determination for writing or approving content in programming inconsistent with the agency's mission to \"inform, engage, and connect people around the world in support of freedom and democracy.\" The briefing or report would have been required to include information on the employment status of the suspended employee and the \"reasons for the Agency's failure to made a formal disciplinary determination.\" The provision originated from an amendment offered by Senator Flake, adopted by Unanimous Consent, during Senate Foreign Relation Committee consideration of the bill on November 28, 2018. Appendix B. Links to U.S. Government Reports U.S. Relations with Cuba, Fact Sheet , Department of State Date: November 8, 2017 Full Text: https://www.state.gov/r/pa/ei/bgn/2886.htm Congressional Budget Justificati on for Foreign Operations FY2019 , Appendix 2 , pp. 474-475, Department of State Date: March 14, 2018 Full Text: https://www.state.gov/documents/organization/279517.pdf Country Report s on Human Rights Practices for 2017 , Cuba , Department of State Date: April 20, 2018 Full Text: https://www.state.gov/documents/organization/277567.pdf Cuba web page, Department of State Link: https://www.state.gov/p/wha/ci/cu/index.htm Cuba web page, Department of Commerce, Bureau of Industry and Security Link: https://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/cuba Cuba web page, Department of Agriculture, Foreign Agricultural Service Link: https://www.fas.usda.gov/regions/cuba Cuba Sanctions web page, Department of the Treasury, Office of Foreign Assets Control Link: https://www.treasury.gov/resource-center/sanctions/Programs/Pages/cuba.aspx International R eligious Freedom Report for 2017 , Cuba , Department of State Date: May 29, 2018 Full Text: https://www.state.gov/documents/organization/281308.pdf International Narcotics Control Strategy Report 2018 , Volume I, Drug and Chemical Control, p. 146, Department of State Date: March 2018 Link: http://www.state.gov/documents/organization/278759.pdf International Narcotics Control Strategy Report 2018, Volume II , Money Laundering, pp. 85-87, Department of State Date: March 2018 Link: http://www.state.gov/documents/organization/278760.pdf Overview of Cuban Imports of Goods and Services and Effects of U.S. Restrictions , U.S. International Trade Commission, Publication 4597 Date: March 2016 Link: https://www.usitc.gov/sites/default/files/publications/332/pub4597_0.pdf Trafficking in Persons Report 2018 , Cuba, Department of State Date: June 2018 Link: https://www.state.gov/j/tip/rls/tiprpt/countries/2018/282640.htm", "summary": "Cuba remains a one-party authoritarian state with a poor human rights record. Current President Miguel Díaz-Canel succeeded Raúl Castro in April 2018, although Castro is continuing as first secretary of Cuba's Communist Party. Over the past decade, Cuba has implemented gradual market-oriented economic policy changes, but critics maintain that it has not taken enough action to foster sustainable economic growth. Most observers do not anticipate major policy changes under Díaz-Canel, at least in the short term; the president faces the enormous challenges of reforming the economy and responding to desires for greater freedom. U.S. Policy Congress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening and at times easing U.S. economic sanctions. Since the early 1960s, the centerpiece of U.S. policy has consisted of economic sanctions aimed at isolating the Cuban government. In 2014, however, the Obama Administration initiated a major policy shift, moving away from sanctions toward a policy of engagement. The policy change included the restoration of diplomatic relations (July 2015); the rescission of Cuba's designation as a state sponsor of international terrorism (May 2015); and an increase in travel, commerce, and the flow of information to Cuba implemented through regulatory changes. In June 2017, President Trump unveiled a new policy toward Cuba that increased sanctions and partially rolled back some of the Obama Administration's efforts to normalize relations. The most significant changes include restrictions on transactions with companies controlled by the Cuban military and the elimination of individual people-to-people travel. In response to unexplained injuries of members of the U.S. diplomatic community at the U.S. Embassy in Havana, the State Department reduced the staff of the U.S. Embassy by about two-thirds; the reduction has affected embassy operations, especially visa processing, and made bilateral engagement more difficult. Legislative Activity In the 115th Congress, debate over Cuba policy continued, especially with regard to economic sanctions. The 2018 farm bill, P.L. 115-334 (H.R. 2), enacted in December 2018, has a provision permitting funding for two U.S. agricultural export promotion programs in Cuba. Two FY2019 House appropriations bills, Commerce (H.R. 5952) and Financial Services (H.R. 6258 and H.R. 6147), had provisions that would have tightened economic sanctions, but final action was not completed by the end of the 115th Congress. Other bills were introduced, but not acted upon, that would have eased or lifted sanctions altogether: H.R. 351 and S. 1287 (travel); H.R. 442/S. 472 and S. 1286 (some economic sanctions); H.R. 498 (telecommunications); H.R. 525 (agricultural exports and investment); H.R. 572 (agricultural and medical exports and travel); H.R. 574, H.R. 2966, and S. 1699 (overall embargo); and S. 275 (private financing for U.S. agricultural exports). Congress continued to provide funding for democracy and human rights assistance in Cuba and for U.S.-government sponsored broadcasting. For FY2017, Congress provided $20 million in democracy assistance and $28.1 million for Cuba broadcasting (P.L. 115-31). For FY2018, it provided $20 million for democracy assistance and $28.9 million for Cuba broadcasting (P.L. 115-141; explanatory statement to H.R. 1625). For FY2019, the Trump Administration requested $10 million in democracy assistance and $13.7 million for Cuba broadcasting. The House Appropriations Committee's FY2019 State Department and Foreign Operations appropriations bill, H.R. 6385, would have provided $30 million for democracy programs, whereas the Senate version, S. 3108, would have provided $15 million; both bills would have provided $29 million for broadcasting. The 115th Congress approved a series of continuing resolutions (P.L. 115-245 and P.L. 115-298 ) that continued FY2019 funding at FY2018 levels through December 21, 2018, but did not complete action on FY2019 appropriations, leaving the task to the 116th Congress. In other action, several approved measures—P.L. 115-232, P.L. 115-244, and P.L. 115-245—have provisions extending a prohibition on FY2019 funding to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba; the conference report to P.L. 115-232 also requires a report on security cooperation between Russia and Cuba. The FAA Reauthorization Act of 2018 (P.L. 115-254) requires the Transportation Security Administration to brief Congress on certain aspects of Cuban airport security and efforts to better track public air charter flights between the United States and Cuba. In April 2018, the Senate approved S.Res. 224, commemorating the legacy of Cuban democracy activist Oswaldo Payá. For more on legislative initiatives in the 115th Congress, see Appendix A.", "document_type": "crs"}
{"report": "Congress has created a wide array of advisory bodies, separate from each chamber's committees and officers, in order to better exercise its legislative, oversight, and investigative mandates, and to attend to both temporary and ongoing administrative tasks and responsibilities. During the past two decades, Congress has established or renewed the existence of hundreds of statutory entities to study, advise on, coordinate, or monitor matters of particular interest to Congress. These entities vary in several dimensions, including their official designation, purpose, lifespan, membership, and mechanism by which members are appointed. Many of these bodies are expressly identified as commissions, but others are designated as boards, advisory committees, or other terms. In this report, they are referred to generically as \"congressional advisory bodies.\" These groups are sometimes created to address a single purpose—to study a discrete policy issue or to attend to one-time or recurring administrative functions. Often, they have a well-defined mandate, which typically includes the submission of a final report to Congress with detailed findings and recommendations. Although some have a specific lifespan, others have been created to provide ongoing support and advice (e.g., the boards of visitors for the U.S. military service academies, or the Commission to Recommend Individuals to the President for Appointment to the Office of Architect of the Capitol). The statutory provisions creating a substantial proportion of congressional advisory bodies provide for a membership that, either entirely or in part, (1) includes, (2) is chosen by, or (3) is recommended by Members of Congress. This report addresses only those statutory groups whose membership involves congressional participation in one or more of these forms. It provides selected background information on these groups and specific information relating to the role of Members of Congress in the appointment process. This report is intended to inform Members of Congress of their specific appointment responsibilities and to make them aware of their opportunities to serve as members of congressional advisory bodies. Additionally, observations regarding the rationale and effects for the many variations in the appointment schemes for existing bodies are intended to provide some alternatives to legislators to facilitate the drafting of membership language in potential future statutes. Following an examination of the appointment schemes to various congressional advisory bodies, this compilation attempts to identify all congressional advisory bodies currently in existence on which Members of Congress serve directly, or for which they make appointments or recommend potential members to another appointing authority (e.g., the President). It includes any statutorily created advisory entity (e.g., boards, advisory panels, task forces) whose membership scheme mandates the participation of Members of Congress, either as potential members or as participants in the process of appointing the membership. Entities created by Congress that have neither congressional membership nor congressional involvement in the appointment process have been omitted. Boards and commissions for which the Senate has \"advise and consent\" authority are also omitted, unless Members of Congress otherwise participate in the appointment process. Also excluded are ad-hoc commissions and advisory groups empaneled by individual congressional committees under their general authority to procure the \"temporary services\" of consultants to \"make studies and advise the committee with respect to any matter within its jurisdiction,\" pursuant to 2 U.S.C. §72a or under chamber rules or resolutions. The membership of these entities, such as the Advisory Commission to Study the Consumer Price Index, might be selected by the chairman and ranking minority member of the committee concerned, and these bodies are generally empaneled for short durations. This report also does not include caucuses, observer groups, or working groups created by means other than statute. Tracking the provisions of law that create congressional advisory bodies is an inherently inexact exercise. Although many such bodies are created in easily identifiable freestanding statutes, others are contained within the statutory language of lengthy omnibus legislation. It is also sometimes difficult to determine when such bodies have ceased to operate, as termination dates are not always included in the organic statute, or may be tied to ambiguous conditions. When making appointments to congressional advisory bodies, Members of Congress may be empowered to act independently or in concert with other Members. Structurally, variations in the authority of appointment officials fall within several common patterns. The statutory scheme may mandate that membership of a congressional advisory body be made up in whole or in part by specifically designated Members of Congress, typically members of the leadership or of specified committees. In most such cases, leadership service is limited to bodies concerned with the internal administrative functions of the House and Senate. For example, membership of the Commission to Recommend Individuals to the President for Appointment to the Office of Architect of the Capitol includes the Speaker of the House, the President pro tempore of the Senate, the majority and minority leaders of the House and the Senate, and the chairmen and the ranking minority members of the Committee on House Administration of the House of Representatives, the Committee on Rules and Administration of the Senate, the Committee on Appropriations of the House of Representatives, and the Committee on Appropriations of the Senate. Selected leaders, often with balance between the parties, may appoint congressional advisory body members, who may or may not be Members of Congress. For appointments made by congressional leaders, the statutory scheme generally mandates that appointments be made by leaders of both parties. The members of some congressional advisory bodies are selected by majority and minority party leaders in equal numbers. In other instances, the majority party appoints a greater number. In a few cases, the majority/minority ratio of appointments to a commission varies, depending upon whether the President is of the same party as the majority in the House or the Senate. One common component of statutory appointment schemes for certain congressional advisory bodies is the requirement that Members of Congress serve on these panels. Certain bodies, such as the British American Parliamentary Group, are composed entirely of Members of Congress. In other instances, a statute may require that a certain specified number of Senators or Representatives be selected, or may prohibit Members of Congress from serving. For appointments made by the President pro tempore of the Senate, 2 U.S.C. §199 specifies involvement of the majority and minority leaders of the Senate. Selected leaders, again often with balance between the parties, may be authorized to recommend members, who may or may not be Members of Congress, for appointment to a congressional advisory body. They may do so either in parallel or jointly, and the recommendations may be made to other congressional leaders, such as the Speaker of the House and President pro tempore of the Senate, to the President, or to a cabinet official. Some statutory provisos may have the effect of limiting the degree of autonomy a Member has in appointing or making recommendations of individuals for congressional advisory body membership. For example, the appointing official may be required by law to select members who are specifically qualified by virtue of their education, knowledge, training, experience, expertise, distinguished service, or recognized eminence in a particular field or fields. In other instances, appointments are expressly limited to individuals occupying specific federal, state, or local government positions, representing a particular occupation, or serving as head of a particular public or private sector institution or organization. In many instances, the authority to appoint members to the entities covered in this report is shared by the executive and legislative branches. When the appointment authority set out in a statute creating a congressional advisory body is shared by the President (or other executive branch officials) and Members of Congress, questions about implementation of the appointment scheme have sometimes prompted the President to comment on separation-of-powers issues raised under the Appointments Clause of the Constitution. Some statutes instruct the President to appoint congressional advisory body members from a list provided by congressional leadership. For example, the appointment scheme for the Commission on Interoperable Data Sharing provides for nine members, one member appointed by the President to serve as chairman, and eight members appointed by the President \"from a list of nominees jointly provided by the Speaker of the House of Representatives, the minority leader of the House of Representatives, the majority leader of the Senate, and the minority leader of the Senate.\" In the signing statement accompanying the law, President George W. Bush noted that methods of selection included in the Appointment Clause of the Constitution include \"appointment by the President with Senate consent, or by the President alone,\" but not by the President \"from a pool of persons selected by congressional leadership.\" Similarly, in a statement accompanying the signing of legislation creating the Brown v. Board of Education 50 th Anniversary Commission, President Bush made it clear that he would not be bound by the membership recommendations of House and Senate leadership required by the statute, but would rather \"welcome, as a matter of comity, the suggestions of the congressional leadership for those positions.\" As the foregoing discussion suggests, several alternative approaches are available to legislators in drafting membership selection language. Inclusion of legislators on such panels insures that Congress will be able to exercise a certain degree of control over the operations of the entity concerned. At the same time, service by Members on congressional advisory bodies is arguably antithetical to at least one of the rationales for creating the entity in the first place, namely, to reduce the workload of Congress by delegating certain functions to temporary bodies. Even in the absence of direct membership on a congressional advisory body, in drafting the particulars of an appointment scheme, legislators can dictate, to some degree, the measure of autonomy an entity enjoys. For example, although the legislation creating the National Commission on Terrorist Attacks Upon the United States (the 9-11 Commission) did not stipulate that Members of Congress be included in the commission's membership, it did call for 9 of the 10 members of the commission to be selected by congressional leaders. Attention to the proper balance between the number of members appointed by congressional leaders and by other individuals, or to the number of Members of Congress required to be among the appointees, or to the qualifications of appointees, can be significant factors in enabling an advisory body to fulfill its congressional mandate. Each currently functioning congressional advisory body that was identified, regardless of when it was initially established, is profiled following the narrative portion of this report. For each entity, a brief summary of its purpose or role is provided, as well as the following information: Statutory D uration of the A dvisory B ody . The termination date is provided for each advisory body, where appropriate. Occasionally, termination dates are ambiguous, due to their contingency upon an associated time line within the statute, such as the date of submission of a final report. FACA A pplicability . Advisory bodies established in the executive branch that report to the President are subject to the Federal Advisory Committee Act (FACA), which governs their creation, administration, and management. Advisory bodies that are appointed by Congress and report only to Congress are not specifically bound by the requirements set forth in FACA. Because many commissions involve both congressional and presidential participation, some of the entities in this report may be governed by FACA. Occasionally, statutes creating congressional advisory bodies will incorporate explicit statutory language exempting a commission from FACA requirements, in whole or in part. Membership Appointment Structure . Each entry includes the advisory body's membership appointment scheme. The particulars of congressional involvement in the appointment process are varied. The statutory language of membership appointment schemes detail a wide range of membership patterns that may be of interest to lawmakers who might be contemplating creation of advisory bodies. In the legislative branch, the individuals most commonly empowered to make appointments to commissions and similar bodies are the Speaker of the House, the President or President pro tempore of the Senate, and the majority and minority leaders of the House and Senate. The majority leader of the House is less often included in these mechanisms, since the appointment role of the minority leader may be paired with the Speaker's appointment role. For each board, the appointment structure is outlined, with the participation of Members of Congress highlighted. For Member appointments, the appointer's role is provided in (parentheses) in the left-hand column. Additionally, the role of noncongressional officials is also provided. Term of Appointment . Most ongoing congressional advisory bodies have fixed terms of appointment set by statute. Statutes creating temporary commissions often provide that appointments are for the \"life of the commission.\" Additionally, commissions are divided into two groups: temporary advisory commissions (e.g., those with a statutory end date) and permanent entities. The more than 90 entries on the following pages highlight the broad diversity of matters Congress has felt deserved examination beyond the established organizational structure of Congress. Entries are arranged alphabetically. Citations to the U.S. Code and the Statutes at Large are provided where particulars relating to the scope, purpose, and composition of these bodies may be located. The internet address of the entity's website is also provided, if available. Information on the involvement of Members of Congress in the appointment process for congressional commissions is also presented in a series of tables. Table 1 through Table 6 list the appointment responsibilities of each of these major congressional leaders. Table 7 lists other congressional leaders, namely the chair or ranking minority members of specified committees in the House and Senate who may also be granted authority to make or recommend appointments, or be designated as members of a commission.", "summary": "Over the past several decades, Congress, by statute, has established a wide array of commissions, boards, and advisory bodies to provide it with assistance in meeting various legislative, investigative, and administrative responsibilities. Some of these entities are temporary and created to serve specific functions, such as studying a discrete policy area or performing one-time tasks. Others are permanent, serving an ongoing purpose, such as overseeing an institution or performing a regular administrative function. The majority of these congressional bodies provide that Members of Congress, particularly the leadership, be intimately involved in the appointment process, either through direct service on a commission, or by appointing or recommending candidates for membership. The choice of a particular mechanism for membership appointment may have implications for the ability of these entities to fulfill their congressional mandates. Examination of the statutory language creating these bodies reveals several common approaches to membership selection. Each alternative schema has its advantages. For example, a commission or board composed entirely of Members permits a high degree of congressional control over the entity's operations. Bodies composed mainly of qualified private citizens or executive branch appointees may provide a broader expertise than Member-only bodies. Assemblages of mixed membership provide some of the advantages of both Member and citizen-only appointment schemes. This report contains a compilation of existing commissions and boards that demonstrates the range of alternative membership-appointment structures. It includes any statutorily created advisory entity (e.g., boards, advisory panels, task forces) whose membership scheme mandates the participation of Members of Congress either as potential members or as participants in the process of appointing the membership. For each entity, information on the purpose, duration, appointment structure, and term of appointment is provided. Finally, information on the involvement of Members of Congress in the appointment process is presented in a series of tables.", "document_type": "crs"}
{"report": "Enacted in 1937, the Federal Aid in Wildlife Restoration Act, now known as the Pittman-Robertson Wildli fe Restoration Act (hereinafter referred to as Pittman-Robertson), provides funding for states and territories to support projects that promote the conservation and restoration of wild birds and mammals and their habitats and programs that provide hunter education and safety training and opportunities. The U.S. Fish and Wildlife Service (FWS), an agency within the Department of the Interior, administers Pittman-Robertson as part of its Wildlife and Sport Fish Restoration program. Revenues generated through excise taxes on pistols and revolvers, other firearms, ammunition, bows, and other archery equipment provide the funding for Pittman-Robertson. After collection, receipts from these excise taxes are deposited into the Federal Aid to Wildlife Restoration Fund in the Treasury, and monies from the fund are made available for FWS for Pittman-Robertson activities in the fiscal year following their collection without any further action by Congress. For three programs within Pittman-Robertson, FWS apportions the funds directly among the states and territories. All 50 states as well as Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands (collectively referred to as territories in this report) are eligible to receive funding through Pittman-Robertson. Since its creation, Pittman-Robertson has provided over $18.8 billion (in 2018 dollars; $12.2 billion in nominal dollars) to states and territories. This report provides an overview of the Pittman-Robertson state and territory programs that support wildlife restoration and hunter education and safety activities, including a breakdown of the various apportionment formulas and an analysis of related issues that may be of interest to Congress. This report focuses on the formula-based programs within Pittman-Robertson that provide funding for states and territories. The Pittman-Robertson Wildlife Restoration Act apportions and allocates funding for five distinct purposes: 1. program administration (Section 4(a)); 2. Wildlife Restoration (Section 4(b)); 3. Basic Hunter Education and Safety (Section 4(c)); 4. Enhanced Hunter Education and Safety Grants (Section 10); and 5. Multistate Conservation Grants (Section 11). Funds for three of these programs—Wildlife Restoration, Basic Hunter Education and Safety, and Enhanced Hunter Education and Safety Grants—are disbursed directly to states based on two apportionment formulas (both hunter education and safety programs use the same formula). The formulas take into account a state's acreage, number of hunting licenses sold, and population ( Figure 1 and Table A-1 ). Territories are apportioned a set percentage of the funds for each program. Washington, DC, does not receive funding under these programs. States and territories can use their apportionments to support the federal share of wildlife and hunter and safety projects that receive Pittman-Robertson funding. Additionally, Pittman-Robertson provides for FWS to allocate nonformula based funding for multistate conservation grants and program administration. Funding for programs authorized in Pittman-Robertson comes from excise taxes on certain firearms, ammunition, and archery equipment. Taxes on these items are imposed on the manufacturer, producer, or importer of these goods. However, these taxes may result in higher prices for the purchaser if part or all of the cost is passed on in the final purchase price. The tax rates are 10% for pistols and revolvers, 11% for other firearms and ammunition, 11% for bows and archery equipment, and a per shaft tax for arrows that is adjusted annually for inflation. Receipts from these excise taxes are deposited into the Federal Aid to Wildlife Restoration Fund in the Treasury, and monies from the fund are made available for FWS in the fiscal year following their collection without any further action by Congress. Revenues generated from these excise taxes vary year by year both in total revenue ( Figure 2 ) and in revenue attributable to a specific item group ( Table 1 ). From FY2007 through FY2016, FWS reported a total of $6.2 billion (in 2018 dollars) of revenue. Ammunition accounted for $2.1 billion (34%), firearms for $1.9 billion (32%), pistols and revolvers for $1.7 billion (27%), and archery equipment for $0.5 billion (8%) of the total (in 2018 dollars). The revenues attributable to ½ the revenues generated from excise taxes on pistols, revolvers, and archery equipment accounted for 17% of the total revenue. These revenues determined the amount available for apportionments through the Basic Hunter Education and Safety program for the years from FY2008 through FY2017 (the years following excise tax collection). The remaining revenues, 83% for FY2007 through FY20016, provide funds for the Wildlife Restoration and Enhanced Hunter Education and Safety programs as well as the Multistate Conservation Grant program and the set-aside for administration. While the overall revenues generated determines the total amount available for apportionment in the year following collection, the amount available for Basic Hunter Education and Safety program (Section 4(c)) is solely based on revenues generated from pistols, revolvers, and archery equipment. As such, amounts available for apportionment and disbursement are program specific and fluctuate based on the total volume of shooting and archery equipment and the type of goods. Between FY1939 and FY2019, FWS disbursed $18.8 billion (in constant 2018 dollars; $12.2 billion in nominal dollars) for wildlife restoration and hunter education and safety activities to states and territories ( Figure 3 ). Annual apportionments have increased over time. However, in recent years, there have been fluctuations of over $100 million between years. FWS disbursed $3.8 billion (in nominal dollars)—an average of $751 million per year—to states and territories for the Wildlife Restoration and the two Hunter Education and safety programs for FY2015 through FY2019 ( Figure 3 ). Each year, individual states received between $4.5 million and $34.7 million, on average, in total apportionments for FY2015 through FY2019. American Samoa, Guam, the Commonwealth of Northern Mariana Islands, and the Virgin Islands each received $1.3 million per year, on average, and Puerto Rico received $3.3 million per year, on average. Table B-1 provides the annual total apportionment for each state and territory for FY2015 through FY2019. The Wildlife Restoration program, also known as Section 4(b), comprises the largest funding stream within Pittman-Robertson. From FY2015 through FY2019, annual state and territory apportionments for the Wildlife Restoration Program averaged $606 million (81% of the $751 million, on average, disbursed directly to states and territories under Pittman-Robertson; see Figure 3 and Table B-2 ). The total amount of funding available for the Wildlife Restoration program for states is determined by deducting the amounts available for administration, the Basic and Enhanced Hunter Education and Safety programs (Sections 4(c) and 10, respectively), multistate conservation grants, and territorial allocations for wildlife restoration activities from the total amount of revenues generated from the excise taxes on pistols, revolvers, firearms, ammunition, and archery equipment in the previous year. States and territories may use this funding to pay the federal share of wildlife restoration projects. States and territories may use their apportionments to pay for up to 75% of the total project cost; they are responsible for the remaining cost of the project using non-Pittman-Robertson funds. Wildlife Restoration program funds are available for use by the states and territories for the fiscal year in which they are apportioned and the following fiscal year. FWS calculates the Wildlife Restoration apportionment for each state using a two-part formula, with each part determining half of the amount apportioned. The formula is based on the ratio of the area of a state compared with the total area of all 50 states and the number of paid hunting licenses sold in a state compared with the total number of paid hunting licenses sold in all 50 states. The area of and number of licenses sold in the territories and Washington, DC, are not included in the totals for all 50 states. However, the minimum and maximum amount any state may receive is 0.5% and 5%, respectively. Territorial apportionments are not formula based. Rather, the caps for territorial apportionments for wildlife restoration activities are set in statute: Puerto Rico receives not more than one-half of 1% (0.5%), and Guam, the U.S. Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands each receive not more than one-sixth of 1% (0.17%) of the total funds apportioned. Collectively, territories can receive slightly more than 1% of the allocated funding. FWS calculates state area as the sum of land and inland water areas in a state. State area does not include coastal, Great Lakes, or territorial waters. The area within an individual state is compared to the total area in all 50 states (territorial area is not counted in the total). In total, the United States contains 3.6 million square miles of land and inland water areas. States' areas vary from 0.03% (Rhode Island) to over 16% (Alaska) of the total U.S. area ( Figure 4 ). States' areas do not change on an annual basis, though they may be updated periodically. The number of paid hunting-license holders used for the calculation in a given apportionment year (also known as calculation year) is \"the number of paid hunting-license holders in each State in the second fiscal year preceding the fiscal year for which such apportionment is made.\" The act does not distinguish between in-state and out-of-state hunters; a hunting license purchased by a nonresident would be equivalent under this formula to one purchased by a resident. For calculation years 2015 to 2019, states collectively sold 15.4 million licenses per year, on average, in the United States. During these five years, Rhode Island sold the fewest licenses per year (8,404, on average) and Texas sold the most (1.1 million per year, on average) ( Figure 4 ). Unlike area, the number of hunting licenses sold varies from year to year ( Table A-2 ). This annual variation influences the apportionment level and can result in states receiving more or less in a given year (subject to minimum and maximum requirements; Table 2 ). From FY2015 through FY2019, 8 states each received the minimum of 0.5% of the apportionments for the Wildlife Restoration program ($3.0 million per year, on average), 40 states received between the minimum and maximum, and 2 states received the maximum of 5% ($30.3 million). All 8 states receiving the minimum allocation are comparatively small (each consists of less than 0.5% of the total U.S. area) and sold a comparatively small number of hunting licenses in recent years (on average, each sold less than 0.5% of the U.S. total). The 2 states—Texas and Alaska—that received the maximum apportionment of 5% are both large (7.4% and 16.3% of the total U.S. area, respectively) but differed significantly in license sales in recent years (on average 7.4% and 0.7%, respectively). Two programs within Pittman-Robertson provide support to states and territories for hunter education and safety projects: Basic Hunter Education and Safety (Section 4(c)) and Enhanced Hunter Education and Safety Grants (Section 10). The amount of funding available for state and territorial apportionments for the Basic Hunter Education and Safety program fluctuates based on annual revenues deposited in the Federal Aid to Wildlife Restoration Fund from excise taxes on pistols, revolvers, and archery equipment ( Figure 1 ). The Enhanced Hunter Education and Safety Grants program receives a statutorily fixed amount of $8 million per year. Both programs use the same apportionment structure, premised on the ratio of a state's population to the total population of the United States, as reported in the most recent decennial census. Statute dictates a minimum (1%) and maximum (3%) state apportionment cap for both programs. Each of the five eligible territories receives one-sixth of 1% (0.17%) of the total amount available for each program. States and territories may use their apportionments to pay for up to 75% of the total cost of a project. Based on the 2010 decennial census, 21 states each contain less than 1% of the U.S. population. Of the 29 remaining, 12 contain between 1% and 2%, 7 between 2% and 3%, 4 between 3% and 4%, and 6 more than 4%. The most populous state, California, contains 12.1% of the total U.S. population. Figure 5 shows the percentage of the population for each state compared with the total for all 50 states calculated from the 2010 U.S. decennial census. Because apportionments are determined based on the decennial census, which only changes when a new decennial census is conducted, the percentage of apportionment each state receives is constant in the years between decennial censuses, though the actual apportionment will fluctuate based on revenues generated by the excise tax on pistols, revolvers, and archery equipment. Based on the 2010 decennial census, 21 states have received the minimum 1%, 3 states have received between 1% and 2%, 9 states between 2% and 3%, and 17 states the 3% cap. The territories have received 0.17% as required in statute. The total amount of funding available for the Basic Hunter Education and Safety program is equal to the revenue generated by half of the excise taxes collected on pistols, revolvers, and archery equipment but not other firearms and ammunition. Apportionments for the Basic Hunter Education and Safety program represent the second-largest component of Pittman-Robertson in terms of funding. Between FY2015 and FY2019, the Basic Hunter Education and Safety program apportioned an average of $136 million per year in total to states and territories (18.2% of the $751 million total average annual apportionments disbursed to states and territories under Pittman-Robertson apportionment programs; see Figure 3 and Table B-3 ). Between FY2015 and FY2019, the majority of states received either the minimum or the maximum allocation established in statute each year; 21 states received the minimum amount required by law (1%, or $1.4 million per year, on average), and 17 states received the maximum (3%, or $4.1 million per year, on average). Each territory received 0.17% ($227,473 per year, on average), as required by statute. States may use funding under this program to pay the federal share of the \"costs of a hunter safety program and the construction, operation, and maintenance of public target ranges, as part of such program.\" Basic Hunter Education and Safety program funds are available for use by states and territories for the fiscal year in which they are apportioned and the following fiscal year. Congress passed legislation to add the Enhanced Hunter Education and Safety Grants program (also known as Section 10) to Pittman-Robertson in 2000. Since FY2003, $8.0 million has been set aside annually for the program for firearm and bow hunter education and safety grants. Pittman-Robertson states that the allowed uses for these grants are determined based on whether a state or territory has \"used all of the funds apportioned to the State under section 669c(c) [Section 4(c)] of this title for the fiscal year.\" If a state or territory has not used all the funds apportioned to it under the Basic Hunter Education and Safety program, it may use monies apportioned under the Enhanced Hunter Education and Safety Grants program for the enhancement of hunter education programs, hunter and firearm safety programs, and hunter development programs; interstate coordination, hunter education, and shooting range programs; bow hunter and archery education, safety, and development; and construction and updating of firearm and archery shooting ranges. If a state or territory has used all of its Basic Hunter Education and Safety program apportionment, it may use its Enhanced Hunter Education and Safety Grants apportionment for any purpose authorized by Pittman-Robertson. FWS annually apportions and disburses funding to states and territories under the Enhanced Hunter Education and Safety Grants program ( Figure 3 and Table B-4 ). For FY2015 to FY2019, each state received between 1% ($80,160 per year, on average) and 3% ($240,480 per year, on average) of the total amount apportioned for these grants. Each eligible territory received 0.17% ($13,360 per year, on average) of the total Enhanced Hunter Education and Safety Grants program apportionments. Because both hunter education programs use the same distribution formula, apportionments for the Enhanced Hunter Education and Safety Grants program follow the same pattern as apportionments for the Basic Hunter Education and Safety program. Unlike the Basic Hunter Education and Safety program, Enhanced Hunter Education and Safety Grant program funds are available for use by states and territories only for the fiscal year in which they are apportioned. Members of Congress have routinely introduced legislation to amend Pittman-Robertson. In particular, Congress has considered issues related to eligible uses of state and territorial apportionments, the funding structure and funding sources for the program, and the apportionment formulas. In recent Congresses, some Members have introduced several bills that would amend the way states and territories are able to spend their apportionments. Some bills have proposed amending Pittman-Robertson to allow additional uses, such as hunter recruitment and retention; others have proposed modifying the federal share and eligible uses of funds for existing or related activities, such as for public target ranges. Some Members introduced multiple bills for both purposes in recent Congresses, including in the 115 th and 116 th Congresses. Several bills in the 115 th Congress would have allowed and in the 116 th Congress would allow states to use funds provided through Pittman-Robertson to promote hunting and recreational shooting, recruitment and retention of hunters and shooters, and public relations. According to the 2016 National Survey of Fishing, Hunting, and Wildlife-Associated Recreation , the number of hunters in the United States declined by 16% (2.2 million individuals) compared to the similar survey in 2011 (from 13.7 million in 2011 to 11.5 million in 2016). These bills would allow states to use funds currently provided for the Wildlife Restoration, Basic Hunter Education and Safety, and Enhanced Hunter Education and Safety Grants programs for hunter and recreational shooter recruitment and retention. In addition, they would create a funding mechanism for the Secretary of the Interior to use for recruitment and retention purposes at the national level. Currently, Pittman-Robertson prohibits the use of Wildlife Restoration program apportionments for public relations related to wildlife management activities. These proposals would remove this prohibition. Proponents of this type of legislation have argued that these bills would provide states with flexibility to use Pittman-Robertson apportionments to support recruitment efforts that would promote participation in hunting and shooting sports. They contend there is a need to attract and retain hunters and recreational shooters, which, in turn, could increase excise tax revenues that support Pittman-Robertson. Stakeholders also point out that wildlife restoration would remain the primary purpose of the act even if amended. Other stakeholders have raised the concern that these bills would diminish wildlife restoration activities by allowing states to use funds currently apportioned for wildlife restoration purposes for recruitment and retention. Other legislation has been introduced, including in the 115 th and 116 th Congresses, that would change the terms under which states may use Pittman-Robertson allocations for projects related to the construction and expansion of public target ranges. Currently, Pittman-Robertson allows states to use funds apportioned under the Basic Hunter Education and Safety program (Section 4(c)) for the \"construction, operation, and maintenance of public target ranges.\" Funds apportioned under the Enhanced Hunter Education and Safety Grants program (Section 10) may be used for \"enhancement of construction or development of firearm shooting ranges and archery ranges, and the updating of safety features of firearm shooting ranges and archery ranges.\" However, both programs have a 75% cap for the federal share of projects supported by Pittman-Robertson funding. All of the proposals in the 115 th and 116 th Congress to amend the eligibility of activities related to shooting ranges would allow states and territories to use their Basic Hunter Education and Safety program apportionments for land acquisition, expansion, and construction related to a target range, rather than solely for construction, operation, and maintenance of a range; allow states and territories to use up to 10% of funds apportioned to them through the Wildlife Restoration program to supplement apportionments for the Enhanced Hunter Education and Safety Grants program to be used for land acquisition, expansion, and construction related to a target range; allow states and territories to use their apportionments to pay for up to 90% of the total cost of a project related to a shooting range, instead of the current 75% federal cost-share cap; and extend the obligation and expenditure window of Enhanced Hunter Education and Safety Grants program apportionments used for shooting ranges to up to five fiscal years from the current window (the fiscal year for which they were apportioned). According to their authors, these bills would address a stated decline in the availability of public target ranges and would provide increased opportunity for target practice at public shooting ranges. Some proponents have further argued that this type of legislation would allow the use of more funds to provide the public with opportunities to \"embrace hunting and shooting sports,\" which could lead to economic benefits. Some proponents also contend that this legislation would make it easier for states to use federal funding, because it would lower the state matching requirement from at least 25% to 10% for target range-related projects and extend the funding window for certain funds. Some stakeholders have raised concerns that this legislation would allow states to use funding for target range-purposes that otherwise would be available for wildlife restoration activities under Section 4(b). Under current law, the Federal Aid to Wildlife Restoration Fund receives revenues generated through an excise tax on firearms, ammunition, and archery equipment. Because Pittman-Robertson funding is entirely reliant on revenues from these taxes, it is subject to spending patterns on these items and can fluctuate with the markets for these goods. In addition, although firearm and archery equipment owners, hunters, and recreational shooters generate the funds used by Pittman-Robertson, many stakeholders contend that the act's wildlife restoration benefits accrue to the American public at large (this is often referred to as user-pay, public-benefit). Both the potential for market-based fluctuation of the excise tax structure and the public benefit nature of Pittman-Robertson have led some stakeholders to propose amending the act to include a funding source that they argue is more stable and not solely reliant on hunters and recreational shooters. Congress has structured revenue sources for Pittman-Robertson so that those who recreate with firearms or bows contribute to funding that is used to maintain and preserve wildlife and hunter safety programs. Upon enactment of the Federal Aid in Wildlife Restoration Act, in 1937, Congress only included revenues generated from excise taxes on firearms (not including pistols and revolvers) and shells and cartridges. In debating this act, some Members stated that taxes imposed on sporting arms and ammunition should be used to benefit wildlife restoration. In 1970, Congress enacted legislation to deposit revenues from an excise tax on pistols and revolvers into the Federal Aid to Wildlife Restoration Fund rather than into the general fund of the Treasury, into which they were being deposited. The purpose of this legislation was to increase revenues available to support wildlife restoration and programs for hunter safety. Congress further amended the revenue sources in 1972, providing that an excise tax on bows and arrows, also created in the same law, also be deposited into the Federal Aid to Wildlife Restoration Fund. This inclusion provided that archers also contribute to the benefits provided by the act. The concept of providing more stable and diversified funds for Pittman-Robertson is not new, and both stakeholders and Congress have addressed this issue on several occasions. For example, some stakeholders have suggested that given the public benefit nature of Pittman-Robertson, an excise tax should be imposed on other categories of goods and services related to outdoor recreation (e.g., backpacks, bicycles, climbing gear, and sport utility vehicles, among other items). This proposal—sometimes referred to as a backpack tax —has spurred an ongoing debate for several decades. Proponents have contended that it would be fairer for all users, not just hunters and shooters, to support wildlife conservation and restoration and that broadening the tax base could raise more revenue for restoration. Conversely, opponents have suggested that the proposal would place an untenable burden on the outdoor industry, leading to fewer sales and making items prohibitively expensive for some stakeholders, and that it could deter individuals from enjoying the outdoors. Congress has not enacted legislation to broaden the excise tax base supporting Pittman-Robertson beyond firearms, ammunition, and archery equipment. However, in FY2001, Congress amended Pittman-Robertson to include an additional subaccount within the Federal Aid to Wildlife Restoration Fund, the Wildlife Restoration and Conservation Account, to provide supplemental funding for wildlife restoration and conservation. In the same law that created the subaccount, Congress appropriated $50 million to the subaccount \"for the development, revision, and implementation of wildlife conservation and restoration plans and programs.\" Congress appropriated funding to this subaccount only in FY2001. In recent Congresses, including the 115 th Congress, some Members have introduced legislation that would have amended Pittman-Robertson to repurpose the subaccount. These bills would have transferred up to $1.3 billion per year into the subaccount from revenues deposited into the Treasury under the Outer Continental Shelf Lands Act and the Mineral Leasing Act. These funds would have been available for states and territories for a variety of conservation and restoration activities. In the 116 th Congress, Congress may continue to consider alternate funding sources for Pittman-Robertson through existing or new mechanisms. Proponents have argued that additional funds from alternate sources would bolster restoration and conservation activities and provide a secure source of funding for Pittman-Robertson. Some stakeholders also have stated that a bill authorizing such alternate funding sources could provide additional resources for federal agencies or tribal partners to implement the conservation of threatened and endangered species, among other concerns. However, Congress may consider if providing funding for conservation and restoration under Pittman-Robertson could affect other potential uses of federal funds. In addition to eligible uses and funding sources, Congress may consider amending Pittman-Robertson's apportionment structure. Currently, states and territories are treated differently under the program; states are apportioned funds based on area, population, and number of hunting licenses (see \" State and Territory Apportionment \" above), whereas territories are allocated funding based on a set percentage or percentage caps. For the Wildlife Restoration program, states receive a minimum of 0.5% of the program's total apportionment, Puerto Rico receives not more than 0.5%, and each of the remaining four eligible territories receives not more than 0.17%. For both the Basic and Enhanced Hunter Education and Safety programs, states receive at least 1% of the total apportionments and territories receive 0.17% of the apportionments. Under current law, Washington, DC, does not receive funding through any of these programs. However, in FY2001, Washington, DC, received funding through the Wildlife Conservation and Restoration Account. Congress may consider issues related to apportionment formulas, including topics related to parity between states, territories, and others. It also may consider amending the apportionment structures, including minimum and maximum allocations, in general. The current structure is the result of multiple congressional actions since the original enactment in 1937. Through these actions, Congress has added and modified apportionment formula and eligibility. Some stakeholders have expressed concern over the discrepancy between the minimum apportionment to states and the set percentage provided to territories; they contend there should be greater parity between states and territories. Other stakeholders have suggested that tribes also should be eligible to receive allocations under Pittman-Robertson programs. Appendix A. State Characteristics Appendix B. Annual Pittman-Robertson Wildlife Restoration Act Apportionments by State and Territory, FY2015-FY2019", "summary": "The Federal Aid in Wildlife Restoration Act (16 U.S.C. §§669 et seq.), enacted in 1937 and now known as the Pittman-Robertson Wildlife Restoration Act, provides funding for states and territories to support wildlife restoration, conservation, and hunter education and safety programs. The U.S. Fish and Wildlife Service (FWS), within the Department of the Interior, administers Pittman-Robertson. All 50 states (but not the District of Columbia) as well as the 5 inhabited U.S. territories receive Pittman-Robertson funds. Funding for FWS to carry out Pittman-Robertson programs comes from excise taxes on firearms, ammunition, and archery equipment. Receipts from these excise taxes are deposited into the Federal Aid to Wildlife Restoration Fund in the Treasury, and monies from the fund are made available for FWS in the fiscal year following their collection without any further action by Congress. Between FY1939 and FY2019, FWS disbursed $18.8 billion (in 2018 dollars) for wildlife restoration and hunter education and safety activities for Pittman-Robertson programs. FWS apportions and disburses funds to states and territories through three formula-based programs: Wildlife Restoration (known as Section 4(b)), Basic Hunter Education and Safety (Section 4(c)), and Enhanced Hunter Education and Safety Grants (Section 10). FWS also allocates nonformula funding for multistate conservation grants and program administration. State apportionments for wildlife restoration projects are based on the land and inland water area and the number of hunting licenses sold in each state. State population is used to determine apportionments for both the Basic and Enhanced Hunter Education and Safety programs. FWS also apportions funding for territories. For Wildlife Restoration, Puerto Rico receives not more than 0.5% of the apportionments made under the act and American Samoa, Guam, the Commonwealth of Northern Mariana Islands, and the U.S. Virgin Islands each receive not more than 0.17%. Each territory receives 0.17% of the total apportionments for both the Basic and Enhanced Hunter Education and Safety programs. Amending Pittman-Robertson is of perennial interest to some in Congress. Members routinely consider legislation to amend how states and territories may use their Pittman-Robertson apportionments, sources of funding to support Pittman-Robertson, and the Pittman-Robertson apportionment formulas. Issues of interest have included whether Pittman-Robertson funds should be available for hunter recruitment and retention activities and the amount available for the expansion or construction of public shooting ranges. Because Pittman-Robertson derives its funding through an excise tax on shooting and archery equipment, the number of people participating in these and related activities influences the amount of available funding for these programs. This, in turn, can lead some to consider issues related to funding sources and whether the existing revenue sources derived from excise taxes on shooting and archery equipment should be modified. Other issues that Congress has addressed include whether to modify the existing apportionment structure, including whether to amend how funding is apportioned for states and territories.", "document_type": "crs"}
{"report": "Artificial intelligence (AI) is a rapidly growing field of technology that is capturing the attention of commercial investors, defense intellectuals, policymakers, and international competitors alike, as evidenced by a number of recent initiatives. On July 20, 2017, the Chinese government released a strategy detailing its plan to take the lead in AI by 2030. Less than two months later Vladimir Putin publicly announced Russia's intent to pursue AI technologies, stating, \"[W]hoever becomes the leader in this field will rule the world.\" Similarly, the U.S. National Defense Strategy, released in January 2018, identified artificial intelligence as one of the key technologies that will \"ensure [the United States] will be able to fight and win the wars of the future.\" The U.S. military is already integrating AI systems into combat via a spearhead initiative called Project Maven, which uses AI algorithms to identify insurgent targets in Iraq and Syria. These dynamics raise several questions that Congress addressed in hearings during 2017 and 2018: What types of military AI applications are possible, and what limits, if any, should be imposed? What unique advantages and vulnerabilities come with employing AI for defense? How will AI change warfare, and what influence will it have on the military balance with U.S. competitors? Congress has a number of oversight, budgetary, and legislative tools available that it may use to influence the answers to these questions and shape the future development of AI technology. Almost all academic studies in artificial intelligence acknowledge that no commonly accepted definition of AI exists, in part because of the diverse approaches to research in the field. Likewise, although Section 238 of the FY2019 National Defense Authorization Act (NDAA) directs the Secretary of Defense to produce a definition of artificial intelligence by August 13, 2019, no official U.S. government definition of AI currently exists. The FY2019 NDAA does, however, provide a definition of AI for the purposes of Section 238: Any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight, or that can learn from experience and improve performance when exposed to data sets. An artificial system developed in computer software, physical hardware, or other context that solves tasks requiring human-like perception, cognition, planning, learning, communication, or physical action. An artificial system designed to think or act like a human, including cognitive architectures and neural networks. A set of techniques, including machine learning that is designed to approximate a cognitive task. An artificial system designed to act rationally, including an intelligent software agent or embodied robot that achieves goals using perception, planning, reasoning, learning, communicating, decision-making, and acting. This definition encompasses many of the descriptions in Table 1 below, which summarizes various AI definitions in academic literature. The field of AI research began in 1956, but an explosion of interest in AI began around 2010 due to the convergence of three enabling developments: (1) the availability of \"big data\" sources, (2) improvements to machine learning approaches, and (3) increases in computer processing power. This growth has advanced the state of Narrow AI, which refers to algorithms that address specific problem sets like game playing, image recognition, and navigation. All current AI systems fall into the Narrow AI category. The most prevalent approach to Narrow AI is machine learning, which involves statistical algorithms that replicate human cognitive tasks by deriving their own procedures through analysis of large training data sets. During the training process, the computer system creates its own statistical model to accomplish the specified task in situations it has not previously encountered. Experts generally agree that it will be many decades before the field advances to develop General AI, which refers to systems capable of human-level intelligence across a broad range of tasks. Nevertheless, the growing power of Narrow AI algorithms has sparked a wave of commercial interest, with U.S. technology companies investing an estimated $20-$30 billion in 2016. Some studies estimate this amount will grow to as high as $126 billion by 2025. DOD's unclassified expenditures in AI contracts for FY2016 totaled just over $600 million, increasing to over $800 million in FY2017. AI has a number of unique characteristics that may be important to consider as these technologies enter the national security arena. First, AI has the potential to be integrated across a variety of applications, improving the so-called \"Internet of Things\" in which disparate devices are networked together to optimize performance. As Kevin Kelley, the founder of Wired magazine, states, \"[AI] will enliven inert objects, much as electricity did more than a century ago. Everything that we formerly electrified we will now cognitize.\" Second, many AI applications are dual-use, meaning they have both military and civil applications. For example, image recognition algorithms can be trained to recognize cats in YouTube videos as well as terrorist activity in full motion video captured by uninhabited aerial vehicles over Syria or Afghanistan. Third, AI is relatively transparent, meaning that its integration into a product is not immediately recognizable. By and large, AI procurement will not result in countable objects. Rather, the algorithm will be purchased separately and incorporated into an existing system, or it will be part of a tangible system from inception, which may not be considered predominantly AI. An expert in the field points out, \"We will not buy AI. It will be used to solve problems, and there will be an expectation that AI will be infused in most things we do.\" A number of Members of Congress have called for action on military AI. During the opening comments to a January 2018 hearing before the House Armed Services Subcommittee on Emerging Threats, the subcommittee chair called for a \"national level effort\" to preserve a technological edge in the field of AI. Former Deputy Secretary of Defense Robert Work argued in a November 2017 interview that the federal government needs to address AI issues at the highest levels, further stating that \"this is not something the Pentagon can fix by itself.\" Other analysts have called for a national AI strategy to articulate AI objectives and drive whole-of-government initiatives and cross-cutting investments. In the meantime, DOD has published a classified AI strategy and is carrying out multiple tasks directed by DOD guidance and the FY2019 NDAA, including establishing a Joint Artificial Intelligence Center (JAIC), which will \"coordinate the efforts of the Department to develop, mature, and transition artificial intelligence technologies into operational use\"; publishing a strategic roadmap for AI development and fielding, as well as guidance on \"appropriate ethical, legal, and other policies for the Department governing the development and use of artificial intelligence enabled systems and technologies in operational situations\"; establishing a National Security Commission on Artificial Intelligence; and conducting a comprehensive assessment of militarily relevant AI technologies and providing recommendations for strengthening U.S. competitiveness. These initiatives will present a number of oversight opportunities for Congress. In addition, Congress may consider the adequacy of current DOD funding levels for AI. Lieutenant General John Shanahan, the lead for the Pentagon's most prominent AI program, identified funding as a barrier to future progress, and a 2017 report by the Army Science Board states that funding is insufficient for the service to pursue disruptive technology like AI. Although DOD funding for AI has increased in 2018—to include the JAIC's $1.75 billion six-year budget and the Defense Advanced Research Projects Agency's (DARPA's) $2 billion multiyear investment in over 20 AI programs—some experts have argued that additional DOD funding will be required to keep pace with U.S. competitors and avoid an \"innovation deficit\" in military technology. Critics of increased federal funding contend that significant increases to appropriations may not be required, as the military should be leveraging research and development (R&D) conducted in the commercial sector. The 2017 National Security Strategy identifies a need to \"establish strategic partnerships to align private sector R&D resources to priority national security applications\" and to reward government agencies that \"take risks and rapidly field emerging commercial technologies.\" In addition, the Office of Management and Budget directed DOD in preparing its FY2020 budget to \"seek to rapidly field innovative technologies from the private sector, where possible, that are easily adaptable to Federal needs, rather than reinventing solutions in parallel.\" Some experts in the national security community also argue that it would not be a responsible use of taxpayer money to duplicate efforts devoted to AI R&D in the commercial sector when companies take products 90% of the way to a useable military application. Others contend that a number of barriers stand in the way of transitioning AI commercial technology to DOD, and that reforming aspects of the defense acquisition process may be necessary. These issues are discussed in more detail later in this report. One impediment to accurately evaluating funding levels for AI is the lack of a stand-alone AI Program Element (PE) in DOD funding tables. As a result, AI R&D appropriations are spread throughout generally titled PEs and incorporated into funding for larger systems with AI components. For example, in the FY2019 National Defense Authorization Act, AI funding is spread throughout the PEs for the High Performance Computing Modernization Program and Dominant Information Sciences and Methods, among others. On the other hand, a dedicated PE for AI may lead to a false precision, as it may be challenging to identify exact investments in enabling technologies like AI. The lack of an official U.S. government definition of AI could further complicate such an assessment. Congress may also consider specific policies for the development and use of military AI applications. Many experts fear that the pace of AI technology development is moving faster than the speed of policy implementation. Former Chairman of the House Armed Services Committee Representative Mac Thornberry has echoed this sentiment, stating, \"It seems to me that we're always a lot better at developing technologies than we are the policies on how to use them.\" Congress may assess the need for new policies or modifications to existing laws to account for AI developments and ensure that AI applications are free from bias. Perhaps the most immediate policy concern among AI analysts is the absence of an independent entity to develop and enforce AI safety standards and to oversee government-wide AI research. Former Secretary of Defense Ashton B. Carter, for example, has suggested the need for an \"AI czar\" to coordinate such efforts. Relatedly, Congress may consider debating policy options on the development and fielding of Lethal Autonomous Weapons Systems (LAWS), which may use AI to select and engage targets. Since 2014, the United States has participated in international discussions of LAWS at the United Nations (U.N.) Convention on Certain Conventional Weapons (CCW). Approximately 25 state parties have called for a treaty banning \"fully autonomous weapon systems\" due to ethical considerations, while others have called for formal regulations or political declarations. Some analysts are concerned that efforts to ban or regulate LAWS could impose strict controls on AI applications that could be adapted for lethal use, thereby stifling development of other useful military—or even commercial—technology. During recent testimony to the U.N., one expert stated, \"If we agree to foreswear some technology, we could end up giving up some uses of automation that could make war more humane. On the other hand a headlong rush into a future of increasing autonomy with no discussion of where it is taking us, is not in humanity's interest either.\" He suggested the leading question for considering military AI applications ought to be, \"What role do we want humans to play in wartime decision making?\" Congress may consider the growth of international competition in the AI market and the danger of foreign exploitation of U.S. AI technology for military purposes. In particular, the Chinese government is reported to be aggressively pursuing AI investments in the United States. Amid growing scrutiny of transactions involving Chinese firms in the semiconductor industry, in September 2017 President Trump, following the recommendation of the Committee on Foreign Investment in the United States (CFIUS), blocked a Chinese firm from acquiring Lattice Semiconductor, a U.S. company that manufactures chips that are a critical design element for AI technology. In this way, some experts believe that CFIUS may provide a means of protecting strategically significant technologies like AI. Indeed, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expands CFIUS's ability to review certain foreign investments, including those involving \"emerging and foundational technologies.\" It also authorized CFIUS to consider \"whether a covered transaction involves a country of special concern that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security.\" Congress may monitor the implementation of FIRRMA and assess whether additional reforms might be necessary to maintain effective congressional oversight of sensitive transactions. In addition, many analysts believe that it may be necessary to reform federal data policies associated with AI. Large data pools serve as the training sets needed for building many AI systems, and government data may be particularly important in developing military AI applications. However, some analysts have observed that much of this data is either classified, access-controlled, or otherwise protected on privacy grounds. These analysts contend that Congress should implement a new data policy that balances data protection and privacy with the need to fuel AI development. Closely related, AI development may increase the imperative for strict security standards. As discussed later in this report, AI algorithms are vulnerable to bias, theft, and manipulation, particularly if the training data set is not adequately curated or protected. During a February 2018 conference with defense industry CEOs, Deputy Defense Secretary Patrick Shanahan advocated for higher cybersecurity standards in the commercial sector, stating, \"[W]e want the bar to be so high that it becomes a condition of doing business.\" Some leading commercial technology companies have issued similar calls for increased scrutiny, with Microsoft's president Brad Smith arguing that a lack of regulation in this area could lead to \"a commercial race to the bottom, with tech companies forced to choose between social responsibility and market success.\" Finally, commercial companies have long cited the potential loss of intellectual property rights as a key impediment to partnering with DOD. In recognition of this issue, Section 813 of the FY2016 NDAA established a \"government-industry advisory panel\" to provide recommendations on technical data rights and intellectual property reform. The panel's report, released in November 2018, offers a number of recommendations, including increased training in intellectual property rights for acquisitions professionals and a pilot program for intellectual property valuation in the procurement process. DOD is considering a number of diverse applications for AI. Currently, AI R&D is being left to the discretion of research organizations in the individual services, as well as to DARPA and the Intelligence Advanced Research Projects Agency (IARPA). However, DOD components are currently required to coordinate with the JAIC regarding any planned AI initiatives costing more than $15 million annually. In addition, the JAIC has been tasked with overseeing the National Mission Initiatives, projects that will leverage AI to address pressing operational challenges. The Office of the Under Secretary of Defense for Research and Engineering, which oversaw the development of DOD's AI Strategy, will continue to support AI development and delivery. The Algorithmic Warfare Cross-Functional Team, also known as Project Maven, has previously been a focal point for DOD AI integration and will transition from the Under Secretary of Defense for Intelligence to the JAIC, where it will become the first of the JAIC's National Mission Initiatives. Project Maven was launched in April 2017 and charged with rapidly incorporating AI into existing DOD systems to demonstrate the technology's potential. Project Maven's inaugural director stated, \"Maven is designed to be that pilot project, that pathfinder, that spark that kindles the flame for artificial intelligence across the department.\" AI is also being incorporated into a number of other intelligence, surveillance, and reconnaissance applications, as well as in logistics, cyberspace operations, information operations, command and control, semiautonomous and autonomous vehicles, and lethal autonomous weapon systems. AI is expected to be particularly useful in intelligence due to the large data sets available for analysis. For example, Project Maven's first phase involves automating intelligence processing in support of the counter-ISIL campaign. Specifically, the Project Maven team is incorporating computer vision and machine learning algorithms into intelligence collection cells that would comb through footage from uninhabited aerial vehicles and automatically identify hostile activity for targeting. In this capacity, AI is intended to automate the work of human analysts who currently spend hours sifting through videos for actionable information, potentially freeing analysts to make more efficient and timely decisions based on the data. The intelligence community also has a number of publicly acknowledged AI research projects in progress. The Central Intelligence Agency alone has around 140 projects in development that leverage AI in some capacity to accomplish tasks such as image recognition and predictive analytics. IARPA is sponsoring several AI research projects intended to produce other analytic tools within the next four to five years. Some examples include developing algorithms for multilingual speech recognition and translation in noisy environments, geo-locating images without the associated metadata, fusing 2-D images to create 3-D models, and building tools to infer a building's function based on pattern-of-life analysis. AI may have a promising future in the field of military logistics. The Air Force, for example, is beginning to use AI for predictive aircraft maintenance. Instead of making repairs when an aircraft breaks or in accordance with monolithic fleet-wide maintenance schedules, the Air Force is testing an AI-enabled approach that tailors maintenance schedules to the needs of individual aircraft. This approach, currently used by the F-35's Automated Logistics Information System, extracts real-time sensor data embedded in the aircraft's engines and other onboard systems and feeds the data into a predictive algorithm to determine when technicians need to inspect the aircraft or replace parts. Similarly, the Army's Logistics Support Activity (LOGSA) has contracted IBM's Watson (the same AI software that defeated two Jeopardy champions) to develop tailored maintenance schedules for the Stryker fleet based on information pulled from the 17 sensors installed on each vehicle. In September 2017, LOGSA began a second project that will use Watson to analyze shipping flows for repair parts distribution, attempting to determine the most time- and cost-efficient means to deliver supplies. This task is currently done by human analysts, who have saved the Army around $100 million a year by analyzing just 10% of shipping requests; with Watson, the Army will have the ability to analyze 100% of shipping requests, potentially generating even greater cost savings in a shorter period of time. AI is likely to be a key technology in advancing military cyber operations. In his 2016 testimony before the Senate Armed Services Committee, Commander of U.S. Cyber Command Admiral Michael Rogers stated that relying on human intelligence alone in cyberspace is \"a losing strategy.\" He later clarified this point, stating, \"If you can't get some level of AI or machine learning with the volume of activity you're trying to understand when you're defending networks ... you are always behind the power curve.\" Conventional cybersecurity tools look for historical matches to known malicious code, so hackers only have to modify small portions of that code to circumvent the defense. AI-enabled tools, on the other hand, can be trained to detect anomalies in broader patterns of network activity, thus presenting a more comprehensive and dynamic barrier to attack. DARPA's 2016 Cyber Grand Challenge demonstrated the potential power of AI-enabled cyber tools. The competition challenged participants to develop AI algorithms that could autonomously \"detect, evaluate, and patch software vulnerabilities before [competing teams] have a chance to exploit them\"—all within a matter of seconds, rather than the usual months. The challenge demonstrated not only the potential speed of AI-enabled cyber tools but also the potential ability of a singular algorithm to play offense and defense simultaneously. These capabilities could provide a distinct advantage in future cyber operations. AI is enabling increasingly realistic photo, audio, and video forgeries, or \"deep fakes,\" that adversaries could deploy as part of their information operations. Indeed, deep fake technology could be used against the United States and U.S. allies to generate false news reports, influence public discourse, erode public trust, and attempt to blackmail diplomats. Although most previous deep fakes have been detectable by experts, the sophistication of the technology is progressing to the point that it may soon be capable of fooling forensic analysis tools. In order to combat deep fake technologies, DARPA has launched the Media Forensics (MediFor) project, which seeks to \"automatically detect manipulations, provide detailed information about how these manipulations were performed, and reason about the overall integrity of visual media.\" MediFor has developed some initial tools for identifying AI-produced forgeries, but as one analyst has noted, \"a key problem … is that machine-learning systems can be trained to outmaneuver forensics tools.\" For this reason, DARPA plans to host follow-on contests to ensure that forensic tools keep pace with deep fake technologies. Artificial intelligence could also be used to create full \"digital patterns-of-life,\" in which an individual's digital \"footprint\" is \"merged and matched with purchase histories, credit reports, professional resumes, and subscriptions\" to create a comprehensive behavioral profile of servicemembers, suspected intelligence officers, government officials, or private citizens. As in the case of deep fakes, this information could, in turn, be used for targeted influence operations or blackmail. The U.S. military is seeking to exploit AI's analytic potential in the area of command and control. The Air Force is developing a system for Multi-Domain Command and Control (MDC2), which aims to centralize planning and execution of air-, space-, cyberspace-, sea-, and land-based operations. In the immediate future, AI may be used to fuse data from sensors in all of these domains to create a single source of information, also known as a \"common operating picture,\" for decisionmakers. Currently, information available to decisionmakers comes in diverse formats from multiple platforms, often with redundancies or unresolved discrepancies. An AI-enabled common operating picture would theoretically combine this information into one display, providing a comprehensive picture of friendly and enemy forces, and automatically resolving variances from input data. Although MDC2 is still in a concept development phase, the Air Force is working with Lockheed Martin, Harris, and several AI start-ups to develop such a data fusion capability. A series of war-games in 2018 sought to refine requirements for this project. Similarly, DARPA's Mosaic Warfare program seeks to leverage AI to coordinate autonomous forces and dynamically generate multidomain command and control nodes. Future AI systems may be used to identify communications links cut by an adversary and find alternative means of distributing information. As the complexity of AI systems matures, AI algorithms may also be capable of providing commanders with a menu of viable courses of action based on real-time analysis of the battle-space, in turn enabling faster adaptation to complex events. In the long run, many analysts believe this area of AI development could be particularly consequential, with the potential to improve the quality of and accelerate wartime decisionmaking. All U.S. military services are working to incorporate AI into semiautonomous and autonomous vehicles, including fighter aircraft, drones, ground vehicles, and naval vessels. AI applications in this field are similar to commercial semiautonomous vehicles, which use AI technologies to perceive the environment, recognize obstacles, fuse sensor data, plan navigation, and even communicate with other vehicles. The Air Force Research Lab completed phase-two tests of its Loyal Wingman program, which pairs an older-generation, uninhabited fighter jet (in this case, an F-16) with an inhabited F-35 or F-22. During this event, the uninhabited F-16 test platform autonomously reacted to events that were not preprogrammed, such as weather and unforeseen obstacles. As the program progresses, AI may enable the \"loyal wingman\" to accomplish tasks for its inhabited flight lead, such as jamming electronic threats or carrying extra weapons. The Army and the Marine Corps tested prototypes of similar vehicles that follow soldiers or vehicles around the battlefield to accomplish independent tasks. For example, the Marine Corps' Multi-Utility Tactical Transport (MUTT) is a remote-controlled, ATV-sized vehicle capable of carrying hundreds of pounds of extra equipment. Although the system is not autonomous in its current configuration, the Marine Corps intends for follow-on systems to have greater independence. Likewise, the Army plans to field a number of Robotic Combat Vehicles (RCVs) with different types of autonomous functionality, including navigation, surveillance, and IED removal. These systems will be deployed as \"wingmen\" for the optionally inhabited Next Generation Ground Vehicle, tentatively scheduled for initial soldier evaluations in FY2020. DARPA completed testing of the Anti-Submarine Warfare Continuous Trail Unmanned Vessel prototype, or \"Sea Hunter,\" in early 2018 before transitioning program development to the Office of Naval Research. If Sea Hunter enters into service, it would provide the Navy with the ability to autonomously navigate the open seas, swap out modular payloads, and coordinate missions with other unmanned vessels—all while providing continuous submarine-hunting coverage for months at a time. Some analysts estimate that Sea Hunter would cost around $20,000 a day to operate, in contrast to around $700,000 for a traditionally inhabited destroyer. DOD is testing other AI-fueled capabilities to enable cooperative behavior, or swarming . Swarming is a unique subset of autonomous vehicle development, with concepts ranging from large formations of low-cost vehicles designed to overwhelm defensive systems to small squadrons of vehicles that collaborate to provide electronic attack, fire support, and localized navigation and communication nets for ground-troop formations. A number of different swarm capabilities are currently under development. For example, in November 2016, the Navy completed a test of an AI-enabled swarm of five unmanned boats that cooperative ly patrolled a 4-by-4-mile section of the Chesapeake Bay and intercepted an \"intruder\" vessel. The results of this experiment may lead to AI technology adapted for defending harbors, hunting submarines, or scouting in front of a formation of larger ships. The Navy also plans to test swarms of underwater drones, and the Strategic Capabilities Office has successfully tested a swarm of 103 air-dropped micro-drones. Lethal Autonomous Weapon Systems (LAWS) are a special class of weapon systems capable of independently identifying a target and employing an onboard weapon system to engage and destroy it with no human interaction. LAWS require a computer vision system and advanced machine learning algorithms to classify an object as hostile, make an engagement decision, and guide a weapon to the target. This capability enables the system to operate in communications-degraded or -denied environments where traditional systems may not be able to operate. The U.S. military does not currently have LAWS in its inventory, although there are no legal prohibitions on the development of LAWS. DOD Directive 3000.09, \"Autonomy in Weapon Systems,\" outlines department policies for semiautonomous and autonomous weapon systems. The directive requires that all systems, regardless of classification, be designed to \"allow commanders and operators to exercise appropriate levels of human judgment over the use of force\" and to successfully complete the department's weapons review process. Any changes to the system's operating state require that the system go through the weapons review process again to ensure that it has retained the ability to operate as intended. Autonomous weapons and a limited type of semiautonomous weapons must additionally be approved before both development and fielding by the Under Secretary of Defense for Policy; the Under Secretary of Defense for Acquisition, Technology, and Logistics; and the Chairman of the Joint Chiefs of Staff. Human-supervised autonomous weapons used for point defense of manned installations or platforms—but that do not target humans—and autonomous weapons that \"apply non-lethal, non-kinetic force, such as some forms of electronic attack, against materiel targets\" are exempted from this senior-level review. Despite this policy, some senior military and defense leaders have expressed concerns about the prospect of fielding LAWS. For example, in 2017 testimony before the Senate Armed Services Committee, Vice Chairman of the Joint Chiefs of Staff General Paul Selva stated, \"I do not think it is reasonable for us to put robots in charge of whether or not we take a human life.\" Regardless, Selva explained that the military will be compelled to address the development of this class of technology in order to find its vulnerabilities, given the fact that potential U.S. adversaries are pursuing LAWS. From the Cold War era until recently, most major defense-related technologies, including nuclear technology, the Global Positioning System (GPS), and the internet, were first developed by government-directed programs before later spreading to the commercial sector. Indeed, DARPA's Strategic Computing Initiative invested over $1 billion between 1983 and 1993 to develop the field of artificial intelligence for military applications, but the initiative was ultimately cancelled due to slower-than-anticipated progress. Today, commercial companies—sometimes building on past government-funded research—are leading AI development, with DOD later adapting their tools for military applications. Noting this dynamic, one AI expert commented, \"It is unusual to have a technology that is so strategically important being developed commercially by a relatively small number of companies.\" In addition to the shift in funding sources, a number of challenges related to technology, process, personnel, and culture continue to impede the adoption of AI for military purposes. A wide variance exists in the ease of adaptability of commercial AI technology for military purposes. In some cases, the transition is relatively seamless. For example, the aforementioned aircraft maintenance algorithms, many of which were initially developed by the commercial sector, will likely require only minor data adjustments to account for differences between aircraft types. In other circumstances, significant adjustments are required due to the differences between the structured civilian environments for which the technology was initially developed and more complex combat environments. For example, commercial semiautonomous vehicles have largely been developed in and for data-rich environments with reliable GPS positions, comprehensive terrain mapping, and up-to-date information on traffic and weather conditions obtained from other networked vehicles. In contrast, the military variant of such a vehicle would need to be able to operate in locations where map data are comparatively poor and in which GPS positioning may be inoperable due to adversary jamming. Moreover, semiautonomous or autonomous military ground vehicles would likely need the ability to navigate off-road in rough terrain—a capability not inherent in most commercial vehicles. Standing DOD processes—including those related to standards of safety and performance, acquisitions, and intellectual property and data rights—present another challenge to the integration of military AI. Often, civilian and military standards of safety and performance are either not aligned or are not easily transferable. A failure rate deemed acceptable for a civilian AI application may be well outside of tolerances in a combat environment—or vice versa. In addition, a recent research study concluded that unpredictable AI failure modes will be exacerbated in complex environments, such as those found in combat. Collectively, these factors may create another barrier for the smooth transfer of commercially developed AI technology to DOD. DOD may need to adjust its acquisitions process to account for rapidly evolving technologies such as AI. A 2017 internal study of the process found that it takes an average of 91 months to move from the initial Analysis of Alternatives, defining the requirements for a system, to an Initial Operational Capability. In contrast, commercial companies typically execute an iterative development process for software systems like AI, delivering a product in six to nine months. A Government Accountability Office (GAO) study of this issue surveyed 12 U.S. commercial companies who choose not to do business with DOD, and all 12 cited the complexity of the defense acquisition process as a rationale for their decision. As a first step in addressing this, DOD has created a number of avenues for \"rapid-acquisitions,\" including the Strategic Capabilities Office, the Defense Innovation Unit, and Project Maven, in order to accelerate the acquisitions timeline and streamline cumbersome processes. Project Maven, for example, was established in April 2017; by December, the team was fielding a commercially acquired prototype AI system in combat. Although some analysts argue that these are promising developments, critics point out that the department must replicate the results achieved by Project Maven at scale and implement more comprehensive acquisitions reform. Commercial technology companies are also often reluctant to partner with DOD due to concerns about intellectual property and data rights. As an official interviewed for a 2017 GAO report on broader challenges in military acquisitions noted, intellectual property is the \"life blood\" of commercial technology companies, yet \"DOD is putting increased pressure on companies to grant unlimited technical data and software rights or government purpose rights rather than limited or restricted rights.\" Some reports indicate that DOD and the defense industry also face challenges when it comes to recruiting and retaining personnel with expertise in AI due to research funding and salaries that significantly lag behind those of commercial companies. Other reports suggest that such challenges stem from quality-of-life factors, as well as from a belief among many technology workers that \"they can achieve large-scale change faster and better outside the government than within it.\" Regardless, observers note that if DOD and defense industry are unable to recruit and retain the appropriate experts, military AI applications could be delayed, \"deficient, or lacking in appropriate safeguards and testing.\" To address these challenges, the Obama Administration launched the Defense Digital Service in 2015 as a means of recruiting private sector technology workers to serve in DOD for one to two year assignments—a \"tour of duty for nerds,\" according to director Chris Lynch. Similarly, former Deputy Secretary of Defense Bob Work has proposed an \"AI Training Corps,\" in which DOD \"would pay for advanced technical education in exchange for two days a month of training with government systems and two weeks a year for major exercises.\" Participants in the program could additionally be called to government service in the event of a national emergency. Other analysts have recommended the establishment of new military training and occupational specialties to cultivate AI talent, as well as the creation of government fellowships and accelerated promotion tracks to reward the most talented technology workers. An apparent cultural divide between DOD and commercial technology companies may also present challenges for AI adoption. A recent survey of leadership in several top Silicon Valley companies found that nearly 80% of participants rated the commercial technology community's relationship with DOD as poor or very poor. This was due to a number of factors, including process challenges, perceptions of mutual distrust, and differences between DOD and commercial incentive structures. Moreover, some companies are refusing to work with DOD due to ethical concerns over the government's use of AI in surveillance or weapon systems. Notably, Google canceled existing government contracts for two robotics companies it acquired—Boston Dynamics and Schaft—and prohibited future government work for DeepMind, a Google-acquired AI software startup. In May 2018, Google employees successfully lobbied the company to withdraw from Project Maven and refrain from further collaboration with DOD. Other companies, however, have pledged to continue supporting DOD contracts, with Amazon CEO Jeff Bezos noting that \"if big tech companies are going to turn their back on the U.S. Department of Defense, this country is going to be in trouble.\" Cultural factors within the defense establishment itself may also impede AI integration. The integration of AI into existing systems alters standardized procedures and upends well-defined personnel roles. Members of Project Maven have reported a resistance to AI integration because integration can be disruptive without always providing an immediately recognizable benefit. Deputy Director for CIA technology development Dawn Meyerriecks has also expressed concern about the willingness of senior leaders to accept AI-generated analysis, arguing that the defense establishment's risk-averse culture may pose greater challenges to future competitiveness than the pace of adversary technology development. Finally, some analysts are concerned that DOD will not capitalize on AI's potential to produce game-changing warfighting benefits and will instead simply use AI to incrementally improve existing processes or reinforce current operational concepts. Furthermore, the services may reject certain AI applications altogether if the technology threatens service-favored hardware or missions. Members of Congress may explore the complex interaction of these factors as DOD moves beyond the initial stages of AI adoption. As military applications for AI grow in scale and complexity, many in Congress and the defense community are becoming increasingly concerned about international competition. In his opening comments at \"The Dawn of AI\" hearing before the Senate Subcommittee on Space, Science, and Competitiveness, Senator Ted Cruz stated, \"Ceding leadership in developing artificial intelligence to China, Russia, and other foreign governments will not only place the United States at a technological disadvantage, but it could have grave implications for national security.\" Since at least 2016, AI has been consistently identified as an \"emerging and disruptive technology\" at the Senate Select Intelligence Committee's annual hearing on the \"Worldwide Threat Assessment.\" In his written testimony for the 2017 hearing, Director of National Intelligence Daniel Coates asserted, \"The implications of our adversaries' abilities to use AI are potentially profound and broad. They include an increased vulnerability to cyberattack, difficulty in ascertaining attribution, facilitation of advances in foreign weapon and intelligence systems, the risk of accidents and related liability issues, and unemployment.\" Consequently, it may be important for Congress to understand the state of rival AI development—particularly because U.S. competitors may have fewer moral, legal, or ethical qualms about developing military AI applications. China is by far the United States' most ambitious competitor in the international AI market. China's 2017 \"Next Generation AI Development Plan\" describes AI as a \"strategic technology\" that has become a \"focus of international competition.\" According to the document, China will seek to develop a core AI industry worth over 150 billion RMB —or approximately $21.7 billion—by 2020 and will \"firmly seize the strategic initiative\" and reach \"world leading levels\" of AI investment by 2030. Recent Chinese achievements in the field demonstrate China's potential to realize its goals for AI development. In 2015, China's leading AI company, Baidu, created AI software capable of surpassing human levels of language recognition, almost a year in advance of Microsoft, the nearest U.S. competitor. In 2016 and 2017, Chinese teams won the top prize at the Large Scale Visual Recognition Challenge, an international competition for computer vision systems. Many of these systems are now being integrated into China's domestic surveillance network and social credit system, which aims to monitor and, based on social behavior, \"grade\" every Chinese citizen by 2021. China is researching various types of air, land, sea, and undersea autonomous vehicles. In the spring of 2017, a civilian Chinese university with ties to the military demonstrated an AI-enabled swarm of 1,000 uninhabited aerial vehicles at an airshow. A media report released after the fact showed a computer simulation of a similar swarm formation finding and destroying a missile launcher. Open-source publications indicate that the Chinese are developing a suite of AI tools for cyber operations. Chinese development of military AI is influenced in large part by China's observation of U.S. plans for defense innovation and fears of a widening \"generational gap\" in comparison to the U.S. military. Similar to U.S. military concepts, the Chinese aim to use AI for exploiting large troves of intelligence, generating a common operating picture, and accelerating battlefield decisionmaking. The close parallels between U.S. and Chinese AI development have some DOD leaders concerned about the prospects for retaining conventional U.S. military superiority as envisioned in current defense innovation guidance. Analysts do, however, point to a number of differences that may influence the success of military AI adoption in China. Significantly, unlike the United States, China has not been involved in active combat for several decades. While on the surface this may seem like a weakness, some argue that it may be an advantage, enabling the Chinese to develop more innovative concepts of operation. On the other hand, Chinese military culture, which is dominated by centralized command authority and mistrust of subordinates, may prove resistant to the adoption of autonomous systems or the integration of AI-generated decisionmaking tools. China's management of its AI ecosystem stands in stark contrast to that of the United States. In general, few boundaries exist between Chinese commercial companies, university research laboratories, the military, and the central government. As a result, the Chinese government has a direct means of guiding AI development priorities and accessing technology that was ostensibly developed for civilian purposes. To further strengthen these ties, the Chinese government created a Military-Civil Fusion Development Commission in 2017, which is intended to speed the transfer of AI technology from commercial companies and research institutions to the military. In addition, the Chinese government is leveraging both lower barriers to data collection and lower costs to data labeling to create the large databases on which AI systems train. According to one estimate, China is on track to possess 20% of the world's share of data by 2020, with the potential to have over 30% by 2030. China's centrally directed effort is fueling speculation in the U.S. AI market, where China is investing in companies working on militarily relevant AI applications—potentially granting it lawful access to U.S. technology and intellectual property. Figure 2 depicts Chinese venture capital investment in U.S. AI companies between 2010 and 2017, totaling an estimated $1.3 billion. The CFIUS reforms introduced in FIRRMA are intended to provide increased oversight of such investments to ensure that they do not threaten national security or grant U.S. competitors undue access to critical technologies. Even with these reforms, however, China may likely gain access to U.S. commercial developments in AI given its extensive history of industrial espionage and cyber theft. Indeed, China has reportedly stolen design plans in the past for a number of advanced military technologies and continues to do so despite the 2015 U.S.-China Cyber Agreement, in which both sides agreed that \"neither country's government will conduct or knowingly support cyber-enabled theft of intellectual property.\" While most analysts view China's unified, whole-of-government effort to develop AI as having a distinct advantage over the United States' AI efforts, many contend that it does have shortcomings. For example, some analysts characterize the Chinese government's funding management as inefficient. They point out that the system is often corrupt, with favored research institutions receiving a disproportionate share of government funding, and that the government has a potential to overinvest in projects that produce surpluses that exceed market demand. In addition, China faces challenges in recruiting and retaining AI engineers and researchers. Over half of the data scientists in the United States have been working in the field for over 10 years, while roughly the same proportion of data scientists in China have less than 5 years of experience. Furthermore, fewer than 30 Chinese universities produce AI-focused experts and research products. Although China surpassed the United States in the quantity of research papers produced from 2011 to 2015, the quality of its published papers, as judged by peer citations, ranked 34 th globally. China is, however, making efforts to address these deficiencies, with a particular focus on the development of military AI applications. Indeed, the Beijing Institute of Technology—one of China's premier institutes for weapons research—recently established the first educational program in military AI in the world. Some experts believe that China's intent to be the first to develop military AI applications may result in comparatively less safe applications, as China will likely be more risk-acceptant throughout the development process. These experts stated that it would be unethical for the U.S. military to sacrifice safety standards for the sake of external time pressures, but that the United States' more conservative approach to AI development may result in more capable systems in the long run. Like China, Russia is actively pursuing military AI applications. At present, Russian AI development lags significantly behind that of the United States and China. In 2017, the Russian AI market had an estimated value of $12 million and, in 2018, the country ranked 20 th in the world by number of AI startups. However, Russia is initiating plans to close the gap. As part of this effort, Russia will continue to pursue its 2008 defense modernization agenda, with the aim of robotizing 30% of its military equipment by 2025. Russia is establishing a number of organizations devoted to the development of military AI. In March 2018, the Russian government released a 10-point AI agenda, which calls for the establishment of an AI and Big Data consortium, a Fund for Analytical Algorithms and Programs, a state-backed AI training and education program, a dedicated AI lab, and a National Center for Artificial Intelligence, among other initiatives. In addition, Russia recently created a defense research organization, roughly equivalent to DARPA, dedicated to autonomy and robotics called the Foundation for Advanced Studies, and initiated an annual conference on \"Robotization of the Armed Forces of the Russian Federation.\" Some analysts have noted that this recent proliferation of research institutions devoted to AI may, however, result in overlapping responsibilities and bureaucratic inertia, hindering AI development rather than accelerating it. The Russian military has been researching a number of AI applications, with a heavy emphasis on semiautonomous and autonomous vehicles. In an official statement on November 1, 2017, Viktor Bondarev, chairman of the Federation Council's Defense and Security Committee, stated that \"artificial intelligence will be able to replace a soldier on the battlefield and a pilot in an aircraft cockpit\" and later noted that \"the day is nearing when vehicles will get artificial intelligence.\" Bondarev made these remarks in close proximity to the successful test of Nerehta, an uninhabited Russian ground vehicle that reportedly \"outperformed existing [inhabited] combat vehicles.\" Russia plans to use Nerehta as a research and development platform for AI and may one day deploy the system in combat, intelligence gathering, or logistics roles. Russia has also reportedly built a combat module for uninhabited ground vehicles that is capable of autonomous target identification—and, potentially, target engagement—and plans to develop a suite of AI-enabled autonomous systems. In addition, the Russian military plans to incorporate AI into uninhabited aerial, naval, and undersea vehicles and is currently developing swarming capabilities. It is also exploring innovative uses of AI for electronic warfare, including adaptive frequency hopping, waveforms, and countermeasures. Finally, Russia has made extensive use of AI technologies for domestic propaganda and surveillance, as well as for information operations directed against the United States and U.S. allies, and can be expected to continue to do so in the future. Despite Russia's aspirations, analysts argue that it may be difficult for Russia to make significant progress in AI development. In 2017, Russian military spending dropped by 20% in constant dollars, with subsequent cuts forecast in both 2018 and 2019. In addition, many analysts note that Russian academics have produced few research papers on AI and that the Russian technology industry has yet to produce AI applications that are on par with those produced by the United States and China. Others analysts counter that such factors may be irrelevant, arguing that while Russia has never been a leader in internet technology, it has still managed to become a notably disruptive force in cyberspace. A number of international institutions have examined issues surrounding AI, including the Group of Seven (G7), the Organisation for Economic Co-operation and Development (OECD), and the Asia-Pacific Economic Cooperation (APEC). The U.N. CCW, however, has made the most concerted effort to consider certain military applications of AI, with a particular focus on LAWS. In general, the CCW is charged with \"banning or restricting the use of specific types of weapons that are considered to cause unnecessary or unjustifiable suffering to combatants or to affect civilian populations\" and has previously debated weapons such as mines, cluster munitions, and blinding lasers. The CCW began discussions on LAWS in 2014 with informal annual \"Meetings of Experts.\" In parallel, the International Committee of the Red Cross (ICRC) held similar gatherings of interdisciplinary experts on LAWS that produced reports for the CCW on technical, legal, moral, and humanitarian issues. During the CCW's April 2016 meeting, state parties agreed to establish a formal Group of Governmental Experts (GGE), with an official mandate to \"assess questions related to emerging technologies in the area of LAWS.\" Although the GGE has now convened three times, it has not produced an official definition of LAWS or issued official guidance for their development or use. As a result, one U.S. participant cautioned that the international community is in danger of \"the pace of diplomacy falling behind the speed of technological advancement.\" AI poses a number of unique opportunities and challenges within a national security context. However, its ultimate impact will likely be determined by the extent to which developers, with the assistance of policymakers, are able to maximize its strengths while identifying options to limit its vulnerabilities. Many autonomous systems incorporate AI in some form. Such systems were a central focus of the Obama Administration's \"Third Offset Strategy,\" a framework for preserving the U.S. military's technological edge against global competitors. Depending on the task, autonomous systems are capable of augmenting or replacing humans, freeing them up for more complex and cognitively demanding work. In general, experts assert that the military stands to gain significant benefits from autonomous systems by replacing humans in tasks that are \"dull, dangerous, or dirty.\" Specific examples of autonomy in military systems include systems that conduct long-duration intelligence collection and analysis, clean up environments contaminated by chemical weapons, or sweep routes for improvised explosive devices. In these roles, autonomous systems may reduce risk to warfighters and cut costs, providing a range of value to DOD missions, as illustrated in Figure 3 . Some analysts argue these advantages create a \"tactical and strategic necessity\" as well as a \"moral obligation\" to develop autonomous systems. AI introduces a unique means of operating in combat at the extremes of the time scale. It provides systems with an ability to react at gigahertz speed, which in turn holds the potential to dramatically accelerate the overall pace of combat. As discussed below, some analysts contend that a drastic increase in the pace of combat could be destabilizing—particularly if it exceeds human ability to understand and control events—and could increase a system's destructive potential in the event of a loss of system control. Despite this risk, some argue that speed will confer a definitive warfighting advantage, in turn creating pressures for widespread adoption of military AI applications. In addition, AI systems may provide benefits in long-duration tasks that exceed human endurance. For example, AI systems may enable intelligence gathering across large areas over long periods of time, as well as the ability to autonomously detect anomalies and categorize behavior. AI has the potential to provide a force-multiplying effect by enhancing human capabilities and infusing less expensive military systems with increased capability. For example, although an individual low-cost drone may be powerless against a high-tech system like the F-35 stealth fighter, a swarm of such drones could potentially overwhelm high-tech systems, generating significant cost-savings and potentially rendering some current platforms obsolete. AI systems could also increase the productivity of individual servicemembers as the systems take over routine tasks or enable tactics like swarming that require minimal human involvement. Finally, some analysts caution that the proliferation of AI systems may decouple military power from population size and economic strength. This decoupling may enable smaller countries and nonstate actors to have a disproportionately large impact on the battlefield if they are able to capitalize on the scaling effects of AI. AI may offer a means to cope with an exponential increase in the amount of data available for analysis. According to one DOD source, the military operates over 11,000 drones, with each one recording \"more than three NFL seasons worth\" of high-definition footage each day. However, the department does not have sufficient people or an adequate system to comb through the data in order to derive actionable intelligence analysis. This issue will likely be exacerbated in the future as data continue to accumulate. According to one study, by 2020 every human on the planet will generate 1.7 megabytes of information every second, growing the global pool of data from 4.4 zettabytes today to almost 44.0 zettabytes. AI-powered intelligence systems may provide the ability to integrate and sort through large troves of data from different sources and geographic locations to identify patterns and highlight useful information, significantly improving intelligence analysis. In addition, AI algorithms may generate their own data to feed further analysis, accomplishing tasks like converting unstructured information from polls, financial data, and election results into written reports. AI tools of this type thus hold the potential to bestow a warfighting advantage by improving the quality of information available to decisionmakers. AI algorithms often produce unpredictable and unconventional results. In March 2016, the AI company DeepMind created a game-playing algorithm called AlphaGo, which defeated a world-champion Go player, Lee Sedol, four games to one. After the match, Sedol commented that AlphaGo made surprising and innovative moves, and other expert Go players subsequently stated that AlphaGo overturned accumulated wisdom on game play. AI's capacity to produce similarly unconventional results in a military context may provide an advantage in combat, particularly if those results surprise an adversary. However, AI systems can fail in unexpected ways, with some analysts characterizing their behavior as \"brittle and inflexible.\" Dr. Arati Prabhakar, the former DARPA Director, commented, \"When we look at what's happening with AI, we see something that is very powerful, but we also see a technology that is still quite fundamentally limited ... the problem is that when it's wrong, it's wrong in ways that no human would ever be wrong.\" AI-based image recognition algorithms surpassed human performance in 2010, most recently achieving an error rate of 2.5% in contrast to the average human error rate of 5%; however, some commonly cited experiments with these systems demonstrate their capacity for failure. As illustrated in Figure 4 , researchers combined a picture that an AI system correctly identified as a panda with random distortion that the computer labeled \"nematode.\" The difference in the combined image is imperceptible to human eyes, but the AI system labeled the image as a gibbon with 99.3% confidence. In another experiment, an AI system described the picture in Figure 5 as \"a young boy is holding a baseball bat,\" demonstrating the algorithm's inability to understand context. Some experts warn that AI may be operating with different assumptions about the environment than human operators, who would have little awareness of when the system is outside the boundaries of its original design. Similarly, AI systems may be subject to algorithmic bias as a result of their training data. For example, researchers have repeatedly discovered instances of racial bias in AI facial recognition programs due to the lack of diversity in the images on which the systems were trained, while some natural language processing programs have developed gender bias. This could hold significant implications for AI applications in a military context, particularly if such biases remain undetected and are incorporated into systems with lethal effects. \"Domain adaptability,\" or the ability of AI systems to adjust between two disparate environments, may also present challenges for militaries. For example, one AI system developed to recognize and understand online text was trained primarily on formal language documents like Wikipedia articles. The system was later unable to interpret more informal language in Twitter posts. Domain adaptability failures could occur when systems developed in a civilian environment are transferred to a combat environment. AI system failures may create a significant risk if the systems are deployed at scale. One analyst noted that although humans are not immune from errors, their mistakes are typically made on an individual basis, and they tend to be different every time. However, AI systems have the potential to fail simultaneously and in the same way, potentially producing large-scale or destructive effects. Other unanticipated results may arise when U.S. AI systems interact with adversary AI systems trained on different data sets with different design parameters and cultural biases. Analysts warn that if militaries rush to field the technology prior to gaining a comprehensive understanding of potential hazards, they may incur a \"technical debt,\" a term that refers to the effect of fielding AI systems that have minimal risk individually but compounding collective risk due to interactions between systems. This risk could be further exacerbated in the event of an AI arms race. Further complicating issues of predictability, the types of AI algorithms that have the highest performance are currently unable to explain their processes. For example, Google created a cat-identification system, which achieved impressive results in identifying cats on YouTube; however, none of the system's developers were able to determine which traits of a cat the system was using in its identification process. This lack of so-called \"explainability\" is common across all such AI algorithms. To address this issue, DARPA is conducting a five-year research effort to produce explainable AI tools. Other research organizations are also attempting to do a backwards analysis of these types of algorithms to gain a better understanding of their internal processes. In one such study, researchers analyzed a program designed to identify curtains and discovered that the AI algorithm first looked for a bed rather than a window, at which point it stopped searching the image. Researchers later learned that this was because most of the images in the training data set that featured curtains were bedrooms. The project demonstrated the possibility that training sets could inadvertently introduce errors into a system that might not be immediately recognized or understood by users. Explainability can create additional issues in a military context, because the opacity of AI reasoning may cause operators to have either too much or too little confidence in the system. Some analysts are particularly concerned that humans may be averse to making a decision based entirely on AI analysis if they do not understand how the machine derived the solution. Dawn Meyerriecks, Deputy Director for Science and Technology at the CIA, expressed this concern, arguing, \"Until AI can show me its homework, it's not a decision quality product.\" Increasing explainability will thus be key to humans building appropriate levels of trust in AI systems. As a U.S Army study of this issue concludes, only \"prudent trust\" will confer a competitive advantage for military organizations. Additional human-machine interaction issues that may be challenged by insufficient explainability in a military context include the following: Goal Alignment . The human and the machine must have a common understanding of the objective. As military systems encounter a dynamic environment, the goals will change, and the human and the machine must adjust simultaneously based on a shared picture of the current environment. Task A lignment. Humans and machines must understand the boundaries of one another's decision space, especially as goals change. In this process, humans must be consummately aware of the machine's design limitations to guard against inappropriate trust in the system. Human Machine Interface. Due to the requirement for timely decisions in many military AI applications, traditional machine interfaces may slow down performance, but there must be a way for the human and machine to coordinate in real time in order to build trust. Finally, explainability could challenge the military's ability to \"verify and validate\" AI system performance prior to fielding. Due to their current lack of an explainable output, AI systems do not have an audit trail for the military test community to certify that a system is meeting performance standards. DOD is currently developing a framework to test AI system lifecycles and building methods for testing AI systems in diverse environments with complex human-machine interactions. AI systems present unique pathways for adversary exploitation. First, the proliferation of AI systems will increase the number of \"hackable things,\" including systems that carry kinetic energy (e.g., moving vehicles), which may in turn allow exploitive actions to induce lethal effects. These effects could be particularly harmful if an entire class of AI systems all have the same exploitable vulnerability. In addition, AI systems are particularly vulnerable to theft by virtue of being almost entirely software-based. As one analyst points out, the Chinese may be able to steal the plans for an F-35, but it will take them years to find the materials and develop the manufacturing processes to build one. In contrast, stolen software code can be used immediately and reproduced at will. This risk is amplified by the dual-use nature of the technology and the fact that the AI research community has been relatively open to collaboration up to this point. Indeed, numerous AI tools developed for civilian use—but that could be adapted for use in weapon systems—have been shared widely on unclassified internet sites, making them accessible to major military powers and nonstate actors alike. Finally, adversaries may be capable of deliberately introducing the kinds of image classification and other errors discussed in the \" Predictability \" section above. In one such case, researchers who had access to the training data set and algorithm for an image classifier on a semiautonomous vehicle used several pieces of strategically placed tape (as illustrated in Figure 6 ) to cause the system to identify a stop sign as a speed limit sign. In a later research effort, a team at MIT successfully tricked an image classifier into thinking that a picture of machine guns was a helicopter—without access to the system's training data or algorithm. These vulnerabilities highlight the need for robust data security, cybersecurity, and testing and evaluation processes as military AI applications are developed. Although AI has not yet entered the combat arena in a serious way, experts are predicting the potential impact that AI will have on the future of warfare. This influence will be a function of many factors, including the rate of commercial investment, the drive to compete with international rivals, the research community's ability to advance the state of AI capability, the military's general attitude toward AI applications, and the development of AI-specific warfighting concepts. Many experts assert that there is a \"sense of inevitability\" with AI, arguing that it is bound to be substantially influential. Nevertheless, in January 2016, the Vice Chairman of the Joint Chiefs of Staff, General Paul Selva, intimated that it may be too early to tell, pointing out that DOD is still evaluating AI's potential. He stated, \"The question we're trying to pose now is, 'Do the technologies that are being developed in the commercial sector principally provide the kind of force multipliers that we got when we combined tactical nuclear weapons or precision and stealth?' If the answer is yes, then we can change the way that we fight.... If not, the military will seek to improve its current capabilities slightly to gain an edge over its adversaries.\" There are a range of opinions on AI's trajectory, and Congress may consider these future scenarios as it seeks to influence and conduct oversight of military AI applications. While many analysts admit that military AI technology is in a stage of infancy, it is difficult to find an expert who believes that AI will be inconsequential in the long run. However, AI critics point to a number of trends that may minimize the technology's impact. From a technical standpoint, there is a potential that the current safety problems with AI will be insurmountable and will make AI unsuitable for military applications. In addition, there is a chance the perceived current inflection point in AI development will instead lead to a plateau. Some experts believe that the present family of algorithms will reach its full potential in another 10 years, and AI development will not be able to proceed without significant leaps in enabling technologies, such as chips with higher power efficiency or advances in quantum computing. The technology has encountered similar roadblocks in the past, resulting in periods called \"AI Winters,\" during which the progress of AI research slowed significantly. As discussed earlier, the military's willingness to fully embrace AI technology may pose another constraint. Many academic studies on technological innovation argue that military organizations are capable of innovation during wartime, but they characterize the services in peacetime as large, inflexible bureaucracies that are prone to stagnation unless there is a crisis that spurs action. Members of the Defense Innovation Board, composed of CEOs from leading U.S. commercial companies, remarked in their most recent report, \"DOD does not have an innovation problem, it has an innovation adoption problem\" with a \"preference for small cosmetic steps over actual change.\" Another analysis asserts that AI adoption may be halted by poor expectation management. The report asserts that overhyped AI capabilities may cause frustration that will \"diminish people's trust and reduce their willingness to use the system in the future.\" This effect could have a significant chilling effect on AI adoption. Most analysts believe that AI will at a minimum have significant impact on the conduct of warfare. One study describes AI as a \"potentially disruptive technology that may create sharp discontinuities in the conduct of warfare,\" further asserting that the technology may \"produce dramatic improvements in military effectiveness and combat potential.\" These analysts point to research projects to make existing weapon systems and processes faster and more efficient, as well as providing a means to cope with the proliferation of data that complicate intelligence assessments and decisionmaking. However, these analysts caution that in the near future AI is unlikely to advance beyond narrow, task-specific applications that require human oversight. Some AI proponents contend that although humans will be present, their role will be less significant, and the technology will make combat \"less uncertain and more controllable,\" as machines are not subject to the emotions that cloud human judgment. However, critics point to the enduring necessity for human presence on the battlefield in some capacity as the principle restraining factor that will keep the technology from upending warfare. An academic study of this trend argues, At present, even an AI of tremendous power will not be able to determine outcomes in a complex social system, the outcomes are too complex – even without allowing for free will by sentient agents.... Strategy that involves humans, no matter that they are assisted by modular AI and fight using legions of autonomous robots, will retain its inevitable human flavor. Pointing to another constraining factor, analysts warn of the psychological impact that autonomous systems will have on an adversary, especially in conflict with cultures that place a premium on courage and physical presence. One study on this topic quotes a security expert from Qatar who stated, \"How you conduct war is important. It gives you dignity or not.\" In addition, experts highlight that the balance of international AI development will affect the magnitude of AI's influence. As one analyst states, \"[T]he most cherished attribute of military technology is asymmetry.\" In other words, military organizations seek to develop technological applications or warfighting concepts that confer an advantage for which their opponent possesses no immediate countermeasure. Indeed, that is the U.S. military's intent with the current wave of technological development as it seeks \"an enduring competitive edge that lasts a generation or more.\" For this reason, DOD is concerned that if the United States does not increase the pace of AI development and adoption, it will end up with either a symmetrical capability or a capability that bestows only a fleeting advantage, as U.S. competitors like China and Russia accelerate their own respective military AI programs. The democratization of AI technology will further complicate the U.S. military's pursuit of an AI advantage. As the 2018 National Defense Strategy warns, \"The fact that many technological developments will come from the commercial sector means that state competitors and nonstate actors will also have access to them, a fact that risks eroding the conventional overmatch to which our Nation has grown accustomed.\" In these circumstances, AI could still influence warfighting methods, but the technology's overall impact may be limited if adversaries possess comparable capabilities. A sizeable contingent of experts believe that AI will have a revolutionary impact on warfare. One analysis asserts that AI will induce a \"seismic shift on the field of battle\" and \"fundamentally transform the way war is waged.\" The 2018 National Defense Strategy counts AI among a group of emerging technologies that will change the character of war, and Frank Hoffman, a professor at the National Defense University, takes this a step further, arguing that AI may \"alter the immutable nature of war.\" Statements like this imply that AI's transformative potential is so great that it will challenge long-standing, foundational warfighting principles. In addition, members of the Chinese military establishment assert that AI \"will lead to a profound military revolution.\" Proponents of this position point to several common factors when making their case. They argue that the world has passed from the Industrial Era of warfare into the Information Era, in which gathering, exploiting, and disseminating information will be the most consequential aspect of combat operations. In light of this transition, AI's potential ability to facilitate information superiority and \"purge combat of uncertainty\" will be a decisive wartime advantage, enabling faster and higher-quality decisions. As one study of information era warfare states, \"[W]inning in the decision space is winning in the battlespace.\" Members of this camp argue that AI and autonomous systems will gradually distance humans from a direct combat role, and some even forecast a time in which humans will make strategic-level decisions while AI systems exclusively plan and act at the tactical level. In addition, analysts contend that AI may contest the current preference for quality over quantity, challenging industrial era militaries built around a limited number of expensive platforms with exquisite capabilities, instead creating a preference for large numbers of adequate, less expensive systems. A range of potential consequences flow from the assumptions surrounding AI's impact on warfighting. Some studies point to overwhelmingly positive results, like \"near instantaneous responses\" to adversary operations, \"perfectly coordinated action,\" and \"domination at a time and place of our choosing\" that will \"consistently overmatch the enemy's capacity to respond.\" However, AI may create an \"environment where weapons are too fast, small, numerous, and complex for humans to digest ... taking us to a place we may not want to go but are probably unable to avoid.\" In other words, AI systems could accelerate the pace of combat to a point in which machine actions surpass the rate of human decisionmaking, potentially resulting in a loss of human control in warfare. There is also a possibility that AI systems could induce a state of strategic instability. The speed of AI systems may put the defender at an inherent disadvantage, creating an incentive to strike first against an adversary with like capability. In addition, placing AI systems capable of inherently unpredictable actions in close proximity to an adversary's systems may result in inadvertent escalation or miscalculation. Although these forecasts project dramatic change, analysts point out that correctly assessing future impacts may be challenging. Historians of technology and warfare emphasize that previous technological revolutions are apparent only in hindsight, and the true utility of a new application like AI may not be apparent until it has been used in combat. Nevertheless, given AI's disruptive potential, for better or for worse, it may be incumbent on military leaders and Congress to evaluate the implications of military AI developments and exercise oversight of emerging AI trends. Congressional actions that affect AI funding, acquisitions, norms and standards, and international competition have the potential to significantly shape the trajectory of AI development and may be critical to ensuring that advanced technologies are in place to support U.S. national security objectives and the continued efficacy of the U.S. military. ", "summary": "Artificial intelligence (AI) is a rapidly growing field of technology with potentially significant implications for national security. As such, the U.S. Department of Defense (DOD) and other nations are developing AI applications for a range of military functions. AI research is underway in the fields of intelligence collection and analysis, logistics, cyber operations, information operations, command and control, and in a variety of semiautonomous and autonomous vehicles. Already, AI has been incorporated into military operations in Iraq and Syria. Congressional action has the potential to shape the technology's development further, with budgetary and legislative decisions influencing the growth of military applications as well as the pace of their adoption. AI technologies present unique challenges for military integration, particularly because the bulk of AI development is happening in the commercial sector. Although AI is not unique in this regard, the defense acquisition process may need to be adapted for acquiring emerging technologies like AI. In addition, many commercial AI applications must undergo significant modification prior to being functional for the military. A number of cultural issues also challenge AI acquisition, as some commercial AI companies are averse to partnering with DOD due to ethical concerns, and even within the department, there can be resistance to incorporating AI technology into existing weapons systems and processes. Potential international rivals in the AI market are creating pressure for the United States to compete for innovative military AI applications. China is a leading competitor in this regard, releasing a plan in 2017 to capture the global lead in AI development by 2030. Currently, China is primarily focused on using AI to make faster and more well-informed decisions, as well as on developing a variety of autonomous military vehicles. Russia is also active in military AI development, with a primary focus on robotics. Although AI has the potential to impart a number of advantages in the military context, it may also introduce distinct challenges. AI technology could, for example, facilitate autonomous operations, lead to more informed military decisionmaking, and increase the speed and scale of military action. However, it may also be unpredictable or vulnerable to unique forms of manipulation. As a result of these factors, analysts hold a broad range of opinions on how influential AI will be in future combat operations. While a small number of analysts believe that the technology will have minimal impact, most believe that AI will have at least an evolutionary—if not revolutionary—effect. Military AI development presents a number of potential issues for Congress: What is the right balance of commercial and government funding for AI development? How might Congress influence defense acquisition reform initiatives that facilitate military AI development? What changes, if any, are necessary in Congress and DOD to implement effective oversight of AI development? How should the United States balance research and development related to artificial intelligence and autonomous systems with ethical considerations? What legislative or regulatory changes are necessary for the integration of military AI applications? What measures can Congress take to help manage the AI competition globally?", "document_type": "crs"}
{"report": "T he federal government has no juvenile justice system of its own. Rather, juvenile justice is administered by the states. The federal government, though, seeks to influence states' juvenile justice systems through the administration of grant programs and the provision of funds. This report provides a brief overview of funding for the juvenile justice-related grant programs administered by the Department of Justice's (DOJ's) Office of Juvenile Justice and Delinquency Prevention (OJJDP). A number of federally funded juvenile justice grant programs are authorized by the Juvenile Justice and Delinquency Prevention Act of 1974 (JJDPA, P.L. 93-415 ). Since its enactment, the JJDPA has been revised by several key amendments, including a significant reorganization in 2002 (by the 21 st Century Department of Justice Appropriations Authorization Act; P.L. 107-273 ). Its grant programs were most recently amended and reauthorized by the Juvenile Justice Reform Act of 2018 ( P.L. 115-385 ). The JJDPA as originally enacted had three main components: (1) it established OJJDP to coordinate and administer federal juvenile justice efforts; (2) it created grant programs to assist states with their juvenile justice systems; and (3) it promulgated core mandates to which states must adhere in order to be eligible for certain grant funding. Although the JJDPA has been amended several times over the past 40 years, it continues to feature these three components. The JJDPA has been the primary channel through which the federal government has provided juvenile justice funding to states. However, other programs also administered by OJJDP have contributed to overall federal juvenile justice funding. The following section outlines various juvenile justice grant programs, including those authorized by the JJDPA. Grants noted in this section have been congressionally authorized at some point in time and have received an appropriation at least once since FY2010. Congress has also provided appropriations for programs that it has not authorized; these programs are not discussed in this section, but they are included in Table 1 , which outlines funding for juvenile justice programs since FY2010. The JJDPA authorizes OJJDP to make formula grants to states for the planning, establishment, operation, coordination, and evaluation of projects that develop more effective juvenile delinquency programs and improve juvenile justice systems. Funds are allocated annually based on each state's proportion of people under the age of 18. States must adhere to certain core mandates to receive their funding. The Juvenile Justice Reform Act of 2018 ( P.L. 115-385 ) amended and reauthorized this program through FY2023. The JJDPA authorizes OJJDP to make grants to state, local, and tribal governments and nongovernmental organizations for programs to develop, test, or demonstrate promising new initiatives that may prevent, control, or reduce juvenile delinquency. The Juvenile Justice Reform Act of 2018 ( P.L. 115-385 ) amended and reauthorized this program through FY2023. Of note, this grant program has not received an appropriation since FY2010. The JJDPA authorizes OJJDP to make grants to states, which are then transmitted through subgrants to units of local government (or nonprofits in partnership with units of local government) for delinquency prevention programs for juveniles who have come into contact with, or are at risk to come into contact with, the juvenile justice system. The Juvenile Justice Reform Act of 2018 ( P.L. 115-385 ) amended and reauthorized this program through FY2023. The JJDPA also authorizes OJJDP to make grants to eligible Indian tribes to support delinquency prevention programs for at-risk youth or those who have come into contact with the juvenile justice system. Traditionally, Congress dedicates amounts from the total appropriation for the Title V program for specific programs and purposes areas (e.g., the Tribal Youth program or preventing gang violence). The Victims of Child Abuse Act of 1990 (Title II of the Crime Control Act of 1990, P.L. 101-647 ) authorizes OJJDP to fund technical assistance, training, and administrative reforms for state juvenile and family courts to improve the way they handle cases of child abuse and neglect. This program was most recently reauthorized in the Violence Against Women Act Reauthorization Act of 2013 ( P.L. 113-4 ). Its authorization of appropriations expired in FY2018, but it has continued to receive funding. The Juvenile Mentoring Program was authorized by the Incentive Grants for Local Delinquency Prevention Programs Act ( P.L. 102-586 ). Grants under this program are awarded to local educational agencies (in partnership with public or private agencies) to establish and support mentoring programs to reduce delinquent behavior, improve scholastic performance, and reduce school dropouts. The program has continued to receive appropriations even though its authorization was repealed ( P.L. 107-273 ). Congress initially established the Juvenile Accountability Block Grant (JABG) program by appropriating funding for it in the FY1998 Department of Justice Appropriations Act ( P.L. 105-119 ). Congress subsequently authorized the JABG program through P.L. 107-273 . Although the authorization for the JABG program is not a part of the JJDPA, it nevertheless is administered by OJJDP. The JABG program authorizes the Attorney General to make grants to states and units of local government to strengthen their juvenile justice systems, including holding juveniles accountable for their actions. Authorization for this program expired in FY2009, but Congress continued to provide appropriations through FY2013. Congress appropriates funding for programs authorized by the JJDPA as well as for other non-JJDPA grant programs through the Juvenile Justice Programs account in the annual Commerce, Justice, Science, and Related Agencies Appropriations Act. Figure 1 shows total appropriations for juvenile justice programs from FY2002 through FY2019. Overall funding for juvenile justice programs, which had typically been above $500 million, peaked at $565 million in FY2002. From FY2002 to FY2007, however, overall funding fell by 38% to $348 million. The majority of this reduction came from cuts to the JABG program. Appropriations for JABG fell from a high of $250 million in FY2002 to $49 million in FY2007. From FY2007 to FY2010, total funding for juvenile justice programs increased by almost 22% to $424 million, with funding for JJDPA programs increasing by 27% to $331 million over this same period. This was the largest juvenile justice appropriation since FY2003. Funding for juvenile justice programs again began to decline in FY2011, and that decline generally continued through FY2017. From FY2010 to FY2017, total funding for juvenile justice programs decreased by nearly 42%, from $424 million to $247 million. Contributing to this drop, Congress eliminated funding for the Challenge Grants in FY2011 and for the JABG program in FY2014. During this time period, however, Congress also started appropriating funding for programs that had not previously been funded under the Juvenile Justice Programs account (including funding for missing and exploited children programs, child abuse training programs for judicial personnel and practitioners, and grants and technical assistance in support of a National Forum on Youth Violence Prevention). After appropriating a low of $247 million for juvenile justice programs in FY2017, Congress increased funding in both FY2018 and FY2019. Congress increased funding for juvenile justice programs to nearly $283 million for FY2018, and it included funds for a new Opioid Affected Youth Initiative. Congress most recently appropriated $287 million for juvenile justice programs for FY2019—the largest appropriation since the $424 million in FY2010. Historically, Congress has set aside funding from the Title V grant for gang prevention activities; however, for FY2019 Congress did not delineate funding for this purpose. It also did not include funding for community-based violence prevention, an administratively established initiative that had received appropriations since FY2010. Policymakers did, though, set aside money for an initiative serving children exposed to violence. Table 1 provides a breakdown of funding for the Juvenile Justice Programs account by program for the 10-year period from FY2010 to FY2019. Appropriations for specific programs in the Juvenile Justice Programs account can vary from year to year. For example, starting in FY2012, Congress moved funding for missing and exploited children programs from the Justice Assistance account to the Juvenile Justice Programs account. In addition, Congress sometimes provides funding for programs as a specific line item in the Juvenile Justice Programs account, but in other years funding for those programs is provided as a set-aside from another program in the account. For example, the Community Based Violence Prevention Initiative and the Competitive Grants Focusing on Girls in the Juvenile Justice System Program have received line item appropriations in some fiscal years and have been funded by set-asides from the Title V Incentive Grants Program in other years. By contrast, some programs have consistently been funded through set-asides from the Title V program (e.g., tribal youth and gang prevention grants).", "summary": "Although juvenile justice has always been administered by the states, the federal government has played a role in this area through the administration of grant programs. Congress has influenced juvenile justice by authorizing and funding grant programs administered by the Department of Justice's (DOJ's) Office of Juvenile Justice and Delinquency Prevention (OJJDP). The Juvenile Justice and Delinquency Prevention Act (JJDPA; P.L. 93-415), enacted in 1974, was the first comprehensive juvenile justice legislation passed by Congress. The JJDPA authorized a series of grant programs designed to support state juvenile justice systems and prevent juvenile delinquency. Since its enactment, the JJDPA has undergone several key amendments, including a significant reorganization in 2002 (by the 21st Century Department of Justice Appropriations Authorization Act; P.L. 107-273). Its grant programs were most recently amended and reauthorized by the Juvenile Justice Reform Act of 2018 (P.L. 115-385). Funding for programs authorized by the JJDPA, as well as for other non-JJDPA grant programs that are administered by OJJDP, is provided through the Juvenile Justice Programs account in the annual Commerce, Justice, Science, and Related Agencies appropriations act. After the restructuring of juvenile justice grant programs in 2002, total funding for these programs began to decline. This decline generally continued through FY2007, after which funding for these programs started to increase. For FY2010, Congress provided $424 million for juvenile justice programs—the largest appropriation since FY2003. Juvenile justice funding then generally declined again from FY2010 through FY2017. After appropriating a low of $247 million for juvenile justice programs in FY2017, Congress increased funding for both FY2018 and FY2019. Through the Consolidated Appropriations Act, 2019 (P.L. 116-6), Congress appropriated $287 million for juvenile justice programs for FY2019—the largest appropriation since the $424 million in FY2010.", "document_type": "crs"}
{"report": "During the Vietnam War, the U.S. military conducted Operation Ranch Hand, a program that sprayed an estimated 18-20 million gallons of herbicides—including approximately 11-12 million gallons of Agent Orange —over about 12,000 square miles of southern Vietnam between 1961 and 1971. A contaminant of the manufacture of Agent Orange (as well as two other herbicides used, Agent Pink and Agent Purple) was 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD), a developmental toxicant and a probable human carcinogen according to the U.S. Environmental Protection Agency. Environmental surveys conducted in Vietnam have identified a number of dioxin \"hot spots,\" including the airbases at Bien Hoa, Danang, and Phu Cat, that are contaminated with TCDD well above internationally acceptable levels (see Figure 1 ). In addition, the A Luoi (or A Shau) Valley, south of Quang Tri and west of Danang, was considered an important segment of the Ho Chi Minh Trail, a key supply route used by North Vietnamese forces and their allies, and was therefore heavily sprayed. The former U.S. military base in the A Luoi Valley has been identified as another \"hot spot.\" In recent years, U.S. response to the environmental damage and health problems caused by Agent Orange and its associated dioxin in Vietnam has been viewed as helping to advance bilateral relations between the two nations. After a meeting with President Tran Dai Quang in May 2016, President Obama stated the following: With regard to security, the United States will continue to do our part to address the painful legacy of war.... We'll continue to help remove unexploded landmines and bombs. And now that our joint effort to remove dioxin—Agent Orange—from Danang Airport is nearly complete, the United States will help in the cleanup at Bien Hoa Air Base. The joint statement issued after that meeting included the following statements: Vietnam welcomed cooperation leading to the successful conclusion of the first phase of dioxin remediation at Danang International Airport, with the final phase underway. The United States committed to partnering with Vietnam to make a significant contribution to the clean-up of dioxin contamination at Bien Hoa Air Base. The Trump Administration has continued the past commitment to provide assistance to Vietnam to address the Agent Orange/dioxin issue. Following their meeting in May 2017 in Washington, DC, President Trump and Prime Minister Nguyen Xuan Phuc released a joint statement, which stated: The two sides committed to work together to address war legacy issues, including through such joint efforts as dioxin remediation, taking note of the progress that has been made at Da Nang Airport and intent to discuss continued collaboration at Bien Hoa Airport, and the removal of unexploded ordnances. On November 10, 2017, Under Secretary of State Thomas Shannon and Senior Lieutenant General Nguyen Phuong Nam held a ceremony to celebrate the completion of the environmental remediation of Danang Airport. On January 23, 2018, the two governments signed a Memorandum of Intent (MOI) to begin the process of dioxin decontamination of Bien Hoa. From 2007 to the present, Congress has appropriated a total of $254.8 million for the environmental remediation of Agent Orange/dioxin and health and disability programs in areas of Vietnam sprayed with Agent Orange or otherwise contaminated by dioxin. Starting with the 112 th Congress, the legislation has appropriated separate amounts for these two purposes, generally with more funds appropriated for environmental remediation than for health and disability programs. All of the amounts appropriated by Congress are subject to the provisions of Section 653(a) (22 U.S.C. §2413(a)) of the Foreign Assistance Act of 1961, as amended (P.L. 87-195; 22 U.S.C. §2151 et seq.). As a consequence, the actual amount available for such assistance may be less than the amount specified in the various laws and their accompanying reports. In addition, the 115 th Congress, under Section 1052 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ), authorized the Secretary of Defense to transfer \"not more than $15,000,000\" in FY2019 to the Secretary of State, for use by USAID, \"to be used for the Bien Hoa dioxin cleanup in Vietnam.\" Any funds transferred are to be taken from the Department of Defense's \"Operation and Maintenance, Defense-wide\" account. The appropriated funds for environmental remediation generally have been allocated under the State Department's Economic Support Fund account (ESF), while the funds for health and disability programs have been allocated under the Development Assistance account (DA). In general, the funds appropriated under both accounts have been made available for two fiscal years. The State Department has delegated responsibility for the administration and obligation of the appropriated funds to the U.S. Agency for International Development (USAID). To date, most of the environmental remediation effort has been focused on the cleanup of the Danang airport, while the funds appropriated for health and disability programs have been used primarily for disability support programs in Danang and other parts of Vietnam. The cleanup of Danang airport has been completed, and U.S. and Vietnamese officials have made arrangements for joint dioxin removal operations at the airbase in Bien Hoa. In addition, the two governments are discussing the appropriate manner to address health and disability problems among Vietnamese nationals that may be attributable to dioxin exposure. The programs and projects funded by the appropriated funds have been administered by the State Department and USAID, in cooperation with various ministries and agencies within the Vietnamese government. In 1999, Vietnam's central government created the Office of the National Steering Committee on Overcoming Consequences of Agent Orange/Dioxin in Vietnam (Office 33, or Committee 33), an interministerial body, to oversee and coordinate its government's policy on Agent Orange and dioxin. Office 33 includes representatives from Vietnam's Ministry of Natural Resources and Environment (MONRE, where Office 33 is administratively located); Ministry of Finance (MOF); Ministry of Foreign Affairs (MOFA); Ministry of Health (MOH); Ministry of Labour, Invalids, and Social Affairs (MOLISA); Ministry of National Defence (MND); Ministry of Planning and Investment (MOPI); and Vietnam Academy of Science and Technology (VAST). Congressional interest has generally focused on two issues. The first issue is determining the amount to allocate for the environmental remediation of dioxin \"hot spots\" in Vietnam and health and disability programs in areas of Vietnam sprayed with Agent Orange or otherwise contaminated by dioxin. The second issue is oversight to ascertain if the State Department and USAID are effectively and appropriately obligating and expending the available funds. In particular, Congress has paid attention to the rate at which USAID has obligated the funds Congress appropriated for use on health and disability activities. The appropriation of funds explicitly to address the Agent Orange/dioxin issue in Vietnam started in May 2007, when the 110 th Congress passed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ). That act appropriated $3 million \"for the remediation of dioxin contaminated sites in Vietnam, and to support health programs in communities near those sites.\" After more than a year of internal consultation, the State Department decided that the administration and obligation of the $3 million would be handled by USAID, setting a precedent for the handling of future appropriations for Agent Orange/dioxin assistance to Vietnam. The 111 th Congress in three separate pieces of legislation appropriated a total of $18 million for dioxin cleanup in Vietnam and related health services (see Table 1 ). In March 2009, the 111 th Congress appropriated $3 million for Agent Orange/dioxin remediation and health care assistance in the vicinity of the Danang \"hot spot\" in the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ). In December 2009, Congress passed the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), which included $3 million for dioxin cleanup and related health services in Vietnam. In July 2010, Congress included $12 million \"to support the remediation of dioxin contamination at the Danang Airport, which poses extreme risks to human health and welfare, and related health activities\" in the Supplemental Appropriations Act, 2010 ( P.L. 111-212 ). In addition, the State Department and USAID allocated $1.9 million in Development Assistance funds for FY2010 for environmental remediation at Danang airport. The conference report accompanying P.L. 112-74 also endorsed language in a Senate report associated with an earlier reported to Senate version of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2012 ( S. 1601 ) directing USAID, in consultation with the Senate Appropriations Committee, the Department of State, the Government of Vietnam, and \"other interested parties,\" to develop a \"comprehensive, multiyear plan\" for Agent Orange-related activities in Vietnam within 180 days after the enactment of the law. The 113 th Congress continued to appropriate funds for the environmental remediation of Agent Orange/dioxin in Vietnam and related health services. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), which superseded P.L. 112-175 , renewed the appropriation levels contained in P.L. 112-74 for FY2013, subject to sequestration requirements. Similarly, P.L. 113-46 and P.L. 113-73 renewed appropriations for FY2014 until being superseded by the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), which appropriated $22.0 million for environmental remediation and $7.0 million for \"health and disability programs in areas sprayed with Agent Orange or otherwise contaminated by dioxin.\" Section 7043(h) of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) states the following: Funds appropriated by this Act under the heading \"Economic Support Fund\" shall be made available for remediation of dioxin contaminated sites in Vietnam and may be made available for assistance for the Government of Vietnam, including the military, for such purposes, and funds appropriated under the heading \"Development Assistance\" shall be made available for health/disability activities in areas sprayed with Agent Orange or otherwise contaminated with dioxin. The act's accompanying \"Explanatory Statement\" specifies that $7.5 million is to be provided under \"Development Assistance\" for \"Vietnam health/disability programs\" and $15.0 million is to be provided under \"Economic Support Fund\" for \"Vietnam (Environmental remediation of dioxin).\" In Section 7043(g) of P.L. 114-113 , the 114 th Congress appropriated funds under the Economic Support Fund for \"remediation of dioxin contaminated sites in Vietnam\" and under Development Assistance for \"health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment and/or cognitive or developmental disabilities.\" S.Rept. 114-79 , which accompanied P.L. 114-113 , provided \"not less than $25 million\" for environmental remediation and $7 million for \"health/disability programs in areas sprayed with Agent Orange or otherwise contaminated by dioxin, to address the mobility, psycho-social, vocational, and other needs of persons with severe upper and lower body mobility impairment and/or cognitive or developmental disabilities.\" The report continued with the statement, \"In order to minimize administrative costs and maximize impact in the field, the Committee intends that, to the maximum extent practicable, health/disability funds shall be implemented by Vietnamese organizations and entities.\" Funding for FY2017 was included in the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). Section 7043(h) states: (1) DIOXIN REMEDIATION—Notwithstanding any other provision of law, of the funds appropriated by this Act under the heading `Economic Support Fund', not less than $20,000,000 shall be made available for activities related to the remediation of dioxin contaminated sites in Vietnam and may be made available for assistance for the Government of Vietnam, including the military, for such purposes. (2) HEALTH AND DISABILITY PROGRAMS—Of the funds appropriated by this Act under the heading 'Development Assistance', not less than $10,000,000 shall be made available for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment and/or cognitive or developmental disabilities. The act permits, for the first time since the United States has funded dioxin environmental remediation in Vietnam, the provision of assistance to the Government of Vietnam. It also reiterates that health and disability programs are to be in areas sprayed with Agent Orange or otherwise contaminated with dioxin. In March 2018, the 115 th Congress appropriated in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) \"not less than $20 million\" for \"activities related to the remediation of dioxin contaminated sites in Vietnam.\" The act also provided that the funds \"may be made available for assistance for the Government of Vietnam, including the military, for such purposes.\" In addition, the act appropriated \"not less than $10 million\" for \"health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment or cognitive or developmental disabilities.\" In February 2019, 116 th Congress appropriated in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) \"not less than $20,000,000\" for \"activities related to the remediation of dioxin contaminated sites in Vietnam and may be made available for assistance for the Government of Vietnam, including the military, for such purposes.\" The Act also appropriated \"not less than $12,500,000 … for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment or cognitive or developmental disabilities.\" The State Department has designated USAID as the responsible agency for the obligation of the appropriated funds for Agent Orange/dioxin-related activities in Vietnam . Table 2 lists the amounts USAID has obligated of funds appropriated over FY2007 to FY2017 by type of activity, implementing partner, and fiscal year. As of May 2018, USAID has obligated 81% of the $127 million appropriated for FY2011-FY2017 for environmental remediation projects, and 63.5% of the $44.3 million appropriated for FY2011-FY2017 for health- and disability-related services. Of the $21 million appropriated for FY2007-FY2011 for either environmental remediation or health- and disability-related services, USAID has obligated $20.3 million, or 96.9%. The manner in which USAID has obligated the appropriated funds has, at times, been an issue with Congress. While the rate of obligations for environmental remediation activities generally has not been a matter of concern, how USAID has obligated appropriations for health and disability activities has drawn some congressional attention. The two main concerns about the health and disability obligations are the seemingly slower pace of utilization (when compared to the environmental remediation funds), and the types of programs being funded. Since Congress began appropriating funds specifically for Agent Orange/dioxin-related activities in Vietnam in FY2007, it generally has designated that the health and disability services are to be provided in locations near Agent Orange/dioxin-contaminated areas. The $3 million appropriated in FY2007 in P.L. 110-28 was \"to support health programs in communities near those sites,\" according to the accompanying Senate report. The joint committee print accompanying P.L. 111-8 stipulated that \"$3,000,000 is provided to continue environmental remediation of dioxin contamination at the Danang Airport and related health activities in nearby communities in Vietnam.\" H.Rept. 112-331 , which accompanied P.L. 112-74 , stated, \"The conferees recommend not less than $5,000,000 under this heading be made available for health/disability activities in areas in Vietnam that were targeted with Agent Orange or remain contaminated with dioxin.\" It is unclear if the State Department and USAID have in all cases obligated these funds in accordance with this locational guidance. Based on the information provided by USAID, funds for health- and disability-related services in FY2007-FY2009 were obligated to programs in Danang. However, for FY2010 to FY2013, the appropriated health and disability funds were largely obligated to Development Alternatives, Inc. (DAI) for a disability support program that was designed to \"broadly address the needs and improve the lives of persons with disabilities,\" without explicit reference to Agent Orange/dioxin \"hot spots.\" According to USAID, this three-year program ended in January 2016. Following consultations with the Ministry of Labour, Invalids, and Social Affairs (MOLISA), Congress, and other interested parties, as of FY2014, USAID reportedly returned to directly obligating funds for health- and disability-related services in smaller amounts and increased its outreach to Vietnamese nongovernmental organizations. This shift to smaller direct program funding is reflected in Table 1 . For more about USAID's disability programs in Vietnam, see \" Disability Programs \" below. One of the main activities financed by congressional appropriations related to Agent Orange/dioxin in Vietnam is the environmental remediation project at Danang Airport. Since its beginnings in 2008, when the U.S. and Vietnamese governments started plans for the environmental remediation of Danang airport, the project has experienced delays in implementation, unexpected increases in the amount of material requiring decontamination, and rising costs. While USAID's initial intent was to complete the project by October 2013, a November 2014 U.S. government audit indicated that the estimated completion date for the project was March 31, 2017. The decontamination was completed in August 2017. During the life of the project, the amount of material to be decontaminated rose from an estimated 61,700 cubic meters (m 3 ) to approximately 90,000 m 3 , plus an additional 60,000 m 3 of \"lower risk material.\" The estimated cost of the project increased from $33.7 million to over $110 million. The joint military/civilian airport in Danang was a major operational hub for the U.S. military's Operation Ranch Hand. One study of Danang airbase found soil concentrations of \"TCDD toxic equivalents\" (TEQ) of up to 365 parts per billion (ppb)—365 times the international maximum level of 1.0 ppb . Seventeen out of the 23 soil samples taken at Danang airbase exceeded the international maximum standard. Work on the project began in December 2009, when the State Department and Vietnam's Ministry of Natural Resources and the Environment (MONRE) signed a memorandum of understanding (MOU) setting the framework for implementing environmental health and remediation programs in Danang. The MOU designated USAID and Office 33 as the implementing agencies. According to a State Department press release, the MOU covered $6.0 million in funds appropriated in FY2007 and FY2009. Among the activities included in the MOU was a grant to CDM International, Inc., in association with Hatfield Associates, to design an environmentally sound engineering approach to dioxin containment at Danang airport. In June 2010, USAID completed an Environmental Assessment (EA) of Danang airport that recommended the use of thermal desorption to decontaminate an estimated 61,700 m 3 of contaminated material in six separate \"hotspots\" at the airport. The EA estimated that the decontamination would take two years to complete at a cost of $33.7 million, but noted that implementation would present \"challenges\" that could increase the cost by 50%. USAID and Vietnam's Ministry of National Defence (MND) signed a Memorandum of Intent in Hanoi on December 30, 2010, with the goal of starting the remediation project in the summer of 2011 and completing the project by October 2013. The Prime Minister approved the remediation of Danang airport by in-pile thermal desorption (IPTD) in February 2011, and MND approved the project in April 2011. USAID posted a Request for Proposals (RFP #486-11-028) in May 2011 for bids on the project. In July 2012, USAID awarded two contracts for the environmental remediation of Danang airport by IPTD. CDM Smith, a U.S. firm headquartered in Massachusetts, was granted $8.37 million for project oversight and construction management. Tetra Tech, Inc., headquartered in California, was awarded $17 million for the excavation and construction components of the project. A ceremony to launch the Danang airport environmental remediation project was held at Danang airport on August 9, 2012; onsite work began on August 20, 2012. An internal USAID audit of the remediation project conducted in November 2014 indicated that six contracts have been awarded for the environmental assessment and remediation project at Danang airport, plus an assessment of Bien Hoa airbase (see Table 3 ). Three of the awarded contracts correspond to the amounts provided by USAID in Table 2 , but three do not, probably reflecting work beyond FY2013. The thermal desorption of the contaminated soil was done in two phases, due to the amount of material involved. The gradual heating of Phase 1, which involved the treatment of approximately 45,000 m 3 of soil contained in an area 70 meters wide and 100 meters long (about the size of a football field) and 8 meters (26 feet) high, began in April 2014. The cooling down of Phase 1 started in April 2015, after soil sampling revealed that more than 95% of the dioxin had been removed. Excavation for Phase 2, which involved the draining of three small lakes and the removal of the exposed lake beds, began in January 2015. The treatment of 45,000 m 3 of Phase 2 soil began in November 2016, and was completed in August 2017. Progress on the decontamination of Danang airport was delayed by several factors. Weather during Vietnam's rainy season (September to December) hampered progress on the excavation of soil and the construction of the thermal treatment area. Soil testing following the drainage of the small lakes determined more soil and sediment would require decontamination than previously estimated. The secondary treatment facility was shut down in July 2014 to change the filtering system. It also took more time than anticipated to raise the ambient temperature of the Phase 1 soil to the target 335°C. USAID's Office of Inspector General conducted an internal audit of the environmental remediation project in November 2014, and noted several potential risks that could delay the project and, by extension, raise its overall cost, including the problems associated with inclement weather and cooling the treated soil. The audit particularly noted the lack of a formal risk management plan to address some of the project risks identified by USAID and the project's contractors, and recommended that a formal risk management plan be implemented. The audit also cited CDM for providing inaccurate performance data and not fulfilling its obligations to provide training to Vietnamese officials, and recommended that more training be provided and better data documentation procedures be adopted. USAID agreed with all of the audit's recommendations. On November 7, 2018, the two governments held a ceremony to mark the completion of the Danang Airport environmental remediation project. The completed project took more than twice as long and cost more than three times as much as initially projected by USAID. According to Pham Quang Vu, head of Vietnam's Air Force and Air Defense Military Science Division, the higher cost and greater time was due to underestimating the contamination at the airport, indicating that 162,500 cubic meters of soil—not 72,900 cubic meters—were contaminated. Anthony Kolb, chief of USAID's environmental remediation unit, stated that the dioxin had percolated three meters deeper than expected. USAID has, in general, utilized the funds Congress appropriated for health/disability activities in areas sprayed with Agent Orange or otherwise contaminated with dioxin as part of its overall program to provide support for persons with disabilities in Vietnam, regardless of the cause of the disability or proximity to Agent Orange \"hot spots.\" According to USAID, starting in 1989 with a program financed by the Leahy War Victims Fund, the U.S. government has provided over $60 million in assistance to disabled Vietnamese, regardless of the cause of the disability. This assistance includes funds specifically appropriated for health services in areas located near Agent Orange/dioxin-contaminated sites and other sources of developmental or health assistance. Between FY2007 and FY2010, the State Department and USAID utilized the funds appropriated for health services for grants to various agencies to offer programs to improve the quality of life for persons with disabilities in Danang. A December 2010 USAID assessment of these grants noted the \"many accomplishments\" of these programs, but also noted that the three-year time period was \"very short for meeting program objectives.\" In 2012, USAID approved a three-year, nationwide Persons with Disability Support Program (PDSP) to be jointly implemented with Development Alternatives, Inc. (DAI) and Vietnam Assistance for the Handicapped (VNAH). The request for applications (RFA) for the project indicated that the program was intended to \"build on the accomplishments of the previous USAID assistance to people with disabilities (PWD) living in communities in Danang, as well as include additional relevant public health activities.\" The project's geographic focus was to be primarily in Danang, and \"to some extent other areas, proposed by the Recipient, where there is a high disability burden, the need is the greatest, and in regions where dioxin hot spots are located.\" The RFA specifically calls for a needs assessment to be conducted in Bien Hoa and Phu Cat. Funding for PDSP was initially set at $9 million. As part of PDSP's cooperative agreement, DAI was to award grants to local partners and organizations providing assistance to persons with disabilities, including health services, rehabilitation therapy, vocational training, and community awareness. In addition, USAID provided assistance to VNAH to work on disability policy and legal framework needs of the Government of Vietnam. The PDSP program was headquartered in Danang, and initially operated in the provinces of Binh Dinh, Danang, and Dong Nai—where the three dioxin \"hot spots\" of Phu Cat, Danang, and Bien Hoa (respectively) are located. According to a June 2015 USAID update, the PDSP program has been extended to the provinces of Quang Nam, Tay Ninh, and Thua Thien-Hue. According to the Aspen Institute, all three provinces were heavily sprayed with Agent Orange during the Vietnam War, but have not been identified as \"hot spots.\" A USAID summary of the program after two years reported that \"nearly US$900,000 in grants to 14 local partners and organizations\" had been awarded. In June 2014, USAID adopted a new approach to the provision of assistance to persons with disabilities in Vietnam. According to the USAID statement, one of the key objectives of USAID assistance to Vietnam is to foster expanded opportunities to vulnerable populations, such as persons with disabilities. To that end, USAID aims \"to address key challenges for persons with disabilities through provision of direct assistance to improve health, independence, and participation in economic and social life.\" In addition to continuing to support changes in Vietnam's disability policies, USAID will finance the provision of physical, occupational, and speech therapies to persons with disabilities, as well as provide training to Vietnamese practitioners and technicians in the delivery of such services. Target areas for these programs are to be locations \"where disability prevalence and poverty rates are high.\" Among the identified locations are the provinces of Binh Dinh, Binh Phuoc, Dong Nai, Quang Nam, Tay Ninh, Thai Binh, and Thua Thien-Hue. All these provinces have been identified by the Aspen Institute as heavily sprayed areas, except Thai Binh. USAID, in consultation with various Vietnamese agencies, will directly administer the new approach. With the environmental cleanup of Danang airport completed, the two governments have begun jointly to explore undertaking a similar cleanup of the dioxin \"hot spot\" located at the Bien Hoa airbase. Bien Hoa airbase was the airport used for the most Agent Orange spraying missions during the war, and is where the most herbicide was stored and used by the U.S. military. One study of soil samples from the Bien Hoa airbase found a sample with a TEQ concentration at over 1,000 ppb—higher than typical samples at the Danang airbase, and 1,000 times higher than the international limit. The Vietnamese government has already conducted some mitigation measures to contain the dioxin contamination at Bien Hoa. A passive landfill (in which the contaminated soil is left untreated) containing 43,000 m 3 of contaminated soil excavated from the herbicide storage area was completed in 2009. However, the airbase has several other distinct dioxin \"hot spots\" that have not been addressed, according to a study conducted by a private consulting firm, Hatfield Consultants, hired by Office 33. The study also determined that contaminated soil had spread from the \"hot spots\" into nearby lakes, ponds, creeks, and drainage ditches, increasing the amount of soil and sediment that will require treatment. The United Nations Development Programme (UNDP) has been working with Office 33 and MONRE for five years to map out the dioxin contamination at Bien Hoa airbase, and develop a master plan for dioxin remediation. According to their joint investigation, released in 2014, approximately 250,000 m 3 of soil would require decontamination with an estimated cost of at least $250 million. In September 2013, USAID contracted CDM International Inc. to conduct an environmental assessment of the Bien Hoa airbase to examine a number of dioxin remediation alternatives. CDM International Inc. partnered with Hatfield Consulting on the project. In May 2016, USAID released the final environmental assessment report. The report determined that an estimated 408,500 to 495,300 m 3 of contaminated soils and sediments are located on or nearby the airbase, or about four to five times as much as is being treated at Danang airport. Five different treatment methods were considered, ranging from containment to in-pile thermal desorption (as was used in Danang). The estimated costs of the five methods ranged from $137 million (for containment in a landfill) to $794 million (using incineration and ex situ thermal treatment). The report noted, however, that these estimated costs may vary from 40% less to 75% more than the stated amounts, expanding the possible range to between $82 million and $1.4 billion. According to USAID, over $3.7 million has been obligated so far to assess the possible environmental remediation of Bien Hoa Airbase. In September 2017, Vietnam's Ministry of National Defence announced work on infrastructure construction for the dioxin decontamination of Bien Hoa airport. The construction, with a reported budget of $11.8 million, included demining operations, road construction, and removing facilities from contaminated areas. On January 23, 2018, USAID and Vietnam's Ministry of National Defence signed a memorandum of intent (MOI) to begin the decontamination of Bien Hoa airport. U.S. Ambassador to Vietnam Daniel J. Kritenbrink reportedly said at the MOI signing ceremony, \"The United States looks forward to working with the Ministry of National Defence on this important initiative, deepening our partnership further, and building a prosperous future for both our countries.\" The MOI commits the two nations to work together to design a remediation program for the Bien Hoa airport. USAID and the Ministry of National Defence signed a five-year, $183 million nonrefundable aid agreement on May 11, 2018, for the decontamination of Bien Hoa airport. At the time of the signing of the agreement, the project was projected to take 10 years at an estimated cost of $390 million. Approximately 500,000 cubic meters of soil, or nearly 50 hectares (123 acres) of land, are to be decontaminated. In September 2018, the Ministry of National Defence signed a memorandum of understanding with the Japanese general contractor, Shimizu Corporation, to construct a decontamination factory at Bien Hoa airport. The factory reportedly will decontaminate the soil by a filtered sponge technique, and be capable of decontaminating 40 tons of soil per hour. The new technique is expected to cost about half as much as the in-pile thermal desorption used at Danang airport. U.S. Secretary of Defense Jim Mattis visited Bien Hoa airport on October 17, 2018. During his tour of the former Agent Orange storage site, Secretary Mattis reportedly said, \"We had promised to help … so this is America keeping her promise to remediate some of the past.\" He also reportedly stated prior to the visit, \"I just want to get eyes on [the site] so when I go back and talk to Congress, I can tell them my impression with actually having seen the site.\" Congressional interest in Agent Orange/dioxin in Vietnam has largely been focused on two issues. The first issue is determining the appropriate amount and type of assistance to provide to address the environmental damage and the health effects of dioxin contamination in Vietnam. The second issue is oversight of how such assistance has been utilized by the State Department and USAID. Congress and the Obama Administration demonstrated a common interest in providing assistance to address the environmental remediation of Agent Orange and dioxin in Vietnam; the Trump Administration has indicated its support for the Agent Orange projects in Vietnam. The State Department regularly has requested funding for decontamination of dioxin \"hot spots\" in Vietnam in its budget request to Congress. As described above, Congress has generally appropriated funds for health and disability services for persons residing in areas sprayed by Agent Orange and otherwise contaminated with dioxin. The State Department and USAID have utilized those funds for various programs for persons with disabilities regardless of the cause. In many, but not all, cases, those programs were conducted in locations near known Agent Orange \"hot spots.\" President Obama's budget requests to Congress did not include funding requests explicitly for health and disability assistance programs for areas sprayed with Agent Orange or otherwise contaminated with dioxin. The Obama Administration budget requests were for disability programs and/or \"vulnerable groups.\" The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) continues the past practice of designating funds for health and disability services for places contaminated with Agent Orange/dioxin. Section 7043(h)(2) of the act, states Of the funds appropriated by this Act under the heading 'Development Assistance', not less than $12,500,000 shall be made available for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment or cognitive or developmental disabilities. The Victims of Agent Orange Relief Act of 2019 ( H.R. 326 ) would \"direct the Secretary of State, the Secretary of Health and Human Services, and the Secretary of Veterans Affairs to provide assistance for individuals affected by exposure to Agent Orange, and for other purposes.\" Section 3 would require the Secretary of State to \"provide assistance to address the health care needs of covered individuals. Such assistance shall include the provision of medical and chronic care services, nursing services, vocational employment training, and medical equipment.\" \"Covered individuals\" is defined as Vietnamese residents affected by health issues related to their exposure to Agent Orange between January 1, 1961, and May 7, 1975, or is \"the child or descendant of an individual\" who was exposed to Agent Orange during the designated time period. Under Section 3, the Secretary of State would also be required to provide assistance \"to repair and rebuild substandard homes in Vietnam for covered individuals and the families of covered individuals.\" Section 4 would require the Secretary of State and the Secretary of Veterans Affairs to \"identify and provide assistance to support research relating to health issues of individuals affected by Agent Orange.\" Section 3 also would require the Secretary of State to provide assistance to \"institutions in Vietnam that provide health care for covered individuals,\" and to \"remediate those geographic areas of Vietnam that the Secretary determines contain high levels of Agent Orange.\" The section further states, \"the Secretary of State shall give priority to heavily sprayed areas, particularly areas that served as military bases where Agent Orange was handled, and areas where heavy spraying and air crashes resulted in harmful deposits of Agent Orange.\" Section 8 states, \"Not later than 30 days after the last day of each fiscal quarter beginning on or after 18 months after the date of the enactment of this Act, the Secretary of State, the Secretary of Health and Human Services, and the Secretary of Veterans Affairs shall each submit to Congress a report on the implementation of the provisions of this Act applicable to such Secretary during the immediately preceding fiscal quarter.\" Beyond determining the level of funding for environmental remediation and the provision of health services to Agent Orange/dioxin-contaminated locations in Vietnam, Congress has overseen the utilization of appropriated funds. With regard to environmental remediation, congressional oversight has focused on the rising cost of the cleanup effort at Danang airport, and the potential implications for funding for the proposed cleanup of Bien Hoa. With regard to USAID's provision of related health services, congressional oversight has focused on what some Members perceive to be a slow pace at which available funds are being obligated and changes in USAID's approach to administering those funds. As noted above, the estimated total cost of the environmental remediation of Danang airport rose from $33.7 million in 2010 to $116 million. Members could point to cost overruns at Danang airport when Congress looks ahead to possibly funding a similar environmental remediation project at Bien Hoa airport, where a USAID study indicated that approximately 500,000 m 3 of soil—about four to five times the amount at Danang—is contaminated. Although the Danang airport cleanup experienced rising costs and delays, USAID was able to keep the project going and the funding flowing. USAID has not been as successful in utilizing the funds provided for health services to areas contaminated with Agent Orange/dioxin. According to information provided by USAID, 63.5% of the funds appropriated in FY2011 to FY2017 have been obligated. In addition, USAID's approach to utilizing health services funds has shifted from direct obligation by USAID, to establishing a cooperative agreement to administer the funds, and back again to direct obligation by USAID. Some observers question whether the health services funds are being used effectively, and in accordance with congressional priorities. The specific language in Section 7043(h)(2) of Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) and H.R. 326 regarding health and/or disability assistance to Vietnam may in part reflect congressional dissatisfaction with State Department and USAID management of previously appropriated funds. Congress has included language in legislation indicating that it is appropriating funds for environmental remediation and health and disability services in Vietnam. The precise amounts appropriated, however, in most cases have been stipulated in either an accompanying report or explanatory statement. The table below provides the relevant text in the public law, as well as the associated language in the accompanying report or explanatory statement.", "summary": "U.S. assistance to Vietnam for the environmental and health damage attributed to a dioxin contained in Agent Orange and other herbicides sprayed over much of the southern portion of the country during the Vietnam War remains a major bilateral issue. Between fiscal years (FY) 2007 and 2019, Congress appropriated nearly $255 million to address these two issues. In addition, the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232) authorized the transfer of up to $15 million to the U.S. Agency for International Development (USAID) for the dioxin cleanup of the Bien Hoa Airbase. Most of the appropriated funds have been used by USAID for the environmental cleanup of Danang airport, one of the major airbases used for storing and spraying the herbicides between 1961 and 1971. A lesser amount of the appropriated funds have been used by USAID for assistance to Vietnam's persons with disabilities, generally, but not always in the vicinity of Danang or other dioxin-contaminated areas. Congressional interest in Agent Orange/dioxin in Vietnam has largely been focused on two issues. The first issue is determining the appropriate amount and type of assistance to provide to address the environmental damage and the health effects of dioxin contamination in Vietnam. The second issue is oversight of how such assistance has been utilized by the State Department and USAID. In November 2017, the United States and Vietnam completed the environmental remediation of approximately 90,000 cubic meters (118,000 cubic yards) of contaminated soil and 60,000 cubic meters (78,000 cubic yards) of lower risk materials at Danang airport by a process known as in-pile thermal desorption (IPTD). Restoration and project closure operations were completed in November 2018. The project took six years, with an estimated overall cost of $116 million. Field studies have identified a number of other areas in Vietnam contaminated with the dioxin associated with Agent Orange, including the airports near Bien Hoa and Phu Cat, as well as sections of the A Luoi Valley. In January 2018, U.S. and Vietnamese governments signed a memorandum of intent (MOI) to begin the cleanup of the Bien Hoa airport. According to a USAID study, the environmental cleanup of Bien Hoa airport could cost an estimated $137 million to $794 million, depending on what form of remediation is used. The provision of health-related assistance to areas contaminated with Agent Orange/dioxin has raised questions about how USAID has utilized appropriated funds. By May 2017, USAID had obligated less than two-thirds of the appropriated funds for FY2011-FY2017. The funds have generally been used for disability assistance programs regardless of the cause of the disability, rather than for both health and disability programs targeting populations residing near Agent Orange/dioxin \"hot spots.\" While the obligations for environmental remediation activities generally have not been a matter of congressional concern, how USAID has obligated appropriations for health and disability activities has drawn some attention. The Consolidated Appropriations Act, 2019 (P.L. 116-6) appropriated \"not less than $20 million\" for environmental remediation and \"not less than $12.5 million … for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin.\" The Victims of Agent Orange Relief Act of 2019 (H.R. 326) would require the Secretary of State to provide assistance to individuals in Vietnam with health issues related to exposure to Agent Orange, as well as \"to institutions in Vietnam that provide health care for covered individuals.\" The act would also require the Secretary of State to provide assistance \"to remediate those geographic areas of Vietnam that the Secretary determines contain high levels of Agent Orange.\"", "document_type": "crs"}
{"report": "The Jones Act, which refers to Section 27 of the Merchant Marine Act of 1920 (P.L. 66-261), requires that vessels transporting cargo from one U.S. point to another U.S. point be U.S.-built, and owned and crewed by U.S. citizens. The act provides a significant degree of protection from foreign competition for U.S. shipyards, domestic carriers, and American merchant sailors. It is a subject of debate because some experts point out that it makes domestic ocean shipping relatively expensive, constrains the availability of ships, and contributes to making it much more costly to build merchant vessels in U.S. shipyards than in shipyards abroad. The Jones Act has been an issue in recent Congresses, coming into prominence amid debates over Puerto Rico's economic challenges and recovery from Hurricane Maria in 2017; in the investigation into the sinking of the 40-year-old ship El Faro with 33 fatalities during a hurricane in 2015; and in discussions about domestic transportation of oil and natural gas. The law's effectiveness in achieving national security goals has also been the subject of attention in conjunction with a congressional directive that the Administration develop a national maritime strategy, including strategies to increase the use of short sea shipping and enhance U.S. shipbuilding capability. In May 2018, the Office of Management and Budget requested public comment on federal requirements that could be modified or repealed to increase efficiency and reduce or eliminate unnecessary or unjustified regulatory burdens in the maritime sector. The Jones Act of 1920 was not the first law requiring that vessels transporting cargo domestically be U.S.-built, owned, and crewed. Rather, it was a restatement of a long-standing restriction that was temporarily suspended during World War I by P.L. 65-73, enacted October 6, 1917. Laws favoring a U.S.-flag fleet over a foreign fleet were initiated by the third act of the First Congress (1 Stat. 27, enacted July 20, 1789), which assessed lesser duties on vessels built and owned domestically than on those foreign-built and -owned. On September 1 of the same year, Congress specified that only a U.S.-built vessel owned by U.S. citizens and with a U.S. citizen captain could register as a U.S. vessel (1 Stat. 55). In 1817, Congress enacted a precursor to the Jones Act by disallowing any vessel wholly or partially foreign-owned from transporting domestic cargo between U.S. ports (3 Stat. 351). In 1886, this prohibition was extended to vessels transporting passengers domestically (24 Stat. 81). The early United States had a comparative advantage in shipbuilding due to its ample supplies of large timber. During the second half of the 1800s, it lost that advantage as wooden sailing ships gave way to iron steamships, with the advantage shifting to Scotland and England. Congress began debating how to respond to the steep drop-off in the share of U.S. foreign trade carried by U.S. vessels. The fall-off in domestic coastwise transport was less severe, but railroads began offering competition to coastal shipping. Proposals to allow foreign-built vessels to sail under the U.S. flag became known as the \"free ship\" movement. Opponents of the free ship movement argued that the higher cost of U.S. crews in and of itself would prevent a resurgence of trade carried by U.S. vessels even if foreign-built ships were allowed. While bills that would have allowed foreign-built vessels to qualify for U.S.-flag international service were reported by House and Senate committees in the late 1800s, it was in 1912 that Congress enacted such a measure (P.L. 62-33, 37 Stat. 562). Thus, since 1912, the domestic build requirement has principally applied to vessels making domestic voyages. In the late 1800s, Congress considered but did not pass bills that would have allowed foreign-built ships in domestic trade. Rather, Congress tightened the language concerning coastwise transport in response to shippers' attempts to avoid high-cost U.S. vessels. For instance, in 1891 a shipper loaded 250 kegs of nails at the Port of New York with an ultimate destination of Los Angeles (Redondo).The shipper loaded the merchandise on a foreign-flag ship bound for Antwerp, Belgium, where the goods were transferred to another foreign-flag ship bound for Los Angeles. Despite the circuitous routing and extra port charges, the freight charges were apparently less than they would have been using a U.S.-built and U.S.-owned ship to carry the nails directly between New York and Los Angeles. A court found that the shipper had acted legally. Similarly, shipments from Seattle to Alaska often were routed via Vancouver, Canada, so shippers could use foreign-flag ships for both legs. Congress amended the coastwise law in 1893 (27 Stat. 455) and again in 1898 (30 Stat. 248) to prohibit shippers from routing cargo through a foreign port so as to avoid coastwise laws. Nonetheless, U.S. shippers continued to use foreign-flag vessels in the Alaska trade by moving cargo between the United States and Vancouver, Canada, by rail. In the Merchant Marine Act of 1920, Senator Wesley Jones of Washington, chair of the Commerce Committee, sought to stop this practice by requiring Alaska-bound cargo to move through the Port of Seattle by amending the coastwise language to cover shipments \"by land and water\" and replacing shipments between \"U.S. ports\" with shipments between \"U.S. points.\" These amendments remain current law. The relative cost of building ships in the United States versus foreign countries was part of the debate leading up to passage of the Jones Act. Four years earlier, in the Shipping Act of 1916, Congress had requested annual reports on the subject from the federal agency in charge of maritime transportation. The minority report to a 1919 House committee report to the bill that would become the Jones Act expressed the view that banning foreign-built ships would result in more costly domestically built ships: … in order to build up and sustain an American merchant marine it is absolutely necessary to remove every restriction against American merchants acquiring ships, whether built in the United States or out of the United States, at the lowest possible price, in order to enable them to compete with other nations in the transportation of the commerce of the world. If our merchants are allowed to buy ships in the open world market and place them under American registry with the privilege of using them both in the coastwise and overseas trade, it will inevitably follow that ships under the American flag will be bought as cheaply as ships under other flags. On the other hand, if the American merchant shall be permitted to buy ships only from American builders in order to engage in our coastwise trade, it necessarily follows that every ship built in the United States will command a higher price than any foreign-built ship. Our American iron and steel manufacturers were unable to compete until they had to. When they had to they did compete successfully. Our shipbuilders can and will do likewise. A 1922 government report on shipbuilding indicated that U.S.-built ships cost 20% more than those built in foreign yards. The cost differential increased to 50% in the 1930s. In the 1950s, U.S. shipyard prices were double those of foreign yards, and by the 1990s, they were three times the price of foreign yards. Today, the price of a U.S.-built tanker is estimated to be about four times the global price of a similar vessel, while a U.S.-built container ship may cost five times the global price, according to one maritime consulting firm. The cost differential is also an issue for Department of Defense officials in charge of military sealift ships. As discussed later in this report, the military has modified a plan to build sealift ships domestically, finding it unaffordable, and instead will buy more used foreign-built cargo ships. Since U.S. shipyards do not build vessels for export, they are not required to compete with foreign shipyards on price or vessel characteristics. However, as was argued in the late 1800s, shipbuilding costs are not the only cost factor. U.S. crewing costs are higher than those of foreign-flag vessels. U.S.-flag ships have an operating cost differential estimated to be over $6 million per ship per year compared to foreign-flag ships. While crewing is the primary cost element, this estimate also includes insurance and ship maintenance costs. A 2011 study by the U.S. Maritime Administration (MARAD) found that in 2010, the average operating cost of a U.S.-flag ship was 2.7 times greater than a foreign-flag ship, but MARAD estimates that this cost differential has since increased. A main thrust of the Merchant Marine Act of 1920 concerned the sale of a surplus of government cargo ships constructed for World War I. A second important and enduring aspect of the bill is its statement of maritime policy. The policy goals stated in the 1920 act, which appear in Section 27, have continued to the present day (46 U.S.C. §50101). The law stated the following: That it is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in times of war or national emergency, ultimately to be owned and operated privately by citizens of the United States; and it is hereby declared to be the policy of the United States to do whatever may be necessary to develop and encourage the maintenance of such a merchant marine. This statement reflects the United States' status as an emerging power at that time. When World War I began in 1914, European nations utilized their ships for the war effort or kept them in harbors for fear of submarine attacks, leaving the United States with a shortage of ships for carrying its foreign trade. The Merchant Marine Act therefore emphasized that the United States should have its own merchant marine so as not to be dependent on any other nations' merchant vessels. The Jones Act applies only to domestic waterborne shipments. It does not apply to the nation's international waterborne trade, which is almost entirely carried by foreign-flag ships. The U.S. citizen crewing requirement means that the master, all of the officers, and 75% of the remaining crew must be U.S. citizens. If the U.S. owner of a Jones Act ship is a corporation, 75% of the corporation's stock must be owned by U.S. citizens. Regarding U.S. territories, the U.S. Virgin Islands, America Samoa, and the Northern Mariana Islands are exempt from the Jones Act. Therefore, foreign-flag ships can transport cargo between these islands and other U.S. points. Puerto Rico is exempt for passengers but not for cargo. Vessels traveling between Guam and another U.S. point must be U.S.-owned and -crewed but need not be U.S.-built. The Coast Guard is in charge of enforcing the U.S.-build requirement for vessels (46 C.F.R. §§67.95-67.101), U.S. ownership of the carriers (46 C.F.R. §§67.30-67.43), and U.S. crewing (46 C.F.R. §10.221)—essentially, the licensing of Jones Act operators. It enforces these requirements when an operator seeks a \"coastwise endorsement\" (46 C.F.R. §67.19) from the agency. The terms \"coastwise qualified\" and \"Jones Act qualified\" are synonymous. Customs and Border Protection (CBP) is primarily responsible for determining what maritime activity falls under the act, namely defining what constitutes \"transportation\" and whether the origin and destination of a voyage are \"U.S. points\" (19 C.F.R. §§4.80–4.93). Agency interpretations of domestic shipping restrictions have been consistent since the late 1800s and early 1900s, as discussed further below. A significant element of the Jones Act is the requirement to use only \"U.S.-built\" vessels. Competing freight transportation modes have no requirement to purchase only domestically built equipment. Congress has not defined what constitutes a U.S.-built vessel, leaving this determination to the Coast Guard. Coast Guard regulations deem a vessel to be U.S.-built if (1) all \"major components\" of its hull and superstructure are fabricated in the United States, and (2) the vessel is assembled in the United States. The \"superstructure\" means the main deck and any other structural part above the main deck (e.g., the bridge, forecastle, pilot house). The Coast Guard holds that propulsion machinery (the ship's engine), other machinery, small engine room equipment modules, consoles, wiring, piping, certain mechanical systems and outfitting have no bearing on a U.S.-build determination. Consequently, for oceangoing ships, U.S. shipyards typically import engines from foreign manufacturers. This is allowed because engines are deemed components that are attached to the hull rather than an integral part of the hull's structure. A ship part or component that is self-supporting and independent of the vessel's structure and does not contribute to the overall integrity of the vessel or compromise the watertight envelope of the hull can be manufactured in a foreign country. However, the part or component must be attached or joined to the vessel in a U.S. shipyard, not an overseas yard. The Coast Guard's test for \"major components\" of the hull or superstructure is based on weight; up to 1.5% of the steel weight of hull and superstructure components can be manufactured abroad. By this reasoning, the propeller, stern bulb, bulbous bow, some rudders (depending on their design), and watertight closures used in U.S.-built vessels are often imported, as long as they (in the aggregate) do not exceed the steel weight limit. The Coast Guard also permits steel products in standard forms (\"off the shelf\") to be imported with no limit on their weight, but any shaping, molding, and cutting of the steel that is custom to the design of the vessel must be performed in a U.S. shipyard. Shipyards typically seek confirmation from the Coast Guard that incorporating certain foreign-built components in construction of a vessel will not disqualify the vessel from the Jones Act trade. These \"determination letters\" written by the Coast Guard detail which and to what extent foreign components are permissible. In the Coast Guard Authorization Act of 2018 ( P.L. 115-282 , §516) Congress directed the Coast Guard to publish these letters. Shipyard unions refer to ships built in this manner as \"kit ships.\" They sued the Coast Guard in 2007, arguing that the Coast Guard's interpretation of the statute violated the Administrative Procedure Act. The U.S. District Court for the Eastern District of Pennsylvania sided with the Coast Guard, noting in part that the Coast Guard's interpretation is rooted and consistent with the Treasury Department's interpretation dating to at least the late 1800s (the Treasury Department was the agency of jurisdiction at that time), as well as U.S. Attorney General interpretations dating to the early 1900s. The shipyard unions' lawsuit was prompted by a Philadelphia shipyard's partnership with a South Korean shipbuilder, begun in 2004, to use the Korean builder's ship designs and other procurement services to build a series of Jones Act tankers. This partnership continues today and also includes container ships built in the Philadelphia shipyard. Since 2006, General Dynamics NASSCO of San Diego, another builder of Jones Act oceangoing ships, has partnered with Daewoo Shipbuilding of South Korea to procure vessel designs, engineering, and some of the materials for the commercial ships it has since built for Jones Act carriers. Importing engines and other major ship components would appear to undermine the Jones Act policy objective of a domestic shipbuilding capability independent of foreign yards. In the court case cited above, the shipyards argued that not allowing use of such foreign components would increase the cost of ships further. This would reduce orders for new ships and harm the domestic fleet. The United States is the largest cruise ship market, but most Americans board foreign-flag cruise ships. This is because CBP has determined that a cruise ship serving a U.S. port does not have to be Jones Act-compliant as long as it has visited a distant foreign port (any port outside North and Central America, Bermuda, the Bahamas, and the Virgin Islands). Thus, for example, if a cruise ship includes Aruba or Curacao in its itinerary, it does not need to be Jones Act-compliant. The reasoning is that the main objective of such a cruise itinerary is to visit such foreign ports, not to transport passengers from one U.S. port to another U.S. port. This reasoning was articulated in a 1910 Attorney General's opinion. Another significant regulatory interpretation allowing for the prevalence of foreign cruise ships at U.S. ports is a 1985 rulemaking by the U.S. Customs Service (the predecessor of CBP). In this rulemaking, Customs allowed foreign-flag cruise ships to make round trips from a U.S. port and to visit other U.S. ports as long as they also include a visit to a nearby foreign port (such as those in Canada, Mexico, or Bermuda). All passengers must continue with the cruise until the cruise terminates at the same dock at which it began. Again, the reasoning is based on the primary intent of the cruise voyage; if the main purpose of the voyage is not domestic transportation of passengers then the Jones Act is not violated. Another type of passenger vessel excursion involves visits to no other ports. The purpose of the voyage could be whale watching, recreational diving, gambling, duty-free shopping, or deep-sea fishing, for example. These are so-called \"voyages to nowhere\" since passengers do not visit any other ports besides the one at which they embark and disembark. In these cases, CBP has determined that if such vessels stay within the 3-mile zone of U.S. territorial waters they must be Jones Act-compliant since CBP considers any places within such waters as \"U.S. points.\" This interpretation is based on Treasury Decision 22275, issued in 1900. However, CBP has determined that if the vessel journeys beyond 3 miles from shore (into international waters), then it does not need to be Jones Act-compliant. This determination is based on a 1912 Attorney General opinion. But the policy regarding charter fishing boats differs from that regarding other passenger vessels. If charter fishing boats venture into international waters, they still must be Jones Act-compliant. This determination is by virtue of a 1936 ruling by the Bureau of Navigation and Steamboat Inspection (Circular Letter No. 103, June 3, 1936), and affirmed by Treasury Decision 55193(2) in 1960. Another element of CBP's interpretation of the Jones Act with respect to passenger vessels is its definition of a passenger. According to CBP, a passenger need not be a paying customer (such as a tour boat or cruise ship ticket holder); rather, the term encompasses anyone aboard a vessel who is not a member of the crew or an owner of the vessel. Thus, for example, an owner of a yacht who chooses to entertain business clients aboard his or her vessel must comply with the Jones Act. A construction company transporting construction workers to a construction site must use a Jones Act-compliant vessel. In the offshore oil market, CBP's interpretations have affected \"lightering\" (the transfer of oil offshore from an oil tanker too large to transit a harbor to a smaller vessel) and offshore supply vessels (OSVs) used to supply oil platforms. CBP has determined that if a tanker to be lightered is anchored to the seabed and within 3 nautical miles of shore (which are U.S. territorial waters), it is a \"U.S. point.\" Many lightering areas in the Gulf of Mexico are 60 to 80 miles offshore and therefore the lightering vessels can be foreign-flagged. Lightering operations in the Delaware Bay and elsewhere are within the 3-mile zone, and therefore lightering vessels operating in these areas must be Jones Act-compliant (in which case tank barges rather than ships are typically used as lighters). Regarding OSVs, two factors determine whether these vessels must be Jones Act-compliant in servicing offshore oil rigs. By virtue of the Outer Continental Shelf Lands Act of 1953 (P.L. 83-212), U.S. waters extend 200 miles offshore strictly for purposes related to the exploration, development, and production of offshore natural resources. CBP has determined that within this zone, only oil rigs attached to the seabed (anchored or submerged to) are \"U.S. points.\" Another type of oil rig is not attached to the seabed: some mobile offshore drilling units (MODUs) are semisubmerged and can hold their positions with the use of propellers. CBP had determined that MODUs not attached to the seabed are not \"U.S. points,\" and therefore foreign-flagged vessels were permitted to service these units. However, in 2008, Congress required that OSVs servicing MODUs be U.S.-owned and -crewed, but need not be U.S.-built ( P.L. 110-181 , §3525), which is the same requirement applied to U.S.-flag vessels engaged in international voyages. A second factor determining whether OSVs must be Jones Act-compliant is whether the OSV is transporting supplies or workers to the oil rig, or if the vessel is involved in installing equipment necessary for the operation of the rig. CBP defines \"vessel equipment\" as anything \"necessary and appropriate for the navigation, operation or maintenance of a vessel or for the comfort and safety of persons on board.\" Consequently, a vessel laying cable or pipeline in U.S. waters does not need to be Jones Act-compliant. Similarly, while OSVs transporting supplies and rig workers must be Jones Act-compliant (if the rig is attached to the seabed), vessels involved in installing rig equipment or conducting geophysical surveying or diving inspections can be foreign-flagged, as well as \"flotels,\" which are vessels that provide living quarters for construction workers. The distinction can be unclear. In 2017, CBP proposed that most or all activities performed by OSVs fall under the Jones Act, but after reviewing comments, the agency withdrew the proposal. Some question whether the Outer Continental Shelf Lands Act, and therefore the Jones Act, applies to offshore wind farms located beyond 3 miles from shore. Currently, wind farm developers are being guided by CBP's interpretations of the Jones Act with respect to OSVs and oil rigs. The Department of Energy has noted that the nonavailability of Jones Act-compliant \"Tower Installation Vessels\" (TIVs) can be a hindrance to offshore wind farm development, especially for installations in deeper water. In Europe, TIVs not only install the towers but also transport the equipment from shore to the offshore site. Since there are no Jones Act-compliant TIVs, U.S. wind developers either transport the equipment from foreign countries or use Jones Act-compliant vessels to transport the equipment to the site from a U.S. port alongside non-Jones Act-compliant TIVs to install the equipment. A third CBP interpretation of the Jones Act has been significant in shaping coastal maritime activity. CBP determined that if merchandise is transformed (manufactured or processed) into a new and different product at an intermediate foreign port, then the vessels transporting the original product from a U.S. port to this foreign port and transporting the transformed product from the foreign port to a U.S. port do not need to be Jones Act-compliant. For example, a Texas oil producer has shipped a gasoline product to a Bahamian storage facility where its product is blended with a different imported petroleum product to produce a final gasoline product that is shipped to New York. Foreign-flag tankers are allowed to make all of these shipments even though it could be argued that a portion of the cargo is being shipped between two U.S. points (Texas and New York). The transformation of the product into a new and different product at an intermediate foreign port distinguishes this case from the 1891 kegs-of-nails case mentioned above. This interpretation has precedent in a 1964 Customs Service ruling involving California rice being processed in the U.S. Virgin Islands (exempt from the Jones Act) before being shipped to Puerto Rico, with both shipment legs involving foreign-flag ships. Since 1920, Congress has enacted provisions that could be said to tighten Jones Act requirements, as well as provisions that exempt certain maritime activities from the requirements. In 1935, Congress forbade Jones Act-qualified vessels sold to foreign owners or registered under a foreign-flag to subsequently requalify as Jones Act-eligible (P.L. 74-191), meaning that they could never again be used in U.S. domestic trade. This provides additional protection from competition for Jones Act carriers if coastal shipping demand increases, because it can take two years to construct a new ship. In 1940, Congress expanded the Jones Act to cover towing vessels, such as river tugs that push barge tows and harbor tugs that assist larger ships, and salvage vessels operating in U.S. waters (P.L. 76-599). In 1988, Congress specified that waterborne transport of valueless material, such as dredge spoil or municipal solid waste, requires use of a Jones Act-qualified vessel ( P.L. 100-329 ). Congress has enacted numerous exemptions or exceptions to the Jones Act. A list of these legislated exemptions and exceptions can be found in the Appendix . It has waived the Jones Act's restrictions when finding that no Jones Act-qualified operator was interested in providing service in a particular market, reasoning that the waiver thus would bring no harm to the domestic maritime industry. For instance, in 1984, Congress exempted passenger travel between Puerto Rico and any other U.S. port as long as no Jones Act-qualified operator was able to provide comparable service ( P.L. 98-563 ). This exemption remains in force, allowing foreign-flag cruise ships to carry passengers between the U.S. mainland and the island. On two occasions, in 1996 ( P.L. 104-324 ) and again in 2011 ( P.L. 112-61 ), Congress has permitted certain foreign-flagged liquefied natural gas (LNG) tankers to provide domestic service because none existed in the Jones Act fleet; no ship owners have made use of these exemptions (see Table A-1 ). Congress has also enacted exemptions due to a sudden spike in demand for Jones Act-qualified vessels. To address a vessel shortage, Congress enacted an exemption for iron ore carried on the Great Lakes during the 1940s that was related to a surge in steelmaking for the war effort. It did the same for a bumper grain harvest in 1951 (see Table A-1 ). In 1996, Congress enacted an exemption for vessels participating in oil spill cleanup operations when an insufficient number of Jones Act-qualified vessels are available. Congress has enacted Jones Act waivers for two innovations in vessel designs used in foreign trade but whose cargo operations included domestic legs that technically would otherwise fall under the Jones Act. One concerned a ship designed to carry river barges on international voyages, a technology known as Lighter Aboard Ship (LASH). In 1971, Congress exempted these specific barges from the Jones Act (P.L. 92-163). The exemption is no longer relevant, as this type of shipping is not now in use. In 1965, as container ships were about to come into use internationally, Congress exempted the movement of empty containers between U.S. ports from the Jones Act (P.L. 89-194). This exemption is restricted to containers used for international shipments, thus allowing the foreign-flagged container carriers to reposition their empty equipment along U.S. coastlines. Jones Act-compliant ships are necessary for transshipment of loaded international containers. This distinction between carriage of loaded and unloaded containers has ramifications for the development of marine highways or short sea shipping routes. Transshipment of international containerized cargo by feeder ships is prevalent abroad, but the practice does not exist in the United States. The Jones Act would require such ships be U.S.-built, -crewed, and -owned. Lack of transshipment services increases demand for rail and road connections to ports, as smaller feeder container ships do not play a role in distributing international containerized cargo among U.S. ports. In addition to authorizing exemptions to the Jones Act under certain circumstances, Congress has enacted exemptions for specific vessels identified by name and identification number (a registration number with a state government, the Coast Guard, or International Maritime Organization). Typically, the legislative language does not indicate why a waiver was needed or describe the kind of vessel, its size, or its function. A search of the statutes at large under the terms \"coastwise\" and \"endorsement\" and \"certificate of documentation\" indicates that since 1989, at least 133 specific vessels have been granted Jones Act waivers by Congress in 16 separate legislative acts. These waivers typically appear in maritime-related legislation, such as a Coast Guard authorization bill. One act contains waivers for 67 vessels and another for 35 vessels. It appears in most cases that these vessels are not commercially significant—for instance, that they are not large or even moderately sized cargo or passenger vessels. Some of them are owned by nonprofit entities. One exception was the previously mentioned 2011 granting of waivers to three LNG tankers built in the United States in the late 1970s that subsequently became foreign-registered ( P.L. 112-61 ). In many cases, it appears the vessel needs a waiver because of a technicality in meeting Jones Act requirements; for example, the U.S.-citizen ownership history may be missing some records. In many cases, the statute granting the waiver places specific conditions on how the vessel can be used. As noted, the domestic shipping restrictions were waived during World War I. They were waived again in preparation for World War II (P.L. 77-507, 1942). In 1950, after the Korean War began, Congress enacted a provision allowing the executive branch to issue waivers \"in the interest of national defense\" (P.L. 81-891). This authority is still in effect, as the language did not specify that it was intended only for the conduct of that war. In 1991 and 2011, waivers were granted on national defense grounds to expedite oil shipments from the Strategic Petroleum Reserve in response to the Persian Gulf War and a conflict in Libya, respectively. In addition to military conflicts, the executive branch has waived the Jones Act for fuel resupply in the aftermath of natural disasters. This so-called \"national defense waiver\" authority has been the basis for recent waivers granted in the aftermath of major hurricanes, beginning with Hurricane Katrina in 2005 up to and including Hurricanes Harvey, Irma, and Maria in 2017 (see Table A-2 ). In 2008 ( P.L. 110-417 ), Congress inserted a role for MARAD to check on the availability of any Jones Act-qualified vessel before granting certain waivers. The lack of heavy-lift vessels in the Jones Act fleet has also prompted national defense waivers: in 2005 to allow a foreign-flag heavy-lift vessel to transport a radar system from Texas to Hawaii and in 2006 to allow an oil company to use a Chinese-flagged heavy-lift vessel to transport an oil rig from the Gulf Coast to Alaska. The national defense justification for the oil rig waiver was apparently based on addressing a fuel shortage in that region of Alaska. However, in 1992, Customs denied a waiver request to use a foreign-flag heavy-lift vessel to transport replicas of Christopher Columbus's Niña, Pinta, and Santa Maria vessels from Boston to San Francisco. A specific type of heavy-lift vessel is used in the construction of offshore oil rigs, but CBP has denied Jones Act waivers for these vessels even after Coast Guard and the Bureau of Safety and Environmental Enforcement in the Department of the Interior advised that not granting a waiver created a safety hazard for these operators. CBP has stated that the \"national defense\" justification is a high standard and that national defense waivers would not be issued for economic reasons such as commercial practicality or expediency. Consistent with this view, while CBP has issued national defense waivers in circumstances involving fuel shortages, it has not issued waivers that would merely favor domestic supply lines over offshore ones, even though one might argue the latter is a national security issue. For instance, in 1976, arguing that offshore supply lines are more vulnerable, some Members of Congress representing Gulf Coast states sought to have the Jones Act extended to the U.S. Virgin Islands. At the time, the largest refinery in North America was located in the U.S. Virgin Islands, and the refinery supplied petroleum products to the U.S. Northeast on foreign-flagged tankers. In 2014, northeast refineries reportedly contemplated seeking a Jones Act waiver to ship crude oil from Texas. These refineries import much of their crude oil. In 2018, the United States exported between 40 million and 80 million barrels of crude oil per month on foreign-flag tankers, imported about 150 million barrels per month from overseas sources on foreign-flag tankers, and shipped about 15 million barrels per month domestically on Jones Act tankers. A similar situation is occurring with liquefied natural gas (LNG): the United States has begun exporting substantial quantities by ship while continuing to import LNG by ship, but no LNG is shipped domestically. There are no LNG tankers in the Jones Act fleet, and it is unclear why shippers have not utilized the 1996 or 2011 waivers for LNG tankers mentioned above. Puerto Rico, which currently imports LNG from Trinidad and Tobago, is seeking a 10-year waiver of the Jones Act to receive bulk shipments of LNG from the U.S. mainland. Recent controversies over the Jones Act have concerned the oceangoing ship and offshore supply vessel sectors. The Jones Act also covers ships on the Great Lakes, river barges, harbor tugs, dredging vessels, and various kinds of passenger vessels. The Jones Act ship fleet, in particular, has shortcomings compared to the merchant fleet desired by the drafters of the 1920 act as they described it in the aforementioned statement of U.S. maritime policy. As of March 2018, there were 99 oceangoing ships in the Jones Act-compliant fleet, employing about 3,380 mariners. The largest category of Jones Act ships is tankers. Of the 57 tankers in the fleet, 11 carry Alaskan crude oil to refineries on the West Coast, 44 are medium-sized product tankers that mostly carry refined products along the Atlantic Coast, and 2 are chemical or asphalt tankers. The dry cargo fleet includes 24 small to medium-sized container ships, 7 ships that have ramps for carrying vehicles (known as roll on/roll off vessels), and 2 dry bulk vessels designed to carry such commodities as grain and coal in bulk form. The fleet also includes 9 relatively small general-cargo vessels supplying subsistence harbors along Alaska's coast. As Figure 1 indicates, the number of oceangoing ships in the Jones Act fleet has shrunk to less than a quarter of what it was in 1950. The ships are much larger today than they were then, but their aggregate carrying capacity (DWT) is still less than in 1950. As shown in the figure, there was a pronounced drop in the size of the fleet in the late 1950s and early 1960s. At a 1967 congressional hearing, Alan Boyd, Secretary of Transportation in the Lyndon B. Johnson Administration, testified that the U.S. merchant marine was \"too small, too old, and too unproductive,\" and stated, \"you do not revitalize an industry by flooding it with Federal dollars and imprisoning it within a wall of protection.\" The Lyndon B. Johnson Administration appears to be the only Administration in the modern era that has called for the repeal of the Jones Act. While domestic ships are carrying fewer tons of freight today than they did in the 1950s, their most direct competitors, railroads and pipelines, are carrying more. Domestic ships have lost market share to land modes even though ships have economic advantages. Ocean carriers do not need to acquire and maintain rights-of-way like railroads and pipelines. They can move much more cargo per trip and per gallon of fuel than trucks and railroads. Although ships are slower than truck and rail modes, many shippers are willing to sacrifice transit time for substantially lower costs, as long as delivery schedules are reliable. The Jones Act fleet is almost entirely engaged in domestic trade routes where overland modes are not an option, serving Alaska, Hawaii, and Puerto Rico. In other words, it operates in markets where shippers have little alternative. Although the Jones Act can be said to have preserved a nucleus of a U.S. maritime industry, it has not succeeded in meeting the stated policy goal of sustaining a growing merchant marine that carries an increasing proportion of the nation's commerce. In the Merchant Marine Act of 1936 (P.L. 74-835, Section 101), Congress amended the policy goals articulated in the 1920 Act by adding the phrase \"providing shipping service on all routes essential for maintaining the flow [of commerce] at all times,\" and also added the word \"safest\" to the policy goal of having the best equipped and most suitable types of vessels. At present, the Jones Act fleet does not appear to achieve either of these goals One can also question whether the policy objective of having \"the best equipped and most suitable types of vessels\" has been achieved. Not all ship designs are represented in the Jones Act fleet. \"Project cargo\" or \"heavy-lift\" vessels are often used to carry oversized pieces of equipment such as smaller vessels, ship engines and modules, wind turbine parts, and power generation equipment. They would be useful for moving dredging fleets to project sites. There have not been any such vessels in the Jones Act fleet in recent decades. The Department of Defense has used \"national defense\" waivers of the Jones Act (see below) to move radar systems and newly built vessels on foreign-flag heavy-lift vessels. This type of cargo typically does not generate regular shipments in any one region; thus these ships would likely need to extend their market reach beyond the United States to include the international market. However, the higher cost structure of Jones Act operators is an obstacle to competing for international shipments. Two dry bulk ships are in the oceangoing Jones Act fleet, and they appear to be mostly inactive, possibly because they are nearly 40 years old. This is twice the economic life of a ship in the global fleet (where ships are typically sent for scrapping between 15 and 20 years of age). The sole Jones Act-qualified chemical tanker was built in 1968. No LNG tankers are in the Jones Act fleet despite new domestic markets as a result of the shale gas boom. The lack of sufficient Jones Act-qualified tanker capacity to move booming shale oil production coastwise added to pressure for lifting the crude oil export ban in 2015. In response to the high cost of U.S.-built and U.S.-crewed ships, the U.S. market has developed a unique vessel design, a seagoing barge called an articulated tug barge (ATB). MARAD estimates that over 150 ATBs are operating in the Jones Act trades. While ATBs are more capable than flatwater barges in handling sea swells (with a hinge between the tug and barge), they are still less capable than ships in handling heavy sea states. They are less reliable and less efficient over longer voyages because they are slower and smaller than tanker ships, and the notch between the barge and tug creates more resistance through the water than a single hull. Since ATBs sail closer to the coasts, they could pose a higher risk of grounding and provide less time to prevent spilled oil from reaching shorelines. ATB crews are not qualified to sail sealift ships. ATBs now carry more cargo (predominantly oil) on coastal voyages than does the tanker fleet (see Figure 2 ). The El Faro was a Jones Act general cargo ship that sank in a hurricane in 2015. Because the ship was built in 1975, it was required to have only open lifeboats rather than the closed lifeboats with auto launchers required on ships built since 1983. After its sinking, the Coast Guard forbade its sister ship of the same age from sailing, and in congressional testimony noted concern about the condition of the rest of the U.S.-flag fleet: We looked a little further beyond this particular incident, caused us to look at other vessels in the fleet and did cause us concern about their condition.… And the findings indicate that it is not unique to the El Faro . We have other ships out there that are in substandard condition.… You know, some of our fleet—our fleet is almost three times older than the average fleet sailing around the world today. Just like your old car, those are the ones likely to breakdown. Those are the (inaudible) one—the ones that are more difficult to maintain and may not start when I go out, turn the key. Substantiating the Coast Guard's concern, in February 2019, the crew of the 46 year-old Jones Act containership Matsonia found a crack in the hull when looking for the source of an oil sheen in Oakland harbor. The Jones Act fleet today is relatively young compared to its prior composition because of shipbuilding undertaken after the large increase in shale oil production and before the lifting of the oil export ban. In part, new ships were needed to comply with tighter emissions requirements in the newly created North American emission control area. Today, just over one-third of the Jones Act oceangoing fleet (35 ships) is 21 years old or older, down from two-thirds (64 ships) in 2007. Jones Act-compliant vessels operating in the Great Lakes are considerably older than the oceangoing fleet. The Great Lakes fleet consists of 33 dry bulk ships and several large barges carrying mostly iron ore, limestone, and coal used in steelmaking, and cement. The U.S. fleet of 1,000-foot freighters, the largest ships operating on the Great Lakes, was built between 1972 and 1981. The second-largest class of ships, around 700 feet in length, is older, with some of the vessels having originally been built in the 1940s or 1950s; a number of these were rebuilt in the 1970s. According to the U.S. Lake Carriers Association, ships operating in freshwater, such as the Great Lakes, can have longer lives than oceangoing vessels. Jones Act-compliant Great Lakes ships are much narrower for their length compared to the global dry bulk fleet because of the dimensions of the Soo Locks in Michigan. Domestic tonnage on the Great Lakes has declined steadily since the 1950s, and is now about half what it was then. The Canadian Great Lakes fleet illustrates the effect that vessel import policy can have on a domestic fleet. Canada's fleet was of similar age as the Jones Act fleet, with the youngest ship having been built in 1985, before Canada imposed a 25% tariff on newly constructed imported ships. While this import tariff was in effect, no new ships were added to the Canadian fleet. In 2010, Canada repealed the import tariff, and since then over 35 new dry bulk ships have been constructed in other countries specifically for service on the Great Lakes. These vessels cannot carry cargo between U.S. points. Thousands of tugs and barges carry mostly dry and liquid bulk commodities on the nation's inland rivers. The fleet includes several thousand tugs or pushboats that push the barge tows, about 20,000 dry cargo barges, and several thousand tank barges that carry liquid bulk cargoes. Tonnage is dominated by the export of corn and soybeans and domestic movement of coal. Since 1990, overall tonnage on the system has been flat or declining slightly. One of the two leading manufacturers of river barges ceased operation in April 2018 in response to the fall-off in demand for coal deliveries by barge. The Dredging Act of 1906 (P.L. 59-185, 34 Stat. 204) requires that vessels engaged in dredging in U.S. waters be U.S.-built, -operated, and -crewed. The 1906 act was prompted by dredging work then being carried out in Galveston Bay, TX, after a calamitous 1900 hurricane. It required all dredge vessels henceforth to be U.S.-built. In 1988, Congress amended the Jones Act to define \"merchandise\" transported domestically by vessel to also include any valueless material ( P.L. 100-329 ). This change effectively required that dredge spoil be transported in Jones Act-qualified vessels. According to one study, the ban on foreign-built dredgers and foreign operators raises the cost of dredging U.S. harbors substantially. According to U.S. Army Corps of Engineers figures, while federal spending on navigation dredging has increased over the last decade by several hundred million dollars per year, the spending increase has not resulted in a larger volume of material being dredged from U.S. harbors. In addition to a limited supply of dredging vessels, increases in the cost of fuel, steel, and labor, as well as more stringent environmental requirements, are factors that may be causing cost increases. The U.S. privately owned fleet is much older and smaller, both in terms of the capacity of individual vessels and the total size of the fleet, compared to the four leading European dredging firms that perform work worldwide (except in U.S. waters). Each of the four European firms has a fleet of hopper dredges, the preferred type for dredging coastal harbors, whose total capacity is around three to four times the capacity of the entire U.S. hopper fleet. Three-quarters of the U.S. privately owned hopper dredge fleet is over 20 years of age, while about three-quarters of the European fleet is under 20 years. When the Army Corps bids harbor work requiring a hopper dredge, one of the four U.S. firms is the sole bidder over a third of the time. When the Army Corps schedules dredging projects for an upcoming year, it has periods when an insufficient number of dredges can perform the work. In addition to the dredge vessel, dredging projects involve a number of support vessels. One study found that mobilization and demobilization of the equipment in the U.S. market can amount to more than one-third of total project costs. Foreign firms use heavy-lift vessels to transport their dredge fleets to the next project. As indicated earlier, no such vessels are available in the Jones Act fleet. The size of the OSV fleet can change significantly with changes in the oil market. In 2017, the offshore supply vessel fleet consisted of about 1,800 vessels, working mainly in the Gulf of Mexico. Over the last decade, annual construction averaged 32 vessels, but ranged between 4 and 53 vessels. Foreign-built vessels are relied upon for construction of rigs in deeper waters. These vessels need dynamic positioning propulsion systems to keep the vessel in place while performing the construction work, as the waters are too deep for anchoring. As mentioned above, similar vessels are lacking in the Jones Act fleet for installing wind towers in deeper waters. As with the commercial aspirations stated in the maritime policy of the Jones Act, there are also perceived shortcomings with respect to the domestic fleet's ability to serve as a naval auxiliary in times of war or national emergency. Since 1920, Congress has enacted programs that designate other fleets for sealift support, but the merchant mariners crewing Jones Act ships are still identified as contributing to the pool of mariners available to crew the sealift fleet. The shrinking size of the U.S. mariner pool puts in doubt its ability to sufficiently crew a reserve sealift fleet, as discussed further below. In 2014 ( P.L. 113-76 ), Congress directed the Department of Transportation and the Department of Defense to develop a national sealift strategy. This has yet to be issued. The crews of Jones Act oceangoing ships are arguably the most salient and immediate element that could be called upon to support military sealift. Jones Act mariners typically have six months of shore leave per year, and those mariners on shore leave would be expected to crew a reserve fleet of government-owned cargo ships kept on standby for military sealift purposes (the Ready Reserve Force, or RRF). The Jones Act crew of oceangoing ships consists of about 3,380 merchant mariners, which is about 29% of the total mariner pool of 11,678 mariners that MARAD estimates would be required to crew the government-owned reserve fleet while still concurrently being able to operate the commercial fleet. The remaining pool of mariners would come from (1) the U.S.-flag privately owned international fleet enrolled in the Maritime Security Program (MSP) consisting of 60 ships and 2,386 commercial mariners, and (2) the Military Sealift Command (MSC) fleet of government-owned ships consisting of about 120 ships and 5,576 mariners. While MARAD estimates that there is a sufficient commercial mariner pool to crew the reserve sealift fleet during a surge lasting up to 180 days, a more prolonged sealift effort would start to entail crew rotations, and MARAD estimates a shortfall of about 1,800 mariners in that scenario. That the mariner pool is barely sufficient to sustain an immediate surge and is insufficient for a longer sealift effort has been a consistent finding of sealift officials for decades, even in previous periods when the mariner pool was much larger than it is today. For instance, this was the same finding by the Department of Defense Transportation Command (TRANSCOM) in 2004, when the RRF consisted of 59 ships and the mariner pool was 16,900. And in 1991, when the RRF consisted of 96 ships and the mariner pool was 25,000 (more than twice the size that it is today), the then MARAD Administrator testified that the mariner pool was barely sufficient to crew the reserve sealift fleet. While the Jones Act's statement of maritime policy indicated a desire for a commercial fleet that also could provide sealift in times of war, since then three other fleets of ships have been established for purposes of military sealift: the RRF, MSC, and MSP. These ships are predominantly foreign-built. The RRF, a concept that originates in a 1954 act of Congress (P.L. 83-608), today consists of 46 ships that can sail upon either 5 or 10 days' notice and are on standby with a skeleton crew of about 600 commercial mariners (13 per ship), but would require an additional 1,200 mariners to sustain its operation once activated. The MSC fleet is controlled by TRANSCOM and has a subset of about 50 ships that carry military cargoes in port-to-port voyages similar to those undertaken by commercial ships. MSC ships are mostly crewed by civilian mariners who are federal employees. The MSP ships, a fleet established by Congress in 1996 ( P.L. 104-239 ), receive an operating subsidy of about $5 million per vessel per year to cover the additional cost of American crews and rely heavily on government cargoes (military and food aid) that pursuant to \"cargo preference\" law are reserved for them. As per long-standing agreements between MARAD, acting as advocate for the U.S. maritime industry, and the Department of Defense, the military is to utilize MSP ships and exhaust that capacity before it utilizes MSC ship capacity. While Jones Act operators are required to purchase more costly U.S.-built ships, the military sealift fleet is largely composed of more economical foreign-built ships. Jones Act operators are competing in the commercial marketplace while the sealift fleet is not. Instead of relying on the Jones Act commercial fleet to provide oceangoing shipbuilding capability, the sealift fleet could be required to be built domestically. The higher cost of the domestically built sealift fleet would be shared nationally, as is the case with other defense assets. Lower-cost coastwise ships would be more price-competitive with railroads, pipelines, and ATBs, thereby enlarging the mariner pool available for sealift support and increasing repair and maintenance work for U.S. shipyards. The sealift ships could also be designed to military specifications rather than be in conflict with commercial needs (see below). The military seeks cargo ships with flexible capabilities: ships not so large that they could face draft restrictions in some overseas harbors, ships with ramps or onboard cranes so that they can still unload cargo at underdeveloped or damaged ports, and ships that can carry a wide variety of cargo types and sizes. The majority of the military sealift fleet consists of product tankers for carrying fuel and roll-on/roll-off (Ro/Ro) ships that have ramps for moving tanks, trucks, and helicopters. It also consists of container ships used for moving ammunition and other supplies. The military's preference for versatility is in conflict with the commercial fleet's trend toward more specialized and larger ships, a trend driven by the need for ships with the lowest operating cost. General cargo and break-bulk ships capable of carrying a wide variety of cargo types and sizes and that were typically equipped with their own onboard cranes have been largely replaced by container ships without onboard cranes. Thus, commercial mariners may no longer have experience operating cargo cranes, as might be required in foreign ports where shore-based cranes are out of service or are not available. The largest container ships require 45 to 50 feet of water below the waterline, far more depth than many ports can provide. Ro/Ro ships have been replaced by \"pure car carriers\" that maximize the number of passenger cars they can carry, but may be less useful for military purposes. Cost pressures have induced commercial carriers to install engines that minimize fuel costs by operating at lower speeds and cannot achieve the higher speeds desired for military sealift ships. In addition, more stringent sulfur emission regulations recently enacted have prompted ship operators to convert to LNG-fueled engines, a fuel not globally available, or to install scrubbers, equipment that takes up cargo space and has no military utility. Licensing of engine crews is specific to engine type. Thus, a growing disparity exists between the military's ideal vessel designs and those of commercial carriers, as well as in the skill sets of the crew. Besides the deep-sea ship crews, another purported Jones Act contribution to military sealift is preservation of a shipyard industrial base with the knowledge and skills to build and repair ships. The Merchant Marine Act of 1970 (P.L. 91-469) added as an additional objective of U.S. maritime policy to have a merchant marine \"supplemented by efficient facilities for building and repairing vessels.\" U.S. shipyards typically build only two or three oceangoing ships per year, and none for export, so they do not achieve economies of scale. There may be gaps of several years in between orders for container ships. In recent years, the demand has been sufficient to sustain one shipyard that builds only commercial ships. However, this yard stated that its employment had fallen below 100 people and that it had no vessels under construction or on order as of March 31, 2019. The other shipyard that builds commercial ships also relies heavily on Navy orders. A larger number of shipyards build smaller vessels such as tour boats, ferries, tugs, barges, and offshore supply vessels. Around 1,000 barges are built in a typical year. These vessels also fall under the Jones Act domestic build requirement and are rarely built for export. However, the shipyards building smaller vessels lack dry docks of sufficient size to repair large ships. The government-owned sealift fleet is 44 years old on average, and many of the vessels are in need of repair. According to the Maritime Administrator, there is an insufficient number of large dry docks to service the sealift fleet, delaying their readiness to sail. Some of the reserve fleet has failed Coast Guard safety inspection, and some ships have too much steel rusted from their hulls to be seaworthy. For example, while sailing to a readiness exercise, a hole was found in the hull of one of the ships. According to TRANSCOM, the Navy's plan to recapitalize the reserve fleet includes building new vessels in domestic shipyards, repairing ships in the current fleet to extend their service life out to 60 years, and purchasing used, foreign-built ships. The Navy has found that repairing the vessels has thus far been three times more expensive and has taken twice as long as originally projected. It therefore is contemplating the need to accelerate the purchase of used, foreign-built ships because building new ships in U.S. yards is estimated to be 26 times more expensive and thus not affordable. In addition to the Jones Act, the Tariff Act of 1930 is intended to support U.S. shipyards by assessing a 50% duty on the price of any nonemergency repairs on U.S. flag ships done in foreign shipyards. A 2011 MARAD study found that many U.S.-flag international trading ships have repairs performed in foreign yards because, even with the 50% duty, the total cost is less than if the repairs were performed in a domestic shipyard. A U.S.-flag operator confirms that this is still the case in 2018.", "summary": "The Jones Act, which refers to Section 27 of the Merchant Marine Act of 1920 (P.L. 66-261), requires that vessels transporting cargo from one U.S. point to another U.S. point be U.S.-built, and owned and crewed by U.S. citizens. The act provides a significant degree of protection for U.S. shipyards, domestic carriers, and American merchant sailors. It is a subject of debate because some experts point out that it leads to high domestic ocean shipping costs and constrains the availability of ships for domestic use. The Jones Act has come into prominence amid debates over Puerto Rico's economic challenges and recovery from Hurricane Maria in 2017; in the investigation into the sinking of the ship El Faro with 33 fatalities during a hurricane in 2015; and in discussions about domestic transportation of oil and natural gas. The law's effectiveness in achieving national security goals has also been the subject of attention in conjunction with a congressional directive that the Administration develop a national maritime strategy, including strategies to increase the use of short sea shipping and enhance U.S. shipbuilding capability. The Jones Act of 1920 was not the first law requiring that vessels transporting cargo domestically be U.S.-built, owned, and crewed. It restated a long-standing restriction that was temporarily suspended during World War I. Since 1920, Congress has enacted provisions that could be said to tighten Jones Act requirements as well as provisions that exempt certain maritime activity from the requirements. In 1935, Congress forbade Jones Act-qualified vessels that were sold to foreign owners or registered under a foreign flag to subsequently requalify as Jones Act-eligible (P.L. 74-191). This provides additional protection from competition for Jones Act carriers if coastal shipping demand increases, because it can take around two years to construct a new ship. In 1940, Congress expanded the Jones Act to include towing and salvage vessels (P.L. 76-599). In 1988, Congress specified that waterborne transport of valueless material required use of a Jones Act-qualified vessel, such that transport of dredge spoil or municipal waste would fall under the law (P.L. 100-329). Generally, dredging and towing vessels, as well as Great Lakes ships, have occasioned less debate about the Jones Act than oceangoing ships and offshore supply vessels. Congress has enacted numerous exemptions or exceptions to the Jones Act. In some cases, Congress has enacted an exemption if there are no Jones Act-qualified carriers interested in providing service in a particular market (for example, passenger travel to and from Puerto Rico). Congress has allowed waivers of the Jones Act for national defense reasons, which most often have been executed to speed fuel deliveries to a region after a natural disaster disrupted normal supply lines. Regulatory interpretations of the Jones Act have been significant in defining what constitutes a \"U.S.-built\" vessel, what constitutes \"transportation\" between two U.S. points, and what are \"U.S. points.\" The Coast Guard has determined that a U.S.-built vessel can be assembled with major foreign components such as engines, propellers, and stern and bow sections. This interpretation has been consistent from the late 1800s. Customs and Border Protection (CBP) has determined that cruise ship voyages that involve visits to foreign ports in addition to a domestic port are not domestic transportation and therefore not subject to the Jones Act. This interpretation also dates to the late 1800s. CBP's interpretations of what constitutes domestic transportation and U.S. points are significant to the offshore oil industry, as some of the vessels supporting that industry must be Jones Act-compliant while others need not be. By long-standing agreement, the military is to utilize U.S.-flag commercial ships for sealift before it utilizes government-owned vessels in its reserve fleet. Jones Act mariners are expected to crew sealift ships when needed, and thus the decades-long shrinkage of the oceangoing Jones Act fleet and mariner pool has been raised as a concern. The Department of Defense is planning to buy more used foreign-built ships for sealift rather than building them in the United States for cost reasons. It also has found that repairing its current fleet in U.S. shipyards is three times more expensive and has taken twice as long as estimated. Much of the commercial fleet is relatively old, raising safety concerns. Some useful types of ships are missing from the Jones Act-qualified fleet, such as heavy-lift vessels, liquefied natural gas (LNG) tankers, and deepwater offshore construction vessels. Both situations appear to some observers to be contrary to the policy goal of the Jones Act, which is to \"have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in times of war or national emergency.\"", "document_type": "crs"}
{"report": "The Soldiers' and Sailors' Civil Relief Act of 1940 (SSCRA) provided civil protections and rights to individuals based on their service in the U.S. Armed Forces. Congress enacted the Servicemembers Civil Relief Act (SCRA) in 2003 in response to the increased deployment of Reserve and National Guard military and as a modernization and restatement of the protections and rights previously available to servicemembers under the SSCRA. The SCRA has been amended since its initial passage, and Congress continues to consider amendments from time to time. Most recently, Congress has enacted amendments to extend certain benefits to the spouses of servicemembers. Congress has long recognized the need for protective legislation for servicemembers whose service to the nation compromises their ability to meet obligations and protect their legal interests. For example, Congress tolled all judicial actions during the Civil War, civil and criminal, for persons who \"by reason of resistance to the execution of the laws of the United States, or the interruption of the ordinary course of judicial proceedings,\" were beyond the reach of legal process. During World War I, Congress passed the Soldiers' and Sailors' Civil Relief Act of 1918, which, unlike many state laws of the Civil War era, did not create a moratorium on legal actions against servicemembers, but instead directed trial courts to apply principles of equity to determine the appropriate action to take whenever a servicemember's rights were implicated in a controversy. During World War II, Congress essentially reenacted the expired 1918 statute as the Soldiers' and Sailors' Civil Relief Act of 1940, and then amended it substantially in 1942 to take into account the new economic and legal landscape that had developed between the wars. Congress enacted amendments to the SSCRA on several occasions during subsequent conflicts, including in 2002, when the benefits of the SSCRA were extended to certain members of the National Guard. The SCRA is an exercise of Congress's power to raise and support armies and to declare war. The purpose of the act is to provide for, strengthen, and expedite the national defense by protecting servicemembers, enabling them to \"devote their entire energy to the defense needs of the Nation.\" The SCRA protects servicemembers by temporarily suspending certain judicial and administrative proceedings and transactions that may adversely affect their legal rights during military service. The SCRA does not provide forgiveness of all debts or the extinguishment of contractual obligations on behalf of active-duty servicemembers, nor grant absolute immunity from civil lawsuits. Instead, the SCRA provides for the suspension of claims and protection from default judgments against servicemembers. In this way, it seeks to balance the interests of servicemembers and their creditors, spreading the burden of national military service to a broader portion of the citizenry. Courts are to construe the SCRA liberally in favor of servicemembers, but retain discretion to deny relief in certain cases. Many of the SCRA provisions are especially beneficial for Reservists activated to respond to a national crisis, but some provisions are also useful for career military personnel. One measure that affects many who are called to active duty is the cap on interest at an annual rate of 6% on debts incurred prior to a person's entry into active-duty military service. Other measures protect military families from being evicted from rental or mortgaged property ; from cancellation of life insurance ; from taxation in multiple jurisdictions ; from foreclosure of property to pay taxes that are due ; and from losing certain rights to public land. This report provides a section-by-section summary of the SCRA. For the purposes of the SCRA, the following definitions apply: 'Servicemember' —Persons covered by the SCRA include members of the \"uniformed services\" found in 10 U.S.C. § 101(a)(5), which include the Army, Navy, Air Force, Marine Corps, Coast Guard, and the commissioned corps of the National Oceanic and Atmospheric Administration and the Public Health Service. 'Military Service' —\"Military service\" includes \"active duty\" as defined in 10 U.S.C. § 101(d)(1); National Guard service as service under a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days under 32 U.S.C. § 502(f) for purposes of responding to a national emergency declared by the President and supported by federal funds; for officers of the Public Health Service or the National Oceanic and Atmospheric Administration, \"active service\" (not further defined); and any period during which a servicemember is absent from duty on account of sickness, wounds, leave, or other lawful case. \"Active duty\" for armed services is defined in 10 U.S.C. § 101(d)(1) as \"full-time duty in the active military service of the United States ... [including] full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned.\" \"Active military service\" is not further defined in Section 101 of Title 10, U.S. Code , although \"active service\" is given the meaning \"service on active duty or full-time National Guard duty,\" in 10 U.S.C. § 101(d)(3). Under the SSCRA, the definition of \"military service\" included language referring to \"periods of training or education under the supervision of the United States preliminary to induction into military service.\" Under the SCRA, persons on active duty and attending a service school are covered, while persons attending training prior to entering active duty, such as officer candidates, may not be covered. It is unclear, for example, whether \"active military service\" under 10 U.S.C. § 101(d) covers training as a member of the Reserve Officer Training Corps or attendance at a military academy. The SCRA does not cover servicemembers who are absent without leave (AWOL). It apparently does not protect individuals who are in a delayed entry status. Nor does it cover personnel entered on the temporary disability retirement list (TDRL). It does not cover civilian contractor employees who are deployed to serve alongside the Armed Forces. 'Period of military service' —A servicemember's \"period of military service\" begins when she enters military service and ends on the date of release from military service or upon death during military service. 'Dependent' —\"Dependent\" is defined as a servicemember's spouse or child (as defined for purposes of veterans' benefits, in 38 U.S.C. § 101 ), or another individual for whom the servicemember provided more than one-half of the support in the 180 days prior to an application for relief under the act. This language appears to codify courts' treatment of the term \"dependent\" as relating to financial dependency rather than strict familial relationships. 'Court' —The term \"court\" includes federal and state courts and administrative agencies, whether or not a court or agency of record. 'State' —\"State\" includes commonwealth, territory, or possession of the United States and the District of Columbia. 'Secretary Concerned' —With respect to a member of the Armed Forces, \"secretary concerned\" refers to the meaning in 10 U.S.C. § 101(a)(9) with respect to commissioned officers of the Public Health Service, the Secretary of Health and Human Services; and with respect to commissioned officers of the National Oceanic and Atmospheric Administration, the Secretary of Commerce. 'Motor Vehicle' —\"Motor vehicle\" is a vehicle driven or drawn by mechanical power and manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line (as defined in 49 U.S.C. § 30102(a)(7)). 'Judgment' —\"Judgment\" includes any judgment, decree, order, or ruling, final or temporary. The SCRA applies everywhere in the United States, including the District of Columbia, and in any territory \"subject to the jurisdiction of\" the United States. It applies to any civil judicial or administrative proceeding in any court or agency in any jurisdiction subject to the act; however, it does not apply to criminal proceedings. The SCRA extends protection to persons who share a debt with one or more covered servicemembers or have secondary liability as a \"surety, guarantor, endorser, accommodation maker, co-maker, or other person who is or may be primarily or secondarily subject to the obligation or liability\" at issue. If the SCRA provisions are invoked as to the servicemember, the court has discretion to grant a stay, postponement, or suspension of the proceedings against such persons, or to set aside or vacate a judgment. Whether a court grants such relief appears to be influenced by equitable considerations, including whether the servicemember is able to appear in court, whether the servicemember's presence is necessary for the defense, and whether an unjust forfeiture could otherwise result. If the servicemember is only nominally a party to the suit, as in cases of negligence where the insurance company might be considered the \"true defendant,\" the modern trend is to deny a stay. Courts do not have the discretion to grant a stay to a co-debtor if the servicemember has not been granted a stay. The act added the term \"co-maker\" to the list of persons who may be entitled to a stay in an action that has been stayed with respect to a servicemember. This effectively codifies courts' interpretations of the previous version of the SCRA. Bail bondsmen who are unable to procure the appearance of the principal due to that person's active-duty service receive protection under the act. In such a case, the court hearing the charge may not enforce the bond during the period of military service of the accused, and has the discretion to return the bail in its entirety to the bail bondsman in the interest of equity and justice. While some courts have interpreted this subsection to allow for no discretion, others have required sureties to make a further showing that the appearance of the principal was in fact prevented due to military service and that the surety made an effort to secure the appearance of the principal in court. Persons who are primarily or secondarily liable on the obligation of a person in military service may waive their rights under the SCRA, but such a waiver must be executed in a separate instrument from that which creates the obligation. If the individual executes the waiver and then enters active military service, the waiver as applied to the individual, or to the dependents of the person, is invalidated. In the event that the waiver is executed after the person receives orders to active duty, but before entering active service, the waiver remains valid. The SCRA protects citizens of the United States who serve in the Armed Forces of allies of the United States in the prosecution of a war or military action, as long as such service is similar to the service in the U.S. Armed Forces. Military authorities are required to provide servicemembers with written information describing their rights and benefits under the SCRA. Military authorities must provide servicemembers with pertinent information on rights and protections available under the SCRA during initial orientation or, in the case of reserve servicemembers, during initial orientation and when mobilized. Additionally, military authorities may provide pertinent information to the adult dependents of servicemembers on the rights and protections available to the servicemembers and dependents. Benefits under Titles I, II, and III of the SCRA are applicable to servicemembers during the period of time between the date they receive their induction or activation orders and the date they report for active duty. The coverage ends in the event the orders to active duty are revoked. Servicemembers may waive some of the benefits of the SCRA by agreeing to modify or terminate a contract, lease or bailment, or an obligation secured by a mortgage, trust, deed, lien, or other security in the nature of a mortgage. In order for the waiver to be effective, it must be executed during or after the servicemember's period of active military service. The written agreement must specify the legal instrument to which the waiver applies and, if the servicemember is not a party to that instrument, the identity of the servicemember concerned. This section extends the protections to servicemembers covered under Section 106 of the act (reservists ordered into active duty and persons ordered to report for induction). Congress amended the SCRA in 2004 to include two additional requirements for a waiver to be effective. The first requirement is that it must be executed separately from the legal instrument to which it applies. The second is that it must be printed in at least 12-point type. The SCRA protects servicemembers from any penalty imposed solely due to their invocation of rights. In other words, a lender cannot revoke a covered person's credit card or exercise foreclosure rights because the servicemember requests that the rate of interest be capped at 6% pursuant to the SCRA. The SCRA provides that no stay, postponement, or suspension of any tax, fine, penalty, insurance premium, or other civil obligation or liability applied for, or received by, a person in military service can be the sole basis for any of the following: 1. a determination by a lender (or other person) that the servicemember is unable to pay the civil obligation or liability; 2. a decision by a creditor to deny or to revoke credit; to change the terms of an existing credit arrangement; or to refuse to grant credit in substantially the amount, or on substantially the terms, requested; 3. an adverse creditworthiness report by, or to, a consumer credit information enterprise; 4. an insurer's refusal to sell insurance coverage; 5. an annotation by the creditor or a credit reporting agency to reference the servicemember's reserve or National Guard military status on her credit report; or 6. a change in the terms offered or conditions required for issuance of insurance. Creditors may, however, take adverse action against a servicemember who fails to comply with obligations after they are adjusted by reason of the act. The act does not appear to preclude insurers or creditors from offering different terms or conditions, denying credit, or taking other adverse actions based solely on the servicemember's status in anticipation that the servicemember might later invoke a right under the act. Legal representatives, such as attorneys or persons possessing a power of attorney, may assert the benefits of the act when acting on the servicemember's behalf. Sections 201 through 208 describe the general relief available in most kinds of court actions. They serve to suspend civil liabilities of military personnel and preserve causes of action either for or against them. In a civil lawsuit, the failure of the defendant to appear in court may result in the award of a default judgment on behalf of the plaintiff. The SCRA protects servicemembers from default judgments in civil actions when they are unable to appear in court due to military service. An amendment to the act in 2008 added language clarifying that civil lawsuits include child custody proceedings. Before a court can grant a default judgment, a plaintiff must file an affidavit stating that the defendant is not on active duty in military service showing necessary facts to support the affidavit or that the plaintiff was unable to determine whether or not the defendant is in military service. A false affidavit is punishable by imprisonment for up to one year, a fine of up to $1,000, or both. The court, before entering a default judgment, must also appoint an attorney to represent the person on active duty in order to protect her legal rights and interests. However, if the attorney appointed to the case cannot locate the servicemember, actions by the attorney do not waive any defenses or otherwise bind the servicemember. Additionally, if the court is unable to determine if a defendant is in military service, the court may require a bond which may later be used to indemnify the defendant if it is determined that she was in military service and the judgment against the defendant is set aside or vacated in part. Moreover, if a court enters a default judgment against a servicemember, the court may set aside its judgment if the servicemember files a motion within 60 days after leaving active military service and can demonstrate that military service prejudiced her availability to appear in court and that there are meritorious or legal defenses to the suit. This section does not provide a means to challenge judgments resulting from cases in which the servicemember made an appearance before the court. Some courts have found that a communication to the court regarding the servicemember's military status, and the resulting applicability of the SCRA to the suit, constitutes an appearance and bars asserting certain defenses and negates the right to petition to have the judgment overturned. An informal communication, such as a letter or a telegram to the court asking for protection under the SCRA should not be counted as an appearance, but some courts have found that a letter from a legal assistance attorney constitutes an appearance, waiving the servicemember's protection against a default judgment. An appearance by defendant's counsel may also waive protection, unless the counsel was appointed pursuant to this section. Subsection (h) contains a provision to protect the rights of a bona fide purchaser by stating that vacating, setting aside, or reversing any judgment under the SCRA will not impair any right or title acquired by any bona fide purchaser for value under the judgment. Therefore, it may be impossible to recover property that had been attached to satisfy a default judgment, although the servicemember would have the right to damages for the value of the property. A court may stay further proceedings in civil litigation, including any child custody proceeding, where the servicemember's ability to participate in the litigation, as either the plaintiff or the defendant, is materially affected by absence due to military service. It applies to servicemembers who are in military service or within 90 days after termination or release from military service. The court must grant a stay of at least 90 days upon receipt of a qualifying application by the servicemember. The court may also grant a stay with respect to co-defendants who are not themselves protected under the SCRA. In an application for a stay under this section, the servicemember must set forth facts stating the manner in which current military duty requirements materially affect her ability to appear, and state a date when she will be able to appear. Additionally, the servicemember must submit a letter from her commanding officer certifying that leave is not authorized to attend proceedings at that time. While a stay is considered under the SCRA as a reasonable imposition upon an individual citizen on behalf of those discharging their obligations to the common defense, it is not available to shield wrongdoing or lack of diligence or to postpone relief indefinitely, or to be used to stay proceedings in matters where the interests or safety of the general public may be at stake. Courts may deny a stay in cases involving purely legal issues or where the servicemember is not the true party in interest or in which the presence of the individual is not essential. A request for a stay under this section does not constitute an appearance for jurisdictional purposes or a waiver of any substantive or procedural defense. Therefore, a servicemember may apply for relief without waiving the right, for example, to assert that the court has no jurisdiction in the case. Moreover, additional stays may be granted based on continuing material effect of military duty. If additional stays are denied, the court must appoint counsel to represent the servicemember. A servicemember who is unsuccessful in securing a stay under this section is precluded from seeking the protections against default judgments granted under Section 201. This section is inapplicable to Section 301 (protection from eviction or distress). Whenever an action is stayed by the court pursuant to the SCRA, penalties that would otherwise accumulate against the person for failing to carry out the terms of a contract cannot be imposed for the period the stay remains in effect. Even without a stay, courts have the discretion to reduce or waive any fines or penalties imposed on a servicemember for failure to carry out the terms of a contract, but only if the servicemember's ability to perform those obligations was impaired by military service. This provision would cover penalties such as early termination fees or fines for late payments. If a servicemember is materially affected by reason of service from complying with a court judgment or order, the court may, on its own motion, and must, on the application of the servicemember, stay the execution of any judgment or order against the servicemember and vacate or stay an attachment or a garnishment of property, money, or debts in the possession of the person on active duty for actions or proceedings commenced against the servicemember. This section applies to actions brought against the servicemember before or during the period of military service or within 90 days after termination of service. Stays granted by courts under the SCRA can remain in effect for the entire period of a servicemember's military service plus 90 days, or any part thereof. As a practical matter, however, courts do not look favorably on protracted stays, and expect most military members to make themselves available to participate in proceedings within a reasonable period of time, especially during peacetime if the servicemember is not stationed abroad. With the court's approval, suits against any co-defendants not in military service may proceed even if the suit has been stayed with respect to the person in the military. This section does not apply to Sections 202 (stays for actions for which the defendant has notice) and 701 (anticipatory relief). These sections contain their own rules for determining the maximum length of a stay. This section tolls the time period applicable for bringing any action by a covered servicemember for an amount of time equal to the person's period of military service. There is no discretion for the court to deny the tolling of an action. The time of service is not counted in determining the servicemember's deadline, for example, for exercising the right to redeem real estate that has been sold or forfeited to enforce an obligation, tax, or assessment. The section applies not just to an action or proceeding in a court but also to any federal or state board, commission, or agency, and may be exercised by the servicemember's heirs, executors, administrators, or assigns, regardless of whether the right or cause of action arose prior to or during the person's period of military service. There is no need to show that military service adversely affected the servicemember's ability to meet relevant obligations. The section does not toll the statute of limitations with respect to federal tax laws. This section caps the maximum interest charged on any debt incurred by a servicemember individually or with the servicemembers' spouse jointly prior to entering active duty at a rate of interest no higher than six percent (6%) a year, if the servicemember's ability to pay is materially affected by active-duty status. The interest above the 6% cap is to be forgiven by the creditor and does not accrue to be owed after the debtor's release from active duty. The monthly payments of an obligation or liability covered by this section are to be reduced by the amount in excess of the 6%, but the terms of the original obligation are to remain the same. The 6% cap is not automatic. The servicemember must provide written notice to the creditor along with a copy of her military orders or other appropriate indicator of military service not later than 180 days after the servicemember is released from military service. A court may grant a creditor relief from this section if, in the opinion of the court, the ability of the servicemember to pay an interest rate in excess of 6% is not materially affected by the military service. A servicemember who wrongly receives an adverse credit report or has her credit limit reduced or further credit denied after invoking the 6% interest cap provision may seek relief through the Fair Credit Reporting Act (FCRA) provisions for \"adverse actions\" and consumer remedies for \"willful or negligent noncompliance by credit reporting agencies upon consumer showing of causal connection between inaccurate credit report and denial of credit or other consumer benefit.\" Historically, federally guaranteed student loans were not eligible for the 6% interest rate cap. Section 428(d) of the Federal Family Education Loan Program, which addressed the applicability of usury laws to federally guaranteed student loans, excluded these loans from the SCRA interest rate limitation. In 2001, the Higher Education Opportunity Act amended Section 428(d) to permit explicitly application of the SCRA interest rate cap to federally guaranteed student loans. As of August 14, 2008, federally guaranteed student loans are treated like all other debts incurred prior to entering active duty. Loans disbursed prior to enactment of the amendment are not covered and therefore are not subject to the 6% interest rate limitation. Additionally, servicemembers currently on active duty who received student loans prior to entering active duty will not be able to claim the 6% cap, but may be entitled to defer repayment or pursue benefits under other laws. In 2008, the Veterans' Benefits Improvement Act added two new subsections to the SCRA addressing penalties for violation of Section 207. Section 207, as amended, closely mirrors the penalty and preservation of remedies provisions found in other sections of the SCRA. Anyone who violates the maximum interest prohibition may be fined or imprisoned for not more than one year. An individual claiming protection under this section may also be awarded consequential or punitive damages. The 6% cap does not apply to loans made after entry into military service; however, Congress has enacted legislation to protect servicemembers and their dependents from certain practices of so-called payday lenders. Added in 2014, Section 208 provides protections to servicemembers in connection with child custody proceedings beyond the stay provisions discussed above. If a court enters a temporary change in custody based solely on the deployment or anticipated deployment of a servicemember, the order must expire no later than the conclusion of a period of time justified by the deployment. The section also prohibits a court from considering deployment or possible deployment of the custodial parent as the sole factor in determining the best interest of the child when contemplating a permanent change in custody. Finally, the section does not create a right to remove the child custody dispute to a federal court; and it does not preempt state law that provides greater protections for deploying servicemembers. This provision, added in 2016, requires the secretaries of each military department to ensure that servicemembers receive annually, and prior to deployment, notice of the child custody protections under the SCRA. Sections 301 through 308 provide protections from eviction and loss of other benefits or rights due to the failure of a servicemember to meet payments on rent, loans, mortgages, or insurance policies. Unlike the other parts of the SCRA, the rights described in these sections can be asserted by a servicemember's dependents in their own right. Under this section as it was enacted in 2003, unless a court orders otherwise, a landlord or person with \"paramount title\" may not evict a servicemember or her dependents from a rented home (such as an apartment, a trailer, or a house occupied as a residence by the servicemember or dependents) if the rent is $2,400 per month or less. Nor can the property be subject to distress without a court order during the servicemember's period of service. Traditionally, the rent ceiling is adjusted annually for inflation, and in 2018 the amount was $3,716.73. In a case where the landlord seeks a court order for the eviction of a servicemember or her dependents, the court is obligated to stay the proceedings for up to three months if the servicemember requests it. In the alternative, the court may adjust the obligation under the lease to preserve the interests of all the parties. Section 202 (stay of proceedings when servicemember has notice) of the act is not applicable to this section. The section provides that anyone who knowingly takes part in an eviction or distress in violation of this section can be punished by imprisonment for up to one year, a fine as provided in Title 18, U.S. Code , or both. Additionally, courts are allowed to grant landlords, or other persons with \"paramount title,\" equitable relief in cases where a stay is granted. For example, a court might reduce the monthly rent for the duration of a servicemember's deployment but require the servicemember to make up the difference over time after her return. If the court orders payment to the landlord, Subsection (d) authorizes the Secretary concerned to make an allotment from the servicemember's military pay to satisfy the terms of the order. Except by court order, no one who has collected a deposit as partial payment for property, where the remainder of the price is to be paid in installments, can repossess the property or cancel the sale, lease, or bailment because of the failure to meet the terms of the contract, if the buyer enters active-duty military service after paying the deposit and subsequently breaches the terms of the contract. A violation of this section is punishable by imprisonment for up to one year, a fine as provided in Title 18, U.S. Code , or both. A court may order the cancellation of the installment sale, mandating the return of the property to the seller as well as the return of paid installments to the buyer, or the court may stay the proceedings, or order such other disposition of the property the court deems equitable. This section does not permit a servicemember unilaterally to terminate a contract, although the servicemember may be able to bring an action under Section 701 for anticipatory relief, as discussed further below. This section covers servicemembers who, prior to a period of active military service, entered into a property transaction subject to a mortgage, a trust deed, or other security loan. The sale, foreclosure, or seizure of property during a servicemember's period of military service, and one year after, is prohibited unless such action is taken under a court order issued prior to foreclosure on the property, or pursuant to an agreement under Section 107 of the act. A federal appeals court has held that the prohibition on foreclosure bars the charging of fees associated with a notice of foreclosure, even though no foreclosure took place. If the servicemember's ability to comply with the terms of the obligation is materially affected by military service and the servicemember thereby breaches the terms of a mortgage, trust deed, or other loan, the court may adjust the obligation to preserve the interests of all parties, or may stay any proceeding against the servicemember for a period of time as justice and equity require. Property foreclosure or other similar action against a servicemember protected by this section taken without benefit of a court order is punishable by imprisonment of up to one year, a fine as provided by Title 18, U.S. Code , or both. If a court stays an action for foreclosure on property, repossession, or the cancellation of a sales contract against a servicemember, the court can appoint three disinterested persons to appraise the property and, on the basis of the appraisal, order the amount of the servicemember's equity to be paid back to the person on active duty as a condition for allowing the foreclosure, repossession, or cancellation. The court is required to consider whether its action would cause undue hardship to the servicemember's dependents—for example, through loss of use of the property. Military persons who live in rental property are allowed to terminate leases to which they are a party early under certain circumstances. This section applies to (1) property leased for a dwelling or for professional, business, or farm use, or other similar purpose, where the person leasing the property later enters active duty in military service, or where the servicemember executes the lease while in military service and thereafter receives military orders for a permanent change of duty station (PCS) or to deploy with a military unit for a period of at least 90 days; and (2) motor vehicle leases for personal or business transportation where the person later enters active military service of not less than 180 days or where the servicemember executes the lease while in military service and thereafter receives PCS orders outside of the continental United States or to deploy with a military unit for at least 180 days. Servicemembers who rent premises are advised to ensure the rental agreement contains a \"military\" clause to allow for early termination of a lease in case of military orders to deploy. In 2004, this right to terminate leases early was expanded to also apply to joint leases. The added language specifies that any lease terminated pursuant to this section also terminates any obligation a dependent of the lessee may have under the lease. In 2018, the right to terminate leases was extended to include the spouse of a servicemember who dies while in military service or performing full-time National Guard duty, active Guard and Reserve duty, or inactive-duty training. The spouse must exercise the right within one year after the death of the servicemember. The servicemember may terminate a property lease early by delivering by hand, private business carrier, or mailing return receipt requested, a written notice and a copy of her military orders to the lessor or its agent. As for a residential lease, if the lease called for monthly rent, then cancellation takes effect 30 days after the next due date for rent following the day the written notice is sent. For all other property leases, the cancellation is considered effective at the end of the month following the month in which the written notice is sent. Any unpaid rent prior to the effective cancellation must be paid to the landlord on a prorated basis. The servicemember is entitled to a refund of any prepaid rent for time after the lease is canceled within 30 days of the termination of the lease. The 2010 amendment to the act prohibits the lessor from charging an early termination fee, but the servicemember is liable for any taxes, summonses, or other obligation in accordance with the terms of the lease. A court can make adjustments if the landlord petitions the court for an \"equitable offset\" prior to the date the lease is effectively canceled. To terminate a motor vehicle lease early under this section, the servicemember must return the motor vehicle to the lessor or its agent no later than 15 days after the date of delivery of the written notice. The cancellation is considered effective on the day on which the vehicle is returned to the lessor. The lessor cannot impose early termination fees on a servicemember, but the servicemember is still responsible for taxes, summonses, title and registration fees, and any other obligation and liability under the lease, including reasonable fees for excessive wear, use, and mileage. Anyone who knowingly seizes personal effects, withholds a security deposit, or otherwise interferes with the return of any other property belonging to a person who has lawfully canceled a lease pursuant to this section is subject to punishment. Specifically, anyone who seizes or otherwise interferes with the removal of property in order to satisfy a claim for rent due for any time after the date of the effective cancellation of the lease may be punished by imprisonment for up to one year, a fine as provided in Title 18, U.S. Code , or both. Originally added to the SCRA by the Veterans' Benefits Improvement Act of 2008, this section was replaced in its entirety by the Veterans' Benefits Act of 2010. Under the new Section 305a, a servicemember is able to terminate a contract for telephone exchange service, in addition to the previously covered cellular phone service, in certain circumstances. In 2018, Congress added cable and internet services. To be eligible, the servicemember must receive orders to relocate for a period of at least 90 days to a location that does not support the contract, and the contract must have been entered into prior to receiving the orders. The telephone service provider is required to cancel the contract without assessing an early termination charge and, in the case of a period of relocation less than three years in duration, allow the servicemember to retain the phone number previously terminated. Additionally, dependents of the servicemember may also terminate their cellular telephone service if they accompany the servicemember to an area that does not support the service contract. If the servicemember re-subscribes to the carrier within 90 days of returning from relocation, the service provider is prohibited from charging a reinstatement fee, but may charge ordinary fees for equipment installation or acquisition. A servicemember who terminates any service must return provider-owned equipment to the service provider within ten days after service is disconnected. If a person entering military service has used a life insurance policy as collateral to secure a debt, she is protected from foreclosure on the policy to satisfy the debt unless the assignee first obtains a court order, except where the assignee is the insurance company itself (in which case the debt amounts to a policy loan). A court may refuse to grant the order if it determines that the servicemember's ability to repay is materially affected by military service. This rule applies during the entire time the insured is on active duty plus one year. The rule does not apply in three cases: (1) if the insured gives her written permission to let a creditor make a claim against the policy in order to satisfy the debt involved; (2) if any premiums required under the life insurance policy are due and unpaid (excluding premiums guaranteed under Title IV of this act); or (3) if the person whose life is insured has died. Anyone who knowingly takes or attempts action contrary to this section shall be punished by imprisonment for up to a year, or a fine as provided in Title 18, U.S. Code , or both. A servicemember with property or effects subject to a lien, including liens for storage, repair, or cleaning of property, is protected from foreclosure or enforcement of the lien during the period of military service plus three months unless a court finds that the servicemember's ability to meet the obligation is not materially affected by military service. A court can also stay the proceedings in these types of enforcement actions or order some other disposition of the case it deems equitable to the parties. This section does not affect the scope of Section 303 (mortgages and trust deeds). Anyone who knowingly takes any action contrary to the provisions shall be punished by imprisonment up to one year, a fine as provided by Title 18, U.S. Code , or both. Servicemembers whose property is seized and sold in order to satisfy a lien may recover damages. The benefits of the rules provided under Title III (50 U.S.C. §§ 3951-59) of the SCRA are extended to dependents of active-duty personnel in their own right. A dependent must petition a court for permission to take advantage of those rules, and the court is not required to grant permission if it determines that the ability of the applicant dependent to comply with the terms of the obligation, contract, lease, or bailment has not been materially impaired by the military service of the person upon whom the applicant is dependent. Title IV provides relief from insurance premiums and guarantees servicemembers' continued coverage under certain commercial life insurance policies. A servicemember who applies for protection under this title will eventually have to pay all of the premiums due, either to the insurer or to the government, in the event the United States pays the delinquent premiums. In this way, servicemembers may defer payments of insurance premiums without losing coverage. There is no need to show that military service materially affects the servicemember's ability to pay. For the purposes of Title IV of the SCRA, the following definitions apply: 'Policy' — \"Policy\" includes any individual contract for whole, endowment, universal, or term life insurance (other than group term life insurance), or benefit similar to life insurance that comes from membership in any fraternal or beneficial association that satisfies all of the following conditions: 1. the policy does not include a provision limiting the amount of insurance coverage based on the insured's military service; 2. the policy does not require the insured to pay higher premiums if she is in military service; 3. the policy does not include a provision that limits or restricts coverage if the insured engages in any activity required by military service; and 4. the policy is \"in force\" (premiums have to be paid on time before any benefit guaranteed by these sections of the law can be claimed) for at least 180 days before the insured enters military service. 'Premium' —\"Premium\" is the amount specified in the policy to be paid to keep the policy in force. 'Insured' —\"Insured\" is defined as a servicemember who owns a life insurance policy. 'Insurer' —\"Insurer\" includes any firm, corporation, partnership, association, or business that can, by law, provide insurance and issue contracts or policies. Either the person insured, an insured's legal representative, or, when the insured person is outside the United States, a beneficiary of the insurance policy must apply for protection of a covered policy under the act. The written application must be submitted to the insurer with a copy sent to the Secretary of Veterans Affairs. The total amount of policies covered is limited to the greater of $250,000, or an amount equal to the maximum limit of the Servicemember's Group Life Insurance (SGLI). The maximum limit of SGLI currently is $400,000. In order to invoke protection for the policies covered under this part of the SCRA, the servicemember, her legal representative, or beneficiary must submit an application in writing identifying the policy and insurer, with an acknowledgment that the insured's rights under the policy are subject to and modified by the provisions of Title IV of this act. The Secretary of Veterans Affairs may require the parties to provide additional information as necessary. The insurer then reports the action to the Department of Veterans Affairs as required by regulation (found in 38 C.F.R. Part 7). By making an application for the protection guaranteed by these sections of the law, the insurer and insured are deemed to have accepted any necessary modifications to the terms of the life insurance policy. The Secretary of Veterans Affairs determines whether a policy is entitled to the protection guaranteed by these sections, and is responsible for notifying the insurer and the insured of that determination. Once the policy is deemed qualified for protection, it may not lapse or otherwise be terminated or be forfeited for the nonpayment of a premium, or interest or indebtedness on a premium. This protection applies during the time the insured person is in military service and for two years after she leaves military service. The approval of the Secretary of Veterans Affairs is necessary for a policyholder to make certain withdrawals and other payments or credits under a policy protected by this part of the SCRA. If such approval is not obtained, rather than paying dividends to the insured or reinvesting them to purchase additional coverage, the insurer must add dividends to the value of the policy to be treated as a credit. The insured is not permitted to take out loans against the policy or cash it in while it is protected without the approval of the Secretary of Veterans Affairs. However, the insured retains the right to modify the designation of beneficiaries. If a covered policy matures due to the death of the insured, the insurance company must reduce its settlement with the beneficiaries by the amount of any unpaid premiums (plus interest). If the rate of interest is not specified in the policy, it will be the same rate applied to policy loans in other policies issued at the time when the insured's policy was issued. Deductions must be reported to the Secretary of Veterans Affairs. In the event the insured fails to pay any premiums owed on a policy at the time the guarantee period expires and the cash surrender value of the policy is less than the amount due, the insurance company may terminate the policy and the United States will pay the insurance company the difference between the cash surrender value and the amount of the outstanding debt. The amount paid to the insurer becomes a debt owed by the insured to the United States that is not dischargeable in bankruptcy. Any funds collected from the insured are added to appropriations for the payment of guaranteed premiums under this part of the SCRA. If the unpaid premiums do not exceed the policy's cash surrender value, the insurer will treat them as a policy loan. The Secretary of Veterans Affairs is responsible for promulgating regulations to carry out the provisions of Title IV, which are found in 38 C.F.R. Part 7. The findings of fact and conclusions of law made by the Secretary in administering these sections are subject to review by the Board of Veterans' Appeals and the U.S. Court of Appeals for Veterans' Claims. Judicial review is permitted only to the extent provided by chapter 72 of Title 38, U.S. Code , which sets forth the scope of review and procedures to be followed. The fifth broad category of provisions of the SCRA provides certain rights regarding public lands and relieves servicemembers from having to pay certain taxes to multiple jurisdictions. It also prevents the attachment of certain personal or real property in order to satisfy tax liens. A servicemember's personal property (including motor vehicles) and real property used by the servicemember as a home, a business, or for agriculture—as long as the property continues to be occupied by the servicemember's family or employees—cannot be sold to collect unpaid taxes or assessments (other than income taxes) without a court order. A court may stay an action to force the sale of property belonging to a person in military service for the collection of unpaid taxes if it finds that the debtor's ability to pay the taxes is materially affected by her military service. In the event a servicemember's property is sold to satisfy tax liabilities, the servicemember has the right to redeem the property for up to six months after the person leaves military service unless a longer period is provided by state or local law. If a servicemember fails to pay a tax or assessment on property covered by this section when due, the amount unpaid and due shall accrue interest at 6%, but no other penalties or interest may be assessed. Additionally, real and personal properties owned jointly by a servicemember and her dependents are covered by this section. However, properties owned through a separate business entity such as a limited liability company may not be covered by this section, even if the servicemember is the sole owner. Servicemembers cannot be deemed to have forfeited any right (including mining and mineral leasing rights) they had for the use of public lands of the United States prior to entering military service based on absence from the land or failure to perform required maintenance or other improvements. Holders of permits and licenses for grazing livestock on public lands who subsequently enter military service may suspend the licenses for the duration of military service plus six months, allowing the servicemember to obtain a reduction or cancellation of fees for the duration of that time. Servicemembers with claims to desert lands prior to entering military service may not have those claims contested or canceled for failing to expend required amounts in improvements annually, or for failing to effect the reclamation of the claim during the period of service or during hospitalization or rehabilitation due to an injury or disability incurred in the line of duty. The protection is in force during and for six months after she leaves military service or is released from hospitalization. An honorably discharged servicemember whose line-of-duty disability prevents her reclamation of land or ability to pay may apply for a patent for the entered or claimed land. To qualify for this protection, notice must be given to the appropriate land office within six months after entering military service. Certain requirements for maintaining a mining claim are suspended during the holder's period of active military service and for six months thereafter or for the duration of hospitalization due to wounds or disability suffered while in the line of duty. During this period, the mining claim cannot be forfeited due to nonperformance of the requirements of the lease. To qualify for this protection, the servicemember must notify the appropriate claims office of commencement of military service within 60 days after the end of the assessment year in which the service began. Any person who holds a permit or a lease under the federal mineral leasing laws who enters military service is allowed to suspend all operations during military service (plus six months), in which case the period of service is not counted as part of the term of the person's permit or license and the holder is not required to pay rentals or royalties during that time. However, to qualify for these privileges, the servicemember has six months after entry into military service to notify the Bureau of Land Management of her entry into service. Nothing in Title V of the SCRA prevents a person in military service from taking any action authorized by law or regulations of the Department of the Interior to assert, perfect, or protect the rights covered in those sections. A servicemember may submit any evidence required to assert this right in the form of affidavits or notarized documents. Affidavits provided pursuant to this section are subject to 18 U.S.C. § 1001. The Secretary of the Interior is responsible for providing military authorities with information explaining the benefits of this Title (except those pertaining to taxation) as well as related application forms for distribution among servicemembers. Protection of land rights under this Title are extended to servicemembers under the age of 21. Residency requirements related to the establishment of a residence within a limited time will be suspended for six months after release from military service for both the servicemember and her spouse. The Secretary of the Interior has the authority to issue regulations necessary to carry out Title V of the act, other than the sections that concern taxes. The collection of federal, state, and local income taxes (excluding Social Security (FICA) taxes) a servicemember owes, either before or after entering service, must be deferred during the period of service and for up to six months after release, if her ability to pay the taxes is materially affected by military service. No interest or other penalty may be imposed on a debt deferred under this section. The statute of limitations for paying the debt is tolled for the length of the person's period of service plus nine months. In order to prevent multiple state taxation on the property and income of military personnel serving within various tax jurisdictions by reason of military service, this section provides that servicemembers neither lose nor acquire a state of domicile or residence for taxation purposes when they serve at a duty station outside their home state in compliance with military orders. A servicemember who conducts other business while in military service may be taxed by the appropriate jurisdiction for any resulting income. However, a tax jurisdiction cannot include the military compensation earned by nonresident servicemembers to compute the tax liability imposed on the non-military income earned by the servicemember. Spouses of servicemembers neither lose nor acquire a state of domicile or residence for taxation purposes when they are present in any tax jurisdiction solely to be with the servicemember in compliance with the servicemember's orders. However, the guarantee of residency is contingent on the spouse having the same original residence or domicile as the servicemember. As amended in 2018, the section provides that in the tax year during which the marriage takes place, the spouse may elect to use the same residence for tax purposes regardless of the date of marriage. The section further provides that income earned by a spouse while in a duty-station tax jurisdiction, other than her original residence or domicile, solely to be with the servicemember may not be taxed by that tax jurisdiction. Personal property of a servicemember and her spouse will not be subject to taxation by a jurisdiction other than their domicile or residence while stationed at a duty station outside of their home state. However, relief from personal property taxes does not depend on whether the property is taxed by the state of domicile. Property used for business is not exempt from taxation. An Indian servicemember whose legal residence or domicile is a federal Indian reservation will pay taxes only under the laws of the federal Indian reservation and not to the state where the reservation is located. \"Tax jurisdiction\" is defined to include \"a State or a political subdivision of a State,\" which includes the District of Columbia and any commonwealth, territory, or possession of the United States (Section 101(6)). \"Taxation\" includes licenses, fees, or excises imposed on an automobile that is also subject to licensing, fees, or excise in the servicemember's state of residence. \"Personal property\" includes intangible and tangible property including motor vehicles. Title VI provides courts the authority to deny remedies to servicemembers that would abuse the purpose of the SCRA. It also indicates how a servicemember's military and financial status can be established in court, and covers other procedural requirements. A court may deny a servicemember the protections of the act with respect to a transfer it finds was made with the intent to exploit the provisions of the act, in order to delay enforcement of the contract, to obtain reduced interest rates, or to avoid obligations with respect to property that was the subject of the transaction. A certificate signed by the Secretary concerned serves as prima facie evidence in an action under the SCRA that the individual is in the military service, the date of induction or discharge, residence at time of induction, rank and rate of pay, and other facts relevant to asserting rights under the SCRA. A servicemember who is missing in action is presumed to continue in military service until she is accounted for or her death has been reported to the Department of Defense or determined by a court or board with the authority to make such determination. Courts may revoke, modify, or extend any interlocutory orders they issued pursuant to the SCRA. Title VII of the SCRA provides a means for servicemembers to petition for relief without having to wait until a creditor brings an enforcement action against them. It also treats powers of attorney and provides relief from liability insurance premiums for servicemembers who need to maintain such policies for their civilian occupations. A servicemember may initiate an action for relief prior to defaulting on any pre-service obligation or liability, including tax obligations, rather than waiting for the creditor to commence proceedings. Dependents do not have independent protection under this section as they do for the provisions of Title III. Courts may grant the following relief: 1. if the obligation involves payments of installments for the purchase of real estate (like a mortgage), the court can stay enforcement of the obligation by adding a period of time, no greater than the period of military service, to the remaining life of the contract, subject to the payment of the balance of principal and accumulated interest that remains unpaid at the termination of the applicant's military service, in equal installments over the duration of the extended life of the contract; and 2. for any other type of obligation, liability, tax, or assessment, the court can stay enforcement, for a period of time equal to the petitioner's period of military service, subject to payment of the balance of principal due plus accumulated interest in equal installments over the duration of the stay. If a stay has been granted under this section, no fine or penalty can be imposed for its duration as long as the servicemember complies with the terms and conditions of the stay. This provision allows servicemembers who are not yet in default on an obligation, but whose ability to make payments is materially affected by military service, to petition the court in effect to rewrite the contract by extending its life, allowing the servicemember to pay down the amount in arrears with equal installments over a longer of period of time. The servicemember must resume making regular payments on the debt after leaving active duty, in addition to the payments to make up for the smaller payments she made while on active duty. A valid power of attorney for a person who is declared to be missing in action is automatically extended for the entire period the person remains in a missing status, unless it expressly provides a date of expiration. The extension is limited to documents that designate the servicemember's spouse, parent, or named relative as the servicemember's attorney in fact. The power of attorney must have been executed during the servicemember's military service or before entry into active service but after receiving an order to report for military service or a notification from the Department of Defense that such an order could be forthcoming. Certain persons who, prior to being called to active duty, were furnishing health care, legal, or any other services which the Secretary of Defense determines to be professional services and who had in effect a professional liability (i.e., malpractice) insurance policy may suspend payment of premiums on their liability insurance while they serve on active duty without losing any coverage. The section covers insurance policies that, according to their terms, would not continue to cover claims arising prior to a lapse in coverage unless the insured continues to pay premiums. Definitions — \"Profession\" is defined in Subsection (i) to include \"occupation.\" Similarly, the expression \"professional\" includes the term \"occupational.\" Neither \"occupation\" nor \"occupational\" is defined. Subsection (i) also defines \"active duty,\" adopting the definition used in Section 101 of Title 10, U.S. Code . However, the provision is further limited to persons called to active duty (other than for training) under 10 U.S.C. §§ 688 (retired members of regular Armed Forces, members of the Retired Reserves, and members of the Fleet Reserve or Fleet Marine Corps Reserve); 12301(a) (activation of Reserves during war or national emergency declared by Congress); 12301(g) (member of Reserve component in captive status); 12302 (Ready Reserve); 12304 (Selected Reserve and certain Individual Ready Reserve members called to active duty other than during war or national emergency); 12306 (Standby Reserve); 12307 (Retired Reserve); and, if any of the preceding sections are invoked, Section 12301(d) (volunteer member of a Reserve component). Suspension of coverage —Professional liability insurance policies covered by this section are suspended from the time the insurer receives a request for protection until the insured requests in writing to have the policy reinstated. In the case of a joint insurance policy, no suspension of coverage is required for the policyholders who are not called to active duty. For example, if several physicians jointly purchase a group policy of malpractice insurance, and only one of them is called to active duty, the coverage of those not called to active duty need not be suspended by the insurer. Premiums —The insurer may not charge premiums for coverage that is suspended. The insurer must either refund any amount already paid for coverage that is suspended or, if the insured professional person chooses, apply the amount toward payment of any premium that comes due after coverage is reinstated. Liability during suspension —The insurer is not obligated to pay any claim that is based on a professional's actions (or inaction) during a period when a policy is suspended. In the case of claims involving obligations imposed by state law on a professional person to assure that her patients or clients will receive professional assistance in her absence to serve on active duty, the section clarifies that the failure of the professional person to satisfy such an obligation will generally be considered to be a breach that occurred before the professional person began active duty. In such a situation, the insurer would be liable for the claim. In the event a claim arises while the patient is receiving alternate care as arranged by the servicemember for patients during her absence, the insurer would not be liable for the claim. Actions against policyholder during suspension of coverage —In the event a malpractice suit (or administrative action) is filed during the period when the insurance is suspended, the litigation will be stayed until the end of the suspension period. The stay applies only where the malpractice is alleged to have occurred before the suspension began, and would thus be covered by the policy. Litigation stayed under this rule is deemed to be filed on the date the suspended insurance is reinstated. The period of any stay granted under this provision is not counted when computing whether or not the relevant statute of limitations has run. In the event that a professional person whose malpractice insurance coverage has been suspended should die during the period of the suspension, any stay of litigation or administrative action against the person under this section is lifted. In addition, the insurer providing the coverage that was suspended is to be liable under the policy just as if the deceased person had died while covered by the policy but before the claim was filed. Reinstatement of coverage —The insurer is required to reinstate the insurance coverage on the date the servicemember transmits a written request for reinstatement, which must occur within 30 days after the covered servicemember is released from active duty. The insurer must notify the policyholder of the due date for payment of any premium required for reinstatement of the policy, and that the premium must be paid within 30 days after the notice is received by the professional person. The section also limits the premium that the insurer can charge for reinstated coverage to the rate that would have applied if the servicemember had not been deployed. The insurer is not allowed to recoup missing premiums by charging higher rates for reinstated coverage. The insurer may charge higher rates for reinstated coverage if it raised the rates for all policyholders with similar coverage, provided that the servicemember would have had to pay a higher premium even if she had not suspended coverage. This section grants servicemembers who were called to military service, as described in § 703(a)(1), the right, upon termination or release from military service, to reinstatement of any health insurance policy that was in effect on the day before the servicemember entered military service, and that terminated at any time during her service. Servicemembers must apply for reinstatement within 120 days of termination or release from active duty. An insurer may not impose new exclusions from coverage or waiting periods for reinstatement of coverage with respect to conditions arising prior to or during the servicemember's period of military service, if such an exclusion or waiting period would not have applied during regular coverage and the condition has not been determined to be a disability incurred in the line of duty under 38 U.S.C. § 105. The section does not apply to employer-sponsored health insurance plans covered by the provisions of the Uniformed Services Employment and Reemployment Rights Act (USERRA). Insurance plans covered by USERRA are subject to similar protections under 38 U.S.C. § 4317. In 2006, Congress added language to Section 704 limiting the ability for insurers to charge a servicemember premium increases on a health insurance policy covered by the section. The amount of the premium may not be increased, on a policy being reinstated for the balance of the period for which the coverage would have continued had it not been terminated, above an amount that would have been charged before termination. In the event that the premiums for similarly covered individuals increased during the terminated period, the increased premium may be assessed to the servicemember upon reinstatement of the policy. Military personnel and their spouses are not deemed to have changed their state of residence or domicile for the purpose of voting for any federal, state, or local office, solely because of their absence from the respective state in compliance with military or naval orders. As amended in 2018, the section provides that a spouse may elect to use the same residence regardless of the date of marriage. The assets of a servicemember are protected from attachments to satisfy business debts for which the servicemember is personally liable, as long as the assets sought to be attached are not held in connection with the business. The obligor would have the right to apply to the court for a modification of the servicemember's relief when warranted by equitable considerations. Title VIII provides the Attorney General the authority to bring civil actions against violators of the SCRA. Servicemembers who are aggrieved by a violation can join an action brought by the Attorney General or can initiate their own civil action against a violator. This section authorizes the U.S. Attorney General to commence a civil action in U.S. district court for violations of the SCRA by a person who (1) engages in a pattern or practice of violating the act; or (2) engages in a violation that raises an issue of significant public importance. Courts may grant any appropriate equitable or declaratory relief, including monetary damages. Additionally, courts, in order to vindicate the public interest, may assess a civil penalty up to $55,000 for a first violation, and up to $110,000 for subsequent violations. Finally, individuals alleging violations of the SCRA, for which the Attorney General has commenced an action, are authorized to intervene in previously commenced cases as a plaintiff. In addition to the right to join a previously commenced case, persons aggrieved by a violation of the SCRA have the ability to commence a civil action in their own right. The court may grant appropriate equitable or declaratory relief, including monetary damages. The court is also authorized to award the costs of the action and reasonable attorney fees to an individual who prevails in a civil action under this section. This section provides that Sections 801 and 802 do not preclude or limit any other remedies available under the law, including consequential or punitive damages for violations of the SCRA.", "summary": "Congress enacted the Servicemembers Civil Relief Act (SCRA) in 2003 in response to the increased deployment of Reserve and National Guard military and as a modernization and restatement of the protections and rights previously available to servicemembers under the Soldiers' and Sailors' Civil Relief Act of 1940 (SSCRA). The SCRA has been amended since its initial passage, and Congress continues to consider amendments from time to time. Congress has long recognized the need for protective legislation for servicemembers whose service to the nation compromises their ability to meet obligations and protect their legal interests. The SCRA is an exercise of Congress's power to raise and support armies and to declare war. The purpose of the act is to provide for, strengthen, and expedite the national defense by protecting servicemembers, enabling them to \"devote their entire energy to the defense needs of the Nation.\" The SCRA protects servicemembers by temporarily suspending certain judicial and administrative proceedings and transactions that may adversely affect their legal rights during military service. The SCRA does not provide forgiveness of all debts or the extinguishment of contractual obligations on behalf of active-duty servicemembers, nor does it grant absolute immunity from civil lawsuits. Instead, the SCRA provides for the suspension of claims and protection from default judgments against servicemembers. In this way, it seeks to balance the interests of servicemembers and their creditors, spreading the burden of national military service to a broader portion of the citizenry. Some protections are contingent on whether military service materially affects the servicemember's ability to meet obligations, while others are not. Courts are to construe the SCRA liberally in favor of servicemembers, but retain discretion to deny relief in certain cases. The Services are required to provide information to servicemembers explaining their rights under the SCRA. Many of the SCRA provisions are especially beneficial for Reservists activated to respond to a national crisis, but many provisions are also useful for career military personnel. One measure that affects many who are called to active duty is the cap on interest at an annual rate of 6% on debts incurred prior to a person's entry into active-duty military service. Creditors are required to forgive the excess interest and are prohibited from retaliating against servicemembers who invoke the 6% interest cap by submitting adverse credit reports solely on that basis. Other measures protect military families from being evicted from rental or mortgaged property; from cancellation of life insurance and professional liability insurance; from taxation in multiple jurisdictions; from losing domicile for voting and other purposes due to being stationed elsewhere; from losing child custody due to deployment or the possibility of deployment; from foreclosure of property to pay taxes that are due; and from losing certain rights to public land. The SCRA makes it unlawful for lienholders or lessors to foreclose or seize property owned or used by servicemembers without a court order. It also permits servicemembers to prematurely terminate leases and other term contracts without incurring any early termination penalties. Statutes of limitations that might otherwise prevent servicemembers from pursuing remedies in court or before any governmental agency, including state and local entities, are tolled for the duration of the servicemember's military service. Servicemembers may initiate an action in court for relief prior to defaulting on any pre-service obligation or liability, in order to obtain restructuring of loan repayments or other equitable relief without incurring any penalty. Servicemembers may bring an action in court to enforce their rights under the SCRA, or the Attorney General may bring a civil action in U.S. district court for violations of the SCRA by a person who (1) engages in a pattern or practice of violating the act; or (2) engages in a violation that raises an issue of significant public importance.", "document_type": "crs"}
{"report": "O n December 21, 2018, President Trump signed into law the First Step Act of 2018 ( P.L. 115-391 ). The act was the culmination of several years of congressional debate about what Congress might do to reduce the size of the federal prison population while also creating mechanisms to maintain public safety. Correctional and sentencing reform was an issue that drew interest from many Members of Congress. Some Members took it up for fiscal reasons; they were concerned that the increase in the Bureau of Prisons' (BOP) budget would take resources away from the Department of Justice's (DOJ) other priorities. Other Members were interested in correctional reform due to concerns about the social consequences (e.g., the effects incarceration has on employment opportunities and the families of the incarcerated, or the normalizing of incarceration) of what some deem mass incarceration , or they wanted to roll back some of the tough on crime policy changes that Congress put in place during the 1980s and early 1990s. This report provides an overview of the provisions of the First Step Act. The act has three major components: (1) correctional reform via the establishment of a risk and needs assessment system at BOP, (2) sentencing reform that involved changes to penalties for some federal offenses, and (3) the reauthorization of the Second Chance Act of 2007 ( P.L. 110-199 ). The act also contains a series of other criminal justice-related provisions that include, for example, changes to the way good time credits are calculated for federal prisoners, prohibiting the use of restraints on pregnant inmates, expanding the market for products made by the Federal Prison Industries, and requiring BOP to aid prisoners with obtaining identification before they are released. The correctional reform component of the First Step Act involves the development and implementation of a risk and needs assessment system (system) at BOP. The act requires DOJ to develop the system to be used by BOP to assess the risk of recidivism of federal prisoners and assign prisoners to evidence-based recidivism reduction programs and productive activities to reduce this risk. DOJ is required to develop and release the system within 210 days of enactment of the First Step Act. The system is to be used to determine the risk of recidivism of each prisoner during the intake process and classify each prisoner as having a minimum, low, medium, or high risk; assess and determine, to the extent practicable, the risk of violent or serious prison misconduct of each prisoner; determine the type and amount of recidivism reduction programming that is appropriate for each prisoner and assign each prisoner to programming based on the prisoner's specific criminogenic needs ; periodically reassess the recidivism risk of each prisoner; reassign prisoners to appropriate recidivism reduction programs or productive activities based on their reassessed risk of recidivism to ensure that all prisoners have an opportunity to reduce their risk classification, that the programs address prisoners' criminogenic needs, and that all prisoners are able to successfully participate in such programs; determine when to provide incentives and rewards for successful participation in recidivism reduction programs or productive activities; determine when a prisoner is ready to transfer into prerelease custody or supervised release; and determine the appropriate use of audio technology for program course materials to accommodate prisoners with dyslexia. DOJ is authorized to use existing risk and needs assessment instruments, validated annually, to meet the requirements of the act. When developing the system, the Attorney General is required to consult with the Director of BOP; the Director of the Administrative Office of the United States Courts; the Director of the Office of Probation and Pretrial Services; the Director of the National Institute of Justice; the Director of the National Institute of Corrections; and the Independent Review Committee, which is established by the First Step Act. When developing the system, the Attorney General, with the assistance of the Independent Review Committee, is required to conduct a review of the existing risk and needs assessment systems; develop recommendations regarding recidivism reduction programs and productive activities; conduct ongoing research and data analysis on (1) evidence-based recidivism reduction programs related to the use of risk and needs assessment, (2) the most effective and efficient uses of such programs, (3) which programs are the most effective at reducing recidivism, and the type, amount, and intensity of programming that most effectively reduces the risk of recidivism, and (4) products purchased by federal agencies that are manufactured overseas and could be manufactured by prisoners participating in a prison work program without reducing job opportunities for other workers in the United States; annually review and validate the risk and needs assessment system, including an evaluation to ensure that assessments are based on dynamic risk factors (i.e., risk factors that can change); validate any tools that the system uses; and evaluate the recidivism rates among similarly classified prisoners to identify any unwarranted disparities, including disparities in such rates among similarly classified prisoners of different demographic groups, and make any changes to the system necessary to address any that are identified; and submit an annual report to Congress each year for five years starting in 2020 (see below). Also, prior to releasing the system, DOJ is required to consult with the Independent Review Committee to review the effectiveness of recidivism reduction programs in prisons operated by BOP; review available information regarding the effectiveness of recidivism reduction programs and productive activities provided in state prisons; review the policies for entering into recidivism reduction partnerships authorized by the act; and direct BOP regarding (1) evidence-based recidivism reduction programs, (2) the ability for faith-based organizations to provide educational programs outside of religious courses, and (3) the addition of any new effective recidivism reduction programs that DOJ finds. Under the act, the system is required to provide guidance on the type, amount, and intensity of recidivism reduction programming and productive activities to which each prisoner is assigned, including information on which programs prisoners should participate in based on their criminogenic needs and the ways that BOP can tailor programs to the specific criminogenic needs of each prisoner to reduce their risk of recidivism. The system is also required to provide guidance on how to group, to the extent practicable, prisoners with similar risk levels together in recidivism reduction programming and housing assignments. The act requires BOP, when developing the system, to take steps to screen prisoners for dyslexia and to provide programs to treat prisoners who have it. Within 180 days of DOJ releasing the system, BOP is required to complete the initial risk and needs assessment for each prisoner (including for prisoners who were incarcerated before the enactment of the First Step Act); begin to assign prisoners to appropriate recidivism reduction programs based on the initial assessment; begin to expand the recidivism reduction programs and productive activities available at BOP facilities and add any new recidivism reduction programs and productive activities necessary to effectively implement the system; and begin to implement any other risk and needs assessment tools necessary to effectively implement the system over time. BOP is required to expand recidivism reduction programming and productive activities capacity so that all prisoners have an opportunity to participate in risk reduction programs within two years of BOP completing initial risk and needs assessments for all prisoners. During the two-year period when BOP is expanding recidivism reduction programs and productive activities, prisoners who are nearing their release date are given priority for placement in such programs. BOP is required to provide all prisoners with the opportunity to participate in recidivism reduction programs that address their criminogenic needs or productive activities throughout their term of incarceration. High- and medium-risk prisoners are to have priority for placement in recidivism reduction programs, while the program focus for low-risk prisoners is on participation in productive activities. Prisoners who successfully participate in recidivism reduction programming or productive activities are required to be reassessed not less than annually, and high- and medium-risk prisoners who have less than five years remaining until their projected release date are required to have more frequent reassessments. If the reassessment shows that a prisoner's risk of recidivating or specific needs have changed, BOP is required to reassign the prisoner to recidivism reduction programs or productive activities consistent with those changes. DOJ is required to develop and administer a training program for BOP employees on how to use the system. This training program must include initial training to educate employees on how to use the system in an appropriate and consistent manner, continuing education, periodic training updates, and a requirement that employees biannually demonstrate competence in administering the system. To ensure that BOP is using the system in an appropriated and consistent manner, DOJ is required to monitor and assess how the system is used at BOP, including an annual audit of the system's use. The First Step Act requires the use of incentives and rewards for prisoners to participate in recidivism reduction programs, including the following: additional phone privileges, and if available, video conferencing privileges, of up to 30 minutes a day, and up to 510 minutes a month; additional time for visitation at the prison, as determined by the warden of the prison; transfer to a facility closer to the prisoner's release residence, subject to the availability of bedspace, the prisoner's security designation, and the recommendation from the warden of the prison at which the prisoner is incarcerated at the time of making the request; and additional incentives and rewards as determined by BOP, to include not less than two of the following: (1) increased commissary spending limits and product offerings, (2) greater email access, (3) consideration for transfer to preferred housing units; and (4) other incentives solicited from prisoners and determined appropriate by BOP. Rewards or incentives prisoners earn are in addition to any other rewards or incentives for which they may be eligible (e.g., good time credit under 18 U.S.C. Section 3624(b)). Under the act, prisoners who successfully complete recidivism reduction programming are eligible to earn up to 10 days of time credits for every 30 days of program participation. Minimum and low-risk prisoners who successfully completed recidivism reduction or productive activities and whose assessed risk of recidivism has not increased over two consecutive assessments are eligible to earn up to an additional five days of time credits for every 30 days of successful participation. However, prisoners serving a sentence for a conviction of any one of multiple enumerated offenses are ineligible to earn additional time credits regardless of risk level, though these prisoners are eligible to earn the other incentives and rewards for program participation outlined above. Offenses that make prisoners ineligible to earn additional time credits can generally be categorized as violent, terrorism, espionage, human trafficking, sex and sexual exploitation, repeat felon in possession of firearm, certain fraud, or high-level drug offenses. Prisoners who are subject to a final order of removal under immigration law are ineligible for additional earned time credits provided by the First Step Act. Prisoners cannot retroactively earn time credits for programs they completed prior to the enactment of the First Step Act, and they cannot earn time credits for programs completed while detained pending adjudication of their cases. The act requires BOP to develop guidelines for reducing time credits prisoners earned under the system for violating institutional rules or the rules of recidivism reduction programs and productive activities. The guidelines must also include a description of a process for prisoners to earn back any time credits they lost due to misconduct. A prisoner is not eligible to be placed in prerelease custody until the amount of time credits the prisoner has earned is equal to the remainder of his/her imposed term of imprisonment; the prisoner has shown a reduced risk of recidivism or has maintained a minimum or low recidivism risk during his/her term of imprisonment; the remainder of his/her imposed term of imprisonment has been computed under applicable law (e.g., any good time credits the prisoner has earned have been credited to his/her sentence); and the prisoner has been determined to be a minimum or low risk to recidivate based on his/her last two assessments, or has had a petition to be transferred to prerelease custody approved by the warden, after the warden's determination that the prisoner (1) would not be a danger to society if transferred to prerelease custody, (2) has made a good faith effort to lower his/her recidivism risk through participation in recidivism reduction programs or productive activities, and (3) is unlikely to recidivate. A prisoner who is required to serve a period of supervised release after his/her term of incarceration and has earned time credits equivalent to the time remaining on his/her prison sentence can be transferred directly to supervised release if the prisoner's latest reassessment shows that he/she is a minimum or low risk to recidivate. However, BOP cannot allow a prisoner to start serving a period of supervised release more than 12 months before he/she would otherwise be eligible to do so. If a prisoner has earned more than 12 months of additional time credits, the amount in excess of 12 months would be served in prerelease custody. Prisoners who are placed on prerelease custody on home confinement are subject to a series of conditions. Per the act, prisoners on home confinement are required to have 24-hour electronic monitoring that enables the identification of their location and the time, and must remain in their residences, except to go to work or participate in job-seeking activities, participate in recidivism reduction programs or similar activities, perform community service, participate in crime victim restoration activities, receive medical treatment, attend religious activities, or participate in family-related activities that facilitate a prisoner's successful reentry. When monitoring adherence to the conditions of prerelease custody, BOP is required, to the extent practicable, to reduce the restrictiveness of those conditions for prisoners who demonstrate continued compliance with their conditions. If a prisoner violates the conditions of prerelease custody, BOP is authorized to place more conditions on the prisoner, or revoke prerelease custody and require the prisoner to serve the remainder of the sentence in prison. If the violation is nontechnical in nature (e.g., committing a new crime), BOP is required to revoke the prisoner's prerelease custody. BOP is required to expand its capacity, if necessary, so that all eligible prisoners can be placed in prerelease custody. The act requires the submission of several reports to help Congress oversee the implementation and assess the effects of the system. Two years after the enactment of the First Step Act, and each year thereafter for the next five years, DOJ is required to submit a report to the House and Senate Judiciary Committees and the House and Senate Subcommittees on Commerce, Justice, Science, and Related Agencies (CJS) Appropriations that includes information on the types and effectiveness of recidivism reduction programs and productive activities provided by BOP, including the capacity of each program and activity at each prison and any gaps or shortages in capacity of such programs and activities; the recidivism rates of prisoners released from federal prison, based on the following criteria: (1) the primary offense of conviction; (2) the length of the sentence imposed and served; (3) the facility or facilities in which the prisoner's sentence was served; (4) the type of recidivism reduction programming; (5) prisoners' assessed and reassessed risk of recidivism; and (6) the type of productive activities; the status of prison work programs offered by BOP, including a strategy to expanding prison work opportunities for prisoners without reducing job opportunities for nonincarcerated U.S. workers; and any budgetary savings that have resulted from the implementation of the act, and a strategy for investing those savings in other federal, state, and local law enforcement activities and expanding recidivism reduction programs and productive activities at BOP facilities. Within two years of the enactment of the First Step Act, the Independent Review Committee is required to submit a report to the House and Senate Judiciary Committees and the House and Senate CJS Appropriations Subcommittees that includes a list of all offenses that make prisoners ineligible for earned time credits under the system, and the number of prisoners excluded for each offense by age, race, and sex; the criminal history categories of prisoners ineligible to receive earned time credits under the system, and the number of prisoners excluded for each category by age, race, and sex; the number of prisoners ineligible for earned time credits under the system who did not participate in recidivism reduction programming or productive activities by age, race, and sex; and any recommendations for modifications to the list of offenses that make prisoners ineligible to earn time credits and any other recommendations regarding recidivism reduction. Within two years of BOP implementing the system, and every two years thereafter, the Government Accountability Office is required to audit how the system is being used at BOP facilities. The audit must include an analysis of the following: whether prisoners are being assessed under the system with the required frequency; whether BOP is able to offer recidivism reduction programs and productive activities as defined in 18 U.S.C. Section 3632(f); whether BOP is offering the type, amount, and intensity of recidivism reduction programs and productive activities that allow prisoners to earn the maximum amount of additional time credits for which they are eligible; whether DOJ is carrying out the duties required by the First Step Act; whether employees of the BOP are receiving the training required by the act; whether BOP offers work assignments to all prisoners who might benefit from them; whether BOP transfers prisoners to prerelease custody or supervised release as soon as they are eligible; and the rates of recidivism among similarly classified prisoners to identify any unwarranted disparities, including disparities among similarly classified prisoners of different demographic groups. The First Step Act authorizes $75 million per fiscal year from FY2019 to FY2023 for DOJ to establish and implement the system; 80% of this funding is to be directed to BOP for implementation. The First Step Act makes several changes to federal sentencing law. The act reduced the mandatory minimum sentences for certain drug offenses, expanded the scope of the safety valve, eliminated the stacking provision, and made the provisions of the Fair Sentencing Act of 2010 ( P.L. 111-220 ) retroactive. The act adjusts the mandatory minimum sentences for certain drug traffickers with prior drug convictions. The act reduces the 20-year mandatory minimum (applicable where the offender has one prior qualifying conviction) to a 15-year mandatory minimum and reduces the life sentence mandatory minimum (applicable where the offender has two or more prior qualifying convictions) to a 25-year mandatory minimum. The act also changes the prior conviction criteria under which these mandatory minimum penalties apply. In order for these mandatory minimums to apply, the offender's prior convictions must meet the new criteria of a serious drug felony or a serious violent felony rather than any felony drug offense . The act makes drug offenders with minor criminal records eligible for the safety valve provision, which previously applied only to offenders with virtually spotless criminal records. The safety valve allows judges to sentence low-level, nonviolent drug offenders to a term of imprisonment that is less than the applicable mandatory minimum. The act eliminates stacking by providing that the 25-year mandatory minimum for a \"second or subsequent\" conviction for use of a firearm in furtherance of a drug trafficking crime or a violent crime applies only where the offender has a prior conviction for use of a firearm that is already final. Under prior law, two violations that were charged concurrently triggered the enhanced mandatory minimum. The First Step Act authorizes courts to apply retroactively the Fair Sentencing Act of 2010, which increased the threshold quantities of crack cocaine sufficient to trigger mandatory minimum sentences, by resentencing qualified prisoners as if the Fair Sentencing Act had been in effect at the time of their offenses. The retroactive application of the Fair Sentencing Act is not automatic. A prisoner must petition the court in order to have his/her sentence reduced. The Second Chance Reauthorization Act of 2018 (Title V of the First Step Act) reauthorizes many of the grant programs that were initially authorized by the Second Chance Act of 2007 ( P.L. 110-199 ). The Second Chance Reauthorization Act also reauthorized a BOP pilot program to provide early release to elderly prisoners. The Second Chance Reauthorization Act amends the authorization for the Adult and Juvenile State and Local Offender Demonstration Program so grants can be awarded to states, local governments, territories, or Indian tribes, or any combination thereof, in partnership with interested persons (including federal correctional officials), service providers, and nonprofit organizations, for the strategic planning and implementation of reentry programs. The Second Chance Reauthorization Act amended the authorization for this program to allow grants to be used for reentry courts and promoting employment opportunities consistent with a transitional jobs strategy in addition to the purposes for which grants could already be awarded. The act also amended the Second Chance Act authorizing legislation for the program to allow DOJ to award both planning and implementation grants. DOJ is required to develop a procedure to allow applicants to submit a single grant application when applying for both planning and implementation grants. Under the amended program, DOJ is authorized to award up to $75,000 for planning grants and is prohibited from awarding more than $1 million in planning and implementation grants to any single entity. The program period for planning grants is limited to one year and implementation grants are limited to two years. DOJ is also required to make every effort to ensure the equitable geographic distribution of grants, taking into account the needs of underserved populations, including tribal and rural communities. Under the amended program, applicants for implementation grants are subject to several requirements, including demonstrating that the application has the explicit support of the chief executive, or the designee, of the state, unit of government, territory, or Indian tribe applying for the grant; discussing the role of federal and state corrections, community corrections, juvenile justice systems, and tribal and local jail systems in ensuring the successful reentry of ex-offenders into the applicants' communities; providing evidence of collaboration with state, local, and tribal agencies overseeing health, housing, child welfare, education, substance abuse, victim services, employment agencies, and local law enforcement agencies; providing a plan for analyzing the barriers (e.g., statutory, regulatory, rules-based, or practice-based) to reentry for ex-offenders in the applicants' communities; demonstrating that a state, local, territorial, or tribal reentry task force will be used to carry out the activities funded under the grant; providing a plan for continued collaboration with a local evaluator; and demonstrating that the applicant participated in the planning grant process, or engaged in a comparable reentry planning process. DOJ is also required to give priority consideration to applications for implementation grants that focus on areas with a disproportionate population of returning prisoners, received input from stakeholders and coordinated with prisoners families, demonstrate effective case assessment and management, review the process by which violation of community supervision are adjudicated, provide for an independent evaluation of reentry programs, target moderate and high-risk returning prisoners, and target returning prisoners with histories of homelessness, substance abuse, or mental illness. Under the amended program, applicants for implementation grants would be required to develop a strategic reentry plan that contains measurable three-year performance outcomes. Applicants would be required to develop a feasible goal for reducing recidivism using baseline data collected through the partnership with the local evaluator. Applicants are required to use, to the extent practicable, random assignment and controlled studies, or rigorous quasi-experimental studies with matched comparison groups, to determine the effectiveness of the program. As authorized by the Second Chance Act, grantees under the Adult and Juvenile State and Local Offender Demonstration program are required to submit annual reports to DOJ that identify the specific progress made toward achieving their strategic performance outcomes, which they are required to submit as a part of their reentry strategic plans. Data on performance measures only need to be submitted by grantees that receive an implementation grant. The act repeals some performance outcomes (i.e., increased housing opportunities, reduction in substance abuse, and increased participation in substance abuse and mental health services) and adds the following outcomes: increased number of staff trained to administer reentry services; increased proportion of eligible individuals served by the program; increased number of individuals receiving risk screening needs assessment and case planning services; increased enrollment in and completion of treatment services, including substance abuse and mental health services for offenders who need them; increased enrollment in and degrees earned from educational programs; increased number of individuals obtaining and maintaining employment; increased number of individuals obtaining and maintaining housing; increased self-reports of successful community living, including stability of living situation and positive family relationships; reduction in drug and alcohol use; and reduction in recidivism rates for individuals receiving reentry services after release, as compared to either baseline recidivism rates in the jurisdiction of the grantee or recidivism rates of the comparison or control group. The act allows applicants for implementation grants to include a cost-benefit analysis as a performance measure under their required reentry strategic plan. The act reauthorizes appropriations for the program at $35 million for each fiscal year from FY2019 to FY2023. The Second Chance Act authorized DOJ to make grants to states, local governments, and Indian tribes to develop, implement, and expand the use of family-based substance abuse treatment programs as an alternative to incarceration for parents who were convicted of nonviolent drug offenses and to provide prison-based family treatment programs for incarcerated parents of minor children. The Second Chance Reauthorization Act amends the authorization for the program to allow grants to be awarded to nonprofit organizations and requires DOJ to give priority consideration to nonprofit organizations that demonstrate a relationship with state and local criminal justice agencies, including the judiciary and prosecutorial agencies or local correctional agencies. The act reauthorizes appropriations for the program at $10 million for each fiscal year from FY2019 to FY2023. The Second Chance Act authorized a grant program to evaluate and improve academic and vocational education in prisons, jails, and juvenile facilities. This program authorizes DOJ to make grants to states, units of local government, territories, Indian tribes, and other public and private entities to identify and implement best practices related to the provision of academic and vocational education in prisons, jails, and juvenile facilities. Grantees are required to submit reports within 90 days of the end of the final fiscal year of a grant detailing the progress they have made, and to allow DOJ to evaluate improved academic and vocational education methods carried out with grants provided under this program. The Second Chance Reauthorization Act amends the authorizing legislation for this program to require DOJ to identify and publish best practices relating to academic and vocational education for offenders in prisons, jails, and juvenile facilities. In identifying best practices, the evaluations conducted under this program must be considered. The act reauthorizes appropriations for this program at $5 million for each fiscal year from FY2019 to FY2023. The Second Chance Act authorized DOJ to make grants to states, units of local government, territories, and Indian tribes to provide technology career training for prisoners. Grants could be awarded for programs that establish technology careers training programs for inmates in a prison, jail, or juvenile detention facility. The Second Chance Reauthorization Act expanded the scope of the program to allow grant funds to be used to provide any career training to those who are soon to be released and during transition and reentry into the community. The act makes nonprofit organizations an eligible applicant under the program. Under the legislation, grants funds could be used to provide subsidized employment if it is a part of a career training program. The act also requires DOJ to give priority consideration to any application for a grant that provides an assessment of local demand for employees in the geographic area to which offenders are likely to return, conducts individualized reentry career planning upon admission to a correctional facility or post-release employment planning for each offender served under the grant, demonstrates connections to local employers, and evaluates employment outcomes. The act reauthorizes appropriations for this program at $10 million for each fiscal year from FY2019 to FY2023. The Second Chance Act authorized DOJ to make grants to states, units of local governments, territories, and Indian tribes in order to improve drug treatment programs in prisons and reduce the post-prison use of alcohol and other drugs by long-term users under correctional supervision. Grants may be used to continue or improve existing drug treatment programs, develop and implement programs for long-term users, provide addiction recovery support services, or establish medication assisted treatment (MAT) services as part of any drug treatment program offered to prisoners. The Second Chance Reauthorization Act reauthorizes appropriations for this program at $15 million for each fiscal year from FY2019 to FY2023. The Second Chance Act authorized DOJ to make grants to nonprofit organizations and Indian tribes to provide mentoring and other transitional services for offenders being released into the community. Funds could be used for mentoring programs in prisons or jails and during reentry, programs providing transition services during reentry, and programs providing training for mentors on the criminal justice system and victims issues. The Second Chance Reauthorization Act amends the authorization for the program to pivot the focus toward providing community-based transitional services to former inmates returning to the community. Reflecting the change in focus, the reauthorization changed the name of the program to \"Community-based Mentoring and Transitional Services Grants to Nonprofit Organizations.\" The act specifies the transitional services that can be provided to returning inmates under the program, including educational, literacy, vocational, and the transitional jobs strategy; substance abuse treatment and services; coordinated supervision and services for offenders, including physical health care and comprehensive housing and mental health care; family services; and validated assessment tools to assess the risk factors of returning prisoners. The act reauthorizes appropriations for this program at $15 million for each fiscal year from FY2019 to FY2023. The Second Chance Reauthorization Act reauthorized and expanded the scope of a pilot program initially authorized under the Second Chance Act that allowed BOP to place certain elderly nonviolent offenders on home confinement to serve the remainder of their sentences. BOP was authorized to conduct this pilot program at one facility for FY2009 and FY2010. An offender eligible to be released through the program had to meet the following requirements: at least 65 years old; never have been convicted of a violent, sex-related, espionage, or terrorism offense; sentenced to less than life; served the greater of 10 years or 75% of his/her sentence; not received a determination by BOP to have a history of violence, or of engaging in conduct constituting a sex, espionage, or terrorism offense; not escaped or attempted to escape; received a determination that release to home detention would result in a substantial reduction in cost to the federal government; and received a determination that he/she is not a substantial risk of engaging in criminal conduct or of endangering any person or the public if released to home detention. The Second Chance Reauthorization Act reestablishes the pilot program and allows BOP to operate it at multiple facilities from FY2019 to FY2023. The act also modifies the eligibility criteria for elderly offenders so that any offenders who are at least 60 year old and have served two-thirds of their sentences can be placed on home confinement. The act also expands the program so that terminally ill offenders can be placed on home confinement. Eligibility criteria for home confinement for terminally ill offenders under the pilot program is the same as that for elderly offenders, except that terminally ill offenders of any age and who have served any portion of their sentences, even life sentences, are eligible for home confinement. Terminally ill prisoners are those who are deemed by a BOP medical doctor to need care at a nursing home, intermediate care facility, or assisted living facility, or those who have been diagnosed with a terminal illness. The Second Chance Act authorized appropriations for a series of reentry-related research projects, including the following: a study by the National Institute of Justice (NIJ) identifying the number and characteristics of children with incarcerated parents and their likelihood of engaging in criminal activity; a study by NIJ identifying mechanisms to compare recidivism rates between states; a study by NIJ on the characteristics of individuals released from prison who do not recidivate; a study by the Bureau of Justice Statistics (BJS) analyzing the populations that present unique reentry challenges; studies by BJS to determine the characteristics of individuals who return to prison, jail, or a juvenile facility (including which individuals pose the highest risk to the community); annual reports by BJS on the profile of the population leaving prisons, jails, or juvenile facilities and entering the community; a national recidivism study by BJS every three years; a study by BJS of violations and revocation of community-based supervision (e.g., probation, parole, or other forms of post-incarceration supervision) violations; providing grants to states to fund studies aimed at improving data collection on former prisoners who have their post-incarceration supervision revoked in order to identify which such individuals pose the greatest risk to the community; and collecting data and developing best practices concerning the communication and coordination between state corrections and child welfare agencies, to ensure the safety and support of children of incarcerated parents. The Second Chance Reauthorization Act reauthorizes appropriations for these research projects at $5 million for each fiscal year from FY2019 to FY2023. Within five years of the enactment of the Second Chance Reauthorization Act, NIJ is required to evaluate grants used by DOJ to support reentry and recidivism reduction programs at the state, local, tribal, and federal levels. Specifically, NIJ is required to evaluate the following: whether the programs are cost-effective, including the extent to which the programs improved reentry outcomes; whether the programs effectively delivered services; the effects programs had on the communities and participants involved; the effects programs had on related programs and activities; the extent to which programs met the needs of various demographic groups; the quality and effectiveness of technical assistance provided by DOJ to grantees for implementing such programs; and other factors as may be appropriate. NIJ is required to identify outcome measures, including employment, housing, education, and public safety, that are the goals of programs authorized by the Second Chance Act and metrics for measuring whether those programs achieved the intended results. As a condition of receiving funding under programs authorized by the Second Chance Act, grantees are required to collect and report data to DOJ related to those metrics. NIJ is required to make data collected during evaluations of Second Chance Act programs publicly available in a manner that protects the confidentiality of program participants and is consistent with applicable law. NIJ is also required to make the final evaluation reports publicly available. The Second Chance Reauthorization Act requires BOP to develop policies for wardens of prisons and community-based facilities to enter into recidivism-reducing partnerships with nonprofit and other private organizations, including faith-based and community-based organizations to deliver recidivism reduction programming. The Second Chance Reauthorization Act repealed the authorization for the State, Tribal, and Local Reentry Courts program (Section 111 of the Second Chance Act), the Responsible Reintegration of Offenders program (Section 212), and the Study on the Effectiveness of Depot Naltrexone for Heroin Addiction program (Section 244). In addition to correctional and sentencing reform and reauthorizing the Second Chance Act, the First Step Act contained a series of other criminal justice-related provisions. The act amended 18 U.S.C. Section 3624(b) so that federal prisoners can earn up to 54 days of good time credit for every year of their imposed sentence rather than for every year of their sentenced served . Prior to the amendment, BOP interpreted the good time credit provision in Section 3624(b) to mean that prisoners are eligible to earn 54 days of good time credit for every year they serve. For example, this means that an offender who was sentenced to 10 years in prison and earned the maximum good time credits each year could be released after serving eight years and 260 days, having earned 54 days of good time credit for each year of the sentence served, but in effect, only 47 days of good time credit for every year of the imposed sentence. The act requires BOP to provide a secure storage area outside of the secure perimeter of a correctional institution for qualified law enforcement officers employed by BOP to store firearms or allow this class of employees to store firearms in their personal vehicles in lockboxes approved by BOP. The act also requires BOP, notwithstanding any other provision of law, to allow these same employees to carry concealed firearms on prison grounds but outside of the secure perimeter of the correctional institution. The act prohibits BOP or the U.S. Marshals Service (USMS) from using restraints on pregnant inmates in their custody. The prohibition on the use of restraints begins on the date that pregnancy is confirmed by a healthcare professional. The restriction ends when the inmate completes postpartum recovery. The prohibition on the use of restraints does not apply if the inmate is determined to be an immediate and credible flight risk or poses an immediate and serious threat of harm to herself or others that cannot be reasonably prevented by other means, or a healthcare professional determines that the use of restraints is appropriate for the medical safety of the inmate. Only the least restrictive restraints necessary to prevent escape or harm can be used. The exception to the use of restraints does not permit BOP or USMS to use them around the ankles, legs, or waist of an inmate; restrain an inmate's hands behind her back; use four-point restraints; or attach an inmate to another inmate. Upon the request of a healthcare professional, correctional officials or deputy marshals shall refrain from using restraints on an inmate or shall remove restraints used on an inmate. If restraints are used on a pregnant inmate, the correctional official or deputy marshal who used the restraints is required to submit a report within 30 days to BOP or USMS, and the healthcare provider responsible for the inmate's health and safety, that describes the facts and circumstances surrounding the use of the restraints, including the reason(s) for using them; the details of their use, including the type of restraint and length of time they were used; and any observable physical effects on the prisoner. BOP and USMS are required to develop training guidelines regarding the use of restraints on inmates during pregnancy, labor, and postpartum recovery. The guidelines are required to include the following: how to identify certain symptoms of pregnancy that require immediate referral to a healthcare professional; circumstances under which exceptions to the prohibition on the use of restraints would apply; in cases where an exception applies, how to use restraints in a way that does not harm the inmate, the fetus, or the newborn; the information required to be reported when restraints are used; and the right of a healthcare professional to request that restraints not be used and the requirement to comply with such a request. The act amends 18 U.S.C. Section 3621(b) to require BOP to house prisoners in facilities as close to their primary residence as possible, and to the extent practicable, within 500 driving miles, subject to a series of considerations. When making decisions about where to house a prisoner, BOP must consider bedspace availability, the prisoner's security designation, the prisoner's programmatic needs, the prisoner's mental and medical health needs, any request made by the prisoner related to faith-based needs, recommendations of the sentencing court, and other security concerns. BOP is also required, subject to these considerations and a prisoner's preference for staying at his/her current facility or being transferred, to transfer a prisoner to a facility closer to his/her primary residence even if the prisoner is currently housed at a facility within 500 driving miles. The act amends 18 U.S.C. Section 3624(c)(2) to require BOP, to the extent practicable, to place prisoners with lower risk levels and lower needs on home confinement for the maximum amount of time permitted under this paragraph. Under Section 3624(c)(2), BOP is authorized to place prisoners in prerelease custody on home confinement for 10% of the term of imprisonment or six months, whichever is shorter. The act amends 18 U.S.C. Section 3582(c) regarding when a court can modify a term of imprisonment once it is imposed. Under Section 3582(c)(1)(A), a court, upon a petition from BOP, can reduce a prisoner's sentence and impose a term of probation or supervised release, with or without conditions, equal to the amount of time remaining on the prisoner's sentence if the court finds that \"extraordinary and compelling reasons warrant such a reduction,\" or the prisoner is at least 70 years of age, the prisoner has served at least 30 years of his/her sentence, and a determination has been made by BOP that the prisoner is not a danger to the safety of any other person or the community. This is sometimes referred to as compassionate release . The amendments made by the act allow the court to reduce a prisoner's sentence under Section 3582(c)(1)(A) upon a petition from BOP or the prisoner if the prisoner has fully exhausted all administrative rights to appeal a failure by BOP to bring a motion on the prisoner's behalf or upon a lapse of 30 days from the receipt of such a request by the warden of the prisoner's facility, whichever is earlier. The act also requires BOP within 72 hours of a prisoner being diagnosed with a terminal illness to notify the prisoner's attorney, partner, and family about the diagnosis and inform them of their option to submit a petition for compassionate release on the prisoner's behalf. Within seven days, BOP is required to provide the prisoner's partner and family with an opportunity to visit. BOP is also required to provide assistance to the prisoner with drafting and submitting a petition for compassionate release if such assistance is requested by the prisoner or the prisoner's attorney, partner, or family. BOP is required to process requests for compassionate release within 14 days. If a prisoner is mentally or physically unable to submit a petition for compassionate release, BOP is required to notify the prisoner's attorney, partner, or family that they can submit a petition on the prisoner's behalf. BOP is required to accept and process requests for compassionate release that are drafted by the prisoner's attorney, partner, or family. BOP is also required to assist prisoners who are mentally or physically unable to prepare their own request if such assistance is requested by the prisoner's attorney, partner, or family. BOP is required to make available to prisoners information regarding their ability to request compassionate release, the timeline for submitting a request, and their right to appeal to a court the denial of a request after exhausting all administrative appeals BOP makes available to prisoners. This information is to appear in written materials for prisoners and staff, and be visibly posted The act also requires BOP to submit annual reports to the House and Senate Judiciary Committees that provides data on how BOP is processing applications for compassionate release. The act amends the authorization for the federal prisoner reentry initiative (34 U.S.C. Section 60541(b)) to require BOP to assist prisoners and offenders who were sentenced to a period of community confinement with obtaining a social security card, driver's license or other official photo identification, and birth certificate prior to being released from custody. The act also amends 18 U.S.C. Section 4042(a) to require BOP to establish prerelease planning procedures to help prisoners apply for federal and state benefits and obtain identification, including a social security card, driver's license or other official photo identification, and birth certificate. BOP is required to help prisoners secure these benefits, subject to any limitations in law, prior to being released. The act also amends Section 4042(a) to require prerelease planning to include any individuals who only served a sentence of community confinement. The act authorizes the Federal Prison Industries (FPI, also known by its trade name, UNICOR) to sell products to public entities for use in correctional facilities, disaster relief, or emergency response; to the District of Columbia government; and to nonprofit organizations. However, FPI is not allowed to sell office furniture to nonprofit organizations. The act also requires BOP to set aside 15% of the wages paid to prisoners with FPI work assignments in a fund that will be payable to the prisoner upon release to aid with the cost of transitioning back into the community. The act requires BOP to provide training to correctional officers and other BOP employees (including correctional officers and employees of facilities that contract with BOP to house prisoners) on how to de-escalate encounters between a law enforcement officer or an officer or employee of BOP and a civilian or a prisoner, and how to identify and appropriately respond to incidents that involve people with mental illness or other cognitive deficits. Within 90 days of enactment of the act, BOP is required to submit a report to the House and Senate Judiciary and Appropriations Committees that assesses the availability of, and the capacity of BOP to provide, evidence-based treatment to prisoners with opioid and heroin abuse problems, including MAT, where appropriate. As a part of the report, BOP is required to provide a plan to expand access to evidence-based treatment for prisoners with heroin and opioid abuse problems, including MAT, where appropriate. After submitting the report, BOP is required to execute the plan it outlines in the report. The act places a similar requirement on the Administrative Office of the United States Courts (AOUSC) regarding evidence-based treatment for opioid and heroin abuse for prisoners serving a term of supervised release. AOUSC has 120 days after enactment to submit its report to the House and Senate Judiciary and Appropriations Committees. The act requires BOP to establish two pilot programs that are to run for five years in at least 20 facilities. The first is a mentoring program that is to pair youth with volunteer mentors from faith-based or community organizations. The other program is to use prisoners to provide training and therapy to animals seized by federal law enforcement officers and to abandoned or rescued animals in the care of organizations that provide shelter and similar services. The act requires BJS to expand data collected under its National Prisoner Statistics program to include 26 new data elements related to federal prisoners. Some of the data the act requires BJS to collect include the following: the number of prisoners who are veterans; the number of prisoners who have been placed in solitary confinement in the past year; the number of female prisoners who are known to be pregnant and the result of those pregnancies; the number of prisoners who received MAT to treat a substance abuse problem; the number of prisoners who are the parent or guardian of a minor child; the number of assaults on BOP staff by prisoners and the number of criminal prosecutions that resulted from those assaults; the capacity of recidivism reduction programs and productive activities to accommodate eligible prisoners at each BOP facility; and the number of prisoners enrolled in recidivism reduction programs and productive activities at each BOP facility, broken down by risk level and by program, and the number of those enrolled prisoners who successfully completed each program. Starting one year after the enactment of the act, BJS is required to submit an annual report to the House and Senate Judiciary Committees for a period of seven years that contains the data specified in the act. The act requires BOP to provide tampons and sanitary napkins that meet industry standards to prisoners for free and in a quantity that meets the healthcare needs of each prisoner. The act requires the Attorney General to coordinate with the Secretary of Housing and Urban Development, the Secretaries of Labor, Education, Health and Human Services, Veterans Affairs, and Agriculture, and the heads of other relevant federal agencies, as well as interested persons, service providers, nonprofit organizations, and state, tribal, and local governments, on federal reentry policies, programs, and activities, with an emphasis on evidence-based practices and the elimination of duplication of services. The Attorney General, in consultation with the secretaries specified in the act, is required to submit a report to Congress within two years of the enactment of the act that summarizes the achievements of the coordination, and includes recommendations for Congress on how to further reduce barriers to successful reentry. The act prohibits juvenile facilities from using room confinement for discipline, punishment, retaliation, or any reason other than as a temporary response to a covered juvenile's behavior that poses a serious and immediate risk of physical harm to any individual. The provisions of the act only apply to juveniles who have been charged with an alleged act of juvenile delinquency; have been adjudicated as delinquent under Chapter 403, Title 18 of the U.S. Code; or are facing charges as an adult in a federal district court for an alleged criminal offense. Juvenile facilities are required to try to use less restrictive techniques, such as talking with the juvenile in an attempt to de-escalate the situation or allowing a mental health professional to talk to the juvenile, before placing the juvenile in room confinement. If the less restrictive techniques do not work and the juvenile is placed in room confinement, the staff of the juvenile facility is required to tell the juvenile why he/she is being placed in room confinement. Staff are also required to inform the juvenile that he/she will be released from room confinement as soon as he/she regains self-control and no longer poses a threat of physical harm to himself/herself or others. If a juvenile who poses a threat of harm to others does not sufficiently regain self-control, staff must inform the juvenile that he/she will be released within three hours of being placed in room confinement, or in the case of a juvenile who poses a threat of harm to himself/herself, that he/she will be released within 30 minutes of being placed in room confinement. If after the maximum period of confinement allowed the juvenile continues to pose a threat of physical harm to himself/herself or others, the juvenile is to be transferred to another juvenile facility or another location in the current facility where services can be provided to him/her. If a qualified mental health professional believes that the level of crisis services available to the juvenile are not adequate, the staff at the juvenile facility is to transfer the juvenile to a facility that can provide adequate services. The act prohibits juvenile facilities from using consecutive periods of room confinement on juveniles. ", "summary": "On December 21, 2018, President Trump signed into law the First Step Act of 2018 (P.L. 115-391). The act was the culmination of several years of congressional debate about what Congress might do to reduce the size of the federal prison population while also creating mechanisms to maintain public safety. This report provides an overview of the provisions of the act. The act has three major components: (1) correctional reform via the establishment of a risk and needs assessment system at the Bureau of Prisons (BOP), (2) sentencing reform via changes to penalties for some federal offenses, and (3) the reauthorization of the Second Chance Act of 2007 (P.L. 110-199). The act also contains a series of other criminal justice-related provisions. The First Step Act requires the Department of Justice (DOJ) to develop a risk and needs assessment system to be used by BOP to assess the recidivism risk of all federal prisoners and to place prisoners in programs and productive activities to reduce this risk. Prisoners who successfully complete recidivism reduction programming and productive activities can earn additional time credits that will allow them to be placed in prerelease custody (i.e., home confinement or a Residential Reentry Center) earlier than they were previously allowed. The act prohibits prisoners convicted of any one of dozens of offenses from earning additional time credits, though these prisoners can earn other benefits, such as additional visitation time, for successfully completing recidivism reduction programming. Offenses that make prisoners ineligible to earn additional time credits can generally be categorized as violent, terrorism, espionage, human trafficking, sex and sexual exploitation, repeat felon in possession of firearm, certain fraud, or high-level drug offenses. The act makes changes to the penalties for some federal offenses. The act modified mandatory minimum prison sentences for some drug traffickers with prior drug convictions by increasing the threshold for prior convictions that count toward triggering higher mandatory minimums for repeat offenders, reducing the 20-year mandatory minimum (applicable where the offender has one prior qualifying conviction) to a 15-year mandatory minimum, and reducing a life-in-prison mandatory minimum (applicable where the offender has two or more prior qualifying convictions) to a 25-year mandatory minimum. The act made the provisions of the Fair Sentencing Act of 2010 (P.L. 111-220) retroactive so that currently incarcerated offenders who received longer sentences for possession of crack cocaine than they would have received if sentenced for possession of the same amount of powder cocaine before the enactment of the Fair Sentencing Act can submit a petition in federal court to have their sentences reduced. The act also expands the safety valve provision, which allows courts to sentence low-level, nonviolent drug offenders with minor criminal histories to less than the required mandatory minimum for an offense. Finally, the act eliminated the stacking provision, which allowed prosecutors to charge offenders with a second and subsequent use of a firearm in furtherance of a drug trafficking or violent offense in the same criminal incident, which, if the offender is convicted, carries a 25-year mandatory minimum. Now, the mandatory minimum will only apply when the offender has a prior conviction for use of a firearm in furtherance of a drug trafficking or violent crime from a previous criminal prosecution. The First Step Act contains the Second Chance Reauthorization Act of 2018. This act reauthorizes appropriations for and expands the scope of some grant programs that were initially authorized under the Second Chance Act of 2007 (P.L. 110-199). The reauthorized programs include the Adult and Juvenile State and Local Offender Demonstration Program, Grants for Family-Based Substance Abuse Treatment, Careers Training Demonstration Grants, the Offender Reentry Substance Abuse and Criminal Justice Collaboration Program, and the Community-Based Mentoring and Transitional Service Grants to Nonprofit Organizations Program. The act also reauthorized and modified a pilot program that allows BOP to place certain elderly and terminally ill prisoners on home confinement to serve the remainder of their sentences. Finally, the First Step Act includes a series of other criminal justice-related provisions. These provisions include a prohibition on the use of restraints on pregnant inmates in the custody of BOP and the U.S. Marshals Service; a change to the way good time credit is calculated so prisoners can earn 54 days of good time credits for each year of imposed sentence rather than for each year of time served; a requirement for BOP to provide a way for employees to safely store firearms on BOP grounds; a requirement for BOP to try to place prisoners within 500 driving miles of their primary residences; authority for the Federal Prison Industries to sell products to public entities for use in correctional facilities, disaster relief, or emergency response, to the District of Columbia government, and to nonprofit organizations; a prohibition against the use of solitary confinement for juvenile delinquents in federal custody; and a requirement that BOP aid prisoners with obtaining identification before they are released.", "document_type": "crs"}
{"report": "The Social Security program pays benefits to retired or disabled workers and their family members and to the family members of deceased workers. As of March 2019, there were 63.3 million Social Security beneficiaries. Approximately 70% of those beneficiaries were retired workers and 13% were disabled workers. The remaining beneficiaries were the survivors of deceased insured workers or the spouses and children of retired or disabled workers. Social Security is financed primarily by payroll taxes paid by covered workers and their employers. The program is also credited with federal income taxes paid by some beneficiaries on a portion of their benefits, reimbursements from the General Fund of the Treasury for various purposes, and interest income from investments held by the Social Security trust funds. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds. The Secretary of the Treasury (the Managing Trustee of the Social Security trust funds) is required by law to invest Social Security revenues in securities backed by the U.S. government. The purchase of U.S. government securities allows any surplus Social Security revenues to be used by the federal government for other (non-Social Security) spending needs at the time. This trust fund financing mechanism allows the General Fund of the Treasury to borrow from the Social Security trust funds. In turn, the General Fund pays back the trust funds (with interest) when the trust funds redeem the securities. The process of investing Social Security revenues in securities and redeeming the securities as needed to pay benefits is ongoing. The Social Security trust funds are both designated accounts within the U.S. Tr easury and the accumulated holdings of special U.S. government obligations. Both represent the funds designated to pay current and future Social Security benefits. The Social Security program is financed primarily by revenues from Federal Insurance Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA) taxes. FICA taxes are paid by both employers and employees, but it is employers who remit the taxes to the U.S. Treasury. Employers remit FICA taxes on a regular basis throughout the year (e.g., weekly, monthly, quarterly or annually), depending on the employer's level of total employment taxes (including FICA and federal personal income tax withholding). The FICA tax rate of 7.65% each for employers and employees has two components: 6.2% for Social Security and 1.45% for Medicare Hospital Insurance. The SECA tax rate is 15.3% for self-employed individuals, with 12.4% for Social Security and 2.9% for Medicare Hospital Insurance. The respective Social Security contribution rates are levied on covered wages and net self-employment income up to $132,900 in 2019. Self-employed individuals may deduct one-half of the SECA taxes for federal income tax purposes. SECA taxes are normally paid once a year as part of filing an annual individual income tax return. In 2018, Social Security payroll taxes totaled $885.1 billion and accounted for 88.2% of the program's total income. In addition to payroll taxes, the Social Security program receives income from other sources. First, certain Social Security beneficiaries must include a portion of their Social Security benefits in taxable income for the federal income tax, and the Social Security program receives a portion of those taxes. In 2018, revenue from the taxation of benefits totaled $35.0 billion, accounting for 3.5% of the program's total income. Second, the program receives reimbursements from the General Fund of the Treasury for a variety of purposes. General Fund reimbursements totaled $0.2 billion, accounting for less than 0.1% of the program's total income. Finally, the Social Security program receives interest income from the U.S. Treasury on its investments in special U.S. government obligations. Interest income totaled $83.3 billion, accounting for 8.3% of the program's total income. The Internal Revenue Service (IRS) processes the tax returns and tax payments for federal employment taxes and federal individual income taxes. All of the tax payments are deposited in the U.S. Treasury along with all other receipts from the public for the federal government. Within the U.S. Treasury, there are numerous accounts established for internal accounting purposes. Although all of the monies within the U.S. Treasury are federal monies, the designation of an account as a trust fund allows the government to track revenues dedicated for specific purposes (as well as expenditures). In addition, the government can affect the level of revenues and expenditures associated with a trust fund through changes in the law. Social Security program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: (1) the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and (2) the Federal Disability Insurance (DI) Trust Fund. Under current law, the two trust funds are legally distinct and do not have authority to borrow from each other. This is important given projections showing that the asset reserves held by the OASI fund will be depleted in 2034, whereas the asset reserves held by the DI fund will be depleted in 2052. Following the depletion of trust fund reserves (2052 for DI and 2034 for OASI), continuing income is projected to cover 91% of DI scheduled benefits and 77% of OASI scheduled benefits. In the past, Congress has authorized temporary interfund borrowing and payroll tax reallocations between OASI and DI to address funding imbalances. This CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds . On a combined basis, the trust funds are projected to remain solvent until 2035, at which point continuing income is projected to cover 80% of program costs. (For a discussion of the status of the DI trust fund, see CRS Report R43318, The Social Security Disability Insurance (DI) Trust Fund: Background and Current Status .) The Social Security trust funds receive a credit equal to the Social Security payroll taxes deposited in the U.S. Treasury by the IRS. The payroll taxes are allocated between the OASI and DI trust funds based on a proportion specified by law. A provision included in the Bipartisan Budget Act of 2015 ( P.L. 114-74 ) temporarily directs a larger share of total payroll tax revenues to the DI fund. For 2016 to 2018, the 12.4% payroll tax rate is allocated as follows: 10.03% for the OASI fund and 2.37% for the DI fund. Beginning in 2019, the allocation reverts back to 10.6% for the OASI fund and 1.8% for the DI fund. The U.S. Treasury makes Social Security benefit payments to individuals on a monthly basis, as directed by the Social Security Administration (SSA) as to whom to pay and the amount of the payment. When benefit payments are made by the U.S. Treasury, the Social Security trust funds are debited for the payments. Periodically, the Social Security trust funds are also debited for the administrative costs of the Social Security program. These administrative costs are incurred by several government agencies, including SSA, the U.S. Treasury, and the IRS. The annual revenues to the Social Security trust funds are used to pay current Social Security benefits and administrative expenses. If, in any year, revenues are greater than costs, the surplus Social Security revenues in the U.S. Treasury are available for spending by the federal government on other (non-Social Security) spending needs at the time. If, in any year, costs are greater than revenues, the cash flow deficit is offset by selling some of the accumulated holdings of the trust funds (U.S. government securities) to help pay benefits and administrative expenses. There are two measures of Social Security trust fund operations: the annual cash flow operations and the accumulated holdings (or trust fund balance). The annual cash flow operations of the Social Security trust funds are a measure of current revenues and current costs. The cash flow operations are positive when current revenues exceed costs (a cash flow surplus) and negative when current costs exceed revenues (a cash flow deficit). In years with cash flow deficits, the Social Security program (unlike other federal programs that operate without a trust fund) may use the accumulated holdings of the Social Security trust funds from prior years to help pay benefits and administrative expenses. Although Social Security is a pay-as-you-go system, meaning that current revenues are used to pay current costs, changes made to the Social Security program in 1983 began a sustained period of annual cash flow surpluses through 2009. Since 2010, however, Social Security has had annual cash flow deficits (program costs have exceeded tax revenues). The 2019 Annual Report of the Social Security Board of Trustees projects that, under their intermediate assumptions, annual cash flow deficits will continue throughout the 75-year projection period (2019-2093). At the end of 2018, the Social Security trust funds had accumulated holdings (asset reserves) of more than $2.9 trillion. The 2019 Annual Report projects that the trust funds will have asset reserves (a positive balance) until 2035, meaning that Social Security benefits scheduled under current law can be paid in full and on time until then. This is the same year projected in last year's report. In addition, the 2019 Annual Report shows the 75-year actuarial deficit for the Social Security trust funds. The actuarial deficit is the difference between the present discounted value of scheduled benefits and the present discounted value of future taxes plus asset reserves held by the trust funds. It can be viewed as the amount by which the payroll tax rate would have to be increased to support the level of benefits scheduled under current law throughout the 75-year projection period (or, roughly the amount by which the payroll tax rate would have to be increased for the trust funds to remain fully solvent throughout the 75-year period). The 2019 Annual Report projects that the 75-year actuarial deficit for the trust funds is equal to 2.78% of taxable payroll. With respect to the change in the projected 75-year actuarial deficit, the trustees state, A 0.05 percentage point increase in the OASDI actuarial deficit would have been expected if nothing had changed other than the one-year shift in the valuation period from 2018 through 2092 to 2019 through 2093. The effects of updated demographic, economic, and programmatic data, and improved methodologies, collectively reduced the actuarial deficit by 0.11 percent of taxable payroll, offsetting most of the effect of changing the valuation period. As noted above, on a combined basis, the Social Security trust funds are projected to have asset reserves sufficient to pay full scheduled benefits until 2035 . Considered separately, the OASI Trust Fund is projected to have sufficient asset reserves until 2034 (last year's report also projected 2034 as the depletion year) and the DI Trust Fund is projected to have sufficient asset reserves until 2052 (20 years later than projected in last year's report). The trustees note, In last year's report, the projected reserve depletion year was the same for OASI and 20 years earlier (2032) for DI. The change in the reserve depletion for DI is largely due to continuing favorable experience for DI applications and benefit awards. Disability applications have been declining steadily since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014. Relative to last year's Trustees Report, disability incidence rates are lower in 2018. They are also assumed to rise more gradually from current levels to reach ultimate levels at the end of 10 years that are slightly lower. Accordingly, the projected Trust Fund depletion date is 20 years later and the 75-year actuarial deficit (0.12 percent of taxable payroll) is 0.09 percentage points lower than was projected last year. Table 1 shows the annual cash flow operations of the Social Security trust funds (noninterest income, cost, and cash flow surplus/deficit) for the historical period 1957 to 2018. From 1957 to 1983, the last time Congress enacted major amendments to the program, the Social Security trust funds operated with cash flow deficits (cost exceeded noninterest income) in 20 of the 28 years. Since 1984, the trust funds have operated with cash flow deficits in nine of the past 35 years (2010 to 2018). Table 2 shows projected cash flow operations of the Social Security trust funds (noninterest income, cost, and cash flow deficits) for the 2019 to 2034 period, as projected by the trustees in the 2019 Annual Report (under the intermediate assumptions). One way to measure the cash flow operations of the trust funds is to take the ratio of noninterest income to cost for each year. A ratio greater than 100% indicates positive cash flow (a cash flow surplus); a ratio less than 100% indicates negative cash flow (a cash flow deficit). Figure 1 shows the ratio of current noninterest income to current cost for the Social Security trust funds each year over the historical period 1957 to 2018 and over the 2019 to 2034 period, as projected by the trustees in the 2019 Annual Report (under the intermediate assumptions). As shown in the figure, in 2009, noninterest income of $689.2 billion divided by a cost of $685.8 billion results in a ratio just over 100% (100.5%), indicating a cash flow surplus for the Social Security trust funds that year. By comparison, in 2018, noninterest income of $920.1 billion divided by a cost of $1,000.2 billion results in a ratio of 92.0%, indicating a cash flow deficit. In the 2019 Annual Report, the Social Security trustees project that the ratio of current noninterest income to current cost will remain below 100% for the 75-year projection period (2019-2093), with the gap between noninterest income and cost increasing over time (under the intermediate assumptions). When the Social Security trust funds operate with annual cash flow deficits, the U.S. Treasury can continue to pay benefits scheduled under current law as long as the accumulated balance in the trust funds is sufficient to cover the costs. This is because the Social Security program has budget authority to pay benefits in full and on time as long as there is an adequate balance in the Social Security trust funds (the designated accounts). When current Social Security revenues are not sufficient to pay benefits, however, the U.S. government must raise the funds necessary to honor the redemption of U.S. government obligations held by the Social Security trust funds as they are needed to pay benefits. If there are no surplus governmental receipts, the U.S. government may raise the necessary funds by increasing taxes or other income, reducing non-Social Security spending, borrowing from the public (i.e., replacing bonds held by the trust funds with bonds held by the public), or a combination of these measures. The Secretary of the Treasury is required by law to invest Social Security revenues in securities backed by the U.S. government. In addition, the Social Security trust funds receive interest on its holdings of special U.S. government obligations. Each U.S. government security issued by the U.S. Treasury for purchase by the Social Security trust funds must be a paper instrument in the form of a bond, note, or certificate of indebtedness. Specifically, Section 201(d) of the Social Security Act states, Each obligation issued for purchase by the Trust Funds under this subsection shall be evidenced by a paper instrument in the form of a bond, note, or certificate of indebtedness issued by the Secretary of the Treasury setting forth the principal amount, date of maturity, and interest rate of the obligation, and stating on its face that the obligation shall be incontestable in the hands of the Trust Fund to which it is issued, that the obligation is supported by the full faith and credit of the United States, and that the United States is pledged to the payment of the obligation with respect to both principal and interest. The Managing Trustee may purchase other interest-bearing obligations of the United States or obligations guaranteed as to both principal and interest by the United States, on original issue or at the market price, only where he determines that the purchase of such other obligations is in the public interest. Any interest or proceeds from the sale of U.S. government securities held by the Social Security trust funds must be paid in the form of paper checks from the General Fund of the Treasury to the Social Security trust funds. The interest rates paid on the securities issued to the Social Security trust funds are tied to market rates. For internal federal accounting purposes, when special U.S. government obligations are purchased by the Social Security trust funds, the U.S. Treasury is shifting surplus Social Security revenues from one government account (the Social Security trust funds) to another government account (the General Fund). The special U.S. government obligations are physical documents held by SSA, not the U.S. Treasury. The securities held by the Social Security trust funds are redeemed on a regular basis. These special U.S. government obligations, however, are not resources for the federal government because they represent both an asset and a liability for the government. For federal budget purposes, on-budget status generally refers to programs that are included in the annual congressional budget process, whereas off-budget status generally refers to programs that are not included in the annual congressional budget process. Social Security is a federal government program that, like the Postal Service, has had its receipts and (most) outlays designated by law as off budget. The off-budget designation, however, has no practical effect on program funding, spending, or operations. The annual congressional budget resolution, in its legislative language, separates the off-budget totals (receipts and outlays) from the on-budget totals (receipts and outlays). The report language accompanying the congressional budget resolution usually shows the unified budget totals (which combine the on- and off-budget amounts) as well as the separate on- and off-budget totals. The President's budget tends to use the unified budget measures in discussing the budget totals. The President's budget documents also include the totals for the on- and off-budget components, as required by law. The Congressional Budget Office uses the unified budget numbers in its analyses of the budget; it generally does not include on- and off-budget data in its regular annual reports. The unified budget framework is important because it includes all federal receipts and outlays, providing a more comprehensive picture of the size of the federal government and the federal budget's impact on the economy. In the unified budget, the Social Security program is a large source of both federal receipts (35.2% in FY2018) and federal outlays (25.1% in FY2018). For purposes of the unified budget, the annual Social Security cash flow surplus or deficit is counted in determining the overall federal budget surplus or deficit. The Social Security trust funds can be viewed as trust funds, similar to any private trust funds, that are to be used for paying current and future benefits (and administrative expenses). By law, the Social Security revenues credited to the trust funds (within the U.S. Treasury) are invested in non-marketable U.S. government obligations. These obligations are physical (paper) documents issued to the trust funds and held by SSA. When the obligations are redeemed, the U.S. Treasury must issue a check (a physical document) to the Social Security trust funds for the interest earned on the obligations. Unlike a private trust that may hold a variety of assets and obligations of different borrowers, the Social Security trust funds can hold only U.S. government obligations. The sale of these obligations by the U.S. government to the Social Security trust funds is federal government borrowing (from itself) and counts against the federal debt limit. The requirement that the Social Security trust funds purchase U.S. government obligations serves several purposes, such as offering a mechanism for the Social Security program to recoup the surplus revenues loaned to the rest of the government; paying interest so that the loan of the surplus revenues does not lose value over time; ensuring that the Social Security trust funds (and not other government accounts) receives credit for the interest earnings; ensuring a level of return (interest) to the Social Security trust funds; and providing a means outside of the securities market for the U.S. government to borrow funds. The accumulated holdings of the Social Security trust funds represent the sum of annual surplus Social Security revenues (for all past years) that were invested in U.S. government obligations, plus the interest earned on those obligations. As a result of surplus Social Security revenues from 1984 to 2009 and the interest income credited to the Social Security trust funds, the accumulated holdings of the Social Security trust funds totaled about $2.9 trillion at the end of calendar year 2018. It is the accumulated holdings of the Social Security trust funds (or the trust fund balance) that many people refer to when discussing the Social Security trust funds. Table 3 shows the accumulated holdings of the Social Security trust funds for the historical period 1957 to 2018. Table 4 shows the projected accumulated holdings of the Social Security trust funds for the 2019 to 2034 period, as projected by the Social Security trustees in the 2019 Annual Report (under the intermediate assumptions). The Social Security trustees project that in 2020 the program's total cost will exceed its total income. Under intermediate assumptions, this relationship is projected to continue until the trust funds are depleted in 2034. The Social Security trustees project that, on average over the next 75 years (2019 to 2093), program costs will exceed income by an amount equal to 2.78% of taxable payroll (on average, costs are projected to exceed income by at least 20%). The gap between income and costs, however, is projected to increase over the 75-year period. For example, in 2035, the cost of the program is projected to exceed income by an amount equal to 3.15% of taxable payroll (costs are projected to exceed income by about 19%). By 2093, the cost of the program is projected to exceed income by an amount equal to 4.11% of taxable payroll (costs are projected to exceed income by about 24%). For illustration purposes, the trustees project that the Social Security trust funds would remain solvent throughout the 75-year projection period if, for example, revenues were increased by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.70 percentage points (from 12.40% to 15.10%; a relative increase of 21.8%); or benefits scheduled under current law were reduced by an amount equivalent to an immediate and permanent reduction of (1) about 17% if applied to all current and future beneficiaries, or (2) about 20% if applied only to those who become eligible for benefits in 2019 or later; or some combination of these approaches were adopted. As part of the annual congressional budget process, the level of federal debt (the federal debt limit) is established for the budget by Congress. The federal debt limit includes debt held by the public, as well as the internal debt of the U.S. government (i.e., debt held by government accounts). Borrowing from the public and the investment of the Social Security trust funds in special U.S. government obligations both fall under the restrictions of the federal debt limit. This means that the balance of the Social Security trust funds has implications for the federal debt limit. The accumulated holdings of the Social Security trust funds represent funds designated to pay current and future benefits. When current Social Security tax revenues fall below the level needed to pay benefits, however, these funds become available only as the federal government raises the resources needed to redeem the securities held by the trust funds. The securities are a promise by the federal government to raise the necessary funds. In past years, when Social Security was operating with annual cash flow surpluses, Social Security's surplus revenues were invested in U.S. government securities and used at the time to pay for other federal government activities. Social Security's past surplus revenues, therefore, are not available to finance benefits directly when Social Security is operating with annual cash flow deficits, as it does today. The securities held by the trust funds must be redeemed for Social Security benefits to be paid. Stated another way, when Social Security is operating with a cash flow deficit, the program relies in part on the accumulated holdings of the trust funds to pay benefits and administrative expenses. Because the trust funds hold U.S. government securities that are redeemed with general revenues, there is increased reliance on the General Fund of the Treasury. With respect to reliance on the General Fund when Social Security is operating with a cash flow deficit, it is important to note that Social Security does not have authority to borrow from the General Fund. Social Security cannot draw upon general revenues to make up for any current funding shortfall. Rather, Social Security relies on revenues that were collected for the program in previous years and used by the federal government at the time for other (non-Social Security) spending needs, plus the interest earned on its trust fund investments. Social Security draws on its own previously collected tax revenues and interest income (accumulated trust fund holdings) when current Social Security tax revenues fall below current program expenditures. As the trustees point out, over the program's history, Social Security has collected approximately $21.9 trillion and paid out $19.0 trillion, leaving asset reserves of $2.9 trillion at the end of 2018. The accumulated trust fund holdings of $2.9 trillion represent the amount of money that the General Fund of the Treasury owes to the Social Security trust funds. The General Fund could be said to have fully paid back the Social Security trust funds if the trust fund balance were to reach zero (i.e., if all of the trust funds' asset reserves were depleted). The trustees project that the asset reserves held by the Social Security trust funds will be depleted in 2035. At that point, the program will continue to operate with incoming receipts to the trust funds. Incoming receipts are projected to be sufficient to pay about 80% of scheduled benefits through the end of the projection period in 2093 (under the intermediate assumptions of the 2019 Annual Report). Title II of the Social Security Act, which governs the program, does not specify what would happen to the payment of benefits in the event that the trust funds' asset reserves are depleted and incoming receipts to the trust funds are not sufficient to pay scheduled benefits in full and on time. Two possible scenarios are (1) the payment of full monthly benefits on a delayed basis or (2) the payment of partial monthly benefits on time. The following table shows the key dates projected for the Social Security trust funds by the Social Security Board of Trustees (based on their intermediate set of assumptions) in each of their annual reports from 1983 to 2019.", "summary": "The Social Security program pays monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. Program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. Projections show that the OASI fund will remain solvent until 2034, whereas the DI fund will remain solvent until 2052, meaning that each trust fund is projected to be able to pay benefits scheduled under current law in full and on time up to that point. Following the depletion of trust fund reserves (2052 for DI and 2034 for OASI), continuing income to each fund is projected to cover 91% of DI scheduled benefits and 77% of OASI scheduled benefits. The two trust funds are legally distinct and do not have authority to borrow from each other. However, Congress has authorized the shifting of funds between OASI and DI in the past to address shortfalls in a particular fund. Therefore, this CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds. On a combined basis, the trust funds are projected to remain solvent until 2035. Following depletion of combined trust fund reserves at that point, continuing income is projected to cover 80% of scheduled benefits. Social Security is financed by payroll taxes paid by covered workers and their employers, federal income taxes paid by some beneficiaries on a portion of their benefits, and interest income from the Social Security trust fund investments. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds. The Social Security trust funds represent funds dedicated to pay current and future Social Security benefits. However, it is useful to view the trust funds in two ways: (1) as an internal federal accounting concept and (2) as the accumulated holdings of the Social Security program. By law, Social Security tax revenues must be invested in U.S. government obligations (debt instruments of the U.S. government). The accumulated holdings of U.S. government obligations are often viewed as being similar to assets held by any other trust on behalf of the beneficiaries. However, the holdings of the Social Security trust funds differ from those of private trusts because (1) the types of investments the trust funds may hold are limited and (2) the U.S. government is both the buyer and seller of the investments. This report covers how the Social Security program is financed and how the Social Security trust funds work.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on the John Lewis (TAO-205) class oiler shipbuilding program, a program to build a new class of 20 fleet oilers for the Navy. The Navy's proposed FY2020 budget requests the procurement of the fifth and sixth ships in the program. Issues for Congress regarding the TAO-205 program include the following: whether to approve, reject, or modify the Navy's FY2020 procurement funding request for the program; the number of oilers the Navy will require in coming years to support its operations; and whether to encourage or direct the Navy to build TAO-205s with more ship self-defense equipment than currently planned by the Navy. Decisions that Congress makes regarding the program could affect Navy capabilities and funding requirements and the U.S. shipbuilding industrial base. For an overview of the strategic and budgetary context in which the TAO-205 program and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. The primary role of Navy fleet oilers is to transfer fuel to Navy surface ships that are operating at sea, so as to extend the operating endurance of these surface ships and their embarked aircraft. Fleet oilers also provide other surface ships with lubricants, fresh water, and small amounts of dry cargo. Fleet oilers transfer fuel and other supplies to other surface ships in operations called underway replenishments (UNREPs). During an UNREP, an oiler steams next to the receiving ship and transfers fuel by hose (see Figure 1 , Figure 2 , and Figure 3 ). Oilers are one kind of Navy UNREP ship; other Navy UNREP ships include ammunition ships, dry cargo ships, and multiproduct replenishment ships. The Navy's UNREP ships are known more formally as the Navy's combat logistics force (CLF). Most of the Navy's CLF ships are operated by the Military Sealift Command (MSC). Navy oilers carry the designation TAO (sometimes written as T-AO). The T means that the ships are operated by MSC with a mostly civilian crew; the A means it is an auxiliary ship of some kind; and the O means that it is, specifically, an oiler. Although the role of fleet oilers might not be considered as glamorous as that of other Navy ships, fleet oilers are critical to the Navy's ability to operate in forward-deployed areas around the world on a sustained basis. The U.S. Navy's ability to perform UNREP operations in a safe and efficient manner on a routine basis is a skill that many other navies lack. An absence of fleet oilers would significantly complicate the Navy's ability to operate at sea on a sustained basis in areas such as the Western Pacific or the Indian Ocean/Persian Gulf region. The Navy states that the ability to rearm, refuel and re-provision our ships at sea, independent of any restrictions placed on it by a foreign country, is critical to the Navy's ability to project warfighting power from the sea. As the lifeline of resupply to Navy operating forces underway, the ships of the Navy's Combat Logistic Force (CLF) enable Carrier Strike Groups and Amphibious Ready Groups to operate forward and remain on station during peacetime and war, with minimal reliance on host nation support. The Navy's existing force of fleet oilers consists of 15 Henry J. Kaiser (TAO-187) class ships ( Figure 4 ). These ships were procured between FY1982 and FY1989 and entered service between 1986 and 1996. They have an expected service life of 35 years; the first ship in the class will reach that age in 2021. The ships are about 677 feet long and have a full load displacement of about 41,000 tons, including about 26,500 tons of fuel and other cargo. The ships were built by Avondale Shipyards of New Orleans, LA, a shipyard that eventually became part of the shipbuilding firm Huntington Ingalls Industries (HII). HII subsequently wound down Navy shipbuilding operations at Avondale, and the facility no longer builds ships. (HII continues to operate two other shipyards that build Navy ships.) The TAO-205 class program was originally called the TAO(X) program, with the (X) meaning that the exact design of the ship had not yet been determined. On January 6, 2015, then-Secretary of the Navy Ray Mabus announced that ships in the class will be named for \"people who fought for civil rights and human rights,\" and that the first ship in the class, TAO-205, which was procured in FY2016, will be named for Representative John Lewis. The class consequently is now known as the John Lewis (TAO-205) class. As part of its goal for achieving a fleet of 355 ships, the Navy wants to procure a total of 20 TAO-205 class ships. The required number of oilers largely depends on the numbers and types of other surface ships (and their embarked aircraft) to be refueled, and the projected operational patterns for these ships and aircraft. The first TAO-205 class ship was procured in FY2016, the second in FY2018, and the third and fourth in FY2019. The Navy's FY2020 five-year (FY2020-FY2023) shipbuilding plan calls for procuring the next seven ships in the class in annual quantities of 2-1-1-2-1. The Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan calls for procuring the remaining nine ships in the program at a rate of one per year starting in FY2025. The first TAO-205 is scheduled for delivery in November 2020. Table 1 shows procurement funding for the TAO-205 program in the Navy's FY2020 budget submission. The Navy's FY2020 budget submission estimates the total procurement cost of the 20 planned TAO-205s at $12,196.1 million (i.e., about 12.2 billion) in then-year dollars, or an average of $609.8 million each. Since the figure of $12,196.1 million is in then-year dollars, it incorporates estimated annual inflation rates for TAO-205s to be procured out to FY2033. The TAO-205 class design ( Figure 5 ) will have capabilities similar to those of the Kaiser-class ships, and will rely on existing technologies rather than new technologies. To guard against oil spills, TAO-205s are to be double-hulled, like modern commercial oil tankers, with a space between the two hulls to protect the inner hull against events that puncture the outer hull. (The final Kaiser-class ships are double-hulled, but earlier ships in the class are single-hulled.) TAO-205s are being built by General Dynamics/National Steel and Shipbuilding Company (GD/NASSCO) of San Diego, CA, a shipyard that builds Navy auxiliaries and DOD sealift ships. On June 25, 2015, the Navy, as part of its acquisition strategy for TAO-205 program, issued a combined solicitation consisting of separate Requests for Proposals (RFPs) for the detailed design and construction (DD&C) of the first six TAO-205s; the DD&C in FY2017 (and also procurement of long lead-time materials in FY2016) for an amphibious assault ship called LHA-8 that the Navy procured in FY2017; and contract design support for the LPD-17 Flight II program (previously called the LX[R] program), a program to procure a new class of 13 amphibious ships. The Navy limited bidding in this combined solicitation to two bidders—Ingalls Shipbuilding of Huntington Ingalls Industries (HII/Ingalls) and GD/NASSCO—on the grounds that these are the only two shipbuilders that have the capability to build both TAO-205s and LHA-8. Under the Navy's plan for the combined solicitation, one of these two yards was to be awarded the DD&C contract for the first six TAO-205s, the other yard was to be awarded the DD&C contract (and procurement of long lead-time materials) for LHA-8, and the shipyard with the lowest combined evaluated price was to receive a higher profit on its DD&C contract and was to be awarded the majority of the LPD-17 Flight II contract design engineering man-hours. On June 30, 2016, the Navy announced its awards in the above-described combined solicitation, awarding a fixed price incentive block buy contract for the DD&C of the first six TAO-205s to GD/NASSCO. (The Navy awarded the contract for the DD&C of LHA-8 to HII/Ingalls. HII/Ingalls was also awarded the majority of the LPD-17 Flight II contract design engineering man-hours.) The Navy was granted authority for using a block buy contract to procure the first six TAO-205s by Section 127 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015). It was earlier estimated that the block buy contract would reduce the procurement cost of the second through sixth TAO-205s by an average of about $45 million each, compared to costs under the standard or default DOD approach of annual contracting. The Navy states that about $35 million of the $45 million in per-ship savings will come from using advance procurement (AP) funding for batch-ordering TAO-205 components. The Navy states that this use of AP funding could have occurred under annual contracting, and that the savings that are intrinsic to the block buy contract are thus about $10 million per ship. Section 8117 of the FY2019 Appropriations Act (Division A of H.R. 6157 / P.L. 115-245 of September 28, 2018) states the following: Sec. 8117. None of the funds provided in this Act for the TAO Fleet Oiler program shall be used to award a new contract that provides for the acquisition of the following components unless those components are manufactured in the United States: Auxiliary equipment (including pumps) for shipboard services; propulsion equipment (including engines, reduction gears, and propellers); shipboard cranes; and spreaders for shipboard cranes. The Appendix presents the Government Accountability Office's (GAO's) assessment of the TAO-205 class program from GAO's annual report surveying DOD major acquisition programs. The Navy's proposed FY2020 budget requests the procurement of the 5th and 6th ships in the program. The Navy estimates the combined procurement cost of the two ships at $1,056.3 million, or an average of $528.1 million each. The two ships have received $75.0 million in prior-year advance procurement (AP) funding, and the Navy's proposed FY2020 budget requests the remaining $981.2 million in procurement funding needed to complete the two ships' estimated combined procurement cost. The Navy's proposed FY2020 budget also requests $73.0 million in AP funding for TAO-205s to be procured in future fiscal years, and $3.7 million in cost-to-complete procurement funding to cover cost growth on TAO-205s procured in prior fiscal years, bringing the total FY2020 procurement funding request for the TAO-205 program (aside from outfitting and post-delivery costs) to $1,057.9 million. One issue for Congress is whether to approve, reject, or modify the Navy's FY2020 procurement funding request for the TAO-205 program. In assessing this issue, Congress may consider, among other things, whether the Navy has accurately priced the work that it is requesting to fund in FY2020. Another issue for Congress concerns the number of oilers the Navy will require in coming years to support its operations. The Navy is implementing a new operational concept, called Distributed Maritime Operations (DMO), that could lead to the development of a fleet with larger numbers of individually smaller ships, and to more-widely dispersed Navy operations. DMO could affect requirements for Navy logistics, including oilers. The Navy states that Recapitalizing the auxiliary and sealift fleet in support of DMO has become a top priority. The initial reviews of the requirements to support this operational maritime concept indicate potential growth across the five lines of effort: refuel, rearm, resupply, repair, and revive. Coincident is the review of the level of effort needed to distribute logistics into a contested maritime environment following safe transfer by the logistics fleet—smaller, faster, multi-mission transports likely resident within the future battle force. The work to fully flesh out the requirement is ongoing, but the aggregate is expected to be no less than the current requirement, reinforcing the urgency to recapitalize the current fleet. An August 2017 GAO report states the following: The readiness of the surge sealift and combat logistics fleets has trended downward since 2012. For example, GAO found that mission-limiting equipment casualties—incidents of degraded or out-of-service equipment—have increased over the past 5 years, and maintenance periods are running longer than planned, indicating declining materiel readiness across both fleets.... The Navy has not assessed the effects of widely distributed operations, which could affect the required number and type of combat logistics ships. The Navy released its new operational concept of more widely distributed operations—ships traveling farther distances and operating more days to support a more distributed fleet—in 2017. The Navy has not assessed the effects that implementing this concept will have on the required number and type of combat logistics ships. These effects could be exacerbated in the event that the Navy is less able to rely on in-port refueling—which has comprised about 30 percent of all refuelings over the past 3 years—placing greater demand on the combat logistics fleet. Given the fleet's dependence on the combat logistics force, waiting until 2019 or 2020 to conduct an assessment, as planned, could result in poor investment decisions as the Navy continues to build and modernize its fleet. Furthermore, without assessing the effects of widely distributed operations on logistics force requirements and modifying its force structure plans accordingly, the Navy risks being unprepared to provide required fuel and other supplies. Another issue for Congress is whether to encourage or direct the Navy to build TAO-205s with more ship self-defense equipment than currently planned by the Navy. The issue relates to how changes in the international security environment might affect how the Navy operates and equips its underway replenishment ships. During the Cold War, the Navy procured underway replenishment ships to support a two-stage approach to underway replenishment in which single-product \"shuttle\" ships (such as oilers, ammunition ships, and dry stores ships) would take their supplies from secure ports to relatively safe midocean areas, where they would then transfer them to multiproduct \"station\" ships called TAOEs and AORs. The TAOEs and AORs would then travel to Navy carrier strike groups operating in higher-threat areas and transfer their combined supplies to the carrier strike group ships. As a result, single-product shuttle ships were equipped with lesser amounts of ship self-defense equipment, and TAOEs and AORs were equipped with greater amounts of such equipment. When the Cold War ended and transitioned to the post-Cold War era, threats to U.S. Navy ships operating at sea were substantially reduced. As a consequence, the amount of ship self-defense equipment on the TAOEs and AORs was reduced, and a single-stage approach to underway replenishment, in which oilers and dry stores ships took supplies from secure ports all the way to carrier strike group ships, was sometimes used. Now that the post-Cold War era has transitioned to a new strategic environment featuring renewed great power competition with countries like China and Russia, and a consequent renewal of potential threats to U.S. Navy ships operating at sea, the question is whether TAO-205s should be equipped with lesser amounts of ship self-defense equipment, like oilers were during both the Cold War and post-Cold War eras, or with greater amounts of ship self-defense equipment, like TAOEs and AORs were during the Cold War. Building TAO-205s with more ship self-defense equipment than currently planned by the Navy could increase TAO-205 procurement costs by tens of millions of dollars per ship, depending on the amount of additional ship self-defense equipment. Section 1026 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015) required an independent assessment of the Navy's combat logistics force ships. The report was delivered to Congress in February 2016. A copy of the report was posted by the media outlet Politico on March 11, 2016. The report states the following: The T-AO(X) will only have a limited capability to defeat a submarine launched torpedo attack and no capability to defeat a missile attack. When delivered, the TAO(X) will have: —[the] NIXIE Torpedo Countermeasure System [for decoying certain types of torpedoes] —[the] Advanced Degaussing System (Anti-Mine) [for reducing the ship's magnetic signature, so as to reduce the likelihood of attack by magnetically fused mines] When required, the T-AO(X) will also have ability to embark Navy Expeditionary Combat Command Expeditionary Security Teams (EST). The ESTs will embark with several crew served weapons and are designed to provide limited self-defense against a small boat attack. The T-AO(X) will have Space, Weight, Power and Cooling (SWAP-C) margins for future installations of the following systems: —[the] Close In Weapon System (CIWS) or SeaRAM (Rolling Airframe Missile) [for defense against missile attack] —[the] Anti-Torpedo Torpedo Defense System (ATTDS) [for destroying torpedoes] Even after the installation of a CIWS or ATTDS, if the T-AO(X) was to operate in anything other than a benign environment, the ship will require both air and surface escorts. The decision to rely on [other] Fleet assets to provide force protection [i.e., defense against attacks] for the T-AO(X) was validated by the JROC [in June 2015]. Table 2 summarizes congressional action on the Navy's request for FY2020 procurement funding for the TAO-205 program. A May 2019 GAO report—the 2019 edition of GAO's annual report surveying DOD major acquisition programs—stated the following regarding the TAO-205 program: Technology Maturity and Design Stability The Navy has matured all Lewis class critical technologies and stabilized the ships' design. In 2014, the Navy identified three critical technologies for the Lewis class, all of which involved a new system for transferring cargo at sea. Prior to initiating detail design activities in June 2016, the Navy completed prototype tests of the critical technologies and found that they were fully mature—an approach consistent with shipbuilding best practices. In 2017, the Navy removed one critical technology—the Heavy e-STREAM cargo delivery system—from the Lewis class design. The Navy had intended to use this system to deliver F-35 Lightning II power modules. The Navy subsequently decided to deliver these by air, which precluded any need for the Heavy system. Lead ship construction began in September 2018 with 95 percent of the ship's total design effort complete. Program officials stated that this figure meant that 100 percent of the ship's basic and functional design were by then complete—an approach consistent with best practices. Throughout detail design and now into construction, the Navy has not changed the Lewis class program's performance requirements. The Navy also leveraged commercial vessel designs to minimize design and construction risks. The Lewis class features a modern double-hull construction, an environmental-based design standard for commercial tankers, to ensure the ships can dock at ports-of-call. This design was included in the final three Kaiser class oilers. Production Readiness The program office has largely kept to its construction schedule to date for the first ship, but a flooding incident at a NASSCO graving dock in July 2018 has affected the delivery of future ships. The program office stated that this incident has not affected current ship fabrication activities. However, the dock's unavailability while repairs are planned and implemented has disrupted the contractor's schedule for future ships. According to the program office, the incident has resulted in some delays to certain delivery dates for ships two through six. Other Program Issues As part of the Navy's plan to expand the fleet, the Navy concluded that it would need an additional three Lewis class ships. The Navy's budget request for fiscal year 2019 increased its planned one-ship-per-year buy to two for fiscal years 2019, 2021, and 2023. The Congress provided appropriations for the additional fiscal year 2019 ship in support of the Navy's request. To account for the additional ships in fiscal years 2019 and 2021, the Navy plans to add two more ships to the low-rate initial production phase. Subsequently, program officials stated that they plan to compete a new contract for the remaining 12 ships using the construction knowledge gained from efforts under the existing contract. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office stated that it continues to follow GAO shipbuilding best practices and has leveraged commercial vessel design practices to minimize risk. The program office also stated that it is currently revising its acquisition baseline to reflect the update in total quantities to 20 ships. In addition, the program office noted that, in fiscal year 2019, it fully funded the third and fourth ships and funded advance procurement for the fifth ship.", "summary": "The Navy began procuring John Lewis (TAO-205) class oilers in FY2016, and a total of four have been procured through FY2019, including two in FY2019. The first six ships are being procured under a block buy contract that was authorized by Section 127 of the FY2016 National Defense Authorization Act (S. 1356/P.L. 114-92 of November 25, 2015). The Navy wants to procure a total of 20 TAO-205s. The Navy's proposed FY2020 budget requests the procurement of the fifth and sixth ships in the program. The Navy estimates the combined procurement cost of the two ships at $1,056.3 million, or an average of $528.1 million each. The two ships have received $75.0 million in prior-year advance procurement (AP) funding, and the Navy's proposed FY2020 budget requests the remaining $981.2 million in procurement funding needed to complete the two ships' estimated combined procurement cost. The Navy's proposed FY2020 budget also requests $73.0 million in AP funding for TAO-205s to be procured in future fiscal years, and $3.7 million in cost-to-complete procurement funding to cover cost growth on TAO-205s procured in prior fiscal years, bringing the total FY2020 procurement funding request for the TAO-205 program (aside from outfitting and post-delivery costs) to $1,057.9 million. Issues for Congress include the following: whether to approve, reject, or modify the Navy's FY2020 procurement funding request for the TAO-205 program; the number of oilers the Navy will require in coming years to support its operations; and whether to encourage or direct the Navy to build TAO-205s with more ship self-defense equipment than currently planned by the Navy.", "document_type": "crs"}
{"report": "T he prices paid by consumers for prescription drugs have been a recent area of significant congressional interest. Several committees in the House and Senate have held hearings this year on drug pricing issues, and a number of bills have been introduced in the 116 th Congress that seek to address the perceived high costs of prescription drugs and other pharmaceutical products. Because intellectual property (IP) rights, including patent rights and regulatory exclusivities, play an important role in the development and pricing of pharmaceutical products, a key focus of this debate is whether existing IP law promptly balances the need for innovation with the costs that IP may impose on the public. Understanding the interplay between several complex legal regimes is necessary in order to fully make sense of this debate. IP law comprises a set of exclusive rights that prevent others from making, copying, or using certain intangible creations of the human mind. Federal law contains several different varieties of IP, depending on the type of intellectual creation at issue. For example, copyright law generally grants authors of original creative works (such as literary works or musical compositions) the exclusive right to reproduce their work, publicly perform and display it, distribute it, and adapt it, for a specified term of years. Other species of federal IP include patent law, which protects novel inventions, and trademark law, which protects symbols used to identify goods and services. Each form of IP covers a different type of creation, has a different procedure for obtaining rights, and grants the IP owner legal rights that vary in scope and duration. Although each of these forms of IP is legally distinct, they broadly share a common motivation: providing incentives to create. Patents and copyrights are typically justified by a utilitarian rationale that exclusive rights are necessary to provide incentives to produce new creative works and technological inventions. This rationale maintains that absent legal protections, competitors could freely copy such creations, denying the original creators the ability to recoup their investments in time and effort, and thereby reduce the incentive to create in the first place. IP incentives are said to be particularly necessary for products, such as pharmaceuticals, that are costly to develop but easily copied once marketed. In the words of the Supreme Court, IP rights are premised on an \"economic philosophy\" that the \"encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors.\" From this perspective, the fundamental aim of IP law is to find the optimal balance between providing incentives for innovation and the costs that IP rights impose on the public. By design, IP rights may lead to increased prices for goods or services that are protected by IP. IP rights are often said to grant a temporary and limited \"monopoly\" to the rights holder. The existence of a patent on a particular manufacturing process, for example, generally means that only the patent holder (and persons licensed by the patent holder) can use that patented process for a set period of time. In some circumstances, this legal exclusivity may allow the patent holder (or her licensees) to charge higher-than-competitive prices for goods made with the patented process, as a monopolist would, because the patent effectively shields the patent holder from competition. New pharmaceutical products generally benefit from two main forms of IP protection: patent rights and regulatory exclusivities. These two sets of exclusive rights are distinct, yet often confused. Patents, which are available to a wide variety of technologies beyond pharmaceuticals, are granted by the U.S. Patent and Trademark Office (PTO) to inventions that are new, useful, nonobvious, and directed at patentable subject matter. The holder of a valid patent generally has the exclusive right to make, use, sell, or import a patented invention within the United States for a period beginning when the patent is issued by the PTO and ending 20 years after the date of the patent application. The Food and Drug Administration (FDA) grants regulatory exclusivities upon the completion of the FDA regulatory process necessary to market pharmaceutical products (i.e., drugs and biological products). Exclusivities are granted only to certain pharmaceutical products such as innovative products (e.g., a new active ingredient or new indication for an existing drug) or those that serve a specific need (e.g., treating rare diseases). Regulatory exclusivities prevent FDA from accepting or approving an application by a competitor for FDA approval of a follow-on product (i.e., a generic or biosimilar version) of a previously approved pharmaceutical for a set time period, and/or preclude a competitor from relying on safety and efficacy data submitted by the original manufacturer for a period of time. Depending on the type of pharmaceutical product at issue and other factors, regulatory exclusivities may last anywhere from six months to 12 years. In overlapping ways, both patent rights and regulatory exclusivities can operate to deter or delay the market entry of a generic drug or biosimilar. The Department of Health and Human Services (HHS) has found that national spending on pharmaceutical products has been rising in recent years, predicting that these expenditures would continue to rise faster than overall health spending. Many factors other than IP rights contribute to the price consumers pay for prescription drugs and biologics, including demand, manufacturing costs, R&D costs, the terms of private health insurance, and the involvement of a government insurance program such as Medicaid. That said, pharmaceutical products are frequently protected by IP rights, and some studies have shown that IP rights are among the most important factors driving high drug prices. For example, FDA has found that increased competition from generic drug manufacturers is associated with lower prices for pharmaceuticals. Given that IP rights may allow the rights holder to charge higher-than-competitive prices, and can deter or delay the market entry of generic drug or biosimilar competitors, changes to IP rights or otherwise facilitating competition is seen by some to offer a potential means of lowering prices for pharmaceutical products. Accordingly, several current proposed congressional reforms to lower drug prices would reform the existing legal structure of IP rights in the pharmaceutical context. This report explains how several of these congressional proposals to reduce drug prices would interact with and/or alter existing IP law for pharmaceutical products. First, the report reviews the basics of patent law, FDA law and regulatory exclusivities, and the interaction between patent rights and FDA approval of pharmaceutical products. With this legal background in hand, the report overviews the details of a number of current legislative proposals to change these laws in order to reduce the drug prices paid by consumers. Several different legal and regulatory regimes create or affect IP rights in pharmaceutical products. As noted above, pharmaceuticals are subject to two principal forms of IP protection—patents and regulatory exclusivities—which are generally distinct, but at times overlap and interact. Complicating matters further is the fact that FDA regulates pharmaceutical products differently depending on whether they derive from natural sources. In particular, before they can be marketed or sold, nonbiological \"drugs\" must be approved by FDA under the Federal Food, Drug, and Cosmetic Act (FD&C Act), whereas \"biologics\" must be licensed by FDA under the Public Health Service Act (PHSA). Finally, patents on pharmaceutical drugs or biologics are subject to specialized patent dispute resolution procedures that can affect a manufacturer's ability to bring a follow-on product (i.e., a generic drug or biosimilar) to market. Specifically, provisions of the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act) govern FDA approval and patent disputes for generic drugs, whereas the Biologics Price Competition and Innovation Act of 2009 (BPCIA) governs FDA licensure and patent disputes for biosimilars. In light of these complexities, a fair amount of background is necessary to understand how IP rights are obtained in pharmaceuticals, how these rights may impact drug prices, and the various reforms that have been proposed in Congress to reduce drug prices for consumers. This section provides this background, proceeding in three parts. First, it reviews patent law, including the requirements for obtaining a patent, the rights granted to patent holders, and various limitations on those rights. Second, it overviews FDA requirements for obtaining approval to market a drug or biological product, the abbreviated pathways for generic drug approval under the Hatch-Waxman Act and biosimilar licensure under the BPCIA, and different regulatory exclusivities that FDA grants to certain types of approved pharmaceutical products. Finally, this section describes and compares the different specialized patent dispute procedures for generic drugs and biosimilars under Hatch-Waxman and the BPCIA, respectively. Congress's authority to grant patents derives from the IP Clause of the U.S. Constitution, which grants Congress the power \"[t]o promote the Progress of Science and useful Arts, by securing for limited Times to . . . Inventors the exclusive Right to their . . . Discoveries.\" The IP Clause was included in the Constitution to create a national, uniform law governing IP rights. In the view of the Framers, the states could not effectively protect copyrights or patents separately because obtaining IP rights in multiple states with differing standards would be difficult and expensive for authors and inventors, undermining the effectiveness of the legal regime. Patent rights do not arise automatically. Rather, to obtain patent protection under the Patent Act, an inventor must file a patent application with the PTO, and a PTO patent examiner must review the application and conclude that the application meets the statutory requirements before the PTO will issue a patent. This section briefly overviews the requirements for obtaining a patent, the scope of the legal rights granted to the holder of a valid patent, and an important limitation on patent rights: the authority of the federal government to grant compulsory licenses for a patent under certain circumstances. Patents are generally available to anyone who \"invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.\" To obtain a patent, the inventor must formally file an application for a patent with the PTO, beginning a process called patent prosecution. During prosecution, a patent examiner at the PTO evaluates the patent application to ensure that it meets all the applicable legal requirements to merit the grant of a patent. In addition to requirements regarding the technical disclosure of the invention, the claimed invention must be (1) directed at patentable subject matter, (2) new, (3) nonobvious, and (4) useful. If granted, patents typically expire twenty years after the date of the initial patent application. The field of patentable inventions is broad, embracing nearly \"anything under the sun that is made by man.\" By statute, patents are available on any new and useful \"process, machine, manufacture, or composition of matter, or . . . improvement thereof.\" Examples of technological areas for patentable inventions include pharmaceuticals, biotechnology, chemistry, computer hardware and software, electrical engineering, mechanical engineering, and manufacturing processes. Although the subject matter of patents is wide-ranging, the Supreme Court has long held that \"laws of nature, natural phenomena, and abstract ideas are not patentable.\" The Court has reasoned that to permit a monopoly on the \"'basic tools of scientific and technological work' . . . might tend to impede innovation more than it would tend to promote it.\" In a series of recent cases, the Supreme Court has established a two-step test for patentable subject matter, sometimes called the Alice test. The first step addresses whether the patent claims are \"directed to\" ineligible subject matter, that is, a law of nature, natural phenomenon, or abstract idea. If not, the invention is patentable. If it is directed at ineligible subject matter, the invention is not patentable unless the patent claims have an \"inventive concept\" under the second step of the Alice test. To have an \"inventive concept,\" the patent claims must contain elements \"sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself,\" transforming the nature of the claim to a patent-eligible application of ineligible subject matter. Perhaps the most fundamental requirement for patentability is that the claimed invention must be actually new . Specifically, the PTO will not issue a patent if \"the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.\" In other words, if every element of the claimed invention is already disclosed in the \"prior art\"—the information available to the public at the time of the patent application—then the alleged inventor \"has added nothing to the total stock of knowledge,\" and no valid patent may issue to her. Even if a claimed invention is novel in the narrow sense that it is not \"identically disclosed\" in a prior art reference (such as an earlier patent or publication), the invention must further be nono bvious to be patentable. Specifically, an invention cannot be patented if \"the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious . . . to a person having ordinary skill\" in the relevant technology. When determining obviousness, courts may evaluate considerations such as \"commercial success, long felt but unsolved needs, [or] failure of others . . . to give light to the circumstances surrounding the origin of the subject matter sought to be patented.\" By its nature, obviousness is an \"expansive and flexible\" inquiry that cannot be reduced to narrow, rigid tests. Nonetheless, if an invention does no more than combine \"familiar elements according to known methods,\" yielding only \"predictable results,\" it is likely to be obvious. In addition to being novel and nonobvious, an invention must be useful to be patentable, that is, it must have a specific and substantial utility. The utility requirement derives from the IP Clause's command that patent laws exist to \"promote the Progress of . . . useful Arts.\" The constitutional purpose of patent law thus requires a \"benefit derived by the public from an invention with substantial utility,\" where the \"specific benefit exists in currently available form.\" This standard for utility is relatively low, however, requiring only that the claimed invention have some \"significant and presently available benefit to the public\" that \"is not so vague as to be meaningless.\" In addition to substantive requirements relating to the invention, the Patent Act imposes a number of requirements relating to the form of the patent application. These provisions are intended to ensure that the patent adequately discloses the invention to the public such that the public can use the invention after the expiration of the patent term. Section 112 of the Patent Act requires that patents must contain a \"specification\" that includes: a written description of the  invention , and of the manner and  process  of making and using it , in such full, clear, concise, and exact terms as to enable any person skilled in the art to . . . make and use the same, and shall set forth the best mode contemplated by the  inventor  or  joint inventor  of carrying out the  invention. This statutory language yields three basic disclosure requirements for patentability. First, to satisfy the written description requirement , the specification must \"reasonably convey[] to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date\" of the patent application. Second, to satisfy the enablement requirement , the specification must contain enough information to teach a person skilled in the art how \"to make and use the invention without undue experimentation.\" Finally, to satisfy the best mode requirement , the specification must demonstrate that the inventor \"possessed a best mode for practicing the invention\" at the time of the patent application, and disclose that preferred way of practicing the invention. If granted, the legal scope of the patent is defined by the patent claims , words which \"particularly point[] out and distinctly claim[] the subject matter which the inventor . . . regards as the invention.\" In essence, while the specification explains the invention in a technical sense, the claims set forth the legal effect of the patent. Much as a deed may describe the boundaries of a tract of land, the claims define the \"metes and bounds\" of the patent right. Patent claims must be sufficiently definite to be valid—that is, when the claims are read in context, they must \"inform, with reasonable certainty, those skilled in the art about the scope of the invention.\" Once granted, the holder of a valid patent has the exclusive right to make, use, sell, or import the invention in the United States until the patent expires. Any other person who practices the invention (i.e., makes, uses, sells, offers to sell, or imports it) without permission from the patent holder infringes the patent and is liable for monetary damages, and possibly injunctive relief, if sued by the patentee. Patents have the attributes of personal property and may be sold or assigned to by the patentee to a third party. A patentee may also license other parties to practice the invention, that is, grant them permission to make, use, sell, or import the invention, usually in exchange for consideration (such as monetary royalties). Patents thus provide a negative right to exclude another person from practicing the claimed invention. However, patents do not grant the patentee any affirmative right to practice the invention. In the pharmaceutical context, this means that even if a manufacturer has a patent on a particular drug (or inventions related to making or using that drug), it nonetheless cannot market that drug without FDA approval. With some exceptions, a patent is generally granted \"for a term beginning on the date on which the patent issues and ending 20 years from the date on which the application for the patent was filed.\" The Patent Act includes provisions that may modify the 20-year term, including to account for excessive delays in patent examination at the PTO, or delays associated with obtaining marketing approval from other federal agencies (including FDA). In the pharmaceutical context, patents claiming a drug product or medical device (or a method of using or manufacturing the same) may be extended for up to five years to account for delays in obtaining regulatory approval, if certain statutory conditions are met. Patents are not self-enforcing: to obtain relief from infringement, the patentee must sue in court. Patent law is an area of exclusive federal jurisdiction, and the traditional forum for most patent disputes is federal district court. Although patent suits may be filed in any district court across the country with jurisdiction over the defendant and proper venue, all appeals in patent cases are heard by a single specialized court, the U.S. Court of Appeals for the Federal Circuit (the Federal Circuit). If the patentee succeeds in proving infringement, the patent holder may obtain two major forms of judicial relief: monetary damages and injunctive relief. Damages must be \"adequate to compensate for the infringement,\" and typically take the form of either (1) lost profits , that is, the net revenue \"lost to the patentee because of the infringement,\" or (2) a reasonable royalty , which awards the amount that the patentee would have received in a \"hypothetical negotiation\" if the patentee and the infringer had negotiated a license in good faith prior to the infringement. Courts have discretion to increase the damages \"up to three times the amount found or assessed,\" but such enhanced damages are \"generally reserved for egregious cases of culpable behavior\" by the infringer. Finally, courts have discretion to award attorneys' fees in \"exceptional cases,\" that is, ones that \"stand[] out from others with respect to the substantive strength of a party's litigating position\" or \"the unreasonable manner in which the case was litigated.\" In addition to monetary damages, a patent holder may also ask courts to order various forms of injunctive relief. At the outset of a patent litigation, a patent holder may seek a preliminary injunction , a court order that prevents the defendant from committing the allegedly infringing acts while the litigation proceeds. If a patent infringement lawsuit is successful, the patent holder may seek a permanent injunction , an order prohibiting the defendant from infringing the patent in the future. Parties accused of patent infringement may defend on several grounds. First, although patents are subject to a presumption of validity, the accused infringer may assert that the patent is invalid . To prove invalidity, the accused infringer must show, by clear and convincing evidence, that the patent should never have been granted by the PTO because it failed to meet the requirements for patentability. Thus, for example, the accused infringer may argue that the invention lacks novelty, is obvious, or claims nonpatentable subject matter; that the patent fails to enable the invention; or that the patent claims are indefinite. Second, the accused infringer may claim an \"absence of liability\" on the basis of noninfringement . In other words, even presuming the patent is valid, the patentee may fail to prove that the activities of the accused infringer fall within the scope of the patent claims. Finally, the accused infringer may argue that the patent is unenforceable based on the inequitable or illegal activities of the patent holder, such as obtaining the patent through fraud on the PTO. Following the passage of the 2011 Leahy-Smith America Invents Act (AIA), the Patent Trial and Appeal Board (PTAB) has become an increasingly important forum for patent disputes. The AIA created several new administrative procedures for challenging patent validity, including (1) post-grant revie w (PGR), which allows petitioners to challenge patent validity based on any of the requirements of patentability if the PGR petition is filed within nine months of the patent's issuance; (2) inter partes review (IPR), which allows any person other than the patentee to challenge patent validity on limited grounds (novelty or obviousness based on prior patents or printed publications) at any time after nine months following the patent's issuance; and (3) a transitional program for covered business method patents (CBM), a PGR-like process limited to certain patents claiming \"business methods\" that will be available only through September 2020. Of these procedures, IPR is by far the most widely used. If a person is the first to synthesize a particular chemical believed to be useful for the treatment of human disease, she may file for a patent on that chemical itself, and—presuming that the application meets all requirements for patentability—the PTO will grant the patent. Patents on a pharmaceutical product's active ingredient may be of particular value to the manufacturer because these patents are unusually difficult, if not impossible, to \"invent around\" (i.e., develop a competing product that does not infringe the patent). However, active ingredient patents are hardly the only patents relating to pharmaceuticals and not necessarily the most important to manufacturers as a practical matter. Indeed, in the case of biological products, if the active ingredient is naturally occurring, it may not be legally possible to patent the biologic itself because it constitutes patent-ineligible subject matter. Pharmaceutical patents may cover many different features of a drug or biologic beyond a claim on the active ingredient itself. Such patents may claim, among other things: 1. a formulation of the drug (e.g., an administrable form and dosage); 2. a method of using the pharmaceutical (e.g., an indication or use for treating a particular disease); 3. technologies used to administer the pharmaceutical or a method of administration; 4. a method of manufacturing or manufacturing technology used to make the pharmaceutical; 5. other chemicals related to the active ingredient, such as crystalline forms, polymorphs, intermediaries, salts, and metabolites. To be patentable, all of these types of inventions must be new, useful, and nonobvious, and sufficiently described in the patent application, like any other invention. In addition, if a person invents an improvement on any of these technologies—for example, a more effective formulation of the drug, a new use, a different manufacturing process, etc.—then the inventor can file for a patent on that improvement, which receives its own patent term. To be patentable, the improvement must be new and nonobvious, that is, \"more than the predictable use of prior art elements according to their established functions.\" Any person wishing to practice the improved form of the invention will need permission from both the holder of the patent on the original technology and the holder of the improvement patent (who need not be the same entity), if neither patent has yet expired. In the case where the original patent has expired but the improvement patent has not, permission from the improvement patentee is required to practice the improved version, but as a matter of patent law any person is free to make and use the original, unimproved version. Because many different aspects of pharmaceutical products (and improvements thereon) are patentable, some pharmaceutical products are protected by dozens of different patents. For example, one recent study of the top 12 drugs by gross U.S. revenue found that pharmaceutical manufacturers had obtained an average of 71 patents on each of these drugs. AbbVie, the maker of the top-selling arthritis biologic Humira, was found to have filed 247 patent applications relating to that product, resulting in 132 issued patents claiming methods of treatment, formulations, methods of manufacturing, and other related inventions. The number and timing of nonactive ingredient patents (sometimes called \"secondary\" patents) have contributed to long-standing concerns by some commentators about so-called patent \"evergreening.\" Evergreening, also known as patent \"layering\" or \"life-cycle management,\" is an alleged practice by which \"drug innovators [seek] to prolong their effective periods of patent protection [through] strategies that add new patents to their quivers as old ones expire.\" Critics of evergreening maintain that, by obtaining later patents on improvements or ancillary aspects of a pharmaceutical, pharmaceutical manufacturers effectively extend patent protection beyond the term set by Congress, deterring follow-on competitors and keeping prices high. In the view of evergreening critics, many secondary pharmaceutical patents are of questionable value and validity. A similar, but distinct, concern voiced by some commentators is the notion of a patent \"thicket.\" This term is used in two slightly different ways, both relating to products with a high number of patents. First, a patent thicket may describe the situation where multiple parties have overlapping patent rights on one product, such that a \"potential manufacturer must negotiate licenses with each patent owner in order to bring a product to market without infringing.\" Patent thickets, in this sense, raise concerns about inefficient exploitation of a technology because the multiplicity of owners increases transaction costs and creates coordination challenges. Second, the term may be used in a looser sense to describe an incumbent manufacturer's practice of amassing of a large volume of patents relating to a single product, with the intent to intimidate follow-on competitors from entering the market (or to make it too costly and risky to do so). AbbVie's Humira patent portfolio has been alleged to be an example of this sort of patent thicket. Although some critics deride patent thickets and evergreening, others assert that these are unfairly pejorative terms for legitimate uses of the patent system. On this view, much innovation is incremental in nature, and sound public policy permits patents on improvements: like any other form of technology, society ought to provide incentives to develop more effective formulations of a drug, methods of treatment, and the like. Secondary pharmaceutical patents may represent inventions with true medical benefits to patients, in which case the effect they may have on competition is arguably justified. Finally, even presuming that some improvement patents granted by the PTO are obvious or not truly innovative, defenders of evergreening may point out that existing law already has several mechanisms to challenge the validity of patents. As explained above, the patent holder generally has the exclusive right to practice the invention. Thus, any other person who wishes to make, use, sell, or import the invention will ordinarily need a license (i.e., permission) from the patent holder, or else be exposed to legal liability. In certain cases, however, patents may be subject to a \"compulsory license,\" which allows another person to use the invention without the prior consent from the patent holder. Compulsory licenses are typically a creation of statute and usually require the sanction of a governmental entity and the payment of compensation to the patent holder. Compulsory licenses differ from ordinary licenses in two important respects: (1) the person seeking to use the invention need not seek advance permission from the patent holder; and (2) the compensation paid to the patentee is ordinarily determined by operation of law, not by private contractual negotiations between the licensee and the patent holder. Current federal law contains a number of compulsory license provisions for patents. For example, under 28 U.S.C. § 1498, which is sometimes described as an \"eminent domain\" provision for patents, the U.S. government has the authority to use any patented invention \"without license.\" The patentee, however, has the right to sue in the U.S. Court of Federal Claims for \"reasonable and entire compensation\" for the government's use of the patented invention. In no event, however, will a court issue an injunction against the United States to prevent its use of the invention. In effect, then, section 1498 allows the United States to issue itself a compulsory license to use any patented invention without obtaining the permission of the patentee, in exchange for the payment of reasonable compensation. The federal government uses its section 1498 authority with some frequency, although it has not been used recently in the pharmaceutical context. Compulsory licensing is also available for inventions made with federal funding under the provisions of the Bayh-Dole Act. In general, the Bayh-Dole Act permits certain government contractors to obtain patents on inventions produced with federal funding. However, the federal government retains the authority to \"march in\" and grant compulsory licenses to third parties for federally funded inventions under certain specified circumstances, such as a failure to practice the patented invention or health or safety needs. A license granted pursuant to Bayh-Dole's march-in provisions must be \"upon terms that are reasonable under the circumstances,\" which may require some compensation to be paid by the licensee to the patentee. The federal government has never exercised its march-in rights under Bayh-Dole. Unlike patent law, which is centrally motivated by promoting innovation, FDA law generally arose to promote public health by protecting consumers from pharmaceuticals that are adulterated, misbranded, unsafe, or ineffective. To this end, new drugs and biologics cannot be marketed without FDA approval. FDA regulates which drugs and biologics may be marketed in the United States through similar but distinct approval processes. Nonetheless, the principle of balancing advancement through innovation against the benefits of competition applies to FDA law as well as patent law. To that end, federal law provides certain regulatory exclusivities for companies that obtain approval for pharmaceutical products that meet the requisite criteria. This section provides an overview of the approval processes for new and follow-on drugs and biologics. It also describes the exclusivities Congress has created to encourage research and development of new pharmaceutical products as well as competition from follow-on products. Drugs are articles, generally chemical compounds, \"intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease\" or \"intended to affect the structure or any function of the body.\" New drugs are those drugs that scientific experts do not generally recognize as safe and effective for their intended use. A new drug may contain an active ingredient that FDA has not previously approved or contain a previously approved active ingredient but modify another aspect of the drug, such as the indication, patient population, formulation, strength, dosage form, or route of administration. All new drugs require FDA approval before they are marketed. New drugs are approved through the new drug application (NDA) process. To obtain approval for a new drug, a sponsor must conduct \"costly and time-consuming studies\" demonstrating the drug's safety and effectiveness for humans. Clinical trials, conducted after the company has completed basic research and animal testing, test the safety, efficacy, and effectiveness of the drug in volunteer human subjects under carefully controlled conditions. When the company is ready to begin clinical trials, it submits an investigational new drug (IND) application to FDA. The IND application provides FDA with information about the drug, including what the drug does, the condition(s) and population(s) the drug is intended to treat, and any data from and analysis of animal studies with the drug. It also includes a proposed clinical study design and written approval from an Institutional Review Board, which reviews the study design. FDA has 30 days to review the IND application and object before clinical investigations proceed. Clinical testing occurs in three phases. Phase I clinical trials test the drug in a small number of subjects and focus on evaluating the safety of the drug. During Phase I clinical trials, the company evaluates how the drug is processed (metabolized and excreted) in the body, determines the highest tolerable dose and optimal dose of the drug, and identifies any acute adverse side effects from the drug. Phase II and Phase III clinical trials evaluate the drug's efficacy and effectiveness in addition to safety. These trials use a larger group of test subjects who have the characteristic, condition, or disease the drug treats. Once clinical trials are complete, the company submits the results in an NDA to FDA's Center for Drug Evaluation and Research (CDER), along with a list of articles used as components of the drug; a statement of the drug's composition; a description of manufacturing methods, facilities, and controls; specimens of the proposed labeling; any required pediatric assessments; and patient information. In general, an NDA also contains the product description, the indication(s) (i.e., the disease or condition and population for which the drug will be used), information about the manufacturing process, and proposed labeling. The NDA may also include a proposed Risk Evaluation and Mitigation Strategy as needed. The FD&C Act provides for two types of NDAs: 505(b)(1) and 505(b)(2). Both types include \"full reports of investigations of safety and effectiveness.\" However, the nature of the company's relationship to the underlying studies differs. For 505(b)(1) NDAs, the company has a right to all of the studies that support the investigational reports, either because the studies were conducted by or for the company, or because the company obtained the right to reference or use the studies from the person who conducted them. For 505(b)(2) NDAs, by contrast, at least some of the information contained in the application relies on studies that were not conducted by or for the company and for which the company has not obtained a right of reference or use. This information to which the company does not have reference takes two forms: (1) published literature where the applicant has not obtained a right to the underlying studies or (2) the FDA's finding of safety and effectiveness for an approved drug. The 505(b)(2) pathway is used to obtain approval for modifications of approved drugs—drugs that are \"neither 'entirely new' nor 'simply a generic version of a branded drug.'\" FDA regulations also permit NDA holders to make changes to the drug or label after approval. Minor changes require only notice, but changes to the drug's label, dosage, strength, or manufacturing methods require a supplemental NDA (sNDA). Because the sNDA relates to a drug already on the market, sNDAs must include post-market information, such as commercial marketing experience and reports in scientific literature and unpublished scientific papers, in addition to descriptions and analyses of clinical studies. FDA reviews the NDA to determine whether there is substantial evidence that the drug is safe and effective for the proposed use, including whether the benefits of the drug outweigh the risks. The agency also reviews the proposed labeling and the manufacturing controls. When FDA completes its review, it sends a letter to the company with the agency's determination. If the NDA meets the requirements for approval, FDA sends an approval letter or, if patent rights or exclusivities bar approval, a tentative approval letter. FDA may impose conditions on its approval of the NDA, such as requiring the company to conduct additional post-market clinical studies referred to as Phase IV clinical trials. If the NDA does not meet the requirements for approval, FDA sends a \"complete response letter\" explaining the deficiencies FDA identified in the NDA and how they could be remedied. Before the Hatch-Waxman Act was enacted in 1984, every new drug submitted to the FDA for preapproval required a complete application under Section 505(b) supported by clinical trial data demonstrating safety and effectiveness. To encourage generic drug entry, the Hatch-Waxman Act established a pathway for abbreviated new drug applications (ANDAs), which allows generic manufacturers to rely on FDA's prior approval of another drug with the same active ingredient—the reference listed drug (RLD)—to establish that the generic drug is safe and effective. The ANDA pathway allows generic manufacturers to avoid the long, expensive process of conducting their own clinical trials. Instead, the generic manufacturer need only conduct studies with its generic product and samples of the RLD to demonstrate that the generic drug is pharmaceutically equivalent and bioequivalent to the RLD. The ANDA also includes the generic manufacturer's proposed labeling, which must be identical to the RLD labeling except for manufacturing information and any approved changes from the RLD specifications. ANDA filers submit this information, its proposed labeling, and any patent certifications to FDA to obtain approval. A biological product is derived from biological material, such as a virus, toxin, vaccine, blood component, or protein, and used for \"the prevention, treatment, or cure of a disease or condition of human beings.\" Biological products \"are generally large, complex molecules\" that \"may be produced through biotechnology in a living system, such as a microorganism, plant cell, or animal cell.\" \"Inherent variations\" between different batches of the same biological product are \"normal and expected.\" According to FDA, the complexity and variability of biological products \"can present challenges in characterizing and manufacturing these products that often do not exist in the manufacture of small molecule drugs.\" FDA's process for approving biological products and generic versions of previously approved products aims to account for these challenges. To be marketed in the United States, a biological product must be (1) covered by a valid biologics license; and (2) marked with the product's proper name; the manufacturer's name, address, and applicable license number; and the product's expiration date. A biological product manufacturer may obtain a biologics license by submitting a biologics license application (BLA) to FDA's Center for Biologics Evaluation and Research (CBER) or CDER for approval. The BLA must include, among other things: \"data derived from nonclinical laboratory and clinical studies\"; \"[a] full description of manufacturing methods; data establishing stability of the product through the dating period\"; representative samples of the product; the proposed labels, enclosures, and containers to be used; \"the address of each location involved in the manufacture of the biological product\"; and if applicable, a proposed Medication Guide. FDA must also be able to examine the product and determine that it \"complies with the standards established\" in the BLA and other requirements, including good manufacturing practices. To approve a BLA, FDA must determine that the biological product is \"safe, pure, and potent\" and that the production and distribution process \"meets standards designed to assure that the biological product continues to be safe, pure, and potent.\" As with drug approvals, FDA either issues the license or issues a complete response letter detailing the reasons for denying the license. After approval, BLA holders must notify FDA of any changes to \"the product, production process, quality controls, equipment, facilities, responsible personnel, or labeling.\" As with the Hatch-Waxman Act, Congress created an abbreviated approval process for biological products through the BPCIA. Under the abbreviated process, a company can obtain a license to market a biological product if it can demonstrate that the product is biosimilar to, or interchangeable with, an approved biological product, referred to as the \"reference product.\" To obtain a BLA for a biosimilar, the manufacturer must submit data demonstrating that its product is \"highly similar to the reference product notwithstanding minor differences in clinically inactive components\" with no \"clinically meaningful differences\" between the two products \"in terms of the safety, purity, and potency of the product.\" \"[T]he condition or conditions of use prescribed, recommended, or suggested in the labeling\" must have been approved for the reference product. The biosimilar product must use \"the same mechanism or mechanisms of action\" to treat any applicable conditions and have the same route of administration, dosage form, and strength as the reference product. Finally, the biosimilar product license application must demonstrate that the production and distribution facilities meet \"standards designed to assure that the biological product continues to be safe, pure, and potent.\" To obtain a BLA for an interchangeable product, the manufacturer must submit data demonstrating that the product is biosimilar to the reference product and \"can be expected to produce the same clinical result as the reference product in any given patient.\" Additionally, for a biological product administered to an individual more than once, the manufacturer must also show that the product does not create a greater \"risk in terms of safety or diminished efficacy\" from alternating from or switching between the biosimilar product and reference product than if the reference product was used alone. Interchangeable products \"may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product.\" In order to balance interests in competition—which the abbreviated approval pathways aim to encourage—with the countervailing interest in encouraging innovation, federal law establishes periods of regulatory exclusivity that limit FDA's ability to approve generic drugs and biosimilars under certain circumstances. This right to exclusivity aims to encourage new drug or biologics applicants to undertake the expense of generating clinical data and other information needed to support an NDA or BLA. It also encourages follow-on product manufacturers to submit abbreviated applications as soon as permissible. There are two general categories of regulatory exclusivity: (1) data exclusivity, which precludes applicants from relying on FDA's safety and effectiveness findings for the reference product (based on the NDA or BLA holder's data) to demonstrate the safety and effectiveness of the follow-on product; and (2) marketing exclusivity, which precludes FDA from approving any other application for the same pharmaceutical product and use, regardless of whether the applicant has generated its own safety and effectiveness data. During a period of data exclusivity, a company could submit an NDA or BLA for the same pharmaceutical product and use. Functionally, however, data exclusivity and marketing exclusivity may generate the same result due to the investment required to generate the necessary data. Federal law provides regulatory exclusivities for new drug and biological products that differ based on such factors as how innovative the product was or the nature of the treatment population. For new drugs, an NDA filer that obtains approval for a drug that contains a new chemical entity (i.e., a new active ingredient) for which no other drug has been approved is eligible for five years of data exclusivity running from the time of NDA approval. During that period, no ANDA or 505(b)(2) NDA (i.e., applications that, by definition, would reference the NDA data) containing that same active ingredient may be submitted to FDA. The one exception is that after four years , FDA may accept for review an ANDA or 505(b)(2) application for the same active ingredient if the application contains a paragraph (IV) certification that a listed patent for the RLD is invalid or not infringed by the generic drug. NDA or sNDA sponsors that obtain approval for significant changes to approved chemical entities that require additional clinical studies are eligible for three years of data exclusivity running from the time of NDA approval. Significant changes would include new indications for or formulations of chemical entities that FDA previously approved. Unlike five-year exclusivity for new chemical entities, FDA may accept ANDA and 505(b)(2) submissions that reference the changes meriting exclusivity during the three year time period. The three-year exclusivity relates to when FDA may approve such applications. To obtain such three-year exclusivity, the NDA or sNDA must \"contain[] reports of new clinical investigations (other than bioavailability studies)\" that were \"essential to the approval\" of the application. In other words, the sponsor must have conducted or sponsored additional clinical trials that were necessary to obtain approval of the new use or formulation of the active ingredient in order to benefit from the three-year exclusivity for that new condition. For brand-name biological products, the BPCIA establishes two applicable periods of exclusivity. First, no biosimilar applications can be submitted for four years \"after the date on which the reference product was first licensed.\" Second, approval of biosimilar application cannot become effective until 12 years \"after the date on which the reference product was first licensed.\" Together, these exclusivity periods mean that for the first four years after a reference biological product is licensed, FDA does not accept any biosimilar applications for review; for the next eight years, FDA accepts biosimilar applications for review, but it would not approve any biosimilar application until 12 years after the date on which the reference product was first licensed. FDA has not adopted a formal position on whether these exclusivity periods are data or marketing exclusivity periods. Supplemental BLAs, for example to change the \"indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength,\" are not eligible for these four and 12-year regulatory exclusivity periods. In addition to providing incentives for innovation, regulatory exclusivities are also used to promote competition by encouraging the entry of follow-on products. When a patent listed for an RLD has not expired, potential ANDA applicants have two choices: (1) wait until the patent expires to be approved or (2) file a paragraph (IV) certification that the patent is invalid or not infringed by the generic product. The potential for ensuing patent litigation raises the expected costs for the first ANDA filer with a paragraph (IV) certification as compared to other ANDA filers. To incentivize generic manufacturers to be the first filer and challenge listed patents, the Hatch-Waxman Act provides 180 days of exclusivity to the first ANDA applicant that successfully challenges an active patent listed for the RLD using a paragraph (IV) certification that the patent is invalid. This exclusivity period precludes FDA from approving another ANDA for the same RLD during the 180-day period. The BPCIA similarly awards regulatory exclusivity to the first interchangeable biological product for a particular reference product. This exclusivity precludes FDA from making an interchangeability determination for a subsequent biologic relying on the same reference product for any condition of use until such exclusivity expires, the timing of which depends on the status of a relevant patent dispute. Specifically, the exclusivity period ends at the earlier of one year after the commercial marketing of the first interchangeable product, 18 months after a final court decision in a patent infringement action against the first applicant or dismissal of such an action, 42 months after approval if the first applicant has been sued and the litigation is still ongoing, or 18 months after approval if the first applicant has not been sued. There are also a number of regulatory exclusivities aimed at encouraging entry into markets that serve smaller or underserved populations or have limited competition. For example, the FD&C Act provides a 180-day exclusivity to an ANDA filer if—at the applicant's request—FDA designates the drug as a \"competitive generic therapy\" (CGT) due to \"inadequate generic competition.\" To receive the exclusivity, the first ANDA approved for the CGT drug must have submitted the ANDA when there were \"no unexpired patents or exclusivities listed in the Orange Book for the relevant RLD,\" and the applicant must commercially market the drug within 75 days of approval. In addition, Congress passed the Orphan Drug Act in 1983 to encourage the development of drugs and biologics to treat rare diseases and conditions. Because these drugs—called \"orphan drugs\" —often treat small patient populations and thus may provide fewer financial incentives for pharmaceutical manufacturers to develop them, the law (among other measures) provides a seven-year marketing exclusivity for companies that obtain approval for these drugs. During the seven-year period, FDA cannot approve an NDA or BLA for the same drug or biologic to treat the same disease or condition, even if the second application generates its own safety and efficacy data. To receive this exclusivity, (1) the drug must treat \"rare diseases or conditions,\" and (2) FDA must not have approved another drug \"for the same use or indication.\" To encourage manufacturers to evaluate the safety and effectiveness of their pharmaceutical products for children, NDA and BLA filers may obtain a \"pediatric exclusivity\" if FDA determines the drug or biological product \"may produce health benefits\" in the pediatric population and the filer completes pediatric studies at FDA's request. Pediatric exclusivity adds six months to any existing exclusivity the NDA or BLA filer has obtained. For example, if the NDA filer obtains a five-year exclusivity for a new active ingredient and conducts the requested pediatric studies, it is entitled to five and a half years of exclusivity. As Table 1 summarizes below, patent rights granted by the PTO and regulatory exclusivities granted by FDA are legally distinct as a general matter. They are, however, motivated by similar purposes. Patents are designed to encourage innovation by providing an economic incentive for inventors to invest their time and resources in the development of novel inventions. Analogously, regulatory exclusivities granted by FDA can be viewed as providing an incentive for pharmaceutical manufacturers to undertake the investments necessary to complete the FDA approval process and bring new drugs and biologics to market. In some circumstances, patent rights can affect when a follow-on generic or a biosimilar can be marketed. For example, if a court hearing a patent dispute grants an injunction against a generic drug manufacturer that prohibits that manufacturer from infringing by making the generic drug, that product cannot be brought to market until after the patent expires. In addition, as discussed below, the Hatch-Waxman Act's specialized patent dispute procedures can affect FDA's ability to approve an ANDA, even prior to a judicial decision. Patent rights may also affect follow-on market entry indirectly , if a generic or biosimilar manufacturer declines to seek FDA approval because of the number of existing patents relating to a product or the costs of challenging them. One of the core aims of the Hatch-Waxman Act was to correct \"two unintended distortions\" in the patent term resulting from the interaction between the temporally limited patent monopoly and FDA premarketing requirements for products such as prescription drugs. The first distortion affected new drug manufacturers: because obtaining FDA marketing approval could take years, the effective patent life (i.e., the period during which the patentee can derive profit from the invention) was shortened by FDA regulatory requirements. In response, the Hatch-Waxman Act granted a patent term extension for certain inventions relating to drug products or medical devices based on delays in obtaining regulatory marketing approval. The other distortion concerned the end of the patent term and affected generic manufacturers. In general, once a patent is expired, the patented invention should be available for anyone to use. As a result, in the pharmaceutical context, generic manufacturers can (at least in theory) enter the market once the applicable patents and/or regulatory exclusivities have expired. However, prior to the Hatch-Waxman Act, some judicial decisions had held that uses of a patented drug necessary to obtain FDA approval, such as conducting tests on a patented drug, constituted patent infringement. Thus, as a practical matter, generic manufacturers could not even begin the process of seeking FDA approval until the applicable patents expired. The result was an \"effective extension of the patent term\" based on the \"combined effect of the patent law and the premarket regulatory approval requirement.\" In response, the Hatch-Waxman Act created a \"safe harbor,\" providing that making, using, or selling an invention \"solely for uses reasonably related to the development and submission of information under a federal law which regulates the manufacture, use, or sale of drugs\" is not patent infringement. A potential side effect of this safe harbor, however, was to limit the ability of a pharmaceutical patent holder to file a lawsuit for patent infringement prior to the generic manufacturer's marketing of the follow-on product. If actions relating to the FDA approval process are no longer infringing, patent litigation against an ANDA filer might not occur until the generic or biosimilar is actually marketed, following the completion of the FDA approval process. However, earlier resolution of such patent disputes is often considered beneficial, as it provides greater legal certainty to the parties. In particular, generic manufacturers can obtain clarity on patent issues before they market a drug and expose themselves to monetary damages. For this reason, the Hatch-Waxman Act made the filing of an ANDA or paper NDA itself an \"artificial\" act of patent infringement. For its part, the BPCIA contains an analogous provision making the filing of a biosimilar or interchangeable BLA an artificial act of patent infringement. Functionally, these artificial acts of infringement enable the original manufacturer, in some circumstances, to sue for patent infringement at the time of the follow-on application, enabling patent disputes to be litigated prior to the marketing of the follow-on product. In short, both of the laws that created an abbreviated pathway for the regulatory approval for follow-on products enacted specialized patent dispute resolution procedures intended to facilitate the early resolution of patent issues. This section reviews these procedures. Under the Hatch-Waxman Act, a drug manufacturer must list as part of its NDA any patent that claims the drug that is the subject of the application, or a method of using that drug. FDA includes information on listed patents in a publication known as the Orange Book . When a generic drug manufacturer files an ANDA, it must provide a certification for each patent listed in the Orange Book with respect to the referenced listed drug (RLD). In particular, with some exceptions, the generic applicant must provide one of four certifications: (I) there is no patent information listed; (II) the patent has expired; (III) the date the patent will expire; or (IV) the patent is invalid and/or not infringed by the generic applicant's product. Paragraph (I) and (II) certifications do not affect FDA's ability to approve the ANDA. If the generic applicant makes a paragraph (III) certification, however, FDA may not approve the ANDA until the patent at issue has expired. A paragraph (IV) certification triggers Hatch-Waxman's specialized patent dispute procedures, often resulting in litigation. First, the generic applicant must give notice of the ANDA and the paragraph (IV) certification to the patentee and the NDA holder. The patent holder then has 45 days in which to bring a lawsuit against the generic applicant. If the patent holder declines to file suit by the deadline, the ANDA applicant may file a \"civil action for patent certainty\" to obtain a declaratory judgment that the Orange Book -listed patents are invalid or not infringed. If the patent holder timely files suit after being notified of the paragraph (IV) certification, this lawsuit triggers the so-called \"thirty-month stay\": FDA generally cannot approve the ANDA for 30 months while the parties litigate their patent dispute. If, prior to the expiration of the 30-month stay, the district court concludes that the patent is invalid or not infringed by the ANDA applicant, FDA may approve the ANDA as of the date of the court's judgment or settlement order to that effect. If the court concludes that the patent is infringed (and that decision is not appealed or affirmed), then the effective date of ANDA approval must be \"not earlier than the date of the expiration of the patent which has been infringed.\" FDA approval of a generic drug application can thus be significantly delayed based upon patent rights asserted by the NDA holder. By statute, the only patents that must be listed with an NDA are those that either (1) \"claim[] the drug\" that is the subject of the NDA or (2) claim \"a method of using such drug.\" FDA regulations make clear that \"drug substance (active ingredient) patents, drug product (formulation and composition) patents, and method-of-use patents\" must be listed, whereas \"[p]rocess patents, patents claiming metabolites, and patents claiming intermediates\" must not be listed. As a result, patents on a process for manufacturing a drug, for example, should not be included in the NDA or listed in the Orange Book . However, FDA does not actively police the patent information listed in the Orange Book , viewing its role as merely \"ministerial.\" This approach has raised concerns among some commentators that irrelevant or inapplicable patents may be listed by NDA holders and included in the Orange Book as a means to deter generic competition. Because of the availability of the 30-month stay and the requirement that ANDA filers make a certification for each patent listed in the Orange Book , it is generally in the interest of NDA holders to list all relevant patents. However, there is no statutory provision providing that the patentee or NDA holder forfeits the right to sue if she fails to list the applicable patents. In addition, because only certain types of patents relating to a drug may be included in the Orange Book , some patent litigation concerning generic drugs takes place outside the specialized procedures of the Hatch-Waxman Act. A different patent dispute resolution scheme applies to biological products and biosimilars, which are subject to regulatory licensure under the PHSA, as amended by the BPCIA. Under the BPCIA, regulatory approval of biologics is not directly contingent on resolution of patent disputes. In contrast to the Hatch-Waxman approach, a BLA filed need not list any patent information as part of its BLA. As a result, no patent information is currently listed in the Purple Book , FDA's list of approved biological products that is the biologics analog of the Orange Book. Table 2 summarizes the key differences between the patent dispute resolution regimes for drugs under Hatch-Waxman and for biologics under the BPCIA. Instead of the Hatch-Waxman certification process, patent disputes regarding biosimilars may be resolved through the BPCIA's \"patent dance.\" The patent dance is \"a carefully calibrated scheme for preparing to adjudicate, and then adjudicating, claims of infringement.\" The first step in the patent dance process is triggered when, not later than 20 days after FDA accepts a biosimilar BLA, the biosimilar applicant provides its application to the reference product sponsor (i.e., the brand-name biologic manufacturer), along with information on how the biosimilar is manufactured. \"These disclosures enable the [reference product] sponsor to evaluate the biosimilar for possible infringement of patents it holds on the reference product (i.e., the corresponding biologic).\" The biosimilar applicant and reference product sponsor then engage in a series of back-and-forth information exchanges regarding the patents that each party believes are relevant, as well as the parties' positions as to the validity and infringement of those patents. Depending on their participation in this information exchange, each party has the opportunity to litigate the patents in two phases: either at the conclusion of the patent dance, or when the applicant provides a notice of commercial marketing no later than 180 days before the date that the biosimilar will be marketed. BLA holders cannot obtain injunctive relief to compel the biosimilar applicant to engage in the patent dance. In practice, this limitation means that biosimilar applicants can choose whether or not they wish to commence the patent dance. However, if the biosimilar applicant chooses not to commence the patent dance, the BPCIA \"authorizes the [reference product] sponsor, but not the applicant, to bring an immediate declaratory-judgment action for artificial [patent] infringement.\" Thus, although the biosimilar applicant need not immediately reveal his manufacturing information if he chooses not to commence the patent dance, he exposes himself to an immediate lawsuit for a declaratory judgment of patent infringement. Unlike patent listing under Hatch-Waxman, the BPCIA contains an express statutory penalty for failing to list relevant patents during the patent dance. If the biosimilar applicant commences the patent dance, the reference product sponsor must provide a list of all \"patents for which the reference product sponsor believes a claim of patent infringement could reasonably be asserted . . . if a person not licensed by the reference product sponsor engaged in the making, using, offering to sell, selling, or importing [the biological product at issue]\" without permission of the patentee. Under the \"list it or lose it\" requirement, the patent holder may forfeit his right to sue if this list is not submitted or is incomplete. Specifically, if a patent \"should have been included in the list [as required during the patent dance], but was not timely included in such list,\" then the patent owner \"may not bring an action under this section for infringement of the patent with respect to the biological product.\" This section reviews a number of legislative proposals in the 115 th and 116 th Congresses that seek to reduce pharmaceutical drug and biological product prices through reforming IP laws and/or facilitating increased competition from generic drug and biosimilar manufacturers. This review is not intended to be comprehensive, nor does it evaluate the merits of these proposals. Rather, proposals are reviewed merely as representative examples of the various types of legal changes under consideration. Related or similar proposals are referenced in the footnotes. As noted above, IP rights are only one factor that may contribute to consumer prices in a highly complex pharmaceutical market. Thus, congressional proposals related to IP rights are merely one potential means to reduce drug prices that is currently under consideration in Congress. Other legislative proposals seeking to reduce drug prices would, for example, permit the Secretary of HHS (the Secretary) to negotiate drug prices for Medicare Part D, allow consumers to import (often cheaper) pharmaceuticals from Canada under certain circumstances, or reform health insurance requirements to institute a cap on consumers' out-of-pocket costs for prescription drugs. Because these and other similar proposals relate only indirectly to IP rights in pharmaceuticals, they are outside the scope of this report. In part due to the complexity of the legal regimes governing IP rights in pharmaceutical products, there are many different approaches that legislators seeking to reduce drug and biologic prices might take. These approaches include efforts to facilitate generic and biosimilar market entry, curtail practices perceived to be anticompetitive, limit IP rights based on pricing behavior, and increase patent transparency. This section surveys some of the specific means used in existing legislative proposals. For many looking at how to reduce drug prices, encouraging the entry of follow-on products—which provide lower-cost alternatives to brand products—is often an area of focus. Accordingly, proposals have been made to overcome perceived barriers to follow-on product entry. One such proposal is the CREATES Act of 2019, which aims to facilitate the timely entry of certain follow-on products by addressing the concern that some brand manufacturers have improperly restricted the distribution of their products to deny follow-on product manufacturers access to samples of brand products (i.e., the reference drug or biological product). Because brand samples are necessary to conduct certain comparative testing required for an ANDA or biosimilar BLA, some have attributed the inability to timely obtain samples as a cause of delay in the entry of generic products. While follow-on product manufacturers can usually obtain brand samples by purchasing them from licensed wholesalers, some brand products are subject to restricted distribution that limits how they can be sold. This restriction can occur in one of two ways. First, a brand manufacturer can voluntarily place its products into restricted distribution in order to have more control over who can purchase them. Second, some high-risk drugs are subject to restricted distributions under statute and FDA regulations. Under the FD&C Act, as amended by the Food and Drug Administration Amendments Act of 2007 (FDAA Act), where a pharmaceutical product entails serious safety concerns (e.g., potentially acute side effects that may warrant special monitoring), FDA may require the sponsor of the NDA or BLA to submit a proposed Risk Evaluation and Mitigation Strategies (REMS), a risk-management plan that uses strategies beyond labeling to ensure that the benefits of a drug or biological product outweigh its risks. Examples of less restrictive REMS requirements include medication guides for patients and communication plans for health care providers. More restrictive REMS programs have elements to assure safe use (ETASU), which can include prescriber and dispenser certification requirements, patient monitoring or registration, or controlled distribution that limits how the product can be sold. If a brand product is subject to REMS with ETASU, the brand manufacturer and the generic or biosimilar manufacturers generally must agree on a single, shared REMS system before the generic product goes on the market. However, FDA can waive the shared REMS requirement and allow the use of a different, comparable system by the generic or biosimilar manufacturer. Since the enactment of the FDAA Act, some generic manufacturers have complained that they have been improperly denied access to samples through restricted distribution. Some brand manufacturers have implemented voluntary, contractual restrictions that target generic manufacturers. Alternatively, if their products are subject to REMS with ETASU, some brand manufacturers have either (1) invoked the restricted distribution component of a REMS with ETASU to deny sales to generic manufacturers, or (2) used the existence of REMS with ETASU to substantially prolong negotiations over the sale of samples or the development of a single, shared REMS system. The existing statutory and regulatory framework provides limited legal recourse to generic manufacturers who have been denied access to or experience long delays in obtaining samples. As an initial matter, there are no statutes or regulations that specifically prohibit a company from imposing voluntary distribution restrictions on its products. For products subject to REMS, the brand manufacturers are generally prohibited from using their REMS to \"block or delay approval of an application . . . to a drug that is subject to the abbreviated new drug application.\" The statute, however, does not expressly authorize FDA to enforce this provision. Accordingly, consistent with FDA's long-standing view that \"issues related to ensuring that marketplace actions are fair and do not block competition would be best addressed by [the Federal Trade Commission],\" FDA has not asserted that it has the authority to compel the sale of samples for comparative testing. Given the lack of recourse under federal drug law, generic manufacturers have attempted to seek relief by suing withholding brand manufacturers for violations of antitrust law. Specifically, they argue that the brand manufacturer's refusal to sell samples or its delay in selling samples constitutes an anticompetitive effort to maintain a monopoly in the brand product market in violation of section 2 of the Sherman Act . Whether this conduct violates antitrust law, however, is unclear because courts have not defined a clear standard for when a refusal to deal is anticompetitive. A generic manufacturer's ability to obtain relief for sample denial under antitrust law is therefore uncertain under existing law. The CREATES Act seeks to address the uncertainties in the existing legal framework by creating a private cause of action that follow-on product developers can use to initiate expedited litigation to obtain needed brand samples. Instead of asserting an antitrust claim, the bill would allow a follow-on product developer to sue to compel the provision of brand samples if specific statutory elements are met. For brand products not subject to a REMS with ETASU (including a product that is subject to voluntary restrictive distribution imposed by the brand manufacturer), the follow-on product developer would need to show that: 1. it had made a request for samples; 2. the brand manufacturer failed to deliver, on commercially reasonable, market-based terms, sufficient quantities of the samples within 31 days of receiving the request; and 3. as of the filing date of the action, the follow-on product developer is still unable to obtain sufficient quantities of the needed samples on commercially reasonable, market-based terms. For products subject to REMS with ETASU, the bill would create a process by which the follow-on product developer can request from FDA an authorization to obtain sufficient quantities of the relevant samples. FDA would issue the authorization if it determines that the follow-on product developer has agreed to comply with or otherwise met the safety conditions or requirements deemed necessary by FDA. In this situation, the follow-on product developer would need to show the first and third elements above, and that the brand manufacturer failed to deliver, on commercially reasonable, market-based terms, sufficient quantities of samples either within 31 days of receiving the request or within 31 days of receiving notice of FDA's authorization, whichever is later. If a follow-on product developer prevails under either cause of action, the bill would require the court to issue injunctive relief compelling the brand manufacturer to provide the samples without delay and award attorney's fees and costs. If the court finds that the brand manufacturer delayed providing the samples without a \"legitimate business justification,\" the court could also award monetary damages. Monetary damages are not to exceed the revenue the brand manufacturer earned on the product during the period beginning on the day that is 31 days after the receipt of the request for samples (or, if the product is subject to REMS with ETASU, on the day that is 31 days after the receipt of the FDA notice of authorization, if that date is later), and ending on the date on which the follow-on product developer receives sufficient quantities of the brand sample. The bill would also provide FDA more latitude to approve a separate REMS system that the follow-on product developer could use if it cannot reach an agreement on a shared strategy with the brand manufacturer. Specifically, rather than requiring the use of a shared system as the default, the bill would amend the relevant statutory provisions to permit the use of a shared system or a different but comparable system as available alternative options. To address the concern that a more relaxed REMS requirement may expose the brand manufacturers to liability, the bill includes a provision that limits the brand manufacturer's liability against claims arising out of a follow-on product developer's failure to follow adequate safeguards during the development and testing of the generic product. Rather than promoting follow-on product entry by providing production incentives to private parties (as the Hatch-Waxman Act did), or by removing certain barriers to entry for private parties (as the CREATES Act would), the Affordable Drug Manufacturing Act of 2018 (ADMA) would direct the government itself to manufacture certain pharmaceuticals. In particular, ADMA aims to facilitate competition in the market for pharmaceutical products by establishing an Office of Drug Manufacturing within HHS that would oversee the production of certain \"applicable drugs.\" ADMA would define an \"applicable drug\" as a drug or biological product that FDA has approved or licensed under specified provisions of the FD&C Act or PHSA, and which would further satisfy one of two conditions. The first condition would require that any patent listed in the Orange Book with respect to such drug has expired, and that any period of regulatory exclusivity granted by FDA under listed provisions of the FD&C Act or PHSA has expired. Moreover, to meet the first condition for an \"applicable drug,\" the drug would have to either (a) not be currently marketed in the United States or (b) be marketed by fewer than three manufacturers. In the case where the drug is being marketed by fewer than three manufacturers, the drug would be required to further meet one of a number of additional criteria such as experiencing a recent price increase or being included on FDA's drug shortage list. The second, alternative condition for meeting the \"applicable drug\" definition would be the existence of a license or other authorization of \"patent use\" under a number of provisions of federal law. These provisions include the United States' \"eminent domain\" authority for patents under 28 U.S.C. § 1498, and the United States' \"march-in rights\" under the Bayh-Dole Act, both of which are discussed above. In short, the \"applicable drug\" definition would generally limit the Office of Drug Manufacturing to producing drugs for which either (1) the applicable patent and regulatory exclusivities have expired (in addition to not being widely marketed currently) or (2) the government already has a patent license under current law. With respect to an applicable drug, the Office would be required to (1) prepare and submit the relevant applications for FDA approval or contract with other entities to do so; (2) acquire the relevant manufacturing rights and then either manufacture the drugs or contract with other entities to do so; (3) sell the drugs at a fair price, which takes into account certain specified factors, and (4) use the money received for the activities of the Office. In addition, the Office would also manufacture or contract with other entities to manufacture active pharmaceutical ingredients (APIs) under specified conditions, including if an API is not readily available from existing suppliers, and set the API's prices based on specified factors. The bill would set forth certain selection criteria for the applicable drugs and require a gradual increase in the number of drugs produced over time. Specifically, the bill would require the Office to prioritize the manufacturing of applicable drugs that would have the greatest impact on (1) lowering drug costs to patients, (2) increasing competition and addressing drug shortages, (3) improving the public health, or (4) reducing costs to Federal and State health programs. In the first year following enactment, the Office would be required to manufacture, or enter into contracts with entities to manufacture, at least 15 applicable drugs. During that time, the Office would also be required to begin the manufacturing of insulin. Within three years of enactment, the Office would be required to manufacture, or enter into contracts with entities to manufacture, at least 25 applicable drugs. Beginning three years after the date upon which the Office first begins manufacturing a drug and annually thereafter, the Secretary would also be required to make available for sale the approved FDA application. If the purchaser of the application either fails to market the applicable drug within six months of purchase or increase its price above the fair price (as adjusted by the consumer price index), the Secretary would be required to revoke the purchaser's approved application and resume production of that drug. The Office would be required to report to the President and Congress annually on specified topics, including a description of the status of applicable drugs for which manufacturing has been authorized. The bill would authorize the Office to be appropriated such sums as may be necessary. As described above, patent litigation can result when generic drug and biosimilar manufacturers seek to market a drug or biological product before patent rights expire by challenging the validity of the brand-name companies' patents and/or their applicability to the follow-on product. Some brand-name companies have resolved or settled such litigation through agreements with the generic manufacturer wherein the brand-name company pays the generic manufacturer a sum of money in return for the generic manufacturer agreeing to wait to enter the market. This practice, referred to as \"reverse payment settlements\" or \"pay-for-delay settlements,\" allows the brand-name company to avoid the risk that its patent will be invalidated, delay the market entry of generic competition, and effectively extend its exclusive right to market the listed drug. A valid patent affords the owner the right to exclude infringing products from the market, but \"an invalidated patent carries with it no such right,\" \"[a]nd even a valid patent confers no right to exclude products or processes that do not actually infringe.\" Because these agreements terminate the litigation, the questions of validity and infringement remain open. The FTC and private parties have alleged that these pay-for-delay agreements entail the brand-name company paying the follow-on applicant \"many millions of dollars to stay out of its market\" and, accordingly, \"have significant adverse effects on competition\" in violation of antitrust laws. The Preserve Access to Affordable Generics and Biosimilars Act (PAAGBA) seeks to limit the ability of drug and biological product manufacturers (i.e., brand-name companies) to pay generic or biosimilar manufacturers to delay their entry into the market. Pay-for-delay agreements may contravene existing antitrust laws if they have anticompetitive effects. Section 1 of the Sherman Act prohibits \"contracts . . . in restraint of trade or [interstate] commerce.\" The Supreme Court has held that the Sherman Act prohibits only unreasonable restraints, recognizing that all contracts operate as a restraint on trade. Section 5 of the Federal Trade Commission Act (FTCA) further prohibits \"unfair methods of competition,\" —a category that includes (but is not limited to) conduct that violates the Sherman Act. When evaluating agreements for potential antitrust violations, the court focuses its inquiry on \"form[ing] a judgment about the competitive significance of the restraint . . . 'based either (1) on the nature or character of the contracts, or (2) on surrounding circumstances giving rise to the inference or presumption that they were intended to restrain trade and enhance prices.'\" The Supreme Court has recognized that \"reverse payment settlements . . . can sometimes violate the antitrust laws,\" and courts have allowed antitrust litigation challenging certain reverse payment settlements to proceed under existing law. In evaluating the reasonableness of contractual restraints on trade, courts have found that \"some agreements and practices are invalid per se, while others are illegal only as applied to particular situations.\" Courts generally apply a \"rule of reason\" analysis unless the agreement falls within a per se illegal category. However, courts use \"something of a sliding scale in appraising reasonableness\" and, in certain instances, apply a more abbreviated rule of reason analysis to an agreement, referred to as a \"quick look.\" Rule of Reason Analysis . While the Supreme Court has not developed a \"canonical\" analytical framework to guide this totality-of-the-circumstances inquiry, most courts take a similar approach in resolving rule-of-reason cases. Under the standard approach, a Section 1 plaintiff has the initial burden of demonstrating that a challenged restraint has anticompetitive effects in a properly defined product and geographic market—that is, that the restraint causes higher prices, reduced output, or diminished quality in the relevant market. If the plaintiff succeeds in making this showing, the burden then shifts to the defendant to rebut the plaintiff's evidence with a procompetitive justification for the challenged practice. If the defendant is unable to produce such a justification, the plaintiff is entitled to prevail. However, if the defendant rebuts the plaintiff's evidence, the burden then shifts back to the plaintiff to show either (1) that the restraint's anticompetitive effects outweigh its procompetitive effects or (2) that the restraint's procompetitive effects could be achieved in a manner that is less restrictive of competition. Per Se Illegal . Certain agreements are considered per se illegal \"without regard to a consideration of their reasonableness\" \"because the probability that these practices are anticompetitive is so high.\" Only restraints that \"have manifestly anticompetitive effects\" and lack \"any redeeming virtue\" are held to be per se illegal. The most common categories are agreements for horizontal price fixing, market allocation, or output limitation. The plaintiff need only demonstrate that the agreement in question falls in one of the per se categories; \"liability attaches without need for proof of power, intent or impact.\" Quick Look Analysis . A \"quick look\" is an abbreviated rule of reason analysis. In identifying this intermediate standard of review, the Court has explained that because \"[t]here is always something of a sliding scale in appraising reasonableness,\" the \"quality of proof required\" to establish a Section 1 violation \"should vary with the circumstances.\" As a result, the Court has concluded that in certain cases—specifically, those in which \"no elaborate industry analysis is required to demonstrate the anticompetitive character\" of a challenged agreement—plaintiffs can establish a prima facie case that an agreement is anticompetitive without presenting the sort of market power evidence traditionally required at the first step of rule-of-reason analysis. While there is no universally accepted \"quick look\" framework, several courts of appeals have endorsed an approach to \"quick look\" cases initially adopted by the FTC. Under this approach, if a Section 1 plaintiff can establish that the nature of a challenged restraint makes it likely to harm consumers, the restraint is deemed \"inherently suspect\" and therefore presumptively anticompetitive. A defendant can rebut this presumption by presenting \"plausible reasons\" why the challenged practice \"may not be expected to have adverse consequences in the context of the particular market in question,\" or why the practice is \"likely to have beneficial effects for consumers.\" If the defendant fails to offer such reasons, the plaintiff is entitled to prevail. However, if the defendant does offer such an explanation, the plaintiff must address the justification by either (1) explaining \"why it can confidently conclude, without adducing evidence, that the restraint very likely harmed consumers,\" or (2) providing \"sufficient evidence to show that anticompetitive effects are in fact likely.\" If the plaintiff succeeds in making either showing, \"the evidentiary burden shifts to the defendant to show the restraint in fact does not harm consumers or has 'procompetitive virtues' that outweigh its burden upon consumers.\" However, if the plaintiff fails to rebut the defendant's initial justification, its challenge becomes a full rule-of-reason case. In Actavis v. FTC , the Supreme Court held that the rule of reason is the appropriate level of analysis for pay-for-delay agreements. Though it recognized the potential for such agreements to have anticompetitive effects, it acknowledged that \"offsetting or redeeming virtues are sometimes present.\" Such justifications might include \"traditional settlement considerations, such as avoided litigation costs or fair value for services.\" Accordingly, the FTC (or other plaintiff) has to fully prove the anticompetitive effects of a particular agreement before the burden shifts to the defendant. PAAGBA seeks to prohibit brand-name manufacturers from compensating follow-on product manufacturers to delay their entry into the market by creating a presumption of illegality, moving away from a rule of reason analysis. The proposed legislation would amend the FTCA to specifically authorize the FTC to initiate enforcement proceedings against parties to \"any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product or biological product.\" Such agreements would be presumed to have anticompetitive effects and violate antitrust laws if the brand-name company agrees to provide the generic with \"anything of value,\" including monetary payments or distribution licenses, in exchange for the generic company agreeing \"to limit or forego research, development, manufacturing, marketing, or sales\" of the generic product \"for any period of time.\" The presumption would not attach, however, to agreements where the only consideration from the brand-name company is the right to market the product before relevant patents or exclusivities expire, reasonable litigation expenses, or a covenant not to sue for infringement. The presumption would not make the agreement per se illegal. The parties to the agreement would have the opportunity to overcome the presumption with \"clear and convincing evidence\" that (1) the agreement provides compensation \"solely for other goods or services\" from the generic company or (2) the agreement's \"procompetitive benefits . . . outweigh the anticompetitive effects.\" In evaluating this evidence, the fact-finder cannot presume that entry would not have occurred—even without the agreement—until the patent or statutory exclusivity expired. It also cannot presume that allowing entry into the market before the patent or statutory exclusivity period expires is necessarily procompetitive. If the FTC proves that parties to an agreement violated these provisions, the proposed legislation provides for assessment of a civil penalty against each violating party. The civil penalty must be \"sufficient to deter violations,\" but no more than three times the value gained by the respective violating party from the agreement. In the event the NDA holder did not gain demonstrable value from the agreement, the value received by the ANDA filer would be used to calculate the penalty. In calculating the penalty for a particular party, an FTC administrative law judge would consider \"the nature, circumstances, extent, and gravity of violation,\" the impact on commerce of the agreement, and the culpability, history of violations, ability to pay, ability to continue doing business, and profits or compensation gained by all parties (i.e., the NDA or BLA holder(s) and ANDA or biosimilar BLA filer(s)). Any penalties assessed would be in addition to, rather than in lieu of, any penalties imposed by other federal law. The FTC would also be able to seek injunctions and other equitable relief, including cease-and-desist orders. In addition, an ANDA filer that was party to such an agreement would forfeit its 180-day exclusivity awarded for challenging a patent using a paragraph (IV) certification. Some commentators have proposed using the government's authority to grant compulsory licenses on patents as a means to lower prices for pharmaceutical products. This could be accomplished through reliance on existing legal authorities, or through legislation that either expands existing authority or specifies conditions for its exercise. An example of the latter approach is the Prescription Drug Price Relief Act of 2019 (PDPRA). PDPRA would create a process by which the Secretary would review the pricing of all brand-name drugs and biological products to determine whether the prices of any such products are \"excessive.\" The Secretary would determine whether a brand-name drug price is excessive in part based on whether the average price in the U.S. exceeds the median price charged for the drug in five foreign \"reference countries.\" If the Secretary determines that the price of a brand-name pharmaceutical product is excessive, he would have the authority to waive or void any government-granted exclusivities, including FDA regulatory exclusivities, and issue compulsory licenses allowing any person to make, use, sell, or import the excessively priced drug despite applicable patents. To accomplish this, the bill would require that NDA and BLA holders submit an annual report to HHS including detailed information about the pricing of \"brand name drugs,\" including information on costs, revenues, R&D expenditures, and the \"average manufacturer price of the drug in the United States and in the reference countries.\" \"Brand name drugs\" are prescription drugs and biologics approved or licensed by FDA under a nonabbreviated regulatory pathway (i.e., not generic drugs or biosimilars) and that are \"claimed in a patent or the use of which is claimed in a patent.\" Using this information, the Secretary would, on at least an annual basis, determine whether the price of any brand-name drug is excessive. The bill envisions two ways in which the Secretary would determine that a brand-name drug price is excessive. First, the Secretary would be required to determine that a drug has an excessive price if the \"average [U.S.] manufacturing price\" exceeds \"the median price charged for such drug in the 5 reference countries.\" Second, the Secretary would determine that a drug has an excessive price if \"the price of the drug is higher than reasonable\" taking into account a number of factors, including the value of the drug to patients, R&D costs, health outcomes, revenues, and recent price increases. Members of the public would be able to petition the Secretary to make an excessive price determination with respect to a particular drug under some circumstances. If the Secretary determines that the price of a brand-name drug is excessive, the Secretary would be authorized to (1) \"waive or void any government-granted exclusivities\" with respect to such drug, and (2) issue \"open, non-exclusive [compulsory] licenses\" that allow competitors to \"make, use, offer to sell or sell, and import [the brand-name drug] and to rely upon the regulatory test data\" of the brand-name drug manufacturer. \"Government-granted exclusivity\" is defined to explicitly include common FDA regulatory exclusivities as well as \"[a]ny other provision of law that provides for exclusivity . . . with respect to a drug.\" The compulsory patent license, which the bill calls a \"excessive drug price license,\" would permit the Secretary to authorize third parties to make and use the excessively priced drug despite patents that \"claim[] a brand name drug or the use of a brand name drug.\" It would also allow third parties to \"rely upon regulatory test data for such drug.\" However, any entity that accepts this compulsory license would be required to pay a \"reasonable royalty\" to the applicable patent holder and any NDA holder whose regulatory exclusivity was voided under the bill's provisions. The royalty rate would either be based on an average rate for pharmaceuticals estimated by the Internal Revenue Service or set by the Secretary based on a number of factors. Any party accepting a compulsory license for an excessively priced drug would still need to apply for FDA approval (or licensure) in order to market a generic (or biosimilar) version. Accordingly, the bill would require FDA to expedite review of such applications and \"act within 8 months.\" During the period between the Secretary's excessive price determination and follow-on product approval, the bill would prohibit the brand-name drug manufacturer from increasing the price of the drug or biologic. In addition to excessive price determinations, the Secretary would use the information received pursuant to the bill to establish a \"comprehensive, up-to-date database\" of brand-name drugs and excessive price determinations. Further, the Secretary would be required to submit an annual report to Congress describing its excessive price reviews and determinations for the preceding year. The Secretary would be required to make both the report and the database available to the public online. Compulsory licensing provisions, like those of the PDPRA, may implicate the Takings Clause of the U.S. Constitution, to the extent that they retroactively affect property rights. The Takings Clause provides that private property shall not \"be taken for a public use, without just compensation.\" Presuming that patents are treated as \"private property\" under the Fifth Amendment, and that the Secretary invoked the compulsory licensing authority, courts may be asked to address: (1) whether compulsory licensing provisions constitute a \"taking\" of private property; (2) whether any such taking was for \"public use\"; and (3) if so, whether the compensation (if any) provided to the rights holder suffices to provide the \"just compensation\" required by the Constitution. Legislative provisions that retroactively void regulatory exclusivities may raise analogous Takings Clause issues. Just as compulsory licensing proposals may limit patent rights based on pharmaceutical product pricing, other proposed reforms would limit FDA regulatory exclusivities based on pricing behavior. For example, the FLAT Prices Act aims to discourage pharmaceutical product manufacturers from significantly increasing the prices of their products. The bill would shorten the relevant periods of regulatory exclusivity for a pharmaceutical product if the manufacturer increases the price by certain percentages within specified time periods. Specifically, the regulatory exclusivity period would be shortened by 180 days if the price increases by more than: (1) 10% over a one-year period; (2) 18% over a two-year period, or (3) 25% over a three-year period. For every price increase that is 5% over the 10%, 18%, or 25% thresholds for these three respective time periods, the exclusivity period would be shortened by an additional 30 days (i.e., a total of 210 days). The bill would also require manufacturers to report any relevant price increases described above to the Secretary within 30 days of the increase. If a manufacturer fails to timely submit the report, the exclusivity period for the relevant drug or biological product would be shortened by an additional 30 days for each day that the report is late. The bill would authorize the Secretary to waive or decrease the reduction in the exclusivity period if (1) the manufacturer submits a report on the price increase that contains all the relevant information, and, (2) based on the report, the Secretary determines that \"the price increase is necessary to enable production of the drug, does not unduly restrict patient access to the drug, and does not negatively impact public health.\" Another potential reform under consideration concerns patent listings and other information included in FDA's lists of approved chemical drugs (the Orange Book ) and biologics (the Purple Book ). One such proposal is the Biologic Patent Transparency Act (BPTA), which would amend the PHSA and patent law to do three principal things: (1) require that BLA applicants (and current BLA holders) provide patent information to FDA; (2) mandate by statute that FDA publish and maintain the Purple Book as a single, searchable list; and (3) require that patent and regulatory exclusivity information be included in the Purple Book . The overall effect would be to make the Purple Book more similar to the Orange Book in some respects. The stated aim of the bill is to curtail patent thickets through greater transparency and limits on the enforcement of late-listed biologic patents. More specifically, the BPTA requires that, within 30 days, the holder of an approved BLA must submit to FDA \"a list of each patent required to be disclosed.\" The patents that would be required to be disclosed include \"any patent for which the holder of [an approved BLA] believes that a claim of patent infringement could reasonably be asserted by the [BLA] holder, or patent owner that has granted an exclusive license to the holder\" if \"a person not licensed by the holder engaged in the making, using, offering to sell, selling, or importing\" the biological product at issue. The bill would also change the \"patent dance\" to require that (if the patent dance is initiated) the list of relevant patents that the reference product sponsor provides to the biosimilar applicant must be drawn from the list provided to FDA. Finally, the bill would enforce its patent listing requirement through a new \"list it or lose it\" provision, providing that the owner of a patent that \"should have been included in the list\" given to FDA, but \"was not timely included in such list, may not bring an action under this section for infringement of the patent.\" The BPTA would codify FDA's practice of publishing the Purple Book and further require that the Purple Book include more information that it does presently, in a more accessible form. In particular, under the bill, the Purple Book would have to include: the official and brand name of each licensed biological product; the date of licensure for each licensed biological product; information about the marketing status, dosage, and route of administration of the biological product; if the product is a biosimilar or interchangeable, the relevant reference product (i.e., the brand-name biologic); and any determination related to biosimilarity or interchangeability for the biological product. Notably, FDA would be required to include patent information, information about whether the product is subject to a period of regulatory exclusivity, and when such exclusivity expires, and to make all the information publicly available as a \"single, easily searchable list.\" Currently, the Purple Book lacks any patent information, contains only partial information on regulatory exclusivities, and is published as two separate files as opposed to a single searchable database. Concerns about perceived high prices for prescription drugs and other pharmaceutical products implicate a complex set of legal regimes, including patent law, FDA law, and specialized patent dispute procedures for drugs and biological products. Much of the debate over allegedly high pharmaceutical prices is fundamentally a matter of public policy: in particular, finding the appropriate balance between providing incentives to create innovative new medicines versus the costs those incentives may impose on the public in the form of higher prices. Nonetheless, knowledge of the workings of the existing legal regimes governing IP rights in pharmaceutical products is necessary to fully understand the implications of the variety of legislative approaches to reduce pharmaceutical prices.", "summary": "Intellectual property (IP) rights play an important role in the development and pricing of pharmaceutical products such as prescription drugs and biologics. In order to encourage innovation, IP law grants the rights holder a temporary monopoly on a particular invention or product, potentially enabling him to charge higher-than-competitive prices. IP rights, if sufficiently limited, are typically justified as necessary to allow pharmaceutical manufacturers the ability to recoup substantial costs in research and development, including clinical trials and other tests necessary to obtain regulatory approval from the Food and Drug Administration (FDA). However, because they may operate to deter or delay competition from generic drug and biosimilar manufacturers, IP rights have been criticized as contributing to high prices for pharmaceutical products in the United States. Two main types of IP may protect pharmaceutical products: patents and regulatory exclusivities. Patents, which are available to a wide range of technologies besides pharmaceuticals, are granted by the U.S. Patent and Trademark Office (PTO) to new and useful inventions. Pharmaceutical patents may claim chemical compounds in the pharmaceutical product, a method of using the product, a method of making the product, or a variety of other patentable inventions relating to a drug or biologic. The holder of a valid patent generally has the exclusive right to make, use, sell, and import the invention for a term lasting approximately 20 years. If a court concludes that a competitor's generic or biosimilar version infringes a valid patent, the court may issue an injunction precluding the competitor from making, using, selling, and importing that competing product until the patent expires. In some circumstances, FDA grants regulatory exclusivities to a pharmaceutical manufacturer upon the completion of the process required to market pharmaceutical products. Before a new drug or biologic can be sold in the United States, companies must apply for regulatory approval or licensure from FDA, which determines if the pharmaceutical is safe and effective. For certain pharmaceuticals, such as innovative products or those that serve particular needs, FDA provides a term of marketing exclusivity upon the successful completion of the regulatory process. If a product is covered by an unexpired regulatory exclusivity, FDA generally may not accept and/or approve an application seeking FDA approval of a follow-on product (i.e., a generic drug or biosimilar). Regulatory exclusivities vary in length from as little as six months to as much as 12 years depending on the specific type of drug or biologic at issue and other factors. Like regulatory exclusivities, patent rights can affect when generic and biosimilar manufacturers can market their follow-on products. Pharmaceutical patent disputes are subject to certain specialized procedures under the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act (BPCIA). Under Hatch-Waxman, applicants seeking approval of a generic version of an existing FDA-approved drug must make a certification with respect to each patent that the brand-name drug manufacturer lists as covering the product. If the generic manufacturer challenges those patents, FDA generally cannot approve the generic drug application for 30 months while the patent dispute is litigated. For biologics, applicants seeking approval of a biosimilar version of an existing biological product may choose to engage in the BPCIA's \"patent dance,\" a complex scheme of private information exchanges made in preparation for formal patent disputes between brand-name biologic and biosimilar manufacturers. The patent dance does not affect FDA's ability to approve a biosimilar application. Some pharmaceutical companies have been criticized for charging high prices and engaging in practices that are perceived by some to exploit the existing legal system governing IP rights on pharmaceutical products. For example, some generic manufacturers have claimed that brand-name drug manufacturers have unreasonably refused to sell them samples of brand-name drugs in order to impede their ability to obtain FDA approval and delay market entry of generic competition. Other commentators have criticized the practice of \"pay-for-delay\" settlements, through which brand-name drug companies settle patent litigation with generic or biosimilar manufacturers by paying them to delay their entry into the market. Still others criticize so-called patent \"evergreening,\" in which pharmaceutical companies are alleged to serially patent minor improvements or ancillary features of their products in order to extend the effective term of patent protection. In recent years, a number of congressional proposals have been introduced that seek to address these and other issues in IP law that are perceived by some to contribute to high prices for pharmaceutical products. These proposed reforms range from relatively modest changes, such as increasing patent transparency, to more sweeping reforms such as pricing controls and government compulsory licensing provisions.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on three new ship-based weapons being developed by the Navy—solid state lasers (SSLs), the electromagnetic railgun (EMRG), and the gun-launched guided projectile (GLGP), also known as the hypervelocity projectile (HVP)—that could substantially improve the ability of Navy surface ships to defend themselves against surface craft, unmanned aerial vehicles (UAVs), and eventually anti-ship cruise missiles (ASCMs). Any one of these three new weapons, if successfully developed and deployed, might be regarded as a \"game changer\" for defending Navy surface ships against enemy missiles and UAVs. If two or three of them are successfully developed and deployed, the result might be considered not just a game changer, but a revolution. Rarely has the Navy had so many potential new types of surface-ship air-defense weapons simultaneously available for development and potential deployment. The issue for Congress is whether to approve, reject, or modify the Navy's acquisition strategies and funding requests for these three potential new weapons. Congress's decisions on this issue could affect future Navy capabilities and funding requirements and the defense industrial base. This report supersedes an earlier CRS report that provided an introduction to potential Navy shipboard lasers. Another CRS report provides an overview of the strategic and budgetary context in which the programs covered in this report, and other Navy programs, may be considered. High-energy lasers (HELs) and railguns are being developed by multiple parts of the Department of Defense (DOD), not just the Navy. HELs, railguns, and GLGP have potential application to military aircraft and ground forces equipment, not just surface ships. And SSLs, EMRG, and GLGP could be used for performing missions other than defense against missiles, UAVs, and surface craft. In particular for the Navy and Marine Corps, EMRG could provide the Navy with a new naval surface fire support (NSFS) weapon for attacking land targets in support of Marines or other friendly ground forces ashore. This report focuses on Navy efforts to develop SSLs, EMRG, and GLGP for potential use in defending Navy surface ships against missiles and UAVs. Although Navy surface ships have a number of means for defending themselves against missiles and UAVs, some observers are concerned about the survivability of Navy surface ships in potential combat situations against adversaries, such as China, that are armed with large numbers of missiles, including advanced models, and large numbers of UAVs. Concern about this issue has led some observers to conclude that the Navy's surface fleet in coming years might need to avoid operating in waters that are within range of these weapons, or that the Navy might need to move toward a different and more distributed fleet architecture that relies less on larger surface ships and more on smaller surface ships, unmanned vehicles, and submarines. Perspectives on whether it would be cost effective to spend money on the procurement and operation of larger surface ships might be influenced by views on whether such ships can adequately defend themselves against enemy missiles and UAVs. Two key limitations that Navy surface ships currently have in defending themselves against missiles and UAVs are limited depth of magazine and unfavorable cost exchange ratios. Limited depth of magazine refers to the fact that Navy surface ships can use surface-to-air missiles (SAMs) and their Close-in Weapon System (CIWS) Gatling guns to shoot down only a certain number of enemy missiles and UAVs before running out of SAMs and CIWS ammunition —a situation (sometimes called \"going Winchester\") that can require a ship to withdraw from battle, spend time travelling to a safe reloading location (which can be hundreds of miles away), and then spend more time traveling back to the battle area. Unfavorable cost exchange ratios refer to the fact that a SAM used to shoot down a missile or UAV can cost the Navy more (perhaps much more) to procure than it cost the adversary to build or acquire the missile or UAV. Procurement costs for Navy air-defense missiles range from several hundred thousand dollars per mission to a few million dollars per missile, depending on the type. In combat scenarios against an adversary with a limited number of missiles or UAVs, an unfavorable cost exchange ratio can be acceptable because it saves the lives of Navy sailors and prevents very expensive damage to Navy ships. But in combat scenarios (or an ongoing military capabilities competition) against a country such as China that has many missiles and UAVs and a capacity for building or acquiring many more, an unfavorable cost exchange ratio can become a very expensive—and potentially unaffordable—approach to defending Navy surface ships against missiles and UAVs, particularly in a context of constraints on U.S. defense spending and competing demands for finite U.S. defense funds. SSLs, EMRG, and GLGP offer a potential for dramatically improving depth of magazine and the cost exchange ratio: D epth of magazine . SSLs are electrically powered, drawing their power from the ship's overall electrical supply, and can be fired over and over, indefinitely, as long as the laser continues to work and the ship has fuel to generate electricity. EMRG projectiles and GLGPs can be stored by the hundreds in a Navy surface ship's weapon magazine. C ost exchange ratio . An SSL can be fired for a marginal cost of less than one dollar per shot (which is the cost of the fuel needed to generate the electricity used in the shot), while GLGP reportedly had an estimated unit procurement cost in 2018 of about $85,000. High-energy SSLs that have enough beam power to counter small boats and UAVs, but not enough to counter missiles, could nevertheless indirectly improve a ship's ability to counter missiles by permitting the ship to use fewer of its SAMs for countering UAVs, and more of them for countering missiles. Similarly, even though GLGPs fired from 5-inch powder guns might not be able to counter anti-ship ballistic missiles (ASBMs), they could indirectly improve a ship's ability to counter ASBMs by permitting the ship to use fewer of its SAMs for countering ASCMs and more of its SAMs for countering ASBMs. The Navy in recent years has leveraged both significant advancements in industrial SSLs and decades of research and development work on military lasers done by other parts of DOD to make substantial progress toward deploying high-energy SSLs on Navy surface ships. Navy surface ships would use high-energy SSLs initially for jamming or confusing (i.e., \"dazzling\") intelligence, surveillance, and reconnaissance (ISR) sensors, for countering small boats and UAVs, and potentially in the future for countering enemy missiles as well. High-energy SSLs on Navy ships would generally be short-range defensive weapons—they would generally counter targets at ranges of about one mile to perhaps eventually a few miles. In addition to a low marginal cost per shot and deep magazine, potential advantages of shipboard lasers include fast engagement times, an ability to counter radically maneuvering missiles, an ability to conduct precision engagements, and an ability to use lasers for graduated responses ranging from detecting and monitoring targets to causing disabling damage. Potential limitations of shipboard lasers relate to line of sight; atmospheric absorption, scattering, and turbulence (which prevent shipboard lasers from being all-weather weapons); an effect known as thermal blooming that can reduce laser effectiveness; countering saturation attacks; possible adversary use of hardened targets and countermeasures; and risk of collateral damage, including damage to aircraft and satellites and permanent damage to human eyesight, including blinding. These potential advantages and limitations are discussed in greater detail in the Appendix . Earlier developments in the Navy's efforts to develop high-energy SSLs include the following: Between 2009 and 2012, the Navy successfully tested a prototype SSL called the Laser Weapon System (LaWS) against UAVs in a series of engagements that took place initially on land and subsequently on a Navy ship at sea. LaWS had a reported beam power of 30 kilowatts (kW). Between 2010 and 2011, the Navy tested another prototype SSL called the Maritime Laser Demonstration (MLD) in a series of tests that culminated with an MLD installed on a Navy ship successfully engaging a small boat. In August 2014, the Navy installed LaWS on the USS Ponce (pronounced pon-SAY)—a converted amphibious ship that operated in the Persian Gulf as an interim Afloat Forward Staging Base (AFSB[I]) —to conduct evaluation of shipboard lasers in an operational setting against swarming boats and swarming UAVs ( Figure 1 and Figure 2 ). In December 2014, the Navy declared LaWS on the Ponce to be an \"operational\" system . Ponce remained in the Persian Gulf until it was relieved in September 2017 by its replacement, the new-construction Expeditionary Sea Base ship Lewis B. Puller (ESB-3). Ponce returned to the United States and was decommissioned in October 2017, at which point LaWS was removed from Ponce. LaWS is to be refurbished to serve as a land-based test asset for the HELIOS effort discussed below. The Navy is now developing SSLs with improved capability for countering surface craft and UAVs, and eventually a capability for countering ASCMs. Navy efforts to develop these more capable lasers include the Solid State Laser Technology Maturation (SSL-TM) effort; the Ruggedized High Energy Laser (RHEL); the Optical Dazzling Interdictor, Navy (ODIN); the Surface Navy Laser Weapon System (SNLWS) Increment 1, also known as the high-energy laser with integrated optical dazzler and surveillance (HELIOS); and the High Energy Laser Counter-ASCM Program (HELCAP). As shown in Figure 3 , the Navy refers to the first four efforts above collectively as the Navy Laser Family of Systems (NFLoS). As also shown in Figure 3 , under the Navy's laser development approach, NFLOS and HELCAP, along with technologies developed by other parts of DOD, are to support the development of future, more capable lasers referred to as SNLWS Increment 2 and SNLWS Increment 3. The Navy's FY2020 budget submission states that \"HELCAP will leverage the knowledge gained in the Navy Laser Family of Systems (NLFoS) efforts…. This leveraged knowledge and new HELCAP technical solutions to the C-ASCM problem will enable a fully informed decision to rapidly field an integrated, fleet ready, HEL Weapon.\" As a follow-on effort to LaWS and MLD, the Navy initiated the SSL Technology Maturation (SSL-TM) program, in which industry teams led by BAE Systems, Northrop Grumman, and Raytheon, among others, competed to develop a shipboard laser with a beam power of up to 150 kW, which would provide increased effectiveness against small boats and UAVs. Technology developed in the SSL-TM effort will support development of the SNLWS Increment 2 system. On October 22, 2015, DOD announced that it had selected Northrop Grumman as the winner of the SSL-TM competition. Figure 4 is an Office of Naval Research (ONR) graphic illustration of the SSL-TM system and its components as installed on the Navy's Self Defense Test Ship (the ex-USS Paul F. Foster [DD-964], an old Spruance [DD-963] class destroyer). In January 2018, the Navy announced that it intended to install the SSL-TM laser on the newly built amphibious ship USS Portland (LPD-27). Sea testing of SSL-TM on the Portland is scheduled for the fourth quarter of FY2019. RHEL reportedly is \"a 150-kilowatt laser that will apparently employ 'different laser architectures' that will handle more powerful laser beams eventually.\" The Navy's FY2020 budget submission states that Budget Activity 3 development (i.e., advanced technology development) associated with RHEL was completed in FY2019; that HELCAP, discussed below, was previously known as RHEL Phase II; and that HELCAP will leverage, among other things, \"Alternative Laser Sources for higher powers, also known as the Ruggedized High Energy Laser (RHEL) activities.\" Congress added about $11.6 million in development funding for RHEL in FY2018; the funding was used for \"long lead procurement for the beam director required to support integrated laser weapons system testing, mission analysis, lethality and defeat of anti-ship cruise missile threats.\" SNLWS Increment 1 is called HELIOS, an acronym meaning high energy laser with integrated optical dazzler and surveillance. The HELIOS effort is focused on rapid development and rapid fielding of a 60 kW-class high-energy laser (with growth potential to 150 kW) and dazzler in an integrated weapon system, for use in countering UAVs, small boats, and ISR sensors, and for combat identification and battle damage assessment. Following a full and open competition based on a request for proposals (RFP) released on June 18, 2017, the Navy on January 26, 2018, awarded Lockheed Martin a $150 million contract for the development, manufacture, and delivery of two HELIOS systems—one for installation on a Navy Arleigh Burke (DDG-51) class Aegis destroyer, the other for land-based testing—by FY2020. The contract includes options for up to 14 additional HELIOS systems that if exercised could increase the total value of the contract to $942.8 million. Figure 5 and Figure 6 show an artist's renderings of HELIOS installed on a DDG-51. A March 21, 2019, press report states: The Navy is planning to install the High Energy Laser and Integrated Optical-dazzler with Surveillance (HELIOS) directed energy (DE) system on a DDG-51 Flight IIA destroyer by FY 2021 as it learns how to integrate laser weapons on its ships, a top official said Wednesday [March 20]. Rear Adm. Ron Boxall, director of Navy Surface Warfare, called characterized the Navy's plans to integrate directed energy weapons as \"yes we are going to burn the boats if you will, and move forward with this technology.\" Boxall said the Navy plans to install a HELIOS system on a West Coast DDG-51 in 2021. \"It's already POM'ed in there to do that, hopefully a West Coast destroyer in '21, onboard. We'll be testing it and then putting it aboard the ship.\" The Lockheed Martin [LMT] HELIOS will consist of a 60-150 kW single laser beam that can target unmanned aircraft systems (UAS) and small boats. The HELIOS is expected to be integrated on to a destroyer for its lifetime. The weapon will also feed intelligence, surveillance and reconnaissance (ISR) data into the ship's combat system and provide a counter-UAS (C-UAS) ISR dazzler capability. The dazzler uses a lower power setting to confuse or reduce ISR capabilities of a hostile UAS. Boxall said he is confident increased DE power outputs will come, but he is not yet confident in integrating them into existing combat systems. \"Because if I'm going to burn the boats, I'm going to replace something that I have on ships today doing that mission with these weapons. And if I do that, I've got to be confident that it's going to work and it's going to cover those missions.\" He added that if a ship has a new DE laser weapon that will both sense and kill targets, \"then I have to make sure it integrates with the other things that I have on my ship that can sense and kill—namely the Aegis weapon system. And so to me the most important aspect of the integrated laser is its integration into my existing combat system, period.\" While Boxall is confident the Navy can continue to increase laser weapon power on ship, one major limiting factor is power margin. The first HELIOS going on a destroyer will go on a Flight IIA ship, but the Flight III as a downside that it uses almost the same hull but focuses more power generation on the new AN/SPY-6 Air and Missile Defense Radar (AMDR). The AMDR will better detect air and missile threats, but \"we are out of schlitz with regard to power. We used a lot of power for that and we don't have as much\" extra for additional functions. Boxall said to get a HELIOS on a DDG-51 Flight III, the Navy will have to either remove something or look at \"very aggressive power management.\" This is part of the calculus in the successor to the DDG-51, the Large Surface Combatant (LSC)…. Last year, the Navy awarded Lockheed Martin a $150 million contract to develop two HELIOS systems in early 2018, with one to integrate on a DDG-51 and one for land-based testing…. However, the FY '19 defense authorization bill restricted the Navy to only one HELIOS per fiscal year without first receiving a detailed contracting and acquisition strategy report. The HELIOS will not merely be bolted on the ship, but integrated into its Aegis combat system to direct the DE weapon…. More recently, in January Lockheed Martin officials said they plan to put HELIOS through a production design review in 2019…. Figure 7 shows a summary of the Navy's proposed FY2020 activities for SSL-TM, RHEL, and HELCAP. The Navy since 2005 has been developing EMRG, a cannon that uses electricity rather than chemical propellants (i.e., gunpowder charges) to fire a projectile. In EMRG, \"magnetic fields created by high electrical currents accelerate a sliding metal conductor, or armature, between two rails to launch projectiles at [speeds of] 4,500 mph to 5,600 mph,\" or roughly Mach 5.9 to Mach 7.4 at sea level. Like SSLs, EMRG draws its power from the ship's overall electrical supply. The Navy originally began developing EMRG as a naval surface fire support (NSFS) weapon for supporting U.S. Marines operating ashore, but subsequently determined that the weapon also has potential for defending against missiles. Following tests with early Navy-built EMRG prototypes, the Navy funded the development of two industry-built EMRG prototype demonstrators, one by BAE Systems and the other by General Atomics (see Figure 8 and Figure 9 ). The two industry-built prototypes are designed to fire projectiles at energy levels of 20 to 32 megajoules, which is enough to propel a projectile 50 to 100 nautical miles. (Such ranges might refer to using the EMRG for NSFS missions. Intercepts of missiles and UAVs might take place at much shorter ranges.) The Navy began evaluating the two industry-built prototypes in 2012. A February 27, 2017, press report stated that a new full and open competition is in the works for the railgun. While the Office of Naval Research and several companies will continue their development of the railgun and projectile, [Naval Sea Systems Command spokeswoman Christianne] Witten said the program office is planning to hold a new competition for the technologies prior to them entering the engineering and manufacturing development phase of the acquisition process, known as \"milestone B.\" \"The railgun acquisition program will avoid being 'locked in' to proprietary solutions for key system components,\" Witten wrote. \"It is the Navy's objective to leverage the industry competition that ONR initially held for the subsystems of pulse power, barrel technology maturation and projectiles. Another round of system full and open competition is planned at milestone B.\" A July 21, 2017, press report stated the following: The U.S. Office of Naval Research (ONR) is proceeding in its electromagnetic railgun research and expects to reach a capacity of 10 rounds per minute with a 32 Mega-Joule muzzle launch for each round, officials said Thursday [July 20]. Dr. Thomas Beutner, department head of Code 35 in ONR's Naval Air Warfare and Weapons Department, told reporters that the railgun research is going well and has made several scientific advances.... Tom Boucher, program officer at Code 35 said the ONR S&T program calls for a maturation of achieving 10 rounds per minute at 32 megajoules by fiscal year 2019. To reach that goal, ONR is building a series of barrels and incorporating lessons learned. They will achieve the full rep-rate and muzzle energy in 2018 and in 2019 demonstrate the longest life of a barrel at that muzzle energy. After reaching these goals the S&T portion of the program should be complete. Separately the Navy's Program Executive Office Integrated Warfare Systems (PEO IWS) will look at shipboard integration if the Navy decides to do that and that office will make any follow-on acquisition decisions, Boucher said.... ONR's rep-rate composite launcher, which can repeat launches quicker than other test devices, will be able to achieve the 10 round-per-minute rate the program seeks by later this summer. ONR plans to gradually ramp up this launcher to higher rep-rate and energy levels through the end of the year, Beutner said. He also talked about how ONR has demonstrated the ability to use pulse power, having fired 5,000 pulse shots. For the rep-rate firing, ONR has to use a larger energy farm or capacitor base resulting in pulse power using over one megajoule per cubic meter energy density. \"That's an important scientific advance in terms of energy density in those capacitors, but even more important that's a size factor that will fit into the ships. Both crewed combatants and future combatants,\" Beutner said. A March 9, 2018, press report states the following: Following a flurry of reports in December predicting the Navy's $500 million electromagnetic railgun experiment was dead on arrival, the chief of Naval Operations told lawmakers this week that the death of the program was greatly exaggerated. \"[We are] fully invested in railgun; we continue to test it,\" Adm. John Richardson told the House Appropriations subcommittee on defense during a Wednesday hearing on Navy and Marine Corps budget issues. \"We've demonstrated it at lower firing rates and ... shorter ranges. Now we have to do the engineering to, sort of, crank it up and get it at the designated firing rates, at the 80- to 100-mile range.\"... Business Insider reported in December that the Pentagon's Strategic Capabilities office was shifting research efforts from the railgun, which uses electromagnetic energy to shoot large projectiles at speeds of up to 4,500 miles per hour, to broader high-velocity projectile study. The Navy has never acknowledged a loss of interest in railgun technology, however. Last July, officials with the Office of Naval Research told reporters that the power behind the gun would be increased to 32 megajoules over the summer, giving the weapon a range of 110 miles.... While Richardson acknowledged the challenges and said Navy brass were \"very conscious\" of reported Chinese achievements in railgun technology, he maintained the service was still invested in the program. As the Navy was developing EMRG, it realized that the guided projectile being developed for EMRG, which weighs about 23 pounds, could also be fired from 5-inch and 155mm powder guns. When fired from EMRG, the projectile reaches hypervelocity (i.e., Mach 5+) speeds, and thus came to be known as the hypervelocity projectile (HVP). When fired from a power gun, the projectile flies quickly, but not as quickly as it does when fired from EMRG. In addition, whereas the Navy's original concept was to use the EMRG projectile for both EMRG and powder guns—and might still decide to do that—the Navy now states that the high-speed projectile fired from powder guns might instead be a different projectile. For both of these reasons, the high-speed projectile for powder guns, which was originally called HVP, is now referred to by the Navy as the gun-launched guided projectile (GLGP). The Navy states that The terms HVP and GLGP are both still used. Hyper Velocity Projectile (HVP) is the term used in the current development programs that [DOD's] SCO [Strategic Capabilities Office] and [Office of naval Research] ONR have ongoing with BAE Systems. Gun Launch Guided Projectile (GLGP) is the term that describes the future acquisition program and the associated performance specification that industry will compete for. GLGP is the RDT&E [research, development, test, and evaluation] budget program element [i.e., line item] covering all guided projectile development effort including HVP. As noted earlier, GLGP had an estimated unit procurement cost in 2018 of about $85,000. Figure 10 and Figure 11 show the then-named HVP. One advantage of GLGP is that the 5-inch and 155mm guns from which it would be fired are already installed on Navy cruisers and destroyers, creating a potential for rapidly proliferating GLGP through the cruiser-destroyer force, once development of GLGP is complete and the weapon has been integrated into cruiser and destroyer combat systems. Navy cruisers each have two 5-inch guns, Navy Arleigh Burke (DDG-51) class destroyers each have one 5-inch gun, and the Navy's three new Zumwalt class (DDG-1000) destroyers each have two 155mm guns. Figure 12 shows launch packages for the then-named HVP configured for 5-inch guns, 155mm guns, and EMRG. In September 2012, when the concept was to use the then-named HVP as a common projectile for both EMRG and powder guns (which might still happen), the Navy described the projectile as a next generation, common, low drag, guided projectile capable of completing multiple missions for gun systems such as the Navy 5-Inch, 155-mm, and future railguns. Types of missions performed will depend on gun system and platform. The program goal is to address mission requirements in the areas of Naval Surface Fire Support, Cruise Missile Defense, Anti-Surface Warfare, and other future Naval mission areas. Mission performance will vary from gun system, launcher, or ship. HVP's low drag aerodynamic design enables high velocity, maneuverability, and decreased time-to-target. These attributes coupled with accurate guidance electronics provide low cost mission effectiveness against current threats and the ability to adapt to air and surface threats of the future. The high velocity compact design relieves the need for a rocket motor to extend gun range. Firing smaller more accurate rounds improves danger close/collateral damage requirements and provides potential for deeper magazines and improved shipboard safety. Responsive wide area coverage can be achieved using HVP from conventional gun systems and future railgun systems. The modular design will allow HVP to be configured for multiple gun systems and to address different missions. The hypervelocity projectile is being designed to provide lethality and performance enhancements to current and future gun systems. A hypervelocity projectile for multiple systems will allow for future technology growth while reducing development, production, and total ownership costs. Research Challenges & Opportunities [include]: -- High acceleration tolerant electronic components -- Lightweight, high strength structural composites -- Miniature, high density electronic components -- Safe high energy propellants compatible with shipboard operations -- Aerothermal protection systems for flight vehicles When fired from 5-inch powder guns, GLGP reportedly achieves a speed of roughly Mach 3, which is roughly half the speed it achieves when fired from EMRG, but more than twice the speed of a conventional 5-inch shell fired from a 5-inch gun. This is apparently fast enough for countering at least some ASCMs. The Navy states that \"The HVP—combined with the MK 45 [5-inch gun] —will support various mission areas including naval surface fire support, and has the capacity to expand to a variety of anti-air threats, [and] anti-surface [missions], and could expand the Navy's engagement options against current and emerging threats.\" A December 21, 2016, opinion column states the following: Now the Navy is acquiring rail guns that use such energy to fire 15- to 25-pound, 18-inch projectiles at 5,000 miles per hour. They hit with the impact of a train slamming into a wall at 100 miles per hour. The high-speed, hence high-energy projectiles, which cost just $25,000, can radically improve fleet-protection capabilities: A barrage of them could counter an enemy's more expensive anti-ship missiles. The daunting challenge posed by defense against the proliferating threat of ballistic missiles is that it is prohibitively expensive to be prepared to intercept a swarm of incoming missiles. New technologies, however, can revolutionize defense against ballistic missiles because small, smart projectiles can be inexpensive. It takes 300 seconds to pick up such a launched missile's signature, the missile must be tracked and a vector calculated for defensive projectiles. A single 25-pound projectile can dispense more than 500 three-gram tungsten impactors and be fired at hypervelocity by electromagnetic energy. Their impact force—their mass times the square of their velocity—can destroy expensive missiles and multiple warheads. Figure 13 is a slide showing the potential application of the then-named HVP to 5-inch power guns, 155mm powder guns, and EMRG. The first line of the slide in Figure 13 , for example, discusses then-named HVP's use with 5-inch powder guns, stating that it uses a high-explosive (HE) warhead for the NSFS mission; that a total of 113 5-inch gun barrels are available in the fleet (which could be a reference to 22 cruisers with two guns each, and 69 destroyers with one gun each); and that as a game-changing capability, it is guided and can be used at ranges of up to 26 nautical miles to 41 nautical miles for NSFS operations, for countering ASCMs, and for anti-surface warfare (ASuW) operations (i.e., attacking surface ships and craft). Figure 14 is a not-to-scale illustration of how then-named HVPs fired from EMRGs and 5-inch guns could be used to counter various targets, including ASCMs and ASBMs. GLGP emerged as a program of particular interest to DOD, which has exploring the potential for using the weapon across multiple U.S. military services. An April 11, 2016, press report states the following: The Pentagon wants to take a weapon originally designed for offense, flip its punch for defense and demonstrate by 2018 the potential for the Army and Navy to conduct missile defense of bases, ports and ships using traditional field guns to fire a new hypervelocity round guided by a mobile, ground variant of an Air Force fighter aircraft radar. The Strategic Capabilities Office [SCO] is working with the Army, Navy and Air Force to craft a Hypervelocity Gun Weapon System that aims, in part, to provide China and Russia an example of a secret collection of new U.S. military capabilities the Defense Department is bringing online in an effort to strengthen conventional deterrence. \"It is a fantastic program,\" Will Roper, [then-]Strategic Capabilities Office director, said in a March 28 interview with reporters, who said the project aims \"to completely lower the cost of doing missile defense\" by defeating missile raids at a lower cost per round and, as a consequence, imposing higher costs on attackers. A May 2, 2016, press report states the following: \"We thought rail guns were something we were really going to go after, but it turns out that powder guns firing the same hypervelocity projectiles gets you almost as much as you would get out of the electromagnetic rail gun, but it's something we can do much faster,\" [then-Deputy Secretary of Defense Robert] Work said. \"We are going to say [to the next administration] 'Look, we believe this is the place where you want to put your money, but we're going to have enough money in there for both the electromagnetic rail gun and the powder gun.' So if the new administration says 'No really the electromagnetic rail gun is the way I want to go,' knock yourself out, we've set you up for success.\" A May 5, 2016, press report similarly states the following: Come January [2017], the Pentagon will almost assuredly have new leadership, complete with a new vision for how the Department of Defense should operate, organize and plan for the future. It's a reality facing down [then-]Defense Secretary Ash Carter and [then-]Deputy Secretary Bob Work as they try to complete a transformation at the Pentagon, one which both men have said is vital to making sure the US is able to maintain its technological edge against great powers like Russia and China in the future.... \"One of the things we have done in our program is build in a lot of different options that they [i.e., officials in the next administration] can pull levers on,\" Work explained. As an example, he pointed to the idea of an electromagnetic railgun. Initially, Work and his team thought that was an area that would be a major focus of development, but as they experimented they realized that a powder gun with a hypervelocity round could have almost the same impact—but at a fraction of the cost, because it did not require the development, testing and adaptation of a new gun. \"We're going to say 'look, this is the place where [we think] you want to put your money,' but we're going to have enough money in both the electromagnetic railgun and the powder gun that if the new administration says 'I really want the electromagnetic railgun, this is the way I want to go,' knock yourself out,\" Work said. \"We've set you up for success.\" A May 9, 2016, press report states the following: [Then-]Deputy Defense Secretary Bob Work said last week that current Pentagon leaders have made investments intended to position the next presidential administration to offset expected Russian and Chinese technological advancements, specifically highlighting lessons learned about a new hypervelocity gun. Work... said one of the key findings to emerge from the effort was the Hypervelocity Gun Weapon System, which he said could be poised to displace much of what the Defense Department had planned to invest in the Navy's electromagnetic rail gun. \"We thought rail guns were going to be something we were really going to go after,\" he said, adding that \"it turns out that powder guns\" are capable of firing the same projectiles, at the same velocity, for far less cost. A July 18, 2016, press report states the following: The Pentagon's office tasked with tweaking existing and developing military technology for new uses is pushing development of ammo meant for the electromagnetic railgun for use in existing naval guns and artillery pieces.... About year and a half ago, researchers at the Pentagon's Strategic Capabilities Office and inside the service realized that there was more short-term promise for not only the Navy but the Army to use the Hyper Velocity Projectiles (HVP) rounds overseen by the Office of Naval Research (ONR) in both services existing powder guns, said [then-]SCO [Strategic Capabilities Office] head William Roper said last week. \"To me they were just interesting test articles a few years ago, but thanks to that service input and us funding some high-risk demonstration we now think that we can do pretty revolutionary things with existing powder guns—think howitzers, Paladins, the Navy's five-inch guns. We've shifted emphasis to that,\" Roper said during a Wednesday talk at the Center for Strategic and International Studies (CSIS). \"Not that we're not interested in railgun—we are—but if you look at the delta between fielding in quantity—we have [more than] a 1,000 powder guns, we have very few railguns.\"... The SCO-led research effort will work to create HVP sensor and a fire control regime that will find its way eventually to the railgun project, Roper said. \"So when the railgun is ready to field it will be able to just be dropped in place as a better launcher as opposed to being a great technology that we have to build a new architecture for,\" he said. \"We're going to take the bet and let's see if we can field this and let's completely flip the paradigm of missile defense.\" A September 19, 2016, press report states the following: After much deliberation, both public and private, the Pentagon, which has shifted emphasis away from the electromagnetic rail gun as a next-generation missile defense platform, sees a new hypervelocity powder gun technology as the key to demonstrating to potential adversaries like China and Russia that U.S. military units on land and sea can neutralize large missile salvos in future conflicts.... \"If you do that, you change every 155 [mm] howitzer in the U.S. Army in every NATO country into a cruise missile and tactical ballistic missile defender and, oh by the way, you extend their offensive range,\" [then-Deputy Secretary of Defense Robert] Work said. The article states that Work \"is pushing hard to lay the groundwork for the next presidential administration to conduct a military exercise called 'Raid Breaker' that would demonstrate the capabilities of the Hypervelocity Gun Weapon System program.\" It quotes him as stating that if DOD conducted such an exercise against 100 cruise missiles and ballistic missiles, \"and were able to convince [potential adversaries] that we're able to knock down 95 to 98 of them, then that would have an enormous impact on the competition in the Pacific, on the competition in Europe and would [clearly] improve conventional deterrence.\" It further quotes him as stating that DOD's modeling shows that \"if we can close the fire support with a controlled solution,\" the weapon would be able to shoot down most of a 100-missile raid. A May 19, 2017, press report states the following: An Army Howitzer is now firing a super high-speed, high-tech, electromagnetic Hyper Velocity Projectile, initially developed as a Navy weapon, an effort to fast-track increasing lethal and effective weapons to warzones and key strategic locations, Pentagon officials said. Overall, the Pentagon is accelerating developmental testing of its high-tech, long-range Electro-Magnetic Rail Gun by expanding the platforms from which it might fire and potentially postponing an upcoming at-sea demonstration of the weapon, Pentagon and Navy officials told Scout Warrior. While initially conceived of and developed for the Navy's emerging Rail Gun Weapon, the Pentagon and Army are now firing the Hyper Velocity Projectile from an Army Howitzer in order to potential harness near-term weapons ability, increase the scope, lethality and range ability to accelerate combat deployment of the lethal, high-speed round. A January 26, 2018, press report states the following: The Pentagon's Strategic Capabilities Office will test-fire a radical new missile defense system in less than a year.... \"That projectile is being designed to engage multiple threats,\" [Vincent Sabio, the HVP program manager at the Pentagon's Strategic Capabilities Office] said of the HVP. \"There may be different modes that it operates in (in terms of) how does it maneuver, how does it close on the threat, and whether it engages a (explosive) warhead or whether it goes into a hit-to-hill mode. Those will all be based on the threat, and we can tell it as it's en route to the threat, 'here's what you're going after, this is the mode you're going to engage in.'\"... So when will the Army and Navy actually get Hyper Velocity Projectiles? Both services are already working with SCO to plan a handover of the program, Sabio said. His role is just to prove the key technology works: specifically, to demonstrate that an HVP can maneuver close enough to \"an inbound, maneuvering threat\" that it could have destroyed it if fitted with the proper warhead. Sabio's not developing that warhead. \"We are building out the full fire control loop including the sensors, the coms links, the projectile, the launchers (i.e.) the guns,\" he said. \"The command and control…. I leave that to my independent transition partners, Navy and Army.\" And by when will the demonstration happen? \"Well,\" said Sabio, \"my program ends less than a year from now.\" A January 8, 2019, press report states: Last summer USS Dewey (DDG-105) fired 20 hyper velocity projectiles (HVP) from a standard Mk 45 5-inch deck gun in a quiet experiment that's set to add new utility to the weapon found on almost every U.S. warship, officials familiar with the test have told USNI News. The test, conducted by the Navy and the Pentagon's Strategic Capabilities Office as part of the Rim of the Pacific (RIMPAC) 2018 international exercise, was part of a series of studies to prove the Navy could turn the more than 40-year-old deck gun design into an effective and low-cost weapon against cruise missiles and larger unmanned aerial vehicles…. While officials confirmed to USNI News that the RIMPAC test was unclassified, both the Office of the Secretary of Defense and the Office of Naval Research would not acknowledge the test when asked by USNI News. Although the Navy in recent years has made considerable progress in developing SSLs, EMRG, and GLGP, a number of significant development challenges remain. Overcoming these challenges will likely require years of additional development work, and ultimate success in overcoming them is not guaranteed. Remaining development challenges for high-energy SSLs include, among other things, making the system rugged enough for extended shipboard use, making the beam director (the telescope-like part of the laser that sends the beam toward the target) suitable for use in a marine environment (where moisture and salt in the air can be harsh on equipment), and integrating the system into the ship's electrical power system and combat system. A January 23, 2015, blog post co-authored by the Office of Naval Research's program officer for the Navy's SSL program states the following: In the near term, many challenges remain to develop and operate high-energy laser systems in the maritime environment that are unique to the Navy and Marine Corps. Among these challenges is dealing with the heat generated as power levels increase. A second issue is packing sufficient power on the platform, which will require advanced battery, generator, power conditioning, and hybrid energy technologies. Current laser technologies are approximately 30 percent electrically efficient. Corrosion and contamination of optical windows by shipboard salt spray, dirt, and grime also are technical challenges. In addition, atmospheric turbulence resulting from shifting weather conditions, moisture, and dust is problematic. Turbulence can cause the air over long distances to act like a lens, resulting in the laser beam's diffusing and distorting, which degrades its performance. Much progress has been made in demonstrating high-energy laser weapon systems in the maritime environment, but there is still much to be done. Additional advances will be required to scale power levels to the hundreds of kilowatts that will make high[-]energy lasers systems robust, reliable, and affordable. Higher power levels are important for the ability to engage more challenging threats and improve the rate and range at which targets can be engaged. The programs managed by ONR are addressing these remaining issues while positioning this important warfighting capability toward an acquisition program and eventual deployment with the fleet and force. Skeptics sometimes note that proponents of high-energy military lasers over the years have made numerous predictions about when lasers might enter service with DOD, and that these predictions repeatedly have not come to pass. Viewing this record of unfulfilled predictions, skeptics have sometimes stated, half-jokingly, that \"lasers are X years in the future—and always will be.\" Laser proponents acknowledge the record of past unfulfilled predictions, but argue that the situation has now changed because of rapid advancements in SSL technology and a shift from earlier ambitious goals (such as developing megawatt-power lasers for countering targets at tens or hundreds of miles) to more realistic goals (such as developing kilowatt-power lasers for countering targets at no more than a few miles). Laser proponents might argue that laser skeptics are vulnerable to what might be called cold plate syndrome (i.e., a cat that sits on a hot plate will not sit on a hot plate again—but it will not sit on a cold plate, either). Remaining development challenges for EMRG involve items relating to the gun itself (including increasing barrel life to desired levels), the projectile, the weapon's electrical power system, and the weapon's integration with the ship. Fielding GLGP on cruisers and destroyers equipped with 5-inch and 155mm powder guns would additionally require GLGP to be integrated with the combat systems of those ships. The Navy stated the following in 2017: The Railgun INP is in the second phase of a two-phase development effort. INP Phase I (FY 2005-2011) successfully advanced foundational enabling technologies and explored, through analysis and war gaming, the railgun's multi-mission utility. Launcher energy was increased by a factor of five to the system objective muzzle energy of 32 mega joules (110 nautical miles range) and barrel life was increased from tens of shots to hundreds of shots. Two contractors delivered tactical-style advanced containment launchers proving the feasibility of composite wound launchers. Pulsed power size was cut in half while thermal management for firing rate (rep-rate) was added to the design. INP Phase II focuses on increasing rep-rate capability. Rep-rate adds new levels of complexity to all of the railgun sub-systems, including thermal management, autoloader, and energy storage. A new test facility capable of supporting rep-rate testing at full energy level is coming on line at the Terminal Range at the Naval Surface Warfare Center, Dahlgren, Virginia. A new demonstration launcher (DL1) has been delivered and installed at the Terminal Range to commission the new facility. Additional rep-rate composite launchers (RCLs) capable of rep-rate are in various stages of design and fabrication. The Office of Naval Research will develop a tactical prototype railgun launcher and pulsed-power architecture suitable for advanced testing both afloat and ashore. A May 19, 2017, press report states the following: Consider 35 pounds of metal moving at Mach 5.8. Ten shots per minute. 1,000 shots before the barrel wears out under the enormous pressures. That's the devastating firepower the Navy railgun program aims to deliver in the next two years, and they're well on their way. \"We continue to make great technical progress,\" said Office of Naval Research program manager Tom Boucher. Boucher and an aide briefed me in the blazing hot courtyard of the Pentagon, which was hosting the annual DoD Lab Day — a kind of military-grade science fair. Three years ago, then-Chief of Naval Operations Jonathan Greenert declared that railguns — which fire projectiles with electromagnetic pulses rather than gunpowder — had come so close to battle-ready that he wanted to test-fire one at sea. Since then the Navy has changed course, deciding that permanent land-based test sites would provide more and better data for fewer dollars than an ad hoc installation aboard a repurposed fast transport (variously known as JHSV or EFP). So on November 17, along the Potomac River at the Naval Surface Warfare Center in Dahlgren, Va., a new 32-megajoule railgun built by BAE Systems opened fire for the first time.... A second railgun is being set up at the Army's White Sands Missile Range in the New Mexico desert, where there's enough wide-open space to fire the weapon at its maximum range of more than a hundred nautical miles. While White Sands tests the long-range performance of the projectile, Dahlgren will work on the weapon itself. Previous test weapons were like medieval bombards, firing just a few times per day. The Dahlgren team is now making multiple shots per hour as they work out the bugs, and by the end of the year they expect to reach the goal of 10 shots per minute. Once they've reached the 10-round a minute rate, Dahlgren will switch focus to barrel life. A decade ago, experimental railguns often wore out their barrel with a single shot. With new materials better able to endure the intense stresses, the barrels on the current test weapons can last for hundreds of shots before requiring replacement — roughly how long a battleship's 16″ barrels lasted back in World War II. The goal is a barrel that lasts 1,000 rounds. Transitioning military technology efforts from the research and development phase to the procurement phase can sometimes be a challenge. Some military technology efforts fail to make the transition, falling into what observers sometimes refer to as the \"valley of death\" metaphorically located between the research and development phase and the procurement phase. A February 27, 2017, press report states that The Navy has established programs for high-energy lasers and the electromagnetic railgun at Naval Sea Systems Command acquisition directorates, paving the way for technologies that have long been stuck in research and development to potentially be installed on the service's ships one day. The program executive office for integrated warfare systems (PEO IWS) is developing acquisition plans for lasers and the electromagnetic railgun, as well as the railgun's associated weapon, the hypervelocity projectile, according to NAVSEA spokeswoman Christianne Witten. Last August, a \"Directed Energy Program Office\" was set up at the above-water sensors directorate within PEO IWS, Witten wrote in a Feb. 22 email. The new office was established to \"accelerate the fielding of High Energy Laser (HEL) weapon systems to the fleet,\" according to the spokeswoman. Additionally, last June, the Navy's acquisition executive charged the surface-ship weapons program office at PEO IWS with developing an acquisition and fielding plan for the railgun and the hypervelocity projectile, Witten said. Potential oversight questions for Congress regarding Navy programs for SNLWS, EMRG, and GLP include the following: Using currently available air-defense weapons, how well could Navy surface ships defend themselves in a combat scenario against an adversary such as China that has or could have large numbers of missiles and UAVs? How would this situation change if Navy surface ships in coming years were equipped with SNLWS, EMRG, GLGP, or some combination of these systems? How significant are the remaining development challenges for SNLWS, EMRG, and GLGP? Are current schedules for developing SNLWS, EMRG, and GLGP appropriate in relation to remaining development challenges and projected improvements in enemy missiles? When does the Navy anticipate issuing roadmaps detailing its plans for procuring and installing production versions of SNLWS, EMRG, and GLGP on specific Navy ships by specific dates? Will the kinds of surface ships that the Navy plans to procure in coming years have sufficient space, weight, electrical power, and cooling capability to take full advantage of SNLWS and EMRG? What changes, if any, would need to be made in Navy plans for procuring large surface combatants (i.e., destroyers and cruisers) or other Navy ships to take full advantage of SNLWS and EMRGs? Given the Navy's interest in HPV, how committed is the Navy to completing the development of EMRG and eventually deploying EMRGs on Navy ships? Are the funding line items for SNLWS, EMRG, and GLDP sufficiently visible for supporting congressional oversight sufficiently visible for supporting congressional oversight? Table 1 summarizes congressional action on selected Navy FY2020 research and development account line items (known as program elements, or PEs) that related to shipboard lasers, EMRG, and GLGP. These PEs do not necessarily capture all Navy research and development work related to these efforts—additional funding for these efforts may occur in other PEs that do not explicitly indicate that they include funding for these efforts. This appendix presents additional information on potential advantages and limitations of shipboard lasers. Potential Advantages In addition to a low marginal cost per shot and deep magazine, potential advantages of shipboard lasers include the following: F ast engagement times . Light from a laser beam can reach a target almost instantly (eliminating the need to calculate an intercept course, as there is with interceptor missiles) and, by remaining focused on a particular spot on the target, cause disabling damage to the target within seconds. After disabling one target, a laser can be redirected in several seconds to another target. A bility to counter radically maneuvering missiles . Lasers can follow and maintain their beam on radically maneuvering missiles that might stress the maneuvering capabilities of Navy SAMs. P recision engagements . Lasers are precision-engagement weapons—the light spot from a laser, which might be several inches in diameter, affects what it hits, while generally not affecting (at least not directly) separate nearby objects. G raduated responses. Lasers can perform functions other than destroying targets, including detecting and monitoring targets and producing nonlethal effects, including reversible jamming of electro-optic (EO) sensors. Lasers offer the potential for graduated responses that range from warning targets to reversibly jamming their systems, to causing limited but not disabling damage (as a further warning), and then finally causing disabling damage. Potential Limitations Potential limitations of shipboard lasers include the following: L ine of sight . Since laser light tends to fly through the atmosphere on an essentially straight path, shipboard lasers would be limited to line-of-sight engagements, and consequently could not counter over-the-horizon targets or targets that are obscured by intervening objects. This limits in particular potential engagement ranges against small boats, which can be obscured by higher waves, or low-flying targets. Even so, lasers can rapidly reacquire boats obscured by periodic swells. A tmospheric absorption, scattering, and turbulence . Substances in the atmosphere—particularly water vapor, but also things such as sand, dust, salt particles, smoke, and other air pollution—absorb and scatter light from a shipboard laser, and atmospheric turbulence can defocus a laser beam. These effects can reduce the effective range of a laser. Absorption by water vapor is a particular consideration for shipboard lasers because marine environments feature substantial amounts of water vapor in the air. There are certain wavelengths of light (i.e., \"sweet spots\" in the electromagnetic spectrum) where atmospheric absorption by water vapor is markedly reduced. Lasers can be designed to emit light at or near those sweet spots, so as to maximize their potential effectiveness. Absorption generally grows with distance to target, making it in general less of a potential problem for short-range operations than for longer-range operations. Adaptive optics, which make rapid, fine adjustments to a laser beam on a continuous basis in response to observed turbulence, can counteract the effects of atmospheric turbulence. Even so, lasers might not work well, or at all, in rain or fog, preventing lasers from being an all-weather solution. T hermal blooming . A laser that continues firing in the same exact direction for a certain amount of time can heat up the air it is passing through, which in turn can defocus the laser beam, reducing its ability to disable the intended target. This effect, called thermal blooming, can make lasers less effective for countering targets that are coming straight at the ship, on a constant bearing (i.e., \"down-the-throat\" shots). Other ship self-defense systems, such as interceptor missiles or a CIWS, might be more suitable for countering such targets. Most tests of laser systems have been against crossing targets rather than \"down-the-throat\" shots. In general, thermal blooming becomes more of a concern as the power of the laser beam increases. S aturation attacks . Since a laser can attack only one target at a time, requires several seconds to disable it, and several more seconds to be redirected to the next target, a laser can disable only so many targets within a given period of time. This places an upper limit on the ability of an individual laser to deal with saturation attacks—attacks by multiple weapons that approach the ship simultaneously or within a few seconds of one another. This limitation can be mitigated by installing more than one laser on the ship, similar to how the Navy installs multiple CIWS systems on certain ships. H ardened targets and countermeasures . Less-powerful lasers—that is, lasers with beam powers measured in kilowatts (kW) rather than megawatts (MW)—can have less effectiveness against targets that incorporate shielding, ablative material, or highly reflective surfaces, or that rotate rapidly (so that the laser spot does not remain continuously on a single location on the target's surface) or tumble. Small boats (or other units) could employ smoke or other obscurants to reduce their susceptibility to laser attack. Measures such as these, however, can increase the cost and/or weight of a weapon, and obscurants could make it more difficult for small boat operators to see what is around them, reducing their ability to use their boats effectively. R isk of collateral damage to aircraft , satellites , and human eyesight . Since light from an upward-pointing laser that does not hit the target would continue flying upward in a straight line, it could pose a risk of causing unwanted collateral damage to aircraft and satellites. The light emitted by SSLs being developed by the Navy is of a frequency that can cause permanent damage to human eyesight, including blinding. Blinding can occur at ranges much greater than ranges for damaging targeted objects. Scattering of laser light off the target or off fog or particulates in the air can pose a risk to exposed eyes. For additional background information on potential Navy shipboard SSLs, see CRS Report R41526, Navy Shipboard Lasers for Surface, Air, and Missile Defense: Background and Issues for Congress , by Ronald O'Rourke.", "summary": "Three new ship-based weapons being developed by the Navy—solid state lasers (SSLs), the electromagnetic railgun (EMRG), and the gun-launched guided projectile (GLGP), also known as the hypervelocity projectile (HVP)—could substantially improve the ability of Navy surface ships to defend themselves against surface craft, unmanned aerial vehicles (UAVs), and eventually anti-ship cruise missiles (ASCMs). The Navy has been developing SSLs for several years, and in 2014 installed on a Navy ship a prototype SSL called the Laser Weapon System (LaWS) that was capable of countering surface craft and UAVs. The Navy is now developing SSLs with improved capability for countering surface craft and UAVs, and eventually a capability for countering ASCMs. Navy efforts to develop these more capable lasers include the Solid State Laser Technology Maturation (SSL-TM) effort; the Ruggedized High Energy Laser (RHEL); the Optical Dazzling Interdictor, Navy (ODIN); the Surface Navy Laser Weapon System (SNLWS) Increment 1, also known as the high-energy laser with integrated optical dazzler and surveillance (HELIOS); and the High Energy Laser Counter-ASCM Program (HELCAP). The Navy refers to the first four efforts above collectively as the Navy Laser Family of Systems (NFLoS). Under the Navy's laser development approach, NFLOS and HELCAP, along with technologies developed by other parts of DOD, are to support the development of future, more capable shipboard lasers. The Navy has been developing EMRG for several years. It was originally conceived as a naval surface fire support (NSFS) weapon for supporting Marines and other friendly forces ashore. Subsequently, it was determined that ERGM could also be used for air and missile defense, which strengthened interest in ERGM development. More recently, it was determined that the projectile to be fired by ERGM could also be fired by existing powder-propellant guns, including 5-inch and 155 mm guns on Navy cruisers and destroyers, and 155 mm artillery guns operated by the Army and Marine Corps. When fired from power guns, the projectile does not fly as quickly as it does when fired from an ERGM, but it still flies quickly enough to be of use as an air-defense weapon. The concept of firing the projectile from powder guns is referred to as GLGP and HVP. One potential advantage of HVP/GLGP is that, once developed, it can be rapidly deployed on Navy cruisers and destroyers and in Army and Marine Corps artillery units, because the powder guns in question already exist. In addition to the question of whether to approve, reject, or modify the Navy's FY2020 funding requests for SSLs, ERGM, and HVP/GLGP, issues for Congress include the following: whether the Navy is moving too quickly, too slowly, or at about the right speed in its efforts to develop these weapons; the Navy's plans for transitioning these weapons from development to procurement and fielding aboard Navy ships; and whether Navy the Navy's shipbuilding plans include ships with appropriate amounts of space, weight, electrical power, and cooling capacity to accommodate these weapons.", "document_type": "crs"}
{"report": "The U.S. State Department welcomed opposition figure Felix Tshisekedi's victory in DRC's December 2018 presidential election, applauding the Congolese people \"for their insistence on a peaceful and democratic transfer of power.\" Election day was indeed largely peaceful, and alternate scenarios that outgoing President Joseph Kabila might have preferred (e.g., his own reelection or the election of his chosen successor, former Interior Minister Emmanuel Ramazani Shadary) ultimately did not materialize. Many Congolese reacted positively to the results. Whether the election was \"democratic\" is debatable, however, as is the degree to which Tshisekedi's presidency represents a \"transfer of power.\" Former President Kabila—whose decision to cling to power past the end of his two constitutionally permitted terms in 2016 sparked a national political crisis and widespread protests—appears poised to retain significant political influence. Kabila, who first assumed the presidency in 2000, now holds the title of \"Senator-for-Life,\" while his Common Front for Congo (FCC) coalition won sweeping majorities in parliament and provincial assemblies, and in subsequent indirect elections for the Senate and provincial governors. Tshisekedi's Union for Democracy and Social Progress (UDPS) won very few sub-national contests, and it has agreed to form a coalition government with the FCC. These factors, along with evidence that a more hardline opposition figure won more votes than Tshisekedi, have led many observers to speculate that the official election results reflected a power-sharing deal between Tshisekedi and Kabila (see \" Politics \" ) . Attention has now turned to gauging President Tshisekedi's performance in office and the extent of his independence. The challenges facing DRC are stark. The country is rich in minerals, forest resources, freshwater, and agricultural potential, but most Congolese live in poverty. Prior to the 2016-2018 impasse over the elections delay and Kabila's political future, international attention toward DRC was overwhelmingly focused on addressing long-running conflicts in the east and supporting the extension of state authority. Security threats, political uncertainty, \"endemic corruption,\" poor infrastructure, and unpredictable regulatory enforcement have contributed to a poor business climate. Ahead of a visit by Tshisekedi to Washington, DC in April 2019, the State Department pledged to work with the new president \"to advance his agenda to combat corruption, strengthen the rule of law, enhance security, protect human rights and promote economic growth through increased foreign investment and trade, particularly with the United States.\" Enduring conflicts and humanitarian suffering in the east both reflect and contribute to regional instability. Neighboring countries such as Rwanda and Uganda have periodically backed Congolese rebel proxies, and the security vacuum has drawn in foreign-origin militias. State security forces have been implicated in serious abuses, including extrajudicial killings and mass rapes. There were 4.5 million internally displaced persons (IDPs) in DRC as of late 2017 (latest U.N. figure available), one of the highest numbers in the world, while another 825,000 Congolese are refugees in neighboring countries. About 12.8 million people (15% of the country's estimated population) were reportedly in \"dire need of assistance\" as of late 2018. A potential new security challenge emerged in April 2019, when the Islamic State (IS, a.k.a. ISIS/ISIL) organization claimed an attack on local security forces in eastern DRC. This appeared to be the latest in a series of developments linking the Islamic State to a nebulous locally based armed group known as the Allied Democratic Forces (ADF), although the extent of ties is subject to debate (see text box on the ADF under \" Conflict in Eastern DRC ,\" below). DRC ranked 176 out of 189 countries on the 2018 U.N. Human Development Index, and its per capita gross domestic product (GDP) stood at $449 in 2018 (see Figure 1 ), among the world's lowest. Industrial mining—particularly of copper and cobalt—is the mainstay of DRC's formal economy, although much of the population is engaged in informal economic activity (including widespread small-scale artisanal mining). In recent years, DRC has produced over half of the world's supply of cobalt, a key ingredient in electric car batteries, among other industrial uses. Relations with international financial institutions have been poor since 2012, when the International Monetary Fund (IMF) ceased its concessional lending program in DRC due to a lack of transparency in state mining contracts. Due to its resources, vast territory, and location ( Figure 1 ), DRC has long served as an arena of regional and international competition. Belgium's King Leopold II claimed \"Congo Free State\" as his personal possession. His administration of the territory became notorious for its plunder of Congo's natural resources, mismanagement, and egregious abuses against the local population, and the Belgian government transitioned the territory into a formal colony in 1908. Belgium granted Congo independence in 1960, shortly after parliamentary elections in which nationalist leader Patrice Lumumba became prime minister. The country's early years following independence were plagued by instability, including a secession movement in southeastern Katanga and an army mutiny that culminated in Lumumba's murder in 1961. One of the first U.N. peacekeeping operations deployed from 1960 to 1964 in response to the Katanga crisis. In 1965, Colonel Joseph Mobutu (a.k.a. Mobutu Sese Seko), who was involved in the mutiny against Lumumba, seized power in a coup and gradually instituted a more centralized and authoritarian form of government. Mobutu's pursuit of an \"authentic\" indigenous Congolese national identity led him to rename the country Zaire. Mobutu's 32-year reign was backed by the United States and other Western powers in the context of Cold War rivalry in Africa. He also relied on fraudulent elections, brute force, and patronage networks fueled by extensive corruption, leading many analysts to brand his regime a \"kleptocracy.\" At the same time, petty corruption came to constitute a crucial economic safety net for many Congolese. Domestic and international pressures mounted on Mobutu as the Cold War drew to a close and as the aging president's health faltered. Mobutu agreed in principle to a multiparty democratic system in 1990 but repeatedly delayed elections. State institutions and the military fractured, while conflicts in neighboring states spilled into DRC, diverting state resources and destabilizing local communities. Hutu extremists who orchestrated the 1994 genocide in Rwanda fled across the border to Zaire, where they used refugee camps to remobilize against the new Tutsi-dominated Rwandan government, reportedly with Mobutu's backing. Rwanda launched cross-border military operations in response, reportedly also targeting civilians on a large scale. Rwanda and Uganda then backed a 1996 rebellion against Mobutu by Laurent Désiré Kabila, an exiled Congolese militant. The ensuing conflict came to be known as the \"first\" Congo war. With Mobutu's security forces and personal health in tatters, Laurent Kabila seized power in 1997 and renamed the country DRC. Mobutu died in exile in Morocco the same year. Tensions among the erstwhile allies soon erupted. In 1998, amid growing popular hostility toward Rwandan soldiers and Congolese of Rwandan descent who had comprised the core of his rebel army, Laurent Kabila attempted to expel these forces, provoking a mutiny. Rwanda and Uganda then deployed troops into DRC and cultivated rebel groups as proxies, this time against Kabila. They also fought each other. Angola, Zimbabwe, Sudan, and others intervened on the government's side. This conflict, dubbed \"Africa's World War,\" caused a major humanitarian crisis and is estimated to have (directly and indirectly) caused 3.3 million deaths. In 2001, Laurent Kabila was assassinated by one of his bodyguards. His son, Joseph Kabila, assumed the presidency and advanced a U.N.-backed peace process. A 2002 peace accord called for foreign troops to withdraw and for Congolese rebels to be integrated into the military and government. Kabila headed a transitional government between 2003 and 2006, and citizens voted overwhelmingly to adopt a new constitution in a referendum in 2005. Landmark national elections were held in 2006, the first relatively open multiparty vote in the country since independence. International observers concluded that those elections were credible, despite procedural shortcomings and significant election-related violence. President Kabila won reelection, following a tense and violent run-off against former rebel leader Jean-Pierre Bemba. Kabila was reelected in 2011 in a vote that international and domestic observers characterized as extremely flawed. The late opposition leader Etienne Tshisekedi, Felix Tshisekedi's father, rejected the results and declared himself president, but his calls for mass protests did not materialize. Kabila's party lost seats in the legislature compared to 2006, but nonetheless assembled a majority coalition. DRC's relations with Uganda, Rwanda, and Angola remain complex and volatile. Tensions with Rwanda have periodically flared since the conclusion of the 1998-2003 war with reports of Rwandan support for Congolese rebel groups, which have fueled xenophobia in DRC. In 2008-2009, Kabila and Rwandan President Paul Kagame agreed to reestablish diplomatic ties and subsequently launched joint military operations in DRC's eastern border regions. Tensions surged during a 2012-2013 Rwandan-backed rebellion known as the M23, but they appear to have eased since then. In early 2018, the eastern province of Ituri experienced a resurgence of militia conflict that spurred a flood of refugees into Uganda and echoed similar dynamics from the early 2000s. Felix Tshisekedi's inauguration as president in January 2019 represented DRC's first peaceful transfer of executive power in its postcolonial history. That he is the son of the late opposition leader Etienne Tshisekedi—who was revered by many Congolese for his role in DRC's political liberalization in the 1990s and uncompromising stance against former president Kabila—added potent symbolism. For the Western donor community, Tshisekedi's victory also averted several scenarios that might have sparked a popular backlash (and thus, a potential for increased instability) or posed other challenges. These included 1) an unconstitutional third-term bid by outgoing president Joseph Kabila; 2) further election delays; or 3) a victory by Kabila's unpopular choice of successor, Emmanuel Ramazani Shadary, who is under European Union (EU) sanctions due to his role in political repression. Whether Tshisekedi is able to deliver on Congolese hopes for change remains to be seen. As discussed above, Kabila appears poised to retain influence over state decision-making, including, potentially, over the security apparatus and lucrative mining sector. An electoral data leak and a parallel vote tabulation overseen by the widely respected Congolese Conference of Catholic Bishops (CENCO) reportedly each showed him losing by a wide margin to rival opposition candidate Martin Fayulu, who was backed by key exiled opposition figures and ran a campaign that was more ardently critical of Kabila. Fayulu has refused to recognize the official results. DRC's election commission (known as the CENI) has not published disaggregated results by polling station that could be checked against election observer data. These factors have led some observers to speculate that the official results reflected a backroom deal—a \"Plan B\" after voters resoundingly rejected Shadary—in which Kabila granted Tshisekedi victory in exchange for protection and continued influence via control of the legislature and provincial governments. The current electoral cycle is scheduled to be completed with local elections due in September 2019, which would be the first multiparty local-level polls since independence. Local elections have repeatedly been scheduled over the past decade, only to be canceled or indefinitely delayed. Uncertainty over the election process and Kabila's succession dominated national politics and preoccupied donors between 2014 and 2018, as it became clear that Kabila would seek to remain in office past the end of his term in 2016 and that this would provoke significant popular opposition and unrest. Local civil society groups, youth activists, CENCO, and regional powers (notably Angola) played a key role in pressuring the government to hold elections in which Kabila was not a candidate. Large street protests first erupted in 2015 in opposition to a ruling party proposal to delay elections pending a time-consuming national census. Local activists, opposition parties, and Catholic lay organizations organized periodic protests through 2018 despite violent repression by state security forces, which fired on civilians, arrested activists, shuttered media outlets, expelled international researchers, and besieged churches where marchers gathered. After the 2018 election results were announced, a few areas saw violent clashes, but much of the country appeared calm or celebratory. Overall, the election process was characterized by flaws and irregularities, and polls showed that voters held a dim view of the CENI. In addition to evidence of high-level CENI corruption, observers noted state restrictions on opposition activism and critical media, a problematic voter registry, a last-minute decision to cancel the presidential vote in four pro-opposition districts, and the fact that two prominent exiled opposition figures (former governor Moïse Katumbi and former rebel leader Jean-Pierre Bemba) were barred from running. Several of these factors, along with repeated election delays, violated a political agreement brokered by CENCO in December 2016 (known as the St. Sylvestre accord) that aimed to encourage relatively fair and timely elections. The DRC government also rejected U.N. logistical support for moving electoral materials around the vast, infrastructure-poor country, which could have averted some disenfranchisement and delays. Despite welcoming Tshisekedi's presidency, the U.S. government has assailed corruption and political repression tied to the electoral process that brought him to office and designated election officials for sanctions (see \" U.S. Policy \" below). Uncertainty over DRC's political future coincided with a surge in conflicts throughout the country between 2016 and 2018. Violence worsened in the east, while new conflicts emerged in previously stable areas, notably the central Kasai region (a stronghold of Tshisekedi's UDPS party) and southeastern Tanganyika province (see map, Figure 1 ). Violence also erupted along ethnic lines in northeastern Ituri in early 2018, reportedly fueled by competition over political influence and resource extraction. In the rural district of Yumbi in western DRC, hundreds of people were killed in December 2018 during an outbreak of violence fueled by local political and ethnic tensions. In some areas, government officials allegedly sought to bolster Kabila's political support by intervening in delicate local power dynamics, while elsewhere, armed groups appeared to jockey for position in anticipation of a power vacuum. The conflicts in Kasai and Tanganyika alone caused the displacement of nearly 2 million people at their peak. Political unrest in urban areas, a string of prison breaks, and attacks in Kinshasa by members of an opaque religious sect known as Bundu dia Kongo contributed to worsening security trends. The conflict in Kasai, which erupted in 2016 after state security forces killed a traditional leader, spawned a humanitarian crisis featuring widespread atrocities, the recruitment and abuse of children, and severe food insecurity. U.N. officials had documented at least 87 mass graves in the region as of 2017. The DRC government blamed the violence on a shadowy antigovernment militia known as Kamuina Nsapu, while U.N. officials attributed many of the killings to the Congolese military and state-backed militias known as the Bana Mura. In March 2017, two U.N. sanctions investigators—one of them a U.S. citizen—were murdered while probing human rights abuses in Kasai, and four Congolese who were with them disappeared. Researchers reported evidence of state security force involvement. Conflict and displacement underlie widespread food insecurity in DRC, despite ample surface water and arable land. Pest infestations and weather patterns also periodically limit harvests. Efforts to contain the ongoing Ebola outbreak in the east have been stymied by security threats as well as deeply entrenched distrust of state actors and outsiders. In the final years of Kabila's presidency (2017-2018), the government lashed out at the donor community as U.S. and European issued targeted sanctions and criticized election delays. In April 2018, the government refused to attend a U.N. humanitarian donor conference in Geneva, accusing aid groups of \"a demonization campaign\" and asserting that \"there is no humanitarian crisis here.\" The government subsequently called for donors to send aid funds directly to a state agency. Aid organizations reported increasing bureaucratic impediments, and as of mid-2018, a draft bill to regulate nongovernmental organizations threatened to impose new constraints. Civilians have been the primary victims of 25 years of brutal violence in DRC's mineral-rich, agriculturally fertile, and densely inhabited east. Tensions over access to land and citizenship rights, as well as localized disputes, criminal activity, and regional geopolitics have helped drive conflict. The DRC armed forces (FARDC) and other state security forces such as the police and national intelligence service (known as the ANR) have been implicated in widespread atrocities, including during counter-insurgency operations and as part of illicit involvement in mining. The spillover of violence from Rwanda and Burundi in the early 1990s aggravated long-standing tensions between and among communities seen as \"indigenous\" and those that trace their origins (however distant) to Rwanda. Since then, various rebellions in the east have drawn backing from Rwanda and escalated into regional crises. Rwanda's proxy involvement in eastern DRC conflicts may have been motived by various factors, including its own national security concerns, solidarity with cross-border ethnic communities, and economic motivations. The most recent example was a 2012-2013 rebellion known as the M23, which originated as a mutiny among members of a Rwandan-backed insurgent group who had been integrated into the military. Anti-Rwandan sentiment, at times expressed as ethnic hate speech, has endured as a recurrent theme in DRC national politics and in grassroots dynamics in the east. Under a U.N.-brokered regional \"Framework Agreement\" signed in 2013, neighboring states agreed to respect DRC's sovereignty and not to sponsor DRC-based armed groups, while the DRC government committed to institutional and security sector reforms. Later that year, the DRC military, backed by a newly created U.N. \"Intervention Brigade,\" defeated the M23. The DRC government never fully implemented its commitments under the 2013 accord or a separate peace process with the M23. In 2017, Human Rights Watch reported that senior DRC security officers had recruited ex-M23 members to suppress protests and protect then President Kabila. Multiple armed groups remain active in the east, including \"Mai Mai\" militias—disparate groups that operate variously as self-defense networks and criminal rackets—as well as foreign-origin groups seeking safe haven and illicit revenues. The latter include the Democratic Forces for the Liberation of Rwanda (FDLR), founded by perpetrators of the 1994 Rwandan genocide, and the aforementioned ADF, a Ugandan-origin group implicated in large massacres (see text box below). Elements of the South Sudanese rebel movement known as the SPLM-iO have also entered DRC. Smaller foreign-origin groups include elements of the Burundian ex-rebel group the National Liberation Forces (FNL) and the Ugandan-origin Lord's Resistance Army (LRA). Particular international attention has been paid to the issue of sexual and gender-based violence in eastern DRC due to reports of gang rape, child rape, mutilation, and other abuses by armed groups and FARDC personnel. Attacks may be opportunistic and/or designed to systematically intimidate local populations. The prevalence of sexual violence in Congolese conflict zones has been attributed to factors such as the eroded status of women, weak state authority, a deeply flawed justice system, and a breakdown in community protection mechanisms. While women and girls are the primary targets, men and boys have also been victims. As with other human rights problems, sexual violence has also been linked to structural problems within the security sector. Donor efforts to improve accountability for perpetrators of serious abuses have produced legal reforms and some high-profile prosecutions, but appear to have had limited systemic impact. Ivory poaching has been notable in two DRC national parks affected by armed conflict and insecurity: Virunga (Africa's oldest national park) in North Kivu, and Garamba in Haut-Uele. A range of actors reportedly participate, including state security force elements from DRC and neighboring states, Congolese militias, Sudanese poaching syndicates, and foreign-origin armed groups such as the FDLR in Virunga and the LRA in Garamba. Poachers are apparently increasingly well-armed and sophisticated, as are park rangers. According to U.N. sanctions monitors, poaching and ivory trafficking present a \"catastrophic threat\" to elephant survival in DRC, but \"the widespread disappearance of elephant populations has made it an ever-diminishing and increasingly marginal source of armed group financing.\" MONUSCO is the world's largest U.N. peacekeeping operation, authorized to comprise up to 16,875 military and 1,441 police personnel. Its mandate has long focused on protecting civilians in conflict zones and supporting stabilization in the east. U.N. Security Council Resolution 2409 (2018) identified two top \"strategic priorities\": (1) protection of civilians and (2) \"support to the implementation of the 31 December 2016 [St. Sylvestre] agreement and the electoral process.\" In March 2019, the Security Council extended MONUSCO's mandate and authorized troop ceiling for nine months, while reorienting the mission's second priority task toward supporting state institutional strengthening and reforms. Other enduring tasks include the protection of U.N. personnel and facilities, support for demobilization of ex-combatants, and support for security sector reform. The Council has also called for an independent strategic review of the mission in 2019, including the articulation of a phased, progressive, and comprehensive \"exit strategy.\" A previous strategic review of MONUSCO by the U.N. Secretary-General in 2017 found that the spike in violence in Kasai and urban locations since 2016 had \"placed a major strain on limited resources.\" Prior to 2016, MONUSCO had positioned the bulk of its forces in the east, in part due to Security Council pressure to align itself with active conflict zones that posed the most pressing threats to civilians. Security Council members and troop-contributing countries continue to debate how MONUSCO should respond to threats to civilians posed by state security forces, as well as what conditions, if any, should be placed on any logistical assistance for future elections (including local elections due in September 2019). MONUSCO has drawn criticism for failing to protect Congolese civilians in various instances. Such shortfalls may be attributed to a combination of factors, including a wide-ranging mandate, logistical challenges, the DRC government's limited commitment to work with the mission to improve stability, and limited capacity and political will among troop-contributing countries. MONUSCO's mandate instructs it to support the DRC government in various ways, and its ability to operate is de facto contingent on government acceptance. MONUSCO personnel have also repeatedly been implicated in sexual abuse and exploitation. Ahead of MONUSCO's mandate renewal in March 2019, the U.S. acting Permanent Representative to the U.N. praised President Tshisekedi for committing to \"work closely with MONUSCO to neutralize armed groups and pave the way for MONUSCO's drawdown and departure,\" but did not explicitly call for an immediate drawdown of personnel. In 2017, the Trump Administration successfully advocated a decrease in MONUSCO's troop ceiling, asserting that the mission was propping up a \"corrupt\" government in Kinshasa. Some observers expressed concern at the time that the troop reduction coincided with the emergence of new conflicts and threats to civilians, as well as election preparations. It also appeared to grant a concession to the Kabila administration, which repeatedly called for MONUSCO to draw down. The U.N. Secretary-General stated in 2017 that MONUSCO had pursued reforms to \"yield efficiencies,\" but called for U.N. member states to \"exercise caution in making further cuts to the Mission's budget that may compromise its ability to deliver on its core priorities.\" The Security Council did not alter the troop ceiling in 2018 or in the March 2019 renewal. Since 2013, the Security Council has authorized a Force Intervention Brigade (FIB) within MONUSCO to target armed groups, including through unilateral operations. The FIB has conducted such operations periodically, but the scope of FIB activity has been limited by troop contributors' evolving perceptions of their own national security interests in DRC, as well as a lack of capacity. A U.N. investigation into a deadly ADF attack on a Tanzanian FIB contingent in 2017 found \"gaps in the training and posture\" of FIB troops. Observers have debated whether the FIB concept could be a useful model for other situations, such as South Sudan and Mali. DRC has some of the world's largest natural resource endowments, but most Congolese depend on subsistence farming and/or informal activities for survival. Per-capita income and human development indicators are among the world's lowest. Industrial mining in the southeast is the mainstay of the formal economy, although small-scale artisanal miners also account for substantial production. DRC is a top global copper producer, and in 2018 it produced 64% of the global supply of cobalt (a key ingredient in batteries for electric cars as well as jet engines, among other industrial uses), along with 24% of natural industrial diamonds and 39% of tantalum. Private sector growth has been constrained by DRC's poor business environment, including its underdeveloped infrastructure, uneven contract enforcement, limited access to credit, continued insecurity in the east, endemic corruption, shortage of skilled labor, and lack of reliable electricity. The State Department assessed in 2018 that DRC's business climate had \"deteriorated,\" reporting (among other concerns) that \"government agencies … exert significant administrative pressure on businesses with audits and inspections that often result in questionable legal fines.\" The country ranked 182 out of 190 in the World Bank's 2018 Doing Business Report. China is the largest consumer of Congolese copper and cobalt, and is DRC's largest overall trading partner. China first emerged as a key player in the economy in 2007, when it pledged $6 billion in loans to DRC for infrastructure, to be repaid through joint-venture mining. A crash in global mineral prices, combined with political and regulatory uncertainty, produced a fiscal crisis in 2015-2017, but booming demand for copper and cobalt has since produced a rebound. GDP growth improved moderately to 3.8% in 2018, compared to 2.4% in 2016, although it remains well below the 2014 rate of 9.5%. During the price slump, major investors pulled back or divested of their assets. Notably, the U.S.-based multinational Freeport McMoRan sold its controlling stake in DRC's largest industrial mine, the Tenke Fungurume copper concession, to a Chinese firm, in an effort to alleviate its global debt. The government has approved oil production contracts around the perimeter of Virunga National Park, a UNESCO World Heritage site, and signaled plans in mid-2018 to open the park to oil exploration, raising concern from conservationists. In 2014, independent researchers accused a British oil company, SOCO, of bribing DRC military commanders to intimidate opponents of oil exploration in Virunga. SOCO later announced that it had ceased operations there. DRC's \"conflict minerals\" are associated with the informal artisanal mining sector in the east. As of 2016, U.N. sanctions monitors reported that industry-led due-diligence measures had deprived armed groups of some opportunities to benefit from illicit mining of tin, tantalum, and tungsten, but that \"supply chains face numerous challenges, such as the involvement of FARDC elements, corruption of government officials and smuggling and leakage of minerals from non-validated mining sites into the legitimate supply chain.\" Gold smuggling through Uganda and Rwanda, and via intermediaries in the Gulf, reportedly continues to provide financing for armed groups. Mineral smuggling also arguably continues to deprive the state of revenues. DRC's industrial mining operations have drawn a different set of concerns. The organization Global Witness has described DRC's mining parastatal Gécamines—headed by Albert Yuma, a prominent Congolese businessman—as central to corrupt networks that it labels a \"regime cash machine.\" In 2012, the IMF ended its concessional loan program due to a lack of transparency in state mining contracts involving Gécamines. Dan Gertler, an Israeli businessman closely tied to President Kabila, has drawn particular international attention due to deals in which he has flipped state-held mining concessions for large profits. In recent years, firms linked to Gertler have been targeted in corruption probes in the United States, Canada, and the UK. In 2017 and 2018, the Trump Administration imposed sanctions on Gertler and various firms linked to him, asserting that he \"used his close friendship with ... Kabila to act as a middleman for mining asset sales in the DRC.\" The Department of the Treasury cited an independent investigation that found DRC had lost over $1.36 billion in potential revenues from underpricing mining assets sold to firms linked to Gertler. Gertler has said he is being unfairly targeted, and that his success reflects his appetite for political risk and focus on DRC. In early 2018, the DRC government promulgated a new mining code that steeply elevates taxes and royalty payments that foreign mining firms will owe the state. President Kabila signed the law in the face of intense opposition from international firms, who objected to the government's decision to ignore \"stability clauses\" that would otherwise have protected existing contracts for 10 years. The new mining code appeared popular among Congolese, while adding to Western investor perceptions of risk. The Trump Administration welcomed Tshisekedi's victory and has pledged to work with him (as noted), while strongly criticizing the process that delivered him the presidency. In March 2019, the Administration imposed targeted financial sanctions on three top CENI officials, citing \"persistent corruption\" and a \"flawed electoral process\" in which the CENI \"failed to ensure the vote reflected the will of the Congolese people.\" This followed the State Department's decision in February to prohibit U.S. entry visas for the same CENI officials, along with the outgoing National Assembly speaker, the head of DRC's Constitutional Court (which confirmed Tshisekedi's victory), and other, unnamed DRC officials, citing corruption and political repression. In a media interview, U.S. Assistant Secretary of State for African Affairs Tibor Nagy asserted that the 2018 vote was \"perhaps the most democratic election that Congo has ever known,\" while nonetheless acknowledging that it had been marked by \"enormous problems.\" Some observers view these various statements as contradictory, while others perceive a U.S. effort \"to help Tshisekedi to curb Kabila,\" and/or evidence of disagreements within the U.S. government on how to respond to the election results. The Administration's broad emphasis on encouraging trade and investment ties while countering \"great power competitors\" in Africa may contribute to its interest in establishing a positive relationship with Tshisekedi. China is DRC's largest trading partner by far, and Chinese firms are prominent in the mining sector. Russia has also intensified its outreach to the country, focusing on military cooperation. Generally, the Trump Administration continued its predecessor's efforts to ensure an electoral transfer of power from Kabila to a new president, and has maintained a high-level focus on DRC human rights issues. Although the Administration initially discontinued the post of Special Envoy to the DRC and Great Lakes region (which the Obama Administration maintained from 2013 to 2016), regional specialist J. Peter Pham was named to the position in late 2018. The Administration has also expanded a policy, initiated under President Obama, of sanctioning DRC state security officials for human rights abuses and obstruction of democracy. In 2017, the Administration further broadened the scope of U.S. sanctions in DRC by issuing an Executive Order pertaining to global human rights abuses and corruption, and using it to designate a prominent businessman and close Kabila associate, Dan Gertler, and his firms, for sanctions. As U.S. Permanent Representative to the U.N. in 2017-18, Ambassador Nikki Haley played a high-profile role in DRC policy by calling for fair elections and greater respect for human rights. Her trip to DRC in October 2017, during which she met with then President Kabila and called for elections by the end of 2018, appeared to spur the CENI's decision to announce an election date. U.S. diplomats then urged DRC authorities to adhere to the stated timetable and to confirm publicly that Kabila would not be a candidate. In February 2018, Ambassador Haley expressed concern about the electoral process and the government's failure to \"release political prisoners, end politically motivated prosecutions, and guarantee the rights of peaceful assembly and freedom of expression.\" U.S. officials simultaneously rejected opposition calls for a \"transition without Kabila\"—that is, for Kabila to be replaced by a transitional government that would, in turn, organize elections—as \"unconstitutional\" and contrary to the 2016 St. Sylvestre accord. U.S. officials have called for a credible investigation into the murders of two U.N. sanctions investigators, U.S. citizen Michael Sharp and Swedish citizen Zaida Catalán, in Kasai in 2017. U.N. sanctions monitors reported in mid-2018 that cooperation between DRC authorities and U.N. experts tasked with assisting DRC's investigation into the case had been \"deficient,\" adding that \"the Congolese security services have interfered with the investigations.\" A colonel in the FARDC was reportedly arrested in connection with the killings in December 2018. U.S. bilateral aid programs in DRC seek to promote stability, economic growth, health, good governance, education, security force professionalization, and military justice. The Trump Administration's FY2020 aid budget request includes $201 million in bilateral funding for DRC, which would be a 25% decrease compared to FY2018 actual allocations. FY2018 bilateral aid levels were, in turn, higher than prior years (see Table 1 below). The United States provides additional funds for emergency humanitarian aid, and for MONUSCO's budget under the U.N. system of assessed contributions for peacekeeping. The Trump Administration's evolving policy toward implementing the Child Soldiers Prevention Act of 2008 (CSPA) and the Trafficking Victims Protection Act (TVPA), as amended, may reshape U.S. aid programs in FY2019. The State Department has repeatedly designated DRC under CSPA (in response to state-backed militias' use of child soldiers) and ranked it as \"Tier III\" (worst) under the TVPA; both designations trigger legal prohibitions on aid, subject to a presidential waiver. In FY2018, President Trump partially waived both types of restrictions for DRC, as the prior Administration had done. For FY2019, in contrast, President Trump did not grant waivers for DRC, meaning—pursuant to the TVPA—that no \"nonhumanitarian, nontrade-related\" assistance may be provided to the government. In principle, this means that military aid is generally prohibited, along with certain economic aid implemented by, or in coordination with, the DRC government. Some discretion may be involved in interpreting and applying the restrictions. The Administration has not publicly detailed which programs are affected by the policy, but it has notified some U.S. aid implementers that their funding may be discontinued. In the 115 th Congress, attention toward DRC focused on deterring President Kabila from clinging to power. H.R. 6207 , which passed the House, would have codified the U.S. sanctions framework for DRC (currently imposed under Executive Orders) and potentially compelled additional designations. The Senate agreed to S.Res. 386 , which called on President Trump to use \"appropriate means\" to assist elections in DRC and \"deter further electoral calendar slippage and abuses against the people of Congo,\" among other provisions. The resolution also called on the DRC government to enable a credible independent investigation into the murders of the two U.N. sanctions investigators in Kasai. In the 114 th Congress, the Senate and House passed resolutions ( S.Res. 485 and H.Res. 780 ) expressing concern over DRC election delays and calling for punitive measures against those responsible for abusing human rights or undermining democracy. More broadly, Congress often focused on human rights challenges in DRC, such as sexual violence, child soldiers, and the international trade in \"conflict minerals\" (see Appendix ). As discussed above (\" Foreign Assistance \"), legislative restrictions on certain types of aid for countries that, like DRC, use child soldiers (Title IV of P.L. 110-457 , the Child Soldiers Prevention Act of 2008 or CSPA, as amended) or have a poor record on human trafficking ( P.L. 106-386 , the Trafficking Victims Protection Act or TVPA, as amended) have affected U.S. engagement and aid funding. The Administration's decision not to issue waivers for DRC in FY2019 has led to the suspension of military assistance and may have a significant impact on other U.S. programs and funding, although the full extent has not been publicly detailed. For the past decade, Congress has placed conditions on U.S. military aid to neighboring countries—at times specifically targeting Rwanda and/or Uganda—in order to deter proxy involvement in conflicts in DRC. Most recently, the Consolidated Appropriations Act, 2019, restricts International Military Education and Training (IMET) funds for any government in Africa's Great Lakes region until the Secretary of State reports that it is not involved in \"destabilizing activities in a neighboring country\" (§7042([a] of Division F, P.L. 116-6 ). Members continue to debate the impact of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ), requiring the Securities and Exchange Commission (SEC) to regulate the disclosure by U.S. firms of their use of designated \"conflict minerals\" originating in DRC or neighboring states. The SEC issued a regulatory rule in 2012 but a court challenge partially stayed its implementation in 2014. In January 2017, the then acting SEC chairman directed staff to \"consider whether the 2014 guidance is still appropriate and whether any additional relief is appropriate in the interim.\" During the 115 th Congress, many Members in the House backed legislation that would have repealed Section 1502 or prohibited its implementation, asserting that the provision has imposed burdensome compliance costs on U.S. firms and/or is harming the Congolese people by deterring trade and investment. Examples included H.R. 4248 , H.R. 10 (§862), and H.R. 3354 (§1108 of Division D). Other Members defended Section 1502 as an important contribution to international efforts to stabilize DRC. Achieving greater stability in DRC—a U.S. regional policy goal for over two decades—may depend on how President Tshisekedi and former president Kabila navigate their respective roles in policymaking, and how their rivals—such as Martin Fayulu, Moise Katumbi, and Jean-Pierre Bemba—choose to pursue their interests. Instability in DRC may be rooted in local-level grievances—namely, \"poverty, unemployment, corruption, criminality, and poor access to land, justice, and education\" —but such issues, and the decision by some to take up arms in response, have often been inflamed by absent, biased, or abusive political leadership. Events in the turbulent surrounding region—notably, rising tensions between Uganda and Rwanda, which have historically intervened in DRC when they feel their interests are threatened—may also impact DRC's stability. Humanitarian crises in neighboring South Sudan, Central African Republic, and Burundi will likely continue to divert international attention and resources. The Trump Administration has pledged to work with DRC's new president to advance reforms and economic prosperity, but similar previous efforts have been stymied by entrenched dysfunction, which appears to benefit certain elites. If President Tshisekedi owes his political survival to former president Kabila, and his electoral victory to flawed political institutions, he may be unlikely or unable to confront these problems. Reforming the security apparatus and the role of Gécamines in governing the mining sector are core challenges that could also be dangerous for a new and largely untested president to take on. Restrictions on U.S. bilateral aid stemming from DRC's designation under child soldiers and trafficking in persons legislation (see \" Foreign Assistance \") may also constrain the kinds of support that the United States is able to provide for the reform of state institutions, including the military. Policymakers in Congress and the executive branch are likely to continue to debate the relative effectiveness of various tools for exerting U.S. influence in DRC, such as diplomacy, sanctions, foreign assistance, and U.S. actions in multilateral forums. P.L. 116-6 , Consolidated Appropriations Act, 2019 . Restricts certain International Military Education and Training (IMET) funds for any government in Central Africa' s Great Lakes region until the Secretary of State reports that it is not involved in \"destabilizing activities\" in a neighboring country. Similar provisions were included in appropriations measures for FY2017-FY2018. P.L. 114-231 , Eliminate, Neutralize, and Disrupt Wildlife Trafficking Act of 2016 (October 7, 2016). Requires the State Department annually to provide to Congress a list of foreign countries that are major sources, transit points, or consumers of wildlife trafficking products; urges the United States to continue providing certain military assistance to African security forces for countering wildlife trafficking and poaching; and other provisions to address the illegal trade in endangered and threatened wildlife. P.L. 113-235 , Consolidated and Further Continuing Appropriations Act, 2015 (December 16, 2015). Restricted Foreign Military Financing (FMF) for Rwanda, with various exceptions, unless the Secretary of State certified that Rwanda is \"implementing a policy to cease political, military and/or financial support to armed groups\" in DRC that have violated human rights or are involved in illegal exports; among other provisions. P.L. 113-76 , Consolidated Appropriations Act, 2014 (January 17, 2014). Restricted FMF for Rwanda, with various exceptions, unless the Secretary of State certified that Rwanda \"is taking steps to cease ... support to armed groups\" in DRC implicated in human rights violations or illegal exports of certain goods. P.L. 113-66 , National Defense Authorization Act for Fiscal Year 2014 (December 26, 2013). Authorized certain types of Defense Department support for foreign forces participating in operations against the LRA (as had P.L. 112-81 , the National Defense Authorization Act for Fiscal Year 2012). P.L. 112-239 , Nat ional Defense Authorization Act for Fiscal Year 2013 (January 2, 2013). Mandated the Secretary of the Treasury and Secretary of State to impose travel and financial sanctions against individuals found by the President to have provided support to the M23 rebellion, subject to a waiver. P.L. 112-74 , Consolidated Appropriations Act, 2012 (December 23, 2011). Restricted FMF for Rwanda and Uganda, with some exceptions, if the Secretary of State found that they were providing support to armed groups in DRC that violated human rights or were involved in illegal mineral exports. P.L. 111-212 , Supplemental Appropriations Act, 2010 (July 29, 2010). Provided $15 million in Economic Support Fund (ESF) for emergency security and humanitarian aid for civilians, particularly women and girls, in eastern DRC. P.L. 111-203 , Dodd-Frank Wall Street Reform and Consumer Protection Act (July 21, 2010). Required the Securities and Exchange Commission (SEC) to issue a regulation requiring U.S.-listed companies whose products rely on certain designated \"conflict minerals\" to disclose whether such minerals originated in DRC or adjoining countries, and to describe related due diligence measures. P.L. 111-172 , Lord's Resistance Army Disarmament and Northern Uganda Recovery Act (May 24, 2010). Directed the President to submit to Congress a strategy to guide U.S. support for multilateral efforts to eliminate the threat posed by the LRA, among other provisions. P.L. 111-117 , Consolidated Appropriations Act, 2010 (December 16, 2009). Restricted FMF grants for Rwanda if it was found to support DRC armed groups. P.L. 111-84 , National Defense Authorization Act for Fiscal Year 2010 (October 28, 2009). Required the executive branch to produce a map of mineral-rich areas under the control of armed groups in DRC. P.L. 111-32 , Supplemental Appropriations Act, 2009 (June 24, 2009). Provided $15 million in Peacekeeping Operations (PKO) funds for DRC, which were used to train a Light Infantry Battalion in an effort to promote security sector reform. P.L. 110-457 (Title IV), William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (December 23, 2008). Prohibits certain security assistance for countries identified by the Secretary of State as supporting the recruitment and use of child soldiers, and to countries ranked as Tier 3 (worst) in the State Department's annual Trafficking in Persons Report , subject to waiver provisions (pursuant to P.L. 106-386 ; see below). P.L. 109-456 , Democratic Republic of the Congo Relief, Security, and Democracy Promotion Act of 2006 (December 22, 2006). Outlined U.S. policy toward DRC. Set a minimum funding level for bilateral foreign aid in FY2006-FY2007 and stated the sense of Congress that the Secretary of State should withhold certain aid if the DRC government was making insufficient progress toward policy objectives. Authorized the Secretary of State to withhold certain types of foreign assistance for countries acting to destabilize DRC. P.L. 106-386 (Division A), Trafficking Victims Protection Act of 2000 (October 28, 2000). Established a ranking system for measuring government efforts to eliminate human trafficking, and prohibits certain types of U.S. aid to the worst-ranked (\"Tier 3\") countries.", "summary": "The United States and other donors have focused substantial resources on stabilizing the Democratic Republic of Congo (DRC) since the early 2000s, when \"Africa's World War\"—a conflict that drew in multiple neighboring countries and reportedly caused millions of deaths—drew to a close. DRC hosts the world's largest U.N. peacekeeping operation and is a major recipient of donor aid. Conflict has nonetheless persisted in eastern DRC, prolonging instability and an enduring humanitarian crisis in Africa's Great Lakes region. New unrest erupted as elections were repeatedly delayed past 2016, their scheduled date, leaving widely unpopular President Joseph Kabila in office. Security forces brutally cracked down on protests, while new conflicts emerged in previously stable regions, possibly fueled by political interference. An ongoing Ebola outbreak in the east has added to DRC's challenges. In April 2019, the Islamic State organization claimed responsibility for an attack on local soldiers in the Ebola-affected area, an apparent effort to rebrand a local armed group known as the Allied Democratic Forces. National elections were ultimately held on December 30, 2018, following intense domestic and regional pressure. Opposition figure Felix Tshisekedi unexpectedly won the presidential contest, though his ability to assert a popular mandate may be undermined by allegations that the official results were rigged to deny victory to a more hardline opposition rival. Many Congolese nonetheless reacted to the outcome with relief and/or enthusiasm, noting that Kabila would step down and that voters had soundly defeated his stated choice of successor, a former Interior Minister. Kabila's coalition nonetheless won sweeping majorities in simultaneous legislative and provincial-level elections, ensuring enduring influence for the former president and his supporters. Whether President Tshisekedi will make durable progress toward spurring inclusive economic growth, reforming state institutions, or ending security force abuses remains to be seen. The Trump and Obama Administrations expended significant efforts to encourage an electoral transfer of power in DRC, that is, \"credible\" elections in which Kabila was not a candidate. U.S. officials have welcomed Tshisekedi's election and pledged to work with him, but they also imposed sanctions against top election officials in the aftermath of the polls, citing corruption in the electoral process. The Trump Administration has more broadly maintained a high-level focus on human rights and governance in DRC, expanding a U.S. unilateral sanctions regime targeting high-level security commanders and appointing regional specialist J. Peter Pham as Special Envoy in 2018. U.S. diplomats have also called on DRC authorities to credibly prosecute the murder in 2017 of two U.N. sanctions investigators, one of whom was a U.S. citizen. The United States remains the largest humanitarian donor in DRC and the largest financial contributor to the U.N. peacekeeping operation, MONUSCO, though the Administration has advocated broad cuts to U.S. peacekeeping funding and secured a decrease in MONUSCO's troop level in 2017. U.S. bilateral aid to DRC totaled $375 million in FY2018, higher than in previous years. Congress has shaped U.S. policy toward DRC, often focusing on human rights and democracy. Recent foreign aid appropriations measures have directed bilateral economic assistance for DRC. In the 115th Congress, the House passed H.R. 6207, which would have codified Executive Orders authorizing U.S. targeted sanctions, while the Senate agreed to S.Res. 386, urging the U.S. President to \"deter further electoral calendar slippage and abuses against the people of Congo.\" For more than a decade, Congress has also sought to deter Rwandan and Ugandan proxy involvement in DRC, including via provisions in aid appropriations legislation. Laws restricting U.S. aid to countries that, like DRC, have poor records on curtailing the use of child soldiers or human trafficking have also shaped U.S. engagement and aid. See also CRS In Focus IF11100, Ebola Outbreak: Democratic Republic of Congo; CRS Report R44402, Rwanda: In Brief; and CRS Report R42618, Conflict Minerals in Central Africa: U.S. and International Responses.", "document_type": "crs"}
{"report": "Iran's nuclear program began during the 1950s. Construction of a U.S.-supplied research reactor, called the Tehran Research Reactor (TRR), located in Tehran began in 1960; the reactor went critical in 1967. During the 1970s, Tehran pursued an ambitious nuclear power program. According to contemporaneous U.S. documents, Iran wanted to construct 10-20 nuclear power reactors and produce more than 20,000 megawatts of nuclear power by 1994. Iran also began constructing a light-water nuclear power reactor near the city of Bushehr, and it considered obtaining uranium enrichment and reprocessing technology. Iran took steps to demonstrate that it was not pursuing nuclear weapons. For example, Tehran signed the nuclear Nonproliferation Treaty (NPT) in 1968 and ratified it in 1970. Iran also submitted a draft resolution to the U.N. General Assembly in 1974 that called for establishing a nuclear-weapons-free zone in the Middle East. Nevertheless, mid-1970s U.S. intelligence reports expressed concern that Iran might pursue a nuclear weapons program. Although Iran cancelled its nuclear program after its 1979 revolution, a 1981 Department of State draft paper argued that Iran might develop a nuclear weapons program in response to a then-suspected Iraqi nuclear weapons program, although Iran was not one of several countries of \"near to medium term proliferation concern\" cited in the paper. Tehran \"reinstituted\" its nuclear program in 1982. According to International Atomic Energy Agency (IAEA) reports, Iran conducted experiments during the 1980s and early 1990s related to uranium conversion, heavy-water production, and nuclear reactor fuel fabrication. A 1985 National Intelligence Council report, which cited Iran as a potential \"proliferation threat,\" stated that Tehran was \"interested in developing facilities that ... could eventually produce fissile material that could be used in a [nuclear] weapon.\" The report, however, added that it \"would take at least a decade\" for Iran to do so. A 1986 CIA report went further, citing \"the advantage of long-range missiles to deliver warheads quickly, virtually without warning, and-unlike aircraft-without facing any defense\" as a \"factor\" that would incentivize Iranian development of nuclear weapons \"in the late 1990s.\" A 1995 U.S. intelligence report stated that Iran was \"aggressively pursuing a nuclear weapons capability and, if significant foreign assistance were provided, could produce a weapon by the end of the decade.\" Somewhat less urgently, an Arms Control and Disarmament Agency report covering 1995 observed that \"Iran's rudimentary program has apparently met with limited success so far, [but] we believe Iran has not abandoned its efforts to expand its nuclear capabilities with a view to supporting nuclear weapons development.\" In 1996 congressional testimony, then-Director of Central Intelligence John Deutch described Iranian efforts to acquire from the former Soviet Union fissile material for a nuclear weapon: In an attempt to shorten the timeline to a weapon, Iran has launched a parallel effort to purchase fissile material, mainly from sources in the former Soviet Union. Iranian agents have contacted officials at nuclear facilities in Kazakhstan on several occasions, attempting to acquire nuclear-related materials. For example, in 1992, Iran unsuccessfully approached the Ulba Metallurgical Plant to obtain enriched uranium. In 1993, three Iranians believed to have had connections to Iran's intelligence service were arrested in Turkey while seeking to acquire nuclear material from smugglers from the former Soviet Union. More recently, the Iranian government has said that it plans to expand its reliance on nuclear power to generate electricity. This program will, Tehran says, reduce Iran's oil and gas consumption and allow the country to export additional fossil fuels; the previous Iranian regime also made this argument. Iran has begun to operate the Bushehr reactor, and Tehran says it intends to build additional reactors to generate 20,000 megawatts of power within the next 20 years. The 2015 Joint Comprehensive Plan of Action (JCPOA) requires Iran to refrain from building heavy-water-moderated reactors for 15 years. Pursuant to the agreement, Iran has pledged to refrain from constructing any such reactors indefinitely. Iranian officials say that Tehran has begun design work on its first indigenously produced light-water reactor, to be constructed at Darkhovin. According to official U.S. and Iranian sources, France agreed to construct the reactor during the 1970s but ended the project after the 1979 revolution in Iran. Atomic Energy Organization of Iran (AEOI) President Ali Akbar Salehi stated in September 2016 that \"we are almost about to sign a contract for designing\" the reactor, \"but it will take a rather long time.\" Iranian officials have repeatedly asserted that the country's nuclear program is exclusively for peaceful purposes (see Appendix A ). Nevertheless, prior to the JCPOA, the United States and other governments argued that Iran may be pursuing, at a minimum, the capability to produce nuclear weapons. Discerning a peaceful nuclear program from a nuclear weapons program can be difficult because much nuclear technology is dual-use. In addition, military nuclear programs may coexist with civilian programs, even without an explicit governmental decision to produce nuclear weapons. Jose Goldemberg, Brazil's former secretary of state for science and technology, observed that a country developing the capability to produce nuclear fuel does not have to make an explicit early [political] decision to acquire nuclear weapons. In some countries, such a path is supported equally by those who genuinely want to explore an energy alternative and by government officials who either want nuclear weapons or just want to keep the option open. Some analysts argue that several past nuclear programs, such as those of France, Sweden, and Switzerland, illustrate this approach. A Swedish official involved in that country's nuclear weapons program \"argued that the main aim should be the generation of nuclear energy, with plutonium production, which would make possible the manufacture of nuclear weapons as a side-effect.\" Moreover, a 1975 U.S. intelligence assessment argued that countries might develop an \"unweaponized\" nuclear explosive device \"to further their political, and even military, objectives.\" The main source of proliferation concern generated by Iran's nuclear program has been Tehran's construction of gas centrifuge uranium-enrichment facilities. Gas centrifuges enrich uranium by spinning uranium hexafluoride gas at high speeds to increase the concentration of the uranium-235 isotope. Such centrifuges can produce both low-enriched uranium (LEU), which can be used in nuclear power reactors, and highly enriched uranium (HEU), which is one of the two types of fissile material used in nuclear weapons. HEU can also be used as fuel in certain types of nuclear reactors. Iran also has a uranium-conversion facility, which converts uranium ore concentrate into several compounds, including uranium hexafluoride. This program is currently constrained by the JCPOA. German Minister of State Niels Annen argued in a February 19, 2019, speech that the JCPOA \"effectively prevents Iran from acquiring a nuclear weapon for as long as the agreement stands.\" However, following the May 8, 2018, U.S. announcement that the United States would no longer participate in the JCPOA and would reimpose sanctions that had been suspended pursuant to the agreement, Iranian President Hassan Rouhani ordered the AEOI to \"go ahead with adequate preparations to resume enrichment at the industrial level without any limit.\" A year later, Rouhani announced additional Iranian responses. (see Appendix C , \"Multilateral Diplomacy Concerning Iran's Nuclear Program\"). Iranian officials have asserted that the country can rapidly reconstitute its fissile material production capability, although Tehran has adhered to the JCPOA-specified limits. Iran claims that it wants to produce LEU fuel for its planned light-water nuclear power reactors, as well as the Tehran Research Reactor (TRR) and other planned future research reactors. The latter reactors will be used to produce isotopes for medical purposes, according to Tehran. Although Iran has expressed interest in purchasing nuclear fuel from other countries, the government asserts that the country should have an indigenous enrichment capability as a hedge against possible fuel supply disruptions. President Rouhani ordered AEOI President Salehi on December 13, 2016, to provide a plan \"for designing and manufacturing nuclear-propulsion system to be used in maritime transportation,\" as well as producing fuel for such a system. However, Iranian officials have indicated that Tehran would not produce enriched uranium exceeding JCPOA-established enrichment limits. In a January 2018 letter, Iran informed the IAEA of the government's \"decision … to construct naval nuclear propulsion in future.\" Tehran explained in an April 2018 letter to the agency that \"[f]or the first five years, no [nuclear] facility will be involved\" and the \"[n]uclear fuelled engines/reactors will be used for civilian purpose.\" Salehi stated in early February 2019 that at the project will take \"at least 15 years\" to complete. A reactor moderated by heavy water, which Iran was constructing at Arak, has also been a source of concern. Although Tehran says that the reactor is intended for the production of radioisotopes for medical purposes, the reactor previously under construction was a proliferation concern because its spent fuel would have contained plutonium well-suited for use in nuclear weapons. Spent nuclear fuel from nuclear reactors contains plutonium, the other type of fissile material used in nuclear weapons. In order to be used in nuclear weapons, however, plutonium must be separated from the spent fuel—a procedure called \"reprocessing.\" Iran has said that it will not engage in reprocessing. This reactor is designed to use natural uranium fuel, which does not require enrichment. Iran has rendered the Arak reactor's original core inoperable pursuant to the JCPOA, which also commits Tehran to redesign and rebuild the reactor based on a design agreed to by the P5+1. In addition to the dual-use nature of the nuclear programs described above, Iran's inconsistent cooperation with the IAEA contributed to suspicions that Tehran had a nuclear weapons program. In the past, Iran has taken actions that interfered with the agency's investigation of its nuclear program, including concealing nuclear activities and providing misleading statements. Then-IAEA Director-General Mohamed ElBaradei explained in a 2008 interview that Iran's cooperation lagged behind IAEA demands: [T]hey [the Iranians] have concealed things from us in the past, but that doesn't prove that they are building a bomb today. They continue to insist that they are interested solely in using nuclear power for civilian purposes. We have yet to find a smoking gun that would prove them wrong. But there are suspicious circumstances and unsettling questions. The Iranians' willingness to cooperate leaves a lot to be desired. Iran must do more to provide us with access to certain individuals and documents. It must make a stronger contribution to clarifying the last unanswered set of questions—those relating to a possible military dimension of the Iranian nuclear program. Consistent with ElBaradei's statement, IAEA Director-General Yukiya Amano explained in a 2012 interview that the IAEA did not claim that \"Iran [has] made a decision to obtain nuclear weapons.\" Notably, Tehran has implemented various restrictions on, and provided the IAEA with additional information about, its uranium enrichment program and heavy-water reactor program pursuant to the JCPOA. Iran and the IAEA agreed in August 2007 on a work plan to clarify the outstanding questions regarding Tehran's nuclear program, most of which concerned possible Iranian procurement activities and research directly applicable to nuclear weapons development. A December 2015 report to the IAEA Board of Governors from agency Director-General Amano contains the IAEA's \"final assessment on the resolution\" of these outstanding issues. Iran also has extensive programs to develop ballistic missiles and cruise missiles. (For more details on Iran's ballistic missile program, see CRS Report R42849, Iran's Ballistic Missile and Space Launch Programs , by Steven A. Hildreth.) The public controversy over Iran's nuclear program began in August 2002, when the National Council of Resistance on Iran (NCRI), an Iranian exile group, revealed information during a press conference (some of which later proved to be accurate) that Iran had built nuclear-related facilities at Natanz and Arak that it had not revealed to the IAEA. The United States had been aware of at least some of these activities, according to knowledgeable former officials. During the mid-1990s, Israel's intelligence services detected Iranian \"efforts to develop a military nuclear industry,\" according to a 2004 Israeli Knesset committee report. Iran ratified the nuclear Nonproliferation Treaty (NPT) in 1970. States-parties to the treaty are obligated to conclude a comprehensive safeguards agreement with the IAEA; Tehran concluded such an agreement in 1974. In the case of nonnuclear-weapon states-parties to the treaty (of which Iran is one), such agreements are designed to enable the IAEA to detect the diversion of nuclear material from peaceful purposes to nuclear weapons uses, as well as to detect undeclared nuclear activities and material. As a practical matter, however, the IAEA's ability to inspect and monitor nuclear facilities, as well as obtain relevant information, pursuant to a comprehensive safeguards agreements is limited to facilities that have been declared by the government. Additional Protocols (see text box below) to IAEA safeguards agreements increase the agency's authority to inspect certain facilities and demand additional information from states-parties, thereby augmenting the agency's ability to investigate clandestine nuclear facilities and activities . The IAEA's statute requires the agency's Board of Governors to refer cases of noncompliance with safeguards agreements to the U.N. Security Council. Prior to the NCRI's revelations, the IAEA had expressed concerns that Iran had not been providing the agency with all relevant information about its nuclear programs, but the IAEA had never found Iran in violation of its safeguards agreement. In fall 2002, the IAEA began to investigate Iran's nuclear activities at Natanz and Arak; inspectors visited the sites the following February. During a June 2003 meeting, the IAEA board first expressed \"concern\" about Iran's past undeclared nuclear activities and urged Tehran to cooperate with the agency's investigation. The IAEA board's first resolution, which was adopted during a September 2003 meeting, called on Tehran to increase its cooperation with the agency's investigation and to suspend its uranium enrichment activities. (For more detail about Iran's nuclear organization, see Appendix B ). President Rouhani identified the Atomic Energy Organization of Iran (AEOI) as \"the authority that was,\" prior to the June 2003 IAEA board meeting, \"basically handling all political and technical issues concerning\" the agency's investigation of Iran's nuclear program. Following that meeting, Iran's Supreme National Security Council created the Supreme Nuclear Committee, which was composed of officials from various agencies, including the AEOI and the ministries of defense, foreign affairs, and intelligence. After the IAEA board adopted its September 2003 resolution, the government placed Rouhani, who was the head of the Supreme National Security Council at the time, in charge of the negotiations concerning Iran's nuclear program. Rouhani explained the resulting nuclear decisionmaking process in 2011: Even though some people thought the nuclear team was operating with complete prerogatives, the facts were otherwise. The work procedure for every issue was that we first had to discuss the matter in the Supreme Nuclear Committee, then we took that result to the Meeting of Leaders, and finally we acted in accordance with the decision of the leaders. In October 2003, Iran concluded an agreement with France, Germany, and the United Kingdom, collectively known as the \"E3,\" to suspend its enrichment activities, sign and implement an Additional Protocol to its IAEA safeguards agreement, and comply fully with the IAEA's investigation. As a result, the IAEA board decided to refrain from referring the matter to the U.N. Security Council, despite U.S. advocacy for such a referral. Statements from current and former Iranian officials indicate that, during fall 2003, Tehran feared that the United States might use Security Council referral as a means to undertake military action or other coercive measures against Iran. Rouhani argued in February 2005 that the United States would not take such action as long as Iran was cooperating with the IAEA and negotiating with the E3. After October 2003, Iran continued some of its enrichment-related activities, but Tehran and the E3 agreed in November 2004 to a more detailed suspension agreement. During negotiations between fall 2003 and summer 2005, both Iran and the E3 offered a number of proposals, although the two sides never reached agreement. The IAEA's investigation, as well as information Tehran provided after the October 2003 agreement, ultimately revealed that Iran had engaged in a variety of clandestine nuclear-related activities, some of which violated Iran's safeguards agreement. These activities included plutonium separation experiments, uranium enrichment and conversion experiments, and importing various uranium compounds. Current and former Iranian officials have depicted a government deeply divided during this time over diplomatic approaches regarding its nuclear program. For example, Seyed Hossein Mousavian, who was Iran's spokesperson during the government's 2003-2005 negotiations with France, Germany, and the United Kingdom (collectively known as the \"E3\"), explained that in 2003 \"there were two schools of thought in Iran. One group advocated engagement with the West, while others were proponents of resistance.\" President Rouhani, who headed the 2003-2005 negotiations, explained during a July 2005 interview that certain parts of the Iranian government opposed the diplomatic track, adding that \"[t]he problems included both disharmony and sabotage.\" Indeed, Rouhani later argued that Iran's Supreme National Security Council took charge of the diplomacy concerning the nuclear program because the Foreign Ministry was not able to be responsible for this task in a good way because some organizations did not pay sufficient attention to this ministry's decisions, especially since there had been disagreements for months between the Foreign Ministry and the Atomic Energy Organization. In a 2005 article, an Iranian Foreign Ministry official explained that the decision to delegate responsibility for the nuclear issue to the Supreme National Security Council was aimed at creating domestic consensus and preventing any possible discrepancies in the decision making process and its implementation at the national level. It was demonstrated in practice that this decision was crucial in preventing the friction between the government, parliament and all other relevant agencies. Iran resumed uranium conversion in August 2005 under the leadership of then-President Ahmadinejad, who had been elected two months earlier. On September 24, 2005, the IAEA Board of Governors adopted a resolution that, for the first time, found Iran to be in noncompliance with its IAEA safeguards agreement. The board, however, did not refer Iran to the Security Council, choosing instead to give Tehran additional time to comply with the board's demands. Iran announced in January 2006 that it would resume research and development on its centrifuges at Natanz. In response, the IAEA board adopted a resolution on February 4, 2006, that referred Iran's case to the Security Council. Two days later, Tehran announced that it would stop implementing its Additional Protocol. In March 2006, the U.N. Security Council President issued a statement, which was not legally binding, that called on Iran to \"take the steps required\" by the February IAEA board resolution. The council subsequently adopted six resolutions concerning Iran's nuclear program: 1696 (July 2006), 1737 (December 2006), 1747 (March 2007), 1803 (March 2008), 1835 (September 2008), and 1929 (June 2010). The second, third, fourth, and sixth resolutions imposed a variety of restrictions on Iran. In addition, these resolutions required Iran to cooperate fully with an ongoing IAEA investigation of its nuclear activities, suspend its uranium enrichment program, suspend its construction of a heavy-water reactor and related projects, and ratify the Additional Protocol to Iran's IAEA safeguards agreement. Resolution 1929 also required Tehran to refrain from \"any activity related to ballistic missiles capable of delivering nuclear weapons\" and to comply with a modified provision (called code 3.1) of Iran's subsidiary arrangement to its IAEA safeguards agreement. Beginning in June 2006, Iran later held multiple rounds of talks with China, France, Germany, Russia, the United Kingdom, and the United States, collectively known as the \"P5+1,\" concerning various proposals for resolving the nuclear dispute. Saeed Jalili, then-head of Iran's Supreme National Security Council, conducted Iran's nuclear negotiations. Following his June 2013 election, Iranian President Rouhani delegated the \"nuclear negotiations portfolio\" to the Foreign Ministry, he explained in a September 2013 interview. The AEOI continued to be responsible for Tehran's negotiations with the IAEA. Supreme Leader Ayatollah Ali Khamene'i was the ultimate decisionmaker regarding Iran's diplomacy concerning the Joint Comprehensive Plan of Action. Then-Under Secretary of State for Political Affairs Wendy Sherman explained during a December 2013 hearing that Khamene'i \"is the only one who really holds the nuclear file—makes the final decisions about whether Iran will reach a comprehensive agreement to forego much of what it has created in return for the economic relief it seeks.\" The Supreme Leader remained in charge of decisions regarding the nuclear program following Rouhani's 2013 election. Deputy Foreign Minister Seyed Abbas Araqchi explained in July 2016 that the nuclear issue was \"under the senior management\" of Khamene'i, adding that With regards the major foreign policy issues the more the decision making progresses and enters important levels the higher the level of engagement; it moves up from the ministry to the administration level and from the administration to the level of Supreme National Security Council and at the end to the supreme leader. Iran and the P5+1 met three times before concluding the Joint Plan of Action (JPA) on November 24, 2013. This agreement placed certain limitations on Iran's nuclear program and established an approach toward reaching a long-term comprehensive solution to international concerns regarding Iran's nuclear program. The two sides began implementing the JPA on January 20, 2014. The P5+1 and Iran reached a framework of a Joint Comprehensive Plan of Action (JCPOA) on April 2, 2015, and finalized the JCPOA on July 14, 2015. The parties began implementing the JCPOA on January 16, 2016. On that day, all of the previous Security Council resolutions' requirements were terminated. The NPT and U.N. Security Council Resolution 2231 compose the current legal framework governing Iran's nuclear program. On May 8, 2018, President Donald Trump announced that the United States would no longer participate in the JCPOA. The United States subsequently reimposed sanctions that had been suspended pursuant to the agreement. Other P5+1 countries immediately reiterated their support for the JCPOA and announced that they intend to fulfill their JCPOA commitments and protect their companies from the effects of any U.S.-imposed sanctions. President Rouhani has pledged to continue implementing the accord, provided Iran continues to receive the economic benefits of the agreement. (For more information about multilateral diplomacy concerning Iran's nuclear program, including the JCPOA's status, see Appendix C . For more information about the Trump administration's JCPOA policy, see Appendix D .) As noted, the IAEA investigation of Iran's nuclear program began in 2002. Iran and the IAEA agreed in August 2007 on a work plan to clarify the outstanding questions regarding Tehran's nuclear program. Most of these issues, which had contributed to suspicions that Iran had been pursuing a nuclear weapons program, were essentially resolved by June 2008.However, then-IAEA Director-General ElBaradei told the IAEA Board of Governors on June 2, 2008, that there is \"one remaining major [unresolved] issue,\" which concerns questions regarding \"possible military dimensions to Iran's nuclear programme.\" Iran and the IAEA subsequently held a series of discussions regarding these issues. The agency provided Iran with documents or, in some cases, descriptions of documents, which had been provided to the IAEA by several governments. The documents indicated that Iranian entities may have conducted studies related to nuclear weapons development. The subjects of these studies included uranium conversion, missile reentry vehicles for delivering nuclear warheads, and conventional explosives used in nuclear weapons. Iranian officials have claimed that the documents are not authentic, but ElBaradei told the IAEA board on June 17, 2009, that there was \"enough in these alleged studies to create concern in the minds of our professional inspectors.\" Iranian officials acknowledged that some of the information in the documents is accurate, but they argued that the activities described were exclusively for nonnuclear purposes. Tehran has provided some relevant information about these matters to the IAEA, but ElBaradei reported in August 2009 that the government should \"provide more substantive responses\" to the IAEA, as well as \"the opportunity to have detailed discussions with a view to moving forward on these issues, including granting the agency access to persons, information and locations identified in the documents.\" IAEA Director-General Amano issued a report to the IAEA board in November 2011 stating that Iran had not \"engaged with the agency in any substantive way\" on the alleged studies since August 2008. According to this report, which provided the most detailed account to date of the IAEA's evidence regarding Iran's suspected nuclear weapons-related activities, the agency has \"credible\" information that Iran has carried out activities \"relevant to the development of a nuclear explosive device,\" including acquisition of \"nuclear weapons development information and documentation,\" work to develop \"an indigenous design of a nuclear weapon including the testing of components,\" efforts \"to procure nuclear related and dual use equipment and materials by military related individuals and entities,\" and work to \"develop undeclared pathways for the production of nuclear material.\" Although some of these activities have civilian applications, \"others are specific to nuclear weapons,\" the report notes. Most of these activities were conducted before the end of 2003, though some may have continued. (See Appendix E and \" Nuclear Weapon Development Capabilities \" for more details.) The IAEA Board of Governors adopted a resolution on November 18, 2011, stating that \"it is essential\" for Iran and the IAEA \"to intensify their dialogue aiming at the urgent resolution of all outstanding substantive issues.\" IAEA and Iranian officials met 10 times between January 2012 and May 2013 to discuss what the agency termed a \"structured approach to the clarification of all outstanding issues related to Iran's nuclear programme.\" However, during an October 2013 meeting, IAEA officials and their Iranian counterparts decided to adopt a \"new approach\" to resolving these issues. Iran signed a joint statement with the IAEA on November 11, 2013, describing a \"Framework for Cooperation.\" According to the statement, Iran and the IAEA agreed to \"strengthen their cooperation and dialogue aimed at ensuring the exclusively peaceful nature of Iran's nuclear programme through the resolution of all outstanding issues that have not already been resolved by the IAEA.\" Tehran subsequently provided the IAEA with information about several of the outstanding issues and later agreed in May 2014 to provide information to the agency by August 25, 2014, about five additional issues, including alleged Iranian research on high explosives and \"studies made and/or papers published in Iran in relation to neutron transport and associated modelling and calculations and their alleged application to compressed materials.\" Iran subsequently provided information about four of these issues. The July 2015 JCPOA states that Tehran was to \"complete\" a series of steps set out in an Iran-IAEA \"Roadmap for Clarification of Past and Present Outstanding Issues.\" According to IAEA Director-General Amano, this road map, which the two sides concluded in July 2015, set out \"a process\" under the November 2013 JPA \"to enable the Agency, with the cooperation of Iran, to make an assessment of issues relating to possible military dimensions to Iran's nuclear programme.\" According to a December 2, 2015, report to the IAEA Board of Governors from Amano, \"[a]ll the activities contained in the road-map were implemented in accordance with the agreed schedule.\" The road map required Amano to present this report, which contains the agency's \"final assessment on the resolution\" of the aforementioned outstanding issues. In response, the board adopted a resolution on December 15, 2015, that notes Iran's cooperation with the road map and \"further notes that this closes the Board's consideration\" of the \"outstanding issues regarding Iran's nuclear programme.\" Because the IAEA has verified that Iran has taken the steps required for Implementation Day to take effect, the board is no longer focused on either Iran's compliance with past Security Council resolutions or past issues concerning Iran's safeguards agreement. Instead, the board is focused on monitoring and verifying Iran's JCPOA implementation \"in light of\" United Nations Security Council Resolution 2231, which the council adopted on July 20, 2015. The December 2015 IAEA resolution requests the Director General to issue quarterly reports to the board regarding Iran's \"implementation of its relevant commitments under the JCPOA for the full duration of those commitments.\" The Director General is also to report to the IAEA Board of Governors and the Security Council \"at any time if the Director General has reasonable grounds to believe there is an issue of concern\" regarding Tehran's compliance with its JCPOA or safeguards obligations. Parchin is an Iranian military site. As part of its investigation into \"possible military dimensions\" of Iran's nuclear program, the IAEA requested that Tehran respond to information which the agency obtained from unnamed governments regarding activity at the military site. Information provided to IAEA indicated that in 2000 \"Iran constructed a large explosives containment vessel\" at Parchin to conduct experiments related to the development of nuclear weapons, according to Amano's November 2011 report. The report did not say whether Iran actually built the vessel or conducted these experiments. IAEA inspectors visited the site twice in 2005, but they did not visit the location \"believed to contain the building which houses the explosives chamber.\" The agency requested access to this latter building in February 2012, but Iran did not provide such access until September 2015 as part of the road map described above. At that time, IAEA officials conducted and supervised verification activities, including \"visual observation and environmental sampling,\" but they \"did not observe a chamber or any associated equipment inside the building.\" Iranian officials told their IAEA counterparts in October 2015 that the building in question \"had always been used for the storage of chemical material for the production of explosives,\" but the \"information available\" to the IAEA, \"does not support Iran's statements on the purpose of the building.\" Beginning in February 2012, Iran apparently undertook efforts to remove evidence of past nuclear-related activities at the site. These efforts, which included landscaping, refurbishing buildings, demolishing buildings, and removing and replacing external wall structures, \"seriously undermined the Agency's ability to conduct effective verification,\" according to Amano's December 2, 2015, report. Iranian officials have implied that the government's refusal to allow IAEA post-2005 access to Parchin was due to Defense Ministry resistance. Fereydoun Abbasi-Davani, then-AEOI President, indicated in 2012 that allowing inspectors to the site was the Iranian military's decision. Rouhani in 2011 described a contentious internal debate regarding access to Parchin: In the area of Agency inspections and especially the inspections of military centers such as Parchin, this was debated for months inside the country and this issue was therefore raised in various meetings over the circumstances in which these inspections would take place. There was serious opposition to the Agency's request to inspect Parchin; the nation's domestic political climate was vigorously opposed to inspectors inspecting Parchin and military centers in general. For more information about the Parchin site, see Appendix E . Iran cooperated with the IAEA in other respects, albeit with varying consistency. The IAEA was (and still is) able to verify that Iran's declared nuclear facilities and materials have not been diverted for military purposes. Moreover, Tehran provided the agency with \"information similar to that which Iran had previously provided pursuant to the Additional Protocol,\" ElBaradei reported to the IAEA board in February 2008, adding that this information clarified the agency's \"knowledge about Iran's current declared nuclear programme.\" Iran, however, provided this information \"on an ad hoc basis and not in a consistent and complete manner,\" the report said. Indeed, the IAEA requested in April 2008 that Iran provide \"as a transparency measure, access to additional locations related ... to the manufacturing of centrifuges, research and development (R&D) on uranium enrichment, and uranium mining.\" Tehran provided such access pursuant to the 2013 JPA. ElBaradei's February 2008 report underscored the importance of full Iranian cooperation with the IAEA investigation, as well as Tehran's implementation of its Additional Protocol: Confidence in the exclusively peaceful nature of Iran's nuclear programme requires that the Agency be able to provide assurances not only regarding declared nuclear material, but, equally importantly, regarding the absence of undeclared nuclear material and activities in Iran.... Although Iran has provided some additional detailed information about its current activities on an ad hoc basis, the Agency will not be in a position to make progress towards providing credible assurances about the absence of undeclared nuclear material and activities in Iran before reaching some clarity about the nature of the alleged studies, and without implementation of the Additional Protocol. The IAEA also asked Iran to \"reconsider\" its March 2007 decision to stop complying with a portion of the subsidiary arrangements for its IAEA safeguards agreement. That provision (called code 3.1), to which Iran agreed in February 2003, requires Tehran to provide design information for new nuclear facilities \"as soon as the decision to construct, or to authorize construction, of such a facility has been taken, whichever is earlier.\" Previously, Iran was required to provide design information for a new facility 180 days before introducing nuclear material into it. Iran invoked the March 2007 decision when it withheld from the IAEA until September 2009 \"preliminary design information\" for the planned Darkhovin reactor; the agency first requested the information in December 2007. Although Iran provided the agency with preliminary design information about the Darkhovin reactor in a September 22, 2009, letter, the IAEA requested Tehran to \"provide additional clarifications\" of the information. Amano reported in September 2010 that Iran had \"provided only limited design information with respect to\" the reactor. Tehran also refused to provide updated design information for the Arak reactor—a decision which, according to a May 2013 report from Amano, had \"an adverse impact on the Agency's ability to effectively verify the design of the facility.\" As part of the JPA, Iran submitted this information to the IAEA on February 12, 2014. Pursuant to the JCPOA, Iran has committed to redesign and rebuild the Arak reactor based on a design agreed to by the P5+1 so that it will not produce weapons-grade plutonium. Iran has rendered the reactor's original core inoperable. Iran had also refused to allow IAEA officials to conduct an inspection of the Arak reactor in order to verify Iranian-provided design information. ElBaradei argued in a June 2009 report to the IAEA board that this continued refusal \"could adversely impact the Agency's ability to carry out effective safeguards at that facility,\" adding that satellite imagery was insufficient because Iran has completed the \"containment structure over the reactor building, and the roofing for the other buildings on the site.\" However, IAEA inspectors visited the reactor facility in August 2009 to verify design information, according to ElBaradei's report issued the same month. IAEA inspectors had last visited the reactor in August 2008. Inspectors have visited the facility several more times, according to reports from Amano. In addition, Iran failed to notify the IAEA until September 2009 that it was constructing a uranium enrichment facility, called the Fordow Fuel Enrichment Plant, near the city of Qom. Iran revealed in September 2009 that it had been constructing the facility and provided some details about it to the IAEA in a September 21, 2009, letter. Four days after the IAEA received the letter, British, French, and U.S. officials revealed that they had previously developed intelligence on the facility. The three governments provided a detailed intelligence briefing to the IAEA after the agency received Iran's letter. U.S. officials have said that, despite its letter to the agency, Iran intended for the facility to be kept secret. Tehran placed the facility under IAEA safeguards after its September 2009 letter. (For more details, see the \" Fordow Enrichment Facility \" section below.) Pursuant to the JCPOA, Iran has begun to convert its Fordow enrichment facility into \"a nuclear, physics, and technology centre\" in which no nuclear material will be present. In a letter published on October 1, 2009, the IAEA asked Iran to provide additional information about the facility, including \"further information with respect to the name and location of the pilot enrichment facility, the current status of its construction and plans for the introduction of nuclear material into the facility.\" The letter also requested that Tehran provide IAEA inspectors with access to the facility \"as soon as possible.\" IAEA officials inspected the facility and met with Iranian officials in late October 2009. According to a November 2009 report from ElBaradei to the IAEA board, Tehran \"provided access to all areas of the facility,\" which \"corresponded with the design information provided by Iran\" a week before the visit. IAEA officials have since conducted regular inspections of the facility. Although Iran provided additional design information about the facility to the IAEA, the agency still had questions about the facility's \"purpose and chronology\" and wished to interview other Iranian officials and review additional documentation, according to ElBaradei's report. Amano reported in May 2012 that Iran had provided the IAEA with some requested information regarding the Fordow construction decision, but the agency still wanted more information from Tehran. Tehran, according to Amano's November 2015 report, has not yet provided all of this information. Subsequent reports from Amano have not addressed the issue. The IAEA has also requested additional information about Iran's production of heavy water. As noted, Iran is constructing a heavy-water nuclear reactor. ElBaradei's November 2009 report states that, during an inspection of Iran's uranium conversion facility the previous month, IAEA inspectors \"observed 600 50-litre drums said by Iran to contain heavy water.\" The inspectors visited the facility to verify updated design information submitted by Iran in August 2009. The inspectors observed the drums after gaining access to an area of the facility that agency inspectors had not previously visited. Tehran told the IAEA that the water originated in Iran and permitted agency inspectors to count the number of drums and weigh a \"small number of randomly selected drums.\" For a time, Tehran did not permit the agency to take samples of the heavy water, but the government did allow such access in February 2014. Similarly, Iran for some time did not grant repeated IAEA requests for \"further access\" to the country's heavy-water production plant since agency inspectors visited the facility in August 2011. However, Iran granted such access in December 2013. The IAEA apparently resolved a discrepancy discovered during an August 2011 inspection of an Iranian research laboratory that had been used to conduct uranium conversion experiments. IAEA measurements revealed that Iran had overstated the amount of material in the facility, described in Amano's November 2011 report as \"natural uranium metal and process waste,\" by almost 20 kilograms. Iran and the IAEA appear to have resolved the issue in 2013. Some nongovernmental experts and former U.S. officials have argued that, rather than producing fissile material for nuclear weapons indigenously, Iran could obtain such material from foreign sources. A November 2007 National Intelligence Estimate (NIE) states that the intelligence community \"cannot rule out that Iran has acquired from abroad—or will acquire in the future—a nuclear weapon or enough fissile material for a weapon.\" A senior intelligence official characterized such acquisition as \"an inherent option\" for Iran. However, Tehran's potential ability to produce its own fissile material is a greater cause of concern; the official explained that \"getting bits and pieces of fissile material from overseas is not going to be sufficient\" to produce a nuclear arsenal. As noted, uranium enrichment facilities can produce highly enriched uranium (HEU), which is one of the two types of fissile material used in nuclear weapons. The other type is plutonium, which is separated from spent nuclear reactor fuel. According to a November 14, 2013, IAEA report, Iran had generally stopped expanding its enrichment and heavy-water reactor programs during the negotiations leading up to the JPA, which the parties finalized later that month. That agreement essentially froze most aspects of Iran's nuclear program to allow time to negotiate the July 2015 JCPOA. When the JPA went into effect in January 2014, Iran had enough uranium hexafluoride containing up to 5% uranium-235 to yield—if further enriched—weapons-grade HEU for as many as eight nuclear weapons. If it had been further enriched, the total amount of Iranian uranium hexafluoride containing 20% uranium-235 would have been sufficient for a nuclear weapon. Pursuant to the JCPOA, Iran has restricted and/or dismantled various portions of its nuclear program. Iran currently lacks enough low-enriched uranium hexafluoride to produce a nuclear weapon. Since the JCPOA's Implementation Day, Iran has imported items for its nuclear program via a JCPOA-established \"procurement channel,\" which, according to the agreement, is to last for a duration of 10 years. A Procurement Working Group, which is part of the JCPOA-established Joint Commission, reviews proposals for nuclear-related transfers to Iran. The working group provides its recommendations to the UN Security Council, which approves any exports. The JCPOA requires Iran to provide the IAEA with \"access to the locations of intended use of all items, materials, equipment, goods and technology\" listed in the NSG's \"Guidelines for Nuclear Transfers.\" Tehran is also to permit exporting governments to \"verify the end-use of all items, materials, equipment, goods and technology\" listed in the NSG's \"Guidelines for Transfers of Nuclear-Related Dual-Use Equipment, Materials, Software, and Related Technology.\" According to a December 6, 2018, report by U.N. Secretary-General António Guterres, the Security Council had received 42 nuclear-related export proposals since Implementation Day; the council approved 28 of those proposals and disapproved four. Nine proposals were withdrawn by the submitting states and one was under review. Iran has used three centrifuge facilities to enrich uranium: a pilot centrifuge facility and a larger commercial facility, both located at Natanz, and the Fordow centrifuge facility located near the city of Qom. Iran also has a variety of facilities and workshops involved in the production of centrifuges and related components. (See Appendix F and CRS Report R42443, Israel: Possible Military Strike Against Iran's Nuclear Facilities , coordinated by Jim Zanotti.) During a July 31 , 2015, press briefing about possible Iranian undeclared nuclear facilities, U.S. Secretary of Energy Ernest Moniz stated that \"we feel pretty confident that we know their current configuration.\" This facility was to have held approximately 50,000 centrifuges. Former Vice President Gholamreza Aghazadeh, who also headed the AEOI until July 2009, explained in February 2009 that Iran intended to install all of the centrifuges by 2015. Iran began enriching uranium in the facility after mid-April 2007; as of November 5, 2013, the facility had produced 10,357 kilograms of low-enriched uranium hexafluoride containing up to 5% uranium-235. This quantity of LEU, if it had been further enriched, would have yielded enough weapons-grade HEU for as many as eight nuclear weapons. As of October 31, 2015, the facility had produced 15,525 kilograms of uranium hexafluoride containing up to 5% uranium-235. However, Iran had only approximately 8,305 kilograms of this material because the rest had been converted into various other chemical forms. Individual centrifuges are linked together in cascades; each cascade in the commercial facility contained either 164 or 174 centrifuges. As of May 17, 2015, Tehran had installed about 15,400 first generation (IR-1) centrifuges, approximately 9,150 of which were enriching uranium. Iran had also installed about 1,000 centrifuges of greater efficiency, called IR-2m centrifuges, in the facility. The IR-2m centrifuges were not enriching uranium. Amano reported in February 2017 that, pursuant to its JCPOA commitments, Iran had 5,060 IR-1 centrifuges installed in the facility and had removed all other centrifuges. Iran had been producing enriched uranium hexafluoride continuing no more than 3.67% uranium-235 but also shipped out most of its LEU to Russia on December 28, 2015, to reduce its stockpile to the required levels. Iran's total stockpile of this material has not exceeded 300 kilograms since Tehran began implementing its JCPOA commitments. Iran began enriching uranium up to 20% uranium-235 in the Natanz pilot facility in February 2010. Iranian officials stated that this enriched uranium was to serve as fuel in Iran's Tehran Research Reactor (TRR), as well as future such research reactors. Construction of the U.S.-supplied TRR began in 1960, and it went critical in 1967. Initially fueled by U.S.-supplied HEU, the reactor was converted to use LEU fuel in 1994 after Argentina agreed to supply the reactor with such fuel in 1987. Fereydun Abbasi-Davani, then-President of the Atomic Energy Organization of Iran, stated in a 2012 interview that once Iran had \"enough\" uranium enriched to this level, the country would use its enrichment facilities to produce enriched uranium containing 3.5% uranium-235. Iran has tested several types of more-advanced centrifuges in the pilot facility; these centrifuges could increase the other enrichment facilities' capacity. Tehran has altered this facility to comply with the JCPOA's limits on Iranian centrifuge research and development. Iran's development of new centrifuges has apparently been less successful than development of the IR-1 centrifuge; past estimates from Iranian officials regarding the deployment of more-advanced centrifuges have been excessively optimistic. According to a 2012 report from a U.N. panel of experts, the advanced centrifuge program's lack of success may have been \"the result of sanctions limiting\" Tehran's \"ability to procure items necessary for its centrifuge programme,\" as well as \"[o]ther variables, including design and manufacturing limitations, or a shortage of other necessary materials.\" The JCPOA contains a detailed description of centrifuge research and development (R&D) that Iran is permitted to conduct under the agreement. Iran is to conduct centrifuge R&D with uranium only at the Natanz pilot facility and will conduct mechanical testing of centrifuges only at the pilot facility and the Tehran Research Centre. Iran submitted an \"enrichment R&D plan\" to the IAEA in January 2016 as part of Tehran's initial declaration for its Additional Protocol. Iranian adherence to that plan is a JCPOA requirement. In December 2011, Iran began enriching uranium up to 20% uranium-235 in the Fordow Fuel Enrichment Plant, according to IAEA reports. As of November 1, 2013, Iran was feeding uranium hexafluoride into four cascades (696 centrifuges) of IR-1 centrifuges and had installed a total of 2,710 IR-1 centrifuges in the facility. Tehran had planned to install a total of 16 cascades containing approximately 3,000 centrifuges. Tehran told the IAEA that the facility would be configured to produce both uranium enriched to 5% uranium-235 and 20% uranium-235. Iran also told the IAEA that \"the facility could be reconfigured to contain centrifuges of more advanced types should Iran take a decision to use such centrifuges in the future.\" Iran agreed under the JCPOA to convert the facility into \"a nuclear, physics, and technology centre.\" The facility will not contain any nuclear material. Pursuant to this commitment, Iran has decreased the number of IR-1 centrifuges to 1,044, and it has removed all nuclear material from the facility. In addition, Iran has modified two cascades \"for the production of stable isotopes\" for medical and industrial uses. As noted, Iran revealed in September 2009 that it had been constructing the facility. That same month, Tehran provided some details about the facility to the IAEA. The United States had been \"observing and analyzing the facility for several years,\" according to September 25, 2009, Obama Administration talking points, which added that \"there was an accumulation of evidence\" earlier in 2009 that the facility was intended for enriching uranium. Some of this evidence apparently indicated that \"Iran was installing the infrastructure required for centrifuges earlier\" in 2009. U.S. officials have not said exactly when Iran began work on the facility, which is \"located in an underground tunnel complex on the grounds of an Islamic Revolutionary Guard Corps\" base near the Iranian city of Qom. Nevertheless, the Atomic Energy Organization of Iran (AEOI), rather than the Iranian military, is responsible for the development and management of the facility, according to the September 2009 U.S. talking points described above. According to a November 2009 report from then-IAEA Director-General ElBaradei, Iran informed the IAEA that construction on the site began in the second half of 2007. However, citing information in its possession that appears to contradict Tehran's claim, the IAEA asked Iran to provide more information about the facility's chronology. U.S. officials suggested that the facility may have been part of a nuclear weapons program. President Obama stated on September 25, 2009, that \"the size and configuration of this facility is inconsistent with a peaceful program.\" But the Administration's talking points were somewhat more vague, stating that the facility \"is too small to be viable for production of fuel for a nuclear power reactor,\" although it \"could be used\" for centrifuge research and development or \"configured to produce weapons-grade uranium.\" The facility \"would be capable of producing approximately one weapon's worth\" of HEU per year, according to the talking points. Iran's failure to inform the IAEA of the Fordow plant's existence until well after Tehran had begun constructing it raised concerns that the country may have had other covert nuclear facilities. A November 2009 IAEA Board of Governors resolution stated that Iran's declaration of the Fordow facility \"reduces the level of confidence in the absence of other nuclear facilities and gives rise to questions about whether there are any other [undeclared] nuclear facilities under construction in Iran.\" Furthermore, then-UK Foreign Office Minister Alistair Burt told Parliament in February 2012 that the Fordow facility \"which Iran initially kept secret from the IAEA, also raises our concerns that there may also be other, undeclared sites in Iran that could be engaged in work\" related to nuclear weapons. Tehran's shifting explanations regarding the facility's purpose also raised concerns that Iran would, in the future, use the facility to produce fissile material for nuclear weapons. Iran's 2009 letter to the IAEA described the Fordow facility as a \"new pilot fuel enrichment plant\" that would produce uranium enriched to no higher than 5% uranium-235. Tehran subsequently changed the plant's stated purpose several times. For example, Tehran, as noted, later told the IAEA that the facility would be configured to produce both uranium enriched to 5% uranium-235 and 20% uranium-235. Apparently suggesting that Iran might later produce uranium containing higher levels of uranium-235, a U.S. official told the IAEA Board of Governors on March 8, 2012, that \"[w]e cannot help but wonder ... whether Iran has finally informed us of the ultimate purpose of this facility.\" For its part, Iran has asserted that the facility is for peaceful purposes and that the government has acted in accordance with its international obligations. As noted, Tehran argued that it was producing enriched uranium containing up to 20% uranium-235 for use as fuel in research reactors, to be used to produce isotopes for medical purposes. Regarding the facility's secret nature, Iranian officials argued that Tehran was not previously obligated to disclose it to the IAEA and stated on several occasions that the facility was concealed to protect it from military attacks. Iran told the IAEA in 2009 that the Fordow facility was to serve as a \"contingency enrichment plant, so that the enrichment activities shall not be suspended in the case of any military attack.\" The Natanz commercial facility \"was among the targets threatened with military attacks,\" Iran explained. Iranian officials stated during a June 2012 meeting with the P5+1 that the Fordow facility is \"not a military base\" and is \"not located on a military base.\" As noted, Iran argued that it was producing LEU containing nearly 20% uranium-235 for use in research reactors; as of January 20, 2014, when the JPA went into effect, Tehran had used the Natanz pilot facility and the Fordow facility to produce a total of 447.8 kilograms of uranium hexafluoride containing up to 20% uranium-235. Iran's production of uranium enriched to this level has caused concern because such production requires approximately 90% of the effort necessary to produce weapons-grade HEU, which contains about 90% uranium-235. If further enriched, this amount of material would have been sufficient for a nuclear weapon. Iran would need approximately 215 kilograms of uranium hexafluoride containing 20% uranium-235 to produce approximately 27.8 kilograms of uranium containing 90% uranium-235—a sufficient amount of weapons-grade HEU for a nuclear weapon. This is a conservative estimate; the specific characteristics of Iran's enrichment facilities may necessitate using more than 215 kilograms of such material. Then-Director of National Intelligence James Clapper suggested during a February 16, 2012, Senate Armed Services Committee hearing that \"a number of factors\" could impede Tehran's ability to produce weapons-grade HEU from uranium enriched to 20% uranium-235. As of January 20, 2014, approximately 160 kilograms of the LEU described above was in the form of uranium hexafluoride and, therefore, available to be further enriched in the near term. Since that date, Iran has either converted much of that material for use as fuel in the Tehran Research Reactor or prepared it for that purpose. Iran diluted the rest of that stockpile so that it contained no more than 5% uranium-235. AEOI spokesperson Behrouz Kamalvandi said in February 2014 that Iran had \"the necessary reservoirs of fuel for 5 years for the Tehran research reactor.\" Iranian officials indicated in the past that Tehran intended to construct 10 additional centrifuge plants—a goal that many analysts argued was virtually unachievable. Then- Atomic Energy Organization President Ali Akbar Salehi stated in 2009 that Iran is investigating locations for the sites. (Salehi was president of the organization from 2009 to 2010; he became president again in August 2013.) In 2012, then-Atomic Energy Organization President Abbasi argued that \"mastering\" centrifuge enrichment technology would enable Iran to \"develop [centrifuge] sites in various locations to avoid any threat by foreign enemies.\" According to the JCPOA, Iran is to enrich uranium only at the Natanz commercial facility for 15 years. Expiration of the JCPOA enrichment restrictions will be \"followed by gradual evolution, at a reasonable pace\" of Iran's enrichment program. According to the JCPOA, Iran's centrifuge-testing program may proceed under strict limits, which will begin to ease approximately eight years after the beginning of the agreement's implementation. An AEOI spokesperson stated in January 2016 that Iran's nuclear program \"will begin to accelerate from the 13 th or 14 th year onwards,\" adding that Tehran plans to increase its enrichment capacity by approximately \"20-fold\" by the end of the 15 th year. Iran plans to produce enough enriched uranium to fuel five or six nuclear reactors, Deputy Foreign Minister Araqchi stated in August 2015. AEOI spokesperson Kamalvandi explained in June 2018 that Iran would begin the process of \"manufacturing and assembly of centrifuge rotors,\" which are critical components of such machines. Iran \"will begin building a centrifuge rotor plant,\" he noted. In addition, Salehi announced in June that Iran has completed building a centrifuge assembly center in the Natanz facility; Tehran had not previously disclosed this facility publicly. The facility's completion \"does not mean that we are going to produce these centrifuges now,\" Salehi said in September 2018, adding that the facility provides Iran with the capability to mass-produce such centrifuges, should the government decide to do so. A senior U.S. intelligence official said in 2007 that a country needs to be able to \"operate large numbers of centrifuges for long periods of time with very small failure rates\" in order to be able to \"make industrial quantities of enriched uranium.\" Iran's record indicates that the country has not always met this standard. The 2007 National Intelligence Estimate stated that Iran still faced \"significant technical problems operating\" its centrifuges. Although a 2008 report to Congress submitted by the Deputy Director for National Intelligence described the amount of LEU that Iran produced in 2008 as a \"significant improvement\" over the amount it had produced during the previous year, data from an August 2015 Institute for Science and International Security report indicate that the average per-centrifuge performance at that facility peaked in 2010 and subsequently fluctuated. The extent to which Iran's progress is sustainable is open to question. Former Pakistani nuclear official Abdul Qadeer Khan described Pakistan's first-generation centrifuges as \"unsuccessful\" in a 1998 interview. Furthermore, Mark Fitzpatrick of the International Institute for Strategic Studies observed that \"[i]t can be years before it is clear whether an enrichment programme is working well,\" observing that centrifuges at a Japanese enrichment facility \"started to crash seven years after installation.\" And, as noted, Iran has struggled to develop and deploy more-advanced centrifuges. Nevertheless, historical experience indicates that sustained operation of gas centrifuges appears to be a manageable task for governments with even modest technical capabilities. According to a U.S. Nuclear Regulatory Commission document, some centrifuges of simple design \"have operated 30 years with a failure rate of less than one percent.\" (See also \" Effects of Sanctions and Sabotage on Iran's Enrichment Program .\") As noted, uranium conversion is a process whereby uranium ore concentrate is converted into several compounds, including uranium hexafluoride—the feedstock for Iran's centrifuges. Iran produced approximately 541 metric tons of uranium hexafluoride between March 2004 and August 10, 2009, using both imported uranium ore concentrate and domestically produced uranium ore concentrate. Iran has not produced any uranium hexafluoride since August 2009, according to IAEA reports, although Tehran has transferred domestically produced uranium ore concentrate to the uranium conversion facility. The 2012 U.N. Panel of Experts report concluded that, based on data from Amano's February 2012 report, Iran had \"an ample supply of uranium hexafluoride to maintain current levels of enrichment for the foreseeable future.\" On June 27, 2018, Iran's official news agency announced that Iran has resumed operations at the conversion facility. According to a report from the Director of National Intelligence to Congress covering 2011, Iran had \"almost exhausted\" its supply of imported uranium ore concentrate. Tehran apparently did not import any more such material prior to December 2015. According to the 2012 U.N. Panel of Experts report, \"a number\" of governments believed that Tehran was \"seeking new sources of uranium ore to supply its enrichment efforts\"; the report added that \"the Panel is not aware of any confirmed cases of actual transfers.\" British Foreign and Commonwealth Office official Tobias Ellwood informed Parliament in June 2015 that the British government was \"not aware of\" any recent reports that Iran had attempted to purchase foreign uranium. Former State Department official Richard Nephew wrote in September 2015 that there had \"not been any verified transfer of uranium to Iran aside from fuel for the Bushehr power reactor.\" In late December 2015, Iran imported between 200 and 220 metric tons of uranium ore concentrate in exchange for LEU that Iran shipped to Russia in order to reduce its stockpile to JCPOA-required levels. The IAEA verified Iran's receipt in February 2017 of approximately 125 metric tons of uranium ore concentrate. During March 2017, Iranian officials stated that the country had imported between 382 and 384 metric tons of this material since concluding the JCPOA. The imported uranium ore concentrate is to serve as fuel for the Bushehr reactors, according to Iranian officials. Prior to 2009, Tehran apparently improved its ability to produce centrifuge feedstock of sufficient purity for light-water reactor fuel; information in a 2010 IAEA report indicated that Iran was purifying its centrifuge feedstock. Whether Iran is currently able to produce feedstock pure enough for weapons-grade HEU is unclear, however. Iran acknowledged to the IAEA in 2003 that it had conducted plutonium-separation experiments—an admission that contributed to suspicions that Iran could have a program to produce plutonium for nuclear weapons. The IAEA, however, continued to investigate the matter; then-IAEA Director-General ElBaradei reported in August 2007 that the agency had resolved its questions about Iran's plutonium activities. As noted above, Iran has said that it does not plan to engage in reprocessing, and IAEA Director-General Amano's November 2011 report described an \"absence of any indicators that Iran is currently considering reprocessing irradiated nuclear fuel to extract plutonium.\" Amano's November 2015 report states that the agency could \"confirm that there are no ongoing reprocessing related activities\" at the Iranian facilities to which the agency has access. The JCPOA prohibits Iran from reprocessing spent reactor fuel, except to produce \"radio-isotopes for medical and peaceful industrial purposes.\" The JCPOA text states that Iran \"does not intend\" to engage in reprocessing after the 15-year period expires and specifies Iran's intention to \"ship out all spent fuel for all future and present nuclear power and research reactors, for further treatment or disposition as provided for in relevant contracts to be concluded consistent with national laws with the recipient party.\" According to the IAEA, Iran has adhered to this requirement. Iran says that its reactor under construction at Arak is intended for the production of medical isotopes and various other purposes. According to a 2008 presentation by Ambassador Soltanieh, the reactor, which was originally designed to be moderated by heavy water, is to substitute for the \"outdated\" Tehran Research Reactor (TRR), which has been in operation since 1967. As noted, Iran subsequently decided to refuel the TRR. According to a 2012 AEOI report, the reactor has several objectives: a suitable replacement for the aging Tehran Research Reactor using local engineers and scientist [sic] with the least dependency to foreign countries; medical, industrial and research radioisotope production of [sic] the country; performing research in the fields of neutron physics, reactor chemistry, thermal-hydraulics, and health physics; obtaining technological and scientific experience in design and construction of nuclear reactors using local experts within the country; training of specialists in the nuclear field; and enhancing the technological levels of the local industries in design and manufacturing of various components such as reactor vessels, heat exchangers, pumps, etc. using nuclear standards. Iran told the IAEA in 2012 that the reactor was scheduled to begin operating during the second half of 2013. The project was about 75% complete as of July 2011. Iran suspended several aspects of the reactor's construction pursuant to the 2013 Joint Plan of Action. The originally designed Arak reactor was a proliferation concern because its spent fuel would have contained plutonium better suited for nuclear weapons than the plutonium produced by light-water moderated reactors, such as the TRR and Bushehr reactor. The original Arak reactor, if it had been completed, could have produced enough plutonium for between one and two nuclear weapons per year. In addition, Iran would have been able to operate the reactor with natural uranium and, therefore, would not have been dependent on supplies of enriched uranium. The JCPOA requires Tehran to render the Arak reactor's original core inoperable. Iran has met this requirement. The agreement also commits Tehran to redesign and rebuild the Arak reactor based on a design agreed to by the P5+1 so that the reactor will not produce weapons-grade plutonium. Tehran is \"trying to complete the project in five years,\" an AEOI spokesperson said in January 2016. AEOI President Salehi stated in September 2016 that China will supply the reactor's first fuel load \"in the next five-year time.\" Iran will subsequently produce the reactor fuel, he said. Iran is to export the spent fuel from this reactor and all other nuclear reactors. In addition, the JCPOA requires Iran to refrain from building heavy-water-moderated reactors for 15 years, and Tehran has pledged to refrain from constructing any such reactors indefinitely. According to IAEA reports and Iranian officials, Iran began to operate its heavy-water production plant located near Arak in August 2006. Reports from Amano since the start of JCPOA implementation indicate that the plant, which is to produce heavy water for the reactor and deuterated solvents, is operating. Pursuant to the JCPOA, Tehran has committed to refrain from accumulating heavy water \"beyond Iran's needs.\" Iran is to \"sell any remaining heavy water on the international market for 15 years.\" According to the agreement, these \"needs\" are 130 metric tons of \"nuclear grade heavy water or its equivalent in different enrichments\" prior to commissioning the redesigned Arak reactor and 90 metric tons after the reactor is commissioned. Iran's stock of heavy water has exceeded 130 metric tons on two occasions since the JCPOA began implementation. On February 17, 2016, the IAEA verified that Tehran's heavy-water stock had exceeded 130 metric tons; on November 8, 2016, the IAEA verified that Iran's stock of heavy water had again exceeded the JCPOA limit. Iran resolved the issue on both occasions by exporting the excess heavy water. Tehran sent this material to Russia and the United States, shipping at least some of it via Oman. Iran told the IAEA on June 18, 2017, that it had transferred 19.1 metric tons of heavy water to a destination outside the country. According to an April 2018 State Department report covering 2017, \"[m]ost Iranian excess heavy water has been sold and delivered to international buyers; the remainder is awaiting sale and is stored in a location outside Iran, under IAEA seal, though it remains Iranian property.\" Tehran has continued to ship heavy water outside Iran, according to the three most recent IAEA reports. the IAEA reported in August and November 2018. The IAEA verified on February 16, 2019, that Iran had 122.8 metric tons of heavy water. Iran is also operating a 1,000-megawatt nuclear power reactor, moderated by light water, near the city of Bushehr. The original German contractor, which began constructing the reactor in 1975, abandoned the project following Iran's 1979 revolution. Russia agreed in 1995 to complete the reactor, but the project subsequently encountered repeated delays; both Russian and Iranian officials attributed those delays to technical issues. In February 2005, Moscow and Tehran concluded an agreement stating that Russia would supply fuel for the reactor for 10 years. Atomstroyexport, a subsidiary of Rosatom, the Russian company, sent the first shipment of LEU fuel to Iran on December 16, 2007, and the reactor received the last shipment near the end of January 2008. The fuel, which is under IAEA seal, will contain no more than 3.62% uranium-235, according to an Atomstroyexport spokesperson. An August 2014 IAEA inspection revealed that the reactor \"was operating at 100% of its nominal power.\" Before 2002, the United States had previously urged Moscow to end the project, citing concerns that it could aid an Iranian nuclear weapons program by providing the country with access to nuclear technology and expertise. However, U.S. officials said in 2002 that Washington would drop these public objections if Russia took steps to mitigate the project's proliferation risks. The 2005 deal requires Iran to return the spent nuclear fuel to Russia. This measure is designed to ensure that Tehran will not separate plutonium from the spent fuel. Moscow argues that the reactor will not pose a proliferation risk because it will operate under IAEA safeguards. It is worth noting that light-water reactors are generally regarded as more proliferation-resistant than other types of reactors. Although the U.N. Security Council resolutions restricted the supply of nuclear-related goods to Iran, they did permit the export of nuclear equipment and fuel related to light-water reactors. Experts have expressed strong doubts regarding Iran's ability to produce fuel for the reactor. According to a July 2014 Iranian government report, Russia and Iran may renew the fuel supply agreement, but they are also \"engaged in negotiations ... to engage in cooperative arrangements for the domestic manufacturing of fuel for the facility after the expiration of the current contract.\" According to an interview published in April 2017, AEOI Deputy Director Pezhman Rahimian stated that the two governments had almost completed a \"road map\" for such manufacturing. AEOI President Salehi expressed \"hope\" in September 2018 that a second power reactor at the Bushehr plant \"will become operational in the next six years.\" A Rosatom official told the IAEA General Conference in September 2018 that \"[p]ractical work to build the second and third\" Bushehr power plant units \"has begun.\" Salehi told the same conference that \"the first concrete pouring\" for the second Bushehr reactor \"has been planned for the third quarter of 2019.\" Iran and Russia signed a contract in November 2014 for the construction of two additional light-water nuclear power reactors in Bushehr, according to Rosatom, the Russian company. The project's construction began in September 2016 and is expected to take 10 years to complete. Iran was \"negotiating with China for building two 100 megawatt power plants,\" Salehi stated in a July 2015 speech. Iran informed the IAEA in an October 2017 letter that Tehran had decided to \"design and construct a critical facility (Light Water Critical Reactor) … for research purposes in near future.\" Iran \"provided preliminary design information for the facility,\" which indicates that the reactor fuel is to contain \"up to 3.67%\" uranium-235. Iran intended its fuel manufacturing plant to produce fuel for the Arak and Darkhovin reactors. The plant started the process of producing fuel for the pre-JCPOA Arak reactor. Iran's Fuel Plate Fabrication Plant has produced fuel for the Tehran Research Reactor. Iran has a uranium mill and a uranium mine located at a site called Bandar Abbas, which is sometimes referred to as Gchine. Iran also has a uranium mine at a site called Saghand and an associated uranium mill called the Ardakan Yellowcake Production Plant. Salehi stated in a January 30, 2019, interview that Tehran plans to construct several more such mills. Iranian officials acknowledge that the country's uranium deposits are insufficient for its planned nuclear power program. These reserves are sufficient, however, to produce 250-300 nuclear weapons, according to a past U.S. estimate. Salehi indicated in February 2019 that Iran continues to explore for uranium. A number of governments employed sanctions and, apparently, sabotage to impede Iran's nuclear program. Iran has tried to improve its capabilities to produce materials and components for its centrifuge program, according to former IAEA Deputy Director General Olli Heinonen. Some Iranian officials have claimed that the country can manufacture centrifuges on its own. For example, then-Iranian Ambassador to the IAEA Ali Asghar Soltanieh said in 2012 that Iran \"has 'fully mastered' the nuclear energy technology and can produce all the 90 pieces of a centrifuge machine on its own and without foreign assistance.\" However, a 2014 U.N. Panel of Experts report observed that the \"quality of such [Iranian-produced] equipment is not known.\" Furthermore, other Iranian officials have suggested that Tehran is not yet able to produce all of the necessary centrifuge components. Then-President of Iran's Atomic Energy Organization Abbasi stated during a 2012 television broadcast that \"Iran could not claim that it did not need other countries\" for its enrichment program, adding that \"domestic production of all items was not economically viable.\" AEOI Director Salehi stated in 2014 that Iran was purchasing some items for its nuclear program \"from some developing and growing Eastern countries.\" Moreover, then-Principal Deputy Assistant Secretary of State for International Security and Nonproliferation Vann Van Diepen said that Iran in 2014 was still attempting to \"procure items\" for the nuclear program. Nevertheless, according to the 2014 Panel of Experts report, several governments told the panel that, since mid-2013, there had been a \"been a decrease in the number of detected [Iranian] attempts ... to procure items for prohibited programmes, and related seizures.\" A 2015 Panel of Experts report states that the panel had not \"identified cases of procurement for activities prohibited\" by Security Council resolutions in force at the time. No governments reported any such cases, the report adds. According to various sources, international sanctions made it difficult for Iran to obtain components and materials for its centrifuge program. For example, the U.N. Panel of Experts 2011 report stated that \"sanctions are constraining Iran's procurement of items related to prohibited nuclear and ballistic missile activity and thus slowing development of these programmes.\" Similarly, the 2012 U.N. Panel of Experts report observed that \"[s]anctions are slowing the procurement by the Islamic Republic of Iran of some critical items required for its prohibited nuclear programme.\" A June 2013 report suggested that this condition still existed, arguing that \"Iran's reliance on procurement abroad continues to provide the international community with opportunities to limit Iran's ability to maintain and expand certain activities.\" Then-UK Foreign Secretary William Hague wrote in 2013 that \"[w]e judge that sanctions have been effective in slowing the nuclear programme to some degree.\" U.S. officials have argued that the sanctions have impeded Iran's ability to acquire technology for its nuclear programs. Then-State Department Special Advisor for Nonproliferation and Arms Control Robert Einhorn told a Washington audience in 2011 that \"[w]e believe Iran has had difficulty in acquiring some key technologies and we judge this has had an effect of slowing some of its programs.\" Similarly, then-National Security Adviser Tom Donilon argued in 2011 that \"[s]anctions and export control efforts have made it more difficult and costly for Iran to acquire key materials and equipment for its enrichment program, including items that Iran can't produce itself.\" However, the extent to which sanctions slowed Tehran's program is unclear. Donilon also cited \"mistakes and difficulties in Iran\" as obstacles to the program's progress. Former IAEA Deputy Director General Heinonen stated that \"[w]e do not know\" whether Iran's delays in deploying advanced centrifuges are attributable to \"lack of raw materials or design problems,\" according to a 2012 press report. Furthermore, reports from the Office of the Director of National Intelligence covering 2009-2011 stated that \"some obstacles slowed\" the progress of Iran's nuclear program during those years, but the report did not name those obstacles. The extent to which alleged efforts by the United States and other governments, including Israel's, to sabotage Iran's centrifuge program have affected Tehran's nuclear program is unclear. The New York Times reported in 2009 that such efforts have included \"undermin[ing] electrical systems, computer systems and other networks on which Iran relies,\" according to unnamed senior U.S. and foreign government officials. One effort involved foreign intelligence services sabotaging \"individual power units that Iran bought in Turkey\" for Tehran's centrifuge program. \"A number of centrifuges blew up,\" according to the Times . Western governments have reportedly made other efforts to sabotage centrifuge components destined for Iran, according to some nongovernmental experts. Iranian officials have asserted that Western countries have tampered with components in transit to Iran's enrichment facilities, directly sabotaged those facilities, and conducted espionage in the country. In addition, New York Times reporter James Risen wrote in 2006 that, according to unnamed U.S. officials, the United States engaged in a covert operation to provide Iran with flawed blueprints for a device designed to trigger a nuclear explosion. The United States and Israel have also reportedly executed cyberattacks on Iran's nuclear facilities. Perhaps the best known of these used the Stuxnet computer worm, which was discovered in 2010 and probably developed by a government to attack Iran's enrichment facilities. Some governments have reportedly assassinated Iranians associated with Iran's nuclear program. The United States also may have obtained information from Iranian officials who defected as part of a CIA program to induce them to do so. Statements from the U.S. intelligence community indicate that Iran has the technical capability to produce nuclear weapons. For example, the 2007 National Intelligence Estimate (NIE) assessed that \"Iran has the scientific, technical and industrial capacity eventually to produce nuclear weapons if it decides to do so.\" More recently, then-Director of National Intelligence Clapper stated during a February 2016 Senate Armed Services Committee hearing that Iran \"does not face any insurmountable technical barriers to producing a nuclear weapon.\" Obtaining fissile material is widely regarded as the most difficult task in building nuclear weapons. As noted, Iran is enriching uranium, but whether and to what extent Tehran has taken the other steps necessary for producing a nuclear weapon is unclear. A 2008 report from former IAEA Director-General ElBaradei points out that the IAEA, with the exception of a document related to uranium metal, has \"no information ... on the actual design or manufacture by Iran\" of components, nuclear or otherwise, for nuclear weapons. However, according to IAEA Director-General Amano's November 2011 report, the IAEA has \"credible\" information that Iran has carried out activities \"relevant to the development of a nuclear explosive device.\" These include acquisition of \"nuclear weapons development information and documentation\" and work to develop \"an indigenous design of a nuclear weapon including the testing of components.\" Although some of these activities have civilian applications, \"others are specific to nuclear weapons,\" the report notes. Most of the report provides additional details about Iranian activities applicable to nuclear weapons development that were described in previous IAEA reports, although it does contain some previously unreported material. The program's purpose was \"to develop a nuclear warhead for the Shahab-3 missile,\" a senior Administration official stated during a November 8, 2011, briefing about Amano's November 2011 report. A 2012 Department of Defense report described Amano's report as containing \"extensive evidence of past and possibly ongoing Iranian nuclear weapons-related research and development work.\" (See Appendix E for more details about the IAEA's information regarding suspected military aspects of Iran's nuclear program.) Amano's November 2011 report states that, according to information available to the IAEA, Iranian activities related to building a nuclear explosive device \"took place under a structured programme\" prior to the end of 2003. That program, however, \"was stopped rather abruptly pursuant to a 'halt order' instruction issued in late 2003 by senior Iranian officials,\" the report says. The weapons-related activities were consolidated under the \"AMAD Plan\" and \"appear to have been conducted during 2002 and 2003.\" Nevertheless, \"[t]here are also indications that some activities relevant to the development of a nuclear explosive device continued after 2003, and that some may still be ongoing,\" according to the report. According to an August 2014 State Department announcement, Iran established the Organization of Defensive Innovation and Research (SPND), which \"is primarily responsible for research in the field of nuclear weapons development,\" in 2011. The SPND \"took over some of the activities related to Iran's undeclared nuclear program,\" the announcement said. According to a 2012 Israeli intelligence report, the SPND was established for the purposes of preserving the technological ability and the joint organizational framework of Iranian scientists in the area of R&D of nuclear weapons, and for the purposes of retaining the skills of the scientists. This is [to] allow renewal of the activity necessary to produce weapon immediately when the Iranian leadership decides to do so. This report also indicates that Iran had not restarted the nuclear weapons program. During an March 2019 press briefing, a senior U.S. official described the SPND as an organization, chunks of which seem to have been created precisely in order to employ people on dual-use things that could easily be repurposed into the very kind of work that was being done before on the weapons program and…in a sense, to keep their skills sharp and available to the Iranian clerical regime. Amano's December 2, 2015, report assesses that Iran conducted \"a range of activities relevant to the development of a nuclear explosive device ... prior to the end of 2003 as a coordinated effort,\" adding that \"some [nuclear weapons-related] activities took place after 2003,\" but \"were not part of a coordinated effort.\" The report concludes that \"these activities did not advance beyond feasibility and scientific studies, and the acquisition of certain relevant technical competencies and capabilities.\" The IAEA \"has no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009,\" the report explains. Iran presented a written assessment of Amano's report on January 7, 2016. The document apparently acknowledges Iranian \"scientific studies of dual-use technologies\" for \"peaceful civilian or conventional military uses,\" but also reiterated previous Iranian claims that the country has done no work on nuclear weapons and that some of the evidence underlying the agency's concerns is inauthentic. A May 1, 2018, IAEA statement reiterated the December 2015 report's conclusions following Israeli Prime Minister Benjamin Netanyahu's disclosure of documents concerning Iran's past nuclear weapons program, though the agency did not comment on the documents specifically. Similarly, Nicole Shampaine, the Chargé d'Affaires at the U.S. Mission to International Organizations in Vienna UNVIE, stated on June 5, 2018, that the Israeli disclosure \"further reaffirms\" the IAEA's December 2015 conclusion that Iran had conducted such research in the past. U.S. Ambassador Jackie Wolcott discussed the Israeli-disclosed documents in a March 2019 statement: The troubling question remains of why Iran sought to preserve this information and expertise. Iran's retention of the archive not only underscores the key weakness of the temporary restrictions in the JCPOA, but strikes at the heart of longstanding concerns that Iran continues to keep its nuclear options open. As we move forward, Iran must end its longstanding efforts to deny and conceal the reality of past nuclear weapons work. Our interest in resolving these issues is not to score political points, but to address critical verification issues with direct relevance to how we move forward. The facts of Iran's past nuclear weapons activities continue to have bearing on current questions about the possibility of undeclared nuclear material and activities in Iran. These issues must be addressed in a clear and straightforward manner, without further delay. The United States supports the IAEA's \"continued, careful assessment of the nuclear archive materials,\" Wolcott added. According to some nongovernmental organization reports, the IAEA has assessed that Iran \"has sufficient information to be able to design and produce a workable implosion nuclear device based upon HEU as the fission fuel.\" However, these reports cite information from an internal 2009 IAEA document that ElBaradei has described as a rolling text complied by the Agency's Department of Safeguards that included all the various pieces of information that had come in from different intelligence organizations, most of which IAEA inspectors had been unable to verify or authenticate ... by definition, it was a series of best guesses. The IAEA Deputy Director General for Safeguards at the time had neither \"assessed\" nor \"signed off on\" the document, ElBaradei added. For its part, the U.S. government has assessed that Iran has not mastered \"all the necessary technologies\" for building a nuclear weapon, a senior Administration official stated in November 2011. During the same briefing, a senior Administration official explained that \"the fact that some activities have apparently continued after the full-scale program was shut down in 2003 suggests that there's been some advancement\" in Iran's ability to develop nuclear weapons, but \"since it appears to be relatively uncoordinated and sporadic activity ... the advancement probably hasn't been that dramatic.\" Perhaps reinforcing this point, Director Clapper stated during the February 2012 Senate Armed Services Committee hearing that \"there are certain things\" that Iran has not yet done to develop a nuclear weapon, but he did not elaborate. Ambassador Stephen D. Mull, then-Coordinator for Implementation of the JCPOA, told a Washington audience on January 21, 2016, that \"there was a portion of the Iranian Government working in a very organized, systematic way to develop the capability to build a nuclear weapon. We don't know to the extent to which that knowledge has been tested or even survived.\" Amano's November 2011 report states that, according to a member of a \"clandestine nuclear supply network\" run by former Pakistani official Abdul Qadeer Khan, Iran \"had been provided with nuclear explosive design information.\" However, this information may not be sufficient to produce a nuclear weapon. Although Khan's network supplied Libya with \"documents related to the design and fabrication of a nuclear explosive device,\" according to the IAEA, these documents lacked \"important parts\" for making a nuclear weapon, according to ElBaradei. In addition to the documents supplied to Tripoli, members of the Khan network had computer files containing \"drawings for the components of two smaller, more advanced nuclear weapons.\" However, according to former IAEA Deputy Director-General Olli Heinonen, these \"detailed designs\" were not \"complete sets\" of weapons design information. Other members of the network could have possessed more complete nuclear weapons designs, he said. The JCPOA indefinitely prohibits specific activities \"which could contribute to the design and development of a nuclear explosive device.\" Neither Iran's comprehensive safeguards agreement nor its additional protocol explicitly prohibit these activities. As noted, the U.S. government assesses that Tehran has not mastered all of the necessary technologies for building a nuclear weapon. In addition, for 15 years Iran is to refrain from \"producing or acquiring plutonium or uranium metals or their alloys\" and \"conducting R&D on plutonium or uranium (or their alloys) metallurgy, or casting, forming, or machining plutonium or uranium metal.\" Producing uranium or plutonium metals is a key step in producing nuclear weapons. A senior intelligence official explained during a December 2007 press briefing that the \"acquisition of fissile material ... remains the governing element in any timelines\" regarding Iran's production of a \"nuclear device.\" The 2007 NIE argued that \"centrifuge enrichment is how Iran probably could first produce enough fissile material for a weapon\" and added that \"the earliest possible date Iran would be technically capable of producing enough HEU for a weapon is late 2009.\" However, it was \"very unlikely\" that Iran would attain such a capability by that date, the estimate says, adding that \"Iran probably would be technically capable of producing enough HEU for a weapon sometime during the 2010-2015 time frame.\" But the State Department Bureau for Intelligence and Research, the estimate says, judged that Tehran \"is unlikely to achieve this capability before 2013\" and all intelligence agencies recognized \"the possibility that this capability may not be attained until after 2015.\" The frequently-cited benchmark for determining the minimum sufficient amount of weapons-grade HEU for a nuclear weapon is 27.8 kilograms of uranium containing 90% uranium-235, but the amount assumed by U.S. government estimates is unclear. To produce its first nuclear weapon, Tehran would likely need to produce more uranium-235. According to a 2011 International Institute for Strategic Studies report, \"the fabrication of an initial bomb would involve an amount of unavoidable wastage.\" Then-Deputy Assistant Secretary of Defense Colin Kahl explained during a November 15, 2011, hearing that \"the time to actually complete a testable [Iranian nuclear] device could shrink over time.\" Then-Secretary of Defense Leon Panetta told 60 Minutes in 2012 that, if Iran were to decide to build a nuclear weapon, \"it would probably take them about a year to be able to produce a bomb and then possibly another one to two years in order to put it on a deliverable vehicle of some sort in order to deliver that weapon.\" Although, as noted, the United States estimated that Iran's Fordow enrichment facility \"would be capable of producing approximately one weapon's worth\" of HEU per year, whether and how that assessment factored into the U.S. timelines for Iranian nuclear weapons development is unclear. Then-Under Secretary of State for Political Affairs Wendy Sherman explained during an October 3, 2013, Senate Foreign Relations Committee hearing that Iran would need as much as one year to produce a nuclear weapon if the government made the decision to do so. At the time, Tehran would have needed two to three months to produce enough weapons-grade HEU for a nuclear weapon. Iran's December 28, 2015, JCPOA-mandated shipment of LEU to Russia lengthened this time to one year, according to February 9, 2016, congressional testimony from then-Director of National Intelligence Clapper. Current Director of National Intelligence Daniel Coats reiterated this assessment in several congressional hearings. A senior U.S. official followed suit in a March 2019 press briefing. The U.S. estimates described above apparently assume that Iran would use its declared nuclear facilities to produce fissile material for a weapon. However, the 2007 NIE states that Iran \"probably would use covert facilities—rather than its declared nuclear sites—for the production of highly enriched uranium for a weapon.\" Similarly, a CIA report covering 2004 concluded that \"inspections and safeguards will most likely prevent Tehran from using facilities declared to the IAEA directly for its weapons program as long as Iran remains a party to the NPT.\" Director Clapper echoed this assessment in a March 2015 interview. Iran would probably prefer to avoid using its safeguarded facilities, partly because the IAEA would likely detect an Iranian attempt to use them for producing weapons-grade HEU. According to former Deputy Assistant Secretary Kahl, Tehran \"is unlikely to dash for a bomb in the near future because IAEA inspectors would probably detect Iranian efforts to divert low-enriched uranium and enrich it to weapons-grade level at declared facilities.\" Similarly, then-Deputy Assistant Secretary of Defense for Media Operations John Kirby told reporters on December 21, 2011, that were Iran to begin producing a nuclear weapon, IAEA inspectors would likely give sufficient warning for the United States to take action. Former IAEA Deputy Director-General Heinonen observed in 2010 that Iran would probably be caught if it attempted to divert more than \"small quantities\" of nuclear material from its safeguarded nuclear facilities. It would be extremely difficult to reconfigure the cascades in the Natanz facility without detection and, in any case, IAEA inspectors measure the isotopic content of enriched uranium and would thereby detect Iranian production of weapons-grade HEU. More recently, Clapper testified that the JCPOA has also enhanced the transparency of Iran's nuclear activities ... [a]s a result, the international community is well postured to quickly detect changes to Iran's declared nuclear facilities designed to shorten the time Iran would need to produce fissile material. Although Iran could eject IAEA inspectors and/or withdraw from the NPT, such a move would be \"an incredibly provocative action and very risky for Iran to undertake,\" then-Department of State Special Advisor Einhorn argued in 2011, adding that Iran was unlikely to take such a risk because its operating first-generation centrifuges are inefficient. It is worth noting that such an action would be virtually unprecedented. A senior intelligence official explained in December 2007 that Iran could use knowledge gained from its Natanz facilities at covert enrichment facilities. According to the NIE, a \"growing amount of intelligence indicates Iran was engaged in covert uranium conversion and uranium enrichment activity,\" but Tehran probably stopped those efforts in 2003. U.S. officials have argued that Iran currently does not appear to have any nuclear facilities unknown to the United States. Then- CIA Director John Brennan stated during a March 2015 interview that the United States has \"a good understanding of what the Iranian nuclear program entails.\" During a July 31 , 2015, press briefing about possible Iranian undeclared nuclear facilities, U.S. Secretary of Energy Ernest Moniz stated that \"we feel pretty confident that we know their current configuration.\" U.S. officials have express ed confidence in the ability of U.S. intelligence to detect Iranian covert nuclear facilities . In addition to the possible nuclear weapons-related activities discussed above, Iran has continued to develop ballistic missiles, which could potentially be used to deliver nuclear weapons. It is worth noting, however, that then-Director of National Intelligence Dennis Blair indicated during a 2009 Senate Armed Services Committee hearing that Iran's missile developments do not necessarily indicate that the government is also pursuing nuclear weapons, explaining that \"I don't think those missile developments ... prejudice the nuclear weapons decision one way or another. I believe those are separate decisions.\" Iran is developing missiles and space launch vehicles \"for multiple purposes,\" he added. Similarly, in a June 2015 statement to Parliament, British Foreign and Commonwealth Office official Tobias Ellwood stated that \"we are not aware of any current links between Iran's ballistic missile programme and nuclear programme.\" In any case, Tehran's nuclear program raised concerns for various other reasons. First, Iran was secretive about the program. For example, Tehran hindered the IAEA investigation by failing to disclose numerous nuclear activities, destroying evidence, and making false statements to the agency. Moreover, although Iran's cooperation with the agency improved, the IAEA still repeatedly criticized Tehran for failing to cooperate fully with the agency's investigation of certain issues concerning Iran's nuclear program. Second, many observers have questioned Iran's need for nuclear power, given the country's extensive oil and gas reserves. The fact that Tehran resumed its nuclear program during its 1980-1988 war with Iraq has also cast doubt on the energy rationale. Furthermore, many countries with nuclear power reactors purchase nuclear fuel from foreign suppliers—indeed, Russia has provided fuel for the Bushehr reactor—a fact that calls into question Iran's need for an indigenous enrichment capability. Moreover, Iranian officials acknowledge that Iran lacks sufficient uranium deposits for its planned nuclear power program. Some government officials have expressed skepticism regarding Iran's stated rationale for its Arak reactor. Tehran says that the reactor is necessary to produce medical isotopes and to replace the Tehran Research Reactor (TRR). However, the TRR is capable of producing such isotopes and has unused capacity. Furthermore, as noted, Iran expressed the desire to obtain more fuel for the TRR. In addition, nonproliferation experts have argued that a new heavy-water reactor would be unnecessary for producing such isotopes. As noted, Iran has rendered the Arak reactor's original core inoperable pursuant to the JCPOA, which also commits Tehran to redesign and rebuild the reactor based on a design agreed to by the P5+1. Iran has maintained that its nuclear program has always been exclusively for peaceful purposes. As noted, the Iranian government says that it plans to expand its reliance on nuclear power in order to generate electricity. Indeed, some experts have documented Tehran's projected difficulty in exporting oil and natural gas without additional foreign investment in its energy infrastructure. Iran has argued that its covert nuclear procurement efforts were necessary to counter Western efforts to deny it nuclear technology—a claim that appears to be supported by a 1997 CIA report. Tehran argues that it cannot depend on foreign suppliers for such fuel because such suppliers have been unreliable in the past. At least one expert has described Iran's inability to obtain nuclear fuel from an international enrichment consortium called Eurodif. During the 1970s, Iran had reached an agreement with Eurodif that entitled Iran to enriched uranium from the consortium in exchange for a loan. Former AEOI President Aghazadeh also argued that although Iran does not need to produce fuel for the Bushehr reactor, the government needed to complete the Natanz facility to provide fuel for the planned Darkhovin reactor. Other factors also suggest that Iran may not have had an active nuclear weapons program after 2003. First, as noted, the IAEA has resolved the outstanding issues described in the August 2007 Iran-IAEA work plan, and the agency has not discovered significant undeclared Iranian nuclear activities for a number of years. Second, Tehran, beginning in 2003, has been willing to disclose previously undeclared nuclear activities to the IAEA. Third, Iran made important changes to the administration of its nuclear program in the second half of 2003—changes that produced greater openness with the IAEA and may have indicated a decision to stop a nuclear weapons program. Fourth, as noted above, Iranian officials have stated numerous times that Tehran is not seeking nuclear weapons, partly for religious reasons—indeed, Khamene'i has issued a fatwa declaring that \"the production, stockpiling, and use of nuclear weapons are forbidden under Islam,\" according to Iranian officials. A change in this stance could damage Iranian religious leaders' credibility. In 2013, an Iranian Foreign Ministry spokesperson described the fatwa as the \"operational instruction\" for Iran's government. A senior Iranian official stated in February 2019 that \"according to the fatwa (religious verdict) of Ayatollah Khamenei, which is based on the hadith of the Prophet, Iran has no intention to make an atomic bomb.\" Mark Fitzpatrick of the International Institute for Strategic Studies has argued that \"given the pervasive religiosity of the regime, it is unlikely that Iran's supreme leader would be secretly endorsing military activity in explicit contradiction of his own religious edict.\" Fifth, Iranian officials argued that nuclear weapons would not improve the country's security, arguing that Iran would not be able to compete with the nuclear arsenals of larger countries, such as the United States. Moreover, the Iranian government has asserted that \"Iran today is the strongest country in its immediate neighborhood. It does not need nuclear weapons to protect its regional interests.\" The U.S.-led spring 2003 invasion of Iraq, which overthrew Iraqi leader Saddam Hussein and thereby eliminated a key rival of Iran, may also have induced Tehran to decide that it did not need nuclear weapons. The government has also argued that a nuclear weapons program \"would be prohibitively expensive, draining the limited economic resources of the country.\" In any case, since Iran has implemented its JCPOA commitments, which, as noted, include significant limits on Iran's nuclear program and transparency requirements with respect to that program, U.S. officials have argued that the Iranian nuclear program poses a less severe proliferation threat. For example, then-Secretary of Defense Ashton Carter testified in March 2016 that the agreement \"places significant limitations on Iran that will effectively cut off its pathways to the fissile material for a nuclear bomb.\" Since at least 2007, the U.S. intelligence community has issued unclassified assessments that Iran has not decided whether to develop nuclear weapons. According to the 2007 NIE, \"Iranian military entities were working under government direction to develop nuclear weapons\" until fall 2003, after which Iran halted its nuclear weapons program \"primarily in response to international pressure.\" The NIE defines \"nuclear weapons program\" as \"Iran's nuclear weapon design and weaponization work and covert uranium conversion-related and uranium enrichment-related work.\" The NIE adds that the intelligence community also assessed \"with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons.\" The NIE also states that, because of \"intelligence gaps,\" the Department of Energy and the National Intelligence Council assessed \"with only moderate confidence that the halt to those activities represents a halt to Iran's entire nuclear weapons program.\" The NIE added that \"[s]ince fall 2003, Iran has been conducting research and development projects with commercial and conventional military applications—some of which would also be of limited use for nuclear weapons.\" The NIE also states that \"Tehran's decision to halt its nuclear weapons program suggests it is less determined to develop nuclear weapons than we have been judging since 2005.\" The change in assessments, a senior intelligence official said in December 2007, was the result of \"new information which caused us to challenge our assessments in their own right, and illuminated previous information for us to be able to see it perhaps differently than we saw before, or to make sense of other data points that didn't seem to self-connect previously.\" According to press accounts, this information included various written and oral communications among Iranian officials indicating that the program had been halted. As noted, the United States may also have obtained information from Iranian officials who defected as part of a CIA program to induce them to do so, as well as from penetration of Iran's computer networks. In addition, the NIE incorporated open-source information, such as photographs of the Natanz facility that became available after members of the press toured the facility. According to the 2007 NIE, the intelligence community assessed \"with moderate-to-high confidence that Iran [did] not have a nuclear weapon.\" The community assessed \"with low confidence that Iran probably [had] imported at least some weapons-usable fissile material,\" but still judged \"with moderate-to-high confidence\" that Tehran still lacked sufficient fissile material for a nuclear weapon. On several occasions, the U.S. intelligence community has reaffirmed the 2007 NIE's assessment that Iran halted its nuclear weapons program but is keeping its options open. The late-September 2009 revelation of the Fordow facility increased suspicions that Iran may have restarted its nuclear weapons program. As noted, some U.S. officials indicated that the facility was likely intended for a nuclear weapons program. Nevertheless, Administration talking points made public on September 25, 2009, stated that the intelligence community still assessed that \"Iran halted its nuclear weapons program in 2003.\" More recently, then-Director of National Intelligence Clapper testified in February 2016 that [w]e continue to assess that Iran's overarching strategic goals of enhancing its security, prestige, and regional influence have led it to pursue capabilities to meet its nuclear energy and technology goals and give it the ability to build missile-deliverable nuclear weapons, if it chooses to do so. Its pursuit of these goals will dictate its level of adherence to the JCPOA over time. We do not know whether Iran will eventually decide to build nuclear weapons.\" Director of National Intelligence Coats reiterated the last sentence in May 2017 testimony. He testified in January 2019 that the U.S. intelligence community \"continue[s] to assess that Iran is not currently undertaking the key nuclear weapons-development activities we judge necessary to produce a nuclear device.\" Additional recent statements from U.S. officials indicate that Iran has not resumed its nuclear weapons program. Any decision to produce nuclear weapons \"will be made by the Supreme Leader,\" Clapper stated in April 2013. The November 2011 report from IAEA Director-General Amano appears to support the U.S. assessment. As noted, the report states that Iranian activities related to building a nuclear explosive device \"took place under a structured programme,\" but senior Iranian officials ordered a halt to the program in late 2003. Echoing the judgment of the 2007 NIE, Amano's report mentions \"indications that some activities relevant to the development of a nuclear explosive device continued after 2003,\" adding that some such activities \"may still be ongoing.\" Most of the activities listed in the report occurred before the end of 2003. During a briefing about Amano's report, a senior Administration official described Iran's post-2003 weapons-related work as \"a much less coordinated ... more sporadic set of research activities,\" some of which \"are sort of related to nuclear weapons development.\" As noted, an April 2012 Department of Defense report described Amano's report as containing \"extensive evidence of past and possibly ongoing Iranian nuclear weapons-related research and development work.\" Amano's December 2, 2015, report assesses that \"before the end of 2003, an organizational structure was in place in Iran suitable for the coordination of a range of activities relevant to the development of a nuclear explosive device.\" S ome Iranian nuclear weapons-related activities \" took place after 2003,\" the report adds, noting that these activities \"were n ot part of a coordinated effort. \" The IAEA \"has no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009,\" the report explains. (See also \" Nuclear Weapon Development Capabilities .\") Some foreign intelligence agencies have apparently concurred with the U.S. assessment that Iran has not yet decided to build nuclear weapons. Director of the French General Directorate of External Security Erard Corbin de Mangoux stated in an interview published in 2010 that \"[w]e do not yet know whether Tehran's objective is to enable itself to acquire such a capability (so-called 'threshold status') or actually to possess it.\" In 2012, Israeli Foreign Minister Avigdor Lieberman appeared to confirm reports that Israeli intelligence shares this U.S. assessment. Moreover, according to a 2012 Israeli intelligence report, \"until 2003,\" Iran had a \"set nuclear program ... for R&D of nuclear weapons.\" However, the report indicates that Iran had not restarted the nuclear weapons program. German intelligence assessments have also reportedly concurred with this assessment. It is worth noting that the February 2018 Nuclear Posture Review asserts that \"Iran's development of increasingly long-range ballistic missile capabilities, and its aggressive strategy and activities to destabilize neighboring governments, raises questions about its long-term commitment to foregoing nuclear weapons capability.\" National Security Adviser John Bolton stated during a January 6, 2019, press conference that \"we have little doubt that Iran's leadership is still strategically committed to achieving deliverable nuclear weapons.\" Other findings of the NIE indicate that the international community may, for the foreseeable future, have to accept some risk that Iran will develop nuclear weapons. According to the 2007 NIE, \"only an Iranian political decision to abandon a nuclear weapons objective would plausibly keep Iran from eventually producing nuclear weapons—and such a decision is inherently reversible.\" As noted, the U.S. intelligence community assesses that Iran has the capacity to produce nuclear weapons at some point. This is not to say that an Iranian nuclear weapons capability is inevitable. As noted above, Iran does not yet have such a capability. But Tehran adherence to the JCPOA is probably necessary to provide the international community with confidence that it is not pursuing a nuclear weapon. The production of fissile material is widely considered the most difficult step in nuclear weapons development. However, even if it had the ability to produce weapons-grade HEU, Iran would still face challenges in producing nuclear weapons, such as developing a workable physics package and effective delivery vehicles. A 1978 CIA report points out that there is a great difference between the development and testing of a simple nuclear device and the development of a nuclear weapons system, which would include both relatively sophisticated nuclear designs and an appropriate delivery system. Moreover, Iran would face significant challenges if it were to attempt to develop and produce HEU-based nuclear weapons covertly; although, as noted, covert production would probably be Tehran's preferred option. Covert centrifuge facilities are notoriously difficult for intelligence agencies to detect, but Iran may not be able to complete a covert centrifuge facility without detection. A 2005 International Institute for Strategic Studies report concluded that \"an Iranian planner would have little basis for confidence that significant nuclear facilities could be kept hidden.\" Tehran would need to hide a number of activities, including uranium conversion, the movement of uranium from mines, and the movement of centrifuge feedstock. Alternatively, Iran could import uranium ore or centrifuge feedstock, but the government would also need to do so covertly. Tehran's implementation of the JCOA has further decreased the probability that the government could successfully conceal a nuclear weapons program. The difficulty of the above task becomes clearer when one considers that foreign intelligence agencies apparently possess a significant amount of information about the Iran's enrichment program. First, both the Natanz and Fordow facilities were discovered by foreign governments before they became operational. Second, the development of the Stuxnet computer worm, discussed above, indicates that at least one foreign government possesses a large amount of information about Iran's centrifuge program, which could not have been obtained via IAEA reporting, according to some experts. As noted, U.S. officials have express ed confidence in the ability of U.S. intelligence to detect Iranian covert nuclear facilities . It is worth noting that, without conducting explosive nuclear tests, Iran could produce only fairly simple nuclear weapons, which are not deliverable by longer-range missiles. Such tests, many analysts argue, would likely be detected. Francois Geleznikoff, director of military applications at Le Commissariat à L'Energie Atomique et aux Énergies Alternative in France, described during a 2018 National Assembly hearing his directorate's monitoring of Iran's and North Korea's nuclear programs: This monitoring depends primarily on the detection of any nuclear tests that they may carry out. Thanks to the international detection system established by the Comprehensive Nuclear Test Ban Treaty, in which France participates actively, and thanks to our own analysis, we are able to alert the French authorities within 30 minutes of a North Korean test, and the same would apply in the event of an Iranian test, for instance. Moreover, moving from the production of a simple nuclear weapon to more sophisticated nuclear weapons could take several additional years. Appendix A. Iranian Statements on Nuclear Weapons Iranian officials have repeatedly asserted that the country's nuclear program is exclusively for peaceful purposes. For example, Supreme Leader Ayatollah Ali Khamene'i declared during a June 3, 2008, speech that Iran is opposed to nuclear weapons \"based on religious and Islamic beliefs as well as based on logic and wisdom.\" He added, \"Nuclear weapons have no benefit but high costs to manufacture and keep them. Nuclear weapons do not bring power to a nation because they are not applicable. Nuclear weapons cannot be used.\" Similarly, then-Iranian Foreign Ministry spokesperson Hassan Qashqai stated on November 10, 2008, that \"pursuance of nuclear weapons has no place in the country's defense doctrine.\" Khamene'i stated in 2012 that Ideologically and religiously speaking, we believe that it is not right [to have nuclear weapons]. We believe that this move [making nuclear weapons] and the use of such weapons are a great sin. We also believe that stockpiling such weapons is futile, expensive and harmful; and we would never seek this. Asked in 2012 if Iran is trying to develop the capability to produce a nuclear weapon, Ambassador Mohammad Chasee, Iran's Permanent Representative to the United Nations, stated that \"[w]e are not going to develop the capacity to be able to make any weapon of mass destruction.\" Iranian Foreign Minister Javad Zarif argued in 2014 that Khamene'i \"has explicitly declared his opposition with regard to the manufacture, stockpile and use of nuclear weapons,\" and observed that \"nuclear weapons have no place in Iran's defense doctrine.\" More recently, President Hassan Rouhani stated in 2018 that \"we are not thinking about developing nuclear weapons, nor will we think about it. The Supreme Leader [Ali Khamenei] has banned it and said that it is not appropriate.\" Appendix B. Organization of Iran's Nuclear Program The Atomic Energy Organization of Iran (AEOI), which the government established in 1974, operates Iran's declared nuclear program and has a variety of peaceful programs in areas such as agriculture, medicine, and basic nuclear research and development. According to the U.S. Department of the Treasury, the AEOI \"has operational and regulatory control over Iran's nuclear program,\" \"reports directly to the Iranian President,\" and is the \"main Iranian organization responsible for research and development activities in the field of nuclear technology.\" Iran's Minister of Science, Research and Technology stated in January 2019 that \"the AEOI acts upon decisions made by the country's Supreme National Security Council.\" The AEOI has been Tehran's main interlocutor with the IAEA. According to an August 2008 Institute for Science and International Security (ISIS) report, the AEOI controls the country's centrifuge program, but that program is operated by an AEOI entity called the Kalaye Electric Company. AEOI officials have told the IAEA that Iran decided to begin its centrifuge enrichment program in 1985. The program consisted of three phases: activities during the first phase, from 1985 until 1997, had been located mainly at the AEOI premises in Tehran; during the second phase, between 1997 and 2002, the activities had been concentrated at the Kalaye Electric Company in Tehran; during the third phase, 2002 to the present, the R&D and assembly activities were moved to Natanz. Gholamreza Aghazadeh's term as AEOI president, which began in 1997, marked an acceleration of Iran's enrichment program. According to President Hassan Rouhani, who headed the 2003-2005 negotiations concerning the nuclear program, the government in 1998 formed the Supreme Council for New Technologies, chaired by then-President Mohammad Khatami, which focused on the nuclear program. Beginning around 1999, Iran's central government gave the AEOI \"authorities that it did not have before,\" Rouhani stated in a 2004 speech, explaining that we gave the agency a freer hand with new credits and a more liberal spending procedure, new facilities, and special regulations. This allowed them to become more active, without being forced to go through bureaucratic and regulatory labyrinths. Nuclear Weapons Program Beginning in the late 1980s, Iran's nuclear weapons program was coordinated by entities connected with Iran's Ministry of Defense Armed Forces Logistics (MODAFL). The AMAD Plan took over these activities several years later; the projects were \"allegedly managed through the 'Orchid Office.'\" After Iran ended the nuclear weapons program in 2003, \"staff remained in place to record and document the achievements of their respective projects,\" according to information provided to the IAEA by unnamed governments. Later, \"equipment and work places were either cleaned or disposed of so that there would be little to identify the sensitive nature of the work which had been undertaken.\" Tehran established an organization called the Organization of Defensive Innovation and Research (SPND) in 2011 by an individual who had \"managed activities useful in the development of a nuclear explosive device\" as part of the Amad Plan and associated entities. The SPND \"is completely separate from Iran's civil nuclear program,\" a senior U.S. official explained during a March 2019 press briefing. According to a 2012 Israeli intelligence document, Iran established the SPND \"for the purposes of preserving the technological ability and the joint organizational framework of Iranian scientists in the area of R&D in nuclear weapons, and for the purposes of retaining the skills of the scientists.\" These activities were to \"allow renewal of the activity necessary to produce weapons immediately when the Iranian leadership decides to do so.\" During an March 2019 press briefing, a senior U.S. official described the SPND as an organization, chunks of which seem to have been created precisely in order to employ people on dual-use things that could easily be repurposed into the very kind of work that was being done before on the weapons program and … in a sense, to keep their skills sharp and available to the Iranian clerical regime. Nevertheless, the IAEA reported in December 2015 that, despite the SPND's establishment in 2011, the post-2003 activities \"were not part of a coordinated effort\" and the agency \"has no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009.\" (For more details, see Appendix E .) The AEOI had links with some entities that were apparently connected to the Amad Plan. For example, a company called Kimia Maadan \"was a cover company for chemical engineering operations under the AMAD Plan while also being used to help with procurement for the [AEOI].\" The organization contracted with the same company to design and build the Gchine mill. Furthermore, Tehran's AEOI-run centrifuge program had connections to entities controlled by Iran's MODAFL, which controlled the Amad Plan. For example, Iran fabricated some components for its second-generation centrifuge in a workshop located on a site belonging to Iran's Defence Industries Organization, which was part of MODAFL. Nevertheless, several factors indicate that the AEOI's illicit nuclear activities were not necessarily part of the nuclear weapons program. First, the NIE appeared to exclude the AEOI-run enrichment program. Explaining that the U.S. intelligence community defined the weapons activities as \"nuclear weapon design and weaponization work and covert uranium conversion-related and uranium enrichment-related work,\" the estimate added that \"Iran's declared civil work related to uranium conversion and enrichment\" was not part of the weapons program. Moreover, a November 2011 IAEA description of the suspected past nuclear weapons program's management structure omits the AEOI. Lastly, September 2009 U.S. intelligence community talking points regarding the September 2009 joint British, French, and U.S. revelation of Iran's Fordow centrifuge facility state that the plant's existence did \"not contradict\" the 2007 NIE's conclusions regarding Iran's nuclear weapons program. One reason for this assessment, the talking points suggest, was that the Fordow facility was developed by the AEOI. U.S. and British officials have stated that Iranian missile development is not currently linked to the nuclear program. Iran's MODAFL oversees Iran's ballistic missile program. The Aerospace Industries Organization, a MODAFL subsidiary, oversees the country's missile production. Although some Islamic Revolutionary Guard Corps (IRGC) entities are associated with MODAFL and the IRGC Air Force operates Iran's ballistic missiles, these entities do not appear to be associated with the AEOI. A State Department official explained in October 2016 that the IRGC \"was not responsible for\" activities related to the possible military dimensions of Iran's nuclear program. Appendix C. Multilateral Diplomacy Concerning Iran's Nuclear Program In fall 2002, the IAEA began to investigate Iran's nuclear activities at Natanz and Arak. Inspectors visited the sites the following February. The IAEA board adopted its first resolution, which called on Tehran to increase its cooperation with the agency's investigation and to suspend its uranium enrichment activities, in September 2003. The next month, Iran concluded an agreement with France, Germany, and the United Kingdom, collectively known as the \"E3,\" to suspend its enrichment activities, sign and implement an Additional Protocol to its IAEA safeguards agreement, and comply fully with the IAEA's investigation. As a result, the IAEA board decided to refrain from referring the matter to the U.N. Security Council, despite U.S. advocacy for such a referral. Statements from current and former Iranian officials indicate that during fall 2003, Tehran feared that the United States might use Security Council referral as a means to undertake military action or other coercive measures against Iran. The IAEA's investigation, as well as information Tehran provided after the October 2003 agreement, ultimately revealed that Iran had engaged in a variety of clandestine nuclear-related activities, some of which violated Iran's safeguards agreement. These included plutonium separation experiments, uranium enrichment and conversion experiments, and importing various uranium compounds. After October 2003, Iran continued some of its enrichment-related activities, but Tehran and the E3 agreed in November 2004 to a more detailed suspension agreement. During negotiations between fall 2003 and summer 2005, both Iran and the E3 offered a number of proposals, although the two sides never reached agreement. According to one former British official involved in the negotiations, a chief obstacle was E3 opposition to a 2005 Iranian proposal that would have included a limited Iranian enrichment program. A former Iranian official argued that the perceived lack of success of Iranian officials who had participated in negotiations with the E3 discredited those officials in the eyes of other Iranian officials. The United States influenced several aspects of the E3 negotiations during this time. For example, the George W. Bush Administration opposed an E3 request to ease sanctions on certain U.S. goods. The United States also persuaded the E3 to refrain from agreeing to any arrangement with Iran that included even a limited Iranian enrichment program, according to accounts from E3 officials directly involved in the diplomacy. Former President George W. Bush has written that the United States' \"ultimate goal\" was \"stopping Iranian enrichment.\" Iran resumed uranium conversion in August 2005 under the leadership of President Mahmoud Ahmadinejad, who had been elected two months earlier. On September 24, 2005, the IAEA Board of Governors adopted a resolution that, for the first time, found Iran to be in noncompliance with its IAEA safeguards agreement. The board, however, did not refer Iran to the Security Council, choosing instead to give Tehran additional time to comply with the board's demands. Iran announced in January 2006 that it would resume research and development on its centrifuges at Natanz. In response, the IAEA board adopted a resolution on February 4, 2006, that referred the matter to the Security Council. Two days later, Tehran announced that it would stop implementing its Additional Protocol. In June 2006, China, France, Germany, Russia, the United Kingdom, and the United States, collectively known as the \"P5+1,\" presented a proposal to Iran that offered a variety of incentives in return for Tehran taking several steps to assuage international concerns about its enrichment and heavy-water programs. The proposal called on the government to address the IAEA's \"outstanding concerns ... through full cooperation\" with the agency's ongoing investigation of Tehran's nuclear programs, to \"suspend all enrichment-related and reprocessing activities,\" and to resume implementing its Additional Protocol. Then-European Union High Representative for Common Foreign and Security Policy Javier Solana presented a revised version of the 2006 offer to Iran in June 2008. P5+1 representatives discussed the new proposal with Iranian officials the next month. Iran provided a follow-up response in August 2008, but the six countries deemed it unsatisfactory. Tehran told the IAEA that it would implement its Additional Protocol \"if the nuclear file\" were \"returned from the Security Council\" to the agency. It is not clear that the council could have met this condition. The 2006 offer's requirements were also included in several U.N. Security Council resolutions, including Resolution 1929, which was adopted on June 9, 2010. Iran issued another proposal in early September 2009, which described a number of economic and security issues as potential topics for discussion but only obliquely mentioned nuclear issues and did not explicitly mention Iran's nuclear program. Tehran Research Reactor Discussions After an October 1, 2009, meeting in Geneva with the P5+1 and High Representative Solana, Iranian officials repeatedly stated that Tehran wanted future discussions about its September 2009 proposal. Nevertheless, during that meeting, Iranian officials agreed in principle to a proposal that would provide LEU fuel containing about 20% uranium-235 for Iran's U.S.-supplied Tehran Research Reactor (TRR), which produces medical isotopes and operates under IAEA safeguards. Iran asked the IAEA in a June 2, 2009, letter to provide fresh fuel for its U.S-supplied TRR. Initially fueled by U.S.-supplied HEU, the reactor was converted to use LEU fuel in 1994 after Argentina in 1987 agreed to supply the reactor with such fuel, which contained about 20% uranium-235. Subsequent to Iran's June 2009 request, the United States and Russia presented a proposal to the IAEA (which the agency conveyed to Iran) for providing fuel for the reactor. According to the proposal, Iran would have transferred approximately 1,200 kilograms of its low-enriched uranium hexafluoride to Russia, which would have either enriched the uranium to about 20% uranium-235 or produced such LEU from Russian-origin uranium. Moscow would then have transferred the low-enriched uranium hexafluoride to France for fabrication into fuel assemblies. Finally, Paris would have transferred the assemblies to Russia for shipment to Iran. France would have delivered the fuel within about one year. As of October 30, 2009, Iran had produced 1,763 kilograms of low-enriched uranium hexafluoride containing less than 5% uranium-235. Beginning on October 19, 2009, Iranian officials met with officials from the IAEA, France, Russia, and the United States to discuss details of implementing the proposal, such as the fuel price, contract elements, and a timetable for shipping the fuel. Two days later, then-IAEA Director-General Mohamed ElBaradei announced the conclusion of a \"draft agreement,\" which was drafted by the IAEA. Iran, France, Russia, and the United States held further discussions regarding the proposal's implementation, but they did not reach agreement with Tehran. Iran resisted transferring all 1,200 kilograms of low-enriched uranium hexafluoride out of the country before receiving the reactor fuel, arguing that the proposal needed more credible assurances that the fuel would actually be delivered. During the last few months of 2009, Iranian officials suggested different compromises, such as shipping its low-enriched uranium hexafluoride out of the country in phases or simultaneously exchanging that material for the TRR fuel on an Iranian island or in a third country, but these proposals were not accepted by the United States, France, and Russia. Further details about the French, Russian, and U.S. proposals later became public. For example, the IAEA had agreed to take formal custody of any Iranian low-enriched uranium hexafluoride transferred pursuant to a TRR agreement. In addition, France, Russia, and the United States had agreed to a \"legally binding Project and Supply Agreement\"; agreed to \"support technical assistance through the IAEA to ensure\" that the TRR would operate safely; and expressed support for allowing Iran to transfer its low-enriched uranium hexafluoride to a third country, which would hold that material in escrow until the TRR fuel was fabricated. The United States also offered \"substantial political assurances that the agreement would be fulfilled.\" An April 20, 2010, letter from then-President Obama to then-President Brazilian President Luis Inácio Lula da Silva stated that the United States had expressed its willingness to \"potentially even play a more direct role in the fuel production process,\" but did not elaborate. The October 2009 IAEA draft did not include an explicit prohibition on Iranian production of uranium enriched to about 20% uranium-235. Instead, the agreement's proponents argued that the supply of fuel for the TRR would obviate the need for Tehran to produce the fuel on its own. The escrow proposal described in the previous paragraph was not contained in the October 2009 IAEA draft. Whether the other provisions described above were explicitly contained in that draft is unclear because no public official copy of it exists. Following a November 20, 2009, meeting, the P5+1 issued a joint statement expressing disappointment with Tehran's failure to respond positively to the TRR proposal. \"We have agreed to remain in contact and expect a further meeting soon to complete our assessment of the situation and to decide on our next steps,\" the statement said. Although some subsequent Iranian statements suggested that Iran was still open to some version of the IAEA proposal, Tehran never officially accepted it. Following a May 17, 2010, meeting of Iranian President Ahmadinejad, Turkish Prime Minister Recep Tayyip Erdogan, and Brazilian President Lula, Iran accepted a proposal, known as the Tehran Declaration, for supplying the TRR with fuel. Iran conveyed its acceptance of the declaration in a May 24, 2010, letter to the IAEA. The Tehran Declaration contained some of the same elements as the October 2009 IAEA draft proposal and other elements described in a February 12, 2010, letter to the IAEA. For example, the declaration stated that Iran would be willing to \"deposit\" 1,200 kilograms of LEU in Turkey. Iran would deposit the fuel, which would be subject to IAEA monitoring in Turkey, \"not later than one month\" after reaching an agreement regarding the details of the exchange with France, Russia, the United States, and the IAEA. However, unlike the IAEA draft proposal, the declaration did not mention an ultimate destination for the LEU to be deposited in Turkey. As noted, Tehran had resisted transferring all 1,200 kilograms of LEU out of the country before receiving fuel for the TRR. IAEA Director-General Amano told the agency's Board of Governors on June 7, 2010, that he had \"immediately conveyed Iran's letter\" to France, Russia, and the United States \"and asked for their views.\" Those three governments responded to the IAEA two days later with letters and a joint paper titled \"Concerns about the Joint Declaration Conveyed by Iran to the IAEA.\" The paper conveyed several reservations about the Tehran Declaration, but did not reject it outright. One reason for the U.S. refusal to accept the proposal was fear that the proposal would disrupt efforts to persuade the Security Council to adopt a resolution imposing additional sanctions on Iran (the council adopted Resolution 1929 in June 2010). Further Talks Iran and the P5+1 met in December 2010 and January 2011, but the two meetings, held in Geneva and Istanbul, respectively, produced no results. In April 2012, the two sides resumed talks in Istanbul. Iran and the P5+1 subsequently held two rounds of talks—a May meeting in Baghdad and a June meeting in Moscow. In addition, the two sides held expert-level discussions in Istanbul in July 2012. Former U.S. officials involved in the JCPOA negotiations have stated that the U.S. decision, articulated to Iran during 2013, to drop its previous insistence that Iran end its enrichment program was decisive for reaching a final agreement. Iranian and Russian officials have made similar claims. Following the April 2012 talks, the P5+1 stated that the process of inducing Iranian compliance with \"all its international obligations\" would be \"guided by the principle of the step-by-step approach and reciprocity.\" The P5+1 presented their proposal the next month during the Baghdad meeting. The six governments demanded that Tehran end its production of enriched uranium containing approximately 20% uranium-235; ship to a third country Iran's stockpile of uranium enriched to this level (this uranium would be under IAEA monitoring); halt enriching uranium, as well as installing centrifuges and centrifuge components, at the Fordow facility; and cooperate fully with the IAEA's investigation. Then-European Union High Representative Catherine Ashton for Common Foreign and Security Policy stated on May 24, 2012, that the P5+1 \"put ideas on the table on reciprocal steps we would be prepared to take.\" These included refraining from imposing new sanctions on Iran; facilitating Iranian access to spare aircraft parts, as well as safety and repair inspections; providing fuel for the TRR; supporting IAEA technical cooperation regarding the TRR's safety; providing medical isotopes to Tehran; potentially reviewing suspended IAEA technical cooperation projects with Iran; and cooperating on Tehran's acquisition of a light-water reactor for producing radioisotopes. The two sides again held talks in February 2013. Technical experts from the P5+1 and Iran met the next month, and another round of talks at the political director level took place in April 2013. Following the June 2013 election of Iranian President Hassan Rouhani, many observers expressed optimism that these negotiations would produce an agreement. After Rouhani took office in August 2013, Iran and the P5+1 met twice later that year (once in October and once in November). The two sides met again on November 20, 2013, and agreed to an accord called the Joint Plan of Action (JPA) on November 24. This agreement set out an approach toward reaching a long-term comprehensive solution to international concerns regarding Iran's nuclear program. The two sides began implementing the JPA on January 20, 2014. The P5+1 and Iran agreed on a framework for a Joint Comprehensive Plan of Action (JCPOA) on April 2, 2015, and finalized the JCPOA on July 14, 2015. JCPOA Status On May 8, 2018, President Donald Trump announced that the United States would no longer participate in the JCPOA. The United States subsequently reimposed sanctions that had been suspended pursuant to the agreement. (For more information about the Trump Administration's JCPOA policy, see Appendix D .) The U.S. withdrawal attracted broad criticism among the other parties to the JCPOA, which states that the P5+1 and Iran \"commit to implement\" the agreement \"in good faith and in a constructive atmosphere, based on mutual respect, and to refrain from any action inconsistent with the letter, spirit and intent of this JCPOA that would undermine its successful implementation.\" Whether the U.S. withdrawal violates UN Security Council Resolution 2231 is unclear; U.S. officials have argued that the JCPOA is not legally binding, but a European Union official told CRS in a November 30, 2016, email that \"the commitments under the JCPOA have been given legally binding effect through UNSC Resolution 2231 (2015).\" Following the initial reactions to the U.S. exit from the accord, Iran and the other parties began negotiations on concrete steps that would continue to provide Iran with the economic benefits of the JCPOA. On May 16, 2018, in an apparent effort to meet Iran's demands for remaining in the agreement, the EU announced \"practical measures\" for continued implementation of the JCPOA, including the following: maintaining and deepening economic relations with Iran; the continued sale of Iran's oil and gas condensate petroleum products and petrochemicals and related transfers; effective banking transactions with Iran; continued sea, land, air, and rail transportation relations with Iran; provision of export credit and special provisions in financial banking to facilitate economic and financial cooperation and trade and investment; further memoranda of understanding and contracts between European companies and Iranian counterparts; further investments in Iran; the protection of European Union economic operators and ensuring legal certainty; and further development of a transparent, rules-based business environment in Iran. Several E3 officials asserted in a November 2, 2018, statement with EU High Representative for Foreign Affairs and Security Policy Federica Mogherini that [i]t is our aim to protect European economic operators engaged in legitimate business with Iran…. As parties to the JCPoA, we have committed to work on, inter alia, the preservation and maintenance of effective financial channels with Iran, and the continuation of Iran's export of oil and gas. On January 31, 2019, France, Germany, and the United Kingdom, announced the creation of \"a Special Purpose Vehicle aimed at facilitating legitimate trade between European economic operators and Iran.\" Called the Instrument for Supporting Trade Exchanges (INSTEX SAS), the vehicle \"will support legitimate European trade with Iran, focusing initially on the sectors most essential to the Iranian population—such as pharmaceutical, medical devices and agri-food goods,\" according to the January 31 announcement. It added that the E3 should reaffirm that its \"efforts to preserve the economic provisions of the JCPOA are conditioned upon Iran's full implementation of its nuclear-related commitments, including full and timely cooperation with the IAEA.\" In a May 9 statement with Mogherini, the E3 Foreign Ministers responded to an Iranian announcement the previous day that Tehran would stop performing some of its JCPOA commitments. \"We remain fully committed to the preservation and full implementation of the JCPOA,\" the statement explained, adding that the participants \"strongly urge Iran to continue to implement its [JCPOA] commitments … and to refrain from any escalatory steps.\" The statement also reiterated the participants' determination \"to continue pursuing efforts to enable the continuation of legitimate trade with Iran.\" Iranian Reaction Iranian officials have repeatedly stated that Tehran would fulfill its JCPOA commitments as long as the United States did, and they repeatedly have rejected renegotiating the JCPOA or negotiating a new agreement, such as the sort described by U.S. officials. Amano told the IAEA Board of Governors on March 4, 2019, that \"Iran is implementing its nuclear-related [JCPOA] commitments.\" Iran \"is fully prepared to return to the pre-JCPOA situation or even [to conditions] more robust than that if the US reneges on its promises to the extent that the JCPOA's continuation harms our national interests,\" Iranian Foreign Minister Javad Zarif asserted the previous month. Deputy Foreign Minister Seyed Abbas Araqchi claimed that Iran \"will be able to reach the industrial enrichment phase in less than two years\"; other Iranian officials have asserted that the country can rapidly reconstitute its fissile material production capability. \"Iran will remain committed to the nuclear deal if the remaining signatories to the JCPOA abide by their commitments,\" Araqchi stated in late January 2019. Atomic Energy Organization of Iran (AEOI) spokesperson Behrouz Kamalvandi stated about two weeks later that, should the remaining JCPOA parties fail to fulfill their JCPOA obligations, the AEOI will accelerate the nuclear program with \"dazzling speed.\" Iranian officials have described a number of possible responses to a U.S. decision to reimpose U.S. sanctions, including resuming uranium enrichment, referring the matter to the Joint Commission, decreasing cooperation with the IAEA, and withdrawing from the NPT. These responses do not include the possible Iranian development of nuclear weapons, Iranian officials have said. Asked on April 21, 2018, if Iran will continue to meet its JCPOA obligations if all P5+1 parties except for the United States continue to uphold their obligations, Zarif replied, \"I believe that's highly unlikely.\" He added that it is important for Iran receive the benefits of the agreement. And there is no way that Iran would do a one-sided implementation of the agreement. And it would require a major effort because right now, with the United States ostensibly in the agreement, a lot has been lacking in terms of Iran benefiting from the deal. Following Trump's May 2018 announcement, Iranian officials rejected negotiating any new agreements. In a May 10, 2018, letter to U.N. Secretary General António Guterres, Foreign Minister Zarif wrote that \"[i]f JCPOA is to survive, the remaining JCPOA Participants and the international community need to fully ensure that Iran is compensated unconditionally through appropriate national, regional and global measures.\" He added that Iran has decided to resort to the JCPOA mechanism in good faith to find solutions in order to rectify the United States' multiple cases of significant non-performance and its unlawful withdrawal, and to determine whether and how the remaining JCPOA Participants and other economic partners can ensure the full benefits that the Iranian people are entitled to derive from this global diplomatic achievement. Supreme Leader Ayatollah Ali Khamene'i stated on May 23 that Iran will continue to participate in the JCPOA only if Europe provides \"concrete guarantees\" that it maintains Iran's existing revenue stream from oil sales to the EU countries. He also demanded that Europe not raise the issues of Iran's missiles programs or regional influence, adding that \"Iran has the right to resume its nuclear activities.\" President Rouhani expressed a similar view in a July 4 speech. According to Iranian officials, Tehran has begun preparations for expanding its uranium enrichment program, albeit within the parameters of the JCPOA for the time being. AEOI spokesperson Kamalvandi stated on June 5, 2018, that the organization \"will start the process of boosting the capacity of the country's uranium enrichment,\" by increasing Iran's capacity to produce uranium hexafluoride. On June 27, Iran's official news agency announced that Iran has resumed operations at its uranium conversion facility, which Iran has used to produce this material. Kamalvandi explained that Iran would begin the process of \"manufacturing and assembly of centrifuge rotors,\" which are critical components of such machines. Iran \"will begin building a centrifuge rotor plant,\" he noted. In addition, AEOI head Ali Akbar Salehi stated that Tehran will begin using an \"advanced centrifuge assembly centre in the Natanz nuclear facility,\" which Iran had not disclosed publicly. Kamalvandi noted that Iran would continue to operate within the constraints of its JCPOA commitments, but added that, should the JCPOA collapse, Iran would produce centrifuges beyond those constraints. As noted, Iran remains subject to its obligations pursuant to the JCPOA and Resolution 2231 and could be subject to the reimposition of multilateral sanctions if Tehran violates these obligations. Several multilateral meetings since the U.S. withdrawal have not produced a firm Iranian commitment to the JCPOA. At Iran's request, the Joint Commission held meetings, attended by all of the JCPOA parties except for the United States, on May 25 and July 6. At the conclusion of the July 6 meeting, the Joint Commission participants reaffirmed their commitment to the EU \"practical measures\" enumerated above. However, President Rouhani reacted to the pledges by saying that \"[u]nfortunately, the EU's package of proposals lacked an operational solution and a specific method for cooperation.\" Reacting to the January 2019 E3 announcement of the Special Purpose Vehicle, Foreign Minister Zarif warned on February 17, 2019, that \"INSTEX falls short of the commitments by the E3 to 'save' the JCPOA,\" adding that \"Europe needs to be willing to get wet if it wants to swim against the dangerous tide of U.S. unilateralism.\" In May 8 letters to the other JCPOA participant governments, Iran announced that, as of that day, Tehran had stopped \"some of its measures under the JCPOA,\" though the government emphasized that it was not withdrawing from the agreement. Specifically, Iran will not transfer LEU or heavy water out of the country in order to maintain those stockpiles below the JCPOA-mandated limits described above. The Iranian government has stated that it will resume full compliance with the JCPOA if the remaining JCPOA participants agree during a 60-day period following the May 8 announcement to meet Tehran's \"main demands, specifically in the banking and oil sectors.\" Absent such an agreement, Iran will cease to accept any constraints on the amount of uranium-235 contained in any Iranian-produced enriched uranium. Iran may then also resume work on the Arak reactor according to the JCPOA-mandated design. Iran will \"take other steps,\" should Tehran fail to reach an agreement with the remaining JCPOA participants during a 60-day period to begin after Iran takes this second set of steps. Iran has also announced that Tehran \"will show a strong and immediate response\" if the remaining JCPOA participants respond to the May 8 action by referring Iran's case to the Security Council or imposing additional sanctions on Iran. Appendix D. Trump Administration Joint Cooperative Plan of Action Policy On May 8, 2018, President Donald Trump announced that the United States would no longer participate in the Joint Cooperative Plan of Action (JCPOA) and would reimpose U.S. sanctions that had been suspended pursuant to the agreement. President Trump ordered Secretary of State Michael Pompeo to \"take all appropriate steps to cease the participation of the United States in the JCPOA,\" and, along with Secretary of the Treasury Steven Mnuchin, to immediately \"begin taking steps to reimpose all United States sanctions lifted or waived in connection\" with the agreement. The United States has notified the other P5+1 states that it will no longer attend meetings of the Joint Commission, the working group concerning the Arak reactor, or the procurement working group, all of which were established pursuant to the JCPOA. Secretary Pompeo detailed a new U.S. approach with respect to Iran during a May 21, 2018, speech as applying \"unprecedented financial pressure on the Iranian regime,\" working \"with the Department of Defense and our regional allies to deter Iranian aggression,\" and advocating \"tirelessly for the Iranian people.\" He asserted that, in exchange for \"major changes\" in Iran's behavior, the United States is \"prepared to end the principal components of every one of our sanctions against the regime …, re-establish full diplomatic and commercial relationships with Iran ..., [a]nd support the modernization and reintegration of the Iranian economy into the international economic system.\" Pompeo listed a number of essential elements for any new agreement: First, Iran must declare to the IAEA a full account of the prior military dimensions of its nuclear program, and permanently and verifiably abandon such work in perpetuity. Second, Iran must stop enrichment and never pursue plutonium reprocessing. This includes closing its heavy-water reactor. Third, Iran must also provide the IAEA with unqualified access to all sites throughout the entire country. Iran must end its proliferation of ballistic missiles and halt further launching or development of nuclear-capable missile systems. Iran must release all U.S. citizens, as well as citizens of our partners and allies, each of them detained on spurious charges. Iran must end support to Middle East terrorist groups, including Lebanese Hizballah, Hamas, and the Palestinian Islamic Jihad. Iran must respect the sovereignty of the Iraqi Government and permit the disarming, demobilization, and reintegration of Shia militias. Iran must also end its military support for the Houthi militia and work toward a peaceful political settlement in Yemen. Iran must withdraw all forces under Iranian command throughout the entirety of Syria. Iran, too, must end support for the Taliban and other terrorists in Afghanistan and the region, and cease harboring senior al-Qaida leaders. Iran, too, must end the IRGC [Islamic Revolutionary Guard Corps] Qods Force's support for terrorists and militant partners around the world. And too, Iran must end its threatening behavior against its neighbors—many of whom are U.S. allies. This certainly includes its threats to destroy Israel, and its firing of missiles into Saudi Arabia and the United Arab Emirates. It also includes threats to international shipping and destructive ... cyberattacks. On May 21, 2018, State Department Director for Policy Planning Hook stated that \"the plan is to continue working with our allies, as we have been over the last few months, to create a new security architecture.\" During a July 2, 2018, press briefing, Hook explained that following Trump's May 8, 2018, announcement, Secretaries Pompeo and Mnuchin \"decided to create joint teams of senior officials to visit every region of the world. These teams were launched on June 4.\" The United States has reimposed sanctions on Iran in two tranches: the first in May 2018 and the second in November 2018. The Administration waived sanctions in November 2018 for non-U.S. persons participating in a number of Iranian nuclear activities: the JCPOA-mandated projects at Arak, Bushehr, and Fordow; transfers from Iran of enriched uranium for the purpose of preventing Iran's low-enriched uranium (LEU) stockpile from exceeding 300 kilograms and exports of natural uranium to Iran in exchange for such transfers; authorized transfers to Iran of LEU fuel for the Tehran Research Reactor; transfers from Iran of \"nuclear fuel scrap,\" which \"cannot be fabricated into fuel plates\" for the reactor; transfers from Iran of spent nuclear reactor fuel; and storage of Iranian heavy water exported before November 5, 2018. In May 2019, the United States renewed waivers for these activities except for the transfers of LEU out of Iran, the \"storage for Iran of heavy water\" that Tehran has \"produced in excess of current limits,\" and \"assistance to expand\" the Bushehr plant \"beyond the existing reactor unit.\" On February 14, 2019, Vice President Michael Pence called on the E3 \"to withdraw from the Iran nuclear deal.\" Trump Administration officials continue to insist that the current U.S. policy is not \"regime change\" in Tehran. Instead, they describe a policy that threatens the Iranian government with the prospect of sanctions-induced political unrest and economic collapse, should Tehran refuse to make certain concessions. State Department Director for Policy Planning Brian Hook explained in a November 2, 2018, press briefing that the reimposition of sanctions is \"designed to do two things: deny the regime the revenue it needs to fund violent wars abroad, and also to change the cost-benefit analysis in our favor so that Iran decides to come back to the negotiating table.\" Hook told National Public Radio on November 9, 2018 that [w]e're not talking about regime change. The future of this regime is up to the Iranian people. What we have been looking for is a change in their behavior, and we are very hopeful that our campaign of maximum economic pressure on this regime is going to help accelerate the path to reform that not only we want but the Iranian people want. Assistant Secretary of State Christopher Ford explained in a December 18, 2018, speech that the U.S. reimposition of sanctions is \"setting the stage for a diplomatic process that can resolve the crisis created by Iran's extraordinary range of malign acts in the Middle East and beyond.\" Trump Administration officials have threatened Iran with possible military action, should Tehran violate its JCOPA nuclear commitments. Pompeo himself stated, during a June 22 television interview, that if Iran were to \"ramp up\" work on its nuclear program, \"the wrath of the entire world will fall upon\" the government, explaining that \"wrath\" referred to \"moral opprobrium and economic power,\" rather than military action. Several months later, Pompeo wrote that [e]conomic pressure is one part of the U.S. campaign. Deterrence is another. President Trump believes in clear measures to discourage Iran from restarting its nuclear program or continuing its other malign activities. With Iran and other countries, he has made it clear that he will not tolerate attempts to bully the United States; he will punch back hard if U.S. security is threatened. Chairman Kim has felt this pressure, and he would never have come to the table in Singapore without it. The president's own public communications themselves function as a deterrence mechanism. The all-caps tweet he directed at Iranian President Hassan Rouhani in July, in which he instructed Iran to stop threatening the United States, was informed by a strategic calculation: the Iranian regime understands and fears the United States' military might. In September, militias in Iraq launched life-threatening rocket attacks against the U.S. embassy compound in Baghdad and the U.S. consulate in Basra. Iran did not stop these attacks, which were carried out by proxies it has supported with funding, training, and weapons. The United States will hold the regime in Tehran accountable for any attack that results in injury to our personnel or damage to our facilities. America will respond swiftly and decisively in defense of American lives. Appendix E. Possible Military Dimensions of Iran's Nuclear Program Then-International Atomic Energy Agency (IAEA) Director-General Mohamed ElBaradei told the agency's Board of Governors on June 2, 2008, that questions regarding \"possible military dimensions\" to Iran's nuclear program constituted the \"one remaining major issue\" concerning the IAEA's investigation of the program. A November 2011 report by current IAEA Director-General Yukiya Amano to the IAEA board contains the most detailed account to date of the IAEA's evidence regarding Iran's suspected nuclear weapons-related activities. Unless otherwise noted, this appendix is based on Amano's November 2011 report. The IAEA has \"credible\" information that Iran has carried out activities \"relevant to the development of a nuclear explosive device.\" Although some of these activities have civilian applications, \"others are specific to nuclear weapons,\" the report notes. Most of these activities were conducted before the end of 2003, though some may have continued. The Iranian government managed these activities via a program structure that included \"senior Iranian figures.\" Amano's report contains a detailed description of the program's structure, which was established in the late 1980s. The program's activities were managed by an institution called the Physics Research Center and were overseen by an Iranian Ministry of Defense entity. About a decade later, the center's activities were consolidated under a new entity called the AMAD Plan. After the Iranian regime halted the AMAD Plan's work in 2003, \"staff remained in place to record and document the achievements of their respective projects,\" according to information provided to the IAEA by unnamed governments. Later, \"equipment and work places were either cleaned or disposed of so that there would be little to identify the sensitive nature of the work which had been undertaken.\" The IAEA has \"other information\" from governments that \"indicates that some activities previously carried out under the AMAD Plan were resumed later.\" Some of these activities \"would be highly relevant to a nuclear weapon programme.\" A December 2015 report from Amano assesses that although s ome Iranian nuclear weapons-related activities \" took place after 2003,\" these activities \"were n ot part of a coordinated effort. \" The IAEA \"has no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009,\" the report explains. The IAEA has information that the AMAD Plan either obtained or attempted to obtain dual-use \"equipment, materials and services which ... would be useful in the development of a nuclear explosive device.\" In addition, the program may have conducted studies on uranium conversion, missile reentry vehicles for delivering nuclear warheads, and conventional explosives used in nuclear weapons. Nuclear Explosive Device Components The IAEA has information indicating that Iran may have conducted work on components for nuclear weapons. Iran possesses a document \"describing the procedures\" for reducing uranium hexafluoride to uranium metal, as well as \"machining ... enriched uranium metal into hemispheres,\" which are \"components of nuclear weapons.\" Tehran has previously told the IAEA that it was offered equipment for casting uranium but never actually received it. Moreover, a member of a clandestine nuclear supply network run by former Pakistani official Abdul Qadeer Khan told the IAEA that Iran \"had been provided with nuclear explosive design information.\" However, this information may not be sufficient to produce a nuclear weapon. (See \" Nuclear Weapon Development Capabilities .\") The IAEA has received information from an unnamed government that Iran carried out \"preparatory work, not involving nuclear material, for the fabrication of natural and high enriched uranium metal components for a nuclear explosive device.\" As noted, the AMAD Plan may have conducted studies on conventional explosives used in nuclear weapons. Implosion-type nuclear explosive devices use conventional explosives to compress a core of highly enriched uranium or plutonium to start a nuclear chain reaction. Specifically, Iran developed detonators that have limited nonnuclear applications but also could be used in a nuclear explosive device. In addition, Tehran may have experimented with a multipoint initiation system, which could be used in conjunction with the detonators. Furthermore, Iran may have conducted high explosive testing, possibly in association with nuclear materials, at the Parchin military site (see below). Lastly, Iran may have worked on neutron initiators, which are used in implosion-type nuclear weapons. Reentry Vehicle As noted, the IAEA has assessed that the AMAD Plan may have conducted studies on missile reentry vehicles for delivering nuclear warheads. These efforts possibly included \"engineering studies to examine\" integrating a payload into the reentry vehicle of Iran's Shahab-3 ballistic missile. Although these activities \"may be relevant to the development of a non-nuclear payload, they are highly relevant to a nuclear weapon programme.\" Tehran also may have conducted work on a \"prototype firing system\" that would enable a missile's nuclear payload \"to explode both in the air above a target, or upon impact of the re-entry vehicle with the ground.\" Parchin Parchin is an Iranian military site. The Institute for Science and International Security described the complex in a 2004 report as \"a huge site dedicated to the research, development, and production of ammunition, rockets, and high explosives,\" adding that the site \"is owned by Iran's military industry and has hundreds of buildings and test sites.\" IAEA inspectors investigated the Parchin site in 2005 after receiving \"information ... from a Member State in the early 2000s alleging that Iran was conducting high explosive testing, possibly in association with nuclear materials.\" Such testing could contribute to the development of implosion-type nuclear explosive devices. IAEA inspectors visited the site twice in 2005, but they \"did not uncover anything of relevance.\" Parchin was not under IAEA safeguards. However, the IAEA requested that Tehran respond to information obtained from unnamed governments indicating that \"Iran constructed a large explosives containment vessel\" in 2000 at Parchin \"in which to conduct hydrodynamic experiments.\" Such experiments are conducted to validate the design of an implosion-type nuclear weapon and are \"strong indicators of possible weapon development.\" The IAEA has not publicly reported whether Iran actually conducted these experiments. The inspectors in 2005 did not visit the building that the IAEA identified as housing the containment vessel. The agency requested access to this building in February 2012, but Iran did not provide such access until September 2015. At that time, IAEA officials \"did not observe a chamber or any associated equipment inside the building.\" Iranian officials told their IAEA counterparts in October 2015 that the building in question \"had always been used for the storage of chemical material for the production of explosives,\" but the \"information available\" to the IAEA, \"does not support Iran's statements on the purpose of the building.\" Other Issues The IAEA asked Tehran about other indications, some of which do not appear in Amano's November 2011 report, suggesting that the country may have pursued nuclear weapons. These include \"information about a high level meeting in 1984 on reviving Iran's pre-revolution nuclear programme\"; \"the scope of a visit by officials\" associated with Iran's Atomic Energy Organization \"to a nuclear installation in Pakistan in 1987\"; information on meetings in 1993 between Iranian officials and members of a clandestine procurement network run by former Pakistani official Khan; information about work done in 2000 that apparently related to reprocessing; Iranian scientists' mathematical research with nuclear weapons applications; and information indicating that Iran \"may have planned and undertaken preparatory experimentation which would be useful were Iran to carry out a test of a nuclear explosive device.\" Appendix F. Iranian Centrifuge Workshops and Related Entities This appendix lists Iranian entities that appear to have manufactured centrifuges or related components, as well as those that appear to have conducted work closely related to these activities. The appendix excludes entities that have been identified as solely involved in procuring materials or components for Iran's centrifuge program. This list is not exhaustive, and some of the publicly available information about Iran's centrifuge workshops may be outdated. International Atomic Energy Agency (IAEA) inspectors had access to Iranian centrifuge workshops until early 2006, in order to verify the October 2003 agreement under which Iran suspended its enrichment program. However, the agency's knowledge of Iran's workshops deteriorated after Tehran ended this access in early 2006. Iran may have subsequently moved centrifuge-related work to other locations and likely built more such workshops. Tehran has provided the IAEA with access to some centrifuge workshops pursuant to the Joint Plan of Action and the Joint Comprehensive Plan of Action. The latter agreement requires Iran to declare specific types of equipment for producing certain centrifuge components, as well as the locations where such production takes place. Kalaye Electric U.N. Security Council Resolution 1737 describes Kalaye Electric, which is located in Tehran, as a \"provider\" to Iran's pilot centrifuge facility located at Natanz. According to an August 2008 Institute for Science and International Security (ISIS) report, Kalaye Electric, an Atomic Energy Organization of Iran (AEOI) entity, operates the country's centrifuge program, but the AEOI controls the program. A December 2011 European Union Council regulation describes several entities as current suppliers to Kalaye Electric, suggesting that the company was still involved in Iran's centrifuge program at that time. 7 th of Tir Resolution 1737 describes 7 th of Tir, located in Esfahan, as \"directly involved\" in Iran's nuclear program. This facility was involved in manufacturing centrifuge components, according to the ISIS report, which added that Iran moved \"the key centrifuge manufacturing equipment and components to Natanz and other AEOI sites\" when the IAEA began monitoring the 2003 suspension agreement. Whether and to what extent the facility is still involved in manufacturing centrifuge components is unknown, the report says. Farayand Technique Resolution 1737 describes this entity, which is located in Esfahan, as \"involved in\" Iran's centrifuge program. The facility was involved in \"making and assembling\" centrifuge components, according to the 2008 ISIS report. According to a 2010 European Council regulation, another entity, called the Iran Centrifuge Technology Company, \"has taken over the activities of Farayand Technique,\" which include \"manufactur[ing] uranium enrichment centrifuge parts.\" Iran Centrifuge Technology Company As noted, this entity, which is apparently located in Esfahan, took over \"the activities of Farayand Technique,\" which have included \"manufactur[ing] uranium enrichment centrifuge parts,\" according to the 2010 European Council regulation. Pars Trash Resolution 1737 describes this Tehran-based entity as \"involved in\" Iran's centrifuge program. According to the ISIS report, the company manufactured centrifuge components. The report does not say whether Pars Trash is still involved in Iran's centrifuge program. Kaveh Cutting Tools Company This entity, according to the 2008 ISIS report, manufactured centrifuge components. The company is \"part of\" Khorasan Metallurgy Industries, the ISIS report says. Both of these entities are located in Mashad. Khorasan Metallurgy Industries is \"involved in the production of centrifuge components,\" according to the 2010 European Council regulation. Khorasan Metallurgy Industries This entity, which is located in Mashad, has been \"involved in the production of centrifuge components,\" according to the 2010 European Council regulation. Sanam Electronic Industry Group Located in Tehran, this entity was, according to ISIS, \"involved in making centrifuge components.\" Abzar Boresh Kaveh Company U.N. Security Council Resolution 1803 describes this company as \"[i]nvolved in the production of centrifuge components.\" Parto Sanat Company The 2010 European Council regulation describes this company, located in Tehran, as a \"[m]anufacturer of frequency changers ... capable of developing/modifying imported foreign frequency changers in a way that makes them usable in gas centrifuge enrichment.\" Eyvaz Technic The 2011 European Council regulation states that, as recently as 2011, this Tehran-based company supplied Iran's Natanz and Fordow centrifuge facilities with equipment relevant to centrifuge operations. Ghani Sazi Uranium Company According to the 2011 European Council regulation, this company, which is located in Tehran, had \"production contracts\" with Kalaye Electric and Iran Centrifuge Technology Company. Iran Pooya The 2011 European Council regulation describes this Tehran-based entity as \"a major manufacturer of aluminium cylinders for centrifuges whose customers\" included the AEOI and Iran Centrifuge Technology Company. Mohandesi Toseh Sokht Atomi Company The 2011 European Council regulation describes this company, located in Tehran, as \"contracted to\" Kalaye Electric \"to provide design and engineering services across the nuclear fuel cycle.\" Saman Nasb Zayendeh Rood The 2011 European Council regulation describes this company, located in Esfahan, as a \"[c]onstruction contractor that has installed piping and associated support equipment at the uranium enrichment site at Natanz.\" The company \"has dealt specifically with centrifuge piping,\" according to the regulation. Jelvesazan Company This company, located in Esfahan, was a possible supplier of vacuum pumps to the Iran Centrifuge Technology Company, according to a December 2012 European Council regulation. Iran Aluminium Company According to the December 2012 European Council regulation, this company, located in Arak, was a supplier to the Iran Centrifuge Technology Company as of mid-2012. Simatec Development Company The December 2012 European Council regulation identified this company, apparently located in Tehran, as a supplier of inverters for centrifuges to the Kalaye Electric Company. Sharif University of Technology This university, located in Tehran, has provided laboratories for use by the entity Kalaye Electric Company and the Iran Centrifuge Technology Company, according to the December 2012 European Council regulation. Zirconium Production Plant A 2012 report from the AEOI identified this plant, located in Esfahan, as a \"provider of pipes and aluminum sheets used in different parts of centrifuge machines.\" Aluminat This Tehran-based company had a contract in 2012 to supply aluminum to the Iran Centrifuge Technology Company, according to the December 2012 European Council regulation. Pishro Systems Research Company This company, according to a 2013 State Department announcement, was \"responsible for research and development efforts across the breadth of Iran's nuclear program,\" including Iran's enrichment program. The company \"likely has or will have a facility\" in Tehran, the State Department said. Fulmen Group This company \"was involved in procuring goods\" and installing \"electrical equipment\" for Iran's Fordow enrichment facility prior to 2009, according to the State Department and the European Union. The company also worked with Kalaye Electric \"on the construction of elements of the Natanz Uranium Enrichment Plant.\" Appendix G. Post-2003 Suppliers to Iran's Uranium Enrichment Program Iran has obtained components, expertise, and material for its nuclear program from a variety of foreign sources. Tehran sought assistance for the program from the Russian and Chinese governments, but it also obtained relevant components, expertise, and material via deceptive procurement techniques. Perhaps Iran's best-known source was a clandestine procurement network run by former Pakistani official Abdul Qadeer Khan. This network began supplying Iran's centrifuge program in 1987, but U.S. and Pakistani officials have characterized the network as defunct since Pakistan publicly revealed the network in early 2004. It is worth noting that, according to former Deputy Director General of the International Atomic Energy Agency (IAEA) Olli Heinonen, the IAEA has not determined the source of material that Iran obtained for its advanced centrifuges. (CRS has not found additional information on this subject.) Methodology Because the original Khan network appears to be defunct, this appendix focuses on post-2003 suppliers to Iran's enrichment program. To obtain the information for this appendix, CRS reviewed official U.S. government reports, as well as lists of entities sanctioned by the United States and the European Union since early 2004. CRS also reviewed public information from the Department of Justice, reports from a U.N. Panel of Experts, and selected nongovernmental reports. To identify suppliers germane to this appendix, CRS excluded Iranian entities or nationals, Iranian ships under foreign flags, and entities associated with the Khan network. This methodology has limitations. Official reports generally do not provide enough information to identify specific suppliers to Iran's enrichment program and Federal Register announcements of the imposition of sanctions generally do not explain the specific transactions that warranted the sanctions. Even if official reports do identify suppliers to Iran's nuclear program, they often do not say whether those entities were supplying Iran's enrichment program. For example, an October 2008 Justice Department fact sheet stated that the sales director of a California-based corporation attempted to illegally export to Iran \"machinery and software to measure the tensile strength of steel,\" explaining that these items \"can make a contribution to nuclear activities of concern.\" The fact sheet, however, did not provide additional information, and neither 2007 testimony from a Department of Commerce official nor a 2008 Commerce Department announcement explained whether the exports were intended for Iran's enrichment program. Similarly, a 2008 report from the Czech Republic's Security Information Service stated that an Iranian company \"subject to sanctions because of its involvement in the Iranian nuclear program\" attempted to acquire \"specific machinery\" from a Czech supplier, but the report did not specify further. Suppliers to Iran's Enrichment Program The information reviewed for this appendix indicates that Iranian-owned entities were using deceptive means in attempts to acquire enrichment technology from foreign entities. However, the sources described above contain no evidence that foreign governments are currently supplying Iran's enrichment program. According to a 2009 State Department report, \"all major suppliers, apart from Russia which is providing assistance to Iran's Bushehr Nuclear Power Plant, have agreed not to provide nuclear technology to Iran.\" In addition, State Department reports covering countries' compliance with international nonproliferation agreements between 2004 and 2010 indicate that the Chinese government is not involved in supplying Iran's suspected nuclear weapons program. Chinese Entities Robert J. Einhorn, then-State Department Special Advisor for Nonproliferation and Arms Control, stated in March 2011 that the United States continued \"to have concerns about the transfer of proliferation-sensitive equipment and materials to Iran by Chinese companies.\" Similarly, the State Department compliance reports mentioned above indicate that unspecified non-Chinese entities have attempted to acquire \"nuclear-related\" materials and equipment from Chinese entities. Furthermore, a CIA report covering 2007 stated that \"private Chinese businesses continue to sell materials, manufacturing equipment, and components suitable for use in ballistic missile, chemical weapon and nuclear weapon programs to North Korea, Iran and Pakistan.\" The report did not specify further. It is worth noting that Chinese entities may have supplied Iran with enrichment-related equipment obtained from Western suppliers. According to court documents made public in July 2012, an Iranian national attempted to obtain U.S.-origin components for Iran's enrichment program using entities in China and the Philippines. More recently, a Chinese citizen pleaded guilty in December 2015 to exporting U.S.-origin components used for uranium enrichment to Iranian entities via China. Other Suppliers Iran has reportedly established front companies in Turkey in order to obtain nuclear-related items. Notably, Turkish entities were involved with the Khan network. Iranian entities have also attempted to obtain nuclear-related items from companies in the Czech Republic, according to reports from that government's Security Information Service. Iran has also attempted to obtain enrichment-related equipment from U.S. suppliers. For example, according to a January 2012 Justice Department fact sheet, a man was sentenced in 2010 for attempting in March 2009 to export pressure transducers, which he had purchased in the United States, to Iran via Canada and the United Arab Emirates. \"Pressure transducers have applications in the production of enriched uranium,\" according to the fact sheet. Also, the Justice Department announced in January 2016 that a Chinese citizen was sentenced in the United States for exporting U.S.-origin pressure transducers to Iran from 2009 to 2012.  In addition, a California-based firm exported \"vacuum pumps and pump-related equipment to Iran through a free trade zone located in the United Arab Emirates [UAE]\" between December 2007 and November 2008. This equipment has \"a number of applications, including in the enrichment of uranium,\" according to the Justice Department fact sheet. In July 2013, an Iranian national pleaded guilty to arranging the illegal export of carbon fiber in 2008 to an Iranian entity. The individuals obtained the material from a U.S. supplier and shipped it to Iran via Europe and the UAE. Carbon fiber \"has nuclear applications in uranium enrichment as well applications in missiles,\" according to an October 2014 Justice Department fact sheet. Declassified documents from the Canada Services Border Agency state that Iranian entities were also attempting to acquire items from Canada for Iran's nuclear program, though the documents do not specifically mention Tehran's enrichment program. The documents also state that \"Iranian procurement agents have ... been able to export items [from Canada],\" international sanctions notwithstanding. The documents, however, do not specify whether exported items were destined for Iran's nuclear program. Moreover, as noted, court documents made public in July 2012 state that an Iranian national attempted to obtain U.S.-origin components via Canada for Iran's enrichment program. Entities in the UAE were part of the Khan network and have been cited as shippers for enrichment-related technology to Iran. Einhorn described the UAE in March 2011 as a \"trans-shipment hub for Iran,\" but added that the UAE \"has also taken strong steps in recent months to curtail illicit Iranian activities.\" A 2011 European Council regulation identified two UAE entities, Modern Technologies FZC and Qualitest FZE, as \"[i]nvolved in procurement of components for [the] Iranian nuclear programme,\" although the regulation did not specify whether the components were for uranium enrichment.", "summary": "Iran's nuclear program began during the 1950s. The United States has expressed concern since the mid-1970s that Tehran might develop nuclear weapons. Iran's construction of gas centrifuge uranium enrichment facilities is currently the main source of proliferation concern. Gas centrifuges can produce both low-enriched uranium (LEU), which can be used in nuclear power reactors, and weapons-grade highly enriched uranium (HEU), which is one of the two types of fissile material used in nuclear weapons. Is Iran Capable of Building Nuclear Weapons? The United States has assessed that Tehran possesses the technological and industrial capacity to produce nuclear weapons. But Iran has not yet mastered all of the necessary technologies for building such weapons. Whether Iran has a viable design for a nuclear weapon is unclear. A National Intelligence Estimate made public in 2007 assessed that Tehran \"halted its nuclear weapons program\" in 2003. The estimate, however, also assessed that Tehran is \"keeping open the option to develop nuclear weapons\" and that any decision to end a nuclear weapons program is \"inherently reversible.\" U.S. intelligence officials have reaffirmed this judgment on several occasions. Obtaining fissile material is widely regarded as the most difficult task in building nuclear weapons. As of January 2014, Iran had produced an amount of LEU containing up to 5% uranium-235, which, if further enriched, could theoretically have produced enough HEU for as many as eight nuclear weapons. Iran had also produced LEU containing nearly 20% uranium-235; the total amount of this LEU, if it had been in the form of uranium hexafluoride and further enriched, would have been sufficient for a nuclear weapon.. After the Joint Plan of Action, which Tehran concluded with China, France, Germany, Russia, the United Kingdom, and the United States (collectively known as the \"P5+1\"), went into effect in January 2014, Iran either converted much of its LEU containing nearly 20% uranium-235 for use as fuel in a research reactor located in Tehran, or prepared it for that purpose. Iran has diluted the rest of that stockpile so that it contained no more than 5% uranium-235. In addition, Tehran has implemented various restrictions on, and provided the IAEA with additional information about, its nuclear program pursuant to the July 2015 Joint Comprehensive Plan of Action (JCPOA), which Tehran concluded with the P5+1. Although Iran claims that its nuclear program is exclusively for peaceful purposes, the program has generated considerable concern that Tehran is pursuing a nuclear weapons program. The U.N. Security Council responded to Iran's refusal to suspend work on its uranium enrichment program by adopting several resolutions that imposed sanctions on Tehran. Despite evidence that sanctions and other forms of pressure have slowed the program, Iran continued to enrich uranium, install additional centrifuges, and conduct research on new types of centrifuges. Tehran has also worked on a heavy-water reactor, which was a proliferation concern because its spent fuel would have contained plutonium—the other type of fissile material used in nuclear weapons. However, plutonium must be separated from spent fuel—a procedure called \"reprocessing.\" Iran has said that it will not engage in reprocessing. Who Is Monitoring Iran's Nuclear Program? The International Atomic Energy Agency (IAEA) monitors Iran's nuclear facilities and has verified that Tehran's declared nuclear facilities and materials have not been diverted for military purposes. The agency has also verified that Iran's compliance with the JCPOA. On the JCPOA's Implementation Day, which took place on January 16, 2016, all of the previous Security Council resolutions' requirements were terminated. The nuclear Nonproliferation Treaty (NPT) and U.N. Security Council Resolution 2231, which the council adopted on July 20, 2015, compose the current legal framework governing Iran's nuclear program. Iran has continued to comply with the JCPOA and Resolution 2231. Iran and the IAEA agreed in 2007 on a work plan to clarify outstanding questions regarding Tehran's nuclear program, most of which concerned possible Iranian procurement activities and research directly applicable to nuclear weapons development. A December 2015 report to the IAEA Board of Governors from agency Director-General Yukiya Amano contains the IAEA's \"final assessment on the resolution\" of these outstanding issues. How Soon Could Iran Produce a Nuclear Weapon? Then-Under Secretary of State for Political Affairs Wendy Sherman explained during an October 2013 hearing of the Senate Committee on Foreign Relations that Iran would need as much as one year to produce a nuclear weapon if the government decided to do so. At the time, Tehran would have needed two to three months to produce enough weapons-grade HEU for a nuclear weapon. Iran's compliance with the JCPOA has increased that time frame to one year, according to U.S. officials. These estimates apparently assume that Iran would use its declared nuclear facilities to produce fissile material for a weapon. However, Tehran would probably use covert facilities for this purpose; Iranian efforts to produce fissile material for nuclear weapons by using its known nuclear facilities would almost certainly be detected by the IAEA.", "document_type": "crs"}
{"report": "In the Federalist Papers , James Madison commented that \"no man is allowed to be a judge in his own case, because his interest would certainly bias his judgment, and, not improbably, corrupt his integrity. With equal, nay with greater reason, a body of men are unfit to be both judge and parties at the same time.\" Since the first session of Congress in 1789, the House of Representatives and the Senate have contemplated how to judge fellow Members. Investigating and judging Members of Congress continues to be an issue for Congress. In 1964, the Senate established the Select Committee on Ethics, and in 1967, the House created the Committee on Standards of Official Conduct, which was renamed the Committee on Ethics in the 112 th Congress (2011-2012). These two committees formally assumed the duties of investigating allegations of wrongdoing against Members of their respective chambers. In the House, the Committee on Ethics has had sole responsibility to investigate and recommend the discipline of Members. Self-discipline by the Committee on Ethics has, at various times, been considered problematic, as Members are dependent on one another to do their jobs, bring individual perspectives on chamber rules to investigations, and are judged by the public at the same time they are judging congressional colleagues. This creates a difficult investigative environment and often leads to closed-door investigations and media allegations of improper enforcement of chamber rules. Historically, Congress has used its ethics power neither arbitrarily nor frequently. Congress has, however, \"periodically tightened its ethics codes and procedures for dealing with misconduct.\" In addition to amending internal congressional ethics codes and procedures, Congress has considered numerous legislative proposals since 1951 to create an independent ethics advisory body that would replace or assist the Committee on Ethics with investigations or enforcement. In the 110 th Congress (2007-2008), the House created the Office of Congressional Ethics (OCE) to review complaints, and when appropriate, refer findings of fact to the Committee on Ethics. The OCE is the first independent, outside body charged by Congress to investigate complaints against Members and refer valid complaints to the Committee on Ethics. The OCE is intended to perform an important public service for the House and the public by assuring the integrity of the chamber. It provides a way for groups and individuals to provide information about alleged misconduct by Members, officers, and employees of the House to an investigative body. The office is designed to \"supplement but not supplant\" the role of the House Committee on Ethics. The OCE formally opened on January 23, 2009, after adopting rules for conducting investigations and a code of conduct for its board members and staff. It has jurisdiction only over current Members, officers, and employees of the House. This report focuses only on the House of Representatives and the House ethics process. Since the establishment of the Senate Select Committee on Ethics and the House Committee on Ethics, members of both committees have sometimes been perceived as reluctant to investigate and discipline colleagues. Seeking to be fair and not to pre-judge or prejudice the consideration of an allegation, the committees operate with little publicity. As a result they have often been criticized by the media for \"failure to properly implement and enforce the internal rules of their respective house of Congress.\" Until 2008, these perceptions led to unsuccessful calls for investigative and enforcement mechanisms to supplement or replace the ethics committees. Over the years, proposals have been offered to create an office of public integrity, an independent ethics commission, and a public review board or office within the legislative branch, composed of former Members of Congress, retired judges, private citizens, or a combination of these. For some, having a panel of senior statesmen help investigate allegations of wrongdoing by Members of Congress is viewed as a way to strengthen Congress. Dennis Thompson, a Harvard professor of public policy and congressional scholar, has long advocated countering the institutional conflict of interest inherent in Members judging Members with an independent body such as an ethics commission. Thompson sees such an outside body as likely to reach more objective and independent judgments. It could more credibly protect members' rights and enforce institutional obligations without regard to political or personal loyalties. It would provide more effective accountability and help restore the confidence of the public. And—an advantage that should appeal to Congress—it would reduce the time members would have to spend on the chores of ethics regulation. Beginning in 1951, even before the ethics committees were created, there were legislative proposals to create an independent entity to investigate complaints in both the House and the Senate or within one house. None of these were enacted. Only the legislative proposals that prompted hearings are discussed below. Proposals receiving no committee action are listed in Table 1 and Table 2 . Between 1951 and 1996, several proposals were introduced in both the House and Senate to create a bicameral independent ethics panel. In 1951, Senate hearings were held on a proposal to create a Commission on Ethics in Government. In 1993, 42 years later, the Joint Committee on the Organization of Congress held hearings on the congressional ethics process. Table 1 also lists legislation introduced to create a Congress-wide independent ethics entity. In the 82 nd Congress (1951-1952), Senator J. William Fulbright introduced S.Con.Res. 21, to create a congressional commission to \"strengthen the faith and confidence of the American people in their Government by assisting in the establishment of higher moral standards in the official conduct of the executive and legislative branches of the Government.\" The resolution was referred to the Senate Committee on Labor and Human Resources, where a special subcommittee was established to examine the resolution. Chaired by Senator Paul Douglas, the Special Subcommittee on the Establishment of a Commission on Ethics in Government held a series of hearings in June and July of 1951. In his introductory remarks, Senator Douglas summarized the importance of ethical standards and why the hearings would focus on more than just Senator Fulbright's concurrent resolution. I think the time has come for positive proposals to deal with the ethical problems of government. This should include not merely the executive agencies, but the Congress itself—because if we investigate others, we should be willing to submit ourselves to investigation—and all private citizens. We all have a great stake in lifting the standards of our governmental performance. Following the hearings, the subcommittee endorsed the passage of S.Con.Res. 21 and the creation of a commission on ethics in government. The subcommittee recommended that A Commission on Ethics in Government should be established by joint resolution of Congress. The Commission's function should be twofold, the first to investigate and report to the President and to the Congress on the moral standards of official conduct of officers and employees of the United States; the effect thereon of the moral standards in business and political activity of persons and groups doing business with the Government or seeking to influence public policy and administration; and the moral standards generally prevailing in society which condition the conduct of public affairs or which affect the strength and unity of the Nation. ... The second function of the Commission should be to recommend measures to improve and maintain at a high level moral standards of official conduct in the Federal Government and of all persons who participate in or are responsible for the conduct of public affairs. It should be noted that the Commission would not be concerned with the morals of individuals—governmental personnel or private citizens—except as they are involved in the conduct of public affairs. In addition to recommending the creation of a commission, the subcommittee also recommended amendments to the Administrative Procedure Act; mandatory disclosure of income, assets, and certain transactions by Members of Congress and certain federal officials; a thorough study of proposed changes to criminal law governing conflict of interest and bribery laws; creation of a citizens' organization to work for better government on the national level; and 12 measures related to ethics issues that merited additional study and consideration. S.Con.Res. 21 was not debated further in either the full committee or on the Senate floor. In 1993, the Joint Committee on the Organization of Congress held hearings on the congressional ethics process that included former and incumbent Members of Congress, as well as academic scholars. Their testimonies dealt with the advantages and disadvantages of independent ethics entities and how an outside body might assist the ethics committees in the enforcement of congressional rules of conduct. The joint committee's final report summarized the differing opinions of witnesses on the role of an independent entity and its ramifications on Congress: While no witnesses advocated giving the entire responsibility to a group of outsiders, some wanted non-members to be able to investigate charges and recommend punishment. Representative Robert Andrews, when testifying in favor of an external ethics commission, said, \"Our system purports to conduct review of ethics by our peers, but I think we misdefine what it means to be a peer. Ultimately, our peers are not fellow Representatives or Senators, ultimately our peers are ordinary citizens.\" Conversely, other witnesses wanted ethics proceedings to be conducted only by members. As former Senator Warren Rudman testified, \"I believe that the Constitution, when it says that we ought to be the judge of our own members, means precisely what it says.\" A former Chairman of the Standards of Official Conduct Committee, Representative Louis Stokes was \"troubled by calls for further procedural reforms, which are based on the notion that the Ethics Committee has not done its job or has not done it properly.\" Subsequently, the House members of the committee recommended that \"the Committee on Standards of Official Conduct should be authorized to use, on a discretionary basis, a panel of non-members in ethics cases.\" No further action was taken on any of the ethics proposals discussed by the joint committee. Prior to the passage of H.Res. 895 in the 110 th Congress (2007-2008), the House considered numerous proposals to create an independent ethics commission. These proposals ranged in scope and included proposals to abolish the Committee on Standards of Official Conduct, authorize an independent entity for all ethics issues, and create an independent entity to work with the committee. Prior to H.Res. 895 , none of the proposals received further consideration after being referred to committee. Table 2 lists proposals that were offered between 1988 and 2007 to create an independent ethics entity in the House. While none of the legislative proposals listed in Table 2 moved beyond introduction, in 2007, the Speaker of the House and the minority leader restarted the conversation about an independent ethics entity by creating a Special Task Force on Ethics Enforcement. The result of the task force's work was the introduction of H.Res. 895 (110 th Congress) and the creation of the Office of Congressional Ethics to collect information from the public; investigate Members, officers, and staff of the House of Representatives; and provide that information to the House Committee on Ethics. On January 31, 2007, House Speaker Nancy Pelosi and Minority Leader John Boehner announced the creation of the Special Task Force on Ethics Enforcement in the House of Representatives. Chaired by Representative Michael Capuano, the task force was charged with considering \"whether the House should create an outside enforcement entity, based on examples in state legislatures and private entities.\" During the next eight months, the task force met 29 times in executive session to discuss the investigative process and to hear from current and former Members of Congress, academic experts, and citizen advocacy groups. The executive sessions both preceded and followed a public hearing in April 2007. Establishment of the task force was part of Speaker Nancy Pelosi's emphasis on ethics reform in the 110 th Congress and followed several congressional scandals in the previous Congresses. In January 2006, congressional Democrats from around the country joined in a Washington, DC, press conference to pledge \"honest leadership and open government.\" At the same time, Public Citizen, a watchdog group, issued a list of six benchmarks for reform which included the establishment of an independent congressional Office of Public Integrity to monitor allegations of ethics violations and refer them to the congressional ethics committees. Public opinion also appeared to favor reform; a January 2006 CNN/USAToday/Gallup poll found that \"corruption in government\" was ranked as an \"extremely important\" or \"very important\" issue by 81% of respondents. On April 19, 2007, the Special Task Force on Ethics Enforcement held a public hearing to discuss \"whether the House should create an independent entity relative to the ethics process, and if so, what form, makeup, authority, et cetera, that entity should be.\" In his opening remarks, Ranking Member Lamar Smith summarized both the positive and negative aspects of creating an independent ethics entity in the House. Today we examine proposals to create an independent ethics commission. I know there are some independent legislative ethics commissions operating ... that would have been considered a success. But I also know there are unique items at work in Washington, DC, and issues of Federal law that do not apply elsewhere. I know some see the need for a commission that operates independently of the duly elected membership of the House of Representatives. Yet I also know there are those who are concerned that the ethics enforcement entity not be so independent from duly elected members that it upsets the checks and balances. That system must exist within our Constitution which requires separation of powers among the executive, judicial and legislative branches. The task force heard from four witnesses, three in favor of an independent ethics entity and one who was opposed. Testifying in favor of an independent entity were Tom Fitton, president of Judicial Watch; Meredith McGehee, policy director of the Campaign Legal Center; and Fred Wertheimer, president of Democracy 21. They each spoke of their belief that creating an independent, impartial, and investigative entity would end the conflict of interest that exists when Members are asked to judge their colleagues. For example, Tom Fitton testified that the \"House ethics process is broken and in need of reform,\" and that \"[a]s this Task Force considers ways for the House to honor its constitutional obligation to uphold its own rules of conduct, I respectfully suggest you strongly consider an independent entity, answerable to House members, which can undertake investigations and make independent findings and recommendations for action to the appropriate House body.\" Testifying against an independent ethics entity was Don Wolfensberger, director of the Congress Project at the Woodrow Wilson International Center for Scholars. Mr. Wolfensberger stated, The bottom line is that the power of Congress to punish its members is rooted in the need to protect the institution from actions and behavior that would bring the body into disrepute or disarray. It is not a power that can be properly exercised, even in part, by non-members for the very reason that only members have the institutional sense, instincts, and legitimacy to exercise it correctly and effectively for the good of the House. Others would tend to confine themselves to the question of justice for the individual member accused. Mr. Wolfensberger further suggested that the House ethics process could be strengthened if the chair and ranking Member kept the full committee membership apprised of the status of all complaints filed with the committee; the full committee determined when an investigative subcommittee should be created; an investigative subcommittee was not allowed to enter into an agreement with a respondent, but instead recommended a proposed settlement that the full committee could finalize, modify, or reject; when an investigative subcommittee report did not adopt a statement of alleged violation, it should be sent to the House (and public) and not to the full committee; and the committee's authority to issue a letter of reproval or other appropriate action be available, as a matter of privilege, for possible House action. Following the hearing, Representative Capuano received a letter signed by 27 House Democrats asking the task force to \"address the structural flaws that underlie the current enforcement process.\" Our current ethics process is also out of step with how these matters are handled in almost half the state legislatures. The experience in the states has proven that effective safeguards can be put in place to deter potential abuse of the ethics process without undermining its integrity and free of any constitutional concerns. Under such a revamped ethics process, final determination of any alleged ethical misconduct would remain the responsibility of the members, as is constitutionally required. We believe that building greater independence into the ethics enforcement process, especially in the investigatory phase, is an appropriate response to the problems of the past and will be a safeguard against any recurrences. In December 2007, the Special Task Force on Ethics Enforcement issued its final report. Only the Democratic members of the task force, however, penned their names to the report. The Republican members chose to withhold comment. The report recommended the creation of an Office of Congressional Ethics as an independent office within the House to \"review information on allegations of misconduct by members, officers, and employees of the House and make recommendations to the Committee on Standards of Official Conduct for the Committee's official consideration and action.\" The task force proposed a six-member entity to investigate possible violations of House rules. The report stated that \"[t]he new Office of Congressional Ethics will act as an origination point for independent review of possible violations of standards of conduct, but will not prevent the Standards Committee from accepting complaints filed by members.\" In a press release accompanying the report, Representative Capuano reported that the task force was recommending that a nonpartisan professional staff be hired by the panel, and current House Members and lobbyists not be permitted to serve on the panel; the OCE conduct preliminary reviews, then refer all matters subject to a second-phase review to the Committee on Standards for disposition; if no merit is found, the board may recommend dismissal; the OCE be given up to 30 calendar days or 5 legislative days, whichever was greater, to conduct a preliminary review, and 45 calendar days or 5 legislative days to review a matter in the second phase before referral to the Committee on Standards; the Committee on Standards be given up to 45 calendar or 5 legislative days, whichever was greater, to consider the matter as allowed pursuant to current Committee on Standards Rules 16b-16e; and the Committee on Standards be required to make a public statement, or finding, on referrals from the OCE by the end of the 45-calendar-day or 5-legislative-day period. In coordination with the release of the task force members' report recommending the creation of an independent ethics entity, Representative Capuano introduced H.Res. 895 on December 19, 2007. In preparation for a Committee on Rules hearing on H.Res. 895 , Representative Capuano sent a Dear Colleague letter in March 2008 and wrote an opinion article in Roll Call advocating adoption of the task force's recommendations for an independent ethics entity. On March 10, the Committee on Rules reported H.Res. 1031 , which provided for adoption of H.Res. 895 , as amended, with a recommendation that the resolution be adopted. The Committee on Rules report included amendments to H.Res. 895 that were to be considered as adopted. The amendments made 13 changes to the original text of H.Res. 895 . A comparison of the amendments adopted by the Committee on Rules and the original language, as proposed by Representative Capuano, can be found in the Appendix . On March 11, 2008, the House debated and agreed to H.Res. 1031 , which provided for the adoption of H.Res. 895 , as amended under a closed, self-executing rule. In his remarks following the passage of H.Res. 895 , Representative Capuano stated, Tonight's passage of H.Res. 895 establishing an Office of Congressional Ethics (OCE) represents the most dramatic progress in years in the drive to strengthen ethics enforcement in the House. It is the culmination of many months of deliberation and review by the Special Task Force on Ethics Enforcement, created jointly by Speaker Pelosi and Minority Leader Boehner. I strongly believe that the approach we have taken to ethics enforcement will improve the reputation of the House and will break the appearance of an 'old boy network' forever. The OCE brings a level of independence to the process because no current members of Congress can serve on the panel. It also brings a level of transparency that is sorely lacking in the current process by requiring that a public statement be issued on most matters reviewed by the OCE. Taken together, these two fundamental elements will go a long way toward restoring the public's confidence in the people's House. The OCE held its first public meeting on January 23, 2009, and began to implement the structural requirements of H.Res. 895 . It also adopted rules of procedure, a code of conduct, and rules for the conduct of a review. The Office of Congressional Ethics was most recently reauthorized by the House as part of the rules package (H.Res. 6) adopted by the 116 th Congress on January 3, 2019. The following sections outline the structure, powers, authority, and procedures of the OCE. The OCE is structured to be nonpartisan. This goal is reflected in the composition of the board's membership, leadership schema, statutory qualifications, employment status of its members and staff, and required oath (or affirmation) of office. In addition, the authorizing resolution specifies a particular hiring process and requires an oath (or affirmation) of staff that OCE information not be disclosed. Six members and two alternates constitute the board. Each member may serve for two Congresses and may be reappointed. Three members and an alternate are appointed by the Speaker, after consultation with the minority leader. Additionally, three members and an alternate are appointed by the minority leader, after consultation with the Speaker. Vacancies on the board are filled by the most senior alternate nominated by the same congressional leader who nominated the departing member. The alternate serves on the board until a replacement is named. If a permanent replacement is not named within 90 days of the vacancy, the alternate continues to serve for the remainder of the term, and the Speaker or minority leader, as applicable, is to nominate a new alternate. The Speaker and the minority leader, acting jointly, may remove a board member for cause. The OCE membership structure is designed to create an incentive for the Speaker and the minority leader to consult when choosing board members. Because no formal confirmation process was established in H.Res. 895 , the nominations of the Speaker and the minority leader result in de facto appointments of chosen individuals to the board. Table 3 lists the members of the board for the 116 th Congress. Pursuant to H.Res. 895 (110 th Congress), Members of the OCE board were restricted to serving on the board for no more than four consecutive Congresses (two consecutive terms). In the 115 th Congress (2017-2018), the House adopted H.Res. 5 , which removed term limits for most board members. This remains in effect for the 116 th Congress. Before board members begin their term, they are required to sign a document agreeing not to be a candidate for the U.S. Senate or the House of Representatives and execute an oath or affirmation on disclosure of information. Copies of the signed document are retained by the Clerk of the House as part of the records of the House. The Clerk makes the documents available to the public, publishes the documents as part of the Congressional Record , and makes a cumulative list of names available on the Clerk's website. The document contains the following statement: I agree not to be a candidate for the Office of Senator or Representative in, or Delegate or Resident Commissioner to, the Congress for purposes of the Federal Election Campaign Act of 1971 until at least 3 years after I am no longer a member of the board or staff of the Office of Congressional Ethics. Additionally, board members must execute an oath or affirmation in writing prior to assuming board responsibilities. Copies of the oath or affirmation are provided to the Clerk as part of the records of the House. The text of the oath is as follows: I do solemnly swear (or affirm) that I will not disclose to any person or entity outside of the Office any information received in the course of my service with the Office, except as authorized by the board as necessary to conduct official business or pursuant to its rules. The board is led by a chair and a co-chair. The chair is designated by the Speaker and the co-chair is designated by the minority leader. The chair, or a majority of board members, has the authority to call a board meeting. Board members are expected to be \"individuals of exceptional public standing who are specifically qualified to serve on the board by virtue of their education, training, or experience in one or more of the following fields: legislative, judicial, regulatory, professional ethics, business, legal, and academic.\" Selection of board members is to be made without regard to political affiliation. Individuals are prohibited from serving as board members if they were (1) a registered lobbyist under the Lobbying Disclosure Act of 1995; (2) registered as a lobbyist during the year prior to appointment; (3) engaged in lobbying, or employed to lobby Congress; (4) an agent of a foreign principal registered under the Foreign Agents Registration Act (FARA); (5) a Member of Congress; or (6) an officer or employee of the federal government. Additionally, former Members, officers, and employees of the House cannot be appointed to the board in the year following their time as a Member, officer, or employee of the House. Restrictions on the political and outside activities of board members are designed to create the independent, nonpartisan group necessary to conduct investigations in an expeditious manner. As explained under \" Investigative Procedure ,\" the OCE has a short time frame to conduct investigations. Members of the OCE board are not considered officers or employees of the House, but do receive remuneration for their service. Board members receive a per diem equal to the daily equivalent of the minimum rate of basic pay for GS-15 employees of the General Schedule for each day of service, including travel time. Pay is only for time when the board member is engaged in performance of duties for the board. The board, with the affirmative vote of at least four members, has the authority to hire staff and fix their compensation. Staff is prohibited from engaging in \"partisan political activity directly affecting any congressional or presidential election,\" and may not \"accept public speaking engagements or write for publication on any subject that is in any way related to [their] employment or duties with the Office without specific prior approval from the chairman and cochairman.\" The board can terminate an employee with an affirmative vote of at least four members. Before staff may begin employment they are required to execute an oath or affirmation on disclosure of information. Copies of the oath or affirmation are provided to the Clerk as part of the records of the House. The text of the oath is as follows: I do solemnly swear (or affirm) that I will not disclose to any person or entity outside of the Office any information received in the course of my service with the Office, except as authorized by the board as necessary to conduct official business or pursuant to its rules. Staff is required to be impartial and unbiased when conducting an investigation. If a staff member has a conflict of interest arising from \"a personal or professional relationship with a subject, a subject's opponent in any election or a witness involved in an investigation, staff shall disclose that fact to the Staff Director who shall disclose it to the Board.\" If the board determines the investigator cannot be impartial, he or she can be terminated from that investigation. The OCE is provided with specific powers to conduct investigations, hold hearings, pay witnesses, and adopt rules. Some of these powers are enumerated in the OCE's authorizing resolution, and others are detailed in rules of conduct to be approved by the OCE. The OCE's primary responsibility is to conduct investigations in an independent, nonpartisan manner, regarding allegations of misconduct against Members, officers, and staff of the House. Following the investigation, the OCE is charged with referring matters, when appropriate, to the Committee on Ethics. Investigations by the OCE are restricted to activities that occurred after March 11, 2008, where a violation of \"law, rule, regulation, or other standard of conduct in effect at the time the conduct occurred and [were] applicable to the subject in the performance of his or her duties or the discharge of his or her responsibilities.\" In the 114 th Congress, two changes related to OCE's investigations were made with the adoption of H.Res. 5 . First, \"any individual who is the subject of a preliminary review or second-phase review by the board shall be informed of the right to be represented by counsel and invoking that right should not be held negatively against them.\" Second, the OCE has been instructed that it \"may not take any action that would deny any person any right or protection provided under the Constitution of the United States.\" In the 115 th and 116 th Congresses, these provisions were continued. The OCE is authorized to conduct meetings, hold hearings, meet in executive session, solicit testimony, and receive evidence necessary to conduct investigations. Pursuant to OCE rules, documents, recordings, or physical evidence \"that was obtained in violation of any law, rule, or regulation\" may not be reviewed. To ensure compliance, individuals submitting evidence to the OCE are asked to affirm that the evidence was not obtained in an illegal manner. OCE rules also allow for witnesses and individuals subject to investigation to submit written comments to the OCE. The OCE is also prohibited from considering privileged evidence without a waiver from the House. The OCE is authorized to pay witnesses in the same manner as prescribed in House Rule XI, clause 5. The OCE is authorized to adopt rules necessary to carry out its duties. H.Res. 895 prescribes five rules that the OCE must adopt. These rules cover termination of a preliminary review on any ground, including de minimis matters; recommendations calling for the Committee on Ethics to dismiss a matter that was subject to a second-phase review on any ground, including being de minimis in nature; witness signing statements, acknowledging that the False Statements Act applies to testimony and documents provided to the OCE; prohibition of ex parte communications between board members or OCE staff and individuals who are subjects of review or interested parties, and communication between Members, officers, or employees of the House with board members or OCE staff regarding matters under review, except as authorized by the board; and an OCE code of conduct, which includes the avoidance of conflicts of interest, to govern the behavior of board members and staff. The OCE is required to establish procedures to prevent the unauthorized disclosure of information received by the office. Breaches in confidentiality are to be investigated by the board. Testimony received or information obtained by the OCE may not be disclosed to any individual or group outside the OCE without the authorization of the board for purposes of conducting official business. Testimony before the Committee on Ethics by board members and staff is exempt from disclosure requirements. Prior to transmittal of recommendations or statements to the Committee on Ethics, individuals under investigation have the right to present, orally or in writing, a statement on the investigation to the board. Pursuant to the authority granted by H.Res. 895 , Section 1(c)(2)(F), the board is authorized to create an investigatory process to examine and make recommendations on cases brought to the OCE's attention. The process consists of four steps: submission of information, preliminary review, second-phase review, and referral to the Committee on Ethics for further investigation or dismissal of the complaint. Each step, with its authority pursuant to H.Res. 895 , and relevant OCE rules are detailed below. The OCE was established to conduct independent, nonpartisan reviews of allegations of misconduct by Members, officers, and employees of the House and, when appropriate, to refer matters to the Committee on Ethics under the Rules of the House. Accordingly, it has established procedures for the public to file information alleging wrongdoing and outlines the process for doing so on its website, http://oce.house.gov . The following should be included in any submission: (1) the name, address, telephone number and e-mail address, if any, of the person submitting the information, and the organization s/he is affiliated with, if any; (2) the full name of the subject of the allegation; (3) the date(s) the alleged conduct occurred; (4) a concise statement of facts (or, the source of the information in the event that the person submitting the information does not have first-hand knowledge of the facts); (5) the law, regulation or rule allegedly violated, if known; (6) if applicable, name(s) and contact information for any potential witness(es); (7) if applicable, copies of any documents related to the allegation; and (8) a signed declaration acknowledging that section 1001 of title 18 United States Code (popularly known as the False Statement Act) applies to the information provided. A copy of the False Statements [Act] is available on the OCE's website and can be provided on request. All information will be reviewed by the OCE; however, submitting information does not trigger an investigation. The decision to begin an investigation (preliminary review) lies solely with the Board. OCE staff is to review information submitted by the public as well as information derived from other sources, including the press. OCE staff or any board member may submit information for the board's consideration. For an investigation to proceed, at least two board members must concur. The first stage of an investigation is a preliminary review. The preliminary review requires a \" reasonable basis to believe the allegation based on all the information then known to the board,\" the written concurrence of two board members (one appointed by the Speaker and one by the minority leader), and written notification by the board to the Committee on Ethics and the individual subject to the review. Once a preliminary review has begun, it must be completed within 30 calendar or 5 legislative days, whichever is later, from the receipt of the written request by a minimum of two board members. Prior to, or at the conclusion of, the 30 calendar or 5 legislative days, the board votes on whether to continue the review and advance the inquiry to a second-phase. To continue the review, the board must find \" probable cause to believe the alleged violation occurred based on all the information then known to the board.\" An affirmative vote of at least three board members is required to proceed to a second-phase review. If the board does not vote to begin a second-phase investigation by the end of the 30-calendar- or 5-legislative-day time period, the investigation is terminated. The board, however, may vote to terminate an investigation at any time during the preliminary-phase review with the affirmative vote of at least four members. Regardless of the OCE's decision on proceeding to a second-phase review, the board must notify, in writing, both the Committee on Ethics and the individual under investigation of the board's decision to continue or terminate the investigation. If the board terminates the inquiry, it has the option of sending a report to the Committee on Ethics with its findings. Should the board vote to conduct a second-phase review, it must be completed within 45 calendar or 5 legislative days, whichever is later. Should the board determine that additional time is needed to conduct the second-phase review, the time period can be extended for an additional 14 calendar days upon a majority vote of the board. This requires the affirmative vote of at least four board members. House rules also require that \"any individual who is the subject of a preliminary review or second-phase review by the board shall be informed of the right to be represented by counsel and invoking that right should not be held negatively against such individual.\" When the OCE completes the second-phase review, the board is required to transmit a written report, its findings, if any, and any supporting documentation to the Committee on Ethics. The referrals must be accompanied by two documents: (1) a report which recommends dismissal, further inquiry, or states that the board vote was a tie, and (2) findings. Neither document is to contain conclusions regarding the validity of the allegation or the guilt or innocence of the person subject to the review—such matters are the sole purview of the Committee on Ethics. The OCE is also obligated to transmit the findings of its investigation, if any, to the Committee on Ethics along with supporting documentation. The findings should include findings of fact; descriptions of relevant information that was not obtained and witnesses not interviewed; recommendations for the issuance of subpoenas; and citations of relevant law, rule, regulation, or standard of conduct relevant to the investigation. The findings should not include the names of cooperative witnesses, any conclusions regarding the validity of the allegations, or statements on the guilt or innocence of the investigative subject. With the findings, the OCE may submit supporting documents, and provide the subject of the investigation a copy of the written report. Like the House Committee on Ethics, the OCE does not have jurisdiction over former Members of the House. Thus, once a Member leaves office, any inquiry or investigation against him or her by either entity will cease in whatever phase a review may be. At the conclusion of any second-phase review, the OCE is required to submit a report, and may submit findings and supporting documentation, to the Committee on Ethics for final disposition. Pursuant to Article 1, Section 5, clause 2 of the Constitution, \"[e]ach House may determine the rules of its proceedings, punish its members for disorderly Behaviour, and, with the Concurrence of two thirds, expel a member.\" For the House of Representatives, the investigative role is generally delegated to the Committee on Ethics. Pursuant to House Rules, the Committee on Ethics can also open an investigation without an OCE referral. Pursuant to House rules, the Committee on Ethics may not receive any referral within 60 days before a federal, state, or local election in which the subject of the case is a candidate. Once the Committee on Ethics receives a referral from the OCE, it must act within 45 days. At that time, the chair must publicly release the committee's actions together with the OCE report and findings, unless the chair and ranking Member jointly decide, or the committee votes, to withhold the information for an additional 45 days. The committee is not required to release the OCE findings if it agrees with an OCE decision to dismiss a particular case or chooses to dismiss a case left unresolved by the OCE. The committee does, however, have the option of making the OCE report and findings public. If the committee decides to take the additional 45 days to consider an OCE referral, at the end of the second 45 days, the chair is required to make public the OCE written report and findings unless the committee votes to initiate an investigation. Should the committee proceed to an investigation, only that fact is announced. The announcement must include the name of the applicable Member, officer, or employee, and the alleged violation(s). If the committee deadlocks on a matter referred by the OCE, it must release the OCE's report and findings. At the end of each Congress, any reports and findings not previously related are required to be released. In the event the Committee on Ethics conducts an investigation, it is conducted pursuant to established committee rules. Pursuant to these rules, action on a case may be deferred at the request of law enforcement or regulatory authorities. Before the Committee on Ethics publicly releases OCE findings and the committee's statement and report, if any, on a referral, the committee is required to give advanced notice of one calendar day to the OCE and any Member, officer, or employee who was the subject of a referral. The Capuano task force envisioned that the Committee on Ethics and the OCE would work closely. The committee is to be notified early and throughout an OCE review. The committee may also ask the OCE to stop a review if the allegation becomes the subject of a Committee on Ethics investigation. In such an occurrence, the OCE board is required to refer the case to the committee, and to treat the matter under the same rules as other OCE referrals. If the committee does not reach a conclusion, it must notify the OCE board. The OCE board may choose to complete a suspended review. Once a matter is returned to the OCE, it must proceed according to the established process outlined above under \" Investigative Procedure .\" The OCE may also, when appropriate, refer allegations to the Office of Congressional Workplace Rights, House Office of the Inspector General, House Commission on Congressional Mail Standards, and state and federal authorities. OCE Rule 13 dictates situations under which referral to one of these entities may be made. Allegations related to laws covered by the Congressional Accountability Act may be referred to the Office of Congressional Workplace Rights. Allegations of \"fraud, waste and abuse in the operations of the House or joint entities of Congress\" may be referred to the Office of the House Inspector General. Allegations \"relating to the proper use of the franking privilege\" may be referred to the House Commission on Congressional Mailing Standards. In consultation with the OCE chair and co-chair, the OCE staff can refer \"information to state and federal authorities in the event that information indicates imminent harm or a threat to public safety.\" Pursuant to H.Res. 895 , the OCE is authorized \"such sums as necessary\" from applicable accounts of the House. Payments made by the OCE are made on vouchers signed by the chair of the board and approved in the manner directed by the Committee on House Administration. All funds expended by the OCE are subject to regulations prescribed by the Committee on House Administration. Table 4 shows the annual appropriations for the OCE since its inception in FY2009. Since the OCE was reauthorized in January 2009, the OCE, although not mandated to do so, has issued quarterly reports. Each quarterly report provides a brief summary of OCE activities, including citizen communications, a summary of the OCE process, and a summary of board actions taken during the quarter and for the Congress. Table 5 provides a summary of the number of cases OCE has considered between 2009 and 2018. Creation of the OCE changed the relationship between the public and the House ethics process. Even with OCE active since 2009, there continue to be options which might further clarify the OCE's relationship with the public, rank-and-file House Members, and the Committee on Ethics. These options each have advantages and disadvantages for the structure of the OCE, its relationship to the Committee on Ethics, and the House's constitutional responsibility to investigate its Members. Consequently, careful comparison of all options for the future of the OCE may be useful to ensure that the most effective process is created while ensuring the continued enforcement of House ethics procedures. CRS takes no position on any of the options identified in this report. The OCE exists pursuant to H.Res. 895 (110 th Congress) and faces renewal on a biannual basis as part of the House rules package. In January 2019, the OCE was reauthorized when H.Res. 6 was agreed to. Because the OCE operates pursuant to a House resolution, a change in party control or a decision to exclude the OCE from the rules package in a future Congress might result in the elimination of the office. If the House wanted to ensure the OCE's continuation, it could create a statutory ethics entity. A permanent statutory office would not require reauthorization each Congress. If the House chose to create a statutory office, should the House desire to alter or terminate the program, subsequent legislation would be necessary to amend or terminate the program. Creation of a statutory ethics office, even if only in the House, would require the concurrence of the Senate and the President's signature. Prior to the creation of the OCE, the Committee on Ethics did not allow public complaints to be to made against Members of Congress. If the House wanted to provide an opportunity for citizens to be involved in the ethics process without the creation of an independent ethics entity (either by resolution or statute), the House could amend House or committee rules to allow the Committee on Ethics to receive formal complaints or information from the general public. Allowing the public to provide information directly to the Committee on Ethics could allay constitutional concerns over the involvement of an independent entity in investigating and recommending action on internal House enforcement matters. Instead of giving power to an outside entity, the Committee on Ethics could establish mechanisms for the intake and evaluation of citizen complaints prior to investigation and potential action of the full committee. This work could be handled by a subcommittee or by the whole committee. Should the Committee on Ethics assume this responsibility, the committee's workload could increase substantially. The OCE specifies the number of contacts its staff has with the public and the number of investigations authorized as part of quarterly reports. It is possible that providing the public with direct access to the Committee on Ethics might result in more information (at least at the level currently handled by the OCE) being provided by the public. In addition, a citizen or group providing information might expect the committee to provide updates on the status of investigations. The relationship between the OCE and the Committee on Ethics continues to evolve. Under the provisions of H.Res. 895, as the OCE completes second-phase reviews and determines that a further investigation is necessary, the OCE board forwards a report and supporting documentation to the Committee on Ethics. The House could provide the OCE with limited subpoena power to enable the OCE board to conduct more thorough investigations prior to referral to the Committee on Ethics. Providing subpoena power to the OCE might reduce the workload and investigative burden of the Committee on Ethics and prevent duplicative efforts on behalf of the OCE and committee staffs. Chairman Capuano, in the task force report, explained that consideration was given to empowering the OCE with subpoena power. During the discussions, the task force sought the professional opinion of numerous experts (including the House parliamentarian, House general counsel, and the Congressional Research Service). The decision not to include subpoena authority was based on various factors, including timeliness. Challenges to a subpoena, it was felt, could hinder and complicate the OCE process and prevent a prompt investigation. Moreover, because of Congress's reluctance to delegate subpoena authority to independent entities, if the task force had recommended giving the OCE that authority, the legislative process might have been delayed while the House debated the merits of the proposal. Currently, if a subpoena is deemed necessary, the House provides the OCE with the ability to recommend to the Committee on Ethics that a subpoena be issued, as part of the authority already delegated to the committee. The House could also provide a mechanism whereby the OCE could formally follow up on investigations forwarded to the Committee on Ethics. Pursuant to current practice, the OCE has no recourse to follow a case once it is referred to the committee. Committee rules require that the committee release the OCE report under certain circumstances. On March 5, 2009, Representative Ron Paul introduced H.Res. 216. The resolution, if agreed to by the House, would have amended House Rules to require a certain period of time to elapse between introduction of legislation and a vote by the House. Included in the resolutions provisions, Rule XXIX would be amended to allow citizens to petition the board of the Office of Congressional Ethics to investigate potential violations of the new rule. Notwithstanding any provision of these rules, any citizen who is eligible to vote and who is not an employee of the executive or judicial branch of the Government may petition the board of the Office of Congressional Ethics to investigate allegations that a member voted for any measure that violated this rule. The addition to the OCE's jurisdiction by amending House rules could be a way to involve the investigative expertise of the OCE in other House matters. H.Res. 216 implied the OCE's authority to take \"complaints\" from the general public. This would appear to be incongruent with OCE's current mission to take \"information\" from public sources and would potentially need to be clarified by the board or by Congress. An amendment to the rules of the House that would reassign the functions of the OCE to the House Ethics Committee was initially proposed to be included as part of the rules package for the 115 th Congress (2017-2018). This language, which was not included in H.Res. 5, would have created a new Office of Congressional Complaint Review, as an office within the Ethics Committee. While much of the investigative structure of OCE would have been retained by this new entity, the timeline for completing a preliminary and second-phase review would have been altered, and the use of anonymous information in review would have been prohibited. The House might determine that the current relationship between the OCE and the Committee on Ethics is effective. Instead of creating an independent statutory ethics entity, reforming the Committee on Ethics, or amending OCE statute, the House could continue to consider the OCE as part of the rules package in subsequent Congresses. Changes to the OCE could be made on an as-needed basis through House resolutions or through changes to the rules package for subsequent Congresses.", "summary": "The House Office of Congressional Ethics (OCE) was established on March 11, 2008, with the passage of H.Res. 895. It was most recently reauthorized by the House as part of the rules package (H.Res. 6) adopted by the 116th Congress on January 3, 2019. The office's establishment followed years of efforts by groups within and outside Congress to create an independent entity to investigate allegations of misconduct by Members, officers, and employees of Congress. During the 110th Congress (2007-2008), Speaker of the House Nancy Pelosi and Minority Leader John Boehner created the bipartisan Special Task Force on Ethics Enforcement, chaired by Representative Michael Capuano, to consider whether the House should create an \"outside\" ethics-enforcement entity. The task force worked for nearly a year before issuing its recommendations for the creation of the OCE. The mandate of the OCE, which has jurisdiction only in the House, is to review information, and when appropriate, refer findings of fact to the House Committee on Ethics. Only this committee, pursuant to House rules, has the authority to recommend House discipline of Members and staff. Information of alleged wrongdoing by Members, officers, and employees of the House may be accepted by the OCE from the general public, but only the OCE board can initiate a review. The OCE is composed of six board members, and at least two alternates, each of whom serves a four-year term. The Speaker and the minority leader are each responsible for the appointment of three board members and one alternate. The chair is selected by the Speaker and a co-chair is selected by the minority leader. Current Members of the House, federal employees, and lobbyists are not eligible to serve on the board. OCE rules for the conduct of investigations and code of conduct can be found at their website, https://oce.house.gov. This report describes the history and rationale behind the creation of the OCE, its operations, its relationship with the House Committee on Ethics, and options potentially available for Congress if further amendments to the House ethics process are desired. For additional information, please refer to CRS Report RL30764, Enforcement of Congressional Rules of Conduct: A Historical Overview, by Jacob R. Straus; CRS Report RL30650, Senate Select Committee on Ethics: A Brief History of Its Evolution and Jurisdiction, by Jacob R. Straus; and CRS Report 98-15, House Committee on Ethics: A Brief History of Its Evolution and Jurisdiction, by Jacob R. Straus.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on the Polar Security Cutter (PSC) program—the Coast Guard's program for acquiring new polar icebreakers. The PSC program has received a total of $1,034.6 million (i.e., about $1.0 billion) in procurement funding through FY2019. The Coast Guard's proposed FY2020 budget requests $35 million in procurement funding for the PSC program, which is enough to cover FY2020 program-management costs. The issue for Congress is whether to approve, reject, or modify the Administration's FY2020 procurement funding request for the PSC program, and, more generally, whether to approve, reject, or modify the Coast Guard's overall plan for procuring new polar icebreakers. Congress's decisions on this issue could affect Coast Guard funding requirements, the Coast Guard's ability to perform its polar missions, and the U.S. shipbuilding industrial base. For a brief discussion of the Coast Guard's Great Lakes icebreakers, see Appendix E . A separate CRS report covers acquisition of general-purpose cutters for the Coast Guard. Another CRS report provides an overview of various issues relating to the Arctic. The permanent statute that sets forth the Coast Guard's primary duties—14 U.S.C. 102—states that among other things, the Coast Guard shall (emphasis added) \"develop, establish, maintain, and operate, with due regard to the requirements of national defense, aids to maritime navigation, icebreaking facilities , and rescue facilities for the promotion of safety on, under, and over the high seas and waters subject to the jurisdiction of the United States,\" and \"pursuant to international agreements, develop, establish, maintain, and operate icebreaking facilities on, under, and over waters other than the high seas and waters subject to the jurisdiction of the United States....\" In addition, Section 888(a) of the Homeland Security Act of 2002 ( H.R. 5005 / P.L. 107-296 of November 25, 2002)—the law that established the Department of Homeland Security (DHS) and transferred the Coast Guard from the Department of Transportation to DHS—sets forth 11 specific missions for the Coast Guard (often referred to as the Coast Guard's 11 statutory missions), including the mission of \"ice operations.\" The Coast Guard's polar icebreakers do not simply break ice—they are multimission cutters that conduct a variety of other operations that are conducted in lower-latitude waters by the Coast Guard's general-purpose cutters. U.S. polar ice operations conducted in large part by the Coast Guard's polar icebreakers support 9 of the Coast Guard's 11 statutory missions. The roles of U.S. polar icebreakers can be summarized as follows: conducting and supporting scientific research in the Arctic and Antarctic; defending U.S. sovereignty in the Arctic by helping to maintain a U.S. presence in U.S. territorial waters in the region; defending other U.S. interests in polar regions, including economic interests in waters that are within the U.S. exclusive economic zone (EEZ) north of Alaska; monitoring sea traffic in the Arctic, including ships bound for the United States; and conducting other typical Coast Guard missions (such as search and rescue, law enforcement, and protection of marine resources) in Arctic waters, including U.S. territorial waters north of Alaska. The Coast Guard's large icebreakers are called polar icebreakers rather than Arctic icebreakers because they perform missions in both the Arctic and Antarctic. Operations to support National Science Foundation (NSF) research activities in both polar regions account for a significant portion of U.S. polar icebreaker operations. Supporting NSF research in the Antarctic focuses on performing an annual mission, called Operation Deep Freeze (ODF), to break through Antarctic sea ice so as to reach and resupply McMurdo Station, the large U.S. Antarctic research station located on the shore of McMurdo Sound, near the Ross Ice Shelf. The Coast Guard states that Polar Star , the Coast Guard's only currently operational heavy polar icebreaker, \"spends the [northern hemisphere] winter [i.e., the southern hemisphere summer] breaking ice near Antarctica in order to refuel and resupply McMurdo Station. When the mission is complete, the Polar Star returns to dry dock [in Seattle] in order to complete critical maintenance and prepare it for the next ODF mission. Once out of dry dock, it's back to Antarctica, and the cycle repeats itself.\" In terms of the maximum thickness of the ice to be broken, the annual McMurdo resupply mission generally poses the greatest icebreaking challenge for U.S. polar icebreakers, though Arctic ice can frequently pose its own significant icebreaking challenges for U.S. polar icebreakers. The Coast Guard's medium polar icebreaker, Healy , spends most of its operational time in the Arctic supporting NSF research activities and performing other operations. Although polar ice is diminishing due to climate change, observers generally expect that this development will not eliminate the need for U.S. polar icebreakers, and in some respects might increase mission demands for them. Even with the diminishment of polar ice, there are still significant ice-covered areas in the polar regions, and diminishment of polar ice could lead in coming years to increased commercial ship, cruise ship, and naval surface ship operations, as well as increased exploration for oil and other resources, in the Arctic—activities that could require increased levels of support from polar icebreakers, particularly since waters described as \"ice free\" can actually still have some amount of ice. Changing ice conditions in Antarctic waters have made the McMurdo resupply mission more challenging since 2000. The Coast Guard's strategy document for the Arctic region, released on May 21, 2013, states that \"The United States must have adequate icebreaking capability to support research that advances fundamental understanding of the region and its evolution,\" and that \"The Nation must also make a strategic investment in icebreaking capability to enable access to the high latitudes over the long-term.\" The operational U.S. polar icebreaking fleet currently consists of one heavy polar icebreaker, Polar Star , and one medium polar icebreaker, Healy . In addition to Polar Star , the Coast Guard has a second heavy polar icebreaker, Polar Sea . Polar Sea , however, suffered an engine casualty in June 2010 and has been nonoperational since then. Polar Sta r and Polar Sea entered service in 1976 and 1978, respectively, and are now well beyond their originally intended 30-year service lives. The Coast Guard is using Polar Sea as a source of spare parts for keeping Polar Star operational. For additional background information on current U.S. polar icebreakers and polar research ships, see Appendix A . For background information on required numbers of U.S. polar icebreakers, see Appendix B . The PSC program was initiated in the Coast Guard's FY2013 budget submission, and envisages the acquisition of three new heavy polar icebreakers, to be followed years from now by the acquisition of up to three new medium polar icebreakers. The Coast Guard wants to begin construction of the first new heavy polar icebreaker in 2021 and have it enter service in 2024. The PSC program was previously known as the polar icebreaker (PIB) program. Changing the program's name to the PSC program is intended to call attention to the fact that the Coast Guard's polar icebreakers perform a variety of missions relating to national security, not just icebreaking. Although it is now called the PSC program, many observers, as a matter of convenience, may continue to refer to it as the polar icebreaker program. The PSC program is managed by a Coast Guard-Navy Integrated Program Office (IPO). A key aim in establishing the IPO was to permit the Navy to share its ship-procurement best practices with the Coast Guard so as to help the Coast Guard reduce the time and cost needed to design and procure the PSCs. The PSC program is using the parent design approach, meaning that the design of the PSC will be based on an existing icebreaker design. A key aim in using the parent design approach is to reduce cost, schedule, and technical risk in the PSC program. The PSC program's schedule calls for delivering the three PSCs at 12-month intervals, at the end of the third quarters of FY2024, FY2025, and FY2026, respectively. The Coast Guard and Navy estimate the procurement cost of the first PSC at $925 million to $940 million, and the total estimated procurement cost of the three-ship PSC program at about $2.95 billion. These figures include the shipbuilder's cost; the cost of government-furnished equipment (GFE), which is equipment for the ships that the government purchases and then provides to the shipbuilder for incorporation into the ship; and government program-management costs. Within these figures, the shipbuilder's contract-award cost for the first ship is $745.9 million, with options for the second and third ships that, if exercised, would increase the total value of the contract to $1,942.8 million (i.e., about $1.9 billion). The PSC program received about $359.6 million in procurement funding through FY2018, including $300 million provided through the Navy's shipbuilding account (which is part of DOD's budget) and $59.6 million provided through the Coast Guard's procurement account (which is part of the Department of Homeland Security's [DHS's] budget). The FY2019 DHS Appropriations Act (Division A of H.J.Res. 31 / P.L. 116-6 of February 15, 2019) provided an additional $675 million for the PSC program through the Coast Guard's procurement account, including $20 million for the procurement of long leadtime materials (LLTM) for the second ship in the program. The PSC program has thus received a total of $1,034.6 million (i.e., about $1.0 billion) in procurement funding through FY2019. The Coast Guard's proposed FY2020 budget requests $35 million in procurement funding for the PSC program, which is enough to cover the PSC program's FY2020 government program-management costs. As shown in Table C-2 , the Coast Guard's FY2019 budget submission had projected that a total of $125 million in procurement funding would be requested for the PSC program in FY2020. For additional background information on funding for the PSC program, see Appendix C . On April 23, 2019, the Coast Guard-Navy Integrated Program Office for the PSC program awarded a $745.9 million fixed-price, incentive-firm contract for the detail design and construction (DD&C) of the first PSC to VT Halter Marine of Pascagoula, MS, a shipyard owned by Singapore Technologies (ST) Engineering. VT Halter was the leader of one of three industry teams that competed for the DD&C contract; the other two bidders reportedly were Bollinger Shipyards of Lockport, Louisiana, and a partnership between Philly Shipyard of Philadelphia and Fincantieri/Marinette Marine, of Marinette, WI. The first PSC is scheduled to begin construction in 2021 and be delivered in 2024, though the DD&C contract includes financial incentives for earlier delivery. The DD&C contract includes options for building the second and third PSCs. If these options are exercised, the total value of the contract would increase to $1,942.8 million (i.e., about $1.9 billion). The figures of $745.9 million and $1,942.8 million cover the shipbuilder's costs; they do not include the cost of government-furnished equipment (GFE), which is equipment for the ships that the government purchases and then provides to the shipbuilder for incorporation into the ship, or government program-management costs. Figure 1 , Figure 2 , and Figure 3 show three renderings of VT Halter's design for the PSC. An April 25, 2019, press report states that \"the Coast Guard and Navy said VT Halter Marine's winning design for the new Polar Security Cutter (PSC) 'meets or exceeds all threshold requirements' in the ship specification\" for the PSC program. A May 7, 2019, press release from VT Halter about its design for the PSC stated: VT Halter Marine is teamed with Technology Associates, Inc. [TAI] as the ship designer and, for over two years, has participated in the U.S. Coast Guard's Heavy Polar Icebreaker Industry Study. The ship design is an evolution from the mature \"Polar Stern II\" [German icebreaker] currently in design and construction; the team has worked rigorously to demonstrate its maturity and reliability. During the study, TAI incrementally adjusted the design and conducted a series of five ship model tank tests to optimize the design. The vessels are 460 feet ín length with a beam of 88 feet overall, a full load displacement of approximately 33,000 long tons at delivery. The propulsion will be diesel electric at over 45,204 horse power and readily capable of breaking ice between six to eight feet thick. The vessel will accommodate 186 personnel comfortably for an extended endurance of 90 days. In addition to TAI, VT Halter Marine has teamed with ABB/Trident Marine for its Azipod propulsion system, Raytheon for command and control systems integration, Caterpillar for the main engines, Jamestown Metal Marine for joiner package, and Bronswerk for the HVAC system. The program is scheduled to bring an additional 900 skilled craftsman and staff to the Mississippi-based shipyard. The German icebreaker design referred to in VT Halter's press release, Polar Stern II (also spelled Polarstern II ), is being built as the replacement for Polarstern , Germany's current polar research and supply icebreaker. A May 9, 2019, press report stated that Polar s tern II was designed by Germany's Ship Design & Consult (SDC) and is being built by German shipbuilder HDW. VT Halter's teammates on the PSC include ship designer Technology Associates, Inc. (TAI), which has been involved in the design for over two years and has made \"a lot of modifications\" in a number of areas to meet Coast Guard requirements, [Ronald Baczkowski, president and CEO of VT Halter Marine] said. The team went through six design spirals to refine the design and the major modifications include changes in the hull form to enhance the ship's icebreaking capabilities and keep the ice clear from the propulsors and sensors, habitability improvements for comfort particularly in open water, easier access to different areas of the ship, and maintenance and endurance capabilities…. Raytheon [RTN] is the integrator for C5I capabilities on the ship and the main engines will be supplied by Caterpillar [CAT]. Switzerland-based ABB and Netherlands-based Trident are supplying the Azipod propulsion system, Florida-based Jamestown Metal Marine is supplying the joiner package, and Netherlands-based Bronswerk the heating, ventilation and cooling system. Figure 4 shows a rendering of the SDC's concept design for Polarstern II . SDC states that its concept design for Polarstern II has a length of 133 meters (about 436.4 feet) long, a beam of 27 meters (about 88.6 feet), and a draft of 10.5 meters (about 34.4 feet), but does not provide the design's displacement. A briefing on a preliminary version of the ship's design stated that the design at that point was somewhat larger, with a length of 145 meters (about 476 feet), a beam of 27.3 meters (about 89.6 feet), a draft of about 11 meters (about 36.1 feet), and a displacement (including payload) of about 26,000 tons. These figures suggest that SDC's somewhat smaller concept design for Polarstern II might have a displacement (including payload) of something less than 26,000 tons, and perhaps closer to 23,000 tons. VT Halter's 33,000-ton design for the PSC is considerably larger than the Coast Guard's current polar icebreakers. As shown in tons Table A-1 , the Coast Guard's largest polar icebreaker, Healy , is 420 feet long and has a full load displacement of 16,000 tons. VT Halter's 460-foot design for the PSC is 40 feet longer than Healy , and its 33,000-ton displacement is more than twice that of Healy . Indeed, in terms of full load displacement, VT Halter's design will be larger than some of Russia's existing nuclear-powered Arctic icebreakers, and about the same size as new nuclear-powered Arctic icebreakers that Russia is building and a nuclear-powered icebreaker that China has announced an intention to build. The horsepower generated by the propulsion plant in VT Halter's design (\"over 45,200\") is roughly one-quarter less than the 60,000 shaft horsepower of the propulsion plant in the Coast Guard's heavy polar icebreaker, Polar Star . A shown in Figure 1 and Figure 2 , however, VT Halter's design includes a centerline shafted propeller flanked by two azimuthing (i.e., swiveling) podded propulsors—an arrangement that, along with other modern icebreaker hull design features, is expected to give VT Halter's design a capability for breaking ice comparable to that of Polar Star . A May 8, 2019 press report states: \"We picked the most modern icebreaker that was on the market, soon to be production-level design that roughly met the Coast Guard's requirements, and we took it and modified it,\" Baczkowski said. \"It has a contoured shape. The shape of the hull does the icebreaking. Instead of being a mass breaking ice, this actually slices the ice. The shape of the hull pushed the broken ice aside, so it doesn't interfere with your propulsion systems, with your instrumentation that's on the other side of the ship.\" The design of the cutter is optimized for seakeeping to support the long voyage from its homeport in Washington state to as far away as the Antarctic, he said. \"It's an optimum design between icebreaking and seakeeping.\" \"With the propulsors, with one fixed and two steerable, we were able to optimize the seakeeping capability so when you're going on long transits from Washington to Antarctica the crew is not beat to a pulp or heavily fatigued because of the stability characteristics in open water.\" One issue for Congress is whether to approve, reject, or modify the Coast Guard's FY2020 procurement funding request for the PSC program. In considering this issue, Congress may consider, among other things, whether the Coast Guard has accurately priced the work it is proposing to do each year in the program, and whether the procurement of the second and/or third PSCs should be deferred or accelerated. As noted earlier, the $35 million in procurement funding that the Coast Guard has requested for the PSC program for FY2020 is enough to cover the program's FY2020 government program-management costs. As shown in Table C-2 , the Coast Guard's FY2019 budget submission had projected that a total of $125 million in procurement funding would be requested for the PSC program in FY2020, suggesting that the Coast Guard had projected requesting, beyond the $35 million, another $90 million or so for other costs, such as procurement of long leadtime materials (LLTM) for the second PSC. An April 15, 2019, press report states: The Coast Guard's fiscal year 2020 budget request of $35 million for its new heavy icebreaker is insufficient for the purchase of long-lead time materials to maintain the program schedule, Rep. Lou Correa (D-Calif.) said April 9th in his opening remarks at a House Homeland Security Transportation and Maritime Security Subcommittee hearing with the heads of the Coast Guard and Transportation Security Administration. Correa, chairman of the subcommittee, was referring to the advance purchase of materials for the second Polar Security Cutter (PSC). The Coast Guard is expected to award a contract for the detailed design and construction of the first PSC within a month and already has the funding. House staffers say the Coast Guard has told them it needs $100 million for long-lead materials for the second PSC or the ship's schedule will be a risk. Funding the procurement of LLTM for both the second and third PSCs in FY2020 might enable improved production economies of scale for that LLTM, which could reduce at the margin the procurement cost of the second and third PSCs. Another potential issue for Congress is whether to use a contract with options or a block buy contract to acquire the ships. As noted earlier, the baseline plan for the PSC program calls for acquiring ships using a contract with options, but Coast Guard and Navy officials are open to the idea of instead using a block buy contract to acquire the ships, and have requested information on this possibility as part of the request for proposals (RFP) for the PSC program that was released on March 2, 2018. Section 311 of the Frank LoBiondo Coast Guard Authorization Act of 2018 ( S. 140 / P.L. 115-282 of December 4, 2018) provides permanent authority for the Coast Guard to use block buy contracting with economic order quantity (EOQ) purchases (i.e., up-front batch purchases) of components in its major acquisition programs. The authority is now codified at 14 U.S.C. 1137. Although a contract with options covers multiple years, it operates more like a form of annual contracting, and it does not generate the kinds of savings that are possible with a block buy contract. Compared to a contract with options, a block buy contract would reduce the government's flexibility regarding whether and when to acquire the second and third ships, and what design to build them to, and in return reduce the combined acquisition cost of the ships covered by the contract. The Navy has used block buy contracts to reduce procurement costs of Virginia-class attack submarines and (in more recent years) Littoral Combat Ships (LCSs) and John Lewis (TAO-205) class oilers. CRS estimates that compared to costs using a contract with options, using a block buy contract that included economic order quantity (EOQ) purchases (i.e., up-front batch purchases) of materials and components for three heavy polar icebreakers would reduce the combined acquisition cost of the three ships by upwards of 7%, which could equate to a savings of upwards of $150 million. A congressionally mandated July 2017 National Academies of Sciences, Engineering, and Medicine (NASEM) report on acquisition and operation of polar icebreakers states the following (emphasis as in original): 3. Recommendation: USCG should follow an acquisition strategy that includes block buy contracting with a fixed price incentive fee contract and take other measures to ensure best value for investment of public funds. Icebreaker design and construction costs can be clearly defined, and a fixed price incentive fee construction contract is the most reliable mechanism for controlling costs for a program of this complexity. This technique is widely used by the U.S. Navy. To help ensure best long-term value, the criteria for evaluating shipyard proposals should incorporate explicitly defined lifecycle cost metrics.... A block buy authority for this program will need to contain specific language for economic order quantity purchases for materials, advanced design, and construction activities. A block buy contracting program with economic order quantity purchases enables series construction, motivates competitive bidding, and allows for volume purchase and for the timely acquisition of material with long lead times. It would enable continuous production, give the program the maximum benefit from the learning curve, and thus reduce labor hours on subsequent vessels.... If advantage is taken of learning and quantity discounts available through the recommended block buy contracting acquisition strategy, the average cost per heavy icebreaker is approximately $791 million, on the basis of the acquisition of four ships. Another potential issue for Congress is whether to continue providing at least some of the procurement funding for the PSC program through the Navy's shipbuilding account, known formally as the Shipbuilding and Conversion Navy (SCN) appropriation account. A May 2018 GAO report states that agreements between DHS, the Coast Guard, and the Navy that were made following the establishment of the Coast Guard-Navy integrated program office for the PSC program \"state that the program's contracting actions could be funded by either USCG or Navy appropriations, and the source of the appropriations will award the contract.\" As noted earlier, of the $300 million of the procurement funding that has provided for the PSC program was provided through the SCN account—$150 million in FY2017, and another $150 million in FY2018. Although providing funding for Coast Guard ships through the SCN account creates some complexity in tracking and executing funding for Coast Guard ship acquisition, and can raise a question as to whether that funding would otherwise go toward the acquisition of Navy ships, it has been used in the past for funding Coast Guard ships other than heavy polar icebreakers: Healy was funded largely (about 89%) through the SCN account. Thirty-three of the Coast Guard's 49 Island-class 110-foot patrol boats (i.e., about 67% of the boats) were procured under a Navy contract. The contract was for the construction of 21 of the boats, and included FY1990 SCN funds and prior year DOD nonexpiring funding. During the construction phase of the contract, the Navy exercised options under the contract for the construction 12 additional boats using FY1990 SCN funding. Subsections (a), (b), and (c) of Section 122 of the FY2018 National Defense Authorization Act ( H.R. 2810 / P.L. 115-91 of December 12, 2017) state the following: SEC. 122. Icebreaker vessel. (a) Authority to procure one polar-class heavy icebreaker.— (1) IN GENERAL.—There is authorized to be procured for the Coast Guard one polar-class heavy icebreaker vessel. (2) CONDITION FOR OUT-YEAR CONTRACT PAYMENTS.—A contract entered into under paragraph (1) shall provide that any obligation of the United States to make a payment under the contract for a fiscal year after fiscal year 2018 is subject to the availability of appropriations or funds for that purpose for such later fiscal year. (b) Limitation on availability of funds for procurement of icebreaker vessels.—None of the funds authorized to be appropriated by this Act or otherwise made available for the Department of Defense for any fiscal year that are unobligated as of the date of the enactment of this Act may be obligated or expended for the procurement of an icebreaker vessel other than the one polar-class heavy icebreaker vessel authorized to be procured under subsection (a)(1). (c) Contracting authority.— (1) COAST GUARD.—If funds are appropriated to the department in which the Coast Guard is operating to carry out subsection (a)(1), the head of contracting activity for the Coast Guard shall be responsible for contracting actions carried out using such funds. (2) NAVY.—If funds are appropriated to the Department of Defense to carry out subsection (a)(1), the head of contracting activity for the Navy, Naval Sea Systems Command shall be responsible for contracting actions carried out using such funds. (3) INTERAGENCY ACQUISITION.—Notwithstanding paragraphs (1) and (2), the head of contracting activity for the Coast Guard or head of contracting activity for the Navy, Naval Sea Systems Command (as the case may be) may authorize interagency acquisitions that are within the authority of such head of contracting activity. Regarding Section 122, the conference report ( H.Rept. 115-404 of November 9, 2017) on H.R. 2810 / P.L. 115-91 states the following: Icebreaker vessel (sec. 122) The House bill contained provisions (sec. 122, 123, and 1012) that would authorize the Secretary of the Navy to act as a general agent for the Secretary of the Department in which the Coast Guard is operating and enter into a contract for icebreaker vessels; prohibit funds for the Department of Defense from being used for the procurement of an icebreaker vessel; and amend section 2218 of title 10, United States Code, to authorize funds associated with the National Defense Sealift Fund for the construction of icebreaker vessels. The Senate amendment contained a similar provision (sec. 1048). The Senate recedes with an amendment that would authorize one polar-class heavy icebreaker vessel, prohibit funds for the Department of Defense from being used for the procurement of an icebreaker vessel other than this one polar-class heavy icebreaker vessel, clarify contracting authorities, and require a Comptroller General report. The conferees recognize the national importance of recapitalizing the U.S. icebreaker fleet and the extraordinary circumstances that necessitated use of Department of Defense funding to procure the first polar-class heavy icebreaker, as partially provided in the Department of Defense Appropriations Act for Fiscal Year 2017. Accordingly, the conferees support the authorization of this icebreaker in this Act. The conferees note the Undersecretary of Management in the Department of Homeland Security (DHS) serves as the Acquisition Decision Authority for the Polar Icebreaker Program and that this program is governed in accordance with DHS Acquisition Management Directive 102–01 and Instruction 102–01–001. The conferees believe maintaining clear lines of authority, responsibility, accountability, and resources with the Secretary and Acquisition Decision Authority of the department in which the U.S. Coast Guard is operating are essential to delivering icebreakers on cost and schedule. Accordingly, the conferees believe the Secretary of the Department of Homeland Security and the Undersecretary of Management in the DHS should be the officials provided with authorities and resources related to the Polar Icebreaker Program. Therefore, the conferees expect subsequent icebreakers to be authorized by the congressional committees with jurisdiction over the Coast Guard and funded using Coast Guard appropriations. (Pages 765-766) Another potential issue for Congress concerns technical, schedule, and cost risk in the PSC program. A September 2018 GAO report on the PSC program states that the Coast Guard did not have a sound business case in March 2018, when it established the cost, schedule, and performance baselines for its heavy polar icebreaker acquisition program, because of risks in four key areas: Design. The Coast Guard set program baselines before conducting a preliminary design review, which puts the program at risk of having an unstable design, thereby increasing the program's cost and schedule risks. While setting baselines without a preliminary design review is consistent with DHS's current acquisition policy, it is inconsistent with acquisition best practices. Based on GAO's prior recommendation, DHS is currently evaluating its policy to better align technical reviews and acquisition decisions. Technology. The Coast Guard intends to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies prior to setting baselines. Coast Guard officials indicated such an assessment was not necessary because the technologies the program plans to employ have been proven on other icebreaker ships. However, according to best practices, such technologies can still pose risks when applied to a different program or operational environment, as in this case. Without such an assessment, the program's technical risk is underrepresented. Cost. The lifecycle cost estimate that informed the program's $9.8 billion cost baseline substantially met GAO's best practices for being comprehensive, well-documented, and accurate, but only partially met best practices for being credible. The cost estimate did not quantify the range of possible costs over the entire life of the program. As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program. Schedule. The Coast Guard's planned delivery dates were not informed by a realistic assessment of shipbuilding activities, but rather driven by the potential gap in icebreaking capabilities once the Coast Guard's only operating heavy polar icebreaker—the Polar Star—reaches the end of its service life.... GAO's analysis of selected lead ships for other shipbuilding programs found the icebreaker program's estimated construction time of 3 years is optimistic. As a result, the Coast Guard is at risk of not delivering the icebreakers when promised and the potential gap in icebreaking capabilities could widen. Another potential issue for Congress is whether to procure heavy and medium polar icebreakers to a common basic design. As noted earlier, the DHS polar icebreaker mission need statement (MNS) states that \"current requirements and future projections ... indicate the Coast Guard will need to expand its icebreaking capacity, potentially requiring a fleet of up to six icebreakers (3 heavy and 3 medium) to adequately meet mission demands in the high latitudes....\" Consistent with this statement, the Coast Guard envisages procuring up to three new medium icebreakers after it procures three new heavy polar icebreakers. The question is whether to develop a separate design for the medium polar icebreakers, or instead build the medium polar icebreakers to the same basic design as the heavy polar icebreakers. A congressionally mandated July 2017 report from the National Academies of Sciences, Engineering, and Medicine (NASEM) on the acquisition and operation of polar icebreakers concluded that notional operational requirements for new medium polar icebreakers would result in ships that would not be too different in size from new heavy polar icebreakers. (As shown in Table A-1 , the Coast Guard's current medium polar icebreaker, Healy , is actually somewhat larger than the Coast Guard's heavy polar icebreaker, Polar Star .) Given what it concluded as the probable similarity in size between future U.S. heavy and medium polar icebreakers, the NASEM report recommended building a single medium polar icebreaker to the same common design as three new heavy polar icebreakers. This approach, the report concluded, would reduce the cost of the medium icebreaker by avoiding the cost of developing a new design and by making the medium polar icebreaker the fourth ship on an existing production learning curve rather than the first ship on a new production learning curve. The NASEM report stated the following (emphasis as in original): 2. Recommendation: The United States Congress should fund the construction of four polar icebreakers of common design that would be owned and operated by the United States Coast Guard (USCG). The current Department of Homeland Security (DHS) Mission Need Statement... contemplates a combination of medium and heavy icebreakers. The committee's recommendation is for a single class of polar icebreaker with heavy icebreaking capability. Proceeding with a single class means that only one design will be needed, which will provide cost savings. The committee has found that the fourth heavy icebreaker could be built for a lower cost than the lead ship of a medium icebreaker class.... The DHS Mission Need Statement contemplated a total fleet of \"potentially\" up to six ships of two classes—three heavy and three medium icebreakers. Details appear in the High Latitude Mission Analysis Report. The Mission Need Statement indicated that to fulfill its statutory missions, USCG required three heavy and three medium icebreakers; each vessel would have a single crew and would homeport in Seattle. The committee's analysis indicated that four heavy icebreakers will meet the statutory mission needs gap identified by DHS for the lowest cost.... 4. Finding: In developing its independent concept designs and cost estimates, the committee determined that the costs estimated by USCG for the heavy icebreaker are reasonable. However, the committee believes that the costs of medium icebreakers identified in the High Latitude Mission Analysis Report are significantly underestimated .... Although USCG has not yet developed the operational requirements document for a medium polar icebreaker, the committee was able to apply the known principal characteristics of the USCG Cutter Healy to estimate the scope of work and cost of a similar medium icebreaker. The committee estimates that a first-of-class medium icebreaker will cost approximately $786 million. The fourth ship of the heavy icebreaker series is estimated to cost $692 million. Designing a medium-class polar icebreaker in a second shipyard would incur the estimated engineering, design, and planning costs of $126 million and would forgo learning from the first three ships; the learning curve would be restarted with the first medium design. Costs of building the fourth heavy icebreaker would be less than the costs of designing and building a first-of-class medium icebreaker.... 6. Recommendation: USCG should ensure that the common polar icebreaker design is science-ready and that one of the ships has full science capability. All four proposed ships would be designed as \"science-ready,\" which will be more cost-effective when one of the four ships—most likely the fourth—is made fully science capable. Including science readiness in the common polar icebreaker design is the most cost-effective way of fulfilling both the USCG's polar missions and the nation's scientific research polar icebreaker needs.... The incremental costs of a science-ready design for each of the four ships ($10 million to $20 million per ship) and of full science capability for one of the ships at the initial build (an additional $20 million to $30 million) are less than the independent design and build cost of a dedicated research medium icebreaker.... In briefings at its first meeting, the committee learned that the National Science Foundation and other agencies do not have budgets to support full-time heavy icebreaker access or the incremental cost of design, even though their science programs may require this capability. Given the small incremental cost, the committee believes that the science capability cited above should be included in the acquisition costs. Science-ready design includes critical elements that cannot be retrofitted cost-effectively into an existing ship and that should be incorporated in the initial design and build. Among these elements are structural supports, appropriate interior and exterior spaces, flexible accommodation spaces that can embark up to 50 science personnel, a hull design that accommodates multiple transducers and minimizes bubble sweep while optimizing icebreaking capability, machinery arrangements and noise dampening to mitigate interference with sonar transducers, and weight and stability latitudes to allow installation of scientific equipment. Such a design will enable any of the ships to be retrofitted for full science capability in the future, if necessary.... Within the time frame of the recommended build sequence, the United States will require a science-capable polar icebreaker to replace the science capabilities of the Healy upon her retirement. To fulfill this need, one of the heavy polar icebreakers would be procured at the initial build with full science capability; the ability to fulfill other USCG missions would be retained. The ship would be outfitted with oceanographic overboarding equipment and instrumentation and facilities comparable with those of modern oceanographic research vessels. Some basic scientific capability, such as hydrographic mapping sonar, should be acquired at the time of the build of each ship so that environmental data that are essential in fulfilling USCG polar missions can be collected. If policymakers decide to procure a second new medium polar icebreaker or a third new medium polar icebreaker, the same general approach recommended by the NASEM report could be followed—a second medium polar icebreaker and third medium polar icebreaker could be built to the same common design used for the three new heavy polar icebreakers and the first new medium polar icebreaker. An April 12, 2018, press report states the following: As the Coast Guard prepares to review industry bids for a new heavy polar icebreaker, the service is keeping its options open for the right number and mix of polar icebreakers it will need in the future, Adm. Paul Zukunft, the [then-]commandant of the Coast Guard, said on Wednesday [April 11]. The Coast Guard's program of record is for three heavy and three medium polar icebreakers but Zukunft said the \"jury is still out\" whether that will remain so. Right now, the service is aiming toward building three new heavy icebreakers, but it might make sense just to keep building these ships, he told reporters at a Defense Writers Group breakfast in Washington, D.C. Zukunft said that \"when you start looking at the business case after you build three, and then you need to look at what is the economy of scale when you start building heavy icebreakers, and would it be less expensive to continue to build heavies and not mediums.\" He added that the heavy icebreakers provide more capability, and if the price is \"affordable\" and in \"the same range\" as building medium icebreakers, then \"maybe you end up with one class of heavy icebreakers.\" Building only one class of ships has a number of advantages in terms of maintenance, crew familiarity, configuration management, and more, he said. A decision on what the future icebreaker fleet will consist of is \"still probably several years out .... but that's one option that we want to keep open going forward,\" Zukunft said. As mentioned earlier, a new heavy polar icebreaker that begins construction in FY2019 might enter service in 2023, while Polar Star was refurbished and reentered service in December 2012 for an intended period of 7 to 10 years—a period that will end between December 2019 and December 2022. Consequently, another potential issue for Congress concerns how to bridge a potential gap in time between the end of Polar Star's current intended service life and the entry into service of one or more new heavy polar icebreakers. As testified by CRS on July 21, 2016, there are at least two options for bridging this time period: One would be to further extend the service life of Polar Star . The other would be to charter (i.e., lease) one or more other icebreakers (perhaps foreign-owned ones), if such ships are available for charter and have capabilities for performing missions performed by U.S. heavy polar icebreakers. The United States has used both of these approaches in the past to mitigate polar icebreaking capacity gaps. The Coast Guard plans to pursue the first of the two options outlined above—further extend the service life of Polar Star —and has requested funding in its FY2019 budget for service life extension work on Polar Star . A September 25, 2017, GAO report on polar icebreakers states the following: While the Coast Guard considered various options to bridge this potential heavy icebreaker gap, in a January 2017 study the Coast Guard reported that it was planning for a limited service life extension of the Polar Star to keep it operational until fiscal year 2025, at an initial cost estimate of $75 million. However, the Coast Guard has not completed a formal cost estimate for this effort and we have previously reported that the $75 million estimate may be unrealistic.... The Coast Guard's Capital Investment Plan for fiscal years 2018-2022 includes $60 million of a planned $75 million for polar icebreaker sustainment, which officials reported as being the rough estimate for the Polar Star's limited service life extension. Coast Guard officials stated that the $75 million rough estimate is based on the cost of the Polar Star's prior 7-10 year service life extension which was completed in fiscal year 2013. However, in July 2017 we reported that the Coast Guard has not completed a cost estimate for this effort, and that the $75 million estimate may be unrealistic based on the assumptions the Coast Guard used, such as continuing to use parts from the Polar Sea as has been done in previous maintenance events. A July 2018 GAO report states the following: The Coast Guard is planning a SLEP on the Polar Star to keep it operational until the first and second new heavy polar icebreakers are delivered (planned for 2023 and 2025, according to current acquisition plans) in order to bridge a potential operational gap. This approach would allow the Coast Guard to operate a minimum of two heavy icebreakers once the first polar icebreaker is delivered. The approach would also provide the Coast Guard with a self-rescue capability—the ability for one icebreaker to rescue the other if it became incapacitated while performing icebreaking operations. The Coast Guard's plan to conduct the Polar Star SLEP during its existing annual depot-level maintenance periods may not be feasible given the amount of maintenance already required on the cutter. The Polar Star's mission capable rating has been decreasing in recent years and reached a low point of 29 percent—well below the target of 41 percent—from October 2016 to September 2017. Based on mission capable data, we found this is mostly due to additional time spent in depot-level maintenance, which has increased in recent years from about 6 months in 2015 to more than 8 months in 2017. Additionally, the Polar Star has required extensions of about 3 months for its annual dry dock periods—the period of time when a cutter is removed from the water so that maintenance can be conducted—in 2016 and 2017 to complete required maintenance activities. These dry docks were originally planned to last between 2-1/2 months and 4 months. These extensions also compressed the amount of time that the crew had to prepare for its annual mission to Antarctica, which, according to members of the Polar Star crew, placed a large stress on the crew, risked the quality of work, and reduced or eliminated the crews' planned rest and personal preparation for their roughly 4-month deployment. Based on our analysis, these delays and extensions are likely to continue as the cutter ages. According to Coast Guard officials, the Polar Star's SLEP work will be conducted during the annual dry dock periods by adding an additional 1 or 2 months to the annual dry docks. However, if the work is unable to be completed during this time frame, it could force the Coast Guard to miss its commitment to conduct the annual Antarctica mission. Coast Guard maintenance officials stated that until the Polar Star completes the SLEP, its repairs will likely continue to get more expensive and time consuming. We will continue to monitor the Polar Star's SLEP through our annual review of DHS programs. As we found in July 2017, the Polar Star SLEP effort has a rough order cost estimate of $75 million, which is based on the reactivation work completed in 2013.41 However, this estimate may be unrealistic based on assumptions the Coast Guard used, such as that it would continue to use parts from the Coast Guard's other heavy polar icebreaker, the Polar Sea, which has been inactive since 2010.42 The Coast Guard's recent assessment of the Polar Star's material condition—the physical condition of the cutter, which includes the hull structure, habitability, major equipment systems, and spare parts availability—was completed in January 2018.43 The material assessment stated that many of the available parts from the Polar Sea have already been removed and installed on the Polar Star. As a result of the finite parts available from the Polar Sea, the Coast Guard may have to acquire new parts for the Polar Star that could increase the $75 million SLEP estimate. The Polar Star's recent material assessment will form the basis to determine which systems will be overhauled during the SLEP and for a more detailed cost estimate. The Coast Guard expects the program to reach the obtain phase of the acquisition life cycle by December 2019, at which time the Polar Star could reach the end of its current useful service life (currently projected to be between 2020 to 2023). This timeline contains risk that the Polar Star could be rendered inoperable before the cutter is able to undergo a SLEP. The feasibility of the second of the two options outlined above—charter (i.e., lease) one or more other icebreakers—would depend on whether an icebreaker was available for charter at the time of the year when the United States would need it to perform desired missions in the Arctic or Antarctic. Foreign polar icebreakers are used by their own countries for icebreaking operations, and may not always be available for charter when the United States might want to use them. If an icebreaker were available for charter, the potential cost effectiveness of this option would then depend on the cost of the charter, the ability of the ship to perform U.S. polar icebreaker missions, and how these costs and capabilities compare to the option of extending the service life of Polar Star . The Coast Guard stated in July 2016 that NSF leased the icebreaker KRASIN from Russia from 2005-2006, ODEN from the Swedish government from 2007-2010, and VLADIMIR IGNATYUK from Russia in 2012 to support the McMurdo resupply mission. All leases were time charters, and crews were supplied with the leases. As a contingency measure, NSF obtained assurances of assistance from other vessels in the area, such as the Chinese flagged [icebreaking] vessel XUE LONG, in the event they encountered difficulty. They also hired icebreaker captains with previous McMurdo experience to supplement the crew. NSF acquired these leases through a RFP process, and had no assurances that icebreakers would be available to perform the mission, or what price would be quoted. This process came with risks, as there was no way to gauge icebreaker availability until NSF received responses to their RFP. Additionally, a foreign-flagged commercial or state vessel can become unavailable for a variety of environmental and political reasons. For example, the Swedish government abruptly terminated their contract during the spring/summer of 2011, and NSF was left without a platform to conduct its mission. NSF requested support from CGC [Coast Guard cutter] HEALY, but it was employed in the Arctic. NSF ultimately leased the Russian icebreaker VLADIMIR IGNATYUK. After that incident, NSF decided to utilize CGC POLAR STAR to support the McMurdo mission, which it has been doing since 2013. One ship that is being offered for lease to the Coast Guard as an interim polar icebreaker is Aiviq ( Figure 5 ), an Arctic oil-exploration support ship owned by Edison Chouest Offshore (ECO). The 361-foot-long ship was ordered in 2009, completed in 2012, and chartered by Royal Dutch Shell to support that company's effort (now ended) to explore for oil in Arctic waters. Following Shell's decision to end that effort, alternative uses for Aiviq have been sought. The ship has been modified to serve as a polar icebreaker, and it is being offered to the Coast Guard for lease as an interim polar icebreaker. It reportedly has also been offered for use as an icebreaker to the Canadian government. The possibility of leasing Aiviq as an interim polar icebreaker has been discussed at certain recent hearings about the Coast Guard. For example, at a July 25, 2017, hearing on Coast Guard capabilities before the Coast Guard and Maritime transportation subcommittee of the House Transportation and Infrastructure Committee, the following exchange occurred: REPRESENTATIVE DON YOUNG (continuing): Have you looked at, Admiral, I know this has been an ongoing battle with me and the Coast Guard over the years, the other possibility of getting an ice breaker into the arena quicker than having one constructed like leasing from another outfit? You know, I've been talking about this a long time. Have you analyzed this again? I know the last time we had a study, it was 1980. That's a long time ago. So is there a way we can put metal on the water, especially for the new shipping through and the—and the cruise ships, because that Healy is old, and—is—have you looked at that at all? ADMIRAL PAUL ZUKUNFT, [THEN-]COMMANDANT, U.S. COAST GUARD: We have. In fact, one potential vendor, we've had multiple interactions. They have a platform that has yet to complete ice trials. We—we would not want to lease something they can't demonstrate its ability to actually operate in the ice that—that Healy sees. Healy was actually beset in ice for 36 hours last year, so it's not ice free up there, and that's a medium ice breaker. This particular platform doesn't have the capability of Healy. But we would at least want to make sure that ice trials were completed. That we could actually be a good steward of taxpayer dollars, so at least a platform that would meet our requirements. So we've had multiple interactions, the last one was probably in May, and the issue of ice trials is still on the table right now. Later in the same hearing, the following exchange occurred: REPRESENATIVE DUNCAN HUNTER, CHAIRMAN: Going back to Mr. Young's question. too, about leasing. You said you—you're—you're waiting for—I'm—I'm guessing money for ice trials. That's what you said. ZUKUNFT: No real dollars have been negotiated in any of this. So... HUNTER: But in—in real terms, you're only paying for gas? I mean what—what does it cost to do ice trials. It's gas, right? You're not going to hire more Coast Guardsmen to come in and—and do it. I mean so that's a figure—your—your overhead's fixed. So what is the cost to—to go do ice trials with the (inaudible)? ZUKUNFT: That would really be for the... HUNTER: The ice—once again the only... ZUKUNFT: ... vendor to decide. HUNTER: ... existing U.S. made ice breaker in America. ZUKUNFT: Yeah. So this—this is a ship that is built with direct drive diesel. Ice breakers are typically diesel electric, which means the generators push the shaft, and they absorb that shock load every time you collide with ice. A reduction gear, fixed gear is going to that—that gear box is going to absorb all that shock. So if you're going to do ice trials, there's a likelihood you might have to replace a reduction gear. There might be real hidden costs of doing ice trials. So if I'm a vendor, I might want to protect myself from some of that risk. Now I'm not the vendor but those would be some of my thoughts of, OK, if you're really serious about this and I do ice trials and now I've just caused X number of dollars that I am now going to have to fit. And oh, by the way, you're not going to lease it because it didn't meet your requirements. I think those are some of the issues that we still have to negotiate. At a June 14, 2016, hearing on Coast Guard mission needs and resource allocation before the Coast Guard and Maritime Transportation subcommittee of the House Transportation and Infrastructure Committee, the following exchange occurred: REPRESENTATIVE HUNTER (Chairman): How do you plan on—on filling the capability gap until you get a heavy icebreaker, which is 10 years at the least based on the best projections of Congress and everybody working together? You still haven't answered that one. ADMIRAL MICHEL: Well, right—the alternatives now, since we'll provide the answer to that, and it's probably going to be either a rolling recapitalization of the Polar Star or to try to bring—let Polar Star taper off and then try to bring Polar Sea back on and bridge out to the new icebreaker. I do not know which one at this point, which path we would want to take. I'm not aware of any other—we've looked out there for vessels to lease for heavy icebreaking capabilities. There's nothing out there on planet earth that you can lease in the heavy icebreaking area. So that's kind of where we are, sir. HUNTER: Was it the—the Finns that came into my office? (UNKNOWN) Mm-hmm. HUNTER: Can't remember whether we had the Norwegians or the Finns. I mean, they—have you—you've obviously looked at that, right? MICHEL: Yes. As a matter of fact I—I traveled to Sweden and Finland... HUNTER: Yeah. MICHEL: ... and talked to them. And they do not have heavy icebreaking capability that will meet the needs as in the FedBizOpps. As a matter of fact, in—when I'm talking FedBizOpps [I mean] there's a technical package that the Coast Guard put out for our [new] heavy icebreaker [i.e., the one that the Obama Administration wanted to begin building in 2020]. It kind of lays out our basic requirements including the long pole in the tent which is the icebreaking requirement, which is six foot minimum at three knots, desirable eight-foot minimum at three knots and then 21 feet backing and ramming. When I talked to the shipbuilders over there, they said there is not a vessel like that that currently exists that will meet those requirements in the—in the FedBizOpps technical package. So you'd have to build a vessel like that. And that's the type of vessel that we're looking for. The Coast Guard's proposed FY2020 budget requests $35 million in Coast Guard procurement funding for the PSC program. Table 1 summarizes congressional appropriation action on the program's FY2019 funding request. Appendix A. Current U.S. Polar Icebreakers and Polar Research Ships This appendix provides background information on current U.S. polar icebreakers and polar research ships. Three Coast Guard Polar Icebreakers Two Heavy Polar Icebreakers—Polar Star and Polar Sea Polar Star (WAGB-10) and Polar Sea (WAGB-11), sister ships built to the same general design ( Figure A-1 and Figure A-2 ), were acquired in the early 1970s as replacements for earlier U.S. icebreakers. They were designed for 30-year service lives, and were built by Lockheed Shipbuilding of Seattle, WA, a division of Lockheed that also built ships for the U.S. Navy, but which exited the shipbuilding business in the late 1980s. The ships are 399 feet long and displace about 13,200 tons. They are among the world's most powerful nonnuclear-powered icebreakers, with a capability to break through ice up to 6 feet thick at a speed of 3 knots. Because of their icebreaking capability, they are considered (in U.S. parlance) heavy polar icebreakers. In addition to a crew of 134, each ship can embark a scientific research staff of 32 people. Polar Star was commissioned into service on January 19, 1976, and consequently is now more than 10 years beyond its originally intended 30-year service life. Due to worn-out electric motors and other problems, the Coast Guard placed the ship in caretaker status on July 1, 2006. Congress in FY2009 and FY2010 provided funding to repair Polar Star and return it to service for 7 to 10 years; the repair work, which reportedly cost about $57 million, was completed, and the ship was reactivated on December 14, 2012. Polar Sea was commissioned into service on February 23, 1978, and consequently is also more than 10 years beyond its originally intended 30-year service life. In 2006, the Coast Guard completed a rehabilitation project that extended the ship's expected service life to 2014. On June 25, 2010, however, the Coast Guard announced that Polar Sea had suffered an engine casualty, and the ship was unavailable for operation after that. The Coast Guard placed Polar Sea in commissioned, inactive status on October 14, 2011. The Coast Guard transferred certain major equipment from Polar Sea to Polar Star to facilitate Polar Star' s return to service, and continues to use Polar Sea as a source of spare parts for Polar Star . One Medium Polar Icebreaker—Healy Healy (WAGB-20) ( Figure A-3 ) was funded in the early 1990s as a complement to Polar Star and Polar Sea , and was commissioned into service on August 21, 2000. The ship was built by Avondale Industries, a shipyard located near New Orleans, LA, that built numerous Coast Guard and Navy ships, and which eventually became part of Huntington Ingalls Industries (HII). (HII subsequently wound down shipbuilding activities at Avondale, and the facility is no longer building ships.) Although it is referred to (in U.S. parlance) as a medium polar icebreaker, Healy is actually larger than Polar Star and Polar Sea —it is 420 feet long and displaces about 16,000 tons. Compared to Polar Star and Polar Sea , Healy has less icebreaking capability (which is why it is referred to as a medium polar icebreaker rather than a heavy polar icebreaker), but more capability for supporting scientific research. The ship can break through ice up to 4½ feet thick at a speed of 3 knots, and embark a scientific research staff of 35 (with room for another 15 surge personnel and 2 visitors). The ship is used primarily for supporting scientific research and conducting other operations in the Arctic. Three National Science Foundation (NSF) Polar Research Ships Nathaniel B. Palmer Nathaniel B. Palmer was built for the NSF in 1992 by North American Shipbuilding, of Larose, LA. Called Palmer for short, it is operated for NSF by Edison Chouest Offshore (ECO) of Galliano, LA, a firm that owns and operates research ships and offshore deepwater service ships. Palmer is 308 feet long and has a displacement of about 6,500 tons. It has a crew of 22 and can embark a scientific staff of 27 to 37. It was purpose-built as a single-mission ship for conducting and supporting scientific research in the Antarctic. It is capable of breaking ice up to 3 feet thick at speeds of 3 knots, which is sufficient for breaking through the ice conditions found in the vicinity of the Antarctic Peninsula, so as to resupply Palmer Station, a U.S. research station on the peninsula. The ship might be considered less an icebreaker than an oceanographic research ship with enough icebreaking capability for the Antarctic Peninsula. Palmer 's icebreaking capability is not considered sufficient to perform the McMurdo resupply mission. Laurence M. Gould Like Palmer , the polar research and supply ship Laurence M. Gould was built for NSF by North American Shipping. It was completed in 1997 and is operated for NSF on a long-term charter from ECO. It is 230 feet long and has a displacement of about 3,800 tons. It has a crew of 16 and can embark a scientific staff of 26 to 28 (with a capacity for 9 more in a berthing van). It can break ice up to 1 foot thick with continuous forward motion. Like Palmer , it was built to support NSF operations in the Antarctic, particularly operations at Palmer Station on the Antarctic Peninsula. Sikuliaq Sikuli a q (see-KOO-lee-auk), which is used for scientific research in polar areas, was built by Marinette Marine of Marinette, WI, and entered service in 2015. It is operated for NSF by the College of Fisheries and Ocean Sciences at the University of Alaska Fairbanks as part of the U.S. academic research fleet through the University National Oceanographic Laboratory System (UNOLS). Sikuliaq is 261 feet long and has a displacement of about 3,600 tons. It has a crew of 22 and can embark an additional 26 scientists and students. The ship can break ice 2½ or 3 feet thick at speeds of 2 knots. The ship is considered less an icebreaker than an ice-capable research ship. Summary Table A-1 summarizes the above six ships. In addition to the ships shown in Table A-1 , another U.S.-registered polar ship with icebreaking capability— the Arctic oil-exploration support ship Aiviq —was used by Royal Dutch Shell oil company to support an oil exploration and drilling effort (now ended) in Arctic waters off Alaska. The ship, which completed construction in 2012, is owned by ECO and chartered by Royal Dutch Shell. It was used primarily for towing and laying anchors for drilling rigs, but is also equipped for responding to oil spills. Appendix B. Required Numbers of U.S. Polar Icebreakers This appendix provides background information on required numbers of U.S. polar icebreakers. June 2013 DHS Polar Icebreaker Mission Need Statement DHS in June 2013 approved a Mission Need Statement (MNS) for the polar icebreaker recapitalization project. The MNS states the following (emphasis added): This Mission Need Statement (MNS) establishes the need for polar icebreaker capabilities provided by the Coast Guard, to ensure that it can meet current and future mission requirements in the polar regions.... Current requirements and future projections based upon cutter demand modeling, as detailed in the HLMAR [High Latitude Mission Analysis Report], indicate the Coast Guard will need to expand its icebreaking capacity, potentially requiring a fleet of up to six icebreakers (3 heavy and 3 medium) to adequately meet mission demands in the high latitudes .... The analysis took into account both the Coast Guard statutory mission requirements and additional requirements for year-round presence in both polar regions detailed in the Naval Operations Concept (NOC) 2010.... The analysis also evaluated employing single and multi-crewing concepts.... Strategic home porting analysis based upon existing infrastructure and distance to operational areas provided the final input to determine icebreaker capacity demand. While the MNS can be viewed as an authoritative U.S. government statement regarding required numbers of U.S. polar icebreakers, it can be noted that the key sentence in the above-quoted passage from the MNS (i.e., the sentence in bold) includes the terms \"potentially\" and \"up to.\" These terms, which are often overlooked in discussions of required numbers of U.S. polar icebreakers, make the key sentence less ironclad as a requirements statement than it would have been if the terms had not been included, and could be interpreted as an acknowledgment that the requirement might amount to something less than three heavy and three medium polar icebreakers. It can also be noted, as stated in the above-quoted passage from the MNS, that the MNS was informed by the High Latitude Mission Analysis Report (HILMAR), and that the HLMAR took into account not only Coast Guard statutory mission requirements, but additional Department of Defense (DOD) requirements for year-round presence in both polar regions as detailed in the 2010 Naval Operations Concept (NOC). This is potentially significant, because DOD appears to have subsequently dropped its 2010 requirement for year-round presence in the polar regions. The use in the MNS of the terms \"potentially\" and \"up to,\" combined with DOD's decision to drop its requirement for year-round presence in the polar regions, together raise a question, other things held equal, as to whether required numbers of U.S. polar icebreakers might be something less than three heavy and three medium polar icebreakers. It is also possible, however, that there have been other changes since the MNS was issued in 2013 that would have the effect, other things held equal, of increasing U.S. requirements for polar icebreakers. The net result of this situation appears uncertain. In recent years, Coast Guard officials have tended to refer simply to a total Coast Guard requirement for three heavy and three medium polar icebreakers. For example, in the October 25, 2016, summary of a request for information (RFI) that the Coast Guard released the next day to receive industry feedback on its notional polar icebreaker acquisition approach and schedule, the Coast Guard states that \"the United States Coast Guard has a need for three Heavy Polar Icebreakers and three Medium Polar Icebreakers with the priority being Heavy Polar Icebreakers.\" A requirement for three heavy and three medium polar icebreakers is often abbreviated as 3+3. Short of a 3+3 requirement, Coast Guard officials in the past have sometimes stated that, as a bare minimum number of heavy polar icebreakers, the Coast Guard needs two such ships. For example, at a November 17, 2015, hearing before the Europe, Eurasia, and Emerging Threats subcommittee and the Western Hemisphere subcommittee of the House Foreign Affairs Committee, then-Vice Admiral Charles Michel, the Vice Commandant of the Coast Guard, stated during the discussion portion of the hearing that the \"Coast Guard needs at least two heavy icebreakers to provide year-round assured access and self-rescueability in the polar regions.\" Similarly, at a June 14, 2016, hearing before the Coast Guard and Maritime Transportation subcommittee of the House Transportation and Infrastructure Committee, Admiral Michel testified that \"our commandant also testified that we need self-rescue capability for our heavy icebreaker and that includes the existing Polar Star that we have out there now. So that means at least two [ships], [and] the High Latitude study says three heavy polar icebreakers is what the Coast Guard's requirement is. So that's kind of where we're talking about for heavy icebreakers.\" A September 25, 2017, Government Accountability Office (GAO) report on polar icebreakers states that the Coast Guard has been unable to address all polar icebreaking requests since 2010. For example, the Coast Guard reported fulfilling 78 percent (25 of 32) of U.S. government agency requests for polar icebreaking services during fiscal year 2010 through 2016. Coast Guard officials cited various factors affecting the Coast Guard's ability to meet all requests, particularly the unavailability of its heavy polar icebreakers. A July 2018 GAO report stated that the Coast Guard operates one medium icebreaker, the Healy, which has an expected end of service life in 2029. Despite the requirement for three medium icebreakers, Coast Guard officials said they are not currently assessing acquisition of the medium polar icebreakers because they are focusing on the heavy icebreaker acquisition and plan to assess the costs and benefits of acquiring medium polar icebreakers at a later time. In addition to the HILMAR, a number of other studies have been conducted in recent years to assess U.S. requirements for polar icebreakers and options for sustaining and modernizing the Coast Guard's polar icebreaker fleet. Polar Icebreakers Operated by Other Countries In discussions of U.S. polar icebreakers, observers sometimes note the size of the polar icebreaking fleets operated by other countries. Table B-1 shows a Coast Guard summary of major icebreakers around the world; the figures in the table include some icebreakers designed for use in the Baltic Sea. Observers sometimes highlight the difference between the number of U.S. polar icebreakers and the much larger number of Russian polar icebreakers. In considering these relative numbers, it can be noted that Russia's Arctic coastline is much longer than the U.S. Arctic coastline, that many more people live in Russia's Arctic (about roughly 2 million) than in the U.S. Arctic (fewer than 68,000 as of July 1, 2017), and that maritime transportation along Russia's Arctic coast is critical for supporting numerous Russian Arctic communities. Countries with interests in the polar regions have differing requirements for polar icebreakers, depending on the nature and extent of their polar interests and activities. July 2017 National Academies (NASEM) Report A July 2017 report on the acquisition and operation of polar icebreakers by the National Academies of Sciences, Engineering, and Medicine (NASEM) that was directed by Congress in Section 604 of the Coast Guard Authorization Act of 2015 ( H.R. 4188 / P.L. 114-120 of February 8, 2016) concluded the following: INTRODUCTION The United States has strategic national interests in the polar regions. In the Arctic, the nation must protect its citizens, natural resources, and economic interests; assure sovereignty, defense readiness, and maritime mobility; and engage in discovery and research. In the Antarctic, the United States must maintain an active presence that includes access to its research stations for the peaceful conduct of science and the ability to participate in inspections as specified in the Antarctic Treaty. The committee's charge... was to advise the U.S. House of Representatives and the U.S. Senate on an assessment of the costs incurred by the federal government in carrying out polar icebreaking missions and on options that could minimize lifecycle costs. The committee's consensus findings and recommendations are presented below. Unless otherwise specified, all estimated costs and prices for the future U.S. icebreakers are expressed in 2019 dollars, since that is the year in which the contracts are scheduled to be made. Supporting material is found in the appendices. FINDINGS AND RECOMMENDATIONS 1. Finding: The United States has insufficient assets to protect its interests, implement U.S. policy, execute its laws, and meet its obligations in the Arctic and Antarctic because it lacks adequate icebreaking capability. For more than 30 years, studies have emphasized the need for U.S. icebreakers to maintain presence, sovereignty, leadership, and research capacity—but the nation has failed to respond....The strong warming and related environmental changes occurring in both the Arctic and the Antarctic have made this failure more critical. In the Arctic, changing sea ice conditions will create greater navigation hazards for much of the year, and expanding human industrial and economic activity will magnify the need for national presence in the region. In the Antarctic, sea ice trends have varied greatly from year to year, but the annual requirements for access into McMurdo Station have not changed. The nation is ill-equipped to protect its interests and maintain leadership in these regions and has fallen behind other Arctic nations, which have mobilized to expand their access to ice-covered regions. The United States now has the opportunity to move forward and acquire the capability to fulfill these needs.... 2. Recommendation: The United States Congress should fund the construction of four polar icebreakers of common design that would be owned and operated by the United States Coast Guard (USCG). The current Department of Homeland Security (DHS) Mission Need Statement (DHS 2013) contemplates a combination of medium and heavy icebreakers. The committee's recommendation is for a single class of polar icebreaker with heavy icebreaking capability. Proceeding with a single class means that only one design will be needed, which will provide cost savings. The committee has found that the fourth heavy icebreaker could be built for a lower cost than the lead ship of a medium icebreaker class.... The DHS Mission Need Statement contemplated a total fleet of \"potentially\" up to six ships of two classes—three heavy and three medium icebreakers. Details appear in the High Latitude Mission Analysis Report. The Mission Need Statement indicated that to fulfill its statutory missions, USCG required three heavy and three medium icebreakers; each vessel would have a single crew and would homeport in Seattle. The committee's analysis indicated that four heavy icebreakers will meet the statutory mission needs gap identified by DHS for the lowest cost. Three of the ships would allow continuous presence in the Arctic, and one would service the Antarctic. As noted in the High Latitude Report, USCG's employment standard is 185 days away from home port (DAFHP) for a single crew. Three heavy icebreakers in the Arctic provide 555 DAFHP, sufficient for continuous presence. In addition, the medium icebreaker USCG Cutter Healy's design service life runs through 2030. If greater capacity is required, USCG could consider operating three ships with four crews, which would provide 740 DAFHP. The use of multiple crews in the Arctic could require fewer ships while providing a comparable number of DAFHP. For example, two ships (instead of the recommended three) operating in the Arctic with multiple crews could provide a similar number of annual operating days at a lower cost, but such an arrangement may not permit simultaneous operations in both polar regions and may not provide adequate redundancy in capability. More important, an arrangement under which fewer boats are operated more often would require more major maintenance during shorter time in port, often at increasing cost. In addition, if further military presence is desired in the Arctic, USCG could consider ice-strengthening the ninth national security cutter. One heavy icebreaker servicing the Antarctic provides for the McMurdo breakout and international treaty verification. The availability of the vessel could be extended by homeporting in the Southern Hemisphere. If the single vessel dedicated to the Antarctic is rendered inoperable, USCG could redirect an icebreaker from the Arctic, or it could rely on support from other nations. The committee considers both options to be viable and believes it difficult to justify a standby (fifth) vessel for the Antarctic mission when the total acquisition and lifetime operating costs of a single icebreaker are projected to exceed $1.6 billion. Once the four new icebreakers are operational, USCG can reasonably be expected to plan for more distant time horizons. USCG could assess the performance of the early ships once they are operational and determine whether additional capacity is needed. USCG is the only agency of the U.S. government that is simultaneously a military service, a law enforcement agency, a marine safety and rescue agency, and an environmental protection agency. All of these roles are required in the mission need statement for a polar icebreaker. USCG, in contrast to a civilian company, has the authorities, mandates, and competencies to conduct the missions contemplated for the polar icebreakers. Having one agency with a multimission capability performing the range of services needed would be more efficient than potentially duplicating effort by splitting polar icebreaker operations among other agencies. The requirement for national presence is best accomplished with a military vessel. In addition, USCG is fully interoperable with the U.S. Navy and the nation's North Atlantic Treaty Organization partners. USCG is already mandated to operate the nation's domestic and polar icebreakers. Continuing to focus this expertise in one agency remains the logical approach.... Government ownership of new polar icebreakers would be less costly than the use of lease financing (see Appendix C). The government has a lower borrowing cost than any U.S.-based leasing firm or lessor. In addition, the lessor would use higher-cost equity (on which it would expect to make a profit) to cover a portion of the lease financing. The committee's analysis shows that direct purchase by the government would cost, at a minimum, 19 percent less than leasing on a net present value basis (after tax). There is also the risk of the lessor going bankrupt and compromising the availability of the polar icebreaker to USCG. For its analysis, the committee not only relied on its extensive experience with leveraged lease financing but also reviewed available Government Accountability Office reports and Office of Management and Budget rules, examined commercial leasing economics and current interest rates, and validated its analysis by consulting an outside expert on the issue.... Chartering (an operating lease) is not a viable option.... The availability of polar icebreakers on the open market is extremely limited. (The committee is aware of the sale of only one heavy icebreaker since 2010.) U.S. experience with chartering a polar icebreaker for the McMurdo resupply mission has been problematic on two prior charter attempts. Chartering is workable only if the need is short term and mission specific. The committee notes that chartering may preclude USCG from performing its multiple missions.... In the committee's judgment, an enlarged icebreaker fleet will provide opportunities for USCG to strengthen its icebreaking program and mission. Although the number of billets that require an expert is small compared with the overall number of billets assigned to these icebreakers, more people performing this mission will increase the pool of experienced candidates. This will provide personnel assignment officers with a larger pool of candidates when the more senior positions aboard icebreakers are designated, which will make icebreaking more attractive as a career path and increase the overall level of icebreaking expertise within USCG. Importantly, the commonality of design of the four recommended heavy icebreakers will reduce operating and maintenance costs over the service life of these vessels through efficiencies in supporting and crewing them. Having vessels of common design will likely improve continuity of service, build icebreaking competency, improve operational effectiveness, and be more cost-efficient.... 3. Recommendation: USCG should follow an acquisition strategy that includes block buy contracting with a fixed price incentive fee contract and take other measures to ensure best value for investment of public funds. Icebreaker design and construction costs can be clearly defined, and a fixed price incentive fee construction contract is the most reliable mechanism for controlling costs for a program of this complexity. This technique is widely used by the U.S. Navy. To help ensure best long-term value, the criteria for evaluating shipyard proposals should incorporate explicitly defined lifecycle cost metrics.... A block buy authority for this program will need to contain specific language for economic order quantity purchases for materials, advanced design, and construction activities. A block buy contracting program with economic order quantity purchases enables series construction, motivates competitive bidding, and allows for volume purchase and for the timely acquisition of material with long lead times. It would enable continuous production, give the program the maximum benefit from the learning curve, and thus reduce labor hours on subsequent vessels. The acquisition strategy would incorporate (a) technology transfer from icebreaker designers and builders with recent experience, including international expertise in design, construction, and equipment manufacture; (b) a design that maximizes use of commercial off-the-shelf (COTS) equipment, applies Polar Codes and international standards, and only applies military specifications (MIL-SPEC) to the armament, aviation, communications, and navigation equipment; (c) reduction of any \"buy American\" provisions to allow the sourcing of the most suitable and reliable machinery available on the market; and (d) a program schedule that allows for completion of design and planning before the start of construction. These strategies will allow for optimization of design, reduce construction costs, and enhance reliability and maintainability.... 4. Finding: In developing its independent concept designs and cost estimates, the committee determined that the costs estimated by USCG for the heavy icebreaker are reasonable. However, the committee believes that the costs of medium icebreakers identified in the High Latitude Mission Analysis Report are significantly underestimated. The committee estimates the rough order-of-magnitude (ROM) cost of the first heavy icebreaker to be $983 million. (See Appendix D, Table D-6.) Of these all-in costs, 75 to 80 percent are shipyard design and construction costs; the remaining 20 to 25 percent cover government-incurred costs such as government-furnished equipment and government-incurred program expenses. If advantage is taken of learning and quantity discounts available through the recommended block buy contracting acquisition strategy, the average cost per heavy icebreaker is approximately $791 million, on the basis of the acquisition of four ships. The committee's analysis of the ship size to incorporate the required components (stack-up length) suggests an overall length of 132 meters (433 feet) and a beam of 27 meters (89 feet). This is consistent with USCG concepts for the vessel. Costs can be significantly reduced by following the committee's recommendations. Reduction of MIL-SPEC requirements can lower costs by up to $100 million per ship with no loss of mission capability.... The other recommended acquisition, design, and construction strategies will control possible cost overruns and provide significant savings in overall life-cycle costs for the program. Although USCG has not yet developed the operational requirements document for a medium polar icebreaker, the committee was able to apply the known principal characteristics of the USCG Cutter Healy to estimate the scope of work and cost of a similar medium icebreaker. The committee estimates that a first-of-class medium icebreaker will cost approximately $786 million. The fourth ship of the heavy icebreaker series is estimated to cost $692 million. Designing a medium-class polar icebreaker in a second shipyard would incur the estimated engineering, design, and planning costs of $126 million and would forgo learning from the first three ships; the learning curve would be restarted with the first medium design. Costs of building the fourth heavy icebreaker would be less than the costs of designing and building a first-of-class medium icebreaker... . In developing its ROM cost estimate, the committee agreed on a common notional design and basic assumptions.... Two committee members then independently developed cost estimating models, which were validated internally by other committee members. These analyses were then used to establish the committee's primary cost estimate.... 5. Finding: Operating costs of new polar icebreakers are expected to be lower than those of the vessels they replace. The committee expects the operating costs for the new heavy polar icebreakers to be lower than those of USCG's Polar Star. While USCG's previous experience is that operating costs of new cutters are significantly higher than those of the vessels they replace, the committee does not believe this historical experience applies in this case. There is good reason to believe that operating costs for new ships using commercially available modern technology will be lower than costs for existing ships.... The more efficient hull forms and modern engines will reduce fuel consumption, and a well-designed automation plant will require fewer operation and maintenance personnel, which will allow manning to be reduced or freed up for alternative tasks. The use of COTS technology and the minimization of MIL-SPEC, as recommended, will also reduce long-term maintenance costs, since use of customized equipment to meet MIL-SPEC requirements can reduce reliability and increase costs. A new vessel, especially over the first 10 years, typically has significantly reduced major repair and overhaul costs, particularly during dry-dock periods, compared with existing icebreakers—such as the Polar Star—that are near or at the end of their service life.... The Polar Star has many age-related issues that require it to be extensively repaired at an annual dry-docking. These issues will be avoided in the early years of a new ship. However, the committee recognizes that new ship operating costs can be higher than those of older ships if the new ship has more complexity to afford more capabilities. Therefore, any direct comparisons of operating costs of newer versus older ships would need to take into account the benefits of the additional capabilities provided by the newer ship. USCG will have an opportunity to evaluate the manning levels of the icebreaker in light of the benefits of modern technology to identify reductions that can be made in operating costs.... 6. Recommendation: USCG should ensure that the common polar icebreaker design is science-ready and that one of the ships has full science capability. All four proposed ships would be designed as \"science-ready,\" which will be more cost-effective when one of the four ships—most likely the fourth—is made fully science capable. Including science readiness in the common polar icebreaker design is the most cost-effective way of fulfilling both the USCG's polar missions and the nation's scientific research polar icebreaker needs.... The incremental costs of a science-ready design for each of the four ships ($10 million to $20 million per ship) and of full science capability for one of the ships at the initial build (an additional $20 million to $30 million) are less than the independent design and build cost of a dedicated research medium icebreaker.... In briefings at its first meeting, the committee learned that the National Science Foundation and other agencies do not have budgets to support full-time heavy icebreaker access or the incremental cost of design, even though their science programs may require this capability. Given the small incremental cost, the committee believes that the science capability cited above should be included in the acquisition costs. Science-ready design includes critical elements that cannot be retrofitted cost-effectively into an existing ship and that should be incorporated in the initial design and build. Among these elements are structural supports, appropriate interior and exterior spaces, flexible accommodation spaces that can embark up to 50 science personnel, a hull design that accommodates multiple transducers and minimizes bubble sweep while optimizing icebreaking capability, machinery arrangements and noise dampening to mitigate interference with sonar transducers, and weight and stability latitudes to allow installation of scientific equipment. Such a design will enable any of the ships to be retrofitted for full science capability in the future, if necessary.... Within the time frame of the recommended build sequence, the United States will require a science-capable polar icebreaker to replace the science capabilities of the Healy upon her retirement. To fulfill this need, one of the heavy polar icebreakers would be procured at the initial build with full science capability; the ability to fulfill other USCG missions would be retained. The ship would be outfitted with oceanographic overboarding equipment and instrumentation and facilities comparable with those of modern oceanographic research vessels. Some basic scientific capability, such as hydrographic mapping sonar, should be acquired at the time of the build of each ship so that environmental data that are essential in fulfilling USCG polar missions can be collected. 7. Finding: The nation is at risk of losing its heavy polar icebreaking capability—experiencing a critical capacity gap—as the Polar Star approaches the end of its extended service life, currently estimated at 3 to 7 years. The Polar Star, built in 1976, is well past its 30-year design life. Its reliability will continue to decline, and its maintenance costs will continue to escalate. Although the ship went through an extensive life-extending refit in 2011–2012, the Polar Star's useful life is estimated to end between 2020 and 2024. As USCG has recognized, the evaluation of alternative arrangements to secure polar icebreaking capacity is important, given the growing risks of the Polar Star losing its capability to fulfill its mission.... 8. Recommendation: USCG should keep the Polar Star operational by implementing an enhanced maintenance program (EMP) until at least two new polar icebreakers are commissioned. Even if the committee's notional schedule for new polar icebreakers is met, the second polar icebreaker would not be ready until July 2025.... The committee's proposed EMP could be designed with planned—and targeted—upgrades that allow the Polar Star to operate every year for its Antarctic mission. The necessary repairs could be performed in conjunction with the ship's current yearly dry-docking schedule within existing annual expenditures, estimated to average $5 million. In particular, the EMP would require improvements in the ship's operating systems, sanitary system, evaporators, main propulsion systems, and controllable pitch propellers. In the committee's judgment, the EMP could be accomplished within USCG's average annual repair expenditures for the Polar Star, which currently range between $2 million and $9 million. Coast Guard High Latitude Study Provided to Congress in July 2011 In July 2011, the Coast Guard provided to Congress a study on the Coast Guard's missions and capabilities for operations in high-latitude (i.e., polar) areas. The study, commonly known as the High Latitude Study, is dated July 2010 on its cover. The High Latitude Study concluded the following: [The study] concludes that future capability and capacity gaps will significantly impact four [Coast Guard] mission areas in the Arctic: Defense Readiness, Ice Operations, Marine Environmental Protection, and Ports, Waterways, and Coastal Security. These mission areas address the protection of important national interests in a geographic area where other nations are actively pursuing their own national goals.... The common and dominant contributor to these significant mission impacts is the gap in polar icebreaking capability. The increasing obsolescence of the Coast Guard's icebreaker fleet will further exacerbate mission performance gaps in the coming years.... The gap in polar icebreaking capacity has resulted in a lack of at-sea time for crews and senior personnel and a corresponding gap in training and leadership. In addition to providing multi-mission capability and intrinsic mobility, a helicopter-capable surface unit would eliminate the need for acquiring an expensive shore-based infrastructure that may only be needed on a seasonal or occasional basis. The most capable surface unit would be a polar icebreaker. Polar icebreakers can transit safely in a variety of ice conditions and have the endurance to operate far from logistics bases. The Coast Guard's polar icebreakers have conducted a wide range of planned and unscheduled Coast Guard missions in the past. Polar icebreakers possess the ability to carry large numbers of passengers, cargo, boats, and helicopters. Polar icebreakers also have substantial command, control, and communications capabilities. The flexibility and mobility of polar icebreakers would assist the Coast Guard in closing future mission performance gaps effectively.... Existing capability and capacity gaps are expected to significantly impact future Coast Guard performance in two Antarctic mission areas: Defense Readiness and Ice Operations. Future gaps may involve an inability to carry out probable and easily projected mission requirements, such as the McMurdo resupply, or readiness to respond to less-predictable events. By their nature, contingencies requiring the use of military capabilities often occur quickly. As is the case in the Arctic, the deterioration of the Coast Guard's icebreaker fleet is the primary driver for this significant mission impact. This will further widen mission performance gaps in the coming years. The recently issued Naval Operations Concept 2010 requires a surface presence in both the Arctic and Antarctic. This further exacerbates the capability gap left by the deterioration of the icebreaker fleet.... The significant deterioration of the Coast Guard icebreaker fleet and the emerging mission demands to meet future functional requirements in the high latitude regions dictate that the Coast Guard acquire material solutions to close the capability gaps.... To meet the Coast Guard mission functional requirement, the Coast Guard icebreaking fleet must be capable of supporting the following missions: Arctic North Patrol. Continuous multimission icebreaker presence in the Arctic. Arctic West Science. Spring and summer science support in the Arctic. Antarctic, McMurdo Station resupply. Planned deployment for break-in, supply ship escort, and science support. This mission, conducted in the Antarctic summer, also requires standby icebreaker support for backup in the event the primary vessel cannot complete the mission. Thule Air Base Resupply and Polar Region Freedom of Navigation Transits. Provide vessel escort operations in support of the Military Sealift Command's Operation Pacer Goose; then complete any Freedom of Navigation exercises in the region. In addition, the joint Naval Operations Concept establishes the following mission requirements: Assured access and assertion of U.S. policy in the Polar Regions. The current demand for this mission requires continuous icebreaker presence in both Polar Regions. Considering these missions, the analysis yields the following findings: The Coast Guard requires three heavy and three medium icebreakers to fulfill its statutory missions. These icebreakers are necessary to (1) satisfy Arctic winter and transition season demands and (2) provide sufficient capacity to also execute summer missions. Single-crewed icebreakers have sufficient capacity for all current and expected statutory missions. Multiple crewing provides no advantage because the number of icebreakers required is driven by winter and shoulder season requirements. Future use of multiple or augmented crews could provide additional capacity needed to absorb mission growth. The Coast Guard requires six heavy and four medium icebreakers to fulfill its statutory missions and maintain the continuous presence requirements of the Naval Operations Concept. Consistent with current practice, these icebreakers are single-crewed and homeported in Seattle Washington. Applying crewing and home porting alternatives reduces the overall requirement to four heavy and two medium icebreakers. This assessment of nonmaterial solutions shows that the reduced number of icebreakers can be achieved by having all vessels operate with multiple crews and two of the heavy icebreakers homeporting in the Southern Hemisphere. Leasing was also considered as a nonmaterial solution. While there is no dispute that the Coast Guard's polar icebreaker fleet is in need of recapitalization, the decision to acquire this capability through purchase of new vessels, reconstruction of existing ships, or commercial lease of suitable vessels must be resolved to provide the best value to the taxpayer. The multi-mission nature of the Coast Guard may provide opportunities to conduct some subset of its missions with non government-owned vessels. However, serious consideration must be given to the fact that the inherently governmental missions of the Coast Guard must be performed using government-owned and operated vessels. An interpretation of the national policy is needed to determine the resource level that best supports the nation's interests.... The existing icebreaker capacity, two inoperative heavy icebreakers and an operational medium icebreaker, does not represent a viable capability to the federal government. The time needed to augment this capability is on the order of 10 years. At that point, around 2020, the heavy icebreaking capability bridging strategy expires. At a July 27, 2011, hearing on U.S. economic interests in the Arctic before the Oceans, Atmosphere, Fisheries, and Coast Guard subcommittee of the Senate Commerce, Science, and Transportation Committee, the following exchange occurred: SENATOR OLYMPIA J. SNOWE: On the high latitude study, do you agree with—and those—I would like to also hear from you, Admiral Titley, as well, on these requirements in terms of Coast Guard vessels as I understand it, they want to have—I guess, it was a three medium ice breakers. Am in correct in saying that? Three medium ice breakers. ADMIRAL ROBERT PAPP, COMMANDANT OF THE COAST GUARD: I agree with the mission analysis and as you look at the requirements for the things that we might do up there, if it is in the nation's interest, it identifies a minimum requirement for three heavy ice breakers and three medium ice breakers and then if you want a persistent presence up there, it would require—and also doing things such as breaking out (inaudible) and other responsibilities, then it would take up to a maximum six heavy and four medium. SNOWE: Right. Do you agree with that? PAPP: If we were to be charged with carrying out those full responsibilities, yes, ma'am. Those are the numbers that you would need to do it. SNOWE: Admiral Titley, how would you respond to the high latitude study and has the Navy conducted its own assessment of its capability? REAR ADMIRAL DAVID TITLEY, OCEANORGRAPHER AND NAVIGATOR OF THE NAVY: Ma'am, we are in the process right now of conducting what we call a capabilities based assessment that will be out in the summer of this year. We are getting ready to finish that—the Coast Guard has been a key component of the Navy's task force on climate change, literally since day one when the Chief of Naval Operations set this up, that morning, we had the Coast Guard invited as a member of our executive steering committee. So we have been working very closely with the Coast Guard, with the Department of Homeland Security, and I think Admiral Papp—said it best as far as the specific comments on the high latitude study but we have been working very closely with the Coast Guard. January 2011 DHS Office of Inspector General Report A January 2011 report on the Coast Guard's polar icebreakers from the DHS Office of the Inspector General stated the following: The Coast Guard does not have the necessary budgetary control over its [polar] icebreakers, nor does it have a sufficient number of icebreakers to accomplish its missions in the Polar Regions. Currently, the Coast Guard has only one operational [polar] icebreaker [i.e., Healy ], making it necessary for the United States to contract with foreign nations to perform scientific, logistical, and supply activities. Without the necessary budgetary control and a sufficient number of icebreaking assets, the Coast Guard will not have the capability to perform all of its missions, will lose critical icebreaking expertise, and may be beholden to foreign nations to perform its statutory missions. The Coast Guard should improve its strategic approach to ensure that it has the long-term icebreaker capabilities needed to support Coast Guard missions and other national interests in the Arctic and Antarctic regions. Regarding current polar icebreaking capabilities for performing Arctic missions, the report states the following: The Coast Guard's icebreaking resources are unlikely to meet future demands. [The table below] outlines the missions that Coast Guard is unable to meet in the Arctic with its current icebreaking resources. The report also states the following: Should the Coast Guard not obtain funding for new icebreakers or major service life extensions for its existing icebreakers with sufficient lead-time, the United States will have no heavy icebreaking capability beyond 2020 and no polar icebreaking capability of any kind by 2029. Without the continued use of icebreakers, the United States will lose its ability to maintain a presence in the Polar Regions, the Coast Guard's expertise to perform ice operations will continue to diminish, and missions will continue to go unmet. Regarding current polar icebreaking capabilities for performing Antarctic missions, the report states the following: The Coast Guard needs additional icebreakers to accomplish its missions in the Antarctic. The Coast Guard has performed the McMurdo Station resupply in Antarctica for decades, but with increasing difficulty in recent years. The Coast Guard's two heavy-duty icebreakers [i.e., Polar Star and Polar Sea ] are at the end of their service lives, and have become less reliable and increasingly costly to keep in service.... In recent years, the Coast Guard has found that ice conditions in the Antarctic have become more challenging for the resupply of McMurdo Station. The extreme ice conditions have necessitated the use of foreign vessels to perform the McMurdo break-in.... As ice conditions continue to change around the Antarctic, two icebreakers are needed for the McMurdo break-in and resupply mission. Typically, one icebreaker performs the break-in and the other remains on standby. Should the first ship become stuck in the ice or should the ice be too thick for one icebreaker to complete the mission, the Coast Guard deploys the ship on standby. Since the Polar Sea and Polar Star are not currently in service, the Coast Guard has no icebreakers capable of performing this mission. [The table below] outlines the missions that will not be met without operational heavy-duty icebreakers. The report's conclusion and recommendations were as follows: Conclusion With an aging fleet of three icebreakers, one operational and two beyond their intended 30-year service life, the Coast Guard is at a critical crossroads in its Polar Icebreaker Maintenance, Upgrade, and Acquisition Program. It must clarify its mission requirements, and if the current mission requirements remain, the Coast Guard must determine the best method for meeting these requirements in the short and long term. Recommendations We recommend that the Assistant Commandant for Marine Safety, Security, and Stewardship: Recommendation #1: Request budgetary authority for the operation, maintenance, and upgrade of its icebreakers. Recommendation #2: In coordination with the Department of Homeland Security, request clarification from Congress to determine whether Arctic missions should be performed by Coast Guard assets or contracted vessels. Recommendation #3: In coordination with the Department of Homeland Security, request clarification from Congress to determine whether Antarctic missions should be performed by Coast Guard assets or contracted vessels. Recommendation #4: Conduct the necessary analysis to determine whether the Coast Guard should replace or perform service-life extensions on its two existing heavy-duty icebreaking ships. Recommendation #5: Request appropriations necessary to meet mission requirements in the Arctic and Antarctic. The report states that The Coast Guard concurred with all five of the recommendations and is initiating corrective actions. We consider the recommendations open and unresolved. The Coast Guard provided information on some of its ongoing projects that will address the program needs identified in the report. 2010 U.S. Arctic Research Commission Report A May 2010 report from the U.S. Arctic Research Commission (USARC) on goals and objectives for Arctic research for 2009-2010 stated the following: To have an effective Arctic research program, the United States must invest in human capital, research platforms, and infrastructure, including new polar class icebreakers, and sustained sea, air, land, space, and social observing systems.... The Commission urges the President and Congress to commit to replacing the nation's two polar class icebreakers. 2007 National Research Council Report A 2007 National Research Council (NRC) report, Polar Icebreakers in a Changing World: An Assessment of U.S. Needs , assessed roles and future needs for Coast Guard polar icebreakers. The study was required by report language accompanying the FY2005 DHS appropriations act ( H.R. 4567 / P.L. 108-334 ). The study was completed in 2006 and published in 2007. Some sources refer to the study as the 2006 NRC report. The report made the following conclusions and recommendations: Based on the current and future needs for icebreaking capabilities, the [study] committee concludes that the nation continues to require a polar icebreaking fleet that includes a minimum of three multimission ships [like the Coast Guard's three current polar icebreakers] and one single-mission [research] ship [like Palmer]. The committee finds that although the demand for icebreaking capability is predicted to increase, a fleet of three multimission and one single-mission icebreakers can meet the nation's future polar icebreaking needs through the application of the latest technology, creative crewing models, wise management of ice conditions, and more efficient use of the icebreaker fleet and other assets. The nation should immediately begin to program, design, and construct two new polar icebreakers to replace the POLAR STAR and POLAR SEA. Building only one new polar icebreaker is insufficient for several reasons. First, a single ship cannot be in more than one location at a time. No matter how technologically advanced or efficiently operated, a single polar icebreaker can operate in the polar regions for only a portion of any year. An icebreaker requires regular maintenance and technical support from shipyards and industrial facilities, must reprovision regularly, and has to effect periodic crew changeouts. A single icebreaker, therefore, could not meet any reasonable standard of active and influential presence and reliable, at-will access throughout the polar regions. A second consideration is the potential risk of failure in the harsh conditions of polar operations. Despite their intrinsic robustness, damage and system failure are always a risk and the U.S. fleet must have enough depth to provide backup assistance. Having only a single icebreaker would necessarily require the ship to accept a more conservative operating profile, avoiding more challenging ice conditions because reliable assistance would not be available. A second capable icebreaker, either operating elsewhere or in homeport, would provide ensured backup assistance and allow for more robust operations by the other ship. From a strategic, longer-term perspective, two new Polar class icebreakers will far better position the nation for the increasing challenges emerging in both polar regions. A second new ship would allow the U.S. Coast Guard to reestablish an active patrol presence in U.S. waters north of Alaska to meet statutory responsibilities that will inevitably derive from increased human activity, economic development, and environmental change. It would allow response to emergencies such as search-and-rescue cases, pollution incidents, and assistance to ships threatened with grounding or damage by ice. Moreover, a second new ship will leverage the possibilities for simultaneous operations in widely disparate geographic areas (e.g., concurrent operations in the Arctic and Antarctic), provide more flexibility for conducting Antarctic logistics (as either the primary or the secondary ship for the McMurdo break-in), allow safer multiple-ship operations in the most demanding ice conditions, and increase opportunities for international expeditions. Finally, an up-front decision to build two new polar icebreakers will allow economies in the design and construction process and provide a predictable cost reduction for the second ship.... The [study] committee finds that both operations and maintenance of the polar icebreaker fleet have been underfunded for many years, and the capabilities of the nation's icebreaking fleet have diminished substantially. Deferred long-term maintenance and failure to execute a plan for replacement or refurbishment of the nation's icebreaking ships have placed national interests in the polar regions at risk. The nation needs the capability to operate in both polar regions reliably and at will. Specifically, the committee recommends the following: The United States should continue to project an active and influential presence in the Arctic to support its interests. This requires U.S. government polar icebreaking capability to ensure year-round access throughout the region. The United States should continue to project an active and influential presence in the Antarctic to support its interests. The nation should reliably control sufficient icebreaking capability to break a channel into and ensure the maritime resupply of McMurdo Station. The United States should maintain leadership in polar research. This requires icebreaking capability to provide access to the deep Arctic and the ice-covered waters of the Antarctic. National interests in the polar regions require that the United States immediately program, budget, design, and construct two new polar icebreakers to be operated by the U.S. Coast Guard. To provide continuity of U.S. icebreaking capabilities, the POLAR SEA should remain mission capable and the POLAR STAR should remain available for reactivation until the new polar icebreakers enter service. The U.S. Coast Guard should be provided sufficient operations and maintenance budget to support an increased, regular, and influential presence in the Arctic. Other agencies should reimburse incremental costs associated with directed mission tasking. Polar icebreakers are essential instruments of U.S. national policy in the changing polar regions. To ensure adequate national icebreaking capability into the future, a Presidential Decision Directive should be issued to clearly align agency responsibilities and budgetary authorities. The Coast Guard stated in 2008 that it \"generally supports\" the NRC report, and that the Coast Guard \"is working closely with interagency partners to determine a way forward with national polar policy that identifies broad U.S. interests and priorities in the Arctic and Antarctic that will ensure adequate maritime presence to further these interests. Identification and prioritization of U.S. national interests in these regions should drive development of associated USCG [U.S. Coast Guard] capability and resource requirements.\" The Coast Guard also stated the following: \"Until those broad U.S. interests and priorities are identified, the current USG [U.S. Government] polar icebreaking fleet should be maintained in an operational status.\" Appendix C. PSC Program Funding This appendix presents additional background information on funding for the PSC program. Summary of Funding in FY2013-FY2020 Budget Submissions Table C-1 shows requested and projected funding for the PSC program in the Coast Guard's budget submissions from the initiation of the PSC program in the FY2013 submission through the FY2020 submission. The reduction in programmed five-year funding for a new polar icebreaker during the FY2014-FY2016 budget submissions shown in Table C-1 appears to have been related to the substantial reduction in the annual funding levels in the Coast Guard's Acquisition, Construction, and Improvements (AC&I) account in those budget submission that is shown in Table C-2 . Prior to the release of the Administration's September 1, 2015, fact sheet, the Coast Guard testified that if annual funding levels in the AC&I account were not increased from the reduced levels in those budget submissions, the icebreaker would be, essentially, an unfunded requirement. For example, at an April 28, 2015, hearing on Coast Guard resources and priorities before the Oceans, Atmosphere, Fisheries, and Coast Guard subcommittee of the Senate Commerce, Science, and Transportation Committee, Admiral Paul Zukunft, the then-Commandant of the Coast Guard, testified that by reactivating Polar Star, we have purchased up to 10 years of decision space to recapitalize our ice-breaking fleet. Two of those years have expired. And while I'm exploring several options to reconstitute our nation's fleet of icebreakers, I will need topline relief [i.e., an increase] in my acquisition budget to make this requirement a reality. For additional discussion of the issue of the funding level of the Procurement, Construction, and Improvements (PC&I) account, see Appendix D . Below are some additional details on each of the budget submissions since the FY2013 submission. FY2013 Submission The Administration's FY2013 budget submission initiated a new project for the design and construction of a new polar icebreaker, and included $860 million over five years for the acquisition of the ship ( Table C-1 )—enough or almost enough to fully fund the acquisition of a new polar icebreaker. (Any remaining needed funding might have been projected for FY2018 and perhaps also FY2019, which were beyond the five-year window of the FY2013 budget submission.) The submission stated that DHS anticipated awarding a construction contract for the ship \"within the next five years\" (i.e., by FY2018) and taking delivery on the ship \"within a decade\" (i.e., by 2023). FY2014 Submission The Administration's FY2014 budget submission reduced the five-year funding for a new polar icebreaker to $230 million ( Table C-1 )—a 73% reduction from the figure in the FY2013 budget submission—but still stated that DHS anticipated awarding a construction contract for the ship \"within the next four years\" (i.e., by FY2018). FY2015 Submission The Administration's FY2015 budget submission maintained five-year funding for a new polar icebreaker at $230 million ( Table C-1 ), but did not state when a construction contract for the ship might be awarded, creating uncertainty about the timing of the project. FY2016 Submission The Administration's FY2016 budget submission, submitted to Congress in February 2015, reduced five-year funding for a new polar icebreaker further, to $166 million ( Table C-1 )—an 81% reduction from the figure in the FY2013 budget submission—and again did not state when a construction contract for the ship might be awarded, maintaining the uncertainty about the timing of the project. On September 1, 2015, the White House issued a fact sheet in conjunction with a visit to Alaska by President Obama indicating that the Administration, in its own internal planning, had at some point over the past two years deferred acquisition of a new polar icebreaker to FY2022, but that this had been changed to FY2020. The newly announced construction start date of FY2020 was a two-year acceleration from the previously unpublicized date of FY2022, and a two-year deferral from the FY2018 date implied in the FY2013 and FY2014 budget submissions. The fact sheet states that the Administration will also \"begin planning for construction of additional icebreakers\" beyond the one that the Obama Administration proposed to begin building in FY2020. On January 13, 2016, the Coast Guard announced that it intended to hold an industry day for the PSC program, followed by one-on-one meetings between the Coast Guard and prospective shipbuilders and ship designers, as a part of the Coast Guard's ongoing market research for the program. The industry day was held on March 18, 2016, and the one-on-one meetings between the Coast Guard and industry officials were scheduled for March 28-31, with industry feedback to be submitted to the Coast Guard by April 5, 2016. FY2017 Submission The Coast Guard's proposed FY2017 budget requested $150 million in procurement funding for a new polar icebreaker. The figure of $150 million included $147.6 million in the polar icebreaker line of the Coast Guard's Acquisition, Construction, and Improvements (AC&I) account, and $2.4 million that was embedded in the personnel and management line in the AC&I account. The Coast Guard's FY2017-FY2021 five-year Capital Investment Plan (CIP) included a total of $780 million in procurement funding for a new polar icebreaker. As shown in Table C-1 , the $150 million requested for FY2017 was the first major increment of procurement funding requested (not just projected for a future fiscal year) for a new polar icebreaker. FY2018 Submission The Coast Guard's proposed FY2018 budget requested $19 million in procurement funding for a new polar icebreaker and includes a total of $949 million over the five-year period FY2018-FY2022. The Coast Guard states that This request supports activities to complete and release a Request for Proposal (RFP) for Detail Design and Construction in FY 2018. Specifically, this funding supports program-wide activities including open water and ice tank model testing; review of Industry Studies contract deliverables; Integrated Program Office (IPO) and Ship Design Team (SDT) support; logistics and integration development for government furnished information and equipment; and additional modeling efforts to inform the evaluation and source selection process for the Detail Design & Construction RFP.... Currently, the Program is maturing the system specification, developing the RFP for Detail Design & Construction, and completing required documentation to transition to the \"Obtain\" phase - planned for early FY 2018. In July 2016, the Coast Guard established an Integrated Program Office with the Navy to continue efforts to accelerate the construction timeline and leverage the expertise and best practices from shipbuilding programs in both services. Based on this collaboration and lessons learned by the Navy, the Program was able to significantly mature the acquisition approach with the incorporation of Industry Studies to identify solutions to minimize cost, schedule, production and technology risks. Industry Studies are focusing on leveraging industry perspectives, existing vessel designs, and use of mature technology to inform the iterative development of the Heavy Polar Icebreaker system specification. Future \"Obtain\" phase activities include award of a contract for Detail Design & Construction for the heavy polar icebreaker. FY2019 Submission The Coast Guard's proposed FY2018 budget requested $750 million in procurement funding for the PSC program and included a total of $1,805 million over the five-year period FY2019-FY2023. The request for $750 million for the PSC program was a late change to the FY2019 budget that is not reflected in Coast Guard FY2019 budget-justification documents that were printed prior to the change. In those earlier documents, the amount of funding requested for FY2019 shows as $30 million rather than $750 million, and the total amount of funding requested in the Coast Guard's PC&I account was correspondingly $720 million less than the figure of $1,886.8 million shown in Table C-2 . FY2020 Submission The Coast Guard's proposed FY2020 budget requests $35 million in procurement funding for the PSC program, which is enough to cover the PSC program's FY2020 government program-management costs. Appendix D. Funding Level in PC&I Account This appendix presents additional discussion of the funding level of the Coast Guard's Procurement, Construction, and Improvements (PC&I) account. Overview The Coast Guard has testified that funding the PC&I account at a level of about $1 billion to $1.2 billion per year—the approximate average annual funding level programmed in the FY2014, FY2015, and FY2016 budget submissions, as shown in Table C-2 —would make it difficult to fund various Coast Guard acquisition projects, including a new polar icebreaker and improvements to Coast Guard shore installations. Coast Guard plans call for procuring Offshore Patrol Cutters (OPCs) at an eventual rate of two per year. If each OPC costs roughly $400 million, procuring two OPCs per year in an PC&I account of about $1 billion to $1.2 billion per year would leave about $200 million to $400 million per year for all other PC&I-funded programs. Since 2017, Coast Guard officials have been stating more regularly what they stated only infrequently in earlier years: that executing the Coast Guard's various acquisition programs fully and on a timely basis would require the PC&I account to be funded in coming years at a level of about $2 billion per year. Statements from Coast Guard officials on this issue in past years have sometimes put this figure as high as about $2.5 billion per year. Using Past PC&I Funding Levels as a Guide for Future PC&I Funding Levels In assessing future funding levels for executive branch agencies, a common practice is to assume or predict that the figure in coming years will likely be close to where it has been in previous years. While this method can be of analytical and planning value, for an agency like the Coast Guard, which goes through periods with less acquisition of major platforms and periods with more acquisition of major platforms, this approach might not always be the best approach, at least for the PC&I account. More important, in relation to maintaining Congress's status as a co-equal branch of government, including the preservation and use of congressional powers and prerogatives, an analysis that assumes or predicts that future funding levels will resemble past funding levels can encourage an artificially narrow view of congressional options regarding future funding levels, depriving Congress of agency in the exercise of its constitutional power to set funding levels and determine the composition of federal spending. Past Coast Guard Statements About Required PC&I Funding Level At an October 4, 2011, hearing on the Coast Guard's major acquisition programs before the Coast Guard and Maritime Transportation subcommittee of the House Transportation and Infrastructure Committee, the following exchange occurred: REPRESENATIVE FRANK LOBIONDO: Can you give us your take on what percentage of value must be invested each year to maintain current levels of effort and to allow the Coast Guard to fully carry out its missions? ADMIRAL ROBERT J. PAPP, COMMANDANT OF THE COAST GUARD: I think I can, Mr. Chairman. Actually, in discussions and looking at our budget—and I'll give you rough numbers here, what we do now is we have to live within the constraints that we've been averaging about $1.4 billion in acquisition money each year. If you look at our complete portfolio, the things that we'd like to do, when you look at the shore infrastructure that needs to be taken care of, when you look at renovating our smaller icebreakers and other ships and aircraft that we have, we've done some rough estimates that it would really take close to about $2.5 billion a year, if we were to do all the things that we would like to do to sustain our capital plant. So I'm just like any other head of any other agency here, as that the end of the day, we're given a top line and we have to make choices and tradeoffs and basically, my tradeoffs boil down to sustaining frontline operations balancing that, we're trying to recapitalize the Coast Guard and there's where the break is and where we have to define our spending. An April 18, 2012, blog entry stated the following: If the Coast Guard capital expenditure budget remains unchanged at less than $1.5 billion annually in the coming years, it will result in a service in possession of only 70 percent of the assets it possesses today, said Coast Guard Rear Adm. Mark Butt. Butt, who spoke April 17 [2012] at [a] panel [discussion] during the Navy League Sea Air Space conference in National Harbor, Md., echoed Coast Guard Commandant Robert Papp in stating that the service really needs around $2.5 billion annually for procurement. At a May 9, 2012, hearing on the Coast Guard's proposed FY2013 budget before the Homeland Security subcommittee of the Senate Appropriations Committee, Admiral Papp testified, \"I've gone on record saying that I think the Coast Guard needs closer to $2 billion dollars a year [in procurement funding] to recapitalize—[to] do proper recapitalization.\" At a May 14, 2013, hearing on the Coast Guard's proposed FY2014 budget before the Homeland Security Subcommittee of the Senate Appropriations Committee, Admiral Papp stated the following regarding the difference between having about $1.0 billion per year rather than about $1.5 billion per year in the PC&I account: Well, Madam Chairman, $500 million—a half a billion dollars—is real money for the Coast Guard. So, clearly, we had $1.5 billion in the [FY]13 budget. It doesn't get everything I would like, but it—it gave us a good start, and it sustained a number of projects that are very important to us. When we go down to the $1 billion level this year, it gets my highest priorities in there, but we have to either terminate or reduce to minimum order quantities for all the other projects that we have going. If we're going to stay with our program of record, things that have been documented that we need for our service, we're going to have to just stretch everything out to the right. And when we do that, you cannot order in economic order quantities. It defers the purchase. Ship builders, aircraft companies—they have to figure in their costs, and it inevitably raises the cost when you're ordering them in smaller quantities and pushing it off to the right. Plus, it almost creates a death spiral for the Coast Guard because we are forced to sustain older assets—older ships and older aircraft—which ultimately cost us more money, so it eats into our operating funds, as well, as we try to sustain these older things. So, we'll do the best we can within the budget. And the president and the secretary have addressed my highest priorities, and we'll just continue to go on the—on an annual basis seeing what we can wedge into the budget to keep the other projects going. At a March 12, 2014, hearing on the Coast Guard's proposed FY2015 budget before the Homeland Security subcommittee of the House Appropriations Committee, Admiral Papp stated the following: Well, that's what we've been struggling with, as we deal with the five-year plan, the capital investment plan, is showing how we are able to do that. And it will be a challenge, particularly if it sticks at around $1 billion [per year]. As I've said publicly, and actually, I said we could probably—I've stated publicly before that we could probably construct comfortably at about 1.5 billion [dollars] a year. But if we were to take care of all the Coast Guard's projects that are out there, including shore infrastructure that that fleet that takes care of the Yemen [sic: inland] waters is approaching 50 years of age, as well, but I have no replacement plan in sight for them because we simply can't afford it. Plus, we need at some point to build a polar icebreaker. Darn tough to do all that stuff when you're pushing down closer to 1 billion [dollars per year], instead of 2 billion [dollars per year]. As I said, we could fit most of that in at about the 1.5 billion [dollars per year] level, but the projections don't call for that. So we are scrubbing the numbers as best we can. At a March 24, 2015, hearing on the Coast Guard's proposed FY2016 budget before the Homeland Security subcommittee of the House Appropriations Committee, Admiral Paul Zukunft, Admiral Papp's successor as Commandant of the Coast Guard, stated the following: I look back to better years in our acquisition budget when we had a—an acquisition budget of—of $1.5 billion. That allows me to move these programs along at a much more rapid pace and, the quicker I can build these at full-rate production, the less cost it is in the long run as well. But there's an urgent need for me to be able to deliver these platforms in a timely and also in an affordable manner. But to at least have a reliable and a predictable acquisition budget would make our work in the Coast Guard much easier. But when we see variances of—of 30, 40% over a period of three or four years, and not knowing what the Budget Control Act may have in store for us going on, yes, we are treading water now but any further reductions, and now I am—I am beyond asking for help. We are taking on water. An April 13, 2017, press report states the following (emphasis added): [Then-]Coast Guard Commandant Adm. Paul Zukunft on Wednesday [April 12] said that for the Coast Guard to sustain its recapitalization plans and operations the service needs a $2 billion annual acquisition budget that grows modestly overtime to keep pace with inflation. The Coast Guard needs a \"predictable, reliable\" acquisition budget \"and within that we need 5 percent annual growth to our operations and maintenance (O&M) accounts,\" Zukunft told reporters at a Defense Writers Group breakfast. Inflation will clip 2 to 3 percent from that, but \"at 5 percent or so it puts you on a moderate but positive glide slope so you can execute, so you can build the force,\" he said. In an interview published on June 1, 2017, Zukunft said the following (emphasis added): We cannot be more relevant than we are now. But what we need is predictable funding. We have been in over 16 continuing resolutions since 2010. I need stable and repeatable funding. An acquisition budget with a floor of $2 billion. Our operating expenses as I said, they've been funded below the Budget Control Act floor for the past five years. I need 5 percent annualized growth over the next five years and beyond to start growing some of this capability back. But more importantly, we [need] more predictable, more reliable funding so we can execute what we need to do to carry out the business of the world's best Coast Guard. Appendix E. Great Lakes Icebreakers This appendix provides a brief discussion of the Coast Guard's Great Lakes icebreakers. The Coast Guard's current Great Lakes icebreaker fleet consists of nine cutters: one heavy icebreaker— Mackinaw (WLBB-30), a 240-foot ship displacing 3,500 tons; six 140-foot Bay -class icebreaking tugs displacing 662 tons each; and two 225-foot Juniper -class seagoing buoy tenders displacing about 2,000 tons each that have a light icebreaking capability. Although Mackinaw is referred to as a heavy icebreaker, the word heavy in this instance is being used in the context of Great Lakes icebreaking— Mackinaw is much larger and has more icebreaking capability than the eight other ships listed above. Mackinaw would not, however, qualify as a heavy polar icebreaker, as it is much smaller and has much less icebreaking capability than a heavy polar icebreaker. Coast Guard officials have stated that they do not view the procurement of additional Great Lakes icebreakers as an urgent near-term acquisition need. In support of this assessment, they cite the capabilities of the current Great Lakes icebreaking fleet, the relatively young age of Mackinaw (which entered service in 2006), service life extension work being done on the ice-breaking tugs that is designed to add 15 years to their service lives, and Canada's own Great Lakes icebreaking capabilities. A 2016 Coast Guard report to Congress on the Great Lakes icebreaking mission stated the following: The current mix of heavy and medium [Great Lakes] icebreakers is capable of managing priorities and requests for icebreaking in Tier 1 and 2 waterways. When a severe ice season stresses Coast Guard asset capabilities, the existing agreement and partnership with Canada fills the capability gap and brings in extra heavy-icebreaking resources to manage the ice.... [T]he 2014 and 2015 ice seasons were a 20-year anomaly, consuming almost twice as many cutter resource hours as in any other year since 2005. The Coast Guard cannot reliably predict the economic impact of maintaining a single heavy Great Lakes icebreaker. Additionally, given the extreme conditions when ice coverage exceeds 90 percent, it is not clear that shipping delays would be significantly mitigated by an increase in icebreaking capability. Delays can be associated with several factors such as slow transit speeds, availability of pilots, and simultaneous and competing demand signals for icebreaking services across the Great Lakes. The Coast Guard's position notwithstanding, some Members of Congress in recent years have expressed interest in the possibility of bolstering the Coast Guard's Great Lakes icebreaking fleet by procuring a second icebreaker with capabilities generally similar to those of Mackinaw . Interest in this option was reinforced by the winters of 2013-2014 and 2014-2015, which featured particularly high levels of ice coverage on the Great Lakes. The committee report language requiring the above-quoted Coast Guard report to Congress is one example of this interest. Another example is Section 820 of the Frank LoBiondo Coast Guard Authorization Act of 2018 ( S. 140 / P.L. 115-282 of December 4, 2018), which states the following: SEC. 820. Great Lakes icebreaker acquisition. (a) Icebreaking on the Great Lakes.—For fiscal years 2018 and 2019, the Commandant of the Coast Guard may use funds made available pursuant to section 4902 of title 14, United States Code, as amended by this Act, for the construction of an icebreaker that is at least as capable as the Coast Guard Cutter Mackinaw to enhance icebreaking capacity on the Great Lakes. (b) Acquisition plan.—Not later than 45 days after the date of enactment of this Act, the Commandant shall submit a plan to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure of the House of Representatives for acquiring an icebreaker described in subsections (a) and (b). Such plan shall include— (1) the details and schedule of the acquisition activities to be completed; and (2) a description of how the funding for Coast Guard acquisition, construction, and improvements that was appropriated under the Consolidated Appropriations Act, 2017 (Public Law 115–31) will be allocated to support the acquisition activities referred to in paragraph (1). An examination of procurement costs for Mackinaw , the National Science Foundation's ice-capable research ship Sikuliaq , new oceanographic research ships being procured for NOAA, and OPCs suggests that a new Mackinaw -sized heavy Great Lakes icebreaker built in a U.S. shipyard might have a design and construction cost between $175 million and $300 million, depending on its exact capabilities and the acquisition strategy employed. The design portion of the ship's cost might be reduced if Mackinaw's design or the design of some other existing icebreaker were to be used as the parent design. Depending on the capabilities and other work load of the shipyard selected to build the ship, the construction time for a new heavy Great Lakes icebreaker might be less than that of a new heavy polar icebreaker.", "summary": "The Coast Guard Polar Security Cutter (PSC) program is a program to acquire three new heavy polar icebreakers, to be followed years from now by the acquisition of up to three new medium polar icebreakers. On April 23, 2019, the Coast Guard-Navy Integrated Program Office for the PSC program awarded a $745.9 million fixed-price, incentive-firm contract for the detail design and construction (DD&C) of the first PSC to VT Halter Marine of Pascagoula, MS, a shipyard owned by Singapore Technologies (ST) Engineering. VT Halter was the leader of one of three industry teams that competed for the DD&C contract. The first PSC is scheduled to begin construction in 2021 and be delivered in 2024, though the DD&C contract includes financial incentives for earlier delivery. The DD&C contract includes options for building the second and third PSCs. If these options are exercised, the total value of the contract would increase to $1,942.8 million (i.e., about $1.9 billion). The figures of $745.9 million and $1,942.8 million cover only the shipbuilder's costs; they do not include the cost of government-furnished equipment (GFE), which is equipment for the ships that the government purchases and then provides to the shipbuilder for incorporation into the ship, or government program-management costs. When GFE and government program-management costs are included, the total estimated procurement cost of the first PSC is between $925 million and $940 million, and the total estimated procurement cost of the three-ship PSC program is about $2.95 billion. The PSC program has received a total of $1,034.6 million (i.e., about $1.0 billion) in procurement funding through FY2019, including $300 million provided through the Navy's shipbuilding account in FY2017 and FY2018. The Coast Guard's proposed FY2020 budget requests $35 million in procurement funding for the PSC program, which is enough to cover the PSC program's FY2020 government program-management costs. The Coast Guard's FY2019 budget submission had projected that a total of $125 million in procurement funding would be requested for the PSC program in FY2020. The operational U.S. polar icebreaking fleet currently consists of one heavy polar icebreaker, Polar Star, and one medium polar icebreaker, Healy. In addition to Polar Star, the Coast Guard has a second heavy polar icebreaker, Polar Sea. Polar Sea, however, suffered an engine casualty in June 2010 and has been nonoperational since then. Polar Star and Polar Sea entered service in 1976 and 1978, respectively, and are now well beyond their originally intended 30-year service lives. The Coast Guard is using Polar Sea as a source of spare parts for keeping Polar Star operational. Issues for Congress for the PSC program include, inter alia, whether to approve, reject, or modify the Coast Guard's FY2020 procurement funding request for the program; whether to use a contract with options or a block buy contract to procure the ships; whether to continue providing at least some of the procurement funding for the PSC program through the Navy's shipbuilding account; technical, schedule, and cost risk in the PSC program; and whether to procure heavy and medium polar icebreakers to a common basic design.", "document_type": "crs"}
{"report": "The last several years have seen renewed debate over the role that race plays in higher education—a debate over \"affirmative action.\" A high-profile lawsuit challenging Harvard University's consideration of race in admitting its incoming classes, and the recent withdrawal of Obama Administration-era guidance addressing similar race-conscious policies, have focused the debate on \"affirmative action\" in perhaps its more familiar sense: the voluntary consideration of student applicants' race as a way of increasing the participation of racial minorities in higher education. Meanwhile, a recent lawsuit involving Maryland's university system has brought renewed attention to \"affirmative action\" in its other, original sense: the mandatory use of race by public higher education systems to eliminate the remnants of state-imposed racial segregation. This report addresses \"affirmative action\" in each of these two senses and discusses how the federal courts have analyzed them under the Fourteenth Amendment's guarantee of \"equal protection.\" The report first considers \"affirmative action\" in its original sense: the mandatory race-conscious measures that the federal courts have imposed on de jure segregated public university systems. The Supreme Court has made clear that a state that had a segregated system of education must eliminate all \"vestiges\" of that system, including through expressly race-conscious remedies. In its consequential 1992 decision United States v. Fordice , the Court charted a three-step inquiry for assessing whether a state has fulfilled that constitutional obligation, examining whether a current policy is traceable to the de jure segregated system, has continued discriminatory effect, and can be modified or practicably eliminated consistent with sound educational policy. Outside this de jure context, \"affirmative action\" has come to refer to a different category of race-conscious policies. These involve what the Court once called the \"benign\" use of racial classifications —voluntary measures designed not directly to remedy past governmental discrimination, but to increase the representation of racial minorities previously excluded from various societal institutions. And in the context of higher education the Court has addressed one type of policy in particular: the use of race as a factor in admissions decisions, a practice now observed by many public and private colleges and universities. As this report explains, the federal courts have come to subject these voluntary \"affirmative action\" policies to a particularly searching form of review, known today as strict scrutiny. And they have so far upheld those policies under a single theory: that the educational benefits that flow from a diverse student body uniquely justify some consideration of race when deciding how to assemble an incoming class. To rely on that diversity rationale, however, the Court now requires universities to articulate in concrete and precise terms what their diversity-related goals are, and why they have chosen those goals in particular. And even once those goals are established, a university must still show that its admissions policy achieves its diversity-related goals as precisely as possible, while ultimately \"treat[ing] each applicant as an individual.\" Because both lines of cases discussed here have their roots in the Equal Protection Clause, this report focuses primarily on public universities, all of which are directly subject to constitutional requirements. But those same requirements apply equally to private colleges and universities that receive federal funds pursuant to Title VI of the Civil Rights Act of 1964 (Title VI or the Act), which similarly prohibits recipients of federal dollars from discriminating on the basis of race. This report concludes by discussing the role that Title VI plays in ensuring equal protection in higher education, both public and private, including several avenues for congressional action under the Act. Though government-sanctioned racial segregation in public education is commonly associated with primary and secondary schools, numerous states had also mandated or permitted racial segregation in institutions of higher education, including through the latter part of the 20 th century, categorically excluding black students solely because of their race. Though the Supreme Court held decades ago that state-sanctioned racial segregation in higher education violates the Equal Protection Clause, such intentional segregation, or practices arising from formerly de jure segregated university systems and their discriminatory effects, may still persist. Addressing such circumstances, the Supreme Court has held the Equal Protection Clause to require states to eliminate all vestiges of their formerly de jure segregated public university systems that continue to have discriminatory effect. As the Court concluded in United States v. Fordice , state actors \"shall be adjudged in violation of the Constitution and Title VI [of the Civil Rights Act]\" to the extent they have failed to satisfy this affirmative duty to dismantle a de jure segregated public university system. A state actor therefore remains in violation of the Equal Protection Clause today if it maintains a policy or practice \"traceable\" to a formerly de jure segregated public university system that continues to foster racial segregation. Where such a violation is shown, race-conscious measures are not only constitutionally permissible, but may be constitutionally required to remedy and eliminate such unconstitutional remnants. As in the K-12 context, a number of states maintained racially segregated public university systems and denied black students admission to post-secondary schools—including colleges, law schools, and doctoral programs —on the basis that these institutions educated white students only. Prior to 1954—the year of the Supreme Court's landmark Brown v. Board of Education decision ( Brown I ) —the Court had interpreted the Equal Protection Clause to permit state-sanctioned racially segregated public educational systems, provided that the separate schools for black students were substantially equal to those reserved for white students. For example, in its 1950 decision Sweatt v. Painter , the Court addressed an equal protection claim raised by a black student challenging the University of Texas Law School's denial of his admission based on his race, pursuant to its white-only admissions policy. At the time of the plaintiff's application in 1946, the state did not have a law school that admitted black students. Denying the plaintiff's requested relief for admission, the state trial court instead granted additional time to Texas to create a law school for black students; the state thereafter created a law school at the Texas State University for Negroes. The Supreme Court, however, held that the law school—which, among other features, lacked accreditation —did not offer an education \"substantially equal\" to that which the plaintiff would receive at the University of Texas Law School. On that basis—the absence of a separate but equivalent legal education—the Court held that the Equal Protection Clause required the plaintiff's admission to the University of Texas Law School. A decisive turn in the Court's interpretation and application of the Equal Protection Clause, however, came by way of its 1954 decision in Brown I . There, the Court held for the first time that race-based segregation \"in the field of public education\" violates the Equal Protection Clause. The Court concluded that race-based segregation in public schools deprives minority students of equal educational opportunities, and observed that segregation commonly denotes inferiority of the minority group. Segregated educational facilities, the Court concluded, are \"inherently unequal.\" The Court's holding in Brown I applies with equal force to public higher education—that is, to public colleges and universities —as does the Court's subsequent 1955 decision in the same case (\" Brown II \"), in which the Court addressed how school authorities and federal courts were to implement the mandate of Brown I . Indeed, one of the Court's earliest applications of Brown I and Brown II was in the higher education context. In that case, State of Fla. Ex. Rel. Hawkins v. Board of Control , the Supreme Court vacated a Florida supreme court decision that declined to order the state's white-only law school to admit a black student. Relying on language in Brown II that courts could consider practical obstacles to a school's transition to desegregation, the Florida court refused to order the plaintiff's admission. The Supreme Court vacated the state court's decision, concluding that in the case of admitting a black student \"to a graduate professional school, there [wa]s no reason for delay\" and that he was \"entitled to prompt admission under the rules and regulations applicable to other qualified candidates.\" Following Brown I and Brown II , the Court's equal protection jurisprudence in the public education context expanded significantly to address questions regarding the scope and sufficiency of state actions to \"dismantle\" racially segregated systems in public school districts across the country, and various challenges to district court-ordered remedies. As the Court revisited these legal standards over time, it continued to describe the affirmative duty of formerly segregated public school entities as the duty to \"take all steps necessary to eliminate the vestiges of the unconstitutional de jure system\" to the extent practicable. Turning to the context of higher education, the Court addressed, in its 1992 decision United States v. Fordice , how these equal protection principles and legal standards apply to a state's affirmative duty to dismantle a formerly de jure segregated public university system. Though it had \"many occasions to evaluate whether a public school district has met its affirmative obligation to dismantle its prior de jure segregated system in elementary and secondary schools,\" the Court explained, Fordice presented the issue of \"what standards to apply\" in determining whether the state has met this obligation in the university context. At issue before the Court was Mississippi's prior de jure public university system. The Court observed that since establishing the University of Mississippi as an institution of \"higher education exclusively of white persons\" in 1848, Mississippi had created four more exclusively white institutions and three exclusively black institutions through 1950. Thereafter, it continued to maintain its racially segregated public university system, and admitted its first black student to the University of Mississippi in 1962 \"only by court order.\" For the \"next 12 years,\" the state's segregated university system \"remained largely intact.\" Around 1987, when the case went to trial, over 99 percent of the state's white students attended the five universities that had been formerly white-only, while the three formerly black-only institutions had student bodies between 92 percent to 99 percent black. Citing its precedent addressing de jure segregation in the K-12 context, the Court stated that \"[o]ur decisions establish that a [s]tate does not satisfy its constitutional obligations until it eradicates policies and practices traceable to its prior de jure dual system that continue to foster segregation.\" Perhaps critically, in the context of remedying a formerly de jure segregated system, a state's \"adoption and implementation of race-neutral policies alone \" is not sufficient to demonstrate that it has \"completely abandoned its prior dual system.\" Aside from segregative admissions policies, the Court explained, a state's other policies may shape and determine student choice and attendance, and continue to foster segregation. Instead, to determine whether a state has satisfied its affirmative duty to dismantle its de jure public university system, the Court set out a three-step analysis. First , the analysis examines whether the challenged policy or practice maintained by the state is \"traceable to its prior [ de jure ] system.\" By way of example, the Court identified four policies that, in its view, were \"readily apparent\" vestiges of de jure segregation: admissions standards based on a test-score range originally adopted for discriminatory reasons; unnecessary program duplication throughout the university system (e.g., multiple institutions offering the same \"nonbasic\" courses); the state's academic mission assignments to its higher education institutions (e.g., assigning the broadest academic missions to only formerly white-only institutions and the narrowest academic mission to a formerly black-only institution); and the continued operation of all public universities established in the de jure segregated system. With respect to traceability, the Court's analysis reflects that where a current policy functions based on distinctions or a framework created in a formerly de jure system, traceability can be shown. For example, when concluding that the state's designation of academic missions to its universities was traceable to de jure segregation, the Court cited evidence that the state's current method of assigning its universities into three academic missions levels largely mirrored a three-tiered grouping of its universities in the de jure system. In addition and more generally, an interim change or new, nondiscriminatory justification for a current policy does not necessarily sever its traceability to a de jure system. Where the traceability of a policy or policies is shown, a party need not show discriminatory intent with respect to those challenged policies. Where traceability is not shown—that is, where the policies \"do not have such historical antecedents\" to de jure segregation—an equal protection challenge would then require \"a showing of discriminatory purpose.\" In those instances, the Court explained, \"the question becomes whether the fact of racial separation establishes a new violation of the Fourteenth Amendment under traditional principles.\" Second , once traceability is shown, the analysis turns to whether those traceable policies have continued discriminatory or \"segregative\" effects in student choice, enrollment, or other facets of the university system. At this stage, the Court noted that a court should not consider \"this issue in isolation,\" but rather examine the \"combined effects\" of all the challenged policies together \"in evaluating whether the State ha[s] met its duty to dismantle its prior de jure segregated system.\" In light of this instruction, it appears the focus of the second step of the test is not on establishing causation between specific racial disparities and specific policies—by this stage, a court has already found traceability—but rather to evaluate whether a state has sufficiently dismantled its formerly de jure system. Consistent with the state's burden of proving it has dismantled its de jure segregated system, the state must show the absence of segregative effects; plaintiffs are not required to establish this second element. Third , because traceable policies that have discriminatory effects \"run afoul of the Equal Protection Clause,\" such policies must accordingly \"be reformed to the extent practicable and consistent with sound educational practices.\" Thus, at the third step, a court assesses whether traceable policies can be \"practicably eliminated\" \"consistent with sound educational practices,\" with the burden on the state to show that the challenged policies are \"not susceptible to elimination without eroding sound educational policy.\" Because the Court remanded the case to the lower court to address practicable elimination, its analysis in Fordice on this point is limited. The Court suggested, however, that if a current policy lacks sound educational justification, it reasonably follows that it can be practicably eliminated in part or in whole. In addition, the Court observed that in some cases, a merger or closure of institutions could be constitutionally required to eliminate vestiges, should other methods fail to eliminate their discriminatory effects. Finally, the Court repeatedly stated that so long as vestiges remain, which have discriminatory effects, the state remains in violation of the Equal Protection Clause unless it can show it cannot practicably eliminate those policies or practices. In addition, Justice O'Connor, in a separate concurring opinion in Fordice , emphasized the \"narrow\" circumstances under which a state could maintain a traceable policy or practice with segregative effects. In her view, courts may \"infer lack of good faith\" on the part of the state if it could accomplish educational objectives through less segregative means, and the state has a \"'heavy burden'\" to explain its preference for retaining the challenged practice. Moreover, even if the state shows that retaining certain traceable policies or practices is \"essential to accomplish its legitimate goals,\" Justice O'Connor asserted that the state must still prove it has \"counteracted and minimized the segregative impact of such policies to the extent possible.\" The Court in Fordice observed that the closure or merger of certain institutions may be constitutionally required, consistent with its holding that any vestige of a de jure segregated system that continues to have discriminatory effect must be eliminated to the extent practicable and consistent with sound educational policy. Yet that invited a new—and more difficult—set of questions: which institutions would be most subject to closure or merger, and under what circumstances would such action be required? Significantly, the Court did not categorically identify which institutions would be most subject to such remedial action —a state's flagship, formerly white-only institutions from which a de jure system originated, for example, or formerly black-only institutions created to preserve white-only admission at other institutions. Instead, the Court concluded that it was unable to determine—on the record presented in Fordice —whether closures or mergers were required in that case and directed the lower court on remand to \"carefully explore\" several considerations. This instruction to the lower court, while not part of the holding in Fordice , suggests that several factors are relevant for determining whether merger or closure is constitutionally required. In addition, the Court observed that maintaining all eight higher education institutions in Mississippi was \"wasteful and irrational,\" particularly in light of the close geographic proximity between some of the universities. This observation suggests that close proximity between institutions offering similar programs could be a relevant factor in assessing remedial closure or merger as well. Regarding the fate of a state's historically black institutions, Justice Thomas, in a concurring opinion, did not read Fordice to \"forbid[]\" those institutions' continued operation or \"foreclose the possibility that there exists 'sound educational justification' for maintaining historically black colleges as such .\" Justice Thomas emphasized that \"[d]espite the shameful history of state-enforced segregation,\" historically black colleges and universities were and remain institutions critical to the academic flourishing and leadership development of many students, and observed that \"[i]t would be ironic, to say the least, if the institutions that sustained blacks during segregation were themselves destroyed in an effort to combat its vestiges.\" In his view, though a state is not constitutionally required to maintain its historically black institutions as such, their continued operation is constitutionally permissible, so long as admission is open to all students \"on a race-neutral basis, but with established traditions and programs that might disproportionately appeal to one race or another.\" Following Fordice , plaintiffs, including the United States in Title VI enforcement actions, have brought suit challenging practices allegedly traceable to a state's de jure segregated university system. Challenged practices have included unnecessary program duplication, which the Court identified in Fordice as one of the \"readily apparent\" remnants of de jure segregation, as well as others such as scholarship policies, funding practices, and the use of curricula at formerly white-only institutions with little representation of black history and culture. More recently, in 2018, a legal challenge against the State of Maryland alleged that practices relating to capital and operational funding, unnecessary program duplication, and the limited institutional missions of the state's formerly black-only institutions are traceable to the state's formerly de jure segregated higher education system. To date, however, only a few federal appellate courts have had occasion to analyze Fordice -based claims, and the Supreme Court has not, since its 1992 decision, addressed claims challenging higher education policies or practices as unconstitutional vestiges of de jure segregation. Though development of the Fordice standard in federal case law is limited, the few appellate decisions applying Fordice provide at least some analytical examples and reflect discernible differences in approach, particularly with respect to the evidence sufficient to satisfy the third element of the Fordice standard—that elimination of a practice is not possible, despite being traceable and having continued discriminatory effect. As discussed above, the Supreme Court in Fordice identified \"unnecessary program duplication\" as a practice traceable to the prior de jure segregated system of higher education at issue in that case, stating that \"it can hardly be denied\" that such duplication was a requisite feature of the prior dual system because \"the whole notion of 'separate but equal' required duplicative programs in two sets of schools.\" Drawing upon that rationale, courts that have addressed unnecessary program duplication have generally had little difficulty tracing duplicative courses and degree programs to prior de jure segregation. On the matter of if and how program duplication might be eliminated, however, there is lesser consensus. Generally, federal courts have considered several methods for eliminating program duplication, such as transferring existing programs from one institution to another, eliminating certain programs altogether, creating cooperative programs, and—perhaps most drastically—merging institutions. Plaintiffs have also raised equal protection challenges to state funding practices that allocate all or most of their federal and state land grants to institutions that were formerly white-only in a de jure system while dedicating significantly less or no funds to formerly black-only institutions. More specifically, these cases have concerned a state's allocation of federal land grants provided annually to support research on agricultural issues and the dissemination or \"extension\" of that research. At issue in Knight v. Alabama , for example, was the State of Alabama's allocation of federal funds between its two land grant universities, Auburn University, formerly white-only in the de jure system, and Alabama A&M University (A&M), formerly established as black-only. The state allocated to Auburn the entirety of Alabama's approximately $4 million in federal aid for agricultural research, and allocated an additional $14 million to Auburn in state funds. Meanwhile, the state had \"for years\" allocated no federal aid to A&M and given state funds for agricultural research in amounts that \"today still totals less than $200,000 each year.\" The U.S. Court of Appeals for the Eleventh Circuit held that the state's current funding allocation was traceable to de jure segregation and instructed the lower court on remand to make determinations with respect to the second and third parts of the Fordice test. On the issue of practicable elimination, the Eleventh Circuit observed that reduced efficiency would not necessarily render a proposed modification impracticable or educationally unsound. By contrast, the Fifth Circuit affirmed a district court's ruling that permitted a state to retain its traceable funding practices. There, despite finding traceability and discriminatory effects, the district court had concluded, based on inefficiencies related to running more than one agricultural research program, that it was not practicable for the state to eliminate its exclusive funding allocation to its formerly white-only land grant institution. The Supreme Court has not revisited its analysis in Fordice , leaving open questions about the permissible applications of its three-part legal standard to an array of fact patterns and legal theories. Similarly, as discussed above, few courts of appeals have addressed claims under Fordice , limiting the development and interpretation of Fordice in federal case law. One such unresolved question is under what circumstances, if any, traceability can be established under Fordice when a state makes changes to an originally discriminatory policy such that the current policy functions differently, but there is still some evidence of traceability between the two, or perpetuation of similar segregative effects under the changed policy as under the original policy. In addition, the Supreme Court and circuit courts have not yet expressly addressed how far a district court may go in remedying an unconstitutional vestige or remnant of a prior de jure public university system. In the K-12 context, the Supreme Court has upheld district court orders that set certain faculty and student ratios at schools in noncompliant school districts, to desegregate them pursuant to Brown and its progeny . It remains unclear, however, whether the district courts enjoy similar authority under Fordice to order similarly extensive remedies. Indeed, the few cases alleging Fordice -type claims that did reach the federal appellate courts ultimately resolved in settlements, thus leaving little judicial guidance on the scope of a court's authority to mandate specific remedies if a state fails to dismantle its formerly de jure segregated public university system. With respect to these unresolved questions, the Supreme Court's express reliance in Fordice on precedent addressing de jure segregation in the primary and secondary school context suggests that at least some of this same precedent should inform future analyses, with adaptation to the higher education context. A finding of a state entity's intent to segregate students by race in the higher education context is critical to showing a violation of the Equal Protection Clause, and has significant legal consequences. In such cases of de jure —that is, intentional, state-imposed —segregation, the state has an affirmative duty under the Equal Protection Clause to eliminate all vestiges of its de jure system by dismantling the infrastructure and other mechanisms that produced the discriminatory segregation. According to the Supreme Court's 1992 Fordice decision, this duty commands more than just the repeal of state laws sanctioning racial segregation in higher education. The state must also uproot or reform any policy or practice \"traceable\" to its formerly de jure system that continues to have discriminatory effect. In Fordice , the state's intent to racially segregate its higher education system was plain: with the founding of the University of Mississippi in 1848, Mississippi explicitly set out to create a public university \"dedicated to the higher education exclusively of white persons,\" and racially segregated its public university system over the next 100 years through the creation of other \"exclusively white institutions\" and \"solely black institutions.\" Nor was Mississippi's system unique in this regard. \"[D]ual system[s]\" of public higher education—one for black students, another for white—were codified in other state and local laws throughout the country. Thus far, federal courts that have addressed de jure segregation in higher education have done so in the context of such codified segregation, as in Fordice . The absence of a codified dual system of higher education, however, may not mean that a university system was not or is not intentionally segregated. As reflected in the Supreme Court decision Keyes v. School District No. 1, Denver, Colorado , even when state authorities have not segregated their public schools by statute, they may still have engaged in unconstitutional racial segregation. Thus, in the K-12 context, federal courts have found de jure segregation based on evidence reflecting a state actor's impermissible segregative intent. This line of cases would appear to apply in the context of higher education as well. As the Court noted in Fordice , where a plaintiff is unable to show that a policy or practice is a vestige of prior de jure segregation, she may nonetheless prove a \"new\" constitutional violation with evidence of a present-day intent to racially segregate students \"under traditional principles\" governing discriminatory intent. This would be consistent with the Court's application of Brown and its progeny broadly across \"the field of public education,\" including higher education, as reflected in Fordice . Because the Supreme Court has yet to address segregative intent in higher education, it is unclear what intent evidence would be sufficient to establish a de jure segregated public university or institution, apart from a law codifying such segregation. As a general matter, though, a court's determination of discriminatory intent is a fact-intensive, \"sensitive inquiry.\" And the Supreme Court has observed that this is even more so in cases alleging de jure segregation in public education. Where the evidence indicates, for example, that a state actor undertook a policy or practice knowing that doing so would have the \"foreseeable\" effect of segregating students by race, that evidence may support an inference of de jure segregation. In addition, at least in the K-12 context, a finding of a state entity's segregative intent in one part of a school system creates a rebuttable presumption that segregation found in other parts of the same system was also intentional. De jure segregation proved by such nonstatutory evidence generally triggers the same affirmative obligation on the state to eliminate the vestiges of its state-imposed segregation, as when de jure segregation is shown through state or local laws. Though segregative intent analyses at the K-12 level may be instructive, the guidance these decisions provide may be limited by the nature of the evidence at issue in those particular cases: the method of student assignment to elementary or secondary schools, for example, or the drawing of attendance zones to create racially segregated schools. It appears unlikely that such evidence would be at issue or directly applicable in cases alleging segregative intent at the collegiate or graduate level. Nonetheless, these decisions generally suggest that categorical distinctions—between evidence indicative of de jure segregation and evidence of existing segregation insufficiently linked to state intent—are difficult to draw. Indeed, given the difficulties that can arise in a court's analysis of \"segregative intent,\" over the years a number of Justices have called into question the rationale and basis for the distinction between de jure and so-called de facto segregation, though the majority of the Court has recognized and continues to recognize this distinction. Whatever the open questions may be regarding the evidence sufficient to show segregative intent, particularly in the higher education context, Fordice instructs that a plaintiff need not provide evidence of new discriminatory intent when alleging that a state has failed to eliminate vestiges of a prior de jure segregated system. And with respect to remedying intentional racial segregation, the Court has repeatedly held that a state not only may use a broad array of explicit race-conscious policies and practices to remedy its constitutional violation, but often must do so. By themselves, race-neutral measures simply may not be enough, the Court has explained, to provide equitable, make-whole relief for intentionally segregative acts. This affirmative obligation to consider race arises, however, only in the context of de jure segregation. Outside that de jure context, institutions of higher education subject to the Equal Protection Clause have no such duty to remedy racial segregation. Nor may they—or the federal courts, for that matter—use the same broad array of race-conscious measures available for remedying de jure segregation. De jure segregation, however, is not the only context in which race-conscious measures in higher education may be used. For over forty years colleges and universities have considered race as a way of increasing the racial diversity of their student bodies, independent from a legal basis relating to de jure segregation. Thus far, however, the Supreme Court has addressed only one type of discretionary race-conscious measure in the higher education context: admissions policies. And when evaluating these discretionary policies, the Court reviews them under a notably different analytical lens, looking to their precision in achieving certain concretely defined and \"compelling\" educational interests, as explained more fully below. \"Affirmative action\" in its original sense grew out of the states' affirmative obligation under the Equal Protection Clause to rid their public institutions of the lingering vestiges of de jure segregation. But \"affirmative action\" has also come to refer to race-conscious policies developed outside this de jure context. These are policies voluntarily adopted by institutions to help racial minorities overcome the effects of their earlier exclusion. And unlike the measures ordered by the courts to right the wrongs of de jure segregation, these policies are strictly voluntary, with their legality consequently turning on constitutional considerations unlike those involved in the de jure context. \"Affirmative action\" in this more familiar, voluntary sense has also been among the most contentious subjects in constitutional law. In the forty years since Regents of the University of California v. Bakke , when the Court first addressed those programs' constitutionality, the Justices have divided sharply over when or whether such programs can survive constitutional scrutiny. And a major point of disagreement among the Justices—lingering to this day —is how strictly to review those policies and what the government or other state entity must do to justify its use of \"benign\" racial classifications. In recent decisions, the Court has reviewed such classifications under a seemingly \"elastic\" regime of strict scrutiny, accepting those classifications only where they have been narrowly tailored to serve compelling government interests. The constitutional guarantee of equal protection broadly prohibits the government from employing \"arbitrary classification[s].\" And the use of racial classifications in particular has long been of special concern for the courts. Indeed, this \"heightened judicial solicitude\" for racial categorizing has roots nearly as old as the Fourteenth Amendment itself. As the Supreme Court explained in an early decision under the Amendment, the \"spirit and meaning\" of the Equal Protection Clause was \"that the law in the States shall be the same for the black as for the white; that all persons, whether colored or white, shall stand equal before the laws of the States, and, in regard to the colored race, ... that no discrimination shall be made against them by law because of their color.\" In the decades since, the Court has only made clearer that it regards the government's use of racial classifications as \"inherently suspect\" and therefore subject to more demanding scrutiny than other classifications, which are typically reviewed only for basic rationality. There has been significant disagreement, however, over just how rigidly the courts should scrutinize a racial classification, especially when the point of the classification is to benefit racial minorities, as in the case of affirmative action. That issue came before the Court for the first time in Bakke , involving a challenge to an affirmative action admissions program begun at the then newly created medical school at the University of California at Davis (the Medical School). And the Court's fractured decision there prefigured the central disagreements that the Justices still face in reviewing so-called \"benign\" racial classifications. In the early 1970s, not long after the Medical School opened, it adopted a race-conscious admissions policy to increase its enrollment of certain \"disadvantaged\" students. Under that policy, the school each year would set aside 16 seats in its entering class of 100 specifically for members of this \"disadvantaged\" group, to be admitted by a \"special admissions\" committee. Although many white students sought admission under this \"special\" policy, the committee considered only students of specifically identified racial minorities. After Allan Bakke, a white male, twice sought—and was denied—admission to the school, he brought suit challenging the set-aside under the Equal Protection Clause as well as Title VI, which prohibits institutional recipients of federal funds—like the Medical School—from discriminating on the basis of race. Bakke's case eventually found its way to the Supreme Court and into the hands of a divided bench. The Justices found themselves particularly at odds over the case's threshold question—what level of scrutiny the Court should apply in reviewing Bakke's challenge. Justice Stevens, writing for a quartet of Justices, concluded that the program violated Title VI, sidestepping the constitutional question. Another four Justices would have reached the equal protection challenge, and in doing so would have required the Medical School to point to \"important governmental objectives\" that justified its admissions policy's use of \"remedial\" racial classifications, along with evidence that their use was \"substantially related to\" achieving those important objectives . Under that standard—a form of intermediate scrutiny —these Justices would have upheld the policy. Justice Powell, announcing the Court's judgment but writing for himself, insisted that all \"racial and ethnic distinctions\" drawn by the government must be regarded as \"inherently suspect,\" calling for \"the most exacting judicial examination.\" What that meant in Bakke , according to Justice Powell, was that the Medical School would need to prove that its use of the \"special admissions\" carve-out was \"precisely tailored to serve a compelling governmental interest\"—the standard of review now known simply as strict scrutiny . And because, in his view, the school could come forward with no such proof, Justice Powell concluded that its affirmative-action policy could not survive the Court's scrutiny, whether under the Fourteenth Amendment or the overlapping standards of Title VI. Because Bakke yielded no majority opinion, it could only hint at how the Court might treat other \"benign\" race-conscious policies that did not involve the sort of apparent quota invalidated in that case or cases outside the unique context of higher education. That uncertainty would last another decade, as the Court, in another series of splintered decisions, weighed constitutional challenges to differently structured affirmative action policies in other contexts, each time without resolving the appropriate standard of review. That uncertainty appeared to abate with the Court's 1989 decision in Richmond v. J.A. Croson , Co. There, for the first time, five Justices clearly signaled that they would apply strict scrutiny to affirmative action plans implemented at the state and local levels, including the program they invalidated in that case, involving the City of Richmond's set-aside of public work funds for minority-owned businesses. But the next year, in Metro Broadcasting, Inc. v. FCC , the Court, in another 5-4 ruling, suggested that it would review federal affirmative action plans differently. In the Court's view there, \"benign race-conscious measures mandated by Congress \" need only \"serve important governmental objectives\" and be \"substantially related to the achievement of those objectives\"—satisfying an intermediate level of scrutiny. Just a few years later, however, in Adarand Constructors, Inc. v. Peńa , the Supreme Court reversed course. There, in a federal contracting case, the Court drew a different lesson from its pre- Metro line of race-classification cases: in the view of the Adarand majority, \"any person, of whatever race, has the right to demand that any governmental actor subject to the Constitution justify any racial classification subjecting that person to unequal treatment under the strictest judicial scrutiny.\" That simple rule therefore precluded the divided regime upheld in Metro Broadcasting , subjecting the states' use of racial classifications to strict scrutiny, while relaxing the review of comparable classifications enacted by Congress. Instead, the Adarand Court held, \"[f]ederal racial classifications, like those of a State, must serve a compelling governmental interest, and must be narrowly tailored to further that interest.\" And to the extent that Metro Broadcasting was \"inconsistent\" with that uniform rule, it was accordingly overruled. After Adarand strict scrutiny therefore became the test of any classification that subjected individuals to unequal treatment based on their race, no matter which state actor was doing the classifying. And the Court expressly extended that holding to the context of higher education. As the Court reaffirmed in Fisher v. University of Texas , \"because racial characteristics so seldom provide a relevant basis for disparate treatment,\" \"[r]ace may not be considered [by a university] unless [its] admissions process can withstand strict scrutiny.\" It therefore appears that a classification that subjects individuals to unequal treatment because of their race, even if for a \"benign\" purpose, will have to satisfy strict scrutiny. In its canonical formulation, that test calls for measuring such classifications along the two dimensions Justice Powell identified in Bakke : (1) the classification must serve a compelling governmental interest and (2) the use of that classification must also be narrowly tailored to achieving that interest. The government has the burden of proving both, and neither is easy to do. Indeed, in the sixty years that separated the Court's now-repudiated decision in Korematsu v. United States from Grutter v. Bollinger , when the Court first upheld an affirmative action policy at a public university, the only other \"racial classifications upheld under strict scrutiny [have been] race-based remedies for prior racial discrimination by the government.\" To many commentators \"strict scrutiny\" has thus come to seem rather more \"strict in theory, but fatal in fact\" —a point sometimes echoed by the Justices themselves. Strict scrutiny may typically be fatal in fact, but affirmative action policies in higher education have been a notable exception. Partly this has to do with the Equal Protection Clause itself, and the often crucial difference that a particular context makes in deciding cases under that \"broad provision[].\" And for several Justices the context of affirmative action, involving the arguably \"benign\" use of race, has seemed particularly distinctive. Yet, despite this contextual difference, the Court has made it clear that its scrutiny of race-conscious admission policies is still every bit as strict. Or, as Justice Kennedy put the point in the first Fisher case, even though \"[s]trict scrutiny must not be 'strict in theory, but fatal in fact,'\" it must also \"not be strict in theory but feeble in fact.\" This seeming tension—between the strictness of the Court's scrutiny and its approval of race-conscious admissions policies—has led the Court to adjust its framework for scrutinizing similar policies over the years. And since Bakke that framework appears to have shifted in two significant respects, corresponding to each of the two prongs of strict scrutiny. First, the Court now requires public universities that adopt affirmative action admissions policies to explain in increasingly \"concrete and precise\" terms what diversity-related educational goals those policies serve and why the university has chosen to pursue them. Anything less, the Court has held, would fail to present an interest sufficiently compelling under strict scrutiny. Second, the Court also now expects universities to prove that their policies achieve those \"concrete and precise goals\" in an appropriately \"flexible\" way, as most clearly exemplified by the Harvard plan that Justice Powell singled out in Bakke . That model has yielded \"five hallmarks\" of an appropriately tailored affirmative action policy, criteria that have since guided lower courts in assessing other affirmative action plans. For a university's affirmative action policy to survive strict scrutiny, a university must first \"demonstrate with clarity that its 'purpose or interest is both constitutionally permissible and substantial.\" The Court has recognized only a single interest that meets that standard: \"the attainment of a diverse student body.\" What exactly that interest amounts to—and how, consequently, a university should ensure it has appropriately tailored its policy to achieve that interest—has been a point of uncertainty since Bakke . With its two decisions in Fisher v. University of Texas , however, the Court appears now to require a more \"concrete and precise\" articulation of the diversity-related educational goals a university hopes to achieve through its affirmative action admissions policy. In addition, the Court also now appears to expect a university to provide a reasoned and principled explanation of why the school believes it important to achieve those goals. The diversity rationale emerged with the Court's first encounter with a voluntary affirmative-action policy, in Bakke . There—in an opinion for the Court joined by no other Justice—Justice Powell explained what interests clearly would not count as compelling enough to satisfy strict scrutiny. Those included the Medical School's alleged interest in having \"some specified percentage\" of certain racial or ethnic groups in a student body and its interest in \"remedying ... the effects of societal discrimination,\" as well as the school's particular interest in \"the delivery of health-care services to communities currently underserved.\" None of these interests, Justice Powell concluded, provided a reason substantial enough to justify turning to race-conscious measures. Nor has the Court said otherwise since. But Justice Powell was also clear about what interest he believed would satisfy strict scrutiny: \"student body diversity.\" And just as importantly, he also explained why: colleges and universities, he suggested, had a uniquely academic interest in promoting an \"atmosphere of speculation, experiment, and creation\"—an interest, more simply, in \"academic freedom.\" That interest, Justice Powell observed, was not only \"essential to the quality of higher education,\" but had also long \"been viewed as a special concern of the First Amendment.\" Thus the \"right to select those students who will contribute the most to the robust exchange of ideas\" not only allowed a university \"to achieve a goal that is of paramount importance in the fulfillment of its mission,\" it also represented a \"countervailing constitutional interest\" that, in Justice Powell's view, called for the Court's respect. In Bakke , Justice Powell set out the basic theory for why diversity could justify an affirmative action policy, at least \"in the context of a university's admissions program. But he gave few details about what that interest encompassed. As he saw it, that interest must have its limits: pursuing diversity would not allow a university to resort to racial quotas, for example, nor could the school disregard other \"constitutional limitations protecting individual rights.\" But Justice Powell declined to indicate where those other limitations fell or how they circumscribed the goals a university could permissibly seek in the name of a diverse student body. And because the Bakke Court fractured as it did, with no one opinion commanding a majority of the Justices' votes, the lessons of that case have been hard to discern, especially after the Court appeared to decline a similar diversity rationale in later cases outside higher education. Perhaps unsurprisingly, the lower courts soon came to reflect this uncertain division of opinion in later cases involving affirmative action programs at other public universities. Some clarity over Bakke 's diversity theory came in 2003, with a pair of decisions reviewing affirmative action policies of the University of Michigan: Grutter v. Bollinger , challenging the university's law school admission program, and Gratz v. Bollinger , challenging the policy used by the university's undergraduate program. Grutter , especially, helped clarify what an interest in diversity involved, and how a university could rely on that interest to defend a race-conscious admissions policy. Under the admissions policy of the University of Michigan Law School ( the Law School) challenged in Grutter , applicants to incoming classes were admitted under a policy that weighed a composite of the applicant's LSAT score and undergraduate GPA along with several more individualized factors, including the applicant's race. The Law School set out to create classes with what it called a \"critical mass of underrepresented minority students,\" to ensure that those students felt \"encourage[d] ... to participate in the classroom and not feel isolated.\" The school, however, never explicitly assigned a numerical target for any particular racial group, though it did track, on an ongoing basis, \"the racial composition of the developing class.\" A rejected white applicant claimed the Law School's admission policy discriminated against her based on her race, in violation of the Equal Protection Clause and Title VI. And her challenge eventually reached the Supreme Court, alongside its companion case, Gratz , challenging the university's admissions policy for its undergraduate program. Given the uncertainties surrounding Bakke 's bottom line, the first major question in Grutter centered on the basic goal of the Law School's policy: Is achieving student diversity an interest compelling enough to justify a school's use of race at all in its admissions decisions? And for the first time the Supreme Court held that it was. Writing for a clear majority, Justice O'Connor adopted the view Justice Powell set out in Bakke : \"student body diversity is a compelling state interest that can justify the use of race in university admissions.\" More than that, the Court made clear that it was willing to defer to the Law School's understanding of that interest, and its goal of \"enroll[ing] a 'critical mass' of minority students.'\" As Justice O'Connor explained for the Court, by enrolling a \"critical mass\" of students, the Law School was trying to achieve the \"substantial\" \"educational benefits that diversity is designed to produce\"—benefits such as \"promot[ing] cross-racial understanding,\" \"break[ing] down racial stereotypes,\" \"promot[ing] learning outcomes,\" and \"better prepar[ing students] as professionals.\" Achieving a \"critical mass\" of underrepresented students, the Court agreed, was simply one way that the Law School could try to vindicate those diversity-related educational benefits. And because this interest was deemed compelling enough to satisfy strict scrutiny, the Court was therefore willing to treat the school's use of the \"critical mass\" target as a permissible proxy for achieving those benefits. Not all the Justices agreed, however, that the university's invocation of \"critical mass\" made the diversity interest more concrete or compelling. In dissent, Justice Kennedy sided with Chief Justice Rehnquist's view that \"the concept of critical mass [was] a delusion used by the Law School to mask its attempt to make race an automatic factor in most instances and to achieve numerical goals indistinguishable from quotas.\" That \"delusion,\" according to Justice Kennedy, did not just make the school's appeal to \"critical mass\" \"inconsistent with [the] individual consideration\" of applicants. It also, in his view, turned the school's admissions policy into a veiled form of racial balancing. And all four dissenting Justices found that result incompatible with the Equal Protection Clause. Grutter appeared to settle the major question left open by the fractured decision in Bakke : whether achieving student diversity was a compelling enough interest for a public university to justify its consideration of race in its admissions policies. Grutter confirmed not only that the Court still viewed student diversity as a compelling interest, but also that a school could vindicate that interest by seeking to enroll a \"critical mass\" of underrepresented minorities in its incoming classes. The ruling also effectively swept aside contrary lower court decisions that struck down other state universities' affirmative action policies, including in Texas. In the wake of Grutter , the University of Texas (UT Austin) decided to revisit its applicant review process, eventually choosing to introduce race as one of the factors considered in its admissions policy. Under the revised policy, UT Austin would continue to admit all Texas high school students who graduated in the top ten percent of their class, and fill in the rest of its incoming undergraduate classes using an index score incorporating two assessments: (1) an \"Academic Index\" (AI) that weighed the applicant's SAT score and academic record; and (2) a \"Personal Achievement Index\" (PAI) that included a more holistic appraisal of the student's character and, following post- Grutter revisions, also factored in the applicant's race. Abigail Fisher, a white Texas student whose application to UT Austin was rejected under this process, challenged the AI-PAI system. That system, she argued, had discriminated against her as a white applicant by allegedly allowing race to figure in the decision to reject her application, in violation of the Equal Protection Clause. Her challenge eventually made its way to the Supreme Court as Fisher v. University of Texas , where the Supreme Court remanded the challenge to the lower court to review UT Austin's policy under strict scrutiny ( Fis her I ), and then upon appeal upheld the school's admission policy ( Fis her II ). In her suit, Fisher did not challenge Grutter 's basic holding—that the university had a compelling interest in student diversity, or even that the school could pursue that interest in diversity by enrolling a \"critical mass\" of underrepresented minorities. But when the Court finally took up her challenge on the merits in Fisher II , Justice Kennedy also took the occasion to revisit Grutter 's analysis, offering several \"controlling principles\" on behalf of the four-Justice majority that would guide its review of UT Austin's race-conscious admissions policy. In Fisher II , as in Fisher I , Justice Kennedy confirmed that Grutter 's bottom line remained good law: \"obtaining 'the educational benefits that flow from student body diversity,'\" he confirmed, was still an interest compelling enough to satisfy strict scrutiny. But perhaps mindful of his dissent in Grutter , Justice Kennedy also clarified that \"asserting an interest in the educational benefits of diversity writ large\" would not suffice. That, he explained, would make the \"university's goals\" too \"elusory or amorphous\" \"to permit judicial scrutiny of the policies adopted to reach them.\" The Court thus cut two new benchmarks for reviewing a university's asserted interest in resorting to race as a factor in its admissions policy. First, the university had to articulate \"precise and concrete goals\" that its race-conscious policy served, goals \"sufficiently measurable\" under \"judicial scrutiny.\" And, second, the university had to provide a \"'reasoned, principled explanation' for its decision to pursue those goals\"—a sound academic rationale, in other words, for wanting to achieve whatever diversity-related goals it set for itself. In the majority's view, UT Austin's use of race in its admissions decisions measured up to both benchmarks. According to the Court, the first benchmark was straightforwardly met: the goals UT Austin articulated, Justice Kennedy pointed out, effectively \"mirror[ed] the 'compelling interest' th[e] Court ha[d] approved in its prior cases.\" And under Grutter , the majority concluded, those benefits passed constitutional muster. Notably, however, achieving critical mass was not among those Justice Kennedy listed. Nor did Justice Kennedy return to the question he raised in Grutter : whether the \"critical mass\" concept even has a place among the \"concrete and precise goals\" that could survive strict scrutiny. But that question was also arguably beside the point in Fisher II . As Justice Kennedy emphasized for the Court, the goals that UT Austin articulated were clearly constitutionally adequate, having come nearly verbatim from the Court's case law. And the university's officials had all offered \"the same, consistent 'reasoned, principled explanation'\" for pursuing them—meeting the Court's second benchmark. That was apparently enough for the Court to conclude that a compelling interest justified the university's diluted use of race in its holistic review of applications. With Fisher I and II , the Court reiterated that the educational benefits that come with a racially diverse student body count among the few interests compelling enough to survive strict scrutiny. But Fisher I and II also narrowed that interest: seeking student body diversity had to involve objectives more specific than the simple desire for \"diversity writ large.\" Rather, under the Fisher formulation, the university must articulate the \"concrete and precise goals\" it expects its affirmative action policy to accomplish, along with a \"reasoned, principled explanation\" of why it has chosen to pursue them. So long as a university does that, it will likely have a strong case, under Fisher I and II , that a compelling interest supports its use of a race-conscious admissions policy. That, however, is only the first of two tests that a policy has to pass under strict scrutiny. The second—probing whether the university has narrowly tailored its policy to achieve those diversity-related benefits—has proved equally critical in the Court's review of affirmative action policies. And once again owing to Justice Powell's opinion in Bakke , the Court appears to have embraced a model of what a narrowly tailored policy looks like: Harvard College's admissions program endorsed in Bakke , now more commonly known as the \"Harvard plan.\" The Harvard plan has also provided the Court with a basis for developing more specific criteria for evaluating other affirmative action policies—what one court has described as the \"five hallmarks of a narrowly tailored affirmative action plan.\" The first affirmative action program to come before the Court—the policy challenged in Bakke at U.C. Davis's Medical School—was also the first to falter under the Court's scrutiny. But because the Justices were unable to cobble together a majority there, they also settled on no single rationale for why the Medical School's policy could not survive the Court's scrutiny. This uncertainty left the lower courts without clear guidance on the permissibility of race-conscious admissions policies structured differently than the one struck down in Bakke . In announcing the judgment in Bakke , however, Justice Powell offered a clear reason why, in his view, the Medical School's policy could not survive a challenge under the Equal Protection Clause. The school's 16-seat set-aside for minority students was not \"the only effective means of serving [the school's] interest in diversity\" —in constitutional parlance, the set-aside was not narrowly tailored. And to explain why not, Justice Powell pointed to the Harvard plan as an example of an appropriately tailored affirmative action policy. That plan, according to Justice Powell, had several significant features that distinguished it—favorably—from the set-aside struck down in Bakk e : In [Harvard's] admissions program, race or ethnic background [is] deemed a \"plus\" in a particular applicant's file, yet it does not insulate the individual from comparison with all other candidates for the available seats. The file of a particular black applicant may be examined for his potential contribution to diversity without the factor of race being decisive when compared, for example, with that of an applicant identified as an Italian-American if the latter is thought to exhibit qualities more likely to promote beneficial educational pluralism. Such qualities could include exceptional personal talents, unique work or service experience, leadership potential, maturity, demonstrated compassion, a history of overcoming disadvantage, ability to communicate with the poor, or other qualifications deemed important ... [And] the weight attributed to a particular quality may vary from year to year depending upon the 'mix' both of the student body and the applicants for the incoming class. Unlike this \"flexible\" system of review, the Medical School policy at issue in Bakke was rigid: reserving a predetermined number of seats for a \"selected ethnic group.\" In Justice Powell's view, that technique effectively precluded a more holistic review, that \"treats each applicant as an individual.\" \"[R]ace or ethnic origin,\" as he saw it, did not serve as \"a single though important element\" of an applicant's file in the Medical School's policy; it had instead become a factor that \"foreclosed\" other applicants \"from all consideration for [certain] seat[s] simply because [they were] not the right color or had the wrong surname.\" A program like that, Justice Powell concluded, could not be narrowly tailored—precisely because another more individualized and \"holistic\" model, like Harvard's, could serve instead. Even if Bakke suggested that the Court's scrutiny of a race-conscious admissions policy would be every bit as strict as for other racial classifications, later cases have made clear that such scrutiny need not always be fatal. The companion cases of Grutter v. Bollinger and Gratz v. Bollinger offer clear examples: each involved affirmative action admissions policies at the University of Michigan, and each yielded a different bottom line, with the Court upholding the Law School's policy in Grutter while striking down the university's undergraduate admissions policy in Gratz . But those diverging results appeared to proceed from a common starting point: how closely the challenged admissions policy resembled the Harvard plan. In the case of the Law School's admissions policy, the Court found the resemblance quite close. As Justice O'Connor explained for the Court in Grutter , \"the Law School engages in a highly individualized, holistic review of each applicant's file, giving serious consideration to all the ways an applicant might contribute to a diverse educational environment.\" It therefore did not award \"mechanical, predetermined diversity 'bonuses' based on race or ethnicity.\" And \"[l]ike the Harvard Plan, the Law School's admissions policy\" accorded each applicant the same sort of flexible consideration that Justice Powell had called for in Bakke . That \"policy st[ood] in sharp contrast,\" however, with the way the Court viewed the university's undergraduate admissions policy in Gratz . Under the undergraduate policy, admissions officers automatically awarded \"20 points, or one-fifth of the points needed to guarantee admission, to every single 'underrepresented minority' applicant solely because of race.\" As Chief Justice Rehnquist explained for the Court, that policy therefore violated a basic feature of \"[t]he admission program Justice Powell described\" in Bakke —a program that \"did not contemplate that any single characteristic automatically ensured a specific and identifiable contribution to a university's diversity.\" The result was a policy that did not \"offer applicants the individualized selection process described in Harvard's example,\" and that could consequently not pass strict scrutiny. On that point Justice O'Connor also agreed. As she explained in supplying her decisive fifth vote, the undergraduate policy simply did not \"enable[] admissions officers to make nuanced judgments with respect to the contributions each applicant is likely to make to the diversity of the incoming class,\" unlike the Law School's more holistic policy. This was true even though the undergraduate policy \"assign[ed] 20 points to some 'soft' variables other than race,\" such as \"leadership and service, personal achievement, and geographic diversity.\" None of that, in Justice O'Connor's view, could counteract the more problematic effect of those factors' being \"capped at much lower levels,\" so that \"even the most outstanding national high school leader could never receive more than five points for his or her accomplishments—a mere quarter of the points automatically assigned to an underrepresented minority solely based on the fact of his or her race.\" That weighting, though not problematic in all cases, had all but ensured there \"that the diversity contributions of applicants [could not] be individually assessed.\" A thumb pressed that heavily on the racial scale, Justice O'Connor concluded, came too close to the \"nonindividualized, mechanical\" balancing condemned by Bakke to survive strict scrutiny. Despite their contrasting results, Gratz and Grutter gestured at several basic criteria by which to assess a university's race-conscious admissions policy. Those criteria, as the U.S. Court of Appeals for the Ninth Circuit later described them, could be summed up in \"five hallmarks of a narrowly tailored affirmative action plan.\" And all five can be traced in one way or another to Justice Powell's analysis of the Harvard plan. 1. No Quotas. Perhaps the clearest violation of the requirement that a policy be narrowly tailored is the use of racial quotas. As Justice O'Connor explained in Grutter , a \"'quota' is a program in which a certain fixed number or proportion of opportunities are reserved exclusively for certain minority groups,\" consequently \"insulat[ing] the individual [applicant] from comparison with all other candidates for the available seats.\" And as Justice Powell emphasized in Bakke , and as has been consistently reaffirmed by the Court since, \"[t]o be narrowly tailored, a race-conscious admissions program cannot use a quota system.\" This ban on quotas therefore precludes the use of a rigid set-aside like the one challenged in Bakke . And it likewise rules out the sort of \"mechanical,\" automatic points system that was once in place at the University of Michigan's undergraduate college and was later invalidated in Gratz . 2. Individualized Consideration. The flip side of the Court's refusal to accept racial quotas has been its insistence on individualizing the consideration of applicants. As Justice Kennedy reaffirmed in Fisher I , echoing Justice Powell's description of the Harvard plan in Bakke , an appropriately tailored program \"must 'remain flexible enough to ensure that each applicant is evaluated as an individual and not in a way that makes an applicant's race or ethnicity the defining feature of his or her application.'\" And as the Court suggested in Gratz and Grutter , an acceptable plan will therefore engage in a \"highly individualized, holistic review of each applicant's file, giving serious consideration to all the ways an applicant might contribute to a diverse educational environment.\" Such review allows \"the use of race as one of many 'plus factors' in an admissions program,\" like in the University of Michigan Law School's policy upheld in Grutter . It also appears to bar a school from \"automatically award[ing] points to applicants from certain racial minorities\" as an effectively decisive factor, as it became under the university's undergraduate policy. 3. Serious, Good-Faith Consideration of Race-Neutral or More Flexible Alternatives. Neither of these two criteria, however, implies that a university must exhaust \"every conceivable race-neutral alternative\" before turning to a race-conscious policy. Instead, a university need only provide evidence that it undertook \"serious, good faith consideration of workable race-neutral alternatives\" before resorting to its choice of a race-conscious plan, but that those alternatives either did not suffice to meet its approved educational goals or would have required some sacrifice of its \"reputation for academic excellence.\" The same holds true, moreover, of more flexible race-conscious alternatives. Thus Justice Powell explained in Bakke that the Medical School's program was not narrowly tailored when the school could have adopted the more individualized, holistic program then in use at Harvard, an option the Medical School apparently did not consider. 4. No Undue Harm. Even though the Court has allowed the use of race-conscious admissions policies under the exacting standard of strict scrutiny, it has also long \"acknowledge[d] that 'there are serious problems of justice connected with the idea of preference itself.'\" In Grutter , Justice O'Connor drew another corollary from that apparent discomfort with racial preferences. \"[A] race-conscious admissions program,\" she explained, must \"not unduly harm members of any racial group.\" What this corollary means more specifically remains unclear; so far it has received only passing attention from the Court. At the least, Justice O'Connor suggested, a race-conscious admissions policy must not \"unduly burden individuals who are not members of the favored racial and ethnic groups.\" And in Grutter , Justice O'Connor put more flesh on that analysis: an affirmative action policy that closely resembled the Harvard plan, she suggested, would not \"unduly harm\" other applicants. It remains to be seen, however, whether this principle might take on new life in the Court's review of other plans. 5. Ongoing Review. In Grutter , Justice O'Connor also drew a fifth and final corollary from the basic premise that the Fourteenth Amendment was meant \"to do away with all governmentally imposed discrimination based on race.\" \"[R]ace-conscious admissions policies,\" she concluded, \"must be limited in time.\" This requirement, Justice O'Connor explained for the Court, reflected a consideration apparently unique to racial classifications: \"however compelling their goals, [they] are potentially so dangerous that they may be employed no more broadly than the interest demands.\" Doctrinally, this meant there could be no \"permanent justification\" for race-conscious admissions policies in higher education; sooner or later they had to end, as the university conceded in its briefing. Practically, this \"logical end point\" could come in one of several ways. It could take the form of an explicit \"durational limit,\" such as a sunset provision. Or it could arrive as a result of \"periodic reviews to determine whether racial preferences are still necessary to achieve student body diversity.\" But, however a university chooses to pursue that end, it has an \"ongoing obligation to engage in constant deliberation and continued reflection regarding its admissions policies\" and the role race plays in them, or whether it should continue to play one at all. For several Justices this ongoing obligation of review also pointed to something more definite—an expiration date, when \"the use of racial preferences will no longer be necessary to further [the school's] interest\" in student body diversity. Looking back over the quarter-century since Bakke , Justice O'Connor \"expect[ed]\" that day to come twenty-five years after casting her deciding votes in Gratz and Grutter —ten years from this writing. What exactly this meant, as either a practical or doctrinal matter, also remains unclear. Indeed, even then several of her fellow Justices seemed less sure, or simply unsure, what to make of that unusually specific constitutional deadline. But with six Justices having since departed the Court, Justices O'Connor and Kennedy included, it remains to be seen whether in the next ten years race-conscious admissions policies will reach this foreordained \"logical end point.\" What seems clear for now, however, is that the Harvard plan described in Bakke remains the Court's working model of a constitutionally satisfactory race-conscious admissions policy. And that, as the Court has consistently said since, is a policy capable of achieving the diversity \"essential\" to the life of a modern university, while still \"treat[ing] each applicant as an individual.\" Race has come to play two major doctrinal roles in higher education today, mirroring the two senses of \"affirmative action\" discussed in this report: the mandatory role, rooted in the affirmative obligation states have to eliminate the vestiges of de jure segregation, and the voluntary role, particularly in admissions decisions at selective colleges and universities. In the context of higher education, the Court has so far considered these two forms of \"affirmative action\" only in relation to public universities, and then primarily as a matter of constitutional law, under the Fourteenth Amendment's Equal Protection Clause. But many of those cases have also involved claims brought under Title VI of the Civil Rights Act of 1964 (Title VI or the Act). And while the Court has read Title VI's protections to overlap with the Equal Protection Clause, Congress still has a significant say over the substantive scope of Title VI as well as its enforcement. Title VI generally protects participants in federally funded \"program[s] or activit[ies]\" from discrimination based on their \"race, color, or national origin.\" To ensure that statutory right, the Act grants all federal funding agencies the authority to issue implementing regulations, and the power to enforce the regulations they issue. In practice, much of the interpretive authority falls to the U.S. Department of Justice (DOJ), and for educational programs, the U.S. Department of Education (ED). Both DOJ and ED have also established their own processes for receiving and investigating complaints of suspected Title VI violations. ED, meanwhile, has also issued its own set of rules to govern the federal education dollars it disburses each year, reaching some 4,700 colleges and universities. Every agency that awards federal funds—ED included—has the authority not just to issue implementing regulations but to enforce those rules against noncompliant recipients, including through an investigation that may, upon a finding of noncompliance, result in the termination, suspension, or refusal to grant federal funds. Thus, for example, where ED finds a school in violation of Title VI or its implementing regulations the department may seek to cut off federal funding through an \"administrative fund termination proceeding,\" as it has in at least some cases. And since the passage of the Civil Rights Restoration Act of 1987, the courts have read the scope of liability under Title VI broadly. With respect to the termination of funds, a Title VI violation in one program at a college or university could therefore jeopardize funding for the institution as a whole. Withdrawing funds may be the ultimate means of enforcing Title VI, but it is far from exclusive. DOJ, for its part, has also sought to achieve compliance through the federal courts, intervening in some private suits alleging Title VI violations and otherwise representing executive branch agencies, such as ED, in lawsuits seeking enforcement of Title VI. DOJ has participated in cases challenging practices of formerly de jure segregated public university systems as well as in settlements resolving such Fordice -related claims. DOJ has also taken a position in cases challenging affirmative action admissions policies, most recently in the ongoing litigation surrounding Harvard College's admissions policies. ED has ventured into this area as well, having recently opened investigations into the admissions decisions at several prominent private universities. Congress continues to have considerable say over how Title VI works—at least within the parameters of the Supreme Court's equal protection jurisprudence. Perhaps the most direct way of doing so is by amendment. As a general matter, Congress could revise Title VI in one of two directions, to make the statute either (1) more restrictive than the Court's current Equal Protection jurisprudence or (2) expressly permissive of race-conscious measures that the Court has upheld or has thus far not addressed. In the more restrictive direction, Congress could prohibit recipients of federal funds from using voluntary race-conscious measures at all—a result that four Justices in Bakke argued Title VI already requires, but which the Court has so far not embraced. A statutory revision of that kind would also implicitly reject the Harvard Plan discussed in Bakke , by excluding race as a permissible factor in admissions decisions at the many universities subject to Title VI, including the many private universities that receive federal funds. And, consequently, an amendment along these lines would make unlawful the type of admissions policies that the Court has approved under the Equal Protection Clause, like those at issue in Grutter and Fisher II . On the other hand, Congress could expressly open other avenues for effectuating Title VI's antidiscrimination mandate. This could include incorporating a private right of action to bring suit under Title VI, which, at present, is an implied right with no statutorily defined remedies. More consequentially, Congress could also amend Title VI to provide for disparate impact liability—that is, a Title VI violation based on a funding recipient's use of certain policies or practices that disproportionately and negatively impact members of a protected class, as already exists under Title VII of the same Act. A provision addressing disparate impact liability—either its availability or foreclosure under Title VI—would resolve a significant and ongoing debate on the issue. Such an addition would also be one way of clarifying whether Congress does in fact intend for Title VI to be read coextensively with the Equal Protection Clause. Beyond legislative amendments, Congress also exercises oversight over the agencies charged with carrying out Title VI's antidiscrimination mandate. As discussed earlier, DOJ and ED are primarily responsible for enforcing Title VI in educational programs. For its part, ED investigates and seeks compliance through its Office for Civil Rights, while the Educational Opportunities Section of the Department of Justice's (DOJ's) Civil Rights Division typically enforces Title VI in educational programs for the department. Both offices maintain public archives documenting their past and current investigations, as well as wider-ranging reports detailing their enforcement priorities and investigatory procedures. And because Title VI applies to a wide variety of entities that receive federal financial assistance, not just colleges and universities, DOJ also publishes news and updates on Title VI enforcement activity in other programmatic areas, from agencies across the federal government. Race has come to play two major doctrinal roles in higher education today, reflecting the two senses of \"affirmative action\" discussed in this report. \"Affirmative action\" in its original sense grew out of the affirmative obligation imposed on the states by the Equal Protection Clause to eliminate the vestiges of de jure segregation from their public schools. And in that sense, \"affirmative action\" involves the mandatory use of race-conscious measures in higher education to right the enduring wrongs of state-sanctioned segregation. But \"affirmative action\" has also come to refer to race-conscious policies outside this de jure context—policies voluntarily adopted by institutions to help racial minorities overcome the effects of their earlier exclusion. In higher education, none has been more salient—or stirred more debate—than the race-conscious admissions policies that colleges and universities across the country have used to diversify their student bodies. Thus far, remedial measures addressing de jure segregation, and voluntary measures designed to promote student-body diversity, have been the only race-conscious measures that the Court has approved under the Equal Protection Clause. And both remain areas of active litigation and administrative enforcement. Over the years, however, the Court has made it clear that it will subject voluntary \"affirmative action\" policies to especially close scrutiny, approving them only when they can be shown to be narrowly tailored to serve compelling educational goals. It has approved such polices twice already, most recently in 2016. Still, several Justices have suggested that the rationales supporting these voluntary race-conscious measures will one day run out. But for the time being, at least, these two lines of authority nevertheless provide a place for affirmative action in higher education today. This authority, however, leaves questions as of yet unexplored. It appears to be an open question, for example, whether a public institution of higher education can cite its own history of intentional exclusion, or else its \"past discrimination,\" as a basis for adopting a race-conscious admissions policy, among other measures. Whether—and how—the courts might assess such untested arguments would likely turn on a range of factors, including the further development of the two lines of authority addressed in this report. Regardless of those and other possible developments, however, Congress still has a significant say in in this area, through its authority not just to revise Title VI but to oversee the Act's enforcement.", "summary": "When federal courts have analyzed and addressed \"affirmative action\" in higher education, they have done so in two distinct but related senses, both under the Fourteenth Amendment's guarantee of \"equal protection.\" The first has its roots in the original sense of \"affirmative action:\" the mandatory use of race by public education systems to eliminate the remnants of state-imposed racial segregation. Because state-sanctioned race segregation in public education violates the Fourteenth Amendment's Equal Protection Clause, in certain cases involving a state's formerly de jure segregated public university system, a state's consideration of race in its higher education policies and practices may be an affirmative obligation. As the U.S. Supreme Court explained in its consequential 1992 decision United States v. Fordice, equal protection may require states that formerly maintained de jure segregated university systems to consider race for the purpose of eliminating all vestiges of their prior \"dual\" systems. Drawing upon its precedent addressing racially segregated public schools in the K-12 context, the Court established a three-part legal standard in Fordice for evaluating the sufficiency and effectiveness of a state's efforts in \"dismantl[ing]\" its formerly de jure segregated public university system. To that remedial end, mandatory race-conscious measures—in this de jure context—are not limited to admissions. Instead, remedies may also address policies and practices relating to academic programs, institutional missions, funding, and other aspects of public university operations. Outside this de jure context, \"affirmative action\" has come to refer to a different category of race-conscious policies. These involve what the Court at one time called the \"benign\" use of racial classifications—voluntary measures designed not to remedy past de jure discrimination, but to help racial minorities overcome the effects of their earlier exclusion. And for institutions of higher education, the Court has addressed one type of affirmative action policy in particular: the use of race as a factor in admissions decisions, a practice now widely observed by both public and private colleges and universities. The federal courts have come to subject these voluntary race-conscious policies—\"affirmative action\" in its perhaps more familiar sense—to a particularly searching form of review known as strict scrutiny. And even though this heightened judicial scrutiny has long been regarded as strict in theory but fatal in fact, the Court's review of race-conscious admissions policies in higher education has proved a notable exception, with the Court having twice upheld universities' use of race as one of many factors considered when assembling their incoming classes. The Court has long grappled with this seeming tension—between the strictness of its scrutiny and its approval of race-conscious admissions policies—beginning with its landmark 1978 decision in Regents of the University of California v. Bakke through its 2016 decision in Fisher v. University of Texas. Though the Equal Protection Clause generally concerns public universities and their constitutional obligations under the Fourteenth Amendment, federal statutory law also plays a role in ensuring equal protection in higher education. To that end, Title VI of the Civil Rights Act of 1964 prohibits recipients of federal funding—including private colleges and universities—from, at a minimum, discriminating against students and applicants in a manner that would violate the Equal Protection Clause. Federal agencies, including the Departments of Justice and Education, investigate and administratively enforce institutions' compliance with Title VI.", "document_type": "crs"}
{"report": "\"Ideas can come from anywhere,\" a scholar of American politics once wrote. To be sure, ideas and recommendations for legislation come from a wide variety of sources, such as individual Representatives; committees and other House working groups; legislative staff; party and chamber leaders; executive branch agencies and the White House; states and localities; members of the media; citizens; and interest groups. Any or all of these individuals or entities may participate in drafting legislation, but only a Member of Congress may formally introduce legislation. Some common considerations taken into account when drafting a bill include the following: What problem does the bill seek to address? Understanding the source of a problem is necessary in order to properly address it. An abundance of information is available to Members in the form of reports, studies, and presentations offered by a wide range of individuals, groups, and organizations, including CRS. Soliciting expert testimony in the context of a committee hearing is another common method by which the House gathers relevant information for use in policymaking. To what committee(s) is it likely to be referred? Committee referral can matter because one committee might be especially receptive to the proposed legislation in comparison to another committee. Members may also prefer that their bill be referred to a committee on which they serve in order to ensure their continued involvement at the committee stage of proceedings. Will the bill attract cosponsors? Cosponsorship conveys a Member's support for a measure, so bills that attract many cosponsors could be seen as enjoying broad support within the chamber. A measure with many cosponsors, especially if they include committee and party leaders, could encourage the relevant committee chair to take some action on the legislation, such as hold hearings on it. Does it have bipartisan appeal? Building a coalition of support for a proposal can take time, and some amount of bipartisan cooperation may be required to secure final passage. Measures that are limited in scope but have broad bipartisan appeal are often brought to the House floor under suspension of the rules, a parliamentary procedure that limits debate and amendment and requires a supermajority vote of two-thirds for a measure to pass. What are the budgetary implications? The House places a number of restrictions on legislation with budgetary consequences. For instance, if a proposal adds to the federal deficit, it may be subject to a point of order on the chamber floor for violating congressional budget rules (many of which are codified in the Congressional Budget Act of 1974). Support for a measure may also hinge on how its costs are paid for. Members may agree about the merits of a bill but disagree with how its provisions are funded. Should companion legislation be introduced in the Senate? To become law, a bill or joint resolution must pass both houses of Congress in identical form (the same text and bill number) and be signed by the President. For this reason, House sponsors sometimes encourage allies in the Senate to introduce identical or similarly worded legislation to expedite bicameral consideration. Companion bills might also attract wider public and Member attention to the issues addressed in the legislation. Is the measure best introduced at the beginning, in the middle, or toward the end of a Congress? Timing the introduction of a measure can be important. Comprehensive legislation is likely to require a great deal of time to work through, both in committee and on the floor. An early introduction will give the House more time to examine the measure's provisions. Advantage might also be gained by being the first to address an issue. Those who move first tend to attract media attention and may be seen by their colleagues as exercising leadership in that particular policy area. Strategic delay is another option. This approach might provide more time for an individual or committee to study the issue and build support for a preferred solution. To be sure, many bills do not follow a linear (or \"regular order\") legislative process—introduction, consideration in committee, and arrival on the floor for further debate and amendment. For example, a legislative proposal that had languished in committee might suddenly be taken up because it deals with an unfolding crisis or emergency. There is no House rule that introduced bills and resolutions must be prepared by the House Office of the Legislative Counsel, but the office plays an important role by providing Members and staff, at their request, with drafts of legislation. Use of the office by Members and staff is nearly universal. Its staff attorneys are both subject matter specialists and experts in legislative drafting, and they focus almost exclusively on policy issues within their areas of expertise. Legislative attorneys are often assigned to serve a specific committee or committees as a kind of nonpartisan, shared staff, and they work closely with committee members and staff to ensure that the bill's language and form matches the intent of its sponsor and adheres to drafting rules and linguistic traditions of the House. Several drafts may be required before a measure is ready for formal introduction. Those drafting legislation may seek assistance from the Office of the Legislative Counsel at any stage. All communications with the office are treated as confidential. The office is located in Room 337 of the Ford House Office Building and can be reached at extension 5-6060 or by sending an email request to legcoun@mail.house.gov. Following introduction, the Speaker refers legislation to the appropriate committee(s) based primarily on how its contents align with the subject matter jurisdictions of committees established in clause 1 of House Rule X. According to clause 2 of House Rule XII, the Speaker shall refer legislation [I]n such a manner as to ensure to the maximum extent feasible that each committee that has jurisdiction under clause 1 of rule X over the subject matter of a provision thereof may consider such provision and report to the House thereon. The Office of the Parliamentarian advises the Speaker on committee referrals. In practice, the Parliamentarian has been delegated the responsibility for committee referrals. Representatives and staff involved in drafting legislation may consult the Office of the Parliamentarian regarding the committee(s) to which their draft measure might be referred. The office is located in Room H-209 of the Capitol (5-7373). The formal procedures that govern the introduction of legislation are few and are found in House Rule XII. \"The system for introducing measures in the House is a relatively free and open one,\" wrote former House Parliamentarian William Holmes Brown. House rules do not limit the number of bills a Member may introduce. Members may introduce legislation for any number of reasons, and they may do so on behalf of another individual, entity, or group \"by request.\" Between 1973 and 2018, Members introduced an average of about 20 bills and resolutions each per Congress. Statistics on introduced measures are presented in Table 1 . When a Representative has determined that a bill or resolution is ready for introduction, it is placed in the box, or \"hopper,\" at the bill clerk's desk on the chamber floor when the House is in session, including a \"pro forma\" session. The hopper is pictured in Figure 1 . The sponsor must sign the measure and attach the names of any original cosponsors on a form provided by the Clerk's office, which is located in Room H-154 of the Capitol Building (5-7000). Cosponsors do not sign the bill. Under the Speaker's announced policies of the 116 th Congress (2019-2020), sponsors are \"encouraged\" to obtain original signatures from cosponsors prior to submitting a cosponsorship form. The bill as drafted by legislative counsel leaves space both for the insertion of a bill number, which is assigned chronologically based on the date of introduction, and for the Parliamentarian's office to note the committee(s) to which the measure was referred. A Member need not seek recognition from the chamber's presiding officer in order to introduce a measure. Following introduction, Members often summarize the purpose and merits of their proposal in a statement published in the \"Extension of Remarks\" section of the Congressional Record . Since the 112 th Congress, House rules have required Members to provide at the time of introduction a statement of constitutional authority indicating why Congress has the authority to enact the proposed bill or joint resolution. The bill clerk does not accept a bill or joint resolution for introduction that lacks a constitutional authority statement. Clause 7(c) of Rule XII establishes that the statement must be as \"specific as practicable,\" and must be attached to the bill when it is dropped in the hopper for introduction. If no such statement is provided, then the measure will be returned to its sponsor. A point of order cannot be lodged against a bill based on the content of a constitutional authority statement. A sponsor may not reclaim a measure he or she has placed in the hopper after it has been assigned a number and referred to committee (a process that normally occurs the same day). Once a measure has been numbered and referred, it becomes the property of the House and cannot be modified by the sponsor. It is too late at this point to make any changes to the bill—however cosmetic they might be—except by amending the bill on the House floor during its consideration. Introduced bills or resolutions can be taken up by the House even if the sponsor resigns from the House or dies. In the first days of a new Congress, hundreds of bills and resolutions are introduced. Measures are usually numbered sequentially based on the date of introduction, but Representatives may seek to reserve bill numbers in advance by communicating with the Parliamentarian's office prior to introduction. Bill numbers are sometimes seen as a way to provide shorthand meaning to the legislation, enhance its visibility, or confer symbolic importance. Measures have sometimes been assigned the same number for several Congresses, perhaps because lawmakers and others have grown accustomed to referring to a bill by its number. For instance, sponsors of tax reform proposals may request H.R. 1040 as a bill number to draw attention to the 1040 tax form many individuals use to pay federal income taxes. By the same logic, a bill addressing ocular health or medical coverage for eyeglass and contact lenses might take the number H.R. 2020 because 20/20 is considered normal vision. In recent Congresses, the House has ordered that bill numbers H.R. 1 through H.R. 10 be reserved for assignment by the majority leader and numbers H.R. 11 through H.R. 20 be reserved for the minority leader. These bills, sometimes called \"message\" bills because they often represent the top agenda items of each political party, tend to generate considerable attention and coverage. The number of bills and resolutions introduced in a given Congress fluctuates over time as Table 1 shows. Some of this variation can be explained on the basis of changes in House rules and practices. From 1968 to 1978, for instance, a limit of 25 was placed on the number of cosponsorships a measure could obtain. One effect of this rule was to encourage the introduction of identically worded legislation (with a new bill number) to allow additional Members to sign on as cosponsors. The cosponsorship limit was removed in 1979, which accounts in part for the drop in introduced measures between the 95 th and 96 th Congresses. No longer was it necessary to introduce duplicative bills for the purpose of gaining cosponsors. The House has also sought to reduce the amount of commemorative legislation it considers. The rules for the 104 th Congress (1995-1996), for instance, included new restrictions on the introduction of measures that would express a commemoration \"through the designation of a specified period of time.\" The decline in the number of introduced measures in that Congress might be attributed at least in part to the new rule. The 116 th Congress (2019-2020) maintains this ban on temporal commemorations. Most measures are introduced by individual Members. Five House committees (Appropriations, Budget, Ethics, House Administration, and Rules) may also draft and report an \"original\" measure on specific subjects identified in House rules. This means that those particular committees do not have to wait for measures to be referred to them in order to act. The committee chair is often considered the sponsor when a committee reports original legislation, although the measure is perhaps best understood as a product that incorporates views and input from other committee members as well.", "summary": "Authoring and introducing legislation is fundamental to the task of representing voters as a Member of Congress. In fact, part of what makes the American political process unique is that it affords all Members an ability to propose their own ideas for chamber consideration. By comparison, most other democratic governments around the world rely on an executive official, often called a premier, chancellor, or prime minister, to originate and submit policy proposals for discussion and enactment by the legislature. Legislators serving in other countries generally lack the power to initiate legislative proposals of their own. In the American political system, ideas and recommendations for legislation come from a wide variety of sources. Any number of individuals, groups, or entities may participate in drafting bills and resolutions, but only Members of Congress may formally introduce legislation, and they may do so for any reason. When a Representative has determined that a bill or resolution is ready for introduction, it is placed in the box, or \"hopper,\" at the bill clerk's desk on the chamber floor when the House is in session. The sponsor must sign the measure and attach the names of any original cosponsors on a form provided by the Clerk's office. Cosponsors do not sign the bill, but sponsors are \"encouraged\" by the Speaker to obtain original signatures from cosponsors prior to submitting the cosponsorship form. Since the 112th Congress, House rules have required Members to provide at the time of introduction a statement of constitutional authority indicating why Congress has the authority to enact the proposed bill or joint resolution. There is no House rule that introduced bills and resolutions must be prepared by the House Office of the Legislative Counsel, but that office plays an important role by providing Members and staff, at their request, with drafts of legislation. Use of the office by Members and staff is nearly universal. Once introduced, the Speaker refers legislation to one or more committees based primarily on how its contents align with the subject matter jurisdictions of committees established in clause 1 of House Rule X. In practice, the Office of the Parliamentarian advises the Speaker in these referral decisions, and the Parliamentarian's recommendations are followed in virtually every case. This report is intended to assist Members and staff in preparing legislation for introduction. Its contents address essential elements of the process, including bill drafting, the mechanics of introduction, and the roles played by key House offices involved in the drafting, submission, and referral of legislation. Statistics on introduced measures are presented in the final section, and a brief explanation of patterns of introduction over time is also provided.", "document_type": "crs"}
{"report": "H ouse of Representatives Website http://www.house.gov House offices only (HouseNet): http://housenet.house.gov Websites of Representatives, leadership offices and organizations, committees, and support offices. The restricted HouseNet website serves as a portal to the other \"House Offices Only\" websites described below and includes access to \"Dear Colleague\" letters and commercial database subscriptions, including ProQuest Congressional. Clerk of the House H-154 Capitol [phone number scrubbed] http://clerk.house.gov House offices only: https://housenet.house.gov/campus/service-providers/legislative-resource-center/office-of-the-clerk For assistance with archiving records, Congressional Record submissions, introduction of legislation, submission of amendments, and roll call vote questions. 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{"report": "Nigeria is considered a key power in Africa, not only because of its size, but also because of its political and economic role on the continent. Nigeria has overtaken South Africa as Africa's largest economy, and it is one of the world's major sources of high-quality crude oil. The country's commercial center, Lagos, is among the world's largest cities. Nigeria has the fastest-growing population globally, which is forecast to reach 410 million by 2050 and overtake the United States to become the world's third-most populous country. It also has one of Africa's largest militaries, and has played an important role in peace and stability operations on the continent. Few states in Africa have the capacity to make a more decisive impact on the region. Despite its oil wealth, Nigeria remains highly underdeveloped. Poor governance and corruption have limited infrastructure development and social service delivery, slowing economic growth and keeping much of the country mired in poverty. Nigeria has the world's second-largest HIV/AIDS-infected population and Africa's highest tuberculosis burden. The country is home to more than 250 ethnic groups, but the northern Hausa and Fulani, the southwestern Yoruba, and the southeastern Igbo have traditionally been the most politically active and dominant. Roughly half the population, primarily residing in the north, is Muslim. Southern Nigeria is predominantly Christian, and Nigeria's Middle Belt (which spans the country's central zone) is a diverse mix. Ethnic and religious strife have been common in Nigeria. Tens of thousands of Nigerians have been killed in sectarian and intercommunal clashes in the past two decades. Ethnic, regional, and sectarian divisions often stem from issues related to access to land, jobs, and socioeconomic development, and are sometimes fueled by politicians. The violent Islamist group Boko Haram has contributed to a major deterioration of security conditions in the northeast since 2009. It espouses a Salafist interpretation of Islam and seeks to capitalize on local frustrations, discredit the government, and establish an Islamic state in the region. The insurgency has claimed thousands of lives and exacerbated an already-dire humanitarian emergency in the impoverished Lake Chad basin region, comprising Nigeria, Niger, Chad, and Cameroon. Nigeria now has one of the largest displaced populations in the world—an estimated 2 million people—most of whom have fled Boko Haram-related violence. In late 2013, the State Department designated Boko Haram and a splinter group, Ansaru, as Foreign Terrorist Organizations (FTOs). Boko Haram's 2015 pledge of allegiance to the Islamic State raised its profile, though the extent of operational ties between the two groups remains unclear. A Boko Haram leadership dispute led, in 2016, to the emergence of a splinter group, the Islamic State-West Africa (IS-WA). The State Department designated IS-WA as an FTO in early 2018. In the southern Niger Delta region, local grievances related to oil production in the area have fueled conflict and criminality for decades. Intermittent government negotiations with local militants and an ongoing amnesty program have quieted the region, but attacks on oil installations surged briefly in 2016 and remain a threat to stability and oil production. Some militants continue to be involved in various local and transnational criminal activities, including maritime piracy and drug and weapons trafficking. These networks often overlap with oil theft networks, which contribute to maritime piracy off the coast of Nigeria and the wider Gulf of Guinea (see map). Already among the most dangerous bodies of water in the world, the Gulf of Guinea has seen a dramatic increase in piracy and attacks against ships in recent years. Presidential and legislative elections slated for mid-February 2019 and gubernatorial and state-level polls due two weeks later increase pressure on some of Nigeria's sociopolitical fault lines. Protests in the Igbo-dominated southeast over perceived marginalization by the government have led to clashes with security forces; separatist sentiment among some Igbo has arisen against the backdrop of a deadly civil war waged from 1967 to 1970, during which secessionists fought unsuccessfully to establish an independent Republic of Biafra. Economic frustration is reportedly widespread in the region, but by many accounts the majority of Igbo would not support insurrection. Meanwhile, an emerging conflict in border regions of neighboring Cameroon has led over 30,000 Cameroonians to seek refuge in Nigeria. In the Middle Belt, violent competition for resources between nomadic herders, largely Muslim, and settled farming communities, many of them Christian, has been on the rise in recent years and is spreading into Nigeria's southern states. Herder-farmer tensions in Nigeria are not new, but they overlap with ethnic and religious divisions and have been exacerbated by desertification, increasing access to sophisticated weapons, land-grabbing by politicians, and banditry. Nigeria, which gained its independence from the United Kingdom in 1960, is a federal republic with 36 states. Its political structure is similar to that of the United States: it has a bicameral legislature with a 109-member Senate and a 360-member House of Representatives. Nigeria's president, legislators, and governors are directly elected for four-year terms. The country was ruled by the military for much of the four decades after independence before making the transition to civilian rule in 1999. Subsequent elections were widely viewed as flawed, with each poll progressively worse than the last. Elections in 2011 were seen as more credible, although they were followed by violent protests in parts of the north that left more than 800 people dead and illustrated northern mistrust and dissatisfaction with the government. The contest for power between north and south that has broadly defined much of Nigeria's modern political history can be traced, in part, to administrative divisions under Britain's colonial administration. Northern military leaders dominated the political scene from independence until the country's democratic transition in 1999. Since the election of President Olusegun Obasanjo in 1999, there has been a de facto power-sharing arrangement, often referred to as \"zoning,\" between the country's geopolitical zones, through which the presidency is expected to rotate among regions. The death of President Obasanjo's successor, northern-born President Umaru Yar'Adua, during his first term in office in 2010, and the subsequent ascension of his southern-born vice president, Goodluck Jonathan, brought the zoning arrangement into question. Jonathan's decision to run in the 2011 elections was seen by many northerners as a violation of the arrangement, which contributed to the violence that followed the polls. Nigeria's 2015 elections were its most competitive contest to date and were viewed as a critical test for its leaders, security forces, and people. They were widely hailed as historic, with President Jonathan and the ruling People's Democratic Party (PDP) losing to a new opposition coalition led by former military ruler Muhammadu Buhari. Jonathan was Nigeria's first incumbent president to lose an election. Buhari's All Progressives Congress (APC) capitalized on popular frustration with rising insecurity, mounting economic pressures, and allegations of large-scale state corruption to win a majority in the legislature and a majority of state elections. Decreased turnout for the PDP appeared to be partly linked to broad discontent with the government's response to the Boko Haram threat, in particular the April 2014 kidnapping of 276 schoolgirls from the northeast town of Chibok and the group's subsequent territorial advances. U.S. government views on the 2015 elections were broadly positive. A White House statement described the event as demonstrating \"the strength of Nigeria's commitment to democratic principles.\" There had been significant concern about the potential for large-scale political violence around the polls, and then-Secretary of State John Kerry traveled to Nigeria months prior to the elections to stress U.S. views about the importance of the event. President Buhari's popularity in the 2015 elections was notable, given his history. A Muslim from Katsina state in northern Nigeria, Buhari had formerly drawn support from across the predominately Muslim north, but had struggled to gain votes in the south. In 2014, his party joined with the other main opposition parties to form the diverse APC coalition. His vice president, Yemi Osinbajo, is an ethnic Yoruba (Nigeria's second-largest ethnic group) Pentecostal pastor and former state attorney general from the populous southwest. Osinbajo is reported to be widely respected, and he served as Acting President during Buhari's months-long stay in London in 2017, when the latter was receiving medical treatment for an undisclosed condition. Buhari's silence on the nature of his illness fueled speculation about his fitness for office. With presidential and legislative elections scheduled for February 16, 2019, and gubernatorial and state assembly polls on March 2, prospects for the ruling APC are uncertain. In October 2018, the party affirmed Buhari as its presidential candidate, but his political standing has arguably weakened since 2015. In advance of the APC primary, several prominent former military and government officials, including former President Obasanjo, publicly urged him to not run again. Buhari is set to run against Atiku Abubakar, a former vice president under Obasanjo and erstwhile Buhari ally who defected from the APC to rejoin the PDP in late 2017. Viewed as a successful businessman prior to his foray into politics, Abubakar has pledged to revive Nigeria's struggling economy. This will be his fourth attempt at the presidency; analysts expect the 2019 election to be closely fought. Abubakar, who like Buhari hails from the North and is Muslim, may be able to split the northern vote and thereby weaken what was previously an APC stronghold. Abubakar is one of several recent high-profile defectors from the APC. In mid-2018, an anti-Buhari faction known as the Reformed APC (R-APC) emerged within the ruling party. Shortly thereafter, Senate President Bukola Saraki, several governors, and dozens of representatives defected to the PDP. In turn, a number of high-ranking PDP officials have joined the ruling party. While not unusual in advance of Nigerian elections, such rearrangements threaten to further paralyze an unproductive legislature and widen rifts between the presidency and parliament, hindering the government's ability to respond to pressing humanitarian and security challenges. In July 2018, a joint preelection assessment by the National Democratic Institute (NDI) and International Republican Institute (IRI) met with senior officials of the Independent National Electoral Commission (INEC) as well as representatives from the government, political parties, civil society organizations, and media. In follow-up statements, the delegation praised INEC's efforts to reinforce the integrity of the electoral process, but noted a lack of public confidence in the neutrality of Nigeria's security services as well as popular concerns about \"vote buying, illegal voting, and efforts to compromise the secrecy of the vote on election day.\" INEC has taken steps to enable voting by marginalized voters, notably those displaced by Nigeria's multiple conflicts. Whether displaced voters are ultimately able to cast their ballots remains to be seen. In December 2018 testimony before Congress, Assistant Secretary of State for African Affairs Tibor Nagy noted other factors that could threaten the credibility of the 2019 polls, including politically motivated attacks on the legitimacy of INEC, intimidation by state security forces, electoral violence, and the possible exclusion of displaced persons and individuals with disabilities from voting. President Buhari's suspension, just weeks before the election, of the country's chief justice, who is head of the judiciary and was accused of failing to declare assets, prompted widespread criticism. The United States and other donors questioned the constitutionality of the decision, which Buhari made without the support of the legislature, and noted concerns that it could affect the perceived credibility of the elections, given the judiciary's role in resolving election disputes. Observers have expressed concern over the potential for the elections to spark violence in parts of the country. In some areas, subnational contests for gubernatorial and state legislative seats may present greater risks for violence than the presidential election, though the latter has received more attention from donors and Nigerian officials. The International Crisis Group (ICG) has identified six states as especially vulnerable to violence owing to their political importance and/or the presence of prevailing social fissures or conflicts: Rivers and Akwa Ibom (in the Niger Delta), Plateau and Adamawa (in the Middle Belt), and Kaduna and Kano (in the northwest). With Nigeria's security forces reportedly overstretched in responding to a range of security threats across the country (discussed below), allegations of politicians stoking divisions for political ends, and concerns about partisanship among some security officials, ICG has described the conditions around the 2019 elections as \"particularly combustible.\" Nigeria is home to one of the world's largest Muslim populations. The north is predominately Sunni Muslim, and 12 northern states use sharia (Islamic law) to adjudicate criminal and civil matters for Muslims. Under the Nigerian constitution, sharia does not apply to non-Muslims in civil and criminal proceedings, but Islamic mores are reportedly often enforced in public without regard to citizens' religion. In some areas, citizen groups known as hisbah provide social services and enforce sharia-based rulings—some with financial and legal backing from state governments. Divisions among ethnic groups, between regions, and between Christians and Muslims often stem from issues related to access to land and jobs and are sometimes fueled by politicians. In Nigeria's Middle Belt, violence between nomadic herdsmen, many of them belonging to the largely Muslim Fulani ethnic group, and settled farming communities, many—but not all—of them Christian, has increased in recent years. An estimate by the International Crisis Group suggests that over 2011-2016, roughly 2,000 Nigerians died annually in herder-farmer clashes, which surged in 2016 to claim some 2,500 lives—more than the total killed in Boko Haram-related violence that year. Amnesty International asserts that herder-farmer violence killed more than 2,000 Nigerians from January through October 2018 and contends that a failure by the Nigerian government to respond to the violence and hold perpetrators to account had fostered a climate of impunity and a cycle of violence characterized by retaliatory attacks. Reports suggest that weapons used by all sides have grown more sophisticated, and that the recent surge in violence has involved the rise of ethnic militias and community vigilante groups backed by local leaders. The nongovernmental organization (NGO) Search for Common Ground describes the violence as \"neither an ethnic nor religious conflict, but rather a competition for resources playing out on ethno-religious lines in a fragile country characterized by impunity and corruption.\" Analysis by Reuters indicates that a decades-long expansion of farming activity into traditional grazing zones had resulted in a 38% decrease in land available for open grazing in the Middle Belt between 1975 and 2013. The U.S. Commission on International Religious Freedom (USCIRF) suggests, however, that the violence often takes on religious undertones and is perceived by some involved to be a religion-based conflict. Attackers have burned villages and destroyed a number of churches and mosques, even as the conflict has spread beyond the Middle Belt into southern states. The violence also affects northern states like Zamfara, where cattle rustling and banditry have fueled vigilantism; notably, in Zamfara the clashes are often occurring between settled Hausa communities and pastoralist Fulani, both Muslim. Illustrative of Nigeria's charged political climate, Buhari, himself an ethnic Fulani, has been accused of complicity in herder attacks due to what some call an insufficient state reaction to the violence. Anti-Shia Muslim sentiment in northern Nigeria has gained increased attention amid reports that the Nigerian army killed hundreds of members of the Islamic Movement of Nigeria (IMN), a Shia group led by Iranian-trained cleric Ibrahim Zakzaky, in December 2015. According to USCIRF reports, the army killed and buried 347 IMN members, injured hundreds more, and arrested almost 200 others over a two-day span in Zaria, Kaduna State. A Kaduna state commission of inquiry found the army responsible for the mass killing, but no soldiers have faced prosecution; instead, state prosecutors brought murder charges against 177 IMN members—dozens of whom, including Zakzaky, remained on trial as of December 2018. Zakzaky's supporters have called for his release and staged repeated demonstrations that have led to clashes with security forces and mass arrests. In October 2018, soldiers reportedly used live fire to disperse an IMN religious gathering and a separate peaceful protest, both in Abuja, killing dozens of IMN members over three days. Nigeria's Shia population has been estimated at between 4 million and 10 million people. Separately, protests in the ethnic Igbo-dominated southeast have raised concern about resurgent separatism in a region that fought a secessionist war (the Biafra War) from 1967 to 1970 in which up to 2 million people died. Igbo political grievances appear to have risen under Buhari. In October 2015, protests led to clashes with security forces, and in 2016, soldiers killed at least 150 pro-Biafra demonstrators, according to Amnesty International. Economic frustration is reportedly widespread in the region, and some experts suggest that the government's forceful response to separatist sentiments could fuel support for taking up arms. Boko Haram has evolved since 2009 to become one of the world's deadliest terrorist groups, drawing in part on a narrative of vengeance for state abuses to elicit recruits and sympathizers. Key factors contributing to its rise in Nigeria include a legacy of overlapping intercommunal and Muslim-Christian tensions in the country; perceived disparities in access to development, jobs, state services, and investment in the north; and popular frustration with elite corruption and other state abuses. Some research suggests that the reportedly heavy-handed response of Nigerian security forces since 2009 has fueled extremist recruitment in some areas. The reported erosion of traditional leaders' perceived legitimacy among local populations in northeast Nigeria and northern Cameroon may also have contributed to the group's ascendance. Resource struggles related to the shrinking of Lake Chad, once one of Africa's largest lakes, have further exacerbated tensions among communities that Boko Haram has reportedly sought to exploit. The nickname Boko Haram was given by Hausa-speaking communities to describe the group's narrative that Western education and culture are corrupting influences and haram (\"forbidden\"). Boko Haram's ideology combines an exclusivist interpretation of Sunni Islam—one that rejects not only Western influence but also democracy, pluralism, and more moderate forms of Islam—with a \"politics of victimhood\" that resonates in parts of Nigeria's underdeveloped north. Some of its fighters have reportedly been recruited by financial incentives or under threat. Some 16,000 people are estimated to have been killed in Boko Haram violence since 2011, and more than 2 million Nigerians are internally displaced. The group has also abducted a large number of civilians, including schoolgirls from Chibok (in 2014) and Dapchi (in 2018); some have escaped or been rescued or released, but dozens from Chibok remain missing as of late 2018, in addition to hundreds of other abductees. Boko Haram has routinely used women and children as suicide bombers since 2014. Boko Haram commenced a territorial offensive in mid-2014 that Nigerian forces struggled to reverse until early 2015, when regional forces, primarily from Chad, launched a counteroffensive. Regional efforts to counter Boko Haram and its Islamic State-affiliated splinter group (see below) are coordinated within the African Union-authorized Multi-National Joint Task Force (MNJTF). The MNJTF has received U.S. and other donor support. The regional force has found success reclaiming some Boko Haram-held territory, but many areas remain insecure and militants continue to stage attacks in northeastern Nigeria and border areas of Cameroon and Niger. Multiple factors have undermined the Nigerian response to Boko Haram, notably security sector corruption and mismanagement. A July 2018 report by the Carnegie Endowment for International Peace concluded that \"decades of unchecked corruption have hollowed out the Nigerian military and security services and rendered them unable to effectively combat Boko Haram or address ethno-religious and communal conflict.\" The State Department has also identified other dynamics limiting the response, including a lack of coordination and cooperation between Nigerian security agencies, limited database use, the slow pace of the judicial system with regard to charging and trying suspected militants, and a lack of sufficient training for prosecutors and judges to implement antiterrorism laws. The International Crisis Group, among others, has called for comprehensive defense sector reform, including \"a drastic improvement in leadership, oversight, administration and accountability across the sector.\" Boko Haram currently appears to pose a threat primarily in northern Nigeria and surrounding areas in neighboring countries. The group also poses a threat to international targets, including Western citizens, in the region. Boko Haram's self-described leader, Abubakar Shekau, has issued threats against the United States, but to date no U.S. citizens are known to have been kidnapped or killed by the group. Boko Haram's 2015 pledge of allegiance to the Islamic State raised its profile and may have provided recruitment and fundraising opportunities, though the extent to which affiliation has facilitated operational ties remains unclear (see text box). In August 2016, the Islamic State recognized the leader of a breakaway faction, Abu Musab al-Barnawi, as the new leader of the Islamic State-West Africa (IS-WA). Barnawi is reported to be the son of Boko Haram founder Mohammed Yusuf and had previously served as Boko Haram's spokesman. His group has reportedly focused its attacks primarily on security force and government targets on both sides of the Nigeria-Niger border, mainly operating in Nigeria's Borno state, where both groups appear most active. The name \"Boko Haram\" is still often used to refer to both groups, reflecting their common history and underscoring debate over the extent to which they are perceived as distinct. Shekau apparently continues to head the other faction. The U.S. Department of Defense has estimated IS-WA to have approximately 3,500 fighters and Boko Haram to have roughly 1,500. The Barnawi-led faction, IS-WA, was reportedly responsible for the February 2018 kidnapping of over 100 schoolgirls from the northeast town of Dapchi. It has also been credited with a series of devastating attacks against Nigerian military bases in 2018, including a spate of raids in late 2018 that reportedly killed more than 100 soldiers. The military has struggled to defend these bases, and the attacks and resulting death toll have reportedly damaged morale. The State Department designated both Boko Haram and IS-WA as FTOs under Section 219 of the Immigration and Nationality Act, as amended, and as Specially Designated Global Terrorists (SDGTs) under Executive Order 13224. The FTO designations aim to assist U.S. and other law enforcement agencies in efforts to investigate and prosecute suspects associated with the group. The State Department had already designated three individuals linked to Boko Haram as SGDTs in June 2012, including Shekau, and in 2013 issued a $7 million reward for information on the location of Shekau through its Rewards for Justice program. The Nigerian government also formally designated Boko Haram and Ansaru as terrorist groups in 2013. The British government had named Ansaru as a \"Proscribed Terrorist Organization\" broadly aligned with Al Qaeda in 2012, and designated Boko Haram as such in July 2013. Boko Haram was added to the U.N. Al Qaeda sanctions list in May 2014. The State Department designated two more senior Boko Haram leaders as SDGTs in December 2015 and added IS-WA leader Barnawi in February 2018. Nigeria's oil wealth has long been a source of political tension, protest, and criminality in the Niger Delta region, where most of the country's oil is produced. Compared to national averages, the region's social indicators are low and unemployment is high. Millions of barrels of oil are believed to have been spilled in the region since production began, causing major damage to the fragile riverine ecosystem and to the livelihoods of many of the Delta's 30 million inhabitants. In 2011, the United Nations Environment Program (UNEP) estimated that it could take 25 to 30 years to clean up Ogoniland, a coastal region in Rivers State hard-hit by pollution. After several delays, the Nigerian government launched a $1 billion Ogoniland restoration program in 2017. Local grievances related to oil production have fueled conflict and criminality for years. An amnesty program launched in 2009 that includes monthly stipends for former militants largely quieted the area, but attacks on oil installations by a militant group that emerged in 2016 pushed production to a 30-year low and sent Nigeria's economy into recession. The resurgence of militant activity may have been linked to President Buhari's intention to end the amnesty, which had originally been scheduled to expire in late 2015, or his decision to cancel pipeline security contracts awarded to prominent former militant leaders by the Jonathan government. In response to renewed violence, Buhari agreed to extend the amnesty and later nearly tripled its budget; a fractious peace returned to the region in mid-2017 and oil production has since rebounded. Nevertheless, ex-militants routinely threaten to resume attacks, and little has been done to develop long-term solutions to the violence. Research suggests some former Delta militants have leveraged the resources and patronage opportunities presented by the amnesty to enter politics. Meanwhile, some reportedly remain involved in local and transnational criminal activities, including piracy and drug and arms trafficking. These networks overlap with oil theft and contribute to piracy off the Nigerian coast in the Gulf of Guinea, one of the world's most dangerous bodies of water (see below). Nigerian military and police have been accused of serious human rights abuses, and activists contend that successive Nigerian administrations have done little to hold abusers accountable. The State Department's 2017 human rights report documents allegations by multiple sources of \"extrajudicial and arbitrary killings\" as well as \"torture, periodically in detention facilities, including sexual exploitation and abuse; use of children by some security elements, looting, and destruction of property.\" While Nigerian officials have acknowledged some abuses by security forces, few security personnel have been prosecuted. The State Department's report suggests that authorities do not investigate the majority of cases of police abuse or punish perpetrators. Abuses by the Nigerian army have taken a toll on civilians and reportedly driven some support for Boko Haram; they have also complicated U.S. efforts to pursue greater counterterrorism cooperation (see below). Major incidents include the army's alleged massacre of more than 640 people at a military detention facility in northeast Borno state in 2014 and a January 2017 air force bombing raid on an internally displaced persons (IDP) camp in Borno that killed as many as 200 people, many of them children. The military also has been accused of committing human rights violations outside of the terror-affected northeast; in late 2017, for instance, an air raid in response to herder-farmer violence in Adamawa state reportedly killed dozens of villagers. The military also has cracked down on domestic and international civil society. In December 2018, citing national security concerns, Nigeria's military suspended activities by the U.N. Children's Fund (UNICEF)—a ban it promptly revoked under widespread pressure—and separately threatened to prohibit operations by Amnesty International. In January 2019, military personnel raided the offices of the Daily Trust , a respected Abuja-based newspaper, for \"undermining national security\" by reporting on a planned military operation in the northeast; soldiers reportedly confiscated computers and arrested several staff members. Human rights monitors have also documented serious abuses by the paramilitary Civilian Joint Task Force (CJTF), a militia that emerged to combat the Boko Haram insurgency. Some observers warn that the government may struggle to demobilize the CJTF, which reportedly numbers over 23,000; some of its members may be integrated into the military or police. Corruption in Nigeria has been characterized as \"massive, widespread, and pervasive,\" by the State Department, and by many accounts, Nigeria's development will be hampered until it can address the perception of impunity for corruption and fraud. Several analyses have been done seeking to quantify the costs of corruption in Nigeria, which pervades a range of sectors and all levels of government. A 2017 study estimated that Nigeria had lost some $65 billion to power sector corruption from 1999 to 2015, for instance, while a nationwide survey estimated that Nigerian officials took some $4.6 billion in bribes in the year to May 2016. Several international firms have been implicated in Nigerian bribery scandals. Nigeria is also known globally for cybercrimes, including \"419 scams,\" advance-fee fraud so-named for the article in the country's penal code that outlaws fraudulent e-mails. More recently, analysts have drawn particular attention to \"security votes\"—opaque discretionary funds widely used throughout the Nigerian government that are particularly vulnerable to embezzlement. Security votes are estimated to total over $670 million annually. According to Transparency International, the Buhari Administration has expanded the number and scale of such discretionary accounts in advance of the 2019 polls. In 2017, Nigeria ranked 148 th out of 180 countries on Transparency International's Corruption Perception Index , a measure of domestic perceptions of corruption. Most observers agree that the oil and gas industries form the core of illicit self-enrichment networks in Nigeria, where petroleum provides the majority of government revenues and export earnings. One expert considers petroleum revenues to be \"the lifeblood of official corruption in Nigeria,\" whose \"epicenter\" is the state oil company, the Nigerian National Petroleum Corporation (NNPC). According to Nigeria's Economic and Financial Crimes Commission (EFCC), a law enforcement agency created in 2003 to combat corruption and fraud, billions of dollars have been expropriated by political and military leaders since oil sales began. Former dictator Sani Abacha reportedly stole more than $3.5 billion, much of it originating in the country's oil sector, during his five years as head of state (1993-1998). Some stolen funds have been repatriated, but other Abacha assets remain frozen abroad. In 2014, the U.S. Department of Justice (DOJ) announced that a federal court in the District of Columbia had ordered forfeited to the United States more than $480 million in Abacha corruption proceeds laundered through U.S. banks and held in foreign bank accounts. DOJ has authority to pay restitution to the victims of the corruption out of the forfeited funds. In 2017, the Swiss government agreed to restitute $321 million through a project overseen by the World Bank, resulting in a total return of $1.2 billion by Switzerland in Abacha assets. In 2017, a Nigerian NGO requested that the Trump Administration return $500 million in Abacha assets \"separate from the $480 million\" forfeited by the DOJ in 2014. In a mid-2018 visit to the White House, President Buhari announced that Nigeria and the United States were collaborating to secure \"the return to Nigeria of over 500 million United States dollars of looted funds siphoned away in banks around the world.\" Other governments are reportedly assisting in that repatriation effort. Illicit expropriation of Nigeria's resources did not stop with Abacha. In a 2013 letter to President Jonathan later made public, central bank governor Lamido Sanusi asserted that up to $20 billion in NNPC revenue could not be accounted for and had likely been diverted in the course of opaque no-bid oil contracts and \"swap deals\" in which crude oil is exported in exchange for refined fuel, among other \"leakages.\" The NNPC denied the allegations, yet then-Minister of Petroleum Resources Diezani Alison-Madueke has since come under investigation for corrupt practices during her tenure as NNPC chairwoman. In December 2018, the EFCC issued an arrest warrant for Alison-Madueke, who also faces charges in an ongoing UK global corruption inquiry. Separately, in 2017, the U.S. DOJ filed a civil complaint seeking the forfeiture of $144 million in ill-gotten assets resulting from corrupt oil dealings between Alison-Madueke and her associates. Observers have identified major structural challenges that render Nigeria's petroleum industry particularly vulnerable to corruption. One key shortcoming is the NNPC's reliance on direct sale-direct purchase (DSDP) contracts, whereby crude oil is exported in exchange for refined petroleum products—transactions associated with high corruption risks, in part due to the abundance of intermediaries involved. Other factors include a general lack of oversight of the NNPC's operations and financial management, amid repeated concerns that the NNPC has failed to remit sufficient revenues to the federal government. Underscoring the extent of corruption in Nigeria's oil industry, investigations continue into bribes attending the 2011 purchase, by Eni and Royal Dutch Shell, of a license for OPL 245, a massive offshore block. The scandal has spurred a series of lawsuits, including an ongoing trial in which top Shell and Eni executives, including Eni's CEO, are defendants; in late 2018, an Italian court sentenced two accused intermediaries in the deal to four-year prison sentences. Global Witness, an international resource governance NGO, asserts that OPL 245's sale at an artificially deflated price may have cost the Nigerian government an estimated $6 billion in expected revenue. The Buhari Administration has introduced legislation to increase transparency in the oil industry (see below), and the EFCC is pursuing investigations into alleged large-scale graft during the Jonathan government. Notable targets of such inquiries include Alison-Madueke as well as former National Security Advisor Colonel Sambo Dasuki, accused of embezzling more than $2 billion through fraudulent security sector procurements. Acting EFCC Chairman Ibrahim Magu has also probed allegations against members of the ruling party, including former APC governors. Yet observers warn that the political influence of beneficiaries of grand corruption in Nigeria may thwart attempts at comprehensive reform. Magu's efforts have reportedly stirred discontent across the country's political class, and key targets of his campaign have thus far escaped prosecution. Despite its status as one of the world's largest crude oil exporters, Nigeria reportedly imported as much as 90% of the country's gasoline for domestic consumption in 2017 and suffers periodically from severe fuel and electricity shortages. In an effort to increase its refining capacity and halt oil imports by 2020, the government has granted permits in recent years for the construction of new independently owned refineries. Nigeria's domestic subsidy on gasoline may have limited the attractiveness of refining capacity expansion plans to foreign investors. For years, the government has subsidized the price its citizens pay for fuel, and economists have long deemed the subsidy benefit unsustainable. At the recommendation of the International Monetary Fund (IMF) and others, President Jonathan cut the subsidy in 2011, sparking strong domestic opposition, including riots. In the face of mass protests and a nationwide strike, the government backtracked and reinstated a partial subsidy, then estimated at 2% of GDP. Public scrutiny of the program has increased amid revelations that billions of dollars allocated for the subsidy may have been misappropriated under Jonathan. The subsidy remains in place despite calls for its elimination from international financial institutions; in March 2018, the NNPC estimated that the subsidy costs more than $2 million per day, while warning that much of the oil sold in Nigeria is smuggled for sale at higher prices in neighboring countries. Analysts contend that the subsidy hampers growth, as gains in revenue associated with global oil price increases are at least partly offset by rising subsidy costs. President Buhari has pledged to reform the oil and gas industry and to recover the \"mind-boggling\" amounts of money stolen from the sector over the years. His government overhauled and reintroduced the Petroleum Industry Bill (PIB), an ambitious piece of legislation aimed at increasing transparency in the industry, attracting investors, and creating jobs. First introduced during the Jonathan Administration, the PIB had stalled in parliament for years, and the regulatory uncertainty surrounding its passage has deterred investment. Lawmakers subsequently split the PIB into four different bills to enable more rapid passage; the first bill, the Petroleum Industry Governance Bill (PIGB), would restructure the NNPC to create four new entities to oversee and regulate bidding and exploration. The NNPC has long been criticized for its lack of transparency and observers have welcomed efforts to improve it, though substantive reform will likely face significant pushback from elites benefitting from the current system. Successive Nigerian administrations have made commitments to economic reform, but their track record has been mixed. According to the IMF, reforms initiated under Obasanjo—most importantly the policies of maintaining low external debt and budgeting based on a conservative oil price benchmark to create a buffer of foreign reserves—lessened the impact of the 2008-2009 global economic crisis on Nigeria's economy. Beginning in 2004, oil revenues above the benchmark price were saved in an Excess Crude Account (ECA), although the government drew substantially from the account in 2009-2010 in an effort to stimulate economic recovery. President Jonathan replaced the ECA with a sovereign wealth fund in 2011. In response to revenue shortfalls due to the slump in oil prices, Nigeria has increasingly sought loans from the international community. In 2015, then-Finance Minister Ngozi Okonjo-Iweala announced that Nigeria had borrowed nearly $2.38 billion to pay government salaries and fund the 2015 budget. Engagement with international financial institutions has expanded under Buhari: in June 2018, the World Bank announced that it had approved a total of $2.1 billion in concessionary loans to Nigeria through its International Development Association (IDA) entity to support access to electricity, promote nutrition, and enhance governance. The government's Eurobond sales garnered $4.8 billion in 2017, with an additional $2.5 million sold in February 2018. The IMF notes that reforms under the Buhari Administration have resulted in \"significant strides in strengthening the business environment and steps to improve governance,\" but stresses the need for non-oil sector activity and revenue mobilization and further structural reforms. The Buhari Administration has sought to shift spending toward capital investment and expanding the social safety net, seeking to stimulate the ailing economy through increased public expenditure. The IMF has lauded Buhari's Economic Growth and Recovery Plan (ERGP), which is intended to drive diversification, create jobs, and secure macroeconomic stability. The Fund has also welcomed the decline of Nigeria's external debt to GDP ratio, though public debt remains highly sensitive to fluctuations in oil sales and the currency exchange rate. Despite its oil wealth and large economy, Nigeria's population is among the world's poorest, and the distribution of wealth is highly unequal. The average life expectancy for Nigerians (estimated at 59 years in 2018) is rising, but the percentage of the population living on less than $1.90 per day has grown in the past decade to a projected 87 million, making Nigeria the country with the largest population living in extreme poverty. Over 30% of the population has no access to improved sources of water, less than one-fifth of households have piped water, and some 70% lack access to adequate sanitation, according to the World Bank. Nigeria ranked 157 out of 189 in the United Nations' 2018 Human Development Index (HDI). Decades of economic mismanagement, instability, and corruption have hindered investment in education and social services and stymied industrial growth. These challenges notwithstanding, Nigeria has attained notable success in public health provision. A small Ebola outbreak in mid-2014 was swiftly contained, enabling World Health Organization (WHO) authorities to declare the country Ebola-free in October 2014. The country has taken great strides to eradicate polio, though sporadic cases have precluded its designation as polio-free. Other successes include decreasing malaria and tuberculosis prevalence and reducing HIV prevalence among pregnant women. Nigeria's HIV/AIDS adult prevalence rate of 2.9% is relatively low in comparison to Southern African nations, but Nigeria comprises the largest HIV-positive population in the world after South Africa, with more than 3 million infected persons. Malaria remains the leading cause of death in Nigeria. In 2014, the Nigerian government announced the rebasing of its economy, which is now recognized as the largest in Africa. The rebased GDP, substantially larger than South Africa's, was almost double what it was previously thought to have been and less reliant on the petroleum sector than expected. Nigeria's GDP now ranks 30 th in the world, according to the World Bank, with notable nonoil contributions from the country's mining, services, manufacturing, and agriculture sectors. Economists suggest that the economy nevertheless continues to underperform, held back by poor infrastructure and electricity shortages. Low global oil prices, compounded by Niger Delta militant attacks on oil installations, led to a recession and sharp decline in real GDP growth in 2016. A subsequent rebound saw growth reach 1.9% in 2018; the IMF forecasts real GDP growth of 2.0% in 2019. The Organization of the Petroleum Exporting Countries estimated Nigeria's crude oil production to be 1.72 million barrels per day (BPD) in 2018, up from 1.66 BPD in 2017 yet below levels recorded in 2010-2015. Insecurity poses a perennial threat to this output: in June 2018, vandalism by oil thieves prompted Shell's Nigerian subsidiary to briefly declare force majeure on exports from one of its streams. China has played a growing role in Nigeria's economy, notably through investment in transport infrastructure, manufacturing, and agriculture and energy projects. According to the American Enterprise Institute, Chinese investments and contracts in Nigeria totaled $8 billion in 2018, when Nigeria ranked as the largest recipient of Chinese investment in sub-Saharan Africa. Notable projects include the 700MW Zungeru hydropower plant, projected to be completed in 2020; CNEEC-Sinohydro Consortium, a Chinese firm, is developing the $1.3 billion project, which is jointly funded by the Nigerian and Chinese governments. China is also involved in the development of the massive Mambilla hydropower project, which is slated to produce more than 3,000MW of energy once operational. The four-dam, $5.8 billion Mambilla project is being constructed by Chinese firms and is largely funded by China's Exim Bank and other Chinese lenders; it is reportedly expected to be completed in 2023. Nigeria is the United States' second-largest trading partner in Africa and the third-largest beneficiary of U.S. foreign direct investment on the continent. Two-way trade was over $9 billion in 2017, when U.S. investment stood at $5.8 billion. Given Nigeria's ranking as one of Africa's largest consumer markets and its affinity for U.S. products and American culture, opportunities for increasing U.S. exports to the country, and the broader West Africa region, are considerable. Nigeria is eligible for trade benefits under the African Growth and Opportunity Act (AGOA). AGOA-eligible exports, nearly all of which are petroleum products, have accounted for over 90% of exports to the United States. Gulf of Guinea crude is prized on the world market for its low sulphur content, and Nigeria's proximity to the United States relative to that of Middle East countries had long made its oil particularly attractive to U.S. interests. The country regularly ranked among the United States' largest sources of imported oil, although U.S. purchases of Nigerian sweet crude have fallen substantially since 2012 as domestic U.S. crude supply increased. U.S. imports, which accounted for over 40% of Nigeria's total crude oil exports until 2012, made the United States Nigeria's largest trading partner. India has recently been the largest importer of Nigerian crude. U.S. energy companies may face increasing competition for rights to the country's energy resources; China, for example, has offered Nigeria favorable loans for infrastructure projects in exchange for oil exploration rights. The U.S. Export-Import (Ex-Im) Bank signed an agreement in 2011 with the Nigerian government that aimed to secure up to $1.5 billion in U.S. exports of goods and services to support power generation reforms. Nigeria is a partner country under USAID's Power Africa initiative, which aims to facilitate 60 million new connections to electricity and 30,000 megawatts of new power generation in Africa by 2030. After a period of strained relations in the 1990s, when a military dictatorship ruled Nigeria, U.S.-Nigeria relations steadily improved under President Obasanjo (1999-2007) and remain robust. Diplomatic engagement is sometimes tempered by U.S. concerns with human rights, governance, and corruption issues, which Nigerian officials sometimes reject as U.S. interference in their domestic affairs. In 2010, the Obama and Jonathan Administrations established the U.S.-Nigeria Binational Commission (BNC) as a strategic dialogue to address issues of mutual concern. Buhari's election in 2015 ushered in an improvement in bilateral relations, which became strained due to U.S. criticisms of the Jonathan Administration's corruption and poor handling of the Boko Haram crisis. President Obama hosted President Buhari at the White House in 2015. Bilateral relations under the Trump Administration appear broadly consistent with those pursued under the Obama Administration. President Trump's call to President Buhari in February 2017, his first to any sub-Saharan African leader, suggested continued emphasis on the importance of the bilateral relationship, and Nigeria was among the counties visited by then-Secretary of State Rex Tillerson in March 2018. President Buhari was the first sub-Saharan leader to visit the Trump White House, in April 2018. During the visit, President Trump lauded Nigeria's security efforts and U.S. cooperation while voicing the need to improve commercial and business ties. In November 2017, the Commerce Department launched the U.S.-Nigeria Commercial and Investment Dialogue (CID) with an initial focus on \"infrastructure, agriculture, digital economy, investment, and regulatory reform.\" Deputy Secretary of State John Sullivan outlined security cooperation, economic growth and development, and democracy and governance as defining goals of U.S.-Nigerian relations during the 2017 meeting of the BNC. Assistant Secretary of State for African Affairs Tibor Nagy visited Nigeria during his first official trip to the continent, in November 2018. He indicated a U.S. interest in seeing Nigeria play a larger role in the region, both in terms of peacekeeping and advancing democracy. The Assistant Secretary described Nigeria as at the center of his efforts to increase U.S. trade and investment in Africa. He and other U.S. officials have stressed the importance of free, fair, transparent, and peaceful elections in 2019. The United States and like-minded donors expressed concern with reported intimidation, interference, and vote-buying during gubernatorial elections in 2018. The United States maintains an embassy in Abuja and a consulate in Lagos. The State Department also maintains \"American Corners\" in libraries throughout the country to share information on the culture and values of the United States. The State Department's travel advisory for U.S. citizens regarding travel to Nigeria notes the risks of armed attacks in the Niger Delta and the northeast as well as the threat of piracy in the Gulf of Guinea, and it warns against travel to Borno, Yobe, and northern Adamawa states. Nigeria has played a significant role in peace and stability operations across Africa, and the United States has provided the country with security assistance focused on enhancing its peacekeeping capabilities. Given Nigeria's strategic position along the coast of the Gulf of Guinea, the United States has also coordinated with Nigeria through various regional forums and maritime security initiatives. Nigeria's waters have been named the most dangerous in the world for maritime piracy and armed robbery at sea. Nigeria is also considered a transshipment hub for narcotics trafficking, and several Nigerian criminal organizations have been implicated in the trade. The U.S. Navy has increased its operations in the Gulf of Guinea and in 2007 launched the African Partnership Station (APS) there. APS deployments have included port visits to Nigeria and joint exercises between U.S., Nigerian, European, and other regional navies. Bilateral counterterrorism cooperation increased in the aftermath of the 2009 bombing attempt of a U.S. airliner by a Nigerian national, but was constrained during the Jonathan Administration despite U.S. concern over the rising Boko Haram threat. The Nigerian government has coordinated with the Department of Homeland Security, the Federal Aviation Administration, and the International Civil Aviation Organization to strengthen its security systems. Cooperation with the Department of Defense has also expanded in recent years. Nigeria is a participant in the State Department's Trans-Sahara Counterterrorism Partnership (TSCTP), a U.S. interagency effort that aims to increase regional counterterrorism capabilities and coordination. Its role in that program, however, has been minor in comparison to Sahel countries. U.S. military assistance for regional efforts to counter Boko Haram has been channeled primarily through engagement with Nigeria's neighbors: Cameroon, Chad, and Niger. Support has also been focused on the region's Multinational Joint Task Force (MNJTF). The United States and several other foreign countries conduct periodic aerial surveillance operations in the region. Many U.S. officials, while stressing the importance of the bilateral relationship and the gravity of security threats in and potentially emanating from the country, have been concerned about abuses by security services, and about the government's limited efforts to address perceived impunity within the forces. Obama Administration concerns culminated in the 2014 decision to block the sale of U.S.-manufactured Cobra helicopters by Israel to Nigeria. Security cooperation subsequently improved and the Obama Administration proceeded with plans for the sale of 12 Super Tucano A-29 aircraft and accompanying ammunition and weaponry, but when a Nigerian jet struck an IDP camp in early 2017, the United States suspended the process. The Trump Administration revisited and approved the sale, worth an estimated $345 million, in December 2017. In a joint press conference during Buhari's 2018 visit to the White House, President Trump downplayed the Obama Administration's concerns. Buhari has faced domestic pressure around the purchase, particularly over his withdrawal, reportedly without parliamentary approval, of nearly $900 million from Nigeria's Excess Crude Account to fund the Super Tucano acquisition and other security-related purchases. According to the contract award, work on the Super Tucanos is expected to be completed in May 2024. Nigerian officials are reportedly sensitive to perceived U.S. interference in internal affairs and have sometimes rejected other forms of assistance, in particular some U.S. military training offers. Upon taking office, President Buhari pledged to \"insist on the rule of law, and deal with any proven cases of deviation from laws of armed conflict, including human rights abuses.\" Nonetheless, observers question whether the government has taken serious steps to hold senior commanders responsible for abuses, and raise concern that \"scorched earth\" tactics may persist. Nigeria routinely ranks among the top recipients of U.S. bilateral foreign assistance in Africa. The United States is Nigeria's largest bilateral donor, providing an average of over $450 million annually (see Table 1 ). According to the State Department's FY2019 Congressional Budget Justification, \"assistance will address the drivers of conflict by seeking to strengthen democratic governance, broaden economic growth by introducing methods that increase agricultural sector productivity and efficiency, and expand the provision of basic services to Nigerians at the state and local levels.\" Nigeria is a focus country under the President's Emergency Plan for AIDS Relief (PEPFAR) and the President's Malaria Initiative (PMI), and Nigerian farmers benefit from agriculture programs under the Feed the Future (FTF) initiative that focus on building partnerships with the private sector to expand exports and generate employment. Interventions to encourage private sector participation in trade and energy are also key components of economic growth initiatives in Nigeria. U.S. security assistance to Nigeria has focused on enhancing maritime security, counternarcotics, counterterrorism, and peacekeeping capacity. Counterterrorism assistance to Nigeria, while increasing, has been constrained by various factors, including human rights concerns. The State Department has included Nigeria on its Child Soldiers Prevention Act (CSPA) List since 2015 due to the CJTF's recruitment and use of children. Nigeria has received various equipment via the Excess Defense Articles (EDA) program, including naval vessels and Mine Resistant Ambush Protected vehicles (MRAPs). Nigeria was one of four country recipients of a $40 million Global Security Contingency Fund regional program launched in 2014 to counter Boko Haram. U.S. Africa Command (AFRICOM) has provided advanced infantry training for some of the troops deployed in the northeast and has deployed U.S. military advisors to the Nigerian military's operational headquarters in Maiduguri, in Borno. U.S. advisors have also supported the headquarters of the African Union-authorized, donor-supported MNJTF, which is commanded by a Nigerian general. U.S. military assistance has increased under the Trump Administration: the Department of Defense (DOD) has notified Congress of over $16 million in DOD Train-and-Equip support (10 U.S.C. 333) in FY2018 and FY2019. Terrorism-related concerns have dominated congressional action on Nigeria in recent years, although some Members have also continued to monitor human rights, governance, and humanitarian issues; developments in the Niger Delta; Nigeria's energy sector; and violence in the country's Middle Belt. Nigeria's elections are often a focus of congressional interest: two resolutions introduced in the final weeks of the 115 th Congress, H.Res. 1170 and S.Res. 716 , would have called for Nigeria to hold credible, transparent, and peaceful elections in 2019; those resolutions have been reintroduced in the 116 th Congress as H.Con.Res. 4 and S.Con.Res. 1 . Several congressional committees have held hearings on Boko Haram in recent years. The House Homeland Security Subcommittee on Counterterrorism and Intelligence held Congress's first hearing to examine the group in late 2011. Prior to the State Department's decision to designate the group as an FTO, several Members in the 113 th Congress introduced legislation, including H.R. 3209 and S. 198 , that would have advocated for the designation. Other recent Boko Haram-related legislation includes, but is not limited to, the following: P.L. 114-92 (FY2016 National Defense Authorization Act, 114 th Congress), with report language directing the Secretaries of Defense and State to provide an assessment of the Boko Haram threat and a description of U.S. counter-Boko Haram efforts. P.L. 114-266 (Boko Haram Regional Threat Strategy, 114 th Congress), requiring a regional strategy to address the threat posed by Boko Haram. P.L. 115-31 (Consolidated Appropriations Act, 2017, 115 th Congress), making funds available for assistance for Nigeria, including counterterrorism programs, activities to support women and girls targeted by Boko Haram, and efforts to protect freedoms of expression, association, and religion.", "summary": "Successive Administrations have described the U.S. relationship with Nigeria, Africa's largest producer of oil and its largest economy, to be among the most important on the continent. The country is Africa's most populous, with more than 200 million people, roughly evenly divided between Muslims and Christians. Nigeria, which transitioned from military to civilian rule in 1999, ranked for years among the top suppliers of U.S. oil imports, and it is a major recipient of U.S. foreign aid. The country is the United States' second-largest trading partner in Africa and the third-largest beneficiary of U.S. foreign direct investment on the continent. Nigerians comprise the largest African diaspora group in the United States. Nigeria is a country of significant promise, but it also faces serious social, economic, and security challenges, some of which pose threats to state and regional stability. The country has faced intermittent political turmoil and economic crises since gaining independence in 1960 from the United Kingdom. Political life has been scarred by conflict along ethnic, geographic, and religious lines, and corruption and misrule have undermined the state's authority and legitimacy. Despite extensive petroleum resources, its human development indicators are among the world's lowest, and a majority of the population faces extreme poverty. In the south, social unrest, criminality, and corruption in the oil-producing Niger Delta have hindered oil production and contributed to piracy in the Gulf of Guinea. Perceived government neglect and economic marginalization have also fueled resentment in the predominately Muslim north, while communal grievances and competition over land and other resources—sometimes subject to political manipulation—drive conflict in the Middle Belt. The rise of Boko Haram has heightened concerns about extremist recruitment in Nigeria, which has one of the world's largest Muslim populations. Boko Haram has focused on a range of targets, but civilians in the impoverished, predominately Muslim northeast have borne the brunt of the violence. The group became notorious for its 2014 kidnapping of over 270 schoolgirls and its use of women and children as suicide bombers. It has staged attacks in neighboring countries and poses a threat to international targets in the region. Boko Haram appears primarily focused on the Lake Chad Basin region. Its 2015 pledge to the Islamic State and the emergence of a splinter faction, Islamic State-West Africa (IS-WA), have raised concerns from U.S. policymakers, though the extent of intergroup linkages is unclear. IS-WA is credited with a number of devastating attacks in 2018 against Nigerian military bases; the army has struggled to defend them. Domestic criticism of the government's response to corruption, economic pressures, and Boko Haram contributed to the election in 2015 of former military ruler Muhammadu Buhari. In what was widely hailed as a historic transition, the ruling People's Democratic Party and President Goodluck Jonathan lost power to Buhari and his All Progressives Congress, marking Nigeria's first democratic transfer of power. Buhari has since struggled to enact promised reforms amid persistent security challenges and a struggling economy. He faces a challenge from former vice president Atiku Abubakar in elections scheduled for February 2019; it is forecast to be a close race. As in previous elections, there are concerns about violence around the polls, and intense, high-stakes contests over a number of legislative and gubernatorial posts increase the risk of conflicts. U.S. officials and Members of Congress have called for credible, transparent, and peaceful elections. U.S.-Nigeria relations under the Trump Administration appear generally consistent with U.S. policy under the Obama Administration. Both Administrations have supported reform initiatives in Nigeria, including anticorruption efforts, economic and electoral reforms, energy sector privatization, and programs to promote peace and development. Congress oversees more than $500 million in U.S. foreign aid programs in Nigeria and regularly monitors political developments; some Members have expressed concern with corruption, human rights abuses, and violent extremism in Nigeria.", "document_type": "crs"}
{"report": "The U.S. Army Corps of Engineers (USACE) is an agency within the Department of Defense with both military and civil works responsibilities. The agency's civil works mission has evolved with the changing needs of the nation. It began with improving and regulating navigation channels thereby facilitating the movement of goods between states and for import and export. Congress then charged the agency to help in reducing the damages from floods. More recently, Congress has authorized the agency to restore aquatic ecosystems. USACE operates more than 700 dams; has built 14,500 miles of levees; and improves and maintains more than 900 coastal, Great Lakes, and inland harbors, as well as 12,000 miles of inland waterways. Congress directs and oversees the specific navigation, flood control, and ecosystem restoration projects that USACE plans and constructs through authorization legislation, annual and supplemental appropriations legislation, and oversight efforts. The agency typically is working with nonfederal project sponsors in the development of these water resource projects. The demand for USACE projects typically exceeds the federal appropriations for these projects. Broadly, Congress is faced with considering how well the nation is addressing its water resource needs and what is the current and future role of USACE in addressing those needs. Part of the issue is how effective, efficient, and equitable is the USACE project delivery process in meeting the nation's needs. Unlike with federal funding for highways and municipal water infrastructure, the majority of federal funds provided to USACE for water resource projects are not distributed by formula to states or through competitive grant programs. Instead, USACE is directly engaged in the planning and construction of projects; the majority of its appropriations are used performing work on specific studies and contracting for construction of projects authorized by Congress. This report examines the standard development and delivery of a USACE water resource project (e.g., steps in the process, role of Congress, nonfederal project sponsor role). It also presents the evolving alternative project delivery and innovative finance options. This report provides an overview of USACE water resource authorization and project delivery processes and selected related issues. The report discusses the following topics: primer on the agency and its authorization legislation, typically titled as a Water Resources Development Act (WRDA); standard process for planning and construction of USACE water resource projects; interest in and authorities for alternative project delivery and innovative finance for water resource projects; and other USACE authorities, including its authorities for Continuing Authorities Programs (CAPs) and technical assistance, emergency response, and reimbursable work. Appendix A describes the evolution of USACE water resource missions and authorities. Appendix B provides an overview of Water Resources Development Acts and other USACE civil works omnibus authorization bills enacted from 1986 through 2018, which are collectively referred to herein as WRDAs. The civil works program is led by a civilian Assistant Secretary of the Army for Civil Works, who reports to the Secretary of the Army. A military Chief of Engineers oversees the agency's civil and military operations and reports on civil works matters to the Assistant Secretary for Civil Works. A civilian Director of Civil Works reports to the Chief of Engineers. The agency's civil works responsibilities are organized under eight divisions, which are further divided into 38 districts. The districts and divisions perform both military and civil works activities and are led by Army officers. An officer typically is in a specific district or division leadership position for two to three years; a Chief of Engineers often serves for roughly four years. In 2018, the Trump Administration has expressed interest in the possibility of removing USACE from the Department of Defense; for more information on the status of this proposal, see \" Proposals on Reorganizing USACE Functions \" later in this report. Local interests and Members of Congress often are particularly interested in USACE pursuing a project because these projects can have significant local and regional economic benefits and environmental effects. In recent decades, Congress has legislated on most USACE authorizations through WRDAs. Congress uses WRDA legislation to authorize USACE water resource studies, projects, and programs and to establish policies (e.g., nonfederal cost-share requirements). WRDAs generally authorize new activities that are added to the pool of existing authorized activities. The authorization can be project-specific, programmatic, or general. Most project-specific authorizations in WRDAs fall into three general categories: project studies, construction projects, and modifications to existing projects. WRDAs also have deauthorized projects and established deauthorization processes. A limited set of USACE authorizations expire unless a subsequent WRDA extends the authorizations. Generally, a study or construction authorization by itself is insufficient for USACE to proceed. For the most part, the agency can only pursue what it is both authorized and funded to perform. Federal funding for USACE civil works activities generally is provided in annual Energy and Water Development appropriations acts and at times through supplemental appropriations acts. Over the last decade, annual USACE appropriations have ranged from $4.7 billion in FY2013 to $7.0 billion in FY2019. An increasing share of the appropriations has been used for operation and maintenance (O&M) of USACE owned and operated projects. In recent years, Congress has directed more than 50% of the enacted annual appropriations to O&M and limited the number of new studies and construction projects initiated with annual appropriations. For more on USACE appropriations, see the following: CRS Report R45326, Army Corps of Engineers Annual and Supplemental Appropriations: Issues for Congress , by Nicole T. Carter; CRS In Focus IF10864, Army Corps of Engineers: FY2019 Appropriations , by Nicole T. Carter; and CRS In Focus IF11137, Army Corps of Engineers: FY2020 Appropriations , by Nicole T. Carter and Anna E. Normand. The agency identified a $98 billion backlog of projects that have construction authorization that are under construction or are awaiting construction funding. That is, the rate at which Congress authorizes USACE to perform work has exceeded the work that can be accomplished with the agency's appropriations. For context, annual appropriations for construction funding in FY2018 and FY2019 were $2.1 billion and $2.2 billion, respectively. Given that USACE starts only a few construction projects using discretionary appropriations in a fiscal year (e.g., five using annual appropriations provided in FY2019), numerous projects authorized for construction in previous WRDAs remain unfunded. USACE may have hundreds of authorized studies that are not currently funded, and few new studies are funded annually. Congress allowed USACE to initiate six new studies using FY2019 appropriations. Beginning with WRDA 1986 ( P.L. 99-662 ), Congress loosely followed a biennial WRDA cycle for a number of years. WRDAs were enacted in 1988 ( P.L. 100-676 ), 1990 ( P.L. 101-640 ), 1992 ( P.L. 102-580 ), 1996 ( P.L. 104-303 ), 1999 ( P.L. 106-53 ), and 2000 ( P.L. 106-541 ). Deliberations on authorization of particular USACE projects and interest in altering how the agency developed, economically justified, and mitigated for its projects resulted extended beyond the biennial cycle, Congress enacting the next WRDA in 2007 ( P.L. 110-114 ). Congress did not enact a WRDA for a number of years following WRDA 2007. An issue that complicated enactment was devising a way to develop an omnibus water authorization bill that identified specific studies and projects to authorize and modify, as congressionally directed spending (known as earmarks ) received increasing scrutiny. The Water Resources Reform and Development Act of 2014 (WRRDA 2014; P.L. 113-121 ) was enacted in June 2014. It authorized 34 construction projects that had received agency review, had Chief of Engineers reports (also known as Chief's r eports ), and had been the subject of a congressional hearing, thereby overcoming most concerns related to earmarks in the legislation. WRRDA 2014 also created a new process for identifying nonfederal interest in and support for USACE studies and projects. For more on WRRDA 2014, see CRS Report R43298, Water Resources Reform and Development Act of 2014: Comparison of Select Provisions , by Nicole T. Carter et al. In Section 7001 of WRRDA 2014, Congress called for the Secretary of the Army to submit an annual report to the congressional authorizing committees—the House Transportation and Infrastructure Committee and the Senate Environment and Public Works Committee—of potential and publicly submitted study and project authorization proposals for Congress to consider for authorization. The process to develop and transmit this report, referred to as the Section 7001 process, provides Congress a means by which to identify new studies and other activities for potential inclusion in an omnibus authorization bill. The Assistant Secretary of the Army delivered to Congress a Section 7001 annual report in February 2015, February 2016, March 2017, and February 2018. A notice requesting public submissions for consideration for the fifth Section 7001 annual report was published on April 20, 2018. USACE accepted submissions through August 20, 2018. These submissions are to be considered for inclusion in the annual report expected to be delivered to the authorizing committees in mid-2019. USACE has indicated that the next call for submissions is expected to open in May 2019. With WRDA 2016, which was Title I of the Water Infrastructure Improvements for the Nation Act (WIIN; P.L. 114-322 , enacted in December 2016), Congress returned enactment of USACE authorization legislation to a biennial timeframe. WRDA 2016 authorized new studies based on proposals in the Section 7001 reports and construction projects based on Chief's reports. The 115 th Congress enacted America's Water Infrastructure Act of 2018 (AWIA 2018, P.L. 115-270 ) in October 2018. AWIA 2018 includes the Water Resources Development Act of 2018 (WRDA 2018) as Title I of the bill. Like WRDA 2016, Congress used the Section 7001 reports to identify new studies, and Chief's reports to identify the construction projects that Congress authorized in WRDA 2018. Like previous Congresses, the 116 th Congress may consider WRDA legislation. These deliberations are likely to be shaped by many factors, such as policy proposals by the President, congressional policies on earmarks, and development of an infrastructure initiative or other actions or developments that may alter the framework and context for federal and nonfederal investments. Congress also may have available various reports to inform its WRDA development and deliberations. In addition to the Section 7001 reports and Chief's reports, the authorizing committees receive annually a report required by Section 1002 of WRRDA 2014. The Section 1002 report identifies when USACE feasibility studies—the detailed studies of the water resource problem that are developed to inform the Chief's report and congressional authorization—are anticipated to reach various milestones. At the start of FY2019, USACE currently had roughly 100 active feasibility studies. In addition to feasibility studies, Congress may be presented with other types of studies recommending actions that require congressional authorization. These studies include postauthorization change reports for modifying an authorized project prior to or during construction, reevaluation reports for a modification to a constructed project, and reports recommending deauthorization of constructed projects that no longer serve their authorized purposes. Reports and analyses by Government Accountability Office (GAO), Inspector Generals, Congressional Budget Office, National Academy of Sciences (NAS), National Academy of Public Administration, Inland Waterway Users Board, Environmental Advisory Board to the Chief of Engineers, advocacy and industry groups, and others also may influence congressional deliberations. In June 2018, the Trump Administration proposed to move the civil works activities from the Department of Defense to the Department of Transportation and the Department of the Interior to consolidate and align the USACE civil works missions with these agencies. Although some Members of Congress have indicated support for looking at which USACE functions may not need to be in the Department of Defense, the conference report that accompanied the USACE appropriations for FY2019 ( P.L. 115-244 ), H.Rept. 115-929 , stated the following: The conferees are opposed to the proposed reorganization as it could ultimately have detrimental impacts for implementation of the Civil Works program and for numerous non-federal entities that rely on the Corps' technical expertise, including in response to natural disasters.… Further, this type of proposal, as the Department of Defense and the Corps are well aware, will require enactment of legislation, which has neither been proposed nor requested to date. Therefore, no funds provided in the Act or any previous Act to any agency shall be used to implement this proposal. As previously noted, USACE's central civil works responsibilities are to support coastal and inland commercial navigation, reduce riverine flood and coastal storm damage, and protect and restore aquatic ecosystems in U.S. states and territories. Additional project benefits also may be developed, including water supply, hydropower, recreation, fish and wildlife enhancement, and so on. In addition, USACE has certain regulatory responsibilities that Congress has assigned to the Secretary of the Army; these responsibilities include issuing permits for private actions that may affect navigation, wetlands, and other waters of the United States. As part of its military and civil responsibilities and under the National Response Framework, USACE participates in emergency response activities (see \" Natural Disaster and Emergency Response Activities \" section of this report). For more information on USACE civil works responsibilities, see Appendix A . The Trump Administration has not provided additional details on its June 2018 reorganization proposal for USACE in subsequent public documents. More recently, USACE and the Assistant Secretary of the Army have focused their attention on efforts to \"revolutionize USACE civil works\" as part of the Trump Administration's reform of how infrastructure projects are regulated, funded, delivered, and maintained. The three objectives of the effort are: (1) accelerate USACE project delivery, (2) transform project financing and budgeting, and (3) regulatory reform (e.g., improve the permitting process). For more on how USACE projects are delivered and how options for project delivery and financing have changed, see \" Standard Project Delivery Process \" and \" Alternative Project Delivery and Innovative Finance ,\" respectively. The 115 th Congress enacted provisions that support receiving information to inform discussions about improving the project delivery and budgeting for projects. In WRDA 2018, Congress included the following provisions: Section 1102, Study of the Future of the United States Army Corps of Engineers; and Section 1103, Study on Economic and Budgetary Analyses. In Section 1102 of WRDA 2018, Congress required that the Secretary of the Army to contract with the National Academy of Sciences to evaluate the following: USACE's ability of carry out its mission and responsibilities and the potential effects of transferring functions and resources from the Department of Defense to a new or existing federal agency; and how to improve USACE's project delivery, taking into account the annual appropriations process, the leadership and geographic structure at the divisions and districts, and the rotation of senior USACE leaders. The legislation requires that the study be completed within two years of enactment (which would be October 2020). In Section 1103 of WRDA 2018, Congress required that the Secretary of the Army contract with the NAS to do the following: review the economic principles and methods used by the USACE to formulate, evaluate, and budget for water resources development projects, and recommend changes to improve transparency, return on federal investment, cost savings, and prioritization in USACE budgeting of these projects. Standard USACE project delivery consists of the agency leading the study, design, and construction of authorized water resource projects. Nonfederal project sponsors typically share in study and construction costs, providing the land and other real estate interests, and identifying locally preferred alternatives. Since the 1950s, questions related to how project beneficiaries and sponsors should share in the cost and delivery of USACE projects have been the subject of debate and negotiation. Much of the basic arrangement for how costs and responsibilities are currently shared was established by Congress in the 1980s, with adjustments in subsequent legislation, including in recent statutes. Congressional authorization and appropriations processes are critical actions in a multistep process to deliver a USACE project. This section describes the standard delivery process for most USACE projects, which consists of the following basic steps: Congressional study authorization is obtained in a WRDA or similar authorization legislation. USACE performs a feasibility study, if funds are appropriated. Congressional construction authorization is pursued. USACE can perform preconstruction engineering and design while awaiting construction authorization, if funds are appropriated. Congress authorizes construction in a WRDA or similar authorization legislation, and USACE constructs the project, if funds are appropriated. The process is not automatic. Appropriations are required to perform studies and construction; that is, congressional study and construction authorizations are necessary but insufficient for USACE to proceed. Major steps in the process are shown in Figure 1 . For most water resource activities, USACE needs a nonfederal sponsor to share the study and construction costs. Since WRDA 1986, nonfederal sponsors have been responsible for funding a portion of studies and construction, and they may be 100% responsible for O&M and repair of certain types of projects (e.g., flood risk reduction and aquatic ecosystem restoration). Most flood risk reduction and ecosystem restoration projects are transferred to nonfederal owners after construction; many navigation and multipurpose dams are federally owned and operated. Nonfederal sponsors generally are state, tribal, territory, county, or local agencies or governments. Although sponsors typically need to have some taxing authority, Congress has authorized that some USACE activities can have nonprofit and other entities as the nonfederal project sponsor; a few authorities allow for private entities as partners. Table 1 provides general information on the duration and federal share of costs for various phases in USACE project delivery. Project delivery often takes longer than the combined duration of each phase shown in Table 1 because some phases require congressional authorization before they can begin and action on each step is subject to the availability of appropriations. A USACE water resource project starts with a feasibility study (sometimes referred to as an investigation) of the water resource issue and an evaluation of the alternatives to address the issue. The purpose of the USACE study process is to inform federal decisions on whether there is a federal interest in authorizing a USACE construction project. USACE generally requires two types of congressional action to initiate a study—study authorization and then appropriations. Congress generally authorizes USACE studies in WRDA legislation. Once a study is authorized, appropriations are sought from monies generally provided in the annual Energy and Water Development appropriations acts. Within USACE, projects are largely planned at the district level and approved at the division level and USACE headquarters. Early in the study process, USACE assesses the level of interest and support of nonfederal entities that may be potential sponsors that share project costs and other responsibilities. USACE also investigates the nature of the water resource problem and assesses the federal government's interest. If USACE recommends proceeding and a nonfederal sponsor is willing to contribute to the study, a feasibility study begins. The cost of the feasibility study (including related environmental studies) is split equally between USACE and the nonfederal project sponsor, as shown in Table 1 . The objective of the feasibility study is to formulate and recommend solutions to the identified water resource problem. During the first few months of a feasibility study, the local USACE district formulates alternative plans, investigates engineering feasibility, conducts benefit-cost analyses, and assesses environmental impacts under the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. §4321). (For more information on NEPA compliance and cost-benefit analyses, see the box \"USACE Feasibility Studies: National Environmental Policy Act Compliance and Economic Analyses.\") The evaluation of USACE water resource projects is governed by the 1983 Principles and Guidelines for Water and Related Resources Implementation Studies (often referred to as the P&G) and by policy direction provided in WRDA bills and other enacted legislation. An important outcome of the feasibility analysis is determination of whether the project warrants further federal investment. Under the P&G, the federal objective in planning generally is to contribute to national economic development (NED) consistent with protecting the nation's environment. A feasibility study generally identifies a tentatively preferred plan, which typically is the plan that maximizes the NED consistent with protecting the environment (referred to as the NED plan). The Assistant Secretary of the Army has the authority to grant an exception and recommend a plan other than the NED plan. In some circumstances, the nonfederal sponsor may support an alternative other than the NED plan, which is known as the locally preferred plan (LPP). If the LPP is recommended and authorized, the nonfederal entity is typically responsible for 100% of the difference in project costs (construction and operation and maintenance costs) between the LPP and the NED plan. Once the final feasibility study is available, the Chief of Engineers signs a recommendation on the project, known as the Chief's report. USACE submits the completed Chief's reports to the congressional authorizing committees (33 U.S.C. §2282a) and transmits the reports to the Assistant Secretary of the Army for Civil Works and the Office of Management and Budget (OMB) for Administration review. Since the mid-1990s, Congress has authorized many projects based on Chief's reports prior to completion of the project review by the Assistant Secretary and OMB. USACE preconstruction engineering and design (PED) of a project may begin after the Chief's report subject to the availability of appropriations (33 U.S.C. §2287). PED consists of finalizing the project's design, preparing construction plans and specifications, and drafting construction contracts for advertisement. USACE work on PED is subject to the availability of USACE appropriations. Once funded, the average duration of PED is two years, but the duration varies widely depending on the size and complexity of a project. PED costs are distributed between the federal and nonfederal sponsor in the same proportion as the cost-share arrangement for the construction phase; see Table 2 for information on the cost-share requirements for construction. Once the project receives congressional construction authorization, federal funds for construction are sought in the annual appropriations process. Once construction funds are available, USACE typically functions as the project manager; that is, USACE staff, rather than the nonfederal project sponsor, usually are responsible for implementing construction. Although project management may be performed by USACE personnel, physical construction is contracted out to private engineering and construction contractors. When USACE manages construction, the agency typically pursues reimbursement of the nonfederal cost share during project construction. Post-construction ownership and operations responsibilities depend on the type of project. When construction is complete, USACE may own and operate the constructed project (e.g., navigation projects) or ownership and maintenance responsibilities may transfer to the nonfederal sponsor (e.g., most flood damage reduction projects). The cost-share responsibilities for construction and O&M vary by project purpose, as shown in Table 2 . Table 2 first provides the cost share for the primary project purposes of navigation, flood and storm damage reduction, and aquatic ecosystem restoration. Next, it provides the cost shares for additional project purposes, which can be added to a project that has at least one of the three primary purposes at its core. WRDA 1986 increased local cost-share requirements; some subsequent WRDAs further adjusted cost sharing. Deviation from the standard cost-sharing arrangements for individual projects is infrequent and typically requires specific authorization by Congress. A project may undergo some changes after authorization. If project features or estimated costs change significantly, additional congressional authorization may be necessary. Congressional authorization for a significant modification typically is sought in a WRDA. Requests for such modifications or for the study of such modifications also are solicited through the Section 7001 annual report process. For less significant modifications, additional authorization often is not necessary. Section 902 of WRDA 1986, as amended (33 U.S.C. §2280), generally allows for increases in total project costs of up to 20% (after accounting for inflation of construction costs) without additional congressional authorization. If nonfederal entities are interested in altering USACE civil works projects after construction, the entity generally must obtain permission from USACE. The agency's authority to allow alterations to its projects derives from Section 14 of the Rivers and Harbors Act of 1899, also known as Section 408 based on its codification at 33 U.S.C. §408. This provision states that the Secretary of the Army may \"grant permission for the alteration or permanent occupation or use of any of the aforementioned public works when in the judgment of the Secretary such occupation or use will not be injurious to the public interest and will not impair the usefulness of such work.\" Pursuant to the regulations, USACE conducts a technical review of the proposed alteration's effects on the USACE project. Section 408 permissions may be required not only for projects operated and maintained by USACE, but also federally authorized civil works projects operated and maintained by nonfederal project sponsors (e.g., many USACE-constructed, locally maintained levees). At the end of the Section 408 process, USACE chooses to approve or deny permission for the alteration. USACE may attach conditions to its Section 408 permission. Most authorizations of USACE construction projects are not time limited. To manage the backlog of authorized projects that are not constructed, Congress has enacted various deauthorization processes. General Deauthorization Authority. Of the current deauthorization authorities for unconstructed projects, the oldest directs the Secretary of the Army to transmit to Congress annually a list of authorized projects and project elements that did not receive obligations of funding during the last five full fiscal years (33 U.S.C. §579a(b)(2)). If funds are not obligated for the planning, design, or construction of the project or project element during the following fiscal year, the project or project element is deauthorized. The final project deauthorization list is published in the Federal Register . The process is initiated when the Secretary of the Army transmits the list. WRDA 2018 One-Time Process. Section 1301 of WRDA 2018 created a one-time process to deauthorize at least $4 billion of authorized projects that are unconstructed and are \"no longer viable for construction.\" This process can deauthorize unconstructed projects or project elements authorized prior to WRDA 2007, projects on the list produced pursuant to the general deauthorization authority (33 U.S.C. §579a(b)(2)), and unconstructed projects requested to be deauthorized by the nonfederal sponsor. WRDA 2016 One-Time Process. Section 1301 of WRDA 2016 created a one-time process to deauthorize projects with federal costs to complete of at least $10 billion that are \"no longer viable for construction.\" This process can only deauthorize projects authorized prior to WRDA 2007. Projects Authorized in WRDA 2018, WRDA 2016 , and WRRDA 2014 . Section 1302 of WRDA 2018 requires that a project authorized in WRDA 2018 be automatically deauthorized if no funding had been obligated for its construction after 10 years of enactment (i.e., 10 years after October 2018), unless certain conditions apply). Section 1302 of WRDA 2016 requires that any project authorized in WRDA 2016 be automatically deauthorized if after 10 years of enactment (December 2026) no funding had been obligated for its construction, unless certain conditions apply. Section 6003 of WRRDA 2014, as amended by Sec. 1330 of WRDA 2018, requires that any project authorized in WRRDA 2014 be automatically deauthorized if after 10 years of enactment (June 2024) no funding had been obligated for its construction. USACE has not addressed uncertainties regarding how implementation of these authorities is to be coordinated. A separate divestiture process is used to dispose of constructed projects or project elements and other real property interests associated with civil works projects. Some divestitures also may require explicit congressional deauthorization. USACE divestitures historically either have been limited to projects or real property interests that no longer serve their authorized purposes (e.g., navigation channels that no longer have commercial navigation) or have been conducted pursuant to specific congressional direction. While Section 1301 of WRDA 2018 appears to provide a one-time opportunity for unconstructed projects to be deauthorized, there currently is no formal process similar to the Section 7001 annual report process for a nonfederal entity to propose that a constructed project be deauthorized. Congress has deauthorized unconstructed and constructed projects and project elements in WRDA legislation. There are two authorities for deauthorizing studies: The Secretary of the Army is directed to transmit to Congress annually a list of incomplete authorized studies that have not received appropriations for five full fiscal years (33 U.S.C. §2264). The study list is not required to be published in the Federal Register . Congress has 90 days after submission of the study list to appropriate funds for a study; otherwise, the study is deauthorized. WRRDA 2014, as amended by WRDA 2018, requires that a feasibility study that remains incomplete 10 years after initiation is automatically deauthorized. CRS has no data indicating that studies have been deauthorized through these processes in recent years. USACE has indicated that the agency is reviewing its 5,600 study authorities to identify studies for deauthorization. As nonfederal entities have become more involved in USACE projects and their funding, they have expressed frustration with the time it takes USACE to complete studies and construction. Delayed completion of water resource projects can postpone some or all of a project's anticipated benefits. The impact of these delays varies by the type of project. Delayed completion of flood risk reduction projects may prolong a community's vulnerability to certain coastal and riverine floods, thereby contributing to the potential cost of disaster response and recovery. Delayed investment in navigation projects may result in postponed transportation cost savings from improved efficiency and in greater reliance on road and rail transport. Delayed aquatic ecosystem restoration projects may result in missed opportunities to attenuate wetlands loss and realize related ecosystem benefits, such as those for water quality and fisheries. Another concern with long project delivery is the potential for an increase in project costs. The Government Accountability Office in a 2013 report summarized its findings regarding cost growth at USACE flood control projects. GAO's detailed review of eight projects found that a factor contributing to cost increases at these USACE-led flood risk reduction projects was funding below the capability level. Other factors included design changes, initial USACE cost estimates being lower than later cost estimates, and differences in contract estimates and actual contract costs. When testifying in 2013, USACE Deputy Commanding General for Civil and Emergency Operations Major General Michael J. Walsh noted that how much funding is put toward a project significantly impacts the duration of project delivery. Although President Trump (as well as previous Presidents) and many Members of Congress have expressed interest in improving the nation's infrastructure, including its water resource infrastructure, balancing the potential benefits of such improvements and concerns about increased federal expenditures poses an ongoing challenge. While a subset of authorized USACE construction activities is included in the President's budget request and funded annually by congressional appropriations, numerous authorized USACE projects or project elements have not received federal construction funding. Competition for USACE discretionary appropriations has increased interest in alternative project delivery and innovative financing , including private financing and public-private partnerships (P3s). In a June 21, 2017, memorandum, the agency's Director of Civil Works announced the initiation of a comprehensive review to identify opportunities to enhance project delivery, organizational efficiency, and effectiveness. Congress, particularly in WRRDA 2014, WRDA 2016, and WRDA 2018, has authorized and extended alternative ways to advance and deliver USACE studies and projects. To expand delivery options, Congress has increased the flexibility in the nonfederal funding of USACE-led activities, nonfederal leadership of USACE studies and projects, and P3s. It also has authorized new financing mechanisms for water resource projects. Some of these expanded delivery and financed options are discussed below. WRRDA 2014 and WRDA 2016 expanded the authorities for nonfederal entities to perform studies and construct projects (or elements of projects) that typically would have been undertaken by USACE. These statutes also provided that the costs of these nonfederal-led activities are shared by the federal government largely as if USACE had performed them. That is, nonfederal entities advancing water resource projects may be eligible to receive credit or reimbursement (without interest) subject to the availability of federal appropriations for their investments that exceed the required nonfederal share of project costs. These authorities typically require that the nonfederal entity leading the project comply with the same laws and regulations that would apply if the work were being performed by USACE. Private sector access to financing and expertise and experience with complex project management are all seen as potential advantages for the delivery of some types of public infrastructure. Interest has expanded in recent years in allowing private engagement in U.S. water resource projects, which would follow the models used in other U.S. infrastructure sectors, such as transportation, and in international examples of private provision of public infrastructure and related services. WRRDA 2014 directed USACE to establish pilot programs to evaluate the effectiveness and efficiency of allowing nonfederal applicants to carry out certain authorized projects. For example, WRRDA 2014 included the following: Section 5014 authorized a P3 pilot program, and Section 1043 authorized the transfer of federal funds to nonfederal entities to use for the construction of authorized USACE projects. The 116th Congress may consider water resource project financing and delivery during deliberations on USACE appropriations and authorization legislation, as well as during discussions of broader infrastructure initiatives. In H.Rept. 115-929 , which accompanied USACE FY2019 appropriations, congressional appropriators directed USACE to continue to develop its policy approach for public-private partnerships. For a discussion of some of the issues that have impeded greater private-sector participation and P3 efforts for USACE and water resource projects (e.g., limitations on USACE entering into long-term contracts and challenges to assessing project-specific user fees) see CRS Testimony TE10023, America's Water Resources Infrastructure: Approaches to Enhanced Project Delivery , by Nicole T. Carter. Under these authorities, additional nonfederal investments may, in the near term, achieve progress on some water resource projects, thereby potentially making federal funding available for other authorized USACE projects. However, additional nonfederal investment may have potential trade-offs for the federal government, including reduced federal influence over the set of studies and construction projects receiving, expecting, and eligible for federal support. Others raise concerns that these provisions alter how USACE funds are used by directing federal dollars toward projects with nonfederal sponsors that can provide more nonfederal funding upfront. A concern from the nonfederal perspective is the challenge of obtaining federal reimbursement. WRRDA 2014 in Sections 5021 through 5035 authorized the Water Infrastructure Finance and Innovation Act (WIFIA), a program to provide direct loans and loan guarantees for identified categories of water projects. The WIFIA concept is modeled after a similar program that assists transportation projects: the Transportation Infrastructure Finance and Innovation Act, or TIFIA, program. Congress established WIFIA with roles for both USACE and the Environmental Protection Agency (EPA). EPA's WIFIA program is funded and operational; USACE's WIFIA program remains in the development phase. WIFIA authorized both agencies to provide assistance in the form of loans and loan guarantees, and it identified each agency to provide that assistance for certain types of water projects. Under the WIFIA program, USACE is authorized to provide WIFIA support for a number of different project types, such as flood damage reduction projects, hurricane and storm damage reduction projects, environmental restoration projects, coastal or inland harbor navigation improvement projects, inland and intracoastal waterways navigation projects, or a combination of these projects. WRRDA 2014 included a number of project selection criteria that would affect whether individual projects are eligible to receive USACE WIFIA funding. WRDA 2018 amended the WIFIA authorization of appropriations provided by WRRDA 2014. WRRDA 2014 authorized WIFIA appropriations for each of FY2015 through FY2019 for $50 million for each of the EPA Administrator and the Secretary of the Army. WRDA 2018 added an authorization of appropriations for the EPA Administration for $50 million for each of FY2020 and FY2021. Implementation of WIFIA requires congressional appropriations to cover administrative expenses (i.e., \"start-up\" costs) and subsidy costs (i.e., the presumed default rate on guaranteed loans). Each agency also must promulgate regulations for the implementation of its WIFIA program. EPA has developed its regulations; USACE has not. The Administration has requested and Congress has provided funds for EPA's WIFIA. EPA is implementing its WIFIA authority. In contrast, the Administration had not requested funding for USACE's WIFIA start-up costs. Congress has directed USACE to develop the structure for its WIFIA program; however, the USACE WIFIA program has not advanced sufficiently to be operational. In H.Rept. 115-929 for FY2019, congressional appropriators directed USACE to continue to develop its WIFIA proposals for future budget submissions and to allow for WIFIA development expenses to be funded through the USACE Expenses account. Similar to recent years, the President's FY2020 request did not request funding for USACE's WIFIA. For a discussion of issues related to USACE implementation of WIFIA, see CRS Testimony TE10023, America's Water Resources Infrastructure: Approaches to Enhanced Project Delivery , by Nicole T. Carter. There are exceptions to the standard project delivery process described above. USACE has some general authorities to undertake small projects, technical assistance, and emergency actions. Congress also has specifically authorized USACE to undertake numerous municipal water and wastewater projects. USACE also performs work on a reimbursable basis for other agencies and entities. These additional authorities are described below. The agency's authorities to undertake small projects are called Continuing Authorities Programs (CAPs). Projects under these authorities can be conducted without project-specific congressional study or construction authorization and without project-specific appropriations; these activities are performed at USACE's discretion without the need for inclusion in the Section 7001 reports. According to USACE, once funded, CAP projects generally take three years from feasibility phase initiation to construction completion. For most CAP authorities, Congress has limited the project size and scope as shown in Table 3 . The CAPs typically are referred to by the section number in the bill in which the CAP was first authorized. WRRDA 2014 requires the Assistant Secretary of the Army to publish prioritization criteria for the CAPs and an annual CAP report. For more information, see CRS In Focus IF11106, Army Corps of Engineers: Continuing Authorities Programs , by Anna E. Normand. Congress has granted USACE some general authorities to provide technical assistance related to water resources planning and for floodplain management. Congress also has authorized USACE to provide technical and construction assistance to tribes. Except where noted in Table 4 , USACE does not need project-specific authority to undertake activities under the authorities listed in Table 4 . For assistance for presidentially declared disasters pursuant to the Stafford Act ( P.L. 93-288 ), USACE may be tasked with performing various response and recovery activities. These activities are funded through the Disaster Relief Fund and performed at the direction of the Federal Emergency Management Agency (FEMA) and the President and at the request of the governor of a state or territory with an affected area. Under the National Response Framework, USACE coordinates emergency support for public works and engineering . This support includes technical assistance, engineering, and construction management as well as emergency contracting, power, and repair of public water and wastewater and solid waste facilities. USACE also assists in monitoring and stabilizing damaged structures and in demolishing structures designated as immediate hazards to public health and safety. In addition, the agency provides technical assistance in clearing, removing, and disposing of contaminated and uncontaminated debris from public property and in establishing ground and water routes into affected areas. USACE coordinates contaminated debris management with EPA. In addition to work performed as part of the National Response Framework, Congress has given USACE its own emergency response authority. This is commonly referred to as the agency's P.L. 84-99 authority, based on the act in which it was originally authorized, the Flood Control and Coastal Emergency Act (P.L. 84-99, 33 U.S.C. §701n). The act authorizes USACE to perform emergency response and disaster assistance. It also authorizes disaster preparedness, advance measures, emergency operations (disaster response and post-flood response), rehabilitation of certain damaged flood control works, protection or repair of certain federally authorized shore protection works threatened by coastal storms, emergency dredging, and flood-related rescue operations. These activities are limited to actions to save lives and protect improved property (public facilities/services and residential or commercial developments). USACE also has some authorities to assist with selected activities during drought. Most of the agency's emergency response work (including the repair program described below) generally is funded through supplemental appropriations provided directly to USACE. Until supplemental appropriations are provided, Congress has provided USACE with authority to transfer money from ongoing USACE projects to emergency operations (33 U.S.C. §701n). In P.L. 84-99, Congress authorized USACE to rehabilitate damaged flood control works (e.g., levees) and federally constructed hurricane or shore protection projects (e.g., federal beach nourishment projects) and to conduct related inspections. This authority is referred to as the Rehabilitation and Inspection Program (RIP). To be eligible for rehabilitation assistance, the project must be in active status at the time of damage by wind, wave, or water action other than ordinary nature. Active RIP status is maintained by proper project maintenance as determined during an annual or semiannual inspection and by the correction of deficiencies identified during periodic inspections. As of early 2017, RIP included around 1,100 projects consisting of 14,000 miles of levees and 33 dams. For locally constructed projects, 80% of the cost to repair the damage is paid using federal funds and 20% is paid by the levee or dam owner. For federally constructed projects, the entire repair cost is a federal responsibility (except the nonfederal sponsor is responsible for the cost of obtaining the sand or other material used in the repair). For damage to be repaired, USACE must determine that repair has a favorable benefit-cost ratio. Local sponsors assume any rehabilitation cost for damage to an active project attributable to deficient maintenance. WRDA 2016 allows that in conducting repair or restoration work under RIP, an increase in the level of protection can be made if the nonfederal sponsor pays for the additional protection. Since 1992, Congress has authorized and provided for USACE assistance with design and construction of municipal drinking water and wastewater infrastructure projects. This assistance has included treatment facilities, such as recycling and desalination plants; distribution and collection works, such as stormwater collection and recycled water distribution; and surface water protection and development projects. This assistance is broadly labeled environmental infrastructure at USACE. Most USACE environmental infrastructure assistance is authorized for a specific geographic location (e.g., city, county, multiple counties) under Section 219 of WRDA 1992 ( P.L. 102-580 ), as amended; however, other similar authorities, sometimes covering regions or states, exist in multiple sections of WRDAs and in selected Energy and Water Development Appropriations acts. The nature of USACE's involvement (e.g., a grant from USACE to the project owner or USACE acting as the construction project manager) and nonfederal cost share vary according to the specifics of the authorization. Most USACE environmental infrastructure assistance requires cost sharing, typically designated at 75% federal and 25% nonfederal; however, some of the assistance authorities are for 65% federal and 35% nonfederal cost sharing. Under Section 219, USACE performs the authorized work; for environmental infrastructure projects authorized in other provisions, USACE often can use appropriated funds to reimburse nonfederal sponsors for work they perform. Since 1992, Congress has authorized USACE to contribute assistance to more than 300 of these projects and to state and regional programs, with authorizations of appropriations totaling more than $5 billion. WRRDA 2014 expanded authorizations and authorization of appropriations for specific multi-state environmental infrastructure activities. In WRDA 2016 and WRDA 2018, Congress expanded the Section 7001 process, allowing nonfederal entities to propose modifications to existing authorities for environmental infrastructure assistance. (For more on Section 7001 process, see \" 2016, 2018, and the Section 7001 Annual Report Process .\") Although no Administration has included environmental infrastructure in a USACE budget request since the first congressional authorization in 1992, Congress regularly includes USACE environmental infrastructure funds in appropriations bills. Congress provided $50 million in FY2015, $55 million in each of FY2016 and FY2017, $70 million in FY2018, and $77 million in FY2019. These funds are part of the \"additional funding\" provided by Congress in enacted appropriations bills. After enactment of an appropriations bill, the Administration follows guidance provided in the bill and accompanying reports to direct its use of these funds on authorized environmental infrastructure assistance activities. The selected environmental infrastructure assistance activities are identified in the agency's work plan for the fiscal year, which is typically available within two months after enactment of appropriations. Recently, funds have been used to continue ongoing environmental infrastructure assistance. Because environmental infrastructure activities are not traditional USACE water resource projects, they are not subject to USACE planning process (e.g., a benefit-cost analysis and feasibility study are not performed). USACE environmental infrastructure assistance activities, however, are subject to federal laws, such as NEPA. In addition to its work for the Department of the Army under USACE's military program, USACE under various authorities also may perform work on a reimbursable basis for other DOD entities, federal agencies, states, tribes, local governments, and foreign governments. Other departments and agencies often call upon USACE's engineering and contracting expertise, as well as experience with land and water restoration and research and development. USACE contracts with private firms to perform most of the work. According to the Chief of Engineers in March 2019 testimony, USACE only accepts requests for reimbursable work that are deemed consistent with USACE's core technical expertise, are in the national interest, and that can be executed without impacting USACE's primary military and civil works missions. An example of reimbursable work include USACE's execution of contracts for EPA's efforts to remediate contaminated sites. Another example is USACE's contract management for border barrier and road construction at the U.S.-Mexico border for the Department of Homeland Security's Customs and Border Protection. USACE may perform this reimbursable work pursuant to broad authorities (e.g., Economy in Government Act, 31 U.S.C. §1535; Intergovernmental Cooperation Act, 31 U.S.C. §6505) or agency-specific authorities (e.g., 10 U.S.C §3036(e) known as the Chief's Economy Act). Appendix A. Evolution of USACE Civil Works Responsibilities The civil responsibilities of the U.S. Army Corps of Engineers (USACE) began with creating and regulating navigable channels and later flood control projects. Navigation projects include river deepening, channel widening, lock expansion, dam operations, and disposal of dredged material. Flood control projects are intended to reduce riverine and coastal storm damage; these projects range from levees and floodwalls to dams and river channelization. Many USACE projects are multipurpose—that is, they provide water supply, recreation, and hydropower in addition to navigation or flood control. USACE environmental activities involve wetlands and aquatic ecosystem restoration and environmental mitigation activities for USACE facilities. The agency's regulatory responsibility for navigable waters extends to issuing permits for private actions that might affect navigation, wetlands, and other waters of the United States. Navigation and Flood Control (1802-1950s) The agency's civil works mission developed in the 19 th century. In 1824, Congress passed legislation charging military engineers with planning roads and canals to move goods and people. In 1850, Congress directed USACE to engage in its first planning exercise—flood control for the lower Mississippi River. In 1899, Congress directed the agency to regulate obstructions of navigable waters (see box titled \"USACE Regulatory Activities: Permits and Their Authorities). During the 1920s, Congress expanded USACE's ability to incorporate hydropower into multipurpose projects and authorized the agency to undertake comprehensive surveys to establish river-basin development plans. The Flood Control Act of 1928 (70 Stat. 391) authorized USACE to construct flood control projects on the Mississippi and Tributaries (known as the MR&T project), and modified a 1917 authority for flood control project on the Sacramento River in California. The modern era of federal flood control emerged with the Flood Control Act of 1936 (49 Stat. 1570), which declared flood control a \"proper\" federal activity in the national interest. The 1944 Flood Control Act (33 U.S.C. §708) significantly augmented the agency's involvement in large multipurpose projects and authorized agreements for the temporary use of surplus water. The Flood Control Act of 1950 (33 U.S.C. §701n) began the agency's emergency operations through authorization for flood preparedness and emergency operations. The Water Supply Act of 1958 (43 U.S.C. §390b) gave USACE authority to include some reservoir storage for municipal and industrial water supply in reservoir projects at 100% nonfederal cost. Changing Priorities (1960-1985) From 1970 to 1985, Congress authorized no major water projects, scaled back several authorized projects, and passed laws that altered project operations and water delivery programs to protect the environment. The 1970s marked a transformation in USACE project planning. The 1969 National Environmental Policy Act (42 U.S.C. §4321) and the Endangered Species Act of 1973 (16 U.S.C. §1531) required federal agencies to consider environmental impacts, increase public participation in planning, and consult with other federal agencies. Enactment in 1972 of what became the Clean Water Act also expanded the USACE's regulatory responsibilities; for more on the USACE role in implementing Section 404 of the Clean Water Act (33 U.S.C. §1344), see the text box \"USACE Regulatory Activities: Permits and Their Authorities.\" Executive orders (E.O. 11988 and E.O. 11990) united the goals of reducing flood losses and decreasing environmental damage by recognizing the value of wetlands and by requiring federal agencies to evaluate potential effects of actions on floodplains and to minimize wetlands impacts. Various dam failures and safety concerns in the United States—Buffalo Creek Dam (private), West Virginia in 1972; Reclamation's Teton Dam (Bureau of Reclamation), Idaho in 1976; and Kelly Barnes Dam (private), Georgia in 1977; among others—drew public and elected officials' attention. Much of the current federal dam safety framework developed out of executive orders and policies in the late 1970s and legislation in the 1980s. These include the USACE's lead role in the National Inventory of Dams; for more information, see the text box \"National Inventory of Dams.\" Environmental Mission and Nonfederal Responsibility (1986-2000) Congress changed the rules for USACE water projects and their funding through the 1986 Water Resources Development Act (WRDA 1986; 33 U.S.C. §2211). WRDA 1986 established new cost-share formulas, resulting in greater financial and decision-making roles for nonfederal stakeholders. It also reestablished the tradition of biennial consideration of an omnibus USACE water resource authorization bill. WRDA 1990 (33 U.S.C. §§1252, 2316) explicitly expanded the agency's mission to include environmental protection and increased its responsibility for contamination cleanup, dredged material disposal, and hazardous waste management. WRDA 1992 (33 U.S.C. §2326) authorized USACE to use the \"spoils\" from dredging in implementing projects for protecting, restoring, and creating aquatic and ecologically related habitats, including wetlands. WRDA 1996 (33 U.S.C. §2330) gave USACE limited programmatic authority to undertake aquatic ecosystem restoration projects. Although USACE has been involved with numerous environmental restoration projects in recent years, WRDA 2000 approved a restoration program for the Florida Everglades that represented the agency's first multiyear, multibillion-dollar effort of this type. Evolving Demands and Processes (2001-present) The agency's aging infrastructure and efforts to enhance the security of its infrastructure from terrorism and natural threats have expanded USACE activities in infrastructure rehabilitation, maintenance, and protection. USACE has been involved in significant flood-related disaster response and recovery activities, including following Hurricane Katrina in 2005, Hurricane Sandy in 2012, and the 2017 hurricane season. WRDA 2007 included provision to expand levee safety efforts. USACE also has redirected its flood control activities to incorporate concepts of flood risk management and, more recently, flood resilience. The regularity with which USACE has received congressional appropriations for natural disaster response has increased attention to its role in emergency response, infrastructure repair, and post-disaster recovery and to the potential for nature-based flood risk reduction measures. WRDA 2007 continued the expansion of the agency's ecosystem restoration activities by authorizing billions of dollars for these activities, including large-scale restoration efforts in coastal Louisiana and the Upper Mississippi River. WRRDA 2014, WRDA 2016, and WRDA 2018 have expanded opportunities for nonfederal public and private participation in project delivery and financing and aimed to improve the efficiency of USACE planning activities. Appendix B. Water Resources Development Acts from 1986 through 2018 This appendix provides an overview of omnibus U.S. Army Corps of Engineers (USACE) authorization legislation from 1986 to 2016. It first presents a table with the various pieces of legislation that functioned as USACE omnibus authorization bills and identifies the titles relevant to USACE. The appendix next provides supplementary information to what was provided in \" USACE Authorization Legislation: 1986 to Present Process \" regarding the evolution of the bills and the contents of specific bills. Overview Table Table B-1 provides additional information on each of the bills that functioned as an omnibus USACE authorization bill often titled as a Water Resource Development Act (WRDA) since 1986. The table includes the following bills. WRDA 1986 ( P.L. 99-662 ) WRDA 1988 ( P.L. 100-676 ) WRDA 1990 ( P.L. 101-640 ) WRDA 1992 ( P.L. 102-580 ) WRDA 1996 ( P.L. 104-303 ) WRDA 1999 ( P.L. 106-53 ) WRDA 2000 ( P.L. 106-541 ) WRDA 2007 ( P.L. 110-114 ) Water Resources Reform and Development Act of 2014 (WRRDA 2014; P.L. 113-121 ) Water Infrastructure Improvements for the Nation Act (WIIN; P.L. 114-322 ) America's Water Infrastructure Act of 2018 (AWIA 2018, P.L. 115-270 ) The table lists the titles used in the bills and the agency or department related to the majority of the provisions in each of those titles. The titles are shown in the table as being primarily associated with either USACE civil works or primarily associated with programs and activities of agencies or departments other than USACE (with the relevant agency or department shown in parentheses). The placement in one of the two columns of the table is a broad sorting and does not reflect the details of each provision within a title. For titles listed as primarily USACE, a few provisions in a title may relate principally to other agencies or departments while the bulk of the title is USACE related, and vice versa for titles listed as not primarily associated with USACE. Titles related to revenue and trust funds that are closely associated with USACE projects and USACE appropriations are shown in the table as USACE titles. As appropriate, clarifying notes are provided in the final column. As shown in Table B-1 , USACE was the focus of the majority of titles for all of the bills except WIIN and AWIA 2018. For two of the bills—WRDA 1992 and WRRDA 2014—there were titles for which the majority of the provisions were related to the U.S. Environmental Protection Agency (EPA) while also being related to USACE activities. For example, Title V of WRRDA 2014 included authorizations that included both EPA and USACE, authorities only related to EPA, and an authority only related to USACE. WRDA 1992 had a title with provisions that related most closely to EPA's role in sediment management; USACE, however, has a role in sediment management more broadly as well as being mentioned in a few of the provisions of Title V of WRDA 1992. In contrast, WIIN included titles on water-related programs and projects spanning various agencies and departments other than USACE. Title I of the bill—which had a short title designated as WRDA 2016—focused specifically on USACE water resource authorizations, while Titles II, III, and IV focused primarily on other agencies; many of the specific provisions in these titles had no or little relationship to USACE. 1986 Through WRDA 2007 WRDA 1986 marked the end of a stalemate between Congress and the executive branch regarding USACE authorizations. It resolved long-standing disputes related to cost sharing, user fees, and environmental requirements. Prior to 1986, disputes over these and other matters had largely prevented enactment of major USACE civil works legislation since 1970. Biennial consideration of USACE authorization legislation resumed after WRDA 1986 in part to avoid long delays between the planning and execution of projects. Interest in authorizing new projects, increasing authorized funding levels, and modifying existing projects is often intense, thus prompting regular WRDA consideration. WRDA enactment was less consistent for a period. Controversial project authorizations and disagreements over the need for and direction of change in how USACE plans, constructs, and operates projects contributed to WRDA bills not being enacted in the 107 th , 108 th , and 109 th Congresses. The 110 th Congress enacted WRDA 2007 in November 2007, overriding a presidential veto. 2007 Through 2018 No WRDA bill was enacted between WRDA 2007 and WRRDA 2014. With WRDA 2016, Congress returned enactment of USACE authorization legislation to a biennial time frame. WRRDA 2014 and WRDA 2016 attempted to address frustrations among some stakeholders with the pace of study and construction of USACE projects by allowing interested nonfederal entities, including private entities, to have greater roles in project development, construction, and financing. WRRDA 2014, which was enacted on June 10, 2014, authorized 34 construction projects that had received agency review, had Chief of Engineers reports (also known as Chief's re ports ), and had been the subject of a congressional hearing, thereby overcoming concerns related to congressionally directed spending (known as earmarks ). These 34 construction projects represented $15.6 billion in federal authorization of appropriations. WRRDA 2014 also altered processes and authorizations for project delivery options, including expanded opportunities for nonfederal entities to lead projects and for innovative financing, such as public-private partnerships. WRDA 2016 authorized new USACE water resource studies (which were among those studies identified in the Section 7001 annual reports submitted in February 2015 and February 2016) and projects, as well as modifications to ongoing construction projects. Each of the construction authorizations for new projects had a Chief's report. WRDA 2016 authorized 30 new construction projects at a federal cost of more than $10 billion. Various USACE provisions in WRDA 2016 related to how nonfederal sponsors may participate in the financing of water infrastructure activities. For more on WRDA 2016 and the other titles of WIIN, see CRS In Focus IF10536, Water Infrastructure Improvements for the Nation Act (WIIN) , by Nicole T. Carter et al. The 115 th Congress enacted America's Water Infrastructure Act of 2018 (AWIA 2018, P.L. 115-270 ) in October 2018. AWIA 2018 included the Water Resources Development Act of 2018 (WRDA 2018) as Title I of the bill. WRDA 2018 focused on USACE activities and dam and levee safety programs (that also relate to authorities of the Federal Emergency Management Agency). Other titles of AWIA 2018 addressed EPA water programs, Department of the Interior water authorities, water and related infrastructure authorities related to tribes, and hydropower (including authorities of the Federal Energy Regulatory Commission). Regarding USACE project authorizations, WRDA 2018 authorized 12 new construction projects at a total cost of $5.6 billion ($3.7 billion federal and $1.9 billion nonfederal); modified 4 projects, increasing the projects' authorization of appropriations by approximately $1.3 billion ($1.1 billion federal and $0.2 billion nonfederal); and authorized project studies. WRDA 2018 expanded most of the agency's programmatic authorization of appropriations levels by 25%. WRDA 2018 also amended existing deauthorization efforts and authorities and established a process to deauthorize $4 billion in construction projects previously authorized by Congress that have not been constructed. In addition, WRDA 2018 included provisions requiring various reports from USACE and reports by the National Academy of Sciences.", "summary": "At the direction of Congress, the U.S. Army Corps of Engineers (USACE) in the Department of Defense (DOD) undertakes water resource development activities. USACE develops civil works projects principally to improve navigable channels, reduce flood and storm damage, and restore aquatic ecosystems. Congress directs USACE through authorizations and appropriations legislation. Congress often considers USACE authorization legislation biennially and appropriations annually. USACE attracts congressional attention because its projects can have significant local and regional economic benefits and environmental effects. This report summarizes authorization legislation, project delivery, authorities for alternative project delivery, and other USACE authorities. Authorization Legislation. For USACE studies and projects, congressional study and project authorization generally is required prior to being eligible for federal appropriations. Congress generally considers an omnibus USACE authorization bill biennially. The bill is typically titled a Water Resources Development Act (WRDA). Agency action on an authorization typically requires funding; that is, both an authorization and an appropriation would be needed to proceed. Most water resource project authorizations in WRDAs fall into three general categories: project studies, construction projects, and modifications to existing projects. A few provisions in WRDA bills have time-limited authorizations; therefore, some WRDA provisions may reauthorize expired or expiring authorities. Recent authorization bills include: America's Water Infrastructure Act of 2018 (AWIA 2018; P.L. 115-270), which included Title I, Water Resources Development Act of 2018 (WRDA 2018) which focused on USACE civil works; Water Infrastructure Improvements for the Nation Act (WIIN; P.L. 114-322), which included Title I ,Water Resources Development Act of 2016 (WRDA 2016) which focused on USACE civil works; and Water Resources Reform and Development Act of 2014 (WRRDA 2014; P.L. 113-121), which was largely, but not wholly, focused on USACE civil works. In WRRDA 2014, Congress developed processes for identifying site-specific studies and projects for authorization to overcome concerns related to congressionally directed spending (known as earmarks). Congress also used these processes for WRDA 2016 and WRDA 2018. Standard and Alternative Project Delivery. The standard process for a USACE project requires two separate congressional authorizations—one for studying feasibility, and a subsequent one for construction—as well as appropriations for both. In recent years, congressional authorization for project construction has been based on a favorable report by the Chief of Engineers (a Chief's report) and an accompanying feasibility report. For most activities, Congress requires a nonfederal sponsor to share some portion of study and construction costs. For some project types (e.g., local flood control), nonfederal sponsors are responsible for operation and maintenance. WRRDA 2014, WRDA 2016, and WRDA 2018 expanded the opportunities for interested nonfederal entities, including private entities, to have greater roles in project development, construction, and financing. WRRDA 2014 also authorized, through the Water Infrastructure Finance and Innovation Act (WIFIA), a program to provide direct loans and loan guarantees for water projects. Although the WIFIA program administered by the U.S. Environmental Protection Agency is operational, the USACE WIFIA program for navigation, flood risk reduction, and ecosystem restoration projects has not been implemented. Other USACE Activities and Authorities. Congress has granted USACE general authorities to undertake some activities without requiring additional congressional authorization, including emergency actions related to flooding and limited actions in response to drought. Additionally, under the National Response Framework, USACE may be tasked with performing activities in response to an emergency or disaster, principally associated with public works and engineering such as providing temporary roofing and emergency power restoration. In addition to its work for the Department of the Army under USACE's military program, USACE under various authorities also may perform work on a reimbursable basis for other DOD entities, federal agencies, state and local governments, and foreign governments (e.g., USACE manages the construction of multiple border barrier projects on a reimbursable basis for Customs and Border Protection).", "document_type": "crs"}
{"report": "The minority leader of the modern House is the head of the \"loyal opposition.\" As the minority party's nominee for Speaker at the start of a new Congress, the minority leader traditionally hands the gavel to the Speaker-elect, who is usually elected on a straight party-line vote. The speakership election illustrates the main problem that confronts the minority leader: the subordinate status of the minority party in an institution noted for majority rule. As David Bonior, D-MI, explained: \"This body, unlike the other, operates under the principle that a determined majority should be allowed to work its will while protecting the rights of the minority to be heard.\" Minority party lawmakers are certain to be heard, but whether they will be heeded is sometimes another matter. Thus, the uppermost goal of any minority leader is to recapture majority control of the House. The minority leader is elected every two years by secret ballot of his or her party caucus or conference. These party leaders are typically experienced lawmakers when they win election to this position. The current minority leader, Kevin McCarthy, R-CA, served 12 years in the House, including as majority leader, prior to assuming his current role (a position he also held during his time in the California state assembly). Speaker Nancy Pelosi, D-CA, served in the House for 16 years when she first became minority leader in the 108 th Congress (2003-2004). Following her first tenure as Speaker from 2007 to 2010, Pelosi was again elected minority leader in the 112 th Congress (2011-2012), at which point she was a 24-year veteran of the House. When her predecessor, John Boehner, R-OH, was elected minority leader in the 110 th Congress (2007-2008), he had served in the House for 18 years including as majority leader, committee chair (Education and the Workforce), and, prior to that, chair of the Republican Conference. Richard Gephardt, D-MO, began his tenure as minority leader in the 104 th Congress (1995-1996) as an 18-year House veteran and a former majority leader and chair of the Democratic Caucus. Gephardt's predecessor, Robert Michel, R-IL, became minority leader in 1981 after 24 years in the House. Much like his successors, John Rhodes, R-AZ, had served in the House for 20 years when he was elected minority leader in 1973. While the position itself is usually occupied by Members with significant House experience, the roles and responsibilities of the minority leader are not well-defined. To a large extent, the duties of the minority leader are based on tradition and custom. Representative Bertrand Snell, R-NY, minority leader from 1931 to 1938, described the position in the following way: He is spokesman for his party and enunciates its policies. He is required to be alert and vigilant in defense of the minority's rights. It is his function and duty to criticize constructively the policies and programs of the majority, and to this end employ parliamentary tactics and give close attention to all proposed legislation. Since Snell's description, other responsibilities have been added to the job. Broadly speaking, the role of the minority leader in the contemporary Congress is twofold: to serve as the leader and spokesperson for the minority party, and to participate in certain institutional prerogatives afforded to Members in the minority. How the minority leader handles these responsibilities is likely to depend on a variety of elements, including personality and contextual factors; the size and cohesion of the minority party; whether or not the party controls the White House; the general political climate both inside and outside the House; and expectations of the party's performance in upcoming elections. The next section of the report discusses the historical origin of this position, and the sections that follow take account of the various party and institutional responsibilities of the minority leader. To a large extent, the position of minority leader is a late-19 th -century innovation. Prior to this time congressional parties were often relatively disorganized, so it was not always evident who functioned as the opposition floor leader. Decades went by before anything like our modern two-party congressional system emerged on Capitol Hill with official titles for those who were selected as party leaders. However, from the beginning days of Congress, various House Members intermittently assumed the role of \"opposition leader.\" Some scholars suggest that Representative James Madison of Virginia informally functioned as the first \"minority leader\" because in the First Congress he led the opposition to Treasury Secretary Alexander Hamilton's fiscal policies. During this early period, it was common for neither major party grouping (Federalists and Republicans) to have an official leader. In 1813, for instance, a scholar recounts that the Federalist minority of 36 Members needed a committee of 13 \"to represent a party comprising a distinct minority\" and \"to coordinate the actions of men who were already partisans in the same cause.\" In 1828, a foreign observer of the House offered this perspective on the absence of formal party leadership on Capitol Hill: I found there were absolutely no persons holding the stations of what are called, in England, Leaders, on either side of the House.... It is true, that certain members do take charge of administration questions, and certain others of opposition questions; but all this so obviously without concert among themselves, actual or tacit, that nothing can be conceived less systematic or more completely desultory, disjointed. Internal party disunity compounded the difficulty of identifying lawmakers who might have informally functioned as a minority leader. For instance, \"seven of the fourteen speakership elections from 1834 through 1859 had at least twenty different candidates in the field. Thirty-six competed in 1839, ninety-seven in 1849, ninety-one in 1859, and 138 in 1855.\" With so many candidates competing for the speakership, it is not at all clear that one of the defeated lawmakers then assumed the mantle of \"minority leader.\" The Democratic minority from 1861 to 1875 was so completely disorganized that they did not \"nominate a candidate for Speaker in two of these seven Congresses and nominated no man more than once in the other five. The defeated candidates were not automatically looked to for leadership.\" In the judgment of one congressional scholar, since 1883 \"the candidate for Speaker nominated by the minority party has clearly been the Minority Leader.\" However, this assertion is subject to dispute. On December 3, 1883, the House elected Democrat John G. Carlisle of Kentucky as Speaker. Republicans nominated J. Warren Keifer of Ohio, who was Speaker the previous Congress. But Keifer was viewed by his colleagues as a discredited leader in part because as Speaker he arbitrarily handed out \"choice jobs to close relatives ... all at handsome salaries.\" Keifer received \"the empty honor of the minority nomination. But with it came a sting—for while this naturally involves the floor leadership, he was deserted by his [party] associates and his career as a national figure terminated ingloriously.\" Representative Thomas Reed, R-ME, who later became Speaker, assumed the de facto role of minority floor leader in Keifer's stead. \"[A]lthough Keifer was the minority's candidate for Speaker, Reed became its acknowledged leader, and ever after, so long as he served in the House, remained the most conspicuous member of his party.\" Although congressional historians disagree as to the exact time period when the minority leadership emerged officially as a party position, it seems safe to conclude that the position was established during the latter part of the 19 th century. This era was \"marked by strong partisan attachments, resilient patronage-based party organizations, and ... high levels of party voting in Congress.\" These conditions were conducive to the establishment of a more highly differentiated House leadership structure in which Members assumed more specialized roles within the institution. (See the Appendix for a list of House minority leaders selected since 1899.) One other historical point merits brief mention. Until the 61 st Congress (1909-1910), \"it was the custom to have the minority leader also serve as the ranking minority member on the two most powerful committees, Rules and Ways and Means.\" Today, the minority leader no longer serves on these committees but does chair the Republican Steering Committee, a party leadership committee responsible for making recommendations to the Conference regarding the committee assignments of House Republicans. The minority leader has a number of formal and informal party responsibilities. Formally, the rules of each party specify certain roles and responsibilities for their leader. For example, under Republican Conference rules for the 116 th Congress (2019-2020), the minority leader nominates party members to the Committees on Rules and House Administration, subject to Conference approval. Republican Conference rules also authorize the minority leader to appoint a \"Leadership Member\" to the Committee on the Budget who \"will serve as the second highest-ranking Republican on the committee,\" and to \"recommend to the House all Republican Members of such joint, select, and ad hoc committees as shall be created by the House, in accordance with law.\" Beyond their formal responsibilities, minority leaders are expected to handle a wide range of informal party assignments. Lewis Deschler, a former House Parliamentarian (1928-1974), summarized the diverse duties of a party's floor leader: A party's floor leader, in conjunction with other party leaders, plays an influential role in the formulation of party policy and programs. He is instrumental in guiding legislation favored by his party through the House, or in resisting those programs of the other party that are considered undesirable by his own party. He is instrumental in devising and implementing his party's strategy on the floor with respect to promoting or opposing legislation. He is kept constantly informed as to the status of legislative business and as to the sentiment of his party respecting particular legislation under consideration. Such information is derived in part from the floor leader's contacts with his party's members serving on House committees, and with the members of the party's whip organization. These and several other party roles merit further discussion because they influence significantly the minority leader's overarching objective: to retake majority control of the House. \"I want to get [my] members elected and win more seats,\" said former Minority Leader Richard Gephardt, D-MO. \"That's what [my party colleagues] want to do, and that's what they want me to do.\" Five activities illustrate how minority leaders seek to accomplish this primary goal. Minority leaders are typically energetic and aggressive campaigners for party incumbents and challengers. For example, they assist in recruiting qualified and competitive candidates; they establish \"leadership PACs\" to raise and distribute funds to House candidates of their party; they encourage party colleagues not to retire or run for other offices so as to limit the number of open seats the party would need to defend; they coordinate their campaign activities with congressional and national party campaign committees; they encourage outside groups to back their candidates; they travel around the country to speak on behalf of party candidates; and they encourage incumbent colleagues to make significant financial contributions to the party's campaign committee. In the weeks leading up to the 2018 congressional elections, for instance, Minority Leader Pelosi was actively campaigning for Democratic incumbents and challengers: With 21 days until the midterm elections, the California Democrat and House minority leader is crisscrossing the country fundraising and rallying the Democratic troops—and plotting her return to the speakership.... In the third quarter [of 2018], Pelosi will report raising $34.2 million for Democrats, including $30.5 million for the DCCC [Democratic Congressional Campaign Committee]. She is by far the biggest source of cash for House Democrats and House Democratic candidates. The minority leader, in consultation with other party colleagues, has a range of strategic options that can be employed to advance minority party objectives. The options selected depend on a wide range of circumstances, such as the visibility or significance of the issue and the relative degree of cohesion within the majority and minority parties. For instance, a majority party riven by internal dissension—as occurred during the early 1900s when \"progressive\" and \"regular\" Republicans were at loggerheads, or beginning in the late 1930s when a \"conservative coalition\" of Southern Democrats and like-minded Republicans emerged—may provide the minority leader with greater opportunities to achieve party priorities than if the majority party exhibited high degrees of party cohesion (and could simply outvote the minority). Among the variable strategies available to the minority party, which can vary from bill to bill and be used in combination or at different stages of the lawmaking process, are the following: Cooperation . The minority party supports and cooperates with the majority party in building winning coalitions on the floor. Inconsequential Opposition . The minority party offers opposition, but it is of marginal significance, typically because the minority is so small. Withdrawal . The minority party chooses not to take a position on an issue, perhaps because of intraparty divisions or to spotlight divisions within the majority party. Innovation . The minority party develops alternatives and agendas of its own and attempts to construct winning coalitions on their behalf. Partisan Opposition . The minority party offers strong opposition to majority party initiatives, but does not counter with policy alternatives of their own. Participation . The minority party is in the position of having to consider the views and proposals of a same-party President and to assess their majority-building role with respect to the President's priorities. A look at one minority leadership strategy—partisan opposition—may suggest why it might be employed in specific circumstances. The purposes of obstruction are several, such as frustrating the majority party's ability to govern or attracting media attention to the alleged ineffectiveness of the majority party. \"We know how to delay,\" remarked Minority Leader Gephardt. Dilatory motions to adjourn, appeals of the presiding officer's ruling, or numerous requests for roll call votes, including on noncontroversial items like approving the House Jou rnal , are standard time-consuming parliamentary tactics. By stalling action on the majority party's agenda, the minority leader may be able to launch a campaign against a \"do-nothing Congress\" and convince enough voters to elevate the party to the House majority. To be sure, the minority leader recognizes that outright opposition carries risks. As a congressional scholar explains, \"A program of consistent opposition to majority party proposals and a refusal to engage in compromise, while electorally valuable, means forsaking policy gains that may otherwise have been achieved.\" Another important aim of the minority leader is to develop an electorally attractive agenda of ideas and proposals that unites party members and appeals to core electoral supporters as well as independents and swing voters. Despite the minority leader's limited ability to set the House's agenda, there are still opportunities to raise minority priorities. For example, the minority leader may file discharge petitions in an effort to bring minority priorities to the floor. If the required 218 signatures on a discharge petition can be obtained—a number that demands at least some support from the majority—minority initiatives can be brought to the floor even despite opposition from the majority leadership or the committee(s) of jurisdiction (or both). As a GOP minority leader explained, the challenge here is to \"keep our people together, and to look for votes on the other side.\" Minority leaders may engage in a range of activities to publicize their party's priorities and to criticize those of the opposition. For instance, to keep their party colleagues \"on message,\" they ensure that their party colleagues are sent packets of suggested press releases or \"talking points\" for constituent meetings in their districts; they help to organize \"town hall meetings\" in Members' districts around the country to publicize the party's agenda or a specific priority, such as health care or tax reform; they sponsor party \"retreats\" to discuss issues and assess the party's public image; they create \"theme teams\" to craft party messages that might be conveyed during the one-minute, morning hour, or special order period in the House; they conduct surveys of party colleagues to discern their policy preferences; they establish websites and Twitter feeds to highlight party priorities; they organize task forces or issue teams to formulate party programs and to develop strategies for communicating these programs to the public; and they appear on various media programs or write newspaper articles to win public support for the party's agenda. House minority leaders also hold joint news conferences with party colleagues and consult with their counterparts in the Senate. The overall objectives are to develop a coordinated communications strategy, to share ideas and information, and to present a united front on issues. Minority leaders also make floor speeches and may close debate for their side on major issues before the House. They must also be prepared \"to debate on the floor, ad lib , no notes, on a moment's notice,\" remarked Minority Leader Michel. In brief, minority leaders are key strategists in developing and promoting the party's agenda and in outlining ways to respond to the opposition's arguments and proposals. A \"Dear Colleague\" letter delivered to House Democratic offices ahead of the August 2018 recess illustrates the point. In the letter, Minority Leader Pelosi outlined the party's agenda and provided this guidance to her Democratic colleagues: A key part of our For The People agenda is to clean up corruption to make Washington work for the American people.... To honor the pledge of our For The People agenda, a Democratic majority will swiftly act to pass tougher ethics and campaign finance laws and crack down on the conduct that has poisoned the GOP Congress and the Trump Administration.... In district events and on social media, we must drive home the clear contrast between the corruption of the GOP Congress and the better deal that Democrats are offering the American people. We will own August with strength, confidence and clarity, as we make our case to the American people. If his or her party controls the White House, the minority leader confers regularly with the President and his aides about issues before Congress, the Administration's agenda, and political events generally. Strategically, the role of the minority leader will vary depending on whether the President is of the same party or the other party. In general, minority leaders will work to advance the goals and aspirations of their party's President in Congress. When Robert Michel, R-IL, was minority leader (1981-1994), he typically functioned as the \"point man\" for Republican Presidents. President Ronald Reagan's 1981 policy successes in the Democratic-controlled House were due in no small measure to Minority Leader Michel's effectiveness in wooing so-called \"Reagan Democrats\" to support, for instance, the Administration's landmark budget reconciliation bill. There are occasions, of course, when minority leaders will fault the legislative initiatives of their President. On an Administration proposal that could adversely affect his district, Michel stated that he might \"abdicate my leadership role [on this issue] since I can't harmonize my own views with the administration's.\" Minority Leader Gephardt publicly opposed a number of President Clinton's legislative initiatives, from \"fast track\" trade authority to various budget issues, and Minority Leader Pelosi came out against a multilateral trade agreement with Asian-Pacific countries negotiated by the Obama White House. When the President and House majority are of the same party, then the House minority leader assumes a larger role in formulating alternatives to executive branch initiatives and in acting as a national spokesperson for his or her party. \"As Minority Leader during [President Lyndon Johnson's] Democratic administration, my responsibility has been to propose Republican alternatives,\" said Minority Leader Gerald Ford, R-MI. Greatly outnumbered in the House, Minority Leader Ford devised a political strategy that allowed Republicans to offer their alternatives in a manner that provided them political protection. As Ford explained, We used a technique of laying our program out in general debate. When we got to the amendment phase, we would offer our program as a substitute for the Johnson proposal. If we lost in the Committee of the Whole, then we would usually offer it as a motion to recommit and get a vote on that. And if we lost on the motion to recommit, our Republican members had a choice: They could vote against the Johnson program and say we did our best to come up with a better alternative. Or they could vote for it and make the same argument. Usually we lost; but when you're only 140 out of 435, you don't expect to win many. Ford also teamed with Senate Minority Leader Everett McKinley Dirksen, R-IL, to act as national spokesmen for their party. They held a press conference every Thursday following the weekly joint leadership meeting, a tradition that began with Ford's predecessor as minority leader, Charles Halleck, R-IN. When Minority Leaders Dirksen and Halleck appeared together they were dubbed the \"Ev and Charlie Show\" by the press, and the \"Republican National Committee budgeted $30,000 annually to produce the weekly news conference.\" Minority status, by itself, is often an important inducement for minority party members to stay together, to accommodate different interests, and to submerge intraparty factional disagreements. To hold a diverse membership together often requires extensive consultations and discussions with rank-and-file Members and with different factional groupings. As Minority Leader Gephardt said, We have weekly caucus meetings. We have daily leadership meetings. We have weekly ranking Member meetings. We have party effectiveness meetings. There's a lot more communication. I believe leadership is bottom up, not top down. I think you have to build policy and strategy and vision from the bottom up, and involve people in figuring out what that is. Gephardt added that \"inclusion and empowerment of the people on the line have to be done to get the best performance\" from the minority party. Other techniques for fostering party harmony include the appointment of task forces composed of party colleagues with conflicting views to reach consensus on issues; daily meetings in the l eader's office (or at breakfast, lunch, or dinner) to lay out floor strategy or political objectives for the minority party; periodic retreats to allow party members to discuss issues and interact with one another outside the confines of Capitol Hill; and the creation of new leadership positions as a way to reach out and involve a greater diversity of party members in the leadership structure. Beyond the party responsibilities of the minority leader are a number of institutional obligations associated with their position as a top House official. Many of these assignments or roles are spelled out in the standing rules of the House, while others have devolved upon the position in other ways. To be sure, the minority leader is provided with extra staff resources—beyond those accorded him or her as a Representative—to assist in carrying out diverse leadership functions. There are limits on the institutional role of the minority leader, because the majority party exercises disproportionate influence over the legislative agenda, partisan ratios on committees, staff resources, administrative operations, and the day-to-day schedule and management of floor activities. Under the rules of the House, the minority leader has certain roles and responsibilities. They include, among others, the following: Under Rule XIII, clause 6(c), the Rules Committee may not issue a \"rule\" that prevents the minority leader or a designee from offering a motion to recommit with instructions during initial House consideration of a bill or joint resolution. This motion allows the minority leader (or a designee) to offer a policy alternative to what the majority is proposing and obtain a floor vote on the minority's preferred solution. Under Rule IX, clause 2, a resolution \"offered as a question of privilege by the Majority Leader or the Minority Leader ... shall have precedence of all other questions except motions to adjourn.\" This rule further references the minority leader with respect to the division of time for debate of these resolutions. If offered by the majority or minority leader, a valid question of privilege—one that involves \"the rights of the House collectively, its safety, dignity and the integrity of its proceedings\"—receives immediate consideration by the House. Rule II, clause 6, states that the \"Inspector General shall be appointed for a Congress by the Speaker, the Majority Leader, and the Minority Leader, acting jointly.\" This rule further states that the minority leader and other specified House leaders shall be notified of any financial irregularity involving the House and receive audit reports of the inspector general. Under Rule X, clause 2, not later \"than March 31 in the first session of a Congress, after consultation with the Speaker, the Majority Leader, and the Minority Leader, the Committee on Oversight and Government Reform shall report to the House the authorization and oversight plans\" of the standing committees along with any recommendations it or the House leaders have proposed to ensure the effective coordination of committees' oversight plans. Rule X, clause 5, stipulates, \"At the beginning of a Congress, the Speaker or a designee and the Minority Leader or a designee each shall name 10 Members, Delegates, or the Resident Commissioner from the respective party of such individual who are not members of the Committee on Ethics to be available to serve on investigative subcommittees of that committee during that Congress.\" Another institutional prerogative of the minority leader is attendance at meetings of the Intelligence Committee. Rule X, clause 11, provides, \"The Speaker and the Minority Leader shall be ex officio members of the select committee but shall have no vote in the select committee and may not be counted for purposes of determining a quorum thereof.\" In addition, each leader \"may designate a respective leadership staff member to assist in the capacity of the Speaker or Minority Leader as ex officio member.\" In addition, the minority leader has a number of other institutional functions. For instance, the minority leader is sometimes statutorily authorized to appoint individuals to certain federal entities. The minority leader also selects three Members to serve as Private Calendar objectors—the majority leader names the other three—and serves on various commissions and groups, including the House Office Building Commission, the United States Capitol Preservation Commission, and the Bipartisan Legal Advisory Group. After consultation with the Speaker the minority leader may convene an early organizational party caucus or conference. Informally, the minority leader maintains ties with majority party leaders to learn about the schedule and other House matters, consults with the majority with respect to reconvening the House per the usual formulation of conditional concurrent adjournment resolutions, and forges agreements or understandings with them insofar as feasible. By House tradition, time is not charged to their side when party leaders, including the minority leader, make extended remarks on the floor. Given the concentration of agenda control and other institutional resources in the majority leadership, the minority leader faces real challenges in promoting and publicizing the party's priorities, serving the interests of his rank-and-file Members, managing intraparty conflict, and forging party unity. The ultimate goal of the minority leader is to lead the party into majority status. Yet there is no set formula on how this is to be done. \"If the history of elections is any guide,\" wrote a congressional scholar, \"it seems apparent that the congressional record of the minority party is only one of many factors that may result in majority status. Most of the other factors cannot be controlled by the minority party and its leaders .\" There is one central dilemma that confronts the minority leader: inferior numbers. This limitation can be overcome on occasion with the right strategic approach, but on many issues this might not be possible. One study of the House minority party summarizes the strategic challenge succinctly: The minority party in the House faces a strategic problem: how do you respond when given only a small slice of the legislative pie? Do you accept the slice you've been given, bargain for more, or use every means at your disposal to win the right to cut the pie yourself? It is this problem, and how the minority party chooses to solve it, that underlies the logic of minority party politics in the House of Representatives.", "summary": "The House minority leader, the head of the \"loyal opposition,\" is elected every two years by secret ballot of his or her party caucus or conference. The minority leader occupies a number of important institutional and party roles and responsibilities, and his or her fundamental goal is to recapture majority control of the House. From a party perspective, the minority leader has a wide range of assignments, all geared toward retaking majority control of the House. Five principal party activities direct the work of the minority leader. First, he or she provides campaign assistance to party incumbents and challengers. Second, the minority leader devises strategies, in consultation with like-minded colleagues, to advance party objectives. Third, the minority leader works to promote and publicize the party's agenda. Fourth, the minority leader, if his or her party controls the White House, confers regularly with the President and his aides about issues before Congress, the Administration's agenda, and political events generally. Fifth, the minority leader strives to promote party harmony so as to maximize the chances for legislative and political success. From an institutional perspective, the rules of the House assign a number of specific responsibilities to the minority leader. For example, Rule XIII, clause 6, grants the minority leader (or a designee) the right to offer a motion to recommit with instructions; and Rule II, clause 6, states that the Inspector General shall be appointed by joint recommendation of the Speaker, majority leader, and minority leader. The minority leader also has other institutional duties, such as appointing individuals to certain federal or congressional entities.", "document_type": "crs"}
{"report": "Strong relations between the United States and Israel have led to bilateral cooperation in many areas. Matters of particular significance include the following: Israel's own capabilities for addressing threats, and its cooperation with the United States. Shared U.S.-Israel concerns about Iran, within the context of the U.S. exit from the 2015 international nuclear agreement, and growing tension involving Iran and Hezbollah at Israel's northern border with Syria and Lebanon. Israeli-Palestinian issues, including those involving Jerusalem, Hamas and the Gaza Strip, funding for Palestinians, and a possible Trump Administration peace plan. Israeli domestic political issues, including probable corruption-related indictments against Prime Minister Binyamin Netanyahu and closely contested elections that are scheduled for April 9, 2019. For background information and analysis on these and other topics, including aid, arms sales, and missile defense cooperation, see CRS Report RL33476, Israel: Background and U.S. Relations , by Jim Zanotti; and CRS Report RL33222, U.S. Foreign Aid to Israel , by Jeremy M. Sharp. Israel relies on a number of strengths to manage potential threats to its security and existence. These strengths include robust military and homeland security capabilities, as well as close cooperation with the United States. Israel maintains conventional military superiority relative to its neighbors and the Palestinians. Shifts in regional order and evolving asymmetric threats during this decade have led Israel to update its efforts to project military strength, deter attack, and defend its population and borders. Israel appears to have reduced some unconventional threats via missile defense systems, reported cyber defense and warfare capabilities, and other heightened security measures. Israel has a robust homeland security system featuring sophisticated early warning practices and thorough border and airport security controls; most of the country's buildings have reinforced rooms or shelters engineered to withstand explosions. Israel also has proposed and partially constructed a national border fence network of steel barricades (accompanied at various points by watch towers, patrol roads, intelligence centers, and military brigades) designed to minimize militant infiltration, illegal immigration, and smuggling from Egypt, Syria, Lebanon, Jordan, and the Gaza Strip. Additionally, Israeli authorities have built a separation barrier in and around parts of the West Bank. Israel is not a party to the Nuclear Nonproliferation Treaty (NPT) and maintains a policy of \"nuclear opacity\" or amimut . A 2017 report estimated that Israel possesses a nuclear arsenal of around 80-85 warheads. The United States has countenanced Israel's nuclear ambiguity since 1969, when Israeli Prime Minister Golda Meir and U.S. President Richard Nixon reportedly reached an accord whereby both sides agreed never to acknowledge Israel's nuclear arsenal in public. Israel might have nuclear weapons deployable via aircraft, submarine, and ground-based missiles. No other Middle Eastern country is generally thought to possess nuclear weapons. Israeli officials closely consult with U.S. counterparts in an effort to influence U.S. decisionmaking on key regional issues, and U.S. law requires the executive branch to take certain actions to preserve Israel's \"qualitative military edge,\" or QME. Additionally, a 10-year bilateral military aid memorandum of understanding (MOU)—signed in 2016—commits the United States to provide Israel $3.3 billion in Foreign Military Financing and to spend $500 million annually on joint missile defense programs from FY2019 to FY2028, subject to congressional appropriations. Israel's leaders and supporters routinely make the case that Israel's security and the broader stability of the region remain critically important for U.S. interests. They also argue that Israel is a valuable U.S. ally. The United States and Israel do not have a mutual defense treaty or agreement that provides formal U.S. security guarantees. Iran remains of primary concern to Israeli officials largely because of (1) Iran's antipathy toward Israel, (2) Iran's broad regional influence, and (3) the probability that some constraints on Iran's nuclear program could loosen in the future. In recent years, Israel and Arab Gulf states have discreetly cultivated closer relations with one another in efforts to counter Iran. Prime Minister Netanyahu has sought to influence U.S. decisions on the international agreement on Iran's nuclear program (known as the Joint Comprehensive Plan of Action, or JCPOA). He argued against the JCPOA when it was negotiated in 2015—including in a speech to a joint session of Congress—and welcomed President Trump's May 2018 withdrawal of the United States from the JCPOA and accompanying reimposition of U.S. sanctions on Iran's core economic sectors. A few days before President Trump's May announcement, Netanyahu presented information that Israeli intelligence operatives apparently seized in early 2018 from an Iranian archive. He used the information to question Iran's credibility and highlight its potential to parlay existing know-how into nuclear-weapons breakthroughs after the JCPOA expires. In his September 2018 speech before the U.N. General Assembly, Netanyahu claimed that Iran maintains a secret \"atomic warehouse for storing massive amounts of equipment and materiel.\" An unnamed U.S. intelligence official was quoted as saying in response, \"so far as anyone knows, there is nothing in [the facility Netanyahu identified] that would allow Iran to break out of the JCPOA any faster than it otherwise could.\" After Netanyahu publicly exposed the Iranian nuclear archive, some former Israeli officials speculated about what action Israel might consider taking against Iranian nuclear facilities if Iran abrogates the JCPOA and expands nuclear activities currently restricted under the agreement. However, Netanyahu had said in an interview that he was not seeking a military confrontation with Iran. Israel and Iran have engaged in hostile action over Iran's presence in Syria. In the early years of the Syria conflict, Israel primarily employed air strikes to prevent Iranian weapons shipments destined for the Iran-backed group Hezbollah in Lebanon. Later, as the Syrian government regained control of large portions of the country with Iranian backing, Israeli leaders began pledging to prevent Iran from constructing and operating bases or advanced weapons manufacturing facilities in Syria. Since 2018, Israeli and Iranian forces have repeatedly targeted one another in and over Syrian- and Israeli-controlled areas. In January 2019, Prime Minister Netanyahu said that Israel had targeted Iranian and Hezbollah targets in Syria \"hundreds of times.\" Limited Israeli strikes to enforce \"redlines\" against Iran-backed forces could expand into wider conflict, particularly if there is a miscalculation by one or both sides. U.S. involvement in Syria could be one factor in Israeli calculations on this issue. The U.S. base at Al Tanf in southern Syria has reportedly \"served as a bulwark against Iran's efforts to create a land route for weapons from Iran to Lebanon.\" Israeli officials favor continued U.S. involvement in Syria, while also preparing for the possibility that they may need to take greater direct responsibility for countering Iran there. Russia's advanced air defense systems in Syria could make it more difficult for Israel to operate there. Since 2015, Russia has operated an S-400 system at Russia's Khmeimim air base in Lattakia, a city on Syria's Mediterranean coast. To date, however, Russia does not appear to have acted militarily to thwart Israeli air strikes against Iranian or Syrian targets, and Israel and Russia maintain communications aimed at deconflicting their operations. In addition to the S-400 that it owns and operates, Russia delivered an S-300 air defense system for Syria's military to Khmeimim airbase in October 2018. The delivery followed Syria's downing of a Russian military surveillance plane in September 2018 under disputed circumstances, shortly after an Israeli operation in the vicinity. According to an Israeli satellite imagery analysis company, three launchers appeared to be operational as of February 2019. It is unclear to what extent Russia has transferred the S-300 to Syrian military control, and how this might affect future Israeli military action in Syria. An Israeli journalist wrote that \"Israel has the knowledge, experience and equipment to evade the S-300, but the fact that additional batteries, manned by Russian personnel, are on the ground, will necessitate greater care [when carrying out future operations against Iran-aligned targets in Syria].\" Since the September 2018 incident, Israeli air strikes appear to have decreased somewhat. On March 25, 2019, President Trump signed a proclamation stating that the United States recognizes the Golan Heights (hereinafter, the Golan) to be part of the State of Israel. The proclamation stated that \"any possible future peace agreement in the region must account for Israel's need to protect itself from Syria and other regional threats\" —presumably including threats from Iran and the Iran-backed Lebanese group Hezbollah. Israel gained control of the Golan from Syria during the 1967 Arab-Israeli war, and effectively annexed it unilaterally by applying Israeli law to the region in 1981 (see Figure 2 ). President Trump's proclamation changed long-standing U.S. policy on the Golan. Since 1967, successive U.S. Administrations supported the general international stance that the Golan is Syrian territory occupied by Israel, with its final status subject to negotiation. In reaction to the U.S. proclamation, others in the international community have insisted that the Golan's status has not changed. In Congress, Senate and House bills introduced in February 2019 ( S. 567 and H.R. 1372 ) support Israeli sovereignty claims to the Golan, and would treat the Golan as part of Israel in any existing or future law \"relating to appropriations or foreign commerce.\" For decades after 1967, various Israeli leaders, reportedly including Prime Minister Netanyahu as late as 2011, had entered into indirect talks with Syria aimed at returning some portion of the Golan as part of a lasting peace agreement. However, the effect of civil war on Syria and the surrounding region, including an increase in Iran's presence, may have influenced Netanyahu to shift focus from negotiating with Syria on a \"land for peace\" basis to obtaining international support for Israel's claims of sovereignty. As part of the periodic conflict in Syria between Israel and Iran , some Iranian missiles have targeted Israeli positions in the Golan. The Syrian government has denounced the U.S. policy change as an illegal violation of Syrian sovereignty and territorial integrity, and insisted that Syria is determined to recover the Golan. Additionally, observers have argued that the policy change could unintentionally bolster Syrian President Bashar al Asad within Syria by rallying Syrian nationalistic sentiment in opposition to Israel's claims to the Golan and deflecting attention from Iran's activities inside Syria. Since 1974, the U.N. Disengagement Observer Force (UNDOF) has patrolled an area of the Golan Heights between the regions controlled by Israel and Syria, with about 880 troops from five countries stationed there as of January 2019. During that time, Israel's forces in the Golan have not faced serious military resistance to their continued deployment, despite some security threats and diplomatic challenges. Periodic resolutions by the U.N. General Assembly have criticized Israel's occupation as hindering regional peace and Israel's settlement and de facto annexation of the Golan as illegal. Hezbollah's forces and Israel's military have sporadically clashed near the Lebanese border for decades—with the antagonism at times contained in the border area, and at times escalating into broader conflict. Speculation persists about the potential for wider conflict and its regional implications. Israeli officials have sought to draw attention to Hezbollah's buildup of mostly Iran-supplied weapons—including reported upgrades to the range, precision, and power of its projectiles—and its alleged use of Lebanese civilian areas as strongholds. Ongoing tension between Israel and Iran over Iran's presence in Syria raises questions about the potential for Hezbollah's forces in Lebanon to open another front against Israel. After the September 2018 incident leading to Russia's installation of an S-300 system in Syria (discussed above), Iran reportedly began directly transferring weapons to Hezbollah in Lebanon while reducing Syria's use as a transshipment hub. One Israeli media account warned that Hezbollah's threat to Israel is increasing because of initiatives to build precision-weapons factories in Lebanon and to set up a military infrastructure in southern Syria. In late 2018 and early 2019, Israel's military undertook an effort—dubbed \"Operation Northern Shield\"—to seal six Hezbollah attack tunnels to prevent them from crossing into Israel. Israeli officials claim that they do not want another war, while at the same time taking measures aimed at constraining and deterring Hezbollah, including through consultation with the U.N. Interim Force in Lebanon (UNIFIL). President Trump has expressed interest in brokering a final-status Israeli-Palestinian agreement, and his Administration has supposedly prepared a proposal to facilitate negotiations, but the Administration has repeatedly postponed releasing the proposal. Many factors may account for the delays, including recent U.S. actions regarding Jerusalem, tension in and around the Gaza Strip, reduced funding for the Palestinians, Israeli settlements in the West Bank, and political jockeying and domestic constraints among Israelis and Palestinians. The U.S. decision—announced in December 2017—to recognize Jerusalem as Israel's capital and move the U.S. embassy there has fed U.S.-Palestinian tensions. Israeli leaders generally celebrated the change, but Palestine Liberation Organization (PLO) Chairman and Palestinian Authority (PA) President Mahmoud Abbas strongly objected. Many other countries opposed President Trump's actions on Jerusalem, as reflected in action at the United Nations. Claiming U.S. bias favoring Israel, Palestinian leaders broke off high-level political contacts with the United States shortly after the December 2017 announcement and have made efforts to advance Palestinian national claims in international fora. However, the PA continues security coordination with Israel in the West Bank. U.S.-Palestinian tensions appear to have influenced Administration decisions to cut off various types of U.S. funding to the Palestinians, and arguably have dimmed prospects for restarting Israeli-Palestinian talks. In a September 2018 address before the U.N. General Assembly, PLO Chairman/PA President Abbas denounced Administration actions that he characterized as taking disputed Israeli-Palestinian issues—such as Jerusalem's status and Palestinian refugee claims—off the negotiating table. Funding for economic and humanitarian needs in the West Bank and Gaza could become even scarcer. In February 2019, Israel announced that it would withhold a portion of the tax revenue it collects for the PA because—pursuant to a law passed by the Knesset in 2018—Israel had determined that amount represented PLO/PA payments made on behalf of individuals allegedly involved in terrorist acts. In response, Abbas announced that the PA would completely reject monthly revenue transfers from Israel if it withheld any amount, even though the transfers comprise approximately 65% of the PA budget. For February, Israel withheld approximately $11 million from the $193 million due to the PA, with the PA rejecting the entire amount as a result. The PA is reportedly seeking temporary financial support from the private sector and local banks, and also asking the Arab League to follow through on its 2010 decision to provide $100 million per month as a \"financial safety net\" for the PA. At the end of January 2019, U.S. bilateral aid to the Palestinians—including nonlethal security assistance that Israel generally supports—ended completely due to the Anti-Terrorism Clarification Act (ATCA, P.L. 115-253 ), which became law on October 3, 2018. Two months after the law's enactment, PA Prime Minister Rami Hamdallah informed Secretary of State Michael Pompeo that the PA would not accept aid that subjected it to federal court jurisdiction. Apparently, U.S. aid will not resume unless Congress amends or repeals the ATCA, or the Administration channels the aid differently. Assistant to the President and Senior Advisor Jared Kushner has stated that the Administration will publicly release a peace plan sometime after Israeli national elections, which are set to occur on April 9, 2019. According to Kushner, the peace plan contains detailed proposals on the various issues that divide Israel and the PLO. Many observers express skepticism about the prospect that these proposals can serve as a basis for the serious resumption of bilateral talks, but Kushner has reportedly said that the Administration is focusing on formulating \"realistic solutions,\" and that \"privately, people are more flexible.\" U.S. officials hope to surmount potential obstacles to the peace plan in the Israeli and Palestinian domestic arenas by obtaining political and economic support for the U.S. initiative from key Arab states in the region, including Saudi Arabia, the United Arab Emirates, Jordan, and Egypt. A number of Arab states share common interests in working behind the scenes with Israel to counter Iranian regional influence. While some diplomatic developments have fed speculation about warming Arab-Israeli ties, reports suggest that key Arab Gulf states remain reluctant to embrace more formal relations with Israel without a resolution of the Palestinian issue. Saudi Arabia's press agency responded to the U.S. recognition of Israel's claims to sovereignty in the Golan Heights by saying that it \"will have significant negative effects on the peace process in the Middle East and the security and stability of the region.\" In a statement with implications both for domestic and international audiences, Prime Minister Netanyahu reportedly said that the March 2019 change in U.S. policy on the Golan proves that countries can retain territory captured in a defensive war. His statement prompted speculation over the possibility that Israeli leaders might consider annexing part of the West Bank and whether the situation in the Golan is sufficiently similar to invite comparison. Days before the April elections, Netanyahu asserted that if he were to lead the next government, he would apply Israeli law to West Bank settlements. The closely contested Israeli national elections—scheduled for April 9, 2019—and the subsequent government formation process will have significant implications for the country's leadership and future policies. Prime Minister Netanyahu faces a challenge from the centrist Blue and White party under the combined leadership of former top general Benny Gantz and former Finance Minister Yair Lapid. Some setbacks for Netanyahu during the campaign have included the attorney general's announcement of probable corruption-related indictments against Netanyahu, new media allegations of possible misconduct relating to Israel's procurement of German submarines, and questions about some individuals or groups possibly spreading rumors against Netanyahu's opponents via social media. Yet, some observers calculate that Netanyahu's Likud could possibly get fewer Knesset seats than Blue and White and still form the next coalition. For more information on the actors involved in the elections, see CRS Insight IN11068, Israel: April 2019 Elections and Probable Indictments Against Prime Minister Netanyahu , by Jim Zanotti and this report's Appendix . In July 2018, the Knesset passed a Basic Law defining Israel as the national homeland of the Jewish people. Some observers have expressed concern that the law might further undermine the place of Arabs in Israeli society, while others view its effect as mainly symbolic. In March 2019, Netanyahu said that Israel is a Jewish, democratic state with equal rights for all its citizens, and \"the nation-state not of all its citizens, but only of the Jewish people,\" reviving domestic debate about the 2018 law and perhaps seeking support during the election campaign from sympathetic voter groups.", "summary": "Strong relations between the United States and Israel have led to bilateral cooperation in many areas. Matters of particular significance to U.S.-Israel relations include Israel's ability to address the threats it faces in its region. Shared U.S.-Israel concerns about Iran and its allies on the nuclear issue and in Syria and Lebanon. Israeli-Palestinian issues. Israeli domestic political issues, including elections scheduled for 2019. Israel relies on a number of strengths to manage potential threats to its security and existence. It maintains conventional military superiority relative to neighboring states and the Palestinians. It also takes measures to deter attack and defend its population and borders from evolving asymmetric threats such as rockets and missiles, cross-border tunneling, drones, and cyberattacks. Additionally, Israel has an undeclared but presumed nuclear weapons capability. Against a backdrop of strong bilateral cooperation, Israel's leaders and supporters routinely make the case that Israel's security and the broader stability of the region remain critically important for U.S. interests. A 10-year bilateral military aid memorandum of understanding (MOU)—signed in 2016—commits the United States to provide Israel $3.3 billion in Foreign Military Financing annually from FY2019 to FY2028, along with additional amounts from Defense Department accounts for missile defense. All of these amounts remain subject to congressional appropriations. Israeli officials seek to counter Iranian regional influence and prevent Iran from acquiring nuclear weapons. Prime Minister Binyamin Netanyahu released new Israeli intelligence on Iran's nuclear program in April 2018, days before President Trump announced the U.S. withdrawal from the 2015 international agreement that constrains Iran's nuclear activities. It is unclear whether Israel might take future military action in Iran if Iranian nuclear activities resume. Since 2018, Israel has conducted a number of military operations in Syria against Iran and its allies, including Lebanese Hezbollah. Israel and Iran also appear to be competing for military advantage over each other at the Israel-Lebanon border. Amid uncertainty in the area, in March 2019 President Trump recognized Israel's claim to sovereignty over the Golan Heights, changing long-standing U.S. policy that held—in line with U.N. Security Council Resolution 497 from 1981—the Golan was occupied Syrian territory whose final status was subject to Israel-Syria negotiation. The prospects for an Israeli-Palestinian peace process are complicated by many factors. Palestinian leaders cut off high-level political contacts with the Trump Administration after it recognized Jerusalem as Israel's capital in December 2017. U.S.-Palestinian tensions have since worsened amid U.S. cutoffs of funding to the Palestinians and diplomatic moves—including the May 2018 opening of the U.S. embassy to Israel in Jerusalem. Palestinian leaders interpreted these actions as prejudicing their claims to a capital in Jerusalem and to a just resolution of Palestinian refugee claims. Israeli Prime Minister Netanyahu has welcomed these U.S. actions. The Trump Administration has suggested that it will release a proposed peace plan after Israeli elections, which are scheduled for April 9, 2019. Speculation continues about how warming ties between Israel and Arab Gulf states may affect Israeli-Palestinian diplomacy, though Saudi Arabia said that the U.S. policy change on the Golan Heights would negatively affect the peace process. Bouts of tension and violence between Israel and Hamas in Gaza have continued—reportedly accompanied by indirect talks between the two parties that are being brokered by Egypt and aim for a long-term cease-fire. Domestically, Israel is preparing for the April 9 elections, which are closely contested. Former top general Benny Gantz is combining with former Finance Minister Yair Lapid to challenge Netanyahu, whom the attorney general has recommended be indicted for corruption in three separate cases. The elections and subsequent government formation process will have significant implications for Israel's future leadership and policies.", "document_type": "crs"}
{"report": "T he federal crop insurance program offers subsidized crop insurance policies to farmers. Historically, the federal crop insurance program has covered primarily traditional field crops such as wheat, corn, and soybeans. In contrast, s pecialty crops —covering fruits, vegetables, tree nuts, and nursery crops—have not been a major part of the federal crop insurance program. However, legislative changes, coupled with ongoing administrative efforts by the U.S. Department of Agriculture (USDA), have expanded federal crop insurance coverage for specialty crops, and they now account for a small but growing number of federal crop insurance policies bought by farmers. Over the past few decades, total specialty crop insured liabilities rose from nearly $1 billion in 1989 to nearly $18.5 billion in 2017. Federal crop insurance policies currently cover around 38 specialty crop categories, which include roughly 80 types of fruits, vegetables, tree nuts, and nursery crops. Many specialty crops, however, do not have crop-specific insurance policies. Currently, about one-half of all U.S. specialty crop acres are covered by federal crop insurance policies. Some specialty crops may be covered under a Whole Farm Revenue Protection (WFRP) insurance policy, intended to fill in coverage gaps for producers of uninsured crops that lack individual policy coverage and for producers marketing to local, farm-identity preserved, or direct markets. Despite this expansion, coverage for specialty crops remains below that for traditional crops. Combined, federal crop insurance for specialty crops and WFRP together accounted for about 17% of the entire federal crop insurance portfolio by liability during crop year 2017. This report focuses on how specialty crops are covered under the federal crop insurance program. For detailed background and historical information on the federal crop insurance program as a whole, and on how the federal crop insurance program operates, see CRS Report R45193, Federal Crop Insurance: Program Overview for the 115th Congress . The federal crop insurance program is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. §1501 et seq .). The USDA's Risk Management Agency (RMA) regulates the program, and the Federal Crop Insurance Corporation (FCIC) funds it. Congress first authorized federal crop insurance in an effort to mitigate the effects on farmers of the Great Depression and of the crop losses seen in the Dust Bowl. In 1938, the FCIC was created to carry out the program, which focused on major crops like wheat in leading producing regions. During the same era, farm programs were established to support crop prices and boost farm income for producers of so-called program crops, including wheat, corn, and cotton. The availability of federal crop insurance expanded with the passage of the Federal Crop Insurance Act of 1980 ( P.L. 96-365 ), which brought coverage to many more crops and regions of the country. To increase participation, Congress enhanced the crop insurance program in 1994 by raising subsidy levels and in 2000 by expanding geographic availability and again raising subsidy levels. The changes also expanded the role of the private sector in developing new products that would help farmers manage their risks. Today, many banks, when making operating loans, require that farmers purchase crop insurance. The federal crop insurance program provides farmers with risk management tools to cope with yield and price declines. Under the program, farmers can purchase subsidized policies that pay indemnities when their production or revenue falls below a producer-selected coverage level. Insurance policies are sold and completely serviced through approved private insurance companies. The insurance companies' losses are reinsured by USDA, and their administrative and operating costs are subsidized by the federal government. In purchasing a crop insurance policy, a producer selects a level of coverage (i.e., deductible) and pays a portion of the premium that increases with higher coverage levels (or none of it in the case of catastrophic coverage). The federal government pays the rest of the premium (63%, on average, in 2017). The federal crop insurance program offers two main levels of coverage: Catastrophic Risk Protection (CAT) and buy-up coverage: 1. CAT coverage insures against losses in excess of 50% of normal yield, equal to 55% of the estimated market price of the crop (called 50/55 coverage). The premium is 100% subsidized. Producers pay an administrative fee of $655 per crop per county. Limited-resource producers may have this fee waived. CAT coverage is not available on all types of policies. 2. Buy- up coverage allows producers to obtain coverage beyond the catastrophic level and pay a premium that is subsidized by the federal government. Buy-up provides for additional coverage up to 85% of production per acre and 100% of a specified market price established for each crop and region. The premium subsidy for these policies ranges from 38% to 67%. Producers pay an administrative fee of $30 per crop per county. The availability of crop insurance for a particular crop in a particular region is an administrative decision made by RMA. The decision is made on a crop-by-crop and county-by-county basis based on farmer demand for coverage and the level of risk associated with the crop in the region, among other factors. In areas where a policy is not available, farmers may request that RMA expand the program to their county. The process usually starts with a pilot program in order for RMA to gain experience and test the program components before it becomes more widely available. Alternatively, a policy can be reviewed and later discontinued if it fails to perform at an acceptable level (e.g., it experiences low participation or high losses). RMA also regularly responds to requests from commodity organizations or industry representatives for enhancements to existing coverage, such as adding revenue coverage. RMA offers pilot programs with various types of coverage for new crops (particularly specialty crops) or that include new geographical areas. It uses the performance of these programs to inform its decision on whether to extend coverage permanently. Efforts to expand federal crop insurance coverage to crops that had not traditionally been eligible under the program dates back to the 1990s. The Federal Crop Insurance Reform and Department of Agriculture Reauthorization Act of 1994 ( P.L. 103-354 ) helped initiate efforts to expand federal crop insurance coverage for specialty crop producers. It amended the Federal Crop Insurance Act to require (among other things) additional data collection, reporting to facilitate the development of new crop insurance policies, tracking the progress of newly developed policies, and an expected timetable for expanding crop insurance coverage to include \"new and specialty crops.\" Since then RMA has submitted episodic reports to Congress tracking this progress. The Agriculture Risk Protection Act of 2000 ( P.L. 106-224 ) further emphasized increasing the availability of risk management tools for producers of crops with no individual policy coverage. Previous omnibus farm bills—including the Agricultural Act of 2014 ( P.L. 113-79 , \"2014 farm bill\") and the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , \"2008 farm bill\")—also enhanced the federal crop insurance program by expanding its scope and broadening policy coverage for specialty crops, organic agriculture, and crops that are sold directly to local markets. These laws authorized and extended other USDA programs that help facilitate the formulation of crop insurance policies for specialty crop producers, including market data collection programs. The 2008 and 2014 farm bills further expanded provisions governing how RMA administers and implements Section 508(h) of the Federal Crop Insurance Act, which governs new policy development, including how it is contracted out and funded, how policy ratings are undertaken, and how a policy may start as a pilot and may (or may not) evolve to a full-fledged insurance policy. Additional information on the Section 508(h) process is described in \" Development of New Policies and Section 508(h) .\" The 2014 farm bill also directed RMA to develop the WFRP insurance policy as part of an effort to provide additional options for crops that lack crop-specific policy coverage. WFRP policies insure revenue of the entire farm, rather than an individual crop, under a single insurance policy that is not limited to specialty crop production. The types of producers eligible for whole farm policies include direct-to-consumer marketers and producers of multiple agricultural commodities, including specialty crops, industrial crops, livestock, and aquaculture products. Coverage is also expanded for the value of packing, packaging, or any other similar on-farm activity. WFRP can be combined with other policies with buy-up coverage. WFRP does not offer CAT-level coverage and cannot be combined with CAT-level policies. WFRP is discussed further in \" Whole Farm Revenue Protection (WFRP) Insurance .\" Despite expansion of the federal crop insurance program, coverage for specialty crops remains below that for traditional crops in terms of individual crop policies and covered acres. Often insurers face technical difficulties in developing new policies such as price discovery, non-weather risks, and premium ratings. In some cases, USDA has not pursued policies for particular commodities because producers have expressed concerns that offering insurance could adversely affect the market (i.e., because an insurance policy reduces producer risk, farmers may plant more acreage, which could drive down prices and total crop revenue). This has been a particular concern for vegetable crops and explains in part lower levels of insured vegetable acreage compared with other crops. These and other challenges are discussed later in \" Challenges with Developing Specialty Crop Policies .\" In statute, specialty crops refers to \"fruits and vegetables, tree nuts, dried fruits, and horticulture and nursery crops (including floriculture)\" [7 U.S.C. §1621 note]. This definition covers more than 300 individual agricultural commodities. It includes fresh and processed fruits and vegetables, tree nuts, a range of nursery plants (trees, shrubs, and flowering plants), culinary herbs and spices, coffee and tea, and also honey and maple syrup, according to guidelines established by USDA. The statutory definition of specialty crops ties to program eligibility and funding allocations for a number of USDA programs providing marketing and research assistance to eligible producer groups. Unlike many traditional commodity crops, specialty crops are generally not eligible for USDA farm revenue support programs—that is, programs such as the Agricultural Risk Loss Coverage (ARC), Price Loss Coverage (PLC), and Marketing Assistance Loans (MAL) programs. The federal government has historically supported specialty crops indirectly through research and marketing grants. The federal government provides direct assistance to individual specialty crop farmers via federal crop insurance and supplemental disaster assistance. Legislative changes coupled with USDA administrative efforts have contributed to broader federal crop insurance coverage of fruits, vegetables, tree nuts, and nursery crops over the past few decades. Total liability, or the estimated value of the insured portion of the crop, is a useful measure of program growth. Specialty crop insured liabilities rose from nearly $1 billion in 1989 to nearly $18.5 billion in 2017 ( Figure 1 ), reflecting increased production and participation. In contrast, total liabilities for all federally insured crops and livestock was $106.7 billion in 2017. At $18.5 billion, specialty crops represented about 17% of the federal crop insurance portfolio by liability in 2017 ( Figure 1 ). Table 1 provides summary statistics of federal crop insurance coverage for specialty crops for crop years 2015 through 2017. It provides total premium, premium subsidies, producer-paid premium, liabilities, indemnities (claim payments), and the number of policies earning premium. Premium subsidies across all commodities (not shown in the table) totaled $6.4 billion (63% of total premium), whereas premium subsidies for specialty crops totaled $701 million (64% of total specialty crop premium) in crop year 2017. Producer-paid premiums are the difference between total premium and premium subsidies. Looking back to 1999, insurance policies then covered 52 specialty crops with planned testing on another nine, according to the Government Accountability Office (GAO). These 61 crops reportedly accounted for a majority of the overall value of specialty crops at that time, but coverage on about 300 additional crops remained unavailable. Coverage expansion for specialty crops continued over the subsequent decade. By 2011, insurance was available for more than 80 specialty crops in counties considered to be major growing areas. Among the crops included were avocados, blueberries, grapes, citrus, onions, pumpkins, and tomatoes. The cumulative new crop insurance product introductions for specialty crops increased from 10 in 2000 to 52 in 2012 ( Figure 2 ). Figure 3 shows the number of specialty crop policies earning premium under the federal crop insurance program from crop years 2000 to 2017. While the number of specialty crop policies shows a general upward trend from 2000 to 2017, the total liability (amount insured) for specialty crops shows a more consistent upward trend during the same time period ( Figure 4 ). A larger increase in liability than in the number of policies could be attributed to several factors, among them more high-value crop policies, increases in commodity prices, farm consolidation, and inflation. About 9 million acres of specialty crops, approximately 800,000 bee colonies, about 100,000 tons of raisins, and roughly 60,000 fruit and coffee trees were covered by federal crop insurance during crop year 2017. As of 2015, federal crop insurance policies were offered for 38 specialty crop categories ( Table 2 ), which include roughly 80 types of fruits, vegetables, tree nuts, and nursery crops. In 1999, insurance policies covered about 50 types of specialty crops. Crops covered by individual federal crop insurance plans include almonds, apples, avocados, bananas, blueberries, cabbage, chili peppers, various citrus fruits, coffee, cranberries, cucumbers, dry beans, dry peas, figs, fresh market beans, fresh market sweet corn, fresh market tomatoes, grapes, green peas, macadamia nuts, mint, mustard, nursery, olives, onions, papaya, pears, pecans, peppers, pistachios, popcorn, potatoes, processing beans, pumpkins, raisins, policies on stone fruit (cherries, fresh apricots, fresh freestone peaches, fresh nectarines, peaches, plums, processing apricots, processing cling peaches, processing freestone peaches, prunes), strawberries, sweet corn, sweet potatoes, table grapes, tomatoes, other types of fruit and nut trees, and walnuts. Bee colonies are also covered. Although the availability of federal crop insurance has been expanding, it is not available for all specialty crops. Crops without insurance for which the USDA's National Agricultural Statistics Service (NASS) reports planted acreage include artichokes, asparagus, blackberries, boysenberries, broccoli, cantaloupes, carrots (fresh and for processing), cauliflower, celery, dates, garlic, guavas, hazelnuts, honeydews, kiwi fruit, lettuce, spinach, squash, tart cherries, and watermelons. In addition, specialty crops for which NASS does not report planted acreage that do not have crop-specific policies include cashews, chives, dates, eggplants, garlic, hazelnuts, leeks, lettuce, melons, most leafy greens, most herbs and spices, some tropical plants, and most root crops. RMA reports that nearly 300 million acres were covered by federal crop insurance policies in crop year 2015. Of those acres, about 8.1 million acres (3%) were specialty crops ( Table 2 ). For the 38 specialty crop categories for which federal crop insurance policies are measured by acreage (as opposed to bee colonies, tons, trees, or plant inventory value), the average participation rate in federal crop insurance was about 76% of eligible acres in crop year 2015. Figure 5 and Figure 6 show these data for selected fruit, tree nut, and vegetable categories. Market penetration often varies widely by crop. For fruits and tree nuts, the share of federally insured acres ranges from less than 1% (strawberries) to more than 80% (citrus and plums/prunes) ( Figure 5 ). For vegetables and melons, insured acres range from 5% of total acres (fresh beans and sweet potatoes) to more than 80% (dry peas, tomatoes) ( Figure 6 ). Insured acreage as a share of crop acreage is relatively high (about 70% of total specialty crop area) in major specialty crop states, including California, Florida, and Washington. Acreage participation for pulse crops (e.g., dry peas, dry beans) is high in Minnesota, Montana, North Dakota, and South Dakota. The 2015 FCIC report to Congress on specialty crops contains detailed acreage data by crop and state, along with maps showing crop insurance participation. Figure 7 shows liabilities for specialty crops with the highest liabilities for crop year 2017. Figure 8 shows a breakdown of crop insurance premium subsidies and producer-paid premium by specialty crop in crop year 2017. That year, the average premium subsidy amount across all specialty crop policies and WFRP was 64%, about 1 percent higher than the average premium subsidy rate for the entire crop insurance portfolio. RMA provides a WFRP policy option to growers insuring 50% to 85% of revenue for all the commodities on a farm under one insurance policy. WFRP benefits farms with specialty or organic commodities that lack individual policy coverage, as well as those farms marketing to local, regional, farm-identity preserved, or direct markets. RMA estimates that 2,700 such policies received premium subsidies in 2017, up from 1,100 policies in 2015 ( Figure 9 ). WFRP premium subsidies totaled about $102 million in 2017, and producer-paid premium amounted to about $42 million, while total liability was estimated at $2.8 billion, up from $1.1 billion in 2015. The 2014 farm bill ( P.L. 113-79 ) required that RMA provide a WFRP policy option to agricultural producers and authorized higher premium subsidy levels for whole-farm policies than for other policy types. The WFRP pilot policy was first offered in 2015. Prior to that, USDA offered similar policies under other names (in particular, Adjusted Gross Revenue or \"AGR\" policies from 1999 to 2002, and AGR and AGR Lite policies from 2003 to 2014). WFRP insures 50% to 85% of revenue for all commodities on a farm under one insurance policy, including (but not limited to) farms with specialty or organic commodities or those marketing to local, regional, farm-identity preserved, specialty, or direct markets. WFRP is available in all counties nationwide—either as a stand-alone policy or in combination with other policies—to farms with up to $10 million in insured revenue at the 85% coverage level and up to $17 million in insured revenue at the 50% coverage level. WFRP does not offer CAT-level coverage (high deductible, 100% premium subsidy) and cannot be combined with CAT-level policies. WFRP premium subsidies range from 55% to 80%, and coverage levels range from 50% to 85%. In crop year 2017, the average premium subsidy for WFRP was 70%, whereas the average premium subsidy across the entire crop insurance portfolio was 63%. That year WFRP policies accounted for 3% of all federal crop insurance liabilities. WFRP requires producers to provide five consecutive years of Schedule F from their federal tax forms on which farm income and expenses are reported to determine their historical revenue guarantee. Some speculate that one of the reasons WFRP participation is not higher is that producers are reluctant to provide tax data. Federal crop insurance policies for specialty crops (and all other crops) are generally either yield-based or revenue-based. For most yield-based policies, a producer can receive an indemnity if there is a yield loss relative to the farmer's \"normal\" (historical) yield. Revenue-based policies protect against crop revenue loss resulting from declines in yield, price, or both. There are two types of yield-based insurance policies for specialty crops: (1) Actual Production History (APH) plans and (2) dollar plans. APH policies account for about 70% of specialty crops policies, with the exception of nursery crops, which tend to be mostly covered through dollar plans. Text Bo x 1 shows examples of an APH policy for citrus fruit with a 50% coverage level and a dollar plan for nursery products with a 65% coverage level. APH policies insure producers against yield losses due to natural causes such as drought, excess precipitation, hail, frost, freeze, fire (if due to natural causes), and insects and disease. An indemnity is not paid if crop loss is caused by insufficient or improper applications of pest or disease control measures. The producer selects the amount of average yield to insure, ranging from 50% to 75% (in some areas up to 85%). The producer also selects the percent of the predicted price to insure, ranging between 55% and 100% of the crop price established annually by RMA. If the harvested crop plus any appraised production is less than the yield insured, the producer is paid an indemnity based on the difference. Indemnities are calculated by multiplying this difference by the insured percentage of the price selected when crop insurance was purchased and by the insured share (coverage level). When purchasing an APH policy, a producer is assigned a \"normal\" crop yield based on the producer's actual production history and a price for the commodity based on estimated market conditions. The producer can then select a percentage of his normal yield to be insured and a percentage of the price he or she wishes to receive when crop losses exceed the selected loss threshold. Dollar plans provide protection against declining value due to damage that causes a yield shortfall. Unlike APH policies, a dollar policy guarantees a dollar amount of coverage and not a level of production, with the amount of insurance based on the cost of growing a crop in a specific area. A loss occurs when the annual crop value is less than the amount of insurance. The maximum dollar amount of insurance is stated on the actuarial document. The insured may select a percentage of the maximum dollar amount equal to CAT or higher coverage levels. The design and implementation of dollar plan policies have been criticized for not insuring actual losses and for covering fraudulent claims. A 1997 USDA Office of the Inspector General audit report on fresh market tomato dollar plans outlined several specific fraud, waste, and abuse concerns. More recently, in December 2017 an RMA-commissioned report on options for improving or replacing dollar plans concluded that the dollar plan as studied (limited area and three crops) \"is not sustainable.\" Revenue insurance is widely available for major program crops (e.g., wheat, corn, soybeans) and protects growers against losses from low yields, low prices, low quality, or any combination of these events. For specialty crops, designing revenue-based insurance products is challenging. These crops often do not have centralized price discovery mechanism such as a futures exchange for developing price projections prior to planting. They also often lack data on actual harvest-time prices. To address these types of data challenges, actual revenue history (ARH) insurance plans have been implemented on a pilot basis for certain specialty crops such as navel oranges and cherries. Rather than insuring historical yields, these pilot policies insure historical revenues using historical prices. This approach assumes that historical prices provide a reasonable estimate of expected future prices. This assumption is deemed viable for perishable crops, such as most fruit and vegetables, but is considered less tenable with storable crops where stock carryover from the previous year can affect current market-year prices. ARH insurance plans have parallels to the APH insurance plans, with the primary difference being that instead of insuring historical yields, the plan insures historical revenues. Text Box 2 shows an example of an ARH policy for California navel oranges. Designed as a catch-all for a variety of crops that may not have individual revenue insurance plans, WFRP policies insure 50%-85% of revenue for all commodities on a farm under one policy. For more information on WFRP, see \" Whole Farm Revenue Protection (WFRP) Insurance .\" RMA offers a few index-based policies, which trigger claim payments based on a predetermined index that is entirely independent of the individual farm operation (e.g., rainfall level). Indemnities are automatically triggered whenever the index falls below a producer-selected coverage level instead of requiring insureds to file claims. One of those policies covers a specialty crop—the Apiculture Pilot Insurance Program (API), which covers honey production. Text Box 3 provides detailed information on producers' choices under API. The Federal Crop Insurance Act provides two methods for developing new crop insurance programs, including (1) internal products developed by RMA or under contract and (2) external products submitted through procedures specified in Section 508(h) of the Federal Crop Insurance Act (7 U.S.C. §1508(h)). Section 522 of the Federal Crop Insurance Act (7 U.S.C. §1522) grants RMA authority to develop new crop insurance policies. This authority was partially removed in 2000 but later reinstated by the 2014 farm bill ( P.L. 113-79 ). Before the enactment of Agricultural Risk Protection Act of 2000 (ARPA, P.L. 106-224 ), products were typically developed internally. ARPA added paragraph (e)(4) to Section 522, which stated, \"on and after October 1, 2000, the Corporation shall not conduct research and development for any new policy for an agricultural commodity offered under this subchapter.\" The 2014 farm bill repealed paragraph (e)(4). ARPA expanded the role of the private sector, allowing private entities to participate in conducting research and development of new insurance products and features. With the expansion of the contracting and partnering authority, Congress authorized RMA to enter into contracts or to create partnerships for research and development of new and innovative insurance products. Private entities could also submit unsolicited proposals for insurance products to the FCIC Board of Directors for approval. In considering such proposals, the board is to evaluate whether the products (1) are in the best interests of producers, (2) follow sound insurance principles, and (3) are actuarially appropriate. Section 508(h) governs new crop insurance policy development, including how it is contracted out and funded, how policy ratings are undertaken, and how a policy may start as a pilot and may (or may not) evolve to a full-fledged insurance policy. FCIC is authorized to reimburse private entities for research, development, and maintenance costs if they develop insurance programs that are approved by the FCIC board. Private sector individuals may submit to the FCIC board (1) crop insurance policies, (2) provisions of policies, or (3) rates of premium. These submissions are commonly referred to as 508(h) submissions. If a private individual prefers, a concept proposal can be submitted to the board prior to fully developing a 508(h) submission. The board may approve an advance payment for the concept proposal for up to 75% of expected research and development expenses to aid in the development of the 508(h) submission. If approved by the board, these insurance products can receive reimbursement for research, development and operating costs, in addition to any approved premium subsidies and reinsurance. Private submitters are eligible to recoup maintenance costs for up to three years after products are offered on the market if they continue to provide support for the products. After three years, the private entity has the choice of turning the product over to RMA, thereby relinquishing all ownership rights in the product, or retaining ownership of the insurance product and continuing to update it in return for a user fee as approved by the board and paid by Approved Insurance Providers who sell the product. The FCIC board must approve all new products. This process can take up to a year and generally depends on the quality and thoroughness of the submission package presented to the board, as well as the responsiveness of the submitter to issues raised by the board and the reviewers, among other factors. In most cases, an independent external panel of experts reviews a proposed product and assesses its actuarial weakness and suggests product improvements. The revised product is submitted to the FCIC board for approval. Once approved, the product is typically implemented as a pilot program in a limited area to test it for effectiveness while limiting financial exposure. Pilot programs typically operate for four years but may be extended for additional testing if needed. Eventually the FCIC board either converts the pilot to a regular program or terminates it. Under law, RMA is not allowed to conduct pilot programs if insurance against the risk to be covered is generally available in the private sector without governmental support. RMA's 2010 Report to Congress describes selected pilot programs that have been developed through the internal procedure and authority, covering quarantine and policies based on actual revenue history (e.g., rather than yields). It also describes a range of private sector initiatives covering pumpkins, apiculture, plantains and bananas, sugarcane, and fresh market beans. Even though new crop insurance product introductions for specialty crops have been increasing, USDA and the industry continue to face a number of challenges when developing and making available new insurance policies for specialty crops that are not currently covered. Most challenges stem from the basic structure of the specialty crop industry, which is often characterized by relatively small acreages, multiple crop varieties (often targeting niche markets), differences in farming practices (which contribute to greater complexity and cost), quality and price discovery issues, grower interest, non-weather risks, and other coverage limitations. Factors such as these affect the potential marketability, actuarial soundness, and feasibility of an insurance policy. A small market reduces sales incentive for companies selling insurance while contributing to higher per-unit costs for developing the product, training staff, modifying computer programs, and other activities. Small acreage also results in low market volume or the establishment of production contracts between producers and buyers. Crops grown and marketed in smaller quantities and/or targeting niche markets often command a price premium, resulting in often highly variable market prices, further complicating price discovery. Moreover, most specialty crops are intended primarily for sale in the higher-value fresh market versus the typically lower-value crops sold for further processing. Fresh product is highly perishable and non-storable, unlike the field crops that are more widely covered by federal crop insurance policies. In general, lack of reliable pricing data for crops not traded on commodity exchanges has been an ongoing challenge for USDA in the federal crop insurance program. RMA's price discovery for specialty crops largely relies on Agricultural Marketing Service, NASS, and other USDA agency data and academic and industry sources. In the absence of a well-developed cash market, such \"thin market\" conditions make it difficult to observe and forecast market prices. For example, in 2015 FCIC cancelled the Dry Bean Revenue Endorsement because USDA did not have sufficient market data from processors to establish a harvest price from which to calculate whether indemnities would be triggered under the endorsement. Setting price guarantees correctly is critical for encouraging participation, the actuarial soundness of the program, and maintaining the overall market dynamics for the crop. If the insurance is priced (rated) too high, producers who tend to have few losses might decide against purchasing insurance, leaving only high-risk farmers in the pool (known as \"adverse selection\"). If the insurance is priced too low, premiums may not cover expected indemnities, potentially inflating the federal cost of the program by providing a greater premium and higher administrative and operating subsidies than was intended. Artificially low premiums might encourage additional crop production, further contributing to weak market prices, thereby adversely affecting financial returns for producers. Another challenge for insuring specialty crops is the diversity and multitude of crop varieties and production practices. Compared with field crops, specialty crops tend to have a wider variety of farming practices that depend on the crop variety, adding complexity to the policy and its development cost. For example, a vegetable crop may need to be grown on raised beds, use plastic, or have specific crop rotations. Various marketing claims made for products (such as that they are organic or other production or sustainability claims) can contribute to product complexity. Understanding how these factors affect potential yields is required for determining what practices can be insured and for developing and establishing underwriting standards. Variation across crops and variety within crop types also complicate the loss adjustment process (i.e., assessing the effect of weather on crop production). Finally, in some cases, USDA has reportedly not pursued policies for particular commodities because some producers have expressed concerns that offering insurance could adversely affect the market (i.e., because an insurance policy reduces producer risk, farmers may plant more acreage, which could drive down prices and total crop revenue). This has been a particular concern for producers of vegetable crops and explains in part lower levels of insured vegetable crop acreage compared with other crops. Producer interest in the availability of a new policy often starts at the local level and is channeled through RMA's regional offices. In general, for a policy to be viable, a crop must have established cultivars, defined farming practices, developed markets, and identified known perils. Significant producer interest (demand for the policy) is also critical. Perhaps more importantly, insurance policies are dependent on the availability of high quality data. High quality data , from an insurance standpoint, refers to data being timely (so that claims can be paid quickly), relevant (so the product offers reliable protection), audited to international reinsurance standards, and available over a sufficiently long time horizon (time series). Data availability and data quality often pose a challenge for crop insurance purposes. USDA offers several programs to help farmers recover financially from natural disasters, including droughts and floods. These programs help to provide assistance to producers of noninsured crops or crops with no current individual policy coverage, including some specialty crops. Other supplemental disaster programs further provide assistance to some specialty crop producers from tree losses and the loss of bee colonies. USDA also provides low-interest emergency loans and land rehabilitation assistance to help farmers return land to production following natural disasters. Among the issues that may arise if Congress continues to consider the role of the federal crop insurance options for specialty crop producers are: Availability of crop-specific policies . Crop-specific policies have not been developed for a number of specialty crops, including artichokes, asparagus, blackberries, boysenberries, broccoli, cantaloupes, carrots (fresh and for processing), cashews, cauliflower, chives, celery, dates, eggplants, garlic, guavas, hazelnuts, honeydews, kiwi fruit, lettuce, spinach, squash, tart cherries, watermelons, most leafy greens, most herbs and spices, some tropical plants, and most root crops. Private submitters proposing to develop new policies must present evidence of marketability to FCIC and RMA. Congress might consider whether there are opportunities for USDA to facilitate market research and publish market data to assist with the development of new policies and spur greater competition among private submitters. Development cost benchmarks . Section 11120 of P.L. 115-334 modifies the definition of reasonable research and development costs related to policies that have been approved by the FCIC board for reimbursement. Costs are to be deemed reasonable if based on (1) for employees or contractors, wage rates equal to not more than two times the Bureau of Labor Statistics hourly wage rates, plus benefits; and (2) other actual documented costs incurred by the applicant. That section also limits the FCIC board's review of user fees. Given that Congress reinstated RMA's authority to develop new products in the 2014 farm bill ( P.L. 113-79 ), Congress might inquire whether costs incurred for RMA-developed policies could provide a benchmark for the reasonableness of private sector requests for reimbursement of development costs. Limited participation in WFRP policies . WFRP is available in every county of every state. Its premium subsidies range from 55% to 80%, and coverage levels range from 50% to 85%. In crop year 2017 the average premium subsidy for WFRP was 70%, whereas the average premium subsidy across the entire crop insurance portfolio was 63%. That year WFRP policies accounted for about 3% of all federal crop insurance liabilities. Some speculate that part of the reason that WFRP participation is not higher is that producers are reluctant to provide tax return data. These policies require producers to provide five consecutive years of Schedule F from their federal tax forms. Given the benefits of risk pooling achieved by insuring a whole farm's revenue and the fraud prevention benefits from requiring tax returns to set historical revenue guarantees, Congress might consider whether there are efficiencies to be gained from incentivizing greater participation in WFRP. Determining a \" market price\" for commodities not sold on exchanges . Lack of reliable pricing data for crops that are not traded on commodity exchanges has been an ongoing challenge for USDA in the federal crop insurance program. RMA's price discovery for specialty crops largely relies on Agricultural Marketing Service, NASS, and other USDA agency data and academic and industry sources. In the absence of a well-developed cash market, such \"thin market\" conditions make it difficult to observe and forecast market prices, which affects RMA's ability to set the appropriate level of price guarantees. Setting price guarantees correctly is critical to the actuarial soundness of the program and for maintaining overall market dynamics for the crop. Increased farm-level price data for commodities not sold on exchanges could also assist producers of those commodities in negotiating contracts and in their financial planning. Congress might consider whether there is a role for the federal government in supporting data collection of farm prices of commodities that are not sold on exchanges. Coverage of quality losses . Many crops are vulnerable to lower prices or to becoming unmarketable due to quality losses. Small markets for specialty crops that are not sold on commodity exchanges may be particularly price-sensitive to variations in quality (e.g., herbs and spices, certain fruits and vegetables, honey). Certain federal crop insurance policies cover some quality losses, but the range of such coverage is limited. Congress might consider (1) whether the current coverage for quality losses is available for all crops that are vulnerable to quality losses, (2) whether loss adjustment procedures for quality losses accurately assess the variations in quality and the effects on marketability and prices, and (3) whether the procedures for assessing quality losses properly balance cost efficiency and fraud prevention. Effect of ad h oc payments on demand for crop insurance . One of the stated policy goals of federal crop insurance has been to reduce the agricultural sector's reliance on supplemental or \"ad hoc\" disaster assistance payments. However, according to the Congressional Budget Office, it is difficult to assess whether this policy goal has been achieved. The 115 th Congress authorized ad hoc disaster assistance, and USDA has separately implemented a \"trade aid\" package, both of which apply to some specialty crops. Given the lower participation levels for certain specialty crop insurance policies as compared to non-specialty crops, Congress might consider whether repeated ad hoc payments in response to adverse events may have an effect on demand for federal crop insurance for crops generally and for specialty crops in particular.", "summary": "The federal crop insurance program offers subsidized crop insurance policies to farmers. Farmers can purchase policies that pay indemnities when their yields or revenues fall below guaranteed levels. While the majority of federal crop insurance policies cover yield or revenue losses, the program also offers policies with other types of guarantees, such as index policies that trigger an indemnity payment based on weather conditions. The Federal Crop Insurance Corporation (FCIC), a government corporation within the U.S. Department of Agriculture (USDA), pays part of the premium—about 63%, on average—across the federal crop insurance portfolio during crop year 2017, while policy holders—farmers and ranchers—pay the balance. Private insurance companies, known as Approved Insurance Providers (AIPs), deliver the policies in return for administrative and operating subsidies from FCIC. AIPs also share underwriting risk with FCIC through a mutually negotiated Standard Reinsurance Agreement. The USDA Risk Management Agency (RMA) administers the federal crop insurance program. The federal crop insurance program primarily covers traditional field crops (such as wheat, corn, and soybeans) that are supported by USDA's revenue-support programs. Unlike these traditional crops, specialty crops—defined in statute as \"fruits and vegetables, tree nuts, dried fruits, and horticulture and nursery crops (including floriculture)\" (7 U.S.C. §1621 note)—have not been a major part of federal crop insurance support. Specialty crops are also generally not eligible for USDA's revenue-support programs. USDA estimates that the statutory definition of specialty crops covers more than 300 agricultural commodities, including fresh and processed fruits and vegetables, tree nuts, nursery plants (trees, shrubs, and flowering plants), herbs, spices, coffee, tea, honey, and maple syrup. Legislative changes, coupled with ongoing administrative efforts by USDA, have expanded federal crop insurance coverage for specialty crops, and they now account for a small but growing number of federal crop insurance policies bought by farmers. Among the issues Congress may consider if it seeks to further expand coverage for specialty crops are data collection and price discovery for commodities not sold on exchanges (such as most fruits and vegetables), coverage of quality losses, and the effect of ad hoc payments on the demand for crop insurance. Federal crop insurance policies currently cover around 38 specialty crop categories, which include roughly 80 types of fruits, vegetables, tree nuts, and nursery crops. Over the past few decades, total specialty crop insured liabilities rose from nearly $1 billion in 1989 to nearly $18.5 billion in 2017. In 2017, federal crop insurance policies covered about 9 million acres of specialty crops, around 800,000 bee colonies, about 100,000 tons of raisins, and roughly 60,000 fruit and coffee trees. Across all specialty crops, coverage and the premium subsidy paid by the federal government may vary depending on the crop. Moreover, for many specialty crops, crop-specific insurance policies are not available. Currently, about one-half of all U.S. specialty crop acres are covered by federal crop insurance policies. Some specialty crops may be covered under a Whole Farm Revenue Protection (WFRP) insurance policy. WFRP is designed to fill in coverage gaps for producers of uninsured crops that lack individual policy coverage and for producers marketing to local, farm-identity preserved, or direct markets. The average premium subsidy rate for WRFP was about 70% in 2017. Federal crop insurance for specialty crops and WFRP together accounted for about 17% of the entire federal crop insurance portfolio, as measured by liability, during crop year 2017.", "document_type": "crs"}
{"report": "First enacted in 1965, the Older Americans Act (OAA, P.L. 89-73, as amended) is the primary federal vehicle for the delivery of social and nutrition services for older persons. The majority of OAA grant funds are provided to states and other entities based on statutory formulas that exist in the following titles: Title III, Grants for State and Community Programs on Aging; Title V, Community Service Employment for Older Americans; Title VI, Grants for Older Native Americans; and Title VII, Vulnerable Elder Rights Protection Activities. These formula grants fund programs that assist older Americans with supportive services in their homes; congregate nutrition services (meals served at group sites such as senior centers, community centers, schools, churches, or senior housing complexes); home-delivered nutrition services; family caregiver support; community service employment; the long-term care ombudsman program; and services to prevent the abuse, neglect, and exploitation of older persons. The OAA also supports grants to older Native Americans for nutrition and supportive services. , Since enactment of OAA, Congress has reauthorized and amended the act numerous times. Most recently, the Older Americans Act Reauthorization Act of 2016 ( P.L. 114-144 ) authorized appropriations for OAA programs for FY2017 through FY2019, and made other changes to the act, including changes to four Title III programs that receive funding under statutory formulas. Prior to the 2016 OAA reauthorization, the OAA Amendments of 2006 ( P.L. 109-365 ) reauthorized all programs under the act through FY2011. Although the authorizations of appropriations under the OAA expired at the end of FY2011, Congress continued to appropriate funding for OAA-authorized activities through FY2016. For most OAA programs, entities such as states, U.S. territories, and tribal organizations are allotted funding based on a population-based formula factor (e.g., aged 55 and over, aged 60 and over, or aged 70 and over). Some statutory requirements for program funding allocations include a \"hold harmless\" provision, which guarantees that states' or other entities' allotments will remain at a certain fiscal year level or amount, provided sufficient funding in a given year (e.g., FY2000 levels or FY2018 levels less 1%). The following describes the OAA statutory provisions that allocate funds to states and other entities under the various titles of the act. Title III authorizes grants to State Units on Aging (SUAs) and Area Agencies on Aging (AAAs) in all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories to act as advocates on behalf of, and to coordinate programs for, older persons (defined in the law as those aged 60 and older). The Administration on Aging (AOA) within the Administration for Community Living (ACL) in the Department of Health and Human Services (HHS), allocates Title III funds to SUAs. The states, in turn, award funds to more than 600 AAAs, which are designated by states to operate within specified planning and service areas. States must develop an intrastate funding formula for distribution of Title III funding within the state that takes into account the geographical distribution of older individuals in the state as well as the distribution of older individuals with greatest economic and social need (with particular attention to low-income minority older individuals) among specified planning and service areas. The state formula for distribution of Title III funding must be developed in accordance with AOA guidelines and approved by the Assistant Secretary for Aging. As the OAA's largest component, discretionary spending under Title III accounts for 73% of the act's total FY2019 appropriations ($1.498 billion out of $2.055 billion). States receive separate allotments of funds for the following six programs authorized under Title III: (1) supportive services and senior centers, (2) congregate nutrition services, (3) home-delivered nutrition services, (4) the Nutrition Services Incentive Program (NSIP), (5) disease prevention and health promotion services, and (6) the National Family Caregiver Support Program (NFCSP). States are required to provide a matching share of 15% in order to receive funds for supportive services and congregate and home-delivered nutrition programs. A matching share of 25% is required for the NFCSP; no match is required for NSIP and disease prevention and health promotion services. To determine state allotments, a separate allocation is calculated for each of the six grant programs. The same formula is used to determine state allocations for supportive services and senior centers, congregate nutrition services, home-delivered nutrition services, and disease prevention and health promotion services. The formulas for the NSIP and NFCSP use different factors. The funding formula for four of these Title III programs—supportive services and senior centers, the congregate and home-delivered nutrition programs, and disease prevention and health promotion services—has been a major point of contention during the past three OAA reauthorizations of 2000, 2006, and 2016. Appendix A of the report provides a detailed legislative history of the Title III funding formula changes and describes the debate surrounding changes to the Title III funding formula during the OAA reauthorizations of 2000, 2006, and 2016. Appendix B provides an analysis of the state-based population data for the U.S. population age 60 and older for these Title III programs. Appendix C compares FY2016 allotment amounts for states and other entities with actual allotment amounts under the statutory funding formula changes in P.L. 114-144 for FY2017 to FY2019 for Title III Parts B, C1, C2 and D programs. Separate state allotments for (1) supportive services and senior centers, (2) congregate nutrition services, (3) home-delivered nutrition services, and (4) disease prevention and health promotion services are based on a population formula factor that is defined as each state's relative share of the total U.S. population aged 60 years and older. For the purposes of this calculation, the total U.S. population aged 60 and older includes all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories. Population data are from annual population estimates published by the U.S. Census; the reference date for estimates is July 1. There is a two-year time lag between the reference year of the population estimates and the respective appropriation year. For example, FY2019 state allotments are calculated using 2017 estimates of the population aged 60 and older. For the purpose of determining state allotments, the law requires that allotments meet two criteria. The first criterion is the \"small state minimum.\" This ensures that all states (including the District of Columbia and Puerto Rico) receive a minimum amount of funds, which is defined as 0.5% (one-half of 1%) of the total grant appropriation for the respective fiscal year. Guam and the U.S. Virgin Islands each are allotted no less than 0.25% (one-quarter of 1%) of the total grant amount, and American Samoa and the Commonwealth of the Northern Mariana Islands are each allotted no less than 0.0625% (one-sixteenth of 1%) of the total grant amount. The second criterion is the \"hold harmless\" provision. The OAA Reauthorization Act of 2016 Amendments ( P.L. 114-144 ) reduces state and U.S. territory hold harmless amounts (previously referenced to FY2006 funding levels) by 1% from the previous fiscal year as follows: For FY2017, no state receives less than 99% of the annual amount allotted to the state in FY2016. For FY2018, no state receives less than 99% of the annual amount allotted to the state in FY2017. For FY2019, no state receives less than 99% of the annual amount allotted to the state in FY2018. For FY2020 and each subsequent fiscal year, no state receives less than 100% of the annual amount allotted to the state in FY2019. The Nutrition Services Incentives Program (NSIP) provides funds to states, territories, and Indian tribal organizations to purchase food or to cover the costs of food commodities provided by the U.S. Department of Agriculture (USDA) for the congregate and home-delivered nutrition programs. NSIP funds are allotted to states and other entities based on a formula that takes into account each state's share of total meals served by the nutrition services program (both congregate and home-delivered meals) in all states and tribes during the prior year. The National Family Caregiver Support Program (NFCSP) provides direct services for caregivers in five core service areas: Information about health conditions, resources, and community-based services. Assistance with accessing available services. Individual counseling, support groups, and caregiver training. Respite care services to provide families temporary relief from caregiving responsibilities. Supplemental services on a limited basis that would complement care provided by family and other caregivers (e.g., adult day health care, home care, home modifications, and assistive devices). Funds for NFCSP are allotted to states based on each state's relative share of the population aged 70 years and older. States receive a minimum grant amount, which is defined as 0.5% (one-half of 1%) of the total grant appropriation for the respective fiscal year. Guam and the U.S. Virgin Islands are allotted no less than 0.25% (one-quarter of 1%) of the total grant appropriation, and American Samoa and the Commonwealth of the Northern Mariana Islands are allotted no less than 0.0625% (one-sixteenth of 1%) of the total grant appropriation. There is no hold harmless provision in the formula allocation for this grant program. Title V authorizes the Community Service Employment for Older Americans Program (CSEOA). Administered by the Department of Labor (DOL), Title V is OAA's second-largest program and is the only federally subsidized employment program for low-income older persons (defined in the law as those aged 55 and older with incomes up to 125% of the federal poverty guidelines). Its FY2019 funding of $400 million represents 20% of the act's total discretionary funding. There is a 10% nonfederal match requirement for Title V grant activities. DOL allocates Title V funds for grants to state agencies in all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories, and to national grantees who are typically nonprofit organizations that operate in more than one state. The total Title V state allotment is the sum of its respective state agency grantee allotment and national grantee allotment for activities in that state. To determine grant allotments for each state, a separate allocation is calculated for each grant type. The 2016 OAA reauthorization did not revise the Title V funding formula, but the formula had been an issue for Congress in the past. During the 2006 OAA reauthorization, the original House bill ( H.R. 5293 ) included a provision to update the \"hold harmless\" year in the Title V formula from FY2000 to FY2006; however, the Senate bill ( S. 3570 ) did not include this provision. The compromise bill ( H.R. 6197 ) enacted into law made no changes to the Title V formula. The following describes the Title V formula allocation. Before allocation of funds to states, DOL is required to reserve funds as follows: up to 1.5% of the total appropriation for Section 502(e) demonstration projects, pilot projects, and evaluation projects; 0.75% of the total appropriation for Guam, the U.S. Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands; and \"such amount as may be necessary\" for national grants to public or private organizations serving eligible Indians and Pacific Island and Asian Americans. After these reservations, the remaining funds are divided into two amounts, one for all state agency grantees and the other for all national grantees. The allocation for these amounts is dependent on program funding. If funds for a given year are equal to their FY2000 level of $440.2 million, then amounts set aside for all state agencies and all national grantees are in proportion to their respective FY2000 levels. If funds for a given year are less than their FY2000 levels, then total amounts for the state and national grantees are reduced proportionately. If funds for a given year exceed the FY2000 level, up to $35 million of the excess is to be distributed as follows: 75% of the excess is to be provided for all state agency grantees and 25% of the excess is to be provided to all national grantees. Any funding amount over $35 million that remains is to be distributed 50/50 to all state agency and national grantees, respectively. Once the total funding levels for grants for state agency and national grantees have been determined, the same formula is used to determine the state agency allotment and the national grantee allotment for each state. Each allotment is distributed to states based on a formula that takes into account (1) a state's share of the total U.S. population aged 55 years and older (includes the District of Columbia and Puerto Rico), and (2) the state per capita income relative to other states. The formula favors states with a lower per capita income and a higher proportion of the population aged 55 and older relative to other states. Population data are from the annual population estimates published by the U.S. Census; the reference date for estimates is July 1. Per capita income data are from the Bureau of Economic Analysis (BEA) within the U.S. Department of Commerce (DOC). There is a two-year time lag between the data (reference year of the population estimates and per capita income) and the respective appropriation year. For the purpose of determining state allotments to state agency and national grantees, the law requires that allotments meet two criteria. The first criterion is that states (including the District of Columbia and Puerto Rico) are to receive at least a minimum grant allotment, which is defined as 0.5% (one-half of 1%) of the respective grant amount for the given fiscal year. The second criterion is the \"hold harmless\" provision. If grant amounts for a given year are equal to, or less than, their FY2000 level, states are to receive an allotment in proportion to their respective FY2000 levels. If grant amounts exceed their FY2000 levels, states are to receive no less than their FY2000 level plus a \"guaranteed growth\" of at least 30% of the percentage increase above the FY2000 level. Title VI authorizes funds for supportive and nutrition services to older Native Americans to promote the delivery of home and community-based supportive services, nutrition services, and family caregiver support. Funds are awarded directly to Indian tribal organizations, Alaskan Native organizations, and nonprofit groups representing Native Hawaiians. To be eligible for funding, a tribal organization must represent at least 50 Native American elders aged 60 or older. In FY2017, grants were awarded to 270 tribal organizations representing 400 Indian tribes, including one organization serving Native Hawaiian elders. FY2019 funding for supportive and nutrition services grants is $34.2 million, while FY2019 funding for the Native American caregiver program is $10.1 million. There is no requirement for tribal organizations to match these grant funds. Separate formula grant awards are made for (1) nutrition and supportive services and (2) family caregiver support services. Formula grants for services to older Native Americans are allocated to tribal and other representing organizations based on their share of the American Indian, Alaskan Native, and Native Hawaiian population aged 60 and over in their services area. Tribal organization allotments must meet a FY1991 \"hold harmless\" provision. If funds for a given year exceed the FY1991 amount, then the grant amount is either (1) increased to equal or approximate the amount the organization received in 1980 or (2) determined based on what the Assistant Secretary considers sufficient if the tribal organization did not receive a grant for either FY1980 or FY1991. For Native Hawaiian programs, formula allotments for services to representing organizations are only required to meet a FY1991 \"hold harmless\" provision. Title VII authorizes the Long-Term Care (LTC) Ombudsman Program and elder abuse, neglect, and exploitation prevention programs. Most Title VII funding is directed at the LTC Ombudsman Program, the purpose of which is to investigate and resolve complaints of residents of nursing facilities and other long-term care facilities. For FY2019, funding for the LTC Ombudsman and Elder Abuse, Neglect, and Exploitation Prevention Programs totals $21.7 million. There is no requirement for states to match these grant funds. Funds for LTC ombudsman and elder abuse prevention activities are allotted to states based on each state's relative share of the population aged 60 years and older. For the purpose of determining state allotments, the law requires that states (including the District of Columbia and Puerto Rico) receive a minimum amount of funds, which is defined as 0.5% (one-half of 1%) of the total grant appropriation for the respective fiscal year. Guam and the U.S. Virgin Islands are allotted no less than 0.25% (one-quarter of 1%) of the total grant appropriation, and American Samoa and the Commonwealth of the Northern Mariana Islands are allotted no less than 0.0625% (one-sixteenth of 1%) of the total grant appropriation. State allotments must also meet a FY2000 \"hold harmless\" provision. SUAs may award funds for these activities to a variety of organizations for administration, including other state agencies, AAAs, county governments, nonprofit service providers, and volunteer organizations. Appendix A. Legislative History of OAA Title III Funding Formula When the OAA was enacted in 1965, Title III funds were allocated to states based on their relative share of the population aged 65 and over. The law also set certain minimum grant amounts for states and territories. For states, the minimum allotment was 1% of total funds appropriated, and for the U.S. Virgin Islands, Guam, and American Samoa, the minimum allotment was 0.5% (one-half of 1%) of funds appropriated. These provisions remained in effect until 1973. The first significant change to the OAA Title III funding formula occurred under the 1973 amendments to the act, which based the formula on the states' relative share of the population aged 60 and over, rather than, as under prior law, aged 65 and over. The 1973 amendments also changed the minimum allotments states and territories were to receive, as follows: states were to receive no less than 0.5% of the total appropriation; and Guam, American Samoa, the U.S. Virgin Islands, and the Trust Territories of the Pacific Islands were to receive no less than 0.25% (one-fourth of 1%) of total funds. In addition, the 1973 amendments specified that states were to receive no less than they received in FY1973 (the hold harmless amount). These provisions remained in effect until the 1978 amendments, which changed the minimum amounts for American Samoa to one-sixteenth of 1% of the appropriation, and added a minimum funding amount for the Northern Marianas (also one-sixteenth of 1%). The 1978 amendments also changed the year for the hold harmless amount. The law stipulated that for fiscal years after 1978, states were to receive no less than they received in FY1978, rather than, as in prior law, FY1973. Successive amendments subsequently changed the hold harmless year. Amendments in 1984 required that for fiscal years after FY1984, states be allotted no less than they received for services in FY1984. There were no changes to the formula provisions under the 1987 amendments. The 1992 amendments moved the hold harmless reference year to FY1987. No further changes were made to these funding formulas until the 2000 amendments. The OAA Amendments of 2000 and 2006 The Title III funding formula for supportive services and senior centers, the congregate and home-delivered nutrition programs, and disease prevention and health promotion services has been a point of controversy in recent congressional attempts to reauthorize the Older Americans Act. Initially, Congress was concerned that the method AOA used to distribute Title III funds was inconsistent with statutory requirements, thereby negatively affecting states experiencing faster growth in their older population. However, more recently, congressional debate has focused on whether or not the statutory formula itself accurately reflects trends in the aging of the U.S. population. The following provides a brief overview of the debate and legislative changes to the Title III funding formula in the OAA reauthorizations of 2000 and 2006. After unsuccessful attempts in the 104 th and 105 th Congresses to reauthorize the OAA, the 106 th Congress approved the Older Americans Act Amendments of 2000 ( P.L. 106-501 ). The Title III funding formula was a controversial issue during the six years of congressional debate on the 2000 OAA reauthorization. Prior to the reauthorization, a 1994 U.S. General Accounting Office (now the Government Accountability Office, or GAO) report found that the method AOA used did not distribute funds among states proportionately to their older population to the maximum extent possible. Instead, AOA allotted funds to states, first according to an amount equal to their FY1987 \"hold harmless\" allocation, with the remainder of the appropriations allotted to states based on their relative share of the population aged 60 and over. This methodology negatively affected states with faster-growing older populations, since the majority of funds were being distributed according to population estimates that did not reflect the most recent trends. The GAO report recommended that AOA revise its methodology for distributing funds to states. In response to these concerns, the 2000 OAA reauthorization resulted in the following changes to the law: (1) Congress clarified the law to ensure that, first, funds were allotted to states based on the most recent population data; (2) Congress created an FY2000 \"hold harmless\" requirement, thereby ensuring that no state would receive less than it received in FY2000; and (3) Congress created the \"guaranteed growth\" provision, ensuring that all states would receive a share of any appropriations increase over the FY2000 level. The Title III funding formula also became a major point of contention during the 2006 OAA reauthorization debate. Congress revisited the FY2000 \"hold harmless\" requirement and \"guaranteed growth\" provision. At the time, the \"hold harmless\" requirement ensured that, provided sufficient funds, every state and U.S. territory received at least its FY2000 amount. The \"guaranteed growth\" provision guaranteed that all states received a certain share of any increase above the FY2000 appropriation. These issues divided Members from states with relatively faster-growing older populations from lawmakers representing states with relatively slower growth in their older populations. High-growth states argued that the \"hold harmless\" provisions in current law provided protections to states whose populations were not increasing as quickly as others', resulting in an inequitable distribution of funds that disadvantaged high-growth states. The OAA 2006 Amendments ultimately resulted in changes to the law as follows: (1) Congress changed the formula to ensure that, provided sufficient funds, every state receives at least its FY2006 amount (creating a new fiscal year \"hold harmless\" amount); and (2) Congress phased out the \"guaranteed growth\" provision, reducing the share of any increase in appropriations from 20% to 0 by 5 percentage points annually beginning in FY2008. For FY2007 through FY2010, the guaranteed growth provisions were as follows: 20% of the percentage increase in appropriations from FY2006 to FY2007; 15% of the percentage increase in appropriations from FY2006 to FY2008; 10% of the percentage increase in appropriations from FY2006 to FY2009; and 5% of the percentage increase in appropriations from FY2006 to FY2010. Under current law, for FY2011 and any succeeding fiscal years, the formula does not include the guaranteed growth provision. The OAA Reauthorization of 2016 The Title III funding formula for supportive services and senior centers, the congregate and home-delivered nutrition programs, and disease prevention and health promotion services continued to be a major point of contention during the 2016 OAA reauthorization debate, which spanned multiple Congresses. Congress again revisited the issue of how much state population growth should influence state funding allocations versus retaining continuity in funding allocations for slower-growth states. In the 113 th Congress, comprehensive OAA reauthorization legislation was introduced in the Senate ( S. 1028 and S. 1562 ) which would have extended the authorizations of appropriations through FY2018 for most OAA programs and would have made various amendments to existing OAA authorities. The Senate HELP Committee ordered S. 1562 reported favorably with an amendment in the nature of a substitute. In the House of Representatives, two OAA reauthorization bills were introduced ( H.R. 3850 and H.R. 4122 ). These bills were referred to the Committee on Education and the Workforce, but saw no further legislative action. Prior to legislative consideration, the topic of OAA statutory funding formulas was again examined by GAO in an analysis of the OAA Title III and VII statutory funding formulas that focused on formula modifications that would capture state differences with respect to need by including factors that measure the needs of the elderly population, costs of services in addressing those needs, and the capacity of states to finance needed services. GAO found that the current formulas could better meet generally accepted equity standards in targeting OAA services to those with \"greatest economic need\" and \"greatest social need.\" For example, GAO found that the need for OAA services can be estimated using data on older individuals' functional limitations. GAO also noted that while revisions to the OAA statutory formula may pose challenges, options to ease the transition such as phasing in implementation over several years and/or instituting funding floors or ceilings may be further provisions for policymakers to consider in any statutory revisions. In the 113 th Congress, S. 1562 did not contain provisions that would amend OAA statutory funding formulas. However, during the Senate HELP Committee consideration of the OAA reauthorization bill, Senator Richard Burr introduced an amendment that would have removed the Title III Part B (supportive services and senior centers), Part C (nutrition services), and Part D (disease prevention and health promotion services) FY2006 hold harmless provision, which was rejected. Senator Tom Harkin, then chairman, stated there would be additional examination of the OAA funding formula by a Senate bipartisan workgroup with a possible solution prior to Senate floor consideration. The bill was subsequently reported out of committee and placed on the Senate Legislative Calendar, but did not receive consideration by the Senate. The bill saw no further action in the Senate. In the 114th Congress, the Older Americans Act Reauthorization Act of 2015 ( S. 192 ) was introduced on January 20, 2015. The bill authorized appropriations for most OAA programs for a three-year period from FY2016 to FY2018. It also made various amendments to existing OAA authorities, including changes to the statutory funding formula for the supportive services and senior centers, congregate nutrition, home-delivered nutrition, and disease prevention and health promotion services under Title III of the act, which lessens the effect of the hold harmless provision over time. The Senate HELP Committee ordered S. 192 reported favorably, and it subsequently passed the Senate on July 16, 2015. The House took up S. 192 on March 21, 2016, and passed the bill with an amendment authorizing appropriations for the three-year period from FY2017 to FY2019. S. 192 , as amended by the House, did not substantively change the hold harmless provision under S. 192 , as passed by the Senate. Rather, it amended the effective dates for the hold harmless reduction, from FY2016 through FY2018 to FY2017 through FY2019. It froze this reduction in place for FY2020 and future fiscal years, unless or until such language is amended. The Senate passed S. 192 as amended by the House on April 7, 2016. President Barack Obama signed P.L. 114-144 , the Older Americans Act Reauthorization Act of 2016, on April 19, 2016. Specifically, P.L. 114-144 changed the statutory funding allocations for OAA Title III, Parts B, C, and D. This provision retained the same state and U.S. territory minimum amounts allotted under current law and the same population-based formula factor (aged 60 and over), but reduced state and U.S. territory hold harmless amounts (currently referenced to FY2006 funding levels) by 1% from the previous fiscal year. The law lessens the effect of the FY2006 hold harmless provision by reducing state and U.S. territory hold harmless amounts by 1% for each of three years, and then freezes this reduction in place for FY2020 and future fiscal years, unless or until such language is amended. Effectively, for those states that receive an annual program allotment based on their FY2006 hold harmless amount, the policy change minimizes any reduction in funding to no more than 1% from the previous fiscal year, assuming a program's total funding level in fiscal years 2017 to 2019 is at or above the previous fiscal year's level. Appendix B. Population Trends Table B-1 shows the population aged 60 and older by state or U.S. territory and the proportion of the entity's population aged 60 and older relative to the total U.S. population aged 60 and over for selected years. U.S. Census data shown are for the 2000 and 2010 Decennial Censuses, as well as the 2017 Intercensal state population estimates, which is the most recent year for which data are available. There is a two-year time lag between the reference year of the population estimates and the respective appropriation year. For example, FY2019 state allotments are calculated using 2017 estimates of the population aged 60 and older. The column labeled \"% Age 60+\" is the entities' relative share of the 60+ population, which functions as its population-based formula factor used to determine state allotments under OAA Title III, Parts B, C, and D and Title VII. The final column of Table B-1 calculates the percentage point change in the population formula factor for each state and U.S. territory from 2000 to 2017. Among all 56 states and U.S. territories (which includes the District of Columbia and Puerto Rico), 29 entities saw a proportionate increase in the population formula factor from 2000 to 2017, while 27 saw a decrease over this time period. The top five states that experienced the greatest proportionate increase were Texas (+0.93%), California (+0.56%), Georgia (+0.47%), North Carolina (+0.37%), and Arizona (+0.37%). The bottom five states that experienced the greatest decline were Pennsylvania (-0.85%), New York (-0.79%), Ohio (-0.44%), Illinois (-0.42%), and New Jersey (-0.35%). Appendix C. The Older Americans Act Reauthorization Act of 2016 ( P.L. 114-144 ): Analysis of Formula Change The following analysis compares FY2016 allotment amounts for states and other entities with actual allotment amounts under the statutory funding formula change in P.L. 114-144 for FY2017 to FY2019. The following tables provide results by program: Table C-1 : Title III, Part B, supportive services and senior centers; Table C-2 : Title III, Part C, subpart 1, congregate nutrition services; Table C-3 : Title III, Part C, subpart 2, home-delivered nutrition services; and Table C-4 : Title III, Part D, disease prevention and health promotion services programs. Each table compares FY2016 state and U.S. territory allotments prior to the statutory funding formula change under P.L. 114-144 to allotments with the change, for FY2017 through FY2019. The columns in each table provide two types of analyses for each year. The first is the percentage change between the entities' FY2016 allotment and the entities' annual allotment for each year, respectively. The second is the entities' allotment type for each year of the change, where \"M\" refers to an entity that receives a minimum allotment amount; \"HH\" refers to an entity that receives an allotment amount based on 99% of the previous fiscal year's hold harmless funding amount; and \"P\" refers to an entity that receives an allotment amount based on the entities' population formula factor. For programs where the current law hold harmless is in effect (i.e., some states and territories receive an allotment based on their hold harmless), the change to the statutory funding formula, often also combined with increases in appropriated funding amounts, reduces the effect of the hold harmless over time. For example, 16 states and territories received an allotment based on their FY2006 hold harmless level for the congregate nutrition services program. Under the statutory funding formula change, the number of states and territories that received an allotment based on the hold harmless (99% of the previous fiscal year) remained at 16 in FY2017 with a 0.2% increase in the total allotment amount from the prior year. That number fell to 4 in FY2018 when combined with a 10% increase in the total allotment amount compared to the prior year and remained at 4 in FY2018. As a state or territory's hold harmless amount is reduced gradually by 1% from the previous year's hold harmless over three fiscal years, additional states and territories received funding based on their hold harmless amount. Effectively, the change to the statutory funding formula, especially when combined with increases in appropriated funding amounts, allows funding freed up from the hold harmless reductions to be redistributed to states and territories based on the population formula factor. Thus, more states and territories received funding based on their population aged 60 and over. Under the supportive services and senior centers and disease prevention and health promotion services programs all states and territories received funding in FY2016 based on a proportionate reduction to their FY2006 hold harmless amount. Total FY2016 funding for these programs was below FY2006 funding levels. The statutory funding formula change combined with program funding increases reduced the number of entities receiving an allotment based on their hold harmless from FY2017 to FY2018 (for supportive services, 29 states in FY2017, to 10 in FY2018; and for disease prevention, 28 states in FY2017, to 0 in FY2018). From FY2018 to FY2019, appropriated amounts for these programs did not change and the number of entities receiving an allotment based on their hold harmless increased slightly—to 12 entities for the supportive services program and 9 entities for disease prevention. For programs where the previous FY2006 hold harmless was not in effect, such as home-delivered nutrition services, the funding formula change had a smaller effect compared to prior law. Two states and territories receive funding for FY2017 based on their hold harmless amount. For FY2018 and FY2019 all states receiving funding based on either their population age 60 and older or the minimum grant amount. In general, the statutory funding formula change did not affect entities receiving an allotment based on the minimum grant amount as P.L. 114-144 made no change to this provision.", "summary": "The Older Americans Act (OAA) is the major vehicle for the delivery of social and nutrition services for older persons. The act's statutory funding formulas determine allotments to states and other entities under the following OAA Titles: Title III, Grants for State and Community Programs; Title V, the Community Service Senior Opportunities Act; Title VI, Grants for Older Native Americans; and Title VII, Vulnerable Elder Rights Protection Activities. This report describes the OAA statutory provisions that allocate funds to states and other entities under various titles of the act. Title III accounts for 73% of the act's total FY2019 discretionary appropriations ($1.498 billion out of $2.055 billion). States receive separate allotments of funds for the following six programs authorized under Title III: (1) supportive services and senior centers, (2) congregate nutrition services, (3) home-delivered nutrition services, (4) the Nutrition Services Incentive Program (NSIP), (5) disease prevention and health promotion services, and (6) the National Family Caregiver Support Program (NFCSP). Formula grants are allotted from the Administration on Aging (AOA), within the Administration for Community Living (ACL) in the Department of Health and Human Services (HHS), to State Units on Aging (SUAs) in all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories. The states, in turn, award funds to approximately 629 Area Agencies on Aging (AAAs). Title V authorizes the Community Service Employment for Older Americans Program (CSEOA). Administered by the Department of Labor (DOL), Title V is OAA's second-largest program and is the only federally subsidized employment program for low-income older persons. Its FY2019 funding of $400 million represents 20% of the act's total discretionary funding. DOL allocates Title V funds for grants to state agencies in all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories, and to national grantees who are typically nonprofit organizations that operate in more than one state. The total Title V state allotment is the sum of its respective state agency grantee allotment and national grantee allotment. Title VI authorizes funds for supportive and nutrition services to older Native Americans to promote the delivery of home and community-based supportive services, nutrition services, and family caregiver support. Funds are awarded directly to Indian tribal organizations, Alaskan Native organizations, and nonprofit groups representing Native Hawaiians. Title VII authorizes the Long-Term Care (LTC) Ombudsman Program and elder abuse, neglect, and exploitation prevention programs. Most Title VII funding is directed at the LTC Ombudsman Program, the purpose of which is to investigate and resolve complaints of residents of nursing facilities and other long-term care facilities. Funds for LTC ombudsman and elder abuse prevention activities are allotted to all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories. The Older Americans Act Reauthorization Act of 2016 (P.L. 114-144) authorizes appropriations for most OAA programs through FY2019. P.L. 114-144 also made changes to the statutory funding formulas for several programs under Title III of the act. Appendix A of the report provides a detailed legislative history of the Title III funding formula changes, including changes under P.L. 114-144, as well as the OAA reauthorizations of 2000 and 2006. Appendix B provides an analysis of the state-based population data for the U.S. population age 60 and older. Appendix C compares FY2016 allotment amounts for states and other entities with actual allotment amounts under the statutory funding formula change in P.L. 114-144 for FY2017 to FY2019 for Title III Parts B, C, and D programs.", "document_type": "crs"}
{"report": "The Federal Housing Administration (FHA) was established by the National Housing Act of 1934 and became part of th e Department of Housing and Urban Development (HUD) in 1965. It insures private lenders against losses on certain home mortgages. If the borrower does not repay the mortgage and the home goes to foreclosure, FHA pays the lender the remaining amount that the borrower owes (that is, it pays a claim to the lender). FHA charges borrowers fees, called premiums, in exchange for the insurance. FHA insurance is intended to encourage lenders to offer mortgages to some borrowers who otherwise might be unable to access mortgage credit at affordable interest rates or at all. For example, FHA requires a smaller down payment than many other types of mortgages, potentially making it easier for lower-wealth borrowers, first-time homebuyers, or others for whom a large down payment may present a barrier to homeownership to obtain a mortgage. To qualify for FHA insurance, both the borrower and the mortgage must meet certain criteria. For example, the principal balance of the mortgage must be under a certain dollar threshold. Lenders that originate FHA-insured mortgages must be approved by FHA. This report describes certain measures of the financial health of the FHA insurance fund for home mortgages, the Mutual Mortgage Insurance Fund. The discussion in this report assumes a certain degree of familiarity with FHA-insured mortgages. For more information on the basic features of FHA-insured mortgages and FHA's role in the mortgage market, see CRS Report RS20530, FHA-Insured Home Loans: An Overview . Most single-family mortgages insured by FHA are financed through an insurance fund called the Mutual Mortgage Insurance Fund (MMI Fund). Since FY2009, the MMI Fund has included FHA-insured reverse mortgages as well as traditional \"forward\" home mortgages. Much of the discussion in this report focuses only on traditional forward mortgages, rather than reverse mortgages. However, certain specified sections discuss both forward and reverse mortgages. Money flows into the MMI Fund primarily from the mortgage insurance premiums paid by borrowers and from sales of foreclosed properties, and money flows out of the MMI Fund primarily from claims paid to lenders when FHA-insured mortgages default. The MMI Fund is intended to be self-supporting. It is meant to pay for costs related to insured loans (such as insurance claims paid to lenders) with money it earns on those loans (such as through premiums paid by borrowers), not through appropriations. The MMI Fund is also required to maintain a capital ratio of 2% to help pay for any unexpected increases in losses on its insured mortgages, beyond the losses that it currently anticipates. (Capital in this context is defined as the assets that the MMI Fund currently has on hand, plus the net present value of future cash flows associated with the mortgages that it currently insures. The capital ratio is the ratio of capital to the total dollar amount of mortgages insured under the MMI Fund.) As will be discussed in more detail later in this report, the MMI Fund, like all federal loan and loan guarantee programs subject to the Federal Credit Reform Act of 1990, has permanent and indefinite budget authority to receive funds from the Department of the Treasury to cover increases in the costs of loan guarantees made in prior years. FHA faces an inherent tension between facilitating the provision of mortgage credit to underserved borrowers and safeguarding the health of the MMI Fund. In the years following the housing and mortgage market turmoil that began around 2007, rising mortgage default rates and falling home prices put pressure on the MMI Fund. This resulted in the capital ratio falling below the required 2% threshold in FY2009 and then turning negative for a period of time. The capital ratio became positive again in FY2014 and regained the 2% threshold in FY2015. The capital ratio falling below 2%, and then turning negative, raised concerns that the MMI Fund would not have enough money to cover all of its expected future losses on the loans that it was currently insuring. At the end of FY2013, the MMI Fund received $1.7 billion from Treasury using its permanent and indefinite budget authority to ensure that it was holding enough funds to cover expected future losses on insured loans. This represented the first time that the MMI Fund ever had to draw on its permanent and indefinite budget authority with Treasury for this purpose. The MMI Fund has not needed to draw such funds from Treasury in subsequent years. Congress has expressed ongoing interest in the MMI Fund's financial status and its prospects for needing additional funds to pay for future losses on its insured loans. This report focuses on the financial position of the MMI Fund. It begins with a brief overview of some of the major factors that affect the MMI Fund's financial soundness. The remainder of the report focuses on (1) how the MMI Fund is accounted for in the federal budget and (2) the results of annual independent actuarial reviews that are mandated by Congress. The budgetary treatment of FHA-insured mortgages and the actuarial review are two different processes, but both examine how the loans insured under the MMI Fund have performed and are expected to perform in the future and the effect of this loan performance on the financial position of the MMI Fund. The annual actuarial review is the basis for determining the capital ratio. However, it is the annual budget process that determines whether or not the MMI Fund requires assistance from Treasury. This section briefly describes some of the major factors that can affect the MMI Fund's financial position. These factors include default and foreclosure rates on FHA-insured loans and the average loss to FHA when a loan goes to foreclosure, the amount of the premiums charged by FHA, the volume of loans that FHA insures, and current and future economic conditions. Traditionally, when an FHA-insured mortgage goes to foreclosure, FHA pays the lender the remaining amount that the borrower owes on the mortgage and takes ownership of the property. The payment to the lender is called a claim . The loss to FHA is the claim amount paid plus any other foreclosure-related expenses (such as the cost of maintaining the foreclosed property), minus any amount that FHA can recoup by selling the foreclosed home. FHA's total losses related to defaults and foreclosures can depend on, among other factors, (1) the number of delinquencies, defaults, and foreclosures on FHA-insured loans; (2) the success of efforts to help borrowers avoid foreclosure on FHA-insured loans or to minimize the costs to FHA associated with a foreclosure; and (3) how much FHA can recoup by reselling foreclosed homes. The number of FHA-insured mortgages that become delinquent on mortgage payments impacts FHA's financial status because higher numbers of delinquencies are likely to translate into higher numbers of foreclosures and more claims paid out by FHA. Not all delinquent or defaulted mortgages will necessarily result in completed foreclosures, but higher delinquency and default rates are more likely to lead to higher foreclosure rates. During turmoil in the housing and mortgage markets starting around 2007, delinquency and foreclosure rates on all types of mortgages, including FHA-insured mortgages, increased, with FHA \"serious delinquency\" rates peaking in early 2012 at nearly 10%. (Seriously delinquent loans are generally defined as loans that are 90 or more days past due, in the foreclosure process, or in bankruptcy.) This increase in distressed mortgages put pressure on the MMI Fund. More recently, delinquency rates on FHA-insured mortgages have generally improved. As of December 2018, FHA reported that about 4% of its insured loans were seriously delinquent. A number of factors contributed to elevated delinquency and default rates on FHA-insured mortgages in the aftermath of the housing market turmoil. Unfavorable economic conditions, such as decreases in home prices and increases in unemployment, affected many regions of the country, leading to more defaults and foreclosures on FHA-insured loans. Other factors, such as the credit quality of some loans, also contributed to increased default rates. Similarly, many factors contributed to the improvement in loan performance beginning in 2013. These factors included improving economic conditions and better credit quality of newly insured loans. FHA data show that the loans insured by FHA in the years since 2009 have generally performed better to date than the loans insured in the years immediately preceding 2009, based on a comparison of serious delinquency rates at the same number of months after loan origination. Default and foreclosure rates can be affected by efforts to help borrowers avoid foreclosure, such as by offering mortgage modifications. Efforts to help borrowers avoid foreclosure and thereby mitigate the losses that the MMI Fund would experience due to a foreclosure are referred to as loss mitigation actions. When a borrower with an FHA-insured loan defaults, the servicer of the loan is required to evaluate whether the borrower is eligible for certain specified loss mitigation actions. If successful, these options can reduce the losses that FHA would otherwise bear on a troubled loan and help minimize losses to the MMI Fund. Some loss mitigation options are intended to result in a borrower keeping his or her home, such as loan forbearance or loan modifications. Other options will result in the borrower losing his or her home, but avoiding foreclosure, such as short sales and deeds-in-lieu of foreclosure. FHA pays incentive payments and, in some cases, partial insurance claim payments to lenders in connection with loss mitigation actions. These costs are likely to be less to FHA than the cost of paying a claim after a foreclosure. However, if the borrower defaults on the mortgage again in the future and the loan then goes to foreclosure, FHA could end up paying the full claim amount. Therefore, the extent to which loss mitigation actions minimize losses to FHA will depend on whether borrowers who receive any type of loan workout remain current on their mortgages or default again in the future. If a mortgage must ultimately go to foreclosure, FHA may be able to recoup some of the claim amount that it pays to the lender by selling the property. In general, the amount that it recoups will usually be less than the claim amount. FHA also incurs costs related to managing and marketing foreclosed properties before they are ultimately sold. The amount of money that FHA loses on a given claim as a share of the outstanding loan balance, after accounting for any amounts it recoups from selling the property, is referred to as its loss severity rate. For the fourth quarter of FY2018, FHA reported that, on average, it lost about 41% of the unpaid principal balance of the loan when it paid insurance claims. (These rates can vary from quarter to quarter; for example, in FY2018 loss severity rates ranged from about 41% to about 46%; in FY2017 they ranged from about 46% to 54%.) FHA's loss severity rates have generally improved in recent years. For example, loss severity rates were 55% in the fourth quarter of FY2013 and 61% in the fourth quarter of FY2012, compared to about 41% in the fourth quarter of FY2018. This improvement has been driven in part by increased use of alternative methods of selling foreclosed properties, which have generally had lower loss severity rates than traditional foreclosures. However, the loss severity rates for traditional foreclosures have also decreased somewhat over time. A number of factors other than disposition methods can also affect loss severities, including home price appreciation or depreciation and the characteristics of the mortgages and properties in question. FHA charges fees, or premiums, to borrowers who obtain FHA-insured mortgages. These premiums are intended to cover the costs of any claims that are paid out of the MMI Fund. Borrowers pay both an up-front premium and an annual premium. These fees represent the main source of revenue flowing into the MMI Fund. The amount of premium revenue that comes into the MMI Fund depends on a number of factors, including the amount of the premiums charged, the number and dollar amount of outstanding mortgages on which borrowers are paying premiums, and how many of these outstanding mortgages are ultimately prepaid—through refinancing the mortgage, paying off the loan, or going to foreclosure—resulting in the borrower no longer paying premiums. Raising premiums can bring more money into the insurance fund and help to ensure that FHA is pricing its insurance high enough to adequately cover its risks. However, if premiums are raised too high, fewer borrowers might choose to take out FHA-insured mortgages, potentially affecting the overall amount of premium revenue that FHA earns. Furthermore, raising premiums too high could reduce the overall quality of the mortgages that FHA insures by potentially making FHA-insured mortgages a less attractive option for all but the borrowers who present the largest credit risk. FHA raised the annual premiums that it charges multiple times in the years following the housing market turmoil before announcing a decrease in the annual premium in January 2015. The annual premiums that FHA is currently charging are lower than at any time since October 2010, though they are higher than the premiums that were charged prior to that date. The number and dollar volume of loans that FHA insures plays a role in its economic stability. On the one hand, more loans insured by FHA could lead to more premium revenue coming into the MMI Fund as more borrowers pay premiums on their FHA-insured loans. On the other hand, more mortgages insured by FHA also increases FHA's liability for loan defaults. Ultimately, the quality of the loans insured and their future performance influence the overall impact of loan volume on the financial stability of the MMI Fund. Economic and housing market conditions impact FHA's financial position in several ways. First of all, economic conditions can contribute to default and foreclosure rates. If more people become unemployed or underemployed, or if home prices fall such that people cannot sell their homes if they can no longer afford their mortgages, then more people may face default or foreclosure. Falling house prices also limit the amount that FHA can recoup when it sells a foreclosed property. Projections of future economic conditions are also important factors in evaluating the health of the MMI Fund. The expected future paths of house prices and interest rates, in particular, play large roles in estimating how FHA-insured mortgages will perform in the future and, ultimately, how much money is expected to flow into and out of the MMI Fund. The future path of house prices is important because, as noted, house prices play a role in default and foreclosure rates and in how much FHA can recoup on foreclosures. Interest rates are important because they can affect home purchase activity as well as the decision by homeowners to refinance their mortgages, which affects how much premium revenue FHA expects to earn as well as affecting FHA's potential liability for future claims. If borrowers with FHA-insured mortgages refinance into new mortgages that are not insured by FHA, those borrowers will stop paying premiums to FHA, reducing the amount of revenue that FHA takes in. However, FHA's overall liabilities will also be reduced since it will no longer be responsible for repaying the lender if the borrower defaults on the mortgage. If assumptions about future economic conditions and their impact on loan performance are not accurate, then current estimates of the MMI Fund's financial position may also not be accurate. This section describes how FHA-insured mortgages are accounted for in the federal budget in the year that the loans are insured and in the years thereafter. It includes a discussion of the circumstances under which the MMI Fund would need an appropriation in order to cover the cost of insuring new single-family loans in an upcoming fiscal year (a situation which has never occurred), and the circumstances under which the MMI Fund can draw on permanent and indefinite budget authority with Treasury to reserve for higher-than-expected costs of loans insured in past years (an event that occurred at the end of FY2013). The Federal Credit Reform Act of 1990 (FCRA) specifies the way in which the costs of federal loan guarantees, including FHA-insured loans, are recorded in the federal budget. The FCRA requires that the estimated lifetime cost of guaranteed loans (in net present value terms) be recorded in the federal budget in the year that the loans are insured. The lifetime cost per dollar of loans guaranteed is reflected in the budget as a credit subsidy rate , and the credit subsidy rate multiplied by the total dollar volume of loans insured that year results in the total amount of credit subsidy for those loans. When a loan guarantee program is estimated to have a positive credit subsidy rate, it requires an appropriation to cover the cost of new loan guarantees before it can insure any new loans in that fiscal year. When a loan guarantee program is estimated to have a negative credit subsidy rate, it means that the present value of the lifetime cash flows associated with the guaranteed loans is expected to result in more money coming into the account than flowing out if it. Rather than requiring an appropriation, a negative credit subsidy rate generates negative subsidy, resulting in offsetting receipts. In the case of the MMI Fund, these offsetting receipts can offset other costs of the HUD budget. In accordance with the FCRA, each year as part of the President's budget request, FHA and the Office of Management and Budget (OMB) estimate the credit subsidy rate for the loans expected to be insured in the upcoming fiscal year. These estimates are based on factors such as projections of how much mortgage insurance premium revenue the loans insured in the upcoming year are expected to bring in, projections of how much FHA will have to pay in future insurance claims related to those loans, and projections of how much money FHA will be able to recover by selling foreclosed properties. These projections, in turn, rest on assumptions about the credit quality of the loans being made and assumptions about future economic conditions (including house prices and interest rates). Since credit reform accounting was implemented, FHA's single-family mortgages have always been estimated to have negative credit subsidy in the year that they are insured. That is, over the life of the loans, the insured loans are projected to make money for the government rather than require an appropriation from the government to pay for their costs. (This applies only to the costs associated with the insured loans themselves; credit subsidy rates do not include the administrative costs of a program. FHA does receive appropriations for administrative contract expenses and for salaries. ) The original credit subsidy rate estimates for FHA-insured loans have ranged from a low of -0.05% in FY2009 to a high of -9.03% in FY2015. The total amount of money that FHA would expect to earn on loans insured in a given year depends on the total dollar amount of loans it insures in that year as well as the credit subsidy rate. If FHA's single-family program were ever estimated to have a positive credit subsidy rate for the upcoming fiscal year, it would require an appropriation to cover the difference between the amount of money FHA expected to take in and pay out over the life of the loans. If funding was not appropriated to cover a positive subsidy rate, then FHA would not be able to insure new loans in that year. (For a brief discussion of a proposed change in the required method of calculating credit subsidy rates that could result in the MMI Fund having a positive credit subsidy rate, see the nearby text box, \" FHA and \"Fair Value\" Accounting .\") In the President's FY2019 budget request, the credit subsidy rate for the MMI Fund, excluding reverse mortgages, was estimated to be negative 3.20% for FY2019. At an expected insurance volume of $230 billion, the budget estimated that the MMI Fund forward portfolio would earn about $7.4 billion in negative credit subsidy in FY2019. CBO does its own credit subsidy estimates, and these estimates are the ones that are used during the appropriations process. For FY2019, CBO estimated that FHA's single-family programs (excluding reverse mortgages) would generate about $6.9 billion in negative credit subsidy. CBO's lower credit subsidy estimate, as compared to the budget request, results from slightly lower estimates of both the credit subsidy rate and overall loan volume for the FHA forward portfolio in FY2019. The amount of money that loans insured by FHA in a given year actually earn for or cost the government over the course of their lifetime is likely to be different from the original credit subsidy estimates due to better or worse than expected performance of those loans. Federal credit reform accounting recognizes this, and provides permanent and indefinite budget authority to federal credit programs to cover any increased costs of loan guarantees in the future. Each year, in consultation with OMB, FHA re-estimates each prior year's credit subsidy rates based on the actual performance of the loans and other factors, such as updated economic projections. Although the original credit subsidy rate for the single-family mortgage insurance program each year has historically been estimated to be negative, the credit subsidy rate re-estimates for the loans insured in several fiscal years are currently estimated to be positive, suggesting that FHA will actually pay out more money than it earns on the loans insured in those years. Table 1 shows the original credit subsidy rate estimates and the most current re-estimated credit subsidy rates (as of the date of this report) for the loans insured in each fiscal year between 1992 and 2017. The first column shows the original credit subsidy rate. In all cases the original subsidy rate estimates were negative (shown in green), meaning that the loans insured in those years were originally expected to make money for the government. The second column shows the current re-estimated credit subsidy rate for each year. Re-estimated credit subsidy rates are shown in green if they remained negative (even if they are less favorable than the original estimate) and in red if they have become positive. (See the PDF version of this report to see the table in color.) For most years, the current re-estimated credit subsidy rate is less favorable than the original estimate, although many of the re-estimated credit subsidy rates are still negative. A lower, but still negative, credit subsidy estimate suggests that the loans insured in that fiscal year will still make money for the government, but less than was originally estimated. In the years between FY2000 and FY2009, the re-estimates of the subsidy rates are positive (shown in red), meaning that the loans insured in these years are currently expected to lose money overall. In six years—FY1992, FY2010, FY2011, FY2012, FY2013, and FY2016—the current re-estimated subsidy rate is more favorable than the original estimated subsidy rate, meaning that the loans insured in those years are now expected to make more money than originally estimated. The credit subsidy rate re-estimates affect the way in which funds are held in the MMI Fund. The MMI Fund consists of two primary accounts: the Financing Account and the Capital Reserve Account. The Financing Account holds funds to cover expected future losses on FHA-insured loans. The Capital Reserve Account holds additional funds to cover any additional, unexpected future losses. Funds are transferred between the two accounts each year on the basis of the re-estimated credit subsidy rates to ensure that enough is held in the Financing Account to cover updated projections of expected losses on insured loans. If the credit subsidy rate re-estimates reflect an aggregate increase in expected losses, funds are transferred from the Capital Reserve Account to the Financing Account to cover the amount of the increase in expected losses. If the credit subsidy rate re-estimates reflect a decrease in aggregate expected losses, funds are transferred from the Financing Account to the Capital Reserve Account. Table 2 illustrates the changes in these account balances between FY2008 and FY2018. In the years following the housing market turmoil that began around 2007, the credit subsidy rate re-estimates showed aggregate increases in expected losses on FHA-insured loans, requiring large transfers of funds from the Capital Reserve Account to the Financing Account to cover these additional expected future losses. At the end of FY2008, the MMI Fund held $9 billion in the Financing Account and $19.3 billion in the Capital Reserve Account. The amounts needed in the Financing Account increased over the next several years and the amounts held in the Capital Reserve Account decreased, reaching zero at the end of FY2013 (when the MMI Fund received funds from Treasury to make a required transfer of funds to the Financing Account). By the end of FY2014, the MMI Fund had begun to rebuild its reserves, holding $7.3 billion in the Capital Reserve Account. As of the end of FY2018, the Capital Reserve Account held $27.2 billion. Although the total resources held in these accounts have increased over the last several years, the total dollar volume of mortgages insured by FHA has also increased, from about $400 billion at the end of FY2008 to about $1.3 trillion at the end of FY2018. Recognizing the fact that estimating the lifetime cost of loan guarantees is inexact, the Federal Credit Reform Act of 1990 includes permanent and indefinite budget authority for federal loan guarantee programs to cover the cost of credit subsidy rate re-estimates. Therefore, if FHA ever needs to transfer more money than it has in the Capital Reserve Account to the Financing Account to cover an increase in expected losses on insured loans, it can draw on its permanent and indefinite budget authority to receive funds from Treasury to make this transfer without additional congressional action. Any funds drawn from Treasury to make a required transfer of funds to the Financing Account are not spent immediately. Rather, they are held in the Financing Account, and used to pay claims to lenders only if the rest of the funds in the Financing Account are exhausted. If economic conditions and loan performance improve, or if loans insured in the future bring in enough money to both cover their own costs and pay for past loans that defaulted, it is possible that any money received from Treasury would never actually be spent. On the other hand, if future insured loans do not bring in enough funds to cover losses on past loans, or if economic conditions and loan performance do not improve, any funds received from Treasury could eventually be spent to pay actual claims. When the President's budget request for FY2014 was released in April 2013, it included an estimate that the MMI Fund would need a mandatory appropriation of $943 million from Treasury during FY2013 in order to make a required transfer of funds from the Capital Reserve Account to the Financing Account. FHA had until the end of FY2013 to make the required transfer of funds, and there was a possibility that the MMI Fund would bring in enough additional funds through the negative credit subsidy it earned on loans that it insured in FY2013 to make the required transfer without depleting the Capital Reserve Account. However, due to reduced loan volumes in FY2013, the MMI Fund earned less than anticipated during the year. At the end of September 2013, HUD announced that the MMI Fund needed about $1.7 billion to ensure that enough money was available in the Financing Account to cover all expected future losses on insured loans. It received these funds from Treasury using the permanent and indefinite budget authority provided under the FCRA. This amount was nearly twice what was anticipated in the President's budget, and represented the first time that FHA had ever needed funds from Treasury to make a required transfer of funds from the Capital Reserve Account to the Financing Account. FHA has not needed to draw additional funds from Treasury since that time. Separately from the annual budget process, FHA is required by law to obtain an independent actuarial review each year that analyzes the financial position of the MMI Fund and to provide an annual report to Congress on the results of the actuarial review. This review traditionally analyzes the MMI Fund's financial position by reporting the amount of funds that it currently has on hand and estimating the net amount (in present value terms) that it expects to earn or lose in the future on loans that it currently insures. These numbers are added together to compute the \"economic value\" of the MMI Fund. The economic value is the amount of money that the MMI Fund would be projected to have on hand after all of the cash flows associated with its insured loans are realized, assuming that it does not insure any more loans going forward. The results of the actuarial review are presented in FHA's annual report to Congress on the financial status of the MMI Fund. The budgetary treatment and the actuarial review of the MMI Fund are two different ways of looking at the same thing—namely, how the loans insured under the MMI Fund have performed and are expected to perform in the future, and the effect of this loan performance on the financial position of the MMI Fund. However, the annual actuarial review is separate from the federal budget process, and uses somewhat different economic assumptions than those used in the federal budget. This section describes the actuarial review and accompanying annual report to Congress along with important related concepts. It then discusses the results of the FY2018 actuarial review and annual report that were released in November 2018. In the annual actuarial review, the independent actuary reviews the MMI Fund's financial information to estimate the MMI Fund's current financial position, including both forward and reverse mortgages insured under the fund. This usually includes reporting the amount of funds that the MMI Fund currently has on hand and estimating the cash flows that it expects in the future—such as premiums paid into the fund and claims paid out of the fund—on the loans that it currently insures. It uses economic modeling to project the MMI Fund's financial status for the current year and several years into the future under a \"base case\" scenario and several alternative economic scenarios. Some of the key terms used in the actuarial report and FHA's annual report on the financial status of the MMI Fund include the following: Capital resources are the net assets (assets minus liabilities) that the MMI Fund currently has on hand that can be converted into cash to pay claims on defaulted mortgages or other expenses. Present value of future cash flows on outstanding business is the estimated amount that the MMI Fund is currently expected to gain or lose in the future, in present value terms, on the loans that it currently insures (this estimate does not take into account any new loans that might be insured in the future). Economic value or economic net worth is the MMI Fund's capital resources plus the present value of its future cash flows on outstanding business. It represents the amount of capital resources that the MMI Fund would have after expected future cash flows on currently insured loans are realized. In other words, it represents the amount that the MMI Fund could use to pay for any additional, unexpected losses on its outstanding loans. The law also mandates that FHA meet a 2% capital ratio requirement, which means that the economic value of the MMI Fund must be at least 2% of the total dollar volume of mortgages that FHA currently insures. The capital ratio is calculated on the basis of the actuarial report. The capital ratio fell below this 2% requirement in FY2009 and remained below 2% for several years thereafter, turning negative in FY2012 and FY2013. The capital ratio was estimated to be positive again in FY2014 and was estimated to exceed 2% in FY2015 and each subsequent year to date. The FY2018 annual actuarial review and FHA's accompanying annual report to Congress on the MMI Fund's financial status were released in November 2018. In its annual report, FHA reported the MMI Fund's total capital resources to be $49.2 billion. This is the amount of resources that FHA currently has on hand that can be converted into cash to pay claims. FHA estimated the present value of future cash flows on insured loans (including both forward and reverse mortgages) to be negative $14.4 billion. In other words, in net present value terms, the loans that FHA currently insures are expected to cost FHA about $14.4 billion over the remaining life of those loans. The economic value of the MMI Fund, therefore, was estimated by FHA to be approximately $34.9 billion ($49.2 billion-$14.4 billion), including both forward and reverse mortgages. The independent actuary separately estimated the present value of future cash flows on insured loans for the MMI Fund. While the actuary's estimate differed somewhat from FHA's, it found FHA's estimate to be reasonable. The estimated economic value of $34.9 billion was an increase of about $8.1 billion compared to FY2017, when the MMI Fund was estimated to have an economic value of $26.7 billion. In FY2012 and FY2013, the MMI Fund was estimated to have a negative economic value. A negative economic value means that the funds that the MMI Fund currently has on hand, plus the present value of the funds that it expects to earn in premiums on loans that it currently insures, would not be enough to pay for the present value of claims on the loans that are currently insured. For example, in FY2013 the MMI Fund was estimated to have an economic value of negative $1.3 billion. This meant that, based on the MMI Fund's capital resources and estimates of future cash flows on insured loans as of the time the report was prepared, FHA was expected to be short about $1.3 billion when all of its currently insured loans were eventually paid off. In contrast, the FY2018 economic value of positive $34.9 billion means that the MMI Fund would be estimated to have that amount left over after all of the expected future cash flows (including premium payments and insurance claims) on its currently insured mortgages were realized. This provides a \"cushion\" should future losses on insured mortgages be higher than currently anticipated. The projections included in the actuarial report and the annual report to Congress rely on several assumptions. For one thing, the estimates of the MMI Fund's current status assume that FHA will not insure any more mortgages. In actuality, FHA will likely continue to insure loans, which will bring in additional resources in the form of premium revenues, but will also create new liabilities in terms of claims. Furthermore, the actuarial review relies upon assumptions about future economic conditions. To the extent that actual future economic conditions differ from these assumptions, the estimates of the MMI Fund's value will also be different. Although FHA estimates that the MMI Fund's economic value in FY2018 is positive $34.9 billion, it notes that, under a variety of alternative future economic scenarios, the MMI Fund's economic value could be different, including potentially negative values in certain severe economic scenarios. Both the actuarial report and the annual report to Congress include an analysis of the MMI Fund's financial position under various alternative economic scenarios. As noted earlier, the MMI Fund is also required by law to maintain a capital ratio of 2%. This is often referred to as the capital ratio requirement. The capital ratio requirement for the MMI Fund was enacted in 1990 amid concerns about the solvency of the FHA single-family mortgage insurance program. At the time, the MMI Fund had a negative economic value. This meant that the expected future cash flows associated with the mortgages currently insured by the MMI Fund, when combined with the capital resources that the MMI Fund currently had on hand, were not expected to be enough to pay for all future claims on FHA-insured loans. In response to these concerns, the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) mandated that, going forward, the MMI Fund's economic value must be at least 2% of the total dollar amount of loans that it is currently insuring. The capital ratio is an expression of the economic value of the MMI Fund as a percentage of the total dollar volume of loans insured by the MMI Fund. It is a measure of how much capital the MMI Fund will have available to pay for unexpected losses on currently insured loans, after the amounts estimated to be needed to cover expected losses are taken into account. In addition to establishing the capital ratio requirement, P.L. 101-508 also directed FHA to make certain changes that were intended to improve the MMI Fund's financial condition. The changes that the law required included charging borrowers an annual mortgage insurance premium to go along with the existing premium that was paid upfront and suspending certain payments (known as distributive shares) that had previously been paid to borrowers under certain conditions. The law also established the requirement for the annual independent actuarial review of the MMI Fund. Some of these changes, such as the additional mortgage insurance premium, essentially meant that FHA would charge more to future borrowers to build up reserves to pay for losses on mortgages made to past borrowers. As Congress considered the legislation prior to enactment, there was debate over the appropriate level for the capital ratio requirement. This debate highlights the ongoing tension that FHA faces between maintaining its financial soundness and carrying out its purpose of expanding access to affordable mortgage credit for underserved borrowers. The 2% threshold was adopted because it was viewed as being high enough to provide FHA with a cushion to withstand some unexpected losses, but without imposing an undue financial burden on future FHA-insured borrowers. A higher capital ratio requirement would have likely required FHA to charge higher premiums for FHA insurance. It was recognized that a 2% requirement would likely be high enough to withstand moderate future economic downturns, but would likely not be high enough to allow the MMI Fund to withstand a catastrophic economic downturn. According to testimony from the General Accounting Office (GAO, now the Government Accountability Office) from 2000: Determining what constitutes an adequate reserve level is essentially a question of what kinds of adverse economic conditions—moderately severe or catastrophic—the reserve should be able to withstand.... In the actuarial review of the Fund conducted by Price Waterhouse for fiscal year 1989, the researchers concluded that actuarial soundness would be consistent with a reserve that could withstand adverse, but not catastrophic, economic downturns. They further concluded that the Treasury implicitly covers catastrophic risk.... By contrast, rating agencies have taken the position, when evaluating private mortgage insurers, that they should have enough capital to withstand catastrophic risk.... However, requiring FHA to hold capital equivalent to that held by private mortgage insurers would likely impair FHA's public purpose. While the law requires the Secretary of HUD to ensure that the MMI Fund maintains a capital ratio of 2%, it does not currently specify consequences or specific actions that the Secretary must take if the capital ratio falls below that threshold. Furthermore, GAO has noted that the 2% capital ratio requirement does not take into account specific economic conditions the MMI Fund should be expected to withstand. It has suggested that Congress could consider enacting legislation to specify such conditions, and to require FHA to maintain a capital ratio that is based on the MMI Fund's ability to withstand those specific economic scenarios. While the results of the actuarial review and the estimate of the capital ratio provide important information about the financial soundness of the MMI Fund, the results of the actuarial review and the capital ratio estimate do not determine whether or not FHA will need to draw on its permanent and indefinite budget authority with Treasury for funds to hold against expected future losses or to pay claims. That is determined as part of the re-estimate process that is done as part of the federal budgeting process each year, which is described in the \" The MMI Fund in the Federal Budget \" section of this report. The capital ratio is reported in FHA's annual report to Congress on the financial status of the MMI Fund, using the actuarial report's numbers for both traditional single-family forward mortgages and reverse mortgages insured by FHA. In FY2018, the annual report estimated the economic value of the MMI Fund to be $34.9 billion. The total dollar volume of mortgages currently insured by the MMI Fund was $1.265 trillion, which means that the capital ratio was estimated to be 2.76% ($34.9 billion divided by $1.265 trillion). This represents an increase from FY2017, when the capital ratio was estimated to be 2.18%. The capital ratio remained above 2% for the fourth straight year; FY2015 was the first time the capital ratio had exceeded 2% since FY2008. In FY2009, the capital ratio was estimated to be 0.53%. This was the first time that the capital ratio had fallen below 2% since the requirement was first met in FY1995. The capital ratio remained below 2% from FY2009 through FY2014, when the capital ratio was estimated to be 0.41%. In FY2012 and FY2013, the capital ratio was estimated to be negative 1.44% and negative 0.11%, respectively. FY2012 was the first time that the MMI Fund had been estimated to have a negative capital ratio since the early 1990s, when Congress enacted the series of changes aimed at ensuring the financial soundness of the MMI Fund, including the requirement for an independent annual actuarial review and the required capital ratio. A negative capital ratio by itself does not trigger any special assistance from Treasury, although it suggests that such assistance could be needed at some point. Rather, any assistance from Treasury is triggered if the credit subsidy rate re-estimates described in the \" Annual Credit Subsidy Rate Re-estimates \" section show that FHA needs to transfer more funds than it has in its Capital Reserve Account into its Financing Account to cover increases in expected future losses. The amount of assistance required from Treasury is based on the credit subsidy rate re-estimates, not on the capital ratio or the economic value of the MMI Fund as reported in the actuarial report. Table 3 shows the MMI Fund's financial position, including its economic value, dollar volume of insured mortgages, and capital ratio, as estimated by the independent actuary and FHA for each fiscal year between FY2006 and FY2018. The drop in the capital ratio in the years after 2008 resulted from both a decrease in the numerator of the ratio (the MMI Fund's economic value) and an increase in the denominator of the ratio (total dollar volume of mortgages outstanding), which reflects the fact that FHA is insuring a greater volume of loans than it has in the recent past. The decrease in the MMI Fund's economic value, in turn, was mostly due to the fact that the present value of future cash flows became increasingly negative for a time, suggesting that FHA was expecting large net cash outflows over the life of the loans that it was currently insuring. This section briefly describes selected current issues related to the financial status of the MMI Fund, and in particular certain issues that are often discussed in the context of the annual actuarial review and annual report to Congress. Namely, it discusses the inclusion of reverse mortgages in the MMI Fund, debate over the appropriate level for the premiums charged for FHA-insured mortgages, and certain trends in FHA-insured mortgage characteristics that FHA identified in its FY2018 annual report as worthy of monitoring. FHA-insured reverse mortgages, known as Home Equity Conversion Mortgages (HECMs), were moved into the MMI Fund beginning in FY2009. In contrast to traditional forward mortgages, HECMs are FHA-insured reverse mortgages for elderly homeowners who are seeking to access their accumulated home equity. HECMs that were insured by FHA prior to FY2009 are obligations of a different FHA insurance fund, but HECMs insured in FY2009 or later are obligations of the MMI Fund. The dollar amount of HECMs insured under the MMI Fund is much smaller than the amount of traditional forward mortgages: about $72 billion of the $1.3 trillion of insurance-in-force under the MMI Fund are HECMs. However, changes in the estimated value of HECMs can have a significant impact on the MMI Fund's overall economic value and on the capital ratio. Estimates of HECM performance are particularly sensitive to economic assumptions, such as future house prices and interest rates, making the value of the HECM portfolio volatile. While the value of forward mortgages insured under the MMI Fund has consistently increased since FY2012, the value of HECMs has fluctuated between negative and positive values and has become increasingly negative in recent years. The volatility in the HECM portfolio can be seen in the results of recent actuarial reviews and in the standalone capital ratios for the forward and HECM portfolios as reported by FHA. As shown in Figure 1 , the standalone capital ratio for the forward mortgage portfolio alone has steadily increased from negative 0.91% in FY2012 to positive 3.93% in FY2018. In comparison, the standalone capital ratio for HECMs has fluctuated during that time period, ranging from a high of positive 3.07% in FY2013 to a low of negative 18.83% in FY2018. (The capital ratio for the overall MMI Fund in FY2018 was estimated to be 2.76%.) Given the smaller overall insurance volume of the HECM portfolio, changes in the portfolio's economic value can have a larger impact on the HECM standalone capital ratio than a comparable dollar volume change in the larger forward portfolio would have on its standalone capital ratio. Nevertheless, the trends in the standalone capital ratios illustrate differences in the performance of the two portfolios. The volatility of HECMs and their inclusion in the MMI Fund potentially raise some policy questions. In its FY2015 annual report on the status of the MMI Fund, FHA noted that including both HECMs and forward mortgages in the fund could make it more difficult to independently assess the financial health of the separate programs, particularly since the capital ratio for the entire MMI Fund is often used as a proxy for the performance of the much larger forward mortgage portfolio. Furthermore, including both types of mortgages in the same fund could impact policies related specifically to forward mortgages, such as the level of fees paid by borrowers, in response to instability in the MMI Fund driven by HECMs. For these reasons, some industry groups and other observers have argued that Congress should consider legislation to remove HECMs from the MMI Fund. However, GAO and others have noted that removing HECMs from the MMI Fund would involve tradeoffs. The upfront and annual mortgage insurance premiums charged by FHA account for most of the revenue coming into the MMI Fund. As described earlier in the \" Mortgage Insurance Premiums \" section of this report, the levels of the premiums charged can impact the MMI Fund's status in several potentially conflicting ways. All else being equal, higher premiums should bring more money into the MMI Fund. However, higher premiums have the potential to negatively impact FHA's finances by leading to a reduction in FHA loan volume or impacting the credit quality of the loans that FHA insures. Higher premiums also increase the costs of FHA-insured mortgages for homebuyers, potentially making FHA-insured mortgages less affordable or pricing some potential homebuyers out of the market. Therefore, setting the appropriate levels for the mortgage insurance premiums requires striking a balance between maintaining affordability of FHA-insured mortgages and managing risk to the insurance fund. In the years following the housing market turmoil that began around 2007, FHA increased the premiums that it charges for new FHA-insured forward mortgages several times. Most of these changes affected the annual premiums. Following several increases, FHA decreased the annual mortgage insurance premiums that it charges in January 2015. The current annual premiums are at their lowest levels since the beginning of October 2010, though they are higher than the premiums that FHA was charging previously. In recent years, as the capital ratio has increased over 2%, some industry groups and housing advocates have called for FHA to further reduce the mortgage insurance premiums it charges for forward mortgages (or to reduce the amount of time that it charges the premiums ), arguing that the MMI Fund is strong enough to take such steps to increase the affordability of FHA-insured mortgages. The improvement in the MMI Fund's capital ratio in FY2018 again led to calls from some advocates and industry groups to decrease the mortgage insurance premiums. However, FHA has reportedly indicated that it is not likely to reduce the premiums in the near future. On January 9, 2017, in the last weeks of the Obama Administration, FHA had announced that it would again decrease the annual mortgage insurance premiums charged to borrowers who took out new FHA-insured mortgages that closed on or after January 27, 2017. However, on the first day of the Trump Administration, before the new premiums had gone into effect, FHA announced that it was suspending the planned premium reduction. In its announcement, FHA indicated a need to further study the impact that the fee decrease could have on the insurance fund and the long-term financial viability of FHA. In its FY2017 annual report to Congress on the financial status of the MMI Fund, FHA estimated that had the premium decrease gone into effect, the capital ratio for the MMI Fund would have been 1.76% in FY2017, below the statutorily mandated level of 2%. The lower capital ratio would have resulted from the combination of an estimated decrease of $3.2 billion in the net present value of expected future cash flows on insured mortgages (stemming from lower premiums that would have been paid on FHA-insured mortgages originated in FY2017, including some borrowers refinancing their existing FHA-insured mortgages into new mortgages with lower premiums) and an estimated increase of $45 billion in FHA's insurance-in-force (stemming from more people obtaining FHA-insured mortgages as a result of the premium decrease). These estimated differences in the net present value of future cash flows and insurance-in-force also would have reduced the economic net worth and the capital ratio for the forward mortgage portfolio alone. However, based on the figures provided in the annual report, the estimated capital ratio for forward mortgages alone would still have remained above 2% if the premium decrease had gone into effect, even though the capital ratio for the MMI Fund as a whole (including both forward mortgages and HECMs) would have fallen below that threshold. The capital ratio for the MMI Fund as a whole is the only number that matters for the purposes of complying with the law. Nevertheless, the estimated impact that the premium decrease would have had on the forward portfolio alone may be relevant to the extent that some are concerned that the inclusion of HECMs in the MMI Fund may affect policy decisions related specifically to the forward portfolio. In the FY2018 annual report to Congress, FHA identified several trends related to the credit quality of its forward mortgage insurance portfolio that it is monitoring due to their potential to increase risk to FHA. In particular, FHA noted the following five trends: Cash-Out Refinances : 75 Cash-out refinances are refinance transactions in which the borrower can access equity in the home by taking out a new mortgage for a higher amount than the remaining principal balance of the existing mortgage. The share of cash-out refinances insured by FHA has been increasing in recent years, reaching 63% of all FHA-insured refinance mortgages, and 15% of all FHA-insured forward mortgages, in FY2018. The share of cash-out refinances may be increasing for several reasons; for example, rising home prices may lead to more cash-out refinances by increasing borrowers' equity in their homes, and continuing low interest rates may be depressing other types of refinancing activity (making cash-out refinances a larger share of all refinance mortgages). Nevertheless, cash-out refinances have the potential to pose a risk to FHA by increasing borrowers' leverage and reducing the equity they have in their homes. If home prices should fall in the future, it is possible that some borrowers with higher loan-to-value ratios due to cash-out refinances could have difficulty repaying their mortgages. Debt-to-Income Ratios : 77 Debt-to-income ratios for borrowers with new FHA-insured purchase mortgages have been increasing in recent years. In FY2018, the average debt-to-income ratio for a new purchase borrower was about 43%, compared to 42% in FY2017 and 40% in FY2008. The share of FHA-insured purchase mortgages with borrower debt-to-income ratios above 50% has been increasing as well, reaching nearly 25% in FY2018. Higher debt-to-income ratios could increase the risk that some borrowers might have problems repaying their mortgages if they encounter financial difficulties. Credit Scores : 78 The average credit scores of borrowers who obtain FHA-insured mortgages have been decreasing since FY2011. In FY2018, the average borrower credit score for FHA-insured mortgages was 670, compared to 676 in FY2017 and 701 in FY2011. This in part reflects a return of FHA to its traditional role in the mortgage market; in the aftermath of the housing market turmoil that began around 2007, FHA insured a greater share of mortgages as mortgage credit conditions tightened, including mortgages for borrowers with higher credit scores who traditionally may not have sought FHA-insured mortgages. As mortgage credit conditions have eased somewhat, more high-credit-score borrowers may find it easier to obtain other types of mortgages. However, lower borrower credit scores could potentially suggest increased risk associated with these mortgages, and FHA has said that it \"will continue to monitor declining credit scores for new FHA endorsements for the risk they pose to the MMIF.\" Down Payment Assistance : 80 FHA has also been monitoring the increasing share of mortgages that have some form of down payment assistance, and in particular down payment assistance provided by a federal, state, or local governmental entity (rather than other sources, such as a family member). In FY2018, about 38% of FHA-insured purchase mortgages included some type of down payment assistance, compared to about 30% in FY2011. FHA has noted that mortgages with down payment assistance, and down payment assistance provided by a governmental entity specifically, tend to have somewhat higher default rates than other FHA-insured mortgages. FHA has also expressed some concerns about certain types of governmental down payment assistance programs and has suggested that it may be necessary to take action to provide more clarity about what types of down payment assistance are allowed. Non b ank Mortgage Originations : 83 The share of FHA-insured mortgages originated by nonbanks, rather than by traditional depository institutions, has been increasing in recent years. In FY2018, nonbank lenders originated nearly 87% of new FHA-insured mortgages. While all lenders that originate FHA-insured mortgages are required to meet certain standards, mortgages originated by nonbanks may pose different types of risks to FHA than traditional depository institutions. In its annual report, FHA stated that it \"believes it needs to strike a better balance in doing business\" with both nonbank and depository lenders. There are several potential drivers of the trends identified by FHA, including, among other things, economic conditions and the availability of other types of mortgage credit. The overall impact of each of these trends on FHA loan performance and, by extension, its finances will depend on a variety of factors, and some of these trends may pose more of a potential risk to FHA than others. ", "summary": "The Federal Housing Administration (FHA) insures private lenders against losses on home mortgages that meet certain eligibility criteria. If the mortgage borrower defaults (that is, does not repay the mortgage as promised) and the home goes to foreclosure, FHA pays the lender the remaining principal amount owed. By insuring lenders against the possibility of borrower default, FHA is intended to expand access to mortgage credit to some households who might not otherwise be able to obtain affordable mortgages, such as those with small down payments. When an FHA-insured mortgage goes to foreclosure, the lender files a claim with FHA for the remaining amount owed on the mortgage. Claims on FHA-insured home mortgages are paid out of the Mutual Mortgage Insurance Fund (MMI Fund), which is funded through fees paid by borrowers (called premiums), rather than through appropriations. However, like all federal credit programs covered by the Federal Credit Reform Act of 1990, FHA can draw on permanent and indefinite budget authority with the U.S. Treasury to cover unanticipated increases in the cost of the loans that it insures, if necessary, without additional congressional action. Each year, as part of the annual budget process, the expected costs of mortgages insured in past years are re-estimated to take into account updated information on loan performance and economic assumptions. If the anticipated costs of insured mortgages have increased, then FHA must transfer funds from a secondary reserve account into its primary reserve account to cover the amount of the increase in the anticipated cost of insured loans. If there are not enough funds in the secondary reserve account, then the MMI Fund is required to take funds from Treasury using its permanent and indefinite budget authority in order to make the required transfer. Separately from the budget re-estimates, FHA is required by law to obtain an independent actuarial review of the MMI Fund each year. This review provides a view of the MMI Fund's financial status by estimating the MMI Fund's economic value—that is, the amount of funds that the MMI Fund currently has on hand plus the net present value of all of the expected future cash flows on the mortgages that are currently insured under the MMI Fund. The actuarial review is used to determine whether the MMI Fund is in compliance with a statutory requirement to maintain a capital ratio of at least 2%. The capital ratio is the economic value of the MMI Fund divided by the total dollar amount of mortgages insured under the MMI Fund. In the years following the housing and mortgage market turmoil that began around 2007, increased foreclosure rates, as well as economic factors such as falling house prices, contributed to increases in expected losses on FHA-insured loans. This put pressure on the MMI Fund and reduced the amount of resources that FHA had available to pay for additional, unexpected future losses. The capital ratio fell below 2% in FY2009 and remained below 2% for several years thereafter, turning negative in FY2012 and FY2013. Concerns about FHA's finances culminated at the end of FY2013, when FHA announced that it would need $1.7 billion from Treasury to cover an increase in anticipated costs of insured loans. This marked the first time that FHA needed funds from Treasury to make the required transfer of funds between the primary and secondary reserve accounts. More recently, the financial position of the MMI Fund has improved. The capital ratio again exceeded the 2% threshold in FY2015 and has remained above 2% in the years since. The FY2018 actuarial review of the MMI Fund estimated the economic value of the MMI Fund to be positive $34.9 billion and the capital ratio to be 2.76%. This suggests that the MMI Fund would have about $34.9 billion remaining after realizing all of its expected future cash flows on currently insured mortgages. The FY2018 results represent an increase from FY2017, when the capital ratio was estimated to be 2.18% and the economic value was estimated to be $26.7 billion.", "document_type": "crs"}
{"report": "The Fifth Amendment to the U.S. Constitution provides that \"[n]o person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury.\" This provision requires that a federal prosecutor, in order to charge a suspect with a serious federal crime, secure the assent of an independent investigative and deliberative body comprising citizens drawn from the jurisdiction in which the crime would be tried. Federal grand juries serve two primary functions: (1) they aid federal prosecutors in investigating possible crimes by issuing subpoenas for documents, physical evidence, and witness testimony; and (2) they determine whether there is sufficient evidence to charge a criminal suspect with the crime or crimes under investigation. Traditionally, the grand jury has done its work in secret. Secrecy prevents those under scrutiny from fleeing or importuning the grand jurors, encourages full disclosure by witnesses, and protects the innocent from unwarranted prosecution, among other things. The long-established rule of grand jury secrecy is enshrined in Federal Rule of Criminal Procedure 6(e), which provides that government attorneys and the jurors themselves, among others, \"must not disclose a matter occurring before the grand jury.\" Accordingly, as a general matter, persons and entities external to the grand jury process are precluded from obtaining transcripts of grand jury testimony or other documents or information that would reveal \"what took place\" in the proceedings, even if the grand jury has concluded its work and even if the information is sought pursuant to otherwise-valid legal processes. At times, the rule of grand jury secrecy has come into tension with Congress's power of inquiry when an arm of the legislative branch has sought protected materials pursuant to its oversight function. For example, some courts have determined that the information barrier established in Rule 6(e) extends to congressional inquiries, noting that the Rule \"contains no reservations in favor of . . . congressional access to grand jury materials\" that would otherwise remain secret. Nevertheless, the rule of grand jury secrecy is subject to a number of exceptions, both codified and judicially crafted, that permit grand jury information to be disclosed in certain circumstances (usually only with prior judicial authorization). And because Rule 6(e) covers only \"matters occurring before the grand jury,\" courts have recognized that documents and information are not independently insulated from disclosure merely because they happen to have been presented to, or considered by, a grand jury. As such, even if Rule 6(e) generally limits congressional access to grand jury information, Congress has a number of tools at its disposal to seek materials connected to a grand jury investigation. This report begins with an overview of the standards governing—and exceptions applicable to—grand jury secrecy under Federal Rule of Criminal Procedure 6(e). The report also addresses whether and how the rule of grand jury secrecy and its exceptions apply to Congress, including the circumstances under which Congress may obtain grand jury information and what restrictions apply to further disclosures. Concluding this report is a discussion of past legislative efforts to amend Rule 6(e) in order to provide congressional committees with access to grand jury materials. Federal law requires the various United States District Courts to order one or more grand juries to be summoned when the public interest requires. Grand jurors must be \"selected at random from a fair cross section of the community in the district or division wherein the court convenes,\" among other things. Grand jury panels consist of 16 to 23 members. After selection, the court swears in members of the grand jury; names a \"foreperson and deputy foreperson\"; and instructs the panel. Federal grand juries sit until discharged by the court, but generally for no longer than 18 months, with the possibility of one six-month extension. The authority of a federal grand jury is sweeping, but it is limited to the investigation of possible violations of federal criminal law triable in the district in which it is sitting. The grand jury may begin its examination even in the absence of probable cause or any other level of suspicion that a crime has been committed within its reach. The grand jury does not conduct its business in open court, nor does a federal judge preside over its proceedings. The grand jury meets behind closed doors, with only the jurors, attorney for the government, witnesses, someone to record testimony, and possibly an interpreter present. The grand jury acts on the basis of evidence presented by witnesses called for that purpose. The attorney for the government will ordinarily arrange for the appearance of witnesses before the grand jury, will suggest the order in which they should be called, and will take part in questioning them. The grand jury most often turns to the prosecutor for legal advice and to draft most of the indictments, which the grand jury returns. Grand jury witnesses usually appear before the grand jury under subpoena. Subpoenas may be issued and served at the request of the panel itself, although the attorney for the government usually arranges the case to be presented to the grand jury. Unjustified failure to comply with a grand jury subpoena may result in a witness being held in contempt. A witness who lies to a grand jury may be prosecuted for perjury or for making false declarations to the grand jury. Neither a potential defendant nor a grand jury target nor any of their counsel has any right to appear before the grand jury unless invited or subpoenaed. Nor does a potential defendant, a grand jury target, or their counsel have any right to present exculpatory evidence or substantive objection to the grand jury. There are four possible outcomes of convening a grand jury—(1) indictment; (2) a vote not to indict; (3) discharge or expiration without any action; or (4) submission of a report to the court under certain circumstances. A grand jury indictment may issue upon the vote of 12 of its members that probable cause exists to believe the accused committed the crime charged. \"Since the 17th Century, grand jury proceedings have been closed to the public, and records of such proceedings have been kept from the public eye.\" An early justification for maintaining the secrecy of grand jury proceedings in England was to prevent suspected criminals from learning of an inquest and absconding. By the late 17th century, legal scholars had begun to recognize the need for secrecy in most matters pertaining to grand jury inquiries—including the identities of subjects and witnesses, the evidence collected, and the plans and deliberations of the jury—in order to realize the additional aims of preserving juror independence, sussing out witness bias and mendacity, and allowing evidence to be fully developed. When the right to grand jury indictment crossed the Atlantic Ocean from England to the American colonies, the rule of grand jury secrecy came with it. Prior to the adoption of the Federal Rules of Criminal Procedure, the federal courts developed a fairly robust, though not unyielding, conception of grand jury secrecy at common law. Secrecy challenges most often arose in the context of criminal defendants' motions to dismiss their indictments on the grounds that the evidence considered by the grand jury could not justify the charges or that some type of misconduct had occurred. Recognizing that these motions called for inspecting records of the proceedings before the grand jury, courts typically acknowledged that they had the discretionary power to permit such inspection \"in the furtherance of justice\" but found that the power should be \"sparingly exercised\" in light of the traditional rule of secrecy. Thus, although a number of courts identified a theoretical imperative for \"removing the veil of secrecy whenever evidence of what has transpired before [the jury] becomes necessary to protect public or private rights,\" courts often declined to engage in such unveiling based merely on a defendant's \"general allegations\" or a potential \"fishing expedition.\" Nevertheless, when deemed \"essential\" to \"the purposes of justice,\" some courts would consider evidence of what occurred before a grand jury to determine whether an indictment against a criminal defendant should be dismissed. This unveiling apparently reflected an understanding that grand juries served not only an investigative function in furtherance of the governmental interest in law enforcement, but also as a \"protector of citizens against arbitrary and oppressive governmental action.\" Thus, as these decisions suggested, disclosure could be appropriate when continuing secrecy would be inconsistent with the citizen-protective function. \"[T]he federal courts' modern version\" of the traditional rule of grand jury secrecy is established by Federal Rule of Criminal Procedure 6(e), in effect since 1946 and amended numerous times over the following 60 years. The Supreme Court has recognized that Rule 6(e) simply \"codifie[d]\" the pre-existing common law requirement \"that grand jury activities generally be kept secret,\" an \"integral part of [the United States] criminal justice system.\" An Advisory Committee Note reflects this understanding, making clear that the Rule \"continues the traditional practice of secrecy . . . except when the court permits a disclosure.\" Courts have identified five principal justifications underlying Rule 6(e)'s secrecy requirement: 1. to prevent the escape of those whose indictment may be contemplated; 2. to insure the utmost freedom to the grand jury in its deliberations, and to prevent persons subject to indictment or their friends from importuning the grand jurors; 3. to prevent subornation of perjury or tampering with the witnesses who may testify before [the] grand jury and later appear at the trial of those indicted by it; 4. to encourage free and untrammeled disclosures by persons who have information with respect to the commission of crimes; 5. to protect [the] innocent accused who is exonerated from disclosure of the fact that he has been under investigation, and from the expense of standing trial where there was no probability of guilt. At the time of its adoption, Rule 6(e) ensured the secrecy of grand jury proceedings by authorizing \"[d]isclosure of matters occurring before the grand jury\" in only limited circumstances. First, such matters \"other than [the jury's] deliberations and the vote of any juror\" automatically could be disclosed to \"the attorneys for the government for use in the performance of their duties.\" Beyond this, \"a juror, attorney, interpreter or stenographer\" could disclose matters occurring before the grand jury only with court authorization (1) \"preliminarily to or in connection with a judicial proceeding,\" or (2) \"at the request of the defendant upon a showing that grounds may exist for a motion to dismiss the indictment because of matters occurring before the grand jury.\" Amendments to Rule 6(e) from 1966 to 2014 have sought, among other things, to align the Rule's text with court-developed exceptions and clarifications that have sometimes extended beyond the literal terms of the version of the Rule in force at a given point in time. The current iteration of Rule 6(e) establishes a general rule of secrecy by setting out a list of persons, including grand jurors and attorneys for the government, who \"must not disclose a matter occurring before the grand jury\" unless the Federal Rules of Criminal Procedure \"provide otherwise.\" Rule 6(e) then \"provide[s] otherwise\" by listing complex exceptions to the prohibition. The exceptions generally fall into two categories: (1) disclosures permitted without judicial authorization, and (2) disclosures permitted with judicial authorization. In the first category, persons prohibited by the Rule from disclosing matters occurring before the grand jury may nevertheless disclose such matters (other than grand jury deliberations or grand juror votes) to an attorney for the government \"for use in performing that attorney's duty\" and to non-attorney \"government personnel\" who are needed to help a government attorney enforce federal criminal law. Government attorneys may also disclose such matters (1) to another federal grand jury; (2) to federal law enforcement, intelligence, protective, immigration, national defense, or national security officials only with respect to matters involving foreign intelligence or counterintelligence; and (3) to \"any appropriate . . . government official\" only with respect to matters involving threats of attack or intelligence gathering by foreign powers or threats of sabotage or terrorism. In the second category of exceptions, the court under whose auspices the grand jury was empaneled may authorize disclosure of a grand jury matter (1) preliminarily to or in connection with a judicial proceeding; (2) to a defendant who shows grounds may exist to dismiss the indictment because of something that occurred before the grand jury; or (3) at the request of the government, to a foreign court or prosecutor or to an \"appropriate\" state, state-subdivision, Indian tribal, military, or foreign government official for the purpose of enforcing or investigating a violation of the respective jurisdiction's criminal law. Beyond the express terms of Rule 6(e), three circuits and a number of district courts have held that courts have inherent authority to disclose grand jury materials in situations where an enumerated Rule 6(e) exception is not otherwise applicable, though the authority may be exercised only in rare or special cases. Additional Rules and statutes also permit disclosure in particular circumstances. When a court-authorized disclosure is at issue, the person or entity seeking grand jury information must make a \"strong showing of particularized need\" that \"outweighs the public interest in secrecy.\" If that showing is made, the court may authorize disclosure \"at a time, in a manner, and subject to any other conditions that it directs.\" The following sections of this report provide more detail on the various provisions of Rule 6(e). Rule 6(e)(2)(B) lists eight categories of persons who \"must not disclose a matter occurring before the grand jury\" unless an exception applies: 1. grand jurors; 2. interpreters; 3. court reporters; 4. operators of recording devices ; 5. persons who transcribe recorded testimony; 6. attorneys for the government; 7. government personnel needed to assist attorneys for the government; 8. persons authorized to receive grand jury materials under 18 U.S.C. § 3322. In other words, the Rule generally imposes an obligation of secrecy on each person permitted to be present while the grand jury is in session, as well as certain persons given access to grand jury information. Yet there is a notable exception to this general imperative: though a \"witness being questioned\" is authorized by Rule 6(d) to be present during grand jury proceedings (for obvious reasons), grand jury witnesses are not included on the list of persons precluded from disclosing grand jury matters. Viewed in conjunction with Rule 6(e)(2)(A)'s admonition that \"[n]o obligation of secrecy may be imposed on any person except in accordance with Rule 6(e)(2)(B),\" the Rule by its plain terms does not obligate grand jury witnesses to maintain the secrecy of the proceedings or their testimony. An Advisory Committee note to the original adoption of Rule 6(e) supports this reading, stating that \"[t]he rule does not impose any obligation of secrecy on witnesses.\" According to the note, such an obligation would constitute \"an unnecessary hardship [that] may lead to injustice if a witness is not permitted to make a disclosure to counsel or to an associate.\" Court decisions generally have been in accord, although a handful of courts have taken the position that an order requiring a witness to refrain from discussing grand jury matters may be entered in rare circumstances when justified by a compelling need. Courts taking this position have relied on \"inherent judicial power\" to \"protect the integrity of the grand jury process,\" which the adoption of Rule 6(e) ostensibly did not undermine. Though a witness is ordinarily free to disclose grand jury information of which he is aware, witnesses cannot be compelled to disclose such information to investigation targets or in separate proceedings. Relatedly, courts have recognized that federal prosecutors may request (but not demand) that witnesses refrain from disclosing the existence of a subpoena or their testimony. Because Rule 6(e)'s language suggests that the list of persons prohibited from disclosing grand jury matters is exclusive, unlisted third parties who obtain grand jury information—even from persons obligated to maintain grand jury secrecy—are also generally not required to keep the information secret. That said, a court authorizing a disclosure under a Rule 6(e) exception may impose a condition that further disclosures not be made, subject to First Amendment limitations. At least one court has observed that courts themselves are not included on the list of those who must refrain from \"disclos[ing] a matter occurring before the grand jury\" under Rule 6(e)(2)(B), interpreting this omission to mean that courts have inherent authority to release grand jury materials regardless of whether a textual exception to grand jury secrecy in Rule 6(e) otherwise applies. This judicial \"inherent authority\" exception, which the Supreme Court has never endorsed, is discussed in more detail infra in the section addressing exceptions to grand jury secrecy. Rule 6(e) prohibits only \"disclosure of matters occurring before the grand jury.\" Accordingly, the Rule is not contravened unless something is \"disclos[ed],\" meaning that a person \"with information about the workings of the grand jury . . . [has] reveal[ed] such information to other persons who are not authorized to have access to it under the Rule.\" Thus, mere use of grand jury information by a person who has already been legitimately exposed to it does not constitute \"disclosure\" within the meaning of Rule 6(e). A more difficult issue is determining what types of information or materials fall within the meaning of \"matters occurring before the grand jury.\" Though not defined in Rule 6(e), courts have tended to view the phrase as broadly encompassing anything that might reveal what took place in the grand jury room. Clear examples include transcripts of proceedings and witness testimony, as well as written \"summaries\" or \"discussions\" of the proceedings or evidence presented. Information about the composition and focus of the grand jury—including the identities of witnesses and jurors, the targets and subjects of the investigation, and even the dates and times a grand jury is in session —are also covered by the Rule. Particular challenges arise in the context of documents such as business records that have been subpoenaed or considered by the grand jury but do not on their face relate to the grand jury itself. In general, \"[t]here is no per se rule against disclosure of any and all information which has reached the grand jury chambers,\" and thus \"[t]he mere fact that information [or documents have] been presented to the grand jury\" does not bar independent disclosure in other proceedings. For example, an agency or litigant may seek corporate records directly from a company, and the company has no basis to claim that the records are insulated from disclosure simply because a federal grand jury separately has subpoenaed them. However, utilizing various (and sometimes conflicting) tests, courts have acknowledged that independently generated documents presented to a grand jury may sometimes constitute \"matters occurring before the grand jury\" in a particular case if the context of a request would make production revelatory of the substance of the grand jury's investigation. For instance, a request for \"documents subpoenaed by the grand jury\" might impermissibly call for disclosure of grand jury matters, as production \"would reveal to the requester that [the documents] had been subpoenaed\" and potentially suggest the focus of the grand jury's investigation. By contrast, a request for documents presented to a grand jury, when coupled with broader requests for \"all evidence\" or documents related to a factual matter, would not necessarily call for disclosure of grand jury matters if production would leave the requester unable to \"determine which documents,\" if any, \"had been submitted to the grand jury.\" The framing of a particular request for documents, and the context in which the request is made, will thus impact whether documents presented to or obtained by a grand jury are considered \"matters occurring before\" it within the meaning of Rule 6(e). One court has addressed the difficulty inherent in parsing when and to what extent documents subpoenaed or reviewed by a grand jury constitute grand jury \"matters\" by applying a presumption that \"confidential documentary information not otherwise public obtained by the grand jury by coercive means\" is covered by the Rule. A party seeking disclosure may rebut the presumption, however, \"by showing that the information is public or was not obtained through coercive means or that disclosure would be otherwise available by civil discovery and would not reveal the nature, scope, or direction of the grand jury inquiry.\" In practice, then, the showing required to rebut the presumption may result in an inquiry similar to that employed by other courts. In addition to the substance of grand jury matters themselves (e.g., transcripts of testimony), Rule 6(e) protects against the indirect revelation of grand jury matters in ancillary proceedings and filings, such as hearings or orders addressing claims of privilege or efforts to quash a subpoena. The Rule provides that the court must \"close any hearing\" and keep \"[r]ecords, orders, and subpoenas relating to grand-jury proceedings\" under seal \"to the extent and as long as necessary\" to prevent unauthorized disclosure of a grand jury matter. Arguing that the public ordinarily has a First Amendment or common law right of access to criminal proceedings, members of the media have sometimes sought to obtain sealed records and orders notwithstanding these provisions, but multiple circuits have rejected such efforts. The prohibition on disclosure of matters occurring before a grand jury is indefinite—in other words, the veil of secrecy is not lifted merely because a grand jury has completed its investigation and either issued an indictment or declined to do so. That said, because some of the \"interests\" underlying the rule of secrecy are \"reduced\" once a grand jury's work is completed, the passage of time may be relevant to whether a court will authorize disclosure pursuant to a Rule 6(e) exception in a particular case. Federal Rule of Criminal Procedure 6(e)(3) contains a series of \"[e]xceptions\" to the general rule of grand jury secrecy that permit disclosure of grand jury matters to specified persons or in certain situations. The exceptions fall into two general categories: (1) disclosures that may be made without judicial authorization (though notice must in some cases be provided), and (2) disclosures that may be made only upon order of the court. Certain statutes and Federal Rules of Criminal Procedure beyond Rule 6(e) also permit disclosure of grand jury information in particular circumstances. Rule 6(e)(3)(A)(i) provides that disclosure of a grand jury matter \"other than the grand jury's deliberations or any grand juror's vote\" may be made without court authorization to \"an attorney for the government for use in performing that attorney's duty.\" The term \"attorney for the government\" is defined elsewhere in the Federal Rules of Criminal Procedure as, in relevant part, (1) the Attorney General \"or an authorized assistant\"; (2) a United States attorney or an authorized assistant; or (3) \"any other attorney authorized by law to conduct proceedings under these rules as a prosecutor.\" Thus, an \"attorney for the government\" under Rule 6(e)(3)(A)(i) encompasses attorneys within the United States Department of Justice, as well as local or federal agency attorneys that have been appointed to act as federal prosecutors. Attorneys outside the Department of Justice who have not been so appointed, however, are excluded. Concerning the Rule's limitation that disclosure to a government attorney be \"for use in performing that attorney's duty,\" an Advisory Committee note states that attorneys are entitled to disclosure \"inasmuch as they may be present in the grand jury room during the presentation of evidence.\" The Supreme Court accordingly has determined that disclosure under the Rule \"is limited to use by those attorneys who conduct the criminal matters to which the materials pertain.\" Accordingly, \"every attorney (including a supervisor) who is working on a [particular] prosecution,\" but not a related civil matter, \"may have access to grand jury materials\" underlying that prosecution. And at least one court has taken a more expansive view, reading the Rule as permitting disclosure to \"government attorneys conducting other criminal matters to which the materials disclosed are relevant,\" even if such attorneys are located in a different jurisdiction than the empaneled grand jury. Once an attorney for the government has access to grand jury materials, he may use the materials as needed for the continued investigation and prosecution of the violations of federal criminal law to which they pertain, including in preparation for trial or during the examination of witnesses. Disclosures not connected to such violations of federal criminal law, however, are prohibited. Under Rule 6(e)(3)(A)(ii), disclosure of a grand jury matter, excluding grand jury deliberations and votes, may be made to \"any government personnel—including those of a state, state subdivision, Indian tribe, or foreign government—that an attorney for the government considers necessary to assist in performing that attorney's duty to enforce federal criminal law.\" This provision was added to Rule 6(e) in 1977 to address the need of Justice Department attorneys \"for active assistance from outside personnel\" in the course of grand jury investigations, including \"investigators from the F[ederal Bureau of Investigation], I[nternal Revenue Service], and other law enforcement agencies[,]\" without the \"time-consuming requirement of prior judicial interposition.\" The term \"government personnel\" has been interpreted to extend to non-attorney government employees such as law enforcement agents and subject-matter experts, as well as agency attorneys outside the Department of Justice who, because they have not been authorized to act as federal prosecutors, would not be entitled to disclosure under Rule 6(e)(3)(A)(i). One question that has arisen is the extent to which employees of private entities that are controlled by or connected to the government may be considered \"government personnel.\" The few cases addressing this question have tended to find that purely private entities and contractors are excluded from the Rule, though a \"quasi-governmental entity\" that has both public and private attributes may not be, \"depending on the facts of the situation.\" As the text of the Rule indicates, government personnel to whom disclosure of information is made may use that information only to assist government attorneys in enforcing federal criminal law. Resultantly, disclosure to government personnel is constrained to an equal degree as disclosure to government attorneys under Rule 6(e)(3)(A)(i), that is, for use in the investigation and prosecution of criminal law violations—but not related civil matters—to which the information pertains. To balance the benefit of disclosure to government personnel as needed against the risk that secrecy will thereby be compromised, Rule 6(e)(3)(B) requires prosecuting attorneys to \"promptly\" provide the court that impaneled the grand jury with the names of all government personnel to whom a disclosure is made under Rule 6(e)(3)(A)(ii). Though the text of this provision suggests that the names need only be provided after disclosure, the legislative history and an Advisory Committee note \"contemplate[] that the names of such personnel will generally be furnished to the court before disclosure is made to them.\" The attorney who provides the court with the names of government personnel to whom disclosure has been made must also \"certify\" that he has \"advised\" those personnel \"of their obligation of secrecy\" under Rule 6(e). Added in 1985, this requirement stemmed from concern that, particularly with respect to state and local government personnel who \"otherwise would likely be unaware of th[e] obligation[,]\" disclosure could result in \"inadvertent breach[es] of grand jury secrecy\" if personnel were not expressly advised to keep the information secret. Rule 6(e)(3)(C) permits an attorney for the government to disclose \"any grand jury-matter to another federal grand jury\" without court authorization. The Advisory Committee note to the Rule's 1983 addition reflects practical reasons for the exception: courts already \"permitted such disclosure in some circumstances\" despite the absence of a specific provision to that effect, and secrecy would \"be protected almost as well by the safeguards at the second grand jury proceeding . . . as by judicial supervision of the disclosure of such materials.\" In other words, when materials from one grand jury are disclosed to a second grand jury, \"secrecy is not thereby compromised, since the second grand jury is equally under Rule 6's requirement of secrecy.\" Courts have held that the exception allows grand jury materials to be transferred not only to \"successor\" grand juries within the same judicial district, but to grand juries in other jurisdictions pursuing separate investigations as well. Two of the most recent, and unique, exceptions to grand jury secrecy in Rule 6(e) permit disclosure of certain information to specified government officials based on the subject matter of that information. First, as part of the USA PATRIOT Act of 2001, Congress amended Rule 6(e) to allow an attorney for the government to disclose any grand jury matter involving foreign intelligence , counterintelligence , or foreign intelligence information to \"any federal law enforcement, intelligence, protective, immigration, national defense, or national security official to assist the official receiving the information in the performance of that official's duties.\" The terms \" foreign intelligence \" and \" counterintelligence \" are respectively defined in a separate statute as information relating to the capabilities, intentions, or activities of foreign governments or elements thereof, foreign organizations, or foreign persons, or international terrorist activities,\" and \"information gathered, and activities conducted, to protect against espionage, other intelligence activities, sabotage, or assassinations conducted by or on behalf of foreign governments or elements thereof, foreign organizations, or foreign persons, or international terrorist activities. The Rule itself defines the term \" foreign intelligence informati on \" as (a) information, whether or not it concerns a United States person, that relates to the ability of the United States to protect against— • actual or potential attack or other grave hostile acts of a foreign power or its agent; • sabotage or international terrorism by a foreign power or its agent; or • clandestine intelligence activities by an intelligence service or network of a foreign power or by its agent; or (b) information, whether or not it concerns a United States person, with respect to a foreign power or foreign territory that relates to— • the national defense or the security of the United States; or • the conduct of the foreign affairs of the United States. The Intelligence Reform and Terrorism Prevention Act of 2004 added another exception, allowing an attorney for the government to disclose any grand jury matter \"involving, within the United States or elsewhere, a threat of attack or other grave hostile acts of a foreign power or its agent, a threat of domestic or international sabotage or terrorism, or clandestine intelligence gathering activities by an intelligence service or network of a foreign power or by its agent\" to \"any appropriate federal, state, state subdivision, Indian tribal, or foreign government official, for the purpose of preventing or responding to such threat or activities.\" As commentators have noted, these contemporary exceptions are fairly expansive in that they allow prosecutors to unilaterally disclose grand jury materials to persons not involved in the prosecution of federal crimes based on definitions that could arguably encompass a \"broad range of information.\" In this sense, the exceptions appear to be a significant departure from the traditional practice of strictly limiting dissemination of grand jury materials. In recognition of the potentially expansive application of the new exceptions, the Rule stipulates that any official to whom a disclosure is made \"may use the information only as necessary in the conduct of that person's official duties subject to any limitations on the unauthorized disclosure of such information.\" Additionally, with respect to state, local, Indian tribal, and foreign government officials, Rule 6(e) provides that they may \"use the information only in a manner consistent with any guidelines issued by the Attorney General and the Director of National Intelligence.\" Finally, within a \"reasonable time after\" any disclosure is made under Rule 6(e)(3)(D), an attorney for the federal government must file a sealed notice with the court indicating that \"such information was disclosed\" and identifying \"the departments, agencies, or entities to which the disclosure was made.\" Despite the facial breadth of the recently added exceptions, it does not appear that they have yet been subject to substantial judicial scrutiny or interpretation. At least one commentator, however, has anticipated that a constitutional challenge is inevitable, given the degree to which the exceptions impact grand jury secrecy (and thus potentially undermine the Fifth Amendment's grand jury requirement). Federal Rule of Criminal Procedure 6(e)(3)(E)(i) permits a court to authorize disclosure of a grand jury matter \"preliminarily to or in connection with a judicial proceeding.\" This exception, which has been part of the Rule since its inception in 1946, is one of the most frequently litigated. An oft-cited definition of the term \"judicial proceeding\" comes from an early U.S. Court of Appeals for the Second Circuit opinion: \"[A]ny proceeding determinable by a court, having for its object the compliance of any person, subject to judicial control, with standards imposed upon his conduct in the public interest, even though such compliance is enforced without the procedure applicable to the punishment of crime.\" Criminal and civil litigation qualify as judicial proceedings, but so too may quasi-judicial matters such as impeachment proceedings and certain disciplinary hearings. Purely administrative or nonjudicial investigations or hearings, on the other hand, typically do not qualify. One question that has arisen is whether the grand jury investigation itself is a \"judicial proceeding\" such that a court may permit materials generated by the investigation to be disclosed for use in connection with those proceedings. Answering this question in the affirmative would, for example, allow an expert witness to review grand jury material prior to testifying before the grand jury. Some courts have concluded either that a grand jury investigation is a judicial proceeding for these purposes or that it is \"preliminary\" to a judicial proceeding—the criminal trial that would follow indictment. Consistent with this approach, said criminal trial generally has been viewed as a judicial proceeding permitting disclosure of materials from the underlying grand jury, though there is authority to the contrary. Conversely, courts have rejected the argument that a proceeding instituted primarily or solely to obtain grand jury materials can itself be considered the \"judicial proceeding\" needed to justify disclosure, recognizing that such a reading of the exception would be circular and \"rule-swallowing.\" With respect to the \"preliminarily to or in connection with\" requirement, the Supreme Court has said that the relevant inquiry is the use for which the grand jury information is being requested: \"the Rule contemplates only uses related fairly directly to some identifiable litigation, pending or anticipated.\" Thus, \"it is not enough to show that some litigation may emerge from the matter in which the material is to be used, or even that litigation is . . . likely to emerge . . . . If the primary purpose of disclosure is not to assist in preparation or conduct of a judicial proceeding, disclosure . . . is not permitted.\" What this limitation on the exception means is that a request for grand jury materials pursuant to a preliminary inquiry or investigation does not come within the scope of the exception where the prospect of a judicial proceeding stemming from the investigation is merely speculative. That said, an administrative or other investigative inquiry may be considered \"preliminar[y]\" to a judicial proceeding if \"a clear pathway exists\" between that process \"and the judicial process and the ultimate judicial role is a very substantial one.\" Rule 6(e)(3)(E)(ii) permits a court to order disclosure \"at the request of a defendant who shows that a ground may exist to dismiss the indictment because of a matter that occurred before the grand jury.\" Along with the \"judicial proceeding\" exception, this exception is the only other mechanism for seeking court authorization to disclose grand jury materials that has been in the Rule since its inception in 1946. There is a strong \"presumption of regularity\" in grand jury proceedings, and thus a defendant requesting court authorization for disclosure under this exception carries a heavy burden in seeking to make the requisite showing. First, dismissal of an indictment itself is a remedy only for misconduct before the grand jury that \"amounts to a violation of one of those 'few, clear rules which were carefully drafted and approved by [the Supreme] Court and by Congress to ensure the integrity of the grand jury's functions'\"—such as violations of Rule 6 or certain statutory provisions establishing prosecutorial standards of conduct. For example, indictment dismissal may be warranted where the prosecutor secures the indictment by actively misleading the grand jury about key evidence, but mere failure to present evidence favorable to the defendant will not justify dismissal. Second, to make the requisite showing that one of the above-mentioned grounds exists, the defendant must do more than make \"conclusory or speculative allegations of misconduct.\" Rather, the defendant must identify a factual basis for inferring that misconduct warranting indictment dismissal has occurred. At least one court has described this as an \"exceedingly high burden.\" For this reason, courts rarely grant requests by defendants under Rule 6(e)(3)(E)(ii), as \"a defendant often can make the necessary showing only with the aid of the [very] materials he seeks to discover.\" Defendants have, at times, pointed out this conundrum, but courts have not been particularly sympathetic. Under Rule 6(e)(3)(E)(iii), a court \"at the request of the government\" may authorize disclosure of a grand jury matter \"when sought by a foreign court or prosecutor for use in an official criminal investigation.\" This provision was added to the Rule as part of the Intelligence Reform and Terrorism Prevention Act of 2004, and appears to have been intended to address uncertainty as to whether a foreign criminal investigation could be considered \"preliminar[y] to . . . a judicial proceeding\" within the meaning of that separate exception. With the 2004 addition, the Rule now expressly recognizes that government attorneys may seek court authorization to disclose materials for use in the course of a foreign criminal investigation, rather than having to separately subpoena the same documents in order to provide them to foreign prosecuting authorities. Closely related to the exception for court-authorized disclosures to foreign courts and prosecutors, Rule 6(e)(3)(E)(iv) permits a court, \"at the request of the government\" and upon a showing by the government that a grand jury matter \"may disclose a violation of State, Indian tribal, or foreign criminal law,\" to order disclosure of a grand jury matter \"to an appropriate state, state-subdivision, Indian tribal, or foreign government official for the purpose of enforcing that law.\" Rule 6(e)(3)(E)(v) extends the same exception to \"an appropriate military official\" for enforcement of \"military criminal law under the Uniform Code of Military Justice.\" Before these exceptions were adopted in 1985, non-federal law enforcement officials could obtain federal grand jury materials for purposes other than federal law enforcement only with court authorization pursuant to the exception permitting disclosure \"preliminarily to or in connection with a judicial proceeding.\" The judicial proceeding exception proved to be \"of limited practical value\" in such circumstances, however, given the requirement that there be some \"identifiable litigation\" to which the disclosure related; where state or other non-federal officials were not already aware of the facts tending to show a violation of the relevant jurisdiction's criminal law, there would likely be no \"pending or anticipated\" judicial proceeding prior to disclosure that would justify such disclosure under the \"judicial proceeding\" exception. According to an Advisory Committee note, \"[t]his inability lawfully to disclose evidence of a [non-federal] criminal violation—evidence legitimately obtained by the grand jury\"—was perceived as \"an unreasonable barrier to the effective enforcement\" of criminal law across jurisdictions. Thus, pursuant to the exceptions, courts may now permit disclosure to a non-federal official \"when an attorney for the government so requests and makes the requisite showing.\" Department of Justice guidelines require that federal prosecutors request and receive internal authorization to apply for a court order under these exceptions before doing so. With respect to which officials are \"appropriate\" within the meaning of the Rule, the Department of Justice takes the position that the term \"shall be interpreted to mean any official whose official duties include enforcement of the . . . criminal law whose violation is indicated in the matters for which disclosure authorization is sought.\" The few court decisions construing the term appear to take a similar view. The Supreme Court has said that where a statute \"explicitly enumerates certain exceptions to a general prohibition, additional exceptions are not to be implied, in the absence of evidence of a contrary legislative intent.\" As discussed above, Rule 6(e) provides that a matter occurring before a grand jury must not be disclosed \"[u]nless these rules provide otherwise.\" Rule 6(e) then explicitly \"provide[s] otherwise\" by granting authority to courts to order disclosure of grand jury matters in particular, enumerated circumstances. Thus, based solely on Rule 6(e)'s text and general principles of statutory construction, it would seem that courts can authorize disclosure of grand jury matters only if one of the express exceptions in Rule 6(e) applies. Some courts have appeared to agree with this proposition, at least in the abstract. Nevertheless, a number of federal courts have determined that the list of court-authorized exceptions in Rule 6(e) is not exclusive, and that courts have \"inherent authority\" to permit disclosure of grand jury information and materials in circumstances not expressly provided for in the Rule. Courts in this camp have pointed to various justifications for recognizing such extra-textual judicial authority to breach grand jury secrecy, including that courts have always had supervisory authority over the grand juries that they impanel, which historically included the discretion to determine when grand jury materials should be released; the advent of the Federal Rules of Criminal Procedure did not eliminate a court's supervisory authority as a general matter, meaning that courts may still take certain actions that are consistent with, though not explicitly authorized by, the Rules; Rule 6(e)(2)(B)'s list of persons who are prohibited from disclosing a matter occurring before the grand jury does not include the court itself; Rule 6(e)(3)(E)'s list of circumstances in which a court \"may\" authorize disclosure does not indicate that those circumstances are exclusive, and the presence of limiting language elsewhere in Rule 6 suggests its absence in (e)(3)(E) was intentional; and the history of the Rules and Advisory Committee notes indicates that Rule 6(e) was meant to be responsive to and reflective of common exceptions that courts developed of their own volition over time. Fearing that an exception to grand jury secrecy not textually constrained could undermine secrecy writ large, courts recognizing their \"inherent authority\" to release grand jury materials in situations not governed by Rule 6(e) have generally cabined the exercise of such authority to \"special\" or \"exceptional\" circumstances. Though a determination that such circumstances exist is \"highly discretionary and fact sensitive,\" factors that courts have considered include the identity of the party seeking disclosure; whether the defendant to the grand jury proceeding or the government opposes the disclosure; why disclosure is being sought in the particular case; what specific information is being sought for disclosure; how long ago the grand jury proceedings took place; the current status of the principals of the grand jury proceedings and that of their families; the extent to which the desired material—either permissibly or impermissibly—has been previously made public; whether witnesses to the grand jury proceedings who might be affected by disclosure are still alive; and the additional need for maintaining secrecy in the particular case in question. The circumstances in which courts have most often ordered disclosure of grand jury materials using their inherent authority have involved matters of significant public or historical interest related to grand jury proceedings that have long since concluded. For instance, one district court in the District of Columbia recently unsealed certain dockets associated with the 1998 investigation into the relationship between former President Clinton and a White House intern, citing the length of time that had elapsed and the substantial public interest in the information. Although the trend appears to be in favor of recognizing a court's extra-textual inherent authority to release grand jury materials, at least in exceptional circumstances, there is some reason to question whether the Supreme Court would agree that this authority exists if faced squarely with the question. Setting aside the text of Rule 6(e) and the general principles discussed above, the Supreme Court in recent years has expressed \"reluctan[ce] to invoke the judicial supervisory power as a basis for prescribing modes of grand jury procedure,\" as the grand jury's status as an independent constitutional fixture \"suggest[s] that any power federal courts may have to fashion\" such procedures \"is a very limited one[.]\" These statements have led one treatise to refer to the existence of judicial inherent authority to release grand jury materials beyond the terms of Rule 6(e) as \"exceedingly doubtful.\" Although Rule 6(e) enumerates the contexts in which a court is authorized to order disclosure of grand jury matters, courts have had to grapple with determining what standard governs the exercise of a court's discretion to order disclosure in a particular case—that is, the showing a requester must make in order for a court to agree that releasing grand jury material is warranted under one of the exceptions for court-authorized disclosure in Rule 6(e). The Supreme Court has said that \"disclosure is appropriate only in those cases where the need for it outweighs the public interest in secrecy,\" and \"the burden of demonstrating this balance\" rests on the party seeking disclosure. Put differently, the secrecy of grand jury proceedings \"must not be broken except where there is a compelling necessity,\" and the \"instances when that need will outweigh the countervailing policy\" of secrecy \"must be shown with particularity\" by the requester. From these general principles has emerged the standard that Rule 6(e) \"require[s] a strong showing of particularized need for grand jury materials before any disclosure will be permitted.\" The Supreme Court announced the contours of this so-called \"particularized need\" standard in the context of the \"judicial proceeding\" exception to Rule 6(e), explaining that \"[p]arties seeking grand jury transcripts under Rule 6(e) must show that the material they seek is needed to avoid a possible injustice in another judicial proceeding, that the need for disclosure is greater than the need for continued secrecy, and that their request is structured to cover only material so needed.\" When the cases describing the \"particularized need\" standard were decided, the only Rule 6(e) exceptions permitting a court to authorize disclosure of grand jury matters were (1) the \"judicial proceeding\" exception, and (2) the exception for a defendant upon showing grounds to dismiss the indictment. As the number of Rule 6(e) exceptions permitting court-authorized disclosure has grown over time, however, one question that has arisen is whether and how the Supreme Court's \"particularized need\" standard applies outside of the \"judicial proceeding\" context in which it was announced. Courts have typically recognized that the general requirement imposed on a requester to show a need for the grand jury materials at issue extends to any exception authorizing court-ordered disclosure. This requirement, whether given the appellation \"particularized need\" or not, will obligate a person seeking court authorization for disclosure to show some factual exigency outweighing the interest in secrecy, which will vary depending on the precise exception being invoked. Thus, for example and as discussed above, a defendant seeking an order authorizing disclosure under Rule 6(e)(3)(E)(ii) must be able to present a factual basis for inferring that misconduct that would warrant dismissal of the indictment has occurred, and a government attorney seeking authorization under Rule 6(e)(3)(E)(iv) must show that the grand jury matter for which disclosure is sought may disclose a violation of State, Indian tribal, or foreign criminal law. Likewise, courts addressing whether to authorize release of grand jury materials pursuant to their inherent authority engage in \"a nuanced and fact-intensive assessment\" of whether the need for the materials is greater than the need to maintain secrecy. Courts considering whether a \"particularized need\" exists in a given case have emphasized that although the standard is \"highly flexible,\" a showing of \"mere relevance, economy, and efficiency will not suffice\" to meet it. Thus, the inquiry often focuses on the contemplated use of the materials at issue and whether alternative channels exist to obtain them. In the context of judicial proceedings, the need to impeach or refresh the recollection of a witness is a well-recognized and valid need, so long as the need is \"real\" and not merely a \"bald assertion[.]\" Other needs that courts have found valid include (1) to substantiate malicious prosecution allegations based on prosecutorial and witness misconduct; (2) to rehabilitate a witness at trial after he has been impeached on cross-examination; and (3) to avoid stymieing an investigation of official improprieties. On the other hand, the mere desire to discover what evidence the grand jury considered has been held to be insufficient. Consistent with the flexible and fact-dependent nature of the \"particularized need\" inquiry, the Supreme Court has said that \"as the considerations justifying secrecy become less relevant, a party asserting a need for grand jury transcripts will have a lesser burden in showing justification.\" Thus, factors courts consider in weighing need against the interest in secrecy may include (1) the nature of the materials sought; (2) whether the requester is a government official or a private party; (3) the time that has elapsed between the grand jury proceedings and the request for disclosure; and (4) whether, in the case of witness testimony or documents, the witness objects to disclosure. Despite the general presumption of grand jury secrecy established by Federal Rule of Criminal Procedure 6(e), other federal statutes and procedural rules sometimes permit (or even mandate) disclosure of grand jury information in particular circumstances. These statutes and rules are explicit in their limited retraction of grand jury secrecy, as they must be, for the Supreme Court has made clear that it \"will not infer\" that Congress has exercised its power to modify the secrecy requirement unless Congress has \"affirmatively express[ed] its intent to do so.\" First, Rule 6(e) itself explicitly cross-references 18 U.S.C. § 3322, part of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which authorizes government attorneys and personnel who are privy to grand jury information to disclose that information, without a court order, to any other government attorney for use in enforcing the civil penalty provisions of FIRREA or \"in connection with any civil forfeiture provision of Federal law.\" In other words, in the specified circumstances, Section 3322 acts as a statutory exception to the rule that government attorneys and personnel may not disclose grand jury matters for use in separate civil proceedings without a court order. The statute also establishes other specific circumstances in which a court may order disclosure of grand jury matters: during an investigation of a \"banking law violation,\" a court may direct disclosure \"to identified personnel of a Federal or State financial institution regulatory agency\" for use \"in relation to any matter within the jurisdiction of such regulatory agency\" or \"to assist an attorney for the government to whom matters have been disclosed\" under the statute. In addition, Federal Rule of Criminal Procedure 16 requires that a criminal defendant be given access to any grand jury testimony he has given relating to the charged offense. With respect to the grand jury testimony of other witnesses, Federal Rule of Criminal Procedure 26.2 and the Jencks Act require that such testimony be provided to the defendant only after the witness in question has testified on direct examination at trial. Disclosure is limited to grand jury testimony that \"relate[s] to the subject matter of the [trial] testimony of the witness.\" The purpose of these limitations is to balance a defendant's right to confront his accusers using information that may impeach their testimony with the need to protect government files \"from unnecessary and vexatious fishing expeditions by defendants.\" Federal Rules of Criminal Procedure 6(e)(3)(F) and (G) address the procedures for seeking court-authorized disclosure of grand jury materials for use in connection with another judicial proceeding. A party seeking disclosure must file a petition in the district \"where the grand jury convened.\" If the petition is filed by \"the government,\" the court may—but is not required to—hear the matter ex parte . Otherwise, the petitioner must provide notice of the petition to (1) an attorney for the government, (2) the parties to the judicial proceeding for which disclosure of the grand jury materials is sought, and (3) \"any other person whom the court may designate.\" The court must \"afford a reasonable opportunity\" to these persons \"to appear and be heard.\" Challenges arise when the judicial proceeding for which grand jury materials are sought is pending in a different judicial district than the district where the grand jury convened, as the latter court may be ill-suited to decide the disclosure question. The Supreme Court addressed this situation in Douglas Oil Co. v. Petrol Stops Northwest , and the Court's conclusions have essentially been adopted in Rule 6(e)(3)(G). The Rule provides that unless the court in which the petition is filed—that is, the court in the district where the grand jury convened—\"can reasonably determine whether disclosure is proper,\" it must transfer the matter to the district where the separate judicial proceeding is pending for determination. This provision reflects \"a preference for having the disclosure issue decided by the grand jury court,\" while recognizing that that court may be unable to reach a decision because it \"will have no first-hand knowledge of the litigation in which the transcripts allegedly are needed, and no practical means by which such knowledge can be obtained.\" To facilitate resolution by the transferee court, the grand jury court must transmit to the transferee court \"the material sought to be disclosed, if feasible, and a written evaluation of the need for continued grand jury secrecy.\" The first requirement \"facilitate[s] timely disclosure if it is thereafter ordered\" and assists the transferee court \"in deciding how great the need for disclosure actually is.\" The Rule does not require transmittal of the grand jury material if it is impracticable to do so, as, for example if the material is \"exceedingly voluminous.\" The requirement of a written evaluation of the need for continuing secrecy recognizes that the grand jury court \"is in the best position to assess the interest in continued grand jury secrecy in the particular instance,\" and it is thus \"important that the court which will now have to balance that interest against the need for disclosure receive the benefit of the [grand jury] court's assessment.\" Upon transfer, the same persons specified in Rule 6(e)(3)(F) must be given a reasonable opportunity to appear and be heard. The transferee court then makes the ultimate decision whether to disclose \"based on its own determination of the need for disclosure and the transferring court's evaluation of the competing need for continued secrecy.\" Generally, a court's order regarding disclosure under Rule 6(e) is immediately appealable. Because the determination of whether \"particularized need\" exists to justify disclosure in a given case is highly fact-specific and discretionary, an appellate court's review will be under the deferential \"abuse of discretion\" standard. A knowing violation of Rule 6, including the obligation of secrecy, \"may be punished as a contempt of court.\" Though not explicit in the Rule, courts have held that both criminal and civil contempt may be imposed, meaning that the remedy may include imprisonment, monetary sanctions, or equitable relief. In limited circumstances, an indictment may also be dismissed or evidence suppressed. For example, where the government unilaterally disclosed a defendant's grand jury testimony in a separate civil forfeiture proceeding to establish probable cause for seizure of the defendant's car, one court suggested that suppression of the testimony could be necessary to \"protect the integrity of the grand jury system.\" Courts disagree on whether the contempt provision of Rule 6 establishes a private right of action based on an alleged violation of grand jury secrecy. A party seeking one of the remedies noted above will be required to establish a prima facie case that a violation of grand jury secrecy has occurred. This showing will ordinarily require some basis to infer that the source of any leaked grand jury information was one prohibited under Rule 6(e), and the court may consider evidence submitted to rebut the allegation of wrongdoing. If a prima facie case is established, the court will hold an evidentiary hearing in which the alleged source of the unauthorized disclosure (typically the government) will bear the burden of \"attempt[ing] to explain its actions.\" For instance, the movants in one case made a prima facie showing that an independent counsel breached grand jury secrecy by submitting to the court \"various news articles indicating that information relating to grand jury proceedings or witnesses was obtained from sources associated with the\" independent counsel's office. The court thus recognized that the independent counsel would be called upon to attempt to rebut the inferences drawn from the news articles by submitting evidence (potentially including affidavits, documents, or live testimony) to show either that the information disclosed to the media did not constitute \"matters occurring before the grand jury\" or that the source of the information was not the government. An order denying a defendant's motion to dismiss the indictment based on a violation of Rule 6(e) is not immediately appealable, and any error may be considered harmless if the defendant is subsequently convicted. As the discussion of grand jury secrecy and Federal Rule of Criminal Procedure 6(e) above reflects, no exception to the general rule of secrecy explicitly authorizes disclosure of grand jury matters to Congress, either by agreement or pursuant to a congressional subpoena. Nevertheless, a few courts have addressed the applicability of Rule 6(e) and its exceptions to congressional requests for information, including in the course of committee investigations and preliminary to impeachment proceedings. At a minimum, these decisions indicate that Congress may be able to obtain grand jury materials by invoking a Rule 6(e) exception before a court under certain circumstances. Congress has also previously considered legislation that would have expressly permitted a court to authorize disclosure of grand jury matters to congressional committees, though the congressional-access provision ultimately did not become law. This section of the report addresses the circumstances in which Congress may obtain and disseminate grand jury materials under Rule 6(e) as it is presently construed; it then addresses legal issues to consider if Congress seeks to create a new Rule 6(e) exception for congressional committees. Congress generally has broad authority to obtain information for oversight and investigative purposes. The power of Congress to conduct investigations is \"inherent in the legislative process,\" and such power is \"as penetrating and far-reaching as the potential power to enact and appropriate under the Constitution.\" As a corollary, the \"[i]ssuance of subpoenas . . . has long been held to be a legitimate use by Congress of its power to investigate.\" Beyond subpoenas, Congress has exercised its power of inquiry through less formal means, such as by submitting letter requests for information. Congressional inquiries are broadly protected from judicial scrutiny. Provided that a committee's investigation is authorized and conducted pursuant to a valid legislative purpose, the Speech or Debate Clause of Article I of the Constitution creates \"an absolute bar to [judicial] interference.\" Pursuant to its broad authority to investigate, Congress has on several occasions sought grand jury information based on legislative interest in particular executive branch activities, either through letters or subpoenas to executive branch officials or through petitions filed with the court. Faced with these legislative efforts to obtain otherwise-secret grand jury materials, courts have reached conflicting conclusions as to whether the rule of grand jury secrecy enshrined in Rule 6(e) applies to disclosures to Congress at all. Relying on an apparently novel conception of the \"authority of Congress under the Speech or Debate Clause,\" two courts have held that Congress has a \"constitutionally independent legal right\" to obtain documents in furtherance of \"legitimate legislative activity\" regardless of whether the documents disclose matters occurring before a grand jury. First, in In re Grand Jury Investigation of Ven-Fuel , the chairman of the Subcommittee on Oversight and Investigations of the House of Representatives' Committee on Interstate and Foreign Commerce petitioned a district court for an order authorizing disclosure of documents presented to a federal grand jury in Florida in the course of its investigation of possible criminal conduct by a company called Ven-Fuel, Inc. The court recognized that the subcommittee's request implicated \"the powers and operations of the coequal, but interdependent, branches of the federal government . . . over theoretical fault lines,\" but concluded there was no \"direct conflict\" because the subcommittee's legitimate legislative purpose in seeking the documents meant that it was \"entitled to disclosure\" regardless of grand jury secrecy rules. Ten years after the decision in Ven-Fuel , the issue of congressional access to grand jury materials came before a different court in connection with the potential impeachment of a federal judge. The judge had been indicted for conspiring to solicit a bribe to influence a judicial decision, causing the House of Representatives to introduce a resolution calling for his impeachment. The resolution was referred to the House Committee on the Judiciary, which subsequently requested that the district court deliver all records of the grand jury that had indicted the judge. The judge objected, but the district court concluded that the committee was entitled to the records for several reasons, one of which was that, in accordance with Ven-Fuel , a \"congressional investigation relating to the impeachment of a federal judge\" falls within the authorized legislative activities \"embraced\" by the Speech or Debate Clause. Criticizing the decision in Ven-Fuel , other courts have sharply disagreed with the conclusion that the Speech or Debate Clause provides a basis to ignore grand jury secrecy when Congress is the requester. In In re Grand Jury Investigation of Uranium Industry , for instance, the Senate Judiciary Committee petitioned a court for an order authorizing disclosure of documents in the possession of the Department of Justice related to its investigation of the uranium industry. The committee's interest in the documents apparently stemmed from the fact that an expansive grand jury investigation conducted by the department's Antitrust Division had yielded no indictments. In seeking court-ordered disclosure of the grand jury materials, the committee asserted, among other things, that it was not required to establish the applicability of a Rule 6(e) exception or make a showing of particularized need because the Speech or Debate Clause entitled it to the materials. The court, however, considered \"the suggestion that Rule 6(e) does not apply to disclosures to Congress\" to be \"[un]acceptable.\" The court noted that Rule 6(e) \"contains no reservations in favor of Congress\" and rejected the Ven-Fuel court's suggestion that the Speech or Debate Clause may be \"used as a sword to enable Congress to penetrate an otherwise secret function of one of the other branches.\" While, in the court's view, the Clause would protect Congress from collateral interference if it were attempting to \"acquire materials which it has a legal right to obtain,\" the Clause would not sanction expansion of Congress's legal rights \"to manufacture a new right to obtain grand jury materials\" that could be affirmatively employed. As the court in Uranium Industry recognized, the Ven-Fuel decision's reliance on the Speech or Debate Clause as a font of constitutional authority permitting congressional access to grand jury materials finds little support in the broader case law on the Clause. Though the Clause functions to protect congressional activity, including lawful use of the subpoena power, from judicial interference when such activity is challenged by a third party, courts have not viewed the Clause to constitute a sword that Congress may use to affirmatively seek judicial authorization for disclosure of information in the possession of a coordinate branch. That said, the extent to which the rule of grand jury secrecy applies more generally along the \"theoretical fault line[]\" that exists between executive branch activity and Congress's Article I investigative authority remains unsettled. It is worth noting in this regard that although Congress's power to obtain information for legitimate legislative purposes is broad, it is not limitless. Though no federal appellate courts have spoken directly to the issue, decisions addressing the now-lapsed independent counsel statute appear to lend some support to the position that Congress enjoys no special constitutional solicitude in obtaining otherwise-secret grand jury materials. That statute required a duly appointed independent counsel to file a pre-termination \"final report\" with the court \"setting forth fully and completely a description of the work of the independent counsel,\" and the statute permitted the court to release \"to the Congress, the public, or any appropriate person, such portions of [the] report . . . as the division of the court considers appropriate.\" In several decisions considering whether to authorize such release of independent counsel reports to Congress and the public, the D.C. Circuit has recognized that Rule 6(e) applies to an independent counsel, meaning that \"any release of grand jury material\" in the final report authorized by statute \"falls within the protective provisions\" of the Rule unless an exception applies. Nevertheless, the court has read a provision of the independent counsel statute permitting a court to authorize disclosure of the report as establishing a \"judicial proceeding\" such that release of the report may fall within that exception to Rule 6(e). Pursuant to the exception, the court has proceeded to consider multiple factors in deciding whether to authorize the report's release. In other words, rather than finding an independent constitutional entitlement to grand jury material when faced with the question of whether to authorize the release to Congress of a report containing such material, the D.C. Circuit has simply applied Rule 6(e). It could be argued, however, that because these cases did not involve a congressional subpoena, the court was not faced with a direct exercise of Congress's constitutional power of inquiry. The Department of Justice, for its part, agrees that it may release grand jury material to Congress in response to a subpoena only to the extent that disclosure is permitted under Rule 6(e). It takes the opposite position from the Ven-Fuel court with respect to separation-of-powers implications when Congress requests grand jury material: in the department's view, recognizing a congressional \"independent right of access\" to grand jury material would amount to \"legislative encroachment into the Executive's exclusive authority to enforce the law.\" Assuming that Rule 6(e) does apply to congressional requests, it is clear that Congress may nevertheless obtain materials that do not constitute \"matters occurring before the grand jury\" within the meaning of the Rule. Rule 6(e) protects from disclosure only those materials that \"tend to reveal some secret aspect of the grand jury's investigation.\" Thus, where a congressional committee has an interest in the subject matter of an ongoing grand jury investigation, the committee may be able to obtain most, if not all, of the same evidence the grand jury is considering from other sources. For instance, although the court in Ven-Fuel viewed Congress as constitutionally entitled to disclosure of documents that had been presented to a grand jury, the court also determined that the documents were not necessarily cloaked in secrecy under Rule 6(e) in the first instance. And while not all courts may take such a narrow view of grand jury \"matters,\" the principle that \"[t]here is no per se rule against disclosure of any and all information which has reached the grand jury chambers\" is a well-recognized one. Although no exception to grand jury secrecy explicitly encompasses disclosures to Congress, a few of the exceptions could apply to Congress in particular situations, which are discussed below in turn. As discussed, Rule 6(e) permits disclosure of grand jury matters, excluding grand jury deliberations and votes, to \"any government personnel—including those of a state, state subdivision, Indian tribe, or foreign government—that an attorney for the government considers necessary to assist in performing that attorney's duty to enforce federal criminal law.\" The term \"government personnel\" is not defined in the Rule, and the provision's legislative history reflects a concern with information-sharing between federal prosecutors and federal law enforcement officers or agency subject-matter experts who were needed to understand certain issues in complex cases. That said, during the hearings on the proposed amendments that added the exception, there was some testimony indicating that the breadth of the term \"government personnel\" could mean that \"even Members of Congress or the military\" would be included. It is thus possible that a Member of Congress, or congressional staff, could be considered \"government personnel\" to whom disclosure could be made without a court order under this exception. Any such disclosure, however, would be exceedingly circumscribed in light of the exception's other requirements. First, disclosure would be at the discretion of the attorney for the government, and would be limited to a situation in which the attorney believed that the Member or staff was needed to assist the attorney in enforcing federal criminal law. Second, the Member or staff to whom disclosure was made could use the grand jury information only for the same purpose, that is, to assist the attorney in prosecuting the federal crimes to which the information related. Third, the Member or staff would be obligated to maintain the secrecy of the information and could further disclose it only in accordance with Rule 6(e). As such, even assuming Members of Congress or congressional staff fall within the meaning of \"government personnel,\" the exception would not permit Congress to seek grand jury materials for broader independent investigative or legislative purposes. Rule 6(e)(3)(D) permits an attorney for the government to disclose, among other things, any grand jury matter involving threats of attack or intelligence gathering by foreign powers or threats of sabotage or terrorism to \"any appropriate federal . . . government official\" (among others). Similar to the exception for \"government personnel,\" the Rule does not define the term \"appropriate . . . government official.\" Nonetheless, other statutory provisions suggest that the term \"government official\" could be construed to include a Member of Congress. As with the \"government personnel\" exception, however, disclosure under this exception would be limited: only grand jury information pertaining to the specified subject matter would be available, at the discretion of the attorney for the government, and the Member receiving the information could use it \"only as necessary in the conduct of [her] official duties subject to any limitations on the unauthorized disclosure of such information.\" Rule 6(e)'s \"judicial proceeding\" exception may also be relevant to Congress. As previously described, the Rule provides that a court may authorize disclosure of a grand jury matter \"preliminarily to or in connection with a judicial proceeding,\" with the term \"judicial proceeding\" generally contemplating some necessary resort to the judicial system. Two courts have determined that a congressional committee's request for grand jury materials pursuant to its ordinary investigative and oversight functions does not qualify under this exception, as the possibility that \"the actions it is investigating may wind up in the courts if wrongdoing is uncovered\" is \"too remote to trigger the Rule 6(e) exception.\" By contrast, where a congressional committee has sought grand jury materials in connection with the contemplated impeachment of a specific public official, several courts have recognized that court-ordered disclosure may be available pursuant to the \"judicial proceeding\" exception. Under this view, though \"impeachment proceedings before Congress . . . are not by a 'court,'\" a \"contemplated trial\" in the Senate is still \"very much a judicial proceeding.\" A committee seeking court-authorized disclosure on the basis of this exception must establish a \"particularized need\" for the materials at issue, which requires a showing that the need outweighs the public interest in secrecy. In the context of impeachment, courts have concluded that a congressional committee's need is sufficient to warrant disclosure, at least where the grand jury's work has concluded. Nevertheless, given that mere \"relevance\" or \"efficiency\" is generally insufficient to establish a particularized need for grand jury materials, the context of the request and the materials at issue could influence whether a committee can show such a need. As discussed, some federal courts have recognized that courts have \"inherent authority\" to order the release of grand jury information in \"special\" or \"exceptional\" circumstances, regardless of whether an explicit Rule 6(e) exception would otherwise apply. One lower court has relied on this inherent authority over grand jury matters, among other things, to authorize the release to the House Judiciary Committee of a report prepared by the grand jury investigating the alleged—and potentially impeachable—improprieties of President Nixon. The D.C. Circuit essentially affirmed that decision, expressing \"general agreement\" with the lower court decision. Another court has also relied on its inherent authority to order the release of the records of a grand jury that had indicted a federal judge to an investigating committee of the judiciary, relying on the \"exceptional circumstance[]\" that the \"question under investigation\"—whether a federal judge should be recommended for impeachment or otherwise disciplined—was \"of great societal importance.\" Recognizing that the investigating committee still was required to show a sufficient need for the grand jury materials, the court concluded such a showing had been made (and was not outweighed by the interest in secrecy) because (1) the investigating committee was composed of federal judges who were acting pursuant to express statutory authority; (2) the grand jury investigation and trial of the judge had already concluded; and (3) only by \"examining all of the record\" could the committee \"determine the true state of the evidence for or against the charge.\" Assuming a court adopts the inherent authority view of Rule 6(e) based on the above decisions, it is possible that a court would be willing to authorize the disclosure of grand jury materials to a congressional committee pursuant to the court's inherent authority. Precedential support for disclosure is strongest in the context of an impeachment inquiry (assuming the court did not view such an inquiry as being \"preliminar[y] to . . . a judicial proceeding\"). It is less certain that an \"inherent authority\" disclosure order would be available to a congressional petitioner when not tied to a contemplated impeachment proceeding. In an appropriately \"exceptional\" situation, a court could be amenable to exercising its inherent authority to order the release of grand jury information in the face of a pressing congressional request. The outcome would depend in large part on whether Congress could establish a sufficiently weighty need for the materials, which would implicate a variety of circumstantial factors. Once grand jury materials find their way into the possession of a Member or committee of Congress, the question arises as to what limits exist on further dissemination of those materials. As previously discussed, Federal Rule of Criminal Procedure 6(e) imposes an obligation of secrecy only on specified persons, of which Congress (or, more generally, a recipient of grand jury information pursuant to the \"judicial proceeding\" or \"inherent authority\" exceptions) is not one. That said, Rule 6(e) does explicitly make court-authorized disclosures \"subject to any . . . conditions that [the court] directs.\" It is thus conceivable that in ordering the release of grand jury information, a court could impose a requirement that the information not be further distributed. However, such a requirement would be in tension with the Constitution's Speech or Debate Clause in the case of Congress, at least where further dissemination occurs in the course of legitimate legislative activity, as the Clause prevents a court from blocking disclosure of information in Congress's possession in such a circumstance. In any event, courts will \"presume that the committees of Congress will exercise their powers responsibly and with due regard for the rights of affected parties,\" though a court may consider the extent to which Congress has taken specific precautions to protect against further dissemination of grand jury materials in deciding whether disclosure is appropriate. Past Congresses, faced with potential limitations on the ability to obtain grand jury materials, have considered legislation that would amend Federal Rule of Criminal Procedure 6(e) to, among other things, permit a court to authorize disclosure of grand jury matters \"upon a showing of substantial need\" to \"any committee of Congress . . . for use in relation to any matter within the jurisdiction of such . . . congressional committee.\" A bill to this effect was introduced during the 99th Congress, prompting the Department of Justice's Office of Legal Counsel to issue a memorandum opinion \"strongly oppos[ing] any provision that would permit Congress independently to petition the courts for Rule 6(e) material.\" In the Office's view, such a provision would \"codify legislative encroachment into the Executive's exclusive authority to enforce the law.\" In other words, the Office took the position that creating a mechanism for Congress to obtain grand jury materials from the court, without any opportunity for interposition by the executive branch, would be inconsistent with the Constitution's separation of powers and would invite \"legislative pressures\" that would interfere with prosecutorial discretion and due process of law. The Senate Judiciary Committee held a hearing on the legislation and a similar bill as to their impacts on Rule 6(e) and grand jury disclosure practices, during which the bill's sponsor, Senator Charles Grassley, expressed concern that Rule 6(e) had been \"utilized by the Justice Department as a shield against legitimate congressional inquiry.\" The Senator pointed out that the bill did not provide \"automatic congressional access to grand jury information,\" but rather allowed \"congressional committees[,] in performance of their constitutional duty to oversee the executive agencies, an opportunity to demonstrate to the court a 'substantial need' for access[.]\" An Associate Deputy Attorney General reiterated in testimony the Department of Justice's position that the provision for congressional access \"would raise substantial constitutional concerns in terms of separation of powers as to where the enforcement authority lies; due process issues in terms of fairness and the application of decisionmaking with respect to criminal prosecutions; as well as the issue of opening the door for raising concerns about potential political influence or persuasion upon criminal prosecutions.\" He did point out, however, that the department had \"accommodate[d] requests from particular congressional committees for investigative materials on an ad hoc basis by appropriate application to the courts, and subject to necessary protective conditions,\" which it would continue to do. In separate testimony, representatives of the American Bar Association and the National Association of Criminal Defense Lawyers argued that the provision under consideration could violate the separation-of-powers doctrine and undermine the \"fundamental tradition of grand jury secrecy\" by \"subvert[ing] the purpose of the grand jury\" to legislative ends. An attorney with expertise on the subject of congressional access to information also testified at the hearing and expressed the view that a bill permitting a court to provide grand jury materials to a congressional committee \"with legitimate oversight functions would not violate separation-of-powers principles.\" However, he believed that Congress should have access to grand jury materials only \"in very limited circumstances\" and suggested that an amendment to Rule 6(e) \"should instruct a Federal court to weigh congressional needs against grand jury secrecy requirements in determining whether to grant access.\" In the attorney's view, this weighing would include consideration of whether the committee could acquire sufficient information from non-grand-jury sources, whether the grand jury proceedings for which information was sought had terminated or were ongoing, and whether the committee had \"in place special provisions to protect the confidentiality of grand jury material.\" The attorney did not view the provision under consideration, as written, to be adequate in light of the considerations he identified. Ultimately, the bill was reported out of committee with the changes to Rule 6(e), including the congressional-access provision, excised, and it does not appear that the legislation was further pursued. Consequently, ambiguity remains regarding the relationship between grand jury secrecy and congressional access to grand jury materials. As the debate in the 99th Congress reflects, any change to the Rule could raise potentially difficult constitutional, interpretive, and policy questions. In any event, should Congress desire to create further exceptions to the secrecy framework beyond Rule 6(e), the Supreme Court has instructed that it must \"affirmatively express its intent to do so.\" ", "summary": "The Fifth Amendment to the U.S. Constitution states that \"[n]o person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury.\" This provision requires that a federal prosecutor, in order to charge a suspect with a serious federal crime, secure the assent of an independent investigative and deliberative body comprising citizens drawn from the jurisdiction in which the crime would be tried. Federal grand juries serve two primary functions: (1) they aid federal prosecutors in investigating possible crimes by issuing subpoenas for documents, physical evidence, and witness testimony; and (2) they determine whether there is sufficient evidence to charge a criminal suspect with the crime or crimes under investigation. Traditionally, the grand jury has conducted its work in secret. Secrecy prevents those under scrutiny from fleeing or importuning the grand jurors, encourages full disclosure by witnesses, and protects the innocent from unwarranted prosecution, among other things. The long-established rule of grand jury secrecy is enshrined in Federal Rule of Criminal Procedure 6(e), which provides that government attorneys and the jurors themselves, among others, \"must not disclose a matter occurring before the grand jury.\" Accordingly, as a general matter, persons and entities external to the grand jury process are precluded from obtaining transcripts of grand jury testimony or other documents or information that would reveal what took place in the proceedings, even if the grand jury has concluded its work and even if the information is sought pursuant to otherwise-valid legal processes. At times, the rule of grand jury secrecy has come into tension with Congress's power of inquiry when an arm of the legislative branch has sought protected materials pursuant to its oversight function. For instance, some courts have determined that the information barrier established in Rule 6(e) extends to congressional inquiries, observing that the Rule contains no reservations for congressional access to grand jury materials that would otherwise remain secret. Nevertheless, the rule of grand jury secrecy is subject to a number of exceptions, both codified and judicially crafted, that permit grand jury information to be disclosed in certain circumstances (usually only with prior judicial authorization). Perhaps the most significant of these for congressional purposes are (1) the exception that allows a court to authorize disclosure of grand jury matters \"preliminarily to or in connection with a judicial proceeding,\" and (2) the exception, recognized by a few courts, that allows a court to authorize disclosure of grand jury matters in special or exceptional circumstances. In turn, some courts have determined that one or both of these exceptions applies to congressional requests for grand jury materials in the context of impeachment proceedings, though there is authority to the contrary. Additionally, because Rule 6(e) covers only \"matters occurring before the grand jury,\" courts have recognized that documents and information are not independently insulated from disclosure merely because they happen to have been presented to, or considered by, a grand jury. As such, even if Rule 6(e) generally limits congressional access to grand jury information, Congress has a number of tools at its disposal to seek materials connected to a grand jury investigation. Prior Congresses have considered legislation that would have expressly permitted a court to authorize disclosure of grand jury matters to congressional committees on a showing of substantial need. However, in response to such proposals, the executive branch has voiced concerns that the legislation would raise due-process and separation-of-powers issues and potentially undermine the proper functioning of federal grand juries. These concerns may have resulted in Congress declining to alter Rule 6(e). As a result, to the extent Rule 6(e) constrains Congress's ability to conduct oversight, legislation seeking to amend the rules governing grand jury secrecy in a way that would give Congress independent access to grand jury materials may raise additional legal and pragmatic issues for the legislative branch to consider.", "document_type": "crs"}
{"report": "This report provides both an overview of the FY2019 defense appropriations act ( P.L. 115-245 ) and access to other CRS products providing additional detail and analysis on particular issues and programs dealt with by that law. The Overview section of the report immediately following this Introduction covers the legislative history of the bill and the strategic and budgetary context within which is was debated. Subsequent sections of the report detail the bill's treatment of specific issues including procurement of various types of weapons. Each section dealing with procurement of a certain type of weapon includes a table presenting basic budget information and links to any relevant CRS product. For FY2019, the Trump Administration requested $668.4 billion to fund programs falling within the scope of the annual defense appropriations act. This included $67.9 billion to be designated by Congress and the President as funding for Overseas Contingency Operations (OCO) and $599.4 billion for DOD's base budget, comprising all operations not designated as OCO. OCO-designated funding is related to current operations in Afghanistan and Syria, but includes other activities that Congress and the President so-designate. As enacted, H.R. 6157 provides $667.3 billion, a net reduction of $1.09 billion amounting to less than two-tenths of 1% of the total (i.e., base budget plus OCO) request. Compared with the total amount provided by the FY2018 defense appropriations bill (P.L. 114-113), the FY2019 act provides an increase of 2.3%. (See Table 1 .) The House initially passed H.R. 6197 on June 28, 2018, by a vote of 359-49. On that same day, the Senate Appropriations Committee reported S. 3159 , its own version of the FY2019 Defense Appropriations bill. Subsequently, the Senate adopted several amendments to H.R. 6157 , including one that substituted the text of the Senate committee bill for the House-passed text. The Senate also adopted an amendment that added to the defense bill the text of S. 3158 , the FY2019 appropriations bill for the Departments of Labor, Health and Human Services, and Education, which the Senate Appropriations Committee had approved on August 20, 2018. The Senate then passed H.R. 6197 , as amended, on August 23, 2018, by a vote of 85-7. A House-Senate conference committee reported a version of the bill on September 13, 2018. The Senate approved the conference report on September 18 by a vote of 93-7 and the House did likewise on September 26 by a vote of 361-61. President Donald J. Trump signed the bill into law ( P.L. 115-245 ) on September 28, 2018. (See Table 2 .) The total amount requested for DOD that falls within the scope of the annual defense appropriations bill and amounts provided in P.L. 115-245 as enacted are relatively close. Within those gross totals, however, there are differences between the amounts requested and the amounts provided for hundreds of specific elements within the sprawling DOD budget. Many of these individual differences reflect congressional judgements about particular issues. However, there also are patterns of differences that reflect congressional views on broad policy or budgetary questions: Title I of the act, that funds Military Personnel accounts, provides $2.2 billion less than was requested for pay and benefits. House-Senate conferees said the reduction should have no adverse impact on the force. According to the conference report, revised estimates of the budgetary impact of recent changes in the military retirement system were the basis for a net reduction from the request of $1.54 billion. Other reductions totaling $430 million were justified by conferees on the basis of \"historical unobligated balances,\" that is, an accumulation of funds in certain accounts that were appropriated in prior years but were not spent. Base budget funding provided by the Operation and Maintenance (O&M) title of the act (Title II) amounts to a net reduction of $5.2 billion from the request. In part, the apparent cut reflects a transfer of nearly $2.0 billion to Title IX of the act, which funds OCO. The conferees justified additional reductions totaling $1.34 billion on the basis of either large unobligated balances or \"historical underexecution,\" (i.e., a pattern of repeatedly spending less on military personnel in a given fiscal year than had been appropriated). On the other hand, total procurement funding for the base budget (Title III) is $4.8 billion higher than the request. While the act makes hundreds of additions and cuts to the funding requested for particular items, three broad themes all push the act's procurement total upward: $2.48 billion is added to buy aircraft and other equipment for National Guard and reserve forces; $2.31 billion is added to fully fund or acquire major components for additional six ships (see Table 9 ); and $2.13 billion is added to the $8.49 billion requested for procurement of F-35 Joint Strike Fighters (see Table 10 ). Similarly, base budget funding in the act for research and development (Title IV) is $3.8 billion higher than the request, partly because the legislation would add $2.3 billion to the $13.7 billion requested for science and technology (S&T) programs – that is, the part of the R&D effort focused on developing new and potentially useful scientific and engineering knowledge rather than on designing specific pieces of equipment intended for production. The Trump Administration presented its FY2019 defense budget request – nearly 96% of which is funded by the annual defense appropriations bill – as responding to an international security environment that has become increasingly contentious in recent years. Many observers view events such as China's construction of military bases in the South China Sea since 2013 and Russia's seizure of Crimea in March 2014 as marking an end to the post-Cold War era that began in the late 1980s and 1990s with the decline and collapse of the Soviet Union. Many observers of contemporary international security trends contend that the United States and its allies are entering an era of increased strategic complexity. Very broadly speaking, during the Cold War and beyond, U.S. national security challenges were difficult, yet relatively straightforward to conceptualize, prioritize, and manage. U.S. national security and foreign policies during the Cold War were focused on its strategic competition with the Union of Soviet Socialist Republics and on containing the spread of communism globally. In the years following the end of the Cold War, U.S. national security policies and practices were largely designed to curtail genocide in the Balkans and Iraq, while simultaneously containing regional aggressors such as Iran and North Korea and recalibrating relations with China and Russia. The terrorist attacks on U.S. territory on September 11 th , 2001 ushered in an era of national security policy largely focused on countering terrorism and insurgencies in the Middle East while containing, if not reversing, North Korean and Iranian nuclear weapons programs. As a legacy of the Cold War's ending, U.S. and allied military forces had overwhelming military superiority over adversaries in the Middle East and the Balkans. Accordingly, operations were conducted in relatively permissive environments. The 2014 Russian invasion of the Crimean peninsula and subsequent proxy war in eastern Ukraine fostered concern in the United States and in Europe about an aggressive and revanchist Russia. Meanwhile, China began building and militarizing islands in the South China Sea in order to lay claim to key shipping lanes. Together, these events highlighted anew the salience in the U.S. national security agenda of dealing with other great powers , that is, states able and willing to employ military force unilaterally to accomplish their objectives. At the same time, the security challenges that surfaced at the end of the Cold War – fragile states, genocide, terrorism, and nuclear proliferation, to name a few – have remained serious threats to U.S. interests. In this international context, conceptualizing, prioritizing, and managing these myriad problems, arguably, is more difficult than it was in eras past. The situation is summarized by the December 2017 U.S. National Security Strategy (NSS), which notes: The United States faces an extraordinarily dangerous world, filled with a wide range of threats that have intensified in recent years. Likewise, the January 2018 National Defense Strategy (NDS) argues: We are facing increased global disorder, characterized by decline in the long-standing rules-based international order—creating a security environment more complex and volatile than any we have experienced in recent memory. The Trump Administration's 2017 NSS and the 11-page unclassified summary of the NDS explicitly reorients U.S. national security strategy (including defense strategy) toward a primary focus on great power competition with China and Russia and on countering Chinese and Russian military capabilities. In addition to explicitly making the great power competition the primary U.S. national security concern, the NDS also argues for a focus on bolstering the competitive advantage of U.S. forces, which, the document contends, has eroded in recent decades vis-à-vis the Chinese and Russian threats. The NDS also maintains that, contrary to what was the case for most of the years since the end of the Cold War, U.S. forces now must assume that their ability to approach military objectives will be vigorously contested. The new U.S. strategy orientation set forth in the 2017 NSS and 2018 NDS is sometimes referred to a \"2+3\" strategy, meaning a strategy for countering two primary challenges (China and Russia) and three additional challenges (North Korea, Iran, and terrorist groups), although given the radically differing nature of these challenges, one might posit that such a heuristic oversimplifies the contours of the strategic environment. Congressional action on all FY2019 appropriations bills was shaped by an effort to rein in federal spending, out of concern for the increasing indebtedness of the federal government. The fastest growing segment of federal spending in recent decades has been mandatory spending for entitlement programs such as Social Security, Medicare, and Medicaid. (See Figure 1 .) The Budget Control Act (BCA) of 2011 (P.L. 112-25) was intended to reduce spending by $2.1 trillion over the period FY2012-FY2021, compared to projected spending over that period. One element of the act established binding annual limits (or caps) to reduce discretionary federal spending through FY2021 by $1.0 trillion. Separate annual caps on discretionary appropriations for defense-related activities and non-defense activities are enforced by a mechanism called sequestration . Sequestration provides for the automatic cancellation of previous appropriations, to reduce discretionary spending to the BCA cap for the year in question. The caps on defense-related spending apply to discretionary funding for DOD and for defense-related activities by other agencies, comprising the national defense budget function which is designated budget function 050 . The caps do not apply to funding designated by Congress and the president as emergency spending or spending on OCO. Congress has raised the annual spending caps repeatedly, most recently with the Bipartisan Budget Act of 2018 (P.L. 115-123), which set the national defense funding cap for FY2019 at $647 billion. Because the cap applies to defense-related spending in other agencies as well as to DOD, and because the annual defense appropriations bill covers most but not all of DOD's discretionary budget, the portion of the cap applicable to FY2019 defense appropriations bill is approximately $600 billion. The Administration's request for the bill was consistent with that cap, as is the enacted bill. The total FY2019 DOD request – including both base budget and OCO funding – continued an upswing that began with the FY2016 budget, which marked the end of a relatively steady decline in real (that is, inflation-adjusted) DOD purchasing power. Measured in constant dollars, DOD funding peaked in FY2010, after which the drawdown of U.S. troops in OCO operations drove a reduction in DOD spending. (See Figure 2 .) The law funds the Administration's proposal to increase the size of the armed forces by 15,600 personnel in the active components – with nearly half of that increase destined for the Navy – and by a total of 800 members of the Air Force Reserve and Air National Guard. The Senate-passed version of the bill would have funded less than half the amount of the proposed increase in active-duty personnel and none of the amount of the proposed increase in the reserve component. (See Table 3 .) The Senate Appropriations Committee report on S. 3159 (which became the basis for the Senate-passed version of the appropriations bill) stated no reason for recommending less than half the amount of the Administration's proposed increase. However, on this point, the Senate version of the appropriations bill mirrored the Senate-passed version of the companion John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year 2019 (H.R. 5515; P.L. 115-232), which also would have approved half the amount of the proposed increase in the active-duty components and none of the amount of the proposed reserve component increase. In the Senate Armed Services Committee report to accompany its version of the NDAA, the panel expressed concern that, because unemployment is at historically low levels, the services might have trouble recruiting enough additional personnel to fill a larger force while maintaining their current standards for enlistment. As with the FY2019 defense appropriations bill, the conference report on the FY2019 NDAA authorized the Administration's proposed increase in military end-strength. The enacted version of the appropriations bill funds the Administration's recommended 2.6 % increase in military basic pay effective January 1, 2019 (as both the House and Senate versions would have done). The Congressional Budget Office (CBO) estimates the cost of this raise to be $1.8 billion. In terms of total funding, the act appropriates $34.0 billion for the Defense Health Program (DHP) in FY2019, which represents an increase of less than 1% over the Administration's $33.7 billion request. As usual, those similar totals mask a number of differences. Compared with the request, the enacted bill cuts: $213 million to force DOD to deal with what House and Senate conferees labelled \"excess growth\" in the cost of pharmaceuticals; $215 million in anticipation that the funds will not be needed because the program will continue to exhibit its pattern of historical underexecution; and $597 million to correct what the House Appropriations Committee said was erroneous accounting for congressional action on the FY2018 DHP budget. Among the amounts the enacted bill would add to the request are: $10 million for training therapeutic service dogs; and $2 million to coordinate the actions of DOD and the Department of Veterans Affairs to study the possible adverse health effects of the widespread use of open burning pits to dispose of trash at U.S. military sites in Iraq and Afghanistan. The Senate-passed version of the bill would have added to the request $750 million for maintenance and repair of DHP facilities, but this was not included in the final version of the bill. Continuing a 28-year-long pattern, the act adds to the Administration's DHP budget request funds for medical research and development. Beginning with a $25 million earmark for breast cancer research in the FY1992 defense appropriations act ( P.L. 102-172 ), Congress has added a total of $13.2 billion to the DOD budget through FY2018 for research on a variety of medical conditions and treatments. The Administration's DHP budget request included $710.6 million for research and development. The House-passed version of H.R. 6157 would have added $775.6 million, most of which was allocated to one of 27 specific medical conditions or treatments. The Senate version would have added to the request $963.2 of which $431.5 million was allocated among 10 specific diseases or treatments. The enacted version of the bill appropriates a total of $2.18 billion for DHP-funded medical research, an increase of $1.47 billion over the request that covers each of the particular medical conditions and treatments that would have been funded by either chamber's bill. As has been typical for several years, the largest amounts for particular diseases in both the House and Senate versions of the FY2019 bill are aimed at breast cancer, prostate cancer, and traumatic brain injury (TBI). (See Table 4 .) The act cuts $4.8 billion from the Administration's $199.5 billion request for base budget O&M funds, making the final appropriation $194.7 billion. However, more than one-third of the apparent reduction ($2.0 billion) is accounted for by funds that the bill appropriates as part of the budget for OCO, despite their having been requested in the base budget. For dozens of additional cuts from the base budget O&M request, House-Senate conferees cited rationales that imply that the reductions need not have an adverse impact on DOD activities: Cuts totaling $1.3 billion were justified by the assumption that particular programs would underspend their budget requests by that amount, often on the basis of what the conferees called a pattern of historic al underexecution of their annual appropriations; Cuts totaling $1.3 billion were justified on grounds that DOD had not justified its request for those funds; and Cuts totaling $343 million were justified on grounds that the requests amounted to unrealistically large increases over the prior year's appropriation. The House-passed version of the bill would have added a total of $1.0 billion spread across the active and reserve components of the armed forces to \"restore readiness.\" According to the House committee report, the funds were intended to be spent on training, depot maintenance, and base operations according to a plan DOD was to submit to Congress 30 days in advance of expenditure. The funds were not included in the enacted version of the bill. The Administration's FY2019 budget request continued the across-the-board modernization of the U.S. strategic arsenal that had been launched by the Obama Administration. Within that program, the initial House and Senate versions of H.R. 6157 funded the major initiatives with some changes, many of which reflected routine budget oversight. (See Table 5 .) The enacted version of the bill adds a total of more than $300 million to the amounts requested to develop three new long-range weapons. Specifically it adds: $69.4 million to the $345.0 million requested for a new, nuclear-armed intercontinental ballistic missile (ICBM) to replace Minuteman III missiles deployed in the 1970s, an increase conferees said would meet an unspecified \"unfunded requirement\"; $203.5 million for \"program acceleration\" to the $263.4 million requested to develop Conventional Prompt Global Strike weapon sufficiently accurate to strike a target at great range with a conventional (i.e., non-nuclear) warhead; and $50 million, also to meet an unspecified \"unfunded requirement,\" to the $614.9 million requested to develop a Long-Range Stand-Off (LRSO) weapon to replace the nuclear-armed air-launched cruise missile (ALCM) carried by long-range bombers. The act supports the general thrust of the administration's funding request for ballistic missile defense, with the sort of funding adjustments that are routine in the appropriations process. For so-called mid-c ourse defense, intended to protect U.S. territory against a relatively small number of intercontinental-range warheads, the Administration's program would expand the fleet of interceptor missiles currently deployed in Alaska and California, while developing an improved version of that interceptor. The program also is deploying shorter-range THAAD, Aegis, and Patriot missiles to provide a so-called terminal defense intended to protect U.S. allies and forces stationed abroad and to provide a second-layer of protection for U.S. targets. (See Table 6 .) The act cuts a total $301.7 million from the amounts requested for various projects associated with mid-course defense of U.S. territory on grounds that these funds were intended for purposes Congress already had funded in the FY2018 defense appropriations act ( P.L. 115-141 ). That measure was enacted two months after the FY2019 budget request was sent to Congress, reiterating the request for the funds in question. The act adds more than $400 million to the amounts requested to develop and acquire missile defenses for South Korea and U.S. forces stationed there. North Korea has tested long-range and short-range ballistic missiles as well as nuclear weapon. The increase includes $284.4 million to develop a network linking THAAD interceptor missiles and shorter-range Patriot missiles based in South Korea and Japan with sensors that could track incoming North Korean missiles. The act also adds $140 million to the $874 million requested to procure THAAD interceptors that are deployed in Guam, in the Middle East, and in South Korea. While Congress and the Administration weighed alternative ways to organize a new organization – a Space Force – to address long-standing criticisms of DOD's acquisition of space satellites and associated launchers, the debate was not cited by the House and Senate Appropriations Committees in their reports on the FY2019 defense appropriations bill. Nor was it cited by House and Senate conferees in their Joint Explanatory Statement to accompany the conference report on the bill. The enacted bill funded – with largely modest changes – the Administration's requests for several major defense-related space programs. (See Table 7 .) The most sizeable departure from the Administration's request was the addition of $200 million to the $245.4 million requested in R&D funding associated with the Evolved Expendable Launch Vehicle (EELV), which is the program for acquiring satellite launch rockets and launch services for relatively heavy DOD space payloads. The act supports the general thrust of the Administration's program to beef up the capacity of Army and Marine Corps units to prevail in full-scale, high-tech combat with the forces of near-peer adversaries, namely Russia and China. The increased DOD emphasis on conventional combat with major powers is rooted in the 2018 National Defense Strategy of which DOD published an unclassified synopsis on January 19, 2018. In addition to modernizing the ground forces' existing capabilities, the Administration's FY2019 budget request included stepped-up investments to improve two capabilities the Army identifies as among its top modernization priorities: mobile defenses against cruise missiles and drone aircraft; and improved firepower and mobility for infantry units. While taking some reductions from the amounts requested for some programs – cuts based on program delays, the availability of prior-year funds, and so forth – the bills would provide funding above the requested level to accelerate other programs. (See Table 8 .) The act funded most of the roughly $2.5 billion requested to continue upgrading the Army's fleet of M-1 tanks, built between 1980 and 1996. For the program to continue modernizing the service's Bradley armored troop carriers – which is roughly contemporary with the tank fleet – it would cut nearly a quarter of the $1.04 billion requested, mostly on grounds of a \"change of acquisition strategy.\" The act provided more funds than requested in order to accelerate modernization of two other components of the Army's current combat vehicle fleet, adding: $110.0 million to the $310.8 million requested to replace the chassis and powertrain of the M-109 Paladin self-propelled with the more powerful and robust chassis of the Bradley troop carrier; and $94.0 million to the $265.3 million requested to replace the flat underside of many types of Stryker wheeled combat vehicles with a V-shaped bottom intended to more effectively deflect the explosive force of buried landmines. The act generally funded programs to replace two older types of tracked vehicles, providing: $447.5 million (of $479.8 million requested) to continue procurement of the Advanced Multi-Purpose Vehicle (AMPV), intended to replace the Vietnam War-vintage M-113 tracked personnel carrier; and $167.5 million, as requested, for procurement of the Amphibious Combat Vehicle (ACV), a successor to the Marine Corps' equally dated AAV-7 amphibious troop carrier. The Administration requested a total of $449 million to develop and begin purchasing vehicles intended to boost the lethality and mobility of Army infantry units – that is, forces not equipped with M-1 tanks and other armored vehicles. Nearly 90% of those funds were for development of a relatively light-weight tank (designated Mobile Protected Firepower or MPF) with the balance of the money intended to begin purchasing four-wheel-drive, off-road vehicles for reconnaissance missions and troop transport, designated Light Reconnaissance Vehicle (LRV) and Ground Mobility Vehicle (GMV), respectively. The act funds the three programs with some relatively small reduction reflecting concerns that their development or testing schedules are unrealistically ambitious. The FY2019 budget request includes nearly $450 million for programs intended to beef up mobile Army defenses against aircraft, including unmanned aerial systems and cruise missiles. These include a Stryker combat vehicle equipped to launch Stinger missiles (designated IM-SHORAD) and a larger, truck-mounted missile launcher (designated IFPC). The act cut the total R&D request for the programs by nearly 25% for various, relatively typical rationales including development program delays. Following what has long been the usual practice, the act adds to the DOD budget $2.35 billion for procurement of aircraft, ground vehicles, and other equipment for National Guard or other reserve component units. These funds are provided in addition to the $3.64 billion worth of equipment for Guard and reserve forces that was included in the Administration's FY2019 budget request. The increase includes a total of $1.30 billion in the National Guard and Reserve Equipment Account (NGREA) which is allocated among the six reserve force components: the Army and Air National Guard, and the Army, Navy, Marine Corps, and Air Force Reserve. In their Joint Explanatory Statement on the final version of the bill, House and Senate conferees directed the funds to be used \"for priority equipment that may be used for combat and domestic response missions.\" Amounts are not earmarked for specific purchases, but conferees on the defense bill directed that \"priority consideration\" in using the funds be given to 18 types of items. The 18 categories range in specificity from \"digital radar warning receivers for F-16s\" to \"cold-weather and mountaineering gear and equipment.\" Other congressional initiatives include specific increases for National Guard equipment: $640 million for 8 C-130J cargo planes; $168 million for 6 AH-64E attack helicopters; $156 million for 8 UH-60 Black Hawk helicopters; and $100 million for HMMWV (\"Hum-vee\") vehicles. The act funds the major elements of the Administration's shipbuilding program, which aims at enlarging and modernizing the Navy's fleet. The stated goals of the program are to improve the Navy's ability to respond to increasingly assertive military operations by China in the Western Pacific and Indian Oceans, and to halt, if not reverse, the decline in the technological edge that U.S. forces have enjoyed for decades. (See Table 9 .) The Administration's $1.60 billion request to fund a Ford -class aircraft carrier was intended as the fourth of eight annual increments to cover the estimated $12.6 billion cost of what will be the third ship of the Ford class. That ship, designated CVN-80 and named Enterprise , is slated for delivery to the Navy at the end of FY2027. The act, which provides nearly the total amount requested, includes a provision that allows the Navy – under certain conditions – to use the funds for a block buy contract that would fund procurement of components for both CVN-80 and the planned fourth ship of the Ford class, designated CVN-81. Proponents of such an arrangement contend that it could accelerate the delivery of the fourth ship and reduce the overall cost of the two vessels. Before the funds could be used for a block buy, DOD would have to certify to Congress an analysis demonstrating that the approach would save money, as required by Section 121 of the companion FY2019 National Defense Authorization Act, H.R. 5515 ( P.L. 115-232 ). The act adds to the Administration's request $1.1 billion to accelerate the planned production of ships to support amphibious landings and large air-cushion craft to haul tanks and other combat equipment ashore. This total includes: $350 million to begin construction of an LHA-class helicopter carrier; $350 million to begin construction of either an LPD-17-class amphibious landing transport or a variant of that ship designated LX(R); $225 million for an Expeditionary Fast Transport, a catamaran that can carry a few hundred troops and their gear hundreds of miles at 40 mph; and $182.5 million to buy eight air-cushion landing craft (instead of the five requested) to haul tanks and other equipment ashore from transport ships. Generally speaking, the act funds the Administration's requests for military aircraft acquisition, subject to relatively minor cuts reflecting routine congressional oversight. The major departures from the request were increased funds to accelerate production of the F-35 Joint Strike fighter and the addition of funds to buy helicopters and C-130 cargo planes for the National Guard. The act's largest addition to the Administration's request for a single weapons program is the addition of $1.70 billion to acquire 16 F-35 Joint Strike Fighters to the 77 F-35s funded in the budget request. The additional funds provides eight more aircraft in addition to the 48 requested for the Air Force, two more of the short-takeoff, vertical-landing (STOVL) F-35s for the Marine Corps (in addition to the 20 requested), and six more of the aircraft carrier-adapted version – four for the Navy (in addition to the nine requested), and two for the Marine Corps. Other notable funding increases in the bill for procurement of combat aircraft include: $65.0 million to extend the life of A-10 ground-attack planes by replacing their wings; and $100.0 million to begin acquisition of a relatively low-tech (and relatively inexpensive) ground-attack plane designated OA-X for use against other-than-top-tier adversaries. Following are the full citations of CRS products identified in tables by reference number only. CRS Reports CRS Report RS22103, VH-71/VXX Presidential Helicopter Program: Background and Issues for Congress , by Jeremiah Gertler CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke CRS Report RL31384, V-22 Osprey Tilt-Rotor Aircraft Program , by Jeremiah Gertler CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke CRS Report RL33745, Navy Aegis Ballistic Missile Defense (BMD) Program: Background and Issues for Congress , by Ronald O'Rourke CRS Report RL34398, Air Force KC-46A Tanker Aircraft Program , by Jeremiah Gertler CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke CRS Report R41464, Conventional Prompt Global Strike and Long-Range Ballistic Missiles: Background and Issues , by Amy F. Woolf CRS Report R42723, Marine Corps Amphibious Combat Vehicle (ACV): Background and Issues for Congress , by Andrew Feickert CRS Report R43049, U.S. Air Force Bomber Sustainment and Modernization: Background and Issues for Congress , by Jeremiah Gertler CRS Report R43240, The Army's Armored Multi-Purpose Vehicle (AMPV): Background and Issues for Congress , by Andrew Feickert CRS Report R43618, C-130 Hercules: Background, Sustainment, Modernization, Issues for Congress , by Jeremiah Gertler and Timrek Heisler CRS Report R44463, Air Force B-21 Raider Long-Range Strike Bomber , by Jeremiah Gertler CRS Report R44968, Infantry Brigade Combat Team (IBCT) Mobility, Reconnaissance, and Firepower Programs , by Andrew Feickert CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke Insight, In Focus CRS Insight IN10931, U.S. Army's Initial Maneuver, Short-Range Air Defense (IM-SHORAD) System , by Andrew Feickert CRS In Focus IF10954, Air Force OA-X Light Attack Aircraft Program , by Jeremiah Gertler", "summary": "The FY2019 Department of Defense Appropriations Act, enacted as Division A of P.L. 115-245 , provides $667.3 billion in new budget authority to fund all activities of the Department of Defense (DOD) except for the construction of military facilities and the operation of military family housing complexes. While the total amount appropriated for DOD for FY2019 was nearly equal to the Administration's request, the act provides more funding than requested for dozens of weapons acquisition programs, with the gross increase exceeding $10 billion. Those additions are offset by hundreds of reductions made elsewhere within the budget request. In effect, these reductions allowed Congress to add billions of dollars to the Administration's DOD budget request without exceeding the cap on defense spending that arose from the Bipartisan Budget Act of 2018 ( P.L. 115-123 ). That cap applies to discretionary appropriations for DOD's base budget —that is, appropriations designated by Congress and the President as funding for emergencies or for Overseas Contingency Operations (OCO). OCO activities include current operations in Afghanistan and Syria, and any other operations which are so designated by Congress and the President. A House-Senate conference committee reported a version of the bill on September 13, 2018. The Senate approved the conference report on September 18 by a vote of 93-7 and the House did likewise on September 26 by a vote of 361-61. President Donald J. Trump signed the bill into law ( P.L. 115-245 ) on September 28, 2018. As enacted, H.R. 6157 funds the Administration's major defense initiatives, including an increase of 16,500 active-duty military personnel. Among the weapons procurement programs for which the bill provides substantial additions add to the amounts requested are the F-35 Joint Strike Fighter used by the Air Force, Navy, and Marine Corps (77 aircraft requested and 93 funded) and the Navy's Littoral Combat Ship (one requested and three funded).", "document_type": "crs"}
{"report": "The annual Department of State, Foreign Operations, and Related Programs appropriations legislation (SFOPS) funds many of the nondefense international affairs activities of the government. It is one of 12 appropriations bills that Congress considers annually to fund the discretionary activities of the government. Congress structures SFOPS into several titles, which consist of broad spending categories. These titles are subdivided into paragraphs that each address one component account, a funding line item that includes one or several activities of the government. A single component account may cover one agency's entire annual budget, grant funds to an independent organization, or fund multiple activities associated with statutory authorities, among other things. In the FY2019 Consolidated Appropriations Act ( P.L. 116-6 ), the Department of State, Foreign Operations, and Related Programs Appropriations Act (Division F) is divided into eight titles, each associated with the following activities: Many of the component accounts within these titles correspond to one or several authorities in statute. Title 22 of the U.S. Code contains many of these authorities. Major acts in Title 22 include the State Department Basic Authorities Act of 1956 (P.L. 84-885; hereinafter the Basic Authorities Act), the Foreign Service Act of 1980 ( P.L. 96-465 ), and the Foreign Assistance Act of 1961 (P.L. 87-195; hereinafter the FAA), among others. This report identifies the statutory authorities that enable each component account to function. A list of these major acts, and cross-references to their location in the U.S. Code , are in Appendix A . For information on SFOPS funding levels, trends, and congressional action, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations , by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill. Title I funds (1) State Department personnel, operations, and programs; (2) U.S. participation in international organizations, such as the United Nations, and international commissions; (3) U.S. government, nonmilitary international broadcasting; and (4) several U.S. nongovernmental agencies and other U.S. commissions and interparliamentary groups, such as the National Endowment for Democracy. The Administration of Foreign Affairs account category provides funding for the State Department's personnel, operations, and programs; including diplomatic security and the construction and maintenance of its facilities in the United States and around the world. It is composed of the following component accounts: DP, the principal operating account of the State Department, includes four funding categories: Human Resources . Funds the salaries of domestic and overseas State Department employees, training services at the Foreign Service Institute, the operating costs of the Bureau of Human Resources, and diversity recruitment and development programs such as the Pickering and Rangel Fellowships. Overseas Programs . Funds the Department's various regional and functional bureaus, along with bureau-administered foreign policy programs. Historically, the account has, for instance, funded the bureaus of African Affairs, International Organization Affairs, and Conflict and Stabilization Operations as well as the costs of department employees' travel on assignment. Diplomatic Policy and Support . Funds many of the Department's strategic and managerial units, such as the Office of the Secretary and the Bureaus of Administration, Budget and Planning, Legislative Affairs, Information Resource Management, the Comptroller and Global Financial Services, and Intelligence and Research, among others. Security Programs . Funds the Department's security programs and policies, including those implemented by the Bureau of Counterterrorism and Countering Violent Extremism and the Office of Foreign Missions. It is also the primary source of funding for the Worldwide Security Protection subaccount, which provides funds to the Bureau of Diplomatic Security and other bureaus to implement programs to protect the department's staff, property, and information. Until FY2019, this account (named Diplomatic & Consular Programs in prior years) included some consular fees and surcharges that offset expenditures. Beginning with FY2019 appropriations, the State Department is to use that revenue to fund the administration of consular and border security programs directly under a new Consular and Border Security Programs account (the CBSP account). That account does not require annual appropriations and thus does not appear in the FY2019 act. CIF funds information technology (IT) and other capital equipment procurement to ensure efficient management, coordination, and utilization of IT resources. Funds allocated to this account, established by Congress in 1994, have supported the ongoing IT modernization initiative at the State Department. This account funds the State Department's Office of Inspector General, which conducts independent audits, inspections, evaluations, and investigations of the programs and offices of the State Department and the Broadcasting Board of Governors (operationally renamed in 2018 as the U.S. Agency for Global Media). This account funds the State Department's management of U.S. educational, professional, and cultural exchanges, such as the Fulbright Scholar Program, the International Visitor Leadership Program, and the Congress-Bundestag Youth Exchange. Authority for these programs derive from the Mutual Education and Cultural Exchange Act of 1961 (popularly referred to as the Fulbright-Hays Act; P.L. 87-256 ), as amended, though several of these programs predate that act. The Representation Expenses account reimburses Foreign Service Officers for entertainment of government officials to advance diplomacy. This account funds reimbursable expenses to municipal, state, and federal law enforcement agencies throughout the United States for \"extraordinary\" services provided to foreign missions and officials, in particular to the New York Police Department to protect representatives to the United Nations. ESCM funds provide for the general management and maintenance of U.S. State Department embassies and other facilities in the United States and abroad. This includes ongoing renovations to the State Department headquarters in Washington, DC. This account also funds Worldwide Security Upgrades (WSU), which provides the State Department's share of the costs to plan, design, and build new embassies and facilities to comply with requirements of the Secure Embassy Construction and Counterterrorism Act of 1999 (Title VI of P.L. 106-113 ). This account addresses unexpected events, such as the evacuation of U.S. diplomats and their families or, in some circumstances, private U.S. citizens or third-country nationals as a result of natural disasters, epidemics, terrorist attacks, or civil unrest. It also funds some nonemergency activities of senior Administration officials, such as G-20 Summits or the Organization for American States (OAS) General Assembly (Basic Authorities Act, §4). This account also funds rewards for informants about international terrorism (the \"Rewards for Justice\" program), narcotics-related activities, transnational organized crime, and war crimes (Basic Authorities Act, §36). For example, information obtained through Rewards for Justice led to the capture and conviction of one of the planners of the 1993 World Trade Center bombing in New York. The Repatriation Loans Program Account subsidizes small loans to destitute U.S. citizens abroad who are unable to fund their return to the United States (Basic Authorities Act, §4). AIT is a nonprofit, private corporation established for \"[p]rograms, transactions, and other relations conducted or carried out by the President or any agency of the United States Government with respect to Taiwan,\" in accordance with the Taiwan Relations Act ( P.L. 96-8 ). It provides consular services for Americans and the people of Taiwan. The account supports a contract providing for salaries, benefits, and other expenses associated with maintaining AIT. The International Center, or the International Chancery Center (ICC), is a 47-acre diplomatic enclave owned by the U.S. government and is located in Washington, DC. Fees from other executive agencies and proceeds from past leases fund ICC development, maintenance, security, and repairs. Congress established and authorized the ICC in the International Center Act ( P.L. 90-553 ) to provide territory for diplomatic missions of foreign governments to the United States. The payment covers the U.S. government's contribution to the Foreign Service Retirement and Disability System and the Foreign Service Pension System for USAID and the Department of State. Through the following two accounts in the International Organizations category, the United States meets its assessed obligations (dues) to the many international organizations and peacekeeping efforts that the United States supports. Title V of SFOPS appropriates voluntary contributions to multilateral organizations. The Contributions to International Organizations account funds U.S.-assessed contributions to the budget of the United Nations, certain U.N. system organizations, inter-American organizations, war crimes tribunals, and other intergovernmental organizations. The Contributions for International Peacekeeping Activities account funds U.S.-assessed contributions to U.N. peacekeeping operations worldwide, as well as assessed contributions to certain ad hoc courts, such as the International Criminal Tribunal for the Former Yugoslavia and the International Residual Mechanism for Criminal Tribunals. Accounts under the International Commissions category provide funding for U.S. obligations under law or treaty to the following bilateral and multilateral commissions: International Joint Commission and the International Boundary Commission (both between the United States and Canada), International Boundary and Water Commission and the Border Environment Cooperation Commission (both between the United States and Mexico); and International fisheries and waters commissions. The sole listing under the \"Related Agency\" category, BBG is the U.S. civilian international media agency. BBG was established as the successor to the U.S. Information Agency in the International Broadcasting Act of 1994 (Title III of P.L. 103-236 ). BBG renamed itself the United States Agency for Global Media in 2018, but recent appropriations have maintained the BBG title. It comprises the Voice of America (VOA) and Radio and TV Martí (under the Office of Cuba Broadcasting [OCB]). BBG also funds grantee organizations Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia (RFA), and Alhurra TV and Radio Sawa (under the Middle East Broadcasting Networks [MBN]). The broadcasting category is divided into two accounts, as follows. This account funds the operations of the BBG and all U.S. government, nonmilitary international broadcasts, including salaries and benefits for new hires and other operating expenses. Programmatic expansion priorities in FY2019 include new Russian and Korean language programs, an increased focus on Venezuela, and a digital media program in the Middle East and North Africa to counter extremist narratives. The Capital Improvements account supports improvements and maintenance of BBG's global transmission network and digital multimedia infrastructure and capital projects. This category includes funding to entities created by the U.S. government that today are nongovernmental but pursue objectives aligned with U.S. foreign policy. Several of these organizations fund themselves with income from trust funds created by Congress, so appropriations authorize use of that income and do not require appropriation of funds. Others receive funding exclusively from the U.S. government, or from both the U.S. government and other donors. The Asia Foundation is a nonprofit organization based in San Francisco that seeks to strengthen democratic institutions in Asia, counter violent extremism, promote economic opportunities for Asian and U.S. businesses, and improve U.S.-Asian relations. In addition to annual appropriations, it receives support from foreign governments, nonprofits, corporations, competitive grants, and individual charitable contributions. The U.S. Institute of Peace works to increase the United States' capacity to prevent, mitigate, and help resolve international conflict without violence. Congress established USIP in 1984 to offer training, analysis, and additional resources to governments, organizations, and individuals seeking to build peace (United States Institute of Peace Act, Title XVII of P.L. 98-525 ). It is prohibited from receiving non-U.S. government funding. The International Center for Middle Eastern-Western Dialogue (the Hollings Center), based in Istanbul, promotes dialogue between the United States and nations with significant Muslim populations to generate new thinking on key international issues and expand people-to-people contacts. Congress established it in 2004 with a dedicated trust fund ( P.L. 108-199 ). The Eisenhower Exchange Program brings professionals who are rising leaders in their countries to the United States and sends their U.S. counterparts abroad. Financed by a dedicated trust fund, it provides programs tailored to each participant and career development opportunities to prepare participants for increasingly senior positions in government, business, and nongovernmental institutions. Financed by a dedicated trust fund, the IASP funds scholarships for Israeli Arabs to attend institutions of higher education in the United States. The East-West Center, based in Hawaii, promotes better relations and understanding among the people and nations of the Asia-Pacific region and the United States through cooperative study, training, and research. In addition to annual appropriations, it receives support from foreign governments, nonprofits, corporations, competitive federal grants, and individual charitable contributions. NED is a private, independent, nonprofit organization that is dedicated to fostering the growth of a wide range of democratic institutions abroad, including political parties, trade unions, free markets, and business organizations. Established in the National Endowment for Democracy Act of 1983 ( Title V of P.L. 98-164 ), NED supports a variety of organizations but maintains four \"core institutes,\" each affiliated with a U.S. domestic organization. The National Democratic Institute (NDI) and the International Republican Institute (IRI) are nonpartisan entities that promote election-related capacity building. The Center for International Private Enterprise, affiliated with the U.S. Chamber of Commerce, supports the private sector by strengthening democratic institutions, and the Solidarity Center, associated with the AFL-CIO, supports labor rights in workplaces abroad. NED also receives funding from the Democracy Fund in Title III of SFOPS. Congress has established a number of organizations to advance selected U.S. objectives in the international arena. Most of these organizations are listed under the Legislative Branch Boards and Commissions in the President's budget request to Congress. Though all except the Commission for the Preservation of America's Heritage Abroad are legislative branch bodies, Congress funds them through SFOPS appropriations given their international affairs focus. This 21-member independent executive agency seeks to identify cemeteries, monuments, and historic buildings in Eastern and Central Europe that are associated with the heritage of U.S. citizens, particularly endangered properties and especially American Jews. It works to obtain, in cooperation with the Department of State, assurances from the governments of the region that the properties will be protected and preserved. The commission also encourages, sponsors, assists, and otherwise facilitates private and foreign government site restoration, preservation, and memorialization projects. Established in 1998, the commission seeks to promote international religious freedom in consultation with the State Department. Composed of both presidential and congressional appointees, it advises and makes policy recommendations to the President, the Secretary of State, and Congress through ad hoc publications and an annual report. The CSCE, established in 1975, seeks to advance U.S. interests by monitoring and promoting human rights, military security, and economic cooperation in the 57-country Organization on Security and Cooperation in Europe (OSCE). Members of Congress lead the commission jointly with executive branch officials. The CECC monitors human rights and the development of rule of law in China . Members of Congress lead the CECC jointly with executive branch officials. This commission, appointed by congressional leadership, monitors, investigates, and submits to Congress an annual report and recommendations on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China. Established in 2017, this commission is required to submit a report evaluating and proposing alternatives for U.S. foreign policy regarding the supply and abuse of illicit drugs in the Western Hemisphere. Unlike the other commissions, it is scheduled to disband after the report's completion. This title provides operational funds for USAID, an independent agency under the foreign policy guidance of the Department of State directly responsible for implementing most bilateral development assistance and disaster relief programs, many of which are funded in Title III of the State, Foreign Operations Appropriations Act. The OE account funds USAID's overseas and domestic operational expenses, including salaries and benefits, overseas mission activities, staff training, physical security, and information technology maintenance. A program begun in FY2003, the CIF supports the modernization of USAID's information technology systems. Unlike the State Department's Capital Investment Fund, USAID's CIF also funds the construction of facilities overseas in lieu of a separate component account to that end. This account supports operational costs of USAID's Office of the Inspector General, which conducts audits and investigations of USAID programs, as well as of the Millennium Challenge Corporation, the Inter-American Foundation, the United States African Development Foundation, and the Overseas Private Investment Corporation. Under this title, funds are appropriated in support of U.S. government departments and independent agencies conducting humanitarian, development, and other programs meeting U.S. foreign policy objectives throughout the world. GHP is made up of two accounts supporting multiple health activities conducted by USAID and by the State Department (FAA, §104). Managed by USAID, appropriations in this account fund programs focused on combating infectious diseases such as HIV/AIDS, malaria, and tuberculosis. Programs also focus on immunization, oral rehydration, maternal and child health, vulnerable children, and family planning and reproductive health. Managed by the Office of the Global AIDS Coordinator (OGAC) in the Department of State, this account is the largest source of funding for the President's Emergency Plan for AIDS Relief (PEPFAR). Funds from this account are transferred to programs implemented by USAID, the Department of Defense, the Centers for Disease Control and Prevention, and the Peace Corps, among others. A specified amount from the Global Health-State account supports the U.S. contribution to the multilateral Global Fund to Fight AIDS, Tuberculosis, and Malaria. Managed by USAID, the Development Assistance account funds programs aligned with priorities in Part I of the FAA, including sectors referenced in Chapters 1 and 2 targeting agriculture and rural development (§103); education and human capital (§105); energy (§106[b]); urban economic and social development (§106[d]); technical cooperation and development (§106[d][1]); economic development research and evaluation (§106[d][2]); and disaster preparedness and reconstruction (§106[d][3]); U.S. citizen-sponsored schools and hospitals overseas (§214); and micro-, small-, and medium-enterprise development programs (including credit access) (§252). Through the FAA's general authorities, DA also funds environment, democracy and governance, water and sanitation, and human rights programs, among others. In sub-Saharan Africa specifically, DA funds particular priorities for that region described in FAA Chapter 10, including agricultural production and natural resources, health, voluntary family planning services, education, and income-generating activities (§496). Managed by the USAID Office of Foreign Disaster Assistance, this account provides relief and rehabilitation to nations struck by natural and manmade disasters and emergencies (FAA, §491[b]). In recent years, the account has been used increasingly to provide emergency food assistance to supplement commodity food aid provided through the P.L. 480 Title II account in the agriculture appropriation (FAA, §491[c]). In 2017, for example, approximately half of obligated IDA funding went to emergency food aid, compared with less than 5% in 2010. The Transition Initiatives account supports the activities of USAID's Office of Transition Initiatives (OTI), an entity launched in 1994 to bridge the gap between stabilization and sustainable development. It supports flexible, short-term assistance projects in political transition countries that are moving from war to peace, civil conflict to national reconciliation, or where political instability has not yet erupted into violence and where conflict mitigation might prevent the outbreak of such violence. Although both Transition Initiatives and IDA operate under disaster response authority of the FAA (§491), IDA focuses on humanitarian needs, while Transition Initiatives targets political factors to build peaceful and democratic societies. The fund supports USAID responses to emerging or unforeseen crises with projects aimed at addressing the root causes of conflict or instability. Previously funded through Defense appropriations (as authorized in the National Defense Authorization Act of 2006, Section 1207, P.L. 109-163 ), today USAID administers it under the general authorities of the FAA. Unlike IDA, it may not be used to respond to disasters, and unlike Transition Initiatives, this account is not associated with its own operational component; rather, it is a flexible funding source available to the USAID Administrator. DCA is a USAID-administered mechanism to subsidize loan guarantees in support of housing projects, water and sanitation systems, and microcredit and small enterprise development, among other programs. In addition to appropriations for the administrative costs of running DCA, Congress authorizes transfers from other component accounts to DCA for loan guarantees. For FY2019, only DA, GHP, and Assistance for Europe, Eurasia, and Central Asia are authorized to transfer funds to DCA. In 2018, Congress passed the Better Utilization of Investments Leading to Development (BUILD) Act (Division F of P.L. 115-254 ), which requires the merger of DCA into a new United States International Development Finance Corporation. FY2019 appropriations for DCA also provide for the costs associated with this transfer. The Economic Support Fund, authorized under Part II, Chapter 4 of the FAA (§531), uses economic assistance to advance U.S. political and strategic goals in countries of special importance to U.S. foreign policy. Once used primarily in support of the Middle East peace process (in FY1997, for example, 87% of ESF went to Israel, Egypt, the West Bank and Jordan), the use of ESF funds has expanded in recent years to support a broader range of countries of importance to the U.S. counterterrorism strategy. ESF supports development projects that may be indistinguishable from those supported by other accounts, but is also used for occasional direct budget support aid and sovereign loan guarantees. The State Department makes ESF programming decisions; USAID, in large part, implements the programs. This account supports democracy promotion programs overseen by the State Department's Bureau of Democracy, Human Rights and Labor (DRL). While in past years a portion of this funding was designated for USAID's Office of Democracy, Conflict, and Humanitarian Assistance, appropriations since FY2017 have gone exclusively to DRL, though transfers to USAID may occur. Authorities for this account are found throughout the FAA, but specific reference to the Democracy Fund was added in 2002 (§116, P.L. 107-228 ). This account provides economic assistance to once-Communist states of the former Soviet Union and Eastern Europe, and is the successor to two earlier accounts that channeled aid to the region after the Cold War. AEECA was discontinued at the Obama Administration's request between FY2013 and FY2015, during which time these activities were funded through the ESF, GHP, and INCLE accounts, and reinstated in FY2016. Authorities under this account are found in the FAA (§498-499) and the Support for Eastern European Democracy (SEED) Act of 1989 ( P.L. 101-179 ). The Migration and Refugee Assistance account, administered by the State Department's Bureau of Population, Refugees, and Migration (PRM), supports refugee assistance and protection activities worldwide. The MRA account supports U.S. contributions to U.N. entities such as the U.N. High Commissioner for Refugees (UNHCR) and the International Organization for Migration (IOM), as well as organizations such as the International Committee for the Red Cross. It funds resettlement of refugees to other countries as well as processing and initial placement of refugees to the United States. The Migration and Refugee Assistance Act of 1962, as amended, sets out these authorities ( P.L. 87-510 ). ERMA is a humanitarian contingency fund for rapid deployment in unanticipated urgent refugee and migrant emergencies. Appropriations typically replenish this account up to a congressionally authorized level, and the executive branch must notify Congress when funds are used. Several agencies operate independently and report directly to the Executive Office of the President, unlike USAID, which operates under guidance from the Secretary of State. The Peace Corps sends U.S. volunteers to developing countries to provide technical aid and to promote mutual understanding on a people-to-people basis between the United States and citizens of foreign nations (Peace Corps Act of 1961, P.L. 87-293 ). The MCC provides large-scale, five-year development grants to foreign governments. Known as \"compacts\" and underpinned by bilateral agreements, these grants are intended to promote economic growth and to eliminate extreme poverty in countries chosen and determined to be eligible, in part, based on their demonstrated commitment to just and democratic governance; investment in health, education, and the environment; and support for economic freedom. Congress established and authorized the MCC in the Millennium Challenge Act of 2003 (Title VI of P.L. 108-199 ). The IAF is a nonprofit corporation that finances small-scale enterprise and grassroots community self-help activities aimed at the social and economic development of poor people in Latin America, as originally set out in the Foreign Assistance Act of 1969 ( P.L. 91-179 ) establishing it as an independent entity. The USADF is a nonprofit corporation that finances small-scale enterprise and grassroots community self-help activities aimed at the social and economic development of poor people in Africa. Modeled after the IAF, the African Development Foundation Act established it in 1980 (Title V of P.L. 96-533 ). This program deploys financial advisors to provide technical assistance to developing or transitional countries in support of economic reforms, with a focus on banking and financial institutions, financial crimes, government debt, revenue policy, and budget and financial accountability (FAA §129, added in 1998 by P.L. 105-277 ). INCLE funds international counternarcotics activities; programs combatting human and wildlife trafficking; and rule of law activities, including support for judicial reform and law enforcement capacity building. Many of the activities under INCLE are overseen and coordinated through the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL). More than half of funding in recent years has gone to programs in the western hemisphere; other major recipients have included Afghanistan, Pakistan, and West Bank/Gaza. INCLE authorities primarily derive from the FAA (§481-490). This account funds a variety of State Department-managed activities aimed at countering proliferation of weapons of mass destruction (FAA, §581-586), supporting antiterrorism training and related activities (FAA, §571-575), and promoting demining operations in developing nations (FAA, §301). It also funds voluntary contributions to certain nonproliferation-focused international organizations (FAA, §301). Programs also finance certain defense articles related to nonproliferation, demining, and antiterrorism to friendly governments (Arms Export Control Act, §23, P.L. 90-629), and disarmament in the former Soviet Union (FREEDOM Support Act, §504, P.L. 102-511 ). Unlike the Title I Contributions to Peacekeeping Activities (CIPA) account, which provides assessed funds for U.N. peacekeeping operations, the PKO account provides voluntary support for multilateral efforts in conflict resolution, such as the training of African peacekeepers and funding operations of the Multinational Force and Observers mission in the Sinai. The State Department controls the funds and sets PKO program policies (FAA, §551-563). DOD implements the activities. Funding through this account has in recent years been devoted almost entirely on the Middle East and sub-Saharan Africa. Through IMET, the United States provides training and education to selected foreign military and civilian personnel on U.S. military practices and standards, including democratic values like civilian control of the military. Participants take courses at military education facilities in the United States or receive instruction from U.S. training teams abroad. The State Department controls the funds and has policy authority over the program (FAA, §541-549), which the Department of Defense implements. The Foreign Military Financing Program supports U.S. overseas arms transfers on a loan and grant basis. Funding generally may be used by recipient countries only to purchase U.S. weapons, equipment and training, though a portion of FMF to Israel may be used to support purchases from Israeli defense firms. The State Department controls the funds and has policy authority (Arms Export Control Act, §23). The Department of Defense implements this program. This account provides voluntary State Department-administered U.S. donations that support the programs of international agencies involved in a range of development, humanitarian, and scientific activities, including the U.N. Development Program (UNDP), U.N. Environment Program (UNEP), U.N. Children's Fund (UNICEF), and U.N. Population Fund (UNFPA). This is distinct from the CIO account under Title I, which funds assessed contributions (dues) to international organizations. Authority is derived from the FAA (§§301-307 on International Organizations and Programs). Under this category, funds are provided through the Department of the Treasury to a wide range of multilateral financial institutions, which offer loans—both \"soft\" (i.e., concessional) and \"hard\" (i.e., near-market rate)—and some grants to developing countries and private sector entities in those countries. Not all international financial institutions require or receive U.S. contributions from year to year; some receive funding under multiyear \"replenishments.\" Authorizations for these contributions have historically been provided in appropriations acts of the relevant year. In the case of concessional lending or grant-making institutions, U.S. appropriations contribute through annual installments toward periodically-agreed donor replenishments as capital is drawn down. Nonconcessional bank institutions typically require new financial commitments only in order to increase the institution's capitalization, as in the ongoing capital increase for the African Development Bank (see below). In FY2019, funds were appropriated for the following entities: Cosponsored by the UNDP, UNEP, and the World Bank, the GEF, administered by the World Bank, makes grants to help developing countries deal with global environmental problems. As the World Bank's \"soft loan\" window, IDA provides concessional loans, grants, and debt relief to the lowest-income countries in the world. The AsDF is the grants-only window of the Asian Development Bank (AsDB), which finances economic development programs in lower-income countries in Asia and the Pacific. AsDF ceased issuing concessional loans in 2017. AsDB now finances and issues all concessional loans directly through its capital reserves. The AfDB lends at near-market rates to public and private entities, with special emphasis on agriculture, infrastructure, and industrial development. To support a general capital increase, legislative provisions include both paid-in capital and callable capital subscriptions. Part of the African Development Bank, the AfDF provides concessional loans and grants to low-income African countries. IFAD is a UN-system financial institution that issues grants and low-interest loans to developing countries to increase rural incomes, improve nutritional levels, and advance food security. Ex-Im Bank issues direct loans, loan guarantees, and export credit insurance to support U.S. exports of goods and services. It aims to support U.S. jobs by providing such financing and insurance when the private sector is unwilling or unable to do so alone and/or to counter financing offered by foreign countries through their export credit agencies. Ex-Im Bank program and administrative expenses are financed by collections such as loan interest, risk premia, and other fees, for which congressional appropriations establish a ceiling. Congress also provides an appropriation for the agency's Office of Inspector General. Ex-Im Bank's enabling legislation is the Export-Import Bank Act of 1945 (P.L. 79-173). OPIC offers political risk insurance, guarantees, and investment financing to encourage U.S. firms to invest in developing countries, under the authority of the FAA (§231-240). Although the agency funds itself in full with loan receipts, appropriations set ceilings on administrative expenses to carry out the insurance programs and denotes a level of support for credit financing. The BUILD Act authorizes a new U.S. International Development Finance Corporation (IDFC), which is to absorb OPIC along with portions of USAID (See DCA section) and assume their responsibilities. It also adds new authorities to this entity. The aforementioned section of the FAA is to be repealed after the IDFC is operational, thereby terminating OPIC. TDA funds project preparation services such as feasibility studies and other activities to link U.S. businesses to export opportunities in emerging markets for infrastructure and other development projects (FAA, §611). For example, TDA funds reverse trade missions which bring foreign decision-makers to the United States. General Provisions set out limitations and prohibitions on assistance; administrative, notification, and reporting requirements; and more detailed funding requirements for specific accounts in other titles of the legislation. This title specifies also allocations for various aid sectors, including education, democracy promotion, water and sanitation, and food security, as well as cross-cutting issues such as gender equality. In addition, Title VII provides more detail about aid to certain countries and regions. Since FY2012, executive branch budget requests have distinguished between \"core\" or \"enduring\" international affairs funding and funding to support \"overseas contingency operations\" (OCO). The OCO designation was described initially in budget documents as reflecting \"the extraordinary costs of Department [of State] and U.S. Agency for International Development (USAID) operations and programs in Afghanistan, Iraq, and Pakistan,\" its use quickly expanded to include a broader range of activities and countries. OCO funds are not counted toward spending caps established by the Budget Control Act, 2011, as amended ( P.L. 112-25 ), and as a result have been used as a means of maintaining international affairs funding levels while complying with BCA budget restraints. While the Trump Administration has proposed the elimination of OCO funding under SFOPS for FY2019 and FY2020, Congress has continued to use the designation in SFOPS legislation. OCO funding supports accounts that received core funding in Titles I-V of the legislation, but is identified separately in Title VIII. Appendix A. State, Foreign Operations Authorizing Legislation and U.S. Code References", "summary": "The annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations legislation funds many of the nondefense international affairs activities of the United States. The State Department portion makes up about one-third of the funding, and the Foreign Operations accounts comprise the remainder. SFOPS is one of 12 annual appropriations acts that fund the federal government each fiscal year. Congress appropriated SFOPS in the Consolidated Appropriations Act, 2019 (P.L. 116-6), under Division F, \"Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019.\" That act is divided into eight titles. Each title funds a variety of government activities, ranging from the operational and administrative costs of government agencies, to direct grant funds for private nonprofit or multilateral organizations. By title, SFOPS provisions set out activities as follows: Title I—Department of State and Related Agency: Funds State Department general operations and diplomatic programs, such as cultural exchange programs, dues to the United Nations, international broadcasting, and grants to U.S. diplomacy-focused nongovernmental organizations such as the National Endowment for Democracy. Title II—United States Agency for International Development (USAID): Funds general operations of USAID, but not USAID foreign assistance programs (see Title III). Title III—Bilateral Economic Assistance: The primary funding source for humanitarian and international development programs of the U.S. government. Includes bilateral assistance for disaster relief, global health, and economic development activities, as well as funding several independent development-oriented agencies, notably the Millennium Challenge Corporation and Peace Corps. Title IV—International Security Assistance: The primary title for U.S. security cooperation programs abroad outside of the National Defense appropriations bill. Includes antinarcotics and rule of law strengthening programs; nonproliferation, anti-terrorism, and demining programs; some assistance to foreign militaries; and some funding for international peacekeeping efforts. Title V—Multilateral Assistance: Contributes funds to several multilateral finance and grant-making institutions. Title VI—Export and Investment Assistance: Funds the three independent export promotion agencies of the U.S. government, the Export-Import Bank; the Overseas Private Investment Corporation; and the Trade and Development Agency. Title VII—General Provisions: Establishes guidance for the allocation of funds appropriated in other titles and lays out restrictions and priorities for programming. Title VIII—Overseas Contingency Operations/Global War on Terrorism: Provides additional funding to accounts in Titles I to V, to address ongoing U.S. military operations priorities overseas, particularly terrorist threats in Afghanistan and Iraq, as well as worldwide.", "document_type": "crs"}
{"report": "The Constitution provides Congress with broad powers over the Armed Forces, including the power \"to raise and support Armies,\" \"to provide and maintain a Navy,\" and \"to make Rules for the Government and Regulation of the land and naval Forces.\" It also provides the Senate with the authority to provide \"Advice and Consent\" on presidential nominations of \"all other Officers of the United States,\" which includes military officers. On the basis of its constitutional authority, Congress has passed a number of laws which govern important aspects of military officer personnel management, including appointments, assignments, grade structure, promotions, and separations. The most senior officers in the Army, Air Force, and Marine Corps are known as general officers. The most senior officers in the Navy are known as flag officers. The phrase \"general and flag officers\" or \"GFO\" refers to all officers in paygrades O-7 through O-10, thereby including one-star, two-star, three-star, and four-star officers. At the highest level, O-10, GFOs hold the most visible and important military positions in the Department of Defense, including the Chairman of the Joint Chiefs of Staff, the chiefs of the four military services, and the combatant commanders. At the lowest level, O-7, they hold positions that span an array of roles, including commanders, deputy commanders, and key staff roles in large organizations. This report provides an overview of active duty GFOs in the United States Armed Forces—including authorizations, duties, and compensation—historical trends in the proportion of GFOs relative to the total force, criticisms and justifications of GFO to total force proportions, and statutory controls. National Guard and Reserve GFOs are not addressed in this report, unless they are serving on active duty in a manner that counts against the active duty caps on GFOs. Given the authority granted to general and flag officers, Congress has developed a statutory framework applicable to this elite group, and considers changes to these laws as it deems appropriate. Congress also periodically reviews the number, duties, and compensation of GFOs. A frequent tension during these reviews has been DOD requests for additional GFOs versus congressional concerns that there are too many GFOs. As one senior DOD official noted during a 1997 congressional hearing: throughout our history there has been a dialogue, just as is going on now, that has ebbed and flowed between the Congress and the military on the number of general and flag officers we need.... I think it is fair to say that over the years, the Congress has consistently taken the view that we have needed fewer general and flag officers, and that we have taken the opposite view, that we needed more than the Congress would allow. These debates tended to intensify during periods of major downsizing and restructuring of our forces, such as after World War II, the Korean War, the Vietnam War, and now after the cold war. References in this report to specific grades (ranks) within the general and flag officer corps will use the appropriate capitalized title, insignia, or paygrade as indicated in Table 1 . As of November 1, 2018, there were 920 active duty GFOs, of which 891 were subject to the statutory caps and 29 were exempt from the statutory caps. Distribution by grade and service is summarized in Table 2 . The 891 GFOS subject to the statutory caps is lower than the maximum of 963 authorized in statute (see \" Current Grade Limits \" later in this report). This is in accord with an intentional decision made by DOD in 2011 as part of an efficiency initiative directed by then-Secretary of Defense Robert Gates. By keeping GFO numbers substantially below the maximum authorized, this policy provides DOD flexibility to respond to new requirements for GFOs without the delays caused by the need to find an \"offset\" by downgrading or eliminating another GFO position. While Congress has specified functions or duties for some key positions—such as members of the Joint Chiefs of Staff, the Combatant Commanders, the top two officers of each service, the Commander of U.S. Special Operations Command, and the Chief of the National Guard Bureau —the great majority of GFO positions are not defined in statute. In these instances DOD uses the following criteria for determining whether a position should be filled by a general or flag officer: Nature, characteristics, and function of the position; Grade and position of superior, principal subordinates, and lateral points of coordination; Degree of independence of operation; Official relations with other U.S. and foreign governmental positions; Magnitude of responsibilities; Mission and special requirements; Number, type, and value of resources managed and employed; Forces, personnel, value of equipment, total obligation authority; Geographic area of responsibility; Authority to make decisions and commit resources; Development of policy; National commitment to international agreements; Impact on national security and other national interests; and Effect on the prestige of the nation or the armed force A summary of the number of active duty GFOs and the proportion of GFOs relative to the total force over the past five decades is provided in Table 3 . A review of GFO levels indicates an 11% increase in the number of four-star officers (36 on September 30, 1965 vs. 40 on September 30, 2018) and a 24% increase in the number of three-star officers (119 vs. 147). At the same time, the number of one-star and two-star officers has decreased by about 35% (1,129 vs. 734). However, during this time period, the size of the total force was cut roughly in half, dropping from 2.66 million on September 30, 1965, to 1.32 million on September 30, 2018. Thus, a more salient measure may be the proportion of GFOs to the total force. Looking at the data from this perspective, it is clear that while GFOs have always made up a very small percentage of the total force, the general and flag officer corps has increased as a percentage of the total force over the past five decades. GFOs made up about one-twentieth of one percent (0.048%) of the total force in 1965, while they made up about one-fifteenth of one percent (0.070%) of the total force in 2018, indicating that the share of the total force made up of GFOs increased by 46%. This historical trend is more pronounced with respect to four-star officers (which grew from 0.0014% of the total force to 0.0030%, a 114% increase) and three-star officers (which grew from 0.0045% of the total force to 0.0112%, a 149% increase). One- and two-star officers as a percentage of the total force increased less rapidly (from 0.0425% of the total force to 0.0557%, a 31% increase). These increases occurred at the same time that the size of the officer corps in general was increasing as a percentage of the total force. As indicated in the last column of Table 3 , between 1965 and 2018, the officer corps increased from 12.76% of the total force in 1965 to 17.51% in 2018, indicating that the share of the total force made up of officers increased by 37%. There have been two principal criticisms raised against the increasing proportion of GFOs relative the total force. The first criticism revolves around the increased cost of employing a GFO in comparison to a lower ranking officer. The second relates to the belief that too many GFOs slow down decisionmaking processes. Each point is explained in more detail below. Cost . GFOs cost more to employ than officers of a lower rank. In part, this is due to the higher compensation they receive. For example, the average GFO in paygrade O-7 receives $204,405 in regular military compensation 14 in 2019, while the average officer in paygrade O-6 receives $180,709. Additionally, there can be other costs associated with GFOs, particularly at higher grades, such as the costs of larger staffs, official travel, security details, and aides. An example of this perspective was provided by a witness at a 2011 congressional hearing, who stated \"The progression towards a more top-heavy force is not without its consequences.... The cost of officers increases markedly with their rank, so taxpayers are overpaying whenever a G/FO is in a position that could be filled by a lower ranking officer.\" Decision making . Another criticism is that an increasing proportion of GFOs slows down decisionmaking by adding additional layers of management between the highest echelons of command and the lowest. In a 2010 speech, former Secretary of Defense Robert Gates criticized the impact of an increase in GFOs and senior civilians in making the Department of Defense a top-heavy and overly bureaucratic organization: During the 1990s, the military saw deep cuts in overall force structure—the Army by nearly 40 percent. But the reduction in flag officers—generals and admirals—was about half that. The Department's management layers—civilian and military—and numbers of senior executives outside the services grew during that same period. Almost a decade ago, Secretary Rumsfeld lamented that there were 17 levels of staff between him and a line officer. The Defense Business Board recently estimated that in some cases the gap between me and an action officer may be as high as 30 layers.... Consider that a request for a dog-handling team in Afghanistan—or for any other unit—has to go through no fewer than five four-star headquarters in order to be processed, validated, and eventually dealt with. This during an era when more and more responsibility—including decisions with strategic consequences—is being exercised by young captains and colonels on the battlefield. The increasing proportion of GFOs in comparison to the total force has been a topic of particular interest during past congressional hearings. During these hearings, and particularly during a 1997 congressional review of GFO authorizations, witnesses from the Department of Defense put forth a number of rationales for this growth, including the following: Joint requirements . One frequently cited cause of the increasing ratio of GFOs during past congressional hearings has been the increase in \"joint\" requirements that followed enactment of the Goldwater-Nichols Act (GNA) in 1986. While removing the Chairman of the Joint Chiefs of Staff from the chain of command, GNA enhanced the authority of the Chairman in other ways; significantly increased the roles and authorities of commanders of the joint Combatant Commands; and emphasized joint duty assignments for officers. These new institutional arrangements led to the creation of more joint GFO positions and powerful career incentives to serve in those positions. Testifying before Congress in 1997, the Vice Director of the Joint Staff emphasized how the growth of joint organizations affected the proportion of GFOs to the total force: \"There is really no law of proportionality here when you talk about joint growth. If you think about it, sir, where we have been since 1980, we stood up CENTCOM, SOCOM, Space Command; we have reorganized to form ACOM, TRANSCOM, [and] STRATCOM.\" Since then, additional joint headquarters have been established, to include U.S. Northern Command (established in 2002), Joint Task Force Guantanamo (established 2002), Combined Joint Task Force Horn of Africa (established 2002), U.S. Africa Command (2007), and U.S. Cyber Command (2009). Coalition Operations . Another rationale used to explain the increased proportion of GFOs has been an increased emphasis by the United States on forging coalitions with other nations to achieve common security objectives. This has, in turn, generated a demand for senior military leaders to conduct coordinated planning, training, and operations with their peers from foreign nations. The argument is also linked to the number of contingency operations the U.S. military has conducted since the end of the Cold War, which have often involved forces from dozens of countries, including the forces of the nation in which the operations take place. Examples of these coalition operations include Iraq and Afghanistan as well as smaller-scale contingencies such as Bosnia, Haiti, and Kosovo (ongoing). Contingency operations such as these are commanded by a GFO, who usually has additional GFOs as subordinate commanders and senior staff officers. Both their experience and the authority inherent in their grade can be considered important elements to the success of complex operations. Political and diplomatic considerations can also be a factor, as the officers leading these operations are normally expected to interact with the senior military and civilian leadership of the foreign nation where the operations are occurring. Organizational structure . As noted previously, the increase in the proportion of GFOs over the past 50 years has not been due to an increase in the number of GFOs, which has gone down in this time period, but to the much larger decrease in the size of the Armed Forces in general. In part, this slower reduction is due to the organizational structure of the Armed Forces, which includes certain GFO positions whether the Armed Forces are comparatively large or small. For example, there was a Chief of Staff of the Air Force at the peak of the Vietnam War, when the Air Force had about 900,000 airmen, and there is one today, when the Air Force has approximately 325,000 airmen. A similar case can be made for many of the GFOs who serve on the Joint Staff, the Service Staffs, the Combatant Commands, and certain defense agencies. Given the organizational structure of the Armed Forces—some of which is required by law—the amount of management \"overhead\" does not necessarily change in direct proportion to the size of the force. Another way of illustrating this is to consider what would happen if an Army division were disestablished: doing so would eliminate about 15,000 soldiers, but only three of them would be general officers. Technological changes . A fourth justification for increased GFO ratios is that technological advances have changed the way the United States fights its wars. Modern weapons systems, much more powerful and accurate than their predecessors, require fewer personnel to deliver greater firepower. Thus, while the number of personnel a GFO commands may decline as more sophisticated equipment is substituted for manpower, the lethality of those forces may increase. From this perspective, the lethality of the weapons systems, rather than the number of people, provides the justification for an organization to be led by a very senior military officer. Additionally, the advent and development of new domains of warfare—such as space and cyber—has led to the creation of new organizations to exploit advantages and defend against vulnerabilities in those environments. There are three main ways in which military personnel, including general and flag officers, are compensated: cash compensation (pay and allowances), non-cash compensation (benefits), and deferred compensation (retired pay and benefits). In this report, only the compensation elements which make up r egular m ilitary c ompensation will be discussed. Regular Military Compensation (RMC) is a statutorily defined measure of the major compensation elements which every servicemember receives. It is widely used as a basic measure of military cash compensation levels and for comparisons with civilian salary levels. RMC, as defined in law, is \"the total of the following elements that a member of the uniformed services accrues or receives, directly or indirectly, in cash or in kind every payday: basic pay, basic allowance for housing, basic allowance for subsistence, and Federal tax advantage accruing to the aforementioned allowances because they are not subject to Federal income tax.\" These elements are described in more detail in the Appendix . Certain GFOs receive a \"personal money allowance\" as well. This is not part of RMC, but is described in a footnote below. Congress included provisions in recent National Defense Authorization Acts to deny GFOs any increase in basic pay during calendar years 2015 and 2016. Table 4 provides the average RMC that general and flag officers received in 2019. It assumes that all GFOs receive BAH, rather than living in government provided housing. Congress has established a statutory framework for GFOs which limits their numbers by grade, requires presidential determination of many three-star and four-star positions, and specifies the grade and/or duties of certain key positions. This framework provides for greater congressional control over the most senior GFO positions, while providing substantial latitude to the executive branch in the management of the remaining GFOs. Sections 525 and 526 of Title 10 establish the number of general and flag officers that may be on active duty in the Army, Navy, Air Force, and Marine Corps. The two provisions establish separate caps for each service and for the joint community. There are certain circumstances under which a general or flag officer does not \"count\" against these caps. Additionally, the President has authority under 10 U.S.C. §527 to suspend the operation of the caps in time of war or national emergency declared by the Congress or the President. Table 5 summarizes the statutory limitations by grade for GFOs for service-specific positions. Table 6 summarizes the statutory limitations for GFOs service in Joint positions. Combining the maximum number of service and joint GFO authorizations, the maximum number of GFO positions authorized is currently 963. The current number of active duty GFOs subject to the statutory caps is 891. There are another 29 active duty GFOs who are not subject to the statutory caps. (See \" Current Number of General and Flag Officers \" earlier in the report.) The FY2017 National Defense Authorization Act included a provision, codified at 10 U.S.C. §526a, to reduce the number of GFOs authorized to be on active duty. The conference report that accompanied the bill highlighted congressional concerns that the military departments had not demonstrated a willingness to implement GFO reductions directed by then-Secretary of Defense Robert Gates in 2011 and, furthermore, noted the context of significant reductions in personnel strength that occurred in the 2011-2016 time frame. Starting in 2023, §526a will lower the number of GFOs that may be on active duty to a maximum of 620 for Service positions and 232 for Joint positions, a reduction of 111 from the current number of GFO positions authorized by 10 U.S.C. §526. Section 601 of Title 10 provides that \"[t]he President may designate positions of importance and responsibility to carry the grade of general or admiral or lieutenant general or vice admiral.... An officer assigned to any such position has the grade specified for that position if he is appointed to that grade by the President with the advice and consent of the Senate.\" Thus, with the exception of those so designated in statute, all three-star and four-star positions must be designated as such by the President. Congress can review the rationale for this designation as part of its oversight function, and the Senate retains the power to confirm or reject the nomination of an individual to fill such a position. The authority of the President to designate such positions is also limited by the strength caps on general and flag officers found in 10 U.S.C. §§525 and 526. Congress has established a number of GFO positions in law which carry designated grades, designated duties, or both. Congress has specified the grade for a number of key positions. For example, 10 U.S.C. §152 specifies that the Chairman of the Joint Chiefs of Staff holds the rank of General or Admiral. Similar language also exists for the Vice Chairman of the Joint Chiefs of Staff, the top two officers of each service, the Commander of U.S. Special Operations Command, and the Chief of the National Guard Bureau. Table 7 highlights some positions with statutorily required grades. Congress sometimes changes these statutory grades. For example, in 2008, Congress increased the grade of the Chief of the National Guard Bureau from Lieutenant General to General. Additionally, Section 502 of the FY2017 National Defense Authorization Act amended various statutory provisions to eliminate the statutory grade for 54 positions. As explained in the report that accompanied the Senate version of the FY2017 National Defense Authorization Act, where the provision originated: The Committee determined that in order to effectively manage the reduction in the number of general and flag officers prescribed elsewhere in this Act, that the Secretary of Defense must be given the flexibility to assign appropriate officer grades to positions. The provision would not prohibit the position from being filled by an officer with the same, or a higher, or lower grade than the law currently requires. Positions with statutorily required grades typically have statutorily required duties as well. Table 7 provides excerpts of the statutorily required responsibilities, duties, or functions of certain GFO positions. Congress sometimes changes these duties. For example, in 2011, Congress changed the law to specify that the Chief of the National Guard Bureau was a member of the Joint Chiefs of Staff whose duties included \"the specific responsibility of addressing matters involving non-Federalized National Guard forces in support of homeland defense and civil support missions.\" Congress has a long-standing interest in the military officer corps in general, and has periodically focused additional attention on its most senior officers. Should Congress elect to address GFO authorizations, duties, compensation, or other related topics in more detail, it may wish to consider the following: What is the most appropriate way to determine how many GFOs the Department of Defense should have? How closely should this be linked to total force size? What other factors would be useful in determining what the right number of GFOs is? How do advances in information technology and decisionmaking tools impact the need for GFOs? Could use of these technologies result in flattened management structures and decrease the need for GFOs? Should Congress modify the current statutory framework that governs GFOs? Should it modify the caps set out in 10 U.S.C. §§525, 526, and 526a? To what extent do other statutory requirements, such as the Goldwater-Nichols Act (GNA), drive GFO requirements? Should GNA be revised to alter this effect? Could organizational restructuring of the Joint Staff and Service Staffs decrease the need for GFOs, or allow positions to be held by lower graded GFOs? Could certain organizations be merged to reduce the requirements for GFOs? Could military relations with international partners be restructured so as to lessen the need for GFO representation? How important is rank equivalence when senior U.S. military personnel work with their allied peers? Could National Guard and Reserve GFOs be used to reduce the need for active duty GFOs? Are there GFO positions that could be eliminated or \"downgraded\" to a lower rank? Are there GFO positions that could be replaced by civilian employees? What are the costs and benefits associated with these actions? How might this impact military effectiveness? Can the direct and indirect costs associated with GFOs be reduced? For example, could compensation or staff costs be reduced without significantly affecting the ability of GFOs to carry out their duties? Regular Military Compensation (RMC), as defined in law, is \"the total of the following elements that a member of the uniformed services accrues or receives, directly or indirectly, in cash or in kind every payday: basic pay, basic allowance for housing, basic allowance for subsistence, and Federal tax advantage accruing to the aforementioned allowances because they are not subject to Federal income tax.\" Each of these elements is described below. Basic Pay All members of the Armed Forces receive basic pay, although the amount varies by pay grade (rank) and years of service (also called longevity). For most servicemembers, basic pay is the largest element of the compensation they receive in their paycheck and typically accounts for about two-thirds of an individual's RMC. It is roughly analogous to civilian salary. Basic Allowance for Housing All servicemembers living in the United States are entitled to either government-provided housing or a housing allowance, known as basic allowance for housing (BAH). About 17% of GFOs living in the United States receive government-provided housing with the remainder receiving BAH to offset the costs of the housing they rent or purchase in the civilian economy. The amount of BAH a servicemember receives is based on three factors: paygrade (rank), geographic location, and whether or not the servicemember has dependents. However, there is no increase in BAH after paygrade O-7. Therefore, the amount of BAH for GFOs does not vary by rank, but only by locality and dependency status. Paygrade and dependency status are used to determine the type of accommodation—or \"housing profile\"—that would be appropriate for the servicemember (for example, one-bedroom apartment, two-bedroom townhouse, or three-bedroom single family home). Geographic location is used to determine the average costs associated with each of these housing profiles. The average costs of these housing profiles are the basis for BAH rates. As a result of this methodology, BAH rates are much higher in some areas than others, but servicemembers of similar paygrade and dependent status should be able to pay for roughly comparable housing regardless of their duty location. Basic Allowance for Subsistence Nearly all servicemembers receive a monthly payment to defray their personal food costs. This is known as basic allowance for subsistence (BAS). BAS is provided at a flat rate, with separate rates for officers and enlisted personnel. In 2019, all officers, including GFOs, received $254.39 a month. Federal Tax Advantage Military allowances are generally not considered part of gross income and are not subject to federal income tax, thus generating a tax benefit for servicemembers. RMC considers only the federal income tax advantage provided by the exemption of housing and subsistence allowances from gross income. The precise value of the federal tax advantage for an individual servicemember will vary depending on his or her unique tax situation.", "summary": "In the exercise of its constitutional authority over the Armed Forces, Congress has enacted an array of laws which govern important aspects of military officer personnel management, including appointments, assignments, grade structure, promotions, and separations. Some of these laws are directed specifically at the most senior military officers, known as general and flag officers (GFOs). Congress periodically reviews these laws and considers changes as it deems appropriate. Areas of congressional interest have included the number of GFOs authorized, the proportion of GFOs to the total force, compensation levels of GFOs, and duties and grades of certain GFOs. As of November 1, 2018, there were 891 active duty GFOs subject to statutory caps, which is 72 less than the maximum of 963 authorized by law. There were also another 29 exempt from the statutory caps. The current number is about average for the post-Cold War era, though substantially lower than the number of GFOs in the 1960s-1980s, when the Armed Forces were much larger in size than they are today. However, while always very small in comparison to the total force, the general and flag officer corps has increased as a percentage of the total force over the past five decades. GFOs made up about one-twentieth of one percent (0.048%) of the total force in 1965, while they made up about one-fifteenth of one percent (0.069%) of the total force in 2018, indicating that the share of the total force made up of GFOs increased by 44%. Some argue that this increased proportion of GFOs is wasteful and contributes to more bureaucratic decisionmaking processes. Others counter that the increased proportion is linked to the military's greater emphasis on joint and coalition operations, core organizational requirements, and the increasing use of advanced technologies. Compensation for GFOs varies. One commonly used measure of compensation, known as regular military compensation (RMC), includes basic pay, basic allowance for housing, basic allowance for subsistence, and the federal tax advantage associated with allowances, which are exempt from federal income tax. In 2019, the lowest-ranking GFOs make about $204,000 per year in RMC, while the highest-ranking GFOs make about $238,000 per year. Congress has also used its authority to specify the grade and duties of certain GFO positions. For example, Congress increased the grade of the Chief of the National Guard Bureau (CNGB) from Lieutenant General to General in 2008. Three years later, Congress again changed the law to specify that the CNGB was a member of the Joint Chiefs of Staff whose duties included \"the specific responsibility of addressing matters involving non-Federalized National Guard forces in support of homeland defense and civil support missions.\" In 2016, Congress removed the statutory grade requirement from 54 GFO positions. This report provides an overview of active duty GFOs in the United States Armed Forces—including authorizations, duties, and compensation—historical trends in the proportion of GFOs relative to the total force, criticisms and justifications of GFO to total force proportions, and statutory controls. National Guard and Reserve GFOs are not addressed in this report, unless they are serving on active duty in a manner that counts against the active duty caps on GFOs.", "document_type": "crs"}
{"report": "Title IX of the Education Amendments of 1972 (Title IX) provides an avenue of legal relief for victims of sexual abuse and harassment committed by professors, teachers, coaches, and others at educational institutions. The statute prohibits discrimination \"on the basis of sex\" of any person in an educational program or activity receiving federal funding. Though Title IX makes no explicit reference to sexual abuse or harassment, the Supreme Court has held that a school district can violate the statute, and be held liable for damages, based on a deliberately indifferent response to a teacher's sexual abuse or harassment of a student. The Court has also held that a school board may be liable under Title IX for a deliberately indifferent response to student-on-student sexual harassment. Meanwhile, federal agencies that administratively enforce the statute, such as the Department of Education (ED), have also determined that educational institutions can be held responsible for instances of sexual harassment under Title IX in certain circumstances. Title IX is thus primarily enforced in two ways: (1) through private rights of action directly against schools by or on behalf of students subject to such harassment in certain circumstances; and (2) by federal agencies that provide funding to educational programs. With respect to the latter enforcement prong, like several other federal civil rights statutes, Title IX makes compliance with its antidiscrimination mandate a condition for receiving federal funding in any education program or activity. Title IX applies to federal-funded schools at all levels of education. For instance, all public school districts receive some federal financial assistance, as do most institutions of higher education through participation in federal student aid programs. Notably, when any part of a school district or institution of higher education receives federal funds, all of the recipient's operations are covered by Title IX. The text of Title IX does not expressly mention sexual abuse or harassment, while current regulations implementing the statute also do not explicitly address sexual harassment (although the regulations do require schools to designate at least one employee to function as a Title IX Coordinator). In each of the last several presidential administrations, however, the Department of Education (ED) has issued guidance documents that instruct schools regarding their responsibilities under Title IX when addressing allegations of sexual harassment. In response, educational institutions have developed procedures and practices to investigate and respond to allegations of sexual harassment and assault. And ED recently issued another notice of proposed rulemaking, after having revoked some of its prior guidance to schools in 2017. As discussed in this report, if adopted, the regulations would significantly change educational institutions' responsibilities for responding to sexual harassment allegations. To place the proposed Title IX regulations in context, this report provides background on the legal landscape that informs the proposal. First, the report examines how federal courts have understood Title IX's requirements in the context of private rights of actions brought by students directly against educational institutions seeking damages for sexual abuse or harassment. The report continues by examining how federal agencies have enforced Title IX, with particular focus on ED's guidance documents that direct schools on how to respond to sexual harassment and assault allegations. The report then considers various constitutional challenges brought by students against public universities, which claim that some universities' responses to allegations of sexual harassment have violated the due process rights of the accused. With this backdrop set, the report examines ED's proposed regulations with an emphasis on how they would alter the responsibilities of schools in complying with Title IX. Title IX of the Education Amendments of 1972 states that \"No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance,\" subject to certain exemptions. In other words, recipients of federal funding, which administer an educational program or activity, are prohibited from discriminating on the basis of sex. The statute, however, does not expressly provide for a private right of action by which victims of sex discrimination may recover for a Title IX violation. Nor does the statute expressly prohibit sexual harassment, abuse, or molestation as forms of unlawful sex discrimination, or otherwise define unlawful sexual abuse or harassment. Title IX also does not delineate the circumstances in which a school or educational program may be liable for such conduct. Given the absence of statutory text \"to shed light on Congress' intent,\" federal courts have played a primary, if not exclusive, role in establishing the remedial scheme by which victims of sexual harassment or abuse may seek relief under Title IX through a private right of action. The Supreme Court first interpreted Title IX to provide for a judicially implied private right of action against a federal-funded educational institution for sexual harassment, and later, an implied damages remedy in such actions. Since then, and in the absence of legislative amendments to Title IX on those issues, the Court has also created the legal standard for establishing liability under Title IX for sexual abuse or harassment committed by a teacher, and other students. The Court, and numerous federal courts of appeals, have described this judicially created liability standard—which draws upon the \"deliberate indifference\" standard as applied under 42 U.S.C. § 1983 —as a \"high bar for plaintiffs to recover under Title IX.\" Critically, in a Title IX private right of action for damages, an educational institution (or other federally funded program or activity) is not strictly liable for a principal's or teacher's sexual harassment or abuse of a student. In other words, the fact that sexual harassment or abuse occurred and was committed by these individuals is not the basis for a funding recipient's liability under the Supreme Court's remedial scheme. Rather, Title IX liability turns on the recipient's response to its actual knowledge of that conduct. A recipient will be liable only when its response was so deficient as to amount to \"deliberate indifference\" to the alleged harassment or abuse. The private right of action currently available under Title IX is one of judicial implication—that is, the Court has interpreted the statute to imply such a right, in the absence of express statutory language providing for it. A private right of action provides a personal legal remedy for victims of sex discrimination in the form of specific relief or damages. In contrast, and as discussed in a later section, administrative enforcement of the statute makes its general focus the institutional policies and practices of the recipient educational institution. Two Supreme Court decisions, together, set out the requirements for establishing an educational funding recipient's liability under Title IX for damages for sexual abuse or harassment: Gebser v. Lago Vista Independent School District and Davis N ext Friend LaShonda D. v. Monroe County Board of Education . The Court's liability standard premises an institution's Title IX liability for sexual harassment or abuse based on the institution's \"deliberate indifference\" in responding to knowledge of that conduct. Thus—and critical to understanding a Title IX private right of action for damages—an educational institution (or other federally funded program or activity) is not strictly liable for a principal's or teacher's sexual harassment or abuse of a student. Indeed, the Supreme Court in Gebser expressly rejected such arguments urging it to apply agency principles to Title IX such that a school would be vicariously liable for such harassment. Instead, liability attaches only if a plaintiff establishes that the funding recipient's response to its \"actual\" knowledge of the discrimination was deliberately indifferent. Put another way, under the Court's remedial scheme, liability under Title IX is based on the funding recipient's \" own failure to act\" adequately in response to known misconduct, not the misconduct itself. Thus, an institution will not be liable absent a showing of deliberate indifference, regardless of whether the conduct committed by a principal or teacher could be characterized as egregious. In creating this standard in Gebser , the Court had attempted to \"'infer how the [1972] Congress would have addressed the issue had the . . . action been included as an express provision in the' statute.\" That task, the Court observed, \"inherently entail[ed] a degree of speculation.\" To inform its analysis, the Court relied significantly on the statute's administrative enforcement provision because, in its view, the provision \"contain[ed] important clues\" from which to infer legislative intent regarding Title IX liability. The Court observed that, pursuant to that provision, agencies that disburse federal funds may suspend or cut funds to a funding recipient for violating Title IX, but only after they \"ha[ve] advised the appropriate person or persons of the failure to comply with the requirement and ha[ve] determined that compliance cannot be secured by voluntary means.\" Because the statute's administrative procedure \"require[s] notice to the recipient and an opportunity to come into voluntary compliance,\" the Court reasoned that it too would similarly require \"actual notice\" to an \"appropriate person\" to establish liability for damages in a private right of action under Title IX. The Court also concluded that a recipient would be liable under Title IX only where a school official responds to that \"actual\" notice so deficiently that its response amounts to \"deliberate indifference.\" In so holding, the Court again looked to Title IX's administrative enforcement scheme and observed that it \"presupposes that an official who is advised of a Title IX violation refuses to take action to bring the recipient into compliance.\" The Court found \"a rough parallel in the standard of deliberate indifference,\" from case law arising under 42 U.S.C. § 1983 addressing claims \"alleging that a municipality's actions in failing to prevent a deprivation of federal rights\" caused a violation. The Court thus held that \"[u]ntil Congress speaks directly on the subject . . . we will not hold a school district liable in damages under Title IX for a teacher's sexual harassment of a student absent actual notice and deliberate indifference\" —a conclusion that elicited a strong dissent. Deliberate indifference is a \"high standard,\" as described by the Supreme Court in Davis , and must \"at a minimum, 'cause [students] to undergo' harassment or 'make them liable or vulnerable' to it.\" Notably, the \"deliberate indifference\" standard does not require funding recipients to \"remedy\" the harassment. Rather, under Davis , a recipient's response to harassment will amount to deliberate indifference only if it is \" clearly unreasonable in light of the known circumstances.\" Because this standard is not \"a mere 'reasonableness' standard,\" a plaintiff must show more than the unreasonableness of a funding recipient's response to sexual abuse or harassment. The plaintiff must show that the recipient was clearly unreasonable in its response. Accordingly, a funding recipient is not liable under Title IX if it responds to sexual abuse or harassment \"in a manner that is not clearly unreasonable.\" In addition to the requisite showing of \"deliberate indifference,\" the Court's standard also requires a plaintiff to establish other threshold showings to prevail in a Title IX suit for damages—both before reaching the question of \"deliberate indifference\" and after establishing \"deliberate indifference\" on the part of the school or entity. Before reaching the issue of whether a funding recipient acted with \"deliberate indifference,\" Gebser requires that a plaintiff establish that \"an appropriate person\" at the funding recipient had \"actual knowledge of discrimination.\" Failure to show either \"actual\" notice or that such notice was provided to \"an appropriate person\" of the funding recipient may constitute the sole basis for a court's dismissal of a Title IX claim seeking damages for sexual harassment or abuse. An \"appropriate person,\" under Gebser , is \"an official who at a minimum has authority to address the alleged discrimination and to institute corrective measures on the recipient's behalf.\" As discussed later in this report, what constitutes \"actual\" notice, and who may constitute an \"appropriate person,\" have caused substantive splits among the circuits. Even where \"deliberate indifference\" is established, the Supreme Court's liability standard further requires a plaintiff alleging student-to-student or peer harassment to make several additional showings: (1) that a funding recipient exercised \"substantial control\" over the harasser and the context in which the harassment occurred; (2) that the harassment itself was \"severe, pervasive, and objectively offensive\"; and (3) the denial of educational access resulting from the harassment. With respect to \"substantial control,\" Davis limits a school's liability for damages to circumstances in which the funding recipient exercised \"substantial control\" over the harasser and in which the harassment took place in a context subject to the recipient's control. If \"the harasser is under the school's disciplinary authority,\" a recipient of federal funding may be liable for its deliberate indifference to the harassment, as the Court in Davis particularly emphasized the recipient's authority to take \"remedial action\" against the harassment. As for \"substantial control\" over the environment, \"the harassment must take place in a context subject to the school district's control.\" As to the nature of the sexual harassment itself, Davis requires that the plaintiff show that the conduct \"is so severe, pervasive, and objectively offensive, and [] so undermines and detracts from the victims' educational experience, that the victim-students are effectively denied equal access to an institution's resources and opportunities.\" Whether the conduct rises to this level depends, as the Court stated in Davis , \"on a constellation of surrounding circumstances, expectations, and relationships,\" \"including, but not limited to, the ages of the harasser and the victim and the number of individuals involved.\" Finally, for harassment to have sufficiently affected the victim's education, the Court in Davis made two additional observations. On the one hand, the Court noted that evidence of a decline in the victim's grades—as was alleged there—\"provides necessary evidence of a potential link between her education\" and the alleged harassment. Yet, the Court also concluded that harassment is actionable under Title IX only when it is \"serious enough to have the systemic effect of denying the victim equal access to an educational program or activity.\" Without defining what might constitute a \"systemic effect,\" the Court offered one example of harassment that does not have such effect: \"a single instance\" of harassment, even when \"sufficiently severe.\" The Supreme Court's Gebser and Davis decisions establish that a school or other educational program that receives federal funding will be liable under Title IX for damages for the sexual abuse or harassment of a student only if it acted with \"deliberate indifference\" in its response to known discrimination. Deliberate indifference, the Fifth Circuit has recently observed, \"'is an extremely high standard to meet.'\" Applying this and other components of the Supreme Court's Title IX liability standard, lower federal courts have varied in their formulations of the evidence required to prove a Title IX claim. Some courts, for example, have interpreted Gebser and Davis to adopt a \"hostile environment\" analysis of Title IX claims alleging teacher-to-student harassment, in light of precedent analyzing harassment claims in the workplace context under Title VII of the Civil Rights Act. Meanwhile, other federal courts have focused their teacher-to-student analysis on whether a plaintiff has established the following elements: \"actual\" notice of discrimination; by an \"appropriate person\" authorized to take corrective measures; and \"deliberate indifference\" by the funding recipient in response to known discrimination. Where a Title IX claim alleges sexual harassment or assault committed by a student against another student , courts have additionally required the plaintiff to establish that: the harassment was \"so severe, pervasive, and objectively offensive\"; the \"victim-students [were] effectively denied equal access to an institution's resources and opportunities\"; and the recipient exercised \"substantial control\" over the harasser and the context in which the harassment occurred. As discussed in further detail below, federal courts of appeals vary—and at times directly conflict—regarding the evidence sufficient to satisfy these elements. Failure to satisfy any one of the elements may be the sole basis for dismissal of a Title IX claim. Under Gebser , a plaintiff must show that the funding recipient had \"actual\" notice of the discrimination; therefore, it is not enough to present evidence that a funding recipient reasonably s hould have known about the alleged sexual misconduct. Under the standard, then, what type of allegations reported to a school give rise to \"actual\" notice? Is it enough, for example, if a funding recipient has actual knowledge of a \" substantial risk of abuse\"? Does it require knowledge of specific allegations of harassment or abuse or—perhaps most narrowly—require knowledge of \"severe, pervasive, and objectively offensive\" conduct? Meanwhile, if a school is notified of a perpetrator's previous acts of sexual harassment or abuse, may that constitute actual notice of that individual's conduct as to others ? Federal courts differ on these questions of actual notice, with some courts further differentiating between evidence that establishes actual notice of a teacher's sexual abuse versus actual notice of sexual violence or harassment committed by a student. As reflected below, which standard a court applies to evaluate \"actual notice\" is determinative—the claim may either proceed to the next phase of the analysis or be foreclosed altogether. In Doe v. School Board of Broward County , the Eleventh Circuit addressed the question of whether complaints of two separate students about the same teacher were \"sufficient in substance to alert [the principal] to the possibility\" of that teacher's sexual assault of a third student. The court held in the affirmative, emphasizing the similarity between the two preceding reports, which alleged multiple occasions of the teacher's propositions for sex and dates, sexual touching, and sexual comments about their bodies. These reports, the court held, raised a triable issue that the principal had actual notice \"of a pattern of harassment.\" And where the analysis of \"actual notice\" looks to knowledge of the risk of sexual abuse or harassment, the court further observed, \"lesser harassment may [] provide actual notice of sexually violent conduct.\" In Bay n ard v. Malone , however, the Fourth Circuit held that the school principal had no \"actual\" notice that a sixth grade teacher was sexually abusing a student in his class, despite receiving multiple prior reports that he molested children. There, the evidence reflected that before the plaintiff started sixth grade at the school, the principal had met with one of this teacher's former students, who reported that he had been sexually molested by the teacher while in the sixth grade, warned that the teacher was a pedophile, and that the principal should watch for certain behaviors. In addition, another teacher at the school told the principal about allegations that this teacher sexually molested children. Separately, the school librarian reported to the principal that she had walked in on the teacher with the plaintiff sitting in his lap, with his arm around the student, and their faces very close together, and that when the teacher saw her, he jumped up and the plaintiff fell to the floor. In relaying the incident, the librarian told the principal the behavior had been \"inappropriate.\" Though the court noted that the principal \"certainly should have been aware of the potential for abuse,\" it held that there was \"no evidence in the record to support a conclusion that [the principal] was in fact aware that a student was being abused.\" The court dismissed the Title IX claim on the basis that no appropriate person had actual notice of the abuse of the plaintiff student. As the above cases reflect, in the absence of a clear definition—either in the statute or from the Supreme Court—courts vary with respect to the nature, specificity, and frequency of allegations sufficient to constitute \"actual\" notice for the purpose of satisfying the first prong of the analysis for Title IX liability for sexual abuse or harassment. The Supreme Court's liability standard for Title IX not only requires actual notice, but also that this notice be made to \"an appropriate person\"—that is, \"an official who at a minimum has authority to address the alleged discrimination and to institute corrective measures on the recipient's behalf.\" Generally, federal appellate case law reflects that rather than treating an individual's title as dispositive, courts engage in fact-specific determinations that appear to focus principally on whether an individual had the ability to halt or address the misconduct or whether the individual occupied a position high enough within the hierarchy of the funding recipient to be fairly said to act in a representative capacity for the recipient. Because the Court's opinions in Gebser and Davis do not clearly delineate which individuals may constitute \"appropriate person[s],\" federal courts have reached varying—and at times conflicting—determinations. In the elementary or secondary school context, for example, courts vary as to which individuals— a principal, teacher, or guidance counselor —have the requisite \"authority to address the alleged discrimination\" and \"institute\" corrective action to constitute \"an appropriate person.\" Some federal courts of appeals have held that a public school principal may—but not always—constitute \"an appropriate person.\" In Warren ex rel . Good v. Reading School District , the Third Circuit held, in a Title IX case alleging sexual abuse by a fourth grade teacher, that the school principal was an \"appropriate person\" in light of her authority to investigate a teacher's misconduct, which in turn implied her authority to \"initiate\" corrective measures such as reporting her findings to the school board. The Fourth Circuit, however, reached the opposite conclusion in Baynard v. Malone , holding that the principal—despite being responsible for supervising and evaluating teachers—was not an \"appropriate person.\" The court emphasized that the principal could not \"be considered the functional equivalent of the school district\" and lacked the authority to \"hire, fire, transfer, or suspend teachers.\" Meanwhile, at least one federal court of appeals has held that a principal who engages directly in sexual abuse or harassment may not constitute an \"appropriate person.\" In Salazar v. South San Antonio Independent School District , the Fifth Circuit interpreted Gebser to hold that where a school official sexually abuses a student, he or she cannot be considered an \"appropriate person,\" even if he would otherwise constitute an \"appropriate person.\" That case involved allegations that a vice principal, who later became principal, sexually abused a student from his third grade to seventh grade year. Though \"uncontroverted testimony at trial\" established that the school official had corrective authority to address sexual harassment during the time he molested the plaintiff, the Fifth Circuit reasoned that it was \"highly unlikely\" that he would take corrective measures or report his own behavior so as to provide actual notice to the funding recipient. The court further rejected the argument that the principal's abuse should be treated as an official action of the school district for Title IX liability purposes, given the Supreme Court's rejection of agency principles to Title IX. The Fifth Circuit concluded that the \"goals and purpose\" of Title IX \"would not be accomplished or effectuated by permitting damage awards\" in such circumstances. In the higher education context, federal courts of appeals have engaged in similarly fact-specific analyses to determine whether a university employee—for example, a college dean, university counsel, or athletics director —constitutes an \"appropriate person\" for the purposes of a Title IX private right of action. The analyses in these cases appear to emphasize evidence relating to the individual's ranking in the university hierarchy, responsibilities involving receiving allegations of harassment, and ability to correct or halt the misconduct. Yet, even when there arguably is such evidence, it may not be sufficient to render that individual an \"appropriate person.\" In Ross v. University of Tulsa , for example, the Tenth Circuit held that campus security officers were not \"appropriate person[s]\" through whom the university could have actual notice of an on-campus sexual assault. The court rejected the contention that the officers' mandatory reporting of sexual assaults to university personnel rendered them \"appropriate person[s],\" instead likening mandatory reporting to a \"clerical act\" rather than taking corrective action. The court also rejected the argument that the officers' participation in investigations of campus violence rendered them \"appropriate person[s],\" as that contention, as presented, \"would assume that anyone participating in the initiation of a corrective process\" is an \"appropriate person.\" Given the variability of courts' analyses as to who may constitute an \"appropriate person,\" it is unlikely that a school's or university's Title IX Coordinator will categorically constitute an \"appropriate person.\" Rather, as reflected in the above decisions, a court's determination—based on the legal standard set out in Gebser —will likely depend on the characteristics it finds indicative of an \"appropriate person\" and the evidence relating to the individual's responsibilities in that institution. As discussed earlier, after establishing \"actual notice\" of the discrimination to an \"appropriate person,\" a plaintiff must additionally prove that the funding recipient acted with deliberate indifference in its response—that is, that the entity acted in a manner that was \" clearly unreasonable in light of the known circumstances.\" Federal appellate courts interpret this standard to require more than a showing that the school or institution failed to respond or act reasonably, or was negligent. Nor is a school required to remedy the harassment to avoid liability in a private right of action based on \"deliberate indifference.\" In these highly fact-intensive analyses, courts examine the nature of the allegations the funding recipient had knowledge of, and what actions the recipient took, if any, in response to that information to determine whether the response was so \"clearly unreasonable\" as to amount to \"deliberate indifference\" to the alleged sexual harassment or abuse. The clearest cases of \"deliberate indifference\" generally concern evidence that the recipient made no effort to respond at all to \"actual\" notice of sexual harassment or abuse. Evidence of such circumstances might include, for example, a funding recipient's failure to initiate an investigation into serious allegations, or take any disciplinary actions in light of repeated reports of sexual harassment. Where there is evidence that the funding recipient responded in some manner, however, federal case law reflects what appear to be divergent and variable analyses as to whether a response is so deficient as to amount to deliberate indifference. Federal appellate courts have commonly described the requisite showing for deliberate indifference as a \"high\" bar to meet. In Doe ex rel . Doe v. Dallas Independent School District , for example, the Fifth Circuit held that the school district's response did not amount to deliberate indifference, despite evidence that could arguably be described as reflecting a deficient response. In that case, the plaintiffs, a group of former students, alleged that the same third grade teacher had sexually abused numerous male students, over the course of four years. The plaintiffs presented evidence that in response to a report of sexual molestation, the principal told the parent that the alleged perpetrator was a \"good teacher\" and that he knew her son was lying; failed to report the allegation to Child Protective Services; did not monitor the teacher further or require him to attend any training; and never raised the issue of sexual abuse again with the teacher until he was ultimately arrested. In the court's view, this evidence failed to create a triable issue of deliberate indifference, as the principal had nonetheless interviewed the student, spoken with his mother, and warned the teacher that if the allegations were true, \"he would be 'dealt with.'\" It could not say, the court concluded, that these actions \"were an inadequate response\" to the student's allegation. When faced with apparently similar evidence of a school's response to allegations of teacher sexual misconduct, the Eleventh Circuit held that, given \"serious deficiencies,\" the district court had erred in holding that defendant's response, as a matter of law, was not deliberately indifferent. There, the principal had received sexual harassment complaints by two students about the same teacher. In its analysis, the court highlighted the response to the second complaint, because by that time, the principal had notice of a possible pattern. The principal, however, \"effectively did nothing other than obtain a written statement\" from the student and the teacher. In addition, though the principal, as he had with the first complaint, reported the second complaint to the school board's special investigative unit, he nonetheless failed to notify the unit that the allegation concerned \"the same teacher who had been the subject of a formal investigation just months earlier.\" It could not be said, the court concluded, that \"merely because school officials 'confronted [the teacher],' 'obtained statements' from the complaining students, and 'informed the [unit] of the sexual misconduct allegations' (while omitting material details),\" that this response was reasonable. Rather, the \"failure to institute any corrective measures aimed at ferreting out the possibility of [the teacher]'s sexual harassment of his students could constitute deliberate indifference.\" Meanwhile, some courts of appeals have analyzed allegations of deliberate indifference that, in their view, the Court's Gebser and Davis decisions did not directly address. In Simpson v. University of Colorado, Boulder , for example, the Tenth Circuit addressed allegations that a university had an \"official policy of deliberate indifference\" by failing to provide adequate training or guidance in light of an \"obvious\" need for such actions. There, the head coach and other staff of the university's football program selected current players to host high school recruits on campus, for the purpose of \"'show[ing] the recruits a good time.'\" During one such football recruiting visit, the plaintiffs, who had agreed to meet with them, alleged that university football players and high school recruits sexually assaulted them. In analyzing the issue of deliberate indifference, the court highlighted evidence that the university coaching staff had prior and ongoing knowledge of sexual assaults occurring during football recruitment and by football players, including the rape of a female student by a university football player two months before the plaintiffs were assaulted. The university had also been previously advised by the local district attorney to implement changes and training to its football recruiting program in light of such sexual assaults. In addition, the head coach \"continued to resist recruiting reforms.\" One player testified that he received little guidance on his responsibilities as a \"player-host\"; and a handbook provided by the school to the players, the court observed, did not \"provide guidance to player-hosts on appropriate behavior by themselves and recruits.\" The court emphasized that the evidence would support findings that, before the plaintiffs had been assaulted, the head coach had both general and specific knowledge of sexual assaults occurring during recruiting visits, that there had been no change in the recruiting program to lessen the likelihood of such assaults, and that the university \"nevertheless maintained an unsupervised player-host program.\" The evidence, the court held, created a triable issue of deliberate indifference. As with the other components of the Supreme Court's standard for a Title IX private right of action—\"actual\" notice to an \"appropriate person\"—federal case law reflects fact-intensive, variable determinations with respect to the evidence necessary to meet the \"high\" bar for showing deliberate indifference on the part of a funding recipient. In addition to the private rights of action discussed above, Title IX is also enforced by federal agencies that provide funding to educational programs. Title IX makes nondiscrimination based on sex a condition for receiving federal financial assistance in any education program or activity. In this administrative enforcement context, if a school is found to have violated Title IX, the ultimate sanction is termination or suspension of federal funds, rather than a legal judgment requiring payment of damages to a particular student. Agencies are authorized to issue regulations (subject to presidential approval) and orders to enforce the statute and are responsible for monitoring recipients' compliance with Title IX. While a number of federal agencies issue funds for educational programs, and thus are responsible for enforcing the statute with respect to recipients of financial assistance for educational programs, two agencies play particularly prominent roles in enforcing Title IX. Pursuant to the Education Amendments of 1974, the Secretary of Education (ED) is specifically directed to promulgate regulations concerning the prohibition of sex discrimination at education programs that receive federal assistance. Because ED is, among other things, \"the primary administrator of federal financial assistance to education,\" the agency plays a lead role in enforcing Title IX against educational institutions. And according to an executive order, the Attorney General coordinates the implementation and enforcement of Title IX across the executive branch. Subject to the coordinating function of the Attorney General, the Department of Justice's Civil Rights Division and OCR collaborate in enforcing Title IX consistent with a memorandum of understanding reached between the agencies, which notes that OCR has primary responsibility for enforcing the statute directly against recipients of financial assistance from ED through complaint investigations and compliance reviews. Accordingly, ED has promulgated regulations implementing Title IX that apply to traditional educational institutions of all levels that receive federal assistance, including elementary and secondary schools, as well as institutions of higher education. Those regulations specifically bar educational institutions from excluding individuals or denying the benefits of any education program or activity on the basis of sex. ED regulations also require that recipients of federal financial assistance that operate education programs designate an employee (commonly referred to as the Title IX Coordinator) to coordinate efforts to comply with ED regulations regarding sex-based discrimination. Further, schools must establish grievance procedures that provide \"prompt and equitable resolution\" of complaints alleging prohibited actions. Pursuant to its role in enforcing Title IX, OCR may conduct periodic reviews of institutions, or directed investigations, to ensure that recipients of federal funds are complying with applicable requirements. OCR also receives complaints from individuals alleging violations of Title IX by educational institutions and investigates allegations. When violations of the statute are found through these means, the office can seek informal resolution through a resolution agreement. According to OCR, if negotiations do not reach a resolution agreement, it may then take more formal enforcement measures, including seeking to suspend or terminate an institution's funding. Notably, neither Title IX's text nor ED's current regulations directly address sexual harassment. In the administrative context, ED's OCR has issued a series of guidance documents that have interpreted Title IX to bar sexual harassment and define distinct responsibilities for educational institutions with regard to such allegations. These documents—while sometimes subject to change—generally reflect a different analysis for assessing a school's Title IX liability for harassment than the Supreme Court case law addressing private rights of action for damages for sexual abuse or harassment. In particular, ED has applied a constructive notice requirement that prompts a school's Title IX responsibility to respond, rather than \"actual notice\" to \"an appropriate person\" as required in the context of suits for damages. In addition, while the Supreme Court has explained that a school's response will result in liability only where \"clearly unreasonable,\" ED has articulated baseline standards for how schools must respond to comply with Title IX. Finally, while the Supreme Court rejected holding schools responsible for sexual harassment under theories of vicarious liability, ED has held schools responsible for sexual harassment under Title IX where a teacher commits misconduct in the scope of their employment. In 1997, OCR released a guidance document stating that sexual harassment of students by school employees, other students, or third parties is a form of sex discrimination prohibited by Title IX. The guidance explained that two general types of conduct constituted sexual harassment: 1. Quid pro quo harassment: wherein a school employee \"explicitly or implicitly conditions a student's participation in an education program or activity or bases an educational decision on the student's submission to unwelcome sexual advances, requests for sexual favors, or other verbal, nonverbal, or physical conduct of a sexual nature\"; or 2. Hostile environment harassment: wherein sexual harassing conduct by a school's employee, another student, or a third party \"is sufficiently severe, persistent, or pervasive to limit a student's ability to participate in or benefit from an education program or activity, or to create a hostile or abusive educational environment.\" In the former case, the 1997 Guidance explained that a school would be liable for quid pro quo harassment by an employee in a position of authority whether or not it knew or should have known of the harassment. In the latter case, the 1997 Guidance explained that, in instances of hostile environment harassment by employees , a school would be liable for harassment if the employee acted with apparent authority or was aided in carrying out the harassment due to his or her position. With respect to sexual harassment by other students or third parties , a school would be liable for harassment if \"(i) a hostile environment exists in the school's programs or activities, (ii) the school knows or should have known of the harassment, and (iii) the school fails to take immediate and appropriate corrective action.\" The Guidance explained that while Title IX does not render a school responsible for the actions of its students, it does make schools responsible for their \"own discrimination in failing to remedy [harassment] once the school has notice.\" Following the release of OCR's 1997 Guidance, the Supreme Court shortly thereafter recognized a substantively different standard for establishing liability in a private suit for damages directly against a school. As discussed above, in 1998, in Gebser , the Supreme Court ruled that in cases of harassment committed by a teacher , a school district is liable only when it has actual knowledge of allegations by an \"appropriate person,\" and so deficiently responds to those allegations that its response amounts to deliberate indifference to the discrimination. And the next year in Davis , the Court held that in addition to a showing of actual knowledge by an appropriate person, and deliberate indifference, a plaintiff suing for damages for sexual harassment committed by a student must show that the conduct was \"so severe, pervasive, and objectively offensive\" that it denied the victim equal access to educational opportunities or benefits. Crucially, the Court in Gebser distinguished between actions by a school that could result in Title IX liability for damages in a private right of action, and Title IX administrative requirements imposed by a federal agency in implementing and enforcing the statute. According to the Court, agencies possess authority to enforce requirements that effectuate Title IX's mandate, \"even if those requirements do not purport to represent a definition of discrimination under the statute.\" In other words, agencies enforcing Title IX may administratively require recipients to comply with certain procedures and rescind funding for violations, even though breaches of such requirements might not subject a school to liability under a private suit for damages. Following these Supreme Court decisions regarding the standard for liability in Title IX damages suits alleging sexual harassment, ED issued a number of guidance documents generally reaffirming its basic position outlined in its 1997 Guidance, including with respect to notice, a school's responsibilities under Title IX to comply with the statute, and the application of vicarious liability in certain situations. In these documents, ED has indicated that the liability standard imposed by the Supreme Court for Title IX sexual harassment violations is distinct from the standards appropriate in the administrative enforcement context. In other words, a school's responsibilities in responding to sexual harassment allegations under Title IX have been treated differently in the context of a suit for damages than in the administrative enforcement context. In 2001, OCR issued a Revised Sexual Harassment Guidance document that—in light of the intervening Supreme Court decisions that set a more stringent standard for obtaining relief regarding private damages actions —reaffirmed the standards of the agency's 1997 Guidance as grounded in Title IX regulations and distinct from private damages litigation. The guidance explicitly applies to all educational institutions that receive federal funds, including universities. It outlines the compliance standards OCR uses for enforcing and investigating violations of Title IX. As a threshold matter, schools are responsible for adopting grievance procedures that provide prompt and equitable resolution of complaints of sexual harassment. Failure to do so will mean that a school is in violation of Title IX. Generally speaking, when sexual harassment has occurred, educational institutions must take \"prompt and effective action calculated to end the harassment, prevent its recurrence, and, as appropriate, remedy its effects.\" If the \"school, upon notice of the harassment, responds by taking prompt and effective action to end the harassment and prevent its recurrence, the school has carried out its responsibility under the Title IX regulations.\" Though framed as guidance, the 1997 and 2001 documents were promulgated by ED after an opportunity for the public to comment on them. (This does not mean, however, that the documents are legislative rules that carry the force of law; guidance documents generally serve to inform the public about the agency's approach to enforcement of the laws and regulations it administers. ) The 2001 Guidance stated that \"unwelcome conduct of a sexual nature\" constitutes sexual harassment. It indicated, however, that it aimed to \"move away from specific labels for types of sexual harassment.\" Instead, the 2001 Guidance explained that the crucial issue in each case \"is whether the harassment rises to a level that it denies or limits a student's ability to participate in or benefit from the school's program based on sex.\" In that situation, \"harassment has occurred that triggers a school's responsibilities under, or violates, Title IX or its regulations.\" That said, it went on to describe types of harassment that largely tracked the categories outlined in the 1997 Guidance: quid pro quo harassment and hostile environment harassment. In the former situation, wherein a teacher or employee conditions a benefit or educational decision on a student's submission to unwelcome sexual conduct, such harassment is automatically considered harassment that limits or denies a student's ability to participate in or benefit from the school's program and thus discriminates based on sex in violation of Title IX. Unlike so-called quid pro quo harassment, a case of hostile environment harassment requires a further investigation into whether the conduct is sufficiently serious to limit or deny a student's ability to benefit from or participate in a school's program because of sex. Because fellow students do not generally have positions of authority, student-on-student harassment generally is considered hostile environment harassment rather than quid pro quo harassment, although teachers and employees may also create a hostile environment. The 2001 Guidance explained that, in evaluating whether hostile environment harassment has occurred, OCR examines all circumstances relevant to the situation. This includes whether the conduct in question was welcome. The 2001 Guidance also explained that, in the context of harassment by a teacher or school employee, the extent of a school's responsibilities to address harassment depends on whether the harassment occurs within \"the context of the employee's provision of aid, benefits, or services to students\" (i.e., in the context of their job responsibilities). With respect to harassment by teachers or employees in the scope of their job responsibilities (or who reasonably appear to be acting in that capacity), assuming the harassment limits or denies a student's ability to benefit from or participate in a school program, a school is responsible for the discriminatory conduct and must stop the behavior, prevent its recurrence, and remedy the effects of harassment for the victim. In such situations, a school is responsible to do this \"whether or not\" it has notice of the behavior. Whether sexual harassment occurs within the scope of an employee's job responsibilities can depend on a variety of factors. In cases of quid pro quo harassment, the behavior clearly occurs in the scope of an employee's job responsibilities. For hostile environment harassment, OCR will evaluate a number of factors to determine whether the harassment occurred in the context of an employee's job responsibilities. The 2001 Guidance also indicates that sometimes harassment that does not occur within an employee's job responsibilities will be sufficiently serious to create a hostile environment. In these cases, once a school has notice of the behavior, it has a duty to stop the harassment and prevent its recurrence. Likewise, in the context of student-on-student harassment (or harassment by third parties) that creates a hostile environment, the school is responsible for eliminating the environment and preventing its recurrence. However, a school is in violation of Title IX if it has notice of the environment and fails to take \"prompt and effective action\" to correct the situation. In that case, the school is responsible for ending the harassment, preventing its recurrence, and remedying the effects of harassment for the student that \"could reasonably have been prevented\" if the school reacted appropriately. As noted above, in certain situations of harassment by a teacher or employee, schools are responsible for harassment even without notice. Otherwise, in cases of sexual harassment by employees, students, or third parties, the 2001 Guidance explains that recipients have notice of a sexually hostile environment if a responsible school employee \"knew, or in the exercise of reasonable care, should have known,\" of the harassment. A responsible employee is \"any employee who has the authority to take action to redress the harassment, who has the duty to report to appropriate school officials sexual harassment or any other misconduct by students or employees, or an individual who a student could reasonably believe has this authority or responsibility.\" Even if a student fails to inform the school or use the appropriate grievance procedures to complain of harassment, a school will be in violation of Title IX if it knows or reasonably should know of a hostile environment. A school is in violation of Title IX if it has notice of a hostile environment and fails to take immediate and effective corrective action. Once a school has notice of potential sexual harassment of students, the 2001 Guidance explained that \"it should take immediate and appropriate steps to investigate or otherwise determine what occurred and take prompt and effective steps reasonably calculated to end any harassment, eliminate a hostile environment if one has been created, and prevent harassment from occurring again.\" In cases of reports of harassment by a student, parent of an elementary or secondary student, or harassment observed by a responsible employee, regardless of whether the harassed student, or student's parents, decide to file a formal complaint, \"the school must promptly investigate to determine what occurred and then take appropriate steps to resolve the situation.\" For situations where a school learns of harassment via other means, a variety of factors will determine whether there are reasonable grounds for the school to investigate. If the allegations are confirmed, then a school has a responsibility to respond as described above. The 2001 Guidance also noted that informal mechanisms may sometimes be used to resolve complaints if the parties agree to do so. However, it made clear that certain informal procedures, such as mediation, are not appropriate in certain cases, such as alleged sexual assault. Finally, the Guidance noted that while \"the rights established under Title IX must be interpreted consistent with any federal guaranteed due process rights,\" schools should nevertheless \"ensure that steps to accord due process rights do not restrict or unnecessarily delay the protections provided by Title IX to the complainant.\" In 2011, OCR issued a Dear Colleague Letter that supplemented its 2001 Guidance and focused on the obligations under Title IX for schools that focused exclusively on peer-to-peer harassment, rather than harassment by a teacher. The Letter explained that sexual harassment \"is unwelcome conduct of a sexual nature,\" and includes \"unwelcome sexual advances, requests for sexual favors, and other verbal, nonverbal, or physical conduct of a sexual nature.\" Sexual harassment also includes sexual violence, which refers to \"physical sexual acts perpetrated against a person's will or where a person is incapable of giving consent due to the victim's use of drugs or alcohol.\" Sexual harassment creates a hostile environment \"if the conduct is sufficiently serious that it interferes with or limits a student's ability to participate in or benefit from the school's program.\" When a school \"knows or reasonably should know about student-on-student harassment that creates a hostile environment, Title IX requires the school to take immediate action to eliminate the harassment, prevent its recurrence, and address its effects.\" The Letter also noted that schools will sometimes have an obligation to respond to incidents of sexual harassment that occur \"off school grounds, outside a school's education program or activity.\" And whether or not the conduct occurred, if a student files a complaint, \"the school must process the complaint in accordance with its established procedures.\" Because students can experience the effects of off-campus sexual harassment at school, \"schools should consider the effects of the off-campus conduct when evaluating whether there is a hostile environment on campus.\" With respect to investigations of sexual harassment allegations, the Letter stated that the standards for liability in the criminal context are distinct from Title IX, and therefore a criminal investigation into allegations of sexual violence does not relieve a school of its duty to conduct a Title IX investigation. It also instructed schools not to wait until the conclusion of a criminal investigation or proceeding to begin their own investigation under Title IX, and if appropriate, to take immediate steps to protect students while a criminal investigation occurs. Although a school may need to temporarily delay an investigation while a criminal fact-finding occurs by police, once the police have finished their fact-finding, the school must promptly resume and complete its fact-finding for Title IX purposes. The 2011 Dear Colleague Letter also outlined various elements of a school's grievance procedures that are critical in order to provide \"prompt and equitable resolution of sexual harassment complaints,\" including sexual violence. The Letter noted \"in order for a school's grievance procedures to be consistent with Title IX standards, the school must use a preponderance of the evidence standard.\" This standard contrasted with the 2001 Guidance, which did not impose an evidentiary standard on school investigations, as well as the prior practice of some schools, which used a \"clear and convincing\" standard. A preponderance of the evidence standard, which requires a showing that a fact or event is more likely than not, is lower than a clear and convincing standard, which requires providing the \"ultimate factfinder [with] an abiding conviction that the truth of . . . factual contentions are 'highly probable.'\" The Letter also strongly discouraged schools from allowing the parties in a hearing to personally cross-examine one another. It noted that if a school allows parties to appeal a finding or remedy, it must do so for both parties. Following requests by schools on how to adequately comply with the 2011 Dear Colleague Letter, ED issued a forty-six-page supplemental Questions and Answers document in 2014 (2014 Q&A) that further explained the responsibilities of schools with regard to allegations of student-on-student sexual violence. It provided more specific instructions to educational institutions regarding their obligations under Title IX. Like the 2011 Dear Colleague Letter, the 2014 Q&A took the form of a guidance document, rather than a legally enforceable legislative rule. The Q&A made clear that when \"a school knows or reasonably should know of possible sexual violence, it must take immediate and appropriate steps to investigate or otherwise determine what occurred.\" It clarified that, in cases of student-on-student sexual violence, a school violates Title IX when (1) \"the alleged conduct is sufficiently serious to limit or deny a student's ability to participate in or benefit from the school's educational program\" (creating a hostile environment) and (2) \"the school, upon notice, fails to take prompt and effective steps reasonably calculated to end the sexual violence, eliminate the hostile environment, prevent its recurrence, and, as appropriate, remedy its effects.\" The 2014 Q&A also explained that Title IX requires schools, upon notice of an allegation, to protect complainants and ensure their safety through the use of interim steps before an investigation is complete. Among other things, it further specified in detail the requirements of Title IX with respect to the responsibilities of a school's Title IX Coordinator (the employee required by regulation to coordinate a school's compliance with Title IX), the elements expected in a school's written grievance procedures for responding to complaints of sexual violence, and which individuals qualify as responsible employees who are required to report allegations of sexual violence to a school's Title IX Coordinator. The document also detailed the requirements for schools in conducting investigations into alleged sexual violence. It stressed that while a school is permitted to use its own \"student disciplinary procedures\" to process complaints of sexual violence, that if a school chooses to do so, the imposition of sanctions against a perpetrator, \"without additional remedies, likely will not be sufficient to eliminate the hostile environment and prevent recurrence.\" The 2014 Q&A noted that because Title IX investigations will not result in the incarceration of individuals, \"the same procedural protections and legal standards are not required\" in Title IX investigations as are compelled in criminal proceedings. Even if a criminal investigation of student-on-student sexual violence is ongoing, a school must conduct its own Title IX investigation. Indeed, the conclusion of a criminal investigation without charges \"does not affect a school's Title IX obligations.\" The document also explained that schools were not required to conduct hearings to assess allegations of sexual violence, but if they did, they could not require the complainant to attend. Further, in the 2014 Q&A, OCR \"strongly discourage[d]\" schools from allowing parties to personally cross-examine one another because such actions \"may be traumatic or intimidating, and may perpetuate a hostile environment.\" Instead, schools could allow parties to submit questions to a trained third party to ask on their behalf. The third party was advised to screen those questions \"and only ask those it deem[ed] appropriate and relevant to the case.\" In response to the foregoing guidance from ED, as well as increased oversight from OCR between 2011 and 2016, schools developed a variety of procedures to ensure that their responses to allegations of sexual assault complied with Title IX. Generally speaking, the specific type of procedures for investigating allegations of sexual harassment vary considerably across educational institutions. While Title IX provides ED with some discretion in terms of administrative enforcement of the statute's bar on sex-based discrimination, including the ability to require public and private schools to develop certain procedures for handling complaints (as long as those schools receive federal funds), this discretion is constrained with respect to state actors (including public universities) by due process protections that set a baseline for the procedural protections afforded to the accused. In the public university context, a number of students subject to disciplinary sanctions for misconduct thus challenged the disciplinary procedures in state and federal courts as unconstitutional. In particular, a number of students faced with disciplinary action by public universities have raised constitutional challenges to the Title IX procedures used to find them responsible for sexual misconduct, arguing that universities violated the Due Process Clause in the handling of their case. The Due Process Clause of the Fourteenth Amendment requires states to observe certain procedures when depriving individuals of life, liberty, or property. In addition to protecting against the deprivation of an individual's physical property, the Constitution guards against the deprivation of certain \"property interests\" without due process. The property interests protected by the Due Process Clause are not themselves created by the Constitution; instead, those interests arise from an independent source, such as state or federal law. To have a protected property interest in a government-created benefit, one must show a \"legitimate claim of entitlement\" that originates in \"existing rules or understandings that stem from an independent source such as state law.\" Likewise, when a state deprives an individual of liberty, states must afford due process to the individual. In fact, when a \"person's good name, reputation, honor, or integrity is at stake because of what the government is doing to him,\" due process may be implicated. In these circumstances, courts often require an accompanying state action that alters or removes a legal status to constitute a deprivation of liberty. Precisely what procedures are constitutionally required before depriving individuals of a protected interest can vary. When deciding what process is due, courts balance three factors enunciated by the Supreme Court in Ma thews v. Eldridge : (1) \"the private interest that will be affected by the official action\"; (2) the risk of an erroneous deprivation and the probable value of additional procedures; and (3) the interest of the government. In general, the Court has made clear that individuals with a protected interest are entitled to notice of the proposed action and a \"meaningful opportunity to be heard\" before the state may deprive them of that interest. The Supreme Court has explained, however, that due process is not a \"technical conception with a fixed content unrelated to time, place, and circumstances.\" Instead, the concept is \"flexible and calls for such procedural protections as the particular situation demands.\" In conducting the balancing of factors pursuant to  M athews v. Eldridge , the severity of the deprivation is a key factor in determining what procedures are constitutionally required. In general, the stronger the private interest at risk of deprivation, the more formal and exacting procedures will be required by courts. The only Supreme Court case to focus on procedural due process in the (nonacademic) student discipline context is Goss v. Lopez . In that case, high school students challenged their suspension from school for up to 10 days without a hearing. The Court first ruled that the public school students had a \"legitimate entitlement to a public education,\" which was a property interest protected by due process; and that interest was deprived by the suspension. As to the process required, the Court ruled that, at a minimum, \"students facing suspension . . . must be given some kind of notice and some kind of hearing.\" The Court also clarified that cases of more stringent sanctions, such as suspensions beyond 10 days or expulsions, \"may require more formal procedures.\" Generally speaking, because public universities constitute state actors subject to the Due Process Clause, they must comply with constitutional standards when suspending or expelling students. Private universities, on the other hand, do not. The Supreme Court has assumed, without deciding on the merits, that students of public universities enjoy a \"constitutionally protectable property right\" in their continued enrollment in an educational institution. A number of federal courts of appeals have ruled that students enrolled in public universities have liberty and/or property interests in their education and that expulsion and certain suspensions can constitute a deprivation of that interest. As discussed in further detail below, as a baseline matter, federal courts have held that due process requires public schools to provide students with notice of the charges against them, the evidence used to make a determination, and the ability to present their side of the story to an unbiased decisionmaker. Of course, whether a public university has afforded a student due process \"is a fact-intensive inquiry and the procedures required to satisfy due process will necessarily vary depending on the particular circumstances of each case.\" While colleges and universities have developed various procedures to comply with OCR's guidance regarding an institution's response to allegations of sexual harassment, a number of individuals subject to these disciplinary processes have challenged some of these procedures in federal court. Several courts have since issued decisions in cases brought by students asserting a due process violation in the context of a Title IX investigation or adjudicatory proceeding. The following section discusses recent notable judicial rulings that address the constitutionality of disciplinary proceedings in the context of sexual misconduct. The discussion below is organized by the type of claim raised against the public university: 1. the university failed to provide adequate notice of the charges against the student; 2. the university did not permit the accused student to confront and challenge the credibility of witnesses who testified against him; 3. the university allowed biased decisionmakers to oversee the proceedings; and 4. the university employed unfair review processes when rehearing an allegation brought by a complainant. Importantly, some of the judicial rulings discussed below address whether a student's stated claim is sufficient to survive a motion to dismiss and do not reach conclusive determinations about the evidence sufficient to establish a due process violation. One type of legal challenge raised by students accused of sexual misconduct is that the public universities failed to adequately notify them of the charges. As an initial matter, reviewing courts have taken the view that there generally will be no due process violation on notice grounds when the school (1) provides a student with timely notice of the actual, full charges against him; and (2) provides the accused student with a meaningful opportunity to prepare for the disciplinary hearing against him. The absence of such protocols, however, can form the basis of a viable due process claim. For example, at one university, an accused student alleged that he was interviewed by a school staff member assigned to investigate charges of sexual misconduct against him without first being notified of the existence of the sexual misconduct allegation. The student was eventually suspended from the university. A federal district court ruled that, given the severity of the suspension (three years), the lack of notice could amount to a due process violation. The court thus held that the student had stated a claim sufficient to survive a motion to dismiss. In another case, an accused student alleged that he was not given adequate notice of the scope of charges against him. Rather, the school only notified him that his conduct on a particular day was under review, but expelled him for sexual misconduct that occurred in relation to other incidents and dates. The federal district court ruled that \"[b]y conveying a limited scope of focus to plaintiff, defendants prejudiced plaintiff's ability to mount an effective defense, which increased the possibility of an erroneous outcome.\" Taken together with other procedural issues in the school's investigation and decision, the court concluded that the school had deprived the student of a liberty interest without due process of law. Similarly, the Sixth Circuit ruled that a student suspended by a university because of suspected sexual assault had sufficiently pleaded a due process violation when the university allegedly did not make available the evidence used in its disciplinary decision against him. The university's Title IX investigator compiled an investigatory report, which was allegedly used by the school's disciplinary hearing panel to adjudicate the student's case. However, the investigator failed to provide the report to the defendant. The court reasoned that the Constitution requires that a school provide the evidence used against a student in the context of significant disciplinary decisions and that a failure to do so constitutes a due process violation. A number of students have brought claims alleging a denial of due process because they were not afforded the opportunity to cross-examine witnesses in school disciplinary hearings. Courts have often rejected these arguments, however, in both sexual harassment proceedings and other disciplinary hearings, noting that the rights of students in disciplinary proceedings are not the same as those of criminal defendants. Case law reflects that courts have been more willing to entertain such claims when students have been denied an opportunity to challenge the credibility of witnesses where a witness's testimony concerns disputed and critical facts. As a general matter, cross-examination has not been regarded as a necessary feature of due process in the civil context. Even outside the context of sexual harassment allegations, courts have often denied due process challenges to university adjudicatory proceedings where students were not permitted to directly cross-examine witnesses, noting that the Due Process Clause does not guarantee the right to cross-examination in school disciplinary proceedings. This principle has been applied in recent cases alleging due process violations in the sexual harassment context. In one case, students challenged a university's adjudicatory proceedings regarding allegations of sexual assault, where accused students were permitted to submit written questions to a panel chair rather than directly to the complainant. The reviewing district court nonetheless rejected a due process challenge to the proceedings. Similarly, the Sixth Circuit denied a due process challenge to a university's disciplinary hearing concerning sexual assault allegations where students were not permitted to directly cross-examine their accuser. The students were permitted to submit written questions to the hearing panel, but were not permitted to submit any follow-up questions, and the panel failed to ask all of the questions they submitted. The circuit court reasoned that the proceedings satisfied the \"limited\" requirement of cross-examination where credibility is at issue, as the \"marginal benefit that would accrue to the fact-finding process by allowing follow-up questions … is vastly outweighed by the burden\" on the school. Likewise, the Fifth Circuit rejected a due process challenge to a university's disciplinary proceedings where the challengers argued they were denied the ability to effectively cross-examine witnesses and confront their accuser. In that case, the court noted that the school's decision did not rest on testimonial evidence, but on the videos and a photo taken and distributed by one of the challengers. Where a credibility determination was critical to the outcome of a proceeding, however, courts have often ruled in favor of due process challenges. For instance, the Sixth Circuit held that a university violated due process when it failed to provide any form of cross-examination in the hearing and the disciplinary decision necessarily rested on a credibility determination. In that case, the university based its decision to suspend a student entirely on the hearsay statement of the complainant, who did not appear at the disciplinary hearing. Importantly, the court noted that the suspended student only requested the additional procedure of posing questions to his accuser through the hearing panel, but he did not ask for the opportunity to directly cross-examine her. The court concluded that in such circumstances, some method must be made available to the adjudicative body to \"assess the demeanor of both the accused and his accuser.\" The court concluded this procedure was necessary to comport with due process when the university's decision rested on a credibility determination. Likewise, the absence of a live hearing may sometimes form the basis of a viable due process claim. For instance, one federal district court ordered a university to provide an accused student facing the possibility of expulsion with a live hearing in order to comply with due process. In that case, the university's procedures for handling sexual misconduct allegations involved an investigator who would meet separately with the parties, conduct interviews with witnesses, and eventually reach a determination as to culpability without any opportunity for a hearing. The court reasoned that due to \"the University's method of private questioning through the investigator, Plaintiff has no way of knowing which questions are actually being asked of Claimant or her response to those questions.\" Accordingly, the court concluded that the university violated the accused student's right to due process. Similarly, the Sixth Circuit has ruled that where credibility is at issue, a university \"must give the accused student or his agent an opportunity to cross-examine the accuser and adverse witnesses in the presence of a neutral fact-finder.\" In that case, a university investigator concluded that the evidence supporting a finding of sexual misconduct was not sufficient, but the university's appeals board reversed after reviewing the report because it found the description of events given by the alleged victim and adverse witnesses more persuasive. At no time was the accused student given a live hearing or a chance to cross-examine his accuser or any adverse witnesses. The Sixth Circuit ruled that because the university ultimately had to \"choose between competing narratives\" in order to resolve the case, due process required a chance to cross-examine his accuser and adverse witnesses before a neutral fact-finder. Some students have also brought due process claims alleging that they were denied the ability to offer exculpatory evidence on their own behalf. Courts appear to examine such claims on a largely fact-specific basis. For instance, in one suit brought against a university, a student alleged he was denied the opportunity to present physical exculpatory evidence on his own behalf at a sexual assault disciplinary hearing. Specifically, the student claimed he was unable to present text messages at his hearing that he claimed would exonerate him. The district court ruled that this allegation raised concerns that he was denied due process. Students subject to disciplinary proceedings regarding sexual harassment or assault at institutions of higher education have also brought challenges alleging that a decisionmaker was biased against them. As a threshold matter, courts generally assume that school disciplinary panels are \"entitled to a presumption of impartiality, absent a showing of actual bias.\" A plaintiff must generally allege facts sufficient to overcome this baseline presumption, such as statements by decisionmakers or a pattern of decisionmaking evidencing bias. For instance, a Fifth Circuit panel rejected a due process claim alleging bias in a university disciplinary hearing concerning sexual assault because the challengers failed to show how the integrity of the proceedings was undermined. In that case, the individual tasked as a victim advocate for the school investigated the charges against the accused and advised the panel members who made the disciplinary decision. The court reasoned that the investigator relied on photo and video evidence to render his findings to the panel and \"there is nothing in the record . . . to suggest that a different investigator would have uncovered information diminishing the significance of that graphic evidence to the initial findings.\" Further, a separate university attorney advised the panel that they were free to draw their own conclusions from the proffered evidence. Evidence of bias in the consequential behavior or statements of decisionmakers, however, may give rise to a viable due process challenge. For example, the Sixth Circuit recently held that a student sufficiently pleaded a due process claim where he alleged that a university disciplinary hearing for alleged sexual assault was biased against him. In that case, one of the hearing panel members acted as investigator, prosecutor, and judge. The court noted that that fact alone did not give rise to a due process violation. Rather, because that individual also allegedly dominated the panel with remarks intended to reduce the defendant's credibility, and reportedly said during the hearing, \"I'll bet you do this [commit sexual assault] all the time,\" the student had plausibly alleged that the hearing panel member was not impartial and had pre-judged his case. Courts have also addressed claims alleging a due process violation for bias based on institutional pressures, such as the sexual assault training received by university officials. For example, one district court rejected a due process claim which argued that university staff members were biased because they received sexual assault training that was not balanced with training for protecting the due process rights of accused students. The court reasoned that it was a \"laudable goal\" for the university to raise awareness of sexual assault and increase sensitivity to problems that victims of sexual violence experience. Plaintiffs' mere belief that the school \"ha[d] a practice of railroading students accused of sexual misconduct simply to appease the Department of Education and preserve its federal funding\" was unsupported by any evidence. In contrast, another district court rejected a motion to dismiss a due process claim brought by an expelled student alleging that the investigation and training materials given to the panel who decided his case were biased. The court reasoned that while this was a \"he-said/she-said\" case, \"there seems to have been an assumption under [the] training materials that an assault occurred. As a result, there is a question whether the panel was trained to ignore some of the alleged deficiencies in the investigation and official report the panel considered.\" Accordingly, the court concluded that there may have been a due process violation because it was \"plausible that the scales were tipped\" against the accused student. Finally, a number of federal district court cases have addressed allegations that a university's disciplinary proceedings violated due process on the basis of unfair review processes for rehearing appeals. In one district court case, a student was cleared by a hearing panel on a charge of sexual assault, but the university ordered a new hearing, apparently premised only on the school being unable to adequately prove its case in the first hearing. The district court found this to be fundamentally unfair to the student and ruled that the allegations survived the university's motion to dismiss. Similarly, in another district court case, a suspended student challenged the validity of a school's procedures where he was initially found not responsible for sexual misconduct by a hearing board, but was later determined guilty after the complainant appealed that decision. At the administrative appeal stage, the school did not give the defendant sufficient notice of, or time to respond to, new evidence against him; did not provide him with details of the identity of a woman he was newly accused of assaulting; did not tell him the names of the members of the appeal board; did not give him notice of the appeal board's meeting; and did not permit him to attend that meeting. The appeals board reversed the initial hearing board's determination that the student was not responsible for sexual misconduct, without explanation, and without any oral presentations or live testimony. The reviewing federal district court ruled that the school failed to provide the student with a meaningful hearing. Likewise, a student brought a claim in federal district court against a university after being expelled for sexual assault even though he had been found not responsible by an initial hearing panel. In that case the school permitted a rehearing after the complainant appealed the initial hearing panel's decision, and subsequently the individual presiding over the appeal expelled the student. The individual presiding over the appeal conducted off-the-record and ex parte meetings with the accuser and failed to deliver the accused student a record of those meetings. According to the reviewing court, by the time the student was permitted to present his defense, the individual overseeing his appeal had pre-judged the case, and expelled the accused student without providing a basis for the decision. The court ruled that these procedural inadequacies, combined with a failure to offer the student notice of the full scope of allegations against him, combined to constitute a due process violation. With the foregoing considerations in the background, in September 2017 OCR withdrew the 2011 Dear Colleague Letter and 2014 Questions and Answers document. ED explained that it would begin the rulemaking process to codify a school's responsibilities under Title IX. In the interim, ED stated that it would continue to rely on the 2001 Guidance; it also issued a new Question and Answer document indicating how the department would address sexual misconduct during that time. The document notifies schools that they may, in certain circumstances, resolve complaints through mediation. It also notifies schools that they may choose to allow appeals either by both parties or solely by the party found to have committed sexual misconduct and not the alleged victim. On November 29, 2018, ED issued a notice of proposed rulemaking in the Federal Register . If adopted, the proposal would significantly alter the responsibilities of schools in responding to allegations of sexual harassment. Among other things, the proposed regulation would (1) define in narrower terms what conduct qualifies as sexual harassment under Title IX; (2) require \"actual notice\" of harassment, rather than constructive notice, to trigger a school's Title IX responsibilities; (3) provide that a school's response to allegations of sexual harassment will violate the statute only if amounting to deliberate indifference; and (4) impose new procedural requirements that reflect concern for due process when schools investigate allegations and make determinations of culpability. The proposed regulation would first define sexual harassment in the following ways: an employee conditioning the provision of a benefit, service, or aid on the individual's participation in unwelcome sexual conduct (i.e., quid pro quo); \"unwelcome conduct on the basis of sex that is so severe, pervasive, and objectively offensive that it effectively denies a person equal access to the recipient's education program or activity\" (i.e., hostile environment); or sexual assault (as defined in regulations implementing the Clery Act). Notably, among the changes to past definitions of sexual harassment issued by ED, the proposal would establish a higher threshold to show a Title IX violation based on hostile environment harassment than that required by ED in the past. As explained in an earlier section of this report, ED's 2001 Guidance described hostile environment harassment as sexually harassing \"conduct [that] is sufficiently serious to deny or limit a student's ability to participate in or benefit from the school's program based on sex.\" The proposed regulations would instead generally adopt the standard for actionable harassment that the Supreme Court's 1999 Davis decision applied in the context of private suits for damages: \"unwelcome conduct on the basis of sex that is so severe, pervasive, and objectively offensive that it effectively denies a person equal access to the recipient's education program or activity.\" In other words, whereas ED previously defined a hostile environment harassment as harassment that is \"sufficiently serious to limit\" a student's ability to benefit from or participate in a school's program, the proposed regulations would define a hostile environment as one \"that is so severe, pervasive, and objectively offensive that it effectively denies a person equal access to the recipient's education program or activity.\" Second, in a departure from past administrative practice, in which ED considered \"constructive notice\" (i.e., known or should have known) to trigger a school's responsibilities in cases of student-on-student harassment, and did not impose a notice requirement in certain cases of harassment by a teacher or employee, the proposal would establish that a school has a duty to respond to allegations of sexual harassment only when it has \"actual knowledge.\" Actual knowledge is defined as notice of harassment (or allegation of harassment) to a school's Title IX Coordinator or official with authority to institute corrective measures; the regulations explicitly reject imputing knowledge to a school based on respondeat superior or constructive notice. Notably, in contrast to past guidance from ED, the mere ability or obligation to report by a school employee does not qualify them as one who possesses authority to institute corrective measures. The proposal explains that this threshold for triggering a school's obligations is intended to align the administrative standard imposed by ED with that articulated by the Supreme Court in Gebser and Davis in the context of private litigation seeking money damages. Further, the proposed regulations would compel schools to respond only to sexual harassment that occurs within a school's \"education program or activity.\" This contrasts with past ED guidance which provided that schools sometimes will be responsible to respond to harassment that occurs \"outside a school's education program or activity.\" For instance, past ED guidance (since rescinded) required schools to \"process all complaints of sexual violence, regardless of where the conduct occurred,\" in order to determine if the conduct has effects on campus. In another departure from prior administrative practice, in which ED judged a school's response under a \"reasonableness\" standard, the proposed regulations only require a school to respond in a manner that is not \"deliberately indifferent.\" Deliberate indifference is a \"response to sexual harassment [that] is clearly unreasonable in light of the known circumstances.\" Once again, this would tether a school's responsibility to that announced by the Court in Davis in the context of private suits for damages. The proposal explains that, for ED, this standard aptly holds schools accountable while allowing for flexibility in making disciplinary decisions. The proposal outlines three situations in which a safe harbor is provided to a school from a finding of deliberate indifference. First, when a formal Title IX complaint is made (by a complainant or Title IX Coordinator), the proposed regulations outline a number of grievance procedures (outlined below) that schools must follow. When a school follows these procedures it would not be deliberately indifferent and has not discriminated under Title IX. Second, if a school has actual knowledge of harassment because of multiple complainants, the Title IX Coordinator must file a complaint. Again, compliance with the grievance procedures would negate any inference of deliberate indifference in this situation. Third, with respect to institutions of higher education, and in situations where there is not a formal complaint, a school would not be deliberately indifferent if it offers and implements supportive measures to the complainant that are aimed to restore or preserve the complainant's access to a school's education program or activity. The school must also at this time notify the complainant in writing of the right to file a formal complaint. As long as an institution of higher education follows these requirements, it would not be deliberately indifferent. Aside from these three situations, the proposed regulations provide that a school with actual knowledge of sexual harassment in an education program or activity must respond in a manner that is not deliberately indifferent. The proposal would also allow schools to remove an individual accused of sexual harassment from an educational program or activity on an emergency basis. However, a school must conduct an individualized risk and safety analysis, determine that the removal is justified because of an immediate threat to students or employees, and provide the accused with notice and an opportunity to challenge the decision. The regulations also allow schools to place a nonstudent employee on administrative leave during an investigation. A significant component of the proposal reflects concern that schools provide accused students with due process protections during the fact-finding process and ultimate determination of culpability. As a threshold matter, schools must investigate allegations received in a formal complaint, but if the alleged conduct would not (if proved) constitute sexual harassment under the regulations, or if it did not occur within a sch ool's program or activity, the complaint must be dismissed. Upon receipt of a formal Title IX complaint regarding sexual harassment, a school must provide written notice to the relevant parties of the allegations, including notice of the available grievance procedures, and notice of the allegations constituting a potential violation, \"including sufficient details known at the time and with sufficient time to prepare a response before any initial interview.\" A school's grievance procedures must treat complainants and respondents equitably, which means that a school must both provide remedies for complainants upon a finding of sexual harassment as well as due process protections for a respondent before any sanctions are imposed. The proposal would provide that a school's treatment of a complainant in response to a formal complaint of harassment can constitute discrimination in violation of Title IX; likewise, a school's treatment of a respondent can discriminate on the basis of sex in violation of Title IX. The procedures must also require an objective evaluation of evidence (both inculpatory and exculpatory) and provide that credibility determinations not be made based on one's status; require that individuals involved in the investigation or decisionmaking process not be biased and receive training on ensuring student safety and providing due process for all parties; include a presumption that respondents are not guilty until proven otherwise; and describe the range of possible sanctions and remedies available, the standard of evidence used, the ability to appeal (if offered) and the range of available supportive measures. With respect to a school's actual investigation of alleged harassment, the proposed regulations require that a school must: place the burden of proof and of gathering evidence on the school (rather than either party); allow each party equal opportunity to present witnesses and evidence; not restrict parties from gathering and presenting relevant evidence or from discussing the allegations; permit both parties equally to have their choice of advisor or other person join them during proceedings, although the school may restrict an advisor's participation so long as restrictions apply equally to both parties; provide parties with written notice of the relevant details of hearings and interviews and allow sufficient time to prepare; for institutions of higher education, provide a live hearing where the decisionmaker must allow each party to ask the other party and witnesses all relevant questions (and follow-up questions) including those that challenge one's credibility; cross-examination must be done by the party's advisor; at the request of either party, schools must allow for cross-examination via technology with the parties in separated rooms; decisionmakers must not rely on any party or witness's statement if they do not submit to cross-examination; allow both parties an equal opportunity to review evidence from the investigation that is directly related to the allegations; and develop a report summarizing the relevant evidence and provide this to the parties at least 10 days prior to a hearing (or time where responsibility is determined). Notably, these requirements depart from past ED guidance by requiring, for institutions of higher education, a quasi-judicial proceeding in the form of a live hearing. Each party may question the other side, and cross-examination must be conducted by a party's advisor. The proposed regulations would also significantly alter the ultimate decisionmaking requirements for schools. For instance, the decisionmaker in a proceeding may not be the investigator or the school's Title IX Coordinator. This would bar the practice of some universities that have used a single investigator to both examine allegations and reach a decision regarding culpability. And in contrast to past guidance from ED, the new regulations permit schools to apply either a preponderance of the evidence standard or a clear and convincing standard. However, schools may apply the former only if they use that same standard for conduct violations other than sexual harassment that carry the same maximum disciplinary penalty. Further, schools must apply the same standard of evidence for complaints against students as it does for employees and faculty. A schools may, but is not required to, allow appeals of decisions. If it does so, it must allow both parties to appeal. A school may also, at any point before reaching a final determination, facilitate an informal resolution process as long as it obtains the parties' written consent and notifies them of the requirements of the process. As discussed above, the antidiscrimination mandate of Title IX, enacted in 1972, prohibits discrimination \"on the basis of sex\" in educational programs in general terms. The statute does not expressly refer to or address sex discrimination in the form of sexual abuse, sexual harassment, or sexual assault. Nor does the statute address when, by whom, or under what circumstances such conduct will amount to a Title IX violation. Given the statute's silence on these issues, federal courts have largely determined when relief is available for individual victims of sexual abuse or harassment. Indeed, in creating the remedial scheme for a private right of action to address such claims, the Supreme Court sought to \"'infer how the [1972] Congress would have addressed the issue'\" if there had been an express provision in the statute, an approach that the Court observed \"inherently entails a degree of speculation, since it addresses an issue on which Congress has not specifically spoken.\" Likewise, given the sparse statutory language, federal agencies have issued shifting guidelines at to the responsibilities of educational institutions in complying with Title IX. As a general matter, Congress enjoys substantial discretion to modify the terms of Title IX to clarify the appropriate standard in private suits for damages as well as in the administrative enforcement context. Congress could, for instance, amend Title IX to define the specific conduct that amounts to a violation of the statute regarding sexual abuse or harassment. In addition, an amendment could also clarify whether liability for harassment should be handled differently in elementary and secondary schools, as opposed to the university context. Likewise, legislation could distinguish between harassment by teachers from that between students. Further, because the private right of action under Title IX has been judicially implied, rather than expressly codified in statute, Congress could modify the legal standards that apply in a private suit for damages. Finally, aside from directly amending Title IX, Congress could also direct federal agencies to alter their administrative enforcement of the statute. For example, Congress could direct ED to promulgate regulations that distinguish between various types of sexual harassment or treat harassment differently depending on the context.", "summary": "Title IX of the Education Amendments of 1972 (Title IX) provides an avenue of legal relief for victims of sexual abuse and harassment at educational institutions. It bars discrimination \"on the basis of sex\" in an educational program or activity receiving federal funding. Although Title IX makes no explicit reference to sexual harassment or abuse, the Supreme Court and federal agencies have determined that such conduct can sometimes constitute discrimination in violation of the statute; educational institutions in some circumstances can be held responsible when a teacher sexually harasses a student or when one student harasses another. Title IX is mainly enforced (1) through private rights of action brought directly against schools by or on behalf of students subjected to sexual misconduct; and (2) by federal agencies that provide funding to educational programs. To establish liability in a private right of action, a party seeking damages for a Title IX violation must satisfy the standards set forth by the Supreme Court in Gebser v. Lago Vista Independent School District, decided in 1998, and Davis Next Friend LaShonda D. v. Monroe County Board of Education, decided the next year. Gebser provides that when a teacher commits harassment against a student, a school district is liable only when it has actual knowledge of allegations by an \"appropriate person,\" and so deficiently responds to those allegations that its response amounts to deliberate indifference to the discrimination. Davis instructs that, besides showing actual knowledge by an appropriate person and deliberate indifference, a plaintiff suing for damages for sexual harassment committed by a student must show that the conduct was \"so severe, pervasive, and objectively offensive\" that it denied the victim equal access to educational opportunities or benefits. Taken together, the Supreme Court's decisions set forth a high threshold for a private party seeking damages against an educational institution based on its response to sexual harassment. In turn, federal appellate courts have differed in how to apply the standards set in Gebser and Davis, diverging on the nature and amount of evidence sufficient to support a claim. In each of the last several presidential administrations, the Department of Education (ED) issued a number of guidance documents that instruct schools on their responsibilities under Title IX when addressing allegations of sexual harassment. These documents—while sometimes subject to change—generally reflected a different standard than the Supreme Court case law addressing private rights of action for damages for sexual abuse or harassment (the Court in Davis acknowledged that the threshold for liability in a private right of action could be higher than the standard imposed in the administrative enforcement context). Those guidance documents had, among other things, established that sometimes a school could be held responsible for instances of sexual harassment by a teacher, irrespective of actual notice; and schools could be held responsible for student-on-student harassment if a \"responsible employee\" knew or should have known of the harassment (constructive notice). ED's previous guidance also instructed educational institutions that they sometimes could be responsible for responding to incidents of sexual harassment occurring off campus. ED also cautioned schools on the use of mediation to resolve allegations of sexual harassment. With regard to the procedures used by schools to resolve sexual harassment allegations, ED informed schools that they must use the preponderance of the evidence standard to establish culpability, and the agency strongly discouraged schools from allowing parties in a hearing to personally cross-examine one another. In response to guidance from ED, as well as increased oversight from the department's Office for Civil Rights (OCR) between 2011 and 2016, schools developed several procedures to ensure that their responses to allegations of sexual harassment and assault complied with Title IX. A number of students faced with disciplinary action by public universities raised constitutional challenges to the Title IX procedures used to find them responsible for sexual misconduct, arguing that universities violated the Due Process Clause in handling their case. ED issued a notice of proposed rulemaking in late 2018, after revoking some of its previous guidance to schools in 2017. The proposed regulations would, in several ways, tether the administrative requirements for schools to the standard set by the Supreme Court in Gebser and Davis. In doing so, the proposed regulations would depart from the standards set by ED in previous guidance documents (some of which have since been rescinded). The new regulations would require \"actual notice,\" rather than constructive notice, of harassment by an education institution to trigger a school's Title IX responsibilities, and provide that a school's response to allegations of sexual harassment will violate Title IX only if it amounts to deliberate indifference. In addition, the new regulations would more narrowly define what conduct qualifies as sexual harassment under Title IX, and also impose new procedural requirements, which appear to reflect due process concerns, when schools investigate sexual harassment or assault allegations and make determinations of culpability.", "document_type": "crs"}
{"report": "This report presents background information and potential oversight issues for Congress on the Navy's Arleigh Burke (DDG-51) and Zumwalt (DDG-1000) class destroyer programs. The Navy's proposed FY2020 budget requests funding for the procurement of three DDG-51s. Decisions that Congress makes concerning destroyer procurement could substantially affect Navy capabilities and funding requirements, and the U.S. shipbuilding industrial base. For an overview of the strategic and budgetary context in which the DDG-51, DDG-1000, and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. Decades ago, the Navy's cruisers were considerably larger and more capable than its destroyers. In the years after World War II, however, the Navy's cruiser designs in general became smaller while its destroyer designs in general became larger. As a result, since the 1980s there has been substantial overlap in size and capability of Navy cruisers and destroyers. (The Navy's new Zumwalt [DDG-1000] class destroyers, in fact, are considerably larger than the Navy's cruisers.) In part for this reason, the Navy now refers to its cruisers and destroyers collectively as large surface combatants (LSCs) , and distinguishes these ships from the Navy's small surface combatants (SSCs) , the term the Navy now uses to refer collectively to its frigates, Littoral Combat Ships (LCSs), mine warfare ships, and patrol craft. The Navy's annual 30-year shipbuilding plan, for example, groups the Navy's surface combatants into LSCs and SSCs. In December 2016, the Navy released a goal to achieve and maintain a Navy of 355 ships, including 104 LSCs. At the end of FY2018, the Navy's force of LSCs totaled 88 ships, including 22 Ticonderoga (CG-47) class cruisers and 66 Arleigh Burke (DDG-51) class destroyers. Under the Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan, the Navy is to achieve a force of 104 large surface combatants by FY2029. The DDG-51 program was initiated in the late 1970s. The DDG-51 ( Figure 1 ) is a multi-mission destroyer with an emphasis on air defense (which the Navy refers to as anti-air warfare, or AAW) and blue-water (mid-ocean) operations. DDG-51s, like the Navy's 22 Ticonderoga (CG-47) class cruisers, are equipped with the Aegis combat system, an integrated ship combat system named for the mythological shield that defended Zeus. CG-47s and DDG-51s consequently are often referred to as Aegis cruisers and Aegis destroyers, respectively, or collectively as Aegis ships. The Aegis system has been updated several times over the years. Existing DDG-51s (and also some CG-47s) are being modified to receive an additional capability for ballistic missile defense (BMD) operations. The first DDG-51 was procured in FY1985 and entered service in 1991. A total of 82 have been procured through FY2018, including 62 in FY1985-FY2005 and 20 in FY2010-FY2019. (In FY2007-FY2009, during the time when the Navy was not procuring DDG-51s, the Navy procured three Zumwalt (DDG-1000) class destroyers, which are discussed below.) With a total of 82 ships funded through FY2019, the DDG-51 program is, in terms of number of hulls, one of the largest Navy shipbuilding programs since World War II. The DDG-51 design has been modified over time. The first 28 DDG-51s (i.e., DDGs 51 through 78) are called Flight I/II DDG-51s. In FY1994, the Navy shifted DDG-51 procurement to the Flight IIA DDG-51 design, which incorporated a significant design change that included, among other things, the addition of a helicopter hangar. A total of 47 Flight IIA DDG-51s (i.e., DDG-79 through DDG-124, plus DDG-127) were procured through FY2016. In FY2017, the Navy shifted DDG-51 procurement to the Flight III DDG-51 design, which incorporates a new and more capable radar called the Air and Missile Defense Radar (AMDR) or SPY-6 radar and associated changes to the ship's electrical power and cooling systems. DDG-51s procured in FY2017 and subsequent years (i.e., DDGs 125 and higher, except for DDG-127 noted above) are to be Flight III DDG-51s. As part of its action on the Navy's FY2018 budget, Congress granted the Navy authority to use a multiyear procurement (MYP) contract for DDG-51s planned for procurement in FY2018-FY2022. This is the fourth MYP contract for the DDG-51 program—previous DDG-51 MYP contracts covered DDG-51s procured in FY2013-FY2017, FY2002-FY2005, and FY1998-FY2001. DDG-51s are built by General Dynamics/Bath Iron Works (GD/BIW) of Bath, ME, and Huntington Ingalls Industries/Ingalls Shipbuilding (HII/Ingalls) of Pascagoula, MS. Lockheed is the lead contractor for the Aegis system installed on all DDG-51s. The SPY-1 radar—the primary radar for the Aegis system on Flight I/II and Flight IIA DDG-51s—is made by Lockheed. The AMDR—the primary radar for the Aegis system on Flight III DDG-51s—is made by Raytheon. The Navy is modernizing its existing DDG-51s (and its CG-47s) so as to maintain their mission and cost-effectiveness out to the end of their projected service lives. In April 2018, the Navy announced that it wants to extend the service lives of all DDG-51s to 45 years—an increase of 5 or 10 years over previous plans to operate DDG-51s to age 35 or 40. Doing this, the Navy has said, will permit the Navy to achieve a total of 355 ships by 2034, or about 20 years earlier than under the FY2019 budget submission, although the 355-ship fleet of the 2030s would have more destroyers and fewer ships of other kinds (including attack submarines and aircraft carriers) than called for in the 355-ship force-level goal. Older CRS reports provide additional historical and background information on the DDG-51 program. In FY2007-FY2009, during the time when the Navy was not procuring DDG-51s, the Navy procured three Zumwalt (DDG-1000) class destroyers. The Navy plans no further procurement of DDG-1000s. The Navy's proposed FY2020 budget requests $155.9 million in procurement funding to help complete the total procurement cost of the three DDG-1000 class ships. The DDG-1000 is a multi-mission destroyer with an originally intended emphasis on naval surface fire support (NSFS) and operations in littoral (i.e., near-shore) waters. Consistent with that mission orientation, the ship was designed with two new-design 155mm guns called Advanced Gun Systems (AGSs). The AGSs were to fire a new 155mm, gun-launched, rocket-assisted guided projectile called the Long-Range Land-Attack Projectile (LRLAP, pronounced LUR-lap). DDG-1000s are designed carry 600 LRLAP rounds (300 for each gun), and to have additional LRLAP rounds brought aboard the ship while the guns are firing, which would create what Navy officials called an \"infinite magazine.\" In November 2016, however, it was reported that the Navy had decided to stop procuring LRLAP projectiles because the projected unit cost of each projectile had risen to at least $800,000. The Navy began exploring options for procuring a less expensive (and less capable) replacement munition for the AGSs. The Navy to date has not announced a replacement munition for the AGSs. In the meantime, it was reported in December 2017 that, due to shifts in the international security environment and resulting shifts in Navy mission needs, the mission orientation of the DDG-1000s will be shifted from an emphasis on NSFS to an emphasis on surface strike, meaning the use of missiles to attack surface ships and perhaps also land targets. Under this new plan, the mix of missiles carried in the 80 vertical launch system (VLS) tubes of each DDG-1000 may now feature a stronger emphasis on anti-ship and land-attack cruise missiles missiles. The two AGSs on each DDG-1000 will, for the time being at least, remain for the most part dormant, pending a final decision on whether to procure a replacement munition for the AGSs (which would require modifying the AGSs and their below-deck munition-handling equipment, since both were designed specifically for LRLAP), or instead pursue another option, such as removing the AGSs and their below-deck equipment and replacing them with additional VLS tubes. For additional background information on the DDG-1000 program, see the Appendix . All cruisers, destroyers, and frigates procured since FY1985 have been built at GD/BIW and HII/Ingalls. Both yards have long histories of building larger surface combatants. Construction of Navy surface combatants in recent years has accounted for virtually all of GD/BIW's ship-construction work and for a significant share of HII/Ingalls' ship-construction work. (HII/Ingalls also builds amphibious ships for the Navy and cutters for the Coast Guard.) Navy surface combatants are overhauled, repaired, and modernized at GD/BIW, HII/Ingalls, and other U.S. shipyards. Lockheed Martin and Raytheon are generally considered the two leading Navy surface combatant radar makers and combat system integrators. Lockheed is the lead contractor for the DDG-51 combat system (the Aegis system), while Raytheon is the lead contractor for the DDG-1000 combat system, the core of which is called the Total Ship Computing Environment Infrastructure (TSCE-I). Lockheed has a share of the DDG-1000 combat system, and Raytheon has a share of the DDG-51 combat system. Lockheed, Raytheon, and Northrop competed to be the maker of the AMDR to be carried by the Flight III DDG-51. On October 10, 2013, the Navy announced that it had selected Raytheon to be the maker of the AMDR. The surface combatant construction industrial base also includes hundreds of additional firms that supply materials and components. The financial health of Navy shipbuilding supplier firms has been a matter of concern in recent years, particularly since some of them are the sole sources for what they make for Navy surface combatants. Several Navy-operated laboratories and other facilities support the Aegis system and other aspects of the DDG-51 and DDG-1000 programs. The Navy estimates the combined procurement cost of the three DDG-51s requested for procurement in FY2020 at $5,463.0 million, or an average of $1,821.0 million each. The ships have received $363.7 million in prior-year Economic Order Quantity (EOQ) advance procurement (AP) funding (i.e., funding for up-front batch orders of components of DDG-51s to be procured under the FY2018-FY2022 MYP contract). The Navy's proposed FY2020 budget requests the remaining $5,099.3 million in procurement funding needed to complete the estimated procurement cost of the three DDG-51s, as well as $224.0 million in EOQ funding for DDG-51s to be procured in FY2021 and FY2022, bringing the total amount requested for the DDG-51 program for FY2020 to $5,323.3 million, excluding outfitting and post-delivery costs. The Navy's proposed FY2020 budget also requests $155.9 million in procurement funding to help complete the total procurement cost of the three DDG-1000 class ships. One issue for Congress for FY2020 is whether to approve, reject, or modify the Navy's FY2020 funding requests for the DDG-51 and DDG-1000 programs. In considering this issue, Congress may consider, among other things, whether the Navy has accurately priced the work it is proposing to fund for FY2020. Another oversight issue for Congress concerns cost, technical, and schedule risk for the Flight III DDG-51. An October 2018 Congressional Budget Office (CBO) report on the cost of the Navy's shipbuilding programs stated the following about the Flight III DDG-51: To meet combatant commanders' goal of improving future ballistic missile defense capabilities beyond those provided by existing DDG-51s—and to replace 15 Ticonderoga class cruisers when they are retired in the 2020s—the Navy plans to substantially modify the design of the DDG-51 Flight IIA destroyer to create a Flight III configuration. That modification would incorporate the new Air and Missile Defense Radar (AMDR), now under development, which will be larger and more capable than the radar on current DDG-51s. For the AMDR to operate effectively in the new Flight III configuration, however, the ships must have a greater capacity to generate electrical power and cool major systems. With those improvements incorporated into the design of the Flight III and the associated increases in the ships' displacement, CBO expects that the average cost per ship over the entire production run would be $1.8 billion in 2018 dollars—about 15 percent more than the Navy's estimate of $1.6 billion. Costs could be higher or lower than CBO's estimate, however, depending on the eventual cost and complexity of the AMDR and the associated changes to the ship's design to integrate the new radar. A May 2019 Government Accountability Office (GAO) report assessing selected DOD acquisition programs stated the following in its assessment of the Flight III DDG-51: Current Status The Navy and the shipbuilders completed Flight III detail design activities in December 2017. As compared to Flight IIA, the Flight III design included considerable changes to the ship's hull, mechanical, and electrical systems to incorporate the AMDR program's SPY-6 radar, and changes to restore ship weight and stability safety margins. To reduce technical risk, the Navy plans to field all but one—the SPY-6 radar—of the program's four mature critical technologies on other ship classes before integration with Flight III. In 2018, however, the Navy identified software-related deficiencies affecting SPY-6 that delayed delivery of a radar array for power and integration testing with the Aegis combat system by at least 1 year. Despite these delays, the Navy plans to complete testing, install the radar on the ship, and activate the combat system for shipboard testing by January 2022. The Navy expects to complete a draft test and evaluation master plan for Flight III by early 2022. The Navy and the Director, Operational Test and Evaluation continue to disagree on whether the use of a self-defense test ship equipped with Aegis and the SPY-6 radar is necessary to validate performance during operational test and evaluation…. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office said that it has delivered 67 DDG 51 class ships since its inception in 1985 and the class remains in serial production at both new construction shipyards. Regarding the AMDR specifically, the report stated the following: Technology Maturity and Design Stability The program office reported that AMDR's four critical technologies are mature—although we disagree—and that the system design is stable. Since our 2018 assessment, the program office has further demonstrated the radar system's performance and capabilities through live testing and simulation. However, based on industry best practices, the program cannot fully demonstrate all critical technologies until the Navy tests them in their realistic, at-sea environment with the Aegis combat system. According to the AMDR program schedule, such testing will occur in 2023 during operational testing with a DDG 51 Flight III ship. Until the Navy completes this testing, the program's design stability remains at risk for disruption. Specifically, any performance deficiencies the Navy discovers during at-sea testing could require it to revise existing design drawings to remedy issues. As part of developmental testing, the program office tested a full-scale, single-face radar array at the Navy's Pacific Missile Range Facility (PMRF) beginning in September 2016. The program office successfully completed several live ballistic missile defense, anti-air, and anti-surface warfare tests. However, in March 2018, the array failed a ballistic missile test because of a defective software update that caused the array to stop tracking a live target. Officials said a software update corrected the issue and they verified the array's performance through a successful retest in January 2019. Officials said the single-face array, originally scheduled to support Aegis combat system equipment testing, will undergo additional testing at PMRF through 2019. As a result, the Navy has revised the acquisition schedule and will instead divert the delivery of a new array to support land-based Aegis combat system equipment testing sometime in 2019. The program has completed software development to support core radar capabilities and will continue to develop radar updates to support system improvements, cybersecurity, and combat system integration through 2021. In parallel to the radar's software development, significant software development remains to integrate AMDR with the Aegis combat system. Program officials said this software development must complete before both systems can be fully integrated and tested. While the Navy plans to test the radar and initial Aegis combat system software at a land-based site, the Navy will not test the radar and final Aegis combat system until both are installed on the lead ship. Any issues identified after the systems are installed on the lead ship could require retrofits to the radar or ship. Production Readiness Nearly 18 months after entering production, the program has not demonstrated that all of its critical manufacturing processes are in statistical control. The program reported that it exercised a contract option for the fourth low-rate initial production unit in April 2018 and was authorized to procure five additional low-rate production units in February 2019. However, in August 2018, the contractor reported early cost growth and schedule variance for the first three low-rate production units because of increased material costs and other production delays. Officials said the delays are partly due to a problem with a digital receiver component, which the contractor is testing. As a result, contractor delivery of the first production radar is at risk of delay from December 2019 to April 2020. The AMDR program office plans to procure more than two-thirds of its 22 total radars prior to completing operational testing. The Navy deliberately planned for AMDR to begin production prior to the start of Aegis upgrade software development to allow time for key radar technologies to mature and for the design to stabilize. However, this concurrency means any deficiencies identified during combat system integration or operational testing may lead to retrofitting after production is underway or complete for many of the radars. Any required retrofitting is likely to increase program costs or delay radar deliveries. Other Program Issues DOD's Director, Operational Test and Evaluation (DOT&E) has yet to approve the AMDR Test and Evaluation Master Plan. DOT&E stated that the proposed test approach for the AMDR and DDG 51 Flight III programs does not provide realistic operational conditions without the use of an AMDR- and Aegis-equipped unmanned self-defense test ship. Because the Navy has elected not to request funds for a test ship, DOT&E and the Navy are revising the DDG 51 Flight III operational test strategy to include AMDR operational requirements and an updated simulation strategy. DOT&E cautioned, however, that DDG 51 Flight III's self-defense and survivability capabilities will not be fully known until the program completes operational testing. Program Office Comments and GAO Response We provided a draft of this assessment to the program office for review and comment. In its comments, the program office disagreed with our assessment of the program's technology maturity, stating that combat system testing is not required to demonstrate mature radar technologies since the technologies have been tested and proven at the land-based PMRF site. We disagree. The PMRF site does not provide a realistic, at-sea environment to test the fit and function of the radar and combat system on a ship. Another issue for Congress concerns the potential impact on the DDG-51 program of a possible change in the surface force architecture. The Navy's current force-level goal of 355 ships, including 104 large surface combatants (i.e., cruisers and destroyers), is the result of a Force Structure Analysis (FSA) that the Navy conducted in 2016. The Navy conducts a new or updated FSA every few years, and it is currently conducting a new FSA that is scheduled to be completed by the end of 2019. Navy officials have suggested that the Navy in coming years may shift to a new surface force architecture that will include a smaller proportion of large surface combatants, a larger proportion of small surface combatants, and a third tier of numerous unmanned surface vehicles (USVs). Some observers believe the results of the new FSA may reflect this potential new surface force architecture. Figure 2 shows a Navy briefing slide depicting the potential new surface force architecture, with each sphere representing a manned ship or USV. Consistent with Figure 2 , the Navy's current 355-ship goal calls for a Navy with twice as many large surface combatants (104) as small surface combatants (52). Figure 2 suggests that the potential new surface force architecture could lead to the obverse—a planned force mix that calls for twice as many small surface combatants than large surface combatants—along with the new third tier of USVs. A January 15, 2019, press report states: The Navy plans to spend this year taking the first few steps into a markedly different future, which, if it comes to pass, will upend how the fleet has fought since the Cold War. And it all starts with something that might seem counterintuitive: It's looking to get smaller. \"Today, I have a requirement for 104 large surface combatants in the force structure assessment; [and] I have [a requirement for] 52 small surface combatants,\" said Surface Warfare Director Rear Adm. Ronald Boxall. \"That's a little upside down. Should I push out here and have more small platforms? I think the future fleet architecture study has intimated 'yes,' and our war gaming shows there is value in that.\" An April 8, 2019, press report states that Navy discussions about the future surface fleet include the upcoming construction and fielding of the [FFG(X)] frigate, which [Vice Admiral Bill Merz, the deputy chief of naval operations for warfare systems] said is surpassing expectations already in terms of the lethality that industry can put into a small combatant. \"The FSA may actually help us on, how many (destroyers) do we really need to modernize, because I think the FSA is going to give a lot of credit to the frigate—if I had a crystal ball and had to predict what the FSA was going to do, it's going to probably recommend more small surface combatants, meaning the frigate … and then how much fewer large surface combatants can we mix?\" Merz said. An issue the Navy has to work through is balancing a need to have enough ships and be capable enough today, while also making decisions that will help the Navy get out of the top-heavy surface fleet and into a better balance as soon as is feasible. \"You may see the evolution over time where frigates start replacing destroyers, the Large Surface Combatant [a future cruiser/destroyer-type ship] starts replacing destroyers, and in the end, as the destroyers blend away you're going to get this healthier mix of small and large surface combatants,\" he said—though the new FSA may shed more light on what that balance will look like and when it could be achieved. Another potential oversight issue for Congress for FY2019 concerns the Navy's plan to shift the mission orientation of the DDG-1000s from an emphasis on NSFS to an emphasis on surface strike. Potential oversight questions for Congress include the following: What is the Navy's analytical basis for shifting the ships' mission orientation? What are the potential costs of implementing this shift? How much of these costs are in the Navy's FY2019 budget submission? How cost-effective will it be to operate and support DDG-1000s as ships with an emphasis on surface strike? When does the Navy plan to decide on whether to procure a replacement munition for the ships' AGSs, or instead pursue another option, such as removing the AGSs and their below-deck equipment and installing additional VLS tubes? What would be the cost of the latter option, and how many additional VLS tubes could be installed? If the ships will operate with their AGSs for the most part dormant, to what degree will that reduce the return on investment (ROI) involved in developing, procuring, operating, and sporting the DDG-1000s? Table 1 summarizes congressional action on the Navy's FY2020 procurement funding requests for the DDG-51 and DDG-1000 programs. This appendix presents additional background information on the DDG-1000 program. Overview The DDG-1000 program was initiated in the early 1990s. The DDG-1000 ( Figure A-1 ) is a multi-mission destroyer with an originally intended emphasis on naval surface fire support (NSFS) and operations in littoral (i.e., near-shore) waters. (NSFS is the use of naval guns to provide fire support for friendly forces operating ashore.) The DDG-1000 was originally intended to replace, in a technologically more modern form, the large-caliber naval gun fire capability that the Navy lost when it retired its Iowa-class battleships in the early 1990s, to improve the Navy's general capabilities for operating in defended littoral waters, and to introduce several new technologies that would be available for use on future Navy ships. The DDG-1000 was also intended to serve as the basis for a planned cruiser called CG(X) that was subsequently canceled. The DDG-1000 is to have a reduced-size crew of 175 sailors (147 to operate the ship, plus a 28-person aviation detachment), compared to roughly 300 on the Navy's Aegis destroyers and cruisers, so as to reduce its operating and support (O&S) costs. The ship incorporates a significant number of new technologies, including an integrated electric-drive propulsion system and automation technologies enabling its reduced-sized crew. With an estimated full load displacement of 15,612 tons, the DDG-1000 design is roughly 64% larger than the Navy's current 9,500-ton Aegis cruisers and destroyers, and larger than any Navy destroyer or cruiser since the nuclear-powered cruiser Long Beach (CGN-9), which was procured in FY1957. The first two DDG-1000s were procured in FY2007 and split-funded (i.e., funded with two-year incremental funding) in FY2007-FY2008; the Navy's FY2019 budget submission estimates their combined procurement cost at $9,242.3 million. The third DDG-1000 was procured in FY2009 and split-funded in FY2009-FY2010; the Navy's FY2019 budget submission estimates its procurement cost at $3,789.9 million. The first DDG-1000 was commissioned into service on October 15, 2016, although its delivery date was revised in the Navy's FY2018 budget submission to May 2018, and revised further in the Navy's FY2019 budget submission to December 2018, creating an unusual situation in which a ship was commissioned into service more than two years prior to its delivery date. The delivery dates for the second and third ships were revised in the Navy's FY2018 budget submission to May 2020 and December 2021, respectively, and were revised further in the Navy's FY2019 budget submission to September 2020 and September 2022, respectively. Program Origin The program known today as the DDG-1000 program was announced on November 1, 2001, when the Navy stated that it was replacing a destroyer-development effort called the DD-21 program, which the Navy had initiated in the mid-1990s, with a new Future Surface Combatant Program aimed at developing and acquiring a family of three new classes of surface combatants: a destroyer called DD(X) for the precision long-range strike and naval gunfire mission; a cruiser called CG(X) for the air defense and ballistic missile mission; and a smaller combatant called the Littoral Combat Ship (LCS) to counter submarines, small surface attack craft (also called \"swarm boats\"), and mines in heavily contested littoral (near-shore) areas. On April 7, 2006, the Navy announced that it had redesignated the DD(X) program as the DDG-1000 program. The Navy also confirmed in that announcement that the first ship in the class, DDG-1000, is to be named the Zumwalt , in honor of Admiral Elmo R. Zumwalt, the Chief of Naval operations from 1970 to 1974. The decision to name the first ship after Zumwalt was made by the Clinton Administration in July 2000, when the program was still called the DD-21 program. New Technologies The DDG-1000 incorporates a significant number of new technologies, including a wave-piercing, tumblehome hull design for reduced detectability, a superstructure made partly of large sections of composite (i.e., fiberglass-like) materials rather than steel or aluminum, an integrated electric-drive propulsion system, a total-ship computing system for moving information about the ship, automation technologies enabling its reduced-sized crew, a dual-band radar, a new kind of vertical launch system (VLS) for storing and firing missiles, and two copies of a new 155mm gun called the Advanced Gun System (AGS). Shipbuilders and Combat System Prime Contractor GD/BIW is the builder for all three DDG-1000s, with some portions of each ship being built by HII/Ingalls for delivery to GD/BIW. Raytheon is the prime contractor for the DDG-1000's combat system (its collection of sensors, computers, related software, displays, and weapon launchers). Under a DDG-1000 acquisition strategy approved by the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD AT&L) on February 24, 2004, the first DDG-1000 was to have been built by HII/Ingalls, the second ship was to have been built by GD/BIW, and contracts for building the first six were to have been equally divided between HII/Ingalls and GD/BIW. In February 2005, Navy officials announced that they would seek approval from USD AT&L to instead hold a one-time, winner-take-all competition between HII/Ingalls and GD/BIW to build all DDG-1000s. On April 20, 2005, the USD AT&L issued a decision memorandum deferring this proposal, stating in part, \"at this time, I consider it premature to change the shipbuilder portion of the acquisition strategy which I approved on February 24, 2004.\" Several Members of Congress also expressed opposition to the Navy's proposal for a winner-take-all competition. Congress included a provision (§1019) in the Emergency Supplemental Appropriations Act for 2005 ( H.R. 1268 / P.L. 109-13 of May 11, 2005) prohibiting a winner-take-all competition. The provision effectively required the participation of at least one additional shipyard in the program but did not specify the share of the program that is to go to the additional shipyard. On May 25, 2005, the Navy announced that, in light of Section 1019 of P.L. 109-13 , it wanted to shift to a \"dual-lead-ship\" acquisition strategy, under which two DDG-1000s would be procured in FY2007, with one to be designed and built by HII/Ingalls and the other by GD/BIW. Section 125 of the FY2006 defense authorization act ( H.R. 1815 / P.L. 109-163 ) again prohibited the Navy from using a winner-take-all acquisition strategy for procuring its next-generation destroyer. The provision again effectively requires the participation of at least one additional shipyard in the program but does not specify the share of the program that is to go to the additional shipyard. On November 23, 2005, the USD AT&L granted Milestone B approval for the DDG-1000, permitting the program to enter the System Development and Demonstration (SDD) phase. As part of this decision, the USD AT&L approved the Navy's proposed dual-lead-ship acquisition strategy and a low rate initial production quantity of eight ships (one more than the Navy subsequently planned to procure). On February 14, 2008, the Navy awarded contract modifications to GD/BIW and HII/Ingalls for the construction of the two lead ships. The awards were modifications to existing contracts that the Navy has with GD/BIW and HII/Ingalls for detailed design and construction of the two lead ships. Under the modified contracts, the line item for the construction of the dual lead ships is treated as a cost plus incentive fee (CPIF) item. Until July 2007, it was expected that HII/Ingalls would be the final-assembly yard for the first DDG-1000 and that GD/BIW would be the final-assembly yard for the second. On September 25, 2007, the Navy announced that it had decided to build the first DDG-1000 at GD/BIW, and the second at HII/Ingalls. On January 12, 2009, it was reported that the Navy, HII/Ingalls, and GD/BIW in the fall of 2008 began holding discussions on the idea of having GD/BIW build both the first and second DDG-1000s, in exchange for HII/Ingalls receiving a greater share of the new DDG-51s that would be procured under the Navy's July 2008 proposal to stop DDG-1000 procurement and restart DDG-51 procurement. On April 8, 2009, it was reported that the Navy had reached an agreement with HII/Ingalls and GD/BIW to shift the second DDG-1000 to GD/BIW, and to have GD/BIW build all three ships. HII/Iingalls will continue to make certain parts of the three ships, notably their composite deckhouses. The agreement to have all three DDG-1000s built at GD/BIW was a condition that Secretary of Defense Robert Gates set forth in an April 6, 2009, news conference on the FY2010 defense budget for his support for continuing with the construction of all three DDG-1000s (rather than proposing the cancellation of the second and third). Reduction in Procurement to Three Ships Navy plans for many years called for ending DDG-51 procurement in FY2005, to be followed by procurement of up to 32 DDG-1000s and some number of CG(X)s. In subsequent years, the planned total number of DDG-1000s was reduced to 16 to 24, then to 7, and finally to 3. At the end of July 2008, in a major reversal of its destroyer procurement plans, the Navy announced that it wanted to end procurement of DDG-1000s and resume procurement of DDG-51s. In explaining this reversal, which came after two DDG-1000s had been procured, the Navy stated that it had reevaluated the future operating environment and determined that its destroyer procurement now needed to emphasize three missions: open-ocean antisubmarine warfare (ASW), countering anti-ship cruise missiles (ASCMs), and countering ballistic missiles. Although the DDG-1000 could perform the first two of these missions and could be modified to perform the third, the Navy concluded that the DDG-51 design could perform these three missions adequately and would be less expensive to procure than the DDG-1000 design. The Navy's proposal to stop procuring DDG-1000s and resume procuring DDG-51s was presented in the Navy's proposed FY2010 budget, which was submitted to Congress in 2009. Congress, in acting on the Navy's FY2010 budget, approved the idea of ending DDG-1000 procurement and restarting DDG-51 procurement, and procured a third DDG-1000 as the final ship in the class. In retrospect, the Navy's 2008 reversal in its destroyer procurement plans can be viewed as an early indication of the ending of the post-Cold War era (during which the Navy focused its planning on operating in littoral waters against the land- and sea-based forces of countries such as Iran and North Korea) and the shift in the international security environment to a new situation featuring renewed great power competition (during which the Navy is now focusing its planning more on being able to operate in mid-ocean waters against capable naval forces from near-peer competitors such as China and Russia). Increase in Estimated Procurement Cost As shown in Table A-1 below, the estimated combined procurement cost for all three DDG-1000s, as reflected in the Navy's annual budget submission, has grown by $4,218.4 million, or 47.0%, since the FY2009 budget (i.e., the budget for the fiscal year in which the third DDG-1000 was procured). Some of the cost growth in the earlier years in the table was caused by the truncation of the DDG-1000 program from seven ships to three, which caused some class-wide procurement-rated costs that had been allocated to the fourth through seventh ships in the program to be reallocated to the three remaining ships. The Navy states that the cost growth shown through FY2015 in the table reflects, among other things, a series of incremental, year-by-year movements away from an earlier Navy cost estimate for the program, and toward a higher estimate developed by the Cost Assessment and Program Evaluation (CAPE) office within the Office of the Secretary of Defense (OSD). As one consequence of a Nunn-McCurdy cost breach experienced by the DDG-1000 program in 2010 (see discussion bvelow), the Navy was directed to fund the DDG-1000 program to CAPE's higher cost estimate for the period FY2011-FY2015, and to the Navy's cost estimate for FY2016 and beyond. The Navy states that it implemented this directive in a year-by-year fashion with each budget submission from FY2010 through FY2015, moving incrementally closer each year through FY2015 to CAPE's higher estimate. The Navy stated in 2014 that even with the cost growth shown in the table, the DDG-1000 program as of the FY2015 budget submission was still about 3% below the program's rebaselined starting point for calculating any new Nunn-McCurdy cost breach on the program. Procurement Cost Cap Section 123 of the FY2006 defense authorization act ( H.R. 1815 / P.L. 109-163 of January 6, 2006) limited the procurement cost of the fifth DDG-1000 to $2.3 billion, plus adjustments for inflation and other factors. Given the truncation of the DDG-1000 program to three ships, this unit procurement cost cap appears moot. 2010 Nunn-McCurdy Breach, Program Restructuring, and Milestone Recertification On February 1, 2010, the Navy notified Congress that the DDG-1000 program had experienced a critical cost breach under the Nunn-McCurdy provision. The Nunn-McCurdy provision (10 U.S.C. 2433a) requires certain actions to be taken if a major defense acquisition program exceeds (i.e., breaches) certain cost-growth thresholds and is not terminated. Among other things, a program that experiences a cost breach large enough to qualify under the provision as a critical cost breach has its previous acquisition system milestone certification revoked. (In the case of the DDG-1000 program, this was Milestone B.) In addition, for the program to proceed rather than be terminated, DOD must certify certain things, including that the program is essential to national security and that there are no alternatives to the program that will provide acceptable capability to meet the joint military requirement at less cost. The Navy stated in its February 1, 2010, notification letter that the DDG-1000 program's critical cost breach was a mathematical consequence of the program's truncation to three ships. Since the DDG-1000 program has roughly $9.3 billion in research and development costs, truncating the program to three ships increased to roughly $3.1 billion the average amount of research and development costs that are included in the average acquisition cost (i.e., average research and development cost plus procurement cost) of each DDG-1000. The resulting increase in program acquisition unit cost (PAUC)—one of two measures used under the Nunn-McCurdy provision for measuring cost growth —was enough to cause a Nunn-McCurdy critical cost breach. In a June 1, 2010, letter (with attachment) to Congress, Ashton Carter, the DOD acquisition executive (i.e., the Under Secretary of Defense for Acquisition, Technology and Logistics), stated that he had restructured the DDG-1000 program and that he was issuing the certifications required under the Nunn-McCurdy provision for the restructured DDG-1000 program to proceed. The letter stated that the restructuring of the DDG-1000 program included the following: A change to the DDG-1000's design affecting its primary radar. A change in the program's Initial Operational Capability (IOC) from FY2015 to FY2016. A revision to the program's testing and evaluation requirements. Regarding the change to the ship's design affecting its primary radar, the DDG-1000 originally was to have been equipped with a dual-band radar (DBR) consisting of the Raytheon-built X-band SPY-3 multifunction radar (MFR) and the Lockheed-built S-band SPY-4 Volume Search Radar (VSR). (Raytheon is the prime contractor for the overall DBR.) Both parts of the DBR have been in development for the past several years. An attachment to the June 1, 2010, letter stated that, as a result of the program's restructuring, the ship is now to be equipped with \"an upgraded multifunction radar [MFR] and no volume search radar [VSR].\" The change eliminates the Lockheed-built S-band SPY-4 VSR from the ship's design. The ship might retain a space and weight reservation that would permit the VSR to be backfitted to the ship at a later point. The Navy states that As part of the Nunn-McCurdy certification process, the Volume Search Radar (VSR) hardware was identified as an acceptable opportunity to reduce cost in the program and thus was removed from the current baseline design.... Modifications will be made to the SPY-3 Multi-Function Radar (MFR) with the focus of meeting ship Key Performance Parameters. The MFR modifications will involve software changes to perform a volume search functionality. Shipboard operators will be able to optimize the SPY-3 MFR for either horizon search or volume search. While optimized for volume search, the horizon search capability is limited. Without the VSR, DDG 1000 is still expected to perform local area air defense.... The removal of the VSR will result in an estimated $300 million net total cost savings for the three-ship class. These savings will be used to offset the program cost increase as a result of the truncation of the program to three ships. The estimated cost of the MFR software modification to provide the volume search capability will be significantly less than the estimated procurement costs for the VSR. Regarding the figure of $300 million net total cost savings in the above passage, the Navy during 2011 determined that eliminating the SPY-4 VSR from the DDG-1000 increased by $54 million the cost to integrate the dual-band radar into the Navy's new Gerald R. Ford (CVN-78) class aircraft carriers. Subtracting this $54 million cost from the above $300 million savings figure would bring the net total cost savings to about $246 million on a Navy-wide basis. A July 26, 2010, press report quotes Captain James Syring, the DDG-1000 program manager, as stating the following: \"We don't need the S-band radar to meet our requirements [for the DDG-1000],\" and \"You can meet [the DDG-1000's operational] requirements with [the] X-band [radar] with software modifications.\" An attachment to the June 1, 2010, letter stated that the PAUC for the DDG-1000 program had increased 86%, triggering the Nunn-McCurdy critical cost breach, and that the truncation of the program to three ships was responsible for 79 of the 86 percentage points of increase. (The attachment stated that the other seven percentage points of increase are from increases in development costs that are primarily due to increased research and development work content for the program.) Carter also stated in his June 1, 2010, letter that he had directed that the DDG-1000 program be funded, for the period FY2011-FY2015, to the cost estimate for the program provided by the Cost Assessment and Program Evaluation (CAPE) office (which is a part of the Office of the Secretary of Defense [OSD]), and, for FY2016 and beyond, to the Navy's cost estimate for the program. The program was previously funded to the Navy's cost estimate for all years. Since CAPE's cost estimate for the program is higher than the Navy's cost estimate, funding the program to the CAPE estimate for the period FY2011-FY2015 will increase the cost of the program as it appears in the budget for those years. The letter states that DOD \"intends to address the [resulting] FY2011 [funding] shortfall [for the DDG-1000 program] through reprogramming actions.\" An attachment to the letter stated that the CAPE in May 2010 estimated the PAUC of the DDG-1000 program (i.e., the sum of the program's research and development costs and procurement costs, divided by the three ships in the program) as $7.4 billion per ship in then-year dollars ($22.1 billion in then-year dollars for all three ships), and the program's average procurement unit cost (APUC), which is the program's total procurement cost divided by the three ships in the program, as $4.3 billion per ship in then-year dollars ($12.8 billion in then-year dollars for all three ships). The attachment stated that these estimates are at a confidence level of about 50%, meaning that the CAPE believes there is a roughly 50% chance that the program can be completed at or under these cost estimates, and a roughly 50% chance that the program will exceed these cost estimates. An attachment to the letter directed the Navy to \"return for a Defense Acquisition Board (DAB) review in the fall 2010 timeframe when the program is ready to seek approval of the new Milestone B and authorization for production of the DDG-1002 [i.e., the third ship in the program].\" On October 8, 2010, DOD reinstated the DDG-1000 program's Milestone B certification and authorized the Navy to continue production of the first and second DDG-1000s and commence production of the third DDG-1000. Technical Risk and Test and Evaluation Issues May 2019 GAO Report A May 2019 GAO report assessing selected major DOD weapon acquisition programs stated the following of the DDG-1000 program: Technology Maturity and Design Stability The DDG 1000 program has fully matured most, but not all, of its nine current critical technologies and reports a stable design. According to the Navy, the fire suppression system, hull form, deckhouse, power system, and undersea warfare suite technologies are all mature. At the same time, the vertical launch system, infrared signature, multi-function radar, and total ship computing environment technologies each continue to approach maturity. The Navy expects to fully mature these systems as it completes ship construction, certification, and testing over the next 2 years. The program originally had 12 critical technologies, but in the last several years, the Navy removed three, including two technologies associated with the advanced gun system—the projectile and the gun—because of the projectile's high cost per round. The Navy planned to rely on these munitions for precision fires and offensive operations. Following an evaluation of five other munition options, the Navy determined that no viable replacement, guided or unguided, was feasible. As a result, the guns will remain inoperable on the ships for the foreseeable future. Lastly, the Navy will use a modified multi-function radar in place of a volume search radar, which the Navy removed from the class. As we have previously reported, the Navy and its shipbuilders had not stabilized DDG 1000's design by lead ship fabrication start in 2009—an approach inconsistent with best practices. This approach contributed to numerous design changes after the fabrication start and significant cost increases and schedule delays. Nearly 10 years later, development and shipboard testing of technologies continues, each of which could lead to discovery that could disrupt the design stability the Navy currently claims. The Navy plans to complete software development for the class in September 2020—a delay of 24 months since our 2018 assessment. As a result, the Navy has had to delay some testing. Also that month, the program plans to complete its cyber security vulnerability evaluation along with the remainder of a 2-year regimen of certifications and several different tests. The Navy expects this regimen to demonstrate the full functionality of the ship's systems. Production Readiness The DDG 1000 shipbuilder is approaching completion of the hull, mechanical, and electrical (HM&E) systems for all three ships of the class. Shipbuilder delivery of the lead ship's HM&E occurred 18 months behind schedule, in part because of problems completing electrical work associated with the ship's power system. The shipbuilder also experienced problems completing the power system for DDG 1001, the second ship in the class. Following sea trials, the Navy inspected one of the ship's main turbine generators and found that the generator was damaged by a woodscrew. The damage was extensive enough that the Navy chose to replace the engine and send it for repair. Officials report that the shipbuilder delivered the ship in April 2018 and the Navy replaced the engine in September 2018 at its expense. The Navy has scheduled DDG 1000's final delivery, including HM&E and combat systems, for May 2019. The Navy has scheduled DDG 1001's final delivery to follow in September 2020. However, the Navy is still working to correct serious deficiencies that its Board of Inspection and Survey has identified on both ships. Specifically, the board found over 320 serious deficiencies when the shipbuilder delivered DDG 1000's HM&E in May 2016, and 246 serious deficiences after the Navy conducted acceptance trials for DDG 1001 in January and February 2018. This increases the likelihood that the ship will not be fully capable and sustainable when provided to the fleet. To limit further delays to DDG 1000 and DDG 1001 construction, the Navy has authorized its shipbuilder to take parts from DDG 1002—the third and final ship of the class, which is under construction. The Navy does not yet know the full extent to which these actions will delay DDG 1002's construction schedule, but stated that these parts typically can be borrowed and replaced without causing a delay. The Navy has scheduled the ship's HM&E delivery in March 2020 followed by final delivery in September 2022. Other Program Issues In a January 2018 decision memorandum, the Navy changed DDG 1000's primary mission from land attack to offensive surface strike. Navy officials are in the process of determining the operational concept for the ship within its new mission. The Navy has yet to establish testing plans to evaluate these future mission sets. According to Navy officials, the Navy's planned modifications to support the new mission will cost about $1 billion, from non-acquisition accounts. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office also stated that it is making good progress delivering the Zumwalt class. The Navy said that, since our assessment, DDG 1000 completed combat systems availability, combat tests are underway, and final delivery is now planned for September 2019. The program office also said that DDG 1001 started combat systems availability in April 2019, and DDG 1002 is 84 percent constructed. The program office further noted that future addition of new systems onto Zumwalt-class ships will provide offensive fire capabilities.", "summary": "The Navy began procuring Arleigh Burke (DDG-51) class destroyers, also known as Aegis destroyers, in FY1985, and a total of 82 have been procured through FY2019. The Navy's proposed FY2020 budget requests funding for the procurement of three more DDG-51s, which would be the 83rd, 84th, and 85th ships in the class. DDG-51s planned for procurement in FY2018-FY2022 are being procured under a multiyear procurement (MYP) contract that Congress approved as part of its action on the Navy's FY2018 budget. DDG-51s procured in FY2017 and subsequent years are being built to a new design (the Flight III DDG-51 design), which incorporates a new and more capable radar called the Air and Missile Defense Radar (AMDR) or SPY-6 radar. The Navy procured DDG-51s from FY1985 through FY2005, and resumed procuring them in FY2010. In FY2007-FY2009, during the time when the Navy was not procuring DDG-51s, the Navy procured three Zumwalt (DDG-1000) class destroyers. The Navy plans no further procurement of DDG-1000s. The Navy's proposed FY2020 budget requests $155.9 million in procurement funding to help complete the total procurement cost of the three DDG-1000 class ships. The Navy estimates the combined procurement cost of the three DDG-51s requested for procurement in FY2020 at $5,463.0 million, or an average of $1,821.0 million each. The ships have received $363.7 million in prior-year Economic Order Quantity (EOQ) advance procurement (AP) funding (i.e., funding for up-front batch orders of components of DDG-51s to be procured under the FY2018-FY2022 MYP contract). The Navy's proposed FY2020 budget requests the remaining $5,099.3 million in procurement funding needed to complete the estimated procurement cost of the three DDG-51s, as well as $224.0 million in EOQ funding for DDG-51s to be procured in FY2021 and FY2022, bringing the total amount requested for the DDG-51 program for FY2020 to $5,323.3 million, excluding outfitting and post-delivery costs. The Navy wants to procure the first ship of a new class of large surface combatants in FY2025. Under the Navy's plan, FY2025 would be the final year of DDG-51 procurement. Issues for Congress for FY2019 for the DDG-51 and DDG-1000 destroyer programs include the following: whether to approve, reject, or modify the Navy's FY2020 funding requests for the DDG-51 and DDG-1000 programs; cost, schedule, and technical risk in the Flight III DDG-51 effort; the potential impact on the DDG-51 program of a possible change in the surface force architecture; and the Navy's plan to shift the mission orientation of the DDG-1000s from an emphasis on naval surface fire support (NSFS) to an emphasis on surface strike.", "document_type": "crs"}
{"report": "T his report describes actions taken by the Administration and Congress to provide FY2019 appropriations for Commerce, Justice, Science, and Related Agencies (CJS) accounts. It also provides an overview of enacted FY2018 appropriations for agencies and bureaus funded as part of annual CJS appropriations. The second part of this report provides an overview of historical funding trends for CJS. The dollar amounts in this report reflect only new funding made available at the start of the fiscal year. Therefore, the amounts do not include any rescissions of unobligated or deobligated balances that may be counted as offsets to newly enacted appropriations, nor do they include any scorekeeping adjustments (e.g., the budgetary effects of provisions limiting the availability of the balance in the Crime Victims Fund). In the text of the report, appropriations are rounded to the nearest million. However, percentage changes are calculated using whole, not rounded, numbers, meaning that in some instances there may be small differences between the actual percentage change and the percentage change that would be calculated by using the rounded amounts presented in the report. The annual CJS appropriations act provides funding for the Departments of Commerce and Justice, select science agencies, and several related agencies. Appropriations for the Department of Commerce include funding for agencies such as the Census Bureau; the U.S. Patent and Trademark Office; the National Oceanic and Atmospheric Administration; and the National Institute of Standards and Technology. Appropriations for the Department of Justice (DOJ) provide funding for agencies such as the Federal Bureau of Investigation; the Bureau of Prisons; the U.S. Marshals Service; the Drug Enforcement Administration; and the Bureau of Alcohol, Tobacco, Firearms, and Explosives, along with funding for a variety of grant programs for state, local, and tribal governments. The vast majority of funding for the science agencies goes to the National Aeronautics and Space Administration and the National Science Foundation. The annual appropriation for the related agencies includes funding for agencies such as the Legal Services Corporation and the Equal Employment Opportunity Commission. The mission of the Department of Commerce is to \"create the conditions for economic growth and opportunity.\" The department promotes \"job creation and economic growth by ensuring fair and reciprocal trade, providing the data necessary to support commerce and constitutional democracy, and fostering innovation by setting standards and conducting foundational research and development.\" It has wide-ranging responsibilities including, among others, trade, economic development, technology, entrepreneurship and business development, monitoring the environment, forecasting weather, managing marine resources, and statistical research and analysis. The department pursues and implements policies that affect trade and economic development by working to open new markets for U.S. goods and services and promoting pro-growth business policies. It also invests in research and development to foster innovation. The agencies within the Department of Commerce, and their major responsibilities, include the following: International Trade Administration (ITA) seeks to strengthen the international competitiveness of U.S. industry, promote trade and investment, and ensure fair trade and compliance with trade laws and agreements; Bureau of Industry and Security (BIS) works to ensure an effective export control and treaty compliance system and promote continued U.S. leadership in strategic technologies by maintaining and strengthening adaptable, efficient, and effective export controls and treaty compliance systems, along with active leadership and involvement in international export control regimes; Economic Development Administration (EDA) promotes innovation and competitiveness, preparing American regions for growth and success in the worldwide economy; Minority Business Development Agency (MBDA) promotes the growth of minority owned businesses through the mobilization and advancement of public and private sector programs, policy, and research; Economics and Statistics Administration (ESA) is a federal statistical agency that promotes a better understanding of the U.S. economy by providing timely, relevant, and accurate economic accounts data in an objective and cost-effective manner; Census Bureau , a component of ESA, measures and disseminates information about the U.S. economy, society, and institutions, which fosters economic growth, advances scientific understanding, and facilitates informed decisions; National Telecommunications and Information Administration (NTIA) advises the President on communications and information policy; United States Patent and Trademark Office (USPTO) fosters innovation, competitiveness, and economic growth domestically and abroad by providing high-quality and timely examination of patent and trademark applications, guiding domestic and international intellectual property (IP) policy, and delivering IP information and education worldwide; National Institute of Standards and Technology (NIST) promotes U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology enhancing economic security; and National Oceanic and Atmospheric Administration (NOAA) provides weather forecasts and research, oceanic and atmospheric monitoring, fisheries management and research, ocean exploration, and support of marine commerce. DOJ's mission is to \"enforce the law and defend the interests of the United States according to the law; to ensure public safety against threats foreign and domestic; to provide federal leadership in preventing and controlling crime; to seek just punishment for those guilty of unlawful behavior; and to ensure fair and impartial administration of justice for all Americans.\" DOJ also provides legal advice and opinions, upon request, to the President and executive branch department heads. The major functions of DOJ offices and agencies are described below: Office of the United States Attorneys prosecutes violations of federal criminal laws, represents the federal government in civil actions, and initiates proceedings for the collection of fines, penalties, and forfeitures owed to the United States; United States Marshals Service (USMS) provides security for the federal judiciary, protects witnesses, executes warrants and court orders, manages seized assets, detains and transports offenders who have not been sentenced, and apprehends fugitives; Federal Bureau of Investigation (FBI) investigates violations of federal criminal law; helps protect the United States against terrorism and hostile intelligence efforts; provides assistance to other federal, state, and local law enforcement agencies; and shares jurisdiction with the Drug Enforcement Administration for the investigation of federal drug violations; Drug Enforcement Administration (DEA) investigates federal drug law violations; develops and maintains drug intelligence systems; regulates the manufacture, distribution, and dispensing of legitimate controlled substances; and conducts joint intelligence-gathering activities with foreign governments; Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) enforces federal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives; Federal Prison System ( Bureau of Prisons; BOP ) houses offenders sentenced to a term of incarceration for a federal crime and provides for the operation and maintenance of the federal prison system; Office on Violence Against Women (OVW) provides federal leadership in developing the nation's capacity to reduce violence against women and administer justice for and strengthen services to victims of domestic violence, dating violence, sexual assault, and stalking; Office of Justice Programs (OJP) manages and coordinates the activities of the Bureau of Justice Assistance; Bureau of Justice Statistics; National Institute of Justice; Office of Juvenile Justice and Delinquency Prevention; Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking; and Office of Victims of Crime; and Community Oriented Policing Services (COPS) advances the practice of community policing by the nation's state, local, territorial, and tribal law enforcement agencies through information and grant resources. The science offices and agencies support research and development and related activities across a wide variety of federal missions, including national competitiveness, space exploration, and fundamental discovery. The primary function of the Office of Science and Technology Policy (OSTP) is to provide the President and others within the Executive Office of the President with advice on the scientific, engineering, and technological aspects of issues that require the attention of the federal government. The OSTP director also manages the National Science and Technology Council, which coordinates science and technology policy across the executive branch of the federal government, and cochairs the President's Council of Advisors on Science and Technology, a council of external advisors that provides advice to the President on matters related to science and technology policy. The National Space Council, in the Executive Office of the President, is a coordinating body for U.S. space policy. Chaired by the Vice President, it consists of the Secretaries of State, Defense, Commerce, Transportation, and Homeland Security; the Administrator of NASA; and other senior officials. The council previously existed from 1988 to 1993 and was reestablished by the Trump Administration in June 2017. The National Aeronautics and Space Administration (NASA) was created to conduct civilian space and aeronautics activities. It has four mission directorates. The Human Exploration and Operations Mission Directorate is responsible for human spaceflight activities, including the International Space Station and development efforts for future crewed spacecraft. The Science Mission Directorate manages robotic science missions, such as the Hubble Space Telescope, the Mars rover Curiosity, and satellites for Earth science research. The Space Technology Mission Directorate develops new technologies for use in future space missions, such as advanced propulsion and laser communications. The Aeronautics Research Mission Directorate conducts research and development on aircraft and aviation systems. In addition, NASA's Office of STEM Engagement (formerly the Office of Education) manages education programs for schoolchildren, college and university students, and the general public. The National Science Foundation (NSF) supports basic research and education in the nonmedical sciences and engineering. The foundation was established as an independent federal agency \"to promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes.\" The NSF is a primary source of federal support for U.S. university research. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. The annual CJS appropriations act includes funding for several related agencies: U.S. Commission on Civil Rights informs the development of national civil rights policy and enhances enforcement of federal civil rights laws; Equal Employment Opportunity Commission is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability, or genetic information; International Trade Commission investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations, adjudicates cases involving imports that allegedly infringe intellectual property rights, and serves as a resource for trade data and other trade policy-related information; Legal Services Corporation is a federally funded nonprofit corporation that provides financial support for civil legal aid to low-income Americans; Marine Mammal Commission works for the conservation of marine mammals by providing science-based oversight of domestic and international policies and actions of federal agencies with a mandate to address human effects on marine mammals and their ecosystems; Office of the U.S. Trade Representative is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries; and State Justice Institute is a federally funded nonprofit corporation that awards grants to improve the quality of justice in state courts and foster innovative, efficient solutions to common issues faced by all courts. For FY2018, Congress and the President provided a total of $72.119 billion for CJS. This included $70.921 billion in regular funding provided pursuant to the Consolidated Appropriations Act, 2018 ( P.L. 115-141 , see Table 1 ) and $1.198 billion in emergency-designated funding provided pursuant to the Further Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2018 ( P.L. 115-123 , see Table 2 ). For FY2018, the Department of Commerce received $12.137 billion ($11.137 billion in regular funding and $1.000 billion in supplemental funding), the Department of Justice received $30.384 billion ($30.299 billion in regular funding and $85 million in supplemental funding), the science agencies received $28.609 billion ($28.511 billion in regular funding and $98 million in supplemental funding), and the related agencies received $989 million ($974 million in regular funding and $15 million in supplemental funding). Comparisons in this report between FY2018 enacted funding and the Administration's FY2019 request, the House and Senate committee-reported FY2019 amounts, and FY2019 enacted funding are based on FY2018 regular funding (i.e., FY2018 enacted funding excluding supplemental appropriations). The Administration requested $66.555 billion for CJS for FY2019, which was 6.2% less than FY2018 regular funding. When comparing the Administration's FY2019 request to the FY2018 funding, it should be considered that the Administration formulated its FY2019 budget request before full-year appropriations for FY2018 were enacted. FY2018 funding levels, for the purposes of the Administration's request, were calculated based on FY2017 funding minus a reduction (0.6791%) as extended under a series of continuing resolutions. The Administration requested the following: $9.797 billion for the Department of Commerce, which was 12.0% less than FY2018 regular funding; $28.835 billion for the Department of Justice, which was 4.8% less than FY2018 regular funding; $27.372 billion for the science agencies, which was 4.0% less than FY2018 regular funding; and $551 million for the related agencies, which was 43.4% less than FY2018 regular funding. The Administration's FY2019 budget for CJS proposed eliminating several agencies and programs: EDA, NIST's Manufacturing Extension Partnership, the Community Relations Service (its functions would have been moved to DOJ's Civil Rights Division), COPS Office (grants managed by the COPS Office would have been moved to OJP), NASA's Education program, and the Legal Services Corporation. The Administration requested some funding for the EDA and Legal Services Corporation for what would have been an orderly closeout of these agencies had Congress adopted the Administration's proposal. The Administration's budget also proposed to move funding for the High Intensity Drug Trafficking Areas (HIDTA) program to the DEA. Currently, HIDTA funding is administered by the Office of National Drug Control Policy. The Administration's requested funding for many CJS accounts was below FY2018 levels; however, there were a handful of exceptions: the Census Bureau's Periodic Census and Programs account (+$1.007 billion, +39.6%), DOJ's Executive Office of Immigration Review (+$59 million, +11.8%), ATF (+$23 million, +1.8%), BIS (+$7 million, +6.3%), NSF's Agency Operations and Award Management account (+$5 million, +1.6%), ESA (+$2 million, +2.0%), and the State Justice Institute (+$2 million, +35.1%). The Administration also proposed a new account structure for NASA, with three new accounts: Exploration Research and Technology, Deep Space Exploration Systems, and low Earth orbit (LEO) and Spaceflight Operations. The proposed Exploration Research and Technology account would have combined the Space Technology account with some elements of the Exploration account and the proposed Deep Space Exploration Systems account would have been the Exploration account minus the elements moved to the Exploration Research and Technology account. LEO and Spaceflight Operations would essentially have been a renaming of the Space Operations account. The House committee-reported bill ( H.R. 5952 ) would have provided a total of $73.923 billion for CJS for FY2019, an amount that was 4.2% greater than regular FY2018 funding and 11.1% greater than the Administration's request. The House Committee on Appropriations recommended the following: $12.106 billion for the Department of Commerce, which was 8.7% greater than regular FY2018 funding and 23.6% greater than the Administration's request; $31.113 billion for the Department of Justice, which was 2.7% greater than regular FY2018 funding and 7.9% greater than the Administration's request; $29.728 billion for the science agencies, which was 4.3% greater than regular FY2018 funding and 8.6% greater than the Administration's request; and $976 million for the related agencies, which was 0.2% greater than regular FY2018 funding and 77.1% greater than the Administration's request. The committee-reported bill would have increased funding for most CJS accounts compared to regular FY2018 funding. Some of the exceptions included the following: ITA (-$2 million, -0.4%); NIST's Scientific and Technical Research and Services account (-$5 million, -0.6%); NIST's Industrial Technology Services account (-$10 million, -6.5%); NIST's Construction of Research Facilities account (-$199 million, -62.4%); NOAA's Operations, Research, and Facilities account (-$63 million, -1.8%); NOAA's Procurement, Acquisition, and Construction account (-$683 million, -29.8%); U.S. Marshals' Construction account (-$28 million, -53.2%); FBI's Construction account (-$305 million, -82.4%); BOP's Buildings and Facilities account (-$12 million, -7.2%); Juvenile Justice Programs (-$71 million, -25.0%); and NASA's Education account (-$10 million, -10.0%). In general, the committee-reported bill would have funded CJS accounts at or above the Administration's request, but there were a few exceptions: BIS (-$7 million, -5.9%); NOAA's Procurement, Acquisition, and Construction account (-$15 million, -0.9%); DOJ's General Administration Salaries and Expenses (-$12 million, -10.3%); Juvenile Justice Programs (-$18 million, -7.6%); NASA's Operations Research and Technology account (-$103 million, -10.2%); and the State Justice Institute (-$1 million, -15.9%). The House Committee on Appropriations did not adopt most of the Administration's proposals. The committee did not eliminate funding for EDA, NIST's Manufacturing Extension Partnership, the Community Relations Service, NASA's Education program, and the Legal Services Corporation. With the exception of NASA's Education program, the committee-reported bill would have funded these agencies and programs at a level equal to FY2018 regular funding. Additionally, the committee-reported bill did not provide funding for the HIDTA program under the DEA. However, the committee adopted two of the Administration's proposals. Funding for the COPS program would have been moved to OJP under H.R. 5952 . Also, the committee-reported bill included the Administration's proposed account structure for NASA. The Senate committee-reported bill ( S. 3072 ) would have provided a total of $72.648 billion for CJS for FY2019, an amount that was 2.4% more than regular FY2018 funding and 9.2% more than the Administration's request. The Senate committee-reported bill would have provided the following: $11.572 billion for the Department of Commerce, which was 3.9% more than regular FY2018 funding and 18.1% more than the Administration's request; $30.699 billion for the Department of Justice, which was 1.3% more than regular FY2018 funding and 6.5% more than the Administration's request; $29.400 billion for the science agencies, which was 3.1% more than regular FY2018 funding and 7.4% more than the Administration's request; and $977 million for the related agencies, which was 0.4% more than regular FY2018 funding and 77.3% more than the Administration's request. In general, the Senate Committee on Appropriations recommended funding many CJS accounts at or above the regular FY2018 funding amount. A few notable exceptions included the following: NIST's Construction of Research Facilities account (-$161 million, -50.5%); NOAA's Procurement, Acquisition, and Construction account (-$484 million, -21.1%); U.S. Marshals' Construction account (-$18 million, -34.5%); DOJ's Interagency Law Enforcement account (-$21 million, -3.9%); NASA's Space Operations account (-$112 million, -2.4%); NASA's Safety, Security, and Mission Services account (-$77 million, -2.7%); and NASA's Construction and Environmental Compliance and Restoration account (-$174 million, -31.0%). The Senate committee-reported bill would have funded nearly every CJS account at or above the level requested by the Administration. The Senate Committee on Appropriations also declined to adopt many of the proposals the Administration put forth in its FY2019 budget. Unlike the House committee-reported bill, S. 3072 would have funded the COPS program through its own account and the committee did not include the Administration's new account structure for NASA. The committee did propose changing the name of NASA's Education account to \"Science, Technology, Engineering, and Mathematics Opportunities.\" The Senate bill would have also funded the Office on Violence Against Women via a transfer from the Crime Victims Fund. On February 15, 2019, President Trump signed into law the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), which includes $72.908 billion for CJS. The FY2019 enacted amount is 2.8% more than regular FY2018 funding and 9.5% more than the Administration's request. The act includes the following: $11.414 billion for the Department of Commerce, which is 2.5% more than regular FY2018 funding and 16.5% more than the Administration's request; $30.934 billion for the Department of Justice, which is 2.1% more than regular FY2018 funding and 7.3% more than the Administration's request; $29.583 billion for the science agencies, which is 3.8% more than regular FY2018 funding and 8.1% more than the Administration's request; and $977 million for the related agencies, which is 0.3% more than regular FY2018 funding and 77.3% more than the Administration's request. FY2019 enacted funding is generally in-line with regular FY2018 funding and higher than the Administration's request. Some notable increases in FY2019 enacted funding compared to regular FY2018 funding include the following: Census Bureau's Periodic Censuses and Programs account (+$1.007 billion, +39.6%), Executive Office of Immigration Review (+$59 million, +11.8%), U.S. Attorneys (+$75 million, +3.5%), U.S. Marshals' Salaries and Expenses account (+$47 million, +3.5%), FBI's Salaries and Expenses account (+$162 million, +1.8%), DEA's Salaries and Expenses account (+$77 million, +3.5%), BOP's Salaries and Expenses account (+$136 million, +1.9%), BOP's Buildings and Facilities account (+$102 million, 63.4%), NASA's Science account (+$684 million, +11.0%), NASA's Space Technology account (+$167 million, +22.0%), NASA's Exploration account (+$261 million, +5.4%), NSF's Research and Related Activities account (+$186 million, +2.9%), and NSF's Major Research Equipment and Facilities Construction account (+$113 million, +61.8%). There were also a few notable decreases in FY2019 enacted funding compared to regular FY2018 funding: NIST's Construction of Research Facilities account (-$213 million, -66.8%); NOAA's Procurement, Acquisition, and Construction account (-$535 million, -23.4%); U.S. Marshals' Construction account (-$38 million, -71.9%); NASA's Space Operations account (-$112 million, -2.4%); and NASA's Construction and Environmental Compliance and Restoration account (-$214 million, -38.1%). Congress largely declined to adopt the Administration's proposals for CJS. Congress did not adopt the Administration's proposed account structure for NASA (though Congress changed the name of NASA's Education account to the \"Science, Technology, Engineering, and Mathematics Engagement\" account), it did not move funding for the HIDTA program to the DEA, and it did not move COPS funding to OJP. Congress also provided funding for the EDA, NIST's Manufacturing Extension Partnership, DOJ's Community Relations Service, and the Legal Services Corporation, all of which the Administration proposed eliminating. Table 1 outlines the FY2018 funding, the Administration's FY2019 request, the House and the Senate committee-reported amounts, and FY2019 funding for the Department of Commerce, the Department of Justice, the science agencies, and the related agencies. Table 2 provides information on FY2018 supplemental funding for CJS. Figure 1 shows the total CJS funding for FY2009-FY2018, in both nominal and inflation-adjusted dollars (more-detailed historical appropriations data can be found in Table 3 ). The data show that nominal funding for CJS reached a new 10-year high in FY2018, if emergency supplemental funding from the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) is not counted. Otherwise, peak funding for CJS over the past 10 fiscal years was in FY2009 when ARRA provided a substantial increase in funding. The $15.992 billion in funding for CJS under ARRA added approximately 25% to the amount Congress and the President provided for CJS through the regular appropriation process that year. While regular nominal funding over the past 10 fiscal years was at its highest in FY2018, in inflation-adjusted terms, funding for FY2018 was lower than it was in FY2010. Increased funding for CJS coincides with the increase to the discretionary budget caps under the Budget Control Act of 2011 (BCA, P.L. 112-25 ). The BCA put into effect statutory limits on discretionary spending for FY2012-FY2021. Under the act, discretionary spending limits were scheduled to be adjusted downward each fiscal year until FY2021. However, legislation was enacted that increased discretionary spending caps for FY2014 to FY2018. A sequestration of discretionary funding, ordered pursuant to the BCA, cut nearly $4 billion out of the total amount Congress and the President provided for CJS for FY2013. Since then, funding for CJS has increased as more discretionary funding has been allowed under the BCA. Figure 2 shows total CJS funding for FY2009-FY2018 by major component (i.e., the Departments of Commerce and Justice, NASA, and the NSF). Increases in CJS funding in FY2009 (not including ARRA funding) and FY2010 largely resulted from more funding for the Department of Commerce in support of the 2010 decennial census, though there were small increases during that same time in funding for DOJ, NASA, and NSF. Although decreased appropriations for the Department of Commerce mostly explain the overall decrease in CJS appropriations from FY2010 to FY2013 (a 47.4% reduction), cuts in funding for DOJ (-8.7%) and NASA (-9.8%) also contributed. Funding for NSF held relatively steady from FY2010 to FY2013. Overall CJS funding has increased since FY2014, and this is partially explained by more funding for the Department of Commerce to help the Census Bureau prepare for the 2020 decennial census. However, over this time period there have also been steady increases in funding for DOJ (+9.5%), NASA (+18.0%), and NSF (+8.5%), as higher discretionary spending caps have been used to provide additional funding to these agencies. Also, the increase in funding for the Department of Commerce is not solely due to more funding for the Census Bureau. Funding has increased for other agencies within the department, such as NOAA (+18.7%) and NIST (+$41.0%).", "summary": "This report describes actions taken by the Trump Administration and Congress to provide FY2019 funding for Commerce, Justice, Science, and Related Agencies (CJS) accounts. It also provides an overview of enacted FY2018 funding for agencies and bureaus funded as part of annual CJS appropriations acts. The Administration requested $66.555 billion for CJS for FY2019. The request included $9.797 billion for the Department of Commerce, $28.835 billion for the Department of Justice (DOJ), $27.372 billion for the science agencies, and $551 million for the related agencies. The Administration's budget proposed eliminating funding for several CJS agencies and accounts. The Administration proposed moving funding for the High Intensity Drug Trafficking Areas program from the Office of National Drug Control Policy to the Drug Enforcement Administration, closing the Community Oriented Policing Services (COPS) Office and moving its responsibilities to the Office of Justice Programs (OJP), and a new account structure for the National Aeronautics and Space Administration (NASA). The bill reported by the House Committee on Appropriations (H.R. 5952) would have provided a total of $73.923 billion for CJS for FY2019. The bill would have provided $12.106 billion for the Department of Commerce, $31.113 billion for DOJ, $29.728 billion for the science agencies, and $976 million for the related agencies. The committee largely declined to adopt many of the Administration's proposals to eliminate funding for several CJS agencies and accounts, though the committee-reported bill would have moved funding for the COPS program to OJP and it included the Administration's proposed account structure for NASA. The bill reported by the Senate Committee on Appropriations (S. 3072) would have provided a total of $72.648 billion for CJS for FY2019. The bill would have provided $11.572 billion for the Department of Commerce, $30.699 billion for DOJ, $29.400 billion for the science agencies, and $977 million for the related agencies. The Senate Committee on Appropriations largely declined to adopt many of the proposals put forth by the Administration in its FY2019 budget. Unlike the Administration's request and the House committee-reported bill, S. 3072 would have funded the COPS program through its own account and the committee did not include the Administration's new account structure for NASA. FY2019 enacted funding for CJS is $72.908 billion. This amount includes $11.414 billion for the Department of Commerce, $30.934 billion for DOJ, $29.583 billion for the science agencies, and $977 million for the related agencies. In general, FY2019 funding for CJS is in-line with FY2018 enacted funding, with a few notable exceptions. These include increased funding for the Census Bureau to help ramp up operations for the 2020 decennial census, increased funding for DOJ's law enforcement agencies and the federal prisons system, and increased funding for several NASA accounts. For FY2018, Congress and the President provided a total of $72.119 billion in funding for CJS. This included $70.921 billion in regular funding provided in the Consolidated Appropriations Act, 2018 (P.L. 115-141) and $1.198 billion in emergency-designated funding provided in the Further Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2018 (P.L. 115-123).", "document_type": "crs"}
{"report": "The nuclear power industry is facing severe economic challenges in the United States. High capital costs, low electricity demand growth, and competition from cheaper sources of electricity such as natural gas and renewables have dampened the demand for new nuclear power plants and accelerated the retirement of existing reactors. As of April 2019, seven nuclear reactors had closed in the United States since 2012, and another 12 had announced that they would retire by 2025. There are currently 98 operating U.S. reactors. As aging reactors reach the end of their operating licenses in 2030 and beyond, the number of retirements is projected to increase. In addition, cost and schedule overruns have hindered recent efforts to build new nuclear units in the United States. The only power reactors currently under construction in the United States—two new units at the Vogtle nuclear plant in Georgia—are five years behind schedule and nearly double their original estimated cost. All nuclear power in the United States is generated by light water reactors (LWRs), which were commercialized in the 1950s and early 1960s and are now used throughout most of the world. LWRs are cooled by ordinary (\"light\") water, which also slows (\"moderates\") the neutrons that maintain the nuclear fission chain reaction. Conventional LWRs are large—with 1,000 megawatts electric generating capacity (MWe) or more—in order to spread their high construction costs among the maximum possible number of kilowatt-hours of electricity over their operating lifetime. At the same time conventional reactors are facing an uncertain future, some in Congress contend that more nuclear power plants, not fewer, are needed to help reduce U.S. greenhouse gas emissions and bring low-carbon power to the majority of the world that currently has little access to electricity. Proponents of this view argue that the key to increasing the number of nuclear power plants is investment in \"advanced\" nuclear technologies, which they say could overcome the economic problems, safety concerns, and other issues that have stalled the growth of conventional LWRs. Congress enacted legislation in September 2018 that defines \"advanced nuclear reactor\" as \"a nuclear fission reactor with significant improvements over the most recent generation of nuclear fission reactors\" or a reactor using nuclear fusion ( P.L. 115-248 ). Titled the Nuclear Energy Innovation Capabilities Act of 2017 (NEICA), the law requires the Department of Energy (DOE) to take several actions to support advanced reactor development, including studying the need for a versatile fast neutron test reactor that could help develop fuels and materials for advanced reactors. Congress included $65 million for R&D to support development of the versatile test reactor in the Energy and Water Development Appropriations Act for FY2019 (Division A of P.L. 115-244 ), and the Trump Administration has requested $100 million more for FY2020. A similar definition of \"advanced nuclear reactor\" is included in the Nuclear Energy Innovation and Modernization Act (NEIMA, P.L. 115-439 ), which was signed January 14, 2019. NEIMA would require the Nuclear Regulatory Commission (NRC) to develop a regulatory framework that could be used for advanced nuclear technologies. Advocates of nuclear power cite a variety of reasons in addition to greenhouse gas reduction for preserving and expanding the U.S. nuclear industry. They contend that a robust domestic nuclear energy industry would contribute to such goals as energy security and diversification, electricity grid resilience and reliability, promotion of a domestic nuclear component manufacturing base and associated exports, clean air, and preservation and enhancement of geopolitical influence. The U.S. Navy uses nuclear energy to power submarines and aircraft carriers. Some observers have suggested that the Navy and other national security organizations benefit from maintaining a strong domestic nuclear energy industry, which provides a post-military career path for many naval reactor personnel, as well as expanding the base of qualified engineers and technicians, and strengthening the infrastructure for training and knowledge transfer. NEICA lists a number of potential advantages of advanced nuclear reactors over conventional LWRs, including \"inherent safety features, lower waste yields, greater fuel utilization, superior reliability, resistance to proliferation, increased thermal efficiency, and the ability to integrate into electric and non-electric applications.\" Advanced reactors encompass a wide range of technologies, including next-generation water-cooled reactors (e.g., small modular light water reactors, supercritical water-cooled reactors), non-water-cooled reactors (e.g., lead or sodium fast reactors, molten salt reactors, and high temperature gas reactors), and fusion reactors. Some advanced reactor concepts are relatively new, while others have been under consideration for decades. Not all observers are optimistic about the potential safety, affordability, proliferation resistance and sustainability of advanced reactors. Because many of these technologies are in the conceptual or design phases, the potential advantages of these systems have not yet been established on a commercial scale. Testing and demonstration would be required to determine the validity of advocates' claims. Many environmental advocates contend that nuclear power would not be necessary to decarbonize world energy supplies, and that public policy should instead focus on renewable energy and efficiency. The U.S. advanced nuclear industry has expanded in recent years to encompass an array of developers, suppliers, and supporting institutions. By one count, there were 35 U.S. companies developing advanced nuclear reactor technologies as of November 2018. Some have projected that the first U.S. advanced reactor could be providing electricity to the grid by the mid-2020s. For example, the advanced reactor company NuScale predicts that its first nuclear plant will \"achieve commercial operation in 2026.\" This report discusses the history of advanced reactor technologies, briefly describes major categories of advanced reactors, provides an overview of federal programs on advanced nuclear technology, and discusses current issues and legislation. Advanced or unconventional reactor designs seek to use combinations of new and existing technologies and materials to improve upon earlier generations of nuclear reactors in one or more of the following areas: cost, safety, security, waste management, and versatility. To achieve these improvements, advanced designs may incorporate one or more of the following characteristics: inherent or passive safety features, simplified or modular designs, enhanced load-following capabilities, high chemical and physical stability, fast neutron spectrums, and \"closed\" fuel cycles (see text box on Fast Reactors). Advanced reactor technologies are often referred to as \"Generation IV\" nuclear reactors, with existing commercial reactors constituting \"Generation III\" or, for the most recently constructed reactors, \"Generation III+.\" Advanced reactor designs may be grouped into three primary categories: Advanced water-cooled reactors , which provide evolutionary improvements to proven water-based fission technologies through innovations such as simplified design, smaller size, or enhanced efficiency; Non-water-cooled reactors , which are fission reactors that use materials such as liquid metals (e.g., sodium and lead), gases (e.g., helium and carbon dioxide), or molten salts as coolants instead of water; and Fusion reactors , which seek to generate energy by joining small atomic nuclei, as opposed to fission reactors, which generate energy by splitting large atomic nuclei. A fourth, cross-cutting category of advanced reactors is the s mall m odular r eactor or SMR . DOE defines SMRs as reactors with electric generating capacities of no more than 300 MW, which \"employ modular construction techniques, ship major components from factory fabrication locations to the plant site by rail or truck, and include designs that simplify plant site activities required for plant assembly.\" Both advanced water-cooled reactors and non-water-cooled reactors may be configured as SMRs. Microreactors are relatively small-capacity SMRs, defined by DOE as producing 1-20 megawatts of thermal energy (MWt), which could be used directly as heat for industrial processes or to generate electricity. Microreactors could be transported by truck and installed at a remote location or military base within a week, according to DOE. Advanced reactor concepts may be characterized along a continuum of technological maturity. Light water-cooled SMRs, high-temperature gas-cooled reactors, and sodium-cooled fast reactors are considered to be among the most mature of the unconventional reactor technologies. Molten salt reactors, gas-cooled fast reactors, and fusion reactors are generally considered to be further from commercialization. Expert estimates of timeframes for commercialization of these technologies range widely, from the mid-2020s for the first small modular LWRs to midcentury or later for some advanced reactor concepts, such as molten salt reactors and gas-cooled fast reactors. Companies developing similar reactor technologies may be at different stages of design and manufacturing readiness. While some experts predict that molten salt reactors will not be available before 2050, Chinese research institutions and a Canadian/U.S. company, Terrestrial Energy, have announced plans to bring a molten salt reactor online in the next decade. Small modular reactors are defined by DOE as reactors with an electric generating capacity of up to 300 MW, as opposed to the average capacity of existing U.S. commercial reactors of about 1,000 MW. Light water reactor SMR designs are based on existing commercial LWR technology but are generally small enough to allow all major reactor components to be placed in a single pressure vessel. The reactor vessel and its components are designed to be assembled in a factory and transported to the plant site for installation, potentially reducing construction time and costs from those of large LWRs. If large numbers of identical SMRs were ordered, mass production could further reduce manufacturing costs and construction schedules, according to proponents of the technology. Shortening the timeframe before a new reactor begins producing revenue could reduce interest payments and shorten payback periods. In addition, each SMR would require a fraction of the capital investment of a large conventional nuclear unit, further reducing the financial risk to plant owners. Some observers have suggested that the smaller size of SMRs would reduce the economies of scale available to larger reactors, potentially negating any SMR cost advantages. A 60 MWe reactor module by U.S. company NuScale Power is currently considered the most mature light water SMR design under development. The design would allow between 6 and 12 SMR modules—depending on the energy needs of the site—to be co-located in a central pool of water, which serves as a heat sink and passive cooling system. NRC plans to complete its safety evaluation report on the design in September 2020 and subsequently issue a final design certification, although no date is currently scheduled. NuScale is planning to begin operating its first 12-module plant in the mid-2020s. It is to be built at Idaho National Laboratory (an 890-square-mile DOE site) with a combination of federal government and non-federal support. As with other SMR concepts, the major components of the NuScale plant are designed to be factory-fabricated and shipped to the plant site for installation. Companies in several countries are currently developing light water SMRs. In addition to NuScale, examples of U.S.-based companies developing this technology include Holtec, Westinghouse, and GE Hitachi. The supercritical water-cooled reactor (SCWR) is a high-temperature variant of existing LWR technologies. SCWRs would use supercritical water—water which has been brought to a temperature and pressure at which the liquid and vapor states are indistinguishable—to improve plant efficiency (which may approach 44% in SCWRs, compared with 34-36% for current reactors). As in a conventional boiling water reactor (BWR), liquid water would pass upward through the reactor core and turn directly to steam, which would drive a turbine-generator ( Figure 1 ). The superheated conditions would eliminate the need in current BWRs for reactor coolant pumps and steam separators and dryers. Supercritical water has already been used to boost plant efficiency in some advanced coal- and gas-fired power plants. SCWRs could be designed to operate in either the fast or thermal neutron spectrums, and to use either light or heavy water as the coolant and/or moderator. Organizations in Canada, China, the European Union, Japan, and Russia are developing SCWRs. High temperature gas reactors (HTGRs), including very high temperature gas reactors (VHTRs), are helium-cooled, graphite-moderated thermal reactors. As their names imply, they would operate at higher coolant outlet temperatures than most existing reactors—700-1,000°C compared to 330°C for existing LWRs. This higher temperature threshold allows for the provision of heat for industrial processes, such as the cogeneration of electricity and hydrogen, and high-temperature processes in the iron, oil, and chemical industries. While previous R&D programs focused on achieving very high outlet temperatures, more recently the focus has shifted to reactor designs with more modest outlet temperatures (700-850°C), based on the assessment that lower temperature reactors may be more commercially viable in the short term. There are two primary design variants: In one, the core is composed of graphite blocks with removable sections that have been embedded with fuel particles; in the other, many billiard ball-sized graphite spheres, or \"pebbles,\" with embedded fuel particles are loaded into the core to form a \"pebble bed.\" The spheres are steadily removed from the bottom of the reactor, tested for their level of burnup, and returned to the top of the reactor if they are still viable as fuel and replaced if not. Many HTGRs have been designed as SMRs. A unique feature of these reactors is their fuel, which is composed of poppy seed-sized fuel particles that have been encased in silicon carbide and other highly heat-resistant coatings ( Figure 2 ). Coupled with the high heat capacity of the graphite moderator, the reactor and its fuel are designed to withstand the maximum core heat attainable during an accident. Therefore, according to HTGR proponents, even the loss of active cooling systems would not result in a core meltdown and radioactive releases to the environment. HTGRs are among the most technologically mature of the advanced reactor concepts. Since the 1960s a number of experimental and commercial HTGRs have been built in multiple countries, including the United States, United Kingdom, Japan, Germany, and China. A small, two-unit pebble bed HTGR plant is currently under construction in China. Development of HTGRs was promoted in the United States by the Next Generation Nuclear Plant (NGNP) program, established by the Energy Policy Act of 2005 ( P.L. 109-58 ). In 2016, DOE awarded X-energy $53 million over five years to develop a modular pebble bed HTGR design. X-energy received a second DOE contract for $10 million in 2018. X-energy is also working with DOE and others to develop the fuel technology that would be used in an HTGR pebble bed reactor. Other U.S. companies developing HTGRs include HolosGen and Hybrid Power Technologies. Gas-cooled fast reactors (GFRs) would be high-temperature, closed fuel cycle fast reactors using helium as a primary coolant ( Figure 3 ). The primary difference between the HTGR (see above) and the GFR is the neutron spectrum: HTGRs operate in the thermal spectrum, while GFRs operate in the fast spectrum. Therefore, the GFRs would not require the massive graphite moderator of HTGRs to slow the neutrons. The GFR would use a closed U-Pu fuel cycle in which the plutonium and uranium would be recycled from the spent fuel to provide a greatly expanded fuel source if configured as a breeder. GFRs would have operating temperatures similar to those of HTGRs—850°C compared to 330°C for existing LWRs—making them suitable for providing process heat for industrial purposes, in addition to producing electric power. One disadvantage of this design is the lower heat removal capability of the helium gas coolant compared to liquid metal coolants such as sodium and lead in the event of an accident. In 2015, a consortium of European countries, including the Czech Republic, Hungary, Poland, and Slovakia, launched a project to jointly develop a demonstration GFR based on a French design. The group set a goal of completing the conceptual design for the ALLEGRO reactor by 2025, with construction to begin thereafter. If successful, ALLEGRO would be the first demonstration of a GFR to date. General Atomics is an example of a U.S. company developing a GFR design, the Energy Multiplier Module (EM 2 ). Along with HTGRs, sodium-cooled fast reactors (SFRs) are among the most technologically mature of the unconventional nuclear concepts. SFRs use fast reactor technology with liquid sodium as the primary coolant. The use of a liquid metal as the coolant allows the primary coolant circuit to operate under lower, near-atmospheric pressure conditions. In addition, even in an emergency without backup electricity, the high heat-transfer properties of liquid sodium (100 times greater than water) would allow for passive cooling through natural circulation. The SFR coolant outlet would reach a temperature of 500-550°C. This lower temperature (compared to 850°C for the GFR) would allow for the use of materials that have been developed and proven in prior fast reactors. SFRs come in two main design variants: loop-type and pool-type designs (see Figure 4 ). In the pool-type SFR, the reactor core and primary heat exchanger are immersed in a single pool of liquid metal, while the loop-type houses the primary heat exchanger in a separate vessel. SFR technologies are conducive to modularization. A disadvantage that has been raised about using sodium as a coolant is that it reacts violently with both air and water. As a result, the primary sodium coolant system (which contains highly radioactive sodium) is often isolated from the steam generation system by an intermediary coolant to prevent a release of radioactivity in the case of an accident. This adds costs and complexity to the system, complicates maintenance and refueling, and introduces an additional safety concern. Fires resulting from sodium leaks have caused shutdowns in several SFRs that have been built to date. Most SFR designs would use a closed fuel cycle in which plutonium and uranium would be re-used from the spent fuel to provide an indefinite fuel source when configured as a breeder; the process would be similar to that used for the GFR (above). Other designs would rely on future advances in fuel technology to extend the fuel cycle to the point where refueling would only need to occur once in a number of decades. SFRs can achieve high burnup of actinides in spent fuel, potentially reducing the long-term radioactivity of high-level nuclear waste. The first SFR was built in the United States in 1951. Since then, approximately 20 SFRs have been built around the world, most of which have been experimental. The United States maintained SFRs as a high priority focus of its nuclear R&D program (primarily due to the technology's plutonium breeding capabilities) up until the cancellation of the Clinch River Breeder Reactor demonstration plant in 1983 amid public opposition, rising construction costs, and increased concern over weapons proliferation. There are five SFRs currently in operation worldwide: one in China, three in Russia, and one in India. Several others are expected to start up by 2020. Examples of U.S. companies developing SFRs include Advanced Reactor Concepts, Columbia Basin Consulting Group, General Electric-Hitachi, Oklo, and TerraPower. General Electric-Hitachi's PRISM design is the only SFR to have passed the NRC preapplication review process, and has been selected to support the Department of Energy's Versatile Test Reactor program. Lead-cooled fast reactors (LFRs) are designed to use a closed fuel cycle with either molten lead or lead-bismuth eutectic (LBE) alloy as a primary reactor coolant (see Figure 5 ). The use of lead as a coolant is seen to confer several advantages. As with the SFR, the use of a liquid metal coolant allows for low-pressure operation and passive cooling in an accident. In contrast to liquid sodium, however, molten lead is relatively inert, adding additional safety and economic advantages. Lead also has a high rate of retention of radioactive fission products, which offers benefits in an accident that could release radioactive materials. In such an accident, the chemical properties of the lead could prevent many of the harmful radionuclides from escaping into the atmosphere. LFRs can also be designed for high burnup of waste actinides, allowing for reduced long-term radioactive wastes. Lead does present some challenges that may require further research and innovation to overcome. At high temperatures, lead tends to corrode structural steel. Achieving commercialization for designs in the higher temperature ranges would thus need further technological advances in corrosion-resistance for structural steel components coming into contact with the liquid lead coolant. Lead is also highly opaque, presenting visibility and monitoring challenges within the core, and very heavy, due to its high density. The high melting point of lead also presents challenges in terms of keeping the lead in liquid form so that it can continue to circulate under lower-temperature scenarios. Russia is the world leader in LFR R&D, with experience building and operating seven LFRs for use in submarines. Russia has announced near-term development of two pure LFR facilities and a third facility that would be capable of using lead coolant for test purposes, in addition to other coolants. Members of the European Union have also announced a collaboration to develop an LFR through the Advanced Lead Fast Reactor European Demonstrator (Alfred). Other countries exploring LFR technologies include China, Japan, Korea, and Sweden. U.S. companies pursuing LFRs include Hydromine and Westinghouse. Any reactor that uses molten salts as a coolant or fuel may be considered a molten salt reactor (MSR). Salt-cooled MSRs (also known as fluoride-cooled high temperature reactors or FHRs) employ molten salts to cool the core, which is composed of solid fuel blocks configured much like an HTGR. Salt-fueled MSRs, by contrast, are unique in that the fuel is not solid, but rather is dissolved in the molten salt coolant. MSRs vary in their design; there are fast and thermal variants, and different moderator materials have been proposed for the thermal variants. Molten salt fast reactors (MSFRs) exhibit high potential for waste actinide burnup and fuel resource conservation. Different molten salts may also be used, depending on the other design features. Outlet temperature specifications range from 700-1000°C, although there are challenges to operating at these temperatures that would need technological advances to resolve. Unique to MSR salt-fueled designs is a safety feature called a \"freeze plug\" below the reactor core, consisting of a salt plug that is cooled to a solid state (see Figure 6 ). In the event of an incident that causes heat to rise in the core, the plug will melt, allowing the molten salt fuel to drain by gravity into a basin that is designed to prevent the fuel from undergoing further fission reactions and overheating. It is unknown whether spent MSR fuel could be safely stored in the long term without undergoing additional treatment after removal from the reactor. MSR technology has been under development for decades. Two thermal-spectrum experimental reactors were built in the United States at Oak Ridge National Laboratory in the 1950s and 1960s. The first molten salt fuel irradiation tests since the completion of those early experiments were conducted in 2017 in the Netherlands, where research on waste treatment is also being pursued. China is currently developing two prototype MSR microreactors with expected start dates in the 2020s. Terrestrial Energy, a Canadian company with a U.S. subsidiary, is in the second stage of design review with the Canadian Nuclear Safety Commission for its integral molten salt reactor (IMSR). The IMSR is the first advanced reactor design to complete phase one of the Canadian pre-licensing process. Terrestrial Energy has announced a goal of commercialization by the late 2020s. Examples of other U.S. companies developing MSRs include Alpha Tech Research Corp., Elysium Industries, Flibe Energy, Kairos Power, TerraPower, Terrestrial Energy USA, ThorCon Power, Thoreact, and Yellowstone Energy. Fusion reactors would fuse light atomic nuclei—as opposed to the fissioning of heavy nuclei—to produce power. Fusion R&D has received significant R&D investment, including over $20 billion in international cooperative funding anticipated to build the International Thermonuclear Experimental Reactor (ITER), a fusion research and demonstration reactor under construction in France. The United States is a major participant in the project. Fusion power would require light atoms, generally isotopes of hydrogen, to be heated to 100 million degrees to form a plasma, a state of matter in which electrons are stripped away from the atomic nucleus. Holding the plasma together while it is heated sufficiently to create a fusion reaction is a major technical challenge. ITER would do this with a powerful magnetic field, while other approaches would compress a pellet of hydrogen with lasers or other intense energy sources. Fusion reactions are routinely produced at the laboratory scale, but none of these reactions have yet achieved \"burning plasma,\" in which energy produced by fusion at least equals the energy needed to heat the plasma. A fusion power reactor would need to achieve \"ignition,\" in which the fusion energy itself would keep the plasma heated. ITER is scheduled to produce its first plasma by the end of 2025, with full operations, including burning plasma experiments, scheduled to begin in 2035. Several U.S. companies are pursuing various approaches toward achieving burning plasma with the aim of commercializing fusion power. According to the Fusion Industry Association, \"fusion produces no harmful emissions or waste fuel. A fusion power plant is physically incapable of having a meltdown. There is no fissile radioactive waste left over.\" However, some reactor materials would be made radioactive by neutron exposure during a fusion reaction, and tritium, a primary anticipated fuel source, is radioactive, although far less so than fission products. Examples of U.S. companies developing fusion technologies include AGNI Energy, Brillouin Energy, Commonwealth Fusion Systems, General Atomics, Helion Energy, HyperV Technologies, Lawrenceville Plasma Physics, Lockheed Martin, Magneto-Inertial Fusion Technologies, NumerEx, and TAE Technologies. Investment in electricity generating technologies is largely determined on the basis of cost. Nuclear energy has historically had high capital costs, but relatively low production costs. In recent years, however, conventional nuclear plants have struggled to compete with falling electricity prices driven largely by natural gas and renewables, particularly in parts of the country that are served by competitive electricity markets. The success of advanced reactors in entering these markets may depend on their ability to reduce capital costs relative to conventional reactors and to offer electricity prices that are competitive with non-nuclear sources of baseload power. High capital costs present a significant barrier to deployment of new nuclear plants in the United States. Conventional nuclear reactors are more expensive to build than most other electric power plants. Nuclear plants must submit to much more rigorous safety regulation and quality standards than other producers of electricity because of the risk posed by a release of radioactive materials. As a result, they require highly specialized construction materials (e.g., nuclear-grade steel), engineering knowledge, and construction expertise, all of which add to a plant's costs. Large conventional reactors also require a great deal of on-site fabrication of structures and components that are too large to be built in a factory, further adding to costs. Capital cost estimates for advanced reactors vary by technology and design. Some designs, such as SMRs, may allow for greater factory fabrication than conventional designs. Costs will remain highly uncertain until demonstration plants are constructed. According to an MIT study, conventional nuclear capital costs are dominated by labor and engineering costs (approximately 60%). By contrast, the actual reactor and associated turbine components comprise less than 20% of the capital cost of the median historical U.S. light water reactor. Accordingly, achieving cost reductions relative to these conventional plants would require that advanced reactor developers find ways to improve upon existing construction methods for nuclear reactors. One advanced reactor design innovation that holds potential for reducing construction costs is modularization of structures and components. Modularity is intended to increase factory production of nuclear components. Manufactured components could then be delivered to the construction site for installation, cutting down on onsite labor, reducing the specialized knowledge needed to custom-build each component on-site, and potentially improving quality. Modularized construction has been shown to improve the pace of construction and reduce costs in other industries, as well as in some recent nuclear construction projects in Asia. NuScale, a U.S.-based SMR vendor, has estimated \"overnight\" cost savings of approximately 10% due to modular construction of structures in its proposed SMR plant. Advanced reactor developers and advocates have also highlighted the cost reduction potential of such characteristics as simplified reactor designs, standardized reactor components, and smaller overall reactor sizes. Advanced reactors may also offer the potential to reduce financing costs as a result of shorter construction times and, in the case of SMRs, the ability to begin generating revenue after the installation of the first module, even as work continues on additional modules. Some advanced reactor concepts also show potential for reducing operational costs. Some designs would utilize simpler systems or increased automation to reduce human labor costs during operation. Many advanced reactor developers contend their designs would improve upon the thermal efficiencies of older generations of nuclear plants by operating at higher temperatures or through use of more efficient power conversion technologies. More-efficient plants may be able to reduce their payback periods relative to their less efficient peers. Not all aspects of advanced reactor concepts would lead to cost reductions. Some reactor designs would have lower power ratings and/or lower power densities (less power for a given core volume) than conventional reactors, which could reduce the cost advantages that existing large reactors achieve through economies of scale. The majority of advanced designs would require fuels with a fissile isotope enrichment of between 5% and 20%, compared with 3-5% for most existing commercial reactors. Enriching fuel to these higher percentages would add costs. Some designs would use as-yet-unlicensed fuel forms, which may be associated with higher fuel fabrication costs. Some advanced reactors would also require spent fuel reprocessing and treatment on the back end before wastes could be safety stored, which may in turn require higher levels of security in order to limit risks of proliferation. These factors have the potential to add substantial costs to reactor operations compared with those of existing light water reactors. Some research on SMRs has suggested that their small size will prevent them from achieving economies of scale. Modularization may allow this disadvantage to be balanced by so-called \"economies of multiples.\" One analysis found that, while SMRs may be cheaper than traditional reactors to construct, the cost per unit of power generated is likely to be higher. It is difficult to accurately estimate the costs of advanced reactors. Many advanced reactor concepts remain in the early stages of design and development, and vendor companies generally do not include detailed costs in their publicly available content. Academic analyses of the costs of non-traditional reactors have produced a range of results. A common metric for measuring and comparing the cost of electricity production among sources is the levelized cost of electricity (LCOE). LCOE is a measure of the unit cost of producing electricity from a given generating source (e.g., coal, natural gas, solar, wind, etc.) and is calculated by dividing the total costs of constructing and operating a plant over its lifetime by its total electricity output over the same period. LCOE can be a useful tool for comparing production costs across sources; however, because there are additional factors that influence the economic competitiveness of a proposed plant, relying upon a single metric for comparison may be misleading. Other possible cost measures include the cost of construction per kilowatt or megawatt of electric generating capacity and the costs of air emissions. One standardized analysis of cost projections from eight advanced reactor vendors found the average projected LCOE for \"nth-of-a-kind\" (NOAK) reactors to be $60/MWh for the included reactor designs. A separate study projected LCOEs in the range of $110 to $120/MWh for included advanced reactor designs. By comparison, the LCOEs per MWh for competing electricity sources are estimated as follows: large LWRs, $112-$183; coal, $60-$143; natural gas combined cycle, $42-$78; wind, $30-$60; utility-scale solar, $43-$53. Such estimates typically exclude costs that are not currently the responsibility of plant owners, such as greenhouse gas emissions. Advanced reactor designs come in a wide range of sizes, from less than 15 MWe to 1,500 MWe or more. In some cases, the optimal reactor size may be influenced by the particular characteristics of a given design. In others, the size may be determined by the needs of the customer or site. A commonality among many unconventional reactor concepts is an increased focus on small reactor designs. As noted earlier, advanced SMRs, 300 MWe and below, \"employ modular construction techniques, ship major components from factory fabrication locations to the plant site by rail or truck, and include designs that simplify plant site activities required for plant assembly,\" according to DOE. The smallest of these—under 20 MW of thermal energy—may also be referred to as microreactors. As noted above, most existing conventional reactors in the United States have an electrical generating capacity of 1,000 MWe or more. The small size and modular nature of SMRs gives them the potential to expand the types of sites and applications for which nuclear energy may be considered suitable (see section on Versatility). SMR designs with multiple reactor modules may allow for size customization based on the needs of the customer or characteristics of the host site. Safety with respect to nuclear energy refers primarily to the minimization of the risk of release of radioactivity into the environment. Advanced reactor systems may have both safety advantages and disadvantages in comparison with existing reactors as a result of their size and design, and the chemical properties of their main components (e.g. the coolant, fuel, and moderator). Because many of these technologies are in the design phase, the operational safety of many of these systems has not yet been established in practice. Testing and demonstration would be needed to validate the safety claims of advanced reactor vendors. Conventional nuclear plants use multiple independent and redundant safety systems to minimize risk. In the majority of cases, these systems are \"active,\" meaning that they rely on electricity or mechanical systems to operate. Advanced nuclear reactors tend to incorporate passive and inherent safety systems as opposed to active systems. Passive systems refer primarily to two types of safety features: (1) the ability of these reactors to self-regulate the rate at which fission occurs through negative feedback mechanisms that naturally reduce power output when certain system parameters (such as temperature) are exceeded, and (2) the ability to provide sufficient cooling of the core in the event of a loss of electricity or other active safety systems. The chemical properties of various advanced coolants, fuels, and moderators may also contribute inherent safety advantages. Examples include higher boiling points for coolants, higher heat capacities for fuels and moderators, and higher retention of radioactive fission products for some coolants. Some advanced reactor coolants (such as liquid metals) remain at atmospheric pressure under high reactor temperatures, putting less stress on primary reactor components than high-pressure coolants such as water. Advanced reactors that can operate at or near atmospheric pressure enable simplification of the coolant system design and safety systems, as well as the potential for improved economic performance. Proponents of small reactors have suggested that SMRs, and microreactors in particular, may pose less of a safety risk due to the smaller total volume of radioactive material on site and lower risk of release to the environment. Consequently, some have argued that they should face streamlined approval processes in line with the NRC's approach of risk-informed regulation. The smaller size of SMRs and microreactors may also enable innovations in siting that could contribute to plant safety. Some have suggested that siting these reactors underground or on floating platforms at sea could reduce risks related accidental release of radioactive materials and seismic activity, respectively. While some advanced reactor coolants and moderators may have the advantages described above, some also have chemical properties that pose safety concerns. Examples include reactivity, toxicity, or corrosiveness of the primary coolant in the case of sodium, lead, and molten salts, respectively. Molten salt-cooled reactors would incorporate the dissolved fuel into the coolant, posing a safety concern for plant workers who must be shielded from the higher levels of radioactivity flowing through the coolant system as a result. Opaque coolants present additional challenges to visual core monitoring and inspection compared to transparent coolants like water. Advanced reactors, and even some existing conventional reactors, may also make use of advances in fuel technologies and accident-tolerant fuels (ATFs). ATFs are designed to better withstand losses in cooling capacity during an accident, reducing the risk of fuel meltdown and allowing reactor operators more time to respond to accidents. Near-term ATF concepts (e.g. coated zirconium cladding, iron-chrome-aluminum-based cladding) may be commercially available as soon as the mid-2020s, while longer-term ATF concepts (e.g. metallic fuels, silicide fuel, and silicon carbide cladding) would need more testing before they could be licensed. In addition to producing energy for peaceful purposes, nuclear fuels such as uranium and plutonium can be used by states to manufacture nuclear weapons material for military use or diverted by non-state actors to produce weapons of mass destruction. The risk of weapons proliferation from civilian nuclear materials presents a challenge for all nuclear energy reactors to varying degrees, and for international controls on nuclear materials. Advanced reactor designs may offer both advantages and disadvantages with respect to their potential effects on nuclear weapons proliferation. Advocates contend that many advanced reactor designs would be more resistant to weapons proliferation than existing LWRS because of factors such as \"sealed\" or difficult-to-access core designs, infrequent refueling, smaller inventories of fissile materials in the core, and remote monitoring capabilities, among others. Some designs may produce waste that is less attractive for weapons proliferation for a variety of reasons. Advanced reactors may also present unique inspection and monitoring challenges. In a 2017 workshop report, the International Atomic Energy Agency (IAEA), which functions as an inspector of nuclear states to ensure compliance with international nonproliferation agreements, noted that some of the characteristics of advanced reactors may make them more difficult to monitor and safeguard. For instance, the opacity of certain advanced coolants, such as sodium, lead, and molten salts, may make it more difficult to monitor reactor cores to ensure nuclear materials are not being diverted. In contrast, inspectors can visually see through cooling water to determine whether fuel rods and assemblies are present or have been removed, possibly for plutonium separation. The IAEA report identified several advanced reactor technologies that pose unique and particularly difficult safeguarding challenges, including transportable reactors, pebble-bed design HTGRs, molten salt reactors, and certain waste reprocessing facilities. The report also noted that \"proliferation resistance and ease to verify (safeguardability) are not interchangeable; and most of the features lending proliferation resistance to Generation-IV reactors actually make safeguards nuclear material accountancy more difficult.\" The utilization by some advanced reactors of more highly enriched fuels could create additional nonproliferation challenges. Many advanced designs would utilize fuel with a fissile isotope enrichment of between 5% and 20% or higher (compared to 5% or lower for most current reactors). At these higher enrichments, even very small reactors would likely contain more than enough fissile material to produce multiple nuclear weapons with further enrichment. The work required to enrich uranium to weapons-grade levels declines as the initial enrichment level rises. Some designs would also produce spent fuel with higher concentrations of isotopes that are desirable from the point of view of weapons production, making them a more attractive target of diversion than current LWR fuel. Additional security measures may be necessary to safeguard against such eventualities. The need to safeguard nuclear materials is present not just at reactor sites, but through the entirety of the nuclear supply chain. This includes during the fuel fabrication process, in transit, and, if applicable, during fuel reprocessing. Many advanced reactors would require or would offer the option to reprocess the spent fuel to extract remaining fissile materials. Some advanced reactor technologies rely on reprocessing to make them cost-effective. Separating these materials from the radioactive wastes makes them more attractive both to thieves for making radiological dispersal devices and to countries that might use them to produce weapons. France, Japan, and the United Kingdom have been engaged in civilian nuclear fuel reprocessing for decades. In the process, they have accumulated more than 290 metric tons of separated plutonium across various civilian facilities as of January 2017. For reference, the minimum fissile inventory required to produce a nuclear weapon from plutonium is generally cited as 10 kg of Pu-239. This figure may vary considerably based on the percentage of other plutonium isotopes mixed with Pu-239 and the sophistication of weapons designs. For existing nuclear power plants in the United States, security and proliferation risks are generally considered to be low, given the current fuel cycle and safeguards regimes in place. In particular, the low-enriched uranium fuel (3%-5% U-235) in U.S. reactors cannot be used for a nuclear explosive device without separation and further enrichment, and the United States lacks commercial facilities for chemical separation of plutonium. Many observers view the lack of reprocessing in the United States as a policy signal to other countries that the country with the largest number of nuclear power plants in the world has been able to support this fleet without reprocessing. The variety of advanced nuclear power plant designs have the potential to further reduce this relatively low risk, or to increase the risks, depending on the technical and policy choices and how they are implemented. Many advanced reactor designs are smaller than the existing fleet of LWRs and are designed for modular installation. Because the number of modules may be altered to meet the power and heating needs of the site, SMRs are intended to accommodate a range of sizes and types of uses, including those that may have been considered too small in the past. SMRs and microreactors have potential applications in providing power to remote and isolated areas, on-site heating for industrial or municipal clients, and heat or power to mobile or temporary clients (e.g. remote construction sites and temporary military stations). The Department of Defense (DOD) has expressed interest in using SMRs to power remote bases, such as the Eielson Air Force Base in Alaska. The John S. McCain National Defense Authorization Act for Fiscal Year 2019 instructs DOE to produce a report on how a program could be undertaken to pilot at least one microreactor at a military or DOE site by the end of 2027. DOD issued a request for information about microreactor prototype designs on January 22, 2019, as a first step in its study. A recent MIT study cautioned that small size alone would not necessarily give advanced reactors a market edge: The industry's problem is not that it has overlooked valuable market segments that need smaller reactors. The problem is that even its optimally scaled reactors are too expensive on a per-unit-power basis. A focus on serving the market segments that need smaller reactor sizes will be of no use unless the smaller design first accomplishes the task of radically reducing per-unit capital cost. Advanced reactors may also be designed for new applications or to capture new markets. Many advanced nuclear reactors would operate at higher temperatures (500-1,000°C) than existing commercial reactors (approximately 300-330°C). Higher operating temperatures would allow some advanced reactors to tap into the large market for heat for industrial processes. Industrial users consume 25% of all primary energy produced in the United States, 80% of which is in the form of process heat. A report by MIT estimates that 17%-19% (or 134-151 GWt) of the U.S. market for industrial heat could be supplied by small (150-300 MWt) advanced reactors. Potential applications include providing process heat for district heating, desalination, petroleum refining and oil shale processing, steam reforming of natural gas, cogeneration, biomass or coal gasification, and hydrogen production, among others. Advanced reactors may nevertheless face steep barriers to entry into these markets in the form of competition from other sources, such as natural gas plants (with or without carbon capture and storage), that are perceived as being less risky, both physically and economically. The radioactivity of nuclear waste presents waste management and facility contamination challenges that are unique to nuclear energy. Radioactivity builds up in a nuclear reactor in three primary ways: 1) through the accumulation of radioactive \"fission products\" that result from the splitting of fissile nuclei, 2) through the accumulation of radioactive \"actinides\" that form when heavy atoms in the reactor core absorb a neutron but do not undergo fission, and 3) through the generation of \"activation products\" in the coolant, moderator, or reactor components that occurs when these materials are made radioactive by absorbing neutrons. The vast majority of the initial radioactivity in nuclear waste comes from the fission products. Due to the long half-lives of some of these radioactive materials (several hundred thousand years and longer), nuclear waste poses long-term health hazards. In 2018, the U.S. inventory of spent nuclear fuel exceeded 80,000 metric tons of uranium (MTU). This is projected to rise at a rate of approximately 1,800 MTU per year, resulting in an estimated 138,000 MTU by 2050. Because no long-term repository or consolidated storage facility for high-level nuclear waste has been licensed by NRC, newly discharged spent nuclear waste is currently stored onsite at nuclear plant locations. Unconventional reactors may offer some waste management advantages over existing commercial reactors. Fast reactors, and some other unconventional reactors, would be more effective at destroying actinides compared with commercial reactors. Actinides are responsible for the vast majority of the radioactive hazard that remains in nuclear waste after the first few centuries. Reducing the prevalence of these long-lived waste products by transmuting them to short-lived radionuclides may reduce the health risk associated with a release of spent fuel that occurs far in the future (when storage containers may be more likely to fail). Actinides are not the only long-lived nuclear wastes, however; some fission products remain radioactive hazards for hundreds of thousands of years and longer. The presence of these fission products in nuclear wastes might not be appreciably reduced by unconventional reactors. As a result, some have argued that, even if advanced reactors are able to deliver the improvements in actinide management that some advocates have claimed are possible, adoption of these reactors at scale would not materially alter the need for a long-term waste repository. Some advanced reactors would use new or non-conventional fuel forms, such as metallic fuels or dissolved molten fuels. Some of these fuels pose additional waste management challenges as a result of their tendency to corrode storage containers or otherwise react with the environment in ways that complicate their safe storage and disposal. Research on the safe management and disposal of advanced reactor waste will be a key element in commercializing these technologies. Environmental impacts for any electric power source must be evaluated based on air emissions, water discharges, and waste management challenges, considering the full life cycle of the technology. The recent focus for nuclear power environmental impacts has been on air emissions, specifically the greenhouse gas footprint. Historically, however, much attention has been given to the waste management challenges associated with nuclear power. The environmental impacts of current LWR nuclear technologies are well studied. The stated goal of many advanced reactor technologies is to reduce environmental impacts. The impacts for newer advanced technologies would need to be evaluated on a case-by-case basis, and assessed empirically to determine whether the impacts are greater or less than current technologies, and whether advanced technologies eliminated any existing challenges in practice or raised new challenges requiring new technologies, regulatory systems, and support industries. Nuclear energy is a low-carbon source of electricity, with no direct emissions from the fission process. As such, it is one of a number of energy technologies available for reducing the carbon emissions associated with electricity production (and potentially other uses of energy, such as industrial heat). The nuclear energy industry is not zero-carbon, however. Historically, fossil fuel-powered plants and equipment have provided energy to support the nuclear supply chain. Uranium enrichment facilities, in particular, have high energy requirements, and U.S. enrichment plants in the past used electricity primarily from coal-fired power plants. Current uranium enrichment plants use only a fraction of the electricity of older enrichment technology and are generally less reliant on coal-fired generation. A study by the DOE National Renewable Energy Laboratory of the life-cycle greenhouse gas emissions of major electric generating technologies found that conventional nuclear reactor emissions were similar to those of renewable energy technologies and only a fraction of coal and natural gas plant emissions. Emissions of conventional air pollutants (e.g., sulfur oxides, nitrogen oxides, mercury, and particulates) from nuclear power operations and fuel cycle activities are similarly very low. Advanced reactors are expected to have similar life-cycle air emissions, as non-combustion energy sources. Supporters of advanced reactor technologies contend that they could reduce the obstacles to nuclear power expansion related to cost, safety, waste management, and fuel supply and therefore allow nuclear power to play a greatly expanded role in worldwide greenhouse gas reduction strategies. Some have argued that decarbonization goals could be achieved more effectively through improvements in existing light water reactor technologies. In particular, such a strategy could avoid additional waste management technical challenges and potential costs associated with the processing of radioactive waste from some classes of advanced reactors. On the other hand, as noted above, proponents of advanced reactor technologies contend that nuclear fuel recycling/reprocessing could reduce the long-term radioactivity of nuclear waste and produce waste forms more resistant to deterioration than LWR spent fuel. Plants with higher thermal efficiencies reject less heat into the environment per kilowatt-hour (KWh) of electricity generated. This can help reduce ecosystem impacts related to heat rejection. For example, increased efficiency may contribute to significant reductions in the amount of water used for waste heat rejection (up to 50% less) per unit of electricity generated, and reduce the amount of heat absorbed by adjacent water bodies. This could have particularly significant implications for the use of nuclear energy in arid environments. The Department of Energy supports the development of advanced nuclear technologies through research and development (R&D) programs housed in two primary offices: the Office of Nuclear Energy and the Office of Science. Collectively, advanced nuclear R&D programs (advanced fission and fusion) within these two offices received 23% of funding for energy R&D in fiscal year (FY) 2019, more than existing nuclear, renewables, or fossil energy (see Figure 7 ). The Advanced Research Projects Agency—Energy (ARPA-E) also provides funding for early stage R&D for advanced nuclear projects. The Office of Nuclear Energy (NE) \"focuses on three major mission areas: the nation's existing nuclear fleet, the development of advanced nuclear reactor concepts, and fuel cycle technologies,\" according to DOE's FY2020 budget justification. NE primarily supports nuclear fission technologies. NE has established a goal for advanced reactor development that \"by the early 2030s, at least two non-light water advanced reactor concepts will have reached technical maturity, demonstrated safety and economic benefits, and completed licensing reviews sufficient to allow construction to go forward.\" According to one analysis, NE reported spending approximately $2 billion on advanced reactor R&D between 1998 and 2015. Analysts have contended that much higher spending levels would be needed for DOE to support the latter stages of advanced reactor R&D, such as demonstrations and commercialization. In FY2019, Congress appropriated $753 million for NE's nuclear R&D programs. Of that, Congress directed $319.5 million (42%) to be used specifically for advanced nuclear technology R&D within the following programs and activities: S upercritical Transformational Electric Power R&D : $5 million appropriated to develop a supercritical carbon dioxide Brayton cycle for thermal-to-electric energy conversion in sodium-cooled fast reactors; Advanced Small Modular Reactor R&D : $100 million appropriated for this new, one-year subprogram that is to support \"cost-shared public-private R&D partnerships\" to address technical challenges and accelerate development of SMR reactor designs and supply chains; Advanced Reactor Technologies : $111.5 million appropriated to conduct early-stage R&D on advanced reactor technologies, including SMRs; Versatile Fast Test Reactor : $65 million appropriated for R&D to support development of a versatile fast test reactor, also called the versatile test reactor; Material Recovery and Waste Form Development : $38 million appropriated to activities related to \"the improvement of the current back end of the nuclear cycle [waste management and reprocessing],\" of which $27 million were specifically directed towards activities supporting advanced nuclear technologies. In addition to the programs that focus exclusively on advanced reactor R&D, several cross-cutting NE programs directly or indirectly support advanced nuclear technologies. NE's Nuclear Energy Enabling Technologies (NEET) program includes several subprograms focused on cross-cutting research to support both existing and advanced nuclear technologies. Subprograms of NEET support DOE's Gateway for Accelerated Innovation in Nuclear (GAIN) initiative, which provides technical, financial, and regulatory support for existing and advanced nuclear technologies by providing enhanced access to DOE's network of national labs and unique nuclear R&D capabilities, as well as through competitive industry funding opportunities. GAIN industry funding opportunities include U.S. Industry Opportunities for Advanced Nuclear Technology Development , a five-year funding opportunity announcement initiated in December of 2017 that offers cost-sharing opportunities for advanced reactor development, demonstration, and regulatory assistance, and for other nuclear R&D. Applications are reviewed and awards are announced on a quarterly basis. DOE expects to award a total of $400 million over the five-year program. Nuclear Energy Voucher Program , which provides industry awardees with access to DOE nuclear expertise and capabilities in the form of vouchers redeemable for research and technical support activities at one of DOE's national laboratories. Vouchers are not direct financial awards, but rather fund the work done by the national laboratory on behalf of the awardee. Recipients are required to provide a 20% minimum cost-share. As of October 16, 2018, GAIN had distributed vouchers worth approximately $10.7 million to 22 companies. In the past, NE has also provided support for the review and licensing of advanced reactors by NRC. From FY2012 to FY2017, the NE SMR Licensing Technical Support program provided cost-sharing arrangements with industry to support first-of-a-kind costs associated with NRC design certification, design licensing, and site licensing. The program provided support for the NRC's review of NuScale's SMR design. DOE brought the program to a close at the end of FY2017. Support for nuclear fusion technologies comes from DOE's Office of Science. Congress appropriated $432 million for nuclear fusion R&D in FY2019, more than for all other advanced nuclear technologies combined. Congress provided a further $132 million for the U.S. contribution to the ITER fusion project, as discussed above. DOE's ARPA-E invests in early-stage energy technologies with high potential for transformational impact. In 2017, ARPA-E announced a funding opportunity for \"technologies to enable lower cost, safer advanced nuclear plant designs\" as part of a new program entitled Modeling-Enhanced Innovations Trailblazing Nuclear Energy Reinvigoration program (MEITNER). In June of 2018, MEITNER awarded $24 million in funding for 10 industry and university projects focused on advanced nuclear technologies. ARPA-E announced grants for five nuclear-related projects totaling $12 million in December 2018. The DOE's Office of Environmental Management (EM) and Office of Legacy Management (LM) provide a variety of functions supporting advanced reactor R&D. First, EM provides waste management services for ongoing advanced reactor R&D activities. For example, EM manages the spent nuclear fuel from the Advanced Test Reactor at the Idaho National Laboratory. DOE describes the Advanced Test Reactor as \"the only U.S. research reactor capable of providing large-volume, high-flux neutron irradiation in a prototype environment … to study the results of years of intense neutron and gamma radiation on reactor materials and fuels for … research and power reactors.\" Second, EM funds and manages environmental remediation and decontamination and decommissioning for several advanced reactor facilities, including the Energy Technology Engineering Center at the Santa Susana Field Laboratory in California, various facilities at the Idaho National Laboratory, and the Hanford site in the state of Washington. At Hanford, EM has conducted decontamination and decommissioning activities at the Fast Flux Test Facility (FFTF) since 1992, which operated for 10 years (1982-1992) as a 400 MWt liquid-metal (sodium)-cooled nuclear research and test reactor to develop and test advanced fuels and materials for the Liquid Fast-Breeder Reactor Program. Third, EM funds facility overhead operations for facilities where advanced reactor R&D is occurring or planned. \"Overhead\" (or \"Landlord\") costs can include infrastructure maintenance (e.g., power, water, roads, bridges), site safeguards and security, worker health and safety, and program direction and administration. For example, EM funds site overhead costs at the Hanford and Savannah River sites, home of the Pacific Northwest and Savannah River National Laboratories, where advanced reactor and fuels research has been conducted. What is the appropriate level of federal support for each stage of technology development? That is a fundamental question in the longstanding national debate over R&D policy writ large. For nuclear energy technology development, major stages include research on fuels and materials, development of reactor concepts and designs, component testing and evaluation, licensing by NRC, demonstration, and commercialization. Typically, the earliest stages of development involve laboratory-scale work and computer modeling and simulation, some of which may be relatively inexpensive and applicable to a broad range of nuclear technology. The later stages focus on specific reactor designs and require construction of full- or nearly full-scale nuclear power plants potentially costing billions of dollars. Even early-stage nuclear research often requires the construction and operation of test reactors, shielded hot cells for remote handling of intensely radioactive materials, and other expensive facilities and infrastructure. The Trump Administration contends that federal support should focus on the early stages of research, where the private sector may have a tendency to underinvest. \"The Federal role in supporting advanced technologies is strongest in the early stages of research and development,\" according to DOE's FY2019 budget justification.\" Consistent with that policy, the Administration opposes funding for \"late stage or near commercial ready technology.\" Opponents of federal funding for energy demonstration and commercialization contend that such activities should be conducted by the private sector, where market forces would determine which technologies would succeed. As asserted by the Heritage Foundation, \"By attempting to force government-developed technologies into the market, the government diminishes the role of the entrepreneur and crowds out private-sector investment. This practice of picking winners and losers denies energy technologies the opportunity to compete in the marketplace, which is the only proven way to develop market-viable products.\" The conferees on FY2019 DOE appropriations did not adopt the Administration's proposed focus on early-stage research, saying, \"The Department is directed throughout all of its programs to maintain a diverse portfolio of early-, mid-, and late-stage research, development, and market transformation activities.\" Supporters of a broader federal role contend that mid- and late-stage federal support is necessary for new technologies to survive the \"valley of death,\" after federally funded early-stage research is completed but before a promising technology is able to attract private-sector funding for the more-expensive later development, demonstration, and commercialization phases. Obtaining funding for expensive and risky demonstration projects has been described as a particularly difficult obstacle. According to former DOE Under Secretary John Deutch, \"energy innovation is constrained not by an absence of new ideas, but by the absence of early examples of successful implementation.\" World electricity generation is projected by the U.S. Energy Information Administration to grow by nearly 50% between 2015 and 2040. While renewable energy and nuclear power are projected to rise substantially during that period, fossil fuels would still constitute about 55% of total generation if current policies and trends continue. Proponents of unconventional nuclear power contend that advanced reactors could mitigate the concerns about safety, cost, radioactive waste, weapons proliferation, and fuel supply that are seen as inhibiting greater utilization of nuclear energy. Under that view, advanced nuclear technology would be indispensable for meeting the world's rapidly increasing demand for electricity without emitting greenhouse gases. \"In the 21 st century the world faces the new challenge of drastically reducing emissions of greenhouse gases while simultaneously expanding energy access and economic opportunity to billions of people,\" according to a recent study by the Massachusetts Institute of Technology. The study found that the cost of worldwide greenhouse gas reductions could be minimized by the deployment of lower-cost nuclear generation. That finding is disputed by various environmental and other groups that contend that a combination of renewable energy and efficiency is the lowest-cost option for eliminating greenhouse gas emissions and could be implemented more quickly. \"With technology already available, renewable energy sources like wind, solar, and geothermal can provide 96 percent of our electricity and 98 percent of heating demand—the vast majority of U.S. energy use,\" according to the environmental advocacy group Greenpeace USA. Some environmental groups contend that the safety and other risks posed by nuclear make it unacceptable in any case, even with advanced technology. The Nuclear Information and Resource Service advocacy group says, \"There is nothing environmentally friendly about nuclear power. It only creates different environmental problems than fossil fuel energy sources. But neither fossil fuels nor nuclear power are safe, sustainable, or healthy for humans and the environment.\" Germany adopted a policy after the Fukushima disaster in 2011 to greatly reduce carbon emissions through renewable energy and efficiency while eliminating nuclear power. The policy, called \"Energiewende,\" or energy transition, calls for Germany's consumption of primary energy (the initial energy content of fuels and other energy sources) to be reduced by 50% in 2050 from its 2008 level, while greatly increasing the use of renewable energy throughout the economy. According to the German government, \"By 2050 renewable energies should make up 60 percent of the gross final consumption of energy, and 80 percent of the gross electricity consumption.\" A 2017 study by an academic team developed \"roadmaps\" for 139 countries to convert to 100% renewable energy by 2050. The study concluded that renewable energy production could be expanded with more certainty than nuclear and other non-emitting sources. The National Renewable Energy Laboratory issued a study in 2012 of the impact of increasing U.S. renewable electricity generation to up to 90% by 2050. The study found that renewables could \"adequately supply 80% of total U.S. electricity generation in 2050,\" with nuclear, coal, and gas supplying the remaining 20%. Nuclear power plants were projected to be located almost entirely east of the Mississippi River for economic and other reasons. Supporters of advanced reactor technologies are urging DOE to construct a fast spectrum Versatile Test Reactor (VTR), which they consider critical for the development of nuclear fuels, materials, instrumentation, and sensors for fast neutron and other advanced reactors. \"To support the innovative R&D required to revive a competitive U.S. nuclear industry, a new test reactor is required with capabilities that far exceed those of the few remaining test reactors,\" a senior executive from the nuclear firm General Atomics testified to Congress in 2015. According to DOE's Idaho National Laboratory (INL), \"Currently, only a few capabilities are available for testing fast neutron reactor technology in the world and none in the U.S.\" Requirements for DOE to plan and develop a \"versatile reactor-based fast neutron source\" by the end of 2025 are included in the Nuclear Energy Innovation Capabilities Act of 2017 (NEICA), signed into law September 28, 2018 ( P.L. 115-248 ). In the 116 th Congress, the Nuclear Energy Leadership Act (NELA, S. 903 ), introduced March 27, 2019, by Senator Murkowski, would authorize DOE to \"provide\" the facility. Funding of $65 million for R&D to support development of the VTR (referred to as a \"versatile fast test reactor\") is included in the Energy and Water Development and Related Agencies Appropriations Act, 2019 (Division A of P.L. 115-244 ). Citing the enactment of NEICA, Energy Secretary Rick Perry announced the official launch of the VTR project on February 28, 2019. The Trump Administration is requesting an additional $100 million for the VTR project in FY2020. DOE announced a contract award on November 13, 2018, to GE Hitachi Nuclear Energy to help develop a conceptual design and cost estimate for the VTR, which is to be adapted from the company's PRISM sodium-cooled fast reactor design. According to INL, which is managing the project, the conceptual design and cost and schedule estimates are to be completed in 2021, after which another contract would be awarded for final design and construction. The VTR is currently scheduled to be operational by October 2026. An INL official estimated in February 2019 that a sodium-cooled VTR would cost $3 billion to $3.5 billion in today's dollars. The Nuclear Energy Research Infrastructure Act of 2018 ( H.R. 4378 , 115 th Congress), which passed the House February 13, 2018, but was not enacted, would have authorized $1.99 billion through FY2025 for the project. Some who are skeptical of the VTR project have questioned whether there would be enough potential users—primarily companies developing fast reactors—to justify its construction and operating costs. Some advanced nuclear reactor developers have doubted that the VTR will begin operating before their designs are completed. Concerns have also been raised about whether new facilities would be required to fabricate fuel for the VTR, and how much those might cost, and the cost of handling and disposing of highly radioactive spent fuel from the reactor. The potential use of plutonium-based fuel in the VTR has drawn opposition because of the usability of such fuel in nuclear weapons. Proposals to authorize DOE to host privately funded experimental and demonstration reactors have been included in several bills in the 114 th and 115 th Congresses, including a provision enacted in NEICA. Supporters of the idea contend that reactor developers could benefit from the expertise and facilities at DOE national laboratories. Safety oversight of private-sector experimental reactors at national laboratories could possibly be conducted by DOE and not require NRC licensing. NEICA specifies that reactors intended to demonstrate commercial suitability would require NRC licenses, even at DOE sites. NEICA added section 958 to the Energy Policy Act of 2005 ( P.L. 109-58 ), which authorizes a DOE National Reactor Innovation Center (NRIC). This program would \"enable the testing and demonstration of reactor concepts to be proposed and funded, in whole or in part, by the private sector.\" Such testing and demonstration would take place at DOE national laboratories or other Department-owned sites. In implementing the NRIC program, DOE is to coordinate with NRC on sharing technical expertise on the advanced reactor technologies under development. DOE announced an agreement on February 18, 2016, with Utah Associated Municipal Power Systems (UAMPS) \"to support possible siting\" of a first-of-a-kind NuScale SMR plant at INL. Under the agreement, \"UAMPS is currently working to identify potential locations that may be suitable\" at the 890-square-mile INL site for construction of the plant, according to DOE. The NuScale SMR is currently undergoing NRC review for a design certification, which is to be issued sometime after 2020. In 2012, DOE announced three agreements \"to develop deployment plans\" for privately funded SMRs at the Department's Savannah River Site in South Carolina. The agreements with Hyperion Power Generation (now Gen4 Energy), Holtec International, and NuScale were intended to help the companies \"obtain information on potential SMR reactor siting at Savannah River and provide a framework for developing land use and site services agreements to further these efforts,\" according to DOE. Because NEICA says reactor testing and demonstration projects would be funded \"in whole or in part\" by the private sector, the potential federal share of such projects could be a future issue before Congress. NEICA requires DOE to submit a report to Congress on costs and other issues that could be raised by the hosting of reactor testing and demonstration projects, including DOE's capabilities for safety review and oversight of privately funded advanced reactor research; potential DOE sites that could host privately funded experimental advanced reactors; contractual mechanisms that could be used for such projects; and responsibility for management and disposal of waste. A crucial stage in the commercialization of nuclear technology is the construction of demonstration reactors, which are expected to cost several billion dollars apiece, depending on their size and level of technical maturity. As noted above, the VTR, which would serve as a test reactor and as a demonstration of GE's PRISM reactor (although downsized from 840 MWt to 311 MWt), is estimated to cost up to $3.5 billion to construct. The first 12-module NuScale plant, at 684 MWe, is estimated to cost $3 billion. Including the demonstration stage, bringing a new reactor technology to the market could require up to 30 years and cost up to $15 billion, according to one recent estimate. The majority of U.S. advanced reactor companies surveyed in 2017 have raised only a small portion of the funding that would be necessary for commercial-scale demonstration of their designs. One analysis found that commercialization of advanced reactor concepts would require significantly higher levels of public funding. DOE has a range of options for supporting the construction of demonstration reactors and helping bring them to the commercial market. DOE can carry out technology demonstration projects on a cost-shared basis under Sec. 988 of the Energy Policy Act of 2005 ( P.L. 109-58 ). At least 50% of demonstration costs must come from non-federal sources, although the Secretary of Energy can reduce the non-federal share based on technological risk and other factors. Repayment of the federal contribution is not required. In addition to construction costs, federal cost sharing can apply to licensing, design work, and \"first of a kind\" engineering, such as the assistance provided to NuScale under the DOE small modular reactor licensing technical support program. Construction of research facilities such as the VTR may be completely funded through congressional appropriations, with users of the facility paying to conduct research (sometimes with DOE grants or vouchers). The VTR would also demonstrate the PRISM technology, as noted above, but it would be smaller than the planned commercial version and would not produce power. The federal government can purchase power generated by demonstration reactors and also pay for research use of the reactors. For the proposed NuScale demonstration, DOE announced a memorandum of understanding (MOU) in December 2018 with the Utah Associated Municipal Power Systems (UAMPS), which would own the plant. The MOU calls for DOE to purchase power from one of the 60 MWe modules in the plant. DOE would use another module for research under the Joint Use Modular Plant (JUMP) program. \"The research is expected to focus principally on integrated energy systems that support the production of both electricity and non-electric energy products,\" according to DOE's announcement. DOE can issue loan guarantees to build advanced nuclear reactors under Title XVII of the Energy Policy Act of 2005. DOE currently has $8.8 billion in loan guarantee authority for advanced nuclear energy projects. To receive a DOE loan guarantee, projects must be found financially viable and they must pay an up-front fee called a \"subsidy cost.\" The subsidy cost is the present value of the government's potential cost of the loan guarantee that could result from future loan defaults. A project considered to be relatively risky would be assessed a relatively high subsidy cost. Title XVII loan guarantees cannot be given to projects that would use federal funds other than the federally guaranteed funding ( P.L. 111-8 , Division C). DOE has awarded $12 billion in Title XVII loan guarantees for the construction of two new reactors at the Vogtle nuclear power plant in Georgia. Power plants using advanced nuclear technology are eligible for a federal tax credit of 1.8 cents per kilowatt-hour of electricity generated, as extended by P.L. 115-123 . The nuclear production tax credits do not have an expiration date, but total credits are limited to 6,000 MW of capacity, limited to $125 million per year per 1,000 MW of capacity for eight years of operation. The availability of the tax credits could help nuclear demonstration projects procure financing and reduce the subsidy cost of DOE loan guarantees. Because the federal government may have limited funding for multibillion-dollar nuclear demonstration projects, a methodology for selecting which projects and technologies to support would likely be necessary. While this would appear to put DOE in the position of \"picking winners,\" as discussed above, it is conceivable that some market-based selection criteria could be at least part of the selection process for demonstration reactor support. One such criterion could be evidence of a customer base, which could include letters of intent for future orders (perhaps conditioned on successful demonstration). Another market-based criterion could be the extent of private matching funds raised for the project, such as firm contracts for power sales from the demonstration plant, or other private funding. Many other criteria could also be considered, such as technology maturity level (the level of technical risk) and the financial and technical strength of the project sponsor. The potential goal of demonstrating the widest possible range of advanced technologies might also be a consideration. The U.S. nuclear industry has argued that current NRC procedures for reviewing and licensing new nuclear reactors are overly burdensome and inflexible, contributing to high regulatory costs and long reviews. Existing licensing pathways and safety regulations, which tend to be based on conventional LWR designs, are not necessarily well-suited to accommodate newer, advanced reactors. Consequently, industry groups and some outside experts have argued for a transition to a technology-neutral regulatory framework, a process which these groups have estimated may take up to five years to complete. The industry has also called for greater flexibility in making changes during reactor construction without regulatory delays. In response to such concerns, NEIMA includes several provisions on advanced nuclear reactor licensing. In the near term, NRC is required to establish \"stages in the licensing process for commercial advanced nuclear reactors,\" which would allow license applicants to gain formal approval for completing each step in the licensing process, such as a conceptual design assessment. A 2016 industry report recommending staged licensing noted that such a process is currently used in Canada and the United Kingdom. \"The step-wise pre-licensing design review processes in Canada and the UK provide earlier opportunities for reactor vendors to demonstrate to their investors and potential investors that the reactor design technology will be licensable,\" according to the report. NEIMA also requires NRC to develop procedures for using \"licensing project plans,\" which are described by the committee report as \"agreements between the agency and applicants early in the application process that reflect mutual commitments on schedules and deliverables to support resource planning for both the agency and the applicant.\" NRC must also increase the use of risk-informed and performance-based licensing evaluation techniques \"within the existing regulatory framework.\" Using such techniques, the evaluation of specific safety and other issues would be informed by the calculated level of risk, and performance standards would be used to evaluate safety, \"when appropriate,\" rather than specific reactor design requirements. NEIMA requires NRC to issue a \"technology-inclusive\" regulatory framework for optional use by advanced reactor applicants. As noted above, NRC regulations currently focus on light water reactors, which are the only commercial reactors currently used in the United States. NRC also must issue a report that would include an evaluation of the need for additional legislation to implement such a regulatory framework. Prior to NEIMA's enactment, NRC had begun preparing for the potential licensing of advanced reactors, issuing implementation action plans for the near, mid-, and long terms. New nuclear fuels are also subject to NRC regulation. Depending on the design, it can take up to six years to develop, test, and license new fuels. Transporting these new fuel forms may require additional innovation and regulation. The nuclear industry has contended that fees charged by NRC for reviewing reactor designs, new fuels, and license applications constitute a significant obstacle to advanced reactor deployment, particularly by relatively small, independent companies. NEICA authorizes DOE to provide grants to advanced reactor license applicants to cover some of their NRC fees throughout the licensing process. Federal agency agreements to purchase power from advanced reactors could substantially improve the financial feasibility of such projects, both at the demonstration and commercialization stages. Such power purchase agreements (PPAs) would provide a projected revenue stream that could help advanced reactor projects obtain financing and potentially reduce their financing costs. Federal agencies could also offer above-market prices for the power to encourage commercialization of nuclear technologies, if authorized by Congress. Proposals to address this issue are included in NELA ( S. 903 ), noted above. Section 2 of NELA would authorize the General Services Administration (GSA) to enter into PPAs for up to 40 years, an increase from the current limit of 10 years. Under 40 U.S.C. §501, GSA can delegate all or part of this authority to other agencies. Under a PPA, the federal government signs a contract to purchase electricity from a public utility for a specific time period. Electricity payments during a PPA contract period, along with any other customer revenues, are intended to be sufficient to allow the power plant developer to recover its construction and other costs, plus a profit, if applicable. The proposed lengthening of the 10-year limit on PPAs is intended to allow enough time for nuclear reactor construction costs to be recovered, according to NELA's sponsors. NELA Section 3 would require DOE to enter into at least one PPA to purchase power from a commercial nuclear reactor by the end of 2023. \"Special consideration\" would be given to \"first-of-a-kind or early deployment nuclear technologies\" that could provide reliable power to important national security facilities, especially facilities disconnected from the electricity grid. If a PPA met those criteria, then electricity rates under the agreement could be higher than the average market rate. PPAs with currently operating commercial nuclear plants would not qualify for above-market rates. Federal PPAs of any duration are subject to cancellation each year if sufficient funds are not appropriated by Congress, and to cancellation at any time for the convenience of the government. DOE's Western Area Power Administration (WAPA), which markets electricity from federal dams and other projects in much of the Western United States, has the authority to sign power sale contracts for up to 40 years (43 U.S.C. 485h(c)). This authority could potentially facilitate PPAs for demonstration reactors at INL or elsewhere in the WAPA service area. According to a 2017 report produced for DOE, \"A federal agency located within WAPA's jurisdiction may leverage WAPA's long-term contract authority by entering into an Interagency Agreement with WAPA and allowing WAPA, in turn, to enter into a PPA with a power provider on such federal agency's behalf for a term of up to 40 years.\" Under that scenario, WAPA could reach an interagency agreement with a military base in California under which WAPA would award a 40-year PPA on behalf of the base to a demonstration reactor at INL and then deliver the power to the base. Many advanced reactors would use fuels that are not currently commercially available, either due to lack of demand or technological immaturity. These include higher-enriched versions of existing uranium fuel as well as new types of fuels that are currently under development. Without near-term investment in fuel processing and fabrication capabilities, there may be insufficient supply of next generation fuels to support the deployment of some advanced reactors. Particular concern has been raised about the availability of high-assay low enriched uranium (HALEU), which would be necessary to power many advanced nuclear reactors. Existing U.S. commercial nuclear reactors are fueled by uranium that has been enriched to between 3% and 5% of the fissile isotope U-235. HALEU is enriched to between 5% and 20%. (At 20% and above, uranium is considered highly enriched and potentially useable for weapons.) Because HALEU is not used in existing commercial reactors, it is not readily available for advanced reactor development, according to the nuclear industry. Section 7 of NELA would require DOE to sell, transfer, or lease high-assay low enriched uranium (HALEU) for use in advanced nuclear reactors. HALEU containing at least 2 metric tons of U-235 is to be made available by the end of 2022 and a total of at least 10 metric tons by the end of 2025. The FY2019 Energy and Water Development Appropriations Act ( P.L. 115-244 , Division A) requires DOE to submit a plan to Congress for HALEU development and provides $20 million for preparation and testing. DOE is currently pursuing two approaches for developing HALEU supplies. One approach is to use DOE-owned HALEU currently stored at INL to fabricate fuel for advanced reactors. DOE issued an environmental assessment on January 17, 2019, that found no significant environmental impact from fabricating the fuel at existing INL facilities. In the other approach, DOE announced January 7, 2019, that it intended to sign a sole-source contract with Centrus Energy to build 16 centrifuges at DOE's Portsmouth, OH, site to enrich \"a small quantity\" of uranium to 19.75% U-235 by October 2020. The Nuclear Energy Institute has estimated that it would take a minimum of seven years to establish the infrastructure to supply this fuel for commercial purposes. DOE has proposed to downblend a supply of high enriched uranium to bridge this gap. By some assessments, 32 GWe of deployed advanced reactor capacity would be required to ensure the economic viability of new fuel fabrication and other fuel cycle facilities. The International Framework on Nuclear Energy Cooperation (IFNEC) is an international body dedicated to ensuring that the \"use of nuclear energy for peaceful purposes proceeds in a manner that is efficient and meets the highest standards of safety, security and non-proliferation.\" IFNEC was formed in 2010 by the members of its precursor organization, the Global Nuclear Energy Partnership. Its membership includes 34 participant countries, 31 observer countries, and 4 international observer organizations. The United States is a participating country. IFNEC working groups focus on issues related to nuclear infrastructure development, reliable fuel services and spent fuel management, and nuclear supply chains and supplier-customer relationships. The Generation IV International Forum (GIF) is a collaborative international initiative to promote the development of the next generation of nuclear energy systems through shared R&D. GIF was created in 2000 with nine original members: Argentina, Brazil, Canada, France, Japan, South Korea, South Africa, the United Kingdom, and the United States. Switzerland, the European Union, China, Russia, and Australia joined subsequently. In 2002, after reviewing 130 advanced reactor designs, the GIF identified 6 nuclear energy systems for further development. Collectively, these are known as Generation IV reactors. The six Generation IV reactor technologies are: Gas-Cooled Fast Reactor, Lead-Cooled Fast Reactor, Molten Salt Reactor, Sodium-Cooled Fast Reactor, Supercritical Water-Cooled Reactor, and Very High Temperature Reactor. Factors used in selecting the designs include safety, sustainability, economics, physical security, proliferation resistance, and waste minimization, and they represent a range of technologies. The GIF has suggested that commercialization of some of these technologies may occur as early as 2030, with demonstration of some technologies possibly occurring within the next decade. Each of these technologies is at a different level of technical maturity. Of these, sodium-cooled fast reactors are considered to be the most mature. Gas-cooled fast reactors, lead-cooled fast reactors, and molten salt reactors are not expected to reach commercialization until 2050 under current rates of development, although some vendors and academics have put forth more optimistic timelines.", "summary": "All nuclear power in the United States is generated by light water reactors (LWRs), which were commercialized in the 1950s and early 1960s and are now used throughout most of the world. LWRs are cooled by ordinary (\"light\") water, which also slows (\"moderates\") the neutrons that maintain the nuclear fission chain reaction. High construction costs of large conventional LWRs, concerns about safety raised by the 2011 Fukushima nuclear disaster in Japan, and other issues have led to increased interest in unconventional, or \"advanced,\" nuclear technologies that could be less expensive and safer than existing LWRs. An \"advanced nuclear reactor\" is defined in legislation enacted in 2018 as \"a nuclear fission reactor with significant improvements over the most recent generation of nuclear fission reactors\" or a reactor using nuclear fusion (P.L. 115-248). Such reactors include LWR designs that are far smaller than existing reactors, as well as concepts that would use different moderators, coolants, and types of fuel. Many of these advanced designs are considered to be small modular reactors (SMRs), which the Department of Energy (DOE) defines as reactors with electric generating capacity of 300 megawatts and below, in contrast to an average of about 1,000 megawatts for existing commercial reactors. Advanced reactors are often referred to as \"Generation IV\" nuclear technologies, with existing commercial reactors constituting \"Generation III\" or, for the most recently constructed reactors, \"Generation III+.\" Major categories of advanced reactors include advanced water-cooled reactors, which would make safety, efficiency, and other improvements over existing commercial reactors; gas-cooled reactors, which could use graphite as a neutron moderator or have no moderator; liquid-metal-cooled reactors, which would be cooled by liquid sodium or other metals and have no moderator; molten salt reactors, which would use liquid fuel; and fusion reactors, which would release energy through the combination of light atomic nuclei rather than the splitting (fission) of heavy nuclei such as uranium. Most of these concepts have been studied since the dawn of the nuclear age, but relatively few, such as sodium-cooled reactors, have advanced to commercial scale demonstration, and such demonstrations in the United States took place decades ago. The 115th Congress enacted two bills to promote the development of advanced nuclear reactors. The first, the Nuclear Energy Innovation Capabilities Act of 2017 (NEICA), was signed into law in September 2018 (P.L. 115-248). It requires DOE to develop a versatile fast neutron test reactor that could help develop fuels and materials for advanced reactors and authorizes DOE national laboratories and other sites to host reactor testing and demonstration projects \"to be proposed and funded, in whole or in part, by the private sector.\" The second, the Nuclear Energy Innovation and Modernization Act (NEIMA, P.L. 115-439), signed in January 2019, would require the Nuclear Regulatory Commission to develop an optional regulatory framework suitable for advanced nuclear technologies. The 115th Congress also appropriated $65 million for R&D to support development of the versatile test reactor in the Energy and Water Development Appropriations Act, FY2019, along with funding for ongoing advanced nuclear research and development programs (Division A of P.L. 115-244). Continued debate over advanced reactor issues is anticipated in the 116th Congress. A fundamental question may be the role of the federal government in advanced nuclear power development. DOE's budget request for FY2020 focuses the federal role on \"early stage research\" rather than the more expensive stages of demonstration and commercialization. Controversy is also likely to continue over the need for advanced nuclear power. Supporters contend that such technology will be crucial in reducing emissions of greenhouse gases and bringing carbon-free power to the majority of the world that currently has little access to electricity. However, some observers and interest groups have cast doubt on the potential safety, affordability, and sustainability of advanced reactors. Because many of these technologies are in the conceptual or design phases, the potential advantages of these systems have not yet been established on a commercial scale. Concern has also been raised about the weapons-proliferation risks posed by the potential use of plutonium-based fuel by some advanced reactor technologies. Other current issues related to advanced reactors include criteria for hosting private-sector demonstration reactors at DOE sites, the licensing framework for non-LWR reactors, longer time periods for federal agreements to purchase power from advanced reactors, and the supply of the high-assay low enriched uranium fuel that would be needed for some advanced reactor designs. There also may be congressional interest about potential federal assistance for demonstration reactors, which are expected to cost billions of dollars apiece. Major options for such assistance include federal cost sharing, loan guarantees, power purchase agreements, purchase of reactor capacity for research uses, and tax credits.", "document_type": "crs"}
{"report": "This report focuses on selected U.S. airborne electronic attack programs. Such programs involve developing and procuring both the aircraft whose primary mission is electronic warfare (EW) and the EW systems that are mounted on U.S. aircraft. The President's FY2020 budget request for the Department of Defense (DOD) seeks funding for a number of airborne EW programs. These programs pose a number of potential oversight issues for Congress, and its decisions on these issues could affect future U.S. military capabilities and funding requirements. Congress has continually shown interest in EW, and airborne electronic attack in particular. Some Members have formed the EW Working Group, and they routinely discuss improving EW capabilities. The National Defense Authorization Acts over the past several years have included provisions related to EW and electronic attack. Most recently the FY2019 John S. McCain National Defense Authorization Act, discussed the Air Force's acquisition strategy for a new EW attack aircraft as well as a study to catalogue all EW capabilities. Electronic warfare (EW)—sometimes also called electromagnetic maneuver warfare (EMW) —is a component of modern warfare, particularly in response to threats posed by technologically sophisticated potential adversaries such as Russia and China. EW generally refers to operations that use the electromagnetic spectrum (i.e., the \"airwaves\") to detect, listen to, jam, and deceive (or \"spoof\") enemy radars, radio communication systems and data links, and other electronic systems. It also refers to operations for defending against enemy attempts to do the same. More formally, DOD defines electronic warfare as \"military action involving the use of electromagnetic and directed energy to control the electromagnetic spectrum or to attack the enemy.\" As shown in Figure 1 , DOD divides EW into electronic warfare support, electronic protection, and electronic attack. Electronic warfare support , sometimes also referred to as electronic support measures (ESM), involves listening to an adversary's radar and radio transmissions in order to detect, locate, and understand how to avoid, jam, or deceive those systems. Electronic protection involves limiting the electromagnetic signatures of one's own military equipment and hardening one's own military equipment against the effects of enemy EW operations. Electronic attack (EA) involves jamming and deceiving enemy radars and radio communications and data links. Developing ever-better EW systems is a component of the overall competition in military capabilities between major military powers. This issue is not frequently discussed publicly in much detail, because the specifics of EW programs tend to be classified and are closely related to intelligence systems and capabilities. During the Cold War, EW capabilities supported the overall competition in military capabilities between the U.S.-led NATO alliance and the Soviet-led Warsaw Pact alliance. The end of the Cold War and the shift in the early 1990s to the post-Cold War era—a period that featured reduced tensions between major powers and a strong U.S. military emphasis on countering terrorist and insurgent organizations—may have led to a reduced emphasis in U.S. defense plans and programs related to so-called high-end warfare, meaning high-intensity warfare against technologically sophisticated adversaries. In recent years, the shift in the international security environment from the post-Cold War era to an era of renewed great power competition has increased the focus on EW in U.S. defense planning and programming. In particular, attention has been given to aspects of EW related to high-end warfare and to concerns among some observers that the United States needs to strengthen its efforts in EW as part of its overall effort to preserve U.S. qualitative military superiority over potential adversaries such as Russia and China. DOD notes Russia has placed an emphasis on EW in its military modernization effort. For example, Russia reportedly has employed EW as part of its military operations in Ukraine and Syria. DOD similarly states that China recognizes the importance of EW in modern military operations and is developing its EW capabilities as an integral part of its broad-based military modernization effort. As China encourages greater integration between its civil and military technological and industrial bases, its EW capabilities may benefit from the sophistication of its extensive civilian electronics industry. EW emerged in the early and middle decades of the 20 th century with the invention and spread of radio and radar and their use in military operations. It therefore predates cyberwarfare, which emerged decades later with the invention and spread of computers and the internet. Today, some overlap exists between EW and cyberwarfare, though there is a key difference between the two. EW focuses on military operations that use the electromagnetic spectrum against radars and radio communication and data links, while cyberwarfare activities—which occur on a day-to-day basis, as well as during overt conflicts—target computers and servers, and involve significant use of the wired connections between them. EW and cyberwar activities can support one another. Although dedicated U.S. EW aircraft are relatively few in number compared with the number of U.S. fighters, strike fighters, and attack aircraft, they play a role in helping to ensure the combat survivability and effectiveness of other aircraft and friendly forces on the ground. EW aircraft detect and jam enemy radars and air defense command-and-control equipment, so that U.S. fighters, strike fighters, attack aircraft, and bombers can more safely penetrate enemy airspace. EA-18G Growlers (discussed below) accompany U.S. fighters, strike fighters, and attack aircraft on missions to penetrate enemy airspace. Other U.S. EW aircraft, such as the EC-130H Compass Call aircraft (discussed below), perform their EW missions from standoff locations in less contested airspace. Fifth-generation stealthy U.S. aircraft such as the F-22 Raptor and the F-35 Joint Strike Fighter are less dependent on EW support than are less stealthy, earlier-generation U.S. aircraft. Even F-22s and F-35s, however, still benefit from EW support under certain circumstances. EW aircraft support the Navy's Naval Integrated Fires Counter-Air (NIF-CA) concept and help ensure the combat survivability and effectiveness of less stealthy, earlier-generation U.S. aircraft and friendly forces on the ground. Although various U.S. manned and unmanned aircraft perform EW operations, this report focuses on DOD's three primary manned EW electronic attack aircraft: the EA-18G Growler, the EC-130H Compass Call, and the EC-37B Compass Call Re-Host. It also focuses on a fourth manned aircraft, the F-35 Joint Strike Fighter, which has extensive built-in EW capabilities. Each of these four aircraft is discussed briefly below. The Boeing EA-18G Growler ( Figure 2 ) is a Navy carrier-capable EW aircraft. Its primary mission is to detect and jam enemy radars. Among the 60 or more aircraft in an aircraft carrier's embarked air wing, typically four or five are EA-18Gs. These aircraft are also operated by the Royal Australian Air Force (RAAF). The EA-18G is the successor to the carrier-capable EA-6B Prowler, which was operated by both the Navy and Marine Corps. The EA-18G achieved initial operational capability (IOC) in September 2009, and EA-18Gs have gradually replaced EA-6Bs. The final operational EA-6Bs, operated by the Marine Corps, were retired in March 2019. Unlike the EA-6B, which was a four-seat aircraft, the EA-18G has a crew of two. The EA-6B was an EW variant of the Navy and Marine Corps carrier-capable A-6 Intruder attack plane; similarly, the EA-18G is an EW variant of the Navy and Marine Corps carrier-capable F/A-18F Super Hornet strike fighter. The EA-18G is equipped with an airborne electronic attack (AEA) avionics suite that has evolved from the EA-6B's Improved Capability III (ICAP III) AEA system. As discussed below, the EA-18G carries AN/ALQ-99 jamming pods, which are to be replaced by Next Generation Jammer jamming pods. The Navy states that \"the EA-18G's electronic attack upgrades meet or exceed EA-6B Airborne… Electronic Attack capability to detect, identify, locate and suppress hostile [electromagnetic] emitters; provide enhanced connectivity to National, Theater and strike assets; and provide organic precision emitter targeting for employment of onboard suppression weapons to fulfill operational requirements.\" The Navy further states that [t]he EA-18G provides full-spectrum airborne electronic attack (AEA) capabilities to counter enemy air defenses and communication networks, most notably anti-radiation missiles. These capabilities continue to be in high demand in overseas contingency operations, where Growler operations protect coalition forces and disrupt critical command and control links. The Air Force does not operate an aircraft directly analogous to the EA-18G. The last such Air Force aircraft was the EF-111 Raven, an EW variant of the F-111 fighter. The Air Force retired the last of its EF-111s in 1998. The Navy states that \"the [EA-18G] inventory objective of 160 aircraft will support ten carrier-based squadrons, five active expeditionary squadrons, and one reserve squadron.\" A total of 163 EA-18Gs were procured through FY2016, including a final procurement of 10 in FY2016. The Department of the Navy does not plan further procurement of EA-18Gs. EA-18Gs, like F/A-18E/Fs, currently are receiving funding for a service life extension; the Growler is expected to be replaced starting in the 2030s. The EC-130H Compass Call ( Figure 3 ) is an EW aircraft based on a modified version of the C-130 Hercules cargo aircraft. The EW system on the aircraft is called the Compass Call system. The Air Force states that the EC-130H \"disrupts enemy command and control communications and limits adversary coordination essential for enemy force management.\" The Compass Call system employs offensive counter-information and electronic attack (or EA) capabilities in support of U.S. and Coalition tactical air, surface, and special operations forces. The EC-130H is operated by a crew of 14, most of whom are assigned to operate the aircraft's EW systems. The EC-130H can be considered a so-called \"low-density, high-demand asset,\" meaning a specialized asset that exists in DOD in relatively low numbers but that DOD uses extensively. A February 2018 press report states that [t]he small, 14-aircraft EC-130H fleet has been flying since 1981—and near-constantly in the Afghanistan, Iraq, and Syrian conflicts, because of the unique capability it offers in communications jamming and electronic attack. It has been a key element in the fight against ISIS, an adversary that has adapted high technology to its tactics and strategy…. EC-130Hs there have been deployed nonstop since 2002, the longest continuously deployed Air Force unit in the Afghanistan war. The EC-130H achieved IOC in 1983. EC-130Hs are being replaced over time by new EC-37B Compass Call Re-Host aircraft (see next section). The Air Force projects in its FY2020 budget submission that it will have 13 EC-130Hs and no EC-37Bs in service at the end of FY2019, and 12 EC-130Hs and one EC-37B in service at the end of FY2020. While EC-130Hs remain in service, the Air Force plans to modernize them to improve their capabilities and reduce their maintenance costs, which have been rising as the aircraft have aged. Air Force plans call for replacing the service's EC-130Hs over time with a total of 10 new EC-37B Compass Call Re-Host aircraft ( Figure 4 ). The first EC-37B was procured in FY2018, two more were procured in FY2019, and the Air Force's proposed FY2020 budget requests $114.1 million for the procurement of a fourth in FY2020. Air Force plans call for procuring additional EC-37Bs at a rate of one per year until the planned total of 10 is reached. The Air Force's FY2020 budget submission projects that the first new EC-37B will enter the Air Force's inventory by the end of FY2020. The first two EC-37Bs are scheduled to achieve Initial Operational Capability (IOC) in 2023. L3 Technologies, a U.S. defense contractor involved in EW programs, is the prime contractor for the EC-37B. The EC-37B is based on the Gulfstream G550 commercial business jet, an aircraft that the Air Force also uses as the basis for its C-37B VIP transport aircraft. The Air Force states that EC-37Bs will receive Prime Mission Equipment (PME) from legacy donor EC-130H aircraft, as well as new, upgraded PME…. The re-hosted COMPASS CALL platform will utilize 70% of the PME off of the current airframe without modification; the remaining 30% of PME will be new or modified (repackaged) for the re-host. [Compared to the EC-130H,] the re-hosted COMPASS CALL aircraft will provide increased range, speed, endurance and operating altitude for better stand-off range and survivability. This will enable the USAF to effectively conduct Electronic Attack (EA) in an Anti-Access/Area Denial (A2AD) environment. The Air Force's acquisition strategy of replacing the EC-130H fleet by re-hosting their EW systems on new Gulfstream G550 aircraft was a subject of debate in Congress and contract-award protests. The Lockheed Martin F-35 Joint Strike Fighter ( Figure 5 ) is being procured in three versions for the Air Force (F-35A), Marine Corps (F-35B), and Navy (F-35C). Another CRS report provides an overview of the F-35 program, which is DOD's largest single acquisition program. While the F-35's primary missions are air-to-ground combat (i.e., strike operations) and air-to-air combat (i.e., fighter operations), the F-35 has a built-in EW capability that is claimed by Lockheed Martin officials—the prime contractor manufacturing the aircraft—to be significantly greater than that of previous U.S. fighters and attack aircraft. Lockheed officials state that the F-35's EW system, designated AN/ASQ-239 serves as a signals collector system which provides: radar warning, identifies the geolocation of electronic emitters, tracks multiple aircraft simultaneously, provides high-gain (i.e., a highly focused radio antenna), high gain counter measures, and high gain electronic attack through the radar. According to Lockheed officials these EW capabilities are designed to provide: wide-frequency coverage, quick reaction time, high sensitivity and probability of intercept, accurate direction finding, track multiple aircraft, and provide self-protection countermeasures and jamming. Lockheed Martin claims that due to the inherent, built-in electronic warfare capabilities the F-35 does not require a dedicated electronic attack aircraft to support it; this would potentially free up other aircraft to perform electronic attack missions to protect less stealthy aircraft. To provide its organic jamming capability the F-35uses its active electronically scanned array (AESA) radar which teamed with advanced jamming algorithm packages, can potentially provide 10 times the jamming power of legacy aircraft. Figure 6 shows the location of EW system-related equipment on the F-35. During a 2018 hearing on the Navy and Marine Corps aviation program review, Lieutenant General Steven Rudder stated that although the Marine Corps was retiring the EA-6B, the Marine Corps' new F-35Bs would have sufficient EW capability for most Marine Corps contingencies. DOD's primary airborne electronic attack payloads include the AN/ALQ-99 electronic attack suite, the Next Generation Jammer, and the Miniature Air Launched Decoy-Jammer. Each of these systems is discussed briefly below. The AN/ALQ-99 tactical jamming system ( Figure 7 and Figure 8 ; see also Figure 2 ) consists of a series of electronic jamming pods. The system was originally developed in the 1970s for the EA-6B, and it was also used by the EF-111A. The system has been updated over time and is currently carried by EA/18Gs. The current version of the system, called the ALQ-99F(V), achieved IOC in 1999. Navy plans call for replacing the ALQ-99 with the Next Generation Jammer (see next section). The Navy states that the ALQ-99 \"is the only airborne tactical jamming system in the Department of Defense inventory. [The] ALQ-99 [system] is facing material and technological obsolescence and cannot counter all current, much less future, threats.\" As mentioned above, Navy plans call for replacing the ALQ-99 with a new EW system called the Next Generation Jammer (NGJ) ( Figure 9 , Figure 10 , and Figure 11 ). The NGJ is being developed in three increments designed to jam across three radio frequency bands to prevent adversaries from using their communications and radar systems. The first increment, which is to provide EW capability in mid-band frequencies, was previously referred to as Increment 1, but is now called the AN/ALQ-249 system or the Next Generation Jammer—Mid Band (NGJ-MB). The next increment, which is to provide EW capability in low-band frequencies, was previously referred to as Increment 2, is now called the Next Generation Jammer—Low Band (NGJ-LB). The remaining increment, currently called Increment 3, is to provide EW capability in high-band frequencies. DOD states that \"the order of development [of the increments] was determined by the assessed capabilities of the developing threat and shortfalls of the legacy system to counter those capabilities, with Inc 1 [the Increment 1 system] covering the most critical threats.\" Raytheon was awarded the contract for developing NGJ-MB. L3 Systems, Northrop Grumman, and Harris were awarded the contract for developing NGJ-LB. The Navy's FY2020 budget submission states that NGJ-MB is scheduled to achieve IOC in the fourth quarter of FY2022. The NGJ program has been a subject of congressional oversight for several years. An August 2018 press report states the Navy stalled in its development of the NGJ, however with the renewed focus of \"great power competition,\" particularly with Russia and China, the NGJ has been given increased importance and priority. Frank Kendall, when he served as the Undersecretary of Acquisition, Technology and Logistics decided to accelerate the program. The Navy's FY2020 budget submission requests $524.3 million for PE 0604274N in FY2020. The budget submission projects annual funding to decline in subsequent years, to $178.4 million in FY2022 and zero funding thereafter as research and development work on NGJ-MB is completed and NGJ-MB transitions from research and development to procurement. The budget submission estimates the total research and development cost of NGJ-MB at $3,985.0 million (i.e., about $4.0 billion), of which $2,848.2 million (i.e., about $2.8 billion) has been received through FY2019. The Navy's FY2020 budget submission requests $6.2 million for PE0604274N—the first procurement funding requested for NGJ-MB. The submission projects that in subsequent years, as procurement of NGJ-MB ramps up, annual funding for this line item would increase to $144.7 million in FY2021 and $534.1 million by FY2024. The submission estimates the total procurement cost of NGJ-MB at $4,830.9 million (i.e., about $4.8 billion). The Navy's FY2020 budget submission requests $111.1 million for this PE in FY2020 and projects annual funding to increase in subsequent years, to $241.5 million in FY2024. The submission estimates the total research and development cost of NGJ-LB at $3,499.1 (i.e., about $3.5 billion), of which $178.3 million has been received through FY2019. Because the NGJ reportedly produces more drag on the EA-18G according to the Navy the Next Generation Jammer has the potential of reducing the operational range of the EA-18G. A November 28, 2018, press report states that the NGJ Mid-band pod produces more drag than the current ALQ-99. Raytheon's proposal for the low-band pod was partially rejected as a result of increased drag over competing designs. These increases in drag have been reported to reduce the operational range of the EA-18G. The specific impact on range is classified. DOD states that the Miniature Air Launched Decoy (MALD) and Jammer (MALD-J), also designated ADM-160 ( Figure 12 and Figure 13 ), is designed as a low-cost, expendable vehicle that can replicate the flight and radar signatures of manned aircraft. The MALD-J adds an electronic attack component. According to the DOD \"MALD-J is designed to support an airborne strike force to achieve mission success by jamming enemy radars and air‑defense systems by degrading/denying detection of friendly aircraft or munitions.\" MALD has a reported range of about 500 nautical miles. It was first developed in the mid-1990s, and more than 2,000 have been produced. A new version, designated MALD-X, is now being developed. An August 2018 press report states that MALD-X enhances the modular nature of the mini cruise missile with the ability to accommodate different electronic warfare payloads that are more advanced than those found on MALD-J. What is planned to come out of MALD-X is a networked decoy that can use its adaptive electronic warfare payload to deliver electronic attacks on air defense nodes autonomously or at the direction of operators from a afar in a semi-autonomous fashion. A derivative of MALD-J and MALD-X, designated MALD-N, is being developed for use on Navy F/A-18E/F strike fighters. Given their interest in, and concerns about, U.S. EW capabilities in the era of renewed great power competition, some Members of Congress have met in recent years through the Electronic Warfare Working Group (EWWG). In the 115 th Congress, Representative Bacon introduced the Joint Electromagnetic Spectrum Operations Readiness Act of 2018 ( H.R. 5522 ). This bill would have asked the DOD to develop a joint campaign modeling capability to model electromagnetic spectrum effect on operations, assess capabilities and capacities of EW platforms associated with operational plans, and develop an interim and annual report on programs and personnel assigned to EW missions. An identical bill in the Senate was referred to the Senate Armed Services Committee. One potential oversight issue for Congress is whether DOD is giving too little, too much, or the right amount of priority to airborne EW programs in its planning and budgeting relative to other U.S. military EW programs (such as those for U.S. ground forces or Navy surface ships) and to other DOD non-EW priorities, particularly in the context of renewed great power competition and improvements in air defense and EW capabilities by Russia, China, and other potential adversaries. Congress may consider developments such as Russia's deployment and sales to other countries of advanced air defense systems. Some observers have expressed concern about Russia's ability to use its advanced air defense systems, such as its S-400 surface-to-air (SAM) missile system, to establish hard-to-penetrate anti-access/area-denial (A2/AD) zones around defended areas in Europe and Middle East, and for countries that purchase Russian-made air defense systems, such as China, to do something similar in other regions. Other observers state that the capabilities of Russia's A2/AD air defense systems have been overrated. The Defense Intelligence Agency states that Russian air defense are among the best in the world, and they continue to develop highly-capable systems which they export to countries like China interested in acquiring long range defensive systems. DOD states that China's air force has one of the largest air defense forces, with a series of advanced long-range surface-to-air missiles. These consist of the Russian S-300PMU, the domestically produced CSA-9, and the recently fielded Russian S-400 system. An April 2018 press report stated (emphasis added): One of the \"wicked problems\" [U.S.] commandos are facing now is in Syria, which [U.S. Army General Tony] Thomas called the \"most aggressive electronic warfare environment on the planet from our adversaries. They are testing us every day, knocking our communications down, disabling our EC-130s , etc.\" Another factor Congress may consider is how, in a situation of finite DOD funding, devoting more funding to airborne EW programs would affect funding for other EW priorities, or DOD non-EW priorities, and what the resulting net change would be in overall U.S. military capabilities. Another potential oversight issue for Congress is whether DOD's proposed mix of airborne EW capabilities and investments is appropriate given the current and projected capabilities of potential adversaries such as Russia and China. Specifically, what is DOD's vision by combining specialized tactical EW aircraft such as the EA-18G, standoff EW aircraft such as the EC-130H and EC-37B, strike fighters with embedded EW capabilities such as the F-35, and air-launched decoys and jammers with growing numbers of stealthy fifth-generation F-35s? What evolutions are occurring in U.S. military operational concepts? Is it appropriate, for example, that the Air Force and Marine Corps no longer operate their own specialized tactical EW aircraft, while the Navy continues to operate and invest in the EA-18G and its Next Generation Jammer EW pods? More generally, to what degree do the airborne EW capabilities of the Air Force, Navy, and Marine Corps overlap, and is that overlap appropriate? A third potential issue for Congress is how DOD uses advances in technology. Electronic attack platforms have evolved from the manned platforms with relatively large crew sizes, such as the EA-6B Prowler and the EC-130H Compass Call, to the EA-8G Growler with a crew of two and the MALD-J, which does not have crew and is a standoff weapon. Evolving A2/AD environments potentially make traditional stand-in jamming too dangerous for manned aircraft. Therefore, Congress may consider policy for DOD regarding developing platforms that are capable of operating in A2/AD environments. What unmanned EW programs does DOD currently fund? Does DOD plan to develop additional stand-in jamming systems? Another oversight issue for Congress concerns the Air Force's planned quantity and rate for procuring EC-37Bs and replacing EC-130Hs. The Air Force plans to replace 14 EC-130H aircraft with 10 EC-37Bs. The Air Force currently maintains 10 EC-130H Compass Calls for operations, with one aircraft devoted to testing and three additional aircraft in back-up inventory. How does the Air Force plan to use a smaller fleet of aircraft? Would 10 EC-37B aircraft be able to meet operational demands? Some Members of Congress have expressed an interest in procuring EC-37Bs more quickly than the Air Force plans, so as to accelerate the replacement of EC-130Hs with EC-37Bs. The committee and conference report language bearing on this issue for the John S. McCain National Defense Authorization Act for Fiscal Year 2019 and the FY2019 DOD appropriations act appear below. John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( H.R. 5515 / S. 2987 / P.L. 115-232 ) The House Armed Services Committee, in its report ( H.Rept. 115-676 of May 15, 2018) on H.R. 5515 , the FY2019 National Defense Authorization Act, stated that [t]he committee supports the Air Force's efforts to recapitalize the aging EC–130H Compass Call fleet with the more capable EC–37 type aircraft. The committee notes that the Air Force must first comply with the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328) and the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91) before it can carry on with the transition plan. The Air Force requested $108.1 million for fiscal year 2019 for one EC–37. The committee is concerned that the Air Force plan to procure one aircraft per year over 10 years in order to recapitalize this fleet is not the most efficient way to move the capability to the field quickly, and may put the Compass Call mission at unacceptable risk of mission failure. Therefore, the committee directs the Secretary of the Air Force to provide a briefing to the House Committee on Armed Services by February 1, 2019, on the Compass Call transition plan. This plan should include: (1) courses of action to accelerate the recapitalization of the EC–130H fleet and Baseline 4 development and deployment for incoming EC–37 aircraft; (2) attendant timelines for each course of action; (3) cost estimates for each course of action; (4) recommended course of action and a plan to manage both fleets while supporting combatant commander requirements; and (5) an assessment of the potential for future cooperative development and procurement of EC–37B Compass Call aircraft by the Royal Air Force of the United Kingdom and the Royal Australian Air Force in a way the leverages the best practices of the RC–135 cooperative program arrangement with the Royal Air Force of the United Kingdom. (Pages 23-24) The Senate Armed Services Committee, in its report ( S.Rept. 115-262 of June 5, 2018) on S. 2987 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019, stated the following: The committee supports the Air Force's efforts to recapitalize the aging EC–130H Compass Call fleet with the EC–37 type aircraft. The committee notes that before it can carry on with the transition plan, the Department of Defense must first comply with the related provisions in the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328) and the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91). While the committee notes that Department has submitted the certification required by the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91), delays in satisfying the requirement has led to a work stoppage on the program lasting at least six weeks. The committee is concerned about the potential for further work stoppages should the Secretary of the Air Force fail to make a timely determination that the EC–37B has a high likelihood of meeting combatant requirements, as required by the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328). The committee encourages the Secretary of the Air Force to make a timely determination for this requirement to avoid further program delays and cost overruns. Therefore, the committee directs the Secretary of the Air Force, not more than 60 days after the determination required by the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328) is made, to provide a briefing to the congressional defense committees on the Compass Call transition plan. This plan should include: (1) Courses of action to accelerate the recapitalization of the EC–130H fleet and Baseline 4 development and deployment for incoming EC–37 aircraft; (a) attendant timelines for each course of action; (b) cost estimates for each course of action; and (2) Recommended course of action and a plan to manage both fleets while supporting combatant commander requirements. (Pages 40-41) FY2019 DOD Appropriations Act (Division A of H.R. 6157 / P.L. 115-245 ) The House Appropriations Committee, in its report ( H.Rept. 115-769 of June 20, 2018) on the FY2019 DOD appropriations act ( H.R. 6157 ), stated the following: The [committee's] recommendation [of FY2019 procurement funding for the program] includes an increase of $194,000,000 above the budget request to procure and modify one additional EC–37B Compass Call aircraft, with the expectation that such funds will allow the Air Force to accelerate the fielding of the fourth such aircraft to meet combatant commander needs and mitigate performance concerns regarding the legacy EC–130H fleet. The Committee recommends that the Secretary of the Air Force consider increasing the procurement of EC–37B aircraft to two per year if such a pace of recapitalization can be achieved without unduly disrupting the operational availability of Compass Call capability for the combatant commanders. (Page 188) In final action on the FY2019 DOD Appropriations Act (Division A of H.R. 6157 / P.L. 115-245 of September 28, 2018), Congress increased the requested amount for procurement of new EC-37Bs by $108 million for \"Program increase - accelerate fourth EC-37B aircraft.\"", "summary": "U.S. airborne electronic warfare (EW) programs involve developing and procuring EW aircraft and EW systems that are mounted on U.S. aircraft. The President's FY2020 budget request for the Department of Defense (DOD) proposes funding for a number of airborne EW programs. The Role of Airborne EW in Modern Warfare EW is a component of modern warfare, particularly in response to threats posed by potential adversaries such as Russia or China. EW refers to operations that use the electromagnetic spectrum (i.e., the \"airwaves\") to detect, listen to, jam, and deceive (or \"spoof\") enemy radars, radio communication systems, data links, and other electronic systems. EW also refers to operations that defend against enemy attempts to do the same. The shift in the international security environment from the post-Cold War era to an era of renewed great power competition has led to an increased focus on EW in U.S. defense planning and programming, particularly aspects of EW related to high-end warfare. U.S. Airborne Electronic Attack Capabilities Airborne EW capabilities are a component of U.S. military airpower. Although dedicated U.S. EW aircraft are relatively few in number compared with U.S. fighters, strike fighters, and attack aircraft, they play a role in helping to ensure the combat survivability and effectiveness of other aircraft and friendly forces on the ground. DOD's three primary manned EW electronic attack aircraft are the Navy EA-18G Growler, the Air Force EC-130H Compass Call, and the Air Force EC-37B Compass Call Re-Host. A fourth manned aircraft—the F-35 Joint Strike Fighter—has extensive, integrated EW capabilities. DOD's primary airborne electronic attack payloads include the AN/ALQ-99 electronic attack suite, the Next Generation Jammer, and the Miniature Air Launched Decoy-Jammer. EW Oversight Issues for Congress Congress has continually shown interest in EW, and the decisions it makes regarding EW could affect future U.S. military capabilities and funding requirements. In particular, EW programs pose several potential oversight issues for Congress Whether DOD is prioritizing appropriately airborne EW programs in its planning and budgeting relative to other U.S. military EW programs (such as those for U.S. ground forces or Navy surface ships) and to other DOD non-EW priorities. Whether DOD's proposed mix of airborne EW capabilities and investments is appropriate. The evolution of technology and how new technologies can be employed for EW operations. The Air Force's planned rate for procuring EC-37Bs and replacing EC-130Hs.", "document_type": "crs"}
{"report": "The Department of Defense (DOD) obligates more than $300 billion annually to pay for goods and services (including research and development). Most of these acquisitions are governed by numerous statutes and regulations found in Title 10 of the United States Code, the Federal Acquisition Regulation (FAR), and the Defense Federal Acquisition Regulation Supplement (DFARS). DOD can also enter into certain transactions without triggering most of the standard acquisition statutes and regulations by using other transaction (OT) authorities. In recent years, Congress has expanded these authorities and DOD is increasingly using OTs for research, prototyping, and production. This report examines (1) how OTs work, (2) why they were established, (3) potential benefits and risks of using OTs, and (4) whether there are data available against which to measure their effectiveness. Appendix A provides a legislative history of DOD's other transaction authorities. On October 4, 1957, the Soviet Union triggered a space race with the United States when it successfully launched Sputnik I into orbit, becoming the first nation to send a man-made satellite into space. Congress, concerned that the United States was falling behind in space, held a series of hearings on an \"emergency\" effort to respond to the Soviet launch of Sputnik. At the same time, a bill was introduced in the Senate to create an agency with the means to quickly and efficiently develop a national space program. These efforts led to passage of the National Aeronautics and Space Act of 1958 (Space Act, P.L. 85-568) in July 1958, which established the National Aeronautics and Space Administration (NASA). In an effort to give the new agency \"the necessary freedom to carry on research, development, and exploration ... to insure the full development of these peaceful and defense uses without unnecessary delay,\" the Space Act granted NASA broad authority to \"enter into and perform such contracts, leases, cooperative agreements, or other transactions as may be necessary\" to accomplish its mission of research and exploration (emphasis added). Congress extended different variations of OT authorities to other select agencies, granting the authority to DOD in the FY1990 & 1991 National Defense Authorization Act (NDAA, P.L. 101-189 ). For an analysis of which non-DOD agencies can use OTs and how the authorities differ by agency, see Appendix B . Other transactions are legally binding contracts that are generally exempt from federal procurement laws and regulations such as the Competition in Contracting Act and the Federal Acquisition Regulation. In contrast, traditional procurement contracts must adhere to the procurement rules set forth in statute and regulation. Generally, DOD can use other transaction authorities for three purposes: 1. conduct research, 2. develop prototypes, or 3. contract for follow-on production of a successful prototype project. DOD's other transaction authorities are found in two sections of law: 10 U . S . C . 2371 grants DOD the authority to use other transactions to carry out basic, applied, and advanced research projects. DOD regulations treat these projects as financial assistance instruments, not as contracts. 10 U . S . C . 2371b permits the use of other transactions to conduct prototype projects and follow-on production. OTs can only be used for prototypes if one of the following applies: at least one nontraditional defense contractor significantly participating in the project; all significant participants are small businesses or nontraditional defense contractors; at least one-third of the total cost of the prototype project is provided by nongovernment participants; or the senior procurement acquisition official provides in writing an explanation of the exceptional circumstances justifying an OT. Follow-on production can only be conducted when the underlying prototype OT was competitively awarded, and the prototype project was successfully completed. 10 U . S . C . 2373 , while generally not considered an o ther t ransaction authority , allows DOD to buy certain items and designs for experimental or test purposes without having to adhere to the procurement laws set forth in Chapter 137 of Title 10. OT authorities grant government officials the flexibility to include, amend, or exclude contract clauses and requirements that are mandatory in traditional procurements (e.g., termination clauses, payments, audit requirements, intellectual property, and contract disputes). OTs can be structured in numerous ways, including a direct relationship between a single government agency and a single provider; joint ventures; partnerships; multiple agencies joining together to fund an agreement encompassing multiple providers; or through a consortium. One common application of OTs is to forge an agreement with a consortium. A consortium is an organized group— it can consist of nonprofits, academic institutions, or contractors— focusing on a specific technology area. Generally, a lead entity coordinates and directs a consortium's activities. Consortia have consisted of a handful to as many as 1,000 members. Consortia can act to facilitate multiparty agreements whereby each member is akin to its own co-prime contractor with the government. In such a case, the government articulates the need or problem it is trying to solve, and the various members of the consortium can submit white papers for consideration. In this scenario, OTs can serve as an efficient way for all members to send unsolicited technology suggestions and solutions to solve a defined challenge. Consortia can also be used to develop an ecosystem of entities working together on a project, whereby members of a consortium pool resources and collaborate with DOD. A number of analysts argue that using consortia in this way gives the federal government a unique ability to leverage and pool the technological expertise and innovation of multiple entities in a particular sector, thereby strengthening and advancing a sector of the industrial base that may have defense applications. Seen like this, OTs can be considered a mechanism to promote defense technology and the defense industrial base, with the potential added benefit of advancing the domestic commercial technology base. Some analysts, however, have argued that many of today's consortia do not operate as collaborative organizations, but function more like managed multiple award task order contracts. These analysts argue that DOD should seek to foster more collaboration in consortia. Some analysts have argued that consortia reduce competition, since only members of the consortium under contract can participate in the project or submit white papers for consideration and funding. Others counter that even when an OT is signed with a single consortium, competition could be increased, since all members of the consortium are notified of the opportunity (expanding the pool of potential competitors aware of the opportunity), and the OT will foster internal competition among consortium members. OTs are not procurement contracts and thus are exempt from numerous procurement statutes and regulations, including the statutes in Chapter 137 of Title 10 ( Procurement Generally ). They are, however, bound by standard contract and other select laws and regulations. Examples of laws that do not apply include the Truth in Negotiations Act, Competition in Contracting Act, Cost Accounting Standards, Contract Disputes Act, and select intellectual property statutes such as the Bayh-Dole Act. A number of these laws are aimed at oversight and protecting the interests of taxpayers. While the Competition in Contracting Act does not apply, 10 U.S.C. 2371b requires that research and prototype projects be competed \"to the maximum extent practicable.\" DOD policy mirrors the statutory language, stating \"[C]ompetition is a good thing. It helps keep prices low, quality high, and gives the government leverage in negotiations.\" To the extent that OTs induce nontraditional contractors to work with DOD, OTs can be viewed as promoting competition among (and within) entities that would not normally compete for DOD contracts. However, the lack of explicitly defined competition requirements could result in less competition for certain OTs. OTs are not free from all legislative and regulatory requirements. Generally, statutes and regulations that are not procurement-specific apply, including the Trade Secrets Act, (18 U.S.C. 1905); the Economic Espionage Act (18 U.S.C. 1831-39); elements of the Freedom of Information Act (5 U.S.C. 552); and fiscal and property laws, such as the Anti-deficiency Act (31 U.S.C. 1341); and the Tucker Act (28 U.S.C. 1491). As can be seen by these citations, many of these statutes are not located in the procurement titles of Title 10 or Title 41. The Government Accountability Office (GAO) has held that OTs are not procurement contracts, and therefore it will not review protests of such an award or solicitation. However, GAO will review \"a timely protest that an agency is improperly using its other transaction authority.\" OT contracts can be protested to the Court of Federal Claims, although there is debate as to the extent of the court's jurisdiction. The limited protest jurisdiction of GAO is appealing to many government procurement officials. One senior Air Force official reportedly stated that OTs are \"just so much faster and so much more attuned to getting something that we want today and not have to spend a couple of years going through a protest, going through this huge process to get something we wanted two years ago.\" It generally does not take that long to go through a GAO protest. By statute, GAO must issue an opinion on a protest within 100 days of the protest being filed, and 70% of cases are resolved in less than 60 days. While exempt from GAO bid protests, OTs are not exempt from GAO audits. Generally, OTs that include government payments exceeding $5 million are required to include a clause granting GAO the right to examine the records of any related party. However, this requirement has a number of limitations. Used properly, OTs can provide significant benefits to DOD. Along with the potential benefits come certain risks. Some of the potential benefits to OTs highlighted by analysts and officials include providing a mechanism to pool R&D resources with industry to facilitate development of, and obtain \"the latest state-of-the-art, dual use technologies\"; attracting nontraditional contractors with promising technological capabilities to work with DOD; lowering costs by eliminating requirements associated with the Federal Acquisition Regulations (i.e., costs associated with required reporting and administrative activities) or sharing costs with industry; and \"speeding up\" the acquisition process. A number of experts argue that OTs provide a unique mechanism for DOD to invest in, and influence the direction of, technology development even when the end result is not directly tied to a military capability. As one observer noted, the real benefit to DOD may be that [t]he R&D has been accomplished and is available to the technical and scientific communities. As a result, a subsequent phase of research can begin or a particular approach can be demonstrated to be of no value. Some argue that OTs have particular import today. Drawing parallels to the space race, these analysts argue that DOD is engaged in a defense technology race. According to the 809 Panel: DoD is now in a period during which the time a particular technology is a dominant force on the battlefield is getting increasingly shorter, disruptive technologies are emerging at a faster pace, and these technologies are more widely dispersed…In a world with rapidly changing technology, time is a valuable resource that must not be taken for granted. It is difficult to predict what capabilities DoD will need 5 to 10 years from now—biotechnology, nanotechnology, artificial intelligence, robotics, or a new technology area not even known today. It also is unclear on what plane the military will conduct warfare—traditional battlefields, space, cyberspace, or some other domain. The current acquisition system lacks the agility needed to adapt to new paradigms. These analysts argue that OTs and similar rapid acquisition authorities are critical for DOD to compete in such a fast-paced global environment where technology and innovation are no longer driven by DOD, but by industry and foreign competitors. In 1960, the United States accounted for 69% of global R&D, with U.S. defense-related R&D alone accounting for more than one-third of global R&D. The federal government funded approximately twice as much R&D as U.S. business. However, from 1960 to 2016, the U.S. share of global R&D fell to 28%, and the federal government's share of total U.S. R&D fell from 65% to 24%, while business's share more than doubled from 33% to 67%. As a result of these global, national, and federal trends, federal defense R&D's share of total global R&D fell to 3.7% in 2016. Given the shift in the global R&D landscape, and the diminishing influence of DOD as a market mover, analysts suggest that the current procurement system is overburdened by regulations and bureaucratic processes that slow the system, increase costs, and dissuade companies from doing business with DOD. In contrast, OTs are viewed as faster, attracting companies that would otherwise forgo working with DOD and promoting broader investment in critical defense capabilities. As one analyst wrote: OTAs are currently the only way to remove the barriers necessary to get these nontraditional sources of innovation to do business with the military. Properly constructed, OTAs help speed up the process, respect a company's IP through negotiation rather than regulatory fiat, and result in contracting under commercial terms and conditions. Congress also appears to have shifted its view on appropriate use of other transactions. In the FY1999 conference report, Congress stated that [OT] authority should only be used in the exceptional cases where it can be clearly demonstrated that a normal contract or grant will not allow sufficient access to affordable technologies. By comparison, in the FY2018 NDAA, Congress expanded OT authorities and stated the following: In the execution of science and technology and prototyping programs, the Secretary of Defense shall establish a preference, to be applied in circumstances determined appropriate by the Secretary, for using transactions other than contracts, cooperative agreements, and grants. Along with the potential benefits come potential risks, including that of diminished oversight and exemption from laws and regulations designed to protect government and taxpayer interests. Some analysts, while acknowledging the important role of OTs, raise concerns over transparency and how these agreements are being employed. As one industry official stated, OTs are a contracting method, not a substitute for good acquisition practices. Discussing a particular OT for cloud services that was protested and ultimately cancelled by DOD, one observer argued The cloud contract provides a teachable moment for procurement reform-minded officials in the Pentagon and Capitol Hill. The problem was not with the OTA mechanism, which remains an essential element of reforming Pentagon procurement. Rather, the problem was with a lack of transparency with how the mechanism was employed. Scott Amey, general counsel of the Project on Government Oversight, cautioned We have to seriously consider how we are using [OTs]; whether we are using them as intended, whether we are getting the goods and services that we really want and need, whether we are getting them at the best cost and process, and we are using this procurement vehicle as a way to just circumvent the rules and have contractors not have the administration and oversight they need to hold them accountable. I'm just afraid this is going to result in a lot of waste, fraud, and abuse in the future. Congress has expressed repeated concerns that OTs could be used to circumvent congressional intent. In the FY1999 NDAA, the committees emphasized that the authority should only be used in a limited manner. The conference report stated the following: The conferees are especially concerned that such authority not be used to circumvent the appropriate management controls in the standard acquisition and budgeting process. Congress echoed a similar concern in the FY2019 NDAA. According to the House report: The committee also urges the Department to reiterate through established guidelines that OTA is not a means for circumventing appropriate use of the Federal Acquisition Regulations, and that full and open competition should be used to the maximum extent possible to maintain a sense of integrity, fairness, and credibility in the Federal Procurement process. Other transactions are also exempt from many of the socioeconomic policies put in place by Congress to promote public policies, including some Buy America requirements. Some analysts have raised concerns that OTs are a way to circumvent many of the public policies enshrined in the acquisition process. A number of analysts and officials have raised concerns that if DOD uses OTs in ways not intended by Congress—or is perceived to abuse the authority—Congress could clamp down on the authority. Under Secretary of the Army Ryan McCarthy reportedly stated that the military department is \"trying to be very judicious about this authority so we don't lose it.\" Some analysts argue that Congress is already clamping down on the use of OTs. These analysts point to language in the FY2019 NDAA and FY2019 appropriations legislation ( P.L. 115-245 ) requiring additional reporting and notification (see Appendix A ). Such notification and reporting requirements, however, are not new; when Congress expanded OT authorities in the past, reporting and notification requirements were commonly included. The reporting requirements may also be a result of congressional frustration with a lack of transparency and data on how DOD uses OTs. DOD lacks authoritative data that can be used to assess OT effectiveness and better understand broader trends associated with these agreements. The most frequently cited source for such data is the Federal Procurement Data System-Next Generation (FPDS-NG), which is the primary source for tracking data on contract obligations, including other transactions for prototypes and follow-on production. FPDS-NG is configured to track data on cost-sharing, other transaction award type, and prevalence of nontraditional contractors. Obligations connected to OTs for research are tracked by the Defense Assistance Awards Data System, which is primarily used to track grants and cooperative agreements. This bifurcation of how OT data are tracked makes it more difficult to get a consolidated view of OT data. According to DOD, all OT data will be reported through FPDS-NG starting in late 2019. The procurement data in FPDS-NG are not fully reliable. There are quality issues relating to accuracy, completeness, and timeliness of data. CRS reviewed FPDS-NG data for prototype OT agreements signed or modified between FY2015 and FY2017 and found similar data inconsistencies. DOD officials acknowledge that they do not have sufficiently reliable data upon which to conduct analysis on the use of OTs and are taking steps to try to improve the data. The analyses below reflect CRS's effort to analyze DOD's use of other transaction authority based on the best available data. According to FPDS-NG, in FY2017, DOD obligated $2.1 billion—and received $360 million in cost-share contributions—on prototype other transaction agreements, representing less than 1% of DOD's total FY2017 contract obligations (approximately $320 billion). Despite the small percentage of obligations, OTs are growing quickly and are expected to continue to grow at a rapid pace. From FY2013 to FY2017, the number of new prototype agreements increased from 12 to 94, an increase of over 650% (see Table 1 ). DOD's Defense Innovation Unit (DIU, formerly known as the Defense Innovation Unit Experimental, or DIUx) was involved with approximately half of the prototype agreements executed in 2017. DOD officials have stated their intent to further increase the department's use of OTs. Officials say that this increase is due to Congress expanding the statutory authority. The Army executed more than 66% of the prototype OT agreements between FY2013 and FY2017, often on behalf of other military departments and components (see Table 2 ). Army Contracting Command-New Jersey at Picatinny Arsenal executes many of these agreements. DIU currently uses Picatinny Arsenal to execute all of its other transaction agreements. A number of private sector companies do not pursue federal government contracts because they are unwilling to forfeit intellectual property rights or adhere to some of the procurement regulations. One of the goals of OTs is to expand the defense marketplace by creating a mechanism for access to technologies and services of companies that would not otherwise work with DOD, particularly startups and companies developing innovative technology. As one industry representative stated: Because they are \"outside\" the FAR, OT agreements do not require such cumbersome oversight and audit requirements such as those imposed by the Truth in Negotiations Act, cost and pricing data or an expensive Cost Accounting System (CAS) qualified financial system. CAS compliant financial systems can cost a company millions of dollars to implement and maintain — and are therefore a significant, if not potentially fatal, barrier to government market entry for startups and small, innovative companies. These requirements tend to reinforce the \"legacy advantage\" of large traditional contractors, who can afford to hire and staff these requirements with large staffs of accountants and lawyers. A number of nontraditional companies told CRS that they are more likely to work with DOD because of the department's other transaction authorities. Despite these claims, some observers question whether OTs are effectively bringing nontraditional contractors into the defense marketplace. A DOD Inspector General report examining other transactions from FY1994 to FY2001 found that OTs did not attract significant numbers of nontraditional defense contractors to do business with DOD. The report found that of the 209 prototype agreements examined, traditional defense contractors received 95% of the $5.7 billion in funds awarded. A recent analysis of FPDS-NG data by Federal News Network had similar findings. According to the report, from FY2015 to FY2017, while nontraditional defense contractors were awarded most of the new OTs (66% vs. 33% for traditional defense contractors), the dollar value of the OTs favored traditional contractors ($20.8 billion vs. $7.4 billion for nontraditional contractors). Some observers have questioned the accuracy of the data published by Federal News Network. According to Charlie McBride, president of Consortium Management Group (which manages two consortia working with DOD through OTs), 88% of the total dollar value of awards to CMG Group has gone to nontraditional prime contractors, and nontraditional entities have participated in the remaining 12%. This debate highlights the lack of authoritative data on OTs. The currently available data may not accurately reflect the extent to which nontraditional contractors are engaged in OT agreements. FPDS-NG does not collect data regarding subcontractors or consortia composition, making it difficult to determine the nature and extent to which nontraditional defense contractors and entities may be working under OT agreements with DOD directly or as subcontractors. When Congress extended OT authority to DOD, it authorized inserting a clause requiring a person or entity to make payments to DOD as a condition of receiving support under the agreement. Such funds were to be merged into an account dedicated to support DARPA advanced research projects. The intent of this provision was to permit DARPA to \"recoup the fruits of such arrangements, when there is a 'dual use' potential for commercial application\" and reinvest the funds to develop other technologies. In addition to the recoupment authority, DOD can share costs with other parties under an OT. Using this approach, the amount of each party's share is negotiated and incorporated into the agreement. Congress believed that OTs and cooperative agreements were ideal vehicles for promoting DOD-industry collaboration in developing dual-use technologies. For example, the FY1992 & 1993 NDAA ( P.L. 102-190 ) authorized DOD to enter into cooperative and other transaction agreements to develop critical dual-use technologies as set forth in the Defense Critical Technologies Plan. According to the Senate report: ... the United States tends to underinvest in dual-use technologies. National security requirements alone often do not justify major DOD support, and market prospects alone often appear to be too long-term or high risk to justify US industry carrying the entire development burden.... The committee encourages use of cooperative agreements and other transactions in lieu of grants or contracts.... The provision would require that at least 50 percent of funding over the life of a partnership derive from non-federal sources but would allow for a smaller industry share at the start. In the 1990s, some DARPA OTs required participants to share costs because the types of work completed generally involved R&D that was mutually beneficial to government needs and industry commercial goals. In certain instances, present-day OTs have cost-sharing requirements that foster collaborative research. Some analysts believe that DOD is not always realizing all the benefits that OTs have to offer, such as sufficiently leveraging private capital or forming true consortia of multiple parties pooling resources. Some of these analysts believe that DOD does not sufficiently use consortia to leverage private investment through the pursuit of collaborative, mutually beneficial, dual-use technologies. Some observers argue that as the legislation on OTs has evolved, the cost-sharing provision for prototype projects has come to create an unfair playing field biased against traditional defense contractors. For prototype projects, traditional contractors generally are required to assume one-third of costs whereas nontraditional defense contractors and small businesses generally do not have to cost share. From a fairness perspective, these observers argue that traditional contractors should not have a mandatory cost share. These observers also point out that some nontraditional defense contractors are companies with billions of dollars of revenue that should not be granted a competitive cost advantage. Putting traditional defense contractors at a competitive disadvantage could deny DOD access to those companies with the most experience working on defense products, potentially depriving the military of access to leading defense-related research and technology. Other observers argue that the cost share as currently structured is appropriate: traditional defense contractors hold a significant competitive edge in their understanding of, and have the systems in place to manage, traditional contracts. In contrast, nontraditional and small businesses, which generally cannot compete with the traditional defense contractors, need the exemption from the cost-share requirement to be able to work with DOD. These observers also argue that traditional contractors are awarded the majority of dollars obligated to OTs, proving how difficult it is for nontraditional suppliers to break into the defense marketplace. Additionally, traditional contractors could avoid the cost-sharing requirement by teaming with a nontraditional contractor. DOD has not effectively tracked data on cost sharing. A 2017 report to Congress indicated that in FY2016 DOD obligated $1 billion for prototype agreements and received $68 million in cost-share contributions. A CRS review found numerous concerns with the data underlying the report, and with DOD's analytical conclusions. See Appendix C for further discussion. A number of analysts and industry officials have raised concerns that DOD could use OTs to avoid competitions, as OTs are exempt from the Competition in Contracting Act. According to statute, follow-on production using other transaction authority can only be awarded if the underlying R&D agreement was competed. In addition, 10 U.S.C. 2371b states that \"to the maximum extent practicable\" OTs must be competed. Determining whether OTs are being used to circumvent competition requires a two-step analysis: 1. Are OTs competed less often that traditional contracts? 2. Is there a benefit to these OTs being competed? Available FPDS-NG data suggest that DOD is broadly complying with 10 U.S.C. 2371b's competition mandate. Between FY2013 and FY2017, approximately 89% of all new OT prototype agreements were competed in some fashion. Many observers and analysts believe that OT agreements can be executed substantially faster, sometimes in a matter of weeks, compared to the months or years it typically takes to execute traditional contracts. Based in part on this belief, some officials and analysts are touting OTs as a new model for conducting acquisitions and the answer to many of the problems in defense acquisition. These analysts argue that in a world of increasingly fast technology development, DOD acquisitions must go faster or risk being left behind. Many acquisition professionals argue that OT contracts are not inherently faster than traditional contracting; instead, they are executed faster because they are not encumbered by the reviews, protests, and bureaucratic layers that have been overlaid on traditional contracting. According to these officials, OTs take just as long as traditional contracts if the same execution and oversight processes are applied. And because all terms are negotiable, complex negotiations could make OTs take longer to execute than traditional contracts that have required, nonnegotiable conditions. The Other Transactions Guide states The OT award process will not always be faster than the traditional procurement processes and sometimes can be as long or longer. The speed of award is tied to many factors, many of which are internal to the organization. DOD has not tracked data on the relative time it takes to execute OTs vs. traditional contracts, making it impossible to objectively assess these claims. Analysts and officials generally agree that the workforce plays a critical role in determining the success or failure of an acquisition. Because there are fewer predefined requirements, OTs can be more difficult to negotiate than traditional contracts, putting DOD at greater risk of not getting what it wants at a reasonable price. The complexity and difficulty of negotiations is particularly high when there are intellectual property/patent rights issues, as is the case with most OTs. Given these challenges, OTs often require more experienced and capable government representatives to ensure implementation of agreements that are in the government's best interest. Some analysts question the extent to which the workforce is sufficiently trained and equipped to negotiate OTs. In response to this concern, in the FY2018 NDAA, Congress required workforce education and training for OTs, and required DOD to establish a cadre of intellectual property experts to advise, assist, and provide resources to program offices that are developing intellectual property strategies for contracts and agreements (see Appendix A ). DOD officials acknowledge that more training and education is required. Given the complexity of OTs and the limited extent to which they are used, some analysts and industry officials suggested that there may be a benefit to establishing a centralized office within DOD responsible for executing or overseeing all other transaction agreements. Such a structure could help ensure that those members of the acquisition workforce engaged in other transactions are sufficiently experienced, trained, and qualified. A number of analysts have argued that DOD should take steps to improve its use of OTs. Many of these analysts have suggested that data are not consistently and accurately tracked, regulations and guidance on when and how to use OTs are vague or insufficient, and the workforce is not sufficiently prepared to effectively use OTs. A number of officials have acknowledged these shortcomings and DOD is reportedly taking steps to address them. For example, in December 2018, DOD issued an updated Other Transactions Guide , a comprehensive guide containing best practices, case studies, and a clarification of myths related to other transaction authorities. In addition, Defense Acquisition University developed new course materials addressing OTs and is working to expand its offerings of relevant training and classes. However, numerous acquisition officials question whether it is possible, or even desirable, to try to quickly implement training aimed at preparing the thousands of DOD acquisition officials to execute OTs. Some of these officials have suggested it might be appropriate to only allow a limited and vetted number of acquisition professionals to be OT agreements officers. Some argue that OTs are just one \"tool in the tool box,\" appropriate for only specific types of contracts, and should not be used to avoid the statutory and regulatory framework or to try to accelerate the process just for the sake of speed. Others have suggested that OTs should be used to cut through bureaucracy, speed up the acquisition process, avoid regulations and bid protests, and perhaps eventually supplant the regular FAR-based contracting process. Given the benefits and risks associated with OTs, questions for Congress include the following: 1. To what extent and in what circumstances do the potential benefits of OTs in terms of cost, schedule, and added capabilities outweigh concerns over potential fraud, waste, abuse, diminished oversight, and other public policy objectives? 2. Should OT authorities be extended further, curtailed, or maintained? The FY2019 NDAA required DOD to submit a report annually through 2021, summarizing DOD's use of OTs, including organizations involved; number of transactions; amounts of payments; and purpose, description, and status of projects. The NDAA also required the Defense Innovation Unit to submit a report to Congress, to include the number of traditional and nontraditional defense contractors with DOD contracts or other transactions resulting directly from the unit's initiatives. The conference report for the FY2019 defense appropriations bill included language expressing the conferees' \"[concern] with the lack of transparency surrounding the employment of OTA, particularly for follow-on production.\" The conferees directed DOD to provide quarterly reports to the House and Senate appropriations committees listing each active OT, and to include additional information for each agreement. The conferees also directed GAO to review DOD's use of OTs to determine whether the \"employment of this authority conforms to applicable statutes and guidelines, to include the identification of any potential conflicts.\" GAO was also required to report on the extent to which OTs have been used since FY2016. The multitude of reporting requirements, and the questionable reliability of the available data, raise a number of questions that Congress may wish to explore, such as the following: 1. To what extent, if any, should the current reporting requirements be consolidated to create a more streamlined and consistent flow of information to Congress? 2. What specific data does Congress need in these reports to effectively conduct oversight? For example, what percentage of research OTs result in prototype projects and follow-on production? 3. To what extent are the data sufficiently reliable, and will such data be easily retrievable in the future, to allow Congress to conduct effective, timely, and ongoing oversight? If the data are not sufficiently reliable or accessible in the future, what other data collection and tracking methods could Congress mandate to ensure ongoing access to reliable data? 4. How are OTs being used? Where and when in the acquisition lifecycle is the authority being used? To what extent is the requirements process being circumvented when DOD awards an OT follow-on production contract for a major system? One analyst suggested that \"no efficiency is lost if only the most able personnel are authorized to procure and administer\" OT agreements and further argued that expanding the use of OTs would increase the training costs by expanding the number of people who can \"weave complex agreements in a relatively unstructured environment.\" Congress may consider whether DOD should establish an acquisition innovation lab or center of excellence responsible for overseeing, executing, and approving all OTs across the department. Such a lab or center could be staffed and supported by a cadre of professionals with experience across the acquisition lifecycle who have a willingness and ability to embrace new ideas and rethink existing practices. Alternatively, such labs or centers could be established in the military departments. Having centers in each organization could allow for consideration of the different missions and business approaches of the departments and help educate the workforce on a more systematic basis. Proponents argue that such an office would help ensure that only experienced and capable officials, with the appropriate training, use OT authorities. Such an office could also help protect against layering internal DOD policies and bureaucracies onto OTs by placing OTs outside of the traditional bureaucratic acquisition process. Proponents could further argue that such an office could better propagate best practices and ensure that OTs are used appropriately and are consistent with guidance and legislation. Having a single office responsible for executing or approving all OTs could also help ensure more timely and accurate information, giving Congress more visibility into DOD's use of other transaction authorities. To the extent that a single, high-level official is responsible for managing and overseeing all OTs, Congress might wish to consider repealing or modifying existing statutory approval requirements. If such an office was able to provide timely and accurate information, Congress might also consider some of the current reporting requirements unnecessary, and may choose to repeal some of the reporting requirements. Opponents of such a proposal argue that centralizing OTs would have the opposite effect, increasing bureaucracy by adding yet another office within DOD. Opponents also argue that such an office could make it more time-consuming to get a project underway and may discourage program offices from attempting or suggesting OTs. Some also argue that a single office may not have the resources to execute and approve agreements in a timely manner, and would inhibit spreading expertise on how to execute OT agreements more broadly across the acquisition workforce. Even proponents who might in theory support establishing such an office could raise significant concerns regarding how such an office would function in practice. A number of alternative options could be pursued to address concerns raised by opponents of establishing a centralized office. Some of these alternative options include the following: Granting such an office primary, but not exclusive, authority to execute OTs. For example, agreement officers specifically authorized to do so could execute OTs, with the centralized office conducting a peer review. Under this construct, the office could also be charged with providing information and expertise/consulting services on the use of OTs to program offices contemplating using the authorities. Establishing centers within each military department, with a designated office in OSD serving a coordinating function (with nondelegable approval authority residing in the military department office designated for OTs). Creating the office as a pilot program for three years, to help DOD manage OTs until such time as the workforce becomes more experienced and proficient in using these agreements. Appendix A. Legislative History Other transaction authority first appeared in the National Aeronautics and Space Act of 1958. Since then, Congress has extended OT authorities to 11 federal agencies and a number of other federal offices (see Appendix B for information on other federal entities with similar authorities). This appendix traces the legislative history of OT authorities and select related statutes applicable to DOD. To read the full text of the three statutory provisions related to OTs (10 U.S.C. 2371, 2371b, and 2373), see Appendix D . National Aeronautics and Space Act of 1958 (P.L. 85-568) Creation of Other Transaction Authority On July 29, 1958 President Dwight D. Eisenhower signed into law the National Aeronautics and Space Act (P.L. 85-568), which established the National Aeronautics and Space Administration (NASA). The purpose of the act included the expansion of human knowledge, preservation of the role of the United States as a leader in space science and technology, and pursuing the most effective utilization of the scientific and engineering resources of the United States. Section 203(b)(5) of the Space Act provided NASA the authority (emphasis added) to enter into and perform such contracts, leases, cooperative agreements, or other transactions as may be necessary in the conduct of its work and on such terms as it may deem appropriate, with any instrumentality of the United States ... or with any person, firm, association, corporation, or educational institution. To the maximum extent practicable and consistent with the accomplishments of the purpose of this Act, such contracts, leases, agreements, and other transactions shall be allocated by the Administrator in a manner which will enable small-business concerns to participate equitably and proportionately in the conduct of the work of the Administration. Intellectual Property Rights The Space Act specifically addressed NASA's \"property rights in inventions.\" Section 305 stated that any invention made in the performance of any work under any contract is the exclusive property of the United States \"unless the Administrator waives all or any part of the rights.\" This was true even when the person who created the invention \"was not employed or assigned to perform research, development, or exploratory work, but the invention is nevertheless related to the contract\" and was made during working hours, or with a contribution of the government. The act granted the Administrator wide latitude to \"waive all or any part of the rights of the United States under this section\" if doing so was deemed to be in the best interests of the United States. When such rights were waived, NASA retained an irrevocable, nonexclusive, nontransferable royalty-free license by or on behalf of the United States. National Defense Authorization Act for FY1990 & FY1991 ( P.L. 101-189 ) The FY1990 & FY1991 NDAA granted DARPA temporary authority to enter into \"cooperative agreements and other transactions\" for the purpose of conducting advanced research projects. The statute clarified that OTs should only be used when \"the use of standard contracts or grants is not feasible or appropriate.\" Congress restricted funding for OTs and cooperative agreements to $25 million of appropriated funds for FY1990 and FY1991, and set the authority to expire on September 30, 1991. Cost Sharing The FY1990 & FY1991 NDAA permitted OTs (or cooperative agreements) to include a clause requiring a person or entity to make payments to DOD as a condition of receiving support under the agreement. Such funds were to be merged into an account dedicated to supporting DARPA advanced research projects using cooperative agreements and other transactions. The act required, to the extent practicable, that funds provided by the government not exceed the total amount provided by the other parties to the project. According to the Senate report, one of the intents of the cost-sharing provision was to permit DARPA to \"recoup the fruits of such arrangements, when there is a 'dual use' potential for commercial application\" and to reinvest the funds to develop other technologies. Reporting Requirements The FY1990 & FY1991 NDAA required DOD to submit an annual report on the use of OTs and cooperative agreements, to include a description of each agreement and the technologies involved, the potential military and commercial utility of the technology, the reasons a contract or grant was not feasible to support the research, and the amount of payments, if any, received by the federal government under the agreement. National Defense Authorization Act for FY1991 ( P.L. 101-510 ) Section 244 increased the funds authorized for cooperative agreements and OTs from $25 million to $50 million. However, no such funding was appropriated. Reporting and Notification Requirements The conference report required DOD to submit to Congress a report listing the cooperative agreements and consortia intended to be used in FY1991-1992. The conference report also required DOD to provide the armed services and appropriations committees 30 days' notice prior to DOD signing a cooperative agreement or agreement with a consortia under OT authority. The Senate report focused on consortia as a method to pool resources, share research among numerous participants, and promote critical dual-use technology. Department of Defense Appropriations Act, 1992 ( P.L. 102-172 ) Limitations on the Use of OTs Section 8113A of P.L. 102-172 placed temporary limitations on the use of agreements undertaken pursuant to 10 U.S.C. 2371: Section 8113A limited the use of OTs and cooperative agreements exclusively to DARPA (to the exclusion of the rest of DOD) for FY1992. Section 8113A limited DARPA to obligating or expending no more than $37.5 million in FY1992 for cooperative agreements or OTs undertaken pursuant to 10 U.S.C. 2371. Section 8113A further established that no more than $75 million could be obligated or expended by DARPA in FY1992 for DOD dual-use critical technology partnerships. National Defense Authorization Act for FY1992 & FY1993 ( P.L. 102-190 ) Expanded Authority Section 826 extended other transaction authority to the military departments, and established separate fund accounts in each department for cost sharing. Section 826 also repealed the sunset for cooperative agreements and OTs, making the authorities permanent. Section 821 authorized DOD to enter into cooperative and other transaction agreements to develop critical dual-use technologies as set forth in the Defense Critical Technologies Plan. According to the Senate report ... the United States tends to underinvest in dual-use technologies. National security requirements alone often do not justify major DOD support, and market prospects alone often appear to be too long-term or high risk to justify US industry carrying the entire development burden.... The committee encourages use of cooperative agreements and other transactions in lieu of grants or contracts.... The provision would require that at least 50 percent of funding over the life of a partnership derive from non-federal sources but would allow for a smaller industry share at the start. The conference report stated that the partnerships should focus on programs that fit into the security needs within DARPA. The conference report also stated that OTs are appropriate for those cases where the \"regulations applicable to the allocation of patent and data rights under the procurement statutes may not be appropriate to partnership arrangements in certain cases.\" National Defense Authorization Act for FY1993 ( P.L. 102-484 ) Cost Sharing Section 4221 established 10 U.S.C. 2511, which required DOD to establish cooperative arrangements with industry, educational institutions, federal labs, and other entities, to pursue research, development, and application of dual-use technologies. The section authorized DOD to use grants, contracts, cooperative agreements, or OTs to create these partnerships, and that the Federal government should not contribute more than 50% of the costs related to projects under this authority. National Defense Authorization Act for FY1994 ( P.L. 103-160 ) Expanded Authority Section 827 established 10 U.S.C. 2358, which gave the Secretary of Defense and the Secretaries of the military departments the authority to conduct basic, advanced, and applied research through the use of contracts, cooperative agreements, grants, and OTs. Previously, OTs were only authorized for advanced research. Prototype Authorities Section 845 granted DARPA the authority to use OTs for prototype projects directly related to weapons or weapon systems proposed to be acquired by DOD. Section 845 required that \"to the maximum extent practicable,\" prototypes be competitively awarded. This authority was set to terminate after three years. Section 845 remained as a note to 10 U.S.C. 2371 until separately codified as 10 U.S.C. 2371b in the FY2016 NDAA ( P.L. 114-92 ). Federal Acquisition Streamlining Act of 1994 ( P.L. 103-355 ) Section 1301 redesignated the language in 10 U.S.C. 2358 (granting the authority to use OTs) to 10 U.S.C. 2371. Reporting Requirements Section 1301 also required DOD to submit an annual report to the armed services committees, to include a general description of the other transactions, including the technologies involved in the research, the potential military and, if any, commercial utility of such technologies, the reasons for not using a contract or grant to provide support for such research, and the amount of payments, if any, received during the fiscal year pursuant to a clause in the other transactions and to what accounts such payments were credited. National Defense Authorization Act for FY1997 ( P.L. 104-201 ) Section 203 required that a senior DOD official be designated in OSD, and that the officials' sole responsibility be developing policy related to, and ensuring implementation of, DOD's dual-use technology program. This section authorized DOD to use OTs (as well as contracts, cooperative agreements, and grants) for dual-use projects only if the project \"is entered into through the use of competitive procedures.\" Section 743 granted DOD the authority to use OTs to conduct research on Gulf War Syndrome, to determine its relationship to possible exposures of members of the Armed Forces to chemical warfare agents and hazardous materials, and the use of inoculations and new drugs. Expanded Prototype Authorities Section 804 amended Section 845 of the FY1994 NDAA by extending to the military departments and officials designated by the Secretary of Defense, the authority to use OTs for certain prototype projects. This authority, originally granted solely to DARPA and set to expire after three years, was given a new termination date of September 30, 1999. Reporting Requirements Section 267 modified elements of the annual report to the armed services committees. National Defense Authorization Act for FY1998 ( P.L. 105-85 ) Section 832 amended 10 U.S.C. 2371 by clarifying that certain information submitted to DOD (i.e. a proposal, business plan, technical information) be protected from disclosure pursuant to 5 U.S.C. 552 for a period of five years. Strom Thurmond National Defense Authorization Act for FY1999 ( P.L. 105-261 ) Section 241 extended the sunset day for the authority to use OTs for prototypes from September 30, 1999, to September 30, 2001. Section 817 amended Section 2371 of Title 10, United States Code, clarifying that information submitted by outside parties in cooperative agreements for basic, applied, and advanced research is protected from disclosure under Section 552 of Title 5, United States Code. Department of Defense Appropriations Act, 1999 ( P.L. 105-262 ) While the enacted FY1999 defense appropriations bill ( P.L. 105-262 ) did not include legislative language addressing OTs, H.Rept. 105-591 , which accompanied the House-reported version of H.R. 4103 , included language expressing the House Appropriations Committee's \"serious reservations\" regarding the Air Force's then-proposed use of an OT agreement—instead of a contract— to develop the Evolved Expendable Launch Vehicle (EELV) program. The committee noted that \"under [OTs] traditional safeguards which protect the government's interest in large acquisition programs are largely absent,\" and required the Under Secretary of Defense for Acquisition, Technology, and Logistics (now the Under Secretary of Defense for Acquisition and Sustainment) and the DOD Inspector General to certify to the congressional defense committees that the use of an OT was appropriate for the EELV program, and that \"adequate safeguards exist[ed] to protect the government's interest and monitor program performance.\" National Defense Authorization Act for FY2000 ( P.L. 106-65 ) Section 801 required that for prototypes using OT authorities, DOD ensure that GAO, under its audit authority, have access to records relating to other transaction prototype agreements exceeding $5 million. Section 801 allowed for a waiver to GAO access and exempted entities that over the last year have not entered into an agreement with DOD that provided for audit access by a government entity. According to the Senate report: Senior DOD officials have sought legislation to extend other transaction authority to production contracts. Under current authority, there is some debate about whether GAO has audit access to other transactions. As the size, costs, and complexity of programs being funded using other transactions increases, the committee wants to ensure that the GAO has audit access in relation to the higher levels of spending and added risks. Reporting Requirements The Senate report also addressed reporting requirements and congressional intent to review the use of OTs. The report stated the following: The committee is assessing the utility of other transaction prototype authority. The statement of managers accompanying the Strom Thurmond National Defense Authorization Act of 1999 directed the Secretary of Defense to report on the use of this authority to the congressional defense committees, no later than March 1, 1999. In addition, both the Department of Defense Inspector General and the General Accounting Office are reviewing the use of other transaction prototype authority and will report to Congress in the coming year. The committee is interested in the extent that new commercial firms are entering the DOD marketplace through the use of other transaction authority, as well as the degree of cost sharing between the government and non-federal government parties. The committee is also interested in any lessons learned from the broad exemptions to federal law provided by other transaction authority. For example, other transactions are exempt from the Competition in Contracting Act, Truth in Negotiations Act, Contract Disputes Act, Antikickback Act of 1986, Procurement Integrity Act, Service Contract Act, Buy American Act, and chapter 137 of title 10, United States Code. Questions have been raised about whether the government's interest is adequately protected in the absence of the applicability of these statutes. Conversely, advocates of the view that the government should take advantage of the flexibility of other transactions have championed proposals to extend other transaction authority to production. The committee directs the Secretary of Defense to provide a new report that updates information in the March 1999 report on the use of other transaction prototype authority to the congressional defense committees by February 1, 2000. National Defense Authorization Act for FY2001 ( P.L. 106-398 ) Limitations on the Use of OTs Section 803 limited the use of OTs for prototype projects to only those circumstances when at least one nontraditional defense contractor significantly participates in the project, one-third of the total cost of the project is paid out of funds provided by parties to the transaction other than the federal government, or the senior procurement executive determines in writing that exceptional circumstances justify use of an OT. Nontraditional defense contractor was defined as an entity that for a period of one year has not entered into or performed \"any contract that is subject to full coverage under the cost accounting standards\" or \"any other contract in excess of $500,000 to carry out prototype projects or to perform basic, applied, or advanced research projects for a Federal agency, that is subject to the Federal Acquisition Regulation.'' Section 803 also extended the authority to use OTs for prototypes from September 30, 2001, to September 30, 2004. According to the Senate report, the intent of using OTs for prototypes is to attract companies that typically do not do business with the Department of Defense and encourage cost sharing and experimentation in potentially more efficient ways of doing business with traditional defense contractors. Other transaction authority is an important acquisition tool that can facilitate the incorporation of commercial technology into military weapon systems. In an environment where, in many areas, commercial technology is now more advanced than defense technology, it is imperative that the Department continue to have the flexibility to use innovative contractual instruments that provide access to this technology. There are, however, improvements that can be made in managing and overseeing these contractual arrangements. Section 804 clarified the extent of GAO's access to records in instances where the party in question has only done business with the government in the preceding year through an OT or cooperative agreement. National Defense Authorization Act for FY2002 ( P.L. 107-107 ) Expanded Authority—Follow-on Production Section 822 of the FY2002 NDAA granted DOD the authority to award a follow-on production contract for prototype projects when at least one-third of the total cost of the prototype project is to be paid out of funds provided by non-federal government sources. Under this authority, such a follow-on contract could be awarded without competition if the prototype project was successfully completed, the number of units in the production contract does not exceed the number of units specified in the underlying prototype agreement, and the price for each unit does not exceed the price specified in the underlying transaction. Department of Defense and Emergency Supplemental Appropriations for Recovery from and Response to Terrorist Attacks on the United States Act, 2002 ( P.L. 107-117 ) Establishment of Army Venture Capital Initiative (AVCI) Section 8150 designated $25 million of the FY2002 funds made available for Army Research, Development, Test, and Evaluation (RDT&E) to be made available to the Secretary of the Army for the purpose of funding a venture capital investment corporation established pursuant to 10 U.S.C. 2371. A 2014 RAND report stated that OT authorities were used only to form the AVCI, and were not used to acquire products or services: \"While OT authorities were used to form [AVCI] itself, any volume of the Army's purchase of products and services from [AVCI] companies is conducted under the FAR.\" National Defense Authorization Act for FY2004 ( P.L. 108-136 ) Expanded Authority Section 847 of the FY2004 NDAA extended the authority to use an OT for developing prototypes to improve weapons or weapon systems currently in use by the Armed Forces. Previously, such authority was restricted to prototypes \"directly relevant to weapons or weapon systems proposed to be acquired or developed\" by DOD. Section 847 also established a pilot program for transitioning prototypes to follow-on contracts for production for nontraditional defense contractors. Under the pilot program, such a follow-on contract could be treated as a commercial item or an item developed with both federal and private sector funds (for purposes of negotiating intellectual property rights). The pilot program was restricted to contracts with nontraditional defense contractors, where the value of the contract does not exceed $50 million (approximately $70 million in FY2018 dollars), and that are firm-fixed price or fixed price with economic adjustment. The pilot program was set to sunset September 30, 2008. Section 1441 authorized any agency that engages in basic, applied, or advanced research and development projects that facilitated defense against or recovery from terrorism or nuclear, biological, chemical, or radiological attack to exercise the same general authority given to DOD as found in 10 U.S.C. 2371 (including for prototype projects). Reporting Requirements Section 1031 sunset the annual reporting requirement for OT after the report covering FY2006 was submitted. National Defense Authorization Act for FY2006 ( P.L. 109-163 ) Restricted Authority and Notification Requirements Section 212 of the FY2006 NDAA directed the Army to procure the Future Combat System using contract procedures set forth in part 15 of the Federal Acquisition Regulation, in lieu of an OT. Section 823 extended ethics requirements to OT prototype authority and required the congressional defense committees be notified in writing at least 30 days before such authority is exercised. Certification Requirements Section 823 also amended Section 845 of the FY1994 NDAA, requiring a written determination by a senior procurement executive for other transaction prototype projects estimated between $20 million and $100 million, and for a written determination by the Under Secretary of Defense for Acquisition, Technology, and Logistics for prototype projects that exceed $100 million. According to the Senate report: Section 845 was intended to be used for limited prototype projects, particularly those in which the Department seeks to engage nontraditional defense contractors that may be averse to the requirements imposed by a standard Department procurement contract. For this reason, the statement of managers accompanying the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public Law 105–261) states: The conferees continue to believe that the section 845 authority should only be used in the exceptional cases where it can be clearly demonstrated that a normal contract or grant will not allow sufficient access to affordable technologies. The conferees are especially concerned that such authority not be used to circumvent the appropriate management controls in the standard acquisition and budgeting process. …. The committee does not believe that the $20.9 billion agreement entered between the Army and the Lead Systems Integrator for the FCS program is consistent with the language and intent of section 845 authority. Section 845 authority is intended to be used for limited prototype projects, particularly those in which the Department of Defense seeks to engage nontraditional defense contractors that may be averse to the requirements imposed by a standard Department contract. Department of Defense Appropriations Act, 2007 ( H.R. 5631 ) Reporting Requirement The FY2007 defense appropriations bill ( P.L. 109-289 ) did not include language addressing OTs. The conference report ( H.Rept. 109-676 ) included language expressing the conferees' \"[concern] with the continued use of OTA contracts by the Missile Defense Agency,\" as such contracts \"lack the customary safeguards found under FAR-based contracts for organizational conflict of interest, truth in negotiations and submission of cost and pricing data.\" The conferees \"strongly encourage[d]\" the Missile Defense Agency to convert \"large development and procurement contracts using OTA to FAR-based contracts,\" and directed the Missile Defense Agency to submit a report to the congressional defense committees on the use of OTs, to include the number, value, and justification for the use of such agreements. National Defense Authorization Act for FY2008 ( P.L. 110-181 ) Section 823 extended the authority for prototype projects for five more years, from September 30, 2008, to September 30, 2013. National Defense Authorization Act for FY2009 ( P.L. 110-417 ) Section 822 required DOD to issue guidance on rights in technical data under non-FAR agreements, including OTs. Section 822 also required that appropriate provisions relating to rights in technical data be included in non-FAR agreements, consistent with policy guidance. This requirements is in statute at 10 U.S.C. 2320 note. Section 824 expanded the scope of the pilot program for transition to follow-on contracts for certain prototype projects to include research projects carried out under 10 U.S.C. 2371. Authority to use the pilot program, set to expire September 30, 2008, was extended to September 30, 2010. Section 874 required OT data be included in the Federal Procurement Data System. National Defense Authorization Act for FY2011 ( P.L. 111-383 ) Section 866 changed the definition of nontraditional defense contractor, conforming the definition to that found in 10 U.S.C. 2302(9). National Defense Authorization Act for FY2013 ( P.L. 112-239 ) Section 863 extended the authority for using OTs for prototype projects from September 30, 2013, to September 30, 2018. Carl Levin and Howard P. \"Buck\" McKeon National Defense Authorization Act for FY2015 ( P.L. 113-291 ) Expanded Authority Section 812 expanded the authority to use OT for prototypes, to include those \"directly related to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the Department of Defense, or to improvement of platforms, systems, components, or materials in use by the Armed Forces.\" Prior to the FY2015 NDAA, OTs could only be used for prototypes relating to weapons or weapon systems proposed to be developed, or for the improvement of weapons or weapon systems currently in use. Reporting Requirements Section 1071 repealed the reporting requirement language found in 10 U.S.C. 2371, relating to OTs for research projects. National Defense Authorization Act for FY2016 ( P.L. 114-92 ) Until the FY2016 NDAA, the prototyping and follow-on production authority established in Section 845 of the FY1994 NDAA (as amended) was found in 10 U.S.C. 2371 note. Section 815 of the FY2016 NDAA simultaneously repealed Section 845 of the FY1994 NDAA and put the repealed language into the newly created 10 U.S.C. 2371b. The FY2016 NDAA also modified 2371b by making the authority permanent. Expanded Authority and Small Business The authorities in Section 2371b were expanded to allow their use when \"all significant participants in the transaction other than the Federal government are small businesses or nontraditional contractors\" and when the agency determines that using an OT would expand the defense supply base in a manner that could not be accomplished through a contract. Section 815 eased the restriction on follow-on production contracts or transactions. Section 815 amended the definition of a nontraditional defense contractor found in 10 U.S.C. 2302 to be an entity that is not currently performing, and for one year prior to an OT has not performed on any contract or subcontract that is subject to full coverage under the cost accounting standards pursuant to Section 1502 of Title 41, U.S.C. Section 815 also required DOD to update its guidance to reflect changes in the statute. The conference report stated that Congress believed OTs are an attractive option for firms and organizations that do not usually participate in government contracting due to typical overhead burdens and the \"one size fits all\" rules governing defense acquisition. The report also stated that OTs could support DOD's effort to access new sources of technological innovation, specifically with Silicon Valley startup firms and small commercial firms. National Defense Authorization Act for FY2018 ( P.L. 115-91 ) Expanded Authority Section 216 of the FY2018 NDAA authorized nonprofit research institutions to enter into OTs with DOD for prototype projects. Section 862 amended 10 U.S.C. 2358, granting the Secretary of Defense and the military departments the authority to pursue basic research, applied research, advanced research, and development projects under the OT authorities granted in Sections 2371 and 2371b of Title 10. Workforce Section 802 required DOD to establish a cadre of intellectual property experts to advise, assist, and provide resources to program offices who are developing intellectual property strategies for contracts and agreements. Section 863 required training and education for personnel involved in OTs and other innovative contracting methods. Certification Requirements and Small Business Section 864 adjusted the language of the statute to state that the dollar threshold relates to the specific transaction for a prototype project and not for the value of the entire project. Section 864 defined a transaction for follow-on production to include \"all individual prototype sub-projects awarded under the transaction to a consortium of United States industry and academic institutions.\" Section 864 also increased the dollar thresholds for required approvals and defined the term small business to include small businesses under Section 9 of the Small Business Act to ensure that companies participating in the Small Business Innovation Research and Small Business Technology Transfer programs were considered small businesses for the purposes of the cost-sharing requirements. Miscellaneous Section 867 required the Secretary of Defense to establish a preference for OTs in the \"execution of science and technology and prototyping programs.\" Section 1711 required DOD to carry out a pilot program to \"assess the feasibility and advisability of increasing the manufacturing capability of the defense industrial base.\" Pursuant to the pilot, Section 1711 authorized DOD to use OTs to support production capabilities in small and medium-sized manufacturers. John S. McCain National Defense Authorization Act for FY2019 ( P.L. 115-232 ) Section 211 of the FY2019 NDAA clarified that follow-on production of a prototype or subproject within a consortium may occur if the individual prototype or subproject is complete; all projects associated with the consortium do not need to be completed before follow-on production of a specific prototype. Expanded Authority The FY2019 NDAA authorized the use of OTs to develop enhanced personal protective equipment (Section 226) and to carry out research under the Explosive Ordnance Disposal Defense Program (Section 311). Reporting Requirements Section 244 required the Defense Innovation Unit to submit a report to Congress, to include the number of traditional and nontraditional defense contractors with DOD contracts or other transactions resulting directly from the unit's initiatives. Section 873 required DOD to submit an annual report through 2021, summarizing DOD's use of OTs, including organizations involved; number of transactions; amounts of payments; and purpose, description, and status of projects. Department of Defense Appropriations Act, 2019 ( P.L. 115-245 ) Reporting Requirements While the enacted FY2019 defense appropriations bill did not include legislative language addressing OTs, the conference report included language expressing the conferees' \"[concern] with the lack of transparency surrounding the employment of OTA, particularly for follow-on production.\" The conferees directed DOD to provide quarterly reports to the House and Senate appropriations committees listing each active OT, and to include the following information on each agreement: funding military service or DOD component; major command (if applicable); contracting activity; appropriation title; budget line item; minimum and maximum award value; vendor; obligations and expenditures to date; product service code; period of performance; and indication if the OT agreement included an option for follow-on production (with a description of the scope of anticipated follow-on production). The conferees also directed GAO to review DOD's use of OTs to determine whether the \"employment of this authority conforms to applicable statutes and guidelines, to include the identification of any potential conflicts.\" GAO was also required to report on the extent to which OTs have been used since FY2016. Notification Requirements The House report to accompany H.R. 6157 acknowledged OTs as an \"important tool to provide flexibility and agility for cutting-edge research and development projects and prototypes.\" However, the report stated its concern \"with the lack of transparency on the use of OTA authority for follow-on production procurements,\" and directed that no funds could be obligated or expended for a follow-on production contract or a transaction carried out under 10 U.S.C. 2371b, until 30 days after the Secretary of Defense provides the congressional defense committees with a notification of the proposed contract or transaction, to include a justification of why an OT is being used for production. Appendix B. Non-DOD Federal Agencies with Agency-Wide OT or Related Authorities A number of agencies have varying other transaction or similar authorities, as reflected in Table B-1 . The table below is not a comprehensive or definitive listing of every federal government entity with OT or related authorities. In some instances, offices, agencies, commissions, and other federal government entities have OT or related authorities that are only associated with certain programs or projects, such as the National Institutes of Health (which has OT authority for such specific activities such as the National Heart, Blood Vessel, Lung, and Blood Diseases and Blood Resources Program [42 U.S.C. §285b-3] and the Cures Acceleration Network [42 U.S.C. §287a]). Appendix C. Reliability of Data on Other Transactions All data have imperfections and limitations. FPDS-NG data can be used to identify broad trends and produce rough estimates, or to gather information about specific contracts. Some observers say that despite their shortcomings, FPDS-NG data are substantially more comprehensive than what is available in most other countries in the world. Understanding the limitations of government procurement data—including knowing when, how, and to what extent to rely on data—can help policymakers incorporate FPDS-NG data more effectively into their decisionmaking process. FPDS-NG OT Data Quality and Accuracy Issues Decisionmakers should be cautious when using data from FPDS-NG to develop policy or otherwise draw conclusions, especially with respect to OTs. In some cases, the data themselves may not be reliable. In other instances, a query for particular data may return differing results, depending on the parameters and timing of the analysis. In particular, all DOD data entered into FPDS-NG are subject to a 90-day delay, and updates to \"data, including new actions, modifications, and corrections are made on a regular basis,\" which could result in changes to \"data ... for current and/or prior fiscal years.\" Inconsistencies in FPDS-NG Data Within FPDS-NG, two primary collections of obligation data exist: one associated with standard government procurement contracts or modifications to such contracts, and the other associated with prototype OT agreements or modifications to such agreements. FPDS-NG's collection of prototype OT data allows for the input of additional data elements—such as nongovernment dollars associated with cost-share prototype OT agreements—not included in FPDS-NG's collection of standard government procurement contract data. More consequentially, FPDS-NG's prototype OT data include two similar data elements that allow users to identify the fiscal year a prototype OT agreement was signed or modified. One, labeled in the database as \"Fiscal Year,\" appears to allow users entering data into the system to manually assign a fiscal year to a transaction. FPDS-NG users entering data into the system appear to have interpreted this data element in various, conflicting ways. For example, a Department of the Air Force OT agreement was signed in February 2016 for the development of rocket propulsion system prototypes under the Evolved Expendable Launch Vehicle (EELV) program. FPDS-NG records an obligation of $115 million in FY2020 for this agreement. Fiscal law bars DOD from obligating money now for future fiscal years that have not yet occurred. The second, labeled \"Contract Fiscal Year,\" appears to be based on the date the prototype OT agreement was signed or modified. See Table C-1 for a comparison of the \"Fiscal Year\" and \"Contract Fiscal Year\" elements for selected new prototype OT agreements signed between FY2013 and FY2017. If a user selects the Fiscal Year data element when attempting to review high-level data on recent trends in the use of prototype OT agreements within DOD—such as the total amount obligated for prototype OT agreements on an annual basis—that user will obtain a substantially different result than if he or she selects the Contract Fiscal Year data element for a similar analysis. See Table C-2 for a comparison of action obligations and nongovernment contributions using the Fiscal Year and Contract Fiscal Year data elements for new prototype OT agreements signed between FY2013 and FY2017. DOD OT Data Analysis Methodological Issues in Congressional Reports A March 2017 report to Congress entitled \"An Assessment of Cost-Sharing in Other Transaction Agreements for Prototype Projects,\" completed by the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics indicated that In FY2016, DOD obligated (Note: Two outliers in 2016 excluded) $1 billion in section 2371b awards and received $68 million in cost-share contributions after excluding two significant trend outliers. DOD cited FPDS-NG as the source for its analysis, and defined the \"significant trend outliers\" excluded as \"two $40 million OTAs with total cost-share of $270 million,\" likely referring to two DARPA prototype OT agreements conducted on a cost-share basis initiated in FY2016. However, a CRS analysis of the same FPDS-NG data identified numerous inconsistencies in DOD's methodological approach. Recreation of DOD Methodology Specifically, DOD appears to have conducted its analysis using the \"Fiscal Year\" data element referenced in this report's discussion of FPDS-NG OT data quality and accuracy issues, which would attribute some prototype OT activities to the wrong fiscal year for the purposes of comparative trend analysis. DOD also compared two disparate transaction types: the reported \"$1 billion in Section 2371b awards\" includes all action obligations associated with ongoing prototype OT activities in FY2016, including transactions associated with prototype OT indefinite delivery contracts, while the \"$68 million in cost-share contributions\" includes only cost-share contributions associated with new prototype OT agreements. If DOD used the \"Contract Fiscal Year\" data element, excluded the identified \"trend outliers,\" and focused on all action obligations and cost-share contributions associated with ongoing prototype OT activities, it would have found instead that the department obligated $1.4 billion for prototype OT agreements in FY2016, with an additional $313.5 million in cost-share contributions from the private sector. On the other hand, if DOD used the \"Contract Fiscal Year\" data element, excluded the identified \"trend outliers,\" and focused on only action obligations and cost-share contributions associated with new prototype OT agreements, it would have found instead that the department obligated $400 million for prototype OT agreements in FY2016, with an additional $272.1 million in cost-share contributions from the private sector. Appendix D. Other Transaction Authority Statutes 10 U.S.C. §2371. Research projects: transactions other than contracts and grants (a) ADDITIONAL FORMS OF TRANSACTIONS AUTHORIZED.— The Secretary of Defense and the Secretary of each military department may enter into transactions (other than contracts, cooperative agreements, and grants) under the authority of this subsection in carrying out basic, applied, and advanced research projects. The authority under this subsection is in addition to the authority provided in Section 2358 of this title to use contracts, cooperative agreements, and grants in carrying out such projects. (b) EXERCISE OF AUTHORITY BY SECRETARY OF DEFENSE.— In any exercise of the authority in subsection (a), the Secretary of Defense shall act through the Defense Advanced Research Projects Agency or any other element of the Department of Defense that the Secretary may designate. (c) ADVANCE PAYMENTS.— The authority provided under subsection (a) may be exercised without regard to Section 3324 of Title 31. (d) RECOVERY OF FUNDS.— (1) A cooperative agreement for performance of basic, applied, or advanced research authorized by Section 2358 of this title and a transaction authorized by subsection (a) may include a clause that requires a person or other entity to make payments to the Department of Defense or any other department or agency of the Federal Government as a condition for receiving support under the agreement or other transaction. (2) The amount of any payment received by the Federal Government pursuant to a requirement imposed under paragraph (1) may be credited, to the extent authorized by the Secretary of Defense, to the appropriate account established under subsection (f). Amounts so credited shall be merged with other funds in the account and shall be available for the same purposes and the same period for which other funds in such account are available. (e) CONDITIONS.— (1) The Secretary of Defense shall ensure that- (A) to the maximum extent practicable, no cooperative agreement containing a clause under subsection (d) and no transaction entered into under subsection (a) provides for research that duplicates research being conducted under existing programs carried out by the Department of Defense; and (B) to the extent that the Secretary determines practicable, the funds provided by the Government under a cooperative agreement containing a clause under subsection (d) or a transaction authorized by subsection (a) do not exceed the total amount provided by other parties to the cooperative agreement or other transaction. (2) A cooperative agreement containing a clause under subsection (d) or a transaction authorized by subsection (a) may be used for a research project when the use of a standard contract, grant, or cooperative agreement for such project is not feasible or appropriate. (f) SUPPORT ACCOUNTS.— There is hereby established on the books of the Treasury separate accounts for each of the military departments and the Defense Advanced Research Projects Agency for support of research projects and development projects provided for in cooperative agreements containing a clause under subsection (d) and research projects provided for in transactions entered into under subsection (a). Funds in those accounts shall be available for the payment of such support. (g) EDUCATION AND TRAINING.—The Secretary of Defense shall— (1) ensure that management, technical, and contracting personnel of the Department of Defense involved in the award or administration of transactions under this section or other innovative forms of contracting are afforded opportunities for adequate education and training; and (2) establish minimum levels and requirements for continuous and experiential learning for such personnel, including levels and requirements for acquisition certification programs. (h) REGULATIONS.— The Secretary of Defense shall prescribe regulations to carry out this section. (i) Protection of Certain Information From Disclosure.-(1) Disclosure of information described in paragraph (2) is not required, and may not be compelled, under Section 552 of Title 5 for five years after the date on which the information is received by the Department of Defense. (2)(A) Paragraph (1) applies to information described in subparagraph (B) that is in the records of the Department of Defense if the information was submitted to the Department in a competitive or noncompetitive process having the potential for resulting in an award, to the party submitting the information, of a cooperative agreement for performance of basic, applied, or advanced research authorized by Section 2358 of this title or another transaction authorized by subsection (a). (B) The information referred to in subparagraph (A) is the following: (i) A proposal, proposal abstract, and supporting documents. (ii) A business plan submitted on a confidential basis. (iii) Technical information submitted on a confidential basis. 10 U.S.C. §2371b. Authority of the Department of Defense to carry out certain prototype projects (a) AUTHORITY.— (1) Subject to paragraph (2), the Director of the Defense Advanced Research Projects Agency, the Secretary of a military department, or any other official designated by the Secretary of Defense may, under the authority of Section 2371 of this title, carry out prototype projects that are directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the Department of Defense, or to improvement of platforms, systems, components, or materials in use by the armed forces. (2) The authority of this section- (A) may be exercised for a transaction (for a prototype project) that is expected to cost the Department of Defense in excess of $100,000,000 but not in excess of $500,000,000 (including all options) only upon a written determination by the senior procurement executive for the agency as designated for the purpose of Section 1702(c) of Title 41, or, for the Defense Advanced Research Projects Agency or the Missile Defense Agency, the director of the agency that- (i) the requirements of subsection (d) will be met; an d (ii) the use of the authority of this section is essential to promoting the success of the prototype project; and (B) may be exercised for a transaction (for a prototype project) that is expected to cost the Department of Defense in excess of $500,000,000 (including all options) only if- (i) the Under Secretary of Defense for Acquisition, Technology, and Logistics determines in writing that- (I) the requirements of subsection (d) will be met; an d (II) the use of the authority of this section is essential to meet critical national security objectives; and (ii) the congressional defense committees are notified in writing at least 30 days before such authority is exercised. (3) The authority of a senior procurement executive or director of the Defense Advanced Research Projects Agency or Missile Defense Agency under paragraph (2)(A), and the authority of the Under Secretary of Defense for Acquisition, Technology, and Logistics under paragraph (2)(B), may not be delegated. (b) EXERCISE OF AUTHORITY.— (1) Subsections (e)(1)(B) and (e)(2) of such Section 2371 shall not apply to projects carried out under subsection (a). (2) To the maximum extent practicable, competitive procedures shall be used when entering into agreements to carry out projects under subsection (a). (c) COMPTROLLER GENERAL ACCESS TO INFORMATION.— (1) Each agreement entered into by an official referred to in subsection (a) to carry out a project under that subsection that provides for payments in a total amount in excess of $5,000,000 shall include a clause that provides for the Comptroller General, in the discretion of the Comptroller General, to examine the records of any party to the agreement or any entity that participates in the performance of the agreement. (2) The requirement in paragraph (1) shall not apply with respect to a party or entity, or a subordinate element of a party or entity, that has not entered into any other agreement that provides for audit access by a Government entity in the year prior to the date of the agreement. (3) (A) The right provided to the Comptroller General in a clause of an agreement under paragraph (1) is limited as provided in subparagraph (B) in the case of a party to the agreement, an entity that participates in the performance of the agreement, or a subordinate element of that party or entity if the only agreements or other transactions that the party, entity, or subordinate element entered into with Government entities in the year prior to the date of that agreement are cooperative agreements or transactions that were entered into under this section or Section 2371 of this title. (B) The only records of a party, other entity, or subordinate element referred to in subparagraph (A) that the Comptroller General may examine in the exercise of the right referred to in that subparagraph are records of the same type as the records that the Government has had the right to examine under the audit access clauses of the previous agreements or transactions referred to in such subparagraph that were entered into by that particular party, entity, or subordinate element. (4) The head of the contracting activity that is carrying out the agreement may waive the applicability of the requirement in paragraph (1) to the agreement if the head of the contracting activity determines that it would not be in the public interest to apply the requirement to the agreement. The waiver shall be effective with respect to the agreement only if the head of the contracting activity transmits a notification of the waiver to Congress and the Comptroller General before entering into the agreement. The notification shall include the rationale for the determination. (5) The Comptroller General may not examine records pursuant to a clause included in an agreement under paragraph (1) more than three years after the final payment is made by the United States under the agreement. (d) APPROPRIATE USE OF AUTHORITY.— (1) The Secretary of Defense shall ensure that no official of an agency enters into a transaction (other than a contract, grant, or cooperative agreement) for a prototype project under the authority of this section unless one of the following conditions is met: (A) There is at least one nontraditional defense contractor or nonprofit research institution participating to a significant extent in the prototype project. (B) All significant participants in the transaction other than the Federal Government are small businesses (including small businesses participating in a program described under Section 9 of the Small Business Act (15 U.S.C. 638)) or nontraditional defense contractors. (C) At least one third of the total cost of the prototype project is to be paid out of funds provided by sources other than other than the Federal Government. (D) The senior procurement executive for the agency determines in writing that exceptional circumstances justify the use of a transaction that provides for innovative business arrangements or structures that would not be feasible or appropriate under a contract, or would provide an opportunity to expand the defense supply base in a manner that would not be practical or feasible under a contract. (2) (A) Except as provided in subparagraph (B), the amounts counted for the purposes of this subsection as being provided, or to be provided, by a party to a transaction with respect to a prototype project that is entered into under this section other than the Federal Government do not include costs that were incurred before the date on which the transaction becomes effective. (B) Costs that were incurred for a prototype project by a party after the beginning of negotiations resulting in a transaction (other than a contract, grant, or cooperative agreement) with respect to the project before the date on which the transaction becomes effective may be counted for purposes of this subsection as being provided, or to be provided, by the party to the transaction if and to the extent that the official responsible for entering into the transaction determines in writing that- (i) the party incurred the costs in anticipation of entering into the transaction; and (ii) it was appropriate for the party to incur the costs before the transaction became effective in order to ensure the successful implementation of the transaction. (e) Definitions.—In this section: (1) The term \"nontraditional defense contractor\" has the meaning given the term under Section 2302(9) of this title. (2) The term \"small business\" means a small business concern as defined under Section 3 of the Small Business Act (15 U.S.C. 632). (f) FOLLOW-ON PRODUCTION CONTRACTS OR TRANSACTIONS.— (1) A transaction entered into under this section for a prototype project may provide for the award of a follow-on production contract or transaction to the participants in the transaction. A transaction includes all individual prototype subprojects awarded under the transaction to a consortium of United States industry and academic institutions. (2) A follow-on production contract or transaction provided for in a transaction under paragraph (1) may be awarded to the participants in the transaction without the use of competitive procedures, notwithstanding the requirements of Section 2304 of this title, if - (A) competitive procedures were used for the selection of parties for participation in the transaction; and (B) the participants in the transaction successfully completed the prototype project provided for in the transaction. (3) Contracts and transactions entered into pursuant to this subsection may be awarded using the authority in subsection (a), under the authority of Chapter 137 of this title, or under such procedures, terms, and conditions as the Secretary of Defense may establish by regulation. (g) AUTHORITY TO PROVIDE PROTOTYPES AND FOLLOW-ON PRODUCTION ITEMS AS GOVERNMENT-FURNISHED EQUIPMENT.— An agreement entered into pursuant to the authority of subsection (a) or a follow-on contract or transaction entered into pursuant to the authority of subsection (f) may provide for prototypes or follow-on production items to be provided to another contractor as Government-furnished equipment. (h) APPLICABILITY OF PROCUREMENT ETHICS REQUIREMENTS.— An agreement entered into under the authority of this section shall be treated as a Federal agency procurement for the purposes of Chapter 21 of Title 41. 10 U.S.C. §2373. Procurement for experimental purposes (a) AUTHORITY.— The Secretary of Defense and the Secretaries of the military departments may each buy ordnance, signal, chemical activity, transportation, energy, medical, space-flight, and aeronautical supplies, including parts and accessories, and designs thereof, that the Secretary of Defense or the Secretary concerned considers necessary for experimental or test purposes in the development of the best supplies that are needed for the national defense. (b) PROCEDURES.— Purchases under this section may be made inside or outside the United States and by contract or otherwise. Chapter 137 of this title applies only when such purchases are made in quantities greater than necessary for experimentation, technical evaluation, assessment of operational utility, or safety or to provide a residual operational capability.", "summary": "The Department of Defense (DOD) obligates more than $300 billion annually to buy goods and services, and to support research and development. Most of these acquisitions are governed by procurement statutes and regulations found in Title 10 (and parts of other select titles) of the United States Code, the Federal Acquisition Regulation (FAR), and the Defense Federal Acquisition Regulation Supplement. Under certain circumstances, DOD can enter into an other transaction (OT) agreement instead of a traditional contract. OT agreements are generally exempt from federal procurement laws and regulations. These exemptions grant government officials the flexibility to include, amend, or exclude contract clauses and requirements that are mandatory in traditional procurements (e.g., termination clauses, cost accounting standards, payments, audit requirements, intellectual property, and contract disputes). OT authorities also grant more flexibility to structure agreements in numerous ways, including joint ventures; partnerships; consortia; or multiple agencies joining together to fund an agreement encompassing multiple providers. Other transaction agreements are legally binding contracts; they are referred to as agreements to distinguish them from the traditional procurement contracts governed by the FAR and procurements laws. Other transaction authorities are set forth in two sections of law: 10 U.S.C. 2371—granting authority to use OTs for basic, applied, and advanced research projects. 10 U.S.C. 2371b—granting authority to use OTs for prototype projects and follow-on production. Under this authority, a prototype project can only be conducted if at least one nontraditional defense contractor significantly participates in the project; all significant participants are small businesses or nontraditional defense contractors; at least one-third of the total cost of the prototype project is provided by nongovernment participants; or the senior procurement acquisition official provides a written justification for using an OT. Follow-on production can only be conducted when the underlying prototype OT was competitively awarded, and the prototype project was successfully completed. OTs have the potential to provide significant benefits to DOD, including attracting nontraditional contractors with promising technological capabilities to work with DOD, establishing a mechanism to pool resources with other entities to facilitate development of, and obtain, state-of-the-art dual-use technologies, and offering a unique mechanism for DOD to invest in, and influence the direction of, technology development. A number of analysts warn that along with the potential benefits come significant risks, including potentially diminished oversight and exemption from laws and regulations designed to protect government and taxpayer interests. In FY2017, DOD obligated $2.1 billion on prototype OT agreements, representing less than 1% of contract obligations for the year. However, the use of OTs is expected to grow at a rapid pace, due in part to recent statutory changes expanding other transaction authorities. A number of analysts and officials have raised concerns that if DOD uses OTs in ways not intended by Congress—or is perceived to abuse the authority—Congress could clamp down on the authority. Generally, DOD lacks authoritative data that can be used to measure and evaluate the use of other transaction authorities.", "document_type": "crs"}
{"report": "With 33 countries—ranging from the Caribbean nation of St. Kitts and Nevis, one of the world's smallest states, to the South American giant of Brazil, the world's fifth-largest country—the Latin American and Caribbean region has made significant advances over the past three decades in terms of both political and economic development. (See Figure 1 for a map of the region and Table 1 for basic facts on the region's countries.) In the early 1980s, 16 Latin American and Caribbean countries were governed by authoritarian regimes, both on the left and the right. Today, most governments are elected democracies, at least formally. The threat to elected governments from their own militaries has dissipated in most countries. Free and fair elections have become the norm in most countries in the region, although elections in several countries have been controversial and contested. In 2017, the Bahamas, Ecuador, and Chile held successful elections for heads of government. Elections in Honduras in November 2017, however, were characterized by significant irregularities, with the Secretary General of the Organization of American States (OAS) calling for new elections to be held. Despite a series of mass civil protests, incumbent President Juan Orlando Hernández was certified as the winner in December 2017. In 2018, nine countries in the region—Antigua and Barbuda, Barbados, Brazil, Costa Rica, Colombia, Grenada, Mexico, Paraguay, and Venezuela—held elections for head of government. With the exception of Venezuela, all of these elections were free and fair. The Venezuelan election, boycotted by most opposition parties, was significantly flawed. In addition, Cuba underwent a political transition in April, when Raúl Castro stepped down from power and Cuba's legislature selected a new president. (See Table 1 for a listing of leaders and elections.) Despite significant improvements in political rights and civil liberties, many countries in the region still face considerable challenges. In a number of countries, weaknesses remain in the state's ability to deliver public services, ensure accountability and transparency, advance the rule of law, and ensure citizen safety and security. There also are numerous examples of elected presidents over the past three decades who left office early amid severe social turmoil and economic crises, the presidents' own autocratic actions contributing to their ouster, or high-profile corruption. Corruption scandals led to the 2015 resignation of Guatemala's president and contributed to the impeachment and removal from office of Brazil's president in 2016. In recent years, the quality of democracy has eroded in several countries in the region. One factor contributing to this democratic erosion is increased organized crime. Organized crime has particularly affected Mexico and several Central American countries because of the increased use of the region as a drug transit zone and the associated rise in corruption, crime, and violence. A second factor negatively affecting democracy in several countries has been the executive's abuse of power. Elected leaders have sought to consolidate power at the expense of minority rights, leading to a setback in liberal democratic practices. Venezuela stands out in this regard, with the government of President Nicolás Maduro repressing the opposition with force and manipulating state institutions to retain power. Media freedom deteriorated in several countries in recent years, precipitated by the increase in organized crime-related violence and by politically driven attempts to curb critical or independent media. In 2018, several countries experienced significant political challenges. Peru's president resigned in March just ahead of a vote on impeachment on corruption charges. In Nicaragua, widespread protests against the government of President Daniel Ortega were suppressed violently, with over 300 people killed. In Brazil, far-right populist Jair Bolsonaro won the presidential race in October; given Bolosonaro's coarse campaign rhetoric, which included a vow to purge Brazil of leftist political opponents, many observers have concerns that his election could pose a threat to democracy and human rights. In Guatemala, efforts by President Jimmy Morales to undermine and expel the U.N.-backed International Commission against Impunity in Guatemala (CICIG) prompted widespread protests and expressions of international concern. Since 1973, the human rights group Freedom House has compiled an annual evaluation of political rights and civil liberties in which it categorizes countries worldwide as free , partly free , and not free . In its 2018 report (covering 2017), the group ranked two countries in the Latin American and Caribbean region as not free: Cuba and Venezuela. It ranked 10 countries as partly free—Bolivia, Colombia, the Dominican Republic, Ecuador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, and Paraguay—and the remaining 21 countries of the region as free. The report pointed to positive developments in Ecuador and Colombia. Freedom House lauded Ecuador's President Lenín Moreno for moving away from the \"often repressive rule\" of his predecessor, Rafael Correa; for easing pressure on the media; and for proposing the restoration of term limits. A referendum on term limits and other reform measures was approved by a substantial margin in early February 2018. The Freedom House report also praised reform measures in Colombia to limit pretrial detention and for the continued expansion of state control in areas formerly controlled by left-wing rebels pursuant to the government's 2016 peace accord with the Revolutionary Armed Forces of Colombia (FARC). On the negative side, Freedom House pointed to concerning developments in Venezuela, Bolivia, Honduras, Nicaragua, and Mexico in 2017. Freedom House described Venezuela as continuing its \"descent into dictatorship and humanitarian crisis.\" In Bolivia, it expressed concern about actions by the country's constitutional court, which overturned presidential term limits that were supported by a 2016 referendum; the term limits would have prevented current President Evo Morales from seeking a fourth term. Freedom House criticized Honduras for flawed November 2017 presidential elections in which belatedly updated vote totals reversed an early vote count and handed victory to the incumbent, and it criticized Nicaragua for holding flawed municipal elections in 2017 favoring the party of President Daniel Ortega. (As discussed below, the situation in Nicaragua has deteriorated in 2018. Since April, there has been growing opposition to Ortega's rule; the government and its supporters have violently repressed this opposition.) In Mexico, Freedom House cited revelations of extensive state surveillance against journalists and civil society activists threatening to expose public corruption. Since 2006, the Economist Intelligence Unit (EIU) has produced an annual democracy index examining the state of democracy worldwide. The index classifies countries as full democracies , flawed democracies , hybrid regimes , and authoritarian regimes based on ratings for 60 indicators covering electoral process and pluralism, civil liberties, the functioning of government, political participation, and political culture. In its democracy index, the EIU examines 24 countries in Latin America and the Caribbean, not including 9 small English-speaking Caribbean countries. In its 2017 index, the EIU classified both Cuba and Venezuela as authoritarian regimes. Venezuela was downgraded to authoritarian for the first time because of the \"continued slide toward dictatorship\" and because of the government's violent suppression of opposition protests, jailing and disenfranchisement of opposition leaders, and sidelining of the opposition-dominated legislature. In its 2018 democracy index, the EIU added Nicaragua to its list of authoritarian countries, noting the \"aggressive repression strategy\" adopted by progovernment forces that led to numerous human rights violations and the deaths of over 300 people. The 2018 EIU index classified five countries in the region—Bolivia, El Salvador, Guatemala, Haiti, and Honduras—as hybrid regimes, or countries characterized by weak rule of law, weak civil society, and, often, widespread corruption. The 2018 index also classified two countries in the region, Costa Rica and Uruguay, as full democracies and 14 countries as flawed democracies, or countries that have free and fair elections and respect basic civil liberties but exhibit weaknesses in other aspects of democracy. The report noted that governments in the region remain beset by corruption and the effects of transnational organized crime and that \"persistent deficiencies in governance and the practice of democracy have given way to a declining confidence in government, in formal political institutions, and in democracy itself.\" It also noted the return of populism to both Mexico and Brazil as disillusioned voters in both countries turned to populist candidates to \"stop the rot.\" Whereas the 1980s were commonly referred to as the lost decade of development because many countries were bogged down with unsustainable public debt, the 1990s brought about a shift from a strategy of import-substituting industrialization to one focused on export promotion, attraction of foreign capital, and privatization of state enterprises. Latin America experienced an economic downturn in 2002 (brought about in part because of an economic downturn in the United States), but it recovered with strong growth rates until 2009, when a global economic crisis again affected the region with an economic contraction of almost 2%, according to International Monetary Fund (IMF) statistics. Some countries in the region experienced deeper recessions than others in 2009. Those more closely integrated with the U.S. economy, such as Mexico, were hit hardest; other countries with more diversified trade and investment partners experienced lesser downturns. The region rebounded in 2010 and 2011, with economic growth rates of 6.1% and 4.6%, respectively, but growth began to decline annually after that, registering 1.3% in 2014 and 0.3% in 2015. The global decline in commodity prices significantly affected the region, as did China's economic slowdown and reduced appetite for imports. The region experienced an economic contraction of 0.6% in 2016, dragged down by recessions in Argentina and Brazil and by Venezuela's severe economic deterioration, in which the economy contracted 16.5%. In 2017, however, economic growth returned to the region, with 1.3% growth. In January 2019, the IMF estimated that economic growth in Latin America and the Caribbean declined slightly to 1.1% in 2018 and was projected to increase to 2% in 2019 and 2.5% in 2020 (see Table 2 ). Early in 2018, the IMF had forecast 1.9% regional growth for the year. However, Venezuela's continued economic decline and persistent economic challenges in several countries lowered growth. Latin America made significant progress in combating poverty and inequality from 2002 through 2014. In 2002, almost 45% of the region's population lived in poverty, but by 2014 that figure had dropped to 27.8%, representing 164 million people. Extreme poverty (currently defined by the World Bank as living on less than $1.90 per day) also declined over this period, from 11.2% in 2002, representing 57 million people, to 7.8% in 2014, or 46 million people. Two key factors accounting for this decline were increasing per capita income levels and targeted public expenditures, known as conditional cash transfer programs, for vulnerable sectors. Since 2015, the poverty rate for Latin America increased to 30.2% of the region's population in 2017 or 184 million people. Likewise, extreme poverty in Latin America increased to 10.2% in 2017, representing 62 million people. The reversal in poverty reduction largely can be attributed to economic setbacks in Brazil and Venezuela, both of which experienced significant declines in per capita income levels, according to the U.N. Economic Commission for Latin America and the Caribbean. In contrast, poverty reduction has continued since 2015 in a number of countries in the region, including five countries that saw a percentage-point drop in poverty between 2016 and 2017: Argentina, Colombia, Costa Rica, El Salvador, and Paraguay. U.S. interests in Latin America and the Caribbean are diverse and include economic, political, security, and humanitarian concerns. Geographic proximity has ensured strong economic linkages between the United States and the region, with the United States being the major trading partner and largest source of foreign investment for many Latin American and Caribbean countries. Free-trade agreements (FTAs) have augmented U.S. economic relations with 11 countries in the region. Latin American nations, led by Venezuela, Mexico, and Colombia, supplied the United States with almost 28% of its imported crude oil in 2016. The Western Hemisphere is a large source of U.S. immigration, both legal and illegal; geographic proximity and economic and security conditions are major factors driving migration trends. Curbing the flow of illicit drugs from Latin America and the Caribbean has been a key component of U.S. relations with the region and a major interest of Congress for more than three decades. Over the past decade, the United States has engaged in close security cooperation with Mexico, Central America, and the Caribbean to combat drug trafficking and related violence. As described above, although most countries in the region have made enormous strides in terms of democratic political development since the 1980s, communist Cuba has remained under authoritarian rule since the 1959 Cuban revolution and undemocratic practices have risen in several countries, particularly in Venezuela, which many observers characterize as a dictatorship, and Nicaragua, which has grown increasingly authoritarian. In its policy toward the region, the Obama Administration set forth a broad framework centered on four priorities: promoting economic and social opportunity, ensuring citizen security, strengthening effective democratic governance, and securing a clean energy future. In many respects, there was significant continuity in U.S. policy toward the region under President Obama; his Administration had many of the same policy approaches as the George W. Bush Administration. In addition, the Obama Administration emphasized partnership and shared responsibility, with policy conducted on the basis of mutual respect through engagement and dialogue. Under the Obama Administration, the United States provided significant support to the region to combat drug trafficking and organized crime and to advance citizen security. Efforts included a continuation of Plan Colombia and its successor programs as well as the creation of the Mérida Initiative, begun in 2007 to support Mexico; the Central America Regional Security Initiative (CARSI), begun in 2008; and the Caribbean Basin Security Initiative (CBSI), begun in 2009. In 2015, spurred by a surge of unaccompanied children and other migrants from Central America seeking to enter the United States, the Obama Administration developed a broader approach known as the U.S. Strategy for Engagement in Central America aimed at improving security, strengthening governance, and promoting prosperity. On trade matters, the Obama Administration resolved outstanding congressional concerns related to FTAs with Colombia and Panama that were negotiated under the Bush Administration; this resolution led to congressional enactment of implementing legislation for the two FTAs in 2011. The Administration also concluded negotiations in 2015 for the proposed Trans-Pacific Partnership (TPP) trade agreement, which included Mexico, Chile, and Peru, among other nations. In the absence of congressional action on comprehensive immigration reform, President Obama turned to executive action in 2012 with a program known as Deferred Action for Childhood Arrivals (DACA), which provided relief from deportation for certain immigrants who arrived as children. The Obama Administration also granted Temporary Protected Status (TPS) to Haitians in the United States after the country's massive earthquake in 2010. In other policy changes, the Obama Administration announced a major policy shift toward Cuba, moving away from the long-standing sanctions-based approach toward a policy of engagement. With regard to the deteriorating political and economic situation in Venezuela, the Obama Administration pressed for dialogue to resolve the conflict. Then, prompted by Congress through passage of the Venezuela Defense of Human Rights and Civil Society Act of 2014 ( P.L. 113-278 ), the Administration imposed targeted sanctions in 2015 on Venezuelan officials involved in human rights abuses. The Trump Administration has taken actions that have changed the dynamics and outlook for U.S. relations with Latin America and the Caribbean. As discussed below, the State Department set forth a framework for U.S. policy toward the region in February 2018 that reflects continuity with long-standing U.S. objectives in the region. The framework, however, appears to be at odds with some of the Administration's actions, sometimes accompanied by tough rhetoric, on immigration, trade, and foreign aid. Although President Trump's cancellation of his planned attendance at the April 2018 Summit of the Americas in Peru was a lost opportunity to engage with hemispheric leaders, Vice President Mike Pence represented the United States at the summit. The Trump Administration proposed deep cuts in assistance to Latin America and the Caribbean, a significant departure from past Administrations. The approximately $1.1 billion requested for the region for each of FY2018 and FY2019 would have reflected a decrease of 36% and 35%, respectively, from the $1.7 billion in assistance provided to the region in FY2017. (As noted below, Congress rejected the Administration's FY2018 request and funded foreign aid to the region at levels approaching assistance in FY2017; for FY2019, the 115 th Congress did not complete action on foreign aid appropriations, but bills in both houses would have continued to fund key U.S. initiatives in Colombia, Mexico, and Central America at levels approaching FY2017 levels. See \" Congress and Policy Toward the Region \" and \" U.S. Foreign Aid ,\" below.) On trade issues, President Trump shifted the long-standing policy of past Administrations that focused on increasing economic linkages with Latin America through reciprocal free trade agreements. He described past free trade agreements as detrimental to U.S. workers and industries and vowed to renegotiate new \"fair and reciprocal\" agreements. President Trump ordered U.S. withdrawal from the proposed Trans-Pacific Partnership (TPP) trade agreement in January 2017; the accord would have increased U.S. economic linkages with Mexico, Chile, and Peru. Similarly, the President strongly criticized NAFTA and warned repeatedly that the United States might withdraw from the agreement with Mexico and Canada. By the end of September 2018, all three countries had reached agreement on a proposed new United States-Mexico-Canada Agreement (USMCA), which would leave NAFTA largely intact but includes some changes, such as provisions regarding the dairy and auto industries. The Administration's imposition of duties on steel and aluminum imports in 2018 added new challenges to U.S. trade relations with several countries in the region. (See \" Trade Policy ,\" below.) Beyond trade, bilateral relations with Mexico have been tested because of inflammatory anti-immigrant rhetoric, President Trump's repeated calls for Mexico to pay for a border wall, and the Administration's September 2017 decision to end DACA (potentially affecting several hundred thousand Mexicans and more than 100,000 migrants from elsewhere in the hemisphere). Despite tensions, overall U.S.-Mexican relations remain cooperative, including security cooperation related to drug interdiction and efforts to bolster economic ties, particularly energy cooperation. (See \" Mexico ,\" below.) Other Trump Administration actions on immigration have caused concerns in the region. The Administration announced the termination of TPS for up to 5,300 Nicaraguans in January 2019; up to 58,000 Haitians in July 2019; up to 263,000 Salvadorans in September 2019; and up to 86,000 Hondurans in January 2020. The countries expressed concerns about whether they have the capacity to receive so many people and about the effects of potential deportations on their economies. The Administration's actions prompted court challenges; in October 2018, a federal court issued a preliminary injunction preventing the termination of TPS designations for Nicaragua, Haiti, and El Salvador, pending the outcome of the litigation. Other immigration actions, such as the implementation of a \"zero tolerance\" policy toward illegal border crossings and an Attorney General decision in June 2018 that migrants' claims pertaining to gang violence or domestic abuse generally will not qualify them for asylum, could restrict the ability of many Central American migrants to receive asylum. (See \" Migration Issues ,\" below.) With regard to Cuba, President Trump unveiled a new policy in June 2017 that partially rolled back some of the Obama Administration's efforts to normalize relations. The most significant changes included restrictions on financial transactions with companies controlled by the Cuban military and the elimination of individual people-to-people travel. In another action affecting bilateral relations, the State Department downsized the staff at embassies in both capitals in September 2017 in response to unexplained injuries of U.S. personnel at the U.S. Embassy in Havana. (See \" Cuba \" below.) With regard to the Caribbean region, the State Department issued a multiyear strategy on U.S. policy toward the region as required by the United States-Caribbean Strategic Engagement Act of 2016 ( P.L. 114-291 ). The strategy established a framework for enhanced relations in six priority areas—security, diplomacy, prosperity, energy, education, and health. In the aftermath of Hurricanes Irma and Maria, the United States provided some $23 million in humanitarian relief assistance to several Caribbean countries and foreign territories. (See \" Caribbean Region \" below.) As the political and economic situation in Venezuela has continued to deteriorate, the Trump Administration has spoken out against the actions of the Maduro government and supported regional efforts to help resolve the situation. It also has imposed a variety of economic sanctions (both targeted and broader economic sanctions) and provided humanitarian assistance for Venezuelans who have fled to other countries. The Administration reportedly has considered additional sanctions aimed at limiting or prohibiting trade with Venezuela, although there are concerns that such sanctions could exacerbate the humanitarian situation without necessarily influencing the behavior of the Maduro government. (See \" Venezuela ,\" below.) In Nicaragua, as political unrest against the increasingly authoritarian rule of President Daniel Ortega began to grow in 2018, the Trump Administration spoke out strongly about against the Ortega government's use of violence and supported an OAS resolution condemning the violence. The Administration also has employed targeted sanctions (visa restrictions and asset freezing) against several individuals responsible for human rights abuses or significant corruption. In Guatemala, the Administration strongly supported the role of the U.N.'s International Commission against Impunity in Guatemala (CICIG) in 2017, when it was under siege by the government of President Jimmy Morales. In 2018, however, some observers contend that the Administration has not spoken out strongly enough as the Morales government continues efforts to weaken CICIG. Although a State Department official testified to Congress in July 2018 about CICIG's important role in strengthening the rule of law, fighting impunity, and combatting corruption in Guatemala, a State Department readout of Secretary of State Mike Pompeo's September 2018 telephone call with President Morales raised questions about U.S. support for CICIG. The statement said that Pompeo and Morales discussed the importance of the Guatemalan government working with CICIG but also that the Secretary expressed continued U.S. support for \"a reformed CICIG\" and committed to working with Guatemala on implementing such reforms in the coming year. After President Morales announced in early January 2019 that he was going to expel CICIG, the U.S. Embassy in Guatemala issued a statement expressing concern about the future of anticorruption efforts in the country but did not specifically mention the president's actions against CICIG. The Trump Administration also warned about the activities of China and Russia in the region. The Administration's 2017 National Security Strategy contends that China \"seeks to pull the region into its orbit through state-led investments and loans,\" and that Russia is continuing \"its failed politics of the Cold War by bolstering its radical Cuban allies as Cuba continues to repress its citizens.\" The strategy asserts that \"both China and Russia support the dictatorship in Venezuela\" and \"are seeking to expand military linkages and arms sales across the region.\" In February 2018, then-Secretary of State Rex Tillerson warned \"against potential actors that are now showing up in our hemisphere,\" specifically referring to China and Russia. Tillerson spoke out against China's \"foothold in Latin America\" and asserted, \"Russia's growing presence in the region is alarming,\" noting its sales of arms and military equipment \"to unfriendly regimes who do not share or respect democratic values.\" Following El Salvador's decision to switch diplomatic relations from Taiwan to China in August 2018, the White House issued a statement that it would reevaluate U.S. relations with the Salvadoran government. In September 2018, the State Department recalled for consultations the U.S. chiefs of mission from the Dominican Republic, El Salvador, and Panama related to those countries' decisions to switch diplomatic recognition from Taiwan to China. The Trump Administration's policy approach toward China's activities in the region is a departure from that of previous Administrations, which, while raising concerns about China's influence, emphasized engagement and consultations with China on Latin America. U.S. warnings about China have been met with skepticism in the region, with some countries calling on the United States to respect their sovereign decisions. (For additional information, see CRS In Focus IF10982, China's Engagement with Latin America and the Caribbean , by Mark P. Sullivan and Thomas Lum.) Trump Administration Policy Framework. Vice President Mike Pence spoke on the Administration's policy toward the region in several speeches during, and just after, an August 2017 trip visiting Argentina, Chile, Colombia, and Panama. Similar to other U.S. officials speaking about U.S. policy in other parts of the world, the Vice President maintained that \"America First\" does not mean America alone. He acknowledged that prosperity and security for Latin America and the United States are inextricably linked. He maintained that transnational crime sustained by drug trafficking is the most immediate threat to security in the region, and he pledged continued U.S. support to combat it. In the Trump Administration's second year, officials fleshed out its framework for U.S. policy in Latin America and the Caribbean. In February 2018, then-Secretary of State Tillerson set forth a framework focused on three pillars for U.S. engagement in the region—economic growth and prosperity, security, and democratic governance. These three pillars have been long-standing U.S. policy objectives in Latin America and the Caribbean, and they match up with three of the Obama Administration's four policy priorities for the region (with the exception of securing a clean energy future). At the April 2018 Summit of the Americas in Peru, Vice President Pence emphasized that the Western Hemisphere nations are bound together by geography, history, and \"an enduring aspiration for freedom.\" U.S. Agency for International Development (USAID) Director Mark Green also advanced this theme of a \"hemisphere of freedom\" in an August 2018 speech that discussed the work of his agency largely within the same policy framework set forth by the State Department. In some respects, the objectives and activities advanced by the State Department's framework for U.S. policy toward the region appear to contradict some of the political rhetoric by President Trump and the Administration's efforts to reduce U.S. foreign assistance to the region significantly. Moreover, as noted above, positive views in the region of U.S. leadership dropped in 2017 and 2018, influenced by disparaging political rhetoric and certain actions on immigration and trade. Such views could affect the willingness of countries in the region to cooperate with the United States on regional and global challenges, making it more difficult for the United States to engender support from individual countries when needed. On November 1, 2018, National Security Adviser John Bolton made a speech in Miami, FL, on the Administration's policies in Latin America that warned about \"the destructive forces of oppression, socialism, and totalitarianism\" in the region. Reminiscent of Cold War political rhetoric, Bolton referred to Cuba, Nicaragua, and Venezuela as the \"troika of tyranny\" in the hemisphere that has \"finally met its match.\" He referred to the three countries as \"the cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere.\" As previewed in the speech, the Administration subsequently increased economic sanctions on all three countries. Congress traditionally has played an active role in policy toward Latin America and the Caribbean in terms of both legislation and oversight. Given the region's geographic proximity to the United States, U.S. foreign policy toward the region and domestic policy often overlap, particularly in areas of immigration and trade. The 115 th Congress rejected many of the Trump Administration's proposed cuts in foreign assistance to Latin America and the Caribbean for FY2018 in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), enacted in March 2018. Congress provided an estimated $1.7 billion in foreign aid to the region, about 55% more than the Administration had requested for FY2018. Likewise, for FY2019, both the House and Senate Appropriations Committees reported out bills ( H.R. 6385 and S. 3108 , respectively) that would have funded key countries and initiatives at levels approaching FY2017 levels. The 115 th Congress approved two short-term continuing resolutions, P.L. 115-245 and P.L. 115-298 , providing FY2019 foreign aid appropriations at FY2018 levels through December 21, 2018, but did not complete full-year FY2019 funding, leaving it for the 116 th Congress. Two additional FY2019 House Appropriations Committee bills, H.R. 5952 (Commerce) and H.R. 6258 / H.R. 6147 (Financial Services), had provisions that would have tightened economic sanctions on Cuba, but the Senate Appropriations Committee's versions did not did not have similar provisions and the 115 th Congress did not complete action on these appropriations measures. The John S. McCain National Defense Authorization Act for FY2019, P.L. 115-232 ( H.R. 5515 ), signed into law in August 2018, has several Latin America provisions. Section 1032 extended a prohibition on the use of funds in FY2019 to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba (similar provisions were included in P.L. 115-244 , FY2019 military construction appropriations, and P.L. 115-245 , FY2019 Department of Defense appropriations). Section 1287 required a report from the Secretary of State, in coordination with the Secretary of Defense and other appropriate agencies, regarding narcotics trafficking corruption and illicit campaign finance in Honduras, Guatemala, and El Salvador, including the naming of officials involved in such activities. The conference report to the bill, H.Rept. 115-874 , also directed the Defense Intelligence Agency to submit a report on security cooperation between Russia and Cuba, Nicaragua, and Venezuela. In December 2018, the 115 th Congress enacted the Nicaragua Human Rights and Anticorruption Act of 2018 ( P.L. 115-335 , H.R. 1918 ). As approved, the measure requires the United States to vote against any loan from the international financial institutions to Nicaragua, except to address basic human needs or promote democracy. The law also authorizes the President to impose sanctions (visa restrictions and assets blocking) on persons responsible for human rights violations or acts of corruption. In other action, the House approved H.R. 2658 in December 2017. Among its provisions, the bill would have authorized humanitarian assistance for Venezuela. Similar bills were introduced in the Senate— S. 1018 in May 2017 and a newer version, S. 3486 , in September 2018, but action was not completed on these initiatives. Both houses approved several resolutions on U.S. policy toward the region over the course of the 115 th Congress. On Venezuela, the Senate passed S.Res. 35 in February 2017, which called for the release of political prisoners and support for dialogue and efforts at the OAS; the House passed H.Res. 259 in December, which urged Venezuela to hold free, fair, and open elections, release all political prisoners, and open a channel for international humanitarian assistance. On September 27, the House Committee on Foreign Affairs approved H.Res. 1006 , amended, which condemns the deteriorating situation in Venezuela and the regional humanitarian crisis it has caused; the committee agreed to seek House consideration of the bill under suspension of the rules. On Mexico, the Senate passed S.Res. 83 in March 2017, which called for the United States to support efforts by Mexico and China to stop the production and trafficking of illicit fentanyl into the United States; the House approved H.Res. 336 in December 2017, reaffirming its strong commitment to a bilateral partnership based on mutual respect. On Argentina, the House passed H.Res. 54 in April 2017, which expressed commitment to the bilateral partnership and commended Argentina for making far-reaching economic reforms; the Senate Foreign Relations Committee reported a similar resolution, S.Res. 18 , in June 2017. On Central America, the House passed H.Res. 145 in May 2017, which reaffirmed that combating corruption in El Salvador, Guatemala, and Honduras is an important U.S. policy interest. On Cuba, the Senate passed S.Res. 224 in April 2018, commemorating the legacy of Cuban democracy activist Oswaldo Payá. On Nicaragua, the House passed H.Res. 981 in July 2018, \"condemning the violence, persecution, intimidation, and murders committed by the Government of Nicaragua against its citizens.\" For a discussion of potential issues for consideration in the 116 th Congress, see \" Outlook for the 116th Congress ,\" below. The United States provides foreign assistance to the nations of Latin America and the Caribbean to support development and other U.S. objectives. U.S. policymakers have emphasized different strategic interests in the region at different times, from combating Soviet influence during the Cold War to promoting democracy and open markets since the 1990s. Over the past two years, the Trump Administration has sought to refocus U.S. assistance efforts in the region to address U.S. domestic concerns, such as irregular migration and transnational crime. The Trump Administration also has proposed significant cuts to U.S. assistance to Latin America and the Caribbean (see Table 3 ). In each of its annual budget proposals, the Administration has requested approximately $1.1 billion to be provided to the region through foreign assistance accounts managed by the State Department and the U.S. Agency for International Development (USAID). The FY2019 request would cut funding for nearly every type of assistance and would reduce aid for every Latin American and Caribbean nation. If enacted, U.S. assistance to the region would decline by $590 million (35%) compared to the FY2018 estimate. The Administration's FY2019 budget proposal also would eliminate the Inter-American Foundation, a small, independent U.S. foreign assistance agency that promotes grassroots development in the region. Congressional Action: After a series of five short-term continuing resolutions that funded most foreign aid programs at slightly below the FY2017 level, Congress passed the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), in March 2018. The act provided an estimated $1.7 billion of foreign assistance for Latin America and the Caribbean. The enacted amount is $607 million (55%) more than the Administration had requested for FY2018 but slightly less than Congress appropriated for the region in FY2017. The 115 th Congress did not complete action on foreign aid appropriations for FY2019. The House and Senate Appropriations Committees approved their respective FY2019 Department of State, Foreign Operations, and Related Programs appropriations measures, H.R. 6385 and S. 3108 , in June 2018. Although the bills and their accompanying reports ( H.Rept. 115-829 and S.Rept. 115-282 ) did not specify appropriations levels for every Latin American and Caribbean nation, the amounts the measures would have designated for key U.S. initiatives in Colombia, Mexico, and Central America would have exceeded the Administration's request significantly. Both measures also would have continued funding the Inter-American Foundation. Neither bill received floor consideration, however, and two continuing resolutions ( P.L. 115-245 and P.L. 115-298 ), that had funded foreign aid programs in the region at the FY2018 level expired on December 21, 2018. For additional information, see CRS Report R45089, U.S. Foreign Assistance to Latin America and the Caribbean: FY2018 Appropriations , by Peter J. Meyer. Latin America and the Caribbean feature prominently in U.S. counternarcotics policy due to the region's role as a source and transit zone for several illicit drugs destined for U.S. markets—cocaine, marijuana, methamphetamine, and plant-based and synthetic opiates. Heroin abuse and opioid-related deaths in the United States have reached epidemic levels, raising questions about how to address foreign sources of opioids—particularly Mexico, which has experienced a sharp uptick in opium poppy cultivation and the production of heroin and fentanyl (a synthetic opioid). Policymakers also are concerned that cocaine overdoses in the United States are on an upward trajectory. Rising cocaine usage is occurring as coca cultivation and cocaine production in Colombia, which supplies roughly 90% of cocaine in the United States, reached record levels in 2017. Whereas Mexico, Colombia, Peru, and most other source and transit countries in the region work closely with the United States to combat drug production and interdict illicit flows, the Venezuelan government does not. Public corruption in Venezuela also has made it easier for drug trafficking organizations to smuggle illicit drugs. Contemporary drug trafficking and transnational crime syndicates have contributed to degradations in citizen security and economic development in some countries, often resulting in high levels of violence and homicides. Despite efforts to combat the drug trade, many governments in Latin America, particularly in the Central American transit zone through which 90% of U.S.-bound cocaine passes, continue to suffer from overstrained criminal justice systems and overwhelmed law enforcement and border control agencies. Moreover, government corruption, including high-level cooperation with criminal organizations, frustrates efforts to interdict drugs, investigate and prosecute traffickers, and recover illicit proceeds. There is a widespread perception, particularly among many Latin American observers, that the continuing U.S. demand for illicit drugs is largely to blame for the Western Hemisphere's ongoing crime and violence problems. Criminal gangs with origins in southern California, principally the Mara Salvatrucha (MS-13) and the \"18 th Street\" gang, continue to undermine citizen security and subvert government authority in Central America. Gang-related violence has been particularly acute in El Salvador, Honduras, and urban areas in Guatemala, contributing to some of the highest homicide rates in the world. Although some gangs engage in local drug distribution, gangs generally do not have a role in transnational drug trafficking. Gangs have been involved in a range of other criminal activities, including extortion, money laundering, and weapons smuggling. Gang-related violence has fueled unauthorized migration to the United States. U.S. Policy. U.S. support to counter drug trafficking and reduce production in Latin America and the Caribbean has been a key focus of U.S. policy toward the region for more than 40 years. The most significant U.S. support program was Plan Colombia, begun in FY2000, which provided more than $10 billion to help Colombia combat both drug trafficking and rebel groups financed by the drug trade. After Colombia signed a historic peace accord with the country's largest leftist guerrilla group, the United States provided assistance to help implement the agreement under a new strategy called Peace Colombia. Colombia's decisions to end aerial fumigation and minimize forced eradication caused some tensions with U.S. officials concerned about rising cocaine production. Colombian President Ivan Duque has vowed to resume aerial fumigation. (Also see \" Colombia \" section below.) U.S. support to combat drug trafficking and reduce crime also has included a series of partnerships with other countries in the region: the Mérida Initiative, which has led to improved bilateral security cooperation with Mexico; the Central America Regional Security Initiative (CARSI); and the Caribbean Basin Security Initiative (CBSI). Under the Obama Administration, those initiatives combined U.S. antidrug and rule-of-law assistance with economic development and violence prevention programs intended to improve citizen security in the region. The Trump Administration's approach to Latin America and the Caribbean has focused heavily on U.S. security objectives. All of the aforementioned assistance programs have continued, but they place greater emphasis on combating drug trafficking, gangs, and other criminal groups than did policies under President Obama. The Trump Administration has also sought to reduce funding for each of the U.S. security assistance programs. President Trump also has prioritized combating gangs, namely the MS-13, which the Department of Justice (DOJ) has named a top priority for U.S. law enforcement agencies. U.S. law enforcement agencies, in cooperation with vetted units in Central America funded through CARSI, have brought criminal charges against thousands of MS-13 members in the United States. Congressional Action: The 115 th Congress held hearings on opioids, which included consideration of heroin and fentanyl production in Mexico, Colombia's peace process and how it relates to drug policy, criminal groups in the Western Hemisphere, and Mexican transnational criminal organizations and border security. In March 2017, the Senate passed S.Res. 83 , which called for increased U.S. support for Mexico's efforts to combat fentanyl. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), provided increased FY2018 resources for Colombia and Mexico, slightly less funding for CARSI, and a stable level of funding for CBSI compared to FY2017. The legislation required a plan on how the State Department is addressing illicit opioid flows. Both the House and the Senate Appropriations Committees' versions of the FY2019 foreign aid appropriations bills ( H.R. 6385 and S. 3108 , respectively) largely would have maintained funding for the aforementioned security partnerships and continued to address the underlying conditions that contribute to crime and violence in addition to antidrug efforts. Congress likely will continue to fund and oversee counternarcotics and antigang programs and to consider the proper distribution of domestic and international drug control funding and the relative balance of civilian, law enforcement, and military roles in regional antidrug and antigang efforts. For additional information, see CRS In Focus IF10578, Mexico: Evolution of the Mérida Initiative, 2007-2019 , by Clare Ribando Seelke; CRS Report R41349, U.S.-Mexican Security Cooperation: The Mérida Initiative and Beyond , by Clare Ribando Seelke and Kristin Finklea; CRS Report R41576, Mexico: Organized Crime and Drug Trafficking Organizations , by June S. Beittel; CRS In Focus IF10400, Transnational Crime Issues: Heroin Production, Fentanyl Trafficking, and U.S.-Mexico Security Cooperation , by Clare Ribando Seelke and Liana W. Rosen; CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress , by Peter J. Meyer; CRS Report R44779, Colombia's Changing Approach to Drug Policy , by June S. Beittel and Liana W. Rosen; CRS Report R43813, Colombia: Background and U.S. Relations , by June S. Beittel; and CRS In Focus IF10789, Caribbean Basin Security Initiative , by Mark P. Sullivan. The Latin American and Caribbean region is one of the fastest-growing regional trading partners for the United States. Economic relations between the United States and most of its trading partners in the region remain strong, despite challenges, such as the renegotiation of NAFTA and President Trump's repeated threats to withdraw from the agreement, and diplomatic tensions and high levels of violence in some countries in the region. The United States accounts for roughly 33% of the Latin American and Caribbean region's merchandise imports and 46% of its merchandise exports. Most of this trade is with Mexico, which accounted for 73% of U.S. imports from the region and 62% of U.S. exports to the region in 2017. In 2017, total U.S. merchandise exports to Latin America and the Caribbean were valued at $393.2 billion and U.S. merchandise imports were valued at $430.0 billion (see Table 4 ). The United States strengthened economic ties with Latin America and the Caribbean over the past 24 years through the negotiation and implementation of FTAs. Starting with NAFTA in 1994, the United States currently has six FTAs in force involving 11 Latin American countries: Mexico, Chile, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Panama, and Peru. NAFTA is significant because of the market-opening provisions but more importantly because it established new rules and disciplines that influenced future trade agreements on issues important to the United States, such as intellectual property rights protection, services trade, agriculture, dispute settlement, investment, labor, and the environment. In addition to FTAs, the United States has extended unilateral trade preferences to some countries in the region through trade preference programs such as the Caribbean Basin Trade Partnership Act and the Generalized System of Preferences (GSP), which expired on December 31, 2017. GSP was reauthorized in March 2018 until the end of 2020, under Division M, Title V of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). Most countries in the region also belong to the World Trade Organization (WTO) and are engaged in WTO multilateral trade negotiations. In the 15 to 20 years after NAFTA, some of the largest economies in South America, such as Argentina, Brazil, and Venezuela, resisted the idea of forming comprehensive FTAs with the United States. As a result, there are numerous other bilateral and plurilateral trade agreements throughout the Western Hemisphere that do not include the United States. For example, the Pacific Alliance, a trade arrangement comprised of Mexico, Peru, Colombia, and Chile, is reportedly moving forward on a possible trade arrangement with Mercosur, composed of Brazil, Argentina, Uruguay, and Paraguay. In a shift in U.S. trade policy toward the region and other parts of the world, President Trump views FTAs as detrimental for U.S. workers and industries. He has made NAFTA renegotiation and modernization a priority of his Administration's trade policy, stating that the agreement is \"the worst trade deal\" and repeatedly warning that the United States may withdraw from the agreement. After a year of NAFTA renegotiation talks, the United States and Mexico reached a preliminary bilateral agreement in August 2018, and the three countries reached an agreement on September 30, 2018, leading to the announcement of the United States-Mexico-Canada Agreement (USMCA). On November 30, 2018, the leaders of all three countries signed the USMCA; the agreement must be approved by Congress and ratified by the governments of Canada and Mexico before it can enter into force. The new agreement leaves NAFTA largely intact but includes some changes, such as provisions regarding the dairy and auto industries. The agreement has updated and modernized provisions on intellectual property rights protection, enforceable labor and environmental provisions, and digital trade provisions, as well as new provisions on corruption and state-owned enterprises. U.S. trade actions in 2018 under Section 232 of the Trade Expansion Action Act of 1962 on aluminum and steel imports added new challenges to U.S. trade relations with the region. In 2018, President Trump issued two proclamations imposing tariffs on U.S. imports of certain steel and aluminum products using presidential powers granted by Section 232. The proclamations outlined the President's decisions to impose tariffs of 25% on steel and 10% on aluminum imports, with some flexibility on the application of tariffs by country. Argentina is exempted permanently from both steel and aluminum tariffs, and Brazil is exempted permanently from steel tariffs. Products from all other countries in Latin America and the Caribbean are subject to the tariffs. In response to U.S. action, Mexico began to impose retaliatory tariffs on 71 U.S. products, covering an estimated $3.7 billion worth of trade. The conclusion of the proposed USMCA did not resolve or address the Section 232 tariffs. President Trump's January 2017 withdrawal from the proposed TPP, an FTA that included Mexico, Peru, and Chile as signatories, signified another change to U.S. trade policy. In March 2018, the other TPP parties, including Mexico, Peru, and Chile, signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which essentially will bring a modified TPP into effect. On December 30, 2018, the CPTPP entered into force among the first six countries to ratify the agreement—Canada, Australia, Japan, Mexico, New Zealand, and Singapore. Chile, Peru, and the remaining three countries are expected to ratify the agreement eventually. Colombia has expressed plans to request entry into the CPTPP after the agreement enters into force among all partners. Some observers contend that U.S. withdrawal from TPP could damage U.S. competitiveness and economic leadership in the region, whereas others see the withdrawal as a way to prevent lower-cost imports and potential job losses. Congressional Action: The 115 th Congress, in both its legislative and its oversight capacities, faced numerous trade policy issues related to the renegotiation and modernization of NAFTA. Now that renegotiation has concluded, the proposed USMCA will face congressional examination. Congress must approve the proposed USMCA before it can enter into force; the agreement likely will be considered by the 116 th Congress. Lawmakers may take an interest as to whether U.S. negotiating objectives were followed, as required by Trade Promotion Authority. They also may consider how the proposed USMCA may affect U.S. industries, especially the auto industry, the U.S. and Mexican economies, North American supply chains, and overall trade relations with the LAC region. The recent Section 232 investigations on aluminum and steel imports raise a number of issues for Congress, including the potential impact of tariffs and retaliatory tariffs from Mexico on U.S. producers, domestic U.S. industries, and consumers. Energy reform in Mexico and the implications for U.S. trade and investment in energy also may be of interest to Congress. Policymakers also may consider how U.S. trade policy is perceived by the region and whether it may affect multilateral trade issues and cooperation on matters regarding security and migration. Another issue relates to U.S. market share. If countries such as Mexico, Chile, Colombia, and Peru continue trade and investment liberalization efforts with other countries without the United States, it may open the door to more intra-trade and investment among Argentina, Brazil, or possibly China and other Asian countries, which may affect U.S. exports. For additional information, see CRS In Focus IF10997, Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement , by Ian F. Fergusson and M. Angeles Villarreal; CRS In Focus IF10047, North American Free Trade Agreement (NAFTA) , by M. Angeles Villarreal; CRS Report R44981, NAFTA Renegotiation and Modernization , by M. Angeles Villarreal and Ian F. Fergusson; CRS In Focus IF10038, Trade Promotion Authority (TPA) , by Ian F. Fergusson; CRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and Implications , by M. Angeles Villarreal; and CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress , coordinated by Rachel F. Fefer and Vivian C. Jones. Latin America's status as a leading source of both legal and unauthorized migration to the United States means that U.S. immigration policies significantly affect countries in the region and U.S. relations with their governments. Latin Americans comprise the vast majority of unauthorized migrants who have received relief from removal (deportation) through the Temporary Protected Status (TPS) program or the Deferred Action for Childhood Arrivals (DACA) initiative. As a result, several Trump Administration U.S. immigration policy changes have concerned countries in the region. These include the Administration's actions to increase immigration enforcement; end TPS designations for Haiti, El Salvador, Nicaragua, and Honduras; rescind DACA; criminally prosecute migrants who unlawfully enter the United States; and alter U.S. asylum policy. The factors that have driven legal and unauthorized U.S.-bound migration from Latin America are multifaceted and have changed over time. They include familial ties, poverty and unemployment, demography, political and economic instability, natural disasters, proximity, economic conditions in the United States, and crime and violence. As an example, Venezuela, a historically stable country with limited emigration to the United States, has recently become a top country of origin among U.S. asylum seekers due to the crisis it has been undergoing (see \" Venezuela \" section below). Apprehensions of, and encounters with, unauthorized migrants at the southwestern U.S. border declined during President Trump's first year in office compared to the same period in 2016, but began to rise in August 2017 and to follow seasonal patterns similar to the last few years. Many analysts attributed that initial decline, in part, to President Trump's tough campaign positions against unauthorized migration, executive action on border security and immigration enforcement (E.O. 13767), and efforts to fund the construction of a border wall. The executive order broadened the focus of interior enforcement to include unauthorized individuals who lack a criminal record. President Trump's assertions that Mexico will pay for a border wall have periodically strained bilateral relations. The Administration's policies have also tested U.S. relations with other countries in the region. Mexico and Central America's northern triangle countries, which received approximately 90% of the 226,119 individuals removed in FY2017, have expressed concerns that potential large-scale removals could overwhelm their capacity to receive and reintegrate migrants. Central American countries also are concerned about the potential for increased removals of gang suspects with criminal records exacerbating security problems in their countries that they have been trying to address with U.S. foreign assistance. Mexico and the northern triangle countries have stepped up services at their U.S. consulates to provide legal and other services to those affected by changes in U.S. immigration policies. Termination of TPS . Since September 2017, the Department of Homeland Security (DHS) has announced plans to terminate TPS designations for six countries, four of which are located in Latin America (El Salvador, Haiti, Nicaragua, and Honduras). The large number (between 250,000-350,000) of Central Americans with TPS relief, along with their length of U.S. residence and resulting economic and family ties, have led some to support extending TPS for Central Americans. Continued recovery difficulties from natural disasters have led others to support continuing TPS for Haitians (up to 59,000). The Trump Administration maintains that ending TPS is a move toward interpreting the original intent of the program—to provide temporary safe haven. In October 2018, a federal court issued a preliminary injunction preventing DHS from terminating the TPS designations for Nicaragua, Haiti, and El Salvador pending the outcome of litigation challenging DHS's termination decisions. Critics of the Administration's decisions to terminate TPS designations for these four countries predict that it is likely to have negative effects on mixed-status families (where adults with TPS have U.S. citizen children), hurt foreign relations, and diminish the flow of remittances on which many families in the region depend. Affected governments have expressed hope that the U.S. Congress will enact legislation to protect their constituents whose TPS protections may be ending. They are nevertheless working with USAID, other donors, and the private sector to prepare reintegration assistance and job opportunities for former TPS beneficiaries who may return to their countries of origin. Rescission of DACA. On September 5, 2017, DHS announced its decision to rescind the DACA initiative. The future of the DACA initiative remains uncertain, as dueling lawsuits are underway in several federal courts to preserve DACA and to force its termination. According to data from U.S. Citizenship and Immigration Services, more than 95% of active DACA recipients were born in Latin America (80% were born in Mexico). The Mexican government has expressed hope that the U.S. Congress will enact legislation to protect individuals who have benefited from the DACA initiative, but also has said that it would welcome and support any DACA enrollees who may be deported. If DACA ends and its beneficiaries must return to their countries of origin, they could have difficulty continuing their education or working in countries struggling with youth unemployment. \"Zero Tolerance\" Immigration Enforcement and Restrictions on Access to Asylum. For the last several years, Central American migrant families have arrived at the U.S.-Mexico border in relatively large numbers, many seeking asylum. In May 2018, DOJ implemented a zero tolerance policy toward illegal border crossing. Under the policy, DOJ prosecuted all adults apprehended while crossing the border illegally, with no exception for asylum seekers or those with minor children. This policy resulted in up to 3,000 children being separated from their parents. After a federal judge mandated that all separated children be reunited with their families in late June 2018, DHS reverted to some prior immigration enforcement policies. Some families have yet to be reunited. On June 11, 2018, then-Attorney General Sessions issued a decision maintaining that victims of gang violence or domestic abuse perpetrated by nongovernmental actors generally do not meet the standards required for receiving asylum in the United States. This decision could restrict the ability of many Central American migrants to quality for asylum. Restricting the availability of asylum in the United States to Central Americans, who face high rates of femicide and gang-related violence, could cause more emigration to Mexico and other countries less equipped to assist them. As increasing numbers of Central American migrants have sought asylum in Mexico, the Mexican government has bolstered its weak humanitarian protection system even as it deported more than 520,000 Central American migrants from 2015-November 2018. Mexico has resisted signing a \"safe third country agreement\" with the Administration, which could require asylum seekers who transit through Mexico to seek asylum there rather than in the United States. It has provided humanitarian visas and work permits, as well as access to asylum in Mexico, to Central American migrants who have transited the country in \"caravans\" and to those affected by a new DHS policy announced on December 20, 2018—according to a DHS press release, the agency plans to return some non-Mexican asylum seekers (excluding unaccompanied minors) to Mexico to await their immigration court decisions. Congressional Action: The 115 th Congress provided foreign assistance to help address some of the factors fueling migration from Central America and to support Mexico's migration management efforts ( P.L. 115-141 ). The Senate Appropriations Committee's version of the FY2019 foreign aid appropriation measure, S. 3108 , would have required that $18 million of the Economic Support Funds provided to Mexico be \"transferred to, and merged with\" funds appropriated under the Migration and Refugee Assistance account to help process the asylum applications of Central Americans in Mexico. It is possible that the 116 th Congress could include a similar provision in legislation to fund foreign aid programs for the remainder of FY2019. The 115 th Congress also did not determine the amount and type of funding to provide for border infrastructure for FY2019. Members of Congress introduced a range of proposals related to TPS and DACA during the 115 th Congress, but none was enacted. For more information, see CRS In Focus IF10215, Mexico's Immigration Control Efforts , by Clare Ribando Seelke; CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress , by Peter J. Meyer; CRS Report R45266, The Trump Administration's \"Zero Tolerance\" Immigration Enforcement Policy , by William A. Kandel; CRS Report R44764, Deferred Action for Childhood Arrivals (DACA): Frequently Asked Questions , by Andorra Bruno; CRS Report R45158, An Overview of Discretionary Reprieves from Removal: Deferred Action, DACA, TPS, and Others , by Ben Harrington; and CRS Report RS20844, Temporary Protected Status: Overview and Current Issues , by Jill H. Wilson. Corruption has become a serious political concern for many countries in the region. Transparency International's Corruption Perceptions Index (CPI) for 2016 and 2017 found that respondents in most Latin American nations believed corruption was increasing. This perception is fueling civil society efforts to combat corrupt behavior and demand government accountability. Corruption continued to be a central theme in elections across the region in 2018, including pivotal, large countries, such as Colombia, Mexico, and Brazil. Perceptions of growing corruption may reflect a greater awareness of corrupt behavior rather than an increase in actual corruption. This heightened awareness may be due to the growing use of social media to report violations and inform the citizenry, as well as to greater scrutiny by domestic media and investigative reporters, international investors, and, in some cases, congressional bodies or justice sector officials. Moreover, the region's growing middle class, with its rising expectations, seeks more from its politicians. The Transparency International surveys found that in the 20 Latin American nations polled, respondents viewed politicians, political parties, and police as among the most corrupt. Citizens reported being most concerned about the use of public office for private gain—graft, influence peddling, extortion, bribe solicitation, money laundering, and political finance violations were the most frequently cited. Corruption in the Region. Venezuela scored lowest (most corrupt by perceptions of its citizenry) among the 20 countries surveyed in the region in the 2016 and 2017 CPI assessments. Public corruption has been a major drain on the economy, particularly in the country's foreign exchange regime. In Brazil, a sprawling corruption investigation under way since 2014 has implicated much of the political class. Brazilian construction firm Odebrecht, in a landmark plea deal, admitted to paying some $735 million in bribes to politicians and office holders throughout Latin America to secure public contracts, producing fallout in several countries, including Colombia, the Dominican Republic, Ecuador, Panama, and Peru. In Mexico, the costs of corruption reportedly reach as much as 5% of gross domestic product each year. Mexico's long-dominant Institutional Revolutionary Party, dogged by the issue in the July 2018 national elections, performed poorly in the final congressional and presidential vote. In Peru, President Pedro Pablo Kuczynski, accused of taking Odebrecht bribes, stepped down in March 2018 to avoid impeachment. His successor, Martin Vizcarra, hosted the Summit of the Americas in April 2018 with a theme of fighting corruption. In the wake of a judicial corruption scandal concerning bribery in Peru's high court, Vizcarra unveiled a series of political and judicial reforms, including anticorruption measures, in August 2018. He then successfully challenged Peru's congress in September 2018 to a vote of confidence in his government with the goal of getting congress to approve the reforms, which include a significant revision of campaign finance rules among other measures. Those reforms were put before voters in a public referendum held in December 2018; three of the four measures on the ballot passed with more than 85% of the vote, including reforms to the magistracy council, finance regulations for politicians and their parties, and a prohibition on the immediate reelection of lawmakers. The only measure that did not pass was a controversial proposal to create a bicameral congress. In Central America, international entities have worked with the governments of Guatemala and Honduras to combat corruption. The U.N.'s International Commission against Impunity in Guatemala, established in 2006, assisted in corruption cases against Guatemala's former President Otto Perez-Molina and his vice president, who were jailed in 2015 after being forced from office. In 2016, the OAS worked with the Honduran government to establish a similar organization, the Mission to Support the Fight against Corruption and Impunity in Honduras (MACCIH). In 2018, as CICIG investigations have focused more closely on relatives of Guatemala's President Jimmy Morales, the government became openly more hostile to extending CICIG's mandate when it expires in September 2019. In September 2018, Morales barred CICIG's commissioner, former Colombian judge Iván Velásquez, from reentering the country, an action opposed by Guatemala's constitutional court. In early January 2019, President Morales appeared to foment a constitutional crisis by ending CICIG's mandate prematurely, not permitting the commissioners to remain in the country through September 2019 in direct disobedience of the nation's top court. The Honduran government also has sought to undermine MACCIH over the past year. U.S. Policy. The 2017 U.S. National Security Strategy states that U.S. strategic interests related to corruption derive from the concern that criminals and terrorists can thrive in governments where corruption is rampant. Many studies indicate that corruption affects productivity and mars competitiveness in developing economies; it can spur migration and reduce GDP measurably when it is systematic. U.S. assistance has supported anticorruption efforts in Central America. Since FY2016, some U.S. aid to the region has been subject to several conditions, including anticorruption measures by recipient governments. U.S. assistance has also supported multilateral efforts to address corruption in Guatemala and Honduras. Both CICIG and MACCIH also receive U.S. support. CICIG received some $50.5 million between FY2008 and FY2017 in U.S. funding. The United States has also imposed targeted economic sanctions on individuals involved in significant acts of corruption. This has included Venezuelan officials involved in corruption pursuant to Executive Order 13692 and individuals from other countries such as the Dominican Republic and Nicaragua targeted pursuant to Executive Order 13818. Congressional Action : Some analysts maintain that U.S. funding for anticorruption programming has been limited, noting worldwide spending in recent years has not exceeded $115 million annually depending on how anticorruption is defined. Nevertheless, Congress has taken steps to condition U.S. assistance, support anticorruption efforts and training for police and justice personnel, and backed the Trump Administration's use of targeted sanctions. Congress could in coming months oversee changes to NAFTA related to corruption in the proposed USMCA, which includes a separate chapter with anticorruption provisions. In May 2017, the House passed H.Res. 145 , reaffirming that combatting corruption is an important U.S. policy interest in the northern triangle countries of Central America, acknowledging the important work of CICIG and MACCIH, and encouraging anticorruption efforts in the northern triangle countries. In July 2017, the Senate Foreign Relations Committee reported S. 1631 , a foreign relations authorization bill with a title focused on combating public corruption worldwide. The FY2019 John S. McCain National Defense Authorization Act (NDAA), P.L. 115-232 , signed into law in August 2018, contains a provision in Section 1287 requiring a report on drug trafficking and corruption in Central America's northern triangle countries, including identifying government officials and other individuals involved in such activities. As noted in the section on \" Central America's Northern Triangle \" below, Congress has continued to support funding for CICIG and MACCIH in FY2018 and FY2019. For additional information, see CRS In Focus IF10802, Spotlight on Public Corruption in Latin America , by June S. Beittel. Current President Mauricio Macri—leader of the center-right Republican Proposal and the Cambiemos (Let's Change) coalition representing center-right and center-left parties—won the 2015 presidential election in a close race. Macri's election ended 12 years of rule by the Kirchners (Néstor Kirchner, 2003-2007, and Cristina Fernández de Kirchner, 2007-2015) from the leftist faction of the Peronist party. The Kirchners' rule helped Argentina emerge from a severe economic crisis in 2001-2002 but was characterized by protectionist and unorthodox economic policies and increasing corruption—former President Fernández is now facing multiple investigations for corruption. President Macri moved swiftly to usher in a series of market-oriented economic policy changes. His government also reached a deal with remaining private creditors in 2016 that ended the country's 15-year default, an action that allowed the government to repair its \"rogue\" debtor status and resume borrowing in international capital markets. Although adjustment measures contributed to a 1.8% economic contraction in 2016, the economy grew by 2.9% in 2017, according to the International Monetary Fund (IMF). In early 2018, the IMF was forecasting almost 2% growth for the year, but Argentina's economic difficulties, including a severe drought affecting agricultural exports, thwarted those expectations; the IMF is now forecasting an economic contraction of 2.6%. Inflation, which was almost 25% at the end of 2017, is forecast to rise to 40% by the end of 2018. As pressure on the peso increased in April, the government turned to the IMF for support. The IMF approved a three-year, $50 billion program in June, with almost $15 billion made available immediately for budget support. As the economy continued to decline, the government reached a revised agreement with the IMF in September to increase its total support to about $57 billion through 2021. After an October 2018 IMF review, Argentina received an additional $5.7 billion, bringing total IMF disbursements to about $20.4 billon. Despite wide-scale protests over austerity measures, the Macri government secured legislative approval in November 2018 for spending cuts and tax increases required under the IMF program. Argentina's economic turbulence has taken a toll on President Macri's popularity, which could threaten his political coalition and make a reelection bid in October 2019 more difficult. Although the Peronist party remains divided, a candidate from its moderate faction could pose a strong bid for the presidency. In the foreign policy arena, the Macri government improved relations with neighboring Brazil and Uruguay and other promarket countries in the region. It has been deeply critical of the antidemocratic actions of the Maduro government in Venezuela. U.S.-Argentine relations generally have been characterized by robust commercial relations and cooperation on such issues as nonproliferation, human rights, education, and science and technology. Under the Kirchner governments, there were periodic tensions in relations. The Obama Administration moved swiftly to engage the Macri government on a range of bilateral, regional, and global issues. Strong bilateral relations are continuing under the Trump Administration. President Macri visited the White House in April 2017, and the two leaders underscored their commitment to expand trade and investment and pledged strengthened partnership to combat narcotics trafficking, money laundering, terrorist financing, corruption, and other illicit finance activities. They also agreed to establish a working group for engagement on cyber issues. In September 2018, amid Argentina's economic difficulties, President Trump reaffirmed strong U.S. support for Argentina and Macri's engagement with the IMF. President Trump held a bilateral meeting with President Macri in Argentina on November 30, 2018, on the sidelines of the Group of 20 (G-20) summit hosted by Argentina. The two countries reached bilateral agreements on educational exchange programs, national park conservation efforts, health cooperation, aviation safety, and energy sector cooperation. Congressional Action : Congress has expressed support for close relations with Argentina. In the 115 th Congress, the House passed H.Res. 54 in April 2017, which expressed commitment to the bilateral partnership and commended Argentina for its economic reforms. In June 2017, the Senate Committee on Foreign Relations reported a similar resolution, S.Res. 18 . Congress provided $2.5 million in FY2018 foreign assistance ( P.L. 115-141 ) to support Argentina's counterterrorism, counternarcotics, and law enforcement capabilities. Over the years, Congress has expressed concern about Argentina's progress in investigating two terrorist bombings in Buenos Aires—the 1992 bombing of the Israeli embassy that killed 29 people and the 1994 bombing of the Argentine-Israeli Mutual Association (AMIA) that killed 85 people—as well as the 2015 death of AMIA special prosecutor Alberto Nisman. H.Res. 201 , reported by the House Foreign Affairs Committee in May 2017, would have expressed support for Argentina's investigation of the bombings. Two other resolutions, S.Res. 354 and H.Res. 704 , would have commended Nisman's work and life and called for a swift, transparent investigation into his death. For additional information, see CRS In Focus IF10932, Argentina: An Overview , by Mark P. Sullivan; and CRS In Focus IF10991, Argentina's Economic Crisis , by Rebecca M. Nelson. Occupying almost half of South America, Brazil is the fifth-largest and the fifth-most populous country in the world. Given its size and tremendous natural resources, Brazil has long had the potential to become a world power. Its rise to prominence has been hindered by setbacks, however, including an extended period of military rule (1964-1985) and uneven economic performance. Brazil gradually consolidated liberal democracy following its political transition, and it implemented economic reforms in the 1990s that laid the foundation for stronger growth. A boom in international demand for Brazilian commodities—such as oil, iron, and soybeans—during the first decade of the 21 st century fueled a period of rapid economic expansion, which contributed to, and was reinforced by, the growth of Brazil's middle class. In addition to providing the Brazilian government with the resources necessary to address long-standing social disparities, this economic growth strengthened Brazil's international stature. Over the past several years, however, Brazil has struggled to emerge from a series of domestic crises. The economy contracted by nearly 7% from 2014 to 2016, according to the IMF, due to a decline in global commodity prices and the government's economic mismanagement. Although economic growth returned in 2017, the national unemployment rate remains above 11% and several million Brazilians who fell out of the middle class during the recession remain in poverty. At the same time, a sprawling corruption investigation under way since 2014 has implicated politicians from across the political spectrum and many of the country's most prominent business executives. The scandal contributed to the controversial impeachment of President Dilma Rousseff (2011-2016). It also fueled discontent with the country's political class, which was exacerbated by rising levels of violence and the enactment of unpopular economic reforms under President Michel Temer (2016-2018). Antiestablishment sentiment propelled right-wing populist Jair Bolsonaro to victory in the country's October 2018 presidential election; he began his four-year term on January 1, 2019. The United States traditionally has enjoyed robust political and economic relations with Brazil, though the countries' independent foreign policies and occasionally divergent national interests have led to some disagreements. U.S. trade policy has generated some friction over the past year as Brazilian officials have objected to the Trump Administration's decision to impose an import quota on Brazilian steel. Nevertheless, the countries have sought to increase cooperation in other areas, launching a new Permanent Forum on Security, collaborating on the provision of humanitarian assistance to Venezuelan migrants, and continuing negotiations over potential U.S. access to Brazil's Alcântara space launch center. President Bolsonaro has called for closer alignment with the United States, and U.S. and Brazilian officials have begun discussing ways to bolster commercial and defense ties and work together on global concerns. Congressional Action: During the 115 th Congress, several Members raised concerns about the state of democracy and human rights in Brazil. They condemned the March 2018 assassination of Rio de Janeiro City Councilor Marielle Franco, questioned the judicial process that led to the imprisonment of former president Luiz Inácio Lula da Silva (2003-2010), and called on the Trump Administration to engage with President Bolsonaro to ensure human rights protections for marginalized communities. The 115 th Congress also continued long-standing U.S. support for conservation efforts in Brazil. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided $10.5 million for environmental programs in the Brazilian Amazon. The FY2019 foreign aid appropriations measures reported in the House and Senate both would have continued such assistance; the House Appropriations Committee's bill, H.R. 6385 , would have provided $10.5 million and the Senate Appropriations Committee's bill, S. 3108 , would have provided $11 million. For additional information, see CRS Insight IN10976, Brazil's Presidential Election , by Peter J. Meyer; and CRS In Focus IF10447, U.S.-Brazil Trade Relations , by M. Angeles Villarreal. The Caribbean is a diverse region of 16 independent countries and 18 overseas territories that include some of the hemisphere's richest and poorest nations. Among the region's independent countries are 13 island nations stretching from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and Guyana and Suriname, located on the north-central coast of South America (see Figure 2 ). In June 2017, the State Department submitted a multiyear strategy for the Caribbean (required by P.L. 114-291 , the United Sates-Caribbean Strategic Enhancement Act of 2016). The strategy established a framework to strengthen U.S.-Caribbean relations in six priority areas: (1) security, with the objectives of countering transnational crime and terrorist organizations and advancing citizen security; (2) diplomacy, with the goal of increasing institutionalized engagement to forge greater cooperation at the OAS and U.N.; (3) prosperity, including the promotion of sustainable economic growth and private sector-led investment and development; (4) energy, with the goals of increasing U.S. exports of natural gas and the use of U.S. renewable energy technologies; (5) education, focusing on increased exchanges for students, teachers, and other professionals; and (6) health, including a focus on long-standing efforts to fight infectious diseases such as HIV/AIDS and Zika. Because of their geographic location, many Caribbean nations are vulnerable to use as transit countries for illicit drugs from South America destined for the U.S. and European markets. Many Caribbean countries also have suffered high rates of violent crime, including murder, often associated with drug trafficking activities. In response, the United States launched the Caribbean Basin Security Initiative (CBSI) in 2009, a regional U.S. foreign assistance program seeking to reduce illicit trafficking in the region, advance public safety and security, and promote social development. Congress has supported funding for the CBSI. From FY2010 through FY2018, Congress appropriated almost $559 million for the CBSI, including $57.7 million in each of FY2017 and FY2018. These funds benefitted 13 Caribbean countries. The program has targeted assistance in five areas: maritime and aerial security cooperation, law enforcement capacity building, border/port security and firearms interdiction, justice sector reform, and crime prevention and at-risk youth. Many Caribbean nations also depend on energy imports and, over the past decade, have participated in Venezuela's PetroCaribe program, which supplies Venezuelan oil under preferential financing terms. The United States launched the Caribbean Energy Security Initiative (CESI) in 2014, with the goal of promoting a cleaner and more sustainable energy future in the Caribbean. The initiative included a variety of U.S. activities to facilitate cleaner energy resources; develop collaborated networks on clean energy; finance clean energy projects; increase energy efficiency; and expand access to electricity, information, and technology. In September 2017, Hurricanes Irma and Maria caused widespread damage in several Caribbean countries and foreign territories, especially in the Eastern Caribbean. Hurricane Irma struck during the first week of September, causing catastrophic damage to the island of Barbuda, with 95% of structures seriously damaged or destroyed. Hurricane Maria struck during the third week of September, killing 27 people in Dominica and causing significant structural damage to most buildings and severe damage to the agricultural sector. In the aftermath of the hurricanes, the United States provided almost $23 million in humanitarian funding to six Caribbean countries and foreign territories, including Antigua and Barbuda, Dominica, the Bahamas, St. Kitts and Nevis, and the foreign territories of St. Martin (French) and St. Maarten (Dutch). Congressional Action : For each of FY2018 and FY2019, the Trump Administration requested $36.2 million for the CBSI, about a 36% decrease from the $57.7 million provided in FY2017. For FY2018, Congress continued to fund the CBSI at the same level as in FY2017, $57.7 million, as set forth in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 , Explanatory Statement, Division K). The law also provided $2 million for the CESI. For FY2019, both the House and Senate versions of the foreign aid appropriation bill would have rejected the Administration's proposed cuts for the CBSI. The House Appropriations Committee's bill, H.R. 6385 ( H.Rept. 115-829 ), would have provided $58 million for the CBSI, while the Senate Appropriations Committee's version, S. 3108 ( S.Rept. 115-282 ), would have provided $57.7 million. The report to the Senate bill also would have provided $2 million for the CESI to support enhanced efforts to help Latin American and Caribbean countries achieve greater energy independence from Venezuela. As noted above, the 115 th Congress did not complete action on FY2019 appropriations, but it did approve a series of continuing resolutions that continued FY2019 funding at the FY2018 level through December 21, 2018, leaving final action on FY2019 funding to the 116 th Congress. In July 2017, the House Western Hemisphere Subcommittee held an oversight hearing on the State Department's new multiyear strategy on the Caribbean (see Appendix ). For additional information, see CRS In Focus IF10789, Caribbean Basin Security Initiative , by Mark P. Sullivan; CRS In Focus IF10666, The Bahamas , by Mark P. Sullivan; CRS In Focus IF10407, Dominican Republic , by Clare Ribando Seelke; CRS In Focus IF10912, Jamaica , by Mark P. Sullivan; CRS In Focus IF10914, Trinidad and Tobago , by Mark P. Sullivan; and CRS Report R45006, U.S. Liquefied Natural Gas (LNG) Exports: Prospects for the Caribbean , by Michael Ratner et al. Also see sections on \" Cuba \" and \" Haiti ,\" below. Central America has received renewed attention from U.S. policymakers in recent years, as the region has become a major transit corridor for illicit drugs and a significant source of irregular migration to the United States. These narcotics and migrant flows are the latest symptoms of deep-rooted challenges in the region, including widespread insecurity, fragile political and judicial systems, and high levels of poverty and unemployment. The Obama Administration determined it was in the national security interests of the United States to work with Central American nations to improve security, strengthen governance, and promote prosperity in the region. Accordingly, the Obama Administration launched a new, whole-of-government U.S. Strategy for Engagement in Central America and requested a significant increase in foreign assistance for the region to support the strategy's implementation. Congress appropriated nearly $1.5 billion of aid for Central America in FY2016 and FY2017, allocating most of the funds to El Salvador, Guatemala, and Honduras—the \"Northern Triangle\" countries of Central America (see Figure 3 ). Congress required a portion of the aid to be withheld, however, until the Northern Triangle governments took steps to improve border security, combat corruption, protect human rights, and address other congressional concerns. The Trump Administration has maintained the U.S. Strategy for Engagement in Central America while seeking to enact some significant changes in U.S. policy toward the region. Over the past two years, the Administration has sought to cut foreign aid to Central America by more than a third and has placed a greater emphasis on security concerns. As noted above (\" Migration Issues \"), the Administration also has implemented a series of immigration policy changes that affect Central Americans living in the United States without authorization, including the phaseout of the DACA program and the termination of TPS for Salvadorans and Hondurans; those decisions currently are being contested in court. The Northern Triangle governments have raised concerns that the Administration's efforts to reduce assistance while simultaneously increasing deportations could exacerbate poverty and instability in the region. The Northern Triangle countries, with U.S. support, have made some tentative progress over the past three years. They have implemented some policy changes intended to stabilize their economies, but the improved macroeconomic situation has yet to translate into better living conditions for many residents since the governments have not invested in effective poverty-reduction programs. Security conditions also have improved in some respects, as homicide rates have declined for three consecutive years. At the same, the Northern Triangle countries continue to contend with some of the highest rates of violent crime in the world and impunity remains widespread. The countries' attorneys general—with the support of the U.N.-backed International Commission against Impunity in Guatemala (CICIG) and the Organization of American States-backed Mission to Support the Fight against Corruption and Impunity in Honduras (MACCIH)—have made significant progress in the investigation and prosecution of high-level corruption cases. Their efforts have generated fierce backlashes, however, and the Guatemalan and Honduran governments repeatedly have sought to undermine CICIG and MACCIH over the past year. (Also see section on \" Corruption ,\" above.) Congressional Action: The 115 th Congress continued to demonstrate support for the U.S. Strategy for Engagement in Central America, though it began to reduce annual funding for the initiative. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), provided an estimated $626.5 million for the Central America strategy, which is $166.5 million more than the Administration requested for FY2018 but $73.2 million less than Congress appropriated for the initiative in FY2017. The FY2019 foreign aid appropriations measures reported out of the House and Senate Appropriations Committees in June 2018, H.R. 6385 and S. 3108 , would have provided $595 and $515.5 million, respectively, to continue implementing the Central America strategy. The Trump Administration requested $435.5 million for Central America in FY2019. Other bills introduced during the 115 th Congress, such as S. 3540 and H.R. 4796 , included provisions intended to guide U.S. policy and improve the effectiveness of the Central America strategy. At the same time, Congress remained concerned about widespread corruption in the region. In May 2017, the House adopted a resolution, H.Res. 145 , that recognized the anticorruption efforts of CICIG, MACCIH, and the attorneys general of El Salvador, Guatemala, and Honduras and called on the Northern Triangle governments to provide the attorneys general with the support, resources, and independence they need to carry out their responsibilities. Congress also approved a provision included in the FY2019 National Defense Authorization Act ( P.L. 115-232 , §1287) that will require the Secretary of State to report the names of Salvadoran, Guatemalan, and Honduran officials known to have engaged in, or facilitated, acts of grand corruption or narcotics trafficking. Moreover, some Members of Congress spoke out about efforts to hinder anticorruption efforts in the Northern Triangle, particularly the Guatemalan president's attempts to undermine and expel CICIG, and called for sanctions to be imposed on corrupt officials. Congress also appropriated funding to support anticorruption efforts. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), provided $6 million for CICIG and $31 million for MACCIH and the Northern Triangle's attorneys general. Some Members of Congress sought to suspend U.S. funding for CICIG after a Russian family convicted of participating in a passport forgery network in Guatemala alleged that the Russian government was using CICIG to persecute Russian dissidents. The U.S. State Department found no evidence supporting the allegations, however, and U.S. funding for the commission continued. The House and Senate Appropriations Committees both recommended continued funding for CICIG, MACCIH, and the attorneys general in their FY2019 foreign aid appropriations measures, H.R. 6385 and S. 3108 . For additional information, seeCRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress , by Peter J. Meyer; CRS In Focus IF10371, U.S. Strategy for Engagement in Central America: An Overview , by Peter J. Meyer; CRS Report R43616, El Salvador: Background and U.S. Relations , by Clare Ribando Seelke; CRS Report R42580, Guatemala: Political and Socioeconomic Conditions and U.S. Relations , by Maureen Taft-Morales; CRS Report RL34027, Honduras: Background and U.S. Relations , by Peter J. Meyer. Colombia is a key U.S. ally in Latin America. Because of Colombia's prominence in the production of illegal drugs, the United States and Colombia forged a close relationship over the past two decades to respond to mutual challenges. Focused initially on counternarcotics, and later on counterterrorism, a program called Plan Colombia laid the foundation for a security partnership between the two countries. Between FY2000 and FY2016, the U.S. Congress appropriated more than $10 billion of assistance from U.S. State Department and Department of Defense accounts to carry out Plan Colombia and its successor strategies. Plan Colombia and its successors were both broad frameworks for U.S. assistance and ways to synchronize the support provided by various U.S. government agencies. Originally designed as a 6-year strategy to end the country's decades-long conflict, eliminate drug trafficking, and promote development, Plan Colombia ultimately became a 17-year U.S.-Colombian bilateral effort. Several analysts consider Plan Colombia a U.S. foreign policy success, although critics point to enduring problems, including illegal drug exports; uneven development, especially in rural areas; and continued murders of human rights and social activists. Revenues from cocaine and heroin trafficking provided resources to the Revolutionary Armed Forces of Colombia (FARC), the largest leftist guerrilla group operating in the country; the National Liberation Army (ELN), the country's second-largest rebel group; and Colombia's rightwing paramilitaries, known as the Self Defense Forces of Colombia (AUC), although the group formally demobilized in 2006. These three groups engaged in a multisided, violent conflict for decades, and the U.S. government declared all three foreign terrorist organizations. In August 2018, Iván Duque, a former senator in the Colombian Congress and member of the right leaning Democratic Center (CD) party, was inaugurated as Colombia's new president, succeeding President Juan Manuel Santos, who served two terms. Duque is the first \"peacetime\" president after more than five decades of conflict, inheriting a controversial peace agreement, which was the central legacy of President Santos and which won him the Nobel peace prize. The Santos government engaged in more than 50 rounds of intense, formal peace talks with the FARC from 2012 to 2016, which produced a peace accord that was ratified by the Colombian Congress in November 2016. President Duque and the CD party were vocal critics of the peace accord and boycotted the final vote in Congress. In the March 2018 legislative elections, the CD party moved from being in opposition in the Senate to become the dominant party. The national elections were notable for their relative lack of violence and higher voter turnout than in recent decades. Duque has set a course for economic renewal and lower taxes, fighting criminality, and rebuilding confidence in the country's institutions. In September 2018, President Duque outlined his broad policy goals in a speech before the U.N. General Assembly, where he denounced the authoritarian government of Venezuelan President Nicolás Maduro and proposed that his government take a lead role in containing Maduro's damage. Maduro's government has spawned a humanitarian crisis that has led to an exodus of Venezuelans fleeing to nearby countries, especially neighboring Colombia. (See \" Venezuela \" section.) According to U.S. estimates, Colombia in 2017 cultivated an unprecedented 209,000 hectares of coca, from which cocaine is derived, capable of generating 921 metric tons of cocaine. The U.N. estimates for 2017, which typically differ in quantity but follow the same trends as U.S. estimates, stated that Colombia's potential production of cocaine reached nearly 1,370 metric tons, 31% above its 2016 estimate. Cocaine exports, primarily to the U.S. market, remain a concern for U.S. lawmakers, despite Colombia's economic stability and improving security, in part due to the demobilization of about 11,000 former FARC. Key issues in the U.S.-Colombian relationship are implementing the Colombian government's peace accord with the FARC; fighting organized crime, which has flared since the FARC demobilized; and reducing corruption. In August 2018, Colombia held a referendum on measures to reduce public corruption that barely missed its threshold and did not pass. The U.S and Colombian governments have joint efforts to address the spike in assassinations of social leaders and human rights defenders and to more effectively combat cocaine production. In meetings between President Duque and U.S. Secretary of State Mike Pompeo in early January 2019, the two partners discussed cooperation on counternarcotics, peace accord implementation, and trade, and Pompeo vowed U.S. assistance to Colombia aimed at decreasing coca production by 50% by 2023.  Congressional Action: In May 2017, Congress enacted a FY2017 omnibus appropriations measure ( P.L. 115-31 ) that funded programs in Colombia at $391.3 million. The FY2018 omnibus appropriations measure, approved by Congress in March 2018 ( P.L. 115-141 ), again provided $391.3 million to support Colombia's transition to peace and peace accord implementation, address inequalities in historically marginalized areas, reintegrate demobilized fighters, and continue counternarcotics efforts, such as building state presence in former FARC-held areas. The Trump Administration's FY2019 budget request for Colombia was $265 million, approximately a 32% below the funds appropriated by Congress in FY2018, whereas both the House and Senate appropriations bills, H.R. 6385 and S. 3108 , would again maintain the funding at $391.3 million. The Administration's request would reduce postconflict recovery programs and place greater emphasis on counternarcotics and security. Colombia also has received additional U.S. humanitarian funding to help it cope with more than 1 million Venezuelan migrants. The U.S. government is providing humanitarian and emergency food assistance and helping to coordinate and support a regional response to the migration crisis. As of September 30, 2018, U.S. government humanitarian funding for the Venezuela response totaled approximately $96.5 million for both FY2017 and FY2018 combined, of which $54.8 million was for Colombia. For additional information, see CRS Report R43813, Colombia: Background and U.S. Relations , by June S. Beittel; CRS Report R44779, Colombia's Changing Approach to Drug Policy , by June S. Beittel and Liana W. Rosen; CRS In Focus IF10817, Colombia's 2018 Elections , by June S. Beittel and Edward Y. Gracia. Cuba remains a one-party authoritarian state with a poor record on human rights. First Vice President Miguel Díaz-Canel succeeded Raúl Castro as president in April 2018, but Castro continues to head the Cuban Communist Party until 2021. The selection of Díaz-Canel, now 58 years of age, reflects the generational change in Cuban leadership that began several years ago and marks the first time since the 1959 Cuban revolution that a Castro is not in charge of the government. Over the past decade, Cuba has implemented gradual market-oriented economic policy changes, but critics maintain that it has not taken enough action to foster sustainable economic growth. Looking ahead, Díaz-Canel continues to faces two significant challenges—moving forward with economic reforms that produce results and responding to desires for greater freedom. Cuba is now in the midst of rewriting its 1976 constitution, with a planned national referendum on February 24, 2019. Among the changes are the addition of an appointed prime minister to oversee government operations, age and term limits on the president, and some market-oriented economic reforms, including the right to private property, but the new constitution would still ensure the state sector's dominance over the economy and the predominant role of the Communist Party in Cuba's political system. Congress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening and at times easing U.S. economic sanctions. Since the early 1960s, the centerpiece of U.S. policy has consisted of economic sanctions aimed at isolating the Cuban government. In 2014, however, the Obama Administration initiated a major policy shift, moving away from sanctions toward a policy of engagement. The policy change included the restoration of diplomatic relations (July 2015); the rescission of Cuba's designation as a state sponsor of international terrorism (May 2015); and an increase in travel, commerce, and the flow of information to Cuba implemented through regulatory changes. President Trump unveiled a new policy toward Cuba in June 2017 increasing sanctions and partially rolling back some of the Obama Administration's efforts to normalize relations. The most significant changes include restrictions on transactions with companies controlled by the Cuban military and the elimination of individual people-to-people travel. In response to unexplained injuries of members of the U.S. diplomatic community at the U.S. Embassy in Havana, the State Department reduced the staff of the U.S. Embassy by about two-thirds; the reduction has affected embassy operations, especially visa processing, and made bilateral engagement more difficult. Congressional Action : In the 115 th Congress, debate over Cuba policy continued, especially with regard to economic sanctions. The 2018 farm bill, P.L. 115-334 ( H.R. 2 ), enacted in December 2018, has a provision permitting funding for two U.S. agricultural export promotion programs in Cuba. Two FY2019 House appropriations bills, Commerce ( H.R. 5952 ) and Financial Services ( H.R. 6258 and H.R. 6147 ), had provisions that would have tightened economic sanctions, but final action was not completed by the end of the 115 th Congress. Other bills were introduced but not acted upon; these bills would have eased or lifted sanctions altogether: H.R. 351 and S. 1287 (travel); H.R. 442 / S. 472 and S. 1286 (some economic sanctions); H.R. 498 (telecommunications); H.R. 525 (agricultural exports and investment); H.R. 572 (agricultural and medical exports and travel); H.R. 574 , H.R. 2966 , and S. 1699 (overall embargo); and S. 275 (private financing for U.S. agricultural exports). Congress continued to provide funding for democracy and human rights assistance in Cuba and for U.S.-government sponsored broadcasting. For FY2017, Congress provided $20 million in democracy assistance and $28.1 million for Cuba broadcasting ( P.L. 115-31 ). For FY2018, it provided $20 million for democracy assistance and $28.9 million for Cuba broadcasting ( P.L. 115-141 ; explanatory statement to H.R. 1625 ). For FY2019, the Trump Administration requested $10 million in democracy assistance and $13.7 million for Cuba broadcasting. The House Appropriations Committee's FY2019 State Department and Foreign Operations appropriations bill, H.R. 6385 , would have provided $30 million for democracy programs, whereas the Senate version, S. 3108 , would have provided $15 million; both bills would have provided $29 million for broadcasting. As noted above, the 115 th Congress approved a series of continuing resolutions that continued FY2019 funding at FY2018 levels through December 21, 2018, but did not complete action on FY2019 appropriations, leaving the task to the 116 th Congress. In other action, several approved measures— P.L. 115-232 , P.L. 115-244 , and P.L. 115-245 —have provisions extending a prohibition on FY2019 funding to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba; the conference report to P.L. 115-232 also requires a report on security cooperation between Russia and Cuba. The FAA Reauthorization Act of 2018 ( P.L. 115-254 ) requires the Transportation Security Administration to brief Congress on certain aspects of Cuban airport security and efforts to better track public air charter flights between the United States and Cuba. In April 2018, the Senate approved S.Res. 224 , commemorating the legacy of Cuban democracy activist Oswaldo Payá. For additional information, see CRS Report R44822, Cuba: U.S. Policy in the 115th Congress , by Mark P. Sullivan; CRS In Focus IF10045, Cuba: U.S. Policy Overview , by Mark P. Sullivan; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by Mark P. Sullivan; and CRS Report R43888, Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations , by Dianne E. Rennack and Mark P. Sullivan. President Jovenel Moïse is completing his second year in office. He assumed office in February 2017 after Haiti had been almost a year without an elected president because of political gridlock and delayed elections. He continues to face a divided congress. Moïse came to office amid ongoing investigations into his possible involvement in money laundering, which he denies. Widespread corruption has been an impediment to good governance throughout much of Haiti's history. In November 2017, the Haitian Senate's Special Commission of Investigation released a report alleging embezzlement and fraud by 15 current and former Haitian officials, including two former prime ministers and President Moïse's chief of staff, in managing $2 billion in loans from Venezuela's PetroCaribe oil program. In early 2018, after the chief of the U.N. mission in Haiti welcomed the justice ministry's appointment of an investigative judge to look into citizens' complaints demanding accountability for those funds, Moïse recalled Haiti's Ambassador to the U.N. in protest. Foreign donors and civic society continued to demand more action against corruption. In October 2018, after a new wave of public protests, Moïse fired two staff members implicated in the PetroCaribe corruption case, and the prime minister created a new commission to investigate its scope. The government began to implement reforms recommended by the International Monetary Fund, which included the gradual elimination of subsidies, especially for energy, and the shifting of public resources toward investments in health, education, and social services. When the reduction of subsidies led to increased fuel prices of up to 51% in July 2018, violent protests ensued, leading to the resignation of Moïse's prime minister and the restoration of the subsidies. Moïse named a new prime minister, Jean-Henry Céant, of an opposition party, after consulting with the legislature to get a consensus candidate. Protests against proposed subsidy reductions and corruption have continued. Given Haiti's proximity to the United States, and the country's chronically unstable political environment and fragile economy, Haiti has been an ongoing concern for the United States. Many in the U.S. Congress view Haiti's stability with great concern, and have demonstrated a commitment to improve conditions there. Haiti is the poorest country in the Western Hemisphere, and chronic political instability and frequent natural disasters exacerbate its poverty. Almost 60% of the country's 10 million people live in poverty, and almost 25% of them live in extreme poverty. Haiti is still recovering from a devastating earthquake in 2010, as well as Hurricane Matthew, which hit the island in 2016. The latter worsened a process begun by a two-year drought, destroying Haiti's food supply and creating a humanitarian disaster. In addition, Haiti continues to struggle against a cholera epidemic inadvertently introduced by U.N. peacekeepers in 2010. Nonetheless, according to the State Department, Haiti is transitioning from a postdisaster era to one of reconstruction and long-term development. The Trump Administration and some in Congress contend that conditions in Haiti no longer warrant a reprieve for Haitian migrants who have been allowed to live and work in the United States under the TPS program since the 2010 earthquake. In November 2017, the Department of Homeland Security announced that TPS for Haitians would be terminated in July 2019. In August 2018, a group of 110 Members called on the Trump Administration to reinstate TPS, saying State Department documents showed the Administration made the decision \"despite warnings of grave consequences for the U.S. national security.\" In October 2018, a U.S. district court in California issued a preliminary injunction against the TPS termination. As long as the injunction remains in effect, Haitians (and citizens from three other countries) will retain their TPS. Termination of this program could affect about 59,000 Haitians in the United States. On January 7, 2019, federal court proceedings began in New York for Saget et al v Trump , a case that challenges President Trump's motion to end TPS for Haitian nationals. In October 2017, the U.N. Stabilization Mission in Haiti (MINUSTAH, 2004-2017) was succeeded by a smaller mission, the U.N. Mission for Justice Support in Haiti (MINUJUSTH), which is focusing on rule of law, development of the Haitian National Police (HNP) force, and human rights. The HNP now have primary responsibility for domestic security. MINUSTAH helped facilitate elections, combat gangs and drug trafficking with the HNP, and respond to natural disasters. MINUSTAH was criticized, however, because of sexual abuse by some of its forces and for introducing cholera to the country. The U.N. maintains it has diplomatic immunity, but after years of international pressure said that it would support the epidemic's victims and a new $400 million plan to fight cholera in Haiti. Neither plan has been fully funded or implemented. Congressional Action: The Trump Administration's proposed FY2018 budget of $157 million for aid to Haiti would have reduced aid by about 15% from that provided in FY2017, but Congress rejected the request and provided about $184 million for Haiti, the same as in FY2017. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), has several Haiti provisions. It continued to condition some assistance until the Secretary of State certified that the Haitian government was taking certain steps to strengthen the rule of law, combat corruption, increase government revenues, and resolve commercial disputes between U.S. entities and the Haitian government. It also continued to permit the Haitian government to purchase U.S. defense articles and services for its Coast Guard. In addition, the measure provided $10 million for multilateral efforts to assist communities affected by cholera resulting from MINUSTAH. The explanatory statement to the measure also provided $8.5 million for Haiti reforestation and $1.5 million for prison assistance. For FY2019, the Administration requested $170.5 million for Haiti, an 8% reduction from that provided in FY2017. Both the House and Senate Appropriations Committees' versions of the FY2019 foreign aid appropriations measure, H.R. 6385 and S. 3108 , would have continued to permit the Haitian government to purchase U.S. defense articles and services for its Coast Guard. The House version also would have continued a provision from FY2018 conditioning some assistance pending a certification from the Secretary of State that the Haitian government was taking certain steps to strengthen the rule of law, combat corruption, increase government revenues, and resolve commercial disputes between U.S. entities and the Haitian government. The Senate Appropriations Committee's report ( S.Rept. 115-282 ) to its version of the bill recommended $51 million in Development Assistance, $9 million in International Narcotics Control and Law Enforcement (INCLE) assistance (including $1.9 million for prison improvements), $255,000 in International Military Education and Training (IMET), $1.2 million in Foreign Military Financing (FMF), and $1.75 million to assist communities in Haiti affected by cholera resulting from the U.N. Stabilization Mission in Haiti. As noted above, Congress did not complete action on FY2019 foreign aid appropriations but approved a series of continuing resolutions that provided funding through December 21, 2018. As noted in the section on \" Migration Issues \" above, a range of proposals related to TPS were introduced in Congress, either to extend it, limit it, adjust some TPS holders to lawful permanent resident status, or make TPS holders subject to expedited removal, but no action was taken on these measures. For additional information, see CRS Report R45034, Haiti's Political and Economic Conditions: In Brief , by Maureen Taft-Morales. Congress has demonstrated renewed interest in Mexico, a top trade partner and energy supplier with which the United States shares a nearly 2,000-mile border and strong cultural, familial, and historical ties. Economically, the United States and Mexico are interdependent, and Congress closely followed efforts to renegotiate NAFTA, which began in August 2017, and ultimately resulted in a proposed United States-Mexico-Canada Agreement (USMCA) signed at the end of November 2018. Similarly, security conditions in Mexico affect U.S. national security, particularly along the U.S.-Mexican border. Observers are concerned about resurgent organized crime-related violence in Mexico. President Enrique Peña Nieto of the Institutional Revolutionary Party (PRI) completed his six-year term on December 1, 2018. Peña Nieto shepherded significant structural reforms through the Mexican congress in 2013-2014, including a reform that opened Mexico's energy market to foreign investment. From 2014 onward, however, he struggled to address human rights abuses, insecurity, and corruption. On December 1, 2018, Andrés Manuel López Obrador, the populist leader of the National Regeneration Movement (MORENA) party, took office for a six-year term after winning 53% of the vote in July presidential elections and majorities in both chambers of congress. López Obrador promised to govern differently than recent PRI and National Action Party (PAN) administrations that have presided over periods of moderate economic growth, rising insecurity, and ongoing corruption. Some observers are concerned that López Obrador may alter Mexico's historically investor-friendly policies and cause friction with the United States, but others predict that he will seek to address poverty and corruption and pursue pragmatic foreign relations. U.S.-Mexican relations remain relatively strong, but periodic tensions have emerged since January 2017. In recent years, both countries have prioritized bolstering economic ties, particularly energy cooperation; interdicting illegal migration from Central America; and combating drug trafficking, including heroin and fentanyl. Security cooperation has continued under the Mérida Initiative, a security partnership for which Congress has provided Mexico some $2.9 billion from FY2008 through FY2018. In January 2017, President Trump's assertion that Mexico should pay for a border wall, which Mexico has consistently opposed, led Peña Nieto to cancel a White House visit. Although the Mexican government continues to oppose paying for the border wall, has spoken out against the Administration's \"zero tolerance\" immigration policies, and is concerned about the future of the DACA initiative, bilateral security and migration efforts continue. Mexico also applied retaliatory tariffs in response to the Trump Administration's recent tariffs on U.S. imports of steel and aluminum. Congressional Action : The 115 th Congress closely followed the renegotiation of NAFTA and how the USMCA could affect the U.S. economy and U.S.-Mexican relations; consideration of the proposed USMCA will likely occur in the 116 th Congress (see \" Trade Policy ,\" below). In March 2017, the Senate passed S.Res. 83 , a resolution calling for U.S. support for Mexico's efforts to combat fentanyl. In December 2017, the House approved H.Res. 336 , a resolution reiterating the importance of bilateral cooperation with Mexico. In November 2018, the House approved H.R. 1567 , which promotes economic partnership and cooperation between the United States and Mexico in the areas of academic exchange, entrepreneurship, and infrastructure integration. In March 2018, Congress provided $152.6 million in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) for Mexico, with extra funds provided to combat the production and trafficking of opioids. The Trump Administration's FY2019 request for Mexico was for $78.9 million, some 43% lower than the FY2017 enacted amount ($138.5 million). The House Appropriations Committee's FY2019 version of the foreign aid appropriations bill, H.R. 6385 ( H.Rept. 115-829 ), recommended providing $125 million for Mexico. The Senate version of the bill, S. 3108 ( S.Rept. 115-282 ), recommended $169.5 million. For additional information, see CRS In Focus IF10867, Mexico's 2018 Elections: Results and Potential Implications , by Clare Ribando Seelke and Edward Y. Gracia; CRS Report R42917, Mexico: Background and U.S. Relations , by Clare Ribando Seelke; CRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and Implications , by M. Angeles Villarreal; CRS In Focus IF10997, Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement , by Ian F. Fergusson and M. Angeles Villarreal; CRS In Focus IF10578, Mexico: Evolution of the Mérida Initiative, 2007-2019 , by Clare Ribando Seelke; CRS Report R41576, Mexico: Organized Crime and Drug Trafficking Organizations , by June S. Beittel; CRS In Focus IF10215, Mexico's Immigration Control Efforts , by Clare Ribando Seelke and Carla Y. Davis-Castro; and CRS In Focus IF10400, Transnational Crime Issues: Heroin Production, Fentanyl Trafficking, and U.S.-Mexico Security Cooperation , by Clare Ribando Seelke and Liana W. Rosen. President Daniel Ortega, now aged 72, is currently suppressing popular unrest in a manner reminiscent of Anastasio Somoza, the dictator he helped overthrow in 1979 as a \"comandante\" of the leftist Sandinista National Liberation Front (FSLN). Ortega served on the Sandinista national reconstruction board, then as president from 1985 to 1990, during which time the United States backed right-wing \"contras\" in opposition to Sandinista governance. In the early 1990s, after decades of dictatorship and civil war, Nicaragua began to establish a democratic government. Democratic space has narrowed, however, as the FSLN and Ortega have consolidated control over the country's institutions. After leaving the presidency in 1990, Ortega served as an opposition leader in the legislature and then was reelected in 2006, 2011, and 2016. Nonetheless, popular opposition to Ortega's rule began to take hold in parts of the country, as his government grew increasingly authoritarian. Ortega buoyed his popular support by implementing social welfare programs that benefited Nicaragua's poor and by accommodating the business community. Domestic and international critics consistently objected to Ortega's antidemocratic policies and self-enrichment, however, and popular domestic support began to wane. Ortega was able to resist most of this pressure because the political opposition was weak, divided, and handicapped by FSLN control of the legislature, electoral council, and other aspects of Nicaraguan political life. Until 2018, for many Nicaraguans, Ortega's populist economic measures that improved their standard of living outweighed his authoritarian tendencies. Similarly, for many in the international community, the relative stability in Nicaragua outweighed Ortega's antidemocratic actions. Both domestic and international attitudes toward the Ortega government began to change in April 2018. Ortega's long-term strategy to retain control of the government began to unravel when he proposed reducing benefits of the social security system to shore up its insolvency. The announcement set off weeks of unexpected protests led by university students, who argued that corruption and mismanagement of social security system resources were the main factors behind the system's problems. Ortega repealed the proposed reforms, but protests continued and grew into mass antigovernment protests led by students, businesspeople, civil society groups, farmers, and the Catholic Church. The protests called for early elections and/or Ortega's resignation. The Ortega government and its parapolice supporters have violently repressed protests, leaving at least 320 people dead and thousands injured. The government has arrested over 400 people, with reports of torture and disappearances. Thousands of people have fled the country. In July 2018, the Inter-American Commission on Human Rights (IACHR) sent a team of independent experts to Nicaragua to investigate potential human rights abuse. They concluded that the security forces' actions could be considered crimes against humanity and called for Ortega to be investigated. Government authorities expelled the team in December 2018, and since then they have destroyed independent news facilities and stripped civil society groups of their legal standing. The government has accused protesters and journalists of plotting coups and conspiring to commit terrorist acts, and it has accused the IACHR investigators of echoing U.S. policies against Nicaragua. The Trump Administration has imposed sanctions against five high-level officials, including Vice President Rosario Murillo. Nicaragua is the second poorest country in the Western Hemisphere after Haiti. Nicaragua maintained growth levels above the average for Latin America over the past decade, but the Economist Intelligence Unit estimates the current political crisis will affect the economy with a contraction of almost 3% in 2018, and a further 0.7% contraction in 2019. Congressional Action: The 115 th Congress enacted the Nicaragua Human Rights and Anticorruption Act of 2018 in December 2018 ( P.L. 115-335 , H.R. 1918 ). The law requires the United States to vote against loans from the international financial institutions to the government of Nicaragua, except to address basic human needs or promote democracy. Loans to the government of Nicaragua may be provided if the U.S. Department of State certifies that Nicaragua has taken effective steps to combat corruption, hold free elections, and implement other reforms. The law also authorizes the President to impose sanctions (visa restrictions and assets blocking) on persons responsible for human rights violations or acts of corruption. For FY2018, Congress appropriated an estimated $10 million in Development Assistance to Nicaragua under the U.S. Strategy for Engagement in Central America. Under the Consolidated Appropriations Act, 2018 ( P.L. 115-141 , S.Rept. 115-152 ), Congress also required the Secretary of State to submit a report to the appropriate congressional committees on the involvement of senior Nicaraguan government officials in corrupt practices or violations of human rights in Nicaragua. For FY2019, the Senate Appropriations Committee's report to its version of the FY2019 foreign aid appropriations bill ( S.Rept. 115-282 to S. 3108 ) recommended $5 million in development assistance for Nicaragua. The House Appropriations Committee's report to its version of the FY2019 appropriations bill ( H.Rept. 115-829 to H.R. 6385 ) provided that the only funding made available in the act should be for programs to promote democracy and the rule of law. As noted above, the 115 th Congress did not complete action on FY2019 foreign aid appropriations, but it did approve continuing resolutions providing foreign assistance at FY2018 levels through December 21, 2018, leaving full-year funding to be decided by the 116 th Congress. In other action, on July 25, 2018, the House passed H.Res. 981 , \"condemning the violence, persecution, intimidation, and murders committed by the Government of Nicaragua against its citizens.\" For additional information, see CRS Report R44560, Nicaragua: In Brief , by Maureen Taft-Morales. Martín Vizcarra was sworn in as Peru's president in March 2018. He had been first vice president to Pedro Pablo Kuczynski, who resigned as president amid bribery allegations related to the Brazilian construction firm Odebrecht. An orderly, constitutional transition took place, and Vizcarra is serving out the remainder of the former president's five-year term, until July 2021. Officials from the previous four Peruvian governments—including their presidents—and the opposition have been implicated in the Odebrecht international bribery scandal. Keiko Fujimori, leader of the Fuerza Popular party, was arrested in October 2018 and placed in pretrial detention for 36 months, pending investigation into her alleged involvement in money laundering. Vizcarra has made fighting corruption a top priority. (Also see \" Corruption \" section above.) He responded swiftly and strongly to a new scandal in which high-level judicial officials were taped allegedly negotiating bribes in exchange for favors. Despite an opposition-dominated legislature that was obstructive to the previous administration, Vizcarra secured legislative support for a series of judicial and political reforms that the public voted on in a December 2018 referendum. An overwhelming majority of voters approved constitutional changes, including reform of the board that makes judicial appointments, reform of campaign financing rules, and the prohibition of consecutive reelection of legislators. Voters rejected a return to a bicameral legislature. Peru's economy has been one of the strongest in Latin America since 2001, consistently growing over 5% per year because of the boom in international prices for commodities—particularly petroleum and minerals. The Economist Intelligence Unit estimates that Peru's economic growth was 3.7% in 2018 and predicts an average of 3.9% annual growth in 2019-2023. In March 2018, Peru and the other 10 signatories of the Trans-Pacific Partnership (minus the United States, which withdrew in 2017) signed a new trade pact, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. President Vizcarra is continuing the same types of market-friendly economic policies as his recent predecessors. In July 2018, Peru's congress granted the executive branch certain legislative authority for 60 days, and Vizcarra began issuing a series of legislative decrees designed to improve infrastructure and stimulate economic growth. Social unrest and debate over exploitation of natural resources long have been and likely will remain major challenges for any Peruvian government. Many disputes have involved the mining industry and the rights of indigenous peoples in those areas where mining exists or where mining interests intend to operate. In December 2018, citizens in three mining regions elected critics of mining as their governors. A current dispute involves a highway project that is to run through protected areas and indigenous reserves in the Amazon rainforest. Successive Peruvian governments have found it politically difficult to balance a stated desire to help the poor and indigenous with efforts to encourage investment, especially in mining, by the business sector. Congressional Action: For FY2018, the Trump Administration requested $49.7 million for Peru, a 23% reduction from the amount provided in FY2017, but Congress ultimately appropriated almost $74 million for Peru in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). For FY2019, the Administration requested $47.4 million. The reports to the House and Senate Appropriations Committees' versions of FY2019 foreign aid appropriations, H.Rept. 115-829 to H.R. 6385 and S.Rept. 115-282 to S. 3108 , specified $32 million in INCLE assistance and $1.8 million in FMF. As noted above, the 115 th Congress did not complete action on FY2019 foreign aid appropriations, but it did approve measures funding foreign aid at FY2018 levels through December 21, 2018. Venezuela remains in the throes of a deep economic and humanitarian crisis under the authoritarian rule of President Nicolás Maduro of the United Socialist Party of Venezuela (PSUV). Maduro, narrowly elected in 2013 for a six-year term after the death of President Hugo Chávez (in office 1999-2013), is unpopular. He has used the courts, security forces, and electoral council to stifle opposition, which is in disarray. On January 10, 2019, Maduro was inaugurated for a second term after winning reelection on May 20, 2018, in an unfair contest that did not meet international election standards. The United States, the European Union, Japan, and most Western Hemisphere countries deemed the election illegitimate. Some of those countries have downgraded their relations or enacted travel bans and sanctions on officials in Maduro's government; others may follow suit. They regard the opposition-controlled National Assembly as the only legitimate branch of government. Maduro's reelection capped off his efforts since 2017 to consolidate power. From March to July 2017, protesters called for President Maduro to release political prisoners and respect the National Assembly. Security forces quashed protests, with more than 130 killed and thousands injured. Maduro then orchestrated the controversial July 2017 election of a National Constituent Assembly to rewrite the constitution, which has usurped the National Assembly's powers. Since the May 2018 elections, Maduro's government has arrested and tortured dissidents, including military officers alleged to have been involved in an assassination attempt against him in August 2018. Venezuela also is experiencing a serious economic crisis, marked by rapid contraction of the economy (14% in 2017 and 18% in 2018), hyperinflation (to almost 1,400,000% in 2018), and severe shortages of food and medicine that have prompted a humanitarian crisis in the country. This crisis has driven more than 3 million Venezuelans to flee since 2015, according to the U.N. High Commissioner for Refugees. President Maduro has blamed U.S. sanctions for the country's economic problems while conditioning receipt of food assistance on support for his government and increasing military control over the economy. He maintains that Venezuela will seek to restructure its debts, although that appears unlikely. The government and state oil company Petróleos de Venezuela, S. A. (PdVSA) defaulted on bond payments in 2017. Lawsuits over nonpayment and seizures of PdVSA assets, including potentially its U.S. subsidiary (CITGO), are possible in 2019. The United States traditionally has had close relations with Venezuela, a major U.S. oil supplier, but friction increased under the Chávez government and has intensified under the Maduro regime. U.S. policymakers have had concerns about the deterioration of human rights and democracy in Venezuela and the lack of bilateral cooperation on antidrug and counterterrorism efforts. U.S. officials have expressed increasing concerns regarding Colombian criminal and terrorist groups in Venezuela. In the wake of the May elections, the Trump Administration increased sanctions on the Maduro government and assistance for neighboring countries sheltering Venezuelan migrants. The Trump Administration deemed the May 2018 elections \"unfree and unfair\" and Maduro's January 10, 2019, inauguration as an \"illegitimate usurpation of power\"; it regards the National Assembly as the only legitimate branch of government. The Administration has employed targeted sanctions against Venezuelan officials responsible for human rights violations, undermining democracy, and corruption, as well as officials and entities engaged in drug trafficking. The most recent sanctions, announced just prior to Maduro's inauguration, targeted 7 individuals and 23 companies that allegedly stole $2.4 billion. Beginning in August 2017, President Trump has imposed broader economic sanctions that restrict the ability of the government and PdVSA to access U.S. financial markets and bar U.S. purchases of Venezuela's new digital currency and Venezuelan debt. The Administration has considered broader sanctions to limit or prohibit trade with Venezuela. Some predict such sanctions could hasten Maduro's demise, whereas others caution that they could worsen the humanitarian crisis. The Administration also is providing nearly $97 million in humanitarian assistance for Venezuelans who have fled to other countries, including Colombia. Congressional Action: The 115 th Congress took several actions to respond to the deteriorating situation in Venezuela and the regional humanitarian and migration crisis it has wrought. In February 2017, the Senate approved S.Res. 35 , which, among its provisions, called for the release of political prisoners and expressed support for dialogue and OAS efforts. In December 2017, the House passed a bill and a resolution on Venezuela: H.R. 2658 , the Venezuela Humanitarian Assistance and Defense of Democratic Governance Act, which would have authorized humanitarian assistance for Venezuela, and H.Res. 259 , which urged the Venezuelan government to suspend the constituent assembly, hold elections, release political prisoners, and accept humanitarian aid. In FY2018 appropriations legislation ( P.L. 115-141 ) enacted in March 2018, Congress provided $15 million to support democracy and human rights in Venezuela. For FY2019, the Trump Administration requested $9 million in democracy and human rights funding for Venezuela, $6 million less than what Congress appropriated in FY2018. The House Appropriation Committee's version of the FY2019 foreign aid appropriations bill, H.R. 6385 , would have provided $15 million; the Senate Appropriations Committee's version, S. 3108 , would have provided $20 million. For additional information, CRS In Focus IF10230, Venezuela: Political and Economic Crisis and U.S. Policy , by Clare Ribando Seelke; CRS In Focus IF10715, Venezuela: Overview of U.S. Sanctions , by Mark P. Sullivan; CRS In Focus IF11029, The Venezuela Regional Migration Crisis , by Rhoda Margesson and Clare Ribando Seelke; CRS Report R44841, Venezuela: Background and U.S. Relations , coordinated by Clare Ribando Seelke; CRS Report R45072, Venezuela's Economic Crisis: Issues for Congress , by Rebecca M. Nelson; and CRS In Focus IF10857, Venezuela's Petroleum Sector and U.S. Sanctions , by Phillip Brown. Many of the U.S. economic, political, and security concerns discussed in this report likely will sustain congressional interest in Latin America and the Caribbean in the 116 th Congress. Congress still faces completing action on FY2019 foreign aid appropriations that propose significant cuts in assistance to the region, and in early 2019 it will begin consideration of the Trump Administration's FY2020 foreign aid budget request. The 116 th Congress likely will pay close attention to the crisis in Venezuela and consider steps to influence the Venezuelan government's behavior in returning to democratic rule and to relieve the humanitarian crisis. The proposed United States-Mexico-Canada Agreement (USMCA) will face congressional examination and likely consideration in the 116 th Congress; Congress must approve the agreement before it can enter into force. In Central America, a potential oversight issue is the effectiveness of U.S. assistance to the Northern Triangle countries related to efforts to combat insecurity, corruption, and human rights violations; of particular concern are efforts to undermine anticorruption efforts in Guatemala and Honduras, especially the Guatemalan president's action against the U.N.-backed CICIG. Congress also potentially could consider immigration legislation related to the termination of TPS for Nicaragua, Haiti, El Salvador, and Honduras and the rescission of DACA. Other potential oversight issues for the 116 th Congress include the surge in Colombian coca cultivation and cocaine production and the effectiveness of U.S. assistance focusing on counternarcotics and counterterrorism; the effectiveness of U.S. assistance to Mexico given the high level of drug trafficking-related violence in the country; how to respond to the increase in political repression and violence in Nicaragua; the extent and significance of Chinese and Russian engagement in the region and the appropriate U.S. policy response; and U.S. relations with Brazil under newly elected President Jair Bolsonaro, as well as concerns about the state of democracy and human rights in the country.", "summary": "Geographic proximity has ensured strong linkages between the United States and Latin America and the Caribbean, based on diverse U.S. interests, including economic, political, and security concerns. The United States is a major trading partner and the largest source of foreign investment for many countries in the region, with free-trade agreements enhancing economic linkages with 11 countries. The region is a large source of U.S. immigration, both legal and illegal; proximity and economic and security conditions are major factors driving migration. Curbing the flow of illicit drugs has been a key component of U.S. relations with the region for more than three decades and currently involves close security cooperation with Mexico, Central America, and the Caribbean. U.S. support for democracy and human rights in the region has been long-standing, with particular current focus on Cuba, Nicaragua, and Venezuela. Under the Trump Administration, the outlook for U.S. relations with the region has changed. The Administration proposed deep cuts in FY2018 and FY2019 assistance to the region compared with FY2017. On trade, President Trump ordered U.S. withdrawal from the proposed Trans-Pacific Partnership trade agreement, which would have increased U.S. economic linkages with Mexico, Chile, and Peru. President Trump criticized the North American Free Trade Agreement (NAFTA) with Mexico and Canada as unfair, warned that the United States might withdraw, and initiated renegotiations; ultimately, the three countries agreed to a United States-Mexico-Canada Agreement in late September 2018. The proposed agreement, which requires congressional approval, largely leaves NAFTA intact but includes some updates and changes, especially to the dairy and auto industries. Administration actions on immigration have caused concern in the region, including efforts to end the deportation relief program known as Deferred Action for Childhood Arrivals (DACA) and Temporary Protected Status (TPS) designations for Nicaragua, Haiti, El Salvador, and Honduras. President Trump unveiled a new policy in 2017 toward Cuba partially rolling back U.S. efforts to normalize relations and imposing new sanctions. Congressional Action in the 115th Congress Congress traditionally has played an active role in policy toward Latin America and the Caribbean in terms of both legislation and oversight. Congress rejected the Trump Administration's proposed FY2018 cuts in foreign assistance to the region when it enacted the Consolidated Appropriations Act, 2018 (P.L. 115-141). Although the 115th Congress did not complete action on FY2019 appropriations funding foreign aid, both House and Senate Appropriations Committees' bills, H.R. 6385 and S. 3108, would have funded key countries and initiatives approaching FY2017 amounts. In other action, Congress enacted the Nicaragua Human Rights and Anticorruption Act of 2018 (P.L. 115-335, H.R. 1918) in December 2018. The measure requires the United States to vote against loans from the international financial institutions to Nicaragua, except to address basic human needs or promote democracy, and authorizes the President to impose sanctions on persons responsible for human rights violations or acts of corruption. In August 2018, Congress enacted the FY2019 defense authorization measure, P.L. 115-232 (H.R. 5515), with several Latin America provisions, including required reports on narcotics trafficking corruption and illicit campaign financing in El Salvador, Guatemala, and Honduras and on security cooperation between Russia and Cuba, Nicaragua, and Venezuela. The House also approved H.R. 2658 on Venezuela in December 2017, which, among its provisions, would have authorized humanitarian assistance for Venezuela; similar bills were introduced in the Senate but were not considered. Both houses approved several resolutions indicating policy preferences on a range of issues and countries: S.Res. 35 and H.Res. 259 on Venezuela, S.Res. 83 and H.Res. 336 on Mexico, H.Res. 54 on Argentina, H.Res. 145 on Central America, S.Res. 224 on Cuba, and H.Res. 981 on Nicaragua. Looking ahead to the 116th Congress, in addition to completing action on FY2019 foreign aid appropriations, many of the U.S. economic, political, and security concerns discussed in this report likely will sustain congressional interest in Latin America and the Caribbean (see \"Outlook for the 116th Congress,\" below.) This report, which will not be updated, tracks legislative action on Latin America and the Caribbean in the 115th Congress in 2017 and 2018.", "document_type": "crs"}
{"report": "The World Trade Organization (WTO) is an international organization that administers the trade rules and agreements negotiated by its 164 members to eliminate trade barriers and create nondiscriminatory rules to govern trade. It also serves as an important forum for resolving trade disputes. The United States was a major force behind the establishment of the WTO in 1995 and the rules and agreements that resulted from the Uruguay Round of multilateral trade negotiations (1986-1994). The WTO encompassed and expanded on the commitments and institutional functions of the General Agreement on Tariffs and Trade (GATT), which was established in 1947 by the United States and 22 other nations. Through the GATT and WTO, the United States and other countries sought to establish a more open, rules-based trading system in the postwar era, with the goal of fostering international economic cooperation, stability, and prosperity worldwide. Today, the vast majority of world trade, approximately 98%, takes place among WTO members. The evolution of U.S. leadership in the WTO and the institution's future agenda have been of interest to Congress. The terms set by the WTO agreements govern the majority of U.S. trading relationships. Some 65% of U.S. global trade is with countries that do not have free trade agreements (FTAs) with the United States, including China, the European Union (EU), India, and Japan, and thus rely on the terms of WTO agreements. Congress has recognized the WTO as the \"foundation of the global trading system\" within U.S. trade legislation and plays a direct legislative and oversight role over WTO agreements. U.S. FTAs also build on core WTO agreements. While the U.S. Trade Representative (USTR) represents the United States at the WTO, Congress holds constitutional authority over foreign commerce and establishes U.S. trade negotiating objectives and principles and implements U.S. trade agreements through legislation. U.S. priorities and objectives for the GATT/WTO are reflected in trade promotion authority (TPA) legislation since 1974. Congress also has oversight of the USTR and other executive branch agencies that participate in WTO meetings and enforce WTO commitments. The WTO's effectiveness as a negotiating body for broad-based trade liberalization has come under intensified scrutiny, as has its role in resolving trade disputes. The WTO has often struggled to reach consensus over issues that can place developed against developing country members (such as agricultural subsidies, industrial goods tariffs, and intellectual property rights protection). It has also struggled to address newer trade barriers, such as digital trade restrictions and the role of state-owned enterprises (SOEs) in international commerce, which have become more prominent in the years since the WTO was established. Global supply chains and advances in technology have transformed global commerce, but trade rules have failed to keep up with the pace of change; since 1995 WTO members have been unable to reach consensus for a new comprehensive multilateral agreement. As a result, many countries have turned to negotiating FTAs with one another outside the WTO to build on core WTO agreements and advance trade liberalization and new rules. Plurilateral negotiations, involving subsets of WTO members rather than all members, are also becoming a more popular forum for tackling newer issues on the global trade agenda. The most recent round of WTO negotiations, the Doha Round, began in November 2001, but concluded with no clear path forward, leaving multiple unresolved issues after the 10 th Ministerial conference in 2015. Efforts to build on current WTO agreements outside of the Doha agenda continue. While WTO members have made some progress toward determining future work plans, no major deliverables or negotiated outcomes were announced at the 11 th Ministerial conference in December 2017 and no consensus Ministerial Declaration was released. Many have concerns that the growing use of protectionist trade policies by developed and developing countries, recent U.S. tariff actions and counterretaliation, and escalating trade disputes between major economies may further strain the multilateral trading system. The WTO is faced with resolving several significant pending disputes, which involve the United States, and resolving debates about the role and procedures of its Appellate Body, which reviews appeals of dispute cases. In a break from past Administrations' approaches, U.S. officials have recently expressed doubt over the value of the WTO institution to the U.S. economy and questioned whether leadership in the organization is a benefit or cost to the United States. While USTR Robert Lighthizer acknowledged at the most recent Ministerial that the WTO is an \"important institution\" that does an \"enormous amount of good,\" the Trump Administration has expressed deep skepticism toward multilateral trade deals, including those negotiated within the WTO. In remarks to the Asia-Pacific Economic Cooperation (APEC) forum in November 2017, President Trump stated the following: \"Simply put, we have not been treated fairly by the World Trade Organization.... What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible.\" President Trump has also at times threatened to withdraw the United States from the WTO. In addition, amid concerns about \"judicial overreach\" in WTO dispute findings, the Administration is currently withholding approval for judge appointments to the WTO Appellate Body—a practice that began under the Obama Administration. While many of the U.S. concerns are not new and are shared by other trading partners, questions remain about U.S. priorities for improving the system. With growing debate over the role and future direction of the WTO, a number of issues may be of interest to Congress, including the value of U.S. membership and leadership in the WTO, whether new U.S. negotiating objectives or oversight hearings are needed to address prospects for new WTO reforms and rulemaking, and the relevant authorities and the impact of potential WTO withdrawal on U.S. economic and foreign policy interests. This report provides background history of the WTO, its organization, and current status of negotiations. The report also explores concerns some have regarding the WTO's future direction and key policy issues for Congress. Following World War II, nations throughout the world, led by the United States and several other developed countries, sought to establish a more open and nondiscriminatory trading system with the goal of raising the economic well-being of all countries. Aware of the role of tit-for-tat trade barriers resulting from the U.S. Smoot-Hawley tariffs in exacerbating the economic depression in the 1930s, including severe drops in world trade, global production, and employment, the countries that met to discuss the new trading system considered open trade as essential for peace and economic stability. The intent of these negotiators was to establish an International Trade Organization (ITO) to address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. Unable to secure approval for such a comprehensive agreement, however, they reached a provisional agreement on tariffs and trade rules, known as the GATT, which went into effect in 1948. This provisional agreement became the principal set of rules governing international trade for the next 47 years, until the establishment of the WTO. The GATT was neither a formal treaty nor an international organization, but an agreement between governments, to which they were contracting parties. The GATT parties established a secretariat based in Geneva, but it remained relatively small, especially compared to the staffs of international economic institutions created by the postwar Bretton Woods conference—the International Monetary Fund and World Bank. Based on a mission to promote trade liberalization, the GATT became the principal set of rules and disciplines governing international trade. The core principles and articles of the GATT (which were carried over to the WTO) committed the original 23 members, including the United States, to lower tariffs on a range of industrial goods and to apply tariffs in a nondiscriminatory manner—the so-called most-favored nation or MFN principle (see text box ). By having to extend the same benefits and concessions to members, the economic gains from trade liberalization were magnified. Exceptions to the MFN principle are allowed, however, including for preferential trade agreements outside the GATT/WTO covering \"substantially\" all trade among members and for nonreciprocal preferences for developing countries. GATT members also agreed to provide \"national treatment\" for imports from other members. For example, countries could not establish one set of health and safety regulations on domestic products while imposing more stringent regulations on imports. Although the GATT mechanism for the enforcement of these rules or principles was generally viewed as largely ineffective, the agreement nonetheless brought about a substantial reduction of tariffs and other trade barriers. The eight \"negotiating rounds\" of the GATT succeeded in reducing average tariffs on industrial products from between 20%-30% to just below 4%, facilitating a 14-fold increase in world trade over its 47-year history (see Table 1 ). When the first round concluded in 1947, 23 nations had participated, which accounted for a majority of global trade at the time. When the Uruguay Round establishing the WTO concluded in 1994, 123 countries had participated and the amount of trade affected was nearly $3.7 trillion. As of the end of 2018, there are 164 WTO members, and trade flows totaled $22.6 trillion in 2017. During the first trade round held in Geneva in 1947, members negotiated a 20% reciprocal tariff reduction on industrial products, and made further cuts in subsequent rounds. The Tokyo Round represented the first attempt to reform the trade rules that had existed unchanged since 1947 by including issues and policies that could distort international trade. As a result, Tokyo Round negotiators established several plurilateral codes dealing with nontariff issues such as antidumping, subsidies, technical barriers to trade, import licensing, customs valuation, and government procurement. Countries could choose which, if any, of these codes they wished to adopt. While the United States agreed to all of the codes, the majority of GATT signatories, including most developing countries, chose not to sign the codes. The Uruguay Round, which took eight years to negotiate (1986-1994), proved to be the most comprehensive GATT trade round. This round further lowered tariffs in industrial goods and liberalized trade in areas that had eluded previous negotiators, notably agriculture and textiles and apparel. It also extended rules to new areas such as services, trade-related investment measures, and intellectual property rights. It created a trade policy review mechanism, which periodically examines each member's trade policies and practices. Significantly, the Uruguay Round created the WTO as a legal international organization charged with administering a revised and stronger dispute settlement mechanism—a principal U.S. negotiating objective (see text box )—as well as many new trade agreements adopted during the long negotiation. For the most part, the Uruguay Round agreements were accepted as a single package or single undertaking , meaning that all participants and future WTO members were required to subscribe to all of the agreements. The WTO succeeded the GATT in 1995. In contrast to the GATT, the WTO was created as a permanent organization. But as with the GATT, the WTO secretariat and support staff is small by international standards and lacks independent power. The power to write rules and negotiate future trade liberalization resides specifically with the member countries, and not the WTO director-general (DG) or staff. Thus, the WTO is referred to as a member-driven organization. Decisions within the WTO are made by consensus, although majority voting can be used in limited circumstances. The highest-level body in the WTO is the Ministerial Conference, which is the body of political representatives (trade ministers) from each member country ( Figure 1 ). The body that oversees the day-to-day operations of the WTO is the General Council, which consists of a representative from each member country. Many other councils and committees deal with particular issues, and members of these bodies are also national representatives. In general, the WTO has three broad functions: administering the rules of the trading system; establishing new rules through negotiations; and resolving disputes between member states. The WTO administers the global rules and principles negotiated and signed by its members. The main purpose of the rules is \"to ensure that trade flows as smoothly, predictably, and freely as possible.\" WTO rules and agreements are essentially contracts that bind governments to keep their trade policies within agreed limits. A number of fundamental principles guide WTO rules. In general, as with the GATT, these key principles are nondiscrimination and the notion that freer trade through the gradual reduction of trade barriers strengthens the world economy and increases prosperity. The WTO agreements apply the GATT principles of nondiscrimination as discussed above: MFN treatment and national treatment. The trade barriers concerned include tariffs, quotas, and a growing range of nontariff measures, such as product standards, food safety measures, subsidies, and discriminatory domestic regulations. The fundamental principle of reciprocity is also behind members' aim of \"entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.\" Transparency is another key principle of the WTO, which aims to reduce information asymmetry in markets, ensure trust, and, therefore, foster greater stability in the global trading system. Transparency commitments are incorporated into individual WTO agreements. Active participation in various WTO committees also aims to ensure that agreements are monitored and that members are held accountable for their actions. For example, members are required to publish their trade practices and policies and notify new or amended regulations to WTO committees. Regular trade policy reviews of each member's trade policies and practices provide a deeper dive into an economy's implementation of its commitments—see \" Trade Policy Review Mechanism (Annex 3) .\" In addition, the WTO's annual trade monitoring report takes stock of trade-restrictive and trade-facilitating measures of the collective body of WTO members. While opening markets can encourage competition, innovation, and growth, it can also entail adjustments for workers and firms. Trade liberalization can also be more difficult for the least-developed countries (LDCs) and countries transitioning to market economies. WTO agreements thus allow countries to lower trade barriers gradually. Developing countries and sensitive sectors in particular are usually given longer transition periods to fulfill their obligations; developing countries make up about two-thirds of the WTO membership—WTO members self-designate developing country status. The WTO also supplements this so-called \"special and differential\" treatment (SDT) for developing countries with trade capacity-building measures to provide technical assistance and help implement WTO obligations, and with permissions for countries to extend nonreciprocal, trade preference programs. In WTO parlance, when countries agree to open their markets further to foreign goods and services, they \"bind\" their commitments or agree not to raise them. For goods, these bindings amount to ceilings on tariff rates. A country can change its bindings, but only after negotiating with its trading partners, which could entail compensating them for loss of trade. As shown in Figure 2 , one of the achievements of the Uruguay Round was to increase the amount of trade under binding commitments. Bound tariff rates are not necessarily the rates WTO members apply in practice to imports from trading partners; so-called applied MFN rates can be lower than bound rates, as reflected in tariff reductions under the GATT. Figure 3 shows average applied MFN tariffs worldwide. In 2017, the United States simple average MFN tariff was 3.4%. A key issue in the Doha Round for the United States was lowering major developing countries' relatively high bound tariffs to below their applied rates in practice to achieve commercially meaningful new market access. Promising not to raise a trade barrier can have a significant economic effect because the promise provides traders and investors certainty and predictability in the commercial environment. A growing body of economic literature suggests certainty in the stability of tariff rates may be just as important for increasing global trade as reduction in trade barriers. This proved particularly important during the 2009 global economic downturn. Unlike in the 1930s, when countries reacted to slumping world demand by raising tariffs and other trade barriers, the WTO reported that its 153 members (at the time), accounting for 90% of world trade, by and large did not resort to protectionist measures in response to the crisis. The promotion of fair and undistorted competition is another important principle of the WTO. While the WTO is often described as a \"free trade\" organization, numerous rules are concerned with ensuring transparent and nondistorted competition. In addition to nondiscrimination, MFN treatment and national treatment concepts aim to promote \"fair\" conditions of trade. WTO rules on subsidies and antidumping in particular aim to promote fair competition in trade through recourse to trade remedies, or temporary restriction of imports, in response to alleged unfair trade practices—see \" Trade Remedies .\" For example, when a foreign company receives a prohibited subsidy for exporting as defined in WTO agreements, WTO rules allow governments to impose duties to offset any unfair advantage found to cause injury to their domestic industries. The scope of the WTO is broader than the GATT because, in addition to goods, it administers multilateral agreements on agriculture, services, intellectual property, and certain trade-related investment measures. These newer rules in particular are forcing the WTO and its dispute settlement system to deal with complex issues that go beyond tariff border measures. As the GATT did for 47 years, the WTO provides a negotiating forum where members reduce barriers and try to sort out their trade problems. Negotiations can involve a few countries, many countries, or all members. As part of the post-Uruguay Round agenda, negotiations covering basic telecommunications and financial services were completed under the auspices of the WTO in 1997. Selected WTO members also negotiated deals to eliminate tariffs on certain information technology products and improve rules and procedures for government procurement. A recent significant accomplishment was the WTO Trade Facilitation Agreement in 2017, addressing customs and logistics barriers. The latest round of multilateral negotiations, the Doha Development Agenda (DDA), or Doha Round, launched in 2001, has achieved limited progress to date, as the agenda proved difficult and contentious. Despite a lack of consensus on its future, many view the round as effectively over. The negotiations stalled over issues such as reducing domestic subsidies and opening markets further in agriculture, industrial tariffs, nontariff barriers, services, intellectual property rights, and SDT for developing countries. The negotiations exposed fissures between developed countries, led by the United States and the EU, on the one hand, and developing countries, led by China, Brazil, and India, on the other hand, who have come to play a more prominent role in global trade. The inability of countries to achieve the objectives of the Doha Round prompted many to question the utility of the WTO as a negotiating forum, as well as the practicality of conducting a large-scale negotiation involving 164 participants with consensus and the single undertaking as guiding principles. At the same time, many proposals have been advanced for moving forward from Doha and making the WTO a stronger forum for negotiations in the future. (See \" Policy Issues and Future Direction .\") The WTO arguably has been more successful in the negotiation of discrete items to which not all parties must agree or be bound (see \" Plurilateral Agreements (Annex 4) \"). Some view these plurilaterals as a more promising negotiating approach for the WTO moving forward given their flexibility, as they can involve subsets of more \"like-minded\" partners and advance parts of the global trade agenda. Some experts have raised concerns, however, that this approach could lead to \"free riders\"—those who benefit from the agreement but do not make commitments—for agreements on an MFN basis, or otherwise, could isolate some countries who do not participate and may face new trade restrictions or disadvantages as a result. Others argue that only though the single undertaking approach to negotiations can there be trade-offs that are sufficient to bring all members on board. The third function of the WTO is to provide a mechanism to enforce its rules and settle trade disputes. A central goal of the United States during the Uruguay Round negotiations was to strengthen the dispute settlement mechanism that existed under the GATT. While the GATT's process for settling disputes between member countries was informal, ad hoc, and voluntary, the WTO dispute settlement process is more formalized and enforceable. Under the GATT, panel proceedings could take years to complete; any defending party could block an unfavorable ruling; failure to implement a ruling carried no consequence; and the process did not cover all the agreements. Under the WTO, there are strict timetables—though not always followed—for panel proceedings; the defending party cannot block rulings; there is one comprehensive dispute settlement process covering all the agreements; and the rulings are enforceable. WTO adjudicative bodies can authorize retaliation if a member fails to implement a ruling or provide compensation. Yet, under both systems, considerable emphasis is placed on having the member countries attempt to resolve disputes through consultations and negotiations, rather than relying on formal panel rulings. See \" Dispute Settlement Understanding (DSU) \" for more detail on WTO procedures and dispute trends. The statutory basis for U.S. membership in the WTO is the Uruguay Round Agreements Act (URAA, P.L. 103-465 ), which approved the trade agreements resulting from the Uruguay Round. The legislation contained general provisions on approval and entry into force of the Uruguay Round Agreements, and the relationship of the agreements to U.S. laws (Section 101 of the act); authorities to implement the results of current and future tariff negotiations (Section 111 of the act); oversight of activities of the WTO (Sections 121-130 of the act); procedures regarding implementation of dispute settlement proceedings affecting the United States (Section 123 of the act); objectives regarding extended Uruguay Round negotiations; statutory modifications to implement specific agreements, including the following: Antidumping Agreement; Agreement on Subsidies and Countervailing Measures (ASCM); Safeguards Agreement; Agreement on Government Procurement (GPA); Technical Barriers to Trade (TBT) (product standards); Agreement on Agriculture; and Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). U.S. priorities and objectives for the GATT/WTO have been reflected in various trade promotion authority (TPA) legislation since 1974. For example, the Omnibus Trade and Competitiveness Act of 1988 specifically contained provisions directing U.S. negotiators to negotiate disciplines on agriculture, dispute settlement, intellectual property, trade in services, and safeguards, among others, that resulted in WTO agreements in the Uruguay Round (see text box above). The Trade Act of 2002 provided U.S. objectives for the Doha Round, including seeking to expand commitments on e-commerce and clarifications to the WTO dispute settlement system. The 2015 TPA, perhaps reflecting the impasse of the Doha Round, was more muted, seeking full implementation of existing agreements, enhanced compliance by members with their WTO obligations, and new negotiations to extend commitments to new areas. Section 125(b) of the URAA sets procedures for congressional disapproval of WTO participation. It specifies that Congress's approval of the WTO agreement shall cease to be effective \"if and only if\" Congress enacts a joint resolution calling for withdrawal. Congress may vote every five years on withdrawal; resolutions were introduced in 2000 and 2005, however neither passed. The WTO member-led body negotiates, administers, and settles disputes for agreements that cover goods, agriculture, services, certain trade-related investment measures, and intellectual property rights, among other issues. The WTO core principles are enshrined in a series of trade agreements that include rules and commitments specific to each agreement, subject to various exceptions. The GATT/WTO system of agreements has expanded rulemaking to several areas of international trade, but does not extensively cover some key areas, including multilateral investment rules, trade-related labor or environment issues, and emerging issues like digital trade or the commercial role of state-owned enterprises. The Marrakesh Agreement is the umbrella agreement under which the various agreements, annexes, commitment schedules, and understandings reside. The Marrakesh Agreement itself created the WTO as a legal international organization and sets forth its functions, structure, secretariat, budget procedures, decisionmaking, accession, entry-into-force, withdrawal, and other provisions. The Agreement contains four annexes. The three major substantive areas of commitments undertaken by the members are contained in Annex 1. The Multilateral Agreement on Trade in Goods establishes the rules for trade in goods through a series of sectoral or issue-specific agreements (see Table 2 ). Its core is the GATT 1994, which includes GATT 1947, the amendments, understanding, protocols, and decisions of the GATT from 1947 to 1994, cumulatively known as the GATT- acquis , as well as six Understandings on Articles of the GATT 1947 negotiated in the Uruguay Round. In addition to clarifying the core WTO principles, each agreement contains sector- or issue-specific rules and principles. The schedule of commitments identifies each member's specific binding commitments on tariffs for goods in general, and combinations of tariffs and quotas for some agricultural goods. Through a series of negotiating rounds, members agreed to the current level of trade liberalization (see Figure 2 above). In the last four rounds of negotiations, WTO members aimed to expand international trade rules beyond tariff reductions to tackle barriers in other areas. For example, agreements on technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures aim to protect a country's rights to implement domestic regulations and standards, while ensuring they do not discriminate against trading partners or unnecessarily restrict trade. The Agreement on Agriculture (AoA) includes rules and commitments on market access and disciplines on certain domestic agricultural support programs and export subsidies. Its objective was to provide a framework for WTO members to reform certain aspects of agricultural trade and domestic farm policies to facilitate more market-oriented and open trade. Regarding market access, members agreed not to restrict agricultural imports by quotas or other nontariff measures, converting them to tariff-equivalent levels of protection, such as tariff-rate quotas—a process called \"tariffication.\" Developed countries committed to cut tariffs (or out-of-quota tariffs, those tariffs applied to any imports above the agreed quota threshold) by an average of 36% in equal increments over six years; developed countries committed to 24% tariff cuts over 10 years. Special safeguards to temporarily restrict imports were permitted in certain events, such as falling prices or surges of imports. The AoA also categorizes and restricts agricultural domestic support programs according to their potential to distort trade. Members agreed to limit and reduce the most distortive forms of domestic subsidies over 6 to 10 years, referred to as \"amber box\" subsidies and measured by the Aggregate Measure of Support (AMS) index. Subsidies considered to cause minimal distortion on production and trade were not subject to spending limits and exempted from obligations as \"green box\" and \"blue box\" subsidies or under de minimis (below a certain threshold) or SDT provisions. In addition, export subsidies were to be capped and subject to incremental reductions, both by value and quantity of exports covered. A so-called \"peace\" clause protected members using subsidies that comply with the agreement from being challenged under other WTO agreements, such as through use of countervailing duties; the clause expired after nine years in 2003. Members are required to regularly submit notifications on the implementation of AoA commitments—though some countries, including the United States, have raised concerns that these requirements are not abided by in a consistent fashion. Further agricultural trade reform was a major priority under the Doha Round, but negotiations have seen limited progress to date (see \" Ongoing WTO Negotiations \"). However, in 2015, members reached an agreement to fully eliminate export subsidies for agriculture. The framework of the GATT did not address the growing linkages between trade and investment. During the Uruguay Round, the Agreement on Trade-Related Investment Measures (TRIMS) was drafted to address certain investment measures that may restrict and distort trade. The agreement did not address the regulation or protection of foreign investment, but focused on investment measures that may violate basic GATT disciplines on trade in goods, such as nondiscrimination. Specifically, members committed not to apply any TRIM that is inconsistent with provisions on national treatment or a prohibition of quantitative restrictions on imports or exports. TRIMS includes an annex with an illustrative list of prohibited measures, such as local content requirements—requirements to purchase or use products of domestic origin. The agreement also includes a safeguard measure for balance of payment difficulties, which permits developing countries to temporarily suspend TRIMS obligations. While TRIMS and other WTO agreements, such as the GATS (see below), include some provisions pertaining to investment, the lack of comprehensive multilateral rules on investment led to several efforts under the Doha Round to consider proposals, which to date have been unfruitful (see \" Future Negotiations \"). In December 2017, 70 WTO members announced plans to begin new discussions on developing a multilateral framework on investment facilitation, in part to complement the successful negotiation of rules on trade facilitation. The GATT agreements focused solely on trade in goods, excluding services. Services were eventually covered in the GATS as a result of the Uruguay Round agreements. The GATS provides the first and only multilateral framework of principles and rules for government policies and regulations affecting trade in services. It has served as the foundation on which rules in other trade agreements on services are based. The services trade agenda is complex due to the characteristics of the sector. \"Services\" refers to a growing range of economic activities, such as audiovisual, construction, computer and related services, express delivery, e-commerce, financial, professional (e.g., accounting and legal services), retail and wholesaling, transportation, tourism, and telecommunications. Advances in information technology and the growth of global supply chains have reduced barriers to trade in services, expanding the services tradable across national borders. But liberalizing trade in services can be more complex than for goods, since the impediments faced by service providers occur largely within the importing country, as so-called \"behind the border\" barriers, some in the form of government regulations. While the right of governments to regulate service industries is widely recognized as prudent and necessary to protect consumers from harmful or unqualified providers, a main focus of WTO members is whether these regulations are applied to foreign service providers in a discriminatory and unnecessarily trade restrictive manner that limits market access. The GATS contains multiple parts, including definition of scope (excluding government-provided services); principles and obligations, including MFN treatment and transparency; market access and national treatment obligations; annexes listing exceptions that members take to MFN treatment; as well as various technical elements. Members negotiated GATS on a positive list basis, which means that the commitments only apply to those services and modes of delivery listed in each member's schedule of commitments. WTO members adopted a system of classifying four modes of delivery for services to measure trade in services and classify government measures that affect trade in services, including cross-border supply, consumption abroad, commercial presence, and temporary presence of natural persons ( Figure 4 ). Under GATS, unless a member country has specifically committed to open its market to suppliers in a particular service, the national treatment and market access obligations do not apply. In addition to the GATS, some members made specific sectoral commitments in financial services and telecommunications. Negotiations to expand these commitments were later folded into the broader services negotiations. WTO members aimed to update GATS provisions and market access commitments as part of the Doha Round. Several WTO members have since submitted revised offers of services liberalization, but in the view of the United States and others the talks have not yielded adequate offers of improved market access (see \" Future Negotiations \"). Given the lack of progress, in 2013, 23 WTO members, including the United States, representing approximately 70% of global services trade, launched negotiations of a services-specific plurilateral agreement. Although outside of the WTO structure, participants designed the Trade in Services Agreement (TiSA) negotiations in a way that would not preclude a concluded agreement from someday being brought into the WTO. TiSA talks were initially led by Australia and the United States, but have since stalled; the Trump Administration has not stated a formal position on TiSA. The TRIPS Agreement marked the first time multilateral trade rules incorporated intellectual property rights (IPR)—legal, private, enforceable rights that governments grant to inventors and artists to encourage innovation and creative output. Like the GATS, TRIPS was negotiated as part of the Uruguay Round and was a major U.S. objective for the round. The TRIPS Agreement sets minimum standards of protection and enforcement for IPR. Much of the agreement sets out the extent of coverage of the various types of intellectual property, including patents, copyrights, trademarks, trade secrets, and geographical indications. TRIPS includes provisions on nondiscrimination and on enforcement measures, such as civil and administrative procedures and remedies. IPR disputes under the agreement are also subject to the WTO dispute settlement mechanism. The TRIPS Agreement's newly placed requirements on many developing countries elevated the debate over the relationship between IPR and development. At issue is the balance of rights and obligations between protecting private right holders and securing broader public benefits, such as access to medicines and the free flow of data, especially in developing countries. TRIPS includes flexibilities for developing countries allowing longer phase-in periods for implementing obligations and, separately, for pharmaceutical patent obligations—these were subsequently extended for LDCs until January 2033 or until they no longer qualify as LDCs, whichever is earlier. The 2001 WTO \"Doha Declaration\" committed members to interpret and implement TRIPS obligations in a way that supports public health and access to medicines. In 2005, members agreed to amend TRIPS to allow developing and LDC members that lack production capacity to import generic medicines from third country producers under \"compulsory licensing\" arrangements. The amendment entered into force in January 2017. While WTO agreements uphold MFN principles, they also allow exceptions to binding tariffs in certain circumstances. The WTO Agreement on Subsidies and Countervailing Measures (ASCM), Agreement on Safeguards, and articles in the GATT, commonly known as the Antidumping Agreement, allow for trade remedies in the form of temporary measures (e.g., primarily duties or quotas) to mitigate the adverse impact of various trade practices on domestic industries and workers. These include actions taken against dumping (selling at an unfairly low price) or to counter certain government subsidies, and emergency measures to limit \"fairly\"-traded imports temporarily, designed to \"safeguard\" domestic industries. Supporters of trade remedies view them as necessary to shield domestic industries and workers from unfair competition and to level the playing field. Other domestic constituents, including some importers and downstream consuming industries, voice concern that antidumping (AD) and countervailing duty (CVD) actions can serve as disguised protectionism and create inefficiencies in the world trading system by raising prices on imported goods. How trade remedies are applied to imports has become a major source of disputes under the WTO (see below). The United States has enacted trade remedy laws that conform to the WTO rules: U.S. antidumping laws (19 U.S.C. §1673 et seq.) provide relief to domestic industries that have been, or are threatened with, the adverse impact of imports sold in the U.S. market at prices that are shown to be less than fair market value. The relief provided is an additional import duty placed on the dumped imports. U.S. countervailing duty laws (19 U.S.C. §1671 et seq.) give similar relief to domestic industries that have been, or are threatened with, the adverse impact of imported goods that have been subsidized by a foreign government or public entity, and can therefore be sold at lower prices than U.S.-produced goods. The relief provided is a duty placed on the subsidized imports. U.S. safeguard laws give domestic industries relief from import surges of goods; no allegation of \"unfair\" practices is needed to launch a safeguard investigation. Although used less frequently than AD/CVD laws, Section 201 of the Trade Act of 1974 (19 U.S.C. §2251 et seq.), is designed to give domestic industry the opportunity to adjust to import competition and remain competitive. The relief provided is generally a temporary import duty and/or quota. Unlike AD/CVD, safeguard laws require presidential action for relief to be put into effect. The dispute settlement system, often called the \"crown jewel\" of the WTO, has been considered by some observers to be one of the most important successes of the multilateral trading system. WTO agreements contain provisions that are either binding or nonbinding. The WTO Understanding on Rules and Procedures Governing the Settlement of Disputes—Dispute Settlement Understanding or DSU—provides an enforceable means for WTO members to resolve disputes arising under the binding provisions. The DSU commits members not to determine violations of WTO obligations or impose penalties unilaterally, but to settle complaints about alleged violations under DSU rules and procedures. The Dispute Settlement Body (DSB) is a plenary committee of the WTO, which oversees the panels and adopts the recommendation of a dispute settlement panel or Appellate Body (AB) panel. Panels are composed of three (or five in complex cases) panelists—not citizens of the members involved—chosen through a roster of \"well qualified governmental and/or non-governmental individuals\" maintained by the Secretariat. WTO members must first attempt to settle a dispute through consultations, but if these fail, a member seeking to initiate a dispute may request that a panel examine and report on its complaint. A respondent party is able to block the establishment of a panel at the DSB once, but if the complainant requests its establishment again at a subsequent meeting of the DSB, a panel is established. At its conclusion, the panel recommends a decision to the DSB that it will adopt unless all parties agree to block the recommendation. The DSU sets out a timeline of one year for the initial resolution of disputes (see Figure 5 ); however, cases are rarely resolved in this timeframe. The DSU also provides for AB review of panel reports in the event a panel decision is appealed. The AB is composed of seven rotating panelists serving four-year terms, with the possibility of a one-term reappointment. According to the DSU, appeals are to be limited to questions of law or legal interpretation developed by the panel in the case (Article 17.6). The AB is to make a recommendation and the DSB is to ratify that recommendation within 120 days of the ratification of the initial panel report, but again, such timely resolution rarely occurs. The United States has raised several issues regarding the practices of the AB and has blocked the appointments of several judges—for more on the current debate, see \" Proposed Institutional Reforms .\" Following the adoption of a panel or appellate report, the DSB oversees the implementation of the findings. The losing party is then to propose how it is to bring itself into compliance \"within a reasonable period of time\" with the DSB-adopted findings. A reasonable period of time is determined by mutual agreement with the DSB, among the parties, or through arbitration. If a dispute arises over the manner of implementation, the DSB may form a panel to judge compliance. If a party declines to comply, the parties negotiate over compensation pending full implementation. If there is still no agreement, the DSB may authorize retaliation in the amount of the determined cost of the offending party's measure to the aggrieved party's economy. There have been some calls for reform of the dispute settlement system to deal with the procedural delays and new strains on the system, including the growing volume and complexity of cases. Filing a dispute settlement case provides a way for countries to resolve disputes through a legal process and to do so publicly, signaling to domestic and international constituents the need to address outstanding issues. Dispute settlement procedures can serve as a deterrent for countries considering not abiding by WTO agreements, and rulings can help build a body of case law to inform countries when they implement new regulatory regimes or interpret WTO agreements. That said, WTO agreements and decisions of panels are not self-executing and cannot directly modify U.S. law. If a case is brought against the United States and the panel renders an adverse decision, the United States would be expected to remove the offending measure within a reasonable period of time or face the possibility of either paying compensation to the complaining member or becoming subject to sanctions, often in the form of higher tariffs on imports of certain U.S. products. As of the beginning of 2019, the WTO has initiated nearly 580 disputes on behalf of its members and issued more than 350 rulings, with 2018 marking its most active year to date. Nearly two-thirds of WTO members have participated in the dispute settlement system. Not all complaints result in formal panel proceedings; about half were resolved during consultations. The complainants usually win their cases, in large part because they initiate disputes that they have a high chance of winning. In the words of WTO Director-General (DG) Roberto Azevêdo, the widespread use of the DS system is evidence it \"enjoys tremendous confidence among the membership, who value it as a fair, effective, efficient mechanism to solve trade problems.\" The United States is an active user of the DS system. Among WTO members, the United States has been a complainant in the most dispute cases since the system was established in 1995, initiating 123 disputes, followed by the EU with 100 disputes. The two largest targets of complaints initiated by the United States are China and the EU, which, combined, account for more than one-third ( Figure 6 ). The latest summary by USTR reports that among WTO disputes through 2015 the United States largely prevailed on \"core issues\" in 46 of its complaints and lost in 4. Since the report was released, additional cases have been ruled in favor of the United States, including disputes over India's solar energy policies and Indonesia's import licensing requirements. The majority of disputes initiated by the United States between 2016 and early 2019 remain in the consultation or panel stages and have not been decided. As a respondent in 153 dispute cases since 1995, the United States has also had the most disputes filed against it by other WTO members, followed by the EU (85 disputes) and China (43 disputes). The EU is the largest source of disputes filed against the United States, followed by Canada, China, South Korea, Brazil, and India. A large number of complaints concern U.S. trade remedies, in particular the methodologies used for calculating and imposing antidumping duties on U.S. imports. The latest summary by USTR reports that as a respondent, the United States won on \"core issues\" in 17 cases and lost in 57 cases through 2015. Since then, the WTO has ruled against the United States on certain aspects of complaints related to U.S. trade remedies, including in cases initiated by South Korea, China, Canada, and Turkey. The United States has prevailed in other cases, for example in December 2017, a panel ruled in U.S. favor in a case brought by Indonesia over U.S. duties on coated paper imports. The DSB has authorized retaliation against the United States for maintaining a measure in violation of WTO rules in just a handful of cases. Most recently, in February 2019, a panel authorized South Korea to retaliate in a complaint over U.S. methodology for calculating antidumping duties on South Korean imports of large residential washers. Several pending WTO disputes are of significance to the United States. One involves China's complaints over U.S. and EU failure to grant China market economy status (see \" China's Accession and Membership \" ) . Other cases involve challenges to the tariff measures imposed by the Trump Administration under U.S. trade laws, including Section 201 (safeguards), Section 232 (national security), and Section 301 (\"unfair\" trading practices) ( Table 3 ). Nine WTO members, including China, the EU, Canada, and Mexico, initiated separate complaints at the WTO, based on allegations that U.S. Section 232 tariffs on steel and aluminum imports are inconsistent with WTO rules. Consultations were unsuccessful in resolving the disputes, and panels have been established in all nine cases. Most countries notified their consultation requests pursuant to the Agreement on Safeguards, though some countries also allege that U.S. tariff measures and related exemptions are contrary to U.S. obligations under several provisions of the GATT. Several other WTO members have requested to join the disputes as third parties. On July 16, 2018, the United States filed its own WTO complaints over retaliatory tariffs imposed by five countries (Canada, China, EU, Mexico, and Turkey) in response to U.S. actions, and in late August, it filed a similar case against Russia. The United States has invoked the so-called national security exception (GATT Article XXI) in defense of the tariffs (see \" Key Exceptions under GATT/WTO \"), and states that the tariffs are not safeguards as claimed by other countries. By the end of January 2019, all of the disputes had entered the panel phase. Annex 3 sets out the procedures for the regular trade policy reviews that are conducted by the Secretariat to report on the trade policies of the membership. These reviews are carried out by the Trade Policy Review Body (TPRB) and are conducted periodically with the largest economies (United States, EU, Japan, and China) evaluated every three years, the next 16 largest economies every five years, and remaining economies every seven years. These reviews are meant to increase transparency of a country's trade policy and enable a multilateral assessment of the effect of policies on the trading system. These reviews also allow each member country to question specific practices of other members, and may serve as a forum to flag, and possibly avoid, future disputes. The most recent trade policy review of China occurred in July 2018. During the review members noted and commended some recent initiatives of China to open market access and liberalize its foreign investment regime. Several concerns were also raised, including \"the preponderant role of the State in general, and of state-owned enterprises in particular,\" and \"China's support and subsidy policies and local content requirements, including those that may be part of the 2025 [Made in China] plan.\" Most WTO agreements in force have been negotiated on a multilateral basis, meaning the entire body of WTO members subscribes to them. By contrast, plurilateral agreements are negotiated by a subset of WTO members and often focus on a specific sector. A handful of such agreements supplement the main WTO agreements discussed previously. Within the WTO, members have two ways to negotiate on a plurilateral basis, also known as \"variable geometry.\" A group of countries can negotiate with one another provided that the group extends the benefits to all other WTO members on an MFN basis—the foundational nondiscrimination principle of the GATT/WTO. Because the benefits of the agreement are to be shared among all WTO members and not just the participants, the negotiating group likely would include those members forming a critical mass of world trade in the product or sector covered by the negotiation in order to avoid the problem of free riders—those countries that receive trade benefits without committing to liberalization. An example of this type of plurilateral agreement granting unconditional MFN is the Information Technology Agreement (ITA), in which tariffs on selected information technology goods were lowered to zero, as negotiated by WTO members comprising more than 90% of world trade in these goods (see below). A second type of WTO plurilateral is the non-MFN agreement, often referred to as \"conditional-MFN.\" In this type, participants undertake additional obligations among themselves, but do not extend the benefits to other WTO members, unless they directly participate in the agreement. Also known as the \"club\" approach, non-MFN plurilaterals allow for willing members to address policy issues not covered by WTO disciplines. However, these types of agreements require a waiver from the entire WTO membership to commence negotiations. Some countries are reluctant even to allow other countries to negotiate for fear of being left out, even while not being ready to commit themselves to new disciplines. Yet, according to one commentator, these members are \"simply outsmarting themselves\" by encouraging more ambitious members to take negotiations out of the WTO altogether, such as the proposed expansion of the GATS through the plurilateral (and outside the WTO) TiSA. The Government Procurement Agreement (GPA) is an early example of a plurilateral agreement with limited WTO membership—first developed as a code in the 1979 Tokyo Round. As of the end of 2018, 47 WTO members (including the 28 EU member countries and United States) participate in the GPA; non-GPA signatories do not enjoy rights under the GPA. The GPA provides market access for various nondefense government projects to contractors of its signatories. Each member specifies government entities and goods and services (with thresholds and limitations) that are open to procurement bids by foreign firms of the other GPA members. For example, the U.S. GPA market access schedules of commitments cover 85 federal-level entities and voluntary commitments by 37 states. Negotiations to expand the GPA were concluded in March 2012, and a revised GPA entered into force on April 6, 2014. Several countries, including China—which committed to pursuing GPA participation in its 2001 WTO accession process—are in long-pending negotiations to accede to the GPA. South Korea, Moldova, and Ukraine were the latest WTO members to join the GPA in 2016. According to estimates by the U.S. Government Accountability Office (GAO), from 2008 to 2012, 8% of total global government expenditures, and approximately one-third of U.S. federal government procurement, was covered by the GPA or similar commitments in U.S. FTAs. Unlike the GPA, the Information Technology Agreement (ITA) is a plurilateral agreement that is applied on an unconditional MFN basis. In other words, all WTO members benefit from the tariff reductions enacted by parties to the ITA regardless of their own participation. Originally concluded in 1996 by a subset of WTO members, the ITA provides tariff-free treatment for covered IT products; however, the agreement does not cover services or digital products like software. In December 2015, a group of 51 WTO members, including the United States, negotiated an expanded agreement to cover an additional 201 products and technologies, valued at over $1 trillion in annual global exports. Members committed to reduce the majority of tariffs by 2019. In June 2016, the United States initiated the ITA tariff cuts. China began its cuts in mid-September 2016 with plans to reduce tariffs over five to seven years. ITA members are expected to review the agreement's scope in 2018 to determine if additional product coverage is needed. The Trade Facilitation Agreement (TFA) is the newest WTO multilateral trade agreement, entering into force on February 22, 2017, and perhaps the lasting legacy of the Doha Round, since it is the only major concluded component of the negotiations. The TFA aims to address multiple trade barriers confronted by exporters and importers and reduce trade costs by streamlining, modernizing, and speeding up the customs processes for cross-border trade, as well as making it more transparent. Some analysts view the TFA as evidence that achieving new multilateral agreements is possible and that the design, including special and differential treatment provisions, could serve as a template for future agreements. The TFA has three sections. The first is the heart of the agreement, containing the main provisions, of which many, but not all, are binding and enforceable. Mandatory articles include requiring members to publish information, including publishing certain items online; issue advance rulings in a reasonable amount of time; and provide for appeals or reviews, if requested. The second section provides for SDT for developing country and LDC members, allowing them more time and assistance to implement the agreement. The TFA is the first WTO agreement in which members determine their own implementation schedules and in which progress in implementation is explicitly linked to technical and financial capacity. The TFA requires that \"donor members,\" including the United States, provide the needed capacity building and support. Finally, the third section sets institutional arrangements for administering the TFA. Under WTO agreements, members generally cannot discriminate among trading partners, though specific market access commitments can vary significantly by agreement and by member. WTO rules permit some broad exceptions, which allow members to adopt trade policies and practices that may be inconsistent with WTO disciplines and principles such as MFN treatment, granting special preferences to certain countries, and restricting trade in certain sectors, provided certain conditions are met. Some of the key exceptions follow. General e xceptions . GATT Article XX grants WTO members the right to take certain measures necessary to protect human, animal, or plant life or health, or to conserve exhaustible natural resources, among other aims. The measures, however, must not entail \"arbitrary\" or \"unjustifiable\" discrimination between countries where the same conditions prevail, or serve as \"disguised restriction on international trade.\" GATS Article XIV provides for similar exceptions for trade in services. National security exception. GATT Article XXI protects the right of members to take any action they consider \"necessary for the protection of essential national security interests\" as related to (i) fissionable materials; (ii) traffic in arms, ammunition, and implements of war, and such traffic in other goods and materials carried out to supply a military establishment; and (iii) taken in time of war or other emergency in international relations. Similar exceptions relate to trade in services (GATS Article XIV bis) and intellectual property rights (TRIPS Article 73). More f avorable t reatment to d eveloping c ountries . The so-called \"enabling clause\" of the GATT—called the \"Decision on Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries\" of 1979—enables developed country members to grant differential and more favorable treatment to developing countries that is not extended to other members. For example, this permits granting unilateral and nonreciprocal trade preferences to developing countries under special programs, such as the U.S. Generalized System of Preferences (GSP), and also relates to regional trade agreements outside the WTO (see below). Exceptions for r egi onal tr ade agreements (RTAs ) . WTO countries are permitted to depart from the MFN principle and grant each other more favorable treatment in trade agreements outside the WTO, provided certain conditions are met. Three sets of rules generally apply. GATT Article XXIV applies to goods trade, and allows the formation of free trade areas and customs unions (areas with common external tariffs). These provisions require that RTAs be notified to the other WTO members, cover \"substantially all trade,\" and do not effectively raise barriers on imports from third parties. GATS Article V allows for economic integration agreements related to services trade, provided they entail \"substantial sectoral coverage,\" eliminate \"substantially all discrimination,\" and do not \"raise the overall level of barriers to trade in services\" on members outside the agreement. Paragraph 2(c) of the \"enabling clause,\" which deals with special and differential treatment, allows for RTAs among developing countries in goods trade, based on the \"mutual reduction or elimination of tariffs.\" RTA provisions in the GATS also allow greater flexibility in sectoral coverage within services agreements that include developing countries. There are currently 164 members of the WTO. Another 22 countries are seeking to become members. Joining the WTO means taking on the commitments and obligations of all the multilateral agreements. Governments are motivated to join not just to expand access to foreign markets but also to spur domestic economic reforms, help transition to market economies, and promote the rule of law. While any state or customs territory fully in control of its trade policy may become a WTO member, a lengthy process of accession involves a series of documentation of a country's trade regime and market access negotiation requirements (see Figure 7 ). For example, Kazakhstan joined the WTO on November 30, 2015, after a 20-year process. Afghanistan became the 164th WTO member on July 29, 2016, after nearly 12 years of negotiating its accession terms. Other countries have initiated the process but face delays. Iran first applied for membership in 1996 and, while it submitted its Memorandum on the Foreign Trade Regime in 2009 (a prerequisite for negotiating an accession package), Iran has not begun the bilateral negotiation process, and the United States is unlikely to support its accession. As the WTO generally operates by member consensus, any single member could block the accession of a prospective new member. As part of the process, a prospective member must satisfy specific market access conditions of other WTO members by negotiating on a bilateral basis. The United States has been a central arbiter of the accession process for countries like China (joined in 2001, see below), Vietnam (2007), and Russia (2012), with which permanent normal trade relations had to be established concurrently under U.S. law for the United States to receive the full benefits of their membership. China formally joined the WTO in December 2001. China has emerged as a major player in the global economy, as the fastest-growing economy, largest merchandise exporter, and second-largest merchandise importer worldwide. China's accession into the WTO on commercially meaningful terms was a major U.S. trade objective during the late 1990s. Entry into the WTO was viewed as an important catalyst for spurring additional economic and trade reforms and the opening of China's economy in a market, rules-based direction. These reforms have made China an increasingly significant market for U.S. exporters , a central factor in global supply chains, and a major source of low -cost goods for U.S. consumers. At the same time, China has yet to fully transit ion to a market economy and the government continue s to intervene in many parts of the econom y, which has created a growing debate over the role of the WTO in both respects . Negotiations for China's accession to the GATT and then the WTO began in 1986 and took more than 15 years to complete. During WTO negotiations, China sought to enter the WTO as a developing country, while U.S. trade officials insisted that China's entry into the WTO had to be based on \"commercially meaningful terms\" that would require China to significantly reduce trade and investment barriers within a relatively short time. In the end, a compromise was reached that required China to make immediate and extensive reductions in various trade and investment barriers, while allowing it to maintain some level of protection (or a transitional period of protection) for certain sensitive sectors (see text box ). According to USTR, after joining the WTO, China began to implement economic reforms that facilitated its transition toward a market economy and increased its openness to trade and foreign direct investment (FDI). China also generally implemented its tariff cuts on schedule. However, by 2006, U.S. officials and companies noted evidence of some trends toward a more restrictive trade regime and more state intervention in the economy. In particular, observers voiced concern about various Chinese industrial policies, such as those that foster indigenous innovation based on forced technology transfer, domestic subsidies, and IP theft. Some stakeholders have expressed concerns over China's mixed record of implementing certain WTO obligations and asserted that, in some cases, China appeared to be abiding by the letter but not the \"spirit\" of the WTO. The United States and other WTO members have used dispute settlement procedures on a number of occasions to address China's alleged noncompliance with certain WTO commitments. As a respondent, China accounts for about 12% of total WTO disputes since 2001. The United States has brought 23 dispute cases against China at the WTO on issues, including IPR protection, subsidies, and discriminatory industrial policies, and has largely prevailed in most cases. Though some issues remain contested, China has largely complied with most WTO rulings. China has also increasingly used dispute settlement to confront what it views as discriminatory measures; to date, it has brought 15 cases against the United States (as of February 2019). More broadly, the Trump Administration has questioned whether WTO rules are sufficient to address the challenges that China's economy presents. USTR Robert Lighthizer expressed this view in remarks in September 2017: \"The sheer scale of their coordinated efforts to develop their economy, to subsidize, to create national champions, to force technology transfer, and to distort markets in China and throughout the world is a threat to the world trading system that is unprecedented. Unfortunately, the World Trade Organization is not equipped to deal with this problem.\" USTR views efforts to resolve concerns over Chinese trade practices to date as limited in effectiveness, including through WTO dispute settlement, as well as recent proposals by WTO members to craft new rules and WTO reforms. In its latest report to Congress on China's WTO compliance, USTR stated the following: [The WTO dispute settlement] mechanism is not designed to address a trade regime that broadly conflicts with the fundamental underpinnings of the WTO system. No amount of WTO dispute settlement by other WTO members would be sufficient to remedy this systemic problem. Indeed, many of the most harmful policies and practices being pursued by China are not even directly disciplined by WTO rules. Another related concern some have is whether China claims it is a \"developing country\" under the WTO. Through developing country status, which countries self-designate, countries are entitled to certain rights under special and differential treatment (SDT), among other provisions in WTO agreements (see \" Treatment of Developing Countries \" and text box ). USTR has claimed that \"China persists in claiming to be a 'developing Member'\" in future negotiations at the WTO. While it is unclear what SDT provisions China has sought in ongoing negotiations, China is a part of the coalition group of Asian developing members at the WTO and has claimed to be a developing country in various fora. Chinese officials have asserted that despite being the world's second-largest economy, China remains a developing country, due to its relatively low GDP per capita and other economic challenges. Concerns over China's trade actions have led the Trump Administration to increase the use of unilateral mechanisms outside the WTO that in its view more effectively address Chinese \"unfair trade practices;\" the recent Section 301 investigation of Chinese IPR and technology transfer practices and resulting imposition of tariffs is evidence of this strategy. Prior to the establishment of the WTO, the United States resorted to Section 301 relatively frequently, in particular due to concerns that the GATT lacked an effective dispute settlement system. When the United States joined the WTO in 1995, it agreed to use the dispute settlement mechanism rather than act unilaterally; many analysts contend that the United States has violated its WTO obligations by imposing tariffs against China under Section 301. The United States also initiated a WTO dispute settlement case against China's \"discriminatory technology licensing\" in March 2018. Subsequently, China filed its own complaints at the WTO over U.S. tariff actions. The United States has pursued cooperation to some extent with other countries with similar concerns over certain Chinese trade practices and the need to clarify and improve WTO rules on industrial subsidies and SOEs in particular. At the WTO Ministerial meeting in December 2017, USTR Lighthizer, the European Commissioner for Trade Cecelia Malmström, and Japan's Minister of the Economy, Trade and Industry Hiroshige Seko announced new trilateral efforts to cooperate on issues related to government-supported excess capacity, unfair competition caused by market-distorting subsidies and SOEs, forced technology transfer, and local content requirements. Observers believe that China, while not specifically named, is the intended target of the coordinated action. The three officials continued talks in 2018 and 2019, issuing a scoping paper on stronger rules on industrial subsidies, as well as joint statements on technology transfer and \"market-oriented conditions.\" They indicated plans to propose a draft text on subsidies rules by spring 2019. Some experts have questioned whether recent U.S. tariff actions might undermine efforts to coordinate further action to address these challenges (see \" Selected Challenges and Issues for Congress \"). Another pending dispute involving China could have significant implications for the treatment of China's economy under WTO rules, in particular debate over the terms of China's \"nonmarket economy\" (NME) status under its WTO accession protocol. Under its accession, China agreed to allow other WTO members to continue to use alternative methodologies, such as surrogate countries, for assessing prices and costs on products subject to antidumping measures. This concession was a result of WTO members' concerns that distortions in the Chinese economy caused by government intervention result in Chinese prices that do not reflect market forces, making them poorly suited to determining dumping margins. China contends that language in its WTO accession protocol requires all WTO members to terminate their use of the alternative methodology by December 11, 2016, including the United States, which has classified China as a NME for trade remedy cases since 1981. The NME distinction is important to China because it has often resulted in higher antidumping margins on Chinese exports; moreover, a significant share of Chinese exports is subject to trade remedies, namely AD duties. The United States and the EU have argued that the WTO language is vague and did not automatically obligate them to extend market economy status (MES) to China because it is still not a market economy. On December 12, 2016, China requested consultations under WTO dispute settlement with the United States and EU over the failure to grant China MES, and the cases are now pending. In April 2017, a panel was established in the EU case, and in November 2017, the United States formally submitted arguments as a third party in support of the EU. The panel said it expected to issue its final report during the second quarter of 2019. The 11 th WTO Ministerial Conference took place December 10-13, 2017, in Buenos Aires, Argentina. The Ministerial generally convenes every two years to make decisions and announce progress on multilateral trade agreements. After countries were unable to complete the Doha Round (see text box ), many questioned what could effectively be achieved in 2017. Members have made some progress in recent years, reaching the Trade Facilitation Agreement in 2013, followed by a small package of deals in 2015 concerning agriculture and rules for LDCs. Still, they remain sharply divided over how to prioritize both unresolved and new issues on the agenda, and, more fundamentally, how to conduct negotiations to better facilitate successful outcomes. WTO Director-General Azevêdo had tempered expectations for major negotiated outcomes or announcements at the 11 th Ministerial, acknowledging that \"members' positions continue to diverge significantly on the substantial issues.\" These differences were perhaps most apparent by the inability of WTO members to reach consensus over a draft Ministerial Declaration, largely due to staunch disagreements over including references to the mandate of the Doha Round (see text box ). Instead the Ministerial became primarily an opportunity for members to take stock of ongoing talks and further define priority work areas. WTO members had worked intensively to build consensus over proposals in several areas, including reducing fisheries subsidies, a permanent solution to public stockholding for food security, domestic services regulations, and e-commerce. Some members pushed for new initiatives in areas such as investment facilitation; others like India advocated for a greater focus on trade facilitation in services. The U.S. proposal to improve overall transparency at the WTO, with penalties for countries that fail to comply with notification requirements, did not garner enough support to be discussed extensively at the Ministerial. The 11 th Ministerial did not result in major breakthroughs. WTO members committed to intensify fisheries subsidies negotiations, \"with a view to adopting\" an agreement by the next Ministerial; the United States has supported these efforts. A joint statement was issued by 60 members in support of advancing multilateral negotiations on domestic regulations in services. Subsets of WTO members also issued statements committing to new work programs or open-ended talks for interested parties to potentially conclude plurilateral agreements in areas, including the following: E-commerce : among 71 WTO members (covering 77% of global trade); Investment facilitation : among 70 WTO members (covering 73% of global trade and 66% of inward FDI); and Micro, small and medium-sized enterprises (MSMEs) : among 87 WTO members (covering 78% of global trade). Of these, the United States signed on to the declaration in support of e-commerce. The lack of concrete multilateral outcomes at the 11 th Ministerial was a reminder of the continued resistance of some countries to a new agenda outside of the original 2001 Doha mandate. In the view of EU Trade Commissioner Malmström, the Ministerial \"laid bare the deficiencies of the negotiating function at the WTO\" and that \"members are systematically being blocked from addressing the pressing realities of global trade.\" Malmström blamed the lack of progress on \"procedural excuses and vetoes\" and \"cynical hostage taking.\" Some developing country members, including India, attempted to block progress in a range of areas—including the renewal of the decades-old moratorium on e-commerce customs duties—absent more progress on Doha issues such as agricultural stockholding for food security. Such \"hostage-taking\" tactics, widely acknowledged to have hindered progress in the Doha Round, further highlight the difficulty of achieving future consensus among all 164 members. While the United States provided input and signaled support for select proposals, the overall perception of many was a lack of U.S. leadership in the Ministerial discussions. Consistent with the Trump Administration's \"America First\" trade policy, the U.S. stated objective for the Ministerial was broadly to \"advocate for U.S. economic and trade interests, including WTO institutional reform and market-based, fair trade policies.\" Several observers were relieved when USTR Lighthizer acknowledged in Ministerial remarks that the WTO plays an important role, even as he outlined key criticisms. The United States viewed the Ministerial outcome positively—that it signaled \"the impasse at the WTO was broken,\" paving the way for like-minded countries to pursue new work in other areas. USTR expressed U.S. support in particular for forthcoming work on e-commerce, scientific standards for agriculture, and disciplines on fisheries subsidies. While WTO members did not announce any negotiated outcomes at the 11 th Ministerial meeting, several countries committed to make progress on ongoing talks, including fisheries subsidies and e-commerce. In other areas, such as agriculture and environmental goods, talks remain stalled with no clear path forward. For some issues multilateral solutions arguably remain ideal, for example, disciplines on agricultural subsidies, which are widely used by developed and advanced developing countries alike. One concern is that such important, unresolved issues may founder for want of a negotiating venue. While the Doha Round largely did not achieve its comprehensive negotiating mandate to lower agricultural tariffs and subsidies, negotiations more limited in scope have continued. The 2015 Nairobi Ministerial agreed to eliminate export subsidies for agriculture, but the issue of public stockholding remains seemingly intractable. Public stockholding, also known as food security programs, is used by governments, especially in developing countries, to purchase and stockpile food to release to the public during periods of market volatility or shortage. These programs become problematic when governments purchase food at a price and quantity that effectively become trade-distorting domestic support. While no agreement was reached at Buenos Aires, some developing countries, such as India, have demanded that the issue be resolved before new issues are considered in the WTO work program. The United States has also flagged the broader issue of notification and transparency. Under WTO agreements, members are required to notify subsidies and trade-distorting support to ensure transparency and consistency with a member's obligation. Compliance with notifications has been notoriously lax, with some countries years behind on their reporting. According to U.S. Department of Agriculture trade counsel Jason Hafemeister, these practices have consequences: In the absence of transparency, how are we to determine whether Members are complying with existing obligations? Moreover, only with comprehensive and current information can negotiators understand, discuss, and address the problems that face farmers today: high tariffs, trade distorting support, and non-tariff barriers. The United States with other countries recently issued new proposals to address these concerns—see \" Transparency/Notification .\" As noted above, WTO members committed to negotiate disciplines related to fisheries subsidies at the 11 th Ministerial with a view toward reaching an agreement by 2020. The proposals aim to meet the goals outlined in United Nations Sustainable Development Goal 14 targeting illegal, unregulated, and unreported (IUU) fishing. Though multiple areas of disagreement remain, members have been negotiating on the scope of exemptions, such as for fuel subsidies. The United States reportedly seeks to minimize the level and scope of such exclusions. Members are expected to move from discussions of proposals into negotiations on a consolidated draft text by early 2019. The Trump Administration has voiced support for the talks, stating that it continues \"to support stronger disciplines and greater transparency in the WTO with respect to fisheries subsidies.\" Digital trade has emerged as a major force in world trade since the Uruguay Round, creating end products (e.g., email or social media), enabling trade in services (e.g., consulting), and facilitating goods trade through services, such as logistics and supply chain management that depend on digital data flows. While the GATS contains explicit commitments for telecommunications and financial services that underlie e-commerce, trade barriers related to digital trade, information flows, and other related issues are not specifically included. The WTO Work Program on Electronic Commerce was established in 1998 to examine trade-related issues for e-commerce under existing agreements. Under the work program, members agreed to continue a temporary moratorium on e-commerce customs duties, and have renewed the moratorium at each ministerial meeting. Some developing countries, however, have begun to question the moratorium, seeing it as blocking a potential government revenue stream. Progress under the work program has largely stalled as multiple members have put forward competing views on possible paths forward. In advance of the 2017 Ministerial, various members had submitted proposals for specific work agendas in e-commerce. The U.S. submission, dated July 4, 2016, reflected many of the ideas included in the proposed Trans-Pacific Partnership (TPP), an FTA with 11 other countries in the Asia-Pacific from which the United States withdrew in January 2017. The proposal may gain the support of other TPP members as several have already ratified a slightly modified agreement—the Comprehensive and Progressive Agreement for TPP (CPTPP or TPP-11)—which maintained the digital trade provisions as negotiated by the United States. The Chinese WTO submission, on the other hand, more narrowly focuses on facilitating e-commerce. India has said it would not agree to any new obligations in the WTO related to e-commerce or digital trade, preferring to focus on issues identified under the original Doha mandate, including agriculture. As a result, the 2017 Ministerial ended with an agreement to \"endeavor to reinvigorate our work.\" The plurilateral effort announced at the ministerial agreeing to \"initiate exploratory work on negotiations on electronic commerce issues in the WTO\" may provide the best avenue to pursue an agreement within the WTO framework. A U.S. discussion paper on the initiative outlined potential provisions, including protecting cross-border data flows, source code, and encryption technology; prohibiting discrimination, customs duties, technology transfer or localization requirements; and promoting cybersecurity and open government data. The United States also included the WTO Telecommunications Reference Paper, seeking all WTO members to adopt its principles on telecommunications competition. Notably, the U.S. submission did not list privacy or consumer protection among its provisions. The group of 49 WTO members formally launched the e-commerce initiative in January 2019, on the sidelines of the World Economic Forum annual meetings. Their joint statement lists not only the United States and EU as participants, but also several developing countries, including China and Brazil. In the statement, the group agreed to seek a \"high standard outcome that builds on existing WTO agreements and frameworks with the participation of as many WTO Members as possible,\" but did not specify which trade barriers and issues are to be addressed. USTR's statement after the meeting emphasized the need for an enforceable agreement with the \"same obligations for all participants.\" The negotiation process is expected to begin in March 2019. It is unclear how, or if, the plurilateral effort will overlap or be incorporated into the existing multilateral work program. Some countries viewed the 11 th Ministerial meeting as a missed opportunity to reinvigorate the stalled EGA plurilateral negotiations. The EGA negotiations, initiated in mid-2014 by 14 WTO members including the United States and China, seek to liberalize trade in environmental goods through tariff liberalization. Current EGA members represent 86% of global trade in covered environmental goods. Like the ITA, the EGA would be an open plurilateral agreement so that the benefits achieved through negotiations would be extended on an MFN basis to all WTO members. Despite 18 rounds of negotiations, members were unable to conclude the agreement at the December 2016 General Council   meeting, and talks have since stalled. Most parties blamed China for the lack of progress, as it rejected the list of products to be included and requested several lengthy tariff phaseout periods which other countries refused to accept. The EGA's future now remains uncertain—while several countries have expressed support for resuming the talks, the Trump Administration has not put forward a public position on the agreement. The inability of WTO members to conclude a comprehensive agreement during the Doha Round raised new questions about the WTO's future direction. Many intractable issues from Doha remain unresolved, and members have yet to reach consensus on a way forward. Persistent differences about the extent and balance of trade liberalization continue to stymie progress, as evidenced by the outcomes of recent ministerial meetings. Further, members remain divided over adopting new issues on the agenda, amid concerns that the WTO could lose relevance if its rules are not updated to reflect the modern global economy. Some WTO members seek to incorporate new issues that pose challenges to the trading system, such as digital trade, competition with SOEs, global supply chains, and the relationship between trade and environment issues. These divisions have called into question the viability of the \"single undertaking,\" or one-package approach in future multilateral negotiations and suggest broader need for institutional reform if the WTO is to remain a relevant negotiating body. Moreover, the consistent practice of some countries like India to block discussion of new issues serves as a reminder of the power of a single member to halt progress in the WTO's consensus-based system. As a result of slow progress at the WTO, countries have increasingly turned to other venues to advance trade liberalization and rules, namely plurilateral agreements and preferential FTAs outside the WTO. Plurilaterals have been seen as having the potential to resurrect the WTO's relevance as a negotiating body, but have also been seen as possibly undermining multilateralism if the agreements are not extended to all WTO members on an MFN basis. Regional trade agreements have also been seen as potential laboratories for new rules. How these negotiations and agreements will ultimately affect the WTO's status as the preeminent global trade institution is widely debated. In addition, an open question is whether U.S. leadership within these initiatives will continue under the Trump Administration. More recently, concerns for some have been mounting about further strains on the multilateral system, due to the growing use of trade protectionist policies by both developed and developing countries, the recent U.S. tariff actions and counterretaliation by other countries, and the escalating trade disputes between major economies. Many countries are questioning whether the WTO is equipped to effectively handle the challenges of emerging markets, as well as the deepening trade tensions. Some experts view the system as facing a potential crisis, while o thers remain optimistic that the current state of affairs could spur renewed focus on reforms of the system. Certain WTO members, like the EU and Canada, have begun to explore some areas for reform (see below). In contrast to the consensus-based agreements of the WTO, some members, including the United States, point to the progress made in sectoral or plurilateral settings as the way forward for the institution. By assembling coalitions of interested parties, negotiators may more easily and quickly achieve trade liberalizing objectives, as shown by the ITA. Sectoral agreements are viewed as one way to pursue new agreements and extend WTO disciplines and commitments in new areas, including, for example, U.S. trade priorities in digital trade and SOEs. The commitments by some WTO members to pursue talks in e-commerce, investment facilitation, and SMEs could plant the seeds for future plurilaterals. Plurilateral negotiations, however, still involve resolving divisions among developed and advanced developing countries. Members were able ultimately to overcome their differences in the ITA negotiation, but thus far have been unable to reach consensus in the EGA. At the same time, the participation of developing and emerging market economies, such as China and India, is critical to achieving agreements that cover a meaningful share of global trade. There is also a concern that plurilateral agreements not applied on an MFN basis could lead nonparticipating countries to become marginalized from the trading system and face new trade restrictions. To attract a critical mass of participants and lower barriers for developing countries and LDCs who may be hesitant to agree to ambitious commitments, agreements could allow flexibility in implementation timeframes and provide additional assistance, as in the TFA. Some experts question whether potential waning U.S. leadership in plurilateral and multilateral trade negotiations might slow momentum toward concluding new agreements (see \" Value of the Multilateral System and U.S. Leadership and Membership \"). The Trump Administration has yet to clarify its position on plurilaterals pursued under the Obama Administration, such as EGA and TiSA, which have stalled, but is supporting new efforts on e-commerce/digital trade. Given that the WTO allows its members to establish preferential FTAs outside the WTO that are consistent with WTO rules, many countries have formed bilateral or regional FTAs and customs areas; since 1990, the number of RTAs in force has increased seven-fold, with 290 trade agreements notified to the WTO and in force, as of the end of 2018. FTAs have often provided more negotiating flexibility for countries to advance new trade liberalization and rulemaking that builds on WTO agreements; however, the agreements vary widely in terms of scope and depth. Like plurilaterals, many view comprehensive FTAs as having potential for advancing the global trade agenda. Also like plurilaterals, however FTAs can also have downsides compared to multilateral deals. The United States currently has 14 FTAs in force with 20 countries. The Trump Administration has stated a preference for negotiating bilateral FTAs, rather than multiparty agreements. In September 2018, the United States, Mexico, and Canada completed negotiations of the proposed USMCA, which revamps the North American Free Trade Agreement (NAFTA). The United States and South Korea also agreed to some modifications of their bilateral FTA. In addition, USTR notified Congress of its intent to begin trade negotiations with the EU, Japan, and the UK. In general, U.S. FTAs are considered to be \"WTO-plus\" in that they reaffirm the WTO agreements, but also eliminate most tariff and nontariff barriers and contain rules and obligations in areas not covered by the WTO. For example, most U.S. FTAs include access to services markets beyond what is contained in the GATS or, more recently, digital trade obligations. While U.S. FTAs cover some major trading partners, the majority of U.S. trade, including with significant trade partners such as China, the EU, and Japan, continues to rely solely on the terms of market access and rulemaking in WTO agreements. In 2017, the United States traded $3.4 trillion with non-FTA partners, compared to $1.8 trillion with its FTA partners ( Figure 8 ). More recently, groups of countries have also been pursuing so-called \"mega-regional\" trade agreements that cover significant shares of global trade. These include the CPTPP signed in March 2018 between 11 countries in the Asia-Pacific to replace the TPP, ongoing negotiations over the Regional Comprehensive Economic Partnership (RCEP) between the Association of Southeast Asian Nations (ASEAN) and six of its FTA partners including China, and the Pacific Alliance signed in June 2012 among Chile, Colombia, Mexico, and Peru. Negotiations on the proposed Transatlantic Trade and Investment Partnership (T-TIP) between the United States and EU stalled, and though new U.S.-EU trade talks are to resume, their scope remains unclear. Such agreements could potentially consolidate trade rules across regions and to a varying extent address new issues not covered by the WTO. There has been wide debate regarding the relationship of preferential FTAs to the WTO and multilateral trading system. Some argue that crafting new rules through mega-regionals could undermine the trading system, create competing regional trade blocs, lead to trade diversion, and marginalize countries not participating in the initiatives. On the other hand, some view such agreements as potentially spurring new momentum at the global level. WTO DG Azevêdo has supported the latter sentiment, expressing that \"RTAs [regional trade agreements] are blocks which can help build the edifice of global rules and liberalization.\" Many analysts have viewed the CPTPP specifically through this lens. Some experts view plurilateral agreements in particular as potential vehicles for bringing new rulemaking from RTAs into the multilateral trading system. While RTAs may propagate precisely what the multilateral system—with MFN and national treatment at its underpinnings—was designed to prevent, namely trade diversion and fragmented trading blocs, some observers believe it may be the only way trade may be liberalized in the future as additional interested parties could join the agreements over time. Since the founding of the WTO, the landscape of global trade has changed dramatically. The commercial internet, the growth of supply chains, and increasing trade in services have all contributed to the tremendous expansion of trade. However, WTO disciplines have not been modernized or expanded since 1995, aside from the TFA and the renegotiation of the ITA and the GPA. In addition to ongoing WTO efforts to negotiate new trade liberalization and rules in areas like e-commerce and digital trade, the following are selected areas of trade policy that could be subjects for future negotiations multilaterally within the WTO, or as plurilaterals. Meaningful progress in areas such as services, competition with SOEs, investment, and labor and environment issues could help increase the relevance of the WTO as a negotiating body. Since the GATS, the scope of global trade in services has increased tremendously, spurred by advances in IT and the growth of global supply chains. Yet, these advances are largely not reflected in the GATS. WTO members committed to further services negotiations (GATS Article XIX), which began in 2000 and were incorporated into the Doha Round. Further talks were spurred by the recognition among many observers that the GATS, while it extended the principles of nondiscrimination and transparency to services trade, was not thought to provide much actual liberalization, as many countries simply bound existing practices. However, services negotiations during Doha also succumbed to the resistance of developing countries to open their markets in response to developed country demands, as well as dissatisfaction with other aspects of the single undertaking. Whether the stalled plurilateral TiSA talks will ultimately lead to services reform in the WTO is an open question. Aside from increased market access, several issues are ripe for future negotiations at the WTO, such as transition from the current positive list schedule of commitments to a negative list. Instead of a member declaring which services are open for competition, it would need to declare which sectors are exempted. This exercise in itself could force members to reexamine their approximately 25-year-old commitments and decide whether current market access barriers will be maintained. New services sectors, such as online education and telemedicine, that were not envisioned at the founding of GATS could also be the subject of future negotiations, at least on a plurilateral basis. The issue of \"servicification\" of traditional goods industries—for example, services that are sold with a good, such as insurance or maintenance services, or enabling services, such as distribution, transportation, marketing, or retail—has also attracted attention as the subject of possible WTO negotiations. Other issues of interest to members include services facilitation (transparency, streamlining administrative procedures, simplifying domestic regulations), and emergency safeguards, envisioned in the GATS (Article X) as an issue for future negotiation. The United States and other members of the WTO see an increased need to discipline state-owned or state-dominated enterprises engaged in international commerce, and designated monopolies, whether through the WTO or through regional or bilateral FTAs. However, WTO rules on competition with state-owned or state-dominated enterprises are limited to state trading enterprises (STE)—enterprises, such as agricultural marketing boards, that influence the import or export of a good. GATT Article XVII requires them to act consistently with GATT commitments on nondiscrimination, to operate in accordance with commercial considerations, and to abide by other GATT disciplines, such as disciplines on import and export restrictions. The transparency obligations consist of reporting requirements describing the reason and purpose of the STE, the products covered by STE, a description of its functions, and pertinent statistical information. Meanwhile, countries desiring disciplines on SOEs have turned to FTAs. The TPP and the proposed USMCA have dedicated chapters on SOEs. The USMCA includes commitments that SOEs of a party act in accordance with commercial considerations; requires parties to provide nondiscriminatory treatment to like goods or services to those provided by SOEs; and prohibits most noncommercial assistance to its SOE, among other issues. The SOE chapter in USMCA likely is aimed at countries other than the three USMCA parties, such as China, to signal their negotiating intentions going forward. While there could be a desire to multilateralize these disciplines, they likely would face objections from those members engaged in such practices. State support provided to SOEs, including subsidies, is a closely related issue, as it can play a major role in market-distorting behavior under current rules. The WTO ASCM covers the provision of specified subsidies granted to SOEs, including by the government or any \"public body.\" Some members, including the United States and EU, have contested past interpretations by the WTO Appellate Body of what qualifies as a public body as too narrow, and remain concerned that a large share of Chinese and other SOEs in effect have avoided being subject to disciplines. As discussed, the United States, EU, and Japan are engaged in ongoing discussions on strengthening rules on industrial subsidies and SOEs, including \"how to develop effective rules to address market-distorting behavior of state enterprises and confront particularly harmful subsidy practices.\"  They commit to both \"maintain effectiveness of existing WTO disciplines\" and also initiate negotiations on \"more effective subsidy rules\" in the near future. At the latest meetings in January 2019, the three partners indicated plans to finalize a proposed text on industrial subsidies by spring 2019. With limited provisions under TRIMS and GATS, rules and disciplines covering international investment are not part of WTO. More extensive protection for investors was one of the \"Singapore issues\" proposed at the 1996 WTO Ministerial as a topic for future negotiations, but then dropped under opposition from developing countries at the 2003 Cancun Ministerial. The OECD also attempted to liberalize investment practices and provide investor protections through a Multilateral Agreement on Investment, however, that effort was abandoned in 1998 in the face of widespread campaigns by nongovernment organizations in developed countries. While multilateral attempts to negotiate investment disciplines have not borne fruit, countries have agreed to investment protections within bilateral investment treaties (BITs) and chapters in bilateral and regional FTAs. The U.S. \"model BIT\" serves as the basis for most recent U.S. FTAs. These provisions are often negotiated between developed countries and developing countries—often viewed as having less robust legal systems—that want to provide assurance that incoming FDI will be protected in the country. Developed countries themselves have begun to diverge on the use and inclusion of provisions on investor-state dispute settlement (ISDS). Incorporating investment issues more fully in the WTO would recognize that trade and investment issues are increasingly interlinked. Moreover, bringing coherence to the nearly 3,000 BITs or trade agreements with investment provisions could be a role for the WTO. In addition, agreement on investment disciplines could help to resolve the thorny issue of investment adjudication between the competing models of ISDS and an investment court, as proposed by the EU in its recent FTAs, given that disputes likely would remit to WTO dispute settlement. While it remains unclear whether developing countries would be more amenable to negotiating investment disciplines multilaterally than they were in 2003, this area could be ripe for plurilateral activity. In the meantime, since the Ministerial some WTO members are pursuing the development of a multilateral framework on investment facilitation. The group is comprised of a mix of developed and developing economies, including the EU, Canada, China, Japan, Mexico, Singapore, and Russia, but not the United States. Labor and environmental provisions were not included in the Uruguay Round agreements, largely at the insistence of developing countries. Some observers maintain that this has created major gaps in global trade rules and call for the WTO to address these issues. Related provisions have developed and evolved within U.S. FTAs outside the WTO. Recent U.S. FTAs require partner countries to adhere to internationally recognized labor principles of the International Labor Organization (ILO) and applicable multilateral environmental agreements, and to enforce their labor or environmental laws and not to derogate from these laws to attract trade and investment. The CPTPP and proposed USMCA also contain provisions, though not identical, prohibiting the most harmful fisheries subsidies, and relating to illegal trafficking, marine species, air quality, marine litter, and sustainable forestry. More broadly, while inclusion of labor and environmental provisions within FTAs has expanded in the past decade, in general the commitments can vary widely in their scope and depth, with only some subject to dispute settlement mechanisms. While general provisions on labor and environment may be a heavy lift at this time given these differences, the WTO has undertaken an effort to discipline fisheries subsidies, which could have a beneficial environmental effect (see above). However, fisheries subsidies may be a special case, as it directly pertains to an existing trade-related agreement, the ASCM. Many observers believe the WTO needs to adopt reforms to continue its role as the foundation of the world trading system. In particular, its negotiating function has atrophied following the collapse of the Doha Round. Its dispute settlement mechanism, while functioning, is viewed by some as cumbersome and time consuming. And some observers, including U.S. officials, contend it has exceeded its mandate when deciding cases. Potential changes described below address institutional and negotiation reform, as well as reforms to the dispute settlement system. Reforms concern the administration of the organization, including its procedures and practices, and attempts to address the inability of WTO members to conclude new agreements. Dispute settlement reforms attempt to improve the working of the dispute settlement system, particularly the Appellate Body (AB). Addressing concerns related to the dispute settlement system may take priority in the near term, as the WTO faces a pending crisis should the AB fall below its three-member quorum in late 2019. Certain WTO members have begun to explore some aspects of reform. In July 2018, the European Commission produced a discussion paper on WTO reform proposals, and in September published a revised paper on its comprehensive approach \"to modernise the WTO and to make international trade rules fit for the challenges of the global economy.\" As noted, the United States, EU, and Japan have issued scoping papers and joint statements on strengthening WTO disciplines on industrial subsidies and SOEs and cooperating on forced technology transfer. In addition, Canada organized a ministerial among a small group of \"like-minded\" countries interested in WTO reform, including Australia, Brazil, Chile, the EU, Japan, Kenya, Mexico, New Zealand, Norway, Singapore, South Korea, and Switzerland, held in Ottawa on October 24-25, based on a discussion draft of its proposals. Canadian trade officials have said that \"starting small has allowed us to address problems head-on and quickly develop proposals,\" while acknowledging that a larger effort must include the United States and China. In a joint communiqué, the group of 13 countries emphasized that \"the current situation at the WTO is no longer sustainable,\" and identified three areas requiring \"urgent consideration\": safeguarding and strengthening the dispute settlement system; reinvigorating the WTO's negotiating function; including how the development dimension can be best pursued in rulemaking; and strengthening the monitoring and transparency of WTO members' trade policies. The group met again in January 2019 on the sidelines of the annual World Economic Forum meetings, committing to make \"significant progress\" toward WTO reform before the G20 meetings convene in June 2019. Some Members of Congress have expressed support for these new efforts to address long-standing concerns of the United States. While consensus in decisionmaking is a long-standing core practice at the GATT/WTO, voting on a nonconsensus basis is authorized for certain activities on a one member-one vote basis. For example, interpretations of the WTO agreements and country waivers from certain provisions require a three-fourths affirmative vote for some matters, while a two-thirds affirmative vote is required for an amendment to an agreement. However, even when voting is possible, the practice of consensus decisionmaking remains the norm. As an organization of sovereign entities, some observers believe the practice of consensus decisionmaking gives legitimacy to WTO actions. Consensus assures that actions taken are in the self-interest of all its members. Consensus also reassures small countries that their concerns must be addressed. However, the practice of consensus has often led to deadlock, especially in the Doha Round negotiations. The ability to block consensus also has perpetuated so-called \"hostage taking,\" in which a country can block consensus over an unrelated matter. In order to attempt to expedite institutional decisionmaking, some expert observers have proposed alternatives to the current system, such as the following: Use the voting procedures currently prescribed in the WTO agreements. Adopt a weighted voting system based on a formula that includes criteria relating to a member's gross domestic product, trade flows, population, or a combination thereof. Establish an executive committee composed of a combination of permanent and rotating members, or composed based on a formula as above or representatives of differing groups of countries. Maintain current consensus voting but require a member stating an objection to explain why it is doing so, or why it is a matter of vital national interest. The \"single undertaking\" method by which WTO members negotiate agreements means that during a negotiating round, all issues are up for negotiation until everything is agreed. On one hand, this method, in which nothing is agreed until everything is agreed, is suited for large, complex rounds in which rules and disciplines in many areas of trade (goods, services, agriculture, IPR, etc.) are discussed. It permits negotiation on a cross-sectoral basis, so countries can make a concession in one area of negotiation and receive a concession elsewhere. The method is intended to prevent smaller countries from being \"steamrolled\" by the demands of larger economies, and helps ensure that each country sees a net benefit in the resulting agreement. On the other hand, arguably, the single undertaking has contributed to the breakdown of the negotiating function under the WTO, exemplified by the never-completed Doha Round, as issues of importance to one country or another served to block consensus at numerous points during the round. Some members, including the EU, have called for \"flexible multilateralism,\" based on continued support for full multilateral negotiations where possible, but pursuit of plurilateral agreements on an MFN basis where multilateral consensus is not possible. An important task of the WTO is to monitor each member's compliance with various agreements. A WTO member is required to notify the Secretariat of certain relevant domestic laws or practices so that other members can assess the consistency of WTO members' domestic laws, regulations, and actions with WTO agreements. Required notifications include measures concerning subsidies, agricultural support, quantitative restrictions, technical barriers to trade, and sanitary and phytosanitary standards. Compliance with the WTO agreement's notification requirements, especially regarding government subsidy programs, has become a serious concern among certain members, including the United States. Many WTO members are late in submitting their required notifications or do not submit them at all. This effectively prevents other members from fully examining the policies of their trading partners. In response, some members—notably the United States and the EU—have proposed incentives for compliance or sanctions for noncompliance with notification reporting requirements. These include the following: A U.S. proposal to impose a series of sanctions including steps to \"name and shame\" an offending member, limiting the member from using certain WTO resources, and designating a member \"inactive.\" An EU proposal to create a rebuttable presumption that a non-notified subsidy measure is an actionable subsidy or a subsidy causing serious prejudice, thereby allowing a member to challenge the subsidy under WTO dispute settlement. An EU proposal to encourage counternotifications—a challenge to the accuracy or existence of another member's notification—against members that do not voluntarily notify on their own. In May and November 2018, for example, the United States launched counternotifications of India's farm subsidy notifications regarding wheat, rice, and cotton. In November 2018, the United States, EU, Japan, Argentina, and Costa Rica put forward a joint proposal that reflects several of these elements, including penalties for noncompliance. It also specifies exemptions for developing countries that lack capacity and have requested assistance to help fulfill notification obligations. A country's development status can affect the pace at which a country undertakes its WTO obligations. Given that WTO members self-designate their status, some members hold on to developing-country status even after their economies begin more to resemble their developed-country peers. In addition, some of the world's largest economies, including China, India, and Brazil, may justify developing country status because their per capita incomes more closely resemble those of a developing country than those of developed countries. Developing country status enables a country to claim special and differential treatment (SDT) both in the context of existing obligations and in negotiations for new disciplines (see text box ). The WTO specifies, however, that while the designated status is on the basis of self-selection, it is \"not necessarily automatically accepted in all WTO bodies.\" Developed countries, including the EU and United States, have expressed frustration at this state of affairs. In January 2019, the United States circulated a paper warning that the WTO is at risk of becoming irrelevant due to the practice of allowing members to self-designate their development status to obtain special and differential treatment. The paper noted that some of the world's richest nations, including Singapore, South Korea, and the United Arab Emirates, as well as some of the world's major trading economies, such as China and India, consider themselves developing countries at the WTO. The paper maintained that self-designation has damaged the negotiating function of the WTO, and contributed to the failure of the Doha Round and possibly ongoing negotiations, if countries can avoid making meaningful offers by claiming exemptions from the rules. Several suggestions have been made to address the situation, including encouraging countries to graduate from developing country status; setting quantifiable criteria for development status; targeting SDT in future agreements on a needs-driven, differential basis; and requiring full eventual implementation of all new agreements. Some of these steps were implemented in the WTO Trade Facilitation Agreement. Supporters of the multilateral trading system consider the dispute settlement mechanism (DSM) not only a success of the system, but essential to maintain the relevance of the institution, especially while the WTO has struggled as a negotiating body. However, the DSM is facing increased pressure for reform, in part due to long-standing U.S. objections over certain rules and procedures. USTR Lighthizer contends that the WTO has become a \"litigation-centered organization,\" which has lost its focus on negotiations. While WTO members have actively used the DSM since its creation, some have also voiced concerns about various aspects, including procedural delays and compliance, and believe the current system could be reformed to be fairer and more efficient. The Doha Round included negotiations to reform the dispute settlement system through \"improvements and clarifications\" to DSU rules. A framework of 50 proposals was circulated in 2003 but countries were unable to reach consensus. Discussions have continued beyond Doha with a primary focus on 12 issues, including third-party rights, panel composition, and remand authority of the Appellate Body. Under prior Administrations, the United States proposed greater control for WTO members over the process, guidelines for the adjudicative bodies, and greater transparency, such as public access to proceedings. However, these negotiations have yet to achieve results. Some experts suggest that enhancing the capabilities and legitimacy of the dispute settlement system will likely require several changes, including improving mechanisms for oversight, narrowing the scope of and diverting sensitive issues from adjudication, improving institutional support, and providing WTO members more input over certain procedures. The immediate flashpoint to the system is the refusal of the United States to consent to the appointment of new AB jurists. The United States has long-standing objections to decisions involving the AB's interpretation of certain U.S. trade remedy laws in particular—the subject of the majority of complaints brought by other WTO members against the United States. The AB consists of seven jurists appointed to four-year terms on a rolling basis, with the possibility of a one-term reappointment. Each dispute case is heard by three jurists. Like the previous Administration, the Trump Administration blocked the process to appoint new jurists in 2017 and 2018, leaving only three AB jurists remaining to hear all cases. Concerns are rising that the AB, already facing a backlog of cases, could come to a halt in 2019 if additional appointments are not made. Deputy DG of the WTO Alan Wolff summarized the stakes in recent remarks, noting that if the Appellate Body were to cease to function, member countries would be unable to appeal an adverse panel decision against one of their policies, and without that option, \"there is a risk of every trade dispute devolving into small and not so small trade wars, consisting of retaliation and counter-retaliation.\" The United States expounded on some of the perceived shortcomings of the dispute settlement system in its most recent trade policy agenda. Arguably the main U.S. complaint is that the system, particularly the AB, is \"adding to or diminishing U.S. rights by not applying the WTO agreements as written\" in the areas of subsidies, antidumping and countervailing duties, standards, and safeguards. At its crux, the current controversy is over the autonomy of the AB, its deference to the DSB, and its obligations to implement the provisions of the DSU. The United States has been the most vocal in its criticisms, yet other WTO members have expressed similar concerns. While the United States has not tabled specific reforms for these complaints to the WTO membership, other members have. Two groups (G-12, G-3) submitted specific proposals for the December 2018 General Council meeting to attempt to break the impasse. The G-12 submission reflects proposals of all 12 members; the G-3 submission contains supplementary proposals put forward by a subset of the 12. The United States criticized the proposals as seeking to change WTO DS rules to fit the practices objectionable to the United States, rather than adhering to the rules as originally negotiated. Instead of seeking to accommodate current practices, U.S. Ambassador to the WTO Dennis Shea proposed that WTO members \"engage in a deeper discussion of the concerns raised, to consider why the Appellate Body has felt free to depart from what WTO Members agreed to, and to discuss how best to ensure that the system adheres to WTO rules as written.\" Ambassador Shea also criticized the G-3 proposals as lessening the accountability of the Appellate Body, rather than increasing it. Under each of the following issues, these proposals are raised along with other reform proposals that members or observers have put forward to address current concerns. Disregard for the 90-day, DSU-mandated deadline for AB appeals. USTR claims that the AB does not have the authority to fail to meet the deadline without consulting the DSB, maintaining that the deadline \"helps ensure that the AB focuses its report on the issue on appeal.\" The G-12 submission proposes to amend the DSU to allow parties, based on a proposal by the AB, to extend the length of time to conclude an appeal. If the parties do not agree on an extension, the AB would propose work procedures or arrangements to allow it to conclude the appeal within 90 days. In addition, the G-3 submission proposes to amend the DSU to increase the number of AB jurists from seven to nine to allow for greater efficiency and geographical diversity. Extension of service by former AB jurists on cases continuing after their four-year terms have expired. The United States maintains that the AB does not have the authority unilaterally to extend the terms of jurists, rather that authority lies with the DSB and that it is a matter of adherence to the DSU. In actual practice, however, it may be the case that having former jurists stay on to finish an appeal may be more efficient than having a new jurist join the case. The G-12 submission proposes to amend the DSU to allow outgoing AB jurists to complete the disposition of a pending appeal, provided that the hearing stage has taken place. In addition, the G-3 submission proposes that outgoing AB members continue to serve until replaced, but not more than two years following expiration of their term. Alternatively, some trade experts have suggested that the AB could refrain from assigning cases to jurists less than 90 days before their exits. During the Obama Administration, the United States blocked the reappointment of a South Korean jurist to the AB in May 2016. The United States cited what it considered \"abstract discussions\" in prior decisions by the jurist that went beyond the legal scope of the WTO. This action has led to the concern that the prospect of non-reappointment could affect the independence of the AB system. However, one former AB jurist opines that, \"reappointment is an option, not a right,\" and calls for the WTO members to determine if a more formal process similar to initial appointment of AB jurists is needed for reappointment. The G-3 submission proposes to amend the DSU to permit AB members to serve one term of longer length (6-8 years) and not allow for reappointment. Other criticisms of the AB involve the extent to which it can interpret WTO agreements. The United States, in arguing for a more restrictive view of the power of the DSB, points to Article 3.2 that \"recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements\" (see text box above). However, those supporting a more expansive view of the DSU's role can point to the same article, which highlights the role \"to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law.\" The scope and reach of the AB's activities is an enduring controversy for the organization, not limited to the Trump Administration. USTR has flagged several specific practices relating to these issues, such as the following: Issuing advisory opinions on issues not relevant to the issue on appeal. This point is related to the U.S. concern that the AB is engaged in \"judicial overreach\" by going beyond deciding the case at hand. USTR contends that the ability to issue advisory opinions or interpretations of text rests with the Ministerial Conference or General Council. The G-12 proposes to amend the DSU to stipulate that the AB address each issue raised in a dispute \"to the extent necessary for the resolution of the dispute.\" Rather than issue advisory opinions, some observers have suggested that the AB also could \"remand\" issues of uncertainty to the standing committees of the WTO for further negotiation. In addition, members could also use a provision of the WTO Agreement (Article IX.2) to seek an \"authoritative interpretation\" of a WTO text at the General Council or Ministerial Conference, which could be adopted by a three-fourths vote. De novo review of facts or domestic law in cases on appeal. The United States alleges that the AB is not giving the initial panel due deference on matters of fact, including regarding the panel's interpretation of domestic law. This point derives from USTR's view that a country's domestic law should be considered as fact, and that the panel's interpretation of the domestic law is thus not reviewable by the AB. The G-12 submission proposes to amend the DSU to clarify that the meaning of a party's domestic laws is a matter of fact, and not reviewable by the AB. Treatment of AB decisions as precedent. Like the previous two concerns, this complaint speaks to the alleged overreach of the AB. USTR asserts that while AB reports can provide \"valuable clarification\" of covered agreements, they cannot be considered or substituted for the WTO agreements and obligations negotiated by members. However, according to a former DG of the WTO, \"the precedent concept used in the WTO jurisprudence is ... centrally important to the effectiveness of the WTO dispute settlement procedure goals of security and predictability.\" A related concern some WTO members have is \"gap-filling\" by the DS system, where the legal precedent is unclear or ambiguous or there are no or incomplete WTO rules regarding a contested issue. Here there are diametrically opposite beliefs: a U.S. trade practitioner asks, \"Is filling gaps and construing silences really not the creation of rights and obligations through disputes vs. leaving such function to negotiations by the members?\" The former DG, however, contends that \"every juridical institution has at least some measure of gap-filling responsibility as part of its efforts to resolve ambiguity.\" The issue of the legitimacy of precedence or gap-filling may be one of the thorniest issues of all with few solutions proposed that would potentially satisfy differences among members. The G-12 submission proposes to amend the DSU to establish a yearly meeting between the AB and the DSB. This session would allow for WTO members to comment on rulings made during the year. According to the submission, it could be a venue \"where concerns with regard to some Appellate Body approaches, systemic issues or trends in the jurisprudence could be voiced.\" It is likely that many of the issues that could arise from proposed reforms to the WTO system would require clarification of or amendment to the language of the Marrakesh Agreement or the DSU. Clarification could take the form of interpretation of the agreements. As noted above, interpretation can be undertaken by the Ministerial Conference (held every two years), General Council, or Dispute Settlement Body, with a three-fourths vote of the WTO membership. Amending the decisionmaking provisions of the Marrakesh Agreement (Article IX) or the DSU would require consensus of the membership at the Ministerial Conference (Marrakesh Agreement, Article X.8). Amendments to the Marrakesh Agreement would require a two-thirds vote of the membership. As noted above, negotiations related to reforms of the DSM occurred during the Doha Round, and despite the criticism of the DSM by the United States and others, the General Council or the DSB has not undertaken serious consideration of these reforms. The United States has served as a leader in the WTO and the GATT since their creation. The United States played a major role in shaping GATT/WTO negotiations and rulemaking, many of which reflect U.S. laws and norms. It was a leading advocate in the Uruguay Round for expanding negotiations to include services and IPR, key sources of U.S. competitiveness, as well as binding dispute settlement to ensure new rules were enforceable. Today, many stakeholders across the United States rely on WTO rules to open markets for importing and exporting goods and services, and to defend and advance U.S. economic interests. The Trump Administration has expressed doubt over the value of the WTO and multilateral trade negotiations to the U.S. economy. As a candidate, President Trump asserted that WTO trade deals are a \"disaster\" and that the United States should \"renegotiate\" or \"pull out.\"  In late June 2018, media reports suggested that President Trump was considering withdrawing the United States from the WTO. While U.S. officials have downplayed talks of withdrawal as \"premature\" and an \"exaggeration,\" the President has since reportedly repeated these threats in July and August 2018. The Administration has continued to express skepticism toward the value of multilateral agreements, preferring bilateral negotiations to address \"unfair trading practices.\" In addition, \"reform of the multilateral trading system\" is a stated Administration trade policy objective. While some U.S. frustrations with the WTO are not new and are shared by other trading partners, the Administration's overall approach has spurred new questions regarding the future of U.S. leadership of and participation in the WTO. Most observers would maintain that the possibility of U.S. withdrawal from the WTO remains unlikely for procedural and substantive reasons. Procedurally, a withdrawal resolution would have to pass the House and Senate; it has also been debated what legal effect the resolution would have if adopted. Moreover, if the United States were to consider such a step, withdrawal would have a number of practical consequences. The United States could face economic costs, since absent WTO membership, remaining members would no longer be obligated to grant the United States MFN status under WTO agreements. WTO rules also restrict members' ability to use quotas, regulations, trade-related investment measures, or subsidies in ways that discriminate or disadvantage U.S. goods and services. They also require members to respect U.S. IPR. Consequently, U.S. businesses could face significant disadvantages in other markets, as members without FTAs with the United States could raise tariffs or other trade barriers at will. Nondiscrimination, a key bedrock principle of the multilateral trading system, could be eroded, particularly given the added impetus U.S. withdrawal could give to the proliferation of FTAs. Withdrawal could also lead to a U.S. loss of influence over how important international trade matters are decided and who writes global trade rules. In the process, economic inefficiencies and political tensions could increase. Exiting the WTO and the international trading relationships it creates and governs could have broader policy implications, including for cooperation between the United States and allies on foreign policy issues. Another question is whether the WTO would flounder without U.S. leadership, or whether other WTO members like the EU and China would increase their roles. As some in the United States question the value of WTO participation and leadership, other countries have begun to assert themselves as leaders and advocates for the global trading system. As noted, cooperation on WTO reform has become elevated as a major topic of discussion at recent high-level meetings, including the latest EU-China Summit held in July 2018 and at the October summit held in Canada among trade ministers from 13 WTO members. Congressional oversight could examine the value, both economic and political, of U.S. membership and leadership in the WTO. As part of its oversight, Congress could consider, or could ask the U.S. International Trade Commission to investigate, the value of the WTO or potential impact of withdrawal from the WTO on U.S. businesses, consumers, federal agencies, laws and regulations, and foreign policy. Congress could vote on a resolution expressing support of the WTO, instructing USTR to prioritize WTO engagement, or, conversely, a resolution for disapproval of U.S. membership under the URAA in 2020. The founding of the GATT and creation of the WTO were premised on the notion that an open and rules-based multilateral trading system was necessary to avoid a return to the nationalistic interwar trade policies of the 1930s. There are real costs and benefits to the United States and other countries to uphold the rules and enforce their commitments and those of other WTO members. A liberalized, rules-based global trading system increases international competition for companies domestically, but also helps to ensure that companies and their workers have access and opportunity to compete in foreign markets with the certainty of a stable, rules-based system. A framework for resolving disputes that inevitably arise from repeated commercial interactions may also help ensure such trade frictions do not spill over into broader international relations. However, certain actions by the Trump Administration and other countries have raised questions about respect for the rules-based trading system, and could weaken the credibility of the WTO. In particular, recent U.S. actions to raise tariffs against major trading partners under Section 232 and Section 301, and to potentially obstruct the functioning of the dispute settlement system by withholding approval for appointments to the AB, have prompted concerns that the United States and other countries who have retaliated to the U.S. actions may undermine the effectiveness and credibility of the institution that it helped to create. Moreover, the outcomes of controversial ongoing dispute cases at the WTO, initiated by several countries over U.S. tariffs, could set precedents and have serious implications for the future credibility of the global trading system. In particular, several U.S. trading partners view U.S. action as blatant protection of domestic industry and not a legitimate use of the national security exception. Some are concerned that U.S. actions may embolden other countries to protect their own industries under claims of protecting their own national security interests. Furthermore, U.S. tariff actions outside of the multilateral system's dispute settlement process may open the United States to criticism and could impede U.S. efforts to use the WTO for its own enforcement purposes. Respect for the rules is also weakened when any country imposes new trade restrictions and takes actions that are not in line with WTO agreements. In particular, China's industrial state policies, including IPR violations and forced technology transfer practices, arguably damage the credibility of the multilateral trading system that is based on respect for the consensus-based rules. In part, the WTO's perceived inability to address certain Chinese policies led to the United States resorting to Section 301 actions. Other countries' pursuit of industrial policy or imposition of discriminatory measures broadly in the name of national or economic security further call into question the viability of the WTO rules-based system. Under the Trump Administration, USTR has put new emphasis on \"preserving national sovereignty\" within the U.S. trade policy agenda, emphasizing that any multinational system to resolve trade disputes \"must not force Americans to live under new obligations to which the United States and its elected officials never agreed.\" The question of sovereignty is not a new one. The withdrawal procedures in the URAA responded to concerns that the WTO would infringe on U.S. sovereignty. During the congressional debate over the Uruguay Round agreements, there were some proposals to create extra review mechanisms of WTO dispute settlement, and many Members stressed that only Congress can change U.S. laws as a result of dispute findings. While U.S. concerns regarding alleged \"judicial overreach\" in WTO dispute findings are long-standing, the Trump Administration has also emphasized unilateral action outside the WTO as a means of defending U.S. interests, including national security. Some observers fear that disagreements at the WTO on issues related to national security (e.g., Section 232 tariffs) may be difficult to resolve through the existing dispute settlement procedures, given current disagreements related to the WTO AB and concerns over national sovereignty that would likely be raised if a dispute settlement panel issued a ruling relating to national security. As noted previously, Article XXI of the GATT allows WTO members to take measures to protect \"essential security interests.\" WTO members and parties to the GATT have invoked Article XXI in other trade disputes. These parties, including the United States, have often argued that each country is the sole judge of questions relating to its own security interests. However, neither the WTO members nor a WTO panel have formally interpreted the Article XXI exception to define its scope. Accordingly, there is little guidance as to (1) whether a WTO panel would decide, as a threshold matter, that it had the authority to evaluate whether U.S. invocation of the exception was proper; and (2) how a panel might apply the national security exception, if invoked, in any dispute before the WTO involving the steel and aluminum tariffs. The broadened membership of the WTO over the past two decades has promoted greater integration of emerging markets such as Brazil, Russia, India, and China in the global economy, and helped ensure that developing country interests are represented on the global trade agenda. At the same time, many observers have attributed the inability of WTO members to collectively reach compromise over new rules and trade liberalization to differing priorities for reforms and market opening among developed countries and emerging markets. One question is to what extent emerging countries like China, with significant economic clout, will take on greater leadership; will such countries play a constructive role, advance the global trade agenda, and facilitate compromise among competing interests? China has voiced support for globalization and the multilateral trading system under which it has thrived. The Chinese government's recent white paper on the WTO stated the following: \"The multilateral trading system, with the WTO at its core, is the cornerstone of international trade and underpins the sound and orderly development of global trade. China firmly observes and upholds the WTO rules, and supports the multilateral trading system that is open, transparent, inclusive and nondiscriminatory.\" At the same time, China has blocked further progress in certain initiatives, including the WTO plurilateral Environmental Goods Agreement, and has not put forward a sufficiently robust offer on government procurement to join that WTO agreement, a long-standing promise. With its industrial policies that advantage domestic industries, some analysts contend that China often abides by the letter but not the \"spirit\" of WTO rules, raising questions about the country's willingness in practice to take on more leadership responsibility in the WTO context. Another related concern voiced by the United States and other WTO members is the role of large emerging markets and the use of developing country status by those and other countries to ensure flexibility in implementing future liberalization commitments. The United States could work with other WTO members to set specific criteria to clarify the \"developing\" country qualification, such as using a combination of metrics including GDP, per capita income, and trade volume. Members could be given incentives to graduate from developing status; different WTO agreements could offer different incentives. The Administration included \"reform of the multilateral trading system\" in its 2018 trade policy objectives. Congress may also hold oversight hearings to ask the USTR about specific plans or objectives regarding WTO reforms for the institution, dispute settlement, or in regards to updating or amending existing agreements to address trade barriers and market-distorting behaviors not sufficiently covered by current rules. Congress could also consider directing the executive branch to increase U.S. engagement in reform negotiations, by, for example, endorsing the current trilateral negotiations announced by USTR, the EU, and Japan to address nonmarket practices, mostly aimed at China. Congress may also want to review the recent report by economists from the WTO, the IMF, and the World Bank that identifies potential areas for greater trade integration, and determine which are in the U.S. national economic interest. Congress could further consider establishing specific or enhanced new negotiating objectives for multilateral trade agreement negotiations, possibly through amendment to TPA. Congress may request that USTR provide an update of ongoing plurilateral negotiations to address new issues, including digital trade—specified by Congress as a principal trade negotiating objective of TPA. Some experts argue however, that recent U.S. unilateral tariff actions may limit other countries' interest in engaging in future WTO or other negotiations to reduce international trade barriers and craft new rules. Such concerns are amplified given the proliferation of preferential FTAs outside the context of the WTO, which have the potential for discriminatory effects on countries not participating, including the United States. Congress may consider the long-term implications of the U.S. actions on current and future trade negotiations. The future outlook of the multilateral trading system is the subject of growing debate, as it faces serious challenges, some long-standing and some emerging more recently. Some experts view the system as long stagnant and facing a potential crisis; others remain optimistic that the current state of affairs could spur new momentum toward reforms and alternative negotiating approaches moving forward. Despite differing views, there is a growing consensus that the status quo is no longer sustainable, and that there is urgent need to improve the system and find ground for new compromises if the WTO is to remain the cornerstone of the trading system. Debate about the path forward continues. Recent proposals for WTO reforms and for new rules have provided the seeds for new ideas, though concrete solutions and next steps have yet to be agreed among countries involved in discussions. In the near term, several events on the horizon could provide added impetus for resolving differences and assessing progress. The dispute settlement system could cease to function by late 2019 if the terms of the three remaining AB members continue to expire without the approval of new appointments. WTO members will also face their biennial Ministerial Conference in June 2020, which could provide an opportunity for countries to announce completion of ongoing negotiations, such as on fisheries subsidies, and concrete progress in other areas of long-standing priority, including the plurilateral efforts launched during the 2017 Ministerial. Meanwhile, other ambitious trade initiatives outside the WTO are proceeding, including the CPTPP, which entered into force in December 2018 for several members and which many analysts view as providing a possible template for future trade liberalization and rulemaking in several areas. ", "summary": "Historically, the United States' leadership of the global trading system has ensured the United States a seat at the table to shape the international trade agenda in ways that both advance and defend U.S. interests. The evolution of U.S. leadership and the global trade agenda remain of interest to Congress, which holds constitutional authority over foreign commerce and establishes trade negotiating objectives and principles through legislation. Congress has recognized the World Trade Organization (WTO) as the \"foundation of the global trading system\" within trade promotion authority (TPA) and plays a direct legislative and oversight role over WTO agreements. The statutory basis for U.S. WTO membership is the Uruguay Round Agreements Act (P.L. 103-465), and U.S. priorities and objectives for the General Agreement on Tariffs and Trade (GATT)/WTO have been reflected in various TPA legislation since 1974. Congress also has oversight of the U.S. Trade Representative and other agencies that participate in WTO meetings and enforce WTO commitments. The WTO is a 164-member international organization that was created to oversee and administer multilateral trade rules, serve as a forum for trade liberalization negotiations, and resolve trade disputes. The United States was a major force behind the establishment of the WTO in 1995, and the rules and agreements resulting from multilateral trade negotiations. The WTO encompassed and succeeded the GATT, established in 1947 among the United States and 22 other countries. Through the GATT and WTO, the United States, with other countries, sought to establish a more open, rules-based trading system in the postwar era, with the goal of fostering international economic cooperation and raising economic prosperity worldwide. Today, 98% of global trade is among WTO members. The WTO is a consensus and member-driven organization. Its core principles include nondiscrimination (most favored nation treatment and national treatment), freer trade, fair competition, transparency, and encouraging development. These are enshrined in a series of WTO trade agreements covering goods, agriculture, services, intellectual property rights, and trade facilitation, among other issues. Some countries, including China, have been motivated to join the WTO not just to expand access to foreign markets but to spur domestic economic reforms, help transition to market economies, and promote the rule of law. The WTO Dispute Settlement Understanding (DSU) provides an enforceable means for members to resolve disputes over WTO commitments and obligations. The WTO has processed more than 500 disputes, and the United States has been an active user of the dispute settlement system. Supporters of the multilateral trading system consider the dispute settlement mechanism an important success of the system. At the same time, some members, including the United States, contend it has procedural shortcomings and has exceeded its mandate in deciding cases. Many observers are concerned that the effectiveness of the WTO has diminished since the collapse of the Doha Round of multilateral trade negotiations, which began in 2001, and believe the WTO needs to adopt reforms to continue its role as the foundation of the global trading system. To date, WTO members have been unable to reach consensus for a new comprehensive multilateral agreement on trade liberalization and rules. While global supply chains and technology have transformed international trade and investment, global trade rules have not kept up with the pace of change. Many countries have turned to negotiating free trade agreements (FTAs) outside the WTO as well as plurilateral agreements involving subsets of WTO members rather than all members. At the latest WTO Ministerial conference in December 2017, no major deliverables were announced. Several members committed to make progress on ongoing talks, such as fisheries subsidies and e-commerce, while other areas remain stalled. While many were disappointed by the limited progress, in the U.S. view, the outcome signaled that \"the impasse at the WTO was broken,\" paving the way for groups of like-minded countries to pursue new work in other key areas. Certain WTO members have begun to explore aspects of reform and future negotiations. Potential reforms concern the administration of the organization, its procedures and practices, and attempts to address the inability of WTO members to conclude new agreements. Proposed DS reforms also attempt to improve the working of the dispute settlement system, particularly the Appellate Body—the seven-member body that reviews appeals by WTO members of a panel's findings in a dispute case. Some U.S. frustrations with the WTO are not new and many are shared by other trading partners, such as the European Union. At the same time, the Administration's overall approach has spurred new questions regarding the future of U.S. leadership and U.S. priorities for improving the multilateral trading system. Concerns have emphasized that the Administration's recent actions to unilaterally raise tariffs under U.S. trade laws and to possibly impede the functioning of the dispute settlement system might undermine the credibility of the WTO system. A growing question of some observers is whether the WTO would flounder for lack of U.S. leadership, or whether other WTO members like the EU and China taking on larger roles would continue to make it a meaningful actor in the global trade environment. The growing debate over the role and future direction of the WTO may be of interest to Congress. Important issues it may address include how current and future WTO agreements affect the U.S. economy, the value of U.S. membership and leadership in the WTO, whether new U.S. negotiating objectives or oversight hearings are needed to address prospects for new WTO reforms and rulemaking, and the relevant authorities and impact of potential U.S. withdrawal from the WTO on U.S. economic and foreign policy interests.", "document_type": "crs"}
{"report": "On January 21, 2019, Venezuela's government-aligned Supreme Court issued a ruling declaring the National Assembly illegitimate and its rulings unconstitutional. (See \" Lead-Up to Maduro's January 2019 Inauguration and Aftermath ,\" below.) On January 21, 2019, Venezuelan military authorities announced the arrest of 27 members of the National Guard who allegedly stole weapons (since recovered) as they tried to incite an uprising against the government. (See \" Lead-Up to Maduro's January 2019 Inauguration and Aftermath ,\" below.) On January 15, 2019, Venezuela's National Assembly declared that President Maduro had usurped the presidency. The legislature also established a framework for the formation of a transitional government led by Juan Guaidó of the Popular Will (VP) party, the president of the National Assembly who was elected on January 5, 2019, to serve until presidential elections can be held (per Article 233 of the constitution). In addition, the legislature approved amnesty from prosecution for public officials who facilitate the transition. (See \" Lead-Up to Maduro's January 2019 Inauguration and Aftermath ,\" below.) On January 13, 2019, Venezuela's intelligence service detained, and then released, Juan Guaidó. Two days prior, Guaidó had said he would be willing to assume the presidency on an interim basis until new elections could be held; he also called for national protests to occur on January 23, 2019. (See \" Lead-Up to Maduro's January 2019 Inauguration and Aftermath ,\" below.) On January 10, 2019, the U.S. Department of State issued a statement condemning Maduro's \"illegitimate usurpation of power\" and vowing to \"work with the National Assembly ... in accordance with your constitution on a peaceful return to democracy.\" (See \" U.S. Policy ,\" below.) On January 10, 2019, the Organization of American States (OAS) passed a resolution rejecting the legitimacy of Nicolas Maduro's new term. (See Appendix B , below.) On January 10, 2019, President Nicolas Maduro began a second term after a May 2018 election that has been deemed illegitimate by the democratically elected, opposition-controlled National Assembly and much of the international community. (See \" Foreign Relations ,\" below.) On January 8, 2019, the U.S. Department of the Treasury imposed sanctions on seven individuals and 23 companies involved in a scheme that stole $2.4 billion through manipulation of Venezuela's currency exchange system under authority provided in Executive Order (E.O.) 13850 . (See \" Targeted Sanctions Related to Antidemocratic Actions, Human Rights Violations, and Corruption ,\" below.) On December 17, 2018, a group of investors demanded the Venezuelan government pay off the interest and principal of a defaulted $1.5 billion bond, the first step in a potential legal process by creditors to recover their assets. (See \" Prospects for 2019 ,\" below.) On December 14, 2018, El Nacional , Venezuela's last independent newspaper with national circulation, stopped publishing its print edition after 75 years. The move ame after numerous advertising restrictions, lawsuits, and threats from the Venezuelan government. (See \" Human Rights,\" below.) On December 14, 2018, the United Nations launched an appeal for $738 million to support refugees and migrants from Venezuela in 2019. (See \" Humanitarian Situation ,\" below.) Venezuela, long one of the most prosperous countries in South America with the world's largest proven oil reserves, continues to be in the throes of a deep political, economic, and humanitarian crisis. Whereas populist President Hugo Chávez (1998-2013) governed during a period of generally high oil prices, his successor, Nicolás Maduro of the United Socialist Party of Venezuela (PSUV), has exacerbated an economic downturn caused by low global oil prices through mismanagement and corruption. According to Freedom House, Venezuela has fallen from \"partly free\" under Chávez to \"not free\" under Maduro, an unpopular leader who has violently quashed dissent and illegally replaced the legislature with a National Constituent Assembly (ANC) elected under controversial circumstances in July 2017. President Maduro won reelection in early elections held in May 2018 that were dismissed as illegitimate by the United States, the European Union (EU), the G-7, and a majority of countries in the Western Hemisphere. U.S. relations with Venezuela, a major oil supplier, deteriorated during Chávez's rule, which undermined human rights, the separation of powers, and freedom of expression. U.S. and regional concerns have deepened as the Maduro government has manipulated democratic institutions; cracked down on the opposition, media, and civil society; engaged in drug trafficking and corruption; and refused most humanitarian aid. Efforts to hasten a return to democracy in Venezuela have failed thus far. President Maduro's convening of the ANC and early presidential elections have triggered international criticism and led to sanctions by Canada, the EU, Panama, Switzerland, the United States, and potentially others. This report provides an overview of the overlapping political, economic, and humanitarian crises in Venezuela, followed by an overview of U.S. policy toward Venezuela. In December 1998, Hugo Chávez, a leftist populist representing a coalition of small parties, received 56% of the presidential vote (16% more than his closest rival). Chávez's commanding victory illustrated Venezuelans' rejection of the country's two traditional parties, Democratic Action (AD) and the Social Christian party (COPEI), which had dominated Venezuelan politics for the previous 40 years. Most observers attribute Chávez's rise to power to popular disillusionment with politicians whom they then judged to have squandered the country's oil wealth through poor management and corruption. Chavez's campaign promised constitutional reform; he asserted that the system in place allowed a small elite class to dominate Congress and waste revenues from the state oil company, Petróleos de Venezuela , S. A. (PdVSA). Venezuela had one of the most stable political systems in Latin America from 1958 until 1989. After that period, however, numerous economic and political challenges plagued the country. In 1989, then-President Carlos Andres Pérez (AD) initiated an austerity program that fueled riots in which several hundred people were killed. In 1992, two attempted military coups threatened the Pérez presidency, one led by Chávez, who at the time was a lieutenant colonel railing against corruption and poverty. Chávez served two years in prison for that failed coup attempt. In May 1993, the legislature dismissed Pérez from office for misusing public funds. The election of former President Rafael Caldera (1969-1974) as president in December 1993 brought a measure of political stability, but the government faced a severe banking crisis. A rapid decline in the price of oil caused a recession beginning in 1998, which contributed to Chávez's landslide election. Under Chávez, Venezuela adopted a new constitution (ratified by a plebiscite in 1999), a new unicameral legislature, and even a new name for the country—the Bolivarian Republic of Venezuela, named after the 19 th century South American liberator Simón Bolívar. Buoyed by windfall profits from increases in the price of oil, the Chávez government expanded the state's role in the economy by asserting majority state control over foreign investments in the oil sector and nationalizing numerous private enterprises. Chávez's charisma, use of oil revenue to fund domestic social programs and provide subsidized oil to Cuba and other Central American and Caribbean countries, and willingness to oppose the United States captured global attention. After Chávez's death, his legacy has been debated. President Chávez established an array of social programs and services known as missions that helped reduce poverty by some 20% and improve literacy and access to health care. Some maintain that Chávez also empowered the poor by involving them in community councils and workers' cooperatives. Nevertheless, his presidency was \"characterized by a dramatic concentration of power and open disregard for basic human rights guarantees,\" especially after his brief ouster from power in 2002. Declining oil production, combined with massive debt and high inflation, have shown the costs involved in Chávez's failure to save or invest past oil profits, tendency to take on debt and print money, and decision to fire thousands of PdVSA technocrats after an oil workers' strike in 2002-2003. Venezuela's 1999 constitution, amended in 2009, centralized power in the presidency and established five branches of government rather than the traditional three branches. Those branches include the presidency, a unicameral National Assembly, a Supreme Court, a National Electoral Council (CNE), and a \"Citizen Power\" branch (three entities that ensure that government officials at all levels adhere to the rule of law and that can investigate administrative corruption). The president is elected for six-year terms and can be reelected indefinitely; however, he or she also may be made subject to a recall referendum (a process that Chávez submitted to in 2004 and survived but Maduro cancelled in 2016). Throughout his presidency, Chávez exerted influence over all the government branches, particularly after an outgoing legislature dominated by chavistas appointed pro-Chávez justices to dominate the Supreme Court in 2004 (a move that Maduro's allies would repeat in 2015). In addition to voters having the power to remove a president through a recall referendum process, the National Assembly has the constitutional authority to act as a check on presidential power, even when the courts fail to do so. The National Assembly consists of a unicameral Chamber of Deputies with 167 seats whose members serve for five years and may be reelected once. With a simple majority, the legislature can approve or reject the budget and the issuing of debt, remove ministers and the vice president from office, overturn enabling laws that give the president decree powers, and appoint the 5 members of the CNE (for 7-year terms) and the 32 members of the Supreme Court (for one 12-year term). With a two-thirds majority, the assembly can remove judges, submit laws directly to a popular referendum, and convene a constitutional assembly to revise the constitution. After the death of President Hugo Chávez in March 2013, Venezuela held presidential elections the following month in which acting President Nicolás Maduro defeated Henrique Capriles of the MUD by 1.5%. The opposition alleged significant irregularities and protested the outcome. Given his razor-thin victory and the rise of the opposition, Maduro sought to consolidate his authority. Security forces and allied civilian groups violently suppressed protests and restricted freedom of speech and assembly. In 2014, 43 people died and 800 were injured in clashes between pro-government forces and student-led protesters concerned about rising crime and violence. President Maduro imprisoned opposition figures, including Leopoldo López, head of the Popular Will (VP) party, who was sentenced to more than 13 years in prison for allegedly inciting violence. The Union of South American Nations (UNASUR) initiated a government-opposition dialogue in April 2014, but talks quickly broke down. In February 2015, the Maduro government again cracked down on the opposition. In the December 2015 legislative elections, the MUD captured a two-thirds majority in Venezuela's National Assembly—a major setback for Maduro. The Maduro government took actions to thwart the legislature's power. The PSUV-aligned Supreme Court blocked three MUD deputies from taking office, which deprived the opposition of the two-thirds majority needed to submit bills directly to referendum and remove Supreme Court justices. From January 2016 through August 2017 (when the National Constituent Assembly voted to give itself legislative powers), the Supreme Court blocked numerous laws and assumed many of the legislature's functions. In 2016, opposition efforts focused on attempts to recall President Maduro in a national referendum. The government used delaying tactics to slow the process considerably. On October 20, 2016, Venezuela's CNE suspended the recall effort after five state-level courts issued rulings alleging fraud in a signature collection drive that had amassed millions of signatures. In October 2016, after an appeal by Pope Francis, most of the opposition (with the exception of the Popular Will party) and the Venezuelan government agreed to talks mediated by the Vatican, along with the former leaders of the Dominican Republic, Spain, and Panama and the head of UNASUR. By December 2016, the opposition had left the talks due to what it viewed as a lack of progress on the part of the government in meeting its commitments. Far from meeting the commitments it made during the Vatican-led talks, the Maduro government continued to harass and arbitrarily detain opponents (see \" Human Rights ,\" below). In addition, President Maduro appointed a hardline vice president, Tareck el Aissami, former governor of the state of Aragua and a sanctioned U.S. drug kingpin, in January 2017. Popular protests, which were frequent between 2014 and autumn 2016, had dissipated. In addition to restricting freedom of assembly, the government had cracked down on media outlets and journalists, including foreign media. Despite these obstacles, the MUD became reenergized in response to the Supreme Court's March 2017 rulings to dissolve the legislature and assume all legislative functions. After domestic protests, a rebuke by then-Attorney General Luisa Ortega (a Chávez appointee), and an outcry from the international community, President Maduro urged the court to revise those rulings, and it complied. In April 2017, the government banned opposition leader and two-time presidential candidate Henrique Capriles from seeking office for 15 years, which fueled more protests. From March to July 2017, the opposition conducted large, sustained protests against the government, calling for President Maduro to release political prisoners, respect the separation of powers, and hold an early presidential election. Clashes between security forces (backed by armed civilian militias) and protesters left more than 130 dead and hundreds injured. In May 2017, President Maduro announced that he would convene a constituent assembly to revise the constitution and scheduled July 30 elections to select delegates to that assembly. The Supreme Court ruled that Maduro could convoke the assembly without first holding a popular referendum (as the constitution required). The opposition boycotted, arguing that the elections were unconstitutional; a position shared by then-Attorney General Luisa Ortega and international observers (including the United States, Canada, the EU, and many Latin American countries). In an unofficial plebiscite convened on July 16 by the MUD, 98% of some 7.6 million Venezuelans cast votes rejecting the creation of a constituent assembly; the government ignored that vote. Despite an opposition boycott and protests, the government orchestrated the July 30, 2017, election of a 545-member National Constituent Assembly (ANC) to draft a new constitution. Venezuela's CNE reported that almost 8.1 million people voted, but a company involved in setting up the voting system alleged that the tally was inflated by at least 1 million votes. Many observers viewed the establishment of the ANC as an attempt by the ruling PSUV to ensure its continued control of the government even though many countries have refused to recognize its legitimacy. The ANC dismissed Attorney General Ortega, who had been critical of the government, voted to approve its own mandate for two years, and declared itself superior to other branches of government. Ortega fled Venezuela in August 2017 and has spoken out against the abuses of the Maduro government. The ANC also approved a decree allowing it to pass legislation, unconstitutionally assuming the powers of the National Assembly. From mid-2017 to May 2018, President Maduro strengthened his control over the PSUV and gained the upper hand over the MUD despite international condemnation of his actions. In October 2017, the PSUV won 18 of 23 gubernatorial elections. Although fraud likely took place given the significant discrepancies between opinion polls and the election results, the opposition could not prove that fraud was widespread. There is evidence that the PSUV linked receipt of future government food assistance to votes for its candidates by placing food assistance card registration centers next to polling stations, a practice also used in subsequent elections. The MUD coalition initially rejected the election results, but four victorious MUD governors took their oaths of office in front of the ANC (rather than the National Assembly), a decision that fractured the coalition. With the opposition in disarray, President Maduro and the ANC moved to consolidate power and blamed U.S. sanctions for the country's economic problems. Maduro fired and arrested the head of PdVSA and the oil minister for corruption. He appointed a general with no experience in the energy sector as oil minister and head of the company, further consolidating military control over the economy. The ANC approved a law to further restrict freedom of expression and assembly. Although most opposition parties did not participate in municipal elections held in December 2017, a few, including A New Time (UNT), led by Manuel Rosales, and Progressive Advance (AP), led by Henri Falcón, fielded candidates. The PSUV won more than 300 of 335 mayoralties. The CNE required parties that did not participate in those elections to re-register in order to run in the 2018 presidential contest, a requirement that many of them subsequently rejected. The Venezuelan constitution established that the country's presidential elections were to be held by December 2018. Although many prominent opposition politicians had been imprisoned (Leopoldo López, under house arrest), barred from seeking office (Henrique Capriles), or in exile (Antonio Ledezma ) by late 2017, some MUD leaders sought to unseat Maduro through elections. Those leaders negotiated with the PSUV to try to obtain guarantees, such as a reconstituted CNE and international observers, to help ensure the elections would be as free and fair as possible. In January 2018, the ANC ignored those negotiations and called for elections to be moved up from December to May 2018, violating a constitutional requirement that elections be called with at least six months anticipation. The MUD declared an election boycott, but Henri Falcón (AP) broke with the coalition to run. Falcón, former governor of Lara, pledged to accept humanitarian assistance, dollarize the economy, and foster national reconciliation. Venezuela's presidential election proved to be minimally competitive and took place within a climate of state repression. President Maduro and the PSUV's control over the CNE, courts, and constituent assembly weakened Falcón's ability to campaign. State media promoted government propaganda. There were no internationally accredited election monitors. The government coerced its workers to vote and placed food assistance card distribution centers next to polling stations. The CNE reported that Maduro received 67.7% of the votes, followed by Falcón (21%) and Javier Bertucci, a little-known evangelical minister (10.8%). Voter turnout was much lower in 2018 (46%) than in 2013 (80%), perhaps due to the MUD's boycott. After independent monitors reported widespread fraud, Falcón and Bertucci called for new elections to be held. Since the May 2018 election, President Maduro has faced mounting economic problems (discussed below), coup attempts, and increasing international isolation (see \" Foreign Relations ,\" below). His government has released some political prisoners, including U.S. citizen Joshua Holt, former Mayor Daniel Ceballos, opposition legislators (Gilber Caro and Renzo Prieto), and, in October 2018, former student leader Lorent Saleh. He reshuffled his Cabinet to establish Delcy Rodriguez, former head of the ANC and former foreign minister, as executive vice president in June 2018 and made additional changes in October 2018 within the judiciary and the intelligence services to strengthen his control. On December 9, 2018, Maduro's PSUV-dominated municipal council elections that most opposition parties boycotted, some 27% of eligible voters participated. During 2018, the opposition remained relatively weak and divided and Maduro focused on quashing coup plots and dissent within the military. His government arrested those perceived as threats, including military officers, an opposition legislator accused of involvement in an August 2018 alleged assassination attempt against Maduro, and a German journalist accused of being a spy. According to Foro Penal (a Venezuelan human rights group), the government held 278 political prisoners as of December 2018. Foro Penal and Human Rights Watch have documented several cases in which those accused of plotting coups were subjected to \"beatings, asphyxiation and electric shocks\" by the intelligence services The October 2018 death of Fernando Albán, an opposition politician who was also in custody for his reported involvement in the August 2018 alleged assassination attempt, has provoked domestic protests and international concern. Given that 70% of the population favored Maduro's resignation instead of his inauguration to a second term, observers predict he will face mounting protests and internal dissent. Maduro's regime also could see more defections. In early January, Christian Zerpa, a former ally of Maduro on the Supreme Court, fled the country to seek asylum in the United States; he maintains that the May election \"was not free and competitive.\" Under the leadership of Juan Guaidó, a 35-year old industrial engineer from the VP party who was elected president of the National Assembly on January 5, 2019, the opposition has been reenergized. Guaidó, buoyed by widespread international condemnation of the May 2018 elections, has declared himself willing to serve as interim president of Venezuela until elections can be called as provided for in Article 233 of the 1999 constitution in the event that a president vacates power. Secret police detained and then subsequently released Guaidó on January 13, 2019; it is unclear whether they were acting under Maduro's authority. A government spokesman maintained that the detention \"was an irregular and unilateral action\" by officials who would be punished. While the Brazilian government and the Secretary General of the OAS have openly welcomed Guaidó as \"interim president,\" the United States and others have expressed solidarity and urged Venezuelans to rally behind him but stopped short of recognizing him as the country's interim leader. The National Assembly has enacted resolutions to declare that President Maduro is no longer the legitimate president, establish a framework for the formation of a transition government, ask 48 countries to freeze Maduro government assets, and provide for amnesty for any public officials (including military members) that support a transition. The Maduro-aligned Supreme Court has ruled that the new leadership of the National Assembly has been acting outside of the law and invalidated its declarations. It remains to be seen how the security forces will respond to these developments, as well as to protests that have been called for January 23, 2019, and beyond. Human rights organizations and U.S. officials have expressed concerns for more than a decade about the deterioration of democratic institutions and threats to freedom of speech and press in Venezuela. Human rights conditions in Venezuela have deteriorated even more under President Maduro than under former President Chávez. Abuses have increased, as security forces and allied armed civilian militias ( collectivos ) have been deployed to violently quash protests. In August 2017, the United Nations Office of the High Commissioner for Human Rights (UNOCHR) issued a report on human rights violations perpetrated by the Venezuelan security forces against the protestors. According to the report, credible and consistent accounts indicated that \"security forces systematically used excessive force to deter demonstrations, crush dissent, and instill fear.\" The U.N. report maintained that many of those detained were subject to cruel, degrading treatment and that in several cases, the ill treatment amounted to torture. UNOCHR called for an international investigation of those abuses. In June 2018, UNOCHR issued another report documenting abuses committed by units involved in crime fighting, the scale of the health and food crisis, and the continued impunity in cases involving security officers who allegedly killed people during the protests. Other selected human rights reports from 2017-2018 include The Venezuelan human rights group Foro Penal and Human Rights Watch maintain that more than 5,300 Venezuelans were detained during the protests. Together, the organizations documented inhumane treatment of more than 300 detainees that occurred between April and September 2017. In February 2018, the Inter-American Commission on Human Rights (IACHR) released its third report on the situation of human rights in Venezuela. The report highlighted the violation of the separation of powers that occurred as President Maduro and the judiciary interfered in the work of the legislature and then replaced it with a constituent assembly. It then criticized state limits on social protests and freedom of expression and said that the government \"must curtail the use of force against demonstrators.\" In March 2018, the State Department's Country Report on Human Rights Practices for 2017 found that \"human rights deteriorated dramatically\" in 2017 as the government tried hundreds of civilians in military courts and arrested 12 opposition mayors for their \"alleged failure to control protests.\" In May 2018, an independent panel of human rights experts added a legal assessment to a report containing information and witness testimonies gathered by the OAS recommending that the International Criminal Court (ICC) should investigate credible reports that the Venezuelan government committed crimes against humanity. These reports published by international human rights organizations, the U.S. government, U.N. entities, and the OAS/IACHR reiterate the findings of PROVEA, one of Venezuela's leading human rights organizations. In its report covering 2017 (published in June 2018), PROVEA asserts that 2017 was the worst year for human rights in Venezuela since the report was first published in 1989. In addition to violating political and civil rights, PROVEA denounces the Maduro government's failure to address the country's humanitarian crisis, citing its \"official indolence\" as causing increasing deaths and massive emigration. For other sources on human rights in Venezuela, see Appendix C . In September 2017, several countries urged the U.N. Human Rights Council to support the High Commissioner's call for an international investigation into the abuses described in the U.N.'s August 2017 report on Venezuela. In June 2018, the High Commissioner for Human Rights urged the U.N. Human Rights Council to launch a commission of inquiry to investigate the abuses it documented in that and a follow-up report. It referred the report to the prosecutor of the ICC. On September 26, 2018, the U.N. Human Rights Council adopted a resolution on Venezuela expressing \"its deepest concern\" about the serious human rights violations described in the June 2018 report, calling upon the Venezuelan government to accept humanitarian assistance and requiring a UNOCHR investigation on the situation in Venezuela to be presented in 2019. In addition to the UNOCHR, former Venezuelan officials, the OAS, and neighboring countries have asked the ICC to investigate serious human rights violations committed by the Maduro government; the ICC prosecutor opened a preliminary investigation in February 2018. In November 2017, former Attorney General Luisa Ortega presented a dossier of evidence to the ICC that the police and military may have committed more than 1,800 extrajudicial killings as of June 2017. In the dossier, Ortega urged the ICC to charge Maduro and several officials in his Cabinet with serious human rights abuses. An exiled judge appointed by the National Assembly to serve on the \"parallel\" supreme court of justice also accused senior Maduro officials of systemic human rights abuses before the ICC. On September 26, 2018, the governments of Argentina, Canada, Chile, Colombia, Paraguay, and Peru requested an investigation of Venezuela's actions by the ICC—the first time fellow states party to the Rome Statute asked for an investigation into the situation of another treaty member. For decades, Venezuela was one of South America's most prosperous countries. Venezuela has the world's largest proven reserves of oil, and its economy is built on oil. Oil traditionally has accounted for more than 90% of Venezuelan exports, and oil sales have funded the government budget. Venezuela benefited from the boom in oil prices during the 2000s. President Chávez used the oil windfall to spend heavily on social programs and expand subsidies for food and energy, and government debt more than doubled as a share of gross domestic product (GDP) between 2000 and 2012. Chávez also used oil to expand influence abroad through PetroC aribe , a program that allowed Caribbean Basin countries to purchase oil at below-market prices. Although substantial government outlays on social programs helped Chávez curry political favor and reduce poverty, economic mismanagement had long-term consequences. Chávez moved the economy in a less market-oriented direction, with widespread expropriations and nationalizations, as well as currency and price controls. These policies discouraged foreign investment and created market distortions. Government spending was not directed toward investment to increase economic productivity or diversify the economy from its reliance on oil. Corruption proliferated. When Nicolás Maduro took office in 2013, he inherited economic policies reliant on proceeds from oil exports. When oil prices crashed by nearly 50% in 2014, the Maduro government was ill-equipped to soften the blow. The fall in oil prices strained public finances. Instead of adjusting fiscal policies through tax increases and spending cuts, the Maduro government tried to address its growing budget deficit by printing money, which led to inflation. The government also tried to curb inflation through price controls, although these controls were largely ineffective in restricting prices, as supplies dried up and transactions moved to the black market. Meanwhile, the government continued to face a substantial debt burden, with debt owed to private bondholders, China, Russia, multilateral lenders, importers, and service companies in the oil industry. Initially, the government tried to service its debt, fearing legal challenges from bondholders. To service its debt, it cut imports, including of food and medicine, among other measures. In August 2018, the Trump Administration imposed sanctions restricting Venezuela's ability to access U.S. financial markets, which exacerbated the government's fiscal situation. By late 2017, the government had largely stopped paying its bondholders, and Maduro announced plans to restructure its debt with private creditors. It also restructured its debt with Russia. Economic output in Venezuela has collapsed. Venezuela's economy has contracted each year since 2014. As the economic crisis has continued and oil production has plummeted (see Figure 3 ), the pace of economic contraction has accelerated. In 2014, the economy contracted by 3.9%; in more recent years, the pace has increased to 16.5% in 2016, 14% in 2017, and 18% in 2018 (see Figure 2 ). In U.S. dollars, Venezuela's GDP has fallen from $331 billion in 2012 to $96 billion in 2018. Hyperinflation is rampant, creating shortages of critical supplies. The government has rapidly expanded the money supply to finance budget deficits, which has led to one of the worst cases of hyperinflation in history, comparable to Germany in 1923 or Zimbabwe in the late 2000s. In October 2018, the IMF forecast that inflation (as measured by average changes in consumer prices) increased from 254% in 2016 to 1,087% in 2017 to 1,370,000% in 2018 (see Figure 2 ). Hyperinflation, as well as low foreign exchange reserves, which make it difficult for Venezuela to import goods and services, has created shortages of critical supplies (including food and medicine), leading to a humanitarian disaster and fueling massive migration (see \" Humanitarian Situation ,\" below). The government remains in default and continues to run unsustainable fiscal policies. Despite pledges to restructure the country's debt, the government has made no discernable progress in negotiations with private creditors and the country remains in default. According to one estimate, the government and state-owned companies owe nearly $8 billion in unpaid interest and principal. Meanwhile, the government continues to run large budget deficits, forecast at 30% of GDP in 2018, amid high debt levels (estimated to be 160% of GDP). By one measure, debt relative to exports, Venezuela is the world's most heavily indebted country. In general, the government has been slow to address the economic crisis or acknowledge the government role in creating it. Instead, the government has largely blamed the country's struggles on a foreign \"economic war,\" a thinly veiled reference to U.S. sanctions. In February 2018, as a way to raise new funds, the cash-strapped government launched a new digital currency, the \"petro,\" backed by oil and other commodities, which runs on blockchain technology. The government claims the petro raised $3.3 billion, but the amount raised has never been confirmed by an independent audit. Additionally, there are questions about the petro's operational viability: there are few signs of the petro being circulated within Venezuela or sold on any major cryptocurrency exchange. In August 2018, the government acknowledged, for the first time, its role in creating hyperinflation and announced a new set of policies for addressing the economic crisis. The new policies, reportedly developed in consultation with international advisers, included introducing a new \"sovereign bolívar,\" which removed five zeros from the previous currency (the bolívar); cutting the government budget deficit from 30% in 2018 to zero, in part by raising value-added tax and increasing the price of petrol; speeding up tax collection; and increasing the minimum salary by more than 3,000%. Since the plan's rollout in August, there is little evidence that the government's policies have restored confidence in Venezuela's economy. In December 2018, Maduro visited Moscow seeking financial assistance. Although he announced investment deals with Russian partners—$5 billion for the oil industry and $1 billion for the gold industry—Russian officials cast doubt on these commitments. The long-anticipated conflict between investors holding defaulted Venezuelan bonds and the government may be coming to a head. Venezuelan government and PdVSA dollar-denominated bonds were largely issued under New York law. It has been expected that bondholders would seek repayment through legal challenges against the Venezuelan government or PdVSA in the U.S. legal system. If successful in their legal challenges, creditors could receive compensation through seizure of Venezuela's assets in the United States, such as Citgo (whose parent company is PdVSA), oil exports, and cash payments for oil exports. Even though the government started missing payments in late 2017, creditors refrained from mounting legal challenges, presumably hoping for higher recovery rates during a more favorable economic environment and/or negotiations with new government. U.S. sanctions also complicate the restructuring process. However, in mid-December 2018, a group of creditors took an initial step toward launching the legal process, by demanding payment on a defaulted $1.5 billion bond. It is expected that other creditors will organize and follow suit. Venezuela's economic crisis has been ongoing for a number of years, and the outlook is bleak. There is neither a clear nor a quick resolution on the horizon, particularly given the concurrent political crisis. The government's policy responses to the economic crisis—even with the new reforms in August—have been widely criticized as inadequate. The government appears loathe to adopt policies widely viewed by economists as necessary to restoring the economy: removing price controls, creating an independent central bank, engaging with an IMF program, and restructuring its debt with private bondholders. The role of the IMF in particular is problematic, with the government resisting outside support from \"imperialist\" powers. Venezuela has not allowed the IMF to conduct routine surveillance of its economy since 2004, and the IMF has found the government in violation of its commitments as an IMF member. However, in December 2018, the IMF acknowledged that the Venezuelan government provided it with some economic data as required by all IMF members. It remains to be seen whether this will be a turning point in the Maduro government's willingness to engage with the IMF. Some analysts believe a change in Venezuela's overall economic strategy will only come if and when there is a change in government. Oil revenues are an important element of Venezuela's economy and account for approximately 98% of the country's export earnings. Venezuela holds the largest amount of oil reserves in the world with more than 300 billion barrels of proven reserves at the end of 2017. However, oil production and export volumes have been trending downward over the last four years. In 2015, oil production in Venezuela averaged 2.37 million barrels per day (b/d). Oil production declined to average 1.9 million b/d in 2017. In March 2018, the International Energy Agency projected that Venezuela's crude oil production would continue declining to just over 1 million b/d and remain at that level until 2023 (see Figure 3 ). Actual oil production in Venezuela has generally followed the projected trend with production in November 2018 averaging approximately 1.13 million b/d. PdVSA's performance has been affected by a number of factors. Since August 2017, the Maduro government has arrested many executives for alleged corruption, which dissidents within the company assert has been a false pretense for replacing technocrats with military officers. Workers at all levels reportedly are abandoning the company by the thousands. Production has been challenged by aging infrastructure, bottlenecks created by PdVSA's inability to pay service companies and producers, and shortages of inputs (such as light crudes for blending) used to process its heavy crude oil. Massive debt (estimated at some $25 billion), combined with U.S. sanctions limiting the willingness of banks to issue credit to PdVSA and the fact that much of its production does not generate revenue, have added to the company's woes. When Conoco sought to seize PdVSA facilities in the Caribbean over nonpayment of past debts in mid-2018, tankers with crude oil began backing up and the company could not satisfy all of its deliveries. Corruption remains a major drain on the company's revenues and an impediment to performance. In 2016, a report by the National Assembly estimated that some $11 billion disappeared at PdVSA from 2004 to 2014. In February 2018, U.S. prosecutors unsealed an indictment accusing former executives in Venezuela's energy ministry and PdVSA of laundering more than $1 billion in oil income. Corruption, as well as looting and misuse of infrastructure, has continued since a military general with no experience in the sector took control of the company in late 2017 and replaced technocrats with military officers and other loyalists. Declining production by PdVSA-controlled assets, through 2015 contrasted with the performance of joint ventures that PdVSA has with Chevron, CNPC, Gazprom, Repsol, and others. From 2010 to 2015, production declined by 27.5% in fields solely operated by PdVSA, whereas production in fields operated by joint ventures increased by 42.3%. The future of these ventures is uncertain, however, as Maduro's government arrested executives from Chevron in April 2018 after they reportedly refused to sign an agreement under unfair terms. Although they were released in June, Chevron and other companies have scaled back their operations. Instead of relying on experienced partners, military officials with little expertise have signed contracts for basic functions, including drilling, with little-known companies that lack experience. PdVSA has also been under pressure to make payments to bondholders and to Canadian miner Crystallex in order to prevent the transfer of Citgo ownership control. Crystallex was awarded a $1.4 billion settlement in 2011 by the International Court for Settlement of Investment Disputes that was linked to Venezuela seizing the company's gold prospects in 2007. A Delaware court issued a decision that would have allowed Crystallex to seize PDV Holding, the PdVSA subsidiary that is Citgo's parent company. Venezuela reached an agreement with Crystallex to make a payment installment towards the $1.4 billion settlement in November 2018. In December 2018, it was reported that Venezuela had violated terms of the settlement agreement. This results in some uncertainty about the path forward for Crystallex to collect on its arbitration award and the potential future of Citgo ownership control. The Administration has imposed sanctions on Venezuela that are designed to affect PdVSA business operations. Sanctions that specifically affect PdVSA include those that limit access to debt finance for business activities. Generally, limiting PdVSA's access to debt potentially results in difficulties for the company financing business activities and also results in PdVSA having to access non-U.S. sources of capital. To date, the Administration has not imposed sanctions that might target petroleum trade between the United States and Venezuela, which is bilateral but heavily weighted towards U.S. refinery purchases of Venezuelan crude oil (see \" Energy Sector Concerns and Potential U.S. Sanctions ,\" below). Growing numbers of people continue to leave Venezuela for urgent reasons, including insecurity and violence; lack of food, medicine, or access to essential social services; and loss of income. As the pace of arrivals from Venezuela has quickened, neighboring countries, particularly Colombia, are straining to absorb a population that is often malnourished and in poor health. According to a 2017 national survey on living conditions, the percentage of Venezuelans living in poverty increased from 48.4% in 2014 to 87% in 2017. Poverty has been exacerbated by shortages in basic consumer goods, as well as by bottlenecks and corruption in the military-run food importation and distribution system. Basic food items that do exist are largely out of reach for the majority of the population due to rampant inflation. Between 2014 and 2016, Venezuela recorded the greatest increase in malnourishment in Latin America and the Caribbean, a region in which only eight countries recorded increases in hunger. According to Caritas Venezuela (an organization affiliated with the Catholic Church), 15% of children surveyed in August 2017 suffered from moderate to severe malnutrition and 30% showed stunted growth. Venezuela's health system has been affected severely by budget cuts, with shortages of medicines and basic supplies, as well as doctors, nurses, and lab technicians. Some hospitals face critical shortages of antibiotics, intravenous solutions, and even food, and 50% of operating rooms in public hospitals are not in use. According to the Venezuelan Program of Education-Action in Human Rights (PROVEA), a 2018 national hospital survey, 88% of hospitals lack basic medicines and 79% lack basic surgical supplies. In addition, a June 2018 Pan-American Health Organization (PAHO) report estimated that some 22,000 doctors (33% of the total doctors that were present in 2014) and at least 3,000 nurses had emigrated. In February 2017, Venezuela captured international attention following the unexpected publication of data from the country's Ministry of Health (the country had not been releasing such data since 2015). The report revealed significant spikes in infant and maternal mortality rates. By 2017, the infant mortality rate in Venezuela was reportedly 79% higher than it had been in 2011, according to World Bank data. PAHO's June 2018 report also documented the spread of previously eradicated infectious diseases like diphtheria (detected in July 2016) and measles (detected in July 2017). Malaria, once under control, is also spreading rapidly, with more than 400,000 cases recorded in 2017 (a 198% increase over 2015). Increasing numbers of people have also reportedly died from HIV/AIDS in Venezuela due to the collapse of the country's once well-regarded HIV treatment program and the scarcity of drugs needed to treat the disease. Observers are concerned that the lack of access to reliable contraception may hasten the spread of sexually transmitted diseases, unwanted pregnancies, and dangerous clandestine abortions. The World Health Organization (WHO) is reportedly helping the government purchase and deliver millions of vaccines against measles, mumps, and rubella. Nevertheless, doctors and health associations have urged the U.N. entity to provide more assistance and exert more pressure on the government to address the health crisis. Moreover, while President Maduro has publicly rejected offers of international humanitarian assistance, in November 2018, the U.N. Central Emergency Response Fund (CERF) allocated $9.2 million for Venezuela to be provided through U.N. entities, such as the U.N. Children's Fund (UNICEF), WHO, and UNHCR. This emergency humanitarian funding is to support projects providing nutritional support to children under five years old, pregnant women and lactating mothers at risk, and emergency health care and other aid for the vulnerable, including the displaced and host communities in Venezuela. Based on conservative figures from UNHCR and other experts, more than 3 million Venezuelan refugees and migrants had left the country by November 2018, with the vast majority remaining in the Latin America and Caribbean region. As of November 2018, the U.N. High Commissioner for Refugees (UNHCR) estimated that there were over 1 million Venezuelans living in Colombia, 500,000 in Peru, 220,000 in Ecuador 130,000 in Argentina, 100,000 in Chile, 94,000 in Panama, and 85,000 in Brazil. Taken as a percentage of their overall population, Venezuelan arrivals have also significantly impacted smaller countries and territories in the Caribbean. For example, Trinidad and Tobago, a twin-island country with 1.4 million people, estimated in late 2018 that it was hosting some 60,000 Venezuelans, which increased its overall population by more than 4%. By the end of 2019, UNHCR and the International Organization for Migration (IOM) estimate that the number of Venezuelan refugees and migrants could reach over 5.3 million. Although not all of the Venezuelans who have fled the country in recent years may be considered refugees, a significant number are in need of international protection. Responses to the Venezuelan arrivals vary by country and continue to evolve with events on the ground. ( See Figure 4 .) Between September 2014 and 2018, roughly 400,000 Venezuelans in the region and beyond (in the United States, Canada, Spain, and elsewhere) applied for political asylum (specific legal protection for which most migrants do not qualify.) As of October 2018, a further 960,000 Venezuelan arrivals in Latin America had been granted alternative legal forms of stay (which typically enables access to social services and the right to work.) Humanitarian experts are most concerned about the roughly 60% of Venezuelans in neighboring countries who lack identification documents. The Venezuelan government has made it increasingly difficult for Venezuelans to obtain a valid passport and therefore legal status outside the country. Those who lack status are vulnerable to arrest and deportation by governments and to abuse by criminal groups, including human trafficking. This is a significant displacement crisis for the Western Hemisphere, which has in place some of the highest international and regional protection standards for displaced and vulnerable persons. Neighboring countries are under pressure to examine their respective migration and asylum policies and to address, as a region, the legal status of Venezuelans who have fled their country. Humanitarian organizations and governments are responding to the needs of displaced Venezuelans in the region. Protection and assistance needs are significant for arrivals and host communities. Services provided vary by country but include support for reception centers and options for shelter; emergency relief items, such as emergency food assistance, safe drinking water, and hygiene supplies; legal assistance with asylum applications and other matters; protection from violence and exploitation; and the creation of temporary work programs and education opportunities. International Humanitarian Assistance. U.N. agencies and other international organizations have launched appeals for additional international assistance, and the U.S. government is providing humanitarian assistance and helping to coordinate regional response efforts (see \" U.S. Humanitarian and Related Assistance ,\" below). The U.N. Secretary-General appointed UNHCR and IOM to coordinate the international response, which includes U.N. entities, nongovernmental organizations, the Red Cross Movement, faith-based organizations, and civil society. Former Guatemalan Vice President Eduardo Stein has been appointed the U.N. Joint Special Representative for Venezuelan Refugees and Migrants to promote dialogue and consensus in the region and beyond on the humanitarian response. In mid-December 2018, UNHCR and IOM launched the regional Refugee and Migrant Response Plan (RMRP), which is the first of its kind in the Americas: an operational and coordination strategy \"responding to the needs of Venezuelans on the move and securing their social and economic inclusion in the communities receiving them.\" The RMRP was put together by 95 organizations covering 16 countries. The RMRP is also an appeal for $738 million in funding to support over 2 million Venezuelans and half a million people in host communities. It focuses on four key areas: direct emergency assistance, protection, socio-economic and cultural integration and strengthening capacities in the receiving countries. The Maduro government has maintained Venezuela's foreign policy alliance with Cuba and a few other leftist governments in Latin America, but the country's ailing economy has diminished its formerly activist foreign policy, which depended on its ability to provide subsidized oil to 17 other Caribbean Basin countries. President Maduro has increasingly relied on financial backing from China and Russia. Unlike under Chávez, an increasing number of countries have criticized authoritarian actions taken by the Maduro government, brought concerns about Venezuela to regional and global organizations, and implemented targeted sanctions against its officials. Since more than 50 countries did not recognize the results of the May 2018 presidential elections and do not consider his current presidency legitimate, Maduro is likely to face increasing international isolation. The OAS has voted not to recognize the legitimacy of Maduro's current term, mirroring the U.S. and EU positions. Paraguay has broken diplomatic ties with the Maduro government and Peru has recalled its last diplomat from Caracas and pledged not to permit Venezuelan officials to travel through its territory. Other countries may follow suit. Venezuela's foreign relations have become more tenuous as additional countries have sanctioned its officials. In September 2017, Canada implemented targeted sanctions against 40 Venezuelan officials deemed to be corrupt; it added another 14 individuals, including President Maduro's wife, following the May elections. In November 2017, the EU established a legal framework for targeted sanctions and adopted an arms embargo against Venezuela to include related material that could be used for internal repression. These actions paved the way for targeted EU sanctions on seven Venezuelan officials in January 2018. On June 25, 2018, the Council of the EU sanctioned 11 additional individuals for human rights violations and undermining democracy and called for new presidential elections to be held. Those sanctions will remain in place through late 2019. In March 2018, Panama and Switzerland sanctioned Venezuelan officials. Additional sanctions by these countries are possible now that they consider Maduro's mandate illegitimate. Ties between Venezuela and a majority of South American countries have frayed with the rise of conservative governments in Argentina, Brazil, Chile, Colombia, and Peru and with Maduro's increasingly authoritarian actions. In December 2016, the South American Common Market (Mercosur) trade bloc suspended Venezuela over concerns that its government had violated the requirement that Mercosur's members have \"fully functioning democratic institutions.\" Six UNASUR members—Uruguay, Argentina, Brazil, Chile, Colombia, and Paraguay—issued a joint statement opposing the Venezuelan Supreme Court's attempted power grab in March 2017. According to the Colombian government, it is working with other South American countries to create a new regional entity to replace UNASUR and isolate Venezuela. Concerned about potential spillover effects from turmoil in Venezuela, Colombia has supported OAS actions, provided humanitarian assistance to Venezuelan economic migrants and asylum seekers, and closely monitored the situation on the Venezuelan-Colombian border. Colombian President Ivan Duque and Brazilian President Jair Bolsonaro have pledged to support efforts to hasten Maduro's exit from power. Tensions remain high along the border with Guyana after the U.N. proved unable to resolve a long-standing border-territory dispute between the countries and referred the case to the International Court of Justice in January 2018. Venezuela's navy stopped ExxonMobile ships doing seismic surveys for the Guyanese government in December 2018. On August 8, 2017, 12 Western Hemisphere countries signed the Lima Accord, a document rejecting the rupture of democracy and systemic human rights violations in Venezuela, refusing to recognize the ANC, and criticizing the government's refusal to accept humanitarian aid. The signatory countries are Mexico; Canada; four Central American countries (Costa Rica, Guatemala, Honduras, and Panama); and six South American countries (Argentina, Brazil, Chile, Colombia, Paraguay, and Peru). Although the Lima Group countries support targeted U.S. economic sanctions, most reject any discussion of military intervention and most are not in favor of restrictions on U.S. petroleum trade with Venezuela. On February 13, 2018, Guyana and St. Lucia joined the Lima Group as it issued a statement calling for the Maduro government to negotiate a new electoral calendar that is agreed upon with the opposition and to accept humanitarian aid. These nations also backed Peru's decision to disinvite President Maduro to the Summit of the Americas meeting of Western Hemisphere heads of state in April 2018. The Lima Group did not recognize the results of the May 20, 2018, Venezuelan elections. Its members were among the 19 countries that voted in favor of an OAS resolution on Venezuela approved on June 5, 2018. The resolution said that the electoral process in Venezuela \"lacks legitimacy\" and authorized countries to take \"the measures deemed appropriate,\" including sanctions, to assist in hastening a return to democracy in Venezuela . On January 4, 2019, thirteen members of the Lima Group (excluding Mexico) signed a declaration that urged President Maduro not to assume power on January 10, 2019 and to cede control of the country to the National Assembly until elections can be held. The signatories resolved to reassess their level of diplomatic engagement with Venezuela, implement travel bans or sanctions (where possible) on high-level Maduro government officials, suspend military cooperation and arms transfers to Venezuela, and evaluate whether to give loans to the Maduro government at regional and international financial institutions, among other measures. While Mexico had previously been an active member of the Lima Group, the leftist government of Andrés Manuel López Obrador has adopted policy of nonintervention in foreign affairs and did not vote for the measure. While some have criticized this policy shift, others maintain that Mexico could perhaps arbitrate between the government and the opposition. Those same thirteen countries also joined with the United States and five others to support a January 10, 2019 OAS resolution on Venezuela not recognizing the legitimacy of Maduro's second term. (See Appendix B for OAS efforts on Venezuela.) The Maduro government has continued to count on political support from Cuba, Bolivia, and Nicaragua, which, together with Venezuela, were key members of the Bolivarian Alliance of the Americas (ALBA), a group launched by President Chávez in 2004. Caribbean members of ALBA—Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, and St. Vincent and the Grenadines—had, until recently, been reluctant to take action that could anger the Maduro government. Since Lenín Moreno took office in May 2017, the Ecuadorian government (another ALBA member) has been critical of the Maduro government. Most of these governments abstained from the June 5, 2018, OAS vote on the legitimacy of the election in Venezuela, with only Bolivia, Dominica, and St. Vincent and the Grenadines voting with Venezuela and against the measure. In January 2019, Ecuador and Haiti voted in favor of the OAS measure that deemed Maduro's second term illegitimate, only Bolivia, Dominica, Nicaragua, St. Vincent and the Grenadines, and Suriname voted with Venezuela and against the measure. Cuba's close relationship with Venezuela was solidified in 2000, when the countries signed an agreement for Venezuela to provide Cuba at least 90,000 barrels of oil per day (b/d) in exchange for technical assistance and other services. Estimates of the number of Cuban personnel in Venezuela vary, but a 2014 study estimated that there were 40,000, 75% of whom were health care workers. At that time, the report said that the number of Cuban military and intelligence advisors in Venezuela may have ranged from hundreds to thousands, coordinated by Cuba's military attaché in Venezuela. It is unclear how many of those professionals have stayed in the country, but Cuban intelligence officers have reportedly helped the Maduro government identify and disrupt coup plots. Although Cuba has imported more oil from Russia and Algeria to make up for dwindling Venezuelan supplies since 2017, the Maduro government remains committed to providing what it can, even if it has to be purchased from other sources. As Venezuela's economic situation has deteriorated, maintaining close relations with China and Russia, the country's largest sources of financing and investment, has become a top priority. From 2007 through 2016, China provided some $62.2 billion in financing to Venezuela. The money typically has been for funding infrastructure and other economic development projects, but has also included some lending for military equipment. It is being repaid through oil deliveries. Although the Chinese government has been patient when Venezuela has fallen behind on its oil deliveries, it reportedly stopped providing new loans to Venezuela in fall 2016. Some observers have criticized China for its continued support to the Venezuelan government and questioned whether a new Venezuelan government might refuse to honor the obligations incurred under Maduro. China refrained from negative commentary after the Constituent Assembly elections and accepted the May 2018 election results. It has responded to U.S. sanctions by stating that \"unilateral sanctions will make the situation even more complicated.\" Russia has remained a strong ally of the Maduro government. It has called for the political crisis in Venezuela to be resolved peacefully, with dialogue, and without outside interference. Russia's trade relations with Venezuela currently are not significant, with $336 million in total trade in 2016, with $334 million, consisting of Russian exports to Venezuela. However, Venezuela had been a major market for Russian arms sales between 2001 and 2013, with over $11 billion in sales. Press reports in May 2017 asserted that Venezuela had more than 5,000 Russian-made surface-to-air missiles, raising concern by some about the potential for them being stolen or sold to criminal or terrorist groups. Russia's 2017 decision to allow Venezuela to restructure $3.15 billion in debt provided much-needed financial relief to the Maduro government. Russian state oil companies Rosneft and Gazprom have large investments in Venezuela. Both are seeking to expand investments in Venezuela's oil and gas markets (see \" Energy Sector Concerns ,\" below). Russia congratulated President Maduro on his reelection and inauguration. Maduro visited Russia to seek investment in early December 2018 after which news reports suggested that Rosneft has lent PdVSA $6.5 billion, partly as a prepayment for crude oil. Russia then sent two nuclear-capable jets to Venezuela to conduct joint exercises (which also occurred in 2008 and 2013) in mid-December in a show of support for the government. The United States historically has had close relations with Venezuela, a major U.S. foreign oil supplier, but friction in relations increased under the Chávez government and has intensified under the Maduro regime. For more than a decade, U.S. policymakers have had concerns about the deterioration of human rights and democratic conditions in Venezuela and the lack of bilateral cooperation on counternarcotics and counterterrorism efforts. U.S. officials have expressed increasing concerns regarding Colombian criminal and terrorist groups in Venezuela. U.S. democracy and human rights funding, which totaled $15 million in FY2018, and political support have bolstered democratic civil society in Venezuela. U.S. humanitarian assistance is supporting Venezuelans who have fled to neighboring countries. The United States has employed various sanctions in response to concerns about the activities of the Venezuelan government or Venezuela-linked individuals and entities. Targeted sanctions escalated after President Maduro usurped the power of the National Assembly by holding constituent assembly elections on July 30, 2017. In the wake of the May 2018 elections that the United States and much of the international community deemed illegitimate, the Trump Administration has sought to increase pressure on the Maduro government in order to hasten a return to democracy in Venezuela. The Administration has ratcheted up targeted sanctions on Venezuelan officials accused of corruption, antidemocratic actions, or human rights abuses under Executive Order (E.O.) 13692 (issued by President Obama in 2015) and on Venezuela-linked individuals and entities for drug trafficking. President Trump issued three executive orders restricting the government and PdVSA's ability to access the U.S. financial system (E.O. 13808), barring U.S. purchases of Venezuela's new digital currency (E.O. 13827), and prohibiting U.S. purchases of Venezuelan debt (E.O. 13835). E.O. 13850, issued in November 2018, created a framework to sanction those who operate in Venezuela's gold sector or those deemed complicit in corrupt transactions involving the government. Following President Maduro's second inauguration, Secretary of State Michael Pompeo pledged to \"use the full weight of U.S. economic and diplomatic power to press for the restoration of Venezuelan democracy.\" National Security Adviser John Bolton lent support to National Assembly leader Juan Guaidó's decision \"to invoke protections under Venezuela's constitution and declare that Maduro does not legitimately hold the country's presidency.\" Vice President Pence has also lent his support to Guaidó. According to U.S. officials, forthcoming U.S. actions could limit or prohibit petroleum trade with Venezuela. Some analysts maintain that oil sanctions could hasten the regime's demise, whereas others caution that such sanctions could inflict further suffering on the Venezuelan people. For more than a decade, the United States has provided democracy-related assistance to Venezuelan civil society through the U.S. Agency for International Development (USAID) and the National Endowment for Democracy (NED). From 2002 through 2010, USAID supported small-grant and technical assistance activities through its Office of Transition Initiatives (OTI) to provide assistance monitoring democratic stability and strengthening the county's democratic institutions. At the end of 2010, USAID's support for such activities in Venezuela was transferred from OTI to USAID's Latin America and Caribbean Bureau. U.S. democracy and human rights assistance to Venezuela amounted to $4.3 million in each of FY2014 and FY2015 and $6.5 million in FY2016, provided through the Economic Support Fund (ESF) funding account. U.S. assistance totaled $7 million in FY2017, provided through the Development Assistance Account. The Trump Administration did not request any assistance for democracy and human rights programs in Venezuela for FY2018. Nevertheless, Congress provided $15 million in democracy and human rights assistance to civil society groups in Venezuela in P.L. 115-141 . For FY2019, the Trump Administration requested $9 million to support democracy and human rights programs in Venezuela that strengthen civil society, democratic institutions and processes, and independent media. Congress has yet to enact a full-year FY2019 appropriations measure, although a series of continuing resolutions provided FY2019 funding through December 21, 2018. Legislation to fund foreign aid programs for the remainder of FY2019 could incorporate provisions from the State, Foreign Operations, and Related Programs appropriations measures that the House and Senate Appropriations Committees approved during the 115 th Congress. The House Committee bill ( H.R. 6385 ) recommended providing $15 million for programs in Venezuela, while the Senate Committee bill ( S. 3108 ) recommended $20 million. As noted above, NED has funded democracy projects in Venezuela since 1992. U.S. funding for NED is provided in the annual State Department and Foreign Operations appropriations measure, but country allocations for NED are not specified in the legislation. In FY2017, NED funded 43 projects in Venezuela totaling $2.6 million (up from $1.6 million in FY2016). The U.S. government is providing humanitarian and emergency food assistance and helping to coordinate and support regional response efforts. As of September 30, 2018 (latest data available), U.S. government humanitarian funding for the Venezuela regional response totaled approximately $96.5 million for both FY2017 and FY2018 combined, of which $54.8 million was for Colombia. (Humanitarian funding is drawn primarily from the global humanitarian accounts in annual Department of State/Foreign Operations appropriations acts.) From October through the end of December, the U.S. Navy hospital ship USNS Comfort was on an 11-week medical support deployment to work with government partners in Ecuador, Peru, Colombia, and Honduras, in part to assist with arrivals from Venezuela. In Colombia, the U.S. response aims to help the Venezuelan arrivals as well as the local Colombian communities that are hosting them. In addition to humanitarian assistance, the United States is also providing $37 million in bilateral assistance to support medium and longer-term efforts by Colombia to respond to the Venezuelan arrivals. In Venezuela, as in other countries, the U.S. government has used targeted sanctions to signal disapproval of officials who have violated U.S. laws or international human rights norms and to attempt to deter others from doing so. Targeted sanctions can punish officials or their associates who travel internationally and hold some of their assets in the United States without causing harm to the population as a whole. Some argue that sanctioning additional Venezuelan officials might help to increase pressure on the Maduro government to cede power or at least stop violating human rights, whereas others argue that increased sanctions would only encourage Maduro and his allies to harden their positions. In December 2014, the 113 th Congress enacted the Venezuela Defense of Human Rights and Civil Society Act of 2014 ( P.L. 113-278 ). Among its provisions, the law required (until December 31, 2016) the President to impose sanctions (asset blocking and visa restrictions) against those whom the President determined were responsible for significant acts of violence or serious human rights abuses associated with the 2014 protests or, more broadly, against anyone who had directed or ordered the arrest or prosecution of a person primarily because of the person's legitimate exercise of freedom of expression or assembly. In July 2016, Congress enacted legislation ( P.L. 114-194 ) extending the termination date of the requirement to impose sanctions until December 31, 2019. In March 2015, President Obama issued Executive Order (E.O.) 13692 , which implemented P.L. 113-278 and went beyond the requirements of the law. The E.O. authorized targeted sanctions against (1) those involved in actions or policies that undermine democratic processes or institutions; (2) those involved in significant acts of violence or conduct constituting a serious abuse or violation of human rights; (3) those involved in actions that prohibit, limit, or penalize the exercise of freedom of expression or peaceful assembly; or (4) those senior Venezuelan officials involved in public corruption. The Department of the Treasury has imposed sanctions on 65 Venezuelans pursuant to E.O. 13692. In March 2015, the Department of the Treasury froze the assets of six members of Venezuela's security forces and a prosecutor involved in repressing antigovernment protesters. Under the Trump Administration, the Department of the Treasury has imposed sanctions against an additional 65 Venezuelans pursuant to E.O. 13692, including members of the Supreme Court, CNE, Cabinet, Constituent Assembly, and security forces (army, national guard, and police). On July 31, 2017, the Administration imposed sanctions on President Maduro, one of four heads of state subject to U.S. sanctions. On May 18, 2018, the U.S. Department of the Treasury imposed sanctions on four current or former Venezuelan officials, including Diosdado Cabello. In September 2018, Treasury sanctioned four members of President Maduro's inner political circle, including his wife Celia Flores and executive vice president Delcy Rodriguez. Other Targeted Sanctions. On November 1, 2018, President Trump signed E.O. 13850, creating a framework to sanction those who operate in Venezuela's gold sector (where much of the gold is produced illegally) or those deemed complicit in corrupt transactions involving the government (see \" Illegal Mining ,\" below). In January 2019, sanctions were imposed under that Executive Order against seven individuals including a former Venezuelan treasurer and a television magnate, and 23 companies involved in a scheme to bribe the government and steal $2.4 billion in state funds. Trafficking in Persons Sanctions . Since 2014, Venezuela has received a Tier 3 ranking in the State Department's annual Trafficking in Persons (TIP) reports. U.S. assistance to Venezuela has not been subject to TIP-related sanctions, since the democracy and human rights aid provided goes to nongovernmental organizations and has been deemed to be in the U.S. national interest. According to the June 2018 TIP report, although the government arrested seven trafficking suspects, it did not provide any data on prosecutions or convictions, victims identified, or any other anti-trafficking efforts. President Trump signed E.O. 13808, effective August 25, 2017, imposing new sanctions that restrict the Venezuelan government's access to U.S. financial markets, which has been an important source of capital for the government and PdVSA. According to the White House, the measures \"are carefully calibrated to deny the Maduro dictatorship a critical source of financing to maintain its illegitimate rule, protect the U.S. financial system from complicity in Venezuela's corruption and in the impoverishment of the Venezuelan people, and allow for humanitarian assistance.\" Sanctions targeting sovereign debt are unusual, but not unprecedented. The sanctions seek to cut off new funds flowing from U.S. investors or through the U.S. financial system to the Maduro government. To this end, sanctions restrict transactions by U.S. investors or within the United States related to new debt issued by the Venezuelan government and PdVSA. U.S. persons are also prohibited from purchasing securities from the Venezuelan government. Additionally, CITGO—whose parent company is PdVSA—is prohibited from distributing profits to the Venezuelan government, though it can continue its operations in the United States. Additionally, the sanctions target new short-term debt (less than 30 days for the Venezuelan government and less than 90 days for PdVSA). This ensures continued access to short-term financing that facilitates U.S. trade with Venezuela, including U.S. imports of oil from Venezuela. Concurrent with the release of the Executive Order in August, Treasury issued licenses to minimize the impact of sanctions on U.S. economic interests and on the Venezuelan people. When the sanctions were announced in August 2017, there was debate about whether they would push Venezuela to default, or whether the government would find alternative sources of financing through new oil-for-loan deals with Russia and China or taking cash from PdVSA. Most economists agree that the sanctions made the fiscal position of the government more difficult, as many international banks ceased all financial transactions with Venezuela, and as sanctions accelerated the decline in Venezuelan oil exports to the United States. In 2018, the Trump Administration issued two additional executive orders to further tighten Venezuela's access to U.S. financial markets. Executive Order 13827, issued in March 2018, prohibits U.S. investors from purchasing or transacting in Venezuela's new digital currency, the petro, designed to help the government raise funds and circumvent U.S. sanctions. Executive Order 13835, issued in May 2018, prohibits U.S. investors from buying debt or accounts receivable with the Venezuelan government, including PdVSA, measures devised to close off an \"avenue for corruption\" used by Venezuelan government officials to enrich themselves. Venezuela has among the highest crime victimization and homicide rates in Latin America and the Caribbean, the region with the highest homicide rates in the world. According to the Venezuelan Violence Observatory (OVV), the homicide rate in Venezuela declined in 2018 (81.4 homicides per 100,000 people) as compared to a rate of 89.1 per 100,000 people in 2017, with part of that decline attributed to migration that has reduced the population. The impunity rate for homicide in Venezuela is roughly 92%. Although many homicides have been committed by criminal groups, extrajudicial killings by security forces and allied armed civilian militias ( collectivos ) also have been rising. In September 2018, Amnesty International published a report describing how security forces have adopted militarized approaches to public security that have resulted in numerous human rights abuses, including extrajudicial killings. A May 2018 report by Insight Crime identified more than 120 high-level Venezuelan officials who have engaged in criminal activity, which has blurred the lines between crime groups and the state. Many of those officials allegedly have engaged in drug trafficking (discussed below), but others reportedly have deputized illegal groups in the neighborhoods and prisons, run smuggling operations in border areas, and extracted revenue from state industries. In 2016, a National Assembly committee estimated that kleptocracy had cost the country some $70 billion. Venezuela's pervasive corruption and extensive 1,370-mile border with Colombia have made the country a major transit route for cocaine destined for the United States and an attractive environment for drug traffickers and other criminals to engage in money laundering. In 2005, Venezuela suspended its cooperation with the U.S. Drug Enforcement Administration (DEA) after alleging that DEA agents were spying on the government, charges U.S. officials dismissed as baseless. Prior to that time, the governments had negotiated an antidrug cooperation agreement (an addendum to a 1978 Bilateral Counternarcotics agreement) that would have enhanced information-sharing and antidrug cooperation. Venezuela has yet to approve that agreement. Since 2005, Venezuela has been designated annually as a country that has failed to adhere to its international antidrug obligations, pursuant to international drug-control certification procedures in the Foreign Relations Authorization Act, FY2003 ( P.L. 107-228 ). In September 2018, President Trump designated Venezuela as one of two countries not adhering to its antidrug obligations. At the same time, President Trump waived economic sanctions that would have curtailed U.S. assistance for democracy programs. The State Department reported in its 2018 International Narcotics Control Strategy Report (INCSR) that Venezuela was one of the preferred trafficking routes for the transit of illicit drugs out of South America, especially cocaine, because of the country's porous border with Colombia, economic crisis, weak judicial system, sporadic international counternarcotics cooperation, and permissive and corrupt environment. The report notes the following: Cocaine is trafficked via aerial, terrestrial, and maritime routes, with most drug flights departing from Venezuelan states bordering Colombia and maritime trafficking that includes the use of large cargo containers, fishing vessels, and \"go-fast\" boats. Maritime trafficking may have increased in 2017. The vast majority of drugs transiting Venezuela in 2017 were destined for the Caribbean, Central America, the United States, West Africa, and Europe. Colombian drug-trafficking organizations—including multiple criminal bands, the FARC, and the National Liberation Army (ELN)—facilitate drug transshipment through Venezuela. Mexican drug-trafficking organizations also operate in the country. Despite a nearly 134% increase in coca cultivation from 2013 to 2016 and a more than 200% increase in potential cocaine production in Colombia, the report states that Venezuelan antidrug forces seized only 32 metric tons (MT) of drugs in the first six months of 2016 (the most recent data available), compared to 66 MT in the first eight months of 2015. They also reported seizing two cocaine labs in the state of Zulia in August 2017. \"Venezuelan authorities do not effectively prosecute drug traffickers, in part due to political corruption,\" but Venezuelan law enforcement officers also \"lack the equipment, training, and resources required to impede the operations of major drug trafficking organizations.\" Venezuela and the United States continue to use a 1991 bilateral maritime agreement to cooperate on interdiction. In 2016, Venezuela worked with the U.S. Coast Guard in six maritime drug interdiction cases (down from 10 in 2015). In addition to State Department reports, a report by Insight Crime entitled Drug Trafficking Within the Venezuelan Regime: the Cartel of the Suns describes in detail how the Venezuelan military, particularly the National Guard, has been involved in the drug trade since 2002. It names officials who have been sanctioned or accused of drug trafficking-related crimes, as well as others for whom there is significant evidence of their involvement in the drug trade. Insight Crime also has documented how the Cartel of the Suns has interacted with illegally armed groups and drug traffickers in Colombia, trafficked cocaine through the Dominican Republic and Honduras, and engaged in corruption with politicians and businesses in El Salvador. Recent cases in the United States also demonstrate the involvement of high-level Venezuelan officials or their relatives in international drug trafficking. President Maduro either has dismissed those cases or appointed the accused to Cabinet positions, where they presumably will be protected from extradition. Some observers have maintained that it may therefore be difficult to persuade officials to leave office through democratic means if, once out of power, they likely would face extradition and prosecution in the United States. On August 1, 2016, the U.S. Federal Court for the Eastern District of New York unsealed an indictment from 2015 against two Venezuelans for cocaine trafficking to the United States. The indictment alleged that General Néstor Luis Reverol Torres, former general director of Venezuela's National Anti-Narcotics Office (ONA) and former commander of Venezuela's National Guard, and Edylberto José Molina, former subdirector of ONA, participated in drug-trafficking activities from 2008 through 2010. President Maduro responded by appointing General Reverol as Minister of Interior and Justice in charge of the country's police forces. In December 2017, two nephews of First Lady Cilia Flores—Franqui Francisco Flores de Freitas and Efraín Antonio Campo Flores—were sentenced to 18 years in a U.S. federal prison for conspiring to transport cocaine into the United States. The two nephews had been arrested in Haiti in November 2015 and convicted in the United States in November 2016. The Department of the Treasury has imposed sanctions on at least 22 individuals and 27 companies with connections to Venezuela for narcotics trafficking by designating them as Specially Designated Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act, P.L. 106-120 , Title VIII; 21 U.S.C. 1901 et seq.). On February 13, 2017, the Department of the Treasury imposed drug-trafficking sanctions against then-Vice President Tareck el Aissami and an associate. In addition to drug trafficking, the 2018 INCSR discusses Venezuela's high level of vulnerability to money laundering and other financial crimes. According to the report, money laundering is widespread in the country and is evident in industries ranging from government currency exchanges to banks to real estate to metal and oil. Venezuela's currency-control system requires individuals and firms to purchase hard currency from the government's currency commission at a fixed exchange rate, which has created incentives for trade-based money laundering. Venezuela revised its laws against organized crime and terrorist financing in 2014 but excluded the government and state-owned industries from the scope of any investigations. The unit charged with investigating financial crimes has \"limited operational capabilities,\" and there is a lack of political will in the judicial system to combat money laundering and corruption. The 2018 INCSR concludes that Venezuela's \"status as a drug transit country, combined with weak AML supervision and enforcement, lack of political will, limited bilateral cooperation, an unstable economy, and endemic corruption\" make the country vulnerable to money laundering. As an example, in mid-June 2018, a U.S. district judge sentenced the Florida owners of a construction equipment export company who had been found guilty of laundering and transferring $100 million from Venezuela to bank accounts in the United States and other countries. On September 20, 2017, the Department of the Treasury's Financial Crimes Enforcement Network advised U.S. financial institutions to report any suspicious financial transactions that could have a nexus with Venezuela. The advisory urges U.S. institutions to exercise increased scrutiny over transactions that may involve lesser-known state-owned enterprises connected to the government. It also warns that recent sanctions against Venezuelan officials could \"increase the likelihood that other non-designated Venezuelan senior political figures may seek to protect their assets.\" Although more than 95% of Venezuela's export revenue comes from oil and gas exports, gold mining, both licit and illicit, has accelerated as the country's economy has collapsed in the face of low global oil prices and an ongoing political crisis. According to the Global Initiative against Transnational Organized Crime, 91% of gold produced in Venezuela was mined illegally—the highest rate in Latin America, even prior to the current crisis. Over the past three years, a boom in illegal mining in Venezuela reportedly has contributed to deforestation and environmental degradation in indigenous areas, clashes between rival criminal gangs and violence committed by those gangs against miners whom they extort, and an outbreak of malaria (a disease that had been eradicated). According to numerous reports, the illegal mining industry also commits various human rights violations, reportedly including the forcible recruitment of child labor from the indigenous Yanomami tribe. Illegally armed groups are active on both sides of the Colombia-Venezuelan border. Former Colombian paramilitaries (the Rastrojos), reportedly control important gasoline smuggling routes between Venezuela and Colombia. National Liberation Army (ELN) guerrillas from Colombia have sought to control illicit gold mining areas near the Colombia-Guyana border. Both the ELN, which is still engaged in armed conflict with the Colombian government, and its rival, the Popular Liberation Army (EPL) reportedly recruit Venezuelans to cultivate coca. Human trafficking and sexual exploitation of Venezuelan migrants is prevalent in Colombia and border regions straddling the countries. Finally, experts assert that dissident FARC guerrillas are using border areas to regroup; they may also be coordinating efforts with the ELN. Violence among these groups and between the groups and the Venezuelan government has escalated, threatening security on both sides of the border. Conflict between the ELN and the EPL over control of the cocaine trade led to an August 2018 daytime shootout in a town on the Colombian side of the border in which eight people died. Since early 2018, Freddy Bernal, an official on the U.S. Kingpin List who allegedly supplied arms to the FARC, has served as head of security in Táchira state bordering Colombia. After Bernal ordered an elite police unit to arrest members of the Rastrojos, the group attacked a Venezuelan military base in October 2018, killing three soldiers. The ELN reportedly killed three Venezuelan national guardsmen in Amazonas state in November 2018. As this violence has occurred, Colombia has also protested periodic crossings into its territory by Venezuelan troops. The Secretary of State has determined annually, since 2006, that Venezuela has not been \"cooperating fully with United States antiterrorism efforts\" pursuant to Section 40A of the Arms Export Control Act (AECA). Per the AECA, such a designation subjects Venezuela to a U.S. arms embargo, which prohibits all U.S. commercial arms sales and retransfers to Venezuela. The most recent determination was made in May 2018. In 2008, the Department of the Treasury imposed sanctions (asset freezing and prohibitions on transactions) on two individuals and two travel agencies in Venezuela for providing financial support to Hezbollah, which the Department of State has designated a Foreign Terrorist Organization. The action was taken pursuant to E.O. 13224, aimed at impeding terrorist funding. The State Department's most recent annual terrorism report, issued in September 2018, stated that \"country's porous borders offered a permissive environment to known terrorist groups.\" Unlike in years past, the report did not identify any specific terrorist groups or sympathizers present in the country. This designation would trigger an array of sanctions, including aid restrictions, requirement for validated export licenses for dual-use items, and other financial restrictions. Critics caution there is a lack of evidence to conclude that the Venezuelan government has \"repeatedly provided support for acts of international terrorism,\" as required by law. Petroleum trade between the United States and Venezuela is bilateral, although heavily weighted toward Venezuelan crude oil exports to U.S. refiners. Traditionally, Venezuela has been a major supplier of crude oil imports into the United States, but the amount, value, and relative share of U.S. oil imports from Venezuela declined in recent years. In 2017, Venezuela was the fourth-largest foreign supplier of crude oil to the United States (behind Canada, Saudi Arabia, and Mexico), providing an average of 618,000 b/d, down from 1.5 million b/d in 2015 (see Figure 5 ). U.S. oil imports from Venezuela have continued to decline in 2018 to a reported annual average of roughly 500,000 b/d, the lowest since 1989. Oil is by far Venezuela's major export to the United States. According to U.S. trade statistics, Venezuela's oil exports to the United States were valued at $11.7 billion in 2017, accounting for 95% of Venezuela's exports to the United States. This figure is down from $29 billion in 2014, reflecting the steep decline in the price of oil. In addition to importing crude oil from Venezuela, the United States also exports light crude oil and other product inputs to Venezuela needed to blend with and refine Venezuelan heavy crude oil. About half of U.S. exports to Venezuela consist of light crude oil and other oil product inputs. The decline in U.S. imports of oil from Venezuela is driven by a number of factors, including Venezuela's decreased production and increased U.S. oil imports from Canada. U.S. sanctions also are making oil imports from Venezuela more difficult. Under the sanctions, U.S. partners can extend new credit to PdVSA for up to 90 days only. PdVSA has dealt with its fiscal problems by delaying payments and paying service providers with promissory notes in lieu of payments. There are concerns that delayed payments and promissory notes would count as new credit and, if their maturity exceeds 90 days, would violate sanctions. These payment issues have contributed to the slowdown in oil production, although they have not halted it. Various sanction options on Venezuela's petroleum sector reportedly have been considered by the Trump Administration as a potential means of applying economic pressure on the Maduro government. Generally, the economic impact of sanctions will depend on the timing (e.g., immediate versus phased) of each option as well as whether or not such sanctions are unilateral (i.e., U.S. only) or multilateral (i.e., U.S. cooperation with other countries). The greatest impact could come from prohibiting Venezuelan petroleum exports to the United States, the largest element of petroleum trade between the countries. From Venezuela's perspective, the country would lose access to a close-proximity market that provides much-needed cash flow to the government. Venezuela would need to find alternative markets for these crude volumes, with India and China being likely destinations. Initially, in order to sell crude to alternative markets, Venezuelan oil may need to be price discounted. The magnitude of this discount is uncertain, and the financial impact would depend on the prevailing market price of crude oil at the time such a prohibition might be introduced. U.S. oil refiners also would be affected by a prohibition on Venezuelan oil imports. Initially, prices for substitute crude oils likely would rise to attract alternative sources of supply (e.g., Canada and Iraq). Although a limited number of U.S. refiners acquire crude oil from Venezuela, any crude oil price increase likely would impact all refiners. U.S. oil producers, however, would benefit financially from an increase in oil prices. Over the past three years, the U.S. government has supported the organization's efforts under Secretary General Luis Almagro to address the situation in Venezuela. Although the United States' ability to advance its policy initiatives within the OAS generally has declined as Latin American governments have adopted more independent foreign policy positions, OAS efforts on Venezuela have complemented U.S. objectives. (See Appendix B for details on OAS efforts.) OAS Secretary General Almagro (who assumed his position in May 2015) has spoken out strongly about the situation in Venezuela. On May 31, 2016, the Secretary General invoked the Inter-American Democratic Charter, Article 20—a collective commitment to promote and defend democracy—when he called on the OAS Permanent Council to convene an urgent session on Venezuela to decide whether \"to undertake the necessary diplomatic efforts to promote the normalization of the situation and restore democratic institutions.\" He issued a report on the political and economic situation in Venezuela, concluding that there were \"serious disruptions of the democratic order\" in the country. The Permanent Council received the report, but struggled until mid-2018 to achieve consensus on how to respond to the evolving crises. In March 2017, OAS Secretary General Almagro issued a new report to the Permanent Council, which called on the Venezuelan government to undertake a series of measures to resume the constitutional order, or face a suspension from the OAS. It called on OAS member states to apply Article 21 of the Inter-American Democratic Charter to suspend Venezuela from the organization if the Venezuelan government failed to address the report recommendations positively within 30 days. An affirmative vote of two-thirds of the member states (23) in a special session of the General Assembly would be necessary to suspend Venezuela from the organization. Although a suspension would demonstrate Venezuela's diplomatic isolation, it is unclear whether it would affect the Maduro government's policies. In May 2017, President Maduro instructed his foreign minister to begin the process for Venezuela to withdraw from the OAS in protest of its recent actions, the first time in OAS history that a country has sought to quit. The withdrawal process, which takes two years, would require Venezuela to pay $8.8 million in back dues. Despite the deteriorating situation in Venezuela, some countries were reluctant in 2017 to follow Almagro's lead in responding to the situation in Venezuela. During the OAS General Assembly meeting in June 2017, 20 countries voted in favor of adopting a resolution to press the Venezuelan government to take concrete actions, but it failed because it needed 23 votes. In the absence of consensus within the General Assembly, Secretary General Almagro continued to speak out against actions taken by the Maduro government. He issued a report in July 2017 describing abuses committed by the government against protesters and another in September 2017 denouncing the consolidation of Venezuela's \"dictatorial regime\" with the formation of the Constituent Assembly. The Secretary General initiated a process to analyze whether the Maduro government's abuses against its citizens constitute crimes against humanity meriting a referral to the ICC. The process culminated in the May 29, 2018 publication of a report with information gathered by the General Secretariat backed by a legal assessment by independent jurists that the Maduro government's actions merit a referral to the ICC. Although some observers have praised Secretary-General Almagro's outspoken activism on Venezuela, others have asserted that he and the OAS are unlikely to be trusted by anyone in the Maduro government as a mediator that could help resolve the current crisis. Since the May 2018 election, a majority of countries within the OAS Permanent Secretariat have voted against the Maduro government. On June 5, 2018, it approved a resolution declaring that the May 20, 2018, electoral process in Venezuela \"lacks legitimacy\" and authorizing countries to take \"measures deemed appropriate,\" including financial sanctions, to assist in hastening a return to democracy in Venezuela. On January 10, 2019, the Permanent Council approved a resolution agreeing \"to not recognize the legitimacy of Nicolas Maduro's new term.\" Secretary-General Almagro has gone further, announcing over social media that he \"welcomes the assumption of Juan Guaidó as interim President of Venezuela in accordance with Article 233 of the Venezuelan constitution\" on January 11, 2019. For some time, analysts have debated how long President Maduro can retain his grip on power amid a deepening economic and humanitarian crisis and how best to help hasten a return to electoral democracy in Venezuela. Despite his reelection and inauguration to a second term, President Maduro faces increasing threats to his control over the country. Under the leadership of a little-known figure, Juan Guaidó of the VP party, the National Assembly has issued a direct challenge to the legitimacy of Maduro's presidency. Maduro still controls the military, but recent arrests of high-level military officials have signaled dissent within the forces. It remains to be seen how they will respond to the National Assembly's approval of a framework for the formation of a transition government and an amnesty law for any military members who support that transition. It is yet unclear whether and under what circumstances Juan Guaidó would accept calls for him to declare himself interim president and how Maduro and the international community would respond to such a development. The Trump Administration has worked bilaterally and multilaterally to increase pressure on the Maduro government while also providing assistance to neighboring countries hosting more than 3 million Venezuelans who have fled the country. In addition to ratcheting up targeted sanctions, the Administration has implemented broader sanctions limiting Venezuela and PdVSA's access to the U.S. financial market. Until now, the Administration had stopped short of implementing even stronger measures, such a ban on petroleum trade with Venezuela, partially out of concern that this could worsen the country's humanitarian crisis. Vice President Pence and Secretary of State Pompeo have condemned Maduro's term as illegitimate, recognized the National Assembly as the only legitimate institution in the country, and lent support to Juan Guaidó and the National Assembly. While some have urged the Administration to take more aggressive measures even though they could contribute to unrest in the country, others have maintained that support for a negotiated solution is the best course of action. The 116 th Congress may consider a number of measures to address the deteriorating situation in Venezuela and its impact on the broader Latin American region. Congress is likely to continue to fund and oversee foreign assistance for democracy and human rights programs to bolster civil society in Venezuela as well as humanitarian assistance to Venezuelans in neighboring countries. Congress could consider a measure to authorize U.S. humanitarian assistance as well. Other measures may be introduced to adjust the immigration status of Venezuelans living in the United States or to provide certain Venezuelans temporary protected immigration status. Congress may consider taking additional steps to try to influence the Venezuelan government's behavior in promoting a return to democracy through additional sanctions or other policies. Oversight issues may examine the role of external actors operating in Venezuela (such as Russia and China) and the impact of the crisis in Venezuela on the broader region. Should a change in government occur, Congress may authorize additional support for reconstruction of the country. Appendix A. Legislative Initiatives in the 115 th Congress Enacted Legislation and Approved Resolutions P.L. 115-31 ( H.R. 244 ). Consolidated Appropriations Act, 2017. Introduced January 4, 2017, as the Honoring Investments in Recruiting and Employing American Military Veterans Act of 2017; subsequently, the bill became the vehicle for the FY2017 appropriations measure known as the Consolidated Appropriations Act, 2017. House agreed to Senate amendments (309-118) May 3, 2017; Senate agreed to House amendment to Senate amendments (79-18) May 4, 2017. President signed into law May 5, 2017. The explanatory statement accompanying the law recommends providing $7 million in democracy and human rights assistance to Venezuelan civil society. P.L. 115-141 ( H.R. 1625 ). Consolidated Appropriations Act, 2018 . Originally introduced March 20, 2017, as the Targeted Rewards for the Global Eradication of Human Trafficking Act, in March 2018, the bill became the vehicle for the FY2018 omnibus appropriations measure known as the Consolidated Appropriations Act, 2018. House agreed (256-167) to an amendment to the Senate amendment March 22, 2018; Senate agreed (65-32) to the House amendment to the Senate amendment March 23, 2018. President signed into law March 23, 2018. The law requires not less than $15 million in democracy and rule of law assistance to Venezuelan civil society. P.L. 115-232 ( H.R. 5515 ). John S. McCain National Defense Authorization Act for Fiscal Year 2019 . Introduced April 13, 2018. House passed (351-66) May 24, 2018. Senate passed (85-10) June 18, 2018, substituting the language of S. 2987 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019. Conference report ( H.Rept. 115-874 ) filed July 25, 2018; House agreed (359-54) to the conference July 26 and Senate agreed (86-10) August 1, 2018. Signed into law August 13, 2018. In the conference report, the conferees directed the Director of the Defense Intelligence Agency to submit a report to several key committees on security cooperation between the Russian Federation and Cuba, Nicaragua, and Venezuela. H.Res. 259 (DeSantis) . Introduced April 6, 2017; reported out of the House Foreign Affairs Committee July 27, 2017, approved by the House December 5, 2017. The resolution expressed concern about the multiple crises that Venezuela is facing; urged the Venezuelan government to hold elections, release political prisoners, and accept humanitarian aid; supported OAS efforts, including a potential temporary suspension of Venezuela from the organization if the government does not convene elections and release political prisoners in a timely manner; and encouraged President Trump to prioritize resolving the crisis in Venezuela, including through the use of targeted sanctions. S.Res. 35 (Cardin) . The resolution expresses support for a dialogue that leads to respect for Venezuela's constitutional mechanisms and a resolution to the multiple crises the country faces, as well as for OAS efforts to invoke the Inter-American Democratic Charter. The resolution urges full U.S. support for OAS efforts and calls for U.S. agencies to hold Venezuelan officials accountable for violations of U.S. law and international human rights standards. Introduced February 1, 2017. Agreed to in the Senate February 28, 2017. Select Additional Legislative Initiatives H.R. 2658 (Engel) . Venezuela Humanitarian Assistance and Defense of Democratic Governance Act of 2017. Introduced May 25, 2017; amended and reported out of the House Foreign Affairs Committee September 28, 2017; approved by the House on December 5, 2017. The bill would have directed the State Department and USAID to deliver a strategy within 90 days of the enactment of the act on how they will work through NGOs in Venezuela or in neighboring countries to channel basic medical supplies and services, food and nutritional supplements, and related technical assistance needed to assist the Venezuelan people; supported OAS efforts to invoke the Inter-American Democratic Charter; secured a Presidential Statement from the United Nations urging the Government of Venezuela to allow the delivery of humanitarian relief; required a report by the Secretary of State, acting through the Bureau of Intelligence and Research, on Venezuelan officials involved in grand corruption, and encourage the imposition of sanctions on those individuals; amended P.L. 113-278 to broaden the activities for which Venezuelans can be sanctioned to include engaging in undemocratic practices or public corruption, extend the date for imposing sanctions through 2022, and urge the Administration to encourage other countries to sanction those individuals; expressed the sense of the House that the President should take all necessary steps to prevent Rosneft from gaining control of U.S. energy infrastructure. required a strategy within 90 days on how U.S. assistance would be coordinated with those of other donors; called on the United States to advocate and, if possible, support an OAS election observation mission to Venezuela when it is appropriate; and required a report on other countries' activities in Venezuela (Russia, China, Iran, and Cuba) within 180 days of enactment. S. 1018 (Cardin) Venezuela Humanitarian Assistance and Defense of Democratic Governance Act of 2017. S. 1018 was introduced May 3, 2017; referred to the Committee on Foreign Relations. This bill would have included many of same provisions as H.R. 2658 . In addition to requiring a strategy on how U.S. humanitarian assistance would be coordinated, S. 1018 would have authorized $10 million in humanitarian assistance for Venezuela and would require the Secretary of State to provide a strategy on how that assistance would be provided; authorized $9.5 million for coordinated democracy and human rights assistance after the Secretary of State submits a strategy on how the funds would be implemented and would make $500,000 available to support any future OAS electoral missions to the country; and prioritized continued U.S. support to Caribbean countries that have been dependent on Venezuela for energy. S. 3486 (Menendez) Venezuela Humanitarian Relief, Reconstruction, and Rule of Law Act of 2018. S. 3486 contains many of the same provisions of H.R. 2658 . Introduced December 12, 2018, referred to the Committee on Foreign Relations. In addition to requiring a strategy on how U.S. humanitarian assistance would be coordinated, the bill would have authorized $40 million in additional humanitarian assistance and required the State Department to convene a donor's conference on Venezuela; provided support for international efforts to hold Venezuelan officials accountable for crimes against humanity; authorized $15 million for democratic actors and civil society; required the Departments of State, Treasury, and Justice to lead international efforts to recover assets stolen by corrupt Venezuelan officials; advanced planning for the economic reconstruction of Venezuela, contingent upon a change in governance in the country; required more intelligence reporting on Venezuelan officials' roles in drug trafficking and corruption, as well as the role of foreign actors in Venezuela; expanded U.S. sanctions on government officials, drug trafficking, and money laundering; required the State Department to work with other Latin American governments to develop their own sanctions regimes; and, codified existing crypto currency sanctions. Appendix B. Organization of American States Action on Venezuela On May 31, 2016, Organization of American States (OAS) Secretary-General Luis Almagro invoked the Inter-American Democratic Charter—a collective commitment to promote and defend democracy—when he called (pursuant to Article 20) on the OAS Permanent Council to convene an urgent session on Venezuela to decide whether \"to undertake the necessary diplomatic efforts to promote the normalization of the situation and restore democratic institutions.\" Secretary-General Almagro issued a report concluding that there were \"serious disruptions of the democratic order\" in the country. The Permanent Council met on June 23, 2016, to receive the report, but did not take any further action. A group of 15 OAS member states issued two statements (in June and August 2016) supporting dialogue efforts but also urging the Venezuelan government to allow the recall referendum process to proceed. On November 16, 2016, the OAS Permanent Council adopted a declaration that encouraged the Maduro government and the MUD \"to achieve concrete results within a reasonable timeframe\" and to \"avoid any action of violence\" that could threaten the process. As dialogue efforts failed to advance, many observers contended that the Maduro government had used such efforts as a delaying tactic. Secretary-General Almagro published a second report to the Permanent Council in March 2017 calling on the Venezuelan government to undertake measures to resume the constitutional order, including holding general elections without delay, or face a possible suspension from the OAS. It concluded by calling on OAS member states to apply Article 21 of the Inter-American Democratic Charter to suspend Venezuela from the organization if the Venezuelan government fails to address the report recommendations positively. An affirmative vote of two-thirds of the member states (23) in a special session of the General Assembly would be necessary to suspend Venezuela from the organization. In the aftermath of the Supreme Court's March 2017 action, the Permanent Council met in a special meeting called by 20 OAS members on April 3, 2017, and approved a resolution by consensus expressing \"grave concern regarding the unconstitutional alteration of the democratic order\" in Venezuela. The body also resolved to undertake additional diplomatic initiatives as needed \"to foster the restoration of the democratic institutional system.\" On April 26, 2017, the OAS Permanent Council voted to convene a meeting of the region's ministers of foreign affairs to discuss the situation in Venezuela. Nineteen countries voted in favor of convening the meeting. However, some countries objected to potential statements or actions (such as a temporary suspension from the OAS) opposed by the Venezuelan government based on the organization's principles of nonintervention and respect for national sovereignty. On May 31, 2017, the OAS convened a meeting of consultation of ministers of foreign affairs to discuss the situation in Venezuela. After much debate, the foreign ministers failed to approve a resolution to address the crisis. Some countries supported a draft resolution put forth by Canada, Panama, Peru, Mexico, and the United States, which called upon the Venezuelan government and the opposition to take a series of steps but also offered humanitarian assistance and willingness to create a \"group or other mechanism of facilitation to support a new process of dialogue and negotiation.\" Other countries supported a resolution offered by the Caribbean Community (CARICOM) calling for dialogue and the creation of an external group to support dialogue between the government and the opposition without the specific preconditions on the government included in the other draft resolution. OAS member states were unable to reach consensus. Foreign ministers reconvened during the OAS General Assembly in Mexico in June 2017. At those meetings, 20 countries voted in favor of adopting the aforementioned resolution put forth by Peru (and backed by the United States) on Venezuela, six countries voted no, and eight abstained. The foreign ministers could reconvene to continue that meeting at any time. In September and November 2017, the OAS General Secretariat facilitated public hearings chaired by an International Panel of Experts it invited to analyze whether the Maduro government had committed crimes against humanity. Victims, legislators, mayors, judges, members of the armed forces, civil servants, human rights defenders and others participated. On February 23, 2018, 19 of 34 member states voted in favor of a resolution by the Permanent Council calling on the Venezuelan government to reconsider convening early presidential elections and to accept humanitarian assistance. While the resolution received more than the simple majority of votes (18) needed to be approved, 15 countries voted against the resolution, abstained, or were not present. On May 29, 2018, the Panel of Experts convened by the OAS published its findings that \"reasonable grounds exist to believe that crimes committed against humanity have been committed in Venezuela\" in a report that has been submitted to the ICC. On June 5, 2018, 19 of 34 member states voted in favor of a resolution stating that the electoral process in Venezuela \"lacks legitimacy\" and authorizing countries to take \"the measures deemed appropriate,\" including sanctions, to assist in hastening a return to democracy in Venezuela. In September 2018, the OAS Secretary-General announced the creation of a new working group to analyze Venezuelan migration issues. From November 19-21, 2018 17 OAS member states sent representatives to examine humanitarian conditions along the Colombia-Venezuela border, including Ambassador Carlos Trujillo of the United States. On January 10, 2019, 19 of 34 member states voted \"to not recognize the legitimacy of Nicolas Maduro's new term as of the 10 th of January of 2019.\" The resolution also urged all Member States to adopt any measures they can to hasten a return to democracy in Venezuela, call for new presidential elections in Venezuela with international observers, respond to the humanitarian needs of Venezuelan migrants, and demand the release of political prisoners. Appendix C. Online Human Rights Reporting on Venezuela", "summary": "Venezuela remains in a deep political crisis under the authoritarian rule of President Nicolás Maduro of the United Socialist Party of Venezuela (PSUV). Maduro, narrowly elected in 2013 after the death of Hugo Chávez (1999-2013), is unpopular. Nevertheless, he has used the courts, security forces, and electoral council to repress the opposition. On January 10, 2019, Maduro began a second term after winning reelection on May 20, 2018, in an unfair contest deemed illegitimate by the opposition-controlled National Assembly and most of the international community. The United States, the European Union, the Group of Seven, and most Western Hemisphere countries do not recognize the legitimacy of his mandate. They view the National Assembly as Venezuela's only democratic institution. Maduro's inauguration capped his efforts to consolidate power. In 2017, protesters called for Maduro to release political prisoners and respect the opposition-led National Assembly. Security forces quashed protests, with more than 130 killed and thousands injured. Maduro then orchestrated the controversial July 2017 election of a National Constituent Assembly; this assembly has usurped most legislative functions. During 2018, Maduro's government arrested dissident military officers and others suspected of plotting against him. Efforts to silence dissent may increase, as the National Assembly (under its new president, Juan Guaidó), the United States, and the international community push for a transition to a new government. Venezuela also is experiencing a serious economic crisis, and rapid contraction of the economy, hyperinflation, and severe shortages of food and medicine have created a humanitarian crisis. President Maduro has blamed U.S. sanctions for these problems, while conditioning receipt of food assistance on support for his government and increasing military control over the economy. He maintains that Venezuela will seek to restructure its debts, although that appears unlikely. The government and state oil company Petróleos de Venezuela, S. A. (PdVSA) defaulted on bond payments in 2017. Lawsuits over nonpayment and seizures of PdVSA assets are likely. U.S. Policy The United States historically had close relations with Venezuela, a major U.S. oil supplier, but relations have deteriorated under the Chávez and Maduro governments. U.S. policymakers have expressed concerns about the deterioration of human rights and democracy in Venezuela and the country's lack of cooperation on counternarcotics and counterterrorism efforts. U.S. democracy and human rights funding, totaling $15 million in FY2018 (P.L. 115-141), has aimed to support civil society. The Trump Administration has employed targeted sanctions against Venezuelan officials responsible for human rights violations, undermining democracy, and corruption, as well as on individuals and entities engaged in drug trafficking. Since 2017, the Administration has imposed a series of broader sanctions restricting Venezuelan government access to U.S. financial markets and prohibiting transactions involving the Venezuelan government's issuance of digital currency and Venezuelan debt. The Administration provided almost $97 million in humanitarian assistance to neighboring countries sheltering more than 3 million Venezuelans. Congressional Action The 115th Congress took several actions in response to the situation in Venezuela. In February 2017, the Senate agreed to S.Res. 35 (Cardin), which supported targeted sanctions. In December 2017, the House passed H.R. 2658 (Engel), which would have authorized humanitarian assistance for Venezuela, and H.Res. 259 (DeSantis), which urged the Venezuelan government to accept humanitarian aid. For FY2019, the Administration requested $9 million in democracy and human rights funds for Venezuela. The 115th Congress did not complete action on the FY2019 foreign assistance appropriations measure. The House version of the FY2019 foreign aid appropriations bill, H.R. 6385, would have provided $15 million for programs in Venezuela; the Senate version, S. 3108, would have provided $20 million. The 116th Congress likely will fund foreign assistance to Venezuela and neighboring countries sheltering Venezuelans. Congress may consider additional steps to influence the Venezuelan government's behavior in promoting a return to democracy and to relieve the humanitarian crisis. Also see CRS In Focus IF10230, Venezuela: Political and Economic Crisis and U.S. Policy; CRS In Focus IF10715, Venezuela: Overview of U.S. Sanctions; and CRS In Focus IF11029, The Venezuela Regional Migration Crisis.", "document_type": "crs"}
{"report": "T he federal government pays benefits to coal miners affected by coal workers' pneumoconiosis (CWP, commonly referred to as black lung disease) and other lung diseases linked to coal mining in cases where the responsible mine operators are not able to pay. Benefit payments and related administrative expenses are paid out of the Black Lung Disability Trust Fund. The primary source of revenue for the trust fund is an excise tax on coal produced and sold domestically. If excise tax revenue is not sufficient to finance Black Lung Program benefits, the trust fund may borrow from the general fund of the Treasury, which contains federal receipts not earmarked for a specific purpose. For 2018, the tax rates on coal were $1.10 per ton of underground-mined coal or $0.55 per ton of surface-mined coal, limited to 4.4% of the sales price. Starting in 2019, under current law, these tax rates are $0.50 per ton of underground-mined coal or $0.25 per ton of surface-mined coal, limited to 2% of the sales price. This decline in the excise tax rates will likely put additional financial strain on a trust fund that already borrows from the general fund to meet obligations. The decline in domestic coal production, recent increases in the rate of CWP, and bankruptcies in the coal sector also contribute to the financial strain on the trust fund. This report provides background information and policy options to help inform the debate surrounding the coal excise tax rate, and other considerations related to the Black Lung Disability Trust Fund. The report begins with an overview of the federal black lung program, providing information on black lung disease and benefits under the program. The report proceeds to examine Black Lung Disability Trust Fund revenues, focusing on the coal excise tax and its history. The report closes with a discussion of policy options, evaluating various revenue- and benefits-related policy options that could improve the fiscal outlook of the Black Lung Disability Trust Fund. The Black Lung Disability Trust Fund is used to finance the payment of federal Black Lung Program benefits under Part C of the Black Lung Benefits Act (BLBA) when a responsible coal operator does not meet its obligations under the law to pay benefits. Coal workers' pneumoconiosis (CWP, commonly referred to as black lung disease) is an interstitial lung disease caused by the inhalation of coal dust. Like in other types of pneumoconioses, the inhalation of coal dust results in the scarring of the lung tissue and affects the gas-exchanging ability of the lungs to remove carbon dioxide and take oxygen into the bloodstream. Exposure to coal dust over an extended period of time can lead to CWP and continued exposure can lead to the progression from the early stages of CWP referred to as \"simple CWP,\" to more advanced stages of scarring referred to as \"complicated CWP\" or progressive massive fibrosis (PMF). There is no cure for CWP and PMF. CWP can lead to loss of lung function, the need for lung transplantation, and premature death. CWP can be identified by observing light spots, or opacities, in x-ray images of the lungs and can be classified using guidelines established by the International Labour Organization (ILO). Despite technological advances in mining dust control, mandatory chest x-rays for miners, free CWP surveillance offered to miners by the National Institute for Occupational Safety and Health (NIOSH), the enactment of numerous pieces of mine safety and health legislation, and the promulgation and enforcement of mine safety and health standards by the Mine Safety and Health Administration (MSHA), CWP persists in American coal miners, especially those in the Appalachian region. After reductions in rates of PMF in the 1990s, this advanced form of CWP has recently been found in Central Appalachia at rates not seen since the early 1970s. In 2017 researchers discovered, among coal miners mostly living in Kentucky and Virginia and served by three federally funded Black Lung Clinics in Virginia, what may be the largest cluster of PMF ever recorded. This cluster of miners with PMF includes a relatively high number of miners with less than 20 years of mining experience as well as cases of PMF in current miners. The occurrence of this advanced stage of CWP in short-tenured and current miners is noteworthy since MSHA standards require that any miner with evidence of CWP be given the option, without loss of compensation or other penalty, to work in an area of the mining operation in which the average concentration of coal dust in the air is continuously maintained at or below an established level that is lower than the permissible exposure level for all miners with the goal of preventing the progression of CWP. The federal Black Lung Program was created in 1969 with the enactment of Title IV of the Federal Coal Mine Health and Safety Act of 1969 (Coal Act, P.L. 91-173, later renamed the Federal Mine Safety and Health Act of 1977 by P.L. 95-164 ). Section 401 of the Coal Act provides the congressional justification for the federal Black Lung Program and cites the lack of benefits for disability and death caused by CWP provided by existing state workers' compensation systems as justification for the creation of a federal program. This section also states that the program is intended to be a cooperative effort between the federal government and the states. The Coal Act also established mandatory safety and health standards for coal mines, including standards limiting exposure of miners to coal dust and giving miners with CWP the option of being moved, without loss of compensation or penalty, to an area of the mine with lower dust concentrations. The Coal Act was later amended by the Black Lung Benefits Act of 1972 (BLBA, P.L. 92-303). The Coal Act established Part B of the federal Black Lung Program to provide cash benefits to miners totally disabled due to CWP and to the survivors of miners who die from CWP. Part B only applies to cases filed on or before December 31, 1973. Part B benefits are paid out of general revenue and were initially administered by the Social Security Administration (SSA). Today, with the exception of a small number of pending appellate cases, Part B benefits are administered by the Department of Labor (DOL), Office of Workers' Compensation Programs (OWCP). The Coal Act established Part C of the Federal Black Lung Program for cases filed after December 31, 1973, and was later amended by the BLBA. Under Part C of the BLBA, all claims for benefits for disability or death due to CWP are to be filed with each state's workers' compensation system, but only if such systems have been determined by DOL as providing benefits that are equivalent to or greater than the cash benefits provided by the federal government under Part B of the BLBA and the medical benefits provided to disabled longshore and harbor workers under the federal Longshore and Harbor Workers' Compensation Act (LHWCA). If a state's workers' compensation system is not determined by DOL to meet these standards, then Part C benefits are to be paid by the each miner's coal employer, or, if no such employer is available to pay benefits, by the federal government. In 1973, Maryland, Kentucky, Virginia, and West Virginia submitted their state workers' compensation laws to DOL for approval, but were denied. To date, no state workers' compensation system has been approved by DOL under Part C of the BLBA. Because no state's workers' compensation system has been determined to be sufficient to pay benefits under Part C, each operator of an underground coal mine is responsible for the payment of benefits to that operator's miners. Operators are required to provide for these benefits either by purchasing insurance for benefits or through self-insurance approved by DOL. A self-insured operator is required to purchase an indemnity bond or provide another form of security (such as a deposit of negotiable securities in a Federal Reserve Bank or the establishment of a trust) in an amount specified by DOL. In order to be approved for self-insurance, federal regulations require that a mine operator have been in business for at least the three previous years and have average assets over the previous three years that exceed current liabilities by the sum of expected benefit payments and annual premiums on the indemnity bond. When a claim for benefits is approved, benefits are to be paid by the \"responsible\" operator, which is generally the last coal operator to employ the miner. If a company has acquired the assets of a mine operator, then that company is considered a \"successor operator\" and is responsible for the payment of claims related to the original operator. The federal government pays benefits in cases in which the responsible operator no longer exists and has no successor operator, or is unable to pay benefits. The federal government pays benefits when an operator has not made payment within 30 days of a determination of eligibility or when benefits are otherwise due to be paid. Initially, under Part C of the Coal Act, these federal benefits were paid out of general revenue. However, pursuant to the Black Lung Benefits Revenue Act of 1977 ( P.L. 95-227 ), these benefits are now paid from the Black Lung Disability Trust Fund established by this law and primarily financed by an excise tax on coal. If a responsible operator can later be identified, the trust fund is authorized by law to seek to recover from this operator the amount of benefits paid by the trust fund and any interest earned on these amounts. The trust fund is also used for the following federal Black Lung Program-related expenses: the payment of benefits for miners whose last coal mine employment was before January 1, 1970; reimbursement to the Treasury for the costs of Part C benefits paid from general revenue before April 1, 1978, for periods of benefit eligibility after January 1, 1974; the repayment and payment of interest on advances made from the general fund to the trust fund; the payment of administrative expenses related to Part C of the BLBA and the coal excise tax incurred after March 1, 1978; and the reimbursement of coal operators who paid Part C benefits before April 1, 1978, for miners whose last coal mine employment ended before January 1, 1970. A miner is eligible for benefits if that miner is totally disabled due to pneumoconiosis arising out of coal mine employment. The survivors of a miner are eligible for benefits if the miner's death was due to pneumoconiosis arising out of coal mine employment. Benefits are only available to miners and their survivors. The BLBA defines a miner as any individual who works or has worked in or around a coal mine or coal preparation facility in the extraction or preparation of coal. Such term also includes an individual who works or has worked in coal mine construction or transportation in or around a coal mine, to the extent such individual was exposed to coal dust as a result of such employment. Thus, other workers who may be exposed to coal dust in their work, such as railroad workers or workers at coal-fired power plants are not eligible for benefits. Persons who live near coal mines or power plants are also not eligible for benefits even if they are exposed to coal dust. In addition, while a miner's family members may receive benefits as survivors and the number of family members can increase the amount of a miner's monthly benefits, family members may not claim benefits on their own due to exposure to coal dust in the home such as from cleaning the miner's soiled clothing. The BLBA defines pneumoconiosis for the purposes of benefit eligibility as \"a chronic dust disease of the lung and its sequelae, including respiratory and pulmonary impairments, arising out of coal mine employment.\" The BLBA directs the Secretary of Labor to develop, through regulations, standards for determining if a miner is totally disabled due to pneumoconiosis or died due to pneumoconiosis. The federal Black Lung Program regulations provide that the definition of pneumoconiosis includes medical or \"clinical\" pneumoconiosis and statutory or \"legal\" pneumoconiosis. Clinical pneumoconiosis is defined as follows: \"Clinical pneumoconiosis\" consists of those diseases recognized by the medical community as pneumoconioses, i.e., the conditions characterized by permanent deposition of substantial amounts of particulate matter in the lungs and the fibrotic reaction of the lung tissue to that deposition caused by dust exposure in coal mine employment. This definition includes, but is not limited to, coal workers' pneumoconiosis, anthracosilicosis, anthracosis, anthrosilicosis, massive pulmonary fibrosis, silicosis or silicotuberculosis, arising out of coal mine employment. Legal pneumoconiosis is defined as any chronic lung disease or impairment and its sequelae arising out of coal mine employment. This definition includes, but is not limited to, any chronic restrictive or obstructive pulmonary disease arising out of coal mine employment. Through these definitions, DOL has established that benefits are available not just to miners with CWP, but also to those miners with other respiratory diseases arising out of coal mine employment such as chronic obstructive pulmonary disease (COPD) even though these diseases are not pneumoconioses and may be linked to other factors unrelated to exposure to coal dust such as cigarette smoking. The BLBA contains five presumptions used to determine if a miner is eligible for black lung benefits. Three of these presumptions are \"rebuttable,\" meaning that, in the absence of any contrary evidence, eligibility is presumed. One presumption is \"irrebutable\" and eligibility for Black Lung program benefits is established if the statutory requirements of the presumption are met. Three of these presumptions apply to current Black Lung Program claims while two apply only to cases filed before the end of 1981. Table 1 provides a summary of the following five presumptions provided by the BLBA. 1. A rebuttable presumption that the pneumoconiosis of a miner who was employed in mining for at least 10 years was caused by his or her employment. 2. A rebuttable presumption that the death of a miner who worked in mining for at least 10 years and who died of any respirable disease, was due to pneumoconiosis. This presumption does not apply to claims filed on or after January 1, 1982, the effective date of the Black Lung Benefits Amendments of 1981 ( P.L. 97-119 ). 3. An irrebuttable presumption that a miner with any chronic lung disease which meets certain statutory tests or diagnoses is totally disabled due to pneumoconiosis or died due to pneumoconiosis. 4. A rebuttable presumption that a miner employed in mining for at least 15 years, and who has a chest x-ray that is interpreted as negative with respect to certain statutory standards but who has other evidence of a totally disabling respiratory or pulmonary impairment, is totally disabled due to pneumoconiosis or died due to pneumoconiosis. This presumption may only be rebutted by the Secretary of Labor establishing that the miner does not or did not have pneumoconiosis or that the miner's respiratory or pulmonary impairment did not arise out of connection to mine employment. 5. A presumption that a miner who died on or before March 1, 1978, and who was employed in mining for at least 25 years before June 30, 1971, died due to pneumoconiosis, unless it is established that at the time of the miner's death, he or she was not at least partially disabled due to pneumoconiosis. This presumption does not apply to claims filed on or after June 29, 1982, which is 180 days after the effective date of the Black Lung Benefits Amendments of 1981. This presumption is not listed in the law as either rebuttable or irrebuttable. The Patient Protection and Affordable Care Act (commonly referred to as the Affordable Care Act (ACA), P.L. 111-148 ) included two provisions that amended the BLBA to reinstate one of the eligibility presumptions and a provision affecting survivors' benefits. The effect of these changes was to increase the opportunity to establish eligibility through the statutory presumptions and make it easier for certain survivors to receive benefits. Pursuant to Section 202(a) of the Black Lung Benefits Amendments of 1981, the fourth presumption did not apply to cases filed on or after January 1, 1982. Section 1556(a) of the ACA removed the prohibition on applying the fourth presumption to cases filed on or after January 1, 1982. It is expected that this ACA provision will increase the number of miners eligible for benefits. The BLBA provides that, for Part C claims, the survivors of a miner who was determined to be eligible to receive benefits at the time of his or her death are not required to file new claims for benefits or revalidate any claim for benefits, thus permitting the payment of survivors' benefits in these cases even if the miner's death was not caused by pneumoconiosis. Pursuant to Section 203(a)(6) of the Black Lung Benefits Amendments of 1981, this provision did not apply to claims filed on or after January 1, 1982. Section 1556(b) of the ACA removed from this provision the exception for claims filed on or after January 1, 1982. It is expected that this ACA provision will increase the number of survivors eligible for benefits. The amendments to the BLBA provided in Section 1556 of the ACA apply to any claims filed under Part B or C of the act after January 1, 2005, that were pending on or after March 23, 2010, the date of enactment of the ACA. Eligible miners receiving benefits under Parts B and C are entitled to medical coverage for their pneumoconiosis and related disability. This medical coverage is provided at no cost to the miner and can generally be obtained from the miner's choice of medical providers. Eligible miners are also entitled to cash disability benefits. The basic benefit rate is set at 37.5% of the basic pay rate at GS-2, Step 1, on the federal pay schedule without any locality adjustment. If the miner has one dependent (a spouse or minor child) the miner is eligible for a benefit of 150% of the basic benefit. A miner with two dependents is eligible for 175% of the basic benefit and a miner with three or more dependents is eligible for 200% of the basic benefit. Benefits may also be paid to the divorced spouse of a miner if the marriage lasted at least 10 years and the divorced spouse was dependent on the miner for at least half of the spouse's support at the time of the miner's disability. A child is considered a dependent until the child marries, or reaches age 18, unless the child is either disabled using the Social Security Disability Insurance (SSDI) definition of disability or is under the age of 23 and a full-time student. The benefit rates are adjusted whenever there are changes to the federal employee pay schedules, but are not separately adjusted to reflect changes in the cost of living. Table 2 provides the benefit rates for 2019. Benefits are offset by state workers' compensation or other benefits paid on account of the miner's disability or death due to pneumoconiosis. Part C benefits, but not Part B benefits, are considered workers' compensation for the purposes of reducing a miner's SSDI benefits. The total amount paid in cash disability benefits has fallen over time, as illustrated in Figure 1 . More is paid in cash disability benefits than is paid in medical benefits. Certain survivors of a miner whose death was due to pneumoconiosis are eligible for cash benefits. In the case of a surviving spouse or divorced spouse, the spouse's benefit is equal to what the miner would have received and is based on the number of dependents of the spouse as provided in Table 2 . If there is no surviving spouse, then benefits are awarded to the surviving minor children in equal shares. If there are no surviving minor children, then benefits can be paid to the miner's dependent parents or dependent siblings. If there are no eligible survivors, no benefits are paid upon the miner's death and benefits do not go to the miner's estate or to any other person, including a person named by the miner in a will. The number of miners and survivors receiving benefits has declined over time, as illustrated in Figure 2 . The primary revenue source for the Black Lung Disability Trust Fund is a per-ton excise tax on coal. Historically, the coal excise tax has not generated enough revenue to meet the trust fund's obligations. Thus, additional funds have been provided from the general fund of the Treasury. The general fund includes governmental receipts not earmarked for a specific purpose, the proceeds of general borrowing, and is used for general governmental expenditures. Internal Revenue Code (IRC) Section 4121 imposes the black lung excise tax (BLET) on sales or use of domestically mined coal. Generally, a producer that sells the coal is liable for the tax. Producers that use their own domestically mined coal, such as integrated utilities or steel companies, are also liable for the tax. The tax rate depends on how coal is mined. Effective January 1, 2019, the tax on underground-mined coal is the lesser of (1) $0.50 per ton, or (2) 2% of the sale price. The tax on surface-mined coal is the lesser of (1) $0.25 per ton, or (2) 2% of the sales price. Before 2019, the tax rates were $1.10 per ton for coal from underground mines or $0.55 per ton for coal from surface mines, with the tax being no more than 4.4% of the sale price. In FY2017, $229 million was collected on coal mined underground (see Figure 3 ). Nearly all of this coal was taxed at the $1.10 per ton rate. In FY2017, $200 million was collected on surface-mined coal. Just over half of this coal was taxed at the $0.55 per ton rate, with the rest subject to the 4.4% of sales price maximum tax. On January 1, 2019, the BLET rates declined to their current levels. The rates that took effect January 1, 2019, would also have taken effect if the Black Lung Disability Trust Fund had repaid, with interest, all amounts borrowed from the General Fund of the Treasury. The tax is imposed on \"coal from mines located in the United States\" and does not apply to imported coal. The tax is designed to support the Black Lung Disability Trust Fund for domestic miners. Very little domestically consumed coal is imported. The BLET also does not apply to exported coal under the Export Clause of the United States Constitution. A credit or refund can be claimed if coal is taxed before it is exported. Black lung excise tax collections have generally declined in recent years (see Figure 3 ). In FY2009, more than $650 million was collected from the BLET. In FY2017, collections were about $429 million. The decline in BLET collections follows the general decline in U.S. coal production. As the price of coal rose in the 2000s, coal mined underground tended to pay the tax at a fixed rate of $1.10 per ton, as opposed to paying 4.4% of the sales price. In the years beyond 2018, coal excise tax receipts are expected to fall sharply, reflecting the decrease in the coal excise tax rate (see Figure 3 ). The excise tax on coal was established to help ensure the coal industry shared in the social costs imposed by black lung disease. Over time, the rate of the tax has been increased, in an effort to provide sufficient revenue to meet this objective. The Black Lung Benefits Revenue Act of 1977 ( P.L. 95-227 ) first imposed the Section 4121 excise tax on coal. When enacted, the tax was $0.50 per ton for coal from underground mines, and $0.25 per ton for coal from surface mines. The tax was limited to 2% of the sales price. The tax was effective for sales after March 31, 1978. Before P.L. 95-227 was enacted there was considerable debate surrounding how black lung benefits programs should be financed. Various mechanisms to shift the costs of the black lung benefits program to the coal industry and its customers were considered. These debates ultimately led to the establishment of the Black Lung Disability Trust Fund and the related excise tax on coal. There was also debate about how to structure the proposed tax. Some suggested a graduated tax, with higher rates imposed on coal with a higher British thermal unit (Btu) content, as such coal was believed to be more likely to cause black lung disease. There were concerns, however, that such a tax could be difficult to administer. Other proposals suggested that coal be subject to a uniform rate, with coal mined from underground deposits subject to a higher rate than other coal (including lignite). A concern with this approach was that coal prices vary substantially per ton for different types of coal (lignite is less expensive than anthracite), meaning that the tax as a percent of the sales price could differ substantially across different types of coal. One answer to this concern is to impose an ad valorem tax, or a tax based on the sales price. Another approach that was considered was to impose a \"premium rate\" at a level that would fully finance the Black Lung Disability Trust Fund, giving authority to the Department of Labor to adjust the fee as necessary. The tax as enacted was the lesser of the per-unit price or the ad valorem rate of 2%. In the early 1980s, it was observed that coal excise tax revenues were not sufficient to meet the trust fund's obligations. The Black Lung Benefits Revenue Act of 1981 ( P.L. 97-119 ) doubled the excise tax rates to $1.00 per ton for coal from underground mines, and $0.50 per ton for coal from surface mines, not to exceed 4% of the sales price. The higher rates were effective January 1, 1982. The doubled rates were temporary, and scheduled to revert to the previous rates on January 1, 1996. Further, the rates could be reduced earlier if the trust fund repaid all advances and interest from the general fund of the Treasury. A stated goal of this legislation was to eliminate the Black Lung Disability Trust Fund's debt. The Consolidated Omnibus Budget Reconciliation Act of 1985 ( P.L. 99-272 ) again increased the BLET rates to $1.10 for underground-mined coal, and $0.55 for surface-mined coal, not to exceed 4.4% of the sales price. The Omnibus Budget Reconciliation Act of 1987 ( P.L. 100-203 ) extended these rates through 2013. Increased excise tax rates on coal were again extended in 2008. Current-law rates were extended through 2018 as part of the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ). When extending the increased rates, Congress reiterated the original intent of establishing trust fund financing for black lung benefits, observing that it is \"to reduce reliance on the Treasury and to recover costs from the mining industry.\" It was also observed that the program's expenses had continued to exceed revenues over time, and that the debt to the Treasury was not likely to be paid off by 2013. For these reasons, \"the Congress believe[d] that it [was] appropriate to continue the tax on coal at the increased rates beyond the expiration date.\" When receipts of the trust fund are less than expenditures, advances are appropriated from the general fund of the Treasury to the trust fund. These advances are repayable, and interest charged on these advances is also payable to the general fund. The Consolidated Omnibus Budget Reconciliation Act of 1985 ( P.L. 99-272 ) provided a five-year forgiveness of interest on debt owed to the Treasury's general fund. As a result, the principal amount of trust fund debt outstanding was relatively unchanged throughout the late 1980s. The moratorium on interest payments ended September 30, 1990. Throughout the 1990s and into the 2000s, the cumulative end-of-year debt of the trust fund grew, and the trust fund continued to receive repayable advances from the general fund to cover expenses. The trust fund was subject to financial restructuring when the current excise tax rate was extended until January 1, 2019, in EESA. The Black Lung Disability Trust Fund debt was restructured in FY2009. Essentially, the partial forgiveness and restructuring allowed the trust fund to refinance outstanding repayable advances and unpaid interest on those advances. As a result of the partial forgiveness and refinancing, the cumulative debt was reduced from $10.4 billion at the end of FY2008 to $6.2 billion by the end of FY2009. At the time of the restructuring it was expected that the trust fund's debt would be fully eliminated by FY2040. The trust fund's cumulative debt has trended downward since the restructuring (see Figure 4 ). However, coal excise tax revenue has been less than anticipated in recent years. As a result, current projections suggest that the trust fund debt will rise over time when considering annual borrowing as well as legacy debt. The trust fund's debt is therefore not on a path to be eliminated. By FY2050, the Government Accountability Office (GAO) projects the trust fund's debt will be $15.4 billion without any changes in current policy. In addition to revenue from the BLET and repayable general fund advances, the trust fund receives revenue from the collection of certain fines, penalties, and interest paid by coal operators and miners and reimbursements from responsible operators. Part C of the BLBA authorizes the following fines and penalties for violations of the act: a civil penalty of up to $1,000 per day for a mine operator's failure to secure benefits through insurance or approved self-insurance; a fine of up to $1,000 upon conviction of the misdemeanor offense of knowingly destroying or transferring property of a mine operator with the intent to avoid the payment of benefits for which the mine operator is responsible; a fine of up to $1,000 upon conviction of the misdemeanor offense of making a false or misleading statement or representation for the purposes of obtaining benefits; and a civil penalty of up to $500 for a mine operator's failure to file a report on miners who are or may be entitled to benefits as required by DOL. The amount of these penalties and fines, as well as interest assessed, is paid into the trust fund. In FY2017, trust fund receipts from fines, penalties, and interest totaled $1.2 million. This is a small source of trust fund revenue relative to the coal excise tax, which generated $428.7 million in trust fund revenues in FY2017. The trust fund is authorized to begin paying benefits within 30 days if no responsible operator has begun payment. If, after paying benefits, DOL is able to identify a responsible operator, the trust fund may seek to collect from that operator the costs of benefits already paid by the trust fund and interest assessed on this amount. The amount of these collections is paid into the trust fund. In FY2017, $19.9 million was collected from responsible mine operators. The amount collected from responsible mine operators has fluctuated over time, but has averaged about 1% of total receipts since 1995. Various factors have contributed to the ongoing situation of trust fund expenditures exceeding trust fund revenues. Throughout the 1980s, black lung benefit payments and administrative expenditures exceeded trust fund revenue. As a result, the trust fund accumulated debt. As discussed above, over time, various efforts have been made to improve the fiscal condition of the trust fund. However, as of the end of FY2017, the trust fund remains in debt. The trust fund's cumulative debt at the end of FY2017 was $3.1 billion. The trust fund also borrowed $1.3 billion from the general fund that same year. Projections suggest that borrowing from the general fund will increase over the next few years, even as cumulative (or legacy) debt is paid down. Under the current excise tax rates, benefit payments and administrative expenses will be approximately equal to trust fund revenues in FY2020 through FY2022 (see Figure 5 ). However, revenues are not projected to be sufficient to repay debt, and expenses are projected to rise over time when debt and interest expenses are included. Specifically, by FY2022, it is projected that the trust fund will borrow $2.6 billion in repayable advances from the general fund. There are various policy options that Congress might consider to improve the fiscal condition of the Black Lung Disability Trust Fund. Broadly, increasing taxes on the coal industry (or maintaining 2018 rates) would pass the costs associated with paying black lung benefits onto the coal industry. Alternatively, forgiving trust fund interest or debt or financing black lung benefits out of general fund revenues would pass the costs of federal black lung benefits onto taxpayers in general. Another option would be to reduce federal black lung benefits. Additional revenue would likely need to be provided to the trust fund if the trust fund is to pay for past black lung benefits and maintain current benefit levels. Additional revenue may be needed even if past debt is forgiven (or assumed by the general fund), as anticipated trust fund revenues are not likely to be sufficient to cover anticipated trust fund expenditures. As discussed above, in the past, Congress and the President have opted to increase the excise tax on coal to address shortfalls in the Black Lung Disability Trust Fund. These increased rates have been temporary, and scheduled to revert back to the reduced rate if the trust fund's debt is eliminated. Congress has chosen to extend the increased rates beyond their scheduled expiration when the trust fund is in debt. One option would be to extend 2018 rates.. The GAO projects that if 2018 coal excise tax rates are extended, the trust fund will have a debt of $4.5 billion in 2050 (see \"GAO Options for Improving Trust Fund Finances\" below). GAO projections suggest that increasing 2018 tax rates by 25% would eliminate the trust fund's debt, leaving the trust fund with a surplus of $0.6 billion in 2050. An alternative way to raise revenue from the coal industry is to scale back or eliminate various tax expenditures, or tax preferences, from which the coal industry benefits. For example, coal producers benefit from being able to expense exploration and development costs and are able to recover costs using percentage depletion (depletion based on revenue from the sale of the mineral asset) instead of cost depletion (depletion based on the amount of the mineral asset exhausted and the amount invested in the asset). The Obama Administration regularly proposed repealing these tax incentives as part of the Administration's annual budget. It could be difficult to assign the revenues raised via the repeal of tax benefits to the trust fund. With an excise tax, it is straightforward to identify the revenue generated by the tax and earmark the revenue for a trust fund. It is not as straightforward to determine the amount of revenue that is raised through the repeal of an income tax expenditure, or direct the additional revenue raised because a certain preference is no longer in the code to a trust fund. Repeal of coal-industry tax benefits could, however, be used to offset the cost of a one-time transfer from the general fund to the trust fund. Revenue from various sources, including the general fund, could be used to supplement trust fund revenue generated from current sources. General fund revenues are not earmarked for a specific purpose, and there is generally no direct link between the source of general fund revenue and the government good or service provided. Black lung benefits were paid out of general revenue before the trust fund was established in 1977. Trust funds are generally established when there is a link between the government benefits or services being provided and the revenue source funding those benefits or services. The Black Lung Disability Trust Fund was established because Congress believed that the costs of the part C black lung program should be borne by the coal industry. Financing black lung benefits with general fund revenue would weaken the link between the industry and black lung benefits, while reducing the burden on the industry associated with paying for black lung benefits. In the past the Black Lung Disability Trust Fund's fiscal outlook has been improved through interest and debt forgiveness. As discussed above, in the late 1990s, there was a five-year forgiveness of interest on debt owed to the Treasury's general fund. More recently, debt was forgiven as part of the 2008 restructuring of the trust fund's debt. The GAO projects that if all current debt were forgiven, the trust fund would accumulate $2.3 billion in new debt by 2050. If all interest were forgiven, the trust fund debt is projected to be $5.8 billion by 2050. Forgiving the trust fund's interest or debt obligations would shift the burden of paying for black lung disability benefits from the coal industry to general taxpayers. However, a one-time appropriation to forgive interest or debt is a transparent option for satisfying the trust fund's obligations to the general fund. The primary expenditures of the trust fund are for the payment of Part C benefits to miners in cases in which there is no responsible operator. In order to reduce expenditures and improve the long-term financial health of the trust fund, Congress could consider several options to reduce the generosity and scope of benefits or increase the ability of the federal government to ensure that coal operators, even those who are in the bankruptcy process, pay benefits for their miners. A reduction in the amount of Part C benefits would result in lower Part C expenditures from both responsible coal operators and the trust fund. However, as compared to other workers' compensation benefits, Part C benefits are relatively low. The basic Part C benefit rate for a single miner is equal to 37.5% of the base rate of pay for federal employees at the GS-2, Step 1 level. For 2019 this benefit is just over $660 per month, or under $8,000 per year. In the majority of state workers' compensation programs, the basic benefit rate is set at two-thirds of the worker's pre-disability wage, subject to statutory minimums and maximums. The other workers' compensation programs administered by DOL, the LHWCA, and the Federal Employees' Compensation Act (FECA) use two-thirds of a worker's pre-disability wage as the basis for their benefits. A federal worker with a spouse or dependent in the FECA program is entitled to 75% of his or her pre-disability wage. The minimum benefit for total disability or death in the FECA program, 75% of GS-2, Step 1, is twice the amount of the Part C benefit rate. In addition, unlike the other federal workers' compensation programs and many state programs, there is no automatic adjustment to Part C benefits to reflect increases in the cost of living. Part C benefits instead increase only when federal pay rates are increased. The eligibility of miners and survivors to Part C benefits could be restricted to reduce expenditures from responsible operators and the trust fund. In 1981, Congress enacted several eligibility restrictions to miners and survivors as part of the Black Lung Benefits Revenue Act of 1981, to address concerns about the financial insolvency of the trust fund. Specifically, this law removed the following three eligibility presumptions for new claims going forward: A rebuttable presumption that the death of a miner who worked in mining for at least 10 years and who died of any respirable disease, was due to pneumoconiosis (listed as presumption 2 in Table 1 ). A rebuttable presumption that a miner employed in mining for at least 15 years, and who has a chest x-ray that is interpreted as negative with respect to certain statutory standards but who has other evidence of a totally disabling respiratory or pulmonary impairment, is totally disabled due to pneumoconiosis, or died due to pneumoconiosis. This presumption may only be rebutted by the Secretary of Labor establishing that the miner does not or did not have pneumoconiosis or that the miner's respiratory or pulmonary impairment did not arise out of connection to mine employment (presumption 4 in Table 1 ). A presumption that a miner who died on or before March 1, 1978, and who was employed in mining for at least 25 years before June 30, 1971, died due to pneumoconiosis, unless it is established that at the time of the miner's death, he or she was not at least partially disabled due to pneumoconiosis (presumption 5 in Table 1 ). In addition to removing three of the five existing eligibility presumptions, the 1981 law also removed the right of the survivors of a miner who is determined to be eligible for Part C benefits at the time of his or her death to receive survivors' benefits without filing a new claim, thus permitting the payment of survivors' benefits in the case of a current beneficiary, even if the beneficiary's death is not proven to be linked to pneumoconiosis. Two of the restrictions put in place by the 1981 legislation were later removed by the ACA. The ACA reinstated the fourth eligibility presumption and expanded rights for survivors' benefits, thus expanding eligibility for both miners and certain survivors. Under Part C of the BLBA, the federal government may recover the costs of benefits, and interest accrued on those benefits, paid by the trust fund from identified responsible operators. In addition, Part C allows the federal government to place a lien on the property and rights to property of an operator that refuses to pay the benefits and interest it owes to the trust fund. In the case of a bankruptcy or insolvency proceeding, this lien is to be treated in the same manner as a lien for taxes owed to the federal government. However, in a 2016 letter to the Comptroller General requesting a GAO review of the trust fund, Representatives Bobby Scott, Ranking Member of the House Committee on Education and the Workforce, and Sander Levin, Ranking Member of the House Committee on Ways and Means, claimed that the number of current and potential bankruptcies among coal operators is placing stress on the trust fund. Representatives Scott and Levin cited the example of Patriot Coal which, according to their letter, transferred $62 million in Part C liabilities to the trust fund when it became insolvent. In addition, this letter claims that insolvent coal operators may be able to avoid trust fund liens by continuing to make benefit payments until after the court in their bankruptcy cases has approved the sale of their assets to another company. Because the original company was never in default of its payments, no lien was filed, and these assets were able to be purchased by another company without any lien or future liability to the trust fund. Congress may examine the issue of the impact of coal operator bankruptcies and the interaction of bankruptcy law and the BLBA's lien provisions, to strengthen both the federal government's ability to ensure that responsible operators are paying for benefits and reduce the benefit expenditures of the trust fund.", "summary": "The federal government pays benefits to coal miners affected by coal workers' pneumoconiosis (CWP, commonly referred to as black lung disease) and other lung diseases linked to coal mining in cases where responsible mine operators are not able to pay. In 2019, the monthly benefit for a miner with no dependents is $660.10. Benefits can be as much as $1,320.10 per month for miners with three or more dependents. Medical benefits are provided separately from disability benefits. Benefit payments and related administrative expenses in cases in which the responsible operators do not pay are paid out of the Black Lung Disability Trust Fund. The primary source of revenue for the trust fund is an excise tax on coal produced and sold domestically. If excise tax revenue is not sufficient to finance Black Lung Program benefits, the trust fund may borrow from the general fund of the Treasury. For 2018, the tax rates on coal were $1.10 per ton of underground-mined coal or $0.55 per ton of surface-mined coal, limited to 4.4% of the sales price. These rates were established in 1986. Starting in 2019, under current law, these tax rates are $0.50 per ton of underground-mined coal or $0.25 per ton of surface-mined coal, limited to 2% of the sales price. These are the rates that were set when the trust fund was established in 1977. The decline in the excise tax rates will likely put additional financial strain on a trust fund that already borrows from the general fund to meet obligations. The decline in domestic coal production, recent increases in the rate of CWP, and bankruptcies in the coal sector also contribute to the financial strain on the trust fund. The Black Lung Disability Trust Fund and associated excise tax on coal were established so that the coal industry, as opposed to taxpayers in general, would bear the burden associated with providing black lung benefits. Throughout its history, the Black Lung Disability Trust Fund has not raised revenues sufficient to meet obligations. As a result, at various points in time, Congress and the President have acted to increase the excise tax on coal, forgive or refinance trust fund debt, and modify black lung benefits eligibility. With the rate of the excise tax on coal reduced in 2019, the 116th Congress may again evaluate options for improving the fiscal condition of the Black Lung Disability Trust Fund, or other issues related to providing federal benefits to miners with black lung disease.", "document_type": "crs"}
{"report": "Infantry Brigade Combat Teams (IBCTs) constitute the Army's \"light\" ground forces and are an important part of the nation's ability to rapidly project forces overseas. The wars in Iraq and Afghanistan, as well as current thinking as to where and how future conflicts would be fought, suggest IBCTs are limited operationally by their lack of assigned transport and reconnaissance vehicles as well as firepower against hardened targets and armored vehicles. To address these limitations, the Army is undertaking three programs: the Ground Mobility Vehicle (GMV)/Infantry Squad Vehicle (ISV), formerly known as the Ultra-Light Combat Vehicle (ULCV); the Light Reconnaissance Vehicle (LRV); and the Mobile Protected Firepower (MPF) programs. These programs would be based on vehicles that are commercially available. This is in order to reduce costs and the time it takes to field combat vehicles associated with traditional developmental efforts. Congress may be concerned with the effectiveness of ground forces over the full spectrum of military operations. A number of past unsuccessful Army acquisition programs have served to heighten congressional oversight of Army programs, including nondevelopmental programs such as those currently being proposed for IBCTs. In addition to these primary concerns, how these new programs affect deployability and sustainability of IBCTs as well as affordability could be potential oversight issues for Congress. Brigade Combat Teams (BCTs) are the basic combined-arms formations of the Army. They are permanent, stand-alone, self-sufficient, and standardized tactical forces consisting of between 3,900 to 4,100 soldiers. There are three types of BCTs: Armored Brigade Combat Teams (ABCTs); Stryker Brigade Combat Teams (SBCTs); and Infantry Brigade Combat Teams (IBCTs). BCTs are found both in the Active Component and the U.S. Army National Guard (USARNG). In February 2017 the Army announced it would establish six Security Force Assistance Brigades (SFABs)—five in the Active Component and one in the Army National Guard (ARNG). SFABs are to be capable of conducting security force assistance (SFA) operations at the tactical (brigade and below) level. While not combat brigades per se, the Army plans for SFABs to be expanded, if the need arises, into fully operational ABCTs or IBCTs capable of conducting major combat operations. Light IBCTs are primarily foot-mobile forces. Light IBCTs can move by foot, vehicle, or air (either air landed or by helicopter). While IBCTs have light- and medium-wheeled vehicles for transport, there are not enough vehicles to transport all or even a significant portion of the IBCT's infantry assets in a single movement. Airborne IBCTs are specially trained and equipped to conduct parachute assaults. They are equipped with limited vehicular assets, and once they have conducted a parachute assault, they move by foot, vehicle, or helicopter, just like Light IBCTs. Air Assault IBCTs are specially trained and equipped to conduct helicopter assaults. What sets them apart from Light and Airborne IBCTs (which can also conduct helicopter assaults) is that they receive additional specialized training; the division to which these BCTs are assigned—the 101 st Airborne Division—has the primary mission and organic helicopter assets to conduct large-scale helicopter assaults. The Army's Field Manual on Brigade Combat Teams describes how IBCTs are employed as follows: The role of the IBCT is to close with the enemy using fire and movement to destroy or capture enemy forces, or to repel enemy attacks by fire, close combat, and counterattack. Fire and movement is the concept of applying fires from all sources to suppress, neutralize, or destroy the enemy, and the tactical movement of combat forces in relation to the enemy (as components of maneuver applicable at all echelons). At the squad level, fire and movement entails a team placing suppressive fire on the enemy as another team moves against or around the enemy. The IBCT performs complementary missions to SBCTs and ABCTs. IBCT complementary missions include control of land areas, populations, and resources. The IBCT optimizes for the offense against conventional, hybrid, and irregular threats in severely restrictive terrain. The IBCT performs missions such as reducing fortified areas, infiltrating and seizing objectives in the enemy's rear, eliminating enemy force remnants in restricted terrain, securing key facilities and activities, and conducting stability in the wake of maneuvering forces. IBCTs easily configure for area defense and as the fixing force component of a mobile defense. The IBCT's lack of heavy combat vehicles reduces its logistic requirements. Not having heavy combat vehicles gives higher commanders greater flexibility when adapting various transportation modes to move or maneuver the IBCT. Chief of Staff of the Army General Mark A. Milley characterizes the operational environment confronting the Army as follows: I believe we are on the cusp of a fundamental change in the character of war. Technology, geopolitics and demographics are rapidly changing societies, economies, and the tools of warfare. They are also producing changes in why, how and where wars are fought—and who will fight them. The significantly increased speed and global reach of information (and misinformation) likewise will have unprecedented effects on forces and how they fight. For example, the proliferation of effective long-range radars, air defense systems, long-range precision weapons, electronic warfare, and cyber capabilities enables adversary states to threaten our partners and allies. Even if we do not fight the producers of these sophisticated weapons, warfare will become more lethal as they export this advanced equipment to their surrogates or customers. Crises involving such adversaries will unfold rapidly, compressing decision cycles and heightening the risks of miscalculation or escalation. Conflict will place a premium on speed of recognition, decision, assembly and action. Ambiguous actors, intense information wars and cutting-edge technologies will further confuse situational understanding and blur the distinctions between war and peace, combatant and noncombatant, friend and foe—perhaps even humans and machines. Warfare in the future will involve transporting, fighting and sustaining geographically dispersed Army, joint and multinational forces over long and contested distances, likely into an opposed environment and possibly against a technologically sophisticated and numerically superior enemy. All domains will be viciously contested, and both air and maritime superiority—which have been unquestioned American advantages for at least 75 years—will no longer be a given. Forces in theater should expect to operate under increased public scrutiny, persistent enemy surveillance, and massed precision long-range fires with area effects. Close combat on sensor-rich battlefields of the future will be faster, more violent and intensely lethal, unlike anything any of us have witnessed. And the majority of our operations will likely occur in complex, densely populated urban terrain. In relation to this operational environment, IBCTs are presented with the following challenges: In the past, light infantry of the 82 nd Airborne, 101 st or 10 th Mountain Division would either air drop by parachute, helicopter air assault, or air land at a friendly or secured airfield or land near one to seize it. However, Anti-Access Area Denial (A2AD) technology and weapons, like air defense systems and anti-armor, mines and improvised explosive devices (IEDs), have become both more effective and prevalent. These open the question of whether traditional insertion drop or landing zone is feasible any longer. It is increasingly likely that an \"off set insertion\" will be necessary with the ground force then moving by land to the objective or operating area. The concept itself is largely an upscaling of what U.S. and other nations' special operations, reconnaissance, and even some airborne units have been doing for some time: using light vehicles, including light armored vehicles that are inserted by airdrop, helicopter, or tactical transport air landing. Using the vehicles they are able to insert discretely where they are unlikely to be detected and then conduct their missions. The Army describes IBCT critical capability gaps as The IBCT lacks the ability to decisively close with and destroy the enemy under restricted terrains such as mountains, littorals, jungles, subterranean areas, and urban areas to minimize excessive physical burdens imposed by organic material systems. The IBCT lacks the ability to maneuver and survive in close combat against hardened enemy fortifications, light armored vehicles, and dismounted personnel. IBCTs lack the support of a mobile protected firepower capability to apply immediate, lethal, long-range direct fires in the engagement of hardened enemy bunkers, light armored vehicles, and dismounted personnel in machine gun and sniper positions; with all-terrain mobility and scalable armor protection; capable of conducting operations in all environments. In its current configuration, Army officials note that IBCTs \"can get there fast with low logistics demand, and they can work in severely restricted terrain, but they lack mobility and protected firepower\" to \"enter a foreign territory, immediately overcome armed opposition and hold an area that enables further troops to enter, like an airfield.\" The Army's concept of operation for these vehicles is to increase ground tactical mobility in the IBCT; allow infantry squads and rifle companies to quickly move extended distances over difficult terrain to seize assault objectives; allow rapid deployment into contested areas while providing high mobility and flexibility upon arrival; and limit the impact on strategic mobility of the IBCT. In this regard, the GMV/ISV is intended to provide mobility to the rifle squad and company; the LRV to provide protection to the moving force by means of scouts, sensors, and a variety of medium-caliber weapons; and the MPF to provide the overall IBCT the capability to more effectively engage and destroy fortifications, bunkers, buildings, and light to medium armored vehicles. The GMV/ISV, LRV, and MPF are briefly described in the following sections based on each individual vehicle's requirements. Payload: Nine soldiers/3,200 pounds capacity. Transportability: UH-60 sling load/CH-47 internal load; Air drop from C-130. Mobility: Provide mobility 75% cross-country; 10% primary roads; 10% secondary roads; 5% urban rubble environment. Protection: Provided by high mobility avoiding enemy contact and soldier Personal Protection Equipment (PPE). Lethality: Provide capability to host crew-served weapons assigned to the infantry squad. Command, Control, Communications, Computers, Intelligence, Reconnaissance, and Surveillance (C4ISR): No requirement for added communication equipment or Size, Weight, Power, and Cooling (SWaP-C) organic equipment of the infantry squad. Transportability: CH-47 internal load (in combat configuration). Air drop from C-130. Range: Greater than 300 miles on internal fuel. Mobility : Provide mobility 75% cross-country; 10% primary roads; 10% secondary roads; 5% urban rubble environment. Lethality: Medium-caliber weapon system to provide precision \"stand-off\" lethality against small arms and offense against light armored vehicles. Protection: Protection from small arms. Capacity: Six scouts with combat equipment. Command, Control, Communications, Computers, Intelligence, Reconnaissance, and Surveillance (C4ISR): Ensure sufficient Size, Weight, Power, and Cooling (SWaP-C) to facilitate the integration of current and future communications organic to an IBCT. Support scout sensor package. R ange: 300 kilometer range; 24-hour operations \"off the ramp\" or on \"arrival at drop zone (DZ).\" Mobility: Capable of traversing steep hills, valleys typical in cross-country and urban terrain, and ford depths equal to that of other organic IBCT vehicles. Lethality: Ability to defeat defensive fortifications (bunkers), urban targets (behind the wall), and armored combat vehicles. Protection: Scalable armor to include underbelly protection. Communications Network: SWaP-C sufficient to support current and future communications organic to an IBCT. The following sections provide brief programmatic overviews of the vehicles. Figure 4 depicts the Department of Defense (DOD) Systems Acquisition Framework, which illustrates the various phases of systems development and acquisitions and is applicable to the procurement of these three systems. The Army plans to acquire the vehicles as modified Non-Developmental Item (NDI) platforms. Because the Army adopted the NDI acquisition approach for all three vehicles, the Army can enter the programs at Acquisition Milestone C: Production and Deployment, and forgo the Engineering and Manufacturing Development Phase associated with developmental items (systems developed \"from scratch\") if so desired. Variations of these vehicles already exist commercially, and in order to meet Army requirements, they would require minor modifications. The Army chose this acquisition strategy because a survey of potential candidates suggested a number of existing vehicles—with minor modifications—could meet the Army's requirements. In the case of the MPF, which was less well-developed than the GMV, the MPF underwent an Analysis of Alternatives (AoA) as part of the Material Solution Analysis phase, which was completed September 7, 2017. Theoretically, adopting a NDI approach for all three vehicles could lead to a shorter acquisition time line and a less expensive overall acquisition. The NDI approach is not without risk, however, as the Technology Maturation and Risk Reduction Phase permits a more detailed examination of candidate systems, which can help identify and address requirement shortfalls earlier in the acquisition process (a less expensive solution as opposed to identifying and correcting problems later in a system's development). In all cases, a full and open competition is expected for all three vehicles. In June 2018, the Army established the Next Generation Combat Vehicle (NGCV) program to replace the M-2 Bradley Infantry Fighting Vehicle (IFV), which has been in service since the early 1980s. In October 2018, Army leadership reportedly decided to add additional vehicle programs to what would be called the NGCV Program. Under the new NGCV Program, the following systems are planned for development: The Optionally Manned Fighting Vehicle (OMFV): the M-2 Bradley IFV replacement. The Armored Multi-Purpose Vehicle (AMPV): the M-113 vehicle replacement. Mobile Protected Firepower (MPF). Robotic Combat Vehicles (RCVs): three versions—Light, Medium, and Heavy. The Decisive Lethality Platform (DLP): the M-1 Abrams tank replacement. Previously, the MPF program was overseen by the Program Executive Office (PEO) Ground Combat Systems, but the NGCV program is overseen by the recently established Army Futures Command (AFC) NGCV Cross Functional Team (CFT). MPF will continue to be overseen by PEO Ground Combat Systems, but the NGCV CFT will determine operational requirements and acquisition schedule. In March 2015, the Army changed the name of its Ultra-Light Combat Vehicle (ULCV) to the Ground Mobility Vehicle (GMV). The overall GMV Army Acquisition Objective (AAO) was 2,065 vehicles for the Army and 317 vehicles for U.S. Army Special Operations Command (USASOC). The specific near-term requirement is 295 vehicles for the five Airborne IBCTs and 317 vehicles for USASOC. The Army's FY2018 budget request modified the Army's original acquisition strategy for the GMV, essentially splitting it into two phases. In the first phase, the Army planned to procure GMVs for the five Airborne IBCTs through a U.S. Special Operations Command (USSOCOM) contract already in place for a similar vehicle (GMV 1.1) for USSOCOM forces. In this case, the Army planned to purchase the Flyer 72 vehicle from General Dynamics Ordnance and Tactical Systems. The Army contended that the limited buy of 295 GMV 1.1 vehicles for the five Airborne IBCTs was the quickest way to field this interim capability that has gone through USSOCOM-sponsored testing and shares the same repair parts, thereby reducing costs. The second phase of the GMV program would be to acquire 1,700 GMVs through a full and open competition once the Army has refined its requirements, which was intended to reduce the overall cost. Army officials noted the GMV 1.1 procurement cost will be higher, however, than the cost of the GMVs procured through full and open competition. The Army planned to spend $194.8 million for 718 vehicles from FY2018 to FY2022, with an expectation that a contract award would be made in FY2020. To equip other types of IBCTs, the Army established the Infantry Squad Vehicle (ISV) program. The ISV is planned to be a larger competitive program than the GMV program and is to have similar operational requirements as the GMV. ISV is planned to be fielded to Active and Reserve Components. The estimated total requirement is for 2,065 vehicles, with projected target production quantities for the next five fiscal years as follows: FY2020: 17 vehicles. FY2021: 118 vehicles. FY2022: 177 vehicles. FY2023: 177 vehicles. FY2024: 162 vehicles. The targeted ISV program acquisition timeline is as follows: Draft Request for Proposal (RFP): March 29, 2019. Industry Day: April 11, 2019. Final RFP Release: April 18, 2019. Prototype Contract Awards (up to three vendors): August 20, 2019. Prototype Vehicle Delivery (two vehicles up to three vendors): November 1, 2019. Production Contract Award: March 31, 2020. Army officials were planning to use the Joint Light Tactical Vehicle (JLTV) to serve as the LRV on an interim basis. From a programmatic perspective, the Army refered to its interim LRV solution as the Joint Light Tactical Vehicle-Reconnaissance Vehicle (JLTV-RV). The JLTV, which is currently in production, could be equipped with additional firepower and sensors to serve in this role while the Army continues to refine its requirements for the LRV. The standard JLTV—at around 18,000 pounds and carrying only four soldiers—does not meet the Army's weight and crew requirements for the LRV as currently envisioned. The Army planned for the LRV to be fielded in IBCT Cavalry Squadrons and Infantry Battalion Scout Platoons. The Army's decision to not request funds for JLTV - RV in its FY2020 budget request calls into question the future of this effort. In October 2016 the Army began its Analysis of Alternatives for MPF candidates. MPF would also be a modified Non-Developmental Item (NDI) platform. The Engineering Manufacturing Development (EMD) phase is planned to begin in FY2019 and last through FY2022, with an anticipated Milestone C—beginning of Production and Deployment—by FY2022. Reports suggested the Army had a requirement for about 500 MPF vehicles with an average unit manufacturing cost of $6 million to $7 million per vehicle, which suggests a total program cost of approximately $3 billion to $3.5 billion. The Marine Corps is reportedly monitoring MPF development for possible use in its Marine tank battalions, which could raise the overall MPF procurement to around 600 vehicles. On November 17, 2017, the Army released a request for proposal (RFP) for MPF. The RFP reportedly noted the Army wished to procure 504 MPF vehicles at a unit manufacturing cost target of $6.4 million per vehicle. In December 2018, the Army reportedly awarded contracts to BAE Systems and General Dynamics Land Systems (GDLS) to build MPF prototypes. Both companies were reportedly awarded contracts not to exceed $376 million to build 12 prototypes for testing before one company is selected to deliver up to 28 low-rate initial production (LRIP) vehicles. BAE was said to have proposed a modified version of the Army's old M-8 Armored Gun System, and GDLS integrated an M-1 Abrams turret onto the British Ajax Scout Vehicle hull into what is called the Griffin III. The FY2020 Army GMV budget request for $37 million in procurement funding supports the procurement of 69 GMVs for the U.S. Army Special Operations Command and 15 ISVs for the Army. The FY2020 GMV Research, Development, Test & Evaluation (RDT&E) request is for $3 million to support operational testing. The Army did not submit a FY2020 budget request for the LRV program. From a programmatic perspective, the Army refers to its interim LRV solution as the Joint Light Tactical Vehicle-Reconnaissance Vehicle (JLTV-RV). The FY2020 Army MPF budget request for $310.152 million in RDT&E funding supports the continuation of rapid prototyping efforts and the completion of 24 prototypes. As previously noted, the Army did not submit a FY2020 budget request for LRV funding. Absent any formal announcement, it is unknown if the Army has decided to cancel this effort, initiate a new effort, or if it is putting this effort on hold to free up funding for other priorities. Another potential issue is if this effort has been cancelled, how the Army will address the operational need for reconnaissance in the IBCTs that the LRV was intended to satisfy. As previously noted, in February 2017 the Army announced it would establish six Security Force Assistance Brigades (SFABs)—five in the Active Component and one in the Army National Guard (ARNG). While not combat brigades per se, the Army plans for SFABs to be expanded, if the need arises, into fully operational ABCTs or IBCTs capable of conducting major combat operations. If the Army plans to expand some of its SFABs into IBCTs it could have an impact on the number of ISVs, LRVs, and MPF systems needed to fully equip these units. While these numbers would likely be modest, it might be of interest to Congress to know how many additional vehicles would be required. Since they would not be part of the SFAB's organic equipment and only needed in the event of Army expansion, how and when will these vehicles be procured and how will they be maintained so that they would be available when needed? Apart from fielding GMVs to Airborne IBCTs, little is known about the Army's overall fielding plan for these vehicles. Would active IBCTs receive these vehicles first, followed by National Guard IBCTs, or would both components receive the vehicles concurrently? When would these vehicles begin arriving at units, and when is the overall fielding anticipated to conclude? Does the Army plan to field these vehicles to prepositioned stocks in addition to units? What are some of the challenges associated with fielding three different vehicles with different production and delivery dates? ", "summary": "Infantry Brigade Combat Teams (IBCTs) constitute the Army's \"light\" ground forces and are an important part of the nation's ability to project forces overseas. The wars in Iraq and Afghanistan, as well as current thinking by Army leadership as to where and how future conflicts would be fought, suggest IBCTs are limited operationally by their lack of assigned transport and reconnaissance vehicles as well as firepower against hardened targets and armored vehicles. There are three types of IBCTs: Light, Airborne, and Air Assault. Light IBCTs are primarily foot-mobile forces. Light IBCTs can move by foot, by vehicle, or by air (either air landed or by helicopter). Airborne IBCTs are specially trained and equipped to conduct parachute assaults. Air Assault IBCTs are specially trained and equipped to conduct helicopter assaults. Currently, the Army contends IBCTs face a number of limitations The IBCT lacks the ability to decisively close with and destroy the enemy under restricted terrains such as mountains, littorals, jungles, subterranean areas, and urban areas to minimize excessive physical burdens imposed by organic material systems. The IBCT lacks the ability to maneuver and survive in close combat against hardened enemy fortifications, light armored vehicles, and dismounted personnel. IBCTs lack the support of a mobile protected firepower capability to apply immediate, lethal, long-range direct fires in the engagement of hardened enemy bunkers, light armored vehicles, and dismounted personnel in machine gun and sniper positions; with all-terrain mobility and scalable armor protection; capable of conducting operations in all environments. To address these limitations, the Army is undertaking three programs: the Ground Mobility Vehicle (GMV)/Infantry Squad Vehicle (ISV), formerly known as the Ultra-Light Combat Vehicle (ULCV); the Light Reconnaissance Vehicle (LRV); and the Mobile Protected Firepower (MPF) programs. These programs would be based on vehicles that are commercially available. This approach serves to reduce costs and the time it takes to field combat vehicles. The GMV/ISV is intended to provide mobility to the rifle squad and company. The LRV would provide protection to the moving force by means of scouts, sensors, and a variety of medium-caliber weapons, and the MPF would offer the IBCT the capability to engage and destroy fortifications, bunkers, buildings, and light-to-medium armored vehicles more effectively. The FY2020 Army GMV budget request for $37 million in procurement funding supports the procurement of 69 GMVs for the U.S. Army Special Operations Command and 15 ISVs for the Army. The FY2020 GMV Research, Development, Test & Evaluation (RDT&E) request is for $3 million to support operational testing. The Army did not submit a FY2020 budget request for the LRV program. The FY2020 Army MPF budget request for $310.152 million in RDT&E funding supports the continuation of rapid prototyping efforts and the completion of 24 prototypes. Potential issues for Congress include the future of the LRV effort; Security Force Assistance Brigades (SFABs) and GMV/ISV, LRV, and MPF requirements; and GMV/ISV, LRV, and MPF fielding plans.", "document_type": "crs"}
{"report": "Program eligibility requirements and payment limits are central to how various U.S. farm programs operate. These requirements fundamentally address various equity concerns and reflect the goals of government intervention in agriculture. They determine who receives federal farm program payments and how much they receive. Eligibility requirements and payment limits are controversial because they influence what size farms are supported. Policymakers have debated what limit is optimal for annual payments, whether payments should be proportional to production or limited per individual or per farm operation, and whether the limit should be specific to each program or cumulative across all programs. Furthermore, program eligibility requirements and payment limits generate considerable congressional interest because their effects differ across regions and by type of commodities produced and because a substantial amount of annual U.S. farm program payments are at stake: Direct federal outlays have averaged $13.7 billion per year from 1996 through 2017. When federal crop insurance premium subsidies are included, annual farm payments have averaged $18.5 billion over the same period. This report discusses various eligibility factors and their interaction under the 2018 farm bill. It describes current restrictions that limit or preclude payments to farmers based on a number of factors as well as areas where few, if any, restrictions limit farmers' access to such benefits or to the amount of benefits. This report begins by discussing farm program eligibility, including the primary types of legal entities participating in farm programs. Other limiting requirements are discussed, such as participant identification, citizenship, the current interpretation of what constitutes \"actively engaged in farming\" (AEF), adjusted gross income (AGI) limits, and conservation compliance. This is followed by a discussion of the direct attribution of payments to individual recipients for assessing whether a person's payment limit has been exceeded. Next, annual payment limits for the major categories of farm programs are examined. Much of this information is summarized in Table 1 . This report also discusses several issues related to farm program payment limits, including policy design issues, that may be of interest to Congress. Finally, an Appendix contains a history of the evolution of annual payment limits for major commodity programs ( Table A-1 ). Farm program payment limits and eligibility requirements may differ by both type of program and type of participating legal entity (e.g., an individual, a partnership, or a corporation). Eligibility and payment limit determinations for farm programs are under the jurisdiction of the U.S. Department of Agriculture's (USDA's) Farm Service Agency (FSA). Congress first added payment limits as part of farm commodity programs in the 1970 farm bill (P.L. 91-524). However, such limits have evolved over time in both scope and amount ( Table A-1 ) as the structure of U.S. agriculture, farm policies, and commodity support programs has changed. With each succeeding farm bill, Congress has addressed anew who is eligible for farm payments and how much an individual recipient should be permitted to receive in a single year. In recent years, congressional debate has focused on attributing payments directly to individual recipients, ensuring that payments go to persons or entities currently engaged in farming, capping the amount of payments that a qualifying recipient may receive in any one year, and excluding farmers or farming entities with incomes above a certain level as measured by their AGI from payment eligibility. Each of these policy measures—depending on how they are designed and implemented—can have consequences, both intended and unintended, for U.S. agriculture. These consequences include, but are not limited to, farm management structure, crop choices, and farm size. Because U.S. farm program eligibility requirements and annual payment limit policy have such broad potential consequences for U.S. agriculture, a review of both current policies and related issues is of potential interest to Congress. Not all farm businesses are eligible to participate in federal farm programs. A number of statutory and regulatory requirements govern federal farm program eligibility for benefits under various programs. Some farm businesses, although eligible to participate, are restricted from receiving certain benefits or may be limited in the extent of program payments that they may receive. Over time, program eligibility rules have evolved, expanding to more programs and including more limitations. Cross-cutting methods of determining program eligibility—such as AGI thresholds—are relatively new. Discussed below are cross-cutting eligibility requirements that affect multiple programs, including participant identification, foreign ownership, nature and extent of participation (i.e., AEF criteria), means tests, and conservation requirements. Generally, program eligibility begins with identification of participants. Identifying who or what entity is participating and therefore how payments may be attributed is the cornerstone to most farm program eligibility. To be eligible to receive any farm program payment, every person or legal entity—including both U.S. citizens and noncitizens—must provide a name and address and have either a social security number (SSN), in the case of a person, or a Taxpayer Identification Number (TIN) or Employee Identification Number (EIN) in the case of a legal entity with multiple persons having ownership interests. In this latter situation, each person with an interest must have a TIN or EIN and must declare interest share in the joint entity using the requisite USDA forms. All participants in programs subject to payment eligibility and payment limitation requirements must submit to USDA two completed forms. The first, CCC-901 (Members' Information), identifies the participating persons and/or entities (through four levels of attribution if needed) and their interest share in the operation. The second form, CCC-902 (Farm Operating Plan), identifies the nature of each person's or entity's stake—that is, capital, land, equipment, active personal labor, or active personal management—in the operation. These forms need to be submitted only once (not annually) but must be kept current in regard to any change in the farming operation. Critical changes to a farming operation might include expanding the number of limitations for payment, such as by adding a new family member, changing the land rental status from cash to share basis, purchasing additional base acres equivalent to at least 20% of the previous base, or substantially altering the interest share of capital or equipment contributed to the farm operation. This information is critical in determining the extent to which each person is actively engaged in the farming operation, as described below. Many types of farm business entities own operations engaged in agricultural production. For purposes of determining the extent to which the participants of a farm operation qualify as potential farm program participants, three major categories are considered ( Table 2 ). 1. Sole proprietorship or family farm . The farm business is run by a single operator or multiple adult family members—the linkage being common family lineage—whereby each qualifying member is subject to an individual payment limit. Thus, a family farm potentially qualifies for an additional payment limit for each family member (18 years or older) associated with the principal operator. Family farms or sole proprietorships comprised nearly 87% of U.S. farm operations in 2012. 2. Joint operation . Each member of a joint operation—where members need not have a common family relation or lineage—is treated separately and individually for purposes of determining eligibility and payment limits. Thus, a partnership's potential payment limit is equal to the number of qualifying members (plus any special designees such as spouses) times the individual payment limit. 3. Corporation. A legally defined association of joint owners or shareholders that is treated as a single person for purposes of determining eligibility and payment limits. This includes corporations, limited liability companies, and similar entities. Most incorporated farm operations are family held. As of 2012, these three categories represented over 98% of U.S. farm operations ( Table 2 ). In addition, federal regulations exist for evaluating both the eligibility of and relevant payment limits for other exceptional types of potential recipients, including a spouse, minor children, and other family members as well as marketing cooperatives, trusts and estates, cash-rent tenants, sharecroppers, landowners, federal agencies, and state and local governments. These institutional arrangements represent a small share (less than 2%) of U.S. farm operations according to USDA's 2012 Census of Agriculture. Special rules also describe eligibility and payment limits in the event of the death of a previously eligible person. To be eligible for certain Title I commodity program benefits under the 2018 farm bill, participants—individuals as well as other types of legal entities—must meet AEF requirements. The AEF requirements apply equally to U.S. citizens, resident aliens, and foreign entities. This section briefly reviews the specific requirements for each type of legal entity—person, partnership, or corporation—to qualify as \"actively engaged in farming.\" An individual producer must meet three AEF criteria: 1. The person, independently and separately, makes a significant contribution to the farming operation of (a) capital, equipment, or land; and (b) active personal labor, active personal management, or a combination of active personal labor and management. 2. The person's share of profits or losses is commensurate with his/her contribution to the farming operation. 3. The person shares in the risk of loss from the farming operation. In general, family farms receive special treatment whereby every adult member (i.e., 18 years or older) is deemed to meet the AEF requirements. Family membership is based on lineal ascendants or descendants but is also extended to siblings and spouses. Furthermore, under the 2018 farm bill (§1703), for purposes of assessing the availability of individual payment limits, the definition of family member has been extended to include first cousins, nieces, and nephews. Current law also allows for special treatment of a spouse: If one spouse is determined to be actively engaged in farming, then the other spouse shall also be determined to have met the requirement. The spousal exception applies to both individual producers (as in a family farm) and producers operating within a partnership. An additional exception is made for landowners who may be deemed in compliance with all AEF requirements if they receive income based on the farm's operating results without providing labor or management. In a general partnership, each member is treated separately for purposes of meeting the AEF criteria and determining eligibility. In particular, each partner with an ownership interest must contribute active personal labor and/or active personal management to the farming operation on a regular basis. The contribution must be identifiable, documentable, separate, and distinct from the contributions made by any other partner. Each partner who fails to meet the AEF criteria is ineligible to participate in the relevant farm program. A corporation, as an association of joint owners, is treated as a single person for purposes of meeting the AEF criteria and determining eligibility. In addition to the AEF criteria cited for a person—of sharing commensurate profits or losses and bearing commensurate risk—each member with an ownership interest in the corporation must make a significant contribution of personal labor or active personal management—whether compensated or not—to the operation that is (a) performed on a regular basis, (b) identifiable and documentable, and (c) separate and distinct from such contributions of other stockholders or members. Furthermore, the collective contribution of corporate members must be significant and commensurate with contributions to the farming operation. If any member of the legal entity fails to meet the labor or management contribution requirements, then any program payment or benefit to the corporation will be reduced by an amount commensurate with the ownership share of that member. An exception applies if (a) at least 50% of the entity's stock is held by members that are \"actively engaged in providing labor or management\" and (b) the total annual farm program payments received collectively by the stockholders or members of the entity are less than one payment limitation. Prior to the 2014 farm bill ( P.L. 113-79 ), the definition of active personal labor or management was broad and could be satisfied by undertaking passive activities without visiting the operation, thus enabling individuals who lived significant distances from an operation to claim such labor or management contributions. This was often seen as problematic, as passive investors were receiving farm program payments without actively contributing to the farming operation. Recent farm bills have amended the AEF criteria in an attempt to tighten the requirements. However, the issue remains controversial. In particular, the 2014 farm bill (§1604) required USDA to add more specificity to the role that a nonfamily producer must play to qualify for farm program benefits. These AEF regulations continue under the 2018 farm bill. As a result of the rule, a limit is placed on the number of nonfamily members of a farming operation who can qualify as a farm manager—depending on the size and complexity of the farm operation. Also, additional recordkeeping requirements now apply for each nonfamily member of a farming operation claiming active personal management status. No such limit applies to the potential number of qualifying family members. Generally, if foreign persons or legal entities meet a particular farm program's eligibility requirements, then they are eligible to participate. One exception is the four permanent disaster assistance programs—Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP), Livestock Forage Disaster Program (LFP), Livestock Indemnity Program (LIP), and Tree Assistance Program (TAP)—and the Noninsured Crop Disaster Assistance Program (NAP), which explicitly prohibit payments to foreign entities other than resident aliens. As of December 31, 2016, foreign persons held an interest in 28.3 million acres of U.S. agricultural land (including forest land). This accounts for 2.2% of all privately held agricultural land in the United States and approximately 1% of total U.S. land. Foreign persons or entities can become eligible for most farm program benefits if they have the requisite U.S. taxpayer ID and meet the AEF criteria discussed earlier. In the case where a foreign corporation or similar entity fails to meet the AEF criteria but has shareholders or partners with U.S. residency status, then the foreign entity may—upon written request to USDA—receive payments representative of the percentage ownership interest by those U.S. citizens or U.S. resident aliens that do meet the AEF criteria. In addition, current law imposes no specific restrictions on foreign persons or entities with respect to eligibility for crop and livestock insurance premium subsidies. Also, the Dairy Margin Coverage (DMC) program makes no distinction about producer or owner citizenship. Instead, the law states that all dairy operations in the United States shall be eligible to participate in the DMC program to receive margin protection payments. Similarly, no citizenship requirement exists for a sugar processor, or a cane or beet producer, operating under the U.S. sugar program price guarantees. However, the sugarcane and sugar beets being processed must be of U.S. origin. Means testing prohibits persons or legal entities from being eligible to receive any benefit under certain commodity and conservation programs during a crop, fiscal, or program year, as appropriate, if their income is above an established level. The first means test for farm programs was established by the 2002 farm bill ( P.L. 107-171 ) ( Table 3 ). Income is measured by an individual's or entity's average AGI from the previous three-year period but excluding the most recent complete taxable year. Recent farm bills, including the 2018 farm bill, have preserved the three-year average AGI as the relevant measure of income. Now that an AGI limit appears acceptable, the debate has shifted to which programs are covered by the means test and what income level is an appropriate threshold. Since most U.S. farms are operated as sole proprietorships or partnerships ( Table 2 ), most farm households are taxed under the individual income tax rather than the corporate income tax. For an individual, AGI is the Internal Revenue Service (IRS) reported adjusted gross income. AGI measures net income—that is, income after expenses. Farm income is reported on the IRS Schedule F where AGI is net of farm operating expenses. For an incorporated business, a comparable measure to AGI—as determined by USDA—is used to measure income. Since the household is the typical unit of taxation, farm and nonfarm income are combined when computing federal income taxes for farm households. In fact, most federal income tax paid by farm households can be attributed to nonfarm income (80% in 2016). Farm operations overwhelmingly report operating losses for tax purposes (because of cash accounting, capital expensing via depreciation, and other practices). For example, in 2015, two-thirds of farm sole proprietors reported a net farm loss for tax purposes. The substantial portion of capital investment that can be expensed in the first year is an important determinant of the large loss reporting. Program participants are required to annually give their consent to the IRS to verify to USDA that they are in compliance with their AGI limit provisions using a specific USDA form (CCC-941). Failure to provide the consent and subsequent certification of compliance results in ineligibility for program payments and a required refund of any payments already received for the relevant year. The initial AGI eligibility threshold established by the 2002 farm bill was for a total AGI of $2.5 million and covered most farm programs (listed in Table 3 ). However, the 2002 farm bill included an exemption if at least 75% of AGI was from farming. The 2008 farm bill replaced the single AGI limit of the 2002 farm bill with three separate AGI limits that distinguished between farm and nonfarm AGI. First, a nonfarm AGI limit of $500,000 applied to eligibility for selected farm commodity program benefits including the Milk Income Loss Contract program, NAP, and the disaster assistance programs. A second farm-specific AGI limit of $750,000 applied to eligibility for direct payments. A third nonfarm AGI limit of $1 million—but subject to an exclusion if 66.6% of total AGI was farm-related income—applied to eligibility for benefits under conservation programs. The AGI limit could be waived in its entirety on a case-by-case basis if a conservation program would protect environmentally sensitive land of special significance. Also, the 2008 farm bill added a provision for married individuals filing a joint tax return whereby the joint AGI could be allocated as if a separate return had been filed by each spouse. This would potentially allow the farmer to exclude any earned income from a spouse as well as a share of any unearned income from jointly held assets for purposes of the eligibility cap. This provision had the potential to significantly reduce the share of farms affected by the AGI cap. The 2014 farm bill returned the eligibility threshold to a single total AGI limit but at a level of $900,000 for individuals and incorporated businesses. It also retained the provision for married individuals filing a joint tax return to allocate the AGI as if a separate return had been filed by each spouse. In the case of a payment to a general partnership or joint venture comprising multiple individuals, the payment would be reduced by an amount that is commensurate with the share of ownership interest of each person who has an average AGI in excess of $900,000. The 2018 farm bill retained the AGI provisions from the 2014 farm bill but added the 2008 farm bill's case-by-case waiver for conservation programs that would protect environmentally sensitive land of special significance. Two provisions—highly erodible land conservation (Sodbuster) and wetland conservation (Swampbuster)—are collectively referred to as conservation compliance. To be eligible for certain USDA program benefits, a producer agrees to conservation compliance—that is, to maintain a minimum level of conservation on highly erodible land and not to convert or make production possible on wetlands. Conservation compliance has been in effect since the Food Security Act of 1985 (1985 farm bill, P.L. 99-198 ). The majority of farm program payments, loans, disaster assistance, and conservation programs are benefits that may be lost if a participant is out of compliance with the conservation requirements. The 2014 farm bill extended conservation compliance to federal crop insurance premium subsidies, and the 2018 farm bill retains this compliance requirement. Most recently, the 2018 farm bill made relatively minor amendments to the compliance provisions. Within U.S. farm policy, conservation compliance continues to be one of the only environmentally based requirements for program participation. The process of tracking payments to an individual through various levels of ownership in single and multiperson legal entities is referred to as \"direct attribution.\" Several types of legal entities may qualify for farm program payments. However, ultimately every legal entity represents some combination of individuals. For example, a joint operation can be made up of a combination of individuals, partnerships, and/or corporate entities. A particular individual may be part of each of these three component entities, as well as additional subentities within each of these components. Farm payments flow down through these arrangements to individual recipients. Congress defines legal entity as an entity created under federal or state law that (1) owns land or an agricultural commodity or (2) produces an agricultural commodity. This broad definition encompasses the multiperson legal entities discussed earlier such as family farm operations, joint ventures, corporations, and institutional arrangements. Ownership shares in a multiperson legal entity are tracked via a person's social security number or EIN as reported in CCC-901 and CCC-902. Identification at the individual payment recipient level is critical for assessing the cumulative payments of each individual against the annual payment limit. Direct attribution was originally authorized in the 2008 farm bill (§1603(b)(3)). All farm program payments made directly or indirectly to an individual associated with a specific farming operation are combined with any other payments received by that same person from any other farming operation—based on that person's pro rata interest in those other operations. It is this accumulation of an individual's payments—tracked through four levels of ownership in multiperson legal entities—that is subject to the annual payment limit (see text box below). The first level of attribution is an individual's personal farming operation. Subsequent levels of attribution are related to those legal entities in which an individual has an ownership share. If a person meets his or her payment limit at the first level of attribution (i.e., on his or her own personal farming operation), then any payments to legal entities at lower levels of attribution are reduced by that person's pro rata share. When the eligibility criteria—including AEF, AGI, conservation compliance, and others—are met, the cumulative benefits across certain farm programs are subject to specific annual payment limits (detailed in Table 1 ) that can be received by an individual or legal entity in a year. Explicit payment limits date back to the 1970s. Despite their longevity, payment limits are not universal among programs. Payment limits are also enforced differently for different types of legal entities (as mentioned earlier and summarized below). For example, certain program limits may be expanded depending on the number of participants, or they may be subject to exceptions, or they may not exist. The major categories of farm program support and the applicability of annual payment limits, if any, are briefly discussed below. Traditionally, much attention focuses on the annual payment limits for the Title I commodity programs, largely because this has been the conduit for the majority of farm program expenditures. Title I commodity program payment limits were first included in a farm bill in 1970 but have evolved substantially since that initial effort ( Table A-1 ). Several major farm support programs—as defined by specific titles of the 2018 farm bill—are currently subject to annual payment limits. Title I (Subtitle A) : ARC and PLC . Payments for the two revenue-support programs—Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC)—must be combined for all covered commodities (except peanuts) and reduced by any sequestration prior to assessing whether they are within the $125,000 annual payment limit for an individual. Peanuts are a notable exception to this rule in that ARC and PLC payments for peanuts (after sequestration) are subject to their own annual payment limit of $125,000 per individual. Title I (Subtitle E): Livestock Forage D isaster P rogram ( LFP ) . The LFP program is subject to an annual limit of $125,000 per person. Title I (Subtitle F ) : Noninsured Crop Disaster Assistance Program (NAP) . Available for crops not currently eligible for crop insurance. Payments for catastrophic coverage are limited to $125,000 per crop year per individual or entity. Payments for additional coverage (referred to as buy-up coverage) are limited to $300,000 per crop year per individual or entity. In addition to commodity programs authorized in periodic farm bills, the Secretary of Agriculture has broad authority under the CCC charter to make payments in support of U.S. agriculture. These payments may be purely ad hoc in nature, or they may be made according to a formula as part of a temporary program. Payments under this type of authority may or may not be subject to payment limits in accordance with the program's specification. Two such programs are currently active—both are subject to annual payment limits. 1. Cotton Ginning Cost Share (CGCS) Program. The CGCS program has been available only in the 2016 and 2018 crop years. Payments under the CGCS program are subject to an annual payment limit of $40,000 per person. 2. Market Facilitation Program (MFP) . USDA established the MFP program in August 2018 as a one-time payment program to help offset the financial losses associated with lost agricultural trade to China as a result of a trade dispute with the United States. MFP payments are subject to a per-person payment limit of $125,000. However, the limit applies separately to three categories of commodities—field crops (corn, sorghum, soybeans, upland cotton, and wheat); livestock (dairy and hogs); and specialty crops (shelled almonds and fresh, sweet cherries). When the farm program benefits for a qualifying recipient exceed the annual limits (as listed in Table 1 ) for a given year, then that individual is no longer eligible for further benefits under that particular program during that year and is required to refund any payments already received under that program that are in excess of the relevant payment limit for that year. As mentioned earlier, family farms receive special treatment whereby every adult member—18 years or older—is deemed to meet the AEF requirements and is potentially eligible to receive farm program payments in an amount up to the individual payment limit. Furthermore, under the 2018 farm bill (§1703(a)(1)), the definition of family member was extended to include first cousins, nieces, and nephews. A partnership's potential payment limit is equal to the limit for a single person times the number of persons or legal entities that comprise the ownership of the joint operation plus any additional exemptions or exceptions. Adding a new member can provide one or two (with qualifying spouse) additional payment limits. Each member of a partnership or joint venture must meet the AEF criteria and must be within the AGI limit. Furthermore, the partnership's total payment limit is reduced by the share of each single member who has already met his or her payment limit (or portion thereof) on another farm operation outside of the partnership. A corporation is treated as a single person for purposes of determining eligibility and payment limits—provided that the entity meets the AEF criteria. Adding a new member to the corporation generally does not affect the payment limit but only increases the number of members that can share a single payment limit. Limits on conservation programs have existed long before limits on farm support programs. Most current conservation programs include some limit on the amount of funding a participant may receive, but these limits vary by program. Some programs have multiple limits that vary based on activity or practice implemented. Several major conservation programs in Title II of the 2018 farm bill are currently subject to annual payment limits. Conservation Reserve Program (CRP) . Payments for CRP can vary based on the type of contract and type of payment. In general, annual rental payments for general enrollment contracts and continuous enrollment contracts are limited to 85% and 90% of the average county rental rate, respectively, and not more than $50,000 total per year. Cost-share payments and incentive payments are also limited and may be waived or applied at different levels under subprograms of CRP, such as land enrolled under the Conservation Reserve Enhancement Program or the Soil Health and Income Protection Pilot. Environmental Quality Incentives Program (EQIP). Total cost-share and incentive payments are limited to $450,000 for all EQIP contracts entered into by a person or legal entity between FY2019 and FY2023. This limit may be waived for new Conservation Incentive Contracts authorized under Section 2304(g) of the 2018 farm bill. Payments for EQIP conservation practices related to organic production are limited to a total of $140,000 between FY2019 and FY2023. Conservation Stewardship Program (CSP) . A person or legal entity may not receive more than a total of $200,000 for all CSP contracts between FY2019 and FY2023. This limit does not apply to the new CSP Grassland Conservation Initiative authorized under Section 2309 of the 2018 farm bill. However, annual payments under the initiative are limited to $18 per acre, not to exceed the number of base acres on a farm. Payments under certain Title I and Title II programs in the 2018 farm bill are excluded from annual payment limits. These exceptions are described below. Another exception to payment limits could result if the principal operator or a major partner of a farm operation dies during the course of a program year and any associated program benefits for the deceased are transferred to another farm operator or partner. Certain farm programs are not subject to annual payment limits. This includes any benefits obtainable under the marketing assistance loan (MAL) program, the sugar program, the dairy program, and three of the four disaster assistance programs (ELAP, LIP, and TAP). Also, benefits from crop insurance premium subsidies and indemnity payments on loss claims are not subject to any limits. Finally, any payments made under the Emergency Watershed Protection Program (EWP) are not subject to payment limits. Title I (Subtitle B) MAL program. Benefits under the MAL program include loan deficiency payments (LDP), marketing loan gains (MLG), and gains under forfeiture or commodity certificate exchanges. Traditionally, MAL benefits in the form of LDPs and MLGs have been subject to payment limits, whereas MAL benefits derived from forfeiting to the CCC the quantity of a commodity pledged as collateral for a marketing assistance loan or from use of commodity certificates to repay a marketing assistance loan have traditionally been excluded from payment limits. However, the 2018 farm bill (§1703(a)(2)) excluded all MAL benefits from payment limits. Title I (Subtitle C) sugar program. The U.S. sugar program does not rely on direct payments from USDA, and generally operates with no federal budget outlays. Instead, the sugar program provides indirect price support to producers of sugar beets and sugarcane and direct price guarantees to the processors of both crops in the form of a marketing assistance loan at statutorily fixed prices. Congress has directed the USDA to administer the U.S. sugar program at no budgetary cost to the federal government by limiting the amount of sugar supplied for food use in the U.S. market, thus indirectly supporting market prices. This indirect subsidy is implicit and not subject to budgetary restrictions. Furthermore, there is no citizenship requirement for a sugar processor, but the sugarcane and sugar beets being processed under the U.S. sugar program price guarantees must be of U.S. origin. Title I (Subtitle D) dairy program . The margin-based dairy support program was first established under the 2014 farm bill (§1401-§1431) without payment limits as the dairy margin protection program (MPP). The MPP was revised and renamed as the Dairy Margin Coverage (DMC) program by the 2018 farm bill. Under the DMC, participants benefit from two potential types of support: an implicit premium subsidy and an indemnity-like payment made when program price triggers are met. The fees or premiums charged for participating in the DMC are set in statute rather than being set annually based on historical data and market conditions. Thus, the subsidy is implicit to the premium paid with no limit on the level of participation. Similarly, any payments made under the DMC are not subject to payment limits. Title I (Subtitle E ) disaster assistance program s: ELAP, LIP, and TAP . Payments under three of the disaster assistance programs in Title I of the 2018 farm bill are excluded from any payment limits. This includes ELAP, LIP, and TAP. Title II conservation program s . Total payments under certain conservation programs are limited to the value or cost of the specific conservation measure that the program is paying for rather than a fixed limit. Under the Agricultural Conservation Easement Program and the EWP program, payments are limited to a portion of the total cost of the easement or project rather than a total funding amount. In the case of the Regional Conservation Partnership Program (RCPP), the 2018 farm bill allows USDA to make payments to producers in an amount necessary to achieve the purposes of the program with no limit on the total amount. Title XI crop- and livestock-related insurance premium subsidies and indemnity payments . The principal support provided for farmers under the federal crop insurance program are federal premium subsidies for both catastrophic and buy-up insurance coverage. Premium subsidies are not subject to any limit on the level of participation or underlying value. Crop insurance indemnities are payments made to cover insurable losses and thus are not subject to any payment limit. To be eligible to purchase catastrophic risk protection coverage, the producer must be a \"person\" as defined by USDA, and to be eligible to purchase any other plan of insurance (such as buy-up coverage, among others), the producer must be at least 18 years of age and have a bona fide insurable interest in a crop as an owner-operator, landlord, tenant, or sharecropper. Payments received directly or indirectly by a qualifying person (i.e., someone who meets AEF, AGI, and any other eligibility requirements) may exceed the applicable limitation if all of the following apply: ownership interest in farmland or agricultural commodities was transferred because of death, the new owner is the successor to the previous owner's contract, and the new owner meets all other eligibility requirements. This provision also applies to an ownership interest in a legal entity received by inheritance if the legal entity was the owner of the land enrolled in an annual or multiyear farm program contract or agreement at the time of the shareholder's death. The new owner cannot exceed the payment amount that the previous owner was entitled to receive under the applicable program contracts at the time of death. However, the new payment limit associated with this transfer would be in addition to the payment limit of the person's own farm operation. If the new owner meets all program and payment eligibility requirements, this provision applies for one program year for ARC and PLC. This reflects the idea that individual resources were committed by both farming operations (the deceased's and the inheritor's) during the growing season with no expectation of death and that individual payment limits should reflect that resource commitment and not impose an unnecessary and unexpected burden on the inheritor. Limitations on farm program payments raise a number of issues that have led to debate among farm policymakers and agricultural stakeholders and may continue to be of interest to Congress as it considers issues of equity and efficiency in farm programs. Theoretically, market prices—based on relative supply and demand conditions under competitive market conditions —provide the most useful signals for allocating scarce resources. In other words, in a situation where no policy support is available, most producers would make production decisions based primarily on market conditions. If these conditions hold, then tighter payment limits (i.e., a smaller role for government support policies and production incentives) would imply that more land would be farmed based on market conditions and less land would be farmed based on policy choices. Supporters of payment limits use both economic and political arguments to justify tighter limits. Economically, they contend that large payments facilitate consolidation of farms into larger units, raise the price of land, and put smaller family-sized farming operations and beginning farmers at a disadvantage. Even though tighter limits would not redistribute benefits to smaller farms, they say that tighter limits could help indirectly by reducing incentives to expand, thus potentially reducing upward price pressure on land markets. This could help small and beginning farmers buy and rent land. Politically, they believe that large payments undermine public support for farm subsidies and are costly. In the past, newspapers have published stories critical of farm payments and how they are distributed to large farms, nonfarmers, or landowners. Limits increasingly appeal to urban lawmakers and have advocates among smaller farms and social interest groups. Critics of payment limits (and thus supporters of higher limits or no limits) counter that all farms are in need of support, especially when market prices decline, and that larger farms should not be penalized for the economies of size and efficiencies they have achieved. They say that farm payments help U.S. agriculture compete in global markets and that income testing is at odds with federal farm policies directed toward improving U.S. agriculture and its competitiveness. In addition to these concerns, this section briefly reviews other selected payment limit issues and eligibility requirements. The majority of farm payments go to a small share of large operators. According to USDA's 2012 Agricultural Census, farms with market revenue equal to or greater than $250,000 accounted for 12% of farm households but produced 89% of the value of total U.S. agricultural production and received 60% of federal farm program payments. Selecting a particular dollar value as a limit on annual government support payments involves a fundamental choice about who should benefit from farm program payments. This has important, but complex, policy implications. For example, numerous academic studies have shown that government payments are usually capitalized into cropland values, thus raising rental rates and land prices. Higher land values disfavor beginning and small farmers, who generally have limited access to capital. As a result, critics contend that there is a lack of equity and fairness under the current system of farm program payments that appears to favor large operations over small and that payment limits are really about farm size. In contrast, supporters of the current system argue that larger farms tend to be more efficient operators and that altering the system in favor of smaller operators may create inefficiencies and reduce U.S. competitiveness in international markets. Furthermore, they contend that tightening payment limits will have different effects across crops, thus resulting in potentially harmful regional effects. Tighter payment limits do not affect all crops and regions equally. As limits are tightened, they will likely first impact those crops with higher per-unit and per-acre production value. Among the major U.S. program crops, higher valued crops include rice, peanuts, and cotton, all of which tend to be produced in the Southeast, the Mississippi Delta, and western states. Furthermore, payment limits may influence local economic activity. In particular, payment limits are likely to have a greater economic impact in regions where agricultural production accounts for a larger share of economic output—that is in rural, agriculture-based counties—and where there may be fewer opportunities for diversification to offset any payment-limit-induced reduction in agricultural incomes. Under current law, peanuts have a separate program payment limit—a consequence of the 2002 federal quota buyout ( P.L. 107-171 , §1603). This separate payment limit affords peanut production an advantage over production of other program crops that are subject to combined payments for ARC and PLC under a single limit. As a result of this feature, a farmer who grows multiple program crops including peanuts has essentially two different program payment limits: 1. $125,000 per person for an aggregation of ARC and PLC program payments made to all program crops other than peanuts, and 2. $125,000 per person for ARC and PLC program payments made exclusively to peanuts. Thus, under an extreme scenario involving large payments for both peanuts and other program crops, this could potentially double a peanut farmer's payment limits to as much as $250,000. The 2018 farm bill (§1703) excluded MAL benefits from any payment limit while also raising the MAL rates for several program crops (§1202), including barley, corn, grain sorghum, oats, extra-long-staple cotton, rice, soybeans, dry peas, lentils, and small and large chickpeas. Raising MAL rates has two potential program effects. First, since MAL rates function as floor prices for eligible loan commodities, higher rates increase the potential for greater USDA outlays under MAL. Second, MAL rates are used to establish the maximum payment under PLC. Thus, raising the loan rate for a program commodity lowers its potential PLC program payment rate. The absence of a limit on benefits received under the MAL program creates the potential for unlimited, fully coupled USDA farm support outlays. As a result, an apparent equity issue emerges when comparing program benefits of a producer facing a hard cap for ARC and PLC payments as compared to a producer with access to MAL benefits. Because MAL payments are fully coupled—that is, tied to the production of a specific crop—MAL program outlays count directly against U.S. amber box spending limits under World Trade Organization (WTO) commitments. To the extent that such program outlays might induce surplus production and depress market prices, they could result in potential challenges under the WTO's dispute settlement mechanism. When eligibility requirements or payment limits are changed, economically rational producers are likely to alter their behavior to make adjustments to optimize net revenue under the new set of policy and market circumstances. For example, new eligibility requirements or tighter payment limits may result in a reorganization of the farm operation to increase the number of eligible persons or to lower the income that counts against a new AGI limit or the farm program payments that count against a smaller payment limit; a change in the crop and program choices or marketing practices, for example, to take advantage of the absence of a payment limit on MAL benefits; a change in crop choices, as agronomic and marketing opportunities allow, to favor a crop with an expanded limit (e.g., peanuts) over crops with more restricted program payment opportunities; or a change in land use, such as instead of farming the same acreage, renting out or selling some land to farmers who have not hit their payment limits. Payment limits applied per unit or per base acre represent an alternative to per-person payment limits that may mitigate some potential distortions to producer behavior. An example of such a per-unit payment limit is the 85% payment reduction factor applied to base acres receiving payments under either the PLC or ARC programs. The reduction factor is applied equally across all program payments irrespective of crop choice, farm size, AGI, or total value of payments. Some economists contend that such a payment reduction factor is generally applied for cost-saving reasons rather than for \"fairness\" or equity reasons that at least partially motivate per-person payment limits. The 2018 farm bill retained the $900,000 AGI limit established under the 2014 farm bill. This AGI limit applies to all farm income whether earned on the farm or off. Under the 2008 farm bill, the AGI limit was divided into two components: a $500,000 AGI limit for farm-earned income and a $750,000 AGI cap on nonfarm earned income. Analysis by USDA (2016) found that fewer farms are affected by the single AGI cap ($900,000) compared with the multiple farm ($500,000) and nonfarm ($750,000) AGI caps of the 2008 farm bill. For example, while federal income tax data are not available for the $900,000 cap level, published data from 2013—a year of record-high farm income—found that only about 0.7% of all farm sole proprietors and share rent landlords reported total AGI in excess of $1 million. Thus, it is likely that consolidating the separate AGI farm and nonfarm limits into a single AGI limit with a higher bound has restored eligibility for farm program payments to some farm operations that had previously been disqualified. Other major exemptions from the AGI limit include state and local governments and agencies, federally recognized Indian tribes, and waivers under RCPP. The 2014 farm bill shifted the farm safety net focus away from traditional revenue support programs and toward crop insurance programs, which are not subject to the AGI cap. The 2018 farm bill maintains this emphasis on crop insurance as the foundational farm safety net program. During the eight-year period of 2011-2018, federal crop insurance premium subsidies averaged $6.4 billion annually. Extending the AGI cap to crop insurance subsidies was considered during both the 2014 and 2018 farm bill debates. However, concerns were raised that the elimination of subsidies for higher-income participants could affect overall participation in crop insurance and damage the soundness of the entire program. However, USDA has estimated that in most years, less than 0.5% of farms and less than 1% of premiums would be affected by the $900,000 income cap if it were extended to crop insurance subsidies as well as to farm program payments.", "summary": "Under the Agricultural Improvement Act of 2018 (P.L. 115-334; 2018 farm bill), U.S. farm program participants—whether individuals or multiperson legal entities—must meet specific eligibility requirements to receive benefits under certain farm programs. Some requirements are common across most programs, while others are specific to individual programs. In addition, program participants are subject to annual payment limits that vary across different combinations of farm programs. Federal farm support programs and risk management programs, along with their current eligibility requirements and payment limits, are listed in Table 1. Terms for most of these programs are applicable for the 2019-2023 crop years. Since 1970, Congress has used various policies to address the issue of who should be eligible for farm payments and how much an individual recipient should be permitted to receive in a single year. In recent years, congressional policy has focused on tracking payments through multiperson entities to individual recipients (referred to as direct attribution), ensuring that payments go to persons or entities actively engaged in farming, capping the amount of payments that a qualifying recipient may receive in any one year, and excluding farmers or farming entities with large average incomes from payment eligibility. Current eligibility requirements that affect multiple programs include identification of every participating person or legal entity—both U.S. and non-U.S. citizens—the nature and extent of an individual's participation (i.e., actively engaged in farming criteria), including ownership interests in multiperson entities and personal time commitments (whether as labor or management) and means testing (persons with combined farm and nonfarm adjusted gross income in excess of $900,000 are ineligible for most program benefits); and conservation compliance requirements. In general, if foreign persons or legal entities meet a program's eligibility requirements, then they are eligible to participate. One exception is the four permanent disaster assistance programs created under the 2014 farm bill (P.L. 113-79) and the noninsured crop disaster assistance program (NAP) in which nonresident aliens are excluded. Current law requires direct attribution through four levels of ownership in multiperson legal entities. Current payment limits include a cumulative limit of $125,000 for all covered commodities under the Price Loss Coverage (PLC) and Agricultural Revenue Coverage (ARC) support programs, with the exception of peanuts, which has its own $125,000 limit. Only one permanent disaster assistance program—the Livestock Forage Disaster Program (LFP)—is subject to a payment limit ($125,000 per crop year). NAP is also subject to a $125,000 per crop year limit per person for catastrophic coverage. Supporters of payment limits contend that large payments facilitate consolidation of farms into larger units, raise the price of land, and put smaller family-sized farming operations and beginning farmers at a disadvantage. In addition, they argue that large payments undermine public support for farm subsidies and are costly. Critics of payment limits counter that all farms need support, especially when market prices decline, and that larger farms should not be penalized for the economies of size and efficiencies they have achieved. Further, critics argue that farm payments help U.S. agriculture compete in global markets and that income testing is at odds with federal farm policies directed toward improving U.S. agriculture and its competitiveness. Congress may continue to address these issues, as well as related questions, such as: How does the current policy design of payment limits relate to their distributional impact on crops, regions, and farm size? Is there an optimal aggregation of payment limits across commodities or programs? Do unlimited benefits under the marketing assistance loan program reduce the effectiveness of overall payment limits?", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress regarding the U.S. role in the world, meaning the overall character, purpose, or direction of U.S. participation in international affairs and the country's overall relationship to the rest of the world. Some observers perceive that after remaining generally stable for a period of about 70 years, the U.S. role in the world is undergoing a potentially historic change. A change in the U.S. role in the world could have significant and even profound effects on U.S. security, freedom, and prosperity. It could significantly affect U.S. policy in areas such as relations with allies and other countries, defense plans and programs, trade and international finance, foreign assistance, and human rights. It could also have implications for future international order. The overall issue for Congress is how to respond to recent developments regarding the U.S. role in the world. Congress's decisions on this issue could have significant implications for numerous policies, plans, programs, and budgets, and for the role of Congress relative to that of the executive branch in U.S. foreign policymaking. A variety of other CRS reports address in greater depth specific policy areas mentioned in this report. Appendix A provides a glossary of some key terms used in this report, including role in the world , grand strategy , international order/world order , unipolar/bipolar/tripolar/multipolar , Eurasia , regional hegemon , spheres-of-influence world , geopolitics , hard power , and soft power . In this report, the term U.S. role in the world is often shortened for convenience to U.S. role . Footnotes in this report with citations taking up more than 10 lines of type have had their citations transferred to Appendix B . The U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years or so) is generally described as one of global leadership and significant engagement in international affairs. Observers over the years have referred to the U.S. role in the world since World War II using various terms and phrases that sometimes reflect varying degrees of approval or disapproval of that role. It has been variously described as that of global leader, leader of the free world, superpower, hyperpower, indispensable power, system administrator, world policeman, or world hegemon. Similarly, the United States has also been described as pursuing an internationalist foreign policy, a foreign policy of global engagement or deep engagement, a foreign policy that provides global public goods, a foreign policy of liberal order building, liberal internationalism, or liberal hegemony, an interventionist foreign policy, or a foreign policy of seeking primacy or world hegemony. A key element of the U.S. role in the world since World War II has been to defend and promote the liberal international order that the United States, with the support of its allies, created in the years after World War II. Although definitions of the liberal international order vary, key elements are generally said to include the following: respect for the territorial integrity of countries, and the unacceptability of changing international borders by force or coercion; a preference for resolving disputes between countries peacefully, without the use or threat of use of force or coercion, and in a manner consistent with international law; respect for international law, global rules and norms, and universal values, including human rights; strong international institutions for supporting and implementing international law, global rules and norms, and universal values; the use of liberal (i.e., rules-based) international trading and investment systems to advance open, rules-based economic engagement, development, growth, and prosperity; and the treatment of international waters, international air space, outer space, and (more recently) cyberspace as international commons. The liberal international order was created by the United States with the support of its allies in the years immediately after World War II. At that time, the United States was the only country with both the capacity and willingness to establish a new international order. U.S. willingness to establish and play a leading role in maintaining the liberal international order is generally viewed as reflecting a desire by U.S. policymakers to avoid repeating the major wars and widespread economic disruption and deprivation of the first half of the 20 th century—a period that included World War I, the Great Depression, the rise of communism and fascism, the Ukrainian famine, the Holocaust, and World War II. U.S. willingness to establish and play a leading role in maintaining the liberal international order is also generally viewed as an act of national self-interest, reflecting a belief among U.S. policymakers that it would strongly serve U.S. security, political, and economic objectives. Supporters of the liberal international order generally argue that in return for bearing the costs of creating and sustaining the liberal international order, the United States receives significant security, political, and economic benefits, including the maintenance of a favorable balance of power on both a global and regional level, and a leading or dominant role in establishing and operating global institutions and rules for international finance and trade. Indeed, some critics of the liberal international order argue that it is primarily a construct for serving U.S. interests and promoting U.S. world primacy or hegemony. As discussed later in this report, however, the costs and benefits for the United States of the liberal international order are a matter of debate. Though often referred to as if it is a fully developed or universally established situation, the liberal international order, like other international orders that preceded it, is incomplete in geographic reach and in other ways; partly aspirational; not fixed in stone, but rather subject to evolution over time; sometimes violated by its supporters; resisted or rejected by certain states and nonstate actors; and subject to various stresses and challenges. Some observers, emphasizing points like those above, argue that the liberal international order is more of a myth than a reality. Other observers, particularly supporters of the order, while acknowledging the limitations of the order, reject characterizations of it as a myth and emphasize its differences from international orders that preceded it. A second element of the U.S. role in the world since World War II has been to defend and promote freedom, democracy, and human rights as universal values, while criticizing and resisting authoritarian and illiberal forms of government where possible. This element of the U.S. role is viewed as consistent not only with core U.S. political values but also with a theory advanced by some observers (sometimes called the democratic peace theory) that democratic countries are more responsive to the desires of their populations and consequently are less likely to wage wars of aggression or go to war with one another. A third element of the U.S. role in the world since World War II has been to oppose the emergence of regional hegemons in Eurasia or a spheres-of-influence world. This objective reflects a U.S. perspective on geopolitics and grand strategy developed during and in the years immediately after World War II, including in particular a judgment that—given the amount of people, resources, and economic activity in Eurasia—a regional hegemon in Eurasia would represent a concentration of power large enough to be able to threaten vital U.S. interests, and that Eurasia is not dependably self-regulating in terms of preventing the emergence of regional hegemons. Although the U.S. role in the world was generally stable over the past 70 years, the specifics of U.S. foreign policy for implementing that role have changed frequently for various reasons, including changes in administrations and changes in the international security environment. Definitions of the overall U.S. role have room within them to accommodate some flexibility in the specifics of U.S. foreign policy. The fact that the U.S. role in the world has been generally stable over the past 70 years does not necessarily mean that this role was the right one for the United States, or that it would be the right one in the future. Although the role the United States has played in the world since the end of World War II has many defenders, it also has critics, and the merits of that role have been a matter of long-standing debate among foreign policy specialists, strategists, policymakers, and the public, with critics offering potential alternative concepts for the U.S. role in the world. One major dimension of the debate is whether the United States should attempt to continue playing the active internationalist role that it has played for the past 70 years, or instead adopt a more-restrained role that reduces U.S. involvement in world affairs. A number of critics of the U.S. role in the world over the past 70 years have offered multiple variations on the idea of a more-restrained U.S. role. A second major dimension within the debate over the future U.S. role concerns how to balance or combine the pursuit of narrowly defined material U.S. interests with the goal of defending and promoting U.S. or universal values such as democracy, freedom, and human rights. A third major dimension concerns the balance in U.S. foreign policy between the use of hard power and soft power. Observers debating these two dimensions of the future U.S. role in the world stake out varying positions on these questions. The long-standing debate over the U.S. role in the world is discussed further below in the \" Issues for Congress \" section of this report, particularly the part entitled \" Should the U.S. Role Change? \" The overall issue for Congress is how to respond to recent developments regarding the U.S. role in the world. Potential key issues for Congress include but are not necessarily limited to the following: Is the U.S. role changing, and if so, in what ways? Should the U.S. role change? Is a change of some kind in the U.S. role unavoidable? How are other countries responding to a possibly changed U.S. role? Is a changed U.S. role affecting world order? What implications might a changed U.S. role in the world have for Congress's role relative to that of the executive branch in U.S. foreign policymaking? How might the operation of democracy in the United States affect the U.S. role in the world? Would a change in the U.S. role be reversible, and if so, to what degree? Each of these issues is discussed briefly below. Some observers argue that under the Trump Administration, the U.S. role in the world is undergoing a potentially historic change. Although views among these observers vary in their specifics, a number of these observers argue that under the Trump Administration, the United States is voluntarily retreating from or abdicating the United States' post-World War II position of global leadership in favor of an approach to U.S. foreign policy that is more restrained, less engaged (or disengaged), more unilateralist, less willing to work through international or multilateral institutions and agreements, and/or less willing to promote and defend certain universal values. Within that general assessment, these observers argue that the United States more specifically is doing one or more of the following: becoming more skeptical of the value to the United States of certain allies, particularly those in Europe, and more transactional in managing U.S. alliance relationships; becoming less supportive of regional or multilateral trade agreements and the World Trade Organization (WTO) in favor of an approach to trade policy that relies more on protectionist measures and on negotiations aimed at reaching new or revised bilateral trade agreements, and which links trade actions more directly to other policy objectives; reducing, becoming more selective in, or becoming indifferent to efforts for defending and promoting freedom, democracy, and human rights as universal values, and for criticizing and resisting authoritarian and illiberal forms of government; and relying less on soft power, and more heavily on hard power, particularly military power. In support of this assessment, these observers tend to cite various actions by the Trump Administration, including the following: the Administration's emphasis on its \"America First\" theme and the concept of national sovereignty applied to both the United States and other countries as primary guideposts for U.S. foreign policy; actions (particularly in 2017) that these observers view as intended to weaken or \"hollow out\" the State Department—including a relatively slow rate for forwarding nominations to fill senior positions in the department, and budget proposals to substantially reduce overall staffing and funding levels for the department—as well as proposed reductions in funding for U.S. foreign assistance programs; U.S. withdrawal from the Trans-Pacific Partnership (TPP) regional trade agreement; the Paris climate agreement; the Iran nuclear agreement; and the Global Compact on Migration (GCM); a U.S. decision to not cooperate with the International Criminal Court (ICC); and a U.S. decision to limit U.S. exposure to decisions by the International Court of Justice (ICJ) by withdrawing from the Optional Protocol Concerning the Compulsory Settlement of Disputes to the Vienna Convention on Diplomatic Relations; mixed signals, including skeptical or critical comments by President Trump, regarding the value to the United States of allies, and particularly the NATO alliance, and a reported focus by President Trump, in assessing allies, on their defense spending levels and their trade imbalances with the United States; an apparent reluctance by President Trump to criticize Russia or to impose certain sanctions on Russia, and an apparent determination by President Trump to seek improved relations with Russia, despite various Russian actions judged by U.S. intelligence agencies and other observers to have been directed against the United States and U.S. overseas interests, particularly in Europe; a reduced U.S. level of involvement in, or U.S. disengagement from, the conflict in Syria, and U.S. acceptance of a reestablished Russian position as a major power broker in the Syrian situation and the Middle East in general; the nonattendance by then-Secretary of State Rex Tillerson at the rollout of the 2017 edition of the State Department's annual country reports on human rights practices around the world; infrequent or inconsistent statements by President Trump or other Administration officials in support of democracy and human rights, or criticizing human rights practices of authoritarian and illiberal governments; U.S. withdrawal from the United Nations Human Rights Council; U.S. actions to reduce the number of international refugees entering the United States; President Trump's reaction to the killing of journalist Jamal Khashoggi; and what these observers view as President Trump's apparent affinity for, or admiration of, the leaders of authoritarian and illiberal governments. Some of the observers who argue that the U.S. role in the world is undergoing a potentially historic change under the Trump Administration oppose the change, while others support it, or at least certain aspects of it. Opponents tend to view the retreat from U.S. global leadership that they see as an unforced error of immense proportions—as a needless and self-defeating squandering or throwing away of something of great value to the United States that the United States had worked to build and maintain for 70 years. Opponents argue that actions contributing to the U.S. retreat are weakening the United States and the U.S. position in the world by rupturing long-standing and valuable U.S. alliance relationships; isolating the United States on certain issues; devaluing or reducing U.S. soft power; making the United States appear less reliable as an ally or negotiating partner; creating vacuums in global leadership and regional power balances that other countries (including China, Russia, the European Union, individual European countries, Canada, Japan, Saudi Arabia, and Iran) are acting to fill, sometimes at the expense of U.S. interests; and weakening and causing doubts about the future of the U.S.-led international order. Supporters tend to view the change they see in the U.S. role, or at least certain aspects of it, as needed and appropriate, if not overdue, for responding to changed U.S. and global circumstances and for defending U.S. interests. Supporters argue that actions being implemented by the Trump Administration reflect a principled realism about what the United States can accomplish in the world; are reasserting the importance of U.S. sovereignty (and the concept of sovereignty in general as an organizing principle for international relations); are proving effective in standing up for U.S. interests in relations with China, as well as U.S. trade interests in general (including new trade agreements with South Korea, Mexico, and Canada); encouraging U.S. allies to make greater military and other contributions to their own security; enhancing deterrence of potential regional aggression by making potential U.S. actions less predictable to potential adversaries; avoiding potentially costly and unproductive commitments of U.S. lives and resources in places like Syria and Yemen; and are achieving progress or potential breakthroughs in terms of denuclearization negotiations with North Korea. Other observers see less change in the U.S. role in the world under the Trump Administration. They argue that although statements from President Trump sometimes suggest or imply a large-scale change in the U.S. role, actions taken by the Administration actually reflect a smaller amount of change, and more continuity with the U.S. role of the past 70 years. In support of this assessment, these supporters cite various actions by the Trump Administration, including the following: the Administration's December 2017 national security strategy (NSS) document, large portions of which reflect—through multiple mentions of U.S. leadership, a general emphasis on great power competition with China and Russia, and strong support for U.S. alliances—a perspective on the U.S. role in the world generally consistent with the U.S. role of the past 70 years, as well as actions the Trump Administration has taken in support of that perspective; the Administration's January 2018 unclassified summary of its supporting national defense strategy (NDS) document, which similarly reflects a perspective on the U.S. role in the world generally consistent with the U.S. role of the past 70 years; the Administration's October 2018 counterterrorism strategy document, which observers view as largely consistent with the counterterrorism strategies of previous administrations; the continuation (as opposed to winding down) of U.S. military operations in Afghanistan and the Middle East; Secretary of State Mike Pompeo's statement that he wants the State Department to \"get its swagger back\"; statements from senior U.S. officials reaffirming U.S. support for NATO; Administration actions to improve U.S. military capabilities in Europe for deterring potential Russian aggression in Europe; and U.S. actions to encourage NATO allies to spend more on defense and to take similar actions; the Administration's implementation of additional sanctions on Russia in response to Russian actions; the Administration's recent, more-confrontational policy toward China, and the Administration's plan to increase funding for U.S. foreign assistance programs to compete against China for influence in Africa, Asia, and the Americas; the Administration's articulation of the concept of a free and open Indo-Pacific (FOIP) region as a framework for U.S. foreign policy directed toward that part of the world; U.S. trade actions that, in the view of these observers, are intended to make free trade more sustainable over the long run by ensuring that it is fair to all parties, including the United States; and statements regarding human rights from then-U.S. Ambassador to the United Nations Nikki Haley and other Administration officials, as well as the U.S. withdrawal from the United Nations Human Rights Council, which in the view of these observers reflect U.S. support (rather than lack of support) for human rights. Among those who see less change in the U.S. role in the world under the Trump Administration, arguments as to whether that is a good or bad thing are to some degree the obverse of those outlined earlier regarding the views of those who argue that the U.S. role in the world is undergoing a potentially historic change under the Trump Administration. In general, supporters of the U.S. role in the world of the past 70 years tend to support areas where they see less change under the Trump Administration, while those who advocate a more-restrained U.S. role have expressed disappointment at what they view as insufficient movement by the Trump Administration in that direction. Some observers argue that if the United States is shifting to a more-restrained role in the world, this change began not with the Trump Administration, but during the Obama Administration. In support of this view, these observers point to the Obama Administration's focus on reducing the U.S. military presence and ending U.S. combat operations in Iraq and Afghanistan in favor of focusing more on domestic U.S. rebuilding initiatives, the Obama Administration's restrained response to the conflict in Syria and to Russian actions in Crimea and eastern Ukraine, and the Obama Administration's policy toward Russia in general. Other observers argue that a shift to a more-restrained U.S. role in the world arguably began even sooner, under the George W. Bush Administration, when that Administration did not respond more strongly to Russia's 2008 invasion and occupation of part of Georgia, or under the Clinton Administration. For both groups of observers, a more-restrained U.S. role in the world under the Trump Administration may represent not so much a shift in the U.S. role as a continuation or deepening of a change that began in a prior U.S. administration. Some observers argue that the question of whether the U.S. role is changing, and if so, in what ways, is difficult to assess, due to what these observers view as mixed, contradictory, or incoherent signals from the Trump Administration on issues such as policy toward Russia, the value of NATO, policy toward North Korea, and trade policy, among other matters. For some of these observers, these mixed signals appear to be rooted in what these observers see as basic differences between President Trump and certain senior Administration officials (or differences among those officials) on these matters, and in what these observers characterize as an unpredictable, impulsive, or volatile approach by President Trump to making and announcing foreign policy decisions. Regarding the final point above, supporters of the Trump Administration argue that U.S. foreign policy had become too predictable for its own good, and that adding an element of unpredictability to U.S. foreign policy is therefore advantageous. The Administration's January 2018 unclassified summary of its supporting national defense strategy document, for example, states that U.S. military operations in the future will be \"strategically predictable, but operationally unpredictable,\" meaning predictable in terms of overall goals, but unpredictable in terms of specific tactics for achieving those goals. Critics, while not necessarily objecting to the value of a certain degree of operational unpredictability, argue that the Trump Administration, through its recurring mixed signals and President Trump's approach to decisionmaking, has taken the idea of unpredictability too far, raising potential doubts in other countries about U.S. policy goals, consistency, resolve, or reliability as an ally or negotiating partner. Some observers see both potential advantages and potential disadvantages in an approach that features a substantial element of unpredictability. Some observers, viewing the difficulty of judging whether and how the U.S. role may have changed under the Trump Administration, have attempted to identify key or unifying characteristics of the Trump Administration's foreign policy or a so-called \"Trump Doctrine.\" These observers have reached varying conclusions as to what those key or unifying characteristics or a Trump Doctrine might be. The above four perspectives—that there is a potentially historic change in the U.S. role; that there is less change, and more continuity; that if there is a change, it began prior to the Trump Administration; and that the degree of change is difficult to assess—are not necessarily mutually exclusive. Assessments combining aspects of more than one of these four perspectives are possible. In addition to the question of whether the U.S. role in the world is changing, another key issue for Congress is whether the U.S. role should change. As mentioned in the background section, the fact that the U.S. role in the world has been generally stable over the past 70 years does not necessarily mean that this role was the right one for the United States, or that it would be the right one in the future. Although the role the United States has played in the world since the end of World War II has many defenders, it also has critics, and the merits of that role have been a matter of long-standing debate among foreign policy specialists, strategists, policymakers, and the public, with critics offering potential alternative concepts for the U.S. role in the world. Debate over the merits of the U.S. role in the world since World War II has been fueled in recent years by factors such as changes in the international security environment, projections of U.S. federal budget deficits and the U.S. debt (which can lead to constraints on funding available for pursuing U.S. foreign policy, national security, and international economic policy goals), and U.S. public opinion on matters relating to U.S. foreign policy. Developments during the Trump Administration regarding possible changes in the U.S. role in the world have further contributed to the debate. As mentioned earlier, a major dimension of the debate is whether the United States should attempt to continue playing the active internationalist role that it has played for the past 70 years, or instead adopt a more-restrained role that reduces U.S. involvement in world affairs. Among U.S. strategists and foreign policy specialists, advocates of a more-restrained U.S. role include (to cite a few examples) Andrew Bacevich, Doug Bandow, Ted Galen Carpenter, John Mearsheimer, Barry Posen, Christopher Preble, William Ruger, and Stephen Walt. These and other authors have offered multiple variations on the idea of a more-restrained U.S. role. Terms such as offshore balancing , offshore control , realism , strategy of restraint , or retrenchment have been used to describe some of these variations. These variations on the idea of a more-restrained U.S. role would not necessarily match in their details a changed U.S. role that might be pursued by the Trump Administration. Observers advocating a more-restrained U.S. role in the world make various arguments regarding the United States and other countries. Arguments that they make relating to the United States include the following: Costs and benefits. In terms of human casualties, financial and economic impacts, diplomatic impacts, and impacts on domestic U.S. values, politics, and society, the costs to the United States of defending and promoting the liberal international order have been underestimated and the benefits have been overestimated. U.S. interventions in the security affairs of Eurasia have frequently been more costly and/or less successful than anticipated, making a strategy of intervening less cost-effective in practice than in theory. U.S. interventions can also draw the United States into conflicts involving other countries over issues that are not vital or important U.S. interests. C apacity. Given projections regarding future U.S. budget deficits and debt, the United States in coming years will no longer be able to afford to play as expansive a role in the world as it has played for the past 70 years. Overextending U.S. participation in international affairs could lead to excessive amounts of federal debt and inadequately addressed domestic problems, leaving the United States poorly positioned for sustaining any future desired level of international engagement. P ast 70 years as a historical aberration. The U.S. role of the past 70 years is an aberration when viewed against the U.S. historical record dating back to 1776, which is a history characterized more by periods of restraint than by periods of high levels of international engagement. Returning to a more-restrained U.S. role would thus return U.S. policy to what is, historically, a more traditional policy for the United States. M oral standing. The United States has not always lived up to its own ideals, and consequently lacks sufficient moral standing to pursue a role that involves imposing its values and will on other countries. Attempting to do that through an interventionist policy can also lead to an erosion of those values at home. P ublic opinion. It is not clear that U.S. public opinion supports the idea of attempting to maintain a U.S. role in the world as expansive as that of the past 70 years, particularly if it means making trade-offs against devoting resources to domestic U.S. priorities. In public opinion polls, Americans often express support for a more-restrained U.S. role, particularly on issues such as whether the United States should act as the world's police force, funding levels for U.S. foreign assistance programs, U.S. participation in (and financial support for) international organizations, and U.S. defense expenditures for defending allies. Arguments that these observers make relating to other countries include the following: Growing wealth and power . Given the rapid growth in wealth and power in recent years of China and other countries, the United States is no longer as dominant globally as it once was, and is becoming less dominant over time, which will make it increasingly difficult or expensive and/or less appropriate for the United States to attempt to continue playing a role of global leadership. I deas about international order. Other world powers, such as China, have their own ideas about international order, and these ideas do not match all aspects of the current liberal international order. The United States should acknowledge the changing global distribution of power and work with China and other countries to define a new international order that incorporates ideas from these other countries. Eurasia as self-regulating. Given the growth in the economies of U.S. allies and partners in Europe and Asia since World War II, these allies and partners are now more capable of looking after their own security needs, and Eurasia can now be more self-regulating in terms of preventing the emergence of regional hegemons in Eurasia. Consequently, the level of U.S. intervention in the affairs of Eurasia can be reduced without incurring undue risk that regional hegemons will emerge there. The current substantial level of U.S. intervention in the affairs of Eurasia discourages countries in Eurasia from acting more fully on their own to prevent the emergence of regional hegemons. Hegemons and spheres of influence . Even if one or more regional hegemons were to emerge in Eurasia, this would not pose an unacceptable situation for the United States—vital U.S. interests could still be defended. Similarly, the emergence of a spheres-of-influence world need not be unacceptable for the United States, because such a world would again not necessarily be incompatible with vital U.S. interests. Observers who support a continuation of the U.S. role in the world of the past 70 years generally reject the above arguments and argue the opposite. Arguments that these observers make relating to the United States include the following: Costs and benefits. Although the costs to the United States of its role in the world over the past 70 years have been substantial, the benefits have been greater. The benefits are so long-standing that they can easily be taken for granted or underestimated. U.S. interventions in the security affairs of Eurasia, though not without significant costs and errors, have been successful in preventing wars between major powers and defending and promoting vital U.S. interests and values. A more-restrained U.S. role in the world might be less expensive for the United States in the short run, but would create a risk of damaging U.S. security, liberty, and prosperity over the longer run by risking the emergence of regional hegemons or a spheres-of-influence world. C apacity. Projections regarding future U.S. budget deficits and debt need to be taken into account, but even in a context of limits on U.S. resources, the United States is a wealthy country that can choose to play an expansive role in international affairs, and the costs to the United States of playing a more-restrained role in world affairs may in the long run be much greater than the costs of playing a more expansive role. Projections regarding future U.S. budget deficits and debt are driven primarily by decisions on revenues and domestic mandatory expenditures rather than by decisions on defense and foreign-policy-related expenditures. Consequently, these projections are an argument for getting the country's fiscal house in order primarily in terms of revenues and domestic mandatory expenditures, rather than an argument for a more-restrained U.S. role in the world. P ast 70 years as a historical aberration. Although a restrained U.S. foreign policy may have been appropriate for the United States in the 18 th and 19 th centuries, the world of the 18 th and 19 th centuries was quite different. For example, given changes in communication, transportation, and military technologies since the 18 th and 19 th centuries, the Atlantic and Pacific oceans are much less effective as geographic buffers between the United States and Eurasia today than they were in the 18 th and 19 th centuries. Experiences in more recent decades (including World Wars I and II and the Cold War) show that a more-restrained U.S. foreign policy would now be riskier or more costly over the long run than an engaged U.S. foreign policy. Moral standing. The United States, though not perfect, retains ample moral authority—and responsibility—to act as a world leader, particularly in comparison to authoritarian countries such as China or Russia. P ublic opinion. Other public opinion poll results show that Americans support a U.S. global leadership role. Arguments that these observers make relating to other countries include the following: Growing wealth and power . Although the wealth and power of countries such as China have grown considerably in recent years, future rates of growth for those countries are open to question. China faces the prospect of declining rates of economic growth and the aging and eventual shrinkage of its population, while Russia has a relatively small economy and is experiencing demographic decline. The United States has one of the most favorable demographic situations of any major power, and retains numerous advantages in terms of economic and financial strength, military power, technology, and capacity for innovation. Although the United States is no longer as dominant globally as it once was, it remains the world's most powerful country, particularly when all dimensions of power are taken into consideration. I deas about international order. The liberal international order reflects U.S. interests and values; a renegotiated international order incorporating ideas from authoritarian countries such as China would produce a world less conducive to defending and promoting U.S. interests and values. Americans have long lived in a world reflecting U.S. interests and values and would not welcome a world incorporating Chinese values on issues such as the rule of law; the scope of civil society; political and human rights; freedom of speech, the press, and information; and privacy and surveillance. Eurasia as self-regulating. Eurasia historically has not been self-regulating in terms of preventing the emergence of regional hegemons, and the idea that it will become self-regulating in the future is a risky and untested proposition. Hegemons and spheres of influence . A regional hegemon in Eurasia would have enough economic and other power to be able to threaten vital U.S. interests. In addition to threatening U.S. access to the economies of Eurasia, a spheres-of-influence world would be prone to war because regional hegemons historically are never satisfied with the extent of their hegemonic domains and eventually seek to expand them, coming into conflict with other hegemons. Leaders of regional hegemons are also prone to misjudgment and miscalculation regarding where their spheres collide. As also noted earlier, a second major dimension within the debate over the future U.S. role concerns how to balance or combine the pursuit of narrowly defined material U.S. interests with the goal of defending and promoting U.S. or universal values such as democracy, freedom, and human rights. Supporters of focusing primarily on narrowly defined material U.S. interests argue, among other things, that deterring potential regional aggressors and resisting the emergence of regional hegemons in Eurasia can require working with allies and partner states that have objectionable records in terms of democracy, freedom, and human rights. Supporters of maintaining a stronger focus on U.S. and universal values in the conduct of U.S. foreign policy argue, among other things, that these values help attract friends and allies in other countries, adding to U.S. leverage, and are a source of U.S. strength in ideological competitions with authoritarian competitor states. As noted earlier, a third major dimension within the debate over the future U.S. role concerns the balance in U.S. foreign policy between the use of hard power and soft power. Some observers argue that a reduced reliance on soft power would undervalue soft power as a relatively low-cost tool for defending and promoting U.S. interests while making the United States more reliant on hard power, particularly military power, which might be a more expensive and/or less effective means for accomplishing certain goals. Other observers argue that the value of soft power is overrated, and that a greater reliance on hard power would be an appropriate response to an era of renewed great power competition. Within the overall debate over whether the U.S. role should change, one specific question relates to the costs and benefits of allies. As noted earlier, some observers believe that under the Trump Administration, the United States is becoming more skeptical of the value of allies, particularly those in Europe, and more transactional in managing U.S. alliance relationships. The U.S. approach to allies and alliances of the past 70 years reflected a belief that allies and alliances are of value to the United States for defending and promoting U.S. interests and for preventing the emergence of regional hegemons in Eurasia. This approach led to a global network of U.S. alliance relationships involving countries in Europe and North America (through NATO), East Asia (through a series of mostly bilateral treaties), and Latin America (through the multilateral Inter-American Treaty of Reciprocal Assistance, known commonly as the Rio Treaty or Rio Pact). Skeptics of allies and alliances generally argue that their value to the United States is overrated; that allies are capable of defending themselves without U.S. help; that U.S. allies frequently act as free riders in their alliance relationships with the United States by shifting security costs to the United States; that in the absence of U.S. help, these allies would do more on their own to balance against potential regional hegemons; and that alliances create a risk of drawing the United States into conflicts involving allies over issues that are not vital to the United States. Supporters of the current U.S. approach to allies and alliances, while acknowledging the free-rider issue as something that needs to be managed, generally argue that alliances are needed and valuable for deterring potential regional aggressors and balancing against would-be potential hegemonic powers in Eurasia; that although allies might be capable of defending themselves without U.S. help, they might also choose, in the absence of U.S. help, to bandwagon with would-be regional hegemons (rather than contribute to efforts to balance against them); that alliances form a significant advantage for the United States in its dealings with other major powers, such as Russia and China (both of which largely lack similar alliance networks); that in addition to mutual defense benefits, alliances offer other benefits, particularly in peacetime, including sharing of intelligence, information, and technology and the cultivation of soft-power forms of cooperation; and that a transactional approach to alliances, which encourages the merits of each bilateral alliance relationship to be measured in isolation, overlooks the collective benefits of maintaining alliances with multiple countries in a region. U.S. public opinion can be an important factor in debates over the future U.S. role in the world. Among other things, public opinion can shape the political context (and provide the impulse) for negotiating the terms of, and for considering whether to become party to, international agreements; influence debates on whether and how to employ U.S. military force; and influence policymaker decisions on funding levels for defense, international affairs activities, and foreign assistance. Foreign policy specialists, strategists, and policymakers sometimes invoke U.S. public opinion poll results in debates on the U.S. role in the world. At least one has argued that the American people \"always have been the greatest constraint on America's role in the world.\" One issue relating to U.S. public opinion that observers are discussing is the extent to which the U.S. public may now believe that U.S. leaders have broken a tacit social contract under which the U.S. public has supported the costs of U.S. global leadership in return for the promise of receiving certain benefits, particularly steady increases in real incomes and the standard of living. Appendix F provides additional background information on U.S. public opinion regarding the U.S. role in the world. The foregoing covers only some of the more prominent arguments and counterarguments in the debate over the future U.S. role in the world. In addition to writings cited in footnotes to the above section, see Appendix C for additional examples of recent writings by observers involved in the debate. Another issue for Congress—one that might be viewed as related to, or forming part of, the previous issue—is whether a change of some kind in the U.S. role, whether desirable or not, is unavoidable due to factors such as the growth in recent decades in the wealth and power of China and other countries, and the effect this has on reducing the U.S. position of dominance in world affairs; constraints on U.S. resources, particularly given projected U.S. budget deficits and debt and competing domestic priorities; the gradual fading over time of collective memory of the major wars and widespread economic disruption and deprivation of the first half of the 20th century, and of how the U.S. role in the world of the last 70 years has been motivated at bottom by a desire to prevent a repetition of the events of that earlier era; and other factors, such as technological developments, that can change power dynamics among nations, influence international financial and economic flows and globalization in general, affect social cohesion and relationships between governments and the governed, affect the development and spread of political beliefs and ideologies, and empower nonstate organizations and individuals in ways not previously possible. Some observers—particularly those who advocate a more-restrained U.S. role in the world—might argue that factors such as those above make a change of some kind in the U.S. role unavoidable, regardless of whether such a change is deemed desirable. Others—particularly those who advocate a continuation of the U.S. role in the world of the past 70 years—might argue that factors such as those above might call for adjustments in the U.S. role, but not necessarily for a larger-scale change, and might even underscore the need for continuing the U.S. role in the world of the past 70 years. In assessing the question of whether a change of some kind in the U.S. role is unavoidable, key factors that Congress may consider include projected rates of economic growth and demographic change in both the United States and other countries, and the potential impacts of technological developments such as those relating to the internet; social media; cyber operations; digital manipulation of videos, photos, and other information (including so-called \"deep fake\" videos); additive manufacturing (aka 3D printing); cryptocurrencies; artificial intelligence; quantum computing; robotics; energy production and use; nanotechnology; and gene editing, to name just a few examples. Another question for Congress concerns how other countries are responding to a possible change in the U.S. role in the world. The sections below provide some brief discussions on this question. Particularly given the shift in the international security environment to an era of renewed great power competition, principally with China and Russia, as well as renewed ideological competition against 21 st -century forms of authoritarianism and illiberal democracy in Russia, China, and other countries, the ways that China, Russia, and other authoritarian or illiberal governments respond to a possible change in the U.S. role in the world could have major implications for U.S. national security. The question of how China may be responding to a possibly changed U.S. role is of particular potential significance because while certain countries, such as Russia, are viewed by some observers as wanting to erode or tear down the liberal international order, China is the only country (other than the United States) that is generally viewed as being potentially capable of acting on its own to build a successor world order. Some observers believe that China has concluded, correctly or not, that the United States is retreating from or abandoning its role as global leader, and that China is responding to this assessment by expanding or accelerating its efforts to increase its economic and political role on the world stage, in part through its ambitious Belt and Road Initiative (BRI); separate the United States from its allies and raise doubts about the reliability of the United States as an ally or partner; work more closely with Russia with the aim of reducing U.S. influence in Eurasia; revise the liberal international order in ways that are conducive to Chinese values and interests; and perhaps eventually supplant the United States in the role of world leader. Other observers perceive that some in China, viewing certain actions by the Trump Administration—including the Administration's \"trade war\" with China, the Administration's articulation of the concept of a free and open Indo-Pacific, and actions aimed at countering China's growing control over the South China Sea—have concluded that the United States is seeking to contain China in a manner broadly consistent with how the United States pursued a policy of containment against the Soviet Union during the Cold War. Still others argue that the Administration's trade actions are leading to closer relations between China and other countries (including U.S. allies in Europe) that do not support certain U.S. trade-related actions. Some observers believe that Russia, like China, has concluded, correctly or not, that the United States is retreating from or abandoning its role as global leader, and that Russia is responding to this assessment by continuing efforts aimed at establishing greater Russian influence over or control of countries on its periphery, and more generally, reestablishing Russia as a major world power; separating the United States from transatlantic allies and weakening the NATO alliance; working more closely with China with the aim of reducing U.S. influence in Eurasia; and raising doubts about the merits of liberal democracy while promoting illiberal and authoritarian approaches to government in Europe and elsewhere. Although Russia, in the eyes of some of these observers, was originally hopeful about establishing better relations with the United States under the Trump Administration, these observers now perceive that Russia has largely given up on this possibility, and now sees a prospect of long-term confrontation with the United States. Some observers have expressed concern that recent U.S. actions, including U.S. sanctions against Russia and the Trump Administration's recent, more-confrontational policy toward China, are helping to push Russia and China closer to one another politically, toward an entente or some other form of strategic cooperation, to the potential or actual detriment of U.S. interests in Eurasia and elsewhere. They argue that U.S. policymakers should pay attention to how U.S. actions could have the effect of encouraging or strengthening such Sino-Russian strategic cooperation, given the combined economic resources, military capabilities, and informational capabilities of China and Russia, and their common goals of separating the United States from its allies, reducing U.S. influence in Eurasia, and raising doubts about the merits of liberal democracy while promoting illiberal and authoritarian approaches to government. Other observers argue that while Russia is working more closely with China to reduce U.S. influence in Eurasia, Russia is at the same time wary of China's continued growth in wealth and power, and of how that might eventually lead to China becoming the dominant power in Eurasia, with Russia being relegated to a secondary or subordinate status. How that might affect Russia's response to a changed U.S. role in the world, particularly over the longer run, is not clear. Some observers argue that what they view as the Trump Administration's reduced or more selective emphasis on, or indifference to, defending and promoting freedom, democracy, and human rights as universal values, and on criticizing and resisting authoritarian and illiberal forms of government, as well as President Trump's apparent affinity for, or admiration of, the leaders of authoritarian and illiberal governments, is emboldening the leaders of authoritarian and illiberal governments to take increased or accelerated actions—including actions for suppressing political opposition and dissent, and for reducing freedom of the press—that are aimed at consolidating or strengthening their authoritarian or illiberal forms of government and perhaps spreading them to other countries. Countries sometimes mentioned in connection with this point include China, Russia, Turkey, Hungary, Poland, the Philippines, Egypt, Syria, and Saudi Arabia, to list some examples. Actions by authoritarian and illiberal governments along these lines could contribute to a resurgent global challenge that some observers perceive to democracy as a form of government and to the idea that freedom, democracy, and human rights are universal values. The 2019 edition of Freedom House's annual report on freedom in the world, for example, states that In 2018, [the annual] Freedom in the World [report] recorded the 13th consecutive year of decline in global freedom. The reversal has spanned a variety of countries in every region, from long-standing democracies like the United States to consolidated authoritarian regimes like China and Russia. The overall losses are still shallow compared with the gains of the late 20th century, but the pattern is consistent and ominous. Democracy is in retreat…. Victories for antiliberal movements in Europe and the United States in recent years have emboldened their counterparts around the world, as seen most recently in the election of Jair Bolsonaro as president of Brazil. These movements damage democracies internally through their dismissive attitude toward core civil and political rights, and they weaken the cause of democracy around the world with their unilateralist reflexes. For example, antiliberal leaders' attacks on the media have contributed to increasing polarization of the press, including political control over state broadcasters, and to growing physical threats against journalists in their countries. At the same time, such attacks have provided cover for authoritarian leaders abroad, who now commonly cry \"fake news\" when squelching critical coverage…. Similarly, punitive approaches to immigration are resulting in human rights abuses by democracies—such as Australia's indefinite confinement of seaborne migrants in squalid camps on the remote island of Nauru, the separation of migrant children from their detained parents by the United States, or the detention of migrants by Libyan militias at the behest of Italy—that in turn offer excuses for more aggressive policies towards migrants and refugees elsewhere in the world. Populist politicians' appeals to \"unique\" or \"traditional\" national values in democracies threaten the protection of individual rights as a universal value, which allows authoritarian states to justify much more egregious human rights violations. And by unilaterally assailing international institutions like the United Nations or the International Criminal Court without putting forward serious alternatives, antiliberal governments weaken the capacity of the international system to constrain the behavior of China and other authoritarian powers. The gravity of the threat to global freedom requires the United States to shore up and expand its alliances with fellow democracies and deepen its own commitment to the values they share. Only a united front among the world's democratic nations—and a defense of democracy as a universal right rather than the historical inheritance of a few Western societies—can roll back the world's current authoritarian and antiliberal trends. By contrast, a withdrawal of the United States from global engagement on behalf of democracy, and a shift to transactional or mercenary relations with allies and rivals alike, will only accelerate the decline of democratic norms…. The stakes in this struggle are high. For all the claims that the United States has lost global influence over the past decade, the reality is that other countries pay close attention to the conduct of the world's oldest functioning democracy. The continuing deterioration of US democracy will hasten the ongoing decline in global democracy. Indeed, it has already done so. Ronald Reagan declared in his first inaugural address, \"As we renew ourselves here in our own land, we will be seen as having greater strength throughout the world. We will again be the exemplar of freedom and a beacon of hope for those who do not now have freedom.\" Nearly four decades later, the idea that the United States is such an exemplar is being steadily discredited…. Our poll found that a strong majority of Americans, 71 percent, believe the US government should actively support democracy and human rights in other countries. But America's commitment to the global progress of democracy has been seriously compromised by the president's rhetoric and actions. His attacks on the judiciary and the press, his resistance to anticorruption safeguards, and his unfounded claims of voting fraud by the opposition are all familiar tactics to foreign autocrats and populist demagogues who seek to subvert checks on their power. Such leaders can take heart from Trump's bitter feuding with America's traditional democratic allies and his reluctance to uphold the nation's collective defense treaties, which have helped guarantee international security for decades. As former US defense secretary James Mattis put it in his resignation letter, \"While the US remains the indispensable nation in the free world, we cannot protect our interests or serve that role effectively without maintaining strong alliances and showing respect to those allies.\" Trump has refused to advocate for America's democratic values, and he seems to encourage the forces that oppose them. His frequent, fulsome praise for some of the world's worst dictators reinforces this perception. Particularly striking was his apparent willingness, at a summit in Helsinki, to accept the word of Vladimir Putin over his own intelligence agencies in assessing Russia's actions in the 2016 elections. The president's rhetoric is echoed in countries with weaker defenses against attacks on their democratic institutions, where the violation of norms is often followed by systemic changes that intensify repression and entrench authoritarian governance…. As the United States ceases its global advocacy of freedom and justice, and the president casts doubt on the importance of basic democratic values for our own society, more nations may turn to China, a rising alternative to US leadership. The Chinese Communist Party has welcomed this trend, offering its authoritarian system as a model for developing nations. The resulting damage to the liberal international order—a system of alliances, norms, and institutions built up under Trump's predecessors to ensure peace and prosperity after World War II—will not be easily repaired after he leaves office. Other observers argue that what they view as the Trump Administration's reduced or more selective emphasis on, or indifference to, defending and promoting human rights may be tacitly encouraging violations by other governments around the world of basic human rights—including extrajudicial killings, mass atrocities, and forced relocations—by sending a signal to those governments that they can commit such acts without having to fear repercussions from the United States. Still other observers, perhaps particularly supporters of the Trump Administration's foreign policy, might argue that violations of human rights predate the Trump Administration and are more of a consequence of changes in foreign governments and the international security environment. Given the significant role of alliances and partner relationships in U.S. foreign policy and defense strategy, reactions by U.S. allies and current or emerging partner countries to a possible change in the U.S. role in the world could have major implications for U.S. national security. Among other things, they could affect specific U.S. foreign policy and defense initiatives that could depend on or benefit from allied or partner support. More generally, they could have implications for what are sometimes referred to as the balance-vs.-bandwagon and free-rider issues. The balance-vs.-bandwagon issue refers to whether other countries choose to counter (i.e., balance against) potential regional hegemons, or instead become more accommodating or deferential toward (i.e., bandwagon with) those potential regional hegemons. For observers who assess that the United States has shifted to a more-restrained U.S. role in the world, the situation provides a test—although not one with precisely the features they might have designed—of a question long argued by strategists, political scientists, and others involved in the debate over the merits of the U.S. role in the world of the past 70 years: Would U.S. allies and partner countries respond to a more-restrained U.S. role by taking stronger actions on their own to balance against potential regional hegemons in Eurasia (i.e., China and Russia), or would they instead respond by bandwagoning with those potential regional hegemons? In discussions of the balance-vs.-bandwagon issue, supporters of continuing the U.S. role of the past 70 years tend to argue that a more-restrained U.S. role in the world could encourage enough of these countries to bandwagon rather than balance that it would shift the global balance of power and regional balances of power against the United States. Those making this argument tend to believe that strong actions by the United States to balance against potential regional hegemons give other countries more confidence to do the same, encouraging what is (for these observers) a virtuous cycle in the direction of balancing against potential regional hegemons. Supporters of a more-restrained U.S. role in the world tend to argue the obverse—that a more-restrained U.S. role would encourage more of these countries, out of a sense of self-preservation, to balance against rather than bandwagon with potential regional hegemons, helping to preserve global and regional balances of power that are favorable to the United States at lower cost to the United States. Those making this argument tend to believe that strong actions by the United States to balance against potential regional hegemons provide room for other countries to act as free riders under the U.S. security umbrella by reducing their own efforts to balance those potential regional hegemons, and that a more-restrained U.S. role will help address a long-term challenge that some observers believe the United States has faced in reducing the free-rider effect among its allies. The transatlantic alliance—the alliance of the United States and Canada with the United Kingdom and other European countries, particularly under the NATO treaty—is generally viewed as a bedrock of post-World War II U.S. national security strategy and a key supporting element of the U.S. role in the world since World War II. Some observers are concerned that President Trump's skeptical or critical views about NATO and other actions by the Trump Administration are straining, weakening, or threatening to rupture the transatlantic alliance, perhaps permanently, with potentially significant or profound effects for U.S. security and diplomacy. Other observers argue that the transatlantic alliance has weathered strains in the past and is doing so again now. Within the general issue of the status of the transatlantic alliance, the free-rider issue and how to address it has been a recurring concern for the United States in its relationship with its NATO allies, where it forms part of a long-standing issue sometimes referred to as the burden-sharing issue. The Trump Administration and its supporters argue that President Trump's skeptical and critical views about NATO, combined with sustained pressure on NATO from the President Trump and senior Administration officials for those countries to spend more on their own defense capabilities, have had the effect of extracting stronger commitments from the NATO allies about increasing their defense spending levels—something that previous U.S. administrations had repeatedly tried to obtain, but with little success. Critics of the Trump Administration agree with a goal of reducing free riding within the alliance where possible, but argue that the commitments on increased defense spending recently articulated by NATO allies do not go substantially beyond commitments those allies made prior to the start of the Trump Administration, and are not worth the damage to alliance relationships that was caused by the confrontational tactics employed by the Trump Administration to obtain them. A number of European countries appear to have responded to a possible change in the U.S. role in the world by announcing an intention to take actions to increase their ability to act autonomously and independently from the United States. Actions that European countries might take autonomously or independent of the United States might or might not be viewed by U.S. observers as being in the U.S. interest. The member states of the European Union (EU) have announced steps to increase the EU's ability to act on security issues, and the Baltic and Nordic states (i.e., countries in Europe that are among those relatively close to Russia) have announced actions to increase their defense capabilities and work more closely with one another on defense and other security issues. European countries have also announced or taken steps to defend existing international trade arrangements and the continued implementation of the Iran nuclear agreement. Some press reports suggest that the Trump Administration's policies toward U.S. allies in Europe may have raised doubts among those allies about the reliability of the United States as an ally, and may have encouraged Germany to work more closely with Russia, at least on trade issues. In Asia and the Indo-Pacific, supporters of a more-restrained U.S. role in the world might argue that Japan, Vietnam, Australia, New Zealand, and India are taking (or appear increasingly ready to take) greater actions to counter China in various parts of the Indo-Pacific region. Supporters of continuing the U.S. role in the world of the past 70 years, on the other hand, might argue that the Philippines under Philippine President Rodrigo Duterte has adopted a largely nonconfrontational policy toward China regarding China's actions in the South China Sea, that the ASEAN countries as a group are split on the question of how much to confront China regarding China's actions in the South China Sea, that the question of policy toward China has been a matter of debate in Australia, and that there may be limits to how far and how fast India is willing to go in terms of increasing its efforts to counter China and cooperate with the United States, Japan, and Australia in countering China. Japan responded to the U.S. withdrawal from the TPP negotiations by leading an effort to finalize the agreement among the 11 remaining partners in the pact—an action that may help forestall the emergence of a more China-centric trading system in the Indo-Pacific region, but which also left the United States on the outside of a major regional trade pact. Japan also supports the concept of a free and open Indo-Pacific—indeed, officials in Japan (and India) articulated the Indo-Pacific concept before it was adopted as a policy initiative by the Trump Administration—and is taking a variety of actions to support the concept. Some observers argue that certain Latin American and African countries have concluded, correctly or not, that the United States has reduced its engagement with them, and as a consequence have become more open to Chinese overtures for expanded economic and other ties. More recently, senior Trump Administration officials have traveled to Latin America to underscore the U.S. commitment to the region and to caution countries there about the potential downsides for those countries of increasing their engagement and cooperation with China. Observing the reactions of various countries around the world to the Trump Administration's foreign policy, two observers stated in March 2018 that President Trump \"is reshaping the way other states interact with America and with one another,\" and that \"as Trump shakes up American policy, he is also shaking up the policies of countries around the globe.\" They state that These global responses, however, are neither as uniform nor as straightforward as one might expect. Policy responses to Trump's America First agenda can be separated into two baskets: those by countries that mostly decry Trump's rhetoric and policies as a crisis of American global leadership, and those by countries that mostly welcome those rhetoric and policies as an opportunity. Within those baskets, there are a total of nine analytically distinct—yet not mutually exclusive—approaches. These approaches run the gamut from resistance to appeasement to exploitation, and have varying prospects for the states pursuing them and varying implications for U.S. global interests. Some of these behaviors are relatively new; others existed prior to Trump and have simply been accentuated by his agenda. Yet all of these behaviors are shifting the relationship between the United States and the world, and all of them will affect the contours of the international environment. Both the prevalence and the effectiveness of these behaviors, in turn, will be affected by how Trump and his ever-shifting cast of advisers chart America's course during the remainder of his presidency, and by how permanent the changes Trump has already made turn out to be. After surveying how various countries are responding, the authors conclude their discussion as follows: Over a year into Trump's presidency, the basic patterns of the world's response are coming into sharper focus. Some countries are seeking to minimize or compensate for the effects of an America First agenda; others are seeking to make the most of them. Yet governments around the world are adjusting in some way or another, which is itself a testament to just how disruptive Trump's presidency has already been. Some of the strategies that foreign actors are pursuing do have potential benefits for the United States, particularly insofar as they lead to greater and perhaps more equitable efforts to sustain the post-World War II international order. Yet there are inherent limits to allied efforts to pick up the geopolitical slack that the United States is creating, and America's own interests will not be as well served by those efforts as they would be by deeper U.S. engagement to shape key negotiations and outcomes. Other strategies, such as hijacking and exploiting the vacuum, are far more dangerous for the United States and the broader global order. Overall, it thus appears that the liabilities of these patterns of global adjustment significantly outweigh the benefits from a U.S. perspective. To put it more sharply, it is surely troubling that many democracies and longtime U.S. partners are scrambling to mitigate the effects of America First, while a number of revisionist or authoritarian powers look to take advantage. Global adjustment to America First is a process, however, and one that has not reached its conclusion. Rather, in a climate of great geopolitical uncertainty, most states appear to be feeling their way and hedging their bets across a range of responses because they are unsure of which is optimal. Germany, for example, has pursued all five of the responses undertaken by states that are mostly discomfited by Trump's approach. Many other states have pursued a similarly diverse range of options as they try to discern where, precisely, Trump's America is headed. This uncertainty leads to a further point, which is that the current instability in U.S. policy could easily shift the patterns of response we have described. Although the America First label and much of the president's rhetoric has remained relatively consistent, there have been significant debates within the administration on what it means in practice on any given policy dispute. The outcomes of those disputes, in turn, seem to be heavily dependent on the rising and declining influence of key personnel, which has itself been an especially fluid variable in this administration.… In short, if global reactions to Trump's presidency reflect global assessments of where that presidency is headed, then continued volatility in U.S. policy so far is likely to cause continued volatility in patterns of global response…. … international responses to America First will depend heavily on how lasting other countries assume that shift to be. If international observers conclude that America First is here to stay, then some approaches—hedging, exploiting the vacuum, America First as a model—will become more appealing, while others—riding out the storm, hugging and appeasing—will seem less feasible. If, however, states conclude that America First is more the aberration than the norm, they will be cautious about pursuing strategies that carry great risk should U.S. policy \"snap back\" in the foreseeable future. In this, as in so many areas, the effects of the Trump era will be determined by how long that era ends up lasting. The discussion above is only one perspective on the issue of how other countries are responding to a possible change in the U.S. role in the world. Other observers may differ regarding how to characterize the ways that certain countries are responding, or the resulting costs and benefits to the United States of those responses. Another issue for Congress is whether a changed U.S. role in the world is affecting world order in some way. As mentioned earlier, certain countries, such as Russia, are viewed by some observers as wanting to erode or tear down the liberal international order, while China is generally viewed as being potentially capable not only of challenging key elements of the current world order, but of acting on its own to revise the current world order or build a new successor world order. Whether caused primarily by a change in the U.S. role in the world or by one or more other factors, a collapse of the liberal international order could lead to the emergence of a less ordered world or a new international order based on a different set of characteristics and values—outcomes that could have significant and potentially profound implications for U.S. security, freedom, and prosperity. Some observers—particularly those who believe that the U.S. role is undergoing a potentially historic change—argue that the change in the U.S. role is contributing, perhaps substantially, to a weakening, erosion, or potential collapse of the liberal international order. Other observers argue that a weakening or erosion of the liberal international order is less a consequence of a changed U.S. role in the world, and more a reflection of the growth in wealth and power of China and other countries and the effect this is having on reducing U.S. dominance in world affairs. Still other observers argue that the weakening, erosion, or potential collapse of the liberal international order has been exaggerated. They might argue that the U.S. role in the world has not changed as much as others have argued, that the institutions undergirding the order are stronger or more resilient than others have argued, that China is more interested in revising than replacing the liberal international order, that China and Europe are taking steps to buttress the trade aspects of the order, or some combination of these points. Another issue for Congress is what implications a changed U.S. role might have for Congress, particularly regarding the preservation and use of congressional powers and prerogatives relating to foreign policy, national security, and international economic policy, and more generally the role of Congress relative to that of the executive branch in U.S. foreign policymaking. Article I, Section 8, of the Constitution vests Congress with several powers that can bear on the U.S. role in the world, while Article II, Section 2, states that the President shall have power to make treaties, by and with the advice and consent of the Senate, provided two-thirds of the Senators present concur. Congress can also influence the U.S. role in the world through, among other things, its \"power of the purse\" (including its control over appropriations for the Department of Defense, the Department of State, and foreign assistance programs); authorizations for the use of military force; approval of trade agreements and other agreements; the Senate's power to confirm the President's nominees for certain executive branch positions (including the Secretaries and other high-ranking officials in the Departments of State and Defense, as well as U.S. ambassadors); and general oversight of executive branch operations. While the Constitution enumerates certain specific powers for Congress and the executive branch that bear on U.S. foreign policy, various observers over the years have argued that the Constitution in effect sets the stage for a perpetual debate regarding the relative roles of Congress and the executive branch in U.S. foreign policymaking. From a congressional perspective, questions in this debate in recent years have included whether Congress over the years has ceded too much authority to the executive branch in the area of war powers—and what the meaning of the war powers function might be in today's world, given ongoing counterterrorist operations, so-called hybrid warfare and gray-zone operations, and cyberwarfare; whether Congress should consider legislation that would limit the President's authority to withdraw the United States from NATO without two-thirds consent of the Senate; whether Congress over the years has ceded too much authority to the executive branch in the area of tariffs and trade negotiations; whether the executive branch is following congressional direction for spending funds and implementing programs bearing on U.S. foreign policy; and whether the executive branch is keeping Congress adequately informed regarding U.S. diplomacy with other countries and U.S. government operations in other countries bearing on the U.S. role in the world, including those carried out by U.S. intelligence agencies or U.S. special operations forces. In a context of a potentially historic change in the U.S. role in the world, a key issue for Congress is whether the general pattern of presidential and congressional activities in foreign policy-related areas that developed over the past 70 years would continue to be appropriate in a situation of a changed U.S. role. Regarding this issue, one observer stated in February 2017 that Like other wide congressional grants of authority to the executive branch—the power to levy \"emergency\" tariffs comes to mind—the vast discretion over immigration Trump has inherited was a product of a different time. Lawmakers during the post-World War II era assumed presidents of both parties agreed on certain broad lessons of prewar history, such as the need to remain widely engaged through trade and collective security, and the importance of humanitarian values—\"soft power\"—in U.S. foreign policy. They did not anticipate today's breakdown in national consensus, much less that heirs to the America Firsters who had failed to attain national power before World War II could ever attain it afterward. Congressional decisions on issues relating to the U.S. role in the world could include measures affecting areas such as war powers, tariffs and trade negotiations, use of appropriated funds for foreign policy-related programs, and executive branch actions to keep Congress informed of U.S. government operations in other countries. A related potential issue for Congress is whether a change in the U.S. role would have any implications for congressional organization, capacity, and operations relating to foreign policy, national security, and international economic policy. Congress's current organization, capacity, and pattern of operations for working on these issues evolved during a long period of general stability in the U.S. role, and may or may not be optimal for carrying out Congress's role in U.S. foreign policy given a changed U.S. role. Another potential issue for Congress is how the operation of democracy in the United States might affect the U.S. role in the world, particularly in terms of defending and promoting democracy and criticizing and resisting authoritarian and illiberal forms of government. During the Cold War—a period that featured an ongoing ideological competition between the United States and the Soviet Union regarding the relative merits of Western-style democracy and Soviet-style governance—the effective operation of U.S. democracy at the federal level and lower levels was viewed as helpful for arguing on the world stage that Western-style democracy was superior, for encouraging other countries to adopt that model, and for inspiring people in the Soviet Union and other authoritarian countries to resist authoritarianism and seek change in the direction of more democratic forms of government. The ability of the United State to demonstrate the effectiveness of democracy as a form of government was something that in today's parlance would be termed an element of U.S. soft power. The end of the Cold War in 1989-1991 and the start of the post-Cold War era in the early 1990s led to a diminution in the ideological debate about the relative merits of democracy versus authoritarianism as forms of government. As a possible consequence, there may have been less of a perceived need during this period for focusing on the question of whether the operation of U.S. democracy was being viewed positively or otherwise by observers in other countries. As discussed in another CRS report, the shift in the international environment over the past few years from the post-Cold War era to a new situation featuring renewed great power competition has led to a renewed ideological debate about the relative merits of Western-style democracy versus 21 st -century forms of authoritarian and illiberal government. Articles in China's state-controlled media, for example, sometimes criticize the operation of U.S. democracy and argue that China's form of governance is more advantageous, and at least one Russian official has argued that Russia's authoritarian form of government, which he referred to as \"sovereign democracy,\" offers certain advantages over Western-style democracy. The potential issue for Congress is whether, in a period of renewed ideological competition, there is now once again a need for focusing more on the question of whether the operation of U.S. democracy is being viewed positively or otherwise by observers in other countries. Another potential issue for Congress is whether a change in the U.S. role in the world would at some point in the future be reversible, should U.S. policymakers in the future desire to return to a U.S. role in the world more like that of the past 70 years. Potential questions for Congress include the following: What elements of change in the U.S. role might be more reversible, less reversible, or irreversible? What elements might be less reversible due to technological developments, changes in international power dynamics, or changes in U.S. public opinion? How much time and effort would be required to implement a return to a U.S. role like that of the past 70 years? How might the issue of reversibility be affected by the amount of time that a change in the U.S. role remains in place before an attempt might be made to reverse it? How might decisions that Congress and the executive branch make in the near term affect the question of potential downstream reversibility? What actions, if any, should be taken now with an eye toward preserving an option for reversing nearer-term changes in the U.S. role? What are the views of other countries regarding the potential reversibility of a change in the U.S. role, and how might those views affect the foreign policies of those countries? Appendix A. Glossary of Selected Terms Some key terms used in this report include the following: Role in the world The term role in the world generally refers in foreign policy discussions to the overall character, purpose, or direction of a country's participation in international affairs or the country's overall relationship to the rest of the world. A country's role in the world can be taken as a visible expression of its grand strategy (see next item). In this report, the term U.S. role in the world is often shortened for convenience to U.S. role . Grand strategy The term grand strategy generally refers in foreign policy discussions to a country's overall approach for securing its interests and making its way in the world, using all the national instruments at its disposal, including diplomatic, informational, military, and economic tools (sometimes abbreviated in U.S. government parlance as DIME). A country's leaders might deem elements of a country's grand strategy to be secret, so that assessments, assumptions, or risks included in the strategy are not revealed to potential adversaries. Consequently, a country's leaders might say relatively little in public about the country's grand strategy. As mentioned above, however, a country's role in the world can be taken as a visible expression of its grand strategy. For the United States, grand strategy can be viewed as strategy at a global or interregional level, as opposed to U.S. strategies for individual regions, countries, or issues. International order/world order The term international order or world order generally refers in foreign policy discussions to the collection of organizations, institutions, treaties, rules, norms, and practices that are intended to organize, structure, and regulate international relations during a given historical period. International orders tend to be established by major world powers, particularly in the years following wars between major powers, though they can also emerge at other times. Though often referred to as if they are fully developed or firmly established situations, international orders are usually incomplete, partly aspirational, sometimes violated by their supporters, rejected (or at least not supported) by certain states and nonstate actors, and subject to various stresses and challenges. Unipolar/bipolar/tripolar/multipolar In foreign policy discussions, terms like unipolar , bipolar , tripolar , and multipolar are sometimes used to refer to the number of top-tier world powers whose actions tend to characterize or give structure to a given historical period's international security situation. The Cold War that lasted from the late 1940s to the late 1980s or early 1990s is usually described as a bipolar situation featuring a competition between two superpowers (the United States and the Soviet Union) and their allies. The post-Cold War era, which followed the Cold War, is sometimes described as the unipolar moment, with the United States being the unipolar power, meaning the world's sole superpower. As discussed in another CRS report, observers have concluded that in recent years, there has been a shift from the post-Cold War era to a new international security situation characterized by renewed great power competition between the United States, China, and Russia, leading observers to refer to the new situation as a tripolar or multipolar world. Observers who might list additional countries (or groups of countries, such as the European Union) as additional top-tier world powers, along with the United States, China, and Russia, might also use the term multipolar. Eurasia The term Eurasia is used in this report to refer to the entire land mass that encompasses both Europe and Asia, including its fringing islands, extending from Portugal on its western end to Japan on its eastern end, and from Russia's Arctic coast on its northern edge to India on its southern edge, and encompassing all the lands and countries in between, including those of Central Asia, Southwest Asia, South Asia, and Southeast Asia. Eurasia's fringing islands include, among others, the United Kingdom and Ireland in Europe, Sri Lanka in the Indian Ocean, the archipelagic countries of Southeast Asia, and Japan. There are also other definitions of Eurasia, some of which are more specialized and refer to subsets of the broad area described above. Regional hegemon The term regional hegemon generally refers to a country so powerful relative to the other countries in its region that it can dominate the affairs of that region and compel other countries in that region to support (or at least not oppose) the hegemon's key policy goals. The United States is generally considered to have established itself in the 19 th century as the hegemon of the Western Hemisphere. Spheres-of-influence world The term spheres-of-influence world generally refers to a world that, in terms of its structure of international relations, is divided into multiple regions (i.e., spheres), each with its own hegemon. A spheres-of-influence world, like a multipolar world, is characterized by having multiple top-tier powers. In a spheres-of-influence world, however, at least some of those top-tier powers have achieved a status of regional hegemon, while in a multipolar world, few or none of those major world powers (other than the United States, the regional hegemon of the Western Hemisphere) have achieved a status of regional hegemon. As a result, in a spheres-of-influence world, international relations are more highly segmented on a regional basis than they are in a multipolar world. Geopolitics The term geopolitics is often used as a synonym for international politics or for strategy relating to international politics. More specifically, it refers to the influence of basic geographic features on international relations, and to the analysis of international relations from a perspective that places a strong emphasis on the influence of such geographic features. Basic geographic features involved in geopolitical analysis include things such as the relative sizes and locations of countries or land masses; the locations of key resources such as oil or water; geographic barriers such as oceans, deserts, and mountain ranges; and key transportation links such as roads, railways, and waterways. Hard power and soft power In foreign policy discussions, the term hard power generally refers to coercive power, particularly military and economic power, while the term soft power generally refers to the ability to persuade or attract support, particularly through diplomacy, development assistance, support for international organizations, education and cultural exchanges, and the international popularity of cultural elements such as music, movies, television shows, and literature. Appendix B. Citations for Certain Footnotes This appendix provides the citations to certain footnotes in the report. Citations for each footnote are generally listed with the most recent on top. Citations for Footnote 7 See, for example: Stephen Grand, \"America's Foreign Policy Power Is Changing Under Trump; No Other Country Can Yet Match America in Terms of Power, But Washington No Longer Possesses the Ability to Shape World Events As It Did in the Cold War's Aftermath,\" National Interest , September 30, 2018. Anne Gearan and David Nakamura, \"Trump Delivers Defiant Defense of His Foreign Policy Approach to Skeptical U.N. Audience,\" Washington Post , September 25, 2018. Colum Lynch, \"Trump Takes Aim at Iran, China, and the Global System in Big U.N. Speech,\" Foreign Policy , September 25, 2018. Vivian Salama, \"At U.N., Trump Defends His Administration's Hard-Line Trade Policies; President Trump Criticized International Organizations and Alliances as Unaccountable, But Received Pushback from Other World Leaders,\" Wall Street Journal , September 25, 2018. David Nakamura, \"'I'm Not the President of the Globe': Trump Goes It Alone as He Faces World Leaders Amid Trade War Against China,\" Washington Post , September 23, 2018. Griff Witte and Michael Birnbaum, \"A Year of Trump's 'America First' Agenda Has Radically Changed the U.S. Role in the World,\" Washington Post , January 20, 2018. Rebecca Kheel, \"Trump Roils the Globe in First Year as Commander in Chief,\" The Hill , December 25, 2017. Reuben Fischer-Baum and Julie Vitkovskaya, \"How Trump is Changing America's Foreign Policy,\" Washington Post , updated August 10, 2017. Citations for Footnote 8 See, for example: John Micklethwait, Margaret Talev, and Jennifer Jacobs, \"Trump Threatens to Pull U.S. Out of WTO If It Doesn't 'Shape Up,'\" Bloomberg , August 30 (updated August 31), 2018. Adam Taylor, \"No President Has Used Sanctions and Tariffs Quite Like Trump,\" Washington Post , August 29, 2018. Ana Swanson and Jack Ewiing, \"Trump's National Security Claim for Tariffs Sets Off Crisis at W.T.O.,\" New York Times , August 12, 2018. Ben White, Nancy Cook, Andrew Restuccia, and Doug Palmer, \"Trump's Trade War Was Decades in the Making,\" Politico , July 9, 2018. Greg Rushford, \"Trump's War on the WTO,\" Wall Street Journal , July 4, 2018. Zeeshan Aleem, \"Trump Is Single-Handedly Trying to Blow Up International Trade,\" Vox , July 2, 2018. Heather Long and Steven Mufson, \"Trump Thinks He's Saving Trade. The Rest of the World Thinks He's Blowing It Up.\" Washington Post , June 2, 2018. Peter Rough, \"Trump's Views on Trade Aren't a Passing Fad,\" Foreign Policy , April 3, 2018. \"Disaster Management; The WTO Is Flawed. But the Trump Administration's Undermining of It Is Bad for the World and for America.\" Economist , December 9, 2017: 18. Citations for Footnote 11 See, for example: Uri Friedman, \"Donald Trump Issues a Scathing Rejection of 'Globalism,'\" Atlantic , September 25, 2018. Dalibor Rohac, \"What Donald Trump Got Right—and Wrong—About the United Nations,\" American Enterprise Institute, September 25, 2018. Nahal Toosi, \"Laughter, Frowns and Shrugs: Trump Speaks to the UN; President Tells World Leaders the US Would Always Put Its Interests Above Theirs, Rejecting the Rise of 'Globalism,'\" Politico , September 25, 2018. Katie Bo Williams, \"A Solitary and Defiant Message to the UN In Trump's Second Speech,\" Defense One , September 25, 2018. Farnaz Fassihi, \"Trump to Emphasize 'Sovereignty' in U.S. Visit, Haley Says,\" Wall Street Journal , September 20, 2018. Anna Simons, \"Yes, Mr. President—Sovereignty!\" American Interest, October 10, 2017. Rich Lowry, \"Sovereignty Is Not a Dirty Word,\" National Review , September 22, 2017. Max de Haldevang, \"Trump Mentioned Sovereignty 21 Times in A Speech Heralding A New American Worldview,\" Quartz, September 19, 2017. Greg Jaffe and Karen DeYoung, \"In Trump's U.N. Speech, An Emphasis on Sovereignty Echoes His Domestic Agenda,\" Washington Post , September 19, 2017. For more on the concept of sovereignty as applied to both the United States and other countries, see, for example, National Security Strategy of the United States of America , December 2017, pp. I-II, 1, 4, 7, 9-10, 25, 39, 40, 41, 45, 46-52, 55. For an alternative view, see Bruce Jones, \"American Sovereignty Is Safe From the UN,\" Foreign Affairs, September 28, 2018. Citations for Footnote 12 See, for example: Daniel R. DePetris, \"Has the State Department Been Stripped of Its Swagger? Washington's Diplomatic Missions Are Being Held Together with Duct Tape and Special Envoys,\" National Interest , January 27, 2019. Jackson Diehl, \"Mike Pompeo Swaggers His Way to Failure,\" Washington Post , December 9, 2018. Doyle McManus, \"Almost Half the Top Jobs in Trump's State Department Are Still Empty,\" Atlantic , November 4, 2018. Daniel R. DePetris, \"'Swagger' Doesn't Make up for Bad American Foreign Policy; An Evaluation of Mike Pompeo's Four Months on the Job,\" National Interest , October 2, 2018. Robbie Gramer, \"Washington Blame Game Ensues as Ambassador Posts Sit Empty; The Disappearance of the Saudi Journalist Jamal Khashoggi Spotlights a Staffing Problem,\" Foreign Policy , October 11, 2018. Robbie Gramer, \"Pompeo's Pledge to Lift Hiring Freeze at State Department Hits Big Snag,\" Foreign Policy , June 7, 2018. Carol Morello, \"More Than 200 Former Diplomats Are Alarmed at the State of American Diplomacy,\" Washington Post , March 28, 2018. Stephen M. Walt, \"The State Department Needs Rehab,\" Foreign Policy , March 5, 2018. Jack Corrigan, \"State Department Lost 12% of its Foreign Affairs Specialists in Trump's First 8 Months,\" Defense One , February 12, 2018. Dan De Luce and Robbie Gramer, \"State Department, USAID Face Drastic Budget Cut,\" Foreign Policy , February 12, 2018. Carol Morello, \"Foreign Aid Cuts Proposed, But 'Friends' Might Be Protected,\" Washington Post , February 12, 2018. Jack Corrigan and Government Executive, \"The Hollowing Out of the State Department Continues,\" Atlantic , February 11, 2018. Gordon Adams and Robert Goldberg, \"Rex Tillerson Is About to make a Terrible Mistake; The Knives Are Out for 'F' at the State Department. The Secretary Should Be Strengthening Rather Than Dismantling It.\" Foreign Policy , December 14, 2017 (the article identifies \"F\" a the State Department's foreign assistance planning and budgeting staff.). Dexter Filkins, \"How Rex Tillerson Wrecked the State Department,\" New Yorker , November 30, 2017. Madeleine K. Albright, \"The National Security Emergency We're Not Talking About,\" Washington Post , November 29, 2017. Felicia Schwartz, \"Tillerson Rebuts Criticism of State Department Staff Declines,\" Wall Street Journal , November 28, 2017. Nicholas Burns and Ryan C. Crocker, \"Dismantling the Foreign Service,\" New York Times , November 27, 2018. Gardiner Harris, \"Diplomats Sound the Alarm as They Are Pushed Out in Droves,\" New York Times , November 24, 2017. Editorial Board, \"The Trump Administration Is Making War on Diplomacy,\" New York Times , November 18, 2017. Carol Morello, \"State Department's Plan for Staff Cuts Causing New Worry in Congress,\" Washington Post , November 15, 2017. Abigail Tracy, \"'Total Bulls**t': Ex-Staffers Say Tillerson's 'Disdain' Is Killing the State Department,\" Vanity Fair , November 14, 2017. [The \"**\" was inserted by CRS. In the original article, the word is spelled out.] Jason Zengerle, \"Rex Tillerson and the Unraveling of the State Department,\" New York Times , October 17, 2017. Kevin Quealy, \"'The Lowest-Profile State Department in 45 Years,' in 2 Charts,\" New York Times , August 1, 2017. Robbie Gramer, Dan De Luce, and Colum Lynch, \"How the Trump Administration Broke the State Department,\" Foreign Policy , July 31, 2017. Roger Cohen, \"The Desperation of Our Diplomats,\" New York Times , July 28, 2017. Colum Lynch, \"Tillerson to Shutter State Department War Crimes Office,\" Foreign Policy , July 17, 2017. Steven Erlanger and Julie Hirschfeld Davis, \"Once Dominant, the United States Finds Itself Isolated at G-20,\" New York Times , July 7, 2017. Colum Lynch, \"Trump's Budget Blueprint: Pulling Up the Diplomatic Drawbridge,\" Foreign Policy, March 16, 2017. Nicholas Burns, \"Trump's Cuts Would Cripple the Country's Diplomats When We Need Them Most,\" Washington Post, March 3, 2017. For more on the State Department and U.S. foreign assistance programs, see, for example, CRS Report R45203, U.S. Department of State Personnel: Background and Selected Issues for Congress , by Cory R. Gill, and CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations , by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill. Citations for Footnote 18 See, for example: Uri Friedman, \"The President of the United States Asks, 'What's an Ally?'\" Atlantic , October 15, 2018. Philip Gordon and Ivo Daalder, \"Trump's Biggest Gift to Putin; Qualifying and Conditioning the Notion of NATO's Defense Guarantee Is a Major Step on the Path to Abandoning It,\" Atlantic, July 19, 2018. Eileen Sullivan, \"Trump Questions the Core of NATO: Mutual Defense, Including Montenegro,\" New York Times, July 18, 2018. Ezra Klein, \"Why is Trump Undermining NATO and the EU? He Just Told Us.\" Vox, July 13, 2018. Uri Friedman, \"Trump vs. NATO: It's Not Just About the Money; The President's Emphasis on Spending Obscures a Much Deeper Skepticism of Alliances,\" Atlantic, July 12, 2018. Ivan Krastev, \"Sorry, NATO. Trump Doesn't Believe in Allies.\" New York Times, July 11, 2018. Alex Ward, \"Trump Blasted US Allies Within Minutes of Arriving at NATO Summit,\" Vox, July 11, 2018. Paul Waldman, \"Will Trump Destroy NATO and Every Other American Alliance?\" Washington Post, July 9, 2018. Krishnadev Calamur, \"Trump Keeps His Friends Distant and His Enemies Closer,\" Atlantic, July 4, 2018. John Hudson, Paul Sonne, Karen DeYoung, and Josh Dawsey, \"U.S. Assessing Cost of Keeping Troops in Germany as Trump Battles with Europe,\" Washington Post, June 29, 2018. Jay Nordlinger, \"Trump, and Us, in the World,\" National Review, June 29, 2018. Robbie Gramer, \"Ahead of NATO Summit, U.S. President Exhorts Allies to Pay Up,\" Foreign Policy, June 27, 2018. Ashley Parker, \"Going It Alone: Trump Increasingly Relies on Unilateral Action to Wield Power,\" Washington Post, June 11, 2018. Susan B. Glasser, \"Under Trump, 'America First' Really Is Turning Out To Be America Alone,\" New Yorker, June 8, 2018. Fred Kaplan, \"The Free World's Landlord; Trump's Persistent Attacks on NATO Can Only Undermine America's Economy and Security,\" Slate, December 12, 2017. Citations for Footnote 22 See, for example: Ben Rhodes, \"A Fatal Abandonment of American Leadership; The Disappearance of Jamal Khashoggi Drives Home the Consequences of the Trump Administration's Refusal to Champion Democratic Values Around the Globe,\" Atlantic , October 12, 2018. David A. Graham, \"The End of American Lip Service to Human Rights; The Administration's Reticence About the Disappearance of a Saudi Journalist Is Offensive, But It's Also Clarifying,\" Atlantic , October 12, 2018. Krishnadev Calamur, \"Nikki Haley's Concern for Human Rights Only Went So Far; The Outgoing U.S. Ambassador to the UN Criticized U.S. Allies Like Saudi Arabia, But Also Pulled Out of the UN Human Rights Council,\" Atlantic , October 9, 2018. Thomas Carothers, \"Can U.S. Democracy Policy Survive Trump?\" Carnegie Endowment for International Peace, October 1, 2018. Abby Bard, \"Trump's UN Speech Hurts America and the International System; America Threatens to Let Everyone Fend for Themselves,\" National Interest , September 26, 2018. David A. Andelman, \"Trump Presides Over a Global Sunset to Democracy,\" CNN , June 18, 2018. Joshua Keating, \"Under Trump, the U.S. Is Becoming More of a Human Rights Outlaw,\" Slate , June 5, 2018; Robbie Gramer, \"Human Rights Groups Bristling at State Department Report; What's Not in the Report Is As Important As What's In It,\" Foreign Policy , April 21, 2018. Josh Rogin, \"The Trump Administration Wants to Dismantle Ronald Reagan's 'Infrastructure of Democracy,'\" Washington Post , March 4, 2018. Richard Fontaine and Daniel Twining, \"Defending America Means Defending Democracy,\" Foreign Policy , February 13, 2018. Adrian A. Basora and Kenneth Yalowitz, \"The Trump Team Is Underestimating the Power of Democracy,\" National Interest , January 28, 2018. Nahal Toosi, \"Leaked Memo Schooled Tillerson on Human Rights; A Tutorial from Policy Aide Brian Hook Followed the Secretary of State's Controversial Remarks About Balancing U.S. Values and Interests,\" Politico , December 19, 2017. Dominic Tierney, \"'Human Rights Are Largely Irrelevant to the Emerging Trump Doctrine,'\" Atlantic ,\" November 14, 2017. Editorial Board, \"Trump Loves Human Rights—When Convenient,\" Washington Post , November 14, 2017. Stephen M. Walt, \"Trump Isn't Sure If Democracy Is Better Than Autocracy; America's President Is Voluntarily Abdicating One of the Country's Biggest Strategic Advantages,\" Foreign Policy , November 13, 2017. Sarah Wildman, \"'America First' Means Human Rights Last During Trump's Visit to Asia,\" Vox , November 8, 2017. Michael H. Fuchs, Shannon McKeown, and Brian Harding, \"If Trump Forgets About Human Rights in Asia, the World Will Suffer,\" Foreign Policy , November 2, 2017. Justin Worland, \"Trump Administration Says It doesn't Want to 'Yell About' Human Rights,\" Time , November 2, 2017. Joshua Keating, \"Wait, Does the Trump Administration Care About Human Rights Now?\" Slate , August 23, 2017. Rukmani Bhatia, \"Quietly Erasing Democracy Promotion at the U.S. State Department,\" Freedom House, August 8, 2017. Josh Rogin, \"State Department Considers Scrubbing Democracy Promotion from Its Mission,\" Washington Post , August 1, 2017. Karen DeYoung, \"Trump Takes a Selective Approach to the Promotion of Human Rights,\" Washington Post , April 25, 2017. Doyle McManus, \"Has the United States Abandoned Its Commitment to Human Rights?\" Los Angeles Times , April 5, 2017. Shannon N. Green, \"When the U.S. Gives Up on Human Rights, Everyone Suffers,\" Foreign Policy , April 4, 2017. Peter Baker, \"For Trump, a Focus on U.S. Interests and a Disdain for Moralizing,\" New York Times , April 4, 2017. See also: Paul R. Pillar, \"The U.S.-Canadian Relationship Must Remain Strong; The White House's Treatment of Canada Is Deeply Disturbing,\" National Interest , August 14, 2018. Ashifa Kassam, \"'We Don't Have a Single Friend': Canada's Saudi Spat Reveals Country is Alone; As Saudi Officials Lashed Out at Canada, the US Remained on the Sidelines, Signaling a Blatant Shift in the Relationship,\" Guardian , August 11, 2018. Joshua Keating, \"The Administration's Infuriating Both Sides-ing of the Canada-Saudi Arabia Dispute,\" Slate , August 8, 2018; Jonathan Lemire and Matthew Pennington, \"AP Analysis: Trump Retreats from US Moral Leadership Stance,\" Associated Press , June 12, 2018. Citations for Footnote 23 See, for example: Colum Lynch, \"In Parting Shot, Nikki Haley Shuns Human Rights Groups at U.N.; She Fashioned Herself a Human Rights Champion but Routinely Clashed with Potential Allies over the Human Rights Council,\" Foreign Policy , October 11, 2018. Krishnadev Calamur, \"Nikki Haley's Concern for Human Rights Only Went So Far; The Outgoing U.S. Ambassador to the UN Criticized U.S. Allies Like Saudi Arabia, But Also Pulled Out of the UN Human Rights Council,\" Atlantic , October 9, 2018. For more on the United Nations Human Rights Council, including the U.S. withdrawal, see, for example: CRS In Focus IF10861, Global Human Rights: Multilateral Bodies & U.S. Participation , by Michael A. Weber. CRS Report RL33608, The United Nations Human Rights Council: Issues for Congress , by Luisa Blanchfield. Citations for Footnote 26 See, for example: William Saletan, \"Trump Is More Loyal to Dictators Than to the U.S.; His Lies About Jamal Khashoggi's Murder Are a Threat to National Security.\" Slate , December 4, 2018. Emily Stewart, \"Trump Says He and Kim Jong Un 'Fell in Love' over Denuclearization Letters; The President's Public Admiration of Brutal Dictators and Strongmen Continued at a Rally in West Virginia,\" Vox , September 30, 2018. Marc Santora and Joanna Berendt, \"Poland's Leader Finds an Ally in Trump, Even as He Brings Courts to Heel,\" New York Times , September 17, 2018. Patrick Kingsley, \"Hungary's Leader Was Shunned by Obama, but Has a Friend in Trump,\" New York Times , August 15, 2018. Krishnadev Calamur, \"Trump Keeps His Friends Distant and His Enemies Closer,\" Atlantic , July 4, 2018. Edward-Isaac Dovere, \"Donald Dreams of Dictators,\" Politico , June 15, 2018. Philip Rucker, \"'Dictator Envy': Trump's Praise of Kim Jong Un Widens His Embrace of Totalitarian Leaders,\" Washington Post , June 15, 2018. Jack Crowe, \"Trump Downplays Kim's Brutality, Says 'A Lot of People' Are Guilty of Atrocities,\" National Review , June 13, 2018. Ishaan Tharoor, \"Trump's Affinity for Dictators over Democrats,\" Washington Post , June 12, 2018. William Saletan, \"Trump's Favorite Animals,\" Slate , May 23, 2018. Fred Hiatt, \"McMaster Warned Against Officials Who 'Glamorize and Apologize' for Dictators. Hmm.\" Washington Post , April 8, 2018. Krishnadev Calamur, \"Nine Notorious Dictators, Nine Shout-Outs From Donald Trump,\" Atlantic , March 4, 2018. Zack Beauchamp, \"Trump Is Embracing a New Generation of Strongmen,\" Vox , February 27, 2018. Zack Beauchamp, \"A Top Adviser Says the Leaders Trump 'Most Admires' Are All Authoritarians,\" Vox , December 14, 2017. Editorial Board, \"President Trump's Thing for Thugs,\" New York Times , November 13, 2017. Jay Nordlinger, \"The American President and American Values,\" National Review , November 13, 2017. Krishnadev Calamur, \"Trump's Gratitude for the 'Bad Guys,'\" The Atlantic , August 11, 2017. Michael Gerson, \"Trump's Embrace of Strongmen is a Very Bad Strategy,\" Washington Post , June 22, 2017. Anne Applebaum, \"How Trump Makes Dictators Stronger,\" Washington Post , May 4, 2017. Philip Rucker, \"Trump Keeps Praising International Strongmen, Alarming Human Rights Advocates,\" Washington Post , May 1, 2017. Citations for Footnote 27 See, for example: Jeffrey, \"U.S. Foreign Policy in Free Fall; The Direct Damage to the Reputation of the United States Has Never Been More Substantial,\" National Interest , January 24, 2019. Jake Sullivan, \"What Donald Trump and Dick Cheney Got Wrong About America,\" Atlantic , January/February 2019. Dana Milbank, \"It's Official. We Lost the Cold War.\" Washington Post , December 21, 2018. Carolyn Kormann, \"How the U.S. Squandered Its Leadership at the U.N. Climate Conference,\" New Yorker , December 15, 2018. Joseph Curtin, \"Trump Has Officially Ruined Climate Change Diplomacy for Everyone; The Evidence Is In: the Paris Agreement Doesn't Work Without the United States.\" Foreign Policy , December 12, 2018. David Pring-Mill, \"Trump Is Failing on Human Rights; It Is Time to Restore Truth and Moral Clarity in the White House,\" National Interest , December 11, 2018. Jennifer Rubin, \"Trump's Not Winning Anything, Anywhere,\" Washington Post , December 3, 2018. Stephen M. Walt, \"Trump's Problem in Europe Isn't Optics; The President's Latest Trip Was a Disaster—But Not Because He Acted Like a Boorish Bully.\" Foreign Policy , November 14, 2018. Robin Wright, \"Trump Completes a Shameful Trip to Paris, Just As He Needs the Global Stage,\" New Yorker , November 12, 2018. Abby Bard, \"Trump's UN Speech Hurts America and the International System; America Threatens to Let Everyone Fend for Themselves,\" National Interest , September 26, 2018. Michael Gerson, \"Trump Is Smashing the Hopes of Oppressed People Everywhere,\" Washington Post , July 19, 2018. Susan B. Glasser, \"'No Way to Run a Superpower': The Trump-Putin Summit and the Death of American Foreign Policy,\" New Yorker , July 19 2018. Will Inboden, \"How Much Damage Did Trump Cause in Helsinki?\" Foreign Policy , July 19, 2018. Ishaan Tharoor, \"Is Trump at War with the West?\" Washington Post , July 18, 2018. Rich Lowry, \"Trump's Helsinki Discord; His Dismaying Comments Undercut the Country He Leads.\" National Review , July 17, 2018. Zack Beauchamp, \"Donald Trump, Vladimir Putin, and America's 'Geopolitical Suicide'; the Trump-Putin Meeting Reveals How Trump Is Killing American Power,\" Vox , July 16, 2018. David Brooks, \"The Murder-Suicide of the West; Trump Forcefully Caps Off Years of Deterioriation in European-American Ties,\" New York Times , July 16, 2018. Abigail Tracy, \"'Appalling,' 'A Mess,' 'Nothing Short of Cowardly': Washington Insiders Reel As Trump Caves to Putin in Helsinki,\" Vanity Fair , July 16, 2018. Amy Zegart, \"The Self-Inflicted Demise of American Power; The Effect of Trump's Foreign-Policy Doctrine Can Be Summed Up as 'Make America Weak Again,'\" Atlantic , July 12, 2018. Anne Applebaum, \"Trump Hates the International Organizations That Are the Basis of U.S. Wealth, Prosperity and Military Power,\" Washington Post , July 2, 2018. Jonathan S. Tobin, \"Trump's G-7 Debacle: The Downside to 'America First'; Does Trump want an end to the Western alliance?\" National Review , June 11, 2018. Michael Mandelbaum, \"America's Global Role in Question,\" American Interest , March 26, 2018. Julie Smith, \"At the Munich Security Conference, the United States Lacked Bravery and Leadership,\" Foreign Policy , February 20, 2018. Fred Kaplan, \"Don't Know What You've Got Til It's Gone; America's Retreat from the World Under Trump Has Shown Why We're Still the Indispensable Nation,\" Slate , January 19, 2018. John R. Schindler, \"The Year American Hegemony Ended,\" Observer , December 31, 2017. Richard Haass, \"America and the Great Abdication; Don't Mistake Donald Trump's Withdrawal from the World for Isolationism,\" Atlantic , December 28, 2017. Laura Zhou and Viola Zhou, \"Donald Trump's Early East Asia Summit Exit Casts Doubt Over US Ties to Asia,\" South China Morning Post , November 14 (updated November 15), 2017. Adam Davidson, \"How Trump Is Quietly Dismantling the Architecture of Global Governance,\" New Yorker , November 10, 2017. Robert Delaney, \"Donald Trump Has Ceded Global Leadership to China, Says Nixon Trip Aide,\" South China Morning Post , November 9, 2017. \"America's Global Influence Has Dwindled Under Donald Trump,\" Economist , November 9, 2017. Fred Kaplan, \"Lost in Asia; Trump's Trip Shows What Happens When a World Leader Is Set Adrift in the World with No Strategy or Goals.\" Slate , November 8, 2017. Josef Joffe, \"Donald Trump and the Future of U.S. Power; The President Underestimates the Unique Genius of Postwar American Grand Strategy: That by Serving Others' Interests, the United States Has Also Served Its Own.\" American Interest , November 3, 2017. Eliot A. Cohen, \"How Trump Is Ending the American Era,\" The Atlantic , October 2017. Hal Brands, \"How to Diminish a Superpower: Trump's Foreign Policy After Six Months,\" War on the Rocks , August 1, 2017. Robert J. Samuelson, \"Trump's Extraordinary Surrender of Power,\" Washington Post , July 9, 2017. Tom Malinowski, \"What America Stood For,\" The Atlantic , March 25, 2017. Alissa J. Rubin, \"Allies Fear Trump Is Eroding America's Moral Authority,\" New York Times , March 10, 2017. Colin Kahl and Hal Brands, \"Trump's Grand Strategic Train Wreck,\" Foreign Policy , January 31, 2017. Richard Stengel, \"The End of the American Century,\" The Atlantic , January 26, 2017. Citations for Footnote 29 See, for example: Nahal Toosi, \"Even Skeptics Winder: Does Trump Deserve Some Foreign Policy Credit?\" Politico , February 5, 2019. Richard Fontaine, \"U.S.-India Relations: The Trump Administration's Foreign Policy Bright Spot,\" War on the Rocks , January 24, 2019. Michael Auslin, \"Trump's Successful Pivot to Asia; America's Regional Allies Are Relieved to Learn That the U.S. Isn't Going Anywhere—for Now.\" Wall Street Journal , January 15, 2019. Greg R. Lawson, \"America's Old School Foreign Policy Ways Must Change; Washington's Policy Elites Are Determined to Mire America Down in a Morass of Multiple Distractions in Peripheral Theaters. Donald Trump Wants to Change Their Boorish Ways.\" National Interest , January 9, 2019. Jon Finer and Robert Malley, \"Trump Is Right to Seek an End to America's Wars,\" New York Times , January 8, 2019. David J. Lynch, \"Trump a Global Loner, Finds His China Trade War Complaints Draw a Crowd,\" Washington Post , December 14, 2018. Greg Autry, \"Trump's China Policy Is a Triumph; The President's Trade War Is Bringing Beijing to Heel.\" Foreign Policy , November 28, 2018. Rebeccah L. Heinrichs, \"Decisive, Disruptive, and Overdue: The Trump Foreign Policy,\" Hudson Institute, November 1, 2018. Richard Javad Heydarian, \"Trump is Forcing China to Reassess its Strategy,\" National Interest , October 20, 2018. Steven W. Mosher, \"Trump Has China Quaking in its Boots,\" New York Post , October 6, 2018. Krishnadev Calamur, \"Trump Is Winning on Trade; The World Might Protest, But Ultimately Countries Have to Deal with the U.S.,\" Atlantic , October 1, 2018. Damian Paletta and Erica Werner, \"Trump Says USMCA Trade Deal with Mexico and Canada Proves Tough Talk and Tariffs Work,\" Washington Post , October 1, 2018. Salvatore Babones, \"Trump's Foreign Policy Successes Show Principled Realism in Action; Trump Has Overcome Internal Resistance and External Pressure to Deliver a Strong of Foreign Policy Successes,\" National Interest , September 26, 2018. Brett D. Schaefer, \"President Trump at the UN: An Unapologetic Defense of 'Principled Realism'; Donald Trump's United Nations Speech Took Stock of the Results of Eighteen Months of 'Principled Realism' in American Foreign Policy. The Record of Achievement Is Surprisingly Strong.\" National Interest , September 26, 2018. Marc A. Thiessen, \"Chaos or Not, Trump Is Racking Up a Record of Foreign Policy Success,\" Washington Post , September 18, 2018. Randall Schweller, \"Three Cheers for Trump's Foreign Policy,\" Foreign Affairs , September/ October 2018: 133-143. Daniel R. DePetris, \"Great Expectations: Trump in Helsinki; Is This the Start of a Russian Reconciliation?\" National Interest , July 16, 2018. Harry J. Kazianis, \"The Coming American-Russian Alliance Against China,\" American Conservative , July 16, 2018. Washington Examiner, \"Trump's Diplomatic Belligerence,\" Washington Examiner , July 12, 2018. Edwin Feulner, \"President Donald Trump and the New International Order,\" Heritage Foundation, June 15, 2018. Conrad Black, \"Trump's North Korean Policy Is Succeeding; He Has Secured Kim Jong-un's Acquiescence to the Agreed Objective.\" National Review , June 13, 2018. Scott Simon, \"A Perspective From A Pro-Trump Political Science Professor,\" NPR , June 9, 2018. (Interview with Randall Schweller.) Raymond Tanter and Ivan Sascha Sheehan, \"Trump's Foreign Policy Plans Put America First,\" National Interest , May 1, 2018. Jonathan S. Tobin, \"Trump Is Still the Leader of the Free World; Despite His Faults, His Realism on the Threat from Tehran Makes Him, and Not Macron or Merkel, the True Defender of the West.\" National Review , April 30, 2018. Stephen M. Walt, \"Has Trump Become a Realist? America Finally Has a President Who Grasps the Basic Logic of Offshore Balancing in the Middle East.\" Foreign Policy , April 17, 2018. Christian Whiton, \"China Gets Trumped,\" National Interest , April 5, 2018. Bruno Macaes, \"The Trump Doctrine,\" American Interest , March 29, 2018. Josh Rogin, \"The United States Is Finally Confronting China's Economic Aggression,\" Washington Post , March 25, 2018. Carol Morello, \"Head of USAID Defends Big Cuts in Foreign Aid Budget,\" Washington Post , March 21, 2018. James Jay Carafano, \"Inside Trump's National Security Team: Unmasking Captain Chaos,\" National Interest , March 7, 2018. Thitinan Pongsudhirak, \"Trump Puts America Back in Asia,\" Daily Star , February 21, 2018. Jeremy Hobson, \"President Trump's Policies Mark 'Return To Realist Principles,' Scholar Says,\" WBUR, January 29, 2018. (Interview with Randall Schweller.). Nile Gardiner, \"Far from Being the Disaster His Critics Predicted, President Trump's World Strategy Is to Lead from the Front,\" Telegraph (UK) , January 15, 2018. Zack Beauchamp, \"The Case for Trump's Foreign Policy, According to a Leading International Relations Scholar,\" Vox , January 11, 2018. (Reports on views of Randall Schweller.). Andrew Exum, \"What Trump Got Right in Foreign Policy in 2017,\" Atlantic , January 4, 2018. Walter Russell Mead, \"Trump Brings Foreign Policy Back to Earth,\" Wall Street Journal , November 29, 2017. Joseph Bosco, \"Trump's 'Principled Realism,'\" Real Clear Defense , September 21, 2017. See also Dmitri K. Simes, \"A Trump Foreign Policy; With the Right Mix of Hard and Soft Power Coupled with Skillful Diplomacy, Trump Can Still Achieve Major Successes.\" National Interest , June 17, 2018. James Jay Carafano, \"The Real Meaning Behind Trump's UN Speech,\" National Interest , September 20, 2017. Nile Gardiner, \"At the UN, Trump Ends the Era of Leading From Behind,\" Heritage Foundation , September 20, 2017. Jonathan S. Tobin, \"Trumpian Rhetoric and U.S. Imperatives,\" National Review , September 20, 2017. Eliott Abrams, \"Trump's Successful U.N. Speech,\" National Review , September 19, 2017. James Roberts and Brett Schaefer, \"An Overhaul of America's Foreign Assistance Programs Is Long Overdue,\" Heritage Foundation , September 19, 2017. Tom Rogan, \"Trump's UN Speech Was A Grand Slam,\" Washington Examiner , September 19, 2017. Stephen M. Walt, \"What Trump Got Right About Foreign Policy,\" Foreign Policy , August 28, 2017. James Jay Carafano, \"Trump and the Art of Rope-A-Dope Diplomacy,\" Heritage Foundation , August 14, 2017. Paul Kengor, \"Trump's Excellent Speech in Poland, on Poland, and About Poland,\" American Spectator , July 9, 2017. Michael Barone, \"Trump's 'Remarkable' Speech in Poland,\" Washington Examiner , July 6, 2017. Robert Charles, \"Trump Speech in Poland—Reagan Is Nodding,\" Fox News , July 6, 2017. James P. Rubin, \"Trump Is Huge in Poland. So, There's That.\" Politico , July 6, 2017. Brett D. Schaefer, \"Trump's Budget Grasps What Congress Doesn't: America's Global Leadership Doesn't Come Free,\" Heritage Foundation, May 29, 2017. Theodore R. Bromund, \"Donald Trump is Right To Cut the State Department's Budget,\" Heritage Foundation, March 27, 2017. James M. Roberts, \"Why Trump's Budget Proposal for the State Department Makes Sense,\" Heritage Foundation, March 17, 2017. Al Mariam, \"Trump's Suspicion of Foreign Aid to Africa Is Right on The Money\" The Hill , March 9, 2017. James M. Roberts, \"The US Needs a New Foreign Aid Model,\" Heritage Foundation, March 7, 2017. Randall L. Schweller, \"A Third-Image Explanation for Why Trump Now: A Response to Robert Jervis' 'President Trump and IR [international relations] Theory,\" ISSF Policy Series , February 8, 2017. Brett D. Schaefer, \"Trump's Plan to Reduce UN Spending Is a Step in the Right Direction,\" Heritage Foundation, February 2, 2017. Citations for Footnote 30 See, for example: Henry R. Nau, \"Return of the Balance of Power; But the Problem Is Neither Nationalism nor Globalism. In Today's World, the Two Are Complementary.\" National Interest , October 18, 2018. Ted Galen Carpenter, \"Where Is Trump's Alleged Isolationism? If You Look At His Actions and Not His Words, You Won't Find It.\" National Interest , October 9, 2018. Dalibor Rohae, \"The New NAFTA Shows Trump's Protectionism Can Be Curbed,\" American Enterprise Institute, October 2, 2018. Reid Standish, \"Europe Should Look to What the United States Does—Not What Trump Says,\" Foreign Policy , August 3, 2018. James Kirchick, \"Trump Wants to Destroy the World Order. So What? Whatever the President's Intentions, His Efforts to Rock the Foundation of International Politics Are Hopeless,\" Foreign Policy , July 26, 2018. Noah Bierman, \"Trump Talks Tough, But After 15 Months, He's Actually Been Risk Averse When It Comes To Military Force,\" Task and Purpose , April 30, 2018. Stephen M. Walt, \"Trump's Sound and Fury Has Signified Nothing, The President's Style Has Been Unique, But the Substance of His Foreign Policy Is Surprisingly Familiar,\" Foreign Policy , January 30, 2018. Gerald F. Seib, \"Trump's 'America First' Message Is a Case of Rhetoric vs. Reality—So Far,\" Wall Street Journal , January 22, 2018. Christopher A. Preble, \"The World Is Reacting to Trump's Words—Not His Actions,\" National Interest , January 10, 2018. David Gordon and Michael O'Hanlon, \"President Trump's Twitter-Fueled Foreign Policy: Not As Bad As You Might Think,\" USA Today , January 5, 2018. Curt Mills, \"Can America's Foreign Policy Be Restrained?\" National Interest , December 12, 2017. Jacob Heilbrunn, \"Is Trump Really a Foreign-Policy Populist?; We Haven't Seen the Sharp Realignment You'd Have Expected from the Campaign.\" National Interest , November 30, 2017. Uri Friedman, \"What's Dangerous About Donald Trump's Foreign Policy? His Unorthodox Approach Has Frightened Some Observers. But It's His More Conventional Moves That Have Cost the Most Lives.\" Atlantic , November 26, 2017. Curt Mills, \"A Year on, Foreign Policy Restrainers Assess the Trump Administration,\" National Interest , November 7, 2017. Brett D. Schaefer, \"Trump's \"Rocketman\" Speech Marked a Welcome Return to Assertive U.S. Foreign Policy,\" Heritage Foundation, September 26, 2017. David French, \"A Donald Trump Speech, a Barack Obama Foreign Policy,\" National Review , September 19, 2017. Joshua Keating, \"The Blob Ate Donald Trump,\" Slate , August 22, 2017. Andrew J. Bacevich, \"The Beltway Foreign-Policy 'Blob' Strikes Back,\" American Conservative , May 26, 2017. Citations for Footnote 31 See, for example: Alex Ward, \"Trump's China Strategy Is the Most Radical in Decades—and It's Failing,\" Vox , September 18, 2018. Joel Gehrke, \"Pentagon Vows to 'Confront and Compete' with China,\" Washington Examiner , August 7, 2018. Walter Russell Mead, \"The Return of James Monroe,\" Wall Street Journal , August 6, 2018. Diego Leiva, \"The Monroe Doctrine Revival,\" Interpreter , February 14, 2018. Daniel P. Vajdich, \"Trump Should Abide by His Own National Security Strategy,\" Foreign Policy , January 24, 2018. Benjamin H. Firedman, \"Trump's Conventional National Security Strategy,\" National Interest , January 11, 2018. Philippe Le Corre and Erik Brattberg, \"Trump's New Strategy Is America's Old Strategy: Gathering Allies,\" National Interest , January 7, 2018. Don Tse and Larry Ong, \"Trump's National Security Strategy a Timely Counter to China's Expansionism,\" Real Clear Defense , January 4, 2018. James S. Robbins, \"The National Security Strategy Will Work; It Is the Difference Between 'Leading from Behind' and Actually Leading.\" National Interest , December 28, 2017. Zalmay Khalilzad, \"Trump Has Unveiled a Strong National Security Strategy,\" National Interest , December 26, 2017. Walter Russell Mead, \"Trump's 'Blue Water' Foreign Policy; The Administration's New Security Strategy Is Reminiscent of Pax Britannica,\" Wall Street Journal , December 25, 2017. Patrick Porter, \"Tradition's Quiet Victories: Trumps National Security Strategy,\" War on the Rocks , December 22, 2017. Niharika Tagotra, \"The US National Security Strategy and Great Power Relations; The NSS Institutionalizes Trends in U.S. Engagement with Both China and India.\" Diplomat , December 20, 2017. Dan Blumenthal, \"Trump Sets the Tone on China: America Will Not Be Challenged,\" The Hill , December 19, 2017. Andrew Browne, \"Trump's New National-Security Policy: Paper Tiger or Hidden Dragon? Some Experts Say the Writing Is Already on the Wall for the U.S. in the Struggle for Dominance in Asia,\" Wall Street Journal , December 19, 2017. Editorial Board, \"Trump's Security Strategy Is Sound, If He Believes It,\" Bloomberg , December 19, 2017. Thomas Wright, \"The National Security Strategy Papers Over a Crisis; The Document Itself Is Generally Coherent. But Can the Bureaucracy Contain the President?\" Atlantic , December 19, 2017. Dov Zakheim, \"Two Cheers for Trump's National Security Strategy; Its Survey of the World is Mostly Accurate, but the Discussion of Domestic Policy Falls Flat,\" Foreign Policy , December 19, 2017. Anne Gearan, \"National Security Strategy Plan Paints China, Russia as U.S. Competitors,\" Washington Post , December 18, 2017. Mike Green, \"The NSS and the China Challenge; The President and His Team Deserve Credit for Formulating a Coherent, Cohesive Approach to Battling Beijing.\" Foreign Policy , December 18, 2017. Jacob Heilbrunn, \"Decoding Trump's New National Security Strategy; What the Document Reveals Most Clearly is the Mental Scaffolding of the Trump Administration, Which Is to Seek American Dominance,\" National Interest , December 18, 2017. James Stavridis, \"Trump's National Security Strategy Is Shockingly Normal; The White House's 'Four Pillars' Could Have Emerged from a Hillary Clinton Administration,\" Bloomberg , December 18, 2017. Patrick Tucker, \"New National Security Strategy See s Rising Russia, Retreat on 'Democratic Peace,'\" Defense One , December 18, 2017. For alternative reactions to the NSS, see: James Stavridis, \"The Danger of Trump's National Security Plan Is In What It Doesn't Say,\" Time , January 11, 2018. Ian Ona Johnson and Ionut Popescu, \"The Missing Element in Trump's NSS: A Competitive National Strategy,\" National Interest , January 2, 2018. Jeremy Maxie, \"Trump's National Security Strategy: Long on Realism, Short on Geoeconomics,\" Diplomat , December 23, 2017. Salman Ahmed, \"Trump Has Set a Scary Strategic Precedent; There's a Reason Why Other Administrations Didn't Plan National Security This Way,\" Foreign Policy , December 21, 2017. Richard Fontaine, \"Trump Should Mind the Gaps in His National Security Strategy,\" War on the Rocks , December 21, 2017. Daniel Goure, \"The Trump National Security Strategy in One Word: Sovereignty,\" Real Clear Defense , December 21, 2017. Susan E. Rice, \"Susan Rice: When America No Longer Is a Global Force for Good,\" New York Times , December 20, 2017. Daniel W. Drezner, \"A Straussian National Security Strategy; There Is a Massive Disconnect Between Trump's Speech and His National Security Strategy. Why?\" Washington Post , December 19, 2017. Kori Schake, \"How to Grade Trump's National Security Strategy on a Curve; Strategizing for This President Isn't Easy. But That Excuse Only Gets You So Far.\" Foreign Policy , December 19, 2017. Eliot A. Cohen, \"Three Ways to Read Trump's National Security Strategy; Is It Better Approached as a Sacred Text, or Examined Like the Scat of a Shaggy, Woodland Beast?\" Atlantic , December 18, 2017. Joshua Keating, \"Trump National Security Strategy Isn't the Slightest Bit Worried About Threat of Climate Change,\" Slate , December 18, 2017. Fred Kaplan, \"Strategic Confusion; Donald Trump's New National Security Strategy Will Baffle Allies and Delight Foes,\" Slate , December 18, 2017. David Frum, \"A National-Security Strategy Devoid of Values,\" Atlantic , December 12, 2017. Citations for Footnote 38footnote 37 For press accounts of this policy, see, for example: Demetri Savastopulo, \"Why Trump's America Is Rethinking Engagement with China; The More Aggressive US Approach Is Part of a Strategic Shift That Goes Well Beyond the Trade War,\" Financial Times , January 14, 2019. David S. Cloud, \"U.S. Policy Toward China Shifts from Engagement to Confrontation,\" Los Angeles Times, December 31, 2018. Jun Mai, \"Picking a Fight: Is Trump's Hawkish Behavior Towards China the Start of a New Cold War?; With Washington Taking a New, Profoundly Aggressive Tack in Its Dealings with Beijing, Analysts Speak of 'Active Competition with Occasional Confrontation' as the New Normal,\" South China Morning Post , October 17 (updated October 18), 2018. Michael C. Bender, Gordon Lubold, Kate O'Keeffe, and Jeremy Page, \"U.S. Edges Toward New Cold-War Era With China; A More Hard-Nosed Stance with Beijing Is Emerging from the Trump Administration as China's Help with North Korea wanes and Trade Talks Stall,\" Wall Street Journal , October 12, 2018. Walter Russel Mead, \"Mike Pence Announces Cold War II; The Administration Is Orchestrating a Far-Reaching Campaign Against China.\" Wall Street Journal , October 8, 2018. Keith Johnson, \"It's No Longer Just a Trade War Between the U.S. and China; Vice Persident Pence's Fierce Attack and Allegations of Tech Spying Escalate the Conflict.\" Foreign Policy , October 4, 2018. Josh Rogin, \"The Trump Administration Just 'Reset' the U.S.-China Relationship,\" Washington Post , October 4, 2018. Citations for Footnote 39 See, for example: Department of State, Advancing a Free and Open Indo-Pacific Region , Fact Sheet, November 18, 2018. Dave Majumdar, \"Trump Has Big Plans for Asia. Well, More Like the 'Indo-Pacific' Region.\" National Interest , April 3, 2018. Jeff M. Smith, \"Unpacking the Free and Open Indo-Pacific,\" War on the Rocks , March 14, 2018. Peter Martin, Justin Sink, and Iain Marlow, \"Trump Discovers 'Indo-Pacific' on Asia Tour in Boost for India,\" Bloomberg , November 14, 2017. Rush Doshi, \"Trump's 'Indo-Pacific Dream' Stumbles—But China Alone Won't Fill the Void,\" War on the Rocks , November 15, 2017. Nikhil Sonnad, \"'Indo-Pacific' Is the Trump Administration's New Name for Asia,\" Defense One , November 8, 2017. Nirmal Ghosh, \"Asia-Pacific? Think Indo-Pacific, Says the US, As It Pursues a Wider Asian Strategy,\" Straits Times , November 7, 2017. Louis Nelson, \"In Asia, Trump Keeps Talking About Indo-Pacific,\" Politico , November 7, 2017. For more on the FOIP, see, for example: White House, \"President Donald J. Trump's Administration is Advancing a Free and Open Indo-Pacific,\" July 20, 2018, accessed August 21, 2018, at: https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-administration-advancing-free-open-indo-pacific/ . Department of State, \"Advancing a Free and Open Indo-Pacific,\" July 30, 2018, accessed August 21, 2018, at: https://www.state.gov/r/pa/prs/ps/2018/07/284829.htm . Department of State, \"Briefing on The Indo-Pacific Strategy,\" April 2, 2018, accessed August 21, 2018, at: https://www.state.gov/r/pa/prs/ps/2018/04/280134.htm U.S. Department of State, \"Remarks on 'America's Indo-Pacific Economic Vision,'\" remarks by Secretary of State Michael R. Pompeo, Indo-Pacific Business Forum, U.S. Chamber of Commerce, Washington, DC, July 30, 2018. Daniel Blumenthal, \"The Outlines of Trump's Asia Strategy,\" American Interest , November 17, 2017 \"Donald Trump Still Has No Proper Asia Policy; But Asia Hands in Washington Are Not Working Against Him,\" Economist , September 13, 2018. Tom Switzer, \"Leadership in Asia: Don't Count the U.S. Out,\" Strategist (ASPI) , October 19, 2017. Citations for Footnote 41 See, for example: Krishnadev Calamur, \"Nikki Haley's Concern for Human Rights Only Went So Far; The Outgoing U.S. Ambassador to the UN Criticized U.S. Allies Like Saudi Arabia, But Also Pulled Out of the UN Human Rights Council,\" Atlantic , October 9, 2018. Edwin J. Feulner, \"'Moral Clarity Becomes a Casualty of the Need to Placate Tyrants,'\" Heritage Foundation, July 25, 2018. Theodore R. Bromund, \"U.S. Right to Quit Human Rights Panel,\" Heritage Foundation, June 26, 2018. Brett D. Schaefer, \"America Is Right to Leave the UN Human Rights Council,\" Heritage Foundation, June 22, 2018. Jimmy Quinn, \"America's Withdrawal from the UNHRC Is a Win for Human-Rights Promotion; There's More to Be Gained at the U.N. by Sidelining Dictators Through Structural Reform Than by Abetting Their Treachery Through Acquiescence.\" National Review , June 21, 2018. Brett D. Schaefer, \"U.S. Withdrawal From the UN Human Rights Council Is the Right Decision,\" Heritage Foundation, June 21, 2018. Brett D. Schaefer, \"U.S. Makes the Right Call to Quit UN Human Rights Council,\" Heritage Foundation, June 19, 2018. \"Relative Moralism; Unnoticed by Donald Trump, the Government He Heads is Still Promoting Democracy and Human Rights in the World,\" Economist , December 9, 2017: 32, 34. Citations for Footnote 43 See, for example: Joe Scarborough, \"Trump is Harming the Dream of America More Than Any Foreign Adversary Ever Could,\" Washington Post , September 10, 2018. Victor Davis Hanson, \"Peter Beinart's Amnesia; NATO's Problems, Putin's Aggression, and American Passivity Predate Trump, Who Had My Vote in 2016 — a Vote I Don't Regret.\" National Review , July 17, 2018. Robert Kagan, \"Things Will Not Be Okay,\" Washington Post , July 12, 2018. Paul Miller, \"Reassessing Obama's Legacy of Restraint,\" War on the Rocks , March 6, 2017. John Vinocur, \"Obama's European Legacy,\" Wall Street Journal , May 29, 2017. Thomas Donnelly, \"Retreat from Reliability,\" Weekly Standard , June 12, 2017. Eli Lake, \"Obama Choked on Russia Long Before the 2016 Election,\" Bloomberg , June 27, 2017. Lawrence J. Haas, \"Encouraging Putin's Recklessness, From Obama to Trump, Washington's Muddled Response to Russia's Behavior Has Left Putin Emboldened,\" U.S. News & World Report , June 27, 2017. James Kirchick, \"Why It's Hard to Take Democrats Seriously on Russia,\" Politico , July 24, 2017 Paul Miller, \"Reassessing Obama's Legacy of Restraint,\" War on the Rocks , March 6, 2017. For articles predating the start of the Trump Administration that make similar arguments, see, for example: Kenneth R. Weinstein, \"Brexit Has Nothing on Obama's Global Amexit,\" Wall Street Journal , July 6, 2016. Fred Hyatt, \"The U.S. Steps Back from the World Stage, and the Consensus for Leadership Dissolves,\" Washington Post , July 31, 2016. Lee Smith, \"Who Lost NATO?\" Weekly Standard , August 1, 2016. Charles Krauthammer, \"The Price of Powerlessness,\" Washington Post , August 18, 2016. William A. Galston, \"Obama's Toothless Foreign Policy,\" Wall Street Journal , September 6, 2016. John Hannah, \"Russia's Middle East Offensive,\" Foreign Policy , September 13, 2016. Anders Fogh Rasmussen \"The United States Must Be the World's Policeman,\" Wall Street Journal , September 20, 2016. Daniel Henninger, \"Aleppo Is Obama's Sarajevo,\" Wall Street Journal , October 5, 2016. Charles Krauthammer, \"The Stillborn Legacy of Barack Obama,\" Washington Post , October 6, 2016. Benjamin Runkle, \"First as Tragedy, Then as Farce: The Echoes of Woodrow Wilson in Barack Obama's Foreign Policy,\" Foreign Policy , October 19, 2016. Frederic C. Hof, \"Russia and Risk: Who is Answerable?\" Atlantic Council, November 1, 2016. Leon Wieseltier, \"Aleppo's Fall Is Obama's Failure,\" Washington Post , December 15, 2016. Stephen F. Hayes, \"Obama's Syria Legacy Is a Betrayal of 'Who We Are,'\" Weekly Standard, December 21, 2016. Asle Toje, \"A Sad Metaphor,\" American Interest , December 21, 2016. Leonid Bershidsky, \"The U.S. Is Now a Country That Can Be Ignored,\" Bloomberg , December 21, 2016. Uri Friedman, \"Obama: Reaching Out to Adversaries, Alienating Allies,\" Atlantic , December 31, 2016. See also: Victor Davis Hanson, \"Was the Pre-Trump World Normal or Abnormal?\" National Review , August 21, 2018. J.J. McCullough, \"Does the World Actually Want American Leadership?; Only When It Follows European Priorities.\" National Review , June 11, 2018. Citations for Footnote 46 See, for example: Jacob Heilbrunn, \"Donald Trump's Real Foreign Policy Has Arrived,\" National Interest , February 9, 2019. Eileen Sullivan, \"Trump Calls His Intelligence People 'Naïve' After They Disagree With Him,\" New York Times , January 30, 2019. John Wagner and Shane Harris, \"Trump Blasts U.S. Intelligence Officials, Disputes Assessments on Iran and Other Global Threats,\" Washington Post , January 30, 2019. Katie Bo Williams, \"Trump Renews Attacks on US Intelligence Community for Contradicting Him,\" Defense One , January 30, 2019. Shane Harris, \"Testimony by Intelligence Chiefs on Global Threats Highlights Differences with President,\" Washington Post , January 29, 2019. Rebecca Morin and Nahal Toosi, \"U.S. Intelligence Chief Breaks with Trump on North Korea, Iran, ISIS,\" Politico , January 29, 2019. David E. Sanger and Julian E. Barnes, \"On North Korea and Iran, Intelligence Chiefs Contradict Trump,\" New York Times , January 29, 2019. Patrick Tucker, \"Intelligence Chiefs Diverge From Trump On Main Threats to US,\" Defense One , January 29, 2019. Peter Baker, \"U.S. Policy on Russia? Trump and His Team Might Give Different Answers,\" New York Times , January 20, 2019. Alex Ward and Jennifer Williams, \"Who Speaks for American Foreign Policy? No One Knows Who to Listen to When the Trump Administration Talks About US Aims Around the World.\" Vox , January 8, 2019. Kevin Baron, \"Trump Just Killed His Own Defense Strategy,\" Defense One , January 3, 2019. Ted Galen Carpenter, \"Why Trump's Advisors Keep Quashing His Realist Aims; Donald Trump Has Time and Again Allowed His Advisors to Talk Him Out of His Realist Foreign-Policy Positions,\" National Interest , January 2, 2019. Kori Schake, \"Trump Doesn't Need a Second 'Solarium,'\" Atlantic , October 30, 2018. Stephen Tankel, \"Has Trump Read His Own Counterterrorism Strategy? The President's Views Don't Seem to Line Up with Those of His Team.\" Foreign Policy , October 12, 2018. Aaron Blake, \"What Putin Whispers in Trump's Ear,\" Washington Post , September 19, 2018. Curt Mills, \"The Rise of John Bolton; John Bolton, National Security Advisor, Appears to Be Charting a Foreign Policy Course of His Own,\" National Interest , September 14, 2018. Mark Landler, \"Bolton Expands on His Boss's Views, Except on North Korea,\" New York Times , September 10, 2018. Zack Cooper, \"A Tale of Two Asia Policies,\" War on the Rocks , September 7, 2018. Helene Cooper and Julian E. Barnes, \"U.S. Officials Scrambled Behind the Scenes to Shield NATO Deal From Trump,\" New York Times , August 9, 2018. Amanda Macia, \"Trump and Defense Secretary Mattis Often Appear at Odds on Key Policies. Here's a Breakdown of Their Differences,\" CNBC , July 31, 2018. Fred Kaplan, \"The 'Reverse Kissinger' Theory of Trump and Putin Doesn't Hold Up,\" Slate , July 27, 2018. Uri Friedman, \"Secretary of a State of Confusion,\" Atlantic , July 26, 2018. Robin Wright, \"The Trump Administration Struggles to Defend Its Unruly Foreign Policy,\" New Yorker , July 26, 2018. Nahal Toosi and Stephanie Murray, \"Trump Team Tries to Show Spine on Russia,\" Politico , July 25, 2018. Bryan Bender, \"Pompeo, Mattis on Cleanup Duty After Trump Diplomatic Blowups,\" Politico , July 24, 2018. Abigail Tracy, \"'There Is a Reason We Tried to Kill This': After Helsinki, The Deep State Fears Trump Cannot Be Saved,\" Vanity Fair , July 19, 2018. Amy Cheng and Humza Jilani, \"Trump on Putin: The U.S. President's Views, In His Own Words; A History of Contradictory Statements from 2015 to the Present,\" Foreign Policy , July 18, 2018. David Nakamura and Carol Morello, \"'To What End?': Trump's Disruptive Diplomacy Inspires Fears Over U.S. Standing Abroad,\" Washington Post , July 17, 2018. Missy Ryan and Carol Morello, \"No One Can Explain What Trump's Russia Summit Means, Not Even the U.S. Government,\" Washington Post , July 17, 2018. Ashley Parker, \"'Very Much Counter to the Plan,' Trump Defies Advisers in Embrace of Putin,\" Washington Post , July 16, 2018. Mark Landler and Julie Hirschfield Davis, \"Trump Opens His Arms to Russia. His Administration Closes Its Fist,\" New York Times , July 14, 2018. Rebecca Ballhaus and Laurence Norman, \"Trump Reaffirms Commitment to NATO After Strained Emergency Meeting; President Says It Is 'Unnecessary' for the U.S. to Withdraw After Demanding That Allies Immediately Meet Military-Spending Goal,\" Wall Street Journal , July 12, 2018. David M. Herszenhorn and Lili Bayer, \"Trump's Whiplash NATO Summit; President Says US Can Go It Alone If Allies Don't Meet Spending Target,\" Politico , July 12, 2018. David M. Herszenhorn, \"Trump at NATO: From 'Sad' to 'Tremendous,'\" Politico , July 11, 2018. Philip Rucker and Ashley Parker, \"Confusion and Squabbling Undermine Trump's Steps Forward on the World Stage,\" Washington Post , May 20, 2018. Dion Nissenbaum, \"In His Foreign Policy, Trump Values Action Over D.C.'s Caution,\" Wall Street Journal , May 9, 2018. Jonah Goldberg, \"Trump's Message to Syria Is a Muddled One; The Strike on Syria Was the Right Call, But the Reason Why Is More Unclear.\" National Review , April 18, 2018. Greg Jaffe, John Hudson, and Philip Rucker, \"Trump, A Reluctant Hawk, Has Battled His Top Aides on Russia and Lost,\" Washington Post , April 15, 2018. Emily Tamkin and Robbie Gramer, \"Will the Real Trump Russia Policy Please Stand Up?\" Foreign Policy , April 2, 2018. Brian Bennett, \"McMaster Caught in the Middle as Mattis and Tillerson Maneuver to Constrain Trump on National Security Issues,\" Los Angeles Times , March 4, 2018. Dave Majumdar, \"Is McMaster Breaking with Trump's Foreign Policy Vision?\" National Interest , February 26, 2018. Andrew Exum, \"The Burden of Trump's National-Security Staff,\" Atlantic , February 19, 2018. Thomas Wright, \"Trump Wants Little to Do With His Own Foreign Policy; The Clash Between America First and the Global Shift to Great-Power Competition,\" Atlantic , January 31, 2018. Josh Lederman and Matthew Lee, \"For Trump's Security Advisers, Tempering an Impetuous Boss,\" Associated Press, January 18, 2018. Hal Brands, \"Trump Doesn't Believe in His Own Foreign Policy. Does That Matter?\" Foreign Policy, January 16, 2018. Peter Beinart, \"Trump Doesn't Seem to Buy His Own National Security Strategy; The Notion of 'Principled Realism' May Please Foreign-Policy Advisers, But It's Not Clear the President Knows What It Is.\" Atlantic , December 19, 2017. Roger Cohen, \"Trump's National Security Strategy Is a Farce,\" New York Times , December 19, 2017. Paul Pillar, \"America Alone,\" National Interest , December 19, 2017. Ishaan Tharoor, \"Trump's Tough Talk Can't Hide the Incoherence of His Foreign Policy,\" Washington Post , December 19, 2017. Eliana Johnson, \"Don't Call Trump Strategy a 'Return to Sanity,' Aide Says; Even As he Unveiled a Strategy Document Warning About Moscow's Intentions, the President Still Hailed Cooperation with Vladimir Putin,\" Politico , December 18, 2017. Mark Lander and David E. Sanger, \"Trump Delivers a Mixed Message on His National Security Approach,\" New York Times , December 18, 2017. Kate Brannen, \"Trump's National Security Strategy is Decidedly Non-Trumpian; An Exclusive Preview of the White House's Plan Highlights the Wide Gulf between What the President Says and What He Does.\" Atlantic , December 8, 2017. Ishaan Tharor, \"Trump's 'Principled Realism' Is an Incoherent Mess,\" Washington Pos t, September 20, 2017. Daniel L. Davis, \"Is H. R. McMaster's Worldview Compatible with the President's?\" National Interest , September 28, 2017. John Cassidy, \"There Is No Trump Doctrine, Only Contradictions and Bluster,\" New Yorker , September 21, 2017. Krishnadev Calamur, \"'The President Speaks for Himself,'\" The Atlantic , August 27, 2017. Daniel Politi, \"Did Secretary of State Rex Tillerson Just Turn on Trump?\" Slate , August 27, 2017. James Kitfield, \"Trump's Generals Are Trying to Save the World. Starting With the White House.\" Politico , August 4, 2017. Richard Haass, \"Donald Trump and the Danger of 'Adhocracy,'\" The Atlantic , July 18, 2017. Citations for Footnote 49 See, for example: Damian Paletta and Philip Rucker, \"'Chaos Breeds Chaos': Trump's Erratic and False Claims Roil the Globe. Again.\" Washington Post , December 4, 2018. Stephen M. Walt, \"Does It Matter That Trump Is a Liar?\" Foreign Policy , September 17, 2018. Jackson Diehl, \"Trump's Foreign Policy Has Devolved into Chaos,\" Washington Post , September 16, 2018; Max Boot, \"Why Would Any Ally Trust the United States Ever Again?\" Washington Post , September 5, 2018. Andrew Restuccia, \"In Abrupt Shift, Trump Makes Nice with EU, Gets Tough on Russia,\" Politico , July 25, 2018. David M. Herszenhorn and Jacopo Barigazzi, \"'Very Stable' Trump? European Leaders Beg to Differ,\" Politico , July 12, 2018. David Frum, \"Trump's Reckoning Arrives; The President's Unpredictability Once Worked to His Advantage—But Now, It Is Producing a Mounting List of Foreign Policy Failures,\" Atlantic , May 24, 2018. Brent D. Griffiths, \"Trump's Approach Is Hurting the U.S., Foreign Policy Experts Say,\" Politico , May 14, 2018. Stephen M. Walt, \"America Can't Be Trusted Anymore, It's Hard to Be Powerful When Nobody Believes a Word You Say,\" Foreign Policy , April 10, 2018. Steven Erlanger, \"Trump's Twitter Threats Put American Credibility on the Line,\" New York Times , January 7, 2018. Paul D. Miller, \"Trump's Nationalism Is Arbitrary, Dangerous, Incoherent, and Silly,\" Foreign Policy , January 3, 2018. Susan B. Glasser, \"Donald Trump's Year of Living Dangerously; It's Worse Than You Think,\" Politico , January/February 2018. Robert B. Zoellick, \"The Peril of Trump's Populist Foreign Policy; His Style of Deal-Making Prizes Uncertainty and Brinkmanship, Without a Plan for What Comes Next,\" Wall Street Journal , November 28, 2017. Kathy Gilsinan, \"What Happens When No One Believes American Threats?\" The Atlantic , August 14, 2017. Citations for Footnote 51 See, for example: Micah Zenko, \"Trump Is America's First Contradiction-in-Chief,\" Foreign Policy , February 12, 2019. Jacob Heilbrunn, \"Donald Trump's Real Foreign Policy Has Arrived,\" National Interest , February 9, 2019. Loren Thompson, \"Trump's Strategic Vision Is More Coherent Than His critics Imagine,\" Forbes , January 22, 2019. Richard Fontaine, \"A Troubling Pattern of Personal Diplomacy; Trump Has a Tendency to Agree Spontaneously to Requests Pitched by Foreign Leaders,\" Atlantic , December 29, 2019. David E. Sanger, \"With the Generals Gone, Trump's 'America First' Could Fully Emerge,\" New York Times , December 21, 2018. Thomas Wright, \"Trump, Unchecked; With Mattis Gone, the President Is Now Free to Indulge His Most Visceral Instincts,\" Atlantic , December 21, 2018. Alex Ward, \"Trump's Saudi Arabia Decision Is the Perfect Distillation of His Worldview; Here's What Trump's Response to Jamal Khashoggi's Murder Really Tell[s] Us About America's Foreign Policy Today.\" Vox , November 21, 2018. William Saletan, \"Trump's Saudi Arabia Response Show His Foreign Policy Is Only About Money; To the President, Jamal Khashoggi's Death Isn't An Outrage. It's the Possible Loss of a Deal.\" Slate , October 26, 2018. Josh Rogin, \"Trump's Only Foreign Policy Doctrine Is Trumpism,\" Washington Post , October 25, 2018. Henry R. Nau, \"Return of the Balance of Power; But the Problem Is Neither Nationalism nor Globalism. In Today's World, the Two Are Complementary.\" National Interest , October 18, 2018. Nahal Toosi, \"Some See Christian First Bias in Trump Foreign Policy,\" Politico , October 4, 2018. Harry J. Kazianis, \"Trump Doctrine Just Declared at UN—and It's Called 'Maximum Pressure,'\" The Hill , September 25, 2018. Danielle Allen, \"Trump's Foreign Policy Is Perfectly Coherent,\" Washington Post , July 23, 2018. Alex Ward, \"What We Learned from Trump's Worst Foreign Policy Week Ever,\" Vox , July 20, 2018. Jonah Goldberg, \"The Trump Doctrine Is Trumpism Writ Large; How 'Make America Great Again' Translates on the World Stage,\" National Review , July 11, 2018. Dov S. Zakheim, \"Trump's Perilous Path; To the Extent Donald Trump Has a Strategy, It Is One Grounded in Assumptions and Realities That Were Far More Relevant 150 Years Ago Than They Are Today,\" National Interest , June 18, 2018. (For a response, see Conrad Black, \"No, Donald Trump Is Not Millard Fillmore or James Buchanan,\" National Interest , August 22, 2018.) Jeffrey Goldberg, \"A Senior White House Official Defines the Trump Doctrine: 'We're America, Bitch,'\" Atlantic , June 11, 2018. Jeremi Suri, \"Trump's Kaiser Wilhelm Approach to Diplomacy; For the U.S. President, Like the Last German Monarch, Foreign Policy Is All About Personal Ego, Not National Interests,\" Foreign Policy , May 29, 2018. David A. Graham, \"Trump Almost Always Folds,\" Atlantic , May 23, 2018. Fred Hiatt, \"Trump Is Proving to Be the Most Predictable of Presidents,\" Washington Post , May 20, 2018. Daniel Levy, \"Trump Is Following, Not Leading,\" Foreign Policy , May 11, 2018. Uri Friedman, \"Trumpism: Speak Loudly and Carry a Big Stick,\" Atlantic , April 6, 2018. Mark Landler, \"On Foreign Policy, President Trump Reverts to Candidate Trump,\" New York Times , April 3, 2018. William Saletan, \"Trump's Perversion; He Rewards America's Enemies and Punishes Its Friends,\" Slate , March 11, 2018. Joshua Zeitz, \"How Trump Is Making Us Rethink American Exceptionalism,\" Politico , January 7, 2018. John Bew and David Martin Jones, \"Is There a Trump Doctrine?\" National Interest , December 22, 2017. Karen DeYoung, \"Trump's Foreign Policy Driven by Campaign Vows, Instinct and Unconventional Thinking,\" Washington Post , December 10, 2017. Peter Beinart, \"Trump Insults People From Afar, Then Praises Them in Person,\" Atlantic , November 9, 2017. Uri Friedman, \"Donald Trump, Dealbreaker,\" The Atlantic , October 12, 2017. Stephen M. Walt, \"The Donald Trump-Kaiser Wilhelm Parallels Are Getting Scary,\" Foreign Policy , October 12, 2017. Paul R. Pillar, \"The Operational Code of President Trump,\" National Interest , October 10, 2017. Citations for Footnote 53 See, for example: John J. Mearsheimer, \"The Great Delusion: Liberal Dreams and International realities; An Excerpt from John Mearsheimer's Latest Book,\" National Interest , October 5, 2018. Daniel L. Davis, \"Reagan's Powerful Legacy Is Being Squandered,\" National Interest , September 15, 2018. Stephen M. Walt, \"America Needs the Muhammad Ali Doctrine,\" Foreign Policy , August 24, 2018. Jacob Heilbrunn, \"How America's Wars Have Created Piles of Debt (And Little Strategic Benefit),\" National Interest , August 21, 2018. Daniel L. Davis, \"America Cannot Keep Hoping the Military Will Solve Everything,\" National Interest , August 19, 2018. Christopher A. Preble, \"Is This the End of the Liberal World Order?\" National Interest , August 3, 2018. Stephen M. Walt, \"Why I Didn't Sign Up to Defend the International Order,\" Foreign Policy , August 1, 2018. William Ruger, Michael C. Desch, \"Conservatism, Realism and Foreign Policy: Kissing Cousins if Not Solutions,\" National Interest , July 30, 2018. Ted Galen Carpenter, \"Russia Is Not the Soviet Union,\" National Interest , July 28, 2018. Doug Bandow, \"The Case for Refashioning NATO,\" National Interest , July 10, 2018. Stephen M. Walt, \"The World Wants You to Think Like a Realist,\" Foreign Policy , May 30, 2018. William Ruger, \"To Defend America, Don't Overreach,\" New York Times , March 19, 2018. Ted Galen Carpenter, \"America Needs to Get Back to the Basics I Foreign Policy,\" National Interest , February 25, 2018. Doug Bandow, \"Europe Still Doesn't Take Its Own Defense Seriously,\" National Interest , February 24, 2018. William Ruger, \"Groupthink, Not the Deep State, Is the Real Culprit,\" National Interest , February 18, 2018. Christopher A. Preble, \"Americans Aren't Ready for Another Big War,\" National Interest , January 17, 2018. Monica Duffy Toft, \"Why is American Addicted to Foreign Interventions?\" National Interest , December 10, 2017. Stephen M. Walt, \"Who's Afraid of a Balance of Power? The United States Is Ignoring the Most Basic Principle of International Relations, to Its Own Detriment,\" Foreign Policy , December 8, 2017. Doug Bandow, \"Why Isn't Europe Preparing for a War with Russia?\" National Interest , December 4, 2017. Christopher A. Preble, \"Libertarianism and Restraint,\" National Interest , November 28, 2017. Doug Bandow, \"Endless War Is No Honor to America's Veterans,\" National Interest , November 19, 2017. Citations for Footnote 57 See, for example: James Traub, \"American Can't Win Great-Power Hardball; As Other Countries Rise, Global Stability Depends on the United States Holding Onto Its Moralism.\" Foreign Policy , November 16, 2017. Stephen M. Walt, \"Trump Isn't Sure If Democracy Is Better Than Autocracy; America's President Is Voluntarily Abdicating One of the Country's Biggest Strategic Advantages,\" Foreign Policy , November 13, 2017. Joshua Muravchik, \"What Trump and Tillerson Don't Get About Democracy Promotion,\" Washington Post , August 4, 2017. Nicole Bibbins Sedaca, \"What Trump and Tillerson Get Wrong About Democracy Promotion,\" Foreign Policy , August 4, 2017. Kate Bateman, \"Wanted: A Trump Team Foreign-Policy Plan with Democratic Values,\" National Interest , June 5, 2017; Elliott Abrams, \"Does Trump Care About Human Rights?\" Politico , May 24, 2017. Joshua Keating, \"Trump and Tillerson's Shortsighted Contempt for Human Rights,\" Slate , May 4, 2017. \"What Rex Tillerson Gets Right About American Values—and What He Gets Wrong,\" Washington Post , May 4, 2017. Heather Timmons, \"The Trump Presidency is Systematically Destroying Any Global Moral High Ground the US Had Left,\" Quartz , March 13, 2017. Citations for Footnote 60 For additional discussion on the costs and benefits of allies, see, for example: Erin Dunne, \"With Threats from China, America's Allies Are More Important Than Ever,\" Washington Examiner , December 13, 2018. Benjamin H. Friedman, \"Bad Idea: Permanent Alliances,\" Defense 360 (Center for Strategic and International Studies, Bad Ideas in National Security Series) , December 13, 2018. Richard Fontaine, \"Trump Gets NATO Backwards; The U.S. Defends Europe Out of Self-Interest,\" Atlantic , November 15, 2018. Michael Miklaucic, \"America's Allies: The Fourth Strategic Offset,\" The Hill , October 24, 2018. Doug Bandow, \"The Dangers of Creating a New Arab Alliance; Donald Trump Doesn't Like the Original NATO, So Why Does He Want a Second One?\" National Interest , October 1, 2018. Kevin Baron, \"On the Campaign Trail for NATO, With Secretary General Stoltenberg,\" Defense One , September 14, 2018. Courtney McBride, \"NATO Chief Defends Value of Military Alliance,\" Wall Street Journal , September 14, 2018. Brian Blankenship, \"Control vs. Cost-Sharing: The Dilemma at the Heart of NATO,\" War on the Rocks , August 7, 2018. Melanie W. Sisson, \"NATO Isn't Cheap—and It's Still Worth the Price,\" National Interest , July 28, 2018. Stephen M. Walt, \"NATO Isn't What You Think It Is,\" Foreign Policy , July 26, 2018. Matthew Continetti, \"Why NATO Matters; The Atlantic Alliance is Crucial to American Deterrence,\" National Review , July 21, 2018. Rich Lowry, \"Don't Dismiss NATO's Faraway Members; Any Chink in the Alliance Undermines the Strength of the Whole Organization.\" National Review , July 20, 2018. Jay Nordlinger, \"Tiny, Faraway Countries and Us,\" National Review , July 20, 2018. David French, \"Yes, We Should Fight for Montenegro; Allied Military Hegemony Keeps the Peace.\" National Review , July 18, 2018. Peter Beinart, \"What's the Point of NATO, Anyway? Trump Isn't the First Republican to Ask That Question,\" Atlantic , July 12, 2018. Daniel Fried, \"The Meaning of the Western Alliance; It Wasn't Just Military Strength That Won the Cold War,\" Atlantic , July 12, 2018. Ira Strauss, \"NATO: The Greatest Bargain America Ever Got,\" National Interest , July 12, 2018. Christian Whiton, \"NATO Is Obsolete,\" National Interest , July 6, 2018; Hugh White, \"Why Is America Still Defending Europe?; Washington Doesn't Have to Bear the Cost of Maintaining Forces in Europe,\" National Interest , July 3, 2018. Mark Hertling, \"NATO Matters, and Trump's Trashing of It Is Dangerous,\" CNN , July 2, 2018. Jordan Cohen, \"Alliances Are a Net Gain, Not a Loss, for America,\" National Interest , June 28, 2018. Bonnie S. Glaser, \"America, Hold On to Your Allies. You'll Need Them,\" New York Times , June 5, 2018. Doug Bandow, \"Time to Terminate Washington's Defense Welfare,\" National Interest , August 30, 2017. John Glaser, \"Withdrawing From Overseas Bases, Why a Forward-Deployed Military Posture Is Unnecessary, Outdated, and Dangerous,\" Cato Institute , July 18, 2017. (Policy Analysis 816). Doug Irving, \"Are America's Overseas Security Commitments Worth It?\" RAND , July 7, 2017. (This post summarizes a RAND report—Daniel Egel, et al, Estimating the Value of Overseas Security Commitments, RAND Corporation, 2016, 81 pp. [Report RR-518]). Hal Brands and Peter D. Feaver, \"What Are America's Alliances Good For?\" Parameters , Summer 2017: 15-30. Hugh White, \"China v US: Who Needs Allies?\" Interpreter , May 29, 2017. Kori Schake, \"NATO Without America?\" American Interest , May 25, 2017. Christopher A. Preble, \"Should the United States Wage War for Friends?\" National Interest , December 15, 2016. Barry R. Posen, \"The High Costs and Limited Benefits of America's Alliances,\" National Interest , August 7, 2016. Charles Lane, \"The Logic Behind Our Alliances,\" Washington Post , July 28, 2016. Jim Talent, \"Why Alliances Matter,\" National Review, July 27, 2016. Jeremy Shapiro and Richard Sokolsky, \"How America Enables Its Allies' Bad Behavior,\" Order from Chaos (Brookings Institution) , May 4, 2016. Walter Russell Mead, \"The Global Vote of No Confidence in Pax Americana,\" American Interest , April 5, 2016. Frank Hoffman, \"Manning the Frontier: Allies and the Unraveling of the World Order,\" War on the Rocks , March 7, 2016. Citations for Footnote 63 For additional discussion of the question of whether a change of some kind in the U.S. role in the world is unavoidable, see, for example: Doug Bandow, \"The One Reason America Can't Police the World Anymore: Washington Is Broke,\" National Interest , December 26, 2018. Noah Smith, \"Commentary: Get Used to It, America: We're No Longer No. 1,\" Chicago Tribune , December 18, 2018. Fareed Zakaria, \"Are We At 'Peak America'?\" Washington Post , November 29, 2018. Douglas Macgregor, \"Donald Trump Meets the End of the Empire; Trump Knows That the American Empire is Crumbling. What Is He Going to Do About It?\" National Interest , October 24, 2018. Steve LeVine, \"How AI Helps Tyrants,\" Axios , October 8, 2018. Stephen Grand, \"America's Foreign Policy Power Is Changing Under Trump; No Other Country Can Yet Match America in Terms of Power, But Washington No Longer Possesses the Ability to Shape World Events As It Did in the Cold War's Aftermath,\" National Interest , September 30, 2018. Weizhen Tan, \"China's Military and Economic Power 'Cannot Be Denied' and US 'Has to Make Room,\" CNBC , September 18, 2018 (reports remarks made by Robert Kaplan). Thomas Wright, \"The Return of Great-Power Rivalry Was Inevitable; With Neo-Authoritarianism on the Rise, the Old Assumptions Undergirding a Common Set of Western Values Just Won't Do,\" Atlantic , September 12, 2018. Yuval Noah Harari, \"Why Technology Favors Tyranny,\" Atlantic , October 2018; Stephen M. Walt, \"America's Anxiety of Influence, The Power of the United States Is Declining—and That's Nothing to Worry About,\" Foreign Policy , August 17, 2018. Zeynep Tufekci, \"How Social Media Took Us from Tahrir Square to Donald Trump,\" MIT Technology Review , August 14, 2018. Bruno Macaes, \"What the West Is Becoming; Countries That Were Once under Western Influence Are Beginning to Assert Themselves, Heralding a New, Democratic—or Chaotic—World Order,\" National Review , August 8, 2018. Ivan Krastev, \"3 Versions of Europe Are Collapsing at the Same Time,\" Foreign Policy , July 10, 2018. Gordon Adams, \"A New World Is Dawning, and the US Will No Longer Lead It,\" The Conversation , June 26, 2018. Ali Wyne, \"Is America Choosing Decline?\" New Republic , June 21, 2018. David M. Smick, \"Who Unraveled the New World Order? It Wasn't Trump. The Global Economic Consensus Began Falling Apart Years Before He Entered Politics.\" Wall Street Journal , June 12, 2018. Victor Davis Hanson, \"The Post-War Order Is Over; And Not Because Trump Wrecked it.\" National Review , May 29, 2018. Rana Dasgupta, \"The Demise of the Nation State, After Decades of Globalisation, Our Political System Has Become Obsolete—and Spasms of Resurgent Nationalism Are a Sign of Its Irreversible Decline,\" Guardian , April 5, 2018. Polina Sinovets, \"The Decline of Cold-War-Era Regimes Could Lead to an International Security Crisis; The Decline of International-Security Regimes Is Inveitable—In Part Because the Majority of Them Were Created During the Cold War,\" National Interest , February 24, 2018. Martin Wolf, \"The Long and Painful Journey to World Disorder,\" Financial Times , January 5, 2017. Citations for Footnote 67 See, for example: Jeanne Wilson, \"Russia and China Beyond Realpolitik: The Bond of Respect and Values,\" Russia Matters , February 4, 2019. Graham T. Allison and Dimitri Simes, \"A Sino-Russian Entente Again Threatens America; The U.S. Must Revise Its Policy Toward Moscow If It Is To Meet the Threat from a Rising China,\" Wall St reet Journal , January 29, 2019. John S. Van Oudenaren, \"America's Nightmare: The Sino-Russian Entente; The Most Dangerous Threat to America 'Would Be a Grand Coalition of China and Russie, United Not by Ideology, But by Complementary Grievance.'\" Natio nal Interest , January 12, 2019. Dimitri K. Simes, \"Dangerous Liaisons; Ignoring Possible Sino-Russian Cooperation Against the United States, and the Factors That Can Exacerbate It, Could Be Very costly,\" Nation al Interest , December 16, 2018. Graham T. Allison, \"China and Russia: A Strategic Alliance in the Making,\" National Interest , December 14, 2018 (a similar version was published on the same date by Russia Matters). David Lawler, \"China and Russia Inch Closer Together,\" Axios , December 14, 2018. Jonathan Hillman, \"China and Russia's Awkward Romance,\" Wash ington Post , November 15, 2018. Marc Champion, \"trump's trade War Is Making Russia and China Comrades Again; Facing U.S. Sanctions and Tariffs, Moscow and Beijing Are Finding Lots of Common Ground,\" Bloomberg , November 5, 2018. Robert Sutter, Confronting Growing China-Russia Cooperation; Options for Congress , National Bureau of Asian Research, November 2018, 4 pp. Citations for Footnote 72 See, for example: Hans Binnendijk, \"Despite Infighting, Here's How NATO Can Persevere,\" Defense News , September 20, 2018. Ishaan Tharoor, \"Trump's NATO Trip Shows 'America First' Is 'America Alone,'\" Washington Post , July 11, 2018. John Vandiver, \"Ex-NATO Commander: Trump's Disdain for US-Led Alliance Leads to 'New and Dangerous' Situation,\" Stars and Stripes , July 3, 2018; \\\\. Stephen M. Walt, \"The EU and NATO and Trump—Oh My!\" Foreign Policy , July 2, 2018. Josh Rogin, \"Trump Is Trying to Destabilize the European Union,\" Washington Post , June 28, 2018. Alex Ward, \"Trump Said 'NATO Is As Bad As NAFTA.' That's Scary,\" Vox , June 28, 2018. David Ignatius, \"Trump Hurls a Wrecking Ball at the Transatlantic Alliance,\" Washington Post , June 21, 2018. Jim Stavridis, \"Trump's Attack on Allies Are Widening the Atlantic,\" Bloomberg , June 14, 2018. Walter Russell Mead, \"Why Trump Clashes With Europe; Sharp Differences in Style and Substance Threaten the Trans-Atlantic Alliance.\" Wall Street Journal , June 11, 2018. Krishnadev Calamur, \"America Alone? A Bitter End to the G7 Summit Could Have Consequences for America's Alliances.\" Atlantic , June 10, 2018. David Frum, \"Trump Goes to War Against the Democracies,\" Atlantic , June 10, 2018. David Leonhardt, \"Trump Tries to Destroy the West,\" New York Times , June 10, 2018. John Harwood, \"Trump Is Helping Putin with a Key Goal When He spurns US Allies,\" CNBC , June 8, 2018. James Goldgeier, \"Less Whole, Less Free, Less at Peace: Whither America's Strategy for a Post-Cold War Europe?\" War on the Rocks , February 12, 2018. Citations for Footnote 80 See, for example: Stephen M. Walt, \"A Playbook for Training Donald Trump; Four Strategies That Other Countries Can Use to Deal with a Suddenly Unpredictable Superpower,\" Foreign Policy , August 13, 2018, which identifies the four strategies as \"balancing,\" \"balking,\" \"bonding,\" and \"delegitimization.\" See also Stewart Patrick, \"The World Order Is Starting to Crack; America's Allies and Adversaries Are Adapting to Donald Trump in Ways That Can't Easily Be Reversed,\" Foreign Policy , July 25, 2018, which identifies three approaches that other countries have taken, referred to as \"aligning with China to defend globalization,\" \"pursuing strategic autonomy,\" and \"filling the void.\" See also: Andrew Restuccia and Hans Von Der Burchard, \"The World Makes Room for Trump; The G-20 Illustrates Global Philosophy in Trump era: Everybody Plus One.\" Politico , December 1, 2018. Edward Wong and Alan Rappeport, \"In Race for Global Power, U.S. and China Push Nations to Pick a Side,\" New York Times , November 21, 2018. David Ignatius, \"The World Is Moving On from Trump. And Others Are Stepping Forward.\" Washington Post , November 13, 2018. Uri Friedman, \"The World Adjusts to Donald J. Trump,\" Atlantic , September 29, 2018. Colum Lynch and Robbie Gramer, \"U.N. Brief: Trump Manages to Untie the U.N.—Against His Isolationist Vision,\" Foreign Policy, September 26, 2018. Uri Friedman, \"UN Secretary-General: American Power Is in Decline, the World Is 'in Pieces,'\" Atlantic , September 13, 2018. Stewart Patrick, \"The World Order Is Starting to Crack; America's Allies and Adversaries Are Adapting to Donald Trump in Ways That Can't Easily Be Reversed,\" Foreign Policy , July 25, 2018. Yasmeen Serhan, \"U.S. Allies Are Helping Trump Undermine Global Trade,\" Atlantic , June 11, 2018. Peter Schechter, \"On Trade, No One Is Waiting for Washington; Trump's Protectionism Hasn't Stopped Increasing Cooperation in the Rest of the World.\" National Review , April 23, 2018. Bates Gill, \"US Allies Aren't Buying Its New Strategies to Confront China,\" Diplomat , February 5, 2018. Stewart Patrick, \"How U.S. Allies Are Adapting to 'America First,'\" Foreign Affairs , January 23, 2018. Isobel Thompson, \"'Catastrophic': World Leaders Fear the Worst As Trump Goes Rogue; Foreign-Policy Relationships Are Falling Apart as the White House Dismantles the Post-War Order,\" Vanity Fair , January 4, 2018. Charles Kupchan, \"Why Cozying Up to Trump Works; The Rest of the World May Not Like the U.S. President's Bluster, But Playing to His Ego Is a Pretty Good Strategy,\" Foreign Policy , November 16, 2017. Krishnadev Calamur, \"How the Rest of the World Heard Trump's UN Speech,\" The Atlantic , September 20, 2017. Colum Lynch, \"Before U.N. Summit, World Tells Trump His 'America-First Fun' Must End,\" Foreign Policy , September 16, 2017. Richard Wike, et al., \"U.S. Image Suffers as Publics Around World Question Trump's Leadership,\" Pew Research Center, June 26, 2017. Citations for Footnote 92 See, for example: Suzanne Nossel, \"Trump and May Are Discrediting Democracy; Chaos and Dysfunction in Washington and London Make Liberal Democratic Government Look Bad—and Embolden China and Russia to Market Authoritarianism As an Efficient Alternative,\" Foreign Policy , January 24, 2019. Curtis Stone, \"US Government Dysfunction Should Alarm More Than Just Panda Fans,\" People's Daily Online , January 8, 2019. Fred Hiatt, \"Trump Is Disarming America in the Face-Off Against China,\" Washington Post , December 2, 2018. Maria Repnikova, \"China's 'Responsive' Authoritarianism,\" Washington Post , November 27, 2018. Fred Hiatt, \"If the Chinese Look to the West for a Democratic Model, What Are We Showing Them?\" Washington Post, November 4, 2018. Nathan VanderKlippe, \"In 'Failure of U.S. Democracy,' China's Strongmen See a Chance to Get Stronger,\" Globe and Mail , November 12, 2017. Li Qingqing, \"US Divide May Deepen Further After Midterm Elections,\" Global Times , November 4, 2018. \"Pittsburgh Attack Exposes US Governance Woes,\" Global Times , October 28, 2018. \"Spotlight: The Three Dimensions of Chinese Governance,\" Xinhuanet , October 23, 2018. Martin Wolf, \"How the Beijing Elite Sees the World, The Charms of Democracy and Free Markets Have Withered for China's Leaders,\" Financial Times , May 1, 2018. David Runciman, \"China's Challenge to Democracy,\" Wall Street Journal , April 26, 2018. \"Western Political Elections Degraded to Taking Power Instead of Actions: Experts,\" People's Daily Online , April 3, 2018. Curtis Stone, \"Op-Ed: The Western Model of Democracy Is No Longer the Only Game in Town,\" People's Daily Online , March 20, 2018. Zhong Sheng, \"Op-ed: China's New Type of Party System Enlightens World,\" People's Daily Online , March 12, 2018. Zheping Huang, \"Xi Jinping Says China's Authoritarian System Can Be a Model for the World,\" Quartz , March 9, 2018. \"Constitutional Amendment Responds to New Era,\" Global Times , February 26, 2018. Brendon Hong, \"The Shutdown Drama in D.C. Was Beijing's Cup of Tea,\" Daily Beast , January 22, 2018. \"Government Shutdown Exposes System Flaws,\" China Daily , January 22, 2018; \"US Divisions Threaten Leadership Role,\" Global Times , January 13, 2018. Curtis Stone, \"Op-Ed: Trump's Fake News Mantra Speaks to a Larger Truth About Western Media,\" People's Daily Online , December 11, 2017. Thomas Barker, \"The Real Source of China's Soft Power; Chinese Soft Power Is Not Measured by Blockbuster Films, But By the Appeal of Its Development Model,\" Diplomat , November 18, 2017. Curtis Stone, \"Op-Ed: Yep, the World Has a New Role Model for Political and Economic Development,\" People's Daily Online , November 2, 2017. Li Laifang, \"Enlightened Chinese Democracy Puts the West in the Shade,\" China Daily , October 17, 2017. See also John Keane, \"Phantom Democracy: A Puzzle at the Heart of Chinese Politics,\" South China Morning Post , August 25, 2018. Citations for Footnote 95 See, for example: James Traub, \"Trump's Foreign Policy Is Here to Stay; Democrats Have the Upper Hand to Take the White House—But Whoever Wins May Have to Adopt the Current Occupant's Worldview,\" Foreign Policy , January 2, 2019. Kadira Pethiyagoda, \"A Restrained Foreign Policy is Becoming More Popular in Washington,\" National Interest , January 1, 2019. Stephen Grand, \"America's Foreign Policy Power Is Changing Under Trump; No Other Country Can Yet Match America in Terms of Power, But Washington No Longer Possesses the Ability to Shape World Events As It Did in the Cold War's Aftermath,\" National Interest , September 30, 2018. Robert Kagan, \"'America First' Has Won; The Three Pillars of the Ideology—Isolationism, Protectionism and Restricting Immigration—Were Gaining Popularity Before Donald Trump Became President and May Outlast His Tenure,\" New York Times , September 23, 2018. Ankit Panda, \"The Damage Is Done: Trump and the Asia-Pacific; The President's Successor Will Need to Offer a Path Forward That Addresses Our Current Self-Serving American Approach,\" Diplomat , September 14, 2018. Anne Gearan, \"The Next Administration Should Revive Support of Democratic Values Abroad, New Report Says,\" Washington Post , September 5, 2018. Stephen M. Walt, \"Planning for the Post-Trump Wreckage,\" Foreign Policy , August 30, 2018. Stewart Patrick, \"The World Order Is Starting to Crack; America's Allies and Adversaries Are Adapting to Donald Trump in Ways That Can't Easily Be Reversed,\" Foreign Policy , July 25, 2018. Ronald Brownstein, \"Has Trump Irreversibly Altered the GOP's Foreign Policy?\" Atlantic , June 14, 2018. Appendix C. Recent Writings on Whether U.S. Role Should Change This appendix lists recent examples of writings on the question of whether the U.S. role in the world should change, with the most recent in top. See also the citations for footnote 53 (regarding proposals for a more-restrained U.S. role in the world) in Appendix B . Nathan Gardels, \"The U.S.-China Trade War May Kill the WTO. And That Is a Good Thing.\" Washington Post , August 24, 2018. Hal Brands, \"America's Global Order Is Worth Fighting For; The Longest Period of Great-Power Peace in Modern History Is Not a 'Myth.'\" Bloomberg , August 14, 2018. Emile Simpson, \"There's Nothing Wrong With the Liberal Order That Can't Be Fixed by What's Right With It; Realists Need to Get a Lot More Realistic about the Global Legal System.\" Foreign Policy , August 7, 2018. Dani Rodrik, \"The WTO Has Become Dysfunctional,\" Financial Times , August 5, 2018. Hal Brands, \"Trump Can't Split Russia From China—Yet,\" Bloomberg , July 31, 2018. Bruno Macaes, \"Why We Need a New Transatlantic Alliance; Trump's Crudity is Unnecessary, But He's Right That Some Rethinking Is Needed.\" National Review , July 13, 2018. Zalmay Khalilzad, \"A Strategic Reset for NATO,\" National Interest , July 10, 2018. Jay Cost, \"Where Should America Stand on the World Stage? Self-Determination and the Liberal Order of Free Trade Must Be Balanced.\" National Review , June 11, 2018. Dov S. Zakheim, \"Clash of the Strategists,\" National Interest , April 15, 2018. (Review of three books on U.S. grand strategy and foreign policy by Robert D. Kaplan, Elliott Abrams, and Harlan K. Ullman.) Hal Brands, \"The Chinese Century? Regardless of How America Responds to the Chinese Challenge, Its Policy Must Be Rooted in Reality,\" National Interest , February 19, 2018. David C. Hendrickson, \"Is America an Empire?\" National Interest , October 17, 2017. Thomas Donnelly and William Kristol, \"An Empire for Liberty,\" Weekly Standard , October 2, 2017. Christopher A. Preble, \"Why Isn't There a Debate About America's Grand Strategy?\" National Interest , September 16, 2017. James Jay Carafano, \"America Desperately Needs a New Grand Strategy for its Role in the World,\" Heritage Foundation, September 11, 2017. Andrew Beddow, \"America Cannot Become a Global Rome,\" National Interest , July 25, 2017. Enea Gjoza, \"America Historically Had a Restrained Foreign Policy: It's Time to Return to It,\" National Interest , July 25, 2017. Walter Russell Mead, \"A Debate on America's Role—25 Years Late,\" Wall Street Journal , May 22, 2017. Stephen Sestanovich, \"The President Is Preventing the Foreign-Policy Debate America Needs To Have,\" Defense One , April 13, 2017. Hal Brands, \"U.S. Grand Strategy in an Age of Nationalism: Fortress America and Its Alternatives,\" The Washington Quarterly , Spring 2017, 73-93. Stephen M. Walt, \"The Donald versus 'The Blob,'\" ISSF Policy Series , February 14, 2017. David H. Petraeus, \"America Must Stand Tall,\" Politico , February 7, 2016. Robert Kagan, \"Backing Into World War III,\" Foreign Policy , February 6, 2017. Eliot Cohen, \"5 Bad Reasons for Pulling Back From the World,\" Politico , January 24, 2017. Richard Fontaine and Mira Rapp-Hooper, \"If America Refuses to Lead,\" Wall Street Journal , January 23, 2017. Eliot Cohen, \"Should the U.S. Still Carry A 'Big Stick,'\" Los Angeles Times , January 18, 2017. Sydney J. Freedberg Jr., \"Fear China Most, 'Flip' Russia, Beware Iran: CSBA,\" Breaking Defense , January 18, 2017. Frank Hoffman, \"The Case for Strategic Discipline During the Next Presidency,\" War on the Rocks , January 10, 2017. Ali Wyne, \"Did the United States Really Win the Cold War?\" National Interest , January 8, 2017. Robert D. Kaplan, \"Why Trump Can't Disengage America From the World,\" New York Times , January 6, 2017. Mina Pollmann, \"Naval Strategy: Restraint Rather Than Hegemon,\" Maritime Executive , January 5, 2017. (Interview with Barry Posen) Hal Brands, et al., Critical Assumptions and American Grand Strategy , Center for Strategic and Budgetary Assessments, 2017, 57 pp. Appendix D. Recent Writings on How Other Countries Are Responding This appendix lists recent examples of writings on the question of how other countries are responding to a possible change in the U.S. role in the world, with the most recent on top. China, Russia, and Authoritarian and Illiberal Countries in General China Hal Brands, \"Don't Let China Take the World Hostage,\" Bloomberg , February 6, 2019. Patrick M. Cronin, \"What is Causing China's Recent War of Words on Washington?\" National Interest , February 3, 2019. David Wainer, \"China Is Eyeing a Widening Void at UN Thanks to Trump,\" Bloomberg , February 1, 2019. Gerald F. Seib, \"As U.S. Footprint Shrinks, Others Happily Fill the Void,\" Wall Street Journal , January 7, 2019. Jackson Diehl, \"While Trump Wallows in the White House, America's Allies Are Left on Their Own,\" Washington Post , January 6, 2019. Jim Hoagland, \"China Is Trying to Woo U.S. Allies. The White House's Response Contains Glaring Failures.\" Washington Post , January 6, 2019. Cao Desheng, \"China's Role in Shaping global Governance Hailed,\" China Daily , December 29, 2018. Bruno Macaes, \"A Preview of Your Chinese Future; China's Vision of World Order Is a More Radical Departure—and More Realistic Alternative—Than the West Understands,\" Foreign Policy , December 7, 2018. Liza Tobin, \"Xi's Vision for Transforming Global Governance: A Strategic Challenge for Washington and Its Allies,\" Texas National Security Review , December 2018. Elizabeth Rosenberg and Edoardo Saravalle, \"China and the EU Are Growing Sick of U.S. Financial Power; They Are Trying Their Best to Erode Washington's Rules.\" Foreign Policy , November 16, 2018. Christopher Bodeen and Emily Wang, \"China-Japan Drawing Closer Amid Trade Pressure from US,\" Associated Press, October 26, 2018. WSJ Staff, \"China, Japan Push for Free Trade as Both Grapple With Trump Demands,\" Wall Street Journal , October 26, 2018. Stephen Nagy, \"Is Trump Pushing China and Japan Together? Not Quite. Security Concerns Will Remain a Barrier to Beijing-Tokyo Rapprochement,\" National Interest , October 25, 2018. Jane Perlez, \"Japan and China, Asian Rivals, Are Trying to Get Along,\" New York Times , October 24, 2018. Anna Fifield and Simon Denyer, \"Japan's Prime Minister, a Trump Buddy, Now Tries to Cozy Up to China's President,\" Washington Post , October 22, 2018. Hu Weijia, \"Bilateral FTAs Can Be Beijing's Opportunity in New Era of Multipolar Trade World,\" Global Times , October 18, 2018. \"In a Divided U.N., China Blazes Quiet Path to Power,\" Japan Times , October 7, 2018. Erik Khzmalyan and Armen Sahakyan, \"Russia and China Aren't Full Allies—Yet; And Here's What Washington Can Do to Keep It That Way,\" National Interest , October 4, 2018. John S. Van Oudenaren, \"America's Iran Policy is Helping China Advance Its Vision of a Multipolar World; Beijing Is Using Washington's Maximalist Approach to Tehran as a Transatlantic Wedge,\" National Interest , October 1, 2018. Yadong Liu, \"How Trump's Policies Are Helping China; Beijing Still Can't Believe Its Luck,\" Foreign Affairs , September 28, 2018. Josh Chin, \"Trump's 'Meddling' Claim Plays Into China's Trade Narrative; By Alleging Without Proof That Beijing Is Interfering in the U.S. Midterms, the President Helped Bolster the Argument That His Real Aim Is to Stop China's Ascent as a Global Power,\" Wall Street Journal , September 27, 2018. Anna Fifield, \"China Thinks the Trade War Isn't Really About Trade,\" Washington Post , September 24, 2018. Richard Gowan, \"China Fills a Trump-Sized Vacuum at the U.N.,\" Politico , September 24, 2018. Jane Perlez, \"China Is Confronting New U.S. Hostility. But Is It Ready for the Fight?\" New York Times , September 23, 2018. Abigail Grace, \"China and America May Be Forging a New Economic Order; It's Not a Cold War. But the Dispute Between the World's Largest Economies is Taking the World into Unknown Territory,\" Atlantic , September 20, 2018. Elena Holodny, \"Russia, China Embrace Uneasily, Aim for 'Desirable World Order,'\" NBC News , September 20, 2018. Gerry Shih, \"In Trump's Trade Wars, China's Unexpected Win: More Friends,\" Washington Post , September 14, 2018. Robert Sutter, \"When Will Closer China-Russia Cooperation Impact US Policy Debate? Washington is Debating Russia and China Policy Separately. It Needs to Consider the Emerging Russia-China Axis.\" Diplomat , September 14, 2018. Peter Landers, \"Japan and China Find Common Ground in Trump's Tariffs as Leaders Meet,\" Wall Street Journal , September 12, 2018. Anton Troianovski, Anna Fifield, and Paul Sonne, \"War Games and Business Deals: Russia, China Sends a Signal to Washington, Washington Post , September 11, 2018. John Van Oudenaren, \"Why China Is Wooing Eastern and Central Europe,\" National Interest , September 4, 2018. Peter Apps, \"Commentary: Why China and Russia Are Obsessed with Vast New War Games,\" Reuters , August 29, 2018. Owen Daniels, \"How China Is Trying to Dominate the Middle East,\" National Interest , August 28, 2018. Catherine Wong, \"China Aims for 'Sustainable' Debt with Africa as Belt and Road Initiative Comes Under Fire from West,\" South China Morning Post , August 28, 2018. Marc Champion, \"What Does a Chinese Superpower Look Like? Nothing Like the U.S.,\" Bloomberg , August 27, 2018. John Pomfret, \"China's Debt Traps Around the World Are a Trademark of Its Imperialist Ambitions,\" Washington Post, August 27, 2018. Mark Beeson, \"China Rises, America Falters, and Geoeconomics Rears Its Head,\" War on the Rocks , August 23, 2018. Wang Peng, \"Opinion: China's Countermeasures to US Indo-Pacific Strategy,\" China Military Online , August 23, 2018. Xie Tao, \"How China Is Polarized by America,\" Diplomat , August 22, 2018. Thorsten Benner, et al, \"How to Fight China's Sharp Power,\" ChinaFile , August 20, 2018. Eric X. Li, \"The Rise and Fall of Soft Power, Nye's Concept Lost Relevance, But China Could Bring It Back,\" Foreign Policy , August 20, 2018. Matthew Carney, \"China and Russia Strengthening Relationship in Bid to Thwart US Dominance,\" ABC (Australian Broadcasting Corporation) , August 19, 2018. Bloomberg News, \"China, Unsure of How to Handle Trump, Braces for 'New Cold War,'\" Bloomberg , August 17, 2018. Amanda Erickson, \"China Has a New Message for the U.S.: Don't Be Alarmed, We're Not That Great,\" Washington Post , August 16, 2018. Keith Bradsher and Steven Lee Myers, \"Trump's Trade War Is Rattling China's Leaders,\" New York Times , August 14, 2018. Jamil Anderlini, \"China-Russia: A Dangerous Liaison,\" Financial Times , August 10, 2018. Abigail Grace, \"China Doesn't Want to Play by the World's Rules,\" Foreign Policy , August 8, 2018. Joel Wuthnow, \"PacNet #55—Why China Discounts the Indo-Pacific Quad,\" Center for Strategic and International Studies, August 7, 2018. Daniel Kliman and Abigail C. Grace, \"China Dreams of America Alone; Washington's Poor Treatment of Its Allies Isn't Helping Either,\" National Interest , August 6, 2018. Timothy R. Heath, \"China Prepares for an International Order After U.S. Leadership,\" Lawfare , August 1, 2018. Nathan Gardels, \"China Is Laying the Groundwork for a Post-American World Order,\" Washington Post , July 27, 2018. Mark Leonard, \"The Chinese Are Wary of Trump's Creative Destruction,\" Financial Times , July 25, 2018. Huong Le Thu, \"Has China Got Everyone Wrong? Beijing Is Wrong to Think Other Countries Will Roll Over When Confronted,\" National Interest , July 24, 2018. Editorial Board, ANU, \"China's Reform Momentum and Global Security,\" East Asia Forum , July 23, 2018. Jonathan Hillman, \"A Chinese World Order,\" Washington Post , July 23, 2018. Elizabeth Economy, \"Xi Jinping's Superpower Plans,\" Wall Street Journal , July 19, 2018. Steven Erlanger and Jane Perlez, \"Europe and Asia Move to Bolster Global Systems That Trump Has Attacked,\" New York Times , July 18, 2018. Kevin Rudd, \"Hi Jinping's Vision for Global Governance,\" Project Syndicate , July 11, 2018. Nicholas Grossman, \"As America Forfeits International Influence, China Takes Advantage; President Trump's Protectionist Foreign Policy Has Created Global Openings That Beijing Is Only Too Happy to Exploit.\" National Review , July 10, 2018. \"Xhi's World Order: July 2024; As America Defies and Dismantles the International Rules-Based Order, a Report from the Future Imagines What Might Replace It,\" Economist , July 7, 2018. Richard Javad Heydarian, \"China Is Making a Bid for Global Primacy,\" National Interest , July 1, 2018. Barbara Demick and Ttracy Wilkinson, \"Under Trump, America's Influence in the Western Pacific May Be on the Decline,\" Los Angeles Times , June 29, 2018. Reuters Staff, \"Xi Says China Must Lead Way in Reform of Global Governance,\" Reuters , June 23, 2018. Kerry Brown, \"China's Exceptionalism Rewrites the Western Political Playbook,\" Economist , June 13, 2018. Hal Brands, \"China's Master Plan: A Global Military Threat,\" Bloomberg , June 10, 2018. Stephen M. Walt, \"Bullies Don't Win at Diplomacy,\" Foreign Policy , June 7, 2018. Lucio Blanco Pitlo III, \"Is China Changing the Postwar Consensus or Enhancing It?\" National Interest , May 14, 2018. Andrew Polk, \"China Is Quietly Setting Global Standards,\" Bloomberg , May 6, 2018. Grant Newsham, \"China-US Trade: A Long-Term Battle of System Versus System,\" Asia Times , May 5, 2018. Chen Guangcheng, \"Chinese Dissident: Trump, Don't Trade Away Democratic Values,\" Washington Post , May 3, 2018. Martin Wolf, \"How the Beijing Elite Sees the World, The Charms of Democracy and Free Markets Have Withered for China's Leaders ,\" May 1, 2018. Evan A. Feigenbaum, \"Reluctant Stakeholder: Why China's Highly Strategic Brand of Revisionism is More Challenging than Washington Thinks,\" Macro Polo , April 27, 2018. Jamie Tarabay, \"China's Xi Has A Single-Mindedness Trump Can Only Dream Of,\" CNN , April 14, 2018. Marcel Plichta, \"China Is Filling the Africa-Sized Gap in US Strategy,\" Defense One , March 28, 2018. Hal Brands and Peter Feaver, \"Living in Trump's World: The Global Reaction to 'America First,'\" War on the Rocks , March 27, 2018. Colum Lynch, \"At the U.N., China and Russia Score Win in War on Human Rights,\" Foreign Policy , March 26, 2018. Helena Legarda, \"China Upgrades Diplomacy While the US Pulls Back,\" Diplomat , March 20, 2018. Robert E. McCoy, \"Beijing Testing the Fault Lines of US Support for Allies Across Asia,\" Asia Times , March 14, 2018. Motoko Rich, \"Trump's Unpredictability on Trade and North Korea Opens a Door for China,\" New York Times , March 10, 2018. Max Fisher and Audrey Carlsen, \"How China Is Challenging American Dominance in Asia,\" New York Times , March 9, 2018. Gerry Shih and Christopher Bodeen, \"China Eyes Greater Global Leadership Role, Downplays Fears,\" Associated Press , March 8, 2018. Benjamin Carolson, \"China Loves trump; The People Love a Winner. The Leadership Loves a Dupe.\" Atlantic , March 2018. Jane Perlez, \"Xi Jinping Extends Power, and China Braces for a New Cold War,\" New York Times , February 27, 2018. Nadege Rolland, \"Beijing's Vision for a Reshaped International Order,\" China Brief , February 26, 2018. Tom Phillips, \"While Trump Eyes Latin America with Malign Neglect, China Sees Opportunity,\" Guardia n, February 9, 2018. Bloomberg News, \"As U.S. Culls Diplomats, China Is Empowering Its Ambassadors,\" Bloomberg , February 7, 2018. Andreas Boje Forsby, \"Trump, Xi, and the Eclipse of the Liberal World Order; As the United States Abdicates, an Illiberal China Steps onto the World Stage,\" DIIS (Dansk Institut for Internationale Studier), February 6, 2018. David Pilling, \"US Abdication in Africa Hands Political Opportunities to China,\" Financial Times , February 7, 2018. Tobin Harshaw and Daniel Moss, \"What Happens When China Eclipses the U.S. in Asia; A Q&A with Hugh White, a Former Top Australian Official Who Feels Beijing Has Already Filled the U.S. Leadership Void,\" Bloomberg , February 3, 2018. Andrew Browne, \"China Builds Bridges and Highways While the U.S. Mouths Slogans; The Marshall Plan Birthed a U.S.-Led Global Order—Now China is Building a New World,\" Wall Street Journal , January 30, 2018. Keith Bradsher, \"At Davos, the Real Star May Have Been China, Not Trump,\" New York Times , January 28, 2018. Peter Baker, \"Souring World Views of Trump Open Doors for China and Russia,\" New York Times , January 18, 2018. Ishaan Tharoor, \"China's Inexorable Rise Is Helped by Trump's Retreat,\" Washington Post , January 11, 2018. Evan Osnos, \"Making China Great Again; As Donald Trump Surrenders America's Global Commitments, Xi Jinping Is Learning to Pick Up the Pieces,\" New Yorker , January 8, 2018. Antonio C. Hsiang, \"As America Withdraws From Latin America, China Steps In,\" Diplomat , January 4, 2018. David Frum, \"Trump's Bellicosity Is Ceding America's Influence to China,\" Atlantic , January 3, 2018. Russia Gerald F. Seib, \"As U.S. Footprint Shrinks, Others Happily Fill the Void,\" Wall Street Journal , January 7, 2019. Jackson Diehl, \"While Trump Wallows in the White House, America's Allies Are Left on Their Own,\" Washington Post , January 6, 2019. Liz Sly, \"In the Middle East, Russia is Back,\" Washington Post , December 5, 2018. James J. Coyle, \"Russian Influence Growing at American Expense,\" The Hill , October 9, 2018. Erik Khzmalyan and Armen Sahakyan, \"Russia and China Aren't Full Allies—Yet; And Here's What Washington Can Do to Keep It That Way,\" National Interest , October 4, 2018. Elena Holodny, \"Russia, China Embrace Uneasily, Aim for 'Desirable World Order,'\" NBC News , September 20, 2018. Zi Yang, \"Vostok 2018: Russia and China's Diverging Common Interests,\" Diplomat , September 17, 2018. Michael Hirsh, \"How Putin's Syrian War Is Humbling Trump,\" Foreign Policy , September 19, 2018. Robert Sutter, \"When Will Closer China-Russia Cooperation Impact US Policy Debate? Washington is Debating Russia and China Policy Separately. It Needs to Consider the Emerging Russia-China Axis.\" Diplomat , September 14, 2018. Anton Troianovski, Anna Fifield, and Paul Sonne, \"War Games and Business Deals: Russia, China Sends a Signal to Washington,\" Washington Post , September 11, 2018. Peter Apps, \"Commentary: Why China and Russia Are Obsessed with Vast New War Games,\" Reuters , August 29, 2018; Matthew Bodner, \"Russia, the Victim? Opposite NATO's Eastern Flank, It's an Expansionist West Causing Anxiety,\" Defense News , August 27, 2018. Matthew Carney, \"China and Russia Strengthening Relationship in Bid to Thwart US Dominance,\" ABC (Australian Broadcasting Corporation) , August 19, 2018. Kevin Ryan, \"Trump Is Your Yeltsin, This Brief Analogy Speaks Volumes About How Russian Security Elites View the Trump Presidency,\" National Interest , August 19, 2018. David Ignatius, \"The Unintended Consequences of U.S. Disengagement in the Middle East,\" Washington Post , August 14, 2018. Evelyn N. Farkas and James M. Ludes, \"We Regret to Inform You That Russia Is (Probably) At It Again,\" Atlantic , August 16, 2018; Chuck Freilich, \"In the Middle East the Russians Aren't Coming: They Are Back,\" National Interest , August 13, 2018. Jamil Anderlini, \"China-Russia: A Dangerous Liaison,\" Financial Times , August 10, 2018. Harry J. Kazianis, \"The Coming American-Russian Alliance Against Russia,\" American Conservative , July 16, 2018. Anton Troianovski, \"Putin's View Triumphs in Helsinki as Trump Questions U.S. Intelligence,\" Washington Post , July 16, 2018. Hal Brands and Peter Feaver, \"Living in Trump's World: The Global Reaction to 'America First,'\" War on the Rocks , March 27, 2018. Colum Lynch, \"At the U.N., China and Russia Score Win in War on Human Rights,\" Foreign Policy , March 26, 2018. Peter Baker, \"Souring World Views of Trump Open Doors for China and Russia,\" New York Times , January 18, 2018. Authoritarian and Illiberal Countries in General Griff Witte, Carol Morello, Shibani Mahtani, and Anthony Faiola, \"Around the Globe, Trump's Style Is Inspiring Imitators and Unleashing Dark Impulses,\" Washington Post , January 22, 2019. Alex Ward, \"North Korea, China, and Iran Are Not Happy With Trump's Foreign Policy; The Three Countries Heavily Criticized the US Over the Last 72 Hours for Its Tough Economic Policies Meant to Change Their Behaviors,\" Vox , November 5, 2018. Uri Friedman, \"Khashoggi's Murder Heralds a New era of Impunity; The Ugly Geopolitics in the Wake of the Saudi Journalist's Death Point to a World in Which Impunity Reigns,\" Atlantic , October 25, 2018. Jackson Diehl, \"Trump Understands Something That the World's Other Power-Hungry Leaders Don't,\" Washington Post , August 19, 2018. Jen Kirby, \"Top UN Human Rights Official Rebukes Trump's Press Attacks as 'Close to Incitement of Violence,'\" Vox , August 13, 2018. Rick Gladstone, \"China and Russia Move to Cut Human Rights Jobs in U.N. Peacekeeping,\" New York Times , June 27, 2018. Colum Lynch, \"Russia and China See in Trump Era a Chance to Roll Back Human Rights Promotion at U.N.,\" Foreign Policy , June 26, 2018. Ishaan Tharoor, \"Washington Wakes Up to 'Authoritarian' Populism in the U.S. and Europe,\" Washington Post , May 10, 2018. (The article discusses reports entitled \"Drivers of Authoritarian Populism in the United States: A Primer,\" and \"Europe's Populist Challenge: Origins, Supporters, and Responses,\" released jointly by the American Enterprise Institute and the Center for American Progress.) Hal Brands and Peter Feaver, \"Living in Trump's World: The Global Reaction to 'America First,'\" Wa r on the Rocks , March 27, 2018. Henri J. Barkey, \"Springtime for Autocrats,\" Ame rican Interest , March 19, 2018. Stein Ringen, \"Who in the World Will Defend Democracy?\" Los Angeles Times , March 13, 2018. Robin Wright, \"The Rise of the World's New Emperors—With America's Help,\" New Yorker , February 27, 2018. Steven Lee Myers, \"With Xi's Power Grab, China Joins New Era of Strongmen,\" New York Times , February 26, 2018. Vikram J. Singh and Danielle Pletka, \"It's Time for the World's Democracies to Stand Up for What They Believe In,\" Wash ington Post , February 20, 2018. Alan Dupont, \"New World Order: Momentum Is Shifting in Favour of Dictators,\" Australian , February 10, 2018. Ishaan Tharoor, \"Trump Is Spreading the Global Erosion of Democracy, Watchdog Says,\" Was hington Post , January 18, 2018. Michael J. Abramowitz, Freedom in the World 2018, Democracy in Crisis, Freedom House, undated, released January 2018, 19 pp. Uri Friedman, \"The Real-World Consequences of 'Fake News,'\" Atlantic , December 23, 2017. Colum Lynch, \"U.N. Human Rights Chief To leave, Citing 'Appalling' Climate for Advocacy,\" For eign Policy , December 20, 2017. Krishnadev Calamur, \"\"From Ttrump's Twitter Feed to Dictators' Mouths; A Partial List of the World Leaders Taking Their Cues from the U.S. President's Fight with the Press,\" Atlantic , December 14, 2017. Steven Erlanger, \"'Fake News,' Trump's Obsession, Is Now a Cudgel for Strongmen,\" New York Times , December 12, 2017. Nikhil Sonnad, \"Trump's Ally in His War on 'Fake News': the Chinese Communist Party,\" Quartz , December 12, 2017. Anne Applebaum, \"Why Neo-Fascists Are Making a Shocking Surge in Poland,\" Washington Post , November 13, 2017. Erica Frantz and Andrea Kendall-Taylor, \"The Evolution of Autocracy: Why Authoritarianism Is Becoming More Formidable,\" IISS, September 18, 2017 (reprint of article published in Survival , October-November 2017: 57-68). Asia and the Indo-Pacific Japan Steven Erlanger and Jane Perlez, \"America's Allies Fear That Traditional Ties No Longer Matter Under Trump,\" New York Times , December 21, 2018. Christopher Bodeen and Emily Wang, \"China-Japan Drawing Closer Amid Trade Pressure from US,\" Associated Press, October 26, 2018. WSJ Staff, \"China, Japan Push for Free Trade as Both Grapple With Trump Demands,\" Wall Street Journal , October 26, 2018. Stephen Nagy, \"Is Trump Pushing China and Japan Together? Not Quite. Security Concerns Will Remain a Barrier to Beijing-Tokyo Rapprochement,\" National Interest , October 25, 2018. Catherine Wong, \"The Fine Line Japan Must Walk Between Frenemy China and Donald Trump'sw 'America First' Agenda,\" South China Morning Post , October 25, 2018. Jane Perlez, \"Japan and China, Asian Rivals, Are Trying to Get Along,\" New York Times , October 24, 2018. Anna Fifield and Simon Denyer, \"Japan's Prime Minister, a Trump Buddy, Now Tries to Cozy Up to China's President,\" Washington Post , October 22, 2018. Brad Glosserman, \"PacNet #70—Japan's Search for Plan C,\" Center for Strategic and International Studies, October 22, 2018. Simon Denyer, \"Japan's Abe Stakes Out new Identity in Region: Stronger Leadership and Wider Military Reach,\" Washington Post , October 20, 2018. Shiro Armstrong, \"Japan's High Stakes Diplomacy with the US and China,\" East Asia Forum , October 14, 2018. Peter Landers, \"Japan and China Find Common Ground in Trump's Tariffs as Leaders Meet,\" Wall Street Journal , September 12, 2018. Rupakjyoti Borah, \"Japan's Indo-Pacific Defense Outreach Continues in Sri Lanka and India,\" Diplomat , August 27, 2018. Associated Press, \"Japan and EU Sign Trade Deal to Eliminate Nearly All Tariffs,\" Los Angeles Times , July 17, 2018. Robin Wright, \"Japan Stands to Gain as America Refuses Involvement in TPP-11 Trade Deal,\" National Interest , July 8, 2018. Australia James Curran, \"Ausralia's Diplomatic Course between China and the United States,\" East Asia Forum , December 16, 2018. Greg Raymond, \"With China-US Tension on the Rise, Does Australia Need a New Defence Strategy?\" The Conversation , November 21, 2018. Jason Scott and James Mayger, \"Australia Vows Pacific Pivot Amid China Concerns,\" Bloomberg , November 7, 2018. Peter Hartcher, \"Goodbye to Australia's Dangerous Delusion,\" Sydney Morning Herald , October 30, 2018. \"Australia Is 'Sleepwalking into an Era of Unprecedented Danger', Warns Former ADF Member Cate McGregor,\" News.com.au , October 5, 2018. Catherine McGregor, \"We Are Sleepwalking into an Era of Unprecedented Danger,\" Sydney Morning Herald, October 4, 2018. Greg Colton, \"US National Defense Strategy May Force Australia to Get Off the Fence,\" Interpreter , January 23, 2018. Hugh White, \"Australia in the New Asia: Without America,\" Australian Outlook (Australian Institute of International Affairs) , December 14, 2017. (Edited extract from speech by Hugh White on December 5, 2017, at launch of his essay \"Without America: Australia in the New Asia,\" Quarterly Essay , Issue 68, November 2017.) Jamie Tarabay, \"China or the US? Australia's Tricky Balancing Act,\" CNN , December 6, 2017. Jane Perlez and Damien Cave, \"As China Rises, Australia Asks Itself: Can It Rely on America?\" New York Times , December 3, 2017. Robert A. Manning, \"Australia Is Worried About America's Ability to Lead,\" Foreign Policy , November 30, 2017. India Tanvi Madan, \"Between a Cold War Ally and an Indo-Pacific Partner: India's U.S.-Russia Balancing Act,\" War on the Rocks , October 16, 2018. Editorial Board, ANU, \"India's Cautious Courtship with the US-Led Order in Asia,\" East Asia Forum , September 24, 2018. T.V. Paul, \"How India Will React to the Rise of China: The Soft-Balancing Strategy Reconsidered,\" War on the Rocks , September 17, 2018. Robert Farley, \"The Question of the Decade: How Closely Will the US and India Align?\" Diplomat , August 30, 2018. Atman Trivedi and Aparna Pande, \"India Is Getting Cold Feet About Trump's America,\" Foreign Policy , August 30, 2018. Hamza Shad, \"Can America and India Really Be Strategic Partners?\" National Interest , August 29, 2018. Oriana Skylar Mastro, \"Can India Help the United States Against China?\" Lawfare , August 26, 2018. Derek Grossman, \"India Is the Weakest Link in the Quad,\" Foreign Policy , July 23, 2018. Asia and the Indo-Pacific in General John S. Van Oudenaren, \"What Does Growing U.S.-China Rivalry Mean for America's Allies in Asia?\" National Interest , December 13, 2018. Richard Javad Heydarian, \"Trump is Forcing China to Reassess its Strategy,\" National Interest , October 20, 2018. Ankit Panda, \"The Damage Is Done: Trump and the Asia-Pacific; The President's Successor Will Need to Offer a Path Forward That Addresses Our Current Self-Serving American Approach,\" Diplomat , September 14, 2018. Shiro Armstrong, \"Building a Coalition for Openness in Asia,\" East Asia Forum , August 19, 2018. Scott D McDonald, \"Wanted: A Strategy for the Indo-Pacific Region; Indo-Pacific Leaders Fear That the United States Is Not Wholly Committed to a Role in the Region,\" National Interest , August 7, 2018. Steven Erlanger and Jane Perlez, \"Europe and Asia Move to Bolster Global Systems That Trump Has Attacked,\" New York Times , July 18, 2018. Donald Kirk, \"Trump Hands Xi Jinping A Win in Singapore—and May Have Handed All of Asia to China,\" South China Morning Post , June 15, 2018. Motoko Rich, \"Trump-Kim Summit Creates New Anxieties for Asian Allies,\" New York Times , June 13, 2018. Simon Roughneen, \"Shifting US Policy Leaves Asian Allies at Sea,\" Nikkei Asian Review , June 13, 2018. Frederick Kempe, \"Fighting the Wrong War? Reaching the Right Peace? Trump's Foreign Policy Unleashed,\" Atlantic Council , June 4, 2018. Christopher Woody, \"Countries in Asia Are Looking for Ways to Counter China's Growing Power—With and Without the US's Help,\" Business Insider , May 26, 2018. Hal Brands, \"Xi May Scare Asia Back Into Washington's Orbit,\" Bloomberg, March 4, 2018; Greg Sheridan, \"Donald Trump's Team Making Headway in Asia,\" Australian , February 3, 2018. Debra Killalea, \"Why Australia and Asian Allies Are Turning Away from US to China,\" news.com.au , January 29, 2018. Ben Westcott, \"Asia Under Trump: How the US Is Losing the Region to China,\" CNN , January 29, 2018. David Camroux, \"Is Trump's America the 'Dispensable' Power in Asia?\" East Asia Forum , December 31, 2017. TJ Pempei, \"Trump's Democratic Destruction and Asian Absenteeism,\" East Asia Forum , December 30, 2017. Andrew Phillips, \"Trump's Truancy in Asia Could Hasten a Hegemon's Demise,\" Interpreter , November 22, 2017. See Sang Tan, \"Can East Asian Regionalism Be a Bulwark Against a 'Post-Liberal' West?\" East Asia Forum , November 18, 2017. Mark Landler, \"Trump's Mixed Messages Fail to Reassure Asian Allies,\" New York Times , November 14, 2017. Foster Klug, \"Asia Braces for Trump and His Unpredictable Foreign Policy,\" Associated Press , November 2, 2017. Robert Dujarric, \"US Allies in the Age of Trump; As Trump Prepares to Visit Asia, U.S. Allies in the Region Are Wondering How to Best Respond to His Administration,\" Diplomat , October 31, 2017. Europe and Canada Leonid Bershidsky, \"Europeans Grow Tired of the U.S.-Led Alliance; Trump Is Downgrading America's Pre-eminent Role in Liberal World Order. Second-Tier Powers Are Trying to Figure Out What Comes Next.\" Bloomberg , February 14, 2019. David M. Herszenhorn, \"Europe's NATO Problem; EU Wants to Expand Military Capabilities, But Reliance on America Stands in the Way.\" Politico, February 14, 2019. Helene Fouquet, \"The Moment Macron Gave Up on Trump,\" Bloomberg , February 13, 2019. Bojan Pancevski, \"In Germany, a Cold War Deal to Hose U.S. Nuclear Weapons Is Now in Question,\" Wall Street Journal , February 12, 2019. Emily Tamkin, \"The Problem with Pompeo's Plan to Rival China and Russia in Central Europe,\" Washington Post , February 12, 2019. Christian Whiton, \"Dump NATO and Defense New Europe,\" National Interest , February 12, 2019. Robbie Gramer, \"When European Countries Retreat From Democracy, How Should the U.S. Respond?\" Foreign Policy , February 11, 2019. Sebastian Sprenger, \"Europe Risks Losing Its Footing amid Shifting World Order, Report Warns,\" Defense News , February 11, 2019. Ruth Bender, \"As U.S. and China Draw Up Trade Barriers, Germany Fights Back,\" Wall Street Journal , February 5, 2019. Dan Balz and Griff Witte, \"Europeans Fear Trump May Threaten Not Just the Transatlantic Bond, But the State of Their Union,\" Washington Post , February 4, 2019. Edward Alden, \"The United States Doesn't Have Your Back; The Trump Administration's Message to Canada and Other U.S. Allies Is Clear: If You Take Heat for Helping Washington, You're On Your Own,\" Foreign Policy , January 29, 2019. Ted Galen Carpenter, \"What the Evolution of NATO's Missions Means for the Future; Washington Is Pushing the Alliance to Adopt an Increasingly Offensive Focus, and the Allies Could Ber Making a Major, Self-Destructive Blunder to Follow Its Lead.\" National Interest , January 27, 2019. Colin Robertson, \"Donald Trump Has Ushered in a New Global Order. Here's How Canada Can Protect Itself,\" Global and Mail , January 22, 2019. Dave Lawler, \"Canada Faces Saudi Arabia and China On Its Own,\" Axios , January 14, 2019. Yaroslav Trofimov, \"Is Europe Ready to Defend Itself? As Donald Trump's America Pulls back and Vladimir Putin's Russia Looms, France and Germany Are Leading a Renewed Drive for a Common European Union Military,\" Wall Street Journal , January 4, 2019. Susan B. Glasser, \"How Trump Made War on Angela Merkel and Europe; The German Chancellor and Other European Leaders Have Run Out of Patience with the President.\" New Yorker , December 24, 2018. Hal Brands, \"Allied Relied on Mattis. Now They're Worried.\" Bloomberg , December 21, 2018. Steven Erlanger and Jane Perlez, \"America's Allies Fear That Traditional Ties No Longer Matter Under Trump,\" New York Times , December 21, 2018. Elizabeth Rosenberg and Edoardo Saravalle, \"China and the EU Are Growing Sick of U.S. Financial Power; They Are Trying Their Best to Erode Washington's Rules.\" Foreign Policy , November 16, 2018. Benjamin Haddad, \"Trump Is Getting the European Army He Wanted; US President Pushed NATO Allies to Get Serious on Defense. Now They're Listening.\" Politico , November 14, 2018. Katrin Bennhold and Steven Erlanger, \"Merkel Joins Macron in Calling for a European Army 'One Day,'\" New York Times , November 13, 2018. Rachel Donadio, \"Trump's Bromance With Macron Fizzles Spectacularly; A Weekend of Presidential Drama in Paris Culminated in the French President's Warning Against an Emerging Global Disorder.\" Atlantic , November 11, 2018. David Nakamura, Seung Min Kim, and James McAuley, \"Macron Denounces Nationalism As a 'Betrayal of Patriotism' in Rebuke to Trump at WWI Remembrance,\" Washington Post , November 11, 2018. Stacy Meichtry and Laurence Norman, \"France's Macron Calls for Creating a 'European Army'; French President Sharply Criticizes Europe's Military Reliance on the U.S., Days Before President Trump Is to Visit,\" Wall Street Journal , November 6, 2018. \"France's Macron Pushes for 'True European Army,'\" BBC , November 6, 2018. Jacob M. Schlesinger, Paul Vieira, and Emre Peker, \"WTO Members Work to Overhaul Trade Watchdog Amid Trump's Criticism; Failure to Meet U.S. Demands Could Leave Global Commercial Court in Limbo; 'Every Case Potentially Becomes a Trade War,' One WTO Official Says,\" Wall Street Journal , October 23, 2018. \"EU Builds Ties with Asia in Face of US Protectionism,\" Agence France-Presse, October 18, 2018. Rick Noack, \"Yes, World Leaders Laughed at Trump. But There Was Another, Less Obvious Sign of Diminishing U.S. Influence,\" Washington Post , September 26, 2018. Agence France-Presse, \"Macron at UN Rebukes Trump's 'Law of the Strongest,'\" Daily Mail (UK) , September 25, 2018. Angela Charlton, \"Trump and Macron: Realism Replaces Unlikely Bromance,\" Associated Press , September 25, 2018. Frank Jordans and Angela Charlton, \"AP Interview: NATO Chief Plays Balancing Act with Russia,\" Associated Press , September 25, 2018. Amy J. Nelson and Emily Byrne, \"To Improve Transatlantic Relations Look to History and Identity; Without Leadership by Example from Europe or America, the World Order Will Shift in China's Favor,\" National Interest , September 25, 2018. Sten Running, \"A Europeanized NATO? The Alliance Contemplates the Trump Era and Beyond,\" War on the Rocks , September 25, 2018. Tim Ruhlig, \"The EU's New China Resolution: Principled But Not Strategic,\" Diplomat , September 13, 2018. Hans Binnendijk, \"Despite Infighting, Here's How NATO Can Persevere,\" Defense News , September 20, 2018. Kristin Huang, \"Russia-China Military Cooperation 'Could Worry Europe,'\" South China Morning Post , September 14, 2018. Pierre Tran, \"France Wonders: Can We Always Count on American Support?\" Defense News , September 14, 2018. Catherine Wong, \"EU and China Need Closer Ties Urgently to Offset Trade Disruption, Says Bloc's New Ambassador in Beijing,\" South China Morning Post , September 14, 2018. Ben Sills and Esteban Duarte, \"Europe Pushing for Euro Dominance to Fend Off Trump, Spain Says,\" Bloomberg , September 13, 2018. Pierre Tran, \"French Joint Chiefs Call for Coordinated European Force,\" Defense News , September 11, 2018. Keith Johnson, \"The Buck Stops Here: Europe Seeks Alternative to U.S.-Dominated Financial System; German and France Complain That the U.S. Is Abusing Sanctions Power to Bully Even Its Allies,\" Foreign Policy , September 5, 2018. John Van Oudenaren, \"Why China Is Wooing Eastern and Central Europe,\" National Interest , September 4, 2018. John Detrixhe, \"The Divide Between the US and Europe Is Growing, Just as Putin Hoped,\" Quartz, September 1, 2018. Anne Kauranen, \"It's Time for Realism in EU-Russia Ties: France's Macron,\" Reuters , August 30, 2018. Agence France-Presse, \"German Foreign Minister Brands Trump's EU Policy 'Irritating,'\" Agence-France-Presse , August 28, 2018. Agence France-Presse, \"French President Emmanuel Macron Insists EU Can No Longer Rely on US to Guarantee Its Security,\" South China Morning Post , August 27, 2018. Angelique Chrisafis, \"Europe Can No Longer Rely on US for Security, Says Emmanuel Macron, Guardian , August 27, 2018. Remi Adekoya, \"Europe's Donald Can Fight Dirty, Too,\" Foreign Policy , August 20, 2018. Ilya Arkhipov and Arne Delfs, \"Putin and Merkel, Pushed Together by Trump, Talk Syria, Pipeline,\" Bloomberg , August 18, 2018. Melissa Eddy, \"Another Surprise Meeting With Putin. This Time, It's Merkel,\" New York Times , August 13, 2018. Ott Ummelas, \"NATO's East Is Rearming, But It's Because of Putin, Not Trump,\" Bloomberg , August 13, 2018. David M. Herszenhorn, \"EU Vows to Thwart Trump's Sanctions on Iran,\" Politico , August 6, 2018. Chrystia Freeland, \"In Defence of the Rules-Based International Order: How Canada and Its Partners Must Fight Back, 32 nd IISS Fullerton Lecture, August 2, 2018. Derek, \"Trump's Performance in Helsinki Shouldn't Have Come as a Surprise; U.S. Allies in Europe Are Resigned to a Trans-Atlantic Relationship That Keeps Getting Worse,\" Foreign Policy , July 19, 2018. Steven Erlanger and Jane Perlez, \"Europe and Asia Move to Bolster Global Systems That Trump Has Attacked,\" New York Times , July 18, 2018. Associated Press, \"Japan and EU Sign Trade Deal to Eliminate Nearly All Tariffs,\" Los Angeles Times , July 17, 2018. Raf Casert, \"EU, US Relations Sinking Further After Divisive Trump Tour,\" Associated Press , July 17, 2018. Jack Ewing, \"E.U. Courts New Partners With Japan Trade Deal,\" New York Times , July 17, 2018. Michael Birnbaum, \"Europe Fears Trump-Putin Summit Will Embolden Kremlin, Weaken Transatlantic Unity,\" Washington Post , July 16, 2018. Michelle Goldberg, \"'Evil Has Won'; Pro-American Germans Feel Betrayed,\" New York Times , July 13, 2018. Abigail Tracy, \"'He Chooses the Hammer Every Time': NATO Left Fuming As Trump Turns Toward Putin,\" Vanity Fair , July 13, 2018. Zachary Cohen, Michelle Kosinski, and Barbara Starr, \"Trump's Barrage of Attacks 'Beyond Belief,' Reeling NATO Diplomats Say,\" CNN , July 12, 2018. Steven Erlanger, Julie Hirschfeld Davis, and Katie Rogers, \"NATO Survives Trump, but the Turmoil Is Leaving Scars,\" New York Times , July 12, 2018. Vanessa Gera, \"Trump's Tough NATO Talk Plays Well on Eastern Flank,\" Associated Press , July 12, 2018. Valentina Pop, Laurence Norman, and Robert Wall, \"Trump Unsettles NATO Allies With Demands as He Backs Alliance,\" Wall Street Journal , July 12, 2018. Reihan Salam, \"The Coming Split in NATO; Trump Wants Our European Allies to Build Their Military Strength. What Will It Look Like If they Do?\" Atlantic , July 12, 2018. Richard Fontaine and Vance Serchuk, \"The West Will Survive Trump,\" Atlantic , July 12, 2018. Robert Burns, \"Trump's Attacks on NATO Raise Questions About Its Future,\" Associated Press , July 10, 2018. Ulrike Franke, \"Watching for Signs of NATO's End of Times,\" War on the Rocks , July 10, 2018. David M. Herszenhorn, \"Trump's Neglect of Europe Goes Beyond Angry Tweets; Unfilled Positions, Truncated Communications, Lack of Policy Clarity Combine to Provoke Anger Across the Continent,\" Politico , July 10, 2018. Phil Stewart, \"As Trump Confounds, Mattis Seen as Quiet Champion Among NATO Allies,\" Reuters , July 9, 2018. Michael Birnbaum, \"Ahead of NATO Summit, Allies Wonder: Will NATO Survive Trump?\" Washington Post , July 8, 2018. Greg Jaffe, Josh Dawsey, and Carol D. Leonnig, \"Ahead of NATO and Putin Summits, Trump's Unorthodox Diplomacy Rattles Allies,\" Washington Post , July 6, 2018. Jimmy Quinn, \"'America First' Is the EU's Greatest Opportunity,\" National Review , June 28, 2018. Reuters Staff, \"EU Leaders to Strengthen Defenses, Seek 'Strategic Autonomy' At Summit: Draft,\" Reuters , June 27, 2018. Josh Rogin, \"Biden: European Leaders Reeling from Trump's Hostile Behavior,\" Washington Post , June 26, 2018. Daniel Boffey, \"Nato Chief Warms Over Future of Transatlantic Relationship,\" Guardian , June 19, 2018. Simon Nixon, \"Europe Ponders New World Order as Trans-Atlantic Ties Fray,\" Wall Street Journal, June 12, 2018. Stephen Collinson, \"The West Is in Crisis, Despite Trump's Glowing Assessment,\" CNN , June 9, 2018. Frederick Kempe, \"Fighting the Wrong War? Reaching the Right Peace? Trump's Foreign Policy Unleashed,\" Atlantic Council , June 4, 2018. Erik Brattberg, \"Why Trump's Tariffs May Push Europe Toward China and Russia,\" National Interest , June 3, 2018. Joergen Oerstroem Moeller, \"The End of the Atlantic Alliance,\" National Interest , May 28, 2018. Yasmeen Serhan, \"Is the U.S. Bringing Europe and Russia Closer Together?\" Atlantic , May 25, 2018. Robbie Gramer, \"NATO Chief Worried About Fissures Between United States and Europe,\" Foreign Policy , May 18, 2018. Keith Johnson, Dan De Luce, Emily Tamkin, \"Can the U.S.-Europe Alliance Survive Trump?\" Foreign Policy , May 18, 2018. James Traub, \"RIP the Trans-Atlantic Alliance, 1945-2018; The Partnership with America Had a Long Life—But Europe Is Ready to Start Over.\" Foreign Policy , May 11, 2018. Stephen M. Walt, \"Europe Has No Clue How to Handle an American Bully,\" Foreign Policy , May 2, 2018. Kevin Baron, \"Macron Mic-Drops on Trump, Offers a New Call to Western Leadership,\" Defense One , April 25, 2018. Steven Erlanger, \"Europe Once Saw Xi Jinping as a Hedge Against Trump. Not Anymore.\" New York Times , March 4, 2018. Doug Bandow, \"Europe Still Doesn't Take Its Own Defense Seriously,\" National Interest , February 24, 2018. Michael Birnbaum and Griff Witte, \"German Defense Minister Slams Trump's Military-Heavy Approach to Security,\" Washington Post , February 16, 2018. Teri Schultz, \"Is Europe Bold Enough to Counter US Ambivalence?\" Deutsche Welle , February 15, 2018. Mercy A. Kuo, \"What the EU Thinks of the US 'Indo-Pacific' Strategy, Insights from Bernt Berger,\" Diplomat , January 31, 2018. Matt Peterson, \"A Glimpse of a Canadian-Led International Order; The U.S. Ditched a Massive Trade Agreement—Which Turned Out Slightly Better Without It,\" Atlantic , January 24, 2018. Freddy Gray, \"The 'Special Relationship' Is in Trouble, And That's Bad News for London,\" National Interest , January 16, 2018. Christiane Hoffmann and Claus Brinkbaumer, \"'We Are Seeing What Happens When the U.S. Pulls Back,'\" Spiegel , January 8, 2018. (Interview with German Foreign Minister Sigmar Gabriel.) Anna Sauerbrey, \"Is the Trans-Atlantic Relationship Dead?\" New York Times , January 3, 2018. Appendix E. Recent Writings on U.S. Role and World Order This appendix lists recent examples of writings on the question whether a changed U.S. role in the world is affecting world order in some way, with the most recent on top. Andreas Illmer, \"China Disappearances Show Beijing Sets Its Own Rules,\" BBC , October 17, 2018. Bethany Allen-Ebrahimian, \"Can the Chinese Be Trusted to Lead International Institutions?\" Defense One , October 14, 2018. Bethany Allen-Ebrahimian, \"Can the Chinese Be Trusted to Lead Global Institutions? The Abduction of Interpol's President Shows That Beijing's Officials Will Be Subordinate to the Orders of the Communist Party,\" Atlantic , October 11, 2018. Matt Stoller, \"If the U.S. Doesn't Control Corporate Power, China Will; Laissez-Faire Economics Has left Firms Bending the Knee to Beijing,\" Foreign Policy , October 11, 2018. Charlotte Gao, \"Abrupt Detention of Meng Hongwei Further Damages China's International Reputation; Meng, Like All Other Chinese Citizens, Deserves Procedural Justice, One Core Value of the Rule of Law Which China Often Ignores,\" Diplomat , October 9, 2018. Julian Ku, \"Why China's Disappearance of Interpol's Chief Matters,\" Lawfare , October 9, 2018. Sophie Richardson, \"China Disappeared Interpol's Chief. The World Can't Pretend It's Business as Usual.\" Washington Post , October 9, 2018. Timothy R. Heath, \"PacNet #68—What Does China's Pursuit of a Global Coalition Mean for World Politics?\" Center for Strategic and International Studies, October 3, 2018. Bradley A. Thayer and John M. Friend,\" The World According to China; Understanding the World China Seeks to Create by 2049, When the PRC Turns 100,\" Diplomat , October 3, 2018. William Dobson, \"China Unbound: What An Emboldened China means For The World,\" NPR , October 2, 2018. Andrea Kendall-Taylor and David Shullman, \"How Russia and China Undermine Democracy; Can the West Counter the Threat?\" Foreign Affairs , October 2, 2018. Amy J. Nelson and Emily Byrne, \"To Improve Transatlantic Relations Look to History and Identity; Without Leadership by Example from Europe or America, the World Order Will Shift in China's Favor,\" National Interest , September 25, 2018. Michelle Nichols, \"U.N. Chief Warms Leaders of 'Increasingly Chaotic' World Order,\" Reuters , September 25, 2018. Steven Erlanger, \"Is the World Becoming a Jungle Again? Should Americans Care?\" New York Times , September 22, 2018. Abigail Grace, \"China and America May Be Forging a New Economic Order; It's Not a Cold War. But the Dispute Between the World's Largest Economies is Taking the World into Unknown Territory,\" Atlantic , September 20, 2018. Elena Holodny, \"Russia, China Embrace Uneasily, Aim for 'Desirable World Order,'\" NBC News , September 20, 2018. Graham Allison, \"The Truth About the Liberal Order,\" Foreign Affairs , August 28, 2018. Jackson Janes and Peter S. Rashish, \"The West's Greatest Challenge Lies in Washington, Not Moscow,\" National Interest , August 17, 2018. Christopher A. Preble, \"Is This the End of the Liberal World Order?\" National Interest , August 3, 2018. James Kirchick, \"Trump Wants to Destroy the World Order. So What? Whatever the President's Intentions, His Efforts to Rock the Foundation of International Politics Are Hopeless,\" Foreign Policy , July 26, 2018. Stewart Patrick, \"The World Order Is Starting to Crack; America's Allies and Adversaries Are Adapting to Donald Trump in Ways That Can't Easily Be Reversed,\" Foreign Policy , July 25, 2018. Uri Friedman, \"The Rise of 'Revisionist America,'\" Atlantic , July 19, 2018. Christopher Cadelago, \"Trump's Step Toward Putin Seals a New World Order; The President Has Upended the Global Definitions of Friends and Foes,\" Politico , July 16, 2018. Max Fisher, \"Trump Shakes the International Order. Could It Break?\" New York Times , July 15, 2018. Robert Kagan, \"Things Will Not Be Okay,\" Washington Post , July 12, 2018. Amitav Acharya, \"Asia After the Liberal International Order,\" East Asia Forum , July 10, 2018. David A. Graham, \"Can Anyone Fill the U.S. Leadership Vacuum on Climate Change? American Withdrawal from the Paris Agreement Is a Test for the Future of the Globe, But Also for the International Order.\" Atlantic , June 25, 2018. George Packer, \"Donald Trump Goes Rogue; In Half a Week, Between Quebec and Singapore, Trump Showed That the Liberal Order Is Hateful to Him, and That He Wants Out,\" New Yorker , June 25, 2018. Kori Schake, \"The Trump Doctrine Is Winning and the World Is Losing,\" New York Times , June 15, 2018. Graham Allison, \"The Myth of the Liberal Order,\" Foreign Affairs , June 14, 2018. Michael Hirsh, \"The International System He Disdains Was Created by Americans—to Advance American Interests.\" Washington Post , June 14, 2018. Robert Kagan, \"Trump's America Does Not Care,\" Washington Post , June 14, 2018. Fred Kaplan, \"Demolition Donald, It's Undeniable That the President Is Wrecking the U.S.-Led International Oder. The Only Question Left Is Whether He's Doing It on Purpose.\" Slate , June 14, 2018. Jeremy Diamond, \"Trump Resets the World Stage,\" CNN , June 13, 2018. Ben Steil, \"The West Will Die So That Trump Can Win,\" Foreign Policy , June 12, 2018. Zachary Karabell, \"Trump's Creative Destruction of the International Order,\" Foreign Policy , June 11, 2018. \"Present at the Destruction; America's President Is Undermining the Rules-Based International Order. Can Any Good Come of It?\" Economist , June 9, 2018: 18-20, 22. Frederick Kempe, \"Present at the Destruction?\" Atlantic Council , June 9, 2018. Aris Folley, \"Top EU Figure: Trump Is 'Undermining' World Order US Created,\" The Hill , June 8, 2018. Karebn DeYoung, \"In Trump, Some Fear the End of the World Order,\" Washington Post , June 8, 2018. Ana Campoy, \"Trump Is a Globalist. Just a Chaotic One.\" Quartz , April 7, 2018. Frerd Bauer, \"To Preserve the 'Liberal World Order,' Reform It; The Political Establishment's Decisions Have Contributed Mightily to the Problems We Face.\" National Review , April 2, 2018. Michael Brendan Dougherty, \"The Endless Hysteria about the Liberal World Order,\" National Review , March 27, 2018. Stewart M. Patrick, \"China and Trump May Bury the Liberal International Order,\" Defense One , March 25, 2018. Joseph S. Nye, \"Human Rights and the Fate of the Liberal Order,\" Project Syndicate , May 9, 2018. Richard N. Haass, \"Liberal World Order, RIP,\" Strategist (ASPI) , March 24, 2018. Hal Brands, \"The 'American Century' Is Over, and It Died in Syria,\" Bloomberg , March 8, 2018; Robert Farley, \"How Can the US Manage a Rising China? The United States Needs to Rethink How It Approaches International Oder,\" Diplomat , February 27, 2018. Eliot A. Cohen, \"Witnessing the Collapse of the Global Elite,\" Atlantic , February 19, 2018. Ash Jain, \"Is the Democratic Order Doomed?\" Atlantic Council , February 15, 2018. Tunku Varadarajan, \"Will China Impost a New World Order? When Pax Britannica Gave Way to Pax Americana, the Transition Was Peaceful. A Repeat Is unlikely, Says the Author of 'Safe Passage.'\" Wall Street Journal , February 9, 2018. Andreas Boje Forsby, \"Trump, Xi, and the Eclipse of the Liberal World Order; As the United States Abdicates, an Illiberal China Steps onto the World Stage,\" DIIS (Dansk Institut for Internationale Studier) , February 6, 2018. Salvatore Babones, \"America Has Little to Fear from a China-Centered World,\" Washington Post , January 25, 2018. Aaron Friedberg, \"China's Understanding of Global Order Shouldn't Be Ours,\" Foreign Policy , January 24, 2018; Matt Peterson, \"A Glimpse of a Canadian-Led International Order; The U.S. Ditched a Massive Trade Agreement—Which Turned Out Slightly Better Without It,\" Atlantic , January 24, 2018. Chengxin Pan, \"Time to Worry About a Chinese-Led Global Order,\" Interpreter , January 10, 2018. Isobel Thompson, \" 'Catastrophic': World Leaders Fear the Worst As Trump Goes Rogue; Foreign-Policy Relationships Are Falling Apart as the White House Dismantles the Post-War Order,\" Vanity Fair , January 4, 2018. Charlotte Gao, \"2018: China Vows to Be the Keeper of International Order,\" Diplomat , January 2, 2018; Jennifer Lind, \"Will the Liberal Order Destroy Itself? While cosmopolitan Americans Grieved on November 9, 2016, That Trump Would Ruin the Liberal International Order, the Order Was Already Straining Under Its Own Ambitions,\" National Interest , December 18, 2017. H. Brands and C. Edel [Hal Brands and Charles Edel], \"The Disharmony of the Spheres; The U.S. Will Endanger Itself If It Accedes to Russian and Chinese Efforts to Change the International System to Their Liking,\" Commentary , December 14, 2017. Korber-Stiftung, \"Yan Xuetong on How Germany and China Should Rethink the Global Order; 'The Current Norms Are No Longer Suitable,'\" Diplomat , December 6, 2017. Oliver Stuenkel, \"No Need to Fear a Post-Western World,\" Global Times , November 28, 2017. Richard Heydarian, \"Trump Humbled in China as Beijing Visit Underlines the New World Order in Asia,\" South China Morning Post , November 13, 2017. David Usborne, \"Donald Trump's America First Doctrine Will Destroy the United Nations,\" Independent (UK) , September 19, 2017. Philip Zelikow, \"Is the World Slouching Toward a Grave Systemic Crisis?\" The Atlantic , August 11, 2017. Fareed Zakaria, \"Say Hello to a Post-America World,\" Washington Post , July 27, 2017. Hal Brands and Eric Edelman, \"America and the Geopolitics of Upheaval,\" National Interest , June 21, 2017. George Fujii, \"The End of American Liberal Internationalism?\" ISSF Policy Series , March 30, 2017. Uri Friedman, \"What a World Led by China Might Look Like,\" The Atlantic , March 29, 2017. Bjorn Jerden, et al., \"Don't Call it the New Chinese Global Order (Yet),\" Foreign Policy , March 7, 2017. Kori Schake, \"Will Washington Abandon the Order?\" Foreign Affairs , January/February 2017. See also the following RAND reports, written under RAND's \"Building a Sustainable International Order\" project: Michael J. Mazarr, Summary of the Building a Sustainable International Order Project , RAND, 2018, 32 pp. Michael J. Mazarr, Astrid Stuth Cevallos, Andrew Radin, and Miranda Priebe, Building a Sustainable International Order, Summary of the First Workshop in the International Order Project Series , RAND, 2016, 8 pp. Michael J. Mazarr, Miranda Priebe, Andrew Radin, and Astrid Stuth Cevallos, Understanding the Current International Order , RAND, 2016, 80 pp. Michael J. Mazarr and Ashley L. Rhoades, Testing the Value of the Postwar International Order , RAND, 2018, 124 pp. Michael J. Mazarr, et al, Measuring the Health of the Liberal International Order , RAND, 2017, 228 pp. Kyle Lascurettes, The Concert of Europe and Great-Power Governance Today: What Can the Order of 19th-Century Europe Teach Policymakers About International Order in the 21st Century? RAND, 2017, 36 pp. Michael J. Mazarr, Miranda Priebe, Andrew Radin, and Astrid Stuth Cevallos, Alternative Options for U.S. Policy Toward the International Order , RAND, 2017, 130 pp. Hal Brands, American Grand Strategy and the Liberal Order: Continuity, Change, and Options for the Future , RAND, 2016, 40 pp. Michael J. Mazarr, Timothy R. Heath, and Astrid Stuth Cevallos, China and the International Order , RAND, 2018, 172 pp. Andrew Radin and Clinton Bruce Reach, Russian Views of the International Order, RAND, 2017, 124 pp. Appendix F. Background Information on U.S. Public Opinion About U.S. Role This appendix presents background information on U.S. public opinion relating to the U.S. role in the world. November 2018 Pew Research Center Survey A November 2018 article by the Pew Research Center regarding a survey of U.S. foreign policy attitudes conducted in November 2018 states The public's leading long-range foreign policy goals for the United States are focused on security, including economic security. About seven-in-ten (72%) say that taking measures to protect the U.S. from terrorist attacks should be a top priority for the country, while about as many (71%) say the same about protecting the jobs of American workers. Two-thirds (66%) say preventing the spread of weapons of mass destruction (WMD) should be a top long-range priority for the United States. With only a handful of exceptions, including stopping the spread of WMD, there are sizable differences between Republicans and Democrats on the 26 foreign policy goals in the survey by Pew Research Center, which was conducted Nov. 7-16 among 10,640 adults. And on several foreign policy goals, particularly the importance of maintaining U.S. military superiority, there also are notable gaps between older and younger adults. U.S. allies. Improving relationships with U.S. allies ranks at the top of Democrats' foreign policy goals (70% top priority) but is a middle-tier objective for Republicans (44%). In addition, Republicans are 30 percentage points more likely to say that getting other countries to assume more of the costs of maintaining world order should be a top priority for U.S. foreign policy (56% vs. 26%). U.S. military superiority. A large majority of Republicans and Republican-leaning independents (70%) say that maintaining the U.S. military advantage over all other countries should be a top priority for the U.S.; just 34% of Democrats and Democratic leaners rate this as a top priority. Notably, maintaining U.S. military superiority is a top priority for a majority of adults ages 50 and older (62%). But just 30% of those younger than 30 say this should be a top foreign policy priority. Refugees and immigration. While only about four-in-ten Democrats (39%) say that aiding refugees fleeing violence should be a top foreign policy priority, far fewer Republicans (11%) say the same. Republicans are far more likely than Democrats to rate reducing both illegal immigration and legal immigration into the U.S. as major priorities. The partisan divide on the importance of reducing illegal immigration, 48 percentage points, is wider than at any point in the past two decades (68% of Republicans vs. 20% of Democrats). Climate change. Partisans have long differed over the importance of dealing with climate change. But the gap is especially wide today, with 64% of Democrats and just 22% of Republicans saying that dealing with climate change should be a top foreign policy priority for the U.S. (The survey was conducted before the Nov. 23 release of the National Climate Assessment.) Russia, Iran, China and North Korea. Partisan opinions about limiting the power and influence of Iran and Russia are nearly mirror images: 52% of Democrats say reducing Russia's power and influence should be a top priority, compared with 32% of Republicans. By contrast, 52% of Republicans rate limiting Iran's power as a top goal, compared with 29% of Democrats. Reducing China's power and influence is not a leading goal for either party, but more Republicans (39%) than Democrats (26%) rate this as a top priority. There is greater partisan agreement on North Korea: 43% of Republicans and 35% of Democrats say limiting North Korea's power and influence is a top priority. Trade and economic relations. Reducing the U.S. trade deficit with other countries is viewed as a top foreign policy priority by 54% of Republicans, compared with 33% of Democrats. And more Republicans (51%) than Democrats (40%) say promoting U.S. economic interests abroad should be a top foreign policy priority. Among the public overall, attracting skilled workers from other countries (16% top priority), promoting democracy in other countries (17%) and finding a solution to the conflict between Israel and the Palestinians (18%) rank near the bottom of the long-range foreign policy goals. However, for each of these items – indeed, for all 26 priorities in the survey – majorities say they should be given top priority or some priority. Young and old differ over importance of foreign policy goals Younger Americans (those under 30) are generally less likely to say that the issues presented in the survey should be a \"top priority.\" Across the 26 items included in the survey, those under 30 are an average of 10 points less likely than those 65 or older to say each should be a \"top priority.\" In some cases the gaps between older and younger Americans are much larger. Younger Americans are much less likely than their older counterparts to prioritize limiting the power and influence of several prominent foreign powers. Only about three-in-ten young people feel that the U.S. should place top priority on limiting the power and influence of Russia (29%), Iran (29%) and North Korea (26%). Even fewer say the same about China (21%). By contrast, Americans 65 or older are much more likely to say that limiting the influence of these countries should be a top priority. For instance, 54% say limiting the power and influence of Russia should be a top priority for the U.S. There are a few issues that younger people place greater importance on than older adults. About half (49%) of those ages 18 to 29 say the U.S. should make protecting groups or nations threatened with genocide a top priority; fewer of those 65 or older (36%) say the same. Younger people are 18 percentage points more likely than the oldest adults to say that promoting and defending human rights in other countries should be a top priority (41% vs. 23%). When it comes to aiding refugees fleeing violence around the world, those younger than 65 are more likely than those ages 65 and older to say this should be a top foreign policy priority for the U.S. There's also a substantial age divide in the priority given to goals involving the U.S. military. Americans 65 and older are more than twice as likely as those under 30 to say that the U.S. maintaining its military advantage over all other countries is a top priority (64% vs. 30%). Younger people are more likely than older people to say that reducing U.S. military commitments overseas should be a top priority (34% vs. 20%). Age gaps also are seen in dealing with terrorism. About eight-in-ten of those 50 and older (81%) say that taking measures to protect the U.S. from terrorist attacks should be a top priority, this figure drops nearly 20 points among those under 50 (63%). When asked about whether the U.S. should prioritize taking measures to seek out and destroy terrorist groups in other countries, about a quarter of Americans under 50 (27%) say it should be a top priority compared with 44% of those 50 or older. Shifting views of U.S. foreign policy goals The public's views of long-term goals for U.S. foreign policy have shifted over the past two decades. In many cases, partisan divides have emerged – or widened – when it comes to how much priority should be placed on key international goals. In the current survey, a sizable majority of Democrats and Democratic leaners (70%) say improving relationships with our allies should be a top priority, while significantly fewer Republicans and Republican leaners say this should be a top priority (44%). This is one of the largest gaps observed on this issue since the question was first asked in 2004. The share of Democrats who view improved relationships with allies as a top priority is much higher than it was in 2011, during Barack Obama's first term, when 48% said this. There is a wide partisan gap over the importance of getting other countries to assume more of the costs of maintaining world order: 56% of Republicans say this is a top priority, compared with just 26% of Democrats. When the question was last asked in 2004, comparable shares of Republicans (59%) and Democrats (58%) said this issue should be a top priority. Democrats are far more likely than Republicans to prioritize promoting democracy in other nations, promoting and defending human rights abroad, and helping improve living standards in developing nations. Though neither party rates the promotion of democracy in other nations as a particularly high priority, Democrats are twice as likely as Republicans to say this should be a top foreign policy goal (22% vs. 11%). Views are about the same as they were in a telephone survey conducted in 2013. A similar pattern emerges on promoting and defending human rights in other countries. About four-in-ten Democrats (39%) say promoting human rights abroad should be a top priority. Fewer Republicans (20%) prioritize this goal. This partisan gap is little different from 2013, but wider than at most other points measured over the past 25 years. Today, just 12% of Republicans say improving living standards in developing nations should be a top priority. More than twice as many Democrats (32%) say this should be a top priority. Republicans are more likely than Democrats to view the promotion of U.S. business and economic interests a top foreign policy priority. This also is the case in views of protecting U.S. jobs and reducing the trade deficit with other countries. Today, roughly half of Republicans (51%) say promoting U.S. business and economic interests abroad should be a top priority in foreign policy. Fewer Democrats (40%) say this should be prioritized. In 2004, 40% of Republicans and 32% of Democrats said promoting U.S. business interests should be a top priority. Among the public overall, protecting the jobs of American workers continues to rank among the top priorities for U.S. foreign policy, though the share who calls this a top priority is somewhat lower today (71%) than in 2013 (81%). More Republicans (81%) than Democrats (65%) say protecting American jobs should be a top U.S. foreign policy priority; this issue is among the top three priorities for members of both parties. When it comes to reducing the U.S. trade deficit with other countries, a double-digit gap currently divides Republicans and Democrats. Over half of Republicans (54%) say \"reducing our trade deficit with other countries\" should be a top priority, while just a third of Democrats (33%) say the same. When the question was last asked in 1997, about equal shares of partisans called this issue a top priority. Some of the largest differences between Republicans and Democrats are seen in views of how much priority should be given to reducing illegal immigration and dealing with global climate change. Nearly seven-in-ten Republicans (68%) say that reducing illegal immigration into the U.S. should be a top U.S. foreign policy goal; just 20% of Democrats say the same. A partisan gap on prioritizing reducing illegal immigration has existed since 2005, but the current gap is especially wide. Since 2013, the share of Democrats who say reducing illegal immigration should be a top priority has declined significantly, from 38% then to 20% today. Democrats continue to be more likely than Republicans to say dealing with global climate change should be a top priority. About two-thirds of Democrats (64%) say this, compared with just 22% of Republicans. A partisan gap has existed since this question was first asked in 2001, but it is as wide as it has ever been during this period. October 2018 Chicago Council on Global Affairs Report A 2018 Chicago Council on Global Affairs report on U.S. public opinion data regarding U.S. foreign policy that was released in October 2018 stated the following: In the wake of the 2016 US presidential election, political analysts warned of a dark era ahead. Newly elected President Donald Trump had long expressed opposition to US security alliances, skepticism of free trade, and support for authoritarian leaders such as Vladimir Putin. Since the American public generally relies on their political leaders for foreign policy decisions, many policy watchers cautioned that the country was headed for a populist, unilateralist, and protectionist retreat from global leadership. While the Trump administration has taken action along this path—unilaterally withdrawing from the Paris and Iran agreements, pulling the United States out from the Trans-Pacific Partnership (TPP) trade agreement, and questioning the value of long-time alliances like NATO—the majority of the American public has not followed this lead. To the contrary, most Americans have moved in the opposite direction. The largest majority since 1974—except for just after the September 11 attacks—now support active US engagement in world affairs. A solid majority supports multilateral diplomacy, underscored by public willingness to accept international decisions that are not the first choice for the United States. A record number of Americans now acknowledge the benefits of international trade. Even though the United States withdrew from both the Paris Agreement and the Iran nuclear deal, public support for these agreements has actually increased. And as the ultimate indicator of commitment to allies, increased majorities express support for sending US troops to defend both NATO and Asian allies if they are attacked. Americans Want the United States to Remain Engaged Despite attempts by the White House to pull the United States back from global engagement, seven in 10 Americans… favor the United States taking an active part in world affairs (70%). This reading is a 7 percentage point increase from the 2017 Chicago Council Survey and is the highest recorded level of support since 1974 except for 2002, the first Chicago Council Survey conducted after the September 11 attacks…. A Majority Wants Shared Action on Global Issues The American public does not envision the United States working alone when playing an active role on the world stage. Rather, a striking majority (91%) say that it is more effective for the United States to work with allies and other countries to achieve its foreign policy goals. Just 8 percent say that it is more effective for the United States to tackle world problems on its own. Sharing leadership on global issues may mean that the United States does not always achieve its preferred policy outcomes. Yet a majority support the United States making decisions with its allies even if it means the United States will sometimes have to go along with a policy that is not its first choice (66% agree, 32% disagree). Similarly, two-thirds of Americans believe that the United States should be more willing to make decisions within the United Nations even if it means that the United States will sometimes have to go along with a policy that is not its first choice (64% agree, 34% disagree)—the highest level of support on this question since it was first asked in 2004, when 66 percent agreed. Support Is Up for the Iran Deal and the Paris Agreement President Trump has broken away from several international agreements since taking office, including the Paris Agreement on climate change and the Iran nuclear deal. But the American public has not followed the president's cues. Majorities of the public say that the United States should participate in the Iran deal (66%) and the Paris Agreement (68%). In fact, support for US participation in both of these high-profile international agreements has risen 6 percentage points over the past year…. It's More Important to be Admired than Feared The administration has attempted to change the nature of US influence around the world by using coercive rhetoric toward both allies and hostile actors. Perhaps reflective of this approach, more Americans think that the United States is now more feared (39%) than admired (20%) around the world today, though many volunteer an alternative response, ranging from \"a joke\" to \"weak\" to \"falling apart.\" But almost three times as many Americans think admiration (73%) of the United States is more important than fear (26%) of the United States to achieve US foreign policy goals. As interactions with US allies have strained over the course of the past year, majorities of Americans say that relations with other countries are worsening (56%) and that the United States is losing allies (57%). Just 12 percent of the public says that the United States is gaining allies and 31 percent state there has been no change. US Public Wants to Maintain or Increase Commitment to NATO While some administration officials have praised NATO, the president has repeatedly criticized European allies for not spending enough on defense. Yet his attacks do not seem to have dented public support for the transatlantic alliance. A majority of Americans continue to favor maintaining (57%) or increasing (18%) US commitment to NATO; in fact, a higher percentage of Americans now favor increasing the US commitment to NATO than ever before…. Support for Using US Troops to Defend Key Allies Has Grown Americans continue to favor contributing to allies' security through bases and security commitments, and their willingness to do so has increased since last year. Majorities of Americans support maintaining long-term military bases in South Korea (74%) and Japan (65%); both responses are at record levels since the question was first asked in the 2002 Chicago Council Survey. As in past surveys, a majority continue to support maintaining US bases in Germany (60%). Further, two-thirds of Americans support sending US troops to defend South Korea (64%) and Japan (64%) if attacked by North Korea, and 54 percent support defending Baltic NATO allies with US troops if Russia invades. Each of these measures is at a peak since the Council began asking these questions. Americans Are High on Trade The White House is waging trade battles on multiple fronts, but the American public is more positive about the benefits of trade than ever before, surpassing even the previous record ratings of 2017…. Large majorities of Americans now say that trade is good for consumers like you (85%), the US economy (82%), and creating jobs in the United States (67%)…. While the president has criticized the North American Free Trade Agreement (NAFTA) and withdrawn from the TPP trade agreement, 63 percent of Americans now say NAFTA is good for the US economy, up from 53 percent in 2017, and another record level in Chicago Council surveys. A majority of Americans (61%) also believe the United States should participate in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or the CPTPP, a trade agreement formed by the 11 signatories to the original TPP after US withdrawal. Americans face the possibility of serious trade disruptions, as the United States and China are currently exchanging several rounds of tariffs. While only four in 10 Americans consider a possible trade war with China a critical threat (42%), a combined seven in 10 Americans are very (31%) or somewhat (41%) concerned that a trade war with China will hurt their local economy.5 Trade disputes with Mexico, America's third-largest trading partner, are somewhat less concerning to the US public: just over half of the public are very (19%) or somewhat (33%) concerned about the impact of a trade war with Mexico on their local economy. Conclusion The Trump administration's bold attempts to reshape US foreign policy have not convinced many Americans to join the bandwagon. The past two years have given the American public a glimpse of President Trump's alternative vision for the role of the United States in the world. And while Trump's base continues to share his vision, the majority of Americans do not. Instead, most Americans are more convinced about the benefits of active US engagement and the need to work with allies. They see US soft power as more effective than muscular intimidation in accomplishing US foreign policy goals and believe the United States is losing allies and world respect. On those specific issues where the White House has taken action—withdrawing from the Iran nuclear deal, the Paris Agreement, and the TPP agreement—Americans are less likely to see them as \"wins\" and more likely to endorse participating in these agreements. On traditional approaches to US foreign policy, including maintaining military bases abroad, defending key allies if attacked, and supporting trade, Americans have doubled down. The bottom line is that two years into the Trump administration, solid majorities of the American public have rejected the \"America First\" platform. June 2018 Chicago Council on Global Affairs Report A 2018 Chicago Council on Global Affairs report on U.S. public opinion data regarding generational differences in U.S. public opinion regarding U.S. foreign policy stated that was released in June 2018 stated the following: Since World War II the United States has maintained an active foreign policy agenda, deeply engaged in both the economic and military domains. Many observers over the past few years, however, have begun to voice doubts about public support for the critical pillars of American internationalism. Some have argued that the American public has lost its appetite for military intervention after more than 15 years at war in the greater Middle East. Others have suggested that Donald Trump's election revealed weakening support for free trade and for the global alliance system the United States built after World War II. Many observers have worried, in particular, about whether younger Americans will be willing to take up the mantle of global leadership. This question matters a good deal in light of the fact that the Millennial Generation, those born between 1981 and 1996, is now the largest generation of Americans. Like the Baby Boomers before them, Millennials have already had an outsized impact on American culture. As they age and begin to take leadership positions in business, government, and across society, their views – not those of their parents and grandparents – will be decisive. Those worried about Millennials' willingness to embrace the traditional liberal internationalism of the post-World War II era may find some evidence for their concerns in survey data. As the 2012 Chicago Council Survey report noted, \"Millennials…are much less alarmed about major threats facing the country, particularly international terrorism, Islamic fundamentalism, and the development of China as a world power, and are less supportive of an activist approach to foreign affairs than older Americans.\" In order to understand where foreign policy attitudes are headed, we employ a generational perspective to analyze a wide range of survey data collected by the Chicago Council on Global Affairs since 1974. The findings reveal that generations share many opinions about international threats, foreign policy goals, and the best approaches to engaging the world. Yet, each generation from the Silent Generation onward entered adulthood somewhat less supportive of expansive American internationalism, with more recent generations expressing lower support for militarized approaches to achieve foreign policy goals. Today, each successor generation is less likely than the previous to prioritize maintaining superior military power worldwide as a goal of US foreign policy, to see US military superiority as a very effective way of achieving US foreign policy goals, and to support expanding defense spending. At the same time, support for international cooperation and free trade remains high across the generations. In fact, younger Americans are more inclined to support cooperative approaches to US foreign policy and more likely to feel favorably towards trade and globalization. Key Findings Each generation since the Silent Generation reports less support than its predecessors for taking an active part in world affairs, as measured by responses to the standard Chicago Council Survey question: \"Do you think it will be best for the future of the country if we take an active part in world affairs or if we stay out of world affairs?\" Sometimes, this difference split Millennials from older Americans; at other times, Millennials and Gen Xers both differ from prior generations. Long-term shifts in ideology and party identification mean that younger Americans today are more liberal than their elders, less likely to identify as Republican, but also more likely not to identify with either party. Because ideology and partisanship exert such powerful influences on public opinion, these trends play a significant role in explaining the size and direction of generation gaps on foreign policy issues. Yet even when the pull of partisanship and party loyalty is greatest, the differences across generations remain visible and large enough to be politically significant. It is difficult to predict how much these generation gaps will influence the direction of US foreign policy. As younger Americans continue to replace older Americans, especially at the voting booth, shifting demographics and attitudes are likely to influence debates about how the United States should engage the world. As younger Americans move through the stages of life it will be interesting to see if these generational differences result in a permanent break from previous patterns of foreign policy attitudes. 2017 Chicago Council on Global Affairs Report A 2017 Chicago Council on Global Affairs report on U.S. public opinion data regarding the Trump Administration's theme of America First stated President Trump's inaugural address, like his campaign, signaled a major departure from the past seven decades of American foreign policy and engagement with the rest of the world. While never fully parsed, the slogans \"Make America Great Again,\" \"America First,\" and \"Americanism, not Globalism,\" along with the president's speeches and tweets, prescribed greater protectionism in trade, a new financial reckoning with our security allies, and a withdrawal from major international agreements. The 2017 Chicago Council Survey, conducted roughly six months into the Trump administration, tested the appeal of these ideas among the American public. The results suggest their attraction remains limited. For now, public criticism of trade deals, support for withholding US security guarantees from allies, and calls for restricting immigration mainly appeal to a core group of Trump supporters (defined in this report as those Americans with a very favorable view of President Trump). Yet, aside from the president's core supporters, most Americans prefer the type of foreign policy that has been typical of US administrations, be they Republican or Democrat, since World War II. Majorities continue to endorse sustaining American engagement abroad... as well as maintaining alliances, supporting trade, and participating in international agreements. Indeed, in key instances, Americans have doubled down on these beliefs. Public support has risen to new highs when it comes to willingness to defend allies, the perceived benefits of trade, and a desire to grant undocumented workers a path to citizenship. Americans Value Allies and Are More Willing Than Ever to Defend Them During the 2016 campaign and into his presidency, Donald Trump has repeatedly criticized allies of freeriding on America's security guarantee and argued that US alliances were not serving American interests. But the US public disagrees. Americans have repeatedly rated alliances as one of the most effective ways for the United States to achieve its foreign policy goals since the question was first asked in 2014. Today, the US public is more convinced than ever of their importance. Americans rate maintaining existing alliances as the most effective foreign policy tool, with 49 percent responding \"very effective\".... followed by maintaining US military superiority (47%) and building new alliances with other countries (36%).... Americans also express confidence in Asian and European allies to deal responsibly with world problems, and solid majorities favor maintaining or increasing the US military presence in the Asia-Pacific (78%), Europe (73%), and the Middle East (70%). A slightly larger majority now (69%) compared with a year ago (65%) say NATO is essential to US security. And for the first time, majorities of Americans are willing to use US troops to defend South Korea if it is invaded by North Korea (62%) or if NATO allies like Latvia, Lithuania, or Estonia are invaded by Russia (52%). The most specific wish that President Trump has for NATO is for allied countries to contribute more to collective defense; he and other administration officials have advocated for withholding US commitment to defend allies until they have paid more. But a majority of Americans think that NATO allies should be convinced to do their part through persuasion and diplomatic channels (59%) rather than threatening to withhold the US security guarantee to NATO allies to get them to pay more for defense (38%). Given these views, it is clear that Americans appreciate the advantages that alliances bring. Majorities say that alliances with Europe and East Asia (60% each) are either mutually beneficial or mostly benefit the United States, and 48 percent say the same about alliances in the Middle East. Core Trump supporters are the most skeptical of the benefits regarding alliances for the United States. Perhaps taking their lead from the president, a majority favor withholding US security guarantee from NATO allies until they pay more (60%); 51 percent of overall Republicans agree. But even core Trump supporters do not seem to believe the alliance is \"obsolete,\" given that a majority (54%) think NATO is still essential to US security. A Record Percentage of Americans Recognize Benefits of Trade Americans are feeling more optimistic about the positive impact of trade. Compared with a year ago, record numbers of Americans now say that international trade is good for US consumers (78%), for the US economy (72%), and for job creation (57%)..... Additionally, the perceived benefits of trade are up across all party affiliations.... A majority of Americans believe that trade deals between the United States and other countries benefit both countries (50%) or mostly benefit the United States (7%). But a substantial percentage of Americans—including a majority of core Trump supporters and a plurality of Republicans overall—think other countries mostly benefit (34%) or neither country benefits (6%). President Trump has blamed poor trade deals for the loss of American jobs, and on this point, Americans agree. A majority say that manufacturing job losses are due to outsourcing (56%) rather than increased automation (42%). Yet, more Americans say that the current administration's policies will harm (41%) rather than help (32%) US workers, and 24 percent say they will make no difference. There are clear partisan divides on expectations for the new administration. Solid majorities of core Trump supporters (82%) and Republicans (64%) expect this administration's policies will do more to protect US workers, which may help explain why they are more optimistic about the overall benefits of international trade to the US economy, consumers, and job creation. For their part, Democrats may feel the need to underscore their support for international trade as a reaction against the trade-bashing rhetoric from both Republican and Democratic candidates in 2016. Concern over Immigration at Lowest Point Yet Immigration was a central issue during the 2016 presidential campaign, and it remains a key pillar in Donald Trump's America First platform. But the American public is less alarmed than last year by the potential threat of large numbers of immigrants and refugees entering the United States. Just 37 percent of Americans characterize immigration as a critical threat, down from 43 percent in 2016, marking a new low in concern for this issue.... There are, however, still large differences between Democrats (20%) and Republicans (61%), with core Trump supporters the most likely of all to consider immigration a critical threat (80%).... As the overall perceived threat from immigration has gone down, support for providing an opportunity for illegal workers in the United States to become citizens has gone up. Among all Americans, two-thirds (65%) support providing illegal immigrants a path to citizenship either immediately or with a waiting period and a financial penalty—an increase of 7 percentage points since last year. Conversely, fewer Americans now say that illegal immigrants should be required to leave their jobs and the United States (22%, down from 28% in 2016). A clear majority of Democrats (77%, up from 71% in 2016) favor a pathway to citizenship either immediately or with conditions. A smaller majority of Republicans now also favor the same solution as Democrats (52%, up from 44%), although 36 percent of Republicans favor deportation (down from 42% in 2016). Even core Trump supporters are divided in their views, with equal numbers supporting deportation (45%) and a path to citizenship (45%) for illegal immigrants. Majority Continue to Support Paris Agreement Conducted just weeks after President Trump kept his campaign promise to withdraw from the Paris Agreement on climate change, the 2017 Chicago Council Survey reveals that 6 in 10 Americans (62%) continue to favor US participation in the agreement. However, overall public support of the Paris Agreement has declined since 2016 (when 71% favored participation) largely because of a 20-point drop in Republican support (37%, down from 57% in 2016), perhaps following the president's lead on this issue. Just 24 percent of core Trump supporters want the United States to participate in the agreement. In contrast, majorities of Democrats (83%) and Independents (60%) continue to support the Paris Accord, though also at slightly lower levels than in 2016 (when it was backed by 87% of Democrats and 68% of Independents). Overall, 46 percent of Americans say that climate change is now a critical threat facing the United States; while still not a majority, this view reflects the highest point of concern recorded by the Chicago Council Survey. Yet, Republicans and Democrats markedly disagree on the gravity of this issue. Seven in 10 Democrats think that climate change is a critical threat, compared with just 16 percent of Republicans and 12 percent of core Trump supporters.... Fractures within the Republican Party Base Headlines over the past year have proclaimed an internal battle within the Republican Party between President Trump's supporters and those who oppose his policies. The 2017 Chicago Council Survey data illustrate these fissures between self-described Republicans who have a very favorable view of President Trump (\"Trump Republicans\") and those who do not (\"non-Trump Republicans\"). Non-Trump Republicans align more with average US public opinion than they do with Trump Republicans. Non-Trump Republicans are closer to the overall public than to Trump Republicans in their views on NAFTA (53% overall public, 49% non-Trump Republicans, 20% Trump Republicans believe the agreement is good for the US economy). Non-Trump Republicans are also closer to the overall public when asked the best way to get US allies to pay more for their defense (61% Trump Republicans, 40% non-Trump Republicans, and 38% overall favor withholding the US security guarantee). And on immigration, the overall public (65%) and non-Trump Republicans (62%) are more aligned in supporting a path to citizenship for illegal immigrants than Trump Republicans (43%). Specific examples of other differences among Republicans are included in each chapter of this report.... Conclusion Despite the politically charged environment over the past year, Americans express remarkably enduring support for an active US role in world affairs, for security alliances, and for trade relationships. They also favor offering illegal immigrants an opportunity to earn citizenship, either immediately or with conditions—a fact often overlooked by political leaders. Even though a portion of Americans have some questions about how much the United States gets out of security alliances and trade agreements, the American public as a whole seems to recognize clear value in maintaining them. President Trump appears to have noticed, and he has begun to adjust some of his campaign positions since moving into the Oval Office. He has declared that NATO is no longer obsolete and has taken some steps to reassure allies that the United States will honor its defense commitments. Officials in Trump's administration, including the vice president and the secretaries of state and defense, hold more mainstream views on defense issues, and they have repeatedly traveled to allied nations to smooth ruffled feathers. President Trump has also moderated some of his anti-trade rhetoric, backing away from accusations of Chinese currency manipulation and seeking to renegotiate rather than abandon NAFTA. These moderated positions are closer to mainstream American views; they are also closer to the views of those Republicans who are not core supporters of Donald Trump. 2016 Pew Research Center Survey A May 2016 article by the Pew Research Center regarding a survey of U.S. foreign policy attitudes conducted in April 2016 states The public views America's role in the world with considerable apprehension and concern. In fact, most Americans say it would be better if the U.S. just dealt with its own problems and let other countries deal with their own problems as best they can. With the United States facing an array of global threats, public support for increased defense spending has climbed to its highest level since a month after the 9/11 terrorist attacks, when 50% favored more defense spending. Currently, 35% say the U.S. should increase spending on national defense, 24% say it should be cut back and 40% say it should be kept about the same as today. The share favoring more defense spending has increased 12 percentage points (from 23%) since 2013.... The new survey, conducted April 12 to 19 among 2,008 U.S. adults, finds the public remains wary of global involvement, although on some measures, support for U.S. internationalism has increased modestly from the historically low levels found in the 2013 study. Still, 57% of Americans want the U.S. to deal with its own problems, while letting other countries get along as best they can. Just 37% say the U.S. should help other countries deal with their problems. And more Americans say the U.S. does too much (41%), rather than too little (27%), to solve world problems, with 28% saying it is doing about the right amount. The public's wariness toward global engagement extends to U.S. participation in the global economy. Nearly half of Americans (49%) say U.S. involvement in the global economy is a bad thing because it lowers wages and costs jobs; fewer (44%) see this as a good thing because it provides the U.S. with new markets and opportunities for growth.... While Americans remain skeptical of U.S. international involvement, many also view the United States as a less powerful and important world leader than it was a decade ago. Nearly half (46%) say the United States is a less powerful and important world leader than it was 10 years ago, while 21% say it is more powerful, and 31% say it is about as powerful as it was then. U.S. seen as leading economic, military power. The share saying the U.S. has become less powerful has declined since 2013, from 53% to 46%, but is among the highest numbers expressing this view in the past four decades. These attitudes also are divided along partisan lines: Republicans (67%) remain more likely than independents (48%) or Democrats (26%) to say that the U.S. has become less powerful and important. However, although many Americans believe the U.S. has become less powerful than it was in the past, the predominant view among the public is that the United States is the world's leading economic and military power. In a separate Pew Research Center survey conducted April 4 to 24 among 1,003 U.S. adults, a majority of Americans (54%) say the United States is the world's leading economic power, with China a distant second at 34%. This is the first time, in surveys dating back to 2008, that more than half of the public has named the United States as the leading economic power. 2016 Chicago Council on Global Affairs Report A 2016 Chicago Council on Global Affairs report on U.S. public opinion data regarding U.S. foreign policy stated Over the past year, Donald Trump has been able to channel the anxieties of a significant segment of the American public into a powerful political force, taking him to the doorstep of the White House. These public anxieties stem from growing concerns about the effects of globalization on the American economy and about the changing demographics of the United States. Although Trump has been able to mobilize many of those who are most concerned about these developments, their motivating concerns are not new. They existed before Donald Trump entered the race, and they are likely to persist even if he loses the election in November 2016. Yet, uniquely among the candidates running for president this cycle, Trump has given voice to this group of Americans, notably through his tough stances on immigration and trade. At the same time, while this segment of the American public has given Donald Trump traction in the presidential race, his views on important issues garner only minority support from the overall American public. While they are divided on expanding a wall on the US border with Mexico, Americans overall support continued immigration into the United States and favor reform to address the large population of unauthorized immigrants already in the country. Americans overall think globalization is mostly good for the United States, and they see many benefits to free trade. And the American public as a whole—including the core supporters of Donald Trump—still favors the country's traditional alliances, a shared leadership role for the United States abroad, and the preservation of US military superiority.... While Trump's views on immigration and trade clearly resonate with his core supporters, some of his other criticisms of US foreign policy are less popular among his base. For example, core Trump supporters are somewhat more cautious than other Americans of alliances and an active US role in world affairs, but in most cases they continue to favor international engagement. This serves as a reminder that despite divides on issues such as immigration and trade, the American public finds a great deal of common ground on American leadership in the world and how to achieve American goals.... 2016 Charles Koch Institute and Center for the National Interest Survey The Charles Koch Institute and the Center for the National Interest stated the following regarding the results of a December 2016 survey of U.S. public opinion regarding U.S. foreign policy: The Charles Koch Institute and the Center for the National Interest today released a poll of 1,000 Americans that shows voters believe focusing on diplomacy and trade are better methods of improving U.S. security than military intervention. \"More than half of Americans think that U.S. foreign policy over the last 15 years has made us less safe,\" said William Ruger, vice president for research and policy at the Charles Koch Institute. \"Americans want the next administration to take a different approach, with many favoring more caution about committing military forces abroad while preferring greater burden sharing by our wealthy allies and diplomacy over regime change. This poll is the second since October where the Charles Koch Institute and the Center for the National Interest have identified Americans' disenchantment with the status quo. The public's call for peace and change reflect the same views they held before the election. It's time that Washington listens to a public expressing greater prudence.\" \"Americans see trade and diplomacy as contributing more to U.S. national security than regime change in foreign lands,\" said Paul J. Saunders, executive director of the Center for the National Interest. \"Voters also support a strong military and more balanced alliances—though many have reservations about unconditional commitments, particularly to some new U.S. allies. The incoming administration and Congress have an important opportunity to define a new model of American leadership that moves beyond the mistakes of the last two decades.\" Poll results show: Americans Still Believe Recent U.S. Foreign Policy Has Made Them Less Safe: • When asked if U.S. foreign policy over the last 15 years had made Americans more or less safe, a majority (52%) said less safe. Just 12% said more, while one quarter said U.S. foreign policy had no impact on their level of safety. • When asked if U.S. foreign policy over the last 15 years had made the world more or less safe, 51% said less safe, 11% said more, and 24% said safety levels had stayed the same. • These findings are largely the same as results from a joint CKI-CFTNI October [2016] poll. Americans Favor Peaceful Engagement Over Military Intervention: • More than two-thirds of respondents (70%) agreed with the statement, \"The U.S. should work with existing governments and heads of state to try to promote peace\" rather than seeking to oust government by force. • When asked which of two options would make the United States safer, 49% said prioritizing diplomacy over military intervention while just 26% said prioritizing military power over diplomacy. Another 25% were not sure. • When asked whether the U.S. government should increase U.S. military spending, decrease it, or keep spending the same, a plurality (40%) wanted to increase spending, while nearly half either wanted to keep it the same (32%) or cut it (17%). Another 12% were not sure. • When asked which of two options would make the United States safer, only 20% said making more attempts at regime change would improve safety, while 45% said cutting the number of U.S. attempts at regime change would improve safety. 35% were not sure. • More than half (54%) said working more through the United Nations would improve U.S. safety, while only 26% thought working less through the United Nations would be better. 24% were not sure. • When asked broadly about what would make the United States safer, respondents preferred expanding U.S. alliance commitments (50%) to reducing U.S. alliance commitments (27%). However, Americans did not see U.S. commitments as necessarily unconditional. Only 26% of the respondents either somewhat or strongly agreed with the statement, \"In a military conflict between Russia and Latvia, Lithuania, or Estonia, the United States should automatically defend that country with American military forces.\" Thirty-two percent either somewhat or strongly disagreed. • Increased trade should be part of the United States' diplomatic efforts. More than half of respondents (55%) said increasing trade would improve U.S. safety. Only 22% said decreasing trade would make the country safer. Another 23% were not sure. • Notwithstanding significant reservations about Russia, over half of voters see that country as a potential partner. When asked whether the United States should view Russia an adversary or as a potential partner, more than half either said Russia should be viewed as both (38%) or should be viewed as a potential partner (17%). Only 33% said Russia definitely should be viewed solely as an adversary. Another 12% said they were unsure. • American voters are unsure about the U.S. relationship with China. When asked whether they viewed China as an ally, 93% of respondents said no. However, 89% also indicated they would not characterize China as an enemy. The most accepted term for China was \"competitor\"—42% of respondents said they agreed with that characterization. Americans Want Washington to Exercise Restraint Abroad: • When asked whether Congress should impeach a president who does not get congressional approval before committing the United States to military action abroad, a plurality (39%) said yes, while just 27% said no. Another 34% were not sure. • When asked which of two options would make the United States safer, 45% of respondents said reducing U.S. military presence abroad, 31% said increasing it, and 24% said they did not know. • When asked which of two options would make the United States safer, 40% of respondents said decreasing the use of U.S. military force for democracy promotion internationally, 31% said increasing it, and 29% were not sure. • When asked about troop levels in Europe, three quarters said the United States should either keep levels the same as they are today (46%) or bring home at least some of the troops (28%). Only 12% said troop levels in Europe should be expanded. A plurality (44%) said the media had not provided enough information about recent U.S. troop deployments in Europe. • When a sked whether the United States should deploy ground troops to Syria, 55% of Americans said no, 23% said yes, and 23% were not sure. Those opposing ground troops in Syria increased by 4 percentage points since the October survey. • When asked whether the United States should increase its military presence in the Middle East, only 22% of respondents said yes, while 35% said they would reduce U.S. presence in the Middle East. Another 29% said they wouldn't change troop levels. Voters Want President-Elect Donald Trump to Exercise Restraint and Audit the Military: • When asked whether President-elect Trump should audit the Pentagon, 57% said yes, 28% weren't sure, and 15% said no. • Americans think our allies should shoulder more of the burden. When asked whether President-elect Trump should encourage NATO countries to increase or decrease their defense spending, only 8% said decrease while 41% said increase, and another 33% said President-elect Trump should encourage NATO countries to keep spending levels stable. • When asked whether the Trump administration should strengthen the U.S. military's relationship with Saudi Arabia, only 20% said it should while 23% suggested the United States should loosen its ties with Saudi Arabia. One third (33%) said the relationship should be kept as is, while another 24% were not sure. • When asked whether President-elect Trump should respect, renegotiate, or walk away from the Iran deal that lifted international sanctions on Iran in exchange for more scrutiny of their nuclear facilities, 32% said renegotiate, 28% said respect, 17% said walk away, and 23% were not sure. Comments from Observers In September 2018, one observer stated the following: President Trump may not enjoy majority support these days, but there's good reason to believe that his \"America First\" approach to the world does. There has been no popular outcry against Mr. Trump's trade battles with Canada, Mexico and the European allies. Experts suggest we are in for a long international trade war, no matter who the next president may be. After all, even Hillary Clinton had to disown her support for the Trans-Pacific Partnership in the last election. The old free-trade consensus is gone. Mr. Trump's immigration policies may be more popular with Republicans than with Democrats, but few Democratic politicians are running on a promise to bring more immigrants into the country. And just as in the 1920s, isolationism joins anti-immigration sentiment and protectionism as a pillar of America Firstism. The old consensus about America's role as upholder of global security has collapsed in both parties. Russia may have committed territorial aggression against Ukraine. But Republican voters follow Mr. Trump in seeking better ties, accepting Moscow's forcible annexation of Crimea and expanding influence in the Middle East (even if some of the president's subordinates do not). They applaud Mr. Trump for seeking a dubious deal with North Korea just as they once condemned Democratic presidents for doing the same thing. They favor a trade war with China but have not consistently favored military spending increases to deter a real war. Democrats might seem to be rallying behind the liberal order, but much of this is just opposition to Mr. Trump's denigration of it. Are today's rank-and-file Democrats really more committed to defending allies and deterring challengers to the liberal world order? Most Democratic politicians railing against Mr. Trump's \"appeasement\" of Moscow hailed Obama's \"reset\" a few years ago and chastised Republicans for seeking a new Cold War. Most Democratic voters want lower military spending and a much smaller United States military presence overseas, which hardly comports with getting tougher on Russia, Korea or China — except on trade. Most Americans in both parties also agree with Mr. Trump that America's old allies need to look out for themselves and stop relying on the United States to protect them. Few really disagreed with the president's stated reluctance to commit American lives to the defense of Montenegro. Britons in the 1930s did not want to \"die for Danzig,\" and Americans today don't want to die for Taipei or Riga, never mind Kiev or Tbilisi. President Obama was less hostile to the allies than Mr. Trump, but even he complained about \"free riders.\" In retrospect it's pretty clear that Mr. Obama was too internationalist for his party base. He expanded NATO, intervened in Libya, imposed sanctions on Russia and presided over the negotiation of the Trans-Pacific Partnership. Democrats may miss Mr. Obama for many reasons, but there's little evidence that the rank-and-file miss those policies. Mr. Trump's narrower, more unilateralist and nationalist approach to the world is probably closer to where the general public is than Mr. Obama's more cosmopolitan sensibility. It would be comforting to blame America's current posture on Mr. Trump. But while he may be a special kind of president, even he can't create a public mood out of nothing. Now as always, presidents reflect public opinion at least as much as they shape it. Between the two world wars, and especially from 1921 through 1936, an American public disillusioned by World War I was averse to further overseas involvement, and it didn't matter whether the presidents were supposed \"isolationists\" like Warren Harding and Calvin Coolidge or supposed \"internationalists\" like Herbert Hoover and Franklin Roosevelt. It took a lot more than fireside chats to turn public opinion around. It took Hitler's conquest of Europe, near-conquest of Britain and, finally, Pearl Harbor to onvince a majority of Americans that America First was a mistake. In our own time, the trend toward an America First approach has been growing since the end of the Cold War. George H.W. Bush, the hero of the Gulf War, had to play down foreign policy in 1992 and lost to a candidate promising to focus on domestic issues. George W. Bush won in 2000 promising to reduce United States global involvement, defeating an opponent, Al Gore, who was still talking about America's indispensability. In 2008, Mr. Obama won while promising to get out of foreign conflicts for good. In 2016, Republican internationalists like Jeb Bush and Marco Rubio were trounced in the primaries. Hillary Clinton struggled to hold off Bernie Sanders, a progressive isolationist, and it was certainly not because of her foreign policy views. Now we have Mr. Trump. Is he an aberration or a culmination? Many foreign policy experts, and most of the foreign leaders pouring into New York this week for the United Nation's General Assembly, have been counting on the former. They place their hopes on the 2020 elections to get America back on its old path. But they may have to start facing the fact that what we're seeing today is not a spasm but a new direction in American foreign policy, or rather a return to older traditions — the kind that kept us on the sidelines while fascism and militarism almost conquered the world. In a May 2017 blog post, one foreign policy specialist stated the following: Over a period of decades, the American people and their elected representatives funded defense expenditures far greater than what would have been necessary simply to protect the continental United States. They faced up to the idea that American troops might fight and die to defend faraway frontiers. And they accepted—often reluctantly—the notion that Washington should take primary responsibility for leading the global economy, U.S. alliances, and international institutions, despite the myriad costs and frustrations involved. Americans accepted these costs not out of any special altruism, of course, but because they believed the benefits of living in—and leading—a stable, prosperous, and liberal world order were ultimately greater. But if the postwar era was thus characterized, as G. John Ikenberry and Daniel Deudney write, by a \"bipartisan consensus…on the paramount importance of American leadership,\" then the 2016 presidential election and its results surely called into question whether that consensus still exists.... So, was the 2016 election merely an aberration within the long history of American internationalism? Or does Trump's victory indicate deeper and perhaps more irrevocable changes in American attitudes on foreign affairs? As it turns out, there are two plausible interpretations of this issue, and they point in very different directions.... If political support for American internationalism was plummeting, one would expect to see unambiguous downturns in public opinion toward U.S. alliances, international trade, and other key initiatives. Yet while there certainly are signs of public alienation from American internationalism – as discussed subsequently – most recent polling data tells a different story. According to public opinion surveys taken in the heat of the 2016 campaign, for instance, 65 percent of Americans saw globalization as \"mostly good\" for the United States, and 64 percent saw international trade as \"good for their own standard of living.\" Even the Trans-Pacific Partnership – which Clinton disowned under pressure from Sanders, and which Trump used as a political punching bag – enjoyed 60 percent support. Reaching back slightly further to 2013, an overwhelming majority – 77 percent – of Americans believed that trade and business ties to other countries were either \"somewhat good\" or \"very good\" for the United States. In other words, if Americans are in wholesale revolt against globalization, most public opinion polls are not capturing that discontent. Nor are they registering a broad popular backlash against other aspects of American internationalism. Although Trump delighted in disparaging U.S. alliances during the campaign, some 77 percent of Americans still saw being a member of NATO as a good thing. A remarkable 89 percent believed that maintaining U.S. alliances was \"very or somewhat effective at achieving U.S. foreign policy goals.\" Similarly, recent opinion polls have revealed little evidence that the American public is demanding significant military retrenchment. In 2016, three-quarters of respondents believed that defense spending should rise or stay the same. The proposition favoring more defense spending had actually increased significantly (from 23 percent to 35 percent) since 2013. Support for maintaining overseas bases and forward deployments of U.S. troops was also strong. And regarding military intervention, recent polls have indeed shown a widespread belief that the U.S. wars in Iraq and Afghanistan were not worth the cost, but these sentiments do not seem to have translated into a broader skepticism regarding the utility of military force. In 2016, for instance, 62 percent of Americans approved of the military campaign against the Islamic State, demonstrating broad agreement that the United States should be willing to use the sword – even in faraway places – when threats emerge. Polling on other issues reveals still more of the same. For all of Trump's critiques of international institutions, international law, and multilateralism, nearly two-third of Americans (64 percent) viewed the United Nations favorably in 2016 and 71 percent supported U.S. participation in the Paris Agreement on combating climate change. And, although polls indicating that over 50 percent of Americans now prefer to let other countries \"get along as best they can\" on their own are far more troubling, here too the overall picture painted by recent survey data is somewhat brighter. As of 2016, more than half – 55 percent – of Americans believed that the United States either did too little or the right amount in confronting global problems. When asked if the United States should continue playing an active role in world affairs, nearly two-thirds answered affirmatively. As one comprehensive analysis of the survey data thus concluded, at present there is just not overwhelming evidence—in the polls, at least—to suggest a broad-gauged public rejection of internationalism: \"The American public as a whole still thinks that the United States is the greatest and most influential country in the world, and bipartisan support remains strong for the country to take an active part in world affairs.\"... ... there is also a far more pessimistic – and equally plausible – way of reading the national mood. From this perspective, Trump's rise is not an aberration or a glitch. It is, rather, the culmination of a quiet crisis that has gradually but unmistakably been weakening the political foundations of American internationalism. That crisis may not yet be manifesting in dramatic, across-the-board changes in how Americans view particular foreign policy issues. But as Trump's election indicates, its political effects are nonetheless becoming profound.... After all, it was not Trump but Obama who first called for the country to shift from nation-building abroad to nation-building at home. Whatever their views on other parts of American internationalism, many Americans apparently agreed. Whereas 29 percent of Americans believed that promoting democracy abroad should be a key diplomatic priority in 2001, by 2013 the number was only 18 percent. When Trump slammed these aspects of American internationalism, he was pushing on an open door.... What Trump intuitively understood, however, was that the credibility of the experts had been badly tarnished in recent years. As Tom Nichols has observed, the deference that experts command from the U.S. public has been declining for some time, and this is certainly the case in foreign policy.... These issues related to another, more fundamental contributor to the crisis of American internationalism: the rupturing of the basic political-economic bargain that had long undergirded that tradition. From its inception, internationalism entailed significant and tangible costs, both financial and otherwise, and the pursuit of free trade in particular inevitably disadvantaged workers and industries that suffered from greater global competition. As a result, the rise of American internationalism during and after World War II went hand-in-hand with measures designed to offset these costs by ensuring upward social mobility and rising economic fortunes for the voters—particularly working- and middle-class voters—being asked to bear them.... This bargain has gradually been fraying since as far back as the late 1970s, however, and in recent years it increasingly seems to have broken. For the fact is that many Americans—particularly less-educated Americans—are not seeing their economic fortunes and mobility improve over time. Rather, their prospects have worsened significantly in recent decades.... Indeed, although there is plenty of public opinion polling that paints a reassuring picture of American views on trade and globalization, there are also clear indications that such a backlash is occurring. In 2016, a plurality of Americans (49 percent) argued that \"U.S. involvement in the global economy is a bad thing because it lowers wages and costs jobs,\" a sentiment perfectly tailored to Trump's protectionist message.... More broadly, it is hard not to see concerns about economic insecurity looming large in the growing proportion of Americans who believe that the United States is overinvested internationally—and who therefore prefer for the \"U.S. to deal with its own problems, while letting other countries get along as best they can.\" In 2013, 52 percent of Americans—the highest number in decades—agreed with a version of this statement. In 2016, the number was even higher at 57 percent. In sum, American voters may still express fairly strong support for free trade and other longstanding policies in public opinion surveys. But it is simply impossible to ignore the fact that, among significant swaths of the population, there is nonetheless an unmistakable and politically potent sense that American foreign policy has become decoupled from the interests of those it is meant to serve. And this point, in turn, illuminates a final strain that Trump's rise so clearly highlighted: the growing sense that American internationalism has become unmoored from American nationalism. American internationalism was always conceived as an enlightened expression of American nationalism, an approach premised on the idea that the wellbeing of the United States was inextricably interwoven with that of the outside world. But the inequities of globalization have promoted a tangible feeling among many voters that American elites are now privileging an internationalist agenda (one that may suit cosmopolitan elites just fine) at the expense of the wellbeing of \"ordinary Americans.\" Likewise, insofar as immigration from Mexico and Central America has depressed wages for low-skilled workers and fueled concerns that the white working class is being displaced by other demographic groups, it has fostered beliefs that the openness at the heart of the internationalist project is benefitting the wrong people. \"Many Jacksonians,\" writes Walter Russell Mead of the coalition that brought Trump to power, \"came to believe that the American establishment was no longer reliably patriotic.\" What does all this tell us about the future of American internationalism? The answer involves elements of both interpretations offered here. It is premature to say that a \"new isolationism\" is taking hold, or that Americans are systematically turning away from internationalism, in light of the idiosyncrasies of Trump's victory and the fact that so many key aspects of internationalism still poll fairly well. Yet no serious observer can contend that American internationalism is truly healthy given Trump's triumph, and the 2016 election clearly revealed the assorted maladies that had been quietly eroding its political vitality. American internationalism may not be slipping into history just yet, but its long-term trajectory seems problematic indeed. Later in May 2017, this same foreign policy specialist stated in a different blog post that On the one hand, it is easy to make the case that Trump's election was more of a black-swan, anomalous event than something that tells us much about the state of public opinion on foreign policy. The election campaign was dominated not by deeply substantive foreign policy debates, in this interpretation, but by the historic unpopularity of both candidates. And of course, Trump was decisively defeated in the popular vote by a card-carrying member of the U.S. foreign policy establishment—and he might well have lost decisively in the electoral college, too, if not for then-FBI Director James Comey's intervention and a series of other lucky breaks late in the campaign. There is, moreover, substantial polling data to suggest that American internationalism is doing just fine. According to surveys taken during the 2016 campaign, 65 percent of Americans believed that globalization was \"mostly good\" for the United States, and 89 percent believed that maintaining U.S. alliances was \"very or somewhat effective at achieving U.S. foreign policy goals.\" Support for U.S. military primacy and intervention against threats such as the Islamic State also remained strong, as did domestic backing for the United Nations and the Paris climate change accords. As an extensive analysis of this polling data by the Chicago Council concluded, there does not seem to be any wholesale public rejection of American internationalism underway: \"The American public as a whole still thinks that the United States is the greatest and most influential country in the world, and bipartisan support remains strong for the country to take an active part in world affairs.\" And indeed, insofar as Trump has had to roll back some of the more radical aspects of his \"America first\" agenda since becoming president—tearing up the North American Free Trade Agreement, declaring NATO obsolete, launching a trade war with China—he seems to be adjusting to this reality. That's the good news. But on the other hand, American internationalism simply cannot be all that healthy, because Trump did win the presidency by running on the most anti-internationalist platform seen in decades. American voters may not have been voting for that platform itself, but at the very least they did not see Trump's radical views on foreign policy as disqualifying. And as one digs deeper into the state of American internationalism today, it becomes clear that there are indeed real problems with that tradition—problems that Trump exploited on his road to the White House, and that are likely to confront his successors as well. Trump's rise has highlighted five key strains that have been weakening the political foundations of American internationalism for years now. First, since the end of the Cold War, it has become harder for Americans to identify precisely why the United States must undertake such extraordinary exertions to shape the global order. Without a pressing, easily identifiable global threat, in other words, it is harder to intuitively understand what American alliances, forward force deployments, and other internationalist initiatives are for. Second, although U.S. internationalism has proven very valuable in shaping a congenial international system, it is undeniable that aspects of that tradition—such as nation building missions in Afghanistan and Iraq—have proven costly and unrewarding in recent years. Not surprisingly, many Americans are thus questioning if the resources that the country devotes to foreign policy are being used effectively. This disillusion has shown up in public opinion polling: Whereas 29 percent of Americans believed that promoting democracy should be a key foreign policy objective in 2001, only 18 percent thought so in 2013. Third, the credibility of the U.S. foreign policy establishment has also been weakened over the past 15 years. This is because policy elites in both parties pursued policies—the Iraq War under President George W. Bush, the subsequent withdrawal from Iraq and creation of a security vacuum in that country under President Barack Obama—that led to high-profile disasters. As a result, when Trump—who actually supported the invasion of Iraq before later opposing it—answered establishment criticism by pointing out that the establishment had brought the United States the Iraq War and the Islamic State, his rejoinder probably made a good deal of sense to many voters. Fourth, U.S. internationalism has been weakened by the declining economic fortunes of the working and middle classes—a phenomenon that has made those groups less enthusiastic about bearing the costs and burdens associated with U.S. foreign policy. The pursuit of globalization and free trade has not been the primary culprit here—issues like automation and the transition to a postindustrial economy have been more important. But it is undeniable that globalization has exacerbated economic insecurity for the working class in particular, and China's integration into the global economy has taken a significant toll on manufacturing and related employment in the United States. During the Republican primaries, in fact, 65 percent of Trump voters believed that U.S. involvement in the international economy was a bad thing. During the general election, Trump overperformed in areas hardest hit by competition from international trade. Fifth, and finally, one can discern among many voters an amorphous but powerful sense that U.S. internationalism has become unmoored from U.S. nationalism—that America's governing classes have pursued an agenda that has worked nicely for the well-to-do, but brought fewer benefits to the ordinary Americans whom U.S. foreign policy is meant to serve. This dynamic is evident in the 57 percent of the population who believed in 2016 that the United States was focusing too much on other countries' problems and not enough on its own. Cracks are growing in the political consensus that has traditionally undergirded American internationalism—cracks through which Trump was able emerge in 2016. The bottom line is that American internationalism is not dead yet, but that it faces serious longterm maladies that could, perhaps, ultimately prove fatal. Also in May 2017, a different foreign policy specialist stated the following: When the Soviet Union collapsed in 1991, the bipartisan foreign-policy establishment was united in seeing a historic opportunity to deepen the liberal order and extend it into the rest of the world. Yet the public had always been skeptical about this project. Jacksonians in particular believed that American global policy was a response to the Soviet threat, and that once the threat had disappeared, the U.S. should retrench. After World War I, and again at the start of the Cold War, Americans had held great debates over whether and how to engage with the world. But that debate didn't happen after the Soviet collapse. Elites felt confident that the end of history had arrived, that expanding the world order would be so easy and cheap it could be done without much public support. Washington thus embarked on a series of consequential foreign-policy endeavors: enlarging the North Atlantic Treaty Organization to include much of Central and Eastern Europe, establishing the World Trade Organization in the mid-'90s, promoting a global democracy agenda whenever possible. American voters have never shared the establishment's enthusiasm for a foreign policy aimed at transforming the post-Cold War world. When given the choice at the ballot box, they consistently dismiss experienced foreign-policy hands who call for deep global engagement. Instead they install untried outsiders who want increased focus on issues at home. Thus Clinton over Bush in 1992, Bush over Gore in 2000, Obama over McCain in 2008, and Trump over Clinton in 2016. Today the core problem in American foreign policy remains the disconnect between the establishment's ambitious global agenda and the limited engagement that voters appear to support. As Washington's challenges abroad become more urgent and more dangerous, the divide between elite and public opinion grows more serious by the day. The establishment is now beginning to discover what many voters intuitively believed back in the 1990s. Building a liberal world order is much more expensive and difficult than it appeared in a quarter-century ago, when America was king. Further, Washington's foreign-policy establishment is neither as wise nor as competent as it believes itself to be. Meantime, the world is only becoming more dangerous.... And the U.S. still lacks a strong consensus on what its foreign policy should be. Washington's foreign policy needs more than grudging acquiescence from the American people if it is to succeed. How to build broad support? First, the Trump administration should embrace a new national strategy that is more realistic than the end-of-history fantasies that came at the Cold War's conclusion. The case for international engagement should be grounded in the actual priorities of American citizens. Second, Mr. Trump and other political leaders must make the case for strategic global engagement to a rightfully skeptical public. For much of the establishment, focusing on the Trump administration's shortcomings is a way to avoid a painful inquest into the failures and follies of 25 years of post-Cold War foreign policy. But Mr. Trump's presidency is the result of establishment failure rather than the cause of it. Until the national leadership absorbs this lesson, the internal American crisis will deepen as the world crisis grows more acute. In an April 2017 blog post, one foreign policy specialist stated the following: Every 20 years or so—the regularity is a little astonishing—Americans hold a serious debate about their place in the world. What, they ask, is going wrong? And how can it be fixed? The discussion, moreover, almost always starts the same way. Having extricated itself with some success from a costly war, the United States then embraces a scaled-down foreign policy, the better to avoid overcommitment. But when unexpected challenges arise, people start asking whether the new, more limited strategy is robust enough. Politicians and policy makers, scholars and experts, journalists and pundits, the public at large, even representatives of other governments (both friendly and less friendly) all take part in the back-and-forth. They want to know whether America, despite its decision to do less, should go back to doing more—and whether it can. The reasons for doubt are remarkably similar from one period of discussion to the next. Some argue that the U.S. economy is no longer big enough to sustain a global role of the old kind, or that domestic problems should take priority. Others ask whether the public is ready for new exertions. The foreign-policy establishment may seem too divided, and a viable consensus too hard to reestablish. Many insist that big international problems no longer lend themselves to Washington's solutions, least of all to military ones. American \"leadership,\" it is said, won't work so well in our brave new world.... Polls suggested [in 2016] that [the public], too, was open to new approaches—but unsure how to choose among them. In May 2016, the Pew Research Center reported that 70 percent of voters wanted the next president to focus on domestic affairs rather than foreign policy. In the same poll, Pew found that majorities of Democrats, Republicans, and independents favored policies that would keep the United States \"the only military superpower.\" Not for the first time, it seemed that Americans wanted to have it all.... ... the two halves of Trump's formula worked together better than critics appreciated. He sensed that the public wanted relief from the burdens of global leadership without losing the thrill of nationalist self-assertion. America could cut back its investment in world order with no whiff of retreat. It would still boss others around, even bend them to its will. Trump embraced Bernie Sanders's economics without George McGovern's geopolitics. Of self-identified conservative Republicans, 70 percent told Pew last year that they wanted the U.S. to retain its global military dominance. \"Make America Great Again\" was a slogan aimed right at them. Trump's more-and-less strategy also helped him with those who wanted a bristly, muscular America but did not want endless military involvements. Rejecting \"nation building\" abroad so as to focus on the home front was Trump's way of assuring voters that he knew how to avoid imperial overstretch. He offered supporters the glow of a Ronald Reagan experience—without the George W. Bush tab. Commenting on the 2016 Charles Koch Institute-Center for the National Interest poll discussed earlier, a December 2016 blog post from staff of The National Interest stated With the election of Donald Trump to the presidency, the American public opted for change. A new poll from the Charles Koch Institute and Center for the National Interest on America and foreign affairs indicates that the desire for a fresh start may be particularly pronounced in the foreign policy sphere. In many areas the responses align with what Donald Trump was saying during the presidential campaign—and in other areas, there are a number of Americans who don't have strong views. There may be a real opportunity for Trump to redefine the foreign policy debate. He may have a ready-made base of support and find that other Americans are persuadable. Two key questions centering on whether U.S. foreign policy has made Americans more or less safe and whether U.S. foreign policy has made the rest of the world more or less safe show that a majority of the public is convinced that—in both cases—the answer is that it has not. 51.9 percent say that American foreign policy has not enhanced our security; 51.1 percent say that it has also had a deleterious effect abroad. The responses indicate that the successive wars in the Middle East, ranging from Afghanistan to Iraq to Libya, have not promoted but, rather, undermined a sense of security among Americans. The poll results indicate that this sentiment has translated into nearly 35 percent of respondents wanted a decreased military footprint in the Middle East, with about 30 percent simply wanting to keep things where they stand. When it comes to America's key relationship with Saudi Arabia, 23.2 percent indicate that they would favor weaker military ties, while 24 percent say they are simply unsure. Over half of Americans do not want to deploy ground troops to Syria. Overall, 45.4 percent say that they believe that it would enhance American security to reduce our military presence abroad, while 30.9 percent say that it should be increased. That Americans are adopting a more equivocal approach overall towards other countries seems clear. When provided with a list of adjectives to describe relationship, very few Americans were prepared to choose the extremes of friend or foe. The most popular term was the fairly neutral term \"competitor.\" The mood appears to be similarly ambivalent about NATO. When asked whether the U.S. should automatically defend Latvia, Lithuania, or Estonia in a military conflict with Russia, 26.1 percent say that they neither agree nor disagree. 22 percent say that they disagree and a mere 16.8 percent say that they agree. Similarly, when queried about whether the inclusion of Montenegro makes America safer, no less than 63.6 percent say that they don't know or are not sure. About Russia itself, 37.8 percent indicate they see it as both an adversary and a potential partner. That they still see it as a potential partner is remarkable given the tenor of the current media climate. The poll results underscore that Americans are uneasy with the status quo. U.S. foreign policy in particular is perceived as a failure and Americans want to see a change, endorsing views and stands that might previously have been seen as existing on the fringe of debate about America's proper role abroad. Instead of militarism and adventurism, Americans are more keen on a cooperative world, in which trade and diplomacy are the principal means of engaging other nations. 49 percent of the respondents indicate that they would prioritize diplomacy over military power, while 26.3 percent argue for the reverse. 54 percent argue that the U.S. should work more through the United Nations to improve its security. Moreover, a clear majority of those polled stated that they believed that increasing trade would help to make the United States safer. In a year that has been anything but normal, perhaps Trump is onto something with his talk of burden sharing and a more critical look at the regnant establishment foreign policy that has prevailed until now. In December 2016, two Australian foreign policy analysts stated the following: The 2016 presidential election demonstrated the rise of a \"restraint constituency\" in American politics that openly questions Washington's bipartisan post-Cold War pursuit of a grand strategy of primacy or liberal hegemony. This constituency has been animated by the return of the Jacksonian tradition of American foreign policy, most notably in the candidacy of Donald Trump, which directly questions the benefits of alliance relationships as well as U.S. underwriting of an open global economic system. It also stresses the need for the United States to act unilaterally in defense of its core foreign policy interests. The resurgence of the Jacksonian tradition will make it difficult for the next President to reestablish a foreign policy consensus and combat perceptions of American decline.\" In a June 2016 blog post, one foreign policy specialist (the same one quoted above for the April 2017 blog post) stated the following: Few things make professors happier than thinking that the public has finally begun to agree with them. No surprise, then, that John Mearsheimer of the University of Chicago and Stephen Walt of Harvard open their article in Foreign Affairs —in which they propose a new \"grand strategy\" for the United States—by observing that \"[f]or the first time in recent memory, a large number of Americans\" are saying they want the same thing. The ideas Mr. Mearsheimer and Mr. Walt propose—big cuts in defense spending, withdrawals from Europe and the Middle East, a focus on China as our only real rival—deserve the discussion they will surely get. But let's put the policy merits to one side. Are the professors right to say they've now got the people behind them? The data say no. Mr. Mearsheimer and Mr. Walt rely on an April Pew poll that found that 57% of Americans want the U.S. \"to deal with its own problems.\" But this is what most Americans always say, no matter what \"grand strategy\" their leaders follow. In 2013, 80% of Pew respondents wanted to \"concentrate more on our own national problems.\" Twenty years earlier, 78% said the same thing. And 20 years before that, 73%. On this particular question, the number today (it's dropped to 69% since 2013) is lower than it has been \"in recent memory,\" but it's always high.... Pew's pollsters, of course, ask many different questions, and the results don't always seem entirely consistent. Still, one trend is very clear: Fewer Americans are saying they want a less activist foreign policy. Three years ago, 51% said the U.S. did \"too much in helping solve world problems.\" This year, 41% did. This pattern—a 10-point drop in three years—holds among Democrats, Republicans, and independents. Ask questions with a sharper policy focus, and the result is steady—sometimes growing—support for a strong U.S. global role. Majorities of Democrats, Republicans, and independents favor policies that would keep the U.S. \"the only military superpower.\" Mr. Mearsheimer and Mr. Walt, by contrast, want to cut defense spending. Only 24% of Americans agree. (That share, also, is down from five years ago, and support for an increase has almost tripled, from 13% to 35%.) The professors want to pull all U.S. forces out of Europe and let our allies handle Russia on their own. Fine, but 77% of the American public thinks that NATO is good for the United States, and almost as many Americans (42%) view Russia as a \"major threat\" as see China that way (50%).", "summary": "Some observers perceive that after remaining generally stable for a period of about 70 years, the U.S. role in the world—meaning the overall character, purpose, or direction of U.S. participation in international affairs and the country's overall relationship to the rest of the world—is undergoing a potentially historic change. A change in the U.S. role in the world could have significant and even profound effects on U.S. security, freedom, and prosperity. It could significantly affect U.S. policy in areas such as relations with allies and other countries, defense plans and programs, trade and international finance, foreign assistance, and human rights. The U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years or so) is generally described as one of global leadership and significant engagement in international affairs. A key element of that role has been to defend and promote the liberal international order that the United States, with the support of its allies, created in the years after World War II. Other key elements have been to defend and promote freedom, democracy, and human rights as universal values, while criticizing and resisting authoritarian and illiberal forms of government where possible; and to oppose the emergence of regional hegemons in Eurasia or a spheres-of-influence world. The fact that the U.S. role in the world has been generally stable over the past 70 years does not necessarily mean that this role was the right one for the United States, or that it would be the right one in the future. Although the role the United States has played in the world since the end of World War II has many defenders, it also has critics, and the merits of that role have been a matter of long-standing debate among foreign policy specialists, strategists, policymakers, and the public, with critics offering potential alternative concepts for the U.S. role in the world. One major dimension of the debate is whether the United States should attempt to continue playing the active internationalist role that it has played for the past 70 years, or instead adopt a more-restrained role that reduces U.S. involvement in world affairs. A number of critics of the U.S. role in the world over the past 70 years have offered multiple variations on the idea of a more-restrained U.S. role. The overall issue for Congress is how to respond to recent developments regarding the U.S. role in the world. Potential key issues for Congress include but are not necessarily limited to the following: Is the U.S. role changing, and if so, in what ways? Should the U.S. role change? Is a change of some kind in the U.S. role unavoidable? How are other countries responding to a possibly changed U.S. role? Is a changed U.S. role affecting world order? What implications might a changed U.S. role in the world have for Congress's role relative to that of the executive branch in U.S. foreign policymaking? How might the operation of democracy in the United States affect the U.S. role in the world, particularly in terms of defending and promoting democracy and criticizing and resisting authoritarian and illiberal forms of government? Would a change in the U.S. role be reversible, and if so, to what degree? Congress's decisions on this issue could have significant implications for numerous policies, plans, programs, and budgets, and for the role of Congress relative to that of the executive branch in U.S. foreign policymaking.", "document_type": "crs"}
{"report": "O ne of the core purposes of the First Amendment's Free Speech Clause is to foster \"an uninhibited marketplace of ideas,\" testing the \"truth\" of various ideas \"in the competition of the market.\" Social media sites provide one avenue for the transmission of those ideas. The Supreme Court has recognized that the internet in general, and social media sites in particular, are \"important places\" for people to \"speak and listen,\" observing that \"social media users employ these websites to engage in a wide array of protected First Amendment activity.\" Users of social media sites such as Facebook, Twitter, YouTube, or Instagram can use these platforms to post art or news, debate political issues, and document their lives. In a study conducted in early 2018, the Pew Research Center found that 68% of U.S. adults use Facebook, 35% use Instagram, and 24% report using Twitter. These sites not only allow users to post content, they also connect users with each other, allowing users to seek out friends and content and often recommending new connections to the user. On most social media platforms, users can then send content to specific people, or set permissions allowing only certain people to view that content. Through human curation and the use of algorithms, these platforms decide how content is displayed to other users. In curating this content, social media sites may also edit user content, combine it, or draft their own additions to that content. These platforms are generally free to users, and make revenue by selling targeted advertising space, among other things. Thus, social media sites engage in a wide variety of activities, at least some of which entail hosting—and creating—constitutionally protected speech. Social media companies have recognized their role in providing platforms for speech. To take one example, in a September 2018 hearing before the Senate Select Committee on Intelligence, the founder and Chief Executive Officer of Twitter, Jack Dorsey, repeatedly referred to Twitter as a \"digital public square,\" emphasizing the importance of \"free and open exchange\" on the platform. Critically, however, social media sites also have content-moderation policies under which they may remove certain content. Further, these sites determine how content is presented: who sees it, when, and where. As one scholar has said, social media sites \"create rules and systems to curate speech out of a sense of corporate social responsibility, but also . . . because their economic viability depends on meeting users' speech and community norms.\" Speech posted on the internet \"exists in an architecture of privately owned websites, servers, routers, and backbones,\" and its existence online is subject to the rules of those private companies. Consequently, one First Amendment scholar predicted ten years ago that \"the most important decisions affecting the future of freedom of speech will not occur in constitutional law; they will be decisions about technological design, legislative and administrative regulations, the formation of new business models, and the collective activities of end-users.\" Social media companies have come under increased scrutiny regarding the type of user content that they allow to be posted on their sites, and the ways in which they may promote—or deemphasize—certain content. A wide variety of people have expressed concern that these sites do not do enough to counter harmful, offensive, or false content . At the same time, others have argued that the platforms take down or deemphasize too much legitimate content. In the September 2018 hearing referenced above, Sheryl Sandberg, the Chief Operating Officer of Facebook, expressed the difficulty of determining what types of speech would violate company standards barring hate speech. Both Dorsey and Facebook founder and Chief Executive Officer Mark Zuckerberg have been asked to respond to allegations of political bias in their platforms' content moderation decisions at hearings before House and Senate committees. Commentators and legislators alike have questioned whether social media sites' content policies are living up to the free speech ideals they have espoused. As a result, some, including Members of Congress, have called for regulation of social media platforms, focused on the way those companies police content. In light of this public policy debate, this report begins by outlining the current legal framework governing social media sites' treatment of users' content, focusing on the First Amendment and Section 230 of the Communications Decency Act of 1996 (CDA). As explained below, under existing law, lawsuits predicated on these sites' decisions to remove or to host content have been largely unsuccessful because of (1) doctrines that prevent the First Amendment from being applied to private social media companies, and (2) Section 230 of the CDA, which often protects social media companies from being held liable under federal or state laws for these decisions. The debate over whether the federal government should fill this legal vacuum has raised the question as to whether and to what extent the federal government can regulate the way social media sites present users' content, either to require these sites to take down, restrict access to, or qualify certain types of content, or, on the other hand, protect users' rights to post content on those sites. Such government regulation would constitute state action that implicates the First Amendment. While the issue largely remains an open question in the courts, the First Amendment may provide some protection for social media companies when they make content presentation decisions, limiting the federal government's ability to regulate those decisions. The extent of any free speech protections will depend on how courts view social media companies and the specific action being regulated. Accordingly, the bulk of this report explores how the First Amendment applies to social media providers' content presentation decisions. Looking to three possible analogues drawn from existing First Amendment law, the report explores whether social media companies could be viewed in the same way as company towns, broadcasters, or newspaper editors. The report also explains the possible regulatory implications of each First Amendment framework as Congress considers the novel legal issues raised by the regulation of social media. Under current federal law, social media users may face at least two significant barriers if they attempt to sue a social media provider for its decisions about hosting or limiting access to users' content. The first, which likely applies only to lawsuits predicated on a platform's decision to remove rather than allow content, is the state action requirement of the First Amendment. The state action doctrine provides that constitutional free speech protections generally apply only when a person is harmed by an action of the government, rather than a private party. The second legal barrier is the CDA's Section 230, which offers broad immunity to \"interactive computer service\" providers. Section 230(c)(1) provides immunity from any lawsuit that seeks to hold a service provider liable for publishing information that was created by an \"information content provider,\" effectively protecting social media sites from liability for hosting content. By contrast, Section 230(c)(2) provides immunity for sites that take good faith action to restrict access to content that the provider or users deem \"obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable.\" Thus, federal law does not currently provide a recourse for many users who would like to challenge a social media site's decision to ban or restrict content, or to host content—and may affirmatively bar liability in certain circumstances. The Free Speech Clause of the First Amendment provides that \" Congress shall make no law . . . abridging the freedom of speech\" and applies to the \" State[s] \" through the Fourteenth Amendment. Thus, the First Amendment, like other constitutional guarantees, generally applies only against government action. As the Supreme Court has said, \"while statutory or common law may in some situations extend protection or provide redress against a private corporation or person who seeks to abridge the free expression of others, no such protection or redress is provided by the Constitution itself.\" However, the Supreme Court has, in limited circumstances, allowed First Amendment claims to proceed against seemingly private parties that abridge protected speech. The clearest example of the Court extending the First Amendment to apply to the actions of a private party comes from Marsh v. Alabama , where the Court held that the First Amendment prohibited the punishment of a resident of a company-owned town for distributing religious literature. While the town in question was owned by a private corporation, \"it ha[d] all the characteristics of any other American town,\" including residences, businesses, streets, utilities, public safety officers, and a post office. Under these circumstances, the Court held that \"the corporation's property interests\" did not \"settle the question\" : \"[w]hether a corporation or a municipality owns or possesses the town[,] the public in either case has an identical interest in the functioning of the community in such manner that the channels of communication remain free.\" Consequently, the corporation could not be permitted \"to govern a community of citizens\" in a way that \"restrict[ed] their fundamental liberties.\" The Supreme Court has described Marsh as embodying a \"public function\" test, under which the First Amendment will apply if a private entity exercises \"powers traditionally exclusively reserved to the State.\" Since Marsh was issued in 1946, however, it has largely been limited to the facts presented in that case. The Supreme Court extended the Marsh decision in 1968: in Amalgamated Food Employees Union v. Logan Valley Plaza , the Court held that a private shopping mall could not prevent individuals from peacefully picketing on the premises, noting similarities between \"the business block in Marsh and the shopping center\" at issue in that case. However, the Court subsequently disclaimed Logan Valley in Hudgens v. NLRB , rejecting the idea that \"large self-contained shopping center[s]\" are \"the functional equivalent of a municipality.\" Instead, the Court held that in Hudgens , where a shopping center manager had threatened to arrest picketers for trespassing, \"the constitutional guarantee of free expression ha[d] no part to play.\" As a result, the picketers \"did not have a First Amendment right to enter this shopping center for the purpose of advertising their strike.\" In another decision in which the Supreme Court held that the First Amendment did not prevent a shopping center from banning the distribution of handbills, the Court distinguished Marsh by noting that \"the owner of the company town was performing the full spectrum of municipal powers and stood in the shoes of the State.\" By contrast, the disputed shopping center had not assumed \"municipal functions or power.\" The fact that the shopping center was generally open to the public did not qualify as a \"dedication of [the] privately owned and operated shopping center to public use\" sufficient \"to entitle respondents to exercise therein the asserted First Amendment rights.\" Apart from the factual circumstances presented by the company town that exercises powers \"traditionally\" and \"exclusively\" held by the government, the Court has sometimes applied the First Amendment against private parties if they have a \"sufficiently close relationship\" to the government. Such circumstances may exist where a private company \"is subject to extensive state regulation\"—although government regulation alone is not sufficient to establish the state action requirement. Instead, the inquiry in such a case is \"whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself.\" In a 2001 case, the Supreme Court held that a state athletic association, while \"nominally private,\" should be subject to First Amendment standards because of \"the pervasive entwinement of public institutions and public officials in its composition and workings.\" Some plaintiffs have argued that various internet companies, including some social media sites, should be treated as state actors subject to the First Amendment when those companies take down or restrict access to their speech. Courts have rejected these claims. Many of these decisions have involved relatively terse applications of existing Supreme Court precedent. In a few cases, however, federal district courts have explored the application of these state action cases in more detail. First, lower courts have repeatedly held that social media sites do not meet the \"exclusive public function test\" and are not akin to a company town. In so holding, courts have recognized that, under prevailing Supreme Court case law, private actors are not \"state actors subject to First Amendment scrutiny merely because they hold out and operate their private property as a forum for expression of diverse points of view.\" Accordingly, they have held that the mere fact that social media providers hold their networks open for use by the public is insufficient to make them subject to the First Amendment. Courts have rejected plaintiffs' efforts to characterize the provision of a public forum or \"the dissemination of news and fostering of debate\" as public functions that were traditionally and exclusively performed by the government. For example, in Cyber Promotions v. American Online (AOL) , a district court rejected the argument that \"by providing Internet e-mail and acting as the sole conduit to its members' Internet e-mail boxes, AOL has opened up that part of its network [to the public] and as such, has sufficiently devoted this domain for public use.\" The court said that \"[a]lthough AOL has technically opened its e-mail system to the public by connecting with the Internet, AOL has not opened its property to the public by performing any municipal power or essential public service and, therefore, does not stand in the shoes of the State.\" The challengers in that case, a company that had been blocked from sending unsolicited advertisements via email, also argued that AOL performed an exclusive public function because the company had \"no alternative avenues of communication . . . to send its e-mail to AOL members.\" The judge rejected this claim as well, concluding that the company did have alternative avenues to send its advertising to AOL members, including other places on the internet as well as \"non-Internet avenues.\" Similarly, in Prager University v. Google LLC , a district court held that by operating YouTube, \"a 'video-sharing website,'\" and then restricting access to some videos, Google had not \"somehow engaged in one of the 'very few' functions that were traditionally 'exclusively reserved to the State.'\" Trial courts have also held that social networks have failed to meet the joint participation, nexus, and entwinement tests for state action. In Cyber Promotions , the court held that there was no joint participation because the government was not involved in AOL's challenged decision. Another trial court, in Quigley v. Yelp, Inc. , similarly concluded joint participation did not exist between various social media sites and the government where the plaintiff failed to show that the state participated in the specific actions challenged in the lawsuit. That court also rejected an argument that there was \"a pervasive entwinement between defendants and the government because the government maintains accounts on the defendants' websites, and uses their websites to communicate with citizens.\" Even assuming that this allegation was true, the court held that this was not \"the sort of entwinement that . . . converts a private party's actions to state action,\" observing that the government did not participate \"in the operation or management of defendants' websites,\" but only used these sites \"in the same manner as other users.\" Accordingly, lower courts have uniformly concluded that the First Amendment does not prevent social media providers from restricting users' ability to post content on their networks. However, the Supreme Court has not yet weighed in on this subject, and as will be discussed in more detail below, a number of legal commentators have argued that, notwithstanding these trial court decisions, courts should view social media platforms as equivalent to state actors, at least when they perform certain functions. A constitutional injury is not the only type of harm that a social media user might suffer as a result of a social network's decisions about user content, and litigants have brought a wide variety of claims challenging these sorts of decisions. For example, plaintiffs have argued that sites' decisions to remove or restrict access to their content constituted unfair competition under the Lanham Act, discrimination under the Civil Rights Act of 1964, tortious interference with contractual relationships, fraud, and breach of contract. Other plaintiffs have attempted to hold online platforms liable for harm stemming from the sites' decisions not to remove content, claiming, for example, that by publishing certain content, the sites committed defamation or negligence, or violated state securities law. However, many of these suits are barred by the broad grant of immunity created by the CDA's Section 230. Section 230, as seen in the text box above, distinguishes between \"interactive computer services\" and \"information content providers.\" An interactive computer service is \"any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server.\" Courts have considered online platforms such as Facebook, Twitter, and Craigslist to be \"interactive computer service\" providers. An information content provider is \"any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.\" Section 230 contains two primary provisions creating immunity from liability. First, Section 230(c)(1) specifies that interactive service providers and users may not \"be treated as the publisher or speaker of any information provided by another information content provider.\" Second, Section 230(c)(2) states that interactive service providers and users may not be held liable for voluntarily acting in good faith to restrict access to objectionable material. Section 230 preempts state civil lawsuits and state criminal prosecutions to the extent that they are \"inconsistent\" with Section 230. It also bars certain federal civil lawsuits, but, significantly, not federal criminal prosecutions. Section 230(e) outlines a few exemptions: for example, Section 230 immunity will not apply in a suit \"pertaining to intellectual property\" or in claims alleging violations of certain sex trafficking laws. Section 230, and particularly Section 230(c)(1), distinguishes those who create content from those who provide access to that content, providing immunity to the latter group. An entity may be both an \"interactive computer service\" provider and an \"information content provider,\" but the critical inquiry for applying Section 230(c)(1) is whether, with respect to the particular actions alleged to create liability, the service provider developed the underlying content. Courts have held that an interactive computer service provider may be subject to suit if it is also acting as a content provider. Frequently, the application of Section 230(c)(1) immunity turns not on the type of suit that is being brought—that is, for example, whether it is a suit for libel or for breach of contract —but on whether the facts establish that the interactive computer service provider was merely a publisher of another's content, or whether the service provider itself created or developed content. Courts have generally held that a site's ability to control the content posted on its website does not, in and of itself, transform an interactive computer service into an internet content provider. As one court said, \"a website does not create or develop content when it merely provides a neutral means by which third parties can post information of their own independent choosing online.\" A service provider may still be immune from suit under Section 230(c)(1) even if it makes small editorial changes to that content. Conversely, a \"website operator\" can be liable for \"content that it creates itself, or is 'responsible, in whole or in part' for creating or developing.\" Even if the service provider does not itself solely create the content, Section 230 immunity might be unavailable if the service provider \"augment[s] the content.\" For example, one state court held that, even assuming that Snapchat was a provider of interactive computer services, a plaintiff's claim against the company could proceed where the alleged harm was caused by a \"filter,\" or a graphic overlay on a user's photo, that was created by Snapchat itself. Because the plaintiff sought \"to hold Snapchat liable for its own conduct,\" the court held that \"CDA immunity does not apply.\" Some courts have applied a \"material contribution test,\" asking whether a service provider \"materially contribute[d] to the illegality\" of the disputed content, or \"in some way specifically encourage[d] development of what is offensive about the content.\" Thus, for example, a federal appellate court concluded that Roommates.com, a site that \"match[ed] people renting out spare rooms with people looking for a place to live,\" was not wholly immune from claims that it had violated laws prohibiting housing discrimination. The court concluded that Roommates.com could be subject to suit for discrimination because the site required all users to respond to questions about their sex, family status, and sexual orientation by selecting among preset answers to those questions, and to state their \"preferences in roommates with respect to the same three criteria.\" Accordingly, in the court's view, as to these questions and answers, Roommates.com was \"more than a passive transmitter of information provided by others; it becomes the developer, at least in part, of that information.\" Each user's personal page was \"a collaborative effort between [Roommates.com] and the subscriber.\" This rendered it the \"'information content provider' as to the questions\" and the answers. Although courts frequently consider the immunity in Section 230(c)(1) and Section 230(c)(2) together, as one \"Section 230\" shield, the text of these provisions suggests they cover distinct circumstances. Section 230(c)(1) applies more broadly, to any suit in which the plaintiff seeks to hold the provider liable as the publisher of another's information. By contrast, Section 230(c)(2) applies only to good-faith, voluntary actions by a provider—or a third party assisting providers—to restrict access to \"obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable\" content. There is an important difference in the language of the two provisions: as noted, Section 230(c)(2) requires a service provider to act in good faith for immunity to apply; Section 230(c)(1) does not contain a similar requirement. While courts frequently apply Section 230 to dismiss lawsuits premised on a service provider's decision to remove or restrict access to another's content, they are somewhat less likely to dismiss lawsuits where the good-faith requirement is involved, because a plaintiff who properly pleads and presents evidence regarding a lack of good faith creates a question of fact that may prevent the court from summarily dismissing the case. One trial court concluded that there was a question as to Google's good faith where the plaintiff alleged that Google was \"selectively enforcing\" a stated policy, and that the policy itself was \"entirely pretextual.\" Another trial court concluded that a company had sufficiently alleged bad faith where it argued that Google had \"falsely accused\" it of violating Google's stated policy, and that Google \"sought to punish [the company] because it\" refused to allow Google to embed advertising in the company's video. One view is that Section 230(c)(2) applies when a provider \" does filter out offensive material,\" while Section 230(c)(1) applies when providers \" refrain from filtering or censoring the information on their sites.\" At least one federal trial judge has noted that interpreting Section 230(c)(1) to bar suits in which a plaintiff seeks to hold a service provider liable for removing the plaintiff's own content would \"swallow[] the more specific immunity in (c)(2).\" The court explained that: Subsection (c)(2) immunizes only an interactive computer service's \"actions taken in good faith.\" If the publisher's motives are irrelevant and always immunized by (c)(1), then (c)(2) is unnecessary. The Court is unwilling to read the statute in a way that renders the good-faith requirement superfluous. Lawsuits directly challenging a website's decision to restrict or remove content, rather than to publish it, often do invoke Section 230(c)(2). Thus, courts have considered the application of Section 230(c)(2), rather than Section 230(c)(1), in lawsuits involving the removal of an app from the Google Play Store, the removal of websites from Google's search results, the removal of videos from YouTube, and decisions to filter certain IP addresses or email addresses. However, this distinction between filtering content and publishing content does not always play out so neatly in the courts, and other decisions have applied Section 230(c)(1) immunity to bar suits that are grounded in an interactive service provider's decision to restrict content. There is one additional circumstance under which Section 230(c)(2) immunity, as opposed to Section 230(c)(1) immunity, may apply. Section 230(c)(2)(B) protects those providers or users of computer services who \"enable or make available to information content providers or others technical means to restrict access to\" objectionable material. This provision may protect, for example, \"providers of programs that filter adware and malware.\" This immunity may apply even where an interactive computer service is not a publisher entitled to immunity under Section 230(c)(1). Thus, as a whole, Section 230 offers broad immunity to \"interactive computer service\" providers when a litigant seeks to hold them liable for publishing, or not publishing, a user's content. Section 230(c)(1) provides immunity from any lawsuit that seeks to hold a service provider liable for publishing information that was created by an \"information content provider,\" effectively protecting social media sites from liability for hosting content. And Section 230(c)(2) provides immunity for sites that take good faith action to restrict access to content that the provider or users deem \"objectionable.\" Consequently, to the extent that private litigants or state governments would have been able to hold social media companies liable under existing law for their decisions regarding presenting or restricting access to user content, those suits have largely been barred under Section 230. As discussed above, courts have often dismissed lawsuits attempting to hold social media providers liable for regulating users' content, whether because the court concludes that the First Amendment does not apply to the actions of these private actors or because the court holds that Section 230(c)(2) of the CDA bars the lawsuit. Additionally, Section 230(c)(1) may bar lawsuits that seek to hold these platforms liable because of their decisions to publish certain content. Particularly because of Section 230, there are few, if any, federal or state laws that expressly govern social media sites' decisions about whether and how to present users' content. Consequently, users' ability to post speech on social media platforms is governed primarily by the private moderation policies created by these companies. In response to broader public policy concerns about how social media entities are policing user content, some commentators and legislators have proposed federal regulation both to protect users' ability to speak freely on those platforms and to require these platforms to take down, deemphasize, or clarify certain content. While the First Amendment, as discussed above, may not apply in disputes between private parties, a federal law regulating internet content decisions would likely qualify as state action sufficient to implicate the First Amendment. After all, the First Amendment provides that \" Congress shall make no law . . . abridging the freedom of speech.\" Once state action is established, the next consideration is to what extent the First Amendment protects social media platforms' content moderation decisions. Stated another way, the relevant question is when social media providers can assert that government regulation infringes on their own speech. Perhaps most obviously, if a social media site posts content that it has created itself, the site may raise First Amendment objections to a law expressly regulating that speech. Social media providers may also argue that they are exercising protected speech rights when they are choosing whether to publish content that was originally created by users and when they make decisions about how to present that content. However, the fact that a law affects speech protected by the First Amendment does not necessarily mean that it is unconstitutional. As explained below, the First Amendment allows some regulation of speech and does not prohibit regulation of conduct. While the First Amendment generally protects the \"freedom of speech,\" its protections do not apply in the same way in all cases. Not every government regulation affecting content posted on social media sites would be analyzed in the same way. A court's analysis would depend on a number of factors. First, a court would inquire into the nature of the precise action being regulated, including whether it is properly characterized as speech or conduct. Laws that target conduct and only incidentally burden speech may be permissible. But \"speech\" is not always easy to identify. Lower courts have held that computer code and programs may be entitled to First Amendment protection, so long as they communicate \"information comprehensible to human beings.\" Courts have also concluded that in some circumstances, domain names might constitute protected speech. And more generally, the Supreme Court has said that \"inherently expressive\" conduct can receive First Amendment protections. If a law does regulate speech, a court would consider the type of speech being regulated to determine how closely to scrutinize the regulation. For example, a court may ask whether that speech is commercial and, as such, deserving of less protection under the First Amendment. Advertisements posted on social media sites would likely qualify as commercial speech. If speech is not purely commercial and is instead, for example, political advocacy, that speech may receive greater protection. Certain categories of speech receive even less protection than commercial speech. For example, the Supreme Court has said that states may prohibit speech advocating violence if that \"advocacy is directed to inciting or producing imminent lawless action and is likely to incite or produce such action.\" Thus, certain types of threatening or violent speech posted on social media may not be entitled to First Amendment protection. However, perhaps in light of the fact that it can be difficult to determine whether speech is protected, the Court has sometimes held that criminal statutes targeting disfavored speech must include a mental state requirement. For example, in United States v. X-Citement Video , the Court noted that, with respect to a federal law prohibiting the distribution of child pornography, criminal liability turned on \"the age of the performers\"—as did First Amendment protection for the materials, given that \"nonobscene, sexually explicit materials involving persons over the age of 17 are protected by the First Amendment.\" Accordingly, although the statute was unclear on this point, the Court held that the law applied only if a person distributing such materials knew that the performers were underage. Even if a statute does target a category of speech that is traditionally proscribable, it may still be invalid if it is overbroad, in the sense that it prohibits a substantial amount of protected speech, as well. Thus, for example, in Ashcroft v. Free Speech Coalition , the Supreme Court held that a federal statute prohibiting \"sexually explicit images that appear to depict minors\" was unconstitutionally overbroad. The statute encompassed pornography that did \"not depict an actual child,\" prohibiting images that were \"created by using adults who look like minors or by using computer imaging.\" Thus, the Court held that the statute violated the First Amendment because it \"proscribe[d] a significant universe of speech that is neither obscene . . . nor child pornography,\" as those two categories had been defined in prior Supreme Court cases. A court would also look to the nature of the regulation itself, and primarily whether it is content-neutral, or whether it instead discriminates on the basis of content or viewpoint, subjecting that law to strict scrutiny. The Court has said that \"a speech regulation is content based if the law applies to particular speech because of the topic discussed or the idea or message expressed.\" In a strict scrutiny analysis, the government must prove that the \"restriction 'furthers a compelling interest and is narrowly tailored to achieve that interest.'\" If a regulation is content-neutral, which is to say, \"justified without reference to the content of the regulated speech,\" a court employs an intermediate scrutiny analysis, asking whether the restriction is \"narrowly tailored to serve a significant governmental interest\" and \"leave[s] open ample alternative channels for communication of the information.\" Accordingly, for example, a federal court of appeals held in Universal City Studios, Inc. v. Corley that government restrictions on posting or linking to decryption computer programs did regulate speech protected by the First Amendment, but ultimately upheld those restrictions as permissible content-neutral regulations. These first two inquiries are distinct, although they do overlap. If a statute targets speech rather than conduct, it is likely that it will target that speech based on its content, and therefore will not be content-neutral. And by contrast, a statute that targets conduct will likely be content-neutral on its face. In Universal City Studios, Inc. , the court held that the challenged government regulations were content-neutral because they \"target[ed] only the nonspeech component\" of the prohibited actions by focusing on the \"functional\" aspects of computer code that operate without any human involvement. It is possible, though, that a law targeting speech would nonetheless be content-neutral. For example, the Court has said that \"a prohibition against the use of sound trucks emitting 'loud and raucous' noise in residential neighborhoods is permissible if it applies equally to music, political speech, and advertising.\" A court might also look to the particular nature of the medium being regulated, asking whether there are special characteristics that might justify greater regulation. The Supreme Court has said that \"[e]ach medium of expression . . . must be assessed for First Amendment purposes by standards suited to it, for each may present its own problems.\" The Court has been willing to extend First Amendment protections that historically applied to speech communicated in traditional public forums such as streets and sidewalks to new mediums for communication, including video games and the internet. But the Court has also recognized that the principles developed \"in the context of streets and parks . . . should not be extended in a mechanical way to the very different context of\" newer media. While the Court has characterized social media as \"the modern public square,\" it has not fully clarified what standards should apply to government regulation of that medium—particularly with respect to social media platforms' roles as hosts for others' speech. The Supreme Court said in Reno v. ACLU that when considering government regulation of \"the Internet\" in general, factors that had previously justified greater regulation of other media did not apply. In that case, the Court held unconstitutional two provisions of the CDA that criminalized the transmission of certain \"indecent\" or \"patently offensive\" material to minors over the internet. The Court rejected the government's argument that the regulation was permissible because the internet is analogous to broadcast media, where the Court has permitted greater regulation of speech. The Court noted that unlike the broadcast industry, \"the vast democratic fora of the Internet\" had not traditionally \"been subject to the type of government supervision and regulation that has attended the broadcast industry,\" and said that \"the Internet is not as 'invasive' as radio or television.\" Accordingly, the Court stated that there was \"no basis for qualifying the level of First Amendment scrutiny that should be applied to this medium.\" However, as will be discussed in more detail below, some scholars have argued that Reno , decided in 1997, does not specifically address government regulation of modern social media sites, which may present unique concerns from those discussed in Reno . Social media sites provide platforms for content originally generated by users. In that capacity, social media sites decide whether to host users' content and how that content is presented, and may alter that content in the process. Whether these editorial functions are \"speech\" protected by the First Amendment presents an especially difficult question. As one federal appellate court noted, \"entities that serve as conduits for speech produced by others\" may \"receive First Amendment protection\" if they \"engage in editorial discretion\" when \"selecting which speech to transmit.\" On the other hand, the court said, such an entity might not be \"a First Amendment speaker\" if it indiscriminately and neutrally transmits \"any and all users' speech.\" Some have argued that social media sites' publication decisions are protected under the First Amendment. Until recently, academic debate focused largely on whether the algorithms employed by search engines to retrieve and present results are properly characterized as the speech of those search engines. One scholar argued that search engines' publication activities meet at least one of the criteria necessary to qualify for First Amendment protection: these sites are publishing \"sendable and receivable substantive message[s]\"—or, in other words, they are communicating content. Another scholar countered this argument by saying that indexing search results is not equivalent to communicating protected ideas, arguing that to be entitled to First Amendment protections, content must be \"adopted or selected by the speaker as its own.\" There are not many court decisions evaluating whether a social media site, by virtue of reprinting, organizing, or even editing protected speech, is itself exercising free speech rights. While a few federal courts have held that search engine results and decisions about whether to run advertisements are speech protected by the First Amendment, these decisions are, so far, limited to trial courts and therefore not precedential beyond the facts of those cases. This relative dearth of cases is likely due in large part to the fact that, as discussed above, Section 230 of the CDA bars a significant number of lawsuits that seek to hold social media providers liable for publishing others' content, often making it unnecessary to consider whether the First Amendment protects these publication decisions. Section 230 has sometimes been described as an attempt to protect the freedom of speech on the internet, suggesting that its displacement of the First Amendment is an implicit consequence of Section 230's speech-protective nature. In other words, Section 230 creates immunity even where the First Amendment might not. Due to the lack of case law examining the issue, commentators have largely analyzed the question of whether a social media site's publication decisions are protected by the First Amendment by analogy to other types of First Amendment cases. At least one scholar has argued that there are three possible frameworks a court could apply to analyze governmental restrictions on social media sites' ability to moderate user content. The first analogy would treat social media sites as equivalent to company towns. Under this scenario, social media sites would be treated as state actors who are themselves bound to follow the First Amendment when they regulate protected speech. The second possible framework would view social media sites as analogous to special industries like common carriers or broadcast media, in which the Court has historically allowed greater regulation of the industries' speech in light of the need to protect public access for users of their services. The third analogy would treat social media sites like news editors, who generally receive the full protections of the First Amendment when making editorial decisions. It is likely that no one analogy can account for all social media platforms, or all activities performed by those platforms. Some social media platforms may exercise more editorial control over user-generated content than others, and any given social media company performs a wide variety of different functions. Consequently, determining which line of case law is most analogous will likely depend on the particular activity being regulated. As discussed in more detail above, although the First Amendment generally applies only to government action, the Supreme Court has held that in limited, special circumstances, private actors should be treated as the government and must comply with constitutional standards when interacting with others. The archetypal case is that of the company town: in Marsh v. Alabama , the Supreme Court held that the residents of a company-owned town—a town that was functionally identical to any ordinary town, but for the fact of its ownership—were entitled to the protections of the First Amendment when distributing religious literature on the streets and sidewalks in that town. Courts have largely held that, under existing Supreme Court precedent, social media providers do not meet the First Amendment's state action requirement. Commentators have argued, however, that dicta in Supreme Court cases may suggest that social media sites should be treated differently. As an initial matter, there is language in Marsh suggesting that privately owned property may be subject to the First Amendment if it is opened for public use: Ownership does not always mean absolute dominion. The more an owner, for his advantage, opens up his property for use by the public in general, the more do his rights become circumscribed by the statutory and constitutional rights of those who use it. Thus, the owners of privately held bridges, ferries, turnpikes and railroads may not operate them as freely as a farmer does his farm. Since these facilities are built and operated primarily to benefit the public and since their operation is essentially a public function, it is subject to state regulation. At least one scholar has argued that, with respect to online forums, \" Marsh should be expanded and read functionally.\" He suggests that courts should ask whether a given online space is the \"functional equivalent\" of a traditional public forum and should engage in a First Amendment analysis that treats private ownership as \"one factor\" when balancing \"the autonomy rights of property owners against the expressive rights of property users.\" But courts, by and large, have rejected the broader implications of this language in Marsh , and the Supreme Court has held that the mere fact that a private space is open to the public is not sufficient to \"entitle\" the public to the protections of the First Amendment in that space. Another scholar, however, has argued that notwithstanding \"this more narrow conception of the public function exception,\" social media sites should still be treated as equivalent to the state under Marsh . He claims that social media sites perform a \"public function\" under Marsh by \"providing a space that has the primary purpose of serving as a forum for public communication and expression, that is designated for that purpose, and that is completely open to the public at large.\" In his view, \"[s]ince managing public squares and meeting places is something that has traditionally been done by the government, social network websites therefore serve a public function that has traditionally been the province of the state.\" As mentioned above, however, trial courts have declined to extend Marsh to social media sites, disagreeing that the provision of a public forum or \"the dissemination of news and fostering of debate\" are public functions that were traditionally and exclusively performed by the government. Others have argued that a more recent Supreme Court decision, Packingham v. North Carolina , might \"signal a shift\" in the state action analysis. In Packingham , the Court struck down a North Carolina law that prohibited a registered sex offender from accessing any \"commercial social networking Web site where the sex offender knows that the site permits minor children to become members or to create or maintain personal Web pages.\" Critically, the Court stated that \"cyberspace\" is today \"the most important place[] . . . for the exchange of views\" protected by the First Amendment, analogizing Facebook, LinkedIn, and Twitter to traditional public forums and characterizing social media sites as \"the modern public square.\" In light of the importance of these forums, the Court concluded that the statute was too broad and not sufficiently tailored to serve the government's asserted interest. Some have suggested that, if the Court views social media as \"the modern public square,\" it may be more willing to say that social media companies \"count as state actors for First Amendment purposes.\" Indeed, Justice Alito declined to join the majority opinion in Packingham because he was concerned about the scope of the Court's \"musings that seem to equate the entirety of the internet with public streets and parks.\" He argued that this broader language was \"bound to be interpreted by some\"—erroneously, in his view—as limiting the government's ability to \"restrict . . . dangerous sexual predators\" from some activities online. At least one court, however, has rejected some of the broader implications of this case, noting that \" Packingham did not, and had no occasion to, address whether private social media corporations like YouTube are state actors that must regulate the content of their websites according to the strictures of the First Amendment. Instead, . . . Packingham concerned whether North Carolina ran afoul of the First Amendment . . . .\" If social media sites were treated as state actors under the First Amendment, then the Constitution itself would constrain their conduct when they act to restrict users' protected speech. Under this framework, Congress could enact legislation to remedy violations of free speech rights by social media entities. For instance, Title III of the Civil Rights Act of 1964 authorizes the Attorney General to bring a civil action against governmental facilities that deny a person equal access \"on account of his race, color, religion, or national origin,\" essentially granting the Attorney General the power to sue to enjoin certain acts that would violate the Fourteenth Amendment's Equal Protection Clause. To take another example, 42 U.S.C. § 1983 allows any person who has been deprived by a state actor \"of any rights, privileges, or immunities secured by the Constitution\" to bring certain civil actions to vindicate those rights in court. By contrast, commentators have argued that under this framework, the problems associated with social media sites hosting too much speech—that is, problems caused by the dissemination of things like misinformation and hate speech—would be exacerbated. If these companies were considered equivalent to state actors and their sites were seen as equivalent to traditional public forums, their ability to regulate speech would be relatively circumscribed. And in turn, so would the government be limited in its ability to require these platforms to take down certain types of content, if that content qualified as protected speech. Thus, one scholar predicted that under this framework, \"[a]ll but the very basest speech would be explicitly allowed and protected—making current problems of online hate speech, bullying, and terrorism, with which many activists and scholars are concerned, unimaginably worse.\" However, to the extent that a federal regulation infringed on speech properly attributed to the social media sites, rather than their users—and this speech could include not only content originally generated by the social media companies, but also their editorial decisions about user-generated content—it could implicate an open First Amendment question. State and local governments are constrained by the First Amendment when they interact with individuals, but the Supreme Court has never squarely resolved whether states and municipalities could themselves assert First Amendment rights against the federal government. At least one scholar has argued that the First Amendment should protect government speech in certain circumstances. And in a 2015 case, the Supreme Court said that a private party could not force a state to include certain messages in its own speech, suggesting that governments do have some right to speak for themselves. On the other hand, Justice Stewart argued in a 1973 concurring opinion that the government has no First Amendment rights, significantly, maintaining that the Court should not treat broadcasters as state actors because it would \"simply strip\" them of their First Amendment rights. Lower courts have largely followed Justice Stewart's view and assumed that state actors may not claim the protection of the First Amendment. Accordingly, it is possible that treating social media sites like state actors would \"strip [them] of their own First Amendment rights.\" Alternatively, courts could analogize social media sites to certain industries, like broadcast media, where the Supreme Court has traditionally allowed greater regulation of protected speech. These cases have their roots in the common law doctrines related to common carriers. Historically, a common carrier is an entity that \"holds itself out to the public as offering to transport freight or passengers for a fee.\" Often, these companies received government licenses authorizing their operations. Common carriers have traditionally been subject to heightened legal duties and generally could not refuse paying customers. Some of these common law doctrines have been incorporated into modern regulation of communications industries: federal statutes treat providers of telecommunications services as common carriers that are subject to certain requirements, and authorize the regulation of radio and television broadcasters. While acknowledging that these companies are private entities who do retain First Amendment rights, the Supreme Court has nonetheless allowed some regulation of these rights, in light of the heightened government interests in regulating such entities. As one federal appellate court has put it, the general \"absence of any First Amendment concern\" with \"equal access obligations\" in this area \"rests on the understanding that such entities, insofar as they are subject to equal access mandates, merely facilitate the transmission of the speech of others rather than engage in speech in their own right.\" However, courts have not treated all entities equated to common carriers identically. In Red Lion Broadcasting Co. v. FCC , the Supreme Court approved of a specific application of the Federal Communication Commission's (FCC's) \"fairness doctrine.\" The FCC rule challenged in Red Lion required broadcasters to give political candidates a reasonable opportunity to respond to any personal attacks published by the broadcaster or to any editorials in which a broadcaster endorsed or opposed particular candidates. The broadcasters argued that these regulations violated the First Amendment, abridging \"their freedom of speech and press\" by preventing them from \"exclud[ing] whomever they choose\" from their allotted frequencies. The Supreme Court noted the unique nature of the broadcast industry, stating that due to \"the scarcity of radio frequencies,\" \"it is idle to posit an unabridgeable First Amendment right to broadcast comparable to the right of every individual to speak, write, or publish.\" This is why, the Court said, it had previously allowed regulations of broadcast media—namely, a licensing system—that might otherwise violate the First Amendment. The Court emphasized that \"[i]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount,\" highlighting \"the right of the public to receive suitable access to social, political, esthetic, moral, and other ideas and experiences.\" Ultimately, the Court held that \"[i]n view of the scarcity of broadcast frequencies, the Government's role in allocating those frequencies, and the legitimate claims of those unable without governmental assistance to gain access to those frequencies for expression of their views,\" the challenged regulations were constitutional. In subsequent cases, the Supreme Court has reaffirmed that \"of all forms of communication, it is broadcasting that has received the most limited First Amendment protection.\" The Court has recognized that broadcasters do engage in speech activity protected by the First Amendment, most notably when a broadcaster \"exercises editorial discretion in the selection and presentation of its programming.\" The Court has said that \"[a]lthough programming decisions often involve the compilation of the speech of third parties, the decisions nonetheless constitute communicative acts.\" Notwithstanding this conclusion, however, the Court has said that in this area, when evaluating broadcasters' First Amendment claims, it will \"afford great weight to the decisions of Congress and the experience of the [FCC].\" Significantly, the Supreme Court has declined to extend this special deference to government regulation of broadcasters to other forms of media. For example, in Turner Broadcasting Systems v. FCC , the Court concluded that the \"less rigorous\" First Amendment scrutiny that applies to broadcast regulation should not be extended to the \"regulation of cable television.\" The Court was considering the FCC's \"must-carry\" regulations, which required cable television broadcasters to set aside a portion of their channels for the transmission of local broadcast television stations. The Court said that cable television \"does not suffer from the inherent limitations,\" in terms of the scarcity of frequencies, \"that characterize the broadcast medium,\" consequently concluding that the \"unique physical characteristics of cable transmission . . . . do not require the alteration of settled principles of our First Amendment jurisprudence.\" Accordingly, the Court has subjected laws that restrict cable providers' protected speech to greater scrutiny than restrictions on broadcast media . But the Court noted in a subsequent decision that \"[c]able television, like broadcast media, presents unique problems . . . which may justify restrictions that would be unacceptable in other contexts.\" And in Turner Broadcasting itself, the Court did cite \"special characteristics of the cable medium\" to justify applying a lower level of scrutiny. The Court recognized that \"[r]egulations that discriminate among media, or among different speakers within a single medium, often present serious First Amendment concerns\" that trigger strict scrutiny. But notwithstanding this general rule, the Court explained that \"heightened scrutiny is unwarranted where,\" as with the must-carry provisions, the \"differential treatment is 'justified by some special characteristic of' the particular medium being regulated.\" Courts have sometimes interpreted Turner Broadcasting to mean that at least certain types of regulations on cable television will receive less scrutiny than, for example, a regulation affecting speech in a traditional public forum. Ultimately, however, the Turner Broadcasting Court cited two justifications for applying intermediate scrutiny, rather than strict scrutiny, to the FCC's must-carry provisions, making it unclear which rationale the Court relied on to uphold the regulations. Prior to its discussion of cable's special characteristics, the Court concluded that intermediate scrutiny was appropriate because the must-carry provisions were \"content-neutral restrictions that impose[d] an incidental burden on speech.\" The Court noted that while the rules did \"interfere with cable operators' discretion . . . , the extent of the interference [did] not depend upon the content of the cable operators' programming.\" Although the must-carry provisions did \"distinguish between speakers,\" that discrimination was \"based only upon the manner in which speakers transmit their messages to viewers, and not upon the messages they carry,\" and, therefore, the rules were content-neutral on their face. Thus, it is somewhat unclear to what extent the Court's decision to apply intermediate scrutiny in Turner Broadcasting rested on \"special characteristics of the cable medium\" and to what extent it depended on a more overarching First Amendment principle regarding content neutrality. While the Supreme Court has identified \"unique problems\" that may justify greater regulation of broadcast and cable, it has expressly held that the factors that justify more extensive regulation of the broadcast media \"are not present in cyberspace.\" In Reno v. ACLU , decided in 1997, the Court said that the internet had not historically \"been subject to the type of government supervision and regulation that has attended the broadcast industry,\" that the internet was not \"as 'invasive' as radio or television\" because a person had to take affirmative action to receive a particular communication on the internet, and that the internet could \"hardly be considered a 'scarce' expressive commodity.\" Consequently, in the Court's view, the factors that justified \"qualifying the level of First Amendment scrutiny that should be applied to\" broadcast media did not apply to the internet. In Reno , the Court ultimately held that two provisions of the CDA that criminalized speech based on its content were unconstitutionally vague and overbroad. Several legal scholars have argued that, contrary to the Court's conclusion in Reno , the internet is analogous to traditional broadcast media and therefore should be subject to greater regulation. Scholars have argued that as the internet has developed, it has \"reproduce[d] the traditional speech-hierarchy of broadcasting\": \"small, independent speakers [are] relegated to an increasingly marginal position while a handful of commercial giants capture the overwhelming majority of users' attention and reemerge as the essential gateways for effective speech.\" Thus, as one scholar argued, \"the hold of certain platforms\" over \"certain mediums of speech\" has \"created scarcity.\" Further, especially as compared to the internet in the late 1990s, when Reno was decided, the internet is \"now more invasive in everyday life\"—arguably more invasive even than television and radio. Another commentator has claimed that rather than traditional broadcast media, search engines might be more analogous to cable providers. In her view, search engines, \"like cable companies,\" \"provide access to the speech of others\" but also \"exercise some degree of editorial discretion over whom they provide access to.\" The analogy may be extended to social media sites, as well, because, like search engines, they also exercise editorial discretion regarding who can post and view content on their sites, and regarding how user-generated content is presented. One lower court rejected these arguments, with respect to search engines, in Zhang v. Baidu .com, Inc . In that case, the plaintiffs argued that Baidu, a Chinese search engine, had violated federal and state civil rights laws by blocking \"from its search results . . . information concerning 'the Democracy movement in China' and related topics.\" Baidu argued that its decisions to block these search results were protected by the First Amendment. The judge noted that \"some scholars\" had argued that under Turner Broadcasting , search-engine results should receive a \"lower level of protection.\" However, in the court's view, the First Amendment \"plainly shield[ed]\" the search engine from this particular lawsuit because the plaintiff's own suit sought \"to hold Baidu liable for, and thus punish Baidu for, a conscious decision to design its search-engine algorithms to favor certain expression on core political subjects over other expression on those same political subjects.\" Accordingly, the court said that \" Turner 's three principal rationales for applying a lower level of scrutiny to the must-carry cable regulations—namely, that cable companies were mere conduits for the speech of others, that they had the physical ability to silence other speakers, and that the regulations at issue were content-neutral—[we]re inapplicable\" to the case before it. The court concluded that Baidu was acting as more than a conduit for others' speech, at least according to the plaintiffs' allegations, that Baidu lacked \"the physical power to silence anyone's voices,\" and that a judicial decision penalizing \"Baidu precisely because of what it does and does not choose to say\" would not be content-neutral. If courts treated social media sites like broadcast media or like cable providers, they would be more likely to uphold government regulation of social media providers. As a preliminary inquiry, a court would likely ask what regulations could be justified by specific characteristics of the regulated medium. If a court believed that the internet in general, or social media in particular, shared relevant characteristics with either traditional broadcast media or with cable providers, then it would be more likely to allow the types of regulations that have traditionally been permitted in those contexts. Thus, a court might ask whether social media sites, like cable companies, exercise a \"bottleneck monopoly power\" or whether, like broadcast television or radio, social media platforms suffer from a \"scarcity\" problem in terms of the number of platforms for speech or are so \"invasive\" as to justify regulation to address these problems. Related, courts might also ask whether the regulations are intended to increase the amount of information or expression available to the public. Thus, if social media sites present distinct problems that threaten the use of the medium for communicative or expressive purposes, courts might approve of regulations intended to solve those problems—particularly if those regulations are content-neutral. These same types of considerations would likely apply both to regulations requiring these platforms to carry certain content and to those requiring the platforms not to carry certain content. But, at least for the time being, without an intervening change in the law, lower courts seem likely to follow Reno and conclude that there is \"no basis for qualifying the level of First Amendment scrutiny that should be applied to\" the internet. The third analogy courts might use to analyze whether social media sites moderating user content are exercising protected speech rights is that of the newspaper editor. In Miami Herald Publishing Co. v. Tornillo , the Supreme Court held that when newspapers \"exercise . . . editorial control and judgment,\" such as choosing what \"material [will] go into a newspaper,\" and making \"decisions . . . as to limitations on the size and content of the paper, and treatment of public issues and public officials,\" they are exercising free speech rights protected by the First Amendment. The Court in that case was considering the constitutionality of a state law that gave political candidates the \"right to reply to press criticism\" of the candidate. A newspaper challenged this statute, arguing that forcing it to print content that it would not otherwise publish violated the First Amendment. The government argued that its law was necessary due to the fact that relatively few news outlets exercised essentially a \"monopoly\" on \"the 'marketplace of ideas.'\" The regulation, in the state's view, \"[e]nsure[d] fairness and accuracy\" and \"provide[d] for some accountability.\" The Supreme Court unanimously rejected this argument, noting that while \"press responsibility\" may be a \"desirable goal,\" it was \"not mandated by the Constitution\" and could not \"be legislated.\" The state law impermissibly \"exact[ed] a penalty on the basis of the content of the newspaper\" by forcing newspapers to spend money to print the replies and by \"taking up space that could be devoted to other material.\" Further, the Court held, \"[e]ven if a newspaper would face no additional costs to comply with a compulsory access law and would not be forced to forgo publication of news or opinion by the inclusion of a reply,\" the law violated the First Amendment \"because of its intrusion into the function of editors.\" Because newspapers exercise \"editorial control and judgment,\" the Court said, they are \"more than a passive receptacle or conduit for news, comment, and advertising,\" and instead engage in protected speech. The Court has recognized this First Amendment protection for editorial judgments outside the context of newspapers, stating more generally that \"compelling a private corporation to provide a forum for views other than its own may infringe the corporation's freedom of speech.\" For example, the Supreme Court said in Arkansas Educational Television Commission v. Forbes that \"[w]hen a public broadcaster exercises editorial discretion in the selection and presentation of its programming, it engages in speech activity.\" And in Pacific Gas & Electric Co . v. Public Utilities Commission , the Court recognized that a utility company had a First Amendment interest in selecting the content contained in its monthly newsletter. The Court said in Pacific Gas & Electric Co. that a state regulatory commission could not require the utility to grant access to entities who disagreed with the utility's views. This regulation infringed on the utility company's First Amendment rights by compelling it \"to assist in disseminating the speaker's message\" and by requiring it \"to associate with speech with which [the company] may disagree,\" forcing the company to respond to those arguments. To take another example, in Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston , the Court held that the private organizers of a parade had a First Amendment right to exclude the Irish-American Gay, Lesbian and Bisexual Group of Boston (GLIB) from the parade. GLIB had sued the parade organizers, arguing that their exclusion violated Massachusetts's antidiscrimination laws by barring them from a public accommodation on the basis of sexual orientation, and state courts had agreed that GLIB's exclusion violated state law. The parade organizers, however, claimed that the parade was an expressive activity and that forcing them to include GLIB's speech in the parade violated their First Amendment rights. The Supreme Court held first that a parade did qualify as \"protected expression,\" even though most of the speech in the parade was not that of the organizers themselves. The Court said that \"a private speaker does not forfeit constitutional protection simply by combining multifarious voices, or by failing to edit their themes to isolate an exact message as the exclusive subject matter of the speech.\" As an example, the Court noted that \"[c]able operators . . . are engaged in protected speech activities even when they only select programming originally produced by others.\" Accordingly, the Court concluded that the selection of parade participants was protected activity under the First Amendment. Consequently, in the Hurley Court's view, characterizing the parade as a public accommodation under the state's antidiscrimination law \"had the effect of declaring the sponsors' speech itself to be the public accommodation,\" and this exercise of state power \"violate[d] the fundamental rule of protection under the First Amendment, that a speaker has the autonomy to choose the content of his own message.\" GLIB argued that this application of the state's public accommodation law should be upheld under Turner Broadcasting , claiming that the parade organizers, \"like a cable operator,\" were \"merely a conduit for the speech of participants in the parade rather than itself a speaker.\" The Court disagreed, saying that unlike the cable operators, \"GLIB's participation would likely be perceived as\" a decision of the parade organizers that GLIB's \"message was worthy of presentation and quite possibly of support as well.\" The better analogy, in the Court's view, was to a newspaper. The Court said that viewers understand that cable programming consists of \"individual, unrelated segments that happen to be transmitted together,\" but in contrast, \"the parade's overall message is distilled from the individual presentations along the way, and each unit's expression is perceived by spectators as part of the whole.\" By contrast, the Supreme Court has rejected the application of Tornillo in cases where compelling a private entity to grant access to third parties would not affect the entity's own speech. First, in PruneY ard Shopping Center v. Robins , a private shopping center, PruneYard, had \"a policy not to permit any visitor or tenant to engage in any publicly expressive activity,\" and pursuant to that policy, asked a number of students distributing pamphlets and seeking signatures on petitions to leave. In a suit brought by the students, the California Supreme Court held that PruneYard's action violated state law, holding that the students \"were entitled to conduct their activity on PruneYard property.\" PruneYard argued that this decision violated their own free speech rights, claiming that \"a private property owner has a First Amendment right not to be forced by the State to use his property as a forum for the speech of others.\" The Court rejected this argument, noting that the government was not forcing PruneYard itself to espouse any specific views, and that PruneYard could \"expressly disavow any connection with\" any particular message. The Court said that under the circumstances, \"[t]he views expressed by members of the public\" would \"not likely be identified with those of the owner.\" The Court distinguished Tornillo on similar grounds in Rumsfeld v. Forum for Academic and Institutional Rights, Inc. (FAIR) . In that case, a group of law schools represented by FAIR protested the Solomon Amendment, which specified \"that if any part of an institution of higher education denies military recruiters access equal to that provided other recruiters, the entire institution would lose certain federal funds.\" Prior to the passage of the Solomon Amendment, some law schools had restricted military recruiting on campus on the basis that the military, through its \"policy on homosexuals in the military,\" violated the schools' nondiscrimination policies. FAIR argued that forcing the schools to \"disseminate or accommodate a military recruiter's message\" violated their First Amendment rights. The Court first noted that the Solomon Amendment primarily regulated conduct and only incidentally compelled speech, in the form of recruiting assistance such as sending emails or posting notices. Further, the Court held that \"accommodating the military's message does not affect the law schools' speech, because the schools are not speaking when they host interviews and recruiting receptions.\" Distinguishing Hurley , the Court said that \"[u]nlike a parade organizer's choice of parade contingents, a law school's decision to allow recruiters on campus is not inherently expressive.\" The Court said that \"the expressive component\" of the schools' decisions to bar military recruiters was \"not created by the conduct itself but by the speech that accompanies it.\" Instead, as in PruneYard , the Court said that \"[n]othing about recruiting suggests that law schools agree with any speech by recruiters,\" noting that the schools remained free to state that they disagreed with the military's policies. A number of federal trial courts have applied Tornillo to hold that search engines exercise editorial judgment protected by the First Amendment when they make decisions about whether and how to present specific websites or advertisements in search results. For example, in Zhang v. Baidu.com, Inc. , the trial court noted that when search engines \"retrieve relevant information from the vast universe of data on the Internet and . . . organize it in a way that would be most helpful to the searcher,\" they \"inevitably make editorial judgments about what information (or kinds of information) to include in the results and how and where to display that information.\" Ultimately, the court held that the plaintiff's \"efforts to hold Baidu accountable in a court of law for its editorial judgments about what political ideas to promote cannot be squared with the First Amendment.\" In line with this view, some scholars have maintained that search engine results represent protected speech because search engines make editorial judgments, \"reporting about others' speech\" in a way that \"is itself constitutionally protected speech. Others have pointed out, however, that such actions would likely be protected only insofar as they do communicate something to listeners. Thus, some scholars have argued that search results—at least if those results are automated \"and experienced as 'objective'\"—would not be protected under the First Amendment because the \"dominant function\" of these results \"is not to express meaning but rather to 'do things in the world'; namely, channel users to websites.\" On this issue, the court in Zhang , said that, given governing Supreme Court precedent, \"the fact that search engines often collect and communicate facts, as opposed to opinions, does not alter the analysis\": \"As the Supreme Court has held, 'the creation and dissemination of information are speech within the meaning of the First Amendment. Facts, after all, are the beginning point for much of the speech that is most essential to advance human knowledge and to conduct human affairs.'\" Reaching the same result through different reasoning, a different district court held that Google's \"PageRanks,\" which rank \"the relative significance of a particular web site as it corresponds to a search query,\" were protected under the First Amendment as subjective opinions. Commentators have argued that Tornillo should apply when, for example, Facebook promotes certain viewpoints over others, as Facebook is exercising editorial judgment about how to present constitutionally protected speech. The trial court's opinion in Zhang suggests that social media sites would be engaging in protected speech insofar as they, like search engines, \"make editorial judgments about what information (or kinds of information)\" to display \"and how and where to display that information.\" On the other hand, the Supreme Court's decision in FAIR suggests that under some circumstances, an entity's decision \"to allow\" third parties to use their platforms might not be expressing a particular view. As with search results, one critical question may be whether the content presentation decisions themselves are communicative or expressive, or whether instead they only take on an expressive meaning when combined with other speech. Related to the question of whether content presentation decisions themselves are expressive, one possible argument against extending the editorial analogy to social media sites is that users would be unlikely to attribute users' speech to the social media sites. In Tornillo itself, the Court held that the newspapers' editorial judgments were protected under the First Amendment without expressly analyzing whether readers would attribute the published content to the newspaper. One significant factor in the Supreme Court's various decisions about whether to extend First Amendment protection to the groups hosting others' speech was whether listeners would be likely to attribute that speech to the host, such as the parade organizer, in Hurley , the shopping center, in PruneY ard , or the law schools, in FAIR . Accordingly, courts may be less likely to conclude that social media sites' decisions regarding users' content are protected by the First Amendment if third parties would be unlikely to attribute users' speech to the social media sites themselves. Whether third parties would attribute user-generated content to social media platforms will likely depend on the particular site or activity being regulated. In particular, where platforms aggregate or alter user-generated content, users may be more likely to see that as the platforms' speech. If the sites aggregate user-generated content, courts may ask, as in Hurley , whether viewers would understand that content to \"consist of individual, unrelated segments\" that are \"neutrally presented,\" or whether instead viewers would understand that each segment \"is understood to contribute something to a common theme,\" and that the aggregate communicates an \"overall message.\" Accordingly, if a site aggregates content into a single story, courts might hold that the sites are acting as more than a mere \"conduit for speech produced by others.\" By contrast, if a site published all user content without restrictions, users' communications, like \"the views expressed by members of the public\" in PruneY ard , might not reasonably be \"identified\" as the views \"of the owner.\" So far, the trial court decisions extending the editorial analogy to search engines have not analyzed this issue in significant detail. If social media sites were considered to be equivalent to newspaper editors when they make decisions about whether and how to present users' content, then those editorial decisions would protected by the First Amendment. Any government regulation of those protected editorial functions that forced social media sites to host content that they would not otherwise transmit, or otherwise restricting those sites' \"autonomy to choose the content\" of their \"own message,\" would likely be subject to strict scrutiny. Similarly, regulations requiring social media providers not to publish protected speech on the basis of the speech's content, or punishing them for publishing that speech, might also be subject to strict scrutiny. To satisfy strict scrutiny, the government must show that the speech restriction \"furthers a compelling interest and is narrowly tailored to achieve that interest.\" Government actions are unlikely to be upheld if a court applies strict scrutiny. Nevertheless, the Supreme Court has, in rare instances, said that the government may \"directly regulate speech to address extraordinary problems, where its regulations are appropriately tailored to resolve those problems without imposing an unnecessarily great restriction on speech.\" Additionally, even if a court held that social media sites' editorial decisions are protected under the First Amendment, it might review a government regulation affecting those decisions under a lower level of scrutiny if the regulation is content-neutral. Even in a traditional public forum, the government may impose \"reasonable time, place and manner restrictions\" on speech. Thus, for example, the Supreme Court has said that while the government may regulate noise by \"regulating decibels\" or \"the hours and place of public discussion,\" it may not bar speech solely \"because some persons were said to have found the sound annoying.\" Accordingly, courts may uphold government regulations if they have only an incidental effect on speech, \"serve a substantial governmental interest,\" and do not \"burden substantially more speech than is necessary to further that interest.\" The permissibility of federal regulation of social media sites will turn in large part on what activity is being regulated. To the extent that federal regulation specifically targets communicative content—that is, speech—or social media platforms' decisions about whether and how to present that content, that regulation may raise constitutional questions. While the Supreme Court has not yet weighed in on the question, lower courts have held that when search engines make decisions regarding the presentation of search results, they are exercising editorial functions protected as speech under the First Amendment. If this reasoning were to be extended to social media sites' decisions regarding the presentation of users' content, Congress's ability to regulate those decisions would be relatively limited. However, even assuming that Congress were to regulate the protected speech of social media companies, this would not necessarily doom a regulation. If, for example, the particular speech being regulated is commercial speech, such as advertisements, the regulation would likely be evaluated under a lower level of scrutiny. In addition, the Court has recognized certain, relatively limited categories of speech that can be more readily regulated: \"For example, speech that is obscene or defamatory can be constitutionally proscribed because the social interest in order and morality outweighs the negligible contribution of those categories of speech to the marketplace of ideas.\" But even with respect to these categories of speech, the government may violate the First Amendment if it engages in further content or viewpoint discrimination within that category. Thus, the Supreme Court has said as an example that while \"the government may proscribe libel,\" \"it may not make the further content discrimination of proscribing only libel critical of the government.\" In addition, if the law imposes criminal liability, the Court may require a mental state requirement, so that, for example, the government has to prove that the defendant knew the speech was obscene. Courts will also apply a lower level of scrutiny to content-neutral regulations. A content-neutral law that regulates only \"the time, place, or manner of protected speech\" may be constitutional if it is \"narrowly tailored to serve a significant governmental interest.\" If a law is not only content-neutral but also focused primarily on regulating conduct, imposing only an incidental burden on speech, a court will uphold the regulation if \"it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest.\" Thus, for example, in Turner Broadcasting , the Supreme Court held that the FCC's must-carry provisions should be reviewed under an intermediate standard, rather than under strict scrutiny, because the rules were content-neutral: their application did not depend on \"the content of the cable operators' programming\" or the messages of the speakers carried. And in FAIR , the Court upheld the Solomon Amendment under intermediate scrutiny after concluding that the law regulated conduct that was not \"inherently expressive\" and only incidentally burdened speech. The Court said that the law did \"not focus on the content of a school's recruiting policy,\" but on \"the result achieved by the policy.\" Additionally, if Congress highlights \"special characteristics\" of social media to justify heightened regulation, courts may be more willing to uphold those regulations. Although the Supreme Court in Reno rejected certain \"special justifications\" that the government argued should allow greater regulation of the internet at large, some have argued that special characteristics of social media might justify limited regulation to address those issues, particularly if those justifications are distinct from the ones rejected in Reno , or if there is evidence that conditions have changed since that decision was issued. To date, however, no courts have found that such special justifications exist, let alone approved of regulations addressing those issues. Finally, Congress may consider how any new regulation would fit into the existing legal framework of the CDA's Section 230. Section 230 creates immunity from most civil lawsuits that seek to treat service providers as the \"publisher or speaker\" of content created by another, and also provides that interactive service providers may not be held liable for taking good faith action to restrict access to content that the provider or users deem \"obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable.\" Insofar as any new federal regulations would subject social media providers to liability for publishing content created by users, or for restricting access to that content, those regulations might conflict with Section 230, and Congress may consider expressly setting out the relationship between those new regulations and Section 230. As a general principle of law, courts are reluctant to imply that new statutes repeal prior laws unless the \"two statutes are in 'irreconcilable conflict,' or . . . the latter act covers the whole subject of the earlier one and 'is clearly intended as a substitute.'\" Accordingly, if a new law does not explain how it relates to Section 230, courts will attempt to read the statutes harmoniously, giving effect to both. If Congress were to create an express exception from Section 230, one issue would be determining the proper scope of that exception, so that Congress is allowing liability only for certain specific activity that it is seeking to discourage. Section 230 was enacted, in part, in response to a trial court decision ruling that an internet service provider should be considered a \"publisher\" of defamatory statements that a third party had posted on a bulletin board that it hosted, and could therefore be subject to suit for libel. Critical to the court's decision was the fact that the service provider had moderated its message boards, qualifying the site as a publisher for purposes of the libel claim in the view of the court. By specifying that no provider of an interactive computer service \"shall be treated as the publisher or speaker\" of another's content, Congress sought, among other things, to overturn this decision. A number of Representatives, including one of the bill's sponsors, said at the time that they wanted to ensure that \"computer Good Samaritans\" would not \"tak[e] on liability\" by regulating offensive content. As discussed, courts subsequently interpreted this provision to bar liability for a wide variety of legal claims, not solely suits for defamation. Section 230, enacted in 1996, has often been described as central to the development of the modern internet. One scholar asserted that \"no other sentence in the U.S. Code . . . has been responsible for the creation of more value than that one.\" Therefore, while Congress may want to modify this broad immunity, it is important to first understand how that immunity currently operates, and why it was created in the first place.", "summary": "As the Supreme Court has recognized, social media sites like Facebook and Twitter have become important venues for users to exercise free speech rights protected under the First Amendment. Commentators and legislators, however, have questioned whether these social media platforms are living up to their reputation as digital public forums. Some have expressed concern that these sites are not doing enough to counter violent or false speech. At the same time, many argue that the platforms are unfairly banning and restricting access to potentially valuable speech. Currently, federal law does not offer much recourse for social media users who seek to challenge a social media provider's decision about whether and how to present a user's content. Lawsuits predicated on these sites' decisions to host or remove content have been largely unsuccessful, facing at least two significant barriers under existing federal law. First, while individuals have sometimes alleged that these companies violated their free speech rights by discriminating against users' content, courts have held that the First Amendment, which provides protection against state action, is not implicated by the actions of these private companies. Second, courts have concluded that many non-constitutional claims are barred by Section 230 of the Communications Decency Act, 47 U.S.C. § 230, which provides immunity to providers of interactive computer services, including social media providers, both for certain decisions to host content created by others and for actions taken \"voluntarily\" and \"in good faith\" to restrict access to \"objectionable\" material. Some have argued that Congress should step in to regulate social media sites. Government action regulating internet content would constitute state action that may implicate the First Amendment. In particular, social media providers may argue that government regulations impermissibly infringe on the providers' own constitutional free speech rights. Legal commentators have argued that when social media platforms decide whether and how to post users' content, these publication decisions are themselves protected under the First Amendment. There are few court decisions evaluating whether a social media site, by virtue of publishing, organizing, or even editing protected speech, is itself exercising free speech rights. Consequently, commentators have largely analyzed the question of whether the First Amendment protects a social media site's publication decisions by analogy to other types of First Amendment cases. There are at least three possible frameworks for analyzing governmental restrictions on social media sites' ability to moderate user content. First, using the analogue of the company town, social media sites could be treated as state actors who are themselves bound to follow the First Amendment when they regulate protected speech. If social media sites were treated as state actors under the First Amendment, then the Constitution itself would constrain their conduct, even absent legislative regulation. The second possible framework would view social media sites as analogous to special industries like common carriers or broadcast media. The Court has historically allowed greater regulation of these industries' speech, given the need to protect public access for users of their services. Under the second framework, if special aspects of social media sites threaten the use of the medium for communicative or expressive purposes, courts might approve of content-neutral regulations intended to solve those problems. The third analogy would treat social media sites like news editors, who generally receive the full protections of the First Amendment when making editorial decisions. If social media sites were considered to be equivalent to newspaper editors when they make decisions about whether and how to present users' content, then those editorial decisions would receive the broadest protections under the First Amendment. Any government regulations that alter the editorial choices of social media sites by forcing them to host content that they would not otherwise transmit, or requiring them to take down content they would like to host, could be subject to strict scrutiny. A number of federal trial courts have held that search engines exercise editorial judgment protected by the First Amendment when they make decisions about whether and how to present specific websites or advertisements in search results, seemingly adopting this last framework. Which of these three frameworks applies will depend largely on the particular action being regulated. Under existing law, social media platforms may be more likely to receive First Amendment protection when they exercise more editorial discretion in presenting user-generated content, rather than if they neutrally transmit all such content. In addition, certain types of speech receive less protection under the First Amendment. Courts may be more likely to uphold regulations targeting certain disfavored categories of speech such as obscenity or speech inciting violence. Finally, if a law targets a social media site's conduct rather than speech, it may not trigger the protections of the First Amendment at all.", "document_type": "crs"}
{"report": "Concurrent receipt refers to the simultaneous receipt of two types of monetary benefits: military retired pay and Department of Veterans Affairs (VA) disability compensation. With several separate programs, varying eligibility criteria, and several eligibility dates, some observers find the subject complex and somewhat confusing. There are, however, two common criteria: first, all recipients are military retirees; second, they are also eligible for VA disability compensation. This report addresses the two primary components of the concurrent receipt program: Combat-Related Special Compensation (CRSC) and Concurrent Retirement and Disability Payments (CRDP). It reviews the possible legislative expansion of the program to additional populations and provides several potential options for Congress to consider. In 1891, Congress first prohibited payment of both military retired pay and a disability pension under the premise that it represented dual or overlapping compensation for the same purpose. The original law was modified in 1941, and the present system of VA disability compensation offsetting military retired pay was adopted in 1944. Under this system, retired military personnel were required to waive a portion of their retired pay equal to the amount of VA disability compensation, a dollar-for-dollar offset. If, for example, a military retiree received $1,500 a month in retired pay and was rated by the VA as 70% disabled (and therefore entitled to approximately $1,000 per month in disability compensation), the offset would operate to pay $500 monthly in retired pay and the $1,000 in disability compensation. The advantage for the retiree was that VA disability compensation was not taxable. For many years some military retirees and advocacy groups sought a change in law to permit receipt of all, or some, of both payments. Opponents of concurrent receipt frequently referred to it as double dipping , maintaining that it represented two payments for the same condition. In the FY2003 NDAA ( P.L. 107-314 ), Congress created a benefit known as Combat Related Special Compensation (CRSC). CRSC provided, for certain disabled retirees whose disability is combat-related, a cash benefit financially identical to what concurrent receipt would provide them. The FY2004 NDAA ( P.L. 108-136 ) authorized, for the first time, the phase-in of actual concurrent receipt (now referred to as Concurrent Retirement and Disability Payments or CRDP), and a greatly expanded CRSC program. The FY2005 NDAA ( P.L. 108-375 ) further liberalized the concurrent receipt rules contained in the FY2004 NDAA and authorized immediate concurrent receipt for those rated by the VA totaling 100%. The FY2008 NDAA ( P.L. 110-181 ) expanded concurrent receipt eligibility to include those who are 100% disabled due to unemployability and provided CRSC to those who were medically retired or retired prematurely due to force reduction programs prior to completing 20 years of service. CRDP phase-in was fully implemented by 2014, allowing retirees with a disability rated at 50% or greater to receive full retired pay and full VA disability compensation without an offset. An understanding of military retirement, VA disability compensation, and the interaction of these two elements is helpful in discussing concurrent receipt. An active duty servicemember becomes entitled to retired pay, frequently referred to as vesting , upon completion of 20 years of service, regardless of age. A member who retires is immediately paid a monthly annuity based on a percentage of their final base pay or the average of their high three years of base pay, depending on when they entered active duty. Retired pay accrues at the rate of 2.5% per year of service for those who have entered the service prior to January 1, 2018, and 2.0% for those entering service on or after January 1, 2018. An alternative retirement option, known as \"Redux,\" was also available for certain active duty servicemembers, depending on their date of entry. Reserve component servicemembers also become eligible for retirement upon completion of 20 years of qualifying service, regardless of age. However, their retired pay calculation is based on a point system that results in a number of \"equivalent years\" of service. In addition, a reserve component retiree does not usually begin receiving retired pay until reaching age 60. While retirement eligibility at 20 years of service is the norm for active component members and age 60 for reserve component members, there are some circumstances that result in earlier retirement. Servicemembers found to be unfit for continued service due to physical disability may be retired if the condition is permanent and stable and the disability is rated by DOD as 30% or greater. These retirees are generally referred to as Chapter 61 retirees , a reference to Chapter 61 of Title 10, which covers disability retirement. As a result, some disability retirees are retired before becoming eligible for longevity retirement while others have completed 20 or more years of service. A servicemember retired for disability may select one of two available options for calculating their monthly retired pay: 1. Longevity Formula. Retired pay is computed by multiplying the years of service times 2.5% or 2.0% (respectively based on a date of entry into service before or after Jan 1, 2018) and then times the pay base. Monthly Retired Pay= (years of service x 2.5% or 2.0%) x (pay base) 2. Disability Formula. Retired pay is computed by multiplying the DOD disability percentage by the pay base. Monthly Retired Pay= disability % x (pay base) The maximum retired pay calculation under either formula cannot exceed 75% of base pay. The retired pay computed under the disability formula is fully taxed unless the disability is the result of a combat-related injury. Since the disability percentage method usually results in higher retired pay, it is most commonly selected. Generally, military retired pay based on longevity is taxable. In certain instances, a portion of disability retired pay may be tax-free. Personnel retired due to force management requirements and before completing 20 years of service are generally referred to as \"TERA retirees\" because the National Defense Authorization Act for Fiscal Year 1993 granted Temporary Early Retirement Authority (TERA) as a manpower tool to entice voluntary retirements during the drawdown of the early 1990s. This authority was in effect from 1992 to 2001. TERA retired pay is calculated in the same way as longevity retirement, but there is a retired pay reduction of 1% for every year of service below 20. To qualify for VA disability compensation, the VA must make a determination that the veteran sustained a particular injury or disease, or had a preexisting condition aggravated, while serving in the Armed Forces. Some exceptions exist for certain conditions that may not have been apparent during military service but which are presumed to have been service-connected. The VA has a scale of 10 ratings, from 10% to 100%, although there is no direct arithmetic relationship between the amounts of money paid for each step. Each percentage rating entitles the veteran to a specific level of disability compensation. In a major difference from the DOD disability retirement system, a veteran receiving VA disability compensation can ask for a medical reexamination at any time (or a veteran who does not receive disability compensation upon separation or retirement from service can be examined or reexamined later). All VA disability compensation is tax-free, which makes receipt of VA compensation desirable, even with the operation of the offset. As a general rule of thumb, DOD pays for longevity while the VA pays for disability. As veterans, military retirees can apply to the VA for disability compensation. A retiree may (1) apply for VA compensation any time after leaving the service and (2) have his or her degree of disability changed by the VA as the result of a later medical reevaluation, as noted above. Many retirees seek benefits from the VA years after retirement for a condition that may have been incurred during military service but that does not manifest itself until many years later. Typical examples include hearing loss, some cardiovascular problems, and conditions related to exposure to Agent Orange. The DOD and VA disability rating systems have much in common, but there are also significant differences. DOD makes a determination of eligibility for disability retirement only once, at the time the individual is separating from the service. Although DOD uses the VA rating schedule to determine the percentage of disability, DOD measures disability, or lack thereof, against the extent to which the individual can or cannot perform military duties. Military disability retired pay, but not VA disability compensation, is usually taxable, unless related to a combat disability. As a result of the current disability process, a retiree can have both a DOD and a VA disability rating and these ratings will not necessarily be the same percentage. The percentage determined by DOD is used to determine fitness for duty and may result in the medical separation or disability retirement of the servicemember. The VA rating, on the other hand, was designed to reflect the average loss of earning power. Studies over the past several years have consistently recommended a single, comprehensive medical examination that would establish a disability rating that could be used by both DOD and the VA. The National Defense Authorization Act for Fiscal Year 2008 required a joint DOD and VA report on the feasibility of consolidating disability evaluation systems to eliminate duplication by having one medical examination and a single-source disability rating. As a result, DOD and the VA initiated a one-year pilot program, now called the Integrated Disability Evaluation System (IDES), at the Walter Reed Army Medical Center, the National Naval Medical Center at Bethesda, and the Malcolm Grove Medical Center at Andrews Air Force Base. The program was expanded to other sites in 2009 and 2010, and since September 2011 all new disability retirement cases at facilities worldwide have been processed through IDES. As IDES streamlined the disability evaluation process, DOD and VA now focus on improving health care data and records sharing, a process deemed \"vital to Service members who are leaving the DOD system with complex medical issues and ongoing health care needs.\" In September 2018, DOD and VA issued a joint statement indicating their commitment to implement an integrated electronic health system that will allow for seamless sharing of health care data between both departments and aid the disability rating process. The FY2003 NDAA, as amended by the FY2004 NDAA, authorized Combat-Related Special Compensation (CRSC). Military retirees with at least 20 years of service and who meet either of the following two criteria are eligible for CRSC: A disability that is \"attributable to an injury for which the member was awarded the Purple Heart,\" and is not rated as less than a 10% disability by the VA; or A disability rating resulting from involvement in \"armed conflict,\" \"hazardous service,\" \"duty simulating war,\" or \"through an instrumentality of war.\" This liberal definition of combat-related encompasses disabilities associated with any kind of hostile force; hazardous duty such as diving, parachuting, or using dangerous materials such as explosives; individual training and unit training and exercises and maneuvers in the field; and \"instrumentalities of war.\" Retirees must apply for CRSC to their parent service, and the parent service is responsible for verifying that the disability is combat-related. This process is not automatic; it is application-driven. CRSC payments will generally be equal to the amount of VA disability compensation that has been determined to be combat-related. The legislation does not end the requirement that the retiree's military retired pay be reduced by the amount of the total VA disability compensation the retiree receives. Instead, CRSC beneficiaries are to receive the financial equivalent of concurrent receipt as \"special compensation,\" but the statute states explicitly that it is not retired pay per se. CRSC payments are paid from the Department of Defense Military Retirement Fund. As of September 2017, a total of 90,740 retirees were receiving CRSC (see Figure 1 ). Servicemembers with a permanent DOD disability rating of 30% or greater may be retired and receive retired pay prior to completing 20 years of service. These retirees are generally referred to as \"Chapter 61\" retirees, a reference to Chapter 61, Title 10, which governs disability retirement. In addition to the Chapter 61 retirees with less than 20 years of service, those who voluntarily retired under the Temporary Early Retirement Authority (TERA) during the military drawdown of the early to mid-1990s also have less than 20 years of service. The original CRSC legislation excluded those active duty members who retired with less than 20 years of service. However, the FY2008 NDAA expanded CRSC to include Chapter 61 and active duty TERA retirees effective January 1, 2008. Eligibility no longer requires a minimum number of years of service or a minimum disability rating (other than the 30% noted above for disability retirement); a 10% VA rating may qualify if it is combat-related. Eligible retirees must still apply to their parent service to validate that the disability is combat-related. The FY2008 NDAA included almost all reserve disability retirees in the eligible CRSC population except those retired under 10 U.S.C. 12731b, a special provision which allows reservists with a physical disability not incurred in the line of duty to retire with between 15 and 19 creditable years of service. As noted earlier, an individual generally cannot receive two separate lifelong government annuities from federal agencies for the same purpose or qualifying event, for example, disability retired pay and VA disability compensation. To preclude this, there is a \"special rule\" for Chapter 61 disability retirees. Application of the special rule caps the CRSC at the level to which the retiree could have qualified based solely on years of service or longevity. In some instances, the special rule could limit or completely eliminate the concurrent receipt payment. In other instances, application of the rule may not result in any changes. Each situation is unique (rank, years of service, DOD and VA disability ratings, and the disability percentage attributable to combat) and requires independent calculations. It appears that those most vulnerable to the reduction of CRSC due to the special rule would be active duty servicemembers with a disability retirement, significantly less than 20 years of service, and a high VA disability rating. Others potentially impacted would be reserve members with little active duty. When CRSC was originally enacted in 2002, it required all applicants to have at least 20 years of service creditable for computation of retired pay. As a result, reserve retirees had to have at least 7,200 reserve retirement points to be eligible for CRSC. As noted earlier, a reservist receives a certain number of retirement points for varying levels of participation in the reserves, or active duty military service. The 7,200-point figure was extraordinarily high; it could only have been attained by a reservist who had many years of active duty military service in addition to a long reserve career. Initially this law, as enacted, effectively denied CRSC to almost all reservists. However, a provision in the FY2004 NDAA clarified the service requirement for reserve component personnel. It specified that personnel who qualify for reserve retirement by having at least 20 years of duty creditable for reserve retirement are eligible for CRSC. While eligible for CRSC, reserve retirees must be drawing retired pay (generally at age 60) to actually receive the CRSC payment. Essentially, with the exception of reserve component members injured while not in a duty status, all military retirees who have been awarded a Purple Heart or have combat-related disabilities compensable by the VA are eligible for CRSC (see Figure 2 ). Military retirees with service-connected disabilities which are not combat-related as defined by the statute are not eligible for CRSC, but may be eligible for CRDP as discussed below. The FY2004 NDAA authorized, for the first time, actual concurrent receipt for retirees with at least a 50% disability, regardless of the cause of disability. However, the amount of concurrent receipt was to be phased in over a 10-year period, from 2004 to 2013, except for 100% disabled retirees, who became entitled to immediate concurrent receipt effective January 1, 2005. Depending on the degree of disability, the initial amount of retired pay that the retiree could have restored would vary from $100 to $750 per month, or the actual amount of the offset, whichever was less. In 2014, all offsets ended and military retirees with at least a 50% disability became eligible to receive their entire military retired pay and VA disability compensation. In FY2017 there were 577,399 retirees receiving CRDP. A retiree cannot receive both CRSC and CRDP benefits. The retiree may choose whichever is more financially advantageous to him or her and may change the type of benefit to be received during an annual o pen s eason to maximize the payments received. There are currently two groups of retirees who are not eligible for CRDP benefits (see Figure 4 ). The first group is nondisability military retirees with service-connected disabilities that have been rated by the VA at 40% or less. The second group includes Chapter 61 disability retirees with service-connected disabilities of 100% or less and with less than 20 years of service. The National Defense Authorization Act for Fiscal Year 1993 granted temporary authority (which expired on September 30, 2001) for the services to offer early retirements to personnel with more than 15 but less than 20 years of service. TERA was used as a manpower tool to entice voluntary retirements during the post-Cold War drawdown. TERA retired pay was calculated in the usual way except that there is an additional reduction of 1% for every year of service below 20. Part or all of this latter reduction could be restored if the retiree worked in specified public service jobs (such as law enforcement, firefighting, and education) during the period immediately following retirement, until the point at which the retiree would have reached the 20-year mark if he or she had remained in the service. TERA retirees are eligible for CRSC and CRDP even though they have less than 20 years of service. The \"special rule\" for disability retirees (discussed below) does not apply to TERA retirees since TERA was not a disability retirement, but rather a regular retirement but for those with less than 20 years of service. The Blended Retirement System (BRS), effective for all servicemembers joining on or after January 1, 2018, offers servicemembers the option to select a lump sum payment of a portion of their military retired pay in lieu of a monthly annuity. If a member retiring under the BRS is eligible for CRDP and elects the lump sum payment of retired pay, the individual will continue to receive a monthly VA disability payment. If the member electing the lump sum payment is not eligible for CRDP (i.e., the retired pay offset applies), the VA will withhold disability payments until the sum of the amount withheld over time equals the gross amount of the lump sum payment. If the member is eligible for CRSC, the procedures for withholding VA disability payments relate to the combat-related portion of the total VA entitlement. CRSC and CRDP share some common elements, but are unique benefits. Table 1 summarizes some of the similarities and differences between CRSC and CRDP. CRDP and CRSC are paid from the DOD Military Retirement Fund. Costs have been rising every year as a consequence of the phased implementation and a rise in the number of eligible recipients. As of September 2017, one-third of all military retirees collecting retired pay were receiving either CRDP or CRSC. Veteran advocacy groups continue to lobby for changes to the concurrent receipt programs that would expand benefits to a larger population of retirees. Other groups have pressed Congress to offset or streamline duplicative benefits, contending that the dual receipt of VA and DOD payments amounts to double-dipping , or in some cases triple-dipping for those veterans also eligible for Social Security Disability Insurance (SSDI) from the Social Security Administration. Some of the factors that Congress might consider regarding potential changes include program costs, program efficiencies, individual eligibility requirements, and interaction with other servicemembers' and veterans' benefits and programs. Below are some options to change concurrent receipt programs that have been proposed or considered. The Congressional Budget Office has estimated that eliminating the CRDP program would save the government $139 billion between 2018 and 2026. While achieving significant cost savings, eliminating or sunsetting concurrent receipt programs could be unpopular among servicemembers, veterans, and their families. Previous efforts to reduce benefits to servicemembers have typically included a grandfather clause that would allow all current servicemembers and retirees to maintain existing benefits while the law would only apply to those who joined the service after a specific date. As previously discussed, the FY2008 NDAA extended CRSC eligibility to Chapter 61 retirees who retired due to combat-related physical disability prior to completing 20 years of service. However, Chapter 61 retirees with service-connected disabilities rated less than 50% or with less than 20 years of service are not eligible for CRDP. Congress could expand the CRDP provision to include this cohort. This option would extend CRDP eligibility to approximately 100,000 additional disability retirees at an estimated 10-year cost of $5.8 billion. At present, those military retirees with service-connected disabilities rated at 50% or greater are eligible for CRDP. Congress could revise the concurrent receipt legislation to include the entire population of military retirees with service-connected disabilities. In 2014, CBO estimated that to extend benefits to all veterans who would be eligible for both disability benefits and military retired pay would cost $30 billion from 2015 to 2024. With the extension of CRSC to Chapter 61 disability retirees, the special rule factors significantly into the concurrent receipt calculations. For those whose CRSC payment is limited or eliminated by the special rule , there may be a perceived inequity between CRSC recipients with 20 or more years of service (longevity retirees) and Chapter 61 (disability retirees who generally have less than 20 years of service) retirees. To resolve this potential issue, Congress could modify or eliminate the special rule or limit its application to specific military operations. However, some observers may note that eliminating or modifying the special rule would result in paying for the same disability twice, by DOD and by VA. It might also complicate future initiatives to simplify and streamline postservice compensation whereby DOD would only compensate for years of service and the VA would only compensate for disability, as recommended by the Dole/Shalala commission. ", "summary": "Concurrent receipt refers to the simultaneous receipt of two types of federal monetary benefits: military retired pay and Department of Veterans Affairs (VA) disability compensation. Prior to 2004, existing laws and regulations dictated that a military retiree could not receive two payments from federal agencies for the same purpose. As a result, military retirees with physical disabilities recognized by the VA would have their military retired pay offset or reduced dollar-for-dollar by the amount of their nontaxable VA compensation. Legislative activity on the issue of concurrent receipt began in the late 1980s and culminated in the provision for Combat-Related Special Compensation (CRSC) in the Bob Stump National Defense Authorization Act for Fiscal Year 2003 (P.L. 107-314). Since then, Congress has added Concurrent Retirement and Disability Payments (CRDP) for those retirees with a disability rated at 50% or greater, extended concurrent receipt to additional eligible populations, and further refined and clarified the program. There are two common criteria that define eligibility for concurrent receipt: (1) all recipients must be military retirees and (2) they must also be eligible for VA disability compensation. An eligible retiree cannot receive both CRDP and CRSC. The retiree must choose whichever is most financially advantageous to him or her and may change the type of benefit to be received during an annual open season. In FY2017, approximately one-third of the retired military population was receiving either CRSC or CRDP at a cost of $12.4 billion. Nevertheless, there are also military retirees who receive VA disability compensation but are not eligible for concurrent receipt. Determining whether to make some or all of this population eligible for concurrent receipt remains a point of contention in Congress. The Congressional Budget Office (CBO) has estimated that to extend benefits to all veterans who would be eligible for both disability benefits and military retired pay would cost $30 billion from 2015 to 2024. In 2016, CBO estimated that eliminating concurrent receipt would save the government $139 billion between 2018 and 2026.", "document_type": "crs"}
{"report": "International trophy hunting is a multinational, multimillion-dollar industry practiced in countries on almost every continent. Trophy hunting is broadly defined as the killing of animals for recreation with the purpose of collecting trophies such as horns, antlers, skulls, skins, tusks, or teeth for display. International and domestic trophy hunting has a long history in the United States, and U.S. citizens import more wildlife trophies than citizens of any other country—over 650,000 trophies in 2017 alone. Many of these trophies are deer, geese, and other common species that were hunted in neighboring countries, such as Canada. However, some of these trophies are rare and threatened animals hunted in countries throughout Africa and parts of Asia and South America. The practice of international trophy hunting, especially of rare and endangered species, has generated controversy for a number of reasons, including its relation to conservation (including of wildlife populations), ethical considerations, and its effect on local economies where the animals are hunted. Proponents of trophy hunting contend that the practice is a potential source of funding for the conservation of species in exchange for the hunting of a proportionally small number of individuals. Further, they argue that trophy hunting can create incentives for conserving habitat and ecosystems where hunted animals roam and, in some impoverished areas in range countries, can provide a means of income, employment, and community development. Critics of trophy hunting contend that the practice can lead to the decline of rare and endangered species and that the pathway of moving funds from hunting to conservation can be fraught with corruption and mismanagement. Further, some argue that it is unethical to kill animals for sport and that the life of an animal should not be valued according to how much a hunter would pay to kill it. Determining the effects of international trophy hunting on species—with regard to either killing animals or conserving them through hunting revenue—can be challenging for several reasons, namely due to lack of data, according to scientists. Difficulty gathering data from range countries can hinder attempts to develop an accurate sense of how hunting affects animals. For example, limited data may misrepresent the number of trophies harvested or animals killed, corruption can blur the route of money from hunters to conservation efforts, and a lack of information on conservation plans and practices associated with domestic laws and regulations can lead to questions about the effectiveness of these conservation efforts. From a scientific perspective, teasing out the effects of trophy hunting from those of other factors that affect a species also can be challenging. Several factors affect the viability of animal populations in the wild, including habitat alteration or destruction, prey or resource availability, genetic makeup of the population, changes in climate, presence of non-native species, poaching, subsistence or market hunting, and trophy hunting, among others. Measuring the condition of a population usually involves taking into consideration several of these factors, and more than one factor typically affects the population's condition. Many scientific studies on trophy hunting's effects on wildlife populations contain disclaimers of insufficient data to measure the effect of hunting on a species. Some studies have reported that unregulated hunting has contributed to the decline of several species. For example, in the 1980s, hunting reportedly played a part in the decline of both the dorcas gazelle ( Gazella dorcus ) and the Nubian bustard ( Neotis nuba ) from Sahelian Africa. Some scientists contend that there are no documented extinctions solely resulting from trophy hunting. Congressional interest in trophy hunting hinges on several aspects of the practice and its potential consequences. There is interest among some Members of Congress and constituents in international trophy hunting of rare and threatened species, such as African lions, elephants, and rhinoceroses. As the largest importer of sport-hunted trophies in the world, the United States can play a role in shaping policy, which likely bolsters this interest. The killing of Cecil the lion in Africa in 2015 drew particular public interest and attention in Congress. The incident stimulated debate on trophy hunting and raised questions about the relative importance of trophy hunting versus other threats to a species. Congress's role in addressing international trophy hunting is limited in some aspects, because the range country oversees most controversial aspects of the activity. However, Congress can address the import of wildlife trophies into the United States and can use laws and regulations to indirectly influence trophy-hunting practices in range countries. Congress has addressed international trophy hunting through several bills and through oversight of the implementation of the Endangered Species Act (ESA; 16 U.S.C. §§1531-1543) and the Convention on the International Trade in Endangered Species of Wild Fauna and Flora (CITES). In addition, some Trump Administration policies have stimulated congressional interest in trophy hunting, such as one to evaluate permits issued for importing sport-hunted trophies of listed animals into the United States on a case-by-case basis, a change from the previous practice of evaluating the range country before issuing permits for hunting these animals. Further, the Trump Administration established an International Wildlife Conservation Council, which is charged with providing advice to the Secretary of the Interior on the benefits of U.S. citizens hunting overseas. This report discusses the history and scope of international trophy hunting in the United States, selected U.S. laws and international agreements that address trophy hunting, and potential issues for Congress to consider regarding international trophy hunting. It does not cover domestic trophy hunting. Sport hunting is one of the oldest known recreational activities, according to some historians. Although the origin of sport hunting remains unclear, some historians trace the practice to instances in Ancient Egypt and more prominently in the Middle Ages. Some authors note that game parks for controlled hunting were prevalent in the Persian Empire (534 BCE-330 BCE). Early reports of sport hunting indicate that it was unregulated and generally occurred in a commons area. Restrictions on sport hunting, according to some historians, first began in the Middle Ages, when it was forbidden to hunt in certain forests owned by a king or other royalty. In the 18 th and 19 th centuries, concerns about overhunting and its consequences for species led to the creation of parks and game lands with hunting regulations. For example, game reserves were created in England and its colonies to monitor and control the effects of sport hunting on animals in the 19 th century. Sport hunting was also practiced in the name of conservation and science, in addition to recreation. Former President Teddy Roosevelt went on hunting expeditions throughout the world; in 1909, he went on an 11-month expedition through British-controlled East Africa and Sudan and reportedly shot or trapped nearly 11,000 animals, including hippopotamuses, elephants, and white rhinoceroses. The Smithsonian Institution financed the expedition, and many of the specimens were deposited into the Smithsonian Natural History Museum. In the 20 th century, sport hunting became a resource, in part, for conservation. For example, sport hunting in the United States contributes to conservation through the Federal Aid in Wildlife Restoration Act of 1937 ( 16 U.S.C. 669-669i) , also known as the Pittman-Robertson Act. Under this act, the purchase of guns, hunting licenses, and ammunition generates revenue for conservation. Further, fees from federal and state duck stamps (stamps are required for waterfowl hunting) and hunting permits have generated funds for conservation in the United States. Trophy hunting originated, in part, during the colonial settlement in Africa. Some note that the establishment of the Dutch East India Company in 1652 led foreign hunters to Africa. Explorers and hunters killed animals for ivory and hides; the emphasis on hunting was for subsistence and trade. Hunters later took advantage of an expanding railway system to access areas infrequently occupied by settlements. Hunters combined sport hunting with the international wildlife trade to generate money, as exemplified by killing elephants and harvesting their ivory and hides for trade. Trophy hunting in Africa increased in the 19 th century and was encouraged by the British authorities, who promoted sport hunting as a way to increase agricultural expansions into historic rangelands. Tourist trophy hunting started in Kenya in the 20 th century and later spread throughout Africa. According to some scientists, trophy hunting aligned with and aided in conservation and development in the 20 th century; funding from trophy hunts, according to some, led to the establishment of protected areas in Africa. Trophy hunting was seen as a mechanism to support development in local communities (see \" Trophy Hunting and Local Communities \"). Trophy hunting occurs throughout the world in areas where wild and managed populations of hunted animals exist. Trophy hunting can target large, charismatic mammals, such as white rhinoceroses ( Ceratotherium simum ) and elephants ( Loxodonta africana ), as well as smaller, lesser-known species, such as markhor ( Capra falconeri ) and argali ( Ovis ammon ). Trophy hunting generates millions of dollars each year through trophy fees and other revenue connected with associated tourism. The largest community of international trophy hunters is from the United States. The United States is also the largest importer of animal trophies; it imports over 10 times more trophies than China, the world's second-largest trophy importer. Several species listed under CITES are hunted for trophies, and their export and import data can provide insight into the practice of international trophy hunting. CITES lists animals that are considered threatened or endangered due to trade and therefore require greater monitoring or conservation. From 2011 to 2015, trophy imports of CITES-listed species into the United States exceeded the sum of CITES-listed species imported into the other top nine trophy-importing countries in the world. (See Figure 1 .) Africa is the most popular place for the international hunting of rare and threatened species for trophies (see Figure 2 ), and several African countries are popular areas for sport hunting. South Africa and Namibia export the most mammalian trophies listed under CITES; in these countries, most trophies exported from CITES-listed species are from lions, lechwe (antelope), certain species of zebra, and leopards. (Data for non-CITES listed species were not readily available.) Some of the most prized species for trophy hunting come from Africa, and their notoriety is reflected in the hunting fees the species command. Fees for hunting animals for trophies vary considerably and are based on the rarity of the animal, the effort needed to hunt the animal, and the animal's popularity for hunting. (See Table 1 .) In Africa, the so-called big five animals of trophy hunting are lions, white rhinoceroses, elephants, leopards, and buffalo. All five species are coveted trophies for hunters, although most international hunters in Africa seek more plentiful, less costly plains game. The big five are notable for the difficulty in hunting them and the high trophy fees that hunters pay, which can range from $9,000 to upward of $350,000. (See Table 1 .) Some studies indicate that many African countries earn most of their trophy-hunting revenue from the big five animals. Four of the big five species are protected under CITES, ESA, or both. As discussed, the United States is the largest importer of sport-hunted trophies in the world for all species and for CITES-listed species. This distinction gives the United States, according to some, an opportunity to influence international sport hunting through its policies for importing trophies and actions by its hunters. U.S. hunters primarily import sport trophies from Canada and South Africa, according to Fish and Wildlife Service (FWS) records; this also holds true for CITES-listed species. (See Figure 3 .) Of the species imported into the United States, the snow goose, mallard, and black bear are the most common (see Figure 4 ). Most of these trophies are imported from Canada, and most imported species into the United States are not considered to be threatened or endangered. Of the CITES-listed species, the black bear and the Sandhill crane are the most imported trophies into the United States with a permit. (See Figure 5 .) The black bear and the sandhill crane are imported largely from Canada; most of the other species are imported from Africa. International sport hunting is largely regulated through laws of the range country, the country importing trophies, and international agreements. Hunters generally must consider regulations of all three entities and apply for applicable permits to hunt and transport trophies. This section will discuss the regulations associated with each category. International trophy hunting can be regulated through some international agreements, depending on the species being hunted. If the hunted species is considered rare or endangered due to trade, CITES might apply. CITES is an international agreement signed by 183 governments, including the United States, which voluntarily agreed to adhere to a series of incrementally more stringent restrictions on imports and exports of wildlife, depending on the sustainability of such trade for the species. CITES lists and categorizes wildlife and plant species based on the extent that these species might be threatened by trade. Protected species are organized under CITES into three appendixes. Species in Appendix I are threatened with extinction due primarily to trade, and trade in Appendix I species for commercial purposes is prohibited. Appendix II contains species that are not necessarily threatened with extinction but require controlled trade to prevent population declines. Species in Appendix III are listed because at least one country has requested other countries to assist in regulating trade of that species. Countries regulate trade through a permit system for importing and exporting species and a quota system for regulating species' take (the act of killing or harvesting a species). Many CITES signatories have implemented permit regulations in their national laws. For the United States, CITES is implemented under ESA. CITES regulates the import and export of trophies from threatened wildlife through permits. For example, a hunter attempting to import a trophy of an animal listed under CITES Appendix I (the most protective category) into the United States would be required to obtain an import and export permit (from the importing country and range country, respectively) for the wildlife or wildlife parts. Trophy imports of CITES-listed species under Appendixes I and II generally are administered through a quota system established by the range country (or in some cases the CITES Secretariat), and they require a determination that the killing of the animal causes no detriment to the population, referred to as a n on- d etriment f inding (NDF). NDFs are required for Appendix I and II species only but can be used to guide the trade of Appendix III species. An NDF for an import permit is made by the designated CITES Scientific Authority of the country of import through the analysis of information (e.g., population status and trade information) from the range country and the permit. FWS is the United States' Scientific Authority for CITES-listed species. The establishment of a quota for exporting individuals of a species can meet the requirements of an NDF. The CITES Secretariat does not necessarily have complete information regarding how range countries set their quotas, but it receives reports from participating countries. For example, range countries regulate African elephant, cheetah, black rhinoceros, and lion trophies by voluntary quotas. Trade of a particular species or exports of a species from a range country can be temporarily suspended under CITES. Such a suspension may occur if there are not sufficient guarantees that trade is not detrimental to the survival of the listed species or if adequate legislation to implement CITES is absent, illegal trade is prevalent, or required scientific reports are missing. Some suspensions of trade are specific to the species, whereas other suspensions can be for all trade for a country. Currently, 29 countries are affected by species-specific trade suspension resolutions, including Equatorial Guinea, South Sudan, Sudan, Tanzania, Ghana, Niger, Liberia, Vietnam, Benin, and Togo, among others. Of those 29 countries, Afghanistan, Djibouti, Grenada, Liberia, Mauritania, and Somalia are subject to a complete suspension of trade on all species. Another multilateral framework for addressing trophy hunting is the European Union (EU). The EU governs international trophy hunting under the EU Wildlife Trade Regulations (WTR). The WTR implements CITES for the EU and aims to protect species by regulating trade, authorizing permits for trade, and allowing for the suspension of certain species from trade with the EU. Regulations promulgated by the EU are in place for all national governments within the EU; however, individual countries enact enforcement regulations. The EU regulates the trade of species through a permit system that is based on the classification of a species within four annexes. The annexes list species according to how trade affects the species. The classification of species within the annexes largely follows CITES classifications, but the annexes contain species not listed by CITES. The permit system addresses sport-hunted trophies directly and recently has listed regulations for the import of polar bear, African elephant, and African lion trophies, among others. Member states under the EU can implement more stringent policies than the EU to address the trade of species. For example, under German regulations, import applications of CITES Appendix I species that do not have an established quota go through heavier review than applications with export quotas. EU regulations also contain a suspension rule, which allows the European Commission (the EU executive arm) to restrict the entry of a species into any country in the EU. A handful of species are prohibited from entry into the EU, including the West African seahorse ( Hippocampus algiricus ) from Guinea and Senegal and the crab-eating macaque ( Macaca fascicularis ) from Laos. EU regulations differ from CITES regulations in a few ways. The EU regulations, according to some observers, are stricter than CITES regulations. For example, some CITES Appendix II species are in Annex A under the EU, and Annex A contains stricter regulations for trade than CITES, according to some. Annex B species under the EU require both import and export permits, whereas similar CITES Appendix II species require only an export permit. The EU wildlife trade system also regulates trade within the EU. Despite its potentially stricter regulations, the EU system is in compliance with CITES, because CITES stipulates that parties can have laws and regulations that are stricter than CITES. The hunting and killing of animals generally are regulated by laws of the range country, which vary by country. Some range countries address trophy hunting with a combination of policies that involve annual quotas for hunting particular species, designated hunting ranges, and permit systems for allowing hunts (e.g., Zimbabwe and South Africa). Other range countries ban trophy hunting outright. Trophy hunting is currently banned in 13 range countries: Angola, Botswana, Congo, Gabon, Ghana, India, Kenya, Malawi, Mauritania, Niger, Nigeria, Rwanda, and South Sudan. Countries such as Romania and Holland ban imports of sport-hunted trophies. Analyzing trophy-hunting laws in range countries is beyond the scope of this report. In the United States, laws related to international trophy hunting are governed by ESA, which implements CITES and is administered by FWS. ESA does not regulate trophy-hunting activities within range countries directly; rather, the law governs what can be imported into the United States. The actual killing of a listed species in a foreign country is governed by the range country. Trophy hunting is regulated by FWS based on the status of the species. Most trophies that are imported into the United States come through a designated port of entry and must have a declaration filled out. FWS may inspect the declaration and the trophy before allowing it into the country. If the species is listed under CITES or ESA, a permit from FWS might be necessary to import the trophy into the United States. For species listed under ESA or CITES, an import and potentially export permit from the range country might be needed. An enhancement-of-survival permit is needed to import trophies of species listed under ESA. Enhancement of survival implies that the import of endangered animals or their parts or products will provide incentives to increase the survival of the species in its native habitat. If a species is listed as threatened, the same concepts apply, unless there is a special rule under Section 4(d) of ESA, which may allow for a limited number of trophies to be imported under different circumstances. In the past, when making an enhancement finding for issuing permits to import trophies, FWS reviewed information in the application and the status of species and conservation programs in the range country. The evaluation was a three-part process to ensure the survival of the species, according to FWS. First, FWS assessed the hunted animal's range country, looking at whether the management of the species is sustainable, if there are resources that support the enforcement of laws and illegal poaching, and whether the country will hold hunters accountable if violations arise. FWS also considered a hunter's actions; for example, a permit application for species in Mozambique asked the hunter to provide a written statement detailing antipoaching activities, clarifying whether the meat from the hunt goes to local communities, and affirming the status of the hunting organization. Reviewing the country's data and conservation program was, in part, an effort to streamline the issuance of individual permits for importing trophies. FWS also used to make non-detriment findings (NDFs) under CITES to facilitate the issuance of CITES permits for importing trophies of CITES-listed species. Species listed under Appendix I need an import permit from FWS; this permit is issued if the imported trophy will not be detrimental to the species' survival and is not primarily intended for commercial purposes. A recent policy change by FWS has altered the process for evaluating the enhancement-of-survival criteria and issuing NDFs for permits related to sport-hunted trophies. FWS issued a memorandum stating that the agency would withdraw ESA enhancement-of-survival findings and CITES NDFs for several species in various countries around the world and evaluate applications for ESA and CITES permits on a case-by-case basis pursuant to the authorities under ESA, which includes CITES. The memorandum further stated that FWS would use status and monitoring information from range countries and evaluate information in each application to ensure that management programs are promoting the conservation of the hunted species. It is unclear whether permit applications or their status will be made public or if there are specific criteria being evaluated in each application to make determinations in lieu of countrywide evaluations. According to the memorandum, the changes were derived from a District of Columbia Court of Appeals opinion on issuing enhancement-of-survival permits under ESA. The appeals court decided that FWS did not adhere to notice and comment rulemaking requirements under the Administrative Procedure Act when making a negative enhancement finding for the import of sport-hunted trophies from Zimbabwe. The controversies surrounding international trophy hunting are rooted in the ecological, ethical, and economic considerations of the practice. Numerous factors affect a species, and teasing out the effects of trophy hunting is challenging due to a lack of long-term monitoring of hunted populations. Most studies also report that with appropriate and consistent management, trophy hunting can be potentially beneficial for species; however, with poor management, trophy hunting can be detrimental for species. This section will analyze several identified ecological and economic factors that are affected by international trophy hunting. Scientists report that trophy hunting can affect a species population with respect to how many individuals are hunted annually ( rate of offtake ), the genetic consequences of hunting, the traits of the individuals selected for hunting (including the social status of the hunted individuals), and the consequences of hunting for the ecosystem where the species resides. Hunting could significantly affect a population, if the number of animals killed is greater than the reproductive rate of the individuals in the population. According to scientists, high rates of trophy hunting have caused population declines in African lions ( Panthera leo ), American cougars ( Felis concolor ), and possibly African leopards ( Panthera pardus ). High rates of trophy hunting also could combine with other factors to cause population declines in animals. For example, poaching and, to a lesser extent, hunting of wild elephants in Africa currently are outpacing the species' reproductive rate, causing an unsustainable loss of elephants annually. To combat this problem, some range countries have adopted regulations that limit hunting certain animals from a given species based on their age. Studies have shown that using an age-restricted quota system that allows the hunting of older animals could lead to sustainable growth of the species population. For example, these types of restrictions could be applied to long-lived species such as African elephants, according to some scientists. In some African countries, such as Mozambique, Tanzania, and Zimbabwe, regulations regarding age-restricted hunting incentivize hunters to respect this system by increasing quotas for hunters who adhere to age restrictions. Hunting rates also are correlated to the rarity of the species, according to some scientists. Some have introduced the concept of the Anthropogenic Allee (AA) Effect (see box for description) to explain why the interest in trophy hunting increases as the species becomes rare. This hypothesis, under certain scenarios, could explain how trophy hunting could severely diminish a species. In contrast to this perspective, some observers contend that managed trophy hunting, which includes scientifically determined quotas, monitoring, and enforcement, can have few negative effects on a wildlife population and can be beneficial for a population in some cases. Trophy hunting might have a significant effect on the genetic makeup of a population if the population is small or if hunting is prolific and focused on individuals with specific traits (e.g., large horns or antlers). Trophy hunting of individuals in small populations could reduce the population's gene pool and increase the chance of inbreeding and breeding by less vigorous males; if too many males are removed from the population by hunting, there is less fighting to establish dominance and breeding rights among males, which can allow less vigorous males to breed. Inbreeding and a reduced gene pool can affect the population's viability and can cause extinction. Managing trophy hunting in small populations of animals through accurate quotas and population monitoring could avoid this problem, according to some scientists. Selectively hunting animals based on gender or body traits could have genetic and evolutionary consequences for the population and species. Targeting only males or females in a population could affect the animals' ability to disperse their traits to future generations. If trophy hunting, for example, focuses on larger, breeding males, there would be fewer males to mate and the population could suffer from low reproductive rates. African lions are vulnerable to excessive losses of males in their population. In addition to the probability of inbreeding, scientists report that removing too many males from a pride could lead to females being unable to mate. These genetic effects of trophy hunting can be mitigated with accurate quotas and managed hunting that targets specific animals in a population, according to some scientists. In one case, scientists recommended that one lion be taken per 2,000 square kilometers in Africa, where population densities are low. Others note that restricting trophy hunting to male lions that are older than six years of age would allow younger males to reproduce and allow for higher-quality trophies from the population. Trophy hunting can disrupt the social makeup of a population or pride if the species is social, such as brown bears ( Ursus arctos ) and African lions ( Panthera leo ). If a dominant male is killed, the male taking over the pride or social group might improve its reproductive success by killing the offspring of the former rival male. If this practice occurs frequently, the population's viability could suffer from lower growth rates and diminished reproduction. For example, in populations of brown bears in Alberta, Canada, scientists reported that cub survival lowered when mature males were killed, causing population declines. Further, male takeovers of lion prides due to trophy hunting can cause the dispersal of subadults away from the population or injury and death to remaining males. Management techniques to avoid these problems have been suggested and include specifying which individual in a social group to hunt and monitoring populations to see if target individuals change. Trophy hunting could be a driver for increasing biodiversity and habitat conservation within range countries. Hunting lands often are cited as conservation areas because of the efforts made to maintain a pristine environment for game animals. In the United States, for example, Ducks Unlimited is involved in conserving nearly 10 million acres of waterfowl habitat used for hunting. In Africa, the area of hunting grounds is significant and exceeds the area of national parks in a few range countries. (See Table 2 .) Observers report that protected and managed hunting lands increase the biodiversity of a range country and could be considered a conservation tool. Some contend that without hunting, these lands would be converted to rangelands for livestock production, which have lower biodiversity than native habitat. Proponents of hunting also suggest that managed hunting grounds protect animals from poaching. Some critics of trophy hunting suggest that hunting grounds do not ensure that threatened or endangered animal populations will rebound from low levels. They contend that some rangeland managers artificially alter the ecosystem by introducing exotic species or manually reducing predators of trophy animals. Further, some note that rangelands for hunting generally are fenced, thus fragmenting the habitat into small blocks. Fenced ranges also could alter the migration and range of several non-hunted species, especially in Africa. In contrast, fences could protect animals from poachers. Several ethical concerns are associated with trophy hunting, and these issues add to the debate on whether the practice is beneficial to conservation. Some critics of the practice contend that paying a fee to kill an animal and collect a trophy as a sign of conquest is unethical and represents objectification of the hunted animal. They further question the role of trophy hunting in aiding conservation, citing lack of data and other forms of generating value from wildlife, such as wildlife viewing. Some supporters of the practice contend that trophy hunting is a recreational pursuit that could increase the value of certain animals and aid in the overall conservation of a population. Some ethical arguments can be relevant in discussing the practice of trophy hunting and its alternative forms. For example, the practice of captive hunting (i.e., hunting animals within an enclosure) causes some hunters to question whether the hunting in this environment represents fair chase . Fair chase has been defined by one organization as \"the ethical, sportsmanlike, and lawful pursuit of free-ranging wild game animals in a manner which does not give the hunter an improper or unfair advantage over the animal.\" Some other hunters claim that fair chase is achieved if the enclosure is large enough for animals to roam a certain distance. Critics of trophy hunting also cite ethical considerations associated with other hunting practices, including shooting animals from vehicles and luring animals with baits. Overall, research on trophy-hunting operations and their economic effect is limited and varies according to the areas studied. Researchers describe both economic benefits and limitations of trophy hunting. Trophy hunting can be a lucrative enterprise for certain parties throughout the world, according to some scientists. In the United States and Europe, trophy hunting can generate billions of dollars. Revenues from trophy hunting in Africa, in comparison, are estimated to generate more than $200 million annually. This estimate varies among sources, causing some to question the accuracy of reported revenue data and the methodology used to aggregate reported revenue data over time and across countries. These data do not illustrate how economically important or insignificant trophy hunting might be in different range countries in Africa. For example, FWS reports that 7 of the 10 countries where lions are allowed to be hunted for trophies are considered developing nations in which 27%-64% of the population is living in poverty. Trophy hunting in these areas could have a proportionally larger effect than in wealthier countries because of the low base income. Proponents of trophy hunting also argue that trophy hunting is economically viable in areas that are unsuitable for photographic ecotourism—areas that are remote, lack infrastructure, contain little attractive scenery, have experienced ongoing or recent struggles with political instability, and contain low densities of viewable wildlife. Countries such as Mozambique, which are less attractive ecotourism destinations, are nevertheless able to generate revenue from sport hunting. Researchers have used survey techniques to evaluate such assertions and found willingness among respondents to finance hunting trips to sites typically less suitable for ecotourism. Critics contend that trophy hunting does not have the significant effect on gross domestic product (GDP) that supporters claim. They argue that trophy-hunting revenue remains a small percentage—1.8%, according to one study—of overall tourism revenues and just a fraction of overall GDP for some of the core wildlife source countries in Africa. A 2009 study by the International Union for the Conservation of Nature (IUCN) further criticized big-game hunting, particularly in West Africa, as a financially suboptimal use of land, because land used for big-game hunting generates smaller economic returns than land used for agriculture or livestock breeding. Additionally, studies have shown that in some instances, revenues associated with trophy hunting provide insufficient economic benefits to motivate local communities to promote the conservation of certain species—particularly carnivores that prey on livestock, such as leopards. This was found to be the case in Niassa National Reserve, Mozambique. Another study found that local benefits derived from wildlife-related activities, including hunting revenue, were insufficient to change incentives for conservation in two observed sites in Mozambique and Namibia. Some proponents of trophy hunting contend that the money generated by trophy hunts helps the communities in and around the range areas by providing jobs and money for community services. For example, some found that trophy hunters were willing to pay substantial premiums for hunting trips that were advertised as offering benefit-sharing arrangements with local communities. The literature often cites community-based natural resource management (CBNRM) as a mechanism to encourage local community involvement in wildlife management decisionmaking and to increase the amount of financial benefits associated with wildlife-related revenue that accrue to local communities. In practice, the results have been mixed. For example, the Communal Areas Management Plan for Indigenous Resources (CAMPFIRE) program in Zimbabwe attempted to create economic incentives for communities and landowners to conduct habitat and ecosystem restoration. At one point, CAMPFIRE generated more than $20 million, of which almost 90% came from trophy hunting, allowing communities to establish management over the habitat and resources within the range area. Of the income generated from tourist activities, such as trophy hunts, 49% went to the communities and 20% went to wildlife management; the remaining 31% went to other administrative projects. Trophy hunting, however, is one of several conservation-oriented wildlife management tools. However, some scientists emphasize that the amount of trophy-hunting revenue that accrues to local communities is disproportionately small. These researchers note that in Cameroon, less than 3% of trophy-hunting revenues accrued to local communities; in Zambia, local communities received some 12% of hunting revenues; and in Tanzania, though law requires a percentage of hunting revenues to accrue to communities living in or adjacent to hunting areas, the funding rarely has reached past the local council level. Others reported that approximately 3% of trophy hunting revenue in Tanzania was allocated to \"area and community development,\" which is vague and creates uncertainty about whether the funds went to species conservation. In some areas, however, a higher percentage of revenues from trophy hunting flows to local communities. Some, for example, cite Zambia's ADMADE (Administrative Design for Game Management Areas) program as a model for locally accruing trophy-hunting revenue, noting that ADMADE receives 67% of all trophy-hunting revenue in game management areas and that 53% of ADMADE revenue is directed toward local wildlife management; the remainder goes to community development. They also cite Botswana and Namibia as examples where trophy-hunting revenue accrues locally. Some scientists conducted an evaluation of the economic contributions of safari hunting to the rural livelihoods of a CBNRM-participating village in Botswana. In addition to documenting multiple economic benefits, including cash dividends, employment income, and community facilities infrastructure development, the scientists found that the distribution of safari hunting benefits was \"fairly equitable\" among village households. Congress might consider whether international trophy hunting is a benefit or detriment to wildlife conservation. There does not appear to be consensus among stakeholders as to whether international trophy hunting is being applied and used as an effective conservation tool throughout range countries where it is practiced. Several observers note that more data need to be collected on how species respond to trophy hunting in the short and long terms and how revenue from trophy hunting is managed in range countries. Proponents of trophy hunting contend that it can be used as a conservation tool if managed in a sustainable and scientifically based manner. They argue that revenue from hunting operations can be channeled into conservation programs and activities that aim to support hunted species and their habitat. Some contend that governance (e.g., having laws in place that require hunting fees to be made available for conservation) is critical for trophy hunting to contribute to conservation. Conservation benefits associated with trophy hunting are seen as wide and varied. Some contend that trophy hunting incentivizes land managers to conserve populations of hunted species, which include threatened and endangered species. In some instances, it may protect species from poaching and use hunting quotas to manage species in a sustainable manner. Additionally, efforts to support trophy hunting can lead to the protection and management of rangelands, which support hunted species and other wildlife in the ecosystem. Local communities can benefit from trophy hunting as part of a tourism framework that could bolster economies through the development of hotels, restaurants, and other tourism-related activities. In certain areas where tourism is sparse, some have noted that trophy hunting can provide income to sustain communities. South Africa provides economic incentives to maintain white and black rhinoceros populations through limited trophy hunting, along with other forms of tourism. Some economists note that countries sometimes use revenue to fund the operational costs of government wildlife management authorities, counterpoaching enforcement activities, and development assistance to local communities. In Zambia, for example, hunting revenues have been used to train and hire village scouts for antipoaching activities in game management areas and to support community development projects for clinics, shelters, and schools. Critics of trophy hunting as a conservation tool question the effectiveness of trophy-hunting management. They note several aspects of trophy-hunting management that could be weak and negatively affect conservation of species and the ecosystem. Critics also question the premise that significant funds from trophy hunting are used to conserve hunted species and the ecosystems they use; these critics cite issues such as corruption as a barrier to ensuring revenues are used for conservation. For example, corruption may result in local people allowing and sometimes assisting poachers. Corruption can take the form of exceeding quotas, allowing hunting outside of rangelands, accepting bribes to overlook illegal activities, and using funds for nonconservation activities. For example, some contend that corruption detrimentally affects conservation effectiveness of trophy hunting in Ethiopia; funds reportedly are funneled to uses other than for conservation. Tanzania also suffers from mismanagement of both resources and funds, according to some studies. From failing to implement new policies designed to include communities in the trophy-hunting revenue cycle to operating a public auction system that allows discretionary spending by officials, leading to corruption and patronage, Tanzania is alleged to have misgoverned trophy hunting. This mismanagement led, in part, to a decreasing lion population, according to some. Scientists also noted that a lack of community involvement in the practice of trophy hunting led communities to defend themselves from lion encroachment, thus adding to the population's decline. Critics contend that offtake rates for some trophy hunted species are unsustainable and could affect populations. Some quotas for hunting animals do not use the best scientific information or are fixed and do not reflect changes in the population. In addition, some quotas do not accurately specify which individual animals may be hunted and their ages, which may have long-term negative genetic consequences on the population. Hunting the wrong individual animals also could have social consequences (e.g., infanticide) in some instances and could affect the viability of a population. Moreover, by not having a defined area or population to manage, hunting could result in several groups hunting the same population of animals without coordination, leading to overhunting quotas or other negative effects on the population. Fenced areas for hunting also could have negative effects on the ecosystem by preventing the migration of nonhunted species and allowing for the introduction of exotic species. In addition, critics argue that if local communities do not receive revenues from trophy hunting, they might be alienated, which could have consequences for maintaining and monitoring the hunted species. Many communities report hunting revenue failing to reach them due to potential corruption and other factors. For example, some communities in Tanzania claim that hunting organizations fail to pay local communities the 5% of revenue upon which the parties agreed. Some stakeholders contend that trophy hunting in any form is unethical. They argue in favor of using other alternatives for generating income from natural resources in its stead (e.g., birdwatching and safari). International trophy hunting is an issue for Congress for several reasons, including the practice's recreational qualities; its effect on wildlife, especially charismatic species; constituent interest in the practice; its relevance to laws that regulate the trade of threatened and endangered animals; and its ethical considerations, among other things. For example, some argue that the killing of Cecil the Lion in 2015 heightened congressional interest because lions are charismatic species and some are against killing threatened species due to ethical concerns. Congress and the Trump Administration have addressed international trophy hunting through the implementation of laws and the dissemination of regulations that address the import of sport-hunted trophies into the United States. Further, the Trump Administration has established the International Wildlife Conservation Council to provide recommendations to the Secretary of the Interior on various aspects of U.S. international trophy hunting. The role of Congress in this issue is limited by the jurisdiction of the United States overseas; hunting quotas, conservation activities, and the flow of revenue from international trophy-hunting activities are largely dictated by the range country. However, the congressional role is potentially meaningful in several areas discussed below. Some scientists and policymakers contend that fully evaluating the effects of trophy hunting on species conservation depends on monitoring and collecting more data on hunting operations and hunted species in range countries. Data from most hunting operations are largely self-reported. In some cases, they are gathered by the range country and international NGOs. Some policy experts contend that the United States could incentivize range countries and hunters to collect and report more data. For example, some argue that Congress could provide overseas development assistance for international programs and grants for NGOs to conduct studies on the effects of trophy hunting on wildlife populations and the distribution of revenue generated by trophy-hunting operations. Some contend that Congress or FWS could require permit applicants to solicit certain data from hunting operations that would verify the operations' conservation activities and the distribution of hunting revenue. Some might propose that international multilateral organizations, such as CITES, could encourage or require range countries to conduct oversight and report data on hunting operations and wildlife operations. This might take the form of long-term monitoring of hunted wildlife populations and systematic surveying of how trophy hunting affects local communities. For example, CITES collects data on specific species, such as African elephants. The Monitoring the Illegal Killing of Elephants Program aims to help range states improve their ability to monitor elephant populations, identify changes in the illegal and natural deaths of elephants, and apply these data to improve law enforcement and strengthen regulatory measures to conserve and manage elephants. This program is supported by parties to CITES and works with range countries and third parties to collect data. Some might contend that a similar program could be used to monitor and collect data on trophy hunting of selected iconic species, such as African lions, pangolins, and leopards. Critics of these approaches could argue that there are limited resources and incentives available for range countries to collect data on trophy hunting and monitoring. In addition, they might contend that data provided by hunting operations could be falsified or could fail to account for corruption and other illegal activities associated with the distribution of hunting revenue. They might question self-reporting by range countries, specifically, whether the data are accurate and affected by corruption. Some contend that to alleviate this issue, data should be transparent and fully identified when planning regulatory actions either through CITES or individual countries. Congress can address international trophy hunting by U.S. hunters through the process of issuing permits to import trophies. In most cases, hunters need a permit to import a trophy from a listed species into the United States. The type of permit varies according to the status of the species under U.S. law or CITES. Currently, FWS is evaluating permit applications on a case-by-case basis, which involves reviewing individual hunting operations and potentially conservation programs in the range country. It is unclear what standards or methodology FWS uses to evaluate each permit on a case-by-case basis. Some might advocate for Congress to enact legislation that would direct the Secretary of the Interior to create and disseminate specific standards for evaluating trophy-import permits, including increasing the amount of information on the condition of the hunted species. Some might argue that equivalent standards across species for measuring whether hunting could enhance the survival of a population (e.g., criteria used by ESA) or be nondetrimental to a population (e.g., criteria used by CITES) could create consistency in evaluating trophy-import permits and lower the time needed to issue them. In addition, some Members argued that making permit applications and decisions publicly available could increase oversight over the process. H.R. 6885 in the 115 th Congress would have authorized this approach. However, other stakeholders could contend that a consistent approach for evaluating permits might not be applicable to all species being hunted or to all hunting operations being considered. For example, evaluating the conservation and hunting of listed species at the country level could mask individual hunting operations that might have different standards and conservation priorities than the range country as a whole. Some stakeholders might petition Congress to establish a third-party certification system to evaluate hunting operations that frequently appear on permit applications for importing trophies. The certification system could employ standards that reflect best practices for trophy hunting; some of these practices could include transparency in funding flows, support for local communities in proximity to hunts, equitable allocations of hunting concessions, and a quota system for hunted animals. A certification system might also alleviate concerns of questionable data sources for certain countries by having a standardized system for evaluating hunting operations. Under certain situations, a certification system could have a provision that allows for a moratorium on hunting a species to allow it to be replenished in the wild. The International Union for the Conservation of Nature has created a set of guiding principles and recommendations for sustainable trophy hunting that could be converted into standards. The principles include biological sustainability; net conservation benefit; socioeconomic benefit; adaptive management in planning, reporting, and monitoring hunting; and accountable and effective governance. Certification systems are used with other natural resources. For example, two primary wood certification programs affect wood consumed in the United States. The Forest Stewardship Council is an independent, international NGO that certifies that wood comes from well-managed forests that meet an established set of criteria. One key criterion is that the \"chain of custody\" information is provided; ideally, this information includes the names and locations of each handler of the wood from the forest where it originated to the shop where the product is being sold. A second certification program is offered by the Sustainable Forest Initiative (SFI). SFI also contains a set of guidelines and principles that must be followed to earn SFI certification, which is done for North American forests and does not have a chain-of-custody requirement. Approximately 120 million hectares are certified under this program in North America. As Congress debates whether international trophy hunting is a benefit or a detriment to wildlife conservation, it might consider promoting alternative forms of trophy hunting in the wild. Some contend that trophy hunting in enclosed ranges could give hunting operations greater control over wildlife populations. The practice of hunting animals that are enclosed within a private game ranch is referred to as captive hunting or, in some cases, canned hunting . The species in captive hunts usually are larger megafauna, such as lions, and typically are bred in captivity for game ranches. Proponents of captive hunting contend that it guarantees hunting success for the hunter, allows hunts to be shorter and less expensive, produces better trophies, drives conservation through economic incentives, and allows for easier management of populations, because they are in a contained environment where hunting can be limited. Critics of captive hunting have a different perspective that drives the controversy behind the practice; they contend that killing animals in a contained environment with no chance of escape is unethical and detracts from the sport of hunting. This concept is termed fair chase and is considered the \"ethical, sportsmanlike, and lawful pursuit and taking of any free-ranging wild, big game animal in a manner that does not give the hunter an improper or unfair advantage over the game animals.\" They argue that animals bred in captivity are not equivalent to wild animals and therefore do not have conservation value or enhance the long-term survival of the wild population. In addition, animals bred in captivity can suffer from limited genetic diversity, and fenced game ranches fragment habitat and limit the free range of wild animals. Central to the controversy behind captive hunting are lion populations in South Africa. Captive hunting is prevalent in South Africa, where over 80%-90% of the lions hunted are believed to be captive. Consumers of these hunts are largely from the United States (approximately 60% of captive lion trophies are exported to the United States) and the EU (approximately 40% of captive lion trophies are exported to the EU). Some in South Africa want to ban the hunting of lions bred in captivity; others note that it is a multi-million dollar industry that generates jobs and argue that the practice should stay. Captive breeding of species listed under ESA with trophy hunting also occurs in the United States. Several species listed under ESA are bred in captivity on ranches in the United States for reintroduction to the wild and, in some cases, for trophy hunting. Ranchers can obtain an enhancement-of-survival permit to allow for the limited killing of some animals in a population. The aim is that the revenue generated from hunting surplus captive-bred animals will aid in the captive breeding and reintroduction of the species into the wild. Some also contend that limited trophy hunting of captive-bred populations could reduce hunting pressure in the wild. There are several examples of how certain species have thrived on ranches and bolstered their international populations; the scimitar-horned oryx ( Oryx dammah ), addax ( Addax nasomaculatus ), and dama gazelle ( Gazella dama ) are captive-bred in the United States and have an exemption under ESA that allows for sport hunting and trophies. The objective is to generate funds from hunting to bolster captive breeding that aims to enhance the propagation and survival of the species in the wild. Congress could address captive hunting through permit regulations, either supporting permits that request trophies imported from captive hunting operations or denying permits from these areas. Another alternative to trophy hunting in wild areas is to ban trophy hunting outright. The range country would make this decision, with little to no participation from the United States. Several countries have banned trophy hunting, as discussed in the section on \" Range Country ,\" above. Some contend that banning hunting could benefit wildlife populations even with the loss of revenue from hunting fees. They argue that other forms of tourism (e.g., wildlife viewing) could sustain financial flows and incentivize conservation. Opponents of a ban on trophy hunting contend that trophy hunting has a positive impact in supporting biodiversity through increased revenue flows and rangeland conservation. They note that hunting bans result in lower revenues for wildlife conservation and communities and could be detrimental to certain communities that depend on hunting revenues. Furthermore, they contend that banning trophy hunting could affect habitat conservation; such a ban could allow for increased habitat conversion to agriculture or livestock rangelands, which has caused species declines due to poaching and human-wildlife conflicts. Banning trophy hunting in fringe regions within a country, where the only form of tourism that can be sustained is trophy hunting, can have negative economic effects, according to some. A ban on trophy hunting in Northern Botswana revealed negative consequences on the communal economy in areas that were previously hunting grounds. According to one study, the revenue generated by hunting expeditions represented around two-thirds of total tourism income. The ban on trophy hunting also led to halting certain CBNRM programs due to loss of funding for these opportunities. The ban on lion hunting particularly affected Botswana's economy, causing it to fall by almost 10% of GDP, according to some sources. In some cases, the banning of hunting correlates with animal population declines. For example, in Kenya, which instituted a hunting ban in 1977, almost all the common wildlife species have declined from their previous levels since the ban to 2016. Concurrently, livestock numbers, notably sheep and goats, increased by 76.3% during the same period. Kenya's population increased from 14.5 million in 1977 to 48.5 million in 2016. Based, in part, on these data, scientists note that demographic pressure and livestock encroachment on wildlife rangelands appear to be the decisive factors leading to wildlife declines in Kenya.", "summary": "International trophy hunting is a multinational, multimillion-dollar industry practiced throughout the world. Trophy hunting is broadly defined as the killing of animals for recreation with the purpose of collecting trophies such as horns, antlers, skulls, skins, tusks, or teeth for display. The United States imports the most trophies of any country in the world. Congressional interest in trophy hunting is related to the recreational and ethical considerations of hunting and the potential consequences of hunting for conservation. For some, interest in trophy hunting centers on particular charismatic species, such as African lions, elephants, and rhinoceroses. Congress's role in addressing international trophy hunting is limited, because hunting is regulated by laws of the range country (i.e., the country where the hunted species resides). However, Congress could address trophy hunting through actions such as regulating trophy imports into the United States or providing funding and technical expertise to conserve hunted species in range countries. International trophy hunting generates controversy because of its potential costs and benefits to conservation, ethical considerations, and its contribution to local economies in range states. Proponents of trophy hunting contend that the practice provides an estimated millions of dollars for the conservation of species in exchange for the hunting of a proportionally small number of individuals. Further, they argue that trophy hunting can create incentives for conserving habitat and ecosystems where hunted animals roam and, in some impoverished areas in range countries, can provide a means of income, employment, and community development. Critics of trophy hunting contend that the practice can lead to the decline of rare and endangered species and that the pathway of moving funds from hunting to conservation can be fraught with corruption and mismanagement. Further, some contend it is unethical to kill animals for sport, or at all, and that animals should not be valued according to how much a hunter would pay to hunt them. The international community, including the United States, has laws and regulations related to international trophy hunting. The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an international agreement that creates a series of incrementally more stringent restrictions on imports and exports of wildlife, depending on the sustainability of such trade. The European Union (EU) also addresses trophy hunting through regulating trade of trophies, issuing permits for trade of trophies, and suspending certain species from trade with the EU if the species is in peril. In the United States, international trophy hunting is addressed by several laws, including the Endangered Species Act (ESA; 16 U.S.C. §§1531-1543), which implements CITES. ESA does not regulate trophy-hunting activities within range countries directly; rather, the law governs what can be imported into the United States. The U.S. Fish and Wildlife Service (FWS) regulates trophy hunting, in part, by issuing permits to import trophies of species that are listed as threatened or endangered under ESA. Congress could address international sport hunting by regulating trophy imports and funding conservation and research activities overseas, among other options. Some activities that Congress could consider, according to observers, include directing the U.S. government to work with foreign governments and partners to monitor hunting practices and game species to help ensure a positive impact from trophy hunting in range states; creating uniform standards for evaluating trophy import permits, specifically whether trophy hunting could enhance the survival of a population as addressed under ESA or be nondetrimental to a population as defined by CITES; mandating that permit applications and decisions be made publicly available; and creating an independent third-party certification system to evaluate trophy hunting operations. Congress also might evaluate alternatives to trophy hunting in the wild. In Africa, for example, some countries have banned trophy hunting altogether and support wildlife viewing and tourism in its place. Some countries, such as South Africa, have large, fenced game ranches where animals can be hunted in a practice called captive hunting. Some contend these operations do not allow for fair chase hunting (i.e., hunting wild animals without boundaries) or contribute to conservation, whereas others argue that they facilitate wildlife management and reduce poaching.", "document_type": "crs"}
{"report": "The right to bail in noncapital cases has firm roots in the United States, dating back to colonial times and originating in English law. As the Supreme Court recognized, the \"traditional right to freedom before conviction permits the unhampered preparation of a defense and prevents inflicting punishment prior to conviction.\" But the Supreme Court has never recognized a right to bail as absolute, and has held that the government may have legitimate interests in limiting the availability of bail, even for noncapital crimes, based not only on possible flight risk but also on other considerations, including the danger an arrestee poses to public safety or specific members of the community. Nonetheless, the Court has also observed that pretrial detention may have negative consequences for criminal defendants, such as by impairing their ability to maintain employment and to support dependents financially. The impact of state and municipal money-bail systems on indigent criminal defendants has prompted legislative interest in, and judicial challenges to, such systems. Money-bail systems allow defendants to avoid jail while awaiting trial by posting a bond according to a fee schedule. Typically, judges do not assess a detainee's individual characteristics beyond the offense charged; instead, judges set a defendant's bail based on the criminal offense with which he is charged. Defendants who cannot pay bail may remain detained pending trial. Money-bail systems differ from the federal bail system, which gives judicial officers greater discretion over the conditions of a defendant's pretrial release. Federal law also expressly provides that a \"judicial officer may not impose a financial condition that results in the pretrial detention of the person.\" Critics of state and local money-bail systems assert, among other things, that fee schedules unduly burden indigent defendants, who face more difficulty paying bail—including relatively low bail fees associated with misdemeanor offenses—than nonindigent defendants accused of similar offenses. Supporters, on the other hand, contend that fee schedules help guarantee a defendant's appearance in subsequent proceedings and treat defendants uniformly. In recent years, a few jurisdictions, including New Mexico, Kentucky, New Jersey, Colorado, and Maryland, have considered legislative proposals or ballot initiatives to eliminate or alter their money-bail systems. Some states, including California, Colorado, and New Jersey, altered their money-bail systems to employ more individualized risk assessment tools rather than using the nature of the offense charged. Recently, defendants have challenged various state or municipal bail systems as inconsistent with the Constitution's Due Process and Equal Protection Clauses. For example, in Jones v. City of Clanton (formerly Varden v. City of Clanton ), the parties settled the case by making release on an unsecured bond the norm rather than the exception. Lawsuits in a few other local jurisdictions have similarly been settled. In Pierce v. City of Velda City , the U.S. District Court for the Eastern District of Missouri issued a declaratory judgment stating that \"no person may, consistent with the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution, be held in custody after an arrest because the person is too poor to post a monetary bond.\" Subsequently, the parties entered a settlement agreement on a new bail policy. During the latter years of the Obama Administration, the Department of Justice (DOJ) submitted a statement of interest in litigation challenging the constitutionality of local bail systems. The DOJ filed an amicus brief in a civil rights lawsuit challenging bail amounts based solely on the offense, calling such systems unconstitutional because of their impact upon indigent defendants. As of the date of this report, it is unclear whether the DOJ and the Trump Administration will continue to take an active role in this case. Money-bail is only one way states and municipalities provide for pretrial release. Absent clear statutory guidance, judges enjoy broad discretion to determine appropriate conditions for releasing a criminal defendant pending trial. When considering pretrial release, judges weigh several factors such as due process, securing a defendant's subsequent court appearance, and protecting society from the defendant. Judges may use various forms of pretrial release such as personal recognizance, secured or unsecured bonds, or conditional release. Historically, judges have denied defendants bail if they pose a flight risk upon release. For example, judges generally presume defendants charged with capital crimes pose a flight risk. The Supreme Court has recognized that the government may have other, constitutionally legitimate grounds for limiting pretrial release of defendants, including danger to public safety. Several state statutory and constitutional provisions deny bail to defendants arrested for capital crimes \"where the proof is evident or the presumption is great,\" and a few also limit bail for noncapital offenses with certain characteristics. Some of these latter restrictions have been challenged legally. In contrast, federal law creates a rebuttable presumption that favors (but does not compel) detention of persons charged with certain offenses when a judge or magistrate determines, on the basis of clear and convincing evidence, that the defendant has a prior conviction for an offense included in one of nine categories of detention-qualifying offenses (crimes of violence, etc.), committed while the accused was free on pretrial release and for which the accused was convicted or released from prison within the last five years. Federal law also establishes a second rebuttable presumption of detention in favor of pretrial detention when the judge or magistrate finds probable cause to believe that the accused has committed a 10-year controlled substance offense, federal crime of terrorism offense, or various kidnapping or sexual offenses committed against a child. The Constitution governs pretrial detention and bail. For money-bail systems, particularly as they apply to indigent defendants, the key provisions are the Eighth Amendment's Excessive Bail Clause and the Fifth and Fourteenth Amendments' Due Process and Equal Protection Clauses. The Eighth Amendment of the U.S. Constitution states that \"[e]xcessive bail shall not be required.\" Bail is excessive when \"set higher than an amount that is reasonably likely to ensure the defendant's presence at the trial.\" While the Eighth Amendment expressly prohibits excessive bail, it does not establish an absolute right to bail. Whether an accused has a right to bail depends on how expansively a court interprets the provision. For example, in Stack v. Boyle , the Court declared that \"this traditional right to freedom before conviction permits the unhampered preparation of a defense, and serves to prevent the infliction of punishment prior to conviction.... Unless this right to bail before trial is preserved, the presumption of innocence, secured only after centuries of struggle, would lose its meaning.\" However, in Carlson v. Landon , decided in the same term as Stack , the Court stated the following: The bail clause was lifted, with slight changes, from the English Bill of Rights Act. In England, that clause has never been thought to accord a right to bail in all cases, but merely to provide that bail shall not be excessive in those cases where it is proper to grant bail. When this clause was carried over into our Bill of Rights, nothing was said that indicated any different concept. The Eighth Amendment has not prevented Congress from defining the classes of cases in which bail shall be allowed in this country. Thus, in criminal cases, bail is not compulsory where the punishment may be death. Indeed, the very language of the Amendment fails to say all arrests must be bailable. Similarly, in United States v. Salerno (Salerno ), the Court found the federal Bail Reform Act to be constitutionally valid under the Eighth Amendment's Excessive Bail Clause. The Bail Reform Act allowed judges to detain individuals in certain limited circumstances when the accused poses a danger to the public at large or to particular members of the public. In upholding the act, the Court noted that the Excessive Bail Clause does not limit congressional considerations to question of flight. In other words, the clause permits the government pursuing compelling interests such as public safety \"though regulation of pre-trial release.\" In addition to Eighth Amendment considerations, pretrial detention and bail must comport with due process principles. Due process requires that statutes imposing pretrial detention serve a compelling governmental interest and do not impose punishment before adjudication of guilt. Moreover, governmental action that deprives an individual of life, liberty, or property must be implemented in a fair, nonarbitrary manner. The U.S. Constitution's due process guarantees are contained in the Fifth Amendment and the Fourteenth Amendment. The Fifth Amendment applies to actions taken by the federal government, whereas the Fourteenth Amendment applies to actions taken by state governments. Each clause provides that the government shall not deprive a person of \"life, liberty, or property, without due process of law.\" Due process may be procedural or substantive. Based on the principle of \"fundamental fairness,\" procedural due process requires notice and an opportunity to be heard before a neutral party. Substantive due process \"forbids the government to infringe certain 'fundamental' liberty interests at all, no matter what process is provided, unless the infringement is narrowly tailored to serve a compelling state interest.\" In Salerno , the Court found that the Bail Reform Act's regulatory character met substantive and procedural due process requirements. Discussing substantive due process, the Court stated the following: Unless Congress expressly intended to impose punitive restrictions, the punitive/regulatory distinction turns on whether an alternative purpose to which the restriction may rationally be connected is assignable for it and whether it appears excessive in relation to the alternative purpose assigned to it. We conclude that the detention imposed by the Act falls on the regulatory side of the dichotomy. The legislative history ... indicates that Congress did not formulate the pretrial detention provisions as a punishment for dangerous individuals. Congress instead perceived pretrial detention as a potential solution to a pressing societal problem. There is no doubt that preventing danger to the community is a legitimate regulatory goal, nor are the incidents of pretrial detention excessive in relation to the regulatory goal Congress sought to achieve. As for procedural due process, the Court found that the act's tailored procedural safeguards satisfied the Constitution. Under the Constitution's equal protection provisions, courts reviewing government action that distinguishes between classes of people apply different levels of scrutiny depending on the classification used. For example, the Supreme Court has held that governmental action that categorizes people based on certain \"suspect\" classifications, such as race, is subject to strict scrutiny, which is the most searching form of judicial review; other classifications, such as those based on age, are permissible if the statute's use of such classification is rationally related to a legitimate state interest. The Supreme Court has invalidated statutes that impose jail or other adverse consequences based on a defendant's indigence, but it has never held that money-bail systems are constitutionally invalid because indigent defendants have greater difficulty paying bail than other criminal defendants. The Supreme Court, however, has considered the constitutional implications of indigence for criminal defendants in other contexts. In a series of cases, the Court held that imprisonment solely because of indigence constitutes invidious discrimination and is constitutionally impermissible. For example, in Bearden v. United States , the Court held that a court could not automatically revoke a defendant's probation for failing to pay a fine and make restitution unless such nonpayment was willful. After the defendant pleaded guilty to burglary and theft by receiving stolen property, the court sentenced him to three years' probation, a $500 fine, and restitution of $250 to be repaid according to a four-month schedule. After the defendant lost his job and could not make the payments, the court revoked his probation, sentencing him to serve the rest of his sentence. In determining the revocation's constitutionality, the Court analogized the equal protection concerns to the fundamental fairness issues of due process analysis and weighed factors including the \"nature of the individual interest affected, the extent to which it is affected, the rationality of the connection between legislative means and purpose, [and] the existence of alternative means for effectuating the purpose ....\" Acknowledging the state's interest in punishment and deterrence, the Court opined that this could be achieved by extending the repayment period or by the defendant performing public service. The Court held that a court must determine whether nonpayment was willful before revoking a defendant's probation. As the lower court had not made such a finding, the Supreme Court held that \"fundamental fairness requires that the petitioner remain on probation\" and remanded the case. In other cases, the Supreme Court has not recognized indigence as a suspect class warranting strict scrutiny analysis. For example, in Ma h er v. Roe , the Court held the following: An indigent woman desiring an abortion does not come within the limited category of disadvantaged classes so recognized by our cases. Nor does the fact that the impact of the regulation falls upon those who cannot pay lead to a different conclusion. In a sense, every denial of welfare to an indigent creates a wealth classification as compared to nonindigents who are able to pay for the desired goods or services. Accordingly, when weighing the constitutionality of bail statutes, some lower courts have used the rational basis standard to examine whether a bond requirement would rationally and reasonably ensure the defendant's appearance at trial or serve another legitimate government interest. While the Supreme Court has recognized rights for indigents in the sentencing and postconviction contexts, it has not addressed such rights in the bail context. Some courts have viewed claims of excessive bail premised solely on indigence to be uncompelling. For example, in Katona v. City of Cheyenne , a Wyoming federal district court rejected an arrestee's assertion that $35 was excessive bail due to his indigence. Noting that excessive or denial of bail may trigger equal protection concerns, the court applied a rational basis standard of review, examining whether the bond requirement was \"rationally and reasonably\" related to nonresidents appearing at trial. Similarly, in Walker v. City of Calhoun , the U.S. Court of Appeals for the Eleventh Circuit vacated a preliminary injunction against the City of Calhoun's money-bail system for misdemeanor offenders. Arrested and charged with \"being a pedestrian under the influence of alcohol,\" Mr. Walker spent six nights in jail because he could not afford the $160 cash bond set by the money-bail schedule. He filed a class action lawsuit alleging that the City of Calhoun violated his Fourteenth Amendment rights by jailing him and other class members \"because of their inability to pay a generically set amount of money to secure release after an arrest.\" The district court found that the bail schedule \"violate[d] the Constitution insofar as it permits individuals who have sufficient resources to post a bond (or to have one posted for them) to be released immediately, while individuals who do not have those resources must wait forty-eight hours for a hearing.\" Appealing to the Eleventh Circuit, the city defended its bail system as constitutional because it discriminated on the seriousness of the offense rather than on wealth. The city argued that the Fourteenth Amendment does not provide \"an absolute entitlement to pretrial release\" and that wealth-based distinctions are subject to rational basis review because wealth is not a suspect class. The city asserted that its bail system met the rational basis standard because it serves the \"legitimate goal of assuring the presence of a defendant at trial.\" The Eleventh Circuit found that the district court erred in applying heightened scrutiny to wealth-based classifications. Citing the Supreme Court's San Antonio Independent School District v. Rodriguez decision, the Eleventh Circuit noted that whether the plaintiff suffered \"an absolute deprivation\" or a \"mere diminishment\" was key because \"differential treatment by wealth is impermissible only where it results in a total deprivation of a benefit because of poverty.\" Because Mr. Walker was not totally deprived of pretrial release but had to wait 48 hours at most to \"receive the same benefit as the more affluent,\" the Eleventh Circuit held that the \"district court was wrong to apply heightened scrutiny under the Equal Protection Clause.\" Other courts have held that bail systems that incarcerate indigent individuals without considering their ability to pay are unconstitutional. In Pierce v. City of Velda City , the district court issued a declaratory judgment, stating that \"no person may, consistent with the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution, be held in custody after an arrest because the person is too poor to post a monetary bond.\" Ultimately, the parties resolved the case through a settlement agreement that changed the jurisdiction's bail system. Recognizing that \"[t]here can be no equal justice where the trial a man gets depends on the amount of money he has,\" the Supreme Court has invalidated statutes or actions that arguably punished individuals for indigence. But the Supreme Court has generally viewed pretrial release of criminal defendants to be a regulatory, rather than a penal, matter, noting that the government may have legitimate and, in some cases, compelling interests in limiting pretrial release for certain types of defendants. The Supreme Court has never squarely assessed whether applying money-bail systems to indigent criminal defendants as a class is permissible. Lower courts are split on whether money-bail systems impermissibly discriminate against indigents. Some courts have found money-bail systems to be constitutionally suspect, while others have upheld money-bail systems as rationally related to legitimate or compelling governmental interests, including providing for a defendant's subsequent court appearance.", "summary": "Money-bail systems allow criminal defendants to avoid prison while awaiting trial by posting a bond set by a fee schedule. The impact of money-bail systems on indigent criminal defendants, however, has prompted legislative interest in and legal challenges to such systems, particularly when the bail does not reflect an individual's specific circumstances, such as potential flight risk or public safety. Critics of money-bail systems assert that fee schedules unduly burden indigent defendants, while supporters argue that fee schedules provide uniformity and ensure that defendants appear at trial. Several states and municipalities have reformed their bail systems. Voters in New Mexico approved a constitutional amendment that allows judges to deny bail to defendants considered exceptionally dangerous, but otherwise permits pretrial release of nondangerous indigent offenders who cannot make bail. Other jurisdictions have altered or eliminated their money-bail systems in recent years, including cities in Alabama, Georgia, and Maryland. Courts have heard legal challenges regarding whether state or local money-bail systems comport with the Constitution's Due Process and Equal Protection Clauses. The Supreme Court has established that the Constitution provides certain protections to indigents during sentencing and postconviction, including ensuring that an indigent's failure to pay a fine cannot result in an automatic revocation of probation or imprisonment beyond the statutory maximum term. The Court, however, has not addressed these rights in the bail context. Applying the rational basis standard, some courts have found money-bail systems that reasonably ensure a defendant's subsequent court appearance to be constitutional. Other courts have indicated that bail systems that detain indigent criminal defendants pretrial, without considering their ability to pay, may be unconstitutional.", "document_type": "crs"}
{"report": "In March 2011, antigovernment protests broke out in Syria, which has been ruled by the Asad family for more than four decades. The protests spread, violence escalated (primarily but not exclusively by Syrian government forces), and numerous political and armed opposition groups emerged. In August 2011, President Barack Obama called on Syrian President Bashar al Asad to step down. Over time, the rising death toll from the conflict, and the use of chemical weapons by the Asad government, intensified pressure for the United States and others to assist the opposition. In 2013, Congress debated lethal and nonlethal assistance to vetted Syrian opposition groups, and authorized the latter. Congress also debated, but did not authorize, the use of force in response to an August 2013 chemical weapons attack. In 2014, the Obama Administration requested authority and funding from Congress to provide lethal support to vetted Syrians for select purposes. The original request sought authority to support vetted Syrians in \"defending the Syrian people from attacks by the Syrian regime,\" but the subsequent advance of the Islamic State organization from Syria across Iraq refocused executive and legislative deliberations onto counterterrorism. Congress authorized a Department of Defense-led train and equip program to combat terrorist groups active in Syria, defend the United States and its partners from Syria-based terrorist threats, and \"promote the conditions for a negotiated settlement to end the conflict in Syria.\" In September 2014, the United States began air strikes in Syria, with the stated goal of preventing the Islamic State from using Syria as a base for its operations in neighboring Iraq. In October 2014, the Defense Department established Combined Joint Task Force-Operation Inherent Resolve (CJTF-OIR) to \"formalize ongoing military actions against the rising threat posed by ISIS in Iraq and Syria.\" CJTF-OIR came to encompass more than 70 countries, and has bolstered the efforts of local Syrian partner forces against the Islamic State. The United States also gradually increased the number of U.S. personnel in Syria from 50 in late 2015 to roughly 2,000 by late 2017. President Trump in early 2018 called for an expedited withdrawal of U.S. forces from Syria, but senior Administration officials later stated that U.S. personnel would remain in Syria to ensure the enduring defeat of the Islamic State. National Security Advisor John Bolton also stated that U.S. forces would remain in Syria until the withdrawal of Iranian-led forces. In December 2018, President Trump ordered the withdrawal of all U.S. forces from Syria, contributing to the subsequent decision by Defense Secretary James Mattis to resign, and drawing criticism from several Members of Congress. In early 2019, the White House announced that several hundred U.S. troops would remain in Syria. The collapse of IS and opposition territorial control in most of Syria since 2015 has been matched by significant military and territorial gains by the Syrian government. The U.S. intelligence community's 2018 Worldwide Threat Assessment stated in February 2018 that, \"The conflict has decisively shifted in the Syrian regime's favor, enabling Russia and Iran to further entrench themselves inside the country.\" At the same time, ongoing conflict between the coalition's Syrian Kurdish partners and Turkey has continued to challenge U.S. policymakers, as has the entrenchment of Al Qaeda-affiliated groups among the opposition and the ongoing humanitarian crisis. As of 2019, 5.7 million Syrians are registered as refugees in nearby countries, with 6.2 million more internally displaced. The U.N. has sponsored peace talks in Geneva since 2012, but it is unclear when (or whether) the parties might reach a political settlement that could result in a transition away from Asad. With many armed opposition groups weakened, defeated, or geographically isolated, military pressure on the Syrian government to make concessions to the opposition has been reduced. U.S. officials have stated that the United States will not fund reconstruction in Asad-held areas unless a political solution is reached in accordance with U.N. Security Council Resolution 2254. Congress has considered the following key issues since the outbreak of the Syria conflict in 2011: What are the core U.S. national interests in Syria? What objectives derive from those interests? How should U.S. goals in Syria be prioritized? What financial, military, and personnel resources are required to implement U.S. objectives in Syria? What measures or metrics can be used to gauge progress? Should the U.S. military continue to operate in Syria? For what purposes and on what authority? For how long? How are developments in Syria affecting other countries in the region, including U.S. partners? What potential consequences of U.S. action or inaction should be considered? How might other outside actors respond to U.S. choices? Amid significant territorial losses by the Islamic State and Syrian opposition groups since 2015 and parallel military gains by the Syrian government and coalition partner forces, U.S. policymakers face a number of questions and potential decision points related to the following factors: The announcement by President Trump in December 2018 that U.S. forces would withdraw from Syria was welcomed by the Syrian government and its Russian and Iranian partners, along with observers who questioned the necessity, utility, and legality of continued U.S. operations. The decision also drew domestic and international criticism from those who argued it could enable the reemergence of the Islamic State and embolden Russia and Iran in Syria (see \" 2018: President Trump Announces Withdrawal \"). Some Members of Congress called upon President Trump to reconsider his decision to withdraw U.S. forces, stating that the move was premature and \"threatens the safety and security of the United States.\" Others embraced the decision, citing concerns about the lack of specific authorization for the U.S. campaign and the effectiveness of U.S. efforts. In February 2019, the White House reversed its December announcement, stating that roughly 400 U.S. troops would remain in Syria. Members of the 116 th Congress may seek clarification on the Administration's strategy to ensure the enduring defeat of the Islamic State. A Lead Inspector General report on Operation Inherent Resolve (OIR) released in February 2019 states that, \"absent sustained [counterterrorism] pressure, ISIS could likely resurge in Syria within six to twelve months and regain limited territory in the [Middle Euphrates River Valley (MERV)].\" The Islamic State has lost the territory it once held in Syria, and much of that territory is now controlled by local forces that have received U.S. training and assistance since 2014. (See Figure 3 and Figure 4 .) In 2017 and 2018, significant reductions in IS territorial control prompted some reevaluation of the Syria Train and Equip (T&E) program, whose primary purpose had been to support offensive campaigns against Islamic State forces. The Trump Administration requested $300 million in FY2019 Counter-ISIS Train and Equip Fund (CTEF) monies for Syria programs, largely intended to shift toward training local partners as a hold force. The Department of Defense Appropriations Act, 2019 ( P.L. 115-245 ) provided $1.35 billion for the CTEF account, slightly less than the Administration's requested amount for the overall account ($1.4 billion) based on congressional concerns about some Syria-related funds. The FY2017 National Defense Authorization Act (NDAA) extended the Syria T&E program's authority through the end of 2018, but the FY2018 NDAA did not extend it further, asking instead for the Trump Administration to submit a report on its proposed strategy for Syria by February 2018. The FY2019 NDAA ( P.L. 115-232 ) prohibited the obligation of FY2019 defense funds for the program until the strategy required by the FY2018 NDAA and an additional update report on train and equip efforts was submitted to Congress. The FY2019 act extended the Syria T&E authority through December 2019 but did not adjust the program's authorized scope or purposes. The Administration's FY2020 defense funding request seeks an additional $300 million to equip and sustain vetted Syrian opposition (VSO) forces. Strained U.S.-Syria ties prior to the start of the conflict, including Syria's designation as a State Sponsor of Terrorism, are reflected in a series of U.S. sanctions and legal restrictions that remain in place today. U.S. policy toward Syria since August 2011 has been predicated on a stated desire to see Bashar al Asad leave office, preferably through a negotiated political settlement. However, the Asad government—backed by Russia and Iran—has reasserted control over much of western Syria since 2015, and appears poised to claim victory in the conflict. In an acknowledgement of the conflict's trajectory, U.S. calls for Asad's departure have largely faded. In late 2018, senior Administration officials stated that while \"America will never have good relations with Bashar al Asad,\" the Syrian people ultimately \"get to decide who will lead them and what kind of a government they will have. We are not committed to any kind of regime change.\" Nevertheless, the Trump Administration has stated its intent to refrain from supporting reconstruction efforts in Syria until a political solution is reached in accordance with UNSCR 2254, which calls for constitutional reform and U.N.-supervised elections. In the short term, policy discussions may focus on whether or how the Syrian government's reassertion of de facto control should affect U.S. military and assistance policy. The Trump Administration has directed a reorientation in U.S. assistance programs in Syria and has sought and arranged for new foreign contributions to support the stabilization of areas liberated from Islamic State control. The practical effect of this approach to date has been the drawdown of some assistance programs in opposition-held areas of northwestern Syria and the reprogramming of some U.S. funds appropriated by Congress for stabilization programs in Syria to other priorities. The future of U.S.-administered stabilization and other assistance programs in formerly opposition-held areas of Syria and areas currently held by U.S. partner forces is in question, in light of both the Asad government's reassertion of control in many areas, the planned reduction of U.S. military forces, and the December 2018 withdrawal of State Department and USAID personnel from northern Syria. As noted above, the Administration has stated its intention to end U.S. nonhumanitarian assistance to Asad-controlled areas of the country until the Syrian government fulfills the terms of UNSCR 2254. The Administration also has stated its intent to use U.S. diplomatic influence to discourage other international assistance to government-controlled Syria in the absence of a credible political process. Then-U.N. Special Envoy for Syria Staffan de Mistura said in 2017 that Syria reconstruction will cost at least $250 billion, and a group of U.N.-convened experts estimated in August 2018 that the cost of conflict damage could exceed $388 billion. Congress may debate how the United States might best assist Syrian civilians in need, most of whom live in areas under Syrian government control, without inadvertently strengthening the Asad government or its Russian and Iranian patrons. Introduced on January 3 by Senator Rubio and three cosponsors, the bill incorporates the Senate version of the Caesar Syria Civilian Protection Act of 2018 considered during the 115 th Congress and passed by the House in a different version. Title III would require the Secretary of the Treasury to make a determination within 180 days of enactment on whether the Central Bank of Syria is a financial institution of primary money laundering concern. If so, the bill would require the Secretary to impose one or more of the special measures described in Section 5318A(b) of Title 31, United States Code. The bill also would expand the scope of secondary sanctions on Syria to include foreign persons who knowingly provide support to Russian or Iranian entities operating on behalf of the Syrian government. It would also make eligible for sanctions foreign persons who knowingly sell or provide military aircraft and energy sector goods or services, or who knowingly provide significant construction or engineering services to the government of Syria. The bill does include several suspension and waiver authorities for the President. Its provisions would expire five years after the date of enactment. In January, the House passed the Caesar Syria Civilian Protection Act of 2019, introduced by Representative Engel ( H.R. 31 ). A version of the bill was also introduced in the Senate by Senators Risch, Menendez, and Rubio ( S. 52 ). An earlier version of the bill was considered during the 115 th Congress. H.R. 31 would eliminate Sections 103 to 303 of S. 52 (primarily amendments to the Syria Human Rights Accountability Act of 2012). The House bill retains all of the provisions found in Title III of S. 1 (see above). Introduced in March by Representative Engel, the bill would state that it is the policy of the United States that U.S. foreign assistance made available for reconstruction or stabilization in Syria should only be used in a democratic Syria or in areas of Syria not controlled by the Asad government or aligned forces. Reconstruction and stabilization aid appropriated or otherwise available from FY2020 through FY2024 could not be provided \"directly or indirectly\" to areas under Syrian government control—as determined by the Secretary of State—unless the President certifies to Congress that the government of Syria has met a number of conditions. These include ceasing air strikes against civilians, releasing all political prisoners, allowing regular access to humanitarian assistance, fulfilling obligations under the Chemical Weapons Convention, permitting the safe and voluntary return of displaced persons, taking steps to establishing meaningful accountability for perpetrators of war crimes, and halting the development and deployment of ballistic and cruise missiles. The House passed an earlier version of the bill during the 115 th Congress. By noting restrictions on U.S. aid provided \"directly or indirectly,\" the bill also would limit U.S. funds that could flow into Syria via multilateral institutions and international organizations, including the United Nations, the International Monetary Fund, and the World Bank. The bill would permit exceptions to the above restrictions on aid to government-held areas for humanitarian projects, \"projects to be administered by local organizations that reflect the aims, needs, and priorities of local communities,\" and projects that meet basic human needs including drought relief; assistance to refugees, IDPs, and conflict victims; the distribution of food and medicine; and the provision of health services. The bill would also state that it is the sense of Congress that the United States should not fund projects in which any Syrian government official or immediate family member has a financial or material interest, or is affiliated with the implementing partner. On March 23, the Syrian Democratic Forces (SDF) announced that the Islamic State had lost its final stronghold in the eastern Syrian town of Baghouz. President Trump initially announced the group's defeat in December 2018, although Coalition and SDF operations against the group continued in 2019. In early March CENTCOM Commander General Joseph Votel stated that the territory held by the Islamic State had been reduced down to a single square mile near Baghouz, along the Euphrates River ( Figure 3 ). However, Votel also noted, we should be clear that what we are seeing now is not the surrender of ISIS as an organization, but a calculated decision to preserve the safety of their families and preservation of their capabilities by taking their chances in camps for internally displaced persons and going to ground and remote areas and waiting for the right time to resurge. Votel also noted that, \"ISIS population being evacuated from the remaining vestiges of caliphate largely remain unrepentant, unbroken, and radicalized. We will need to maintain a vigilant offensive against this now widely dispersed and disaggregated organization.\" Coalition officials previously have stated that they do not intend to operate in Syrian-government controlled territory, despite reports that IS militants remain present in those areas. Continued attacks by the Islamic State in 2019 have raised concerns about the group's resiliency and potential to regenerate, particularly given plans to withdraw most U.S. military forces from Syria. On January 16, a suicide bombing claimed by the Islamic State killed 4 Americans and 15 others in the northern city of Manbij, in Aleppo province. One week later, a vehicle-borne improvised explosive device targeted a joint American-SDF patrol in the town of Ash Shaddadi in Hasakah province. Both cities were liberated from the Islamic State in 2016. The most recent Lead Inspector General report on Operation Inherent Resolve (OIR) states that, \"absent sustained [counterterrorism] pressure, ISIS could likely resurge in Syria within six to twelve months and regain limited territory in the [Middle Euphrates River Valley (MERV)].\" Prior to the Administration's withdrawal announcement in December 2018, U.S. officials had stated that once the conventional fight against the Islamic State was completed, the coalition would shift to a \"new phase\" focused on stabilization, including the training of local forces to hold liberated areas. These plans were reflected in the Defense Department and State Department requests for appropriations for FY2019. Following the Administration's February announcement that several hundred U.S. troops would remain in Syria, Chairman of the Joint Chiefs of Staff General Joseph Dunford stated, [...] this is about campaign continuity. So we had a campaign that was designed to clear ISIS from the ground that they had held, and we always had planned to transition into a stabilization phase where we train local forces to provide security and prevent the regeneration of ISIS. So there is -- there is no change in the basic campaign, the resourcing is being adjusted because the threat has been changed. While military officials have emphasized the continuity of the U.S. military campaign, it is not clear whether the threat posed by the Islamic State is similarly unchanged, particularly as the group shifts from controlling territory to operating as what General Votel has described as a \"clandestine insurgency.\" U.S. officials in 2018 stated that the Islamic State had \"atomized,\" becoming more dispersed in its command and control, and posing a more decentralized threat. Former U.S. Special Envoy Brett McGurk, who resigned in December 2018, had stated that the \"defeat of the physical space is not the defeat of ISIS,\" noting that the group is less vulnerable to conventional military operations once it no longer holds large areas of territory. Idlib province has been under rebel control since 2015, hindering the Asad government's ability to transit directly from government-held areas in the south to Syria's largest city of Aleppo, in the north. While a range of opposition groups operate in Idlib, U.S. officials have described the province as a safe haven for Al Qaeda, while also highlighting the significant civilian presence. U.S. initiatives in Idlib aimed at countering violent extremism (CVE) were halted in May 2018 as part of a broader withdrawal of U.S. assistance to northwest Syria. De-escalation A rea & D emilitarized Z one . In May 2017, an agreement between Russia, Iran, and Turkey established the Idlib de-escalation area (encompassing all of Idlib province as well as portions of neighboring Lattakia, Aleppo, and Hama provinces). The agreement was designed to reduce violence between regime and opposition forces. However, regime forces continued to pursue military operations in the area, recapturing about half of the de-escalation area by mid-2018. Both regime and armed opposition forces expressed determination to control the remaining portions of Idlib, raising fears that a large-scale offensive pitting Syrian government forces against a mix of armed opposition and jihadist forces could trigger a humanitarian crisis for civilians in the area. In October 2018, Russia and Turkey created a demilitarized zone in parts of Idlib province to separate the two sides. 2019 Jihadist Advance . In January 2019, the Al Qaeda-linked group Haya't Tahrir al Sham (HTS) seized large areas of Idlib province from rival armed groups, forcing them to accept an HTS-run civil administration. HTS was established in 2017 as a successor to the Nusra Front (Al Qaeda's formal affiliate in Syria). U.S. officials have stated that \"The core of HTS is Nusra,\" and amended the FTO designation of the Nusra Front in May 2018 to include HTS as an alias. U.S. officials in mid-2017 described Idlib province as \"the largest Al Qaeda safe haven since 9/11.\" Beginning in 2014, the United States conducted a series of air strikes, largely in Idlib province, against Al Qaeda targets. These strikes fell outside the framework of Operation Inherent Resolve (which focuses on the Islamic State), and U.S. officials stated that they were conducted on the basis of the 2001 AUMF. At least a dozen foreign Al Qaeda leaders have been killed in Syria since 2014, mostly in Idlib. A February 2017 U.S. drone strike in Idlib killed the deputy leader of Al Qaeda, and a U.S. strike on an Al Qaeda training camp in Idlib the previous month killed more than 100 Al Qaeda fighters. In addition to HTS, the intelligence community's 2019 worldwide threat assessment also referenced another Al Qaeda-linked group in Syria known as Hurras al Din (\"Guardians of Religion\"). While HTS and Hurras al Din have occasionally clashed in Idlib, some analysts have assessed that the two groups \"serve different functions that equally serve al-Qa`ida's established objectives: one appeals to hardened jihadis with an uncompromising doctrine focused on jihad beyond Syria and one appeals to those focused on the Syrian war.\" In February 2019, the two groups signed an accord pledging broader cooperation. The 2019 expansion of jihadist groups in Idlib has raised concern about the potential for renewed Syrian and/or Russian operations in the area. In March 2019, Syrian and Russian strikes in Idlib reportedly intensified to their highest level in months. U.N. officials have described Idlib as a \"dumping ground\" for fighters and civilians—including an estimated 1 million children—evacuated or displaced from formerly opposition-held areas in other parts of the country. U.N. officials have warned that a mass assault on Idlib could result in \"the biggest humanitarian catastrophe we've seen for decades.\" Turkey has maintained a military presence in northern Syria since 2016, and currently has forces deployed in Aleppo and Idlib provinces. Turkish forces partner with local Arab militias and have conducted border operations against the Islamic State and other jihadist fighters, while also targeting Syrian Kurdish forces. President Trump has stated that Turkey could play a larger role in countering the Islamic State in Syria, although it is unclear to what extent U.S. and Turkish objectives overlap. Turkish officials have openly stated that their objectives are not limited to IS militants, and that they also intend to expand military operations against Kurdish forces—including those that have been allied with the United States as part of the counter-IS campaign. It is unclear to what extent Ankara is prepared to launch counter-IS operations in parts of Syria not adjacent to Turkey's border. U.S. military officials have noted that Turkey has not participated in ground operations against the Islamic State in Syria since 2017, and that Turkish forces have not participated in the fight against the Islamic State in the Middle Euphrates River Valley (MERV), which is roughly 230 miles away from the Turkish border. Turkish officials have requested U.S. air and logistical support for their potential operations, despite the two countries' different stances on the YPG. In January 2019, President Trump proposed the creation of a 20-mile deep \"safe zone\" on the Syria side of the border. Secretary of State Mike Pompeo later said that the U.S. \"twin aims\" are to make sure that those who helped take down the IS caliphate have security, and to prevent terrorists from attacking Turkey out of Syria. It is unclear who would enforce such a zone. Some sources suggest that U.S. officials favor having a Western coalition patrol any kind of buffer zone inside the Syrian border, with some U.S. support, while Turkey wants its forces together with allied Syrian opposition partners to take that role. Kurdish representatives have said that a safe zone must be guaranteed by international forces. In September 2018, Israeli Intelligence Minister Israel Katz said, \"in the last two years Israel has taken military action more than 200 times within Syria itself.\" Israeli strikes in Syria have mostly targeted locations and convoys near the Lebanese border associated with weapons shipments to Lebanese Hezbollah. However, in 2018, strikes widely attributed to Israel for the first time directly targeted Iranian facilities and personnel in Syria. In September 2018, Israel struck military targets in Syria's coastal province of Lattakia. A Syrian antiaircraft battery responding to the Israeli strikes downed a Russian military plane, killing 15 Russian personnel. An IDF spokesperson stated that Israeli jets were targeting \"a facility of the Syrian Armed Forces from which systems to manufacture accurate and lethal weapons were about to be transferred on behalf of Iran to Hezbollah in Lebanon.\" The spokesperson added that the IDF and the Russian military maintain a deconfliction system in Syria, stating that the Russian plane was not in the area of operation during the Lattakia strike and blaming \"extensive and inaccurate\" Syrian antiaircraft fire for the incident. In response to the downing of their plane, Russian defense officials announced plans to provide an S-300 air defense system to Syria. The expanding presence of Iranian and Iranian-backed personnel in Syria remains a consistent point of tension between Israel and Iran. In a rare acknowledgement, Israeli military officials in January 2019 confirmed strikes on Iranian military targets in Syria. Israel has accused Hezbollah of establishing a cell in Syrian-held areas of the Golan Heights, with the eventual goal of launching attacks into Israel. For additional information, see CRS In Focus IF10858, Iran and Israel: Tension Over Syria , by Carla E. Humud, Kenneth Katzman, and Jim Zanotti. Since 2012, the Syrian government and opposition have participated in U.N.-brokered negotiations under the framework of the Geneva Communiqué. Endorsed by both the United States and Russia, the Geneva Communiqué calls for the establishment of a transitional governing body with full executive powers. According to the document, such a government \"could include members of the present government and the opposition and other groups and shall be formed on the basis of mutual consent.\" The document does not discuss the future of Asad. Subsequent negotiations have made little progress, as both sides have adopted differing interpretations of the agreement. The opposition has said that any transitional government must exclude Asad. The Syrian government maintains that Asad was reelected (by referendum) in 2014, and notes that the Geneva Communiqué does not explicitly require him to step down. In the Syrian government's view, a transitional government can be achieved by simply expanding the existing government to include members of the opposition. Asad has also stated that a political transition cannot occur until \"terrorism\" has been defeated, which his government defines broadly to include all armed opposition groups. As part of the Geneva Process, U.N. Security Council Resolution (UNSCR) 2254, adopted in 2015, endorsed a \"road map\" for a political settlement in Syria, including the drafting of a new constitution and the administration of U.N.-supervised elections. U.S. officials continue to stress that a political solution to the conflict must be based on the principles of UNSCR 2254. The last formal round of Geneva talks, facilitated by then-U.N. Special Envoy for Syria Staffan de Mistura, closed in late January 2018. While the United States continues to call for a political settlement to the conflict, the U.S. intelligence community has assessed that Asad is \"unlikely to negotiate himself from power\" or make meaningful concession to the opposition: The regime's momentum, combined with continued support from Russia and Iran, almost certainly has given Syrian President Bashar al-Asad little incentive to make anything more than token concessions to the opposition or to adhere to UN resolutions on constitutional changes that Asad perceives would hurt his regime. The United States has repeatedly expressed its view that Geneva should be the sole forum for a political settlement to the Syria conflict, possibly reflecting concern regarding the Russia-led Astana Process. However, the United States supported de Mistura's efforts throughout 2018 to stand up a Syrian Constitutional Committee, an initiative originally stemming from the Russian-led Sochi conference in January 2018 (see below). De Mistura resigned in December 2018, and was succeeded by veteran Norwegian diplomat Geir Pederson. As of early 2019, Pederson has continued De Mistura's efforts to convene a constitutional committee. Since January 2017, peace talks hosted by Russia, Iran, and Turkey have convened in the Kazakh capital of Astana. These talks were the forum through which three \"de-escalation areas\" were established—two of which have since been retaken by Syrian military forces. The United States is not a party to the Astana talks but has attended as an observer delegation. Russia has played a leading role in the Astana process, which some have described as an alternate track to the Geneva process. The United States has strongly opposed the prospect of Astana superseding Geneva. Following the release of the Joint Statement by President Trump and Russian President Putin on November 11, 2017 (in which the two presidents confirmed that a political solution to the conflict must be forged through the Geneva process pursuant to UNSCR 2254), U.S. officials stated that We have started to see signs that the Russians and the regime wanted to draw the political process away from Geneva to a format that might be easier for the regime to manipulate. Today makes clear and the [Joint Statement] makes clear that 2254 and Geneva remains the exclusive platform for the political process. The 11 th round of Astana talks was held in November 2018. In February 2019, the presidents of Russia, Iran, and Turkey held a trilateral summit at the Russian Black Sea resort of Sochi to discuss the future of Idlib, anticipated changes to the U.S. military presence in Syria, and how to move forward on the formation of a constitutional committee. Constitutional Committee . Despite the November 2017 agreement, Russia persisted in its attempts to host, alongside Iran and Turkey, a \"Syrian People's Congress\" in Sochi, intended to bring together Syrian government and various opposition forces to negotiate a postwar settlement. The conference, held in January 2018, was boycotted by most Syrian opposition groups and included mainly delegates friendly to the Asad government. Participants agreed to form a constitutional committee comprising delegates from the Syrian government and the opposition \"for drafting of a constitutional reform,\" in accordance with UNSCR 2254. The statement noted that final agreement regarding the mandate, rules of procedure, and selection criteria for delegates would be reached under the framework of the Geneva process. The United States supports the formation of the committee under U.N. auspices, but has emphasized that \"the United Nations must be given a free hand to determine the composition of the committee, its scope of work, and schedule.\" Following the 2018 Sochi Conference, de Mistura sought to reach consensus among the parties regarding delegates for the constitutional committee. The committee's membership is to be divided in equal thirds between delegates from the Syrian government, Syrian opposition, and delegates selected by the U.N. comprising Syrian experts, civil society, independents, tribal leaders, and women. The sticking point remains this latter, U.N.-selected group, known as the \"middle third list.\" The Syrian government has objected to the U.N.'s role in naming delegates to the list, describing the constitution as \"a highly sensitive matter of national sovereignty.\" In July 2018, the Syrian Democratic Council (SDC), the political wing of the U.S.-backed Syrian Democratic Forces (SDF), opened formal discussions with the Syrian government. The Kurdish-held areas in northern Syria, comprising about a quarter of the country, are the largest remaining areas outside of Syrian government control. Asad has stated that his government intends to recover these areas, whether by negotiations or military force. In early 2019, the U.S. intelligence community also assessed that the Asad government was \"likely to focus on reasserting control over Kurdish-held areas.\" Following President Trump's announcement in December 2018 that the United States shortly would withdraw forces from Syria, Kurdish leaders sought Asad government protection from a possible Turkish attack. Turkey, which captured the Kurdish enclave of Afrin in northern Syria in 2018, has stated its intent to expand its military operations against PYD and YPG elements in Syria, and Kurdish concerns about such an operation appear to have accelerated talks between Kurdish representatives and the Asad government. The PYD is not a party to the ongoing talks in Geneva between Syrian government and opposition forces, despite the fact that its YPG militia controls the vast majority of territory that remains outside of Syrian government control. As of 2019, nearly 12 million people in Syria are in need of humanitarian assistance, 6.2 million Syrians are internally displaced, and an additional 5.6 million Syrians are registered with the U.N. High Commissioner for Refugees (UNHCR) as refugees in nearby countries. The Syrian government has long opposed the provision of humanitarian assistance across Syria's border and across internal lines of conflict outside of channels under Syrian government control. Successive U.N. Security Council resolutions have nevertheless authorized the provision of such assistance. The Syrian government further seeks the prompt return of Syrian refugees from neighboring countries, while humanitarian advocates and practitioners raise concern about forced returns and the protection of returnees from political persecution and the difficult conditions prevailing in Syria. The U.N. Secretary-General regularly reports to the Security Council on humanitarian issues and challenges in and related to Syria pursuant to Resolutions 2139 (2014), 2165 (2014), 2191 (2014), 2258 (2015), 2332 (2016), 2393 (2017), 2401 (2018), and 2449 (2018). The United States is the largest donor of humanitarian assistance to the Syria crisis, drawing from existing funding from global humanitarian accounts and some reprogrammed funding. As of March 2019, total U.S. humanitarian assistance for the Syria crisis since 2011 had reached more than $9.5 billion. Of this total, roughly $4.7 billion has gone toward meeting humanitarian needs inside Syria, while the remainder has supported host communities in Lebanon, Jordan, Turkey, Iraq, and Egypt that host Syrian refugees. The Trump Administration's FY2020 request would eliminate funding for the International Disaster Assistance (IDA) account as well as funding for overseas humanitarian assistance programs previously funded through the Migration and Refugee Assistance (MRA) account. Instead, it requests $5.9 billion in funding for a new International Humanitarian Assistance (IHA) account, intended to consolidate all U.S. overseas humanitarian programming into a single account. Funds requested for the IHA account would fund the U.S. humanitarian response in Syria and other crisis areas. Multilateral humanitarian assistance in response to the Syria crisis includes both the Regional Refugee and Resilience Plan (3RP) and the Humanitarian Response Plan (HRP). The 3RP is designed to address the impact of the conflict on Syria's neighbors, and encompasses the Lebanon Crisis Response Plan, the Jordan Response Plan, and country chapters in Turkey, Iraq, and Egypt. It includes a refugee/humanitarian response coordinated by UNHCR and a \"resilience\" response (stabilization-based development assistance) led by the U.N. Development Program (UNDP). In parallel to the 3RP, the HRP for Syria is designed to address the crisis inside the country through a focus on humanitarian assistance, civilian protection, and increasing resilience and livelihood opportunities, in part by improving access to basic services. This includes the reconstruction of damaged infrastructure (water, sewage, electricity) as well as the restoration of medical and education facilities and infrastructure for the production of inputs for sectors such as agriculture. In 2019, U.N. officials warned that the Syria conflict was not over, and that significant humanitarian needs remain. The 2019 3RP appeal seeks $5.5 billion and the HRP for Syria seeks $3.3 billion, on par with previous years. U.N. officials have noted that the 2018 3RP appeal was funded at 62%, while the Syria HRP was funded at 65%. Since 2011, U.S. policy toward the unrest and conflict in Syria has attempted to pursue parallel interests and manage interconnected challenges, with varying degrees of success. Among the objectives identified by successive Administrations and by many Members in successive sessions of Congress have been supporting Syrian-led efforts to demand more representative, accountable, and effective governance; seeking a negotiated settlement that includes a transition in Syria away from the leadership of Bashar al Asad and his supporters; limiting or preventing the use of military force by state and nonstate actors against civilian populations; mitigating transnational threats posed by Syria-based Islamist extremist groups; meeting the humanitarian needs of internally and externally displaced Syrians; preventing the presence and needs of Syrian refugees from destabilizing neighboring countries; limiting the negative effects of other third party interventions on regional and international balances of power; and responding to and preventing the use of chemical weapons. As Syria's conflict has changed over time from civil unrest to nationwide military conflict involving multiple internal and external actors to the apparent resurgence of the Asad government, the policies, approaches, and priorities of the United States and others also have changed. As of late 2018, the United States and its Syrian and regional partners have not succeeded in inducing or compelling Syrian President Bashar al Asad to leave office or secured a fundamental reorientation of Syria's political system as part of a negotiated settlement process. The United States continues to advocate for an inclusive negotiated solution, but has largely acquiesced to Asad's resumption of political and security control. Forceful interventions in Syria by Russia, Iran, Turkey, the United States, and Israel have created a fundamentally different set of calculations for policymakers to consider relative to those that prevailed prior to the conflict. In 2018, the Administration's Syria policy underwent significant changes, reflecting an internal policy review as well as apparent differences of opinion between President Trump and senior military and diplomatic officials. In January 2018, then-Secretary of State Rex Tillerson stated that \"the United States will maintain a military presence in Syria focused on ensuring that ISIS cannot re-emerge.\" Tillerson stated that the United States intended to carry out stabilization initiatives in areas liberated from IS control, pursue measures to de-escalate the conflict, partner with allies to address counterterrorism goals, encourage U.N.-mediated peace efforts, and provide targeted reconstruction in areas liberated from the Islamic State. This approach was echoed by CENTCOM Commander General Votel, who said in testimony that, \"after we have removed [ISIS] from their control of the terrain, we have to consolidate our gains and we have to ensure that the right security and stability is in place so that they cannot resurge.\" In March 2018, President Trump fired Secretary Tillerson. The President later stated that U.S. troops in Syria would be \"coming out of Syria, like, very soon.\" Speaking about Syria on April 3, Trump reiterated, \"I want to get out. I want to bring our troops back home.\" Military officials sought to downplay any divisions within the Administration, stating, \"... as we reach finality against ISIS in Syria, we're going to adjust the level of our presence there. So in that sense, nothing actually has changed.\" An April 7 chemical weapons attack by the Syrian government and subsequent U.S., British, and French air strikes on Syrian CW facilities also appeared to temper the President's calls for a quick U.S. military withdrawal from the country. However, by May 2018, the Administration had begun to shift away from direct U.S. funding of stabilization programs in areas of Syria recently liberated from IS control. The Administration moved to end a range of U.S. nonlethal, nonhumanitarian assistance programs for opposition-held communities in southern and northwestern Syria, including in Idlib province. At the same time, officials continued to stress the importance of a sustained U.S. presence in the country. In July, then-Defense Secretary Mattis stated that U.S. military forces were focused on the \"last bastions\" of the Islamic State in Syria, adding, \"As that falls, then we'll sort out a new situation. But what you don't do is simply walk away and—and leave the place as devastated as it is, based on this war. You don't just leave it, and then ISIS comes back.\" In August, Administration officials announced that the State Department would \"redirect approximately $230 million in stabilization funds for Syria.\" In August and September, the Administration notified Congress that these funds, originally appropriated as FY2017 ESF-OCO, would be reprogrammed to meet other priorities. Administration officials also stated that the United States intended to rely on contributions from foreign partners, including a $100 million contribution from Saudi Arabia and contributions from the United Arab Emirates and Germany, to continue stabilization efforts in northeastern Syria. In the fall of 2018, Administration officials began to articulate a three-track Syria strategy which included seeking the enduring defeat of the Islamic State, achieving a political settlement to the Syrian civil war based on the terms of UNSCR 2254, and inducing the departure of all Iranian-commanded forces from Syria. In September 2018, U.S. National Security Advisor John Bolton stated, \"We're not going to leave [Syria] as long as Iranian troops are outside Iranian borders and that includes Iranian proxies and militias.\" In November 2018, Ambassador James F. Jeffrey—appointed in August as the Secretary of State's Special Representative for Syria Engagement—stated that, \"U.S. troops will stay on in Syria we say until the enduring defeat of ISIS which means to establish the conditions so that local forces, local populations, local governments, can deal with ISIS as a terrorist or as an insurgent movement.\" In December, then-Special Presidential Envoy for the Global Coalition to Defeat ISIS Brett McGurk stated that, \"Even as the end of the physical caliphate is clearly now coming into sight, the end of ISIS will be a much more long-term initiative,\" adding, \"Nobody is declaring a mission accomplished.\" McGurk also stated that if we've learned one thing over the years, enduring defeat of a group like this means you can't just defeat their physical space and then leave; you have to make sure the internal security forces are in place to ensure that those gains, security gains, are enduring. President Trump announced on December 19 that U.S. forces would be returning from Syria \"now.\" He stated, \"We have defeated ISIS in Syria, my only reason for being there during the Trump Presidency.\" Pentagon Spokesperson Dana White later stated that while the U.S.-led coalition had liberated IS-held territory, the campaign against the group was not over. Nevertheless, a Pentagon spokesperson confirmed that the Defense Department had \"started the process of returning U.S. troops home\" from Syria, and State Department personnel reportedly were evacuated from Syria within 24 hours of the announcement. The announced troop withdrawal came as a surprise to senior military and diplomatic officials, who publicly had stated that the United States intended to remain inside Syria to carry out stabilization operations. The week prior to the announcement, Brett McGurk had emphasized that the Islamic State is likely to be a resilient force, stating, There's clandestine cells. Nobody is saying that they are going to disappear. Nobody is that naive. So we want to stay on the ground and make sure that stability can be maintained in these areas [...] obviously, it would be reckless if we were just to say, well, the physical caliphate is defeated, so we can just leave now. Following the announcement, some Defense and State Department officials reportedly sought to persuade the White House to reconsider the withdrawal. On December 20, Defense Secretary Mattis submitted his resignation. On December 22, Brett McGurk announced that he would accelerate his resignation as Special Presidential Envoy for the Global Coalition to Defeat ISIS, stating that, \"The recent decision by the president came as a shock and was a complete reversal of policy that was articulated to us […] I ultimately concluded that I could not carry out these new instructions and maintain my integrity.\" The Syria withdrawal announcement was criticized by many Members of Congress, but some Members embraced the decision as overdue. Senators Graham, Shaheen, Ernst, King, Cotton, and Rubio drafted an open letter to President Trump, stating, \"We believe that such action at this time is a premature and costly mistake that not only threatens the safety and security of the United States, but also emboldens ISIS, Bashar al Assad, Iran, and Russia.\" Senator Graham also drafted a nonbinding resolution ( S.Res. 738 ) calling on the President to reconsider his decision. In contrast, Senator Rand Paul and Representatives Ted Lieu and Ro Khanna praised the President's decision, citing concerns about the wisdom, effectiveness, and authorization for U.S. operations. Some U.S. allies also criticized the decision, including coalition partners in the counter-IS campaign such as France and the United Kingdom. A spokesperson for the French Defense Ministry stated that French air strikes against the Islamic State in Syria would continue. Britain's defense minister disputed the claim that the Islamic State had been defeated, saying that the group had morphed into another form and was \"very much alive.\" In contrast, Russian President Putin praised the U.S. move toward withdrawal, calling it \"correct.\" Turkish leaders also welcomed the U.S. decision, which some reports described as having been influenced by a call between President Trump and Turkish President Erdogan. In early January, U.S. forces began withdrawing equipment—but not personnel—from Syria. In late February, the White House announced that the United States would leave approximately 400 troops in Syria, reversing President Trump's December withdrawal announcement. These troops reportedly are intended to form part of a multinational force of roughly 800-1,500 military personnel, which the Administration intends to solicit mostly from NATO member states. When asked about the mission of the remaining U.S. contingent in Syria, Chairman of the Joint Chiefs of Staff General Joseph Dunford stated, It's the same -- we're -- this is about campaign continuity. So we had a campaign that was designed to clear ISIS from the ground that they had held, and we always had planned to transition into a stabilization phase where we train local forces to provide security and prevent the regeneration of ISIS. So there is -- there is no change in the basic campaign, the resourcing is being adjusted because the threat has been changed. In March 2019, the Wall Street Journal , citing unnamed U.S. officials, reported that the U.S. military was preparing to leave as many as 1,000 troops in Syria. In a statement, General Dunford described this claim as \"factually incorrect.\" Other reports citing U.S. officials have stated that the number of U.S. forces to remain in Syria ultimately will depend on the number of forces pledged by allied states. The Administration's FY2020 defense funding request assumes for budgeting purposes that more than 7,000 U.S. military personnel will be deployed to Iraq and Syria in FY2020. It is unclear whether USAID and State Department personnel will redeploy to Syria to spearhead stabilization projects. Administration officials have stated that they are seeking increased coalition financial contributions to continue Syria stabilization efforts. The Administration's FY2020 foreign assistance request states that the United States will seek to \"leverage\" additional partner contributions. The request does not include funding for specific assistance programs in Syria but states that funds designated for Relief and Recovery Fund purposes could be used in Syria. On March 25, President Trump issued a proclamation recognizing the Golan Heights as part of the state of Israel. The Golan Heights, a roughly 450-square-mile plateau situated between Israel and Syria, has been disputed since 1967, when Israel captured most of the area from Syria. U.N. Security Council resolutions have called for the final status of the area to be determined via negotiations between the two sides. In 1974, U.N. Security Council Resolution 350 established the United Nations Disengagement Observer Force (UNDOF) to monitor a separation zone between Israel and Syria on the Golan Heights. In 1981, Israel effectively annexed the Golan Heights unilaterally by applying Israeli law to the area. In December 1981, the Security Council voted unanimously to adopt Resolution 497, stating that the annexation was \"null and void and without international legal effect.\" Syria condemned the Trump Administration's March 2019 recognition of Israeli sovereignty, describing it as a \"flagrant violation\" of U.N. resolutions regarding the status of the Golan. For additional information, see CRS Insight IN11081, Israel and Syria in the Golan Heights: President Trump Voices Support for Israeli Sovereignty Claim , by Jim Zanotti and Carla E. Humud. Since 2011, Members of Congress and successive Administrations have debated presidential authority to conduct military operations in Syria absent a declaration of war. This has, over time, included debates regarding the potential imposition of no-fly zones over areas of the country to protect civilians, operations against various extremist groups, force protection for U.S. military personnel and partner forces inside Syria, and strikes against Syrian chemical weapons facilities and related forces. In April 2018, U.S. missile strikes targeted chemical weapons-related facilities in Syria, in response to a chemical weapons attack in the city of Douma. The strikes occurred just over a year after the U.S. strike on Al Shayrat airbase in Homs province, following the sarin gas attack in Khan Sheikhoun. Describing the Administration's view of the authorities underlying the 2018 operation, Defense Secretary Mattis stated As our commander in chief, the president has the authority under Article II of the Constitution to use military force overseas to defend important U.S. national interests. The United States has an important national interest in averting a worsening catastrophe in Syria, and specifically deterring the use and proliferation of chemical weapons. Similarly, in an April 8, 2017, letter to Congress, President Trump had stated that he had acted \"pursuant to my constitutional authority to conduct foreign relations and as Commander in Chief and Chief Executive\" in ordering the April 6, 2017, U.S. missile strikes on Al Shayrat airbase. In the letter, President Trump says that he \"acted in the vital national security and foreign policy interests of the United States,\" and that, \"the United States will take additional action, as necessary and appropriate, to further its important national interests.\" In the past, Presidents have justified the use of military force by relying on presidential powers they assert are inherent under Article II Commander in Chief and Chief Executive authority. The executive branch has claimed that a President may use military force to defend U.S. national security interests (even when an immediate threat to the United States and its Armed Forces is not necessarily apparent) and to promote U.S. foreign policy. In 2017 and 2018, the U.S. military used force against the Syrian government and its allies on limited occasions for force-protection purposes, including for the protection of U.S. partner forces. In an August 2017 letter to Senate Foreign Relations Committee Chairman Senator Bob Corker, the State Department asserted that \"the 2001 AUMF also provides authority to use force to defend U.S., Coalition and partner forces engaged in the campaign to defeat ISIS to the extent such use of force is a necessary and appropriate measure in support of counter-ISIS operations.\" The letter states the Administration's view that The strikes taken by the United States in May and June 2017 against the Syrian Government and pro-Syrian-Government forces were limited and lawful measures to counter immediate threats to U.S. or partner forces engaged in that campaign. The United States does not seek to fight the Syrian Government or pro-Syrian-Government forces. However, the United States will not hesitate to use necessary and proportionate force to defend U.S., Coalition, or partner forces engaged in the campaign against ISIS. Congress has debated Syria-specific and Islamic State-focused authorization for military force proposals intermittently in recent years. In 2013, the Senate Foreign Relations Committee considered and reported a proposed authorization for the use of military force following a chemical weapons attack in the suburbs of Damascus, Syria ( S.J.Res. 21 , 113 th Congress). The Senate did not consider the measure further. Since U.S. military action against the Islamic State began in June 2014, starting in Iraq and then spreading to Syria, Congress also has debated the need for enactment of a new IS-specific authorization for use of military force. President Obama asserted that the campaign against the Islamic State in Iraq and Syria was authorized by both the Authorization for Use of Military Force (2001 AUMF; P.L. 107-40 ; claiming that the Islamic State was a successor organization of Al Qaeda and that elements of Al Qaeda were present in Syria) and Authorization for Use of Military Force Against Iraq Resolution of 2002 (2002 AUMF; P.L. 107-243 ; claiming authority to defend Iraq from the Islamic State threat). As noted above, Senate committees held hearings on a proposed new AUMF ( S.J.Res. 59 ) in 2018. Since 2015, U.S. forces have operated in Syria in support of the counter-IS campaign. Roughly 2,000 U.S. military personnel conduct train and equip program-related activities as well as \"advise and assist\" operations in support of U.S. partner forces. The Special Operations Joint Task Force, Operation Inherent Resolve (SOJTF-OIR) led by Brigadier General Patrick B. Roberson has been \"the primary advise, assist and accompany force in Syria, working closely with the SDF.\" SOJTF-OIR has reported to the Combined Joint Task Force-Operation Inherent Resolve (CJTF-OIR), which leads the international coalition to defeat the Islamic State in Iraq and Syria. In September 2018, Lieutenant General Paul LaCamera assumed command of CJTF-OIR. U.S. forces have operated in northern and eastern Syria in partnership with the SDF and in southwest Syria in partnership with the Maghawir al Thawra militia near the At Tanf garrison adjacent to the tri-border area shared by Syria, Jordan, and Iraq. As discussed above (\" Presidential Authority to Strike Syria under U.S. Law \"), U.S. strike operations against the Islamic State and Al Qaeda-affiliated targets in Syria are conducted pursuant to the 2001 Authorization for Use of Military Force. U.S. forces have operated in Syria for train and equip program purposes as well as to advise and assist U.S. partner forces, whether or not those specific partner forces were trained and/or armed under the train and equip program. Such \"advise and assist\" activities may have been conducted pursuant to the authorities outlined by train and equip program provisions or pursuant to other defense authorities defined in law or asserted by the executive branch. This includes military operations against IS targets conducted pursuant to the 2001 Authorization for Use of Military Force. U.S. operations in Syria also are supported in part by the 2014 request of the Iraqi government to the U.N. Security Council for military support to address the threat of terrorism emanating from Syria. In 2014, Congress created a new authority for the Department of Defense (DOD) to train and equip select Syrians in the FY2015 National Defense Authorization Act (NDAA, Section 1209 of P.L. 113-291 , as amended). This authority, as amended by subsequent legislation, enables DOD \"to provide assistance, including training, equipment, supplies, stipends, construction of training and associated facilities, and sustainment, to appropriately vetted elements of the Syrian opposition and other appropriately vetted Syrian groups and individuals.\" Such assistance activities are authorized for select purposes, including supporting U.S. efforts to combat the Islamic State and other terrorist organizations in Syria and promoting the conditions for a negotiated settlement to Syria's civil war. Congress has not appropriated funds specifically for the Syria train and equip program since the program's inception. Rather, Congress has authorized the Department of Defense to reprogram funds from global counterterrorism assistance accounts to operations and maintenance accounts to support program activities, with each reprogramming subject to the prior approval of the four congressional defense committees. As of March 2019, more than $2.5 billion has been reprogrammed or requested for the program. ( Table 1 provides information about program funding and related requests.) The FY2019 NDAA ( P.L. 115-232 ) extends the program's authorization through the end of 2019, but also places limitations on the use of FY2019 funds for the program until certain requirements have been met. The act prohibits the obligation or expenditure of funds authorized to be appropriated for FY2019 until both (1) the President submits the report on U.S. strategy in Syria required by Section 1221 of the FY2018 NDAA ( P.L. 115-91 ), and (2) the Secretary of Defense submits a separate report to the congressional defense committees regarding the program. The act also requires the Secretary of Defense to submit a written certification quarterly on matters including progress on stabilization as well as any human rights violations committed by U.S.-supported groups. The act continues to apply the prior approval reprogramming requirements applied to date for the use of appropriated funds. The Department of Defense Appropriations Act, 2019 ( P.L. 115-245 ) provides $1.35 billion for the CTEF account, slightly less than the Administration's requested amount for the overall account ($1.4 billion). As in previous years, the text of the act does not specify the amount for Syria-specific programs. The Administration's FY2020 request seeks $300 million in CTEF funds to equip and sustain \"vetted Syrian opposition (VSO) forces,\" including Internal Security Forces. The department describes U.S. SDF and other partners as VSO in planning and reporting documents. The request states that the \"primary focus\" will be on the continued equipping of Internal Security Forces, and that these forces \"together with wide-area security and other VSO elements, will focus on back-clearing and holding areas that were liberated from ISIS.\" The Administration's FY2019 request had envisioned the creation of a 35,000-person Internal Security Force and a 30,000-person combat force. The FY2020 request references a 61,000 VSO force without specifying what percentage of these are to be focused on internal security versus other tasks. Other differences with the FY2019 request include a reduced emphasis on direct U.S. training of VSO forces. Instead, the FY2020 request states that DOD will \"support the VSO's ongoing efforts to recruit, vet, train, and equip additional Syrians representative of the population and enable them to engage ISIS throughout the battlespace.\" The request states that $252 million was enacted for the Syria Train and Equip program in FY2019 (about $50 million less that the Administration's FY2019 request). It also notes that the FY2020 budget realigns $250 million in FY2019 funds for IS-related border security support to partner nations from the CTEF fund to Operation and Maintenance, Defense-wide. The Administration's FY2020 foreign assistance budget request reflects a move by the Trump Administration to end nonlethal assistance for the Syrian opposition, and to shift funding responsibility for stabilization projects to coalition partners. Since 2012, the United States has provided nonlethal assistance to Syrian opposition groups. The United States also has funded stabilization efforts in areas of northeastern Syria liberated from Islamic State control. Possibly reflecting a recognition that the Syria conflict has \"decisively shifted in the Syrian regime's favor,\" the FY2020 request includes no Syria-specific funding. Since 2012, the United States has provided a range of nonlethal assistance to Syrian opposition and civil society groups. At the start of the Syria conflict, U.S. ability to provide aid to the Syrian opposition was limited by restrictions stemming from an existing body of U.S. bilateral sanctions against Syria, as well as Syria's status as a state sponsor of terrorism. President Obama invoked emergency and contingency authorities under the Foreign Assistance Act to enable initial deliveries. To enable the expanded delivery of aid to Syrian opposition groups, the executive branch requested and Congress granted specific authorities to provide nonlethal foreign assistance in Syria for certain purposes notwithstanding other provisions of law. Over time, Congress expanded and amended these authorities to focus on areas of congressional priority and to put into place oversight and reporting requirements. Since FY2012, successive Administrations and Congresses have taken evolving approaches to requests and appropriations of funds for assistance and stabilization programs in Syria. Funding for both types of projects has been drawn from a mix of regular and OCO funds from multiple accounts—largely ESF—with the Administration required to notify Congress of its intent to use these funds for assistance and stabilization efforts in Syria. FY2017 Funds . In January 2017, the Obama Administration notified Congress that it intended to spend $230 million in FY2017 ESF-OCO funds (originally appropriated under the Further Continuing and Security Assistance Appropriations Act, 2017, P.L. 114-254 ) to support stabilization in areas liberated from the Islamic State in Syria. In August and September 2018, the Trump Administration notified Congress of plans to reprogram those funds and instead rely on contributions from foreign partners—reflecting a broader assessment by the Administration that the United States was bearing more than its share of costs in regards to Syria stabilization. The Administration's FY2020 budget request states that $422 million in OCO funds were obligated for Syria in FY2017. FY2018 Funds. The Administration has not acted to obligate or expend funds appropriated by Congress in FY2018 foreign operations appropriations legislation for nonlethal assistance and stabilization in Syria. The FY2018 appropriations act ( P.L. 115-141 ) authorized the use of $500 million in FY2018 funds from various foreign assistance accounts for a \"Relief and Recovery Fund\" (RRF) for areas liberated from the Islamic State, while not specifying a specific amount for Syria. RRF funds could be used for Syria stabilization, but as of March 2019 no FY2018 monies have been notified for programs in Syria. FY2019 . The Administration's FY2019 budget request sought $130 million in Economic Support and Development Fund (ESDF) monies and $44.5 million in Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) for stabilization efforts in nongovernment-controlled areas of Syria. The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) states that, of the funds appropriated under the ESF, INCLE, and PKO accounts, no less than $40 million should be made available for nonlethal stabilization assistance for Syria, of which not less than $7 million should be made available for emergency medical and rescue response, and chemical weapons use investigations. Notably, the act states only that nonlethal assistance is to be provided for stabilization purposes. This is a significant departure from the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ), which made funds available for 14 listed purposes including establishing inclusive local governance, bolstering the viability of the Syrian opposition, developing civil society and independent media, and countering extremism. The Administration's FY2020 State and Foreign Operations request for Syria seeks no ESDF or NADR funding for Syria-specific programs, in contrast to the FY2019 request which sought $130 million and $44.5 million for Syria programs in the two accounts, respectively. The request includes $145 million from various accounts for the Relief and Recovery Fund, some of which could be used in Syria. To monitor and implement U.S. assistance programs, several regionally based teams were established. A Syria Transition Assistance and Response Team (START) operated from Turkey and coordinated U.S. humanitarian and foreign assistance to northern Syria, including assistance to opposition-held areas. In Jordan, the Southern Syria Assistance Platform (SSAP) monitored and coordinated comparable U.S. humanitarian and foreign assistance to southern and eastern Syria, including assistance to opposition-held areas. The Trump Administration also deployed a small team of U.S. civilian assistance officials (known as START Forward) inside areas of northern Syria where DOD-trained and/or equipped local forces are in control. In 2018, these programs underwent significant changes. Some START programs were amended and/or ended in 2018 in line with the Administration's plans to focus on stabilizing former IS-held areas to the east. Cross-border SSAP programs reportedly were halted in mid-2018, after Syrian military forces regained control of southwestern Syria. In late 2018, the announced withdrawal of U.S. forces was preceded by the withdrawal of U.S. civilian personnel from northern Syria. With the Administration's 2019 announcement that some U.S. forces would remain in Syria, it is unclear whether or under what circumstances START Forward personnel might redeploy to the country to assist in stabilization efforts. Increasingly vocal demands by the Syrian government and its international supporters for an end to cross-border assistance operations may significantly complicate U.S. assistance operations. This dynamic has been evident in Russian objections to the renewal of the U.N. Security Council mandate for cross-border and cross-line humanitarian operations (Resolutions 2393 and 2449), but it similarly applies to ongoing Syrian government rejections of non-humanitarian assistance operations in opposition-held areas. UNSCR 2449 currently authorizes cross-border and cross-line humanitarian assistance until January 10, 2020—at which point the resolution will be subject to renewal at the Security Council. Russia and China abstained from the December 2018 renewal, and the Russian representative objections argued that \"new realities ... demand that [the mandate] be rejigged with the ultimate goal of being gradually but inevitably removed.\" The United States, the United Nations, and others have assessed that the Syrian government has used chemical weapons repeatedly against opposition forces and civilians in the country. Expert teams affiliated with the U.N.-OPCW Joint Mission to Investigate Allegations of the Use of Chemical Weapons in the Syrian Arab Republic (JIM) and the OPCW Fact-Finding Mission (FFM) in Syria have investigated some of these allegations and have found evidence that in some cases confirms and in others suggests that chemical weapons and/or toxic chemicals have been used in attacks by the Syrian regime and by the Islamic State. Any use of chemical weapons is prohibited by the Chemical Weapons Convention, which Syria joined in September 2013. The majority of reports of chemical weapons use in Syria have consisted of chlorine use in barrel bombs in addition to the use of sarin in August 2013, April 2017, and possibly April 2018. The use of sarin by the Syrian military in the April 2017 and April 2013 attacks was confirmed by the United Nations. Reports of the use of chlorine gas as a chemical weapon in barrel bombs used by the Syrian military began to surface in April 2014 and continue. Most recently, the FFM has been investigating an alleged CW incident in Aleppo on November 24, 2018. U.N. investigators have confirmed several cases of the use of mustard gas by the Islamic State. The OPCW established a fact-finding mission to investigate these allegations. The Syrian government continues to deny categorically that it has used chemical weapons or toxic chemicals, while accusing opposition forces of doing so and calling into question the methods and results of some investigations into alleged chemical attacks. The Russian Federation supports the Syrian position. On April 7, Syrian government forces launched a chemical attack on Douma, killing at least 40 people and injuring hundreds more. U.S. officials described the symptoms displayed by victims as consistent with an asphyxiation agent and \"a nerve agent of some type.\" Then-Defense Secretary Mattis stated, \"We're very confident that chlorine was used. We are not ruling out sarin right now.\" An OPCW/FFM investigation concluded in March 2019 that it is likely that toxic chlorine was used as a weapon in the attack, which came within the context of broader Syrian government operations to retake the rebel enclave of eastern Ghouta, on the outskirts of Damascus. On April 13 (April 14 local time), more than 100 missiles were launched into Syria from British, French, and U.S. air and naval platforms in the Red Sea, the Northern Arabian Gulf, and the Eastern Mediterranean. The strikes targeted three chemical weapons storage and research sites in Syria: the Barzeh Research and Development Center on the outskirts of Damascus and the Him Shinshar chemical weapons storage and bunker facilities in Homs province. Contrasting the operation with the April 2017 U.S. strikes on Al Shayrat airbase, military officials stated, \"Last year the focus was on the delivery [of chemical weapons]. This time, we went—the strikes went to the very heart of the enterprise, to the research, to development, to storage.\" U.S. military officials also stated that \"obviously the Syrian chemical weapons system is larger than the three targets that we addressed tonight. However, these are the targets that presented the best opportunity to minimize collateral damage, to avoid killing innocent civilians, and yet to send a very strong message.\" On April 4, 2017, Syrian aircraft operating in rebel-held Idlib province conducted several air strikes using what U.S. officials assessed to be a chemical nerve agent. The strikes, which occurred in the town of Khan Sheikhoun, killed an estimated 80 to 100 people. The Director General of the OPCW, which conducted a fact-finding mission following the attack, stated on April 19 that four of its laboratories had \"incontrovertible\" evidence that victims \"were exposed to Sarin or a Sarin-like substance.\" In addition, then-Secretary of State Tillerson said that the U.S. government had a \"very high level of confidence\" that the Syrian air force had used the nerve agent sarin in two earlier 2017 attacks—on March 25 and March 30 in neighboring Hamah province. On April 6, 2017, the United States fired 59 Tomahawk missiles at Al Shayrat airfield in Homs province, from which U.S. intelligence sources had concluded the Khan Sheikhoun attack was launched. A Defense Department statement said the U.S. strike \"targeted aircraft, hardened aircraft shelters, petroleum and logistical storage, ammunition supply bunkers, air defense systems, and radars\" and that \"the strike was intended to deter the regime from using chemical weapons again.\" Secretary Mattis later stated that \"around 20 aircraft were taken out\" by the strike. The United States also imposed sanctions on 271 Syrian employees of the Scientific Studies and Research Center (SSRC), the entity responsible for managing Syria's chemical weapons program. The largest-scale use of chemical weapons in Syria to date was an August 21, 2013, nerve gas attack, which the U.S. government estimated killed more than 1,400 people. A U.N. investigation subsequently identified the nerve agent as sarin. The U.S. intelligence community assessed that the Syrian government had \"used chemical weapons on a small scale against the opposition multiple times in the last year.\" President Obama requested congressional approval of a limited authorization for the use of military force to respond. As part of a diplomatic solution to the crisis based on a U.S.-Russian joint proposal, the Obama Administration withdrew the threat of military force and Syria agreed to give up its chemical weapons and join the Chemical Weapons Convention (CWC). U.N. Security Council Resolution 2118 (2013) further mandated that Syria give up all its chemical weapons under Chapter VII provisions of the U.N. Charter. After joining the CWC in September 2013, Syria declared that it possessed 1,308 metric tons of chemical warfare agents and precursor chemicals, including several hundred metric tons of the nerve agents sarin and VX, as well as mustard agent in ready-to-use form. The nerve agents were stored as two separate components that are combined before use, called precursor chemicals, a form that facilitated removal and destruction efforts. In an unprecedented effort, the international community oversaw the removal in late 2013 and 2014 of chemical weapons agents to locations outside of Syria for destruction. As of January 4, 2016, all of Syria's declared Category 1 and 2 chemicals had been neutralized. As of June 2018, the OPCW had verified that all 27 of Syria's declared chemical weapons production facilities (CWPFs) had been destroyed. The continued use of chemical weapons in Syria has raised questions about Syrian compliance. In addition, the OPCW has not been able to verify the completeness of the Syrian initial declaration, part of Syria's obligations after having joined the CWC. For years, the United States, the OPCW Director General, and other governments have asserted that Syria had not declared all of its chemical weapons stocks and facilities. The OPCW's Declaration Assessment Team (DAT) continues to investigate \"gaps, inconsistencies and discrepancies\" through interviews and lab analysis of samples from site visits according to OPCW Executive Council reports. The latest report said that since the government of Syria has not answered the DAT's inquiries, the OPCW \"cannot fully verify that the Syrian Arab Republic has submitted a declaration that can be considered accurate and complete in accordance with the Chemical Weapons Convention.\" A technical meeting to resolve these differences was held in mid-March. Since the first reports of alleged chemical weapons use during the conflict in Syria, the U.N. Secretary-General, the U.N. Security Council, and the CWC Executive Council have formed several different bodies to investigate chemical weapons use in Syria, outlined below. Of these, OPCW inspections to verify CWC compliance as well as the OPCW Fact Finding Mission are the only two currently functioning: In response to the Syrian government and other governments' request, in March 2013, the U.N. Secretary-General established the United Nations Mission to Investigate Allegations of the Use of Chemical Weapons in the Syrian Arab Republic . The Syrian government alleged that opposition forces had used chemical weapons at Khan al-Asal on March 19, 2013, while opposition forces had accused the Asad government of CW use there. Following a U.S.- and Russian-brokered deal with Syria to join the CWC, the Security Council established the U . N . -OPCW Joint Mission to oversee the removal of chemical weapons in Syria between October 2013 and June 2014. After Syria joined the CWC in September 2013, the OPCW was responsible for overseeing the verification of its initial declaration and continues to monitor destruction of chemical weapons facilities in the country. The OPCW Director-General declared the creation of a Fact Finding Mission (FFM) in Syria on April 29, 2014, in response to new allegations of the use of chlorine as a weapon from December 2013 to April 2014. The CWC allows for the OPCW Director General to start an investigation into chemical weapons use in a member state with its permission. The Syrian government agreed to accept the FFM and provide security. The FFM did not have authority to attribute attacks until a decision was taken by a special session of the CWC member states in June 2018. That decision gave the FFM authority to attribute as part of its investigations. On August 7, 2015, the U.N. Security Council unanimously adopted Resolution 2235, which established a new OPCW-U.N. Joint Investigative Mechanism (JIM) tasked with identifying \"to the greatest extent feasible\" those responsible for or involved in chemical attacks identified by the OPCW fact finding mission. The JIM's mandate expired in November 2017. Earlier U.N. and OPCW investigations starting in 2013 had not been tasked with assigning responsibility for alleged attacks but were to identify whether and which type of chemical weapons were used. This changed with the JIM, which was mandated to attribute attacks. The JIM was to have access anywhere in Syria; however, the JIM's mission was complicated by the security situation on the ground. The OPCW FFM and JIM have concluded with a high degree of confidence that chemical weapons were used in Syria in 48 incidents from April 2014 to November 24, 2017. All incidents occurred in governorates considered by the Syrian government as outside its effective control from 2014 to present. The JIM was able to attribute the use of chemical weapons in 7 of these 48 incidents. The JIM concluded that the Syrian Armed Forces dropped barrel-bombs containing chlorine or a chlorine-like substance from helicopters on towns in the Idlib Governorate in three attacks: Talmenes on April 21, 2014, Qmenas on March 16, 2015, and Sarmin on March 16, 2015. The FFM concluded in its June 2017 report that sarin had been used as a weapon in Khan Sheikhoun, Idlib Governorate, on April 4, 2017. The JIM concluded on October 26, 2017, a few weeks before the expiration of its mandate, that the Syrian Armed Forces used sarin-filled aerial bombs in the Khan Sheikhoun attack, and that ISIL used sulfur mustard-filled mortars in attacks in Um Housh, Aleppo Governorate, on September 15 and 16, 2016. The Security Council extended the mandate of the JIM through November 2017 but further attempts to renew the mandate were blocked by Russia, which argues for a wider regional coverage. In January 2018, the French government gathered 30 countries in Paris to announce a new effort, the \"International Partnership against Impunity for the Use of Chemical Weapons,\" to raise awareness of the issue, strengthen international action against CW use, and bolster international pressure on Syria. Then-U.S. Secretary of State Rex Tillerson attended. Repeated efforts by these states to pass U.N. Security Council resolutions condemning attacks have been blocked by a Russian veto on multiple occasions. The latest incidence of chemical weapons use on April 7, 2018, elevated these issues again to the U.N. Security Council, where Russia defends the Syrian stance. The United States, United Kingdom, and France proposed a U.N. Security Council Resolution in support of a U.N. investigation into who was responsible for the April 7 attack, but the resolution was vetoed by Russia. Nevertheless, under the U.N. and OPCW mechanisms already in place from past Security Council resolutions, the OPCW's Fact-Finding Mission (FFM) continued to investigate instances of use, including the April 2018 attack in Douma. In August 2011, the U.N. Human Rights Council established an Independent International Commission of Inquiry into human rights abuses and violations of international law in the Syrian conflict. The Commission has documented the use of prohibited chemical weapons in Syria and is specifically mandated to identify perpetrators. It is instructed \"where possible, to identify those responsible with a view to ensuring that perpetrators of violations, including those that may constitute crimes against humanity, are held accountable.\" The Commission of Inquiry's 2017 report says that between March 2013 and March 2017, it documented 25 incidents of CW use in Syria, \"of which 20 were perpetrated by government forces and used primarily against civilians.\" The victory of pro-Asad forces in the broader conflict appears likely, and, from a U.S. perspective, that may further complicate several unresolved issues, including the stabilization and governance of areas recaptured from the Islamic State; the resolution of security threats posed by extremist groups in northwest Syria; the return and reintegration of internally and externally displaced Syrians; the reconstruction of conflict-damaged areas; the management of Syria-based threats to Syria's neighbors; and, the terms of a postconflict political order in Syria. In light of current trends and conditions related to these issues, Administration officials and Members of Congress may reexamine appropriate terms and conditions for U.S. investment, force deployment, and the nature of relationships with U.S. partners in and around Syria. Combatting the Islamic State in Syria has been the top priority for U.S. policymakers since 2014. Prior to President Trump's announcement in December 2018 that U.S. military forces would withdraw from Syria, U.S. policymakers had stated their intention to train and equip local forces to hold and secure areas recaptured from the Islamic State. They also had signaled that U.S. funds would no longer be invested at previously prevailing levels to stabilize conflict-damaged areas under U.S. partner control in Syria's northeast. Instead, the Trump Administration seeks to encourage coalition members and U.S. partners to contribute to stabilization efforts as a means of lowering the direct costs to the United States. Questions about program management, coordination, and evaluation may have accompanied what was expected to have been a planned shift toward joint stabilization. More fundamental questions now exist about the future of security and stabilization efforts amid U.S. plans for military withdrawal. The Administration's FY2020 defense funding requests suggest it plans to continue to support U.S. partner forces, but the potential reintegration of areas of Syria's east and northeast by the Asad government—whether by force or negotiation—raises other challenging policy questions. If the resurgent Asad government adopts a confrontational posture toward withdrawing U.S. forces and their local partners, renewed conflict could result and create new threats to U.S. personnel, demands on U.S. resources, and dilemmas for U.S. decisionmakers. If the Asad government adopts a relatively conciliatory approach toward U.S. partners and moves to reintegrate the northeast under its control through negotiation, it may seek to absorb U.S.-trained and -equipped forces into its own ranks. In light of standing and proposed restrictions on the use of U.S. nonhumanitarian funding in Asad-controlled areas, the expansion of Syrian government control to the areas of northeastern Syria recaptured from the Islamic State could impose limits on U.S. involvement in stabilization and/or counterterrorism activities. Areas of Idlib province are the most significant zone remaining outside of government control in western Syria, and pro-Asad forces may launch military operations to reclaim areas of the province in the coming months. Although infighting among anti-Asad groups in the province escalated in 2018 and mutual suspicions remain between Syrian and non-Syrian fighters, extremist groups and some opposition fighters relocated to the province are expected to forcefully resist any Syrian government military campaign. Turkish forces present in some areas also may oppose or actively resist pro-Syrian government forces if hostilities erupt. The wide-scale use of military force by the Syrian government and its supporters against opposition-held areas of Idlib would likely result in significant civilian casualties and displacement and could generate renewed calls for U.S. or coalition military intervention to protect and aid civilians. The presence in Idlib of Al Qaeda-aligned individuals remains a security concern of the United States and its allies, but the ability of U.S. and coalition forces to operate in or over Idlib may continue to be complicated by Syrian government disapproval and Russian military capabilities. If the Syrian government delays or defers action against opposition-held areas of Idlib, extremist groups hostile to the United States could enjoy some degree of continued safe haven. The Asad government also might seek to leverage the persistence of an extremist threat in Idlib to aid in its consolidation of domestic political and international diplomatic support for Asad's continued rule. Conflict in Syria has taken the lives of hundreds of thousands of people and has displaced millions within the country and beyond its borders. As the intensity of conflict has declined in some areas of the country, displaced Syrians have faced difficult choices about whether or how to return to their home areas amid uncertainty about security, potential political persecution, crime, economic conditions, lost or missing documentation, and prospects for recovery. The Asad government is actively encouraging internally displaced Syrians to return home and is seeking the return of Syrian refugees from neighboring countries under a Russian-designed plan. Humanitarian advocates and practitioners continue to raise concerns about the security and protection of returnees and displaced individuals in light of conditions in many areas of the country and questions about the Syrian government's approach to political reconciliation. In addition, mechanisms and mandates that have provided for the delivery of humanitarian assistance across the Syrian border without the consent of the Syrian government could face renewed scrutiny in coming months, and the Asad government and its backers may pressure neighboring countries to forcefully return Syrian refugees that are within their jurisdictions. The United States remains the leading donor for international humanitarian efforts related to Syria, and U.S. policymakers may face a series of decisions about whether or how to continue or adapt U.S. support in light of changing conditions. In 2017, U.N. Special Envoy for Syria Staffan de Mistura estimated that Syria's reconstruction will cost at least $250 billion, and a group of U.N.-convened experts estimated in August 2018 that the cost of conflict damage could exceed $388 billion. The Trump Administration has stated its intent not to contribute to the reconstruction of Asad-controlled Syria absent fundamental political change and to use U.S. diplomatic influence to discourage other international assistance to Asad-controlled Syria. Congress also has acted to restrict the availability of U.S. funds for assistance projects in Asad-controlled areas and is considering legislation that would further restrict such assistance through FY2024 ( H.R. 1706 ). In the absence of U.S. engagement, other actors such as Russia or China could conceivably provide additional assistance for reconstruction purposes, but may be unlikely to mobilize sufficient resources or adequately coordinate investments with other members of the international community to meet Syria's considerable needs. Predatory conditional assistance could also further indebt the Syrian government to these or other international actors and might strengthen strategic ties between Syria and third parties in ways inimical to U.S. interests. A lack of reconstruction, particularly of critical infrastructure, could delay the country's recovery and exacerbate the legacy effects of the conflict on the Syrian population, with negative implications for the country's security and stability. Aside from terrorism threats posed by Syria-based Sunni Islamist extremists, U.S. partners and allies among Syria's neighbors perceive threats from Syria-based Iranian forces and associated militia, the reconstituted Syrian military and security services, Russia's presence, and the activities of Syria-based Kurdish armed groups. Asad's post-2015 fortunes in the conflict are largely attributable to the support of Russia and Iran. While there are some tensions reported between Syrian leaders and their foreign partners, it is difficult to foresee a scenario in the short term in which the current Syrian government would seek or be in a position to compel a fundamental change in the posture or presence of Russian or Iranian forces inside Syria. The Syrian security services, once severely degraded, have reconstituted some of their lost capabilities and may continue to grow in strength and coherence. For U.S. partners like Israel and Jordan, these conditions pose long-term strategic challenges, and any independent military or diplomatic actions on their part to address them in turn may create challenges in their relationship with the United States. Similarly, the Turkish government expresses continuing concern about the presence and power in Syria of armed Kurdish groups, including groups partnered with the United States. Turkish military deployments inside Syria are ongoing and the prospect of confrontation between Turkish forces, U.S. forces, and their respective partners remains a real one. U.S. plans for any enduring partnership with Kurdish-led or -constituted armed groups in Syria or for an enduring U.S. presence in areas under their control would likely have caused related tensions in U.S. relations with Turkey, Syria, Russia, and Iran to persist. If Kurdish armed groups reconcile and align with the Asad-led government in the wake of U.S. drawdown or withdrawal, it could increase the likelihood of more pronounced confrontation between Turkey, the Syrian government, and its allies. An abrupt severance of all U.S. support for Kurdish groups also could sour U.S. relations not just with Syrian Kurds, but with Kurdish populations and leaders in other regional countries. Since 2011, the United States has pursued a policy of seeking fundamental political change in Syria, initially reflected in U.S. calls for President Asad to step aside. The Trump Administration in 2018 stated that it seeks behavior change rather than regime change in Syria. However, the Administration still calls for a political settlement to the Syria conflict based on UNSCR 2254—which requires the drafting of a new constitution and the holding of U.N.-supervised elections. Asad's reelection in self-administered 2014 elections and his subsequent reconsolidation of security control in much of western Syria may limit the likelihood of substantive political change in line with U.S. preferences. U.N.-led negotiations over a settlement of the conflict remain open-ended, but appear unlikely to result in the meaningful incorporation of opposition figures or priorities into new governing arrangements in the short term. Alternative negotiations backed by Asad's Russian and Iranian supporters have their own logic and momentum, and place Syria's opposition groups in a political predicament. Congress and the Administration may reexamine what remaining points of leverage the United States can exercise or whether new points of leverage could be developed that might better ensure a minimally acceptable political outcome. Members of Congress and Administration officials may differ among themselves over what such an outcome might entail. Perceptions among Syrian opposition supporters of U.S. abandonment or acquiescence to an Asad victory may also have long-term diplomatic and security consequences for the United States and its partners. The 115 th Congress appropriated defense funds for FY2019 and the 116 th Congress has appropriated foreign assistance funds for FY2019. As discussed above, Congress conditioned the availability for obligation of some of the defense funds on the Administration's provision of a new strategic plan for Syria and the delivery of oversight reporting on current Syria programs to Congress. As of March 2019, Congress was reviewing the Administration's responses and its FY2020 requests for additional funding. Questions remain about the specifics of the Administration's planned military withdrawal as well as the decision's effect on other U.S. priorities. The 116 th Congress may attempt to reach consensus on a formal congressional counterproposal to the Administration's priorities and initiatives, and such a task is likely to be challenging if past trends in congressional debate prevail. As with Administration policy decisions, Asad's likely eventual victory in the conflict runs counter to long-stated congressional preferences and thus complicates appropriation, authorization, and sanctions decisions. Principal questions for Congress for the future may concern the extent and nature of conditions Congress places on U.S. engagement with the Asad-led government and on the expenditure of U.S. funds for any remaining U.S. programs in Asad-controlled areas. For the foreseeable future, the essential dilemma for Members of Congress and the Administration may remain how to pursue U.S. counterterrorism and stabilization goals in Syria while maintaining a minimal U.S. military footprint in the country and avoiding actions that further empower the Asad government. While this may be accomplished in part by working through local partners and regional allies, these may also have interests and goals in Syria that do not align with U.S. preferences. New efforts by the Asad government and its external backers to assert the Syrian government's sovereignty could prompt additional scrutiny of residual U.S. and coalition military operations inside the country, to include partnership with local forces. Observers, U.S. officials, and many Members of Congress continue to differ over which incentives and disincentives may prove most effective in influencing various combatants in Syria and their supporters. Still less defined are the long-term commitments that the United States and others may be willing to make to achieve an inclusive political transition; protect civilians; defend U.S. partners; promote accountability and reconciliation; or contribute to the rebuilding of a country significantly destroyed by years of brutal war. Carla E. Humud, Coordinator, Analyst in Middle Eastern Affairs ( [email address scrubbed] , [phone number scrubbed]) Christopher M. Blanchard, Specialist in Middle Eastern Affairs ( [email address scrubbed] , [phone number scrubbed]) Mary Beth D. Nikitin, Specialist in Nonproliferation ( [email address scrubbed] , [phone number scrubbed]) ", "summary": "Since 2011, the Syria conflict has presented significant policy challenges for the United States. (For a brief conflict summary, see Figure 2). U.S. policy toward Syria since 2014 has prioritized counterterrorism operations against the Islamic State (IS, also known as ISIL/ISIS), but also has included nonlethal assistance to Syrian opposition groups, diplomatic efforts to reach a political settlement to the civil war, and humanitarian aid to Syria and regional countries affected by refugee outflows. U.S. forces deployed to Syria have trained, equipped, and advised local partners under special authorization from Congress and have worked primarily \"by, with, and through\" those local partners to retake nearly all areas formerly held by the Islamic State. Following an internal policy review, Administration officials in late 2018 had described U.S. policy toward Syria as seeking (1) the enduring defeat of the Islamic State; (2) a political settlement to the Syrian civil war; and (3) the withdrawal of Iranian-commanded forces. President Trump's December 2018 announcement that U.S. forces had defeated the Islamic State and would leave Syria appeared to signal the start of a new U.S. approach. However, in February 2019, the White House stated that several hundred U.S. troops would remain in Syria, and the President is requesting $300 million in FY2020 defense funding to continue to equip and sustain Syrian partner forces. The FY2019 National Defense Authorization Act (P.L. 115-232) required the Administration to clarify its Syria strategy and report on current programs in order to obligate FY2019 defense funds for train and equip purposes in Syria. The United States continues to advocate for a negotiated settlement between the government of Syrian President Bashar al Asad and Syrian opposition forces in accordance with U.N. Security Council Resolution 2254 (which calls for the drafting of a new constitution and U.N.-supervised elections). However, the Asad government's use of force to retake most opposition-held areas of Syria has reduced pressure on Damascus to negotiate, and U.S. intelligence officials in 2019 assessed that Asad has little incentive to make significant concessions to the opposition. U.S. officials have stated that the United States will not contribute aid to reconstruction in Asad-held areas unless a political solution is reached. The United States has directed more than $9.1 billion toward Syria-related humanitarian assistance, and Congress has appropriated billions more for security and stabilization initiatives in Syria and neighboring countries. The Defense Department has not disaggregated the costs of military operations in Syria from the overall cost of the counter-IS campaign in Syria and Iraq (known as Operation Inherent Resolve, OIR), which had reached $28.5 billion by September 2018. The 115th Congress considered proposals to authorize or restrict the use of force against the Islamic State and in response to Syrian government chemical weapons attacks, but did not enact any Syria-specific use of force authorizations. The 116th Congress may seek clarification from the Administration concerning its overall Syria policy, plans for the withdrawal of U.S. military forces, the U.S role in ensuring a lasting defeat for the Islamic State, U.S. investments and approaches to postconflict stabilization, the future of Syrian refugees and U.S. partners inside Syria, and the challenges of dealing with the Iran- and Russia-aligned Asad government.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on the Aegis ballistic missile defense (BMD) program, which is carried out by the Missile Defense Agency (MDA) and the Navy, and gives Navy Aegis cruisers and destroyers a capability for conducting BMD operations. The issue for Congress is whether to approve, reject, or modify Department of Defense (DOD) acquisition strategies and proposed funding levels for the Aegis BMD program. Congress's decisions on the Aegis BMD program could significantly affect U.S. BMD capabilities and funding requirements, and the BMD-related industrial base. For an overview of the strategic and budgetary context in which the Aegis BMD program may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. Most of the Navy's cruisers and destroyers are called Aegis ships because they are equipped with the Aegis ship combat system—an integrated collection of sensors, computers, software, displays, weapon launchers, and weapons named for the mythological shield that defended Zeus. The Aegis system was originally developed in the 1970s for defending ships against aircraft, anti-ship cruise missiles (ASCMs), surface threats, and subsurface threats. The system was first deployed by the Navy in 1983, and it has been updated many times since. The Navy's Aegis ships include Ticonderoga (CG-47) class cruisers and Arleigh Burke (DDG-51) class destroyers. A total of 27 CG-47s (CGs 47 through 73) were procured for the Navy between FY1978 and FY1988; the ships entered service between 1983 and 1994. The first five ships in the class (CGs 47 through 51), which were built to an earlier technical standard in certain respects, were judged by the Navy to be too expensive to modernize and were removed from service in 2004-2005, leaving 22 ships in operation (CGs 52 through 73). A total of 62 DDG-51s were procured for the Navy between FY1985 and FY2005; the first entered service in 1991 and the 62 nd entered service in FY2012. The first 28 ships are known as Flight I/II DDG-51s. The next 34 ships, known as Flight IIA DDG-51s, incorporate some design changes, including the addition of a helicopter hangar. No DDG-51s were procured in FY2006-FY2009. The Navy during this period instead procured three Zumwalt (DDG-1000) class destroyers. The DDG-1000 design does not use the Aegis system and does not include a capability for conducting BMD operations. Navy plans do not call for modifying the three DDG-1000s to make them BMD-capable. Procurement of DDG-51s resumed in FY2010, following procurement of the three DDG-1000s. A total of 20 DDG-51s were procured in FY2010-FY2019. DDG-51s procured in FY2017 and subsequent years are being built to a new version of the DDG-51 design called the Flight III version. The Flight III version is to be equipped with a new radar, called the Air and Missile Defense Radar (AMDR) or the SPY-6 radar, that is more capable than the SPY-1 radar installed on all previous Aegis cruisers and destroyers. Sales of the Aegis system to allied countries began in the late 1980s. Allied countries that now operate, are building, or are planning to build Aegis-equipped ships include Japan, South Korea, Australia, Spain, and Norway. Most of Japan's Aegis-equipped ships are currently BMD-capable, and Japan plans to make all of them BMD-capable in coming years. The Aegis-equipped ships operated by South Korea, Australia, Spain, and Norway are not BMD-capable. Aegis ships are given a capability for conducting BMD operations by incorporating changes to the Aegis system's computers and software, and by arming the ships with BMD interceptor missiles. In-service Aegis ships can be modified to become BMD-capable ships, and DDG-51s procured in FY2010 and subsequent years are being built from the start with a BMD capability. The Aegis BMD system exists in several variants. Listed in order of increasing capability, these include (but are not necessarily limited to) 3.6.X variant, the 4.0.3 variant, the 4.1 variant (also known as the Aegis Baseline [BL] 5.4 variant), the 5.0 CU (Capability Upgrade) variant (also known as the BL 9.1 variant), the 5.1 variant (also known as the BL 9.2 variant), and the 6.X variant (also known as the BL 10 variant). Figure 1 summarizes the capabilities of some of these variants (using their designations as of 2016) and correlates them with the phases of the European Phased Adaptive Approach (or EPAA; see discussion below) for European BMD operations. As shown in Figure 1 , the Aegis BMD system was originally designed primarily to intercept theater-range ballistic missiles, meaning short-, medium-, and intermediate-range ballistic missiles (SRBMs, MRBMs, and IRBMs, respectively). In addition to its capability for intercepting theater-range ballistic missiles, detection and tracking data collected by the Aegis BMD system's radar might be passed to other U.S. BMD systems that are designed to intercept intercontinental ballistic missiles (ICBMs), which might support intercepts of ICBMs that are conducted by those other U.S. BMD systems. With the advent of the Aegis BMD system's new SM-3 Block IIA interceptor (which is discussed further in the next section), DOD is now evaluating the potential for the Aegis BMD system to intercept certain ICBMs. Section 1680 of the FY2018 National Defense Authorization Act ( H.R. 2810 / P.L. 115-91 of December 12, 2017) directed DOD to \"conduct a test to evaluate and demonstrate, if technologically feasible, the capability to defeat a simple intercontinental ballistic missile threat using the standard missile 3 block IIA missile interceptor.\" DOD's January 2019 missile defense review report states the following: The SM-3 Blk IIA interceptor is intended as part of the regional missile defense architecture, but also has the potential to provide an important \"underlay\" to existing GBIs [ground-based interceptors] for added protection against ICBM threats to the homeland. This interceptor has the potential to offer an additional defensive capability to ease the burden on the GBI system and provide continuing protection for the U.S. homeland against evolving rogue states' long-range missile capabilities. Congress has directed DoD to examine the feasibility of the SM-3 Blk IIA against an ICBM-class target. MDA will test this SM-3 Blk IIA capability in 2020. Due to the mobility of sea-based assets, this new underlay capability will be surged in a crisis or conflict to further thicken defensive capabilities for the U.S. homeland. Land-based sites in the United States with this SM-3 Blk IIA missile could also be pursued. A March 18, 2019, press report states: The Pentagon plans a \"first-of-its-kind\" test of an unprecedented weapons capability to intercept and destroy an enemy Intercontinental Ballistic Missile \"ICBM\" -- from a Navy ship at sea using a Standard Missile-3 Block IIA. The concept, as articulated by Pentagon officials and cited briefly in this years' DoD \"Missile Defense Review,\" would be to use an advanced SM-3 IIA to \"underlay\" and assist existing Ground-Based Interceptors (GBI), adding new dimensions to the current US missile defense posture.… The testing, Pentagon officials tell Warrior, is slated for as soon as next year. The effectiveness and promise of the Raytheon-built SM-3 IIA shown in recent testing have inspired Pentagon weapons developers to envision an even broader role for the weapon. The missile is now \"proven out,\" US weapons developers say…. \"The SM-3 IIA was not designed to take out ICBMs, but is showing great promise. This would be in the upper range of its capability -- so we are going to try,\" the Pentagon official told Warrior…. The SM-3 IIA's size, range, speed and sensor technology, the thinking suggests, will enable it to collide with and destroy enemy ICBMs toward the beginning or end of their flight through space, where they are closer to the boundary of the earth's atmosphere. \"The SM-3 IIA would not be able to hit an ICBM at a high altitude, but it can go outside the earth's atmosphere,\" the Pentagon official said. \"You want to hit it as far away as possible because a nuke could go off.\" A March 26, 2018, press report states the following: [MDA] Director Lt. Gen. Sam Greaves said MDA \"is evaluating the technical feasibility of the capability of the SM-3 Block IIA missile, currently under development, against an ICBM-class target.\" \"If proven to be effective against an ICBM, this missile could add a layer of protection, augmenting the currently deployed GMD [ground-based missile defense] system,\" Greaves said in written testimony submitted March 22 to the Senate Armed Services strategic forces subcommittee. [Greaves] said MDA will conduct a demonstration of the SM-3 Block IIA against an ICBM-like target by the end of 2020.\" The BMD interceptor missiles used by Aegis ships are the Standard Missile-3 (SM-3), the SM-2 Block IV, and the SM-6. The SM-3 is designed to intercept ballistic missiles above the atmosphere (i.e., exo-atmospheric intercept), in the midcourse phase of an enemy ballistic missile's flight. It is equipped with a \"hit-to-kill\" warhead, called a kinetic vehicle, that is designed to destroy a ballistic missile's warhead by colliding with it. MDA and Navy plans call for fielding increasingly capable versions of the SM-3 in coming years. The current versions, called the SM-3 Block IA and SM-3 Block IB, are to be supplemented in coming years by SM-3 Block IIA. Compared to the Block IA version, the Block IB version has an improved (two-color) target seeker, an advanced signal processor, and an improved divert/attitude control system for adjusting its course. Compared to the Block IA and 1B versions, which have a 21-inch-diameter booster stage at the bottom but are 13.5 inches in diameter along the remainder of their lengths, the Block IIA version has a 21-inch diameter along its entire length. The increase in diameter to a uniform 21 inches provides more room for rocket fuel, permitting the Block IIA version to have a burnout velocity (a maximum velocity, reached at the time the propulsion stack burns out) that is greater than that of the Block IA and IB versions, as well as a larger-diameter kinetic warhead. The United States and Japan have cooperated in developing certain technologies for the Block IIA version, with Japan funding a significant share of the effort. The SM-2 Block IV is designed to intercept ballistic missiles inside the atmosphere (i.e., endo-atmospheric intercept), during the terminal phase of an enemy ballistic missile's flight. It is equipped with a blast fragmentation warhead. The existing inventory of SM-2 Block IVs—72 as of February 2012—was created by modifying SM-2s that were originally built to intercept aircraft and ASCMs. A total of 75 SM-2 Block IVs were modified, and at least 3 were used in BMD flight tests. MDA and the Navy are now procuring a more capable terminal-phase (endo-atmospheric intercept) BMD interceptor based on the SM-6 air defense missile (the successor to the SM-2 air defense missile). The SM-6 is a dual-capability missile that can be used for either air defense (i.e., countering aircraft and anti-ship cruise missiles) or ballistic missile defense. A July 23, 2018, press report states the following: The Defense Department has launched a prototype project that aims to dramatically increase the speed and range of the Navy's Standard Missile-6 by adding a larger rocket motor to the ship-launched weapon, a move that aims to improve both the offensive and defensive reach of the Raytheon-built system. On Jan. 17, the Navy approved plans to develop a Dual Thrust Rocket Motor with a 21-inch diameter for the SM-6, which is currently fielded with a 13.5-inch propulsion package. The new rocket motor would sit atop the current 21-inch booster, producing a new variant of the missile: the SM-6 Block IB. On September 17, 2009, the Obama Administration announced a new approach for regional BMD operations called the Phased Adaptive Approach (PAA). The first application of the approach is in Europe, and is called the European Phased Adaptive Approach (EPAA). EPAA calls for using BMD-capable Aegis ships, a land-based radar in Europe, and two Aegis Ashore sites in Romania and Poland to defend Europe against ballistic missile threats from countries such as Iran. Phase I of EPAA involved deploying Aegis BMD ships and a land-based radar in Europe by the end of 2011. Phase II involved establishing the Aegis Ashore site in Romania with SM-3 IB interceptors in 2016. Phase 3 involves establishing the Aegis Ashore site in Poland with SM-3 IIA interceptors by perhaps FY2020. The completion of construction of the Poland site has been delayed by at least a year, MDA says, due to contractor performance issues. Each Aegis Ashore site in the EPAA is to include a structure housing an Aegis system similar to the deckhouse on an Aegis ship and 24 SM-3 missiles launched from a relocatable Vertical Launch System (VLS) based on the VLS that is installed in Navy Aegis ships. Although BMD-capable Aegis ships were deployed to European waters before 2011, the first BMD-capable Aegis ship officially deployed to European waters as part of the EPAA departed its home port of Norfolk, VA, on March 7, 2011, for a deployment to the Mediterranean that lasted several months. Under the FY2020 budget submission, the number of BMD-capable Navy Aegis ships is projected to increase from 38 at the end of FY2018 to 59 at the end of FY2024. During the period FY2018-FY2024, the portion of the force equipped with earlier Aegis variants is to decrease, and the number equipped with later variants is to increase. On October 5, 2011, the United States, Spain, and NATO jointly announced that, as part of the EPAA, four BMD-capable Aegis ships were to be forward-homeported (i.e., based) at the naval base at Rota, Spain. The four ships were transferred to Rota in FY2014 and FY2015. Navy officials have said that the four Rota-based ships can provide a level of level of presence in the Mediterranean for performing BMD patrols and other missions equivalent to what could be provided by about 10 BMD-capable Aegis ships that are homeported on the U.S. east coast. The Rota homeporting arrangement thus effectively releases about six U.S. Navy BMD-capable Aegis ships for performing BMD patrols or other missions elsewhere. The Aegis BMD development effort, including Aegis BMD flight tests, has been described as following a development philosophy long held within the Aegis program office of \"build a little, test a little, learn a lot,\" meaning that development is done in manageable steps, then tested and validated before moving on to the next step. For a summary of Aegis BMD flight tests since 2002, see Appendix A . Japan is modifying all six of its Aegis destroyers to include the Aegis BMD capability. As of August 2017, four of the six ships reportedly had been modified, and Japan planned to modify a fifth by March 2018, or perhaps sooner than that. In November 2013, Japan announced plans to procure two additional Aegis destroyers and equip them as well with the Aegis BMD capability, which will produce an eventual Japanese force of eight BMD-capable Aegis destroyers. The two additional ships are expected to enter service in 2020 and 2021. Japanese BMD-capable Aegis ships have participated in some of the flight tests of the Aegis BMD system using the SM-3 interceptor (see Table A-1 in Appendix A ). Japan cooperated with the United States on development the SM-3 Block IIA missile. Japan developed certain technologies for the missile, and paid for the development of those technologies, reducing the missile's development costs for the United States. Japan plans to procure and operate two Aegis Ashore systems that reportedly are to be located at Ground Self-Defense Force (GSDF) facilities in Akita Prefecture in eastern Japan and Yamaguchi Prefecture in western Japan, and would be operated mainly by the GSDF (i.e., Japan's army). The two systems reportedly will be equipped with a new Lockheed-made radar called the Long Range Discrimination Radar (LRDR) rather than the Raytheon-made SPY-6 AMDR that is being installed on U.S. Navy Flight III DDG-51s, and reportedly will go into operation by 2023. A July 6, 2018, press report states that \"The U.S. and Japan are looking to jointly develop next-generation radar technology that would use Japanese semiconductors to more than double the detection range of the Aegis missile defense system.\" An October 12, 2018, press report states that \"the South Korean military has decided to buy ship-based SM-3 interceptors to thwart potential ballistic missile attacks from North Korea, a top commander of the Joint Chiefs of Staff revealed Oct. 12. Other countries that MDA views as potential naval BMD operators (using either the Aegis BMD system or some other system of their own design) include the United Kingdom, the Netherlands, Spain, Germany, Denmark, and Australia. Spain, South Korea, and Australia either operate, are building, or are planning to build Aegis ships. The other countries operate destroyers and frigates with different combat systems that may have potential for contributing to BMD operations. The Aegis BMD program is funded mostly through MDA's budget. The Navy's budget provides additional funding for BMD-related efforts. Table 1 shows MDA procurement and research and development funding for the Aegis BMD program. Research and development funding for the land-based SM-3 is funding for Aegis Ashore sites. MDA's budget also includes additional funding not shown in the table for operations and maintenance (O&M) and military construction (MilCon) for the Aegis BMD program. One issue for Congress is whether to approve, reject, or modify MDA's FY2019 procurement and research and development funding requests for the program. In considering this issue, Congress may consider various factors, including whether the work that MDA is proposing to fund for FY2019 is properly scheduled for FY2019, and whether this work is accurately priced. Another potential issue for Congress concerns required numbers of BMD-capable Aegis ships versus available numbers of BMD-capable Aegis ships. Some observers are concerned about the potential operational implications of a shortfall in the available number of BMD-capable relative to the required number. Regarding the required number of BMD-capable Aegis ships, an August 15, 2018, Navy information paper states the following: The [Navy's] 2016 Force Structure Assessment [FSA] sets the requirement [for BMD-capable ships] at 54 BMD-capable ships, as part of the 104 large surface combatant requirement, to meet Navy unique requirements to support defense of the sea base and limited expeditionary land base sites…. The minimum requirement for 54 BMD ships is based on the Navy unique requirement as follows. It accepts risk in the sourcing of combatant commander (CCDR) requests for defense of land. - 30 to meet CVN escort demand for rotational deployment of the carrier strike groups - 11 INCONUS for independent BMD deployment demand - 9 in forward deployed naval forces (FDNF) Japan to meet operational timelines in USINDOPACOM - 4 in FDNF Europe for rotational deployment in EUCOM. A related potential issue for Congress is the burden that BMD operations may be placing on the Navy's fleet of Aegis ships, particularly since performing BMD patrols requires those ships to operate in geographic locations that may be unsuitable for performing other U.S. Navy missions, and whether there are alternative ways to perform BMD missions now performed by U.S. Navy Aegis ships, such as establishing more Aegis Ashore sites. A June 16, 2018, press report states the following: The U.S. Navy's top officer wants to end standing ballistic missile defense patrols and transfer the mission to shore-based assets. Chief of Naval Operations Adm. John Richardson said in no uncertain terms on June 12 that he wants the Navy off the tether of ballistic missile defense patrols, a mission that has put a growing strain on the Navy's hard-worn surface combatants, and the duty shifted towards more shore-based infrastructure. \"Right now, as we speak, I have six multi-mission, very sophisticated, dynamic cruisers and destroyers―six of them are on ballistic missile defense duty at sea,\" Richardson said during his address at the U.S. Naval War College's Current Strategy Forum. \"And if you know a little bit about this business you know that geometry is a tyrant. \"You have to be in a tiny little box to have a chance at intercepting that incoming missile. So, we have six ships that could go anywhere in the world, at flank speed, in a tiny little box, defending land.\" Richardson continued, saying the Navy could be used in emergencies but that in the long term the problem demands a different solution. \"It's a pretty good capability and if there is an emergent need to provide ballistic missile defense, we're there,\" he said. \"But 10 years down the road, it's time to build something on land to defend the land. Whether that's AEGIS ashore or whatever, I want to get out of the long-term missile defense business and move to dynamic missile defense.\" The unusually direct comments from the CNO come amid growing frustration among the surface warfare community that the mission, which requires ships to stay in a steaming box doing figure-eights for weeks on end, is eating up assets and operational availability that could be better used confronting growing high-end threats from China and Russia. The BMD mission was also a factor in degraded readiness in the surface fleet. Amid the nuclear threat from North Korea, the BMD mission began eating more and more of the readiness generated in the Japan-based U.S. 7th Fleet, which created a pressurized situation that caused leaders in the Pacific to cut corners and sacrifice training time for their crews, an environment described in the Navy's comprehensive review into the two collisions that claimed the lives of 17 sailors in the disastrous summer of 2017. Richardson said that as potential enemies double down on anti-access technologies designed to keep the U.S. Navy at bay, the Navy needed to focus on missile defense for its own assets. \"We're going to need missile defense at sea as we kind of fight our way now into the battle spaces we need to get into,\" he said. \"And so restoring dynamic maneuver has something to do with missile defense. A June 23, 2018, press report states the following: The threats from a resurgent Russia and rising China―which is cranking out ships like it's preparing for war―have put enormous pressure on the now-aging [U.S. Navy Aegis destroyer] fleet. Standing requirements for BMD patrols have put increasing strain on the U.S. Navy's surface ships. The Navy now stands at a crossroads. BMD, while a burden, has also been a cash cow that has pushed the capabilities of the fleet exponentially forward over the past decade. The game-changing SPY-6 air and missile defense radar destined for DDG Flight III, for example, is a direct response to the need for more advanced BMD shooters. But a smaller fleet, needed for everything from anti-submarine patrols to freedom-of-navigation missions in the South China Sea, routinely has a large chunk tethered to BMD missions. \"Right now, as we speak, I have six multimission, very sophisticated, dynamic cruisers and destroyers―six of them are on ballistic missile defense duty at sea,\" Chief of Naval Operations Adm. John Richardson said during an address at the recent U.S. Naval War College's Current Strategy Forum. \"You have to be in a tiny little box to have a chance at intercepting that incoming missile. So we have six ships that could go anywhere in the world, at flank speed, in a tiny little box, defending land.\" And for every six ships the Navy has deployed in a standing mission, it means 18 ships are in various stages of the deployment cycle preparing to relieve them. The Pentagon, led by Defense Secretary Jim Mattis, wants the Navy to be more flexible and less predictable―\"dynamic\" is the buzzword of moment in Navy circles. What Richardson is proposing is moving standing requirements for BMD patrols away from ships underway and all the associated costs that incurs, and toward fixed, shore-based sites, and also surging the Navy's at-sea BMD capabilities when there is an active threat.... In a follow-up response to questions posed on the CNO's comments, Navy spokesman Cmdr. William Speaks said the Navy's position is that BMD is an integral part of the service's mission, but where long-term threats exist, the Navy should \"consider a more persistent, land-based solution as an option.\" \"This idea is not about the nation's or the Navy's commitment to BMD for the U.S. and our allies and partners―the Navy's commitment to ballistic missile defense is rock-solid,\" Speaks said. \"In fact, the Navy will grow the number of BMD-capable ships from 38 to 60 by 2023, in response to the growing demand for this capability. \"The idea is about how to best meet that commitment. In alignment with our national strategic documents, we have shifted our focus in an era of great power competition―this calls us to think innovatively about how best to meet the demands of this mission and optimize the power of the joint force.\"... While the idea of saving money by having fixed BMD sites and freeing up multimission ships is sensible, it may have unintended consequences, said Bryan McGrath, a retired destroyer skipper and owner of the defense consultancy The FerryBridge Group. \"The BMD mission is part of what creates the force structure requirement for large surface combatants,\" McGrath said on Twitter after Defense News reported the CNO's comments. \"Absent it, the number of CG's and DDG's would necessarily decline. This may in fact be desirable, depending on the emerging fleet architecture and the roles and missions debate underway. Perhaps we need more smaller, multi-mission ships than larger, more expensive ones. \"But it cannot be forgotten that while the mission is somewhat wasteful of a capable, multi-mission ship, the fact that we have built the ships that (among other things) do this mission is an incredibly good thing. If there is a penalty to be paid in peacetime sub-optimization in order to have wartime capacity--should this not be considered a positive thing?\" McGrath went on to say that the suite of combat systems that have been built into Aegis have been in response to the BMD threat. And indeed, the crown jewels of the surface fleet―Aegis Baseline 9 software, which allows a ship to do both air defense and BMD simultaneously; the Aegis common-source library; the forthcoming SPY-6; cooperative engagement―have come about either in part or entirely driven by the BMD mission.... A Navy official who spoke on condition of anonymity, to discuss the Navy's shifting language on BMD, acknowledged the tone had shifted since the 2000s when the Navy latched onto the mission. But the official added that the situation more than a decade later has dramatically shifted. \"The strategic environment has changed significantly since the early 2000s―particularly in the western Pacific. We have never before faced multiple peer rivals in a world as interconnected and interdependent as we do today,\" the official said. \"Nor have we ever seen technologies that could alter the character of war as dramatically as those we see emerging around us. China and Russia have observed our way of war and are on the move to reshape the environment to their favor.\" In response to the threat and Defense Secretary Jim Mattis' desire to use the force more dynamically, the Navy is looking at its options, the official said. \"This includes taking a look at how we employ BMD ships through the lens of great power competition to compete, deter and win against those who threaten us.\" A January 29, 2019, press report states the following: The Navy is looking to get out of the missile defense business, the service's top admiral said today, and the Pentagon's new missile defense review might give the service the off-ramp it has been looking for to stop sailing in circles waiting for ground-based missile launches. This wasn't the first time Adm. John Richardson bristled in public over his ships sailing in \"small boxes\" at sea tasked with protecting land, when they could be out performing other missions challenging Chinese and Russian adventurism in the South China Sea and the North Atlantic…. \"We've got exquisite capability, but we've had ships protecting some pretty static assets on land for a decade,\" Richardson said at the Brookings Institute. \"If that [stationary] asset is going to be a long-term protected asset, then let's build something on land and protect that and liberate these ships from this mission.\" Japan is already moving down the path of building up a more robust ground-based sensor and shooter layer, while also getting its own ships out to sea armed with the Aegis radar and missile defense system, both of which would free up American hulls from what Richardson on Monday called \"the small [geographic] boxes where they have to stay for ballistic missile defense.\" Another related potential issue for Congress concerns burden sharing—how allied contributions to regional BMD capabilities and operations compare to U.S. naval contributions to overseas regional BMD capabilities and operations, particularly in light of constraints on U.S. defense spending, worldwide operational demands for U.S. Navy Aegis ships, and calls by some U.S. observers for increased allied defense efforts. The issue can arise in connection with both U.S. allies in Europe and U.S. allies in Asia. Regarding U.S. allies in Asia, a December 12, 2018, press report states the following: In June, US Navy Chief of Naval Operations (CNO) Admiral John Richardson said during a speech at the US Naval War College that the US Navy should terminate its current practice of dedicating several US Navy warships solely for Ballistic Missile Defense (BMD). Richardson wanted US warships to halt BMD patrols off Japan and Europe as they are limiting, restrictive missions that could be better accomplished by existing land-based BMD systems such as Patriot anti-missile batteries, the US Terminal High Altitude Area Defense (THAAD) anti-missile system and the Aegis Ashore anti-missile system. In the months since dropping his bombshell, Richardson—and much of the debate—has gone quiet. \"My guess is the CNO got snapped back by the Pentagon for exceeding where the debate actually stood,\" one expert on US naval affairs told Asia Times. But others agree with him. Air Force Lt Gen Samuel A Greaves, the director of the US Missile Defense Agency (MDA), acknowledges Richardson's attempts to highlight how these BMD patrols were placing unwelcome \"strain on the (US Navy's) crews and equipment.\" But there are complications. While it may free US Navy warships for sea-control, rather than land defense, there is a concern that next- generation hypersonic cruise missiles could defeat land-based BMD systems, such as Aegis Ashore, while the US Navy's Aegis-equipped warships offer the advantages of high-speed mobility and stealth, resulting in greater survivability overall. As Japan prepares to acquire its first Aegis Ashore BMD system – and perhaps other systems such as the THAAD system which has been deployed previously in Romania and South Korea – the possibility that the US Navy will end its important BMD role represents abrupt change…. Japan's decision to deploy Aegis Ashore can fill in any gap created by a possible US Navy cessation of BMD patrols. \"The land-based option is more reliable, less logistically draining, and despite being horrendously expensive, could be effective in the sense that it provides a degree of reassurance to the Japanese people and US government, and introduces an element of doubt of missile efficacy into [North Korean] calculations,\" said [Garren Mulloy, Associate Professor of International Relations at Daito Bunka University in Saitama, Japan], adding, however, that these systems could not cover Okinawa. \"Fixed sites in Japan could be vulnerable, and the Aegis vessels provide a flexible forward-defense, before anything enters Japanese airspace, but with obviously limited reactions times,\" Mulloy said. \"Aegis Ashore gives more reaction time – but over Japanese airspace.\"… The silence about this sudden possible shift in the US defense posture in the western Pacific is understandable: it is a sensitive topic in Washington and Tokyo. However, the Trump administration has urged its allies to pay more for their own defense needs and to support US troops deployed overseas. Meanwhile, Tokyo needs to proceed cautiously given the likelihood that neighbors might view a move on BMD as evidence that Tokyo is adopting an increasingly aggressive defense posture in the region. But for them, it is a no-win situation. If the US does ditch the BMD patrol mission, China and North Korea might view the shift as equally menacing given that it greatly enhances the US Navy's maritime warfare capabilities. Another potential issue for Congress is whether to convert the Aegis test facility in Hawaii into an operational land-based Aegis BMD site. DOD's January 2019 missile defense review report states, in a section on improving or adapting existing BMD systems, that Another repurposing option is to operationalize, either temporarily or permanently, the Aegis Ashore Missile Defense Test Center in Kauai, Hawaii, to strengthen the defense of Hawaii against North Korean missile capabilities. DoD will study this possibility to further evaluate it as a viable near-term option to enhance the defense of Hawaii. The United States will augment the defense of Hawaii in order to stay ahead of any possible North Korean missile threat. MDA and the Navy will evaluate the viability of this option and develop an Emergency Activation Plan that would enable the Secretary of Defense to operationalize the Aegis Ashore test site in Kauai within 30 days of the Secretary's decision to do so, the steps that would need to be taken, associated costs, and personnel requirements. This plan will be delivered to USDA&S, USDR&E, and USDP within six months of the release of the MDR. A January 25, 2019, press report states the following: The Defense Department will examine the funding breakdown between the Navy and the Missile Defense Agency should the government make Hawaii's Aegis Ashore Missile Defense Test Center into an operational resource, according to the agency's director. \"Today, it involves both Navy resources for the operational crews -- that man that site -- as well as funds that come to MDA for research, development and test production and sustainment,\" Lt. Gen. Sam Greaves said of the test center when asked how the funding would shake out between the Navy and MDA should the Pentagon move forward with the recommendation. Another potential issue for Congress concerns the potential for ship-based lasers, electromagnetic railguns (EMRGs), and gun-launched guided projectiles (GLGPs, previously known as hypervelocity projectiles [HVPs]) to contribute in coming years to Navy terminal-phase BMD operations and the impact this might eventually have on required numbers of ship-based BMD interceptor missiles. Another CRS report discusses the potential value of ship-based lasers, EMRGs, and GLGPs for performing various missions, including, potentially, terminal-phase BMD operations. Another potential oversight issue for Congress is technical risk and test and evaluation issues in the Aegis BMD program. Regarding this issue, a December 2018 report from DOD's Director, Operational Test and Evaluation (DOT&E)—DOT&E's annual report for FY2018—stated the following in its section on the Aegis BMD program: Assessment • Results from flight testing, high-fidelity M&S, HWIL, and distributed ground testing demonstrate that Aegis BMD can intercept non-separating, simple-separating, and complex-separating ballistic missiles in the midcourse phase. However, flight testing and M&S did not address all expected threat types, ground ranges, and raid sizes. • FTM-45 successfully and fully demonstrated the Aegis BL 9.2 organic engagement capability and corrective action for the previous FTM-29 missile failure. FTM-29 was only partially able to demonstrate EOR capability given the in-flight missile failure. In FTM-29, the Aegis Weapon System supported the SM-3 Block IIA missile and demonstrated bi-directional communication between the SM-3 Block IIA guidance section and the KW until loss of signal at horizon. However, the weapon system did not exercise all aspects of communication after KW eject. DOT&E considers the FTM-29 failure to be an example of a shortfall in conducting ground testing in an operationally representative way, and an example of a deficiency found in OT that DT should have discovered. • The MDA implemented process improvements to better identify, report, and fi x common failures and anomalies identified during SM-3 ground testing prior to flight testing. • SM CTV-03 demonstrated the capability of the Aegis BMD 4.1 upgrade to fi re an SM-6 Dual I missile. The BMD 4.1 build incorporates BL 9.C1 capabilities into the BMD 4.0 baseline. • FS-17 demonstrated the Aegis BMD 4.0.3 capability to interoperate with NATO partners over operational communication architectures during cruise missile and ballistic missile engagements, and to use remote data provided by NATO partners to prosecute remote engagements. JFTM-05 Event 2 demonstrated inter-ship communication between U.S. and Japanese destroyers using a realistic communications architecture while prosecuting ballistic missile engagements. Pacific Dragon demonstrated interoperability between U.S. Aegis BMD assets, Japanese destroyers, and Republic of Korea naval assets. • Aegis BMD has exercised rudimentary engagement coordination with Terminal High-Altitude Area Defense firing units, but not with Patriot. The MDA plans to include Patriot in FTO-03. MDA ground tests have routinely demonstrated that inter-element coordination and interoperability need improvement to increase situational awareness and improve engagement efficiency. • The MDA has been collaborating with DOT&E and the Under Secretary of Defense (Research and Engineering) to establish an affordable ground testing approach to support assessments of reliability. DOT&E cannot assess SM-3 missile reliability with confidence until the MDA is able to provide additional ground test data that simulates the in-flight environment. DOT&E is working with the MDA to determine if existing ground test venues are able to provide the needed missile reliability data. Recommendations The MDA should: 1. Ensure that ground tests of all SM-3 missile components, sections, and all-up rounds use the same configuration as will be flown in flight tests (i.e., \"test as you fly\"). 2. Determine how to properly score acceptance ground test data for production missiles to enable their use in estimating SM-3 reliability. 3. Fund and execute high-fidelity M&S RFRs for Aegis BL 9.2 SM-3 Block IIA and SM-6 Dual II scenarios that span the engagement battlespace. Regarding the SM-6 missile, the January 2018 DOT&E report also stated the following: Assessment • As reported in the DOT&E FY18 SM-6 BLK I FOT&E Report, the SM-6 remains effective and suitable with the exception of the classified deficiency identified in the FY13 IOT&E Report. The SM-6 Block 1 satisfactorily demonstrated compatibility with Aegis Weapon System Baseline 9 Integrated Fire Control capability. • In FY17-18, the Navy developed and tested specific software improvements to SM-6 BLK I to mitigate the classified performance problems discovered during IOT&E. As previously reported, testing conducted by the Navy demonstrated the software improvements perform as intended, but did not eliminate them. Recommendation 1. The Navy should continue to improve software based on IOT&E results and verify corrective actions with flight tests. Table 2 summarizes congressional action on the FY2020 request for MDA procurement and research and development funding for the Aegis BMD program. Appendix A. Aegis BMD Flight Tests Table A-1 presents a summary of Aegis BMD flight tests since January 2002. As shown in the table, since January 2002, the Aegis BMD system has achieved 33 successful exo-atmospheric intercepts in 42 attempts using the SM-3 missile (including 4 successful intercepts in 5 attempts by Japanese Aegis ships, and 2 successful intercepts in 3 attempts attempt using the Aegis Ashore system), and 7 successful endo-atmospheric intercepts in 7 attempts using the SM-2 Block IV and SM-6 missiles, making for a combined total of 40 successful intercepts in 49 attempts. In addition, on February 20, 2008, a BMD-capable Aegis cruiser operating northwest of Hawaii used a modified version of the Aegis BMD system with the SM-3 missile to shoot down an inoperable U.S. surveillance satellite that was in a deteriorating orbit. Including this intercept in the count increases the totals to 34 successful exo-atmospheric intercepts in 43 attempts using the SM-3 missile, and 41 successful exo- and endo-atmospheric intercepts in 50 attempts using SM-3, SM-2 Block IV, and SM-6 missiles.", "summary": "The Aegis ballistic missile defense (BMD) program, which is carried out by the Missile Defense Agency (MDA) and the Navy, gives Navy Aegis cruisers and destroyers a capability for conducting BMD operations. Under the FY2020 budget submission, the number of BMD-capable Navy Aegis ships is projected to increase from 38 at the end of FY2018 to 59 at the end of FY2024. BMD-capable Aegis ships operate in European waters to defend Europe from potential ballistic missile attacks from countries such as Iran, and in in the Western Pacific and the Persian Gulf to provide regional defense against potential ballistic missile attacks from countries such as North Korea and Iran. The Aegis BMD program is funded mostly through MDA's budget. The Navy's budget provides additional funding for BMD-related efforts. MDA's proposed FY2020 budget requests a total of $1,784.2 million (i.e., about $1.8 billion) in procurement and research and development funding for Aegis BMD efforts, including funding for two Aegis Ashore sites in Poland and Romania. MDA's budget also includes operations and maintenance (O&M) and military construction (MilCon) funding for the Aegis BMD program. Issues for Congress regarding the Aegis BMD program include the following: whether to approve, reject, or modify MDA's FY2020 funding procurement and research and development funding requests for the program; required numbers of BMD-capable Aegis ships versus available numbers of BMD-capable Aegis ships; the burden that BMD operations may be placing on the Navy's fleet of Aegis ships, and whether there are alternative ways to perform BMD missions now performed by U.S. Navy Aegis ships, such as establishing more Aegis Ashore sites; burden sharing—how allied contributions to regional BMD capabilities and operations compare to U.S. naval contributions to overseas regional BMD capabilities and operations; whether to convert the Aegis test facility in Hawaii into an operational land-based Aegis BMD site; the potential for ship-based lasers, electromagnetic railguns (EMRGs), and hypervelocity projectiles (HVPs) to contribute in coming years to Navy terminal-phase BMD operations and the impact this might eventually have on required numbers of ship-based BMD interceptor missiles; and technical risk and test and evaluation issues in the Aegis BMD program.", "document_type": "crs"}
{"report": "The broadband loan and grant programs at RUS are intended to accelerate the deployment of broadband services in rural America. \"Broadband\" refers to high-speed internet access and advanced telecommunications services for private homes, commercial establishments, schools, and public institutions. Currently in the United States, residential broadband is primarily provided via cable modem (from the local provider of cable television service), fiber-optic cable, mobile wireless (e.g., smartphones), or over the copper telephone line (digital subscriber line or \"DSL\"). Other broadband technologies include fixed wireless and satellite. Broadband access enables a number of beneficial applications to individual users and to communities. These include ecommerce, telecommuting, voice service (voice over the internet protocol or \"VOIP\"), distance learning, telemedicine, public safety, and others. It is becoming generally accepted that broadband access in a community can play an important role in economic development. Access to affordable broadband is viewed as particularly important for the economic development of rural areas because it enables individuals and businesses to participate fully in the online economy regardless of geographical location. For example, aside from enabling existing businesses to remain in their rural locations, broadband access could attract new business enterprises drawn by lower costs and a more desirable lifestyle. Essentially, broadband potentially allows businesses and individuals in rural America to live locally while competing globally in an online environment. A 2016 study from the Hudson Institute found that rural broadband providers directly and indirectly added $24.1 billion to the U.S. economy in 2015. The rural broadband industry supported 69,595 jobs in 2015, both through its own employment and the employment that its purchases of goods and services generated. Given the large potential impact broadband may have on the economic development of rural America, concern has been raised over a \"digital divide\" between rural and urban or suburban areas with respect to broadband deployment. While there are many examples of rural communities with state-of-the-art telecommunications facilities, recent surveys and studies have indicated that, in general, rural areas tend to lag behind urban and suburban areas in broadband deployment. For example According to the Federal Communications Commission's (FCC's) Communications Marketplace Report , \"As of year-end 2017, 94% of the overall population had coverage [of fixed terrestrial broadband at speeds of 25 Mbps/3 Mbps], up from 91.9% in 2016. Nonetheless, the gap in rural and Tribal America remains notable: 24% of Americans in rural areas and 32% of Americans in Tribal lands lack coverage from fixed terrestrial 25 Mbps/3 Mbps broadband, as compared to only 1.5% of Americans in urban areas. The data demonstrate, however, that the gap between urban and rural or Tribal areas has narrowed each year over the last five years.\" Also according to the FCC's Communications Market Report , rural areas continue to lag behind urban areas in mobile broadband deployment. Although evaluated urban areas saw an increase of 10 Mbps/3 Mbps mobile LTE from 81.9% in 2014 to 92.6% in 2017, such deployment in evaluated rural areas remained relatively flat at about 70%. According to January 2018 survey data from the Pew Research Center, 58% of adults in rural areas said they have a high-speed broadband connection at home, as opposed to 67% of adults in urban areas and 70% of adults in suburban areas. A November 2017 Census Bureau survey reported by the National Telecommunications and Information Administration (NTIA) Digital Nation Data Explorer showed 72.9% of rural residents reporting using the internet, versus 78.5% of urban residents. According to NTIA, the data \"indicates a fairly constant 6-9 percentage point gap between rural and urban communities' internet use over time.\" The comparatively lower population density of rural areas is likely the major reason why broadband is less deployed than in more highly populated suburban and urban areas. Particularly for wireline broadband technologies—such as cable modem, fiber, and DSL—the greater the geographical distances among customers, the larger the cost to serve those customers. Thus, there is often less incentive for companies to invest in broadband in rural areas than, for example, in an urban area where there is more demand (more customers with perhaps higher incomes) and less cost to wire the market area. The terrain of rural areas can also be a hindrance, in that it is more expensive to deploy broadband technologies in a mountainous or heavily forested area. An additional added cost factor for remote areas can be the expense of \"backhaul\" (e.g., the \"middle mile\"), which refers to the installation of a dedicated line that transmits a signal to and from an internet backbone, which is typically located in or near an urban area. Another important broadband availability issue is the extent to which there are multiple broadband providers offering competition and consumer choice. Typically, multiple providers are more prevalent in urban than in rural areas. Because private providers are unlikely to earn enough revenue to cover the costs of deploying and operating broadband networks in many unserved rural areas, it is unlikely that private investment alone will bring service to these areas. In 2000, given the lagging deployment of broadband in rural areas, Congress and the Administration acted to initiate pilot broadband loan and grant programs within the Rural Utilities Service of the U.S. Department of Agriculture. While RUS had long maintained telecommunications loan and grant programs (Rural Telephone Loans and Loan Guarantees, Rural Telephone Bank, and more recently, the Distance Learning and Telemedicine Loans and Grants), none were exclusively dedicated to financing rural broadband deployment. Title III of the FY2001 agriculture appropriations bill ( P.L. 106-387 ) directed USDA/RUS to conduct a \"pilot program to finance broadband transmission and local dial-up Internet service in areas that meet the definition of 'rural area' used for the Distance Learning and Telemedicine Program.\" Subsequently, on December 5, 2000, RUS announced the availability of $100 million in loan funding through a one-year pilot program \"to finance the construction and installation of broadband telecommunications services in rural America.\" The broadband pilot loan program was authorized under the authority of the Distance Learning and Telemedicine Program (7 U.S.C. 950aaa), and was available to \"legally organized entities\" not located within the boundaries of a city or town having a population in excess of 20,000. The FY2002 agriculture appropriations bill ( P.L. 107-76 ) designated a loan level of $80 million for broadband loans, and on January 23, 2002, RUS announced that the pilot program would be extended into FY2002, with $80 million in loans made available to fund many of the applications that did not receive funding during the previous year. Meanwhile, the FY2002 agriculture appropriations bill ( P.L. 107-76 ) allocated $20 million for a pilot broadband grant program, also authorized under the Distance Learning and Telemedicine Program. On July 8, 2002, RUS announced the availability of $20 million for a pilot grant program for the provision of broadband service in rural America. The program was specifically targeted to economically challenged rural communities with no existing broadband service. Grants were made available to entities providing \"community-oriented connectivity,\" which the RUS defined as those entities \"who will connect the critical community facilities including the local schools, libraries, hospitals, police, fire and rescue services and who will operate a community center that provides free and open access to residents.\" The pilot program was extended into FY2003, as the Consolidated Appropriations Resolution of 2003 ( P.L. 108-7 ) allocated $10 million for broadband grants. Currently, RUS has four ongoing programs that have been established to incentivize and subsidize broadband infrastructure investment in unserved and underserved rural areas. These include the following: Rural Broadband Access Loan s —funds the costs of construction, improvement, or acquisition of facilities and equipment needed to provide service in eligible rural areas. Community Connect Grants —funds broadband deployment into rural communities where it is not yet economically viable for private sector providers to deliver service. Telecommunications Infrastructure Loans and Loan Guarantees —funds the construction, maintenance, improvement, and expansion of telephone service and broadband in extremely rural areas with a population of 5,000 or less. Distance Learning and Telemedicine Grants —principally funds end-user equipment to help rural communities use telecommunications to link teachers and medical service providers in one area to students and patients in another. In addition, a new broadband loan and grant pilot program—the ReConnect Program—has been established and funded at $600 million by the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). Table A-1 in the Appendix shows the total amount and number of awards provided by the RUS broadband programs for each state between FY2009 and FY2016. In its April 2017 report, Rural Broadband Deployment: Improved Consistency with Leading Practices Could Enhance Management of Loan and Grant Programs , GAO reported that (according to RUS data) since FY2004, RUS has approved 704 broadband projects totaling almost $8.6 billion in loans and $144.8 million in grants to deploy telecommunications or broadband infrastructure networks in rural areas. Building on the pilot broadband loan program at RUS, Section 6103 of the Farm Security and Rural Investment Act of 2002 ( P.L. 107-171 ) amended the Rural Electrification Act of 1936 to authorize a loan and loan guarantee program to provide funds for the costs of the construction, improvement, and acquisition of facilities and equipment for broadband service in eligible rural communities. Section 6103 made available, from the funds of the Commodity Credit Corporation (CCC), a total of $100 million through FY2007. P.L. 107-171 also authorized any other funds appropriated for the broadband loan program. The program was subsequently reauthorized by Section 6110 of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ), and by Section 6104 of the Agricultural Act of 2014 ( P.L. 113-79 ). Beginning in FY2004, Congress annually blocked mandatory funding from the CCC. Thus—starting in FY2004—the program was funded as part of annual appropriations in the Distance Learning and Telemedicine account within the Department of Agriculture appropriations bill. Every fiscal year, Congress approves an appropriation (loan subsidy) and a specific loan level (lending authority) for the Rural Broadband Access Loan and Loan Guarantee Program. Table 1 shows—for the life of the program to date—loan subsidies and loan levels (lending authority) set by Congress in annual appropriations bills. The Rural Broadband Access Loan and Loan Guarantee Program is codified as 7 U.S.C. 950bb. On July 30, 2015, the RUS published in the Federal Register the interim rule (7 C.F.R. part 1738) implementing the Rural Broadband Access Loan and Loan Guarantee Program as reauthorized by the enactment of the Agricultural Act of 2014 ( P.L. 113-79 ), and the interim rule was made final on June 9, 2016. Entities eligible to receive loans include corporations, limited liability companies, cooperative or mutual organizations, Indian tribes or tribal organizations, and state or local governments. Eligible areas for funding must be completely contained within a rural area (or composed of multiple rural areas). Additionally, at least 15% of the households in the proposed funded service areas must be unserved, no part of the proposed service area can have three or more incumbent service providers, and no part of the proposed service area can overlap with the service area of current RUS borrowers or of grantees that were funded by RUS. The latest Notice of Solicitation of Applications (NOSA) announced that RUS is now accepting applications on a rolling basis through September 30, 2019, which will give RUS the ability to request additional information and modifications to submitted applications if necessary. RUS will evaluate the submitted applications every 90 days, and anticipates at least two evaluation periods for FY2019. The minimum loan amount is $100,000, while the maximum loan amount is $25 million. The NOSA has maintained its definition of broadband service and broadband lending speed at no less than 25 Mbps download and 3 Mbps upload for both mobile and fixed services. The 2018 farm bill, which was signed by the President on December 20, 2018 ( P.L. 115-334 , Agriculture Improvement Act of 2018), adds a grant component to the broadband loan program, increases the annual authorization level from $25 million to $350 million, and changes the proposed service area threshold from 15% to 50%. RUS will issue a revised regulation that implements the changes made by the 2018 farm bill. For up to one year after enactment, the Secretary shall use the previously existing rules and regulations for the broadband loan program until a final rule is issued. For the latest application information, see http://www.rd.usda.gov/programs-services/farm-bill-broadband-loans-loan-guarantees . The Consolidated Appropriations Act of 2004 ( P.L. 108-199 ) appropriated $9 million \"for a grant program to finance broadband transmission in rural areas eligible for Distance Learning and Telemedicine Program benefits authorized by 7 U.S.C. 950aaa.\" Essentially operating the same as the pilot broadband grants, the program provides grant money to applicants proposing to provide broadband on a \"community-oriented connectivity\" basis to currently unserved rural areas for the purpose of fostering economic growth and delivering enhanced health care, education, and public safety services. Funding for the broadband grant program is provided through annual appropriations in the Distance Learning and Telemedicine account within the Department of Agriculture appropriations bill. Table 2 shows a history of appropriations for the Community Connect Broadband Grants. Eligible applicants for broadband grants include most state and local governments, federally recognized tribes, nonprofits, and for-profit corporations. Funded projects must serve a rural area where broadband service above a specified minimum speed does not exist, deploy free broadband service for at least two years to all community facilities, and offer broadband to residential and business customers. Up to 10% of the grant may be used for the improvement, expansion, construction, or acquisition of a community center that provides online access to the public. On May 3, 2013, RUS issued a new final rule for Community Connect grants in the Federal Register . The final rule changes previous requirements related to matching funds, eligible communities, and application scoring criteria. The final rule also removes the previous definition of broadband service speed (200 kbps). A new threshold for broadband service speed and broadband grant speed (the speed the grantee must deliver) will be provided in an annual Notice of Funding Availability (NOFA) in the Federal Register . The NOFA will also specify the deadline for applications, the total amount of funding available, and the maximum and minimum amount of funding available for each grant. In February 2019, RUS issued a Funding Opportunity Announcement (FOA) establishing an application window for FY2019 Community Connect grants through April 15, 2019. The FOA set a minimum threshold for speeds constituting broadband service at 10 Mbps download and 1 Mbps upload for both fixed and mobile broadband. The minimum broadband speed that an applicant must propose to deliver is 25 Mbps download, 3 Mbps upload for both fixed and mobile service to the customer. The minimum grant is $100,000 and the maximum is $3 million. Further information, including application materials and guidelines, is available at http://www.rd.usda.gov/programs-services/community-connect-grants . The 2018 farm bill ( P.L. 115-334 ) codifies the Community Connect Grant Program and authorizes the program at $50 million for each of fiscal years 2018 through 2023. The Telecommunications Infrastructure Loan and Loan Guarantee Program provides loans and loan guarantees for the construction, maintenance, improvement, and expansion of telephone service and broadband in rural areas. The program was first authorized in 1949 to finance rural telephone service. Since 1995, RUS has required that networks funded by this program offer broadband service as well. Loans and loan guarantees are available only to rural areas and towns with a population of 5,000 or less. Eligible areas are those without telecommunications facilities or areas where the applicant is the recognized telecommunications provider. Funded projects cannot duplicate existing services. The program is authorized to provide several different types of financing, including direct Treasury rate loans, which bear interest at the government's cost of money (or the current Treasury rate). Thus, the interest charged varies with the Treasury rate. As Treasury rates increase, so does the cost to the borrower for these loans. guaranteed loans, which are provided to borrowers of a nongovernment lender or from the Federal Financing Bank (FFB). The interest rate charged on FFB loans is the Treasury rate plus an administrative fee of one-eighth of 1%. The terms of these loans may vary significantly and allow borrowers more flexibility in meeting their financing needs. hardship direct loans, which bear interest at a fixed rate of 5% per year. These loans are intended only for borrowers with extremely high investment costs in terms of per subscriber service. These borrowers also have a very low number of subscribers for each mile of telecommunications line constructed. This low subscriber density inherently increases the cost to serve the most sparsely populated rural areas. Because of the high cost of the investment needed, these borrowers cannot typically afford higher interest rate loans. The annual loan level for the Telecommunications Infrastructure Loan and Loan Guarantee Program is $690 million. Currently, the 5% hardship loans are not offered—because of low interest rates, the Treasury and FFB loans can currently offer lower interest rates than the 5% offered by hardship loans. The Distance Learning and Telemedicine (DLT) Program was established by the 1996 farm bill—the Federal Agriculture Improvement and Reform Act of 1996 ( P.L. 104-127 ). Though initially providing both grants and loans, since FY2009 only DLT grants have been awarded by RUS. DLT grants serve as initial capital assets for equipment and software that operate via telecommunications to rural end-users of telemedicine and distance learning. DLT grants do not support connectivity. Grant funds may be used for audio, video, and interactive video equipment; terminal and data terminal equipment; computer hardware, network components, and software; inside wiring and similar infrastructure; acquisition of instructional programming; broadband facilities; and technical assistance. Eligible applicants include most entities in rural areas that provide education or health care through telecommunications, including most state and local governmental entities, federally recognized tribes, nonprofits, for-profit businesses, and consortia of eligible entities. The 2018 farm bill ( P.L. 115-334 ) reauthorizes the DLT program through FY2023 at $82 million per year and sets aside 20% of DLT grant funding for applications related to substance use disorder treatment services. An Interagency Task Force on Agriculture and Rural Prosperity was created on April 25, 2017, by Executive Order 13790 and was charged with identifying legislative, regulatory, and policy changes to promote agriculture, economic development, job growth, infrastructure improvements, technological innovation, energy security, and quality of life in rural America. The first recommendation of the Task Force's report to the President was to expand e-connectivity in rural and tribal areas. To help implement this recommendation, the Administration requested $500 million in a discretionary add-on to the FY2018 appropriation which would fund a combination grant/loan program at USDA/RUS to deploy broadband in rural and tribal areas. Section 779 of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) appropriated $600 million to RUS to \"conduct a new broadband loan and grant pilot program.\" The law states that the funding is to \"remain available until expended,\" and that at least 90% of the households to be served by a project receiving a loan or grant under the pilot program shall be in a rural area without sufficient access to broadband, defined for this pilot program as 10 Mbps downstream, and 1 Mbps upstream, which shall be reevaluated and redetermined, as necessary, on an annual basis by the Secretary of Agriculture; an entity to which a loan or grant is made under the pilot program shall not use the loan or grant to overbuild or duplicate broadband expansion efforts made by any entity that has received a broadband loan from RUS; in addition to other available funds, not more than 4% of the funds can be used for administrative costs to carry out the pilot program and up to 3% may be utilized for technical assistance and predevelopment planning activities to support the most rural communities; and RUS shall adhere to the notice, reporting, and service area assessment requirements previously established in the 2014 farm bill. The Explanatory Statement that accompanied the FY2018 Consolidated Appropriations Act states The agreement reiterates that funding should be prioritized to areas currently lacking access to broadband service, and investments in broadband shall consider any technology that best serves the goals of broadband expansion. Lastly, the agreement restates the importance of coordination among federal agencies in expanding broadband deployment and adoption and expects the Department to take caution to maximize these limited resources and not overbuild or duplicate existing broadband capable infrastructure. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provides $550 million in FY2019 for the pilot broadband loan and grant program, now called the Ru ral eConnectivity Pilot Program, or ReConnect Rural Broadband Program. The $550 million includes $125 million in direct appropriation, plus $425 million to be reprogrammed from the cushion of credit subaccount (7 U.S.C. 940c). Division B, Section 779 direct s the Secretary of Agriculture to ensure that applicants determined to be ineligible for the ReConnect Program have a means of appealing or otherwise challenging that determination in a timely fashion. The law also directs the Secretary, in determining whether an entity may overbuild or duplicate broadband expansion efforts made by an entity that has received an RUS broadband loan, to not consider loans that were rescinded or defaulted on, or loans the terms and conditions of which were not met, if the entity under consideration has not previously defaulted on, or failed to meet the terms and conditions of, a Rural Utilities Service loan or had a Rural Utilities Service loan rescinded. On December 14, 2018, RUS released the Funding Opportunity Announcement ( FOA ) and solicitation of applications for the ReConnect Program. As set forth in the statute, at least 90% of the households to be served by a project receiving a loan or grant under the pilot program shall be in a rural area without sufficient access to broadband at a minimum speed of 10 Mbps/1 Mbps. RUS defines \"sufficient access to broadband\" as any rural area that has fixed, terrestrial broadband service delivering at least 10 Mbps downstream and 1 Mbps upstream. Mobile and satellite service will not be considered in making the determination that households in the proposed funded service area do not have sufficient access to broadband. With the government shutdown delaying the rollout of the ReConnect Program, on February 25, 2019, RUS released an amendment and clarification to the December FOA , with revised application deadlines. Approximately $600 million has been set aside for funding opportunities under the FOA, with additional budget authority available for a reserve which may be used for additional loans or grants. Award recipients must complete projects within five years. Entities eligible for awards are states or local governments, U.S. territories, an Indian tribe, nonprofit entities, for-profit corporations, limited liability companies, and cooperative or mutual organizations. This includes telecommunications companies, rural electric cooperatives and utilities, internet service providers, and municipalities. Funds will be awarded for projects that have financially sustainable business models that will bring broadband to rural homes, businesses, farms, ranches, and community facilities such as first responders, health care facilities, and schools. The ReConnect Program consists of three funding categories. Up to $200 million is available. The maximum amount that can be requested is $50 million. Interest rate is set at a fixed 2%. Eligible areas are where 90% of households do not have sufficient access to broadband at 10 Mbps/1 Mbps. Applicants must propose to build a network capable of providing service to every premise in the proposed funded service area at a minimum speed of 25 Mbps/3 Mbps. Applications accepted on a rolling basis through July 12, 2019. Up to $200 million is available. The maximum amount that can be requested is $25 million for the loan and $25 million for the grant. Loan and grant amounts will always be equal. Interest rate for the loan will be set at the Treasury rate. Eligible areas are where 90% of households do not have sufficient access to broadband at 10 Mbps/1 Mbps. Applicants must propose to build a network capable of providing service to every premise in the proposed funded service area at a minimum speed of 25 Mbps/3 Mbps Applications accepted on a rolling basis through June 21, 2019. Up to $200 million is available. The maximum amount that can be requested is $25 million. Applicants must provide a matching contribution equal to 25% of the cost of the overall project. Eligible areas are where 100% of households do not have sufficient access to broadband at 10 Mbps/1 Mbps. Applicants must propose to build a network capable of providing service to every premise in the proposed funded service area at a minimum speed of 25 Mbps/3 Mbps. Applications accepted on a rolling basis through May 31, 2019. More information on the ReConnect Program is available at https://reconnect.usda.gov . RUS has three programs that provide or have provided loans for broadband infrastructure projects: the Rural Broadband Access Loan and Loan Guarantee program (also known as the Farm Bill broadband loan program), the Broadband Initiatives Program (BIP under the ARRA), and the Telecommunications Infrastructure Loan Program (established in 1949 as the Rural Telephone Loan and Loan Guarantee program). Whereas RUS broadband loans are used as up-front capital to invest in broadband infrastructure, the Federal Communications Commission's (FCC's) Universal Service Fund (USF)—specifically, the high cost fund—has functioned as an ongoing subsidy to keep the operation of telecommunications networks in high cost areas profitable for providers. Many RUS telecommunications and broadband borrowers (loan recipients) receive high cost USF subsidies. In many cases, the subsidy received from USF helps provide the revenue necessary to keep the loan viable. The Telecommunications Infrastructure Loan Program is highly dependent on high cost USF revenues, with 99% (476 out of 480 borrowers) receiving interstate high cost USF support. This is not surprising, given that the RUS Telecommunications Infrastructure Loans are available only to the most rural and high cost areas (towns with populations less than 5,000). Regarding broadband loans, 60% of BIP (stimulus) borrowers draw from state or interstate USF support mechanisms, while 10% of Farm Bill (Rural Broadband Access Loan and Loan Guarantee Program) broadband borrowers receive interstate high cost USF support. The FCC, in an October 2011 decision, adopted an order that calls for the USF to be transformed, in stages, over a multiyear period—from a mechanism to support voice telephone service to one that supports the deployment, adoption, and use of both fixed and mobile broadband. More specifically, the high cost program is being phased out and a new fund, the Connect America Fund (CAF), which includes the targeted Mobility Fund and new Remote Areas Fund, is replacing it. During this transition, the uncertainty surrounding the FCC's proposed methodology for distributing Connect America Fund monies has led many small rural providers to postpone or cancel investment in broadband network upgrades. According to RUS, \"demand for RUS loans dropped to roughly 37% of the total amount of loan funds appropriated by Congress in FY2012,\" and \"[c]urrent and prospective RUS borrowers have communicated their hesitation to increase their outstanding debt and move forward with planned construction due to the recently implemented reductions in USF support and Inter-Carrier Compensation (ICC) payments.\" The Rural Broadband Access Loan and Loan Guarantee Program, the Community Connect Grant Program, the Telecommunications Infrastructure Loan and Loan Guarantee program, the Rural Broadband ReConnect Program, and the Distance Learning and Telemedicine grant program are funded through the annual Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act. The appropriations provided to the broadband loan programs are loan subsidies which support a significantly higher loan level. Table 3 shows recent and proposed appropriations for the rural broadband programs in the Rural Utilities Service. The Administration's FY2018 budget proposal requested the following for RUS broadband programs: Rural Broadband Access Loans—$4.5 million in budget authority to subsidize a broadband loan level of $27 million. According to the budget proposal, this funding level will provide for approximately 3 loans in FY2018. Telecommunications Infrastructure Loans—$0.863 million in budget authority to subsidize a loan level of $690 million ($345 million for Treasury loans and $345 million for FFB loans). The subsidy is for Treasury loans. According to the budget proposal, this funding level will provide for approximately 40 loans in FY2018. Community Connect and DLT grants—for FY2018, the Administration is proposing transferring Community Connect and DLT grants into a new $162 million \"Rural Economic Infrastructure Program,\" which will also include Rural Development Community Facilities grants and Home Repair grants. Up to $80 million will be directed toward the Appalachian region. According to the Administration, the new account \"combines the Rural Development grant programs into one account to provide the Administration with the flexibility to place resources where significant impact can be made for economic infrastructure development.\" On July 12, 2017, the House Appropriations Committee approved the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2018 ( H.R. 3268 ; H.Rept. 115-232 ). The bill provided $4.521 million to subsidize a loan level of $26.991 million for the broadband loan program. Funding provided for the broadband loan program was intended to promote availability in those areas where there is not otherwise a business case for private investment in a broadband network. The committee directed RUS to focus expenditures on projects that bring broadband service to underserved households and areas. The House bill provided $122.692 million for the new Rural Economic Infrastructure Account (24% below the Administration request), which would include both Community Connect and DLT grants, along with Community Facilities grants and Home Repair grants. The bill included language requiring at least 15% of the account resources ($18.4 million) be allocated to each program area. The committee noted that tribal communities continue to struggle with gaining access to broadband service, and encouraged the Secretary to provide a report that identifies the specific challenges Indian Tribal Organizations (ITOs) have in gaining access to broadband service and provide a plan for addressing these challenges, including how the Community Connect program can assist ITOs. Regarding telecommunications loans, the House matched the Administration proposal, providing a loan level of $690 million ($345 million in direct Treasury loans and $345 million in FFB loans) with an appropriation of $0.863 million to subsidize direct Treasury loans. Additionally, the House Appropriations Committee report directed USDA to continue coordinating with the FCC, NTIA, and other related federal agencies to ensure that policies tied to one federal program do not undermine the objectives and functionality of another. The committee directed the department to prepare a report, in collaboration with the FCC and DOC, detailing areas of responsibility toward addressing rural broadband issues. The report shall include, but not be limited to, how the programs work complimentarily to one another; how they address broadband issues in unserved and underserved areas, including tribal lands; identify barriers to infrastructure investment in rural areas and tribal lands; data speeds which fixed, wireless, and mobile broadband users in rural areas and tribal lands experience; and cost estimates to increase speeds to 25 Mbps in unserved communities and communities currently being served by speeds less than 25 Mbps. On July 20, 2017, the Senate Appropriations Committee approved its version of the FY2018 agriculture appropriations bill ( S. 1603 ; S.Rept. 115-131 ). The bill provided $4.53 million to subsidize a loan level of $27.043 million for the broadband loan program, $30 million for the Community Connect grant program, and $26.6 million for DLT grants. Unlike the House and the Administration request, the committee did not include funding for Rural Economic Infrastructure grants. For telecommunications loans, the Senate matched the House bill and the Administration proposal, providing a loan level of $690 million ($345 million in direct Treasury loans and $345 million in FFB loans) with an appropriation of $0.863 million to subsidize direct Treasury loans. Regarding the broadband loan program, the committee encouraged RUS to focus expenditures on projects that bring broadband service to currently unserved households, and directed RUS to report back to the committee on administrative efforts to eliminate duplicative or overbuilding of broadband technology. The committee also recommended that USDA explore a pilot grant program to demonstrate the use of multistrand fiber-optic cable that exists as part of electrical transmission infrastructure to provide state-of-the-art broadband services to currently underserved rural schools and medical centers within a mile of the existing cable. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided $5 million to subsidize a broadband loan level of $29.851 million, $30 million to Community Connect broadband grants, and $49 million for DLT grants, which included an additional $20 million to address the opioid epidemic in rural America. P.L. 115-141 also appropriated $600 million to RUS to \"conduct a new broadband loan and grant pilot program.\" The Administration's FY2019 budget proposal requested the following for RUS broadband programs: Rural Broadband Access Loans—$4.5 million in budget authority to subsidize a broadband loan level of $23.149 million. According to the budget proposal, this funding level will provide for approximately three loans in FY2019. Telecommunications Infrastructure Loans and Loan Guarantees—$0.863 million in budget authority to subsidize a loan level of $690 million ($172.6 million for Treasury loans and $517.4 million for FFB loans). The subsidy is for Treasury loans. According to the budget proposal, this funding level will provide for approximately 30 loans in FY2019. Community Connect Grants—$30 million, which will support approximately 13 broadband grants in FY2019. Distance Learning and Telemedicine Grants—$23.6 million, which will support approximately 72 projects in FY2019. On May 16, 2018, the House Appropriations Committee approved the FY2019 Agriculture Appropriations bill ( H.R. 5961 ; H.Rept. 115-706 ). The bill would provide the following: Rural Broadband Access Loans—$5.83 million in budget authority to subsidize a broadband loan level of $29.851 million. Telecommunications Infrastructure Loans and Loan Guarantees—$1.125 million in budget authority to subsidize direct Treasury loans set at a level of $465 million. Along with a loan level $225 million for FFB guaranteed loans, the total loan level is $690 million. Community Connect Grants—$30 million. Distance Learning and Telemedicine Grants—$32 million. ReConnect Program—$550 million. This appropriation would continue the pilot broadband loan and grant program that was funded (at $600 million) in the FY2018 Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). In the committee report, the committee expressed its view that \"it is important for Departments to avoid efforts that could duplicate existing networks built by private investment or those built leveraging and utilizing other federal programs.\" As such, the committee \"directs the Secretary of Agriculture to coordinate with the Federal Communications Commission (FCC) and the National Telecommunications Information Administration (NTIA) to ensure wherever possible that broadband loans and grants issued under the pilot program are being targeted to areas that are currently unserved.\" The committee directed USDA to use the NTIA's assessment of the current state of broadband access nationwide, and to explore using all broadband technologies, including, but not limited to, fiber, cable modem, fixed wireless, and television white space. The committee also noted that tribal communities continue to struggle with gaining access to broadband service, and encouraged the Secretary to provide a report that identifies the specific challenges Indian Tribal Organizations (ITOs) have in gaining access to broadband service and provide a plan for addressing these challenges, including how the Community Connect program can assist ITOs. On May 24, 2018, the Senate Appropriations Committee approved its FY2019 Agriculture Appropriations bill ( S. 2976 ; S.Rept. 115-259 ). The bill would provide the following: Rural Broadband Access Loans—$5.83 million in budget authority to subsidize a broadband loan level of $29.851 million. Telecommunications Infrastructure Loans and Loan Guarantees—$1.725 million in budget authority to subsidize direct Treasury loans set at a level of $345 million. Along with a loan level of $345 million for FFB guaranteed loans, the total loan level is $690 million. Community Connect Grants—$30 million. Distance Learning and Telemedicine Grants—$50 million (including $20 million to help address the opioid epidemic in rural America). ReConnect Program—$425 million. The committee encouraged RUS to focus expenditures on projects that bring broadband service to currently unserved households, and directed RUS to report back to the committee on administrative efforts to eliminate duplicative or overbuilding of broadband technology. The committee also recommended that USDA explore a pilot grant program to demonstrate the use of multistrand fiber-optic cable that exists as part of electrical transmission infrastructure to provide state-of-the-art broadband services to currently underserved rural schools and medical centers within a mile of the existing cable; encouraged RUS to coordinate with the FCC and other relevant federal entities when making determinations of sufficient broadband access, to ensure the most accurate and up-to-date broadband coverage data are used, while being cognizant of potential problems of overbuilding; encouraged the Secretary to utilize appropriate grant program funds to locate buried, antiquated infrastructure facilities prior to construction of new utilities infrastructure financed by RUS; and urged RUS to ensure the agency's criteria and application processes provide for fair consideration of open access projects by accounting for the unique structures and opportunities such projects present in advancing broadband deployment in unserved and underserved communities. On February 15, 2019, the Consolidated Appropriations Act, 2019 was signed into law ( P.L. 116-6 ). The FY2019 appropriations and levels are as follows: Rural Broadband Access Loans—$5.83 million in budget authority to subsidize a broadband loan level of $29.851 million. Telecommunications Infrastructure Loans and Loan Guarantees—$1.725 million in budget authority to subsidize direct Treasury loans set at a level of $345 million. Along with a loan level of $345 million for FFB guaranteed loans, the total loan level is $690 million. Community Connect Grants—$30 million. Distance Learning and Telemedicine Grants—$47 million (including $16 million to address the opioid epidemic in rural America). ReConnect Program—$550 million ($125 million direct appropriation plus $425 million to be reprogrammed from the cushion of credit account). P.L. 116-6 also directs USDA rural development programs, including the broadband programs, to allocate (to the maximum extent feasible) at least 10% of funds to projects in persistent poverty counties. The conference report ( H.Rept. 116-9 ) contains language directing USDA to avoid efforts that could duplicate existing networks built by private investment or those built leveraging and utilizing other federal programs, and directs the Secretary to coordinate with the FCC and NTIA to ensure wherever possible that broadband loans and grants are targeted to areas that are currently unserved. In particular, the conference agreement directs USDA to use the NTIA's assessment of the current state of broadband access nationwide. USDA is also directed, in implementing a strategy for broadband deployment to unserved communities, to explore using all technologies, including but not limited to, fiber, cable modem, fixed wireless, and television white space. The Administration's FY2020 budget proposal requested the following for RUS broadband programs: Rural Broadband Access Loans—Zero funding. According to the budget proposal, the elimination of funding will be offset by continued access by most eligible borrowers to the ReConnect Program (broadband pilot loan and grants). ReConnect Program—$200 million, which, according to the budget proposal, will support approximately eight loans, grants, or loan/grant combinations in FY2020. Telecommunications Infrastructure Loans and Loan Guarantees—$1.933 million in budget authority to subsidize a loan level of $690 million ($175.7 million for Treasury loans and $514.3 million for FFB loans). The subsidy is for the Treasury loans. According to the budget proposal, this funding level will provide for approximately 20 loans in FY2020. Community Connect Grants—$30 million, which will support approximately 13 broadband grants in FY2020. Distance Learning and Telemedicine Grants—$43.6 million, which will support approximately 90 projects in FY2020. RUS broadband programs have been awarding funds to entities serving rural communities since FY2001. Since their inception, a number of criticisms have emerged. Perhaps the major criticism of the broadband loan program was that not enough loans are approved, thereby making it difficult for rural communities to take full advantage of the program. The loan application process has been criticized as being overly complex and burdensome, requiring applicants to spend months preparing costly market research and engineering assessments. Many applications are rejected because the applicant's business plan is deemed insufficient to support a commercially viable business. The biggest reason for applications being returned has been insufficient credit support, whereby applicants do not have sufficient cash-on-hand (one year's worth is required in most cases). The requirement for cash-on-hand is viewed as particularly onerous for small start-up companies, many of whom lack sufficient capital to qualify for the loan. Such companies, critics assert, may be those entities most in need of financial assistance. In report language to the FY2006 Department of Agriculture Appropriations Act ( P.L. 109-97 ), the Senate Appropriations Committee ( S.Rept. 109-92 ) directed the RUS \"to reduce the burdensome application process and make the program requirements more reasonable, particularly in regard to cash-on-hand requirements.\" The committee also directed USDA to hire more full-time employees to remedy delays in application processing times. At a May 17, 2006, hearing held by the Senate Committee on Agriculture, Nutrition, and Forestry, the Administrator of the RUS stated that RUS is working to make the program more user friendly, while at the same time protecting taxpayer investment: As good stewards of the taxpayers' money, we must make loans that are likely to be repaid. One of the challenges in determining whether a proposed project has a reasonable chance of success is validating the market analysis of the proposed service territory and ensuring that sufficient resources are available to cover operating expenses throughout the construction period until such a time that cash flow from operations become sufficient. The loan application process that we have developed ensures that the applicant addresses these areas and that appropriate resources are available for maintaining a viable operation. According to RUS, the loan program was initially overwhelmed by applications (particularly during a two-week period in August 2003), and as the program matured, application review times have dropped. On May 11, 2007, RUS released a Proposed Rule which sought to revise regulations for the broadband loan program. In the background material accompanying the Proposed Rule, RUS stated that the average application processing time in 2006 was almost half of what it was in 2003. Since the inception of the broadband grant and loan programs, the criteria for applicant eligibility have been criticized both for being too broad and for being too narrow. An audit report released by USDA's Office of Inspector General (IG) found that the \"programs' focus has shifted away from those rural communities that would not, without Government assistance, have access to broadband technologies.\" Specifically the IG report found that the RUS definition of rural area has been \"too broad to distinguish usefully between suburban and rural communities,\" with the result that, as of March 10, 2005, $103.4 million in loans and grants (nearly 12% of total funding awarded) had been awarded to 64 communities located near large cities. The report cited examples of affluent suburban subdivisions qualifying as rural areas under the program guidelines and receiving broadband loans. On the other hand, eligibility requirements have also been criticized as too narrow. For example, the limitation of assistance only to communities of 20,000 or less in population excludes small rural towns that may exceed this limit, and also excludes many municipalities seeking to deploy their own networks. Similarly, per capita income requirements can preclude higher income communities with higher costs of living (e.g., rural Alaska), and the limitation of grant programs only to underserved areas excludes rural communities with existing but very limited broadband access. The IG report found that RUS too often has given loans to communities with existing broadband service. The IG report found that \"RUS has not ensured that communities without broadband service receive first priority for loans,\" and that although RUS has a system in place to prioritize loans to unserved communities, the system \"lacks a cutoff date and functions as a rolling selection process—priorities are decided based on the applicants who happen to be in the pool at any given moment.\" The result is that a significant number of communities with some level of preexisting broadband service have received loans. According to the IG report, of 11 loans awarded in 2004, 66% of the associated communities served by those loans had existing service. According to RUS, 31% of communities served by all loans (during the period 2003 through early 2005) had preexisting competitive service (not including loans used to upgrade or expand existing service). In some cases, according to the IG report, \"loans were issued to companies in highly competitive business environments where multiple providers competed for relatively few customers.\" At the May 1, 2007, hearing before the House Subcommittee on Specialty Crops, Rural Development, and Foreign Agriculture, then-RUS Administrator James Andrews testified that of the 69 broadband loans awarded since the program's inception, 40% of the communities approved for funding were unserved at the time of loan approval, and an additional 15% had only one broadband provider. Awarding loans to entities in communities with preexisting competitive service raised criticism from competitors who already offer broadband to those communities. According to the National Cable and Telecommunications Association (NCTA), \"RUS loans are being used to unfairly subsidize second and third broadband providers in communities where private risk capital already has been invested to provide broadband service.\" Critics argued that providing loans in areas with preexisting competitive broadband service creates an uneven playing field and discourages further private investment in rural broadband. In response, RUS stated in the IG report that its policies are in accordance with the statute, and that they address \"the need for competition to increase the quality of services and reduce the cost of those services to the consumer.\" RUS argued that the presence of a competitor does not necessarily mean that an area is adequately served, and additionally, that in order for some borrowers to maintain a viable business in an unserved area, it may be necessary for that company to also be serving more densely populated rural areas where some level of competition already exists. In 2008, as directed by the House Appropriations Committee ( H.Rept. 110-258 , FY2008 Agriculture appropriations bill), the IG reexamined the RUS broadband loan and loan guarantee program to determine whether RUS had taken sufficient corrective actions in response to the issues raised in the 2005 IG report. The IG concluded \"the key problems identified in our 2005 report—loans being issued to suburban and exurban communities and loans being issued where other providers already provide access—have not been resolved.\" Specifically, the follow-up IG report found that between 2005 and 2008, RUS broadband borrowers providing services in 148 communities were within 30 miles of cities with 200,000 inhabitants, including communities near very large urban areas such as Chicago and Las Vegas. The IG report also found that since 2005 \"RUS has continued providing loans to providers in markets where there is already competing service.\" Of the 37 applications approved since September 2005, 34 loans were granted to applicants in areas where one or more private broadband providers already offered service. These 34 borrowers received $873 million to service 1,448 communities. The IG report found that since 2005, 77% of communities which were expected to receive service from a project financed by an approved RUS broadband loan had at least one existing broadband provider present, 59% had two or more existing providers, and 27% had three or more existing providers. In an official response to the follow-up IG report, RUS fundamentally disagreed with the IG criticisms, stating that the loans awarded between 2005 and 2008 were provided \"in a way entirely consistent with the statutory requirements of the underlying legislation governing administration of the program, the regulations and guidance issued by the Department to implement the statute, and the intent of Congress.\" Specifically, RUS argued that its May 11, 2007, Proposed Rule, and the subsequent changes to the broadband loan and loan guarantee statute made by the 2008 farm bill, both addressed concerns over loans to nonrural areas and to communities with preexisting broadband providers. However, the Final Rule based on the Proposed Rule and the 2008 farm bill had not yet been released and implemented during the 2005-2008 period examined by the IG, and RUS was compelled by law to continue awarding broadband loans under the existing law and rules. During 2009 and 2010, the Rural Broadband Access Loan and Loan Guarantee program was in hiatus while RUS implemented the Broadband Initiatives Program (Recovery Act grants and loans) and developed new regulations implementing the 2008 farm bill. On March 14, 2011, the new rules were released. According to then-RUS Administrator Jonathan Adelstein, \"this regulation and other measures taken by the agency have addressed all the concerns raised by the OIG,\" and on March 24, 2011, \"the OIG notified RUS that it has closed its audits of the RUS broadband loan program.\" In May 2014, GAO released its report, USDA Should Evaluate the Performance of the Rural Broadband Loan Program . In the report, GAO analyzed rural broadband loans awarded between the years 2003 and 2013. GAO found that of the 100 loans awarded (worth $2 billion), 43% were no longer active due to 25 loans rescinded and 18 defaulted (RUS rejected 149 of the 249 applications received); that RUS loans can help promote limited broadband deployment and economic development, but performance goals do not fully align with the program's purpose; and that FCC reforms of the Universal Service Fund and intercarrier compensation have created temporary uncertainty that may be hindering investment in broadband. To address its findings, GAO made two recommendations to the Secretary of Agriculture: evaluate loans made by RUS through the broadband loan program to identify characteristics of loans that may be at risk of rescission or default; and align performance goals under the \"enhance rural prosperity\" strategic objective in the Annual Performance Report to the broadband loan program's purpose, to the extent feasible. The Rural Broadband Access Loan and Loan Guarantee program is authorized by Section 601 of the Rural Electrification Act of 1936. Since the program was established in the 2002 farm bill, it has been subsequently reauthorized and modified by the 2008 and 2014 farm bills. The 2018 farm bill seeks to again reauthorize and modify the program, as well as addressing other RUS broadband programs and issues. The 110 th Congress considered reauthorization of the Rural Broadband Access Loan and Loan Guarantee program as part of the 2008 farm bill. The following are some key issues which were considered during the debate over reauthorization of the RUS broadband loan and loan guarantee program. The RUS broadband program was criticized for excluding too many applicants due to stringent financial requirements (e.g., the requirement that an applicant have a year's worth of cash-on-hand) and an application process—requiring detailed business plans and market surveys—that some viewed as overly expensive and burdensome to complete. During the reauthorization process, Congress considered whether the criteria for loan eligibility should be modified, and whether a more appropriate balance could be found between the need to make the program more accessible to unserved and often lower-income rural areas, and the need to protect taxpayers against bad loans. The definition of which communities qualify as \"rural\" had been changed twice by statute since the broadband loan program was initiated. Under the pilot program, funds were authorized under the Distance Learning and Telemedicine Program, which defines \"exceptionally rural areas\" (under 5,000 inhabitants), \"rural areas\" (between 5,000 and 10,000), and \"mid-rural areas\" (between 10,000 and 20,000). RUS determined that communities of 20,000 or less would be eligible for broadband loans in cases where broadband services did not already exist. In 2002, this definition was made narrower by the Farm Security and Rural Investment Act ( P.L. 107-171 ), which designated eligible communities as any incorporated or unincorporated place with fewer than 20,000 inhabitants, and which was outside any standard metropolitan statistical area (MSA). The requirement that communities not be located within MSA's effectively prohibited suburban communities from receiving broadband loans. However, in 2004, the definition was again changed by the FY2004 Consolidated Appropriations Act ( P.L. 108-199 ). The act broadened the definition, keeping the population limit at 20,000, but eliminating the MSA prohibition, thereby permitting rural communities near large cities to receive loans. Thus the current definition used for rural communities is the same as what was used for the broadband pilot program, except that loans can now be issued to communities with preexisting service. The definition of what constitutes a \"rural\" community is always a difficult issue for congressional policymakers in determining how to target rural communities for broadband assistance. On the one hand, the narrower the definition the greater the possibility that deserving communities may be excluded. On the other hand, the broader the definition used, the greater the possibility that communities not traditionally considered \"rural\" or \"underserved\" may be eligible for financial assistance. A related issue is the scope of coverage proposed by individual applications. While many of the loan applications propose broadband projects offering service to multiple rural communities, RUS identified a trend toward larger regional and national proposals, covering hundreds or even more than 1,000 communities. The larger the scope of coverage, the greater the complexity of the loan application and the larger the possible benefits and risks to taxpayers. Loans to areas with competitive preexisting service—that is, areas where existing companies already provide some level of broadband—sparked controversy because loan recipients are likely to compete with other companies already providing broadband service. During reauthorization, Congress was asked to more sharply define whether and/or how loans should be given to companies serving rural areas with preexisting competitive service. On the one hand, some argued that the federal government should not be subsidizing competitors for broadband service, particularly in sparsely populated rural markets which may be able only to support one provider. Furthermore, keeping communities with preexisting broadband service eligible may divert assistance from unserved areas that are most in need. On the other hand, many suburban and urban areas currently receive the benefits of competition between broadband providers—competition which can potentially drive down prices while improving service and performance. It is therefore appropriate, others argued, that rural areas also receive the benefits of competition, which in some areas may not be possible without federal financial assistance. It was also argued that it may not be economically feasible for borrowers to serve sparsely populated unserved communities unless they are permitted to also serve more lucrative areas which may already have existing providers. The 2002 farm bill ( P.L. 107-171 ) directed RUS to use criteria that are \"technologically neutral\" in determining which projects to approve for loans. In other words, RUS is prohibited from typically valuing one broadband technology over another when assessing loan applications. As of November 10, 2008, 37% of approved and funded projects employed fiber-to-the-home technology, 17% employed DSL, 25% fixed wireless, 19% hybrid fiber-coaxial (cable), and 2% broadband over powerlines (BPL). No funding has been provided for projects utilizing satellite broadband. While decisions on funded projects were required to be technologically neutral, RUS (through the Secretary of Agriculture) had the latitude to determine minimum required data transmission rates for broadband projects eligible for funding. According to the statute, \"the Secretary shall, from time to time as advances in technology warrant, review and recommend modifications of rate-of-data transmission criteria for purposes of the identification of broadband service technologies.\" Some argued that the minimum speed thresholds should be raised to ensure that rural areas receive \"next-generation\" broadband technologies with faster data rates capable of more varied and sophisticated applications. On the other hand, significantly raising minimum data rates could exclude certain technologies—for example, typical data transmission rates for fiber and some wireless technologies exceed what is offered by \"current generation\" technologies such as DSL and cable. Proponents of keeping the minimum threshold at a low level argued that underserved rural areas are best served by any broadband technology that is economically feasible to deploy, regardless of whether it is \"next\" or \"current\" generation. The Food, Conservation, and Energy Act of 2008 became law on June 18, 2008 ( P.L. 110-246 ). Section 6110, \"Access to Broadband Telecommunications Services in Rural Areas,\" reauthorized the RUS broadband loan and loan guarantee program and addressed many of the criticisms and issues raised during the reauthorization process. The following summarizes broadband-related provisions that changed previous law. Defines rural area as any area other than (1) a city or town that has a population of greater than 20,000 and (2) an urbanized area contiguous and adjacent to a city or town with a population greater than 50,000. The Secretary may, by regulation only, consider not to be rural an area that consists of any collection of census blocks contiguous to each other with a housing density of more than 200 housing units per square mile and that is contiguous with or adjacent to an existing boundary of a rural area. Provides that the highest priority is to be given to applicants that offer to provide broadband service to the greatest proportion of households currently without broadband service. Eligible entities are required to submit a proposal to the Secretary that meets the requirements for a project to offer to provide service to a rural area and agree to complete build out of the broadband service within three years. Prohibits any eligible entity that provides telecommunications or broadband service to at least 20% of the households in the United States from receiving an amount of funds under this section for a fiscal year in excess of 15% of the funds authorized and appropriated for the broadband loan program. Directs the Secretary of Agriculture \"from time to time as advances in technology warrant,\" to review and recommend modifications in rate-of-data-transmission criteria for the purpose of identifying eligible broadband service technologies. At the same time, the Secretary is prohibited from establishing requirements for bandwidth or speed that have the effect of precluding the use of evolving technologies appropriate for use in rural areas. Prohibits the Secretary from making a loan in any area where there are three or more incumbent service providers unless the loan meets all of the following requirements: (1) the loan is to an incumbent service provider that is upgrading service in that provider's existing territory; (2) the loan proposes to serve an area where not less than 25% of the households are offered service by not more than 1 provider; and (3) the applicant is not eligible for funding under another provision of the Rural Electrification Act. Incumbent service provider is defined as an entity providing broadband service to not less than 5% of the households in the service territory proposed in the application. Also prohibits the Secretary from making a loan in any area where not less than 25% of the households are offered broadband service by not more than one provider unless a prior loan has been made in the same area. Directs the Secretary to consider existing recurring revenues at the time of application in determining an adequate level of credit support. Requires the Secretary to ensure that the type, amount, and method of security used to secure a loan or loan guarantee is commensurate to the risk involved with the loan or loan guarantee, particularly when the loan or loan guarantee is issued to a financially healthy, strong, and stable entity. The Secretary is also required, in determining the amount and method of security, to consider reducing the security in areas that do not have broadband service. Allows the Secretary to require an entity to provide a cost-share in an amount not to exceed 10% of the amount of the loan or loan guarantee. Retains the current law rate of interest for direct loans—which is the rate equivalent to the cost of borrowing to the Department of the Treasury for obligations of comparable maturity or 4%. Directs that loan or loan guarantee may have a term not to exceed 35 years if the Secretary determines that the loan security is sufficient. In case of substantially underserved trust areas (for example, Indian lands), where the Secretary determines a high need exists for the benefits of the program, the Secretary has the authority to provide loans with interest rates as low as 2% and may waive nonduplication restrictions, matching fund requirements, credit support requirements, or other regulations. Allows the Secretary to require an entity that proposes to have a subscriber projection of more than 20% of the broadband service market in a rural area to submit a market survey. However, the Secretary is prohibited from requiring a market survey from an entity that projects to have less than 20% of the broadband market. Requires public notice of each application submitted, including the identity of the applicant, the proposed area to be served, and the estimated number of households in the application without terrestrial-based broadband. Authorizes the Secretary to take steps to reduce the costs and paperwork associated with applying for a loan or loan guarantee under this section by first-time applicants, particularly those who are smaller and start-up internet providers. Allows the Secretary to establish a preapplication process under which a prospective applicant may seek a determination of area eligibility. Provides that an application, or a petition for reconsideration of a decision on such an application, that was pending on the date 45 days before enactment of this act and that remains pending on the date of enactment of this act is to be considered under eligibility and feasibility criteria in effect on the original date of submission of the application. Authorizes the Rural Broadband Access Loan and Loan Guarantee program at $25 million to be appropriated for each of fiscal years 2008 through 2012. Requires that the Secretary annually report to Congress on the rural broadband loan and loan guarantee program. The annual report is to include information pertaining to the loans made, communities served and proposed to be served, speed of broadband service offered, types of services offered by the applicants and recipients, length of time to approve applications submitted, and outreach efforts undertaken by USDA. Section 6111 provides for a National Center for Rural Telecommunications Assessment. The center is to assess the effectiveness of broadband loan programs, work with existing rural development centers to identify appropriate policy initiatives, and provide an annual report that describes the activities of the center, the results of research carried out by the center, and any additional information that the Secretary may request. An appropriation of $1 million is authorized for each of the fiscal years 2008 through 2012. Section 6112 directs the Chairman of the Federal Communications Commission (FCC), in coordination with the Secretary, to submit to Congress a report describing a comprehensive rural broadband strategy. Requires the report to be updated during the third year after enactment. During 2009 and 2010, the Farm Bill Broadband Loan Program was on hiatus as RUS implemented the Broadband Initiatives Program (BIP) established under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). At the same time, final regulations implementing the broadband loan program as reauthorized by the 2008 farm bill were on hold and were being refined to reflect, in part, RUS experience in implementing BIP. Subsequently, on March 14, 2011, an Interim Rule and Notice was published in the Federal Register setting forth the rules and regulations for the broadband loan program as reauthorized by P.L. 110-246 . While the rule was immediately effective, RUS accepted public comment before ultimately releasing a final rule. Meanwhile, pursuant to Section 6112 of P.L. 110-246 , the FCC released on May 22, 2009, its report on rural broadband strategy, entitled Bringing Broadband to Rural America . The report made a series of recommendations including improved coordination of rural broadband efforts among federal agencies, states, and communities; better assessment of broadband needs, including technological considerations and broadband mapping and data; and overcoming challenges to rural broadband deployment. On January 27, 2014, the conference report for the Agricultural Act of 2014 was filed ( H.Rept. 113-333 ). The conference agreement was approved by the House on January 29, approved by the Senate on February 4, and signed into law ( P.L. 113-79 ) by the President on February 7, 2014. P.L. 113-79 amended Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to reauthorize the Rural Broadband Access Loan and Loan Guarantee Program through FY2018. P.L. 113-79 also included provisions to redefine project area eligibility with respect to existing broadband service, increase the program's transparency and reporting requirements, define a minimum level of broadband service, require a study on the gathering and use of address-level data, and establish a new Rural Gigabit Network Pilot Program. The conference agreement did not include a Senate bill proposal ( S. 954 ) to create a new grant component to the existing broadband loan and loan guarantee program, nor did the conference agreement adopt the Senate bill's broadening of the definition for eligible rural areas. Specifically, Section 6104 of P.L. 113-79 made the following changes to the Rural Broadband Access Loan and Loan Guarantee program: Project area eligibility—provides that an eligible area is one where not less than 15% of the households in the proposed service territory are unserved or have service levels below the minimum acceptable level of broadband service (which is set at 4 Mbps/1 Mbps). Priority—directs RUS to give the highest priority to applicants that offer to provide broadband service to the greatest proportion of unserved households or households that do not have residential broadband service that meets the minimum acceptable level of broadband service, as certified by the affected community, city, county, or designee; or demonstrated on the broadband map of the affected state if the map contains address-level data, or the National Broadband Map if address-level data are unavailable. RUS shall provide equal consideration to all qualified applicants, including those that have not previously received grants, loans, or loan guarantees. Also gives priority to applicants that offer to provide broadband service not predominantly for business service, but if at least 25% of customers in the proposed service territory are commercial interests. Evaluation period—directs RUS to establish not less than two evaluation periods for each fiscal year to compare loan and loan guarantee applications and to prioritize loans and loan guarantees to all or part of rural communities that do not have residential broadband service that meets the minimum acceptable level of broadband service. Market survey requirement—provides that survey information must be certified by the affected community, city, county, or designee; and demonstrated on the broadband map of the affected state if the map contains address-level data, or the National Broadband Map if address-level data are unavailable. Notice requirement—directs RUS to maintain a fully searchable database on the internet that contains a list of each entity that has applied for assistance, the status of each application, and a detailed description of each application. For each entity receiving assistance, the database shall provide the name of the entity, the type of assistance being received, the purpose for which the entity is receiving the assistance, and each semiannual report submitted. Reporting—requires semiannual reports from loan recipients for three years after completion of the project describing in detail the use of the assistance, and the progress toward fulfilling project objectives. Default and deobligation—directs RUS to establish written procedures for recovering funds from loan defaults, deobligating awards that demonstrate an insufficient level of performance or fraudulent spending, awarding those funds to new or existing applicants, and minimizing overlap among programs. Service area assessment—directs RUS to promptly post on its website a list of the census block groups that an applicant proposes to service. RUS will provide not less than 15 days for broadband service providers to voluntarily submit information about the broadband services that the providers offer in the groups or tracts listed so that RUS may assess whether the applications submitted meet the eligibility requirements. If no broadband service provider submits this information, RUS will consider the number of providers in the group or tract to be established by reference to the most current National Broadband Map or any other data RUS may collect or obtain through reasonable efforts. Definition of broadband service—establishes \"the minimum acceptable level of broadband service\" as at least 4 Mbps downstream and 1 Mbps upstream. At least once every two years, the Secretary shall review and may adjust this speed definition and may consider establishing different minimum speeds for fixed and mobile (wireless) broadband. Terms and conditions—in determining the terms and conditions of assistance, the Secretary may consider whether the recipient would be serving an area that is unserved (or has service levels below the minimum acceptable level of broadband service), and if so, can establish a limited initial deferral period or comparable terms necessary to achieve the financial feasibility and long-term sustainability of the project. Report to Congress—adds requirements to the content of the annual report to Congress, including the number of residences and businesses receiving new broadband services; network improvements, including facility upgrades and equipment purchases; average broadband speeds and prices on a local and statewide basis; any changes in broadband adoption rates; and any specific activities that increase high-speed broadband access for educational institutions, health care providers, and public safety service providers. Reauthorization—reauthorizes the broadband loan and loan guarantee program through FY2018 at the current level of $25 million per year. Study on providing effective data for the National Broadband Map—directs USDA, in consultation with DOC and the FCC, to conduct a study of the ways data collected by RUS could most effectively be shared with the FCC to support the development and maintenance of the National Broadband Map. The study shall include a consideration of the circumstances under which address-level data could be collected by RUS and appropriately shared with the FCC. In addition, Section 6105 authorized a new Rural Gigabit Network Pilot Program. Specifically, USDA was authorized to provide grants, loans, or loan guarantees for projects that would extend ultra-high-speed broadband service (defined as 1 gigabit per second downstream capacity) to rural areas where ultra-high-speed service is not provided in any part of the proposed service territory. The pilot program was authorized at $10 million per year for the years FY2014 through FY2018. However, no funding was appropriated for this pilot program over that period, and the Rural Gigabit Network Pilot Program was not implemented. On July 30, 2015, the RUS published in the Federal Register the interim rule (7 C.F.R. part 1738) implementing the Rural Broadband Access Loan and Loan Guarantee Program as reauthorized by the February 7, 2014, enactment of the Agricultural Act of 2014 ( P.L. 113-79 ). Publication of the interim rule allowed the program to go forward, initially with two application periods per year. The interim rule was made final on June 9, 2016. With the 2014 farm bill expiring on September 30, 2018, the 115 th Congress considered reauthorization of the RUS broadband loan and loan guarantee program and other broadband-related provisions in the 2018 farm bill. On April 12, 2018, H.R. 2 , the Agriculture and Nutrition Act of 2018, was introduced by Representative Conaway. Subtitle B of Title VI (\"Connecting Rural Americans to High Speed Broadband\") would reauthorize the Rural Broadband Access Loan and Loan Guarantee Program and make a number of changes to the RUS rural broadband programs. On April 18, 2018, the House Agriculture Committee approved H.R. 2 ( H.Rept. 115-661 ) with amendments. On June 21, 2018, the House passed H.R. 2 . On June 11, 2018, the 2018 Senate farm bill, S. 3042 , was introduced by Senator Roberts. The Agriculture Improvement Act of 2018 was approved on June 13, 2018, by the Committee on Agriculture, Nutrition, and Forestry and ordered to be reported with an amendment in the nature of a substitute favorably. On June 28, 2018, the Senate passed its version of H.R. 2 . The following are some key differences between the House and Senate bills with respect to the rural broadband loan and loan guarantee program. Under current law, projects eligible for rural broadband loans and loan guarantees can only (with some exceptions) serve areas in which 15% or more of households are unserved or have service levels below the minimum acceptable level of broadband service. Additionally, under current law, an eligible service area can have no more than two incumbent broadband service providers. The House bill does not change the current service area eligibility threshold for rural broadband loans and loan guarantees. On the other hand, the Senate bill would require that rural broadband loans, loan guarantees, and grants can only serve areas in which 90% or more of households are unserved or have service levels below the minimum acceptable level of broadband service. The Senate bill also provides that an eligible service area can have no more than one incumbent broadband service provider. Both the House and Senate bills add a grant component to the current farm bill broadband loan and loan guarantee program. In the House bill, grants are only available in combination with associated loans under the rural broadband, electric infrastructure, and telecommunications infrastructure loan and loan guarantee programs. Additionally, project areas must serve hard-to-reach communities—specifically areas with a density of less than 12 service points per road mile and where no incumbent provider delivers fixed terrestrial broadband service at or above the minimum broadband speed. The maximum federal share of a total project cost varies by the density of the project service area, ranging from a 25% to 75% federal share. In the Senate bill, grants are subject to the same service area eligibility criteria as broadband loans and loan guarantees (no less than 90% unserved, no more than one incumbent). The maximum federal share for a grant is 50%, although USDA can adjust the federal share up to 75% if the Secretary determines that the project would serve particularly remote, unserved, and low-income areas. Both the House and Senate bills set the minimum broadband service speed at 25 Mbps (download)/3 Mbps (upload), to be reviewed by the Secretary at least once every two years. Additionally, the House bill requires USDA to establish projections of minimum acceptable standards of broadband service for 5, 10, 15, 20, and 30 years into the future. Unless cost prohibitive, projects eligible for a rural broadband loan or loan guarantee must provide broadband service at the minimum level, and must be determined capable of meeting future minimum speed standards over the life of the loan or loan guarantee. The House bill authorizes RUS to make rural broadband loans or loan guarantees to middle mile infrastructure projects, which are defined as any broadband infrastructure that does not connect directly to end user locations (including anchor institutions) and may include interoffice transport, backhaul, internet connectivity, data centers, or special access transport to rural areas. The Senate bill does not contain a middle mile infrastructure provision. For rural broadband loans and loan guarantees, the House bill sets an authorization level of $150 million for each of fiscal years 2019 through 2023. Additionally, the House bill provides $350 million for each of fiscal years 2019 to 2023 for grants to be available in combination with associated loans and loan guarantees. The Senate bill sets an authorization level for broadband loans, loan guarantees, and grants of $150 million for each of fiscal years 2019 through 2023. On December 10, 2018, the conference report ( H.Rept. 115-1072 ) accompanying H.R. 2 , the Agriculture Improvement Act of 2018, was filed. The conference report was agreed to in the House and Senate on December 11 and December 12 respectively. On December 20, 2018, the President signed the bill ( P.L. 115-334 ). The following summarizes the major provisions relevant to RUS broadband programs. Adds a grant component to the existing program, which is now authorized to provide grants, loans, loan guarantees, and loan/grant combinations. Priority —directs the Secretary to give the highest priority to applications proposing to serve rural communities that do not have any residential broadband service of at least 10 Mbps/1 Mbps. Also receiving high priority are projects that provide the maximum level of broadband service to the greatest proportion of rural households in the proposed service area. Additional priority factors include rural communities with a high percentage of low-income residents, with populations under 10,000, that are experiencing outmigration, that are isolated from other population centers, or that propose to provide broadband for use in various applications of precision agriculture. Projects will also receive priority if they are developed or funded by two or more stakeholders (for example, public-private partnerships). Grant Eligibility and Cost-Sharing —projects eligible for grants (including grant/loan combinations) must be carried out in a proposed service territory in which not less than 90% of the households are unserved. Grants shall not exceed 75% of the total project cost to an area with a density fewer than 7 people per square mile, 50% to an area with a density of 7 to 12 people per square mile, and 25% to an area with a density of 12 to 20 people per square mile. However, the Secretary has the authority to adjust the federal share of a grant up to 75% for an area of rural households without any 10 Mbps/1 Mbps broadband service, or rural communities that are under 10,000 in population, with a high percentage of low-income residents, experiencing outmigration, that are isolated from other population centers, or that are proposing broadband deployment for precision agriculture applications. Additionally, the Secretary may make modifications of the density thresholds to ensure that funds are best utilized to provide broadband service in communities that are the most rural in character. Loan Eligibility —for broadband loans or loan guarantees, eligible proposed service areas must have not less than 50% of households unserved or below the minimum acceptable level (set at 25 Mbps/3 Mbps) of fixed broadband service, whether terrestrial or wireless. P.L. 115-334 raises the previous eligibility threshold from 15% to 50%. Left unchanged is the eligibility requirement that broadband service cannot be provided in any part of the proposed service territory by three or more incumbent service providers. Broadband Buildout Requirements —allows five years for applicants to complete the buildout of a project (up from three years). Requires the Secretary to set a current minimum acceptable standard of broadband service of 25 Mbps/3 Mbps, and to establish projections of minimum acceptable standards of broadband service of a project for 5 to 10 years, 11 to 15 years, 16 to 20 years, and more than 20 years into the future. The Secretary shall review and may adjust those minimum levels at least once every two years. Projects eligible for a rural broadband loan or loan guarantee must provide broadband service at the minimum level, and must be determined capable of meeting future minimum speed standards over the life of the loan or loan guarantee. However, if an applicant shows that it would be cost prohibitive to meet the minimum acceptable level of broadband service for the entirety of a proposed service territory due to its unique characteristics, the Secretary and the applicant may agree to utilize substitute standards for any unserved portion of the project. Technical Assistance and Training —the Secretary may provide to eligible applicants technical assistance and training to prepare applications, including required reports and surveys, and to improve financial management relating to the proposed project. Only applicants proposing to serve communities without residential broadband service of at least 10 Mbps/1 Mbps are eligible for technical assistance and training. Not less than 3% and not more than 5% of the annual appropriation for the broadband grant, loan, and loan guarantee program shall be used for technical assistance and training. Guaranteed Loan Fees —requires the Secretary to charge lenders of guaranteed loans a fee to offset subsidy costs. Fees shall be in such amounts as to bring down the cost of subsidies for guaranteed loans, but that do not act as a bar to participation in the program. Payment Assistance for Certain Loan and Grant Recipients —allows the Secretary to award grant funding—subject to agreed project milestones, objectives, and other considerations—that would allow a loan recipient to receive the benefit of a subsidized loan (with reduced interest rates) or a payment assistance loan. Authorization —sets an authorization level of $350 million for each of fiscal years 2019 through 2023 (up from $25 million per year), and delays the termination of authority to make loans and loan guarantees until September 30, 2023. Authorizes $10 million for each of fiscal years 2018 through 2023 for grants, loans, and loan guarantees toward middle mile infrastructure projects. Middle mile infrastructure connects underserved rural areas to the internet backbone; it does not connect directly to end-user locations. A project is eligible if at least 75% of the interconnection points serve eligible rural areas. A grant cannot exceed 20% of the total project cost. Renames the Rural Gigabit Network Pilot Program (which was authorized in the 2014 farm bill but never funded through appropriations) as the Innovative Broadband Advancement Program, which is authorized to provide a grant, a loan, or both to an eligible entity to demonstrate innovative broadband technologies or methods of broadband deployment that significantly decrease the cost of deployment and provide substantially faster broadband speeds than are available in a rural area. The program is authorized at $10 million for each of fiscal years 2018 through 2023. Codifies the existing Community Connect Grant Program and authorizes the program at $50 million for each of fiscal years 2018 through 2023. Defines an eligible service area as having broadband service capacity less than speeds of 10 Mbps download and 1 Mbps upload. Requires the Secretary, beginning on October 1, 2020, to consider any portion of a service territory subject to an outstanding grant agreement as unserved for the purposes of broadband loan programs if broadband service is not provided at a minimum of 10 Mbps/1 Mbps, unless the broadband provider has begun or already constructed broadband facilities in that area which would meet the minimum acceptable broadband service standard. Requires the Secretary to establish written procedures for all broadband programs to recover funds from loan and grant defaults, deobligate awards that demonstrate an insufficient level of performance or fraudulent spending, award those funds on a competitive basis to new or existing applicants, and minimize overlap among programs. The Secretary may establish a deferral period of not shorter than the buildout period established for the project in order to support the financial feasibility and long-term sustainability of the project. Public Notice —requires the Secretary to make available to the public a fully searchable database on the RUS website that contains information on all broadband projects provided assistance or for which assistance is sought. Service Area Assessment —after giving public notice for a particular project seeking assistance, the Secretary shall provide 45 days for providers to voluntarily submit information indicating their presence in a proposed service area. If no existing provider submits such information, the Secretary may collect or obtain through reasonable efforts any other data on existing providers. In the case of applications requesting funding for unserved rural areas, the Secretary shall confirm unserved rural areas by conferring with the FCC and NTIA, reviewing any other source relevant to service data validation, and performing site-specific testing to verify the unavailability of any retail broadband service. Reporting —the Secretary shall require entities receiving assistance to provide an annual report for three years after completion of the project that describes the use by the entity of the assistance and the progress toward fulfilling the objectives of the project. Middle mile project recipients are required to submit a semiannual report for five years after project completion. The recipient of assistance shall also provide complete, reliable, and precise geolocation information that indicates the location of new broadband service that is being provided. The Secretary is also required to submit an annual report to Congress that describes the extent of participation in the RUS broadband assistance programs for the preceding fiscal year. The Secretary may obligate, but not disperse, funds before the completion of otherwise required environmental, historical, or other types of reviews if the Secretary determines that a subsequent site-specific review shall be adequate and easily accomplished for the location of towers, poles, or other broadband facilities in the service area of the borrower without compromising the project or the required reviews. The proceeds of any loan or loan guarantee may be used by the recipient for the purpose of refinancing an outstanding obligation on another telecommunications loan. Allows a recipient of grants, loans, or loan guarantees provided by the Office of Rural Development to use not more than 10% of the amount for rural broadband infrastructure projects, including both retail and nonretail activities, except for a recipient who is seeking to provide retail broadband service in any area where such service is available at the minimum broadband speeds. Additionally allows a recipient of electric grants, loans, or loan guarantees to set aside not more than 10% of the amount for retail broadband service, for use only in an area that is not being provided with the minimum acceptable level of broadband service. The funding cannot result in competitive harm to any existing grant, loan, or loan guarantee under the Rural Electrification Act of 1936. Clarifies that the Secretary, through the RUS telephone loan program, may refinance loans of persons furnishing telephone service in rural areas, including indebtedness of recipients on another telecommunications loan made under the Rural Electrification Act. Also strikes the current law limitation that the refinancing may not constitute more than 40% of the loan. Consultation between USDA and NTIA —USDA shall consult with NTIA to assist in the verification of eligibility for USDA broadband programs. To this end, NTIA shall make available its broadband assessment and mapping capabilities. Consultation between USDA and FCC —USDA shall consult with the FCC before providing broadband assistance for a project to serve an area with respect to which another entity is receiving Connect America Fund or Mobility Fund support. The FCC shall consult with USDA before offering Connect America Fund or Mobility Fund support to serve an area with respect to which another entity has received RUS broadband assistance. Report to Congress —USDA, the FCC, and NTIA shall submit to Congress a report on how best to coordinate federally supported broadband programs and activities in order to achieve various objectives regarding long-term broadband service needs of rural residents. Provides that for one year after enactment, the Secretary shall use the previously existing rules and regulations for the broadband loan and Community Connect grant program until a final rule is issued. Establishes an interagency Rural Broadband Integration Working Group that shall consult with a wide spectrum of stakeholders to identify, assess, and determine possible actions relating to barriers and opportunities for broadband deployment in rural areas. Not later than 60 days after enactment, the Working Group shall publish a comprehensive survey of federal programs that currently support or could reasonably be modified to support broadband deployment and adoption; and all federal agency policies and rules with the direct or indirect effect of facilitating or regulating investment in, or deployment of, wired and wireless broadband networks. The Working Group will submit to the President a list of actions that federal agencies can take to support broadband deployment and adoption, including timelines to complete a list of priority actions and rulemakings. Section 6101 sets aside 20% of DLT grant funding for applications related to substance use disorder treatment services; Section 6102 reauthorizes the DLT program through FY2023 at $82 million per year; Section 6418 requires the Secretary to collect fees on loan guarantees in amounts that when combined with any appropriated funds equal the subsidy on such guarantees. The Secretary shall charge and collect from the lender fees in such amounts as to bring down the costs of subsidies for the guaranteed loan, except that the fees shall not act as a bar to participation in the program nor be inconsistent with current practices in the marketplace; and Section 12511 establishes the Task Force for Reviewing the Connectivity and Technology Needs of Precision Agriculture in the United States. The Task Force will develop policy recommendations to promote deployment of broadband on unserved agricultural land, with a goal of achieving reliable capabilities on 95% of agricultural land in the United States by 2025. Aside from the 2018 farm bills and annual appropriations legislation, the following bills were introduced into the 115 th Congress seeking to impact the RUS broadband programs: H.R. 800 (Huffman), introduced on February 1, 2017, as the New Deal Rural Broadband Act of 2017, would establish an Office of Rural Broadband within USDA; authorize a \"Breaking Ground on Rural Broadband Program\" to make grants, loans, or loan guarantees to eligible entities for serving rural and underserved areas ($20 billion to remain available until September 30, 2022); establish a Tribal Broadband Assistance Program ($25 million for each of fiscal years 2017 through 2022); establish a broadband grant program to accompany the Rural Broadband Loan program; modify the Telecommunications Infrastructure Loan program by raising the threshold for an eligible rural area from 5,000 to 20,000 population and by permitting RUS to give preference to loan applications that support regional telecommunications development; and direct USDA to establish and maintain an inventory of any real property that is owned, leased, or otherwise managed by the federal government on which a broadband facility could be constructed, as determined by the Under Secretary for Rural Broadband Initiatives. Referred to the Committee on Agriculture, and in addition to the Committees on Natural Resources and Energy and Commerce. H.R. 1084 (Kelly of Illinois), introduced on February 15, 2017, as the Today's American Dream Act, would direct GAO to submit to Congress a report on the efficiency and effectiveness of efforts by federal agencies to expand access to broadband service, including the RUS telecommunications and broadband programs. Referred to the Committee on Ways and Means, and in addition to the Committees on Education and the Workforce, Agriculture, Financial Services, Small Business, Energy and Commerce, the Judiciary, and Oversight and Government Reform. H.R. 4232 (Pocan), introduced on November 2, 2017, as the Broadband Connections for Rural Opportunities Program (BCROP) Act, would amend Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to establish a broadband grant program to accompany the Rural Broadband Loan program. Also would raise the broadband loan program authorization from $25 million to $50 million. Referred to the Committees on Energy and Commerce and on Agriculture. H.R. 4291 (Stefanik), introduced on November 7, 2017, as the Precision Farming Act, would utilize Rural Utilities Service loans and loan guarantees under the rural broadband access program to provide broadband service for agricultural producers, and would provide universal service support for installation charges for broadband service for agricultural producers in order to improve precision farming and ranching. Referred to the Committees on Energy and Commerce and on Agriculture. H.R. 4308 (Lujan Grisham), introduced on November 8, 2017, as the Rural Broadband Expansion Act, would authorize the Rural Utility Service's Community Connect broadband grant program at $100 million for each of fiscal years 2019 through 2023. Referred to the Committees on Agriculture and on Energy and Commerce. H.R. 5172 (O'Halleran), introduced on March 6, 2018, would assist Indian tribes in maintaining, expanding, and deploying broadband systems. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. H.R. 5213 (Hartzler), introduced on March 8, 2018, would prohibit the Rural Utilities Service from providing assistance for the provision of broadband service with a download speed of less than 25 megabits per second or an upload speed of less than 3 megabits per second, and clarify the broadband loan and loan guarantee authority provided in Section 601 of the Rural Electrification Act of 1936. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. H.R. 6073 (Cramer), introduced on June 12, 2018, as the RURAL Broadband Act of 2018, would prohibit USDA from providing broadband loans or grants for projects that overbuild or otherwise duplicate broadband networks operated by another provider that have received universal service support from the FCC or previous broadband assistance from RUS. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. S. 1676 (Gillibrand), introduced on July 31, 2017, as the Broadband Connections for Rural Opportunities Program (BCROP) Act, would amend Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to establish a broadband grant program to accompany the Rural Broadband Loan program. Also would raise the broadband loan program authorization from $25 million to $50 million. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 2654 (Smith), introduced on April 12, 2018, as the Community Connect Grant Program Act of 2018, would amend the Rural Electrification Act of 1936 to authorize the Community Connect Grant Program at an annual level of $50 million per year. Defines \"eligible broadband service\" as operating at or above the applicable minimum download and upload speeds established by the FCC in defining the term \"advanced telecommunications capability.\" Referred to Committee on Agriculture, Nutrition, and Forestry. S. 2970 (Daines), introduced on May 24, 2018, as the RURAL Broadband Act of 2018, would prohibit USDA from providing broadband loans or grants for projects that overbuild or otherwise duplicate broadband networks operated by another provider that have received universal service support from the FCC or previous broadband assistance from RUS. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3080 (Murkowski), introduced on June 18, 2018, as the Food Security, Housing, and Sanitation Improvements in Rural, Remote, and Frontier Areas Act of 2018, would amend the Rural Electrification Act of 1936 to include a satellite project or technology within the definition of broadband service. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3360 (Wyden), introduced August 21, 2018, as the Broadband Internet for Small Ports Act, would establish priority for small harbors to receive RUS broadband funding. Referred to the Committee on Agriculture, Nutrition, and Forestry.", "summary": "Given the large potential impact broadband access may have on the economic development of rural America, concern has been raised over a \"digital divide\" between rural and urban or suburban areas with respect to broadband deployment. While there are many examples of rural communities with state-of-the-art telecommunications facilities, recent surveys and studies have indicated that, in general, rural areas tend to lag behind urban and suburban areas in broadband deployment. According to the Federal Communications Commission's Communications Marketplace Report, as of 2017, 24% of Americans in rural areas lacked coverage from fixed terrestrial 25 Mbps/3 Mbps broadband, as compared to only 1.5% of Americans in urban areas. The comparatively lower population density of rural areas is likely a major reason why broadband is less deployed than in more highly populated suburban and urban areas. Particularly for wireline broadband technologies—such as cable modem and fiber—the greater the geographical distances among customers, the larger the cost to serve those customers. The Rural Utilities Service (RUS) at the U.S. Department of Agriculture (USDA) houses three ongoing assistance programs exclusively created and dedicated to financing broadband deployment: the Rural Broadband Access Loan and Loan Guarantee Program, the Community Connect Grant Program, and the ReConnect Program. Additionally, the Telecommunications Infrastructure Loan and Loan Guarantee Program (previously the Telephone Loan Program) funds broadband deployment in rural areas. Distance Learning and Telemedicine (DLT) grants—while not principally supporting connectivity—fund equipment and software that operate via telecommunications to rural end-users of telemedicine and distance learning applications. The Consolidated Appropriations Act, 2019 (P.L. 116-6) provided $5.83 million to subsidize a rural broadband loan level of $29.851 million, $30 million to Community Connect broadband grants, $47 million for DLT grants, and $1.725 million in loan subsidies for a total loan level of $690 million for the Telecommunications Infrastructure Loan and Loan Guarantee Program. P.L. 116-6 also provided $550 million for the ReConnect Program, which is in addition to the $600 million provided in the 2018 Consolidated Appropriations Act. The Administration's FY2020 budget proposal requested zero funding for Rural Broadband Access Loans, $200 million for the ReConnect Program, $1.933 million in budget authority to subsidize a loan level of $690 million for Telecommunications Infrastructure Loans and Loan Guarantees, $30 million for Community Connect Grants, and $43.6 million for Distance Learning and Telemedicine Grants. On December 20, 2018, the President signed the 2018 farm bill (P.L. 115-334, Agriculture Improvement Act of 2018). Regarding the RUS broadband programs, the act includes provisions authorizing a grant component in combination with the broadband loan program; increasing the annual authorization level from $25 million to $350 million; raising the proposed service area eligibility threshold of unserved households from 15% to 50% for broadband loans; authorizing grants, loans, and loan guarantees for middle mile infrastructure; directing improved federal agency broadband program coordination; and providing eligible applicants with technical assistance and training to prepare applications. In the 116th Congress, appropriations will determine the extent to which these programs will be funded.", "document_type": "crs"}
{"report": "The IDFC is authorized by statute to be a \"wholly owned Government corporation ... under the foreign policy guidance of the Secretary of State\" in the executive branch. Its purpose is to \"mobilize and facilitate the participation of private sector capital and skills in the economic development\" of developing and transition countries, in order to complement U.S. development assistance objectives and foreign policy interests (§1412). In other words, the IDFC's mission is to promote private investment in support of both U.S. global development goals and U.S. economic interests. Not yet operational, the IDFC represents a potentially major overhaul of U.S. development finance efforts. The IDFC's enabling legislation is the Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), which was enacted on October 5, 2018, as Division F of a law to reauthorize the (unrelated) Federal Aviation Administration (FAA) ( H.R. 302 / P.L. 115-254 ). Under the BUILD Act, the IDFC is to consolidate and expand the U.S. government's existing development finance functions—currently conducted primarily by the Overseas Private Investment Corporation (OPIC) and the U.S. Agency for International Development (USAID). By statute, the IDFC is a successor agency to OPIC, which is to terminate when the IDFC is operational. The BUILD Act consolidates functions currently carried out primarily by OPIC and certain elements of USAID (see Appendix ). The act established the new IDFC to be a successor entity to OPIC, taking over all of its functions and authorities and adding new ones. The IDFC's authorities would expand beyond OPIC's existing authorities to make loans and guarantees and issue insurance or reinsurance. They would also include the authority to take minority equity positions in investments, subject to limitations. In addition, unlike OPIC, the IDFC would be able to issue loans in local currency. The extent to which USAID functions will be transferred to the new IDFC is less clear. The act specifies that the Development Credit Authority (DCA), the existing legacy credit portfolio under the Urban and Environment Credit Program, and any other direct loan programs and non-DCA guarantee programs shall be transferred to the IDFC. It also provides the authority for, but does not require, the transfer of USAID's Office of Private Capital and Microenterprise, the existing USAID-managed enterprise funds (it gives the IDFC authority to establish new funds), and the sovereign loan guarantee portfolio. The disposition of these functions is to be detailed in the reorganization plan that the Administration must submit to Congress within 120 days of enactment. The reorganization plan is expected to be submitted by early February 2019. In addition, the IDFC would have the authority to conduct feasibility studies on proposed investment projects (with cost sharing) and provide technical assistance. \"Development finance\" is a term commonly used to describe government-backed financing to support private sector capital investments in developing and emerging economies. It can be viewed on a continuum of public and private support, situated between pure government support through grants and concessional loans and pure commercial financing at market-rate terms. Development finance generally is targeted toward promoting economic development by supporting foreign direct investment (FDI) in underserved types of projects, regions, and countries; undercapitalized sectors; and countries with viable project environments but low credit ratings. Such support is aimed to increase private sector activity and public-private partnerships that would not happen otherwise in the absence of development finance support because of the actual or perceived risk associated with the activity. Tools of development finance may include equity (raising capital through the sale of ownership shares), direct loans, loan guarantees, political risk insurance, and technical assistance. Development financing is particularly important for infrastructure funding, where annual global investment in transportation, power, water, and telecommunications systems falls, by one account, almost $800 million short of the estimated $3.3 trillion required to keep pace with projected economic growth. The largest infrastructure investment gaps are in the road and electricity sectors in developing and emerging economies. DFIs are specialized entities that supply development finance, generally aiming to be catalytic agents in promoting private sector investment in developing countries. In the United States, OPIC has been the primary DFI since the 1970s. In FY2017, OPIC reported authorizing $3.8 billion in new commitments for 112 projects, and its exposure reached a record high of $23.2 billion (see Figure 1 ). OPIC estimated that it helped mobilize $6.8 billion in capital and supported 13,000 new jobs in host countries that year. Sub-Saharan Africa represents the largest share of OPIC's portfolio by region. OPIC has committed $2.4 billion in financing and political risk insurance for Power Africa−a major public-private partnership coordinated by USAID−to date, including committing $12.4 million for a loan to support construction of a hydropower plant in Uganda in FY2017. Among other focus areas, OPIC currently has $5 billion invested in the Indo-Pacific in projects to expand access to energy, education, and financial services, as well as to support local farmers. On July 30, 2018, OPIC, the Japanese Bank for International Cooperation (JBIC, Japan's counterpart to OPIC), and the Australian government announced a trilateral partnership to mobilize investments in infrastructure projects in the Indo-Pacific region to support development, connectivity, and economic growth in the region. Other agencies, such as the U.S. Agency for International Development (USAID), also provide development finance. The IDFC is to take on the DFI mantle for the United States under the BUILD Act. At the bilateral level, national governments can operate DFIs. The United Kingdom was the first country to establish a DFI in 1948. Many countries have followed suit. In the United States, OPIC began operations in 1971, but the U.S. government's role in overseas investment financing predates OPIC's formal establishment. Bilateral DFIs are typically wholly or majority government-owned. They operate either as independent institutions or as a part of larger development banks or institutions. Their organizational structures have evolved, in some cases, due to changing perceptions of how to address identified development needs in the most effective way possible. Unlike OPIC, other bilateral DFIs tend to be permanent and not subject to renewals by their countries' legislatures. DFIs also can operate multilaterally, as parts of international financial institutions (IFIs), such as the International Finance Corporation (IFC), the private-sector arm of the World Bank. They can operate regionally through regional development banks as well. Examples of these banks include the African Development Bank (AfDB), the Asian Development Bank (AsDB), the European Bank for Reconstruction & Development (EBRD), and the Inter-American Development Bank (IDB). DFIs vary in their specific objectives, management structures, authorities, and activities. Historically, official development assistance (ODA) has been a primary way that the United States and other developed countries have provided support for infrastructure projects in developing countries. However, foreign aid for infrastructure has declined over decades while the growth of direct private investment flows has outpaced ODA, making development finance an increasingly prominent way to encourage private investment in undercapitalized areas. Private investors face challenges investing in developing countries due to political risk, exchange rate risk, and weaknesses in legal, regulatory, and institutional environments, among other things. In such cases, government support, whether through equity, financing, or political risk insurance, may provide needed liquidity or assurances to catalyze private investment. While it does not mention China by name, the BUILD Act alludes to concerns with state-directed investments, such as China's Belt and Road Initiative (BRI), which launched in 2013. The act states that it is U.S. policy to \"facilitate market-based private sector development and inclusive economic growth in less developed countries\" through financing, including to provide countries a robust alternative to state-directed investments by authoritarian governments and [U.S.] strategic competitors using best practices with respect to transparency and environmental and social safeguards, and which take into account the debt sustainability of partner countries (§1411). Supporters view the IDFC as a central part of the U.S. response to China's growing economic influence in developing countries, exemplified by the BRI—which could provide, by some estimates, anywhere from $1 trillion to $8 trillion in Chinese investments and development financing for infrastructure projects in developing countries (see text box ). The Administration and many Members of Congress have been critical of China's financing model, which they find to lack transparency, operate under inadequate environmental and social safeguards for projects, and employ questionable lending practices that may lead to unsustainable debt burdens in some poorer countries (so-called \"debt diplomacy\"). Under this view, the IDFC (when operational) may help the United States compete more effectively or strategically with China. While even a strengthened OPIC may not be able to compete \"dollar-for-dollar\" with China's DFI activity, supporters argue that the United States \"can and should do more to support international economic development with partners who have embraced the private sector-driven development model.\" Others, however, argued that the act could have tightened the IDFC's focus with respect to China, for instance, by requiring the IDFC to have a specific focus on countering China's investment and economic influence; from this perspective, the failure to narrow the IDFC's scope makes it likely that the new entity may support projects of limited U.S. foreign policy and strategic interest—a concern that some critics have levied against OPIC. In February 2018, two proposed versions of the BUILD Act, H.R. 5105 in the House and S. 2463 in the Senate, were introduced to create a new U.S. International Development Finance Corporation (IDFC). Both bills proposed consolidating all of OPIC's functions and certain elements of USAID—including the Development Credit Authority (DCA), Office of Private Capital and Microenterprise, and enterprise funds. A major difference between the two bills, as introduced, was that H.R. 5105 would have authorized the IDFC for seven years, while S. 2463 would have authorized it for two decades, until September 30, 2038. The House-passed version (July 17, 2018; H.Rept. 115-814 ) and Senate committee-reported version (June 27, 2018) bridged some differences, including both providing a seven-year authorization. On September 26, 2018, the House adopted a resolution ( H.Res. 1082 ) to pass the BUILD Act as part of the Federal Aviation Administration Reauthorization Act of 2018 (FAA Reauthorization Act; H.R. 302 ). The Senate followed with its passage of the BUILD Act as part of the FAA Reauthorization Act on October 3, 2018. On October 5, 2018, the President signed into law the FAA Reauthorization Act, with the BUILD Act in Division F. Although the President's FY2018 budget request called for eliminating OPIC's funding as part of its critical view of U.S. government agencies with international development orientations, the Administration ultimately pursued development finance reform through OPIC as an opportunity to respond to China's growing economic influence in developing countries. The Trump Administration included development finance consolidation in its FY2019 budget request and subsequent set of government-wide reorganization proposals. The Administration supported the BUILD Act bills introduced in Congress ( H.R. 5105 , S. 2320 ), viewing them as broadly consistent with its goals, while calling for some modifications. It later said that amendments to the BUILD Act fulfilled the Administration's goals, including to \"align U.S. government development finance with broader foreign policy and development goals, enhancing the competitiveness and compatibility of the U.S. development finance toolkit.\" The BUILD Act follows long-standing debate among policymakers over whether or not government financing of private-sector activity is appropriate. Supporters argued that OPIC helps fill in gaps in private-sector support that arise from market failures and helps U.S. firms compete against foreign firms backed by foreign DFIs for investment opportunities—thereby advancing U.S. foreign policy, national security, and economic interests. Various civil society stakeholders have proposed consolidating the development finance functions of OPIC and other agencies into a new DFI in order to boost OPIC and make U.S. development finance efforts more competitive with those of foreign countries. Opponents held that OPIC diverts capital away from efficient uses and crowds out private alternatives, criticized OPIC for assuming risks unwanted by the private sector, and questioned the development benefits of its programs. They have called for terminating OPIC's functions or privatizing them. While the BUILD Act garnered overall support, specific aspects of it were subject to debate. Some development advocates expressed concern that the BUILD Act's transfer of DCA and other credit program authority from USAID to the IDFC may sever the close link between these funding mechanisms and the USAID development programs into which they have been embedded, potentially making the tools less effective and less development-oriented. Others saw potential for the DCA to become a more robust financing option for USAID programs under the new IDFC, with its expanded authorities. In response to these concerns, the BUILD Act includes many provisions, discussed later in this report, to promote coordination and linkages between USAID and the IDFC, and to emphasize the development mission of the IDFC. Some in the development community also questioned whether the new DFI would have a sufficiently strong development mandate, as well as raised concerns about the transparency, environmental, and social standards of the new DFI relative to OPIC. Some critics of OPIC supported strengthening statutorily the aim of the IDFC in specifically countering China's influence in the developing countries. Other possible policy alternatives include focusing on enhancing coordination of development finance functions among agencies or supporting development goals through multilateral and regional DFIs in which the United States plays a major leadership role. While the IDFC authorized by the BUILD Act has yet to be established, and some implementation questions remain, the act detailed many aspects of how the new entity should be structured, managed, and overseen by Congress. This section discusses the BUILD Act provisions that describe how the new IDFC is expected to function once established. The BUILD Act defines \"appropriate congressional committees\" as the Senate Foreign Relations and Appropriations committees and the House Foreign Affairs and Appropriations committees (§1402(1)). It imposes a number of reporting and notification requirements on the IDFC with respect to these congressional committees. These committees have typically been the same ones in which legislation related to OPIC and USAID is introduced. The BUILD Act establishes the IDFC for the stated purpose of mobilizing private-sector capital and skills for the economic benefit of less-developed countries, as well as countries in transition from nonmarket to market economies, in support of U.S. development assistance and other foreign policy objectives (§1412(b)). This is very similar to the mission of OPIC, as described in the Foreign Assistance Act of 1961, as amended. The legislation includes several provisions intended to ensure that the corporation remains focused on this development mission. The act directs the IDFC to prioritize support to countries with low-income or lower-middle-income economies, establishes a position of Chief Development Officer on the board, and requires that a performance measurement system be developed that includes, among other things, standards and methods for ensuring the development performance of the corporation's portfolio. The annual report required by the BUILD Act also must include an analysis of the desired development outcomes for IDFC-supported projects and the extent to which the corporation is meeting associated development metrics, goals, and objectives. The BUILD Act establishes a Board of Directors (\"Board\"), a Chief Executive Officer (CEO), a Deputy Chief Executive Officer (Deputy CEO), a Chief Risk Officer, a Chief Development Officer, and any other officers as the Board may determine, to manage the IDFC (§1413(a)). The BUILD Act vests all powers of the IDFC in the nine-member Board of Directors (§1413(b)). By statute, the Board is composed of a C hief Executive Officer ; four U.S. government officials —the Secretary of State, USAID Administrator, Secretary of the Treasury, and Secretary of Commerce (or their designees); and four non government members appointed by the President of the United States by and with the advice and consent of the Senate, with \"relevant experience\" to carry out the IDFC's purpose, which \"may include experience relating to the private sector, the environment, labor organizations, or international development.\" These members have three-year terms, can be reappointed for one additional term, and serve until their successors are appointed and confirmed. The Board's Chairperson is the Secretary of State and the Vice Chairperson is the USAID Administrator (or their designees). The Board differs in size and potentially composition from that of OPIC's Board. By statute, OPIC's 15-member Board of Directors is composed of eight \"private sector\" Directors, with specific requirements for representation of small business, labor, and cooperatives interests, and seven \"federal government\" Directors (including the OPIC President, USAID Administrator, U.S. Trade Representative, and a Labor Department officer). The President of the United States appoints the Board Chairman and Vice Chairman from among the members of the Board. Five members of the Board constitutes a quorum for the transaction of business. The Board is required to hold at least two public hearings each year to allow for stakeholder input. The BUILD Act establishes four officers for IDFC management. A Chief Executive Officer, who is under the Board's direct authority, is responsible for the IDFC's management and exercising powers and duties as the Board directs (§1413(d)). The BUILD Act also establishes a Deputy Chief Executive Officer (§1413(e)). The Chief Executive Officer and Deputy Chief Executive Officer are appointed by the President of the United States, by and with the advice and consent of the Senate, and serve at the pleasure of the President. The act outlines the positions of the Chief Risk Officer and Chief Development Officer in more detail. Both officers are to be appointed by the CEO, subject to Board approval, from among individuals with senior-level experience in financial risk management and development, respectively. They each are to report directly to the Board and are removable only by a majority Board vote. The Chief Risk Officer, in coordination with the Audit Committee established by the act, is responsible for developing, implementing, and managing a comprehensive process for identifying, assessing, monitoring, and limiting risks to the IDFC (§1413(f)). The Chief Development Officer's responsibilities include coordinating the IDFC's development policies and implementation efforts with USAID, the Millennium Challenge Corporation (MCC), and other relevant U.S. government departments and agencies; managing IDFC employees dedicated to working on transactions and projects codesigned with USAID and other relevant U.S. government entities; and authorizing and coordinating interagency transfers of funds and resources to support the IDFC (§1413(g)). OPIC's enabling legislation does not include either a specific Chief Risk Officer or Chief Development Officer. The BUILD Act establishes a Development Advisory Council to advise the Board on the IDFC's development objectives (§1413(i)). By statute, its members are Board-appointed on the recommendation of the CEO and Chief Development Officer, and composed of no more than nine members \"broadly representative\" of NGOs and other international development-related institutions. Its functions are to advise the Board on the extent to which the IDFC is meeting its development mandate and any suggestions for improvements. The BUILD Act establishes several oversight structures to govern the agency overall and particular aspects. Unlike OPIC, which is overseen by the USAID Inspector General, the IDFC is to have its own Inspector General (IG) (§1414) to conduct reviews, investigations, and inspections of its operations and activities. In addition, the act requires the Board to establish a \"transparent and independent accountability mechanism\" to annually evaluate and report to the Board and Congress regarding statutory compliance with environmental, social, labor, human rights, and transparency standards; provide a forum for resolving concerns regarding the impacts of specific IDFC-supported projects with respect to such standards; and provide advice regarding IDFC projects, policies, and practices (§1415). The BUILD Act also requires the IDFC to establish a Risk Committee and Audit Committee to ensure monitoring and oversight of the IDFC's investment strategies and finances (§1441). Both committees are under the direction of the Board. The Risk Committee is responsible for overseeing the formulation of the IDFC's risk governance structure and risk profile (e.g., strategic, reputational, regulatory, operational, developmental, environmental, social, and financial risks) (§1441(b)), while the Audit Committee is responsible for overseeing the IDFC's financial performance management structure, including the integrity of its internal controls and financial statements, the performance of internal audits, and compliance with legal and regulatory finance-related requirements (§1444(c)). In general, the IDFC's authorities are limited to (§1421(a)) carrying out U.S. policy and the IDFC's purpose, as outlined in the statute; mitigating risks to U.S. taxpayers by sharing risks with the private sector and qualifying sovereign entities through cofinancing and structuring of tools; and ensuring that support provided is \"additional\" to private-sector resources by mobilizing private capital that would otherwise not be deployed without such support. The emphasis on additionality reflects OPIC's current policy, but is not explicitly in OPIC's enabling legislation. Policymakers have debated whether OPIC supports or crowds out private-sector activity. Under the BUILD Act, the IDFC's authorities would expand beyond OPIC's existing authorities to make loans and guarantees and issue insurance or reinsurance (see Table 1 ). They would also include the authority to take minority equity positions in investments. USAID-drawn authorities include technical assistance and the establishment of enterprise funds. In addition, the IDFC would have the authority to conduct feasibility studies on proposed investment projects (with cost-sharing) and provide technical assistance. A chart depicting the current development finance functions of relevant U.S. agencies, as well as how those functions may be shifted by the BUILD Act, is in the Appendix . The IDFC's functions are discussed below. Loan and Guarantees. The IDFC is authorized to make loans or guarantees upon the terms and conditions that it determines (§1421(b)). Loans and guarantees are subject to the Federal Credit Reform Act of 1990 (FCRA). IDFC financing may be denominated and repayable in either U.S. dollars or foreign currencies, the latter only in cases where the Board determines there is a \"substantive policy rationale.\" This is distinct from OPIC, which is limited to making loans in U.S. currency. Equity Investments. The BUILD Act authorizes the IDFC to take equity stakes in private investments (§1421(c)). The IDFC can support projects as a minority investor acquiring equity or quasiequity stake of any entity, including as a limited partner or other investor in investment funds, upon such terms and conditions as the IDFC may determine. Loans and guarantees may be denominated and repayable in either U.S. dollars or foreign currencies, the latter only in cases where the Board determines there is a \"substantive policy rationale.\" The IDFC is required to develop guidelines and criteria to require that the use of equity authority has a clearly defined development and foreign policy purpose, taking into account certain factors. The BUILD Act places limitations on equity investment, both in terms of the specific project and the overall support. The total amount of support with respect to any project cannot exceed 30% of the total amount of all equity investment made to that project at the time the IDFC approves support. Furthermore, equity support is limited to no more than 35% of the IDFC's total exposure. The BUILD Act directs the IDFC to sell and liquidate its equity investment support as soon as commercially feasible commensurate with other similar investors in the project, taking into account national security interests of the United States. The addition of equity authority is potentially significant. OPIC does not have the capacity to make equity investments; it can only provide debt financing as a senior lender, meaning it is repaid first in the event of a loss. Foreign DFIs often have been reluctant to partner with OPIC because they would prefer to be on an equal footing. Potential expansion of OPIC's equity authority capability has met resistance from some Members of Congress in the past, based on discomfort with the notion of the U.S. government acquiring ownership stakes in private investments, among other concerns. Insurance and r einsurance . The IDFC may issue insurance or reinsurance to private-sector entities and qualifying sovereign entities assuring protection of their investments in whole or in part against political risks (§1421(d)). Examples include currency inconvertibility and transfer restrictions, expropriation, war, terrorism, civil disturbance, breach of contract, or non-honoring of financial obligations. Investment promotion . The IDFC is authorized to initiate and support feasibility studies for planning, developing, and managing of and procurement for potential bilateral and multilateral development projects eligible for support (§1421(e)). This includes training on how to identify, assess, survey, and promote private investment opportunities. The BUILD Act directs the IDFC, to the maximum extent practicable, to require cost-sharing by those receiving funds for investment promotion. Special projects and programs. The IDFC is authorized to administer and manage special projects and programs to support specific transactions, including financial and advisory support programs that provide private technical, professional, or managerial assistance in the development of human resources, skills, technology, capital savings, or intermediate financial and investment institutions or cooperatives (§1421(f)). This includes the initiation of incentives, grants, or studies for the energy sector, women's economic empowerment, microenterprise households, or other small business activities. Enterprise funds. The BUILD Act authorizes but does not require the transfer of existing USAID enterprise funds to the IDFC (§1421(g)). Existing Europe/Eurasia enterprise funds are winding down. The two newer funds, in Tunisia and Egypt, remain primarily funded by U.S. government grant funds and are private sector-managed, arguably requiring close USAID oversight and an in-country presence to ensure the funds fulfill a development, rather than a purely for-profit, mission. As such, their removal to an agency without either feature may make this model less effective as a development instrument. The BUILD Act also gives the IDFC authority to establish new enterprise funds. It has been argued, however, that the IDFC's authority to conduct equity investment would make enterprise funds unnecessary. All of the IDFC's authorities, like prior support by OPIC and USAID components, are backed by the full faith and credit of the U.S. government. In other words, the full faith and credit of the U.S. government is pledged for full payment and performance of obligations under these authorities (§1434(e)). The maximum contingent liability (overall portfolio) that the IDFC can have outstanding at any one time cannot exceed $60 billion (§1433). This is more than double OPIC's current exposure limit—$29 billion. In recent years, OPIC support has reached record highs—totaling $23.2 billion in FY2017. While the IDFC's exposure cap is small compared to the potentially trillions of dollars that China is pouring into development efforts like the BRI, supporters argue that the IDFC could catalyze other private investment to developing countries through the U.S. development finance model. According to the BUILD Act, the IDFC will be funded through a Corporate Capital Account comprised of fees for services, interest earnings, returns on investments, and transfers of unexpended balances from predecessor agencies (§1434). Annual appropriations legislation will designate a portion of these funds that may be retained for operating and program expenses, while the rest will revert to the Treasury, much like the current OPIC funding process. Like OPIC, the new IDFC is expected to be self-sustaining, meaning that anticipated collections are expected to exceed expenses, resulting in a net gain to the Treasury. The act also authorizes transfers of funds appropriated to USAID and the State Department to the IDFC. This authority will allow USAID missions and bureaus to continue to fund DCA activities related to their projects through transfers, as they now do through transfers to the DCA office within USAID. The BUILD Act does not authorize annual appropriations levels for administrative and program expenses for the new IDFC, and it is unclear how future appropriations provisions for the IDFC will compare to current OPIC and DCA provisions. In FY2018, appropriators made $79.2 million of OPIC revenue available for OPIC's administrative expenses and $20 million available for loans and loan guarantees. DCA was appropriated $10 million for administrative expenses and authorized to use up to $55 million transferred from foreign assistance accounts managed by USAID to support loan guarantees. In general, if the IDFC determines that the holder of a loan guaranteed by the IDFC suffers a loss as a result of default by the loan borrower, the IDFC shall pay to the holder the percentage of loss per contract after the holder of the loan has made further collection efforts and instituted any required enforcement proceedings (§1423). The IDFC also must institute recovery efforts on the borrower. The BUILD Act puts limitations on the payment of losses, such as generally limiting it to the dollar value of tangible or intangible contributions or commitments made in the project plus interest, earnings, or profits actually accrued on such contributions or commitments to the extent provided by such insurance, reinsurance, or guarantee. The Attorney General must take action as may be appropriate to enforce any right accruing to the United States as a result of the issuance of any loan or guarantee under this title. The BUILD Act also imposes certain limitations on payments of losses. The BUILD Act provides that the IDFC's authorities terminate seven years after the date of the enactment of the act (§1424). It also provides that the IDFC terminates on the date on which its portfolio is liquidated. This is markedly different from the annual extensions of authority required for OPIC in recent years. A longer-term authorization as given to the IDFC could be beneficial for supporting investments in infrastructure projects, which often are multiyear endeavors, as well as underscore a sustained U.S. commitment to respond to China's BRI. The BUILD Act authorizes the IDFC to set terms and conditions for its support, subject to certain parameters. Reason for support. The IDFC is only permitted to provide its support if it is necessary either to alleviate a credit market imperfection or to achieve a specified goal of U.S. development or foreign policy by providing support in the most efficient way to meet those objectives on a case-by-case basis (§1422(b)(1)). Length of support. The final maturity of a loan or guarantee cannot exceed 25 years or the debt servicing capabilities of the project to be financed by the loan, whichever is lesser (§1422(b)(2)). Risk-sharing. With respect to any loan guarantee to a project, the IDFC must require parties to bear the risk of loss in an amount equal to at least 20% of the guaranteed support by the IDFC to the project (§1422(b)(3))—compared to 50% risk-sharing in most cases for OPIC. U.S. financial interest. The IDFC may not make a guarantee or loan unless it determines that the borrower or lender is responsible and that adequate provision is made for servicing the loan on reasonable terms and protecting the U.S. financial interest (§1422(b)(4)). Interest rate. The interest rate for direct loans and interest supplements on guaranteed loans shall be set by reference to a benchmark interest rate (yield) on marketable Treasury securities or other widely recognized or appropriate comparable benchmarks, as determined in consultation with the Director of the Office of Management and Budget and the Secretary of the Treasury. The IDFC must establish appropriate minimum interest rates for loan guarantees, and other instruments as necessary. The minimum interest rate for new loans must be adjusted periodically to account for changes in the interest rate of the benchmark financial interest (§1422(b)(5) and (6)). Fees and premiums. The IDFC must set fees or premiums for support at levels that minimize U.S. government cost while supporting the achievement of objectives for that support. The IDFC must review fees for loan guarantees periodically to ensure that fees on new loan guarantees are at a level sufficient to cover the IDFC's most recent estimates of its cost (§1422(b)(7)). Budget authority. The IDFC may not make loans or loan guarantees except to the extent that budget authority to cover their costs is provided in advance in an appropriations act (§1422(b)(10)). Standards. The IDFC must prescribe explicit standards for use in periodically assessing the credit risk of new and existing direct loans or guaranteed loans. It also must rely upon specific standards to assess the developmental and strategic value of projects for which it provides support and should only provide the minimum level of support needed to support such projects (§1422(b)(9) and (11)). Seniority. Any loan or guarantee by the IDFC is to be on a senior basis or pari passu with other senior debt unless there is a substantive policy rationale for otherwise (§1422(b)(12)). In general, the IDFC is to prioritize support for less-developed countries (i.e., with a \"low-income economy or a lower-middle-income economy\"), as defined by the World Bank (§1402 and §1411). It must restrict support in less-developed countries with \"upper-middle-income economies\" unless (1) the President certifies to Congress that such support furthers U.S. national economic or foreign policy interests; and (2) such support is designed to have \"significant development outcomes or provide developmental benefits to the poorest population\" of that country (§1412). This arguably narrows the IDFC's focus to low-income and lower-middle-income countries, compared to OPIC's statutory requirements and practice. The IDFC may provide support in any country the government of which has entered into an agreement with the United States authorizing the IDFC to provide support (§1431). Preference for U.S. sponsors. The IDFC must give preferential consideration to projects sponsored by or involving private-sector entities that are \"U.S. persons\"—defined as either U.S. citizens or entities owned or controlled by U.S. citizens (§1451(b)). This presumably eases OPIC's requirement for projects to have a \"U.S. connection\" based on U.S. citizenship or U.S. ownership shares; the particular requirements vary by program. This change arguably opens up the possibility that the IDFC could support investments by foreign project sponsors, assuming they meet other statutory requirements. Preference for countries in compliance with i nternational trade obligations . The IDFC must consult at least annually with the U.S. Trade Representative (USTR) regarding countries' eligibility for IDFC support and compliance with international trade obligations (§1451(c)). The IDFC must give preferential consideration to countries in compliance with (or making substantial progress in coming into compliance with) their international trade obligations. While OPIC does not have a comparable obligation, the USTR (or a designated Deputy USTR) is a member of OPIC's Board of Directors. Worker rights. The IDFC can only support projects in countries taking steps to adopt and implement laws that extend internationally recognized worker rights (as defined in §507 of the Trade Act of 1974, 19 U.S.C. 2467) to workers in that country. It must include specified language in all contracts for support regarding worker rights and child labor (§1451(d)). These provisions appear to be similar to OPIC's requirements in terms of worker rights. Environmental and social impact. The Board is prohibited from voting in favor of any project that is likely to have \"significant adverse environmental or social impact impacts that are sensitive, diverse, or unprecedented\" unless it provides an impact notification (§1451(e)). The act requires that (1) the notification be at least 60 days before the date of the Board vote and take the form of an environmental and social impact assessment or initial audit; (2) the notification be made available to the U.S. public and locally affected groups and nongovernmental organizations (NGOs) in the host country; and (3) the IDFC include provisions in any contract relating to the project to ensure mitigation of any such adverse environmental or social impacts. OPIC's enabling legislation has substantially similar requirements as the IDFC's first two requirements with respect to environmental and social impacts. Women's economic empowerment consideration. The IDFC must consider the impact of its support on women's economic opportunities and outcomes and take steps to reduce gender gaps and maximize development impact by working to improve women's economic opportunities (§1451(f)). This is distinct from OPIC's statutory requirements. C ountries embracing private enterprise. The IDFC is directed to give preferential consideration to projects for which support may be provided in countries whose governments have demonstrated \"consistent support for economic policies that promote the development of private enterprise, both domestic and foreign, and maintain the conditions that enable private enterprise to make full contribution to the development of such countries\" (§1451(g)). The BUILD Act gives examples of market-based economic policies, protection of private property rights, respect for rule of law, and systems to combat corruption and bribery. OPIC's private enterprise-related requirement appears to be more limited. Small business support. The IDFC must, using broad criteria, to the maximum extent possible, give preferential consideration to supporting projects sponsored by or involving small business, and ensure that small business-related projects are not less than 50% of all projects for which the IDFC provides support and that involve U.S. persons (§1451(i)). OPIC's small business support requirement has a 30% target. Limitation on support for a single entity. No entity receiving IDFC support may receive more than an amount equal to 5% of the IDFC's maximum contingent liability (§1451(a)). In comparison, OPIC has specific limitations by program; for example, no more than 10% of maximum contingent liability of investment insurance can be issued to a single investor, and no more than 15% of maximum contingent liability of investment guarantees can be issued to a single investor. Boycott restriction. When considering whether to approve a project, the IDFC must take into account whether the project is sponsored by or substantially affiliated with any individual involved in boycotting a country that is \"friendly\" with the United States and is not subject to a boycott under U.S. law or regulation (§1451(h)). The measure is aimed at ensuring that beneficiaries of the new DFI's support are \"not undermining [U.S.] foreign policy goals.\" Concerns about boycotts against Israel appear to figure prominently. International terrorism/human rights violations restriction . The IDFC is prohibited from providing support for a government or entity owned or controlled by a government if the Secretary of State has determined that the government has repeatedly provided support for acts of international terrorism or has engaged in a consistent pattern of gross violations of internationally recognized human rights (§1453(a)). In comparison, OPIC must take into account human rights considerations in conducting its programs. Sanctions restriction. The IDFC is also prohibited from all dealings related to any project prohibited under U.S. sanctions laws or regulations, including dealings with persons on the list of specially designated persons and blocked persons maintained by the Office of Foreign Assets Control (OFAC) of the Department of the Treasury, except to the extent otherwise authorized by the Secretaries of the Treasury or State (§1453(b) and (c)). OPIC is subject to sanctions restrictions as well. Commercial banks can provide financing for foreign investment, such as through project finance, and political risk insurance. The BUILD Act requires that before the IDFC provides support, it must ensure that private-sector entities are afforded an opportunity to support the project. The IDFC must develop safeguards, policies, and guidelines to ensure that its support supplements and encourages, but does not compete with, private-sector support; operates according to internationally recognized best practices and standards to avoid market-distorting government subsidies and crowding out of private-sector lending; and does not have significant adverse impact on U.S. employment (§1452). The BUILD Act requires the IDFC to develop a performance measurement system to evaluate and monitor its projects and to guide future project support, using OPIC's current development impact measurement system as a starting point (§1442). The IDFC must develop standards for measuring the projected and ex post development impact of a project. It also must regularly make information about its performance available to the public on a country-by-country basis. Measuring development impact can be complicated for a number of reasons, including definitional issues, difficulties isolating the impact of development finance from other variables that affect development outcome, challenges in monitoring projects for development impact after DFI support for a project ends, and resource constraints. Comparing development impacts across DFIs is also difficult as development indicators may not be harmonized. To the extent that the proposed DFI raises questions within the development community about whether it would be truly \"developmental\" at its core, rigorous adherence to development objectives through a measurement system will likely be critical to gauging its effectiveness. Moreover, Congress may choose to take a broader view of U.S. development impact, given the active U.S. contributions to regional and multilateral DFIs. At the end of each fiscal year, the IDFC must submit to Congress a report including an assessment of its economic and social development impact, the extent to which its operations complement or are compatible with U.S. development assistance programs and those of qualifying sovereign entities, and the compliance of projects with statutory requirements (§1443). In addition, no later than 15 days before the IDFC makes a financial commitment over $10 million, the Chief Executive Officer must submit to the appropriate congressional committees a report with information on the financial commitment (§1446(a) and (b)). The CEO also must notify the committees no later than 30 days after entering into a new bilateral agreement (§1446(c)). The IDFC must \"maintain a user-friendly, publicly available, machine-readable database with detailed project-level information,\" including description of support provided, annual report information provided to Congress, and project-level performance metrics, along with a \"clear link to information on each project\" online (§1444). The new agency also must cooperate with USAID to engage with investors to develop a strategic relationship \"focused at the nexus of business opportunities and development priorities\" (§1445). This includes IDFC actions to develop risk mitigation tools and provide transaction-structuring support for blending finance models (generally referring to the strategic use of public or philanthropic capital to catalyze private-sector investment for development purposes). The BUILD Act requires the President to submit to Congress within 120 days of enactment a reorganization plan that details the transfer of agencies, personnel, assets, and obligations to the IDFC. The reorganization plan is expected to be submitted by early February 2019. The President must consult with Congress on the plan not less than 15 days before the date on which the plan is transmitted, and before making any material modification or revision to the plan before it becomes operational. The reorganization plan becomes effective for the IDFC on the date specified in the plan, which may not be earlier than 90 days after the President has transmitted the reorganization plan to Congress (§1462(e)). The actual transfer of functions may occur only after the OPIC President and CEO and the USAID Administrator jointly submit to the foreign affairs committees a report on coordination, including a detailed description of the procedures to be followed after the transfer of functions to coordinate between the IDFC and USAID (§1462(c)). During the transition period, OPIC and USAID are to continue to perform their existing functions. Thus, the IDFC could become operational as early as summer 2019 based on this timeline ( Figure 2 ). OPIC anticipates that the IDFC could become operational as of October 1, 2019. At that time, OPIC is to be terminated and its enabling legislation is to be repealed (§1464). The IDFC is to replace OPIC, and, as such, would be among other federal entities that play a role in promoting U.S. trade and investment efforts. The Export-Import Bank (Ex-Im Bank) provides direct loans, loan guarantees, and export credit insurance to support U.S. exports, in order to support U.S. jobs. The Trade and Development Agency (TDA) aims to link U.S. businesses to export opportunities in overseas infrastructure and other development projects, in order to support economic growth in these overseas markets. TDA provides funding for project preparation activities, such as feasibility studies, and partnership building, such as reverse trade missions bringing foreign decisionmakers to the United States. The IDFC's authority to conduct feasibility studies and provide other forms of technical assistance has raised questions about overlap with the functions of TDA, but BUILD Act supporters note that while functions may overlap, they will be for different purposes—supporting U.S. investment abroad in the case of the IDFC and supporting U.S. exports in the case of TDA. There may also be some overlap of function between the IDFC and USAID if the reorganization plan calls for the transfer of the Office of Private Capital and Microenterprise from USAID to the IDFC and the IDFC starts its own microfinance programs, as microfinance activities are integrated throughout USAID and would not cease with the transfer of the office. Similarly, if the IDFC uses its authority to create new enterprise funds while declining to transfer existing funds under USAID authority, there may be some overlap in that authority as well. The 116 th Congress will have responsibility for overseeing the implementation of the BUILD Act, including review of the reorganization plan, the transition it prescribes, and impact on U.S. foreign policy objectives. As part of this process, Congress may consider a number of policy issues, including the following: Is the Administration meeting the implementation requirements of the BUILD Act? Does the reorganization plan reflect congressional intent, and are the choices made within the discretion allowed by the BUILD Act justified? How can the IDFC best balance its mission to support U.S. businesses in competing for overseas investment opportunities with its development mandate? What are the policy trade-offs associated with the capacity limits, authorities, policy parameters, and other features formulated by Congress in the BUILD Act? Does the legislation find the right balance, or does the implementation process identify areas where legislative changes might be beneficial? In creating the BUILD Act, Congress gave great consideration to strategic foreign policy concerns. In addition to providing commercial opportunities for U.S. firms, development finance may shape how countries connect to the rest of the world through ports, roads, and other transportation and technological links, providing footholds for the United States to advance its approaches to regulations and standards. Another potential role for development finance is to provide a means to spread U.S. values on governance, transparency, and environmental and social safeguards. Does the current statutory framework enable the IDFC to respond effectively to U.S. strategic concerns, particularly with regard to China's BRI? More fundamentally, is the IDFC's aim to compete with, contain, or counter the BRI and Chinese world vision it represents? Beyond establishing the IDFC, Congress may consider whether to advocate for creating international \"rules for the road\" for development finance. Such rules could help ensure that the IDFC operates on a \"level playing field\" relative to its counterparts, given the variation in terms, conditions, and practices of DFIs internationally. U.S. involvement in developing such rules could help advance U.S. strategic interests. However, such rules would only be effective to the extent that major suppliers of development finance are willing to abide by them. For example, China is not a party to international rules on export credit financing, though it has been involved in recent negotiations to develop new rules on such financing. Should Congress press the Administration to pursue international rules on development finance? Is it feasible to engage China in this regard? ", "summary": "Members of Congress and Administrations have periodically considered reorganizing the federal government's trade and development functions to advance various U.S. policy objectives. The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), which was signed into law on October 5, 2018 (P.L. 115-254), represents a potentially major overhaul of U.S. development finance efforts. It establishes a new agency—the U.S. International Development Finance Corporation (IDFC)—by consolidating and expanding existing U.S. government development finance functions, which are conducted primarily by the Overseas Private Investment Corporation (OPIC) and some components of the U.S. Agency for International Development (USAID). While the IDFC is expected to carry over OPIC's authorities and many of its policies, there are some key distinctions. For example, in comparison to OPIC, the new IDFC, by statute, is to have the following: More \"tools\" to provide investment support (e.g., authority to make limited equity investments and provide technical assistance). More capacity (a $60 billion exposure cap compared to OPIC's $29 billion exposure cap). A longer authorization period (seven years compared to OPIC's year-to-year authorization through appropriations legislation in recent years). More specific oversight and risk management (including its own Inspector General [IG], compared to OPIC, which is under the USAID IG's jurisdiction). A key policy rationale for the BUILD Act was to respond to China's Belt and Road Initiative (BRI) and China's growing economic influence in developing countries. In this regard, the IDFC aims to advance U.S. influence in developing countries by incentivizing private investment as an alternative to a state-directed investment model. The BUILD Act also aims to increase the effectiveness and efficiency of U.S. government development finance functions, as well as to achieve greater cost savings through consolidation. The BUILD Act requires the Administration to submit to Congress a reorganization plan within 120 days of enactment of the act, and the IDFC is not permitted to become operational any sooner than 90 days after the President has transmitted the reorganization plan. The 116th Congress will have responsibility for overseeing the Administration's implementation of the BUILD Act. As the IDFC is operationalized, Members of Congress may examine whether the current statutory framework allows the IDFC to balance both its mandates to support U.S. businesses in competing for overseas investment opportunities and to support development, as well as whether it enables the IDFC to respond effectively to strategic concerns especially vis-à-vis China. Congress also may consider whether to press the Administration to pursue international rules on development finance comparable to those that govern export credit financing. More broadly, the IDFC's establishment could renew legislative debate over the economic and policy benefits and costs of U.S. government activity to support private investment, and whether such activity is an effective way to promote broad U.S. foreign policy objectives.", "document_type": "crs"}
{"report": "The President and Congress have historically played different roles when sending U.S. troops into hostile situations. The President has the power under Article II, Section 2, of the Constitution to use the Armed Forces to repel attacks. Congress under Article I, Section 8, has the power to declare war and raise and support the Armed Forces. The War Powers Resolution was enacted to ensure that the President and Congress share decisions where U.S. troops may become involved in hostilities. This sharing of power has often resulted in controversy, particularly when troops are sent into situations where there has not been a formal declaration of war. In most instances, Congress has used its legislative prerogatives through funding mechanisms or declarations of policy either to affirm or to place limits on presidential action. In three instances, Congress has authorized the use of military force in advance of hostilities: the Persian Gulf War (1991), military operations in Afghanistan (2001), and the \"use of force against Iraq\" resolution (2002). In each case, however, the President has maintained that while he may have sought congressional consultation and support, the President has the constitutional authority as Commander in Chief to use force, including the Armed Forces of the United States, to protect U.S. national security interests. Additionally, the executive branch has long viewed congressional enactment of defense appropriations bills as de facto authorization for operations funded under those measures, although Congress has often included provisions stating that no separate authorization for the use of force is implied by the appropriation of funds. Related CRS products CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications , by Jennifer K. Elsea and Matthew C. Weed. CRS Report R42699, The War Powers Resolution: Concepts and Practice , by Matthew C. Weed. CRS Report R42738, Instances of Use of United States Armed Forces Abroad, 1798-2018 , by Barbara Salazar Torreon and Sofia Plagakis. This report describes the congressional debate that often surrounds the issue of employing the U.S. military abroad. Initially written in response to a congressional request for a list of votes on this topic from 1982-1992, this report has been updated as needed since that time. The floor votes included are those directly related to the use and funding of U.S. troops abroad, often in the context of the War Powers Resolution, or to their continued presence or withdrawal. The laws, bills, and resolutions below are listed in the chronological order of the votes that were held. Links to the actual roll call votes are provided, when available (since 1990 in the House and 1989 in the Senate). These links include each Member's yea or nay vote. In some cases, House or Senate votes are voice votes, and, thus, no roll call vote exists. Moreover, the ultimate disposition of amendments listed in the report (i.e., whether such amendments were incorporated into any final law) may not be self-evident. Some amendments may appear as considered; some may have been further amended during subsequent proceedings or in conference; some may have been deleted in conference when one chamber receded from that amendment. In other instances, only one chamber of Congress may have voted on a particular measure; for example, a House or Senate simple resolution is a measure that expresses nonbinding opinions on policies or issues and is effective only in the chamber in which it is proposed. It does not require concurrence by the other chamber or approval by the President. On September 29, 1982, President Reagan deployed 1,200 marines to serve as part of a multinational observer force to restore the sovereignty of the Lebanese government. By March 30, 1984, the mission had ended. Related CRS products CRS Report R44759, Lebanon , by Carla E. Humud. On October 25, 1983, President Reagan sent U.S. Marines and Army troops to Grenada in order to protect American lives and restore law and order at the request of the Organization of Eastern Caribbean States. All U.S. troops were removed from Grenada by December 15, 1983. On December 20, 1989, President George H.W. Bush deployed 14,000 U.S. military forces to Panama in order to protect American lives, restore Panamanian democracy, and apprehend General Manuel Noriega. Congress did not immediately react to the situation, as the 101 st Congress, first session had ended on November 22, 1989; the second session of the 101 st Congress did not begin until January 23, 1990. The 14,000 U.S. troops were removed from Panama by February 13, 1990. Related CRS products CRS In Focus IF10430, Panama , by Mark P. Sullivan. CRS Report RL30981, Panama: Political and Economic Conditions and U.S. Relations Through 2012 , by Mark P. Sullivan. On August 2, 1990, Iraqi troops invaded Kuwait, seized its oil fields, ousted the Kuwaiti leadership, installed a new government in Kuwait City, and massed troops on the Saudi Arabian border. On August 9, President Bush reported that he had deployed U.S. troops to the region. Legislation in late 1990 (101 st Congress, second session) focused on imposing sanctions against Iraq, in seeking the withdrawal of Iraqi forces from the area, and in supporting the President in carrying out the provisions of the relevant United Nations Security Council resolutions. On January 12, 1991 (102 nd Congress, first session), the Congress authorized the \"use of force\" against Iraq in advance of the outbreak of hostilities with Iraq on January 16. Related CRS products CRS Report RS21513, Kuwait: Governance, Security, and U.S. Policy , by Kenneth Katzman. On December 10, 1992, President George H.W. Bush reported that he had deployed U.S. troops into Somalia on December 8, in response to United Nations Security Council Resolution 794, which authorized the Secretary General to \"use all necessary means to establish as soon as possible a secure environment for humanitarian relief operations in Somalia\" and to provide military forces for accomplishing this mission. U.S. troops were deployed to assist United Nations Forces in Somalia (UNOSOM) throughout 1993 and 1994, ending on March 3, 1995. Related CRS products CRS In Focus IF10155, Somalia , by Lauren Ploch Blanchard and Katherine Z. Terrell. CRS Report R45428, Sub-Saharan Africa: Key Issues and U.S. Engagement , coordinated by Tomas F. Husted. On October 20, 1993, President Bill Clinton reported that U.S. ships had begun enforcing a United Nations embargo against Haiti. On September 19, 1994, President Clinton had deployed 1,500 troops to Haiti to restore democracy; that level was ultimately increased to over 20,000. By March 21, 1995, U.S. troops were reduced to under 5,300 and incorporated into the United Nations Multinational Force in Haiti. By September 21, 1995, they were reduced to under 2,500 personnel. U.S. troops ended their deployment to Haiti by April 17, 1996. Related CRS products CRS Report R45034, Haiti's Political and Economic Conditions: In Brief , by Maureen Taft-Morales. Archived CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by Maureen Taft-Morales and Clare Ribando Seelke. The civil war in the former Yugoslav Republic of Bosnia-Herzegovina resulted in U.S. military participation in various efforts over several years to halt the fighting. The United States participated in both United Nations and NATO actions without explicit congressional authorization. Beginning in 1992, the United Nations Security Council adopted Resolution 770, which called on all nations to take \"all measures necessary\" to facilitate the delivery of humanitarian assistance to Sarajevo. On August 11, 1992, the Senate passed S.Res. 330 , which urged the President to work for such a resolution and pledged funds for participation, but also said that no U.S. military personnel should be introduced into hostilities without clearly defined objectives. On the same day, the House passed H.Res. 554 , which urged the Security Council to authorize measures, including the use of force, to ensure humanitarian relief. As the conflict in Bosnia continued and escalated over the next several years, U.S. troops were sent to participate in NATO and United Nations peacekeeping missions. Consequently, leaders in Congress began calling for greater congressional involvement in decisions. In 1994, for example, the Senate passed S. 2042 , which called for the United States to end unilaterally its arms embargo with Bosnia; the Senate also passed an amendment to S. 2042 which stated that no ground combat troops should be deployed to Bosnia unless previously authorized by Congress. The House did not act on the measure. With the signing of the Dayton Peace Agreement for Bosnia on December 14, 1995, NATO took over the ground operation from UNPROFOR (United Nations Protection Force). Consequently, in late 1995, over 20,000 U.S. combat troops were sent to Bosnia as part of the NATO-led peacekeeping force. In December 1995, Congress considered and voted on a number of bills and resolutions, but the House and Senate could not come to consensus on any single measure. In 1996, President Clinton agreed to provide up to 8,500 ground troops to participate in the NATO-led follow-on force in Bosnia termed the Stabilization Force (SFOR). Subsequent efforts by both the House and Senate to require the President to either limit funding for the Bosnia operations or to bring the troops home did not succeed. On March 18, 1998, for example, the House defeated by a vote of 193-225 H.Con.Res. 227 , which would have directed the President to remove U.S. Armed Forces from the Republic of Bosnia-Herzegovina, pursuant to Section 5(c) of the War Powers Resolution. On July 22, 2002, President Bush reported to Congress that U.S. Armed Forces contributions to SFOR in Bosnia-Herzegovina were approximately 2,400 personnel. U.S. troops ended their mission in Bosnia-Herzegovina when SFOR was replaced by the European Union Force (EUFOR Althea) in 2004. The following table includes legislation of what was introduced and voted on during the 102nd Congress-105th Congresses (1992-1998). Related CRS products CRS Insight IN10980, Postelection Issues in Bosnia and Herzegovina , by Sarah E. Garding. CRS Report RS21774, Bosnia and the European Union Military Force (EUFOR): Post-NATO Peacekeeping , by Julie Kim. CRS Report 96-723, Bosnia Implementation Force (IFOR) and Stabilization Force (SFOR): Activities of the 104th Congress , by Julie Kim. On March 24, 1999, President Clinton ordered U.S. military forces to begin air strikes against the Federal Republic of Yugoslavia (Serbia and Montenegro) in cooperation with the NATO-led operation. The strike was ordered in response to Yugoslavia's campaign of violence against ethnic Albanians in the province of Kosovo. On June 3, 1999, Yugoslavia agreed to a peace plan calling for withdrawal of Yugoslav forces from Kosovo to include an international peacekeeping force. On June 10, 1999, NATO air strikes were halted, and Yugoslav forces withdrew their military forces from Kosovo by June 20, 1999. Congress, while not authorizing directly, and in advance, this military action, introduced and voted on several legislative measures related to deployment of U.S. military forces for combat or peacekeeping in the Balkan region. The House adopted H.Con.Res. 42 on March 11, 1999, which authorized the President to send troops as peacekeepers; the Senate passed a non-binding resolution ( S.Con.Res. 21 ) on March 23, 1999, that expressed the sense of Congress that the President was authorized to conduct military air operations in cooperation with NATO allies against Yugoslavia. However, the House later defeated the Senate resolution, on April 28, 1999. Other House or Senate votes sent conflicting signals in addressing funding related to troop deployments in the region, declaration of war issues, and executive and congressional roles in sending U.S. military forces abroad. The following legislation is representative of what was introduced and voted on in the 106 th Congress. Related CRS products CRS Report R44979, Kosovo: Background and U.S. Relations , by Vincent L. Morelli. CRS Report R44955, Serbia: Background and U.S. Relations , by Vincent L. Morelli and Sarah E. Garding. CRS Report RL31053, Kosovo and U.S. Policy: Background to Independence , by Julie Kim and Steven Woehrel. CRS Report RL30127, Kosovo Conflict Chronology: September 1998 - March 1999 , by Julie Kim. On September 11, 2001, terrorists attacked the United States with a coordinated series of aircraft hijackings and suicide crashes into populated buildings. Two airplanes crashed into the twin towers of the World Trade Center in New York City, causing their complete destruction. Another airplane crashed into the Pentagon near Washington, DC, and a fourth airplane crashed in southwestern Pennsylvania (near Shanksville) after passengers attempted to take control of the aircraft in order to prevent it from crashing into an important symbol of democracy and freedom, perhaps in the Washington, DC, area. Over 3,000 people lost their lives in these terrorist attacks. Consequently, on September 14, 2001, Congress passed a joint resolution, which \"authorizes the President to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations, or persons.\" It further states that the act is intended to constitute specific statutory authorization within the meaning of the War Powers Resolution. President George W. Bush signed the joint resolution into law on September 18, 2001. On October 9, 2001, President Bush reported in a letter to Congress that U.S. Armed Forces had begun combat action in Afghanistan against the Al Qaeda terrorists and their Taliban supporters starting at 12:30 p.m. (EDT) on October 7, 2001. Related CRS products CRS Report R43983, 2001 Authorization for Use of Military Force: Issues Concerning Its Continued Application , by Matthew C. Weed. On October 10, 2002, after several days of debate, the House passed H.J.Res. 114 , which authorized the use of military force against Iraq. The Senate had considered its own measure, S.J.Res. 45 , beginning on October 3, but indefinitely postponed it, and instead passed H.J.Res. 114 on October 11, 2002. As enacted into law, the joint resolution provides authorization for the use of military force against Iraq and expresses support for the President's efforts to (1) strictly enforce through the United Nations Security Council all relevant Security Council resolutions regarding Iraq; and (2) obtain prompt and decisive action by the Security Council to ensure that Iraq abandons its strategy of delay, evasion, and noncompliance and promptly and strictly complies with all relevant Security Council resolutions. In addition, it authorizes the President to use the U.S. Armed Forces to (1) defend U.S. national security against the continuing threat posed by Iraq; and (2) enforce all relevant Security Council resolutions regarding Iraq. It directs the President, prior to or as soon as possible (but no later than 48 hours) after exercising such authority, to make available to the Speaker of the House of Representatives and the President pro tempore of the Senate his determination that (1) reliance on further diplomatic or peaceful means alone will not achieve the above purposes; and (2) acting pursuant to this joint resolution is consistent with the United States and other countries continuing to take necessary actions against international terrorists and terrorist organizations, including those who planned, authorized, committed, or aided the terrorist attacks of September 11, 2001. It declares that this section is intended to constitute specific statutory authorization for use of the Armed Forces, consistent with the requirements of the War Powers Resolution. Finally, it requires the President to report to Congress at least every 60 days on matters relevant to this resolution. The war with Iraq (Operation Iraqi Freedom) began on March 19, 2003, with an aerial attack against a location where Iraqi President Saddam Hussein was suspected to be meeting with top Iraqi officials. U.S. and British troops entered Iraq on March 20, 2003, and while the invasion encountered resistance, particularly in its early stages, U.S. forces had largely gained control of Baghdad by April 9, 2003. The northern cities of Kirkuk and Mosul fell shortly afterward, and on April 14, 2003, U.S. troops entered Tikrit, Saddam's birthplace and the last major population center outside coalition control. On April 15, 2003, President George W. Bush declared that \"the regime of Saddam Hussein is no more.\" U.S. military operations against Al Qaeda and Taliban forces in Afghanistan proceeded pursuant to the 2001 Authorization for Use of Military Force from October 2001 onward. U.S. military operations in Iraq proceeded pursuant to the 2002 Authorization for Use of Military Force in Iraq from March 2003 onward. On March 25, 2003, President George W. Bush requested $74.8 billion in the FY2003 Emergency Supplemental for the ongoing military operations in Iraq, postwar occupation, reconstruction and relief in Iraq, and international assistance to countries contributing to the war in Iraq or the global war on terrorism. The cost of the continued U.S. presence in Afghanistan and additional funds for homeland security were also included. H.R. 1559 , enacted into law as P.L. 108-11 on April 16, 2003, provided $78.49 billion in funding for these purposes. The Senate passed H.R. 1559 in lieu of its version, S. 762 , by unanimous consent. On September 17, 2003, President Bush formally requested an additional $87 billion for the ongoing military operations and for reconstruction assistance in Iraq, Afghanistan, and elsewhere. H.R. 3289 (FY2004 supplemental appropriations for Iraq, Afghanistan, and the global war on terrorism) was enacted into law as P.L. 108-106 on November 6, 2003, providing $87.5 billion in funding. The House approved the conference agreement by a roll call vote on October 31, 2003, and the Senate approved the conference agreement by voice vote on November 3, 2003. Earlier, on October 17, 2003, the Senate had approved its own version of the measure, S. 1689 , but vitiated its passage and returned the bill to the Senate Calendar. Related CRS products CRS Report R45025, Iraq: Background and U.S. Policy , by Christopher M. Blanchard. CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by Kenneth Katzman and Clayton Thomas. CRS Report R41070, Al Qaeda and Affiliates: Historical Perspective, Global Presence, and Implications for U.S. Policy , coordinated by John W. Rollins. The 2011 uprising against Libyan dictator Muammar Qadhafi prompted calls for Western military assistance to the rebels, initially in the form of a no-fly zone to prevent regime aircraft from attacking rebel forces and civilians. As the revolt progressed, air strikes were conducted by U.S. and NATO forces against regime targets under Operation Odyssey Dawn and Operation Unified Protector. The Qadhafi government was overthrown and Qadhafi himself was killed, leading to the lifting of strict regime political control in Libya but also to an uncertain security environment in which rival militias competed in the absence of any strong central authority. U.S. military operations began in March 2011 and ended in October 2011. A September 11, 2012, armed attack on a U.S. diplomatic compound in Benghazi, Libya resulted in the deaths of four Americans, including the U.S. ambassador. Related CRS products CRS Report RL33142, Libya: Transition and U.S. Policy , by Christopher M. Blanchard . What began as protests, then an internal armed uprising in Syria in 2011 became a broader conflict, with various factions of Syrian rebels and foreign fighters joined in combat with each other as well as with the forces of the Asad regime, itself aided by fighters from outside Syria. In summer 2013 the Obama Administration announced that the U.S. intelligence community had determined \"with high confidence\" that the Asad regime had used chemical weapons attacks against its own people, resulting in mass casualties. The United States has been providing nonlethal materiel support to selected opposition groups, and a congressionally authorized U.S. train-and-equip program continues. See section below, \" Military Action against the Islamic State (IS, ISIS, ISIL) .\" Related CRS products CRS Report RL33487, Armed Conflict in Syria: Overview and U.S. Response , coordinated by Carla E. Humud. One group rose to prominence in the fighting against the Assad regime: the self-proclaimed \"Islamic State\" (IS), also known as ISIS (Islamic State in Iraq and Syria) and ISIL (Islamic State in Iraq and the Levant). A lineal descendant or continuation of the insurgent group al-Qaeda in Iraq, some of its senior operatives gained experience fighting American forces in Iraq. Particularly noted for sophisticated online media releases and extremely brutal tactics, IS in its self-released videos showed numerous massacres and beheadings, including those of a number of captured Westerners. It made significant territorial gains in Syria and also in Iraq, where its forces captured refineries and banks, thereby acquiring a self-financing capacity. The Iraqi military suffered high personnel losses through casualties and desertions, as well as enormous losses of materiel. After a series of online releases depicting the beheadings of American captives of IS, and in the wake of the success of the IS campaign in Iraq and Syria, President Obama authorized a program of aid to anti-IS forces, particularly the Iraqi military and the Kurds. In cooperation with a coalition of allies, he ordered air strikes designed to assist Iraqi and Kurdish forces battling IS and degrade IS military capabilities. IS has suffered extensive territorial losses in the combined campaign and today controls far less territory in Syria and Iraq than at the height of its power, but the potential for terrorist acts committed by IS foreign fighters returning to their countries of origin is a matter of concern for antiterrorism and police authorities. Related CRS products CRS Report R43612, The Islamic State and U.S. Policy , by Christopher M. Blanchard and Carla E. Humud. CRS Report R43760, A New Authorization for Use of Military Force Against the Islamic State: Issues and Current Proposals , by Matthew C. Weed. CRS Report R44135, Coalition Contributions to Countering the Islamic State , by Kathleen J. McInnis. CRS In Focus IF10604, Al Qaeda and Islamic State Affiliates in Afghanistan , by Clayton Thomas. Beginning in March 2015, Saudi Arabia and a coalition of partner countries (including the United Arab Emirates, Bahrain, Kuwait, Egypt, Jordan, Morocco, Senegal, and Sudan) engaged in conflict in Yemen against the Ansar Allah/Houthi movement and followers of the late president of Yemen, Ali Abdullah Saleh. The United States has been providing logistical and intelligence support, for a time including air-to-air refueling. Refueling operations ended in early November 2018. Civilian casualties in the conflict have been a matter of concern and congressional debate, along with humanitarian conditions in general in Yemen. Related CRS Products CRS Report R43960, Yemen: Civil War and Regional Intervention , by Jeremy M. Sharp. CRS Report R45046, The War in Yemen: A Compilation of Legislation in the 115th Congress , by Jeremy M. Sharp and Christopher M. Blanchard. CRS Report R42738, Instances of Use of United States Armed Forces Abroad, 1798-2018 , by Barbara Salazar Torreon and Sofia Plagakis. CRS Report RL32492, American War and Military Operations Casualties: Lists and Statistics , by Nese F. DeBruyne. CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications , by Jennifer K. Elsea and Matthew C. Weed. CRS Report R42699, The War Powers Resolution: Concepts and Practice , by Matthew C. Weed. Legislative Information System (LIS) of the U.S. Congress at http://www.congress.gov/ . Congressional Quarterly searchable online floor vote database at http://www.cq.com . Congressional Quarterly Almanac . Washington, CQ Press. Annual. CQ Weekly . Washington, CQ Press. Various issues. ", "summary": "This report summarizes selected congressional roll call votes related to instances in which U.S. Armed Forces have been sent abroad in potentially hostile situations. These votes reflect the type of congressional actions that observers maintain bear directly on issues affecting policy and the funding of troops abroad, often in the context of the War Powers Resolution, continued presence or withdrawal of troops, and the \"use of force.\" The cases of Lebanon (1982-1983), Grenada (1983), Panama (1989), the Persian Gulf War (1990-1991), Somalia (1992-1995), Haiti (1993-1996), Bosnia (1992-1998), Kosovo (1999), the terrorist attack against the United States (2001) (including the use of U.S. Armed Forces in Afghanistan), and the use of U.S. Armed Forces against Iraq (2002-2003) and Iraq and Afghanistan (2001-Present) are examined, as are the revolution in Libya and its aftermath, the uprising and war in Syria, and military action against the self-proclaimed Islamic State (IS a.k.a, ISIS/ISIL). The roll call votes that are available online (since 1990 in the House and 1989 in the Senate) are hyperlinked in the text.", "document_type": "crs"}
{"report": "Congress passed and the President signed the FY2019 Consolidated Appropriations Act on February 15, 2019 ( P.L. 116-6 , H.Rept. 116-9 ). This action, more than four months into the fiscal year, followed three continuing resolutions (CRs) and a 34-day partial government shutdown ( Table 1 ). In 2018, both the House and Senate Appropriations Committees reported FY2019 Agriculture appropriations bills ( H.R. 5961 on May 16, 2018, and S. 2976 on May 24, 2018). The Senate amended and passed its version as Division C of a four-bill minibus ( H.R. 6147 on August 1, 2018). In January 2019, during the partial government shutdown, the House passed various combinations of agriculture appropriations bills in an attempt to reopen the government ( H.R. 21 , H.R. 265 , H.R. 648 ). The Senate did not consider the measures until the Consolidated Appropriations Act moved in February 2019. See Figure 1 and Appendix B for more timeline context. The higher discretionary budget caps in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) facilitated development of the appropriation amounts. The official discretionary total of the enacted FY2019 Agriculture appropriation is $23.03 billion, $35 million more than was enacted in FY2018 (+0.2%; Table 2 ) on a comparable basis that excludes the Commodity Futures Trading Commission (CFTC). The enacted total is more than was proposed in the House-reported bill but less than in the Senate-passed bill. The appropriation also carries mandatory spending—though that is largely determined in separate authorizing laws—that totals nearly $129 billion. Thus, the overall total of the FY2019 Agriculture appropriation is about $152 billion. The Agriculture appropriations bill—formally known as the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act—funds all of USDA, excluding the U.S. Forest Service. It also funds the Food and Drug Administration (FDA) in the Department of Health and Human Services (HHS) and, in even-numbered fiscal years, CFTC. Jurisdiction is with the House and Senate Committees on Appropriations and their respective Subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies. The bill includes mandatory and discretionary spending, but the discretionary amounts are the primary focus during the bill's development. The scope of the bill is shown in Figure 2 . The federal budget process treats discretionary and mandatory spending differently: Discretionary spending is controlled by annual appropriations acts and receives most of the attention during the appropriations process. The annual budget resolution process sets spending limits for discretionary appropriations. Agency operations (salaries and expenses) and many grant programs are discretionary. Mandatory spending —though carried in the appropriation and usually advanced unchanged—is controlled by budget rules during the authorization process. Spending for so-called entitlement programs is set in laws such as the 2018 farm bill and 2010 child nutrition reauthorizations. In the FY2019 Agriculture appropriations act, discretionary appropriations are 15% ($23 billion) of the $152 billion total. Mandatory spending carried in the act comprised $129 billion, about 85% of the total. About $106 billion of the $129 billion mandatory amount is attributable to programs in the 2018 farm bill. Some programs are not in the authorizing jurisdiction of the House or Senate Agriculture Committees, such as FDA, WIC, or child nutrition ( Figure 2 ). Within the discretionary total, the largest discretionary spending items are the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); agricultural research; rural development; FDA; foreign food aid and trade; farm assistance program salaries and loans; food safety inspection; animal and plant health programs; and salaries and expenses for the conservation programs ( Figure 2 ). The main mandatory spending items are the Supplemental Nutrition Assistance Program (SNAP, and other food and nutrition act programs), child nutrition (school lunch and related programs), crop insurance, and farm commodity and conservation programs that are funded through USDA's Commodity Credit Corporation (CCC). SNAP is referred to as an \"appropriated entitlement\" and requires an annual appropriation. Amounts for the nutrition program are based on projected spending needs. In contrast, the CCC operates on a line of credit. The annual appropriation provides funding to reimburse the Treasury for the use of this line of credit. Over time, changes by title of the Agriculture appropriations bill have generally been proportionate to changes in the bill's total discretionary limit, though some activities have sustained relative increases and decreases. Agriculture appropriations peaked in FY2010, declined through FY2013, and have been higher since then ( Figure 3 ). Comparisons to historical benchmarks, though, may be tempered by inflation adjustments ( Figure 4 ). In FY2018, USDA reorganization affected the placement of some programs between Titles I and II of the bill. The stacked bars in Figure 3 represent the discretionary authorization for each appropriations title. The total of the positive stacked bars is the budget authority in Titles I-VI. Prior to FY2018, it was higher than the official discretionary spending allocation (the blue line) because of the budgetary offset from negative amounts in Title VII (general provisions) and other scorekeeping adjustments that were negative, mostly due to limits on mandatory programs and rescissions. The Trump Administration released its FY2019 budget request on February 12, 2018. USDA concurrently released its more detailed budget summary and justification, as did the FDA, and the independent agencies of the CFTC and the Farm Credit Administration (FCA). The Administration also highlighted some of the proposed reductions and eliminations separately. From these documents, the congressional appropriations committees evaluated the request and began to consider their own bills in the spring of 2018. For accounts in the jurisdiction of the Agriculture appropriations bill, the Administration's budget proposed $17 billion, a 25% reduction from FY2018 ( Table 2 , Figure 3 ). The timing of the Administration's budget request for FY2019 preceded Congress enacting the final, omnibus FY2018 appropriation in March 2018. Therefore, amounts in the FY2018 column of the Administration's budget documents are based on FY2017 and the CR and are different from the enacted FY2018 levels that came later and as shown in this report. Budget enforcement for appropriations has both procedural and statutory elements. The procedural elements are associated with the budget resolution and are enforced through points of order. Typically, each chamber's full Appropriations Committee receives a top-line procedural limit on discretionary budget authority, referred to as a \"302(a)\" allocation, from the Budget Committee via an annual budget resolution. The Appropriations Committees then in turn subdivide the allocation among their subcommittees, referred to as the \"302(b)\" allocations. The statutory elements impose limits on discretionary spending in FY2012-FY2021 and are enforced through discretionary budget caps and sequestration (2 U.S.C. 901(c)). The Budget Control Act of 2011 (BCA, P.L. 112-25 ) set discretionary budget caps through FY2021 as a way of reducing federal spending. Bipartisan Budget Acts (BBAs) in 2013, 2015, and 2018 ( P.L. 113-67 , P.L. 114-74 , and P.L. 115-123 , respectively) have avoided sequestration on discretionary spending—with the exception of FY2013—by raising those caps. In February 2018, the BBA raised the FY2019 cap on nondefense discretionary spending by $68 billion and the cap on defense spending by $85 billion. It also provided language to execute (or \"deem\") those higher caps for the appropriations process without following the usual procedures for an FY2019 budget resolution. Under these higher caps and authorities, the House and Senate Appropriations Committees proceeded to mark up the FY2019 appropriations bills. The Agriculture appropriations bills are receiving roughly the same subcommittee allocation (\"302(b)\" allocation) in each chamber that was used to complete the FY2018 appropriation under the BBA. For FY2019, the subcommittee allocations for agriculture appropriations are House: $23.273 billion ( H.Rept. 115-710 , May 23, 2018), including the CFTC. Senate: $23.235 billion ( S.Rept. 115-260 , May 24, 2018), excluding the CFTC. Appendix A discusses budget sequestration and its effects on agriculture accounts. Sequestration of discretionary accounts occurred in FY2013. Sequestration on mandatory accounts began in FY2013, continues to the present, and has been extended by the Bipartisan Budget Acts. The House Agriculture Appropriations Subcommittee marked up its FY2019 bill on May 9, 2018, by voice vote. On May 16, 2018, the full Appropriations Committee passed and reported an amended bill ( H.R. 5961 , H.Rept. 115-706 ) by a vote of 31-20 ( Table 1 , Figure 1 ). The $23.23 billion discretionary total in the House-reported FY2019 Agriculture appropriation would have been $14 million less than enacted in FY2018 (-0.1%; Table 2 , Figure 3 ). Generally speaking, the House-reported bill did not include most of the reductions proposed by the Administration and continued the trend of appropriations from prior years. Table 3 provides details at the agency level. The primary changes from FY2018 that comprised the relatively flat $14 million overall decrease in the House-reported bill—recognizing that some amounts for certain program areas were in the General Provisions—would have done the following: Increased base FDA appropriations by $308 million (+11%). However, it did not continue to separate FDA funding for the opioid crisis that was in the General Provisions title of the FY2018 appropriation (-$94 million). Increased agricultural research (+$79 million, +2.6%) by raising appropriations for the Agricultural Research Service (ARS) and National Institute of Agriculture (NIFA). Increased the Animal and Plant Health Inspection Service (APHIS) by $16 million (+1.7%). Increased the Rural Utility Service by $82 million (+13%), mostly due to higher base funding for rural water and waste disposal programs. However, the bill did not continue separate funding for rural water that was in the General Provisions title last year (-$500 million) or for telemedicine for the opioid crisis (-$20 million). It would have reduced separate funding for a broadband pilot program while continuing to fund some of it through the General Provisions title (-$50 million). Decreased discretionary appropriations for domestic nutrition assistance programs by reducing WIC by $175 million (-2.8%) and the commodity assistance programs by $15 million (-4.7%). However, the reduction scored in the General Provisions title by rescinding WIC carryover balances was smaller in FY2019, retaining more budget authority (+$500 million). Decreased the base funding in international food assistance Food for Peace grants by $100 million (-6.2%) and would not have continued the extra funding that was in the General Provisions title of the FY2018 appropriations (-$116 million). In addition to discretionary spending, the House-reported bill also carried funding for mandatory spending—largely determined in separate authorizing laws—that would have totaled $121.82 billion, about $936 million less than in FY2018 because of automatic changes in economic conditions and entitlement enrollment rather than any change from congressional action. Thus, the overall total of the House-reported bill was about $145 billion. As the 116 th Congress began in 2019 under a funding gap (see the heading \" Government Shutdown \"), the House passed various combinations of appropriations bills in an attempt to reopen the government. The Senate did not consider the measures and waited until a compromise for the Consolidated Appropriation Act moved in February 2019. On January 3, 2019, the House passed a six-bill full-year omnibus appropriation ( H.R. 21 ), with agriculture appropriations in Division C. With few exceptions, the bill for agriculture was essentially identical to the Senate-passed Agriculture appropriations bill from the 115 th Congress (Division C of H.R. 6147 ; see under the heading \" Senate Action \"). On January 10, 2019, the House passed H.R. 265 , a stand-alone Agriculture appropriations bill. On January 23—two days before agreement for a third CR reopened the government—the House passed H.R. 648 , another six-bill omnibus appropriation with Agriculture appropriations in Division A. The Senate Agriculture Appropriations Subcommittee initially marked up a FY2019 bill on May 22, 2018, by voice vote. On May 24, the full committee passed and reported an amended bill ( S. 2976 , S.Rept. 115-259 ) by a vote of 31-0. On August 1, 2018, the Senate passed a four-bill minibus ( H.R. 6147 ) by a vote of 92-6, with agriculture as Division C ( Table 1 , Figure 1 ). The discretionary total of the Senate-passed bill was also $23.23 billion. However, the Senate bill's total would have been $229 million more than enacted in FY2018 (+1%) on a comparable basis that excludes the CFTC, since the latter was part of the enacted FY2018 appropriation. The Senate-passed bill would have provided about $250 million more than the House-reported bill on a comparable basis that subtracted CFTC from the House bill. Table 3 provides details at the agency level. The primary changes from FY2018 at the agency level that comprised the Senate-passed bill's overall $228 million increase were the following: Increased base FDA appropriations by $159 million (+6%). Like the House bill, it would not have continued separate FDA funding for the opioid crisis that was in the General Provisions title of the FY2018 appropriation (-$94 million). Increased APHIS by $19 million (+1.9%), slightly more than the House bill. Decreased discretionary appropriations for domestic nutrition assistance programs by reducing WIC by $25 million (-0.4%). This was a smaller reduction than in the House bill. In the rescissions in the General Provisions title, the reduction was smaller than was rescinded in FY2018 (+$400 million). Nonetheless, the Senate bill's rescission was greater than in the House bill. Increased international nutrition assistance by raising the base funding for Food for Peace grants by $116 million (+7.2%). The extra funding that was in the General Provisions title of the FY2018 appropriations was not continued (-$116 million). Decreased funding for the four agricultural research agencies by $44 million (-1.4%), mostly by providing no funding for ARS building and facilities (-$141 million), while increasing ARS salaries and expenses (+$98 million). Decreased the extra funding for rural development compared to the amount provided in the FY2018 General Provisions (-$100 million for rural water, -$175 million for broadband). Base funding for rural development was unchanged overall. The Senate-passed bill's mandatory spending was virtually identical to that of the House-reported bill ($121.82 billion). Its overall total of discretionary and mandatory appropriations was $145 billion. In the absence of a final FY2019 agriculture appropriation at the end of FY2018, Congress enacted three CRs to continue government operations. The first CR was from October 1, 2018, through December 7, 2018 ( P.L. 115-245 , Division C). The second CR continued temporary funding through December 21, 2018 ( P.L. 115-298 ). A 34-day funding gap (partial government shutdown) occurred between the second and third CRs (see the heading \" Government Shutdown \" for more discussion of the funding lapse). To end the government shutdown, Congress passed and the President signed a third CR ( P.L. 116-5 ) that covered the period from January 26, 2019, through February 15, 2019. At the end of the third CR, an omnibus appropriation was enacted to cover the rest of the fiscal year (see the heading \" FY2019 Consolidated Appropriations Act \"). In general, a CR continues the funding rates and conditions that were in the previous year's appropriation. The Office of Management and Budget (OMB) may prorate funding to the agencies on an annualized basis for the duration of the CR through a process known as apportionment. For the 81 days (22%) of FY2019 through December 21, 2018, and the 21 days of the third CR that preceded February 15, 2019, the CRs continued the terms of the FY2018 Agriculture appropriations act (Section 101 of P.L. 115-245 ) and excluded the FY2018 change in mandatory program spending (CHIMP) on the Biomass Crop Assistance Program, which was not authorized for FY2019; and provided sufficient funding to maintain mandatory program levels, including for nutrition programs (Section 110)—this is the standard approach taken in recent years' CRs, but it was additionally important for SNAP, because some authorizations in the 2014 farm bill began expiring after FY2018. CRs may adjust prior-year amounts through anomalies or make specific administrative changes. Five anomalies specifically applied to the agriculture appropriation during the CRs: Child Nutrition Pro grams: apportionment for a summer foods program that allowed it to be operational by May 2019 (Section 114 of P.L. 115-245 ). R ural Utilities Service: allowed a loan authorization level for the Rural Water and Waste Disposal program of $4.141 billion (Section 115). Commodity Credit Corporation ( CCC ): allowed CCC to receive its appropriation to reimburse the Treasury for a line of credit about a month earlier than usual, prior to a customary final report and audit. Many farm bill payments to farmers were due in October 2018 in addition to USDA's plan to make supplemental payments under a trade assistance program. Without the anomaly, CCC might have exhausted its $30 billion line of credit (Section 116). Agricultural Research Service : provided an additional $42 million for operations and maintenance at the National Bio and Agro-Defense Facility (NBAF) being built in Manhattan, Kansas, and its transfer to USDA from the Department of Homeland Security (Section 117). Department of Homeland Security (DHS) : allowed DHS to transfer up to $15 million to USDA to support NBAF operations (Section 125). When an appropriation (or CR) expires and no further budget authority has been provided, a funding gap exists, which may cause operations to cease at affected agencies. In general, the Antideficiency Act (31 U.S.C. 1341 et seq. ) prohibits federal agencies from obligating funds before an appropriations measure has been enacted. Exceptions may allow certain activities to continue, such as for law enforcement, protection of human life or property, and activities funded by other means such as carryover funds or user fees. Programs that are funded by other authorities—such as entitlements or the mandatory programs in the farm bill—may also be affected if the program is executed using personnel whose salaries are funded by discretionary appropriations that are affected by the funding gap. For FY2019, a 34-day funding gap lasted from December 22, 2018, through January 25, 2019. It affected agencies within the jurisdiction of seven of the 12 appropriations bills, including Agriculture appropriations. On December 19, 2018, the Senate had passed H.R. 695 , a CR that would have continued temporary funding through February 8, 2019, but the House-passed amendment to that bill on December 20 added homeland security funding for construction of physical barriers at borders and supplemental appropriations for natural disasters that the Senate did not accept. Prior to FY2019, the previous shutdown was a two-day, weekend shutdown in January 2018, and before that a 16-day shutdown in October 2013. Before that, the next previous multiday shutdown occurred in FY1996, though agriculture appropriations were not affected that year because a stand-alone full-year Agriculture appropriation had been enacted. In general, a shutdown results in the furlough of many personnel and curtailment of affected agency activities and services. Agencies make their own determinations about activities and personnel that are \"excepted\" from furlough and publish their intentions in \"contingency plans\" that are supervised by OMB. For agencies in the Agriculture appropriations jurisdiction, shutdown or contingency plans were published for USDA, FDA, and the CFTC. Generally, government employees of affected agencies do not receive pay during a shutdown. Excepted employees may be required to report to work but do not receive their current pay. Exempt employees may receive paychecks during the shutdown from a separately authorized funding source that remains available. On January 16, 2019, the President signed P.L. 116-1 to guarantee back pay to furloughed and excepted employees after the government shutdown ended. USDA initially estimated on December 23, 2018, that 61% of its employees were excepted from furlough in the agencies that are funded by Agriculture appropriations (all of USDA except the Forest Service), which numbered 37,860 staff being excepted out of 62,288. In general, the number of excepted and furloughed personnel varies by agency and may change as a shutdown continues as funding availability changes and as new circumstances arise. A summary of how the shutdown affected the operation of different agencies between December 22, 2018, and January 25, 2019, follows: Nearly 90% of staff in the Food Safety and Inspection Service and Agricultural Marketing Service were initially retained to continue food safety inspections of meat and poultry at processing plants and to continue commodity grading and inspection services (8,434 and 3,944 staff, respectively). About 69% of the Animal and Plant Health Inspection Service was excepted (5,456 staff) to continue preclearance inspection for transportation between Hawaii and Puerto Rico and the mainland and to carry out quarantine and certification for imports and exports. Resources in research laboratories and facilities that could be damaged by inattention were protected by excepting 18% (1,116 staff) of the Agricultural Research Service. The Farm Service Agency (FSA) initially excepted 7,589 staff (72% out of 10,479) through December 28 but then closed county offices, thereby lowering the number of excepted employees to 27 (0.3%). As the shutdown continued, FSA announced on January 16, 2019, that it would recall about 2,500 employees to reopen FSA county offices for three days (January 17-18 and January 22). On these days, FSA provided administrative services to farmers mostly related to past activities that were obligated, including issuing tax documents, but was not to process new program applications. On January 22, USDA further announced that as the shutdown continued, FSA offices would remain open on a full-time basis (with excepted staff) from January 24 to February 8 and three days per week thereafter. This latter plan was not implemented because the shutdown ended on January 25. All 9,342 staff of the Natural Resources Conservation Service (NRCS) was exempted by using carryover funding and mandatory funding authorized in the 2014 farm bill. Near the end of the shutdown, NRCS had begun preparations to furlough much of its agency beginning on February 3, 2019, after having retained 100% of the agency since the beginning of the shutdown. By beginning to furlough some employees, NRCS intended to conserve carryover balances and focus exempted staff on carrying out certain mandatory farm bill programs. This plan was not implemented because the shutdown ended on January 25. Most of USDA's Food and Nutrition Service (FNS) programs, whether mandatory or discretionary, rely on funding provided in appropriations acts. FNS program operations during a government shutdown vary based on the different programs' available resources, determined by factors such as contingency or carryover funds and terms of the expired appropriations acts, as well as USDA's decisionmaking. Beginning in late December 2018, FNS released program-specific memoranda to states and program operators describing the status of different nutrition assistance programs during the current funding lapse. SNAP benefits for January were issued as scheduled, and on January 8 USDA announced that the expired CR allowed for an early distribution of February benefits so long as benefits were issued on or before January 20. Among the related agencies that are funded in Agriculture appropriations: FDA initially retained 59% of its employees in excepted status (10,344 staff out of 17,397) based on a combination of factors including carryover funding, the need to safeguard human life, and the protection of property. For food safety inspection specifically, FDA excepted 135 employees for inspection of food facilities deemed to have the highest risk to public health. Inspections of other facilities were postponed. CFTC excepted 9% of its employees (61 staff out of 673) to address risks that could pose a threat to the functioning of the stock market and commodity markets and that could affect the safety of human life or the protection of property. While a number of selected USDA functions may have continued during the shutdown, many others ceased operations. Examples of USDA functions that were not performed by furloughed employees included data collection and analysis that informs the commodity markets; development of regulations to implement the new farm bill that was enacted in December 2018; completing the Administration's \"trade aid\" payments; approving loan guarantees for commercial banks; processing and funding direct farm loans, rural development loans, and grant programs (rural housing, community facilities, rural water, rural business, and broadband); agricultural research programs and grants; and many international assistance programs. On February 15, 2019, Congress passed and the President signed the FY2019 Consolidated Appropriations Act ( P.L. 116-6 , H.Rept. 116-9 ). The agriculture portion is Division B of the act. The official discretionary total of the Agriculture appropriation is $23.03 billion, which is $35 million more (+0.2%) than was enacted for FY2018 on a comparable basis that excludes the CFTC from the FY2018 total ( Table 2 ). On that same comparable basis, the enacted total is $6.3 billion more than the Administration requested (+38%), $55 million more than was proposed in the House-reported bill (+0.2%) but $194 million less than in the Senate-passed bill (-0.8%). The appropriation also carries mandatory spending that totals nearly $129 billion, which is determined in other authorizing laws. Thus, the overall total of the FY2019 Agriculture appropriation is about $152 billion ( Figure 2 ). Table 3 summarizes appropriations amounts at the agency level. The primary changes that account for the overall $35 million discretionary increase in the FY2019 Consolidated Appropriations Act are the following: Increase in the four agricultural research agencies in Title I by $387 million (+13%) to $3.4 billion, mostly by increasing ARS building and facilities by $241 million, ARS salaries and expenses by $100 million, and NIFA by $64 million. Increase in base FDA appropriations in Title VI by $269 million (+10%) to $3.1 billion (excluding user fees) while not renewing extra funding in general provisions (Title VII) that was in the FY2018 appropriation for opioid enforcement and surveillance (-$94 million reduction to the budget score). Increase in WIC funding by a net $200 million, accounting for changes in rescissions of carryover balances and in the base appropriation. In FY2019 $500 million is rescinded from carryover balances, smaller than the rescission of $800 million in FY2018, for a comparative $300 million increase. The base WIC appropriation in Title IV is reduced by $100 million to $6.075 billion. Also, appropriations for nutrition program administration is increased by $11 million. Increase in APHIS by $29 million (+3%) to $1.014 billion. Maintain Food for Peace appropriations effectively at $1.716 billion by decreasing the base appropriation in Title V by $100 million and increasing extra funding in Title VII by $100 million. Also, salaries and expenses for the Foreign Agricultural Service are increased (+14 million). Maintain overall discretionary farm production and conservation funding in Title II (+0.5%, +$13 million) while shifting some administrative funding from program agencies into a new administrative business center. Decrease in the effective amount for rural development by essentially maintaining its base appropriation in Title III (+0.4%, +$11 million) and reducing extra appropriations that were made in the FY2018 general provisions (Title VII) for water and wastewater programs (-$425 million) and rural broadband (-$475 million). Decrease in the budgetary offset provided by other scorekeeping adjustments, mostly from smaller negative subsidies that are provided by farm and rural development loan programs. In FY2018, $481 million was offset. In FY2019, $404 million is offset (+$77 million increase in the budget score). Also, mandatory spending (+$16 million) is increased by further reducing the effect of appropriations act CHIMPS. Mandatory spending carried in the Consolidated Appropriations Act increased by $6 billion over FY2018 to $129 billion and was higher than estimated for the House and Senate bills. The annual change was mostly due to higher costs for crop insurance (+$6.5 billion), greater reimbursement for the CCC (+1.1 billion), and lower outlays for child nutrition (-$1.1 billion) and SNAP (-$0.5 billion). In addition to setting budgetary amounts, the Agriculture appropriations bill has also been a vehicle for policy-related provisions that direct how the executive branch should carry out the appropriation. These provisions may have the force of law if they are included in the text of the appropriation, usually in the General Provisions, but their effect is generally limited to the current fiscal year. In some instances, the provisions may amend the U.S. Code and have long-standing effects. The explanatory statement in the conference report that accompanies the final appropriation ( H.Rept. 116-9 ), and the House and Senate report language that accompanies the committee-reported bills ( H.Rept. 115-706 , S.Rept. 115-259 ), may also provide additional policy instructions. These documents do not have the force of law but often explain congressional intent, which the agencies are expected to follow. Indeed, the committee and conference reports may need to be read together to capture all of the congressional intent for the fiscal year: Congressional Directives. The explanatory statement is silent on provisions that were in both the House Report ( H.Rept. 115-706 ) and Senate Report ( S.Rept. 115-259 ) that remain unchanged by this conference agreement, except as noted in this explanatory statement. The conference agreement restates that executive branch wishes cannot substitute for Congress's own statements as to the best evidence of congressional intentions, which are the official reports of the Congress.... The House and Senate report language that is not changed by the explanatory statement is approved and indicates congressional intentions. The explanatory statement, while repeating some report language for emphasis, does not intend to negate the language referred to above unless expressly provided herein. Table 4 compares some of the major policy provisions that have been identified in the General Provisions (Title VII) of the FY2019 Agriculture appropriations bills and act. It excludes policies that may have been addressed in the report language or explanatory statement. Many of these provisions have been included in past years' appropriations laws. Appendix A. Budget Sequestration Sequestration is a process to reduce federal spending through automatic, largely across-the-board reductions that permanently cancel mandatory and/or discretionary budget authority. Sequestration is triggered as a budget enforcement mechanism when federal spending would exceed statutory budget goals. Sequestration is currently authorized by the Budget Control Act of 2011 (BCA; P.L. 112-25 ). Table A-1 shows the rates of sequestration that have been announced and the total amounts of budget authority that have been cancelled from accounts in Agriculture appropriations. Table A-2 provides additional detail at the account level for mandatory accounts. Discretionary Spending For discretionary spending, sequestration is authorized through FY2021 if discretionary defense and nondefense spending exceed caps that are specified in statute (2 U.S.C. 901(c)). In FY2013, the timing of the appropriations acts and the first year of sequestration resulted in triggering sequestration on discretionary spending. In FY2014-FY2018, Bipartisan Budget Acts in 2013, 2015, and 2018 (BBAs; P.L. 113-67 , P.L. 114-74 , and P.L. 115-123 , respectively) have avoided sequestration on discretionary spending. These BBAs raised the discretionary budget caps that were placed in statute by the BCA and allowed Congress to enact larger appropriations than would have been allowed. For FY2019, the BBA in 2018 similarly provides a higher discretionary cap that may avoid sequestration (see \" Discretionary Budget Caps and Subcommittee Allocations \"). Mandatory Spending Authorization of Sequestration For mandatory spending, sequestration is presently authorized through FY2027, having been amended and extended by acts that were subsequent to the BCA (2 U.S.C. 901a(6)). That is, sequestration continues to apply annually to certain accounts of mandatory spending and is not avoided by the BBAs ( Table A-1 ). The original FY2021 sunset on the sequestration of mandatory accounts has been extended four times as an offset to pay for avoiding sequestration on discretionary spending in the near term or as a general budgetary offset for other authorization acts: 1. Congress extended the duration of mandatory sequestration by two years (until FY2023) as an offset in BBA 2013. 2. Congress extended it by another year (until FY2024) to maintain retirement benefits for certain military personnel ( P.L. 113-82 ). 3. Congress extended sequestration on nonexempt mandatory accounts another year (until FY2025) as an offset in BBA 2015. 4. Congress extended sequestration on nonexempt mandatory accounts by another two years (until FY2027) as an offset in BBA 2018 ( P.L. 115-123 Division C, §30101(c)). Exemptions from Sequestration Some farm bill mandatory programs are exempt from sequestration. Those expressly exempt by statute are the nutrition programs (SNAP, the child nutrition programs, and the Commodity Supplemental Food Program) and the Conservation Reserve Program. Some prior legal obligations in the Federal Crop Insurance Corporation and the farm commodity programs may be exempt as determined by OMB. Generally speaking, the experience since FY2013 is that OMB has ruled that most of crop insurance is exempt from sequestration, while the farm commodity programs, disaster assistance, and most conservation programs have been subject to it. Implementation of Sequestration Sequestration on nonexempt mandatory accounts continues in FY2019. Nonexempt mandatory spending is to be reduced by a 6.2% sequestration rate and thus paid at 93.8% of what would otherwise have been provided. This results in a reduction of about $1.5 billion from mandatory agriculture accounts in FY2019. Appendix B. Action on Agriculture Appropriations, FY1996-FY2019", "summary": "The Agriculture appropriations bill funds the U.S. Department of Agriculture (USDA) except for the Forest Service. It also funds the Food and Drug Administration (FDA) and—in even-numbered fiscal years—the Commodity Futures Trading Commission (CFTC). Agriculture appropriations include both mandatory and discretionary spending. Discretionary amounts, though, are the primary focus during the bill's development. The largest discretionary spending items are the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); agricultural research; rural development; FDA; foreign food aid and trade; farm assistance program salaries and loans; food safety inspection; animal and plant health programs; and salaries and expenses for administering conservation programs. On February 15, 2019, Congress passed and the President signed the FY2019 Consolidated Appropriations Act (P.L. 116-6, H.Rept. 116-9). This action, more than four months into the fiscal year, followed three continuing resolutions and a 34-day partial government shutdown. The official discretionary total of the enacted FY2019 Agriculture appropriation is $23.03 billion, which is $35 million more than enacted in FY2018 (+0.2%) on a comparable basis that excludes the CFTC. The enacted total is $6.3 billion more than the Administration requested (+38%), $55 million more than was proposed in the House-reported bill (+0.2%), but $194 million less than in the Senate-passed bill (-0.8%). Among the primary differences that account for the overall $35 million discretionary increase for FY2019 over FY2018 are an increase in agricultural research (mostly for construction) by $387 million (+13%) to $3.4 billion, an increase in FDA appropriations by $269 million (+10%) to $3.1 billion, an increase in WIC funding by a net $200 million (accounting for changes in the amount of carryover balances rescinded and in the base appropriation), an increase in five other program areas by a combined $78 million, and a decrease in rural development by reducing extra appropriations that were made in FY2018 for water and wastewater programs (-$425 million) and rural broadband (-$475 million). The appropriation also carries $129 billion of mandatory spending that is largely determined in separate authorizing laws. The mandatory spending increased by $6 billion not because of congressional action this year but because of changing economic and program conditions. The annual change was mostly due to higher costs for crop insurance (+$6.5 billion), greater reimbursement for the Commodity Credit Corporation (+1.1 billion), and lower outlays for child nutrition (-$1.1 billion) and SNAP (-$0.5 billion). With mandatory and discretionary spending appropriations combined, the FY2019 agriculture total is nearly $152 billion. The Consolidated Appropriations Act and its underlying bills also contain policy provisions that affect how the appropriation is delivered. These provisions affect disaster programs, rural definitions, industrial hemp, animal regulations, nutrition programs, dietary guidelines, CFTC, and tobacco products. Sequestration on mandatory accounts—a process that reduces federal spending through automatic across-the-board reductions—also continues to affect agriculture spending.", "document_type": "crs"}
{"report": "To ensure that Members of Congress uphold high standards, the U.S. Constitution provides sole authority to establish rules and punish and expel Members to the House of Representatives and the Senate, respectively. Article I, Section 5, clause 2 provides that \"Each House may determine the Rules of its Proceedings, punish its Members for disorderly Behaviour, and, with the Concurrence of two thirds, expel a Member. \" In the 18 th and 19 th centuries, the Senate used its authority to establish ethics rules and to punish individual Members sparingly. Former Senate historian Richard Baker observed that \"[f]or nearly two centuries, a simple and informal code of behavior existed. Prevailing norms of general decency served as the chief determinants of proper legislative conduct. \" During that time, Congress often dealt with ethics issues \"on a case-by-case basis, [and then] only with the most obvious acts of wrongdoing, those clearly 'inconsistent with the trust and duty of a member. '\" Events in the early 1960s, including charges of corruption and influence peddling against Secretary to the Majority Robert G. \"Bobby\" Baker, prompted the Senate Committee on Rules and Administration, which had jurisdiction over \"[m]atters relating to the payment of money out of the contingent fund of the Senate or creating a charge upon the same,\" to hold hearings on financial and business activities of current and former Members, officers, and employees of the Senate. This report examines the history and evolution of the Senate Select Committee on Ethics, including the committee's jurisdiction and investigative procedure. It does not deal with changes to criminal law (as defined in Title 18, U .S. Code ), with criminal prosecutions of Members of Congress, or with the specifics of disciplinary cases in the Senate. Prior to the 88 th Congress (1963-1964), no standard mechanism existed for discipline of Senators. During the 88 th Congress, the Senate created the first ethics committee, the Select Committee on Standards and Conduct. In the 95 th Congress (1977-1978), the Senate changed the committee's name to the Committee on Ethics. Ethics reform became more salient in the Senate after Secretary to the Majority Robert G. \"Bobby\" Baker resigned on October 8, 1963, following allegations that he had misused his official position for personal financial gain. Following Mr. Baker's resignation, the Senate agreed to a resolution (S.Res. 212) to \"inquire into the financial and business interests of any officer, employee, or former employee of the Senate.\" The resolution directed the Committee on Rules and Administration to conduct an investigation into current and former officers' and employees' financial and business interests. The resolution stated, Resolved , That the Committee on Rules and Administration or any duly authorized subcommittee thereof is authorized and directed to make a study and investigation with respect to any financial or business interests or activities of any officer or employee or former officer or employee of the Senate, for the purpose of ascertaining (1) whether any such interests or activities have involved conflicts of interest or other impropriety, and (2) whether additional laws, rules, or regulations are necessary or desirable for the purpose of prohibiting or restricting any such interests or activities. The Committee shall report to the Senate at the earliest practicable date the results of its study and investigation, together with such recommendation as it may deem desirable. Pursuant to the S.Res. 212, the Committee on Rules and Administration held a series of hearings to investigate the general business interests and activities of Senate officials and employees. In the report issued following the hearings, the committee recognized that serious allegations had been made against a former employee, and that no specific rules or regulations governed the duties and activities of Members, officers, or employees of the Senate. The committee also concluded that many of Baker's outside activities were in conflict with his official duties and made several recommendations, including adoption of public financial disclosure rules and other guidelines for Senate employees. Following the investigation into Mr. Baker, additions to the Senate rules—calling for public financial disclosure reports and more controls on staff involvement with Senate campaign funds—were introduced to implement the committee's recommendations. Additionally, the Committee on Rules and Administration considered the creation of a separate ethics committee. In a committee report on proposed amendments to Senate rules, Senator John Sherman Cooper discussed an amendment he proposed, but which did not pass the committee, to create a select committee on standards and conduct. I regret that a resolution which I offered was rejected by the majority party representation on the committee. The resolution which I offered would have established a select committee on standards and conduct, composed of six members, three from each of the parties, to be appointed by the President of the Senate. This committee would be authorized to receive complaints of unethical, improper, illegal conduct of members, officers, or employees of the Senate, to make investigation of allegations of such conduct, to propose rules and regulations, to give advisory opinions, and to make recommendations to the Senate regarding disciplinary action if required. I believe the establishment of such a committee made up of distinguished Members of the Senate would act as a deterrent upon possible violations, and in the exercise of jurisdiction, would have the confidence of the Senate and the public. I do not consider that such a special select committee should be considered as a policing committee, but one which, as I have said, would deter possible violations and deal with them with utmost dispatch and fairness. On July 1, 1964, Senator B. Everett Jordan filed a resolution (S.Res. 338) to amend the jurisdiction of the Committee on Rules and Administration and allow the committee to investigate every alleged violation of the rules of the Senate, and to make appropriate findings of fact and conclusions with respect thereto after according to any individual concerned due notice and opportunity for hearing. In any case in which the committee determines that any such violation has occurred, it shall be the duty of the committee to recommend to the Senate appropriate disciplinary action, including reprimand, censure, suspension from office or employment, or expulsion from office or employment. Consideration of S.Res. 338 began on July 24, 1964. During debate, Senator Cooper proposed an amendment similar to his proposed amendment in the Committee on Rules and Administration. The amendment proposed to remove jurisdiction over ethical issues from the Committee on Rules and Administration and create a permanent, bipartisan Select Committee on Standards and Conduct. In proposing his amendment, Senator Cooper summarized why he thought the Senate should create a select committee instead of granting disciplinary authority to the Committee on Rules and Administration. First, in the event that an investigation into the affairs of a Member of the Senate or an employee becomes necessary, it is to give assurance that the investigation would be complete and, so far as possible, would be accepted by the Senate and by the public as being complete. Second—and this is important to all Members and to all employees of the Senate—it is to provide that an investigation, which could touch their rights and their offices as well as their honor, would be conducted by a select committee which by reason of its experience and its judgment, would give assurance that their right and honor would be justly considered. Senator Cooper's amendment was adopted by a vote of 50 to 33. Subsequently, the Senate agreed to S.Res. 338, as amended, to create a Select Committee on Standards and Conduct and for the first time created a continuing internal disciplinary body. Members of the Select Committee on Standards and Conduct were first appointed in July 1965, allowing the Committee on Rules and Administration to complete the Baker investigation. In October 1965, the committee elected a chair and vice chair, appointed its first staff, and began developing standards of conduct for the Senate. On March 11, 1975, Senator Adlai Stevenson introduced S.Res. 109 to \"establish a temporary select committee to study the Senate committee system.\" Agreed to in March 1976, the temporary select committee held hearings in July and September. Among items considered was the combination of the Select Committee on Standards and Conduct and the Committee on Rules and Administration. In a letter from Senator Howard Cannon, chair of the Select Committee on Standards, the ethics committee expressed opposition to this idea. In part, the letter read, The Select Committee on Standards and Conduct took note of the tentative decision of your Committee to recommend the consolidation of this Committee with the Committee on Rules and Administration. While we are mindful of the promised benefit of reducing the number of Committees which Senators must attend, we strongly believe that your decision would fatally damage any usefulness our Committee might have as well as to impugn any system of ethics in the Senate. By its very nature it is indispensable to an ethics committee of the Congress to be bipartisan in membership, to conduct any worthy investigation without control of its budget by any other committee, to be served by a nonpartisan staff, to advice and counsel with Senators, and to exercise prudent judgment in the conduct of its business. Consolidation of any ethics committee with a more-normal type of committee is likely to destroy all of these characteristics and to overwhelm any ethics identity. Unlike other committees, moreover, the Senate Committee on Standards and Conduct is mandated to directly assist the Senate in the discharge of a Constitutional responsibility. Subsequently, the temporary select committee recommended that the functions of the Select Committee on Standards and Conduct should be combined with the Committee on Rules and Administration. While no further action was taken by the 94 th Congress (1975-1976), the issue was readdressed during the 95 th Congress (1977-1978). In a report on S.Res. 4 , a resolution to amend the Senate committee system, the Committee on Rules and Administration rejected the idea of combining the Committee on Standards with the Committee on Rules and Administration and instead recommended establishment of a newly constituted bipartisan ethics committee to demonstrate to the public the \"seriousness with which the Senate views congressional conduct.\" In February 1977, the Senate agreed to S.Res. 4 and created the permanent Select Committee on Ethics to replace the Select Committee on Standards and Conduct. Initially, membership on the new select committee was limited to six years. In the 96 th Congress (1979-1980), the Senate adopted S.Res. 271 , and removed the six-year service limitation. In the 1940s, public criticism regarding potential conflicts of interest by Members of Congress supplementing their income from speeches and outside activities led to concern over the lack of disclosure of Members' finances. In 1946, Senator Wayne Morse introduced the first public financial disclosure legislation to require annual, public financial disclosure reports by Senators (S.Res. 306). In remarks on the introduction of the resolution, Senator Morse defended Members' right to earn outside income, but believed that the American people were entitled to know about alternate income sources. Commenting on the resolution's purpose, Senator Morse stated, I may say that my resolution is bottomed upon the very sound philosophical principle enunciated by Plutarch that Caesar's wife must be above suspicion. Likewise, I feel that, so far as the public's evaluation of Members of the Senate is concerned, they must be above suspicion. Hence, I think my resolution which calls for the filing with the Secretary of the Senate of all sources and amounts of senatorial income is in keeping with the public's right to know what influences may possibly be brought to bear upon Members of the Senate in the performance of their legislative duties. No action was taken on Senator Morse's proposal. In 1958, Congress established the first Code of Ethics for Government Service (Code of Ethics). Initially proposed in 1951 by Representative Charles Bennett, the Code of Ethics was adopted following a House investigation of presidential chief of staff Sherman Adams, who was alleged to have received gifts from an industrialist being investigated by the Federal Trade Commission. The Code of Ethics for Government Service standards continue to be recognized as ethical guidance in the House and Senate. The Code of Ethics is not legally binding, however, because it was adopted by congressional resolution, not by law. In October 1965, as one of its first actions, the Select Committee on Standards and Conduct recommended rules of conduct for Members, officers, and employees of the Senate. In March 1968, the Select Committee on Standards and Conduct reported a resolution (S.Res. 266) making four additions to the Standing Rules of the Senate. After several days of debate, the Senate adopted a new code of conduct. The four areas covered by the new code of conduct were (1) outside employment of officers and employees, (2) raising and permissible uses of campaign funds, (3) political fund-raising activities of Senate staff, and (4) annual financial disclosures by senatorial candidates as well as Members, officers, and designated employees of the Senate. Following the Watergate scandal in the Nixon Administration, reforms \"such as electoral changes, designed to prevent the recurrence of the Watergate type of offense\" were initiated in the executive branch. Subsequently, the Senate began to examine their own activities and behavior. On January 18, 1977, Senate Majority Leader Robert Byrd and Minority Leader Howard Baker jointly introduced S.Res. 36 , to establish a temporary Select Committee on Official Conduct. As part of a larger discussion on raising salaries for all federal employees, Senator Baker expressed his belief that establishing a formal code of conduct was an essential piece of raising government salaries. The increase in compensation for Members of Congress will, no doubt, be considered and voted upon in the very near future. It is imperative, therefore, that prompt attention be given to questions relating to ethical conduct and financial disclosure. For this reason, the distinguished majority leader and I have agreed to propose the establishment of an ad hoc committee to study all questions relating to a Senate code of conduct. The committee will have 15 members, including a chairman and vice chairman, of which eight will be of the majority party and seven of the minority party. It will be instructed to study all matters relating to the standards and conduct of Members of the Senate and to make its report and recommendations no later than March 1. In this manner, Mr. President, I believe that the Senate can proceed to adoption of an equitable code of conduct as quickly as possible and with the benefit of the ad hoc committee's report. S.Res. 36 was adopted by unanimous consent. The Select Committee on Official Conduct held hearings in February 1977 and issued a final report on March 10. The Select Committee reported a resolution ( S.Res. 110 ) to amend the Code of Conduct and propose additions to the Standing Rules of the Senate (then numbered XLII to L), which would become the Code of Official Conduct. The proposed rules changes included the first public financial disclosure requirements for Senators and officers and employees of the Senate; limits on gifts, outside earnings, and the use of the frank; and prohibited unofficial office accounts and lame-duck foreign travel. There was also a provision prohibiting discrimination in staff employment. On April 1, 1977, S.Res. 110 was agreed to and the Select Committee recommendations were adopted. In 2007, pursuant to the Honest Leadership and Open Government Act, several sections of the Senate Code of Official Conduct were amended. These included placing restrictions on former Senators and senior staff who become federally registered lobbyists; requiring disclosure by Senators and staff of post-employment job negotiations; implementing protections against Senators from influencing hiring decisions based on political affiliation; and amending the Senate gift rules. The current Senate Code of Official Conduct can be found in Rules 34 through 43 of the Standing Rules of the Senate. Additionally, federal statutes contain numerous provisions which prohibit or restrict certain activities by Members and employees. Discussion of the prohibitions and restrictions pursuant to federal law are included in the Senate Ethics Manual . Table 1 provides a list of Standing Rules of the Senate that are included in the Code of Official Conduct. Pursuant to S.Res. 338 (88 th Congress), the Select Committee on Standards and Conduct was given the authority to (1) investigate allegations of improper conduct which may reflect upon the Senate; (2) investigate violations of laws, rules, and regulations of the Senate relating to the conduct of Members, officers, and employees in their official duties; (3) recommend disciplinary action, when appropriate; and (4) recommend additional Senate rules to insure proper conduct. Following the creation of the Select Committee on Ethics, the Senate adopted S.Res. 110 (95 th Congress) and transferred the jurisdiction of the former Select Committee on Standards and Conduct and made the new committee responsible for enforcing and interpreting the Senate Code of Official Conduct. Since 1973, several additions have been made to the Select Committee on Ethics' jurisdiction. The additions have included use of the frank, disclosure of intelligence material, acceptance of foreign gifts, administration of public financial disclosure forms, and enforcement of fair employment practices. In 1973, Congress passed legislation ( P.L. 93-191 ) clarifying the proper use of the franking privilege by Members of Congress and authorizing the Select Committee on Standards and Conduct to provide assistance and counsel to Senators and staff on the use of the frank. When the Senate Select Committee on Intelligence was created in 1976, the Ethics Committee was given specific jurisdiction to investigate any unauthorized disclosure of intelligence information by a Senator, officer, or employee of the Senate and to report to the Senate on any substantiated allegation. In August 1977, following the enactment of P.L. 95-105 (FY1978 Foreign Relations Authorization Act), which amended the Foreign Gifts and Decorations Act of 1966, the Select Committee on Ethics was designated the \"employing agency\" for the Senate and was authorized to issue regulations governing the acceptance by Senators and staff of gifts, trips, and decorations from foreign governments. In August 1979, the Select Committee on Ethics was given responsibility for administering the Senate public financial disclosure requirements contained in the Ethics in Government Act of 1978. Pursuant to amendments in the Ethics Reform Act of 1989, the Ethics Committee was named as the \"supervising ethics office\" for laws governing gifts to federal employees and gifts by employees to their supervisors. In 1991, Title III (Government Employee Rights Act of 1991) of the Civil Rights Act of 1991 established the Senate Office of Fair Employment Practices. The Office of Fair Employment Practices was designed to adjudicate discrimination complaints and gave the Select Committee on Ethics jurisdiction to review, upon request, decisions of the office. In 1995, authority to review discrimination cases was transferred to the Office of Compliance with the passage of the Congressional Accountability Act (CAA). The Ethics Committee continues to have jurisdiction over disciplinary cases that could result from an Office of Compliance investigation under Senate Rule 42. On April 4, 2012, the STOCK Act (Stop Trading on Congressional Knowledge Act) was passed to affirm that no exemption exists from \"insider trading\" laws and regulations for Members of Congress and congressional employees. Pursuant to the act, the Senate Select Committee on Ethics is required to issue interpretive guidance of the relevant rules of each chamber, including rules on conflicts of interest and gifts, clarifying that a Member of Congress and an employee of Congress may not use nonpublic information derived from such person's position as a Member of Congress or employee of Congress or gained from the performance of such person's official responsibilities as a means for making a private profit. Pursuant to the STOCK Act, the Select Committee on Ethics has issued two sets of guidance on the implementation of the law. The first, issued on June 15, 2012, provided a summary of STOCK Act requirements for Senate Staff, reminders of periodic transaction and financial disclosure requirements, and disclosure forms. The second, issued on December 4, 2012, provided specific guidance on insider trading restrictions under securities laws and Senate ethics rules. Pursuant to changes made since 1977, the Select Committee on Ethics currently has jurisdiction over the following areas: 1. receive complaints and investigate allegations of improper conduct which may reflect upon the Senate, violations of law, violations of the Senate Code of Official Conduct, and violations of rules and regulations of the Senate, relating to the conduct of individuals in the performance of their duties as Members of the Senate, or as officers or employees of the Senate, and to make appropriate findings of fact and conclusions with respect thereto; 2. recommend, when appropriate, disciplinary action against Members and staff; 3. recommend rules or regulations necessary to insure appropriate Senate standards of conduct; 4. report violations of any law to the proper Federal and State authorities; 5. regulate the use of the franking privilege in the Senate; 6. investigate unauthorized disclosures of intelligence information; 7. implement the Senate public financial disclosure requirements of the Ethics in Government Act; 8. regulate the receipt and disposition of gifts from foreign governments received by Members, officers, and employees of the Senate; 9. render advisory opinions on the application of Senate rules and laws to Members, officers, and employees; 10. for complaints filed under the Government Employee Rights Act of 1991 respecting conduct occurring prior to January 23, 1996, review, upon request, any decision of the Senate Office of Fair Employment Practices; 11. develop and implement programs for Members, officers, and employees to educate them about standards of conduct applicable in the performance of their official duties; 12. \"conduct ongoing ethics training and awareness programs for Members of the Senate and Senate staff\"; and 13. issue an annual report on the number of alleged violations of Senate rules received from any source, including the number raised by a Senator or staff of the committee, and including the number of allegations dismissed or on which the committee took the specific actions. Procedures for the Select Committee on Ethics are established pursuant to S.Res. 338 (88 th Congress), as amended; P.L. 93-191 ; S.Res. 400 (94 th Congress); and 5 U.S.C. Section 7342. The Ethics Committee may initiate an inquiry or investigate allegations brought by Senators, Senate officers, Senate staff, or outside individuals and groups. While the committee does not have formal procedural requirements for filing a complaint, the committee can issue public statements regarding a specific inquiry. If the committee chooses not to issue a public statement, all allegations are treated confidentially and the committee has a practice of neither confirming nor denying that a matter is before the committee. \"Upon completion of its investigative process, the Committee may recommend to the Senate or party conference an appropriate sanction for a violation or improper conduct, including, for Senators, censure, expulsion, or party discipline and, for staff members, termination of employment.\" In 1977, the Senate agreed to S.Res. 110 , which created the Code of Official Conduct. Title II of S.Res. 110 amended S.Res. 338, the 1964 resolution that created the procedures of the Select Committee on Standards and Conduct, which became the Select Committee on Ethics. The amendments required the Select Committee to receive complaints and investigate alleged violations of the Senate Code of Official Conduct and to publish necessary regulations to implement the code. Title II also required the publishing of advisory opinions in the Congressional Record, if requested by specified individuals. Appendix A. Membership on the Senate Select Committee on Standards and Conduct, 1965-1976 Created in the 89 th Congress (1965-1966), a total of 14 Senators served on the Senate Select Committee on Standards and Conduct prior to its being disbanded with the creation of the Senate Select Committee on Ethics in the 95 th Congress (1977-1978). Table A-1 provides a list of all Members who served on the Senate Select Committee on Standards and Conduct, their party affiliation, and their state. Majority party Members are listed first. Appendix B. Membership on the Senate Select Committee on Ethics, 1977-2019 Created in the 95 th Congress (1977-1978), the Senate Select Committee on Ethics has had a total of 57 different members. Table B-1 provides a list of all Members who have served on the Senate Select Committee on Ethics, their party affiliation, and their state. Majority party Members are listed first.", "summary": "The U.S. Constitution provides each House of Congress with the sole authority to establish rules and punish and expel Members. From 1789 to 1964, the Senate dealt individually with cases of disciplinary action against Members, often forming ad hoc committees to investigate and make recommendations when acts of wrongdoing were brought to the chamber's attention. Events of the 1960s, including the investigation of Secretary to the Majority Robert G. \"Bobby\" Baker, for alleged corruption and influence peddling, prompted the creation of a permanent ethics committee and the writing of a Code of Conduct for Members, officers, and staff of the Senate. The Senate Select Committee on Ethics was first established in 1964. This bipartisan, six-member committee investigates alleged violations of the rules of the Senate and recommends disciplinary actions. In the 95th Congress (1977-1978), the Senate expanded the committee's jurisdiction and altered its procedures to implement revisions to the Senate Code of Official Conduct. Also, to reflect these changes the committee was renamed the Select Committee on Ethics. This report briefly outlines the background of ethics enforcement in the Senate, including the creation of the Select Committee on Standards and Conduct and the subsequent renaming of the committee as the Select Committee on Ethics. The report also provides a brief overview of the Senate Code of Conduct and on the Select Committee's current jurisdiction and procedures. For additional information on ethics in the Senate, please see CRS Report RL30764, Enforcement of Congressional Rules of Conduct: A Historical Overview, by Jacob R. Straus.", "document_type": "crs"}
{"report": "The Temporary Assistance for Needy Families (TANF) block grant was created by the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ). It replaced the program of cash assistance for needy families that dated back to the New Deal, Aid to Families with Dependent Children (AFDC), and some of its related programs. The enactment of the 1996 welfare reform law was the culmination of a debate about how to overhaul programs providing cash assistance to needy families with children—specifically, those headed by single mothers—that spanned four decades: from the 1960s to the 1990s. The 1996 welfare law provided both program authority and funding (appropriations) for TANF through the end of FY2002. Most of the legislative activity on TANF since 2002 has been to extend the program funding and financing authority for TANF. Most of these extensions did not change TANF policy, though policy changes were included in extensions enacted in 2006, 2010, and 2012. The TANF Extension Act of 2019 ( P.L. 116-4 ) extended TANF funding through June 30, 2019. This report will begin with a brief overview of the history of the AFDC program and the welfare reform debates of the 1960s to the 1990s. That overview will be followed by a summary of the 1996 welfare reform law and the changes made since 1996. The report concludes with a detailed chronology of TANF legislation. The modern form of cash assistance for needy families with children dates back to the Progressive Era of the early 1900s, and state- or locally funded mothers' pensions for \"fatherless\" families. The purpose of these programs was to permit these mothers to stay at home and care for their children. Federal funding for these programs was first provided in the Social Security Act of 1935 (P.L. 74-271) through the Aid to Dependent Children (ADC) program, later renamed the Aid to Families with Dependent Children program (AFDC). Many of the later changes, and the welfare reform debates of the 1960s to the 1990s, focused on issues of work and whether providing cash to nonworking single mothers served as disincentives for both work and marriage. However, the history of the ADC/AFDC program touched many other facets of the well-being of children and their families. ADC/AFDC provided federal funding for social services, medical assistance, child care, and foster care. These were later spun off into separate programs, with dedicated federal funding. While much of the focus of the welfare reform debates was on the single mother (custodial parent), ADC/AFDC policy also touched on noncustodial parents. The Child Support Enforcement (CSE) program was created, in great part, to reimburse states and the federal government for the costs of providing assistance to single mothers, and making noncustodial fathers responsible for these costs. CSE has evolved into a program that distributes child support payments collected from noncustodial parents to custodial parents, mostly to families that have never received or are no longer receiving cash assistance. The Social Security Act of 1935 (P.L. 74-271) created the social insurance programs of Old Age Benefits and unemployment compensation, where workers earned protection against lost wages because of old age and involuntary unemployment. It also created federal funding for state programs providing assistance for low-income aged persons, blind persons, and programs for needy families with children where one parent (usually the father) was unable to support the family. The ADC program provided grants to the states to help finance programs to assist children who were \"deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent\" and who lived with the other parent or a relative. States ran the program and determined eligibility for its benefits. The federal government provided funding for a portion of the expenditures made in state ADC programs. The legislative history of the 1935 act explicitly stated that the purpose of ADC payments was to permit mothers to stay at home rather than work: The very phrases \"mothers' aid\" and \"mothers' pensions\" place an emphasis equivalent to misconstruction of the intention of these laws. These are not primarily aids to mothers but defense measures for children. They are designed to release from the wage-earning role the person whose natural function is to give her children the physical and affectionate guardianship necessary not alone to keep them from falling into social misfortune, but more affirmatively to rear them into citizens capable of contributing to society. The 1935 Social Security Act left administration and many decisions about eligibility to the states. States also determined ADC benefit amounts. In the early years, families receiving ADC benefits were often headed by a widow or had a disabled father. However, over time the natures of both the program and the families it aided changed. The Social Security Amendments of 1939 (P.L. 76-379) added \"survivor\" benefits to the program of old age benefits, renaming it Old Age and Survivors Insurance. Survivor benefits, like old age benefits, were social insurance benefits earned through work in a covered job and paid to spouses and children upon the death of a worker or retiree. This provided an alternative, and more universal, means of aiding widows and their children. The Social Security Amendments of 1956 (P.L. 84-881) added Disability Insurance to Old Age and Survivor Insurance, with the combined program now commonly referred to as Social Security. The 1956 amendments also expanded the types of jobs covered by Social Security. These changes, too, provided more universal means of aiding the types of families that were originally assisted by ADC. The families receiving ADC increasingly were families where the father was alive but absent. The caseload also became increasingly nonwhite. The issue of whether single mothers should work was also much debated. The intent of ADC to allow single mothers to stay home and raise their children was often met with resistance at the state and local levels. It was also contrary to the reality that low-income women, particularly women of color, were sometimes expected to, and often did, work. Further, the increase in women's labor force participation in the second half of the 20 th century—particularly among married white women—eroded support for payments that permitted single mothers to remain at home and out of the workforce. The Social Security Amendments of 1956 (P.L. 84-881) added the goals of creating \"self-sufficiency\" and strengthening family life to ADC, along with funding for services that would seek to achieve these goals. P.L. 87-31, enacted in 1961, first made cash assistance benefits available to families headed by two able-bodied parents at state option. This authority was temporary at first (in response to an economic downturn), but was later made permanent. In 1962, the program was renamed Aid to Families with Dependent Children. The 1962 amendments, the Public Welfare Amendments of 1962 (P.L. 87-543), also established a community work and training program for adult AFDC recipients, largely intended for men in two-parent families. The Social Security Amendments of 1967 (P.L. 90-248) enacted both financial incentives for adult recipients to work and, for the first time, requirements for AFDC mothers to work. These amendments required states to disregard from a family's countable income some earnings when determining its \"need\" and benefits. The amendments also created a new work program under AFDC—the Work Incentive Program (WIN)—that expanded the population served by an AFDC-related work program to women. The late 1960s marked the beginning of the welfare reform debates, with proposals put to Congress to completely replace AFDC with a different type of program. This occurred as AFDC's costs and the number of families receiving its benefits increased. In 1964, fewer than 1 million families received AFDC. By 1973, the AFDC rolls had increased to 3.1 million families. For the decade beginning in 1969, these proposals were based on the \"negative income tax\" (NIT) concept. The NIT proposals would have provided a guaranteed income to families who had no earnings (the \"income guarantee\" that was part of these proposals). For families with earnings, the NIT would have provided for a gradual reduction in the benefit as earnings increased. President Nixon proposed to replace AFDC with an NIT-type program in 1969, the Family Assistance Plan (FAP). This proposal also would have nationalized the program, with the federal government paying the income guarantee and states able to supplement the federal guarantee with their own funds. This legislation was not enacted; it passed the House twice but never passed the Senate. In 1972, the Senate Finance Committee proposed to guarantee jobs—rather than income—for parents of school-age children. That proposal, too, did not ultimately pass. President Carter also proposed an NIT-based cash assistance program coupled with a public service job program in 1977. President Carter's proposals died in committee (they were never reported to either the full House or Senate). A less ambitious proposal from President Carter in 1979 passed the House but did not pass the Senate. The proposals to change AFDC made by President Reagan at the beginning of his Administration differed sharply from the earlier welfare reform proposals. They emphasized devolution to the states in decisionmaking, rather than nationalization. They also emphasized requirement to work, rather than work incentives. The Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ) limited the earnings disregard that was enacted in 1967, ending benefits for many who were on the rolls and working. It also gave states expanded authority to require recipients to engage in community service or work experience programs (unpaid work) in exchange for their AFDC benefit. In 1982, President Reagan proposed to completely devolve cash assistance for families with children. That proposal did not pass. In the 1980s, there was increasing attention to \"welfare dependency.\" Research at that time showed that while many mothers were on cash assistance for a short period of time, a substantial minority of mothers remained on the rolls for long periods. Additionally, policymakers began to focus on the possibility that a single mother who left welfare for work might be financially worse off than if she did not work and continued to collect benefits. Such a single mother, who might command relatively low wages in the labor force, risked losing medical assistance from Medicaid for herself and her children and faced work-related costs such as child care. The Family Support Act of 1988 ( P.L. 100-485 ) established in AFDC the notion of mutual responsibility between the cash assistance recipient and the state. It created the Job Opportunities and Basic Skills (JOBS) Training program, which provided employment services, education, and training for cash assistance recipients. The Family Support Act also mandated that states provide benefits for two-parent families, though it was on more restrictive terms than those for single-parent families. The Family Support Act also established the Transitional Medical Assistance (TMA) program that continued Medicaid coverage for a period of time for those who otherwise would have lost eligibility for Medicaid when moving from welfare to work. Further, it guaranteed child care for AFDC recipients engaged in work activities and provided time-limited (transitional) child care for those who left AFDC for work. Subsequent legislation, enacted in 1990, further expanded child care by creating a new block grant for those without a connection to AFDC, new matching funds to subsidize child care for those \"at risk\" of receiving AFDC, and a major expansion of the Earned Income Tax Credit (EITC). Additionally, an era of experimentation on \"welfare-to-work\" initiatives began in the 1980s. President Reagan proposed legislation in 1987 that would have authorized states to conduct demonstration projects that could have included AFDC and any other low-income assistance programs. These demonstrations would have been overseen at the federal level by an Interagency Low-Income Opportunity Board. Though the proposed legislation was not enacted, the Reagan Administration, and subsequently the Administrations of George H. W. Bush and Bill Clinton, issued waivers of AFDC requirements under another provision of law. The experimentation on \"welfare-to-work\" initiatives found that requiring participation in work or job preparation activities could effectively move single mothers off the benefit rolls and into jobs. The number of families receiving cash assistance had been fairly stable during the period from 1982 to 1988. However, beginning in the summer of 1989 the number of families receiving cash assistance began to increase once again. During the 1992 presidential campaign, then-candidate Bill Clinton promised to \"end welfare as we know it.\" He stressed time-limited aid and expanded financial supports for those who did go to work. The 1993 tax bill further expanded the EITC. President Clinton made his welfare reform proposal in June 1994. It would have phased in a two-year limit on AFDC receipt without work, followed by required participation in a wage-paying work program after two years. It would also have expanded funding for training within the first two years. It was estimated to increase child care costs for participants in the JOBS program or the wage-paying work program. The proposal would have barred AFDC to unwed minor mothers. President Clinton's proposal was never considered by either the House or the Senate. However, during the period before the enactment of the 1996 welfare reform law, the Administration granted waivers of AFDC law to 43 states allowing them to engage in \"welfare reform\" demonstration projects. Some of these waivers were for small-scale demonstrations, but some were for statewide demonstrations of state-designed cash assistance and work programs. Welfare reform was one of 10 legislative initiatives that was included in the \"Contract with America,\" developed by Republicans for the 1994 congressional campaign. The welfare proposal in the Contract with America would have required recipients to work after two years of AFDC (like the Clinton Administration proposal), but it also would have imposed a lifetime five-year limit on benefits. It would have barred AFDC to unwed minor mothers and would have imposed a \"family cap,\" not increasing benefits for new babies born into AFDC families. Funding for AFDC and child care would have been capped, with states given the option to receive AFDC as a block grant. H.R. 4 , as introduced at the start of the 104 th Congress, was the Contract with America proposal. However, immediately following the 1994 congressional election, House Republicans worked with several Republican governors to craft an alternative proposal that would block grant funding for AFDC and other social programs. The welfare reform legislation considered by House committees reflected the block grant proposals rather than the original H.R. 4 legislation. Legislation reported from the House committees was bundled into an omnibus welfare reform bill that included the end of AFDC and its replacement with TANF. That bill, the Personal Responsibility Act, substituting for the original text of H.R. 4 , passed the House on March 24, 1995. H.R. 4 , as passed by the House, formed the basis for all later welfare reform bills considered and passed by the 104 th Congress. It would have replaced AFDC and related programs of Emergency Assistance, and the work and training program for AFDC recipients, with a block grant to the states for Temporary Assistance for Needy Families; allotted TANF basic block grant funds to states based on recent expenditures in AFDC and related programs; allowed states to spend their TANF grants on a broad range of benefits and services; gradually phased in a requirement that 50% of the caseload be either working or engaged in activities, but limited the ability of states to count education and training toward that target; the requirement could also be met, fully or partially, through caseload reduction (i.e., the caseload reduction credit); established a five-year lifetime limit on cash assistance; prohibited unwed minor parents from receiving cash assistance; prohibited states from increasing cash benefits when a new baby was born to a family already on the rolls (the family cap); and limited need-tested benefits for noncitizens in need-tested programs, including requiring that noncitizens be in the United States for five years before being eligible for TANF. The House-passed bill also consolidated AFDC-related child care funding with the block grant created in 1990, and it increased funding for child care. However, it ended the guarantee that those transitioning from welfare-to-work be provided child care. The Senate Finance Committee ordered H.R. 4 reported in May 1995. The Finance Committee bill adopted a similar structure to the House bill. Different from the House bill, however, the Senate Finance Committee bill would have continued a separate employment and training program; did not include a family cap; and did not include the prohibition on benefits to unwed minor parents. Disputes about the committee-reported measure over items such as the distribution of funds held up consideration of the bill until August and September of 1995. Negotiations between party leaders in the Senate, Senator Robert Dole for the Republicans and Senator Thomas Daschle for the Democrats, produced an accord that also adopted the basic structure of the House bill but made some substantial modifications. The compromise bill included a requirement that states continue to spend some of their own funds (a \"maintenance of effort,\" or MOE requirement) in order to receive their full block grant funds; supplemental grants to states with high rates of population growth and/or low historical welfare spending per poor child; a contingency fund for states experiencing economic need; a provision to allow aid to unwed minor parents who were living in an adult supervised setting; and \"charitable choice\" provisions to permit increased participation of faith-based organizations in the delivery of welfare services. The Senate passed its version of H.R. 4 on September 19, 1995. Following passage of welfare reform legislation in the Senate, both the House and Senate began the process of crafting legislation to implement the budget adopted for FY1996. On October 17, 1995, the House Budget Committee reported its budget reconciliation bill ( H.R. 2491 ), which included the end of AFDC and its replacement with TANF. It passed the House on October 26, 1995. The Senate version of the budget reconciliation bill also generally included the Senate-passed version of the TANF proposal, and it passed on October 28, 1995. Conferees came to an agreement on the budget reconciliation bill—including the welfare reform provisions—on November 17, 1995. The House- and Senate-approved conference agreement was vetoed by President Clinton on December 6, 1995. President Clinton's veto message highlighted his opposition to cuts to Medicare, Medicaid, the EITC, and child nutrition programs. The President said: On welfare reform, I strongly support real welfare reform that strengthens families and encourages work and responsibility. But the provisions in this bill, when added to the EITC cuts, would cut low-income programs too deeply. With the veto of the budget reconciliation bill, attention turned toward finalizing House-Senate agreements on the stand-alone welfare reform bill ( H.R. 4 ). A final conference report on H.R. 4 was filed on December 20, 1995. The final agreement included many of the modifications to TANF that were adopted in the Senate, including a compromise maintenance of effort requirement; supplemental grants to states with high population growth and/or low historical spending per poor child, but with limited funding; and a state option to impose a family cap. President Clinton vetoed H.R. 4 on January 9, 1996. In vetoing the bill, the President remarked: The final welfare reform legislation should provide sufficient child care to enable recipients to leave welfare to work; reward States for placing people in jobs; restore the guarantee of health coverage for poor families; require States to maintain their stake in moving people from welfare to work; and protect States and families in the event of economic downturn and population growth. The President also objected to budget cuts not related to the TANF proposal, such as provisions that would have cut spending in food stamps (now the Supplemental Nutrition Assistance Program), benefits for disabled children, benefits for noncitizens, school lunches, and foster care and adoption assistance. With welfare reform twice vetoed, the National Governor's Association (NGA) in February 1996 adopted a policy position asking for additional child care funds, additional contingency funds for recessionary periods, and bonus payments for states that meet certain employment outcomes. In May 1996, House and Senate Republicans introduced bills that reflected the policies of the vetoed H.R. 4 and provided additional funding for child care, the TANF contingency fund, and performance bonuses. H.R. 3734 , the budget reconciliation bill for that year, included these welfare reform provisions together with a proposal to revise Medicaid. H.R. 3734 passed the House on July 18, 1996. The Senate made a key modification to the bill by dropping its Medicaid provisions. The welfare reform provisions remained in H.R. 3734 , and it passed the Senate on July 23, 1996. A conference agreement on the bill was filed July 30, 1996; it passed the House on July 31, 1996, and the Senate on August 1, 1996. President Clinton signed the legislation, known as the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA; P.L. 104-193 ), into law on August 22, 1996. The 1996 welfare reform law repealed AFDC and some of its related programs and replaced it with the TANF block grant. Funding for the AFDC-related child care programs was consolidated into a separate funding stream dedicated to child care. Some things did not change with the 1996 law. As was the case with AFDC, TANF programs are run by states (and sometimes localities), and they determine the maximum benefits under the programs and set the income eligibility thresholds. Table 1 summarizes some of the major differences between AFDC and TANF. It should be noted that at the time of enactment of the 1996 law many states were operating under waivers of the AFDC rules that related to cash assistance. These waivers imposed time limits, set different rules for counting earnings than did the AFDC federal rules, and set different rules for work or participation in job activities. TANF permitted states to continue programs operated under waivers, even if the provisions of the waiver were inconsistent with TANF rules. The last of these waivers expired in 2007. The Balanced Budget Act of 1997 (BBA97, P.L. 105-33 ), enacted one year after the 1996 welfare reform law, made a number of changes to TANF. It created a program providing additional funding dedicated to financing work activities. The Welfare-to-Work Grant program (WTW) provided $3 billion for two years, FY1998 and FY1999. Under the program, funding was divided, with 75% provided to states and local workforce areas through a formula and 25% dedicated to competitive grants. The program was originally targeted at the hardest to serve population on TANF and similarly disadvantaged noncustodial parents. The WTW grant program was administered by the Department of Labor (DOL), not the Department of Health and Human Services (HHS), which administers TANF. Subsequent legislation relaxed requirements for targeting services to the hardest to serve, and as funds were spent more slowly than anticipated, the deadline for expenditures was extended. The BBA97 made several other permanent changes to TANF, including permitting a greater percentage of recipients to be counted as engaged in work through education and training, but retaining a limit on counting such participation; setting a statutory limit on transfers from TANF to the Social Services Block Grant at 10%; and making technical corrections to the 1996 welfare reform bill, including technical corrections to TANF. In February 2002, President George W. Bush made proposals for the reauthorization of the TANF block grant and related welfare reform proposals. The document, Working for Independence, outlined a five-year reauthorization that would have funded the basic TANF block grant at the same level provided from FY1997 through FY2002 for an additional five years; provided mandatory child care funding through FY2007 at its FY2002 level (with no inflation or other adjustment over the period FY2003-FY2007); provided dedicated funding for grants to promote healthy marriage; raised the work participation standard to a minimum of 70% of families with a \"work-eligible individual\" that must be working or engaged in activities; required 40 hours per week of work or engagement in activities for full credit toward meeting the standard, but allowed for partial credit for hours less than 40 hours per week; allowed states to count rehabilitative activities for three months on the rolls, but narrowed the activities that counted after three months to work or community service or work experience; and ended the caseload reduction credit against the work standards, replacing it with a credit for recipients who left the rolls for work. The Bush Administration proposals were incorporated (with some modifications) into bills that passed the House in 2002 and 2003: H.R. 4737 (107 th Congress) and H.R. 4 (108 th Congress). A major difference between the Bush Administration proposal and the House proposals of 2002 and 2003 was that the House proposals retained the caseload reduction credit and provided extra credit to states that had large historical caseload reductions. Following House action, the Senate Finance Committee reported substantially differing versions of each bill. The Senate Finance Committee bills did not narrow the activities that could be counted toward the work participation standard after three months, and they expanded the ability of states to count participation in rehabilitative activities toward the TANF work participation standard. The Senate Finance Committee bills would have replaced the caseload reduction credit with a credit based on employed leavers, families diverted from the rolls, and families receiving work supports. The full Senate never acted on either of the Senate Finance Committee-reported bills. In the absence of reauthorization legislation, TANF program and funding authority was extended on a temporary basis 13 times from 2002 to 2006. The early part of 2005 again saw committee action on legislation to reauthorize TANF. On March 9, 2005, the Senate Finance Committee ordered reported legislation that became S. 667 (109 th Congress). The following week, the House Ways and Means Committee's Subcommittee on Human Resources considered H.R. 240 and sent it to the full committee. However, further action on TANF reauthorization did not occur until the fall of 2005, when the House and Senate began considering legislation under the budget reconciliation process. The House passed as part of their reconciliation bill (the House amendment to S. 1932 ) the TANF reauthorization bills that essentially incorporated the proposals passed by the House in 2002 and 2003 and were contained in H.R. 240 . The Senate version of the reconciliation bill contained no TANF provisions. The conference report on the budget reconciliation bill included TANF provisions different from those that passed the House. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) included (1) a long-term extension of TANF funding, through the end of FY2010; (2) the elimination of performance bonuses to states; (3) the establishment of a $150 million fund for research and competitive grants on healthy marriage and responsible fatherhood, with $100 million per year for healthy marriage initiatives and $50 million per year for responsible fatherhood initiatives; and (4) changes to TANF work rules, such as counting caseload reduction only from 2005 (rather than 1995) toward the work participation standards, requiring HHS to define specific work activities that may count for each listed statutory work activity, and requiring that states verify work activities of recipients. The DRA also included an increase in mandatory child care funding from $2.717 billion per year to $2.917 billion per year. The conference report on the DRA passed the House on December 19, 2005. Congress finished reconciling differences between the two chambers in February 2006. President Bush signed the DRA into law as P.L. 109-171 on February 8, 2006. The economy entered into a recession after December 2007, with a major financial crisis and accelerating job loss occurring in late 2008. In response, the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) passed Congress and was signed by President Obama. ARRA included tax cuts; unemployment insurance provisions; and extra funding for programs, including provisions to provide fiscal relief to states. ARRA also included $5 billion for a new TANF Emergency Contingency Fund (ECF) available to be spent in FY2009 and FY2010. The ECF supplemented funding for the regular TANF contingency fund, which itself was depleted in early FY2010. The ECF reimbursed states for 80% of the cost of increased expenditures for basic assistance, short-term emergency aid, and subsidized employment. ARRA also temporarily froze the TANF caseload reduction credit at prerecession levels, through its application to the FY2011 work participation standards. The long-term extension of TANF enacted in the DRA expired at the end of FY2010 (September 30, 2010). Since then, Congress continued TANF program authority and funding through a series of short-term extensions. TANF extensions have been incorporated into stop-gap continuing resolutions or omnibus appropriations bills to fund all or most of the government, added to tax bills, added to unrelated legislation, or passed as stand-alone legislation. (As used in this report, stand-alone legislation represents laws enacted that addressed only TANF and related programs.) There were two gaps in funding for TANF during this period. Funding lapsed during broader \"government shutdowns\" in October 2013 and beginning in December 2018. States were permitted to draw on unspent, previously appropriated TANF funds to finance their TANF activities during the shutdown. While many of the short-term extensions of TANF funding did not make changes to TANF policy, three extension laws did The Claims Resolution Act of 2010 (CRA, P.L. 111-291 ), a bill to settle claims against the federal government for certain Indian tribes, included a TANF extension through the end of FY2011. It also altered funding for the healthy marriage and responsible fatherhood programs, splitting the combined $150 million appropriation for them at $75 million for healthy marriage and $75 million for responsible fatherhood (it had previously been $100 million for healthy marriage and $50 million for responsible fatherhood). Additionally, the CRA required special one-time reports from the states on how they spend funds and on individuals with no reported hours of work participation. The CRA also provided funding for TANF supplemental grants only through June 30, 2011 (rather than September 30, 2011, the end of the fiscal year). Supplemental grants were not funded for the last quarter of FY2011, nor any fiscal year thereafter. The Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ) extended TANF through the end of FY2012, and also permanently amended TANF law to require states to act to prevent cash assistance recipients from withdrawing their benefits at Automated Teller Machines (ATMs) at strip clubs, casinos, and liquor stores. The FY2017 Consolidated Appropriations Act ( P.L. 115-31 ) extended funding for the TANF block grant for the remainder of FY2017 and for FY2018. It also financed TANF-related research through a set-aside of 0.33% of the TANF basic block grant appropriation. This reduced the TANF basic block grant to each state by 0.33%. In 2018, the House Ways and Means Committee reported legislation ( H.R. 5861 , 115 th Congress) that would have reauthorized and funded TANF for five years; revised TANF's work rules to measure employment outcomes rather than participation; required all assistance recipients to have an individualized plan; required that all TANF funds be spent on families with incomes at or below 200% of poverty; and required a minimum percentage of TANF funds to be spent on assistance, work activities, or short-term economic aid. The bill was not considered by the full House. P.L. 104-193 , enacted August 22, 1996, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, established the block grant of Temporary Assistance for Needy Families. Funds for most TANF grants were appropriated through FY2002; supplemental grants and the TANF contingency fund were appropriated through FY2001. States were required to implement TANF, and accept their block grant funding, by July 1, 1997, though they could opt to implement earlier. P.L. 104-327 , enacted October 19, 1996, amended the transition rule from the pre-TANF programs to TANF that limited total FY1997 federal funding for TANF and pre-TANF programs. It changed the limit on funding to the states for FY1997 from an amount equal to their basic block grant to an amount equal to their basic block grant plus, if they qualified, what they would have received from the TANF contingency fund. P.L. 105-33 , enacted August 5, 1997, the Balanced Budget Act of 1997, raised the cap limiting the counting of education as work from 20% to 30% of those considered engaged in work, and temporarily removed from that cap teen parents engaged in education through FY1999; set the maximum allowable TANF transfer to Title XX social services at 10% of the block grant (rather than one-third of total transfers); and made technical corrections to P.L. 104-193 . P.L. 105-33 also established the Welfare-to-Work (WTW) grant program within TANF (funded at $3 billion over two years, FY1998 and FY1999), but administered by the Department of Labor at the federal level, with local administration by state workforce investment boards and competitive grantees. P.L. 105-89 , enacted November 19, 1997, the Adoption and Safe Families Act, reduced the contingency fund appropriation by $40 million. P.L. 105-178 , enacted June 9, 1998, the Transportation Act for the 21 st Century, permitted the use of federal TANF funds as matching funds for reverse commuter grants. It also set the statutory limit on TANF transfers to Title XX social services at 4.25% of the block grant. (Note that subsequent annual appropriation bills restored the 10% limit on TANF transfers to SSBG.) P.L. 106-113 , enacted November 29, 1999, an omnibus appropriations act, broadened eligibility for recipients to be served by the WTW grant program and added limited authority for vocational education or job training to be WTW activities. P.L. 106-554 , enacted December 21, 2000, an omnibus appropriation act, gave grantees two more years to spend WTW grant funds (for a total of five years from the date of the grant award). P.L. 107-147 , enacted March 9, 2002, the Job Creation and Worker Assistance Act, extended the TANF supplemental grants and contingency funds, both of which had expired on September 30, 2001, through FY2002. Supplemental grants were extended at FY2001 levels. P.L. 107-229 , enacted September 30, 2002, a short-term continuing resolution, extended TANF basic grants, supplemental grants, bonus funds, and contingency funds (and other related programs) through December 20, 2002. P.L. 107-294 , enacted November 22, 2002, a short-term continuing resolution, extended TANF and related funding through March 30, 2003. P.L. 108-7 , enacted February 20, 2003, an omnibus appropriations act, extended TANF and related funding through June 30, 2003. P.L. 108-40 , enacted June 30, 2003, a stand-alone bill, extended TANF and related funding through September 30, 2003. P.L. 108-89 , enacted October 1, 2003, a multipurpose bill, included an extension of TANF and related funding through March 31, 2004. P.L. 108-199 , enacted January 23, 2004, a consolidated appropriations bill, rescinded all remaining unspent WTW formula grant funds, effectively ending the WTW grant program. P.L. 108-210 , enacted March 31, 2004, a stand-alone bill, extended TANF and related funding through June 30, 2004. P.L. 108-262 , enacted June 30, 2004, a stand-alone bill, extended TANF and related funding through September 30, 2004. P.L. 108-308 , enacted September 30, 2004, a stand-alone bill, extended TANF and related funding through March 31, 2005. P.L. 109-4 , enacted March 25, 2005, a stand-alone bill, extended TANF and related funding through June 30, 2005. P.L. 109-19 , enacted July 1, 2005, a stand-alone bill, extended TANF and related funding through September 30, 2005. P.L. 109-68 , enacted September 21, 2005, allowed states to draw upon contingency funds to assist those displaced by Hurricane Katrina, allowing directly affected states to receive funds from the loan fund, with repayment of the loan forgiven, and suspending penalties for failure to meet certain requirements for states directly affected by the hurricane. It also temporarily extended TANF grants through December 30, 2005. P.L. 109-161 , enacted December 30, 2005, a stand-alone bill, extended TANF grants through March 30, 2006. P.L. 109-171 , enacted February 8, 2006, the Deficit Reduction Act of 2005, extended most TANF grants through FY2010 (supplemental grants were extended through the end of FY2008), eliminated TANF bonus funds, established competitive grants within TANF for healthy marriage and responsible fatherhood initiatives, revised the caseload reduction credit, and required HHS to issue regulations to define specific activities that count toward the TANF work participation standards as well as verify work and participation in activities. P.L. 110-275 , enacted July 15, 2008, the Medicare Improvements and Patients and Providers Act of 2008, included an extension of TANF supplemental grants through the end of FY2009. P.L. 111-5 , enacted February 17, 2009, the American Recovery and Reinvestment Act, established a $5 billion Emergency Contingency Fund (ECF) to reimburse states for increased costs associated with the Great Recession for FY2009 and FY2010. The fund reimbursed states, territories, and tribes for 80% of the increased costs of basic assistance, nonrecurrent short-term benefits, and subsidized employment. The law also permitted states to freeze caseload reduction credits at prerecession levels, allowed states to use TANF reserve funds for any benefit or service (it was previously restricted to assistance), and extended supplemental grants through the end of FY2010. P.L. 111-242 , enacted September 30, 2010, a short-term continuing resolution, extended TANF funding through December 3, 2010. P.L. 111-290 , enacted December 4, 2010, a short-term continuing resolution, extended TANF funding authority through December 18, 2010. P.L. 111-291 , enacted December 8, 2010, the Claims Resolution Act of 2010, extended basic TANF funding through the end of FY2011 (September 30, 2011) but provided supplemental grants only through June 30, 2011. It also altered funding for the healthy marriage and responsible fatherhood programs, splitting the combined $150 million appropriation for them at $75 million for healthy marriage and $75 million for responsible fatherhood. The act required some additional reporting on work activities and TANF expenditures. P.L. 112-35 , enacted September 30, 2011, the Short-Term TANF Extension Act, extended basic TANF funding for three months, through December 31, 2011. No funding was provided for TANF supplemental grants. P.L. 112-78 , enacted December 23, 2011, the Temporary Payroll Tax Cut Continuation Act of 2011, extended basic TANF funding for two months, through February 29, 2012. P.L. 112-96 , enacted February 22, 2012, the Middle Class Tax Relief and Job Creation Act of 2012, extended basic TANF funding for the remainder of FY2012 (to September 30, 2012). It also prevented electronic benefit transaction access to TANF cash at liquor stores, casinos, and strip clubs; states would be required to prohibit access to TANF cash at ATMs at such establishments. It also required states to report TANF data in a manner that facilitates the exchange of that data with other programs' data systems. P.L. 112-175 , enacted September 28, 2012, a continuing resolution providing funding for the first six months of FY2013, extended TANF funding through March, 2013. P.L. 112-275 , enacted January 14, 2013, the Protect Our Kids Act of 2012, appropriated $612 million to the TANF contingency fund for FY2013 and FY2014, and reserved $2 million from each of the two years' appropriations for the activities of a commission to examine child welfare fatalities. P.L. 113-6 , enacted March 26, 2013, an omnibus appropriations bill, extended TANF funding through the remainder of FY2013. P.L. 113-46 , enacted October 17, 2013, a short-term continuing resolution , extended TANF funding through January 15, 2014. (T h is resolution ended the government shutdown and a TANF funding gap from October 1, 2013, through October 16, 2013.) P.L. 113-73 , enacted January 15, 2014, a short-term continuing resolution, extended TANF funding through January 18, 2014. P.L. 113-76 , enacted January 17, 2014, a consolidated appropriations act, extended TANF funding for the remainder of FY2014 (through September 30, 2014). P.L. 113-164 , enacted September 19, 2014, a short-term continuing resolution, extended TANF funding through December 11, 2014. P.L. 113-202 , enacted December 12, 2014, a short-term continuing resolution, extended TANF funding through December 13, 2014. P.L. 113-203 , enacted December 13, 2014, a short-term continuing resolution, extended TANF funding through December 17, 2014. P.L. 113-235 , enacted December 16, 2014, an omnibus appropriations act, extended TANF funding through September 30, 2015. P.L. 114-53 , enacted September 30, 2015, a short-term continuing resolution, extended TANF funding through December 11, 2015. P.L. 114-96 , enacted December 11, 2015, a short-term continuing resolution, extended TANF funding through December 16, 2015. P.L. 114-100 , enacted December 16, 2015, a short-term continuing resolution, extended TANF funding through December 22, 2015. P.L. 114-113 , enacted December 18, 2015, a consolidated appropriations act, extended TANF funding for the remainder of FY2016 as part of an omnibus appropriations act. P.L. 114-223 , enacted September 29, 2016, a short-term continuing resolution, extended TANF funding through December 9, 2016. P.L. 114-254 , enacted December 10, 2016, extended TANF funding through April 28, 2017. P.L. 115-30 , enacted April 28, 2017, extended TANF funding through May 5, 2017. P.L. 115-31 , the Consolidated Appropriation Act, 2017, enacted May 5, 2017, extended TANF funding for the remainder of FY2017 and through the end of FY2018. It provided that 0.33% of the funding in the TANF basic block grant pay for TANF-related research activities. This reduced the basic TANF block grant for each state by that percentage (0.33%). The act also required the Department of Health and Human Services, in consultation with the Department of Labor, to develop a database named \"What Works Clearinghouse of Proven and Promising Projects to Move Welfare Recipients into Work,\" to consist of research projects that deliver services to move TANF recipients into work. P.L. 115-245 , enacted September 28, 2018, a short-term continuing resolution, extended TANF funding through December 7, 2018. P.L. 115-298 , enacted December 7, 2018, a short-term continuing resolution, extended TANF funding through December 21, 2018. P.L. 116-4 , the TANF Extension Act of 2019, enacted January 24, 2019, a stand-alone TANF bill, extended TANF funding through June 30, 2019. (This legislation ended a TANF funding gap that occurred after the expiration of P.L. 115-298 on December 21, 2018.)", "summary": "The Temporary Assistance for Needy Families (TANF) block grant was created in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193). It was born out of the welfare reform debates that spanned four decades, from the 1960s through the 1990s. These debates focused on the Aid to Families with Dependent Children (AFDC) program, which provided federal funding for state-run programs delivering assistance to needy families with children, with most families receiving assistance historically being headed by single mothers who were not working. The welfare reform debates focused on whether and how much single mothers should be expected to work, and whether the program itself contributed to dependency by providing disincentives to work and raise children in two-parent families. In 1992, then-candidate Bill Clinton promised to \"end welfare as we know it.\" President Clinton submitted his welfare reform proposal to Congress in June 1994, but Congress did not take any action on it. A welfare reform proposal was included in the House Republican \"Contract with America\" document during the 1994 congressional campaign. This proposal would have altered, but not replaced, AFDC. Immediately after the 1994 congressional campaign, with Republicans taking control of both the House and the Senate, the new House leadership and Republican governors crafted a proposal to end AFDC and replace it with the TANF block grant. This proposal passed Congress as part of two separate pieces of legislation in 1995, but President Clinton vetoed both. In 1996, a revised proposal was offered and passed Congress. On August 22, 1996, President Clinton signed the 1996 welfare reform bill that ended AFDC and replaced it with TANF, a broad-purpose block grant to the states that helps fund a wide range of benefits, services, and activities to address the effects of, and root causes of, child poverty and economic disadvantage. Reflecting its origins in the welfare reform debates, most TANF policy revolves around the state programs of cash assistance and work programs that the block grant helps fund. Most TANF policies in effect in 2019 date back to the 1996 welfare reform law. The original funding provided in that law for TANF expired at the end of FY2002 (September 30, 2002), and most of the legislative activity since then has been to continue funding on a short-term basis. From FY2002 to FY2006, TANF was funded by a series of short-term extensions. There was one long-term extension of TANF funding—The Deficit Reduction Act of 2005 (DRA, P.L. 109-171)—which extended it from FY2006 through the end of FY2010. The DRA also made some changes to TANF work rules and established a program of competitive grants mostly to community-based organizations for healthy marriage and responsible fatherhood initiatives. Since the end of FY2010, TANF has again been funded by a series of short-term extensions. Most recently, it was extended through June 30, 2019, by the TANF Extension Act of 2019 (P.L. 116-4).", "document_type": "crs"}
{"report": "Since 1978, the federal government has entered into 36 water rights settlements with 40 individual Indian tribes. These Indian water rights settlements are a means of resolving ongoing disputes related to Indian water rights between tribes, federal and state governments, and other parties (e.g., water rights holders). The federal government is involved in these settlements pursuant to its tribal trust responsibilities. Many of these settlements have been authorized by Congress to provide funding for projects that allow tribes to access and develop their water resources. At issue for Congress is not only the new settlements completing negotiations but also how well the current process for negotiating and recommending settlements for authorization is working. Some of the challenges raised by these settlements pertain to satisfying the federal trust responsibility related to tribal water rights, the provision of federal funding associated with the universe of these settlements, and the principles and expectations guiding ongoing and future negotiation of new settlements and renegotiation of past settlements. This report provides background on Indian water rights settlements and an overview of the settlement process. It provides background on Indian water rights, describes the settlement process, and summarizes enacted and potential settlements to date. It also analyzes issues related to Indian water rights, with a focus on the role of the federal government and challenges faced in negotiating and implementing Indian water rights settlements. Finally, it focuses on settlements in a legislative context, including enacted and proposed legislation. Indian water rights are vested property rights and resources for which the United States has a trust responsibility. The federal trust responsibility is a legal obligation of the United States dictating that the federal government must protect Indian resources and assets and manage them in the Indians' best interest. Historically, the United States has addressed its trust responsibility by acting as trustee in managing reserved lands, waters, resources, and assets for Indian tribes and by providing legal counsel and representation to Indians in the courts to protect such rights, resources, and assets. Specifically in regard to Indian water rights settlements, the United States has fulfilled its trust responsibility to Indian tribes by assisting tribes with their claims to reserved water rights through litigation, negotiations, and/or implementation of settlements. The specifics of Indian water rights claims vary, but typically these claims arise out of the right of many tribes to water resources dating to the establishment of their reservations. Indian reserved water rights were first recognized by the Supreme Court in Winters v. United States in 1908. Under the Winters doctrine, when Congress reserves land (i.e., for an Indian reservation), Congress implicitly reserves water sufficient to fulfill the purpose of the reservation. In the years since the Winters decision, disputes have arisen between Indians asserting their water rights and non-Indian water users, particularly in the western United States. In that region, the establishment of Indian reservations (and, therefore, of Indian water rights) generally predated settlement by non-Indians and the related large-scale development by the federal government of water resources for non-Indian users. In most western states, water allocation takes place under a system of prior appropriation in which water is allocated to users based on the order in which water rights were acquired. Under the Winters doctrine and the western system of prior appropriation, the water rights of tribes often are senior to those of non-Indian water rights holders because Indian water rights generally date to the creation of the reservation. However, despite the priority of Indian reserved water rights, non-Indian populations frequently have greater access to and allocations of water through infrastructure. This discrepancy leads to disputes that typically have been litigated or, more recently, resolved by negotiated settlements. Litigation of Indian water rights is a costly process that may take several decades to complete. Even then, Indian water rights holders may not see tangible water resources and may be awarded only paper water —that is, they may be awarded a legal claim to water but lack the financial capital to develop those water resources. This situation occurs because, unlike Congress, the courts cannot provide tangible wet water by authorizing new water projects and/or water-transfer infrastructure (including funding for project development) that would allow the tribes to exploit their rights. As a result, negotiated settlements recently have been the preferred means of resolving many Indian water rights disputes. Negotiated settlements afford tribes and other interested stakeholders an opportunity to discuss and come to terms on quantification of and access to tribal water allocations, among other things. These settlements often are attractive because they include terms and conditions that resolve long-standing uncertainty and put an end to conflict by avoiding litigation. However, there remains disagreement among some as to whether litigation or settlements are most appropriate for resolving Indian water rights disputes. The primary issue regarding settlement for Indian reserved water rights is quantification —identifying the amount of water to which users hold rights within the existing systems of water allocation in various areas in the West. However, quantification alone often is not sufficient to secure resources for tribes. Thus, the negotiation process frequently also involves provisions to construct water infrastructure that increases access to newly quantified resources. In addition to providing access to wet water, some negotiated settlements have provided other benefits and legal rights aligned with tribal values. For instance, some tribal settlements have included provisions for environmental protection and restoration. The federal government's involvement in the Indian water rights settlement process is guided by a 1990 policy statement established during the George H. W. Bush Administration, \"Criteria and Procedures for the Participation of the Federal Government in Negotiations for the Settlement of Indian Water Rights Claims\" by the Working Group on Indian Water Settlements (Working Group) from the Department of the Interior (DOI). DOI adopted the criteria and procedures in 1990 to establish a framework to inform the Indian water rights settlement process and expressed the position that negotiated settlements, rather than litigation, are the preferred method of addressing Indian water rights. As discussed in the below section \" Steps in Settlement Process ,\" the primary federal entities tasked with prenegotiation, negotiation, and implementation duties for Indian water rights settlements are DOI, the Department of Justice (DOJ), and the Office of Management and Budget (OMB). DOI has the majority of responsibilities related to participating in and approving Indian water rights settlements. Within DOI, two entities coordinate Indian water settlement policy. First, the Working Group on Indian Water Settlements, established administratively in 1989 and comprised of all Assistant Secretaries and the Solicitor (and typically chaired by a counselor to the Secretary or Deputy Secretary), is responsible for making recommendations to the Secretary of the Interior regarding water rights settlements, including overarching policy guidance for settlements. Second, the Secretary of the Interior's Indian Water Rights Office (SIWRO) is responsible for oversight and coordination of Indian water rights settlements, including interfacing with negotiation and implementation teams for individual settlements, as well as tribes and other stakeholders. The SIWRO is led by a director who reports to the chair of the Working Group. DOI also appoints teams to work on individual Indian water rights settlements during the various stages of the settlement process (see below section, \" Steps in Settlement Process \"). Each team includes a chairman who is designated by the chair of the Working Group (i.e., the counselor to the Secretary) and who represents the Secretary in all settlement activities. Federal teams typically are composed of representatives from the Bureau of Indian Affairs (BIA), Bureau of Reclamation (Reclamation), U.S. Fish and Wildlife Service, Office of the Solicitor, and DOJ. The teams explain general federal policies on settlement and, when possible, help to develop the parameters of a particular settlement. Broadly speaking, there are four steps associated with Indian water rights settlements: prenegotiation, negotiation, settlement, and implementation. The time between negotiation, settlement, and implementation can take several years. Each step, including relevant federal involvement, is discussed below. Prenegotiation includes any of the steps before formal settlement negotiations begin. This stage includes, in some cases, litigation and water rights adjudications that tribes have taken part in before deciding to pursue negotiated settlements. For instance, one of the longest-running cases in Indian water rights history, New Mexico v. Aamodt , was first filed in 1966; multiparty negotiations began in 2000 and took more than a decade to complete. The federal government also has its own prenegotiation framework that may involve a number of phases, such as fact-finding, assessment, and briefings. More information on these roles (based on DOI's \"Criteria and Procedures\" statement) is provided below. The fact-finding phase of the federal prenegotiation process is prompted by a formal request for negotiations with the Secretary of the Interior by Indian tribes and nonfederal parties. During this time, consultations take place between DOI and DOJ, which examine the legal considerations of forming a negotiation team. If the Secretary decides to establish a team, OMB is notified with a rationale for potential negotiations (based on potential litigation and background information of the claim). No later than nine months after notification, the team submits a fact-finding report containing background information, a summary and evaluation of the claims, and an analysis of the issues of the potential settlement to the relevant federal entities (DOI, DOJ, and OMB). During the second phase, the negotiating team works with DOJ to assess the positions of all parties and develops a recommended federal negotiating position. The assessment should quantify all costs for each potential outcome, including settlement and no settlement. These costs can range from the costs for litigation to the value of the water claim itself. During the third phase, the Working Group on Indian Water Settlements presents a recommended negotiating position to the Secretary. In addition to submitting a position, the working group recommends the funding contribution of the federal government, puts forth a strategy for funding the contribution, presents any views of DOJ and OMB, and outlines positions on major issues expected during the settlement process. The actual negotiations process (see \" Negotiation ,\" below) is the next phase for the Working Group on Indian Settlements, in which OMB and DOJ are updated periodically. If there are proposed changes to the settlement, such as in cost or conditions, the negotiating position is revised following the procedures of the previous phases. The negotiation phase can be prolonged and may take years to resolve. During this process, the federal negotiation team works with the parties to reach a settlement. The process generally is overseen by the aforementioned DOI offices, as well as by the BIA's Branch of Water Resources and Water Rights Negotiation/Litigation Program, which provide technical and factual work in support of Indian water rights claims and financial support for the federal government to defend and assert Indian water rights. Reclamation's Native American Affairs Program also facilitates the negotiation of water rights settlements by providing technical support and other assistance. In 2016, OMB issued guidance that it be more involved in the negotiation process, and it has laid out a set of requirements for DOI and DOJ to provide regular written updates on individual settlements. Once the negotiation phase has been completed and parties have agreed to specific terms, the settlement is typically presented for congressional authorization (as applicable). In these cases, Congress typically must enact the settlement for it to become law and for projects outlined under the settlement to be eligible for federal funding. If Congress is not required to approve the settlement, the settlements generally may be approved administratively by the Secretary of the Interior or the U.S. Attorney General or judicially by judicial decree. Once a settlement is approved (either administratively or by Congress), the SIWRO oversees its implementation through federal implementation teams. Federal implementation teams function much like federal negotiation teams, only with a focus on helping the Indian tribe(s) and other parties implement the settlement. For settlements that began through litigation or adjudication, the settlement parties must reconvene to reconcile the original agreement with the settlement, along with any additional changes. After the Secretary of the Interior signs the revised agreement, the adjudication court conducts an inter se process in which it hears objections from any party. Once the court approves the settlement, it enters a final decree and judgment. The actual implementation usually is carried out by one or more federal agencies (typically Reclamation or BIA, based on terms of the agreement) that act as project manager. Altogether, the \"Criteria and Procedures\" statement stresses that the cost of settlement should not exceed the sum of calculable legal exposure and any additional costs related to federal trust responsibility and should promote comity, economic efficiency, and tribal self-sufficiency. Funding for the settlement itself typically is provided through Reclamation and/or BIA. However, in some cases other agencies contribute based on the particular terms of a settlement. The federal government has been involved with Indian water rights settlements through assessment, negotiation, and implementations teams (for enacted settlements) since 1990. As of 2018, there were 21 ongoing negotiation teams working on settlements projected to cost more than $2 billion. Additionally, there are 23 implementation teams active for carrying out approved settlements. Overall, the federal government has entered into 36 settlements since 1978, with Congress enacting 32 of these settlements. The remaining settlements were approved administratively by the Secretary of the Interior or the U.S. Attorney General or by judicial decree. Table 1 below lists enacted settlements as of the date of this report, while Table 2 lists negotiation teams as of 2017 (the last time this information was made available). Once the stakeholders have agreed to initiate negotiation of a settlement, a number of issues may pose challenges to a successful negotiation and implementation of a settlement. Such challenges may include defining and finding a source of adequate funding for a settlement and contending with other issues within settlements, such as compliance with environmental regulations and identification of sources and conditions for water delivery. Congress may be asked to weigh in on one or more of these issues as they are considered. The delivery of wet water (as opposed to paper water) to tribes that have enacted settlement agreements frequently requires significant financial resources and long-term investments by the federal government, often in the form of new projects and infrastructure. For federal policymakers, a widely recognized challenge is identifying and enacting federal funding to implement settlements while also resulting in cost-savings relative to litigation. In response to concerns related to implementation costs, some settlements have been renegotiated over time to decrease their estimated federal costs. For instance, legislation to authorize the Blackfeet Compact was first introduced in 2010 and was subsequently renegotiated and revised, resulting in a reduction to estimated federal costs by approximately $230 million (nominal dollars) compared to the version of this legislation that was introduced in 2016. Partially in response to concerns related to justifying the costs of proposed settlements, OMB issued a memo to DOI and DOJ on June 23, 2016, outlining new steps that would provide for greater involvement by OMB earlier in the settlement negotiation process. OMB also stated that it would require, among other things, a description and quantification of the costs and benefits of proposed settlements by DOI and DOJ prior to a formal letter of Administration position. After a preferred federal contribution is identified and agreed upon, other challenges include identifying the source and structure of federal funding proposed for authorization. Recent congressionally authorized Indian water rights settlements have been funded in various ways, including through discretionary funding authorizations (i.e., authorizations that require annual appropriations by Congress); direct or mandatory funding (i.e., spending authorizations that do not require further appropriations); and combinations of both. In regard to mandatory funding, some settlements have been funded individually and several others have been funded with mandatory spending from a single account, the Reclamation Water Settlements Fund (see \" Combined Mandatory/Discretionary Funding ,\" below). Additionally, some have tapped preexisting or related federal receipt accounts as the source for mandatory funding. The timing of the release of funds also has varied widely among settlements and may in some cases depend on expected future actions (e.g., contingent on completion of plans and/or certain nonfederal activities). Selected examples of how recent Indian water rights settlements have been funded are discussed below. These sections describe different structural approaches to funding Indian water rights settlements that have been approved by Congress in the past, including when and how the funding is expected to be released (if applicable). They also discuss another source that is sometimes mentioned in this context, the DOJ Judgment Fund in the Department of the Treasury. Discretionary spending, or spending that is subject to appropriations, historically has been the most common source of funding for congressionally approved Indian water rights settlements. In many cases, Congress has authorized the appropriations of specific sums for individual settlements, including individual funds within the settlement. For example, the Pechanga Band of Luiseño Mission Indians Water Rights Settlement Act ( P.L. 114-322 , Title III, Subtitle D) approved the Pechanga Water Rights Settlement. This legislation established the Pechanga Settlement Fund and four accounts within it: (1) Pechanga Recycled Water Infrastructure account; (2) Pechanga ESAA Delivery Capacity account; (3) Pechanga Water Fund account; and (4) Pechanga Water Quality account. These accounts are authorized to receive future discretionary appropriations from Congress totaling to $28.5 million, and the funds must be spent by April 30, 2030. Congress also has chosen to authorize discretionary appropriations of \"such sums as may be necessary\" at times. For instance, the Colorado Ute Settlement Act Amendments of 2000 (Title III, P.L. 106-554 ) authorized the implementation and the operations and maintenance of the Animas-La Plata project and authorized Reclamation to construct these facilities using such sums as may be necessary. Two major pieces of settlement legislation in the 111 th Congress authorized a combination of mandatory and discretionary spending for Indian water rights settlement and are discussed below. Title X of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ) authorized mandatory spending for accounts with broadly designated purposes aligning with Indian water rights settlements. It also included discretionary funding for a number of settlements. This legislation created a new Treasury Fund, the Reclamation Water Settlements Fund, and scheduled funds to be deposited and available in this account beginning in 2020. The act directed the Secretary of the Treasury to deposit $120 million into the fund for each of the fiscal years 2020 through 2029 (for a total of $1.2 billion). The fund may be used to implement a water rights settlement agreement approved by Congress that resolves, in whole or in part, litigation involving the United States, and it may be used if the settlement agreement or implementing legislation requires Reclamation to provide financial assistance for or to plan, design, or construct a water project. The act also assigned tiers of priority to access these funds in the following order: First-tier priority is assigned to the Navajo-Gallup Water Supply Project (a key element of the Navajo Nation Water Rights Settlement), the Aamodt Settlement, and the Abeyta Settlement; and Second-tier priority is assigned to the settlements for the Crow Tribe, the Blackfeet Tribe, and the Tribes of the Fort Belknap reservation, as well as the Navajo Nation in its water rights settlement over claims in the Lower Colorado River basin. If Congress does not approve and authorize projects that are given priority under the legislation by December 31, 2019, the amounts reserved for the priorities are to revert to the Reclamation Water Settlement Fund for any other authorized use of the fund under the act. Thus, if there were any \"leftover\" funding, these funds could be available for other authorized Indian water rights settlements. The fund itself is scheduled to terminate on September 30, 2034, and the unexpended and unobligated balance of the fund will be transferred to the Treasury at that time. In addition to the mandatory funds noted above, P.L. 111-11 also authorized $870 million in discretionary appropriations for the Navajo-Gallup project. Although P.L. 111-11 provided an appropriation of mandatory funding to be used by several settlements at a future date, provisions in the Claims Resolution Act of 2010 ( P.L. 111-291 ) authorized and provided direct or mandatory spending for four individual water rights settlements. P.L. 111-291 also included discretionary funding for some of these settlements and additional mandatory funding for the Navajo-Gallup project (authorized in P.L. 111-11 ). Among other things, P.L. 111-291 authorized and appropriated approximately $82 million in mandatory funding for the Aamodt Settlement in a newly created Aamodt Settlement Pueblos' Fund and authorized an additional $93 million in discretionary funding subject to appropriations; authorized the Abeyta Settlement, appropriated $66 million in mandatory funds for implementation of that agreement in a newly created Taos Pueblos' Water Development Fund, and authorized an additional $58 million in discretionary funding subject to appropriations; authorized the Crow Tribe Water Rights Settlement, appropriated $302 million in mandatory funding for that agreement, and authorized an additional $158 million in discretionary funding subject to appropriations; authorized the White Mountain Apache Tribe water rights quantification, appropriated mandatory funding of approximately $203 million to multiple sources to carry out that settlement, and authorized an additional $90 million in discretionary appropriations; and authorized and appropriated a total of $180 million from FY2012 to FY2014 in mandatory funding to the Reclamation Water Settlements Fund established under P.L. 111-11 to carry out the Navajo-Gallup Water Supply Project authorized in that same legislation. Other water rights settlements have been funded through additional mechanisms, including redirection of funds accruing to existing federal receipt accounts. These funds may differ from traditional mandatory funds in that they make available funding without further appropriations but they also depend on the amount of funding accruing to such an account. For example, the Arizona Water Settlements Act ( P.L. 108-451 ) authorized water rights settlements for the Gila River Indian Community (GRIC) and the Tohono O'odham Nation, respectively. Both water rights settlements required funding for delivery infrastructure associated with water deliveries from the Central Arizona Project (CAP). To fund these costs, P.L. 108-451 required that certain CAP repayments and other receipts that accrue to the previously existing Lower Colorado River Basin Development Fund (LCRBDF, which averages receipts of approximately $55 million per year) be made available annually, without further appropriation (i.e., mandatory funding) for multiple purposes related to the GRIC and Tohono O'odham settlements. For instance, the bill required that after FY2010, deposits totaling $53 million be made into a newly established Gila River Indian Community Operations Maintenance and Rehabilitation Trust Fund, to assist in paying for costs associated with the delivery of CAP water. In addition to a number of other settlement-related spending provisions, the bill stipulated that up to $250 million in LCRBDF receipts be made available for future Indian water rights settlements in Arizona. However, if sufficient LCRBDF balances are not available for any of the bill's priorities, then funding is to be awarded according to the order in which these priorities appear in the bill. Another potential source of payment for Indian water rights settlements could be the Judgment Fund, which is a permanent indefinite appropriation available to pay all judgments against the United States that are \"not otherwise provided for\" by another funding source. Certain criteria must be met for a payment to come out of the Judgment Fund. First, the judgment must be monetary and final, so that payments are not made from the Judgment Fund when there is a chance the award could be changed or overturned. Second, the payment must be certified by the Secretary of the Treasury, who has delegated administration of the Judgment Fund to the Bureau of the Fiscal Service. Finally, payment of the judgment, award, or settlement either must be authorized by certain statutes or must be a final judgment rendered by a district court, the Court of International Trade, or the U.S. Court of Federal Claims. Alternatively, payment can stem from a compromise settlement negotiated by the Attorney General (or any authorized person) if such settlement arises under actual litigation or is in \"defense of imminent litigation or suits against the United States.\" Many judgments are paid from the Judgment Fund because the operating appropriations of federal agencies are \"generally not available to pay judgments.\" The government historically has entered into compromise settlements with Indians and Indian tribes on a variety of legal issues, and both the federal district courts and the U.S. Court of Federal Claims generally can hear suits brought by Indian tribes. The Judgment Fund has been used to pay for some of these settlements. For example, Title I of the Claims Resolution Act of 2010 (CRA; P.L. 111-291 ) authorizes and implements the settlement reached in the Cobell v. Salazar litigation. Under the act, Congress directed the Secretary of the Treasury to establish a Trust Land Consolidation Fund and deposit into it $1.9 billion \"out of the amounts appropriated to pay final judgments, awards, and compromise settlements\" under the Judgment Fund. For purposes of this transfer, the act also states that the statutory conditions of the Judgment Fund have been met. Notably, although the CRA included a number of separate water rights settlements with specific Indian tribes, it appears to have set up other funding mechanisms for the Indian tribes' water rights settlements, as it did not specifically direct payment from the Judgment Fund. For example, although Title III of the CRA authorized mandatory funding of approximately $203 million to multiple sources to carry out the White Mountain Apache Tribe (WMAT) Water Rights Quantification Agreement and authorized an additional $90 million in discretionary appropriations (see reference to this legislation in the previous section, \" Combined Mandatory/Discretionary Funding \"), it established various funds from which these moneys could be used. One such fund is the WMAT Settlement Fund, for which Congress authorized $78.5 million to be appropriated to the Secretary of the Treasury. This language indicates that Congress must act separately to appropriate funds so that the Secretary may then transfer $78.5 million into the WMAT Settlement Fund. The CRA established a second fund, the WMAT Maintenance Fund, for which Congress mandated appropriations by directing the Secretary to transfer $50 million \"out of any funds in the Treasury not otherwise appropriated.\" This language indicates that the funds will be transferred, without a separate appropriation, from the U.S. Treasury General Fund, which is \"the largest fund in the Government ... [and] is used for all programs that are not supported by trust, special, or revolving funds.\" As mentioned above, if there is another source of funding provided for by appropriation or statute, regardless of the actual funding level, then payment from the Judgment Fund is precluded. Courts look for an appropriation that has programmatic specificity, regardless of the agency's use of the funds. For example, if an agency already had spent an appropriated sum on other litigation or expended the money elsewhere (as in many of the above examples of Indian water rights settlements), then payment from the Judgment Fund for all or part of the award may be precluded. Under these circumstances, the agency would have to seek an additional appropriation from Congress . In the future, whether the Judgment Fund may be used for payments related to Indian water settlement agreements seems to depend on the nature of the claim, the substantive law at issue, existing sources of funding, and the forum in which the award is made. The environmental impact of settlements has been an issue for federal agencies, environmental groups, and tribes, among others. In some cases, construction of settlement projects has been challenged under federal environmental laws, such as the National Environmental Policy Act of 1969 (NEPA; P.L. 91-190), the Clean Water Act (CWA; P.L. 92-500), the Endangered Species Act of 1973 (ESA; P.L. 93-205 ), and the Safe Drinking Water Act ( P.L. 93-523 ). Because some settlements involve construction of new water projects (such as reservoirs, dams, pipelines, and related facilities), some have argued that settlements pose negative consequences for water quality, endangered species, and sensitive habitats. For example, the Animas-La Plata project, originally authorized in the Colorado River Basin Project Act of 1968 (P.L. 84-485) and later incorporated into the Colorado Ute Water Rights Settlement Act of 1988 ( P.L. 100-585 ), faced opposition from several groups over the alleged violation of various environmental laws. Additionally, the U.S. Environmental Protection Agency raised concerns that the project would negatively affect water quality and wetlands in New Mexico. These and other concerns stalled construction of the project for a decade. The Colorado Ute Settlement Act Amendments of 2000 ( P.L. 106-554 ) amended the original settlement to address these concerns by significantly reducing the size and purposes of the project and codifying compliance to NEPA, CWA, and ESA. Other enacted settlements that initially encountered opposition stemming from environmental concerns include the Jicarilla Apache Tribe Water Settlement Act of 1992 ( P.L. 102-441 ) and the Yavapai-Prescott Indian Tribe Water Rights Settlement Act of 1994 ( P.L. 103-434 ). In addition to the need to quantify reserved water rights, a key difficulty during the negotiation process is identifying a water source to fulfill reserved water rights. Generally, this is done through reallocating water to tribes from existing sources, as was done for selected tribes in Arizona and the Central Arizona Project under the Arizona Water Settlements Act of 2004 ( P.L. 108-451 ). In some cases, settlements have provided funds for tribes to acquire water from willing sellers. In addition to identifying and quantifying a water source, settlements can address the type of water (i.e., groundwater, surface water, effluent water, stored water) and the types of uses that are held under reserved water rights (e.g., domestic, municipal, irrigation, instream flows, hunting and fish, etc.) as well as water quality issues. Another common issue addressed within settlements is the question of whether to allow for the marketing, leasing, or transfer of tribal water. Twenty-one of the 32 congressionally enacted settlements permitted some form of marketing, leasing, or transferring, ranging from limited off-reservation leasing to less restrictive forms of marketing. This exchange of water can provide dual benefits of better water reliability in areas of scarce supplies and economic incentives to tribes. At the same time, some tribes and state users oppose any allowance for water marketing in settlements. Some members within tribes object to the exchange of water on religious and cultural grounds, due to the belief that water is fundamentally attached to tribal life and identity. Some non-Indians oppose allowances for water marketing in these agreements when marketing has the potential to increase the price of water that otherwise might be available for free to downstream water users and thus potentially could harm regional economies. As such, negotiating the right to market, lease, or transfer water can be a contentious issue that results in several restrictions to mitigate potential negative impacts. The certainty of Indian water rights settlements is commonly cited as a multilateral benefit for the stakeholders involved. Supporters regularly argue that mutual benefits accrue as a result of these agreements: tribes secure certainty in the form of water resources and legal protection, local users and water districts receive greater certainty and stability regarding their water supplies, and the federal and state governments are cleared from the burden of potential liability. Some tribal communities have objected to settlements based on these principles. They have argued that the specific, permanent quantification of their water rights through settlements may serve to limit the abilities of tribes to develop in the future. Similarly, some have argued against settlements as they may limit tribes to a particular set of uses (e.g., agriculture) and prevent potential opportunities for greater economic yields in the future. Some contend that to avoid use-based limitations, water rights settlements should focus on allowing water leasing and marketing (see discussion in \" Water Supply Issues ,\" above) so tribes can control and use their water resources with greater flexibility. Still others have spoken out against the idea of negotiated settlements entirely, as they oppose negotiating their claims in exchange for lesser water rights and money. They view the process as akin to the \"first treaty era,\" when Indian tribes forfeited their lands. They note that in the future, the courts may be more favorable and allow for greater gains through litigation. Nontribal users also may raise their own concerns with the certainty of water rights settlements. Some water users have complained that provisions in certain settlements have the potential to maintain or even increase uncertainty associated with their water rights. For example, some water users in western Montana have raised concerns that the Confederated Salish and Kootenai Tribes (CSKT) Water Compact recognizes off-reservation water rights with the potential to significantly curtail nontribal water rights beyond those quantified in the CSKT Compact. Several common questions that are raised often in regard to Indian water rights settlements are discussed below. Although settlements essentially act as a quid pro quo relationship among the many stakeholders involved, the federal government's role in all stages of the settlement process serves as a way to fulfill its trust responsibility to the tribes to secure, protect, and manage the tribes' water rights. Furthermore, many tribes have breach-of-trust claims against the federal government. Settlements (including those that provide for federal resources and funding for new water infrastructure) provide an opportunity for tribes to formally waive these claims and potentially resolve these disputes. It is difficult to make broad characterizations of the impact of Indian water rights settlements. As of 2019, the federal government has been involved in the negotiation of more than 50 Indian water rights settlements. As previously noted, 36 of these negotiations have resulted in federal settlements with tribes and others. Whether these settlements have been successful depends in part on the metric used to define success. In most cases, the settlements have secured rights and access (or potential access) to tribal water resources. However, many of the projects to provide this access are ongoing, so it is not possible to characterize their end result for tribes and the federal government. Further, the extent to which settlements eventually achieve their anticipated benefits likely will vary among individual settlements. Some (including both Indian and non-Indian users) who support negotiating settlements in general may disagree with the contents or outcomes of specific settlements. Others may contend that other means (i.e., litigation) are more appropriate for solving these issues. Due to the mix of discretionary and mandatory funds involved, it can be difficult to track the funding status of Indian water rights settlements. CRS estimates that as of FY2019, the federal government had appropriated more than $2.9 billion in nominal discretionary funding to implement Indian water rights settlements, plus an additional $4.3 billion in mandatory funds that have been made available or are expected to be made available in future years pursuant to authorizing legislation. These appropriations have been provided to multiple agencies, including Reclamation, BIA, the Bureau of Land Management, and the U.S. Fish and Wildlife Service. The total amount of authorized Indian water rights settlements is not formally tracked by the Administration. In early 2019, DOI estimated that Reclamation had a backlog of $1.3 billion in \"authorized but unfunded\" Indian water rights settlements. Presumably, any future authorized settlements without associated mandatory funding commitments would add to this total. Settlements are negotiated on a case-by-case basis, so the details of each settlement vary and are related to specific issues between tribes and water users in a given area. Generally, most settlements ratify agreements and compacts that have been reached by stakeholders; authorize reallocation and delivery of water from existing sources; and authorize construction and funding for new water projects that are built by Reclamation (and in many cases, transferred to the tribes). In addition to providing access to water, most settlements have resulted in tribal development funds into which the Secretary of the Interior makes scheduled payments for the purpose of economic development and to cover various costs of managing water projects. As previously stated, quantification and types of use are general issues within settlements, although additional benefits can be prominent factors as well. For example, numerous settlements have been negotiated to include provisions that would establish programs for fish and wildlife protection as well as ecosystem restoration. In other cases, tribes and settlements have focused less on specific quantification and more on securing greater control of their rights or pursuing alternative forms of gaining water rights—for example, P.L. 100-228 approved an agreement that would allow the Seminole Tribe of Florida to administer its water rights and possess jurisdiction to manage its water resources with a water district at no cost to the federal government. In another case, the Zuni Indian Tribe waived certain claims to water to gain federal funds to purchase water rights from willing sellers. And, in many cases, settlements have authorized conditions for water marketing and leasing for tribes, although the degree to which this is allowed varies by settlement. Since 2009, Congress has enacted nine Indian water rights settlements involving 13 tribes, at an authorized federal cost of more than $2 billion. These settlements were enacted in four bills: P.L. 111-291 (The Claims Resolution Act of 2010); P.L. 113-169 (the Pyramid Lake Paiute-Fish Springs Ranch Settlement Act); P.L. 113-223 (the Bill Williams River Water Rights Settlement Act of 2014); and P.L. 114-322 (the Water Infrastructure Improvements for the Nation Act, or WIIN). Several of these settlements, including those enacted by the 113 th Congress and the Choctaw Nation and Chickasaw Nation Water Settlement Act included in WIIN, were not associated with any new federal funding authorizations or appropriations. An issue related to Indian water rights settlements in recent Congresses has been the circumstances under which this type of legislation is to be transmitted and considered. During the 115th Congress, the chairman of the House Natural Resources Committee sent a letter to the Attorney General and the Secretary of the Interior outlining the committee's process and expectations for considering Indian water rights settlement legislation (this process was similar to that used by the committee dating in the 114 th Congress). These requirements included the following: A statement by the relevant departments (i.e., DOI and DOJ) affirming that each proposed settlement adheres to current executive branch criteria and procedures. Specific affirmation by the departments that the cost of a settlement to all parties does not exceed the value of the existing claims as calculated by the federal government and that federal contributions do not exceed the sum of calculable legal exposure and federal trust or programmatic responsibilities. Conveyance to a court by DOJ and agreement in writing by all settling parties to the settlement, pending a legislative resolution. Approval in writing by the departments of the legislative text needed to codify the settlement. Consent to being available to testify by DOJ. Listing of the legal claims being settled by both departments. It is unclear to what extent any of these requirements will continue to apply in the 116 th Congress. In the 116 th Congress, H.R. 644 and S. 1207 would both approve a settlement resolving water rights claims of the Navajo Nation on the San Juan River in the Upper Colorado River Basin in Utah. It would authorize the Secretary of the Interior to establish a Navajo Water Development Trust Fund and would authorize appropriations (plus any interest on these deposits) for two accounts to be established within the fund: 1. The Navajo Water Development Projects Account, which would be authorized to receive appropriations of $198.3 million, adjusted for inflation, for municipal water supply projects. 2. The Navajo OM&R Account, which would be authorized to receive appropriations of $11.1 million for water supply facility operations and maintenance activities. In addition, $1 million in nontrust fund appropriations would be authorized for the Department of the Interior to implement the settlements. The bill would reserve tribal access (through the project) to as much as 81,500 acre-feet per year from water sources adjacent to or within the Navajo Nation's reservation in Utah. This depletion would be subtracted from the State of Utah's Colorado River allocation. In return, parties (including the Navajo Nation, the United States, and the State of Utah) would waive and release most claims associated with this settlement. Additionally, the Navajo Nation has agreed to subordinate its water rights under the settlement to existing, non-Indian uses. According to the Navajo Nation, this could result in water shortages for the tribe 11% to 46% of the time when its full 81,500 acre-feet water right is put to use. Earlier versions of the Navajo Utah Settlement legislation (e.g., introduced versions in the 115 th Congress) adhered to the historically common practice of authorizing funds for Reclamation to construct new water resource facilities for the tribe. However, the fund-based approach evidenced in the current version of the legislation, in which the department would release funds from the Trust Fund to the Navajo Nation for expenditures as needed, represents a notable departure from this model. Advocates of the approach believe it may help to avoid cost overruns and would have the added benefit of supplementing available funds by accumulating interest. While the Navajo Nation supports this approach for this proposed settlement, it is unclear if other tribes with pending water-rights claims would support such a fund-based template for future settlements. Congress is also considering the extension of mandatory funding for the Reclamation Water Settlement Fund, which was originally enacted in 2009. In the 116 th Congress, H.R. 1904 and S. 886 would both extend the aforementioned $120 million per year in mandatory funds for the Reclamation Water Rights Settlement Fund to make these amounts available in perpetuity. The annual transfer to this fund is currently set to begin in FY2020 and occur annual through FY2029. The bill would allow these transfers to continue, and would not alter the priority tiers laid out currently laid out for the fund. In absence of specific prioritized settlements, funding would be available for other settlement agreements that require the planning, design and construction of water supply infrastructure, project.to rehabilitate existing water delivery systems, or projects restore fish and wildlife habitat affected by Reclamation projects. Long-standing disputes over water rights and use involving Indian tribes continue to be negotiated and settled by the executive branch and are thus likely to be an ongoing issue for Congress. This matter includes implementation of ongoing Indian water rights settlements, negotiation of new settlements, and consideration of these settlements for potential enactment and subsequent funding. As of the end of the 115 th Congress, 32 settlements had been enacted since 1978, and 4 settlements had been approved administratively. Additional funding for ongoing settlements and authorization of and appropriations for new settlements are likely to be requested in the future. In considering Indian water rights settlements, primary issues for Congress may include the cost, contents, and sufficiency of federally authorized efforts to settle tribal water rights claims, as well as the circumstances under which these settlements are considered and approved by authorizing committees and others (i.e., whether the settlements are accompanied by formal statements of Administration support, cost estimates, etc.). In addition, the preferred extent of federal involvement in implementing settlements, including the question of whether the federal government or tribes should take the lead in developing and constructing projects, may be of interest to Congress.", "summary": "In the second half of the 19th century, the federal government pursued a policy of confining Indian tribes to reservations. These reservations were either a portion of a tribe's aboriginal land or an area of land taken out of the public domain and set aside for a tribe. The federal statutes and treaties reserving such land for Indian reservations typically did not address the water needs of these reservations, a fact that has given rise to questions and disputes regarding Indian reserved water rights. Dating to a 1908 Supreme Court ruling, courts generally have held that many tribes have a reserved right to water sufficient to fulfill the purpose of their reservations and that this right took effect on the date the reservations were established. This means that, in the context of a state water law system of prior appropriations, which is common in many U.S. western states, many tribes have water rights senior to those of non-Indian users with water rights and access established subsequent to the Indian reservations' creation. Although many Indian tribes hold senior water rights through their reservations, the quantification of these rights is undetermined in many cases. Tribes have pursued quantification of their water rights through both litigation and negotiated settlements. The settlements involve negotiation between tribes, the federal government, states, water districts, and private water users, among others. They aim to resolve conflict between rights holders and allow the parties to determine specific terms of water allocation and use with certainty. Over the last 50 years, negotiated settlements have been the preferred course for most tribes because they are often less lengthy and costly than litigation. Additionally, many stakeholders have noted that these negotiated agreements are more likely to allow tribes not only to quantify their water rights on paper but also to procure access to these resources in the form of infrastructure and other related expenses, at least in some cases. After being negotiated, approval and implementation of Indian water rights settlements require federal action. As of 2019, 36 Indian water rights settlements had been federally approved, with total costs in excess of $5.8 billion. Of these, 32 settlements were approved and enacted by Congress and 4 were administratively approved by the U.S. Departments of Justice and the Interior. After being congressionally authorized, federal projects associated with approved Indian water rights settlements generally have been implemented by the Bureau of Reclamation or the Bureau of Indian Affairs (both within the Department of the Interior), pursuant to congressional directions. Congress has appropriated discretionary and mandatory funding (and, in some cases, both) for these activities, including in recent appropriations bills. In the 116th Congress, H.R. 1904 proposes to extend certain mandatory funds for these settlements in perpetuity (the funding currently expires in FY2029). Several individual Indian water rights settlements recently have been considered and enacted, including three that were enacted during the 114th Congress. A primary challenge facing new settlements is the availability of federal funds to implement ongoing and future agreements. Indian water rights settlements often involve the construction of major new water infrastructure to allow tribal communities to access water they hold rights to, and obtaining federal funding for these projects can be difficult. As a result, some settlements have been renegotiated to reduce their federal costs. At issue is under what circumstances (if any) Congress should approve new Indian water rights settlements and whether Congress should fund (and in some cases amend) existing settlements. Some argue that resolution of Indian water rights settlements is a mutually beneficial means to resolve long-standing legal issues, provide certainty of water deliveries, and reduce the federal government's liability. Others argue against authorization and funding of new settlements, either on general principle or with regard to specific individual settlements and activities.", "document_type": "crs"}
{"report": "The JLTV is an Army-led, multiservice initiative to develop a family of future light tactical vehicles to replace many of the High Mobility, Multi-Wheeled Vehicles (HMMWVs) used by the armed services today. HMMWVs, which first entered service in 1985, were developed during the Cold War when improvised explosive devices (IEDs) and other antivehicle explosive devices were not a major factor in military planning. The HMMWVs' demonstrated vulnerability to IEDs and the difficulties and costs experienced in \"up-armoring\" HMMWVs already in the inventory have led to renewed emphasis on vehicle survivability. DOD officials have emphasized that JLTVs are not intended to replace HMMWVs \"one for one.\" The JLTV program is a joint Army/Marine Corps effort to develop and produce both vehicles and associated trailers. The JLTV family of vehicles consists of two mission categories: the JLTV Combat Tactical Vehicle (CTV), which seats four passengers, and the JLTV Combat Support Vehicle (CSV), which seats two passengers. The JLTV Combat Tactical Vehicle has a 3,500 lb. payload capacity and comes in three variants: the General Purpose (GP) variant; the Heavy Guns Carrier (HGC) variant; and the Close Combat Weapon carrier (CCWC) variant. The JLTV Combat Support Vehicle has a 5,100 lb. payload capacity and comes in one variant: the Utility (UTL) Prime Mover variant, which can accommodate a shelter. As planned, JLTVs would be mechanically reliable, maintainable (with on-board diagnostics), all-terrain mobile, and equipped to link into current and future tactical data nets. Survivability and strategic and operational transportability by ship and aircraft are also key JLTV design requirements. The JLTV is an Acquisition Category (ACAT) 1D program. The Army bears the overall responsibility for developing the JLTV through its Joint Program Office, which reports to the Program Executive Office (PEO) for Combat Support & Combat Service Support (PEO CS&CSS) in Warren, MI, which reports to the Assistant Secretary of the Army for Acquisition, Logistics, and Technology (ASA [AL&T]). Marine participation is centered on a program office under the supervision of the Program Executive Officer Land Systems (PEO LS) Marine Corps at Quantico, VA. In November 2006, the Joint Chiefs of Staff's Joint Requirement Oversight Council (JROC) approved the JLTV program. On December 22, 2007, the Under Secretary of Defense for Acquisition, Technology, and Logistics USD (AT&L) signed an Acquisition Decision Memorandum (ADM) directing the JLTV Program to move from the Concept Refinement Phase into the Technology Development (TD) Phase of the DOD System Acquisition Process. The Army and Marines had intended to issue a Request for Proposal (RFP) for Technology Development Phase as early as October 2007. Concerned with funding adequacy, technical maturity, and shifting requirements, the Pentagon's acquisition executive disapproved the issuance of the RFP and directed the Army and Marines to \"go back to the drawing board and develop a robust technology development phase.\" On February 5, 2008, an RFP for Technology Development Phase was issued to industry. The RFP stated the government desired to award three contracts for the JLTV Technology Development Phase. The RFP stipulated that proposals would be due April 7, 2008, and the TD Phase would last 27 months. Contractors would build four test subconfigurations during the first 15 months, followed by 12 months of testing. On October 28, 2008, three awards were made for the JLTV TD Phase for a total of $166 million. The three industry teams were (1) BAE Systems Land and Armaments, Ground Systems Division, Santa Clara, CA, and NAVISTAR Defense, Warrenville, IL; (2) General Tactical Vehicles, Sterling Heights, MI—a joint venture between General Dynamics Land Systems and AM General; and (3) Lockheed Martin Systems Integration, Oswego, NY, BAE Systems, Alcoa Defense, Pittsburgh, PA, and JWF Defense Systems, Johnstown, PA. On November 7 and November 12, 2008, protests were filed with the Government Accountability Office (GAO) against the TD contract awards by the Northrop Grumman-Oshkosh team and the Textron-Boeing-SAIC team alleging there were \"unintended discrepancies\" in how the government rated bids in terms of the criteria of systems maturity, logistics, and costs. As a result of that protest, work on the JLTV program by the three winning teams was suspended. On February 17, 2009, GAO rejected the JLTV protests and the stop-work orders were lifted. In February 2011, the JLTV Program Office announced the award of the EMD contract would be delayed until January or February 2012 because the Army changed requirements for the JLTV to have the same level of under-body protection as the Mine-Resistant, Ambush-Protected All-Terrain Vehicle (M-ATV). DOD had planned to award two contracts for the EMD phase, which was scheduled to last 24 months, but instead opted for a 48-month-long EMD phase before awarding Production and Deployment contracts in the second quarter of FY2016. It was decided that there would be two variants—a Combat Tactical Vehicle (CTV), which can transport four passengers and carry 3,500 pounds, and a Combat Support Vehicle (CSV), which can transport two passengers and carry 5,100 pounds. On January 26, 2012, the Army issued the RFP for the JLTV's EMD Phase. Industry proposals for the EMD contract were to have been filed with the Army by March 13, 2012. The RFP stipulated that up to three EMD contracts could be awarded, and contract award occurred in June 2012. These contracts would be capped at $65 million per contract. The duration of the EMD performance period would be 27 months starting with contract award. Vendors would be required to provide 22 prototypes for testing 12 months after contract award, and the target cost for the base vehicle configuration was $250,000 (FY2011 constant dollars), excluding add-on armor kits and other kits identified in the RFP. On August 22, 2012, the Army announced the award of three firm-fixed price JLTV EMD contracts totaling approximately $185 million. The three companies awarded the EMD contracts were AM General, LLC (South Bend, IN); Lockheed Martin Corporation (Grand Prairie, TX); and Oshkosh Corporation (Oshkosh, WI). The period of performance was for 27 months, with each contractor receiving initial funding between $28 million and $36 million per contractor, with the balance of funding up to the full contract amount being provided in FY2013 and FY2014. In 12 months, each team was required to deliver 22 prototypes and contractor support for a 14-month comprehensive government testing program, which included blast, automotive, and user evaluation testing. The overall EMD Phase was scheduled to last 33 months. According to the Army, \"the EMD Phase is designed to test and prepare the next-generation vehicles for a Limited User Test, Capabilities Production Document and Milestone C procurement decision in FY 2015.\" Unsuccessful bidders Navistar Defense, BAE Systems, and General Tactical Vehicles (a team of General Dynamics and AM General) were permitted to continue developing JLTV candidate vehicles at their own risk and expense, if they notified the government within 30 days of the EMD contract award. Reports suggested some bidders considered continuing development of JLTV candidates for submission for production source selection. On December 12, 2014, the Army reportedly released the final RFP for JLTV low-rate initial production and full-rate production and gave competitors until February 10, 2016, to refine and submit their bids. The Army—on behalf of itself and the Marines—planned to select a winner and issue a single contract award in late summer 2016. The winning contractor would build approximately 17,000 JLTVs for the Army and Marines during three years of low-rate initial production, followed by five years of full-rate production. The first Army unit would be equipped with JLTVs in FY2018, and the Army's complete acquisition of JLTVs would be completed in 2040. The Marines would begin acquiring their 5,500 JLTVs at the beginning of production and would be completed by FY2022. It was reported that the three companies who were picked in 2012 to build prototypes—Oshkosh, Lockheed Martin, and AM General—submitted their bids for the LRIP contract by the February 10, 2015, deadline. It was also reported that none of the three competitors had said publicly if they included in their proposals an option for the Army to purchase a technical data package for their vehicles. If the Army acquired the technical data package, theoretically the Army could use that data for future production runs, which could enhance competition and possibly result in better prices for the government. On August 25, 2015, the Army awarded Oshkosh a $6.7 billion low rate initial production (LRIP) contract with eight options to procure the initial 16,901 vehicles for the Army and Marines. The JLTV is to be produced in Oshkosh, WI. A full rate production decision was planned for FY2018, and called for the production of 49,100 JLTVs for the Army and 5,500 for the Marine Corps. On September 8, 2015, Lockheed Martin reportedly planned a protest with GAO, with a program spokesman stating the following: After evaluating the data provided at our debrief, Lockheed Martin has filed a protest of the award decision on the JLTV program. We firmly believe we offered the most capable and affordable solution for the program. Lockheed Martin does not take protests lightly, but we are protesting to address our concerns regarding the evaluation of Lockheed Martin's offer. On September 10, 2015, the Army reportedly issued a stop-work order to Oshkosh, with a GAO spokesman noting, \"The Federal Acquisition Regulation requires contracting officers to automatically suspend performance on an awarded contract, following appropriate notification of a protest from GAO.\" On December 11, 2015, Lockheed Martin informed GAO that it would file its JLTV protest instead with the U.S. Court of Federal Claims. On December 15, 2015, GAO closed Lockheed Martin's protest \"without further action.\" With the GAO protest dismissed, the Army lifted its stop-work order to Oshkosh on December 15, 2015. The U.S. Court of Federal Claims denied Lockheed Martin's stop-work request on February 11, 2016, meaning Oshkosh could continue work associated with the JLTV contract until the court resolved the contract award dispute. On February 17, 2016, Lockheed Martin reportedly withdrew its JLTV protest in the U.S. Court of Federal Claims. On March 22, 2016, the Army reportedly placed a $243 million order with Oshkosh Defense to build 657 JLTVs, as well as 2,977 installation kits and related vehicle support LRIP items. The first JLTVs were delivered in September 2016. Primarily due to program disruption resulting from the Lockheed Martin protest, the JLTV will not reach IOC in mid-2019 as originally planned. Instead, the Army anticipates a six-month delay in IOC until the end of 2019, and the Marine Corps IOC, originally expected for the fourth quarter of FY2018, will now be a year later in the first quarter of FY2020. Although these delays are significantly longer than the protest period, officials from both services noted their respective IOCs were adjusted to reflect delays in scheduled testing. The Army reportedly ordered 258 JLTVs and 1,727 associated components in December 2017 for a total of $100.1 million, with the estimated contract completion date May 31, 2019. According to Oshkosh Defense, it had delivered more than 1,000 vehicles since October 2016, and soldiers and Marines were expected to start receiving JLTVs for operational use in FY2019. Also in FY2019, a full-rate production decision is expected, with an Army and Marine Initial Operating Capability (IOC) expected in early FY2020. The Army reportedly decided to use the JLTV as the platform for its upcoming Light Reconnaissance Vehicle (LRV) program, instead of procuring a new system. Army officials note the JLTV is an interim solution, largely based on costs associated with developing a new system, and, in the future, the Army could opt to pursue an original design for its LRV. It is not known whether additional JLTVs will need to be acquired under the Army's JLTV contract to meet LRV requirements. Reportedly, some Army officials want JLTVs that will serve as an LRV to have two more seats to accommodate scouts as well as a weapon larger than a .50 caliber machine gun, such as a 30 mm cannon. These modifications are viewed as necessary to increase the effectiveness of scout platoons as well as provide sufficient firepower to destroy enemy reconnaissance formations. In the near term, the Air Force plans to replace HMMWVs with JLTVs in its security forces, explosive ordnance disposal, pararescue, tactical air control, and special tactics units. Reportedly, the Air Force eventually would like to replace its entire 3,270 HMMWV fleet with JLTVs, but Air Force budget documents detail JLTV procurement only from FY2019 through FY2022. The Marines reportedly plan to increase their JLTV requirement from 5,500 vehicles to 9,091 vehicles—about a 65% increase over the Marines' original approved acquisition objective. Marine leadership reportedly wanted to acquire these additional vehicles as quickly as possible, budget permitting. In June 2017, Marine Corps officials reportedly noted it would take \"a couple of years\" to formally adjust their approved acquisition objective (AAO), meaning that eventually, JLTVs would account for approximately half of the Marines' light tactical vehicle fleet. The British Army will reportedly acquire 2,747 JLTVs, valued at more than $1 billion, through the Foreign Military Sales (FMS) process. The sale also includes an armor kit, spare tires, and fording gear, as well as training for vehicle operators and maintainers. DOD reports both the Army and Marines have extended their procurement profiles due to program strategy changes, primarily due to updating the mix of vehicle variants and kits. The Army now plans to conclude its procurement in FY2036 and the Marines in FY2023. Total program costs have also increased to $28.03 billion (a 10.9% increase), primarily due to the increase in procurement profiles, increase in Marine Corps quantities to 9,091 vehicles, updates in vehicle configuration and kit mix for the Army, updates in vehicles and kits based on the vehicle configuration mix for the Marines, and an increase in other support and initial spares for the Army and Marines. A redacted May 2, 2018, DOD IG report notes that, while the Army and Marine Corps developed adequate test plans, the services have not demonstrated effective test results to prepare the JLTV program for full rate production. The IG's review of test results in August and September of 2017 determined the JLTV failed to meet all maintenance-related performance requirements. The IG suggested certain capabilities be developed to address the shortfall, but specifics were redacted in the public version of the report. The JLTV Program Executive Office (PEO) noted in response that the program would equip all JLTVs with the unspecified capability cited in the IG's report. On January 28, 2019, the first JLTVs were delivered to the 1 st Armored Brigade Combat Team (ABCT), 3 rd Infantry Division at Ft. Stewart, GA. Plans call for the 1 st ABCT to be equipped with about 500 JLTVs by the end of March 2019. It is not known if the 500 JLTVs have been fielded as of the date of this report. The Marines started fielding JLTVs at Camp Pendleton, CA, in February 2019, with initial operational capability planned for late summer 2019. Among other things, DOT&E's FY2018 Annual Report contends the following: The JLTV General Purpose (GP), Heavy Guns Carrier (HGC), and Utility (UTL) variants are operationally effective for employment in combat and tactical missions. The JLTV Close Combat Weapons Carrier (CCWC) is not operationally effective for use in combat and tactical missions. The CCWC provides less capability to engage threats with the Tube-launched, Optically tracked, Wire-guided (TOW) missiles over the fielded High Mobility Multipurpose Wheeled Vehicle (HMMWV). The missile reload process is slow and difficult for crews. All JLTVs are not operationally suitable because of deficiencies in reliability, maintainability, training, manuals, crew situational awareness, and safety. Reportedly, the Army has decided to delay JLTV full-rate production, previously scheduled for December 2018, until the early summer of 2019, in order to assess options for vehicle design changes suggested by soldiers and marines during testing, potentially resulting in a program schedule breach. Reportedly, the full-rate production decision can be delayed until June 2019, but beyond that, it could trigger a Nunn-McCurdy breach, requiring, among other things, a report to Congress and a new program schedule. Marine Corps program officials reportedly have worked through a number of the problems addressed in DOT&E's FY2018 Annual Report. They suggest that many of the problems identified in the report can be addressed through improved tactics, techniques, and procedures and that some of the issues identified, such as insufficient training manuals, were a result of program decisions resulting from budget restrictions placed on the service. Marine officials also noted that legacy HMMWVs had similar challenges identified during testing in 1986, but these issues were resolved after fielding. In terms of reliability and maintainability, Marine officials noted HMMWVs go between 500 to 600 miles between operational mission failures, compared to the JLTV's requirement of 2,400 miles before operational mission failure, which the JLTV has surpassed during its developmental testing. Compared to HMMWVs, the JLTV is said to be less burdensome in terms of maintenance, although JLTV maintenance may take a little longer due to a need to remove armored panels and a more complex engine. The Marines reportedly plan to field its first 55 JLTVs to support units at training locations, including the School of Infantry West, School of Infantry East, and the Motor Transport Maintenance Instructional Company, by the end of May 2019. Beginning in July 2019, operational units are planned to receive their first vehicles (3 rd Battalion, 8 th Marines at Camp Lejeune, NC), which will also signify the Marines Initial Operational capability (IOC). By the end of FY2019, all three Marine Expeditionary Forces (MEFs)—1 st MEF in Camp Pendleton, CA; 2 nd MEF in Camp Lejeune, NC; and 3 rd MEF in Okinawa, Japan—will have received some combination of all variants. On March 13, 2019, Army leadership reportedly announced the Army was considering lowering its overall requirement for JLTVs. In order to free up funding for modernization, the Army decided to cut funding over the next five years for 93 programs—including the JLTV. Army officials noted the service already has 55,000 HMMWVs and 800 Infantry Squad Vehicles (ISVs), contending the Army \"has more capability than we need.\" Army officials reportedly were looking to lower the overall requirement for JLTVs and would determine \"a new top line requirement soon.\" On March 14, 2019, it was reported the Army planned to buy 1,900 fewer JLTVs than originally planned, reducing program funding by nearly $800 million over the Future Years Defense Plan (FYDP). The FY2020 presidential budget request includes RDT&E and procurement funding requests, as well as FY2020-requested quantities in the base budget and Overseas Contingency Operations (OCO) budget request. A redacted May 2, 2018, DOD Inspector General's (IG's) report notes the Army and Marine Corps had not demonstrated effective test results to prepare the JLTV program for full-rate production. The IG's review of test results in August and September of 2017 determined the JLTV failed to meet all maintenance-related performance requirements. The IG suggested certain capabilities be developed to address the shortfall, but specifics were redacted in the public version of the report. DOT&E's FY2018 Annual Report noted the following: All JLTVs are not operationally suitable because of deficiencies in reliability, maintainability, training, manuals, crew situational awareness, and safety. The JLTV Close Combat Weapons Carrier (CCWC) is not operationally effective for use in combat and tactical missions. The CCWC provides less capability to engage threats with the Tube-launched, Optically tracked, Wire-guided (TOW) missiles over the fielded High Mobility Multipurpose Wheeled Vehicle (HMMWV). The missile reload process is slow and difficult for crews. Military officials involved with the JLTV program appear to be minimizing these findings, reportedly suggesting some of these unspecified problems are \"minor improvements identified by soldiers and Marines during testing.\" Another report alleges the Army \"did not respond to questions about the production decision nor the recent DOT&E report, which detailed several JLTV problems.\" The Army's decision to delay full-rate JLTV production affects not just the Army, but the other services as well, and can be considered a significant programmatic decision. To reconcile possible concerns, a detailed look at the DOD IG's and DOT&E's findings and the actions that will be required to rectify identified deficiencies could be in order. Such an examination could help policymakers determine if these deficiencies are minor in nature, or if more extensive and potentially time-consuming and expensive corrective actions will be required. While it is not yet known how any delay in full-rate JLTV production will affect the program, it might be considered prudent for policymakers to examine the potential consequences of a delayed full-rate production decision. While a minor delay not invoking a Nunn-McCurdy breach may be inconsequential or have a minimal impact, a longer delay, potentially triggering a Nun-McCurdy breach, could have significant consequences in terms of program schedule; program cost; service allocation of JLTVs; overall fielding plan; training and readiness of units receiving JLTVs; and potential Foreign Military Sales (FMS). Such an examination could prove useful to policymakers in the event that a full-rate production decision is significantly delayed, particularly in terms of both program oversight and FY2020 defense authorizations and appropriations discussions. The Army's March 14, 2019, announcement that it was planning to reduce its overall requirement for JLTVs by 1,900 vehicles to help free up funding for modernization raises potential issues for Congress. With the Army reportedly suggesting it has more light tactical vehicle capability than it needs with existing HMMWVs and ISVs, questions could arise as to the accuracy of the Army's original JLTV requirements process. Other questions could arise as well: With a revised overall JLTV requirement, what is the Army's new fielding plan to units? With fewer JLTVs to be fielded, what is the overall operational impact to the force? With an overall JLTV reduction, will the Army's Reserve Components receive fewer JLTVs than originally planned? Finally, will this new revised JLTV requirement be final, or is it possible the Army might again reduce overall JLTV requirements to free up funding for other higher-priority programs, or if future budget reductions are imposed on the Army?", "summary": "The Joint Light Tactical Vehicle (JLTV) is being developed by the Army and the Marine Corps as a successor to the High Mobility, Multi-Wheeled Vehicle (HMMWV), which has been in service since 1985. On October 28, 2008, awards were made for the JLTV Technology Development (TD) Phase to three industry teams: (1) BAE Systems, (2) the team of Lockheed Martin and General Tactical Vehicle, and (3) AM General and General Dynamics Land Systems. On January 26, 2012, the Army issued the Request for Proposal (RFP) for the JLTV's Engineering Manufacturing Development (EMD) phase. Up to three EMD contracts scheduled for June could have been awarded. The period of performance for EMD contracts was 27 months, and the overall EMD phase was scheduled to last 33 months. Vendors were required to provide 22 JLTV prototypes for testing 12 months after contract award. The target cost for the base vehicle was $250,000, excluding add-on armor and other kits. On August 22, 2012, the Army announced the award of three firm-fixed price JLTV EMD contracts totaling approximately $185 million. The three companies awarded the EMD contracts were AM General, LLC (South Bend, IN); Lockheed Martin Corporation (Grand Prairie, TX); and Oshkosh Corporation (Oshkosh, WI). On September 3, 2013, the Army began JLTV testing at Aberdeen Proving Ground, MD; Yuma, AZ; and Redstone Arsenal, AL. The Army planned to select a single vendor by 2015, with the first Army brigade being equipped with JLTVs by 2018. FY2015 program plans anticipated a Milestone C (Production and Deployment Phase Approval) decision in the fourth quarter of FY2015, followed by Low Rate Initial Production (LRIP). On August 25, 2015, it was announced the Army had awarded Oshkosh a $6.7 billion low rate initial production (LRIP) contract with eight options to procure the initial 16,901 vehicles for the Army and Marines. The JLTV is being produced in Oshkosh, WI. It is also reported the Army plans to use the JLTV as the interim platform for its upcoming Light Reconnaissance Vehicle (LRV) program instead of procuring a new system. The British Army is reportedly trying to acquire 2,747 JLTVs through Foreign Military Sales (FMS). The Marines have also reportedly increased their JLTV requirement for a total of 9,091 JLTVs. The Air Force and Navy are also procuring a limited number of JLTVs for use. A redacted May 2, 2018, DOD Inspector General (IG) report noted the services have not demonstrated effective test results to prepare the JLTV program for full rate production, but the JLTV Program Office has plans to address this concern. The Director, Operational Test and Evaluation (DOT&E) FY2018 Annual Report notes among other findings that JLTVs are not operationally suitable because of deficiencies in reliability, maintainability, training, manuals, crew situational awareness, and safety. Reportedly, the Army has decided to delay JLTV full-rate production, previously scheduled for December 2018, until the early summer of 2019 in order to assess options for vehicle design changes. On March 14, 2019, Army leadership reportedly announced the Army was lowering its overall requirement for JLTVs by 1,900 vehicles in order to free up funding for modernization. The FY2020 Research, Development, Test and Evaluation (RDT&E) and Procurement JLTV budget request for all four services is $1.641 billion for 4,090 vehicles. Potential issues for Congress include (1) the possible examination of the DOD Inspector General's Report and DOT&E's FY2018 Annual Report findings and full-rate JLTV production, (2) the potential consequences of a delayed full-rate JLTV production decision, and (3) implications of the Army's new top-line JLTV requirement.", "document_type": "crs"}
{"report": "A s the Supreme Court has observed, while the First Amendment protects the \"freedom of speech,\" it \"does not protect violence.\" But when speech promotes violence, a tension can form between the values of liberty and security. In an oft-quoted passage from a dissenting opinion, Justice Robert Jackson argued that the problems this tension creates are not insurmountable but must be confronted with a dose of pragmatism: a government can temper \"liberty with order,\" but to treat free speech as absolute threatens to \"convert the constitutional Bill of Rights into a suicide pact.\" While Justices of the Court have often disagreed over when free speech rights must yield to the government's interests, when it comes to speech promoting violence, the Court has rejected an all-or-nothing approach. Over the past 50 years, the Court has drawn a line between speech that advocates violence in the abstract and speech that facilitates it in a specific way, with the former receiving more robust constitutional protections. It has done so because, in the Court's view, upholding the First Amendment requires preserving \"uninhibited, robust, and wide-open\" debate on public issues, even if that means allowing individuals to express ideas that are \"deeply offensive to many.\" In more recent years, some have begun to question whether and how the Court's decisions in this area should apply to speech online. The \"vast democratic fora of the Internet\" have provided ample platforms not only for those seeking to debate issues or express controversial views, but also for individuals and entities planning violent attacks or threatening violence online. Many policymakers and commentators, including some Members of Congress, have expressed concerns about the proliferation of social media content promoting terrorism and violence and the influence such speech can have on other internet users. Some have called on Congress to restrict or even prohibit such content, which raises the question of whether the First Amendment would allow such regulation. A number of legal scholars have explored these issues, and some have proposed recommendations to Congress about how best to address these concerns in accordance with the First Amendment. Although governmental efforts to combat online content promoting terrorism or violence could take a number of forms, this report focuses on the First Amendment implications of imposing civil or criminal liability on individual internet users (i.e., the originators of the content) rather than the social media companies or internet service providers themselves. As such, it focuses on the underlying First Amendment issues that are likely to be common to both forms of government action, but does not discuss the additional considerations attendant to regulating a social media platform, which are the subject of another CRS report. The report begins with some background on the use of the internet by terrorist groups and the reported influence of online content on certain individuals accused of committing violent attacks. It then considers the question of who can invoke the First Amendment by analyzing whether its free speech protections apply to foreign nationals when they post online content from abroad, for example, in circumstances such as U.S. prosecutions where online content is introduced as evidence of a crime. The report then discusses the overarching First Amendment principles that bear on what the government may regulate under the First Amendment, including (1) the distinction between regulating conduct and speech; (2) the presumed invalidity of content-based laws; and (3) relevant \"unprotected\" categories of speech that generally can be restricted because of their content. The report next discusses the strict scrutiny standard and the overbreadth doctrine, which impose limitations on how the government can regulate by requiring that laws restricting speech be sufficiently tailored and not so broad as to chill protected speech. Finally, the report concludes with some considerations for Congress in evaluating the constitutionality of regulating online content promoting terrorism or violence. According to the Federal Bureau of Investigation (FBI), the internet and, in particular, the use of social media are among the key \"factors [that] have contributed to the evolution of the terrorism threat landscape\" since the September 11, 2001, terrorist attacks. Certain organizations that track or study hate crimes also cite the internet as a tool used to intimidate and harass people because of their race, ethnicity, religion, sexual orientation, or other attributes. At the same time, some commentators have questioned the purported link between what some refer to as \"hate speech\" and bias-motivated crimes or have expressed concern that focusing on the ideological motivations of speakers has led to calls to criminalize protected speech divorced from any criminal intent or action. While the nature or extent of the relationship between online speech and criminal conduct may be disputed, the use of the internet by terrorist groups is well documented. U.S.-designated terrorist groups such as the Islamic State (also known as ISIS or ISIL), Al Qaeda, Hamas, and Al Shabaab, have long used social media to disseminate their ideologies and recruit new members to their causes. The Islamic State group has used Twitter and YouTube to disseminate videos of its fighters executing prisoners and to claim credit for attacks around the world. Al Shabaab used Twitter to claim credit for the 2013 attack on the Westgate Shopping Mall in Nairobi, Kenya, and to distribute information about the attack while it unfolded. News outlets are also beginning to examine how the alleged perpetrator of the March 2019 terrorist attacks on two mosques in New Zealand may have used social media to announce and promote his actions. In addition, the internet reportedly has played a key role in certain individuals' personal \"journey[s] to terrorism\" or violent extremism —a process often referred to as \"radicalization.\" For example, the person convicted of killing nine black parishioners in a South Carolina church in 2015 was said to have \"self-radicalized\" online, adopting a \"white supremacy extremist ideology, including a belief in the need to use violence to achieve white supremacy.\" In 2015, it was reported that \"the digital legacy\" of Anwar al Awlaki—a U.S. citizen who became closely involved with Al Qaeda's affiliate in Yemen and was targeted and killed by a U.S. drone strike there—influenced the ideologies of certain individuals accused or convicted of terrorist activities, including the Boston Marathon bombers. Speech advocating violence and terrorism is prohibited by the terms of service of Facebook, Twitter, and certain other social media outlets. Such prohibitions are permissible under current judicial interpretations of First Amendment law because these platforms are operated by private actors, and the First Amendment constrains only state (i.e., government) action. Although the more established sites reportedly have increased their efforts to disable accounts that are associated with terrorist groups or remove content promoting terrorism or violence, it is not clear how comprehensive or successful these efforts have been. Moreover, users banned from one platform may move to another online forum that does not have the same restrictions, sometimes finding a community of like-minded individuals who reinforce or escalate their violent rhetoric (sometimes referred to as \"echo chambers\"). As previously noted, this report focuses on the First Amendment considerations relevant to government regulation of online content promoting terrorism or violence. Because of the global reach of many online platforms, this report begins with the threshold question of the First Amendment's reach, and in particular, whether it applies to foreign nationals posting online content from outside of the United States. While the First Amendment may extend to U.S. citizens speaking abroad or foreign nationals speaking within the United States under some circumstances, the Supreme Court has not directly opined on whether the First Amendment applies to online content that a foreign national posts while located outside of the United States. Nevertheless, the Court's decisions involving the extraterritorial reach of other constitutional protections, as well as lower court decisions involving the First Amendment rights of foreign nationals, suggest that foreign nationals may face barriers in claiming First Amendment protections for such speech. The Supreme Court's decision in United States v. Verdugo-Urquidez —though it involves the Fourth Amendment—is instructive. In that case, the Court held that the Fourth Amendment, which \"prohibits 'unreasonable searches and seizures,'\" did not extend to the search of a Mexican citizen's home in Mexico by U.S. authorities. The Court reasoned that in contrast to the Fifth and Sixth Amendments, which concern trial rights and procedures, the Fourth Amendment applies regardless of the prospect of trial, and \"a violation of the Amendment is 'fully accomplished' at the time of an unreasonable governmental intrusion.\" As such, any violation would have \"occurred solely in Mexico.\" Four of the five Justices who joined the majority opinion reasoned that the Fourth Amendment reserves its protections to \"the people,\" which they interpreted as a \"term of art employed in select parts of the Constitution.\" In the view of those Justices, a textual analysis of the Constitution suggested that \"'the people' protected by the Fourth Amendment, and by the First and Second Amendments,\" meant \"a class of persons who are part of a national community or who have otherwise developed sufficient connection with this country to be considered part of that community.\" Because the defendant had \"no voluntary attachment to the United States\" at the time of the search, he could not claim the protections of the Fourth Amendment. At least two sitting Supreme Court justices—Justices Clarence Thomas and Brett Kavanaugh—have suggested that the First Amendment does not apply to foreign nationals abroad, citing to Verdugo-Urquidez . The discussion that more directly addressed the applicability of free speech protections to foreign nationals came from then-Judge Brett Kavanaugh in a 2014 case involving the United States' prosecution of an Al Qaeda associate. In that case, a U.S. military commission convicted a personal assistant to Osama bin Laden for, among other things, conspiracy to commit war crimes. The defendant \"claim[ed] that he was unconstitutionally prosecuted for his political speech, including his production of [an] al Qaeda recruitment video celebrating the terrorist attack on the U.S.S. Cole .\" When the case, Al Bahlul v. United States , first reached the full U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), the court ruled on a different legal question and remanded the case for consideration of the First Amendment challenge. However, Judge Kavanaugh authored a separate opinion, in part to address the First Amendment's applicability. He stated that \"although non-U.S. citizens arguably may have some First Amendment rights at [a U.S. military base in] Guantanamo or in other U.S. territories for any speech they engage in there , non-U.S. citizens have no First Amendment rights abroad in foreign countries.\" The Supreme Court has applied the Constitution to aliens in the United States and in U.S. territories, but has not extended constitutional rights to aliens in foreign countries. See Boumediene v. Bush , 553 U.S. 723, 768-71 (2008) (applying Article I, Section 9 to U.S. Naval base at Guantanamo, which was \"[i]n every practical sense . . . not abroad\"); United States v. Verdugo-Urquidez , 494 U.S. 259 (1990) (declining to apply Fourth Amendment to search and seizure of alien's property in Mexico); Johnson v. Eisentrager , 339 U.S. 763 (1950) (declining to apply habeas corpus right to U.S.-controlled military prison in Germany); see also Al Maqaleh v. Hagel , 738 F.3d 312 (D.C. Cir. 2013) (declining to apply habeas corpus right to U.S. military base in Afghanistan); Al Maqaleh v. Gates , 605 F.3d 84 (D.C. Cir. 2010) (same). Therefore, [the defendant] had no First Amendment rights as a non-U.S. citizen in Afghanistan when he led bin Laden's media operation. Two years later, the full D.C. Circuit took up the Al Bahlul case again following remand. This time, the court squarely rejected the defendant's First Amendment challenge, citing the concurring opinions of Judge Kavanaugh, Judge Patricia Millett, and Judge Robert Wilkins, who all concluded that the defendant could not avail himself of the First Amendment's protections. Thus, as the D.C. Circuit phrased it in a prior decision, \"aliens beyond the territorial jurisdiction of the United States are generally unable to claim the protections of the First Amendment.\" Nevertheless, \"[i]n a variety of contexts th[e] Court has referred to a First Amendment right to 'receive information and ideas.'\" In order to preserve this right, the Court has largely rejected governmental attempts to control information because of how the government views that information. For example, in Lamont v. Postmaster Gen eral , the Court held that a federal statute requiring the Postal Service to withhold foreign mailings classified as \"communist political propaganda\" from addressees unless they requested delivery of the mailings in writing amounted \"to an unconstitutional abridgment of the addressee's First Amendment rights.\" The Court concluded that the \"regime of this Act is at war with the 'uninhibited, robust, and wide-open' debate and discussion that are contemplated by the First Amendment.\" Whether or when the government must observe the First Amendment in its interactions with foreign nationals in order to preserve the rights of U.S. citizens is uncertain. As then–D.C. Circuit Judge Ruth Bader Ginsburg noted in a dissenting opinion, \"[t]he [F]irst [A]mendment secures to persons in the United States the respect of our government for their right to communicate and associate with foreign individuals and organizations.\" Referring to Lamont , she observed that \"the first federal law the Supreme Court ever held violative of the [F]irst [A]mendment involved a condition on international correspondence—a restraint on delivery of mail from abroad.\" While finding it unnecessary to decide in that case \"whether the [F]irst [A]mendment limits the actions of U.S. officials in their dealings with foreign parties,\" Judge Ginsburg noted the following principle from the Restatement (Third) of Foreign Relations : The provisions of the United States Constitution safeguarding individual rights generally control the United States government in the conduct of its foreign relations as well as in domestic matters, and generally limit governmental authority whether it is exercised in the United States or abroad, and whether such authority is exercised unilaterally or by international agreement. Judge Ginsburg concluded by stating that she \"would hesitate long before holding that in a United States-foreign citizen encounter, the amendment we prize as 'first' has no force in court.\" Based on these principles and decisions, there may be some cases involving social media content posted by foreign nationals that implicate the free speech rights of U.S. citizens, who may be members of the particular online forum or otherwise have access to it. However, there could be prudential limitations on a foreign national's ability to assert those rights. And, even if a court concludes that a particular foreign national has standing in a given case, it is not clear that the First Amendment would protect his or her online activities based solely on the purported interests of other Internet users. In contrast, the Supreme Court has recognized that U.S. citizens regularly exercise First Amendment rights when communicating online, so free speech protections are more directly in play when considering the United States' regulation of its own citizens' online speech. Accordingly, the remainder of this report discusses the principles that bear on the government's ability to regulate online content promoting terrorism or violence when there is no dispute about the First Amendment's applicability. A key initial consideration in evaluating whether a law or a particular application of that law comports with the First Amendment is whether the law at issue regulates conduct or speech . The distinction is sometimes elusive because speech may occur during a course of conduct, and actions themselves can sometimes be inherently expressive or \"symbolic\" speech protected by the First Amendment. As a potential starting point, a law typically regulates conduct if it dictates what the regulated persons or entities \"must [or must not] do . . . not what they may or may not say .\" But the touchstone for deciding whether such a law implicates the First Amendment appears to be whether the law targets expression. To determine whether a law targets expression and depending on the facts of the case, a court might consider (1) the express terms (i.e., \"the face\") of the law, (2) the purpose of the law, or (3) its practical application to see whether the law is directed at certain content or speakers or applies to the challenger's activities solely as a result of what that party seeks to communicate. If a law does not target expression, the First Amendment extends the government more leeway to regulate that activity even if the regulation incidentally burdens speech. As the Supreme Court has explained, [R]estrictions on protected expression are distinct from restrictions on economic activity or, more generally, on nonexpressive conduct. . . . [T]he First Amendment does not prevent restrictions directed at commerce or conduct from imposing incidental burdens on speech. That is why . . . \"an ordinance against outdoor fires\" might forbid \"burning a flag\" . . . . However, the conduct-focused nature of a law does not necessarily preclude First Amendment review where the government seeks to penalize a person under that law because of ideas or messages that person communicated. The Supreme Court applied these principles in its 2010 decision in Holder v. Humanitarian Law Project , which involved the constitutionality of a federal statute concerning the provision of material support to U.S.-designated foreign terrorist organizations (FTOs). The statute imposes criminal penalties on anyone who \"knowingly provides material support or resources to [an FTO], or attempts or conspires to do so.\" It defines \"material support or resources\" in relevant part as \"any property, tangible or intangible, or service, including . . . training, expert advice or assistance, . . . false documentation or identification, communications equipment, . . . personnel (1 or more individuals who may be or include oneself) . . . , except medicine or religious materials.\" In Humanitarian Law Project , a group of U.S. citizens and domestic organizations brought a preenforcement challenge to the law, arguing that it would be unconstitutional to punish them for the types of support that they wished to provide to two FTOs. Specifically, the plaintiffs sought to (1) train members of one FTO on how to use humanitarian and international law in peaceful dispute resolution; (2) teach that FTO's members how to petition international organizations for relief; and (3) engage in political advocacy for the rights of certain groups, including by supporting one of the FTOs \"as a political organization\" for this purpose. After concluding that most of these activities clearly constituted \"training\" or \"expert advice or assistance\" under the law, the Court proceeded to address the First Amendment implications of applying the statute to the plaintiffs' activities. The Humanitarian Law Project Court rejected the \"extreme positions\" advanced by both sides. On the one hand, it rejected the plaintiffs' contention that the statute banned their \"pure political speech,\" noting that the law did not prevent the plaintiffs from becoming members of the FTOs, speaking and writing freely about these organizations, or engaging in independent advocacy. The Court reasoned that \"Congress has prohibited 'material support,' which most often does not take the form of speech at all. And when it does, the statute is carefully drawn to cover only a narrow category of speech to, under the direction of, or in coordination with foreign groups that the speaker knows to be terrorist organizations.\" On the other hand, the Court rejected the government's position that applying the law to the plaintiffs' activities implicated only conduct, not speech. It reasoned that the law itself \"regulates speech on the basis of its content\" because whether plaintiffs are subject to prosecution \"depends on what they say.\" Referring to the statutory definitions of \"training\" and \"expert advice or assistance,\" the Court noted that if the plaintiffs' speech to the organizations \"imparts a 'specific skill' or communicates advice derived from 'specialized knowledge'—for example, training on the use of international law or advice on petitioning the United Nations—then it is barred.\" Even if the law \" generally functions as a regulation of conduct,\" the Court reasoned, in these circumstances, \"as applied to plaintiffs the conduct triggering coverage under the statute consists of communicating a message.\" As discussed in more detail infra , the Court ultimately held that the material support statute did not violate the First Amendment as applied to the plaintiffs' proposed activities because the challenged statutory prohibitions were necessary to further the government's asserted interests in combating terrorism. Unlike a law involving \"material support,\" which, in the Court's view, \"most often\" takes the form of conduct rather than speech, a law that expressly prohibits or restricts, for example, social media posts promoting terrorism or violence would more clearly involve speech because of its central focus on communications. Although the Supreme Court has not had many occasions to consider laws that expressly restrict online content, in a First Amendment challenge to a federal law that restricted the online transmission of certain \"indecent\" and \"patently offensive\" content, both the parties and the Court evaluated the law as regulating speech, not conduct. Once it is established that a law regulates speech, the next consideration is whether it does so on the basis of content. First Amendment law historically has distinguished between laws that restrict speech because of its content or viewpoint and those that do not draw content-based distinctions or that have a content-neutral justification. Although the Justices of the Court have sometimes disagreed over whether a particular law is content-based for First Amendment purposes, the Court has largely settled on the following definition: Government regulation of speech is content based if a law applies to particular speech because of the topic discussed or the idea or message expressed. This commonsense meaning of the phrase \"content based\" requires a court to consider whether a regulation of speech \"on its face\" draws distinctions based on the message a speaker conveys. Some facial distinctions based on a message are obvious, defining regulated speech by particular subject matter, and others are more subtle, defining regulated speech by its function or purpose. Courts scrutinize content-based distinctions because of the potential for the government to silence speech with which it disagrees by prohibiting or imposing special burdens on an entire category of speech: \"content discrimination 'raises the specter that the Government may effectively drive certain ideas or viewpoints from the marketplace.'\" Justice Anthony Kennedy wrote in a case involving federal restrictions on the transmission of sexually explicit cable programming: \"The history of the law of free expression is one of vindication in cases involving speech that many citizens may find shabby, offensive, or even ugly. It follows that all content-based restrictions on speech must give us more than a moment's pause.\" The Supreme Court has repeatedly stated that content-based laws are \"presumptively unconstitutional\" and subject to the Court's most stringent review, at least insofar as they involve fully protected speech. In current First Amendment parlance, such laws must survive \"strict scrutiny,\" meaning that the government must demonstrate that they are narrowly tailored to serve compelling governmental interests. Under the Court's current formulation, a law that expressly regulates what topics can be discussed in a social media post would likely be considered a \"content-based\" restriction on speech, as the regulation \"applies to particular speech because of the topic discussed or the idea or message expressed.\" As such, as a general matter, such a law would likely be subject to strict scrutiny and presumptively invalid. However, this level of scrutiny may not apply if the regulated content falls within a category of speech that the Court has said is not fully protected, as discussed in the next section. If a law regulates speech, the next consideration in the First Amendment analysis is whether that speech is considered protected (sometimes referred to as \"fully protected\" ) or instead falls within one of the narrow categories of so-called \"unprotected\" speech (sometimes referred to as the First Amendment's \"exceptions\" ) recognized by the Supreme Court. Such categories are not determinative of whether a law is constitutional, but the government generally has greater leeway to regulate unprotected speech based on its content. The Supreme Court has long considered political and ideological speech to be at the \"core\" of the First Amendment and the ability to exchange ideas to be integral to a functioning democracy. Our cases have often noted the close connection between our Nation's commitment to self-government and the rights protected by the First Amendment. . . . The First Amendment creates \"an open marketplace\" in which differing ideas about political, economic, and social issues can compete freely for public acceptance without improper government interference. The government may not prohibit the dissemination of ideas that it disfavors, nor compel the endorsement of ideas that it approves. These principles extend even to speech that many would consider to be deeply offensive or hateful. Accordingly, a law that restricts speech concerning \"politics, nationalism, religion, or other matters of opinion\" generally receives strict scrutiny. But the First Amendment does not just protect core political and ideological speech. Even in cases involving speech historically considered to have lower \"social value,\" the government generally \"has no power to restrict expression because of its message, its ideas, its subject matter, or its content.\" The same is generally true for speech that the legislature considers \"too harmful to be tolerated,\" as the government generally may not proscribe speech based on its content unless that speech falls within one of the narrow categories of unprotected speech recognized by the Supreme Court. Three of those categories are of particular relevance in the context of online speech that promotes terrorism or violence. In 1969, in Brandenburg v. Ohio , the Supreme Court considered a state law that prohibited \"advocat[ing] . . . the duty, necessity, or propriety of crime, sabotage, violence, or unlawful methods of terrorism as a means of accomplishing industrial or political reform.\" The state convicted a Ku Klux Klan leader of violating the statute based on films of a Klan rally that showed, among other things, hooded figures carrying firearms burning a cross and included, in the Court's words, \"scattered phrases . . . that were derogatory of Negroes and, in one instance, of Jews.\" During a speech, the defendant stated, \"We're not a revengent organization, but if our President, our Congress, our Supreme Court, continues to suppress the white, Caucasian race, it's possible that there might have to be some revengeance taken.\" The Supreme Court reversed the defendant's conviction, concluding that the statute, by punishing \"mere advocacy and [forbidding], on pain of criminal punishment, assembly with others merely to advocate the described type of action\" violated the First Amendment. Effectively establishing a three-part test, the Court held that \"the constitutional guarantees of free speech and free press do not permit a State to forbid or proscribe advocacy of the use of force or of law violation except where such advocacy is [1] directed to inciting or producing [2] imminent lawless action and [3] is likely to incite or produce such action.\" The Court reiterated that \"the mere abstract teaching . . . of the moral propriety or even moral necessity for a resort to force and violence, is not the same as preparing a group for violent action and steeling it to such action.\" Supreme Court cases since Brandenburg have helped to elucidate its \"directed to,\" \"imminence,\" and \"likelihood\" requirements to some degree—though not in the specific context of internet speech. Hess v. Indiana involved a conviction for disorderly conduct stemming from an anti-war rally at which the defendant shouted, \"We'll take the [expletive] street later.\" The Court overturned the defendant's conviction because his statement, though made to a crowd of people, \"was not directed to any person or group of persons\" and \"amounted to nothing more than advocacy of illegal action at some indefinite future time.\" In the Court's words, \"there was no evidence, or rational inference from the import of the language, that his words were intended to produce, and likely to produce, imminent disorder.\" Some argue that the Hess decision suggests that the Court views the \"imminence\" requirement to mean that violence must be likely to occur immediately as a result of the speech at issue. State and federal courts have not always applied Hess or the imminence requirement of Brandenburg so strictly. For example, in People v. Rubin , a California state court ruling, the defendant was charged with solicitation of murder. During a press conference to protest an upcoming march by the American Nazi Party through Skokie, IL, the defendant offered money to anyone who \"kills, maims, or seriously injures a member of the American Nazi Party.\" He added, \"This is not said in jest, we are deadly serious.\" The trial court concluded that his speech was protected by the First Amendment, but the state appeals court reversed in a split decision with one judge dissenting. Analogizing criminal solicitation to incitement, the appeals court applied Brandenburg 's imminence and likelihood requirements and concluded that both were satisfied even though the march in Skokie was not scheduled to take place until five weeks after the defendant had spoken. The court wrote that \"time is a relative dimension and imminence a relative term, and the imminence of an event is related to its nature. . . . We think solicitation of murder in connection with a public event of this notoriety, even though five weeks away, can qualify as incitement to imminent lawless action.\" Supreme Court decisions after Hess suggest that whether strong rhetoric is directed to inciting or producing imminent lawless action depends on the context in which the statements at issue were made—and to some degree, whether violence actually resulted. In NAACP v. Claiborne Hardware Co. , \"17 white merchants\" filed suit against the NAACP, its Field Secretary in Mississippi, and over a hundred other individuals involved in a \"boycott of white merchants in Claiborne County, [Mississippi],\" that was organized to protest racial discrimination, alleging tortious interference with trade. In relevant part, at issue were claims arising from certain speeches that the Field Secretary, Charles Evers, made during the middle of the boycott. In the wake of the shooting and killing of \"a young black man . . . during an encounter with two Port Gibson police officers,\" which led to mounting \"[t]ension in the community\" and \"sporadic acts of violence,\" Evers allegedly stated that \"boycott violators would be 'disciplined'\" and that if anyone was caught entering the boycotted stores, \"we're gonna break your damn neck.\" The Claiborne Hardware Court held that Evers was not liable to the boycotted store owners for their economic losses because his speech was protected under the First Amendment. The Court acknowledged that \"[i]n the passionate atmosphere in which the speeches were delivered, they might have been understood as inviting an unlawful form of discipline or, at least, as intending to create a fear of violence whether or not improper discipline was specifically intended.\" Still, the Court held, \"[t]he emotionally charged rhetoric . . . did not transcend the bounds of protected speech set forth in Brandenburg \" because the \"strong language\" used was part of \"lengthy addresses\" that \"generally contained an impassioned plea for black citizens to unify, to support and respect each other, and to realize the political and economic power available to them .\" Of potential significance, the Court noted that \"a substantial question [as to the defendant's liability] would be presented\" if that language \"had been followed by acts of violence,\" but there was no evidence of violence occurring after the challenged statements. In a later case, Texas v. Johnson , involving a criminal defendant's First Amendment challenge to his prosecution for burning a flag during a political protest, the Supreme Court ruled for the defendant, finding it notable that despite the allegedly \"disruptive behavior of the protestors during their march . . . no actual breach of the peace occurred at the time of the flagburning or in response to the flagburning.\" The Court added that in such circumstances, the \"likel[ihood]\" of imminent lawless action under Brandenburg cannot be inferred merely because an audience may take \"serious offense\" to particular expression. The Court explained, [A] principal \"function of free speech under our system of government is to invite dispute. It may indeed best serve its high purpose when it induces a condition of unrest, creates dissatisfaction with conditions as they are, or even stirs people to anger.\" Terminiello v. Chicago , 337 U.S. 1, 4 (1949). It would be odd indeed to conclude both that \"if it is the speaker's opinion that gives offense, that consequence is a reason for according it constitutional protection,\" FCC v. Pacifica Foundation , 438 U.S. 726, 745 (1978) (opinion of Stevens, J.), and that the government may ban the expression of certain disagreeable ideas on the unsupported presumption that their very disagreeableness will provoke violence. Thus, the Court reasoned, to equate the potential for violence with speech \"directed to\" and \"likely to\" incite or produce such action would be to \"eviscerate [the Court's] holding in Brandenburg .\" Scholars and commentators have noted the limits of the Brandenburg incitement doctrine when it comes to regulating content on social media. In particular, many have questioned what constitutes \"imminence\" when speech is made in an online forum rather than in connection with a specific event where violence or unrest might be anticipated. Others have questioned how the \"directed to\" or \"likelihood\" prongs of the test operate when speech is made to an unknown audience of internet users rather than an assembled group in person. In applying Brandenburg to internet speech, a few lower courts have identified certain types of content that may not constitute incitement but might constitute a true threat, another category of unprotected speech discussed below. For example, the Third Circuit has stated that \"merely posting information on unlawful acts that have already occurred, in the past, does not incite future, imminent unlawful conduct,\" but held that under the circumstances of that case, the defendants' use of \"past incidents to instill fear in future targets\" amounted to unprotected speech. That circuit also observed in dicta in another case that Brandenburg might allow the government to obtain an injunction to \"restrain a website published by a hate group naming specific groups or individuals as targets, or specifying instructions for committing a crime.\" As with incitement of the Brandenburg variety, the government may prohibit some forms of intimidation such as \"true\" threats. True threats occur when the speaker \"means to communicate a serious expression of an intent to commit an act of unlawful violence to a particular individual or group of individuals,\" even if the speaker does not \"actually intend to carry out the threat.\" In this way, the doctrine focuses on the harms related to the message the speaker communicates rather than the possibility that it will stir others to commit violent acts. Like the line between incitement and \"mere advocacy\" that the Court drew in Brandenburg , the Supreme Court has distinguished true threats from \"political hyperbole.\" In Watts v. United States —the 1969 decision coining the phrase \"true threat\"—the Court held that a statute that prohibited any person from \"knowingly and willfully . . . [making] any threat to take the life of or to inflict bodily harm upon the President of the United States\" was \"constitutional on its face.\" But the Court ruled that it was improperly applied to an individual who, in the course of expressing opposition to the draft during a public rally, stated, \"If they ever make me carry a rifle the first man I want to get in my sights is L.B.J. . . . They are not going to make me kill my black brothers.\" The Court reasoned that this \"kind of political hyperbole\" was not a \"true 'threat'\" within the meaning of the statute because \"[the Court] must interpret the language Congress chose 'against the background of a profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials.'\" Nearly 35 years later, in Virginia v. Black , the Supreme Court applied the true threats doctrine in a case involving a state law prohibiting cross burning with the intent to intimidate. The Court explained that \"[i]ntimidation in the constitutionally proscribable sense of the word is a type of true threat, where a speaker directs a threat to a person or group of persons with the intent of placing the victim in fear of bodily harm or death.\" The Court held that \"[t]he First Amendment permits [a state] to outlaw cross burnings done with the intent to intimidate because burning a cross is a particularly virulent form of intimidation.\" A plurality of the Court went on to conclude that the particular statute before it was unconstitutional insofar as it included a presumption making cross burning \"prima facie evidence of an intent to intimidate a person or group of persons.\" They reasoned that such a presumption would likely result in convictions in any cross-burning case regardless of the purpose of the cross burning and therefore chill protected speech. While some scholars have cited the true threats doctrine as one avenue for the government to regulate social media content promoting terrorism or violence, others have argued that the Supreme Court's decisions in this area may provide inadequate guidance for distinguishing between real threats online and protected expression, particularly in cases where judges do not share the same linguistic frame of reference as members of a particular online community. This year, the Supreme Court declined to review the Pennsylvania Supreme Court's interpretation of the true threats doctrine in a case involving alleged \"terroristic threats\" posted to social media. In Commonwealth v. Knox , the state court considered whether the defendant had a First Amendment right to publish \"a rap-music video containing threatening lyrics directed to named law enforcement officers,\" including two officers who were scheduled to testify against him in a pending criminal case. The defendant argued that he never intended for the video to be uploaded to social media (in that case, YouTube and Facebook) and that the song was a way to express himself and was not meant to be taken literally. Several organizations filed briefs in support of the defendant, noting, among other things, the defendant's status as a semiprofessional rap artist and the First Amendment protections accorded to speech about violence in other forms of media. The Pennsylvania Supreme Court held that the song constituted a true threat. It began by observing that although \"First Amendment freedoms apply broadly to different types of expression,\" and while the government \"generally lacks the authority to restrict expression based on its message, topic, ideas, or content,\" speech that \"threatens unlawful violence can subject the speaker to criminal sanction\" under the true threats doctrine. The court explained that while the Watts decision suggested that courts should use a \"contextual,\" \"objective\" standard in determining whether speech constituted a \"true threat,\" courts since Virginia v. Black \"have disagreed over whether the speaker's subjective intent to intimidate is relevant in a true-threat analysis.\" For its part, the Pennsylvania Supreme Court read the opinions in the Black case to mean that the \"First Amendment necessitates an inquiry into the speaker's mental state,\" which can be discerned from context. After reviewing the lyrics in the defendant's song, the court concluded that certain \"aspects of the song tend to detract from any claim that [the defendant's] words were only meant to be understood as an artistic expression of frustration\"; namely, that the song \"mentions [two police officers] by name, stating that the lyrics are 'for' them,\" and \"proceeds to describe in graphic terms how [the defendant] intends to kill those officers.\" The court also noted that the lyrics were \"tied to interactions which had recently taken place between [the defendant and the named officers],\" and that the named officers responded to hearing them by taking measures to enhance their safety. With respect to the song's publication online, the court stated that \"although the song was not communicated directly to the police and a third party uploaded it to YouTube, this factor does not negate an intent on [the defendant's] part that the song be heard by the officers.\" The court accepted the lower courts' findings that the defendant \"either intended for the song to be published or knew publication was inevitable,\" particularly where a link to the YouTube video was later posted on a Facebook page thought to belong to a codefendant who helped to write and record the song. The case law to date on online communications demonstrates that not all forms of alleged intimidation are analyzed under the true threats doctrine. In a lower court case involving state tort claims for invasion of privacy and intentional infliction of emotional distress, a federal district court in Montana rejected the First Amendment arguments of the defendant, an \"alt-right website\" publisher accused of launching an anti-Semitic \"troll storm\" against the plaintiff after publishing several articles accusing her of \"extortion\" in business discussions with the \"mother of [a] prominent neo-Nazi.\" The defendant allegedly published the plaintiff's \"phone numbers, email addresses, and social media profiles, as well as those of her husband, twelve-year-old son, friends, and colleagues\" after which she and her family \"received more than 700 disparaging and/or threatening messages over phone calls, voicemails, text messages, emails, letters, social media comments, and Christmas cards.\" According to the court, the defendant had \"called for 'confrontation' and 'action,' but he also told readers to avoid illegal activity.\" In denying the defendant's motion to dismiss, the court did not analyze the defendant's speech as a true threat or any other category of unprotected speech, reasoning that \"there is no categorical exception to the First Amendment for harassing or offensive speech.\" Instead, it considered whether it was clear from the pleadings that the defendant was speaking on a matter of public concern, which might give rise to a First Amendment defense under Supreme Court precedent. The court concluded that the plaintiff had \"made a plausible claim that [the defendant's] speech involved a matter of strictly private concern.\" The court reasoned that although the defendant \"drew heavily on his readers' hatred and fear of ethnic Jews, rousing their political sympathies, there is more than a colorable claim that he did so strictly to further his campaign to harass [the plaintiff]\" because of \"a perceived conflict\" between the plaintiff and his friend's mother. Like incitement and true threats, speech that is integral to criminal conduct is considered unprotected under the Court's First Amendment jurisprudence. This exception has sometimes been used to explain why the government may proscribe so-called \"inchoate crimes—acts looking toward the commission of another crime\" such as conspiracy, solicitation, and attempt. Although these acts typically involve speech, the speech is \"intended to induce or commence illegal activities\" and thus is \"undeserving of First Amendment protection.\" Once again, the Supreme Court has distinguished in this context between \"proposal[s] to engage in illegal activity\" and \"the abstract advocacy of illegality,\" extending the First Amendment's protections to the latter type of speech. However, as one district court has observed, the \"line between advocacy and action\" can be \"a hazy one,\" particularly in the case of inchoate offenses where the \"action\" that the law criminalizes \"may be minor or look benign.\" Some courts have cited the speech integral to criminal conduct doctrine in rejecting First Amendment challenges to criminal convictions based on online communications. However, the scope of the doctrine, particularly as it applies in the internet context, is not clear. One scholar has suggested that \"[h]aving to show that something on social media is 'integral' to criminal activity seems like a tall order\" except perhaps in \"the case of a Tweet or Facebook posting along the lines of 'the bomb is in location x. Here is what you need to do to detonate it in location y at time z.'\" In contrast, another scholar has suggested that it is too easy, particularly in the context of federal terrorism statutes, to prosecute someone for conspiracy based on online speech and thereby avoid Brandenburg 's requirements. More broadly, others have proposed ways to cabin the doctrine's reach so that it is not used in a circular fashion to criminalize speech because of its content without \"serious First Amendment analysis.\" In view of these considerations, this category of unprotected speech appears to be less well-defined (and thus susceptible to broader application) than the standards for incitement and true threats. Whether the government seeks to regulate protected speech, unprotected speech, or both, the First Amendment imposes some limitations on the means the government may use to achieve its regulatory objectives. When a law regulates protected speech, courts generally apply strict scrutiny and require the government to show that the law is narrowly tailored to achieve a compelling governmental interest. In contrast, laws that primarily regulate nonexpressive conduct or unprotected speech normally are not subjected to strict scrutiny. However, such laws can sometimes be challenged as unduly overbroad on the grounds that a \"substantial number of [their] applications are unconstitutional, judged in relation to the statute's plainly legitimate sweep.\" This section examines the strict scrutiny test and the overbreadth doctrine, as well as applications of those doctrines in the context of terrorism-related offenses and criminal prosecutions involving online speech, as those standards and precedents are likely to affect how the government may regulate online speech promoting terrorism or violence. As previously noted, when a law regulates protected speech—especially on the basis of its content—courts generally require the government to prove: (1) a compelling governmental interest, and (2) that the law is narrowly tailored to achieve that interest. As discussed below, not all of the government's interests in regulating speech promoting violence may rise to the level of compelling. In addition, even if the government can demonstrate a compelling interest, it would still have to show that the law is sufficiently tailored to that interest. The Supreme Court has held that the government does not have a compelling interest—or even a substantial one —in shielding listeners from messages that they might find offensive. In addition, where the government has deemed certain speech harmful, the Court has in some cases required the government to demonstrate actual harms that the regulation can redress. In contrast, the Court has repeatedly recognized the government's compelling interests in maintaining national security and combating terrorism. It has also acknowledged that Congress and the executive branch are uniquely positioned—both as a constitutional matter and in terms of their expertise—to safeguard the nation's security and regulate foreign affairs. Accordingly, it has recognized some situations in which the First Amendment must yield to the \"exclusive[]\" authority of the political branches to \"maintain[] normal international relations and defend[] the country against foreign encroachments and dangers.\" Once the government has established a compelling interest, the focus of the First Amendment inquiry is on whether the law is sufficiently tailored to achieve that interest. Under a strict scrutiny standard, narrow tailoring typically means that the law has to be the least speech-restrictive means of advancing the government's interest. For example, in Reno v. ACLU , the Supreme Court struck down two provisions of the Communications Decency Act of 1996 (CDA) that banned the knowing transmission of \"indecent\" messages, and the knowing sending or display of \"patently offensive\" messages, to minors over the internet. The CDA contained affirmative defenses for persons who took \"good faith, reasonable, effective, and appropriate actions\" to restrict minors' access to the prohibited communications or who restricted access through certain age-verification measures such as requesting a verified credit card. The Court first concluded that the terms \"indecent\" and \"patently offensive\" were vague and thus threatened to \"silence[] some speakers whose messages would be entitled to constitutional protection.\" Moving to the narrow tailoring analysis, the Court then explained that the CDA's \"burden on protected speech cannot be justified if it could be avoided by a more carefully drafted statute.\" The Court recounted the district court's findings regarding the technological limitations of restricting minors' access to such content and the cost-prohibitive nature of age-verification solutions. In contrast, the district court had found that available software for parental controls could curtail minors' access in a reasonably effective way. The Court concluded that the government failed to \"explain why a less restrictive provision would not be as effective as the CDA,\" and thus the challenged provisions were not narrowly tailored. While a court may examine the availability and effectiveness of less speech-restrictive alternatives under some circumstances, it may exercise some deference in evaluating the policy judgments of Congress and the Executive in certain areas such as national security and foreign affairs. The Humanitarian Law Project decision discussed above is one case in which the Court applied stringent scrutiny but deferred in some measure to the means that Congress chose to combat terrorism. In that case, the Supreme Court construed the federal material support statute to ban \"only material support coordinated with or under the direction of\" an FTO, not \"[i]ndependent advocacy that might be viewed as promoting the group's legitimacy.\" It concluded that the statute was \"carefully drawn\" insofar as it reached speech rather than conduct. The Court then considered whether the law, as applied to the plaintiffs' proposed activities, was \"necessary to further\" the government's compelling interest in combating terrorism. In this regard, the Court examined the plaintiffs' contention that they sought to advance only the \"legitimate activities of the [FTOs], not their terrorism.\" Reasoning that whether FTOs \"meaningfully segregate support of their legitimate activities from support of terrorism is an empirical question,\" the Court gave \"significant weight\" to \"the considered judgment of Congress and the Executive that providing material support to [an FTO]—even seemingly benign support—bolsters the terrorist activities of that organization.\" The Court then provided examples of how the plaintiffs' support could potentially further the terrorist objectives of the organizations. In upholding the statute as applied to the plaintiffs' activities, the Court cabined its decision in three respects. First, it held that it was not opining on the constitutionality of \"any future applications of the material-support statute to speech or advocacy\" or \"any other statute relating to speech and terrorism.\" Second, it suggested that \"a regulation of independent speech\" may not \"pass constitutional muster, even if the Government were to show that such speech benefits [FTOs].\" And third, it expressly disclaimed any suggestion \"that Congress could extend the same prohibition on material support at issue here to domestic organizations.\" The Humanitarian Law Project decision was criticized by several dissenting Justices and some outside commentators for a perceived departure from settled First Amendment standards. The three dissenting Justices agreed that the government has a \"compelling\" interest \"in protecting the security of the United States\" by \"denying [FTOs] financial and other fungible resources.\" However, they argued that the government failed to show how applying the statute to the plaintiffs' activities would \" help achieve that important security-related end,\" which is typically required under any level of heightened scrutiny. Legal scholars have disagreed as to whether the decision is consistent with the protections accorded to political advocacy in other contexts such as campaign finance. Others have argued that the Court erred in prohibiting \"mere advocacy\" without asking whether the plaintiffs' activities amounted to proscribable incitement under Brandenburg. At least one commentator has emphasized the context of the decision, suggesting that the serious national security concerns presented by terrorism may have weighed on the Justices in the majority. Lower courts have applied the Court's reasoning in Humanitarian Law Project in cases involving material support prosecutions where key evidence included the defendant's online activities. In United States v. Mehanna , the First Circuit considered the defendant's appeal from his convictions for conspiring to provide material support to Al Qaeda and providing material support for terrorism. As the court described it, his indictment on the terrorism-related charges was \"based on two separate clusters of activities\": (1) the defendant's travel to Yemen in search of a terrorist training camp; and (2) the year after his return to the United States, the defendant's translations of \"Arab-language materials into English,\" which he posted \"on a website . . . that comprised an online community for those sympathetic to al-Qa'ida and Salafi-Jihadi perspectives,\" and at least some of which \"constituted al-Qa'ida-generated media and materials supportive of al-Qa'ida and/or [violent] jihad.\" On appeal, the defendant argued that the government's theory of guilt centered on the translations and that the jury's guilty verdict was improperly based on protected First Amendment speech. The trial court had instructed the jury that it need not consider \"the scope or effect of the guarantee of free speech contained in the First Amendment\" because \"activity that is proven to be the furnishing of material support\" because it was undertaken at the direction of or in coordination with an FTO rather than independent advocacy \"is not activity that is protected by the First Amendment.\" The First Circuit held that the trial court's instructions were proper because they \"captured the essence of the controlling decision\" in Humanitarian Law Project and \"already accounted for [free speech] protections.\" The court further held that \"[i]t makes no difference that the absence of facts showing coordination with al-Qa'ida [in the defendant's translation activities] might have resulted in constitutionally protected conduct,\" because the jury had ample evidence to convict him on the basis of his travel to Yemen and associated activities. In United States v. Elshinawy , the defendant, a U.S. citizen, was indicted for providing and conspiring to provide material support to ISIL in the form of personnel (i.e., himself), services, and financial services. Many of the allegations were based on social media communications between the defendant and a childhood friend who was a member of ISIL and resided outside of the United States. These conversations allegedly included the defendant's \"pledge[ of] his allegiance to ISIL\" and \"plans to obtain or make some sort of explosive device.\" In addition, the defendant received funds transfers from overseas allegedly for the purpose of conducting a terrorist attack on ISIL's behalf. The defendant challenged the indictment on First Amendment grounds, arguing that the government sought to criminalize protected speech and association; namely, his independent interest in ISIL's cause. The district court, while suggesting that the defendant's characterizations of his communications could be raised in his defense at trial, largely rejected his First Amendment argument, stating that it \"distort[ed] the allegations and misapprehend[ed] the [material support] statute.\" The court noted that in interpreting the same statute in Humanitarian Law Project , the Supreme Court drew a line between independent advocacy and operating under an FTO's \"direction and control.\" The court reasoned that the indictment's allegations included \"more than just an expression of support during a conversation over social media\" because the defendant pledged his allegiance to ISIL. Moreover, the court held, to the extent that any statements were mere expressions of support, those statements could not be considered \"in isolation\" and must be viewed \"along with defendant's conduct.\" In United States v. Nagi , a U.S. citizen charged with attempting to provide material support to ISIL in the form of personnel (i.e., himself) moved to dismiss the indictment on First Amendment grounds. The defendant argued that the government could not prosecute him merely because he allegedly traveled to Turkey with the intent of entering Syria and joining ISIL because such a prosecution would violate his First Amendment right of association. The district court disagreed, based on the Supreme Court's reasoning in Humanitarian Law Project . In particular, the court rejected the defendant's argument that his charges were based on \"something that § 2339B does not prohibit: simple membership in a terrorist organization.\" In the court's view, \"the anticipated trial evidence show[ed] that the Defendant attempted to work 'under the direction of, or in coordination with' ISIL,\" not merely to associate with the group. Among other things, the government planned to introduce the defendant's Twitter pledge to support ISIL's leader and his purchase of combat gear. The court explained that although the Twitter pledge itself was protected under the First Amendment, the government could use it to show the defendant's intent. As the examples above illustrate, the First Amendment has not greatly restricted material support prosecutions concerning online speech, particularly when courts have contextualized the speech within a course of conduct. However, these cases may be of limited utility in evaluating the government's authority to regulate speech promoting terrorism in a prophylactic way, because they did not present scenarios involving online speech exclusively; in other words, the government proffered or introduced evidence that the defendant took some other step in coordination with an FTO. Although a law directed at unprotected speech is unlikely to trigger strict scrutiny, the overbreadth doctrine may nonetheless limit Congress's ability to regulate online speech. The Supreme Court has said that \"a law may be invalidated as overbroad if 'a substantial number of its applications are unconstitutional, judged in relation to the statute's plainly legitimate sweep.'\" This rule, called the overbreadth doctrine, \"prohibits the Government from banning unprotected speech if a substantial amount of protected speech is prohibited or chilled in the process.\" Because the doctrine can result in a court declaring a law invalid on its face rather than in the specific context before it, the Court has called the overbreadth doctrine \"strong medicine\" to be used \"sparingly and only as a last resort\" when the statute cannot be construed in a more limited manner. According to the Court, \"[r]arely, if ever, will an overbreadth challenge succeed against a law or regulation that is not specifically addressed to speech or to conduct necessarily associated with speech (such as picketing or demonstrating).\" At least one circuit court has upheld the material support statute against an overbreadth challenge—albeit in circumstances in which the defendant failed to allege any circumstances in which the statute might be applied to protected speech. Overbreadth challenges have also arisen more generally in the context of other statutes that implicate online communications. In United States v. Ackell , a defendant convicted under a federal law prohibiting stalking challenged the statute as facially overbroad on appeal. In relevant part, the law makes it a crime to (1) use \"any interactive computer service or electronic communication service\" or other facility of interstate commerce; (2) \"to engage in a course of conduct\" that \"causes, attempts to cause, or would be reasonably expected to cause substantial emotional distress\" to that person or certain other individuals; (3) with the \"intent to kill, injure, harass, [or] intimidate . . . [that] person.\" Construing the statute, the First Circuit reasoned that the law \"targets conduct rather than speech\" because, \"[b]y its own terms,\" it regulates a \"course of conduct.\" Although the court acknowledged that the statute refers to interactive computer services and other facilities of interstate commerce that \"are commonly employed to facilitate communication,\" it concluded that the statute \"covers countless amounts\" of nonexpressive conduct such as mailing unknown substances to another person or repeatedly infecting a person's computer with viruses. Turning to whether the statute in practice might nonetheless apply to a substantial amount of protected speech in relation to its plainly legitimate sweep, the court construed the law to primarily implicate two categories of unprotected speech: true threats and speech integral to criminal conduct. Beyond those categories, the court identified only one case in which the government had prosecuted a defendant under the statute for protected speech and rejected the defendant's proffered hypothetical applications as either too speculative or falling outside the statutory proscription. The court acknowledged that the statute \" could have an unconstitutional application,\" but declined to \"administer the 'strong medicine' of holding the statute facially overbroad.\" As the discussion above illustrates, regulating online content in accordance with the First Amendment—even online content promoting terrorism or violence—presents challenges. These challenges are due in large part to the complexities of free speech jurisprudence and the lack of controlling authority about how doctrines developed nearly 50 years ago—many in the context of statements made by identifiable speakers at political or ideological rallies—apply to speech on the internet where the lines between advocacy, incitement, threats, and conduct can be even more blurred. Nevertheless, the cases and scholarship to date suggest some general guideposts for evaluating the free speech implications of scholarly or legislative proposals to restrict online content promoting terrorism or violence. First, a law that primarily regulates conduct online as opposed to speech may not trigger heightened First Amendment scrutiny. Likewise, a general regulatory scheme that incidentally regulates online content is unlikely to trigger heightened scrutiny. However, if a law expressly regulates certain types of online communications based on the words used or their effect on other internet users, it may be assumed to regulate speech rather than conduct. Second, a law that is narrowly drafted to prohibit online speech that falls within one of the so-called unprotected categories of speech may not trigger heightened First Amendment scrutiny. In this regard, speech on the internet advocating violence as an abstract proposition would likely be considered protected, while speech that incites imminent violence, constitutes a true threat, or is integral to criminal conduct may be deemed unprotected. Third, even if alaw is directed at nonexpressive conduct or unprotected speech on the internet, it may still be subject to an overbreadth challenge if, in practice, it prohibits a substantial amount of protected speech in relation to its plainly legitimate sweep. Fourth, except under some circumstances involving unprotected speech, a law that regulates online speech on the basis of its content would likely be subject to strict scr utiny. A law that regulates online content on the basis of the viewpoints expressed would likely present a clearer case of content discrimination and would be presumptively invalid regardless of whether the underlying speech is protected. Finally, the government may have more leeway to regulate online content when asserting its interests in national security and foreign affairs; however, such laws, to the extent they restrict or burden protected speech, would likely have to withstand heightened (if not strict) First Amendment scrutiny. In addition to the considerations listed above, close attention to legal challenges regarding the enforcement of existing laws as applied to online activities may provide guidance to lawmakers seeking to balance the First Amendment interests of internet users with the safety and security of U.S. citizens on and offline.", "summary": "Recent acts of terrorism and hate crimes have prompted a renewed focus on the possible links between internet content and offline violence. While some have focused on the role that social media companies play in moderating user-generated content, others have called for Congress to pass laws regulating online content promoting terrorism or violence. Proposals related to government action of this nature raise significant free speech questions, including (1) the reach of the First Amendment's protections when it comes to foreign nationals posting online content from abroad; (2) the scope of so-called \"unprotected\" categories of speech developed long before the advent of the internet; and (3) the judicial standards that limit how the government can craft or enforce laws to preserve national security and prevent violence. At the outset, it is not clear that a foreign national (i.e., a non-U.S. citizen or resident) could invoke the protections of the First Amendment in a specific U.S. prosecution or litigation involving online speech that the foreign national posted from abroad. The Supreme Court has never directly opined on this question. However, its decisions regarding the extraterritorial application of other constitutional protections to foreign nationals and lower court decisions involving speech made by foreign nationals while outside of the United States suggest that the First Amendment may not apply in that scenario. In contrast, free speech considerations are likely to be highly relevant in evaluating the legality of (1) proposals for the U.S. government to regulate what internet users in the United States can post, or (2) the enforcement of existing U.S. laws where the government seeks to hold U.S. persons liable for their online speech. Although the government typically can regulate conduct without running afoul of the First Amendment, regulations that restrict or burden expression often do implicate free speech protections. In such circumstances, courts generally distinguish between laws that regulate speech on the basis of its content (i.e., the topic discussed or the message expressed) and those that do not, subjecting the former to more stringent review. A law that expressly restricts online communications or media promoting violence or terrorism is likely to be deemed a content-based restriction on speech; whereas a law that primarily regulates conduct could be subject to a less stringent standard of review, unless its application to speech turns on the message expressed. Whether such laws would survive First Amendment scrutiny depends on a number of factors. Over the past 50 years, the Supreme Court has generally extended the First Amendment's free speech protections to speech that advocates violence in the abstract while allowing the government to restrict or punish speech that threatens or facilitates violence in a more specific or immediate way. The subtle distinctions that have developed over time are reflected in the categories of speech that the court has deemed unprotected, meaning that the government generally can prohibit speech in these areas because of its content. These include incitement to imminent lawless action, true threats, and speech integral to criminal conduct. Although judicial decisions have helped to define the scope of some of these categories, open questions remain as to how they apply in the context of online speech. For instance, legal scholars have questioned what it means for speech to incite \"imminent\" violence when posted to social media. They have also asked how threats should be perceived when made in the context of online forums where hyperbolic speech about violence is common. The extent to which the government can regulate speech promoting violence or terrorism also depends on whether its law or action satisfies the applicable level of scrutiny that the Court has developed to evaluate measures that restrict or burden speech. In general, laws that regulate protected speech on political or ideological matters are subject to strict scrutiny, a test that requires the government to demonstrate that its law is narrowly tailored to achieve a compelling governmental interest. Nevertheless, in some cases, courts have concluded that the government's national security interests justify restrictions on protected speech, such as in 2010 when the Supreme Court upheld certain applications of a federal statute prohibiting providing material support to U.S.-designated foreign terrorist organizations.", "document_type": "crs"}
{"report": "Congress created offices of inspector general (OIGs) in 1978 (via P.L. 95-452 , the Inspector General Act of 1978, or the IG Act) to assist in its oversight of the executive branch. At that time, Congress determined that there were serious deficiencies in the executive branch's auditing and investigative activities designed to curb waste, fraud, and abuse and promote agency operational and program efficiency. For example, the House and Senate reports accompanying the bill that became the IG Act argued that auditing and investigative activities were scattered throughout the various federal departments and were often conducted in response to a complaint as opposed to having in place \"affirmative programs to look for possible fraud or abuse\"; investigators in some agencies (including the Small Business Administration, SBA) were not allowed to initiate investigations without clearance from officials responsible for the programs involved; many agency representatives engaged in auditing and investigative activities (including those within the SBA) reported that their office lacked sufficient budgets to do its job, many of the auditing and investigative offices (including those at the SBA) often reported to those who were responsible for the program being audited or investigated; and some auditors and investigators were unable to devote full time to their audit or investigative responsibilities. The House report concluded that independent OIGs \"are urgently needed.\" The Senate report concluded that \"with rare exceptions, the agencies have not adequately policed their own operations and programs.\" OIGs were designed to provide Congress and federal agency heads independent, nonpartisan analysis, conducted in accordance with generally accepted government auditing standards, to identify and recommend ways to limit waste, fraud, and abuse in federal programs and enhance operational and program efficiency and effectiveness. OIGs' activities were to supplement and complement those of the Government Accountability Office (GAO), which serves a similar, though not identical, role in assisting Congress fulfill its oversight function. Together, OIGs and GAO (along with the Congressional Research Service [CRS] and the Congressional Budget Office [CBO]) provide Congress with information and analysis needed to conduct effective oversight and, in the process, help Congress maintain its balance of power with the presidency. OIGs currently exist in more than 70 federal agencies, including all departments and larger agencies, numerous boards and commissions, and other entities. They are predominantly located in executive branch agencies, but several legislative branch entities—for example, the Library of Congress (LOC), GAO, and the Government Publishing Office (GPO)—also have OIGs. The overwhelming majority of OIGs, including the U.S. Small Business Administration OIG (SBA OIG), are governed by the IG Act. It structures inspector general (IG) appointments and removals, powers and authorities, and duties and responsibilities. Other laws have established or amended IG powers and authorities in specified agencies or programs. As a result, IG statutory powers and authorities are not identical across the federal government and, in certain cases, these differences are significant. Nonetheless, in general, statutory OIGs follow the IG Act's standards, guidelines, and directives. For example, the IG Act provides IGs five statutory duties and responsibilities as follows: 1. Conduct, supervise, and coordinate audits and investigations of their agency's programs and operations. 2. Review existing and proposed legislation and regulations relating to their agency and make recommendations in mandated semiannual reports concerning the impact of such legislation or regulations on their agency's programs and operations or on the prevention and detection of fraud and abuse in those programs and operations. 3. Recommend policies to improve their agency's administration of its programs and operations and prevent and detect fraud and abuse in those programs and operations. 4. Recommend policies to facilitate relationships between their agency and other federal, state, and local government agencies and nongovernmental entities to promote the economy and efficiency of their agency's administration of its programs and operations and prevent and detect fraud and abuse in those programs and operations. 5. Keep both their agency head and Congress fully and currently informed concerning fraud and other serious problems, abuses, and deficiencies relating to their agency's administration of its programs and operations and to report on the progress made in implementing recommended corrective action. This report examines the SBA OIG's statutory authorities; reporting requirements; funding; staffing and organizational structure; and recent activities (audits, investigations, etc.). The SBA OIG's impact on monetary savings, SBA programs and operations, and legislation affecting the agency is also examined. The report concludes with some observations concerning the SBA OIG's relationship with Congress. Some areas of possible congressional interest, other than SBA OIG funding and staffing issues, include exploring ways to more accurately quantify the SBA OIG's claims of monetary savings and to determine if the SBA OIG should undertake additional tracking and monitoring activities to more accurately quantify the office's impact on SBA programs, operations, and legislation. The SBA OIG is a separate, independent office that provides \"independent, objective oversight to improve the integrity, accountability, and performance of the SBA and its programs for the benefit of the American people.\" The SBA IG (Hannibal \"Mike\" Ware) directs the office and is \"appointed by the President, by and with the advice and consent of the Senate, without regard to political affiliation and solely on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations.\" The SBA is a Cabinet-level agency. Although the SBA is one of the smaller Cabinet-level agencies (with an annual budget of $715.4 billion in FY2019), it administers a relatively wide range of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. The SBA OIG is responsible for examining these programs and the various SBA offices that administer them. IGs report to the head of their agency or establishment, but are provided various powers and protections that support their independence. For example, the SBA IG reports to the SBA Administrator, but may be removed from office only by the President, or through the impeachment process in Congress. has the authority to hire staff. determines priorities and projects (e.g., audits, reviews and investigations) without outside direction. cannot be prevented or prohibited \"from initiating, carrying out, or completing any audit or investigation, or from issuing any subpoena during the course of any audit or investigation.\" must be provided \"access to all records, reports, audits, reviews, documents, papers, recommendations, or other material available ... which relate to programs and operations with respect to which [the SBA] Inspector General has responsibilities under this Act.\" must be provided \"appropriate and adequate office space\" and \"such equipment, office supplies, and communications facilities and services as may be necessary for the operation of\" the SBA OIG, including any \"necessary maintenance services for such offices and the equipment and facilities located therein.\" The IG Act provides all IGs nine statutory authorities: 1. Access to all records, reports, audits, reviews, documents, papers, recommendations, or other material available relating to the IG's responsibilities under the IG Act. 2. Make such investigations and reports relating to their agency's administration of its programs and operations as are, in the judgment of the IG, necessary or desirable. 3. Request such information or assistance as may be necessary for carrying out the duties and responsibilities provided by the IG Act from any federal, state, or local governmental agency or unit thereof. 4. Require by subpoena the production of all information, documents, reports, answers, records, accounts, papers, and other data in any medium necessary in the performance of the functions assigned by the IG Act; provided that procedures other than subpoenas shall be used by the IG to obtain documents and information from federal agencies. 5. Administer to or take from any person an oath, affirmation, or affidavit, whenever necessary in the performance of the functions assigned by the IG Act. 6. Have direct and prompt access to their agency head when necessary for any purpose pertaining to the performance of functions and responsibilities under the IG Act. 7. Select, appoint, and employ such officers and employees as may be necessary for carrying out the functions, powers, and duties of the Office subject to the provisions of title 5, United States Code , governing appointments in the competitive service, and the provisions of chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates. 8. Obtain services as authorized by Section 3109 of title 5, United States Code , at daily rates not to exceed the equivalent rate prescribed for grade GS-18 of the General Schedule by Section 5332 of title 5, United States Code . 9. To the extent and in such amounts as may be provided in advance by appropriations acts, to enter into contracts and other arrangements for audits, studies, analyses, and other services with public agencies and with private persons, and to make such payments as may be necessary to carry out the provisions of the IG Act. In addition, the IG Act provides 25 OIGs, including the SBA OIG, direct law enforcement authority. It also authorizes the U.S. Attorney General to delegate law enforcement authority to other OIGs under specified circumstances. The IG Act requires IGs to prepare and transmit semiannual reports (two per year) to their agency's head, not later than April 30 and October 31 of each year, summarizing the OIG's activities during the immediately preceding six-month periods ending on March 31 and September 30. Agency heads are to transmit these reports to the appropriate committees or subcommittees of Congress in unaltered form within 30 days after receipt. Agency heads may provide any additional comments deemed appropriate. Agency heads must also provide specified information, such as statistical tables showing the total number of audit reports, inspection reports, and evaluation reports for which final action had not been taken by the commencement of the reporting period; on which management decisions were made during the reporting period; and for which no final action had been taken by the end of the reporting period. Copies of the semiannual reports must be made available to the public upon request and at a reasonable cost within 60 days of their transmission to Congress. The OIG's semiannual reports are required to include, but not limited to, 16 informational items. For example, the SBA OIG's report must include, among other items, the following: A description of significant problems, abuses, and deficiencies relating to the SBA's administration of programs and operations identified during the reporting period. A description of the SBA OIG's recommendations for corrective action. An identification of each significant recommendation described in previous semiannual reports on which corrective action has not been completed. A summary of matters referred to prosecutive authorities and the prosecutions and convictions that have resulted. A summary of each report made to the SBA Administrator relating to instances when information or assistance requested has, in the IG's judgment, been unreasonably refused or not provided during the reporting period. A listing of each audit report, inspection report, and evaluation report issued during the reporting period and for each report, where applicable, the total dollar value of questioned costs (including a separate category for the dollar value of unsupported costs) and the dollar value of recommendations that funds be put to better use. A summary of each audit report, inspection report, and evaluation report issued before the commencement of the reporting period for which no management decision has been made by the end of the reporting period (including the date and title of each such report), an explanation of the reasons such management decision has not been made, and a statement concerning the desired timetable for achieving a management decision on each such report. Information concerning any significant management decision with which the SBA IG is in disagreement. IGs are also required to report suspected violations of federal criminal law directly and expeditiously to the U.S. Attorney General, and any \"particularly serious or flagrant problems, abuses, or deficiencies\" relating to their agency's operations and administration of programs immediately to the agency's head. In addition, pursuant to P.L. 106-531 , the Records Consolidation Act of 2000, and the Office of Management and Budget (OMB) Circular A-136, the SBA OIG issues an annual Report on the Most Serious Management and Performance Challenges Facing the SBA . This report is, arguably, the SBA OIG's signature oversight document, focusing attention \"on areas that are particularly vulnerable to fraud, waste, error, and mismanagement, or otherwise pose a significant risk and generally have been subject to one or more OIG or GAO reports.\" The IG Act provides presidentially appointed IGs a separate appropriations account, known colloquially as a \"line item,\" for their offices. This provision prevents federal administrators from limiting, transferring, or otherwise reducing OIG funding once it has been specified in law. IGs are authorized to transmit a budget estimate and request to their respective agency head each fiscal year. Each IG's request must include amounts for operations, training, and for the support of the Council of the Inspectors General on Integrity and Efficiency (CIGIE). The agency's budget request to the President must include the OIG's original budget request and any comments the affected IG has regarding the proposal. The President must include in the Administration's budget submission to Congress the IG's original request; the amount requested by the President for the OIG's operations, training, and support for CIGIE; and any comments the affected IG has regarding the proposal if the IG concludes that the President's budget would substantially inhibit the IG from performing the duties of the office. Each year, the SBA OIG transmits a budget justification document to the SBA Administrator, which is available online. That document includes the SBA OIG's budget request, an overview of the SBA OIG's mission and authorities, a list of critical risks facing the SBA, an accounting of the office's oversight activities during the previous fiscal year, areas of emphasis for the coming fiscal year, and a table of statistical highlights and accomplishments for the previous fiscal year (such as the number of reports and recommendations issued, estimated amounts saved or recouped, number of indictments and convictions). Table 1 shows the SBA OIG's appropriations over the FY2010-FY2019 period. The SBA OIG received an appropriation of $22.9 million for FY2019. As shown in Table 2 , the SBA OIG's FTEs have remained relatively stable since FY2000, ranging from a low of 93 FTEs in FY2014 to a high of 113 FTEs in FY2019. Approximately 85% of the SBA OIG's expenditures are attributed to payroll expenses. In 2013, then-SBA IG Peggy Gustafson testified that \"resource constraints do sometime preclude us from initiating or continuing a number of investigations\" and if she were provided additional resources, she would \"target early defaulted loans, fraud, and lender negligence, and ... increase the capacity of our existing investigative personnel.\" The SBA OIG's staff is organized into three divisions and several support offices The Auditing Division performs and oversees audits and reviews of SBA programs and operations, focusing on SBA business and disaster loans, business development and government contracting programs, as well as mandatory and other statutory audit requirements involving computer security, financial reporting, and other work. The Investigations Division manages a program to detect and deter illegal and improper activities involving SBA's programs, operations, and personnel. The division has c riminal investigations staff who carry out a full range of traditional law enforcement functions and security operations staff who conduct name checks and, where appropriate, fingerprint checks on program applicants to prevent known criminals and wrongdoers from participating in SBA programs. Security operations staff also conduct required employee background investigations. The Management and Administration Division provides business support (e.g., budget and financial management, human resources, IT, and procurement) for the various OIG functions and activities. The Office of Counsel provides legal and ethics advice to all OIG components; represents the OIG in litigation arising out of or affecting OIG operations; assists with the prosecution of criminal, civil, and administrative enforcement matters; processes subpoenas; responds to Freedom of Information and Privacy Act requests; and reviews and comments on proposed policies, regulations, legislation, and procedures. The OIG Hotline, under the purview of the Chief of Staff , reviews allegations of waste, fraud, abuse, or serious mismanagement within the SBA or its programs from employees, contractors, and the public. The SBA OIG's headquarters is located in Washington, DC. The SBA OIG's Investigations Division has 12 field offices located across the United States. The SBA OIG's structure is shown in its organizational chart (see Figure 1 ). As mentioned previously, the SBA OIG conducts and supervises audits and investigations of the SBA's programs and operations. As a complement to its criminal and civil fraud investigations, the SBA OIG also recommends to the SBA suspensions, debarment, and other administrative enforcement actions against SBA lenders, borrowers, contractors, and others who have engaged in fraud or have otherwise exhibited a lack of business integrity. The SBA OIG also conducts, supervises, and participates in various training activities to counter fraud in SBA programs. During FY2018, the SBA OIG issued 26 audit reports containing 111 recommendations for improving the SBA's operations. The SBA's OIG provided several examples in its FY2018 semi-annual reports to Congress of what it considered to be among its more noteworthy audits, including the following: An audit of the SBA's State Trade Expansion Program (STEP) determined that \"while SBA has made significant progress in improving the overall management and effectiveness of STEP since the audit of the pilot program in 2012, SBA needs to improve its performance measures and its program oversight\" or be \"at risk of not fully realizing the impact of the program in increasing the number of small businesses exploring significant new trade opportunities.\" The OIG made six recommendations to improve the program. The SBA planned actions to resolve five of the six recommendations and had already implemented actions to resolve one of the recommendations by the audit's completion. The OIG examined a sample of 11 7(a) loans (out of about 1,500 7(a) loans) made to poultry farmers from FY2012 to FY2016 and determined that these loans did not meet regulatory and SBA requirements for eligibility because the large chicken companies (integrators) in their sample \"exercised such comprehensive control over the growers [through a series of contractual restrictions, management agreements, oversight inspections, and market controls] that SBA OIG believes the concerns appear affiliative under SBA regulations.\" The OIG concluded that \"therefore, SBA and lenders approved 7(a) loans that were apparently ineligible under SBA size standard regulations and requirements.\" The OIG found that integrator controls overcame practically all of a grower's ability to operate their business independent of integrator mandates and concluded that, as a result, \"from FY2012 to FY2016, SBA guaranteed approximately $1.8 billion in loans that may be ineligible.\" The OIG recommended that (1) the SBA review the loans cited in the evaluation sample to determine their eligibility and take appropriate corrective action and (2) review the arrangements between integrators and growers and \"establish and implement controls, such as supplemental guidance, to ensure SBA loan specialists and lenders make appropriate affiliation determinations.\" The SBA agreed with both recommendations. Soon after the OIG's report was released, the SBA issued a statement indicating that it had reviewed the 11 loans cited in the report and confirmed that the loans \"were correctly made in accordance with agency policy at the time.\" The SBA also assured borrowers and lenders that existing 7(a) loan guarantees to poultry famers would continue to be honored and that the SBA is \"examining the policies and procedures around poultry loans to ensure SBA loans continue to be directed towards those small businesses most in need of assistance.\" The SBA subsequently held several public forums \"to better understand the use of SBA guaranteed loans by small farmers in the poultry industry.\" The OIG audited the SBA's oversight of the Minority Small Business and Capital Ownership Development Program (commonly known as the \"8(a) program\") continuing eligibility processes \"to determine whether SBA's oversight ensured 8(a) program participants met continuing eligibility requirements.\" The 8(a) program is designed to assist small businesses unconditionally owned and controlled by one or more socially and economically disadvantaged individuals with training, technical assistance, and contracting opportunities. The OIG found that 20 of the 25 firms it reviewed should have been removed from the 8(a) program and that these firms received $126.8 million in new 8(a) set-aside contract obligations in FY2017 \"at the expense of eligible disadvantaged firms.\" The OIG concluded that the SBA \"did not consistently identify ineligible firms in the 8(a) program,\" \"did not always act to remove firms it determined were no longer eligible for the program,\" \"did not perform required continuing eligibility reviews when it received specific and credible complaints regarding firms' eligibility,\" and \"did not log all complaints.\" The OIG made 11 recommendations to improve the overall management of the 8(a) program continuing eligibility processes. The SBA agreed with 7 of the recommendations, partially agreed with the other 4 recommendations, and reported that it planned to conduct continuing eligibility reviews for the firms that the OIG identified as ineligible and take appropriate action. In FY2018, the SBA OIG's investigations resulted in 62 indictments or informations and 43 convictions. For example, A Missouri man was sentenced in federal court to 30 months in prison and five years of supervised release and ordered to pay $1,675,495 in restitution following an OIG investigation that revealed that the man committed bank fraud and made false statements to a financial institution in connection with his role in defrauding the SBA and a bank. The man was involved in a scheme to obtain a $2.9 million SBA loan through the use of straw companies and false business records. A co-conspirator had previously entered into a settlement agreement with the bank wherein he agreed to pay back $1.8 million of misappropriated SBA loan proceeds. An employee of a large defense contractor was sentenced in federal court to five years of imprisonment and three years of supervised release, was fined $50,000, and ordered to forfeit $1,273,440 after an OIG investigation revealed that he \"had utilized a retired U.S. Army colonel's Section 8(a) communications and engineering firm as a front company to obtain government contracts.\" The retired colonel (and owner) was sentenced in federal court to five years of imprisonment and three years of supervised release, was fined $100,000, and forfeited $3 million in proceeds earned by his now defunct 8(a) firm. A Missouri veteran pled guilty to wire fraud and major program fraud following an OIG investigation that revealed that he was involved in a scheme to fraudulently claim service-disabled veteran-owned small business status for a firm to enable that firm to obtain a $40 million DOD contract. The veteran posed as a figurehead for the firm in exchange for monetary compensation for his participation in the scheme. The SBA OIG also sent 84 present responsibility actions (suspension and debarment referrals) to the SBA that resulted in 25 proposed debarments and 17 final debarments. As will be discussed later, the SBA OIG also annually provides training and outreach sessions, attended by more than 1,000 government employees, lending officials, and law enforcement representatives, on topics related to fraud in government lending and contracting programs. The SBA OIG reports that its audits and investigations resulted in monetary savings and recoveries of nearly $224.5 million in FY2018 ($55.4 million from potential investigative recoveries and fines, $22.9 million from asset forfeitures, $0.73 million for loans or contracts not approved or canceled, and $145.4 million in disallowed costs agreed to by management). Most OIGs, including the SBA OIG, quantify their monetary savings by identifying and reporting amounts affected by their activities. This methodological approach, arguably, provides a fairly good overview of the OIG's activities' scope, nature, and impact. However, this approach has limitations. For example, precise data concerning monetary savings are not always readily available. Also, from a budgetary perspective, the monetary savings identified is sometimes less than the actual monetary savings realized. For example, Savings from potential recoveries and fines ($55.4 million in FY2018) is derived from the actual amount imposed by courts in criminal sentencings (including fines and restitution), criminal settlements, and civil settlements. These recoveries are deemed \"potential\" because the court ordered them in FY2018, but they may not have been collected yet. The SBA OIG does not track collections resulting from these orders. As a result, the SBA OIG is not able to report the final amount of money actually recovered. Savings from loans or contracts not approved or cancelled ($0.73 million in FY2018) is \"comprised of the sum of the amounts that would have been borrowed as loans or awarded via contracts had there been no involvement by the OIG Investigations Division.\" From a budgetary perspective, the actual monetary savings generated by these actions is less than the amount cited. When a SBA loan is not approved, no funds are returned to the SBA because the loan amount has not been issued yet. When a SBA business loan is cancelled, the loan amount is ultimately returned to the lender, not to the SBA, because the SBA did not make the loan, it guaranteed a portion of it. When a small business contract is not approved, no funds are returned to the agency sponsoring the contract because the contracted amount has not been awarded yet. When a small business contract is cancelled, the contracted amount is typically made available to other contractors. Savings from disallowed costs agreed to by management ($145.4 million in FY2018) could result in actual budgetary savings, but the recovery process typically takes time. As a result, the final savings for disallowed costs is often not known during the fiscal year in which it is reported. Finally, estimating the monetary savings from the SBA OIG's activities is challenging because it is difficult, if not impossible, to determine what changes the SBA might have made to its programs and operations if the SBA OIG did not exist. Perhaps indicative of these methodological challenges, the SBA OIG's semiannual reports and annual congressional budget justification document's statistical highlights sections refer to these figures as \"office-wide dollar accomplishments\" as opposed to monetary savings. Pursuant to P.L. 106-531 , the Records Consolidation Act of 2000, and OMB Circular A-136, the SBA OIG issues an annual Report on the Most Serious Management and Performance Challenges Facing the SBA . This report is, arguably, the SBA OIG's signature oversight document, focusing attention \"on areas that are particularly vulnerable to fraud, waste, error, and mismanagement, or otherwise pose a significant risk and generally have been subject to one or more OIG or GAO reports.\" The FY2019 Report on the Most Serious Management and Performance Challenges Facing the SBA lists the following eight challenges: 1. Weaknesses in small business contracting programs and inaccurate procurement data undermine the reliability of contracting goals achievements. 2. SBA needs to continue to improve information technology controls to address operational risks. 3. SBA needs effective human capital strategies to carry out its mission successfully and become a high-performing organization. 4. SBA needs to improve its risk management and oversight practices to ensure its loan programs operate effectively and will continue to benefit small businesses. 5. SBA needs to ensure that the Section 8(a) business development program identifies and addresses the needs of program participants, only eligible firms are admitted into the program, and standards for determining economic disadvantage are justifiable. 6. SBA can improve its loan programs by ensuring quality deliverables and reducing improper payments at SBA loan operation centers. 7. SBA's disaster assistance programs must balance competing priorities to deliver timely assistance and reduce improper payments. 8. SBA needs robust oversight of its grant management. The SBA OIG provides a series of recommended actions within each of the reported challenges to enhance the effectiveness of the SBA's programs and operations. The management challenges are \"driven by SBA's current needs\" and based on the SBA OIG's understanding of the SBA's programs and operations, as well as challenges presented in other agency reports, principally GAO reports. Accordingly, the challenges presented each year may change based on the SBA's actions or inactions \"to remedy past weaknesses.\" For example, in its FY2019 report, the SBA OIG reported that the SBA had \"increased its oversight of the acquisition program, updated its policies and procedures, and implemented a requirement for management to conduct annual reviews of the acquisition process controls.\" As a result, the SBA OIG removed SBA's acquisition process from the list of the SBA's most serious challenges and added a new challenge regarding SBA's grant management oversight. OIGs are, arguably, best known for investigations addressing waste, fraud, and abuse and audits containing recommendations to enhance programmatic and operational efficiencies. However, a full and complete assessment of an OIG's impact should address all of the office's statutory responsibilities, including its efforts to enhance programmatic and operational efficiencies and the OIG's agency's effectiveness in achieving program goals through audits; reduce waste, fraud, and abuse through investigations; assist Congress and the OIG's agency by making recommendations concerning the impact of legislation and regulations on programmatic and operational efficiencies and waste, fraud, and abuse; assist the OIG's agency by making recommendations to facilitate the agency's relationships with other governmental and nongovernmental entities; and keep the OIG's agency head and Congress fully and currently informed of its findings and the agency's progress in implementing recommended corrective actions. As shown in Table 3 , over the past nine fiscal years, the SBA OIG issued 204 audit reports (an average of 22.66 audit reports per fiscal year); provided 1,011 recommendations for improving SBA operations, identifying improper payments, and strengthening controls to reduce fraud and unnecessary losses in SBA programs (an average of 112.3 recommendations per fiscal year), with the SBA taking action on 992 recommendations (an average of 110.2 recommendations addressed per fiscal year); generated $372.3 million in savings and efficiencies (an average of $41.4 million per fiscal year) in disallowed costs agreed to by SBA management and recommendations that funds be put to better use agreed to by SBA management; questioned $571.3 million in costs (an average of $63.5 million per fiscal year); and recommended that $141.1 million be put to better use (an average of $15.7 million per fiscal year). In terms of impact, the data presented in Table 3 suggest that the SBA has made hundreds of changes to its internal operating procedures and programs as a direct result of the SBA OIG's audits. In addition, comments by members of the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship during congressional oversight hearings suggest that they view the SBA OIG's audits as helpful in their oversight of the SBA, especially in terms of identifying management weaknesses and recommending solutions to remedy those weaknesses. For example, in his opening remarks at a March 2016 congressional oversight hearing concerning the SBA's management and performance challenges, Representative Steve Chabot, then-chair of the House Committee on Small Business, stated It is clear that the Inspector General plays a critical role in ensuring effective management of the SBA. By conducting audits to identify program mismanagement, by investigating fraud or other wrongdoing, or by recommending changes to increase the efficiency of SBA operations, she has provided independent and objective reviews of agency actions. However, some Members have also noted that the SBA OIG's impact is limited because the SBA OIG has no enforcement authority and the SBA has chosen to ignore many of its recommendations. As Representative Nydia Velazquez noted during that March 2016 congressional oversight hearing, some of the management challenges reported in the SBA OIG's annual Report on the Most Serious Management and Performance Challenges Facing the SBA \"were first highlighted over a decade ago.\" In addition, Peggy Gustafson (SBA IG from October 2, 2009 to January 9, 2017) testified at that hearing that the SBA currently \"has 144 open OIG recommendations pertaining to reviews conducted in recent years and not so recent years across SBA programs.\" She also testified that the SBA did demonstrate positive progress in resolving recommendations associated with five of the identified challenges [in the annual report on the most serious challenges facing the SBA]. However, they remained at status quo on four of the challenges and demonstrated no progress on one recommendation in an area related to information technology. Now, clearly these results I would say paint a mixed picture relative to SBA's commitment to addressing these challenges in earnest and their ability to overcome these challenges. Having said that, I think it also has to be acknowledged that SBA has shown that with a sustained, committed effort over time, they can achieve successful results in these challenges. For example, they moved to green [implemented the SBA OIG's recommendations concerning] … the very large challenge related to their LMAS [Loan Management and Accounting System Modernization] IT system. So I think that really shows that these are challenges that with the right effort can really be conquered and met. Others have suggested that OIGs in general, including the SBA OIG, focus their auditing efforts on identifying and addressing programmatic and operational inefficiencies and spend less time addressing \"whether the agency program operations were providing the outputs intended by Congress.\" In their view, Congress passed P.L. 103-62 , the Government Performance and Results Act of 1993, and P.L. 111-352 , the Government Performance and Results Act Modernization Act of 2010, to provide mechanisms to assess the effectiveness of federal programs in a way that supplements the efforts of OIGs (e.g., by establishing statutory requirements for most agencies to set goals, measure performance, and submit related plans and reports to Congress for its potential use). In sum, the evidence suggests that the SBA OIG's audits have helped to increase the efficiency of the SBA's programs and operations. However, it could also be argued that the SBA OIG's impact is muted because OIGs lack enforcement authority, meaning that the SBA may proceed with, or without, taking into account the recommendations presented in the SBA OIG's audits. As shown in Table 4 , over the past nine fiscal years, the SBA OIG opened 672 cases (an average of 74.7 cases opened per fiscal year); issued 570 indictments or informations (an average of 63.3 indictments or informations per fiscal year), with 431 convictions (an average of 47.8 convictions per fiscal year); generated $1,057.4 million in investigative recoveries and fines, asset forfeitures attributed to OIG investigations, and loans or contracts not approved or cancelled as a result of investigations (an average of $117.5 million per fiscal year); and recommended 571 suspensions or disbarments (an average of 63.4 per fiscal year), with the SBA suspending or disbarring 273 of these firms or owners (an average of 30.3 firms/owners per fiscal year). The SBA OIG also reported that it has an active, annual caseload of about 255 criminal and civil fraud investigations of potential loan and contracting fraud and other wrongdoing and that \"many of these investigations involve complex, multi-million-dollar fraudulent financial schemes perpetrated by multiple suspects.\" The data presented in Table 4 suggest that the SBA OIG's investigations have resulted in hundreds of criminal convictions and millions of dollars in recovered funds. In addition, comments by members of the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship suggest that, generally speaking, they acknowledge and value the SBA OIG's investigations as a means to identify and reduce waste, fraud, and abuse. However, the SBA's former IG, Peggy Gustafson, has testified that the SBA OIG's investigative efforts, in initiating and continuing investigations, are constrained by resource limitations. The SBA OIG reports that it routinely reviews and comments on proposed changes to the SBA's program directives. These changes \"include regulations, internal operating procedures, agency policy notices, and SBA forms completed by the public.\" The SBA OIG also tracks, reviews, and comments on legislation affecting the SBA and participates in OMB's Legislative Referral Memoranda (LRM) process for reviewing and coordinating agency recommendations on proposed, pending, and enrolled legislation. The SBA OIG also \"receives, through the SBA Office of Congressional and Legislative Affairs, congress-related documents being circulated by OMB, including pending legislation for consideration of Administration views and perspectives.\" When the SBA OIG identifies \"material weaknesses\" in changes proposed by the SBA, it \"works with the Agency to implement recommended revisions to promote controls that are more effective and deter waste, fraud, or abuse.\" The SBA OIG provides the SBA with both formal and informal comments. Formal comments are provided \"through the Agency's internal document control process, the Correspondence Management System (CMS), and as a reviewing party in the Agency's Paperwork Reduction Act (PRA) process.\" Informal comments \"occur in the context of program officials seeking SBA OIG guidance when preparing new guidance.\" In terms of legislation, the SBA OIG provides comments and suggestions \"directly with congressional stakeholders\" and shares its views with SBA officials and OMB if the legislation is being \"circulated for solicited views by OMB through its LRM process, or if determined by the OIG to be a necessary course of action.\" As shown in Table 5 , over the past nine fiscal years, the SBA OIG conducted 1,035 reviews of legislation, regulations, standard operating procedures, and other issuances (an average of 115.0 reviews per fiscal year); and submitted comments on 515 of these initiatives (an average of 57.2 initiatives commented on per fiscal year). The data in Table 5 suggest that the SBA OIG actively reviews and comments on legislation and SBA program directives. However, it is difficult to determine the impact of these reviews and comments because the SBA OIG does not track or report data concerning the SBA's response to these comments. The SBA OIG indicated that neither the dynamic nature of the informal comment process nor the collaborative follow-up procedures from formal comments are conducive to quantification.... Our sense of these comments is that the Agency will generally act upon SBA OIG comments. Typically, the Agency modifies clearances and PRA packages in response to material SBA OIG concerns. An accurate tracking and quantification of these clearances, however, is unlikely to yield particularly useful data relative to the resource expenditure necessary for that collection. The SBA OIG provides training and outreach sessions on topics related to fraud in government lending and contracting programs. These training and outreach sessions are designed to facilitate the SBA's relationships with other governmental and nongovernmental entities in identifying and ameliorating fraud. The SBA OIG's outreach and training sessions are attended by SBA and other government employees, lending officials, and law enforcement representatives. Topics include \"types of fraud, fraud indicators and trends; how to report suspicious activity that may be fraudulent; suspension and debarment, the Program Fraud Civil Remedies Act, and other topics related to deterring and detecting fraud in government lending and contracting programs.\" As shown in Table 6 , the SBA OIG provided 609 outreach and training sessions from FY2010 to FY2018 (an average of 67.7 sessions per fiscal year) to 13,278 attendees (an average of 1,475 attendees per fiscal year). The data presented in Table 6 suggest that the SBA OIG actively provides training and outreach sessions related to identifying and addressing fraud. The office also participates in a number of activities involving federal agencies and others with an interest in fraud prevention activities. It is difficult to measure the impact of these training and outreach activities on the SBA's interaction with other federal agencies. The SBA OIG reports that these sessions are well-attended, and receive high ratings from attendees. As mentioned previously, the IG Act requires IGs to keep their agency's administrator and Congress fully and currently informed concerning fraud and other serious problems, abuses, and deficiencies relating to the agency's administration of its programs and operations and to report on the progress made in implementing recommended corrective action. The SBA OIG's informational role is conducted through both formal and informal communication. Formal communication occurs through (1) the publication of audits, investigations, semiannual reports, and the annual Report on the Most Serious Management and Performance Challenges Facing the SBA ; (2) correspondence with SBA officials, congressional staff, and Members of Congress; (3) briefings with SBA officials, congressional staff, and Members of Congress (as needed or as requested); (4) press releases; and occasionally (5) congressional testimony. Informal communication occurs primarily through telephone consultation or by email with SBA officials, congressional staff, and Members of Congress (often facilitated by the SBA OIG's chief of staff). In terms of communication with Congress, the SBA OIG reports that it \"has regular communications and meetings (as needed or requested) to keep the Congress apprised of significant findings or issues identified during our oversight of SBA \" and that the \"OIG has a staff member that is responsible for congressional relations.\" In addition, because its semiannual reports to Congress are published every six months, the SBA OIG finds that those reports' \"utility as a viable means to make a recommendation for legislation advancing through the legislative process is limited in the context of current legislative affairs.\" As a result, because \"the legislative process is very dynamic,\" the SBA OIG often relies on \"frequent and informal\" communication with congressional staff and Members of Congress to provide its input on legislation and other matters affecting the SBA, often by telephone and email. The SBA OIG reports frequent and, in its view, meaningful consultation with both the SBA and Congress in an attempt to keep them fully informed of its activities and recommendations. It is difficult to determine the impact and/or extent of the SBA OIG's communication with SBA officials, congressional staff, and Members of Congress because much of that communication occurs through informal means, is not tracked, and data concerning the SBA's or congressional response to the provided comments and recommendations are not compiled or reported. However, at the aforementioned March 2016 congressional hearing on the SBA's management and performance challenges, Representative Steve Chabot stated that, By clarifying the specific areas in which improvement is needed and highlighting possible paths forward for the agency, the insights offered by the Inspector General are invaluable as the Committee continues to work with the SBA to develop meaningful solutions to its management and performance challenges. Generally speaking, OIGs' relationships with Congress tend to ebb and flow over time, varying with the personalities, interests, needs, and actions of the principals involved. One constant has been a genuine interest from Members of Congress of both political parties in OIGs' efforts to identify and reduce waste, fraud, and abuse and enhance program efficiency and effectiveness. The congressional interest in these issues can take on a partisan, contentious tone, especially during periods of divided government. The House and Senate Committees on Small Business, however, have traditionally tried to avoid partisanship. For example, at a potentially contentious Senate Committee on Small Business and Entrepreneurship hearing in 2007, then-Senate Committee Chair John Kerry stated, \"Senator Snowe [then-ranking Member] and I and all Members of this Committee manage a Committee that works in a very bipartisan way and try very hard to keep the politics off the table.\" More recently, Representative Steve Chabot stated the following during House floor consideration of H.R. 208 , the Recovery Improvements for Small Entities After Disaster Act of 2015: I want to offer a special thanks to our committee's ranking member, Ms. Velazquez, for her insight and leadership on this issue and for working in a bipartisan, bicameral manner, as she does. I have seen that as chair of the Small Business Committee that I chair now, but I have also been the ranking member under her when she was chair, and it was always bipartisan. We have worked together in a very collegial manner, and I thank her for that. The extent to which the small business committees have been able to avoid partisan conflict has varied somewhat over time, reflecting the personalities of committee leaders and the nature of the issues that have presented themselves at any given time. Nonetheless, the small business committees' tradition of valuing bipartisanship has served to reduce the potential for conflict with the SBA OIG, primarily because committee members generally do not feel a need to question the SBA OIG's motives when its investigations and audits find perceived weaknesses in the Administration's implementation of the SBA's programs or in the Administration's efforts to identify and address waste, fraud, and abuse. The expectation that both committee members and the SBA IG do not, and should not, pursue a political agenda may help to explain why small business committee members rarely ask the SBA OIG to undertake specific studies. In their view, the SBA IG is expected to aggressively pursue perceived weaknesses in the SBA's programs and operations regardless of potential political consequences. Requesting specific studies could be seen as suggesting that the SBA OIG is not doing its job well, or as a partisan effort to embarrass the Administration. The SBA OIG's relationship with Congress has not always been without controversy. For example, in October 2008, then-Senator John Kerry, chair of the Senate Committee on Small Business and Entrepreneurship, criticized the SBA OIG on the Senate floor for issuing what he described as \"a heavily redacted report\" concerning the SBA's oversight of one of the agency's largest 7(a) lenders. Speaking on behalf of himself and then-Ranking Member Senator Olympia Snowe, he accused the SBA OIG of not exercising \"independent authority on what was redacted and instead let the agency it was investigating dictate that large sections of the report be redacted ... contrary to the usual process that occurs with SBA OIG reports.\" He argued that the SBA OIG's action had \"the potential to render the OIG useless,\" and \"prevented accountability in Government by keeping from the public information about the oversight capabilities of an agency that, though comparatively small, can have a huge impact on our economy.\" Senator Kerry's comments illustrate how quickly an OIG's relationship with Congress can change. Prior to the publication of that redacted report, the SBA OIG was generally praised by Members of both political parties for its efforts concerning the oversight of the SBA's response to the 2005 Gulf Coast hurricanes, audits of the SBA's oversight of lenders, and investigations leading to numerous indictments and convictions of fraudulent SBA lenders and borrowers. In sum, comments by House and Senate small business committee leaders seem to suggest that they view the SBA OIG and GAO as two valuable assets that can assist and enhance the committees' oversight role. However, history has shown that an apparent harmonious relationship between an OIG and congressional committees can change quickly as circumstances change. Some areas of possible congressional interest concerning the SBA OIG, other than funding and staffing issues, include exploring ways to more accurately quantify the SBA OIG's claims of monetary savings and determining if the SBA OIG should undertake additional tracking and monitoring activities to more accurately quantify the office's impact on SBA programs and operations and legislation. ", "summary": "Congress created offices of inspector general (OIGs) to assist in its oversight of the executive branch. OIGs provide independent, nonpartisan analysis, conducted in accordance with generally accepted government auditing standards, to identify and recommend ways to limit waste, fraud, and abuse in federal programs and enhance program and operational efficiency and effectiveness. OIGs' activities supplement and complement those of the Government Accountability Office (GAO), which serves a similar, though not identical, role in assisting congressional oversight of the executive branch. Together, OIGs and GAO provide Congress with information and analysis needed to conduct effective oversight and, in the process, help Congress maintain its balance of power with the presidency. OIGs exist in more than 70 federal agencies, including all departments and larger agencies, numerous boards and commissions, and other entities. The U.S. Small Business Administration's Office of Inspector General (SBA OIG) was created under authority of the Inspector General Act of 1978 (P.L. 95-452, as amended). Its three primary statutory purposes are to 1. conduct and supervise audits and investigations of the SBA's programs and operations; 2. recommend policies designed to promote the economy, efficiency, and effectiveness of the SBA's programs and operations and to prevent and detect fraud and abuse; and 3. keep both the SBA Administrator and Congress \"fully and currently informed about problems and deficiencies relating to the administration of such programs and operations and the necessity for and progress of corrective action.\" During FY2018, the SBA OIG issued 26 audit reports containing 111 recommendations for improving the SBA's programs and operations, and its investigations resulted in 62 indictments or informations and 43 convictions. The SBA OIG claimed that its recommendations resulted in monetary savings and recoveries of nearly $224.5 million in FY2018. In addition, the SBA OIG's annual Report on the Most Serious Management and Performance Challenges Facing the SBA focuses attention \"on areas that are particularly vulnerable to fraud, waste, error, and mismanagement, or otherwise pose a significant risk and generally have been subject to one or more OIG or GAO reports.\" This report examines the SBA OIG's statutory authorities; reporting requirements; funding ($22.9 million in FY2018); staffing and organizational structure; and recent activities (audits, investigations, etc.). It also examines the SBA OIG's impact on monetary savings, SBA programs and operations, and legislation affecting the agency. The report concludes with observations concerning the SBA OIG's relationship with Congress. Some areas of possible congressional interest, other than SBA OIG funding and staffing issues, include exploring ways to more accurately quantify the SBA OIG's claims of monetary savings and to determine if the SBA OIG should undertake additional tracking and monitoring activities to more accurately quantify the office's impact on SBA programs, operations, and legislation.", "document_type": "crs"}
{"report": "T his report examines the President's authority to terminate the United States' international obligations under the North American Free Trade Agreement (NAFTA) without further action from Congress. It also examines whether the NAFTA Implementation Act, the primary federal statute that implements the agreement in domestic law, would remain in effect if the President successfully terminated U.S. obligations under the agreement. In analyzing these issues, the report focuses on three related questions: (1) whether, under international law, the President may terminate U.S. international obligations under NAFTA without congressional approval; (2) whether, under domestic law, the President, relying on constitutional or statutory authority, may terminate U.S. international obligations under NAFTA unilaterally; and (3) whether the NAFTA Implementation Act would remain in effect if the President successfully terminated U.S. international obligations under the agreement. NAFTA is an international trade agreement among the United States, Canada, and Mexico that became effective on January 1, 1994. The agreement includes market-opening provisions that remove tariff and nontariff barriers to trade, as well as other rules affecting trade in areas such as agriculture, customs procedures, foreign investment, government procurement, intellectual property protection, and trade in services. The United States approved NAFTA as a congressional-executive agreement by a majority vote of each house of Congress, rather than as a treaty ratified by the President after Senate approval by a two-thirds majority vote. It was not a self-executing agreement; rather, implementing legislation was required to provide domestic legal authorities with the power to enforce and comply with the agreement's provisions. Congress approved and implemented NAFTA in domestic law in the NAFTA Implementation Act. Although many U.S. obligations under NAFTA were already implemented in domestic law prior to Congress's enactment of the NAFTA Implementation Act, Congress delegated rulemaking authority to the President and various federal agencies in the Act so that they could further implement NAFTA in domestic law by promulgating executive orders, proclamations, or regulations. The NAFTA implementing legislation contemplates certain limited changes to certain provisions of NAFTA (e.g., certain rules of origin) in accordance with NAFTA's rules for minor amendments to the text of the agreement and limited congressional delegations of authority to the President to implement such changes in U.S. law. On May 18, 2017, U.S. Trade Representative (USTR) Ambassador Robert Lighthizer notified Congress that the Administration intended to renegotiate NAFTA. More than a year later, following the conclusion of the negotiations, President Trump signed a proposed replacement for NAFTA, the United States-Mexico-Canada Free Trade Agreement (USMCA), along with his counterparts from Canada and Mexico. The new agreement addressed a variety of issues, including changes to rules of origin for automotive trade; intellectual property rights protections; digital trade; limitations on the scope of investor-state dispute settlement (ISDS) provisions; and certain provisions on agricultural trade. President Trump has at times suggested that he will withdraw the United States from NAFTA unilaterally if Congress does not approve the USMCA. International law does not itself prohibit the President from unilaterally terminating the United States' obligations under NAFTA. NAFTA is a legally binding agreement under international law. In other words, NAFTA is a \"treaty\" under international law, a term that has a more expansive meaning than the same term when used in U.S. domestic practice. In this regard, it is important to distinguish \"treaty\" in the context of international law, in which \"treaty\" and \"international agreement\" are synonymous terms for all binding agreements, and \"treaty\" in the context of domestic American law, in which \"treaty\" may more narrowly refer to a particular subcategory of binding international agreements that receive the Senate's advice and consent. Part V of the Vienna Convention on the Law of Treaties (Vienna Convention), which the United States has not ratified but considers to reflect, in many aspects, customary international law, provides rules for withdrawal of a party from a binding international agreement. Article 54 of the Vienna Convention provides that \"termination of a treaty or the withdrawal of a party may take place . . . in conformity with the provisions of the treaty . . . .\" Article 2205 of NAFTA, which Congress approved in the NAFTA Implementation Act, provides that a \"Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.\" NAFTA does not address whether, in the context of the United States' withdrawal from the agreement, the term \"Party\" includes both the President and Congress acting together to accomplish withdrawal. In addition, neither the other provisions of the agreement, the context in which they appear, nor the subsequent practice of the NAFTA parties sheds light on the issue. In the absence of language to the contrary in NAFTA Article 2205, the Vienna Convention applies. Article 67 of the Vienna Convention provides that: Any act of declaring invalid, terminating, withdrawing from or suspending the operation of a treaty pursuant to the provisions of the treaty . . . shall be carried out through an instrument communicated to the other parties. If the instrument is not signed by the Head of State, Head of Government or Minister for Foreign Affairs, the representative of the State communicating it may be called upon to produce full powers [i.e., a document showing that the representative has authority to terminate the agreement on behalf of the state]. It thus appears that if the President (i.e., the \"head of state\" for the United States) communicated a notice of withdrawal from NAFTA to Canada and Mexico, and such notice became effective at least six months later, it would terminate the United States' obligations under the agreement as a matter of international law. The withdrawal process under international law, however, may not account for the unique statutory, constitutional, and separation-of-powers principles related to withdrawal under U.S. domestic law, as discussed below. If the President sought to terminate U.S. international obligations under NAFTA, an injured business or other party with standing to bring a lawsuit might seek an injunction from a U.S. federal court directing the executive branch to refrain from issuing a notice terminating U.S. obligations under NAFTA or a declaration from the court that such issuance is unlawful. It is difficult to predict how a court might resolve such a challenge, as U.S. courts have uniformly avoided answering whether the U.S. Constitution authorizes the President to terminate an international pact without express congressional approval. Instead, courts have left the executive and legislative branches to resolve disagreements over the termination power through the political process. While no court has considered a case involving a trade agreement approved as a congressional-executive agreement under Trade Promotion Authority (TPA) procedures, there is a significant possibility that a court would dismiss such a case for lack of jurisdiction. Congress could signal that it disputes the Executive's termination of U.S. NAFTA obligations to a court by enacting a law or resolution with a veto-proof majority opposing or purporting to block such action. If Congress passed such an act or resolution and the Executive still terminated NAFTA in direct derogation of that act or resolution, the legal paradigm governing the separation-of-powers analysis might shift. To resolve certain separation-of-powers conflicts, the Supreme Court typically applies the approach set forth in Justice Jackson's concurring opinion in Youngstown Sheet & Tube Co. v. Sawyer , which states that the President's constitutional powers often \"are not fixed but fluctuate, depending on their disjunction or conjunction with those of Congress.\" Justice Jackson's opinion sets forth a tripartite framework for evaluating the constitutional powers of the President. The President's authority is (1) at a maximum when acting pursuant to authorization by Congress; (2) in a \"zone of twilight\" when Congress and the President \"may have concurrent authority, or in which its distribution is uncertain,\" and Congress has not spoken on an issue; and (3) at its \"lowest ebb\" when taking measures incompatible with the will of Congress. Although Congress has not enacted a law or resolution prohibiting the President from terminating NAFTA unilaterally, such action could place the President's authority at the \"lowest ebb.\" In that scenario, the President may act in contravention of the will of Congress only in matters involving exclusive presidential prerogatives that are \"at once so conclusive and preclusive\" that they \"disabl[e] the Congress from acting upon the subject.\" Members of the executive branch have suggested that treaty termination is part of the President's plenary powers, but one could plausibly advance the counterargument that the legislative branch plays a shared role in the termination process, especially in matters that implicate Congress's enumerated powers, such as international trade. Assuming that a federal court found a case challenging the President's termination of NAFTA to be justiciable, it would likely evaluate the President's authority to take such action. Because Congress has not enacted a resolution or legislation disapproving of unilateral NAFTA termination, in order to terminate NAFTA without further congressional action, either (1) the President must possess plenary constitutional authority to terminate U.S. international obligations under NAFTA, or (2) Congress must have authorized the President to take such action through legislation. Although the Constitution establishes a procedure whereby the Executive has the power to make treaties with the advice and consent of the Senate, it is silent as to how the United States may withdraw from treaties or congressional-executive agreements. Scholars have also noted that the framers of the Constitution never directly addressed the power to terminate treaties (or congressional-executive agreements) in the Federalist Papers , the Constitutional Convention debates, or the debates of the state ratifying conventions. In the absence of guidance from the text or original meaning of the Constitution, a court considering whether the President has the constitutional authority to terminate U.S. international obligations under NAFTA without congressional approval would likely turn to other methods of constitutional interpretation. As discussed below, applying relevant methods of interpretation does not provide a clear answer as to whether the President possesses plenary constitutional authority to terminate U.S. obligations under NAFTA. One method of constitutional interpretation, known as structuralism, draws inferences from the design of the Constitution, including the relationships among the three branches of the federal government (commonly called separation of powers). In this vein, Article I, Section 8 of the Constitution specifically gives Congress the authority to impose duties on imports of products from other countries and to \"regulate Commerce with foreign Nations.\" By contrast, although the President may possess constitutional authority to negotiate trade agreements and communicate a notice of withdrawal from an agreement to trading partners, Article II gives the President no specific power over international commerce or trade. The manner in which the Constitution apportions power over international commerce, granting such power specifically to Congress, suggests that the President may simply lack authority to terminate U.S. international obligations under NAFTA, which addresses commercial matters, without further congressional action. The Supreme Court, however, has interpreted Article II of the Constitution as granting the President the \"vast share of responsibility\" for conducting foreign relations. This authority includes, but also extends beyond, specific Article II powers to appoint ambassadors with advice and consent of the Senate; submit treaties to the Senate; ratify treaties; and act as the Commander in Chief of the Armed Forces. Courts and scholars generally accept that such authority includes the exclusive authority to negotiate treaties and international agreements and make official communications with foreign states. Because terminating the United States' NAFTA obligations implicates foreign relations and, more specifically, communication of a notice of withdrawal to foreign sovereigns (i.e., Canada and Mexico), one could argue that the design of the Constitution provides the President with independent power to terminate NAFTA unilaterally. Nonetheless, the President's preeminent role in communicating with foreign powers does not necessarily imply that he has authority to terminate a trade agreement without congressional consent. Long-established historical practices of the political branches may also be relevant to whether the President can terminate NAFTA unilaterally. In some cases, the United States has withdrawn from international legal agreements pursuant to the joint action of the political branches. However, beginning at the turn of the 20th century, the President has sometimes withdrawn unilaterally from an international agreement without the consent of Congress. Thus, general historical practice involving the termination of international agreements has been inconsistent, and therefore it may not be particularly helpful in resolving questions about the President's power to terminate trade agreements unilaterally. Defining the relevant historical practice more narrowly provides little guidance, as well. Historical experience with the suspension of modern free trade agreements (FTAs)—those subsequently approved and implemented in domestic law as congressional-executive agreements by a majority vote in both houses of Congress under Trade Promotion Authority (TPA) procedures—is limited. In fact, no U.S. FTA approved as a congressional-executive agreement under these procedures has been terminated. In the single instance involving suspension rather than termination of an FTA, Congress amended the act implementing the U.S.-Canada Free Trade Agreement preceding NAFTA to suspend certain provisions in the act while allowing others to continue to operate. Although this historical practice concerns suspension of an FTA rather than termination, a court could interpret it to suggest that Congress may have a role in terminating U.S. international obligations under NAFTA. However, because it is a single instance and involves suspension rather than termination of an agreement, a court could also find it to provide little guidance on the President's authority in this context. The practical consequences of a court concluding that the President possesses the power to terminate a trade agreement unilaterally may also be relevant. Generally, a pragmatic approach to constitutional interpretation weighs the future costs and benefits of an interpretation to society or the political branches, selecting the interpretation that may lead to the perceived best outcome. However, it is difficult to predict which set of pragmatic arguments a court would find most persuasive. On the one hand, one could argue that the President should possess an exclusive power of unilateral termination because (1) the nation must have a \"single policy\" regarding which international trade agreements remain in effect, and (2) additional pronouncements from Congress on the issue could result in confusion for the United States and its trading partners. One might also arguably justify a unilateral termination power on the grounds that the United States needs a means to make decisive, quick, and clear decisions on withdrawal from NAFTA or other FTAs, particularly when another party has breached the agreement, and that it would make it easier for the President to threaten NAFTA partners with U.S. withdrawal from the agreement as a means of leverage to obtain concessions from them during renegotiation of the agreement. On the other hand, one could instead argue that a unilateral termination power would improperly allow a single actor (i.e., the President) to eliminate an international commercial agreement. In addition, the President's use of such a power could be viewed to undermine the United States' ability to make convincing international commitments in the realm of trade as well as other areas. Notwithstanding whether the President has plenary constitutional authority to terminate NAFTA, the President could terminate NAFTA without first seeking congressional approval if Congress has already given the Executive such authorization either expressly or by implication. It is unclear whether a court would find that Congress has implicitly approved of unilateral presidential termination of NAFTA obligations. Congress has enacted a detailed statutory framework for the negotiation, legislative consideration, and implementation of free trade agreements under Trade Promotion Authority (TPA) procedures. During the past few decades, Congress and the President have used this legal framework to conclude and implement 14 free trade agreements with 20 countries, including NAFTA. Given this extensive framework for legislative approval and implementation of trade agreements, a court might find it unlikely that Congress implicitly authorized the President to withdraw from NAFTA without further congressional action. On the other hand, the fact that Congress enacted a comprehensive statutory framework for entering into trade agreements, but not withdrawing from them, may indicate that Congress was not as concerned with the President's termination of U.S. obligations under the agreements. Nonetheless, some commentators have argued that Congress has specifically authorized the President to terminate U.S. international obligations under NAFTA. In particular, these commentators have pointed to Sections 125 and 301 of the Trade Act of 1974, an act that, among other things, sets up the procedure for Congress's consideration of trade agreement implementing legislation, as potentially providing such authority. The following subsections of this report therefore analyze whether Sections 125 and 301 grant the President this termination authority. Some commentators have argued that Section 125(a) of the Trade Act of 1974 authorizes the President to terminate U.S. NAFTA commitments. Congress specifically made this subsection applicable to NAFTA in the Omnibus Trade and Competitiveness Act of 1988, the Trade Promotion Authority (TPA) legislation for NAFTA. Section 125(a), titled \"Termination and Withdrawal Authority,\" which specifically addresses withdrawal from FTAs, provides the following: (a) Grant of authority for termination or withdrawal at end of period specified in agreement Every trade agreement entered into under [the Trade Act of 1974] shall be subject to termination, in whole or in part, or withdrawal, upon due notice, at the end of a period specified in the agreement. Such period shall be not more than 3 years from the date on which the agreement becomes effective. If the agreement is not terminated or withdrawn from at the end of the period so specified, it shall be subject to termination or withdrawal thereafter upon not more than 6 months' notice. If the President were to invoke Section 125(a) as authority for terminating U.S. international obligations under NAFTA, his actions might be challenged in federal court as exceeding the statutory authority delegated to him. Because no court has yet interpreted Section 125(a), the scope of the President's power under this provision would be an issue of first impression. In deciding whether Section 125(a) authorizes the President to terminate U.S. obligations under NAFTA, the court might consider several principles of statutory interpretation. First, a court would likely consider the ordinary meaning of the text. In this vein, the title of subsection (a) may provide some guidance. The title \"Grant of authority for termination or withdrawal at end of period specified in agreement\" may suggest that Congress's purpose in enacting Section 125(a) was to \"grant\" the President the authority to terminate the agreement in accordance with the withdrawal provision in NAFTA Article 2205 without the need for further legislation. However, the Supreme Court has stated that statutory headings and titles \"are not meant to take the place of the detailed provisions of the text\" and that the title of an act \"cannot enlarge or confer powers.\" Although the title of subsection (a) may provide limited interpretive aid, it does not specify which political actor has withdrawal authority. Thus, it is unlikely that a court would view it as conferring authority on the President to terminate U.S. obligations under NAFTA. Turning to the text of Section 125(a), the provision states that agreements like NAFTA \"shall be subject to termination.\" The relevant dictionary definition of \"subject\" is \"contingent on or under the influence of some later action.\" To say that NAFTA is \"subject to\" termination means that it is capable of later being terminated but says nothing about which political actor(s) must terminate the agreement. This reading is supported by the canon of statutory construction that \"Congress . . . does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not . . . hide elephants in mouseholes.\" It seems unlikely that Congress would have \"hidden\" a delegation of authority to the President to terminate NAFTA in a vaguely worded provision. Rather, the ordinary meaning of Section 125(a) appears to require only that the text of the NAFTA agreement contain a provision allowing for its termination. Legislative history materials appear to confirm this reading of Section 125(a). These materials suggest that Section 125(a)'s purpose was to ensure that trade agreements entered into by the President contained language providing for termination or withdrawal at the end of a certain time period. This reading is suggested by the House Committee on Ways and Means report on a predecessor to Section 125, Section 2(b) of the 1934 Reciprocal Trade Agreements Act. Congress enacted that law to authorize the President to negotiate reciprocal agreements reducing barriers to international trade during the Great Depression in order to stimulate the domestic economy. The House committee report stated the following: The final provision of the bill under consideration deals with the amount of time during which a foreign trade agreement with another country may run. The provision is that such agreement must be terminable at the end of not more than 3 years. If it is not terminated at that time it must thereafter be terminable at any time upon not more than 6 month[s'] notice. The committee reports thus suggest that Section 125(a)'s purpose was to ensure that the trade agreements that the President entered into would be subject to termination or terminable . Under this reading, Section 125(a) does not appear to delegate authority to the President to terminate those agreements unilaterally by delivering notice of withdrawal to trading partners. One scholar has argued that Section 301 of the Trade Act of 1974 authorizes the President to terminate U.S. obligations under NAFTA. Section 301 provides that the Office of the United States Trade Representative (USTR), a federal agency within the Executive Office of the President, must take certain specified trade actions \"subject to the specific direction, if any, of the President regarding any such action\" when it finds, after conducting an investigation and following other procedures, that: (A) the rights of the United States under any trade agreement are being denied; or (B) an act, policy, or practice of a foreign country—(i) violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement, or (ii) is unjustifiable and burdens or restricts United States commerce. Section 301 also provides the USTR with discretion to take \"all appropriate and feasible\" trade actions specifically authorized under subsection (c) when it finds that \"an act, policy, or practice of a foreign country is unreasonable or discriminatory and burdens or restricts United States commerce, and . . . action by the United States is appropriate.\" Section 301(c) provides a list of actions that the USTR may or must take in response to the unfair foreign trade practices. As relevant here, that list authorizes USTR to: (A) suspend, withdraw, or prevent the application of, benefits of trade agreement concessions to carry out a trade agreement with the foreign country [that is the subject of the Section 301 investigation]; (B) impose duties or other import restrictions on the goods of, and, notwithstanding any other provision of law, fees or restrictions on the services of, such foreign country for such time as the Trade Representative determines appropriate . . . Notably, the list of actions in Section 301(c) does not explicitly include authorization for the Executive to deliver a notice of withdrawal from a trade agreement to U.S. trading partners and thereby terminate U.S. obligations under the agreement. Rather, as discussed further below, the legislative history of this provision, as recounted in committee reports, indicates that Congress merely intended the provision to provide the President broad authority to take action against unfair foreign trade practices by imposing various barriers to trade under domestic law, including by suspending or terminating individual trade concessions. The text and legislative history do not appear to suggest that Section 301(c) more broadly authorizes the USTR to terminate a trade agreement. However, as discussed below, the Executive might exercise the authority in Section 301 to establish significant barriers to trade with Canada and Mexico. Accordingly, if the USTR were to interpret Section 301(c) as authorizing it to terminate a trade agreement, it would appear that its actions would fall outside of the statutory authority delegated to the agency. It should be noted that courts reviewing specific USTR actions under Section 301 have in the past accorded \"substantial deference to decisions of the Trade Representative implicating the discretionary authority of the President in matters of foreign relations,\" including the USTR's selection of a remedy following a Section 301 investigation. But the U.S. Court of Appeals for the Federal Circuit, which reviews the USTR's actions under Section 301, has held that, under the Administrative Procedure Act, \"[t]he judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent.\" Furthermore, a court may hold agency action unlawful when there has been \"a clear misconstruction of the governing statute\" or \"action outside delegated authority.\" Because the text and legislative history of Section 301 indicate that Congress merely intended the provision to furnish the Executive with broad authority to take action against unfair foreign trade practices by imposing various barriers to trade under domestic law, it seems unlikely that a court would accord deference to a USTR interpretation that Section 301 authorizes the President to deliver notice of termination to Canada or Mexico. Although neither Section 125 nor Section 301 of the Trade Act of 1974 appears to authorize the Executive to terminate U.S. international obligations under NAFTA, these statutory provisions appear to grant broad authority to the executive branch to impose barriers to trade on goods and services from Canada and Mexico under domestic law. For example, the text and legislative history of Section 125(b)-(f) suggest that Congress intended to provide the President with broad authority to terminate various presidential proclamations implementing a trade agreement in domestic law (e.g., proclamations implementing tariff reductions) and to impose trade barriers in order to, for example, respond to a breach of the agreement by another party. And the text and legislative history of Section 301, as recounted in committee reports, indicate that the provision was intended to provide the Executive with broad authority to effect the temporary suspension or withdrawal of individual trade concessions accorded by the United States to the goods and services of trading partners while a trade agreement remained in effect. Although such provisions appear to furnish the executive branch with broad authority to suspend or terminate individual trade concessions, the Executive's actions under these provisions could be subject to challenge before international and domestic tribunals. For example, the Executive's imposition of trade barriers pursuant to such authorities may place the United States in breach of its obligations under other international agreements, such as the World Trade Organization (WTO) agreements. If a dispute proceeded to a WTO panel, and the panel rendered an adverse decision against the United States, the United States would be expected to remove the offending measure, generally within a reasonable period of time, or face the possibility of paying compensation to the complaining member or being subject to sanctions. Such sanctions might include the complaining member imposing higher duties on imports of selected products from the United States. However, a WTO Member could begin to impose its own duties on selected U.S. exports without awaiting the outcome of a dispute settlement proceeding. In addition, a domestic court might consider whether, in exercising authority under Section 125, the President acted within the scope of his delegated powers as defined by the terms of the statute, or whether the President's actions were proportional to the circumstances cited to justify them. As a further example, a federal court could review USTR's Section 301 actions under the Administrative Procedure Act to determine whether they are \"arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.\" A reviewing court might consider, for example, whether the USTR's Section 301 actions involved \"a clear misconstruction of the governing statute,\" \"a significant procedural violation,\" or \"action outside delegated authority.\" The NAFTA Implementation Act, the primary federal statute that implements NAFTA in domestic law, would likely remain in effect if the President successfully terminated the United States' international obligations under NAFTA unilaterally. Under Supreme Court precedent, the repealing of statutes generally must conform to the same bicameral and presentment process set forth in Article I that is used to enact new legislation. For example, in Clinton v. City of New York , the Supreme Court struck down the Line Item Veto Act (LIVA), a law that authorized the President, within five days of signing a bill into law, to make partial cancellation of certain tax and spending provisions in the law if the President determined certain criteria were met. The Court held that the LIVA violated the bicameralism and presentment requirements of the Constitution because the President could effectively repeal acts of Congress without going through the regular legislative process involving House and Senate passage of legislation and presentment of it to the President for his signature or veto. Nonetheless, the Court has recognized Congress's authority to enact contingent legislation that provides for the alteration of a law's effect based on a condition that arises after the law is enacted. It should be noted that Sections 109(b) and 415 of the NAFTA Implementation Act contain language that could be read to effect the repeal of certain provisions of the NAFTA Implementation Act under specific circumstances. Specifically, section 109(b) states the following: (b) TERMINATION OF NAFTA STATUS—During any period in which a country ceases to be a NAFTA country, sections 101 through 106 shall cease to have effect with respect to such country. Section 415(a) provides similar language with respect to certain provisions addressing dispute settlement in antidumping and countervailing duty cases in Title IV of the NAFTA Implementation Act: IN GENERAL—Except as provided in subsection (b)[, which contains transitional provisions], on the date on which a country ceases to be a NAFTA country, the provisions of this title (other than this section) and the amendments made by this title shall cease to have effect with respect to that country. The NAFTA Implementation Act defines \"NAFTA country\" as those countries (i.e., Canada and Mexico) (1) to which the agreement is in force and (2) to which the United States \"applies the Agreement.\" The text and legislative history of Sections 109(b) and 415 of the NAFTA Implementation Act indicate that Congress intended these sections to trigger automatic termination of certain provisions of the Act with respect to Canada or Mexico when either country withdrew from NAFTA but the United States remained a party. However, it is unclear what language in either of these provisions would afford the President the authority to terminate the agreement without such conduct by Canada or Mexico. Moreover, interpreting Sections 109(b) and 415 to provide for the automatic termination of certain provisions in the NAFTA Implementation Act when the President unilaterally terminates U.S. NAFTA obligations under international law would appear to violate a key canon of statutory construction that holds that if one plausible reading of a statute would raise questions about the statute's constitutionality, a court should look for another, \"fairly possible\" reading that would avoid the constitutional issue. Interpreting Sections 109(b) and 415 to authorize the President to terminate portions of the NAFTA Implementation Act by withdrawing the United States from NAFTA would raise the question of whether Congress's delegation of such authority to the President violates separation-of-powers principles by contravening the Presentment Clause of the Constitution, which, as noted above, requires that legislation be passed by Congress and presented to the President for his signature or veto in order to become law. Accordingly, a more likely reading of Sections 109(b) and 415 would likely be that certain provisions of the NAFTA Implementation Act cease to have effect with respect to Canada or Mexico if either country withdraws from NAFTA but the United States remains a party. Therefore, absent further congressional action, the United States' withdrawal from NAFTA alone appears unlikely to trigger Sections 109(b) and 415 or render the NAFTA Implementation Act ineffective. Notably, even if the NAFTA Implementation Act remains in effect, other provisions of federal law (e.g., Section 301 of the Trade Act of 1974) may grant the President or a federal agency authority to restrict trade with Canada or Mexico. As noted, such actions would likely be subject to judicial review on various grounds.", "summary": "NAFTA is an international trade agreement among the United States, Canada, and Mexico that became effective on January 1, 1994. The agreement includes market-opening provisions that remove tariff and nontariff barriers to trade, as well as other rules affecting trade in areas such as agriculture, customs procedures, foreign investment, government procurement, intellectual property protection, and trade in services. Congress approved and implemented NAFTA in domestic law in the NAFTA Implementation Act (P.L. 103-182, 107 Stat. 2057). On May 18, 2017, U.S. Trade Representative Ambassador Robert Lighthizer notified Congress that the Administration intended to renegotiate NAFTA. More than a year later, following the conclusion of the negotiations, President Trump signed a proposed replacement for NAFTA, the United States-Mexico-Canada Free Trade Agreement (USMCA), along with his counterparts from Canada and Mexico. President Trump has at times suggested that he will withdraw the United States from NAFTA unilaterally if Congress does not approve the USMCA. This report examines the President's authority to terminate the United States' international obligations under NAFTA without further action from Congress. It also examines whether the NAFTA Implementation Act, the primary federal statute that implements the agreement in domestic law, would remain in effect if the President successfully terminated U.S. obligations under the agreement. In analyzing these issues, the report focuses on three related questions: (1) whether, under international law, the President may terminate U.S. international obligations under NAFTA without congressional approval; (2) whether, under domestic law, the President, relying on constitutional or statutory authority, may terminate U.S. international obligations under NAFTA unilaterally; and (3) whether the NAFTA Implementation Act would remain in effect if the President successfully terminated U.S. international obligations under the agreement. With regard to the first question, under international law, the President appears to be able to terminate the United States' international obligations under NAFTA without congressional approval by delivering six months' notice of withdrawal to Canada and Mexico, provided such notice later becomes effective (e.g., assuming that a court does not enjoin the Executive from issuing the notice or declare such issuance unlawful). The answer to the second question is less clear, however, and would require a reviewing court to confront several complicated issues of first impression, including the scope of the President's constitutional authority and statutory authority to terminate an international agreement. Justiciability questions may prevent a court from definitively answering the constitutional questions, leaving the resolution of the President's constitutional authority to the political process. With regard to the statutory question, while legal commentators have raised various arguments with respect to the President's domestic legal authority to terminate U.S. NAFTA international obligations unilaterally, it does not appear that any statute expressly affords the President with the authority to terminate NAFTA on his own. It is unclear whether Congress's enactment of an extensive legal framework providing for legislative consideration, approval, and implementation of trade agreements indicates that Congress did not intend to authorize the President implicitly to withdraw from NAFTA without further congressional action. Nonetheless, as explained below, provisions of federal law such as Sections 125 and 301 of the Trade Act of 1974 may provide the Executive with broad authority to suspend individual trade concessions granted to NAFTA countries and thereby establish barriers to trade with Canada and Mexico. At the same time, the Executive's use of such authority would, however, likely be subject to review on various grounds by domestic or international tribunals. Finally, whether the NAFTA Implementation Act would remain in effect after termination of U.S. obligations under NAFTA would be informed by Supreme Court precedent generally requiring the repeal of statutes to conform to the same bicameral process set forth in Article I of the Constitution that is used to enact new legislation. Accordingly, as an initial matter, it would appear that the President lacks authority to terminate the domestic effect of the NAFTA Implementation Act without going through the full legislative process for repeal. Thus, the Act appears to remain in effect unless Congress has, consistent with the Constitution, delegated to the President authority to terminate its provisions or made such provisions \"self-terminating.\"", "document_type": "crs"}
{"report": "In academic year (AY) 2017-2018, 6,700 institutions of higher education (IHEs), enrolling over 27 million postsecondary education students in AY2016-2017, participated in the federal student aid programs authorized under Title IV of the Higher Education Act of 1965 (HEA; P.L. 89-329, as amended). These IHEs ranged in sector, size, and educational programs offered. They comprised all sectors (i.e., public, private nonprofit, and proprietary), with some IHEs enrolling as few as three students and others enrolling over 190,000 in a single year. Offered educational programs varied from certificate programs in career and technical fields to doctoral and professional degree programs. Most of these IHEs operate from year to year with few severe financial or operational concerns; however, each year, a few do face such concerns, which may cause them to cease or significantly curtail operations. The recent closure of multiple large, proprietary (or private, for-profit) IHEs has brought into focus the extent to which a postsecondary student's education may be disrupted by a school closure. However, even in instances of a small IHE's closure, student concerns remain the same. Concerns include the following, among others: Can they continue their postsecondary education at another school? How will they finance future postsecondary educational pursuits? Are they liable for repaying loans they may have borrowed to pursue a postsecondary credential that they were unable to obtain because of an IHE's closure? This report provides an explanation of the options a postsecondary student may pursue in the event the IHE he or she attends closes, any financial relief that may be available to such students, and other practical implications for students following a school's closure. First, this report describes the academic options available to such students, such as participating in a teach-out or transferring to a new IHE. Next, it discusses issues related to financing a postsecondary education, including the extent to which borrowers may have any loans borrowed to finance educational expenses discharged due to a school closure and whether future financial assistance, including federal student loans, Pell Grants, and GI educational benefits, may be available to students should they decide to continue their postsecondary education at another IHE. This report then describes additional relief that may be available to students who attended IHEs that closed, such as the potential to have tuition paid reimbursed through a state tuition recovery fund. Finally, this report describes some potential income tax implications for students when their IHE has closed, including the extent to which they may incur a federal income tax liability for loans discharged and whether higher education tax credits remain available to them in future years. The Appendix provides a list of abbreviations used in this report. In the event of a school closure, currently enrolled students must consider their academic options, including whether they will continue pursuing their postsecondary education, and if so, where. Two options that may be available to students include teach-outs and credit transfer. To participate in the Title IV federal student aid programs, an IHE must, among other requirements, agree to submit a teach-out plan to its accrediting agency if it intends to close a location that provides 100% of at least one educational program offered by the IHE or if it intends to otherwise cease operations. As part of a teach-out plan, an IHE may enter into a teach-out agreement with another IHE to provide the closing IHE's students with an educational program of similar content. A teach-out plan is an institution's \"written plan that provides for the equitable treatment of students if [the IHE] ceases to operate before all students have completed their program of study.\" Accrediting agencies establish the criteria IHEs must meet when submitting a teach-out plan; thus, there are no standard components of a teach-out plan. Typically, however, in a teach-out plan, an IHE may be required to include provisions for students to complete their programs of study within a reasonable amount of time, a communication plan to affected parties (e.g., faculty and students) informing them of the impending closure, and information on how students may access their institutional records. As part of a teach-out plan, an IHE may enter into a teach-out agreement with another IHE. A teach-out agreement is an agreement between the closing IHE and another IHE that provides the closing IHE's students with a reasonable opportunity to complete their programs of study at the new IHE. Teach-out agreements are used when an IHE ceases operations before all of its enrolled students are able to complete their programs of study. Under a teach-out agreement, the new IHE must provide students with an educational program that is of an acceptable quality and reasonably similar in content, structure, and scheduling to that provided by the closing IHE; be accredited or preaccredited by a Department of Education (ED) recognized accrediting agency, remain stable, carry out its mission, and meet all obligations to its current students; and demonstrate that it can provide students with access to its services without requiring students to move or travel a substantial distance. In addition, teach-out agreements may establish the cost of attendance for students being taught out. When implemented, teach-out agreements may take a variety of forms. For instance, a teach-out agreement may provide that the teach-out institution will provide the faculty and student supports necessary to deliver the closing IHE's educational programs at the closing IHE's facilities for the remainder of the academic year in which the closing IHE ceases operations. In other instances, a teach-out agreement may provide educational programs to the closing IHE's students at the teach-out IHE's facilities. In the event an IHE closes without a teach-out plan or agreement in place, the IHE's accrediting agency must work with ED and appropriate state agencies to assist students in finding opportunities to complete their postsecondary education. In lieu of a teach-out, students of closed IHEs may be able to continue their postsecondary education by transferring some or all of the credits earned at the closed IHE to another IHE. In general, credit transfer is the process of one institution (the accepting institution) measuring a student's prior learning (typically via coursework) at another institution (the sending institution) and comparing that prior learning against educational offerings at the accepting institution. The accepting institution determines whether a student's prior learning meets its standards and whether the prior learning is applicable to its educational programs. If it determines the prior learning meets its standards, the accepting institutions gives credit toward its educational programs for the prior learning, such that a student transferring credits need not repeat all or part of a program's curriculum. Transfer-of-credit policies are determined by individual IHEs. To smooth the credit transfer process, some IHEs have entered into articulation agreements. Articulation agreements are agreements between two or more IHEs demonstrating that a student's prior learning from a sending IHE meets the accepting IHE's standards. Typically, they guarantee acceptance of at least some credits earned at the sending institution by the accepting institution. The HEA does not require Title IV participating IHEs to maintain transfer-of-credit policies nor does it specify requirements for transfer-of-credit policies for IHEs that do have them. The HEA does, however, require that Title IV participating IHEs make publicly available any transfer-of-credit policies they may have in place. In disclosing transfer-of-credit policies, accepting IHEs must include information on the criteria the institution uses in evaluating credit transfers, and all institutions that are parties to articulation agreements must disclose a list of IHEs with which it has articulation agreements. Students who attended a closed IHE may decide to continue their postsecondary education at another IHE and may wish to transfer credits earned at the closed IHE to the new IHE. Typically, students must initiate the credit-transfer process by expressing interest in transferring credit to another IHE. The IHE would then inform the student of next steps the student must take to enroll. Because IHEs set their own credit transfer criteria, credit transfer may not be guaranteed. Thus, some students may have all or a large proportion of their previously earned credits transferred to an accepting IHE and may experience little to no disruption or delay in their postsecondary educational pursuits, while others may have few or no credits transferred to an accepting IHE and may experience significant disruptions and delays in their postsecondary education. In addition, a student may incur greater financial obligations (e.g., student loans) if he or she must repeat coursework because credit from the closed school did not transfer. Finally, students who successfully transfer some or all of their previously earned credits would be required to meet the accepting IHE's satisfactory academic progress (SAP) policies to maintain eligibility to receive Title IV funds at the accepting IHE. IHEs may establish their own SAP policies, but these policies must meet minimum federal standards, which must establish a minimum grade point average (or equivalent) and a maximum time frame in which students must complete their education program (pace of completion). Only transfer credits that count toward a student's educational program at the accepting IHE are included in the accepting IHE's calculation of SAP. Thus, if a student is unable to transfer any credits from a closed IHE to another IHE, the student's previously earned credits will not count toward the accepting IHE's SAP calculation and would not have the potential to affect the student's aid eligibility with respect to SAP at the new IHE. However, should some or all of a student's previously earned credits from a closed IHE transfer to another IHE, depending on the accepting IHE's specific SAP policy, a student's Title IV eligibility may be affected such that he or she may not be meeting the IHE's SAP policies and thus may be ineligible for Title IV aid at the accepting IHE. Along with considering academic options in the event of a school closure, students may also need to consider the financial options available to them, as they may have received financial assistance to help finance their education at the closed school and may need to seek financial assistance should they decide to continue pursuing a postsecondary education. Considerations for students who borrowed funds (or parents who borrowed funds on behalf of a student) to finance their education at a closed school include whether they are responsible for repaying any loans borrowed to attend the school. Considerations for students who wish to continue their education at another IHE include the extent to which their eligibility for various forms of financial aid (e.g., Direct Loans, Pell Grants, GI Bill Educational Benefits) may be affected by their previous use of those benefits at the closed school. In some instances, individuals who borrowed funds to finance postsecondary education expenses may be provided some relief from being required to repay their loans, depending on the type of loan they seek to have discharged and specific borrower circumstances. Students who attended a school that closed (or the parents of students who attend a school that closed) may have borrowed federal student loans to help finance their postsecondary education at the closed school. For HEA Title IV federal student loans (i.e., loans made under the Direct Loan [DL], Federal Family Education Loan [FFEL], and Perkins Loan programs), borrowers may be provided some relief from being required to repay their federal student loans through a closed school loan discharge. In addition, borrowers who are ineligible for a closed school loan discharge may, in certain circumstances, seek debt relief on their Title IV student loans by asserting a borrower defense to repayment (BDR) for certain acts or omissions of an IHE, if the cause of action directly relates to the loan or educational services for which the loan was provided. The availability of a BDR claim may be closely related to a school's closure, as oftentimes, a BDR claim is predicated on misleading representations of an IHE relating to the educational services provided, and in recent years allegations of misrepresentation have played a part in the ultimate closure of some IHEs. Previously, regulatory provisions addressed closed school discharge standards and procedures. They also addressed BDR standards and procedures, but in a somewhat limited manner. On November 1, 2016, ED promulgated new regulations (hereinafter, \"the 2016 regulations\") intended to create a more robust set of standards and streamlined procedures for assessing BDR claims and to make some changes to the closed school discharge procedures. These regulations were scheduled to take effect on July 1, 2017, but prior to the effective date, ED issued a Final Rule establishing July 1, 2019, as the new effective date for the regulations. Following a series of lawsuits, however, a court vacated the delay of the 2016 regulations. The 2016 regulations went into effect October 16, 2018, and ED is currently working to fully implement the 2016 regulations. On July 31, 2018, ED issued a new Notice of Proposed Rulemaking to revise the BDR standards. A Final Rule has not yet been issued, and it appears that the potential new BDR regulations would not go into effect until at least July 2020. The following section of the report describes the closed school discharge and BDR regulations, as in effect on October 16, 2018. Students who attended a school that closed (or their parents) may be eligible to have the full balance of the outstanding HEA Title IV loans they borrowed to attend the IHE discharged. In general, borrowers of Title IV loans may be eligible to have the full balance of their outstanding HEA Title IV loans discharged (including any accrued interest and collection costs) if they, or the student on whose behalf a parent borrowed in the case of Parent PLUS Loans, are unable to complete the program in which they enrolled due to the closure of the school. Borrowers who have their loans discharged due to a school closure are also eligible to be reimbursed for any amounts previously paid or collected on those loans, and if any adverse credit history was associated with the loan (e.g., default), the loan discharge will be reported to credit bureaus so that they may delete the adverse credit history associated with the loan. Closed School Loan Discharge Eligibility Typically, to be eligible for loan discharge due to school closure, a student must have been enrolled in an IHE when it closed or must have withdrawn from the IHE within 120 days prior to its closure. In addition, the student must have been unable to complete his or her program of study at the closed school or in a comparable program at another IHE, either through a teach-out agreement or by transferring any credits to another IHE. If the closing school offers the option for students to complete their education through a teach-out agreement with another IHE, a student may refuse the option, and the borrower may still qualify for loan discharge. However, in general, a borrower may not qualify for a closed school discharge in the following scenario: a student refuses the teach-out, later enrolls at another IHE in a program comparable to the one in which he or she had been enrolled, receives t ransfer credit for work completed at the closed school, and completes the program at the new IHE. Alternatively, if a student transfers credits to a new school but completes an entirely different program of study at the new school, then the borrower is eligible for loan discharge, regardless of the fact that some credits from the closed IHE may have transferred to the new IHE. This is because the program at the new school is entirely different than the one for which the loans were intended at the previous school. Finally, to obtain discharge a borrower must cooperate with ED in any judicial or administrative proceeding brought by ED to recover amounts discharged from the school. If a borrower fails to cooperate with ED, the loan discharge may be revoked. Closed School Loan Discharge Procedures Borrowers may have their loans discharged in one of two ways: (1) by applying for a closed school loan discharge or (2) by having their loans automatically discharged by the Secretary of Education (the Secretary). Borrowers applying for a closed school discharge must fill out the closed school loan discharge application and return it to their loan servicer. Generally, while a borrower's loan discharge application is being considered, the borrower's loan is placed in forbearance until a discharge decision is made. Under forbearance, a borrower is able to temporarily stop making payments or reduce the monthly payments on his or her federal student loans. During this time, interest continues to accrue on both subsidized and unsubsidized loans. In addition, collections on an eligible defaulted loan cease, although a borrower may continue to make payments on the loan. Borrowers may initiate the closed school loan discharge process on their own; however, the Secretary is required to identify all borrowers who may be eligible for a closed school discharge upon a school's closure and mail to each borrower a discharge application and an explanation of qualifications and procedures for obtaining a discharge, if the borrower's address is known. After the Secretary sends notice to a borrower, the Secretary suspends any effort to collect a borrower's defaulted loans. The borrower then has 60 days in which to submit a closed school discharge application. If the borrower fails to submit such an application within the 60-day time frame, the Secretary resumes collections and again provides the borrower with another discharge application and an explanation of qualifications and procedures for obtaining a discharge. Should a borrower not submit a closed school discharge application within the 60-day time frame, he or she may still submit a closed school discharge application at any time for consideration. Alternatively, a borrower's loans will be automatically discharged by the Secretary, if with respect to schools that closed on or after November 1, 2013, the Secretary determines that the borrower did not subsequently reenroll in any Title IV eligible institution within three years after the school closed. A borrower's loans also may be automatically discharged if the Secretary determines the borrower qualifies for the discharge based on information within ED's possession. Relief Provided If a borrower receives a closed school discharge, the full balance of the outstanding Title IV loan borrowed to attend the IHE is discharged and the borrower is qualified to be reimbursed for any amounts previously paid or collected on those loans. In addition, for loans that were considered in default, ED is to consider such loans not in default following discharge, and the borrower is to regain eligibility to receive additional Title IV assistance. Finally, ED is to update reports to consumer reporting agencies so that they may delete any adverse credit history associated with the loan. Even if borrowers who attended a closed school are ineligible for a closed school loan discharge, they may, in certain circumstances, seek debt relief on their Title IV student loans by asserting a borrower defense to repayment (BDR) certain acts or omissions of an IHE, if the cause of action directly relates to the loan or educational services for which the loan was provided. The availability of a BDR claim may be closely related to a school's closure, as oftentimes, a BDR claim is predicated on misleading representations of an IHE relating to the educational services provided, and in recent years, allegations of misrepresentation have played a part in the ultimate closure of some IHEs. Whether a borrower may seek this type of relief depends on the type of Title IV loan borrowed. The standard under which a BDR may be reviewed also depends on the type of Title IV loan borrowed and when the loan was disbursed. Newly promulgated BDR procedures apply to many, but not all, BDR claims and vary depending on the type of Title IV loan. If a borrower's BDR is successful, ED is to determine the amount of debt relief to which the borrower is entitled, which can include relief from repaying all or part of the outstanding loan balance and reimbursement for previous amounts paid toward or collected on the loan. Additionally, if an adverse credit history was associated with the loan (e.g., default), the loan discharge is to be reported to credit bureaus so that they may delete the adverse credit history associated with the loan. Applicable Borrower Defense to Repayment Standards The HEA specifies that Direct Loan borrowers may assert as a defense to repayment certain \"acts or omissions of an institution of higher education.\" Although this statutory language is specific to Direct Loans, implementing regulations have expanded the instances in which a borrower of a non-Direct Loan may assert a BDR claim. Thus, loans that are potentially eligible for discharge under a BDR claim include Direct Loan program loans and Federal Family Education Loan program loans and Perkins Loans program loans, if they are first consolidated into a Direct Consolidation Loan. In addition, even if a FFEL program loan is not consolidated into a Direct Consolidation Loan, FFEL program regulations specify instances in which a FFEL program loan may not be legally enforceable, such that a borrower need not repay it. ED has stated that the claims a borrower could bring as a defense against repayment under the FFEL program are the same as the pre-July 1, 2017, standards (discussed later in this report) that could be brought under the DL program. Perkins Loan program loans that are not consolidated into Direct Consolidation Loans may not assert a BDR claim. In general, two separate BDR standards may be applied to eligible student loans under the Direct Loan program regulations. For eligible loans made prior to July 1, 2017, a borrower may assert as a defense to repayment an IHE's acts or omissions that \"would give rise to a cause of action against the school under applicable State law,\" and the IHE's acts or omissions must relate to the making of the loan for enrollment at the IHE or the provision of educational services for which the loan was provided (hereinafter, \"pre-July 1, 2017, standard\"). For eligible loans made on or after July 1, 2017, a borrower may assert as a defense to repayment one of the following, as it relates to the making of a borrower's loan for enrollment at the IHE or the provision of the educational services for which the loan was made (hereinafter, \"post-July 1, 2017, standard\"): A substantial misrepresentation by an IHE that the borrower \"reasonably relied on to the borrower's detriment when the borrower decided to attend, or to continue attending, the school\" or decided to take out certain loans; A nondefault, contested state or federal court judgment against an IHE; or A breach of contract by an IHE, where an IHE failed to perform obligations under the terms of a contract with a student, such as the provision of specific programs or services. As indicated above, the BDR standard applied in a borrower's case may depend to a large extent on the date on which a borrower's loans were disbursed. However, other considerations that relate to the type of federal student loan made also play a role in determining which BDR standard may apply in a borrower's case. In general, for DL program loans not paid off through a Direct Consolidation Loan, the BDR standard used would depend on the date on which a borrower's loans were disbursed. For FFEL program loans not paid off through a Direct Consolidation Loan, the pre-July 1, 2017, standard would apply. For DL program loans paid off through a Direct Consolidation Loan, the BDR standard used would depend on the date on which the underlying Direct Loan was disbursed. For eligible non-DL program loans paid off through a Direct Consolidation Loan, the BDR standard used would depend on the date on which the Direct Consolidation Loan was made. Direct Consolidation Loans comprising underlying loans disbursed both before and after July 1, 2017, would necessarily have been disbursed after July 1, 2017. Thus, in this scenario, the post-July 1, 2017, standard would apply to any eligible non-DL program loans paid off through the Direct Consolidation Loan and either the pre- or post-July 1, 2017, standard would apply to any Direct Loans paid off through the Direct Consolidation Loan, depending on the date the underlying Direct Loan was disbursed. Table 1 depicts the BDR standard that would be applied in a BDR proceeding based on type of federal student loan at issue and the date on which the loan was disbursed. BDR Procedures Regulations establish two separate processes through which a BDR claim may be asserted on a borrower's DL program loans: an individual claim process and a group claim process. This section of the report describes the 2016 regulations' BDR procedures for DL program loans (including Direct Consolidation Loans that repaid eligible non-DL program loans for which a borrower asserts a BDR claim) under which BDR claims may be more likely to be asserted, as DL program borrowers account for approximately 80% of all borrowers with outstanding Title IV loans. The procedures described herein would not apply to ED-owned FFEL program loans or to FFEL programs loans held by private and state-based entities that are not consolidated into Direct Consolidation Loans. For such ED-owned FFEL program loans, ED would review and adjudicate any BDR claims. For such FFEL program loans not owned by ED, BDR claims procedures may vary by loan holder. To assert a BDR claim as an individual, a borrower must submit a BDR application, which among other items requires the borrower to provide evidence that supports his or her BDR claim. Upon receipt of the application and while the BDR claim is evaluated, ED places any nondefaulted Direct Loans into forbearance and ceases collections on defaulted loans. If a borrower with a FFEL program loan files a BDR claim with ED, ED notifies the lender or loan holder, as appropriate. The lender places the loan in forbearance in yearly increments, and the loan holder ceases collection on any defaulted loans while a borrower's BDR claim is being evaluated. If ED determines that the borrower would be eligible for relief if he or she consolidated the FFEL program loan into a Direct Consolidation Loan, the borrower would then be able to consolidate the loan into a Direct Consolidation Loan and receive BDR relief. If ED determines that the borrower would not qualify for BDR, then the loan is removed from forbearance or collections resume, as appropriate. To determine whether an individual qualifies for BDR relief, the Secretary designates an ED official to review the borrower's application and resolves the claim through a fact-finding process. As part of that process, ED notifies the IHE against which the BDR claim is asserted and reviews any evidence submitted by the borrower and other relevant information, such as ED records and any submissions from the IHE. After the fact-finding process, the ED official issues a written decision on the claim. If the claim is approved in full or in part, ED notifies the borrower of the relief provided. If the claim is denied in full or in part, ED notifies the borrower of the reason for the denial, along with other relevant information. The decision made by the ED official is \"final as to the merits of the claim and any relief that may be granted on the claim.\" However, if the borrower's claim is denied in full or in part, the borrower may request that ED reconsider his or her claim upon the identification of new evidence. In addition, ED may reopen a BDR application at any time to consider evidence that was not considered in the previous decision. Regulations also establish a group process for BDR claims. Under these procedures, upon consideration of factors such as a common set of facts and claims or fiscal impact, the Secretary may initiate a process to determine whether a group of borrowers has a BDR claim. ED may identify members for a group BDR claim by either consolidating applications filed by individuals in the above-described process that have common facts and claims or by determining that there are common facts and claims that apply to borrowers who have not filed individual applications. Loans of borrowers who have filed individual claims that are consolidated into a group BDR claim remain in forbearance or suspended collections as described above, and loans of identified group members who have not filed individual claims are placed in forbearance or suspended collections as described above. ED notifies identified group members of the group proceeding and informs them that they may opt out of the group proceeding. ED also notifies the school against which the group BDR claim is asserted. For the fact-finding portion of a group BDR claim, one set of procedures applies to a BDR claim relating to loans made to attend a school that has closed and from which there is no financial protection or other entity that ED may recover losses from associated with the BDR claims. Another set of fact-finding procedures applies to BDR claims relating to loans made to attend a school that has closed and for which there are financial protections or other entities from which ED may recover losses associated with BDR claims, or that is open. If the claim relates to loans made to attend a school that has closed and for which there is no financial protections or entities against ED may recover, a hearing official considers any evidence and arguments presented by ED on behalf of the group, along with any additional information such as ED records or responses from the school that the ED official considers necessary. After the fact-finding process, the ED official issues a written decision on the claim. As with the individual claims process, if the group claim is approved in full or in part, ED notifies the borrowers of the relief provided. If the claim is denied in full or in part, ED notifies the borrowers of the reason for the denial, along with other relevant information. The decision made by the ED official is \"final as to the merits of the group borrower defense and any relief that may be granted on the group claim.\" However, if relief for the group has been denied in full or in part, an individual borrower may file a claim for individual relief as previously described. In addition, ED may reopen a BDR application at any time to consider evidence that was not considered in the previous decision. Group BDR procedures for a claim that relates to loans made to attend a closed school for which there are financial protections or entities from which ED may recover losses or to loans made to attend an open school are substantially similar to those procedures for group BDR claims for closed schools without financial protections described above. However, in addition to the above-described procedures, the IHE against which the claim is brought is given the opportunity to present evidence and arguments during the fact-finding process. In addition, the school or the ED official who presented the group's BDR claims may appeal the decision of the hearing official within 30 days after the decision is issued and received by the school and the ED official. Should an appeal be made, the hearing official's decision does not take effect pending the appeal. The Secretary issues a final decision on the appealed claim. If relief for the group has been denied in full or in part, and after a final decision has been made (either following an appeal by the school or the ED official or after 30 days from the hearing official's decision have passed), an individual borrower may file a claim for individual relief as previously described. Additionally, ED may reopen a BDR application at any time to consider evidence that was not considered in the previous decision. Finally, to obtain relief a borrower must cooperate with ED in the relevant individual or group BDR proceeding. If a borrower fails to cooperate with ED, the relief may be revoked. Relief Provided Regulations specify the relief that may be afforded to a borrower who, as an individual or as part of a group, successfully asserts a BDR. This section of the report focuses on BDR relief available to borrowers with DL program loans, including Direct Consolidation Loans that repaid eligible non-DL program loans. However, it should be noted that borrowers of FFEL program loans that have not been consolidated into Direct Consolidation Loans are eligible to have all or part of their loan discharged, and may be eligible to be reimbursed for payments previously paid toward or collected on the loans if certain conditions are met. Borrowers of Perkins Loans are ineligible for BDR relief unless they first consolidate their loans into a Direct Consolidation Loan. For Direct Loans, if a borrower defense is approved, ED (either the ED official in an individual BDR claim or the hearing official in the group BDR claim) determines the appropriate amount of relief to award the borrower. Relief provided can include a discharge of all or part of the loan amounts owed to ED on the loan at issue. A borrower may also be eligible to have all or part of amounts previously paid toward or collected on his or her loan reimbursed by ED. Payments made or collections on Direct Loans, including Direct Consolidation Loans that repaid eligible non-DL program loans, are reimbursable by ED if the borrower asserted the BDR claim within the applicable statute of limitations and the payments were made directly to ED. Reimbursements are to equal the amount by which the payments or collections on the loans (or portion of the loan in the case of Direct Consolidation Loans to which a BDR claim applied to some, but not all, of the underlying loans) exceed the amount of the loan that was not discharged. To calculate the amount of relief to be provided, ED takes into account a variety of factors, depending on the basis on which the BDR claim was brought. Substantial m isrepresentation : ED is to factor the borrower's cost of attendance to attend the IHE, the value of the education the borrower received, the value of the education that a reasonable borrower in the borrower's circumstances would have received, the value of the education the borrower should have expected given the information provided to the borrower by the school, and/or any other relevant factors. Court judgment against the IHE : If the judgment provides specific financial relief, ED will provide the unsatisfied amount of relief. If the judgment does not provide specific financial relief, ED \"will rely on the holding of the case and applicable law to monetize the judgment.\" Breach of contract by the IHE : ED is to determine relief \"based on the common law of contracts\" and other reasonable considerations. In addition to monetary relief, other relief, as appropriate, may be provided to a borrower. Such relief may include, but is not limited to, determining that the borrower is not in default on his or her loan and is eligible to receive additional Title IV assistance and updating reports to consumer reporting agencies so that they may delete any adverse credit history associated with the loan. TEACH Grant recipients whose TEACH Grants have converted into a Direct Loan for failure to complete TEACH Grant service requirements may seek relief under either a closed school discharge or a successful BDR. Program regulations specify that for individuals who do not complete the program's teaching service requirements, the TEACH Grant converts into a DL and the individual \"is eligible for all of the benefits of the Direct Loan Program.\" Thus, so long as an individual meets all applicable closed school discharge or BDR criteria, they may be provided relief from repaying a TEACH Grant that has converted into a DL. In some instances, students who attended a closed school may have borrowed private education loans to help finance their postsecondary education at the closed school. Private education loans are nonfederal loans made to a student to help finance the cost of their postsecondary education. Unlike federal student loans, which have statutorily prescribed terms and conditions that are typically uniform in nature, private education loan terms and conditions are primarily governed by market conditions that may vary greatly, depending on a variety of factors such as the lender, the borrower's creditworthiness, and the market. Thus, the extent to which a private education loan borrower may be provided relief from the requirement to repay their loans may largely depend on the individual private education loan's terms and conditions. Pell Grant recipients who attended an IHE that closed may have some portion of their Pell eligibility restored. All Pell Grant recipients are subject to a cumulative lifetime eligibility cap on Pell Grant aid equal to 12 full-time semesters (or the equivalent). The HEA exempts from a student's lifetime eligibility cap the period of attendance at an IHE at which a student was unable to complete a course of study because the IHE closed. ED uses its information technology systems to adjust Pell eligibility for those students who attended a closed school and were not reported as having \"graduated\" from that school. Following an adjustment, ED notifies students of the adjustment. GI Bill entitlement may be restored following a school closure. However, a school closure may result in some GI Bill participants receiving an overpayment of benefits that they would become responsible for repaying. Prior to 2015, GI Bill entitlement was not restored for benefits received at an educational institution that later closed. The Harry W. Colmery Veterans Educational Assistance Act of 2017 ( P.L. 115-48 ) authorizes the restoration of GI Bill entitlement for individuals affected by school closures. Generally, GI Bill recipients are entitled to benefits equal to 36 months of full-time enrollment (or the equivalent for part-time educational assistance) under one GI Bill. In the case of the Survivors' and Dependents' Educational Assistance Program (DEA; 38 U.S.C., Chapter 35), recipients who first enrolled in a program of education before August 1, 2018, have 45 months (or the equivalent for part-time educational assistance) of entitlement. Entitlement is restored for an incomplete course or program for which the individual is unable to receive credit or lost training time as a result of an educational institution closing. P.L. 115-48 applies to school closures occurring after January 1, 2015. In addition to restoring such entitlement, P.L. 115-48 permits the VA to continue paying a Post-9/11 GI Bill housing allowance through the end of the academic term following such closure but no longer than 120 days. Entitlement is not charged for the interim housing allowance. The extension of benefits following such closure is only applicable to the Post-9/11 GI Bill. Finally, P.L. 115-48 requires that the Department of Veterans Affairs (VA) notify affected individuals of imminent and actual school closures and notify them how such closure will affect their GI Bill entitlement. GI Bill participants must apply for benefit restoration and the housing allowance extension. Under general GI Bill regulations, if there are mitigating circumstances, a GI Bill participant who withdraws from all courses may remain eligible for benefits for the portion of the course completed. However, if there are no mitigating circumstances, the individual may be required to repay all benefits received for pursuit of the course. Mitigating circumstances are circumstances beyond the individual's control that prevent the individual from continuously pursuing a program of education. A school closing is considered to be a mitigating circumstance. Some GI Bill benefits, such as advance payments and the Post-9/11 GI Bill tuition and fees payment, Yellow Ribbon payment, and books and supplies stipend, may be paid as a lump sum before or at the beginning of an academic term. An overpayment may occur for a prorated portion of those upfront payments if an individual is unable to complete the academic term without mitigating circumstances. Under Post-9/11 GI Bill regulations, the VA may determine the ending date of educational assistance based on the facts found if an eligible individual's educational assistance must be discontinued for any reason not described in regulations. A school that permanently closes may qualify as a reason not described in regulations. For students who wish to continue their education at another IHE, another financial consideration related to an IHE's closure is the extent to which the students' eligibility for various financial aid sources may be affected by their previous use of those benefits at the closed institution. In addition to the duration of eligibility limits generally placed on Pell Grants and GI educational benefits discussed in the previous section, other federal student aid eligibility criteria that could affect future receipt of additional Title IV student loans include borrowing limits and eligibility limitations for receipt of Direct Subsidized Loans. Generally, annual and aggregate borrowing limits apply to Title IV student loans. Annual loan limits prescribe the maximum principal amount that may be borrowed in an academic year, and aggregate limits apply to the total amount of outstanding Title IV loans that borrowers may accrue. Borrowing limits for DL program loans vary by borrower academic standing (e.g., grade or credential level), loan type (e.g., Subsidized or Unsubsidized Direct Loan), and dependency status. For borrowers who receive a closed school discharge or whose loans have been discharged under a successful BDR claim, any discharged loans do not count against their annual and aggregate loan limits.   In general, for borrowers of Direct Subsidized Loans, the federal government pays the interest that accrues on the loan while the borrower is enrolled in school on at least a half-time basis, during a six-month grace period thereafter, and during periods of authorized deferment. Individuals who are new borrowers on or after July 1, 2013, may only receive Direct Subsidized Loans for a period of time equal to 150% of the published length of the borrower's academic program (e.g., a borrower enrolled in a four-year degree program may receive six years' worth of Direct Subsidized Loans). However, for borrowers who receive a closed school loan discharge or who successfully assert a BDR claim, the discharged loan will not count against the borrower's Subsidized Loan usage period. In addition to available debt relief, some states operate state tuition recovery funds (STRFs), which may reimburse students for charges paid to closed IHEs that are not covered by other sources. For example, a student may have his or her Direct Loan discharged due to school closure, and an STRF may provide relief to cover expenses such as cash payments made directly to a closed IHE for tuition payments or to provide relief on private student loans borrowed to attend an IHE. The availability of and eligibility for such funds vary by state; not all states operate STRFs. Borrowers whose student loans are discharged due to school closure will be subject to federal and state income taxes on the discharged loans unless they qualify for an exception. Students who received funds from an STRF might similarly be subject to tax on any funds received, although the tax treatment of such funds is unclear. Additionally, there could be tax consequences for individuals who had previously claimed certain federal education tax benefits. This section examines the potential federal and state tax consequences that may arise for these borrowers and students. Under the Internal Revenue Code (IRC), borrowers whose debt is forgiven must generally include the amount of the canceled debt in income when determining their federal income tax liability. In other words, they are subject to tax on the amount of the discharged loan. There are, however, various exceptions to this rule under which a borrower may exclude from income all or part of the forgiven debt. The HEA contains several exceptions providing for certain student loan discharges. These exceptions apply to borrowers of FFELs, Direct Loans, and Perkins Loans who borrowed such loans to attend any IHE and whose loans are discharged due to school closure. Under the HEA exceptions, these borrowers will not be subject to federal income taxes on the discharged amounts so long as the student borrowers (or students on whose behalf a parent borrowed) meet the general criteria regarding the discharge of debt tied to closed schools described earlier in this report. The HEA does not address the tax treatment of (1) federal student loans discharged due to a successful borrower defense to repayment or (2) private education loans that are discharged under most circumstances. As such, in these cases, the borrowers will be taxed on the amount of the discharged loan unless they qualify for an exception found outside of the HEA. Federal tax law provides several exceptions that may be relevant to borrowers whose loans are discharged. For example, IRC Section 108 excludes forgiven debt if the taxpayer is insolvent. Thus, borrowers whose liabilities exceed the fair market value of their assets immediately prior to discharge will not be taxed on the discharged student loan. Another example of an exception that might be relevant is the disputed debt doctrine. Under this doctrine, a discharged loan is not considered income for federal tax purposes if the loan was based on fraud or misrepresentation by the lender. Guidance issued by the Internal Revenue Service (IRS) in 2015 and 2017 illustrates how the doctrine might be applied in the student loan context. The 2015 guidance provides that former students of Corinthian Colleges, Inc. (CCI) whose federal student loans are discharged under a defense against repayment claim will not be taxed on the discharged amounts because many would likely qualify under the disputed debt doctrine due to the school's fraudulent behavior. In 2017, the IRS extended this same relief to former students of schools owned by American Career Institutes, Inc. (ACI). In addition, in 2018 the IRS issued guidance explaining that it would provide similar tax treatment regarding the discharge of private student loans taken out by borrowers who attended schools owned by CCI or ACI, where the loans are discharged due to legal settlements of cases brought by federal and state governmental agencies alleging that CCI, ACI, and certain private lenders engaged in unlawful business practices. In order to exclude a discharged loan from income, borrowers must determine that they qualify for an exception based on their individual circumstances and be able to show that the determination is correct if the IRS contests it. If the IRS disagrees and assesses tax based on the amount of the discharged loan, the taxpayer may challenge the assessment in federal court. Students who receive funds from STRFs might also face federal tax consequences, although the tax treatment is less clear. As a general rule, any amount received by a taxpayer is includible in gross income, and potentially subject to taxation, unless specifically excluded by law. It is not clear how this principle applies in the context of STRF payments, as there do not appear to be court decisions or IRS guidance addressing the issue. There are several theories under which students could arguably exclude the payments from income, depending on their circumstances and the specifics of the state's plan. For example, the payment might be treated as a nontaxable reimbursement of tuition, scholarship, or state benefit. If the payment is excluded from the student's income, the student may be required to account for previously claimed federal education tax benefits, as discussed below. Along with the potential taxation of discharged student loans and amounts received from STRFs, a school's closure or the discharge of a borrower's student loan may have consequences related to higher education tax benefits. While there are a variety of federal tax benefits that help offset some of the costs of a higher education, four are relevant for purposes of this report for reasons discussed below. These four benefits include the following: The student loan interest deduction , under which qualifying taxpayers may annually deduct up to $2,500 of student loan interest for the entire duration of repayment. The tuition and fees deduction , which allows taxpayers to reduce their income subject to tax for tuition and fees paid annually, up to $4,000, depending on their income level. As of the date of this report, the tuition and fees deduction cannot be claimed on 2018 or subsequent tax returns. The Lifetime Learning Credit (LLC) , under which qualifying taxpayers may annually reduce their tax liability for tuition and fees paid, up to $2,000. The LLC is a nonrefundable credit, meaning any amount of the credit in excess of income tax liability is effectively forfeited by the taxpayer. The American Opportunity Tax Credit (AOTC) , under which qualifying taxpayers can reduce tax liability by $2,500 per student annually (depending on eligible expenses and the taxpayer income level). The AOTC can be claimed for tuition and fees and books, supplies, and equipment, but not room and board. Additionally, the AOTC is a refundable credit, which means taxpayers with little to no tax liability can receive up to $1,000 of the AOTC as a refund check. Tuition and fees paid with the proceeds of a loan can count toward claiming these tax benefits, but any aid that is tax-free, such as a Pell Grant, must generally reduce the amount of expenses against which the benefits may be claimed. As a general rule, either the parent or the student who pays the qualifying education expenses will claim the tax benefit, depending on whether the student is the parent's dependent for tax purposes. Taxpayers can generally only claim one tax benefit per student annually. Students who continue to pursue higher education after a school closure are eligible for these education tax benefits, pursuant to the requirements applicable to all taxpayers. However, in some instances, a taxpayer who claims the AOTC may be ineligible for the credit in future years due to statutory restrictions on the period of education for which students may claim the credit. Specifically, the AOTC can only be claimed for expenses incurred during the first four years of a postsecondary education, irrespective of whether those first four years lead to a postsecondary credential. Therefore, for example, it appears that if a student attended a school for three years and that school closed, the maximum remaining time the student could claim the AOTC is one additional year. There is seemingly no IRS guidance or case law addressing how this requirement is applied in the context of students whose schools have closed, including students who may have to pay back previously claimed credits (discussed below). The other three benefits contain no limits on the period of education in which students may claim them. Taxpayers may be required to account for previously claimed education tax benefits if they subsequently qualify to exclude discharged student loans or STRF payments. The borrowers who might be affected are those who claimed the LLC or AOTC for expenses that were paid with the proceeds from a student loan that was subsequently discharged, deducted expenses for tuition and fees that were paid with the proceeds from a student loan that was subsequently discharged, deducted interest on a student loan that was subsequently discharged, or claimed a tax credit (i.e., the LLC or AOTC) or a deduction (for tuition and fees or student loan interest) for expenses that were reimbursed by an STRF payment. In order to prevent these borrowers from getting the double benefit of both (1) a credit or deduction and (2) the exclusion of the discharged loan or STRF payment, such borrowers may be required to pay back the value of the credit or deduction. However, there may be circumstances in which the IRS will not require a taxpayer to account for previously claimed tax benefits. For example, in its 2015, 2017, and 2018 guidance addressing former students of CCI and ACI, the IRS announced that it would not require these borrowers to account for previously claimed education tax benefits. The IRS did not explain its reasoning in reaching this determination, and it is not clear the extent to which the agency may provide similar benefits to other borrowers. A school closure or the discharge of a student loan may also result in state income tax consequences. Most states use the IRC's definition of income as the starting point for computing state income tax liability. As such, to the extent that the borrower must pay federal income tax on the discharged debt or account for previously claimed federal education tax benefits, he or she may be taxed at the state level as well. Similarly, to the extent that the borrower qualifies to exclude the amounts from federal income taxation, such treatment may also apply at the state level. However, while most state tax codes follow the IRC, states are not required to adopt the federal definition of income and, thus, some states may provide for different tax treatment. Furthermore, states with their own education tax benefits or tuition recovery funds may have laws or policies specifically addressing the state tax treatment of the benefits and funds. The following are abbreviations used throughout this report.", "summary": "When an institution of higher education (IHE) closes, a student's postsecondary education may be disrupted. Students enrolled at closing IHEs may face numerous issues and may be required to make difficult decisions in the wake of a closure. Two key issues students may face when their IHEs close relate to their academic plans and their personal finances. The academic issues faced by students when their schools close include whether they will continue to pursue their postsecondary education, and if so, where and how they might do so. Students deciding to continue their postsecondary education have several options. They may participate in a teach-out offered by the closing institution or by another institution. A teach-out is a plan that provides students with the opportunity to complete their program of study after a school's closure. Students may also be able to transfer the credits they previously earned at the closed IHE to another IHE. If a student is able to transfer some or all of the previously earned credits, he or she would not be required to repeat the classes those credits represent at the new institution; if a student is unable to transfer previously earned credits, the student may be required to repeat the classes those credits represent at the new IHE. Decisions regarding the acceptance of credit transfers are within the discretion of the accepting IHE. The financial issues faced by students when their schools close include whether they are responsible for repaying any loans borrowed to attend a closed school and how they might finance any additional postsecondary education they pursue. In general, a closed school loan discharge is available to a borrower of federal student loans made under Title IV of the Higher Education Act (P.L. 89-329, as amended), if the student was enrolled at the IHE when it closed or if the student withdrew from the IHE within 120 days prior to its closure. Additionally, the student must have been unable to complete his or her program of study at the closed school or a comparable program at another IHE, either through a teach-out agreement or by transferring any credits to another IHE. Borrowers ineligible for a closed school discharge may be able to have eligible Title IV federal student loans discharged by successfully asserting as a borrower defense to repayment (BDR) certain acts or omissions of an IHE, if the cause of action directly relates to the loan or educational services for which the loan was provided. Whether a borrower may have discharged all or part of any private education loans borrowed to attend the closed IHE may depend on the loan's terms and conditions. Some students may also face issues regarding how they might finance future postsecondary educational pursuits. If a borrower receives a closed school discharge or has a successful BDR claim, the discharged loan will not count against the borrower's Subsidized Loan usage period, which typically limits certain borrowers' receipt of Direct Subsidized Loans for a period equal to 150% of the published length of his or her academic program, and a borrower's statutory annual and aggregate borrowing limits on Direct Subsidized and Direct Unsubsidized Loans are unlikely to be affected. Students who receive a Pell Grant for enrollment at a school that closed may have an equivalent amount of Pell eligibility restored. Likewise, if the student used GI Bill educational benefits from the Department of Veterans Affairs for attendance at a closed school, those benefits can be restored. Students may be reimbursed for payments on charges levied by closed IHEs that are not covered by other sources from a State Tuition Recovery Fund (STRF). The availability of and student eligibility for such funds vary by state, and not all states operate STRFs. Finally, the receipt of any of the above-mentioned benefits may have federal and state income tax implications, including the potential creation of a federal income tax liability for borrowers who have certain loans discharged.", "document_type": "crs"}
{"report": "Federal law houses hundreds of offenses punishable by a mandatory minimum term of imprisonment. Although only a handful of these mandatory minimum offenses are prosecuted with any regularity, drug trafficking offenses accounted for over two-thirds of the total. Congress has created three procedures that make punishment for these offenses a little less mandatory. One, the so-called safety valve (18 U.S.C. § 3553(f)), permits a sentencing court to disregard a statutory minimum sentence for the benefit of a low-level, nonviolent, cooperative defendant with a minimal prior criminal record, convicted under several mandatory minimum controlled substance offenses. The other two, 18 U.S.C. § 3553(e) and Rule 35(b) of the Federal Rules of Criminal Procedure, afford a sentencing court comparable latitude but only on the motion of the prosecutor, based on the defendant's substantial assistance to the government, and without regard to the offense charged. In October 2009, Congress instructed the U.S. Sentencing Commission to prepare a report on the mandatory minimum sentencing provisions under federal law. In early 2010, the commission conducted a survey of federal district court judges regarding their views on mandatory minimum sentencing. A majority of those responding endorsed amendments to the safety valve and substantial assistance exceptions. The commission also held a public hearing at which several witnesses urged adjustments in the safety valve and substantial assistance provisions. The commission subsequently recommended that Congress consider expanding the safety valve to cover other offenses and to reach offenders with a slightly more extensive prior criminal record. The First Step Act authorized safety-valve relief for convictions under the Maritime Drug Enforcement Act and for defendants with slightly more extensive prior criminal records. Low-level drug offenders can escape some of the otherwise applicable mandatory minimum sentences if they qualify for the safety valve. Congress created the safety valve after it became concerned that the mandatory minimum sentencing provisions could have resulted in equally severe penalties for both the more and the less culpable offenders. It is available to qualified offenders convicted of violations of the drug trafficking, simple possession, attempt, or conspiracy provisions of the Controlled Substances or Controlled Substances Import and Export acts. It is not available to avoid the mandatory minimum sentences that attend some of the other controlled substance offenses, even those closely related to the covered offenses. For instance, not covered are convictions under the statute that proscribes drug trafficking near schools, playgrounds, or public housing facilities and that sets the penalties for violation at twice those set for simple drug trafficking. In addition, until the First Step Act, safety valve relief was not available to those convicted under the Maritime Drug Law Enforcement Act (MDLEA), even though the MDLEA proscribes conduct closely related to the smuggling and trafficking activities outlawed in the Controlled Substances Import and Export Act. The prosecution need not prove that a defendant is ineligible for safety valve relief. The Supreme Court did hold in Alleyne v. United States \"that any fact that increases the mandatory minimum is an 'element' [of the offense] that must be submitted to the jury\" and proved beyond a reasonable doubt. Subsequent lower appellate courts, however, have held that Alleyne does not require a jury verdict or application of the reasonable doubt standard. Thus, for the convictions to which the safety valve applies, the defendant must convince the sentencing court by a preponderance of the evidence that he satisfies each of the safety valve's five requirements. He may not have a disqualifying criminal history point total. He may not have used violence or a dangerous weapon in connection with the offense. He may not have been an organizer or leader of the drug enterprise. He must have provided the government with all the information and evidence at his disposal. Finally, the offense may not have resulted in serious injury or death. [T]he defendant does not have – (A) more than 4 criminal history points, excluding any criminal history points resulting from a 1-point offense, as determined under the sentencing guidelines; (B) a prior 3-point offense, as determined under the sentencing guidelines; and (C) a prior 2-point violent offense, as determined under the sentencing guidelines. 18 U.S.C. § 3553(f)(1). The criminal history point disqualification refers to the defendant's prior criminal record. The Sentencing Guidelines assign criminal history points based on a defendant's past criminal record. Prior sentences of imprisonment or juvenile detention of less than 60 days are assigned a single criminal history point . Prior sentences of imprisonment or juvenile detention of from 60 days up to a year and a month are assigned two criminal history points ; as are sentences imposed for offenses committed while the defendant was in prison, was an escaped prisoner, or was on probation, parole, or supervised release. Prior sentences of imprisonment for a year and a month or more are assigned three criminal history points . A number of convictions do not count, including the following: Stale convictions 15-year-old, three-point convictions, 10-year-old, one- or two-point convictions, or 5-year-old, one- or two-point juvenile adjudications; Summary court-martial convictions; Foreign convictions; Tribal convictions; Expunged, reversed, vacated, or invalidated convictions; and Certain petty offenses or minor misdemeanors: Hunting and fishing violations, juvenile truancy, and the like, regardless of the sentence imposed. Gambling, prostitution, and the like if the offender was sentenced no more severely than to imprisonment for 30 days or less or to probation for less than a year. Similar offenses to those listed \"by whatever name they are known.\" [T]he defendant did not use violence or credible threats of violence or possess a firearm or other dangerous weapon (or induce another participant to do so) in connection with the offense, 18 U.SC. 3553(f)(2). [T]he offense did not result in death or serious bodily injury to any person, 18 U.S.C. § 3553(f)(3). The safety valve has two disqualifications designed to reserve its benefits to the nonviolent. The weapon or threat-of-violence disqualification turns upon the defendant's conduct or the conduct of those he \"aided or abetted, counseled, commanded, induced, procured, or willfully caused.\" It is not triggered by the conduct of a co-conspirator, unless the defendant aided, abetted, or counselled the co-conspirator's violence or possession. Disqualifying firearm possession may be either actual or constructive. Constructive possession is the dominion or control over a firearm or the place where one is located. Disqualification requires the threat of violence or possession of a firearm \"in connection with the offense,\" sometimes characterized as \"active possession.\" In many instances, possession of a firearm in a location where drugs are stored or transported, or where transactions occur, will be enough to support an inference of possession in connection with the drug offense of conviction. \"[E]ven a single intimidating confrontation [is] enough to constitute a credible threat\" and is consequently safety valve disqualifying. Conversely, a sentencing enhancement for a co-conspirator's possession does not automatically preclude qualification. The Sentencing Guidelines define \"serious bodily injury\" for purposes of Section 3553(f)(3) as an \"injury involving extreme physical pain or the protracted impairment of a function of a bodily member, organ, or mental faculty; or requiring medical intervention such as surgery, hospitalization, or physical rehabilitation.\" On its face, the definition would include serious bodily injuries, such as hospitalization, suffered by the defendant as a result of the offense. Moreover, a defendant is more likely to be disqualified under Section 3553(f)(3) if a fellow conspirator seriously injures a victim than would be the case under Section 3553(f)(2) if the conspirator merely carries a firearm. [T]he defendant was not an organizer, leader, manager, or supervisor of others in the offense, as determined under the sentencing guidelines and was not engaged in a continuing criminal enterprise, as defined in Section 408 of the Controlled Substances Act, 18 U.S.C. § 3553(f)(4)(emphasis added). The defendant must also establish that he or she was not \"an organizer, leader, manager, or supervisor of others in the offense.\" The term supervisor is construed broadly and encompasses anyone who exercises control or authority of another during the commission of the offense. The Sentencing Guidelines disqualify anyone who receives a guideline level increase for their aggravated role in the offense. Thus, by implication, it does not require a defendant to have received a guideline increase based on his minimal or minor participation in a group offense, nor does it disqualify a defendant who acted alone. [N]ot later than the time of the sentencing hearing, the defendant has truthfully provided to the Government all information and evidence the defendant has concerning the offense or offenses that were part of the same course of conduct or of a common scheme or plan, but the fact that the defendant has no relevant or useful other information to provide or that the Government is already aware of the information shall not preclude a determination by the court that the defendant has complied with this requirement, 18 U.S.C. § 3553(f)(5). At one time the most heavily contested safety valve prerequisite, Section 3553(f)(5) requires full disclosure on the part of the defendant. As in the case of the other prerequisites, the defendant here bears the burden of establishing his qualification for safety valve relief. The requirement extends not only to information concerning the crime of conviction, but also to information concerning other crimes that \"were part of the same course of conduct or of a common scheme or plan,\" including uncharged related conduct. Neither Section 3553(f) nor the Sentencing Guidelines explain what form the defendants' full disclosure must take. At least one court has held that under rare circumstances disclosure through the defendant's testimony at trial may suffice. Most often the defendant provides the information during an interview with prosecutors or by a proffer. The defendant must disclose the information to the prosecutor, however. Disclosure to the probation officer during preparation of the presentence report is not sufficient. Moreover, a defendant does not necessarily qualify for relief merely because he has proffered a statement and invited the prosecution to identify any additional information it seeks; for \"the government is under no obligation to solicit information from a defendant.\" The defendant must provide the government with all the relevant information in his possession. And, he must do so \"no later than the time of the sentencing hearing.\" Information offered after the sentencing hearing does not qualify, although information offered following appellate remand for resentencing and prior to the resentencing hearing may qualify. On the other hand, past lies do not render a defendant ineligible for relief under the truthful disclosure criterion of the safety valve, although they may undermine his credibility. Three provisions authorize federal courts to reduce a defendant's sentence on the motion of the government for substantial assistance: Rule 35(b) of the Federal Rules of Criminal Procedure, 18 U.S.C. § 3553(e), and Section 5K1.1 of the U.S. Sentencing Guidelines. Only Section 3553(e) and Rule 35(b) authorize sentences below otherwise applicable mandatory minimums. Unlike the safety valve, neither Section 3553(e) nor Rule 35(b) is limited to mandatory minimums established for controlled substance offenses. The substantial assistance provision, 18 U.S.C. § 3553(e), passed with little fanfare in the twilight of the 99 th Congress as part of the massive Anti-Drug Abuse Act of 1986, legislation that established or increased a number of mandatory minimum sentencing provisions. The section continues in its original form virtually unchanged: (e) Limited Authority To Impose a Sentence Below a Statutory Minimum. - Upon motion of the Government, the court shall have the authority to impose a sentence below a level established by statute as a minimum sentence so as to reflect a defendant's substantial assistance in the investigation or prosecution of another person who has committed an offense. Such sentence shall be imposed in accordance with the guidelines and policy statements issued by the Sentencing Commission pursuant to section 994 of title 28, United States Code. The section passed between the date authorizing creation of the Sentencing Guidelines and the date they became effective. Rather than replicate the language of Section 3553(e), the guidelines contain an overlapping section that authorizes a sentencing court to depart from the minimum sentence called for by the guidelines. As a general rule, a defendant is entitled to a sentence below an otherwise applicable statutory minimum under the provisions of Section 3553(e) only if the government and the court agree. The courts have acknowledged that due process or equal protection or other constitutional guarantees may provide a narrow exception. \"Thus, a defendant would be entitled to relief if a prosecutor refused to file a substantial-assistance motion, say, because of the defendant's race or religion.\" A defendant is entitled to relief if the government's refusal constitutes a breach of its plea agreement. A defendant is also \"entitled to relief if the prosecutor's refusal to move was not rationally related to any legitimate Government end.\" Some courts have suggested that a defendant is entitled to relief if the prosecution refuses to move under circumstances that \"shock the conscience of the court,\" or that demonstrate bad faith, or for reasons unrelated to substantial assistance. A majority of the judges who answered the Sentencing Commission's survey agreed that relief under Section 3553(e) should be available even in the absence of motion from the prosecutor. Despite their similarities, Section 3553(e) and U.S.S.G. Section 5K1.1 are not the same. A motion under Section 3553(e) authorizes a sentence beneath the mandatory minimum, and a motion under U.S.S.G. Section 5K1.1 authorizes a sentence beneath the applicable Sentencing Guideline range. Thus, a motion under Section 5K1.1 will ordinarily not be construed as a motion under Section 3553(e), in order to permit a court sentence below an otherwise applicable mandatory minimum sentencing requirement. Any sentence imposed below the statutory minimum by virtue of Section 3553(e) must be based on the extent of the defendant's assistance; it may not reflect considerations unrelated to such assistance. It has been suggested, however, that a court may use the Section 5K1.1 factors for that determination, that is, \"(1) the court's evaluation of the significance and usefulness of the defendant's assistance, taking into consideration the government's evaluation of the assistance rendered; (2) the truthfulness, completeness, and reliability of any information or testimony provided by the defendant; (3) the nature and extent of the defendant's assistance; (4) any injury suffered, or any danger or risk of injury to the defendant or his family resulting from his assistance; [and] (5) the timeliness of the defendant's assistance.\" The substantial assistance exception makes possible convictions that might otherwise be unattainable. Yet, it may also lead to \"inverted sentencing,\" that is, a situation in which \"the more serious the defendant's crimes, the lower the sentence—because the greater his wrongs, the more information and assistance he had to offer to a prosecutor\"; while in contrast the exception is of no avail to the peripheral offender who can provide no substantial assistance. Perhaps for this reason, most of the judges who responded to the Sentencing Commission survey agreed that a sentencing court should not be limited to assistance-related factors and should be allowed to use the generally permissible sentencing factors when calculating a sentence under Section 3553(e). In the before-and-after sentencing tale of avoiding a statutory mandatory minimum for substantial assistance, Rule 35(b) is the after. It is available only after sentencing. If the defendant's sentence is vacated on appeal, a Section 3553(e) motion rather than a Rule 35(b) motion is the appropriate vehicle for relief during resentencing. The rule features a two-pronged postsentence authorization for sentence reduction at the behest of the government. First, the government may always file a motion for sentence reduction including reduction below an otherwise applicable mandatory minimum if it does so within a year of sentencing. Second, the government may file a comparable motion a year after sentencing, but only under narrow circumstances that excuse the failure to make a more timely motion. Here, too, a motion by the government is a prerequisite to relief, and the government's decision to refuse to move can be overcome only where the government's silence is unconstitutionally grounded or based on some rationale not reasonably related to a legitimate government end. A district court, faced with a Rule 35(b) motion, must determine whether the defendant in fact rendered substantial assistance and if so what level of reduction, if any, is warranted. As part of its assessment, the court may, but is not required to, consider the general sentencing factors found in 18 U.S.C. § 3553(a). There is some authority for the proposition that the defendant has no right to notice and hearing following the submission of a Rule 35(b) motion. Moreover, Rule 35(b) does not authorize a court to reduce the amount of restitution previously ordered.", "summary": "Federal law requires a sentencing judge to impose a minimum sentence of imprisonment following conviction for any of a number of federal offenses. Congress has created three exceptions. Two are available in any case where the prosecutor asserts that the defendant has provided substantial assistance in the criminal investigation or prosecution of another. The other, commonly referred to as the safety valve, is available, without the government's approval, for a handful of the more commonly prosecuted drug trafficking and unlawful possession offenses that carry minimum sentences. Qualification for the substantial assistance exceptions is ordinarily only possible upon the motion of the government. In rare cases, the court may compel the government to file such a motion when the defendant can establish that the refusal to do so was based on constitutionally invalid considerations, or was in derogation of a plea bargain obligation or was the product of bad faith. Qualification for the safety valve exception requires a defendant to satisfy five criteria. His past criminal record must be minimal; he must not have been a leader, organizer, or supervisor in the commission of the offense; he must not have used violence in the commission of the offense, and the offense must not have resulted in serious injury; and prior to sentencing, he must tell the government all that he knows of the offense and any related misconduct. In response to a congressional request, the U.S. Sentencing Commission recommended expansion of the safety valve. The First Step Act, P.L. 115-391, broadened the safety valve for the benefit of (1) defendants with slightly more serious criminal records and (2) defendants convicted under the Maritime Drug Enforcement Act.", "document_type": "crs"}
{"report": "Many of the disputes involving public education and school choice stem from a fundamental question of whether education is a public or private good. While education has historically been considered a public good, it has characteristics of both a public and a private good. That is, the benefits of education are both private, in that they accrue to individuals, and public, in that they promote a stable and democratic society and a prepared workforce. However, the distinction between education as a private good and a public good may be blurred, as others benefit from the work produced by an individual and an individual benefits from living in a stable and democratic society. As some researchers have argued, \"schooling takes place at the intersection of two sets of rights, those of the family and those of the society.\" Parents have the right to raise their children in the manner they deem most suitable, including making decisions about their education, while a democratic society uses education \"as a means to reproduce its most essential political, economic, and social institutions through a common schooling experience.\" There are many forms of school choice and mechanisms used to facilitate choice, including intradistrict and interdistrict public school choice, public charter schools, magnet schools, vouchers, tax credits/deductions, education savings accounts (ESAs), and homeschooling. School choice efforts in some of these areas are supported by federal programs, such as the programs to support public charter schools and magnet schools that are authorized under the Elementary and Secondary Education Act (ESEA). The most controversial issues regarding publicly funded school choice have involved the provision of direct or indirect support to enable students to attend private schools, especially religiously affiliated private schools. Numerous bills related to the public funding of private school choice have been introduced over the past several Congresses, but most proposals have failed to be enacted. An exception to this has been the District of Columbia Opportunity Scholarship Program (DC OSP). The DC OSP provides scholarships (also known as vouchers) to students in the District of Columbia to attend participating private elementary and secondary schools, including religiously affiliated private schools. It is the only federally funded voucher program in the United States. The Consolidated Appropriations Act, 2004 ( P.L. 108-199 ), which combined six appropriations bills—including the FY2004 District of Columbia Appropriations Act—authorized and appropriated funding for the DC OSP. The DC OSP was established under the DC School Choice Incentive Act of 2003, which was included in P.L. 108-199 . Appropriations were initially authorized for FY2004 through FY2008. The program is administered by the U.S. Department of Education (ED). The FY2004 appropriations act provided funding for the DC OSP for the first time and also, for the first time, provided funding for District of Columbia Public Schools (DCPS) for the improvement of public education, and funding for the District of Columbia State Education Office (SEO) for public charter schools. This approach, commonly known as the \"three-pronged approach\" to funding elementary and secondary education in the District of Columbia, was initially suggested by Mayor Anthony Williams when he asked for federal assistance for public education in the District of Columbia. The proposal was supported by the George W. Bush Administration and many Members of Congress. While concerns were raised during consideration of the DC School Choice Incentive Act of 2003 that only the DC OSP—not school improvement funding for DCPS or public charter schools—was authorized for five years, the federal government has also provided funds to support school improvement in DC public schools and DC public charter schools for each year that the DC OSP has been funded. The DC OSP has been reauthorized twice. It was first reauthorized by the SOAR Act as authorized under Division C of the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ). The SOAR Act replaced the DC School Choice Incentive Act of 2003, reauthorized the DC OSP, and authorized appropriations for DC public schools and DC public charter schools for FY2012 through FY2016. The program was subsequently reauthorized by the SOAR Reauthorization Act ( P.L. 115-31 ), which amended the SOAR Act and extended the authorization of appropriations for the DC OSP, DC public schools, and DC public charter schools through FY2019. Many of the provisions included in the SOAR Act continue to be reflected in current law. Changes to the DC OSP have also been made primarily through appropriations acts in the intervening fiscal years. For FY2019, $52.5 million was appropriated for the SOAR Act, with $17.5 million each provided to the DC OSP, DCPS, and the DC State Education Office. This report begins with a detailed discussion of the provisions of the SOAR Act, as amended. Subsequent sections of the report discuss appropriations for the DC OSP, DC public schools, and DC public charter schools. This is followed by an examination of student and private school participation in the DC OSP. The next two sections discuss the local program management of the DC OSP and related evaluations conducted by the Government Accountability Office (GAO), as well as the DC OSP impact evaluations that have been conducted by ED. The last section of the report examines the potential costs associated with discontinuing the DC OSP. Several appendices are also included. The first appendix provides information on scholarship use ( Appendix A ). This is followed by appendices that provide information on private school participation in the DC OSP ( Appendix B ) and the impact evaluation reports ( Appendix C ), and a summary of the impact evaluation findings ( Appendix D ). This is followed by a glossary of the acronyms used in this report ( Appendix E ). The final appendix provides the legislative history of the program, beginning with initial enactment through FY2018 appropriations ( Appendix F ). While the SOAR Act provides funding for scholarships for students to attend participating private elementary and secondary schools as well as funding for DC public schools and DC public charter schools, the focus of this report is on the DC OSP. Some attention will be given to the current requirements related to the funds provided to DC public schools and DC public charter schools and how much funding has been provided each fiscal year, but no attempt will be made to provide comprehensive information about the use of or requirements related to these funds. This section of the report provides an overview of the SOAR Act, which was most recently comprehensively reauthorized by the SOAR Reauthorization Act. It includes a discussion of the legislative provisions related to the DC OSP as well as requirements related to funding provided for DC public schools and DC public charter schools. An overview of the legislative history of the DC OSP is included in Appendix F . Section 3002 includes congressional findings related to the SOAR Act that discuss parental school choice, the inadequacy of public school choice in the District of Columbia, student performance on the National Assessment of Educational Progress (NAEP) and per-pupil expenditures in the District of Columbia, the DC School Choice Incentive Act, interest in the DC OSP and evaluation findings, and congressional commitment to continuing the DC OSP as part of a three-pronged funding strategy that also includes DC public schools and DC public charter schools. Section 3003 includes the stated purpose of the SOAR Act. The purpose of the program is to provide low-income parents residing in DC, particularly those with a child attending an elementary or secondary school that has been identified as one of the lowest-performing schools under DC's accountability system, with \"expanded options\" for enrolling their child in other DC schools. The program is intended to continue to operate until public schools in DC \"have adequately addressed shortfalls in health, safety, and security,\" and DC students are testing at or above the national average in reading and mathematics. For the purposes of the DC OSP, an \"eligible student\" is a student who is a DC resident and comes from a household that is receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) or whose income does not exceed either (1) 185% of the poverty line, or (2) for a household with a child participating in the DC OSP in the preceding year or under the DC School Choice Incentive Act while it was still in effect, 300% of the poverty line. The DC OSP also uses the term \"participating eligible student.\" This refers to an eligible student who was awarded a scholarship regardless of whether the student uses the scholarship to attend a participating private school. The Secretary of Education (hereinafter referred to as the Secretary) is required to award a competitive grant to one or more eligible entities with approved applications to implement a program to provide eligible students with expanded school choice options. For the purposes of the DC OSP, an \"eligible entity\" is defined as a nonprofit organization or consortium of nonprofit organizations. The Secretary may award one grant or multiple grants based on the quality of the applications submitted and the DC OSP's priorities. Grants may be awarded for no more than five years. Since the inception of the DC OSP, the Secretary has only awarded a grant to one eligible entity at a time. For the purposes of this report, the eligible entity is also referred to as the local program administrator. In implementing the DC OSP, the Secretary is prohibited from limiting the number of eligible students receiving scholarships and may not prevent an otherwise eligible student from participating in the program based on any of the following three criteria: 1. The type of school the student previously attended (e.g., a student already enrolled in a private school is eligible to apply for a scholarship). 2. Whether or not a student has previously received a scholarship or participated in the DC OSP, regardless of the number of years since the student was awarded a scholarship or participated in the DC OSP. 3. Whether or not the student was a member of the control group used by the Institute of Education Sciences (IES) to carry out previous DC OSP evaluations. To receive a grant, an eligible entity is required to submit an application that includes a detailed description of how the entity will do the following: address the program priorities (see subsequent discussion); ensure that a random selection process, which gives weight to the priorities discussed below, will be used if more eligible students apply for a scholarship than can be accommodated in the DC OSP; ensure that if more participating eligible students seek enrollment at a participating private school than the school can accommodate, the school will use a random selection process to select participating eligible students; notify parents of eligible students about the availability of expanded choice opportunities to enable parents to make informed decisions; carry out activities to provide parents of eligible students with expanded choice options by awarding scholarships; determine the amount that will be provided to parents for the payment of tuition, fees, and transportation expenses, if applicable; seek out private elementary and secondary schools in DC to participate in the program; ensure that each participating private school will meet the reporting and other program requirements; ensure that each participating private school will submit to site visits by the eligible entities as determined necessary by the eligible entity; ensure that participating schools are financially responsible and will use the funds received effectively; ensure the financial viability of participating private schools in which 85% or more of all students enrolled in the school are participating eligible students that use a scholarship; address the renewal of scholarships for participating eligible students, including continued eligibility; ensure that a majority of its voting board members or governing organization are DC residents; and ensure that it utilizes internal fiscal and quality controls and complies with applicable financial reporting requirements and DC OSP requirements. In its application, the eligible entity must also provide an assurance that it will comply with all requests related to any evaluation carried out in compliance with the DC OSP evaluation requirements. In determining grant awards to eligible entities, the Secretary must give priority to applications that will most effectively do three things. First, in awarding scholarships, the eligible entity must give priority to two types of students—(1) an eligible student who, in the school year preceding the school year for which the eligible student is applying for a scholarship, attended an elementary or secondary school identified as one of the lowest-performing schools under DC's accountability system; and (2) students whose household includes a sibling or other child who is already participating in the program of the eligible entity, regardless of whether such students have previously been assigned to a DC OSP evaluation control group or have previously attended a private school. Second, the eligible entity must effectively target resources to students and families that lack the financial resources to take advantage of educational options. Third, the eligible entity must provide students and families with the widest range of educational options. Section 3007 includes requirements for the use of funds. An eligible entity is required to use the grant funds to provide eligible students with scholarships to pay tuition, fees, and transportation expenses (if applicable) to enable the eligible student to attend the participating private school of his/her choice. The eligible entity is required to ensure that the amount of tuition and fees charged by a participating school for an eligible student participating in the DC OSP does not exceed the amount of tuition and fees charged by such school to students who do not participate in the DC OSP. In using the grant funds to provide scholarships, the eligible entity is required to make scholarship payments to the parent of an eligible student participating in the program in a manner which ensures that the funds will be used to pay tuition, fees, and applicable transportation expenses. With respect to the scholarship amount, in addition to the other DC OSP requirements, the eligible entity is permitted to provide larger scholarships to eligible students with the greatest need. For the 2011-2012 school year, scholarship amounts were capped at $8,000 for kindergarten through 8 th grade and at $12,000 for grades 9-12. The Secretary is required to adjust these amounts annually for inflation. For the 2018-2019 school year, scholarship amounts are up to $8,857 for elementary and middle school and up to $13,287 for high school. The Secretary is required to make $2 million of the amount appropriated for the DC OSP each fiscal year available for the eligible entity to use to cover specific expenses. Funds can be used to cover administrative expenses including, for example, determining student eligibility to participate, selecting eligible students to receive scholarships, determining the scholarship amounts, maintaining records, and conducting site visits. They also include the cost of conducting a study, including a survey of participating parents, on any barriers participating eligible students experienced in gaining admission to or attending their first choice participating private school. The results of this study were required to be submitted to Congress no later than the end of the first full fiscal year after the date of enactment of the SOAR Reauthorization Act. The eligible entity can also use the funds for educating parents about the program and assisting them with the application process, including providing information about the program and participating schools, providing funds to assist parents in meeting expenses that might otherwise preclude the participation of eligible students in the DC OSP, and for streamlining the application process. The eligible entity is also permitted to use up to 1% of the funds appropriated each year for the DC OSP to provide tutoring services to participating eligible students who need additional academic assistance. If funds are insufficient to provide tutoring services to all such students, priority must be given to students who previously attended an elementary or secondary school identified as one of the lowest-performing schools under the DC accountability system. If funds appropriated for the DC OSP for any fiscal year remain available for subsequent fiscal years, the Secretary must make them available to the eligible entity. If the remaining funds were appropriated prior to the enactment of the SOAR Funding Availability Act, the funds must be provided to the eligible entity beginning on the date of enactment of such act. If the remaining funds were appropriated on or after the date of enactment of such act, the Secretary must make the funds available by the first day of the first subsequent fiscal year. If the eligible entity decides to use these additional funds during a fiscal year, the eligible entity must use not less than 95% of the funds to provide scholarships for eligible students or to increase the amount of the scholarships during such year and not more than 5% of such additional funds for administrative expenses, parental assistance, or tutoring. Funds used for administrative expenses, parental assistance, or tutoring must be in addition to the funds made available for these purposes each fiscal year. Section 3007 also includes requirements for participating private schools. All participating private schools must meet the following requirements: The school has and maintains a valid certificate of occupancy issued by DC. For all prospective students, the school makes \"readily available\" information on its accreditation. If the school has been operating for five years or less, the school submits to the eligible agency proof of adequate financial resources. This must reflect the school's ability to maintain operations throughout the school year. The school agrees to submit to site visits as determined to be necessary by the eligible entity. The school has financial systems, controls, policies, and procedures to ensure that funds are used in accordance with the requirements of the DC OSP. The school ensures that participating students are taught core subject matter by a teacher who has a baccalaureate degree or its equivalent. The school conducts criminal background checks on school employees who have direct and unsupervised interaction with students. The school complies with all requests for data and information related to the DC OSP reporting requirements. In addition, Section 3007 requires participating schools to meet accreditation requirements. The specific requirements differ depending on whether a private school was participating in the DC OSP as of the date of enactment of the SOAR Reauthorization Act or not. For private schools that were participating in the DC OSP as of the date of enactment of the SOAR Reauthorization Act, the school must be fully accredited by an accrediting body described in certain parts of the District of Columbia School Reform Act of 1995. If a participating private school does not meet this requirement then not later than one year after the date of enactment of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), the school must be pursuing full accreditation by one of the aforementioned accrediting bodies and be fully accredited by such accrediting body not later than five years after the date on which the school began the process of pursuing full accreditation. If a private school was not participating in the DC OSP as of the date of enactment of the SOAR Reauthorization Act, it must submit documentation that the school has been fully accredited by one of the aforementioned accrediting bodies prior to participating in the DC OSP. All participating private schools are required to submit a certification to the eligible entity that the school has been fully accredited by one of the aforementioned accrediting bodies within five years of the enactment of the SOAR Reauthorization Act. If a participating private school fails to meet the relevant accreditation requirements, the eligible entity is required to assist the participating eligible students in that school to identify, apply to, and enroll in another participating private school. Section 3008 includes additional requirements that participating private schools must meet. In general, participating private schools are prohibited from discriminating against program participants or applicants on the basis of race, color, national origin, religion, or gender. The last prohibition does not apply, however, to single sex schools that are operated by, supervised by, controlled by, or connected to a religious organization to the extent that nondiscrimination based on gender would be inconsistent with the religious tenets or beliefs of the school. In addition, a parent may choose and a participating private school may offer a single sex school, class, or activity. The SOAR Act specifically says that nothing in the act should be construed as altering or amending the Individuals with Disabilities Education Act (IDEA). With respect to sectarian participating private schools, nothing in the SOAR Act prohibits the school from hiring in a manner consistent with the school's religious beliefs, requires the school to alter its mission or remove religious symbols from its building, or prevents the school from retaining religious terms in its name, selecting its board members on a religious basis, or including religious references in its mission statements or other chartering or governing documents. Each participating private school may require eligible students to follow any rules of conduct or other requirements that apply to all other students at the school. All participating private schools are required to comply with requests for data and information with respect to program evaluations required by the SOAR Act. Each participating private school is also required to comply with any testing requirements associated with the aforementioned program evaluations and discussed in detail below. IES will administer relevant assessments to students participating in the evaluation, unless the student is attending a participating private school that is administering the same assessment. If the participating private school is administering the assessment to an eligible student, it must make the assessment results available to the Secretary as necessary for the evaluation of the DC OSP. Any assistance provided to the parents of an eligible student through the DC OSP shall be considered assistance to the student and shall not be considered assistance to the participating private school that enrolls the student. In addition, any assistance provided to the parents of an eligible child under the DC OSP shall not be treated as income of the child or his/her parents for purposes of federal tax laws or for determining eligibility for other federal programs. Data on participating private schools are provided in a subsequent section of this report. In addition, Appendix B provides a list of schools participating in the DC OSP for school year 2018-2019. Section 3009 includes the evaluation requirements associated with the SOAR Act. These include requirements related to the DC OSP as well as requirements related to the use of funds by DC public schools and DC public charter schools. As part of the evaluation and monitoring requirements, the Secretary and the Mayor of the District of Columbia (hereinafter referred to as the Mayor) are required to enter into two joint agreements. First, they must jointly enter into an agreement with IES to annually evaluate the DC OSP. Second, they must jointly enter into an agreement to monitor and evaluate the funds authorized and appropriated for DC public schools and DC public charter schools. The Secretary, through a grant, contract, or cooperative agreement, must ensure that the aforementioned annual evaluation of the DC OSP is conducted using \"an acceptable quasi-experimental research design\" to determine the effectiveness of the DC OSP. The research design is prohibited from using a control study group that includes students who applied for but did not receive a scholarship. The study must evaluate the following issues: A comparison of the academic achievement of participating eligible students in grades 3-8 and at one grade at the high school level with the academic achievement of students with similar backgrounds who are attending DC public schools and DC public charter schools (hereinafter referred to as the comparison group). Participating eligible students must be assessed using the same reading and mathematics assessments used by the DC public schools to comply with the requirements of Section 1111(b) of the ESEA. The success of the program in expanding choice options for parents of participating eligible students and increasing the satisfaction of such parents and students with their choice. The reasons parents of participating eligible students choose to have their child participate in the DC OSP, including important characteristics for selecting private schools. A comparison of the retention rates, high school graduation rates, college enrollment rates, college persistence rates, and college graduation rates of participating eligible students with the rates of students in the comparison group. A comparison of the college enrollment rates, college persistence rates, and college graduation rates of students who participated in the DC OSP in 2004, 2005, 2011, 2012, 2013, 2014, and 2015 after winning the lottery to participate with the rates for students who entered but did not win the lottery in those years and who, as a result, served as the control group for previous DC OSP evaluations. In making such comparisons, nothing prohibits students who entered but did not win the lottery from reapplying for a scholarship. A comparison of the safety of the schools attended by participating eligible students and schools in DC attended by students in the comparison group, based on the perceptions of students and parents. An assessment of student academic achievement at participating private schools in which 85% of the total number of students enrolled in the school are opportunity scholarship recipients. Any other issue applicable to participating eligible students the Secretary considers appropriate such as the impact of the program on DC public elementary and secondary schools. Data collected on the impact of the program on academic achievement and the educational attainment of participating eligible students and on students and schools in DC must be disseminated by the Secretary. IES also has responsibilities with respect to evaluations. IES is required to assess participating eligible students in grades 3-8 and at one grade at the high school level, by supervising the administration of the same reading and mathematics assessments used by the DC public schools to comply with the requirements of Section 1111(b) of the ESEA. In addition, IES is required to measure the academic achievement of all participating eligible students in grades 3-8 and at one grade at the high school level. Finally, IES is also required to work with the eligible entity that receives a grant under the DC OSP to ensure that the parents of each participating eligible student agree to allow their child to participate in the aforementioned evaluations and assessments carried out by IES. In meeting the evaluation requirements included in Section 3009, no personally identifiable information may be discussed in compliance with Section 444 of the General Education Provisions Act (GEPA). With respect to any student who is not attending a public elementary or secondary school, personally identifiable data shall only be disclosed to individuals carrying out the evaluation of the DC OSP, the group of individuals providing information for carrying out the evaluation of such student, and the parents of such student. The Secretary is required to submit to various congressional committees annual interim reports (not later than April 1 of the year after the date of enactment of the act) and each subsequent year through the year in which a final report is submitted, on the progress and preliminary results of the DC OSP evaluation. The Secretary must also submit a final report on the results of the DC OSP evaluation to the same congressional committees no later than one year after the final year for which a grant is made to the eligible entity. All reports and underlying data gathered in compliance with Section 3009 shall be made available to the public upon request, in a \"timely manner,\" following the Secretary's submission of a report to Congress. In making this information public, no personally identifiable information shall be disclosed or made available to the public. The Secretary may not use more than 5% of the funds appropriated for the DC OSP for a given fiscal year for evaluation purposes. The reporting requirements associated with the DC OSP are included in Section 3010. The eligible entity that receives funds during a year must submit a report to the Secretary not later than July 30 of the following year that provides information on the activities that were carried out using the funds received during the prior year. Additionally, the eligible entity must submit a report to the Secretary by September 1 of the year during which the second school year of the eligible entity's program is completed and for each of the next two years that includes data on the academic growth and achievement of scholarship participants, the high school graduate rate and college admission rate of scholarship participants, where appropriate, and parental satisfaction with the program. All of these reports are prohibited from including personally identifiable information. The eligible entity is also required to ensure that each participating private school during a given school year reports to the parents of each scholarship participant on the student's academic achievement; the safety of the school, including data on the incidence of school violence, student suspensions, and student expulsions; and the school's accreditation status. With respect to a scholarship participant's academic performance, the school must compare the student's performance with the (1) aggregate academic achievement of other scholarship recipients at the school who are in the same grade or level, and (2) aggregate academic achievement of the student's peers at the school who are in the same grade or level. Except for providing information about a student who is the subject of a report to the student's parent, these reports are prohibited from including personally identifiable information. Finally, the Secretary is required to report to various congressional committees not later than six months after the first appropriation of funds and annually thereafter on the findings from the reports submitted by the eligible entity. As previously discussed, the DC OSP is funded as part of a three-pronged funding arrangement. The other two parts of this three-pronged approach include DC public schools and DC public charter schools. Section 3004(b) requires the Secretary to provide funds to the Mayor if the Mayor agrees to the requirements included in Section 3011 for the DC public schools to improve public education in DC and for the DC public charter schools to improve and expand quality public charter schools in DC. Section 3011 of the SOAR Act specifies the requirements that must be met with respect to the funding provided under the act for public education in the District of Columbia. As a condition of receiving funds for DC public schools and DC public charter schools, the Mayor is required to do three things: 1. ensure that all DC public schools and DC public charter schools provide IES with all of the information that IES requires to carry out the aforementioned assessments and evaluations; 2. enter into an agreement with the Secretary to monitor and evaluate the use of funds provided to DC public schools and DC public charter schools under the SOAR Act; and 3. not later than six months after the first appropriation of funds and annually thereafter, submit to various congressional committees a report on how the funds provided under the SOAR Act for public education were used in the preceding school year and how such funds are contributing to student achievement. If after reasonable notice and an opportunity for a hearing, the Secretary determines that the Mayor has failed to comply with these requirements, the Secretary is authorized to withhold funds appropriated to DC public schools, DC public charter schools, or both, depending on whether the failure relates to DC public schools, DC public charter schools, or both. In addition to specifying requirements that the Mayor must meet, Section 3011 also includes specific requirements pertaining to the provision of funds to DC public charter schools. The Secretary is permitted to direct the funds provided for any fiscal year (or a portion of such funds) to the Office of the State Superintendent of Education (OSSE) in DC. However, by doing so, the Secretary may not affect funding available for the DC OSP. The OSSE is permitted to transfer the funds received to subgrantees that are specific DC public charter schools or networks of such schools or to DC-based nonprofit organizations with experience in successfully providing support or assistance to DC public charter schools or networks of such schools. In addition, the funds provided for DC public charter schools shall be available to any DC public charter school that is in good standing with the DC Public Charter School Board (DCPCSB). Further, OSSE and the DCPCSB are prohibited from restricting the availability of funds to certain types of schools based on the school's location, governing body, or school facilities. Section 3014 authorizes $60 million to be appropriated for each fiscal year from FY2012 through FY2019. Of the funds appropriated in each of these fiscal years, one-third of the funds must be used for the DC OSP, one-third of the funds must be used for DC public schools, and one-third of the funds must be used for DC public charter schools. If appropriations for these fiscal years do not equal $60 million, the amount that is appropriated must be divided in thirds among the DC OSP, DC public schools, and DC public charter schools. Funds appropriated for FY2012 through FY2019, as well as those previously appropriated and available, are to remain available until expended. Section 3012 of the SOAR Act includes multiple transition provisions, including the repeal of the DC School Choice Incentive Act of 2003, special rules regarding funding, provisions related to multiyear awards, requirements for a MOU, and orderly transition provisions. With respect to the special rules regarding funding, the SOAR Act makes changes to prior appropriations bills that provided funding for the DC OSP. First, the SOAR Act allows funds provided for the DC OSP for FY2009, FY2010, or any other act to be used to provide opportunity scholarships for the 2011-2012 school year to students who have not previously received such scholarships. Second, the SOAR Act stated that provisions of the FY2010 appropriations act related to a report on the academic rigor and quality of each participating school and a requirement that the Secretary ensure that site inspections are conducted at each participating private school at least twice a year no longer applied. Third, any unobligated amounts that had been reserved to carry out these aforementioned provisos were to be made available to the eligible entity for administrative expenses or to provide scholarships, including providing scholarships for the 2011-2012 school year to students who had previously not received such scholarships. The transition provisions also include a requirement that a recipient of a grant or contract under the DC School Choice Incentive Act of 2003, as such act was in effect on the day prior to the enactment of the SOAR Act, shall continue to receive funds in accordance with the terms and conditions of such grant or contract with certain exceptions. For example, the aforementioned provisos related to the DC OSP that were addressed by the first special rule related to funding shall not apply. In addition, any changes made by the MOU, discussed below, shall apply. The transition provisions require the Secretary and the Mayor to revise the MOU that was entered into under the DC School Choice Incentive Act of 2003, as such act was in effect on the day prior to the enactment of the SOAR Act, to address the implementation of the DC OSP under the SOAR Act. The revised MOU must also address how the Mayor will ensure that DC public schools and DC public charter schools comply with all the \"reasonable requests\" for information needed to fulfill the evaluation requirements of the DC OSP. Finally, the Secretary is permitted to take such steps as the Secretary determines to be necessary to provide for an orderly transition from the authority of the DC School Choice Incentive Act of 2003 to the authority of the SOAR Act. Funding for the DC OSP has been included with more general funding provided by the federal government to the District of Columbia for school improvement since the program's inception. The FY2004 Consolidated Appropriations Act, which authorized the School Choice Incentive Act, provided funding specifically for school improvement in the District of Columbia that is allocated among three entities: (1) the District of Columbia public schools for the improvement of public education, (2) the State Education Office for the expansion of public charter schools, and (3) ED for the DC OSP. Since FY2004, Congress has continued to provide funding for each of these three entities. From FY2004 though FY2019, over $800 million has been appropriated for these entities. Table 1 details funding allocations for the program's three funding recipients. This section of the report provides data on student and private school participation in the DC OSP. The data discussed in this section have been taken from publicly available reports or have been provided by the DC OSP local program administrator. Depending on when in each school year the data were collected, there may be some inconsistencies in the data, particularly with respect to student participation. Since the program's inception in the 2004-2005 school year through the 2018-209 school year, 24,351 applications have been submitted, and 10,701 scholarships have been awarded. The number of students participating from year to year has ranged from just over 1,000 students to over 1,900 students for a total of 22,493 nonunique students through the 2018-2019 school year ( Table 2 ). From the 2009-2010 school year through the 2017-2018 school year, most student participants used a scholarship to enroll in grades prekindergarten through 8 th grade, but the number of enrollees in these grade levels has fluctuated by year ( Figure 1 ). While a smaller number of students have used a scholarship to attend a high school, the number of students using a scholarship at that level has fluctuated less over this time period, particularly in recent school years. Appendix A includes detailed data on scholarship use by grade level. Data on applications to the program are available for school years 2011-2012 through 2018-2019 but only sporadically in prior years ( Table 3 ). For the first year of the program (2004-2005 school year), almost 2,700 students applied for a scholarship. Four years later (2008-2009 school year), the number of scholarship applications was 726 with the majority of the applications coming from returning students. During the 2012-2013 school year, the number of applications exceeded 1,550 with over 1,000 applications coming from new students. Since that school year, the program has received over 3,000 applications each year. For the 2018-2019 school year, a total of 3,294 applications were received with 1,961 applications submitted by returning students and 1,333 applications submitted by new students. Of these students, 1,645 students—1,329 returning students and 316 new students—used a scholarship in 44 of the 46 participating private schools. Among the students using a scholarship during the 2018-2019 school year, the average annual family income was $23,285. In addition, 43% of the participating students were eligible for SNAP or Temporary Aid for Needy Families (TANF) benefits. The majority of the participating students were African-American/Black (73.7%), followed by Hispanic and/or Latino (17.3%). Since the inception of the DC OSP program, the number of participating schools has ranged from 46 schools to 68 schools ( Table 4 ). With the exception of the first two years of the program, there has been a generally downward trend in the number of participating private schools. As students choose which participating private school they would like to attend and have to meet any relevant admission criteria at such school, not every participating school may enroll a participating eligible student. As shown in Table 4 , there has never been a school year in which all of the participating private schools also enrolled a scholarship recipient. The percentage of participating schools enrolling scholarship recipients has ranged from 78.8% to 98.0%. Appendix B provides more detailed information about participating private schools for the 2018-2019 school year. For the 2018-2019 school year, 46 private schools are participating in the DC OSP. Of these schools, 39 serve students in elementary or middle schools and 20 serve students in high school. For participating private schools that reported data on tuition, the scholarship could fully cover tuition at 11 schools for all or some of the grades served by the school. Of the 46 participating private schools, 33 schools indicated they were accredited, 1 school indicated that it was a candidate for accreditation, and 8 schools did not provide any information on their accreditation status. Since the enactment of the DC OSP and through each subsequent reauthorization of the DC OSP, statutory language has required ED to award one or more grants to an eligible entity to administer the program. Since the inception of the program, ED has only awarded a grant to one eligible entity through each grant competition. To date, three different organizations have served as the local program administrator for the DC OSP. The Washington Scholarship Fund (WSF) was the first organization to serve as the local program administrator for the DC OSP. At the time it was selected, the WSF was the largest and oldest granter of privately financed scholarships in the District of Columbia. WSF's contract to administer the program was for the five-year period that corresponded with the original program authorization of the DC OSP (FY2004 though FY2008). In its first evaluation of the program, the Government Accountability Office found that WSF expanded its operations from \"$150,000 in federal and foundation grants in fiscal year 2004 to $12.9 million in 2006 without sufficient accountability mechanisms to govern the use of the OSP funds.\" GAO also determined that WSF \"did not have the capacity to oversee participating private schools and administer a growing scholarship program funded with federal dollars.\" GAO made several recommendations to ED about directing the grantee to improve internal controls, continue to integrate its financial systems, improve monitoring, and \"provide accurate and complete information to parents.\" The findings from the GAO evaluation are discussed in greater detail below. When the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) extended the DC OSP beyond its original authorization period, ED held a competition in FY2009 to select a local program administrator for a one-year period. WSF was once again selected as the local program administrator. However, WSF was unable to continue administering the program beyond the 2009-2010 school year \"because it was unable to obtain the additional funding commitments necessary to serve the participating families and fulfill school oversight responsibilities.\" The WSF transferred administration of the DC OSP to the DC Children and Youth Investment Trust Cooperation (hereinafter referred to as the Trust) in 2010. To receive the grant following the transfer of local program administration from WSF to the Trust, the Trust was required to submit a grant transfer agreement to ED that had to address the absolute priority that FY2009 appropriations only be used to provide scholarships to currently enrolled students and that FY2010 and prior-year appropriations only be used to provide scholarships during the 2010-2011 school year to students who received scholarships during the 2009-2010 school year. ED subsequently granted a waiver and extension of the one-year project period to the Trust. ED did not think it would be in the public interest to run another grant competition for FY2010 and FY2011, if funds were appropriated, especially since it was anticipated that the project would only operate for a short period of time and serve a limited population of students. ED did not run another grant competition to select a local program administrator until FY2015. GAO conducted a second evaluation of the DC OSP while the Trust was serving as the local program administrator. It found that the Trust was unable to provide accurate and timely information to parents about participating schools. GAO also found that the Trust lacked the internal controls necessary for effective implementation and oversight of the DC OSP. In addition, GAO found that ED had provided limited assistance to the Trust with respect to several areas outlined in a MOU and made 10 recommendations for how ED could improve the program. A more detailed discussion of the findings from the GAO evaluation is included below. Ultimately, the Trust decided to no longer serve as the program administrator. On August 19, 2015, ED awarded a grant to Serving Our Children to be the program administrator for the DC OSP. The grant was for a three-year period from October 1, 2015, to September 20, 2018. In January 2018, ED proposed granting a waiver to extend the period of performance for the current grantee for up to two years to allow Serving Our Children to receive additional funds in FY2018 and FY2019 to continue serving DC students. ED proposed the waiver be based on four factors: 1. Extending Serving Our Children's project period would \"create stability and continuity\" as the DC OSP enters its last two years of its program authorization. 2. Based on the number of eligible applications to serve as the program administrator that were submitted during past DC OSP competitions, ED indicated that \"few organizations are eligible for and have the capacity to administer\" the DC OSP. 3. Extending Serving Our Children's grant period would allow the organization to \"fully implement the new recruitment and marketing strategies designed to significantly increase scholarship usage rates.\" 4. Extending Serving Our Children's project period would align the next DC OSP competition with the \"next anticipated reauthorization of the SOAR Act.\" ED subsequently issued a final waiver and extension of the project period in April 2018. GAO has not conducted an evaluation of DC OSP program management since Serving Our Children was granted the contract to administer the program. GAO examines how federal funds are spent. It provides Congress and federal agencies with information on how to save money and work more efficiently. With respect to the DC OSP, GAO has evaluated certain accountability mechanisms and whether they are operating as intended, such as the program's use of funds and general adherence to statutory requirements. GAO also has evaluated how ED and the District of Columbia fulfilled their roles and responsibilities for the DC OSP. As mentioned above, GAO has conducted two evaluations of the DC OSP. The first evaluation was published in 2007 when the DC OSP was administered by the WSF. This evaluation primarily used data collected and reported during the 2005-2006 school year. The second evaluation was published in 2013 when the program was administered by the Trust. This evaluation primarily used data from a performance audit from May 2012 to September 2013, as well as program documentation from 2010 to 2013. GAO's first evaluation of the DC OSP included an assessment of three program goals: (1) accountability mechanisms governing the use of funds, (2) results of WSF's efforts to meet the program's recruiting priorities and eligibility requirements and inform parents of their choices, and (3) the extent that the evaluation of the DC OSP reflects statutory requirements and the implementation of the program supports the detection of useful and generalizable findings. For the first goal, GAO found that WSF's accountability mechanisms regarding the use of funds were not strong, and WSF did not adhere to its own procedures. For example, WSF used OSP funds to pay tuition for students that attended schools that typically did not charge students tuition, which was not in accordance with statutory requirements. In addition, the WSF used funds to pay before- and after-care fees, and GAO was unable to determine whether this use of funds was in accordance with statutory requirements. WSF's accountability mechanisms were weakened by rapid expansion and limited time to design and implement the internal controls necessary to manage the major increase in operations. WSF also experienced a high rate of staff turnover during the first several years of administering the DC OSP. With regard to WSF's efforts to meet the recruiting priorities, GAO found that WSF was not able to recruit an appropriate number of students from schools in need of improvement. Specifically, the proportion of students from schools in need of improvement that received a scholarship was lower than the proportion of such students attending DC public schools. WSF also had difficulty finding placements for students at the secondary level because there were fewer openings available at participating private schools. WSF also faced challenges in providing parents with accurate information regarding private schools. For example, in some cases, WSF provided inaccurate information on teacher qualifications and tuition for some schools. In terms of meeting statutory evaluation requirements, GAO found that the research design was strong and that the use of random assignment facilitated appropriate comparisons between students who received a scholarship and similar students who attended DC public schools. Over the course of the program evaluation, however, the DC public schools changed the assessment measure used to measure student achievement. The original assessment used to evaluate the DC OSP was chosen in accordance with statutory requirements. However, it became mismatched with the assessment used by DC public schools. The lack of consistency in the assessment measure between the DC OSP students and the DC public school students limited the ability to make comparisons and generalize findings. GAO's second evaluation of the DC OSP included an assessment of three program goals: (1) the extent to which the Trust provides information that enables families to make informed school choices, (2) whether the Trust's internal controls ensure accountability for the DC OSP, and (3) how ED and the District of Columbia agencies have performed their stated roles and responsibilities. The Trust made efforts to inform families of their school choices through various outreach activities, including advertising through print, radio, bus ads, newspapers, and flyers posted in public areas. GAO, however, found that the Trust was not able to provide accurate and timely information to parents about participating schools. For example, the participating school directory was published nine months after the start of the school year and lacked key information about tuition, fees, and accreditation. GAO found that the Trust lacked the internal controls necessary for effective implementation and oversight of the DC OSP. For example, the Trust did not have a process for verifying self-reported information from private schools, including eligibility information. Additionally, while there were adequate procedures in place for financial reporting, the Trust did not submit mandatory financial reports on time and in accordance with statutory requirements. In some cases, reports were one or two years late. ED and the District of Columbia have a MOU to clarify roles and responsibilities in the implementation of certain aspects of the DC OSP. These agencies worked in a cooperative agreement with the Trust to meet program goals. GAO found that ED provided limited assistance to the Trust with regard to several areas outlined in the MOU. For example, ED was responsible for helping the Trust make improvements to financial reporting procedures and site visit policies, as well as improving the accuracy of information provided to parents. ED provided general assistance with administrative and operational functions; however, GAO found that ED did not provide assistance in these specific areas of the MOU. In addition, there was a lack of clarity regarding the responsibility of the Trust to conduct building, zoning, health, and safety inspections in participating schools. As a result, inspections were not conducted as described in the MOU. In addition to the previously discussed DC OSP evaluations conducted by GAO, which focused largely on program implementation issues, ED has conducted impact evaluations of the participation of schools, parents, and students in the DC OSP, as well as the effectiveness of the program on student achievement and other outcome measures. These evaluations focused on determining the effectiveness of the DC OSP in increasing student achievement, parent and student satisfaction, school safety, and parental involvement. The impact evaluations were designed to provide evidence for whether the DC OSP works to improve academic achievement for students and expand school choice options for parents. Appendix C provides a link to each of these evaluation studies. A summary of the results of each of the impact evaluations is discussed below and more detailed results are presented in Appendix D . IES has conducted six evaluations of the DC OSP . The first two evaluations gathered data on schools, students, and parents that chose to participate in the program. These participation evaluations, however, did not gather achievement data or other outcomes that would allow for the evaluation of the effectiveness of the program. The next four evaluations were impact evaluations that measured the effectiveness of the DC OSP with student achievement data and other outcomes of interest. These six evaluations took place under different legislative requirements over a period of 12 years. A seventh evaluation is beginning with data collected during school year 2018-2019. Table 5 provides a list and descriptive characteristics of evaluations of the DC OSP conducted by ED. It depicts how DC OSP evaluations correspond to the school years in which data were collected. Appendix C provides links to the ED reports corresponding to each evaluation. The four impact evaluations published to date are similar in their design and presentation of results. The first two were conducted under the legislative requirements of P.L. 108-199 and the second two were conducted under the legislative requirements of P.L. 112-10 . While there are some differences between the requirements, both evaluations were required to use the strongest possible research design to determine the effectiveness of the DC OSP and both evaluations used similar outcome measures (e.g., student achievement in reading and mathematics, parent and student satisfaction, perceptions of school safety, and parental involvement). Due to these similarities, results are reported by outcome measure. For each outcome measure, the results of evaluations required by P.L. 108-199 are discussed first and the results of evaluations required by P.L. 112-10 are discussed second. As previously discussed, the evaluations were required to use the strongest possible research design for determining the effects of the DC OSP. The use of lotteries in the DC OSP allowed the evaluation to use the \"gold standard\" of evaluation, which is randomization. The lottery created two randomly selected groups: students who were selected to receive a scholarship (treatment group) and students who applied for but were not selected to receive a scholarship (control group). For those students who received a scholarship, some students chose to use the scholarship (scholarship use group) and some students chose not to use the scholarship (scholarship offer group). The evaluations use three groups to determine the effectiveness of the program (two treatment groups and one control group): (1) students who were offered a scholarship (scholarship offer group), (2) students who used a scholarship (scholarship use group), and (3) students who were not offered a scholarship (control group). For the purposes of the evaluation, the scholarship offer group and the scholarship use group are considered treatment groups. Treatment groups and the control group were compared on the following outcome measures: (1) reading and mathematics achievement on a grade-appropriate, nationally norm-referenced standardized test; (2) parent and student satisfaction (surveys); (3) parent and student perceptions of school safety (surveys); and (4) parental involvement (surveys). The effects of each outcome measure were disaggregated by several subgroups. Across the four evaluation studies, subgroups included the following: (1) students who previously attended a school in need of improvement (SINI), (2) students who did not attend a SINI (non-SINI), (3) students in elementary school, (4) students in secondary school, (5) students who had lower levels of achievement (below the median) when entering the scholarship program, (6) students who had higher levels of achievement (above the median) when entering the scholarship program, (7) male students, (8) female students, (9) students in cohort 1 (students who applied in 2004), and (10) students in cohort 2 (students who applied in 2005). All subgroups were not examined in all evaluations. The following section discusses the results of the four impact evaluations, comparing the treatment groups (scholarship offer and scholarship use groups) to the control group (scholarship not offered) on the four outcome measures. Appendix D provides summary tables describing the results of the four impact evaluations conducted by ED. There is one table for each outcome measure: (1) reading and mathematics achievement ( Table D-1 ), (2) parent and student satisfaction ( Table D-2 ), (3) parent and student perceptions of school safety ( Table D-3 ), and (4) parental involvement ( Table D-4 ). The tables report each outcome measure disaggregated by subgroups (e.g., SINI, non-SINI, elementary, secondary, etc.). Table D-1 presents the results for reading and mathematics achievement. Evaluations conducted under the requirements of P.L. 108-199 report the following: For reading achievement , students who were offered or used a scholarship scored significantly higher overall than students in the control group in the first impact evaluation; however, the effect was not observed in the second impact evaluation. In the second impact evaluation, the overall effect on reading achievement was not significant, but there were some statistically significant positive effects for subgroups (e.g., students in elementary school, students who had higher levels of achievement entering the year, and female students). For mathematics achievement, students who were offered or used a scholarship did not score significantly differently than students in the control group. Evaluations conducted under the requirements of P.L. 112-10 report the following: For reading achievement , students who were offered or used a scholarship did not score significantly differently overall than students in the control group in both impact evaluations. In some subgroups, there were statistically significant negative effects of scholarship offer and scholarship use. For example, students in secondary schools showed statistically significant negative effects on reading achievement across both impact evaluations. For mathematics achievement , across both impact evaluations, students who were offered or used a scholarship scored statistically significantly lower overall than the control group in both impact evaluations. Table D-2 presents the results for parent and student satisfaction. Evaluations conducted under the requirements of P.L. 108-199 report the following: Parent satisfaction for parents of students who were offered or used a scholarship was significantly higher than parents of students in the control group for both impact evaluations. At the subgroup level, this trend was seen consistently across the evaluations for the subgroups of students from non-SINI schools and students who entered the scholarship program with higher levels of achievement. Student satisfaction for students who were offered or used a scholarship was not significantly different than students in the control group for both impact evaluations. Evaluations conducted under the requirements of P.L. 112-10 report the following: Parent satisfaction for parents of students who were offered or used a scholarship was not significantly different than parents of students in the control group for both impact evaluations. In the second impact evaluation, there were some positive subgroup effects for parents of higher-achieving students, but the effect was not observed in the overall group. Student satisfaction for students who were offered or used a scholarship was not significantly different than students in the control group for both impact evaluations. Table D-3 presents the results for parent and student perceptions of school safety. Evaluations conducted under the requirements of P.L. 108-199 report the following: Parent perceptions of school safety for parents of students who were offered or used a scholarship were significantly higher compared to parents of students in the control group. In the first impact evaluation, all subgroups of parents reported higher perceptions of safety. In the second impact evaluation, only one subgroup of parents reported higher perceptions of school safety (i.e., parents of students who previously attended non-SINI schools). Student perceptions of school safety for students who were offered or used a scholarship were not significantly different than students in the control group for both impact evaluations. Evaluations conducted under the requirements of P.L. 112-10 report the following: Parent perceptions of school safety for parents of students who were offered or used a scholarship were significantly higher compared to parents of students in the control group. The positive effect was observed across most subgroups in both impact evaluations. Student perceptions of school safety for students who were offered or used a scholarship were not significantly different compared to students in the control group in the first impact evaluation. However, in the second impact evaluation, students reported significantly higher perceptions of school safety if they were offered or used a scholarship. The positive effect was observed for several subgroups of students, including students from SINI schools, students in secondary schools, and students who entered the program with lower levels of mathematics achievement. Table D-4 presents the results for parental involvement. Evaluations conducted under the requirements of P.L. 108-199 report the following: Parental involvement of parents of students who were offered or used a scholarship was not significantly different from the control group. In some subgroups, the first impact evaluation showed that parental involvement of parents in the treatment group was lower than the control group (i.e., parents of students who previously attended non-SINI schools, parents of secondary students, parents of students who entered the program with higher levels of achievement, and parents of females). Evaluations conducted under the requirements of P.L. 112-10 report the following: Parental involvement of parents of students who were offered or used a scholarship was not significantly different from the control group. In the first impact evaluation, there was one positive effect of parental involvement for one subgroup (i.e., parents of students in secondary school), but the effect was not observed in the overall group. The federal government has provided over $245 million since FY2004 to support the DC OSP. These grants have been accompanied by program evaluation results to examine the return on the federal government's investment. The findings from these evaluations over the course of the existence of the program have been mixed (see Appendix D ). This leads to questions about whether the program is successful and how success should be measured. Another question that arises is whether the results of these evaluations can be used to replicate the DC OSP in other locations. Each of these issues is discussed briefly below. When evaluating a new program, some expect immediate positive results. In the evaluation studies of the DC OSP, students who were offered or used a scholarship made some significant gains in reading compared to the control group and had similar or sometimes lower mathematics achievement compared to the control group. While these results may not be overwhelmingly positive, it is difficult to gauge how much achievement gain to expect. To create a context for interpreting the results of the DC OSP evaluation, it may be helpful to consider the results of other impact evaluations of similar scholarship programs. Several states have similar scholarship programs and have conducted impact evaluations. The Louisiana Scholarship Program (LSP), for example, offers publicly funded vouchers for low-performing students to attend private schools if their family income does not exceed 250% of the poverty line. In the first two years, there were significant negative effects for students who participated in the LSP program. The evaluation of the LSP after three years, however, found no statistically significant differences in reading or mathematics. A retrospective analysis of records for the Indiana Choice Scholarship Program found that scholarship recipients scored similarly in reading but significantly lower in math after four years. Based on the results of these evaluations, results from the DC OSP seem to be in line with what is typical for students after several years of participation in this type of scholarship program. Another issue related to evaluating the program is whether the evaluations are focused on the appropriate outcome measures and how much weight should be afforded to a given outcome measure. There is a substantial focus on student academic performance, which is a common focus of the evaluation of education programs, including those offered in public schools. The DC OSP evaluations have also looked at other factors such as perceptions of school safety, parent involvement, and high school graduation rates. As with other academic programs, if academic performance is comparable to or lagging behind that of a comparison group but some gains are seen on other outcome measures, the question becomes one of whether those other gains are sufficient to merit program continuation or possible program expansion. This question is difficult to grapple with, as school voucher advocates may point to any successes as a reason for program continuation, while opponents of school vouchers may point to any shortcomings as a reason for the program to be eliminated. The \"gold standard\" in any experimental evaluation is the use of random assignment into treatment and control groups. The evaluations described above required IES to use the strongest possible research design for determining the effectiveness of the opportunity scholarship program. The DC OSP evaluation used random assignment to choose students who would be offered a scholarship and students who would not be offered a scholarship. It was not practical or feasible, however, to randomly assign students to use the scholarship and other students not to use the scholarship. By the nature of the program, parents and students were provided with a choice. As such, the random assignment allows for a direct comparison between students who were offered a scholarship and those who were not offered a scholarship. It did not, however, allow for a direct comparison between students who used the scholarship and those who were not offered a scholarship. To determine the effect on students who used the scholarship, researchers used a mathematical adjustment. The effect of using a scholarship was estimated by dividing the impact of being offered a scholarship by the fraction of the treatment group that used the scholarship. Because researchers are not able to use random assignment of students to require the use of a scholarship in a school choice program, it may be more practical to use quasi-experimental research designs. P.L. 115-31 allows IES to use an acceptable quasi-experimental research design for determining the effectiveness of the DC OSP. This approach does not use a control group of students who applied for but did not receive a scholarship. A well-designed, quasi-experimental approach, however, would allow IES to make reasonable comparisons between students who use a scholarship to students of similar backgrounds in DC public schools and DC public charter schools. During the impact evaluations, IES was required to work with eligible entities to ensure that parents of each student who applies for a scholarship agree to allow their child to participate in the assessment for the evaluation. Evaluations need a certain level of participation, or \"response rate\" to have results be considered reliable and valid. Response rates are not typically 100%. For example, the final evaluation report under P.L. 108-199 finds that the effective response rate for reading and mathematics assessments was 69.4% for the control group and 69.5% for the treatment group. That is, approximately 69.5% of students who were offered a scholarship participated in reading and mathematics assessments. The What Works Clearinghouse considers response rates below 70%, or a difference in response rates between treatment and control groups of over 5%, to be a possible attrition problem. Another potential source of attrition is natural attrition as students either graduate or leave secondary education. The DC OSP impact evaluations are part of a longitudinal study that tracks students over time. Some students in the first cohort were in secondary school. Over four years of evaluation under P.L. 108-199 , there was a natural attrition of students who could no longer be part of the study because they \"graded-out\" or left the K-12 education system. By the final year of the evaluation, 13% of the treatment group could no longer be tracked because they \"graded-out\" or left. When the sample size of an evaluation is reduced due to attrition, it becomes harder to find an effect of the treatment. That is, an effect of a certain size may be significant in one year, but as the sample size is reduced, that same size of effect may become insignificant in the next year because of a lack of power in the study. The likelihood of finding an effect in an impact evaluation is dependent on the sensitivity of outcome measures. To evaluate reading and mathematics achievement in the DC OSP evaluation, IES used both the Stanford Achievement Test, version 9 (evaluations conducted under the requirements of P.L. 108-199 ) and the TerraNova, Third Edition (evaluations conducted under the requirements of P.L. 112-10 ). These assessments were selected because they were considered a grade-appropriate, nationally norm-referenced standardized test for students in grades K-12 with a relatively short administration (90 minutes for the reading and mathematics subtests). These assessments, however, are not aligned with standards and curricula in place at DC private schools, public schools, or public charter schools. It is possible, therefore, that the assessments used in the evaluations were not sensitive to the potential academic gains made by students participating in the evaluation. P.L. 115-31 has changed the assessment requirements such that future evaluations must use the same reading and mathematics assessments used by the DC public schools to comply with the ESEA. DC public schools currently administer assessments developed by the Partnership for Assessment of Readiness for College and Careers (PARCC). PARCC assessments are aligned with academic standards used by the DC public schools. These assessments, however, may not be aligned with the standards in place in DC private schools. The PARCC assessments, therefore, may be more sensitive to changes in achievement for students who attend DC public schools than students who attend DC private schools. It is possible that future evaluations will have a positive bias toward DC public school students since the assessment theoretically measures what they are learning in the classroom. The extent to which the assessments measure what DC private school students are learning in the classroom is unknown. In evaluation terms, therefore, there may be a positive bias toward the control group. If there is a positive bias toward the control group, it would be more difficult to detect a significant effect of the treatment (i.e., the offer or use of a DC opportunity scholarship). Positive results of impact evaluations are often used as evidence to \"scale-up\" a specific education policy or practice. In some cases, an education policy or practice that works in one setting may also work in another setting. If providing another school choice option to parents and students in the District of Columbia produces positive results, is this evidence that these results would likely be replicated in another state or city? It is difficult to interpret the results of the DC OSP impact evaluations within the context of other school choice programs. DC has a unique structure of governance and a relatively large number of charter schools. If the program has evidence of increasing achievement and expanding choice options for students and their parents, the likelihood that these effects would generalize to other cities remains unknown. Appendix A. DC OSP Scholarship Use by Grade Level, 2009-2010 School Year Through 2017-2018 School Year Appendix B. Private Schools Participating in the DC OSP, 2018-2019 School Year Appendix C. Impact Evaluation Reports Appendix D. Summary of Impact Evaluation Results Appendix E. Glossary of Acronyms Appendix F. Legislative History of the DC Opportunity Scholarship Program This appendix traces the DC OSP from the efforts associated with its initial enactment through its current authorization. With the exception of the SOAR Technical Corrections Act ( P.L. 112-92 ), the enacting legislation and all subsequent amendments related to the DC OSP have been included in appropriations bills. Funding for the DC OSP is provided under the Federal Payment for School Improvement account under the District of Columbia title, which is included in the Financial Services appropriations act. This account was established with the enactment of the DC OSP in FY2004. Other changes to the DC OSP, such as program reauthorizations, have also been included in annual appropriations bills but have been detailed elsewhere in the appropriations bills. This discussion includes each relevant bill that has been enacted since the DC School Choice Incentive Act of 2003. While the discussion includes some information about provisions specifically affecting DC public schools and DC public charter schools, the focus of the discussion is on the DC OSP. Enactment of the Opportunity Scholarship Program In the Bush Administration's FY2004 budget submission, the Administration requested $75 million for a Choice Incentive Fund that would have provided competitive grants to states, local educational agencies (LEAs), and community-based organizations that expanded opportunities for parents of children who attend low-performing schools to attend higher-performing schools, including charter schools and private schools. Under the Administration's proposal, a portion of the funds would have been reserved for school choice programs in the District of Columbia. Both the Mayor of the District of Columbia (hereinafter referred to as the Mayor), Anthony Williams, and the President of the District of Columbia Board of Education, Peggy Cooper Cafritz, endorsed the concept of private school vouchers as a means of improving education options for DC public school students and as a means for transforming the city's faltering public school system. Local supporters of a voucher program insisted that the program had to be federally funded and could not result in a reduction of funds to the city's traditional public schools and public charter schools. Eleanor Holmes Norton, the District of Columbia's Delegate to Congress, subsequently criticized the Mayor's support for a federally funded voucher program, noting that the proposal was an affront to home rule. Other opponents of the voucher program argued that the program would reduce needed funding for public education and be of minimal benefit to most of the city's students. The establishment of a federally supported voucher program met with both support and resistance in Congress. In July 2003, the House Committee on Government Reform passed H.R. 2556 , the DC Parental Choice Incentive Act of 2003, by a vote of 22 to 21. The act would have created a federally funded scholarship program to serve low-income students in the District of Columbia. The program would have established a competitive grant program under which the Secretary of Education would award grants to eligible entities for the operation of one or more scholarship programs. Grantees would have awarded scholarships of up to $7,500 per academic year to students who are residents of the District of Columbia and whose family income did not exceed 185% of the poverty level to enable them to attend private elementary and secondary schools located in the District of Columbia. The program would have been authorized at $15 million for FY2004 and at such sums as may be necessary through FY2008. Later that month, the House Committee on Appropriations reported H.R. 2765 , which would have provided $10 million for a school choice program in the District of Columbia in the FY2004 appropriations bill for the District of Columbia. The program was substantively similar to the program proposed under H.R. 2556 . During floor debate on H.R. 2765 two voucher-related amendments were offered. The first, offered by Delegate Norton, would have eliminated the proposed voucher program. The amendment failed to pass by a vote of 203 to 203. A second amendment was offered by Representative Tom Davis that would have established eligibility criteria for students to receive a voucher and cap the maximum amount of funding a voucher could provide for any given school year. The amendment passed by a vote of 209 to 206. The Senate's version of the FY2004 District of Columbia appropriations bill ( S. 1583 ) included the DC Student Opportunity Scholarship Act of 2003. This bill was substantively similar to H.R. 2556 , and contained the framework on which the final provisions for the DC School Choice Incentive Act were based. It was placed on the Senate calendar but was never considered on the Senate floor. The Senate-passed version of H.R. 2765 , however, did not include funding to establish a scholarship program for low-income students. It did include funding for school improvement for public schools and public charter schools in the District of Columbia. The House-passed version of H.R. 2765 did not include funding for these specific purposes. The DC School Choice Incentive Act, which created the DC Opportunity Scholarship Program, was authorized and funded by the Consolidated Appropriations Act, 2004 ( H.R. 2673 ; P.L. 108-199 ), which included the FY2004 District of Columbia appropriations bill. Specific funding for the DC OSP was provided under the header \"Federal Payment for School Improvement,\" which also included funding for DCPS for the improvement of public education and the SEO for the expansion of public charter schools. This approach, commonly known as the three-pronged approach to funding elementary and secondary education in the District of Columbia, was initially suggested by Mayor Williams when he asked for federal assistance for public education in the District of Columbia. The proposal was supported by the Administration and many Members of Congress. While concerns were raised during consideration of the bill that only the DC OSP—not school improvement funding for DCPS or public charter schools—was authorized for five years, each year the DC OSP has been funded, the federal government has also provided funds to support school improvement in DC public schools and DC public charter schools. DC School Choice Incentive Act (FY2004 Appropriations) The DC School Choice Incentive Act of 2003 ( P.L. 108-199 , Title III) authorized the DC OSP to provide the families of low-income students, particularly students attending elementary or secondary schools identified for improvement, corrective action, or restructuring under the ESEA, as amended by the No Child Left Behind Act (NCLB; P.L. 107-110 ), with expanded opportunities to enroll their children in schools of choice located in the District of Columbia. The program was authorized for FY2004 through FY2008 as a five-year demonstration program. An appropriation of $14 million was specified for FY2004; appropriations for the subsequent fiscal years were for \"such sums as may be necessary.\" Under the DC OSP, the Secretary was permitted to award grants to eligible entities for a period of not more than five years to make scholarships to eligible students. Thus, the eligible entity functions as the local program administrator in practice. An eligible entity was defined as an educational entity of the DC government, a nonprofit organization, or a consortium of nonprofit organizations. In selecting one or more eligible entities to operate the program, the Department of Education (ED) was required to give priority to eligible entities who would most effectively give priority to eligible students who, in the school year preceding the school year for which the student is seeking a scholarship, were attending a school that was identified for improvement, corrective action, or restructuring under the ESEA. In addition, ED was required to give priority to eligible applicants that would target available resources to students and families who lacked the financial resources to take advantage of school choice options and that would provide students and families with the widest range of school options. The eligible entity was permitted to use up to 3% of the funds it receives for administrative expenses. Student eligibility for the program was open to children from families with incomes not exceeding 185% of the poverty line who were entering kindergarten through 12 th grade or who turned five years old by September 30 of the school year for which scholarships are awarded. Eligible students could apply to receive a scholarship valued at up to $7,500 to cover the costs of tuition, fees, and transportation expenses associated with attending participating private elementary and secondary schools located in the District of Columbia. Scholarships provided to students were considered assistance to the student (as opposed to the school) but were not treated as income of the parents for federal tax purposes or for determining eligibility for other federal programs. Students were required to reapply each year to participate in the program. Scholarship recipients remained eligible to continue to participate in the scholarship program, as long as their family income did not exceed 200% of the poverty level. Students enrolled in public schools identified for school improvement, corrective action, or restructuring under Title I-A of the ESEA were given priority in receiving scholarships; however, all students meeting program eligibility criteria were eligible for scholarships regardless of whether they were previously enrolled in a public or private school. In general, private schools participating in the DC OSP were prohibited from discriminating against program participants or applicants on the basis of race, color, national origin, religion, or gender. The latter prohibition did not apply, however, to single sex schools that were operated by, supervised by, controlled by, or connected to a religious organization to the extent that nondiscrimination based on gender would be inconsistent with the religious tenets or beliefs of the school. In addition, nothing in the DC School Choice Incentive Act allowed participating schools to alter or modify the provisions of the Individuals with Disabilities Education Act. With respect to sectarian private schools that accepted scholarship students, nothing in the School Choice Incentive Act prohibited the school from hiring in a manner consistent with the school's religious beliefs or required the school to alter its mission or remove religious symbols from its building. All participating private schools were required to comply with requests for data and information with respect to program evaluations required by the DC School Choice Incentive Act. The DC School Choice Incentive Act required the DC OSP to be evaluated annually. The Secretary and Mayor were required to jointly select an independent entity to conduct these evaluations. The independent entity evaluating the program was required to measure the academic achievement of participating students, use the same measurement to assess participating students as is used to assess students in DC public schools, and work with the eligible entity to ensure that the parents of all students who apply for a scholarship, regardless of whether a scholarship is received, agree that the student will participate in measurements conducted by the independent evaluator for the period for which the student applied for or received a scholarship. The evaluation was required to compare the academic achievement of scholarship recipients with students in the same grades attending DC public schools and the eligible students who applied for but did not receive a scholarship. The evaluation also had to examine the extent to which the program expanded choice options for parents; the reasons parents chose to participate in the program; retention rates, dropout rates, graduation rates, and college admissions rates for participating students with students of similar backgrounds who did not participate in the scholarship program; the impact of the program on students and public elementary and secondary schools in DC; the safety of the participating private schools attended by scholarship recipients compared with schools attended by students who were not participating in the DC OSP; and other issues as designated by the Secretary. FY2004 Appropriations The Consolidated Appropriations Act, 2004 ( P.L. 108-199 ), which authorized the DC School Choice Incentive Act, also appropriated funds for the DC OSP as well as funds for DCPS and the SEO for DC public charter schools. P.L. 108-199 specified that up to $1 million of the funds appropriated for the DC OSP could be used to administer and fund assessments. There were also requirements that applied specifically to DCPS. FY2005 Appropriations The District of Columbia Appropriations Act, 2005 ( P.L. 108-335 ) provided appropriations for the DC OSP, DCPS, and the SEO for DC public charter schools. While several statutory requirements were attached to the funding provided to charter schools and DCPS, with respect to the funds appropriated for the DC OSP, the law required that up to $1 million could be used to administer and fund required assessments. FY2006 Appropriations The Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006 ( P.L. 109-115 ) provided funding for the DC OSP, DCPS, and the SEO for DC public charter schools for FY2006. With respect to the DC OSP, it included a provision that permitted up to $1 million provided for scholarships to be used to administer and fund assessments. FY2007 Appropriations The Revised Continuing Appropriations Resolution, 2007 ( P.L. 110-5 ) authorized a long-term continuing resolution for FY2007 appropriations. This provided funding for the DC OSP, DCPS, and the SEO for DC public charter schools for FY2007. In addition, under the long-term continuing resolution, the provisions included in the FY2006 appropriations act relevant to the DC School Choice Incentive Act remained in effect with the addition of a new requirement related to charter schools. FY2008 Appropriations The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) provided funding for the DC OSP, DCPS, and the SEO for DC public charter schools for FY2009. With respect to the DC OSP, it permitted up to $1.8 million of the funds provided for the scholarship program to be used to administer and fund assessments. FY2009 Appropriations The Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) provided funding for the DC OSP, DCPS, and the SEO for DC public charter schools. With respect to the DC OSP, it added additional requirements for schools to be eligible to participate in the program and included language limiting the appropriation of funds for the program beyond FY2010. P.L. 111-8 added two requirements for participating private schools. First, participating private schools were required to have and maintain a valid certificate of occupancy issued by the District of Columbia. Second, a core subject matter teacher of scholarship recipients was required to hold a four-year bachelor's degree. Statutory language did not require that the bachelor's degree be held in the subject area of instruction. That is, it was not required, for example, that only a teacher with a four-year bachelor's degree in English can teach English classes for scholarship recipients. P.L. 111-8 further specified that the use of any funds in any act for scholarships after the 2009-2010 school year shall be available only upon reauthorization of the program and the adoption of legislation by the District of Columbia approving such reauthorization. Senator Ensign (NV) offered an amendment ( S.Amdt. 615 ) to strike the requirement that additional funding could only be provided to the program if the program was reauthorized by Congress and subsequently approved by the District of Columbia. He noted that other federal education programs, including the Higher Education Act, continued to receive federal funding despite having expired authorizations. Further, he argued that the final program evaluation had not been completed and ending the program after the 2009-2010 school year would force students, including those who had been scholarship recipients for several years, to find new schools. The amendment failed to pass by a vote of 39-58. The explanatory statement accompanying P.L. 111-8 specified that appropriations provided for opportunity scholarships in the FY2009 Omnibus Appropriations Act could only be used to provide scholarships for students currently participating in the program . That is, the funds could not be used to expand program participation. The explanatory statement also directed the Chancellor of DCPS to take steps to minimize the potential disruption and ensure the smooth transition for any scholarship recipients seeking to enroll in the public school system as a result of changes made to the DC OSP after the 2009-2010 school year. FY2010 Appropriations The Omnibus Appropriations Act, 2010 ( P.L. 111-117 ) provided funding for the DC OSP, DCPS, and the SEO for DC public charter schools. With respect to the DC OSP, it did not apply the provision in P.L. 111-8 that required that DC OSP funds be available only upon reauthorization of the program and the adoption of legislation by the District of Columbia to the FY2010 appropriations. Of the funds available for the DC OSP, the law specified that up to $1 million could be used to administer and fund assessments and up to $1 million could be used to administer student testing to allow for comparisons of the academic performance of participating private schools enrolling scholarship participants. Consistent with the previous year's appropriations language, P.L. 111-117 maintained that the DC OSP funds could only be used to provide opportunities to students who received scholarships in the 2009-2010 school year. P.L. 111-117 also added additional requirements for participating private schools. Participating private schools were required to be in compliance with accreditation and other standards under the District of Columbia compulsory school attendance laws that applied to educational institutions that are not affiliated with DCPS. In addition, the Secretary was required to submit a report to Congress by June 15, 2010, that provided information on the academic rigor and quality of each participating school. To obtain comparable data for the report, the Secretary was required to ensure that all eligible scholarship recipients participated in the same academic performance assessments as students enrolled in DCPS during the 2009-2010 school year. The Secretary was also required to ensure that at least two site inspections are conducted at each participating school on an annual basis. Scholarships for Opportunity and Results (SOAR) Act The SOAR Act was authorized under Division C of the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ). The SOAR Act replaced the DC School Choice Incentive Act, reauthorized the DC OSP, and authorized appropriations for DC public schools and DC public charter schools for FY2012 through FY2016. Many of the provisions included in the SOAR Act continue to be reflected in current law (see previous discussion of current law provisions), so they are not discussed in detail in this section. Subsequent acts that amended the SOAR Act are discussed below, including information on the changes they made to the SOAR Act. FY2011 Appropriations The Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ) provided FY2011 appropriations for the DC OSP, DC public schools, and DC public charter schools. It specified that up to $1 million could be used to administer and fund assessments and also specified that no funds could be used to administer student testing to allow for comparisons of the academic performance of participating private schools enrolling scholarship participants. In addition, the act removed the requirement that DC OSP funds be used to provide scholarships only to students who had received scholarships during the 2009-2010 school year. It further specified that scholarships could be provided to eligible students regardless of whether they had received a scholarship in any prior school year. The act did continue to require the Secretary to submit a report, detailing the academic rigor and quality of each participating private school and the associated assessments that were included in the FY2010 appropriations. Finally, the act changed the requirement that the Secretary ensure that site visits were conducted at least twice annually at participating private schools to requiring that the Secretary ensure that site visits are conducted annually. FY2012 Appropriations The Consolidated Appropriations Act, 2012 ( P.L. 112-74 ) provided FY2012 appropriations for the three parts of the SOAR Act. The act did not include any DC OSP specific provisions beyond appropriating funds for the program. SOAR Technical Corrections Act The SOAR Technical Corrections Act (SOAR TCA; P.L. 112-92 ) made changes to three sections of the SOAR Act. First, with respect to the Section 3007 requirement that teachers of core academic subjects who are teaching participating students must hold a baccalaureate degree or its equivalent, the SOAR TCA specified that the term \"core academic subjects\" was to be defined as it was in the ESEA Section 9101(11). Second, the SOAR TCA added requirements to Section 3008 regarding the administration of nationally norm-referenced standardized tests. The act required IES to administer the relevant assessment to students participating in the evaluation, unless the student is attending a participating private school that is administering the same assessment. If the participating private school is administering the assessment to an eligible student, it must make the assessment results available to the Secretary as necessary for the evaluation of the DC OSP. Finally, the SOAR TCA amended the DC OSP evaluation requirements included in Section 3009. With respect to the responsibilities of the Institute of Education Sciences, requirements were added to align the use of a grade appropriate, nationally norm-referenced standardized test with the new provisions added to Section 3008 of the SOAR Act by the SOAR TCA. The SOAR TCA also added language to the provision that IES was required to work with the eligible entity to ensure that each student who applied for a scholarship, regardless of whether a scholarship was received, and the parents of such student agree to participate in the measurements given by the IES to specify that the provision applied only to students asked to participate in the measurements by IES. FY2013 Appropriations The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) provided FY2013 appropriations for the three parts of the SOAR Act. The act did not include any DC OSP specific provisions beyond appropriating funds for the program. FY2014 Appropriations The Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) provided FY2014 appropriations for the three parts of the SOAR Act. The act did not include any DC OSP specific provisions beyond appropriating funds for the program. FY2015 Appropriations The Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) provided funding for the three parts of the SOAR Act for FY2015. It also specified that of the funds provided for the DC OSP, $3 million had to be used for administrative expenses, student academic assistance, and evaluation. DC OSP School Certification Requirements Act Section 917 of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), amended the SOAR Act to include new requirements that private schools have to meet to participate in the DC OSP, including accreditation requirements for the first time. A participating private school was required to be provisionally or fully accredited by a national or regional accrediting agency that is recognized in the DC School Reform Act of 1995 or any other body deemed appropriate by the Office of the State Superintendent of Education for the purpose of accrediting an elementary or secondary school. However, if the private school was participating in the DC OSP as of the day prior to the enactment of the DC OSP School Certification Requirements Act and did not meet the aforementioned accreditation requirement, the school could remain eligible to participate in the DC OSP if not later than one year after such date of enactment, the school had to pursue accreditation from one of the aforementioned accrediting agencies and not later than five years after such date of enactment be provisionally or fully accredited by such accrediting agency. The eligible entity was permitted to grant a one-time, one-year extension of this requirement to a participating private school that could demonstrate that it would be awarded accreditation prior to the end of the one-year extension period. A private school that was not participating in the DC OSP prior to the enactment of such act was not permitted to participate in the program unless it was actively pursuing provisional or full accreditation from one of the aforementioned accrediting agencies and met all of the other requirements for participating private schools. The eligible entity was directed to assist the parents of a participating eligible student in identifying, applying to, and enrolling in another participating private school if the student was enrolled in a participating private school that could not meet the requirements of the act or was enrolled in a participating private school that ceases to participate in the DC OSP. The eligible entity was also required to ensure that each participating private school submits within five years after the date of enactment of the DC OSP School Certification Requirements Act, a certification that the school has been awarded provisional or full accreditation or has received a one-year accreditation extension from the eligible entity. In addition to the accreditation requirements, all participating public schools were required to conduct criminal background checks on school employees who have direct and unsupervised interaction with students. The participating private schools were also required to comply with all data and information requests regarding the DC OSP reporting requirements. FY2016 Appropriations The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) provided funding for all three parts of the SOAR Act for FY2016. With respect to the DC OSP, the statutory language also required that the Secretary follow the priorities for awarding scholarships and make them available to eligible students, including those who were not offered a scholarship during any previous school year. Further, the law required that $3.2 million be used for administrative expenses, student academic assistance, and evaluation. SOAR Funding Availability Act The SOAR Funding Availability Act, Section 162 of the Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ), amended the SOAR Act in multiple ways. First, it amended Section 3007 of the SOAR Act to require that any funds appropriated for the DC OSP that remained available on the date of enactment of the SOAR Availability Act and any remaining funds appropriated on or after the date of enactment by the first day of the subsequent fiscal year had to be used by the eligible entity administering the program in at least one of two ways. First, the eligible entity was required to use at least 95% of these funds to provide additional scholarships or to increase the amount of the scholarships during such year. Second, the eligible entity was permitted to use not more than 5% of such funds for administrative expenses, parental assistance, or tutoring. If funds were used for the latter purposes, the funds had to be in addition to any funds that the eligible entity was already required to use for those purposes during that year. Further, the law specified that all funds appropriated for scholarships at any time would remain available until expended. FY2017 Appropriations and SOAR Reauthorization Act The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provided FY2017 appropriations for the DC OSP, DC public schools, and DC public charter schools. It also reauthorized the SOAR Act. The law continued the same requirements regarding the following of priorities and awarding scholarships to eligible children as well as using $3.2 million for administrative expenses, parental assistance, student academic assistance, and evaluation. The law made numerous changes with respect to reauthorizing the SOAR Act. As these changes are included in the previous discussion of current law provisions, this discussion provides only an overview of the changes made to the SOAR Act by the SOAR Reauthorization Act. The law repealed the DC Opportunity Scholarship Program School Certification Requirements Act included in P.L. 114-113 . The SOAR Reauthorization Act included requirements related to provisions that participating private schools must meet to participate in the DC OSP, including provisions related to accreditation, background checks, and complying with data and information requests. The law added prohibitions on the imposition of limits on eligible students participating in the DC OSP. For example, the Secretary was prohibited from preventing an otherwise eligible student from participating in the DC OSP based on the type of school the student previously attended; whether a student previously received a scholarship or participated in the program, regardless of how many years a student received but did not use a scholarship; and whether a student previously participated in a DC OSP evaluation control group. The law limited the number of site visits at each participating school to one visit. The law required the eligible entity to ensure the financial viability of participating public schools in which 85% or more of the enrolled students were using a scholarship to attend. The law added new requirements related to internal fiscal and quality controls and financial reporting for the eligible entity serving as the local program administrator. The law updated references to the District of Columbia's accountability system used to comply with the requirements of Title I-A of the ESEA and clarified that eligible students who had previously attended a private school could still receive a scholarship. The law also added a definition of \"core subject matter\" and dropped the reference to \"core academic subjects,\" as the definition was no longer included in the ESEA. The law included accreditation requirements for participating private schools. The law specified that the eligible entity must treat a participating eligible student who received, but did not use, a scholarship in a previous year as a renewal student and not as a new applicant. The law made some changes to administrative expenses and uses of funds. For example, the law changed the requirement that not more than 3% of the funds available for the DC OSP could be reserved for administrative expenses to requiring $2 million to be made available each fiscal year for administrative expenses and parental assistance. The law made numerous changes to the DC OSP program evaluation requirements, including with respect to the duties of the Secretary and Mayor, the duties of IES, and the issues to be evaluated. For example, the law amended the requirement that the Secretary ensure that the DC OSP evaluation was conducted \"using the strongest possible research design\" to require that an \"acceptable quasi-experimental research design\" be used. The law included provisions prohibiting the disclosure of personal information. It also included transition provisions requiring the termination of previous evaluations and provisions regarding new evaluations. A provision was also added requiring the Mayor to ensure IES has all the information needed to carry out the evaluation. The law gave the Secretary the authority to withhold funds from DC public schools or DC public charter schools under certain circumstances and included new requirements regarding the distribution of funds to public charter schools. The law required the Secretary and the Mayor to review their MOU in specific ways. FY2018 Appropriations The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided FY2018 appropriations for the DC OSP, DC public schools, and DC public charter schools. It included the same requirements as the FY2017 act regarding priorities and the awarding of scholarships to eligible children and using $3.2 million for administrative expenses, parental assistance, student academic assistance, and evaluation. FY2019 Appropriations The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided FY2019 appropriations for the DC OSP, DC public schools, and DC public charter schools. It included the same requirements as the FY2017 act regarding priorities and the awarding of scholarships to eligible children. It allowed up to $1.2 million of the funds provided for the DC OSP to be used for administrative expenses, parental assistance, and student academic assistance, and up to $500,000 of the funds provided for the DC OSP to be used for evaluations. ", "summary": "The District of Columbia Opportunity Scholarship Program (DC OSP) is the only federally funded voucher program for elementary and secondary education. It operates exclusively in the District of Columbia. The Consolidated Appropriations Act, 2004 (P.L. 108-199), which included the FY2004 District of Columbia Appropriations Act, also included the now-repealed DC School Choice Incentive Act of 2003. The DC School Choice Incentive Act initially authorized the DC OSP. Appropriations were authorized for FY2004 through FY2008. The DC OSP provides scholarships to eligible students to attend participating private elementary or secondary schools, and is administered by the U.S. Department of Education (ED). The FY2004 appropriations act provided funding for the DC OSP for the first time and also, for the first time, provided funding for District of Columbia Public Schools (DCPS) for the improvement of public education, and funding for the District of Columbia State Education Office for public charter schools. Funding for DCPS and public charter schools was not addressed in the DC School Choice Incentive Act of 2003. However, for every year that Congress has provided funding for the DC OSP, it has also provided funding for the DC public schools and DC public charter schools. The provision of federal funds for the DC OSP, DC public schools, and public charter schools is commonly referred to as the \"three-pronged approach\" to supporting elementary and secondary education in the District of Columbia. Reauthorization The DC OSP has been reauthorized twice. It was reauthorized by the Scholarships for Opportunity and Results (SOAR) Act (P.L. 112-10) in 2011, which also repealed the DC School Choice Incentive Act of 2003. The SOAR Act authorized appropriations from FY2012 through FY2016 for the DC OSP, DC public schools, and DC public charter schools. The DC OSP was subsequently reauthorized by the SOAR Reauthorization Act (P.L. 115-31), which amended the SOAR Act and extended the authorization of appropriations for the DC OSP, DC public schools, and DC public charter schools through FY2019. Changes to the DC OSP have also been made primarily through appropriations acts in the intervening fiscal years. For FY2019, $52.5 million was appropriated for the SOAR Act, with $17.5 million each provided to the DC OSP, DCPS, and the DC State Education Office. Participation Based on data available from Serving Our Children, the current local DC OSP administrator, since the program's inception in the 2004-2005 school year, over 21,057 applications have been submitted, and over 8,400 scholarships have been awarded. For the 2017-2018 school year, over 3,900 applications for scholarships were received from new applicants and returning students. Over 1,650 students received and used a scholarship at 44 of 48 participating private schools that school year. While the value of the scholarship has changed over time, for the 2018-2019 school year students may receive up to $8,857 to attend a participating private elementary or middle school and up to $13,287 to attend a participating private high school. Evaluation The DC OSP has been evaluated by two federal agencies: the Department of Education (ED) and the Government Accountability Office (GAO). The evaluations conducted by these two agencies differed considerably in terms of purpose and scope. ED evaluated the participation of schools, parents, and students in the DC OSP, as well as the effectiveness of the program on student achievement and other outcome measures. GAO evaluated certain accountability mechanisms and whether they were operating as intended, such as the program's use of funds and general adherence to statutory requirements. GAO also evaluated how ED and the District of Columbia fulfilled their roles and responsibilities for the DC OSP. The impact evaluations conducted by ED found mixed results. These evaluations focused on four outcome measures: (1) reading and mathematics achievement, (2) parent and student satisfaction, (3) parent and student perceptions of school safety, and (4) parental involvement. The GAO evaluations revealed issues with the way the DC OSP was being administered by the first two local program administrators, as well as concerns about ED's oversight of the program.", "document_type": "crs"}
{"report": "Since its founding in 2006, the National Popular Vote (NPV) initiative has promoted an agreement among the states, an interstate compact that would effectively establish direct popular election of the President and Vice President without a constitutional amendment, while retaining the structure of the electoral college system. The United States is unique among \"presidential\" republics by providing an indirect election to choose its chief executive. The President and Vice President of the United States are selected not by registered voters, but by the electoral college, electors appointed in the states \"in such Manner as the Legislature thereof may direct.... \" Alexander Hamilton, who was \"present at the creation\" of the Constitution in 1787, commented favorably on the electoral college system in The Federalist : The mode of appointment of the Chief Magistrate of the United States is almost the only part of the system, of any consequence, which has escaped without severe censure, or which has received the slightest mark of approbation from its opponents.... I venture somewhat further, and hesitate not to affirm that if the manner of it be not perfect, it is at least excellent. It unites in an eminent degree all the advantages the union of which was to be wished for. Notwithstanding Hamilton's endorsement, the first proposal to change the electoral college system by constitutional amendment was introduced as early as 1800, and since that time more than 700 proposals to reform or eliminate the college have been introduced in Congress. Reform advocates have long focused on the fact that it does not provide for direct democratic election, that less-populous states are afforded an arithmetical advantage due to the assignment of two electors to each state, regardless of population, and that the winner-take-all system makes it possible for candidates to win an electoral college majority and the presidency, while gaining fewer votes than their principal opponents in the popular election. Between 1949 and 1979, Congress considered amendments to reform the electoral college, or replace it with direct popular election, in committee and on the floor of both chambers. Proposed amendments must, however, meet the requirements of the Constitution's Article V, which calls for two-thirds approval by both houses of Congress, and ratification by three-fourths of the states; to date, no electoral college reform proposal has met these requirements. Proponents of the National Popular Vote initiative contend that their plan will achieve direct popular election while circumventing the requirements of Article V, and will guarantee that the popular vote winners will always be elected President and Vice President. The fundamentals of the electoral college system were established by Article II, Section 1 of the U.S. Constitution, and subsequently revised by the Twelfth Amendment. The Constitution's minimal provisions have been complemented over the past two centuries by a range of federal and state laws, political party procedures, and enduring political traditions, leading to the system as it exists today. The salient features of the contemporary system are detailed below. The electors are collectively known as the electoral college; although this phrase does not appear in the Constitution, it gained currency in the early days of the republic, and was recognized in federal law in 1845. The electoral college has no continuing existence; its sole purpose is to elect the President and Vice President. Each state is allocated a number of electors equal to the combined total of its U.S. Senate and House of Representatives delegations. The District of Columbia is also allocated three electors. At present, the total is 538, reflecting the combined size of the Senate (100 Members), the House (435 Members), and the District of Columbia electors. Any person may serve as an elector, except Senators and Representatives, or any other person holding an office of \"trust or profit\" under the United States. Article II, Section 1 of the Constitution empowers the states to \"appoint [electors], in such Manner as the Legislature thereof may direct.... \" This grant of authority provides the constitutional basis claimed for the NPV initiative. In practice, all states currently provide for popular election of their electoral college delegations. Candidates for the office of elector are nominated by political parties and other groups on the presidential ballot in each state. In most cases, the candidates for the office of elector are nominated by the state party committee or the party's statewide convention. The winning presidential nominees must gain a national majority of 270 or more electoral votes, out of the 538 total, in order to be elected. If no ticket of candidates attains a majority, then the House of Representatives elects the President, and the Senate the Vice President, in a procedure known as contingent election. Candidates for the office of elector are selected by their respective political parties. They are expected to vote for the presidential and vice presidential candidates to whom they are pledged. Some states seek to require them to so vote by law or other means, but most constitutional scholars hold that the electors remain free agents under the Constitution, and that they may vote for any person they choose. On rare occasions, an elector will vote for a different candidate, or abstain from casting a vote for any candidate; he or she is known as a \"faithless elector.\" The goal of presidential campaigns under the existing system is to win by carrying states that collectively cast a majority of electoral votes. Political parties and presidential campaigns tend to focus on states that are closely contested (widely referred to as \"battleground\" states), or that have large delegations of electoral votes, or both. Winning a majority of the more populous and/or battleground states is considered crucial to obtaining the necessary electoral vote majority. In 48 states and the District of Columbia, the presidential/vice presidential ticket winning the most popular votes (a plurality or more) in that state is awarded all its electoral votes. That is to say, the winning party's entire ticket of electors is elected. This is referred to as the \"winner-take-all\" or \"general ticket\" system. Presidential Election Day is set by law for Tuesday after the first Monday in November every fourth year succeeding the election of President and Vice President. On Presidential Election Day, voters cast one vote for the candidates they support. They are, however, actually voting for the state political party \"ticket\" of electors supporting those presidential and vice presidential candidates. Presidential electors assemble on the first Monday after the second Wednesday in December following the general election. They meet in their respective states, not collectively, and cast separate votes by ballot for the President and Vice President. After the electors vote, the results are sent by the states to Congress and various other federal authorities. On January 6 of the year following a presidential election, Congress meets in a joint session to count the electoral votes and make a formal declaration of which candidates have been elected President and Vice President. A range of factors contributed to the emergence of the National Popular Vote initiative in the first decade of the 21 st century. A major source was frustration by reform advocates after three decades of failed attempts to secure congressional approval for a direct popular election amendment. A more immediate spur was the contentious and disputed presidential election of 2000, which is regarded as having been a major factor contributing to the development of the NPV proposal. One of the factors cited for the emergence of the NPV initiative has been the exacting requirements set by the Constitution for amendments, in this case, a direct popular election constitutional amendment. As noted previously, approval by two-thirds of Members present and voting is required in both houses when Congress proposes an amendment, followed by ratification by three-fourths of the states, 38 at present, usually within a seven-year period specified by Congress. Between 1948 and 1979, Congress debated electoral college reform at length; throughout this time, hundreds of reform proposals were introduced in both chambers. They generally centered on one of two courses: \"end it\" by eliminating the entire electoral college system and establishing direct popular election, or \"mend it\" by reforming its more controversial provisions. Between 1948 and 1979, proposed amendments were the subject of hearings in the Senate and House Judiciary Committees on 17 different occasions, while electoral college reform was debated in the Senate on five occasions and twice in the House during this period. Proposals were approved by the necessary two-thirds majority twice in the Senate and once in the House, but never in the same Congress. Following the 1979 defeat of a direct popular election amendment on the Senate floor, and the retirement or defeat of prominent congressional advocates, the question of electoral college reform largely disappeared from public attention and Congress's legislative agenda. Although Senators and Representatives continued to introduce reform proposals, few received action beyond routine committee referral, and in time, the number of measures introduced dropped to zero. Even after the presidential elections of 2000 and 2016, in which the winner of the electoral vote won fewer popular votes than his opponent (a so-called \"misfire\") , there was little evidence that Congress was prepared to consider an electoral college reform amendment. Proposals to replace the electoral college system with direct popular election continued to be introduced, but in dwindling numbers as the years passed. No proposal for direct popular election was introduced in the 113 th Congress. By comparison, 41 direct popular election or electoral college reform amendments were proposed in the 95 th Congress (1977-1978). Following the 2016 election, however, four constitutional amendments introduced late in the 114 th Congress proposed eliminating the electoral college and replacing it with direct election. To date in the 116 th Congress, three amendments to establish direct popular election by constitutional amendment have been introduced, but no action beyond committee referral has been taken on them. Until recently, survey research findings showed public support for presidential election reform through direct popular election by sizable margins. As early as 1967, the Gallup Poll reported that 58% of respondents supported direct election, compared with 22% who favored retaining the electoral college. More recently, Gallup's 2013 survey recorded that 63% of respondents favored an amendment providing for direct election, while 29% favored retention of the electoral college. Following the 2016 election, however, overall support for direct election was measured at 49% in favor to 47% opposed. It is arguable that the change in public attitudes was influenced by the 2016 election results, in which the Republican nominees won the election with a majority of electoral votes, but fewer popular votes than their Democratic opponents. For instance, Gallup reported a shift to greater support for the electoral college system by respondents who identified themselves as \"Republican\" or \"Lean Republican.\" Conversely, already high levels of support for direct popular election among respondents who identified themselves as \"Democratic\" or \"Lean Democratic\" rose still further in the post-2016 election Gallup Poll. To date, CRS has identified one survey that was specifically designed to measure public commitment to the NPV initiative. A March 27, 2019, Politico/Morning Consult poll posed relevant questions on the presidential election process and the NPV compact. The first question, which presented a general outline of the existing electoral college system and the generic alternative of direct popular election, reported that respondents preferred direct election by 50% to 34% for retaining the electoral college, and 16% reporting \"Don't know/No opinion.\" The next question explained the proposed NPV compact and asked respondents' preference for NPV or the electoral college method. Although the level of support for NPV was lower than that measured for generic direct popular election, a plurality of respondents to this question favored the \"National Popular Vote Interstate Compact\" by a plurality of 43% in favor, to 33% opposed and 23% who reported \"Don't know/No opinion.\" The disputed presidential election of 2000 was arguably a catalyst for new thinking on electoral college reform . Following a closely contested campaign, Republican candidates George W. Bush and Richard Cheney were elected over Democratic nominees Al Gore Jr. and Joseph Lieberman following a bitter dispute over election results in Florida tha t was ultimately decided by the Supreme Court . The high court's decision left Bush and Cheney with a narrow plurality in Florida of 537 popular votes and a similarly narrow electoral college majority of 30 states with 271 electoral votes, while their Democratic opponents took 20 states and the District of Columbia with 266 electoral votes (one District of Columbia elector cast a blank ballot in protest against the outcome) . It was the first election since 1888 in which the candidates elected uncontestably won fewer popular votes than their principal opponents : the Gore / Lieberman Democratic ticket gained 50,992,335 popular votes to 50,455,156 for Bush / Cheney. The se election results generated considerable discontent with the system. Some critics argued for a constitutional amendment, but the 107 th Congress faced a heavy legislative workload throughout this period, which initially included enactment of President George W. Bush's legislative program and was later expanded to urgent responses to the terrorist attacks of September 1 1, 2001 . Rather than focus on the lengthy process associated with consideration of a constitutional amendment, Congress focused on legislati ve remedies. The Help America Vote Act of 2002, passed in response to the numerous irregularities in voting systems and procedures revealed by the 2000 election, mandated election administration reforms and v oting system technology enhancements (funded in part by federal grants to the states) intended to ensure accurate and timely voting and vote tabulation in future elections. In 2016, the presidential election was again won by nominees who gained a majority of electoral votes but fewer popular votes than their major party opponents. Although proposals to amend the Constitution to provide direct popular election were introduced in response to this occurrence late in the 114 th Congress , and again in the 115 th Congress, the 2016 results did not result in the degree of c ontroversy a nd activism that followed the electoral college \"misfire \" of 2000. T he following factor may have contributed to this situation : i n 2000, a shift in Florida's electoral votes from Bush/Cheney to Gore/Lieberman would have changed the election result; by comparison, in 2016, a shift in the state with the closest vote margin, Michigan , would not have altered the election. While the 2000 election's \"misfire\" did not result in consideration of a constitutional amendment, it did prompt considerable study and investigation into new approaches to electoral reform among scholars of the presidential election process and political activists. Law professors Robert W. Bennett of Northwestern University, Vikram Amar of the University of California-Davis, and Akhil Amar of Yale University School of Law are generally credited as the intellectual godparents of the concept that ultimately evolved into the National Popular Vote Interstate Compact, which relies on the Constitution's broad grant of power to each state to \"appoint, in such Manner as the Legislature thereof may direct [emphasis added], a Number of Electors, equal to the whole Number of Senators and Representatives to which the State may be entitled in the Congress.\" Project FairVote, an issue advocacy group self-described as a nonprofit, nonpartisan \"501(c)(4)\" organization, appears to have been an incubator of the NPV concept. FairVote has supported NPV for \"over a decade,\" and was an early supporter of National Popular Vote Inc., the plan's official advocacy group; moreover, longtime FairVote board members Robert Richie and the late Representative John B. Anderson were early supporters of the National Popular Vote initiative and contributors to its manifesto, Every Vote Equal . As noted previously, the NPV initiative was the ultimate result of the various studies and proposals offered following the presidential election of 2000. The NPV initiative seeks to establish direct popular election of the President and Vice President through an interstate compact, rather than by constitutional amendment. Ideally, under the compact's provisions, legislatures of the 50 states and the District of Columbia would pass legislation binding the signatories to appoint presidential electors committed to the presidential/vice presidential ticket that gained the most votes nationwide . If all 50 states and the District of Columbia were compact members, this would deliver a unanimous electoral college decision for the candidates winning a plurality of the popular vote. Specifically, the plan calls for an agreement among the states, an interstate compact effected through state legislation, in which the legislature in each of the participating states agrees to appoint electors pledged to the candidates who won the nationwide popular vote . State election authorities would count and certify the popular vote in each state, which would be aggregated and certified as the \"nationwide popular vote.\" The participating state legislatures would then choose the slate of electors pledged to the \"nationwide popular vote winner,\" notwithstanding the results within their particular state s . To ensure success, the initiative would come into effect only if states whose total electoral votes equal or exceed the constitutional majority of 270 were to approve the plan. If the nationwide popular vote were effectively tied, the states would be released from their commitment under the compact, and could choose electors who represented the presidential ticket that gained the most votes in each particular state. One novel NPV provision would enable the presidential candidate who won the national popular vote to fill any vacancies in the electoral college with electors of his or her own choice. States would retain the right to withdraw from the compact, but if a state chose to withdraw within six months of the end of a presidential term, the withdrawal would not be effective until after the succeeding President and Vice President had been elected. The NPV advocacy effort is managed by National Popular Vote Inc., a \"501(c)(4)\" nonprofit corporation established in California in 2006 by Barry Fadem, an attorney specializing in initiative and referendum law, and John R. Koza, Ph.D., an automated systems scientist and entrepreneur. As a 501(c)(4) entity, it is permitted to engage in political activity in furtherance of its goal, without forfeiting its tax-exempt status, so long as this is not its primary activity. NPV states on its website that its \"specific purpose is to study, analyze and educate the public regarding its proposal to implement a nationwide popular election of the President of the United States.\" Dr. Koza serves as chairman of NPV Inc., and Mr. Fadem serves as president. NPV's advisory board includes former Senators and Representatives of both major political parties. In 2006, National Popular Vote Inc. published a detailed handbook, Every Vote Equal: A State-Based Plan for Electing the President by National Popular Vote . This publication, in its fourth edition at the time of this writing, provides a detailed account of various issues related to the NPV initiative, including the electoral college, earlier reform efforts, interstate compacts, the text of the proposed compact, a strategy for advancing the initiative, and a 340-page section addressing \"myths about the National Popular Vote Compact.\" National Popular Vote Inc. maintains an office in Mountain View, CA. Supporters in various state legislatures began to introduce measures to adopt the interstate compact shortly after NPV's inaugural press conference on February 23, 2006. The NPV Compact has been introduced at various sessions in the legislatures of all 50 states and the Council of the District of Columbia, which performs the functions of a state legislature in the nation's capital, and has received some form of active consideration in 38 states and the D.C. Council. Among other activities, NPV maintains a regular communications program of email newsletters announcing activities and soliciting readers to petition governors and state legislators to support the compact. At the time of this writing, NPV claims that 3,112 state legislators have either sponsored or cast a recorded vote in their respective legislatures for the compact. NPV also claims endorsements from legislators and endorsements by the New York Times , Los Angeles Times , Chicago Sun-Times , Minneapolis Star Tribune , Boston Globe , Miami Herald , and other newspapers. NPV also advocates use of the citizen initiative process where available to enact state adherence to the compact; it asserts that when Article II, Section 1, clause 2 grants authority to the states to appoint \"in such Manner as the Legislature thereof may direct,\" the authority extends to the states' entire lawmaking process, which in some states includes the proposal and passage of legislation and constitutional amendments through citizen initiative. The citizen initiative approach to the interstate compact, however, has yet to be used at the time of this writing. At the time of this writing, in May 2019, the following 14 states and the District of Columbia have adopted the National Popular Vote Compact. Collectively, they are assigned a total of 189 electoral votes. The National Popular Vote Interstate Compact has been introduced since its inception in all 50 states and the District of Columbia. States that have adopted NPV at the time of this writing are listed in chronological order, by year of adoption, as follows: Hawaii (4 electoral votes), 2008; Illinois (20 electoral votes), 2008; Maryland (10 electoral votes), 2008; New Jersey (14 electoral votes), 2008; Washington (12 electoral votes), 2009; Massachusetts (11 electoral votes), 2010; District of Columbia (3 electoral votes), 2010; Vermont (3 electoral votes), 2011; California (55 electoral votes), 2011; Rhode Island (4 electoral votes), 2013; New York (29 electoral votes), 2014; Connecticut (7 electoral votes), 2018; Colorado (9 electoral votes), 2019; Delaware (3 electoral votes), 2019; and New Mexico (5 electoral votes), 2019. After initial momentum in 2008, when four states joined the compact in one year, NPV made slower progress toward its goal of approval by states accounting for 270 electoral votes. Highlights were California's approval in 2011, which added 55 electoral votes to the tally, and New York's accession to the compact in 2014. Beginning with Connecticut's approval in 2018, followed in 2019 by Colorado, Delaware, and New Mexico, 24 additional electoral votes were added to the NVP count, bringing the total to 189, 70% of the 270 votes needed for NPV to go into effect. By early May 2019, legislation to join the NPV had been introduced in the current session of at least one chamber of the legislature in 14 states that controlled a combined total of 150 electoral votes. As of April 17, the compact had been approved in Nevada by the Assembly (lower chamber of the legislature) and in Oregon by the Senate. Accession by these two states would raise the NPV member total to 202 electoral votes. Conversely, proposals to rescind approval of the NPV Interstate Compact have been introduced in the legislatures of Connecticut, Hawaii, Maryland, Massachusetts, New Jersey, and Washington, to date; none has been approved. Some observers note that, despite NPV's assertion of bipartisan support, all the jurisdictions that have joined the compact to date could be identified as \"leaning\" Democratic or \"solid\" Democratic in their support of the Democratic Party, as classified by a recent Gallup survey. For instance, 11 of the 14, including California, Delaware, the District of Columbia, Hawaii, Illinois, Maryland, Massachusetts, New Jersey, New Mexico, Rhode Island, and Vermont, were found by Gallup to be among the \"most solidly Democratic states in 2017.\" Alluding to this fact, one commentator observed that [a]ll the states to have joined so far are very blue. Until some purple states and red states sign on, the compact has little in the way of territory to conquer.... The seven states where President Obama won [in 2012] by the widest margins, along with D.C., have joined. So have three others—New Jersey, Illinois and Washington—where Obama won by at least 15 percentage points. But none below that threshold have done so. The 2016 presidential election results in Colorado, Connecticut, Delaware, and New Mexico, the most recent adherents to the NPV compact, arguably confirm this observation—the Democratic candidates won the popular vote in all four states, by margins of between 4.9% in Colorado to 13.7% in Connecticut. On the other hand, several states where the NPV remained under active consideration in 2019—Arizona, Florida, Georgia, Idaho, Indiana, Kansas, North Carolina, Ohio, and South Carolina—were carried by the Republican presidential ticket in 2016. As the NPV campaign developed momentum in the states, particularly between 2008 and 2011, defenders of the existing arrangements and the electoral college announced measures to promote retention of the electoral college system. In October 2011, the Heritage Foundation, a conservative public policy institute, released a report opposing the NPV compact. That same month, Roll Call reported that the State Government Leadership Foundation, a project of the Republican State Leadership Committee, would begin a campaign to defend the electoral college and counter recent NPV gains. Further activity, however, does not appear to have been undertaken by these groups by the time of this writing. Arguments in support of and opposed to the National Popular Vote proposal resemble those advanced in favor of and against direct popular election of the President. The central issue turns on the question of the asserted simplicity and democratic attractiveness of the direct election idea as compared to a more complex array of factors cited by supporters of the electoral college system. Proponents of the NPV initiative arguably share the philosophical criticism voiced by proponents of direct popular election, who maintain that the electoral college system is intrinsically undemocratic—it provides for \"indirect\" election of the President and Vice President. This, they assert, is an 18 th century anachronism, dating from a time when communications were poor, the literacy rate was much lower, and the nation had yet to develop the durable, sophisticated, and inclusive democratic political system it now enjoys. They maintain that only direct popular election of the President and Vice President is consistent with modern democratic values and practice. Beyond this fundamental challenge, critics cite what they identify as a wide range of technical failings of the electoral college arrangement. Perhaps the most prominent of these is that the electoral college system can result in the election of a President and Vice President who have won the electoral vote, but gained fewer popular votes than their major opponent. This condition results at least in part from the nearly universal reliance on the \"winner-take-all\" or general ticket system of awarding electoral votes in the states, which is also criticized by NPV advocates. Under the general ticket system, the candidates winning the most popular votes in a state (a plurality is sufficient) are awarded all that state's electors and electoral votes; under these circumstances, a presidential ticket can gain all of a state's electoral votes on even a slim margin of popular votes. Presidents were elected in 1876, 1888, 2000, and 2016 who received fewer popular votes than their major party opponents, while the runner-up in both popular and electoral votes was elected by the House of Representatives when four candidates split the vote in the presidential election of 1824. NPV supporters advocate the compact on the grounds of fairness and respect for the voters' choice. At the core of their arguments, they assert that the process would be simple, national, and democratic; the NPV interstate compact would provide de facto for a single, democratic choice, allowing all the nation's voters to choose the President and Vice President directly, with no intermediaries. The \"people's choice,\" they assert, would win in every election, and every vote would carry the same weight in the election, no matter where in the nation it was cast. No state would be advantaged, nor would any be disadvantaged. According to NPV, the central argument in favor is that the compact \"would guarantee the Presidency to the candidate who receives the most popular votes [or at least a plurality] in all 50 states (and the District of Columbia).\" According to NPV, there would never again be a presidential election \"misfire\" or another \"wrong winner.\" Other elements of the electoral college system criticized by NPV advocates (and other electoral college reformers) would arguably disappear or be rendered irrelevant. These include the faithless elector phenomenon, the general ticket system's asserted \"disfranchisement\" of voters who backed the losing candidates, and various asserted \"voting power\" advantages attributed to large (populous) states, small states, states with large populations of noncitizens, states with low rates of voter participation, and populous states with concentrations of minority-group voters. In addition, the NPV compact would almost certainly eliminate the need for contingent election of the President and Vice President under the Twelfth Amendment. NPV advocates also assert the compact would provide a practical benefit to states that tend to be noncompetitive in presidential elections and which therefore receive fewer campaign visits by major party candidates. With \"every vote equal,\" NPV maintains that presidential and vice presidential nominees and their organizations would need to spread their presence and resources more evenly as they campaigned for every vote nationwide, rather than concentrate on winning key \"battleground\" states. They assert that, under the present system candidates have no reason to poll, visit, organize, campaign, or worry about the concerns of voters of states that they cannot possibly win or lose. This means that voters in two thirds of the states are effectively disenfranchised in presidential elections because candidates concentrate their attention on a small handful of \"battleground\" states. In 2004, candidates concentrated over two-thirds of their money and campaign visits in just five states; over 80% in nine states, and over 99% of their money in just 16 states. For instance, NPV notes that California voters seldom see the presidential or vice presidential nominees or benefit from campaign spending because the Golden State, having voted Democratic since 1988, is considered to be reliably \"blue,\" and Democratic Party candidates are said to take its 55 electoral votes for granted. They also note that Republican candidates make few California appearances, but, NPV asserts, for the opposite reason: why spend time and resources in support of an apparently hopeless cause? Similar arguments made by NPV on the Republican side apply to Texas, a state that has voted for Republican presidential nominees since 1980. In 2016 for instance, NPV claims that no Democratic nominee participated in a general election campaign event in California or Texas, while a Republican nominee appeared in only one campaign event in each of those states. By comparison, according to their calculations, the hotly contested battleground states of Florida, North Carolina, and Pennsylvania received, respectively, 71, 55, and 54 candidate appearances. According to NPV's analysis of campaign appearances, the 2016 major party candidates for President and Vice President appeared at a total of 375 campaign events during the general election campaign, but they visited only 12 states; by NPV's calculation, 38 states and the District of Columbia were bypassed during the campaign. NPV advocates also maintain that the concentration of campaign resources, advertising, and candidate appearances in battleground states depresses turnout in \"flyover\" states, where candidates make few campaign appearances. The U.S. Elections Project report, America Goes to the Polls, 2016 , appears to offer statistics consistent with this assertion, finding that the participation rate of the population eligible to vote in 14 battleground states was 65% in the 2016 presidential election, as opposed to comparable nationwide turnout of 60%. It also reports findings similar to those advanced by NPV: 95% of campaign visits during the 2016 campaign were made in battleground states, as was 99% of \"ad spending.\" The NPV manifesto also cites a Brookings Institution study of the 2004 presidential election in support of its argument, stating, \"Because the electoral college has effectively narrowed elections like the last one to a quadrennial contest for the votes of a relatively small number of states, people elsewhere are likely to feel that their votes don't matter.\" It should be noted, however, that a range of other political, social, cultural, and economic factors may also contribute to the disparity in turnout between battleground and non-battleground states. NPV further suggests that the disparity in participation may ultimately damage the ability to govern on the state and local levels and could have a negative impact on the legitimacy of public institutions: Diminished voter turnout in presidential races in non-battleground states weakens down-ballot candidates, thereby making the state even less competitive in the future. Governance—not just electioneering—is affected by the winner-take-all rule. National Popular Vote opponents oppose the compact on various grounds. Some argue that it is unconstitutional or \"anticonstitutional,\" that is, contrary to the Founders' intentions and the spirit of the nation's fundamental charter. It is also asserted that NPV would solve few of the electoral college system's alleged problem issues and would create some of its own. Finally, some observers note that the NPV compact is an interstate compact as defined in Article I, Section 10, clause 3 of the Constitution, and as such would be subject to congressional approval. This issue is examined in greater detail in a separate section of this report. On the most fundamental philosophical basis, opponents might argue that the NPV compact violates one of the basic principles of majoritarian democracy: it does not require that candidates win a majority of the popular vote in order to gain the presidency. Rather, it would anoint as winner the ticket that gains more popular votes than any other. A majoritarian democracy, it may be argued, should require a majority in order to elect; it may be further noted that the existing system, by comparison, requires a majority in the electoral college. As one commentary noted only the strictest of majoritarians desire a purely majoritarian presidential election system, and those individuals should be deeply troubled by the prospect of plurality presidencies, which the NPVC [sic] expressly countenances. Indeed, the NPVC promises to create more difficulties and \"misfires\" in its own way than the Electoral College system its proponents so earnestly seek to replace. Further, opponents might ask how the NPV compact would function in the event of a multicandidate election, a phenomenon that recurs from time to time in U.S. presidential elections. One commentator posited the following problematic scenario under such circumstances: Under the compact, one can easily imagine a multi-candidate race in which a candidate would win, say, a thirty-four percent plurality of the popular vote nationwide while losing in every state and D.C. If all of the states and D.C. were signatories to the compact, all the electoral votes in such a hypothetical race would be awarded contrary to the will of voters choosing electors (still not voting directly for President under this plan). Would the United States accept a President who wasn't the choice of sixty-six percent of those voting, nor even the choice of a single state? The existing electoral college system, NPV skeptics might also assert, is a fundamental element in the federal constitutional arrangements established by the Constitution. Fearing \"the tyranny of the majority,\" the Founders established a system of government that provides checks and balances designed to restrain the majority and secure minority rights. These principles are also embedded in the structure of federal elections: the Senate, the House of Representatives, and the presidency were deliberately provided with different terms of office and different electorates, and the states were given an important role in the federal election process. In particular, through the electoral college the United States elects its national Presidents and Vice Presidents in a state-based federal election. Successful nominees are compelled under this system to present a broad political vision that commands nation-spanning \"concurrent majorities\" and appeals to the great variety of Americans. As in the case of the Senate, less populous states are accorded a small numerical advantage by assignment of two at-large electors reflecting the Constitution's equal apportionment of Senators to each state regardless of its population. The NPV initiative, they could claim, would discard the Founders' intentions in favor of what they consider to be a flawed \"majoritarian\" presidency that would ill-serve a continent-spanning and profoundly diverse republic. Another criticism centers on the use of the NPV compact to effect a fundamental change in the presidential election process and a de facto amendment to the Constitution, but without following the procedures set out in Article V. Critics may note that NPV's founders admit their plan is an \"end run\" around the Constitution. Proponents might counter with the argument that Article V presents too high a hurdle for what they consider a necessary reform of the system. Opponents, however, could respond that the Founders intended the various supermajority requirements in Congress and the states to ensure that successful constitutional amendments enjoy broad national support. The bare majority of electoral votes required to implement NPV, they might note, meets none of these supermajority requirements. As one study critical of the NPV initiative concluded, because the use of an interstate compact \"does not conform to the constitutional means of changing the original decisions of the Framers, NPV could not [therefore] be a legitimate innovation.\" A final argument on this line might be that one \"end run\" around the amendment process might lead to others, setting a dangerous precedent for similar efforts in the future. Opponents might note that the NPV would eliminate the electoral college system's multiplier effect generated by the winner-take-all or general ticket system used in 48 states and the District of Columbia, which tends to magnify the winning ticket's margin of victory, and is said to confer greater legitimacy to the victors. For instance, in 2016, Republican nominee Donald Trump's clear electoral vote majority of 304 votes (56.5% of the total), compared with Democratic nominee Hillary Clinton's 227 (42.2% of the total) could be said to reinforce and confirm his victory, notwithstanding Clinton's plurality of the popular vote (48.2%), compared with Trump's 46.1%. From a practical standpoint, NPV opponents might argue that the NPV would actually lead to an increase in contested election results and legal challenges in the states, as the political parties maneuver to claim every possible vote. They assert that the existing tabulation of popular votes within each state reduces contested results and recounts. Under NPV, the incentive to gain every vote would arguably lead to far broader disputes and widespread recounts at every level of election administration. As a Heritage Foundation study concluded Under the NPV … any suspicions necessitating a recount in even a single district would be an incentive for a national recount.... The prospect of a candidate challenging \"every precinct, in every county, in every state of the Union\" should be abhorrent to anyone who witnessed the drama, cost, delay, and undue litigation sparked by the Florida recount of 2000. Opponents might also assert that the increased incidence of recounts would be further complicated by wide-ranging disparities in state procedures, potentially leading to prolonged periods of uncertainty following close presidential elections. Critics may also note that the NPV plan contains no \"statute of limitations,\" unlike proposed constitutional amendments, for which Congress typically sets a seven-year ratification period. Where, critics may ask, is a similar time limit that would \"sunset\" the NPV compact, after which it would expire or return to \"square one\"? According to its website, NPV was launched on February 23, 2006; if it were a constitutional amendment proposed by Congress, it would have expired on February 23, 2013, since by the end of the customary seven-year deadline it was \"ratified\" by only eight states and the District of Columbia. By what reasoning, they might ask, should the NPV be exempt from the standards of timeliness and contemporaneity Congress customarily sets for constitutional amendments? Opponents might reject claims that, under NPV, campaign spending and candidate appearances would be spread and scheduled more widely, beyond the current concentration of time and resources in battleground states. They might argue that spreading campaign resources and candidate events in non-battleground states is a questionable argument to justify a fundamental change in the presidential election process. Campaign appearances and spending, they could assert, should not be considered to be a local economic stimulus package, nor are the amounts in question sufficient to make much of a difference in the economic condition of most states. As one critical analysis notes, \"... the nation does not hold presidential elections to foster local economic development.\" Moreover, they might continue, it is equally dubious to assert that nominees will slight the concerns of citizens of the non-battleground states from which they draw their greatest support, or that concentrated campaigning in the battleground states somehow \"disenfranchises\" voters in others. In the modern era, a small percentage of voters actually attends an in-person presidential or vice presidential candidate appearance. Television (especially broadcast and cable TV news networks), social media, the internet, and newspapers—not the traditional rallies, torchlight parades, and handbills—dominate presidential election campaigns in the 21 st century. In addition to policy issues discussed previously, some observers have also raised questions related to the NPV initiative based on the fact that it is an interstate compact as defined in the Constitution. Others have questioned whether NPV might conflict with some provisions of the Voting Rights Act. The NPV initiative has been described by its supporters variously as a bill, a state-level statute, and an interstate compact. The latter reference necessitates an analysis of whether the initiative complies with the Compact Clause of the Constitution. An interstate compact—under the broadest understanding—is a contract between two or more consenting states. The Supreme Court has further suggested that an interstate compact often requires reciprocal commitments between the governments of two or more states, such that one state's commitment is conditioned on the action of another state and no state can unilaterally repeal its commitment. The use of interstate compacts predates the Constitution, as the Articles of Confederation contained a similar Compact Clause that provided a qualified prohibition on states entering into any agreements between them without the consent of Congress. The chaos resulting from the disunity created by the Articles of Confederation prompted the Framers of the Constitution generally to \"impose more uniformity\" among the states, resulting in a Constitution that wholly prohibits states from entering into any treaties, alliances, and federations. Nonetheless, the Constitution maintained the Articles of Confederation's qualified prohibition on interstate compacts and agreements, allowing states to enter into an interstate compact so long as the participating states seek the consent of Congress. Specifically, the Compact Clause provides that \"No State shall, without the Consent of Congress ... enter into any Agreement or Compact with another State.... \" While the historical rationale for Article I's qualified prohibition on interstate compacts is unclear, the Compact Clause generally reflects the view of the Framers that states should be able to work cooperatively together, as well as the concern that unchecked interstate alliances might threaten the harmony of the Union or the authority vested by the Constitution in the federal government. As the Supreme Court noted in Cuyler v. Adams , \"By vesting in Congress the power to grant or withhold consent, or to condition consent on the states' compliance with specified conditions, the Framers sought to ensure that Congress would maintain ultimate supervisory power over cooperative state action that might otherwise interfere with the full and free exercise of federal authority.\" The Compact Clause places no limits on what might be done through an interstate compact other than the requirement of congressional consent. In the early years of government under the Constitution, compacts were used almost exclusively to settle boundary disputes. Beginning with the establishment of the Port of New York Authority in 1921, however, compacts began to be used to address more complex, regional issues requiring intergovernmental cooperation. Some compacts are merely advisory in form, but others may be regulatory, with significant powers granted to multistate commissions. More recently, compacts have addressed such wide-ranging concerns as mental health treatment, law enforcement and crime control, education, driver licensing and enforcement, environmental conservation, energy, nuclear waste control, facilities operations, transportation, economic development, insurance regulation, placement of children and juveniles, disaster assistance, and pollution control. Approximately 200 interstate compacts are in effect today. Accordingly, the central legal issue with respect to the Compact Clause is whether a given interstate compact requires the consent of Congress. While a \"literal\" reading of the Compact Clause \"would require the States to obtain congressional approval before entering into any agreement among themselves, irrespective of form, subject, duration, or interest to the United States [emphasis added],\" the Supreme Court has repeatedly rejected such a reading. In 1893, in Virginia v. Tenness e e , Justice Stephen Field, writing for the Court, contended that a broad reading of the Compact Clause would \"embrace all forms of stipulation, written or verbal, and relating to all kinds of subjects[,]\" requiring congressional consent to agreements \"which the United States can have no possible objection or have any interest in interfering with,\" as well as those that \"may tend to increase ... the political influence of the contracting states, so as to encroach upon or impair the supremacy of the United States.... \" Surmising that the Compact Clause could not have been intended to have such a broad reach, Justice Field concluded that the Clause prohibits states from entering into compacts without congressional consent only when the underlying compact is \"directed to the formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States.\" The Supreme Court has subsequently reaffirmed Justice Field's \"functional view of the Compact Clause,\" and, accordingly, generally where an agreement does not fall within the scope of the Compact Clause as envisioned by the Court in Virginia v. Tennessee , the agreement \"will not be invalidated for lack of congressional consent.\" Whether the NPV initiative requires congressional consent under the Compact Clause first requires a determination as to whether NPV even constitutes an interstate compact. At times, its supporters have resisted framing the initiative as an interstate compact, arguably out of concern for running afoul of the Compact Clause's provisions. For example, Professor Akhil Amar has argued that because the initiative does not create a \"new interstate governmental apparatus,\" the NPV should not be considered an interstate compact, as NPV compact signatory states are merely exercising power collectively that each state could exercise on its own. It is unclear, however, whether the creation of a new interstate governmental entity formed out of an agreement between two or more states is necessary, as opposed to sufficient, in order to deem an agreement as being an interstate compact subject to the Compact Clause. While the Supreme Court, in Northeast Bancorp , suggested that a \"joint organization or body\" formed out of an interstate agreement is a \"classic indic[ium] of a compact,\" the Court has never adopted a definition of an interstate compact that solely rests on the existence of an interstate governmental body. Instead, the Court appears to have adopted a broader definition of what an interstate compact can entail. For example, in Virginia v. Tennessee , the Court noted that the words \"compacts\" and \"agreements\" are synonymous and \"cover all stipulations affecting the conduct or claims of the parties.\" In other words, when two or more states enter into a stipulated agreement whereby one state agrees to perform an act in consideration for a reciprocal act by the other state(s), that agreement can be considered an interstate compact. This broad definition of a compact appears to encompass the NPV compact, as the initiative requires signatory states to agree mutually to appoint their electors to the winner of the national popular vote. Moreover, NPV binds each assenting state, as no member state can withdraw from it within six months or less of the end of a President's term. Because NPV prohibits states from freely \"modify[ing] or repeal[ing] [the agreement] unilaterally\" and requires \"reciprocation\" of mutual obligations, it appears that the initiative can be described as an interstate compact. Assuming the NPV initiative is an interstate compact, the question remains whether it is one that implicates the Compact Clause. The answer to that question primarily depends on whether NPV is \"directed to the formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States .\" In other words, the \"test\" for whether a particular interstate compact requires congressional consent is centrally concerned with vertical balances of power between the federal government and the states; namely, \"whether the Compact enhances state power quoad the National Government.\" While the NPV arguably increases the political power of the states that have consented to it by ensuring that those states' desired outcome for the presidential election—the awarding of the majority of electoral votes to the presidential candidate supported by the majority of the voting populace—it is unclear how that increase in political power would be at the expense of the power of the federal government. After all, the Constitution provides the federal government with no role in determining the members of the electoral college. One scholar has suggested that the NPV initiative would lead to a vertical alteration of power by eliminating the possibility that the House of Representatives would resolve a presidential election in the absence of an electoral majority for a single candidate because it is premised on a majority of electoral votes going to a single candidate. The House of Representatives, however, has decided only two presidential elections in American history, and whether such an arguably hypothetical and de minimis diminishment of federal power through the NPV would be sufficient to require congressional consent under the Compact Clause is simply unresolved by the relevant case law. While the Supreme Court's case law interpreting the Compact Clause is centrally concerned with vertical federalism concerns (i.e., the balance of power between the state and federal governments), the Court has recognized a potential secondary rationale suggested for the Compact Clause: to preserve the horizontal balance of powers among the various states. And horizontal federalism concerns could very well be implicated by the Compact Clause, as the provision appears to have been included in the Constitution out of concern both for the supremacy of the federal government and unity among the various states. Whether the NPV compact threatens the powers of nonconsenting states has been the subject of much debate among academics. Those in support of the initiative have contended that the nonconsenting states do not lose any power as a result of the NPV. According to this line of argumentation, even under the NPV, all states would retain their right to select the electors of their choosing, as nonmember state electors would still be counted in the electoral vote. Others, however, have pointed to the underlying premise of the NPV—to enhance the political power of more populous states in presidential elections—as evidence that the initiative diminishes the power of nonconsenting states. In other words, while non-compacting states would still retain the power to appoint electors, the influence that comes with that power would arguably be diminished because a state's role in the national election would be defined by its percentage of the popular vote and not by its percentage of electors, warranting congressional interest in approving a compact that effectuated such a change in national elections. Ultimately, however, whether the NPV actually threatens the power of nonconsenting states is a debate that remains active within academia but would likely be the source of considerable litigation if the initiative ever became effective. If congressional consent is needed for the NPV, that consent can take various forms. Usually congressional consent to an interstate compact takes the form of a joint resolution or act of Congress specifying its approval of the text of the compact and adding any conditions or provisions it deems necessary, often embodying the compact document. As with most congressional actions, consent to an interstate compact must occur with the approval of both houses and must be signed by the President before it becomes law. Rarely has the President vetoed or threatened to veto consent legislation by Congress. While congressional consent to an interstate compact is most often explicit, consent by Congress may also be implied by subsequent acts of Congress as \"[a]n inference clear and satisfactory that Congress ... intended to consent\" to a compact may be sufficient. Congress may also delegate its power to approve a compact to a federal official so long as an \"intelligible principle\" against which approval can be measured is apparent. Ultimately, if congressional consent is truly needed for NPV to be effective, the initiative might have difficulty ever being enacted because the approval of both houses of Congress and the President would likely necessitate additional hurdles beyond the already challenging task of amassing support at the state level for the NPV. Beyond the legal issues raised with respect to the Compact Clause, the NPV initiative also potentially raises other broader constitutional concerns, including whether the states can functionally obviate the role of the electoral college through the NPV. Article II of the Constitution establishes that the election of the President should occur indirectly through the election by the electoral college. The choice of an indirect election for the President was a deliberate one by the Framers of the Constitution, because, while noting the importance that the \"sense of the people\" should influence the choice for President, they found it \"equally desirable\" for the \"immediate election\" of the President to be made by a body representative of distinct state interests and removed from the threat of unchecked majoritarianism. The result was that the Constitution established a presidential election process that was \"manifestly nonmajoritarian,\" with the electoral college, a body established to represent the distinct views of each state, as the centerpiece of the election process. The central constitutional issue presented by the NPV, therefore, is whether the states, through an interstate compact, can functionally transform the presidential election system enshrined in the Constitution into a more majoritarian process. Supporters of the NPV argue that the Constitution provides the legal means for states to transform the presidential election system into one where the President is elected based solely on the result of the national popular vote. Specifically, clause 2 of Article II, Section 1 of the Constitution provides the states with the power to \"appoint, in such Manner as the Legislature thereof may direct,\" the electors who represent the state in the electoral college. Facially, the Constitution's primary limitation on the power of a state to select its electors is the final number of electors awarded to each state. While perhaps an argument can be made that the structure, logic, and history of the Constitution place limits on the manner or method in which a state chooses its electors, the text of the Constitution simply does not impose any such limits. Supreme Court case law also supports reading Article II of the Constitution to broadly provide states with wide discretion as to the manner in which its electors are selected. Specifically, in 1892 in McPherson v. Blacker, a unanimous Supreme Court upheld a Michigan law providing for the election by individual congressional district of presidential electors against a challenge that the law violated Article II of the Constitution. In so holding, the Court placed great emphasis on a number of state laws that existed shortly after the ratification that provided a variety of \"modes of choosing the electors,\" including selection by the legislature itself, by a \"vote of the people for a general ticket,\" \"by vote of the people in districts,\" or by some permutation of those methods. Viewing this evidence together with the text of Article II and the historical evidence from the Constitutional Convention led the Court to broadly conclude state legislatures have \"conceded plenary power ... in the matter of the appointment of electors,\" allowing the Michigan law to stand. Applying McPherson to the case of the NPV, the argument can and has been made that if the states have plenary power with respect to the manner of how electors are appointed, the power necessarily allows states to select electors in line with the results of the national popular vote. More recently, supporters of the NPV have relied on the Supreme Court's 2015 ruling in Arizona Legislature v. Arizona Independent Redistricting Commission (AIRC) —which held that the State of Arizona had wide discretion under the Elections Clause of the Constitution to select the method by which the state provided for redistricting —to argue that the states retain broad discretion in selecting electors under Article II, which uses similar language to the provision interpreted in AIRC. Others have argued that the structure of the Constitution and historical evidence suggest that the states do not have such vast discretion in appointing electors as to functionally transform the election for President into a national popular referendum. As noted elsewhere in this report, the electoral college was created by the Framers to ensure that states with the least population retained power in the selection of the President, providing a check against domination by the most populous states. The electoral college, being a product of the choices of individual state legislatures, was envisioned by the Framers as a body that would represent the specific interests of a given state, as opposed to the undifferentiated nation at large. Accordingly, it may be argued that allowing the most populous states to collude to ensure that the national popular vote, as opposed to the wishes of an individual state, dictates the results of a state's slate of electors, could arguably be irreconcilable with the Framers' intentions with respect to the electoral college. As such, for those who find the NPV compact constitutionally suspect under Article II, McPherson 's broad pronouncements about the nature of a state's power to appoint electors should be viewed in the context of that particular case, where the state of Michigan was attempting to appoint its electors based on the votes of an individual district in the state, as opposed to the state as a whole. In contrast to the law at issue in McPherson , with NPV, there appears to be no evidence contemporaneous with the ratification of the Constitution of a state selecting its electors in accordance with the results of the national popular vote. Unlike the State of Michigan in McPherson , an NPV state's electors might not be a product of the views of the state at the time of the election, but instead would reflect national popular sentiment about who should be the President. Moreover, the Supreme Court, in interpreting arguably analogous language from Article I of the Constitution allowing states to regulate the manner of the selection of the Members of the House of Representatives and Senate, concluded that the states cannot exercise their delegated authority in a way that would \"effect a fundamental change in the constitutional structure.\" The question that remains is whether the Court in a future case challenging the NPV compact would interpret the states' authority under Article II to appoint electors to be broad enough to allow the President to be selected as a result of the national popular vote, a question that, given the lack of any precise precedent respecting the constitutionality of the NPV compact under Article II, will likely remain unresolved until such time. Other critics claim the NPV compact might violate Sections 2 and 5 of the Voting Rights Act (VRA). Writing in Columbia Law Review , David Gringer invokes the voting power theory. He argues that the plan conflicts with Section 2 of the VRA because moving from \"a state-based [vote] to a national popular vote dilutes the voting strength of a given state's minority population by reducing its ability [voting power] to influence the outcome of presidential elections.\" Gringer also asserts that the NPV compact may violate Section 5 of the act. In 2013, however, the U.S. Supreme Court invalidated Section 4(b) of the VRA, which contained a formula prescribing which states and jurisdictions with a history of discrimination were required to obtain prior approval or \"preclearance\" under Section 5 before changing any voting standard, practice, or procedure. Although the Court invalidated only the coverage formula in Section 4, by extension, Section 5 has been rendered currently inoperable. Prior to the Supreme Court ruling, Gringer argued that the NPV compact would qualify as a covered practice under Section 5, and that the legislatures of all the \"covered\" states would have been required to obtain preclearance before implementing the compact. Responding to this point, National Popular Vote Inc. noted the following: The National Popular Vote bill manifestly would make every person's vote for President equal throughout the United States in an election to fill a single office (the Presidency). It is entirely consistent with the goal of the Voting Rights Act. There have been court cases under the Voting Rights Act concerning contemplated changes in voting methods for various representative legislative bodies.... However, these cases do not bear on elections to fill a single office (i.e., the Presidency). In 2012, the Justice Department's Civil Rights Division specifically declined to challenge California's accession to the NPV compact on VRA grounds. The states' authority to appoint electors by any method their legislatures choose is not absolute. Federal court decisions have struck down state laws concerning appointment of electors that were found to be in violation of the Fourteenth Amendment's guarantee of equal protection: Although Clause 2 (of Article II, Section 1 of the Constitution) seemingly vests complete discretion in the states, certain older cases had recognized a federal interest in protecting the integrity of the process. Thus, the Court upheld the power of Congress to protect the right of all citizens who are entitled to vote to lend aid and support in any legal manner to the election of any legally qualified person as a presidential elector.... [I]n Oregon v. Mitchell (42 U.S. 112 (1970)), the Court upheld the power of Congress to reduce the voting age in presidential elections and to set a thirty-day durational residency period as a qualification for voting in presidential elections. Although the Justices were divided on the reasons, the rationale emerging from this case, considered with Williams v. Rhodes , (393 U.S. 20 1968)) is that the Fourteenth Amendment limits state discretion in prescribing the manner of selecting electors and that Congress in enforcing the Fourteenth Amendment may override state practices that violate that Amendment and may substitute standards of its own. Critics of the electoral college system have sought direct election of the President and Vice President without success for more than two centuries. The NPV initiative represents a novel effort to achieve this goal by use of an interstate compact that would circumvent the stringent requirements necessary for the proposal and ratification of constitutional amendments. Since its inception in 2006, NPV has achieved a degree of success: 14 states and the District of Columbia, controlling a total of 189 electoral votes, have joined the compact since 2008. Progress has arguably been sporadic, however, notwithstanding active campaigning by National Popular Vote Inc. Over the course of more than a decade, NPV has heretofore failed to develop a sustained momentum toward its stated goal of states controlling 270 electoral votes. The action of three states in joining NPV to date in 2019 marks the most activity in a single year since 2008; it remains to be seen whether this trend will continue. To date, certain Democratic-leaning states have joined the compact. The arguable lack of support in Republican-controlled state legislatures raises questions about further accessions to the compact in the immediate future, particularly given the fact that the GOP controlled both legislative chambers in 30 states following the 2018 elections. To date, while the NPV initiative has generated interest among supporters of direct popular election of the President, it does not appear to have gained widespread awareness among the public at large. The findings of the March 27, 2019, Politico/Morning Consult survey cited earlier in this report arguably suggest that greater public knowledge of NPV might spur popular support for the compact. This might then contribute to further momentum if additional states were to join, particularly populous ones like Florida (29 electoral votes), Georgia (16 electoral votes), and Ohio (18 electoral votes) where the compact was under active consideration in 2019. Under these circumstances, proponents might be energized and encouraged by a sense of progress for the initiative. At the same time, NPV opponents could be expected to coalesce around the issues identified earlier in this report, and renew and increase their efforts in defense of the electoral college system. The activities of both might ultimately bring the NPV initiative to the more immediate attention of Congress.", "summary": "The National Popular Vote (NPV) initiative proposes an agreement among the states, an interstate compact that would effectively achieve direct popular election of the President and Vice President without a constitutional amendment. It relies on the Constitution's grant of authority to the states in Article II, Section 1 to appoint presidential electors \"in such Manner as the Legislature thereof may direct.... \" Any state that joins the NPV compact pledges that if the compact comes into effect, its legislature will award all the state's electoral votes to the presidential ticket that wins the most popular votes nationwide, regardless of who wins in that particular state. The compact would, however, come into effect only if its success has been assured; that is, only if states controlling a majority of electoral votes (270 or more) join the compact. By early May 2019, 14 states and the District of Columbia had joined the compact. After early momentum—eight states and the District of Columbia joined the NPV Compact between 2007 and 2011—the pace of state accessions slowed through 2018. Since then, four additional states joined, bringing the total number of electoral votes controlled by NPV member states to 189. During the same period, legislation to join the compact had been introduced during the current session in at least one chamber of the legislature in 14 additional states that control an additional 150 electors. The NPV initiative emerged following the presidential election of 2000, in which one ticket gained an electoral vote majority, winning the presidency, but received fewer popular votes than its opponents. NPV grew out of subsequent discussions among scholars and activists about how to avoid similar outcomes in the future and to achieve direct popular election. Proponents of NPV assert that it would guarantee the presidential candidates who win the most popular votes nationwide will always win the presidency; that it would end the inequities of the general ticket/winner-take-all system of awarding electoral votes; and that candidates would extend their focus beyond winning the \"battleground states,\" campaigning more widely and devoting greater attention to issues of concern to other parts of the country. They further assert that NPV would accomplish this while avoiding the exacting standards set for the proposal and ratification of constitutional amendments. Opponents argue that NPV would undermine the authority of states under the Constitution and the Founders' intention that presidential elections should be both national and federal contests; that it is an admitted \"end run\" around the Constitution that would circumvent the amendment process; and that it might actually lead to more disputed presidential elections characterized by politically contentious state recounts. The NPV has also been debated on legal grounds. Some observers maintain that it must be approved by Congress, because it is an interstate compact that would affect key provisions of constitutional presidential election procedures. NPV Inc., the organization managing the initiative's advocacy campaign, responds that congressional approval is not necessary because NPV concerns the appointment of electors, a subject that falls within state constitutional authority, and that the Supreme Court has previously rejected arguments that similar compacts would impair the rights of nonmember states. Other critics claim that NPV might violate the Voting Rights Act by diluting minority voter influence and avoiding the recently invalidated preclearance requirement for election procedure changes in covered jurisdictions. In response, NPV Inc. has asserted that the compact is \"entirely consistent with the goal of the Voting Rights Act.\" This report monitors the NPV's progress in the states and will identify and analyze further developments as warranted.", "document_type": "crs"}
{"report": "The hundreds of Iraqi interpreters who work for the U.S. military conceal their identities in distinctive ways. One wears a bulletproof Kevlar helmet and a black mask. Another wears sunglasses and a balaclava that covers his entire head. What they share is the extraordinary danger of their job. Targeted for death by insurgents, they also face suspicion from their employers and often lie to relatives for fear that word of their job will get out. This excerpt from a January 2006 article in a Michigan newspaper suggests the dangerous work that Iraqi interpreters and translators performed in support of the U.S. war effort. Other sources similarly document the work performed by Afghan interpreters and translators and the danger they face. For example, a former Afghan interpreter for the U.S. military, profiled in a January 2017 article, said that it was too dangerous for him to return from the Afghan capital to his native province because of the Taliban. According to the interpreter: [Taliban] will stop the car and block the road, and say, 'Come here, I need you, bro' … Then hang me or shoot me. In January 2006, the 109 th Congress enacted the first in a series of legislative provisions to enable certain Iraqi and Afghan nationals to become U.S. lawful permanent residents (LPRs) based on their service to the U.S. government. Section 1059 of the FY2006 National Defense Authorization Act (NDAA) made certain Iraqi and Afghan nationals who had worked directly with U.S. Armed Forces as translators eligible for special immigrant visas (SIVs). Special immigrants comprise a category of permanent employment-based admissions under the Immigration and Nationality Act (INA). Upon admission to the United States, holders of SIVs are granted LPR status. A House Judiciary Committee report on a related bill in the 109 th Congress to provide special immigrant status for Iraqi and Afghan translators ( H.R. 2293 ) described the need for the legislation, as follows: A number of alien translators currently working in Iraq and Afghanistan embedded with units of the U.S. Armed Forces are providing extremely valuable services. Their cooperation and close identification with the U.S. military have put these individuals and their families in danger. This danger will only escalate after U.S. forces leave or reduce their strength in Iraq and Afghanistan. Congress subsequently broadened the special immigrant classification for translators and also authorized a second special immigrant classification for certain Iraqi and Afghan nationals who had worked for, or on behalf of, the U.S. government in Iraq or Afghanistan, respectively. This report analyzes the SIV classifications for Iraqis and Afghans within the context of both the larger INA special immigrant category and selected other permanent admissions categories. It discusses the legislative changes to the individual Iraqi and Afghan special immigrant programs since their initial authorization, provides statistics on visa issuances, and considers challenges that have faced the programs. The term special immigrant is defined in Section 101(a)(27) of the INA. The definition consists of an enumeration of classifications eligible for this category, such as LPRs who are returning from a temporary stay abroad. Most special immigrant classifications are subject to an annual numerical limitation. The special immigrant category was added to the INA by a 1965 immigration law, known as the 1965 amendments. The INA, as originally enacted in 1952, included a predecessor category of nonquota immigrants , immigrants who could be admitted to the United States without regard to numerical limitations. In the 1952 act, these nonquota immigrants included returning LPRs, natives of Western Hemisphere countries, ministers of religion, and long-serving employees of the U.S. government abroad, among other groups. The 1965 amendments to the INA redesignated the nonquota immigrants as special immigrants and made some changes to the various classifications. The Immigration Act of 1990 further amended the special immigrant provisions in the INA. It placed the special immigrant category under a revised INA section on permanent employment-based immigration and imposed an overall annual numerical limitation of 10,000 on special immigrants, with exemptions for certain classifications. In addition, the 1990 act amended the existing special immigrant classifications and added several new ones. A 1991 immigration act changed the overall annual limitation on special immigrants from 10,000 to 7.1% of the worldwide level of employment-based immigration. Subsequent laws added new special immigrant classifications. Today the special immigrant category encompasses a hodgepodge of classifications, but there are some commonalities among the seemingly disparate groups. Many of the classifications, for example, have a humanitarian element. In another commonality, some of the classifications are directed at individuals in certain fields of work that have a public service component. These include classifications for religious workers, graduates of foreign medical schools licensed to practice medicine in the United States, and international broadcasters. Particularly relevant for this report are special immigrant classifications that apply to individuals who have worked for the U.S. government. These include classifications for 15-year employees or former employees of the U.S. government abroad; nationals of Panama who are 15-year employees or former employees of the U.S. government in the former Canal Zone; and individuals who, after lawful enlistment abroad, have served or will serve on active duty in the U.S. Armed Forces for 12 years. Some of the classifications based on U.S. government employment apply to individuals who are placed in danger because of their work. For example, there is a special immigrant classification for individuals who were employees of the Panama Canal Company or Canal Zone Government on April 1, 1979, who provided faithful service for at least five years, and \"whose personal safety, or the personal safety of whose spouse or children, as a direct result of such Treaty, is reasonably placed in danger because of the special nature of any of that employment.\" As discussed in the next section, the two special immigrant classifications for Iraqis and Afghans similarly apply to individuals who performed U.S. government-related service, with one requiring the presence of a serious threat to the individual as a result of that U.S. government employment. There are two special immigrant classifications specifically for nationals of Iraq and Afghanistan: one for individuals who worked as translators or interpreters and one for individuals who were employed by, or on behalf of, the U.S. government in Iraq or by, or on behalf of, the U.S. government or by the International Security Assistance Force in Afghanistan. These classifications, in their current form, are the product of a series of legislative enactments, which initially established the classifications and then amended them (see Table 1 for a comparison of the main features of the programs within these classifications). A prospective Iraqi or Afghan special immigrant must submit a petition for classification; be otherwis e eligible to receive an immigrant visa; and be otherwise admissible to the United States, as specified. Regarding this last requirement, in order to gain admission to the United States, an individual must be admissible under the INA. The INA sets forth various grounds of inadmissibility, which include health-related grounds, security-related grounds, and public charge (i.e., indigence). The public charge ground does not apply to applicants under the special immigrant programs for Iraqis and Afghans; thus, these applicants are not required to demonstrate economic self-sufficiency. Section 1059 of the FY2006 NDAA made certain Iraqi and Afghan nationals who had worked directly with U.S. Armed Forces for at least one year as translators, and their spouses and children, eligible to be classified as special immigrants. The provision capped the number of principal aliens who could become special immigrants at 50 annually and provided that these individuals would count against the overall special immigrant cap (see \" Legislative History of the Special Immigrant Category \"). Section 1059 was amended in 2007 to expand eligibility to certain Iraqi and Afghan nationals who had worked directly with U.S. Armed Forces, or under Chief of Mission authority, for at least one year as translators or interpreters. To be eligible for this special immigrant classification, as amended, the alien also had to obtain a favorable written recommendation from the Chief of Mission or a general or flag officer in the relevant Armed Forces unit. The 2007 legislation temporarily increased the numerical limit on this special immigrant program (to 500 for each of FY2007 and FY2008) and provided that the classification would be exempt from the overall numerical limits on special immigrants. Another 2007 amendment provided that if the numerical limits were not reached in a fiscal year any remaining numbers would be carried forward to the next year. A second special immigrant classification for nationals of Iraq or Afghanistan and their spouses and children was established by Section 1244 of the FY2008 NDAA (for Iraqis) and by Title VI of the Omnibus Appropriations Act, 2009 (for Afghans). This classification, as subsequently amended, is for certain Iraqi and Afghan nationals who were employed by, or on behalf of, the U.S. government in Iraq or Afghanistan, respectively, as specified. The Carl Levin and Howard P. \"Buck\" McKeon National Defense Authorization Act for FY2015 expanded eligibility for the Afghan program to include certain employees of the International Security Assistance Force. To be eligible for this special immigrant classification for nationals of Iraq or Afghanistan, an alien must obtain a recommendation from a senior supervisor that documents the alien's \"faithful and valuable service\" as well as approval from the Chief of Mission. In addition, an applicant must have experienced \"an ongoing serious threat\" as a result of his or her employment. The Section 1244 program for Iraqis who were employed by, or on behalf of, the U.S. government in Iraq requires not less than one year of employment on or after March 20, 2003. The law that originally established the program did not specify an end date for the employment period. The Iraqi program was initially capped at 5,000 principal aliens annually for five years (later specified as FY2008-FY2012) with a provision to carry forward any unused numbers from one fiscal year to the next, including from FY2012 to FY2013. This program expired for principal aliens at the end of FY2013. At the beginning of FY2014, however, the 113 th Congress approved a short-term extension of the program in P.L. 113-42 . For FY2014, P.L. 113-42 provided for the approval of cases that were pending when the program expired on September 30, 2013, as well as 2,000 new cases, as long as the principal aliens in the new cases completed the required one-year period of employment by September 30, 2013, and filed an application with the Chief of Mission in Iraq by December 31, 2013. The NDAA for FY2014 rewrote the extension language in P.L. 113-42 to provide for the issuance of no more than 2,500 visas to principal applicants after January 1, 2014, and to extend the application deadline to September 30, 2014 (for an overview of the application process, see \" Iraqi and Afghan Special Immigrant Visa Application Process \"). No changes to the numerical cap or application deadline have been made since then. A similar SIV program for Afghans who were employed by, or on behalf of, the U.S. government in Afghanistan, as originally enacted, required not less than one year of employment on or after October 7, 2001. It was initially capped at 1,500 principal aliens annually for FY2009 through FY2013 with a provision to carry forward any unused numbers from one fiscal year to the next, including from FY2013 to FY2014. Several laws passed by the 113 th Congress amended the Afghan program's numerical limitations to provide for additional visas. The FY2014 Consolidated Appropriations Act provided for the granting of special immigrant status to up to 3,000 principal aliens for FY2014 and the carrying forward and use of any unused balance for FY2014 through the end of FY2015. This law required the one-year employment period to end by December 31, 2014, and required principal aliens to file an application with the Chief of Mission in Afghanistan by September 30, 2014 (see \" Iraqi and Afghan Special Immigrant Visa Application Process \"). The Emergency Afghan Allies Extension Act of 2014 provided that an additional 1,000 principal aliens could be granted special immigrant status by December 31, 2014. This language required principal aliens to apply to the Chief of Mission no later than the same December 31, 2014, date. Making further changes to the Afghan program's numerical limitations, the FY2015 NDAA provided that an additional 4,000 principal aliens could obtain special immigrant status from the December 19, 2014, enactment date through September 30, 2016. For purposes of obtaining special immigrant status under the new provision, the law set the termination date for the required one-year employment period at September 30, 2015, the deadline to apply to the Chief of Mission at December 31, 2015, and the expiration date for the visa issuance authority at March 31, 2017. Legislation passed in the 114 th Congress further amended the Afghan SIV program. The NDAA for FY2016 increased from 4,000 to 7,000 the number of additional special immigrant visas available for issuance after December 19, 2014, and provided that these visas would remain available until used. The act also modified the employment requirements for certain applicants, requiring no less than two years of employment for those filing petitions after September 30, 2015, and extended both the employment period for eligibility and the application deadline until December 31, 2016. Regarding the future of the Afghan SIV program, the act included the following provision: It is the sense of Congress that the necessity of providing special immigrant status under this subsection should be assessed at regular intervals by the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives, taking into account the scope of the current and planned presence of United States troops in Afghanistan, the current and prospective numbers of citizens and nationals of Afghanistan employed ... and the security climate in Afghanistan. The NDAA for FY2017 increased the number of additional special immigrant visas to 8,500 and extended both the employment eligibility period and the application deadline to December 31, 2020. At the same time, it placed restrictions on qualifying employment for, or on behalf of, the U.S. government for visa issuance purposes for applications filed after the law's December 23, 2016, date of enactment. For these applications, eligibility is limited to Afghans employed in Afghanistan (1) to serve as interpreters and translators, particularly while traveling away from U.S. embassies and consulates with personnel of the Department of State or the U.S. Agency for International Development or traveling off-base with U.S. military personnel; or (2) to perform sensitive activities for the U.S. government in Afghanistan. In the 115 th Congress, the FY2017 Consolidated Appropriations Act increased the number of additional visas available under the SIV program for Afghans who were employed by, or on behalf of, the U.S. government from 8,500 to 11,000. The NDAA for FY2018 provided 3,500 additional visas under this program, for a total of 14,500 visas available for issuance after December 19, 2014. The employment termination date and the application deadline remained unchanged at December 31, 2020. In the 116 th Congress, the FY2019 Consolidated Appropriations Act makes an additional 4,000 visas available under the SIV program for Afghans who were employed by, or on behalf of, the U.S. government, for a total of 18,500 visas available for issuance after December 19, 2014. The employment termination date and the application deadline remain unchanged at December 31, 2020. This law also makes the funding for the additional 4,000 visas conditional on the Secretary of State developing a system for prioritizing the processing of Afghan SIV applications and submitting specified reports, including a report on processing improvements that was required under the NDAA for FY2019 (see \" Application Processing \"). As noted, since FY2009, the annual numerical limit on the Section 1059 program for translators and interpreters has been 50, well below the numerical limits on the programs for Iraqis and Afghans who were employed by, or on behalf of, the U.S. government in Iraq or Afghanistan, respectively. A 2008 law authorized the Secretary of Homeland Security or the Secretary of State to convert an approved special immigrant petition under the former program (filed before October 1, 2008) for which a visa was not immediately available to an approved petition under the latter program and subject to the numerical limits of that latter program. The process of applying for an Iraqi or Afghan special immigrant visa has multiple steps. The application process described in this section is for Iraqis and Afghans who are abroad, who represent the vast majority of applicants. (An applicant in the United States whose petition for classification as a special immigrant is approved under the process described below could then submit an application to adjust status along with supporting documentation; applicants in the United States do not go through the visa process.) The first step under the programs for Iraqis and Afghans who worked for or on behalf of the United States is to apply for Chief of Mission approval. To apply, the principal applicant must submit documentation to the Department of State (DOS), including, among other required information, a letter from the applicant's employer confirming employment; a letter of recommendation from the applicant's direct U.S. citizen supervisor; and a statement from the applicant describing the threats he or she received as a result of his or her U.S. government employment. If approval is granted, the applicant receives a Chief of Mission approval letter. The next step for applicants under the special immigrant programs for Iraqis and Afghans who worked for, or on behalf of, the United States—and the first step for applicants under the program for translators and interpreters—is to file a petition with the Department of Homeland Security's U.S. Citizenship and Immigration Services (DHS/USCIS) along with accompanying documents. In the case of the program for those who worked for, or on behalf of, the United States, the required documents include copies of the Chief of Mission approval letter and of the letter of recommendation from the direct supervisor. In the case of the program for translators or interpreters, the required documents include evidence of qualifying employment, a letter of recommendation from the Chief of Mission or a general or flag officer in the relevant U.S. Armed Forces unit, and evidence of a background check and screening by the Chief of Mission or the U.S. Armed Forces. A petition for classification as an Iraqi or Afghan special immigrant that is approved by USCIS is forwarded to DOS's National Visa Center (NVC), which contacts the applicant to advise him or her to begin collecting required documents. The applicant must submit forms and documents for all family members applying for visas to the NVC. In addition to the immigrant visa application, these materials include copies of passport biodata pages, birth certificates, and civil documents; police certificates, if applicable; and a refugee benefits election form, indicating whether the applicant, if approved to receive a special immigrant visa, would like to participate in DOS's Reception and Placement program and receive associated benefits (see \" Resettlement Assistance and Federal Public Benefits \"). The NVC schedules an in-person visa interview for the principal applicant and any family members at a U.S. embassy or consulate abroad. The interview is required to determine eligibility for a visa. Applicants' fingerprints are taken at the time of the interview. Applicants are also required to have a medical examination at their own cost. After the interview, the consular office informs the applicant about any missing documentation and about any problems with the case that may prevent issuance of a visa. Many cases require additional \"administrative processing\" after the interview. Applicants who are issued visas and who have elected to participate in DOS's resettlement program must have their travel to the United States arranged by the International Organization for Migration. Visa recipients who have elected not to participate in DOS's resettlement program are responsible for making their own travel arrangements. Upon admission to the United States, SIV recipients obtain LPR status. Special immigrant classifications have been established to provide for the permanent admission to the United States of specific populations. As noted, special immigrants comprise a subcategory of permanent employment-based immigrants in the INA, although they are not, in fact, admitted for employment purposes. While the special immigrant category is unique, it does bear similarities to other admission categories that are authorized by other sections of the INA. Unlike special immigrants, refugees comprise a category of humanitarian admissions under the INA. As defined in the INA, a refugee is a person who is unwilling or unable to return to his or her home country \"because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion.\" Refugees accepted for admission to the United States can be accompanied by their spouses and children. The admissions process for refugees is separate from and different than the process for immigrants. After one year in refugee status, they are required to apply to adjust to LPR status. By contrast, special immigrants, like immigrants generally, are granted LPR status upon admission to the United States. Despite the definitional and procedural differences, there is overlap between the refugee category and the special immigrant category, particularly the special immigrant classifications for Iraqis and Afghans. And the same individuals may be eligible to apply for both refugee status and for classification under one of the Iraqi or Afghan special immigrant programs. Unlike the refugee category, the special immigrant classifications for Iraqis and Afghans do not require a showing of persecution. At the same time, the statutory definitions of an eligible alien for the special immigrant programs for Iraqis and Afghans who worked for, or on behalf of, the United States include the following: \"has experienced or is experiencing an ongoing serious threat as a consequence of the alien's employment by the United States Government.\" Another similarity between the special immigrant and refugee categories concerns the element of having a connection to the United States. As noted in the preceding legislative history discussion, U.S. government service is a common feature in special immigrant classifications, including those for Iraqis and Afghans. A U.S. connection also may facilitate access to the U.S. refugee admissions program. Overseas refugee processing is conducted through a system of three priorities for admission. The priorities provide access to U.S. resettlement consideration. Priority 1, which covers refugees for whom resettlement seems to be the appropriate durable solution, applies to all nationalities and requires no connection to the United States. A U.S. connection, however, is a factor under Priorities 2 and 3, which provide more direct access to the U.S. refugee admissions program. Priority 2 covers specified groups of special humanitarian concern to the United States, which may be defined by their nationalities, clans, ethnicities, or other characteristics. A U.S. connection is a required element for some Priority 2 groups, such as Iraqis associated with the United States. Priority 3, which is limited to designated nationalities, covers family reunification cases and requires the prospective refugee to have an eligible relative in the United States. Iraqi and Afghan special immigrants are treated like refugees for purposes of federal public benefits. Under the refugee provisions in the INA, some inadmissibility grounds are not applicable to refugees. The inapplicable grounds include public charge, as is the case with Iraqi and Afghan special immigrants. Relatedly, needy refugees are eligible for resettlement assistance through programs administered by DOS and the Department of Health and Human Services' Office of Refugee Resettlement (HHS/ORR). Under DOS's Reception and Placement program, public and private, nonprofit entities provide new arrivals with initial resettlement services and referrals to other services, as needed. ORR's refugee resettlement programs provide transitional assistance to refugees and other designated groups. Refugees are also subject to special rules with respect to federal public benefits, such as Medicaid and Supplemental Security Income (SSI) for the Aged, Blind and Disabled. While Iraqi and Afghan special immigrants are now eligible for the same federal public assistance as refugees, this was not always the case. The original law establishing the special immigrant program for Iraqi and Afghan translators included no language on eligibility for resettlement support. Subsequent laws on the Iraqi and Afghan special immigrant programs made Iraqis and Afghans eligible for refugee assistance and benefits on a time-limited basis. With the enactment of the NDAA for FY2010, special immigrants from Iraq and Afghanistan became eligible for the same resettlement assistance, entitlement programs, and other benefits as refugees and for the same periods of time. Amerasian children, like Iraqis and Afghans who have assisted the U.S. government, are the subject of special permanent admissions provisions in the INA. The Amerasian provisions have a humanitarian component, but, like the special immigrant provisions, are not a category of humanitarian admissions. Instead, Amerasian children are admitted to the United States under the permanent family-based immigration provisions of the INA (as opposed to the employment-based provisions under which special immigrants are admitted). A law enacted in 1982 amended the INA to provide for the admission to the United States as family-based immigrants of individuals born in Korea, Vietnam, Laos, Kampuchea (Cambodia), or Thailand between 1950 and 1982 with U.S. citizen fathers. An immigrant petition could be filed by the eligible individual or by another person on behalf of an eligible individual. Beneficiaries could not be accompanied to the United States by their mothers or other relatives. In the case of minors, the 1982 law required the mother or guardian to sign a written release and provided for placement of the child with a U.S. citizen or LPR sponsor. A subsequent law enacted in 1987, as amended, eliminated some of restrictions on the immigration of Amerasian children. The 1987 law, which provided for the admission to the United States as immigrants of Vietnamese nationals born in Vietnam between 1962 and 1976 and fathered by a U.S. citizen, permitted the beneficiary to be accompanied by a mother, a spouse, and children. The 1987 law, as amended, also made the public charge ground of inadmissibility inapplicable to these aliens and made them eligible for benefits under the refugee provisions of the INA. With these changes, the treatment of this group became more similar to that of refugees and today's Iraqi and Afghan special immigrants. Through the end of FY2018, more than 79,000 individuals had been issued special immigrant visas abroad, or been adjusted to LPR status in the United States, under the special immigrant classifications for Iraqi and Afghan nationals. Principal applicants accounted for about 26,000 of the total; dependent spouses and children accounted for the remaining 53,000. Table 2 provides data on the special immigrant classification for Iraqi and Afghan translators and interpreters. Table 3 provides data on the special immigrant classification for Iraqis and Afghans who were employed by, or on behalf of, the U.S. government in Iraq or Afghanistan, respectively. As shown in Table 3 and as discussed in the next section, there was a significant drop in visa issuances from FY2017 to FY2018. The tables are mutually exclusive; an individual appears in only one table. (The Appendix contains separate tables for Iraqis and Afghans for each special immigrant classification.) There is a fundamental tension in the administration of the Iraqi and Afghan SIV programs between a sense of urgency to issue visas in a timely fashion to eligible individuals and a need to conduct appropriate security screening. This tension is quite sharp because on the one hand these programs are aimed at individuals who assisted the United States and face danger because of it, and on the other hand there are serious concerns that this population may pose security threats. Overlaying this dynamic is the structure of the SIV programs themselves, with statutory timeframes and numerical limitations. The Iraqi and Afghan SIV application process has been subject to much criticism. According to a February 2014 PBS NewsHour piece on the SIV program for Afghans who worked for, or on behalf of, the U.S. government: Critics describe the process of applying for a visa as opaque, prohibitively complicated and painfully slow, putting the applicant's [ sic ] lives at risk with each passing month that their visas aren't approved. In a 2010 assessment of the SIV program for Iraqis who worked for, or on behalf of, the U.S. government, another observer characterized the application process as a series of procedural barriers and argued that it was impossible to navigate the process without English-speaking legal assistance. Anecdotal reports describe years-long waits for approval, layers of bureaucracy, and unexpected denials. DOS has acknowledged past problems processing Afghan SIV applications but has also cited changes to improve the efficiency of the system. In the 2014 PBS NewsHour piece, Jarrett Blanc, Deputy Special Representative for Afghanistan and Pakistan, identified the need for approval by the Chief of Mission committee in the U.S. embassy in Kabul, Afghanistan, as a \"key bottleneck at the start of the process\" that has been addressed. Blanc explained that by increasing the number of committees handling cases, applications could be reviewed within two weeks of filing. Other changes to the Iraqi and Afghan SIV programs implemented by DOS to decrease processing times were enumerated by Janice Jacobs, former Assistant Secretary of State for Consular Affairs, in written testimony for a July 2011 Senate hearing: We no longer require documentation that we found to be redundant; we have decreased the amount of paperwork that must be submitted by mail in favor of electronic submissions; and we have reorganized internal procedures so that the process moves faster. Incomplete applications also present problems. In response to questions on the SIV program for Iraqis who worked for, or on behalf of, the U.S. government following an October 2011 Senate Judiciary Committee oversight hearing, DHS referred to obstacles faced by SIV applicants in preparing their applications. The cited obstacles included difficulties obtaining a recommendation from a supervisor and a copy of the work contract. In his comments on the parallel Afghan SIV program for the PBS NewsHour piece, Blanc argued that the Afghan applicants share responsibility for the processing delays by failing to submit all the necessary paperwork. The Department of Homeland Security reported at a December 2012 House Homeland Security Committee hearing that it takes between 3 and 10 days, on average, to process an Iraqi or Afghan SIV petition. The department indicated in response to a question following the October 2011 Senate Judiciary Committee hearing that it did not need additional resources to expedite SIV petition processing (see \" Iraqi and Afghan Special Immigrant Visa Application Process \"). The 113 th Congress enacted legislation to amend the SIV programs for Afghans and Iraqis who worked for, or on behalf of, the U.S. government to address application processing-related concerns. The FY2014 NDAA established a review process for denial of Chief of Mission approval under each program. More generally, this law directed the Secretary of State and the Secretary of Homeland Security, in consultation with the Secretary of Defense, to make changes to the processing of applications under each program such that \"all steps ... incidental to the issuance of such visas, including required screenings and background checks, should be completed not later than 9 months after the date on which an eligible alien submits all required materials to complete an application for such visa.\" At the same time, the act included an exception to the nine-month limit in \"high-risk cases for which satisfaction of national security concerns requires additional time.\" The FY2014 NDAA included reporting requirements related to application processing under the SIV programs for Afghans and Iraqis who worked for, or on behalf of, the U.S. government. It required the Secretary of State and the Secretary of Homeland Security, in consultation with the Secretary of Defense, to report to Congress on the implementation of improvements to SIV application processing under both programs. The FY2019 NDAA subsequently required a new report on the implementation of SIV application processing improvements under the Afghan program. The July 2018 conference report on this legislation noted concern that \"the SIV application process continues to suffer from inadequate interagency coordination which has resulted in undue delay, needless stress on applicants, and a sizable drop in SIV admissions this year.\" In addition to requiring a congressional report, the FY2014 NDAA provided for public reports on Iraqi and Afghan SIV application processing. It required the Secretary of State and the Secretary of Homeland Security, in consultation with the Secretary of Defense, to publish quarterly reports describing improvements in efficiency in SIV application processing. The first quarterly reports on the Iraqi and Afghan SIV programs, dated April 2014, stated that the \"U.S. government has devoted resources to reducing the amount of time required to complete the SIV process.\" Similar language appears in all subsequent quarterly reports on the Iraqi program through the most recent July 2018 report, and in all subsequent quarterly reports on the Afghan program through the April 2017 report. Among other data, the quarterly reports on the Iraqi and Afghan SIV programs include average total U.S. government processing time for SIV applications. This statistic excludes any steps in the application process that are the responsibility of the applicant, such as filing a petition with USCIS (see \" Iraqi and Afghan Special Immigrant Visa Application Process \"). In the initial April 2014 quarterly reports, average total U.S. government processing time was 239 business days for the Iraqi program and 287 business days for the Afghan program. In the January 2016 reports, average total U.S. government processing time was 311 business days for the Iraqi program and 293 business days for the Afghan program. In the most recent quarterly reports for July 2018, average total U.S. government processing time was 252 calendar days for the Iraqi program and 692 calendar days for the Afghan program. A lawsuit challenging the delays in processing Iraqi and Afghan SIV applications was filed in federal court in the District of Columbia in June 2018. It remains pending as of the date of this report. As suggested by the \"high-risk cases\" language cited in the preceding section, protecting U.S. national security remains a major concern about the Iraqi and Afghan SIV programs. Iraqi and Afghan SIV applicants are subject to security checks conducted by DHS and DOS, a process that involves coordination with other agencies. Details of the security review process are not publicly available. In her written testimony for the July 2011 Senate hearing, Jacobs said, \"While we cannot discuss specifics for security reasons, SIV applicants from Iraq as well as Afghanistan undergo multiple layers of review.\" In written responses to questions following an April 2013 Senate Foreign Relations Committee hearing, then-Secretary of State John Kerry identified the interagency security screening process as one of the \"major obstacles\" to the quick processing of Afghan SIV applications. Indicating that security screening \"takes the most time,\" he offered that \"the Department of State is working constantly with our interagency counterparts to streamline this comprehensive and essential process while eliminating bottlenecks.\" Scrutiny of the security review process for Iraqi and Afghan SIV applicants increased in 2011 following the arrest on terrorism charges of two Iraqi nationals who had entered the United States through the U.S. refugee program. The potential security risks posed by prospective refugees and special immigrants from Iraq and elsewhere were discussed at the December 2012 House hearing cited above, which was entitled Terrorist Exploitation of Refugee Programs . At the hearing, then-DHS Deputy Under Secretary for Analysis Dawn Scalici described U.S. government efforts to identify potential threats: When we look at on [ sic ] the potential in the future for terrorist groups to exploit the refugee program, we do have concerns. Hence, we have the enhanced security and vetting procedures.... I will tell you that we have intelligence-driven processes regardless of the immigration program that a terrorist actor may seek to use or just travel to the United States. We are reviewing intelligence on a regular basis, sharing that with interagency partners and developing the procedures by which we can help to identify and further [screen] individuals of concern. The quarterly reports on application processing under the SIV programs for Iraqis and Afghans who worked for, or on behalf of, the U.S. government mention security screening. For example, the July 2018 reports for both programs reference \"thorough screening for national security concerns.\" Neither Iraq nor Afghanistan is among the countries subject to entry restrictions or limitations under President Donald Trump's September 2017 presidential proclamation on enhanced vetting. Regarding Iraq, however, the proclamation includes a recommendation from the Secretary of Homeland Security that \"nationals of Iraq who seek to enter the United States be subject to additional scrutiny to determine if they pose risks to the national security or public safety of the United States.\" The SIV program for Iraqi and Afghan translators and interpreters is ongoing, while the programs for Iraqis and Afghans who worked for, or on behalf of, the U.S. government are temporary. As of the date of this report, the temporary Afghan program and the temporary Iraqi program are scheduled to end when all the available visas are issued. As detailed above, each of the three SIV programs has been subject to statutory numerical limitations from the start. The numerical limitations language in the statutes creating the programs for Iraqis and Afghans who worked for, or on behalf of, the U.S. government also provided for the carryover of unused visas from a given fiscal year to the next during a specified period (see \" Special Immigrant Visas for Iraqis and Afghans \"). In the case of the program for Iraqis who worked for, or on behalf of, the U.S. government, as amended, any of the 5,000 visas made available annually for principal aliens for FY2008 through FY2012 that were not used in a given fiscal year were carried forward to the next fiscal year , with unused visas for FY2012 carried forward to FY2013. Visas that were carried forward but not used in that next fiscal year were lost. At the end of FY2013, the Iraqi program ended and any remaining visas were lost. The program was subsequently revived and new visas were authorized. Currently, P.L. 113-66 provides for the issuance of 2,500 visas to principal aliens under the Iraqi program after January 1, 2014. This law required that applications be filed by September 30, 2014, but included no deadline for issuance of the visas. Under the program for Afghans who worked for, or on behalf of, the U.S. government, as originally authorized, any of the 1,500 visas made available annually for principal aliens for FY2009 through FY2013 that were not used in a given fiscal year were carried forward to the next fiscal year. P.L. 113-76 provided for the issuance of 3,000 visas to principal aliens for FY2014 and for the carrying forward of any unused balance for issuance in FY2015. As under the Iraqi program, carried-over visas that were not used in the second fiscal year were lost. Subsequent Afghan special immigrant visa provisions enacted by the 113 th Congress made additional visas available subject to specified employment periods, application deadlines, and visa issuance authority expiration dates. Legislation enacted by the 114 th , 115 th , and 116 th Congresses made additional visas available for issuance after December 14, 2014, but provided that these visas would remain available until used. Some of these laws also extended employment termination dates and application deadlines (see \" Afghan Program \"). In 2014 and 2017, DOS temporarily stopped scheduling interviews for Afghan special immigrant visa applicants due to a dwindling stock of available visas. The FY2019 Consolidated Appropriations Act provides for the issuance of a total of 18,500 visas to principal aliens under the Afghan program after December 19, 2014. The SIV program for translators and interpreters is capped at 50 visas for principal aliens per year. It has been capped at this level for each year except for FY2007 and FY2008, when the cap stood at 500. This program did not originally include carryover provisions, but such language was later added by amendment. As under the other SIV programs, visas that are carried forward but not used in the next fiscal year are lost. Consideration of these numerical limitation and carryover provisions, in conjunction with the visa issuance data for the SIV programs for Iraqis and Afghans who worked for, or on behalf of, the U.S. government (in Table A-3 and Table A-4 in the Appendix ), indicates that thousands of visas provided for these two programs are no longer available. As shown in the tables, through FY2013, visa issuances under both programs consistently fell well below the statutory limits. Under current statutory provisions for the SIV programs for Iraqis and Afghans who worked for, or on behalf of, the U.S. government, as described above, there are no deadlines for the issuance of the visas. There seems to be broad agreement that the United States should admit for permanent residence Iraqis and Afghans who assisted the U.S. government overseas, provided that they do not pose security risks. Yet implementing the SIV programs intended to accomplish this policy goal has proven difficult. Given the seeming consensus that the U.S. government should assist its Iraqi and Afghan employees in need, an ongoing question for Congress is whether the existing SIV provisions are sufficient to accomplish this, or whether further extensions of the temporary SIV programs for Iraqis and Afghans who worked for, or on behalf of, the U.S. government, or other changes to the SIV provisions are warranted. Iraqi and Afghan Translators and Interpreters Table 2 in the main body of the report provides data on visa issuances to Iraqis and Afghans (combined) under the special immigrant program for translators and interpreters. The tables here present visa issuance data under this program for Iraqis and Afghans separately. Table A-1 provides data on Iraqi nationals who were issued special immigrant visas, or who adjusted to LPR status in the United States, under the special immigrant program for translators and interpreters. Table A-2 provides comparable data for Afghan nationals. Both Table A-1 and Table A-2 exclude certain dependents that are included in Table 2 . These are dependents (27 in total) who received a special immigrant visa or adjusted status under the translator/interpreter program and are Iraqi or Afghan nationals but were born in a third country. These 27 dependents account for the discrepancy between these tables and Table 2 . The significant decreases in Table A-1 and Table A-2 after FY2008 reflect changes in the numerical limitations on this classification (see \" Aliens Who Worked as Translators or Interpreters \"). Iraqis and Afghans Who Worked for the U.S. Government Table 3 in the main body of the report provides data on visa issuances to Iraqis and Afghans (combined) under the special immigrant programs for Iraqis and Afghans who worked for the U.S. government. The tables here present visa issuance data under these programs for Iraqis and Afghans separately. Table A-3 provides data on Iraqi nationals who were issued special immigrant visas, or who adjusted to LPR status in the United States, under the special immigrant program for Iraqis who were employed in Iraq by, or on behalf of, the U.S. government. Table A-4 provides comparable data for Afghan nationals under the special immigrant program for Afghans who were employed in Afghanistan by, or on behalf of, the U.S. government or by the International Security Assistance Force. Both Table A-3 and Table A-4 exclude certain dependents that are included in Table 3 . These are dependents (477 in total) who received a special immigrant visa or adjusted status under these programs and are Iraqi or Afghan nationals but were born in a third country. These 477 dependents account for the discrepancy between these tables and Table 3 .", "summary": "Congress has enacted a series of legislative provisions since 2006 to enable certain Iraqi and Afghan nationals to become U.S. lawful permanent residents (LPRs). These provisions make certain Iraqis and Afghans who worked as translators or interpreters, or who were employed by, or on behalf of, the U.S. government in Iraq or Afghanistan, eligible for special immigrant visas (SIVs). Special immigrants comprise a category of permanent employment-based admissions under the Immigration and Nationality Act (INA). While the special immigrant category is unique, it does bear some similarities to other admission categories that are authorized by other sections of the INA, including refugees and Amerasian children. To apply under the SIV programs for Iraqis or Afghans, a prospective special immigrant must submit a petition to the Department of Homeland Security; be otherwise eligible for an immigrant visa; and be otherwise admissible to the United States. An Iraqi or Afghan SIV applicant whose petition is approved and who is abroad is required to have an in-person visa interview at a U.S. embassy or consulate abroad to determine visa eligibility. Upon admission to the United States, SIV recipients are granted LPR status. Iraqi and Afghan special immigrants are eligible for the same resettlement assistance and federal public benefits as refugees. There are three SIV programs for Iraqi and Afghan nationals. One is a permanent program for certain Iraqis and Afghans who have worked directly with U.S. Armed Forces, or under Chief of Mission authority, as translators or interpreters. This program is currently capped at 50 principal aliens (excluding spouses and children) per year. The other two SIV programs for Iraqis and Afghans are temporary. One program is for certain Iraqis who were employed in Iraq by, or on behalf of, the U.S. government during a specified period. It was capped at 5,000 principal aliens annually for FY2008 through FY2012 and included a provision to carry forward any unused numbers from one fiscal year to the next. It expired at the end of FY2013, but was subsequently revived. Current statutory authority provides for the issuance of no more than 2,500 visas to principal applicants after January 1, 2014. Applications are no longer being accepted for this program because the application deadline has passed. There is a similar SIV program for certain Afghans who were employed in Afghanistan by, or on behalf of, the U.S. government or by the International Security Assistance Force during a specified period. The program was capped at 1,500 principal aliens annually for FY2009 through FY2013, with a provision to carry forward any unused numbers from one fiscal year to the next. Current statutory authority provides for the issuance of no more than 18,500 visas to principal applicants after December 19, 2014. The application period for this program remains open. Through the end of FY2018, more than 79,000 individuals were granted special immigrant status under the three SIV programs for Iraqi and Afghan nationals. Principal applicants accounted for about 26,000 of the total, and dependent spouses and children accounted for the remaining 53,000. The Iraqi and Afghan SIV programs have faced challenges with respect to application processing, security screening, and visa availability. The structure of the SIV programs themselves, with statutory timeframes and numerical limitations, introduces additional complication.", "document_type": "crs"}
{"report": "Medicare is a federal insurance program that pays for covered health care services of most individuals aged 65 and older and certain disabled persons. Medicare serves approximately one in six Americans and virtually all of the population aged 65 and over. In calendar year (CY) 2019, the program is expected to cover about 61 million persons (52 million aged and 9 million disabled) at a total cost of about $798 billion, accounting for approximately 3.8% of gross domestic product. The Medicare program is administered by the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS), and individuals enroll in Medicare through the Social Security Administration (SSA). Medicare consists of four parts—Parts A through D. Part A covers hospital services, skilled nursing facility services, home health visits, and hospice services. Part B covers a broad range of medical services and supplies, including physician services, laboratory services, durable medical equipment, and outpatient hospital services. Enrollment in Part B is voluntary; however, most Medicare beneficiaries (about 91%) are enrolled in Part B. Part C (Medicare Advantage) provides private plan options, such as managed care, for beneficiaries who are enrolled in both Part A and Part B. Part D provides optional outpatient prescription drug coverage. Each part of Medicare is funded differently. Part A is financed primarily through payroll taxes imposed on current workers (2.9% of earnings, shared equally between employers and workers), which are credited to the Hospital Insurance (HI) Trust Fund. Beginning in 2013, workers with annual wages over $200,000 for single tax filers or $250,000 for joint filers pay an additional 0.9%. Beneficiaries generally do not pay premiums for Part A. In 2019, total Part A expenditures are expected to reach about $328 billion, representing about 41% of program costs. Parts B and D, the voluntary portions, are funded through the Supplementary Medical Insurance (SMI) Trust Fund, which is financed primarily by general revenues (transfers from the U.S. Treasury) and premiums paid by enrollees. In 2019, about $2.8 billion in fees on manufacturers and importers of brand-name prescription drugs also will be used to supplement the SMI Trust Fund. In 2019, Part B expenditures are expected to reach about $367 billion, and Part D expenditures are expected to reach about $104 billion, representing 46% and 13% of program costs, respectively. (Part C is financed proportionately through the HI and SMI Trust Funds; expenditures for Parts A and B services provided under Part C are included in the above expenditure figures.) Part B beneficiary premiums are normally set at a rate each year equal to 25% of average expected per capita Part B program costs for the aged for the year. Higher-income enrollees pay higher premiums set to cover a greater percentage of Part B costs, while those with low incomes may qualify for premium assistance through one of several Medicare Savings Programs administered by Medicaid. Individuals who receive Social Security or Railroad Retirement Board (RRB) retirement or disability benefits have their Part B premiums automatically deducted from their benefit checks. Part B premiums are generally announced in the fall prior to the year that they are in effect (e.g., the 2019 Part B premiums were announced in October 2018). In 2019, the standard monthly Part B premium is $135.50. However, about 3.5% of Part B enrollees are protected by a hold-harmless provision in the Social Security Act that prevents their Medicare Part B premiums from increasing more than the annual dollar amount of the increase in their Social Security benefit payments. These individuals pay premiums of less than $135.50. In addition to premiums, Part B beneficiaries may pay other out-of-pocket costs when they use services. The annual deductible for Part B services is $185.00 in 2019. After the annual deductible is met, beneficiaries are responsible for coinsurance costs, which are generally 20% of Medicare-approved Part B expenses. This report provides an overview of Medicare Part B premiums, including information on Part B eligibility and enrollment, late-enrollment penalties, collection of premiums, determination of annual premium amounts, premiums for high-income enrollees, premium assistance for low-income enrollees, protections for Social Security recipients from rising Part B premiums, and historical Medicare Part B premium trends. This report also provides a summary of various premium-related issues that may be of interest to Congress. Specific Medicare and Social Security publications and other resources for beneficiaries, and those who provide assistance to them, are cited where appropriate. An individual (or the spouse of an individual) who has worked in covered employment and paid Medicare payroll taxes for 40 quarters is entitled to receive premium-free Medicare Part A benefits upon reaching the age of 65. Those who have paid in for fewer than 40 quarters may enroll in Medicare Part A by paying a premium. All persons entitled to Part A (regardless of whether they are eligible for premium-free Part A) are also entitled to enroll in Part B. An aged person not entitled to Part A may enroll in Part B if he or she is aged 65 or over and either a U.S. citizen or an alien lawfully admitted for permanent residence who has resided in the United States continuously for the immediately preceding five years. Those who are receiving Social Security or RRB benefits are automatically enrolled in Medicare, and coverage begins the first day of the month they turn 65. These individuals will receive a Medicare card and a \"Welcome to Medicare\" package about three months before their 65 th birthday. Those who are automatically enrolled in Medicare Part A also are automatically enrolled in Part B. However, because beneficiaries must pay a premium for Part B coverage, they have the option of turning it down. Disabled persons who have received cash payments for 24 months under the Social Security or RRB disability programs also automatically receive a Medicare card and are enrolled in Part B unless they specifically decline such coverage. Those who choose to receive coverage through a Medicare Advantage plan (Part C) must enroll in Part B. Persons who are not receiving Social Security or RRB benefits, for example because they are still working or have chosen to defer enrollment because they have not yet reached their full retirement benefit eligibility age, must file an application with the SSA or RRB for Medicare benefits. There are two kinds of enrollment periods, one that occurs when individuals are initially eligible for Medicare and one annual general enrollment period for those who missed signing up during their initial enrollment period. A beneficiary may drop Part B enrollment and reenroll an unlimited number of times; however, premium penalties may be incurred. Those who are not automatically enrolled in Medicare may sign up during a certain period when they first become eligible. The initial enrollment period is seven months long and begins three months before the month in which the individual first turns 65. (See Table 1 .) Beneficiaries who do not file an application for Medicare benefits during their initial enrollment period could be subject to the Part B late-enrollment penalty. (See \" Late-Enrollment Premium Penalty and Exemptions .\") If an individual accepts the automatic enrollment in Medicare Part B, or enrolls in Medicare Part B during the first three months of the initial enrollment period, coverage will start with the month in which an individual is first eligible, that is, the month of the individual's 65 th birthday. Those who enroll during the last four months will have their coverage start date delayed from one to three months after enrollment. The initial enrollment period of those eligible for Medicare based on disability or permanent kidney failure is linked to the date the disability or treatment began. An individual who does not sign up for Medicare during the initial enrollment period must wait until the next general enrollment period. In addition, persons who decline Part B coverage when first eligible, or terminate Part B coverage, must also wait until the next general enrollment period to enroll or reenroll. The general enrollment period lasts for three months from January 1 to March 31 of each year, with coverage beginning on July 1 of that year. A late-enrollment penalty may apply. Beneficiaries who do not sign up for Part B when first eligible, or who drop it and then sign up again later, may have to pay a late-enrollment penalty for as long as they are enrolled in Part B. Monthly premiums for Part B may go up 10% for each full 12-month period that one could have had Part B but did not sign up for it. (See \" Calculation of Penalty .\") Some may be exempt from paying a late-enrollment penalty if they meet certain conditions that allow them to sign up for Part B during a special enrollment period (SEP). (See \" Penalty Exemptions .\") In 2018, about 1.4% of Part B enrollees (about 760,000) paid this penalty. On average, their total premiums (standard premium plus penalty) were about 28% higher than what they would have been had they not been subject to the penalty. Those who receive premium assistance through a Medicare Savings Program do not pay the late-enrollment penalty. Additionally, for those disabled persons under the age of 65 subject to a premium penalty, once the individual reaches the age of 65, he or she qualifies for a new enrollment period and no longer pays a penalty. The penalty provision was included in the original Medicare legislation enacted in 1965 to help prevent adverse selection by creating a strong incentive for all eligible beneficiaries to enroll in Part B. Adverse selection occurs when only those persons who think they need the benefits actually enroll in the program. When this happens, per capita costs are driven up and premiums go up, causing more enrollees (presumably the healthier and less costly ones) to drop out of the program. With most eligible persons over the age of 65 enrolled in Part B, the costs are spread over the majority of this population and per capita costs are less than would be the case if adverse selection had occurred. As the Part B late-enrollment penalty is tied to Medicare eligibility and not to access to covered services, individuals who live in areas where Medicare benefits are generally not provided, such as outside of the United States or in prison, could still be subject to the Part B late-enrollment penalty if they do not sign up for (or if they drop) Part B when eligible. To illustrate, if a retired Medicare-eligible individual stopped paying Part B premiums while living overseas for a three-year period and reenrolled when returning to the United States, he or she would not be entitled to a SEP. This individual would instead need to enroll during the general enrollment period and could also be subject to late-enrollment penalties based on that three-year lapse in coverage. Additionally, Part B does not have a \"creditable\" coverage exemption similar to that under the Part D outpatient prescription drug benefit. Except for certain circumstances discussed below, having equivalent coverage does not entitle one to a SEP should one decide to enroll in Part B later. For example, an individual who has retiree coverage similar to Part B and therefore decides not to enroll in Part B when first eligible could be subject to late-enrollment penalties if he or she enrolls in Part B at a later time (for example, because the retiree coverage was discontinued). The late-enrollment penalty is equal to a 10% premium surcharge for each full 12 months of delay in enrollment and/or reenrollment during which the beneficiary was eligible for Medicare. The period of the delay is equal to (1) the number of months that elapse between the end of the initial enrollment period and the end of the enrollment period in which the individual actually enrolls or (2) for a person who reenrolls, the months that elapse between the termination of coverage and the close of the enrollment period in which the individual enrolls. Generally, individuals who do not enroll in Part B within a year of the end of their initial enrollment period would be subject to the premium penalty. For example, if an individual's initial enrollment period ended in September 2016 and the individual subsequently enrolled during the 2017 general enrollment period (January 1 through March 31), the delay would be less than 12 months and the individual would not be subject to a penalty. However, if that individual delayed enrolling until the 2019 general enrollment period, the premium penalty would be 20% of that year's standard premium. (Although the elapsed time covers a total of 30 months of delayed enrollment, the episode includes only two full 12-month periods.) An individual who waits 10 years to enroll in Part B could pay twice the standard premium amount. The late-enrollment surcharge is calculated as a percentage of the monthly standard premium amount (e.g., $135.50 in 2019), and that amount is added to the beneficiary's premium each month. The hold-harmless provision does not provide protection from increases in the penalty amounts. This means that although those who are held harmless in 2018 pay reduced premiums, any late-enrollment penalties are based on the 2019 premium of $135.50 per month. Using the example above in which an individual is subject to a 20% premium penalty, the total monthly premium in 2019 would be calculated as follows (see text box): For those subject to the high-income premium (see \" Income-Related Premiums \"), the late-enrollment surcharge applies only to the standard monthly premium amount and not to the higher-income adjustment portion of their premiums. Using the example of a 20% penalty for a beneficiary with an income of between $85,000 and $107,000, the applicable income-related adjustment of $54.10 would be added on to the penalty-adjusted premium of $162.60 ($135.50 + $27.10 penalty), for a total monthly premium of $216.70. There is no upper limit on the amount of the surcharge that may apply, and the penalty continues to apply for the entire time the individual is enrolled in Part B. Each year, the surcharge is calculated using the standard premium amount for that particular year. Therefore, if premiums increase in a given year, the dollar value of the surcharge will increase as well. Under certain conditions, select beneficiaries may be exempt from the late-enrollment penalty. Beneficiaries who are exempt include working individuals (and their spouses) with group coverage, some international volunteers, and those who based their nonenrollment decision on incorrect information provided by a federal representative. Individuals who are permitted to delay enrollment have their own SEPs. A working individual and/or the spouse of a working individual may be able to delay enrollment in Medicare Part B without being subject to the late-enrollment penalty. Delayed enrollment is permitted when an individual aged 65 or older has group health insurance coverage based on the individual's or spouse's current employment (with an employer with 20 or more employees). In 2018, about 2.0 million of the 3.8 million working aged population were enrolled in Part A only, with most of the rest enrolled in both Parts A and B. Delayed enrollment is also permitted for certain disabled persons who have group health insurance coverage based on their own or a family member's current employment with a large group health plan. For the disabled, a large group health plan is defined as one that covers 100 or more employees. Specifically, persons permitted to delay coverage without penalty are those persons whose Medicare benefits are determined under the Medicare Secondary Payer program. Under Medicare Secondary Payer rules, an employer (with 20 or more employees) is required to offer workers aged 65 and over (and workers' spouses aged 65 and over) the same group health insurance coverage that is made available to other employees. The worker has the option of accepting or rejecting the employer's coverage. If he or she accepts the coverage, the employer plan is primary (i.e., pays benefits first) for the worker and/or spouse aged 65 or over, and Medicare becomes the secondary payer (i.e., fills in the gaps in the employer plan, up to the limits of Medicare's coverage). Similarly, a group health plan offered by an employer with 100 or more employees is the primary payer for its employees under 65 years of age, or their dependents, who are entitled to Medicare because of disability. Such individuals may sign up for Medicare Part B (or Part A) anytime that they (or their spouse) are still working, and they are covered by a group health plan through the employer or union based on that work. Additionally, those who qualify for Medicare based on age may sign up during the eight-month period after retirement or the ending of group health plan coverage, whichever happens first . (If an individual's group health plan coverage, or the employment on which it is based, ends during the initial enrollment period , that individual would not qualify for a SEP.) Disabled individuals whose group plan is involuntarily terminated have six months to enroll without penalty. Individuals who fail to enroll during this special enrollment period are considered to have delayed enrollment and thus could be subject to the penalty. For example, even though an individual may have continued health coverage through the former employer after retirement or have COBRA coverage, he or she must sign up for Part B within eight months of retiring to avoid paying a Part B penalty if he or she eventually enrolls. Individuals who return to work and receive health care coverage through that employment may be able to drop Part B coverage, qualify for a new special enrollment period upon leaving that employment, and reenroll in Part B without penalty as long as enrollment is completed within the specified time frame. Some international volunteers may also be exempt from the Part B late-enrollment penalty. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) permits certain individuals to delay enrollment in Part B without a late-enrollment penalty if they volunteered outside of the United States for at least 12 months through a program sponsored by a tax-exempt organization defined under Section 501(c)(3) of the Internal Revenue Code. These individuals must demonstrate that they had health insurance coverage while serving in the international program. Individuals permitted to delay enrollment have a six-month SEP, which begins on the first day of the first month they no longer qualify under this provision. Under certain circumstances, a SEP may be created and/or late-enrollment penalties may be waived if a Medicare beneficiary can establish that an error, misrepresentation, or inaction of a federal worker or an agent of the federal government (such as an employee of the Social Security Administration, CMS, or a Medicare administrative contractor) resulted in late Part B enrollment. To qualify for an exception under these conditions, the beneficiary must provide documentary evidence of the error, which \"can be in the form of statements from employees, agents, or persons in authority that the alleged misinformation, misadvice, misrepresentation, inaction, or erroneous action actually occurred.\" Time-limited equitable relief also may be granted for certain categories of individuals. For example, CMS may provide a special enrollment period to those affected by a weather related emergency or a major disaster. Additionally, as described in more detail below, CMS determined that it did not provide adequate information regarding Part B enrollment to certain individuals with exchange coverage who enrolled in Medicare Part A and is allowing equitable relief to these individuals through September 2019. CMS generally encourages those who have coverage through an individual exchange (also known as marketplace) plan, and subsequently become eligible for Medicare, to drop the exchange coverage and enroll in Medicare during their initial enrollment period. After an individual has become eligible for Medicare Part A, any tax credits and cost-sharing reductions that individual receives through an exchange plan end. CMS recognized that \"these individuals did not receive the information necessary at the time of their Medicare [initial enrollment period], Part B SEP for the working aged or disabled, or initial enrollment in the Exchange to make an informed decision regarding their Part B enrollment.\" This may have resulted in these individuals not enrolling in Part B, or enrolling in Part B late and being subject to a late enrollment penalty. CMS is thus offering time-limited equitable relief through September 30, 2019, for certain individuals enrolled in both premium-free Medicare Part A and in a plan provided through the health insurance exchanges. Specifically, those who are currently, or had previously been, enrolled in an exchange plan and in premium-free Medicare Part A, and had an initial enrollment period that began on or after April 1, 2013 (or a Part B SEP that ended on or after October 1, 2013) may enroll in Part B without penalty through September 30, 2019. Additionally, the Part B late enrollment penalties of those who had both Part A and exchange coverage and signed up for Part B outside of their initial enrollment period may be reduced or eliminated. To request this equitable relief, qualifying individuals must contact the Social Security Administration and provide appropriate documentation indicating that they were enrolled in an exchange plan and eligible for Medicare during the specified period. Part B premiums may be paid in a variety of ways. If an enrollee is receiving Social Security or Railroad Retirement benefits, the Part B premiums must, by law, be deducted from these benefits. Additionally, Part B premiums are deducted from the benefits of those receiving a Federal Civil Service Retirement annuity. The purpose of collecting premiums by deducting them from benefits is to keep premium collection costs at minimum. This withholding does not apply to those beneficiaries receiving state public assistance through a Medicare Savings Program because their premiums are paid by their state Medicaid program. (See \" Premium Assistance for Low-Income Beneficiaries .\") Part B enrollees whose premiums are not deducted from Social Security, Railroad Retirement, or Civil Service Retirement monthly benefits; are paid by Medicaid; or are paid by another person or organization must pay premiums directly to CMS. By law, a Social Security beneficiary who is enrolled in Medicare Part B must have the Part B premium automatically deducted from his or her Social Security benefits. Automatic deduction from the Social Security benefit check also applies to Medicare Advantage participants who are enrolled in private health care plans in lieu of traditional Medicare. In 2018, about 68% of Medicare Part B enrollees (40.7 million) had their Part B premiums deducted from their Social Security benefit checks. Social Security beneficiaries who do not pay Medicare Part B premiums include those who are under the age of 65 and do not yet qualify for Medicare (e.g., began receiving Social Security benefits at the age of 62); receive low-income assistance from Medicaid to pay the Part B premium; have started to receive Social Security disability insurance (SSDI) but are not eligible for Medicare Part B because they have not received SSDI for 24 months; or chose not to enroll in Medicare Part B. The amount of an individual's Social Security benefits cannot go down from one year to the next as a result of the annual Part B premium increase, except in the case of higher-income individuals subject to income-related premiums. (See \" Protection of Social Security Benefits from Increases in Medicare Part B Premiums .\") For those beneficiaries \"held harmless,\" the dollar amount of their Part B premium increases would be held below or equal to the amount of the increase in their monthly Social Security benefits. A small percentage of Medicare Part B enrollees do not receive Social Security benefits. For example, some individuals aged 65 and older may have deferred signing up for Social Security for various reasons, for instance if they have not yet reached their full Social Security retirement age or are still working. Additionally, certain persons who spent their careers in employment that was not covered by Social Security—including certain federal, state, or local government workers and certain other categories of workers—do not receive Social Security benefits but may still qualify for Medicare. For those who receive benefit payments from the RRB or the Civil Service Retirement System (CSRS), Part B premiums are deducted from the enrollees' monthly benefit payments. While RRB retirement benefit amounts are protected by the hold-harmless provision, CSRS benefits are not held harmless from annual increases in the Part B premium. For those who do not receive these types of benefit payments, Medicare will generally bill directly for their premiums every three months. The enrollee who is being billed does not necessarily have to pay his or her own premiums; premiums may be paid by the enrollee, a relative, friend, organization, or anyone else. In cases where an organization wants to be billed for the Part B premiums of a number of Medicare beneficiaries, it may enter into a formal group-billing arrangement with CMS. Those approved as group billers include such entities as city and county governments, state teacher retirement systems, and certain religious orders. In instances in which a beneficiary's monthly Social Security benefit is not sufficient to cover the entire Part B premium amount, Medicare may bill the beneficiary for the balance. Nonpayment of premiums results in termination of enrollment in the Part B program, although a grace period (through the last day of the third month following the month of the due date) is allowed for beneficiaries who are billed and pay directly. Each year, the CMS actuaries estimate total per capita Part B costs for beneficiaries aged 65 and older over for the following year and set the Part B premium to cover 25% of expected Part B expenditures. However, because prospective estimates may differ from the actual spending for the year, contingency margin adjustments are made to ensure sufficient income to accommodate potential variation in actual expenditures during the year. (See \" Contingency Margin .\") The Part B premium is a single national amount that does not vary with a beneficiary's age, health status, or place of residence. Premiums may be adjusted upward for late enrollment (see \" Late-Enrollment Premium Penalty and Exemptions \") and for beneficiaries with high incomes (see \" Income-Related Premiums \"), or they may be adjusted downward for those protected by the hold-harmless provision (see \" Protection of Social Security Benefits from Increases in Medicare Part B Premiums \"). Monthly Part B premiums are based on the estimated amount that would be needed to finance Part B expenditures on an incurred basis during the year. In estimating needed income and to account for potential variation, CMS takes into consideration the difference in prior years of estimated and actual program costs, the likelihood and potential impact of potential legislation affecting Part B in the coming year, and the expected relationship between incurred and cash expenditures (e.g., payments for some services provided during a particular year may not be paid until the following year). Once the premium has been set for a year, it will not be changed during that year. While both aged and disabled Medicare beneficiaries may enroll in Part B, the statute provides that Part B premiums are to be based only on the expected program costs—that is, the monthly actuarial rate —for the aged (those 65 years of age and older). The actuarial rate for the aged is defined as one-half of the expected average monthly per capita program costs for the aged plus any contingency margin adjustments. Standard Part B premiums are one-half of the actuarial rate. (See Appendix A for a discussion of the history of the premium methodology.) Part B costs not covered by premiums are paid for through transfers from the General Fund of the Treasury. The monthly actuarial rates for both aged and disabled enrollees are used to determine the needed amount of matching general revenue funding. Starting in 2016, a $3.00 per month surcharge is being added onto the standard premium (higher amounts for high-income individuals). To mitigate the expected large premium increases for those not held harmless in 2016, the Bipartisan Budget Act of 2015 (BBA 15; P.L. 114-74 ) required that 2016 Medicare Part B premiums be set as if the hold-harmless rule were not in effect—in other words, to calculate premiums as if all enrollees were paying the same annual inflation-adjusted standard premium. (For additional information on the changes made by BBA 15, see Appendix D .) To compensate for the lost premium revenue (below the required 25%) and to ensure that the SMI Trust Fund had adequate income to cover payments for Part B benefits in 2016, the act allowed for additional transfers from the General Fund of the Treasury to the SMI Trust Fund. To offset the approximately $9 billion in increased federal spending in 2016 resulting from the reduction in standard premiums for those not held harmless, a $3.00 surcharge was added to the monthly premium in 2016, and will continue to be applied in subsequent years until the additional federal costs are fully offset. For those who pay high-income premiums, the surcharge increases on a sliding scale up to $9.60. (See \" Income Categories and Premium Adjustments .\") It is estimated that the surcharge will be applied to premiums through 2021. To determine the 2019 monthly Part B premium amount, CMS first estimated the monthly actuarial rate for enrollees aged 65 and older using actual per-enrollee costs by type of service from program data through 2017 and projected these costs through 2019. CMS estimated that the monthly amount needed to cover one-half of the total benefit and administration costs for the aged in 2019 would be $263.47. However, because of expected variations between projected and actual costs, a contingency adjustment of $3.74 was added to this amount. (See \" Contingency Margin ,\" below.) After a reduction of $2.31 to account for expected interest on trust fund assets, the monthly actuarial rate for the aged was determined to be $264.90. The 2019 Part B standard premium is one-half of $264.90, or $132.50 per month (25% of the monthly expected per capita costs of the aged). The BBA 15 repayment surcharge of $3.00 was then added onto that amount for a total monthly premium of $135.50. (As noted, only those not held harmless pay the standard 2019 premium and surcharge. Those held harmless in 2019 pay lower amounts.) The contingency margin is the amount set aside to cover an appropriate degree of variation between actual and projected costs in a given year. For example, in some years, legislation that resulted in increased Medicare Part B expenditures for the year was enacted after the premium for the year had been set. The Medicare actuaries consider a contingency reserve ratio—net assets at the end of a year in the Part B account of the SMI Trust Fund compared to the following year's expected expenditures—in the amount of 15% to 20% to be adequate, and normally aim for a 17% ratio when determining Part B financing for the upcoming year. Financing fell short of this goal in 2018; however, the CMS actuaries estimate that the 2019 premium rates will allow asset levels in the Part B account to increase to appropriate levels by the end of 2019. The contingency margin in 2019 is affected by a number of factors. Because about 3.5% of Part B enrollees are being held harmless and pay reduced premiums in 2019, the premiums of the remaining 96.5% were adjusted so that aggregate premiums would still cover 25% of Part B costs in 2019. This increase is included in the contingency margin. Additionally, starting in 2011, manufacturers and importers of brand-name drugs began paying a fee that is allocated to the SMI Trust Fund. The contingency margin was thus reduced to account for this additional revenue. Further, certain payment incentives to encourage the development and use of health information technology (HIT) by Medicare physicians are excluded from premium determinations. (HIT bonuses or penalties are directly offset through transfers of general funds from the Treasury.) The 2019 contingency margin adjustment of $3.74 reflects the expected net effects of all of the above factors. For the first 41 years of the Medicare program, all Part B enrollees paid the same Part B premium, regardless of their income. However, the Medicare Modernization Act of 2003 (MMA; P.L. 108-173 ) required that, beginning in 2007, high-income enrollees pay higher premiums. About 3.6 million Medicare Part B enrollees (about 6.6%) paid these higher premiums in 2018. Adjustments, known as income-related monthly adjustment amounts (IRMAA), are made to the standard Part B premiums for high-income beneficiaries, with the share of expenditures paid by beneficiaries increasing with income. This share ranges from 35% to 85% of the value of Part B coverage. In 2019, individuals whose incomes exceed $85,000 and couples whose combined income exceeds $170,000 are subject to higher premium amounts. The hold-harmless provision that prevents a beneficiary's Social Security benefits from decreasing from one year to the next as a result of the Part B premium increase does not apply to those subject to an income-related increase in their Part B premiums. (See \" Protection of Social Security Benefits from Increases in Medicare Part B Premiums .\") To determine those subject to the high-income premium, Social Security uses the most recent federal tax return provided by the Internal Revenue Service. In general, the taxable year used in determining the premium is the second calendar year preceding the applicable year. For example, the 2018 tax return (2017 income) was used to determine who wo uld pay the 2019 high-income premiums. The income definition on which the high-income premiums are based is modified adjusted gross income (MAGI), which is different from gross income. Specifically, gross income is all income from all sources, minus certain statutory exclusions (e.g., nontaxable Social Security benefits). From gross income, adjusted gross income (AGI) is calculated to reflect a number of deductions, including trade and business deductions and losses from sale of property. MAGI is defined as AGI plus certain foreign-earned income and tax-exempt interest. If a person had a one-time increase in taxable income in a particular year (such as from the sale of income-producing property), that increase would be considered in determining the individual's total income for that year and thus his or her liability for the income-related premium two years ahead. It would not be considered in the calculations for future years. In the case of certain major life-changing events that result in a significant reduction in MAGI, an individual may request to have the determination made for a more recent year than the second preceding year. Major life-changing events include (1) death of a spouse; (2) marriage; (3) divorce or annulment; (4) partial or full work stoppage for the individual or spouse; (5) loss by individual or spouse of income from income-producing property when the loss is not at the individual's direction (such as in the case of a natural disaster); and (6) reduction or loss for individual or spouse of pension income due to termination or reorganization of the plan or scheduled cessation of the pension. Certain types of events, such as those that affect expenses but not income or those that result in the loss of dividend income because of the ordinary risk of investment, are not considered major life-changing events. If Medicare enrollees disagree with decisions regarding their IRMAAs, they may file an appeal with Social Security. Enrollees may either submit a \"Request for Reconsideration\" or contact their local Social Security office to file an appeal. (An enrollee does not need to file an appeal if he or she is requesting a new decision based on a life-changing event described above or if the enrollee has shown that Social Security used the wrong information to make the original decision.) Depending on their level of income, Medicare beneficiaries may be classified into one of six income categories. In 2019, individuals with incomes less than $85,000 a year ($170,000 for a couple) pay the standard premium, which is based on 25% of the average Part B per capita cost. Individuals with incomes over $85,000 per year and couples with combined income over $170,000 per year pay a higher percentage of Part B costs. Depending on one's level of income over these threshold amounts, premiums may be adjusted to cover 35%, 50%, 65%, 80%, or 85% of the value of Part B coverage (with the rest being subsidized through federal general revenues). Additionally, high-income individuals pay surcharges ranging from $4.20 to $10.20 per month to offset increased federal spending in 2019 due to premium reductions under BBA 15 (compared to a $3.00 surcharge for those who pay the standard premium). In 2019, total IRMAAs for the five high-income levels, including the additional BBA 15 surcharges, are $54.10, $135.40, $216.70, $297.90, and $325.00 respectively. The income categories and associated premiums for 2019, including the applicable BBA 15 repayment surcharges, are shown below in Table 2 . When both members of a couple are enrolled in Part B, each pays the applicable premium amount. Married persons who lived with their spouse at some point during the year but who filed separate returns are subject to different premium amounts. The income levels and premium amounts are shown in Table 3 . The original provision establishing the Part B income-related premiums set the initial income threshold and high-income-level ranges. Prior to 2010, annual adjustments to these levels were based on annual changes in the consumer price index for urban consumers (CPI-U), rounded to the nearest $1,000. However, Section 3402 of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) froze the income thresholds and ranges at the 2010 level through 2019 rather than allowing them to rise with inflation. As a result, as incomes have increased with inflation, a greater share of Medicare enrollees are reaching the high-income thresholds and paying the high-income premiums than would have been the case without this freeze. Additionally, beginning in 2018, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ) changed the income thresholds of the top two income categories at that time. Individuals with incomes between $133,500 and $160,000 per year are now in the 65% applicable percentage category (which previously applied to those with incomes between $160,000 and $214,000 in 2010-2017). The income threshold for the highest category at that time (80%) was changed to $160,000 (which previously applied to $214,000 in 2010-2017). The thresholds for the lower two income categories were not changed. (See Table 4 .) With the exception of the addition of a new top threshold category described below, the 2019 income thresholds for the high-income categories are the same as in 2018. For years 2020 and after, the thresholds will be adjusted annually for inflation based on the new (2018 and 2019) threshold levels. Section 53114 of the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123 ) added an additional high-income category beginning in 2019 for individuals with annual income of $500,000 or more or couples filing jointly with income of $750,000 or more. (See Table 4 .) Enrollees with income equal to or exceeding these thresholds pay premiums that cover 85% of the average per capita cost of the Parts B and D benefits instead of 80%. The threshold for couples filing jointly in this new income tier is calculated as 150% of the individual income level rather than 200% as in the other income tiers. This new top income threshold will be frozen through 2027 and will be adjusted annually for inflation starting in 2028 based on the CPI-U. Medicare beneficiaries with limited incomes and resources may be able to qualify for assistance with their premiums and other out-of-pocket expenses. About one in five Medicare beneficiaries receives Part B premium subsidies. Medicare beneficiaries who qualify for full Medicaid benefits ( full dual-eligibles ) have most of their health care expenses paid for by either Medicare or Medicaid. For these individuals, Medicaid covers the majority of Medicare premium and cost-sharing expenses, and it supplements Medicare by providing coverage for services not covered under Medicare, such as dental services and long-term services and supports. In cases where services are covered by both Medicare and Medicaid, Medicare pays first and Medicaid picks up most of the remaining costs. Each state has different rules about eligibility and applying for Medicaid. Beneficiaries who do not meet their respective state's eligibility criteria for Medicaid may still qualify for assistance with Part B premiums if they have incomes of less than 135% of the federal poverty level (FPL) and assets of less than $7,730 for an individual or $11,600 for a couple in 2019. These assistance programs are commonly referred to as Medicare Savings Programs (MSPs). Three of these programs provide assistance with Part B premiums. The type of assistance is based on a beneficiary's level of income. Aged or disabled persons with incomes at or below FPL may qualify for the Qualified Medicare Beneficiary (QMB) program. In 2019, the QMB monthly qualifying income levels are $1,061 for individuals and $1,430 for a couple (annual income of $12,732 and $17,160, respectively). QMBs are entitled to have their Medicare Parts A and B cost-sharing charges, including the Part B premium and all deductibles and coinsurance, paid by Medicaid. (See Table 5 .) For QMBs, Medicaid coverage is limited to the payment of Medicare premiums and cost-sharing charges (i.e., the Medicare beneficiary is not entitled to coverage of Medicaid plan services, unless the individual is otherwise entitled to Medicaid). Individuals whose income is more than 100% but less than 120% of FPL may qualify for assistance as a Specified Low-Income Medicare Beneficiary (SLMB). In 2019, the monthly income limits are $1,269 for an individual and $1,711 for a couple (annual income of $15,228 and $20,532, respectively). Medicaid pays the Medicare Part B premiums for SLMBs, but not other cost sharing. Individuals whose income is between 120% and 135% of FPL may qualify for assistance as Qualifying Individuals (QIs). In 2019, the monthly income limit for a QI is $1,426 for an individual, and for a couple, it is $1,923 (annual income of $17,112 and $3,076, respectively). Medicaid protection for these individuals is limited to payment of the monthly Medicare Part B premium. Expenditures under the QI program are, however, paid for (100%) by the federal government from the Medicare SMI Trust Fund up to the state's allocation level. A state is required to cover only the number of people that would bring the state's spending on these population groups in a year up to its allocation level. Any expenditures beyond that level are voluntary and paid entirely by the state. Funding for the QI program was first made available by the Balanced Budget Act of 1997 (BBA97; P.L. 105-33 ). Subsequent legislation extended the program and the amounts available through allocation. MACRA permanently extended the QI program. After a person becomes eligible to receive Social Security benefits, his or her monthly benefit amount is adjusted annually to compensate for increases in the prices of goods and services over time. Near the end of each year, the Social Security Administration announces the cost-of-living adjustment (COLA) payable in January of the following year. The amount of the COLA is based on inflation as measured by the Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W). If the CPI-W decreases, Social Security benefits stay the same—benefits are not reduced during periods of deflation. When the annual Social Security COLA is not sufficient to cover the standard Medicare Part B premium increase, most Medicare beneficiaries are protected by a hold - harmless provision in the Social Security Act. Specifically, if in a given year the increase in the standard Part B premium would cause a beneficiary's Social Security check to be less, in dollar terms, than it was the year before, then the Part B premium is reduced to ensure that the amount of the individual's Social Security check does not decline. This determination is made by the Social Security Administration. To be held harmless in a given year, a Social Security beneficiary must have received Social Security benefit checks in both December of the previous year and January of the current year, and the beneficiary must also have had Part B premiums deducted from both checks. The hold-harmless provision operates by comparing the net dollar amounts of the two monthly benefit payments; if the net Social Security benefit for January of the current year is lower than in December of the previous year, then the hold-harmless provision applies to that person. Premiums of those held harmless are then reduced to an amount that would not cause their Social Security benefits to decline in the next year. The premium paid by those held harmless is called the Variable Supplementary Medical Insurance premium. Those not held harmless pay the standard premium as determined for that year. Typically, the hold-harmless provision affects only a small number of beneficiaries and has had minimal impact on Part B financing. In most years, this rule primarily protects those with relatively low Social Security payments. However, in years in which there is no or a very low Social Security COLA, such as in 2010, 2011, 2016, and 2017, a large number of beneficiaries may be protected by this provision. (See \" Application of the Hold-Harmless Rule in Years Prior to 2016 ,\" \" Application of the Hold-Harmless Rule in 2016 ,\" and \" Application of the Hold-Harmless Rule in 2017 .\") Not all beneficiaries are protected by the hold-harmless provision and, under some circumstances, may be subject to significantly higher premiums than those who are held harmless. Groups that are not protected include the following: Higher- I ncome B eneficiaries. Higher-income beneficiaries who are required to pay income-related Part B premiums are explicitly excluded by law from protection under the hold-harmless provision. They are required to pay the full amount of any increase in their Part B premiums. (See \" Income-Related Premiums .\") Lower- I ncome B eneficiaries. Lower-income beneficiaries who receive premium assistance from Medicaid are not held harmless as their premiums are not deducted from their Social Security benefits. However, the Medicaid program pays the full amount of any increase in their Part B premiums. (See \" Premium Assistance for Low-Income Beneficiaries .\") Those W ho D o N ot R eceive Social Security. This group includes those who have not yet signed up for Social Security for various reasons, for example because they have deferred signing up because they have not reached full retirement age or are still working. It also includes disabled beneficiaries whose Social Security Disability Insurance (SSDI) cash benefits have been discontinued because they have returned to work but who are still eligible for Medicare. Additionally, those who receive benefits exclusively through a different retirement plan are not held harmless. This group includes certain federal retirees under the Civil Service Retirement System as well as certain state and local government workers—such as teachers, law-enforcement personnel, and firefighters—who have their own pension programs. Those W ho D id N ot H ave Medicare P remiums D educted from T heir Social Security C hecks at the E nd of O ne Y ear and the B eginning of the N ext. This category includes those who enroll in Social Security or Medicare during the year in which the hold-harmless provision is in effect, including SSDI recipients who become eligible for Medicare that year after the 24-month waiting period. It also includes those who had Medicare premiums paid on their behalf one year, for example by Medicaid, but lost that coverage during the next year. Some people protected by the hold-harmless provision may still see a decrease in their Social Security checks due to an increase in Medicare Part D premiums. Part D premiums are not covered by the hold-harmless provision, although beneficiaries with low-income subsidies would not be affected. Additionally, those who pay the late-enrollment penalty are not fully protected from the hold-harmless rule. (See \" Late-Enrollment Premium Penalty and Exemptions .\") In a year in which the hold-harmless provision is in effect, the late-enrollment surcharges are calculated as a percentage of the premiums of those not held harmless. These surcharges are considered \"nonstandard\" premiums and thus are not limited by the hold-harmless provision. As described earlier, an individual's Social Security COLA is determined by multiplying his or her benefit amount by the inflation rate, the CPI-W. Part B premiums are determined by projected Part B program costs. Thus, the number of people held harmless can vary widely from year to year, depending on inflation rates and projected Part B costs. For most years, the hold-harmless provision has affected a relatively small number of beneficiaries. However, due to low inflation, no COLA adjustments were made to Social Security benefits in 2010 and 2011. Most Medicare beneficiaries (about 73%) were protected by the hold-harmless provision and continued to pay the 2009 standard monthly premium of $96.40 in both 2010 and 2011. Because Part B expenditures were still expected to increase in those years, and because beneficiary premiums are required to cover 25% of those costs, the premiums for those not held harmless (27% of beneficiaries) were higher than they would have been had the rest of the beneficiaries not been held harmless. The standard monthly premiums paid by those not held harmless were $110.50 in 2010 and $115.40 in 2011. In 2011, of the 27% who were not eligible to be held harmless, about 3% were new Medicare enrollees, about 5% were high-income, about 17% had their premiums paid for by Medicaid, and the remaining 2% did not have their premiums withheld from Social Security benefit payments. In 2012 and 2013, Social Security beneficiaries received a 3.6% and a 1.7% COLA, respectively, which more than covered the Part B premium increases in those years; therefore, the hold-harmless provision was not applicable for most beneficiaries. Similarly, in 2014 and 2015, with a Social Security COLA increase of 1.5% and 1.7%, respectively, and no increase in Part B premiums, the hold-harmless provision also was not broadly applicable in those years. In 2016, for a third time, there was no Social Security COLA increase, but there was a projected increase in Medicare Part B premiums—from $104.90 per month in 2015 to about $121 per month in 2016. Similar to its application in 2010 and 2011, the hold-harmless provision as applied in 2016 protected some beneficiaries but not others. In 2016, about 70% of Part B enrollees were held harmless and continued to pay the 2015 monthly premium amount of $104.90 through 2016. Those not held harmless included those eligible for premium assistance through their state Medicaid programs (about 19%), those who paid the high-income premiums (about 6%), those who did not receive Social Security benefits (3%), and new enrollees in 2016 (5%). Absent legislation, the premiums of those not held harmless (the remaining 30%) would have been higher than the premiums would have been had the hold-harmless provision not been in effect. However, BBA 15 mitigated the expected large increases for those not held harmless and required that their premiums be calculated as if the hold-harmless rule were not in effect. BBA 15 also required that a monthly surcharge of $3.00 be added to standard premiums (more for those with high incomes) until the increased cost to the federal government of reducing the premiums is offset. (See Appendix D .) The total standard premium amount for those Part B enrollees not held harmless in 2016, including the $3.00 per month surcharge, was $121.80. Should there have been a 0% Social Security COLA in 2017, BBA 15 would have allowed for a similar Medicare Part B premium setting mechanism for 2017 as in 2016. However, as there was a very small (0.3%) Social Security COLA in 2017, this provision did not apply. Because the Social Security COLA was not large enough to cover the full Medicare Part B premium increase, about 70% of enrollees were held harmless in 2017. Those held harmless in 2017 pa id , on average, about $109.00 per month for their Part B premiums. However, their actual premiums var ied depending on the dollar amount of the increase in their Social Security benefit. Additionally, many of those not held harmless in 2016 because they were new to Medicare in that year may have qualif ied to be held harmless in 2017. If they qualif ied , t he premiums for those individuals would have been equal to the 2016 premium of $121.80, plus the dollar amount of the increase in their monthly Social Security benefit. As the prem iums of those not held harmless ( the remaining 30% of enrollees) had to cover both their share of the premium increases plus that of the 70% held harmless, the Medicare trustees estimated that their 2017 Part B premiums could be as high as $149 per month. However, in setting the 2017 premiums, the Secretary \"exercised her statutory authority to mitigate projected premium increases for these beneficiaries\" by setting a lower - than - normal contingency reserve ratio for the SMI T rust F und in 2017 . This had the effect of reducing premiums below what they might have been had the ratio been set at a more conventional level. In 2017, those not held harmless pa id monthly premiums of $134.00 . In 2018, there was a 2.0% Social Security COLA and no increase in the 2018 Medicare Part B premiums (i.e., the Part B premium was $134.00 per month in both 2017 and 2018). For many Part B enrollees who were held harmless in 2017, the Social Security COLA was large enough to cover the difference between the full Medicare premium of $134.00 and the reduced premium amount they paid in 2017. Therefore, many of those held harmless in 2017 no longer saw reduced premiums in 2018 and returned to paying the standard premium amounts (which include the $3.00 BBA 15 surcharge). To illustrate, for someone receiving a Social Security benefit of $1,404.00 per month in 2017 (the average amount for retired workers in that year), a 2.0% Social Security COLA would have resulted in an increased benefit of about $28.00 per month in 2018. If that person had been held harmless in 2017 and was paying a Medicare Part B premium of $109.00 per month, this Social Security benefit increase would have been more than enough to cover the $25.00 difference between that individual's reduced Part B 2017 premium amount of $109.00 and the 2018 premium of $134.00. Therefore, that person's Medicare Part B premiums could have increased up to the full premium amount of $134.00 in 2018. CMS estimated that about 72% of Part B enrollees were not held harmless in 2018. About 42% of enrollees were held harmless in 2017 but no longer qualified for reduced premiums in 2018 because they did not meet the requirement that their Social Security benefits would decrease as a result of the increase in their Part B premiums. The remaining 30% included those who normally do not qualify to be held harmless, for instance, because they paid high-income premiums, had their premiums paid on their behalf by Medicaid, or did not receive Social Security benefits. About 28% of Part B enrollees did not receive a large enough increase in their Social Security COLAs to cover the full amount of the Part B premium and thus qualified to be held harmless and paid reduced premiums in 2018. Their premiums could have increased from the premium amount they paid in 2017, plus the dollar amount of the increase in their monthly 2018 Social Security benefit. For example, for someone with a monthly Social Security benefit of $600.00 in 2017, the 2.0% 2018 COLA would have provided an increase of about $12.00. If that individual had been paying $109.00 per month for Medicare premiums in 2017, the $12.00 increase would not have been sufficient to cover the full $134.00 per month. In this example, the individual would have paid $109.00 plus $12.00 ($121.00) per month in 2018. The 2019 Social Security COLA of 2.8% was large enough to increase the benefits of most of those who were held harmless in 2018 to levels sufficient to cover the difference between the amount of the (reduced) premiums they paid in 2018 and the 2019 premiums of $135.50. In 2019, only about 3.5% of beneficiaries (about 2 million) are being held harmless and pay premiums lower than the 2019 premium of $135.50. Part B premium changes over time generally reflect the growth in total Part B expenditures, although the exact relationship between Part B expenditures covered by the Part B premium has been changed by statute at various points. (See Appendix A .) The standard monthly Part B premium has risen from $3.00 in 1966 to $135.50 in 2019. (See Figure 1 .) For comparison, during a similar time period, average annual Part B benefit costs per beneficiary have increased from about $101.00 in 1970 (about $8.42 per month) to a projected $6,391 per beneficiary (about $532.60 per month) in 2019. Prior to 2000, the Part B premium decreased from year to year twice. The first instance was from 1989 ($31.90) to 1990 ($28.60) as a result of the repeal of the Medicare Catastrophic Coverage Act of 1988 ( P.L. 100-360 ). The second was from 1995 ($46.10) to 1996 ($42.50) as a result of the transition from a premium as determined by a fixed dollar amount under the Omnibus Reconciliation Act of 1990 ( P.L. 101-508 ) to 25% of costs as directed under the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). More recently, because of the absence of a Social Security COLA in 2010 and 2011, most beneficiaries were held harmless and paid the 2009 premium of $96.40 per month during those years. The standard 2010 and 2011 premiums, paid by those who were not held harmless, were thus higher than they would have been had the hold-harmless provision not been in effect. (See prior section \" Protection of Social Security Benefits from Increases in Medicare Part B Premiums \" for additional detail.) Since 2000, the standard Medicare Part B premium has almost tripled, from $45.50 in 2000 to the current premium of $135.50 in 2019. This growth has been due to a number of factors that have increased per capita Part B expenditures during that time, including the rising prices of health care services and equipment, new technologies, and increased utilization of Medicare Part B services. While Part B expenditure growth has slowed in recent years, the Medicare trustees project faster benefit spending growth over the next five years (an 8.2% Part B average annual growth rate compared with a 5.5% growth rate over the last five years). The Medicare trustees estimate that 2020 premiums will increase to about $141.10 per month, and that premiums will increase thereafter at an average rate of about 5.3% per year through 2027. (For estimates of premiums in future years through 2027, see Appendix C .) The Medicare trustees estimate that Medicare Part B premiums will increase from $135.50 per month in 2019 to about $202.70 in 2027. (See Appendix C .) Rising Medicare premiums could have a large effect on Social Security beneficiaries, particularly on those who rely on Social Security as their primary source of income. For example, in 2018, Social Security benefits represented about 33% of the income of Americans aged 65 and older. About 48% of married couples and 69% of unmarried persons received more than half of their income from Social Security, and 21% of married couples and 44% of unmarried persons received more than 90% of their income from Social Security. Some of these beneficiaries may see a decline in their standard of living as their Medicare premiums rise. Once a person receives Social Security, his or her benefit is indexed to inflation and thereafter grows with annual Social Security COLAs. However, Medicare premiums are based on the per capita cost growth of Part B benefits, which reflects the growth in the cost of medical care and in the utilization and intensity of services used by beneficiaries, factors that have historically grown faster than CPI-W. Additionally, as there has been a continuing shift from providing care in inpatient (Part A) to outpatient settings (Part B), a greater portion of Medicare spending is expected to be covered by beneficiary premiums. This means that, over time, Medicare premiums are expected to represent a growing proportion of most beneficiaries' Social Security income. Since 2000, Social Security's annual COLA has resulted in a cumulative benefit increase of about 50%, significantly less than the Part B premium growth of close to 200%. The Medicare trustees estimated that average Part B plus Part D premiums would represent close to 12% of the average Social Security benefit in 2018 and would increase to an estimated 17% in 2092. (See Appendix B and Appendix C for historical, current, and projected Part B premiums.) Additionally, while the hold-harmless provision provides protection against increases in the Part B premium, the rule does not apply to Part D premiums or to late-enrollment penalties. Therefore, even in a year with a 0% or a very low Social Security COLA, beneficiaries may still see a decline in benefits as a result of increases in Part D premiums and/or any applicable late-enrollment penalties. The law does not specify how Medicare Part B financing (premiums and general revenues) should be established in years in which the hold-harmless provision applies to a large number of Medicare beneficiaries. Under current law, the only way to generate enough premium revenue to cover 25% of Part B costs is to have those not held harmless shoulder the entire beneficiary share of any increase in premiums. Absent legislation such as BBA 15, the premiums of those not held harmless can therefore be significantly greater than if there were no hold-harmless provision. As the Medicare trustees pointed out in their 2010 annual report, \"(t)his approach to preventing exhaustion of the Part B trust fund account is the only one available under current law,\" despite the \"serious equity issues\" that this method raises. In years in which there has been both a 0% or a very low Social Security COLA and a Medicare premium increase, concerns have been raised about the potential financial impact of the premium increases on those not held harmless as well as on the state Medicaid agencies that pay Part B premiums on behalf of low-income beneficiaries. For example, individuals in retirement systems other than Social Security or RRB may also have not received a COLA but could face significantly higher Medicare premiums than those who qualified for protection under the hold-harmless provision. Some have proposed changes to the hold-harmless provision to avoid the disproportionate impact of premium increases on those not held harmless, such as holding all Part B enrollees harmless in years in which there is no Social Security COLA or allowing Social Security checks to decline as a result of Medicare premium increases in some years. Others have proposed linking the Social Security COLA to a measure of inflation that is based on purchasing patterns of the elderly, such as the BLS's Experimental Consumer Price Index for Americans Aged 62 and Older (CPI-E) or requiring a minimum annual Social Security COLA. Periodically, proposals have been offered to modify or eliminate the Part B premium penalty either for all enrollees or alternatively for a selected population group. As an increasing number of new Medicare-eligible beneficiaries must actively sign up for Medicare because they are not yet receiving Social Security benefits (e.g., their full retirement Social Security age exceeds the Medicare age of eligibility), there is concern that more people could become subject to late-enrollment penalties. For example, the Medicare Rights Center reported a large number of calls to its hotline related to transitioning to Medicare. Their report notes that \"(m)any individuals who call Medicare Rights are confused by Medicare enrollment rules, and specifically by decision-making related to taking or declining Part B\" and that \"Medicare-eligible people who do not understand Part B enrollment rules and fail to enroll in Medicare when they first became eligible may face late-enrollment penalties, gaps in coverage, and disruptions to access to needed care.\" Some proposals have suggested modifying the penalty provision to limit both the amount and the duration of the surcharge, as is the case for delayed Part A enrollment, which has a maximum 10% surcharge and a duration of twice the number of years that enrollment was delayed. (See Appendix E for information on the Part A premium and late-enrollment penalty.) Some have also suggested that Medicare Part B have a creditable-coverage exemption, similar to that under Part D, that would allow Medicare beneficiaries with equivalent coverage to postpone enrollment in Part B without being subject to a penalty. For example, under the Part D prescription drug benefit, individuals are not subject to a late-enrollment penalty if they have maintained \"creditable\" prescription drug coverage prior to enrollment—that is, coverage that is expected to pay at least as much as Medicare's standard prescription drug coverage. Creditable prescription drug coverage includes employer-based prescription drug coverage, qualified State Pharmaceutical Assistance Programs, and military-related coverage (e.g., Veterans Affairs health care system and TRICARE). Other suggestions include formally training employers about Medicare coverage and interaction with other insurance; improving education on Medicare, including late-enrollment penalties, for those nearing Medicare-eligibility age; and expanding equitable relief to include remedies for actions based on misinformation provided by entities in addition to an agent of the federal government, such as an agent of state or local government, and/or an employer or insurer. In recent Congresses, a number of bills have been introduced that would address some of the issues associated with the Part B late-enrollment penalty. For example, in the 116 th Congress, H.R. 1788 would limit the penalty to 15% and twice the period of no enrollment, and would exclude periods of COBRA, retiree, and VA coverage when determining the late enrollment penalty. In the 115 th Congress, H.R. 2575 and S. 1909 would have required Medicare to provide advance notification to those approaching Medicare eligibility, required the creation of a centralized enrollment webpage containing both Social Security and Medicare online tools, restructured Medicare enrollment periods and coverage periods, and expanded the eligibility for special enrollment periods for those who meet exceptional conditions as defined by the Secretary of HHS. Also introduced in the 115 th Congress, H.R. 2342 would have required that employers notify employees about the availability of special enrollment periods to obtain marketplace coverage and Medicare coverage upon termination or separation, and H.R. 5104 would have established a special Medicare Part B enrollment period for individuals enrolled in COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation coverage who elected not to enroll in Part B during their initial enrollment period. Additionally, H.R. 707 would have, among other changes, eliminated late-enrollment penalties for those between the ages of 65 and 70. As introduced in the 112 th Congress, in addition to creating a special enrollment period for those with COBRA coverage, H.R. 1654 would have created a continuous enrollment period that would have allowed Medicare-eligible beneficiaries to sign up for Part B outside of the general enrollment period and to receive health coverage the following month. H.R. 1654 would have also expanded eligibility for equitable relief to those who based enrollment decisions on incorrect information provided by group health plans and plan sponsors, and it would have directed the Government Accountability Office to study problems with Part B enrollment. In the 111 th Congress, H.R. 2235 would have limited the penalty for late Part B enrollment to 10% and limited the duration to twice the period of no enrollment, similar to the Part A late-enrollment penalty. It also would have excluded periods of COBRA and retiree coverage from the penalty. As Medicare currently represents about 14% of federal spending, many proposals to reduce federal deficits include suggestions to reduce Medicare program spending and/or increase program income. For example, some proposals would increase Medicare premiums as a portion of total program funding, whereas others would limit the amount of federal contributions. Certain proposals suggest limiting premium increases to high-income beneficiaries. For example, the President's FY2017 budget proposal would have increased the percentage of per capita expenditures paid by high-income enrollees from 35% to 80% of expenditures to a range of between 40% and 90%, and it would have increased the number of high-income brackets from four to five. The proposal also would have continued the freeze on income thresholds until 25% of beneficiaries were subject to the high-income premiums. (Subsequent to that proposal, the BBA 18 added a fifth high-income bracket with premiums set at 85% of per capita expenditures. See \" Income-Related Premiums .\") Other proposals suggest increasing premiums paid by all Part B enrollees. For example, a proposal introduced in 2011 by then-Senators Lieberman and Coburn suggested raising the standard Part B premium from the current 25% of program costs to 35% over five years. In 2016, about 34% of beneficiaries enrolled in traditional Medicare bought Medigap policies from private insurance companies that cover some or all of Medicare's cost sharing. Individuals who purchase Medigap must pay a monthly premium, which is set by, and paid to, the insurance company selling the policy. There are 10 standardized Medigap plans with varying levels of coverage. Two of the 10 standardized plans cover Parts A and B deductibles and coinsurance in full (i.e., offer first-dollar coverage). In 2015, 65% of all beneficiaries who purchased Medigap insurance were covered by one of these two plans. Some are concerned that beneficiaries enrolled in Medigap plans with low cost-sharing requirements may have less incentive to consider the cost of health care services and may thus increase costs to the Medicare program. To address this, Section 401 of MACRA prohibits the sale of Medigap policies that cover Part B deductibles to newly eligible Medicare beneficiaries beginning in 2020. Some have also proposed imposing a Part B premium surcharge for Medicare beneficiaries who purchase certain types of Medigap plans. For example, the President's FY2016 budget proposal suggested imposing a Part B premium surcharge of approximately 15% of the average Medigap premium (about 30% of the Part B premium) for new Medicare beneficiaries who enroll in a near first-dollar Medigap plan. Finally, other proposals, such as that put forth in the FY2019 House Budget Resolution, would place limits on the amount of the federal subsidy for Medicare, and premiums would vary depending on the Medicare plan in which the beneficiary enrolled. In general, such premium support proposals would limit federal spending by changing the current Medicare program from a defined-benefit to a defined-contribution system. Most such proposals would limit the growth in the annual federal premium subsidy. Depending on how such a proposal is designed, and should Medicare costs grow more quickly than the limit, beneficiary premiums could increase more rapidly than the amount of the premium subsidy. Some of the issues that would need to be addressed when evaluating these types of deficit reduction proposals include (1) the ability of Medicare beneficiaries to absorb increased costs given their current levels of income and assets, as well as their other out-of-pocket expenditures (both health and non-health related); (2) the willingness of high-income beneficiaries to continue participating in Medicare Part B should their premiums be increased; and (3) the capacity of the Medicaid program to continue providing premium assistance to low-income beneficiaries should premiums increase. Appendix A. History of the Part B Premium Statutory Policy and Legislative Authority The basis for determining the Part B premium amount has changed several times since the inception of the Medicare program, reflecting different legislative views of what share beneficiaries should bear as expenditures have increased. When the Medicare program first went into effect in July 1966, the Part B monthly premium was set at a level to cover 50% of Part B program costs. Legislation enacted in 1972 limited the annual percentage increase in the premium to the same percentage by which Social Security benefits were adjusted for changes in the cost-of-living adjustments (i.e., COLAs). Under this formula, revenues from premiums soon dropped from 50% to below 25% of program costs because Part B program costs increased much faster than inflation as measured by the Consumer Price Index on which the Social Security COLA is based (see Table A-1 ). From the early 1980s, Congress regularly voted to set Part B premiums at a level to cover 25% of program costs, in effect overriding the COLA limitation. The 25% provisions first became effective January 1, 1984, with general revenues covering the remaining 75% of Part B program costs. Premiums increased in 1989 as a result of the Medicare Catastrophic Coverage Act of 1988 ( P.L. 100-360 ), which added a catastrophic coverage premium to the Part B premium. The act was repealed in November 1989, and the Part B premium for 1990 fell as a result. Congress returned to the general approach of having premiums cover 25% of program costs in the Omnibus Budget Reconciliation Act of 1990 (OBRA 90; P.L. 101-508 ). However, OBRA 90 set specific dollar figures, rather than a percentage, in law for Part B premiums for the years 1991-1995. These dollar figures reflected Congressional Budget Office estimates of what 25% of program costs would be over the five-year period. However, program costs grew more slowly than anticipated, in part due to subsequent legislative changes. As a result, the 1995 premium of $46.10 actually represented 31.5% of Medicare Part B program costs. The Omnibus Budget Reconciliation Act of 1993 (OBRA 93; P.L. 103-66 ) extended the policy of setting the Part B premium at a level to cover 25% of program costs for the years 1996-1998. As was the case prior to 1991, a percentage rather than a fixed dollar figure was used, which meant that the 1996 premium ($42.50) and the 1997 premium ($43.80) were lower than the 1995 premium ($46.10). The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ) permanently set the premium at 25% of program costs so that, generally speaking, premiums rise or fall with Part B program costs. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173 ), as modified by the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ), required that beginning in 2007, higher-income beneficiaries pay higher Part B premiums. The income thresholds used to determine eligibility for the high-income premium are to be adjusted each year by the growth in the Consumer Price Index. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended, Section 3402), however, froze these thresholds for the period of 2011 through 2019 at the 2010 levels. In 2020, the thresholds were to return to the levels they would have been had they been adjusted for inflation each year during the freeze and again indexed to inflation each year. As this would have resulted in higher income thresholds, it would have had the effect of reducing the number of beneficiaries who pay the high-income premiums in 2020. Section 402 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ) maintains the freeze on the income thresholds for all income categories through 2017 and on the lower two high-income premium tiers through 2019. Beginning in 2018, MACRA reduces the threshold levels for the two highest income tiers so that more beneficiaries will fall into the higher percentage categories. (See \" Income Thresholds .\") Additionally, starting in 2020, the income thresholds for all income categories will be adjusted annually for inflation based on the 2019 income thresholds. This will, in effect, maintain the proportion of beneficiaries who pay the high-income premium. Due to a 0% Social Security COLA coupled with an increase in Medicare premiums, a large percentage of Medicare Part B enrollees were protected by the hold-harmless provision in 2016 and continued to pay the 2015 premium of $104.90 per month. The Medicare trustees estimated that the standard premiums of those not held harmless in 2016 would therefore need to be increased to approximately $159 per month for aggregate premiums to still cover 25% of per capita benefit costs. The Bipartisan Budget Act of 2015 (BBA 15; P.L. 114-74 ), however, mitigated this sharp premium increase and required that the 2016 Part B standard premium be calculated as if the hold-harmless rule were not in effect and the increased costs had been spread across all beneficiaries. (See Appendix D .) Instead of having those not held harmless bear the increase for all of the Part B enrollee population, the act allowed for the transfer of additional general revenues to the SMI Trust Fund to make up for the shortfall in premium revenue. As a result of this change, Part B enrollees not held harmless paid a standard monthly premium of $121.80 in 2016. To offset the increased costs, a $3.00 surcharge was added to the monthly premium in 2016 (the $121.80 premium amount included this surcharge), and will continue to be applied in subsequent years until the additional federal cost of about $9 billion is fully offset (the surcharge increases on a sliding scale for those who pay high-income premiums, up to $9.60). BBA 15 provided for similar premium adjustments in 2017 if there were a 0% Social Security COLA again in that year. However, as there was a 0.3% 2017 Social Security COLA, this provision was not applicable in 2017. Section 53114 of the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123 ) added an additional high-income category beginning in 2019 for individuals with annual incomes of $500,000 or more or couples filing jointly with incomes of $750,000 or more. Enrollees with income equal to or exceeding these thresholds pay premiums that cover 85% of the average per capita cost of Part B benefits instead of 80%. The threshold for couples filing jointly in this new income tier is calculated as 150% of the individual income level rather than 200% as in the other income tiers. The BBA 15 premium surcharge for this category is $10.20. This new top income threshold will be frozen through 2027 and will be adjusted annually for inflation starting in 2028 based on the CPI-U. Appendix B. Standard and High-Income Part B Premiums and Income Thresholds: 2007-2019 Appendix C. Estimated Future Part B Premiums Appendix D. Bipartisan Budget Act of 2015 Changes to 2016 Part B Premiums Under normal circumstances, standard Medicare Part B premiums are set at an amount to cover 25% of projected average per capita Part B expenditures plus an appropriate contingency margin. Due to expected growth in the cost of Part B benefits, the Medicare trustees projected that in order to cover 25% of benefit costs as well as to build up adequate contingency reserves, the 2016 Part B premiums would need to be increased to about $121 per month from the 2015 amount of $104.90. However, due to the absence of a Social Security COLA in 2016 and the resulting widespread application of the hold-harmless provision, most Part B enrollees continued to pay the 2015 premium amount of $104.90 through 2016. With about 70% of enrollees continuing to pay $104.90, the only way that premiums could cover 25% of per capita expenditures would have been if those not held harmless (the remaining 30%) bore the entire cost increase (i.e., if the aggregate increase in premiums were spread out over fewer people). The Medicare trustees estimated that the premiums of those not held harmless would therefore need to be increased to about $159 per month. The trustees also estimated that high-income beneficiaries (i.e., those earning more than $85,000) would need to pay significantly higher monthly premiums of about $223, $319, $414, or $510 depending on their level of income (compared to their respective 2015 premiums of $147, $210, $273, and $336 per month). To mitigate the expected large premium increases for those not held harmless, the Bipartisan Budget Act of 2015 (BBA 15; P.L. 114-74 ) required that 2016 Medicare Part B premiums be set as if the hold-harmless rule were not in effect—in other words, to calculate premiums as if all enrollees were paying the same annual inflation-adjusted standard premium (about $121 per month). To compensate for the lost premium revenue (below the required 25%) and to ensure that the Supplementary Medical Insurance (SMI) Trust Fund had adequate income to cover payments for Part B benefits in 2016, the act allowed for additional transfers from the General Fund of the Treasury to the SMI Trust Fund. To offset the approximately $9 billion in increased federal spending in 2016 resulting from the reduction in standard premiums for those not held harmless (i.e., the additional amounts transferred from the General Fund), as well as the loss of income due to reductions in the income-related monthly adjustment for high-income enrollees, the law required that a $3.00 per month surcharge be added to standard premiums in 2016, and each subsequent year, until the $9 billion is fully offset. (For those who pay high-income premiums, the surcharge increases on a sliding scale, up to $9.60.) It is expected that this surcharge will be applied to premiums through 2021. The monthly repayment surcharge is paid only by those not held harmless. Should there have been a 0% Social Security COLA in 2017, BBA 15 allowed for a similar Medicare Part B premium setting mechanism for 2017. However, as there was a 0.3% COLA in 2017, this provision did not apply. BBA 15 did not allow for similar adjustments beyond 2017. Appendix E. Part A Premiums The vast majority of persons turning the age of 65 are automatically entitled to Medicare Part A based on their own or their spouse's work in covered employment. However, individuals aged 65 and older who are not otherwise eligible for Medicare Part A benefits and certain disabled individuals who have exhausted other entitlement may voluntarily purchase Part A coverage. In most cases, persons who voluntarily purchase Part A must also purchase Part B. The periods during which one can enroll are the same as those for Part B (see \" Medicare Part B Eligibility and Enrollment \"). The monthly Part A premium is equal to the full average per capita value of the Part A benefit ($437.00 per month in 2019). Persons who have at least 30 quarters of covered employment (or are married to someone who has such coverage) pay a premium that is 45% less than the full Part A premium ($240.00 per month in 2019). CMS estimates that in 2019, about 679,000 individuals will voluntarily enroll in Part A by paying the full premium and about 75,000 will pay the reduced premium. Similar to Part B, a penalty is imposed for persons who delay Part A enrollment beyond their initial enrollment period (which is the same seven-month period applicable for enrollment in Part B). However, both the amount of the penalty and the duration of the penalty are different than under Part B. Persons who delay Part A enrollment for at least 12 months beyond their initial enrollment period are subject to a 10% premium surcharge. The surcharge is 10% regardless of the length of the delay. Further the surcharge only applies for a period equal to twice the number of years (i.e., 12-month periods) during which an individual delays enrollment. Thus, an individual who delays enrollment for three years under Part A would be subject to a 10% penalty for six years, whereas a person who delays enrollment for the same three-year period under Part B would be subject to a permanent 30% penalty.", "summary": "Medicare is a federal insurance program that pays for covered health care services of most individuals aged 65 and older and certain disabled persons. In calendar year 2019, the program is expected to cover about 61 million persons (52 million aged and 9 million disabled) at a total cost of $798 billion. Most individuals (or their spouses) aged 65 and older who have worked in covered employment and paid Medicare payroll taxes for 40 quarters receive premium-free Medicare Part A (Hospital Insurance). Those entitled to Medicare Part A (regardless of whether they are eligible for premium-free Part A) have the option of enrolling in Part B, which covers such things as physician and outpatient services and medical equipment. Beneficiaries have a seven-month initial enrollment period, and those who enroll in Part B after this initial enrollment period and/or reenroll after a termination of coverage may be subject to a late-enrollment penalty. This penalty is equal to a 10% surcharge for each 12 months of delay in enrollment and/or reenrollment. Under certain conditions, some beneficiaries are exempt from the late-enrollment penalty; these exempt beneficiaries include working individuals (and their spouses) with group coverage through their current employment, some international volunteers, and those granted \"equitable relief.\" Whereas Part A is financed primarily by payroll taxes paid by current workers, Part B is financed through a combination of beneficiary premiums and federal general revenues. The standard Part B premiums are set to cover 25% of projected average per capita Part B program costs for the aged, with federal general revenues accounting for the remaining amount. In general, if projected Part B costs increase or decrease, the premium rises or falls proportionately. However, some Part B enrollees are protected by a provision in the Social Security Act (the hold-harmless provision) that prevents their Medicare Part B premiums from increasing more than the annual increase in their Social Security benefit payments. This protection does not apply to four main groups of beneficiaries: low-income beneficiaries whose Part B premiums are paid by the Medicaid program; high-income beneficiaries who are subject to income-related Part B premiums; those whose Medicare premiums are not deducted from Social Security benefits; and new Medicare and Social Security enrollees. Most Part B participants must pay monthly premiums, which do not vary with a beneficiary's age, health status, or place of residence. However, since 2007, higher-income enrollees pay higher premiums to cover a higher percentage of Part B costs. Additionally, certain low-income beneficiaries may qualify for Medicare cost-sharing and/or premium assistance from Medicaid through a Medicare Savings Program. The premiums of those receiving benefits through Social Security are deducted from their monthly payments. Each year, the Centers for Medicare & Medicaid Services (CMS) determines the Medicare Part B premiums for the following year. The standard monthly Part B premium for 2019 is $135.50. However, in 2019, the hold-harmless provision applies to about 3.5% of Part B enrollees, and these individuals pay lower premiums. (The premiums of those held harmless vary depending on the dollar amount of the increase in their Social Security benefits.) Higher-income beneficiaries, currently defined as individuals with incomes over $85,000 per year or couples with incomes over $170,000 per year, pay $189.60, $270.90, $352.20, $433.40, or $460.50 per month, depending on their income levels. Starting in 2018, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10) reduced the income thresholds in the highest two income tiers so that more enrollees will pay higher premiums. The Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123) added an additional income tier beginning in 2019 for individuals with annual incomes of $500,000 or more or couples filing jointly with incomes of $750,000 or more. Current issues related to the Part B premium that may come before Congress include the amount of the premium and its rate of increase (and the potential net impact on Social Security benefits), the impact of the hold-harmless provision on those not held harmless, modifications to the late-enrollment penalty, and possible increases in Medicare premiums as a means to reduce federal spending and deficits.", "document_type": "crs"}
{"report": "In the Federalist Papers , James Madison noted the importance of participation by upstanding citizens at all levels of government as a condition for legitimate governance. \"The aim of every political constitution is, or ought to be, first to obtain for rulers men who possess most wisdom to discern, and most virtue to pursue, the common good of the society; and in the next place, to take the most effectual precautions for keeping them virtuous whilst they continue to hold their public trust.\" To ensure that Members uphold high standards, the Constitution provides each house of Congress sole authority to establish rules, judge membership requirements, and punish and expel its Members. Article I, Section 5, clause 1 provides that \"Each House shall be the Judge of the Elections, Returns, and Qualifications of its own Members.\" In addition, clause 2 provides that \"Each House may determine the Rules of its Proceedings, punish its Members for disorderly Behaviour, and, with the Concurrence of two thirds, expel a Member.\" Congress used their ability to establish ethics rules and to punish individual Members sparingly in the 18 th and 19 th centuries. As former Senate historian Richard Baker observed on the subject of congressional ethics, \"[f]or nearly two centuries, a simple and informal code of behavior existed. Prevailing norms of general decency served as the chief determinants of proper legislative conduct. \" During that time, Congress often dealt with potential ethics issues \"on a case-by-case basis, only with the most obvious acts of wrongdoing, those clearly 'inconsistent with the trust and duty of a member. '\" Events in the 1960s, including the investigation of Representative Adam Clayton Powell's alleged misuse of Education and Labor Committee funds, prompted a special subcommittee of the Committee on House Administration to investigate the allegations and the potential creation of an ethics committee to establish a code of conduct for the House of Representatives. This report examines the history and evolution of the House Committee on Ethics, including the committee's jurisdiction and investigative procedure. It does not deal with changes to federal or state criminal law or with criminal pros ecutions of Members of Congress or with the specifics of disciplinary cases in the House. Prior to the creation of the House Committee on Standards of Official Conduct in the 90 th Congress (1967-1968), no uniform mechanism existed for self-discipline in the House of Representatives. Congress, however, had previously attempted to create an ethical framework for House Members and employees. In 1958, Congress established the first Code of Ethics for Government Service. Initially proposed in 1951 by Representative Charles Bennett, the Code of Ethics was adopted as a result of a House investigation of presidential chief of staff Sherman Adams, who was alleged to have received gifts from an industrialist being investigated by the Federal Trade Commission. The Code of Ethics for Government Service standards continue to be recognized as ethical guidance in the House and Senate. They are, however, not legally binding because the code was adopted by congressional resolution, not by law. In the period preceding the creation of the Committee on Standards of Official Conduct in 1967, investigations into alleged wrongdoing by Members and staff of the House were dealt with in an ad-hoc fashion. There were, however, attempts to create a more uniform system to investigate and discipline Members and staff. For example, during hearings before the Joint Committee on the Organization of Congress in 1965, considerable testimony was presented on the ethical conduct of Members, and the need for House and Senate codes of conduct, financial disclosure regulations, and a House Ethics Committee (the Senate had created one in 1964). In its final report, the joint committee called for the creation of a Committee on Standards and Conduct in the House. On September 2, 1966, following publicized allegations of misconduct by House Education and Labor Committee Chair Adam Clayton Powell, Representative Charles Bennett introduced H.Res. 1013 to create a Select Committee on Standards and Conduct, which was referred to the Committee on Rules. On September 7, the Committee on Rules reported the resolution \"with the recommendation that the resolution do pass.\" On October 19, the House debated, amended, and agreed to H.Res. 1013, creating the select committee. As adopted, the resolution created a 12-member panel, with 6 majority and 6 minority Members appointed by the Speaker of the House. The Select Committee was charged with two duties. They were to (1) recommend to the House, by report or resolution such additional rules or regulations as the Select Committee shall determine to be necessary or desirable to insure proper standards of conduct by Members of the House and by officers or employees of the House, in the performance of their duties and the discharge of their responsibilities; and (2) report violations, by a majority vote of the Select Committee, of any law to the proper Federal and State authorities. Pursuant to H.Res. 1013, the report on the select committee's activities at the end of the 89 th Congress (1965-1966) included recommendations for House action on ethics-related matters. Because the select committee only existed between October and December 1966, the committee concluded that they could not \"prudently recommend changes in existing provisions of law or recommend new ones at this time.\" Instead, they recommended that (1) the committee be continued as a select committee in the 90 th Congress; (2) legislation introduced in the 90 th Congress on standards and conduct should be referred to the select committee; and (3) Members of the House should be asked for suggested changes in existing statutes. In addition, the report included draft language for the continuation of the select committee. In the first session of the 90 th Congress (1967-1966), more than 100 resolutions were introduced to create a Committee on Standards of Official Conduct. One of these proposals, H.Res. 18, was introduced on January 10, 1967, by Representative Charles Bennett, chair of the Select Committee on Standards and Conduct in the 89 th Congress. H.Res. 18 was referred to the Committee on Rules, which held a series of hearings on this, and other similar resolutions, in February and March 1967. During the hearings, the Committee on Rules heard from numerous Members of the House and considered proposals to create both a select and a standing committee on standards and conduct. Representative Bennett, the sponsor of H.Res. 18, argued that a standards committee would be essential to aid the House in dealing with issues of perceived and actual impropriety by Members. He testified The public image of Congress demands that the House establish a full, working, thoughtful committee working solely in the field of standards and conduct. Sixty percent of those answering a recent Gallup poll said they believe the misuse of Government funds by Congressmen is fairly common. Of course, we know that such abuses are, in fact, not common, but we have seen a number of such damaging polls showing the people's lack of faith in the integrity of Congress. There is a need for a vehicle in the House to achieve and maintain the highest possible standards by statute and enforcement thereof. This can only be done after through study by a committee whose primary interests are in the field of ethics. On April 6, 1967, following its hearings on H.Res. 18 and other similar resolutions, the House Rules Committee reported H.Res. 418, \"to establish a standing committee to be known as the Committee on Standards of Official Conduct.\" On April 13, the House debated and passed H.Res. 418 by a vote of 400 to zero. The resolution created a bipartisan 12-member standing committee with the initial mission to make \"recommendations for its jurisdiction\" and to \"recommend as soon as practicable to the House of Representatives such changes in laws, rules, and regulations as the committee deems necessary to establish and enforce standards of official conduct for Members, officers and employees of the House.\" The first members of the committee were appointed on May 1 when H.Res. 457 (majority members) and H.Res. 458 (minority members) were agreed to by the House. The Committee on Standards of Official Conduct (Committee on Standards) held its first hearings in the summer and fall of 1967. The hearings were designed to help the committee meet the requirements of H.Res. 418 \"to write, and recommend to the House, a set of standards for the official conduct of the Chambers' Members and employees.\" In March 1968, the committee issued a report summarizing their activities and recommending continuation of the committee as a select committee; changes in the committee's jurisdiction and powers; creation of a Code of Official Conduct and financial disclosure rules for Members, officers, and employees of the House; establishment of standardized controls by the Committee on House Administration over committees using counterpart funds (foreign currencies held by U.S. embassies that can only be spent in the country of origin); a prompt review of the Federal Corrupt Practices Act (reporting of campaign expenditures) by the House; and compliance by House candidates with applicable provisions of the proposed Code of Official Conduct. On March 14, 1968, Representative Melvin Price, chair of the Committee on Standards, introduced H.Res. 1099 \"to continue the Committee on Standards of Official Conduct as a permanent standing committee of the House of Representatives.\" The resolution was referred to the Committee on Rules, and was reported with amendments on April 1. On April 3, the Committee on Rules reported a special rule (H.Res. 1119) for the consideration of H.Res. 1099. Following adoption of H.Res. 1119, debate on H.Res. 1099 proceeded. In his opening statement, Representative Price discussed the reasons for amending H.Res. 418 and making the committee a permanent, standing committee of the House. The reason for amending that original resolution, as opposed to offering a completely new resolution, is that the committee felt it would be advantageous—from the standpoints of continuity and orderliness—to extend the life of the existing committee rather than constitute a new committee. Following the adoption of several amendments, H.Res. 1099 was agreed to by a vote of 406 to 1. The resolution provided for (1) continuation of the Committee on Standards as a permanent standing House committee; (2) enumeration of the committee's jurisdiction and powers; (3) creation of the first House Code of Official Conduct (Rule XLIII); and (4) adoption of the first financial disclosure requirements for Members, officers, and designated employees (Rule XLIV). In the 112 th Congress, the House renamed the Committee on Standards of Official Conduct to the Committee on Ethics. The committee will be referred to as the Committee on Ethics for the remainder of this report. In addition to establishing the Committee on Ethics as a permanent standing committee, H.Res. 1099 formalized the committee's jurisdiction. The History of the United States House of Representatives, 1789-1994 , published by the Committee on House Administration in the 103 rd Congress (1993-1994), summarized four major jurisdictional areas for the Committee on Ethics. Since 1968, the House has authorized and directed the Ethics Committee to: (1) recommend to the House legislative or administrative actions deemed necessary for establishing or enforcing standards of conduct; (2) investigate allegations of violations of the Code of Official Conduct or any law, rule, regulation, or other standard of conduct applicable to Members, officers, and employees in the performance of official duties; and after notice and a hearing, recommend to the House whatever action or sanctions it deems appropriate; (3) subject to House approval, report to appropriate state and federal authorities about evidence of violations of law by Members, officers, and employees in the performance of official duties; and (4) issue and publish advisory opinions for the guidance of Members, officers, and employees. The committee was also provided with jurisdiction over the Code of Official Conduct and financial disclosure. In addition to establishing the committee's jurisdiction, H.Res. 1099, and subsequent amendments, imposed several constraints on the Committee on Ethics. These limits, except where noted, are still in effect in House Rule XI, clause 3(a). They stipulate that there must be an affirmative vote of seven out of 12 committee members for the issuance of any report, resolution, recommendation, or advisory opinion relating to the official conduct of a Member, officer, or employee or the investigation of such conduct; investigations, other than those initiated by the committee, can be undertaken only upon receipt of a complaint, in writing and under oath, from a Member of the House, or an individual not a Member if the committee finds that such complaint has been submitted by the individual to no fewer than three Members who have refused in writing to transmit the complaint to the committee; investigations of alleged violations of any law or rule that was not in effect at the time of the alleged violation are prohibited; and members of the committee are not eligible to participate in any committee proceeding relating to their official conduct. H.Res. 1099 also empowered the committee to hold hearings, receive testimony, and issue subpoenas in the course of conducting an investigation. When discussing the jurisdiction of House committees, it is important to note that the House Parliamentarian is the sole definitive authority on questions relating to the jurisdiction of the chamber's committees and should be consulted for a formal opinion on any specific procedural question. Since the establishment of the Committee on Ethics as a permanent standing committee, the committee's jurisdiction has been amended a number of times. Each of these changes \"necessitated following experience under prior rules\" and reflected the changing nature of ethics enforcement in the House. On May 19, 1970, Representative William Colmer introduced H.Res. 1031 to amend then clause 19 of Rule XI of the House \"with respect of lobbying practices and political campaign contributions affecting the House of Representatives.\" The Committee on Rules reported the resolution on June 11, and it was brought up for debate on July 8. Following debate, the resolution was adopted to give the Committee on Ethics formal jurisdiction over lobbying activities as well as those involving the raising, reporting, and use of campaign funds. Authority over campaign contributions, lobbying, and financial disclosure have subsequently been removed from the committee's jurisdiction. In the 94 th Congress (1975-1976), the House transferred jurisdiction over campaign contributions to the Committee on House Administration as part of the rules package. In the 95 th Congress (1977-1978), the House transferred jurisdiction over lobbying to the Committee on the Judiciary and jurisdiction over measures relating to financial disclosure was reassigned to the Committee on Rules. On March 2, 1977, the House adopted H.Res. 287 , which contained several amendments and additions to the House rules of conduct. Included were the first requirement that financial disclosure be made public; limits on outside earned income and unofficial office accounts; and further restrictions on the acceptance of gifts, the use of the franking privilege, and limits on foreign travel. Pursuant to H.Res. 287 , the Committee on Ethics assumed jurisdiction over these additional areas and was authorized to maintain the public financial disclosure reports filed by Members, officers, and designated employees. In addition, the House established a Select Committee on Ethics, chaired by Representative L. Richardson Preyer, to assist the Committee on Ethics with the implementation of the new rules. On July 14, 1977, the House agreed to H.Res. 658 and established the Permanent Select Committee on Intelligence. The resolution also authorized the Committee on Ethics to \"investigate an unauthorized disclosure of intelligence or intelligence-related information by a Member, officer, or employee of the House in violation of paragraph (c) and report to the House concerning any allegation which it finds to be substantiated.\" In August 1977, the Committee on Ethics was designated as the \"employing agency\" for the House. Pursuant to P.L. 95-105 , the Foreign Relations Authorization Act for FY 1978, the committee was authorized to issue regulations governing the acceptance by House Members, personnel, and employees of gifts, trips, and decorations from foreign governments. In 1978, the Ethics in Government Act began requiring government-wide public financial disclosure requirements. Subsequently, with the adoption of the House rules for the 96 th Congress (1979-1980), the provisions of the House financial disclosure rule were replaced by those of the Ethics Act and incorporated into House rules. This act delegated to the Committee on Ethics review, interpretation, and compliance responsibilities for the public financial disclosure reports that henceforth were to be filed with the Clerk of the House. On April 4, 2012, the STOCK Act (Stop Trading on Congressional Knowledge Act) was passed to affirm that no exemption exists from \"insider trading\" laws and regulations for Members of Congress and congressional employees. Pursuant to the act, the House Committee on Ethics (and the Senate Select Committee on Ethics) is required to issue interpretive guidance of the relevant rules of each chamber, including rules on conflicts of interest and gifts, clarifying that a Member of Congress and an employee of Congress may not use nonpublic information derived from such person's position as a Member of Congress or employee of Congress or gained from the performance of such person's official responsibilities as a means for making a private profit. On August 17, 2012, the committee issued a \"pink sheet\" on the implementation of the STOCK Act that clarified who is required to file, what transactions must be reported, the requirements for participating in a stock's initial public offering (IPO), waivers and exclusions to the act, when transactions must be reported, how and where transactions should be reported, late filing fees, penalties for failing to file and filing false information, and how to get assistance from the committee. The Ethics Reform Act of 1989 amended the Ethics in Government Act of 1978 and included a variety of ethics and pay reforms for the three branches of government. Enforcement of these changes further expanded the jurisdiction of the Committee on Ethics. Changes made pursuant to the Ethics Reform Act of 1989 included enforcement of the act's ban on honoraria, limits on outside earned income, and restrictions on the acceptance of gifts. The committee was also given the responsibility for consideration of any requests for a written waiver of the limits imposed by the House gift ban rule. Procedures for the Committee on Ethics are set through House Rule XI, clause 3 and are further specified in the committee's rules. Since its creation in 1967, several changes have been made to the Committee on Ethics' procedures. Change to the committee's procedures can be divided into eight broad time periods or categories: changes in the 1970s, the Ethics Reform Act of 1989, the Ethics Reform Task Force of 1997, 109 th Congress changes, 110 th Congress changes, 113 th Congress changes, 114 th Congress changes, and the creation of the Office of Congressional Ethics in 2008. No changes were made to House ethics procedures in the 111 th or 112 th Congresses. During the first years of the Committee on Ethics many adjustments were made to the procedural operations of the committee. While some of the changes made during the 1970s have been repealed or replaced, three changes remain in effect. 1. In the 93 rd Congress (1973-1974), the House agreed to H.Res. 988 and amended the jurisdiction and procedures of nearly all standing committees. As part of those reforms, House Rules were amended to permit a majority vote to approve Committee on Standard's reports, recommendations, advisory opinions, and investigations; 2. In the 95 th Congress (1977-1978), the House included in its opening day rules package a provision permitting a member of the committee to disqualify himself/herself from participating in an investigation upon submission of an affidavit of disqualification in writing and under oath; and 3. In the 96 th Congress (1979-1980), House rules were amended to prohibit \"information or testimony received, or the contents of a complaint or the fact of its filing\" from being \"publicly disclosed by any committee or staff member unless specifically authorized in each instance by a vote of the full committee.\" The Ethics Reform Act of 1989 ( P.L. 101-194 ) contained provisions affecting all three branches of government and mandated changes to the House Committee on Ethics. Specifically, it established the Office of Advice and Education in the Committee on Ethics. The Office of Advice and Education's primarily responsibilities include (A) Providing information and guidance to Members, officers and employees of the House regarding any laws, rules, regulations, and other standards of conduct applicable to such individuals in their official capacities, and any interpretations and advisory opinions of the committee. (B) Submitting to the chairman and ranking minority member of the committee any written request from any such Member, officer or employee for an interpretation of applicable laws, rules, regulations, or other standards of conduct, together with any recommendations thereon. (C) Recommending to the committee for its consideration formal advisory opinions of general applicability. (D) Developing and carrying out, subject to the approval of the chairman, periodic educational briefings for Members, officers and employees of the House on those laws, rules, regulations, or other standards of conduct applicable to them. The Office of Advice and Education offers training, guidance, and provides recommendations to Members, officers, and employees of the House on standards of conduct applicable to their official duties. Many other changes implemented by the 1989 act are still applicable. These include \"bifurcation\" (separation) within the committee of its investigative and adjudicative functions; a requirement that the committee report to the House on any case it has voted to investigate and that any \"letter of reproval\" or other committee administrative action may be issued only as part of a final report to the House; a statute of limitation prohibiting the committee from initiating or undertaking an investigation of alleged violations occurring prior to the third previous Congress unless they are related to a continuous course of conduct in recent years; a guarantee that any Member who is the respondent in any Ethics Committee investigation may be accompanied by one counsel on the House floor during consideration of his/her case; and a time limit of committee service of no more than three out of any five consecutive Congresses. The act also increased the size of the committee's membership from 12 to 14. That change, however, was superseded by the 1997 amendments that reduced the size of the committee from 14 to 10 members. On February 12, 1997, the House created an Ethics Reform Task Force to \"look into any and all aspects of the ethics process,\" including Who can file a complaint and upon what basis of information, what should be the standards for initiating an investigation, what evidentiary standard should apply throughout the process, how has the bifurcation process worked, does it take too long to conduct a review, should non-House Members play a part in a reformed ethics process, should we enlarge the pool of Members who might participate in different phases of the process? Chaired by Representatives Bob Livingston and Ben Cardin, the 10-member task force was directed to review the existing House ethics process and to recommend reforms. At the same time that the House approved the establishment of the task force, it also approved a 65-day moratorium on the filing of new ethics complaints to enable the Task Force to conduct its work \"in a climate free from specific questions of ethical propriety.\" After seven months of study, the Task Force reported to the House in June 1997 with several recommendations. These included ensuring that the Committee on Standards operated in a non-partisan manner; that the committee's workings be kept confidential unless otherwise voted on by the committee; that an improved system be created for the filing of information offered as a complaint; that the committee should create an efficient administrative structure; that due process for Members, officers, and employees of the House be preserved; that Members play a greater role in the ethics process; and that matters before the committee be dealt with in a timely manner. On September 18, 1997, the House debated and agreed to H.Res. 230 , a rule to provide for the consideration of H.Res. 168 , the implementation of the Task Force's recommendations, and proceeded to debate and amend H.Res. 168 . The major ethics process changes adopted pursuant to H.Res. 168 included the following: altering the way individuals who are not Members of the House file complaints with the Committee on Ethics by requiring them to have a Member of the House certify in writing that the information is submitted in good faith and warrants consideration; decreasing the size of the committee from 14 members to 10; establishing a 20-person pool of Members (10 from each party) to supplement the work of the Ethics Committee as potential appointees to investigative subcommittees that the committee might establish; requiring the chair and ranking minority member of the committee to determine within 14 calendar days or 5 legislative days, whichever comes first, if the information offered as a complaint meets the committee's requirements; allowing an affirmative vote of two-thirds of the members of the committee or approval of the full House to refer evidence of violations of law disclosed in a committee investigation to the appropriate state or federal law enforcement authorities; providing for a nonpartisan, professional committee staff; allowing the ranking minority member on the committee to place matters on the committee's agenda; and decreasing the maximum service on the committee from six years to four years during any three successive Congresses and required at least four members to be rotated off the committee at the end of each Congress. On January 4, 2005, the House included several provisions in its rules for the 109 th Congress (2005-2006) that affected the Committee on Ethics. These included the process for handling allegations against a House Member, officer, or employee; procedures for instances when the conduct of one Member, officer, or employee might be referenced in the course of an investigation against another Member, officer, or employee; the due process for respondents and witnesses; and the dismissal of complaints. Subsequently, on April 27, 2005, the House reversed earlier 109 th Congress changes when it agreed to H.Res. 240 and reinstated \"certain provisions of the rules relating to procedures of the Committee on Standards of Official Conduct to the form in which those provisions existed at the close of the 108 th Congress.\" On June 5, 2007, the House agreed to H.Res. 451 , directing the Committee on Ethics to \"respond to the indictment of, or the filing of charges of criminal conduct in a court of the United States or any State against, any Member of the House of Representatives by empaneling an investigative subcommittee to review the allegations not later than 30 days after the date the Member is indicted or the charges are filed.\" The resolution was adopted following the grand jury indictment of a Member of the House in the United States District Court for the Eastern District of Virginia. The requirements of H.Res. 451 were continued in the rules packages for both the 111 th and the 112 th Congresses. As part of the rules package ( H.Res. 5 ) for the 113 th Congress (2013-2014), the House amended the Code of Conduct (Rule XXIII, clause 8(c)) to remove references to \"spouses\" and replace those references with the term \"relative.\" For the purpose of the Rule, relative is defined as an individual who is related to the Member, Delegate, or Resident Commissioner as father, mother, son, daughter, brother, sister, uncle, aunt, first cousin, nephew, niece, husband, wife, father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, stepfather, stepmother, stepson, stepdaughter, stepbrother, stepsister, half brother, half sister, grandson, or granddaughter. Additionally, H.Res. 5 required that copies of executed oaths (or affirmations) made by an officer or employee of the House be retained by the Sergeant at Arms, while oaths (or affirmations) made by Members, Delegates, or the Resident Commissioner continue to be retained by the Clerk of the House. First adopted as part of the rules package ( H.Res. 5 ) for the 114 th Congress (2015-2016), the House made two changes to Rule XI, clause 3, by adding a new paragraph at the end of the section on House Ethics Committee procedures that stated The committee may not take any action that would deny any person any right or protection provided under the Constitution of the United States. H.Res. 5 further amended Rule XI, clause 3(a)(6)(B)(i) to require that all new officers, employees, Members, Delegates, and the Resident Commissioner receive ethics training within 60 days of beginning their House service. Previously, only new officers or employees were required to complete ethics training within their first 60 days of service. As part of the rules package ( H.Res. 5 ) for the 115 th Congress (2017-2018), the House amended Rule II, clause 3 to authorize the Sergeant at Arms to impose a fine—$500 for a first offense and $2,500 for any subsequent offense—against a Member, Delegate, or Resident Commissioner for using electronic devices to take photographs, or record floor proceedings in violation of Rule XVII, clause 5. Should a fine be imposed, the Member has 30 calendar days or 5 legislative days (whichever is later) to appeal the fine to the Committee on Ethics. The Committee then has 30 calendar days or 5 legislative days (whichever is later) to dismiss the fine or allow it to proceed, and report its action to the Speaker of the House, the Chief Administrative Officer (CAO), and the Member involved. As part of the rules package ( H.Res. 6 ) for the 116 th Congress (2019-2020), the House amended Rule XI to require that all Members, Delegates, and the Resident Commissioner attend and certify completion of annual ethics training. Previously, only officers and employees were required to certify the completion of ethics training on an annual basis. Additionally, H.Res. 6 authorizes the Committee on Ethics to \"consider as evidence the transcripts and exhibits from trial where a Member, Delegate, or the Resident Commissioner was convicted by a court of record for a crime related to the subject of the investigation by the Committee on Ethics.\" The 116 th Congress also directed the Committee on Ethics to empanel an investigative subcommittee to review allegations related to indictments of, or the filing of charges of criminal conduct against, any Member of the House. This provision was first agreed to in the 110 th Congress. On March 11, 2008, the House adopted H.Res. 895 to create the Office of Congressional Ethics (OCE). The OCE was created to review information, and when appropriate, refer findings of fact to the House Committee on Ethics. Information of alleged wrongdoing by Members, officers, and employees of the House may be accepted by the OCE from the general public, but only the OCE board can initiate a review. The OCE was most recently reauthorized by the House as part of the rules package ( H.Res. 6 ) adopted by the 116 th Congress on January 3, 2019. Since its inception in the 90 th Congress (1967-1968), the Committee on Ethics has had a total of 303 members. Table A-1 provides a list of all Members to have served on the Committee on Ethics, their party affiliation, and their state and district.", "summary": "The United States Constitution (Article 1, Section 5, clause 1) provides each House of Congress with the sole authority to establish rules, judge membership requirements, and punish and expel Members. From 1789 to 1967, the House of Representatives dealt with disciplinary action against Members on a case-by-case basis, often forming ad-hoc committees to investigate and make recommendations when acts of wrongdoing were brought to the chamber's attention. Events of the 1960s, including the investigation of Representative Adam Clayton Powell for alleged misuse of Education and Labor Committee funds, prompted the creation of a permanent ethics committee and the writing of a Code of Conduct for Members, officers, and staff of the House. Begun as a select committee in the 89th Congress (1965-1966), the House created a 12-member panel to \"recommend to the House … such … rules or regulations … necessary or desirable to insure proper standards of conduct by Members of the House and by officers and employees of the House, in the performance of their duties and the discharge of their responsibilities.\" Acting on the select committee's recommendations, the House created a permanent Committee on Standards of Official Conduct in the 90th Congress (1967-1968). In the 112th Congress (2011-2012), the committee was renamed the Committee on Ethics. This report briefly outlines the background of ethics enforcement in the House of Representatives, including the creation of both the Select Committee on Ethics and the Committee on Ethics. The report also focuses on various jurisdictional and procedural changes that the committee has experienced since 1967 and discusses the committee's current jurisdiction and procedures. For additional information on ethics in the House of Representatives, please refer to CRS Report R40760, House Office of Congressional Ethics: History, Authority, and Procedures, by Jacob R. Straus; CRS Report RL30764, Enforcement of Congressional Rules of Conduct: A Historical Overview, by Jacob R. Straus; and CRS Report R44213, Altering House Ethics Committee Sanction Recommendations on the Floor: Past Precedent and Options for Action, by Jacob R. Straus and James V. Saturno.", "document_type": "crs"}
{"report": "On March 8, 2018, President Trump issued two proclamations imposing tariffs on U.S. imports of certain steel and aluminum products, respectively, using presidential powers granted under Section 232 of the Trade Expansion Act of 1962. Section 232 authorizes the President to impose restrictions on certain imports based on an affirmative determination by the Department of Commerce (Commerce) that the targeted products are being imported into the United States \"in such quantities or under such circumstances as to threaten to impair the national security.\" Section 232 investigations and actions are important for Congress, as the Constitution gives it primary authority over international trade matters. In the case of Section 232, Congress has delegated to the President broad authority to impose limits on imports in the interest of U.S. national security. The statute does not require congressional approval of any presidential actions that fall within its scope. In the Crude Oil Windfall Profit Tax Act of 1980, however, Congress amended Section 232 by creating a joint disapproval resolution provision under which Congress can override presidential actions in the case of adjustments to petroleum or petroleum product imports. Section 232 is one of several tools the United States has at its disposal to address trade barriers and other foreign trade practices. These include investigations and actions to address import surges that are a \"substantial cause of serious injury\" or threat thereof to a U.S. industry (Section 201 of the Trade Act of 1974), those that address violations or denial of U.S. benefits under trade agreements (Section 301 of the Trade Act of 1974), and antidumping and countervailing duty laws (Title VII of the Tariff Act of 1930). Trade is an important component of the U.S. economy, and Members often hear from constituents when factories and other businesses are hurt by competing imports, or if exporters face trade restrictions and other market access barriers overseas. Section 232 actions may affect industries, workers, and consumers in congressional districts and states (both positively and negatively). Following the steel and aluminum Section 232 actions, Commerce initiated Section 232 investigations into imports of automobiles and automobile parts in May 2018, uranium ore and product imports in July 2018, and titanium sponges in March 2019. Commerce submitted the auto investigation report to the President on February 17, 2019, but the report has not been made public or shared with Congress; the uranium report is expected by mid-April 2019, and the titanium sponges report is due in late November 2019. The current investigations have raised a number of economic and broader policy issues for Congress. This report provides an overview of Section 232, analyzes the Trump Administration's Section 232 investigations and actions, and considers potential policy and economic implications and issues for Congress. To provide context for the current debate, the report also includes a discussion of previous Section 232 investigations and a brief legislative history of the statute. The Trade Act of 1962, including Section 232, was enacted during the Cold War when national security issues were at the forefront. Section 232 has been used periodically in response to industry petitions, as well as through self-initiation by the executive branch. The Trade Expansion Act establishes a clear process and timelines for a Section 232 investigation, but the executive branch's interpretation of \"national security\" and the potential scope of any investigation can be expansive. Upon request by the head of any U.S. department or agency, by application by an interested party, or by self-initiation, the Secretary of Commerce must commence a Section 232 investigation. The Secretary of Commerce conducts the investigation in consultation with the Secretary of Defense and other U.S. officials, as appropriate, to determine the effects of the specified imports on national security. Public hearings and consultations may also be held in the course of the investigation. Commerce has 270 days from the initiation date to prepare a report advising the President whether or not the targeted product is being imported \"in such quantities or under such circumstances as to threaten to impair\" U.S. national security, and to provide recommendations for action or inaction based on the findings. Any portion of the report that does not contain classified or proprietary information must be published in the Federal Register . See Figure 1 for the Section 232 process and timeline. While there is no specific definition of national security in the statute, it states that the investigation must consider certain factors, such as domestic production needed for projected national defense requirements; domestic capacity; the availability of human resources and supplies essential to the national defense; and potential unemployment, loss of skills or investment, or decline in government revenues resulting from displacement of any domestic products by excessive imports. Once the President receives the report, he has 90 days to decide whether or not he concurs with the Commerce Department's findings and recommendations, and to determine the nature and duration of the action he views as necessary to adjust the imports so they no longer threaten to impair the national security (generally, imposition of some trade-restrictive measure). The President may implement the recommendations suggested in the Commerce report, take other actions, or decide to take no action. After making a decision, the President has 15 days to implement the action and 30 days to submit a written statement to Congress explaining the action or inaction; he must also publish his findings in the Federal Register . Presidential actions may stay in place \"for such time, as he deems necessary to adjust the imports of such article and its derivatives so that such imports will not so threaten to impair the national security.\" The Commerce Department (or the Department of the Treasury before it) initiated a total of 31 Section 232 investigations between 1962 and 2019, including three investigations that remain ongoing (see Table B-1 ). In 16 of these cases, Commerce determined that the targeted imports did not threaten to impair national security. In 11 cases, Commerce determined that the targeted imports threatened to impair national security and made recommendations to the President. The President took action eight times. One case was terminated at the petitioner's request before Commerce completed its investigation. Prior to the Trump Administration, 10 Section 232 investigations were self-initiated by the Administration. (For a full list of cases to date, see Appendix B .) In eight investigations dealing with crude oil and petroleum products, Commerce decided that the subject imports threatened to impair national security. The President took action in five of these cases. In the first three cases on petroleum imports (1973-1978), the President imposed licensing fees and additional supplemental fees on imports, which are no longer in effect, rather than adjusting tariffs or instituting quotas. In two cases, the President imposed oil embargoes, once in 1979 (Iran) and once in 1982 (Libya). Both were superseded by broader economic sanctions in the following years. In the three most recent crude oil and petroleum investigations (from 1987 to 1999), Commerce determined that the imports threatened to impair national security, but did not recommend that the President use his authority to adjust imports. In the first of these reports (1987), Commerce recommended a series of steps to increase domestic energy production and ensure adequate oil supplies rather than imposing quotas, fees, or tariffs because any such actions would not be \"cost beneficial and, in the long run, impair rather than enhance national security.\" In the latter two investigations (1994 and 1999), Commerce found that existing government programs and activities related to energy security would be more appropriate and cost effective than import adjustments. By not acting, the President in effect followed Commerce's recommendation. Prior to the Trump Administration, a President arguably last acted under Section 232 in 1986. In that case, Commerce determined that imports of metal-cutting and metal-forming machine tools threatened to impair national security. In this case, the President sought voluntary export restraint agreements with leading foreign exporters, and developed domestic programs to revitalize the U.S. industry. These agreements predate the founding of the World Trade Organization (WTO), which established multilateral rules prohibiting voluntary export restraints (see \" WTO Cases \"). In addition to the two recent cases on steel and aluminum, on May 23, 2018, after consultations with President Trump, Commerce Secretary Wilbur Ross announced the initiation of a Section 232 investigation to determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts threaten to impair national security. In January 2018, two U.S. mining companies petitioned for the investigation into uranium imports. On July 18, Commerce announced the initiation of a Section 232 investigation on these imports and informed the Secretary of Defense. In September 2018, a U.S. titanium company petitioned for the investigation into titanium sponge imports. In March 2019, Commerce announced the initiation of a Section 232 investigation on these imports and informed the Secretary of Defense. While unilateral trade restrictions may appear to be counter to U.S. trade liberalization commitments under the WTO agreements, Article XXI of the General Agreement on Tariffs and Trade (GATT), which predates and was one of the foundational agreements of the WTO, allows WTO members to take measures to protect \"essential security interests.\" Broad national security exceptions are also included in international trade obligations at the bilateral and regional levels, and could potentially limit the ability of countries to challenge such actions by trade partners. Historically, exceptions for national security have been rarely invoked and multiple trading partners have challenged recent U.S. actions under the WTO agreements (see \" WTO Cases \"). In April 2017, two presidential memoranda instructed Commerce to give priority to two self-initiated investigations into the national security threats posed by imports of steel and aluminum. In conducting its investigation, Commerce held public hearings and solicited public comments via the Federal Register and consulted with the Secretary of Defense and other agencies, as required by the statute. In addition to the hearings, stakeholders submitted approximately 300 comments regarding the Section 232 investigation and potential actions. Some parties (mostly steel producers) supported broad actions to limit steel imports, while others (mostly users and consuming industries such as automakers) opposed any additional tariffs or quotas on imports. The U.S. aluminum industry held differing views of the global aluminum tariff, with most parties opposing it. Some stakeholders in the steel and aluminum industries sought a middle ground, endorsing limited actions to target the underlying issues of overcapacity and unfair trade practices. Still others focused on the process, voicing caution in the use of Section 232 authority and warning against an overly broad definition of \"national security\" for protectionist purposes. The Commerce investigations analyzed the importance of certain steel and aluminum products to national security, using a relatively broad definition of \"national security,\" defining it to include \"the general security and welfare of certain industries, beyond those necessary to satisfy national defense requirements, which are critical for minimum operations of the economy and government.\" The scope of the investigations extended to current and future requirements for national defense and to 16 specific critical infrastructure sectors, such as electric transmission, transportation systems, food and agriculture, and critical manufacturing, including domestic production of machinery and electrical equipment. The reports also examined domestic production capacity and utilization, industry requirements, current quantities and circumstances of imports, international markets, and global overcapacity. Commerce based its definition of national security on a 2001 investigation on iron ore and semi-finished steel. Section 232 investigations prior to 2001 generally used a narrower definition considering U.S. national defense needs or overreliance on foreign suppliers. The final reports, submitted to the President on January 11 and January 22, 2018, respectively, concluded that imports of certain steel mill products and of certain types of primary aluminum and unwrought aluminum \"threaten to impair the national security\" of the United States. The Secretary of Commerce asserted that \"the only effective means of removing the threat of impairment is to reduce imports to a level that should ... enable U.S. steel mills to operate at 80 percent or more of their rated production capacity\" (the minimum rate the report found necessary for the long-term viability of the U.S. steel industry and, separately, for the aluminum industry). The Secretary further recommended the President \"take immediate action to adjust the level of these imports through quotas or tariffs\" and identified three potential courses of action for both steel and aluminum imports, including tariffs or quotas on all or some steel imports from specific countries. The Secretary of Defense, while concurring with Commerce's \"conclusion that imports of foreign steel and aluminum based on unfair trading practices impair the national security,\" recommended targeted tariffs and that \"an inter-agency group further refine the targeted tariffs, so as to create incentives for trade partners to work with the U.S. on addressing the underlying issue of Chinese transshipment\" in which Chinese producers ship goods to another country to reexport. He also noted, however, that \"the U.S. military requirements for steel and aluminum each only represent about three percent of U.S. production.\" On March 8, 2018, President Trump issued two proclamations imposing duties on U.S. imports of certain steel and aluminum products, based on the Secretary of Commerce's findings. The proclamations outlined the President's decisions to impose tariffs of 25% on steel and 10% on aluminum imports effective March 23, 2018, but provided for flexibility in regard to country and product applicability of the tariffs (see below). The new tariffs were to be imposed  in addition  to any duties already in place, including antidumping and countervailing duties. In the proclamations, the President established a bifurcated approach, instructing Commerce to establish a process for domestic parties to request individual product exclusions and a U.S. Trade Representative (USTR)-led process to discuss \"alternative ways\" through diplomatic negotiations to address the threat with countries having a \"security relationship\" with the United States. The President officially notified Congress of his actions in a letter dated April 6, 2018. Several Members actively engaged in voicing their views since the investigations were launched, including through hearings and letters to the President. Initially, the President temporarily excluded imports of steel and aluminum products from Mexico and Canada from the new tariffs, and the Administration implicitly and explicitly linked a successful outcome of the North American Free Trade Agreement (NAFTA) renegotiation to maintaining the exemptions. With regard to other countries, the President expressed a willingness to be flexible, stating that countries with which the United States has a \"security relationship\" may discuss \"alternative ways\" to address the national security threat and gain an exemption from the tariffs. The President charged the USTR with negotiating bilaterally with trading partners on potential exemptions. On March 22, after discussions with multiple countries, the President issued proclamations temporarily excluding Australia, Argentina, Brazil, South Korea, the European Union (EU), Canada and Mexico, from the Section 232 tariffs. The President gave a deadline of May 1, 2018, by which time each trading partner had to negotiate \"a satisfactory alternative means to remove the threatened impairment to the national security by imports\" for steel and aluminum in order to maintain the exemption. On April 30, 2018, the White House extended negotiations and tariff exemptions with Canada, Mexico, and the EU for an additional 30 days, until June 1, 2018, and exempted Argentina, Australia, and Brazil from the tariffs indefinitely pending final agreements. South Korea, which pursued a resolution over the tariffs in the context of discussions to modify the U.S.-South Korea (KORUS) Free Trade Agreement, agreed to an absolute annual quota for 54 separate subcategories of steel and was exempted from the steel tariffs. South Korea did not negotiate an agreement on aluminum and its exports to the United States have been subject to the aluminum tariffs since May 1, 2018. On May 31, 2018, the President proclaimed Argentina and Brazil, in addition to South Korea, permanently exempt from the steel tariffs, having reached final quota agreements with the United States on steel imports. Brazil, like South Korea, did not negotiate an agreement on aluminum and is subject to the aluminum tariffs. The Administration also proclaimed aluminum imports from Argentina permanently exempt from the aluminum tariffs subject to an absolute quota. The Administration proclaimed imports of steel and aluminum from Australia permanently exempt from the tariffs as well, but did not set any quantitative restrictions on Australian imports. As of June 1, 2018, imports of steel and aluminum from Canada, Mexico, and the European Union are subject to the Section 232 tariffs. These countries are among the largest suppliers of U.S. imports of the targeted goods, accounting for nearly 50% by value in 2018 (see Appendix D ). The imposition of tariffs on these major trading partners increases the economic significance of the tariffs and prompted criticism from several Members of Congress, including the chairs of the House Ways and Means and Senate Finance Committees. The Trump Administration completed negotiations on the proposed United States-Mexico-Canada Agreement (USMCA) on September 30, 2018, to replace the NAFTA. The USMCA did not resolve or address the Section 232 tariffs on imported steel and aluminum from Canada and Mexico, but it includes a requirement that motor vehicles contain 70% or more of North American steel and aluminum content to qualify for duty-free treatment. The three parties continue to discuss the steel and aluminum tariffs, which some analysts speculate could result in quotas on imports of Mexican and Canadian steel and aluminum. Some U.S., Canadian, and Mexican policymakers have suggested that the parties will not ratify the new agreement until the Section 232 tariffs are removed; the White House economic adviser stated that the Administration continues to negotiate the tariffs as \"part of the bigger legislative picture discussion\" for passage of USMCA. With respect to the EU, on July 27, 2018, after meeting with EU President Juncker, President Trump announced plans for \"high-level trade negotiations\" to eliminate tariffs, including those on steel and aluminum, among other objectives. The two sides agreed to not impose further tariffs on each other's trade products while negotiations are active. It is unclear what those negotiations may seek in terms of alternative measures, but the United States could seek some type of quantitative restriction given the agreements the Administration has negotiated to date with most exempted countries. In addition to seeking quantitative restrictions, the Trump Administration may also pursue increasing traceability and reporting requirements, which may help limit transshipments of steel or aluminum originating from nonexempt countries. To limit potential negative domestic impacts of the tariffs on U.S. consumers and consuming industries, Commerce published an interim final rule for how parties located in the United States may request exclusions for items that are not \"produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.\" Requests for exclusions and objections to requests have been and will continue to be posted on regulations.gov. The rule went into effect the same day as publication to allow for immediate submissions. Exclusion determinations are based upon national security considerations. To minimize the impact of any exclusion, the rule allows only \"individuals or organizations using steel articles ... in business activities ... in the United States to submit exclusion requests,\" eliminating the ability of larger umbrella groups or trade associations to submit petitions on behalf of member companies. Any approved product exclusion is limited to the individual or organization that submitted the specific exclusion request. Parties may also submit objections to any exclusion within 30 days after the exclusion request is posted. The review of exclusion requests and objections will not exceed 90 days, creating a period of uncertainty for petitioners. Exclusions will generally last for one year from the date of signature. As of March 4, 2019, Commerce received almost 70,000 steel product exclusion requests, with 16,500 exclusions granted and 500 denied. As of the same date, Commerce received 10,000 aluminum exclusion requests, with 3,000 exclusions granted and 500 denied. Companies have complained about the intensive, time-consuming process to submit exclusion requests; the lengthy waiting period to hear back from Commerce, which has exceeded the 90 days in some cases; what some view as an arbitrary nature of acceptances and denials; and that all exclusion requests to date have been rejected when a U.S. steel or aluminum producer has objected. Alcoa, the largest U.S. aluminum maker, requested an exemption for all aluminum imported from Canada, where it operates three aluminum smelters. While the company benefits from higher aluminum prices as a result of the tariffs, it is also seeing increased costs in its own supply chain. In addition, the Cause of Action Institute filed a series of Freedom of Information Act (FOIA) requests to gain insight into the exclusion process. Commerce did not respond, leading the organization to file a lawsuit against the agency. Several Members of Congress have raised concerns about the exclusion process. A bipartisan group of House Members, for example, raised concerns about the speed of the review process and the significant burden it places on manufacturers, especially small businesses. The Members included specific recommendations, such as allowing for broader product ranges to be included in a single request, allowing trade associations to petition, grandfathering in existing contracts to avoid disruptions, and regularly reviewing the tariffs' effects and sunsetting them if they have a \"significant negative impact.\" Commerce asserts it has taken several steps to improve the exclusion process, including increasing and organizing its staff \"to efficiently process exclusion requests,\" and \"expediting the grant of properly filed exclusion requests that receive no objections.\" The agency's International Trade Administration (ITA) also became involved in the exclusion process by analyzing exclusion requests and objections to determine whether there is sufficient domestic production available to meet the requestor's product needs. BIS remains the lead agency involved in making final decisions regarding whether the requests are granted or denied. Some Members have questioned the Administration's processes and ability to pick winners and losers through granting or denying exclusion requests. On August 9, 2018, Senator Ron Johnson requested that Commerce provide specific statistics and information on the exclusion requests and process and provide a briefing to the Committee on Homeland Security and Governmental Affairs. Senator Elizabeth Warren requested that the Commerce Inspector General investigate the implementation of the exclusion process, including a review of the processes and procedures Commerce has established; how they are being followed; and if exclusion decisions are made on a transparent, individual basis, free from political interference. She also requested evidence that the exclusions granted meet Commerce's stated goal of \"protecting national security while also minimizing undue impact on downstream American industries,\" and that the exclusions granted to date strengthen the national security of the United States. Pending legislation to revise Section 232 also addresses the process for excluding products (e.g., S. 287 ). On September 6, 2018, Commerce announced a new rule to allow companies to rebut objections to petitions. The new rule, published September 11, 2018, includes new rebuttal and counter-rebuttal procedures, more information about the exclusion submission requirements and process, the criteria Commerce uses in deciding whether to grant an exclusion request, and revised estimates of the total number of exclusion requests and objections that Commerce expects to receive. On October 29, 2018, the Commerce Inspector General's office (IG) initiated an audit of the agency's processes and procedures for reviewing and adjudicating product exclusion requests. The audit is ongoing. To ensure that Commerce follows through with improving the exclusion process, in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), signed on February 15, 2019, Congress provided funding for \"contractor support to implement the produ ct exclusion process for articles covered by actions taken under section 232.\" To ensure improvements to the exclusion process, Congress indicated that the additional money is to be \"devoted to an effective Section 232 exclusion process\" and required that Commerce submit quarterly reports to Congress. Congress mandated that the reports identify the number of exclusion requests received; the number of exclusion requests approved and denied; the status of efforts to assist small- and medium-sized businesses in navigating the exclusion process; Commerce-wide staffing levels for the exclusion process, including information on any staff detailed to complete this task; and Commerce-wide funding by source appropriation and object class for costs undertaken to process the exclusions. As of March 28, 2019, U.S. Customs and Border Protection assessed $4.7 billion and $1.5 billion from the Section 232 tariffs on steel and aluminum, respectively. The tariffs collected are put in the general fund of the U.S. Treasury and are not allocated to a specific fund. Based on 2017 U.S. import values, annual tariff revenue from the Section 232 tariffs could be as high as $5.8 billion and $1.7 billion for steel and aluminum, respectively, but such estimates do not account for dynamic effects that may impact import flows. Generally, higher import prices resulting from the tariffs should cause both import demand and tariff revenue to decrease over time, provided that U.S. production increases and sufficient domestic alternatives become available. Tariff revenue is also likely to decline as the Commerce Department grants additional product exclusions. According to the President's proclamations implementing the Section 232 tariffs, one of the objectives of the tariffs is to \"reduce imports to a level that the Secretary assessed would enable domestic steel (and aluminum) producers to use approximately 80 percent of existing domestic production capacity and thereby achieve long-term economic viability through increased production.\" In 2018, U.S. imports of steel and aluminum products covered by the Section 232 tariffs totaled $29.5 billion and $17.6 billion, respectively (see Appendix D ). Over the past decade, steel imports have fluctuated significantly, by value and quantity, while imports of aluminum have generally increased. U.S. imports of both metals increased slightly by value from 2017 to 2018 (Section 232 tariffs became effective at different times for different countries), but imports of both decreased by more than 10% in quantity terms (-3.8 million metric tons for steel and -0.9 million metric tons for aluminum). U.S. imports from individual countries fluctuated to an even greater degree over the past year ( Figure 3 ). The largest declines in U.S. steel imports, by value, were from South Korea (-$430 million, -15%), Turkey (-$413 million, -35%), and India (-$372 million, -49%), with significant increases from the EU (+$567 million, +22%), Mexico (+$508 million, +20%), and Canada (+$404 million, +19%). The largest declines in aluminum imports were from China (-$729 million, -40%), Russia (-$676 million, -42%), and Canada (-$294 million, -4%), with major increases from the EU (+$395 million, 9%), India (+$221 million, 58%), and Oman ($186 million, +200%). The countries with permanent exclusions from the tariffs (all except Australia are instead subject to quotas) accounted for 18.4% of U.S. steel imports in 2018 and 4.4% of U.S. aluminum imports. In 2018, U.S. steelmakers employed 140,100 workers ( Figure 4 ), accounting for 1.1% of the nation's 12.7 million factory jobs. Employment in the steel industry has declined for many years as new technology, particularly the increased use of electric arc furnaces to make steel, has reduced the demand for workers. According to the Bureau of Labor Statistics, labor productivity in steelmaking nearly tripled since 1987 and rose 20% over the past decade. Hence, even a significant increase in domestic steel production is likely to result in a relatively small number of additional jobs. In 2018, for the first time since 2014, steel manufacturers added 2,700 jobs, a rise of 2% from a year earlier. Aluminum manufacturers employed 58,100 workers in 2018, a figure that has changed little since the 2007-2009 recession. Domestic smelting of aluminum from bauxite ore, which requires large amounts of electricity, has been in long-term decline, and secondary aluminum produced from recycled scrap melted in a smelter now accounts for the majority of domestic aluminum production. Imports of secondary unwrought aluminum are not covered by the Section 232 aluminum trade action. Steelmaking and aluminum smelting are both extremely capital intensive. As a result, even small changes in output can have major effects on producers' profitability. Domestic steel producers have operated at 80% or less of production capacity in recent years, with a shift in recent months to a capacity utilization rate at U.S. steel mills of more than 80%. Primary aluminum producers in the United States have operated at about 78% of production capacity in December 2018, up from around 43% in December 2017. A stated aim of the metals tariffs is to enable U.S. producers in both sectors to use an average of 80% of their production capacity, which the Section 232 reports deem necessary to sustain adequate profitability and continued capital investment. The OECD Global Forum on Steel Excess Capacity estimates global steel overcapacity was at 595 million metric tons in 2017. While China is the world's largest steel producer, accounting for roughly 45% of global capacity, relatively little Chinese steel enters the U.S. market directly, due to extensive U.S. dumping and subsidy determinations, but the large amount of Chinese production acts to depress prices globally. China has indicated that it plans to reduce its crude steelmaking capacity by 100-150 million metric tons over the five-year period from 2016 to 2020. According to the Chinese government, the country's crude steel capacity has fallen by more than 120 million metric tons since it announced its steel reduction goal in 2016. No OECD or other multinational forum has been established to monitor global aluminum overcapacity, though aluminum industry groups have called for such a forum. Although China accounted for more than half of the world's primary aluminum production in 2017, it does not export aluminum in commodity form to the United States. China ships semi-finished aluminum such as bars, rods, and wire to the United States. These are subject to the Section 232 tariffs. Metals imports should be put in the context of U.S. production. In 2018, the United States produced more than twice the amount of steel it imported. According to ITA, import penetration—the share of U.S. demand met by steel imports—reached 33% in 2016, compared to 23% in 2006. Some segments of the domestic steel industry, such as slab converters, import a sizable share of their semi-finished feedstock from foreign suppliers, totaling nearly 7.5 million tons in 2018. In the primary aluminum market, U.S. net import reliance rose to 50% in 2018 from 33% in 2014, according to the U.S. Geological Survey. Most U.S. foreign trade in steel and aluminum is with Canada (see Appendix C ). OECD analysis has found that ongoing global steel overcapacity and excess production are largely caused by government intervention, subsidization, and other market-distorting practices, although these are not the only factors. Other reasons for excess capacity include cyclical market downturns. The situation is similar in the aluminum industry, where government financial support for large aluminum stockpiles has delayed the response to lower demand. Past Administrations worked to address the issue of steel overcapacity. President George W. Bush, for example, initiated international discussions on global capacity reduction and improved trade discipline in the steel industry as part of his general steel announcement of 2001. Other governments agreed to join the Bush Administration in discussing overcapacity and trade issues at the OECD in a process that started in mid-2001. The industrial, steel-producing members of the OECD were joined by major non-OECD steel producers, such as India, Russia, and, during later stages of the talks, China. Negotiations were suspended indefinitely in 2004, and by 2005, the OECD had abandoned this effort to negotiate an agreement among all major steel-producing countries to ban domestic subsidies for steel mills. The Obama Administration also participated in international efforts to curb steel imports, including the launch of the G-20 Global Forum on Steel Excess Capacity in 2016, another venue that sought to address the challenges of excess capacity in steel worldwide. In December 2016, the G-20 convened its first meeting of more than 30 economies—all G-20 members plus interested OECD members—as a global platform to discuss steel issues among the world's major producers. The same year, as part of the U.S.-China Strategic and Economic Dialogue (SE&D) established in 2009, the Obama Administration agreed to address excess steel production and also to communicate and exchange information on surplus production in the aluminum sector. In September 2018, the OECD Forum agreed on a process to identify and remove subsidies and take other measures to reduce the global steel overcapacity. The OECD issued a consensus report outlining six principles and specific policy recommendations to address excess steel capacity. The USTR, while supportive of the recommendations, questioned the Forum's ability to pursue effective implementation and did not rule out unilateral action. The aluminum industry argues it is also suffering because of China's excess production of primary aluminum. According to the aluminum associations of Japan, Europe, Canada, and the United States, global overcapacity amounted to 11 million metric tons in 2017. Akin to the global steel industry, aluminum producers contend that excess production has been largely caused by government intervention, subsidization, and other market-distorting practices, among other factors. As noted, the U.S. Aluminum Association and some of its international counterparts seek to establish a global forum to address aluminum excess capacity. The Trump Administration's Section 232 actions have led multiple U.S. trading partners, such as the EU, the UK, and Canada, to initiate their own safeguard investigations and quota restrictions to prevent dumping of steel and aluminum exports and protect domestic industries. Unlike the OECD efforts, the individual country safeguard actions are uncoordinated. In addition to the Section 232 action, the Trump Administration is pursuing joint action on industrial overcapacity in other forums. The USTR, Ambassador Lighthizer, met with his EU and Japanese counterparts in May 2018, and the three countries agreed to  concrete steps  to address \"nonmarket-oriented policies and practices that lead to severe overcapacity, create unfair competitive conditions for our workers and businesses, hinder the development and use of innovative technologies, and undermine the proper functioning of international trade.\" The ministers agreed to work toward negotiation of new international rules on subsidies and state-owned enterprises and improved compliance with WTO transparency commitments. The parties also agreed to cooperate on their concerns with third parties' technology transfer policies and practices and issued a joint statement containing a list of factors that identify if market conditions for competition exist. The parties have met multiple times and continue to work together, aiming to identify signals for nonmarket policies, enhance information sharing, and work with third parties to ensure market economy conditions exist and discuss potential new rules and means of enforcement. In addition, in November 2018, the United States, the EU, Japan, Argentina, and Costa Rica put forward a joint proposal in the WTO to increase transparency, proposing incentives for compliance or penalties for noncompliance with WTO notification reporting requirements regarding subsidies. U.S. unilateral tariff actions, however, may limit other countries' willingness to participate in multilateral forums. Section 232 tariffs on steel and aluminum imports into the United States raise a number of issues for Congress. The economic repercussions of U.S. and foreign actions may be felt not only by domestic steel and aluminum producers, but by downstream manufacturers or other industries targeted for retaliation, and consumers. The response by other countries can have implications for the U.S. economy and multilateral world trading system. Also, other countries may be hesitant in the future to cooperate with the United States to address broader global issues, including steel and aluminum overcapacity, if their exports are subject to U.S. tariffs. U.S. trading partners' responses to Section 232 actions have varied based on the country's relationship with the United States. Some countries are pursuing direct negotiations, while keeping other countermeasures in reserve, and raising actions at the WTO (see below). Others have proposed or pursued retaliation with their own tariffs. Some companies have pursued litigation, and may also seek alternative markets for their own products to avoid U.S. tariffs. Several major U.S. trading partners have proposed or are imposing retaliatory tariffs in in response to the U.S. actions (see Figure 5 below). In total, retaliatory tariffs are in effect on products accounting for approximately $23.2 billion of U.S. exports in 2018. The process of retaliation is complex given multiple layers of relevant international rules and the potential for unilateral action, which may or may not adhere to those existing rules. Both through agreements at the WTO and in bilateral and regional free trade agreements (FTAs), the United States and its trading partners have agreed to maintain certain tariff levels. Those same agreements include rules on potential responses, including formal dispute settlement procedures and in some cases commensurate tariffs, when one party increases its tariffs above agreed-upon limits. In addition to the national security considerations the Trump Administration has cited as justification for its Section 232 actions, increased tariffs are permitted under these agreements, under specific circumstances, including for example, antidumping tariffs, countervailing duties, and safeguard tariffs. The retaliatory actions of U.S. trading partners to date have been notified to the WTO pursuant to the Agreement on Safeguards. These retaliatory notifications are in addition to ongoing WTO dispute settlement proceedings (see \" WTO Cases \"). FTA partner countries may also claim that the increase in U.S. tariff rates violates U.S. FTA commitments and seek recourse through those agreements. For example, Canada and Mexico, U.S. partners in NAFTA, claim that the U.S. actions violate commitments in both NAFTA and the WTO agreements. Canada initially announced its intent to launch a dispute under the NAFTA's dispute settlement provisions in addition to actions at the WTO, although it appears Canada has taken no such action to date. U.S. trading partners' retaliation to the Trump Administration's Section 232 tariff actions has magnified the effects of the Section 232 tariffs. From an economic perspective, retaliation increases the scope of industries affected by the tariffs. U.S. agriculture exports, for example, are among the largest categories of U.S. exports targeted for retaliation, which may have contributed to reduced sales of certain U.S. farm products. Given the scale of U.S. motor vehicle and parts imports, if the Trump Administration moves forward with Section 232 tariffs on that sector and U.S. trading partners respond with retaliation of a similar magnitude, it could have significant negative effects on U.S. exporters. For example, the United States imported more than $50 billion of motor vehicles and parts from the EU in 2018, and the EU has announced it has prepared potential retaliatory tariffs on a commensurate value of U.S. exports. Retaliatory actions may also heighten concerns over the potential strain the Section 232 tariffs place on the international trading system. Many U.S. trading partners view the Section 232 actions as protectionist and in violation of U.S. commitments at the WTO and in U.S. FTAs, while the Trump Administration views the actions within its rights under those same commitments. Furthermore, the Trump Administration argues that retaliation to its Section 232 tariffs, which U.S. trading partners have imposed under WTO safeguard commitments, violates WTO rules because it has imposed Section 232 tariffs pursuant to WTO national security exceptions. If the dispute settlement process in those agreements cannot satisfactorily resolve this conflict, it could lead to further unilateral actions and increasing retaliation. The President's actions under Section 232 have resulted in legal challenges in the U.S. domestic court system. Specifically, the Section 232 actions on steel and aluminum have been challenged in cases before the U.S. Court of International Trade (CIT). In one case, Severstal Export Gmbh, a U.S. subsidiary of a Russian steel producer, sought a preliminary injunction from the United States Court of International Trade to prevent the United States from collecting the import tariffs on certain steel products. The company and its Swiss affiliate argued that the President acted outside of the authority that Congress had delegated to him because the tariffs were not truly imposed for national security purposes. The court denied the motion, determining that the plaintiffs were unlikely to prevail on the merits of their challenge. According to the case docket, the parties agreed to dismiss the case in May 2018. In another case, which was heard by a three-judge panel of the court, the American Institute for International Steel (AIIS), a trade association, challenged the constitutionality of Congress's delegation of authority to the President under Section 232. The plaintiffs in the case argued that \"Congress created an unconstitutional regime in section 232, in which there are essentially no limits or guidelines on the trigger or the remedies available to the President, and no alternative protections to assure that the President stays within the law, instead of making the law himself.\" On March 25, 2019, the court issued an opinion rejecting the plaintiffs' arguments that Congress delegated too much of its legislative power to the President in Section 232, in violation of the separation of powers established in the Constitution. In granting the United States' motion for judgment on the pleadings, the court held that it was bound by a 1976 Supreme Court precedent determining that Section 232 did not amount to an unconstitutional delegation because it established an \"intelligible principle\" to guide presidential action. One member of the three-judge panel, Judge Katzmann, wrote separately to express his significant concerns about the ruling without openly dissenting. Katzmann wrote that he was bound to follow Supreme Court precedent and uphold the delegation but questioned whether the nondelegation doctrine retained any significant meaning if a delegation as broad as that in Section 232 was permissible. The case is currently under appeal. Most recently, U.S. importers of Turkish steel have initiated a case arguing that the President's increase of the Section 232 steel tariffs from 25% to 50% on U.S. imports from Turkey did not have a sufficient national security rationale, did not follow statutory procedural mandates, and violates the plaintiffs' Fifth Amendment Due Process rights because the action \"creates an arbitrary distinction between importers of steel products from Turkey and importers of steel products from all other sources.\" The case remains pending before the CIT. The President's imposition of tariffs on certain imports of steel and aluminum products, as well as Commerce's exemption of certain WTO members' products from such tariffs, may also have implications for the United States under WTO agreements. As an example, on April 9, 2018, China took the first step in challenging the executive branch's actions as violating U.S. obligations under the WTO agreements (particularly the Agreement on Safeguards) by requesting consultations with the United States. Under WTO dispute settlement rules, members must first attempt to settle their disputes through consultations. If these fail, the member initiating a dispute may request the establishment of a dispute settlement panel composed of trade experts to determine whether a country has violated WTO rules. In October, China requested the formation of a panel. Other WTO members have requested consultations with the United States, or joined existing requests, and panels have been composed to hear the cases (see Figure 6 ). In its request, China alleged that the U.S. tariff measures and exemptions are contrary to U.S. obligations under several provisions of the GATT, the foundational WTO agreement that sets forth binding international rules on international trade in goods. In particular, China alleged that the measure violates GATT Article II, which generally prohibits members from imposing duties on imported goods in excess of upper limits to which they agreed in their Schedules of Concessions and Commitments. It further alleged that Commerce's granting of exemptions from the import tariffs to some WTO member countries, but not to China, violates GATT Article I, which obligates the United States to treat China's goods no less favorably than the goods of other WTO members (i.e., most-favored-nation treatment). China also maintained that the Section 232 tariff measures are \"in substance\" a safeguards measure intended to alleviate injury to a domestic industry from increased quantities of imported steel that competes with domestic steel, but that the United States did not make the proper findings and follow the proper procedures for imposing such a measure as required by the GATT and WTO Safeguards Agreement. The United States has invoked the so-called national security exception in GATT Article XXI in defense of the steel and aluminum tariffs. GATT Article XXI states, in relevant part, that the GATT will not be construed . . . (b) to prevent any [member country] from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; [or] (iii) taken in time of war or other emergency in international relations. . . While some analysts argue that a WTO panel may evaluate whether a WTO member's use of the national security exception falls within one of the three provisions listed above, historically, the United States has taken the position that this exception is self-judging—or, in other words, once a WTO member has invoked the exception to justify a measure potentially inconsistent with its WTO obligations, a WTO panel may not proceed to the merits of the dispute and cannot evaluate whether the WTO member's use of the exception is proper. Though this exception has been invoked several times throughout the history of the WTO and its predecessor agreement, the GATT 1947, it has yet to be interpreted by a WTO dispute settlement panel. Accordingly, there is little guidance as to (1) whether a WTO panel would decide, as a threshold matter, that it had the authority to evaluate whether the United States' invocation of the exception was proper; and (2) how a panel might apply the national security exception, if invoked, in any dispute before the WTO involving the new steel and aluminum tariffs. In the past, however, WTO members have expressed concern that overuse of the exception will undermine the world trading system because countries might enact a multitude of protectionist measures under the guise of national security. If one of the WTO panels renders an adverse decision against the United States, the United States would be expected to remove the tariffs, generally within a reasonable period of time, or face the possibility of paying compensation to the complaining member or being subject to countermeasures allowed under the rules. Such countermeasures might include the complaining member imposing higher duties on imports of selected products from the United States. However, China has already begun imposing its own duties on selected U.S. exports without awaiting the outcome of a dispute settlement proceeding, perhaps because it often takes years before the WTO's Dispute Settlement Body authorizes a prevailing WTO member to retaliate. In turn, the United States has argued that unilateral imposition of tariffs in response to the U.S. Section 232 measures cannot be justified under WTO rules. On July 16, 2018, the United States filed its own WTO complaints over the retaliatory tariffs imposed by five countries (Canada, China, EU, Mexico, and Turkey) in response to U.S. actions, and in late August filed a similar case against Russia. Dispute settlement panels have been composed to hear these cases. As mentioned, subsequent to the steel and aluminum investigations, the Trump Administration initiated a third Section 232 investigation into the imports of automobiles, including SUVs, vans and light trucks, and automotive parts in May 2018. Commerce held a public hearing to inform the investigation and requested comments from stakeholders on the impact of these imports on national security, identifying a broad set of factors related to national defense and the national economy for consideration. As many foreign auto manufacturers have established facilities in the United States, Commerce specifically requested information on how the impact may differ when \"U.S. production by majority U.S.-owned firms is considered separately from U.S. production by majority foreign-owned firms.\" The value of U.S. imports potentially covered under the new investigation is significantly greater than that of steel and aluminum imports. With complex global supply chains, industry dynamics such as the existence of foreign-owned auto manufacturing facilities in the United States, and the potential for further retaliation by trading partners if tariffs are imposed as a result of the investigation, the economic consequences could be substantial. According to Ford Motor Co.'s executive vice president and president of global operations, Joe Hinrichs, \"the auto industry is a global business. The benefits of scale and global reach are important ... The big companies that we compete against—Toyota, Volkswagen, General Motors, Nissan, Hyundai, Kia—are all global in nature because we realize the benefits of sharing the engineering, the platforms and scale, and our supply base.\" Some Members and auto industry representatives have spoken out in opposition to the new Section 232 investigation. The Driving American Jobs Coalition was created to oppose the potential tariffs and is comprised of a coalition of industry groups representing auto manufacturers, parts suppliers, auto dealers, parts distributors, retailers, and vehicle service providers. Others view the investigation as a tactical move by the Administration to pressure trade negotiating partners as the President continues to threaten auto tariffs. As mentioned, the EU has reportedly drafted a list of targets for retaliatory tariffs if the Administration moves forward with auto tariffs under Section 232. Three groups have voiced support for at least limited measures to address auto imports: the United Automobile Workers, the United Steelworkers, and the Forging Industry Association. Commerce submitted the final Section 232 report to the President on February 17, 2019, but the report has not been publicly released. Some Members have asked for the report to be made public, and the Cause of Action Institute sued Commerce to release the report after an unsuccessful Freedom of Information Act request. As noted earlier, the President has 90 days to review the report and make his determination as to whether he agrees or not with the Commerce findings and/or recommendation. In advance of the report's release, Senate Finance Chairman Grassley publicly reiterated his opposition to potential tariffs on auto or auto part imports, stating \"I hope the president will heed my call to forgo the auto tariffs and focus on opening new markets.... In short, raising tariffs on cars and parts would be a huge tax on consumers who buy or service their cars, whether they are imported or domestically produced.\" Proposed legislation in the House and Senate would require a report by the U.S. International Trade Commission (USITC) on the economic importance of domestic automotive manufacturing before the President could act ( S. 121 , H.R. 1710 ). Unlike the self-initiated investigations into steel, aluminum, and auto imports, the Trump Administration opened two additional Section 232 investigations in response to industry petitions. In July 2018, Commerce launched a Section 232 investigation into uranium ore and product imports in response to a petition from two U.S. mining companies and after consulting with industry and government officials. The petitioners, the uranium-mining companies Energy Fuels and Ur-Energy, requested limiting imports to guarantee about 25% of the U.S. nuclear market for U.S. uranium producers, and \"Buy American\" provisions for government purchases of uranium to bolster the industry. Uranium mining is a relatively small-scale industry in the United States, accounting for 1.6% of global production of uranium from mines. At the end of 2017, Energy Fuels was the only remaining operator of a uranium mine in the United States. The Energy Information Administration (EIA) reports U.S. production at U.S. mines shrank to 1.2 million pounds, down 55% from 2016, and U.S. production in 2017 was at its lowest annual level since 2004. EIA also reports annual drops since 2013 in shipments, employment, and expenditures in the U.S. uranium production industry. Kazakhstan accounted for 39% of the world's production of uranium; Canada and Australia supplied roughly a third of the world's production in 2017. China made up 3.2% of worldwide uranium production in 2017. The House Natural Resources Subcommittee questioned the need for the investigation and requested documentation from the petitioners regarding their communication with the Administration. The U.S. nuclear power industry opposes the investigation and claims that a uranium quota would lead to job losses in their industry. In March 2019, Commerce launched another Section 232 investigation in response to a petition from a U.S. titanium firm. In explaining the investigation, the Commerce Secretary stated, \"Titanium sponge has uses in a wide range of defense applications, from helicopter blades and tank armor to fighter jet airframes and engines.\" Titanium Metals Corporation (known as Timet) is currently the only producer of titanium sponge in the United States; USGS estimates that titanium sponge manufacturing employed 150 workers in 2018. In 2015, there were three such producers. For 2018, and the United States was 75% import reliant for titanium sponge. In 2018, Japan was the biggest supplier of titanium sponge, accounting for more than 90% of sponge imports; Kazakhstan was the second-leading supplier to the United States, making up 6.5% of imported titanium sponge. Although China was the world's largest producer of titanium sponge, producing 70,000 tons in 2018, it is not an important source of sponge imports for the United States. Any Section 232 tariff would be added to the existing 15% ad valorem tariff on titanium sponge imports. Unlike steel and aluminum imports, which have multiple countervailing and antidumping duties in place, there are no such duties in place for uranium or titanium sponge imports; however, there is a suspended investigation into Russian uranium imports. The Section 232 tariffs affect various stakeholders in the U.S. economy, prompting reactions from several Members of Congress, some in support and others voicing concern. Congress has also held a number of hearings to examine the issue. For example, the tariffs and their effects on U.S. stakeholders were a focus of Members' questions during recent House Ways and Means and Senate Finance hearings on U.S. trade policy with USTR Robert Lighthizer. In general, the tariffs are expected to benefit domestic steel and aluminum producers by restricting imports, thereby putting upward pressure on U.S. steel and aluminum prices and expanding production in those sectors, while potentially negatively affecting consumers and downstream domestic industries (e.g., manufacturing and construction) due to higher costs of input materials. In addition, retaliatory tariffs by other countries raise the price of U.S. exports, potentially leading to fewer sales of U.S. products abroad, magnifying the possible negative impact of the Section 232 tariffs. Economic studies of the tariffs estimate varying potential aggregate outcomes, but generally suggest an overall modest negative effect on the U.S. economy of the tariffs imposed to date, which could increase considerably if the Administration proceeds with Section 232 tariffs on U.S. motor vehicles and parts. U.S. motor vehicle and parts imports totaled $373.7 billion in 2018, nearly eight times the value of U.S. steel and aluminum imports ($47.1 billion) subject to Section 232 tariffs. Changes in tariffs affect economic activity directly by influencing the price of imported goods and indirectly through changes in exchange rates and real incomes. The extent of the price change and its impact on trade flows, employment, and production in the United States and abroad depend on resource constraints and how various economic actors (foreign producers of the goods subject to the tariffs, producers of domestic substitutes, producers in downstream industries, and consumers) respond as the effects of the increased tariffs reverberate throughout the economy. The following outcomes are generally expected at the level of individual firms and consumers: The price of the imported goods subject to the tariff is likely to increase . The magnitude of the price increase will depend on a number of factors, including the extent to which foreign producers lower their own prices and absorb a portion of the tariff increase. Known as the tariff \"pass-through\" rate, recent economic studies find that the tariffs have been nearly completely passed through to downstream industries and consumers with little effect on foreign export prices. Anecdotal reports suggest U.S. firms are paying increased prices for steel and aluminum purchased from abroad. For example, CP Industries, a maker of steel cylinders based in McKeesport, PA, is paying tariffs on imports of certain Chinese steel pipes it asserts cannot be produced in sufficient quantity in the United States to meet its demands. The company claims this raises the costs of its production by roughly 10%. The higher input costs potentially give foreign competitors an advantage in the U.S. market and abroad. Demand for the imported goods facing the tariffs is likely to decrease, while demand for those goods produced domestically is likely to increase. Consumers and downstream firms' sensitivity to the price increase (their price elasticity of demand) will depend in large part on the degree to which the steel and aluminum products produced domestically are sufficient substitutes for the products facing the tariffs. In 2018, the year the tariffs went into effect, U.S. imports of steel and aluminum subject to higher tariffs decreased by more than 10% in quantity terms, although both increased slightly in value terms ( Figure 3 ). Annual domestic U.S. steel production meanwhile increased by 6% from 2017 to 2018, while primary U.S. aluminum production increased by 18% (January-November, latest data available). The price and output of goods subject to the tariff produced domestically are likely to increase. As consumers of the products facing the tariffs shift their demand to lower- or zero-tariff substitutes, domestic producers are likely to respond with a combination of increased output and prices. Resource constraints that may limit or slow an expansion of output could cause prices to increase more rapidly. The low U.S. unemployment rate suggests such constraints may include frictions in shifting labor from other domestic industries into steel and aluminum production. In addition to reacting to higher-cost production and supply constraints, domestic steel and aluminum producers may also increase prices simply as a strategic response to the higher prices charged by their foreign competitors subject to the tariffs. In an anticipation of higher domestic demand and the ability to charge higher prices on U.S. steel and aluminum, some producers have announced investment and production increases. For example, U.S. Steel Corporation announced plans to increase capacity through a number of new or expanded facilities, including most recently a new furnace near Birmingham, AL. Similarly, three U.S. aluminum smelters are being restarted, including a Century Aluminum facility in Kentucky. Broad indices of U.S. steel and aluminum producer prices were up 14% and 5% between 2017 and 2018, respectively. Input costs for downstream domestic producers are likely to increase. As prices likely rise in the United States for the goods subject to the tariffs, domestic industries that use steel and aluminum in their products (\"downstream\" industries, such as auto manufacturers and oil producers) face higher input costs. Higher input costs for downstream domestic producers are likely to lead to some combination of lower profits for producers and higher prices for consumers, which in turn could dampen demand for downstream products and result in a reduction of output in these sectors, and possibly employment declines. For example, Ford CEO James Hacket suggested the metal tariffs are expected to cost the auto manufacturer roughly $1 billion. U.S. exports from the industries subject to retaliatory tariffs are likely to decline. Six U.S. trading partners (Canada, Mexico, EU, China, Turkey, and Russia) have imposed retaliatory tariffs in response to U.S. Section 232 tariffs affecting approximately $23 billion of U.S. exports in 2018, including many U.S. agricultural goods such as pork and dairy products. The retaliatory tariffs may have led to decreased demand for U.S. exports and given U.S. exporters an incentive to manufacture abroad to avoid the tariffs. For example, according to U.S. Department of Agriculture, Chinese tariffs on soybeans caused overall U.S. agricultural and food exports to China to decline in 2018, and China increased its purchases of soybeans from Brazil and elsewhere. Canada, Mexico, and the EU account for 80% of U.S. exports subject to retaliatory tariffs in response to Section 232 actions. Since the retaliatory tariffs took effect, U.S. exports to these trading partners have decreased on average by 25%, 10%, and 38%, respectively. Facing retaliatory tariffs on U.S. motorcycle exports to the EU, Harley Davidson has announced its intent to shift some of its production out of the United States in order to remain competitive in the EU market. Aggregating these microeconomic effects, tariffs also have the potential to affect macroeconomic variables, although these impacts may be limited in the case of the Section 232 tariffs, given their focus on two specific commodities with potential exemptions, relative to the size of the U.S. economy. With regard to the value of the U.S. dollar, as demand for foreign goods potentially falls in response to the tariffs, U.S. demand for foreign currency may also fall, putting upward pressure on the relative exchange value of the dollar. This in turn would reduce demand for U.S. exports and increase demand for foreign imports, partly offsetting the effects of the tariffs. Tariffs may also affect national consumption patterns, depending on how the shift to higher-cost domestic substitutes affects consumers' discretionary income and therefore aggregate demand. Finally, given their ad hoc nature, these tariffs, in particular, are also likely to increase uncertainty in the U.S. business environment, potentially placing a drag on investment. From a global standpoint, tariff increases on steel and aluminum are likely to result in an unambiguous welfare loss due to what most economists consider is a misallocation of resources caused by shifting production from lower-cost to higher-cost producers. On the other hand, some see the Administration's trade actions as addressing long-standing issues of fairness that are intended to provide U.S. producers with a more level playing field. Looking solely at the domestic economy, the net welfare effect is unclear, but also likely negative. Generally, economic models would suggest the negative impact of higher prices on consumers and industries using the imported goods is likely to outweigh the benefit of higher profits and expanded production in the import-competing industry and the additional government revenue generated by the tariff. It is theoretically plausible to generate an overall positive welfare effect for the domestic economy if the foreign producers absorb a large enough portion of the tariff increase. Given the current excess capacity and intense price competition in the global steel and aluminum industries, however, this level of tariff absorption by foreign firms seems unlikely. Moreover, retaliation by foreign governments would erode this welfare gain. The direct economic effects of the Section 232 tariffs on steel and aluminum may be limited due to the relatively small share of economic activity directly affected. In 2018, U.S. steel and aluminum imports were $29.5 billion and $17.6 billion, respectively, roughly 2% of all U.S. imports. Various stakeholder groups have prepared quantitative estimates of the costs and benefits across the economy. Specific estimates from these studies should be interpreted with caution given their sensitivity to modeling assumptions and techniques, but generally they suggest a small negative overall effect on U.S. gross domestic product (GDP) from the tariffs with employment shifts into the domestic steel and aluminum industries and away from other sectors in the economy. As Congress debates the Administration's Section 232 actions it may consider the following issues, many of which include potential legislative responses. In enacting Section 232 of the Trade Expansion Act, Congress delegated aspects of its authority to regulate international commerce to the executive branch. Use of the statute to restrict imports does not require any formal approval by Congress or an affirmative finding by an independent agency, such as the USITC, granting the President broad discretion in applying this authority. Should Congress disapprove of the President's use of the statute, its current recourse is limited to passing new legislation or using informal tools to pressure the Administration (e.g., putting holds on presidential nominee confirmations in the Senate). Some Members and observers have suggested that Congress should require additional steps in the Section 232 process. In the 116 th Congress, a variety of proposals have been introduced to amend Section 232, in various ways, such as by requiring an economic impact study by the USITC, congressional consultation, or approval of any new tariffs, allowing for a resolution of disapproval of trade actions, or revisiting the delegation of its constitutional authority more broadly, such as by requiring congressional approval of executive branch trade actions more generally. Some Members, including Senate Finance Chair Grassley, seek to draft a consensus bill to restore congressional authority that would gain sufficient bipartisan support to withstand a possible presidential veto. Issues under debate include whether any changes would be retroactive, potentially affecting the steel and aluminum tariffs, or whether they would only apply to future actions, and whether Congress's role should be consultative or decisive (e.g., requiring congressional approval). For a list of proposals in the 116th Congress, see Appendix C . Several major U.S. trading partners have proposed or are currently imposing retaliatory tariffs in response to the U.S. actions. In the 115 th Congress, some Members of Congress proposed legislation to respond to the potential economic impact of these foreign retaliatory tariffs. Some proposals expand programs like trade adjustment assistance to include assistance for workers, firms, and farmers harmed by foreign retaliation. Other measures propose increased funding and programming for certain agricultural export programs to help farmers find new markets for their exports. For a list of proposals from the 115 th Congress, see Appendix C . It is relatively easy for a stakeholder to prompt the Section 232 investigation process. The statute states that \"Upon request of the head of any department or agency, upon application of an interested party, or upon his own motion, the Secretary of Commerce ... shall immediately initiate an appropriate investigation.\" To limit the volume of Section 232 petitions and ensure that any requests are sufficiently justified, Congress may consider establishing criteria or a threshold that a request must meet before Commerce and Defense agencies invest resources in conducting a Section 232 investigation. Similarly, Congress may consider limiting the types of imported articles that may be considered under Section 232 (e.g., S. 287 ). Congress created the Section 232 process to try to ensure that U.S. imports do not cause undue harm to U.S. national security. Some observers have raised concerns that restrictions on U.S. imports under Section 232, however, may harm U.S. allies, which could also have negative implications for U.S. national security. For example, Canada is considered part of the U.S. defense industrial base according to U.S. law and is also a top source of U.S. imports of steel and aluminum. National security is not clearly defined in the statute, allowing for ambiguity and alternative interpretations by an Administration. International trade commitments both at the multilateral and FTA level generally include broad exceptions on the basis of national security. The Trump Administration argues its Section 232 actions are permissible under these exceptions, while many U.S. trading partners claim the actions are unrelated to national security. If the United States invokes the national security exemption in what may be perceived to be an arbitrary way, it could similarly encourage other countries to use national security as a rationale to enact protectionist measures and limit the scope of potential U.S. responses to such actions. Congress may consider amending Section 232 to address these concerns. For example, some Members have proposed to narrowly defin e \"national security\" under Section 232 and the factors to be considered in a Section 232 investigation . One bill limits it to protection against foreign aggression ( S. 287 ). Addressing the specific market-distorting practices that are the root causes of steel and aluminum overcapacity (e.g., government intervention, subsidization) may require updating or amending existing trade agreements. Broad WTO negotiations for new multilateral rules, which may have offered opportunity to address some of these issues, have stalled. Recent U.S. FTA negotiations, including the recently concluded USMCA, include related disciplines (e.g., by establishing rules on state-owned enterprises or anticorruption), and the United States is engaged in negotiations with China on overcapacity and other trade barriers. To address these issues, Congress could consider establishing specific or enhanced new negotiating objectives for trade agreement negotiations, potentially through new or modified Trade Promotion Authority (TPA) legislation. Congress could also consider directing the executive branch to prioritize engagement in such negotiations, by, for example, endorsing the current OECD discussions or the trilateral negotiations announced by USTR with the EU and Japan to address nonmarket practices, including subsidies, state-owned enterprises, and technology transfer requirements, mostly aimed at China. Some analysts argue that the United States risks undermining the international system it helped create when it invokes unilateral trade actions that may violate core commitments and with regard to broad use of national security exemptions. These observers fear that disagreements at the WTO on these issues may be difficult to resolve through the existing dispute settlement procedures given the concerns over national sovereignty that would likely be raised if a WTO dispute settlement panel issued a ruling relating to national security. Furthermore, actions by the United States that do not make use of the multilateral system's dispute settlement process may open the United States to criticism and could impede U.S. efforts to use the multilateral system for its own enforcement purposes. For example, China called on other parties such as the EU to join it in opposition to the U.S. actions on Section 232, while simultaneously promoting domestic policies often seen as undermining WTO rules. Congress could potentially address these concerns by conducting increased oversight of the Administration's actions by inviting testimony from multiple parties, considering legislation to establish more stringent criteria, or requiring congressional approval of any use of Section 232, among other possible actions. The U.S. unilateral actions under Section 232 have raised the level of tension with U.S. trading partners and could pose risks to broader international economic cooperation. For example, trade tensions between the United States and its traditional allies contributed to the lack of consensus at the conclusion of the G-7 summit in June 2018. The strain on international trading relationships also could have broader policy implications, including for cooperation between the United States and allies on foreign policy issues. Appendix A. Amendments to and Past Uses of Section 232 (19 U.S.C. §1862) Concern over national security, trade, and domestic industry was first raised by the Trade Agreements Extension Act of 1954 (P.L. 83-464 §2). The 1954 act prohibited the President from decreasing duties on any article if the President determined that such a reduction might threaten domestic production needed for national defense. In 1955, the provision was amended to also allow the President to increase trade restrictions, in cases where national security may be threatened. The Trade Agreements Extension Act of 1958 (P.L. 85-686 §8) expanded the 1955 provisions, by outlining specific factors to be considered during an investigation, allowing the private sector to petition for relief, and requiring the President to publish a report on each petition. The factors to be considered during an investigation included (1) the domestic production capacity needed for U.S. national security requirements, (2) the effect of imports on domestic production needed for national security requirements, and (3) \"the impact of foreign competition on the economic welfare of individual domestic industries.\" Section 232 of the Trade Expansion Act of 1962 (P.L. 87-794) continued the provisions of the 1958 Act. Section 232 has been amended multiple times over the years, including (1) to change the time limits for investigations and actions; (2) to change the advisory responsibility from the Secretary of the Treasury to the Secretary of Commerce; and (3) to limit presidential authority to adjust petroleum imports. In 1980, Congress amended Section 232 to create a joint disapproval resolution provision under which Congress could override presidential actions to adjust petroleum or petroleum product imports. The bill was signed into law on April 2, 1980, the same day that President Carter proclaimed a license fee on crude oil and gasoline pursuant to Section 232 in Proclamation 4744. On April 15, 1980, two weeks after the President's proclamation on the crude oil and gasoline license fee, Representative James Shannon introduced House Joint Resolution 531 to disapprove and effectively nullify the presidential action. The House Ways and Means Subcommittee on Trade voted 14 to 4 to disapprove the presidential action; the resolution was favorably reported out of the full committee on a 27 to 7 vote. Dissenting views were voiced by Members who supported the fee program and were concerned about U.S. dependence on foreign oil. While the measure passed the House, it was indefinitely postponed in the Senate. Multiple joint resolutions of disapproval were introduced in Congress in 1980, but none passed both chambers. In addition to the disapproval mechanism created in the Crude Oil Windfall Profit Tax Act of 1980, President Carter's action in Proclamation 4744 was also challenged in court and through separate legislation in Congress. On May 13, 1980, a federal district court struck down the President's action on petroleum imports as unlawful, thereby preventing the government from implementing the program. The court's decision, however, was appealable to the higher courts. Before a court could consider an appeal, Congress enacted an amendment to a bill to extend the public debt limit ( P.L. 96-264 , Section 2) on June 6, 1980, which terminated Proclamation 4744's petroleum import program. Section 2 of P.L. 96-264 did not use the disapproval mechanism established in the Crude Oil Windfall Profit Tax Act of 1980; it was a separate piece of legislation that was attached as an amendment to an unrelated bill. On June 19, 1980, the President formally rescinded Proclamation 4744 \"in its entirety, effective March 15, 1980.\" Appendix B. Section 232 Investigations Appendix C. Proposals Concerning Section 232 Appendix D. 2018 U.S. Steel and Aluminum Imports", "summary": "President Trump has used Section 232 authority to apply new tariffs to steel and aluminum imports and potentially on automobile and automobile parts and other sectors currently under investigation. These actions have raised a number of policy issues and some Members of Congress have introduced legislation to revise various Section 232 authorities. Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) provides the President with the ability to impose restrictions on certain imports based on an affirmative determination by the Department of Commerce (Commerce) that the product under investigation \"is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.\" Section 232 actions are of interest to Congress because they are a delegation of Congress's constitutional authority \"To lay and collect … Duties\" and \"To regulate Commerce with foreign Nations.\" Global overcapacity in steel and aluminum production, mainly driven by China, has been an ongoing concern of Congress. The George W. Bush, Obama, and Trump Administrations each engaged in multilateral discussions to address global steel capacity reduction through the Organisation for Economic Co-operation and Development (OECD). While the United States has extensive antidumping and countervailing duties on Chinese steel imports to counter China's unfair trade practices, steel industry and other experts argue that the magnitude of Chinese production acts to depress prices globally. Effective March 23, 2018, President Trump applied 25% and 10% tariffs, respectively, on certain steel and aluminum imports. The President temporarily exempted several countries from the tariffs pending negotiations on potential alternative measures. Permanent tariff exemptions in exchange for quantitative limitations on U.S. imports were eventually announced covering steel for Brazil and South Korea, and both steel and aluminum for Argentina. Australia was permanently exempted from both tariffs with no quantitative restrictions. In August 2018, President Trump raised the tariff to 50% on steel imports from Turkey. The proposed United States-Mexico-Canada Agreement (USMCA) would not resolve or address the Section 232 tariffs on imported steel and aluminum from Canada and Mexico. Commerce is managing a process for potential product exclusions in order to limit potential negative domestic effects of the tariffs on U.S. businesses and consumers. Of the nearly 70,000 steel exclusion requests, over 16,000 have been granted, and about 46,000 have been denied to date. Commerce also received about 10,000 aluminum exclusion requests, with 3,000 exclusions granted and 500 denied. Several Members have raised issues and concerns about the exclusionary process. U.S. trading partners are challenging the tariffs under World Trade Organization (WTO) dispute settlement rules and have threatened or enacted retaliatory measures. Some analysts view the U.S. unilateral actions as potentially undermining WTO rules, which generally prohibit parties from acting unilaterally, but provide exceptions, including when parties act to protect \"essential security interests.\" Congress enacted Section 232 during the Cold War when national security issues were at the forefront of national debate. The Trade Expansion Act of 1962 sets clear steps and timelines for Section 232 investigations and actions, but allows the President to make a final determination over the appropriate action to take following an affirmative finding by Commerce that the relevant imports threaten to impair national security. Prior to the Trump Administration, there were 26 Section 232 investigations, resulting in nine affirmative findings by Commerce. In six of those cases the President imposed a trade action. The Trump Administration has launched three additional Section 232 investigations. On May 23, 2018, Commerce initiated an investigation on U.S. automobile and automobile part imports; on July 18, 2018, Commerce launched a Section 232 investigation into uranium ore and product imports; and on March 4, 2019, Commerce began an investigation into titanium sponge imports. The latter two investigations were in response to petitions by U.S. firms. These investigations, as well as the Administration's decision to apply the steel and aluminum tariffs on imports from Canada, Mexico, and the EU—all major suppliers of the affected imports—have prompted further questions by some Members of Congress and trade policy analysts on the appropriate use of the trade statute and the proper interpretation of threats to national security on which Section 232 investigations are based. These actions have also intensified debate over potential legislation to constrain the President's authority with respect to Section 232. The steel and aluminum tariffs are affecting various stakeholders in the U.S. economy, prompting reactions from several Members of Congress, some in support of the measures and others voicing concerns. In general, the tariffs are expected to benefit some domestic steel and aluminum manufacturers, leading to potentially higher domestic steel and aluminum prices and expansion in production in those sectors, while potentially negatively affecting consumers and many end users (e.g., auto manufacturing and construction) through higher costs. To date, Congress has held hearings on the potential economic and broader policy effects of the tariffs, and legislation has been introduced to override the tariffs that have already been imposed, or to revise or potentially limit the authority previously delegated to the President in future investigations.", "document_type": "crs"}
{"report": "There are about 150 ombudsman offices located throughout the federal government. About a third of them are statutorily authorized. The others were created through executive action. Although there are differences among them in terms of their origin, staffing, funding, and organizational structure, they are all tasked with receiving and helping to resolve disputes in an impartial manner. Some ombudsman offices are limited to helping to resolve disputes that arise within the federal agency in which they are housed. Others are limited to helping to resolve disputes received from the agency's clients. Still others may help to resolve disputes that arise both within the federal agency and from the agency's clients. The Office of the National Ombudsman, housed within the U.S. Small Business Administration (SBA), is fairly unique in that it is authorized to help resolve disputes received from the public across federal agencies. It was created in 1996 as part of P.L. 104-121 , the Contract with America Advancement Act of 1996 (Title II, the Small Business Regulatory Enforcement Fairness Act of 1996 [SBREFA]). It is a relatively small office, with authorization for up to seven employees. It currently has five employees: a Deputy National Ombudsman (Mina Wales), an administrative officer, an external outreach manager, and two case management specialists. The National Ombudsman position, which is currently vacant, is appointed by the SBA Administrator. The Office of the National Ombudsman's primary purpose is to provide small businesses, small government entities (those serving populations of less than 50,000), and small nonprofit organizations that believe they have experienced unfair or excessive regulatory compliance or enforcement actions (such as repetitive audits or investigations, excessive fines, and retaliation by federal agencies) a means to comment about such actions. As an impartial liaison, the Office of the National Ombudsman \"directs reported regulatory fairness matters to the appropriate agency for high-level fairness review, and works across government to address those concerns, reduce regulatory burdens, and help small businesses succeed.\" SBREFA also created a five-person Small Business Regulatory Fairness Board in each of the SBA's 10 regions to advise the National Ombudsman on matters related to federal regulatory enforcement activities affecting small businesses. Specifically, SBREFA directs the SBA Administrator to designate an ombudsman to work with each federal agency with regulatory authority over small businesses to ensure that small businesses that receive or are subject to an audit, on-site inspection, compliance assistance effort, or other enforcement-related communication or contact by federal agency personnel are provided a means to comment on those regulatory compliance and enforcement activities; receive comments from small businesses regarding actions by federal agency employees conducting small business regulatory compliance or enforcement activities; refer comments to the affected federal agency's inspector general in appropriate circumstances and maintain the confidentiality of the person or small business making these comments; based on substantiated comments received from small businesses and Small Business Regulatory Fairness Boards, annually report to Congress and affected federal agencies an evaluation of the federal agency's regulatory compliance and enforcement activities, including a rating of the agency's responsiveness to small businesses; provide the affected federal agency with an opportunity to comment on the National Ombudsman's annual report to Congress prior to publication and include in the final report a section in which the affected federal agency may comment on issues that are not addressed by the National Ombudsman in revisions to the draft; and coordinate and report annually on the Small Business Regulatory Fairness Boards' activities, findings, and recommendations to the SBA Administrator and the heads of affected federal agencies. This report examines the Office of the National Ombudsman's origin and history; describes its organizational structure, funding, functions, and current activities; and discusses a recent legislative effort to enhance its authority. During the 115 th Congress, S. 1146 , the Small Business Regulatory Relief Act of 2017, would have, among other provisions, expanded the National Ombudsman's authority to work with federal agencies on the development of best practices for educating, training, and assisting small entities in understanding and complying with federal regulations; authorized the National Ombudsman to evaluate federal agency regulatory compliance guides, ensure that those guides are available to small business development centers and other SBA management and training resource partners, conduct small business customer service surveys on an ongoing basis to assess the timeliness and quality of federal agency regulatory activities, and develop an outreach program to promote awareness of the National Ombudsman's activities; and authorized to be appropriated such sums as are necessary to carry out these additional responsibilities. On March 19, 1996, the Senate passed, 100-0, S. 942 , the Small Business Regulatory Enforcement Fairness Act of 1996. The bill, which included provisions creating the Office of the National Ombudsman and 10 regional Small Business Regulatory Fairness Boards, was later incorporated into P.L. 104-121 , the Contract with America Advancement Act of 1996. The bill was based on recommendations of the 1995 White House Conference on Small Business. The 1995 White House Conference on Small Business, like its 1980 and 1986 predecessors, was preceded by state conferences and regional meetings. The 1,904 delegates to the 1995 White House Conference on Small Business considered more than 150 policy recommendations forwarded from the regional meetings and six petitions. Through a series of votes, the delegates narrowed the list of policy recommendations to 60, which were sent to the President and Congress for consideration. Improving the Regulatory Flexibility Act was the 3 rd highest vote-getter (1,398 votes) at the conference and paperwork and regulatory reform was the 25 th highest vote-getter (1,046 votes). SBREFA addressed both recommendations. The Office of the National Ombudsman and the Small Business Regulatory Fairness Boards were created to address the recommendation concerning federal regulatory reform. During Senate floor debate, the bill's proponents argued that the Office of the National Ombudsman was part of the bill's overall effort to create a \"more cooperative and less punitive regulatory environment between agencies and small business that is less threatening and more solution-oriented than we have achieved in the past.\" They argued that it would \"help small businesses get fair and legal treatment from the government if they have been treated unfairly\" and \"also assist small businesses in recovering legal fees as a result of unfair Government actions.\" During floor debate, Senator John Glenn indicated that he supported the legislation but was concerned that the Office of the National Ombudsman and the Small Business Regulatory Fairness Boards could \"end up creating a one-sided record of complaints that will distort the broad public mission of our agencies.\" He also indicated that federal agencies are not \"the enemy when they carry out the laws passed by the people's representatives in Congress\" and was \"happy, at least, that in the final version of the bill before us, the Ombudsman will focus on general agency enforcement activity and not attempt to evaluate or rate the performance of individual agency personnel.\" Senator Carl Levin also supported the legislation but argued that \"the committee [on Small Business] should have taken more time to look at the pros and cons of placing an ombudsman in each regulatory agency, rather than relying on a lone ombudsman in the Small Business Administration to cover all agencies.\" Initially, the Office of the National Ombudsman was located in Chicago and had a three-person staff. The first National Ombudsman (Peter Barca) was appointed in November 1996, and 50 small business owners were appointed to the 10 Small Business Regulatory Fairness Boards in that same month. The Small Business Regulatory Fairness Boards were all chartered by February 1997, and became operational in June 1997. During its first year, the Office of the National Ombudsman also created its first small business appraisal form to receive small business comments, developed a structure to evaluate federal agency regulatory compliance and enforcement activities, instructed Small Business Fairness Board members about SBREFA, published a brochure, established its toll-free 1-888-REGFAIR telephone number, created a website, and held 10 public hearings across the nation \"to enable small businesses to publicly bring forth their concerns of the regulatory enforcement structure.\" The Office of the National Ombudsman also received 735 telephone calls, had more than 56,000 hits on its website, and had 110 small businesses initiate an appraisal form. Fifty filed a completed appraisal form, and 33 of these forms were forwarded to federal agencies for responses. To the dismay of some Members, the Office of the National Ombudsman did not issue a report card on federal agency compliance and enforcement practices in its first annual report to Congress, dated December 31, 1997, primarily because the National Ombudsman felt that the office had not had sufficient small business participation to grade the agencies' performance. Instead, the National Ombudsman provided synopses of 12 small business appraisal forms that illustrated what the National Ombudsman identified as \"four common themes in the regulatory environment\" that are faced by small businesses: \"(1) agencies change their rules in the middle of the game; (2) agencies disregard the economic and other consequences of their actions on small businesses; (3) small businesses often get ensnarled in conflicting regulatory requirements when two federal agencies' jurisdiction overlap; and (4) small businesses fear federal agency retaliation.\" In FY1998, the SBA provided the Office of the National Ombudsman its first annual budget (see Table 1 ). The SBA provided $500,000 ($351,000 was actually spent that year), sufficient to hire seven staff members (a writer, clerk or receptionist, agency investigator, attorney, public information officer, special assistant, and policy coordinator), and pay for travel, printing, and overhead expenses (photocopying, telephone line, postage, supplies, etc.). Actual staffing levels have varied somewhat over the years. Including the National Ombudsman, there were 3 staff members in FY1997, 11 in FY1999, 9 in FY2000, 8 in FY2002, 7 from FY2007 to FY2014, 4 from FY2015 to FY2017, 6 in FY2018, and 5 in FY2019. As mentioned previously, the Office of the National Ombudsman has authorization for up to seven employees (including the National Ombudsman position, which is currently vacant). The Office of the National Ombudsman's annual report to Congress subsequently included its mandated report card on federal agency regulatory performance, and that section of the report became the focus of congressional hearings, primarily because several federal agencies received relatively low grades, especially in the timeliness of their responses to small business comments. The National Ombudsman added a \"best practices\" section to the annual report to Congress \"so one agency would know what the other agencies are doing and have that dialogue going on, and to encourage them\" to do better. Peter Barca left the National Ombudsman position in July 1999, leaving the position vacant until January 2000 when Gail A. McDonald was appointed the second National Ombudsman. Shortly after her appointment, the SBA's Administrator at that time, Aida Alvarez, decided to relocate the Office of the National Ombudsman from Chicago to SBA's headquarters in Washington, DC, reportedly in an effort to increase the office's \"visibility\" within the administration. The physical relocation was completed in August 2001. In 2002, the Office of the National Ombudsman entered into a memorandum of understanding with the SBA Office of Advocacy in which both parties \"pledged the highest degree of cooperation\" and the Office of Advocacy (which focuses on issues related to the development of federal regulations and their impact on small businesses) agreed \"to offer the services of its Regional Advocates in planning the Ombudsman's regional fairness board hearings.\" In 2003, the third National Ombudsman, Michael L. Barrera, testified during a congressional hearing that \"as public awareness of ONO [Office of the National Ombudsman] grows, cooperation among the small business community and Federal regulatory agencies is [also] growing.\" He noted that federal agency attendance at Small Business Regulatory Fairness Board hearings \"has improved dramatically\" and pointed out that the Internal Revenue Service, through its Taxpayer Advocate system, \"now attends every RegFair Hearing and Roundtable conducted by ONO.\" In 2006, the Office of the National Ombudsman renewed its previous memorandum of understanding with the SBA Office of Advocacy \"to foster increased cooperation between the offices as they both work to provide a more small business friendly regulatory environment.\" Specifically, the Office of the National Ombudsman agreed to receive comments and concerns regarding the impact of regulations on small business and the burden of regulatory compliance and federal regulatory enforcement; where appropriate, forward such comments to the Office of Advocacy; provide information and materials generated through the Office of the National Ombudsman's activities that are more appropriately within the Office of Advocacy's jurisdiction; and promote the SBA's programs and services, including the Office of Advocacy's regulatory and research role, through its various hearings and roundtables and \"include the Office of Advocacy Regional Advocates in the planning and implementation of those activities as appropriate.\" The SBA Office of Advocacy, which has a larger budget and more staff than the Office of the National Ombudsman, agreed to provide material that may be distributed to participants in the Office of the National Ombudsman's Regulatory Fairness Program; and provide the National Ombudsman with regulatory complaints and other information generated by small business interests that are more appropriately within the Office of the National Ombudsman's jurisdiction. The Office of Advocacy's FY2019 appropriation is $9.120 million and it has authorization for 52 full-time equivalent employees. In recent years, Congress has focused increased attention on the Office of the National Ombudsman's efficacy in helping small businesses resolve their regulatory disputes with federal agencies, as opposed to focusing on how many small businesses contacted the office, submitted a formal comment, or participated in one of the office's hearings and roundtable discussions. For example, in 2016, the House Committee on Small Business noted that the National Ombudsman \"has no investigative capacity nor authority to overrule, stop or delay a federal action\" and asked the National Ombudsman to report back to the committee the percentage of cases that were referred to federal agencies for resolution in FY2014 (420) that resulted in a favorable outcome for the small businesses, \"such as reduction of a penalty.\" The National Ombudsman reported that 41 of the 420 small businesses (about 10%) that had a regulatory compliance or enforcement dispute forwarded to a federal agency in FY2014 for resolution received a favorable outcome. As noted previously, the Office of the National Ombudsman has authorization for seven employees (including the National Ombudsman position, which is vacant) and currently has five employees: a Deputy National Ombudsman, an administrative officer, an external outreach manager, and two case management specialists. The 10 Small Business Regulatory Fairness Boards are required to meet at least annually to advise the National Ombudsman on matters related to federal agency small business regulatory activities, report substantiated instances of excessive federal enforcement actions against small businesses, and prior to publication, comment on the National Ombudsman's annual report to Congress. The boards are composed of five volunteers who are an owner, operator, or officer of a small business. Board members are appointed by the SBA Administrator, after receiving the recommendations of the chair and ranking minority member of the House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship. No more than three board members may be of the same political party, they cannot be a federal officer or employee, in either the executive branch or Congress, and they serve at the pleasure of the SBA Administrator for terms of three years or less. The boards are based in the SBA's 10 regions Region 1 (serving Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont); Region 2 (serving New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands); Region 3 (serving Delaware, Maryland, Pennsylvania, Virginia, West Virginia, and the District of Columbia); Region 4 (serving Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee); Region 5 (serving Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin); Region 6 (serving Arkansas, Louisiana, New Mexico, Oklahoma, and Texas); Region 7 (serving Iowa, Kansas, Missouri, and Nebraska); Region 8 (serving Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming); Region 9 (serving Arizona, California, Hawaii, Nevada, and the territories of Guam and American Samoa); and Region 10 (serving Alaska, Idaho, Oregon, and Washington). As shown in Table 1 , the SBA provided the Office of the National Ombudsman $1.313 million in FY2018, and an estimated $1.143 million in FY2019. The SBA has requested $1.438 million for FY2020. Unlike the SBA's Office of Advocacy, which is also tasked with serving as an independent advocate for small businesses in the regulatory process (but primarily at the developmental stage), the Office of the National Ombudsman does not have its own funding account. The SBA funds the Office of the National Ombudsman through its salaries and expenses' executive direction subaccount. That account includes funding for the SBA's Office of the Administrator, Office of General Counsel, Office of Government Relations, Office of Hearings and Appeals, Office of Marketing and Communications, Office of Performance Management and Chief Financial Officer, and the National Ombudsman. The Office of Advocacy was also funded through that account, but Congress directed the SBA to provide the Office of Advocacy its own budgetary account in P.L. 111-240 , the Small Business Jobs Act of 2010, as a means to enhance the Office of Advocacy's independence from the SBA Administrator. To date, similar legislation has not been introduced to provide the Office of the National Ombudsman its own funding account within the SBA. Instead, ombudsman advocates have argued that ombudsman offices \"should not have duties within the agency that might create a conflict with their responsibilities as a neutral, and their budgets should be publicly disclosed.\" Small businesses that believe they have experienced excessive or unfair federal regulatory compliance or enforcement actions may file a formal comment with the Office of the National Ombudsman. The formal comment typically includes the following basic information and a signed consent form (SBA Form 1993) authorizing the Office of the National Ombudsman to pursue the matter with the federal agency: a description of the specific action taken by the federal agency and the results of this action; the specific resolution sought; and any relevant documentation. These comments may be filed online or in paper form, and commenters can receive information regarding the comment form or information about the Office of the National Ombudsman by calling the National Ombudsman's Regulatory Fairness Helpline at 888-REG-FAIR. In addition, small businesses may file comments \"on-the-spot\" at any of the Office of the National Ombudsman's regional hearings and roundtables. Once a comment is submitted, a case management specialist reviews the case and any supporting documentation to ensure that the necessary authorization and other information are present. The case management specialist then determines how the Office of the National Ombudsman can best assist the small business, advises the small business of expected next steps, and, if the comment is to be forwarded to a federal agency, explains the parameters of the SBREFA review. Comments forwarded to a federal agency include a request for \"a prompt, high-level, responsive review of the matter reported.\" The federal agency is asked to consider the fairness of the case from a small business perspective and \"to provide a practical, timely response that balances the spirit of the regulation with the specific circumstances of the small business.\" All comments are handled on a confidential, protected basis, and can be raised anonymously, if preferred by the small business. The case management specialist then follows up with the federal agency and the small business as appropriate and communicates with the small business owners the actions taken to assist them. In FY2018, the Office of the National Ombudsman assisted 354 small businesses, responded to numerous general inquiries, conducted 10 regional regulatory fairness roundtables across 5 of its regions, completed 118 outreach events, and initiated contact with 100 trade associations representing more than 2 million small business owners and SBA resource partners. The National Ombudsman also met with senior officials representing 27 federal agencies. In addition, the National Ombudsman's annual report includes a report card providing letter grades (which can range from A to F) for each federal agency (and in several instances, for individual offices within the federal agency) two grades rating the agency's responsiveness to small business concerns (the timeliness of the agency's response and the quality of the response); three grades rating the agency's compliance with SBREFA (the agency's nonretaliation policies against small business commenters, the provision of regulatory compliance assistance to small businesses, and the provision of notice to small businesses of their rights under SBREFA); and an overall grade. In FY2017, 39 federal agencies and offices received an overall grade of A, 1 received an overall grade of B, 1 received an overall grade of C, and the Department of Veterans Affairs received an overall grade of D. No agencies received an overall grade of F. Some Members and small business advocates have argued that the Office of the National Ombudsman should be provided additional resources. For example, on March 29, 2017, a small business advocate argued the following at a Senate Committee on Small Business and Entrepreneurship hearing: Where the Office of Advocacy works on the front end of a development of a significant regulation, the Office of the National Ombudsman is charged with helping small businesses on the back end, with all regulation compliance. It serves as the conduit for small businesses to have their grievances about compliance problems, or other issues, with Federal agencies, heard directly by the agencies, in an effort for successful resolution. In this way, the Office of the National Ombudsman, and the agencies, can detect patterns of compliance problems so that the agencies can revisit rules for modification. This important component of the rulemaking process is woefully underfunded. The Office of the National Ombudsman actually relies on volunteers to help get the message out about its vital small business services. It is, for the most part, unknown and underutilized. If Congress really wants to help small businesses with Federal regulations, invest more in the small business outreach, support, and feedback loop. As mentioned previously, many small businesses that submit formal comments to the Office of the National Ombudsman do not receive a favorable outcome from the federal agency. Some Members and small business advocates have argued that the Office of the National Ombudsman should be provided additional authority to assist small businesses in their efforts to resolve their regulatory disputes with federal agencies. For example, during the 115 th Congress, S. 1146 , the Small Business Regulatory Relief Act of 2017, would have, among other provisions, expanded the National Ombudsman's authority to work with federal agencies on the development of best practices for educating, training, and assisting small entities in understanding and complying with federal regulations; authorized the National Ombudsman to evaluate federal agency regulatory compliance guides, ensure that those guides are available to small business development centers and other SBA management and training resource partners, conduct small business customer service surveys on an ongoing basis to assess the timeliness and quality of federal agency regulatory activities, and develop an outreach program to promote awareness of the National Ombudsman's activities; and authorized to be appropriated such sums as are necessary to carry out these additional responsibilities. Others Members appear unconvinced that providing the Office of the National Ombudsman additional resources and/or authority is necessary. They have argued, for example, that the best way to reduce small business regulatory burden is not more government but less regulation. The Office of the National Ombudsman is a small office with a relatively large mandate—to serve as an impartial liaison across federal agencies for small businesses that believe they have not been treated fairly in the enforcement of federal regulations. It faces several challenges. First, the Office of the National Ombudsman is generally recognized as being an independent, impartial office, but it is housed within the SBA and remains subject to its influence through (1) its proximity to the agency and its organizational culture; (2) the budgetary process, which provides the SBA Administrator the authority to determine the Office of the National Ombudsman's budget; and (3) the appointment and removal process, which provides the SBA Administrator the authority to hire and fire the ombudsman. In addition, the sheer size of the SBA (more than 3,200 full-time employees and an annual budget of about $700 million) relative to the Office of the National Ombudsman, and the existence of the SBA's Office of Advocacy, which has a similar mission (but focused primarily on regulatory development as opposed to regulatory compliance and enforcement), makes it more difficult than would otherwise be the case for the Office of the National Ombudsman to be recognized by stakeholders as the definitive voice for small businesses in the regulatory process. Second, the National Ombudsman has often had a relatively short tenure. The last two National Ombudsmans (Earl L. Gay and Nathan J. Miller) each served for about a year. The National Ombudsman has left office for various reasons, such as a change in Administration or for opportunities in the private sector. Frequent turnover can lead to continuity problems for the office. Third, the Office of the National Ombudsman does not have the authority to compel federal agencies to undertake specific actions to resolve disputes. As a result, although its annual rating of federal agency responsiveness to small business concerns does provide it a means to exert some influence on federal agency actions, its role in resolving disputes is somewhat constrained. Finally, the Office of the National Ombudsman's relatively limited budget and staffing level restricts its ability to engage in outreach activities that could increase small business awareness of its existence and services.", "summary": "The Office of the National Ombudsman was created in 1996 as part of P.L. 104-121, the Contract with America Advancement Act of 1996 (Title II, the Small Business Regulatory Enforcement Fairness Act of 1996 [SBREFA]). Housed within the U.S. Small Business Administration (SBA), the office's primary purpose is to provide small businesses, small government entities (those serving populations of less than 50,000), and small nonprofit organizations that believe they have experienced unfair or excessive regulatory compliance or enforcement actions (such as repetitive audits or investigations, excessive fines, and retaliation by federal agencies) a means to comment about such actions. The Office of the National Ombudsman is an impartial liaison that reports small business regulatory fairness matters to the appropriate federal agency for review and works across government to address those concerns and reduce regulatory burdens on small businesses. SBREFA also created 10 Small Business Regulatory Fairness Boards, one in each of the SBA's 10 regions, to advise the National Ombudsman on matters related to federal regulatory enforcement activities affecting small businesses. Specifically, the National Ombudsman works with each federal agency with regulatory authority over small businesses to ensure that small businesses are provided a means to comment on the federal agency's regulatory compliance and enforcement activities; receives comments from small businesses regarding actions by federal agency employees conducting small business regulatory compliance or enforcement activities; refers comments to the affected federal agency's inspector general in appropriate circumstances while maintaining the confidentiality of the person or small business making these comments; issues an annual report to Congress and affected federal agencies evaluating the agency's compliance and enforcement activities, including a rating of their responsiveness to small businesses; provides the affected federal agency with an opportunity to comment on the annual report prior to publication and includes in the report a section in which the affected federal agency may comment on issues that are not addressed by the National Ombudsman in revisions to the draft; and coordinates and reports annually on the Small Business Regulatory Fairness Boards' activities, findings, and recommendations to the SBA Administrator and the heads of affected federal agencies. This report examines the Office of the National Ombudsman's origin and history; describes its organizational structure, funding, functions, and current activities; and discusses a recent legislative effort to enhance its authority. During the 115th Congress, S. 1146, the Small Business Regulatory Relief Act of 2017, would have, among other provisions, expanded the National Ombudsman's authority to work with federal agencies on the development of best practices for educating, training, and assisting small entities in understanding and complying with federal regulations; and authorized the National Ombudsman to evaluate federal agency regulatory compliance guides, ensure that those guides are available to small business development centers and other SBA management and training resource partners, conduct small business customer service surveys on an ongoing basis to assess the timeliness and quality of federal agency regulatory activities, and develop an outreach program to promote awareness of the National Ombudsman's activities. This report also discusses some challenges facing the Office of the National Ombudsman although it is generally recognized as an independent, impartial office, it is housed within the much larger SBA and remains subject to its influence; the National Ombudsman has often stayed in the position for a relatively short time. Frequent turnover can lead to continuity problems for the office; it does not have the authority to compel federal agencies to undertake specific actions to resolve disputes. As a result, although its annual rating of federal agency responsiveness to small business concerns does provide it a means to exert some influence on federal agency actions, its role in resolving disputes is somewhat constrained; and its relatively limited budget and staffing level restrict its ability to engage in outreach activities that could increase small business awareness of its existence and services.", "document_type": "crs"}
{"report": "T he Antiquities Act was enacted in 1906 in response to the destruction of prehistoric ruins and other archaeological sites in the western United States, often by amateur archaeologists and treasure hunters. The act authorizes the President to declare, by public proclamation, historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest located on federal land as national monuments. It also authorizes the President to reserve parcels of land surrounding these objects, but limits the size of such reservations to \"the smallest area compatible with the proper care and management of the objects to be protected.\" Though the Antiquities Act was enacted with the primary goal of preserving archaeological sites, it has also been frequently used to protect naturally occurring objects, such as the geological features within the Grand Canyon National Monument. Once a national monument is established, use of the lands and resources within the monument's boundaries are subject to the limitations specified in the proclamation itself and other sources of law, without need of congressional authorization. Since its enactment, Presidents have used the Antiquities Act to establish 158 national monuments, reserving millions of acres of land in the process, and to modify existing monuments more than 90 times. Like many laws concerning federal lands, the Antiquities Act operates in the midst of an ongoing, and sometimes contentious, public policy debate regarding how to best reconcile the need to preserve natural resources and other objects located on public lands with the needs of the local communities affected by the limitations on land use that follow from the creation of a national monument. Though most monument proclamations have been uncontroversial, some have precipitated corrective legislation and litigation. In two instances, Congress passed legislation placing geographic limits on the President's authority to establish national monuments. Attempts to undo proclamations through litigation have been less successful, as courts have uniformly upheld challenged proclamations through a broad interpretation of the Antiquities Act. The Antiquities Act has received renewed attention in recent years as a result of President Trump's December 2017 proclamations reducing the size of the Grand Staircase-Escalante National Monument and the Bears Ears National Monument. Various groups have challenged those proclamations in federal district court, arguing (among other things) that the Antiquities Act does not empower the President to diminish the size of national monuments. These cases will be the first time a court has had an opportunity to address whether the President has such authority. This report begins by discussing the Antiquities Act's legislative history. It then provides an overview of the act's provisions before reviewing past presidential proclamations as well as judicial decisions and legislation related to certain monument proclamations. Finally, the report discusses the current litigation involving President Trump's proclamations diminishing the Grand Staircase-Escalante and Bears Ears monuments, with a focus on the parties' arguments addressing whether the Antiquities Act authorizes the President to diminish a national monument. Congress passed the Antiquities Act in 1906, and President Theodore Roosevelt signed it into law that same year. As this section discusses, this law's enactment marked the culmination of a multiyear effort to empower the federal government to take swift action to protect archaeological sites and other objects of historical and scientific value from destruction. In the 1880s, a growing interest emerged in the prehistoric ruins and other archaeological sites located in the western United States. Prehistoric ruins were initially discovered by ranchers and other prospectors in Colorado, New Mexico, and Arizona. Word of these discoveries spread rapidly, leading to extensive and unregulated excavation of these sites by antiquity hunters from around the world. Amateur excavators removed large quantities of artifacts from prehistoric sites and sold them to exhibitors, museum curators, and private collectors, often causing extensive damage to the ruins during the excavation process. These excavations continued throughout the 1880s and 1890s, leading one observer to bemoan that \"[a] commercial spirit is leading to careless excavations for objects to sell, and walls are ruthlessly overthrown, buildings torn down in hope of a few dollars' gain.\" During this period, federal law did not provide general protection against the excavation or destruction of historic sites located on public lands or require a permit before excavation could commence. Nonetheless, some limited protections did apply. First, the General Land Office was authorized to \"withdraw specific tracts of land from sale or entry for a temporary period,\" a power it exercised with increasing frequency as the threat to historic sites grew. Second, through the Forest Reserve Act of 1891, the President had authority to \"create permanent forest reserves by executive proclamation.\" However, though lands within forest reserves were \"withdrawn from disposition and entry under the homestead and other laws, they were not protected from other forms of development, especially mining.\" Thus, none of these laws authorized the President to make permanent and comprehensive reservations for the purpose of preservation. With the need for federal intervention apparent, Congress set out to empower the President to expeditiously protect historic sites from further destruction. Legislation to protect the nation's antiquities was first introduced in Congress in 1900, though the various proposals differed in how they defined the objects to be protected and how the objects were to be designated. The first bill, introduced by Representative Jonathan P. Dolliver of Iowa, would have authorized the President to designate as a park or reservation \"any prehistoric or primitive works, monuments, cliff dwellings, cave dwellings, cemeteries, graves, mounds, forts, or any other work of prehistoric or primitive man\" in addition to \"any natural formation of scientific or scenic value or interest, or natural wonder or curiosity on the public domain.\" Under this bill, the President would have had authority to designate surrounding land needed for such preservation \"as [the President] may deem necessary for the proper preservation or suitable enjoyment of said reservation,\" and the Secretary of the Interior would have been empowered to acquire private lands or interests within reservation areas. A proposal supported by the Department of the Interior that same year would have similarly vested protective powers in the President, but it defined the objects to be preserved more generally than Representative Dolliver's proposal, protecting \"tracts of public land\" based on their \"scenic beauty, natural wonders or curiosities, ancient ruins or relics, or other objects of scientific or historic interest, or springs of medicinal or other properties.\" Neither of these proposals limited the amount of land the President could reserve. In contrast to these proposals, a bill introduced that same Congress by Representative John Shafroth of Colorado and reported out of the House Committee on the Public Lands provided much narrower authority to the executive branch. That legislation would have authorized the Secretary of the Interior—rather than the President—to \"reserve from sale, entry, and settlement\" any public lands containing \"monuments, cliff dwellings, cemeteries, graves, mounds, forts, or any other work of prehistoric, primitive, or aboriginal man,\" but it would have limited the Secretary to creating monuments in Colorado, Wyoming, and the then territories of Arizona and New Mexico, with no monument to exceed 320 acres. None of these proposals passed either chamber of Congress. In the following Congress, the Senate did pass legislation aimed at protecting antiquities. That legislation would have authorized the Secretary of the Interior to make \"temporary withdrawals\" of land to protect \"historic and prehistoric ruins, monuments, archaeological objects, and other antiquities,\" but only to the extent \"necessary for the preservation\" of those objects. Permanent withdrawals would have been authorized for \"ruins and antiquities of special importance,\" but the amount of land reserved could not \"exceed[] six hundred and forty acres in any one place.\" As these proposals were being considered, some Members of Congress sought to limit the total amount of land the Executive could withdraw. During a hearing before the House Committee on the Public Lands on the Senate-passed legislation, Delegate Bernard Rodey of New Mexico expressed his desire that the bill contain \"some limit upon the amount of withdrawals that [the Executive] could make,\" noting that much of the land in New Mexico was already withdrawn from public use and that many archaeological sites in need of preservation were located within this territory. Delegate Rodey worried that the Executive could evade an acreage limitation—such as the 640-acre limitation in the Senate-passed bill—by creating multiple 640-acre tracts. Other committee members and witnesses, however, concluded that the Executive was \"not . . . likely to\" evade an acreage limitation in this way and that a 640-acre limitation \"would prevent very extensive reservations in any one State.\" In response to Delegate Rodey's concerns, Edgar Lee Hewett—a prominent archaeologist who was closely involved in developing the Antiquities Act —suggested that the President's discretion could be sufficiently checked by language stating \"that positively no more land shall be withdrawn than is necessary for the purpose.\" The House Committee on the Public Lands reported the Senate bill to the full House, but the legislation was opposed by the Smithsonian Institution and ultimately did not win passage. After more than half a decade of debate, the 59th Congress passed the Antiquities Act in 1906. Legislation drafted by Edgar Lee Hewett was introduced in both chambers of Congress in 1906. This proposal authorized the President (rather than the Secretary of the Interior) to issue \"public proclamation[s]\" to protect \"historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest\" on federal land as \"national monuments.\" This proposal also limited the amount of land reserved for each monument \"to the smallest area compatible with the proper care and management of the objects to be protected[.]\" The Senate bill was passed by voice vote in that chamber on May 24, 1906. During the House debate, Representative John Lacey—chairman of the House Committee on the Public Lands—responded to an inquiry from Representative John Stephens of Texas as to \"[h]ow much land will be taken off the market in the Western States by the passage of the bill?\" Representative Stephens was particularly concerned that the bill provided authority similar to the Forest Reserve Act of 1891, under which Presidents had set aside tens of millions of acres of land. \"Not very much,\" was Representative Lacey's reply, pointing to the language in the proposed legislation requiring that the amount of land reserved be \"the smallest area necessary\" to preserve designated objects. This assurance mirrored that found in the House report on the bill, which explained that \"[t]he bill proposes to create small reservations reserving only so much land as may be absolutely necessary for the preservation of these interesting relics of prehistoric times.\" The House passed the Senate bill on June 5, unanimously and without amendment. President Theodore Roosevelt signed the bill into law on June 8, 1906. The Antiquities Act consists of four sections. In its first section, the act imposes a fine or imprisonment for not more than 90 days (or both) on \"any person who shall appropriate, excavate, injure, or destroy any historic or prehistoric ruin or monument, or any object of antiquity, situated on lands owned or controlled by the Government of the United States.\" As written, this section prohibits damaging objects of antiquity, regardless of whether the President had established a monument under the authority conferred by Section 2 of the act. The penalties of this section apply in addition to general federal prohibitions on the misappropriation of federal property. The second section—the core of the act—authorizes the President \"in his discretion\" \"to declare by public proclamation historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest that are situated upon the lands owned or controlled by the Government of the United States to be national monuments.\" In addition to protecting the \"objects\" themselves, the act also authorizes the President to \"reserve . . . parcels of land\" to be part of the monuments, but requires that those parcels be \"confined to the smallest area compatible with the proper care and management of the objects to be protected.\" The Antiquities Act does not require the President to produce an evidentiary record or to follow specific procedures in establishing a national monument. Moreover, because proclamations under the Antiquities Act are issued directly by the President, rather than by an executive agency, they are not subject to the procedural and judicial review provisions of the Administrative Procedure Act (APA) or the procedural and administrative record requirements of the National Environmental Policy Act (NEPA). As a result, presidential proclamations under the Antiquities Act offer a more expeditious means of preserving federal lands than other environmental statutes. The act also does not specify what effect the establishment of a national monument has on the use of the objects and lands encompassed within the monument, other than by prohibiting the appropriation, excavation, injury, or destruction of \"historic or prehistoric ruin[s],\" \"monument[s],\" or other \"object[s] of antiquity.\" Instead, limitations on the use of lands and resources within a monument follow from a variety of other sources. The Mineral Leasing Act prohibits new mineral leasing within national monuments, and a presidential proclamation may impose additional restrictions on mining and mineral claims, as well as oil and gas leases, timber harvesting, and hunting, fishing, and grazing. Use restrictions may also be found in the management plans developed by the agency responsible for overseeing a given monument. Monuments established in the last 50 years have also made accommodations for the continued exercise of valid rights existing at the time of the monument's creation. The act is also silent on which federal agency is responsible for managing a national monument once established. For much of the act's history, the National Park Service was most often selected for this task. Indeed, every monument from 1933 to 1978 was assigned to the National Park Service's care. However, some Presidents have departed from this practice and tasked other agencies (such as the Bureau of Land Management) with this responsibility. In its last sections, the act authorizes the executive branch to issue permits for \"the examination of ruins, the excavation of archaeological sites, and the gathering of objects of antiquity\" for the benefit of scientific or educational institutions in order to \"increas[e] the knowledge of such objects\" and for their \"permanent preservation in public museums.\" The act also authorizes the responsible executive departments to issue \"uniform rules and regulations\" to effectuate the act's provisions. President Theodore Roosevelt did not tarry long before using his new authority. On September 24, 1906, President Roosevelt issued his first proclamation under the Antiquities Act to protect Devil's Tower—a \"lofty isolated rock\" and \"natural wonder\" located in Wyoming —with a reservation of land totaling 1,152 acres. Most of President Roosevelt's initial designations similarly adhered to Representative Lacey's predication that \"[n]ot very much\" land would be reserved through presidential proclamations under the act. President Roosevelt's second designation in December 1906 (El Morro in New Mexico) consisted of 160 acres and his third (Montezuma Castle in Arizona, also in December 1906) was 161 acres. But it did not take long for the size of monuments to increase. As part of his establishment of the Chaco Canyon National Monument in March 1907, President Roosevelt reserved 20,629 acres, while his creation of the Petrified Forest National Monument in Arizona set aside 60,776 acres. Yet these designations were dwarfed by his establishment of the 808,120-acre Grand Canyon National Monument, by far the largest of President Roosevelt's monuments. All told, President Roosevelt designated 18 monuments in his final years in office. Over the last century, Presidents have utilized the Antiquities Act to varying degrees. Presidents from Taft through Eisenhower established or enlarged 10 or more monuments each, with President Franklin Roosevelt leading the pack with 30. Presidents after Eisenhower used the act to a lesser extent. Presidents Kennedy and Johnson each created or enlarged less than ten monuments, President Ford enlarged two, and Presidents Nixon, Reagan, and George H. W. Bush created or enlarged none. President Carter, however, created or enlarged 17 monuments. The Antiquities Act's three-term dormancy ended with the election of President Clinton. During his two terms in office, President Clinton established 19 new monuments and enlarged three more. These new monuments included the 1.7 million-acre Grand Staircase-Escalante National Monument in Utah. Following a decline in use under President George W. Bush, who created six national monuments, President Obama exceeded all his predecessors by establishing 29 new monuments and enlarging another five. Among these was the 1.35 million-acre Bears Ears monument in Utah, designated in the last week of President Obama's presidency. To date, President Trump has established one national monument, the Camp Nelson National Monument in Kentucky. All told, Presidents Theodore Roosevelt through Trump have used the Antiquities Act to establish a total of 158 national monuments. These presidents also issued proclamations modifying existing monuments over 90 times. Though many of these monuments have retained their status as national monuments, Congress has exercised its authority under the Property Clause to alter certain monument designations, whether by incorporating the monument (or portions thereof) into the National Park System, transferring the monuments to state control, or abolishing the monument outright. No President has purported to abolish a national monument, but past Presidents have reduced the size of monuments on 18 separate occasions. President Franklin Roosevelt took such action four times during his presidency, while President Eisenhower did so on six occasions. Presidents Taft, Wilson, Coolidge, Truman, and Kennedy each reduced three or fewer monuments. In some instances, Presidents have simultaneously removed lands from a monument reservation while adding others. No President after Kennedy diminished an existing monument until President Trump's issuance of proclamations in December 2017 diminishing the Grand Staircase-Escalante National Monument by 700,000 acres and the Bears Ears National Monument by 1.15 million acres. Most monument declarations have not generated significant debate. Over the years, however, a few monuments have proved controversial, resulting in corrective legislation, litigation, or both. In two instances, Congress imposed restrictions on the President's authority to establish national monuments in Wyoming and Alaska, and in some cases it has abolished monuments altogether. But through all this, Congress has not fundamentally altered the authority of the President under the Antiquities Act. Courts also have broadly interpreted the President's authority to designate prehistoric ruins and other man-made structures (in addition to naturally occurring objections of scientific interest) and to determine the amount of lands needed for their preservation. Finally, though the Supreme Court has not directly addressed the scope of judicial review of a presidential proclamation, courts that have addressed the issue have concluded that such review is deferential. The first lawsuit implicating an Antiquities Act proclamation involved President Theodore Roosevelt's 1908 creation of the Grand Canyon National Monument, which reserved the land designated as part of that monument \"subject to all prior valid adverse claims.\" A businessman and his associates continued to conduct mining operations within the bounds of the monument, arguing first that the President had \"no authority\" to establish the monument because it was not the type of object encompassed by the act, and second that they had a valid and preexisting \"lode mining claim.\" In its 1920 decision in Cameron v. United States , the Supreme Court rejected this challenge. Recognizing the Grand Canyon as \"the greatest eroded canyon in the United States\" and \"one of the great natural wonders,\" the Court noted that it \"has attracted wide attention among explorers and scientists\" and \"affords an unexampled field for geological study.\" Thus, the Court concluded that the Grand Canyon was an \"object[] of unusual scientific interest\" for purposes of the Antiquities Act. President Franklin Roosevelt's 1943 establishment of the Jackson Hole National Monument—a 221,610-acre monument in Wyoming — generated both litigation and legislation. Litigants sued in federal district court in Wyoming to invalidate the proclamation, claiming (among other things) that the reserved land \"contain[ed] no objects of an historic or scientific interest\" and was \"not confined to the smallest area compatible\" with the preservation of the monument. The court concluded first that it had \"limited jurisdiction to investigate and determine whether or not the Proclamation\" was lawful. Though acknowledging that a court could void a proclamation lacking any evidentiary support, the court concluded that it lacked authority to determine the legality of the monument based on its own assessment of the preponderance of the evidence. The court thus held that its review was limited only to assessing whether the government had put forward \"substantial evidence\" to sustain the proclamation. Relying on that standard, the court upheld the Jackson Hole National Monument. It found that the United States' evidence of \"trails and historic spots in connection with the early trappings and hunting of animals\" and \"structures of glacial formation and peculiar mineral deposits and [indigenous] plant life\" was sufficient to sustain the proclamation with respect to both the nature of the objects designated and the amount of lands reserved. In so doing, the court placed the \"burden . . . on the Congress to pass such remedial legislation as may obviate any injustice brought about\" by the proclamation. Congress's response to the Jackson Hole monument has been described as \"perhaps the most successful congressional opposition to a monument proclamation.\" Extensive hearings were held by committees in both chambers. The House Committee on the Public Lands emphasized the economic injury that the reservation of land would inflict on the local communities, including by reducing the tax base for local governments and \"destroying the cattle business.\" The Senate Committee on Public Lands and Surveys went further, and concluded that the Jackson Hole proclamation \"disregarded\" the Antiquities Act's requirement that reserved lands be \"confined to the smallest area\" necessary for preservation. In this committee's judgment, the authority given the President in the Antiquities Act \"was not broad enough to cover the establishment of the Jackson Hole Monument,\" and so it sought to \"disestablish[]\" that monument in order to eliminate \"a dangerous precedent.\" Congress ultimately approved legislation abolishing the Jackson Hole monument, but President Roosevelt pocket-vetoed that bill. Responding in kind, Congress refused to fund the Jackson Hole monument for the next seven years. The fate of Jackson Hole was finally resolved when President Truman signed legislation to consolidate it with the existing Grand Teton National Park. But Congress further restricted the President's authority under the Antiquities Act by including a provision in this legislation that amended the Antiquities Act to prohibit the President from establishing monuments within Wyoming. Though the Antiquities Act authorizes the President to set aside \"lands,\" the Supreme Court in the 1970s concluded that the act authorizes the preservation of waters and submerged lands as well. In Cappaert v. United States , the United States sought to prevent ranchers, the Cappaerts, from pumping groundwater on their ranch that was two and one-half miles from an underground pool known as \"Devil's Hole,\" located within a 40-acre plot of land within the Death Valley National Monument. The Cappaerts' use of groundwater, the United States argued, reduced the water level of Devil's Hole and threatened the survival of a rare desert fish—the Devil's Hole pupfish—living within. The United States argued that this pumping was prohibited because the proclamation adding Devil's Hole to the Death Valley National Monument also reserved the groundwater feeding the pool. Relying on the Antiquities Act's legislative history, the Cappaerts argued that the inclusion of Devil's Hole in the Death Valley monument was unlawful because the act allows only the protection of land, not water or animals. In any event, the Cappaerts argued, the inclusion of thousands of square miles of groundwater for the preservation of the 40-acre Devil's Hole violated the requirement that land reservations \"be confined to the smallest area compatible\" with the preservation of the designated objects. The Supreme Court rejected the Cappaerts' arguments in a few brief sentences. Relying on Cameron , the Court concluded that the underground pool, and the endangered pupfish living within, were objects of scientific interest and thus appropriate subjects of protection under the Antiquities Act. Two years later, the Supreme Court in United States v. California reaffirmed that the Antiquities Act allows the President to withdraw bodies of water, as well as plots of land, when it upheld President Truman's expansion of the Channel Island National Monument. In 1980, Congress also imposed an additional territorial restriction on the President's authority under the Antiquities Act, this time in response to President Carter's creation of numerous monuments in Alaska. In 1971, Congress passed and President Nixon signed the Alaska Native Claims Settlement Act, which authorized the Secretary of the Interior to propose up to 80 million acres for preservation and gave Congress five years to approve or disapprove the recommendation. During that five-year window, the lands would be temporarily withdrawn. But when it became clear that Congress would not act before this deadline, President Carter invoked his authority under the Antiquities Act to establish 17 new or expanded monuments within Alaska, totaling 56 million acres. These monument proclamations \"sparked bitter opposition in Alaska,\" leading to protests throughout the state. Responding to these protests, and with the twin goals of securing environmental protection and providing for the economic needs of Alaskans, Congress passed and the President signed the Alaska National Interest Lands Conservation Act (ANILCA). This law rescinded President Carter's monument designations, but simultaneously set aside over 100 million acres of land for conservation, much of which consisted of the same lands that had been included in President Carter's monuments. But to avoid a repeat of the controversy that surrounded President Carter's proclamations, Congress again limited the President's authority under the Antiquities Act, providing that \"future executive branch action which withdraws more than five thousand acres, in the aggregate, of public lands within the State of Alaska\" will not be \"effective until notice is provided in the Federal Register and to both Houses of Congress\" and that each \"withdrawal shall terminate unless Congress passes a joint resolution of approval within one year after the notice of such withdrawal has been submitted to Congress.\" Like the Jackson Hole monument, several of President Carter's Alaska monuments were challenged in federal district court. The district court, while recognizing that the Antiquities Act limits the President's discretion as to which objects may be protected and how much land may be included in a monument, rejected the plaintiffs' argument that the Antiquities Act does not apply to naturally occurring objects of scientific interest. The court observed that prior Presidents had repeatedly used the Antiquities Act for this purpose and Congress had not amended the Antiquities Act in response, thus indicating Congress's tacit approval of the practice. No appeal was taken from the district court's decision in this case. Litigation over the Antiquities Act abated during the 1980s and early 1990s, as President Reagan and President H. W. Bush did not use the Antiquities Act to establish national monuments. That hiatus came to an end with challenges to several of President Clinton's monument designations, including the Grand Staircase-Escalante monument in Utah and the Giant Sequoia monument in California. The plaintiffs in two cases— Mountain States Legal Foundation v. Bush and Tulare County v. Bush —argued (among other things) that President Clinton exceeded his authority under the Antiquities Act because that law authorizes only designations of \"man-made objects, such as prehistoric ruins and ancient artifacts,\" not natural phenomena, and because the monuments were not limited to the smallest area necessary for protecting the designated objects. The U.S. Court of Appeals for the D.C. Circuit rejected these arguments. The court of appeals disposed of the first objection based on the Supreme Court's holdings in Cameron and Cappaert . \"[T]he President's Antiquities Act authority,\" the court explained, \"is not limited to protecting only archaeological sites.\" The court of appeals then decided that it had no occasion to resolve the second argument—that the reserved land was not the smallest area compatible with the preservation of the objects—because it determined that the plaintiffs failed to meet their burden of \"identify[ing] the improperly designated lands with sufficient particularity to state a claim.\" Notably, the district court in each of these cases dismissed the suits by concluding that judicial review of proclamations under the Antiquities Act is limited \"to the face of the Proclamation,\" thus prohibiting courts from reviewing \"the President's determinations and factual findings.\" The D.C. Circuit, however, declined to \"decide the availability or scope of judicial review of a Presidential Proclamation . . . under the Antiquities Act,\" based on its conclusion that the plaintiffs had failed to allege facts which could plausibly show noncompliance with the Antiquities Act. At the same time, the court of appeals suggested that judicial review of an Antiquities Act proclamation would be appropriate to the extent of ensuring that the President acted within his statutory authority. Relying on Cappaert and Cameron , the D.C. Circuit explained \"that [judicial] review is available to ensure that the Proclamations are consistent with constitutional principles and that the President has not exceeded his statutory authority.\" Though the D.C. Circuit in Mountain States and Tulare did not purport to definitively resolve the scope of judicial review of a monument proclamation, a federal district court in Utah Association of Counties v. Bush did. This case involved a challenge to President Clinton's designation of the Grand Staircase-Escalante monument, with the plaintiffs taking the view that the President exceeded his authority under the Antiquities Act by \"fail[ing] to designate the requisite objects of historic or scientific value\" and \"not limit[ing] the size of the monument to the 'smallest area' necessary to preserve the objects.\" The district court, however, declined to engage in an in-depth review of these claims, concluding instead that because the Antiquities Act commits the creation of monuments to the President's discretion, judicial review of those proclamations is limited to \"ascertaining that the President in fact invoked his powers under the Antiquities Act\"—that is, that he \"considered the principles that Congress required him to consider.\" Under this deferential standard, the court rejected the plaintiffs' claims because it was \"evident from the language of the Proclamation\" that President Clinton had \"considered the principles that Congress required him to consider.\" The most recent case to address the scope of presidential power under the Antiquities Act involved a challenge to President Obama's establishment of the 4,913-square mile Northeast Canyons and Seamounts Marine National Monument. As its name suggests, this monument is composed of \"underwater canyons and mountains, and the ecosystems around them,\" sitting approximately 130 miles off of the coast of Massachusetts in an area of water known as the Exclusive Economic Zone. Those challenging the designation argued that the term \"lands\" in the Antiquities Act does not encompass submerged lands and, even if it does, that the amount of \"land\" reserved was not the smallest necessary for preserving the designated objects. In addition, the plaintiffs contended that the monument proclamation was invalid because the reserved waters were not completely controlled by the United States, thus violating the requirement in the Antiquities Act that reserved lands be \"owned or controlled by the Federal Government.\" The district court began with the scope of its review. Relying on the Supreme Court and D.C. Circuit cases discussed above, the court distinguished between two types of challenges to a presidential proclamation. The first category involves those \"that can be judged on the face of the proclamation,\" such as the argument in Cappaert that only archaeological sites qualify as objects of historic or scientific interest under the act. When a challenge is premised on a disputed question of law, judicial review is conducted without deference. The district court distinguished this category of challenge from those \"requir[ing] some factual development,\" such as the argument raised in Mountain States and Tulare that the amount of land reserved was not \"the smallest area compatible with the proper care and management of the objects to be protected.\" Though recognizing that \"[t]he availability of judicial review of this category of claims . . . stands on shakier ground,\" the court relied on Mountain States and Tulare to conclude that a plaintiff asserting such a challenge must at least \"offer plausible and detailed factual allegations that the President acted beyond the boundaries of authority that Congress set.\" With this framework, the district court rejected the plaintiffs' challenges. As to their first argument, the court relied on Capp a e rt and California to conclude that the Antiquities Act authorizes the President to reserve submerged lands and the water associated with them. As to the second argument, the district court recognized that it fell within the second category of challenges, thus potentially limiting the scope of the court's review. But, as in Mountain States and Tulare , the district court concluded that it did not need to resolve the scope of judicial review because it found that the plaintiffs failed to offer specific, nonconclusory factual allegations \"establishing a problem with [the monument's] boundaries.\" The court also rejected the plaintiffs' argument that President Obama lacked authority under the Antiquities Act to establish the monument because the United States did not have \"complete control\" over the Exclusive Economic Zone. The court first concluded that the Antiquities Act does not require that the United States have complete control over the relevant area, only that the United States \"'exercise directing or restraining influence.'\" Applying this definition, the court concluded that the United States' \"broad sovereign authority\" to regulate and manage the Exclusive Economic Zone for conservation and other purposes—a level of influence unrivaled by any other sovereign—established the federal control necessary under the Antiquities Act. In summary, Courts have consistently interpreted the Antiquities Act as giving the President broad authority to protect objects of historic and scientific interest and to determine the amount of lands needed for their preservation. Despite repeated arguments to the contrary, courts have uniformly concluded that the Antiquities Act is not limited to the protection of prehistoric ruins and other man-made structures, but encompasses naturally occurring objects of scientific interest, including bodies of water and submerged lands. And, though it has received less judicial attention, at least one court has held that the United States need not have absolute control over the lands (or waters) at issue in order for them to fall within the ambit of the Antiquities Act. However, the scope of judicial review of a monument proclamation has not been settled. Though courts appear to acknowledge that review of a presidential proclamation is deferential, particularly with respect to factual and discretionary determinations, they have not definitively decided what amount of review is appropriate. The President has clear authority under the Antiquities Act to establish national monuments. Less clear, however, is the President's authority to diminish a previously established monument or to abolish a monument altogether. As already discussed, several Presidents in the early and mid-20th century reduced the size of existing monuments, but none of those modifications was challenged in court, thus leaving the lawfulness of that practice unresolved. That may soon change. On December 4, 2017, President Trump issued two proclamations modifying the Grand Staircase-Escalante National Monument (established by President Clinton) and the Bears Ears National Monument (established by President Obama). This was the first time since President Kennedy that a President has diminished a national monument. President Trump's proclamations explained that each of the monuments contained objects that were \"not . . . of any unique or distinctive scientific or historic significance\" and were not in danger of being damaged or destroyed. The proclamations explained that other federal laws enacted after the Antiquities Act's passage protected many of these objects, such as the Archaeological Resources Protection Act and the Endangered Species Act. On these grounds, the proclamations concluded that the lands reserved for these monuments were \"greater than the smallest area compatible with the protection of the objects for which the lands were reserved.\" All said, President Trump's proclamations reduced the Grand Staircase-Escalante monument from 1.7 million acres to 1 million acres and the Bears Ears monument from 1.35 million acres to 228,784 million acres. President Trump's proclamations attracted significant attention, leading many scholars to take a renewed look at presidential authority under the Antiquities Act. These proclamations have also been challenged in court, and those cases are now pending in the U.S. District Court for the District of Columbia. As discussed below, the plaintiffs in these cases have raised multiple arguments to oppose the proclamations. First, the plaintiffs argue that the Antiquities Act does not authorize the President to abolish or diminish monuments once established. Second, the plaintiffs contend that, absent statutory authorization, President Trump's proclamations exceed his authority under the Constitution and conflict with Congress's constitutional power to regulate public lands. Third, and finally, some of the plaintiffs have brought a claim under the APA against the Secretary of the Interior and other federal officials, arguing that because President Trump's proclamations are unauthorized, these officials will be acting unlawfully in failing to abide by the original proclamations issued by President Clinton and President Obama. The United States contests the plaintiffs' standing to sue, contends that judicial review of Presidential proclamations is limited in scope, and argues that the plaintiffs' arguments are meritless in any event. The remainder of this report discusses the central arguments made by the plaintiffs and the United States in this litigation. The parties advance competing interpretations of the Antiquities Act. The plaintiffs contend that the President's authority under the act is limited to the express grants of authority in the text itself, namely, the power to \"declare\" monuments and to \"reserve\" surrounding lands—neither of which includes or implies the distinct power to diminish or revoke a monument. \"In ordinary parlance,\" the plaintiffs argue, \"the phrases to 'declare national monuments' and to 'revoke' or 'shrink' national monuments are polar opposites[.]\" Under this reading, the Antiquities Act authorizes the President to create national monuments in order to provide for the expeditious protection of objects of historical and scientific interest, but leaves with Congress the authority to modify monuments once established. The plaintiffs point to a number of contemporaneous statutes to support this reading, principally the Forest Service Organic Act of 1897, the Reclamation Act of 1902, and the Pickett Act. Because these statutes contain express grants of authority to the President to modify or otherwise alter an initial reservation of public lands, the plaintiffs argue that the absence of similar language in the Antiquities Act implies the absence of similar authority. In particular, the plaintiffs note that the Forest Reserve Act of 1891 authorized the President to \"set apart and reserve . . . public land bearing forests\" and to \"declare the establishment of such reservations and the limits thereof,\" but did not also include authorization to revoke or modify a reservation once made. After President Cleveland and several Members of Congress expressed the view that the Forest Reserve Act did not authorize the President to alter an existing reservation, Congress passed the Forest Service Organic Act to fill that gap. That law expressly authorized the President to \"revoke, modify, or suspend\" existing forest reservations in order to \"remove any doubt\" regarding the President's authority to do so. Having just gone to the trouble of expressly authorizing the President to modify a prior land reservation, the plaintiffs argue that it \"belies logic\" that Congress would have intended the Antiquities Act to confer this authority sub silentio . And the plaintiffs highlight the fact that Representative Lacey—one of the primary supporters of the Antiquities Act—stated that the Forest Reserve Act did not authorize the President to alter existing reservations. The plaintiffs also point to the Reclamation Act of 1902—authorizing the Secretary of the Interior to \"withdraw . . . lands\" and \"restore to public entry any of the lands so withdrawn\" —and the Pickett Act of 1910—providing that lands withdrawn by the President will remain reserved \"until revoked by him or by an Act of Congress\" —to show that when Congress intends to authorize the President to alter a reservation of federal land, it confers that authority expressly. Finally, in addition to these laws, the plaintiffs identify other \"near-contemporaneous statutes that expressly include language regarding modification or revocation of withdrawn land.\" By contrast, the United States argues that the Antiquities Act does authorize the President to modify a previously established monument. The United States places significant weight on the act's requirement that the area of land reserved \"shall be confined to the smallest area compatible\" for preserving the monument. That language, the United States argues, imposes a continuing obligation that cannot be met without the accompanying authority to reduce a monument when it is later determined that excess lands were included in the reservation. Moreover, the United States asserts that the President possesses authority to diminish existing monuments—even absent express statutory authorization—based on \"the general principle that reconsideration 'is inherent in the power to decide.'\" According to the United States, \"[n]umerous statutes authorize various Executive Branch officers to regulate, administer, and make decisions, without expressly saying that those decisions can be repealed or modified.\" The Antiquities Act is, in the United States' view, no exception. Finally, the United States contests the plaintiffs' argument that contemporaneous public land laws imply the absence of modification authority in the Antiquities Act. With respect to the Pickett Act, the United States notes that this law provided that \"withdrawals or reservations shall remain in force until revoked by [the President] or by an act of Congress .\" Given that Congress has authority under the Property Clause of the Constitution to dispose of federal law as it sees fit, the United States argues that this language must be read as simply acknowledging existing authority vested in both Congress and the President. As for the Forest Service Organic Act, the United States contends that the legislative record shows mixed opinions among Members of Congress on whether the President had authority under that law to modify existing reservations. Thus, the United States contends that this law's inclusion of language authorizing the President to alter reservations does not reflect a congressional consensus that the President did not have this power already, but merely shows that Congress took a belt-and-suspenders approach in order to (in the words of the statute) \"remove any doubt\" on this question. Noting that historical practice may inform a court's understanding of executive power, the United States argues that the long-standing practice of executive monument modification and congressional acquiescence in this practice shows that the President has authority under the Antiquities Act to modify existing monuments. The United States first points to the fact that past Presidents have reduced the size of national monuments a total of 18 times, including President Taft's reduction of the Petrified Forest National Monument \"[o]nly five years after passage of the Antiquities Act.\" Though Congress was no doubt aware of these modifications, the United States observes that Congress never passed legislation disapproving this practice, even as Congress did amend the Antiquities Act after President Franklin Roosevelt's creation of the Jackson Hole National Monument to prohibit the establishment of future monuments in Wyoming. The United States also relies on various legal opinions from the executive branch to bolster its argument that Congress has acquiesced in an executive assertion of authority to diminish monuments. In a series of opinions issued in 1915, 1935, and 1947, the Department of the Interior concluded that the President has authority under the Antiquities Act to reduce the size of existing monuments. These opinions identified two sources for that power. First, the Department of the Interior concluded that the President had an implied power to undo reservations or withdrawals of public land. For this, the Department of the Interior relied on the Supreme Court's 1915 decision in United States v. Midwest Oil , which held that Congress had implicitly delegated authority to the President to withdraw or reserve lands from public use by acquiescing in the Executive's \"long-continued practice\" of making such withdrawals and reservations. From this principle, the Department of the Interior concluded that the President had acquired an implied power to diminish the size of national monuments through congressional acquiescence in this practice, as well as the Executive's practice of reducing Indian reservations established by executive order pursuant to statutes that, like the Antiquities Act, did not expressly authorize modification. Second, in opinions from 1935 and 1947, the Department of the Interior argued for presidential modification authority based on the language in the Antiquities Act requiring that lands reserved be \"the smallest area compatible\" for the preservation of the designated objects. The plaintiffs contest the United States' reliance on congressional and executive practice. While noting that \"past practice does not, by itself, create power,\" the plaintiffs further argue that history does not show the \"systematic, unbroken, executive practice\" \"long pursued to the knowledge of Congress and never before questioned\" that is necessary to support the United States' acquiescence argument. The plaintiffs note that even during the time when several Presidents were reducing monuments, various departments within the executive branch issued opinions concluding that the President does not have implied authority to undo a reservation of land. Thus, in a 1924 opinion, the Department of the Interior concluded that the President did not have authority to modify a monument because a monument once established \"becomes a fixed reservation subject to restoration to the public domain only by legislative act.\" This view was reiterated in a 1932 opinion from the Department of the Interior. The U.S. Attorney General also issued opinions on this question, though the one opinion to address the scope of presidential authority under the Antiquities Act left the issue of monument modification unresolved. In a 1938 opinion, Attorney General Homer Cummings considered whether the President has authority under the Antiquities Act to abolish the Castle Pinckney National Monument. Noting that Presidents had \"from time to time . . . diminished the area of national monuments . . . by removing or excluding lands therefrom,\" the Attorney General concluded that \"[the President's] power so to confine that area\" does not include \"the power to abolish a monument entirely.\" In support of this conclusion, the 1938 opinion relied on a previous Attorney General opinion from 1862, which concluded that the President lacked implied authority to undo a military reservation made by executive order where the statute authorizing the initial reservation did not also authorize its reversal. \"The grant of power to execute a trust, even discretionally,\" the Attorney General argued, \"by no means implies the further power to undo it when it has been completed.\" Both the United States and the plaintiffs maintain that the 1938 Attorney General opinion supports their position. Though stating that it agrees with the 1938 Attorney General opinion with respect to monument abolition , the United States asserts that this opinion supports the existence of authority to modify monuments through its acknowledgment that prior Presidents had done so and through its reliance on the Antiquities Act's requirement that reservations be limited to the smallest area necessary. The plaintiffs, by contrast, argue that the same logic that led the Attorney General to conclude that the Antiquities Act does not confer authority to abolish monuments shows that the President also lacks authority to modify monuments. The plaintiffs also argue that the United States' claim of an unbroken assertion of, and congressional acquiescence in, executive authority to diminish national monuments is undermined by the numerous instances in which the executive branch itself sought statutory authorization to reduce existing monuments—requests that Congress uniformly denied. For example, the Secretary of the Interior in 1925—the year after that department issued an opinion disclaiming presidential modification authority —sent a letter to Congress requesting that it pass legislation to provide this authorization. Though legislation was introduced in both chambers to accomplish this end, neither became law. In fact, only a few months earlier the Department of the Interior had asked Congress to reduce the Casa Grande Ruins National Monument and at the same time grant the President authority \"in his discretion to eliminate lands from national monuments by proclamation.\" But while Congress did pass legislation reducing the Casa Grande Ruins National Monument, it did so only after removing the language that would have given general modification authority to the President. Finally, the plaintiffs rely on the enactment of the Federal Land Policy and Management Act of 1976 (FLPMA) to show that the President lacks authority to modify national monuments. Congress passed FLPMA to modernize and streamline the management of federal lands. In so doing, FLPMA repealed 29 separate statutes authorizing the President to make withdrawals of federal land and simultaneously \"repealed\" the Supreme Court's decision in United States v. Midwest Oil Co. —one of the bases relied on by the Department of the Interior to find an implied presidential authority to diminish national monuments. At the same time, a provision in FLPMA prohibits \"[t]he Secretary\" from \"modify[ing] or revok[ing] any withdrawal creating national monuments under [the Antiquities Act],\" while leaving the act otherwise unchanged. While acknowledging that FLPMA's prohibition is directed to the \"Secretary\"—not the President—the plaintiffs point to the House report accompanying the legislation, which stated that FLPMA \"reserve[s] to the Congress the authority to modify and revoke withdrawals for national monuments created under the Antiquities Act\" —suggesting an intent to consolidate all withdrawal authority in Congress. The United States responds that FLPMA's use of the term \"Secretary,\" rather than \"President,\" is controlling, and that the legislative history on which the plaintiffs rely cannot overcome the plain statutory language. Assuming that the President has authority to diminish an existing monument, the parties dispute the scope of judicial review of a presidential proclamation that purports to exercise that authority. As previously discussed, the D.C. Circuit in Mountain States and Tulare , and the district court in Massachusetts Lobstermen's Association , did not definitively resolve the scope of judicial review of a monument designation, while the district court in Utah Association of Counties concluded that judicial review was limited to assessing whether the President considered the principles specified in the Antiquities Act. Both parties rely on these cases to support their positions. The United States contends that judicial review of Presidential proclamations is \"extremely limited\" to \"addressing . . . whether the President's decision to modify the Monument is authorized by the Antiquities Act\"—that is, \"whether the President, on the face of the Proclamation, exercised his authority in accordance with [the] act's standard.\" On this view, if a proclamation invokes the standards specified in the Antiquities Act in the course of diminishing a monument, a court has no authority to evaluate the factual determinations underlying the proclamation or to review the manner in which the President chose to exercise his discretion in reducing the monument. The United States supports its position by noting that a President's discretionary decisions—unlike agency action—are not subject to \"arbitrary and capricious\" or \"abuse of discretion\" review under the APA. Thus, the United States asserts that President Trump's proclamations must be upheld because, on their face, they \"'advert[] to the statutory standard' for designating monument objects and reserving monument lands.\" The plaintiffs, by contrast, contend that courts are not limited to assessing whether a proclamation purports to apply the Antiquities Act, but are authorized to conduct a more searching inquiry to ensure that the President \"'has not exceeded his statutory authority.'\" On this view, courts have authority to review the factual determinations and rationale underlying a proclamation that diminishes a national monument to ensure that the President did not abuse his discretion in modifying the monument's boundaries. Applying this more searching inquiry, the plaintiffs contend that President Trump's proclamations—though purporting to only \"modify\" the Grand Staircase-Escalante and Bears Ears monuments—effected \"the wholesale dismantling\" of these monuments, thus constituting an abuse of any presidential authority that might exist to diminish a national monument. Further, as required by Mountain States and Tulare , the plaintiffs identify particular objects that, in their view, should not have been removed from the boundaries of these monuments. At least one plaintiff has also argued that President Trump's proclamations were an abuse of discretion because they were \"improperly motivated by potential energy production and resource extraction,\" rather than \"the protection and preservation of sensitive resources.\" Some plaintiffs also note that President Trump's proclamations not only reduced the amount of land reserved for these monuments, but also removed certain objects from these monuments. They argue that because the \"objects\" selected for preservation under the Antiquities Act are the \"monuments\" under the act, the exclusion of any previously designated object is, in effect, a revocation of a monument —a power the Executive has disclaimed. Thus, these plaintiffs contend that President Trump's proclamations surpassed any authority that might exist under the Antiquities Act to \"diminish\" or \"modify\" the amount of land included in a monument designation. There are viable arguments on both sides of the debate over the President's authority to diminish monuments. Both parties purport to rely on the text of the Antiquities Act, and both have marshalled historical sources and practice to support their respective interpretations. As one scholar has concluded, \"[r]isk is present all around,\" as \"the legal authorities are mixed and none are clearly controlling.\" However, though the President's authority to diminish monuments may reasonably be questioned, it appears clear that Congress has authority to codify or repeal a presidential proclamation. The Property Clause of the Constitution gives Congress the \"[p]ower to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States.\" The Supreme Court has long held that \"the power over the public land thus entrusted to Congress is without limitations.\" And Congress has exercised this authority on several occasions in response to presidential proclamations issued under the Antiquities Act, whether by incorporating monuments (or portions thereof) into the National Park System, transferring certain monuments to state control, or by abolishing monuments outright. Legislation was introduced in the 115th and 116th Congresses in response to President Trump's proclamations diminishing the Grand Staircase-Escalante and Bears Ears monuments. Some proposals would have overridden President Trump's proclamations and expanded the monuments to their original (or greater) size. Other Members of Congress have proposed amending the Antiquities Act to limit the President's authority to declare national monuments and to bar the President from diminishing existing monuments, except in specified circumstances. At present, none of these proposals has passed either chamber of Congress. In the absence of congressional action, the President's authority to diminish national monuments will ultimately be decided by the courts.", "summary": "Summary The Antiquities Act authorizes the President to declare, by public proclamation, historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest situated on federal lands as national monuments. The act also authorizes the President to reserve parcels of land surrounding the objects of historic or scientific interest, but requires that the amount of land reserved be confined to the smallest area compatible with the proper care and management of the objects to be protected. Since its enactment in 1906, Presidents have used the Antiquities Act to establish 158 monuments, reserving millions of acres of land in the process. Presidents have also modified existing monuments, whether by increasing or decreasing their size (or both), on more than 90 occasions. Though most monument proclamations have been uncontroversial, some have spurred corrective legislative action and litigation. Congress has twice imposed geographic limitations on the President's authority under the Antiquities Act in response to proclamations reserving millions of acres of land in Wyoming and Alaska. Litigants have also challenged the President's authority to establish certain monuments, disputing whether the historic or scientific objects selected for preservation were encompassed by the act, as well as whether the amount of land reserved exceeded the smallest area necessary for the objects' preservation. Courts, however, have uniformly rejected these challenges and adopted a broad interpretation of the President's authority under the Antiquities Act. No President has purported to revoke a national monument, but past Presidents have reduced the size of existing monuments on 18 occasions. In 2017, President Trump issued proclamations reducing the size of the Grand Staircase-Escalante National Monument and the Bears Ears National Monument. Various groups have sued to block these proclamations, arguing that the President exceeded his authority under the Antiquities Act. Because none of the prior proclamations diminishing monuments was challenged in court, these lawsuits offer the first opportunity for a court to decide whether the act empowers the President to diminish a national monument. Those challenging President Trump's proclamations argue that the Antiquities Act's authorization for the President to \"declare\" national monuments and \"reserve\" surrounding lands does not include the distinct power to revoke or diminish an existing monument. They underscore this point by noting that, unlike the Antiquities Act, several contemporaneous public land laws expressly authorized the President to undo a prior reservation of land. The plaintiffs also highlight a number of 19th and early 20th century legal opinions from the executive branch concluding that the President lacks authority to undo a reservation of land absent express statutory authorization. Finally, the plaintiffs argue that the Federal Land Policy and Management Act of 1976 (FLPMA)—which prohibited the Secretary of the Interior from modifying or revoking a national monument established under the Antiquities Act—demonstrates Congress's intent to consolidate modification power in the legislature. By contrast, the United States argues that the requirement that reserved land be \"the smallest area compatible\" with the preservation of the designated objects empowers the President to reduce the size of a monument when he determines that more land was reserved than necessary. The United States also contends that the Executive has implied authority to revisit prior discretionary decisions. Further, the United States argues that the President's authority to diminish monuments is confirmed by the 18 times past Presidents have done so and by several executive branch legal opinions that support this conclusion. Finally, the United States argues that FLPMA is irrelevant because that law prohibits the Secretary of the Interior, not the President, from diminishing monuments. While the President's authority to diminish a national monument has been questioned, there appears to be no dispute that Congress has authority to do so, a power it has exercised before. Several Members of Congress have introduced legislation either codifying or reversing President Trump's proclamations or placing limits on the President's authority under the Antiquities Act going forward.", "document_type": "crs"}
{"report": "Established by Congress as an amendment to the Clean Air Act, the Renewable Fuel Standard (RFS) mandates that U.S. transportation fuels contain a minimum volume of biofuel. The mandated minimum volume increases annually and must be met using both conventional biofuel (e.g., corn starch ethanol) and advanced biofuel (e.g., cellulosic ethanol). For a renewable fuel to be applied toward the mandate, it must be used for certain purposes (i.e., transportation fuel, jet fuel, or heating oil) and meet certain environmental and biomass feedstock criteria. A variety of factors, such as infrastructure, technology, and limited federal assistance, have led to challenges in meeting the total volume requirement established by Congress. These challenges have included a lack of cellulosic biofuel production and delays by the U.S. Environmental Protection Agency (EPA) in approving fuel pathways. Further, it is not clear how changes in gasoline consumption in response to fluctuating crude oil and gasoline prices impact the biofuel or conventional fuel industries. It is also uncertain how the program will fare once EPA implements the \"reset\" provision of the statute, which allows the agency to modify the volumes required for future years (starting in 2016) if certain conditions are met. In addition, some stakeholders have expressed concern about the transparency of the market wherein credits are traded to demonstrate compliance with the mandate. Lastly, there is concern by some biofuel producers that the Trump Administration's issuance of multiple small refinery exemptions has adversely affected, or will adversely affect, biofuel demand. Small refiners may petition the EPA Administrator for an exemption from the RFS mandate if they can prove disproportionate economic hardship. There are, however, two fuel categories that have consistently met their statutory targets: conventional biofuel and biomass-based diesel. Also, since 2014, two advanced biofuel pathways—renewable compressed natural gas and renewable liquefied natural gas—have constituted the majority of the cellulosic biofuel volume target established by EPA. Challenges in implementing the RFS have led to scrutiny of the program in Congress and to litigation about EPA's regulations. Largely due to concerns about the implementation and feasibility of the RFS, some Members of Congress have expressed their perspectives on EPA's proposed and final rules as well as EPA's implementation of the program. They also have questioned whether to amend or repeal the RFS or whether to maintain the status quo. This report provides a basic description of the RFS, including some of the widely discussed policy issues related to it. The Renewable Fuel Standard (RFS) was established by the Energy Policy Act of 2005 ( P.L. 109-58 ; EPAct05) and expanded in 2007 by the Energy Independence and Security Act ( P.L. 110-140 ; EISA). The RFS mandate requires that transportation fuels sold or introduced into commerce in the United States contain an increasing volume of a predetermined suite of renewable fuels. The statute required 4.0 billion gallons of renewable fuel in 2006, ascending to 36.0 billion gallons required in 2022, with EPA determining the volume amounts after 2022 in future rulemakings. The statute centers on four renewable fuel categories—conventional biofuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel—each with its own target volume. The total renewable fuel requirement under the RFS is met with the combination of fuels from two renewable fuel categories: conventional biofuel and advanced biofuel. The requirement for advanced biofuel, in general, can be met with the combination of three types of advanced biofuel: cellulosic biofuel, biomass-based diesel, and other advanced biofuels. To date, the total annual volumes required have been met mostly with conventional biofuel (e.g., corn starch ethanol). Beginning in 2015, the mandate capped the conventional biofuel volume amounts while increasing the requirement for advanced biofuels. For instance, the statutory RFS total advanced biofuel requirement increases over time from approximately 7% of the RFS in 2010 to 58% of the RFS in 2022. A key part of the statutory definition of each fuel category is whether the fuel achieves certain greenhouse gas (GHG) reductions relative to gasoline and diesel fuel. Each fuel is assigned a lifecycle GHG emission threshold (in proportion to baseline lifecycle GHG emissions for gasoline and diesel). For example, a fuel must achieve at least a 50% GHG reduction to be considered an advanced biofuel , at least a 60% reduction to be considered a cellulosic biofuel , and at least a 50% reduction to be considered biomass-based diesel . Similarly, biofuel from new facilities—those built after enactment of the 2007 law—must achieve at least a 20% GHG reduction to qualify as a conventional renewable fuel. EPA regulates compliance with the RFS using a tradable credit system. Obligated parties (generally, refiners) submit credits—called renewable identification numbers (RINs)—to EPA that equal the number of gallons in their annual obligation. This annual obligation, referred to as the renewable volume obligation (RVO), is the obligated party's total gasoline and diesel sales multiplied by the annual renewable fuel percentage standards announced by EPA. RINs are valid for use in the year they are generated and the following year. Obligated parties may carry a deficit from one year to the next, but in the year following the deficit, the obligated party must meet compliance for that year's renewable fuel volume requirement and purchase or generate enough credits to satisfy the deficit from the previous year. RINs may be used by the party that generates them or they may be traded with other parties. The EPA Moderated Transaction System (EMTS) is used to register RIN transactions. Different biofuels are not treated equally within the RFS. The categories are nested within each other, such that some fuels qualify for multiple categories (e.g., cellulosic ethanol), while others (mainly corn starch ethanol) may only be used to meet the overall RFS but not the advanced category or its nested subcategories. For example, a gallon of cellulosic biofuel may be used to meet the cellulosic biofuel mandate, the advanced biofuel mandate, and the total renewable fuel mandate, possibly making it a more highly valued fuel. In addition, some biofuels generate more RINs per volume than others because of the difference in the fuel's energy content. This difference is accounted for by a metric referred to as the equivalence value (EV) of the biofuel. The EV of a renewable fuel represents the number of gallons that can be claimed for compliance purposes for every physical gallon of renewable fuel used, and it is generally the ratio of the energy content of a gallon of the fuel to a gallon of ethanol. For example, because biodiesel has an EV of 1.5 when being used as an advanced biofuel, 1,000 physical gallons of biodiesel would equal 1,500 RIN gallons of advanced biofuels. EPA released the final rule for the RFS for 2019 on November 30, 2018. The rule calls for 19.92 billion gallons of total renewable fuel for 2019—a 1% increase from the 19.29 billion gallons required in 2018 (see Table 1 ). The conventional biofuel volume requirement remains at 15.00 billion gallons. The volume requirements set by EPA for 2019 for total renewable fuel, advanced biofuel, and cellulosic biofuel are all less than the volumes called for in statute but greater than the previous year's volumes—an annual occurrence that started in 2014. EPA used the cellulosic waiver authority to reduce the statutory volumes. EPA reduced the statutory targets for both advanced biofuel and total renewable by the same amount as the reduction for the cellulosic biofuel (i.e., 8.08 billion gallons). EPA reports that the advanced biofuel statutory target of 13.0 billion gallons \"cannot be reached in 2019 … primarily due to the expected continued shortfall in cellulosic biofuel.\" EPA estimates there are 2.59 billion carryover RINs available. In its response to comments regarding the rule, EPA mentions a forthcoming reset rulemaking. EPA set the biomass-based diesel 2020 volume requirement at 2.43 billion gallons. Biomass-based diesel is the predominant biofuel used to satisfy the advanced biofuel portion of the mandate. Previously, it has been used to backfill the overall advanced biofuel requirement if another advanced biofuel fell short (e.g., cellulosic biofuel). EPA reports \"the advanced biofuel volume requirement is driving the production and use of biodiesel and renewable diesel volumes over and above volumes required through the separate BBD [biomass-based diesel] standard\" and that the 2020 volume requirement \"provides sufficient incentive to producers of 'other' advanced biofuels.\" EPA acknowledges that it took into consideration the unavailability of the biodiesel tax credit for 2019, the tariffs on imports of biodiesel from Argentina and Indonesia, the tariffs on soybeans exported to China, and more in its assessment of the biodiesel requirement for 2020. Implementation of the RFS has been complex, and compliance with some of its parts has been challenging, according to some stakeholders. This section briefly explains some of the general concerns and challenges with implementing the RFS. EPA administers the RFS. This responsibility includes evaluating renewable fuel pathways eligible for the RFS. In addition, EPA is required to evaluate the ability of the biofuel industry to produce enough fuel to meet the annual volume standard, release an annual volume standard based on its research findings, and ensure that annual compliance by obligated parties is met. All of the above must be completed annually, taking into consideration comments from other government agencies, the public, and, recently, court decisions. These responsibilities could be viewed as an addition to EPA's regulatory workload and have required EPA to develop new capabilities to carry them out. For several years following the 2010 issuance of the amended RFS final rule, EPA has had difficulty projecting certain volume requirements (e.g., cellulosic biofuels) which have led EPA to use its waiver authority to set annual volume requirements for cellulosic biofuel, total advanced biofuel, and total renewable fuel different from what was stated in the statute. Legal challenges have been brought against the EPA regarding some of these annual fuel volume projections. For instance, the American Petroleum Institute objected to EPA's 2012 cellulosic biofuel production projection, among other things, and challenged it in court. The federal court vacated the 2012 cellulosic biofuel standard and provided principles for EPA to apply to future annual projections. Likewise, Americans for Clean Energy and other petitioners challenged various aspects of the final rule that set the volume requirements and projections for 2014-2016 and 2017 for biomass-based diesel, including EPA's interpretation of \"inadequate domestic supply\" in exercising its general waiver authority to reduce the total volume requirements. The D.C. Circuit Court vacated EPA's 2016 total renewable fuel volume requirement and remanded the 2015 final rule to EPA for reconsideration consistent with the court's decision. In some instances the timing of EPA's RFS regulatory actions, such as the annual announcement of the renewable fuel volume requirements, has not met statutory deadlines. The most recent final rules, including the 2019 final rule, adhere to the statutory schedule. However, some of the earlier final rules did not meet the statutory deadline. A lack of timely rulemaking combined with inaccurate volume projections could affect private investment, according to some advanced biofuel producers. Regardless, they lead to uncertainty in compliance for obligated parties. The amount of time it takes the agency to approve new fuel pathways and register new facilities has been raised in public comments to proposed RFS rules. Slow approval could stifle investment and production of new fuels. Further, prolonged processing time for some program enhancement rules—such as the Proposed Renewables Enhancement and Growth Support Rule (REGS rule)—may impede the growth of the program. Lastly, the final rule for 2014 through 2016 triggered the \"reset\" provision of the RFS for the advanced biofuel and cellulosic biofuel categories. The 2019 final rule triggered the \"reset\" provision for total renewable fuel. Thus, three of the four renewable fuel categories identified in statute are subject to being \"reset\" by the EPA Administrator. The reset provision gives the EPA Administrator authority to adjust the applicable volumes of the RFS for future years starting in 2016 if certain conditions are met. How EPA implements this provision will affect renewable fuel production and compliance with the overall program. EPA reports that it will issue a rulemaking in early 2019 that proposes to reset the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020-2022. As noted above, there are a number of nested categories within the RFS; a fuel may qualify as a biofuel for one or more portions of the mandate. Difficulty by some advanced biofuel producers in understanding which advanced biofuels qualify for the RFS can lead to challenges in determining how compliance is being met. Not all fuels from a renewable source are eligible under the RFS. The RFS operates as a biofuel standard, with priority assigned to liquid transportation fuels from biomass feedstocks. Other renewable sources (e.g., wind) do not qualify. Before a fuel can generate RFS RINs, however, that fuel pathway must be approved by EPA; according to advanced biofuel producers that process can take a considerable amount of time for some fuels. Lastly, some may view the RFS as a biofuel production mandate. The statutory language does not mandate the production of biofuels; rather, it mandates the use of biofuel. However, it could be argued that it is difficult to use a fuel that is not being produced and that the RFS therefore indirectly creates a demand for certain biofuels and thus stimulates their production. By statute, cellulosic biofuel is targeted to comprise approximately 44% of the total renewable fuel mandate in 2022. However, the annual cellulosic biofuel production volume established by Congress is not being met. Actual cellulosic biofuel production volumes (e.g., cellulosic ethanol) are below the expectations set when the law was passed. For instance, in 2019, the statute requires 8.5 billion gallons of cellulosic biofuel. EPA set the 2019 target volume at 418 million gallons for 2019. This shortfall is due to several factors, including lack of private investment, technology setbacks, and uneven support from the federal government. These factors, coupled with the fact that annual volumes in the statute were established when market conditions for raising investment capital for new biofuel technologies were more favorable, may suggest unrealistic targets for some advanced biofuels for the near future. These production limitations have raised questions about whether the statutory cellulosic biofuel volumes are attainable. The \"blend wall\"—the upper limit to the total amount of ethanol that can be blended into U.S. gasoline and still maintain automobile performance and comply with the Clean Air Act—has been viewed by many to be in direct conflict with the biofuel volumes mandated in the RFS. Thus far, the largest volume being met under the RFS is for the nonadvanced (conventional) biofuel segment of the mandate, met mainly with corn starch ethanol blended into gasoline. Due to a variety of factors, ethanol content in gasoline is generally limited to 10% (E10). With a relatively fixed supply of gasoline, the amount of ethanol that can be supplied this way is also limited. If the ethanol content of gasoline for the majority of vehicles remains at 10%, and given current fuel consumption rates, the conventional biofuel portion of the RFS is requiring slightly more ethanol than can technically be blended into gasoline. While the blend wall remains a concern, it may not be as significant an impediment to immediate fuel consumption as previously considered by some. Indeed, EPA reports \"the E10 blendwall is not the barrier that some stakeholders believe it to be.\" Had the RFS mandates—for both conventional biofuel and advanced biofuel—come to fruition in the form of mostly ethanol, or had fuel consumption decreased further, the blend wall potentially could have led to more discussion about the volume mandates. However, primarily due to the lack of cellulosic biofuel production, more time has been granted to address the blend wall and the scheduled levels of biofuels in the RFS. Some possible approaches could alleviate blend wall concerns in the near term. One option suggested by some is to blend higher levels of ethanol into conventional gasoline. In 2010 EPA granted a Clean Air Act waiver that allows gasoline to contain up to 15% ethanol for use in model year 2001 and newer light-duty motor vehicles. However, limited demand, infrastructure and automobile warranty concerns, and the lack of a waiver to sell E15 during the summer months, have precluded widespread offering and purchase of E15, gasoline blended with 10.5% to 15% ethanol. Widespread use of E15 could potentially postpone the blend wall for a few years. Another option to address the blend wall would be an aggressive push for the use of ethanol in flexible-fuel vehicles capable of using E85, a gasoline-ethanol blend containing 51% to 83% ethanol. However, there are infrastructure constraints with the use of E85. For example, the number of E85 fueling stations is limited. To help address these infrastructure issues, the U.S. Department of Agriculture (USDA) announced $100 million in matching grants in 2015 under its Biofuel Infrastructure Partnership. The grants may be used for blender pumps, dedicated E15 or E85 pumps, and new storage tanks and related equipment associated with new facilities or additional capacity. The RFS is not a stand-alone policy. It interacts with many factors that are not easily controlled. For example, cellulosic biofuel production, at a minimum, requires conversion technology, which itself requires technical expertise and time to ramp up to commercial scale. The large quantity of biomass feedstocks needed to produce such biofuels requires factors such as appropriate weather conditions and an expectation of stable markets for feedstock commodities. Further, some types of biofuel production thus far have been sensitive to the availability of tax incentives in order to be economically feasible (e.g., biodiesel). Unexpected occurrences (e.g., drought, failed technology, tax incentive expiration) could potentially impact an entire industry, especially for some advanced biofuels in nascent industries compared to conventional transportation fuels. The RFS was established in 2005 at a time when Congress foresaw the need to diversify the country's energy portfolio, strengthen the economy of rural communities that could contribute to biofuel production, bolster U.S. standing in an emerging segment of the energy technology market, and protect the environment, among other objectives. The RFS was then subsequently expanded in 2007. Over the past decade some components of the RFS have progressed steadily toward meeting statutory requirements and other components have not. The RFS is a program with ambitious objectives. Policy questions surrounding future consideration of the RFS might include What should be the purposes of the RFS? Is the RFS properly designed to achieve those purposes? What happens when, and if, the RFS achieves its purposes? At the outse t, some would argue that the first question may seem straightforward; the RFS exists to introduce more biofuels into the transportation fuel market to achieve a number of transportation fuel supply and environmental objectives. However, the statute does not list any specific purposes or objectives. Some stakeholders argue that the RFS exists primarily to find another market for biomass feedstocks or to promote the economy of rural America (e.g., the construction of biofuel facilities that create jobs). To the extent the RFS was designed to reduce U.S. dependence on foreign oil, and to the extent that hydraulic fracturing and the growth of unconventional oil and gas production have contributed to achieving that objective, some stakeholders have questioned whether the RFS is still needed for energy security purposes. Likewise, the environmental impact of the RFS could be challenged, as the advanced biofuel component of the RFS—set to yield greater greenhouse gas emission reduction benefits—has missed the statutory targets by a large margin. In examining whether the RFS is well designed to realize its general purpose, some have inquired about the challenges in achieving the ambitious RFS targets, given concerns about the slow development of some advanced biofuel supplies. Additionally, past delays in announcing final annual standards by EPA have led to uncertainty for biofuel producers, feedstock growers, and refiners. Whether the RFS should be eliminated, amended to address the current challenges in the program, or maintained in its current form is an ongoing question for Congress. A related question is whether the current provisions for EPA to waive various portions of the RFS mandates and to reset the RFS are sufficient to address the current supply challenges or whether the use of these waivers runs counter to the goals of the program. Some Members of Congress have proposed alternatives to the RFS, such as transitioning to an octane standard. Other Members of Congress have expressed interest in modifying or eliminating the conventional biofuel (e.g., corn starch ethanol) portion of the mandate. Some contend that the conventional biofuel segment of the biofuels industry is well established, so it should not require a use mandate. In addition, it has been argued that a demand for conventional biofuels exists regardless of congressional involvement. Others counter that the RFS is needed to help lower GHG emissions and to assure that the biofuels industry continues to have access to a fuel distribution infrastructure that is largely controlled by petroleum interests.", "summary": "The Renewable Fuel Standard (RFS) requires U.S. transportation fuel to contain a minimum volume of renewable fuel. The RFS—established by the Energy Policy Act of 2005 (P.L. 109-58; EPAct05) and expanded in 2007 by the Energy Independence and Security Act (P.L. 110-140; EISA)—began with 4 billion gallons of renewable fuel in 2006 and aims to ascend to 36 billion gallons in 2022. The Environmental Protection Agency (EPA) has statutory authority to determine the volume amounts after 2022. The total renewable fuel statutory target consists of both conventional biofuel and advanced biofuel. Since 2014, the total renewable fuel statutory target has not been met, with the advanced biofuel portion falling below the statutory target by a large margin since 2015. Going forward, it is unlikely that the United States will meet the total renewable fuel target as outlined in statute. EPA administers the RFS and is responsible for several tasks. For instance, within statutory criteria EPA evaluates which renewable fuels are eligible for the RFS program. Also, EPA establishes the amount of renewable fuel that will be required for the coming year based on fuel supply and other conditions although waiver authority in the statute allows the EPA Administrator to reduce the statutory volumes if necessary. Further, the statute requires that the EPA Administrator \"reset\" the RFS—whereby the fuel volumes required for future years are modified by the Administrator if certain conditions are met. EPA monitors compliance for the RFS using a system of tradable credits referred to as renewable identification numbers (RINs). Congress has expressed ongoing interest in the RFS, particularly as the mandate relates to other legislative efforts (e.g., Reid Vapor Pressure requirements for ethanol-gasoline fuel blends containing greater than 10% ethanol, a national octane standard) and about oversight of the RIN market, among other things. Some assert it is time to amend or repeal the RFS, while others contend the best course of action is to maintain the status quo. For instance, some Members contend the RFS hurts consumers by creating an artificial market for ethanol. Others see ethanol as a part of a competitive energy strategy. Congress may also express interest in how the EPA Administrator applies the RFS \"reset\" authority. EPA reports that in early 2019 it will issue a rulemaking that proposes to modify—or \"reset\"—the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020-2022.", "document_type": "crs"}
{"report": "Requirements for military awards and decorations can change over time. New events and changes in military, political, or social conditions can generate debate over who is eligible for various military awards. These changes tend to be controversial, especially with veterans groups. Congress has considered several pieces of legislation that would change who would be eligible to receive the Purple Heart, and under what conditions. The wars in Iraq and Afghanistan have greatly increased the number of servicemembers receiving the Purple Heart award as well as the potential conditions under which they receive the award. Increasingly acknowledged conditions, such as traumatic brain injuries (TBI) and post-traumatic stress disorder (PTSD), as well as accidents and other events while deployed, bring up new questions as to when a servicemember deserves a Purple Heart. The July 17, 2015, shooting of servicemembers at a Marine recruiting office and a naval reserve center in Chattanooga, TN, again prompted questions about applying the Purple Heart to terrorist attacks versus criminal acts. Veterans groups often voice their views when Congress or the President proposes making changes to expand eligibility for the Purple Heart. These groups argue, for example, that a servicemember who acquires PTSD may not always deserve the same recognition as a servicemember killed or wounded in direct combat, while others contend that these medical conditions can debilitate servicemembers just as much as physical injuries and can have lasting effects on servicemembers' lives. Determining which actions and events make a servicemember qualified for receiving a Purple Heart, and whether expanding eligibility does a disservice to those who have already earned the award, are contentious elements of this debate. Although Congress has traditionally left many military award requirements to the executive branch, the Constitution does allow Congress to act in this area, and events have prompted changes regarding eligibility for the Purple Heart. On December 19, 2014, Congress passed The Carl Levin and Howard P. \"Buck\" McKeon National Defense Authorization Act (NDAA) for Fiscal Year 2015. Section 571 of the NDAA for FY2015 expanded eligibility by redefining what should be considered an attack by a \"foreign terrorist organization\" for purposes of determining eligibility for the Purple Heart. As a result, servicemembers wounded and killed in the 2009 shootings in Little Rock, AR, and at Fort Hood, TX, were awarded Purple Hearts in 2015. Congressional offices often receive questions about Purple Heart eligibility from constituents, especially when eligibility rules change. The number of these questions is likely to increase as servicemembers return from conflicts around the world and if eligibility requirements are again changed. This report will examine the history of the Purple Heart and changes in eligibility over time as well as current issues facing Congress. In 1782, George Washington created the Badge of Military Merit to reward \"any singularly meritorious action\" displayed by a soldier, noncommissioned officer, or officer in the Continental Army. This award was intended to encourage gallantry and fidelity among soldiers, and would later become known as the Purple Heart. The Badge of Military Merit was designed as a purple heart of cloth edged with a narrow lace. Records are incomplete and researchers debate how many soldiers received this award. According to Military Order of the Purple Heart, three soldiers from Connecticut were the first to receive the Badge of Military Merit during the American Revolutionary War. All three were noncommissioned officers and the only recipients who received the award from General Washington. The soldiers were Sergeant William Brown, 5 th Connecticut Regiment of the Connecticut Line on May 3, 1783; Sergeant Elijah Churchill, 2 nd Continental Light Dragoons on May 3, 1783; and Sergeant Daniel Bissell, 2 nd Connecticut Regiment of the Connecticut Line, on June 10, 1783. However, the Badge of Military Merit fell into disuse shortly after its conception. The Badge of Military Merit was not seriously considered again until General Douglas MacArthur (then Army Chief of Staff) revived the award on February 22, 1932, the 200 th anniversary of George Washington's birth. This award, renamed the \"Purple Heart,\" was redesigned to its modern appearance: a purple heart-shaped medal with bronze border and George Washington's coat of arms between two green spray leaves. See Figure 1 . General MacArthur also redefined the eligibility requirements to those who received Meritorious Service Citation certificates from World War I or those authorized to wear wound chevrons by Army Regulation (AR) 600-8-22, Military Awards . It was at this point that the Purple Heart became focused on soldiers killed and wounded in combat, rather than \"any singularly meritorious act.\" In 1942, President Franklin Roosevelt extended the Purple Heart award, which to this point was exclusively an Army award, to Navy, Marine Corps, and Coast Guard members serving in World War II. In 1952, President Truman retroactively awarded Purple Hearts to personnel in the Navy, Marine Corps, and Coast Guard that qualified after April 5, 1917, thus including World War I veterans of all services. From 1962 until 1998, eligibility for the Purple Hearts was changed on several occasions. President Kennedy authorized Purple Hearts to all servicemembers, and civilians serving with the Armed Forces, who were engaged in armed conflict against an opposing military or hostile foreign force. This expansion was written to permit U.S. servicemembers, and the civilians that accompanied them, who were killed or wounded in Vietnam to receive the Purple Heart, as many of those servicemembers were officially considered advisors to the Republic of Vietnam, rather than combatants. Purple Heart eligibility was expanded again by President Reagan to include military personnel and government civilians killed or wounded in international terrorist attacks after March 28, 1973, or those serving in peacekeeping operations outside of the United States. This expansion was in response to increased terrorist attacks against U.S. servicemembers abroad, namely the Marine Corps Barracks bombing in Beirut, Lebanon, in 1983. The NDAA for Fiscal Year 1996 expanded eligibility to prisoners of war injured or wounded in captivity prior to 1962, a group of servicemembers previously not covered for Purple Heart eligibility by President Kennedy's executive order. In 1997, President Clinton signed the NDAA for Fiscal Year 1998, which limited future awards of the Purple Heart to military personnel. It has since remained a military-only award. The Department of Defense does not maintain a record of the number of Purple Heart recipients. However, some military historians estimated more than 1 million Purple Hearts have been awarded mostly to soldiers since 1932. Likewise, the National Purple Heart Hall of Honor estimates 1.8 million Purple Hearts have been awarded since the medal was established by the Army in 1932. During the 115 th Congress (2017-2018), H.R. 7097 was introduced as the \"Find our Hearts Act.\" It would have amended Title 10, United States Code, to require the establishment of a searchable database containing the names and citations of members of the Armed Forces who have been awarded the Purple Heart. H.R. 7097 was referred to the House Armed Services Committee but saw no further action. See Table 1 for current Purple Heart legislation. Currently, the Purple Heart is authorized for any member of the U.S. Armed Forces who has been wounded or died from wounds sustained under one of the following conditions: (1) In accordance with E.O. 11016, subject to the provisions of Sections 1129, 1129a, and 1131 of Title 10, U.S.C., and P.L. 104-106 , the Secretary of a Military Department, will, in the name of the President of the United States, award the PH, with suitable ribbons and appurtenances, to any Service member under the jurisdiction of that Department who, after April 5, 1917, has been wounded, killed, or who has died or may hereafter die of wounds received under any of the following circumstances: (a) In action against an opposing armed force of a foreign country in which U.S. Armed Forces are or have been engaged. (b) In any action with an opposing armed force of a foreign country in which the Military Services are or have been engaged. (c) While serving with friendly foreign forces engaged in armed conflict against an opposing armed force in which the United States is not a belligerent party. (d) As a result of an act of any such enemy or opposing armed forces. (e) As the result of an act of any hostile foreign force. (f) After March 28, 1973, as a result of an international terrorist attack against the United States or a foreign nation friendly to the United States, recognized as such an attack for purposes of award of the PH by the Secretary of the Military Department concerned, or jointly by the Secretaries of the Military Departments concerned if members from more than one Military Department are wounded in the attack. The Secretary of the Military Department concerned shall notify the Under Secretary for Personnel and Readiness USD(P&R) prior to awarding the PH for an international terrorist attack that occurs in the United States or its territories. (g) After March 28, 1973, as a result of military operations while serving outside the territory of the United States as part of a peacekeeping force. (h) On or after December 7, 1941, pursuant to Section 1129 of Title 10, U.S.C., a service member who is killed or wounded in action as the result of action by friendly weapon fire while directly engaged in combat, other than as a result of an act of an enemy of the United States, unless (in the case of a wound) the wound is the result of willful misconduct of the member. (i) Before April 25, 1962, pursuant to Section 521 of P.L. 104-106 which held as a prisoner of war (POW), or while being taken captive in the same manner as a former POW who is wounded on or after that date while held as a POW. A person will be considered to be a former POW if the person is eligible for the POW Medal under Section 1128 of Title 10, U.S.C. (j) On or after December 7, 1941, to a Service member who is killed or dies while in captivity as a prisoner of war (POW) under circumstances establishing eligibility for the POW medal pursuant to section 1128 of Title 10, U.S.C., and Volume 2 of DoD Manual 1348.33, Manual of Military Decorations and Awards , unless compelling evidence is presented that shows that the member's death was not the result of enemy action. (k) After September 11, 2001, pursuant to section 1129a of Title 10, U.S.C., to a Service member on active duty who is killed or wounded in an attack by a foreign terrorist organizations in circumstances where the death or wound is the result of an attack targeted on the member due to such member's status as a member of the armed forces. An attack by an individual or entity shall be considered to be a foreign terrorist attack if the individual or entity was in communication with the foreign terrorist organization before the attack and the attack was inspired or motivated by the foreign terrorist organization. An award is not authorized if the death or wound was the result of the willful misconduct of the Service member. To assist in making a PH determination pursuant to section 1129a of Title 10, U.S.C., the Military Department Secretary concerned may request an intelligence assessment from the Defense Intelligence Agencies' Defense Combating Terrorism Center (DCTC). The DCTC assessment of potential foreign terrorist attacks by an individual or entity will assess whether the individual or entity was in communication with the foreign terrorist organization before the attack, and if the attack was inspired or motivated by the foreign terrorist organization. The assessment shall include supporting citations and rationale. (2) A wound for which the award is made must have been of such severity that it required treatment, not just examination, by a military medical officer. (a) Treatment must be noted in the Servicemember's medical record. (b) Award may be made of wounds treated by a medical professional other than a medical officer provided a medical officer issues a statement in the Service member's medical record that the extent of the wounds were such that the wounds would have required treatment from a medical officer if one had one been available to treat the wounds. (3) After May 17, 1998, pursuant to Section 1131 of Title 10, U.S.C., the PH may only be awarded to a person who is a Service member at the time the person is killed or wounded under circumstances otherwise qualifying that person for award of the PH. Before this date, the Secretary of the Military Department concerned was authorized to award the PH to U.S. civilian nationals who were serving under competent authority in any capacity with the armed forces of that department. For deceased servicemembers, the Purple Heart may be given to the representatives of the deceased as the individual Service Secretary considers appropriate. Servicemembers can be awarded multiple Purple Hearts for separate incidents. The servicemember receives the Purple Heart medal for the first award. Subsequent awards are indicated with oak leaf clusters or 5/16 inch service stars, depending on the rules of the recipient's service. Purple Hearts may not be awarded to foreign military personnel. Although the decision to award medals and other military decorations traditionally rests with the executive branch, Congress has been expanding its role in this area in recent decades, exercising its constitutional power \"To Make Rules for the Government and Regulation of the land and naval forces.\" Previously, Congress took the lead and adjusted Purple Heart eligibility in both the NDAA for FY1996 and the NDAA for FY1998. See Appendix A . In response to some mass shootings in recent years, Congress passed a provision in the NDAA for FY2015 that expanded the Purple Heart's eligibility requirements. On June 1, 2009, a man who was allegedly angry over the killing of Muslims in Iraq and Afghanistan opened fire on two U.S. Army soldiers near a recruiting station in Little Rock, AR, killing one and wounding the other. On November 5, 2009, an Army major opened fire at Ft. Hood, TX, killing 13 and wounding 29, many of them servicemembers. Both men were charged with murder and other crimes. Federal and local law enforcement authorities initially considered these acts to be crimes, and the Defense Department reports the Fort Hood shooting as \"workplace violence,\" not acts perpetrated by an enemy or hostile force, which made them ineligible for the Purple Heart. However, some believed these acts should be viewed as acts of war or domestic terrorism because they involved Muslim perpetrators angered over U.S. actions in Iraq and Afghanistan. Section 571 of the NDAA for FY2015 ( P.L. 113-291 ) expanded the eligibility for the Purple Heart by redefining what should be considered an attack by a \"foreign terrorist organization\" for purposes of determining eligibility for the Purple Heart. The law states that an event should be considered an attack by a foreign terrorist organization if the perpetrator of the attack \"was in communication with the foreign terrorist organization before the attack\" and \"the attack was inspired or motivated by the foreign terrorist organization.\" Still, some are opposed to awarding the Purple Heart for terrorist acts that were initially deemed \"workplace violence\" by the Department of Defense (DOD) or a criminal act, and not earned on a battlefield. This act arguably sets a precedent for the future and could make Purple Heart eligibility more subjective, allowing public sentiment to determine what events are worthy of a Purple Heart. On April 10, 2015, then-Army Secretary John McHugh and Army Lieutenant General Sean MacFarland, 3 rd Corps and Fort Hood commanding general, presented Purple Hearts to the families of the 10 servicemembers killed and to the 26 servicemembers wounded during the attack. Defense of Freedom Medals were also awarded to DOD civilians killed and wounded during the attack. In a memorandum, Secretary McHugh directed the Army to \"expedite certain other benefits for which soldiers receiving the Purple Heart are traditionally eligible.\" In addition to the victims of the Fort Hood shooting, the two victims of the June 2009, shooting at a recruiting station in Little Rock, Arkansas, received Purple Hearts on July 1, 2015. Army Private William Andrew \"Andy\" Long was killed and Army Private Quinton Ezeagwula was wounded in that attack by Abdulhakim Muhammad, who was convicted and sentenced to life in prison without the possibility of parole. Encouraged by the expanded eligibility provision in the NDAA for FY2015, legislation was introduced during the 114 th Congress to award Purple Hearts to other military victims of domestic terrorism. Section 583 of the House-passed version of H.R. 1735 , the NDAA for FY2016, would have awarded the Purple Heart to servicemembers who were victims of the April 19, 1995, Oklahoma City, Oklahoma bombing. Supporters for awarding the Purple Heart to the victims of the Oklahoma City bombing refer to the FY2015 NDAA as precedent. However, critics contend that the bombing was an act of domestic terrorism and does not meet the current eligibility requirements of the assailant being inspired by or motivated by an international terrorist organization. The final version of the FY2016 NDAA ( P.L. 114-92 ) did not include this provision. On July 16, 2015, Muhammad Youssef Abdulazeez shot at a Marine Corps recruiting center and Naval Reserve Center in Chattanooga, TN. This incident again raised congressional interest regarding the eligibility for the Purple Heart for servicemembers killed and wounded during an attack inspired by or motivated by international terrorist organizations. Four marines were killed and one was injured during the rampage, and the lone sailor later died from his injuries. The FBI investigation later concluded that Abdulazeez was \"motivated by foreign terrorist organization propaganda,\" but that it was difficult to determine which terrorist group may have inspired him. On December 16, 2015, then-Secretary of the Navy Ray Mabus announced that the Purple Heart would be awarded to five servicemembers killed and one wounded in the July 2015 shootings at two naval centers in Chattanooga, Tennessee. Secretary Mabus stated that \"following an extensive investigation, the FBI and NCIS have determined that this attack was inspired by a foreign terrorist group, the final criteria required for the awarding of the Purple Heart to this Sailor and these Marines.\" On January 14, 2016, then-Navy Vice Admiral Robin Braun presented the Purple Heart to the family of Logistics Specialist 2 nd Class Randall Smith at the Navy Operational Support Center Chattanooga. Brigadier General Terry V. Williams presented the Purple Heart on January 26, 2016, to Sergeant DeMonte R. Cheeley, who survived the attack, at a ceremony in Chattanooga. On April 20, 2016, Lieutenant General Rex McMillian, then-head of Marine Corps Forces Reserve, presented Purple Hearts to the families of Gunnery Sergeant Thomas Sullivan, Staff Sergeant David Wyatt, Sergeant Carson Holmquist, and Lance Corporal Squire \"Skip\" Wells in a ceremony at the Hunter Museum of American Art in Chattanooga. U.S. Airman 1 st Class Spencer Stone was onboard a train from Amsterdam to Paris with two friends, Anthony Sadler and Alek Skarlatos, when they subdued a heavily armed gunman who attempted to fire an AK-47 at the passengers. Stone was stabbed in the face and neck by the gunman as the trio restrained him before he could discharge his weapon. The vacationing Americans were hailed as heroes and awarded the French Legion of Honor on August 24, 2015. On September 14, 2015, Air Force Secretary Deborah Lee James announced that Stone would receive the Purple Heart along with the Airman's Medal, the Air Force's highest noncombat award. At the Pentagon on September 17, 2015, then-Defense Secretary Ash Carter presented Stone the Purple Heart and Airman's Medal. During the ceremony, Carter presented the Soldier's Medal to Oregon National Guard Specialist Alek Skarlatos, and civilian Anthony Sadler received the Secretary of Defense Medal for Valor. On June 12, 2016, a security guard, Omar Mateen, killed 49 people and wounded 53 others in an attack inside Pulse, a gay nightclub in Orlando, Florida. Army Reserve Captain Antonio Davon Brown was one of the 49 people killed and may be eligible for the Purple Heart depending on the outcome of the FBI investigation. According to the FBI, Mateen had pledged allegiance to the Islamic State group after his attack in a call to 911. At this time, it is unclear if the Army will make a decision regarding Captain Brown's eligibility for the Purple Heart. On September 28, 2016, H.R. 6234 was introduced to amend Title 18, U.S.C., to provide for penalties for the sale of any Purple Heart awarded to a member of the Armed Forces. This legislation would have made selling the medal punishable by fines and up to six months in prison. H.R. 6234 would have placed the Purple Heart into a new protected category, keeping it away from not just con artists but also memorabilia collectors. The measure was named for Private Corrado Piccoli, a World War II infantryman killed in action in 1944, whose Purple Heart was found for sale at an antique store in 2009. This bill was referred to the House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations but saw no further action in the 114 th Congress. This legislation was reintroduced in the 115 th Congress on January 13, 2017, as H.R. 544 , the Private Corrado Piccoli Purple Heart Preservation Act of 2017, and a related bill, S. 765 , was passed by the Senate on August 3, 2017. Both bills were referred to committee in the House but saw no further action. On January 15, 2019, S. 122 , Private Corrado Piccoli Purple Heart Preservation Act, was introduced in the 116 th Congress. The bill was read twice and referred to the Senate Judiciary Committee. The House version of the National Defense Authorization Act (NDAA) for FY2019, H.R. 5515 , included a provision (Section 629) that would extend certain morale, welfare, and recreation (MWR) privileges to certain veterans, including Purple Hearts recipients, and their caregivers. This bill became P.L. 115-232 on August 13, 2018. Section 621 of the enacted bill adopted House Section 629, which extends eligibility of certain MWR and commissary privileges to certain veterans, including Purple Heart recipients, and their caregivers starting in 2020. For additional information see section, \"Defense Commissary System,\" in CRS Report R45343, FY2019 National Defense Authorization Act: Selected Military Personnel Issues . For bill summaries of Purple Heart legislation in the 116 th Congress as introduced, see Table 1 . The large number of veterans with invisible wounds returning from Iraq and Afghanistan has the Department of Defense (DOD) reevaluating Purple Heart eligibility for traumatic brain injuries (TBI) and mental conditions such as post-traumatic stress disorder (PTSD). DOD considers some TBIs eligible for the Purple Heart, as many of those injuries can be diagnosed using brain scans and other objective medical tests. However, there is continued debate on the inclusion of mental conditions, such as PTSD, as part of the appropriate criteria for the Purple Heart. Congress, as well as various executive agencies and departments, is funding and conducting studies regarding PTSD. The National Alliance on Mental Illness, a national grassroots advocacy group representing families and people affected by mental illness, is advocating that the Purple Heart be awarded for psychological wounds including PTSD to eliminate stigma and encourage servicemembers to seek care. At this time, DOD does not consider servicemembers with PTSD eligible for the Purple Heart. Army Regulation 600-8-22 allows \"concussion injuries caused as a result of enemy generated explosions\" but specifically disqualifies post-traumatic stress disorders. Army guidance emphasizes \"the degree to which the enemy caused the injury\" when determining eligibility and places PTSD in a column of noneligible injuries. The Marine Corps defines PTSD as a \"severe combat stress injury\" and says that combat stress injuries are \"not directly caused by the enemy's intentional use of an outside force or agent,\" and thus do not qualify. Servicemembers are divided on this issue. Some servicemembers believe that mental injuries such as PTSD should be eligible for the Purple Heart, while others believe that it would dishonor those who have received Purple Hearts for physical injuries. Proponents argue that some veterans are less likely to seek help for their mental-health injuries because of the stigma associated with PTSD, and that stigma could be lessened by recognizing their injuries as real. Opponents, including some veterans from the Military Order of the Purple Heart and Veterans of Foreign Wars, are resistant to accepting PTSD as grounds for eligibility. A representative of The Military Order of the Purple Heart stated, \"We believe strongly in and support the criteria that the wound or death should be sustained in combat at the hands of the enemies of the United States.\" In addition, the national spokesman for the Veterans of Foreign Wars, Joseph E. Davis, said, \"Medals aren't awarded for illness or disease, but for 'achievement and valor.'\" Appendix A. Timeline of Purple Heart Eligibility August 7, 1782: George Washington creates the Badge of Military Merit. Awarded to several Continental soldiers but it quickly falls from use. February 22, 1932: Army Chief of Staff General Douglas MacArthur revives the Badge of Military Merit as an Army award, renamed \"the Purple Heart,\" and retroactively awarded to wounded WWI veterans. December 3, 1942: Executive Order 9277—President Franklin Roosevelt expands Purple Heart eligibility to include U.S. Navy, Marine Corps, and Coast Guard. Retroactively awards Purple Hearts to December 6, 1941. November 12, 1952: Executive Order 10409—President Truman retroactively awards Purple Hearts to U.S. Navy, Marine Corps, and Coast Guard veterans after April 5, 1917. April 25, 1962: Executive Order 11016—President Kennedy extends eligibility to civilians serving with military forces. February 23, 1984: Executive Order 12464—President Reagan awards Purple Hearts to those killed and wounded in terrorist attacks after March 28, 1973, or on peacekeeping missions outside the United States. February 10, 1996: National Defense Authorization Act for Fiscal Year 1996 (Section 521, P.L. 104-106 ) includes \"prisoners of war wounded before April 25, 1962, while held as a prisoner of war (or while being taken captive) in the same manner as a former prisoner of war who is wounded on or after that date while held as a prisoner of war (or while being taken captive).\" November 18, 1997: National Defense Authorization Act for Fiscal Year 1998 (Section 571, P.L. 105-85 ) limits future Purple Heart awards to members of the Armed Forces. October 17, 2006: National Defense Authorization Act for Fiscal Year 2007 (Section 556, P.L. 109-364 ) includes prisoners of war captured after December 7, 1941. April 30, 2008: Purple Heart Family Equity Act of 2007 ( P.L. 110-207 ) revises the congressional charter of the Military Order of the Purple Heart to authorize associate membership for the spouse and siblings of a recipient of the Purple Heart medal. December 19, 2014: National Defense Authorization Act for Fiscal Year 2015 (Section 571, P.L. 113-291 ) expands eligibility for the Purple Heart by redefining what should be considered an attack by a foreign terrorist organization, and awards Purple Heart medals to servicemembers wounded or killed during the 2009 shootings at Ft. Hood, Texas, and Little Rock, Arkansas. Appendix B. Staffer Instructions for Medal Requests Members of Congress are able to directly request that a Service Secretary consider awarding military decorations to individuals or groups. Upon receiving a request from a Member's office, the Service Secretary concerned will review the proposal for the award or presentation of a decoration (or the upgrading of a decoration). Based on that review, the Secretary shall determine the merits of approving the award or presentation of the decoration and other necessary determinations. The Secretary shall submit a notice to the requesting Member, the Senate Armed Services Committee, and the House Armed Services Committee with one of the following results: (1) The award or presentation of the decoration does not warrant approval on the merits. A statement explaining the Secretary's reason will be included. (2) The award or presentation of the decoration warrants approval and a waiver by law of time restrictions prescribed by law is recommended. (3) The award or presentation of the decoration warrants approval on the merits and has been approved as an exception to policy. (4) The award or presentation of the decoration warrants approval on the merits, but a waiver of the time restrictions prescribed in law is not recommended. A statement explaining the Secretary's reason will be included. Source: Compiled from the National Defense Authorization Act for Fiscal Year 1996 ( P.L. 104-106 , §526), February 10, 1996.", "summary": "The Purple Heart is one of the oldest and most recognized American military medals, awarded to servicemembers who were killed or wounded by enemy action. The conflicts 2001 to the present have greatly increased the number of Purple Hearts awarded to servicemembers. Events over the past few years have spurred debate on the eligibility criteria for the Purple Heart. Shootings on U.S. soil and medical conditions such as traumatic brain injury (TBI) and post-traumatic stress disorder (PTSD) have prompted changes to the eligibility requirements for the Purple Heart. Some critics believe that these changes may lessen the value of the medal and the sacrifices of past recipients on the battlefield. In the past, efforts to modify the Purple Heart's eligibility requirements were contentious, and veterans groups were vocal concerning eligibility changes. While medal requirements are often left to the military and executive branch to decide, Congress is involved in Purple Heart eligibility, utilizing its constitutional power \"To Make Rules for the Government and Regulation of the land and naval Forces\" (U.S. Constitution, Article I, Section 8, clause 14). The Carl Levin and Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015 (P.L. 113-291) included language that expands eligibility for the Purple Heart. Previous debates have raised several questions about the Purple Heart. In some respects, how an event is defined can determine eligibility: Is a servicemember the victim of a crime or a terrorist attack? Conversely, arguing that killed or wounded servicemembers \"should\" be eligible for the Purple Heart can redefine an event: Is the servicemember an advisor to a foreign military or a combatant? Are PTSD and other mental health conditions adequate injuries to warrant the Purple Heart? These are questions that Congress might consider if it chooses to act on this issue.", "document_type": "crs"}
{"report": "A number of opportunities exist for individuals who are not regular congressional employees to provide assistance to congressional offices. The titles used to describe these positions are sometimes used interchangeably, but there can also be some key differences. An intern is an individual who provides assistance, paid or unpaid, to a congressional office on a temporary basis. The internship experience is typically considered to provide an educational benefit for that individual. An intern's role does not substitute for or replace the duties of regular employees. If an intern is paid, then some of the rules applicable to congressional employees may apply. This report focuses on congressional interns, as described above, although their role can sometimes seem similar to individuals in the following positions: A volunteer also provides assistance to a congressional office, and the experience is generally considered to be of educational value for the volunteer. In many cases, a volunteer's role in a congressional office can be similar to that of an unpaid intern. A volunteer cannot receive financial compensation for his or her service. The volunteer's assignments are not to replace the regular duties of paid employees. A fellow is an individual who also performs services in a congressional office on a temporary basis, but typically through participation in an established, graduate-level or mid-career education program. Fellows often receive compensation from a sponsoring employer, professional association, or other organization while working in Congress during the course of the fellowships. Congressional offices may try to recruit fellows and work with existing programs, but a fellowship is usually not a position a congressional office creates on its own. A page is a high-school junior, at least 16 years old, who participates in a more structured program for a semester or summer. Pages continue to serve in the Senate, but the House program was discontinued in 2010. Although they are appointed by individual Senators, the pages provide assistance as a group in the Senate chamber, and receive housing, education, and a stipend from the Senate. Few statutes or standing rules of the House or Senate make specific references to congressional interns. In many cases, the distinction between a paid internship and an unpaid internship affects which formal rules apply to interns. Guidance and policies for House interns can be found in the House Ethics Manual , in the Members' Congressional Handboo k , Congressional C ommittee Handbook , from the House Committee on Ethics, and from the Committee on House Administration. For Senate interns, guidance and policies are mainly found in the Senate Ethics Manual , from the Senate Select Committee on Ethics, and from the Senate Committee on Rules and Administration. Congressional offices can choose to set additional rules for their interns to follow. House or Senate rules that apply to paid congressional employees generally extend to paid interns as well. These might include, but are not limited to, the Code of Official Conduct for the appropriate chamber, gift restrictions, ban on solicitations, and prohibition on payment for a speech, appearance, or publication. Financial disclosure rules may also apply in the Senate if the intern is receiving compensation from a source other than the U.S. government. Paid interns are exempt from some provisions of the Fair Labor Standards Act (FLSA) that otherwise apply to congressional staff, like minimum wage and overtime pay requirements, as well as employee benefits, like insurance and retirement. Fewer House or Senate rules may apply to unpaid interns than to paid interns. To enhance accountability for unpaid interns, the House or Senate ethics committees or individual congressional offices can set standards for unpaid interns to abide by that mirror some of the same rules that paid interns or congressional employees follow. A congressional office can enforce the rules it sets as internal office policies for unpaid interns, whereas the House and Senate institutionally may have fewer enforcement mechanisms affecting unpaid interns. The House Committee on Ethics, for example, advises that offices obtain an agreement in writing from unpaid interns at the outset of an internship. This agreement would acknowledge that the intern agrees \"to serve without compensation and to not make any future claim for payment, and acknowledge that the voluntary service does not constitute House employment.\" The committee also suggests that unpaid interns refrain from actions that present themselves as congressional officers or employees. The Senate Select Committee on Ethics requires that unpaid interns file a disclaimer with the Financial Clerk of the Senate acknowledging that their service is voluntary, or gratuitous, in nature. The committee also notes that the conflict-of-interest provisions in the Standing Rules of the Senate \"apply to any intern, fellow, or volunteer providing Senate services,\" even if the individual is only working for a single day. Interns performing full-time services in the Senate for over 90 days during a calendar year are also required to abide by the Senate Code of Conduct. It may be useful for House and Senate interns to familiarize themselves with the broader technology-use policies that apply to congressional offices. Computers, email accounts, internet access, and other technology resources provided to interns by the congressional office primarily should be used for official congressional business with any personal use limited and incidental. Because information sent and received from a congressional computer or network may be traced back to a particular office, an office may choose to implement additional standards for interns' incidental computer and internet usage. Offices may also develop guidelines for what is or is not permissible for interns to post on social media or public websites about their work. Paid interns are required to follow the House or Senate gift rules that apply to regular employees, and the House and Senate ethics committees advise that unpaid interns should also abide by the gift rules. Generally, these rules prohibit (1) receiving gifts from lobbyists or foreign agents, (2) receiving any individual gift valued at over $50, and (3) receiving $100 or more in gifts (each valued at $10 or more) from a single source. In most cases, it is typically permissible for a Member, staffer, or office to give an intern a small gift in recognition of his or her service. Federal law, however, prohibits supervisors from accepting gifts from interns. Offices often provide additional information or guidance to interns about congressional operations or resources. Offices, for example, might provide an overview of the House or Senate rules that apply to interns, or clarify their own office policies regarding attendance, technology use, phone etiquette, and other expectations. Information about emergency procedures and contact information for the appropriate police or medical services is commonly provided. Some offices may provide interns with a basic overview of the legislative process or how to perform legislative research. Locations of buildings or offices within the Capitol Complex and information on dining facilities and other on-site services may be useful for interns on Capitol Hill, and similar information about the area surrounding a state or district office could be provided to interns in those offices. House and Senate offices are able to set many of their own requirements for intern selection, just as they are with general personnel decisions. Some offices, for example, may require that interns are currently enrolled students, have reached a certain level of education, or that interns live in a Member's district or state. Many congressional offices post internship opportunities and application procedures on their websites. House offices can use the House Vacancy Announcement and Placement Service to post an internship announcement and may also request resumes from its resume bank. Similarly, the Senate Placement Office can publish opportunities for internships, collect applications, or provide resumes from its resume bank if a Senate office chooses to use the service. In many instances, Members of Congress have broad discretion to determine who works in their offices, but different laws, rules, and considerations may apply to a noncitizen's potential service, based on the individual's status, particularly if the individual receives pay. House offices may wish to contact the Office of the General Counsel, Committee on Ethics, or the Committee on House Administration before employing a noncitizen as an intern. In the Senate, offices may wish to contact the Senate Disbursing Office, Office of Legal Counsel, Select Committee on Ethics, or the Committee on Rules and Administration for guidance on employing noncitizen interns. The House and Senate ethics manuals provide some general guidance for congressional offices on working with foreign-national interns. Conflict-of-interest considerations may affect the responsibilities an office chooses to assign to a foreign-national intern. Interns who are foreign-nationals should not be assigned duties that might influence U.S. policy in a way that benefits the intern's home country. As with interns who are U.S. citizens or nationals, a foreign-national intern who receives outside funding for an internship should not be assigned work responsibilities that might affect the intern's employer or other sponsoring organization. Member offices are to be careful not to mix official congressional resources with campaign resources. Interns working in a congressional office may also work for a political campaign, but the two responsibilities are to be carefully delineated and kept separate so that congressional time, property, facilities, equipment, or other resources are not used for electoral campaigns. The prohibitions against using congressional resources for political purposes extend broadly and include any campaign activities within House or Senate offices, rooms, and buildings, even if such activities are conducted online using a staffer's personal account or device. If an intern is paid, then the standard prohibitions regarding nepotism or employment of relatives established in law and House or Senate rules apply. Because each congressional office is its own hiring authority, an intern may be related to another Member or staff in a different office without violating these rules. The House Ethics Committee also notes that a Member in the House can accept volunteer services from immediate family. Often, interns in congressional offices are college-age individuals or recent college graduates between 18 and 24 years old. Historically, individuals under 18 generally serve Congress as pages. There is no minimum age for congressional interns. If working with interns who are under 18, an office may want to consider the potential concerns related to working with minors and carefully evaluate the job-related skills and maturity of the prospective intern. There is also no maximum age for interns. Older individuals returning to higher education, considering a career change, or seeking a congressional internship for other reasons could also receive an educational benefit from such service and may have useful experience to share with a congressional office. In 1978, the Senate initiated a Senior Citizen Internship Program for individuals over 60 years old; the program operated for a number of years, but is currently inactive. Internship lengths often reflect time periods designated by the academic calendar, occurring, for example, over the course of the fall or spring semester, or during the summer. On their websites, some congressional offices advertise three-week internships, whereas others expect interns to serve for multiple months. Internship lengths within the same office can vary too, depending on the intern's availability and the office's resource constraints. There are no minimum lengths for House or Senate internships in statute, but certain considerations may affect the parameters offices choose for how long an internship should last. Congressional documents generally state that internships serve primarily as an educational experience. To meet this expectation, a congressional office may determine a minimum length for internships based on the amount of time it believes necessary to provide a sufficient learning opportunity. More detailed guidance is available for the maximum length of internships. Paid interns in the House can serve no longer than 120 days during a 12-month period. For unpaid interns, House guidance for Member offices suggests that \"limitations should be imposed on ... the duration of services any one volunteer may provide,\" to ensure \"that such voluntary assistance does not supplant the normal and regular duties of paid employees.\" The Senate Handbook notes that an internship should be for a total period not exceeding 12 months, and the Office of Workplace Rights (formerly Office of Compliance) has previously suggested the same maximum length for internships. Interns may receive pay from the congressional office they work in, if the office decides to provide it. FY2019 appropriations for the House and Senate provide some designated funding for internships in Members' personal offices in each chamber. Members may also use their own office resources, such as from the Members' Representational Allowance (MRA) in the House and the Senators' Official Personnel and Office Expense Account (SOPOEA) in the Senate, to provide compensation for interns. Committees or other congressional offices may provide compensation for interns through their appropriate accounts designated for staff salaries. In the House, the Committee on House Administration has set a gross annual rate of pay for interns for Member and committee offices to follow. Paid interns working in Washington, DC, may also be eligible for transit subsidies. Paid congressional interns are exempt from many of the provisions of the Fair Labor Standards Act of 1938 (FLSA) that otherwise apply to congressional staff following the passage of the Congressional Accountability Act (CAA) in 1995, including minimum wage requirements and overtime compensation. Previously, the Lyndon Baines Johnson Congressional Intern Program operated in the House from 1973 to 1994 and made two-month paid internships available for each Member office. Funds for this program have not been appropriated since the 103 rd Congress (1993-1994). Many educational institutions or other organizations sponsor congressional internships, and interns may receive stipends from these groups for their internships. Some of these internship opportunities are listed in CRS Report 98-654, Internships, Fellowships, and Other Work Experience Opportunities in the Federal Government . Some of these organizations operate internship programs in conjunction with congressional caucuses or other congressional entities to place paid interns in congressional offices. This is permissible, as long as there is no conflict of interest presented during the course of the internship. Additionally, the House and Senate ethics committees note that Members or staff cannot raise funds for programs that place interns or fellows in their own offices. When an intern is sponsored by an outside entity, ethics guidance says the intern should not be given responsibilities that could result in a direct or indirect benefit to the sponsor. If an intern is paid by an outside organization, congressional offices might take steps to ensure that the intern's duties do not supplant the regular duties of official staff, as this could be considered a violation of rules that prohibit House Members from using outside resources to conduct their official duties. The House and Senate expect that a congressional internship provides an educational experience but, institutionally, make no requirements that an intern receive school credit or be a currently enrolled student. Some congressional offices may choose to select interns on the basis of whether they will receive, or will not receive, academic credit for the experience. Each educational institution sets its own requirements for granting academic credit, and while some schools or academic departments encourage internships and grant academic credit for them, others do not allow students to receive academic credit for internships. School requirements may prevent a student from receiving academic credit for an internship experience that the intern may have personally found to be highly educational. A short internship, for example, may not meet a school's requirement for the number of hours served to receive credit. There is no minimum required number of interns for each congressional office; offices are not obligated to hire any interns unless they choose to. If interns are unpaid, there is no cap on the maximum number of interns for either the House or Senate. Offices, however, may want to ensure there is enough office space for interns to work in, and that there is enough work available to provide interns with a sufficient educational experience. If interns are paid, there may be a maximum number of interns an office can employ, based on applicable staff ceiling rules for the office. Under 2 U.S.C. Section 5321, interns in House Member offices paid by the Members' MRA count against the applicable staff ceiling for House personal offices. Interns in House Member offices paid under the intern allowance provided by the FY2019 legislative branch appropriations act ( P.L. 115-244 , Â§120) do not count against the staff ceiling for House personal offices. The number of interns in offices can fluctuate from year to year and within seasons during the year. During the summer, for example, offices commonly have more interns than during other parts of the year. For Member offices, the location of an internship in Washington, DC, or in a state or district office may also affect the number of interested and available interns. The substance of the work performed in an internship may vary greatly between district/state offices and Washington, DC, offices if the roles assumed by those different Member offices vary. For example, an intern's tasks may involve more constituent service activities in a district or state office than they would in a Washington, DC, office where the emphasis may be more on legislative activities. The same House and Senate rules and policies generally apply to district or state office interns and to Washington, DC, office interns. Due to the high concentration of congressional interns on Capitol Hill, some training opportunities and congressional programs may be available to Washington, DC, interns, but not to interns serving in district or state offices further away. House interns who are paid from the internship program funded in the FY2019 House appropriations bill ( P.L. 115-244 , Â§120) must be based in a Member's Washington, DC, office. For security purposes, interns in Washington, DC, offices can obtain a congressional ID badge, available from the Office of the Sergeant at Arms for the appropriate chamber. District or state office interns are also eligible to receive ID badges at the request of the employing Member office. ID badges are to be returned to the Office of the Sergeant at Arms upon completion of an internship. If interns are paid by Congress, then they are to take many of the mandatory trainings discussed below that new House or Senate employees are required to take. If interns are unpaid, however, fewer House or Senate trainings are mandatory for them. Because interns may be working with Congress or in a professional environment for the first time, congressional offices may want to have their interns attend additional trainings to better ensure they are prepared for their work and can represent the office appropriately. All interns in the House of Representatives are required to complete a training session on workplace rights and responsibilities. Also in the House, any individual who has access to the House network needs to complete an information security training online. A paid intern who is employed for 60 days or more is to take a House ethics training, which is mandatory for new House employees. Unpaid interns or paid interns with a shorter internship are not required to take this ethics training. Other programs or courses offered by the House may be available to interns and helpful for their work duties. The Senate Office of Education and Training provides a number of courses specifically designed for interns. A few, including harassment prevention and an overview of the Senate Code of Conduct, are listed as required courses, whereas others, like information security training, are listed as recommended or optional. Many of these courses are online and can be accessed via the Senate intranet in a state or Capitol Hill office. Other courses offered by the Senate Office of Education and Training or the Senate Library may be open to interns if space permits. Interns who are expected by their offices to use Congressional Research Service (CRS) resources or place requests must attend the \"Orientation Program for Interns and Volunteers\" offered by CRS. Interns who might need to use the Library of Congress resources more broadly can sign up for a research orientation covering the Library's collections, resources, and policies. If interns are responsible for hosting tours of the U.S. Capitol, they may be advised to sign up for a tour-leader training course offered by the Architect of the Capitol. Each summer, the Committee on House Administration and the Senate Committee on Rules and Administration cosponsor the Congressional Summer Intern Lecture Series, providing congressional interns with insights about politics and policymaking from Members of Congress, other government officials, and journalists. The lectures are scheduled from June through August, and the days and times vary based on speaker availability. Some programs and courses offered by CRS are open to congressional interns, provided that they have completed the CRS intern orientation. Current offerings are posted at http://www.crs.gov/events , and can help enrich the educational component of an intern's experience. Some video versions of past CRS events are also available at http://www.crs.gov/events/recordedevents , which may be helpful for district or state office interns.", "summary": "Many interns serve Congress, assisting individual Members, committees, and other offices or support services. Interns serve the House or Senate in a temporary capacity, primarily for an educational benefit, although some interns may receive pay for their service. Like many aspects of congressional operations, individual House or Senate offices can make many of their own rules and guidelines for interns, if they choose to operate an internship program. Additional institutional rules, however, may also apply. In the House, policies set by the Committee on Ethics or the Committee on House Administration may also affect congressional offices and interns, and in the Senate, additional relevant policies may be set by the Senate Select Committee on Ethics or the Committee on Rules and Administration. This report addresses frequently asked questions (FAQs) about congressional interns and internships. It is intended to provide information to congressional offices about the role of interns and to provide a summary of some of the policies and guidance provided by the House and the Senate related to internships. It addresses the House and Senate rules that apply to congressional internships, factors that may affect an office's selection process and an individual's eligibility to serve in an internship, and some of the congressional resources and training opportunities available for interns. For additional information about internship opportunities, refer to CRS Report 98-654, Internships, Fellowships, and Other Work Experience Opportunities in the Federal Government .", "document_type": "crs"}
{"report": "The federal government owns roughly 640 million acres, more than a quarter of the land in the United States. These lands are heavily concentrated in 12 western states (including Alaska), where t he federal government owns roughly half of the overall land area. Four federal agencies—the National Park Service (NPS), Fish and Wildlife Service (FWS), and Bureau of Land Management (BLM), all in the Department of the Interior (DOI), and the U.S. Forest Service (FS) in the Department of Agriculture—administer about 95% of those lands. No single law provides authority for these four agencies to acquire and/or disposal of lands. Rather, Congress provided various acquisition and disposal authorities through laws enacted over more than a century. This report describes the primary authorities of the four agencies. The extent to which each of the agencies has authority to acquire and dispose of land, and the nature of the authorities, varies considerably. Some of the agencies have relatively broad authority to acquire and/or dispose of land. Most notably, the BLM has relatively broad authority for both acquisitions and disposals. By contrast, the NPS has no general authority to acquire land to create new park units or to dispose of park lands. The extent of the acquisition and disposal authorities for the FS and the FWS are not nearly as broad as the BLM's but not nearly as restrictive as the NPS's. The FS authority to acquire lands is mostly limited to lands within or contiguous to the boundaries of a national forest. The agency has various authorities to dispose of land, but they are relatively constrained and infrequently used. The FWS has various authorities to acquire lands but no general authority to dispose of its lands. The acquisition authorities differ as to the circumstances in which they apply, and the disposal authorities likewise differ as to their purposes. Thus, where a specific acquisition or disposal by an agency is contemplated, the particular authority at issue should be consulted. In general, the acquisition authorities are designed to allow federal agencies to acquire lands that could be viewed as benefitting from federal management. Among other circumstances, acquisition might be authorized to bring inholdings or lands adjacent to federal lands into federal ownership to improve or simplify management of federal lands. Acquisitions also might be authorized to conserve species, protect natural and cultural resources, and increase opportunities for recreation. The disposal authorities generally are designed to allow federal agencies to dispose of land that is no longer required for a federal purpose, might be inefficient to manage, or might be chiefly valuable for another purpose. For instance, disposal might be authorized to allow lands to be used for agriculture, community development, mineral extraction, or educational purposes. Agencies also acquire and dispose of federal land in exchanges. Exchanges are not discussed separately in this report, as often the authorities to acquire and dispose of lands also apply to land exchange. However, there are provisions of law particularly applicable to exchanges. The exchange authorities for the NPS and the FWS are relatively narrow. The Federal Land Policy and Management Act of 1976 (FLPMA; 43 U.S.C. §§1701-1781) provides broader exchange authority and is the main authority governing exchanges by the BLM and the FS. Congress often faces questions on the adequacy of existing acquisition and disposal authorities; the nature, extent, and location of their use; the extent of federal land ownership overall; and the sources and levels of land acquisition funds, among other issues. The suitability of the acquisition and disposal authorities, and the extent and circumstances of their use by the agencies, forms the backdrop for congressional consideration of measures to establish, modify, or eliminate the use of authorities. With regard to the establishment of new authorities, for instance, some 115 th Congress proposals would authorize states to exchange land grant parcels for federal lands. Other measures would authorize the BLM and FS to convey small tracts to adjacent landowners and to govern the use of proceeds from these conveyances. Proposals to modify authorities include measures in the 115 th Congress to reauthorize and amend BLM authority to sell or exchange land under the Federal Land Transaction Facilitation Act (FLTFA; 43 U.S.C. §§2301 et seq.), as well as bills to amend the Small Tracts Act (16 U.S.C. §521e) regarding the type and value of FS lands that can be disposed of and the use of related proceeds. Among the provisions to eliminate the use of authorities are those to prevent the disposal of federal land under the General Mining Law of 1872, which have been contained in annual Interior appropriations laws since FY1995. In addition, Congress frequently considers legislation authorizing and governing the acquisition or disposal of specific parcels. For example, Title XXX of P.L. 113-291 contained various provisions to authorize the acquisition and/or disposal of land. Congress may consider such legislation to provide an agency with acquisition or disposal authority in a particular instance because it is lacking. In other cases, Congress directs a particular acquisition or disposal to facilitate the action. For instance, the legislation may seek to direct an acquisition based on Congress's assessment of public needs and priorities. It may expedite the process for acquiring a parcel of land, such as by limiting the assessments and evaluations that ordinarily would be required under law. The legislation also might authorize actions not ordinarily permitted, such as the conveyance of land at reduced or no cost rather than at fair market value. Congress also addresses acquisition and disposal policy in the context of deliberations on the role and goals of the federal government in owning and managing land generally. The extent to which the federal government should own land remains controversial. Many westerners contend that there is excessive federal influence over their lives and economies and that the federal government should divest itself of many lands. Many others support the policy of retaining lands in federal ownership on behalf of the public and sometimes advocate adding more lands to enhance protection. Recent Congresses considered diverse bills pertaining to the extent of federal land ownership. Among others, 115 th Congress measures would authorize or direct the Secretary of the Interior and the Secretary of Agriculture to offer to sell a certain percentage of land in each of several fiscal years. Other bills provide that where a land management agency acquires land, an equal number of acres is to be offered for sale. Another set of issues pertains to the sources and levels of funds for land acquisition. The principal financing mechanism for federal land acquisition is discretionary appropriations under the Land and Water Conservation Fund (LWCF). Provisions of the Land and Water Conservation Fund Act of 1965 (LWCF Act; 54 U.S.C. §§200301 et seq.) had provided for $900 million in specified revenues to be deposited in the LWCF annually. These provisions expired September 30, 2018. Each year, Congress determines the level of appropriations from the LWCF for federal land acquisition. Total appropriations for land acquisition and the amount provided to each of the federal land management agencies have varied substantially since the program's origin in 1965. In the 115 th Congress, some measures propose permanent reauthorization of the LWCF and/or mandatory appropriations at the authorized level. Advocates of such bills typically seek stable, predictable funding to promote a strong federal role in acquiring and managing sensitive resources. Other measures would direct a portion of funding to particular purposes, such as acquisitions in areas with restricted access for fishing, hunting, and other types of recreation. Still other proposals would allow LWCF to be used for a broader array of purposes, including nonacquisition purposes, due to concerns about the extent of federal land ownership and the availability of funding for other federal activities. Additional sources of funding are available for some agencies or under certain authorities. For instance, the FWS has a mandatory source of funds for land acquisition through the Migratory Bird Conservation Fund, as discussed below. As another example, the BLM also has mandatory spending authorities that allow the agency to keep the proceeds of land sales and use these proceeds for subsequent acquisitions and other purposes. These authorities are discussed below. The application of mandatory spending authorities, including the uses of the proceeds, has been the subject of congressional debate. As noted above, various laws authorizing and governing specific land acquisitions have been enacted. In addition, the four federal land management agencies have different standing authorities for acquiring lands. In general, all four agencies are authorized to accept land as gifts and bequests. In addition, each generally is authorized to use eminent domain —taking private property, through condemnation, for public use—while compensating the landowner. However, this practice is controversial, and it is rarely used by the land management agencies. The primary land acquisition authorities are described below for each of the four federal land management agencies. In general, the agencies are presented in the order of the breadth of their authorities, with the NPS (the narrowest authorities) first and the BLM (the broadest authorities) last. The NPS does not have standing authority to acquire lands for new or existing units of the National Park System, except in limited circumstances. Rather, most units have been created by Congress, and the law creating a park unit typically includes specific authority for the NPS to acquire nonfederal inholdings within the identified boundaries of that park. The Secretary of the Interior is authorized to make certain boundary adjustments of park units for \"proper preservation, protection, interpretation, or management\" and to acquire the nonfederal lands within the adjusted boundary, under specified provisions and conditions (54 U.S.C. §100506(c)). Some of these conditions have been interpreted to apply particularly to boundary adjustments requiring land purchases, as opposed to those in which added lands are acquired by donation, transfer, or exchange. The President has authority to create national monuments on federal lands under the Antiquities Act of 1906 (54 U.S.C. §§320301 et seq.). In total, 158 monuments have been created by presidential proclamation. Most are managed by the NPS, but some are managed by the BLM and other agencies. Under law, the Secretary of the Interior and the NPS have responsibilities related to the potential acquisition of lands for the National Park System. Among other requirements, the Secretary is directed \"to investigate, study, and continually monitor the welfare of\" areas that could potentially be added to the system and to report to Congress on possible additions (54 U.S.C. §100507). Furthermore, the general management plan for each unit is to include potential changes to the boundaries of the unit and the reasons for such changes (54 U.S.C. §100502). The Secretary also is to conduct a \"systematic and comprehensive review of certain aspects of the National Park System\" and to submit a related report to Congress at least every three years (54 U.S.C. §100505(a)) that includes a list of all authorized but unacquired lands within the boundaries of park units and a priority listing of these unacquired parcels (54 U.S.C. §100505(c)). The Secretary of Agriculture has various authorities to acquire lands for the National Forest System (NFS). The NFS consists of 284 units covering 232.4 million acres of federal and nonfederal land, including national forests, national grasslands, purchase units, land utilization projects, and other areas. Today, only an act of Congress can create new NFS units, but the Secretary may acquire lands within or contiguous to the proclaimed exterior boundaries of an NFS unit. The NFS contains substantial acreage of nonfederal lands within the proclaimed boundaries of the system, particularly in the east, where national forests were established after extensive settlement. NFS units in the Eastern and Southern Regions average about 46% nonfederal land within their boundaries, while Western Region NFS units average about 10%. The FS has very limited regulatory authority over the uses of the 39.5 million acres of nonfederal land within the NFS. The FS's primary land acquisition authority is the Weeks Act of 1911 (16 U.S.C. §515), which was used to acquire many of the lands that became the eastern national forests. The Weeks Act authority continues to be the agency's primary authority to acquire lands; however, acquisitions are now limited to lands within (or adjacent to) established NFS unit boundaries. The Weeks Act also authorizes the Secretary to modify the NFS unit boundary as needed to encompass new acquisitions. Other laws authorize the FS to acquire lands for the national forests, typically in specific areas or for specific purposes. For example, Section 205 of the Federal Land Policy and Management Act (FLPMA; P.L. 94-579 ) authorizes the acquisition of access corridors—including easements—to national forests across nonfederal lands (43 U.S.C. §1715(a)). Another example is the Act of August 3, 1956 (7 U.S.C. §428(a)), which authorizes the FS to acquire lands without any geographical limitations but does require a provision be made in a specific appropriation or other law. Another law authorizes proceeds from certain land sales or exchanges to be used for acquisitions, including for administrative sites and enhancement of recreational access. However, the acquisitions are limited to the state in which FS previously conveyed NFS land under specific disposal authorities, as discussed later in this report. Several other acquisition authorities apply to specific national forests, such as the Act of June 11, 1940, which authorizes the purchase of lands within the Angeles National Forest in California. In addition, the Secretary of Agriculture and the secretary of a military department that has lands within or adjacent to proclaimed NFS land may interchange lands, without reimbursement or transfer of funds. Many of the acquisition authorities also allow the FS to accept donations of land as specified. Within the NFS, the Secretary of Agriculture also is authorized to acquire privately owned lands within or adjacent to designated wilderness areas (16 U.S.C. §1134(c)), Wild and Scenic River corridors (16 U.S.C. §1277), and certain segments of designated National Trails (16 U.S.C. §1244), as specified by the law creating the trail. Lands may be added to the National Wildlife Refuge System (NWRS) in a number of ways, including through congressional and administrative actions and donations. A principal FWS land acquisition authority is the Migratory Bird Conservation Act of 1929 (MBCA; 16 U.S.C. §§715 et seq.). This act authorizes the Secretary of the Interior to recommend areas \"necessary for the conservation of migratory birds\" to the Migratory Bird Conservation Commission, after consulting with the relevant governor (or state agency) and appropriate local government officials (16 U.S.C. §715a and §715c). In addition, the state in which the purchase is located must have consented to the acquisition by law (16 U.S.C. §715f and §715k-5). The Secretary may then purchase or rent areas or interests therein approved by the commission and acquire by gift or devise any area or interest therein (16 U.S.C. §715d). The MBCA authority is used frequently because of the availability of funding through the Migratory Bird Conservation Fund (MBCF, 16 U.S.C. §718d). The MBCF is supported by multiple sources of funding, including three major sources: the sale of hunting and conservation stamps (commonly known as duck stamps); import duties on arms and ammunition; and a portion of certain refuge entrance fees. MBCF funds are permanently appropriated to the extent of receipts and, after paying certain administrative costs, may be used for the \"location, ascertainment, and acquisition of suitable areas for migratory bird refuges ...\" (16 U.S.C. §718d(b)). The predictability of funding and permanent authority for use makes the MBCF, and thus the MBCA, particularly important for FWS land acquisition and unique among the four agencies. Other laws provide general authority to expand the NWRS, including the Fish and Wildlife Coordination Act of 1934 (16 U.S.C. §§661-667a), the Fish and Wildlife Act of 1956 (16 U.S.C. §§742a et seq.), and the Endangered Species Act of 1973 (16 U.S.C. §§1531-1544). The National Wildlife Refuge System Administration Act of 1966 (16 U.S.C. §§668dd-668ee) authorizes the Secretary of the Interior to acquire land or interests therein through donated funds or exchange (16 U.S.C. §668dd(b)). Further, FLPMA authorizes the Secretary of the Interior to withdraw lands from the public domain for creating or adding to refuges (which would be an interagency transfer), although withdrawals exceeding 5,000 acres are subject to congressional approval (43 U.S.C. §1714(c)). In contrast to NPS and FS land acquisition, where the lands generally must be within the boundaries of established units, the FWS can acquire new lands to create a new refuge or to expand an existing one under the general FWS authorities cited above, as well as under certain other laws. Some national wildlife refuge (NWR) units have been created by specific acts of Congress, such as Protection Island NWR (WA) and Bayou Sauvage Urban NWR (LA) (16 U.S.C. §668dd note). Units also can be created by executive order; for example, the Midway Atoll NWR was created by President Clinton in Executive Order 13022. The BLM has broad, general authority to acquire lands, principally under Section 205 of FLPMA. Specifically, the Secretary of the Interior is authorized to acquire, by purchase, exchange, donation, or use of eminent domain, lands or interests therein (43 U.S.C. §1715(a)). The BLM acquires land or interests in land, including inholdings, for a variety of reasons. These include to protect natural and cultural resources, to increase opportunities for public access and recreation, and to improve management of lands. As noted above, various laws directing the disposal of particular lands sometimes have been enacted. In addition, the four federal land management agencies have different standing authorities for disposing of lands. The specific disposal authorities are discussed below for each of the four agencies in the order of their apparent breadth, with the NPS (the narrowest authorities) first and the BLM (the broadest authorities) last. The NPS does not have general authority to dispose of National Park System lands. Units and lands of the Park System that were established by acts of Congress can be disposed of only by acts of Congress. Preservation of park units is a management goal and provisions of law limit the power of the Secretary of the Interior to dispose of land in changing park boundaries. Although the Secretary can, under specified conditions, make boundary changes that concurrently add and remove land within the boundary, minor boundary revisions solely to remove NPS acreage can be made only by Congress. Also, the Secretary can acquire by exchange lands that are adjacent to a boundary revision, but the Secretary cannot dispose of NPS land to do so (54 U.S.C. §100506(c)). Presidents have modified the boundaries of national monuments established by previous presidential proclamations, in some cases reducing the size of the monument. However, no president has terminated a monument established by proclamation. The FWS does not have general authority to dispose of its lands. With certain exceptions, wildlife refuge lands administered by the FWS can be disposed only by an act of Congress (16 U.S.C. §§668dd(a)(5) and (6)). For refuge lands reserved from the public domain, FLPMA prohibits the Secretary of the Interior from modifying or revoking any withdrawal which added lands to the NWRS (43 U.S.C. §1714(j)). For acquired lands, disposal is allowed only if: (1) the disposal is part of an authorized land exchange (16 U.S.C. §§668dd(a)(6) and (b)(3)); or (2) the Secretary determines the lands are no longer needed and the Migratory Bird Conservation Commission approves the disposal (16 U.S.C. §668dd(a)(5)). In the latter case, the disposal must recover the acquisition cost or be at the fair market value (whichever is higher), and the receipts must be deposited in the Migratory Bird Conservation Fund. The Secretary of Agriculture has numerous authorities to convey lands within proclaimed NFS boundaries out of federal ownership—through sale or exchange—although previous, broader authorities have been modified or revoked. Many of the authorities put constraints on land disposal, such as applying only to a specific geographical area or to the disposal of particular administrative properties or facilities. Many of the authorities are used in conjunction with FLPMA and other federal law and as such may place requirements on the sale or exchange of land. This includes obtaining at least fair market value for the sale of federal lands; requiring that nonfederal land exchanged for federal land be in the same state; and requiring exchanged lands to be of equal value, although value may be partially equalized with a cash payment (43 U.S.C. §1716). The General Exchange Act of 1922 (16 U.S.C. §485) authorizes the exchange of NFS land or timber that was reserved from the public domain if the Secretary determines it will be in the public interest. The nonfederal land must be within the same state and within the exterior boundary of a national forest, and it must be chiefly valuable for national forest purposes, among other provisions. The Weeks Act of 1911 allows for similar exchanges for acquired NFS lands (16 U.S.C. §516). The 1983 Small Tracts Act authorizes the Secretary to dispose of NFS land by sale or exchange, generally up to certain specified acreage limits. The disposal may be To improve management efficiencies where NFS lands are interspersed with nonfederal mineral rights owners, or if the Secretary determines the parcels to be inaccessible, physically isolated from other federal land, or to have lost national forest character (40 acres maximum); To relieve encroachments including due to erroneous surveys, or encroachments by a permanent habitable improvement if there is no evidence that the encroachment was intentional or due to negligence (10 acres maximum); To dispose of unneeded federal rights-of-way substantially surrounded by nonfederal lands (no specified acreage limitation); and If the parcel is used as a cemetery, landfill, or sewage plant pursuant to a special use authorization for the use and occupancy of NFS land (no specified acreage limitation) (16 U.S.C. §521e). The conveyance must be determined to be in the public interest and the tracts may not be valued at more than $500,000. The land can be disposed of for cash, lands, interests in land (such as an easement), or any combination thereof for at least the value of the land being sold or exchanged (16 U.S.C. §521d) plus \"all reasonable costs of administration, survey, and appraisal incidental to such conveyance\" (16 U.S.C. §521f). In some cases, the proceeds may be used for specified land acquisition purposes. The 1958 Townsites Act authorizes the Secretary to transfer up to 640 acres of NFS land adjacent to communities in Alaska or the 11 western states for townsites, if the \"indigenous community objectives ... outweigh the public objectives and values which would be served by maintaining such tract in Federal ownership\" (16 U.S.C. §478a). Public notice of the application for such transfer is required, and upon a \"satisfactory showing of need,\" the Secretary may offer the land to a local governmental entity at \"not less than the fair market value.\" The Education Land Grant Act, also known as the Sisk Act (16 U.S.C. §479a), authorizes the Secretary to transfer up to 80 acres of NFS land for a nominal cost upon written application of a public school district. It provides for reversion of the title to the federal government if the lands are not used for the educational purposes for which they were acquired. There are a few other specific authorities that allow for the disposal of NFS lands. For example, the 1911 Weeks Act authorizes the disposal of NFS lands that are \"chiefly valuable for agriculture\" but were acquired inadvertently or otherwise, if agricultural use will not injure the forests or streamflows and the lands are not needed for public purposes. The lands can be sold as homesteads in parcels of up to 80 acres (16 U.S.C. §519). The Bankhead-Jones Farm Tenant Act of 1937 (7 U.S.C. §§1010-1012) also authorizes the disposal of lands acquired under its authority, although the FS has adopted regulations stating that the Bankhead-Jones lands comprising the national grasslands will be held permanently (36 C.F.R. §213.1(b)). The BLM can dispose of land under several authorities. They include (1) exchanges and sales under FLPMA, (2) sales or exchanges under the FLTFA, (3) transfers to other governmental units or nonprofit entities for public purposes, (4) patents under the General Mining Law of 1872, and (5) geographically limited sale authorities. With regard to exchanges under FLPMA, the exchanges must serve the public interest, and the federal and nonfederal lands in the exchange must be located in the same state and be of equal value (with cash equalization payments possible), among other requirements (43 U.S.C. §1716). With regard to sales under FLPMA, the BLM is authorized to sell certain tracts of public land that are identified through the land-use planning process. Such tracts must meet specific criteria (43 U.S.C. §1713(a)): (1) such tract because of its location or other characteristics is difficult and uneconomic to manage as part of the public lands, and is not suitable for management by another Federal department or agency; or (2) such tract was acquired for a specific purpose and the tract is no longer required for that or any other Federal purpose; or (3) disposal of such tract will serve important public objectives, including but not limited to, expansion of communities and economic development, which cannot be achieved prudently or feasibly on land other than public land and which outweigh other public objectives and values, including, but not limited to, recreation and scenic values, which would be served by maintaining such tract in Federal ownership. The size of the tracts for sale is determined by \"the land use capabilities and development requirements.\" Proposals to sell tracts of more than 2,500 acres first must be submitted to Congress and can be disapproved by Congress. Lands may not be sold at less than their fair market value. They generally must be sold through competitive bidding, although modified competition and noncompetitive sales are allowed. FLTFA provides for the sale or exchange of BLM lands identified for disposal under BLM land- use plans. The law create s a separate Treasury account for most of the proceeds (96%) from the sale or exchange, and it provide s for the use of those funds by the Secretary of the Interior and the Secretary of Agriculture. The Secretaries may acquire nonfederal lands, specifically inholdings , lands adjacent to federal lands that contain exceptional resources , and areas adjacent to inaccessible lands that are open to recreation. Up to 20% of the funds in the account may be used for administrative costs, and at least 80% of the funds for acquisition are to be in the state in which the funds are generated . The Recreation and Public Purposes Act (43 U.S.C. §869) authorizes the Secretary, upon application by a qualified applicant, to dispose of any public lands to a State, Territory, county, municipality, or other State, Territorial, or Federal instrumentality or political subdivision for any public purposes, or to a nonprofit corporation or nonprofit association for any recreational or any public purpose consistent with its articles of incorporation or other creating authority. The lands can be sold or leased, and the act specifies conditions, qualifications, and acreage limitations for transfer. The price of the land depends on the type of entity that will receive it, for instance, whether a state government or a nonprofit organization. The price also depends on the intended use of the land, with some sales and leases made at no cost. Although the BLM can dispose of lands through patents under the General Mining Law of 1872, since FY1995 a series of annual moratoria on issuing mineral patents has been enacted into law. These moratoria, contained in the annual Interior appropriations laws, have effectively prevented this means of federal land disposal. Specifically, the Mining Law allows access to and development of hardrock minerals on federal lands that have not been withdrawn from entry. With evidence of valuable minerals and sufficient developmental effort, the Mining Law allows mining claims to be patented, with full title (of surface and mineral rights) transferred to the claimant upon payment of the appropriate fee. Nonmineral lands used for associated milling or other processing operations can also be patented (30 U.S.C. §42). Patented lands may be used for purposes other than mineral development. The BLM also has geographically limited land sale authorities. The program with the largest revenue stream has been the Southern Nevada Public Land Management Act of 1998, which allows the Secretary of the Interior to sell or exchange certain lands around Las Vegas. The BLM and the local government unit jointly decide on the lands to be offered for sale or exchange. In general, 85% of the proceeds are deposited into a special account, and are available to the Secretary of the Interior for land acquisition in Nevada and other purposes in the state, such as certain capital improvements and development of parks, trails, and natural areas. The other 15% of the proceeds are for state or local purposes, specifically the State of Nevada General Education Fund (5%) and the Southern Nevada Water Authority (10%). Other provisions of law similarly provide for BLM land sales in particular areas (mostly in Nevada), with specific allocations of the proceeds. Further, the BLM continues to dispose of land in Alaska as required by law, such as through transfers to the state of Alaska and to Alaska native corporations. A total of about 150 million acres in Alaska will be transferred from federal to state and private ownership. ", "summary": "The federal government owns roughly 640 million acres, heavily concentrated in 12 western states. Four agencies—the National Park Service (NPS), Fish and Wildlife Service (FWS), and Bureau of Land Management (BLM) in the Department of the Interior, and the U.S. Forest Service (FS) in the Department of Agriculture—administer about 95% of those lands. The extent to which each of these four federal agencies have authority to acquire and dispose of land varies considerably. The BLM has relatively broad authority for both acquisitions and disposals under the Federal Land Policy and Management Act of 1976 (FLPMA). The agency also has other authorities for disposing of land, including two laws that allow the agency to retain the proceeds for subsequent land acquisition, among other purposes, and a law that allows transfers to governmental units and other entities for public purposes. By contrast, the NPS has no general authority to acquire land to create new park units or to dispose of park lands. The FS authority to acquire lands is mostly limited to lands within or contiguous to the boundaries of a national forest. The agency has various authorities to dispose of land, but they are relatively constrained and infrequently used. The FWS has various authorities to acquire lands but no general authority to dispose of its lands. The agency frequently uses acquisition authority under the Migratory Bird Conservation Act of 1929 because of the availability of funding through the Migratory Bird Conservation Fund. The nature of the acquisition and disposal authorities of the four federal agencies also varies. In general, the acquisition authorities are designed to allow the four agencies to bring into federal ownership lands that many contend could benefit from federal management. Disposal authorities generally are designed to allow agencies to convey land that is no longer needed for a federal purpose or that might be chiefly valuable for another purpose. Some of the authorities specify particular circumstances where they can be used, such as the conveyance of FS land for educational purposes and the disposal of BLM land for recreation and public purposes. Congress often faces questions on the adequacy of existing acquisition and disposal authorities; the nature, extent, and location of their use; and the extent of federal land ownership overall. The current acquisition and disposal authorities form the backdrop for consideration of measures to establish, modify, or eliminate authorities, or to provide for the acquisition or disposal of particular lands. In some cases, Congress enacts bills to provide authority to acquire or dispose of particular parcels where no standing authority exists and, in other cases, to direct or facilitate land transactions. Congress also addresses acquisition and disposal policy in the context of debates on the role and goals of the federal government in owning and managing land generally, and it has considered broader measures to dispose of lands or to promote acquisition. Other issues for Congress pertain to the sources and levels of funds for land acquisition. The Land and Water Conservation Fund (LWCF) is the primary source of funding for land acquisition. Congress has considered diverse measures related to the LWCF, such as legislation to make LWCF funding permanent and bills to direct LWCF monies to additional, nonacquisition purposes. Additionally, the FWS has the Migratory Bird Conservation Fund, an account with mandatory spending authority supported by revenue from three sources. The BLM also has mandatory spending authorities that allow the proceeds from land sales to be used for land acquisition, among other purposes.", "document_type": "crs"}
{"report": "Commemorative coins are coins that are \"produced with the primary intention of creating a special souvenir to be sold (at a premium above face value) to observe or memorialize an anniversary, special occasion, or other event.\" Produced by the U.S. Mint pursuant to an act of Congress, these coins celebrate and honor American people, places, events, and institutions. Although they are considered legal tender, they are not minted for general circulation. Instead, they are designed to be collected and to help designated groups raise money to support group activities. Commemorative coin legislation is often proposed by Members of Congress as part of their representational duties. The first commemorative coin was authorized in 1892 for the World's Columbian Exposition in Chicago. Issued as a silver half-dollar, the proceeds for the sale of the coin were used \"for the purpose of aiding in defraying the cost of completing in a suitable manner the work of preparation for inaugurating the World's Columbian Exposition.\" Beginning in 1892 and continuing to the present day—with a hiatus between 1954 and 1981—coins have been a part of the commemoration of people, places, events, and institutions. This report examines the origins, development, and current practices for commemorative coins, including the authorization process; the design of coins; and issues for congressional consideration, including the disbursement of surcharges, the number of coins minted per year, differences between the number of authorized coins and coins sold, and requirements for legislative consideration in the House and Senate. Since 1892, Congress has authorized 152 new commemorative coins. Sixty of these coins were authorized between 1892 and 1954. During this period, most commemorative coins celebrated state anniversaries (e.g., Connecticut's tercentennial in 1935), expositions and event anniversaries (e.g., the Lexington-Concord Sesquicentennial in 1925 or the Louisiana Purchase Exposition in 1903), or helped support memorials (e.g., the Grant Memorial in 1922 or the Stone Mountain Memorial in 1925). During this time period, coins \"were sold to sponsoring organizations, which resold them to the public at higher prices as a means of fundraising.\" The authorization of new commemorative coins was \"discontinued by Congress in 1939, with the exception of three coins issued through 1954.\" For a list of historical commemorative coins authorized between 1892 and 1954, see Appendix A . Between 1954 and 1981, Congress did not authorize any new commemorative coins. The moratorium on new commemorative coins was in part because public interest in the coins had waned and the Department of the Treasury was concerned that \"multiplicity of designs on United States coins would tend to create confusion among the public, and to facilitate counterfeiting.\" In his February 1954 veto statement to Congress on S. 2474 (83 rd Congress), which would have authorized a 50-cent piece for the tercentennial of New York City, President Eisenhower cited a diminishing interest among the public for the collection of commemorative coins. President Eisenhower stated: I am further advised by the Treasury Department that in the past in many instances the public interest in these special coins has been so short-lived that their sales for the purposes intended have lagged with the result that large quantities have remained unsold and have been returned to the mints for melting. In 1982, Congress resumed the authorization of commemorative coins with the enactment of a bill to issue a commemorative half-dollar for George Washington's 250 th birthday. With the issuance of new commemorative coins, the \"range of subject matter expanded to include subjects such as women, historical events, and even buildings and landscapes.\" Additionally, the concept of surcharges as a method to direct money to designated groups was introduced. The idea of a surcharge—a statutorily authorized \"dollar amount added to the price of each coin\" —was not without controversy. \"These related surcharges became controversial with collectors, many of whom resented making involuntary donations when they bought coins. Today, the practice ... is ... the linchpin that has ignited most commemorative programs—as potential recipients of the surcharge launch ... lobbying campaigns in Congress.\" Commemorative coins authorized during the modern period can be subdivided into coins minted between 1982 and 1997, and coins minted since 1998. In 1996, the Commemorative Coin Reform Act (CCRA) was enacted to (1) limit the maximum number of different coin programs minted per year; (2) limit the maximum number of coins minted per commemorative coin program; and (3) clarify the law with respect to the recovery of Mint expenses before surcharges are disbursed and conditions of payment of surcharges to recipient groups. The CCRA restrictions began in 1998. Between 1982 and 1997, Congress authorized 47 commemorative coins. In several cases, multiple coins were authorized to recognize specific events, including the 1984 Summer Olympics in Los Angeles and the 1996 Summer Olympics in Atlanta. See Appendix B for a list of commemorative coins authorized by Congress prior to the two-per-year limit imposed by the CCRA. As noted above, the CCRA limited the U.S. Mint to issuing two coins per year, beginning in 1998. This action was taken in response to the proliferation of commemorative coins authorized since the program was restarted in 1982. Between 1982 and 1997, as many as six different coins were minted in a single year (1994). Ten distinct coins were issued each year (eight Olympic coins per year in addition to two other commemorative coin programs) in 1995 and 1996. Starting in 1998, a maximum of two coins were to be authorized for minting in a given year. Even with this restriction, however, three coins were minted in 1999. Additionally, on two occasions, only one coin was authorized for a given year—2003 and 2008. Table 1 lists authorized commemorative coins since 1998, including their authorizing statute. As listed in Table 1 , a total of 41 commemorative coins were struck by the U.S. Mint between 1998 and 2018. The average coin minted during this time period was authorized three years prior to being struck, with the longest time period between authorization and minting being the West Point Bicentennial commemorative coin, which was authorized in 1994 to be struck in 2002. The shortest time period between authorization and minting was the San Francisco Old Mint commemorative coin, which was authorized and struck in the same year: 2006. In addition to completed commemorative coin programs, Congress has authorized coins to be minted in 2019 and future years. Currently, coins are authorized for 2019 and 2020. No coins are currently authorized for 2021 or beyond. Table 2 lists current and future commemorative coins, including their authorizing statute. Each Congress, several proposals are introduced to authorize new commemorative coins. Table 3 lists proposals for new commemorative coins introduced in the 115 th Congress. These bills would have authorized coins for minting between 2017 and 2022. Legislation that became law—American Legion 100 th Anniversary and the Naismith Memorial Basketball Hall of Fame—is not included in Table 3 . Commemorative coin legislation generally has certain features, including findings that summarize the commemorative subject's history and importance; specifications for denominations, weight, and metallic makeup; design requirements, including required dates, words, and images; start and end dates for minting coins and any other limitations; requirements for selling coins; coin surcharge and distribution to designated groups; and assurances that costs of the coin program are recouped by the U.S. Mint. The following provides examples of the features generally found in a commemorative coin bill. Commemorative coin legislation typically includes a section of findings. These include historical facts about the people, places, events, and institutions being honored by the coin. For example, the legislation to authorize the Star-Spangled Banner commemorative coin stated: The coin specification section typically provides details on the type and number of coins authorized to be minted. Additionally, this section generally includes language that makes the coin legal tender and a numismatic item. In some cases, this section also includes specific language on coin design. For example, the legislation authorizing the National Baseball Hall of Fame commemorative coin includes language on the three types of coins authorized—$5 gold coin, $1 silver coin, and half-dollar clad coin—and a sense of Congress that the reverse side of the coin should be \"convex to more closely resemble a baseball, and the obverse concave.\" Commemorative coin legislation also typically specifies requirements for the design of the coin. These include official language on words or dates that are to appear on the coin and instructions about how the design might be chosen. For example, the legislation to authorize the Civil Rights Act of 1964 commemorative coin stated: The issuance of coins section typically specifies the time period that the coin will be available for sale and provides any instructions to the Secretary of the Treasury as to which mint location should strike the coins and the quality of the coins to be issued. For example, the March of Dimes commemorative coin authorization stated: The sale of coins section typically sets the sale price of the coin and provides instructions to the Mint on bulk sales and prepaid coin orders. For example, the statute authorizing the Five-Star Generals commemorative coin stated: The surcharges section of the legislation typically sets the surcharges (amount above the face value that the U.S. Mint charges) per coin and designates the distribution of these surcharges to recipient organizations. For example, the statute to authorize the U.S. Army commemorative coin stated: More information on surcharges and disbursement to designated recipient organizations can be found below under \" Disbursement of Surcharges .\" Some bills have included a section on financial assurances. This section generally states that minting coins will not result in a net cost to the government. The Mint is currently required to recover its expenses before it can disburse potential surcharges to recipient organizations designated in a commemorative coin statute. The Mint has stated that all commemorative coin programs have operated at no cost to the taxpayer since 1997. For example, the statute to authorize the American Legion 100 th Anniversary commemorative coin stated: Once a commemorative coin bill is introduced, it is typically referred to the House Committee on Financial Services or the Senate Committee on Banking, Housing and Urban Affairs. Neither House nor Senate rules provide any restrictions specifically concerning consideration of commemorative coin legislation on the House or Senate floor. Pursuant to Senate and House rules, the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services have jurisdiction over commemorative coin legislation. In the Senate, the Banking, Housing and Urban Affairs Committee rules place a minimum on the number of cosponsors a commemorative coin bill must have before committee consideration. Committee Rule 8 requires that \"at least 67 Senators must cosponsor any ... commemorative coin bill or resolution before consideration by the Committee.\" The rules of the House Financial Services Committee adopted for the 116 th Congress do not specifically address committee consideration of commemorative coin legislation, although informal practices may exist. After Congress has authorized a commemorative coin, the U.S. Treasury begins the coin design process. This process involves consultation with the Citizens Coinage Advisory Committee (CCAC) and a design recommendation by the U.S. Commission of Fine Arts (CFA). The final decision on a coin's design is made by the Secretary of the Treasury. Established by P.L. 108-15 , the CCAC advises the Secretary of the Treasury on theme and design of all U.S. coins and medals. For commemorative coins, the CCAC advises the Secretary with regard to events, persons, or places to be commemorated, the mintage level of coins, and commemorative coin designs. The CCAC consists of 11 members appointed by the Secretary of the Treasury, with four persons appointed upon the recommendation of the congressional leadership (one each by the Speaker of the House, the House minority leader, the Senate majority leader, and the Senate minority leader). The CCAC meets several times each year to consider design suggestions for coins and medals. For each coin considered, the CCAC provides advice to the Secretary \"on thematic, technical, and design issues related to the production of coins.\" Recommendations are then published to the committee's website, at http://www.ccac.gov . When making recommendations to the Secretary, the CCAC considers several design aspects. Figure 1 shows the CCAC's \"Design Aspects We Look For,\" when advising groups on coin design. Figure 2 shows examples of U.S. Commemorative coins. These include the first U.S. commemorative coin (1893 World's Columbian Exposition half-dollar), one of the best-selling commemorative coin programs of all time (1986 Statue of Liberty half-dollar), and one of the most recent (2016 National Park Service Centennial). The U.S. Mint also makes a formal presentation of design options to the U.S. Commission of Fine Arts (CFA). Established in 1910, the CFA advises \"upon the location of statues, fountains, and monuments in the public squares, streets, and parks in the District of Columbia, the selection of models for statues, fountains, and monuments erected under the authority of the Federal Government; the selection of artists; and questions of art generally when required to do so by the President or a committee of Congress.\" This includes review of commemorative coins when they are presented by the U.S. Mint and the issuance of recommendations for a coin's design. For example, in March 2016, the U.S. Mint presented several alternative designs for the Boys Town Centennial Commemorative Coin program. In a letter to the U.S. Mint, the CFA provided recommendations on the design for each of the three statutorily required coins. CFA's letter stated: After receiving advice from the CCAC and the CFA, the Secretary of the Treasury, through the U.S. Mint, finalizes the coin's design and schedules it for production at the appropriate time. In some cases, the U.S. Mint holds a competition for coin designs. For example, in February 2016, the U.S. Mint announced a design competition for the 2018 commemorative coin to World War I American Veterans. Additionally, designers competed for the 2018 Breast Cancer Awareness commemorative coin. The final design was announced in October 2017. From authorization to coin launch, the CCAC has estimated that a commemorative coin takes a minimum of between 56 and 60 weeks. This includes the coin design process, engraving, marketing, printing materials, and coin launch. This timeline, however, does not account for coin programs that might be authorized years in advance of the coins' scheduled release. In those circumstances, the process from authorization to coin launch will be considerably longer. The process, as described by the CCAC, is shown in Figure 3 . As discussed above under \" Authorizing Commemorative Coins ,\" each authorizing statute sets a surcharge amount per coin and designates one or more recipient organizations to receive the surcharges. A designated recipient organization is \"any organization designated, under any provision of law, as the recipient of any surcharge imposed on the sale of any numismatic item.\" Commemorative coin legislation generally includes the name(s) of the organization(s) that will benefit from the sale of the coin and how the surcharges will be divided, if necessary. For example, the legislation authorizing a commemorative coin for the U.S. Marshals Service specified four groups to receive distribution from the program. They were the U.S. Marshals Museum, Inc., the National Center for Missing & Exploited Children, the Federal Law Enforcement Officers Association Foundation, and the National Law Enforcement Officers Memorial Fund. Additionally, the law might also specify how much money the designated recipient organization should receive. For th e Marshals Service commemorative coin, the first $5 million was specified for the U.S. Marshals Museum. After that, additional surcharges were divided equally among the National Center for Missing & Exploited Children, the Federal Law Enforcement Officers Association Foundation, and the National Law Enforcement Officers Memorial Fund. Once a commemorative coin has been authorized, the CCRA requires that certain standards be met before surcharge payments can be distributed to designated recipient organizations: 1. The recipient organization must raise funds from private sources \"in an amount that is equal to or greater than the total amount of the proceeds of such surcharge derived from the sale of such numismatic item.\" 2. The qualifying funds raised from private sources must be for the purposes specified by the enabling legislation. 3. The U.S. Mint must recover \"all numismatic operation and program costs allocable to the program.\" 4. The recipient organization must submit an audited financial statement and submit the results of annual audits to demonstrate, to the satisfaction of the Secretary of the Treasury, that it has qualified for surcharge proceeds and is properly expending them. Guidance provided by the U.S. Mint in Surcharge Recipient Organization's Compliance Procedures for Surcharge Eligibility & Payments includes further details of the requirements placed on designated recipient groups before surcharge payments can be made . These include requirements for documentation on the amount of money raised from private sources and the period of fund raising. To document these requirements, designated recipient groups must fill out a \"Schedule of Funds Raised From Private Sources,\" which is provided in an appendix to the Surcharge Recipient Organization's Compliance Procedures for Surcharge Eligibility & Payments publication. Following completion of these tasks, and after the Mint has recouped any expenses related to minting the commemorative coin, surcharges are then disbursed to the designated recipient organization. Since 1982, when the commemorative coin program was restarted, the U.S. Mint has raised more than $506 million in surcharges for various designated recipient groups. Production costs for each commemorative coin can differ based on design, administrative costs, and metals used. For example, Table 4 shows how the U.S. Mint calculated surcharges for a commemorative coin for the 2007 Benjamin Franklin Commemorative Coin. As Members of Congress contemplate introducing legislation, and the House or the Senate potentially considers commemorative coin measures, there are several issues that could be considered. These can be divided into issues for individual Members of Congress with respect to individual coins, and issues for Congress as an institution. Individual issues include choices Member may make about which people, places, events, or institutions might be honored; which groups might receive surcharge payments; and whether specific design elements might be required for a proposed coin. Institutional issues might include committee or chamber rules on the consideration of commemorative coins and the limit on the number of commemorative coins minted per year. Some commemorative coin programs are more popular than others. For example, since the commemorative coin program was restarted in 1982, the average commemorative coin program has sold approximately 1 million coins. The 1986 U.S. Statue of Liberty coins (15,491,169 coins) sold the most, while the 1997 Franklin Delano Roosevelt gold $5 coin sold the fewest (41,368). The introduction of commemorative coin legislation often serves two purposes: to honor people, places, events, or institutions and to provide designated recipient groups with potential surcharge funds. These two purposes often go together. Since only two coins may be minted in a given year, Congress may face a ranking of which groups are honored at any given time. In making that decision, consideration might be given to coins that are likely to sell their authorized allotment and provide the designated recipient group with disbursed surcharges over coins that might be less popular and might not sell enough units to provide surcharges to the designated recipient group. Alternatively, Congress could decide that a person, place, event, or institution merits a commemorative coin regardless of the potential sales of the coin. In this instance, the authorization for a coin might not expect that the allotment would be fully sold, but that the recognition provided by the coin was nevertheless desirable. An important part of commemorative coin legislation is the designation of groups to receive potential surcharges from the coin sales. Often, when drafting legislation, Members have specific organizations in mind as recipients of potential surcharges. As that legislation is being drafted, however, Members face a choice of whether surcharges should be directed to a single group, or to more than one entity. In order for a group to receive surcharge payments, it must go through two stages: (1) raise sufficient matching funds from private sources, and (2) be subject to annual audits on its use of surcharge payments. Designated recipient groups are required to raise matching funds from private sources prior to the disbursement of surcharges. A group's ability to raise sufficient funds is a potentially important consideration. Should a group not raise sufficient private funds, the full surcharge payment for which they could be eligible might not be disbursed. Authorizing legislation generally includes language about how the group might use surcharges. As shown in \" Surcharges \" above, these purposes are often broad. For example, the legislation that authorized the 1993 Thomas Jefferson Commemorative coin directed surcharges to two organizations: the Jefferson Endowment Fund and the Corporation for Jefferson's Poplar Forest. Funds for the Jefferson Endowment Fund were to be used \"to establish and maintain an endowment to be a permanent source of support for Monticello and its historic furnishings; and for the Jefferson Endowment Fund's educational programs, including the International Center for Jefferson Studies.\" For the Corporation for Jefferson's Poplar Forest, funds were to be used for the \"restoration and maintenance of Poplar Forest.\" Once sufficient funds are raised and surcharges are disbursed, designated recipient groups are subject to an audit of surcharge payments. Additionally, the surcharge payments must be \"accounted for separately from all other revenues and expenditures of the organization.\" These audits are conducted \"in accordance with generally accepted government auditing standards by an independent public accountant selected by the organization.\" Should a group not use payments properly, that information would likely be discovered by the required audit and could potentially result in a sanction, although no specific penalty is mentioned in law. In some cases, commemorative coin authorizations have required the Mint to incorporate design elements beyond requirements for specific words (e.g., \"Liberty,\" or \"E Pluribus Unum\"), the denomination (e.g., \"one dollar\"), or the year. In these cases, the authorizing legislation specifically states the design element. For example, it was a sense of Congress that the National Baseball Hall of Fame commemorative coin was to be curved to look more like a baseball. Similarly, the 2018 Breast Cancer Awareness $5 gold coin is to be minted using \"pink gold.\" Should a Member wish to have a specific design element incorporated into a future commemorative coin, the authorizing legislation would likely need to contain that language either as a sense of Congress or as part of the coin specification section. Including language that would require a certain design element would likely ensure that the Member's vision for the commemorative coin would be incorporated into the design and minting process. Such specification, however, could serve to limit design choice for the commemorative coin and might alter the cost structure of striking a coin, if the required element diverges from standard coin-minting practices. As discussed above under \" Consideration of Legislation in Congress ,\" neither House nor Senate rules provide any restrictions specifically concerning consideration of commemorative coin legislation on the House or Senate floor. The Senate Committee on Banking, Housing, and Urban Affairs, however, does have a committee rule that requires that at \"least 67 Senators must cosponsor any ... commemorative coin bill or resolution before consideration by the Committee.\" Currently, the House Financial Services Committee has not adopted any specific rules concerning committee consideration of commemorative coin legislation, although it has required a minimum number of cosponsors in past Congresses. As demonstrated by the discontinuation of the House Financial Services Committee rule requiring a minimum number of cosponsors for committee commemorative coin legislation, committee rules can be changed from Congress to Congress. Should the House want to place requirements on the consideration of commemorative coin legislation, the Financial Services Committee could readopt its former rule, or something similar. Adopting committee rules to require a minimum number of cosponsors might encourage bill sponsors to build support among Representatives for a commemorative coin bill to honor a specified group or event. Such a minimum requirement, however, could potentially limit the committee in the number or type of commemorative coin bills it considers. Since only the Senate Committee on Banking, Housing, and Urban Affairs has a rule that imposes a formal qualification on the potential consideration of commemorative coin legislation, the possible path forward for a bill can be different within each chamber. Should the House, the Senate, or both want to adopt similar language for the consideration of commemorative coin legislation, such language could be incorporated into future committee rules, into House and Senate Rules, or into law. Taking steps to formally codify the commemorative coin consideration process might provide sponsors with a single process for coin consideration, which could make it easier for coin bills to meet minimum requirements for consideration across both the House and Senate. Such codification could also limit congressional flexibility and might result in fewer proposals or authorizations to comply with new standards. In 1996, Congress limited the U.S. Mint to issuing two coins per year beginning in calendar year 1998. This action was taken in response to the proliferation of commemorative coins authorized since the program was restarted in 1982. Should Congress want to increase or decrease the maximum number of commemorative coins minted per year, the law could be amended. Reducing the number of commemorative coins per year would also reduce the number of groups or events that might be commemorated and reduce the number of designated recipient groups that might be aided by the disbursement of coin surcharges. A decrease in the number of commemorative coins per year, however, could increase sales on authorized coins by reducing potential competition among coin programs. Should Congress desire to increase the number of coins, more people, places, events, or institutions could potentially be honored, and a larger variety of designated recipient groups might receive surcharges from the U.S. Mint. Authorizing additional commemorative coin programs, however, could increase the number of commemorative coins available and reintroduce problems associated with competition among commemorative coin programs and result in a proliferation of coins on the market at any given time. Such a scenario might result in decreased surcharge disbursement opportunities for individual designated recipient groups. Commemorative coins have long been a popular way to honor people, places, and events. Historically, commemorative coins were issued to celebrate state anniversaries, expositions, and event anniversaries, or to support the building of memorials. Coins were generally sold to sponsoring organizations, who then resold them to raise funds. In the modern era, only two coins can be minted per year at the same time; according to the U.S. Commission of Fine Arts (CFA), the \"range of subject matter [has] expanded to include subjects such as women, historical events, and even buildings and landscapes.\" Additionally, instead of selling coins to organizations to raise money, the concept of surcharges as a method to direct money to designated groups has been introduced. As Congress considers the authorization of new coins to support designated recipient groups, consideration might be given to coins that could maximize sales and provide groups with the ability to earn as much money as possible for surcharges to support group activities. On the other hand, if Congress's intent for a coin is to recognize a person, place, event, or institution, then smaller sales numbers might not factor into legislative decisionmaking. Some commemorations inherently have broader appeal than others and the sale of commemorative coins often reflects the popularity of a particular person, place, event, or institution to coin collectors and the broader general public. To potentially maximize the appeal and sale of commemorative coins to support designated recipient organizations, Congress might consider whether the people, places, events, or institutions to be commemorated have a broad appeal and whether design elements might be specified that would make the coin more appealing to the general public. For example, the 1986 Statue of Liberty commemorative coin (shown in Figure 2 ) sold over 15 million units, while other coins have sold as few as approximately 40,000. For a designated recipient organization to earn surcharges, the U.S. Mint's production costs must be recouped before payments can be made. As a result, coins that sell out of statutory allotments are more likely to generate significant surcharges than those that struggle to find a market beyond commemorative coin collectors. Similarly, on at least three occasions, Congress has provided specific requirements to the U.S. Mint on the design of commemorative coins—that the 2014 National Baseball Hall of Fame coin be curved to represent a baseball; that the 2018 National Breast Cancer Awareness coin be tinted pink, to reflect the color associated with breast cancer awareness efforts; and that the 2019 Apollo 11 50 th Anniversary coin be convex to resemble an astronaut's helmet. Evidence from the coin collecting community suggests that a coin with unique design features may be more attractive for coin collectors and noncollectors alike. For example, a coin-collecting publication reported that the National Baseball Hall of Fame coin was so popular that the U.S. Mint had difficulty meeting demand for orders, especially because it was the \"first U.S. coin to utilize this [curved or dish design] production method and with a baseball theme, [it] ended up being a homerun with collectors.\" The goal of commemorative coins is twofold: to commemorate a person, place, event, or institution and to provide surcharges to groups. As Congress considers future commemorative coins, the ability to appeal to broad segments of the population to purchase coins in support of designated recipient groups might be a consideration. If Congress considers what people, places, events, or institutions might be honored and the coins' designs, the commemorative coin program could create innovative designs that raise significant monies for designated recipient groups. Since not all people, places, events, or institutions have the same appeal to the general public, consideration of which might be the best subject of commemorative coins would ensure that the U.S. Mint dedicates its resources to coins that are more likely to sell out authorized allotments and provide maximum surcharge payments. Alternatively, Congress could recognize important people, places, events, or institutions with a coin without consideration of the potential surcharges. In this case, historically important people, places, events, or institutions could be recognized by the United States regardless of potential amounts raised for these groups. Appendix A. Historical Commemorative Coins Between 1892 and 1954, 60 commemorative coins were authorized by Congress. Table A-1 provides a list of these coins organized by the year in which they were struck by the mint. The table also includes the type of coin, the subject, and the authorization statute. Appendix B. Modern Commemorative Coins, 1982-1997 Between 1982 and 1997, 47 commemorative coins were authorized by Congress. Table B-1 provides a list of these coins organized by the year in which they were struck by the Mint. The table also includes the coin's subject and authorizing statute. Coin denominations are not provided for modern commemorative coins because authorizing legislation generally provides for more than one denomination per commemorative coin series.", "summary": "Commemorative coins are produced by the U.S. Mint pursuant to an act of Congress and are often proposed by Members of Congress as part of their representational duties. These coins are legal tender that celebrate and honor American people, places, events, and institutions. Overall, 152 commemorative coins have been authorized since 1892. Since 1982, when Congress reinstituted the commemorative program, 91 commemorative coins have been authorized. Since 1998, only two coins may be authorized for any given year. To date, Congress has authorized commemorative coins to be issued through 2020. The issuance of commemorative coins can be broadly divided into two eras: historical coins and modern coins. Historical commemorative coins were those authorized between 1892 and 1954 and generally celebrated anniversaries, public events, or the construction of new memorials. These coins were sold by the government to the sponsor organization, which then resold the coins to the public at a higher price to earn money to support their mission. In 1939, Congress stopped authorizing new coins because a glut of commemorative coins on the market had caused their value to decline, and the U.S. Treasury became concerned that so many coins might facilitate counterfeiting. These sentiments were echoed by President Dwight D. Eisenhower, who in 1954 vetoed legislation for a half-dollar honoring the tercentennial of New York City and remarked that \"large quantities [of coins] have remained unsold and have been returned to the mints for melting.\" The historical era concluded with the minting of George Washington Carver and Booker T. Washington half-dollars between 1951 and 1954. The modern commemorative coin era began in 1982, when Congress authorized coins to celebrate the 250th anniversary of George Washington's birth. Between 1982 and 1997, prior to the Commemorative Coin Reform Act (CCRA) of 1996's statutory limitation of two commemorative coins issued per year, 47 commemorative coins were authorized and minted. Between 1998 and 2018, an additional 41 coins were authorized and minted. Three additional coins have been authorized, two in 2019 and one in 2020 (to date). Commemorative coin legislation generally has a specific format. Once a coin is authorized, it follows a specific process for design and minting. This process includes consultation and recommendations by the Citizens Coin Advisory Commission (CCAC) and the U.S. Commission of Fine Arts (CFA), pursuant to any statutory instructions, before the Secretary of the Treasury makes the final decision on a coin's design. Following the conclusion of a coin program, designated recipient organizations may receive surcharge payments, once the U.S. Mint has recouped all costs associated with producing the coin. Should Congress want to make changes to the commemorative coin process, several individual and institutional options might be available. The individual options include decisions made by Members of Congress as to which people, places, events, or institutions should be celebrated; which groups should receive potential surcharge payments; and any specific design requirements Congress might want to request or require. The institutional options could include House, Senate, or committee rules for the consideration of commemorative coin legislation and whether the statutory maximum of two coins minted per year is too many or too few.", "document_type": "crs"}
{"report": "As the trials of Sheldon Silver and Dean Skelos illustrate, corruption among high-profile public officials continues to be a concern in the United States. Likewise, recent examples abound of powerful executives in the private sector abusing positions of trust for personal gain. Faced with this reality, Congress has shown consistent interest in policing public- and private-sector corruption, enacting a number of criminal provisions aimed at holding corrupt officials accountable for their actions under federal law. However, one of federal prosecutors' most potent existing tools for combating such corruption—18 U.S.C. § 1346, which defines the crimes of mail and wire fraud as including so-called \"honest services\" fraud—has been a source of contention between the courts and Congress for years. While Congress has manifested its intent that the mail and wire fraud statutes should broadly cover the self-interested actions of federal, state, local, and private-sector officials, the Supreme Court and lower federal courts have repeatedly limited the scope of 18 U.S.C. § 1346 out of concern that a broad construction would render the statute unconstitutionally vague (and, with respect to state and local officials, potentially raise federalism concerns). This report thus provides an overview of the still-developing federal crime of honest services fraud and highlights certain legal issues that Congress may consider if it seeks to address the scope of the crime legislatively. Chapter 63 of Title 18 of the U.S. Code broadly criminalizes the use of the mails or wires in furtherance of \"any scheme or artifice to defraud,\" or \"for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.\" A core category of conduct reached by these mail and wire fraud statutes concerns misrepresentations or omissions that would deprive a victim of his or her money or property. In such cases, \"the victim's loss of money or property supplie[s] the defendant's gain, with one the mirror image of the other.\" A straightforward example is the filing of an insurance claim for a car accident that never happened in order to obtain a payout from the insurance company. Yet 18 U.S.C. § 1346 establishes that the term \"scheme or artifice to defraud\" as used in Chapter 63 also \"includes a scheme or artifice to deprive another of the intangible right of honest services.\" This provision was enacted in the late 1980s, in response to the U.S. Supreme Court's holding in McNally v. United States that the mail fraud statute was \"limited in scope\" to only \"the protection of property rights.\" Section 1346 abrogates McNally 's holding, codifying the understanding of some of the lower federal courts that the mail and wire fraud statutes extend to conduct that deprives a person or group of the right to have another act in accordance with some externally imposed duty or obligation, regardless of whether the victim so deprived has suffered or would suffer a pecuniary harm. Recognizing that this lower court understanding in fact evinced \"considerable disarray\" as to the kinds of schemes that would qualify as \"honest services\" fraud, however, the Supreme Court subsequently read a limiting principle into Section 1346 in Skilling v. United States in order to avoid invalidating the statute as unconstitutionally vague. After Skilling , mail and wire fraud prosecutions under an honest services theory may extend only to \"offenders who, in violation of a fiduciary duty, participate[] in bribery or kickback schemes.\" The conversation between the Court and Congress regarding the scope of honest services fraud and its culmination in Skilling have presented more questions that lower courts have been tasked with answering, including the sources of fiduciary duties and the types of conduct that qualify as bribery and kickback schemes. This report provides an overview of the mail and wire fraud statutes and the pre- Skilling development of the \"honest services\" theory of fraud. The report then examines the theory's codification in 18 U.S.C. § 1346 and subsequent limitation in Skilling , and surveys post- Skilling judicial elaboration of the requirements for honest services fraud. Finally, this report briefly addresses some issues Congress may consider if it seeks to alter the scope of honest services fraud through legislation. 18 U.S.C. § 1341 prohibits use of the mails (including the United States Postal Service and \"any private or commercial interstate carrier\") for the purpose of executing \"any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.\" 18 U.S.C. § 1343 likewise prohibits transmissions \"by means of wire, radio, or television communication in interstate or foreign commerce\" for the purpose of executing such schemes or artifices. These federal crimes, commonly known as \"mail fraud\" and \"wire fraud,\" encompass multiple forms of fraudulent conduct using jurisdictional hooks that reach practically all forms of communication. Because the two statutes (save for the medium used in connection with the offense) essentially mirror each other, interpretations and analyses of one statute will typically apply to the other. To secure a mail or wire fraud conviction, the government must prove beyond a reasonable doubt four elements, each of which is discussed in more detail below: 1. a scheme to defraud involving a material deception; 2. foreseeable use of the mail, a private commercial carrier, or a wire or radio communication in furtherance of said scheme; and 3. intent to defraud another of 4. money, property, or honest services. The requisite \"scheme to defraud\" has been framed broadly, sometimes as broadly as \"a departure from fundamental honesty, moral uprightness and candid dealings in the general life of the community.\" Generally, what the scheme to defraud element contemplates is conduct reasonably calculated to deceive. Because the mail and wire fraud statutes criminalize the \"scheme\" to defraud, and not the fraud itself, the government need not prove that the scheme was successful. However, the Supreme Court has established that the deception contemplated by a scheme to defraud must be \"material,\" that is, the misrepresentation or concealment at issue must have \"a natural tendency to influence, or [be] capable of influencing,\" the person \"to [whom] it was addressed.\" The second element of mail or wire fraud requires proof that the defendant used or caused to be used the U.S. mail; any private or commercial interstate carrier; or a \"wire, radio, or television communication in interstate or foreign commerce.\" The defendant need not have personally dispatched the offending mail or communication, so long as use of the mails or wires could reasonably be foreseen. The statutory text contemplates use of the mails or wires \"for the purpose of executing\" the scheme or artifice to defraud, which courts typically frame as use \"in furtherance of\" the fraudulent scheme. The mailing or wire communication does not have to be \"inherently criminal\" or \"essential\" to the scheme in order to qualify —rather, it must only be \"part of the execution of the scheme as conceived by the perpetrator at the time.\" As a result, illicit conduct under the statutes can include mailings or transmissions \"designed to lull the victims into a false sense of security,\" postpone an investigation by authorities, or otherwise conceal the fraud. The government must also prove that the defendant in a mail or wire fraud prosecution had the intent to defraud, meaning \"the specific intent to deceive or cheat, usually for the purpose of getting financial gain for one's self or causing financial loss to another.\" A person who merely expresses an opinion or, in good faith, makes a statement of fact that turns out to be inaccurate cannot have the specific intent to defraud. However, deliberate disregard for (or conscious avoidance of) the truth is no defense, nor is the belief that a victim will be unharmed. The government may prove intent through circumstantial evidence, such as evidence that the defendant attempted to conceal his activity or profited from the fraudulent endeavor. The final element of mail or wire fraud focuses on the object of the fraud. It is clear that the mail and wire fraud statutes contemplate schemes aimed at obtaining victims' money or property. In addition to tangible property, the statutes apply to intangible interests, such as confidential business information, that have \"long been recognized as property.\" If an interest lacks value in the hands of the ostensible victim, however, it is not protected by the statutes as \"property.\" Beyond money or property, 18 U.S.C. § 1346 establishes that a scheme or artifice to defraud includes \"a scheme or artifice to deprive another of the intangible right of honest services.\" It is the history and interpretation of this provision that are the focus of this report. The original mail fraud statute was enacted in 1872 and merely prohibited \"any scheme or artifice to defraud.\" Congress amended the statute in 1909 to add the second clause, \"or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.\" Mirroring this language, the wire fraud statute became law in 1952. Though the legislative history of the mail fraud provision, and the inclusion of the \"obtaining money or property\" clause, arguably suggest that Congress initially contemplated only frauds involving money or property, lower federal courts by the 1980s had interpreted the mail and wire fraud statutes to cover deprivations of intangible rights. \"Most\" of these cases involved public officials who \"made governmental decisions with the objective of benefitting themselves or promoting their own interests, instead of fulfilling their legal commitment to provide the citizens of the State or local government with their loyal service and honest government.\" Regardless of whether the betrayed party (the citizenry) was or would be financially harmed, under this theory, the violation lay in the deprivation of that party's intangible right to the official's \"honest services.\" This is not to say that the doctrine extended only to public officials, however—courts came to recognize that a private employee could also be guilty of mail or wire fraud for breaching a fiduciary duty to the employer. So-called \"honest services\" fraud often arose in the context of an official's or employee's receipt of a bribe or kickback in exchange for some veritable benefit. Yet the doctrine was not limited to bribery and kickback schemes; other forms of self-dealing, such as concealing material conflicts of interest, also gave rise to honest services mail and wire fraud prosecutions. Neither were the intangible rights protected by the mail and wire fraud statutes confined to honest services. Rather, courts broadly applied the statutes to deprivations of other intangible rights like the right to privacy and the right to honest elections. While the fluid scope of liability under the mail and wire fraud statutes caused some to worry that the federal courts were effectively \"develop[ing] a common law crime of unethical conduct,\" federal prosecutors appeared to view the flexibility and expansive reach of the statutes as a benefit. Then, in 1987, the Supreme Court's decision in McNally v. United States \"stopped the development of the intangible-rights doctrine in its tracks.\" McNally involved a scheme among public officials and a private individual in Kentucky to funnel kickbacks received from an insurance company, which the defendants had given an agency contract, to companies owned and controlled by them. The defendants were convicted of mail fraud on the theory that the officials deprived the citizens of Kentucky of \"their intangible rights to honest and impartial government\" by misusing their offices \"for private gain.\" The Supreme Court reversed, however, examining the text and legislative history of the mail fraud statute to conclude that the provision was \"limited in scope to the protection of property rights.\" In the Court's view, a broader reading would \"leave [the statute's] outer boundaries ambiguous and involve[] the Federal Government in setting standards of disclosure and good government for local and state officials.\" In other words, the Court's decision was driven by two constitutional concerns that have underlain much of the subsequent commentary on the scope of the honest services doctrine: first, a criminal statute may violate the Due Process Clauses of the Fifth and Fourteenth Amendments if it is so vague that \"ordinary people can[not] understand what conduct is prohibited.\" Thus, by alluding to the potentially \"ambiguous\" \"outer boundaries\" of the mail fraud statute, the Court was signaling that, if not construed more narrowly, the statute could be considered unconstitutionally vague. Second, courts are hesitant to read federal criminal statutes in a way that intrudes on areas of traditionally state-exclusive interest in light of the Constitution's reservation to the states of powers not expressly given to the federal government. This concept of federalism inherent in the Constitution has animated the Court's hesitancy to involve the federal government in policing the ethicality of state and local officials. Ultimately, the Court in McNally declined to adopt a reading of the mail fraud statute that would risk contravening the constitutional principles described above absent a decision by Congress to \"speak more clearly than it has.\" Within a short time, however, Congress had accepted the Court's invitation to speak by passing legislation, now codified at 18 U.S.C. § 1346, which clarified that \"the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services.\" There is some indication in the legislative history that this provision was intended to \"overturn the McNally decision\" in full, \"reinstat[ing] all of the pre- McNally case law pertaining to the mail and wire fraud statutes without change.\" Nonetheless, it is doubtful that Section 1346 restored all pre- McNally case law, as the \"intangible rights\" that courts had viewed the mail and wire fraud statutes to cover were not necessarily limited to honest services. As noted above, cases prior to McNally had recognized that deprivations of other intangible rights like the right to privacy and the right to honest elections could be covered. Thus, by limiting 18 U.S.C. § 1346 to the \"right of honest services,\" \"Congress amended the law to cover [only] one of the 'intangible rights' that lower courts had protected under § 1341 prior to McNally .\" Following the enactment of 18 U.S.C. § 1346, the lower federal courts continued to apply the mail and wire fraud statutes to a range of fraudulent conduct on the part of both public officials and private parties implicating the deprivation of an intangible right of honest services. \"[T]ypical[]\" cases involved \"either bribery . . . or [the] failure to disclose a conflict of interest, resulting in personal gain.\" In light of Section 1346's expansive language and the federalism and overbreadth concerns voiced by the Supreme Court in McNally , however, courts recognized that some \"limiting principle\" was needed in cases implicating an honest services theory of fraud. Yet beyond general pronouncements that Section 1346 \"does not encompass every instance of official misconduct\" and is \"not violated by every breach of contract, breach of duty, conflict of interest, or misstatement made in the course of dealing,\" the lower courts failed to reach a consensus on what the substance and scope of an effective limiting principle should be. For example, some courts recognized a limitation that to be guilty of mail or wire fraud on an honest services theory, a defendant must have participated in a scheme involving conduct that violated or would violate state law. These courts expressed concern that leaving federal judges free to define the duties and breaches that would constitute a violation of the mail and wire fraud statutes would amount to unmoored federal imposition of \"an ethical regime for state employees.\" However, several other courts rejected the state-law limitation as inconsistent with the intent of the statute. Taking a different tack, a few courts imposed a \"foreseeable harm\" requirement in honest services cases. As the U.S. Court of Appeals for the Sixth Circuit enunciated the limitation, conviction for honest services fraud in these jurisdictions required proof that the defendant \"foresaw or reasonably should have foreseen that [the victim] might suffer an economic harm as a result of the breach\" of fiduciary duty. In Frost , for instance, the Sixth Circuit applied the foreseeable harm limitation to conclude that university professors committed honest services fraud by entering into a scheme with their students to submit plagiarized dissertations, as they could have \"reasonably contemplated\" that the breach of their duty to the university would cause it to \"suffer a concrete business harm by unwittingly conferring an undeserved advanced degree\" on each student. Courts recognizing the foreseeable harm requirement appeared to apply it only in private-sector cases, where the \"meaning of the 'intangible right of honest services' has different implications\" given that \"a strict duty of loyalty ordinarily is not part of\" commercial and employment relationships. On occasion, however, the requirement was stated broadly enough to potentially encompass public-sector cases, as well. According to the Fourth and Sixth Circuits, the merits of the foreseeable harm requirement were twofold: (1) it kept \"the focus of the analysis on employee intent rather than employer response,\" and (2) it \"limit[ed] the scope of § 1346 to serious harms.\" Yet as with the state-law limitation, multiple other courts refused to apply the foreseeable harm limitation, rejecting it as \"something of an ipse dixit designed simply to limit the scope of section 1346.\" A competing, and less stringent, alternative to the court-created \"foreseeable harm\" requirement was the \"materiality test,\" which merely emphasized the inherent constraint that a misrepresentation must have \"the natural tendency to influence or [be] capable of influencing\" the employer to change its behavior. In the view of courts employing this test, it allowed honest services fraud to encompass \"some cases of non-economic, yet serious, harm in the private sphere.\" Proponents of the more stringent foreseeable harm requirement, however, pointed out that although the materiality test was \"similar in many respects,\" it might apply too broadly to cases where an employer \"overreacted to an insignificant fraud\" or \"changed [its] business practices to avoid the mere appearance of impropriety.\" In still another variation, the Seventh Circuit established the limiting principle that a scheme participant must have misused his position for private gain . One panel in the circuit viewed the limitation as \"cabin[ing] zealous prosecutors by insuring that not every violation of a fiduciary duty becomes a federal crime\" and reducing \"the risk of creating federal common law crimes.\" Nevertheless, given the Seventh Circuit's acknowledgment that its private gain limitation was created out of expediency, other circuits denounced it as \"substituting one ambiguous standard for another\" or as an attempt \"to judicially legislate by adding an element to honest services fraud which the text and the structure of the fraud statutes do not justify.\" Finally, at least two courts appeared to reject any reliance on judicially crafted special tests or limiting principles in honest services cases, concluding instead that existing elements—such as the requirement that the defendant possessed a specific intent to defraud—were sufficient to cabin Section 1346's breadth. These courts did, however, acknowledge that the existence of one or more of the elements required in other circuits, such as private gain, could \"bolster a showing of deceptive intent,\" among other things. In 2009, Justice Scalia dissented from the denial of certiorari in an honest services case, arguing that the lack of a \"coherent limiting principle\" to \"separate[] the criminal breaches, conflicts and misstatements from the obnoxious but lawful ones\" invited \"abuse by headline-grabbing prosecutors in pursuit of local officials, state legislators, and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct.\" The following year, the Supreme Court granted certiorari in three cases that seemed poised to settle the various disagreements among the federal appellate courts over the requirements for honest services fraud. First, in United States v. Weyhrauch , a state legislator had voted on a bill regarding taxation of oil production while failing to disclose a prospective interest in an oil field services company that had taken an active stance on the legislation. The Supreme Court agreed to review whether, in such a circumstance, the state-law limitation (i.e., that the defendant must have violated a duty imposed by state law) should apply. Second, in United States v. Black , corporate executives allegedly transferred millions of dollars from a subsidiary to themselves through fraudulent non-compete agreements. The appellate court affirmed the defendants' convictions for honest services fraud, in part, on the ground that the government was not required to prove that the scheme sought to financially harm the company, presenting the Supreme Court with an opportunity to address the so-called \"foreseeable harm\" limitation. Third, in United States v. Skilling , a former executive of the energy-trading and utilities company Enron was convicted of participating in a conspiracy to boost the company's stock price by misstating the company's financial situation. The Fifth Circuit affirmed, and the defendant then argued in part in his petition for certiorari that the appellate court should have applied the Seventh Circuit's \"private gain\" requirement to save Section 1346 from unconstitutional vagueness, giving the Supreme Court occasion to consider the merits of that limitation. Ultimately, the Supreme Court did not expressly endorse any of the limiting principles propagated by the courts of appeals and presented for review in Weyhrauch , Black , and Skilling . However, the Court did use Skilling as a vehicle to drastically limit the scope of honest services fraud in another way. As noted above, Jeffrey Skilling, the one-time CEO of Enron, was convicted of (among other things) wire fraud on the theory that he deprived the company and its shareholders of his honest services by manipulating financial results and making false and misleading statements about the company's performance in order to \"prop up Enron's short-run stock prices.\" On appeal, the Fifth Circuit upheld Skilling's honest services fraud conviction, rejecting Skilling's argument that his conduct could not fall within the meaning of Section 1346 because it \"was in the corporate interest and therefore was not self-dealing.\" Skilling then argued to the Supreme Court that the statute should be struck down as unconstitutionally vague. The Supreme Court agreed with Skilling that Section 1346, as written, could raise \"due process concerns underlying the vagueness doctrine\" given the breadth of its language. However, the Court declined to strike down the statute as irremediably vague, opting instead to construe it narrowly in a way that avoided the problem. The Court began by \"survey[ing]\" the \"body of pre- McNally honest-services\" case law, a corpus that, in the Court's view, Section 1346 was clearly intended \"to refer to and incorporate.\" The Court's survey yielded two conclusions: (1) that \"honest-services decisions preceding McNally were not models of clarity or consistency\"; and (2) that despite the inconsistency, the honest services doctrine encompassed a \"solid core\" of cases \"involving offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes.\" Therefore, to steer clear of a \"vagueness shoal,\" the Supreme Court read Section 1346 as being limited only to this \"core\" of bribery and kickback cases. Regarding the precise definitions of bribery and kickbacks, the Court cited to existing federal bribery statutes and the definition of \"kickback\" contained in Title 41 of the U.S. Code, opining that Section 1346 would \"draw[] content not only from the pre- McNally case law, but also from [these] federal statutes proscribing—and defining—similar crimes.\" The Court also clarified that its holding would not render Section 1346 \"superfluous\" in light of its now-substantial overlap with these \"similar crimes\"—as an example, the Court noted that 18 U.S.C. § 201, the \"principal federal bribery statute,\" applies only to federal public officials, meaning that Section 1346 would continue to reach \"state and local corruption and . . . private-sector fraud\" that \"might otherwise go unpunished.\" Significantly, the Court in Skilling rejected the argument, advanced by the government, that Section 1346 should be construed to extend as well to \"undisclosed self-dealing by a public official or private employee—i.e., the taking of official action by the employee that furthers his own undisclosed financial interests while purporting to act in the interests of those to whom he owes a fiduciary duty.\" Although courts prior to Skilling had recognized bribery and undisclosed conflicts of interest as the two \"typical[]\" scenarios giving rise to honest services fraud prosecutions, the Supreme Court viewed an undisclosed self-dealing or conflict-of-interest category of honest services fraud as \"amorphous\" given that lower courts had \"reached no consensus on which schemes qualified.\" The Court thus refused to adopt the government's \"less constrained construction,\" that is, one that would include undisclosed self-dealing, \"absent Congress' clear instruction otherwise.\" In a footnote, the Court went on to provide guidance to Congress should it decide \"to take up the enterprise of criminalizing\" such conduct, noting that legislation \"would have to employ standards of sufficient definiteness and specificity to overcome due process concerns.\" In the Court's view, the formulation proposed by the government—a prohibition on the \"taking of official action by the employee,\" with the specific intent to deceive, \"that furthers his own [material] undisclosed financial interests while purporting to act in the interests of those to whom he owes a fiduciary duty\"—would \"leave[] many questions unanswered,\" including (1) how significant the conflicting interest would have to be, (2) the extent to which official action would have to further the interest, and (3) what (and to whom) information should be conveyed in order for disclosure to be adequate. Justice Scalia wrote separately in Skilling to make clear that he viewed Section 1346 as unconstitutionally vague and did not find the Court's limiting construction sufficient to address his concerns. Specifically, Justice Scalia pointed out that (1) not a single court's version of the pre- McNally honest services doctrine limited it only to bribery and kickbacks, rendering the Court's supposition that it was respecting the intent of Congress dubious; and (2) even limited to bribery and kickbacks in breach of a fiduciary duty, Section 1346 (and the majority opinion) left the nature, content, and source of the requisite duty hopelessly unclear and subject to conflicting conceptualizations by the lower courts. On this latter point, the majority addressed Justice Scalia's critique by maintaining in a footnote that \"debates\" over \"the source and scope of fiduciary duties\" were \"rare in bribe and kickback cases,\" with the existence of a fiduciary relationship usually being \"beyond dispute.\" The Court also provided several \"examples\" of such relationships: (1) the relationship between a public official and the public at large, (2) the relationship between an employee and his employer, and (3) the relationship between a union official and union members. In light of the Supreme Court's decision in Skilling , the two other honest services cases in which the Court granted certiorari— Weyhrauch and Black —proved to be anticlimactic. Weyhrauch , which had presented the Court with an opportunity to pass on the \"state-law\" limitation, was simply vacated and remanded for further consideration in light of Skilling ; and the Court in Black —a case involving the \"foreseeable harm\" limitation—cursorily ruled that the jury instructions in the case were incorrect because they did not reflect Skilling 's construction of Section 1346, that is, that honest services fraud encompasses only participation in a bribery or kickback scheme in violation of a fiduciary duty. The Supreme Court's decision in Skilling makes clear that honest services mail or wire fraud must involve \"offenders who, in violation of a fiduciary duty, participate[] in bribery or kickback schemes.\" In light of that holding, lower courts in recent years have had to reconsider the (1) vitality of the \"limiting principles\" they adopted prior to Skilling , (2) source and scope of fiduciary duties, and (3) definition and application of the terms \"bribery\" and \"kickbacks.\" Given that the Supreme Court in Skilling neither explicitly endorsed nor rejected any of the Section 1346 \"limiting principles\" developed by the lower courts, the decision's impact on the disputes among the courts of appeals was not immediately clear. Indeed, one of Justice Scalia's complaints was the Court's failure to address the \"fundamental indeterminacy\" of the requisite fiduciary obligation, including its source and application to private-sector and public-official defendants. That said, the opinion in Skilling offered some clues as to the continuing vitality of the limiting principles discussed above. First, by limiting honest services fraud to schemes involving bribery or kickbacks, Skilling appeared to indirectly validate the Seventh Circuit's \"private gain\" limitation, as any bribe or kickback would necessarily seem to constitute such a gain. The Seventh Circuit, which was the only circuit to have squarely adopted the private gain limitation prior to Skilling , recognized as much in a 2014 opinion, noting that its \"general approach\" of \"focus[ing] on the defendant's benefit from the fraud . . . was vindicated\" in Skilling (though \"[n]ow, only bribery or kickbacks, rather than any private gain whatsoever, can be used to show honest-services fraud\"). Thus, after Skilling , actual or contemplated private gain appears to be a necessary but not sufficient condition for imposition of criminal liability on an honest services fraud theory. Second, dictum from Skilling may be read as calling into question the \"foreseeable harm\" limitation adopted by some circuits. In describing the development of the honest services theory of fraud, the Court in Skilling explained that the theory targets corruption where \"the betrayed party [has] suffered no deprivation of money or property,\" noting that \"[e]ven if the scheme occasion[s] a money or property gain for the betrayed party, . . . actionable harm [lies] in the denial of that party's right to the offender's 'honest services.'\" The opinion used as an example a mayor who accepts a bribe from a third party in exchange for awarding that party a city contract, where \"the contract terms [are] the same as any that could have been negotiated at arm's length.\" Based on this dictum, at least one district court after Skilling has, in a case involving a public official, rejected the argument that honest services fraud requires \"an actual or intended economic loss to the victim.\" Of course, as described above, the circuits that recognized a foreseeable harm limitation prior to Skilling mostly applied it only in private-sector cases, leading a different post- Skilling district court to \"follow the clear precedent from the Fourth Circuit . . . and apply the reasonably foreseeable harm test in the context of . . . [an] alleged private-sector honest-services offense.\" By contrast, the Seventh Circuit has held that the government need not show \"actual or intended tangible harm\" in either public- or private-sector cases, while the Ninth Circuit in a post- Skilling decision has rejected a foreseeable-economic-loss requirement for public officials but left for \"another day\" the question of whether \"economic damages need be shown\" in private-sector cases. Finally, with respect to the \"state law\" limitation adopted by the Third and Fifth Circuits—that is, the requirement that a defendant must have violated some affirmative duty recognized under state law—one might read the Skilling Court's brief discussion of \"the source and scope of fiduciary duties\" as calling the limitation into question. In dismissing Justice Scalia's concerns regarding the indeterminacy of such duties, the majority in Skilling averred that the existence of a fiduciary relationship was \"usually beyond dispute\" in bribe and kickback cases, citing several examples of public and private duties arising from \"specific relationship[s] between two parties.\" This apparent endorsement of a broad conception of fiduciary relationships in the context of honest services fraud would seem to be inconsistent with a requirement that any breach of duty be grounded in positive state law. Nevertheless, and perhaps bearing out Justice Scalia's concerns, the source and scope of fiduciary duties have, as discussed below, continued to be a source of considerable confusion among lower courts following Skilling . The courts of appeals have recognized that under Skilling , honest services fraud requires the existence and breach of a \"fiduciary duty.\" Yet the details of the requirement implicate, as one district court recently put it, \"a troubling analysis that has divided federal courts throughout the country.\" The analysis focuses on at least \"three discrete questions: [W]hat types of relationships potentially give rise to the requisite fiduciary duty?; [W]hat are the permissible legal sources of the fiduciary duty?; and [W]hat is the nature or scope of the fiduciary duty, such that a defendant's breach of this obligation would satisfy the fiduciary duty requirement of honest services fraud?\" With respect to the first question, a logical starting point is the Skilling footnote that provides three \"examples\" of fiduciary relationships that lower courts had previously found to be \"beyond dispute\": \"public official-public, employee-employer, and union official-union members.\" Courts have recognized that this footnote does not \"represent an exhaustive list of the fiduciary relationships that can support an honest-services fraud prosecution,\" meaning that other relationships sharing similar characteristics, \"such as attorney-client, doctor-patient, or stockbroker-customer,\" may also be included. And one appellate court has determined that the term \"fiduciary\" may encompass even \"informal\" relationships of trust where \"one party acts for the benefit of another and induces the trusting party to relax the care and vigilance which it would ordinarily exercise.\" Not all courts agree with this broader conception of a fiduciary relationship, however. Regarding the second question, courts have turned to \"a smorgasbord of sources\" to find the requisite fiduciary duty, and appear to be divided into three general camps: \"those that permit the fiduciary duty to be derived from various sources, including state, federal, and common law; those that require the fiduciary duty to be derived from state law; and those that require the fiduciary duty to be derived from federal law.\" Among the courts that look to \"various sources,\" state law is apparently a sufficient, but not necessary, basis for a fiduciary duty, and decisions may also rely on sources as disparate as common-law agency principles or merely \"inherent\" duties arising from the relationship at issue. Indeed, some courts have seemingly treated the existence of the relationship as synonymous with the existence of a fiduciary duty without analyzing the source of the duty at all. It is also unclear to what extent courts that rely on multifarious sources can be distinguished from the courts that purport to apply a federal standard, as in both circumstances the court may end up relying on common-law principles that are not grounded in positive law. With respect to those courts that require a state-law duty, post- Skilling jurisprudence is somewhat muddled. In a 2012 decision, one Fifth Circuit panel announced that Skilling did not \"obviate the requirement that a state official, when prosecuted under § 1346, owe a state-law duty.\" However, that decision, as well as an earlier Fifth Circuit opinion on which it relied, may have conflated the notion of a state-law duty with a question discussed in more detail below: whether bribery and kickbacks may be defined under state law. And one district court in the Fifth Circuit has subsequently relied on the same precedent to conclude that \"[t]here is no requirement that the actions taken by [the defendants] in exchange for the payments and kickbacks be a violation of state law.\" The legal basis for the relationship that must exist and the obligation that relationship creates thus remain unclear. Regarding the third question—the nature and scope of the requisite fiduciary duty—the outcome will likely depend on what source of authority is relied upon and how it is framed. As noted above, some courts have treated the existence of an employment relationship, for example, in the context of a bribe or kickback scheme as a conclusive indication that a fiduciary duty has been breached in a way that constitutes honest services fraud, while other courts have focused more specifically on the \"type of fiduciary duty\" at issue and whether it \"falls within the core\" of the term as applied in honest services cases. As noted above, the Supreme Court in Skilling indicated that the prohibition on bribes and kickbacks should \"draw[] content not only from the pre- McNally case law, but also from federal statutes proscribing—and defining—similar crimes.\" The Court then cited 18 U.S.C. § 201(b), which criminalizes bribery of federal public officials; 18 U.S.C. § 666(a)(2), which criminalizes bribery in programs receiving federal funds; and 41 U.S.C. § 8701(2), which defines the term \"kickback\" for purposes of the statutory provisions prohibiting kickbacks in connection with public contracts. Relying on this portion of the Supreme Court's opinion, courts after Skilling have tended to look to the federal anti-bribery and anti-kickback statutes cited by the Court to \"give substance to the prohibition on honest-services fraud,\" though some courts have also relied on state-law definitions of bribery or simply on prior honest services case law. In general, bribery requires a quid pro quo , meaning a specific intent to \"give or receive something of value in exchange for an official act.\" This requirement distinguishes a bribe from a \"gratuity,\" which \"may constitute merely a reward for some future act that the public official will take (and may already have determined to take), or for a past act that he has already taken.\" Thus, although the text of the federal bribery statutes appears to criminalize it, payment or receipt of a mere gratuity does not constitute honest services fraud. The quid pro quo required for bribery need not be explicit in most cases, though in light of the First Amendment concerns that arise when an alleged bribe is a political contribution, an explicit quid pro quo may be required under those circumstances. The person offering a bribe also need not \"spell out which payments control which particular official acts\" —rather, proof of a \"stream of benefits\" coinciding with a pattern of official acts is sufficient. Additionally, there is no requirement that a bribe payor and payee come to a meeting of the minds. One who offers a bribe may be convicted of honest services fraud even if the offer is rejected, and one who intends to accept a bribe may be convicted even absent proof that the payor had the requisite intent. There does appear to be some disagreement, however, as to whether a bribe recipient may be prosecuted for honest services fraud when he has no intent to take official action but falsely suggests to the payor that he will do so. In 2016, the Supreme Court narrowly construed the scope of conduct that may be considered an \"official act\" supporting bribery, thus potentially narrowing the scope of honest services fraud once again as well. In McDonnell v. United States , the former governor of Virginia was charged with honest services fraud, among other things, for accepting benefits from a nutritional supplement company in exchange for his influence in organizing university studies of the company's product. Importantly, the parties agreed that \"bribery\" for purposes of honest services fraud should be defined by reference to 18 U.S.C. §§ 201(b)(1)(A) and (b)(2)(A), which require an intent to influence or a promise to be influenced in the performance of an \"official act.\" Of course, the parties disputed the definition of \"official act\" and whether it encompassed the defendant's conduct. The McDonnell Court ultimately construed the term \"official act\" narrowly. According to the Court, for there to be an official act, there must be some concrete \"question, matter, cause, suit, proceeding or controversy\" that involves \"a formal exercise of governmental power . . . similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee.\" Additionally, the defendant must at least agree to \"make a decision or take an action\" on that question, matter, cause, suit, proceeding, or controversy, which \"may include using his official position to exert pressure on\" or advise another to perform an official act. Simply \"setting up a meeting, talking to another official, or organizing an event (or agreeing to do so)—without more\"—is not enough. The Court's decision in McDonnell to construe the term \"official act\" narrowly was animated by the same constitutional concerns that undergirded its prior decisions imposing limitations on honest services fraud prosecutions—namely, that a broader construction could leave the scope of criminal liability unclear and impinge on the states' authority to \"regulate the permissible scope of interactions between state officials and their constituents.\" Following McDonnell , there has been some speculation that the \"stream of benefits\" theory of bribery—that is, that specific payments need not be linked to particular official acts—is dead. However, at least one court has held to the contrary. Furthermore, because the parties in McDonnell agreed that bribery should be defined by reference to Sections 201(b)(1)(A) and (b)(2)(A), the Court had no occasion to consider whether an \"official act\" (as it defined the term) must always underlie public-sector honest services fraud based on bribery. Thus, to the extent courts look to provisions beyond (b)(1)(A) and (b)(2)(A) to give content to the bribery requirement in honest services cases, McDonnell arguably would have no impact. That said, it does seem that McDonnell could potentially cabin the scope of honest services fraud liability in at least some cases where liability is premised on the definition of bribery found in Section 201. For instance, in the high-profile prosecution of Sheldon Silver, the former speaker of the New York State Assembly, the Second Circuit vacated Silver's conviction on honest services charges because the jury instructions broadly captured conduct \"such as arranging meetings or hosting events with constituents\" that would be considered lawful after McDonnell . Though it appears that honest services fraud prosecutions since 2010 have largely focused on bribery, a few cases have involved kickback schemes. \"A kickback scheme typically involves an employee's steering business of his employer to a third party in exchange for a share of the third party's profits on that business.\" The defendant need not directly receive the profits, however—a kickback scheme may involve one who \"directs the third party to share its profits with an entity designated by the [defendant] in which [he] has an interest\" or with \"others loyal to the defendant.\" Some federal prosecutors appear to have addressed the limitations imposed in Skilling and McDonnell by reframing cases that might previously have been brought on an honest services theory as traditional \"money or property\" wire fraud. Specifically, at least one circuit has favorably referenced a theory of intangible property that encompasses a \"right to control\" one's assets, which may permit prosecutors to use the mail and wire fraud statutes to reach some conflict-of-interest cases that can no longer be tried on an honest services theory. On more than one occasion since 2010, Congress has considered legislation that would expand honest services fraud to include certain categories of conduct that 18 U.S.C. § 1346 no longer encompasses under the Supreme Court's interpretations of the statute. For instance, the Senate and House considered bills in the 112th Congress that would have restored undisclosed self-dealing as a basis for honest services fraud prosecution in public-, but not private-sector, cases. The legislation would have expanded the definition of \"scheme to defraud\" to include a scheme by a \"public official\"—meaning a federal, state, or local officer, employee, or agent—to (1) perform an official act that, at least in material part, furthers his own or certain relatives' or associates' financial interests; and (2) conceal or knowingly fail to disclose \"material information\" about the interest required to be disclosed \"by any Federal, State, or local statute, rule, regulation, or charter applicable to the public official.\" In short, it appears that the legislation would have expanded the scope of honest services fraud liability in public-sector cases, beyond the bribery and kickback schemes contemplated in Skilling , to include one additional category of conduct: failure to disclose a material financial conflict of interest. Additionally, though the bills were considered prior to the Supreme Court's decision in McDonnell , it appears that at least one version would have established a slightly broader definition of an \"official act\" than the one the Court subsequently announced. Ultimately, the bills introduced in the 112th Congress did not become law, nor has any other legislation purporting to reexpand the scope of honest services fraud become law as of this writing. Nevertheless, some commentators have continued to lament what they view as the Supreme Court's blunting of a previously sharp weapon to combat public corruption, arguing that the decisions in Skilling and McDonnell placed too little weight on \"the interests of citizens in honest government\" and urging Congress to find a legislative fix. Other observers, however, have suggested that the deleterious impact of the decisions is overstated, pointing out that federal prosecutors still have multiple legal avenues through which to combat corruption in the public sphere. In any event, should Congress revisit and reconsider the scope of 18 U.S.C. § 1346, understanding the vagueness and federalism concerns that have animated the Supreme Court's repeated limiting constructions of the statute may be beneficial to preventing further judicial limitations. One place to start would be the Skilling Court's identification of some questions that must be answered if Congress seeks to \"take up the enterprise of criminalizing undisclosed self-dealing . . . .\" These questions include (1) how \"direct or significant\" a conflicting financial interest must be; (2) the extent to which an \"official\" act or action must further the conflicting financial interest in order to constitute fraud; and (3) to whom a disclosure must be made, and what information it must contain, for a conflicted official to avoid criminal liability. Answering these questions in any proposed legislation may go a long way toward achieving the \"definiteness and specificity\" needed to potentially avoid the vagueness and federalism concerns that the Court has repeatedly articulated.", "summary": "As the trials of Sheldon Silver and Dean Skelos illustrate, corruption among high-profile public officials continues to be a concern in the United States. Likewise, recent examples abound of powerful executives in the private sector abusing positions of trust for personal gain. Faced with this reality, Congress has shown consistent interest in policing public- and private-sector corruption, enacting a number of criminal provisions aimed at holding corrupt officials accountable for their actions under federal law. However, one of federal prosecutors' most potent existing tools for combating such corruption—18 U.S.C. § 1346, which defines the crimes of mail and wire fraud as including so-called \"honest services\" fraud—has been a source of contention between the courts and Congress for years. 18 U.S.C. § 1346 defines the term \"scheme or artifice to defraud,\" as used in the general statutes prohibiting use of the mails or wires to commit fraud, to include a scheme or artifice to deprive another of the intangible right of honest services. Congress enacted this provision in the late 1980s in response to the U.S. Supreme Court's holding in McNally v. United States that the mail fraud statute was limited in scope to only the protection of tangible property rights. The McNally decision was grounded in concerns that a broader construction of the statute could leave its outer boundaries ambiguous and unjustifiably involve the federal government in setting standards for good government at the local level. Nevertheless, Section 1346 abrogates McNally's holding, codifying the understanding of some of the lower federal courts that the mail and wire fraud statutes extend to conduct that deprives a person or group of the right to have another act in accordance with some externally imposed duty or obligation, regardless of whether the victim so deprived has suffered or would suffer a pecuniary harm. Recognizing that this lower court understanding in fact evinced considerable disarray as to the kinds of schemes that would qualify as honest services fraud, however, the Supreme Court subsequently read a limiting principle into Section 1346 in Skilling v. United States in order to avoid invalidating the statute as unconstitutionally vague. After Skilling, mail and wire fraud prosecutions under an honest services theory may extend only to those who, in violation of a fiduciary duty, participate in bribery or kickback schemes. Notably, the Skilling decision withdrew from the reach of Section 1346 a significant category of cases that had been prosecuted as honest services fraud up to that point: cases involving more general financial self-dealing or conflicts of interest, where no bribes or kickbacks are given. Congress has considered legislation on more than one occasion that would reinstate the self-dealing category of honest services fraud rejected in Skilling, though the law remains unchanged as of this writing. The conversation between the Court and Congress regarding the scope of honest services fraud and its culmination in Skilling have presented more questions that lower courts have been tasked with answering, including the source of the requisite fiduciary duty and the conduct that qualifies as bribery or kickbacks. Courts have looked to a variety of sources to give content to the fiduciary duty requirement, including federal, state, and common law. Likewise, in fleshing out the contours of the bribery or kickbacks called for in Skilling, lower courts have relied on anti-bribery and anti-kickback provisions found in federal statutes. In the recent case of McDonnell v. United States, the Supreme Court limited the reach of one of those statutes—18 U.S.C. § 201, which makes it a crime to offer or solicit anything of value to influence an \"official act\"—by construing the term \"official act\" narrowly. Nevertheless, alternate routes appear to be available to prosecute bribery schemes involving conduct that may be beyond the scope of McDonnell. Should Congress seek to alter the scope of honest services fraud, it will likely need to be attuned to the concerns that federal courts interpreting 18 U.S.C. § 1346 have voiced over the years. Chief among these have been the concerns that—as written—the statute has the potential to sweep too broadly and regulate ethically dubious conduct of state and local officials in a way that conflicts with the Constitution.", "document_type": "crs"}
{"report": "T his report describes actions taken by the Administration and Congress to provide FY2020 appropriations for Commerce, Justice, Science, and Related Agencies (CJS) accounts. The dollar amounts in this report reflect only new appropriations made available at the start of the fiscal year. Therefore, the amounts do not include any rescissions of unobligated or deobligated balances that may be counted as offsets to newly enacted appropriations, nor do they include any scorekeeping adjustments (e.g., the budgetary effects of provisions limiting the availability of the balance in the Crime Victims Fund). In the text of the report, appropriations are rounded to the nearest million. However, percentage changes are calculated using whole, not rounded, numbers, meaning that in some instances there may be small differences between the actual percentage change and the percentage change that would be calculated by using the rounded amounts discussed in the report. The annual CJS appropriations act provides funding for the Departments of Commerce and Justice, select science agencies, and several related agencies. Appropriations for the Department of Commerce include funding for agencies such as the Census Bureau, the U.S. Patent and Trademark Office, the National Oceanic and Atmospheric Administration, and the National Institute of Standards and Technology. Appropriations for the Department of Justice (DOJ) provide funding for agencies such as the Federal Bureau of Investigation; the Bureau of Prisons; the U.S. Marshals; the Drug Enforcement Administration; and the Bureau of Alcohol, Tobacco, Firearms, and Explosives, along with funding for a variety of public safety-related grant programs for state, local, and tribal governments. The vast majority of funding for the science agencies goes to the National Aeronautics and Space Administration and the National Science Foundation. The annual appropriation for the related agencies includes funding for agencies such as the Legal Services Corporation and the Equal Employment Opportunity Commission. The mission of the Department of Commerce is to \"create the conditions for economic growth and opportunity.\" The department promotes \"job creation and economic growth by ensuring fair and reciprocal trade, providing the data necessary to support commerce and constitutional democracy, and fostering innovation by setting standards and conducting foundational research and development.\" It has wide-ranging responsibilities including trade, economic development, technology, entrepreneurship and business development, monitoring the environment, forecasting weather, managing marine resources, and statistical research and analysis. The department pursues and implements policies that affect trade and economic development by working to open new markets for U.S. goods and services and promoting pro-growth business policies. It also invests in research and development to foster innovation. The agencies within the Department of Commerce, and their responsibilities, include the following: International Trade Administration (ITA) seeks to strengthen the international competitiveness of U.S. industry, promote trade and investment, and ensure fair trade and compliance with trade laws and agreements; Bureau of Industry and Security (BIS) works to ensure an effective export control and treaty compliance system and promote continued U.S. leadership in strategic technologies by maintaining and strengthening adaptable, efficient, and effective export controls and treaty compliance systems, along with active leadership and involvement in international export control regimes; Economic Development Administration (EDA) promotes innovation and competitiveness, preparing American regions for growth and success in the worldwide economy; Minority Business Development Agency (MBDA) promotes the growth of minority owned businesses through the mobilization and advancement of public and private sector programs, policy, and research; Economics and Statistics Administration (ESA) is a federal statistical agency that promotes a better understanding of the U.S. economy by providing timely, relevant, and accurate economic accounts data in an objective and cost-effective manner; Census Bureau , a component of ESA, measures and disseminates information about the U.S. economy, society, and institutions, which fosters economic growth, advances scientific understanding, and facilitates informed decisions; National Telecommunications and Information Administration (NTIA) advises the President on communications and information policy; United States Patent and Trademark Office (USPTO) fosters innovation, competitiveness, and economic growth domestically and abroad by providing high-quality and timely examination of patent and trademark applications, guiding domestic and international intellectual property (IP) policy, and delivering IP information and education worldwide; National Institute of Standards and Technology (NIST) promotes U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology enhancing economic security; and National Oceanic and Atmospheric Administration (NOAA) provides daily weather forecasts, severe storm warnings, climate monitoring to fisheries management, coastal restoration, and support of marine commerce. DOJ's mission is to \"enforce the law and defend the interests of the United States according to the law; to ensure public safety against threats foreign and domestic; to provide federal leadership in preventing and controlling crime; to seek just punishment for those guilty of unlawful behavior; and to ensure fair and impartial administration of justice for all Americans.\" DOJ also provides legal advice and opinions, upon request, to the President and executive branch department heads. The major DOJ offices and agencies, and their functions, are described below: Office of the United States Attorneys prosecutes violations of federal criminal laws, represents the federal government in civil actions, and initiates proceedings for the collection of fines, penalties, and forfeitures owed to the United States; United States Marshals Service (USMS) provides security for the federal judiciary, protects witnesses, executes warrants and court orders, manages seized assets, detains and transports alleged and convicted offenders prior to sentencing to their court hearings, and apprehends fugitives; Federal Bureau of Investigation (FBI) investigates violations of federal criminal law; helps protect the United States against terrorism and hostile intelligence efforts; provides assistance to other federal, state, and local law enforcement agencies; and shares jurisdiction with the Drug Enforcement Administration for the investigation of federal drug violations; Drug Enforcement Administration (DEA) investigates federal drug law violations; coordinates its efforts with other federal, state, and local law enforcement agencies; develops and maintains drug intelligence systems; regulates the manufacture, distribution, and dispensing of legitimate controlled substances; and conducts joint intelligence-gathering activities with foreign governments; Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) enforces federal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives; Federal Prison System ( Bureau of Prisons; BOP ) houses offenders sentenced to a term of incarceration for a federal crime and provides for the operation and maintenance of the federal prison system; Office on Violence Against Women (OVW) provides federal leadership in developing the nation's capacity to reduce violence against women and administer justice for and strengthen services to victims of domestic violence, dating violence, sexual assault, and stalking; Office of Justice Programs (OJP) manages and coordinates the activities of the Bureau of Justice Assistance; Bureau of Justice Statistics; National Institute of Justice; Office of Juvenile Justice and Delinquency Prevention; Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking; and Office of Victims of Crime; and Community Oriented Policing Services (COPS) advances the practice of community policing by the nation's state, local, territorial, and tribal law enforcement agencies through information and grant resources. The science offices and agencies support research and development and related activities across a wide variety of federal missions, including national competitiveness, space exploration, and fundamental discovery. The primary function of the Office of Science and Technology Policy (OSTP) is to provide the President and others within the Executive Office of the President with advice on the scientific, engineering, and technological aspects of issues that require the attention of the federal government. The OSTP director also manages the National Science and Technology Council, which coordinates science and technology policy across the executive branch of the federal government, and cochairs the President's Council of Advisors on Science and Technology, a council of external advisors that provides advice to the President on matters related to science and technology policy. The National Space Council, in the Executive Office of the President, is a coordinating body for U.S. space policy. Chaired by the Vice President, it consists of the Secretaries of State, Defense, Commerce, Transportation, and Homeland Security; the Administrator of NASA; and other senior officials. The council previously existed from 1988 to 1993 and was reestablished by the Trump Administration in June 2017. The National Science Foundation (NSF) supports basic research and education in the nonmedical sciences and engineering. The foundation was established as an independent federal agency \"to promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes.\" The NSF is a primary source of federal support for U.S. university research in the nonmedical sciences and engineering. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. The National Aeronautics and Space Administration (NASA) was created to conduct civilian space and aeronautics activities. It has four mission directorates. The Human Exploration and Operations Mission Directorate is responsible for human spaceflight activities, including the International Space Station and development efforts for future crewed spacecraft. The Science Mission Directorate manages robotic science missions, such as the Hubble Space Telescope, the Mars rover Curiosity, and satellites for Earth science research. The Space Technology Mission Directorate develops new technologies for use in future space missions, such as advanced propulsion and laser communications. The Aeronautics Research Mission Directorate conducts research and development on aircraft and aviation systems. In addition, NASA's Office of STEM Engagement (formerly the Office of Education) manages education programs for schoolchildren, college and university students, and the general public. The annual CJS appropriations act includes funding for several related agencies: U.S. Commission on Civil Rights informs the development of national civil rights policy and enhances enforcement of federal civil rights laws; Equal Employment Opportunity Commission is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability, or genetic information; International Trade Commission investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations, adjudicates cases involving imports that allegedly infringe intellectual property rights, and serves as a resource for trade data and other trade policy-related information; Legal Services Corporation is a federally funded nonprofit corporation that provides financial support for civil legal aid to low-income Americans; Marine Mammal Commission works for the conservation of marine mammals by providing science-based oversight of domestic and international policies and actions of federal agencies with a mandate to address human effects on marine mammals and their ecosystems; Office of the U.S. Trade Representative is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries; and State Justice Institute is a federally funded nonprofit corporation that awards grants to improve the quality of justice in state courts and foster innovative, efficient solutions to common issues faced by all courts. The Administration requests $71.388 billion for CJS for FY2020, which is $1.520 billion (-2.1%) less than the $72.908 billion appropriated for CJS for FY2019 (see Table 1 ). When comparing the Administration's FY2020 request to the FY2019 funding, it should be considered that the Administration formulated its FY2020 budget request before full-year appropriations for FY2019 were enacted. The Administration requests the following: $12.214 billion for the Department of Commerce, which is $801 million (+7.0%) more than FY2019 enacted funding; $30.529 billion for the Department of Justice, which is $405 million (-1.3%) less than FY2019 enacted funding; $28.092 billion for the science agencies, which is $1.491 billion (-5.0%) less than FY2019 enacted funding; and $552 million for the related agencies, which is $425 million (-43.5%) less than FY2019 enacted funding. The increase in funding for the Department of Commerce is almost entirely the result of a proposed $2.334 billion (65.7%) increase for the Census Bureau's Periodic Censuses and Programs account. The funding is requested to help the Census Bureau conduct the decennial 2020 Census. The Administration's FY2020 budget for CJS proposes eliminating several agencies and programs: EDA, NIST's Manufacturing Extension Partnership, NOAA's Pacific Coastal Salmon Recovery Fund, the Community Relations Service (its functions would be moved to DOJ's Civil Rights Division), the COPS Office (grants for community policing activities would be moved to OJP), NASA's Office of STEM Engagement (formerly the Office of Education), and the Legal Services Corporation. The Administration requests some funding for the EDA ($30 million) and Legal Services Corporation ($18 million) to help provide for an orderly closeout of these agencies. The Administration proposes a $30 million (-75.0%) reduction for the Minority Business Development Administration. It proposes to change the agency's focus to being a policy office that concentrates on advocating for the minority business community as a whole rather than supporting individual minority business enterprises. The Administration proposes to move funding for the High Intensity Drug Trafficking Areas (HIDTA) program to the DEA. Currently, HIDTA funding is administered by the Office of National Drug Control Policy. The Administration's requested funding for many CJS accounts is below FY2019 levels; however, there are a few exceptions, which include the following: BIS (+$10 million, +8.1%), Economic and Statistical Analysis (+$7 million, +6.9%), NTIA (+$3 million, +7.4%), the Executive Office of Immigration Review (+$110 million, +19.6%), DOJ's general legal activities (+$23 million, +2.6%), the U.S. Marshals' Federal Prisoner Detention account (+$315 million, +20.3%), DOJ's National Security Division (+$8 million, +8.1%), ATF (+$52 million, +3.9%), and the Office of the U.S. Trade Representative (+$6 million, +11.3%). The Administration proposes renaming three of NASA's accounts: the Space Technology account would be changed to the Exploration Technology account, the Exploration account would be changed to the Deep Space Exploration Systems account, and the Space Operations account would be changed to the Low Earth Orbit and Spaceflight Operations account. Unlike the Administration's FY2019 budget, which proposed a new account structure for NASA, the FY2020 budget proposal does not appear to include a realignment of items that would be funded from these accounts. The annual CJS appropriations act traditionally includes an obligation cap of funds expended from the Crime Victims Fund (CVF). The Administration's FY2020 budget does not include a proposed obligation cap for the CVF. Rather, the Administration proposes a new $2.300 billion annual mandatory appropriation for crime victims programs. Within this amount, $492.5 million would be for the OVW, $10.0 million would be for oversight of OVC programs by the OIG, $12.0 million would be for developing innovative crime victims services initiatives, and a set-aside of up to $115.0 million would be for tribal victims assistance grants. From the remaining amount, the Office for Victims of Crime (OVC) would provide formula and non-formula grants to the states to support crime victim compensation and victims services programs. Also, the Administration's budget includes a proposal to transfer all of the ATF's responsibilities related to alcohol and tobacco enforcement to the Department of the Treasury's Tax and Trade Bureau. The Administration argues that the proposed realignment will allow the ATF to focus on its efforts to prevent violent crime. The proposal does not affect how much the Administration requests for the ATF for FY2020. Table 1 outlines the FY2019 funding and the Administration's FY2020 request for the Department of Commerce, the Department of Justice, the science agencies, and the related agencies. Figure 1 shows the total CJS funding for FY2010-FY2019, in both nominal and inflation-adjusted dollars (more-detailed historical appropriations data can be found in Table 2 ). The data show that nominal funding for CJS reached a 10-year high in FY2019, though in inflation-adjusted terms, funding for FY2019 was lower than it was in FY2010. There is a cyclical nature to total nominal funding for CJS because of appropriations for the Census Bureau. Overall funding for CJS traditionally starts to increase a few years before the decennial census, peaks in the fiscal year in which the census is conducted, and then declines immediately thereafter. This is discussed in more detail below. Increased funding for CJS also coincides with increases to the discretionary budget caps under the Budget Control Act of 2011 (BCA, P.L. 112-25 ). The BCA put into effect statutory limits on discretionary spending for FY2012-FY2021. Under the act, discretionary spending limits were scheduled to be adjusted downward each fiscal year until FY2021. However, legislation was enacted that increased discretionary spending caps for FY2014 to FY2019. A sequestration of discretionary funding, ordered pursuant to the BCA, cut $2.973 billion out of the total amount Congress and the President provided for CJS for FY2013. Since then, funding for CJS has increased as more discretionary funding has been allowed under the BCA. Figure 2 shows total CJS funding for FY2010-FY2019 by major component (i.e., the Department of Commerce, the Department of Justice, NASA, and the NSF). Although decreased appropriations for the Department of Commerce (a 47.4% reduction) mostly explain the overall decrease in CJS appropriations from FY2010 to FY2013, cuts in funding for DOJ (-8.7%) and NASA (-9.8%) also contributed. Funding for NSF held relatively steady from FY2010 to FY2013. Overall CJS funding has increased since FY2014, and this is partially explained by more funding for the Department of Commerce to help the Census Bureau prepare for the 2020 decennial census. While funding for the Department of Commerce decreased from FY2018 to FY2019, it is partly the result of the department receiving $1.000 billion in emergency supplemental funding for FY2018. If supplemental funding is excluded, appropriations for the Department of Commerce increased 2.5% from FY2018 to FY2019. While increased funding for the Department of Commerce partially explains the overall increase in funding for CJS since FY2014, there have also been steady increases in funding for DOJ (+11.5%), NASA (+21.8%), and NSF (+12.6%), as higher discretionary spending caps have been used to provide additional funding to these agencies. Also, increased funding for the Department of Commerce is not only the result of more funding for the Census Bureau. Funding for NOAA increased by 41.0% from FY2014 to FY2018 and funding for NIST increased by 15.9% over the same time period. However, funding for both of these agencies decreased from FY2018 to FY2019, meaning that the increase in the Department of Commerce's funding during this time period was almost solely attributable to increased funding for the Census Bureau.", "summary": "This report describes actions taken by the Trump Administration and Congress to provide FY2020 appropriations for Commerce, Justice, Science, and Related Agencies (CJS) accounts. The annual CJS appropriations act provides funding for the Department of Commerce, which includes agencies such as the Census Bureau, the U.S. Patent and Trademark Office (USPTO), the National Oceanic and Atmospheric Administration (NOAA), and the National Institute of Standards and Technology (NIST); the Department of Justice (DOJ), which includes agencies such as the Federal Bureau of Investigation (FBI), the Bureau of Prisons (BOP), the U.S. Marshals, the Drug Enforcement Administration (DEA), and the U.S. Attorneys; the National Aeronautics and Space Administration (NASA); the National Science Foundation (NSF); and several related agencies such as the Legal Services Corporation and the Equal Employment Opportunity Commission. The Administration requests $71.388 billion for CJS for FY2020, which is $1.520 billion (-2.1%) less than the $72.908 billion appropriated for CJS for FY2019. The Administration's request includes $12.214 billion for the Department of Commerce, $30.529 billion for the Department of Justice, $28.092 billion for the science agencies, and $552 million for the related agencies. The Administration's FY2020 budget proposes eliminating several CJS agencies and programs, including the Economic Development Administration, the Community Oriented Policing Services Office, NASA's STEM Engagement Office (formerly the Office of Education), and the Legal Services Corporation. The Administration proposes reducing funding for many accounts in CJS, though there are a few exceptions—the most notable of which is the proposed $2.334 billion increase for the Census Bureau's Periodic Censuses and Programs account. The increased funding is requested to help the Census Bureau conduct the decennial 2020 Census.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress on the LPD-17 Flight II amphibious ship program. The Navy's FY2020 budget submission defers the planned procurement of the second LPD-17 Flight II ship, LPD-31, by one year, to FY2021, and requests $247.1 million in advance procurement (AP) funding for the ship. This report also discusses LHA-9, a different kind of amphibious ship that the Navy wants to procure in FY2024. The Navy's proposed FY2020 budget does not request any procurement or AP funding for this ship. Issues for Congress include whether to procure LPD-31 in FY2020 or FY2021; whether to procure LPD-31 (if it is procured in FY2020) with full funding or incremental funding; the amount of procurement or AP funding to provide for LPD-31 and LHA-9 in FY2020; and more generally whether the Navy is placing too much, too little, or about the right amount of emphasis on amphibious ships in its FY2020 budget submission, particularly compared to other Navy shipbuilding programs. Congress's decisions on these issues could affect Navy capabilities and funding requirements and the shipbuilding industrial base. For an overview of the strategic and budgetary context in which the LPD-17 Flight II program and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. Navy amphibious ships are operated by the Navy, with crews consisting of Navy personnel. The primary function of Navy amphibious ships is to lift (i.e., transport) embarked U.S. Marines and their equipment and supplies to distant operating areas, and enable Marines to conduct expeditionary operations ashore in those areas. Although amphibious ships are designed to support Marine landings against opposing military forces, they are also used for operations in permissive or benign situations where there are no opposing forces. Due to their large storage spaces and their ability to use helicopters and landing craft to transfer people, equipment, and supplies from ship to shore without need for port facilities, amphibious ships are potentially useful for a range of combat and noncombat operations. On any given day, some of the Navy's amphibious ships, like some of the Navy's other ships, are forward-deployed to various overseas operating areas. Forward-deployed U.S. Navy amphibious ships are often organized into three-ship formations called amphibious ready groups (ARGs). On average, two or perhaps three ARGs might be forward-deployed at any given time. Amphibious ships are also sometimes forward-deployed on an individual basis to lower-threat operating areas, particularly for conducting peacetime engagement activities with foreign countries or for responding to smaller-scale or noncombat contingencies. Navy amphibious ships can be divided into two main groups—the so-called \"big-deck\" amphibious assault ships, designated LHA and LHD, which look like medium-sized aircraft carriers, and the smaller (but still sizeable) amphibious ships designated LPD or LSD, which are sometimes called \"small-deck\" amphibious ships. The LHAs and LHDs have large flight decks and hangar decks for embarking and operating numerous helicopters and vertical or short takeoff and landing (V/STOL) fixed-wing aircraft, while the LSDs and LPDs have much smaller flight decks and hangar decks for embarking and operating smaller numbers of helicopters. The LHAs and LHDs, as bigger ships, in general can individually embark more Marines and equipment than the LSDs and LPDs. The Navy's 355-ship force-level goal, released in December 2016, calls for achieving and maintaining a 38-ship amphibious force that includes 12 LHA/LHD-type ships, 13 LPD-17 class ships, and 13 LSD/LPD-type ships (12+13+13). The goal for achieving and maintaining a force of 38 amphibious ships relates primarily to meeting wartime needs for amphibious lift. Navy and Marine Corps officials have testified that fully meeting U.S. regional combatant commander requests for day-to-day forward deployments of amphibious ships would require a force of 50 or more amphibious ships. The Navy's force of amphibious ships at the end of FY2018 included 32 ships, including 9 amphibious assault ships (1 LHA and 8 LHDs), 11 LPD-17 Flight I ships, and 12 LSD-41/49 class ships. The LSD-41/49 class ships, which are the ships to be replaced by LPD-17 Flight II ships, are discussed in the next section. The Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan projects that the Navy's force of amphibious ships will increase gradually to 38 ships by FY2026, remain at a total of 36 to 38 ships in FY2027 to FY2034, decline to 34 or 35 ships in FY2035-FY2038, increase to 36 or 37 ships in FY2039-FY2046, and remain at 35 ships in FY2047-FY2049. Over the entire 30-year period, the force is projected to include an average of about 35.8 ships, or about 94% of the required figure of 38 ships, through resulting amount of lift capability provided by the ships would not necessarily equate to about 94% of the amphibious lift goal, due to the mix of ships in service at any given moment and their individual lift capabilities. The Navy's 12 aging Whidbey Island/Harpers Ferry (LSD-41/49) class ships ( Figure 1 ) were procured between FY1981 and FY1993 and entered service between 1985 and 1998. The class includes 12 ships because they were built at a time when the Navy was planning a 36-ship (12+12+12) amphibious force. They have an expected service life of 40 years; the first ship will reach that age in 2025. The Navy's FY2020 30-year shipbuilding plan projects that the 12 ships will retire between FY2026 and FY2038. The Navy decided in 2014 that the LSD-41/49 replacement ships would be built to a variant of the design of the Navy's San Antonio (LPD-17) class amphibious ships. (A total of 13 LPD-17 class ships [LPDs 17 through 29] were procured between FY1996 and FY2017.) Reflecting that decision, the Navy announced on April 10, 2018, that the replacement ships would be known as the LPD-17 Flight II ships. By implication, the Navy's original LPD-17 design became the LPD-17 Flight I design. The first LPD-17 Flight II ship is designated LPD-30. Subsequent LPD-17 Flight II ships are to be designated LPD-31, LPD-32, and so on. Whether the LPD-17 Flight II ships constitute their own shipbuilding program or an extension of the original LPD-17 shipbuilding program might be a matter of perspective. As a matter of convenience, this CRS report refers to the Flight II shipbuilding effort as a separate program. Years from now, LPD-17 Flight I and Flight II ships might come to be known collectively as either the LPD-17 class, the LPD-17/30 class, or the LPD-17 and LPD-30 classes. Compared to the LPD-17 Flight I design, the LPD-17 Flight II design ( Figure 2 ) is somewhat less expensive to procure, and in some ways less capable—a reflection of how the Flight II design was developed to meet Navy and Marine Corps operational requirements while staying within a unit procurement cost target that had been established for the program. In many other respects, however, the LPD-17 Flight II design is similar in appearance and capabilities to the LPD-17 Flight I design. Of the 13 LPD-17 Flight I ships, the final two (LPDs 28 and 29) incorporate some design changes that make them transitional ships between the Flight I design and the Flight II design. Consistent with the Navy's 38-ship amphibious force-level goal, the Navy wants to procure a total of 13 LPD-17 Flight II ships. The first LPD-17 Flight II ship, LPD-30, was procured in FY2018. Under the Navy's FY2019 budget submission, the second LPD-17 Flight II ship, LPD-31, was to be procured in FY2020, and the remaining 11 were to be procured at a rate of one per year starting in FY2022. The Navy's FY2020 budget submission proposes deferring the procurement of LPD-31 to FY2021 and the procurement of the third ship (LPD-32) to FY2023, with the final 10 ships to be procured at a rate of one per year starting in FY2025. As shown in Table 1 , when compared to the Navy's FY2019 budget submission, the Navy's FY2020 budget submission reduces from four to two the total number of LPD-17 Flight II ships to be procured during the period FY2020-FY2024. Under the Navy's FY2020 budget submission, LPD-17 Flight II ships cost roughly $1.8 billion each to procure. Table 2 shows LPD-17 Flight II procurement and advance procurement (AP) funding for FY2020-FY2024 as presented in the Navy's FY2020 budget submission. The most recently procured LHA/LHD-type amphibious assault ship is LHA-8 ( Figure 3 ), which was procured in FY2017 and is scheduled under the Navy's FY2020 budget submission to be delivered in January 2024. The Navy wants to procure the next LHA/LHD-type ship, LHA-9, in FY2024. LHA/LHD-type ships are considerably larger and more expensive than LPDs. The Navy's FY2020 budget submission estimates LHA-9's procurement cost at $4,076.4 million (i.e., about $4.1 billion). Some in Congress and elsewhere are interested in the potential for accelerating the procurement of LHA-9 from FY2024 to an earlier year, such as FY2020 or FY2021, in part to achieve better production learning curve benefits in shifting from production of LHA-8 to LHA-9 and thereby reduce LHA-9's procurement cost in real (i.e., inflation-adjusted) terms. For example, the Senate Armed Services Committee's report ( S.Rept. 115-262 of June 5, 2018) on the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (S. S. 2987 ) stated: The committee remains concerned with the Navy procurement profile for large deck amphibious assault ships, which includes a span of 7 years until the next large deck amphibious assault ship (LHA–9) is procured in 2024. The committee notes that efficiencies could be gained by reducing this span, which could enable a steadier workforce with an increased learning curve, material and equipment suppliers on more reliable and fixed delivery contracts, and a more effective continuous improvement schedule. The committee urges the Secretary of the Navy to accelerate procurement of LHA–9 to not later than 2021…. (Pages 82-83) As part of its action on the Navy's proposed FY2019 budget, Congress provided $350 million in unrequested AP funding for LHA-9, in part to encourage the Navy to accelerate the procurement of LHA-9 from FY2024 to an earlier fiscal year, such as FY2020 or FY2021. Under the Navy's FY2020 budget submission, the Navy continues to show LHA-9 as a ship planned for procurement in FY2024, and the Navy's proposed FY2020 budget does not request any additional procurement or AP funding for the ship. Consistent with past practice for procuring LHA/LHD-type amphibious ships, the Navy's FY2020 budget submission anticipates using two-year incremental funding (i.e., split funding) to procure LHA-9, with the bulk of the ship's procurement cost to be divided between FY2024 and FY2025. Table 3 shows FY2020-FY2024 funding for the ship under the Navy's FY2020 budget submission. Huntington Ingalls Industries/Ingalls Shipbuilding (HII/Ingalls) of Pascagoula, MS, is the Navy's current builder of both LPDs and LHA/LHD-type ships, although other U.S. shipyards could also build amphibious ships. The amphibious warship industrial base also includes many supplier firms in numerous U.S. states that provide materials and components for Navy amphibious ships. HII states that the supplier base for its LHA production line, for example, includes 457 companies in 39 states. FY2020 procurement and funding issues for Congress for FY2020 include the following: whether to procure LPD-31 in FY2020 or FY2021; whether to procure LPD-31 (if it is procured in FY2020) with full funding or incremental funding; the amount of procurement or AP funding to provide for LPD-31 and LHA-9 in FY2020; and more generally whether the Navy is placing too much, too little, or about the right amount of emphasis on amphibious ships in its FY2020 budget submission, particularly compared to other Navy shipbuilding programs. Regarding the first issue above, supporters of procuring LPD-31 in FY2020 could argue that it could put the Navy on a path to achieving the 38-ship amphibious ship force-level goal sooner than FY2026, permit the $350 million in AP funding that Congress provided for the program in FY2019 to be executed as intended, and leave more budgetary room in FY2021 for funding other Navy programs. Supporters of procuring LPD-31 in FY2021 could argue that FY2026 is an acceptable date for achieving the 38-ship amphibious ship force-level objective, particularly given the challenges the Navy faces for meeting some of its other force-level goals in coming years (such as those for attack submarines and aircraft carriers); that in a situation of finite Navy or Department of Defense (DOD) funding, procuring LPD-31 in FY2020 might require reductions in funding for other Navy or DOD programs, with an uncertain net result on Navy or DOD capabilities; and that Congress can make the FY2019 AP funding executable by passing legislation permitting the funding to be used on an LPD-17 Flight II ship procured in FY2021. Regarding the second issue above, supporters of procuring LPD-31 with full funding could argue that it would leave more budgetary room in FY2021 and perhaps one or more years beyond that for funding other Navy programs, and that Navy surface ships other than aircraft carriers and LHA/LHD-type amphibious assault ships have generally been procured with full funding rather than incremental funding. Supporters of funding LPD-31 with incremental funding could argue that doing so would reduce FY2020 funding needs for LPD-31, preserving more FY2020 funding for other Navy or DOD programs, and that there have been a few instances over the years in which Navy surface ships other than aircraft carriers and LHA/LHD-type amphibious assault ships have been procured with incremental funding. Regarding the third issue above, factors that Congress may consider include whether the Navy has properly scheduled and accurately estimated the work on these ships it is proposing to do in FY2020, and how the type and amount of work to be done on these ships in FY2020 would change if LPD-31 were procured in FY2020 instead of FY2021, and if procurement of LHA-9 were accelerated from FY2024 to an earlier fiscal year, such as FY2020 or FY2021. Regarding the fourth issue above, supporters of amphibious ships might argue that by deferring the procurement of LPD-31 to FY2021, reducing the number of LPD-17 Flight II ships to be procured in FY2020-FY2024, and not accelerating the procurement of LHA-9 from FY2024 to an earlier fiscal year, the Navy's FY2020 budget submission is placing a reduced emphasis on amphibious ships in its shipbuilding plans, particularly compared to other type of Navy ships, such as attack submarines, destroyers, and frigates, all of which experienced additions or accelerations in FY2020 or FY2021 under the Navy's FY2020 budget submission. Amphibious ships, they could argue, are as important as these other types of ships, and are in high demand by U.S. regional combatant commanders. Other observers, while acknowledging the value of amphibious ships, might argue that within a finite Navy budget, the Navy needs to make difficult choices about what type of ships to procure; that attack submarines, destroyers, and frigates are critical for countering China's improving naval capabilities and for performing other missions; and that the Navy currently has substantial shortfalls in attack submarines, large surface combatants (such as destroyers), and small surface combatants (such as frigates) relative to its force-level goals for those types of ships. Another potential issue for Congress is technical risk in the LPD-17 Flight II and LHA programs. A May 2019 Government Accountability Office (GAO) report—the 2019 edition of GAO's annual report surveying DOD major acquisition programs—states the following about the LPD-17 Flight II program: Current Status The Navy planned to accelerate purchase of LPD 30—the first fully configured Flight II ship—after Congress appropriated $1.8 billion above the fiscal year 2018 budget request, according to program officials. The Navy reported that it awarded contracts in August 2018 for LPD 30 long lead time materials and in March 2019 for lead ship construction. The Navy based the Flight II design on Flight I, with modifications to reduce costs and meet new requirements. According to program officials, roughly 200 design changes will distinguish the two flights including replacing the composite mast with a steel stick. Officials stated that the design would not rely on any new technologies. However, the Navy plans to install a new radar, the Enterprise Air Surveillance Radar, which is still in development. The Navy expects live radar system testing through November 2019, with a complete radar prototype in February 2020. Although program officials consider these activities to be low risk, the Navy will make its decision to begin ship construction by December 2019 without incorporating lessons learned from radar testing into the design. Starting construction before stabilizing the design could require the Navy to absorb costly design changes and rework during ship construction. The Navy initially pursued a limited competition for LX(R), but now has a non-competitive acquisition strategy for LPD 17 Flight II. The Navy plans to award sole-source contracts to Huntington Ingalls—the only shipbuilder of Flight I ships—for Flight II construction. Further, the program did not request a separate independent cost estimate for Flight II prior to awarding the LPD 30 detail design and construction contract. At the same time, the Navy identified no plans to establish a cost baseline specific to Flight II. Without this baseline, the Navy would report full LPD 17 program costs—rather than Flight II specific costs—constraining visibility into Flight II. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated as appropriate The program office stated that LPD Flight II is included under the existing LPD 17 acquisition program baseline, and that no other viable contractor responded to a public notice regarding the Navy's plan to award Huntington Ingalls the LPD 30 construction contract. The May 2019 GAO report stated the following about the LHA program: Current Status In June 2017, the Navy exercised a contract option for detail design and construction of the LHA 8. The LHA 8 incorporates significant design changes from earlier ships in the LHA 6 class, but Navy officials were unable to quantify the changes. The Navy started construction in October 2018 and LHA 8 is scheduled to be delivered in January 2024. The LHA 8 program office has not identified any critical technologies. However, the ship is relying on technology that is currently being developed by another Navy program, the Enterprise Air Surveillance Radar (EASR), with delivery expected in August 2021. EASR, intended to provide self-defense and situational awareness capabilities, is derived from the pre-existing Air and Missile Defense Radar program, but will be a different size and will rotate. LHA 8 program officials have identified the radar as the program's highest development risk. If the radar is not delivered on schedule, Navy officials report that this could lead to out-of-sequence design and delayed installation and testing. Officials responsible for developing the radar, however, stated that the radar is approaching maturity and is on schedule to be delivered to the shipbuilder when needed. The Navy began construction with about 61 percent of the LHA 8 product model completed—an approach inconsistent with shipbuilding best practices. These best practices call for 100 percent completion of 3D product modeling prior to construction start to minimize the likelihood of costly re-work and out of sequence work that can drive schedule delays. The Navy, however, estimates that the LHA 8 shipbuilder will not complete 100 percent of the ship's 3D product model until June 2019, almost 8 months after the start of construction. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office stated that the Navy understands all design changes incorporated on the LHA 8, such as reintroducing the well deck and incorporating EASR. According to the program office, the Navy does not begin construction on any section of the LHA 8 ship before completing that respective section's design. Table 4 summarizes congressional action on the Navy's FY2020 funding request for the LPD-17 Flight II and LHA-9 programs.", "summary": "The Navy wants to procure a total of 13 LPD-17 Flight II amphibious ships. LPD-17 Flight II ships cost roughly $1.8 billion each to procure. The first LPD-17 Flight II ship, LPD-30, was procured in FY2018. As part of its action on the Navy's proposed FY2019 budget, Congress provided $350 million in unrequested advance procurement (AP) funding for a second LPD-17 Flight II ship, LPD-31, to be procured in FY2020. This was consistent with the Navy's FY2019 budget submission, under which LPD-31 was planned for procurement in FY2020 and the remainder of its procurement cost was to be requested in FY2020. The Navy's FY2020 budget submission, however, proposes deferring the procurement of LPD-31 by one year, to FY2021, and the Navy's proposed FY2020 budget, rather than requesting the remainder of LPD-31's procurement cost, instead requests $247.1 million in AP funding for the ship. Navy officials state that if no LPD-17 Flight II ship is procured in FY2020, the $350 million in FY2019 AP funding that Congress provided for the LPD-17 program would become unexecutable, because that funding was provided specifically for use in building an LPD-17 Flight II ship procured in FY2020, not an LPD-17 Flight II ship procured in FY2021. The $350 million in FY2019 AP funding can be made executable by procuring LPD-31 in FY2020 or by passing legislation permitting the FY2019 AP funding to be used for an LPD-17 Flight II ship procured in FY2021. One alternative for procuring LPD-31 in FY2020 would be to do so with full funding (i.e., with the remainder of the ship's procurement cost provided in FY2020). Another alternative would be to pass legislation giving the Navy the authority to procure LPD-31 in FY2020 using incremental funding. Navy officials state that under the latter alternative, the amount of procurement funding needed for LPD-31 in FY2020 would be, at a minimum, roughly $200 million, and not more than the requested amount of $247.1 million. As part of its action on the Navy's proposed FY2019 budget, Congress also provided $350 million in unrequested AP funding for a different kind of amphibious ship—an amphibious assault ship called LHA-9. This ship is considerably larger and more expensive than an LPD-17 Flight II ship. The Navy's FY2020 budget submission estimates LHA-9's procurement cost at $4,076.4 million (i.e., about $4.1 billion). Under the Navy's FY2019 budget submission, LHA-9 was planned for procurement in FY2024. The $350 million in FY2019 AP funding that Congress provided was intended to encourage the Navy to accelerate the procurement of LHA-9 from FY2024 to an earlier fiscal year, such as FY2020 or FY2021. Under the Navy's FY2020 budget submission, the Navy continues to show LHA-9 as a ship planned for procurement in FY2024, and the Navy's proposed FY2020 budget does not request any additional procurement or AP funding for the ship. Issues for Congress include whether to procure LPD-31 in FY2020 or FY2021; whether to procure LPD-31 (if it is procured in FY2020) with full funding or incremental funding; the amount of procurement or AP funding to provide for LPD-31 and LHA-9 in FY2020; more generally whether the Navy is placing too much, too little, or about the right amount of emphasis on amphibious ships in its FY2020 budget submission, particularly compared to other Navy shipbuilding programs; and technical risk in the LPD-17 Flight II and LHA programs.", "document_type": "crs"}
{"report": "Beginning the summer 2013 through 2016, there were numerous reports in the media on sexual assault incidents in the U.S. armed services. In many cases, such reports were followed by questions on what actions were taken by the Department of Defense (DOD), the Obama Administration, and Congress to address the issue. This report lists a comprehensive chronology of official activities in response to incidents of military sexual assault, as well as legislative action on the issue. The report is divided into three sections: the DOD and the Obama Administration's actions, congressional action, and legislation in the 113 th (2013-2014) and 114 th (2015-2016) Congresses. Also included is a resources section with related articles, hearings, and reports. Information in this report was compiled from the official government websites of DOD, the Obama White House and Congress.gov for historical background and will not be updated. June 13, 2012 – DOD announced Army Major General Gary S. Patton as the new director of the Sexual Assault Prevention and Response Office (SAPRO). September 25, 2012 – As part of the DOD's efforts to confront the crime of sexual assault in the military, then Secretary of Defense Leon Panetta announced improvements to prospective commander and senior enlisted training and a review of the initial military training environment in every service. December 21, 2012 – DOD released key findings from the Academic Program Year (APY) 2011-2012 Report on Sexual Harassment and Violence at the United States Military Service Academies. According to this report, the overall prevalence rate of unwanted sexual contact increased in all three military academies. From 2011 to 2012, the Air Force Academy in Colorado showed the largest increase in reported sexual assaults from 33 to 52 incidents. Sexual assaults at the Naval Academy in Annapolis, MD, increased from 11 to 15, and were up at the U.S. Military Academy in West Point, NY, from 10 to 13. January 18, 2013 – DOD announced the release of the 2012 Workplace and Gender Relations Survey of Reserve Component Members . This report included rates of unwanted sexual contact, unwanted gender-related behaviors (i.e., sexual harassment and sexist behavior), and gender discriminatory behaviors and sex discrimination reported by survey respondents during the past 12 months. March 7, 2013 – Defense Secretary Chuck Hagel, in a letter responding to Members of Congress, wrote that an internal review was being conducted of a decision by a senior Air Force commander, Lt. Gen. Craig Franklin, to overturn the sexual assault conviction of an Air Force fighter pilot, Lt. Col. James Wilkerson. Colonel Wilkerson was found guilty in November 2012 of aggravated sexual assault and was sentenced to one year in military prison. Lt. General Franklin's decision to overturn the findings of the court-martial freed Colonel Wilkerson, and allowed him to be reinstated in the Air Force. In his letter, Hagel said that while General Franklin's decision could not be overturned, he had asked Pentagon lawyers and the Secretary of the Air Force to review the way in which General Franklin decided the case. He also said he wanted a review of whether the military should change the way it handles sexual assault cases. April 2, 2013 – Secretary Chuck Hagel stated in a message to all DOD personnel on Sexual Assault Awareness and Prevention Month that, \"Together, we must work every day to instill a climate that does not tolerate or ignore sexist behavior, sexual harassment, or sexual assault. These have no place in the United States military and violate everything we stand for and the values we defend.\" April 8, 2013 – Secretary Hagel announced that DOD's Office of General Counsel will review Article 60 of the Uniform Code of Military Justice (UCMJ) after an Air Force officer's court-martial conviction for sexual assault was dismissed using the authority provided by Article 60. May 6, 2013 – The Office of the Secretary of Defense released a 24-page memorandum from Secretary Hagel to all heads of the military services regarding DOD's 2013 Sexual Assault Prevention and Response Strategy, and the release of the Annual Report on Sexual Assault in the Military 2012 (2 volumes). According to this report, in FY2012 (October 1, 2011, through September 30, 2012), the number of sexual assaults reported by members of the military rose 6% to 3,374. An anonymous survey of military personnel showed the number of service members who had experienced unwanted sexual contact could be as many as 26,000 but most never reported the incidents. That number is an increase over the 19,000 estimated assaults in 2011. These reports involved offenses ranging from abusive sexual contact to rape. May 7, 2013 – In a DOD press briefing, Defense Secretary Chuck Hagel and Major General Gary Patton, director of SAPRO, announced new series of actions to further DOD's sexual assault and prevention efforts. Hagel directed service chiefs to develop methods to hold all military commanders accountable for establishing command climates of dignity and respect in incorporating sexual assault prevention and victim care principles in their commands. May 7, 2013 – DOD announced the establishment of the Response Systems to Adult Sexual Assault Crimes Panel consisting of nine selected appointees. Secretary of Defense Hagel appointed five members to serve on the response systems panel, who joined four members appointed by the chairman and ranking member of the Senate Armed Services Committee, and the chairman and ranking member of the House Armed Services Committee. May 14, 2013 – The Army announced that an Army Sergeant First Class assigned to III Corps, Fort Hood, TX, was under investigation for pandering, abusive sexual contact, assault, and maltreatment of subordinates. May 15, 2013 – Returning from NATO meetings in Brussels, the Chairman of the Joint Chiefs of Staff, Army Gen. Martin E. Dempsey, told reporters that sexual assault in the Armed Forces constitutes a crisis in the military. He further stated that \"We're losing the confidence of the women who serve that we can solve this problem, and that's a crisis.\" May 16, 2013 – At the White House, President Obama met with senior military leaders on the issue of sexual assault in the U.S. Armed Forces. The President stated that not only is it \"shameful and disgraceful\" but also \"dangerous to our national security.\" May 17, 2013 – During a press briefing, Defense Secretary Hagel and Chairman of the Joint Chiefs of Staff Army Gen. Martin Dempsey discussed their meeting with President Obama, Vice President Biden, and senior enlisted and officer leadership in the U.S. military. Dempsey told the Armed Forces Press Service that he believes that the long wars in Iraq and Afghanistan may be factors in the growing incidents of sexual assault. He also stated that: \"If a perpetrator shows up at a court-martial with a rack of ribbons and has four deployments and a Purple Heart, there is certainly a risk that we might be a little too forgiving of that particular crime.\" May 17, 2013 – In an interview, Air Force Chief of Staff, Gen. Mark Walsh, said that sexual assaults in his branch of the military typically involve alcohol use and can be traced to a lack of respect for women. \"We have a problem with respect for women that leads to many of the situations that result in sexual assault in our Air Force,\" he told reporters in his Pentagon office. Walsh further stated that combatting the crisis is his top priority and that he reviews every reported case of sexual assault. May 22, 2013 – The Pentagon announced that DOD's sexual assault prevention staff would be exempt from furloughs. According to Pentagon spokeswoman, Cynthia O. Smith, \"The full-time civilians working these programs and implementing policies will not be furloughed. This will ensure responsive victim care and ensure all the programs recently directed by Secretary Hagel are implemented swiftly and efficiently.\" May 24, 2013 – President Obama addressed graduates of the U.S. Naval Academy in Annapolis, MD, and noted in his commencement speech that the misconduct of some in the military can endanger U.S. forces and undermine U.S. efforts to achieve security and peace worldwide. He further stated that those who commit sexual assault are not only committing a crime, they also \"threaten the trust and discipline that make our military strong.\" May 25, 2013 – In a commencement speech at the U.S. Military Academy at West Point, NY, Defense Secretary Chuck Hagel told graduates that they must be the generation of leaders that will commit to building a culture of respect for every member of the military. He stated that sexual harassment and sexual assault in the military \"are a profound betrayal of sacred oaths and sacred trusts.\" He also quoted President Obama's remarks at the Naval Academy when he said, \"these crimes have no place in the greatest military on earth.\" May 30, 2013 – Pentagon officials reaffirmed DOD's commitment to fighting sexual assault by launching the Safe HelpRoom at http://SafeHelpline.org , a Sexual Assault Support Service for the DOD community. This new service allows victims to participate in moderated group chat sessions to connect with and support one another in a secure online environment. The Safe HelpRoom is in response to a need for peer support services identified by users of DOD's Safe Helpline for sexual assault victims. June 6, 2013 – In a speech at the 2013 Joint Women's Leadership Symposium, Navy Adm. James A. Winnefeld Jr., vice chairman of the Joint Chiefs of Staff, said plans to combat and eliminate sexual assault include a greater investment in specially trained sexual assault investigators and a push for more psychological, medical, and legal assistance for victims. The vice chairman also said officials will examine the scientific roots of behavioral factors associated with potential predators, which will assist sexual assault prevention efforts. June 7, 2013 – The Pentagon released a statement that Maj. Gen. Michael T. Harrison was suspended of his duties as the Commanding General of United States Army Japan and I Corps for failing in his duties as a commander to report or investigate an allegation of sexual assault. June 7, 2013 – Air Force officials announced Maj. Gen. Margaret H. Woodward has been assigned to direct the Air Force Sexual Assault Prevention and Response Office to replace Lt. Col. Jeffrey Krusinski, the former chief of the Air Force Sexual Assault Prevention and Response Program. He was arrested and charged by Arlington County, VA, police for allegedly being drunk and groping a woman in a parking lot one mile from the Pentagon. In the previous year, Maj. Gen. Woodward led the investigation of Air Force training in the wake of a sexual assault scandal centered at Lackland Air Force Base, Texas. June 27, 2013 – Defense Secretary Hagel met in person with the Sexual Assault Response Systems Review Panel for the first time. According to the Pentagon, \"the panel will conduct an independent review and assessment of the systems used to investigate, prosecute, and adjudicate crimes involving sexual assault and related offenses under the Uniform Code of Military Justice, and will develop recommendations to improve the effectiveness of those systems.\" DOD established the panel in accordance with the National Defense Authorization Act (NDAA) for Fiscal Year 2013 ( P.L. 112-239 , Section 576 (a)). Previously, Hagel held a teleconference with panel members. July 3, 2013 – The Chief of the National Guard Bureau, Army Gen. Frank J. Grass, launched a comprehensive campaign designed to assist National Guard units in combating sexual assault as part of a military-wide effort to protect victims and eradicate the crime from the ranks. July 9, 2013 – DOD Inspector General (IG) released its report, Joint Warfighting and Readiness Evaluation of the Military Criminal Investigative Organizations Sexual Assault Investigations . The report evaluated the Military Criminal Investigative Organizations' (MCIOs') sexual assault investigations in 2010 to determine whether they were adequately investigated. The report found most MCIO investigations (89%) met or exceeded the investigative standards and returned only cases with significant deficiencies (11%) to the MCIOs for corrective action. July 18, 2013 – The Air Force adopted two new measures to eliminate sexual assault from within the ranks, including requiring mandatory discharge for airmen, officer or enlisted, who commit sexual assault, and requiring the Air Force's most senior commanders to review actions taken on these cases. In addition, the Air Force Academy is reviewing the results of a survey on sexual assault taken on June 24, 2013. Suggestions from survey respondents ranged from involving faculty with character coaching to a complete revamping of how the Air Force Academy trains its freshmen. July 18, 2013 – Secretary of the Navy Ray Mabus announced additional resources for investigators and a new initiative designed to enhance accountability and transparency across the Navy. Mabus approved nearly $10 million to hire more than 50 additional Naval Criminal Investigative Service (NCIS) Family and Sexual Violence Program personnel to shorten investigation times, and directed the Navy and Marine Corps to regularly publish online the results of each service's courts- martial. July 18, 2013 – The Air Force announced that airmen who commit sexual assaults will be discharged, and senior commanders must review actions taken on sexual assault cases under new Air Force initiatives as of July 2, 2013. August 15, 2013 – Defense Secretary Hagel announced seven new anti-sexual assault initiatives in a memo detailing \"... absolute and sustained commitment to providing a safe environment in which every service member and DOD civilian is free from the threat of sexual harassment and assault,\" he wrote in a statement. \"Our success depends on a dynamic and responsive approach. We, therefore, must continually assess and strive to improve our prevention and response programs.\" October 3, 2013 – Air Force Col. Alan R. Metzler, the deputy director for SAPRO, emphasized that the first step to stopping sexual assault in the military is through prevention but when prevention fails, new measures to improve victims' confidence and combat underreporting were needed. Metzler outlined the DOD Sexual Assault Advocate Certification Program (D-SAACP) and the Defense Sexual Assault Incident Database (DSAID), two initiatives set to improve the advocacy services provided to victims of sexual assault. November 9, 2013 – Army Maj. Gen. Gary S. Patton, director of DOD's SAPRO, reported on DOD's recent prevention and awareness successes before the Response Systems to Adult Sexual Assault Crimes Panel. He testified that new DOD initiatives to combat sexual assault helped create a 46% jump in victims reporting compared to the previous year. December 20, 2013 – President Obama instructed Defense Secretary Hagel and Chairman Dempsey to continue their efforts to make substantial improvements with respect to sexual assault prevention and response, including to the military justice system. He also directed that they report back with a full-scale review of their progress, by December 1, 2014. January 10, 2014 – Army Maj. Gen. Jeffrey J. Snow, the new SAPRO chief announced the release of the Annual Report to Congress on Sexual Harassment and Violence at the Military Service Academies . The report covered the 2012-13 academic year, and found in 2013, reports of sexual assault decreased at the U.S. Military Academy at West Point, New York and the U.S. Air Force Academy in Colorado Springs, Colorado. The number of reported incidents went up at the U.S. Naval Academy in Annapolis, Maryland. January 30, 2014 – The independent Response Systems to Adult Sexual Assault Crimes Panel accepted a subcommittee recommendation that senior military commanders retain authority for referring these crimes to courts-martial. May 1, 2014 – DOD released the 2013 Annual Report on Sexual Assault in the Military . The report covered the period from Oct. 1, 2012, through Sept. 30, 2013, and revealed 5,061 reports of sexual assault in the Defense Department, a 50 percent jump from the previous year. More than 70 percent of all cases that the military had jurisdiction resulted in criminal charges. July 17, 2014 – DOD collaborated with the Justice Department's Office for Victims of Crime to develop a curriculum that expands on the skills learned in initial sexual assault response coordinator and sexual assault prevention and response victim advocate training. December 4, 2014 – Secretary Hagel released DOD's Report to the President of the United States on Sexual Assault Prevention and Response on its progress in addressing sexual assault in the military, and announced four directives to further strengthen the department's prevention and response program. According to this report, based on survey data, servicemembers experienced fewer sexual assaults in FY2014 than in FY2012, an estimated 19,000, down from 26,000. January 16, 2015 – Secretary Hagel at the Air Force Sexual Assault Prevention and Response Summit remarked that the fight to end sexual assault in the military must be \"personal.\" He cited \"encouraging progress\" over the last year, but acknowledged more can be done, notably in areas such as social retaliation, which he said stems from the overall environment. February 11, 2015 – The annual report on sexual harassment and violence at the military service academies estimated that overall rates of unwanted sexual contact at the military service academies declined in Academic Program Year (APY) 2013-2014, decreased for both men and women, indicating that fewer sexual assaults occurred at the academies in APY 13-14 than in APY 11-12. February 19, 2015 – Health and criminal investigation experts spoke at the Army's Sexual Harassment/Assault Response Program Summit on the underreporting of male victims of sexual assault in the military due to factors such as shame and fear of being ostracized. March 26, 2015 – SAPRO head Army Maj. Gen. Jeffrey Snow monitored 50 initiatives put in place by past Defense secretaries Leon Panetta and Chuck Hagel. According to Snow, the most recent data, gathered last year, shows the past-year prevalence of sexual assault is down significantly, Snow said. Estimates indicate there were 6,000 to 7,000 fewer sexual assaults in 2014 than in 2012. May 1, 2015 – According to the 2014 RAND Military Workplace Stud y, \"the percentage of active duty women who experienced unwanted sexual contact over the past year declined from 6.1% in 2012 to an estimated 4.3% in 2014. For active duty men, the estimated prevalence rate dropped from 1.2% in 2012 to 0.9% in 2014. Based on these rates, an estimated 18,900 service members experienced unwanted sexual contact in 2014, down from around 26,000 in 2012.\" May 22, 2015 – Defense Secretary Ash Carter announced Army Maj. Gen. Camille M. Nichols will assume duties as director of SAPRO effective June 8, 2015. January 8, 2016 – DOD announced the release of the Annual Report on Sexual Harassment and Violence at the Military Service Academies for A cademic P rogram Y ear 2014-2015 . Data in the report indicated the academies received 91 sexual assault reports during the academic year, an increase of 32 reports over the previous year. April 2 8 , 2016 – Defense Secretary Ash Carter announced a sexual assault retaliation prevention and response strategy aimed at how the department supports servicemembers who experience retaliation, while aligning prevention and response efforts across the services. May 5, 2016 – The annual report of the Defense Department's Sexual Assault Prevention and Response Program indicated that DOD's efforts are having an impact. In FY2015, service members made 6,083 reports of sexual assault – the same rate as the previous fiscal year, with four in 1,000 servicemembers reporting sexual assault despite a smaller active force size. In addition, 21 percent of those making restricted reports in fiscal 2015 chose to convert to unrestricted reports, enabling them to participate in the military justice process. September 19 , 2016 – The Naval Academy in Annapolis, MD, hosted an all-day training event to strengthen how military and civilian communities work together to support servicemembers who report sexual assault in a joint program between DOD and the Justice Department. October 19, 2016 – DOD released the 2016 Military Investigation and Justice Experience Survey that allowed servicemembers who have experienced sexual assault and elected to participate in the military justice process the opportunity to provide DOD with direct feedback on their experiences; and to improve the services and support servicemembers reporting sexual assault. December 15, 2016 – Defense Department officials announced the release of the \"DOD Plan to Prevent and Respond to Sexual Assault of Military Men,\" designed to enhance outreach to military men and increase efforts to help them recover. The following information was compiled using Congress.gov, Congressional Quarterly (CQ.com), House.gov, Senate.gov, and Roll Call. See the section \"Resources\" for a list of congressional hearings, reports and other documents. January 23, 2013 – The House Armed Services Committee held a hearing on sexual misconduct at Lackland Air Force Base in San Antonio, TX. January 25, 2013 – H.R. 430 , Protect Our Military Trainees Act, was introduced. This legislation would have amended the Uniform Code of Military Justice to protect new members of the Armed Forces who are undergoing basic training from the sexual advances of the members of the Armed Forces responsible for their instruction. It also requires that violators be punished as a court-martial may direct. March 5, 2013 – H.R. 975 , the Servicemember Mental Health Review Act, was introduced. This bill would have amended Title 10, United States Code, to extend the duration of the Physical Disability Board of Review and to the expand the authority of such Board to review the separation of members of the Armed Forces on the basis of a mental condition not amounting to disability, including separation on the basis of a personality or adjustment disorder. This would have included a review of those victims who have suffered military sexual trauma. March 13, 2013 – S. 548 , Military Sexual Assault Prevention Act of 2013, was introduced, read twice, and referred to the Senate Armed Services Committee. This legislation aimed to amend Title 10, United States Code, and to improve capabilities of the Armed Forces to prevent and respond to sexual assault and sexual harassment in the Armed Forces. March 13, 2013 – Victims of sexual assault in the military testified before a Senate panel examining the military's handling of sexual assault cases and stated that the \"military justice system is broken.\" They urged Congress to make changes in the law that would stem the rape, sexual assault, and sexual harassment that they said are pervasive in the service branches. Several male Navy veterans testified before the Senate Armed Service Committee's military personnel panel investigating sexual assaults in the military. One recounted that he was raped in 2000 by a higher-ranking petty officer aboard a submarine. He told the committee that he carries permanent shame not for the sexual assault but over how the Navy forced him to leave. He stated in his testimony, \"I carry my discharge as an official and permanent symbol of shame, on top of the trauma of the physical attack, the retaliation and its aftermath.\" March 20, 2013 – S. 628 , Servicemember Mental Health Review Act, was introduced, read twice and referred to the Committee on Armed Services. Related to H.R. 975 , this bill would have amended Title 10, United States Code, to extend the duration of the Physical Disability Board of Review and to the expand the authority of such board to review the separation of members of the Armed Forces on the basis of a mental condition not amounting to disability, including separation on the basis of a personality or adjustment disorder. This would have included a review of those victims who may have suffered military sexual trauma. April 17, 2013 – H.R. 1593 , Sexual Assault Training Oversight and Prevention (STOP) Act, was introduced. This bill seeks to amend Title 10, United States Code, by establishing a Sexual Assault Oversight and Response Council and an enhanced Sexual Assault Oversight and Response Office \"to improve the prevention of and response to sexual assault in the Armed Forces, and by requiring the appointment of a Director of Military Prosecutions for sexual-related offenses committed by a member of the Armed Forces.\" April 26, 2013 – A U.S. senator reportedly put a hold on the nomination of Air Force Lt. Gen. Susan Helms, nominated to serve as vice commander of the U.S. Space Command. Earlier in February 2012, Gen. Helms rejected the recommendation of legal counsel and overturned the conviction of an Air Force captain who had been found guilty of aggravated sexual assault of a female lieutenant. May 7, 2013 – S. 871 , Combating Military Sexual Assault Act of 2013, was introduced, read twice and referred to the Committee on Armed Services. This legislation would have aimed to provide any victim with a special military lawyer who would assist them throughout the process, prohibit sexual contact between instructors and trainees during and within 30 days of completion of basic training or its equivalent, and ensure that sexual assault response coordinators are available to help members of the National Guard and Reserve. May 7, 2013 – H.R. 1864 , to amend Title 10, United States Code, would have required an Inspector General investigation of allegations of retaliatory personnel actions taken in response to making protected communications regarding sexual assault, was introduced and referred to the House Armed Services Committee. This bill would have required the Inspector General of the Department of Defense (DOD), the Department of Homeland Security (DHS) with respect to the Coast Guard, or any of the military departments to investigate allegations of retaliatory personnel actions taken in response to making protected communications regarding alleged instances of rape, sexual assault, or other forms of sexual misconduct in violation of the Uniform Code of Military Justice. May 7, 2013 – At the Senate Armed Services Committee, Subcommittee on Personnel hearing Gen. Mark Welsh, the Air Force's Chief of Staff, told the committee that he and Air Force Secretary Michael Donley were \"appalled\" by the charges against Lt. Col. Jeffrey Krusinski, branch chief of the Air Force's Sexual Assault and Prevention Office. He was arrested and charged by Arlington County, VA, police for allegedly being drunk and groping a woman in a parking lot one mile from the Pentagon. \"Sexual assault prevention and response efforts are critically important to us,\" Welsh said. \"It is unacceptable that this occurs anywhere, at any time, in our Air Force.\" May 8, 2013 – H.R. 1867 , the Better Enforcement for Sexual Assault Free Environments (BE SAFE) Act of 2013, was introduced, read twice, and referred to the House Armed Services Committee. This bill would have amended Title 10, United States Code, \"to require an Inspector General investigation of allegations of retaliatory personnel actions taken in response to making protected communications regarding sexual assault.\" This bill would ensure those found guilty of rape, sexual assault, sodomy, or an attempt to commit any of those crimes, are—at a minimum—dismissed or dishonorably discharged from the military. The five-year statute of limitations within the military's justice system for sexual assault cases would be eliminated, and legal assistance services available to victims would be expanded. May 8, 2013 – In a hearing of the Defense Subcommittee of the Senate Appropriations Committee, senators questioned the Air Force's top leaders over rising sexual assaults in the military. Some senators cited DOD statistics from the Annual Report on Sexual Assault in the Military 2012 on the number of incidents of sexual assaults the same week Lt. Col. Jeffrey Krusinski, Chief of the Air Force's Sexual Assault Prevention and Response Branch, was arrested and charged with sexual battery. May 9, 2013 – A hearing of the Defense Subcommittee of the House Appropriations Committee on the Air Force budget was held. Witnesses included Michael Donley, Secretary of the Air Force, and General Mark Welsh, Air Force Chief of Staff. Members of the committee questioned them on Defense Secretary Hagel's review of the decision by Lt. Gen. Craig Franklin to dismiss Lt. Col. James Wilkerson's sexual assault conviction. May 14, 2013 – H.Res. 213 , a resolution to establish the \"Special Committee on Sexual Assault and Abuse in the Armed Forces\" was introduced. A \"Dear Colleague\" memorandum urged support of this legislation referencing Gen. Martin Dempsey's denouncement of military sexual assault as a \"crisis\" and the need for Congress to address this problem in a \"deeper, more comprehensive manner.\" This Special Committee would have included 19 members appointed by the Speaker and Minority Leader, as well as chairman and ranking members of the committees on Armed Services, Appropriations, Judiciary, and Oversight and Government Reform. May 14, 2013 – H.R. 1960 , a bill to authorize appropriations for FY2014 for military activities of the Department of Defense, for military construction, and for defense activities of the Department of Energy, to prescribe military personnel strengths for such fiscal year, and for other purposes, was introduced. The FY2014 NDAA addressed the issue of sexual assault in the military by establishing minimum sentencing guidelines for any service members found guilty of sexual assault as well as other provisions. May 15, 2013 – H.R. 1986 , Sexual Assault Nurse Examiner (SANE) Deployment Act, was introduced. This bill would have provided for the assignment of Sexual Assault Nurse Examiners-Adult/Adolescent to brigades and equivalent units of the Armed Forces. May 15, 2013 – H.R. 2002 , Combating Military Sexual Assault Act of 2013, was introduced and referred to the House Committee on Armed Services. This bill was related to S. 871 , and would have provided any sexual assault victim with a special military lawyer who would assist them throughout the process, prohibit sexual contact between instructors and trainees during and within 30 days of completion of basic training or its equivalent, and ensure that sexual assault response coordinators (SARCs) are available to help members of the National Guard and Reserve. May 16, 2013 – H.R. 2016 , Military Justice Improvement Act of 2013, was introduced and referred to the Committee on Armed Services. This bill would have required \"a commanding officer who receives a report of a sexual-related offense involving a member in such officer's chain of command to act immediately upon such report by way of referral to the appropriate criminal investigative office or service.\" This bill was related to S. 538 , Military Sexual Assault Prevention Act of 2013, and S. 967 , Military Justice Improvement Act of 2013. May 16, 2013 – S. 967 , Military Justice Improvement Act of 2013, was introduced, read twice, and referred to the Committee on Armed Services. This bill would have required a commanding officer who receives a report of a sex-related offense involving a member in such officer's chain of command to act immediately upon such report by way of referral to the appropriate criminal investigative office or service. May 21, 2013 – S. 992 , a bill to provide for offices on sexual assault prevention and response under the Chiefs of Staff of the Armed Forces, to require reports on additional offices and selection of sexual assault prevention and response personnel, and for other purposes. This bill was read twice and referred to the Committee on Armed Services. May 22, 2013 – A House panel passed a number of changes in sexual assault prevention programs that limited commander discretion in reducing or dismissing rape and assault charges and expanded support services for victims. The House Armed Services Subcommittee on Military Personnel approved the personnel issues as part of H.R. 1960 , the FY2014 NDAA bill. May 22, 2013 – The Senate Appropriations Subcommittee on Defense held a hearing on the Army's FY 2014 Budget Request. Witnesses included Secretary of the Army, John McHugh and Chief of Staff of the Army, General Raymond T. Odierno. Army Secretary McHugh announced at this hearing that the service will soon require soldiers being considered for sexual assault prevention jobs to undergo behavioral-health evaluations as a way of screening out potential sex offenders from these high-profile positions. This was in response to a senator's question about the criteria for sexual assault prevention jobs. McHugh said that service record and availability are the only criteria commanders are using to fill these jobs since sexual-assault prevention positions do not fall under any military occupational specialty and lack career incentives. May 23, 2013 – S. 1032 , Better Enforcement for Sexual Assault Free Environments Act of 2013, was introduced, read twice and referred to the Committee on Armed Services. This bill would amend Title 10, United States Code, to make certain improvements in the Uniform Code of Military Justice related to sex-related offenses committed by members of the Armed Forces. June 4, 2013 – The uniformed chiefs of the Army, Navy, Air Force, Marine Corps, and Coast Guard appeared before a hearing of the Senate Armed Services Committee, Subcommittee on Military Personnel. These military leaders acknowledged that despite a \"zero tolerance\" for sexual abuse, they had neglected the \"epidemic\" in the ranks by not always monitoring subordinate commanders. Chairman of the Joint Chiefs of Staff, Army Gen. Martin Dempsey pointed to competing demands and pressures of fighting two wars in Iraq and Afghanistan, as a justification for lack of adequate monitoring. The Service Chiefs voiced support for legislative changes that would take tougher action against offenders and provide more support for victims of military sexual assault. They opposed a legislative proposal that would remove unit commanders' legal power to oversee major criminal cases and transfer that authority to uniformed prosecutors. The Army Chief of Staff, Gen. Ray Odierno, noted that taking away commanders' authority in matters of military justice would adversely impact discipline and that \"we cannot, however, simply 'prosecute' our way out of this problem. At its heart, sexual assault is a discipline issue that requires a culture change.\" June 4, 2013 – S. 1092 was introduced, read twice, and referred to the Senate Armed Services Committee. This bill would have amended Title 10, United States Code, to require an Inspector General investigation of allegations of retaliatory personnel actions taken in response to making protected communications regarding sexual assault. June 6, 2013 –would allow victims of sexual assault to apply for a permanent change The House Armed Services Committee passed H.R. 1960 , the NDAA for FY2014, by a vote of 59-2. According to the Committee's Fact Sheet, \"the FY14 NDAA of station or unit transfer, while authorizing the Secretary of Defense to inform commanders of their authority to remove or temporarily reassign service members who are the alleged perpetrators of sexual assault. It also requires the provision of victims' counsels, qualified and specially trained lawyers in each of the services, to be made available to provide legal assistance to the victims of sex-related offenses. The FY14 NDAA adds rape, sexual assault, or other sexual misconduct to the protected communications of service members with a Member of Congress or an Inspector General.\" June 14, 2013 – The House passed H.R. 1960 , the NDAA for FY2014 by a vote of 315 to 108 (Roll no. 244). This bill includes a provision protecting victims of sexual assault in the Armed Forces as protected communications under military whistle-blower laws, to shield victims against retaliatory actions. The measure seeks to encourage more victims to report assaults, rape and other forms of sexual misconduct. June 17, 2013 – H.R. 2397 , \"Department of Defense Appropriations Act, 2014,\" was introduced and referred to the House Committee on Appropriations. It was reported as an original measure, H.Rept. 113-113 . Lawmakers wrote in this committee report that they were \"outraged by the pervasive problem of sexual assault in the Armed Forces. Sexual assault is not just an issue in the military; it is an epidemic. To address it, the Committee believes that there must be a culture change at every level of the military, from the most senior leadership to the most junior ranks.\" Included was a measure that would provide $182 million for the Pentagon's Sexual Assault Prevention and Response Office (SAPRO) and for an expansion of a victim's counseling program. For FY2013, the programs received $95 million. The bill included $25 million that was not requested by the administration in a transfer account to expand assistance across the Defense Department. June 20, 2013 – S. 1197 , NDAA for Fiscal Year 2014, was introduced in the Senate. This bill would have authorized \"appropriations for fiscal year 2014 for military activities of the Department of Defense, for military construction, and for defense activities of the Department of Energy, to prescribe military personnel strengths for such fiscal year, and for other purposes,\" and referred to the Committee on Armed Services. The original measure was reported to the Senate in Report No. 113-44 and placed on the Legislative Calendar under General Orders (Calendar No. 91). Included in this bill was Title V—Military Personnel Policy, Subtitle E—Sexual Assault Prevention and Response and Military Justice. June 27, 2013 – H.R. 1864 , a bill \"To amend Title 10, United States Code, to require an Inspector General investigation of allegations of retaliatory personnel actions taken in response to making protected communications regarding sexual assault,\" was agreed to/passed in the House, 423-0 (Roll no. 294). July 18, 2013 – Army Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, and Navy Adm. James A. Winnefeld Jr., the vice chairman, in a hearing before the Senate Armed Services Committee said that commanders should retain responsibility for prosecuting service members accused of sexual assault, and taking that authority away could harm good order and discipline. July 2 2 , 2013 – H.R. 2777 , Stop Pay for Violent Offenders Act, was introduced \"to amend Title 10, United States Code, to authorize the Secretaries of the military departments to suspend the pay and allowances of a member of the Armed Forces who is held in confinement pending trial by court-martial or by civil authority for any sex-related offense or capital offense.\" July 24, 2013 – H.Amdt. 408 to H.R. 2397 , an amendment to provide funds to identify individuals who were separated from the military on the grounds of a disorder subsequent to reporting a sexual assault and, if appropriate, correcting their record. This amendment (A065) was agreed to by voice vote. July 24, 2013 – H.R. 2397 , \"Department of Defense Appropriations Act, 2014,\" was passed/agreed to in House, 315 - 109 (Roll no. 414). October 22, 2013 – H.R. 3304 , the NDAA for FY2014, was introduced in the House. As introduced, the bill would have provided for a defense counsel interview of victim of an alleged sex-related offense in presence of trial counsel, counsel for the victim, or a Sexual Assault Victim Advocate, prohibition on service in the Armed Forces by individuals who have been convicted of certain sexual offenses, Coast Guard regulations regarding request for permanent change of station or unit transfer by victim of sexual assault, temporary administrative reassignment or removal of an active duty member accused of committing a sexual assault, Inspector General investigation of allegations of retaliatory personnel actions taken in response to making protected communications regarding sexual assault, compliance tracking of commanding officers in conducting organizational climate assessments for purposes of preventing and responding to sexual assaults, advancement of submittal deadline for report of independent panel on assessment of military response systems to sexual assault, retention of certain forms on sexual assault, timely access to Sexual Assault Response Coordinators by the National Guard and Reserves, and qualifications and selection of Department of Defense sexual assault prevention and response personnel and required availability of Sexual Assault Nurse Examiners. It also would establish commanding officer actions regarding sexual assault reports, an eight-day incident reporting requirement in response to unrestricted report of sexual assault in which the victim is a member of the Armed Forces, and curricula that addresses the prevention of sexual assault at the military service academies. December 26, 2013 – H.R. 3304 , the NDAA for FY2014 became P.L. 113-66 . As enacted, the bill included more than two dozen provisions to address an epidemic of sexual assault in the military in Title XVII—Sexual Assault Prevention and Response and Related Reforms, Subtitle A—Reform of Uniform Code of Military Justice. February 26, 2014 – Dr. Karen S. Guice, principal deputy assistant secretary of defense for health affairs, and other Defense Department officials testified before the Senate Armed Services Committee's personnel subcommittee on the relationship between military sexual assault survivors and the subsequent development of suicide and post-traumatic stress disorder. April 9, 2014 – H.R. 4435 , the Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015, was introduced in the House. The bill would have applied Title XVII of the National Defense Authorization Act for Fiscal Year 2014 ( P.L. 113-66 ; 127 Stat. 950) to the military service academies, consulted with victims of sexual assault regarding victims' preference for prosecution of offense by court-martial or civilian court, created a confidential review of characterization of terms of discharge for victims of sexual offenses, revised requirements relating to DOD policy on retention of evidence in a sexual assault case to allow return of personal property upon completion of related proceedings, required the DOD Inspector General to review separation of members who made unrestricted reports of sexual assault, and would have created a deadline for submission of report containing results of review of Office of Diversity Management and Equal Opportunity role in sexual harassment cases. Prior to passing in the House, the House Armed Services Committee rejected an amendment from Congresswoman Speier that would have removed the military chain of command from decisions to prosecute sexual assault cases and other major crimes, except offenses that are unique to the military. She offered an alternative proposal, which would have only removed commanding officers' prosecutorial discretion for instances of sexual assault, that was also rejected by a 28-34 vote. It was received in the Senate, read twice, and placed on Senate Legislative Calendar under General Orders. Calendar No. 425. June 2, 2014 — S. 2410 , the Carl Levin National Defense Authorization Act for Fiscal Year 2015, was introduced in the Senate. It was placed on Senate Legislative Calendar under General Orders. Calendar No. 402. The bill included measures on military justice such as enhancing sexual assault prevention and response, the application of P.L. 113-66 , Title XVII to military academies, and the collaboration between the Departments of Justice and Defense. December 19 , 2014 — H.R. 3979 , the Carl Levin and Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015, was signed as P.L. 113-291 . Subtitle D—Military Justice, Including Sexual Assault and Domestic Violence Prevention and Response addressed the following: modification of DOD policy on retention of evidence in a sexual assault cases to permit return of personal property upon completion of related proceedings; requirements relating to Sexual Assault Forensic Examiner; analysis and assessment of disposition of most serious offenses; a plan for limited use of certain information on sexual assaults in restricted reports by military criminal investigative organizations; the establishment of a Defense Advisory Committee on Investigation, Prosecution, and Defense of Sexual Assault in the Armed Forces; confidential review of the terms of discharge of sexual assault survivors; deadline for submission of report containing results of review of Office of Diversity Management and Equal Opportunity role in sexual harassment cases; and applied Title XVII of the NDAA for Fiscal Year 2014 ( P.L. 113-66 ; 127 Stat. 950) to the military service academies. January 13, 2015 — S. 178 , the Justice for Victims of Trafficking Act of 2015 was introduced in the Senate. Title V of this bill \"Military Sex Offender Reporting\" stipulates that the Secretary of Defense shall provide the Attorney General information about sex offenders in the military to be included in the National Sex Offender Registry and the Dru Sjodin National Sex Offender Public Website. It became P.L. 114-22 on May 29, 2015. February 3, 2015 — H.R. 677 , American Heroes COLA Act of 2015, was introduced in the House, passed on February 9, and the next day was received in the Senate, read twice, and referred to the Committee on Veterans' Affairs. Section 6 proposed that veterans whose claims were being reviewed again in relation to a previously denied claim relating to military sexual trauma be given priority, among other claims. February 12, 2015 — H.R. 956 , the Military Track, Register and Alert Communities Act of 2015 (Military TRAC Act) was introduced in the House and referred to the House Armed Services Committee's Subcommittee on Military Personnel on November 23. This bill intended to require DOD to maintain a sex offender registry of individuals convicted of certain sex offenses under the Uniform Code of Military Justice or of other military offenses appropriate for sex offender registration purposes. April 13, 2015 — H.R. 1735 , the National Defense Authorization Act for Fiscal Year 2016, was introduced in the House. Subtitle D addressed military justice, including sexual assault and domestic violence prevention and response. April 24, 2015 — H.R. 2029 , the Consolidated Appropriations Act, 2016 was introduced in the House and later became P.L. 114-113 . Section 8057 specified that \"$25,000,000 shall be for continued implementation and expansion of the Sexual Assault Special Victims' Counsel Program.\" May 14, 2015 — S. 1356 , the National Defense Authorization Act for Fiscal Year 2016 was introduced in the Senate and later became P.L. 114-92 on November 25, 2015. Subtitle D \"Military Justice, Including Sexual Assault and Domestic Violence Prevention and Response\" amended the Uniform Code of Military Justice, authorized Special Victims' Counsel for civilian DOD employees, required the DOD to develop a policy to standardize the training for Special Victims' Counsel, required the establishment of Defense Advisory Committee on Investigation, Prosecution, and Defense of Sexual Assault in the Armed Forces within 90 days, required the development of a plan to improve prevention and response to sexual assaults of male members of the Armed Forces, required the establishment of a strategy to prevent retaliation against Armed Forces members who report or intervene on behalf of sexual assault victims, and authorized the President to modify Rule 304(c) of the Military Rules of Evidence to conform to the rules governing the admissibility of the corroboration of admissions and confessions in the trial of criminal cases in the U.S. district courts. June 11, 2015 — S. 1558 , Department of Defense Appropriations Act, 2016, was introduced in the Senate. The bill would have required specified O&M funds to be used for continued implementation and expansion of the Sexual Assault Prevention and Response Program. June 11, 2015 — S. 1567 , a bill to amend Title 10, United States Code, to provide for a review of the characterization or terms of discharge from the Armed Forces of individuals with mental health disorders alleged to affect terms of discharge, was introduced in the Senate. The bill proposed to address medical evidence reviews for former members applying for relief from the terms of their discharge due to military sexual trauma among other conditions. June 11, 2015 — S.Amdt. 1578 to S.Amdt. 1463 in H.R. 1735 , National Defense Authorization Act for Fiscal Year 2016, was proposed in the Senate and later considered and defeated on June 16. This bill was intended to reform procedures for determinations to proceed to trial by court-martial for certain offenses under the Uniform Code of Military Justice. It did not achieve 60 votes in the Senate by Yea-Nay Vote. The final vote was 50 - 49. April 12, 2016 — H.R. 4909 , the NDAA for FY2017, was introduced in the House where it passed on May 18. On May 26, it was received in the Senate, read twice, and placed on Senate Legislative Calendar under General Orders. Calendar No. 502. April 18, 2016 — H.R. 4991 , the Prevent Retaliation and Open up Transparency to Expand Care for Troops (PROTECT) Act of 2016, was introduced in the House and later referred to the House Armed Services' Subcommittee on Military Personnel. The bill intended to amend the Uniform Code of Military Justice to establish the offense of retaliation with provisions that would permit any person intent on retaliating against anyone for reporting or planning to report a criminal offense to be punished as a court-martial may direct. May 18, 2016 — S. 2943 , the National Defense Authorization Act for Fiscal Year 2017, was introduced in the Senate and became P.L. 114-328 on December 23. Subtitle D specified requirements for the review by a discharge review board of claims by former members asserting post-traumatic stress disorder (PTSD) or traumatic brain injury (TBI) in connection with combat or sexual trauma. Subtitle E \"Military Justice and Legal Assistance Matters\" required an annual report on sexual assault and response efforts, required Sexual Assault Prevention and Response Office to establish evaluation metrics and best practices in the prevention of and response to retaliation, and modified the definition of sexual harassment for the purposes of investigations of complaints of harassment by commanding officers. Title XXXV \"Maritime Matters\" established requirements for policies and training regarding sexual harassment and sexual assault prevention and response at the U.S. Merchant Marine Academy and required the Inspector General of the Department of Transportation to submit a report to Congress about the sexual harassment and sexual assault prevention and response program at the U.S. Merchant Marine Academy. Title LIV \"Court-Martial Jurisdiction\" specified the sexual offenses over which general courts-martial have exclusive jurisdiction. Title LX \"Punitive Articles\" created a new section of the Uniform Code of Military Justice addressing accountability for sexual misconduct committed by recruiters and trainers during the various phases within the recruiting and basic military training environments, revised the definition of ''sexual act'' with respect to the offenses of rape and sexual assault. May 19, 2016 — H.R. 5293 , Department of Defense Appropriations Act, 2017, was introduced in the House, passed on June 16, received in the Senate the next day, where it received a motion to proceed to consideration. The bill would have required O&M funds to be used for continued implementation and expansion of the Sexual Assault Prevention and Response (SAPR) Program. May 26, 2016 — S. 3000 , Department of Defense Appropriations Act, 2017, was introduced in the Senate and placed on Senate Legislative Calendar under General Orders. Calendar No. 500. The Senate Committee on Appropriations, Subcommittee on Department of Defense held several hearings prior from February-April. The bill would have required specified O&M funds to be used for continued implementation and expansion of the SAPR Program. DOD Directive No. 6495.01. \"Sexual Assault Prevention and Response (SAPR) Program,\" January 23, 2012, Incorporating Change 3, April 11, 2017, at http://www.esd.whs.mil/Portals/54/Documents/DD/issuances/dodd/649501p.pdf DOD Directive No. 6495.02. \"Sexual Assault Prevention and Response (SAPR) Program Procedures,\" March 28, 2013, Incorporating Change 3, May 24, 2017, at https://www.esd.whs.mil/Portals/54/Documents/DD/issuances/dodi/649502p.pdf DOD Inspector General (IG). E valuation of the Military Criminal Investigative Organizations Sexual Assault Investigations, DODIG-2013-091, July 9, 2013, 104 p . at http://www.dodig.mil/reports.html/Article/1118941/evaluation-of-the-military-criminal-investigative-organizations-sexual-assault/ Sexual Assault Prevention and Response Office (SAPRO) at https://www.sapr.mil/ Includes the full text of DOD Annual Reports, FY2004 - FY2016, and reports on Sexual Harassment and Violence at the U.S. Military Service Academies, Academic Program Years (APY) 2005-2018. \"Final 2014–2015 Academic Program Year Annual Report on Sexual Harassment and Sexual Assault at the United States Merchant Marine Academy,\" Maritime Administration, undetermined date, at https://www.marad.dot.gov/wp-content/uploads/pdf/Final-2014-2015-SASH-Report.pdf \"Department of Transportation U.S. Merchant Marine Academy Culture Audit, Deliverable 4. Final Report,\" U.S. Merchant Marine Academy, December 2016, at https://cms.dot.gov/sites/dot.gov/files/docs/mission/civil-rights/263966/dot-usmma-report.pdf \"Sexual Assault Prevention and Response (SAPR) Program,\" United States Coast Guard, LMI, December 2016, at https://media.defense.gov/2017/Mar/29/2001723560/-1/-1/0/CIM_1754_10E.PDF \"Preliminary 2015-2016 Academic Year Biennial Survey and Report on Sexual Harassment and Sexual Assault at the United States Merchant Marine Academy,\" Maritime Administration, January 12, 2017, at https://www.marad.dot.gov/wp-content/uploads/pdf/Preliminary-2015-2016-SASH-Report.pdf Military Justice: Oversight and Better Collaboration Needed for Sexual Assault Investigations and Adjudications , GAO-11-579, Jun 22, 2011, 42 p. http://www.gao.gov/products/GAO-11-579 Preventing Sexual Harassment: DOD Needs Greater Leadership Commitment and an Oversight Framework , GAO-11-809, Sep 21, 2011, 47 p. http://www.gao.gov/assets/590/585344.pdf Prior GAO Work on DOD's Actions to Prevent and Respond to Sexual Assault in the Military , GAO-12-571R, Mar 30, 2012, 40 p. http://www.gao.gov/assets/590/589780.pdf DOD Has Taken Steps to Meet the Health Needs of Deployed Servicewomen, but Actions Are Needed to Enhance Care for Sexual Assault Victims, GAO-13-182, January 29, 2013, 40 p. http://www.gao.gov/assets/660/651624.pdf Military Personnel: Actions Needed to Address Sexual Assaults of Male Servicemembers, Report to the Committee on Armed Services , GAO-15-284, March 19, 2015, 86 p. http://www.gao.gov/products/GAO-15-284 Sexual Assault: Actions Needed to Improve DOD's Prevention Strategy and to Help Ensure It Is Effectively Implemented, GAO-16-61, November 4, 2015, 59 p. http://www.gao.gov/products/GAO-16-61 DOD and Coast Guard: Actions Needed to Increase Oversight and Management Information on Hazing Incidents Involving Servicemembers, GAO-16-226, Feb 9, 2016, 74 p. http://www.gao.gov/products/GAO-16-226 The following news sources are listed in chronological order to make it easier to follow the numerous incidents of wide-spread misconduct reported in the media. Military.com has ongoing news on military sexual assault at http://www.military.com/topics/sexual-assault . Montgomery, Nancy. \"Johnson Found Guilty of Last Two Counts; Awaits Sentencing.\" Stars and Stripes , June 13, 2012, at http://www.stripes.com/news/johnson-found-guilty-of-last-two-counts-awaits-sentencing-1.180204 Carroll, Chris. \"Air Force has Identified 31 Alleged Victims in Lackland Sex Abuse Scandal,\" Stars and Stripes, June 28, 2012, at http://www.stripes.com/news/air-force-has-identified-31-alleged-victims-in-lackland-sex-abuse-scandal-1.181597 Dao, James. \"Instructor for Air Force Is Convicted in Sex Assaults,\" New York Times , July 20, 2012, at http://www.nytimes.com/2012/07/21/us/lackland-air-force-base-instructor-guilty-of-sex-assaults.html?pagewanted=all&_r=0 Blansett, Susan and Hoffman, Michael. \"Sexual Assault Cases Flood Military Courts,\" Military.com, August 13, 2012, at http://www.military.com/daily-news/2012/08/13/sex-assault-cases-flood-military-courts.html Risen, James. \"Honor Betrayed: Attacked at 19 by an Air Force Trainer, and Speaking Out,\" New York Times , February 26, 2013, at http://www.nytimes.com/2013/02/27/us/former-air-force-recruit-speaks-out-about-rape-by-her-sergeant-at-lackland.html?pagewanted=all Mulrine, Anne. \"Seeking the Sex-Assault Solution,\" Air Force Magazine , April 2013, at http://www.airforcemag.com/MagazineArchive/Pages/2013/April%202013/0413solution.aspx \"5 Former Lackland Commanders Disciplined,\" Military.com, May 2, 2013, at http://www.military.com/daily-news/2013/05/02/5-former-lackland-commanders-disciplined.html Kime, Patricia. \"Lawmakers Act Fast with New Legislation on Military Sexual Assault.\" Army Times , May 7, 2013. Shapira, Ian. \"July Trial Set for Jeffrey Krusinski, Air Force Officer Accused of Sexual Battery.\" Washington Post , May 9, 2013, at https://www.washingtonpost.com/local/july-trial-set-for-air-force-officer-accused-of-sexual-battery/2013/05/09/8a21eb92-b8d9-11e2-92f3-f291801936b8_story.html?utm_term=.e0d4951e6573 Steinhauer, Jennifer. \"Lawmakers, at White House, Discuss Sex Abuse in Military.\" New York Times , May 9, 2013, at http://www.nytimes.com/2013/05/10/us/politics/lawmakers-huddle-at-white-house-on-sex-abuse-in-military.html?_r=0 Whitlock, Craig. \"Pentagon Grapples with Sex Crimes by Military Recruiters,\" Washington Post , May 12, 2013, at http://articles.washingtonpost.com/2013-05-12/world/39210853_1_military-recruiters-sexual-abuse-army-reserve Sisk, Richard. \"Assault Prevention NCO Investigated for Sex Crimes.\" Military.com, May 15, 2013, at http://www.military.com/daily-news/2013/05/15/assault-prevention-nco-investigated-for-sex-crimes.html Whitlock, Craig. \"Some in Congress want Changes in Military Law as a Result of Sex Crimes,\" Washington Post , May 15, 2013, at http://www.washingtonpost.com/world/national-security/some-in-congress-want-changes-in-military-law-as-result-of-sex-crimes/2013/05/15/672a2a8a-bd8b-11e2-a31d-a41b2414d001_story.html Sisk, Richard. \"Sex Assault Crisis Pushes Senate to Overhaul UCMJ,\" Military.com, May 16, 2013, at http://www.military.com/daily-news/2013/05/16/sex-assault-crisis-pushes-senate-to-overhaul-ucmj.html Tilghman, Andrew. \"Dempsey: DOD May Have Become 'Too Forgiving' of Sexual Assault,\" Army Times , May 17, 2013. Brady, Gen. Roger Brady (ret.). \"Commentary: Telling Truths about Sexual Assault is Risky,\" Air Force Times , May. 21, 2013. Salcedo, Michele. \"Senator: Fire Commanders Allowing Sex Assault,\" Army Times, May 26, 2013. Tucker, Eric. \"More Details Released on Annapolis Sex Assault Investigation: Allegations Made Against Three Football Players,\" Navy Times , May 30, 2013. Lardner, Richard. \"Brass Seeks to Temper Military Justice Overhaul,\" Associated Press, June 3, 2013, at http://www.military.com/daily-news/2013/06/03/brass-seeks-to-temper-military-justice-overhaul.html Cassata, Donna and Richard Lardner. \"Sexual Assaults Force Changes to Military Justice,\" Associated Press, June 4, 2013, at http://www.military.com/daily-news/2013/06/04/sexual-assaults-force-changes-to-military-justice.html Zengerle, Patricia. \"U.S. Lawmakers Act to Limit Military Authority in Sex Assault Cases,\" Reuters, June 5, 2013, at http://www.reuters.com/article/2013/06/05/us-usa-military-sexassault-congress-idUSBRE9541IG20130605 Cassata, Donna and Richard Lardner. \" House OKs 2-Yr Jail Term for Military Sex Assault ,\" Associated Press, June 14, 2013, at http://www.military.com/daily-news/2013/06/14/house-oks-2-year-jail-term-for-military-sex-assault.html Montgomery, Nancy. \" After 2 decades of sexual assault in military, no real change in message ,\" Stars and Stripes , July 7, 2013, at https://www.stripes.com/news/after-2-decades-of-sexual-assault-in-military-no-real-change-in-message-1.229091 Steinhauer, Jennifer. \"Complex Fight in Senate over Curbing Military Sex Assaults,\" New York Times , June 14, 2013, at http://www.nytimes.com/2013/06/15/us/politics/in-senate-complex-fight-over-curbing-sexual-military-assaults.html?pagewanted=all Dao, James. \"In Debate over Military Sexual Assault, Men Are Overlooked Victims,\" New York Times , June 23, 2013, at http://www.nytimes.com/2013/06/24/us/in-debate-over-military-sexual-assault-men-are-overlooked-victims.html?pagewanted=all&_r=0 Sisk, Richard. \"Military Tries to Sever Booze, Sex Assault Link,\" Military.com, July 8, 2013, at http://www.military.com/daily-news/2013/07/08/military-tries-to-sever-booze-sex-assault-link.html Watson, Julie. \"Military Works to Change Culture to Combat Rape,\" Associated Press, July 15, 2013, at http://www.military.com/daily-news/2013/07/15/military-works-to-change-culture-to-combat-rape.html Olson, Wyatt. \"IG Review Finds Deficiencies in Sex Assault Cases,\" Stars and Stripes, July 16, 2013, at http://www.military.com/daily-news/2013/07/16/ig-review-finds-deficiencies-in-sex-assault-cases.html Shanker, Thom. \"New Support for Military in Sex Cases,\" New York Times , July 24, 2013, at http://www.nytimes.com/2013/07/25/us/politics/new-support-for-military-in-sex-cases.html Taranto, James. \"A Strange Sort of Justice at West Point,\" The Wall Street Journal, July 26, 2013, at https://www.wsj.com/articles/a-strange-sort-of-justice-at-west-point-1376453937 Cassata, Donna, \"Senator Targets Military Law over Sexual Assault,\" Associated Press, July 29, 2013, at http://www.military.com/daily-news/2013/07/29/senator-targets-military-law-over-sexual-assault.html?comp=7000023317843&rank=3 Groer, Annie. \" Military brass claim progress in pursuing sexual assault cases ,\" Washington Post, August 1, 2013, at https://www.washingtonpost.com/blogs/she-the-people/wp/2013/08/01/military-brass-claim-progress-in-pursing-sexual-assault-cases/?utm_term=.72e55e7e218c Jennifer Koons. \"Sexual Assault in the Military: Can the Pentagon stem the rise in incidents?\" CQ Researcher , vol. 23, no. 29 (A ugust 9, 2013 ), p p. 693-716 . Laird, Lorelei. \" Military lawyers confront changes as sexual assault becomes big news ,\" ABA (American Bar Association) Journal , September 2013, at http://www.abajournal.com/magazine/article/military_lawyers_confront_changes_as_sexual_assault_becomes_big_news/ Jelinek, Pauline. \" Pentagon: Reports of Sexual Assault Up 46 Percent ,\" Associated Press, November 8, 2013, at http://www.military.com/daily-news/2013/11/08/pentagon-reports-of-sexual-assault-up-46-percent.html Matthews, Michael F. \" The Untold Story of Military Sexual Assault ,\" The New York Times, November 24, 2013, at http://www.nytimes.com/2013/11/25/opinion/the-untold-story-of-military-sexual-assault.html \" Men Sexually Assaulted in the Military Speak Out ,\" Baltimore Sun, December 20, 2013, at http://www.military.com/daily-news/2013/12/20/men-sexually-assaulted-in-the-military-speak-out.html Kageyama, Yuri and Richard Lardner. \"Documents Reveal Chaotic Military Sex-Abuse Record,\" Associated Press, February 10, 2014, at http://www.military.com/daily-news/2014/02/10/documents-reveal-chaotic-military-sex-abuse-record.html Montgomery, Nancy. \"AF Program Rare Bright Spot in Sex Assault Fight,\" Stars and Stripes , February 27, 2014, at http://www.military.com/daily-news/2014/02/27/air-force-program-rare-bright-spot-in-sex-assault-fight.html Cox, Matthew. \"Alcohol Policies Reviewed as Sex Assault Rises,\" Military.com, May 1, 2014, at http://www.military.com/daily-news/2014/05/01/alcohol-policies-reviewed-as-sex-assault-rises.html Burns, Robert. \"Army Knocks 2-Star Down to 1-Star Rank,\" Associated Press, August 27, 2014, at http://www.military.com/daily-news/2014/08/27/army-knocks-2-star-down-to-1-star-rank.html Milham, Matt. \"Army: It's Good News That Sexual Assault Reports Are Up,\" Stars and Stripes , September 26, 2014, at http://www.military.com/daily-news/2014/09/26/army-its-good-news-that-sexual-assault-reports-are-up.html Draper, Robert. The Military's Rough Justice on Sexual Assault,\" New York Times , November 26, 2014, at https://www.nytimes.com/2014/11/30/magazine/the-militarys-rough-justice-on-sexual-assault.html Sisk, Richard. \"Sexual Assault Reports Increase 8%, Pentagon Cites Progress,\" Military.com, December 4, 2014, at http://www.military.com/daily-news/2014/12/04/sexual-assault-reports-increase-8-pentagon-cites-progress.html Baldor, Lolita C. \"Male Military Sex Assault Victims Slow to Complain,\" Associated Press, December 9, 2014, at http://www.military.com/daily-news/2014/12/09/male-military-sex-assault-victims-slow-to-complain.html Roulo, Claudette. \"Sexual Assault Rates Decrease at Military Service Academies,\" DOD News, Defense Media Activity, February 11, 2015, at http://archive.defense.gov/news/newsarticle.aspx?id=128158 Pellerin, Cheryl. \"DOD Honors Sexual Assault Response Coordinators,\" DOD News, April 23, 2015, at https://www.defense.gov/News/Article/Article/604510/ Rowe, Major Derek. \"General courts-martial for sexual assault: How do they work?\" Air Force News , April 28, 2015, at http://www.af.mil/News/Commentaries/Display/Article/586763/general-courts-martial-for-sexual-assault-how-do-they-work/ Sisk, Richard. \"Military Sexual Assault Reports Increased 11 Percent Last Year,\" Military.com, May 1, 2015, at http://www.military.com/daily-news/2015/05/01/military-sexual-assault-reports-increased-11-percent-last-year.html Johnson, Lieutenant General Michelle D., U.S. Air Force Academy superintendent; Vice Admiral Walter E. \"Ted\" Carter Jr., superintendent, U.S. Naval Academy; Lieutenant General Robert L. Caslen, superintendent, U.S. Military Academy; Rear Admiral James A. Helis, superintendent, U.S. Merchant Marine Academy; Rear Admiral Sandra L. Stosz, superintendent, U.S. Coast Guard Academy. \"Lessons to Share: The five superintendents of federal service academies discuss how their institutions -- which faced scrutiny over sexual assault before many other colleges attracted such attention -- have responded to the issue,\" Inside Higher Ed, May 7, 2015, at https://www.insidehighered.com/views/2015/05/07/essay-how-federal-service-academics-prevent-and-punish-sexual-assault Tilghman, Andrew. \"Military sexual assault claims: 1 in 20 lead to jail time,\" Military Times, May 13, 2015, at https://www.militarytimes.com/2015/05/13/military-sexual-assault-claims-1-in-20-lead-to-jail-time/ Schogol, Jeff. \"Defense seeks dismissal of sexual assault case transferred to Washington,\" Air Force Times, October 17, 2015, at https://www.airforcetimes.com/news/your-air-force/2015/10/17/defense-seeks-dismissal-of-sexual-assault-case-transferred-to-washington/ Whitlock, Craig. \"In the war against sexual assault, the Army keeps shooting itself in the foot,\" Washington Post, December 19, 2015, at https://www.washingtonpost.com/news/checkpoint/wp/2015/12/19/in-the-war-against-sexual-assault-the-army-keeps-shooting-itself-in-the-foot/?utm_term=.d856136e939b Defense Media Activity. \"Defense Department Proposes UCMJ Changes,\" DOD News, December 28, 2015, at https://www.defense.gov/News/Article/Article/638108/defense-department-proposes-ucmj-changes/ Losey, Stephen. \"USAF launches new strategy to curb sexual assault,\" Air Force Times, December 30, 2015, at https://www.airforcetimes.com/news/your-air-force/2015/12/30/usaf-launches-new-strategy-to-curb-sexual-assault/ Kime, Patricia. \"Sexual assault reporting rises at U.S. service academies,\" Military Times , January 8, 2016, at https://www.militarytimes.com/news/your-military/2016/01/08/sexual-assault-reporting-rises-at-u-s-service-academies/ Larter, David B. \"Navy sex assault victims may be eligible for early separation,\" Navy Times, January 20, 2016, at https://www.navytimes.com/news/your-navy/2016/01/20/navy-sex-assault-victims-may-be-eligible-for-early-separation/ Cox, John Woodrow. \"Why sex assault reports have spiked at the Naval Academy, West Point and the Air Force Academy, Washington Post , March 11, 2016, at https://www.washingtonpost.com/news/checkpoint/wp/2016/03/11/why-sex-assault-reports-have-spiked-at-the-naval-academy-west-point-and-the-air-force-academy/?utm_term=.a5e15f2f16f1 Whitlock, Craig, Thomas Gibbons-Neff. \"Military bringing more charges against ofﬁcers for sexual assault,\" Washington Post, March 20, 2016, at https://www.stripes.com/news/us/military-bringing-more-charges-against-of%EF%AC%81cers-for-sexual-assault-1.400140#.WeTFNOFRXUc Lardner, Richard. \"Pentagon misled lawmakers on military sexual assault cases,\" Associated Press , April 18, 2016, at https://apnews.com/23aed8a571f64a9d9c81271f0c6ae2fa/pentagon-misled-lawmakers-military-sexual-assault-cases Kheel, Rebecca. \"Senators ask Obama to investigate whether Pentagon misled Congress,\" The Hill, April 19, 2016, at http://thehill.com/policy/defense/276832-senators-ask-obama-to-investigate-pentagons-sexual-assault-comments Secretary of the Air Force Public Affairs. \"Air Force report on sexual assault highlights program's progress,\" Air Force News , May 05, 2016, at http://www.af.mil/News/Article-Display/Article/752653/air-force-report-on-sexual-assault-highlights-programs-progress/ Tilghman, Andrew. \"Military sex assault: Just 4 percent of complaints result in convictions,\" Military Times , May 5, 2016, at https://www.militarytimes.com/veterans/2016/05/05/military-sex-assault-just-4-percent-of-complaints-result-in-convictions/ Montgomery, Nancy. \"US Military Court Addresses 'Incapable of Consent' to Sex Issue,\" Stars and Stripes , May 18, 2016, at http://www.military.com/daily-news/2016/05/18/us-military-court-addresses-incapable-of-consent-to-sex-issue.html Losey, Stephen. \"Military must do right by wrongly-discharged sexual assault victims, advocates say,\" Air Force Times , May 19, 2016, at https://www.airforcetimes.com/news/your-air-force/2016/05/19/military-must-do-right-by-wrongly-discharged-sexual-assault-victims-advocates-say/ Lyle, Amaani. \"DoD Safe Helpline Offers Specialized Support to Sexual Assault Victims,\" DOD News, July 15, 2016, at https://dod.defense.gov/News/Article/Article/841166/dod-safe-helpline-offers-specialized-support-to-sexual-assault-victims/ Rein, Lisa. \"Merchant Marine Academy under fire for sexual assault allegations,\" Stars and Stripes, August 12, 2016, at https://www.stripes.com/news/us/merchant-marine-academy-under-fire-for-sexual-assault-allegations-1.423595 Lyle, Amaani. \"DoD Unveils Plan to Broaden Sexual Assault Support to Men,\" DOD News, Defense Media Activity, December 15, 2016, at https://www.defense.gov/News/Article/Article/1030795/dod-unveils-plan-to-broaden-sexual-assault-support-to-men/ The following sources are listed in alphabetical order by author. Burgess, Ann W., Donna M. Slattery, and Patricia A. Herlihy. \"Military Sexual Trauma: A Silent Syndrome.\" Journal of Psychosocial Nursing & Mental Health Services 51, no. 2 (2013): 20-6. D'Ambrosio-Woodward, Tricia. \"Military Sexual Assault: A Comparative Legal Analysis of the 2012 Department of Defense Report on Sexual Assault in the Military: What It Tells Us, What It Doesn't Tell Us, and How Inconsistent Statistic Gathering Inhibits Winning the 'Invisible War.'\" Wisconsin Journal of Law, Gender & Society 29, no. 2 (2014): 173-211. Farris, Coreen, Terry L. Schell and Terri Tanielian. Physical and Psychological Health Following Military Sexual Assault: Recommendations for Care, Research, and Policy . Santa Monica, CA: RAND Corporation, 2013. http://www.rand.org/pubs/occasional_papers/OP382 Firestone, Juanita M., J. M. Miller, and Richard Harris. \"Implications for Criminal Justice from the 2002 and 2006 Department of Defense Gender Relations and Sexual Harassment Surveys.\" American Journal of Criminal Justice : AJCJ 37, no. 3 (2012): 432-451. Gibson, Carolyn J., Kristen E. Gray, Jodie G. Katon, Tracy L. Simpson, and Keren Lehavot. \"Sexual Assault, Sexual Harassment, and Physical Victimization during Military Service across Age Cohorts of Women Veterans.\" Women's Health Issues 26, no. 2 (2016): 225-231. Harrell, Margaret C., Laura Werber, Marisa Adelson, Sarah J. Gaillot, Charlotte Lynch and Amanda Pomeroy. A Compendium of Sexual Assault Research . Santa Monica, CA: RAND Corporation, 2009. http://www.rand.org/pubs/technical_reports/TR617 Holland, Kathryn, Rabelo, Verónica, and Cortina, Lilia. Sexual Assault Training in the Military: Evaluating Efforts to End the 'Invisible War.' American Journal of Community Psychology 54, no. 3/4 (2014): 289-303. Morral, Andrew R., Kristie Gore, and Terry L. Schell. Sexual Assault and Sexual Harassment in the U.S. Military, Volume 1. Design of the 2014 RAND Military Workplace Study . Santa Monica, CA: RAND Corporation, National Defense Research Institute, 2014. https://www.rand.org/pubs/research_briefs/RB9841.html Morral, Andrew R., Kristie Gore, and Terry L. Schell. Sexual Assault and Sexual Harassment in the U.S. military: Volume 2. Estimates for Department of Defense Service members from the 2014 RAND Military Workplace Study . Santa Monica, CA: RAND Corporation, National Defense Research Institute, 2015. https://www.rand.org/pubs/research_reports/RR870z2-1.html O'Brien, Carol, Jessica Keith, and Lisa Shoemaker. \"Don't Tell: Military Culture and Male Rape.\" Psychological Services 12, no. 4 (2015): 357-365. Stander, Valeria A. and Cynthia J. Thomsen. \"Sexual Harassment and Assault in the U.S. Military: A Review of Policy and Research Trends.\" AMSUS Military Medicine (Association of Military Surgeons of the United States) 181, no. 1S (2016): 20-27. This chronological list of hearings was compiled from Congress.gov and CQ.com. U.S. Congress, House Armed Services Committee, A Review of Sexual Misconduct by Basic Training Instructors at Lackland Air Force Base , 113 th Cong., 1 st sess., January 23, 2013, H.A.S.C. No. 113-2 (Washington, DC: GPO, 2013). U.S. Congress, House Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for 2014 , Part 1, 113th Cong., 1 st sess., February 26, 2013 (Washington, DC: GPO, 2013). U.S. Congress, Senate Armed Services Committee, Subcommittee on Personnel, Testimony on Sexual Assault in the Military, 113 th Cong., 1 st sess., March 13, 2013, S. Hrg. 113-303 (Washington, DC: GPO, 2013). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for Fiscal Year 2014 , 113th Cong., 1 st sess., April 17, 2013 (Washington, DC: GPO, 2013). U.S. Congress, House Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for 2014, Part 2 , 113th Cong., 1 st sess., April 24, 2013 (Washington, DC: GPO, 2013). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for Fiscal Year 2014 , 113th Cong., 1 st sess., April 24, 2013 (Washington, DC: GPO, 2013). U.S. Congress, House Appropriations Committee, Subcommittee on Defense, President Obama's Fiscal 2014 Budget Proposal for the U.S. Navy and Marine Corps , 113 th Cong., 1 st sess., May 7, 2013 (Washington, DC: GPO, 2013). U.S. Congress, Senate Armed Services Committee, D epartment of Defense Authorization for Appropriations for Fiscal Year 2014 and the Future Years Defense Program , 113 th Cong., 1 st sess., May 7, 2013 (Washington, DC: GPO, 2013). U.S. Congress, House Appropriations Committee, Subcommittee on Defense, President Obama's Fiscal 2014 Budget Proposal for the U.S. Army , 113 th Cong., 1 st sess., May 8, 2013. (Washington, DC: GPO, 2013). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense, President Obama's Fiscal 2014 Budget Proposal for the U.S. Air Force , 113 th Cong., 1 st sess., May 8, 2013 (Washington, DC: GPO, 2013). U.S. Congress, House Appropriations Committee, Subcommittee on Defense, President Obama's Fiscal 2014 Budget Proposal for the U.S. Air Force , 113 th Cong., 1 st sess., May 9, 2013 (Washington, DC: GPO, 2013). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for Fiscal Year 2014 , 113th Cong., 1 st sess., May 22, 2013 (Washington, DC: GPO, 2013). U.S. Congress, Senate Armed Services Committee, Pending Legislation Regarding Sexual Assaults in the Military , 113 th Cong., 1 st sess., June 4, 2013, S. Hrg. 113–320 (Washington, DC: GPO, 2013). U.S. Congress, Senate Armed Services Committee, Subcommittee on Personnel, Markup of the National Defense Authorization Act for Fiscal Year 2014 , 113 th Cong., 1 st sess., June 11, 2013 (Washington, DC: GPO, 2013). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for Fiscal Year 2014 , 113th Cong., 1 st sess., June 11, 2013 (Washington, DC: GPO, 2013). U.S. Congress, House Armed Services Committee, Subcommittee on Military Personnel, Women in Service Review s , 113 th Cong., 1 st sess., July 24, 2013, H.A.S.C. No. 113–50 (Washington, DC: GPO, 2013). U.S. Congress , Senate Armed Services Committee, Subcommittee on Personnel, The Relationships Between Military Sexual Assault, Post-Traumatic Stress Disorder and Suicide, and on Department of Defense and Department of Veterans Affairs Medical Treatment and Management of Victims of Sexual Trauma , 113 th Cong., 2 nd sess., February 26, 2014, S. Hrg. 113-480 (Washington, DC: GPO, 2013) . U.S. Congress, Armed Services Committee , Fiscal Year 2015 National Defense Authorization Budget Request from the Department of Defense , 113 th Cong., 2 nd sess., March 6 , 2014 (Washington, DC: GPO, 2014). U.S. Congress, House Armed Services Committee, Fiscal Year 2015 National Defense Authorization Budget Request from the Department of the Navy , 113 th Cong., 2 nd sess., March 12 , 2014 (Washington, DC: GPO, 2014). U.S. Congress, House Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for 2015, Part 1 , 113 th Cong., 2 nd sess., March 13, 2014 (Washington, DC: GPO, 2014). U.S. Congress, House Armed Services Committee , Fiscal Year 2015 National Defense Authorization Budget Request from the Department of the Air Force , 113 th Cong ., 2 nd sess., March 14, 2014 (Washington, DC: GPO, 2014). U.S. Congress, House Armed Services Committee , Fiscal Year 2015 National Defense Authorization Budget Request from the Department of the Army , 113 th Cong., 2 nd sess., March 25 , 2014 (Washington, DC: GPO, 2014). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense , Department of Defense Appropriations for 2015 , 113th Cong., 2 nd sess., March 26 , 2014 (Washington, DC: GPO, 2014). U.S. Congress, House Appropriations Committee, Subcommittee , Department of Defense Appropriations for 2015 , Part 2, 113 th Cong., 2 nd sess., April 2, 2014, (Washington, DC: GPO, 2014). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense , Department of Defense Appropriations for 2015 , 113th Cong., 2 nd sess., April 2 , 2014 (Washington, DC: GPO, 2014). U.S. Congress, House Armed Services Committee , National Defense Priorities from the Members for the Fiscal Year 2015 National Defense Authorization Act , 113 th Cong ., 2 nd sess., April 9 , 2014 (Washington, DC: GPO, 2014). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for Fiscal Year 2015 , 113th Cong., 2 nd sess., April 9, 2014 (Washington, DC: GPO, 2014). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense, Department of Defense Appropriations for Fiscal Year 2015 , 113th Cong., 2 nd sess., April 30, 2014 (Washington, DC: GPO, 2014). U.S. Congress, Senate Appropriations Committee, Subcommittee on Defense , Department of Defense Appropriations for 2015 , 113th Cong., 2 nd sess., June 18 , 2014 (Washington, DC: GPO, 2014). U.S. Congress, Senate Armed Services Committee , Department of Defense Authorization for Appropriations for Fiscal Year 2016 and the Future Years Defense Program , Part 1 , 114th Cong., 1 st sess., March 3 , 10 , 12 , 18 , 19, 26, April 4, 30 , 2015 (Washington, DC: GPO, 2015). U.S. Congress, Senate Armed Services , Department of Defense Authorization for Appropriations for Fiscal Year 2016 and the Future Years Defense Program , Part 7 Strategic Forces, 114 th Cong., 1 st sess., March 4, 25, April 15, 22, 29 , 2015 (Washington, DC: GPO, 2015). U.S. Congress, Senate Armed Services Committee, Department of Defense Authorization for Appropriations for Fiscal Year 2016 and the Future Years Defense Program , Part 3 Readiness and Management Support, 114 th Cong., 1 st sess., March 11, 25, April 22, 2015 (Washington, DC: GPO, 2015). U.S. Congress, Senate Armed Services Committee, The Current State of Readiness of U.S. Forces in Review of the Defense Authorization Request for Fiscal Year 2016 and the Future Years Defense Program , 114 th Cong., 1 st sess., March 25, 2015 (Washington, DC: GPO, 2015). U.S. Congress, Senate Armed Services Committee, Department of Defense Authorization for Appropriations for Fiscal Year 2017 and the Future Years Defense Program , Part 1 , 114 th Cong., 2 nd sess., February 11, 23, March 3, 10, 15, 17, April 5, 7, 26, 2016 (Washington, DC: GPO, 2016). U.S. Congress, House Armed Services Committee, The Fiscal Year 2017 Na tional Defense Authorization Budget Request from the Department of Defense , 114 th Cong., 2 nd sess., March 22, 2016 (Washington, DC: GPO, 2016). U.S. Congress, Senate Armed Services Committee, Subcommittee on Strategic Forces, The Current State of Research, Diagnosis, and Treatment for Post-Traumatic Stress Disorder and Traumatic Brain Injury , 114 th Cong., 2 nd sess., April 20, 2016 (Washington, DC: GPO, 2016). U.S. Congress, House Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2014 on H.R.1960 with Additional and Dissenting Views, 113 th Cong., 1 st sess., H. Rept. 113-102 (Washington, DC: GPO, 2013). U.S. Congress, House Committee on Appropriations, Department of Defense Appropriations Bill, 2014 to Accompany H.R. 2397 together with Additional Views, 113 th Cong., 1 st sess., H. Rept. 113-113 (Washington, DC: GPO, 2013). U.S. Congress, Senate Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2014 to accompany S. 1197, 113 th Cong., 1 st sess., S. Rept. 113-44 (Washington, DC: GPO, 2013). U.S. Congress, Senate Committee on Appropriations, Department of Defense Appropriations Bill, 2014 to accompany S.1429, 113 th Cong., 1 st sess., S. Rept. 113-85 (Washington, DC: GPO, 2013). U.S. Congress, House Committee on Armed Services, First Annual Report on the Activities of the Committee on Armed Services for the One Hundred Thirteenth Congress , 113 th Cong., 1 st sess., H. Rept. 113-309 (Washington, DC: GPO, 2013). U.S. Congress, House Committee on Armed Services, Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015 to accompany H.R.4435, 113 th Cong, 2 nd sess., H. Rept. 113-446 (Washington, DC: GPO, 2014). U.S. Congress, House Committee on Armed Services, Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015 supplemental report to accompany H.R.4435, 113 th Cong. 2 nd sess., H. Rept. 113-446 part 2 (Washington, DC: GPO, 2014). U.S. Congress, Senate Committee on Armed Services, Carl Levin National Defense Authorization Act for Fiscal Year 2015 to accompany S.2410, 113 th Cong, 2 nd sess., S. Rept. 113-176 (Washington, DC: GPO, 2014). U.S. Congress, House Committee on Appropriations, Department of Defense Appropriations Bill, 2015 to accompany H.R.4870, 113 th Cong., 2 nd sess., H. Rept. 113-473 (Washington, DC: GPO, 2014). U.S. Congress, Senate Committee on Appropriations, Department of Defense Appropriations Bill, 2015 to accompany H.R.4870, 113 th Cong., 2 nd sess., S. Rept. 113-211 (Washington, DC: GPO, 2014). U.S. Congress, House Committee on Armed Service, National Defense Authorization Act for Fiscal Year 2016 to accompany H.R.1735, 114 th Cong., 1 st sess., H. Rept. 114-102 (Washington, DC: GPO, 2015). U.S. Congress, Senate Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2016 to accompany S.1376, 114 th Cong., 1 st sess., S. Rept. 114-49 (Washington, DC: GPO, 2015). U.S. Congress, House Committee on Appropriations, Department of Defense Appropriations Bill, 2016 to accompany H.R.2685, 114 th Cong., 1 st sess., H. Rept. 114-139 (Washington, DC: GPO, 2015). U.S. Congress, Senate Committee on Appropriations, Department of Defense Appropriations Bill, 2016 to accompany S.1558, 114 th Cong., 1 st sess., S. Rept. 114-63 (Washington, DC: GPO, 2015). U.S. Congress, House Conference Report, National Defense Authorization Act for Fiscal Year 2016 to accompany H.R.1735, 114 th Cong., 1 st sess., H. Rept. 114-270 (Washington, DC: GPO, 2015). U.S. Congress, House Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2017 on H.R.4909, 114 th Cong., 2 nd sess., H. Rept. 114-537 (Washington, DC: GPO, 2016). U.S. Congress, Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2017 to accompany S.2943, 114 th Cong, 2 nd sess., S. Rept. 114-255 (Washington, DC: GPO, 2016). U.S. Congress, House Committee on Appropriations, Department of Defense Appropriations Bill, 2017 to accompany H.R.5293, 114 th Cong., 2 nd sess., H. Rept. 114-577 (Washington, DC: GPO, 2016). U.S. Congress, Senate Committee on Appropriations, Department of Defense Appropriations Bill, 2017 to accompany S.3000, 114 th Cong., 2 nd sess., S. Rept. 114-263 (Washington, DC: GPO, 2016). U.S. Congress, House Conference Report, National Defense Authorization Act for Fiscal Year 2017 to accompany S. 2943, 114 th Cong, 2 nd sess., H. Rept. 114-840 (Washington, DC: GPO, 2016).", "summary": "This report focuses on previous activity in Congress regarding high profile incidents of sexual assault in the military during the summer 2013 through 2016. Included are separate sections on the official responses related to these incidents by the Department of Defense (DOD), the Obama Administration, and Congress including legislation during the 113th (2013-2014) Congress and 114th Congress (2015-2016). The last section is a resource guide for sources in this report and related materials on sexual assault and prevention during this period. This report will not be updated and supersedes CRS Report R43168, Military Sexual Assault: Chronology of Activity in Congress and Related Resources. For current information regarding Congress and issues on sexual assault in the military, see CRS Report R44944, Military Sexual Assault: A Framework for Congressional Oversight, by Kristy N. Kamarck and Barbara Salazar Torreon. For legislative initiatives in the 115th Congress, see CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues, by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon and CRS Report R45343, FY2019 National Defense Authorization Act: Selected Military Personnel Issues, by Bryce H. P. Mendez et al.", "document_type": "crs"}
{"report": "F or more than forty-five years, all three branches of government have struggled with how to interpret the meaning of \"waters of the United States\" in the Clean Water Act. In 1972, Congress eliminated the requirement that waters must be navigable in the traditional sense —meaning they are capable of being used by vessels in interstate commerce—in order to be subject to federal water pollution regulation. Rather than use traditional tests of navigability, the 1972 amendments to the Federal Water Pollution Control Act, which came to be known as the Clean Water Act, redefined \"navigable waters\" to include \"the waters of the United States, including the territorial seas.\" Disputes over the meaning of that phrase have been ongoing ever since the change. Some courts and commentators disagree on how the scope of federal jurisdictional waters changed over time as a result of interpretative approaches taken by the agencies responsible for administering the Clean Water Act—the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps). This debate resurfaced during the Obama Administration when the Corps and EPA issued a rule, known as the Clean Water Rule, which substantially redefined \"waters of the United States\" in the agencies' regulations for the first time in more than two decades. While some argued that the Clean Water Rule constituted a major expansion of federal jurisdiction, others asserted that the agencies construed the term in a narrower fashion than in prior regulations. A vocal critic of the Clean Water Rule, President Trump shifted the executive branch's policy toward the meaning of \"waters of the United States.\" In February 2017, President Trump issued an executive order directing EPA and the Corps to review and revise or rescind the Clean Water Rule. The agencies currently are in the process of carrying out the executive order, and they unveiled proposed regulations redefining \"waters of the United States\" in December 2018. As in nearly all prior attempts to define this phrase, however, observers disagree on whether the latest proposed definition correctly calibrates the scope of federal water pollution regulation. This report provides context for this debate by examining the history of major changes to the meaning of \"waters of the United States\" as expressed in federal regulations, legislation, agency guidance, and case law. The Clean Water Act is the principal law governing pollution of the nation's surface waters. Among other requirements, the act prohibits the unauthorized discharge of pollutants into \"navigable waters,\" and requires persons wishing to discharge dredged or fill material into \"navigable waters\" to obtain a permit from the Corps. In its definition section, the act defines the term \"navigable waters\" to mean \"waters of the United States, including its territorial seas.\" This single, jurisdiction-defining phrase applies to the entire law, including the national pollutant discharge elimination system (NPDES) permit program; permit requirements for disposal of dredged or fill material, known as the Section 404 program; water quality standards and measures to attain them; oil spill liability and prevention; and enforcement. The Clean Water Act itself does not expand further on the meaning of \"waters of the United States.\" Instead, the Corps and EPA have expounded on this phrase through agency guidance and regulations, which federal courts have struck down on various occasions as failing to satisfy statutory or constitutional requirements. Federal authority to regulate waters within the United States primarily derives from the Commerce Clause, which gives Congress the power to \"regulate commerce with foreign nations, and among the several states . . . .\" Accordingly, federal laws and regulations regulating waters of the United States cannot cover matters that exceed that constitutional source of authority. Legal challenges to the Corps' and EPA's interpretation of \"waters of the United States\"—particularly those which were successful—often followed broader trends in interpreting the Commerce Clause. For a period after its enactment in 1972, courts generally interpreted the Clean Water Act as having a wide jurisdictional reach, but, in recent decades, the Supreme Court has emphasized that \"the grant of authority to Congress under the Commerce Clause, though broad, is not unlimited.\" A time line of events in the evolution of the definition of \"waters of the United States\" is provided in the Appendix , and major events are shown in Figure 1 . Historically, federal laws regulating waterways, such as the Rivers and Harbors Appropriations Act of 1899 (Rivers and Harbors Act), exercised jurisdiction over \"navigable water[s] of the United States[.]\" The Supreme Court interpreted this phrase to govern only waters that were \"navigable-in-fact\"—meaning that they were \"used, or are susceptible of being used, . . . as highways for commerce, over which trade and travel are or may be conducted in the customary modes of trade and travel on water.\" Beginning with the Federal Water Pollution Control Act of 1948, Congress began to use a different jurisdiction-defining phrase to regulate pollution of \"interstate waters,\" which it defined as \"all rivers, lakes, and other waters that flow across, or form a part of, a State's boundaries.\" Congress amended that legislation in 1961 to expand federal jurisdiction from \"interstate waters\" to \"interstate or navigable waters[.]\" The Federal Water Pollution Control Act Amendments of 1972, which came to be known as the Clean Water Act, again amended the jurisdictional reach of federal water pollution legislation. There, Congress exercised jurisdiction over \"navigable waters,\" but provided a new definition of that phrase, stating: \"The term 'navigable waters' means the waters of the United States, including the territorial seas.\" This subtle definitional change proved to have tremendous consequences for the jurisdictional scope of the Clean Water Act. In debating the 1972 amendments that created the Clean Water Act, some Members of Congress explained that they intended the revised definition to expand the law's jurisdiction beyond traditionally navigable or interstate waters. The conference report states that the \"conferees fully intend that the term 'navigable waters' be given the broadest possible constitutional interpretation unencumbered by agency determinations which have been made or may be made for administrative purposes.\" And during debate in the House on approving the conference report, one Representative explained that the definition \"clearly encompasses all water bodies, including streams and their tributaries, for water quality purposes.\" Courts have frequently referred to the act's legislative history when interpreting its jurisdictional reach, but they have not always agreed on the import of this history. The Corps and EPA share responsibility for administering the Clean Water Act. Both agencies have administrative responsibilities under Section 404 of the act, and EPA administers most other Clean Water Act-related programs in partnership with U.S. states. Because of this shared jurisdiction, both agencies create regulations defining the waters subject to their regulatory jurisdiction. In the initial years following the enactment of the Clean Water Act, their respective definitions differed significantly. In May 1973, EPA issued its first set of regulations implementing the Clean Water Act's NPDES permit program. There, EPA defined the term \"navigable waters\" to include six categories of waterbodies. Three months prior to issuing these regulations, EPA's general counsel had provided an opinion on the meaning of \"navigable waters\" in the Clean Water Act. The general counsel's recommended definition largely mirrored EPA's 1973 regulatory definition, but with one critical difference: categories four through six of the general counsel's recommendation would have included interstate lakes, rivers, and streams that are utilized for interstate activities rather than intrastate waters used for such activities. EPA's definition of \"navigable waters\" in its non-NPDES water pollution regulations at the time also differed in certain ways from its May 1973 definition. The Corps' early implementation of the Clean Water Act differed considerably from EPA's regulations. After initially proposing regulations that simply repeated the statutory definition of \"navigable waters,\" the Corps issued final regulations in April 1974 implementing Section 404 of the Clean Water Act. There, the Corps acknowledged the language from the conference report for the Clean Water Act as calling for the \"broadest possible constitutional interpretation\" of navigable waters, but concluded that the Constitution limited its jurisdiction to the same waters that it regulated under preexisting laws, such as the Rivers and Harbors Act. Based on this reasoning, the Corps defined \"navigable waters\" using language that generally limited its jurisdiction to waters that were navigable-in-fact. Less than one year after the Corps published its first regulations defining jurisdictional waters, the United States District Court for the District of Columbia struck them down as too narrow and inconsistent with the Clean Water Act. In Natural Resources Defense Council v. Callaway , the court held that because \"Congress . . . asserted federal jurisdiction over the nation's waters to the maximum extent permissible under the Commerce Clause of the Constitution[,]\" the definition could not be limited to \"traditional tests of navigability[.]\" The court ordered the Corps to produce new regulations that acknowledged \"the full regulatory mandate\" of the Clean Water Act. The Corps responded to Callaway on May 6, 1975, by publishing proposed regulations that offered four alternative methods of redefining the Corps' jurisdiction under the 1972 amendments. At the same time that it proposed these alternatives, the Corps published a press release stating that the holding of Callaway may require \"the rancher who wants to enlarge his stock pond, or the farmer who wants to deepen an irrigation ditch or plow a field, or the mountaineer who wants to protect his land against stream erosion\" to obtain federal permits. These events brought public and media attention to the breadth of jurisdiction under the Clean Water Act. They also created a disagreement between the Corps and EPA, and led to a series of subcommittee hearings in the House and Senate. In the aftermath of this public and congressional scrutiny, the Corps issued interim final regulations in 1975 in which it revised the definition of \"navigable waters\" for purposes of the Clean Water Act's Section 404 program by adopting much of the structure used in EPA's 1973 regulations. The Corps' definition also added \"wetlands, mudflats, swamps, marshes, and shallows\" that are \"contiguous or adjacent to other navigable waters\" and \"artificially created channels and canals used for recreational or other navigational purposes that are connected to other navigable waters\" to the definition of \"waters of the United States.\" Finally, the Corps' 1975 interim regulations permitted federal regulation over all other waters that a Corps' district engineer \"determines necessitate regulation for the protection of water quality\" based on the Corps' technical standards and evaluation criteria. In 1977, the Corps issued final regulations reorganizing the definition of \"waters of the United States\" into five categories. The final category of the 1977 definition contained the Corps' most expansive definition of jurisdictional waters as of that time. A footnote to the Corps' regulations explained that the Category Five waters incorporate \"all other waters of the United States that could be regulated under the federal government's Constitutional powers to regulate and protect interstate commerce.\" The Corps would continue to use this Commerce Clause-focused provision (with revisions) until the Clean Water Rule was published in 2015, and EPA would later adopt it in its regulations. After the Corps' 1975 and 1977 regulations, some Members of Congress introduced bills that sought to limit the Clean Water Act's jurisdiction to traditional, navigable-in-fact waters, but the proposed limiting legislation never became law. Instead, Congress amended the Federal Water Pollution Control Act through the Clean Water Act of 1977, which did not alter the jurisdictional phrase \"waters of the United States.\" The original version of the Clean Water Act of 1977 introduced in the House would have limited the Corps' jurisdiction, and an amendment proposed in the Senate sought similar limitations. But the original Senate version, which generally retained the existing definition of \"navigable waters,\" was adopted in conference and passed into law. The Clean Water Act of 1977, as enacted, contained certain exemptions from Section 404 permitting for \"normal farming, silviculture, . . . ranching[,]\" and other activities. While the 1977 legislation appeared to resolve temporarily some congressional dispute over the reach of the Clean Water Act, disagreement arose between the Corps and EPA over which agency had final authority to determine which waters were subject to Section 404 permit requirements. EPA independently defined the jurisdictional reach of the Clean Water Act as it related to programs like NPDES and oil pollution prevention, but it incorporated the Corps' definition into its regulations related to Section 404 permits. At the same time, however, EPA separately expanded on that definition in an appendix to its Section 404 regulations. The U.S. Attorney General ultimately intervened in 1979 and provided a legal opinion that EPA has final administrative authority to determine the reach of the term \"navigable waters\" for purposes of Section 404. The Corps and EPA eventually executed a Memorandum of Agreement in 1989 resolving that EPA would act as the lead agency responsible for developing programmatic guidance and interpretation of the scope of jurisdictional waters, and the Corps would be responsible for most case-specific determinations on whether certain property was subject to Section 404. Although it took the agencies 10 years after the Attorney General's opinion to agree formally on a division of responsibilities, the Corps and EPA streamlined and harmonized the regulatory definition of \"waters of the United States\" well before that. In May 1980, EPA issued regulations redefining the term among its consolidated permit requirements, and the Corps adopted EPA's definition in interim regulations two years later . The Corps issued final regulations in 1986 that did not change the regulatory definition, and the two agencies continued to use this core definition (with modifications) until they published the Clean Water Rule in 2015 . The Supreme Court reviewed a legal challenge to the Corps' application of \"waters of the United States\" for the first time in 1985 in United States v. Riverside Bayview Homes, Inc . There, the Corps sought to enjoin a property owner from discharging fill material on his wetlands located one mile from the shore of Lake St. Clair in Michigan, a 468-square-mile, navigable-in-fact lake that forms part of the boundary between Michigan and Ontario, Canada. The Corps argued that, by defining \"waters of the United States\" to include wetlands that are \"adjacent to\" other jurisdictional waters, including navigable-in-fact waters like Lake St. Clair, its regulations required the landowner to obtain a Section 404 permit before discharging fill material. Before the case reached the Supreme Court, the Sixth Circuit concluded that it must construe the Corps' regulatory definition narrowly in order to avoid a potential violation of the Fifth Amendment prohibition on the taking of private property for public use without just compensation. Applying this method of interpretation, the Sixth Circuit construed the Corps' regulations so as not to include the wetlands at issue, and it avoided reaching a decision on whether the Corps' regulations were constitutional. The Supreme Court reversed. Although it acknowledged that on a \"purely linguistic level\" it may seem unreasonable to classify lands , wet or otherwise, as waters , the Supreme Court called such a plain language approach \"simplistic.\" Further, it rejected the lower courts' concerns over the constitutionality of the Corps' regulations as \"spurious.\" Instead of applying a narrow approach to avoid constitutional implications, the Court gave deference to the Corps' position, and concluded that because \"[w]ater moves in hydrological cycles\" rather than along \"artificial lines,\" it was reasonable for the Corps to conclude that \"adjacent wetlands are inseparably bound up with the 'waters' of the United States . . . .\" The Court also cited legislative history from the passage of the Clean Water Act and the amendments in 1977—in which the term \"adjacent wetlands\" was added to the statute —as support for its conclusion that Congress intended for the Clean Water Act to have a broad jurisdictional reach which included the adjacent wetlands at issue. In concluding that adjacent wetlands could reasonably be covered, however, the Court also emphasized that it did not express any opinion on the Corps' authority to regulate discharges of fill material into wetlands that are not adjacent to bodies of open water. Following Riverside Bayview Homes , the Corps and EPA engaged in rulemaking in which they interpreted the Clean Water Act to govern all waters which were used or may have been used by migratory birds crossing state lines. The agencies did not redefine \"waters of the United States\" through this interpretation, which came to be known as the Migratory Bird Rule, but instead stated that the Migratory Bird Rule was a \"clarification\" of the existing regulatory definition. The agencies also continued to adjust their interpretation of the definition of \"waters of the United States\" in the late 1980s by, among other things, excluding nontidal drainage and irrigation ditches, artificial lakes or ponds used for irrigation and stock watering, reflecting pools, and swimming pools. In 1993, the agencies jointly revised their regulations to exclude \"prior converted cropland\"—areas that were previously drained and converted to agricultural use—from jurisdictional waters. In addition to disputes over the textual definition of \"waters of the United States,\" disagreement surrounding the technical standards used to delineate the physical boundaries of jurisdictional waters, particularly wetlands , arose in the late 1980s. The Corps issued the first wetlands delineation manual in 1987 (1987 Manual), but EPA published its own manual the following year which used an alternative technical analysis. Differences among these and other wetlands manuals led to the preparation of an interagency Federal Manual for Identifying and Delineating Jurisdictional Wetlands in January 1989 (Federal Manual). Some observers criticized aspects of the Federal Manual, including the methodology it employed for identifying and delineating jurisdictional waters. Some also argued that the Federal Manual improperly expanded the scope of federal regulations of wetlands. Disagreements ultimately led to congressional action in 1991 in the form of appropriations legislation that prohibited the Corps from using funds to identify jurisdictional waters using the Federal Manual. The following year, Congress mandated that the Corps use the 1987 Manual until a new manual was published after public notice and comment. The interagency group proposed revisions to the Federal Manual, which received over 100,000 comments, but that proposal was never finalized, and no interagency wetlands manual was created. In contrast to the agencies' attempt to align jurisdictional waters with what they interpreted to be the outer reaches of the Commerce Clause in the 1980s, a series of court cases beginning in the late 1990s caused the Corps and EPA to modify their interpretation of \"waters of the United States.\" For much of the 20th century, the Supreme Court broadly construed the Commerce Clause to give Congress discretion to regulate activities which \"affect\" interstate commerce, so long as its legislation was reasonably related to achieving its goals of regulating interstate commerce. In the 1995 case of United States v. Lopez , however, the Supreme Court struck down a federal statute for the first time in more than 50 years based purely on a finding that Congress exceeded its powers under the Commerce Clause. In Lopez , the Court held the Commerce Clause did not provide a constitutional basis for federal legislation criminalizing possession of a firearm in a school zone because the law neither regulated a commercial activity nor contained a requirement that the firearm possession be connected to interstate commerce. The Court revisited its prior Commerce Clause cases and sorted Congress's commerce power into three categories: (1) regulation of channels of commerce, (2) regulation of instrumentalities of commerce, and (3) regulation of economic activities which not only affect but \"substantially affect\" interstate commerce. Lopez set the backdrop for a series of major opinions limiting federal jurisdiction under the Clean Water Act. The United States Court of Appeals for the Fourth Circuit issued the first in the series of decisions limiting the jurisdictional reach of the Clean Water Act in 1997. Following a seven-week trial in United States v. Wilson , a jury convicted three defendants of violating Section 404 for knowingly discharging fill material into wetland property located approximately 10 miles from the Chesapeake Bay and 6 miles from the Potomac River in Maryland. On appeal to the Fourth Circuit, the defendants challenged their conviction on the grounds that the portion of the Corps' regulatory definition of \"waters of the United States\"—which included all waters \"the use, degradation or destruction of which could affect interstate or foreign commerce\"—exceeded the Corps' statutory authority in the Clea n Water Act and Congress's constitutional authority in the Commerce Clause. Relying in part on the holding in Lopez , the Fourth Circuit agreed with a portion of the defendants' arguments and ordered a new trial. The court reasoned that, under Lopez , the regulated conduct must \"substantially affect\" interstate commerce in order to invoke the Commerce Clause power. Because the Corps purported to regulate waters that \"could affect\" interstate commerce—without regard to whether there was any actual effect, substantial or otherwise—the Fourth Circuit concluded that the Corps exceeded its authority. Although the Fourth Circuit strongly suggested that the Corps' assertion of jurisdiction exceeded the constitutional grant of authority under the Commerce Clause, it ultimately invalidated the challenged portion of the regulations solely on the ground that it exceeded the congressional authorization under the Clean Water Act. As Wilson never reached the Supreme Court, it was only binding precedent in the Fourth Circuit, and the stricken language remained in the regulations of the Corps and EPA until the release of the 2015 Clean Water Rule. Although the Corps did not modify its regulatory definition of \"waters of the United States\" in response to Wilson , it did publish guidance in March 2000 on the effect of the decision on its Section 404 jurisdiction. The Corps explained that, within the Fourth Circuit only , \"isolated waters\" must be shown to have an actual connection to interstate or foreign commerce. \"Isolated waters,\" in Clean Water Act parlance, are waters that are not navigable-in-fact, not interstate, not tributaries of the foregoing, and not hydrologically connected to such waters—but whose use, degradation, or destruction could affect interstate commerce. The 2000 guidance also provided clarification on certain nontraditional waters that the Corps considered part of the \"waters of the United States.\" Jurisdictional waters, the Corps explained, included both intermittent streams , which have flowing water supplied by groundwater during certain times of the year, and ephemeral streams , which have flowing water only during and for a short period after precipitation events. The Corps also deemed drainage ditches constructed in jurisdictional waters to be subject to the Clean Water Act except when the drainage was so complete that it converted the entire area to dry land. In 2001, the Supreme Court took up another challenge to the jurisdictional reach of the Clean Water Act in Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers ( SWANCC ), revisiting the issue for the first time since its 1995 decision in Riverside Bayview Homes . In SWANCC , the Court evaluated whether Clean Water Act jurisdiction extended to an abandoned sand and gravel pit which contained water that had become a habitat for migratory birds. Citing the legislative history of the 1972 amendments and the Clean Water Act of 1977, the Corps had argued that the Clean Water Act can extend to such isolated waters under the Migratory Bird Rule. In a 5-4 ruling, the Court rejected the Corps' position, and held that the Corps' assertion of jurisdiction over isolated waters based purely on their use by migratory birds exceeded its statutory authority. The SWANCC Court's conclusion was informed, in part, by Lopez and another landmark Commerce Clause decision issued five years later, United States v. Morrison , in which the Court held that Congress lacked constitutional authority under the Commerce Clause to enact portions of the Violence Against Women Act. In light of this jurisprudence, the SWANCC Court concluded that allowing the Corps to assert jurisdiction under the Migratory Bird Rule raised \"serious constitutional questions\" about the limits of Congress's authority and \"would result in significant impingement of States' traditional and primary power of land and water use.\" Rather than interpret the Clean Water Act in a way that would implicate these \"significant constitutional and federalism questions[,]\" the Court concluded that Congress's use of the phrase \"navigable waters\" in the Clean Water Act \"has at least the import of showing us what Congress had in mind for enacting the [act]: its traditional jurisdiction over waters that were or had been navigable in fact or which could reasonably be made so.\" Based on this reading, the Court concluded that Congress did not intend to invoke the outer limits of the Commerce Clause in the Clean Water Act, and the Corps could not rely on the Migratory Bird Rule as a basis for jurisdiction. In contrast to Riverside Bayview Homes , the SWANCC Court focused less on the legislative history of the Clean Water Act, and instead emphasized the Corps' original interpretation of the 1972 amendments in which it limited its jurisdiction to navigable-in-fact waters. Although the Riverside Bayview Homes Court found that classical \"navigability\" was of \"limited import\" in determining Clean Water Act jurisdiction, the SWANCC Court distinguished that case as focused on \"wetlands adjacent to navigable waters.\" The ponds which formed in the abandoned gravel pits in SWANCC were \" not adjacent to open water[,]\" and therefore lacked the requisite \"significant nexus\" to traditionally navigable waters necessary for jurisdiction under the Clean Water Act, the Court concluded. SWANCC did not go as far as the Fourth Circuit, however, in striking down an entire subsection of the definition of \"waters of the United States.\" It limited its holding to the Migratory Bird Rule, which the Corps described as an effort to \"clarify\" its regulatory definition. But while its direct holding was arguably narrow, SWANCC 's rationale was much broader and called into question whether the Corps and EPA could assert jurisdiction under the Clean Water Act over many wholly intrastate isolated waters. The relationship between SWANCC 's limited holding and the Court's broader rationale generated considerable litigation over the scope of the Clean Water Act. The general counsels for the Corps and EPA added their voices to the post- SWANCC debate in a joint memorandum issued on the last full day of the Clinton Administration, January 19, 2001. Combining the \"significant nexus\" language from SWANCC with the existing regulatory definition of \"waters of the United States,\" the agencies concluded that they could continue to exercise jurisdiction over isolated waters so long as the use, degradation, or destruction of those waters could affect other \"waters of the United States.\" The potential effect on or degradation on existing jurisdictional waters, the agencies reasoned, established the \"significant nexus\" mentioned in SWANCC . In January 2003, the Corps and EPA issued a notice of proposed rulemaking regarding how field staff should address jurisdictional issues in the Clean Water Act and which contained a revised joint memorandum on the effect of SWANCC . The agencies later abandoned that proposed rulemaking effort, leaving unanswered questions over federal jurisdiction over isolated waters after SWANCC . These uncertainties caused the Corps and EPA to shift their attention to alternative bases for jurisdiction in defining \"waters of the United States\"—such as \"adjacent wetlands\"—and set the stage for the Supreme Court's next encounter with a Clean Water Act jurisdictional dispute in Rapanos v. United States . Rapanos involved a consolidation of two cases on appeal from the Sixth Circuit— Rapanos and Carabell —both of which concerned the breadth of the Clean Water Act's jurisdiction over \"adjacent\" wetlands. In Carabell , landowners challenged whether Section 404 jurisdiction extends to \"wetlands that are hydrologically isolated from any of the 'waters of the United States[,]'\" and Rapanos presented the similar question of whether this jurisdiction includes nonnavigable wetlands \"that do not even abut a navigable water.\" In both cases, collectively referred to as Rapanos , the Sixth Circuit upheld the Corps' assertion of jurisdiction over the wetland property in question. Many anticipated that Rapanos would provide clarity on the disputes following SWANCC . And although a majority of five Justices agreed that the Sixth Circuit decision was flawed, they were not able to agree on a single, underlying standard which would govern future jurisdictional disputes. Instead, a four-Justice plurality opinion, authored by Justice Scalia, and an opinion by Justice Kennedy, writing only for himself, proposed two alternative tests for evaluating jurisdictional waters. With no controlling rationale from the majority, lower courts interpreting Rapanos struggled with the question of what analysis to apply in Clean Water Act jurisdictional disputes. When a majority of the Supreme Court agrees only on the outcome of a case and not on the ground for that outcome, the holding of the Court which lower courts must follow \"may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds.\" While this rule may appear straightforward, it is not always self-evident how courts should identify which Justice's opinion rests on the \"narrowest grounds.\" Some courts have held that Justice Kennedy's \"significant nexus\" test is the narrowest ruling to be derived from Rapanos . Others concluded that waterbodies that satisfy either the plurality test or the \"significant nexus\" test satisfy Rapanos and may be deemed jurisdictional. Of the nine circuits that have addressed the issue, all have applied Justice Kennedy's significant nexus test either alone or in combination with the plurality's test, and none have applied the plurality approach alone. Still, some courts and observers have criticized the significant nexus test as vague and difficult to implement. The Corps and EPA offered their own interpretation of Rapanos through guidance to field officers in 2007, which the agencies revised and replaced after public comment in 2008. The 2008 guidance adopted the view taken by some lower courts that jurisdiction exists over any waterbody that satisfies either the plurality approach or the significant nexus test. The agencies further deconstructed the jurisdictional analysis into three categories: (1) waters that are categorically jurisdictional; (2) waters that may be deemed jurisdictional on a case-by-case basis; and (3) waters that are excluded from jurisdiction under the Clean Water Act. In 2011, the Corps and EPA sought comments on proposed changes to the 2008 guidance, which the agencies acknowledged would increase the number of waters regulated under the Clean Water Act in comparison to its earlier post- Rapanos guidance. The potential enlargement of jurisdiction spawned congressional attention, including a letter signed by 41 Senators requesting that the agencies abandon the effort. Some Members of Congress introduced prohibitions on funding related to the draft guidance in several appropriations bills, but those provisions were never enacted. Instead, the agencies abandoned pursuit of the 2011 draft guidance in favor of their 2015 effort at defining the scope of \"waters of the United States,\" the Clean Water Rule. The Corps and EPA issued the Clean Water Rule in May 2015 in an effort to clarify the bounds of jurisdictional waters in the wake of SWANCC and Rapanos . The agencies relied on a synthesis of more than 1,200 published and peer-reviewed scientific reports and over 1 million comments on the proposed version of the rule. The Clean Water Rule contains the same three-tier structure from the agencies' 2008 joint guidance, identifying waters that (1) are categorically jurisdictional, (2) may be deemed jurisdictional on a case-by-case basis if they have a significant nexus with other jurisdictional waters, and (3) are categorically excluded from the Clean Water Act's jurisdiction. In an effort to reduce uncertainty about the scope of federal jurisdiction, the agencies sought to increase categorical jurisdictional determinations and reduce the number of waterbodies subject to the case-specific significant nexus test. The Clean Water Rule was the subject of significant debate among observers, stakeholders, and Members of Congress, and a 2015 Government Accountability Office (GAO) report found that EPA violated publicity or propaganda and antilobbying provisions in prior appropriations acts through its promotion of the Clean Water Rule on social media. The 114th Congress also took steps to block its implementation. In January 2016, the Senate and House passed a resolution of disapproval seeking to nullify the Clean Water Rule under the Congressional Review Act. However, President Obama vetoed that resolution, and a procedural vote in the Senate to override the veto failed. The Obama Administration intended the Clean Water Rule to take effect on August 28, 2015, but 31 states and 53 non-state plaintiffs, including industry associations, environmental groups, and others, filed suit challenging its legality. The plaintiffs argued, among other things, that the rule exceeded the agencies' statutory and constitutional authority and did not comply with the rulemaking requirements in the Administrative Procedure Act (APA). Environmental groups, seven states, and the District of Columbia intervened in defense of the rule. Before any court could address the merits of the claims, however, an impasse arose over what court was the proper forum for the litigation. Whereas some plaintiffs filed suit in federal district courts, others argued that a judicial-review provision in Section 509 of the Clean Water Act gave the U.S. circuit courts of appeals direct appellate-level review over challenges to the Clean Water Rule. At the district court level, some courts dismissed their suits, concluding that the courts of appeals had exclusive jurisdiction. But one district court—the District Court for the District of North Dakota (District of North Dakota)—ruled that it had jurisdiction to review the Clean Water Rule. In August 2015, the District of North Dakota concluded that the rule was likely to be struck down on the merits, and it granted a motion for preliminary injunction, temporarily barring the Clean Water Rule's implementation in 13 western states. (The court later added another state, Iowa, to the scope of injunction.) In the parallel litigation at the appellate level, a Judicial Panel on Multidistrict Litigation consolidated and transferred all circuit court cases to the United States Court of Appeals for the Sixth Circuit (Sixth Circuit). In the consolidated, appellate-level litigation, the Sixth Circuit concluded that the agencies should not apply the Clean Water Rule during the pendency of the legal challenges, and it issued a nationwide stay of the rule. The Sixth Circuit also concluded that it—and not the district courts—had exclusive jurisdiction over the challenges to the Clean Water Rule, setting the stage for the Supreme Court to address the threshold question of which court or courts possess jurisdiction to hear the Clean Water Rule cases. In National Association of Manufacturers (NAM) v. Department of Defense , the Supreme Court disagreed with the Sixth Circuit and concluded that the Clean Water Act did not provide direct appellate-level jurisdiction over the pending cases. Section 509 of the Clean Water Act lists seven categories of agency actions subject to direct appellate review, Justice Sotomayor explained in an opinion for the unanimous Court, but a legal challenge to a rule defining \"waters of the United States\" does not fall within those categories. \"Congress has made clear that rules like the [Clean Water] Rule must be reviewed first in federal district court[,]\" the Court concluded. While NAM resolved the threshold question of which courts can hear challenges to the Clean Water Rule, it did not address the merits of the challenges themselves. Merits challenges soon resumed at the district court level after the 2018 NAM decision. In the interim, while the jurisdictional issue was being litigated, the legal landscape had changed as a result of the Trump Administration's shift in United States' policy toward the jurisdictional reach of the Clean Water Act. The Trump Administration opposes the Clean Water Rule, and it is in the process of attempting to rescind the rule and replace it with new regulations elaborating on the meaning of \"waters of the United States.\" Less than two months after taking office, President Trump issued Executive Order 13778 directing EPA and the Corps to revise or rescind the Clean Water Rule. The executive order instructs the agencies to review the Clean Water Rule for consistency with the Administration's policy to \"ensure that the Nation's navigable waters should be kept free from pollution, while at the same time promoting economic growth, minimizing regulatory uncertainty, and showing due regard for the role of the Congress and the States under the Constitution.\" The executive order also provides that EPA and the Corps \"shall consider\" interpreting the jurisdictional reach of the Clean Water Act in a manner consistent with Justice Scalia's plurality opinion in Rapanos . EPA and the Corps intend to carry out Executive Order 13778 through a two-step process. First, they proposed to issue regulations that rescind the Clean Water Rule and recodify the definition of \"waters of the United States\" that was in place before the agencies issued that rule in 2015. Second, they proposed to engage in a separate rulemaking process to develop new regulations that will define the jurisdictional reach of the Clean Water Act. In July 2017, EPA and the Corps provided notice and sought comment on a proposed rule (Step One Proposal) rescinding the Clean Water Rule and replacing it with the same text that existed before the Clean Water Rule was promulgated. In 2018, the agencies issued a supplemental notice expanding on their legal rationale for repealing the Clean Water Rule and clarifying that the Step One Proposal is intended to rescind permanently the Clean Water Rule in its entirety. According to the supplemental notice, a full repeal is necessary because the Clean Water Rule exceeded the agencies' statutory authority by adopting an interpretation of Justice Kennedy's Rapanos opinion that was inconsistent with the Clean Water Act and the opinion itself. The agencies also argued that the complex legal landscape created by litigation surrounding the Clean Water Rule has undermined the Clean Water Rule's goal of providing greater clarity regarding the scope of \"waters of the United States.\" The public comment period for the proposed repeal closed on August 13, 2018. In December 2018, EPA and the Corps unveiled a second proposed rule (Step Two Proposal) that would complete the second step of the repeal and revise process by creating new regulations that substantively redefine \"waters of the United States.\" According to EPA and the Corps, the Step Two Proposal is intended to provide \"predictability and consistency by increasing clarity as to the scope of 'waters of the United States' federally regulated\" under the Clean Water Act. The agencies also intend the Step Two Proposal to \"clearly implement\" the Clean Water of Act's objectives of restoring and maintaining the quality of the nation's waters while respecting state and tribal authority over land and resources. The Step Two Proposal would define \"waters of the United States\" to include six categories of waterbodies. The Step Two Proposal would mark a significant change from post- Rapanos interpretations of \"waters of the United States\" because it would eliminate the case-by-case \"significant nexus\" evaluation that has been part of EPA and the Corps' guidance and regulations since 2007. According to the agencies, improvements to the definitions of \"adjacent wetland\" and \"tributary\" in the Step Two Proposal would eliminate the need for case-specific significant nexus tests. Under the Clean Water Rule, a wetland is adjacent to jurisdictional waters (and therefore subject to Clean Water Act regulation itself) if, among other potential criteria, it meets certain distance requirements from the ordinary high water mark of other jurisdictional waters. The Step Two Proposal would largely eliminate the distance evaluation and define \"adjacent wetlands\" as those wetlands that \"abut\" ( i.e. , touch) or have a \"direct hydrological surface connection with\" other jurisdictional waters. Tributaries under the Step Two Proposal must contribute flow to traditionally navigable waters through other jurisdictional waters or non-jurisdictional waters that convey downstream perennial or intermittent flows. Under the Clean Water Rule, by contrast, a tributary is any water that contributes flow to jurisdictional waters that have a bed, bank, and ordinary high water mark. In addition to the two-step repeal and replace plan, the Trump Administration has engaged in a third rulemaking process designed to suspend the Clean Water Rule until February 2020. While the Clean Water Rule states that it is effective as of August 28, 2015, EPA and the Corps published a separate final rule (Applicability Date Rule), which adds a new \"applicability date\" of February 6, 2020, to the Clean Water Rule. The Trump Administration's impetus for the Applicability Date Rule is derived, in part, from the Supreme Court's NAM v. Department of Defense decision. Prior to NAM , the Sixth Circuit's nationwide stay of the Clean Water Rule prevented EPA and the Corps from applying the Clean Water Rule anywhere in the United States. But after NAM concluded that challenges to the rule must begin in federal district courts, the Sixth Circuit dismissed the consolidated appellate-level challenges and vacated its stay. With no nationwide stay in place and with the step-one repeal rule still in proposed form, the Clean Water Rule could have reverted into effect in states that were not subject to a district court injunction. Seeking to prevent reactivation of the Clean Water Rule in some parts of the country, EPA and the Corps promulgated the Applicability Date Rule in an effort to suspend the Clean Water Rule while the agencies undertake the two-step repeal and revise process. Like many prior rules related to the definition of \"waters of the United States,\" litigants challenged the Applicability Date Rule in federal courts. In late 2018, two federal district courts determined that EPA and the Corps did not comply with administrative rulemaking requirements in promulgating the Applicability Date Rule. By declining to consider comments on the substantive merits of the pre-Clean Water Rule regulations, the agencies deprived the public of a \"meaningful opportunity\" to comment on the Applicability Date Rule in violation of the Administrative Procedure Act, the courts held. Both courts issued orders vacating the Applicability Date Rule nationwide. As a consequence, there currently is no instrument (either a final rule or court order) that bars application of the Clean Water Rule on a nationwide basis. The multitude of legal challenges related to \"waters of the United States\" has created a complex legal landscape for the 116th Congress. Because both rules in the Trump Administration's rescind-and-replace process are still in proposed form, the Obama Administration's Clean Water Rule remains the current regulation defining waters of the United States. However, post- NAM challenges to the Clean Water Rule have proceeded at the U.S. district court level, and three federal district courts have entered preliminary injunctions barring application of the Clean Water Rule during the pendency of the suits. At the same time, these district courts have limited the scope of their injunction to the specific states that brought legal challenges to the Clean Water Rule. The ultimate result is that the Clean Water Rule currently is enjoined in 28 states, but it is the current enforceable regulation in 22 states, the District of Columbia, and U.S. territories. While finalization of the Trump Administration's Step One and Step Two Proposals could bring greater uniformity to this fragmented legal landscape, those rules are also likely to engender new litigation. The focus of future lawsuits, if filed, is likely to depend on the rulemaking process and content of the final rules. But observers expect critics to challenge whether EPA and the Corps considered sufficient scientific data and provided an adequate rationale to depart from prior agency guidance and regulations that utilized Justice Kennedy's \"significant nexus\" test. While critics of that test argue that it is too unpredictable for the average landowner to determine whether a waterbody is part of the \"waters of the United States,\" opponents of the Trump Administration's policy contend that the Step Two Proposal would also introduce new technical definitions that ordinary landowners would not be able to implement without hiring a specialist. Because the \"waters of the United States\" debate hinges on the meaning of a statutory term, Congress could enact legislation that seeks to define the jurisdictional reach of the Clean Water Act more clearly. Some Members of the 115th Congress introduced legislation that would have amended the Clean Water Act by providing a narrower definition of \"waters of the United States.\" Other legislation introduced in the 115th Congress would have repealed the Clean Water Rule or allowed EPA and the Corps to repeal the Clean Water Rule without regard to the requirements of the Administrative Procedure Act. While none of the proposed legislation in the 115th Congress was enacted, at least one bill introduced in the 116th Congress proposes to repeal the Clean Water Rule and narrow the Clean Water Act's definition of jurisdictional waters. The debate over the jurisdictional reach of the Clean Water Act implicates complex and overlapping concerns of environmental protection, statutory interpretation, federalism, and constitutional law. While judicial interpretations of \"waters of the United States\" generally have followed broader trends in understanding of the scope of the Commerce Clause, the Supreme Court's inability to identify a unified rationale in Rapanos has caused significant confusion and debate over the outer reaches of the Clean Water Act in the following years. Both the Obama Administration (in the Clean Water Rule) and the Trump Administration (in its rescind and revise process) have sought to provide clarity by promulgating new definitions of \"waters of the United States\" in EPA and the Corps' regulations. But both Administrations' efforts have faced criticism and legal challenges from certain stakeholders, creating a fragmented legal landscape for the 116th Congress in which \"waters of the United States\" means different things in different parts of the nation. Because the \"waters of the United States\" debate hinges on the meaning of a statutory term, Congress could provide greater clarity and uniformity by amending the Clean Water Act to define its jurisdictional scope more clearly, but legislative proposals thus far have not been enacted. ", "summary": "For more than forty-five years, all three branches of government have struggled with how to interpret the meaning of \"waters of the United States\" in the Clean Water Act. In a shift from early water pollution legislation, the 1972 amendments to the Federal Water Pollution Control Act, which came to be known as the Clean Water Act, eliminated the requirement that federally regulated waters must be capable of being used by vessels in interstate commerce. Rather than use traditional navigability tests, the 1972 amendments redefined \"navigable waters\" for purposes of the Clean Water Act's jurisdiction to include \"the waters of the United States, including the territorial seas.\" Disputes over the proper meaning of that phrase have been ongoing since that change. Federal authority to regulate waters within the United States primarily derives from the Commerce Clause, and accordingly, federal laws and regulations concerning waters of the United States cannot cover matters which exceed that constitutional source of authority. During the first two decades after the passage of the Clean Water Act, courts generally interpreted the act as having a wide jurisdictional reach. In recent decades, however, the Supreme Court has emphasized that \"the grant of authority to Congress under the Commerce Clause, though broad, is not unlimited.\" This modern Commerce Clause jurisprudence has informed federal courts' approach to interpreting which \"waters\" are subject to the Clean Water Act. At the same time, the Supreme Court has not always provided clear rules for determining whether a particular waterbody is a water of the United States. In its most recent case on the issue, Rapanos v. United States, the High Court issued a fractured 4-1-4 decision with no majority opinion providing a rationale for how to evaluate jurisdictional disputes. Some courts and commentators disagree on how the scope of federal jurisdictional waters changed over time as a result of interpretative approaches taken by the agencies responsible for administering the Clean Water Act—the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps). This debate resurfaced during the Obama Administration when the Corps and EPA issued a rule, known as the Clean Water Rule, which substantially redefined \"waters of the United States\" in the agencies' regulations for the first time in more than two decades. While some argued that the Clean Water Rule constituted a large-scale expansion of federal jurisdiction, others asserted that the agencies construed the term in a narrower fashion than in prior regulations. A vocal critic of the Clean Water Rule, President Trump shifted the executive branch's policy toward the meaning of \"waters of the United States.\" In February 2017, President Trump issued an executive order directing EPA and the Corps to review and revise or rescind the Clean Water Rule. The agencies currently are in the process of carrying out the executive order, and they unveiled proposed regulations redefining \"waters of the United States\" in December 2018. As in nearly all prior attempts to define this phrase, observers disagree on whether the latest proposed definition correctly calibrates the scope of federal jurisdiction to regulate water pollution.", "document_type": "crs"}
{"report": "The federal government has played a role in subsidizing housing construction and providing homeownership and rental assistance for lower-income households since the 1930s. Today, Congress funds a number of programs to help meet the housing needs of poor and vulnerable populations. The programs are primarily administered by the Department of Housing and Urban Development (HUD), with some assistance provided to rural communities through the Department of Agriculture and some tax benefits administered through the Department of the Treasury. The modern housing assistance programs include both relatively flexible grants to state and local governments to serve homeless people, build affordable housing, provide assistance to first-time homebuyers, and promote community development; and more structured, direct assistance programs that provide low-cost apartments and rental vouchers to poor families, administered through local public, quasi-public, and private intermediaries. The federal government also makes tax credits available to states to distribute to developers of low-cost housing and provides mortgage insurance to lenders that make certain types of mortgages to eligible homebuyers or developers of multifamily housing. One of the federal government's largest housing benefits, arguably, is the mortgage interest deduction, which is not targeted to lower-income households and is available to homeowners who pay mortgage interest and itemize their deductions. This report begins with an overview of the history and evolution of federal housing assistance policy. It then provides descriptions of today's major federal housing assistance programs. The report concludes with a discussion of issues and trends in federal housing assistance policy. This report is primarily focused on the federal government's programs and policies that provide housing-related assistance to households and communities to assist lower-income families. This is a narrower focus than the federal government's role in all aspects of housing and housing finance. For example, this report does not explore the federal government's regulation of lead-based paint hazards in residential structures, assistance to communities in responding to mass displacement immediately following natural disasters, or financial industry regulations as they affect both residential and commercial lending. It also does not provide an in-depth discussion of the federal government's role in facilitating a secondary market for mortgages through the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac or the government agency Ginnie Mae. The federal government's first major housing policy was formulated in response to trouble in the mortgage market resulting from the Great Depression. Until the early 1930s, most mortgages were written for terms of three to five years and required borrowers to make payments only on an annual basis. At the end of the three- or five-year terms, the remaining loan balance had to be repaid or the mortgage had to be renegotiated. Another feature of the mortgage market at that time was that lenders would only lend 40% to 50% of the value of the property, so borrowers had to have the cash to complete the transaction or find someone willing to finance the balance (or part of the balance) in a second mortgage. During the Great Depression, however, lenders were unable or unwilling to refinance many of the loans that became due. When borrowers could not pay the loan balances, lenders foreclosed on the loans and took possession of the properties. It was against this backdrop that the Housing Act of 1934 (P.L. 73-479) was enacted. The broad objectives of the act were to (1) encourage lenders to invest in housing construction, and (2) stimulate employment in the building industry. The act created the Federal Housing Administration (FHA). FHA insured lenders against losses on home modernization and home improvement loans, created the Mutual Mortgage Insurance Fund to fund the operation of the newly created mortgage insurance programs, and established national mortgage associations to buy and sell mortgages. The creation of FHA also institutionalized a new idea: 20-year mortgages on which a loan would be completely repaid at the end of its term. If borrowers defaulted, FHA insured the lender for full repayment. Eventually, lenders began to make long-term mortgages without FHA insurance as long as borrowers made significant down payments. Over time, 15- and 30-year mortgages have become the standard mortgage products. As in the case of the mortgage finance market, the federal government initially became involved in providing rental housing assistance in response to the Great Depression. In the early 1930s, a housing division was added to President Franklin D. Roosevelt's Works Progress Administration (WPA) as a part of the effort to create jobs and spur economic growth. The Housing Division acquired land and built multifamily housing projects for occupancy by lower-income families across the country. However, the Housing Division's activities proved controversial with local government officials who thought that they were not consulted in the process. This provided the background for the enactment of the U.S. Housing Act of 1937 (P.L. 75-412). It replaced the WPA's Housing Division and its projects by establishing a new, federal United States Housing Agency (a precursor agency to today's Department of Housing and Urban Development) and a new Low-Rent Public Housing program. The new program required partnerships between the federal government, states, and localities. States that wished to receive assistance in building low-rent public housing were required to pass enabling legislation creating new, quasi-governmental, local public housing authorities (PHAs). These PHAs could then apply to the federal government for funding to aid in the construction and maintenance of low-rent housing developments targeted to low-income families. The act declared that it was the policy of the United States to promote the general welfare of the nation by employing its funds and credit, as provided in this Act, to assist the several states and their political subdivisions to alleviate present and recurring unemployment and to remedy the unsafe and unsanitary housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families of low-income, in rural or urban communities, that are injurious to the health, safety, and morals of the citizens of the nation. Housing was a major issue in the presidential and congressional races of 1948. President Harry S. Truman's pledge to address the postwar housing shortage and the problem of urban slums played a key role in his large margin of victory. In his State of the Union Address in 1949, which unveiled the \"Fair Deal,\" President Truman observed that \"Five million families are still living in slums and firetraps. Three million families share their homes with others.\" He further stated The housing shortage continues to be acute. As an immediate step, the Congress should enact the provisions for low-rent public housing, slum clearance, farm housing, and housing research which I have repeatedly recommended. The number of low-rent public housing units provided for in the legislation should be increased to 1 million units in the next 7 years. Even this number of units will not begin to meet our need for new housing. The Housing Act of 1949 (P.L. 81-171) declared the goal of \"a decent home and a suitable living environment for every American family.\" The act (1) established a federal urban redevelopment and slum clearance program, authorizing federal loans of $1 billion over a five-year period to help local redevelopment agencies acquire slum properties and assemble sites for redevelopment; (2) reactivated the public housing program for low-income families (which had been on hold during World War II), authorizing subsidies to local housing authorities sufficient to build 810,000 units over six years; (3) expanded the FHA's mortgage insurance program to promote home building and homeownership; (4) created within the U.S. Department of Agriculture a program of financial assistance and subsidies to improve housing conditions on farms and in rural areas; and (5) authorized federal grants for research, primarily to improve the productivity of the housing industry. Through the 1950s, the federal government's role in housing assistance focused largely on public housing, which served a mostly poor population. Congress recognized that there was a gap in the market—few options existed for moderate-income families whose incomes were too high to qualify for public housing but too low to afford adequate market rate housing. Proposals had been made in Congress to address the shortage of housing for moderate-income households during the 1950s; however, no legislation had been enacted, in part due to the cost to the government of creating and funding a new program. To find a way to serve this segment of the population without creating another large housing program with high expenditures, Congress approved legislation at the end of the 1950s and throughout the 1960s that engaged the private sector in the development of affordable rental housing. The Housing Act of 1959 (P.L. 86-372) was the first significant instance where government incentives were used to persuade private developers to build housing that would be affordable to low- and moderate-income households. As part of P.L. 86-372, Congress created the Section 202 Housing for the Elderly program. Through the Section 202 program, the federal government extended low-interest loans to private nonprofit organizations for the development of affordable housing for moderate-income residents age 62 and older. The low interest rates were meant to ensure that units would be affordable, with nonprofit developers being able to charge lower rents and still have adequate revenue to pay back the government loans. The Housing Act of 1961 (P.L. 87-70) further expanded the role of the private sector in providing housing to low- and moderate-income households. The act created the Section 221(d)(3) Below Market Interest Rate (BMIR) housing program, which both insured mortgages to private developers of multifamily housing and provided loans to developers at low interest rates. The BMIR program expanded the pool of eligible borrowers to private for-profit developers and government entities, as well as nonprofit developers. Eligible developers included cooperatives, limited-dividend corporations, and state or local government agencies. Like the Section 202 program, the low interest rates in the BMIR program were meant to ensure that building owners could offer affordable rents to tenants. The Housing and Urban Development Act of 1965 (P.L. 89-117) added rental assistance to the list of incentives for private multifamily housing developers that participated in the Section 221(d)(3) BMIR program. The Rent Supplement Program, enacted as part of P.L. 89-117, capped the rents charged to participating tenants at 20% of their incomes and paid building owners the difference between 20% of a tenant's income and fair market rent. P.L. 89-117 also created the Section 23 leased housing program, which was the first program to provide rent subsidies for use with existing private rental market units. The Housing and Urban Development Act of 1968 (P.L. 90-448) created the Section 236 and Section 235 programs. In the Section 236 program, the government subsidized private developers' mortgage interest payments so that they would not pay more than 1% toward interest. Some Section 236 units also received rent subsidies (referred to as Rental Assistance Payments [RAP]) to make them affordable to the lowest-income tenants. The Section 235 program instituted mortgage interest reduction payments similar to the Section 236 program, but for individual homeowners rather than multifamily housing developers. Through it, eligible borrowers could obtain FHA-insured mortgages with subsidized interest rates. As the program was originally enacted, HUD was to make subsidy payments to the lender in order to reduce the interest rate on the mortgage to as low as 1%. By the end of the 1960s, subsidies to private developers had resulted in the creation of hundreds of thousands of rental housing units. Approximately 700,000 units of housing had been built through the Section 236 and Section 221(d)(3) programs alone. The Section 202 program had created more than 45,000 units for elderly households. The Section 235 program and Section 23 leased-housing program provided ownership and rental subsidies for thousands more. Through 1972, the Section 235 program subsidized nearly 400,000 homeowners, while the Section 23 leased-housing program provided rent subsidies for more than 38,000 private market rental units. Despite the growth in the role of private developers, public housing was still the largest housing subsidy program, with roughly 1 million units built and subsidized by the early 1970s. Another development during the 1960s was an income-based rent structure. Under the public housing program, tenants generally paid rent in an amount equal to the costs of operating the assisted housing in which they lived. Over time, as operating costs rose, there was a concern that the below-market rents being charged were too high to be affordable to the poorest families. The Brooke Amendment, which was included as part of the Housing and Urban Development Act of 1969 (P.L. 91-152), limited tenant contributions toward rent in all rent assisted units (including public housing and all project-based rental assistance units) to an amount equal to 25% of tenant income (this was later raised to 30%). The Brooke Amendment is considered to be responsible for codifying an income-based rent structure in federal housing programs. In 1968, Congress enacted the Fair Housing Act as Title VIII of the Civil Rights Act (P.L. 90-284). The law prohibits discrimination in the sale, rental, or financing of housing based on race, color, religion, national origin, sex, familial status, and handicap. In addition to prohibiting discrimination, the Fair Housing Act also requires HUD and other federal agencies to administer their housing and urban development programs in ways that affirmatively further fair housing. In other words, as determined by courts, HUD is to prevent segregation and ensure that housing is open to everyone. Leading up to the passage of the Fair Housing Act, there had been years of governmental and private discrimination in the provision of housing. For example, the Federal Housing Administration's policies and underwriting requirements often discouraged or prohibited FHA insurance for mortgages in certain areas, including non-white or racially mixed areas, and encouraged occupancy restrictions based on race for the mortgages it insured. Such policies limited minority households' opportunities to achieve homeownership and contributed to patterns of racial segregation. Systematic racial discrimination was not limited to private market housing transactions, but was also prevalent in public housing. Together, a presidential order, Supreme Court cases, and civil rights legislation, including the Fair Housing Act, worked to make it illegal to deny public housing assistance to families based on their race and to segregate public housing residents systematically by race, both of which had been common practice since the inception of the program. In 1977, Congress enacted the Community Reinvestment Act (CRA) as part of the Housing and Community Development Act of 1974 ( P.L. 95-128 ). The CRA affirms that federally insured depository institutions have an obligation to meet the credit needs of the communities in which they are chartered and accept deposits, consistent with financial safety and soundness considerations, and requires federal banking regulators to assess the extent to which banks are meeting those needs. The enactment of the CRA grew out of concern that banking deposits were funding lending activities across the country at the expense of providing credit in certain areas where deposits were collected, thereby contributing to neighborhood disinvestment. By the early 1970s, concern was growing about the cost, efficacy, and equity of the construction-based housing subsidy programs, such as the Section 236 and public housing programs. Multiple series of pilot programs were launched to test the cost-effectiveness of supply-side (construction) subsidies versus demand-side (rental assistance) subsides. President Richard M. Nixon criticized the existing programs as not equitably serving families in the same circumstances, providing poor quality housing, being too costly, and placing some families in homes they could not afford. Based on these concerns, President Nixon declared a moratorium on all new activity under the major housing subsidy programs—except for the Section 23 leased-housing program—that began in January 1973. Assisted housing activity slowly restarted in response to lawsuits and new legislation. The Housing Act of 1974 ( P.L. 93-383 ) was the first omnibus housing legislation since 1968 and the first such legislation following the Nixon moratorium. The act created a new low-income rental assistance program, referred to as Section 8. Although the 1960s had seen rental assistance programs like Rent Supplement and Section 23, the scale of the Section 8 program made it the first comprehensive rental assistance program. The Section 8 program combined features of the Section 236 program, which was popular with advocates of construction-based subsidies, and the Section 23 leased-housing program, which used the existing housing stock and was popular with the Nixon Administration. Through Section 8, the federal government provided private property owners monthly assistance payments for new or substantially rehabilitated rental units. In exchange for monthly rental payments, property owners agreed to rent to eligible low-income families (defined as families with incomes at or below 80% of local area median income), who would pay an income-based rent. It also provided PHAs with the authority to enter into rental assistance contracts for existing, private market units that met certain quality standards. Over time, the use of Section 8 in new construction and substantial rehabilitation projects was found to be more expensive than its use in existing housing. The Housing and Urban-Rural Recovery Act of 1983 ( P.L. 98-181 ) repealed HUD's authority to enter into new Section 8 contracts tied to new construction and substantial rehabilitation, but retained HUD's authority to issue new contracts for existing properties. The act also created a new demonstration program to test a modified use of Section 8, referred to as vouchers. Vouchers were similar to the use of Section 8 rent subsidies in existing housing, but they provided more flexibility to PHAs, particularly by permitting families to pay more than 30% of their incomes in rent. The demonstration was made permanent in 1985. By the mid-1980s, federal housing programs had gone through a number of iterations. Some programs had been scrapped as inefficient, subject to fraud and abuse, or too expensive. Shifting federal priorities—toward reducing taxes and increasing military spending in response to the Cold War—reduced funding available for social programs, including housing assistance. Creation of assisted housing with federal funds was on the decline, with production slowing significantly between 1982 and 1988. In addition, existing affordable rental units were being lost as use restrictions between private owners and HUD expired or as owners chose to prepay their low-interest mortgages and begin charging market-rate rent. As a result of reduced federal support for housing, state and local governments and private for-profit or nonprofit organizations began to take the initiative in developing innovative ways of providing housing in their communities. Policymakers acknowledged that, in some cases, local communities had better knowledge about how to provide housing than the federal government, and might be able to provide housing more efficiently than HUD. From the late 1980s through the 1990s, Congress acknowledged the value of local control and gave more decisionmaking authority over housing policy to state and local governments through the creation of block grants and tax credits. In 1986, the Low Income Housing Tax Credit (LIHTC) program was created as part of the Tax Reform Act of 1986 ( P.L. 99-514 ). The LIHTC was not initially part of the bill that became the Tax Reform Act ( H.R. 3838 ). However, because portions of H.R. 3838 eliminated the favorable treatment of real estate investment income, Members added the LIHTC program to the bill to ensure that developers would have an incentive to continue to construct low- and moderate-income housing. The LIHTC, intentionally or not, was one of the first major programs to give a good deal of control over federal funding for housing to states. Tax credits are allocated to states based on population, and states have discretion in setting priorities as to how the credits will be used. While states must prioritize projects that serve the lowest-income tenants for the longest period of time, they may choose to allocate credits based on criteria such as the tenant populations served (e.g., those with special needs, families with children, or those on public housing waiting lists). Just one year after enactment of the LIHTC, Congress passed the Stewart B. McKinney Homeless Assistance Act ( P.L. 100-77 ), which included funding for several grants that states and localities could use to assist people experiencing homelessness. Grants were available for permanent and transitional housing, as well as supportive services, with the idea that localities are in a better position to know how to serve the people living in their communities. In 1990, Congress created another large, flexible block grant to states and localities. The National Affordable Housing Act of 1990 (NAHA, P.L. 101-625 ) authorized the HOME Investment Partnerships program. HOME was modeled after an earlier block grant, the Community Development Block Grant (CDBG), which was created as part of the Housing Act of 1974 to consolidate several special purpose grants funding many activities other than housing, such as neighborhood revitalization, open space, and water and sewer grants. NAHA directed that HOME funds be allocated to states and localities based on a formula and that funds be targeted to assist families with incomes at or below 80% of area median income (or lower in some cases). Recipient jurisdictions were permitted to use funds to assist homebuyers and homeowners, construct rental housing, and provide rental assistance, and they were required to establish plans for spending their funds, meet matching requirements, and partner with local nonprofits. The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA, P.L. 104-330 ) reorganized the system of federal housing assistance to Native Americans by eliminating several separate programs of assistance and replacing them with a single block grant program. In addition to simplifying the process of providing housing assistance, a purpose of NAHASDA was to provide federal assistance for Indian tribes in a manner that recognizes the right of Indian self-determination and tribal self-governance. Throughout the 1990s, concern about the state of public housing grew. The public perceived public housing to be mismanaged, of poor quality, and dangerous. At the same time, interest was growing in reforming social programs by devolving control to the states and increasing the programs' focus on promoting work and self-sufficiency. Concern over the condition of public housing—and the influence of the 1996 welfare reform debate and legislation—led to proposals for major public and assisted housing reforms. Several years of debate in Congress culminated with the enactment of the Quality Housing and Work Responsibility Act of 1998 (QHWRA; P.L. 105-276 ). The purposes of QHWRA, as defined in the act, were to deregulate PHAs, provide PHAs with more flexibility in their use of federal assistance, facilitate mixed income communities, decrease concentrations of poverty in public housing, increase accountability and reward effective management of PHAs, create incentives and economic opportunities for residents assisted by PHAs to work and become self-sufficient, consolidate the Section 8 voucher and certificate programs into a single market-driven program, remedy the problems of troubled PHAs, and replace or revitalize severely distressed public housing projects. Specific reforms in QHWRA included increased income targeting in the voucher program, removal of federal preference categories for housing assistance, enactment of a limited community service requirement in public housing, creation of the Section 8 Housing Choice Voucher program (a hybrid of the Section 8 voucher and certificate programs), authorization of the HOPE VI program, consolidation and reform of funding for public housing, and modifications to the assessment systems for PHAs. QHWRA also featured the so-called \"Faircloth Amendment,\" which prohibited the use of public housing funding for the development of any net new units of public housing. In the 10 years following passage of QHWRA, the number of public housing units declined by more than 10%. This is attributable to a number of policy changes, many of which were contained in QHWRA, including the Faircloth Amendment limiting development of new public housing, the growth of HOPE VI paired with the removal of a requirement for one-for-one replacement of demolished units, and an increased focus on mixed finance redevelopment of public housing. The pace of decline in the overall number of public housing units increased again with the introduction of the Rental Assistance Demonstration in 2012 ( P.L. 112-55 ). RAD allows PHAs to remove their properties from the public housing program and instead receive a form of Section 8 rental assistance. As the program is currently authorized, HUD is authorized to approve the conversion of nearly half of the remaining public housing stock to Section 8 rent assistance. Another important development in housing policy in more recent years was the 2007 financial crisis and its aftermath. The financial crisis itself was precipitated in large part by mortgage lending practices and its aftermath was felt heavily in housing markets as home prices fell, foreclosures rose, and the homeownership rate dropped significantly. This led to a variety of policy responses addressing both the perceived causes and the effects of the housing and financial market turmoil. For example, major reforms enacted in 2008 resulted in federal conservatorship for two housing government-sponsored enterprises (Fannie Mae and Freddie Mac) that continues today. Congress and both the George W. Bush and Obama Administrations created several temporary programs to address rising foreclosure rates. The recession that accompanied the financial market turmoil prompted Congress and President Obama to enact an economic stimulus package in 2009 that included a significant one-time increase in resources for, among other things, several federal housing programs (including public housing, CDBG, and grants for LIHTC projects). In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ) instituted new rules related to mortgages intended to protect consumers and the financial system from some of the lending practices that preceded the financial crisis, among other reforms. In the ensuing years, there has been ongoing debate about the effects of some of these policy responses as well as the appropriate role of the government in providing support for homeownership and the housing finance system more generally. Today's system for providing housing assistance to low-income families is made up of programs that fall into three main categories: rental housing assistance, federal assistance to state and local governments, and housing finance and homeownership assistance. These categories are not necessarily mutually exclusive. For example, some assistance provided to states and local governments can in turn be used to provide various types of housing finance or homeownership assistance. Rental assistance is provided primarily through rent vouchers that families can use in the private market; below-market rental units owned by PHAs or private landlords under contract with the federal government; and, to a limited extent, construction of new below-market rental units. Assistance to state and local governments comes in several forms, including broad, flexible block grants that can be used for rental, homeownership, or community development purposes; special purpose block grants; and programs based in the tax system. Housing finance and homeownership assistance can include direct assistance to defray home buying costs, tax incentives, and mortgage insurance programs to help provide incentives for the private market to meet the needs of underserved segments of the population. Such assistance may help finance single-family housing, which can assist eligible homebuyers in obtaining mortgages to purchase homes, or multifamily housing, which can assist housing developers in obtaining financing to develop affordable rental housing. This section provides a description of the major housing assistance programs that fall into the three aforementioned categories. Section 8 Housing Choice Vouchers (vouchers) are a form of tenant-based rental assistance funded by the federal government, administered locally by quasi-governmental PHAs, and provided to private landlords on behalf of low-income families. (The program is codified at 42 U.S.C. §1437f(o)). Generally, an eligible family with a voucher lives in the housing of its choice in the private market (assuming the unit meets program standards and the landlord is willing to participate in the program) and the voucher pays the difference between the family's contribution toward rent and the actual rent for the unit. Specifically, a family pays 30% of its adjusted income toward rent (although it can choose to pay more) and the PHA, which receives funding from HUD, makes payments to the landlord based on a maximum subsidy set by the PHA (based on the local fair market rent established by HUD), less the tenant's contribution. Families are eligible to receive vouchers if they are very low-income (earning 50% or less of the local area median income) or low-income (earning 80% or less of the local area median income) and meet other special criteria (for example, are elderly or have disabilities). However, PHAs must provide 75% of all vouchers available in a year to extremely low-income families (earning 30% or less of the greater of area median income or the poverty guidelines). Vouchers are nationally portable; once a family receives a voucher, it can take that voucher and move to any part of the country where a voucher program is being administered. There are several special forms of Section 8 vouchers. Tenant protection vouchers are provided to families who are being displaced from other HUD programs. Some tenant protection vouchers, called enhanced vouchers, can have higher values than regular vouchers. PHAs also have the discretion to \"project-base\" some of their vouchers. Project-based vouchers are attached to specific housing units rather than given to families to use in homes of their choosing. Another special form is the homeownership voucher; PHAs have the discretion to allow eligible first-time homebuyers to use their vouchers to make monthly mortgage payments. (For more information, see CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance , by Maggie McCarty.) The voucher program is not an entitlement program. Families that wish to receive vouchers must generally apply to their local PHA and are placed on a waiting list, the length of which varies by community and can range from several months to many years. Congress has authorized and funded roughly 2 million vouchers. The funding for them is provided annually by Congress in the appropriations for HUD. The Section 8 voucher program is the largest of HUD's rental assistance programs, serving the largest number of households and accounting, in recent years, for more than one-third of the department's budget. Congress has generally renewed all existing vouchers each year; in some years, Congress also creates new vouchers to serve additional families, referred to as incremental vouchers. The current distribution of vouchers across PHAs results from a variety of allocation methods used in the past: formula-based, competitive, and other methods. While the distribution of funding to PHAs is generally based on the number of vouchers that they have and the cost of those vouchers, the exact distribution formula has often been modified by Congress in the appropriations process. Under the project-based Section 8 rental assistance program, HUD entered into contracts with private property owners under which owners agreed to rent their housing units to eligible low-income tenants for an income-based rent, and HUD agreed to pay the difference between tenants' contributions and a rent set by HUD. Families are eligible to live in project-based Section 8 units if they are low-income (having income at or below 80% of the area median income), but 40% of units made available each year must be reserved for extremely low-income families (those with income at or below 30% of the area median income). No new project-based Section 8 contracts with private landlords have been awarded since the mid-1980s, although existing contracts can be renewed upon their expiration. Roughly 1 million project-based units are still under contract and receive assistance. The original contracts were for 10- to 40-year periods and were provided with multiyear funding from Congress for the length of the contracts. Therefore, each year Congress only has to provide new funding for those contracts that have expired and require annual renewal (although, eventually, all of those long-term contracts will expire so all contracts will require annual funding). (See Table 1 for appropriations information.) Not all contracts are renewed, so there has been a loss of project-based Section 8 units over time. When owners do not renew, tenants are provided with Section 8 tenant protection vouchers. For more information, see CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance , by Maggie McCarty. Low-rent public housing developments are owned and operated by local public housing authorities (PHAs) and subsidized and regulated by the federal government. (The program is codified at 42 U.S.C. §1437.) Generally, families are eligible to live in public housing if they are low-income (earning at or below 80% of area median income), but 40% of public housing units that become available in a year must be given to families that are extremely low-income (earning at or below the greater of 30% of area median income or the federal poverty guidelines). As in the two Section 8 programs, families living in public housing pay 30% of their adjusted income toward rent. PHAs receive several streams of funding from HUD to help make up the difference between what tenants pay in rent and what it costs to maintain public housing. PHAs receive operating funds and capital funds through a formula allocation process; operating funds are used for management, administration, and the day-to-day costs of running a housing development, and capital funds are used for modernization needs (such as replacing a roof or heating and cooling system, or reconfiguring units). PHAs can also apply for competitive Choice Neighborhoods revitalization grants (which replaced the HOPE VI program), which are used to demolish and rebuild, or substantially rehabilitate, severely distressed public housing, replacing it with mixed-income housing. There are roughly 1 million public housing units under contract with the federal government, making public housing the second-largest direct housing assistance program. The 1998 Public Housing Reform Act ( P.L. 105-276 ) prohibited PHAs from increasing the total number of public housing units in their inventories; however, the number of public housing units had begun to decline steadily before then for a number of reasons. PHAs are authorized to demolish or sell their public housing developments with HUD's permission, and since the mid-1990s they have not been required to replace those units with new units (although they must provide displaced families with Section 8 vouchers). The 1998 act also provided authority to allow, and in some cases require, PHAs to convert their public housing units to the voucher program. Also, the HOPE VI program has contributed to the demolition of more units than it has replaced. Most recently, the Rental Assistance Demonstration (RAD) authorizes up to nearly half of the current public housing stock to leave the program via conversion to Section 8. (For more information about public housing, see CRS Report R41654, Introduction to Public Housing , by Maggie McCarty.) Through the Section 202 Supportive Housing for the Elderly program, HUD provides funds to nonprofit organizations that in turn build rental properties for low-income elderly households (those where one or more persons are age 62 or older). It was created as part of the Housing Act of 1959 (P.L. 86-372). (The program is codified at 12 U.S.C. §1701q.) Section 202 is the only federal housing program that funds housing exclusively for elderly persons, although from approximately 1964 to 1990 non-elderly persons with disabilities were eligible for residency in Section 202 properties. Although the Section 202 program initially provided low-interest loans to nonprofit developers, since the early 1990s the program has provided nonprofit developers with capital grants, together with project rental assistance contracts (rental assistance that is similar to project-based Section 8). The current version of the Section 202 program serves very low-income elderly households (those with incomes at or below 50% of area median income). (For more information about the Section 202 program, see CRS Report RL33508, Section 202 and Other HUD Rental Housing Programs for Low-Income Elderly Residents , by Libby Perl.) The Section 811 Supportive Housing for Persons with Disabilities Program was created in 1990 as part of the Cranston-Gonzalez National Affordable Housing Act ( P.L. 101-625 ). (The program is codified at 42 U.S.C. §8013.) Until the enactment of Section 811, the Section 202 program provided housing for persons with disabilities. Through Section 811, HUD provides capital grants to nonprofit organizations to create rental housing that is affordable to very low-income households (income at or below 50% of AMI) with an adult who has a disability. The program also funds project rental assistance contracts to subsidize the rent paid by tenants. Housing built with capital grants may include group homes, independent living facilities, multifamily rental units, condominium units, and cooperative housing. Section 811 developers must provide supportive services to those residing in the units. In addition, through FY2010 the Section 811 program created tenant-based rental assistance, sometimes called \"mainstream vouchers,\" that tenants could use to find housing in the private market, much like Section 8 vouchers. However, since FY2011 (based on a law enacted in 2010 [ P.L. 111-374 ]), Section 811 tenant-based assistance has been funded via the Section 8 account. Also as part of P.L. 111-374 , Section 811 rental assistance funds were made available to be used in conjunction with capital funding from other sources (such as LIHTC and HOME funds). (For more information about the Section 811 program, see CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities , by Libby Perl.) The Section 236 program was an initiative to encourage private developers to create housing affordable to low- and moderate-income households. It was created as part of the Housing and Urban Development Act of 1968 (P.L. 90-448), and was active in promoting new development from approximately 1969 to 1973. (The program is codified at 12 U.S.C. §1715z-1.) The Section 236 program provided mortgage insurance to housing developers for the construction and rehabilitation of rental housing, and it continues to provide mortgage subsidies to building owners through a mechanism called Interest Reduction Payments (IRPs). IRPs are subsidies to owners that ensure they will only pay 1% interest on their mortgages. Given the reduced financing costs, owners can charge below-market rents for Section 236 units. Many units also receive rental assistance payments through the project-based Section 8 rental assistance program, Rent Supplement program, or Rental Assistance Payments (RAP) program, making the units affordable to very low-income and extremely low-income families. The Section 221(d)(3) Below Market Interest Rate (BMIR) program was another HUD program that encouraged private developers to create affordable housing by offering FHA-insured loans with interest rates of 3%. It was enacted as part of the Housing Act of 1961 (P.L. 87-70) and actively insured new loans until 1968, when the Section 236 program replaced it as a vehicle for affordable housing development. (The Section 221(d)(3) program is codified at 12 U.S.C. §1715 l .) Like Section 236, units created under this program are offered for below-market rents and may also receive rental assistance. Title V of the Housing Act of 1949 authorized the U.S. Department of Agriculture (USDA) to make loans to farmers to enable them to construct, improve, repair, or replace dwellings and other farm buildings to provide decent, safe, and sanitary living conditions for themselves and their tenants, lessees, sharecroppers, and laborers. USDA was authorized to make grants, or combinations of loans and grants, to those farmers who could not qualify to repay the full amount of a loan but needed the funds to make their dwellings sanitary or to remove health hazards to the occupants or the community. Although the act was initially targeted to farmers, over time it has been amended to enable USDA to make housing loans and grants to rural residents in general. The USDA housing programs are generally referred to by the section number under which they are authorized in the Housing Act of 1949, as amended. Under the Section 515 program, the Rural Housing Service of the USDA is authorized to make direct loans for the construction of rural rental and cooperative housing. (The program is codified at 42 U.S.C. §1485.) The loans are made at a 1% interest rate and are repayable in 50 years. Except for public agencies, all borrowers must demonstrate that financial assistance from other sources is not enough to enable the borrower to provide the housing at terms that are affordable to the target population. Under the Section 538 program, USDA guarantees loans made by private lenders to developers of affordable rural rental housing for low- and moderate-income households. (The program is codified at 42 U.S.C. §1490p-2.) Under the Section 521 program, rental assistance payments, which are made directly to owners of rental properties, make up the difference between the tenants' rent payments (30% of tenant income) and the USDA-approved rent for the Section 515 units. (The Section 521 program is codified at 42 U.S.C. §1490a.) Owners must agree to operate the property on a limited profit or nonprofit basis. (For more information about rural housing assistance programs, see CRS Report RL31837, An Overview of USDA Rural Development Programs , by Tadlock Cowan.) The LIHTC was enacted as part of the Tax Reform Act of 1986 ( P.L. 99-514 ) and provides incentives for the development of affordable rental housing through federal tax credits administered through the Internal Revenue Service. (The program is codified at 26 U.S.C. §42.) The tax credits are disbursed to state housing finance agencies (HFAs) based on population. HFAs, in turn, award the credits to housing developers that agree to build or rehabilitate housing in which a certain percentage of units will be affordable to low-income households. Housing developers then sell the credits to investors and use the proceeds to help finance the housing developments. The benefit of the tax credits to the purchasing investors is that they reduce the investor's federal income tax liability annually over a 10-year period. Because tax credits reduce the amount of private financing required to build or rehabilitate housing, the owners of developments financed through tax credits are able to charge lower rents. To qualify for the tax credits, one of three criteria must be met: at least 20% of units in a development must be occupied by households with incomes at or below 50% of area median income; at least 40% of units must be occupied by households with incomes at or below 60% of area median income; or, more recently, properties have been allowed to adopt an \"income-averaging\" approach that enables them to serve a mix of higher-income families if they also serve lower-income families, as long as it results in an average of 40% of units being occupied by households with incomes that average 60% or below of area median income. Rent charged for the rent-restricted units in a development may not exceed 30% of an imputed income limitation—calculated based on area median incomes. Units financed with tax credits must remain affordable for at least 15 years, although states may choose to adopt longer use restrictions. As of 2018, more than 2.3 million units had been placed in service using LIHTCs. In FY2018, the Joint Committee on Taxation estimated that the LIHTC would result in a $9 billion tax expenditure. (For more information about the LIHTC, see CRS Report RS22389, An Introduction to the Low-Income Housing Tax Credit , by Mark P. Keightley.) The federal government authorizes state and local governments to issue private activity bonds, up to a certain limit, which are exempt from federal taxes. One form of a private activity bond is a mortgage revenue bond (MRB). (MRBs are codified at 26 U.S.C. §143.) State or local governments—or their authorized agencies, such as housing finance agencies—sell MRBs to investors. Because the interest earned by bondholders is exempt from federal (and sometimes state) taxation, the bonds can be marketed at lower interest rates than would be required for similar taxable instruments. The proceeds of the bond sales, less issuance costs and reserves, are used to finance home mortgages to eligible (generally first-time) homebuyers. In effect, the tax exemption on the bonds provides an interest rate subsidy to homebuyers. To qualify for the benefit, a borrower must not have been a homeowner in the past three years, the mortgage must be for the principal residence of the borrower, the purchase price may not exceed 90% (110% in targeted areas) of the average purchase price in the area, and the income of the borrower may not exceed 110% (140% in targeted areas) of the median income for the area. In FY2018, the Joint Committee on Taxation estimated that MRBs would result in a $1.3 billion tax expenditure. The Community Development Block Grant (CDBG) program was enacted as part of the Housing and Community Development Act of 1974 ( P.L. 93-383 ), and is administered by HUD. (The program is codified at 42 U.S.C. §§5301-5321.) Its purpose is to develop viable urban communities by providing decent housing, a suitable living environment, and expanding economic opportunities primarily for low- and moderate-income persons. The CDBG program distributes 70% of total funds through formula grants to entitlement communities—central cities of metropolitan areas, cities with populations of 50,000 or more, and urban counties—and the remaining 30% goes to states for use in small, non-entitlement communities. Recipient communities may use CDBG funds for a variety of activities, although at least 70% of funds must be used to benefit low- and moderate-income persons. Eligible activities include the acquisition and rehabilitation of property for purposes such as public works, urban beautification, and historic preservation; the demolition of blighted properties; services such as crime prevention, child care, drug abuse counseling, education, or recreation; neighborhood economic development projects; the rehabilitation or development of housing; and housing counseling services. Beyond CDBG's annual appropriations, Congress has used the program's framework to provide additional, supplemental, and special appropriations to assist states and communities in responding to various economic crises and manmade and natural disasters. (For more information about CDBG, see CRS Report R43394, Community Development Block Grants: Recent Funding History , by Eugene Boyd.) The HOME Investment Partnerships Program is a housing block grant program administered by HUD and designed to expand the supply of decent, safe, sanitary, and affordable housing. (The program is codified at 42 U.S.C. §§12741 et seq.) HOME funding is allocated via formula: 60% of funds are awarded to \"participating jurisdictions\" (localities that have populations above a certain threshold and qualify for a certain amount of funding under the formula), and 40% are awarded to states. HOME grantees must match 25% of their HOME grants (with some exceptions) and submit a plan to HUD detailing their community housing needs and priorities. HOME funds can be used for four main purposes: rehabilitation of owner-occupied housing, homebuyer assistance, rental housing construction and rehabilitation, and the provision of tenant-based rental assistance. All HOME funds must be used to benefit low-income families (those with incomes at or below 80% of area median income), and at least 90% of funds used for rental housing activities or tenant-based rental assistance must be used to benefit families with incomes at or below 60% of area median income. (For more information about HOME, see CRS Report R40118, An Overview of the HOME Investment Partnerships Program , by Katie Jones.) The Housing Trust Fund (HTF) was created in the Housing and Economic Recovery Act of 2008 (HERA, P.L. 110-289 ). It is a block grant administered by HUD that is targeted primarily toward the development of rental housing for the lowest-income households. (The program is codified at 12 U.S.C. §4568.) HTF funds are allocated to states via formula. HTF funds are to be used primarily for rental housing; however, by statute up to 10% of funds can be used for certain homeownership activities for eligible first-time homebuyers. Furthermore, all HTF funds must benefit households that are at least very low-income, and at least 75% of the funds used for rental housing must benefit extremely low-income households (or households with incomes at or below the poverty line). While the HTF is similar to the HOME program in some ways, it is more explicitly focused on rental housing and has deeper income targeting requirements than HOME. The HTF is funded through contributions from the government-sponsored enterprises Fannie Mae and Freddie Mac rather than through appropriations. Although the HTF was created in 2008, due to concerns about Fannie Mae's and Freddie Mac's financial situations, the first contributions were not provided to the HTF until 2016. (For more information about the Housing Trust Fund, see CRS Report R40781, The Housing Trust Fund: Background and Issues , by Katie Jones.) The Homeless Assistance Grants were established in 1987 as part of the Stewart B. McKinney Homeless Assistance Act ( P.L. 100-77 ). They are administered by HUD and fund housing and services for homeless persons. The grants have gone through several permutations since their enactment, with the most recent change taking place when they were reauthorized in the 111 th Congress by the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act, enacted as part of the Helping Families Save Their Homes Act ( P.L. 111-22 ). (The Homeless Assistance Grants are codified at 42 U.S.C. §11360, et seq.) The Homeless Assistance Grants consist of the Emergency Solutions Grants (ESG) program, Continuum of Care (CoC) program, and Rural Housing Stability (RHS) program. ESG funds are distributed to local communities and states by formula and may be used by grantees in two categories: (1) emergency shelter and related services and (2) homelessness prevention and rapid rehousing. The statute limits use of funds in the first category to the greater of 60% of a state or local government's ESG allocation or the amount the recipient spent for these purposes in the year prior to the effective date of the HEARTH Act. CoC program funds, distributed to nonprofit organizations, public housing agencies, and state and local governments via a competition, may be used for transitional housing, permanent supportive housing, rapid rehousing, supportive services, and Homeless Management Information Systems. The RHS program has not been implemented, but would allow rural grantees to assist people who are experiencing homelessness in the same ways as the CoC program. The statute would also allow RHS funds to be used for homelessness prevention activities, relocation assistance, short-term emergency housing, and home repairs that are necessary to make housing habitable. (For more information about the Homeless Assistance Grants, see CRS Report RL33764, The HUD Homeless Assistance Grants: Programs Authorized by the HEARTH Act , by Libby Perl.) The Housing Opportunities for Persons with AIDS (HOPWA) program is the only federal program that provides funding specifically for housing for persons with acquired immunodeficiency syndrome (AIDS) and related illnesses. Congress established the program as part of the Cranston-Gonzalez National Affordable Housing Act ( P.L. 101-625 ) in 1990. (The program is codified at 42 U.S.C. §§12901-12912.) HOPWA program funding is distributed both by formula allocations and competitive grants. HUD awards 90% of appropriated funds by formula to states and eligible metropolitan statistical areas (MSAs) that meet thresholds regarding population, AIDS cases, and AIDS incidence. Recipient states and MSAs may allocate grants to nonprofit organizations or administer the funds through government agencies. HOPWA grantees may use funds for a wide range of housing, social services, program planning, and development costs. (For more information about HOPWA, see CRS Report RL34318, Housing for Persons Living with HIV/AIDS , by Libby Perl.) The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA, P.L. 104-330 ), reorganized the system of federal housing assistance to Native Americans by separating Native American programs from the public housing program, and by eliminating several separate programs of assistance and replacing them with a single block grant program. In addition to simplifying the process of providing housing assistance, a purpose of NAHASDA was to provide federal assistance for Indian tribes in a manner that recognizes the right of Indian self-determination and tribal self-governance. The act provides block grants to Indian tribes or their tribally designated housing entities (TDHEs) to use for a wide range of affordable housing activities through the Native American Housing Block Grant (NAHBG) program. The tribe must submit an Indian housing plan (IHP), which is reviewed by HUD for compliance with statutory and regulatory requirements. Funding is provided under a need-based formula, which was developed pursuant to negotiated rulemaking between tribal representatives and HUD. Tribes and TDHEs can leverage funds, within certain limits, by using future grants as collateral to obtain private loans for affordable housing activities under the Title VI Loan Guarantee Program. (For more information about NAHASDA, see CRS Report R43307, The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA): Background and Funding , by Katie Jones.) The Federal Housing Administration (FHA) was established by the National Housing Act of 1934 (P.L. 73-479). Today, it is an agency within HUD that insures private lenders against losses on certain home mortgages. Because lenders are insured against loss if borrowers default, they are more willing to make loans to borrowers who might not otherwise be served by the private market, particularly those with low down payments or little credit history. FHA-insured borrowers pay insurance premiums to FHA and mortgages are subject to certain requirements, such as limits on the size of the loan. FHA administers a variety of both single-family and multifamily mortgage insurance products. Single-family products include insurance for home purchase, refinance, and home improvement loans, as well as reverse mortgages to allow the elderly to access equity in their homes. Multifamily products include insurance for loans for the purchase, repair, or construction of apartments, hospitals, and nursing homes. These products are administered through two primary program accounts—the Mutual Mortgage Insurance Fund account (MMI Fund) and the General Insurance/Special Risk Insurance Fund account (GI/SRI Fund). The MMI Fund provides financial backing for insurance on single-family mortgages. The GI/SRI Fund backs insurance for mortgages on multifamily buildings, hospitals and nursing homes, and for an assortment of special purpose loans such as manufactured housing loans and home improvement loans. While FHA insures a variety of different types of mortgages, its single-family home mortgage program is by far its largest. FHA insures mortgages for both home purchases and refinances, but it tends to make up a larger share of the home purchase market than the refinance market (FHA's market share fluctuates depending on economic conditions and other factors). FHA's share of the home purchase market averaged about 14% from the mid-1990s until the early 2000s, but fell to 5% by 2005 as other types of mortgage credit (including subprime mortgages) became more easily available. It then increased dramatically after 2007, reaching a high of 33% in 2009, as the housing market experienced turmoil, mortgage credit standards tightened, and FHA insured a larger number of mortgages in what had become a smaller mortgage market overall. FHA's share has decreased since its peak, but at 20% in 2017 it remains higher than it was in the years preceding the housing market turmoil. (For more information on FHA, see CRS Report RS20530, FHA-Insured Home Loans: An Overview , by Katie Jones.) The Servicemen's Readjustment Act of 1944 (P.L. 78-346) established the home loan guaranty program, which is administered by the Department of Veterans Affairs (VA). (The program is codified at 38 U.S.C. §3710 et seq.) The VA loan guaranty came about as a less expensive alternative to a cash bonus for veterans returning from World War II that would still provide benefits to veterans. The loan guaranty program assists veterans by insuring mortgages made by private lenders, and it is available for the purchase or construction of homes and for refinancing existing loans. The loan guaranty has expanded over the years so that it is available to (1) all veterans who fulfill specific duration of service requirements or who were released from active duty due to service-connected disabilities, (2) members of the reserves who completed at least six years of service, and (3) spouses of veterans who died in action, died of service-connected disabilities, or died while receiving (or while being entitled to receive) benefits for certain service-connected disabilities. Under the loan guaranty, the VA agrees to reimburse lenders for a portion of losses if borrowers default. Unlike the FHA insurance program, the VA does not insure 100% of the loan; instead, the percentage of the loan that is guaranteed is based on the loan amount, and is typically about 25% of the loan. As shown in Table 11 , the total number of VA-insured purchase loans originated per year as a share of all home purchase mortgages has increased from 2% in FY2005 through FY2007 to 9% in FY2017. (For more information on VA home loans, see CRS Report R42504, VA Housing: Guaranteed Loans, Direct Loans, and Specially Adapted Housing Grants , by Libby Perl.) USDA's Rural Housing Service administers a number of loan programs to assist with the financing of both owner-occupied housing and rental housing in rural areas. It also administers some grant programs for purposes such as home repairs. Through the Section 502 Rural Housing Loan program, USDA is authorized both to make direct loans and to guarantee private loans to very low- to moderate-income rural residents for the purchase or repair of new or existing single-family homes. (The program is codified at 42 U.S.C. §1472.) The direct loans have a 33-year term and interest rates may be as low as 1%. Borrowers in rural areas with incomes at or below 80% of area median income qualify for the direct loans. The guaranteed loans have 30-year terms, and borrowers in rural areas with incomes at or below 115% of the area median qualify. Priority for both direct and guaranteed loans is given to first-time homebuyers, and USDA may require that borrowers complete a homeownership counseling program. Through the Section 504 program, USDA makes loans and grants to very low-income homeowners (those with incomes at or below 50% of area median income) for home repairs or improvements, or to remove health and safety hazards. (The program is codified at 42 U.S.C. §1474.) The Section 504 grants may be available to homeowners who are age 62 or older. Depending on the cost of the repairs and the income of the elderly homeowner, the owner may be eligible either for a grant that would cover the full cost, or for some combination of a loan and grant. To qualify for a grant, the elderly homeowner must be unable to repay the full cost of the repairs. In FY2017, USDA provided about 3,400 Section 504 loans for a total of about $20 million and about 4,800 grants for a total of about $29 million. (For more information about rural housing programs, see CRS Report RL31837, An Overview of USDA Rural Development Programs , by Tadlock Cowan.) The Federal Home Loan Banks (FHLB; the Banks) were created in 1932 by the Federal Home Loan Bank Act (P.L. 72-304) to serve as lenders to savings and loan associations, which at the time made the majority of home mortgage loans. The Banks were established to ensure the liquidity of these associations, and today lend money to commercial banks, credit unions, and insurance companies in addition to savings and loan associations. The FHLB System includes eleven regional wholesale Banks and an Office of Finance. Each Bank is a separate legal entity, cooperatively owned by its member financial institutions, and has its own management, employees, and board of directors. Each Bank is assigned a distinct geographic area. The FHLB System is a government-sponsored enterprise (GSE). As a GSE, a Bank receives certain privileges, such as an exemption from particular taxes, to assist it in carrying out its mission, and it is also required to engage in required activities to support affordable housing. Each of the Banks is required annually to contribute 10% of its net income toward an Affordable Housing Program (AHP). (The program is codified at 12 U.S.C. §1430. Regulations are at 12 C.F.R. Part 1291.) Through the AHP, the Banks provide grants and subsidized loans for rental and owner-occupied housing for very low- and low-income households. Each Bank may set aside up to the greater of 35% of its AHP funds or $4.5 million per year to help low- and moderate-income households purchase homes by providing grants for down payment or closing cost assistance or other costs related to buying or rehabilitating a home. At least one-third of the amount set aside for homeownership assistance must be used for first-time homebuyers or rehabilitation of owner-occupied housing, with a maximum per-household grant amount that may be adjusted annually to account for changes in home prices. Each of the Banks also operates a Community Investment Program (CIP). (The program is codified at 12 U.S.C. §1430. Regulations are at 12 C.F.R. Part 952.) Through the CIP, the Banks offer advances to member financial institutions at discounted interest rates to fund rental and owner-occupied housing for households at or below 115% of area median income, as well as other community development activities. The Capital Magnet Fund (CMF) was created in the Housing and Economic Recovery Act of 2008 (HERA, P.L. 110-289 ) and is administered by the Department of the Treasury's Community Development Financial Institutions (CDFI) Fund. (The program is codified at 12 U.S.C. §4569.) The CMF provides competitive grant funds to CDFIs or eligible nonprofit organizations to use to finance affordable housing and certain related community development activities. CMF funds can be used for either rental housing or homeownership, but they must primarily benefit low-income households. The CMF is meant to leverage other sources of funding, and eligible activities are supposed to leverage at least 10 times the CMF award amount from other sources. Eligible forms of assistance that grantees can provide with CMF funds include capitalizing loan loss reserves or revolving loan funds and providing risk-sharing loans or loan guarantees, among other things. Like the Housing Trust Fund, described earlier in this report, the CMF is funded through contributions from the government-sponsored enterprises Fannie Mae and Freddie Mac rather than through appropriations. Although the CMF was created in 2008, the first contributions were not transferred to it until 2016 due to concerns about Fannie Mae's and Freddie Mac's financial situations. (For more information on the CMF and CDFIs in general, see CRS Report R42770, Community Development Financial Institutions (CDFI) Fund: Programs and Policy Issues , by Sean Lowry.) Homeownership promotion has generally taken two forms: government assistance in the financing of home purchases, and tax preferences favoring homeowners. One of the largest tax benefits for homeowners is the mortgage interest deduction. It allows homeowners to deduct the interest paid on their mortgage (subject to caps) from their taxable income, thus reducing their tax liability. The deduction benefits those households that own homes, have a mortgage on which they pay interest, have federal income tax liability, and for whom itemized deductions exceed the standard deduction (note that the vast majority of tax filers take the standard deduction). It is not targeted to lower-income households. In FY2018, the Joint Committee on Taxation estimated that the mortgage interest deduction would result in a $33.7 billion tax expenditure. (For more information about the mortgage interest deduction, see CRS Report R41596, The Mortgage Interest and Property Tax Deductions: Analysis and Options , by Mark P. Keightley.) When the federal housing assistance programs began in the 1930s, the nation was considered to be ill-housed. The Housing Act of 1937 identified an \"acute shortage of decent, safe, and sanitary dwellings.\" Thanks in part to stricter building codes and standards, most housing in the United States today is decent, safe, and sanitary. Although some units are still considered substandard, the greatest housing problem today is perceived to be affordability. Housing is considered \"affordable\" if it costs no more than 30% of a household's income. Households that pay half or more of their income toward their housing costs are considered severely cost burdened; households that pay between 30% and 50% are considered moderately cost burdened. According to data from the Census Bureau's American Community Survey, 18.5 million households were severely cost burdened and 19.6 million households were moderately cost burdened in 2016. Public policy is generally most concerned with the housing affordability problems of the lowest-income families, because high housing costs may prevent these families from meeting their other basic needs. The American Community Survey data show that in 2016, 70% of households with annual income below $15,000 were severely cost burdened (compared to 64% in 2001), and 33% of households with annual income between $15,000 and $29,999 were severely cost burdened (compared to 25% in 2001). HUD must report to Congress periodically on the incidence of \"worst case\" housing needs, which are defined as occurring when unassisted renters with very low incomes (at or below 50% of area median income) pay more than half of their income for housing costs or live in severely substandard housing. In a 2017 report, HUD found that roughly 8.3 million renter households (7% of all households) had worst case housing needs in 2015. This represented an increase compared to 2013, when 7.7 million renter households (6.7% of all households) had worst case housing needs; a decrease from 2011, when 8.5 million renter households had worst case needs; and a nearly 41% increase since 2007, when 5.9 million renter households had worst case needs. Prior to 2005, the percentage of households with worst case housing needs had remained relatively steady—roughly 5% of all households—since HUD began reporting on worst case needs in 1991. The vast majority of households with worst case housing needs are severely cost burdened but live in standard housing. For example, in 2015 about 95.6% of households with worst case housing needs experienced cost burdens only. About 1.8% of households had worst case housing needs solely because they lived in substandard housing, while another 2.6% experienced both conditions. Public housing, Section 8 vouchers, and the project-based Section 8 rental assistance programs combined serve roughly 4 million households and can be considered the primary housing assistance programs for low-income families. These three forms of assistance are similar in many ways. They all target assistance to extremely low-income families, require families to pay 30% of their incomes toward rent, and generally have long waiting lists for assistance. However, they vary in terms of their evolution, the structure of their benefit (a portable voucher versus a housing unit), and their administration (PHA versus private owner). The similarities and differences in the programs themselves result in similarities and differences in the characteristics of the households they serve. Table 14 provides household characteristics data for participants in the tenant-based Section 8 voucher program, the public housing program, and the project-based Section 8 rental assistance program. The tenant-based Section 8 voucher program serves more single, female-headed households with children than do the public housing program or project-based programs, although they are not a majority of those served by the program. Based on 2017 HUD data, 40% of voucher households were households with children headed by females, compared to 34% of public housing households and 25% of project-based households. The project-based Section 8 program primarily serves families headed by persons who are elderly or disabled, which account for over three-fourths (81%) of all households served in the program. This is not surprising given that owners of project-based housing may designate entire properties for elderly or disabled households. In addition, units of Section 202 housing for the elderly that were developed during the 1970s and 1980s were subsidized with project-based Section 8 rental assistance. Public housing and the Section 8 voucher program each also have a large majority of households (71% and 61%, respectively) where the head or spouse is elderly or disabled. HUD reports the race and ethnicity of the head of household as non-Hispanic white, non-Hispanic black, Hispanic, non-Hispanic Asian or Pacific Islander, and non-Hispanic Native American. In the Section 8 voucher program and public housing, households headed by non-Hispanic blacks make up the largest share (48% and 43%, respectively). In the project-based Section 8 program, households headed by non-Hispanic whites are the largest share (42%), with households headed by non-Hispanic blacks making up 34% of the total. Between 15% and 21% of households served across the three programs have heads of household who identify their ethnicity as Hispanic, with public housing having the largest share. The rules governing the three main housing assistance programs require that they serve households that are low-income (income at or below 80% of area median income). However, with the targeting required in these programs, many households that are served have very low or extremely low incomes (at or below 50% or 30% of area median income, respectively). As an example, in 2018 the national median income was $71,900, meaning that low income would be considered to be at or below $57,500; very low income, $35,950; and extremely low income, $21,550. The majority of households served in each of the three programs have incomes at or below $14,999. The percentage of households with incomes at or below this level is 63% in the Section 8 voucher program, 65% in public housing, and 70% in project-based Section 8 rental assistance. Beginning in the 1980s, the federal government decreased its role in the creation of assisted housing. This occurred in several ways. Congress ceased funding new construction under the project-based Section 8 program, which from its enactment in 1974 had subsidized hundreds of thousands of units of assisted housing. This left very few active programs in which HUD supported the development of physical housing units. Between 1976 and 1982, the federal housing programs produced more than 1 million units of subsidized housing. In the following years, however, annual production was around 25,000 new subsidized units. Around the time that federal housing production was declining, Congress created two programs—the Treasury Department's Low Income Housing Tax Credit (LIHTC) program and HUD's HOME Investment Partnerships program—that gave a good deal of control over decisions regarding housing policy and development to state and local governments. These programs, particularly the LIHTC, have been used by states and localities to create hundreds of thousands of units of affordable housing. The federal government's decision to take a lesser role in the development of housing has had several consequences. First, state and local governments have taken on an increased role in providing affordable housing and establishing priorities in their communities. Second, due to a reduction in the number of new affordable housing units that are created each year, the need to preserve existing affordable housing units has taken on a new importance. A third consequence is the need for multiple streams of funding other than federal grants in order both to support the creation of new affordable housing units and to preserve existing units. These three consequences are discussed more fully below. First, with the advent of both the LIHTC program and the HOME program, states and localities were able to prioritize and develop housing using a larger and more flexible pool of federal funds. Until that point, states helped finance mortgage loans and affordable rental housing through their Housing Finance Agencies, but the states' roles were limited by the amount of funds available. In the LIHTC program, states develop plans in which they may set aside a certain percentage of tax credits for populations such as homeless individuals or persons with disabilities. They may also decide to use tax credits to preserve existing housing and/or build new housing. Funds that states receive from the HOME program may be used for the construction of new rental housing and rental assistance for low-income households. A potential drawback of these programs is their inability, on their own, broadly to reach the neediest households. For example, in an LIHTC development, at least 20% of units must be affordable to households at or below 50% of area median income, or 40% of units must be affordable to households at or below 60% of area median income. More recently, properties have been allowed to adopt an \"income-averaging\" approach that allows them to serve a mix of higher-income families if they also serve lower-income families, as long as it results in an average of 40% of units being occupied by households with incomes that average 60% or below of area median income. Many of the older HUD programs constructed housing that was affordable to households at or below 30% of area median income—those considered extremely low-income. Often these households cannot afford units in LIHTC properties without rental subsidies, such as Section 8 vouchers. Another way some states and local governments support affordable housing is through establishment of their own housing trust funds. These trust funds use dedicated funding sources such as document recording fees or real estate transfer taxes to create a pool of funds for affordable housing. By using a dedicated source of financing, trust funds may not be as subject to the vicissitudes of state budgets as are other means of funding housing development. States and local communities also support affordable housing through inclusionary zoning. Through this method, housing developers are expected to dedicate a percentage of units they build as affordable housing. In exchange, states or local communities give developers incentives that allow them to expand or speed up the pace of development. Some of the incentives include density bonuses or zoning variances that allow developers to build larger facilities than they would be able to under existing zoning regulations, as well as expedited approval of building permits. A second consequence of the decreased role of the federal government in the production of affordable housing units is the increased pressure to maintain the affordability of existing units. Many HUD subsidized units that were developed in the 1960s and 1970s through programs such as Section 236 and Section 221(d)(3), as well as those units that received project-based Section 8 rental assistance, are no longer available to low-income households. At the time the properties were developed, building owners entered into contracts with HUD in which they agreed to maintain affordability for a certain number of years. The duration of these contracts varied; depending on the federal program, these contracts, or \"use restrictions,\" may last between 15 years (the LIHTC program, although states may adopt longer use restrictions) and 50 years (early Section 202 developments). Over time, these contracts have begun to expire, property owners have chosen to pay off their mortgages early and end the use restrictions, or mortgages have matured and their accompanying use restrictions have ended. When any of these events occur, owners may have the option to charge market-rate rents for the units, potentially making them unaffordable for current tenants. The term used to refer to efforts to maintain the affordability of these housing units is \"affordable housing preservation.\" Congress has attempted to enact laws that would preserve affordable housing units; however, due to the temporary nature of some of the measures, preservation remains a concern. Congress first enacted legislation to help preserve affordable rental housing in 1987. The Emergency Low-Income Housing Preservation Act (ELIHPA), enacted as part of the Housing and Community Development Act of 1987 ( P.L. 100-242 ), was a temporary measure that prevented owners of Section 236 and Section 221(d)(3) properties from prepaying their mortgages unless certain conditions were met, including permission from HUD. In 1990, the Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA), enacted as part of the Cranston-Gonzalez National Affordable Housing Act ( P.L. 101-625 ), continued the ELIHPA conditions required for prepayment, and also offered incentives to owners to maintain affordability. However, six years after LIHPRHA was enacted, Congress reinstated the right of owners to prepay their mortgages without prior HUD permission (see P.L. 104-134 ). Two years later, in FY1998, Congress stopped providing funding to HUD for preservation incentives to owners under LIHPRHA, effectively ending the LIHPRHA program (see H.Rept. 105-175 ). Another effort to preserve affordable housing was enacted as part of the Multifamily Assisted Housing Reform and Accountability Act (MAHRA, P.L. 105-65 ). Through this effort, HUD restructures the debt of building owners while at the same time renegotiating their rental assistance contracts. Unlike ELIHPA and LIHPRHA, MAHRA is still in effect. A third consequence of the decreased federal role in the production of affordable housing is the need for low-income housing developers to bring together multiple funding streams in order to build a development. When the federal government first began to subsidize the production of affordable housing, in many cases the funds appropriated for housing programs were sufficient to construct or rehabilitate the affordable units without the need for funds from the private financial markets. Over the years, however, federal programs that provide grants for the construction of multifamily housing for low-income households have become a smaller portion of the government's housing portfolio. At the same time, the grants themselves have become a smaller portion of the total amount needed to support the development of affordable housing. As a result, it has become necessary for developers to turn to multiple sources of financing, including LIHTCs, tax exempt bonds, and state or local housing trust funds. In addition, it is often necessary for building owners to seek rent subsidies through programs like Section 8 and HOME to make renting to very low- or extremely low-income households feasible. The interactions among these various financing streams can be complex, and putting together a development plan may require the expertise of housing finance professionals. Over time, the number of Section 8 vouchers provided and funded by the federal government has grown, while the number housing units it directly subsidizes—through project-based Section 8 rental assistance and public housing—has declined. This change from project-based assistance to tenant-based assistance is due, in part, to Congress's decision to expand the voucher program by creating new vouchers after new construction in the project-based Section 8 program and public housing program had been halted. Some of these were general purpose vouchers, available to any eligible family, and some were special purpose vouchers, targeted to special populations such as families transitioning from welfare to work and homeless veterans. This shift is also due, in part, to declines in the number of project-based assistance and public housing units. As previously noted in this report, the project-based rental assistance contracts between private landlords and HUD began expiring in the 1980s. When these contracts expire, private property owners can either renew their contracts with HUD (typically on an annual or five-year basis) or leave the program. When property owners leave the program, their tenants typically receive Section 8 vouchers—referred to as tenant protection vouchers. Since the mid-1990s, when public housing units are demolished or sold, PHAs are not required to replace each lost unit with a new public housing unit. Instead, displaced families who are not relocated to other public housing units are provided with tenant-protection vouchers. Also contributing to the decline in public housing units is the Rental Assistance Demonstration (RAD) program, enacted as part of the FY2012 Consolidated Appropriations Act ( P.L. 112-55 ). Through RAD, PHAs may, with HUD's approval, remove their public housing properties from the public housing program and convert the funds they receive through the public housing operating and capital funds to either project-based Section 8 rental assistance or project-based vouchers. As noted earlier, HUD is currently authorized to transition up to nearly half of the current stock of public housing to a form of Section 8 via RAD. The shift from project-based assistance to tenant-based assistance has several implications for families. Vouchers offer portability, which, for some residents of public or other assisted housing, may mean the ability to move out of a troubled community to a community with new opportunities. However, there is debate over whether voucher portability leads to economic or social mobility. Early research on mobility showed promise that families—particularly, low-income black families—that moved from heavily poverty- and minority-concentrated public housing neighborhoods to more economically and racially integrated neighborhoods using vouchers could see improved employment and child outcomes. Subsequent mobility research showed mixed results, although the most recent research has further supported the idea that neighborhood effects can be powerful for young children. There is also some evidence that, for families accustomed to living in public housing, the transition to the private rental market with a voucher can be difficult without counseling and other supports, which may not be provided consistently. Finally, there is evidence that the portability option offered by vouchers is not utilized fully by families to access areas of opportunity. This may be due in part to families' preferences, but it also may be due to structural barriers in the program and/or in local rental markets, such as the maximum value of the voucher relative to rents in opportunity areas and landlord willingness to participate in the program. Since the 1930s, the federal government has engaged in various activities that provide support for homeownership. The specific types of support provided, and the policy rationales for that support, have evolved over the decades. Currently, the federal government provides support for homeownership through a variety of programs and activities, many of which are described in this report. Some of these programs and activities benefit a broad range of homebuyers (e.g., the favorable tax treatment of homeownership, secondary market institutions that support the mortgage market) while others focus specifically on homebuyers who face certain barriers to homeownership (e.g., federal mortgage insurance and guaranty programs, grant programs that can be used for down payment or closing cost assistance). While not all of these existing programs and initiatives were established specifically with the intention of promoting homeownership, many policymakers have come to view the programs and activities as important for helping households access affordable financing to purchase a home. In recent decades, federal efforts related to homeownership have also included a focus on reducing disparities in homeownership rates. Homeownership rates vary based on a number of demographic and geographic factors, but large and long-standing gaps in homeownership rates by race and ethnicity have been a particular area of concern, in part out of recognition of federal policies that explicitly contributed to these disparities. Many Presidents in recent decades have expressed support for the concept of specifically increasing homeownership rates, particularly among minority groups who have traditionally been less likely to be homeowners. Generally, these proposals involved little new federal funding, but sought to rally the private sector to use existing programs to reach some specified target. The severe downturn in U.S. housing and mortgage markets that began around 2007 resulted in increased mortgage foreclosure rates and steep declines in home equity in many parts of the country. It also led to a pronounced drop in the overall homeownership rate and further widened the gap in homeownership rates between white and black householders, in particular. As of 2017, the Census Bureau reported a homeownership rate of 63.9%, down from a peak of 69% in 2004. The homeownership rate for non-Hispanic white householders (72.3%) is 30 percentage points higher than it is for black householders (42.3%). (In comparison, in 2001 the homeownership rate for non-Hispanic white householders was about 27 percentage points higher than it was for black householders: 74.3% compared to 47.7%.) Hispanics, who can be of any race, had a homeownership rate of 46.2% in 2017, about 26 percentage points lower than the rate for non-Hispanic white households. The housing market turmoil and its aftermath have raised a variety of questions about the appropriate role of the federal government in supporting homeownership going forward, including how best to balance the perceived benefits of homeownership with its possible risks. Many policymakers believe that federal policy should continue to support activities that help provide access to homeownership, especially for creditworthy households who may otherwise have difficulty becoming homeowners. However, recent experience has reduced the focus on specifically attempting to increase homeownership rates to a particular target and underscored the importance of ensuring that homeownership is not just attainable, but also sustainable over the long term. The following tables present data on federal spending (outlays) on selected housing assistance programs as well as data on the number of rent-assisted units, since 1980. Table 15 presents spending, or outlays, for selected housing assistance programs, in both real and nominal dollars. This table does not include any spending information related to loan commitments or obligations, nor does it include tax expenditures or expenditures from non-appropriated sources (such as the National Housing Trust Fund). As can be seen in Table 15 , outlays for the selected programs have increased, in both real and nominal dollars (a 449% increase in nominal dollars, a 108% increase in real dollars), over the more than three decades presented. Table 16 and Figure 1 present the total number of units eligible for payment /households served under selected rental assistance programs from FY1980 to FY2016. The rental assistance programs reflected in these data are a subset of a group of housing assistance programs for which spending data are presented in Table 15 . As shown, units/households in the rental assistance programs has grown by 66% over the more than three decades presented. Most of that growth happened in the 1980s and early 1990s. Since the early 1990s, the number of units eligible for payment has gone up and down from year to year, with an overall decline in units from FY2001 to FY2009. HUD stopped publishing \"units eligible for payment\" data after FY2009. Beginning with FY2010, the data shown reflect HUD's report of the number of households served by various HUD programs, taken from their annual performance reports. Between FY2010 and FY2016, there was some modest and uneven growth in the number of assisted households, with increases in vouchers offsetting decreases in other forms of assistance. Table 16 also helps to illustrate the trend away from public housing and other housing assistance toward rental assistance (e.g., Section 8 vouchers) discussed earlier in this report. The number of units assisted under the other housing assistance programs has been on the decline since the Nixon moratorium in the 1970s. For many of those units, once the family leaves the program, it receives a voucher. In the case of public housing, the number of units continued to increase until the mid-1990s, as contracted units became available. Since the mid-1990s, through the HOPE VI program and other authority, PHAs have been demolishing and disposing of many of their public housing developments. Some replacement public housing units have been built in their place, but many of the units were replaced with Section 8 vouchers.", "summary": "The federal government has been involved in providing housing assistance to lower-income households since the 1930s. In the beginning, the federal government played a role in supporting the mortgage market (through establishment of the Federal Housing Administration [FHA] and the government-sponsored enterprises) and in promoting construction of low-rent public housing for lower-income families through local public housing authorities (PHAs). Over time, the federal government has shifted away from providing construction-based subsidies toward providing rental subsidies, and private developers and property owners have been playing a larger role. Today's federal housing assistance programs fall into three main categories: rental housing assistance, assistance to state and local governments, and assistance for homeowners. Most of these programs are administered by the Department of Housing and Urban Development (HUD). Current housing assistance programs include Section 8 vouchers and project-based rental assistance, public housing, housing for the elderly (Section 202), housing for persons with disabilities (Section 811), rural rental assistance (the United States Department of Agriculture's Section 521 program), Community Development Block Grants (CDBG), HOME Investment Partnerships Block Grants, Low-Income Housing Tax Credits (LIHTC), homeless assistance programs, Federal Housing Authority (FHA) and Department of Veterans Affairs mortgage insurance, and the mortgage interest deduction in the tax code. Most federal housing assistance programs are aimed at making housing affordable for low-income families. Affordability—defined as housing that costs no more than 30% of a family's income—is considered to be the largest housing problem today. Rental assistance programs, which are the largest source of direct housing assistance for low-income families, all allow families to pay affordable, income-based rents; however, different forms of assistance target different types of households, including the elderly, persons with disabilities, and families with children. Several trends in federal housing policy have emerged in recent decades. As the focus of federal housing assistance has shifted away from construction-based subsidies to rental assistance, block grants, and LIHTC, state and local governments have had greater access to federal resources to fund local housing and community development priorities. This shift in federal funding has also led affordable housing developers to pursue mixed financing: the use of multiple streams of federal, state, and local funding, or private financing. In the past, lagging homeownership rates among low-income and minority households have prompted several Presidents to promote homeownership-based housing policies. However, given the severe downturn in U.S. housing markets that began in 2007 and the resulting high foreclosure rate, it is unclear to what degree federal policy will continue to focus on increasing access to homeownership.", "document_type": "crs"}
{"report": "The Clean Water Act (CWA) authorizes the principal federal program to aid municipal wastewater treatment plant construction and related eligible activities. Congress established this program in the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500) (although prior versions of the act had authorized less ambitious grants assistance since 1956). Title II of P.L. 92-500 authorized grants to states for wastewater treatment plant construction under a program administered by the Environmental Protection Agency (EPA). Federal funds were provided through annual appropriations under a state-by-state allocation formula contained in the act itself. States used their allotments to make grants to cities to build or upgrade wastewater treatment plants, supporting the overall objectives of the act: restoring and maintaining the chemical, physical, and biological integrity of the nation's waters. The federal share of project costs, originally 75% under P.L. 92-500, was reduced to 55% in 1981. By the mid-1980s, there was considerable policy debate between Congress and the Administration over the future of the act's construction grants program and, in particular, the appropriate federal role in funding municipal water infrastructure projects. Through FY1984, Congress had appropriated nearly $41 billion under this program, representing the largest nonmilitary public works programs since the Interstate Highway System. The grants program was a target of budget cuts in the Reagan Administration, which sought to redirect budgetary priorities in part to sort out the appropriate roles of federal, state, and local governments in a number of domestic policy areas, including water pollution control. The Administration's rationale included several points: The original intent of the program to address the backlog of sewage treatment needs had been virtually eliminated by the mid-1980s. Most remaining projects (such as small, rural systems) were believed to pose little environmental threat and were not appropriate federal responsibilities. State and local governments, in the Administration's view, were fully capable of running construction programs and have a clear responsibility to construct treatment capacity to meet environmental objectives that were primarily established by states. Thus, the Reagan Administration sought a phaseout of the act's construction grants program by 1990. Many states and localities supported the idea of phasing out the grants program, since many were critical of what they viewed as burdensome rules and regulations that accompanied the federal grant money. However, they sought a longer transition and ample flexibility to set up long-term financing to promote state and local self-sufficiency. Congress's response to this debate was contained in 1987 amendments to the act ( P.L. 100-4 , the Water Quality Act of 1987). It authorized $18 billion over nine years for sewage treatment plant construction, through a combination of the Title II grants program and a new State Water Pollution Control Revolving Funds program—hereinafter the clean water state revolving fund (CWSRF) program. Under the new program, in CWA Title VI, federal grants would be provided as seed money for state-administered loans to build sewage treatment plants and, eventually, other water quality projects. Cities, in turn, would repay loans to the state, enabling a phaseout of federal involvement while the state built up a source of capital for future investments. Under the amendments, the CWSRF program was phased in beginning in FY1989 (in FY1989 and FY1990, appropriations were split equally between Title II and Title VI grants) and entirely replaced the previous Title II program in FY1991. The intention was that states would have flexibility to set priorities and administer funding, while federal aid would end after FY1994. The CWSRF authorizations for appropriations provided in the 1987 amendments expired in FY1994, but pressure to extend federal funding has continued, in part because, although Congress has appropriated $98 billion in CWA Title II and Title VI wastewater infrastructure assistance since 1972, funding needs remain high: According to the most recent formal estimate by EPA and states (prepared in 2016), an additional $271 billion nationwide is needed over the next 20 years for all types of projects eligible for funding under the act. Congress has continued to appropriate funds, and continued to assist states and localities in meeting wastewater infrastructure needs and complying with CWA requirements. In 1996, Congress established a parallel program under the Safe Drinking Water Act (SDWA) to help communities finance projects needed to comply with federal drinking water regulations. Funding support for drinking water occurred for several reasons. First, until the 1980s, the number of drinking water regulations was fairly small, and public water systems often did not need to make large investments in treatment technologies to meet those regulations. Second, good quality drinking water traditionally has been available to many communities at relatively low cost. By comparison, essentially all communities have had to construct or upgrade sewage treatment facilities to meet the requirements of the CWA. Over time, drinking water circumstances changed, as communities grew, and commercial, industrial, agricultural, and residential land-uses became more concentrated, thus resulting in more contaminants reaching drinking water sources. Moreover, as the number of federal drinking water standards has increased, many communities have found that their water may not be as good as once thought and that additional treatment technologies are required to meet the new standards and protect public health. Between 1986 and 1996, for example, the number of regulated drinking water contaminants grew from 23 to 83, and EPA and the states expressed concern that many of the nation's 52,000 small community water systems were likely to lack the financial capacity to meet the rising costs of SDWA compliance. According to the most recent EPA-state survey (issued in 2018), future funding needs for projects to treat and deliver public drinking water supplies in the United States are $473 billion over the next 20 years. Congress responded to these concerns by enacting the 1996 SDWA Amendments ( P.L. 104-182 ), which authorized a drinking water state revolving loan fund (DWSRF) program to help systems finance projects needed to comply with SDWA regulations and to protect public health. This program, fashioned after the CWSRF program, authorizes EPA to make grants to states to capitalize DWSRFs which states then use to make loans to public water systems. Appropriations for the program were authorized at $599 million for FY1994 and $1 billion annually for FY1995 through FY2003. Capitalization grants for DWSRF programs were provided for the first time in FY1997. Although the authorizations for appropriations expired in FY2003, Congress continued to provide funding for the program in annual appropriations, totaling $23 billion through FY2019. America's Water Infrastructure Act of 2018 (AWIA; P.L. 115-270 ), enacted on October 23, 2018, reauthorized appropriations for the DWSRF at $1.17 billion in FY2019, $1.30 billion in FY2020, and $1.95 billion in FY2021. The first section of this report includes a table that summarizes the history of appropriations for both wastewater and drinking water infrastructure programs. The next section discusses several historical developments in water infrastructure funding. The last section contains a detailed chronology of congressional activity regarding wastewater and drinking water infrastructure funding for each fiscal year since the 1987 CWA amendments. Table 1 summarizes funding for the wastewater and drinking infrastructure programs since enactment of the 1987 CWA amendments ( P.L. 100-4 ). Funding for these EPA programs is contained in the appropriations act providing funds for the Department of the Interior, Environment, and Related Agencies. Within the portion of the bill that funds EPA, wastewater treatment assistance was first specified in an account called Construction Grants, which was subsequently renamed State Revolving Funds/Construction Grants, and then renamed Water Infrastructure. Since FY1996, this account has been titled State and Tribal Assistance Grants (STAG). The STAG account now includes all water infrastructure funds and management grants provided to assist states in implementing air quality, water quality, and other media-specific environmental programs. The FY1996 appropriation was the first to include both water infrastructure and other state environmental grants; the latter previously were included in EPA's general program management account. Amounts shown in Table 1 include funds for CWA Title II grants, CWSRF grants, drinking water SRF grants, special project grants (discussed below), and the Water Infrastructure Finance and Innovation Act (WIFIA) program. Congress first provided appropriations to cover the subsidy costs of this program in FY2017, as discussed in the detailed chronology section below. Table 1 does not include funds for consolidated state environmental management grants. These grants include funding for a wide range of environmental programs, which have changed over time. In recent years, the categorical grants have included funding for water, air, and waste programs. The categorical grant programs most closely related to water infrastructure issues include grants for states' nonpoint source management programs (CWA Section 319) and states' pollution control programs (CWA Section 106). Funding levels for the environmental management state grants are discussed below in the appropriations chronology section. As an additional comparison, Figure 1 illustrates the total EPA water infrastructure appropriations (for clean water and drinking water assistance combined) between FY1986 and FY2019 in both nominal dollars (i.e., not adjusted for inflation) and constant (2018) dollars (i.e., adjusted for inflation). This section discusses several historical developments of note regarding appropriations for EPA's water infrastructure programs. The practice of earmarking a portion of the construction grants/SRF account for specific wastewater treatment and other water quality projects began with the FY1989 appropriations. The practice increased to the point of representing a significant portion of appropriated funds (31% of the total water infrastructure appropriation in FY1994, for example, but less in subsequent years: 2.5% in FY2009 and 5% in FY2010). The number of projects receiving these earmarked funds also increased: from 4 in FY1989 to 319 in FY2010. Beginning in FY2000, the larger total number of earmarked projects resulted in more communities receiving such grants, but at the same time receiving smaller amounts of funds. Thus, while a few communities received individual earmarked awards of $1 million or more, the average size of earmarked grants shrank: $18.1 million in FY1995, $4.9 million in FY1999, $1.08 million in FY2006, and $586,000 in FY2010. (Conference reports on the individual appropriations bills, noted in the later discussion in this report, provide some detail on projects funded in this manner.) The effective result of earmarking was to reduce the amount of funds provided to states to capitalize their SRF programs. Between FY1989 and FY2010, approximately 10% of the total water infrastructure appropriations ($7.4 billion) went to earmarked project grants. Interest groups representing state water quality program managers and administrators of infrastructure financing programs criticized the practice of earmarked appropriations. They contended that earmarking undermined the intended purpose of the state funds—promoting water quality improvements nationwide. Many state officials preferred funds to be allocated more equitably, not based on what they viewed largely as political considerations, and they preferred for state environmental and financing officials to retain responsibility to set actual spending priorities. Further, they argued that the special projects funding would diminish the level of seed funding to SRFs, delaying the time when SRFs would be financially self-sufficient. The practice of earmarking was criticized because designated projects were arguably receiving more favorable treatment than other communities' projects: They were generally eligible for 55% federal grants (and were not required to repay 100% of the funded project cost, as is the case with a loan through an SRF), and the practice circumvented the standard process of states determining the priority by which projects will receive funding. It also meant that the projects were generally not reviewed by the CWA authorizing committees. This was especially true after FY1992, when special purpose grant funding was designated for types of projects not authorized in the Clean Water Act or the Safe Drinking Water Act. Members of Congress intervened for a specific community for a number of reasons. In some cases, the communities may have been unsuccessful in seeking state approval to fund the project under an SRF loan or other program. For some, the cost of a project financed through a state loan was deemed unacceptably high, because repaying the loan would result in increased user fees that ratepayers felt would have been unduly burdensome. In the early years of this congressional practice, special purpose grant funding originated in the House version of the EPA appropriations bill, while the Senate, for the most part, resisted earmarking by rejecting or reducing amounts and projects included in House-passed legislation. Therefore, special purpose grant funding on several occasions was an issue during the House-Senate conference on the appropriations bill. Beginning in FY1999, however, both the House and Senate proposed earmarked projects in their respective versions of the EPA appropriations bill, with the final total number of projects and dollar amounts determined by conferees. The Clean Water Act Title II grants program effectively ended when authorizations for it expired after FY1990. One result of earmarking special purpose grants in appropriations bills was to continue grants as a method of funding wastewater treatment construction long after FY1990. This practice led Congress to provide EPA grants for drinking water system projects, which had not previously been available. However, as discussed in the next section, general opposition to congressional earmarking stopped the practice after FY2011. The federal percentage share and local match required on special purpose grants varied depending on the project and the year of funding. For example, in the early projects (FY1989), the 1987 CWA amendments specified the federal cost shares, which ranged from 75% to 85%. In FY1992 and FY1993, the appropriations acts specified that funds were provided \"as grants under title II,\" resulting in a requirement for local communities to provide a 45% share of project costs. After FY1993, the appropriations acts themselves were the authority for the special purpose projects grants. In the FY1995 appropriation bill, which also directed allocation of funds appropriated in FY1994 to several needy cities, Congress addressed the issue of federal and local cost shares in report language accompanying the bill, but not in the appropriation act itself. The conferees are in agreement that the agency should work with the grant recipients on appropriate cost-share arrangements. It is the conferees' expectation that the agency will apply the 45% local cost share requirement under Title II of the Clean Water Act in most cases. In the FY1996 appropriations, both the act and accompanying reports were silent on federal/local cost share and applicability of Title II requirements. Because of that, EPA officials planned to require only a 5% local match for most of the special purpose grants in that bill, which is the standard matching requirement for other EPA noninfrastructure grants. Under the agency's rules, the local match could include in-kind services, as well as funding toward the project. In the FY1997 appropriations, Congress included report language as it had in FY1995 concerning federal and local cost share requirements. The conferees are in agreement that the Agency should work with the grant recipients on appropriate cost-share agreements and to that end the conferees direct the Agency to develop a standard cost-share consistent with fiscal year 1995. The FY1998 and FY1999 appropriations included neither bill nor report language on this point. However, language in the House and Senate Appropriations Committees' reports on the FY1998 and FY1999 bills directed EPA to work with grant recipients on appropriate cost-share arrangements. For FY2000, Congress included explicit report language concerning the local match. The conferees agree that the $331,650,000 provided to communities or other entities for construction of water and wastewater treatment facilities and for groundwater protection infrastructure shall be accompanied by a cost-share requirement whereby 45 percent of a project's cost is to be the responsibility of the community or entity consistent with long-standing guidelines for the Agency. These guidelines also offer flexibility in the application of the cost-share requirement for those few circumstances when meeting the 45 percent requirement is not possible. Similar report language concerning local cost-share requirements accompanied the conference reports on the appropriations bills from FY2001 through FY2005. Beginning with FY2004, Congress specified in the appropriations legislation that the local share of project costs shall be not less than 45%. Similarly, beginning with the FY2003 appropriations legislation, Congress also specified that, except for those limited instances in which an applicant meets the criteria for a waiver of the cost-share requirement, the earmarked grant shall provide no more than 55% of an individual project's cost, regardless of the amount appropriated. The practice of earmarking special project water infrastructure grants continued to change. First, in FY2007, Congress applied a one-year moratorium on earmarks in all appropriations bills. For the next three years, special project grants were allowed in appropriations bills—including EPA's—but again in FY2011, no special project funding was provided for congressional projects. Following the 2010 midterm election and during subsequent months while FY2011 appropriations were under consideration (discussed below), the general issue of congressional earmarks of specific projects had become highly controversial because of the overall growing number of them, concern over the influence of special interests on spending decisions, and lack of congressional oversight. In response, President Obama said he would veto any legislation containing earmarks, the House extended the ban on earmarks under the Republican Conferences rules, and the chairman of the Senate Appropriations Committee announced a moratorium on earmarks for FY2011 and FY2012. Thus, the FY2011 full-year appropriations measure contained no congressionally directed special project funds for water infrastructure projects in the EPA STAG account. However, it did include funds requested by the President: $10 million for Alaska Native Villages and $10 million for U.S.-Mexico border projects. The FY2012 full-year appropriations measure also contained no special project funding in the EPA STAG account. The FY2012 bill did include funds for Alaska Native and Rural Villages ($10 million) and for U.S.-Mexico border projects ($5 million). The moratorium on congressional earmarks has continued. The FY2013 full-year appropriations measure ( P.L. 113-6 ) contained no special project funding in the STAG account. As with other recent bills, however, it did include funds for Alaska Native and Rural Villages ($9.5 million) and for U.S.-Mexico border projects ($4.7 million). Similarly, the moratorium on earmarks continued in FY2014 and FY2015; P.L. 113-76 contained no special project funding in the STAG account for FY2014, but did include funds for Alaska Native and Rural Villages ($10 million) and for U.S.-Mexico border projects ($5 million). The FY2015 funding bill, P.L. 113-235 , was the same as FY2014. The FY2016, FY2017, and FY2018 appropriations acts ( P.L. 114-113 , P.L. 115-31 , and P.L. 115-141 , respectively) included $20 million for Alaska Native and Rural Villages and $10 million for U.S.-Mexico border projects. The FY2019 appropriations act provided $25 million for Alaska Native and Rural Villages and $15 million for U.S.-Mexico border projects. President Trump's FY2020 budget request proposes to eliminate funding for the U.S.-Mexico border program and decrease funding for the Alaska Native and Rural Villages to $3 million. Although the CWSRF and DWSRF have largely functioned as loan programs, both allow the implementing state agency to provide \"additional subsidization\" under certain conditions. Since its amendments in 1996, the SDWA has authorized states to use up to 30% of their DWSRF capitalization grants to provide additional assistance, such as forgiveness of loan principal or negative interest rate loans, to help disadvantaged communities (as determined by the state). In 2018, AWIA increased that percentage to 35% and conditionally required states to provide at least 6% of their annual grants as additional subsidization. Congress amended the CWA in 2014, adding similar provisions to the CWSRF program. In addition, appropriations acts in recent years have required states to use minimum percentages of their allotted funds to provide additional subsidization. This trend began with the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), which required states to use at least 50% of their funds to \"provide additional subsidization to eligible recipients in the form of forgiveness of principal, negative interest loans or grants or any combination of these.\" Subsequent appropriation acts have included similar conditions, with varying percentages of subsidization. The FY2016, FY2017, FY2018, and FY2019 appropriations acts included an identical condition, requiring 10% of the CWSRF grants and 20% of the DWSRF grants to be used \"to provide additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest loans, or grants (or any combination of these).\" The 1987 CWA amendments authorized federal grants to assist states in implementing programs to manage water pollution from nonpoint sources such as farm and urban areas, construction, forestry, and mining sites. Because of competing demands for funding, it was difficult for Congress to fund this grant program and other water quality initiatives in the 1987 act. Appropriators did fund Section 319 grants in EPA's general program management account (abatement, control, and compliance) in FY1990, FY1991, and FY1992 but well below authorized levels. In the FY1993 act, appropriators moved funding into the SRF/construction grants account, thereby providing a degree of protection from competing priorities. In FY1996, Congress included all state grants for management of environmental programs in a single consolidated grants appropriation. In doing so, Congress endorsed a Clinton Administration proposal for a more flexible approach to state grants, a key element of EPA's efforts to improve the federal-state partnership in environmental programs. In more recent years, Congress has provided specific funding amounts for certain programs within the categorical grants appropriation. This section summarizes, in chronological order, congressional activity to fund items in the STAG account since the 1987 CWA amendments. The authorization period covered by P.L. 100-4 was FY1986-FY1994. By the time the amendments were enacted, FY1986 was over, as was a portion of FY1987. Thus, appropriations for those two years only indirectly reflected the policy and program changes for later years that were contained in P.L. 100-4 . For FY1986, Congress appropriated a total of $1.8 billion, consisting of $600 million approved in December 1985 (while Congress was beginning to debate reauthorization legislation that eventually was enacted as P.L. 100-4 in January 1987) and $1.2 billion more in July 1986. For FY1987, while debate on CWA reauthorization continued, President Reagan requested $2.0 billion, consistent with his legislative proposal to terminate the grants program by FY1990. In October 1986, Congress appropriated $2.4 billion ( P.L. 99-500 / P.L. 99-591 ). However, only $1.2 billion of that amount was released immediately, pending enactment of a reauthorization bill, which was then in conference. Following enactment of the Water Quality Act of 1987, remaining FY1987 funds were released as part of a supplemental appropriations bill ( P.L. 100-71 ). Conferees on that measure agreed, however, to shift $39 million of the remaining unreleased grant funds to other priority water quality activities authorized in P.L. 100-4 . The final total of construction grant monies was $2.361 billion. For FY1988 the President again requested $2.0 billion. In December 1987, Congress approved legislation providing FY1988 appropriations ( P.L. 100-202 , the omnibus continuing resolution to fund EPA and other federal agencies). In it, Congress appropriated $2.304 billion for construction grants. Final action on the EPA budget and other funding bills had been delayed by budget-cutting talks between Congress and the White House. Reduced construction grants funding was one of many spending cuts required to implement a congressional-White House \"summit agreement\" on the budget. The final construction grants appropriation was less than funding levels that had been included in separate versions of a bill passed by the House and Senate before the budget summit, $2.4 billion. For FY1989, President Reagan requested $1.5 billion, or 35% below FY1988 appropriations and 37.5% less than the authorized level of $2.4 billion for FY1989. In separate versions of an EPA appropriations bill, the House and Senate voted to provide $1.95 billion and $2.1 billion respectively. The final figure, in P.L. 100-404 , was $1.95 billion, which included $68 million for special projects in four states. Thus, the actual amount provided for grants was $1.882 billion. That total was divided equally between the previous Title II grants program and new Title VI SRF program, as provided in the authorizing language of P.L. 100-4 . The FY1989 legislation was the first to include earmarking of funds for specified projects or grants in EPA's construction grants account, an action that continued in subsequent years, as discussed above. All of the projects funded in the 1989 legislation were ones that had been authorized in provisions of the Water Quality Act of 1987 (WQA, P.L. 100-4 ). The designated projects were in Boston (authorized in Section 513 of the WQA, to fund the Boston Harbor wastewater treatment project), San Diego/Tijuana (Section 510, to fund an international sewage treatment project needed because of the flow of raw sewage from Tijuana, Mexico, across the border), Des Moines, IA (Section 515, for sewage treatment plant construction), and Oakwood Beach/Redhook, NY (Section 512 of the WQA, to relocate natural gas distribution facilities that were near wastewater treatment works in New York City). For FY1990, President Reagan's budget requested $1.2 billion in wastewater treatment assistance, or 50% less than the authorized level and 38.5% less than the FY1989 enacted amount of $1.95 billion. Further, the Reagan budget proposed that the $1.2 billion consist of $800 million in Title VI monies and $400 million in Title II grants, contrary to provisions of the CWA directing that appropriations be equally divided between the two grant programs, as in FY1989. President Bush's revised FY1990 budget, presented in March 1989, made no changes from the Reagan budget in this area. In acting on this request, Congress agreed to provide $2.05 billion, including $46 million for three special projects (Boston, San Diego/Tijuana, and Des Moines), leaving a total of $1.002 billion each for Titles II and VI ( P.L. 101-144 ). Title II funds were reduced by $6.8 million, however, due to funds earmarked for a specific project in South Carolina. Although these amounts were appropriated, all funds in the bill were reduced by 1.55% (or, a $31.8 million reduction from the construction grants account) to provide funds for the federal government's antidrug program. Final FY1990 appropriations were altered again by passage of the FY1990 Budget Reconciliation measure and implementation of the Balanced Budget and Emergency Deficit Control Act (the Gramm-Rudman-Hollings Act), which established procedures to reduce budget deficits annually, resulting in a zero deficit by 1993. For each fiscal year that the deficit was estimated to exceed maximum targets established in law, an automatic spending reduction procedure was triggered to eliminate deficits in excess of the targets through \"sequestration,\" or permanent cancellation of budgetary resources. Thus, to meet budget reduction mandates and, in particular, deficit reduction targets under the Balanced Budget and Emergency Deficit Control Act (the Gramm-Rudman-Hollings Act), additional funding cuts were included in P.L. 101-239 , the Budget Reconciliation Act of 1989, affecting construction grants funding and all other accounts not exempted from Gramm-Rudman procedures. P.L. 101-239 provided that the \"sequestration\" procedures under the Gramm-Rudman-Hollings Act would be allowed to apply for a portion of FY1990 (for 130 days, or 35.6% of the year), providing an additional automatic spending reduction in EPA and other agencies' programs subject to the act. As a result of these reductions, funding for wastewater treatment aid in FY1990 totaled $1.98 billion, or $30 million more than in FY1989. The total included $53 million for special projects in San Diego, Boston, Des Moines, and Honea Path/Ware Shoals, SC, $960 million for Title II grants, and $967 million for Title VI grants. The combined reductions amounted to 3.4% less than the amount agreed to by conferees on P.L. 101-144 (i.e., $2.05 billion), before subtracting funds for antidrug programs and accounting for effects of the Gramm-Rudman partial-year sequester. For FY1991, President Bush requested $1.6 billion in funding for wastewater treatment assistance. This total included $15.4 million for the San Diego project authorized in Section 510 of the Water Quality Act of 1987, to fund construction of an international sewage treatment project. The remainder, $1.584 billion, would be only for capitalization grants under Title VI of the act, as the 1987 legislation provides for no new Title II grants after FY1990. In acting on EPA's appropriations for FY1991 ( P.L. 101-507 ), Congress agreed to provide $2.1 billion in wastewater treatment assistance. Beginning in FY1991, all appropriated funds are utilized for capitalization grants under Title VI of the act (as provided in the Water Quality Act of 1987); funding for the traditional Title II grants program was no longer available. The enacted level included several earmarkings: $15.7 million for San Diego (Section 510 of the WQA), $20 million for Boston Harbor (Section 513 of the WQA), and $16.5 million for a new Water Quality Cooperative Agreement Program under Section 104(b)(3) of the act. The President's budget had requested $16.5 million to support state permitting, enforcement, and water quality management activities, especially to offset the reductions in aid to states due to elimination of state management setasides from the previous Title II construction grants program. Congress agreed to the level requested, but provided it as a portion of the wastewater treatment appropriation, rather than as part of EPA's general program management appropriation, as in the President's request. As a result of these earmarkings, $2.048 billion was provided for Title VI grants. For FY1992, President Bush requested $1.9 billion in wastewater treatment funds, or $100 million more than authorized under the Water Quality Act of 1987 for Title VI grants in FY1992. However, out of the $1.9 billion total, the President's request sought $1.5 billion for Title VI SRF grants and $400 million as grants under the expired Title II construction grants program for the following coastal cities: Boston, San Diego, New York, Los Angeles, and Seattle. Two of the five designated projects had been authorized in the 1987 CWA amendments; the other three did not have explicit statutory authorization. Also, $16.5 million was requested for Water Quality Cooperative Agreement grants to the states. In acting on the request in November 1991, Congress provided total wastewater funds of $2.4 billion ( P.L. 102-139 ). The total was allocated as follows: $1,948.5 million for SRF capitalization grants, $16.5 million for Section 104(b)(3) grants, $49 million for the special project in San Diego-Tijuana (Section 510 of the Water Quality Act), $46 million to the Rouge River (MI) National Wet Weather Demonstration Project, and $340 million as construction grants under title II of the Clean Water Act for several other special projects—the Back River Wastewater Treatment Plant (Baltimore), Maryland, the Boston Harbor project, New York City, Los Angeles, San Diego (a wastewater reclamation project), and Seattle. This appropriation bill was the first to include special purpose grant funding for several projects not specifically authorized in the Clean Water Act or amendments to that law. For FY1993, President Bush requested $2.484 billion for state revolving funds/construction grants (now called the water infrastructure account). The requested total included $340 million to be targeted for 55% construction grants to six communities: Boston, New York, Los Angeles, San Diego, Seattle, and Baltimore. In addition, the President requested that $130 million be directed toward a Mexican Border Initiative, consisting of $65 million for construction of the international treatment plant at San Diego (to address the Tijuana sewage problem), $15 million for projects at Nogales, AZ, and New River, CA, and $50 million as 50% grants for colonias in Texas. The President also requested $16.5 million for Section 104(b)(3) grants. Along with these special project and grant amounts, the request sought $2.014 billion for SRF assistance. Final action on FY1993 funding occurred on September 25, 1992 ( P.L. 102-389 ). It provided an appropriation of $2.55 billion, but $622.5 million of this amount was reserved for special projects and other grants. The bill provided $50 million in CWA Section 319 grants and $16.5 million in Section 104(b)(3) grants out of the SRF amount. It included $556 million for the following special purpose grants: the international treatment plant at San Diego (Tijuana—Section 510 of the WQA, with bill language capping funding for that project at $239.4 million), plus projects in Boston; New York; Los Angeles; San Diego; Seattle; Rouge River, MI; Baltimore; Ocean County, NJ; Atlanta; and for colonias in Texas, Arizona, and New Mexico. The final SRF grant amount under the bill was $1.928 billion. Early in 1993, President Clinton requested that Congress approve \"economic stimulus and investment\" spending, in the form of supplemental FY1993 appropriations. Both his original proposal and a subsequent modified proposal included additional SRF grant funds, but neither of the bills enacted by Congress in response to these requests ( P.L. 103-24 , P.L. 103-50 ) provided additional SRF funds. For FY1994, the Clinton Administration requested $2.047 billion for water infrastructure. The funds in this request were $1.198 billion to capitalize State Revolving Funds, $150 million for Mexican border project grants, and $100 million for a single hardship community (Boston). The request also included $599 million to capitalize new state drinking water revolving funds. The final version of the FY1994 legislation ( P.L. 103-124 ) provided $2.477 billion for water infrastructure/state revolving funds. Of this total amount, $599 million was to be reserved for drinking water SRFs, if authorization legislation were enacted; $80 million was for Section 319 grants; $22 million was for Section 104(b)(3) grants; and $58 million was for Tijuana/San Diego—Section 510 of the WQA. This resulted in an appropriation of $1.718 billion for clean water SRFs. In addition, the final bill provided that $500 million be used to support water infrastructure financing in economically distressed/hardship communities. Under the bill, these funds were not available for spending until May 31, 1994, and were set aside until projects were authorized in the CWA for this purpose. Thus, the bill as enacted provided $1.218 billion immediately for clean water SRFs, with the expectation that $500 million more would be available for financing hardship community projects after May 31, 1994. For FY1995, President Clinton requested $2.65 billion for water infrastructure consisting of $1.6 billion for CWA SRFs, $100 million for Section 319 nonpoint source management grants to states, $52.5 million for a grant to San Diego for a wastewater project pursuant to Section 510 of the WQA, $47.5 million for other Mexican border projects, $50 million to the state of Texas for colonias projects, and $100 million for grants under Title II for needy cities (intended for Boston). The request included $700 million for drinking water SRFs, pending enactment of authorizing legislation. The President's budget also requested $21.5 million for Section 104(b)(3) grants/cooperative agreements. Final agreement on FY1995 funding was contained in P.L. 103-327 , enacted in September 1994, which provided a total of $2.962 billion for water infrastructure financing. Of the total, $22.5 million was for grants under Section 104(b), $100 million for Section 319 grants, $70 million for Public Water System Supervision program grants (grants to states under the Safe Drinking Water Act to support state implementation of delegated drinking water programs), $52.5 million for the Section 510 project in San Diego, and $700 million for drinking water SRFs (contingent upon enactment of authorization legislation). The remaining $2.017 billion was for CWA projects. Of this amount, $1.235 billion was for clean water SRF grants to states under Title VI of the CWA. The remaining $781.8 million (39% of this amount, 26% of the total appropriation) was designated for 45 specific, named projects in 22 states. The earmarked amounts ranged in size from $200,000 for Southern Fulton County, PA, to $100 million for the city of Boston. Finally, the conferees included bill language concerning release of the $500 million in FY1994 needy cities money (because the authorizing committees of Congress had not acted on legislation to authorize specific projects, as had been intended in P.L. 103-124 ) as follows: $150 million to Boston, $50 million for colonias in Texas, $10 million for colonias in New Mexico, $70 million for a New York City wastewater reclamation facility, $85 million for the Rouge River project, $50 million for the city of Los Angeles, $50 million for the county of Los Angeles, and $35 million for Seattle, WA. In February 1995, President Clinton submitted the Administration's budget request for FY1996. It requested $2.365 billion for water infrastructure funding consisting of $1.6 billion for clean water state revolving funds, $500 million for drinking water state revolving funds, $150 million to support Mexico border projects under the U.S.-Mexican Border Environmental Initiative and NAFTA, and $100 million for special need/economically distressed communities (not specified in the request, but presumed to be intended for Boston), plus $15 million for water infrastructure needs in Alaska Native Villages. In February 1995, congressional appropriations committees began considering legislation to rescind previously appropriated FY1995 funds, as part of overall efforts by the 104 th Congress to shape the budget and federal spending. These efforts resulted in passage in July 1995 of P.L. 104-19 , which rescinded $16.5 billion in total funds from a number of departments, agencies, and programs. In the water infrastructure area, it rescinded $1,077,200,000 from prior year appropriations including the $3.2 million for a project in New Jersey (it had mistakenly been funded twice in P.L. 103-327 ) and $1,074,000,000 in other water infrastructure appropriations. Although not contained in bill language, it was understood that the larger rescinded amount consisted solely of drinking water SRF funds (leaving $1.235 billion for FY1995 clean water SRF funds, $778.6 million for earmarked wastewater projects—both amounts as originally appropriated—and $225 million in FY1994-FY1995 drinking water SRF funds that had not yet been authorized). It took until April 1996 for Congress and the Administration to reach agreement on FY1996 appropriations for EPA as part of omnibus legislation ( P.L. 104-134 ) that consolidated five appropriations bills not yet enacted due to disagreements over funding levels and policy. Agreement came as the fiscal year was more than one-half over. Before that, however, congressional conferees reached agreement in November 1995 on FY1996 legislation for EPA ( H.R. 2099 , H.Rept. 104-353 ). Conferees agreed to provide $2.323 billion for a new account titled State and Tribal Assistance Grants (STAG), consisting of infrastructure assistance and state environmental management grants for 16 categorical programs that had previously been funded in a separate appropriations account. The total included $1.125 billion for clean water SRF grants, $275 million in new appropriations for drinking water SRF grants, and $265 million for special purpose project grants. Report language provided that the drinking water SRF money also included $225 million from FY1995 appropriations rescinded in P.L. 104-19 . The drinking water SRF money would be available upon enactment of SDWA reauthorization legislation that would authorize a drinking water SRF program; otherwise, it would revert to clean water SRF grants if the SDWA were not reauthorized by June 30, 1996. This made the total potentially available for drinking water SRF grants $500 million. The November 1995 agreement on H.R. 2099 included $658 million for consolidated state environmental grants. In doing so, Congress endorsed an Administration proposal for a more flexible approach to state grants, a key element of EPA's efforts to improve the federal-state partnership in environmental programs. In lieu of traditional grants provided separately to support state air, water, hazardous waste, and other programs, consolidated grants are intended to reduce administrative burdens and improve environmental performance by allowing states and tribes to target funds to meet their specific needs and integrate their environmental programs, as appropriate. Congress's support was described in accompanying report language. The conferees agree that Performance Partnership Grants are an important step to reducing the burden and increasing the flexibility that state and tribal governments need to manage and implement their environmental protection programs. This is an opportunity to use limited resources in the most effective manner, yet at the same time, produce the results-oriented environmental performance necessary to address the most pressing concerns while still achieving a clean environment. Including state environmental grants in the same account with water infrastructure assistance reflected Congress's support for enhancing the ability of states and localities to implement environmental programs flexibly and support for EPA's ability to provide block grants to states and Indian tribes. The H.R. 2099 conference agreement also included legislative riders intended to limit or prohibit EPA from spending money to implement several environmental programs. The Administration opposed the riders. The House and Senate approved this bill in December, but President Clinton vetoed it, because of objections to spending and policy aspects of the legislation. With no full-year funding in place from October 1995 to April 1996, EPA and the programs it administers (along with agencies and departments covered by four other appropriations bills not yet enacted) were subject to a series of short-term continuing resolutions, some lasting only a day, some lasting several weeks. In March 1996, the House and Senate began consideration of an omnibus appropriations bill to fund EPA and other agencies for the remainder of FY1996, finally reaching agreement in April on a bill ( H.R. 3019 ) enacted as P.L. 104-134 . Congress agreed to provide $2.813 billion for a new account titled STAG, consisting of state grants and infrastructure assistance, as in H.R. 2099 , the vetoed measure. The total was divided as follows: $1.3485 billion for clean water SRF grants (including $50 million for impoverished communities), $500 million in new appropriations for drinking water SRF grants, $150 million for Mexico-border project grants and Texas colonias , as requested, $15 million for Alaska Native Villages, as requested, $141.5 million for 17 special purpose project grants, and $658 million for consolidated state environmental grants, which states could use to administer a range of delegated environmental programs. Report language provided that the drinking water SRF money also included $225 million from FY1995 appropriations that remained available after the rescissions in P.L. 104-19 , for a total of $725 million. The drinking water SRF money was contingent upon enactment of legislation authorizing an SRF program under the Safe Drinking Water Act by August 1, 1996; otherwise, it would revert to clean water SRF grants. The final agreement ( P.L. 104-134 ) included several of the legislative riders from previous versions of the legislation, including riders related to drinking water and clean air, but dropped others strongly opposed by the Administration. Funds within the STAG account were redistributed after Congress passed Safe Drinking Water Act amendments in August 1996. Enactment of the amendments ( P.L. 104-182 ) occurred on August 6—after the August 1 deadline in P.L. 104-134 that would have made $725 million available for drinking water SRF grants in FY1996. Thus, the previously appropriated $725 million reverted to clean water SRF grants, making the FY1996 total for those grants $2.0735 billion. While debate over the FY1996 appropriations was continuing, in March 1996, President Clinton submitted the details of a FY1997 budget. For water infrastructure and state and tribal assistance, the request totaled $2.852 billion consisting of $1.35 billion for clean water SRF grants (the request included language that would authorize states the discretion to use this SRF money either for clean water or drinking water projects), $165 million for U.S.-Mexico border projects, Texas colonias , and Alaska Native Village projects, $113 million for needy cities projects, $550 million for drinking water infrastructure SRF funding, contingent upon enactment of authorizing legislation, and $674 million for state performance partnership consolidated management grants, which could address a range of environmental programs. In response to the Administration's request, in June 1996 the House approved legislation ( H.R. 3666 ) providing FY1997 funding for EPA. In the STAG account, the House approved $2.768 billion, $84 million less than requested but on the whole endorsing the budget request. The total provided the following: $1.35 billion for clean water SRF grants, as requested; $165 million, as requested, for U.S.-Mexico Border projects, Texas colonias , and Alaska Native Village projects; $450 million for drinking water SRF funding, contingent upon authorization; $674 million for state performance partnership consolidated management grants; and $129 million for seven special purpose grants. In July, the Senate Appropriations Committee reported its version of H.R. 3666 . The committee approved $2.815 billion for this account, consisting of $1.426 billion for clean water SRF grants; $550 million for drinking water SRF grants, contingent upon authorization; $165 million, as requested, for U.S.-Mexico border projects, Texas colonias , and Alaska Native Village projects; and $674 million for consolidated state grants. The committee rejected the provision of the House-passed bill providing $129 million for special purpose grants, including funds for Boston and New Orleans requested by the Administration, saying in report language that earmarking is provided at the expense of state revolving funds and does not represent an equitable distribution of grant funds ( S.Rept. 104-318 ). During debate on H.R. 3666 in September, the Senate adopted an amendment to reduce the FY1997 appropriation for clean water SRF grants by $725 million in order to fund the new drinking water SRF program. This action was intended to restore funds to the drinking water program which had been lost when Safe Drinking Water Act amendments were not enacted by August 1, 1996. Thus, the Senate-passed bill provided $701 million for clean water SRF grants and $1.275 billion for drinking water SRF grants for FY1997. Other amounts in the account were unchanged. The conference report on H.R. 3666 ( H.Rept. 104-812 ) was approved by the House and Senate on September 24, 1996. President Clinton signed the bill September 26 ( P.L. 104-204 ). It reflected compromise of the House- and Senate-passed bills, providing the following amounts within the STAG account ($2.875 billion total): $625 million for clean water SRF grants, $1.275 billion for drinking water SRF grants, $165 million, as requested, for U.S.-Mexico border projects, Texas colonias , and Alaska Native Village projects, $136 million for 18 specific wastewater, water, and groundwater project grants (the 7 specified in House-passed H.R. 3666 , plus 11 more; the bill provided funds for each of the needy cities projects requested by the Administration, but in lesser amounts), and $674 million for consolidated state grants, which could support implementation of a range of environmental programs. The allocation of clean water and drinking water SRF grants was consistent with the Senate's action to restore funds to the drinking water program after enactment of the Safe Drinking Water Act amendments in early August. Subsequently, Congress passed a FY1997 Omnibus Consolidated Appropriations bill to cover agencies and departments for which full-year funding had not been enacted by October 1, 1996 ( P.L. 104-208 ). It included additional funding for several EPA programs, as well as $35 million (on top of $40 million provided in P.L. 104-204 ) for the Boston Harbor cleanup project. President Clinton presented the Administration's budget request for FY1998 in February 1997. For water infrastructure and state and tribal assistance, the request totaled $2.793 billion, consisting of $1.075 billion for clean water SRF grants, $725 million for drinking water SRF grants, $715 million for consolidated state environmental grants, and $278 million for special project grants. House and Senate committees began activities on FY1998 funding bills somewhat late in 1997, due to prolonged negotiations between Congress and the President over a five-year budget plan to achieve a balanced budget by 2002. After appropriators took up the FY1998 funding bills in June, the House passed EPA's appropriation in H.R. 2158 ( H.Rept. 105-175 ) on July 15. In the STAG account, the House approved $3.019 billion, consisting of $1.25 billion for clean water SRF grants ($600 million more than FY1997 levels and $175 million more than requested by the President), $750 million for drinking water SRF grants ($425 million less than FY1997 levels, but $25 million more than the request), $750 million for state environmental assistance grants, and $269 million for special projects. The latter included funds for the special projects requested by the Administration but at reduced levels ($149 million total for these projects), plus $120 million in special project grants for 21 other communities. The Senate passed a separate version of an FY1998 appropriations bill on July 22, 1997 ( S. 1034 , S.Rept. 105-53 ). It provided $3.047 billion for the STAG account, consisting of $1.35 billion for clean water SRF grants, $725 million for drinking water SRF grants, $725 million for state environmental assistance grants, and $247 million for special project grants. The Senate bill provided the amounts requested by the Administration for U.S.-Mexico border projects, Texas colonias , and Alaska Native Village projects (but no special funds for others requested by the President), plus $82 million for 18 special project grants for other communities identified in report language. Conferees reached agreement on FY1998 funding in early October 1997 ( H.R. 2158 , H.Rept. 105-297 ). The final version passed the House on October 8 and passed the Senate on October 9. President Clinton signed the bill October 27 ( P.L. 105-65 ). As enacted, it provided $3.213 billion for the STAG account, consisting of $1.35 billion for clean water SRF grants, $725 million for drinking water SRF grants, $745 million for consolidated state environmental assistance grants (which could address a range of environmental programs), and $393 million for 42 special purpose project and special community need grants for construction of wastewater, water treatment and drinking water facilities, and groundwater protection infrastructure. It included the following amounts for grants requested by the Administration: $75 million for U.S.-Mexico border projects, $50 million for Texas colonias , $50 million for Boston Harbor wastewater needs, $10 million for New Orleans, $3 million for Bristol County, MA, and $15 million for Alaska Native Village projects. The final bill also provided funds for all of the special purpose projects included in the separate House and Senate versions of the legislation, plus three projects not included in either earlier version. Bill language was included in P.L. 105-65 to allow states to cross-collateralize clean water and drinking water SRF funds, that is, to use the combined assets of amounts appropriated to State Revolving Funds as common security for both SRFs, which conferees said is intended to ensure maximum opportunity for states to leverage these funds. Senate committee report language also said that the conference report on the 1996 Safe Drinking Water Act Amendments had stated that bond pooling and similar arrangements were not precluded under that legislation. The appropriations bill language was intended to ensure that EPA does not take an unduly narrow interpretation of this point which would restrict the states' use of SRF funds. On November 1, 1997, President Clinton used his authority under the Line Item Veto Act ( P.L. 104-130 ) to cancel six items of discretionary budget authority provided in P.L. 105-65 . The President's authority under this act took effect in the 105 th Congress; thus, this was the first EPA appropriations bill affected by it. The cancelled items included funding for one of the special purpose grants in the bill, $500,000 for new water and sewer lines in an industrial park in McConnellsburg, PA. Reasons for the cancellation, according to the President, were that the project had not been requested by the Administration; it would primarily benefit a private entity and is outside the scope of EPA's usual mission; it is a low priority use of environmental funds; and it would provide funding outside the normal process of allocating funds according to state environmental priorities. However, in June 1998, the Supreme Court struck down the Line Item Veto Act as unconstitutional, and in July the Office of Management and Budget announced that funding would be released for 40-plus cancellations made in 1997 under that act (including those cancelled in P.L. 105-65 ) that Congress had not previously overturned. (For additional information, see CRS Report RL33635, Item Veto and Expanded Impoundment Proposals: History and Current Status , by Virginia A. McMurtry.) President Clinton's budget request for FY1999, presented to Congress in February 1998, requested $2.9 billion for the STAG account, representing 37% of the $7.9 billion total requested for EPA programs. The total included $1.075 billion for clean water SRF grants, $775 million for drinking water SRF grants, $115 million for water infrastructure projects along the U.S.-Mexico border projects and in Alaska Native Villages, $78 million for needy cities projects, and $875 million for consolidated state environmental grants (which could address a range of environmental programs). Legislative action on the budget request occurred in mid-1998. Both houses of Congress increased amounts for water infrastructure financing, finding the Administration's request for clean water and drinking water SRF grants, as well as special project funding, not adequate. First, the Senate Appropriations Committee reported its version of an EPA spending bill in June 1998 ( S. 2168 , S.Rept. 105-216 ). This bill, passed by the Senate July 17, provided $3.2 billion for the STAG account, consisting of $1.4 billion for clean water SRF grants, $800 million for drinking water SRF grants, $105 million for U.S.-Mexico and Alaska Native Village projects, $100 million for 39 other special needs infrastructure grants, and $850 million for state performance partnership/categorical grants. As in FY1998, the committee included bill language allowing states to cross-collateralize their clean water and drinking water state revolving funds, making the language explicit for FY1999 and thereafter. Second, the House passed its version of EPA's funding bill ( H.R. 4194 , H.Rept. 105-610 ) on July 29. This bill provided $3.2 billion for the STAG account, consisting of $1.25 billion for clean water SRF grants, $775 million for drinking water SRF grants, $70 million for U.S.-Mexico and Alaska Native Village projects, $253.5 million for 49 other special needs infrastructure grants (including nine projects also funded in the Senate bill), and $885 million for state environmental management grants (a 20% increase above FY1998 amounts for these state grants). Conferees resolved differences between the two versions in October 1998 ( H.R. 4194 , H.Rept. 105-769 ). The conference agreement provided $3.4 billion for the STAG account, consisting of $1.35 billion for clean water SRF grants, $775 million for drinking water SRF grants, $80 million for U.S.-Mexico and Alaska Native and Rural Village projects, $301.8 million for 80 other special needs project grants, and $880 million for state and tribal environmental program grants (which could address a range of environmental programs). The House and Senate approved the agreement on October 7 and 8, respectively, and President Clinton signed the bill into law on October 21 ( P.L. 105-276 ). Additional funding was provided in the Omnibus Consolidated and Supplemental Appropriations Act, FY1999 ( P.L. 105-277 ). This bill, which provided full-year funding for agencies and departments covered by seven separate appropriations measures, directed $20 million more in special needs grants for the Boston Harbor wastewater infrastructure project, on top of $30 million that was included in P.L. 105-276 . For FY2000, beginning on October 1, 1999, the Administration requested $2.638 billion for water infrastructure assistance and state environmental grants. The total, $370 million less than the FY1999 appropriation for this account, consisted of $800 million for clean water SRF grants, $825 million for drinking water SRF grants, $128 million for Mexican border and special project grants, and $885 million for consolidated state environmental grants (which could address a range of environmental programs). The request included one SRF policy issue. The Administration asked the appropriators to grant states the permission to set aside up to 20% of FY2000 clean water SRF monies in the form of grants for local communities to implement nonpoint source pollution and estuary management projects. Under the Clean Water Act, SRFs may only be used to provide loans. Some have argued that some types of water pollution projects which are eligible for SRF funding may not be suitable for loans, as they may not generate revenues which can be used to repay the loan to a state. This new authority, the Administration said, would allow states greater flexibility to address nonpoint pollution problems. Critics of the proposal said that making grants from an SRF would reduce the long-term integrity of a state's fund, since grants would not be repaid. Some Members of Congress and stakeholder groups were particularly critical of the budget request for clean water SRF grants, $550 million (40%) less than the FY1999 level. Critics said the request was insufficient to meet the needs of states and localities for clean water infrastructure. In response, EPA acknowledged that several years prior the Clinton Administration had made a commitment to states that the clean water SRF would revolve at $2 billion annually in the year 2005. Because of loan repayments and other factors, EPA said, the overall fund will be revolve at $2 billion per year in the year 2002, even with the 20% grant setaside included in the FY2000 request. According to EPA, the $550 million decrease from 1999 would have only a limited impact on SRFs and would still allow the agency to meet its long-term capitalization goal of providing an average amount of $2 billion in annual assistance. The House and Senate passed their respective versions of an EPA appropriations bill ( H.R. 2684 ) in September 1999. The conference committee report resolving differences between the two versions ( H.Rept. 106-379 ) was passed by the House on October 14 and the Senate on October 15 and was signed by the President on October 20 ( P.L. 106-74 ). The final bill provided $7.6 billion overall for EPA programs, including $3.47 billion for the STAG account. Within that account, the bill included $1.35 billion for clean water SRF grants, $820 million for drinking water SRF grants, $885 million for categorical state grants (which generally support state and tribal implementation and could address a range of environmental programs), $80 million for U.S.-Mexico border and Alaska Rural and Native Village projects, and $331.6 million for 141 other special needs water and wastewater grants specified in report language. The final bill did not approve the Administration's request to allow states to use up to 20% of clean water SRF monies as grants for nonpoint pollution and estuary management projects. Subsequent to enactment of the EPA funding bill, Congress passed the Consolidated Appropriations Act for FY2000 with funding for five other agencies ( P.L. 106-113 ), which included provisions requiring a government-wide cut of 0.38% in discretionary appropriations. The bill gave the President some flexibility in applying this across-the-board reduction. Details of the reduction were announced at the time of the release of the FY2001 budget. EPA's distribution of the rescission resulted in a total reduction of $16.3 million for 139 of the special needs water and wastewater projects identified in P.L. 106-74 . These projects were reduced 4.9% below enacted levels. The agency did not reduce funds for the two projects that had been included in the President's FY2000 budget request (Bristol County, MA, and New Orleans, LA) or for the United States-Mexico border and the Alaska Rural and Native Villages programs. EPA also reduced funds for the clean water SRF (enacted at $1.35 billion) by 0.3%, for a final funding level of $1.345 billion. The appropriation level was not reduced for the drinking water SRF or consolidated state grants. The President's budget for FY2001 requested a total of $2.9 billion for water infrastructure assistance and state environmental grants. For the second year in a row, President Clinton requested $800 million for the clean water SRF program, a $545 million reduction from the FY2000 level. The request included $825 million for the drinking water SRF program, $100 million for U.S.-Mexico border project grants, $15 million for Alaska Native Villages projects, two needy cities grants totaling $13 million (Bristol County, MA, and New Orleans, LA), plus $1.069 billion for consolidated state environmental grants (which could address a range of environmental programs). The budget included a policy request similar to one in the FY2000 budget, which Congress rejected. The FY2001 budget sought flexibility for states to set aside up to 19% of clean water SRF monies in the form of grants for local communities to implement nonpoint source pollution and estuary management projects. The House approved its version of EPA's funding bill ( H.R. 4635 , H.Rept. 106-674 ) on June 21, 2000. For the STAG account, H.R. 4635 provided $3.2 billion ($273 million more than requested, but $288 million below the FY2000 level). The total in the STAG account consisted of $1.2 billion for clean water SRF grants, $825 million for drinking water SRF grants, $1.068 billion (the budget request) for categorical state grants, and $85 million for U.S.-Mexico border and Alaska Rural and Native Villages projects. Beyond these, however, the House-passed bill included no funds for other special needs grants. The Senate approved its version of the funding bill ( S.Rept. 106-410 ) on October 12, 2000. For the STAG account, the Senate-passed bill provided $3.3 billion, consisting of $1.35 billion for clean water SRF grants, $820 million for drinking water SRF grants, $955 million for categorical state grants, $85 million for U.S.-Mexico border and Alaska Rural and Native Village projects, and $110 million for special needs water and wastewater grants. In October, the House and Senate approved EPA's funding bill for FY2001 ( H.Rept. 106-988 ), providing $1.35 billion for clean water SRF grants (the same level enacted for FY2000) and $825 million for drinking water SRF grants. The enacted bill included $110 million in grants for water infrastructure projects in Alaska Rural and Native Villages and U.S.-Mexico border projects and an additional $336 million for 237 other specified project grants throughout the country. The bill also provided $1,008 million for state categorical program grants ($60 million less in total than requested), which states could use to address a range of environmental programs. Total funding for the STAG account was $3.6 billion. Congress disapproved the Administration's policy request concerning use of clean water SRF monies for nonpoint source project grants. President Clinton signed the bill October 27, 2000 ( P.L. 106-377 ). Subsequently, in December, Congress provided $21 million more for five more special project water infrastructure grants (in addition to the $336 million in P.L. 106-377 ) as a provision of H.R. 4577 , the FY2001 Consolidated Appropriations Act ( P.L. 106-554 ). Also in that legislation, Congress enacted the Wet Weather Water Quality Act, authorizing a two-year, $1.5 billion grants program to reduce wet weather flows from municipal sewer systems. The provision was included in Section 112, Division B, of P.L. 106-554 . In April 2001, the Bush Administration presented its budget request for FY2002. The Administration requested a total of $2.1 billion for clean water infrastructure funds, consisting of $823 million for drinking water SRF grants, $850 million for clean water SRF grants (compared with $1.35 billion appropriated for FY2001), and $450 million for the new program of municipal sewer overflow grants under legislation enacted in December, the Wet Weather Water Quality Act. However, that act provided that sewer overflow grants are only available in years when at least $1.35 billion in clean water SRF grants is appropriated. Subsequently, Administration officials said they would request that Congress modify the provision linking new grant funds to at least $1.35 billion in clean water SRF grants. The Bush budget requested no funds for special earmarked grants, except for $75 million to fund projects along the U.S.-Mexico border and $35 million for projects in Alaska Native Villages (both are the same amounts provided in FY2001). In response, some Members of Congress and outside groups criticized the budget request, saying that it did not provide enough support for water infrastructure programs. The President's budget also requested $1.06 billion for state categorical program grants, which generally support state and tribal administration of a range of environmental programs. The House passed its version of FY2002 funding for EPA on July 30 ( H.R. 2620 , H.Rept. 107-159 ). The House-passed bill provided a total of $2.4 billion for water infrastructure funds, consisting of $1.2 billion for clean water SRF grants, $850 million for drinking water SRF grants, $200 million for special project grants (individual projects were unspecified in the report accompanying H.R. 2620 ), $75 million for U.S.-Mexico border projects, and $30 million for Alaska Rural and Native Villages. The House bill provided no separate funds for the new wet weather overflow grant program, which the Administration had requested. Including $1.08 billion for state categorical program grants, total STAG account funding in the bill was $3.44 billion, about $150 million higher than the President's request. The Senate passed its version of this appropriations bill on August 2 ( S. 1216 , S.Rept. 107-43 ). Like the House, the Senate rejected separate funding for wet weather overflow grants, and the Senate increased clean water SRF grant funding to the FY2001 level. The Senate-passed total for the STAG account was $3.49 billion, including $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, $140 million for special needs infrastructure grants specified in accompanying report language, $75 million for U.S.-Mexico border projects, $30 million for Alaska Rural and Native Villages, and $1.03 billion for state categorical program grants. Resolution of this and other appropriations bills in fall 2001 was complicated by congressional attention to general economic conditions and responses to the September 11 terrorist attacks on the World Trade Center and the Pentagon. Nevertheless, the House and Senate gave final approval to legislation providing EPA's FY2002 funding ( H.R. 2620 , H.Rept. 107-272 ) on November 8, and President Bush signed the bill on November 26 ( P.L. 107-73 ). The final bill did not include separate funds for the new sewer overflow grant program requested by the Administration, which both the House and Senate had rejected, but it did include $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, $344 million for 337 earmarked water infrastructure project grants specified in report language, and the requested $75 million for U.S.-Mexico border projects and $30 million for Alaska Rural and Native Villages. The bill included total STAG funding of $3.7 billion. President Bush presented the Administration's FY2003 budget request in February 2002, asking Congress to appropriate $2.185 billion for EPA's water infrastructure programs (compared with $2.659 billion appropriated for FY2002). The FY2003 request sought $1.212 billion for clean water SRF grants, $850 million for drinking water SRF grants, and $123 million for a limited number of special projects (especially in Alaska Native Villages and in communities on the U.S.-Mexico border). The Administration proposed to eliminate funds for unrequested infrastructure project spending that Congress had earmarked in the FY2002 law, which totaled $344 million. Also, the Administration requested no funds for the municipal sewer overflow grants program enacted in 2000. Some Members of Congress criticized the request level for clean water SRF capitalization grants, which was $138 million below the FY2002 enacted amount. In August 2002, the Senate Appropriations Committee approved an FY2003 funding bill for EPA that would provide $1.45 billion for clean water SRF grants, $100 million more than the FY2002 level ( S. 2797 , S.Rept. 107-222 ). In addition, the Senate committee bill included $875 million for drinking water SRF grants, $140 million for special needs infrastructure grants specified in report language, $45 million for Alaska Rural and Native Village project grants, $75 million for U.S.-Mexico border projects, and $1.134 billion for state categorical program grants, which could address a range of environmental programs. The House Appropriations Committee approved its version of an FY2003 funding bill with $1.3 billion for the clean water SRF program ( H.R. 5605 , H.Rept. 107-740 ) in October. This bill also included $850 million for drinking water SRF grants, $227.6 million for special needs infrastructure grants enumerated in report language, $35 million for Alaska Rural and Native Village project grants, $75 million for U.S.-Mexico border projects, and $1.173 billion for state categorical program grants, which could address a range of environmental programs. Neither appropriations committee included funds for the sewer overflow grant program authorized in 2000 (the Administration did not request FY2003 funds for these grants). Due to complex budgetary disputes during the year, final action did not occur before the 107 th Congress adjourned in November 2002, and it extended into 2003, more than five months after the start of the fiscal year. Congress and the President reached agreement on funding levels for EPA and other nondefense agencies in an omnibus appropriations act ( P.L. 108-7 ; H.J.Res. 2 , H.Rept. 108-10 ), which the President signed on February 20. The EPA portion of the enacted bill included $1.34 billion for clean water SRF grants, $844 million for drinking water SRF grants, and $413 million more for 489 special water infrastructure project grants to individual cities specified in conference report language, plus projects in Alaska Native Villages and communities on the U.S.-Mexico border. It also provided a total of $1.14 billion for categorical state grants, which generally support states and tribal implementation of a range of environmental programs. On February 3, 2003, before completion of the FY2003 appropriations, President Bush submitted his budget request for FY2004. It requested a total of $1.798 billion for water infrastructure funds, consisting of $850 million for clean water SRF grants, $850 million for drinking water SRF grants, and $98 million for priority projects (especially in Alaska Native Villages and in communities on the U.S.-Mexico border). As in previous years, the Administration requested no funds for congressionally earmarked project grants for individual communities. Some Members of Congress and interest groups criticized the request for clean water SRF grants ($490 million below the FY2003 enacted level), but Administration officials responded by saying that the request reflected a commitment to fund this program at the $850 million level through FY2011. Funding at that level and over that long-term period, plus repayments of previous SRF loans made by states, would be expected to increase the revolving levels of the overall program from $2.0 billion to $2.8 billion per year, the Administration said. The President's budget also requested $1.2 billion for categorical state grants, which could address a range of environmental programs. On July 25, the House approved H.R. 2861 ( H.Rept. 108-235 ), providing FY2004 appropriations for EPA. As passed, the bill included $1.2 billion for clean water SRF grants, $850 million for drinking water SRF grants, $203 million for earmarked water infrastructure project grants, and $75 million in grants for high-priority projects in Alaska Native Villages and along the U.S.-Mexico border. Senate action on its version of a funding bill for EPA ( S.Rept. 108-143 ) occurred on November 18. The Senate-passed bill provided $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, $130 million for targeted infrastructure project grants, plus $95 million in grants for projects in Alaska Native Villages and along the U.S.-Mexico border. As with the previous year's appropriations, Congress did not enact legislation providing FY2004 funds for EPA before the beginning of the new fiscal year; thus EPA programs were covered by a series of continuing resolutions (CRs). The last of these CRs ( P.L. 108-135 ) extended FY2003 funding levels through January 31, 2004. On December 8, 2003, the House passed legislation providing full-year funding for EPA and other agencies that lacked enacted appropriations ( H.R. 2673 ). The conference report on this bill ( H.Rept. 108-401 ) provided $1.34 billion for clean water SRF grants, $845 million for drinking water SRF grants, and $425 million in grants for 520 earmarked grants in listed communities, Alaska Native Villages, and U.S.-Mexico border projects. The Senate approved the conference report on January 22, 2004, and President Bush signed the legislation January 23 ( P.L. 108-199 ). The FY2005 EPA appropriation for water infrastructure funds was the lowest total for these programs since FY1997 (the first year in which Congress provided both clean water and drinking water SRF capitalization grants, as well as earmarked project grants). The decline was due primarily to a reduction in funding for the clean water SRF program from an average of $1.35 billion since FY1998 to $1.09 billion. President Bush's FY2005 budget, presented February 2, 2004, requested a total of $3.0 billion for water infrastructure assistance and state environmental program grants. It included $850 million for clean water SRF grants, $850 million for drinking water SRF grants, $94 million for priority projects (primarily in Alaska Native Villages and along the U.S.-Mexico border), and $1.25 billion for categorical grants, which could address a range of environmental programs. As in recent budgets, the Administration requested no funds for congressionally earmarked project grants. Anticipating that critics likely would focus on the clean water SRF request ($492 million below the FY2004 level), in its budget documents the Administration said that the request included funding for the clean water SRF at $850 million annually through 2011, which, together with loan repayments, state matches, and other funding sources, would result in a long-term average revolving level of $3.4 billion. Likewise, the budget anticipated funding the drinking water SRF program at the same $850 million annually through 2011, resulting in a long-term average revolving level of $1.2 billion. House and Senate Appropriations committees began review of the EPA budget request in March. On September 9, 2004, the House Appropriations Committee reported FY2005 funding for EPA in a bill that included the Administration's requested level of $850 million for clean water SRF grants, $850 million for drinking water SRF grants, and earmarked grants for priority water infrastructure projects totaling $393.4 million ( H.R. 5041 , H.Rept. 108-674 ). On September 21, the Senate Appropriations Committee reported its version of this bill ( S. 2825 , S.Rept. 108-353 ), which included $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, and $217 million for earmarked project grants. Final action on the FY2005 appropriation did not occur before the start of the fiscal year. On November 20, the House and Senate passed H.R. 4818 ( H.Rept. 108-792 ), the Consolidated Appropriations Act, 2005, an omnibus appropriations bill comprising nine appropriations measures, including funding for EPA. The bill provided total funding for EPA of $8.1 billion, a decrease from the $8.4 billion approved in FY2004, but $340 million more than was requested by the President in February. One of the most controversial items in the final bill was a $251 million decrease for clean water SRF grants from the FY2004 level, although the $1.09 billion total was $241 million more than in the President's budget. The final measure also included $843 million for drinking water SRF capitalization grants; $401.7 million for 669 earmarked grants in listed communities, Alaska Native Villages, and U.S.-Mexico border projects; and $1.14 billion for categorical state grants, which generally support state and tribal administration of a range of environmental programs. The $2.34 billion total for water infrastructure programs and projects was $542 million more than was requested by the President, but $276 million less than Congress appropriated for FY2004. President Bush signed the legislation December 8, 2004 ( P.L. 108-447 ). The FY2006 appropriation for water infrastructure funds marked the second consecutive year in which Congress appropriated less funding for these programs, providing lower levels both for clean water SRF capitalization grants and for earmarked project grants than in FY2005. President Bush presented the FY2006 budget request in February 2005. Overall for EPA, it sought 5.6% less than Congress had appropriated for FY2005. The Administration's deepest cuts affecting EPA were proposed for the STAG account. The budget requested $730 million for clean water SRF grants (33% below FY2005 appropriated funding and 45.6% below the FY2004 level), $850 million for drinking water SRF grants (a slight increase from the FY2005 level), $69 million for priority projects (primarily in Alaska Native Villages and along the U.S.-Mexico border), and $1.2 billion for state categorical grants, which could address a range of environmental programs. As in previous years, the Administration requested no funds for congressionally earmarked water infrastructure projects. Advocates for the SRF programs (especially state and local government officials) contended that cuts to the clean water program would impair their ability to carry out needed municipal wastewater treatment plant improvement projects. Administration officials responded that the proposed SRF reductions for FY2006 were because Congress had boosted funds above the FY2005 request level. These officials said that the Administration planned to invest $6.8 billion in the clean water SRF program between FY2004 and FY2011, after which federal funding was expected to end, and the state SRFs were expected to have an annual revolving level of $3.4 billion. If Congress appropriated more than requested in any given year (as occurred in FY2005), they said, that target would be met sooner, leading to reduced requests for the SRF in subsequent years until a planned phaseout in FY2011. On May 19, 2005, the House passed H.R. 2361 , providing FY2006 funding for EPA. As passed, it provided $850 million for clean water SRF grants ($120 million more than the President's request), $850 million for drinking water SRF grants, and $269 million for earmarked water infrastructure grants. During debate, the House rejected two amendments to increase clean water SRF funding. On June 29, the Senate passed its version of H.R. 2361 , providing $1.1 billion for clean water SRF grants, $850 million for drinking water SRF grants, and $290 million for earmarked project grants. The House bill required that $100 million of the SRF funding come from balances from expired contracts, grants, and interagency agreements from various EPA appropriation accounts. The Senate bill, in contrast, called for a $58 million rescission of unobligated amounts associated with grants, contracts, and interagency agreements in various accounts, but did not specify that such monies go to SRF funding. Conferees resolved differences between the bills ( H.Rept. 109-188 ), and the House and Senate approved the measure in July; the President signed it into law on August 2 ( P.L. 109-54 ). As enacted, the bill provided $900 million for clean water SRF grants; $850 million for drinking water SRF grants; $285 million for 259 earmarked grants in listed communities, Alaska Native Villages, and along the U.S.-Mexico border; and $1.13 billion for categorical state grants, which could address a range of environmental programs. The final bill required an $80 million rescission from expired grants, contracts, and interagency agreements in various EPA accounts (not just the STAG account) not obligated by September 1, 2006. It did not direct the rescinded funds to be applied to the clean water SRF, as proposed by the House. The $2.03 billion total in the bill for EPA water infrastructure programs and projects was $386 million more than was requested by the President, but $301 million less than Congress appropriated for FY2005. Further, the funding amounts specified in P.L. 109-54 were reduced slightly. First, a provision of P.L. 109-54 , Section 439, mandated an across-the-board rescission of 0.476% for any discretionary appropriation in that bill. Second, in December 2005 Congress enacted P.L. 109-148 , the FY2006 Department of Defense Appropriations Act, and Section 3801 of that bill mandated a 1% across-the-board rescission for discretionary accounts in any FY2006 appropriation act (except for discretionary authority of the Department of Veterans Affairs). As a result of these two rescissions, the final levels for the STAG account were $887 million for clean water SRF grants; $838 million for drinking water SRF grants; $281 million for 259 earmarked grants in listed communities, Alaska Native Villages, and along the U.S.-Mexico border; and $1.11 billion for categorical state grants, which could address a range of environmental programs. FY2006 EPA water infrastructure programs and projects thus total $2.0 billion. On October 28, President Bush requested that Congress rescind $2.3 billion from 55 \"lower-priority federal programs and excess funds,\" including $166 million from clean water SRF monies. In the end, Congress did not endorse the specific request to reduce clean water SRF appropriations. The two rescissions resulting from P.L. 109-54 and P.L. 109-148 totaled a $13.2 million reduction from the $900 million specified in the EPA appropriations act. President Bush presented the Administration's FY2007 budget request in February 2006, asking Congress to appropriate $1.570 billion for EPA's water infrastructure programs. The FY2007 request sought $687.6 million for clean water SRF grants, $841.5 million for drinking water SRF grants, and $40.6 million for special projects in Alaska Native Villages, Puerto Rico, and along the U.S.-Mexico border. When the 109 th Congress adjourned in December 2006, it had not completed action on appropriations legislation to fund EPA (or on nine other appropriations bills covering the majority of domestic discretionary agencies and departments) for the fiscal year that began October 1, 2006, thus carrying over this legislative activity into the 110 th Congress. In December 2006, Congress enacted a continuing resolution, P.L. 109-383 (the third such continuing resolution since the start of the fiscal year on October 1), providing funds for EPA and the other affected agencies and departments until February 15, 2007. The President's FY2007 budget request for clean water SRF capitalization grants was 22% less than the FY2006 appropriation for these grants and 37% below the FY2005 funding level. The request for drinking water SRF grants was essentially the same as in recent years ($4 million more than FY2006, $1.7 million less than FY2005). As in recent budgets, the Administration proposed no funding for congressionally designated water infrastructure grants, but, as noted above, it did seek a total of $40.6 million for Administration priority projects. Advocates of the clean water SRF program (especially state and local government officials) again contended, as they have for several recent years, that the cuts would impair their ability to carry out needed municipal wastewater treatment plant improvement projects. Administration officials responded that cuts for the clean water SRF in FY2007 were necessary because Congress boosted funds above the requested level in FY2005 and FY2006. On May 18, 2006, the House passed H.R. 5386 ( H.Rept. 109-465 ), providing the requested level of $687.6 million for clean water SRF grants and $841.5 million for drinking water SRF grants. The Senate Appropriations Committee approved the same funding levels for these grant programs when it reported H.R. 5386 on June 29 ( S.Rept. 109-275 ), but the Senate did not act on this measure before the 109 th Congress adjourned in December. Before adjournment, Congress enacted a continuing resolution (CR), P.L. 109-383 (the third such CR since the start of the fiscal year on October 1), providing funds for EPA and the other affected agencies and departments until February 15, 2007. Funding levels provided under this CR followed a \"lowest level\" concept for individual programs; that is, programs were funded at the lowest level under either House-passed FY2007 appropriations, Senate-passed appropriations, or the FY2006 funding. For clean water SRF grants, the resulting appropriation through mid-February was $687.6 million, as in House-passed H.R. 5386 . For drinking water SRF grants, the appropriation level through mid-February was $837.5 million, the FY2006-enacted level. The CR included funds for congressionally earmarked water infrastructure project grants totaling $200 million, as in House-passed H.R. 5386 . Returning to these issues in 2007, in mid-February, Congress passed H.J.Res. 20 , a continuing appropriations resolution that provides funding for EPA and the other affected agencies through the end of FY2007. As passed, this full-year resolution held most programs and activities at their FY2006 appropriated levels. However, clean water SRF capitalization grants were one of the few programs that received a funding increase under the resolution: these grants received $1.08 billion ($197 million more than in FY2006, and $396 million more than the President requested for FY2007). The resolution further prohibited project grants for congressional earmarks, but not for special project grants requested in the President's budget. The action to ban earmarks in FY2007 occurred when leaders in the 110 th Congress sought to finish up appropriations actions that were unresolved at the end of the 109 th Congress, and at the same time the newly elected Congress moved to adopt rules and procedures to reform the congressional earmarking process for the future. (Water infrastructure project earmarks totaled $281 million in EPA's FY2006 appropriation.) President Bush signed H.J.Res. 20 on February 15, 2007 ( P.L. 110-5 ). The final FY2007 amounts provided in P.L. 110-5 were $1.084 billion for clean water SRF capitalization grants, $837.5 million for drinking water SRF capitalization grants, $83.75 million for Alaska Native Village and U.S.-Mexico border project grants requested by the Administration, and $1.11 billion for categorical state grants, which could be used to administer a range of environmental programs. President Obama presented his FY2008 budget request to Congress on February 5, 2007, before finalization of the FY2007 appropriations. The budget sought $687.6 million for clean water SRF grants, the same amount requested for FY2007; $842.2 million for drinking water SRF grants; $25.5 million for special project grants for Alaska Native Villages and the U.S.-Mexico border region; and $1.065 billion for categorical state grants, which could address a range of environmental programs. In June 2007, the House passed H.R. 2643 , providing FY2008 appropriations for EPA. This bill included $1.125 billion for clean water SRF grants, $842.2 million for drinking water SRF grants, plus $175.5 million for 143 congressionally designated water infrastructure project grants. The Senate Appropriations Committee approved companion legislation ( S. 1696 ) that similarly included higher funding levels for several water quality programs. The Senate committee's bill provided less funding for clean water SRF grants than the House bill ($887 million), the same amount for drinking water SRF grants, and slightly more for congressionally designated water infrastructure project grants ($180 million). The Senate did not take up S. 1696 . By October 1, the start of FY2008, Congress had not enacted any appropriations bills for FY2008, and Congress enacted several short-term continuing appropriations resolutions to temporarily fund EPA and other government agencies until final agreement, which occurred in December 2007. Full-year funding for EPA's water infrastructure programs was included in the Consolidated Appropriations Act for FY2008 (Division F, Title II), signed by the President December 26, 2007 ( P.L. 110-161 ). The final FY2008 amounts provided in this legislation were $689.1 million for clean water SRF capitalization grants ($1.5 million more than requested by the Administration), $829.0 million for drinking water SRF capitalization grants ($13.2 million less than requested), $177.2 million for 282 earmarked grants in listed communities, Alaska Native Villages, and U.S.-Mexico border projects ($151.7 million more than requested), and $1.078 billion for categorical state grants ($13.3 million more than requested), which could address a range of environmental programs. President Obama presented his FY2009 budget request to Congress on February 6, 2008. The budget sought $555 million for clean water SRF grants, $134 million less than Congress appropriated for FY2008; $842.2 million for drinking water SRF grants, $13 million more than was appropriated for FY2008; $25.5 million for special project grants for Alaska Native Villages and the U.S.-Mexico border region, $18.8 million less than was appropriated for FY2008; and $1.057 billion for categorical state grants, which could address a range of environmental programs. As in past years, the budget requested no funds for other earmarked grants. In June 2008, a House Appropriations subcommittee approved a bill with FY2009 funding for EPA, but no further action occurred before the start of the fiscal year. At the end of September 2008, Congress and the President agreed to legislation providing partial-year funding for EPA and most other agencies and departments. This bill, the Consolidated Security, Disaster Assistance, and Continuing Resolution Act, 2009 ( P.L. 110-329 ), provided funding through March 6, 2009, at FY2008 funding levels. A second short-term continuing resolution was enacted on March 6 ( P.L. 111-6 ), while Congress was finishing consideration of a full-year omnibus FY2009 appropriations bill that the President signed on March 11 ( P.L. 111-8 ). The omnibus bill provided $689 million in regular appropriations for clean water SRF grants, $829 million for drinking water SRF grants—both at the same levels as were appropriated in FY2008—and $1.094 billion for categorical state grants, which support administration of a range of environmental programs. The omnibus appropriations act also includes $183.5 million for earmarked water infrastructure grants. In February 2009, Congress responded to the nation's economic crisis by enacting the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ), legislation providing FY2009 supplemental appropriations to a number of government programs. Part of the philosophy underlying the legislation was the concept of using federal investments to make accelerated investments in the nation's public infrastructure in order to create jobs while also meeting infrastructure needs. To that end, the legislation included $4.0 billion for clean water SRF capitalization grants (for total FY2009 funds of $4.689 billion) and $2.0 billion for drinking water SRF capitalization grants (for total FY2009 funds of $2.829 billion). The supplemental SRF funds were available for obligation through FY2010, but under the legislation, states were to give preference when awarding funds to activities that can start and finish quickly, with a goal that at least 50% of the funds go to activities that can be initiated within 120 days of enactment. States were to give priority to wastewater projects that could proceed to construction within 12 months of enactment, and funds for projects that were not under contract or under construction by February 12, 2010, would be reallocated by EPA to other states. Further, the legislation required states to reserve at least 20% of the SRF capitalization grant funds for a Green Project Reserve, that is, projects intended to achieve improved energy or water efficiency. It also specified that all assistance agreements made in whole or in part with funds appropriated under the ARRA must comply with prevailing wage requirements of the Davis-Bacon Act. President Obama presented his Administration's FY2010 budget request on May 7, 2009. For EPA as a whole, the budget sought $10.5 billion, a 38% increase above levels enacted in EPA's regular FY2009 appropriations ( P.L. 111-8 ). The bulk of the increase in the President's budget was for water infrastructure assistance, which would receive 157% above FY2009 levels (excluding ARRA supplemental funds). The request included $2.4 billion for clean water SRF capitalization grants; $1.5 billion for drinking water SRF capitalization grants; $20 million for Alaska Native Village and U.S.-Mexico border projects; and $1.111 billion for state categorical grants (1.5% above FY2009 levels), which generally support state administration of environmental programs. Congress provided FY2010 appropriations for EPA in P.L. 111-88 , passed by the House and Senate in October 2009 and signed into law on October 30. In this measure, Congress provided the following: $2.1 billion for clean water SRF capitalization grants; $1.387 billion for drinking water SRF capitalization grants; $186.7 million for 319 congressionally earmarked special project grants, including assistance for Alaska Native Villages and U.S.-Mexico border projects; and $1.116 billion for state categorical environmental grants, which could address a range of environmental programs. The FY2010 appropriations act included some restrictions that Congress also had specified in the American Recovery and Reinvestment Act, discussed above, namely a requirement that 20% of SRF capitalization grant assistance be used for \"green\" infrastructure and also that Davis-Bacon Act prevailing wage rules shall apply to construction of wastewater or drinking water projects carried out in whole or in part with assistance from the SRF. President Obama presented the FY2011 budget request in February 2010. For EPA as a whole, the budget sought $10.02 billion in discretionary budget authority, a 3% decrease from levels enacted for EPA in FY2010. The largest component of the reduced request, compared with FY2010, was $200 million less for grants to capitalize clean water and drinking water SRF programs. In explaining the request, EPA budget documents noted that even with a slight reduction, the budget \"continues robust funding for the SRFs.\" As in past years, the President requested no funds for congressionally designated water infrastructure projects. The request included $2.0 billion for clean water SRF capitalization grants; $1.287 billion for drinking water SRF capitalization grants; $20 million for Alaska Native Village and U.S.-Mexico border projects; and $1.277 billion for state categorical grant programs (14% higher than the FY2010 enacted amount), which could address a range of environmental programs. Congress took only limited action on FY2011 funding for EPA before the start of the new fiscal year on October 1, 2010: a House Appropriations subcommittee approved a bill in July, but no further action followed. At the end of September, the House and Senate passed a continuing resolution to extend FY2010 funding levels for EPA and other federal agencies and departments until December 3, 2010, because no FY2011 appropriations bills had been enacted by October 1. President Obama signed the continuing resolution (CR) on September 30 ( P.L. 111-242 ). This bill was followed by six more short-term CRs before Congress came to final resolution of FY2011 spending on April 14, 2011, enacting a bill to provide funding for EPA and all other federal agencies and departments through September 30 ( P.L. 112-10 ). The final bill reduced overall funding for EPA 15% below the FY2010 level. The enacted bill included $1.522 billion for clean water SRF capitalization grants; $963.1 million for drinking water SRF capitalization grants; $19.96 million for Alaska Native Village and U.S. Mexico-border projects; and $1.254 billion for state categorical grant programs, which generally support implementation of a range of environmental programs. Policymakers began to consider the budget for FY2012 before finalizing the funding levels for FY2011. The President submitted the Administration's FY2012 budget request on February 14, 2011. It sought $9 billion total for EPA, a decrease of $1.3 billion from the FY2010 enacted level, but 3% higher than the FY2011 enacted level. The President's request included $1.55 billion for clean water SRF capitalization grants, $990 million for drinking water SRF capitalization grants, $20 million for Alaska Native Village and U.S.-Mexico border assistance, and $1.2 billion for state categorical grants, which could address a range of environmental programs. For several days in July 2011, the House debated H.R. 2584 , providing FY2012 appropriations for EPA, but did not take final action on the bill before the August recess. As reported, the bill provided $7.3 billion for EPA, 17% less than FY2011 funds and 19% less than the President's FY2012 request. It reduced funds for the clean water SRF capitalization grants to $689 million and $829 million for drinking water SRF capitalization grants (the same levels provided in FY2008), while including no funds for congressionally designated special projects (i.e., earmarks). The reported bill also provided $1.002 billion for state categorical grants, which could address a range of environmental programs. There was no action on this bill in the Senate. Final congressional action on FY2012 appropriations for EPA and most other federal agencies and departments did not occur until the end of December 2011, enacted in an omnibus appropriations act, P.L. 112-74 . The enacted bill included $1.466 billion for clean water SRF capitalization grants (3.7% below FY2011); $917.9 million for drinking water SRF capitalization grants (4.7% below FY2011); $14.976 million for Alaska Native Village and U.S.-Mexico border projects; and $1.089 billion for state categorical grants, which could address a range of environmental programs. President Obama presented the Administration's FY2013 budget request in February 2012. It sought $8.34 billion overall for EPA, or 4.7% below the level enacted for FY2012. The request included $1.175 billion for clean water SRF capitalization grants, $850 million for drinking water SRF capitalization grants, $20 million for Alaska Native Village and U.S.-Mexico border assistance, and $1.2 billion for state categorical grants, which could address a range of environmental programs. The total amount requested for SRF capitalization grants is 15% below the FY2012 enacted level, reflecting a 20% reduction for the clean water program and a 7.4% reduction for the drinking water program. The House Appropriations Committee approved legislation providing FY2013 funds for EPA in July 2012 ( H.R. 6091 ). As reported, the bill provided $689 million for clean water SRF capitalization grants (the same level provided in FY2008), $829 million for drinking water SRF capitalization grants, $994 million for state categorical grants, and no funds for Alaska Native Village or U.S.-Mexico border projects. The House did not take up H.R. 6091 , nor did the Senate act on an EPA appropriations bill (although the Senate Appropriations Committee released a draft bill in September 2012). Prior to the start of FY2013 on October 1, 2012, Congress passed and the President signed a continuing resolution bill providing funding for government agencies and departments through March 27, 2013 ( P.L. 112-175 ). This measure funded the government generally at FY2012 levels plus a 0.6% increase. Final action on FY2013 appropriations occurred in the Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ). Funding enacted in this bill included $1.452 billion for clean water SRF capitalization grants; $908.7 million for drinking water SRF capitalization grants; $15 million for Alaska Native Village and U.S.-Mexico border assistance; and $1.1 billion for state categorical grants, which generally support state and tribal implementation of a range of environmental programs. However, these amounts were reduced under the March 1, 2013, sequester order of the President, which reduced affected accounts by 5.0%, and by an across-the-board rescission of 0.2% necessary to avoid exceeding the FY2013 discretionary spending limits in law. After these reductions, available FY2013 funding was approximately $1.38 billion for the clean water SRF capitalization grants, $860 million for drinking water SRF capitalization grants, $14 million for Alaska Native Village and U.S.-Mexico border assistance, and $1.0 billion for state categorical grants. President Obama presented the Administration's FY2014 budget in April 2013. It sought $8.15 billion overall for EPA, including $1.095 billion for clean water SRF capitalization grants, $817 million for drinking water SRF capitalization grants, $15 million for Alaska Native Village and U.S.-Mexico border projects, and $1.136 billion for state categorical grants. The total amount requested for SRF capitalization grants was 19% below the FY2013 enacted level. In mid-2013, the House Appropriations Subcommittee on Interior, Environment, and Related Agencies drafted a bill (unnumbered) that would have reduced overall funding for EPA by 34% from the FY2013 enacted level, including an 83% reduction for clean water SRF capitalization grants (the bill would have provided $250 million) and a 65% reduction for drinking water SRF capitalization grants ($350 million was included in the bill). According to subcommittee documents, the reduction was appropriate because, despite recent federal support, little progress has been made to reduce the known water infrastructure gap. The full committee did not complete markup of this bill. The Senate Appropriations Subcommittee on Interior, Environment, and Related Agencies drafted an alternative bill that would have maintained funding for the clean water SRF program at $1.45 billion and funding for the drinking water SRF program at $907 million. There was no further action on this bill. Congress did not reach final agreement on FY2014 appropriations before the start of the fiscal year on October 1, but did agree to a short-term continuing appropriations measure ( P.L. 113-46 ), which provided funding through January 15, 2014. Final action on appropriations for EPA and all other federal agencies and departments occurred as part of the Consolidated Appropriations Act, 2014 ( H.R. 3547 , P.L. 113-76 ), signed by the President on January 17, 2014. This bill provides $1.45 billion for clean water SRF capitalization grants (5% more than FY2013 funds and 32% higher than the President's FY2014 budget request) and $907 million for drinking water SRF capitalization grants (5% more than FY2013 funds and 11% higher than the President's FY2014 budget request). The bill also provides $15 million for Alaska Native Village and U.S.-Mexico border assistance, and $1.0 billion for state categorical grants, which generally support state and tribal implementation of a range of environmental programs. President Obama presented the Administration's FY2015 budget on March 4, 2014. It sought $7.89 billion overall for EPA, including $1.018 billion for clean water SRF capitalization grants, $757 million for drinking water SRF capitalization grants, $15 million for Alaska Native Village and U.S.-Mexico border projects, and $1.13 billion for state categorical grants. The total amount requested for SRF capitalization grants was 25% below the FY2014 enacted level. Final full-year appropriations were enacted as part of the Consolidated and Further Continuing Appropriations Act, 2015, enacted in December 2014 ( P.L. 113-235 ). The legislation provided the same water infrastructure funding levels as in FY2014: $1.45 billion for clean water SRF capitalization grants and $907 million for drinking water SRF capitalization grants. As with the FY2014 appropriations, the bill provided $15 million for Alaska Native Village and U.S.-Mexico border assistance and $1.0 billion for state categorical grants, which could address a range of environmental programs. The Administration's FY2016 budget requested $8.6 billion overall for EPA. The request included $1.116 billion for clean water SRF capitalization grants, $1.186 billion for drinking water SRF capitalization grants (31% higher than the FY2016 appropriation), $15 million for Alaska Native Village and U.S.-Mexico border projects, and $1.162 billion for state categorical grants, which generally support state and tribal implementation of a range of environmental programs. Although the House and Senate Appropriations Committees reported bills to provide FY2016 appropriations for EPA, final appropriations action for EPA and other agencies occurred as part of the Consolidated Appropriations Act, 2016, signed by the President December 18, 2015 ( P.L. 114-113 ). The bill provided $1.394 billion for clean water SRF capitalization grants ($55 million less than FY2015, but $278 million above the President's request), $863 million for drinking water SRF capitalization grants ($44 million below the FY2015 level, and $323 million less than the President's request), and $30 million for Alaska Native Village and U.S.-Mexico border water infrastructure projects. It also provided $1.06 billion for state categorical grants. President Obama presented the Administration's FY2017 budget in February 2016, requesting $8.3 billion in total for EPA ($127 million above the FY2016 enacted budget). The request for EPA included $979.5 million for clean water SRF capitalization grants ($424 million less than the FY2016 enacted level), $1.02 billion for drinking water SRF capitalization grants ($157 million above the FY2016 amount), $22 million for Alaska Native Village and U.S.-Mexico border projects, and $1.158 billion for state categorical grants, which generally support state and tribal implementation of environmental programs. During congressional hearings on the EPA request, many Members criticized the requested 30% decrease in funds for clean water SRF capitalization grants. This criticism was reflected to some degree in appropriations bills the Appropriations Committees subsequently approved that include EPA funding. In July 2016, the House passed H.R. 5538 , FY2017 Interior and Environment Appropriations Act; it included $1.0 billion for clean water SRF grants, $1.07 billion for drinking water SRF grants, and $1.06 billion for state categorical grants. The Senate Appropriations Committee reported a companion bill, S. 3068 , in June. It included $1.35 billion for clean water SRF grants, $1.02 billion for drinking water SRF grants, and $1.09 billion for state categorical grants. The Senate did not take up this bill. Congress did not reach final agreement on an EPA funding bill before the start of FY2017. However, on September 28, the House and Senate passed a 10-week continuing resolution that extended FY2016 funding levels, minus a 0.496% across-the-board reduction, through December 9, 2016 ( P.L. 114-223 ). A second continuing resolution, passed in December 2014, extended FY2016 funding levels, minus a 0.1901% across-the-board reduction, from December 10, 2016, through April 28, 2017 ( P.L. 114-254 ). The Obama Administration's FY2017 budget submission also included a $15 million request to allow EPA to begin making water infrastructure project loans under a program that Congress enacted in 2014, the Water Infrastructure Financing and Investment Act, or WIFIA. P.L. 114-254 included the first appropriation, $20 million, for EPA to do so. The FY2017 final appropriations act (discussed below) provided an additional $8 million for EPA's WIFIA program (and $2 million for EPA to administer the program). Final full-year appropriations were enacted as part of the Consolidated and Further Continuing Appropriations Act, 2017, signed by President Trump on May 5, 2017 ( P.L. 115-31 ). The act provided the same level of funding for water infrastructure as FY2016: $1.394 billion for clean water SRF capitalization grants ($414 million above President Obama's request), $863 million for drinking water SRF capitalization grants ($158 million less than President Obama's request), and $30 million for Alaska Native Village and U.S.-Mexico border water infrastructure projects. It also provided $1.07 billion for state categorical grants, which support a range of environmental programs. The Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ), included an additional $100 million in DWSRF funding to assist Flint, MI, as authorized in the Water Infrastructure Improvements for the Nation (WIIN) Act ( P.L. 114-322 ). The Trump Administration's FY2018 budget request proposed $8.6 billion overall for EPA. The request included $1.394 billion for clean water SRF capitalization grants and $863 million for drinking water SRF capitalization grants (the same amounts as the FY2017 appropriation). The request proposed $597 million for state categorical grants, a 44% reduction compared to FY2017 levels. Much of this reduction came from the elimination of funding for nonpoint source grants (CWA Section 319) and reduction of grant funding for water pollution control (CWA Section 106). In addition, the President's budget request proposed to eliminate funding for Alaska Native Village and U.S.-Mexico border projects. Similar to the previous fiscal year, Congress did not reach final agreement on an EPA funding bill before the start of FY2018. EPA and other federal departments and agencies operated under multiple continuing resolutions generally at FY2017 enacted levels (minus across-the-board rescissions). Final full-year appropriations were enacted as part of the Consolidated Appropriations Act, 2018, signed by President Trump on March 23, 2018 ( P.L. 115-141 ). EPA's STAG account (Division G, Title II) included $1.394 billion for the clean water SRF and $863 million for the drinking water SRF program (the same amounts appropriated for FY2017, less $100 million for the DWSRF provided to assist Flint, MI). Division G, Title IV (General Provisions), Section 430, included an additional $600 million ($300.0 million each) within the STAG account for both SRF programs. P.L. 115-141 also provided $63 million for the WIFIA program, more than doubling the FY2017 appropriation. The act provided $20 million for Alaska Native Village projects and $10 million U.S.-Mexico border projects. It also provided $1.08 billion for state categorical grants, which support a range of environmental programs. In addition, the act provided the first appropriations for three programs authorized in the WIIN Act ( P.L. 114-322 , Title II, the Water and Waste Act of 2016): $10 million to help public water systems serving small or disadvantaged communities meet SDWA requirements; $20 million to support lead reduction projects, including lead service line replacement; and $20 million to establish a voluntary program for testing for lead in drinking water at schools and child care programs. The Trump Administration's FY2019 budget request proposed $6.15 billion overall for EPA. The request included $1.394 billion for clean water SRF capitalization grants and $863 million for drinking water SRF capitalization grants (the same amounts requested in FY2018). The request included $20 million for the WIFIA program: $17 million to cover subsidy costs, which EPA estimated would allow the agency to lend approximately $2 billion (EPA Budget Justification), and $3 million for administrative costs. In addition, the request proposed $597 million for state categorical grants and $3 million for Alaska Native Village projects. The request proposed to eliminate funding for nonpoint source grants (CWA Section 319), reduce grant funding for water pollution control (CWA Section 106), and eliminate funding for U.S.-Mexico border water infrastructure projects. At the beginning of FY2019, EPA operated under the terms and conditions of multiple continuing resolutions (Division C of P.L. 115-245 ; P.L. 115-298 ; and P.L. 116-5 ). A \"partial government shutdown\" began on December 22, 2018, during which EPA operated under its shutdown contingency plans. Final full-year appropriations were enacted as part of the Consolidated Appropriations Act, FY2019 ( P.L. 116-6 ), signed by President Trump on February 15, 2019. FY2019 appropriations were provided in two titles of P.L. 116-6 . Title II included $1.394 billion for the CWSRF, $864.0 million for the DWSRF, and $10.0 million for WIFIA. Title IV included an additional $600.0 million ($300.0 million each) for both SRF programs and an additional $58.0 million for WIFIA. Title IV of P.L. 116-6 included $65.0 million within the EPA STAG account for grants authorized in the WIIN Act ( P.L. 114-322 ): $25 million to help public water systems serving small or disadvantaged communities meet SDWA requirements, $15 million to support lead reduction projects (including lead service line replacement), and $25 million to establish a voluntary program for testing for lead in drinking water at schools and child care programs. In addition, the act provided $25 million for Alaska Native Village projects and $15 million U.S.-Mexico border projects. It also provided $1.08 billion for state categorical grants, which support a range of environmental programs. The Trump Administration's FY2020 budget request proposed $6.07 billion overall for EPA. The request included $1.120 billion for CWSRF capitalization grants; $863 million for drinking water SRF capitalization grants; $25 million for the WIFIA program: $20 million to cover subsidy costs, which EPA estimated would allow the agency to lend over $2 billion (EPA Budget Justification), and $5 million for administrative costs; $3 million for Alaska Native Village projects; $10 million for testing for lead in drinking water at schools and child care programs; $61 million for sewer overflow control grants; $154 million for water pollution control grants (CWA Section 106); and $580 million for state categorical grants, which support a range of environmental programs. The Administration's request proposed to eliminate funding for the following: nonpoint source grants, U.S.-Mexico border water infrastructure projects, drinking water grants for small and disadvantage communities, and lead reduction project grants.", "summary": "The principal federal program to aid municipal wastewater treatment plant construction is authorized in the Clean Water Act (CWA). Established as a grant program in 1972, it now capitalizes state loan programs through the clean water state revolving loan fund (CWSRF) program. Since FY1972, appropriations have totaled $98 billion. In 1996, Congress amended the Safe Drinking Water Act (SDWA, P.L. 104-182) to authorize a similar state loan program for drinking water to help systems finance projects needed to comply with drinking water regulations and to protect public health. Since FY1997, appropriations for the drinking water state revolving loan fund (DWSRF) program have totaled $23 billion. The U.S. Environmental Protection Agency (EPA) administers both SRF programs, which annually distribute funds to the states for implementation. Funding amounts are specified in the State and Tribal Assistance Grants (STAG) account of EPA annual appropriations acts. The combined appropriations for wastewater and drinking water infrastructure assistance have represented 25%-32% of total funds appropriated to EPA in recent years. Prior to CWA amendments in 1987 (P.L. 100-4), Congress provided wastewater grant funding directly to municipalities. The federal share of project costs was generally 55%; state and local governments were responsible for the remaining 45%. The 1987 amendments replaced this grant program with the SRF program. Local communities are now often responsible for 100% of project costs, rather than 45%, as they are required to repay loans to states. The greater financial burden of the act's loan program on some cities has caused some to seek continued grant funding. Although the CWSRF and DWSRF have largely functioned as loan programs, both allow the implementing state agency to provide \"additional subsidization\" under certain conditions. Since its amendments in 1996, the SDWA has authorized states to use up to 30% of their DWSRF capitalization grants to provide additional assistance, such as forgiveness of loan principal or negative interest rate loans, to help disadvantaged communities. America's Water Infrastructure Act of 2018 (AWIA; P.L. 115-270) increased this proportion to 35% while conditionally requiring states to use at least 6% of their capitalization grants for these purposes. Congress amended the CWA in 2014, adding similar provisions to the CWSRF program. In addition, appropriations acts in recent years have required states to use minimum percentages of their allotted SRF grants to provide additional subsidization. Final full-year appropriations were enacted as part of the Consolidated Appropriations Act, FY2019 (P.L. 116-6), on February 15, 2019. The act provided $1.694 billion for the CWSRF and $1.163 billion for the DWSRF program, nearly identical to the FY2018 appropriations. The FY0219 act provided $68 million for the WIFIA program, a $5 million increase from the FY2018 appropriation. Compared to the FY2019 appropriation levels, the Trump Administration's FY2020 budget request proposes to decrease the appropriations for the CWSRF, DWSRF, and WIFIA programs by 34%, 26%, and 63%, respectively.", "document_type": "crs"}
{"report": "The nation's air, land, and marine transportation systems are designed for accessibility and efficiency, two characteristics that make them vulnerable to attack. The difficulty and cost of protecting the transportation sector from attack raises a core question for policymakers: how much effort and resources to put toward protecting potential targets versus pursuing and fighting terrorists. While hardening the transportation sector against terrorist attack is difficult, measures can be taken to deter terrorists. The focus of debate is how best to implement and finance a system of deterrence, protection, and response that effectively reduces the possibility and consequences of terrorist attacks without unduly interfering with travel, commerce, and civil liberties. For all modes of transportation, one can identify four principal policy objectives that would support a system of deterrence and protection: (1) ensuring the trustworthiness of the passengers and the cargo flowing through the system; (2) ensuring the trustworthiness of the transportation workers who operate and service the vehicles, assist the passengers, or handle the cargo; (3) ensuring the trustworthiness of the private companies that operate in the system, such as the carriers, shippers, agents, and brokers; and (4) establishing a perimeter of security around transportation facilities and vehicles in operation. The first three policy objectives are concerned with preventing an attack from within a transportation system, such as occurred on September 11, 2001. The concern is that attackers could once again disguise themselves as legitimate passengers (or shippers or workers) to get in position to launch an attack. The fourth policy objective is concerned with preventing an attack from outside a transportation system. For instance, terrorists could ram a bomb-laden speedboat into an oil tanker, as was done in October 2002 to the French oil tanker Limberg , or they could shoot a shoulder-fired missile at an airplane taking off or landing, as was attempted in November 2002 against an Israeli charter jet in Mombasa, Kenya. Achieving all four of these objectives is difficult at best, and in some modes, is practically impossible. Where limited options exist for preventing an attack, policymakers are left with evaluating options for minimizing the consequences of an attack, without imposing unduly burdensome requirements. Following the 9/11 terrorist attacks, Congress took swift action to create the Transportation Security Administration (TSA) within the U.S. Department of Transportation and gave it control over all airline passenger and baggage screening functions and deployment of armed air marshals on commercial passenger flights. In 2003, TSA was transferred to the newly formed Department of Homeland Security (DHS). To this day, the federal role in airport screening remains controversial. While airports are allowed to opt out of federal screening, alternative private screening under TSA contracts has been limited to 22 airports out of approximately 450 commercial passenger airports where passenger screening is required. Congress has sought to ensure that optional private screening remains available for those airports that want to pursue this option. The TSA Modernization Act, incorporated into the FAA Reauthorization Act of 2018 ( P.L. 115-254 ), includes language directing TSA to streamline the contracting process for private screening at airports, and directs TSA to look into the feasibility of modifying the program to allow individual airport terminals, instead of entire airports, to switch over to screening by private contractors. Proposals seeking more extensive reforms of passenger screening have not been extensively debated. Rather, aviation security legislation has largely focused on specific mandates to comprehensively screen for explosives and carry out background checks and threat assessments. Despite the extensive focus on aviation security for more than a decade, a number of challenges remain, including effectively screening passengers, baggage, and cargo for explosives threats; developing effective risk-based methods for screening passengers and others with access to aircraft and sensitive areas; incorporating biometrics into the passenger screening process to verify identities; exploiting available intelligence information and watchlists to identify individuals who pose potential threats to civil aviation; implementing effective systems, regulations, and international agreements to assess risk and conduct risk-based screening of air cargo shipments worldwide; effectively deterring and responding to security threats in public areas of airports and at screening checkpoints; developing effective strategies for addressing aircraft vulnerabilities to shoulder-fired missiles and other standoff weapons; and addressing the potential security implications of unmanned aircraft operations in domestic airspace and developing effective countermeasures to protect critical infrastructure, including airports and aircraft, from attacks using drones. Prior to the 9/11 attacks, explosives screening in the aviation domain was limited in scope and focused on selective screening of checked baggage placed on international passenger flights. Immediately following the 9/11 attacks, the Aviation and Transportation Security Act (ATSA; P.L. 107-71 ) mandated 100% screening of all checked baggage placed on domestic passenger flights and on international passenger flights to and from the United States. In addition, the Implementing the 9/11 Commission Recommendations Act of 2007 ( P.L. 110-53 ) mandated the physical screening of all cargo placed on passenger flights. Unlike passenger and checked baggage screening, TSA does not routinely perform physical inspections of air cargo. Rather, TSA satisfies this mandate through the Certified Cargo Screening Program. Under the program, manufacturers, warehouses, distributors, freight forwarders, and shippers carry out screening inspections using TSA-approved technologies and procedures both at airports and at off-airport facilities in concert with certified supply-chain security measures and chain-of-custody standards. Internationally, TSA works with other governments, international trade organizations, and industry to assure that all U.S.-bound air cargo shipments carried aboard passenger aircraft meet the requirements of the mandate. Additionally, TSA works closely with Customs and Border Protection (CBP) to carry out risk-based targeting of cargo shipments, including use of the CBP Advance Targeting System-Cargo (ATS-C), which assigns risk-based scores to inbound air cargo shipments to identify shipments of elevated risk. Originally designed to combat drug smuggling, ATS-C has evolved over the years, particularly in response to an October 2010 cargo aircraft bomb plot that originated in Yemen, to assess shipments for explosives threats or other terrorism-related activities. CBP and TSA continue to pilot test the Air Cargo Advance Screening (ACAS) system, initiated in 2010, under which freight forwarders and airlines voluntarily submit key data elements of cargo manifests for predeparture vetting. P.L. 115-254 requires TSA to establish an air cargo security division and review and improve the Known Shipper Program and Certified Cargo Screening Program to enhance their effectiveness and address any identified vulnerabilities. The act also requires U.S. Customs and Border Protection to work with TSA to establish a formal ACAS program for inbound international cargo modelled on the long-running ACAS pilot program. It directs TSA to examine the feasibility of expanding the use of computed tomography to air cargo and examine other emerging screening technologies that may enhance air cargo screening. Given the focus on the threats to aviation posed by explosives, a significant focus of TSA acquisition efforts has been on explosives screening technologies. The Transportation Security Acquisition Reform Act ( P.L. 113-245 ) required TSA to develop a five-year technology investment plan and mandated formal justifications and certifications that technology investments are cost-beneficial. The act also required tighter inventory controls and processes to ensure efficient utilization of procured technologies. P.L. 115-254 requires TSA to update this plan annually to accompany its budget request. The act also requires TSA to establish an innovation task force to work with industry to identify, cultivate, and accelerate the development and implementation of innovative transportation security technologies. A major thrust of TSA's acquisition and technology deployment strategy is improving the capability to detect concealed explosives and bomb-making components carried by airline passengers. The October 31, 2015, downing of a Russian passenger airliner departing Sharm el-Sheikh, Egypt, reportedly following the explosion of a bomb aboard the aircraft, renewed concerns over capabilities to detect explosives in baggage and cargo and monitoring of airport workers with access to aircraft, particularly overseas. In response to a 2009 incident aboard a Northwest Airlines flight, the Obama Administration accelerated deployment of Advanced Imaging Technology (AIT) whole body imaging devices and other technologies at passenger screening checkpoints. This deployment responded to the 9/11 Commission recommendation to improve the detection of explosives on passengers. In addition to AIT, next generation screening technologies for airport screening checkpoints include advanced technology X-ray systems for screening carry-on baggage, bottled liquids scanners, cast and prosthesis imagers, shoe scanning devices, and portable explosives trace detection equipment. The use of AIT has raised a number of policy questions. Privacy advocates have objected to the intrusiveness of AIT, particularly when used for primary screening. To allay privacy concerns, TSA eliminated the use of human analysis of AIT images and does not store imagery. In place of human image analysts, TSA has deployed automated threat detection capabilities using automated targeting recognition (ATR) software. Another concern raised about AIT centered on the potential medical risks posed by backscatter X-ray systems, but those systems are no longer in use for airport screening, and current millimeter wave systems emit nonionizing millimeter waves generally not considered harmful. More recently, the effectiveness of AIT and ATR has been brought into question. In 2015, the DHS Office of Inspector General completed covert testing of passenger screening checkpoint technologies and processes and consistently found failures in technology and procedures coupled with human error that allowed prohibited items to pass into secure areas. Even prior to the revelations of weaknesses in passenger checkpoint screening technologies and procedures, the use of AIT was controversial. Past legislative proposals specifically sought to prohibit the use of whole body imaging for primary screening (see, for example, H.R. 2200 , 111 th Congress). Primary screening using AIT is now commonplace at larger airports, but checkpoints at many smaller airports have not been furnished with AIT equipment and other advanced checkpoint detection technologies. This raises questions about TSA's long-range plans to expand AIT to ensure more uniform approaches to explosives screening across all categories of airports. Through FY2018, TSA deployed about 960 AIT units. It has not planned for procurements beyond this level, although many smaller airports are not equipped with this capability. TSA plans to manage this risk to a large extent through risk-based passenger screening measures, primarily through increased use of voluntary passenger background checks under the PreCheck trusted traveler program. However, this program, likewise, is not available at many smaller airports: Currently, the program's incentive of expedited screening is offered at fewer than half of all commercial passenger airports. The FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) directed TSA to initiate a demonstration program at three to six large airports to examine passenger checkpoint reconfigurations that increase efficiencies and reduce vulnerabilities, and a separate demonstration program at three airports to develop and test next-generation screening system prototypes designed to expedite passenger handling. P.L. 115-254 instructs TSA to continue operation of its systems integration facility at Washington Reagan National Airport for testing and evaluating advanced transportation security screening technologies, and to ensure timely assessments of new screening technologies. It also directs TSA to promote a diverse security technology industry to better enable small business innovators to develop and commercialize new transportation security technologies. The act requires TSA to formally establish its innovation task force to accelerate the development of innovative transportation security technologies and capabilities. The act also directs DHS to conduct a review to determine whether the Transportation Security Laboratory in Atlantic City, NJ, whose core mission is to perform research, development, and validation of explosives detection and mitigation technologies, should be managed by TSA or by another DHS entity. The laboratory was originally transferred to TSA from the Federal Aviation Administration (FAA), but has been in the hands of the DHS Science and Technology Directorate for more than a decade. TSA has initiated a number of risk-based screening initiatives to focus its resources and apply directed measures based on intelligence-driven assessments of security risk. These include PreCheck; modified screening procedures for children 12 and under; and a program for expedited screening of known flight crew and cabin crew members. Programs have also been developed for modified screening of elderly passengers similar to those procedures put in place for children. PreCheck is modeled on CBP programs such as Global Entry, SENTRI, and NEXUS. Under the program, participants vetted through a background check process are processed through expedited screening lanes where they can keep shoes on and keep liquids and laptops inside carry-on bags. As of December 2018, PreCheck expedited screening lanes were available at more than 200 airports. The cost of background checks under the PreCheck program is recovered through application fees of $85 per passenger for a five-year membership. TSA's goal is to process 50% of passengers through PreCheck expedited screening lanes, thus reducing the need for standard security screening lanes, but it has struggled to increase program membership. One concern raised over the PreCheck program is the lack of biometric authentication to verify participants at screening checkpoints. A predecessor test program, the Registered Traveler program, which used private vendors to issue and scan participants' biometric credentials, was scrapped by TSA in 2009 because it failed to show a demonstrable security benefit. In 2016, biometric identity authentication was reintroduced at 13 airports under a private trusted traveler program known as Clear. Participants in Clear, which is separate from PreCheck and not operated or funded by TSA, use an express lane to verify identity using a fingerprint or iris scan rather than interacting with a TSA document checker. Previously, the extensive use of a program called \"managed inclusion\" to route selected travelers not enrolled in PreCheck through designated PreCheck expedited screening lanes also raised objections. The Government Accountability Office (GAO) found that TSA had not fully tested its managed inclusion practices, and recommended that TSA take steps to ensure and document that testing of the program adheres to established evaluation design practices. TSA phased out the managed inclusion program in the fall of 2015. Since September 2015, TSA behavior detection officers and explosives trace detection personnel no longer direct passengers not enrolled in PreCheck to expedited screening lanes, but pre-assessments using canine teams have continued at some major airports. Questions remain regarding whether PreCheck is fully effective in directing security resources to unknown or elevated-risk travelers. Nonetheless, it has improved screening efficiency. TSA has estimated annual savings in direct screener workforce costs totaling $110 million as a result of PreCheck and other risk-based initiatives. A study suggested that considerably greater efficiency gains might be realized if TSA could double the annual number of PreCheck screenings, which would require increasing the number of PreCheck-eligible travelers to about 15 to 20 million. PreCheck expansion was addressed in recent legislation, and oversight of TSA efforts to expand PreCheck may be a specific topic of interest during the 116 th Congress. Language in P.L. 115-254 directs TSA to work with at least two private-sector entities to expand PreCheck enrollment options and forge at least two agreements for marketing the program, setting enrollment targets of 7 million by the end of FY2019, 10 million by the end of FY2020, and 15 million by the end of FY2021. The act also directs TSA to explore cost-effective options for conducting recurrent background checks of program participants, although this could raise concerns over impacts on enrollments if procedures for recurrent checks impose additional burdens on participants. The act requires TSA to ensure that PreCheck expedited screening lanes are open and available to program participants during peak and high-volume travel times and take steps to provide expedited screening at standard screening lanes when PreCheck lanes are not available. It also instructs TSA to ensure that only trusted traveler program members and members of the Armed Forces are permitted to use PreCheck screening lanes. P.L. 115-254 also directs TSA and CBP to work together on the deployment of biometric technologies for the entry-exit program for international travelers and other uses. According to the TSA Biometrics Roadmap, TSA also plans to integrate biometrics technology for identity verification of PreCheck travelers, and seeks to eventually expand the voluntary use of biometrics to all domestic air travelers. Plans for increased use of biometrics raise privacy and data-protection concerns that may be of particular interest to congressional oversight committees. In addition to passenger screening, TSA, in coordination with participating airlines and labor organizations representing airline pilots, has developed a known crewmember program to expedite security screening of airline flight crews. In July 2012, TSA expanded the program to include flight attendants. TSA has also developed a passenger behavior detection program to identify potential threats based on observed behavioral characteristics. TSA initiated early tests of its Screening Passengers by Observational Techniques (SPOT) program in 2003. By FY2012, the program deployed almost 3,000 behavior detection officers at 176 airports, at an annual cost of about $200 million. Questions remain regarding the effectiveness of the behavioral detection program, and privacy advocates have cautioned that it could devolve into racial or ethnic profiling. While some Members of Congress have sought to shutter the program, Congress has not moved to do so. For example, H.Amdt. 127 (113 th Congress), an amendment to the FY2014 DHS appropriations measure that sought to eliminate funding for the program, failed to pass a floor vote. Congress also has not taken specific action to revamp the program, despite the concerns raised by GAO and the DHS Office of Inspector General. P.L. 115-254 directed TSA to utilize risk-based strategies in deploying federal air marshal teams on international and domestic flights. However, a more controversial TSA initiative using air marshals to shadow passengers whose behavioral profiles based on past itineraries indicated they might pose an elevated security risk was reportedly shuttered in December 2018 after media reports and some Members of Congress raised concerns over the privacy implications of the program. Airlines were formerly responsible for checking passenger names against terrorist watchlists maintained by the government. Following at least two instances in 2009 and 2010 in which such checks failed to identify individuals who may pose a threat to aviation, TSA took responsibility for checking passenger names under the Secure Flight program. In November 2010, DHS announced that 100% of passengers flying to or from U.S. airports are being vetted using the Secure Flight system. Secure Flight vets passenger name records against a subset of the Terrorist Screening Database (TSDB). On international flights, Secure Flight operates in coordination with the use of watchlists by CBP's National Targeting Center-Passenger, which relies on the Advance Passenger Information System (APIS) and other tools to vet both inbound and outbound passenger manifests. In addition to flights of U.S. and foreign airlines, all inbound and outbound international flights using chartered and private aircraft must transmit passenger and crew manifests to CBP at least one hour prior to departure. In addition to these systems, TSA conducts risk-based analysis of passenger data carried out by the airlines through use of the Computer-Assisted Passenger Prescreening System (CAPPS). In January 2015, TSA gave notification that it would start incorporating the results of CAPPS assessments, but not the underlying data used to make such assessments, into Secure Flight, along with each passenger's full name, date of birth, and PreCheck traveler number (if applicable). These data are used within the Secure Flight system to perform risk-based analyses to determine whether passengers receive expedited, standard, or enhanced screening at airport checkpoints. P.L. 115-254 removed statutory references to CAPPS, replacing them with references to the Secure Flight Program to clarify that these various passenger vetting elements are fully encompassed under Secure Flight. The act also directed TSA to conduct and publicly disseminate a review of its privacy impact assessment of the Secure Flight Program. Central issues surrounding the use of terrorist watchlists in the aviation domain that may be considered during the 116 th Congress include the speed with which watchlists are updated as new intelligence information becomes available; the extent to which all information available to the federal government is exploited to assess possible threats among passengers and airline and airport workers; the ability to detect identity fraud or other attempts to circumvent terrorist watchlist checks; the adequacy of established protocols for providing redress to individuals improperly identified as potential threats; and the adequacy of coordination with international partners. In addition, there has been a growing interest in finding better ways to utilize watchlists to prevent terrorist travel, particularly travel of radicalized individuals seeking to join forces with foreign terrorist organizations such as the Islamic State (IS). Language in P.L. 114-190 directed TSA to assess whether recurrent fingerprint-based criminal background checks could be carried out in a cost-effective manner to augment terrorist watchlist checks for PreCheck program participants. Additionally, the act directed TSA to expand criminal background checks for certain airport workers. Airport perimeter security, access controls, and credentialing of airport workers are generally responsibilities of airport operators. There is no common access credential for airport workers. Rather, each airport separately issues security credentials to airport workers. These credentials are often referred to as Security Identification Display Area (SIDA) badges, and they convey the level of access that an airport worker is granted. TSA requires access control points to be secured by measures such as posted security guards or electronically controlled locks. Additionally, airports must implement programs to train airport workers to challenge anyone not displaying proper identification. Airports may also deploy surveillance technologies, access control measures, and security patrols to protect airport property from intrusion, including buildings and terminal areas. Such measures are paid for by the airport, but must be approved by TSA as part of an airport's overall security program. State and local law enforcement agencies with jurisdiction at the airport are generally responsible for patrols of airport property, including passenger terminals. They also may patrol adjacent properties to deter and detect other threats to aviation, such as shoulder-fired missiles (see \" Mitigating the Threat of Shoulder-Fired Missiles to Civilian Aircraft \"). TSA requires security background checks of airport workers with unescorted access privileges to secure areas at all commercial passenger airports and air cargo facilities. Background checks consist of a fingerprint-based criminal history records check and security threat assessment, which include checking employee names against terrorist database information. Certain criminal offenses committed within the past 10 years, including aviation-specific crimes, transportation-related crimes, and other felony offences, are disqualifying. Airports must collect applicant biographical information and fingerprints to submit to TSA to process background checks. Many airports use a service known as the Transportation Security Clearinghouse to coordinate the processing of background check applications. P.L. 114-190 directed TSA to update the eligibility criteria and disqualifying criminal offenses for SIDA access credentials based on other transportation vetting requirements and knowledge of insider threats to security. The law proposes that TSA expand the criminal history look-back period from the current 10 years to 15 years, and that individuals be disqualified if they have been released from prison within 5 years of their application. The statute directs TSA to establish a formal waiver process for individuals denied credentials. It also calls for full implementation of recurrent vetting of airport workers with SIDA access credentials using the Federal Bureau of Investigation's (FBI's) Rap Back service to identify disqualifying criminal offences. Language in P.L. 115-254 requires TSA to provide congressional oversight committees with data on the number of airport workers being continuously vetted though the Rap Back service. It also directs TSA to identify means of using homeland security and intelligence resources to educate TSA personnel on means to better mitigate insider threats. The law also requires TSA to establish a centralized database of individuals who have had security access or aircraft-operator credentials revoked for failing to comply with aviation security requirements. P.L. 114-190 directed TSA to conduct random physical inspections of airport workers at SIDA access points and in SIDA areas. P.L. 115-254 clarifies that TSA-led random inspections of aviation workers be targeted, strategic, and focused on providing the greatest level of security effectiveness, rather than being \"random\" in the true sense of the word. The law also directs TSA to continue its covert testing of employee access controls and provide measures of the effectiveness of such operations to airport operators, and as appropriate, to airlines. The act also establishes more stringent standards for individuals applying for SIDA access, requiring that such individuals provide their social security number in order to strengthen vetting effectiveness. Explosives screening technologies at passenger screening checkpoints primarily consist of the AIT whole body imaging systems; advanced technology X-ray imagers for carry-on items; and explosives trace detection systems used to test swab samples collected from individuals or carry-on items for explosives residue. TSA began introducing Computed Tomography (CT) scanning technology at passenger screening checkpoints in FY2018 on a trial basis, and plans to expand the use of CT technology for scanning carry-on items throughout FY2019, with an aim of deploying more than 150 units at 14 major airports. TSA asserts that CT technology offers automated capabilities to help improve detection of explosives and other threats. TSA concedes, however, that the introduction of CT technology, at least initially, will require more resources to clear increased numbers of false alarms compared to X-ray technology, and seeks to increase screener numbers at those airports where CT will be deployed to minimize these impacts on passenger screening. P.L. 115-254 directs TSA to proceed with these CT pilot programs and also to examine the feasibility of using CT technology to screen cargo carried on passenger aircraft. The act also directs TSA to assess other emerging screening technologies that may be used to enhance air cargo screening. For checked baggage screening, TSA utilizes a combination of CT-based explosives detection systems and chemical trace detection technology. TSA deploys either high-speed (greater than 900 bags per hour), medium-speed (400 to 900 bags per hour), or reduced-size (100 to 400 bags per hour) CT-based systems, depending on airport needs and configurations. TSA is also funding the development of new algorithms to more reliably detect homemade explosives threats in checked baggage and reduce false positives. TSA pays for or reimburses airports for modifying baggage-handling facilities and installing new inspection systems to accommodate explosives detection technologies. The TSA's National Explosives Detection Canine Team Program trains and deploys canines and handlers at transportation facilities to detect explosives. The program includes approximately 370 TSA teams and 675 state and local law enforcement teams trained by TSA under partnership agreements. More than 350 of the TSA teams are dedicated to passenger screening at 46 airports. Following airport bombings in Brussels, Belgium, and Istanbul, Turkey, in 2016, there has been interest in increasing deployments of canine teams in nonsterile areas of airport terminals. P.L. 114-190 authorized TSA to provide training to foreign governments in airport security measures including the use of canine teams. The act also directed TSA to utilize canine teams to minimize passenger wait times and maximize security effectiveness of checkpoint operations. P.L. 115-254 directs TSA to establish a working group to assess ways to support a decentralized, nonfederal domestic breeding program for explosives detection canines and to modernize canine breeding, medical, technical, and training standards. It further instructs TSA to develop guidance for the procurement and deployment of third-party domestic canines to enhance public area security at transportation hubs, including airports. Large hub airports that do not have their full allocation of explosives detection canine teams would be able to directly acquire canines from TSA-approved third-party sources, but canines procured in this manner would be trained by TSA personnel. Additionally, the act directs TSA to issue standards for the primary screening of air cargo by private entities using dogs and handlers not owned or employed by TSA. Incident response at airports is primarily the responsibility of airport operators and state or local law enforcement agencies, with TSA acting as a regulator in approving an airport's comprehensive security program. Federal law enforcement may also be involved in developing and reviewing response plans, but will typically not have a lead role in event response. However, federal law enforcement may assume a lead investigative role following a security incident, particularly if the event is determined to be an act of terrorism. P.L. 115-254 directs TSA to establish a working group to collaborate with public and private stakeholders to develop nonbinding recommendations for enhancing security in public areas of transportation facilities. The act also directs TSA to increase funding under the law enforcement reimbursable program for airports to increase the presence of law enforcement officers in public areas to provide visible deterrents to terrorists, including in baggage claim and ticketing areas and on airport access roads, as well as at screening checkpoints. On November 1, 2013, a lone gunman targeting TSA employees fired several shots at a screening checkpoint at Los Angeles International Airport (LAX), killing one TSA screener and injuring two other screeners and one airline passenger. In a detailed postincident action report, TSA identified several proposed actions to improve checkpoint security, but did not support proposals to arm certain TSA employees or provide screeners with bulletproof vests, and did not recommend mandatory law enforcement presence at checkpoints. The Gerardo Hernandez Airport Security Act of 2015 ( P.L. 114-50 ), named in honor of the TSA screener killed in the LAX incident and enacted in September 2015, requires airports to adopt plans for responding to security incidents and to create a mechanism for sharing information among airports regarding best practices for airport security incident planning, management, and training. It also requires TSA to identify ways to expand the availability of funding for checkpoint screening law enforcement support through cost savings from improved efficiencies mainly achieved through implementing PreCheck expedited screening protocols. TSA partially reimburses local law enforcement agencies for support at screening checkpoints, and P.L. 115-254 directs TSA to increase funding for the reimbursable program to expand protection of public areas of airports as well as screening checkpoints. TSA regulates foreign air carriers that operate flights to the United States to enforce requirements regarding the acceptance and screening of passengers, baggage, and cargo carried on those aircraft. As part of this regulation, TSA inspects foreign airports from which commercial flights proceed directly to the United States. Officials known as Transportation Security Administration Representatives (TSARs) assess country compliance with international standards for aviation security and plan and coordinate U.S. airport risk analysis and assessments of foreign airports. TSARs also administer and coordinate TSA response to terrorist incidents and threats to U.S. citizens and transportation assets and interests overseas. Fifteen foreign last point of departure airports (eight in Canada, two in the Bahamas, one in Bermuda, one in Aruba, two in Ireland, and one in Abu Dhabi) have Customs and Border Protection (CBP) preclearance facilities where passengers are admitted to the United States prior to departure. Passengers arriving on international flights from these preclearance airports deplane directly into the airport sterile area upon arrival at the U.S. airport of entry, where they can board connecting flights or leave the airport directly, rather than being routed to customs and immigration processing facilities. CBP has announced its intention to expand customs preclearance to additional countries and airports. While agreements to offer preclearance at airports in Stockholm, Sweden, and Punta Cana, Dominican Republic, were finalized in 2016, preclearance operations at these airports have not yet been established. Plans to offer preclearance at other airports are still being negotiated. Assessing screening measures at preclearance airports is a particular priority for TSA. TSA is also working to increase checked baggage preclearance processing so checked baggage does not have to be rescreened by TSA at the U.S. airport of entry, which has been the practice. Language in P.L. 114-190 requires TSA to conduct security risk assessments at all last point of departure airports, and authorizes the donation of security screening equipment to such airports to mitigate security vulnerabilities that put U.S. citizens at risk. P.L. 115-254 mandates that any such donated screening equipment be restored to original commercial settings and must not contain TSA-specific security standards or algorithms. Recipients of donated screening equipment must satisfactorily demonstrate that they are capable of properly maintaining it and must ensure that, once the equipment is retired from service, it does not get into the hands of terrorists or otherwise compromise security. The act also directs DHS, in coordination with the Department of State, to review and improve international aviation security standards and dissemination and implementation processes for security directives and emergency amendments to security requirements issued to domestic and foreign air carriers. It instructs TSA to work with the International Civil Aviation Organization to raise minimum standards for aviation security. P.L. 115-254 also directs TSA to work with FAA to track public charter flights between the United States and Cuba, and to brief congressional oversight committees on aviation security measures at Cuban airports that have air service to the United States. The terrorist threat posed by small man-portable shoulder-fired missiles was brought into the spotlight soon after the 9/11 terrorist attacks by the November 2002 attempted downing of a chartered Israeli airliner in Mombasa, Kenya. Since then, Department of State and military initiatives have sought bilateral cooperation and voluntary reductions of shoulder-fired missiles, formally referred to as man-portable air defense systems (MANPADS), worldwide. The most visible DHS initiative to address the threat was the multiyear Counter-MANPADS program carried out by the DHS Science & Technology Directorate. The program concluded in 2009 with extensive testing and FAA certification of two systems capable of protecting airliners against heat-seeking missiles. The systems have not been deployed on commercial airliners in the United States, however, due largely to high acquisition and life-cycle costs. U.S. airlines have not voluntarily invested in these systems for operational use, and argue that the costs for such systems should be borne, at least in part, by the federal government. MANPADS are mainly seen as a security threat to civil aviation overseas, but a MANPADS attack in the United States could have a considerable impact on the airline industry. While major U.S. airports have conducted vulnerability studies, efforts to reduce vulnerabilities to potential MANPADS attacks face significant logistic challenges. While Congress has not formally debated the issue since the conclusion of the DHS program in 2009, any future terrorist attempts to use standoff weapons, including shoulder-fired missiles, to attack civilian aircraft could quickly escalate this to a major national security priority. The proliferation of civilian drones, also known as unmanned aircraft systems (UAS), raises potential security risks, including the possibility that terrorists could use a drone to carry out an attack against a ground target. It is also possible that drones themselves could be targeted by terrorists or cybercriminals seeking to tap into sensor data transmissions or to cause mayhem by hacking or jamming command and control signals. Two principal concerns are that drones could be used to attack critical infrastructure or high-profile targets and that unauthorized drone operations in close proximity to airports could disrupt air transportation. The 116 th Congress may have a particular interest in policies and technologies to mitigate safety and security threats posed by unmanned aircraft. Terrorists could potentially use drones to carry out small-scale attacks using explosives, or as platforms for chemical, biological, or radiological attacks. In September 2011, the FBI disrupted a homegrown terrorist plot to attack the Pentagon and the Capitol with large model aircraft packed with high explosives. Widely publicized drone incidents include an unauthorized flight at a political rally in Dresden, Germany, in September 2013 that came in close proximity to German Chancellor Angela Merkel; a January 2015 crash of a small hobby drone on the White House lawn in Washington, DC; a series of unidentified drone flights over landmarks and sensitive locations in Paris, France, in 2015; and drone sightings around London Gatwick and Heathrow airports in December 2018 that grounded numerous airline flights. These incidents have raised additional concerns about safety and security threats posed by small unmanned aircraft. Domestically, there have been numerous reports of drones flying in close proximity to airports and manned aircraft, in restricted airspace, and over stadiums and outdoor events. In September 2017, a hobby drone collided with a National Guard Black Hawk helicopter assigned to patrol the skies over New York harbor during a meeting of the United Nations General Assembly, causing damage to one of the helicopter's rotor blades. Numerous other safety incidents involving drones have been reported in the United States and abroad, but few have been tied to terrorism. However, ISIS is known to have used drones in conflict zones to conduct reconnaissance and drop explosives. While the payload capacities of small unmanned aircraft would likely limit the damage a terrorist attack using conventional explosives could inflict, drone attacks using chemical, biological, or radiological weapons could be more serious. Regulations for small unmanned aircraft used for commercial purposes require TSA to carry out security threat assessments of certificated operators as it does for civilian pilots. However, this requirement does not apply to recreational users, who are already permitted to operate small drones at low altitudes. Moreover, while FAA has issued general guidance to law enforcement regarding unlawful UAS operations, it is not clear that law enforcement agencies have sufficient training or technical capacity to respond to this potential threat. Technology may help manage security threats posed by unmanned aircraft. Integrating tracking mechanisms as well as incorporating \"geo-fencing\" capabilities, designed to prevent flights over sensitive locations or in excess of certain altitude limits, into unmanned aircraft systems may help curtail unauthorized flights. Language in P.L. 114-190 directed FAA to establish a pilot program to detect and mitigate unmanned aircraft operations in the vicinity of airports and other critical infrastructure. Additionally, the act directed FAA to develop an air traffic management system for small UASs that could include measures to detect and deter security threats posed by UASs. The National Defense Authorization Act for FY2017 ( P.L. 114-328 ) authorized the Armed Forces and the Department of Energy to take necessary actions to mitigate threats posed by a UAS to certain security-related facilities in the United States. The act authorizes the military to detect, monitor, and track UASs; issue warnings to operators; disrupt control of a UAS, including interrupting or jamming control signals; seize or take control of the UAS; confiscate the unmanned aircraft; or use reasonable force to disable or destroy the UAS. P.L. 115-254 more broadly authorizes the Department of Justice and DHS to take similar defensive actions to protect people, facilities, or assets from credible threats posed by UASs. The act also expands the mission of the Coast Guard to include carrying out protective measures to safeguard its facilities and assets, including Coast Guard vessels and aircraft, from threats posed by unmanned aircraft. P.L. 115-254 also directs FAA to coordinate with the various agencies authorized to engage in counter-unmanned aircraft (C-UAS) activities to review standards, policies, and practices with respect to maintaining safety for airspace users, protecting individuals and property on the ground, and not interfering with avionics, navigation, and air traffic control systems. Additionally, the review is to assess the adequacy of those agencies' coordination with FAA regarding C-UAS operations, the adequacy of training for personnel operating C-UAS systems, information sharing regarding airspace authorizations, and best practices for consistent C-UAS operations. The act directs FAA to work with the Department of Defense (DOD), DHS, and other relevant agencies to ensure that technologies developed to mitigate risks posed by an errant or hostile UAS do not adversely impact safe airport operations and air traffic and air navigation services. The act also directs FAA to work with DOD to streamline deployment of C-UAS and requires FAA to develop a comprehensive strategy for identifying and responding to public safety threats posed by UASs. It also requires FAA to implement a pilot program using remote detection capabilities to identify UASs in order to carry out enforcement actions against UAS operators not in compliance with applicable aviation laws and regulations. P.L. 115-254 establishes a formal prohibition against civilians arming unmanned aircraft with dangerous weapons. Additionally, the act establishes criminal penalties for flying a drone over the White House grounds, the Vice President's residence, sites where the President or other individuals protected by the Secret Service are visiting, or other buildings or grounds hosting a special event of national significance. It also establishes criminal penalties for using a drone in a manner that interferes with wildfire suppression efforts or related law enforcement or emergency response activities. There is growing concern over cybersecurity threats to aircraft, air traffic control systems, and airports. Executive Order 13636 provides broad guidance for DHS to work with FAA to identify cybersecurity risks, establish voluntary cybersecurity measures, and share information on cybersecurity threats within the broader cybersecurity framework. Additionally, 49 U.S.C. §44912 specifically directs TSA to periodically review threats to civil aviation with a particular focus on specified threats, including the potential disruption of civil aviation service resulting from a cyberattack. TSA has indicated that its approach to cybersecurity thus far has not been through regulation, but rather through voluntary collaboration with industry. Under this framework, TSA formed the Transportation Systems Sector Cybersecurity Working Group, which created a cybersecurity strategy for the transportation sector in 2012. Also, in coordination with the FBI and industry partners, TSA launched the Air Domain Intelligence Integration Center and an accompanying analysis center in 2014 to share information and conduct analysis of cyberthreats to civil aviation. In recognition of those threats, FAA has developed a software assurance policy for all FAA-owned and FAA-controlled information systems. However, according to an April 2015 GAO report, while FAA has taken steps to protect air traffic control systems from cyberthreats, it faces continuing challenges in mitigating cyberthreats, particularly as it transforms air traffic control systems under its NextGen modernization initiative. While FAA has adopted an evolving framework to address the cybersecurity of its systems, a January 2018 GAO report warned that new aircraft tracking technologies that will transform air traffic control in the coming years under NextGen have unmitigated cybersecurity vulnerabilities, including vulnerabilities to jamming, hacking, and spoofing of signals, that could compromise air traffic operations as well as pose a threat to national security and military aircraft operations. For systems onboard aircraft, FAA requires cybersecurity to be addressed in the existing airworthiness certification process. Large commercial aircraft and aviation systems manufacturers now typically collaborate with software security companies to attain high levels of assurance for software embedded in avionics equipment. Despite efforts to design aircraft systems to be resilient to cyberthreats, in April 2015 TSA and the FBI issued warnings that the increasing interconnectedness of these systems makes them vulnerable to unauthorized access and advised airlines to look out for individuals trying to tap into aircraft electronics and for evidence of tampering or network intrusions. FAA separately addresses cybersecurity of government-owned air traffic control systems and certified aircraft systems. However, GAO has cautioned that FAA's current approach to cybersecurity does not adequately address the interdependencies between aircraft and air traffic systems, and consequently may hinder efforts to develop a comprehensive and coordinated strategy. While it identified no easy fix, GAO recommended that FAA develop a comprehensive cybersecurity threat model, better clarify cybersecurity roles and responsibilities, improve management security controls and contractor oversight, and fully incorporate National Institute of Standards and Technology information security guidance throughout the system life cycle. Language in P.L. 114-190 mandated development of a comprehensive strategic framework for reducing cybersecurity risks to the national airspace system, civilian aviation, and FAA information systems. P.L. 115-254 directs FAA to review and update the framework to address known cybersecurity risks to the aviation system and short-term and long-term objectives for addressing these risks. The act also directs FAA to address cybersecurity in the certification of aircraft avionics systems and component software, and the cybersecurity of systems and technologies relating to the air traffic control system. The act also directs FAA to develop an integrated cybersecurity testbed for air traffic control modernization technologies. It orders a National Academy of Sciences study to develop recommendations on how to increase the size, quality, and diversity of FAA's cybersecurity workforce. P.L. 115-254 directs TSA to implement the framework for improving critical infrastructure cybersecurity developed by the National Institute of Standards and Technology to manage cybersecurity risks and conduct cybersecurity vulnerability assessments, including cybersecurity evaluations of the PreCheck program as well as transportation worker credentialing programs that contain data on individuals. The act also directs TSA to coordinate with international counterparts to harmonize validation processes, allowing reciprocal recognition of security and screening technology approvals that comply with agreed-upon standards relating to performance as well as information security and cybersecurity. The act also directs DHS to review global aviation security standards and practices, including assessments of the cybersecurity risks of security screening equipment. In November 2018, TSA released a new cybersecurity roadmap providing a broad framework for how it will work with transportation industry and government stakeholders to address cybersecurity risks, including risks to aviation. The specific roles of TSA and FAA in regulating cybersecurity, particularly in areas such as aircraft and avionics certification and air traffic control, which have historically been FAA responsibilities, may be a specific topic for congressional oversight during the 116 th Congress. Bombings of and shootings on passenger trains in Europe and Asia have illustrated the vulnerability of passenger rail systems to terrorist attacks. Passenger rail systems—primarily subway systems—in the United States carry about five times as many passengers each day as do airlines, over many thousands of miles of track, serving stations that are designed primarily for easy access. The increased security efforts around air travel have led to concerns that terrorists may turn their attention to \"softer\" targets, such as transit or passenger rail. A key challenge Congress faces is balancing the desire for increased rail passenger security with the efficient functioning of transit systems, the potential costs and damages of an attack, and other federal priorities. The volume of ridership and number of access points make it impractical to subject all rail passengers to the type of screening all airline passengers undergo. Consequently, transit security measures tend to emphasize managing the consequences of an attack. Nevertheless, steps have been taken to try to reduce the risks of an attack as well. These include vulnerability assessments; emergency planning; emergency response training and drilling of transit personnel (ideally in coordination with police, fire, and emergency medical personnel); increasing the number of transit security personnel; installing video surveillance equipment in vehicles and stations; and conducting random inspections of bags, platforms, and trains. The challenges of securing rail passengers are dwarfed by the challenge of securing bus passengers. There are some 76,000 buses carrying 19 million passengers each weekday in the United States. Some transit systems have installed video cameras on their buses, but the number and operating characteristics of transit buses make them all but impossible to secure. In contrast with the aviation sector, where TSA provides security directly, security in surface transportation is provided primarily by the transit and rail operators and local law enforcement agencies. TSA's main roles are oversight, coordination, intelligence sharing, training, and assistance. However, it provides some operational support through its Visible Intermodal Prevention and Response (VIPR) teams, which conduct operations with local law enforcement officials, including periodic patrols of transit and passenger rail systems to create \"unpredictable visual deterrents.\" Several presidential Administrations have sought to reduce the size of the VIPR program, the value of which has yet to be demonstrated, but Congress has sought to increase the size of the program. Congressional efforts to promote the security of passenger rail and transit include providing grants to service providers, requiring those providers considered to be high-risk targets (by DHS) to have security plans approved by DHS, and requiring DHS to conduct security background checks and immigration status checks on all transit and railroad frontline employees. According to TSA, its three primary objectives for reducing risk in transit are to increase system resilience by protecting high-risk/high-consequence assets (i.e., critical tunnels, stations, and bridges); expand visible deterrence activities (i.e., canine teams, passenger screening teams, and antiterrorism teams); and engage the public and transit operators in the counterterrorism mission. TSA surface transportation security inspectors conduct assessments of transit systems (and other surface modes) through the agency's Baseline Assessment for Security Enhancement (BASE) program. The agency has also developed a security training and security exercise program for transit. TSA's program for securing surface transportation is known as Risk Mitigation Activities for Surface Transportation (RMAST). The intent of the RMAST program is to focus TSA's limited surface security resources on high-risk entities and locations. However, GAO reported in 2017 that TSA had not identified or prioritized high-risk entities for the RMAST program to focus on. The surface transportation inspector program has been a focus of congressional interest. Issues of concern to Congress have included whether the inspectors promoted from screening passengers at airports have sufficient expertise in surface transportation security; the administrative challenge of having the surface inspectors managed by airport-based federal security directors who themselves typically have no surface transportation experience; and the security value of the tasks performed by surface inspectors. The number of surface inspectors declined from 404 in FY2011 to 222 (full-time equivalent positions) in FY2018. TSA attributed the decrease to efficiencies achieved through focusing efforts on the basis of risk. However, in 2017 GAO reported that surface transportation inspectors were spending more time on the surface transportation mode that TSA had identified as the lowest risk than on the one identified as the highest risk. Surface inspection field offices are located near airports, and surface inspectors may spend a significant portion of their time on tasks related to aviation safety, but TSA does not have complete information on the extent to which surface inspectors are tasked to work on aviation security. GAO reported in 2014 that lack of guidance to TSA's surface inspectors resulted in inconsistent reporting of rail security incidents and that TSA had not consistently enforced the requirement that rail agencies report security incidents, resulting in poor data on the number and types of incidents. GAO also found that TSA did not have a systematic process for collecting and addressing feedback from surface transportation stakeholders regarding the effectiveness of its information-sharing effort. In a 2015 hearing, GAO testified that TSA had put processes in place to address these issues. DHS provides grants for security improvements for public transit, passenger rail, and occasionally other surface transportation modes under the Transit Security Grant Program. The vast majority of the funding goes to public transit providers. CRS estimates that, on an inflation-adjusted basis, funding for this program has declined 84% since 2009, when Congress allocated $150 million in the American Recovery and Reinvestment Act of 2009, in addition to routine appropriations (see Table 1 ). In a 2012 report, GAO found potential for duplication among four DHS state and local security grant programs with similar goals, one of which was the public transportation security grant program. Despite this finding, Congress has not supported consolidation of the programs, though appropriators have expressed concern that grant programs have not focused on areas of highest risk and that significant amounts of previously appropriated funds have not yet been awarded to recipients. In P.L. 114-50 , Congress directed TSA to ensure that all passenger transportation providers it considers as having high-risk facilities have in place plans to respond to active shooters, acts of terrorism, or other security-related incidents that target passengers. The bulk of U.S. overseas trade is carried by ships, and thus the economic consequences of a maritime terrorist attack could be significant. In the aftermath of the 9/11 attacks, the U.S. Customs Service (now Customs and Border Protection, CBP) and the Coast Guard realized that they needed to \"push the borders out\"—that is, they needed to begin screening vessels and cargo before they reached a U.S. port. While the previous screening methods that occurred at U.S. ports were sufficient to intercept other illicit cargo (e.g., drug smuggling) they could be too late in the case of intercepting a terrorist bomb. Thus, Customs instituted the \"24-hour rule,\" requiring importers to submit shipment information to Customs a day before the shipment arrived at the overseas port of loading rather than submitting this information within days of its arrival at a U.S. port. Customs analyzes this information and other intelligence to flag shipments it believes are higher risk or have an unknown risk. Under the Container Security Initiative, those riskier shipments are examined by imaging machines or possibly unloaded before being loaded on a vessel. (It is practically impossible to examine shipping containers once they are aboard a vessel or while the ship is at sea.) Similarly, the Coast Guard recognized the need to extend terrorist screening beyond U.S. ports. It required ships to announce and report their intended arrival four days before entering a U.S. harbor. The Coast Guard examines the vessel's particulars, its crew, and past history to evaluate the security risk. The Coast Guard pushed for establishing international standards for port security at the International Maritime Organization so that overseas ports sending cargo to the United States would abide by the same security regulations as U.S. ports. The Coast Guard also visits foreign ports to assess their security measures. In addition to pushing the borders out, these agencies have instituted multiple layers of security that cover the four main elements of maritime transportation: ports, vessels, cargo, and workers. CBP's Customs Trade Partnership Against Terrorism (C-TPAT) program identifies a series of practices that importers are to follow that are designed to cover a shipper's entire supply chain—from the overseas point of origin to final delivery in the United States. For instance, C-TPAT includes procedures and independent checks when loading a shipping container and applying the seal on its doors to prevent tampering while in route. In addition to container inspection equipment installed at overseas ports, CBP has installed radiation portal monitors at each truck exit gate in U.S. ports. The Coast Guard requires vessel owners, port authorities and their terminal operators to submit security plans that describe their access control measures, drills and exercises to respond to a security incident, and other measures to secure their facilities. The Coast Guard recognizes that U.S. ports vary greatly in terms of their geographies and types of cargo they handle. The port security plans allow the industry to develop plans specific to their vulnerabilities. An important goal of the Coast Guard is \"maritime domain awareness\"—knowledge of the varied legitimate vessel activity taking place in a harbor (cargo, fishing, recreational) so as to spot any abnormal or suspicious activity. One aspect of this is requiring many vessels to be equipped with Automatic Identification Systems (transponders). The Coast Guard, along with TSA, has also instituted a port worker background check for longshoremen, truck drivers, vessel crews, and others that need access to port terminals. A Transportation Worker Identification Credential (TWIC) card must be obtained from the TSA and renewed every five years. Congress authorized much of the Coast Guard's role in maritime security in the Maritime Transportation Security Act of 2002 (MTSA; P.L. 107-295 ) and CBP's role in the Security and Accountability for Every Port Act of 2006 (SAFE Port Act; P.L. 109-347 ). Congress modified these maritime security programs in Division J of the FAA Reauthorization Act of 2018 ( P.L. 115-254 ). Two aspects of maritime security that have drawn attention recently are cybersecurity and the use of drones for coastal surveillance. The development of electronic navigation (\"e-navigation\"), involving the replacement of paper charts with electronic charts (already commonplace) or the replacement of channel marker buoys with virtual aids to navigation (in progress), could create vulnerabilities to cyberattack. In June 2017, a cyberattack on Maersk Line, the largest container carrier, prevented the carrier from taking bookings and required it to close its U.S. terminals for two to three days. A less severe attack affected COSCO Shipping in July 2018. P.L. 115-254 incorporated cybersecurity as a required element in MTSA security plans for terminal and vessel operators. The Coast Guard has provided guidance for vessels and ports to address cyber vulnerabilities, and has incorporated cybersecurity into existing enforcement and compliance programs. The Coast Guard has added cybersecurity training to the requirements for mariner licensing and for port security officer qualifications. Greater use of unmanned aircraft systems potentially offers significant efficiencies in performing various Coast Guard missions, including coastal surveillance. Congress has provided funding for the use of drones aboard national security cutters. The Coast Guard has tested both hand-held drones and larger drone aircraft to extend the surveillance range of its patrol vessels. Since 2015, the Coast Guard has been testing UASs in the Arctic for missions such as surveying ice conditions, marine environmental monitoring, marine safety, and search and rescue. The unmanned aircraft being tested each summer can be launched from land or a Coast Guard cutter. The Coast Guard Authorization Act of 2018 ( P.L. 115-282 , §812) requests a study by the National Academy of Sciences as to how drones could be used to enhance the Coast Guard's maritime domain awareness. The act also allows the Coast Guard to lease but not design its own large UASs if funding is provided for design and construction of Offshore Patrol Cutters (§304).", "summary": "The nation's air, land, and marine transportation systems are designed for accessibility and efficiency, two characteristics that make them vulnerable to terrorist attack. While hardening the transportation sector is difficult, measures can be taken to deter terrorists. The enduring challenge facing Congress is how best to implement and finance a system of deterrence, protection, and response that effectively reduces the possibility and consequences of terrorist attacks without unduly interfering with travel, commerce, and civil liberties. Transportation security has been a major policy focus since the terrorist attacks of September 11, 2001. In the aftermath of those attacks, the 107th Congress moved quickly to pass the Aviation and Transportation Security Act (ATSA; P.L. 107-71), creating the Transportation Security Administration (TSA) and mandating that security screeners employed by the federal government inspect airline passengers, their baggage, and air cargo. Despite the extensive focus on aviation and transportation security over the past decade, a number of challenges remain, including developing and deploying effective biometric capabilities to verify the identities of transportation workers and travelers; developing effective risk-based approaches to vetting and screening transportation workers accessing secured areas of airports and other sensitive areas of transportation networks; developing cost-effective solutions to screen air cargo and freight without impeding the flow of commerce; and coordination among state, local, and federal homeland security and law enforcement personnel to effectively deter and respond to criminal and terrorist acts targeting public areas of transportation facilities. The FAA Extension, Safety, and Security Act of 2016 (P.L. 114-190) and the TSA Modernization Act (P.L. 115-254, Division K) included provisions intended to improve screening technologies, streamline the passenger screening process, mandate more rigorous background checks of airport workers, strengthen airport access controls, increase passenger checkpoint efficiency and operational performance, and enhance security in public areas of airports and at foreign airports where flights depart for the United States. Oversight of TSA actions to implement these mandates may be an area of particular interest in the 116th Congress. Particular topics may include the evolution of screening technologies and assessments of emerging screening technology solutions; the expansion of canine teams for transportation security; the expansion of the PreCheck program to expedite screening of known travelers; the use of biometrics and associated data security and privacy concerns; implementing effective approaches, regulations, and international agreements to conduct risk-based screening of air cargo shipments worldwide; protecting public areas of airports; and developing effective countermeasures to protect critical infrastructure, including airports and aircraft, from attacks using drones. Bombings of passenger trains in Europe and Asia in the past few years illustrate the vulnerability of passenger rail systems to terrorist attacks. Passenger rail systems—primarily subway systems—in the United States carry about five times as many passengers each day as do airlines, over many thousands of miles of track, serving stations that are designed primarily for easy access. Transit security issues of recent interest to Congress include the quality of TSA's surface transportation inspector program. The bulk of U.S. overseas trade is carried by ships, and thus the economic consequences of a maritime terrorist attack could be significant. Customs and Border Protection (CBP) and the Coast Guard have implemented security screening procedures that effectively \"push the borders out\"—that is, they begin screening vessels and cargo before they reach a U.S. port. Two aspects of maritime security that have drawn attention recently are cybersecurity and the use of drones for coastal surveillance.", "document_type": "crs"}
{"report": "The Bush tax cuts, enacted in 2001 and 2003, were scheduled to expire at the end of 2010. Among the expiring tax provisions was a lower 15% rate for long-term capital gains and dividends, with a 0% tax rate on capital gains and dividends for taxpayers subject to ordinary rates of 15% or less. Absent legislative action, capital gains tax rates would have reverted to pre-2003 rates of 20% and 10% (18% and 8% for assets held for five years or more), and dividends would be taxed at ordinary rates. The highest ordinary tax rate is currently 35% but, absent change, will rise to 39.6%. President Obama proposed in both his budget outlines (FY2010 and FY2011) to retain the 15% and 0% rates for lower- and middle-income taxpayers, but to tax both dividends and capital gains at 20% for married couples with income of $250,000 or more and single taxpayers with income of $200,000 or more. The tax rates were temporarily extended through the end of 2012 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). The final resolution at the beginning of 2013 (American Taxpayer Relief Act of 2012, P.L. 112-240 ) was to tax capital gains for higher-income individuals at the higher rate, but at incomes of $480,050 for married couples and $453,350 for singles in 2018, considerably higher than those proposed by President Obama. Compared with most other tax provisions, the potential revenue gain scored for an increase in capital gains taxes is strongly affected by behavioral responses assumed by the Joint Committee on Taxation (JCT) and the Department of the Treasury. As an illustration, the Obama Administration estimated in February 2010 that allowing the Bush tax cuts for capital gains to expire would have raised $16 billion of revenue in FY2019. Yet, based on Congressional Budget Office (CBO) projections in January 2010, the current effective capital gains tax was 13.3% in 2008 and would have increased to 17.9% in 2019; applying the differential in these rates to the realizations in 2019 would have produced a revenue difference of $40 billion. Although some of this differential could arise from different forecasts, assumptions about behavioral responses are the main reason for the reduction in projected revenues. To address these potential behavioral responses, some supporters of increasing taxes on capital gains (given that such gains comprise a significant part of the income of high-income individuals) have proposed applying mark-to-market rules to tax capital gains as accrued, which would eliminate the realization response for affected assets. Assets that are less easily valued could be subject to look-back treatment, which would increase the tax to achieve the same after-tax earnings that would have occurred if the tax were imposed on an accrual basis. Such an approach has a number of complexities, and to the extent that these changes aim to address the behavioral response, it is important to understand the limits this behavioral assumption imposes on options for increasing taxes on realized capital gains and the empirical basis for these estimated effects. Realizations responses in revenue projections by the revenue-estimating agencies (JCT and Treasury) were publicly discussed at the end of the 1980s, in the midst of a contentious debate. This report explains how these responses affect revenues, discusses the debate that occurred in the late 1980s, reviews research since that time, and analyzes the implications for revenue effects. The analysis in this report suggests that the Obama Administration's projections and those of the JCT, absent a change in their realizations response, may likely understate revenue gains from allowing lower capital gains tax rates to expire. Because taxpayers can choose to realize capital gains, economists and policymakers have been concerned about a reduction in the potential revenue from capital gains taxes because those taxes reduce realizations. It is possible for a tax increase to lose revenue if the response is large enough. If realizations are postponed until death, the gains escape tax entirely. Thus, there is an incentive to delay and perhaps ultimately avoid the tax by not selling assets. Capital gains realizations responses are typically expressed in the form of an elasticity, which is the percentage change in realizations divided by the percentage change in taxes. These elasticities are expected to be negative but are often reported without the minus sign (and will be in this report). If realizations increase by 5% when the tax rate falls by 10%, the elasticity is 0.5; if realizations increase by 10% when the tax rate falls by 10%, the elasticity is one; if realizations rise by 20% while the tax rate falls by 10%, the elasticity is two. The higher the value of the elasticity, the smaller the revenue gain or loss from a capital gains tax increase or decrease. If the elasticity is less than one, a tax increase gains revenue; if the elasticity is greater than one, the tax increase loses revenue. For a small increase in tax rates, the ratio of revenue gain projected to the gain realized with no behavioral response (static gain) is one minus the elasticity. Thus, if the elasticity is 0.25, 75% of the static revenue gain will be realized (that is (1-0.25) times the static gain). If the elasticity is 1.25, the tax increase will lose 25% of the static gain (i.e., (1-1.25) equals minus 0.25). Three types of elasticities are relevant to capital gains realizations and revenues and are discussed in the economics literature. The first is the permanent elasticity, which is most relevant for permanent tax law changes: it measures the longer-run (after a year or two) realizations response to a permanent change in tax rate. The second is the short-run elasticity, which measures the short-term response to a permanent change. The third is the transitory elasticity, which measures the response to a temporary tax increase or decrease. This transitory effect might occur because the incomes of wealthy individuals (and the associated taxes due) may vary from year to year, and they time realizations in years when their tax rates are low. It may also occur in the aggregate when a tax change is pre-announced. For example, if taxpayers learn that the tax is increasing next year, they may shift realizations into the current year to take advantage of this year's lower tax rate. Although this discussion will focus on the magnitude and effects of permanent elasticities, these short-term and transitory effects constitute both a challenge in estimation and affect shorter-term responses to changes. Thus a brief discussion is in order. The short-term realizations elasticity has most often been discussed (as it was in the late 1980s) in the context of a capital gains tax cut. The idea behind such as response is that taxpayers have a large stock of accrued gains that they would have already realized if the tax rate were lower and thus there will be a larger increase in realizations in the first year or two. Applying such an effect has two caveats. The first is that the short-term response may be muted if there has been a recent increase in realizations. For example, unbeknownst to revenue estimators in the late 1980s (because the data were not available), there had been a surge in realizations in 1986 because of the pre-announced increase in capital gains taxes for 1987 and later years as part of the Tax Reform Act of 1986. With so many of these accrued gains exhausted, it was unlikely that there would have been a very large short-run response had a tax cut been enacted in 1990. Second, and more important for the current issue, there is no reason to expect that short-run responses apply to a tax increase that is not pre-announced, because, although a cut in taxes may unleash significant short-term realizations from the existing stock of gains, an increase should not cause a similar contraction. The stock of gains that has not been realized because of taxes will simply remain unrealized, with no effect on realizations. The transitory response is sometimes used interchangeably with the short-term response, but transitory responses can be thought of as occurring because of a temporary lower or higher rate. As noted above, a large aggregate transitory response occurred in 1986 because of the passage of legislation that raised future tax rates significantly. A large increase also occurred in 2012 for the same reason. However, because the higher-income taxpayers who realize most capital gains can have significant fluctuations in income and taxes, transitory responses occur among individuals even in years when the law does not change. This possibility of a transitory response was more pronounced in the period (prior to 1987) when capital gains were subject to graduated rates (because the tax benefit was an exclusion rather than a fixed rate). Statistical estimates of realizations responses can be based on a variety of functional forms, but one of the most common functions causes the elasticity (percentage change in gains divided by a percentage change in tax rates) to rise proportionally with the tax rate. Therefore elasticities should be reported with reference to the assumed tax rate. For much of the discussion in the 1990 debate, the relevant tax rate was the one associated with the tax change under consideration, the 22% rate midway between the current and new rate. Many elasticities discussed at that time reflect that rate. Capital gains realizations elasticities are expected to be negative but the elasticities in this report will be stated and referred to in absolute value (without the minus sign). This formulation also leads to a revenue-maximizing tax rate, which is the tax rate at which the most capital gains tax revenue will be realized. The underlying equations are presented in Appendix A . For considering the effects of allowing tax increases, the 22% rate appears appropriate as a starting point (although the effect would roughly reflect the midpoint between the old and new tax rates). Under current law, in addition to the rates of 0%, 15%, and 20%, there is also the 3.8% net investment income tax enacted by the 2010 health care law for taxpayers with incomes above $250,000 for couples and $200,000 for singles. The Congressional Budget Office estimates an overall marginal tax rate of 21.2% for long-term capital gains, and the Department of the Treasury estimates a similar rate of 21.3%. Note that these issues surrounding capital gains taxes and realizations are not applicable to taxes on dividends, which are estimated by CBO to be taxed at a slightly lower marginal rate of 18.4%. In 1990, the George H. W. Bush Administration proposed to reduce the capital gains tax rate that had been adopted in 1986. That legislation increased the top rate on capital gains from 20% to 28% by taxing capital gains as ordinary income. During the late 1980s, the revenue-estimating agencies (the Joint Committee on Taxation and the Department of the Treasury's Office of Tax Analysis) had begun to investigate and add behavioral responses in the form of realizations elasticities. The Congressional Budget Office also began to include tax variables in their regressions used to forecast baseline capital gains revenues. Because of the strict budget constraints applying at that time, the issue of revenue cost was a crucial one in 1990. The Administration chose an elasticity (at a 22% rate) of 0.98. The JTC used an elasticity of 0.76. Two types of data were used to estimate the realizations response. The first was aggregate time series, which related total realizations in different years to the tax rate in that year. The second was micro-data studies, which examined individual taxpayers' realizations in comparison to their tax rates. These studies included cross-section studies (which compare taxpayers in a single year), pooled cross-section time-series (which compare taxpayers and include many years but do not follow individual taxpayers over time) and panel studies (which compare taxpayers over time, tracking each taxpayer). As shown in Table B -1 in Appendix B , estimates of the realizations response varied dramatically, from 0.3 to almost 4. To make the revenue implications clear, an elasticity of 0.3 would imply, for a small increase in the tax rate, that the revenue gained would be 70% of the revenue projected if there were no realizations response. An elasticity of 4 implies a loss of three times the projected revenue gained if there were no behavioral response. Estimates based on aggregate time series were generally lower, ranging from 0.3 to 0.9 (70% to 10% of revenue gained). Estimates based on individual taxpayer data ranged from 0.55 to 3.8. The range of estimated responses and their implications for revenue implied serious problems with the estimation methods. The range was particularly broad for estimates based on individual data. The JCT took the position that the time series results were more reliable, and they estimated their own elasticity using this methodology. The Treasury never actually provided a specific methodology for their number, but rather reported it as a conservative choice given the realizations estimates. Researchers trying to estimate the realizations response faced many problems, which are discussed in more detail in Appendix B . In general, individual data are preferred for estimation, because aggregation can produce a bias and loses information. In addition, it is very difficult to control for other factors that change over time. More important, for using individual data, was the problem of distinguishing between permanent and transitory responses. Because income, especially of high-income individuals who realize most gains, can fluctuate over time, tax rates also vary over time. Individuals would be expected to time realizations to coincide with periods of low rates. Individuals might also need to cash in assets when income (and therefore taxes) is unusually low. This concern basically precluded relying on simple cross-section results for permanent responses. Thus, no revenue-estimating entity relied on the larger elasticities (close to 4) produced by some of these micro-data studies. Arguments were made at the time that panel data, which followed individuals over several years, could be used to separate these elasticities, because in these data individual tax rates could be examined over several years. These studies used the average of the current, previous, and future tax rate as a permanent rate. These studies reported smaller elasticities, but ones that still were well above one in some cases. Because of an incorrectly reported elasticity, the three panel studies available at that time appeared to produce a much narrower range of results. These panel results probably influenced the Treasury to choose a larger elasticity than those suggested by the aggregate time series data. However, as noted in the following section, the last panel study also had a very large elasticity. Thus, although attempts were made to address the problem of transitory effects with panel studies, this procedure may not correct for the transitory effect, perhaps because periods of lower income or higher income can continue for several years. Although panel studies offered some possibility of controlling for transitory effects, the panels available were for only a few years. If the higher-income individuals who realize most gains experienced prolonged spells of higher or lower than normal income, panel studies might reduce the transitory element, but estimates could still reflect some transitory response elements. Thus panel estimates could still be too large, whereas the biases in time-series estimates remained uncertain. Neither approach was without flaws. Ultimately the proposed tax cuts were not enacted at that time (although they were eventually reduced in 1997 and again in 2003). The range of realizations elasticities, even if confined to time series estimates, is very broad for revenue-estimating purposes or otherwise evaluating capital gains taxes. Researchers turned their attention to methods to produce more precise and reliable estimates. One important event that influenced thinking about these elasticities was the sharp spike in realizations that occurred in 1986. Between 1985 and 1986, realizations rose from $170.6 billion to $324.4 billion, falling to $144.2 billion in 1987. A study of this phenomenon using taxpayer data showed that these gains occurred in December, and were seven times the gains in December of the previous year. This increase, which took place when a tax increase was passed for the following years, was evidence of the magnitude of transitory realizations responses and contributed further to concerns about the reflection of transitory responses in the econometric studies. Eleven additional academic econometric studies of the realizations response have been identified beginning in 1990, and nine of those studies are reported in Table 1 . The table also includes estimates of practices by CBO, JCT, and Treasury. CBO cautions that its realizations estimate is not for the purpose of estimating revenues. Rather, the tax rate is included as part of an overall statistical study which includes many variables used to project capital gains realizations for the baseline. The second column of Table 1 reports the coefficient which, multiplied by the tax rate, will produce the elasticity. The studies are arrayed by elasticity, from smallest to largest. Table 1 also includes the results of a study by Gravelle, which was not an econometric study. Some analysts had observed that large estimated elasticities from cross-section and panel studies implied large realizations that were far outside the scope of historical experience. Gravelle's study noted that there was a limit to the realizations response in that, for a permanent elasticity, realizations could not exceed accruals (the change in the market value of assets). If every asset were sold every year, realizations would equal accruals, but they could be no larger. The study provided data on the ratio of realizations to accruals, along with tax rates, over a long period of time, and used the average values to estimate the upper limit of the realizations elasticity. The study found that limit to be 0.5, below the estimates of all existing cross-section and panel studies, and below most of the time series studies. Moreover, the 0.5 limit is an upper limit and implies that in the absence of taxes and transactions costs individuals would sell every asset every year. Because some assets are unlikely to be sold even in those circumstances, because investors are satisfied with their investments, the elasticity is likely to be considerably lower. (For example, individuals and families holding controlling shares of corporations are unlikely to sell their assets, as are individuals with investments in family businesses and real estate, or simply those whose portfolios are satisfactory.) Table 1 , therefore, reports both the upper limit and the midpoint of this study. This study was prepared in 1991, and covered the data from 1954 to 1989. In the study, the realizations to accruals level was estimated at 46% and the tax rate was estimated at 18.4%. More recent evidence covering the period 1989-2013 finds a similar ratio, 48%, and a similar tax rate of 17.3%. These findings support the limits to realizations elasticities found in the initial Gravelle study. As an illustration, the Dowd, McClelland, and Muthitacharoen panel study that produced the highest coefficient implies that if all income taxes and transactions taxes and costs were eliminated, realizations would 4.25 times their current value, when the level of accruals suggests they could be no more than twice as large. That same study also corrected the elasticity for the most recent panel study of the 1980s, indicating an elasticity of 3.2, similar to the cross-section results. This correction reinforced the observation that the panel studies could not necessarily address the transitory issues that plagued cross-section studies. Four of the nine studies are panel studies, three are times series, and two are cross-state aggregate panel studies. The Burman and Randolph study was an early innovative econometric study because it used variation in state tax rates to estimate the permanent elasticity. That study found a very small elasticity that was statistically insignificant and a very large (in excess of 6) transitory elasticity. Because state tax rates are exogenous and presumed permanent, their evidence suggested a very small response. Auerbach and Siegel replicated their approach with different years and found similar results. The findings in these studies were consistent with the Gravelle estimate of limits in that they fell below the upper limit of elasticities. Most subsequent studies have incorporated state tax rates. The Auten and Joulfaian study and the Dowd, McClelland, and Muthitacharoen study are individual panel studies and had the highest elasticities of any of the studies. Two aspects were likely to lower their elasticities compared with earlier panel studies: they added state tax rates and they had a longer panel, so that time series effects probably became more important. Both studies, however, continued the approach used by earlier panel studies that used adjacent years to capture permanent tax rates. This period may be too short, and for that reason their estimates probably continue to reflect transitory, timing responses. These timing responses are not appropriate for measuring a permanent response. The Dowd, McClelland, and Muthitacharoen study also provided sensitivity analysis, producing a wide range of estimates reflecting different specifications, inclusion of different variables, and different time periods. For example, considering different time subperiods, the coefficient ranged from 1.8 to 8.0, although the latter estimate would seem questionable because it also produced a large transitory elasticity of the wrong sign. Three of the studies (along with CBO's estimate) used aggregate time series data. The Gillingham and Greenlees study was the earliest and added a few years of data to some earlier studies, whereas the other time series studies (Eichner and Sinai) added many more years. Both studies control for 1986, which was an unusual year. It appears that more years added to time series data lead to lower elasticities; however, all of the time series results fall within the range of the eight time series studies from the 1980s. One time series study falls below the upper limit estimated by Gravelle, one is about at the upper limit, and one is considerably larger. The third time series study was based on Australian data (one of the rare studies undertaken on data outside of the United States). The two state studies, by Bogart and Gentry and by Bakija and Gentry, used aggregate data over time grouped by state. Because they include time controls, they also relied on cross-state variation to identify a permanent response. Their results were slightly above the Gravelle study's upper limit. Bakija and Gentry also show that the control for state fixed effects is important; coefficients rise from 2.91 to 3.88 without state fixed effects. The elasticities in Table 1 are closer together and lower than those in the studies of the 1980s. JCT's current coefficient appears to be similar to the estimate used during the 1990 debate (although the elasticity was slightly higher in 1990, that appears to be due to the exclusion of small portfolio effects; without those, it would probably be around 0.76). The Treasury estimate has been reduced and is now of the same rough magnitude as the JCT assumption. Given the evidence from panel studies that use state variation to identify permanent effects and studies of the reasonableness of elasticities given realizations responses, both JCT and Treasury estimates appear high, so that they likely understate the revenue to be gained from increasing the tax rate. Table 2 uses the elasticities from Table 1 and the CBO projections to compare these revenue estimates for raising the tax rate on capital gains by five percentage points, for 2019, based on those results. (The method for calculating the revenue is in Appendix A .) The estimates are based on CBO's estimates of revenue for 2019 of $199 billion, and their average marginal tax rate of 21.2%. The $199 billion is adjusted down to $180 billion to reflect the share of gains that are short-term gains taxed at ordinary rates, as reported by the Department of the Treasury. As shown in Table 2 , the revenue gain as a percentage of static gain ranges from a reduction of 26% to a reduction of 97%. The revenue gain for the five-percentage-point tax rate increase ranges, from the lowest to the highest elasticity, from $31.4 billion per year to $1 billion, a range of $30.4 billion. These results also illuminate the interest in adopting measures such as an accrual-based taxation that could also include a look-back method. (See Appendix A for an explanation of calculating taxes under the look-back method.) Such a method would not only eliminate the realizations response, increasing capital gains revenues for the five-percentage-point increase from $10.3 billion to $43.2 billion, but by taxing unrealized gains it would collect $222 billion on unrealized gains in a steady state ($180 billion at the old rates and $222 billion at the new rate). Which results are most reliable? The Auten and Joulfaian panel study, judging by problems with short panels in the 1980s, probably retains some transitory elasticity effects because it applied the same methodology. Although it also reflects time series elements, the estimate is probably an overstatement of the permanent elasticity. It also substantially exceeds the upper limit estimated by Gravelle. The Dowd, McClellan, and Muthitacharoen study produced the largest elasticity and also uses adjacent periods to measure the transitory elasticity. It also indicates dramatically differing estimates from different subperiods, implying some fragility in the estimates. Turning to time series, the Eichner and Sinai results include many more years than Gillingham and Greenlees, suggesting that this time series result should be preferred. CBO includes even more years. Given the findings of the remaining studies and of Gravelle's limit calculations, the elasticity is likely below 0.5. These findings suggest that revenue-estimating assumptions retained from the 1990 debate may understate the revenue gain. In all cases, evidence from both post-1980s econometric studies and the limits study indicates that there will be revenue gains from increasing the tax rate by five percentage points, although these gains are negligible relative to the static gain for the highest elasticity. Assuming the lower elasticities (and consistent with the Gravelle constraints), revenue gained would be three times the amount likely to be projected by the JCT. Using the Gravelle upper limit, revenues would be 45% larger. Thus, the JCT's projections, absent a change in their realizations response, may likely understate revenue gains from increasing capital gains tax rates. Appendix A. Technical Appendix This appendix shows in the first section the standard realization of revenues from a coefficient derived from a semi-log function. The second shows the method of calculating taxes under the look-back method. Modeling Realizations and Revenues The elasticity of realizations with respect to taxes can be estimated with a variety of functional forms, but one of the most common, and the one on which the estimates in Table 2 are based is a semi-log function of the form (excluding the constant and other regressors, such as stock market values and GDP): (1) log G = bt where G is gains, t is the tax rate, and b is the tax rate coefficient to be estimated. If equation (1) is differentiated, and b is restated in absolute value, the result is: (2) dG/G = -b dt Multiplying the right hand side top and bottom by t results in an elasticity (dG/G divided by dt/t) of bt. Because the relationship is normally negative, but it is convenient to restate b in absolute value, a minus sign is added to b. If equation (1) is restated in its originally, nonlogged form (again ignoring other explanatory variables and stating b in absolute value), it is: (3) G = A e -bt Since revenues are tG, the revenue equation is written: (4) R = tAe -bt Note that if equation (4) is logged and differentiated, the result is dR/r = dt/t (1-bt). Thus, if the absolute value of the elasticity bt, is 1, there is no revenue gain. To estimate revenues, denoting new values with an *, divide new revenues by old to achieve: (5) R* = R* (t*/t)e -b(t*-t) The revenue maximizing tax rate is where dR/R=0, or where (1-bt) equals zero. This rate is equal to 1/b. Thus, if the coefficient of b is two, the revenue maximizing tax rate is 50% and if b equals 5 the revenue maximizing tax rate is 20%. Calculating Taxes under the Look-Back Method A look-back method decreases basis (i.e., increases taxable gain) in order to achieve the same net on a sale as if the tax had been paid on an accrual basis. In these calculations, g = growth rate, T= holding period, S = sales price, B = basis, t = tax rate, and B* = new basis. To determine the growth rate g: (1) B(1+g) T = S And solving for g: (1) g = (S/B) (1/T) -1 To find a value of B* that will give you the same return as accrual taxation: The gain on realization with the new basis is S-t(S-B*) The gain on accrual is B(1+g(1-t)) T Equating them and substituting in for the value of g: (3) B(1+ ((S/B) 1/T -1)(1-t)) T = S-t(S-B*) Solving for B* (4) B* = [B(1+ ((S/B) 1/T -1)(1-t)) T -S(1-t)]/t Appendix B. Econometric Studies Elasticities in Studies of the 1980s Table B -1 reports the elasticities found in a series of estimates of the realizations elasticity in the 1980s, the information available to influence a choice of realizations response at the time of the 1990 debate. These studies are discussed in general terms earlier, and in more specific terms in the following subsection. Where possible elasticities are reported at a 22% tax rate. The studies are divided into categories based on the fundamental approach used. Citations to all studies in this report are in Appendix C . General Issues Statistical (or econometric) studies relating capital gains realizations to tax rates face many challenges, and some of the debate over the evidence reflects the concerns about these challenges. The debate also concerned which type of data should be used: aggregate time series (which examines total economy-wide realizations over time compared with the economy-wide tax rates) versus individual taxpayer data (which related individual realizations to individual tax rates). As can be seen in Table B -1 , aggregate time series results were generally smaller and more consistent, falling within a range of 0.3 to 0.9. Estimates based on micro data (individual observations) varied from 0.55 to almost 4. The estimate for the pooled time-series, cross-section regression probably reflects a mix of times series and cross-section results. Other things equal, it is more desirable to use individual data, because aggregate data cause a loss of information (i.e., individual variability is lost when individual responses are aggregated) and can bias the results. In addition, it is difficult to control for all of the changes over time that can affect realizations. Two of these, changes in transactions costs and a disconnect between changes in asset prices and changes in accruals, could cause estimates to be overstated. Nor is it clear that the times series estimates are capturing only permanent effects. Other effects, however, could work in the opposite direction. Yet the problems associated with studies based on individual data sets were so severe that many researchers believed that aggregate time series results were more reliable. As an initial problem and point of contention, the effective capital gains tax rate, which would be used as a predetermined (exogenous) variable to explain realizations in a regression, is actually an endogenous variable which is influenced by the amount of realizations itself. Different techniques could, in theory, be used to address this very serious econometric problem, including using the first dollar tax rate (the tax that would appear on the first dollar of capital gains), using maximum statutory rates, using a rate based on predicted gains (where predicted gains are based on other attributes), or using instrumental variables methods. In general, these problems of endogeneity of the explanatory variable are much more severe in the case of individual cross-section data, where much of the variation is due to individual circumstances, and less important in aggregate time series data where the major source of variation is changes in the law. As noted earlier, another important issue, for using individual data, was the problem of distinguishing between permanent and transitory responses. Because income, especially of high-income individuals who realize most gains, can fluctuate over time, tax rates also vary over time. Individuals would be expected to time realizations to coincide with periods of low rates. Individuals might also need to cash in assets when income (and therefore taxes) is unusually low. Although attempts were made to address this problem with panel studies by averaging the previous year, current year, and next year tax rates to create a permanent rate, this procedure may not correct for the transitory effect, perhaps because periods of lower income can continue for several years. Studies Since the 1980s The following discussion reviews the realizations studies published since the 1980s. In some cases, studies used many specifications, and this section explains why specific results were reported in Table 1 , and why results from two studies were not included. References to these studies are in Appendix C . They are discussed in order of publication. Slemrod and Shobe (1990) This study uses a six-year small panel to replicate the Feldstein, Slemrod, and Yitzhaki and the Auten and Clotfelter studies. The authors found varying, but quite large, elasticities (in excess of 1, and in excess of 5 in some cases). Their study appears to confirm potential problems with these studies, and also suggests short panels have significant problems as well (as the elasticity for their full sample was 5.84). These large elasticities are similar to those from cross-section and some panel studies in the 1980s, although some were not statistically significant and results varied significantly over time periods. Slemrod and Shobe also estimated a regression that related the difference between current year realizations and average realizations to the difference between current year and average tax rates. They also obtain large, but statistically insignificant results. They acknowledge that their results may capture transitory effects. Because this study continues a methodology that has largely been rejected, the results are excluded from Table 1 . Gillingham and Greenlees (1992) This study extends a previous times series analysis covering 1954-1985 for a short period (through 1989) and makes some changes in approaches used by CBO to replicate the results. The CBO study referenced used tax rates based on predicted gains in a standard regression. The authors consider three changes. The first is to use an instrumental variables technique that uses taxes on predicted gains as an instrument (that is, first regress actual effective tax rates on predicted tax rates and use the fitted values in the regression on realizations). This provision increased the coefficient from 2.9 to 4.2 and increased the elasticity at a 22% tax rate, from 0.64 to 0.92. Second, they suggested use of the maximum tax rate as an instrument rather than the predicted tax rate, which increased the coefficient to 5.8 and the elasticity to 1.28. They also argued that the data should be differenced (a change in realizations related to a change in rates); differencing produced higher elasticities (1.39 for the instrument with predicted gains and 1.429 for the instrument with the maximum rate) but these elasticities were not statistically significant at conventional levels. Differencing may also capture short-term or transitory effects. Finally they extended the time period through 1989, with and without excluding 1986. Excluding 1986, they found an estimate of 3.4 rather than 4.2 using the predicted gains instrument and 3.5 when the data were differenced (corresponding to elasticities of 0.75 and 0.77 at a 22% rate). For the maximum rate, the values were 5.4 and 5.3 (with and without differencing), corresponding to elasticities of 1.18 and 1.16. Confining the elasticities under consideration to those in the extended sample but excluding 1986, the crucial issue is whether to use the predicted gains rate or the maximum rate as an instrument. It is difficult to know what conclusion to draw from this study, because the principal conclusion of the authors is that micro-data approaches are superior. Problems exist with using the maximum rate as an instrument for this time-series regression, because the law itself changed substantially over the time period in a way that altered the relationship between the maximum rate and the average rate. Over this time period, there were episodes where the maximum rate affected a large fraction of taxpayers and other periods where it affected only a small fraction of taxpayers. Given these reservations about using the maximum rate, the coefficient of 3.4 is reported in Table 1 . Burman and Randolph (1994) The Burman and Randolph study is perhaps the most innovative study done since the 1980s. It separated permanent and transitory effects in a short panel (1979-1983) using variations in state tax rates to identify permanent effects. For the transitory rate, the authors included in their instruments the first dollar current tax rate, which introduced a transitory element. Thus taxpayers with unusually low current income, excluding capital gains (and low current first dollar rates) would have transitory rates below their permanent rates, whereas those with high income would have higher rates. The permanent rates would vary across taxpayers in different states due to state tax rates. The authors estimated an elasticity of 0.18 at an 18% tax rate, which implies a coefficient of one, and an elasticity of 0.22 at a 22% tax rate. This estimated effect was not statistically significant, probably because there was not very much variation in tax rates. They estimated a transitory elasticity of 6.45. Several subsequent studies use across-state variations or incorporate state tax rates into the analysis. Bogart and Gentry (1995) This study also relied on differentials across states to identify permanent responses, but used aggregate state level gains from 1979 to 1990. The study also uses year dummies to control for fixed-year effects, so that the basic identification is due largely to the differential in tax rates across states. The authors report an elasticity of 0.65, which at their reported tax rate reflects a coefficient of 2.5. For a 22% rate, this coefficient leads to an elasticity of 0.55. The techniques used in the study should identify a permanent elasticity. Auerbach and Siegel (2000) Auerbach and Siegel used panel data from 1985 to 1994 to replicate the Burman and Randolph results for a different time period. They report an elasticity of 0.33 at the mean of the tax rate. Unfortunately, they do not report the tax rate. Based on evidence from other sources (Eichner and Sinai), the tax rate is probably around 25%. Using that tax rate, the coefficient is 1.126 and suggests an elasticity at a 22% rate of 0.25, very close to the Burman and Randolph results. They find a transitory elasticity of 4.9 (4.1% at a 22% rate). Auerbach and Siegel also report an alternative specification in which they add several instruments to the permanent tax rate including the first dollar tax rate for the current year and the year ahead maximum statutory rate to a regression on the next year's tax rate. The permanent elasticity is much higher, 1.75 rather than 0.33. This magnitude of elasticity is similar to that found in panel and cross-section studies in the 1980s. The problem with their approach is that this addition of the current first dollar rate likely adds a transitory element to the permanent tax rate, which explains their significantly larger elasticity. Thus, the 1.126 coefficient is reported in Table 1 . Auerbach and Siegel also provide a separate regression for the very wealthy and for \"sophisticated\" taxpayers (who report sales of more complicated financial products such as derivatives or report short sales). Their findings using the Burman and Randolph methodology indicate that there is essentially no response for these taxpayers. Eichner and Sinai (2000) This study extends time series analysis through 1997, but finds that it is important to exclude 1986 from the estimates. When 1986 is excluded the coefficient is 2.28, for an elasticity of 0.5. There is also a case for excluding 1997, although it is not as important. When both are excluded, the coefficient in a semi-log specification is 2.18, which implies, at a 22% tax rate, an elasticity of 0.48. As in the case of Gillingham and Greenlees, many specifications are tried. One approach used an instrumental variables method relying on the top marginal tax rate. This approach led to an estimate of 3.8, for an elasticity of 0.84. Curiously, the coefficient changes quite substantially when 1997 was also excluded, to 5.13 and an elasticity of 1.13. One of the problems of using the top marginal tax rate is that there are differences between that tax rate and the average tax rate in the years before 1986 when the tax benefit was an exclusion and rates where more steeply graduated. The authors also tried some specifications with changes in tax rates. These tended to lead to elasticities ranging from 0.83 to 1.46. However, in most of these cases some or most of the tax rate coefficients were not statistically significant. Moreover, it is more likely that this approach reflects more transitory elements. Given the problems with using marginal rates and the instability of specifications with tax rate changes, the 2.28 coefficient is reported in Table 1 . Auten and Joulfaian (2004) This analysis uses a longer micro-data panel (over 17 years) to estimate permanent and transitory effects. Although they include state tax rates, they do not use the state tax variation to identify permanent effects. Their approach is similar to the panel studies of the 1980s in that it uses adjacent years to separate permanent and transitory effects. Their estimate is lower than most estimates of short panels from the 1980s, although this lower elasticity may reflect time series elements. It is likely, however, that the permanent estimate contains transitory elements. They find an elasticity of 0.72 at an apparent 20% tax rate, which indicates a coefficient of 3.6 and an elasticity of 0.79 at a 22% tax rate. Evans (2009) The Evans study is a basic cross-section regression, relying on the public use file, with a number of different specifications, leading to elasticities typically between 2 and 5. Although there are some issues associated with the public use file data, because tax returns are blended for high-income taxpayers to protect confidentiality, the main reservation about this study is that it reflects the fundamental, and now widely recognized, shortcomings of cross-section studies, and the findings cannot be interpreted as reflecting permanent realizations elasticities. These results are not reflected in Table 1 . Bakija and Gentry (2014) This study uses a 50-year panel of state data reflecting changes in combined federal and state tax rates. The data are aggregated by state, including state- and time-fixed effects. The identification for the effects comes from changes in effective state marginal tax rates, which are largely exogenous. The state-fixed effects mean that unobserved differences across states are controlled for. The authors provide a number of tests of the effects of changing specification, in particular showing that omitting state-fixed effects and year-fixed effects, separately and together, has significant effects in raising the elasticities. Dowd, McClelland and Muthitacharoen (2015) This study uses standard panel methods using a 10-year panel, although its estimates of transitory elasticities rely, as with other studies, on adjacent years, which may not be sufficient to eliminate transitory effects. However, it does have year-fixed effects, which should help control for transitory effects from law changes (as opposed to income changes). It also provides considerable sensitivity analysis with different specifications and time subperiods. Minas, Lim, and Evans (2018) This study is an aggregate time series study done with Australian data from 1988 to 2015 and spans a period which included an exclusion for part of capital gains as well as changes in marginal tax rates. It includes controls similar to those in U.S. studies for GDP, inflation, and the stock market index. Appendix C. Citations to Studies Citations to Studies of the 1980s (in Table B-1 ) Auerbach, Alan J. \"Capital Gains Taxation and Tax Reform.\" National Tax Journal (September 1989), pp. 391-401. Auten, Gerald E. \"Capital Gains Taxes and Realizations: Can a Tax Cut Pay for Itself?\" Policy Studies Journal (Autumn 1980), pp. 53-60. Auten, Gerald E., Leonard E. Burman, and William C. Randolph. \"Estimation and Interpretation of Capital Gains Realization Behavior: Evidence from Panel Data.\" National Tax Journal (September 1989), p. 353374. (This study was also released by the U.S. Department of Treasury. OTA Paper 67, May 1989). Auten, Gerald E. and Charles Clotfelter. \"Permanent vs. Transitory Effects and the Realization of Capital Gains.\" Quarterly Journal of Economics (November 1982), pp. 613-632. Congressional Budget Office. Effects of the 1981 Act on the Distribution of Income and Taxes Paid . Staff Working Paper. August 1986. Congressional Budget Office. How Capital Gains Tax Rates Affect Revenues: The Historical Evidence . March 1988. Darby, Michael, Robert Gillingham, and John S. Greenlees. \"The Direct Revenue Effects of Capital Gains Taxation: A Reconsideration of the Time Series Evidence.\" Treasury Bulletin , U.S. Department of Treasury. June 1988. Feldstein, Martin, Joel Slemrod, and Shlomo Yitzhaki. \"The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains.\" Quarterly Journal of Economics (June 1980), pp. 777-791. Gillingham, Robert, John S. Greenlees, and Kimberly D. Zieschang. New Estimates of Capital Gains Realization Behavior: Evidence from Pooled Cross Section Data . U. S. Department of Treasury, OTA Paper 66. May 1989. Jones, Jonathan D. An Analysis of Aggregate Time Series Capital Gains Equations . U. S. Department of Treasury, Office of Tax Analysis Paper 65. May 1989. Lindsey, Larry. Capital Gains: Rates, Realizations, and Revenues . National Bureau of Economic Research, Working Paper 1893. April, 1986. Minarik, Joseph. \"The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains: Comment.\" Quarterly Journal of Economics (February 1984), pp. 93-110. U.S. Department of Treasury. Office of Tax Analysis. Report to the Congress on the Capital Gains Tax Reductions of 1978 . September 1985. Citations to Studies Since the 1980s Auerbach, Alan J. and Jonathan M. Siegel, \"Capital-Gains Realizations of the Rich and Sophisticated,\" American Economic Review , Vol. 90, Papers and Proceedings of the One Hundred Twelfth Annual Meeting of the American Economic Association, May 2000, pp. 276-282. Auten, Gerald and David Joulfaian, \"Taxes and Capital Gains Realizations: Evidence from a Long Panel,\" Prepared for Presentation at the Society of Government Economists session at the Allied Social Science Association Meetings, January 8, 2005, December 2004. Posted at http://www.aeaweb.org/annual_mtg_papers/2005/0109_0800_1204.pdf . Bakija, Jon M. and William M. Gentry, Capital Gains Realizations: Evidence from a Long Panel of State-Level Data , Working Paper, Williams College, June 2014. Posted at https://web.williams.edu/Economics/wp/BakijaGentryCapitalGainsStatePanel.pdf . Bogart, William T. and William M. Gentry, \"Capital Gains Taxes and Realizations: Evidence from Interstate Comparisons.\" Review of Economics and Statistics , vol. 77 (May 1995), pp. 267-282. Burman, Leonard E. and William C. Randolph, \"Measuring Permanent Responses to Capital Gains Tax Change in Panel Data,\" American Economic Review , vol. 83 (September 1994), pp. 794-809. Dowd, Tim, Robert McClelland, and Athiphat Muthitacharoen, \"New Evidence on the Elasticity of Capital Gains,\" National Tax Journal , vol. 68, no. 3, September 2015, pp. 511-544. Evans, Paul, \"The Relationship Between Realized Capital Gains and Their Marginal Rate of Taxation, 1976-2004,\" Institute for Research on the Economics of Taxation, Capital Gains Series no. 2, October 9, 2009. Posted at http://iret.org/pub/CapitalGains-2.pdf . Eichner, Matthew and Todd Sinai, \"Capital Gains Tax Realizations and Tax Rates: New Evidence from Time Series.\" National Tax Journal , vol. 53, no.3, part 2 (September 2000), pp. 663-682. Gillingham, Robert and John S. Greenlees, \"The Effect of Marginal Tax Rates on Capital Gains Revenue: Another Look at the Evidence,\" National Tax Journal , vol. 45 (June 1992), pp. 167-177. Minas, John, Youngdeok Lim, and Chris Evans, \"The Impact of Tax Rate Changes on Capital Gains Realisations: Evidence from Australia,\" Australian Tax Forum , accepted for publication 2018. Slemrod, Joel and William Shobe, The Tax Elasticity of Capital Gains Realizations: Evidence from a Panel of Taxpayers . National Bureau of Economic Research, Working Paper 3237. January 1990. Posted at http://www.nber.org/papers/w3237.pdf .", "summary": "Compared with most other tax provisions, the potential revenue gain scored for an increase in capital gains taxes is strongly affected by behavioral responses assumed by the Joint Committee on Taxation (JCT) and the Department of the Treasury. As an illustration, the Obama Administration estimated in February 2010 that allowing the Bush tax cuts for capital gains to expire would have raised $16 billion of revenue in FY2019. Yet, based on Congressional Budget Office (CBO) projections in January 2010, the current effective capital gains tax was 13.3% in 2008 and would have increased to 17.9% in 2019; applying the differential in these rates to the realizations in 2019 would have produced a revenue difference of $40 billion. Although some of this differential could arise from different forecasts, assumptions about behavioral responses are the main reason for the reduction in projected revenues. Because these behavioral responses limit the potential revenue scored from a tax increase on capital gains and because of concerns that most income of very high-income individuals is in the form of capital gains (whether accrued or realized), proposals have been advanced to tax capital gains currently (as accrued) by marking to market publicly traded securities and imposing a look-back tax on difficult-to-value assets. Such a change faces a number of difficulties; thus it is important to understand the evidence of the behavioral responses. The analysis in this study suggests that the Administration's projections and those of the JCT, absent a change in their realizations response, may understate revenue gains from increasing capital gains tax rates. Realizations responses in revenue projections by the revenue-estimating agencies (Joint Committee on Taxation and the Treasury) were publicly discussed at the end of the 1980s, in the midst of a contentious debate. The larger the absolute value of the elasticity (the percentage change in realizations divided by the percentage change in taxes), the smaller the revenue gain; with elasticities larger than one in absolute value, a loss would occur. Estimated elasticities in the literature prior to 1990 ranged from 0.3 to almost 3.8, leaving limited guidance for revenue-estimating agencies. JCT used an elasticity of 0.76, whereas Treasury used an elasticity of one. Concerns were raised at that time that there were serious problems with this evidence. Perhaps the most significant concern was that the larger results from studies of individuals reflected a timing or transitory response (high-income taxpayers with variable income chose to realize gains when tax rates were temporarily low). This transitory response is not appropriate for assessing a permanent change. Evidence and studies since that time suggest that the permanent elasticity is considerably lower than what appeared to be the case in 1990. The surge in realizations in 1986 as a capital gains tax rate increase was preannounced provided compelling evidence of the importance of a transitory response. A study of the limits of realizations (which cannot exceed accruals in the long run) suggested the elasticity (percentage change in realizations divided by the percentage change in the tax rate) could be no more than 0.5 in absolute value (evaluated at a 22% tax rate), and a midpoint of 0.25. A number of new econometric studies, using new techniques to isolate the permanent response, suggested elasticities of around 0.5 or less. Other recent studies suggested larger responses. The JCT appears to maintain its original assumption, while the Treasury response has been reduced to be similar to JCT's; both appear to exceed the realizations limit. Simulations indicate that an increase in capital gains tax rates of five percentage points would raise slightly more than $40 billion on a static basis for 2019, about $30 billion using the 0.25 elasticity and $18 billion using the 0.5 elasticity. The JCT estimates would likely be around $10 billion, reflecting a 0.68 elasticity. Taxing gains on an accrual basis would eliminate this response in the long run and gain additional revenues on currently unrealized gains.", "document_type": "crs"}
{"report": "Many observers consider sanctions to be a central element of U.S. policy to counter Russian malign behavior. This includes Russia's invasion of Ukraine in 2014, election interference and cyberattacks, human rights abuses, illicit trade with North Korea, support to the government of Syria, and use of a chemical weapon. The United States also employs sanctions in an effort to deter further objectionable activities by Russia (e.g., expanding the war in Ukraine or launching new attacks in neighboring countries). Most Members of Congress support a robust use of sanctions amid concerns about Russia's international behavior and geostrategic intentions. Most Russia-related sanctions implemented by the United States have been levied in response to Russia's 2014 invasion of Ukraine. These sanctions are based on national emergency authorities granted the office of the President in the National Emergencies Act (NEA; P.L. 94-412 ; 50 U.S.C. 1621) and International Emergency Economic Powers Act (IEEPA; P.L. 95-223 ; 50 U.S.C. 1701) and exercised by President Barack Obama in 2014 in a series of executive orders (EOs 13660, 13661, 13662, 13685). The Obama and Trump Administrations have used these EOs to impose sanctions on approximately 650 Russian individuals and entities. The executive branch also has used a variety of EOs and legislation to impose sanctions on Russian individuals and entities in response to a number of other concerns. Legislation that established specifically Russia-related sanctions includes the following: The Sergei Magnitsky Rule of Law Accountability Act of 2012 ( P.L. 112-208 , Title IV; 22 U.S.C. 5811 note). Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014, as amended (SSIDES; P.L. 113-95 ; 22 U.S.C. 8901 et seq.). Ukraine Freedom Support Act of 2014, as amended (UFSA; P.L. 113-272 ; 22 U.S.C. 8921 et seq.). Countering Russian Influence in Europe and Eurasia Act of 2017, as amended (CRIEEA; P.L. 115-44 , Countering America's Adversaries Through Sanctions Act [CAATSA], Title II; 22 U.S.C. 9501 et seq.). The last of these, CRIEEA, codifies Ukraine-related and cyber-related EOs, strengthens sanctions authorities from the 2014 Ukraine-related EOs and legislation, and identifies several new sanctions targets, both possible new categories of designees and additional objectionable behavior. It also establishes congressional review of any action the President takes to ease or lift a variety of sanctions. The Trump Administration's pace in implementing sanctions, particularly primary and secondary sanctions under CRIEEA, has raised some questions in Congress about the Administration's commitment to holding Russia responsible for its malign behavior. Administration officials contend they are implementing a robust set of sanctions on Russia, including new CRIEEA requirements. As of the start of 2019, the Trump Administration has made 29 designations based on new sanctions authorities in CRIEEA, relating to cyberattacks (§224, 24 designations), human rights abuses (§228, amending SSIDES, 3 designations), and arms sales (§231, 2 designations). The Administration has not made designations under new CRIEEA authorities related to pipeline development, corrupt privatization deals, or support to Syria (§§232-234), nor has it made other designations under SSIDES or UFSA, as amended by CRIEEA (§§225-228), related to weapons transfers abroad, gas export cutoffs, special oil projects, corruption, and sanctions evasion. Some Members of Congress have called on the President to make more designations based on CRIEEA's mandatory sanctions provisions. The Trump Administration has made many Russia-related designations under sanctions authorities that predate CRIEEA, however. These authorities include Ukraine-related and cyber-related EOs codified by CRIEEA, as well as EOs related to weapons proliferation, North Korea, Syria, transnational crime, and international terrorism. The Administration also has made designations based on earlier legislation, such as the Sergei Magnitsky Act; the Global Magnitsky Human Rights Accountability Act (22 U.S.C. 2656 note); the Iran, North Korea, and Syria Nonproliferation Act, as amended (INKSNA; 50 U.S.C. 1701 note); and the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act; 22 U.S.C. 5601 et seq.). The United States has imposed most Ukraine-related sanctions on Russia in coordination with the European Union (EU). As the invasion of Ukraine progressed in 2014, the Obama Administration argued that EU support for sanctions was crucial, as the EU has more extensive trade and investment ties with Russia than does the United States. Many view U.S.-EU cooperation in imposing sanctions as a tangible indication of U.S.-European solidarity, frustrating Russian efforts to drive a wedge between transatlantic partners. Since 2017, the efforts of Congress and the Trump Administration to tighten U.S. sanctions unilaterally have prompted some degree of concern in the EU about U.S. commitment to sanctions coordination and U.S.-EU cooperation on Russia and Ukraine more broadly. The United States (and, in response to certain activities, the EU and others) has imposed sanctions on Russia mainly to pressure Russia to withdraw from Crimea and eastern Ukraine; to cease malicious cyber activity against the United States, its allies, and partners; to deter and, in some instances, take punitive steps in response to human rights abuses and corruption; to abide by the Chemical Weapons Convention; and to halt Russia's support to the Syrian and North Korean regimes. Many observers have debated the degree to which sanctions promote change in Russia's behavior. With respect to Ukraine, Russia has not reversed its occupation and annexation of Crimea, nor has it stopped fostering separatism in eastern Ukraine. On the contrary, it has extended military operations. After Russia opened a bridge to Crimea over the Kerch Strait, the waterway connecting the Black Sea to the Sea of Azov, it stepped up its interference with commercial traffic traveling to and from ports in eastern Ukraine. On November 25, 2018, Russian coast guard vessels forcibly prevented three Ukrainian naval vessels from transiting the Kerch Strait, fired on them as they sought to leave the area, and detained and imprisoned their crew members. At the same time, Russia has signed two agreements that recognize the entire occupied region in eastern Ukraine as part of Ukraine, and Russian-led separatist military operations have been limited to areas along the perimeter of the current conflict zone. Russia has not expanded its military aggression to other states. With respect to other malign activities, the relationship between sanctions and Russian behavior is difficult to determine. Sanctions in response to Russia's malicious cyber-enabled activities, human rights abuses, corruption, use of a chemical weapon, weapons proliferation, and support to Syria and North Korea are relatively limited and highly targeted. The extent to which such sanctions might be expected to change Russian behavior is unclear. To the extent that Russia does change its behavior, other factors besides sanctions could be responsible. If Russia does not change its behavior in response to sanctions, this may be for a number of reasons. Russian policymakers may be willing to incur the cost of sanctions, whether on the national economy or on their own personal wealth, in furtherance of Russia's foreign policy goals. Sanctions also might have the unintended effect of boosting internal support for the Russian government, whether through appeals to nationalism (\"rally around the flag\") or through Russian elites' sense of self-preservation. Finally, sanctions may be targeting individuals that have less influence on Russian policymaking than the United States assumes. Furthermore, the economic impact of sanctions may not be consequential enough to affect Russian policy. Most Russia-related sanctions do not broadly target the Russian economy or entire sectors. Rather, they consist of broad restrictions against specific individuals and entities, as well as narrower restrictions against wider groups of Russian companies. Overall, more than four-fifths of the largest 100 firms in Russia (in 2017) are not directly subject to any U.S. or EU sanctions, including companies in a variety of sectors, such as transportation, retail, services, mining, and manufacturing. Although Russia faced several economic challenges in 2014-2015, including its longest recession in almost 20 years, the 2014 collapse in global oil prices had a larger impact than sanctions. Russia's economy strengthened in 2016 and 2017, as oil prices rose. The sanctions' relatively low impact on the Russian economy is by design. The Obama Administration and the EU intended for Ukraine-related sanctions, which account for most U.S. and global Russia-related sanctions, to have a limited and targeted economic impact. They sought to target individuals and entities responsible for offending policies and/or associated with key Russian policymakers in a way that would get Russia to change its behavior while minimizing collateral damage to the Russian people or to the economic interests of the countries imposing sanctions. Moreover, some sanctions were intended to put only long-term pressure on the Russian economy, by denying oil companies access to Western technology to modernize their industry or locate new sources of oil. The full economic ramifications of these restrictions potentially have yet to materialize. There is some evidence that U.S. sanctions on Russia can have broad economic effects if they are applied to economically significant targets, although doing so may create instability in global financial markets. April 2018 sanctions on Rusal, a global aluminum firm, had broad effects that rattled Russian and global financial markets. The sanctions on Rusal marked the first time the United States and the EU imposed full blocking sanctions on a top-20 Russian firm and the first time the Treasury Department appeared prepared to implement CRIEEA-mandated secondary sanctions. In December 2018, however, the Treasury Department announced its intention to remove sanctions on Rusal, pending 30 days for congressional review, on the basis of an agreement that would require Kremlin-connected billionaire Oleg Deripaska, who is subject to sanctions, to relinquish his control over the firm (for more, see \" The Section 241 \"Oligarch\" List ,\" below). This report provides a comprehensive overview of the use of sanctions in U.S. foreign policy toward Russia. It is compartmentalized, however, so that readers primarily interested in a particular issue, for example sanctions in response to Russia's use of a chemical weapon, may find the relevant information in a subsection of the report. The report first provides an overview of U.S. sanctions authorities and tools, particularly as they apply to Russia. It next describes various sanctions regimes that the executive branch has used to impose sanctions on Russian individuals and entities or that are available for this purpose, addressing authorities, tools, targets, and historical context. Third, the report briefly discusses countersanctions that Russia has introduced in response to U.S. and other sanctions. Fourth, it addresses the evolution of U.S. coordination with the European Union on Russia sanctions policy, and similarities and differences between U.S. and EU sanctions regimes. Finally, the report assesses the economic impact of sanctions on Russia at the level of the national economy and individual firms. Economic sanctions provide a range of tools Congress and the President may use to seek to alter or deter the objectionable behavior of a foreign government, individual, or entity in furtherance of U.S. national security or foreign policy objectives. Scholars have broadly defined economic sanctions as \"coercive economic measures taken against one or more countries [or individuals or entities] to force a change in policies, or at least to demonstrate a country's opinion about the other's policies.\" Economic sanctions may include limits on trade, such as overall restrictions or restrictions on particular exports or imports; the blocking of assets and interest in assets subject to U.S. jurisdiction; limits on access to the U.S. financial system, including limiting or prohibiting transactions involving U.S. individuals and businesses; and restrictions on private and government loans, investments, insurance, and underwriting. Sanctions also can include a denial of foreign assistance, government procurement contracts, and participation or support in international financial institutions. Sanctions that target third parties—those not engaged in the objectionable activity subject to sanctions but engaged with the individuals or entities that are—are popularly referred to as secondary sanctions . Secondary sanctions often are constructed to deter sanctions evasion, penalizing those that facilitate a means to avoid detection or that provide alternative access to finance. The United States has applied a variety of sanctions in response to objectionable Russian activities. Most Russia-related sanctions, including most sanctions established by executive order (see \" Role of the President ,\" below), do not target the Russian state directly. Instead, they consist of designations of specific individuals, entities, and vessels on the Specially Designated Nationals and Blocked Persons List (SDN) of the Treasury Department's Office of Foreign Assets Control (OFAC). Sanctions block the U.S.-based assets of those designated as SDNs and generally prohibit U.S. individuals and entities from engaging in transactions with them. In addition, the Secretary of State, in consultation with the Secretary of Homeland Security and Attorney General, is tasked with denying entry into the United States or revoking visas granted to designated foreign nationals. Sanctions in response to Russia's invasion of Ukraine also consist of sectoral sanctions . Often, sectoral sanctions broadly apply to specific sectors of an economy. In the case of Russia-related sanctions, sectoral sanctions have a narrower meaning; they apply to specific entities in Russia's financial, energy, and defense sectors that OFAC has identified for inclusion on the Sectoral Sanctions Identifications (SSI) List. These sectoral sanctions prohibit U.S. individuals and entities from engaging in specific kinds of transactions related to lending, investment, and/or trade with entities on the SSI List, but they permit other transactions. Another major category of Russia-related sanctions consists of a presumption of denial to designated end users for export licenses. The Department of Commerce's Bureau of Industry and Security (BIS) places entities subject to export restrictions on the Entity List (Supplement No. 4 to Part 744 of the Export Administration Regulations). The President, for a variety of reasons related to constitutional construction and legal challenges throughout U.S. history, holds considerable authority when economic sanctions are used in U.S. foreign policy. If Congress enacts sanctions in legislation, the President is to adhere to the provisions of the legislation and is responsible for determining the individuals and entities to be subject to sanctions. The President also often has the authority to be the sole decisionmaker in initiating and imposing sanctions. The President does so by determining, pursuant to the International Emergency Economic Powers Act (IEEPA), that there has arisen an \"unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States.\" The President then declares that a national emergency exists, as provided for in the National Emergencies Act (NEA), submits the declaration to Congress, and establishes a public record by publishing it in the Federal Register . Under a national emergency, the President may further invoke the authorities granted his office in IEEPA to investigate, regulate, or prohibit transactions in foreign exchange, use of U.S. banking instruments, the import or export of currency or securities, and transactions involving property or interests in property under U.S. jurisdiction. President Obama invoked NEA and IEEPA authorities to declare that Russia's 2014 interference in Ukraine constituted a threat to the United States. On that basis, he declared the national emergency on which most Ukraine-related sanctions are based. President Obama and President Trump also have used the NEA and IEEPA to declare national emergencies related to cyber-enabled malicious activities and election interference. Congress influences which foreign policy and national security concerns the United States responds to with sanctions by enacting legislation to authorize, and in some instances require, the President to use sanctions. Congress has taken the lead in authorizing or requiring the President (or executive branch) to use sanctions in an effort to deter weapons proliferation, international terrorism, illicit narcotics trafficking, human rights abuses, regional instability, cyberattacks, corruption, and money laundering. Legislation can define what sanctions the executive branch is to apply, as well as the conditions that need to be met before these sanctions may be lifted. One limitation on the role of Congress in establishing sanctions originates in the U.S. Constitution's bill of attainder clause. Congress may not enact legislation that \"legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial.\" In other words, Congress may enact legislation that broadly defines categories of sanctions targets and objectionable behavior, but it is left to the President to \"[determine] guilt and [inflict] punishment\"—that is, to populate the target categories with specific individuals and entities. In the executive branch, several agencies have varying degrees of responsibility in implementing and administering sanctions. Primary agencies, broadly speaking, have responsibilities as follows: Department of the Treasury's OFAC designates SDNs to be subject to the blocking of U.S.-based assets; prohibits transactions; licenses transactions relating to exports (and limits those licenses); restricts access to U.S. financial services; restricts transactions related to travel, in limited circumstances; and identifies entities for placement on the SSI List as subject to investment and trade limitations. Department of State restricts visas, arms sales, and foreign aid; implements arms embargos required by the United Nations; prohibits the use of U.S. passports to travel, in limited circumstances; and downgrades or suspends diplomatic relations. Department of Commerce's BIS restricts licenses for commercial exports, end users, and destinations. Department of Defense restricts arms sales and other forms of military cooperation. Department of Justice investigates and prosecutes violations of sanctions and export laws. The United States imposes sanctions on Russia in accordance with several laws and executive orders. In 2012, the United States introduced a new sanctions regime on Russia in response to human rights abuses. In 2014, the United States introduced an extensive new sanctions regime on Russia in response to Russia's invasion of Ukraine. In 2016, the United States imposed sanctions on Russian individuals and entities for election interference. In 2017, Congress introduced and the President signed into law legislation that strengthened existing sanctions authorities and established several new sanctions in response to Russia's invasion of Ukraine, malicious cyber-enabled activities, human rights abuses, and corruption. The United States also has imposed sanctions on Russian individuals and entities in response to the use of a chemical weapon, weapons proliferation, trade with North Korea in violation of U.N. Security Council requirements, support for the Syrian government, transnational crime, and terrorism. For an overview of Russia-related sanctions authorities and designations, see Appendix B . In December 2012, Congress passed and the President signed into law the Sergei Magnitsky Rule of Law Accountability Act of 2012 (hereinafter the Sergei Magnitsky Act). This legislation bears the name of Sergei Magnitsky, a Russian lawyer and auditor who died in prison in November 2009 after uncovering massive tax fraud that allegedly implicated government officials. The act entered into law as part of a broader piece of legislation related to U.S.-Russia trade relations (see text box entitled \"Linking U.S.-Russia Trade to Human Rights,\" below). The Sergei Magnitsky Act requires the President to impose sanctions on those he identifies as having been involved in the \"criminal conspiracy\" that Magnitsky uncovered and in his subsequent detention, abuse, and death. The act also requires the President to impose sanctions on those he finds have committed human rights abuses in Russia against individuals fighting to expose the illegal activity of government officials or seeking to exercise or defend internationally recognized human rights and freedoms. The Global Magnitsky Human Rights Accountability Act ( P.L. 114-328 , Title XII, Subtitle F; 22 U.S.C. 2656 note) followed in 2016. This act authorizes the President to apply globally the sanctions authorities aimed at the treatment of whistleblowers and human rights defenders in Russia in the 2012 act. The Global Magnitsky Act also authorizes the President to impose sanctions against government officials and associates around the world responsible for acts of significant corruption. Of the 49 individuals designated pursuant to the Sergei Magnitsky Act, 38 are directly associated with the alleged crimes that Magnitsky uncovered and his subsequent ill-treatment and death. OFAC has designated another nine individuals, all from Russia's Chechnya region, for human rights violations and killings in that region and for the 2004 murder of Paul Klebnikov, the American chief editor of the Russian edition of Forbes . Two designations target the suspected killers of former Russian spy Alexander Litvinenko in London in 2006. In December 2017, President Trump issued EO 13818 to implement the Global Magnitsky Act, in the process expanding the target for sanctions to include those who commit any \"serious human rights abuse\" around the world, not just human rights abuse against whistleblowers and human rights defenders. At the same time, the Administration issued the first 13 designations under the act; among them were two Russian citizens designated for their alleged participation in high-level corruption. Most OFAC designations of Russian individuals and entities have been in response to Russia's 2014 invasion and annexation of Ukraine's Crimea region and Russia's subsequent fostering of separatist conflict in eastern Ukraine. In 2014, the Obama Administration said it would impose increasing costs on Russia, in coordination with the EU and others, until Russia \"abides by its international obligations and returns its military forces to their original bases and respects Ukraine's sovereignty and territorial integrity.\" The United States has imposed Ukraine-related sanctions on more than 650 individuals, entities, and vessels (see Table 1 and Table B-1 ). In addition to Treasury-administered sanctions, the Department of Commerce's BIS denies export licenses for military, dual-use, or energy-related goods to designated end users, most of which also are subject to Treasury-administered sanctions. The basis for these Ukraine-related sanctions is a series of four executive orders (EOs 13660, 13661, 13662, and 13685) that President Barack Obama issued in 2014. Two of President Obama's Ukraine-related EOs target specific objectionable behavior. EO 13660 provides for sanctions against those the President determines have undermined democratic processes or institutions in Ukraine; undermined Ukraine's peace, security, stability, sovereignty, or territorial integrity; misappropriated Ukrainian state assets; or illegally asserted governmental authority over any part of Ukraine. EO 13685 provides for sanctions against those the President determines have conducted business, trade, or investment in occupied Crimea. The other two EOs provide for sanctions against a broader range of targets. EO 13661 provides for sanctions against any Russian government officials, those who offer them support, and those operating in the Russian arms sector. EO 13662 provides for sanctions against individuals and entities that operate in key sectors of the Russian economy, as determined by the Secretary of the Treasury. OFAC established four SDN lists based on the four Ukraine-related EOs: two lists for those found to have engaged in specific activities related to the destabilization and invasion of Ukraine, and two lists for broader groups of targets. As of the start of 2019, OFAC has placed more than 365 individuals, entities, and vessels on the four Ukraine-related SDN lists (see Table 1 and Table B-1 ). OFAC has drawn on EO 13660 to designate individuals and entities for their role in destabilizing and invading Ukraine. Designees mainly include former Ukrainian officials (including ex-President Viktor Yanukovych and a former prime minister), de facto Ukrainian separatist officials in Crimea and eastern Ukraine, Russian-based fighters and patrons, and associated companies or organizations. OFAC has drawn on EO 13685 to designate primarily Russian or Crimea-based companies and subsidiaries that operate in occupied Crimea. OFAC has drawn on EO 13661 and EO 13662 to designate a wider circle of Russian government officials, members of parliament, heads of state-owned companies, and other prominent businesspeople and associates, including individuals the Treasury Department has considered part of Russian President Vladimir Putin's \"inner circle.\" It also has designated related entities. Among the designated government officials and heads of state-owned companies are Russia's minister of internal affairs, Secretary of the Security Council, directors of the Foreign Intelligence Service and National Guard Troops; the chairs of both houses of parliament; and the chief executive officers of state-owned oil company Rosneft, gas company Gazprom, defense and technology conglomerate Rostec, and banks VTB and Gazprombank. OFAC also has designated several politically connected Russian billionaires (whom the Treasury Department refers to as oligarchs) under EO 13661 and, as of April 2018, EO 13662. Designees include 11 of Russia's wealthiest 100 individuals, including 2 of the top 10, as estimated by Forbes . Of these 11 billionaires, 7 were designated in April 2018. The entities OFAC has designated include holdings owned or controlled by SDNs. These holdings include Bank Rossiya, which the Treasury Department has described as the \"personal bank\" of Russian senior officials; other privately held banks and financial services companies (e.g., SMP Bank and the Volga Group); private aluminum company Rusal; gas pipeline construction company Stroygazmontazh; construction company Stroytransgaz; electric company EuroSibEnergo; and vehicle manufacturer GAZ Group. Designated entities also include several defense and arms firms, such as the state-owned United Shipbuilding Corporation, Almaz-Antey (air defense systems and missiles), Uralvagonzavod (tanks and other military equipment), NPO Mashinostroyenia (missiles and rockets), and several subsidiaries of the state-owned defense and hi-tech conglomerate Rostec, including the Kalashnikov Group (firearms). Prior to April 2018, OFAC used EO 13662 solely as the basis for identifying entities for inclusion on the SSI List. Individuals and entities under U.S. jurisdiction are restricted from engaging in specific transactions with entities on the SSI List, which OFAC identifies as subject to one of four directives under the EO. SSI restrictions apply to new equity investment and financing (other than 14-day lending) for identified entities in Russia's financial sector (Directive 1); new financing (other than 60-day lending) for identified entities in Russia's energy sector (Directive 2); and new financing (other than 30-day lending) for identified entities in Russia's defense sector (Directive 3). A fourth directive prohibits U.S. trade with identified entities related to the development of Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil and, amended as a result of requirements enacted in CRIEEA in 2017, such projects worldwide in which those entities have an ownership interest of at least 33% or a majority of voting interests. As of the start of 2019, OFAC has placed 13 Russian companies and their subsidiaries and affiliates on the SSI List. The SSI List includes major state-owned companies in the financial, energy, and defense sectors; it does not include all companies in those sectors. The parent entities on the SSI List, under their respective directives, consist of the following: Four large state-owned banks (Sberbank, VTB Bank, Gazprombank, Rosselkhozbank) and VEB, which \"acts as a development bank and payment agent for the Russian government\"; State-owned oil companies Rosneft and Gazpromneft, pipeline company Transneft, and private gas producer Novatek; State-owned defense and hi-tech conglomerate Rostec; and For restrictions on transactions related to deepwater, Arctic offshore, or shale oil projects, Rosneft and Gazpromneft, private companies Lukoil and Surgutneftegaz, and state-owned energy company Gazprom (Gazpromneft's parent company). In addition to issuing four Ukraine-related executive orders in 2014, President Obama signed into law the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act (SSIDES) on April 3, 2014, and the Ukraine Freedom Support Act (UFSA) on December 18, 2014. SSIDES was introduced in the Senate on March 12, 2014, six days after President Obama issued the first Ukraine-related EO, declaring a national emergency with respect to Ukraine. The President signed UFSA into law the day before he issued his fourth Ukraine-related EO, prohibiting trade and investment with occupied Crimea. CRIEEA, which President Trump signed into law on August 2, 2017, amended SSIDES and UFSA (for more on CRIEEA, see \" Countering Russian Influence in Europe and Eurasia Act of 2017 ,\" below). Both SSIDES and UFSA expanded upon the actions the Obama Administration took in response to Russia's invasion of Ukraine. President Obama, however, did not cite SSIDES or UFSA as an authority for designations or other sanctions actions. In November 2018, President Trump cited SSIDES, as amended by CRIEEA (Section 228), to designate two individuals and one entity for serious human rights abuses in territories forcibly occupied or controlled by Russia. President Trump has not cited UFSA as an authority for any sanctions designations. Sanctions authorities in SSIDES and UFSA overlap with steps taken by the President in issuing executive orders under emergency authorities. Many individuals and entities OFAC designated for their role in destabilizing Ukraine, for example, could have been designated pursuant to SSIDES. Similarly, some of the individuals OFAC designated in April 2018 as \"oligarchs and elites who profit from [Russia's] corrupt system\" potentially could have been designated pursuant to the authority in SSIDES that provides for sanctions against those responsible for significant corruption. In addition, Russian arms exporter Rosoboronexport, subject to sanctions under UFSA, is subject to sanctions under other authorities (see \" Weapons Proliferation \"). SSIDES and UFSA contain additional sanctions provisions that the executive branch could use. These include sanctions against Russian individuals and entities for corruption, arms transfers to Syria and separatist territories, and energy export cutoffs. They also include potentially wide-reaching secondary sanctions against foreign individuals and entities that facilitate significant transactions for Russia-related designees, help them to evade sanctions, or make significant investments in certain oil projects in Russia (for details, see text box entitled \"Sanctions in Ukraine-Related Legislation\" below). The executive branch draws on national emergency authorities to impose sanctions for a range of malicious cyber-enabled activities, including activities the United States has attributed to the Russian government. On April 1, 2015, President Obama issued EO 13694, invoking national emergency authorities to declare that \"the increasing prevalence and severity of malicious cyber-enabled activities originating from, or directed by persons located … outside the United States, constitute an unusual and extraordinary threat.\" EO 13694 targeted those who (1) engage in cyberattacks against critical infrastructure, (2) for financial or commercial gain, or (3) to significantly disrupt the availability of a computer or network. Although the President declared the national emergency relating to malicious cyber-enabled activities in April 2015, he did not announce the first designations until December 2016. On December 28, 2016, President Obama issued EO 13757, which amended EO 13694 to establish sanctions against those engaged in \"tampering with, altering, or causing a misappropriation of information with the purpose or effect of interfering with or undermining election processes or institutions.\" Under the amended EO, OFAC designated four individuals and five entities for election-related malicious cyber activities. These designees included Russia's leading intelligence agency (Federal Security Service, or FSB), military intelligence (Main Intelligence Directorate, or GRU), and four GRU officers. In addition, OFAC designated two individuals for financial-related malicious cyber-enabled activities. In March 2018, the Trump Administration designated 13 individuals and 3 entities for election-related malicious cyber activities. These designees included the Internet Research Agency (IRA), the Russian \"troll factory\" that the Department of Justice's Special Counsel's Office indicted for crimes related to U.S. election interference in February 2018, as well as 12 of its employees, its alleged financial backer, and two of the financier's companies, all of which were also indicted. In June and August 2018, OFAC designated five individuals and seven entities that the Treasury Department referred to as FSB enablers. One of these entities, Divetechnoservices, \"procured a variety of underwater equipment and diving systems for Russian government agencies\" and \"was awarded a contract to procure a submersible craft.\" The Treasury Department noted that Russia \"has been active in tracking undersea communications cables, which carry the bulk of the world's telecommunications data.\" In December 2018, OFAC designated two individuals and four entities for cyber-enabled election interference. According to the Treasury Department, these designees were \"related to Project Lakhta, a broad Russian effort that includes the IRA, which has sought to interfere in political and electoral systems worldwide\" and has the same financial backers as the IRA. The designees included a Project Lakhta employee whom the Department of Justice charged in September 2018 for conspiracy to defraud the United States related to Project Lakhta's efforts \"to interfere in the U.S. political system, including the 2018 midterm election.\" Designees also included four entities that represent themselves as media outlets and the head of one of these entities. CRIEEA, enacted in August 2017, codified EO 13694, as amended, and, in Section 224, enlarged the scope of cyber-related activities subject to sanctions to include a range of activities conducted on behalf of the Russian government that undermine \"cybersecurity against any person, including a democratic institution, or government\" (for more on CRIEEA, see \" Countering Russian Influence in Europe and Eurasia Act of 2017 ,\" below). In March 2018, the Trump Administration designated, pursuant to Section 224, the FSB, GRU, and four GRU officers, all of which OFAC previously had designated under EO 13694, as well as two other GRU officers, for the 2017 \"NotPetya\" ransomware attack that targeted Ukraine and spread to other countries. In June 2018, OFAC designated one more entity under this authority. In December 2018, OFAC designated 13 GRU officers for undermining cybersecurity under Section 224. OFAC designated nine of the officers for cyber-related election interference and four for cyber-enabled operations against the World Anti-Doping Agency (WADA) and/or the Organization for the Prohibition of Chemical Weapons (OPCW). All of these officers also have been indicted by the Department of Justice for related crimes. In addition, OFAC designated two GRU officers for the \"attempted assassination\" in the United Kingdom of former Russian military intelligence officer Sergei Skripal and his daughter through the use of a lethal nerve agent (for more, see \" Use of a Chemical Weapon ,\" below). Although the attempted assassination was not cyber-related, OFAC used Section 224 to designate these officers as agents of the previously designated GRU. On August 2, 2017, President Trump signed the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA), which includes as Title II the Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA). CRIEEA codifies Ukraine-related and cyber-related EOs (discussed above), strengthens sanctions authorities from Ukraine-related EOs and legislation, and establishes several new sanctions. It also establishes congressional review of any action the President takes to ease or lift a variety of sanctions. As of the start of 2019, the Trump Administration has made 29 designations based on new sanctions authorities in CRIEEA, relating to cyberattacks (§224, 24 designations), human rights abuses (§228, amending SSIDES, 3 designations), and arms sales (§231, 2 designations). The Administration has not made designations under other new CRIEEA authorities related to pipeline development, questionable privatization deals, and support to Syria (§§232-234), nor has it made other designations under SSIDES or UFSA as amended by CRIEEA (§§225-228) related to weapons transfers abroad, certain oil projects, corruption, and sanctions evasion. Some Members of Congress have called on the President to make more designations based on CRIEEA's mandatory sanctions provisions. Trump Administration designations pursuant to CRIEEA include the following (some of which are discussed in more detail above, in \" Ukraine-Related Executive Orders and Legislation \" and \" Cyber-Related Executive Orders and Legislation \"): On March 15, 2018, OFAC made its first designations under new CRIEEA authorities in response to actions taken to undermine cybersecurity (§224). OFAC designated two entities and six individuals responsible for a 2017 global ransomware attack. Separately, OFAC made 16 designations for election-related cyber-enabled activities pursuant to EO 13694 (which was codified by CRIEEA). On April 6, 2018, OFAC imposed sanctions on 7 politically connected Russian billionaires (referred to by the Treasury Department as oligarchs), 12 companies they own or control, and 17 government officials. OFAC made these designations under the Ukraine-related EOs codified by CRIEEA. OFAC has made four other rounds of designations under these Ukraine-related EOs: on June 20, 2017 (before CRIEEA entered into law), when it designated as SDNs or placed on the SSI List 58 individuals and entities; on January 26, 2018, when it designated or placed on the SSI List 42 individuals and entities; on November 8, 2018, when it designated 9 individuals and entities; and on December 19, 2018, when it designated 1 individual. On June 11 and August 21, 2018, OFAC designated five individuals and seven entities it referred to as FSB enablers for malicious cyber-enabled activities pursuant to EO 13694. OFAC also designated one of these entities pursuant to Section 224 of CRIEEA. On September 20, 2018, the Administration imposed its first secondary sanctions pursuant to Section 231 of CRIEEA, against those engaged in \"significant transactions\" with the Russian defense or intelligence sectors. OFAC designated the Equipment Development Department of China's Central Military Commission, as well as its director, for taking delivery of 10 Su-35 combat aircraft in December 2017 and S-400 surface-to-air missile system-related equipment in 2018. On November 8, 2018, OFAC designated two individuals and one entity for committing serious human rights abuses in Russian-occupied regions of Ukraine pursuant to SSIDES, as amended by CRIEEA, Section 228. On December 19, 2018, OFAC designated two individuals and four entities for cyber-enabled election interference pursuant to EO 13694. OFAC also designated 15 individuals pursuant to Section 224 of CRIEEA for cyber-related election interference and/or cyberattacks against WADA or the OPCW, as well as for the attempted assassination in the UK of a former Russian intelligence officer and his daughter. As of the start of 2019, the Administration has not imposed sanctions under other CRIEEA authorities (§§225-228, 232-234). The Administration could use these authorities to target the following: significant foreign investment in deepwater, Arctic offshore, or shale oil projects within Russia (§225, amending UFSA); foreign financial institutions that facilitate certain transactions for Russia's defense or energy sectors, or for those subject to Ukraine-related sanctions (§226, amending UFSA); those who engage in significant corruption (§227, amending UFSA); sanctions evaders and foreign persons that facilitate significant transactions for those subject to Russia-related sanctions (§228, amending SSIDES); investment in Russia's energy export pipelines (§232); investment (or facilitating investment) that contributes to the privatization of Russia's state-owned assets \"in a manner that unjustly benefits\" government officials and associates (§233); and any foreign person who supports or facilitates Syria's acquiring or developing a variety of advanced or prohibited weapons and defense articles, including weapons of mass destruction (§234). The Trump Administration's pace in implementing sanctions, particularly primary and secondary sanctions under CRIEEA, has raised some questions in Congress about the Administration's commitment to holding Russia responsible for its malign activities. Administration officials contend they are implementing a robust set of Russia-related sanctions, including new CRIEEA requirements. When President Trump signed CAATSA (with CRIEEA as Title II) into law in August 2017, his signing statement noted that the legislation was \"significantly flawed\" and \"included a number of clearly unconstitutional provisions.\" He said he would implement the legislation \"in a manner consistent with the President's constitutional authority to conduct foreign relations.\" In the first few months of 2018, some Members of Congress expressed concern about the absence of new designations pursuant to CRIEEA's new authorities. Resolutions were introduced in the Senate, on February 12, 2018, and the House, on February 26, 2018, calling on the President to exercise relevant mandatory sanctions authorities under CRIEEA in response to Russia's \"continued aggression in Ukraine and forcible and illegal annexation of Crimea and assault on democratic institutions around the world, including through cyber attacks.\" On March 15, 2018, OFAC made its first designations, related to cyberattacks, under CRIEEA's new authorities. The Administration might not invoke various CRIEEA authorities for a number of reasons. First, the Administration might cite only a relevant executive order, for example, and not legislation with corresponding authority or requirements. Second, sanctions provisions have different evidentiary requirements, which could lead the Administration to choose one over another; it also might be easier to later remove a designation made under one authority than under another. Third, investigations can take time; if OFAC has not made a designation, it may still be investigating activity that is potentially subject to sanctions. Finally, the Administration may seek to use a particular authority to deter objectionable activity; if that deterrence effort is successful, it may need to make only a few (or no) designations based on that authority. Congress and the Administration have worked to align their positions on one of CRIEEA's new authorities, Section 231, which imposes sanctions on individuals and entities that engage in significant transactions, including arms purchases, with Russia's defense and intelligence sectors. In October 2017, the State Department issued initial guidance regarding Section 231 sanctions. It indicated it would examine \"a wide range of factors ... in looking at any individual case\" to determine whether a \"significant transaction\" had occurred. These factors \"may include, but are not limited to, the significance of the transaction to U.S. national security and foreign policy interests, in particular whether it has a significant adverse impact on such interests; the nature and magnitude of the transaction; and the relation and significance of the transaction to the defense or intelligence sector of the Russian government.\" A senior State Department official said the State Department would \"take a close look around the world at transactions and dealings that we think may fall within the scope of this sanctions provision, and we're going to look at really robust engagement ... and talk to partners and allies about where we find transactions that may be problematic.\" In October 2017, the Administration fulfilled a Section 231 requirement to \"specify the persons that are part of, or operate for or on behalf of, [Russia's] defense and intelligence sectors.\" The State Department emphasized that the 39 entities on the list were not subject to sanctions but that secondary sanctions could be imposed on individuals and entities \"that are determined to knowingly engage in a significant transaction with a person specified in the Guidance on or after the date of enactment of the Act.\" In January 2018, the Administration indicated that the threat of Section 231 sanctions was having an effect without making any designations. State Department spokesperson Heather Nauert said the State Department estimated that Section 231 had led \"foreign governments [to abandon] planned or announced purchases of several billion dollars in Russian defense acquisitions.\" In February 2018, then-Secretary of State Rex Tillerson reiterated that \"we've been advising countries around the world as to what the impact on their relationship and purchases that they might be considering with Russia, and many have reconsidered those and have decided to not proceed with those discussions.\" In August 2018, U.S. Assistant Secretary of State Wess Mitchell said that \"the chilling effect\" of Section 231 had led to some $8 billion to $10 billion in \"foreclosed arms deals.\" At the same time, the Administration sought greater flexibility with regard to Section 231 sanctions. As originally enacted, Section 231 allowed the President to waive the application of sanctions for national security reasons or to \"further the enforcement of this title,\" but only if the President certified that Russia had \"made significant efforts to reduce the number and intensity of cyber intrusions.\" In addition, the President could delay the imposition of sanctions, if the President certified that an individual or entity was \"substantially reducing the number of significant transactions\" it makes with Russia's defense or intelligence sector. In April 2018, then-Secretary of Defense James Mattis asked Congress to consider introducing a more \"flexible [national security] waiver authority.\" Otherwise, he said, \"we prevent ourselves from acting in our own best interest and place an undue burden on our allies and partners.\" In July 2018, Secretary Mattis wrote to the chairpersons of the House and Senate Armed Services Committees to request the introduction of a limited national security waiver that \"would enable allied nations to simultaneously sustain their current force while they move to a closer security relationship with the U.S.\" In so doing, the United States would be able to support those \"whose goal is to end reliance on Russian weapons sales…. Failure to provide waiver relief would deny the U.S. a very effective tool to undermine Russian influence in many areas of the world.\" In response to Secretary Mattis's request, Congress amended Section 231 in the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 , §1294). The amendment provides for a national security waiver that does not require congressional review but does require the President to certify a transaction would not (1) be with an entity that directly participated in or facilitated cyber intrusions, (2) endanger the United States' multilateral alliances or ongoing operations, (3) increase the risk of compromising U.S. defense systems, or (4) negatively impact defense cooperation with the country in question. The President also must certify that the country is taking steps to reduce the share of Russian-produced arms and equipment in its total inventory or is cooperating with the United States on other matters critical to U.S. national security. As of the start of 2019, the Administration has not used this waiver authority. On September 20, 2018, OFAC made its first designations pursuant to Section 231 against the Equipment Development Department of China's Central Military Commission, as well as its director, for taking delivery from Russia of 10 Su-35 combat aircraft in December 2017 and S-400 surface-to-air missile system-related equipment in 2018. In September 2018, the State Department also expanded and formalized the list of individuals and entities it considers part of Russia's defense and intelligence sectors. Now referring to this list as the List of Specified Persons, the State Department indicated that \"any person who knowingly engages in a significant transaction with any of these persons is subject to mandatory sanctions under CRIEEA section 231.\" The State Department again expanded the list in December 2018. CRIEEA, in Section 241, required the Administration to submit a report to Congress that includes \"an identification of any indices of corruption\" among \"the most significant senior foreign political figures and oligarchs in the Russian Federation, as determined by their closeness to the Russian regime and their net worth.\" The Section 241 requirement neither authorizes nor requires the President to impose sanctions on individuals included in the report. The Treasury Department submitted this report in unclassified form with a classified annex in January 2018. The unclassified report drew on publicly available lists of political figures and wealthy Russians, without assessments of their closeness to the regime or \"indices of corruption.\" According to the Treasury Department, the classified annex contains an \"extremely thorough analysis\" of information pertaining, among other things, to \"links to corruption, and international business affiliations of the named Russian persons.\" Many observers speculated that the list—or a more tailored version, possibly based on information from the classified annex—might serve as the basis for new designations. In January 2018 testimony to the Senate Committee on Banking, Housing, and Urban Affairs, Secretary of the Treasury Steven Mnuchin indicated that \"we intend to now use that report and that intelligence to go forward with additional sanctions.\" On April 6, 2018, OFAC designated several politically connected Russian billionaires (whom the Treasury Department referred to as oligarchs), companies owned or controlled by these individuals, and government officials. OFAC made these designations under Ukraine-related authorities codified by CRIEEA. The Treasury Department, however, suggested the designations were in the spirit of CRIEEA's new authorities, as they were \"in response to worldwide malign activity\" and not just Russia's invasion of Ukraine. The Treasury Department added that \"Russian oligarchs and elites who profit from [a] corrupt system will no longer be insulated from the consequences of their government's destabilizing activities.\" The designation of Rusal, a leading global producer of aluminum, attracted global attention. The move marked the first time OFAC designated one of Russia's 20 largest companies. International attention also focused on the fact that designating Rusal opened the door to the possible imposition of wide-ranging secondary sanctions, mandated by CRIEEA, on foreign individuals and entities that facilitate significant transactions on behalf of designees. Rusal's designation made foreign banks and firms reluctant to engage in transactions with the firm. The Trump Administration appears to have been responsive to international concerns regarding Rusal's designation. On April 23, 2018, the Administration provided a six-month wind-down period for transactions with Rusal that it has repeatedly prolonged and indicated it would remove sanctions against the firm if Kremlin-connected billionaire Oleg Deripaska, who is subject to sanctions, divested and ceded control (since his control was the justification for Rusal's designation in the first place). On December 19, 2018, the Treasury Department announced that an agreement on eliminating Deripaska's control of Rusal's parent company had been reached and, accordingly, notified Congress it intended to terminate sanctions on Rusal and two related companies in 30 days. Pursuant to CRIEEA, Congress has authority to review this action and to prevent its implementation, if Congress passes a joint resolution of disapproval by a veto-proof majority within 30 days. The United States imposes economic sanctions on Russian individuals and entities in response to a variety of other objectionable activities. These activities include the use of a chemical weapon, weapons proliferation, trade with North Korea in violation of U.N. Security Council requirements, support for the Syrian government, transnational crime, and terrorism. On August 6, 2018, Secretary of State Michael Pompeo determined that in March 2018 the Russian government used a chemical weapon in the United Kingdom in contravention of international law (see text box entitled \"U.S. Determination of Russia's Use of a Chemical Weapon,\" below). This finding triggered the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act). The CBW Act requires the President (who, in 1993, delegated CBW Act authorities to the Secretary of State) to terminate arms sales; export licenses for U.S. Munitions List items; foreign military financing; and foreign assistance, other than that which addresses urgent humanitarian situations or provides food, agricultural commodities, or agricultural products. The act also requires the President to deny credit, credit guarantees, or other financial assistance from the U.S. government, including Export-Import Bank programs, and to deny export licenses for goods controlled for national security reasons (the Commodity Control List). The act requires the imposition \"forthwith\" of these sanctions upon determining that a chemical weapon has been used. On August 27, 2018, Assistant Secretary of State for International Security and Nonproliferation Christopher Ford announced the establishment of these sanctions. However, he invoked national security waiver authority to allow for the continuation of foreign assistance, exports related to government space cooperation and commercial space launches, and export licensing for national security-sensitive goods and technology in specific categories related to civil aviation safety, deemed exports or reexports on a case-by-case basis, wholly owned U.S. subsidiaries operating in Russia, and commercial end users for commercial purposes. Within three months after the initial determination (in this case, early November 2018), the CBW Act also requires the President to take further economic and diplomatic punitive steps unless he can determine and certify to Congress that Russia \"is no longer using chemical or biological weapons in violation of international law or using lethal chemical or biological weapons against its own nationals,\" \"has provided reliable assurances that it will not in the future engage in any such activities, and\" \"is willing to allow on-site inspections by United Nations observers or other internationally recognized, impartial observers, or other reliable means exist, to ensure\" that Russia is not using chemical or biological weapons in violation of international law or against its own nationals. If the President does not certify on all these terms, he, in consultation with Congress, is required to oppose support to Russia in international financial institutions; prohibit U.S. banks from making loans or providing credit to the Russian government, other than those related to the purchase of food or other agricultural commodities or products; prohibit exports to Russia of all other goods and technology, except food and other agricultural commodities and products; restrict importation into the United States of articles that are of Russia-origin growth, product, or manufacture; downgrade or suspend diplomatic relations; and set in motion the suspension of foreign air carriers owned or controlled by Russia \"to engage in foreign air transportation to or from the United States.\" As of the start of 2019, the Secretary of State had not levied a new round of sanctions, nor had the President determined that Russia meets the three conditions needed to avert sanctions. On November 6, 2018, the State Department informed Congress that it \"could not certify that Russia met the required conditions\" and intends \"to proceed in accordance with the terms of the CBW Act, which directs the implementation of additional sanctions.\" In September 2018 testimony to the House Committee on Foreign Affairs, then-Assistant Secretary of State Manisha Singh said \"we intend to impose a very severe second round of sanctions under the CBW. The global community will not tolerate behavior such as we have seen from Russia, especially in poisoning and killing its own citizens.\" The CBW Act authorizes the President to waive sanctions if he finds it essential to U.S. national security interests to do so and notifies Congress at least 15 days in advance. The President also may waive sanctions if he finds \"that there has been a fundamental change in the leadership and policies of the government of that country, and if the President notifies the Congress at least 20 days before the waiver takes effect.\" CBW-related sanctions remain in place for at least a year. They may be removed only after the President determines and certifies to Congress that the three conditions stated above have been met and that Russia is making restitution to those affected by the use of the chemical weapon. Several laws require the President to impose sanctions on those he determines have engaged in trade in weapons of mass destruction or advanced conventional weapons. Restrictions cover a range of activities but generally include a one- to two-year cutoff of procurement contracts with the U.S. government and restrictions on import and export licensing. Restrictions also may include a denial of U.S. foreign aid, sales of defense articles and defense services subject to U.S. export control for national security and foreign policy purposes (U.S. Munitions List items), and export licenses for dual-use goods and services (Commerce Control List). Pursuant to the Iran, North Korea, and Syria Nonproliferation Act, as amended (INKSNA), Russian state-owned arms exporter Rosoboronexport and six other Russian defense entities are denied most U.S. government procurement contracts, export licenses, and trade in U.S. Munitions List-controlled goods and services. Weapons proliferation sanctions against Rosoboronexport are in addition to Ukraine-related sectoral sanctions imposed on the agency in December 2015 and its designation in April 2018 as an SDN for providing support to the Syrian government. Restrictions against entering into government contracts and other transactions with Rosoboronexport have been stated in annual Defense appropriations acts since 2013. The prohibitions against transactions with Rosoboronexport do not apply to contracts related to the maintenance or repair of Mi-17 helicopters purchased by the United States \"for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally.\" They also do not apply to procurement related to the purchase or maintenance of optical sensors that \"improve the U.S. ability to monitor and verify Russia's Open Skies Treaty compliance.\" In October 2012, the Department of Commerce's BIS imposed restrictions on 119 Russian individuals and entities, and 45 others from 11 other countries, for suspected involvement in procurement and delivery of items to Russia for military-related and other governmental or related end uses in violation of the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations. BIS periodically has imposed restrictions on other Russian individuals and entities for suspected violations of the EAR with respect to exports to Russia for military and other purposes. In December 2017, BIS imposed export-licensing restrictions on two entities for producing a ground-launched cruise missile system and associated launcher in violation of the Intermediate-Range Nuclear Forces Treaty. The U.N. Security Council, beginning in 2006, has required its member states to curtail a range of diplomatic, finance, trade, and exchange relations with North Korea. The Security Council took action in response to North Korea's withdrawal from the Treaty on Non-Proliferation of Nuclear Weapons, its testing of nuclear weapons, and its efforts to develop missile delivery systems. Security Council resolutions also have drawn attention to North Korea's abuse of diplomatic privileges and immunities, money laundering, bulk cash smuggling, disruption of regional stability, and disregard for the human rights conditions of its civilian population. To meet the United States' U.N. obligations, and to implement requirements enacted in the North Korea Sanctions and Policy Enhancement Act of 2016 (P.L. 114-122; 22 U.S.C. 9201 et seq.), as amended by the Korean Interdiction and Modernization of Sanctions Act (Title III, CAATSA), the President has issued a series of executive orders to block assets, transactions, and travel of designated North Korean individuals and entities. These sanctions also apply to other foreign individuals and entities that engage in trade or support North Korean designees. In June and August 2017, OFAC designated a Russian oil company and its subsidiary, three Russian individuals, and two Singapore-based companies those individuals control under EO 13722 (March 2016) for trade in petroleum with North Korea. OFAC also designated two Russian entities and two related individuals for sanctions pursuant to EO 13382 (June 2005) for providing supplies and procuring metals to a North Korean company designated in 2009 for its weapons of mass destruction programs. In August and September 2018, OFAC designated four more entities and six vessels for facilitating trade with North Korea. On August 3, 2018, OFAC designated a Russian bank under EO 13810 (September 2017) for \"facilitating a significant transaction on behalf of an individual designated for weapons of mass destruction-related activities.\" According to the Treasury Department, the bank has had a commercial relationship with North Korean entities since at least 2009. On August 21, 2018, OFAC designated two Russian shipping companies and six vessels under EO 13810 for involvement \"in the ship-to-ship transfer of refined petroleum products with North Korea-flagged vessels, an activity expressly prohibited by the U.N. Security Council.\" On September 13, 2018, OFAC designated under EO 13722 and EO 13810 a Russia-based front company for a China-based information technology company that \"in reality ... is managed and controlled by North Koreans\" and facilitates the exportation of information technology workers from North Korea. In a series of executive orders dating back to 2004, the President has sought to block trade and transactions with the government of Syria and its supporters. The U.S. government has imposed these sanctions in response to Syria's past occupation of Lebanon, support of international terrorism, pursuit of weapons of mass destruction and the means to deliver them, undermining of international efforts to stabilize Iraq, and escalating violence against its own people. In April 2018, OFAC designated Russia's state-owned arms exporter Rosoboronexport and an associated bank pursuant to EO 13582 (August 2011) for providing material support and services to the government of Syria. Previously, during the Obama Administration, OFAC designated two other banks, which have since had their licenses revoked, and 12 related individuals pursuant to EO 13582 (in May 2014, November 2015, and December 2016). Russian individuals and entities are subject to sanctions for activities related to transnational crime. OFAC currently designates at least 15 Russian individuals and 6 entities for their roles in transnational criminal organizations (TCOs). In December 2017, OFAC designated as a TCO the \"Thieves-in-Law,\" which it characterized as \"a Eurasian crime syndicate that has been linked to a long list of illicit activity across the globe.\" OFAC also designated 10 individuals (Russian nationals and others) and 2 entities as TCOs for their relation to the Thieves-in-Law; these designees included 6 individuals that OFAC previously had designated in July 2011, during the Obama Administration, as part of a related TCO, the Brothers' Circle. In December 2017, OFAC delisted the Brothers' Circle and several related individuals and entities, when it designated the Thieves-in-Law. Russian individuals and entities are subject to sanctions related to global terrorism. OFAC has designated at least 2 entities and 12 affiliated individuals, in Russia or as fighters abroad, as Specially Designated Global Terrorists (SDGTs). The Caucasus Emirate, a terrorist and insurgent group in Russia's North Caucasus region, was established in 2007. OFAC listed its founder, Doku Umarov, as an SDGT in 2010 (he was killed in 2013). OFAC designated the Caucasus Emirate itself in May 2011. In 2015, the Islamic State recognized as its local affiliate the Caucasus Province (Vilayet), which reportedly was established by insurgents previously affiliated with the Caucasus Emirate. OFAC designated the Caucasus Province as an SDGT in September 2015. As in past years, FY2018 and FY2019 appropriations restrict assistance to the Russian government. The Department of Defense Appropriations Act, 2019 ( P.L. 115-245 , Division A), prohibits the use of defense funding to make a loan or loan guarantee to Rosoboronexport or any of its subsidiaries (§8103). For FY2018, the Energy and Water Development and Related Agencies Appropriations Act, 2018 ( P.L. 115-141 , Division D), prohibits funds to Russia from its Defense Nuclear Nonproliferation Account (§305(a)). For the same year, the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2018 (Division K), requires country notification procedures to be invoked for foreign aid to Russia (§7015(f)). This act also prohibits funds from being made available to Russia's central government (§7070), a restriction in place since FY2015. The State Department's 2018 Trafficking in Persons Report identifies Russia as a Tier 3 nation that fails to meet minimum standards for the elimination of human trafficking. The designation requires limits on aid and U.S. support in the international financial institutions. In December 2018, under the International Religious Freedom Act of 1998, as amended ( P.L. 105-292 , 22 U.S.C. 6401 et seq.), Secretary of State Pompeo included Russia for the first time on the Special Watch List identifying \"governments that have engaged in or tolerated severe violations of religious freedom.\" The Special Watch List was established in 2016 to publicly name foreign governments whose treatment of religious freedoms has deteriorated over the past year. Naming to the Special Watch List serves as a warning that the United States could be considering designating the foreign nation as a Country of Particular Concern (CPC) in the coming year. If Russia were to be designated a CPC, it would become subject to diplomatic and economic sanctions that could range from private demarches to prohibitions on export licensing, procurement contracts, and transactions through U.S. financial institutions. The Russian government has responded to U.S. and other sanctions by imposing a variety of retaliatory measures, also known as countersanctions. The day the Senate passed the Sergei Magnitsky Act in December 2012, the Russian government announced new restrictions on imported beef, pork, and poultry that, within a few months, led to a major decline in U.S. meat imports to Russia. Several days after President Obama signed the act into law, the Russian parliament voted to ban U.S. adoptions of Russian children. It also introduced a visa ban against U.S. citizens whom Russia characterized as being involved in human rights violations or crimes against and persecution of Russian citizens. The day after OFAC issued its first designations under the Sergei Magnitsky Act in April 2013, the Russian government issued a list of U.S. citizens prohibited from entering Russia. Russia also imposed countersanctions in response to Ukraine-related sanctions. These measures included additional travel prohibitions and a ban on the import of agricultural products from countries that had imposed sanctions on Russia. Russia imposed countersanctions related to CRIEEA in anticipation of the act being signed into law. The day after Congress passed the legislation in July 2017, and while the bill awaited the President's signature, the Russian government ordered a reduction of U.S. mission personnel in Russia to no more than 455, which it said was equal to the number of Russian personnel in the United States. It also suspended U.S. use of storage and resort facilities in Moscow. Some observers viewed these measures as a response to CRIEEA but also, belatedly, to the Obama Administration's December 2016 decision to declare certain Russian diplomatic personnel persona non grata and to deny access to two Russian government-owned compounds. In response, on August 31, 2017, the Trump Administration closed Russia's Consulate General in San Francisco, a chancery annex in Washington, DC, and a consular annex that functioned as a trade office in New York City. In March 2018, in response to a nerve agent attack on British citizen and former Russian military intelligence officer Sergei Skripal and his daughter, the Trump Administration expelled 60 Russian diplomats and closed the Russian consulate in Seattle. In response, Russia expelled 60 U.S. diplomats and closed the U.S. Consulate General in St. Petersburg. After the United States' imposition of new designations of Russian government officials and politically connected billionaires and their holdings in April 2018, President Putin signed into law an act authorizing, but not requiring, restrictions related to trade with the United States and other unfriendly states, as well as foreign access to Russian public procurement and privatization. Like the United States, the EU has imposed sanctions—or restrictive measures in EU parlance—against Russia since 2014 for its annexation of Ukraine's Crimea region and its subsequent fostering of separatism in eastern Ukraine. The EU imposed Ukraine-related sanctions largely in cooperation with the United States. EU sanctions are similar, although not identical, to U.S. sanctions. Many in the EU welcomed efforts by Congress in 2017 to ensure that the Trump Administration maintained U.S. sanctions on Russia. At the same time, new sanctions that Congress introduced in CRIEEA raised some concerns in Europe about the continued alignment of U.S.-EU sanctions and cooperation on Ukraine policy more broadly. Unlike the United States, the EU has not imposed sanctions on Russian individuals or entities for actions related to human rights violations, malicious cyber activity, corruption, transnational crime, or support to Syria or North Korea. However, the March 2018 nerve agent attack in the United Kingdom on former Russian intelligence officer Sergei Skripal and his daughter helped spur the EU to agree to a broad new sanctions regime targeting individuals and entities involved in the development and use of chemical weapons. A degree of momentum also appears to be building within the EU for new EU-wide restrictive measures against people and organizations that carry out cyberattacks, as well as human rights violations. Imposing EU sanctions requires the unanimous agreement of all 28 EU member states. Most EU sanctions are imposed for a defined period of time (usually six months or a year) to incentivize change and provide the EU with flexibility to adjust the sanctions as warranted. Unanimity among EU member states also is required to renew (i.e., extend) EU sanctions. Since the outbreak of the Ukraine crisis in early 2014, the United States and the EU have pursued similar policies—including those related to sanctions—aimed at supporting Ukraine's political transition and restoring its territorial integrity. U.S.-EU cooperation in imposing sanctions on Russia and coordination on other political and diplomatic responses to the Ukraine conflict largely have been viewed as a high point in transatlantic relations and have helped prevent Russia from driving a wedge between the United States and Europe. In the first half of 2014, Ukraine-related sanctions that the United States and the EU imposed focused mostly on denying visas and freezing assets of Russian and Ukrainian government officials and pro-Russian separatists. The United States then imposed its first round of sectoral sanctions on July 16, 2014. At the time, many in the EU were hesitant to impose sectoral sanctions on Russia; they worried that doing so might hinder a peaceful resolution to the conflict and negatively affect the EU's extensive trade and investment relations with Russia. Some EU countries dependent on Russian oil and gas supplies also feared that stronger sanctions could prompt Russia to cut off energy exports in retaliation. On July 17, 2014, the day after President Obama imposed the first U.S. sectoral sanctions on Russia, separatists in eastern Ukraine downed Malaysia Airlines Flight MH17 with a missile supplied by the Russian military. This event, along with the intensifying conflict and continued Russian intransigence, changed the political calculus in Europe on sanctions. European officials and publics were particularly dismayed when the separatists prohibited access to the MH17 crash site and delayed recovery of the remains of the 298 victims, including over 200 EU citizens. By the end of July 2014, the EU expanded its list of individuals and entities subject to asset freezes and visa bans and joined the United States in imposing sanctions on selected companies in Russia's financial, defense, and energy sectors. Both the United States and the EU further tightened their sectoral sanctions in September 2014. U.S.-EU coordination sought to close as many gaps as possible between the two sanction regimes to send a unified message to Russia, maximize the effectiveness of sanctions, and make compliance for financial firms and multinational companies easier. President Obama asserted that the combined U.S.-EU measures would \"have an even bigger bite\" than U.S. sanctions alone. Although EU sectoral sanctions largely mirror those imposed by the United States, they represent a carefully crafted compromise among EU member states. Agreeing on sectoral sanctions was difficult for the EU, given that the union's 28 member states have varying economic interests and historical relations with Russia. EU member states sought to draft certain provisions in ways to protect some national economic interests. For example, Germany and other member states dependent on Russian gas supplies were eager to preserve their energy ties to Russia. Consequently, the EU decided to apply lending and investment restrictions only in the oil sector, not to Gazprom or other companies in the Russian gas sector. The EU also applied restrictions on the sale of energy exploration equipment, technology, and services only to oil, not gas, development projects. Finally, the EU designed sectoral sanctions in a way that would share potential economic burdens across all member states. The EU has tied lifting its sanctions on Russia to the full implementation of the Minsk peace agreements for Ukraine and asserts that it is committed to maintaining sanctions until this goal is achieved. At the same time, questions persist in some EU countries about the sanctions' effectiveness, especially amid concerns that sanctions could be hindering EU relations with Russia on other global priorities and harming European business interests. The EU sanctions (and Russian countersanctions) have come with financial costs for certain industries in some EU member states, including Germany, Finland, and the Baltic states. Some European officials have periodically floated ideas about restructuring the sanctions. Others firmly reject suggestions to relax or recalibrate EU sanctions and have urged the Trump Administration to uphold U.S. sanctions on Russia. EU sanctions in response to Russia's annexation of Crimea and destabilization of eastern Ukraine consist of three measures: Restrictive measures on individuals and entities in Russia and Ukraine believed to be involved in the annexation of Crimea and destabilization of eastern Ukraine. Designees are subject to asset freezes and, for individuals, visa bans. As of the start of 2019, the EU has designated 164 individuals and 44 entities (Council Decision 2014/145/CFSP, March 17, 2014). Economic sanctions targeting Russia ' s finance, defense, and energy sectors ( sectoral sanctions). The EU requires its member states to impose lending and investment restrictions on five major state-controlled Russian banks, three defense firms, and three energy companies, as well as their subsidiaries outside the EU. The sanctions also ban the import and export of arms; the sale of dual-use goods and technology to Russian military end users and nine mixed companies; and sales of equipment, technology, and services for oil-development projects related to deepwater, Arctic offshore, and shale exploration (Council Decision 2014/512/CFSP, July 31, 2014). Restrictions on economic relations with Ukraine's occupied Crimea region. The EU has banned EU individuals and EU-based companies from importing goods, exporting certain goods and technologies, and providing tourism services in Ukraine's Crimea region. The EU also has restricted trade and investment in certain economic sectors and infrastructure projects (Council Decision 2014/386/CFSP, June 23, 2014). In addition, in response to the political upheaval in Ukraine in early 2014 and in an effort to bolster Ukraine's political transition, the EU imposed restrictive measures on individuals identified as responsible for the misappropriation of Ukrainian state funds or for the abuse of office causing a loss of Ukrainian public funds. The EU hoped to prevent the transfer of such funds outside of Ukraine and to facilitate their recovery. As of the start of 2019, the EU has frozen assets of and imposed visa bans on 13 former Ukrainian officials, including ex-Ukrainian president Viktor Yanukovych and others who served in his government (Council Decision 2014/119/CFSP, March 5, 2014). As of the start of 2019, the United States has designated as Ukraine-related SDNs—subject to asset freezes, prohibitions on transactions, and, for individuals, travel bans—209 individuals, 158 entities, and 2 vessels. In its equivalent sanctions programs, the EU has designated 177 individuals and 44 entities. Both the United States and the EU have designated a number of high-ranking Russian officials and other individuals close to President Putin. The U.S. and EU lists of designated individuals and entities are not identical. Various legal and political reasons account for some of the differences in the U.S. and EU designations. The EU has imposed sanctions on more individuals and entities directly related to the fighting in Ukraine—military officials, insurgents, and battalions—than has the United States. The United States has specifically designated more companies operating in Crimea and entities affiliated with other designated individuals and entities, whereas the EU provides for blanket restrictions on Crimea-related activities and against affiliated individuals and entities. The EU is unable to impose restrictive measures on some individuals who hold dual citizenship with EU countries. Since 2014, several individuals have been removed from the EU sanctions list. Unlike the United States, which requires a decedent's survivors to petition for removal, the EU removes individuals from its sanctions list due to death. In addition, some designees have successfully petitioned for their removal. EU and U.S. restrictions against lending and/or investments with entities in specific sectors mostly overlap and target a handful of key companies and their subsidiaries in the financial, defense, and energy sectors, including exports and services related to deepwater, Arctic offshore, or shale oil projects in Russia (see Table C-1 ). The manners in which the United States and the EU employ this measure differ somewhat and have changed over time. As of the start of 2019, the United States specifically identifies 13 Russian companies and 276 of their subsidiaries and affiliates as subject to sectoral sanctions. The EU, for its part, identifies 11 entities (and majority-owned subsidiaries outside the EU) as subject to sectoral sanctions. The United States has explicitly identified several companies, including Gazprom, with which sales of equipment, technology, and services for certain oil projects are prohibited; by contrast, the EU has not named specific companies to which these prohibitions apply. In addition, the EU does not impose sanctions on such oil projects worldwide, as CRIEEA does. EU and U.S. policies are comparable in restricting most arms trade with and dual-use exports to Russia, but the EU applied arms-trade sanctions to future contracts only. The EU decision to allow existing arms sales and service contracts with Russia to continue was largely at the insistence of France (which had an existing $1.2 billion contract to sell two Mistral helicopter carriers to Russia) and some Central European countries that rely on Russian companies to service their Soviet-era weapons systems. Analysts suggest, however, that the arms-trade sanctions—and ongoing concern about Russian actions in Ukraine and Russian military resurgence—prompted EU members to reevaluate some existing weapons system sales and licenses. Although not required to do so under the terms of the EU sanctions, France canceled the sales contract with Russia for the Mistral helicopter carriers. Germany also canceled a preexisting contract to supply Russia with a $155 million combat simulation center. Central and Eastern European countries have been advancing plans to phase out Russian-origin military equipment and replace it with more modern U.S. and European equipment. The EU and the United States also addressed the issue of existing sales and service contracts on energy development projects differently. The EU allowed for the continuation of existing contracts and agreements, in certain cases with authorization at the national level. The United States generally prohibited, other than a brief wind-down period, the continuation of existing contracts and agreements, unless otherwise authorized by OFAC. This difference led, for instance, to Eni (an Italian energy company) continuing its deepwater exploration in the Black Sea in partnership with Russian state-controlled oil company Rosneft; by contrast, ExxonMobil withdrew from certain joint ventures with Rosneft in 2018 after failing in April 2017 to secure a waiver from the Treasury Department to move forward with its own oil exploration project in the Black Sea. Neither the United States nor the EU has employed sectoral sanctions that broadly target Russia's gas sector or state-controlled gas company Gazprom. Reports suggest that as the United States and EU worked to develop sanctions on Russia in 2014, they agreed to avoid measures that could harm the other's interests, including in relation to the production and supply of Russian gas. As discussed above, many EU countries dependent on Russian gas supplies were particularly worried about sanctions that could impede the flow of Russian gas and harm relations with Russia in this area. The United States and EU do apply financial restrictions to two Gazprom subsidiaries (Gazpromneft, its oil production and refining subsidiary, and Gazprombank, a financial institution), and the U.S. restrictions on deepwater, Arctic offshore, and shale oil projects also specifically apply to Gazprom. In addition, the United States applies lending restrictions to Novatek, a private Russian gas company. Neither the United States nor the EU has applied sanctions targeting gas production or trade. Given the previously close U.S.-EU coordination on Ukraine-related sanctions, many in the EU were dismayed by certain provisions in CRIEEA as the draft legislation evolved in 2017. European leaders and EU officials recognized that the main intent of CRIEEA was to codify and strengthen sanctions on Russia, including many with parallels in EU legislation. They also were concerned, however, that some of the initial provisions were drafted without regard for the EU's role as a U.S. partner and had the potential to negatively affect EU economic, business, and energy interests. For example, the German and Austrian governments were concerned about the possible effects of a provision authorizing (but not requiring) sanctions on individuals or entities that engage in trade or make investments (with a value of $1 million, or $5 million in aggregate over 12 months) that enhance Russia's ability to construct energy export pipelines. This provision had the potential to establish new secondary sanctions on German, Austrian, and other European energy companies through their financing of the Nord Stream 2 pipeline, a Gazprom-run project to increase the amount of Russian gas delivered to Germany and other parts of Europe via the Baltic Sea. Some in Europe also objected to what they viewed as a unilateral imposition of sanctions. Those of this view worried that new U.S. sanctions could complicate the delicate political consensus on the EU's own sanctions and weaken U.S.-EU cooperation on Ukraine. Others warned that codifying U.S. sanctions could reduce flexibility in negotiations with Moscow on resolving the conflict in Ukraine. Finally, many in the EU were troubled that CRIEEA's introduction of more general secondary sanctions against those who engage in significant transactions with U.S. designees could impact European business partners of Russian companies, even if those companies were not on the EU's own sanctions list. EU concerns were accommodated to some degree by language inserted in CRIEEA specifying that the President should \"continue to uphold and seek unity\" with European partners on sanctions (§212) and that new U.S. sanctions on pipeline ventures would not be imposed without coordinating with U.S. allies (§232). Following CRIEEA's enactment, the European Commission (the EU's executive) expressed overall satisfaction that \"European interests can thus be taken into account in the implementation of any [U.S.] sanctions.\" At the same time, some in Europe remain wary that implementation of new U.S. sanctions could affect European energy projects. The European Commission has cautioned that the EU is prepared to take \"appropriate steps\" if U.S. sanctions disadvantage EU companies trading with Russia in the energy sector. The EU has not elaborated publicly on what such \"appropriate steps\" might be, and the EU hopes to avoid the need for these measures. In October 2017, the Trump Administration published guidance noting that pipeline-related sanctions in CRIEEA, Section 232, would not apply to existing projects (i.e., those initiated before August 2, 2017). The guidance also reasserted that the United States would not impose any such sanctions without coordination with U.S. allies. Some European officials and experts are skeptical of the Trump Administration's commitment to consult the EU and its member states ahead of imposing new sanctions, especially amid broader European concerns about whether the Administration regards the EU as a partner or a competitor. Those of this view point, for example, to the Trump Administration's April 6, 2018, designation of several Russian billionaires and the companies they control. Some media reports suggested the Trump Administration issued these designations without significant prior consultations with the EU or leading European governments. In particular, the designation of Rusal, a leading global producer of aluminum and the raw material alumina, had potentially significant implications for Europe's aluminum and manufacturing sectors. Concern that the Administration would enforce CRIEEA's secondary sanctions against European firms that have commercial and financial dealings with Rusal (whose facility in Ireland supplies many European aluminum producers) effectively halted such transactions. The U.S. announcement also led to a rise in the price of alumina. European officials warned that sanctions on Rusal could lead to plant closures, job losses, and the supply and production chains of key European industries, ranging from the makers of aluminum cans and foil to automobile and aerospace companies. The Trump Administration appears to have been responsive to subsequent European entreaties (and those of other international partners, such as Brazil) regarding the difficulties posed for them by Rusal's designation. Treasury Secretary Mnuchin indicated that the \"impact on our partners and allies\" contributed to a U.S. decision to extend the wind-down period for transactions with Rusal. In December 2018, the Treasury Department announced its intention to terminate sanctions against Rusal and two related companies (see \" The Section 241 \"Oligarch\" List ,\" above). Some analysts have noted that the United States and the EU continue to coordinate other Ukraine-related sanctions. In January 2018, for example, the Trump Administration designated three individuals (including a Russian deputy energy minister) and one entity under Ukraine-related authorities that the EU had sanctioned in April 2017 for their involvement in supplying occupied Crimea with gas turbines. German company Siemens originally sold the turbines for use in Russia; the EU determined that the transfer of the turbines to Crimea was in breach of contractual provisions covering the original sale by Siemens and in contravention of EU prohibitions on the supply of key equipment for certain infrastructure projects in Crimea. Beyond Ukraine, the EU and many member states are concerned about a range of other Russian activities, including use of a chemical weapon, cyber threats, and human rights abuses. In October 2018, the EU approved a new legal framework that is to allow it to impose restrictive measures on individuals and entities involved in the development and use of chemical weapons, regardless of their nationality or location. Authorized sanctions include travel bans and asset freezes. Although this measure is not aimed at Russia specifically, observers largely view the March 2018 Skripal attack as providing impetus for the new sanctions framework. The EU has not yet named individuals or entities subject to these new sanctions, but many analysts expect the two Russian intelligence officers accused of carrying out the Skripal attack will be among those ultimately designated. Analysts also expect that any new EU-wide sanctions for cyber activities would not be aimed at Russia specifically but could be used against Russian individuals and entities who are believed to be engaged in malicious cyber activities. In October 2018, EU leaders directed that \"work on the capacity to respond to and deter cyberattacks through EU restrictive measures should be taken forward.\" Press reports indicate that such sanctions likely would consist of travel bans and asset freezes, although the EU has not yet put forward a specific proposal. Some European leaders and EU officials—including some members of the European Parliament—have called for an \"EU Magnitsky Act\" to impose sanctions on Russians complicit in human rights abuses, money-laundering activities, and other \"antidemocratic\" activities. Since 2016, Estonia, Latvia, and Lithuania have passed their own national versions of the Sergei Magnitsky Act or Global Magnitsky Act. In May 2018, the UK Parliament approved a so-called Magnitsky amendment to its new Sanctions and Anti-Money Laundering Act that expands UK authorities to sanction individuals, companies, or states that commit gross human rights violations. Press reports indicate that Sweden, Denmark, and the Netherlands are considering similar national \"Magnitsky\" legislation. The Netherlands also has proposed that the EU should develop a new sanctions regime that could target individuals accused of human rights abuses worldwide, regardless of their nationality. Media reports suggest that the Netherlands has refrained from naming its proposal for a new EU human rights sanctions regime after Sergei Magnitsky in an effort to ensure the necessary EU consensus. Dutch officials reportedly assess that some EU member states may be hesitant to support such a regime if it were named for Magnitsky because of concerns that it would prompt a negative Russian reaction. Other experts note that the motivations for developing an EU-wide human rights sanctions regime go beyond concerns about Russia and have been prompted by the killing of Saudi journalist Jamal Khashoggi. Following the Skripal attack, some UK parliamentarians and analysts began calling for additional financial sanctions on Russia, including possibly banning financial clearinghouses from selling Russian sovereign debt. UK Prime Minister Theresa May reportedly agreed to look into imposing such a ban on the City of London, but experts note that any such sanctions likely would be more effective if imposed by the EU, given that key European clearinghouses are not incorporated in the UK and would not be affected by unilateral UK sanctions. Many analysts are skeptical, however, that the EU would be able to achieve the required unanimity to impose such additional EU-wide sanctions on Russian financial activity. Some analysts also suggest that the UK's expected departure from the EU in March 2019 may diminish the prospects for any further EU sanctions targeting Russia's sovereign debt. It is difficult to disentangle the impact of sanctions imposed on Russia, particularly those related to its invasion of Ukraine, from fluctuations in the global price of oil, a major export and source of revenue for the Russian government. In 2014 and 2015, Russia faced serious economic challenges and entered a two-year recession ( Figure 1 ), its longest in almost 20 years. Investor sentiment collapsed, resulting in capital flight, a collapse in the value of the ruble, and inflation ( Figure 1 and Figure 2 ). The Russian government and many Russian firms (including firms not subject to sanctions) were broadly shut out of capital markets. The government's budget deficit widened, and it tapped reserves to finance spending, defend the value of the ruble, and recapitalize banks affected by sanctions. Between the end of 2013 and May 2015, Russia's foreign exchange reserves fell by about one-third. Oil prices began to rise in 2016. Although they have not reached pre-2014 levels, the uptick helped to stabilize Russia's economy. The rate of economic contraction slowed, inflation fell, and the value of the ruble stabilized ( Figure 1 ). The Russian government and non-sanctioned Russian entities resumed some access to international capital markets, capital outflows slowed, and foreign direct investment into Russia rebounded ( Figure 2 ). At the same time, 2016 was a difficult fiscal year; the Russian government relied heavily on funding from one of its sovereign wealth funds and was forced to partially privatize Rosneft, the prized state-owned oil company, to raise funds. Russia continues to face long-term economic challenges relating to adverse demographic changes and limited progress on structural reforms. Its reserve holdings remain well below their peak levels. In addition, sanctions continue to constrain the ability of some Russian firms, particularly in the banking sector, to access financing ( Figure 2 ). However, the Russian economy is notably stronger than in 2014-2015. In 2017, the International Monetary Fund (IMF) commended Russian authorities for their effective policy response, which, along with higher oil prices, helped the economy exit its two-year recession. One expert noted \"the fear of economic destabilization that has permeated the country since its 2014 invasion of Crimea—which was met with crippling sanctions from the West—has all but evaporated.\" Some statistical studies estimate the precise impact of sanctions relative to other factors, particularly large swings in oil prices. These studies suggest that sanctions may have had a negative but modest impact. One survey of research on the economic impact of sanctions and oil prices concluded that sanctions had a relatively smaller impact on Russian gross domestic product (GDP) than oil prices. Likewise, in November 2014, Russian Finance Minister Anton Siluanov estimated the annual cost of sanctions to the Russian economy at $40 billion (2% of GDP), compared to $90 billion to $100 billion (4% to 5% of GDP) lost due to lower oil prices. Similarly, in 2015, Russian economists estimated that sanctions would decrease Russia's GDP by 2.4% by 2017 but that this effect would be 3.3 times lower than the effect of the oil price shock. Another analysis found that oil prices, not sanctions, drove changes in the value of the ruble. Russian officials and businesspeople subject to sanctions, who at times have harshly criticized the sanctions, have made public statements that appear to support these conclusions. For example, in November 2016, Putin argued that sanctions were \"severely harming Russia\" in terms of access to international financial markets but that the impact was not as severe as the harm from the decline in energy prices. Likewise, in July 2017, Alexei Kudrin, an economic adviser to Putin, argued that U.S. sanctions were curbing economic growth in Russia and preventing the country from regaining its status as a leading economic power. He contended, however, that a robust structural reform package could lift growth to 3%-4% and offset the effects of sanctions. In May 2018, Arkady Rotenberg, a billionaire businessman close to Putin, said the Ukraine-related sanctions \"did create certain difficulties, but we've overcome them, and these difficulties made us unite.\" Russia's economic recovery in 2016-2017 occurred while sanctions remained in place and, in some instances, were tightened. As a result, some have questioned why the sanctions have not had a greater economic impact. A key factor is that the Obama Administration, the EU, and other international counterparts designed Ukraine-related sanctions, which account for most of the implemented U.S. and global Russia sanctions, to have a limited and targeted economic impact. The sanctions do not broadly prohibit economic activity with Russia. They were intended to be \"smart sanctions\" that targeted individuals and entities responsible for offending policies and/or were associated with key Russian policymakers but inflicted minimal collateral damage on the Russian people or on the economic interests of countries imposing sanctions. As a result, the Ukraine-related sanctions target specific Russian individuals and firms. In some cases, they prohibit only specific types of transactions. Overall, more than four-fifths of the largest 100 firms in Russia (in 2017) are not directly subject to any U.S. sanctions, including companies in a variety of sectors, such as railway, retail, autos, services, mining, and manufacturing ( Table D-1 ). According to one independent Russian polling firm, 78% of individuals polled in April 2018 reported that they were largely unaffected by Western sanctions. More than half of the U.S. SDN sanctions that block assets and restrict transactions target individuals, not firms. Such sanctions may be consequential for the specific individuals involved and may send important political messages, but they are unlikely to have broader effects on Russia's economy. SDN sanctions on entities are mainly limited to businesses controlled by designated individuals, companies that operate in Crimea, and several defense and arms firms. Of the 100 largest firms in Russia, 7 are subject to full blocking (SDN) sanctions ( Table D-1 ). In contrast, the sectoral (SSI) sanctions target large Russian companies, affecting 7 of Russia's 10 largest companies. However, they limit a specific set of transactions relating to debt, equity, and/or certain long-term oil projects ( Table D-1 ). In terms of debt (and, in some cases, equity) restrictions, the sanctions were intended to restrict the access of major Russian financial, energy, and defense firms to international markets. Many major Russian firms had borrowed heavily from international investors. Restricting their access to new financing from western capital markets was intended to disrupt their ability to refinance (rollover) existing debts. As their debts matured, this would force firms to make large repayments or scramble for alternative sources of financing. The sectoral sanctions restricting certain oil projects sought to put long-term pressure on the Russian government by denying Russian oil companies access to Western technology to modernize their industry or locate new sources of oil. In 2016, a State Department official explained that sanctions were not designed to push Russia \"over the economic cliff\" in the short run but to exert long-term economic pressure on the country. By design, the full economic ramifications of restrictions on oil projects may have yet to materialize fully. The IMF estimated that lower capital accumulation and technological transfers resulting from sanctions could reduce Russia's output in the longer term by up to 9%; in contrast, it estimated the short-term impact of the sanctions as much smaller, between 1.0% and 1.5%. Even if the economic effects on Russia's economy as a whole may have been modest, the impact on specific firms and sectors may be more significant. Several anecdotal examples illustrate the sanctions' impact on the firm and sector levels: Russian banks have been reluctant to provide financial services in Crimea over the threat of sanctions. Rostec, a major state-owned defense conglomerate, saw profits drop in 2014 from a loss in foreign investment caused by sanctions. Some Western oil service companies, a valuable source of expertise and equipment for Russian oil companies, limited their operations in Russia following sanctions. Exxon canceled its involvement in a joint venture with Rosneft over U.S. sanctions. Sanctions reportedly forced Rosneft to suspend an oil project in the Black Sea. The Russian government has encouraged wealthy Russians to repatriate offshore funds, citing the need for financing in the face of sanctions. Workers in Rusal's hometown have expressed concerns about their jobs following U.S. sanctions. Alfa Bank, Russia's largest privately held bank (and not under U.S. sanctions), announced in January 2018 that it was winding down its business with Russian defense firms, many of which are subject to SDN sanctions. Using statistical models, one study uses firm-level data to assess the impact of U.S. and European sanctions in 2014 on Russian firms. Based on data from between 2012 and 2016, it finds that sanctioned firms on average lost about one-quarter of their operating revenues, over one-half of their asset values, and about one-third of their employees relative to their non-sanctioned peers. The authors argue that the findings suggest the sanctions effectively targeted firms with relatively minimal collateral damage to other Russian firms. The study estimates the average effects on sanctioned firms and provides only a snapshot of the sanctions' effects. Some sanctioned firms did worse than average; other sanctioned firms did well. For example, the ruble-denominated profits of Sberbank (the largest bank in Russia), Rostec (a major defense conglomerate), and Novatek (an independent natural gas producer) are higher today than when sectoral sanctions were imposed in 2014 (see Table D-2 ). Some firms have weathered the sanctions better than others have. This discrepancy may be attributable to a number of factors. First, the extent to which sanctions interrupted economic transactions varies across sanction targets. It is not clear to what extent some sanctioned targets, including Russian intelligence services, the Night Wolves (a motorcycle club), or the Eurasian Youth Union, engage in significant economic transactions with the United States or in the U.S. financial system. If the transactions are limited, the sanctions are more symbolic than disruptive of economic activity. Additionally, the limited design of the sectoral sanctions did not necessarily result in a rapid disruption in business operations, particularly as oil prices picked up. Despite sanctions, Russian energy firms largely have been able to carry on business as normal. Russian oil production has reached record highs, despite restrictions on access to Western technology for certain oil exploration projects. Second, the Russian government has implemented various measures to support some sanctioned firms. For example, Sberbank benefited from substantial central bank purchases of its new debt, which it can no longer sell in U.S. and European capital markets due to sanctions. The Russian government strategically granted contracts to sanctioned firms; it provided sanctioned Bank Rossiya the sole contract to service the $36 billion domestic wholesale electricity market, granted the contract to build a bridge linking the Russian mainland with annexed Crimea to a sanctioned construction company (Stroygazmontazh), and selected a sanctioned bank (VTB) to be the sole manager of the government's international bond sales. In December 2014, the government launched a bank recapitalization program worth about 1.2% of GDP to support large and regional banks directly or indirectly affected by the sanctions, as well as provided regulatory forbearance and increased deposit insurance. The central bank also helped sanctioned banks access foreign currency. The Russian government increased its orders from its defense industry firms in 2014, offsetting sales lost from the sanctions. It is also repurposing a nationalized bank, Promsvyazbank, to finance Russia's defense industry in response to financing challenges created by sanctions. In addition, Promsvyazbank extended a new credit line to the Renova Group, owned by billionaire Viktor Vekselberg, to support the firm within weeks after it and its owner came under U.S. sanction in April 2018. More government support may be forthcoming. For example, the head of Novatek, an independent natural gas producer subject to financing restrictions, reportedly has requested government assistance funding the creation of deepwater drilling equipment to replace U.S. imports. The government is creating a department within the Finance Ministry to liaise with sanctioned businesses, study their challenges, and draft government proposals for support. Although it is difficult to find a precise quantitative estimate of the extent to which the Russian government has used resources to shield firms from sanctions, such support shifts the cost of sanctions from the targeted firms to the government. Third, some Russian firms have minimized the sanctions' impact by forging alternative economic partnerships. For example, sanctions had the potential to jeopardize Russia's military modernization program, but Russia ultimately found alternative suppliers, particularly from China, South Korea, and Southeast Asia. Additionally, independent gas company Novatek secured alternative financing from China to proceed with a natural gas project in the Artic. Gazprom secured a $2 billion loan from the Bank of China, the largest loan from a single bank in Gazprom's history. More generally, Russian energy firms have concluded a number of corporate agreements with Chinese and Saudi companies following the imposition of sanctions. However, the extent to which Russia can successfully execute a \"pivot to China\" and other non-Western sources of financing, investment, and trade should not be overstated. Public Chinese banks seem more willing to engage than private Chinese banks, and business transactions are complicated by other geopolitical considerations, such as Russia's reluctance to join China's new development bank, the Asian Infrastructure Investment Bank, or participate in Asian forums, such as the Asia-Pacific Economic Cooperation summit. Eager to attract investment, Russian firms also appear to be offering better investment deals to Chinese investors to circumvent financing problems caused by sanctions, suggesting that alternative financing has not been a full substitute for Western capital. Finally, CRIEEA's introduction of a policy option to impose secondary sanctions against third parties that engage in significant transactions with sanctioned Russian individuals and firms, and with Russia's defense and intelligence sectors, means that these alternatives remain risky and uncertain. Debates about the effectiveness of U.S. and other sanctions on Russia continue in Congress, in the Administration, and among other stakeholders. After more than four years of escalating sanctions, Russia has not reversed its occupation and annexation of Ukraine's Crimea region, nor has it stopped fostering separatism in eastern Ukraine. On the contrary, it has extended military operations to the Black Sea and the Azov Sea bordering Ukraine and Russia. The United States and its allies have documented multiple instances of Russian cyber-enabled malicious activities. They also have determined that Russian agents used a lethal nerve agent to attack an opponent in the United Kingdom. In addition, Russia remains an influential supporter of the Syrian government. Nonetheless, many observers argue that sanctions help to restrain Russia or that the imposition of sanctions is an appropriate foreign policy response regardless of immediate effect. Since the introduction of sanctions, multiple reports suggest Russian government officials and their supporters pay close attention to sanctions developments and express concern about their real and potential impact. Observers also note that sanctions have led the Russian government to make policy adjustments, including diverting resources to affected businesses and sectors. There exists a wide range of options moving forward. Some argue it is necessary to introduce more sanctions on Russia, including more comprehensive and/or more targeted sanctions. Others contend that the Administration should first focus on fully implementing the range of existing sanctions authorized by law. Some observers stress the need to coordinate new sanctions with Europeans and other allies. Others are skeptical that sanctions can produce desired changes in Russian behavior, especially without also using other foreign policy tools. Some express concerns that sanctions, particularly those that are imposed unilaterally, hurt U.S. businesses and cede economic opportunities to firms in other countries. In the 115 th Congress, several bills were introduced to increase the use of sanctions to address Russia's malign activities. Members of Congress may continue to debate the establishment and implementation of U.S. sanctions on Russia in the 116 th Congress. Potential new sanctions on Russia in legislation range widely. In the 115 th Congress, they included measures to expand the types of targeted individuals, entities, and sectors ( S. 3336 , H.R. 6437 , S. 2313 / H.R. 4884 , H.R. 5428 , H.R. 5216 ); expand the range of prohibited transactions, including with regard to Russian sovereign debt ( S. 3336 , H.R. 6437 , S. 2313 / H.R. 4884 , H.R. 6423 , H.R. 5428 ); make mandatory previously discretionary secondary sanctions on Russian pipeline investment ( S. 3229 , H.R. 6384 ); expand the scope of sanctions in response to malicious cyber-enabled activities ( H.R. 5576 / S. 3378 ); determine whether the government of Russia supports acts of international terrorism (which would expand sanctions on Russia) ( S. 3336 , S. 2780 , H.R. 6573 , H.R. 6475 ); and expand congressional review procedures to the Sergei Magnitsky Act ( S. 3336 , S. 3275 ) . Appendix A. Legislative Abbreviations and Short Titles CAATSA: Countering America's Adversaries Through Sanctions Act ( P.L. 115-44 ) CBW Act: Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 ( P.L. 102-182 , Title III; 22 U.S.C. 5601 et seq.) CRIEEA: Countering Russian Influence in Europe and Eurasia Act of 2017, as amended ( P.L. 115-44 , Title II; 22 U.S.C. 9501 et seq.) Global Magnitsky Act: Global Magnitsky Human Rights Accountability Act ( P.L. 114-328 , Title XII, Subtitle F; 22 U.S.C. 2656 note) IEEPA: International Emergency Economic Powers Act ( P.L. 95-223 ; 50 U.S.C. 1701) INKSNA: Iran, North Korea, and Syria Nonproliferation Act, as amended ( P.L. 106-178 , 50 U.S.C. 1701 note) NEA: National Emergencies Act ( P.L. 94-412 ; 50 U.S.C. 1621) Sergei Magnitsky Act: The Sergei Magnitsky Rule of Law Accountability Act of 2012 ( P.L. 112-208 , Title IV; 22 U.S.C. 5811 note) SSIDES: Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014, as amended ( P.L. 113-95 ; 22 U.S.C. 8901 et seq.) UFSA: Ukraine Freedom Support Act of 2014, as amended ( P.L. 113-272 ; 22 U.S.C. 8921 et seq.) Appendix B. U.S. Sanctions on Russia Appendix C. U.S. and EU Sectoral Sanctions Appendix D. Russian Firms and U.S. Sanctions", "summary": "Many observers consider sanctions to be a central element of U.S. policy to counter Russian malign behavior. Most Russia-related sanctions implemented by the United States have been levied in response to Russia's 2014 invasion of Ukraine. In addition, the United States has imposed sanctions on Russia in response to human rights abuses, election interference and cyberattacks, weapons proliferation, illicit trade with North Korea, support to Syria, and use of a chemical weapon. The United States also employs sanctions to deter further objectionable activities. Most Members of Congress support a robust use of sanctions amid concerns about Russia's international behavior and geostrategic intentions. Ukraine-related sanctions are mainly based on four executive orders (EOs) the President introduced in 2014. In addition, Congress passed and the President signed into law two acts establishing sanctions in response to Russia's invasion of Ukraine: the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 (SSIDES; P.L. 113-95/H.R. 4152) and the Ukraine Freedom Support Act of 2014 (UFSA; P.L. 113-272/H.R. 5859). In 2017, Congress passed and the President signed into law the Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA; P.L. 115-44/H.R. 3364, Countering America's Adversaries Through Sanctions Act [CAATSA], Title II). This legislation codifies Ukraine-related and cyber-related EOs, strengthens existing Russia-related sanctions authorities, and identifies several new targets for sanctions. It also establishes congressional review of any action the President takes to ease or lift a variety of sanctions. Additional sanctions on Russia may be forthcoming. On August 6, 2018, the United States determined that in March 2018 the Russian government used a chemical weapon in the United Kingdom in contravention of international law. In response, the United States launched an initial round of sanctions on Russia, as required by the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act; P.L. 102-182/H.R. 1724, Title III). The law requires a second, more severe round of sanctions in the absence of Russia's reliable commitment to no longer use such weapons. The United States has imposed most Ukraine-related sanctions on Russia in coordination with the European Union (EU). Since 2017, the efforts of Congress and the Trump Administration to tighten U.S. sanctions on Russia have prompted some degree of concern in the EU about U.S. commitment to sanctions coordination and U.S.-EU cooperation on Russia and Ukraine more broadly. The EU continues to consider the possibility of imposing sanctions in response to Russia's use of a chemical weapon in the United Kingdom, human rights abuses, and cyberattacks. Debates about the effectiveness of U.S. and other sanctions on Russia continue in Congress, in the Administration, and among other stakeholders. Russia has not reversed its occupation and annexation of Ukraine's Crimea region, nor has it stopped fostering separatism in eastern Ukraine. On the contrary, it has extended military operations to the Black Sea and the Azov Sea bordering Ukraine and Russia. With respect to other malign activities, the relationship between sanctions and Russian behavior is difficult to determine. Nonetheless, many observers argue that sanctions help to restrain Russia or that their imposition is an appropriate foreign policy response regardless of immediate effect. In the 115th Congress, several bills were introduced to increase the use of sanctions in response to Russia's malign activities. The 116th Congress may continue to debate the role of sanctions in U.S. foreign policy toward Russia.", "document_type": "crs"}
{"report": "In FY2019 and FY2020, more than 90% of federal highway assistance is being distributed to the states by formula. Highway funding formulas have been in use to apportion federal highway authorizations among the states since the passage of the first federal-aid highway act more than a century ago. The resulting apportionments are widely used to evaluate how individual states benefit from federal highway assistance relative to other states. Although the procedure currently used to distribute federal highway funds is written into law and programs receiving funds in this manner are frequently referred to as \"formula programs,\" the statutory language does not describe any formula in a straightforward way. In consequence, it can be difficult to understand how the apportionment of funds is determined, and whether that apportionment adequately reflects considerations that may be of concern to Members of Congress. This report describes the origins and development of highway formula funding, and then discusses how the use of various formula factors gave way to the current apportionment mechanism. A series of tables compares individual states' shares of the FY2018 apportionment with their shares of some factors relevant to highway needs. The Federal Aid Road Act of 1916 (39 Stat. 355), which created the first ongoing federal program to fund road construction, used three factors to apportion federal highway funds among the states. After setting some funds aside to cover administrative costs, the law apportioned the remaining authorization to the states according to three factors. These factors were selected, in part, because they were not difficult to compile and seemed relevant to individual states' costs to build and maintain a highway system. The three factors, which were weighted equally, were 1. land area: the ratio which the area of each state bore to the total area of all states; 2. population: the ratio which the population of each state bore to the total population of all the states, as shown by the latest available census; and 3. postal road mileage: the ratio which the mileage of rural free delivery routes and star routes in each state bore to the total mileage of such in all the states at the close of the preceding year. The selection of these factors had much to do with disagreement between urban and rural interests about the goals of the road program and with constitutional concerns regarding the appropriateness of federal spending on road construction. The population and land area factors were proxies for the rural and urban state interests. The population factor was seen as protecting the interests of the more densely populated eastern states and the land area factor as protecting the interests of large but less populated western states. The use of a postal road mileage factor helped allay any constitutional qualms, as Article I, Section 7 of the Constitution specifically grants Congress the power \"To establish…post roads,\" but the factor also garnered favor from less populous states. The 1916 act also set the maximum federal share of the cost of any highway project at 50%. The 1916 act supported the construction of rural roads and excluded streets and roads in places having a population of 2,500 or more. The formula factors enacted in 1916 remained in place, with only temporary changes made in Depression-era emergency legislation and war legislation, until passage of the Federal-Aid Highway Act of 1944 (58 Stat. 838). The 1944 act began to shift the federal highway program away from construction of rural roads. It created three separate highway systems: a Primary System, a Secondary System, and an Urban System. Each system was authorized a percentage of the total funds provided, which were then apportioned among the states by formula. The Federal Highway Act of 1921 (42 Stat 22) retained the three formula factors adopted in 1916, but increased federal control over the use of funds by requiring the designation of a system of highways, limited to 7% of each state's total highway mileage, on which the federal funds could be spent. The 1921 act also guaranteed that each state would receive at least one-half percent of the total appropriation in any year. With this law, the three main characteristics of today's federal highway program were in place: funds were apportioned to the states by formula and implementation was left primarily to state governments; the states were required to provide matching funds; and the funds could be spent only on designated federal-aid highways. The Primary System funds were apportioned using the three formula factors established in 1916: each state's share of the national land area, population, and rural post road mileage, with each factor weighted equally. Funds for the Secondary System were apportioned based on each state's share of the national land area, rural population, and rural postal route mileage. The Urban System formula apportioned funds to the states based on one formula factor: each state's share of the national population living in urban areas of 5,000 or more residents. Although the act still favored rural areas, it was the first significant programmatic shift away from what had been essentially a rural road program. During the 1970s and 1980s, as Congress created many narrowly targeted programs within the Federal-Aid Highway Program, it frequently adopted formula factors specific to those programs. By FY1977, there were 35 separate authorized programs. Of those, 13, including all the larger programs, apportioned funds by a variety of statutory formulas. Examples of programs receiving more narrowly targeted funding were the new highway safety and hazard elimination programs, for which funds were apportioned based on both total state population and public road mileage. With the aging of the Interstate Highway System, a new Interstate Resurfacing, Restoration, Rehabilitation, and Reconstruction Program (Interstate 4R) was created, with funding apportioned based on each state's Interstate Highway lane miles and vehicle miles traveled on the Interstate System, as shares of the respective national totals. A 1986 report from the General Accounting Office (GAO) criticized the use of land area, decennial population, and postal road mileage in the distribution of highway funding. It recommended instead the use of vehicle miles traveled (on and off the Interstate System), lane miles, motor fuel consumption, annualized population statistics, and road deterioration. Although the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA; P.L. 102-240 ) substantially reorganized the highway programs, it apportioned the funds of the four largest apportioned programs (accounting for roughly 70% of all apportioned funds) according to each state's share of apportionments during the FY1987-FY1991 period rather than according to specific factors. According to a 1995 GAO report, this procedure, to a significant extent, made \"the underlying data and factors… not meaningful because the funding outcome is largely predetermined.\" Under ISTEA, the apportionments from FY1992 through FY1998 were fixed for six years by the factors used in the FY1987-1991 apportionments. Significantly, they did not reflect the new 1990 census data. An exception was a new program, the Congestion Mitigation and Air Quality Improvement Program (CMAQ), which was apportioned according to population in each state's air quality non-attainment areas relative to the national population living in non-attainment areas. In 1998, the Transportation Equity Act for the 21 st Century (TEA-21; P.L. 105-178 ) reestablished apportionment formula factors for individual programs within the Federal-Aid Highway Program, often using new factors designed to act as proxies for the needs a program was intended to address. For example, the formula for the National Highway System program, one of several large programs, used four factors to apportion the annual authorization: 1. 25% based on the ratio of each state's lane miles on principal arterial routes (excluding the Interstate System) to the national total; 2. 35% based on the ratio of each state's vehicle miles traveled on principal arterial routes (excluding the Interstate System) to the national total; 3. 30% based on the ratio of each state's diesel fuel use on highways within each state to the national total; 4. 10% based on the ratio of each state's per capita lane miles of principal arterial highways to the national total. The Surface Transportation Program, the federal-aid program that the states had the greatest discretion in spending, was apportioned by a formula that used three weighted factors: 1. 25% based on the ratio of each state's total lane miles of federal-aid highways to the national total; 2. 40% based on the ratio of each state's vehicle miles on federal-aid highways to the national total; 3. 35% based on the ratio of each state's estimated tax payments attributable to highway users paid into the highway account of the Highway Trust Fund—the source of federal funding for highways—to the national total. The last surface transportation reauthorization that used formula factors to apportion individual program authorizations was the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA-LU; P.L. 109-59 ), enacted in 2005. That law apportioned 13 programs using funding formulas. For example, funds under the Highway Safety Improvement Program were apportioned according to three equally weighted factors: (1) each state's share of lane miles of federal-aid-highways; (2) vehicle miles traveled on federal-aid highways; and (3) number of fatalities on the federal-aid system. In contrast, the Railway-Highway Crossings Program used the share of public railway-highway crossings in each state. The factors of land area and postal route mileage were no longer used for distributing any highway funds. Population figures were used for only two of the 13 formula programs authorized in SAFETEA-LU. Between 1982 and 2005, the formulas embedded in surface transportation authorization acts were not always decisive in determining how funds were apportioned. After some states objected that their residents paid more of the motor fuel and truck taxes that flowed into the highway account of the Highway Trust Fund than they received in federal highway funding, Congress enacted \"equity\" programs that generally did three things. First, each act included a guarantee that each state would receive federal funding at least equal to a specific percentage of the federal highway taxes its residents paid. Second, all or nearly all states were given an increase in funding from the equity program. Third, the program size was calculated in a way to assure that the states receiving less than their residents paid in highway taxes could be made whole up to their guaranteed percentage and most other states could get more funding as well. In the 1982 act, 5% of highway funding was distributed through the equity program, but in SAFETEA in 2005 the equity program received over 20% of the funds. The equity program distribution determined the total apportionment amount for each state and reduced the impact of the formula factors when it came to calculating each state's apportionments under the individual formula programs. The Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ), enacted in 2012, eliminated or consolidated two-thirds of the federal highway programs. It also made major changes in the way funds were apportioned among the states. Prior to MAP-21, Congress wrote authorizations for each individual apportioned program into law, and specified the formula factors that were used to determine each state's share of the authorization for that program. Beginning with MAP-21, all the large formula programs shared a single authorization amount, and the states' apportioned shares of the total authorization were determined before their amounts were divided among the specific programs. MAP-21 did not specify any formula factors that were to be used to apportion funds among the states. Instead, the apportionment was based primarily on each state's share of total apportionments in FY2012, the last year of SAFETEA, as extended. In practice, this meant that the main determinants of the totals apportioned among the states under MAP-21 were the relative distributions under the equity bonus program established in SAFETEA. In the MAP-21 formula, Congress addressed concerns about fairness from two different perspectives. On the one hand, it guaranteed that each state received an apportionment equal to at least 95 cents of every dollar the state's highway users paid in highway taxes. This represented an increase from the 92% return guaranteed in 2012, the final year of SAFETEA. On the other hand, by effectively fixing the apportionment shares at the FY2012 level Congress ensured that most states receiving more from the Federal-Aid Highway Program than their residents paid in federal highway taxes would still get increases in funding. As was true under the SAFETEA and earlier equity programs, some states could receive larger amounts without substantially reducing the amounts provided to other states only because of the large amounts of funding provided. This was possible because the bill transferred $18 billion from other Treasury accounts to the highway account of the Highway Trust Fund. The Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94 ), enacted in 2015, is the current authorization of federal highway programs. It made only modest changes to the MAP-21 apportionment mechanism. As was true with MAP-21, the FAST Act authorizes a single amount for each year for all the apportioned highway programs combined. It retained the basic MAP-21 formula and the basic MAP-21 programmatic structure. This means that while apportionments are still based primarily on each state's share of total apportionments in FY2012, the final year of SAFETEA, each state is guaranteed an apportionment equal to at least 95% of the amount its residents pay into the highway account of the Highway Trust Fund. Under the FAST Act, the authorization that funds six programs within the Federal-Aid Highway Program is apportioned among the states by formula. The programs are the National Highway Performance Program (NHPP), the Surface Transportation Block Grant program (STBG), the Highway Safety Improvement Program (HSIP), the Congestion Mitigation and Air Quality Improvement Program (CMAQ), Metropolitan Planning (MP), and the National Highway Freight Program (NHFP). As summary of the process follows. Prior to calculating states' apportionments for FY2020, the Federal Highway Administration is to reserve two amounts, $67 million for NHPP and $1.020 billion for STBG. These reserve funds will later supplement these programs. The remaining amount, net of these two amounts, is the \"base apportionment amount.\" Each state's initial apportionment amounts are calculated for the three components (the base apportionment, supplemental NHPP, and supplemental STBG) by multiplying the base apportionment and two supplemental amounts by the ratio that each state's FY2015 apportionments bear to the nationwide total for FY2015. Next, the three initial amounts are adjusted, if necessary, to assure that each state's total base apportionment plus reserve funds is no less than 95 cents for every dollar the state contributed to the highway account of the Highway Trust Fund in the most recent fiscal year for which data are available. Any necessary upward adjustments for some states are offset by proportional decreases to the amounts of other states. However, basing initial apportionment amounts on FY2015 apportionment shares and guaranteeing a 95-cents-on-the-dollar return to all states without major reductions in some states' funding requires a larger program than the existing Highway Trust Fund taxes can fund. As was true under MAP-21, large transfers from the Treasury general fund to the highway account of the Highway Trust Fund authorized in the FAST Act made it possible to fund the Federal-Aid Highway Program in a way that would fulfill the 95% guarantee without having to reduce other states' apportionments significantly. Each state's base apportionment amount is used as the starting point in determining the division of the state's apportionment among the six apportioned programs. First, the amount determined for the NHFP is set aside from each state's base apportionment. Second, from the remaining amounts an amount is distributed for CMAQ (according to the state's FY2009 CMAQ apportionment share). Third, the state's MP program gets a distribution (based on the state's FY2009 apportionment share). Fourth, the remainder of the state's apportionment is divided among the three remaining core programs as follows: 63.7% is apportioned to the NHPP, 29.3% to the STBG, and 7% to the HSIP. Fifth, the STBG (each year FY2016-FY2020) and NHPP (for FY2019-FY2020 only) reserve funds are added to supplement each state's STBG and NHPP amounts calculated from the state's base apportionments. As described above, the procedure currently used to apportion federal highway funds among the states is not based on any particular policy objectives other than ensuring the stability of state shares based on the apportionment shares in the last year of MAP-21, FY2015. In addition, each state is guaranteed an amount at least equal to 95 cents on the dollar of the taxes paid by its residents into the highway account of the Highway Trust Fund. Some policy-related factors used to distribute highway funds in the past are no longer in use, while other possible factors sometimes mentioned in policy discussions, such as states' rates of population growth and projected increases in truck traffic, have never been used as formula factors. The following tables compare each state's share of highway apportionments under current law to that state's proportion of various factors that have been used in the past in the distribution of federal highway funds. Table 5 provides a ranking of individual states' apportionment amounts as judged by these factors.", "summary": "More than 90% of federal highway assistance is distributed to the states by formula. Between 1916, when Congress created the first ongoing program to fund road construction, and 2012, various formula factors specified in law were used to apportion highway funds among the states. After 1982, these factors were partially overridden by provisions to guarantee that each state received federal funding at least equal to a specific percentage of the federal highway taxes its residents paid. Since enactment of the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141) in 2012, formula factors such as population and highway lane mileage have ceased to have a significant role in determining the distribution of funds. The apportionment among the states under the current surface transportation law, the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94), passed in 2015, is not based on any particular policy objectives other than ensuring the stability of states' shares of total funding based on their shares in the last year of MAP-21, In addition, each state is guaranteed an amount at least equal to 95 cents on the dollar of the taxes paid by its residents into the highway account of the Highway Trust Fund. Some policy-related factors used to distribute highway funds in the past are no longer in use, while other possible factors sometimes mentioned in policy discussions, such as states' rates of population growth and projected increases in truck traffic, have never been used as formula factors. This report describes mechanism by which Federal-Aid Highway Program funds are distributed today, and includes tables comparing individual states' shares of the FY2018 apportionment with their shares of some factors relevant to highway needs. Table 5 ranks states' apportionments based on the apportionment amount per resident, per square mile of land area, per federal-aid highway lane mile, and per million vehicle miles traveled on federal-aid highways.", "document_type": "crs"}
{"report": "Historically located between empires, various Georgian kingdoms and principalities were incorporated into the Russian Empire beginning in the early 19 th century. Georgia enjoyed a brief period of independence from 1918 until its forcible incorporation into the Union of Soviet Socialist Republics (USSR, or Soviet Union) in 1921-1922. Georgia gained independence in 1991 with the collapse of the Soviet Union. Georgia is located in the South Caucasus, a region between the Black and Caspian Seas and separated from Russia by the Greater Caucasus mountain range. The South Caucasus also borders Iran and Turkey (see Figure 1 ). Georgia's South Caucasus neighbors, Armenia and Azerbaijan, have been locked in territorial conflict for almost three decades over the predominantly Armenian-populated region of Nagorno-Karabakh, formally part of Azerbaijan. Georgia has its own unresolved conflicts with two Russian-supported regions, Abkhazia and South Ossetia. These regions, in addition to being settled by ethnic Georgians, are home to ethnic groups that more closely identify with ethnic kin in Russia's North Caucasus, located across the Caucasus mountain range. After a short war with Georgia in 2008, Russia unilaterally recognized the independence of these breakaway regions and stationed military forces on their territory. Georgians speak and write their own distinct Caucasian language, with a written literary form that emerged at least as early as the fifth century. The Georgian Orthodox Church, to which most Georgians belong, is autocephalous (independent), with roots that date back to the fourth century. Today, many observers consider Georgia to be one of the most democratic states among the USSR's successor states. The U.S.-based nongovernmental organization (NGO) Freedom House considers Georgia to be the freest post-Soviet state (not including the Baltic states), followed by Ukraine, Moldova, and Armenia. Georgia has a parliamentary system of governance, resulting from constitutional reforms that came into effect in 2013 and 2018. The prime minister is the country's most powerful executive. Georgia's president is commander in chief of the armed forces and has the power to veto legislation and dissolve parliament under certain circumstances. Georgia's prime minister, Mamuka Bakhtadze (aged 36), assumed office in June 2018. Bakhtadze was Georgia's minister of finance from November 2017 to June 2018; he previously served as the head of Georgian Railways and the Georgian International Energy Corporation. Georgia's president, elected in November 2018, is Salome Zurabishvili (aged 67), a former member of parliament (2016-2018) and minister of foreign affairs (2004-2005) who was previously a French national and diplomat. The parliamentary chairman is Irakli Kobakhidze (aged 40), a former professor of law and politics. Georgia has a unicameral legislature with 150 members elected for four-year terms by two methods: 77 by party list and 73 by majoritarian district. The most recent parliamentary elections in 2016 resulted in a sizeable win for Georgia's center-left ruling party, Georgian Dream-Democratic Georgia (GD), which initially led a ruling coalition after coming to power in 2012 and now governs alone. GD won 49% of the party list vote and nearly all majoritarian races, leading to control of more than 75% of parliamentary seats (116 of 150 deputies). Before losing this supermajority in February 2019 (see \" Ruling Party Tensions \" below), GD had enough votes to unilaterally enact changes to Georgia's constitution. This led many observers and opposition supporters to express concern that there were insufficient checks and balances against the ruling party. GD's main competitor in 2016 was the center-right United National Movement (UNM), the former ruling party previously led by ex-president Mikheil Saakashvili. The UNM received 27% of the party vote and 27 seats (18%). After months of infighting, the UNM fragmented in 2017, and most of its deputies, including much of the party's senior leadership, formed a new opposition party called European Georgia-Movement for Liberty. A third electoral bloc, the nationalist-conservative Alliance of Patriots of Georgia-United Opposition, cleared the 5% threshold to enter parliament with six seats. Georgia's most recent local elections were in 2017. They provided a similar picture of ruling party dominance across the country. In the party-list portion of the vote to local councils, GD won in all 73 districts, with a total of 56% of the vote. The UNM and European Georgia won 27% of the vote (17% and 10%, respectively). The nationalist-conservative Alliance of Patriots won 7%. GD won more than 92% of majoritarian seats, giving it a total of 77% of seats in local councils nationwide. GD also won mayoral elections in all but two districts. The most recent presidential elections were held in two rounds in October and November 2018. The victor, Salome Zurabishvili, won 60% of the vote in the second round. Zurabishvili ran as an independent candidate, although she was supported by GD. UNM candidate Grigol Vashadze, like Zurabishvili an ex-foreign minister, received 40%. The first round of the election was a closer race (39% to 38%), but Zurabishvili appeared to benefit from greater turnout in the runoff (56%, compared to 46% in the first round). Domestic and international observers considered the election to be competitive but flawed. Observers noted instances of official pressure against state employees to support Zurabishvili, as well as incidents of ballot box stuffing. They also expressed concern about allegations of mass vote-buying, related to Prime Minister Bakhtadze's pre-runoff announcement that a philanthropic foundation associated with GD founder and chairman Bidzina Ivanishvili had agreed to purchase and forgive the small private debts of more than 600,000 individuals. The U.S. Department of State said it shared the concerns of observers and indicated \"these actions are not consistent with Georgia's commitment to fully fair and transparent elections.\" Since 2018, GD has exhibited signs of internal tension. Many observers believe that GD founder Ivanishvili continued to maintain an influential behind-the-scenes role in government after stepping down as prime minister in 2013. Ivanishvili formally returned to politics as GD's party chairman in 2018, reportedly due to frustration with the party's growing internal divides. Then-Prime Minister Giorgi Kvirikashvili resigned less than two months later, citing \"disagreements\" with Ivanishvili. Kvirikashvili's resignation also followed a series of anti-government demonstrations against what protestors perceived to be heavy-handed police raids and judicial bias. Prime Minister Bakhtadze succeeded Kvirikashvili in June 2018. More recently, GD suffered parliamentary defections in February 2019, as a result of a dispute concerning judicial appointments (see \" Dispute over Judicial Reforms \" below). By the end of March 2019, eight members of parliament, led by Eka Beselia, former chairwoman of the parliamentary committee on legal affairs, had left GD. Beselia and most of the defecting MPs were expected to establish a new faction, while two MPs joined the Patriots of Georgia faction. The GD government also has had tense relations with the presidency. Ex-President Giorgi Margvelashvili, who was elected in 2013, initially was allied to GD. He subsequently adopted a more independent stance and fell out of favor with then-Prime Minister Ivanishvili. Margvelashvili frequently criticized the government and vetoed legislation several times, although parliament usually overrode his veto. Margvelashvili chose not to run for reelection in 2018. For the 2018 election, GD did not nominate its own presidential candidate. This possibly reflected a belief within the party leadership that the powers of the presidency were too limited to warrant fielding a candidate for the position. After some deliberation, however, GD decided to support Zurabishvili, an independent candidate. Before making this decision, government officials had criticized Zurabishvili for comments she made on the 10 th anniversary of the August 2008 war that appeared to blame Georgia's ex-leadership for the war. One of the government's internal disputes concerns judicial reform. A series of reforms from 2013 to 2017 restructured Georgia's judicial institutions. A High Council of Justice oversees the appointment and dismissal of judges. The council has 15 members, a majority of whom are selected by the Conference of Judges, the judiciary's self-governing body. In December 2018, several GD members of parliament criticized the High Council's decision to nominate several judges to Georgia's 28-seat Supreme Court whom they considered tainted by association with the UNM. The dispute sparked an intensive debate within the ruling party, as well as with some NGOs who sided with the dissenting GD members out of a concern that the nominated judges could be susceptible to corruption. Ultimately, the Supreme Court nominees withdrew their candidacies. GD's leadership agreed to further debate the rules of appointment and blamed the dispute on the opposition. Appointments to a nine-member Constitutional Court are divided between the parliament, president, and the Supreme Court. In recent years, the Constitutional Court has been the focus of various disputes concerning possible bias (sometimes against the government, other times against the opposition). In July 2018, the Constitutional Court received international attention for ruling that marijuana use was not a criminal offense, a decision government officials and church representatives heavily criticized. In response, parliament passed legislation imposing strict limitations on marijuana use. After GD won a supermajority in 2016, Georgia's parliament convened a State Constitutional Commission to draft additional reforms to the constitution intended to consolidate Georgia's transition to a parliamentary system of governance. Parliament passed the reforms in September 2017 by a vote of 117-2. Opposition parties, who opposed certain measures that appeared to strengthen the ruling party, refused to participate in the vote; civil society organizations also registered opposition. Then-President Margvelashvili vetoed the amendments and proposed alternative reforms. Parliament overrode his veto, and the president signed the amendments into law. The constitutional reforms entered into force after the 2018 presidential election. The reforms affect Georgia's parliamentary system in several ways. One of the main changes is the abolition of Georgia's directly elected presidency beginning in 2023. Instead, the president is to be indirectly elected by a college of electors made up of parliamentary deputies and local government representatives. Another major change is that parliamentary elections are to be held entirely on the basis of party lists, eliminating single-member districts. In theory, this change is expected to lead to greater opposition representation in parliament, as in Georgia parties that win the party-list vote tend to overwhelmingly win single-member districts. Although this change was to take effect in 2020, parliament voted to push back its implementation to 2024, a move many observers interpreted as an attempt to prolong the ruling party's dominance. In January 2019, several opposition parties launched a petition to pressure the government to implement the shift to a fully proportional system in advance of the 2020 parliamentary elections. In the course of adopting constitutional reforms, parliament considered several recommendations of the Council of Europe's Venice Commission, a legal and democratic advisory body. In the end, the commission provided a \"positive assessment\" of the reforms, although it noted \"the postponement of the entry into force of the proportional election system to October 2024 is highly regrettable and a major obstacle to reaching consensus.\" The Venice Commission said the reform \"completes the evolution of Georgia's political system towards a parliamentary system and constitutes a positive step towards the consolidation and improvement of the country's constitutional order, based on the principles of democracy, the rule of law and the protection of fundamental rights.\" For more than two decades, Georgia has been recovering from the severe economic decline it experienced after the Soviet Union collapsed. It remains a relatively poor country. In 2018, Georgia's GDP was around $16.7 billion (approximately 16 times less than that of Connecticut, a U.S. state with a similar population size). Its per capita GDP ($4,506) is midsized in comparison to Russia and other post-Soviet states. In 2017-2018, Georgia's economy appeared to enter a period of relatively strong growth. After average GDP growth of around 3% a year from 2013 to 2016, Georgia's GDP grew at 4.8% a year in 2017 and 2018. Increased economic growth has been based on strengthening domestic consumption and external demand, as well as \"generally strong policy efforts,\" according to the International Monetary Fund (IMF). The IMF forecasts a sustained rate of GDP growth of around 4.9% annually from 2019 to 2021. In February 2019, the IMF commended Georgian authorities \"for advancing structural reforms [but] stressed the need for continued efforts to promote inclusive growth and higher economic resilience to external shocks.\" Poverty has declined in recent years, although it is still relatively high. According to official data, 22% of the population lived in poverty in 2017 (down from 39% a decade before). In recent years, recorded unemployment has been around 14%; some surveys suggest a higher rate of unemployment. More than 40% of Georgian laborers work in agriculture, a sector of the economy that accounts for less than 10% of GDP. Georgia's economy depends in part on remittances from labor migration. From 2013 to 2017, remittances made up around 11% of Georgia's GDP. In 2017, Russia was estimated to be the source of almost 60% of Georgian remittances, followed by Ukraine (8%), Greece (5%), and Armenia (4%). In 2017, the IMF approved a three-year Extended Fund Facility arrangement to provide Georgia with around $285 million in loans to support economic reforms focusing, among other things, on financial stability and infrastructure investment. The IMF noted the need for Georgia to increase its agricultural productivity, improve its business environment, and reform its education system. Georgia has suffered in the past from energy shortages and gas cutoffs, but it has improved its energy security in recent years. Georgia has rehabilitated hydropower plants and constructed new ones. Nearly all its natural gas supplies come from neighboring Azerbaijan. In 2018, Georgia's three largest merchandise trading partners were Turkey ($1.7 billion, or 14% of Georgia's trade), Russia ($1.4 billion, 11%), Azerbaijan ($1.1 billion, 9%), and China ($1.0 billion, 8%). Trade with the European Union (EU), as a whole Georgia's largest trading partner, made up around 27% of total trade ($3.4 billion). More than half of Georgia's merchandise exports (51%) went to five countries: Azerbaijan, Russia, Armenia, Bulgaria, and Turkey. Its main exports were copper ores, beverages (wine, water, and spirits), motor vehicles, and iron and steel. Free trade agreements with the EU (signed in 2014) and China (signed in 2017) may improve Georgia's prospects for export-led growth. Georgia is also exploring a trade agreement with India. However, Georgia's manufacturing sector is small, and its top exports include used foreign cars and scrap metal, which provide low added value. The IMF indicates that Georgia could further diversify its agricultural exports but notes the need to improve quality and standards. Tourism to Georgia has increased in recent years and annual tourism-related income has more than quadrupled since 2010. In 2018, the number of international visitors who stayed in the country overnight was around 4.8 million, a 345% increase since 2010. Most tourists are from neighboring countries: Russia, Azerbaijan, Turkey, and Armenia. In recent years, foreign direct investment (FDI) appears to have exceeded the high levels Georgia enjoyed in 2006 to 2008, before the global financial crisis, when FDI averaged $1.5 billion a year. From 2014 to 2018, FDI averaged $1.64 billion a year. More than 60% of the total amount came from Azerbaijan, the Netherlands, the United Kingdom, and Turkey. During this period, most FDI was in transport and communications (28%); other leading sectors were finance (13%), construction (13%), and energy (10%). In 2017, the IMF noted that attracting FDI to sectors with high export potential, including tourism and agriculture, is \"crucial to ensure growth in foreign markets.\" Georgia aspires to be a key transit hub for the growing East-West overland trade route between China and Europe. In pursuit of this goal, a U.S.-Georgian consortium is constructing a major new deepwater port and free industrial zone in Anaklia, which is located on Georgia's Black Sea coast and abuts the Russian-occupied region of Abkhazia. The port, scheduled to begin operations in 2021, is considered Georgia's largest-ever infrastructure investment and is to be accompanied by major government investments in Georgia's road and rail infrastructure. The Georgian government has long made closer integration with the EU and NATO a priority. According to recent polls, over 80% of the Georgian population supports membership in the EU and over 75% supports membership in NATO. In 2014, Georgia concluded an association agreement with the EU that included a Deep and Comprehensive Free Trade Area (DCFTA) and encouraged harmonization with EU laws and regulations. The EU granted Georgia visa-free travel in 2017. The EU also is a major provider of foreign aid to Georgia, providing on average over €120 million (around $135 million) a year in 2017 and 2018. As of 2018, the benefits of the EU free-trade agreement for Georgia remain unclear. In 2018, the total value of Georgian exports to the EU was 17% greater than in 2014. Exports to the EU as a share of Georgia's total exports, however, were the same in 2018 as they were in 2014 (22%). The EU asserts that Georgia is \"reaping the benefits of economic integration\" with the EU but notes that \"further efforts are needed to stimulate exports and improve the trade balance.\" Georgia has close relations with NATO, which considers Georgia one of its \"closest operational partners.\" A NATO-Georgia Commission, established in 2008, provides the framework for cooperation. At its 2014 Wales Summit, NATO leaders established a \"Substantial NATO-Georgia Package\" to help Georgia bolster its defense capabilities, including capacity-building, training, exercises, and enhanced interoperability. In 2015, Georgia joined the NATO Response Force, a rapid reaction force. Georgia is one of the top troop contributors (and the top non-NATO contributor) in the NATO-led Resolute Support Mission in Afghanistan. At its height, Georgia's deployment to NATO's previous International Security Assistance Force (ISAF) reached over 1,500 troops, who served with no operational caveats. As of December 2018, Georgia is the fifth-largest contributor to the Resolute Support Mission, with 870 troops. Georgia also contributed more than 2,250 troops to the NATO-led Kosovo Force, or KFOR, between 1999 and 2008. In 2015, NATO opened a Joint Training and Evaluation Center in Georgia to provide training, evaluation, and certification opportunities to enhance interoperability and operational readiness. The center hosted its second joint NATO-Georgia exercise in March 2019 (the first one was held in 2016). Some NATO member states also participate in two sets of annual U.S.-Georgia military exercises: Agile Spirit and Noble Partner (see \" Security Assistance Since the August 2008 War ,\" below). NATO also has established a Defense Institution Building School for professional development and training. Many observers consider that closer integration with the EU and NATO has not enabled Georgia to improve its near-term prospects for membership in these organizations. The EU is unlikely to consider Georgia a candidate for membership soon, given the EU's internal challenges and a lack of support for enlargement among many members. In 2008, NATO members agreed that Georgia and Ukraine would become members of NATO, but Georgia has not been granted a NATO Membership Action Plan (MAP) or other clear path to membership. Many observers attribute Georgia's lack of a clear path to NATO membership to some members' concerns that Georgia's membership could lead to a heightened risk of war with Russia, which currently occupies around 18% of Georgia's territory. Many believe that NATO will not move forward with membership as long as Russia occupies Georgian territory and the conflict remains unresolved. Georgia's secessionist regions of Abkhazia and South Ossetia broke away from Georgia in the early 1990s, during and after Georgia's pursuit of independence from the USSR. Since then, Georgia's relations with Russia have been difficult, as Tbilisi has blamed Moscow for obstructing Georgia's Western leanings. Many observers believe that Moscow supports Abkhazia and South Ossetia to prevent Georgia from joining NATO. Georgia's relations with Russia worsened after ex-President Saakashvili came to power in 2003 and sought to accelerate Georgia's integration with the West. After clashes increased between Georgian and secessionist forces, Russia invaded Georgia in August 2008 to prevent Georgia from reestablishing control over South Ossetia. Russia subsequently recognized Abkhazia and South Ossetia as independent states. Over the last decade, Russia has tightened control over Abkhazia and South Ossetia. It has constructed border fencing and imposed transit restrictions across the administrative boundary lines dividing the two regions from the rest of Georgia. Russia has established military bases that reportedly house around 3,500 personnel each, and it also stations border guards in the two regions. In 2016, Russia finalized an agreement with the de facto authorities of Abkhazia, establishing a combined group of military forces. In 2017, Russia concluded an agreement with South Ossetia to integrate the breakaway region's military forces with its own. Since coming to power in 2012, the GD government has sought to improve relations with Russia, particularly economic ties. In 2013, Moscow lifted an embargo on popular Georgian exports (including wine and mineral water) that had been in place since 2006. As a result, Russia again became one of Georgia's main trading partners. The share of Georgia's merchandise exports to Russia as a percentage of its total exports rose from 2% in 2012 to 13% in 2018. Improved economic relations with Russia have not led to progress in resolving the conflicts over Abkhazia and South Ossetia. The EU leads an unarmed civilian Monitoring Mission in Georgia (EUMM) that monitors compliance with the cease-fire agreements that ended the August 2008 war. Although the EUMM's mandate covers all of Georgia, local and Russian authorities do not permit it to operate in Abkhazia and South Ossetia; EUMM representatives have been allowed to cross the boundary line on a few occasions to address specific issues. All parties to the conflict, together with the United States, the EU, the United Nations (U.N.), and the Organization for Security and Cooperation in Europe (OSCE), participate in the Geneva International Discussions, convened quarterly to address issues related to the conflict. They also participate in joint Incident Prevention and Response Mechanisms (IPRM), together with the U.N. and OSCE, designed to address local security issues and build confidence. Abkhaz and South Ossetian representatives periodically have suspended their participation in the IPRM, however; the IPRM for Abkhazia did not convene at all from 2012 to 2016. In general, efforts to rebuild ties across conflict lines or return internally displaced persons have made little progress. In 2018, the Georgian government unveiled a peace initiative and enacted related legislative amendments to facilitate greater engagement with Abkhazia and South Ossetia in trade and educational affairs. The United States and the EU have expressed support for this initiative. Whether Russia and the two regions will accept any of the initiative's elements remains to be seen. Improved relations with Russia do not appear to have led to greater public support in Georgia for closer integration with Russia. Several overtly pro-Russian parties performed poorly in the 2016 parliamentary elections. One electoral bloc critical of Georgia's European integration, the nationalist-conservative Alliance of Patriots, cleared the 5% threshold to enter parliament, but even this bloc's leadership did not campaign for membership in the Russia-led Eurasian Union. In a 2018 survey, less than 30% of respondents expressed support for joining the Eurasian Union. Georgia is one of the United States' closest partners among the post-Soviet states. With a history of strong economic aid and security cooperation, the United States and Georgia have deepened their strategic partnership since Russia's 2008 invasion of Georgia and 2014 invasion of Ukraine. A U.S.-Georgia Charter on Strategic Partnership, signed in 2009, provides the framework for much of the two countries' bilateral engagement. A Strategic Partnership Commission convenes annual plenary sessions and working groups to address political, economic, security, and people-to-people issues. Before the 2008 war, the United States supported granting Georgia a NATO Membership Action Plan and backed NATO's April 2008 pledge that Georgia eventually would become a member of NATO. In August 2017, U.S. Vice President Michael Pence said in Tbilisi that the Trump Administration \"stand[s] by the 2008 NATO Bucharest statement, which made it clear that Georgia will one day become a member of NATO.\" At a press conference after the July 2018 NATO summit in Brussels, President Trump said that \"at a certain point [Georgia will] have a chance\" to join NATO, if \"not right now.\" U.S. policy expressly supports Georgia's sovereignty and territorial integrity. In a visit to Tbilisi in August 2017, Vice President Michael Pence said the United States \"strongly condemns Russia's occupation on Georgia's soil.\" In January 2018, the State Department indicated that \"the United States' position on Abkhazia and South Ossetia is unwavering: The United States fully supports Georgia's territorial integrity within its internationally recognized borders.\" The United States supports a resolution to the conflict within these parameters. The United States calls on Russia to comply with the terms of the 2008 cease-fire agreement, including withdrawal of its forces to prewar positions, and to reverse its recognition of Abkhazia and South Ossetia as independent states. The U.S. government has expressed support for Georgia's \"commitment to dialogue and a peaceful resolution to the conflict,\" and in 2018 the State Department welcomed the new peace initiative that the government of Georgia unveiled. The State Department regularly participates in the Geneva International Discussions. Congress also has expressed firm support for Georgia's sovereignty and territorial integrity. The Countering Russian Influence in Europe and Eurasia Act of 2017 ( P.L. 115-44 , Title II, §253) states that the United States \"supports the policy known as the 'Stimson Doctrine' and thus does not recognize territorial changes effected by force, including the illegal invasions and occupations\" of Abkhazia and South Ossetia, and other territories occupied by Russia. As with previous appropriations, FY2019 foreign operations appropriations prohibit foreign assistance to governments that recognize Abkhazia or South Ossetia and restrict funds from supporting Russia's occupation of Abkhazia and South Ossetia ( P.L. 116-6 , §7047(c)). The 2014 Ukraine Freedom Support Act ( P.L. 113-272 ) provides for sanctions against Russian entities that transfer weapons to Georgian territory. In February 2019, the Georgia Support Act ( H.R. 598 ) was reintroduced in the House. The act originally passed the House by unanimous consent in December 2018, during the 115 th Congress. The act would express support for Georgia's sovereignty, independence, and territorial integrity, as well as for its democratic development, Euro-Atlantic and European integration, and peaceful conflict resolution. The act would require the Secretary of State to submit to Congress reports on U.S. security assistance to Georgia, U.S.-Georgia cybersecurity cooperation, and a strategy to enhance Georgia's capabilities to combat Russian disinformation and propaganda. The act also would require the President to impose sanctions on those responsible for serious human rights abuses in Abkhazia and South Ossetia. Many Members of Congress have expressed their support for Georgia in House and Senate resolutions. In September 2016, during the 114 th Congress, the House of Representatives passed H.Res. 660, which expressed support for Georgia's territorial integrity, in a 410-6 vote. The resolution condemned Russia's military intervention and occupation, called upon Russia to withdraw its recognition of Abkhazia and South Ossetia as independent states, and urged the U.S. government to declare unequivocally that the United States will not recognize Russia's de jure or de facto sovereignty over any part of Georgia under any circumstances. In January 2019, a resolution (H.Res. 93) was reintroduced in the House supporting Georgia's territorial integrity and condemning a decision by the Syrian government to recognize Abkhazia and South Ossetia as independent states. The Senate and House have passed other resolutions in support of Georgian sovereignty and territorial integrity: in 2011-2012 ( S.Res. 175 , H.Res. 526), in September 2008 ( S.Res. 690 ), and, before the conflict, in May-June 2008 (H.Res. 1166, S.Res. 550 ) and December 2007 ( S.Res. 391 ). Georgia has long been a leading recipient of U.S. foreign and military aid in Europe and Eurasia. In the 1990s (FY1992-FY2000), the U.S. government provided over $860 million in total aid to Georgia ($96 million a year on average). In the later part of the decade, the United States began to provide Georgia with increased amounts of aid to improve border and maritime security and to combat transnational crime, including through the development of Georgia's Coast Guard. In the 2000s, Georgia became the largest per capita recipient of U.S. aid in Europe and Eurasia. From FY2001 to FY2007, total aid to Georgia amounted to over $945 million ($135 million a year, on average). In 2005, Georgia also was awarded an initial five-year (2006-2011) $295 million grant from the U.S. Millennium Challenge Corporation (MCC) for road, pipeline, and municipal infrastructure rehabilitation, as well as for agribusiness development. The United States gave increased amounts of military aid to Georgia after the terrorist attacks of September 11, 2001. At the time, the George W. Bush Administration considered Georgia part of a \"second stage\" in the \"war on terror,\" together with Yemen and the Philippines, and supported Georgia with a two-year Train and Equip Program. This program was followed by a Sustainment and Stability Operations Program through 2007 that supported a Georgian troop deployment to Operation Iraqi Freedom. After Russia invaded Georgia in August 2008, the United States substantially increased its assistance to Georgia. The U.S. government immediately provided over $38 million in humanitarian aid and emergency relief, using U.S. aircraft and naval and coast guard ships. In September 2008, then-Secretary of State Condoleezza Rice announced a total aid package worth at least $1 billion. Total U.S. assistance to Georgia for FY2008-FY2009 amounted to $1.04 billion, which included $250 million in direct budgetary support and an additional $100 million in MCC funds (taking the total amount of Georgia's initial MCC grant to $395 million). Since the 2008 war, Georgia has continued to be a major recipient of U.S. foreign aid in the Europe and Eurasia region. Nonmilitary aid totaled $60 million a year on average from FY2010 to FY2017. In addition, Georgia was awarded a second five-year (2014-2019) MCC grant of $140 million to support educational infrastructure and training, and to improve the study of science and technology. In FY2018, U.S. nonmilitary aid to Georgia totaled $70.8 million. For FY2019, Congress appropriated $89.8 million in nonmilitary aid. The president's FY2020 nonmilitary aid request for Georgia is $42.4 million. After the 2008 war, Georgia continued to receive U.S. military assistance, including around $144 million in postwar security and stabilization assistance in FY2008-FY2009. Since FY2010, Georgia has received further military assistance, primarily through Foreign Military Financing (FMF) aid, Coalition Support Funds, and Train and Equip and other capacity-building programs. These funds have been used to support Georgia's deployments to Afghanistan in ISAF and the follow-on Resolute Support Mission, as well as for Georgian border security, counterterrorism, and defense readiness. U.S. military assistance to Georgia in FY2010-FY2017 is estimated to have been around $74 million a year on average. For FY2018, military aid to Georgia is estimated to have totaled $40.4 million. This includes $35 million in FMF assistance, $2 million in International Military Education and Training (IMET), and $3.4 million for counter-weapons of mass destruction (WMD) capacity-building assistance. For FY2019, Congress again appropriated $35 million in FMF and $2 million in IMET funds. Additional defense funding includes $4.3 million in maritime capacity-building assistance and $2.5 million in counter-WMD capacity-building assistance. Outside of Afghanistan, the United States has gradually deepened its postwar defense cooperation with Georgia. The Obama Administration refrained from approving defensive (anti-tank and antiaircraft) arms sales to Georgia. Observers considered various reasons for this hesitation, including doubts regarding the deterrent effect of such weapons, concerns about encouraging potential Georgian offensives to retake territory, and a desire to avoid worsening relations with Russia as the Administration embarked on a new \"reset\" policy with Moscow. In testimony to the Senate Foreign Relations Committee a year after Russia's invasion, then-Assistant Secretary of Defense Alexander Vershbow characterized U.S. defense cooperation with Georgia as \"a methodical, yet patient, strategic approach … [focused] on building defense institutions, assisting defense sector reform, and building the strategic and educational foundations\" for training and reform. He said the United States was \"carefully examining each step [of its military assistance program] to ensure it would not be counterproductive to our goals of promoting peace and stability in the region.\" U.S.-Georgia defense cooperation deepened over time. In a 2012 visit to Georgia, then-Secretary of State Hillary Clinton said that increased cooperation would help improve Georgia's self-defense capabilities, promote defense reform and modernization, and provide training and equipment to support Georgia's ISAF deployment and NATO interoperability. U.S.-Georgia security cooperation expanded further in 2016. In July 2016, then-U.S. Secretary of State John Kerry and then-Georgian Prime Minister Giorgi Kvirikashvili signed a Memorandum on Deepening the Defense and Security Relationship between the United States and Georgia. In December 2016, the two countries concluded a three-year framework agreement on security cooperation that would focus on \"improving Georgia's defense capabilities, establishing [an] effective and sustainable system of defense, enhancing interoperability of the Georgian Armed Forces with NATO, and ensuring effective military management.\" The framework agreement led to the launching in February 2017 of a three-year, $35 million training initiative, the Georgia Defense Readiness Program. This initiative seeks to build the capacity of Georgia's armed forces \"to generate, train and sustain forces in preparation for all national missions.\" Unlike the Obama Administration, the Trump Administration approved the provision of major defensive lethal weaponry to Georgia. In November 2017, the U.S. State Department approved a Foreign Military Sale of over 400 Javelin portable anti-tank missiles, as well as launchers, associated equipment, and training, at a total estimated cost of $75 million. The Georgian Ministry of Defense confirmed that the \"first stage\" of two sales was complete as of January 2018. In June 2018, then-U.S. Assistant Secretary of State for European and Eurasian Affairs Wess Mitchell said the United States seeks to \"check Russian aggression,\" including by \"building up the means of self-defense for those states most directly threatened by Russia militarily: Ukraine and Georgia.\" The United States and Georgia have held annual joint military exercises in Georgia since 2011. Initial exercises, dubbed Agile Spirit, began as a counterinsurgency and peacekeeping operations training exercise and shifted to a \"conventional warfare focus\" in 2015, the year after Russia's invasion of Ukraine. That year, Agile Spirit began to include other NATO partners. A second bilateral exercise, Noble Partner, was launched in 2015; the Department of Defense characterized it as the \"most robust\" U.S.-Georgia exercise ever, designed to support Georgia's integration into the NATO Response Force. In 2018, the United States was Georgia's seventh-largest source of merchandise imports and eighth-largest destination for exports. The value of Georgia's merchandise imports from the United States—mainly vehicles, industrial machinery, and meat—was $360 million in 2018. The value of merchandise exports to the United States—mainly iron and steel and inorganic chemicals—was $160 million in 2018. Since 2012, the United States and Georgia periodically have discussed the possibility of a free-trade agreement. The two countries have signed a bilateral investment treaty and a Trade and Investment Framework Agreement. They also have established a High-Level Dialogue on Trade and Investment. During Vice President Michael Pence's August 2017 visit to Georgia, he expressed the United States' \"keen interest in expanding our trade and investment relationship with Georgia.\"", "summary": "Georgia is one of the United States' closest partners among the states that gained their independence after the USSR collapsed in 1991. With a history of strong economic aid and security cooperation, the United States has deepened its strategic partnership with Georgia since Russia's 2008 invasion of Georgia and 2014 invasion of Ukraine. U.S. policy expressly supports Georgia's sovereignty and territorial integrity within its internationally recognized borders, and Georgia is a leading recipient of U.S. aid to Europe and Eurasia. Many observers consider Georgia to be one of the most democratic states in the post-Soviet region, even as the country faces ongoing governance challenges. The center-left Georgian Dream-Democratic Georgia party (GD) has close to a three-fourths supermajority in parliament and governs with limited checks and balances. Although Georgia faces high rates of poverty and underemployment, its economy in 2017 and 2018 appeared to show stronger growth than it had in the previous four years. The GD led a coalition to victory in parliamentary elections in 2012 amid growing dissatisfaction with the former ruling party, Mikheil Saakashvili's center-right United National Movement, which came to power as a result of Georgia's 2003 Rose Revolution. In August 2008, Russia went to war with Georgia to prevent Saakashvili's government from reestablishing control over the regions of South Ossetia and Abkhazia, which broke away from Georgia in the early 1990s and became informal Russian protectorates. Congress has expressed firm support for Georgia's sovereignty and territorial integrity. The Countering Russian Influence in Europe and Eurasia Act of 2017 (P.L. 115-44, Title II, §253) states that the United States \"does not recognize territorial changes effected by force, including the illegal invasions and occupations\" of Abkhazia, South Ossetia, and other territories occupied by Russia. In September 2016, the House of Representatives passed H.Res. 660, which condemns Russia's military intervention and occupation of Abkhazia and South Ossetia. In February 2019, the Georgia Support Act (H.R. 598), which originally passed the House by unanimous consent in the 115th Congress (H.R. 6219), was reintroduced in the 116th Congress. The act would express support for Georgia's sovereignty, independence, and territorial integrity, as well as for its democratic development, Euro-Atlantic integration, and peaceful conflict resolution in Abkhazia and South Ossetia. The United States provides substantial foreign and military aid to Georgia each year. Since 2010, U.S. nonmilitary aid to Georgia has totaled around $64 million a year on average, in addition to a five-year Millennium Challenge Corporation grant of $140 million to support education. In FY2019, Congress appropriated almost $90 million in nonmilitary aid to Georgia. Since 2010, U.S. military aid to Georgia has been estimated at around $68 million a year on average. In FY2019, Congress appropriated $35 million in Foreign Military Financing and $2 million in International Military Education and Training funds. Defense assistance also includes a three-year, $35 million training initiative, the Georgia Defense Readiness Program.", "document_type": "crs"}
{"report": "The rules of the House of Representatives generally grant Members an opportunity to review legislative measures by governing the length of time the measures must be made available before being considered on the floor. Different House rules establish availability requirements for reported bills and resolutions, unreported bills and joint resolutions, conference committee reports, and special rules (resolutions reported by the Rules Committee intended to regulate floor consideration of a measure named in the resolution). Under House rules, draft committee reports and unreported bills and joint resolutions are considered available under these rules if they are \"publicly available in electronic form at a location designated by the Committee on House Administration.\" Conference committee reports and accompanying joint explanatory statements are also considered available if they are in electronic form at such a location. It is not a requirement under the rule that the measures be available in the designated location. Instead, the House rule is meant to provide an additional means through which Members, congressional staff, and the general public can access these documents. Measures and other matters reported by committees may not be considered on the House floor until a draft of the committee report on the matter has been available for at least 72 hours. Specifically, the \"proposed text\" of the committee report—except for any supplemental, minority, additional, or dissenting views—must be made available. Under House Rule XI, clause 2(l), committee members are guaranteed two calendar days to submit supplemental or other views for inclusion in a committee report—if notice of intent to file supplement views was given at the markup. However, the committee majority, before receiving such views, can make a draft of the committee report available and start the 72-hour clock. The House rule exempts several kinds of measures specified in the rule, including resolutions reported by the Rules Committee. Bills and joint resolutions that have not been reported by committee, and therefore are not accompanied by a written report, may also not be considered on the House floor unless the measure has been available for at least 72 hours. If a measure has not been reported by a committee, it is generally not eligible for floor consideration unless it is called up under a procedure that waives the requirement that it be reported. Such procedures are discussed below in the section on waiving the availability requirements. The House rule requires that before a conference report can be considered, its text and its accompanying joint explanatory statement must be available in the Congressional Record for 72 hours. Alternatively, the conference report can be considered if it has been made publicly available in electronic form at a location designated by the Committee on House Administration (currently http://docs.house.gov/ ) . In addition, copies of a conference report and the joint explanatory statement must be available for at least two hours prior to its consideration. According to the rule, this 72-hour availability requirement does not apply during the last six days of a session. In contemporary practice, however, it is difficult to implement this exception to the rule. Adjournment resolutions are usually not approved until very shortly before the adjournment takes place. This practice usually makes it impossible to know when the \"last six days\" of a session begin. Absent a resolution setting a future date for adjournment, the 72-hour rule applies even as the House nears the end of a session. The 72-hour availability requirement for conference reports would cease to apply only in the last six calendar days before the constitutional end of a session on January 3. Near the end of a session, however, the House sometimes agrees to special rules reported by the Rules Committee that waive the availability requirement. This is discussed below in the section on waiving availability requirements. The House frequently operates under special rules, or resolutions reported from the Rules Committee, which can waive any or all of the above rules . Special rules are required to lie over for one legislative day, which means the special rule cannot be reported and considered on the same legislative day. A legislative day is not necessarily a calendar day. A legislative day begins the first time the House meets after an adjournment and ends when the House adjourns again. Because the House typically adjourns at the end of a calendar day, legislative and calendar days usually coincide. Rule XIII also provides several exceptions to the layover requirement for special rules. First, a special rule may be considered the same day it is presented if it proposes only to waive the rules mandating that committee reports and conference reports be available for 72 hours. If the rule also sets the terms for the consideration of the matter, perhaps by waiving points of order, then the rule is required to lie over for one legislative day. Second, a special rule may be considered the same day it is presented to the House in the last three days of a session. In modern practice, as mentioned above, the House rarely agrees to an adjournment date far in advance, usually making it impossible to know when \"the last three days\" begin. Third, the one-day layover requirement for special rules can be waived if two-thirds of the Members voting agree to the waiver (a quorum being present). In addition, as discussed below, the Rules Committee may report a special rule that waives the one-day layover requirement for subsequent special rules. The House has several means for waiving its rules when it wishes to act expeditiously. For example, the House may set aside any of its availability requirements by unanimous consent. It may also call up and agree to a bill or conference report that has not met the availability requirements by a two-thirds vote to suspend the rules. As previously mentioned, according to Rule XIII, clause 6(a)(1), the one-day layover requirement for a special rule can be waived by two-thirds of the Members voting. The House can also waive the availability requirements by a simple majority. If a majority of the House desires to do so, the House can vote on a measure the same calendar day that the text was made available to Members. The House usually does this by agreeing to two special rules, as explained below. It may also achieve the same result by convening for two legislative days on the same calendar day in the manner also described below. The Rules Committee may report a special rule that waives the 72-hour availability requirement for bills, resolutions, or conference reports. A rule only waiving the availability requirement can be presented and called up on the same day. Special rules, however, often set the terms for considering a measure as well. A special rule for the consideration of a measure might waive the 72-hour availability requirement but also structure the amending process. Such a rule would be required to lie over for one legislative day (unless this requirement was waived by a two-thirds vote). Similarly, a rule for the consideration of a conference report often waives points of order against the conference report and against its consideration. Under current House rules, that special rule is also required to lie over for one legislative day unless the requirement is waived by a two-thirds vote. In short, special rules only waiving the 72-hour availability requirement are not required to lie over for one legislative day. To waive the one-day layover requirement of Rule XIII, clause 6(a), for a special rule, the Rules Committee may report a special rule that waives this requirement. The rule providing this waiver is subject to the same one-day layover requirement. If such a special rule is adopted, the House can then consider and adopt a special rule providing for the consideration of a measure later on the same legislative day. The special rule for the consideration of the measure can waive the 72-hour availability requirement for the measure. In this way, the House of Representatives, by majority vote, has the potential to call up, debate, and pass a measure in a single day even if the measure has not been made available prior to consideration. In order to achieve this result, however, the Rules Committee must have reported the additional special rule on the previous legislative day. In summary, a simple majority of the House can call up, debate, and vote on a measure in a single calendar day, regardless of how long the text has been available, by taking the following steps: First, the House agrees to a special rule waiving the one-day layover requirement for any special rule for the consideration of a specified matter. (This rule is required to lie over for one legislative day.) Second, the House agrees to a separate special rule setting the terms of consideration of the measure and waiving any availability requirements for the measure itself. (This rule need not lie over for one legislative day. The first special rule waived the one-day layover requirement for this special rule.) Third, the House calls up, debates, and votes on the measure. Although the House rarely chooses to do so, it could agree to call up and consider a measure in a single calendar day by convening two legislative days in a single calendar day. It would do this by agreeing to a motion to adjourn for a brief period at some point during its session. Agreement to this motion would terminate the legislative day, and when the House returned from its brief adjournment pursuant to this motion, a new legislative day would begin. If the Rules Committee presents a special rule before the House adjourns, the rule can be considered on the next legislative day regardless of how much time has elapsed. In other words, if a special rule were reported, and the House adjourned and then shortly thereafter reconvened, the special rule would have been available for one legislative day, meeting the layover requirement of the standing rule. The House could then consider the special rule that, among other things, could waive the 72-hour availability requirement for a resolution, bill, or conference report. From time to time, the House has also been known to recess after legislative business, but not adjourn, in order to give the Rules Committee time to complete and report a special rule. The rule could be reported very late or even early in the morning of the next calendar day. Regardless of whether or not it is the next calendar day when the rule is reported, if the House adjourns after it is reported, when it reconvenes it will be a new legislative day, and the layover requirement will be considered met. In the contemporary House, it is not uncommon for the Rules Committee to report several special rules at the end of a session that waive the availability requirements for subsequent special rules for the consideration of certain specified measures. In the past, the House has also agreed to resolutions reported by the Rules Committee near the end of a session that waived availability requirements in general. Special rules that waive availability requirements are sometimes referred to as \"same day rules.\" They are also sometimes referred to, particularly by their opponents, as \"martial law\" rules. The term has been used by Members of the House for at least 15 years, but it has not been applied consistently to any one type of special rule. It has been used, for example, to describe both special rules that waive the one-day layover requirement for subsequent special rules and to describe broad special rules that trigger some provisions of House rules and waive others for the remaining duration of a session. Supporters of end-of-session resolutions that waive availability requirements sometimes argue that these special rules are meant to achieve the same end as the standing rules that make certain provisions of House rules inapplicable during the final days of the session. As mentioned above, the 72-hour availability requirement for conference reports does not apply in the last six days of a session. The one-day layover requirement for special rules does not apply in the last three days of a session. In recent years, Congress has not agreed to a concurrent resolution setting an adjournment date until just before adjournment takes place. As a result, these standing rules are not triggered in the contemporary House. By agreeing to a same-day rule near the end of the session, the House can achieve the same end as the existing, but technically inapplicable, standing rules that waive availability requirements at the end of a session. Opponents of these end-of-session resolutions sometimes argue that all Representatives should be guaranteed some time to examine legislative proposals regardless of when they are presented during the course of a session.", "summary": "House rules govern the length of time legislative measures must be available to Members before being considered on the floor. For measures reported from committee, a draft of the committee report must have been available for 72 hours. Conference reports must also have been available for 72 hours and special rules for considering measures for one legislative day. Bills and joint resolutions that have not been reported by committee, and therefore are not accompanied by a written report, may also not be considered on the House floor unless the measure has been available for 72 hours. Proposed committee reports, unreported bills and joint resolutions, conference reports, and joint explanatory statements are considered available under these rules if they are publicly available in electronic form on a website designated by the Committee on House Administration for this purpose, http://docs.house.gov. The House has several means by which it can choose to waive these availability requirements and call up, debate, and vote on a measure in a single calendar day even if the text of the measure was not made available prior to consideration. These include (1) considering a measure under the suspension of the rules procedure or by unanimous consent, (2) adopting a special rule that waives the 72-hour requirement, (3) adopting a special rule that waives the one-day requirement for another special rule, and (4) convening a second legislative day on the same calendar day. Waiving availability requirements allows the House to act quickly when necessary, such as near the end of a session.", "document_type": "crs"}
{"report": "Each of the four major federal land management agencies has maintenance responsibility for tens of thousands of diverse assets in dispersed locations. These agencies are the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), and National Park Service (NPS), all within the Department of the Interior (DOI), and the Forest Service (FS) within the Department of Agriculture. These agencies maintain assets to preserve their functioning and to repair and replace components as needed. The infrastructure needs of the federal land management agencies have been a subject of significant federal and public attention for many years. Congressional and administrative attention has focused on deferred maintenance and repairs , defined as \"maintenance and repairs that were not performed when they should have been or were scheduled to be and which are put off or delayed for a future period.\" \"Maintenance and repair\" include a variety of activities intended to preserve assets in an acceptable condition, including activities such as preventive maintenance and replacement of parts, systems, and components. These terms do not include activities intended to expand the capacity of assets to allow them to serve different purposes or significantly increased needs. Deferred maintenance and repairs often are called the maintenance backlog . The agencies assert that continuing to defer the maintenance and repair of facilities accelerates the rate of these facilities' deterioration, increases their repair costs, and decreases their value. Debate has focused on varied issues, including the level of funds needed to reduce deferred maintenance, whether agencies are using existing funding efficiently, the priority of deferred maintenance relative to regular maintenance, and whether additional sources of funds should be directed to maintenance. Other issues include how to balance the maintenance of existing infrastructure with the acquisition of new assets, whether disposal of assets is desirable given limited funding, and how much to prioritize maintaining infrastructure relative to other government functions. Another issue relates to the dollar amount of deferred maintenance and the reasons for fluctuations over time. This report focuses on these issues. It first provides agency deferred maintenance estimates for FY2018, the most recent fiscal year for which this information is available. It also discusses changes in deferred maintenance over the past decade (FY2009-FY2018) and then identifies some of the factors that likely contributed to these changes. The agencies typically identify deferred maintenance through periodic condition assessments of facilities. FS currently reports an annual deferred maintenance dollar total composed of estimates for 10 classes of assets. These classes include roads, buildings, trails, bridges, and water systems, among others. DOI currently reports annual deferred maintenance composed of estimates for four broad categories of assets: (1) roads, bridges, and trails; (2) irrigation, dams, and other water structures; (3) buildings; and (4) other structures. The \"other structures\" category includes a variety of assets (e.g., recreation sites and hatcheries). For each of the 10 years covered by this report, FS has reported the amount of deferred maintenance as a single figure. DOI agencies began reporting deferred maintenance as a single figure in FY2015. In prior years, DOI agencies reported estimates as a range. For FY2014, for instance, the range had an \"accuracy level of minus 15 percent to plus 25 percent of initial estimate.\" According to DOI, a range had been used because \"due to the scope, nature, and variety of the assets entrusted to DOI, as well as the nature of deferred maintenance itself, exact estimates are very difficult to determine.\" FS estimates of deferred maintenance included in this report generally are taken from the agency's annual budget justifications to Congress. The DOI Budget Office provided the Congressional Research Service (CRS) with a deferred maintenance range for each DOI agency for each fiscal year from FY2009 to FY2014. From these ranges, CRS calculated mid-range figures. For instance, DOI estimated NPS deferred maintenance for FY2014 at between $9.31 billion and $13.70 billion. The CRS-calculated mid-range figure is $11.50 billion. This report reflects CRS's mid-range calculations for FY2009-FY2014 to facilitate comparison with FS estimates. Since FY2015, the DOI Budget Office has provided CRS with a single estimate for each DOI agency, and those figures are used in this report. They represent deferred maintenance as of the end of the fiscal year (i.e., September 30). For both FS and DOI agencies, the deferred maintenance estimates generally reflect project costs. Finally, totals shown in the body and in tables of this report may not add to 100% due to rounding. The four agencies had combined FY2018 deferred maintenance estimated at $19.38 billion. The agencies had widely varying shares of the total. NPS had the largest portion, 62%, based on an estimate of $11.92 billion. The FS share was 27% of the total, with an estimated deferred maintenance of $5.20 billion. The FWS portion was 7%, reflecting the agency's deferred maintenance of $1.30 billion. BLM had the smallest share, 5%, based on a backlog estimate of $0.96 billion. Each agency's deferred maintenance estimate for FY2018 consisted of various components. For FS, the single largest asset class was roads, which comprised 61% of the FY2018 total of $5.20 billion. The next largest asset class was buildings, which represented 24% of the FS FY2018 total. The next two largest asset classes were trails and bridges, each with 5%. Six other asset classes made up the remaining 6%. For NPS, the largest asset category was roads, bridges, and trails, which comprised 57% of the FY2018 deferred maintenance total of $11.92 billion. The buildings category comprised 19% of the total, followed by 18% for other structures and 6% for irrigation, dams, and other water structures. Roads, bridges, and trails also reflected the largest share of BLM's FY2018 deferred maintenance, with 69% of the $0.96 billion total. Two other categories of assets had relatively comparable portions, specifically 14% for buildings and 12% for other structures. The remaining 6% was for irrigation, dams, and other water structures. Roads, bridges, and trails made up the smallest portion of FWS's FY2018 deferred maintenance ($1.30 billion), unlike for the other agencies. Moreover, the four asset categories had roughly comparable portions, as follows: 27% for buildings; 27% for other structures; 24% for irrigation, dams, and other water structures; and 22% for roads, bridges, and trails. As shown in Table 1 and Figure 1 , in current dollars, the total deferred maintenance estimate for the four agencies showed considerable variation over the 10-year period from FY2009-FY2018, with a peak in FY2012. It ended the decade relatively flat, with an increase of $0.36 billion overall, from $19.02 billion to $19.38 billion, or 2%. Both the BLM and NPS estimates increased, by $0.42 billion (80%) and $1.75 billion (17%), respectively. By contrast, both the FWS and FS estimates decreased, by $1.71 billion (57%) and $0.11 billion (2%), respectively. Within these overall changes, there was considerable variation among agency trends. The NPS estimate increased fairly steadily for several years, fell in FY2016, then rose again. The FS estimate was similar at the beginning and end of the decade, although it fluctuated between $5.10 billion and $6.03 billion throughout the 10-year period. The BLM estimate also fluctuated, falling in the first few years of the decade, then rising, leveling off, and rising again to a new high at the end of the decade. The FWS estimate had a generally steady decline during the first several years, leveled off somewhat after FY2015, and reached a decade low in FY2018. Figure 1 depicts the annual changes in current dollars for each agency and for the four agencies combined. Factors that might have contributed to the changes are discussed in the \" Issues in Analyzing Deferred Maintenance \" section, below. By contrast, as shown in Table 2 and Figure 2 , in constant dollars, the total deferred maintenance estimate for the four agencies decreased over the course of the ten-year period by $3.61 billion, from $22.99 billion to $19.38 billion, or 16%. Three agencies had overall decreases: $0.37 billion (3%) for NPS, $1.22 billion (19%) for FS, and $2.34 billion (64%) for FWS. However, the BLM estimate increased by $0.32 billion (50%) over the 10-year period. As was the case for current-dollar estimates, the overall changes in constant dollars reflected various fluctuations. The BLM estimate fell and rose during the period, with the lowest estimate in FY2011 and the highest at the end (FY2018). The FWS estimate exceeded $3 billion for each of the first four years before dropping steeply over the next six years to roughly one-third of the FY2009 level. The NPS estimate peaked in FY2010, then mainly declined, until increasing in FY2018. The FS estimate exceeded $6 billion for the first half of the 10-year period. It ranged roughly between $5 billion and $6 billion during the second half of the period, reaching a low of $5.20 billion in both FY2017 and FY2018. Figure 2 depicts the annual changes in constant dollars for each agency and for the four agencies combined. Throughout the decade, agency shares of the deferred maintenance totals differed, as shown in Figure 3 and Figure 4 . In both current and constant dollars, in each fiscal year NPS had the largest portion of total deferred maintenance and considerably more than any other agency. FS consistently had the second-largest share, followed by FWS and then BLM. Moreover, in both current and constant dollars, each agency's portion of the total annual deferred maintenance changed over the decade. Specifically, the NPS portion of the annual total grew overall throughout the period, from 53% in FY2009 to 62% in FY2018. By contrast, the FS share of the total decreased over the 10-year period from 28% to 27%. The FWS component also declined, from 16% to 7%, whereas the BLM portion rose from 3% to 5%. The asset class or category that included roads typically comprised the largest portion of each agency's deferred maintenance. Roads represented the largest portion of FS deferred maintenance from FY2009 to FY2018. Over the 10-year period, the NPS roads, bridges, and trails category had the highest share of the agency's deferred maintenance, and irrigation, dams, and other water structures had the smallest. In some years, the portion of NPS deferred maintenance for the \"other structures\" category exceeded the buildings portion, but in some years the reverse was the case. Roads, bridges, and trails also was the biggest category of BLM's deferred maintenance from FY2009 to FY2018. Although this category typically represented a majority of the FWS total deferred maintenance in the earlier part of the period, this has not been the case since FY2013. A decline in the dollar estimate for roads, bridges, and trails resulted in a sizeable drop in overall FWS deferred maintenance beginning in FY2013, as discussed below. Fluctuations in deferred maintenance estimates are likely the result of many factors, among them estimation methods, levels of funding, and asset portfolios, as discussed below. The extent to which these and other factors affected year-to-year changes in any one agency's maintenance backlog is unclear, in part because comprehensive information is not readily available in all cases or has not been examined. Therefore, the data in this report may not fully explain the changes in deferred maintenance estimates over time. Methods for assessing the condition of assets and estimating deferred maintenance have changed over the years. As a result, it is unclear what portion of the change in deferred maintenance estimates is due to the addition of maintenance work that was not done on time and what portion may be due to changes in methods of assessing and estimating deferred maintenance. With regard to facility assessment, agencies have enhanced efforts to define and quantify the maintenance needs of their assets. Efforts have included collecting comprehensive information on the condition of facilities and maintenance and improvement needs. For instance, the first cycle of comprehensive condition assessments of NPS industry-standard facilities was completed at the end of FY2006. However, through at least FY2018, NPS continued to develop business practices to estimate the maintenance needs of nonindustry-standard assets. This category presents particular challenges because it includes unique asset types. Alterations in methodology have contributed to changes in deferred maintenance estimates, as shown in the following examples for roads. The FY2015 FWS budget justification states that [i]n 2012, Service leadership concluded that condition assessment practices and policies in place at that time were unintentionally producing higher than appropriate [deferred maintenance (DM)] cost estimates for some types of constructed real property. DM estimates for our extensive inventory of gravel and native surface roads are a major contributor to this challenge. In response, the FWS is refining its practices and procedures to improve consistency of DM cost estimates and their use in budget planning. Significant reductions in the DM backlog are resulting from this effort. Subsequent FWS budget justifications have elaborated on changes to methods of estimating deferred maintenance for roads. For instance, the FY2017 document states that \"deferred maintenance estimates for our extensive inventory of roads were further classified to emphasize public use and traffic volume. As a result, minimally used administrative roads are now generally excluded from contributing to deferred maintenance backlog calculations.\" Of note is that the roads, bridges, and trails category of FWS deferred maintenance declined substantially (by $1.18 billion, 81%) in the past several years in current dollars, from $1.46 billion in FY2012 to $0.28 billion in FY2018. This decline is reflected in the smaller FWS deferred maintenance total for FY2018 ($1.30 billion). The FWS change in the method of estimating deferred maintenance for roads, bridges, and trails appears to be a primary reason for the decreased estimate for this category and total FWS deferred maintenance over the 10-year period. Similarly, FS attributes variations in deferred maintenance partly to changes in the methodology for estimating roads. For example, in FY2013 and FY2014, FS adjusted the survey methodology for passenger-car roads, with the goal of providing more accurate estimates of the roads backlog. The FS estimate of deferred maintenance for roads fell in current dollars by $0.84 billion (22%) from FY2012 to FY2014, from $3.76 billion to $2.92 billion. The extent to which the drop is attributable to changes in methodology, including regarding the types of roads reflected in the estimates, is not certain. Finally, in FY2014, the NPS first reflected deferred maintenance for unpaved roads as part of its total deferred maintenance estimate (in agency financial reports). The agency's total deferred maintenance increased in current dollars by $0.26 billion (4%) from FY2013 to FY2014, from $6.57 billion to $6.83 billion. DOI cited the inclusion of unpaved roads as among the reasons for changes in NPS deferred maintenance estimates, although the extent of the effect on NPS estimates is unclear. Broader changes in methodology also occurred during the decade. For example, DOI agencies had been using an accuracy range of -15% to +25% to derive the estimated range of deferred maintenance for industry-standard assets. The change to a single estimate beginning in FY2015 would have affected DOI deferred maintenance estimates as reflected in this report. How much total funding is provided each year for deferred maintenance for the four agencies is unclear because annual presidential budget requests, appropriations laws, and supporting documents typically do not aggregate funds for deferred maintenance. Portions of deferred maintenance funding (for one or more of the four agencies) have come from agency maintenance and construction accounts, recreation fees, the Highway Trust Fund (Department of Transportation) for roads, the Timber Sale Pipeline Restoration Fund (for FS and BLM), NPS concession fees, and the NPS Centennial Challenge account, among other accounts. In addition, funding figures are not directly comparable to deferred maintenance estimates because the estimates are limited to project costs and thus do not reflect indirect costs, such as salaries and benefits for government employees. Annual appropriations figures typically reflect indirect costs. Evaluations of the sufficiency of federal funding for deferred maintenance may be hindered by the lack of total funding figures and by the incomparability of appropriations and deferred maintenance estimates. Deferred maintenance estimates might vary due to economic conditions that are not related to agency efforts or within the control of facility managers. For example, if deferred maintenance estimates reflect costs of needed materials, fuel, supplies, and labor, then the cost of deferred maintenance might change as the costs of these products and services change. Further, DOI has noted that NPS deferred maintenance estimates could fluctuate with market trends and inflation. Moreover, consistent and comprehensive information on the effect of federal funding on the condition of facilities and deferred maintenance over the decade does not appear to be available in budget documents. In particular, information based on the facilities condition index (FCI) seems to be incomplete or inconsistent in agency budget justifications. In some cases, budget justifications either do not provide FCI figures for assets or provide figures only for certain years. In other cases, it is not clear whether the FCI figures cover all agency assets or a subset of the assets. Together, the budget justifications present a mix of FCI information using quantitative measurements; percentage measurements; and qualitative statements, such as that a certain number or percentage of structures are in \"good\" condition, but without corresponding FCI figures. Although amounts and impacts of deferred maintenance funding may not be readily available, the agencies at times have asserted a need for increased appropriations to reduce their backlogs. As a recent example, the Interior Budget in Brief for FY2020 sets out a proposal for the establishment of a \"Public Lands Infrastructure Fund,\" with revenues from energy development on federal lands, to be used for deferred maintenance needs of the four agencies (as well as the Bureau of Indian Education). As a second example, a 2017 audit report asserted that reducing the FS maintenance backlog \"will require devoting the necessary resources over an extended period of time,\" and that \"increasing wildfire management costs have left the agency without extra funding to concentrate on reducing deferred maintenance.\" Moreover, in the past, agencies sometimes attributed reductions in deferred maintenance (or slower rates of increase) in part to additional appropriations, such as those provided in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). The FY2016 FWS budget justification notes the ARRA funding as one factor contributing to a reduction in the backlog from the FY2010 high, for instance. Some observers and stakeholders have identified ways to potentially address deferred maintenance without solely relying on federal funding. For instance, a 2016 report by the Government Accountability Office (GAO) on NPS deferred maintenance listed various actions that NPS is taking at some park units. They include using donations, volunteers, and partnerships to assist with maintenance; leasing assets to nonfederal parties in exchange for rehabilitation or maintenance; and partnering with states in seeking transportation grants. As another example, a 2016 report by a research institute set out options including outsourcing certain agency operations to the private sector, establishing a franchising system for new park units, and disposal of assets. The asset portfolios of the four agencies vary considerably in terms of number, type, size, age, and location of agency assets. Although comprehensive data on these variables over the past decade are not readily available, it is likely that they affect agency maintenance responsibilities and maintenance backlogs. For instance, NPS has more assets than the other DOI agencies, a sizeable portion of which were constructed before 1900 or in the first half of the 20 th century. The 2016 GAO report assessed various characteristics of the NPS maintenance backlog, including the age of park units. The agency determined that of the total FY2015 NPS deferred maintenance, park units established over 100 years ago had the largest share (32%). Further, park units established more than 40 years ago collectively accounted for 88% of all NPS deferred maintenance. Moreover, some NPS assets are in urban areas or are iconic structures, which could affect maintenance costs. The effect of changes in agency asset portfolios on deferred maintenance is not entirely clear. However, it could be asserted that the acquisition of assets, such as a sizeable number of large or iconic assets in relatively poor condition, would increase regular maintenance needs and the backlog, if maintenance is not performed when scheduled. For instance, the NPS asserted that \"when parks are created or when new land is acquired, the properties sometimes come with facilities that are in unacceptable condition or are unstable for the park or partner organizations.... When facilities are excess to the park ... they also contribute to the deferred maintenance backlog.\" Similarly, it could be argued that disposal of assets, such as a large quantity of old assets in poor condition, could reduce deferred maintenance. For example, a 2017 audit of the FS recommended that the agency \"establish goals and milestones to aggressively reduce the number of unused or underused assets in the agency's portfolio\" as one way to reduce maintenance backlogs given limited resources. Agencies examine whether to retain assets in their current condition or dispose of some assets, as the following examples indicate. FS has sought to reduce its maintenance backlog by conveying unneeded or underused administrative sites, as well as decommissioning roads, road and facility infrastructure , and nonpriority recreation sites. FWS has attributed reductions in deferred maintenance in part to \"disposing of unneeded assets.\" NPS identifies assets that are not critical to the agency's mission and that are in relatively poor condition for potential disposal. In the past, the agency has noted that although the agency seeks to improve the condition of its asset portfolio by disposing of assets, \"analysis of removal costs versus annual costs often precludes the removal option.\" ", "summary": "Each of the four major federal land management agencies maintains tens of thousands of diverse assets, including roads, bridges, buildings, and water management structures. These agencies are the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), National Park Service (NPS), and Forest Service (FS). Congress and the Administration continue to focus on the agencies' deferred maintenance and repair of these assets—in essence, the cost of any maintenance or repair that was not done when it should have been or was scheduled to be done. Deferred maintenance and repair is often called the maintenance backlog. In FY2018, the most recent year for which these estimates are available, the four agencies had combined deferred maintenance estimated at $19.38 billion. This figure includes $11.92 billion (62%) in deferred maintenance for NPS, $5.20 billion (27%) for FS, $1.30 billion (7%) for FWS, and $0.96 billion (5%) for BLM. The estimates reflect project costs. Over the past decade (FY2009-FY2018), the total deferred maintenance for the four agencies fluctuated, peaking in FY2012 and ending the decade relatively flat in current dollars. It increased overall by $0.36 billion, from $19.02 billion to $19.38 billion, or 2%. Both the BLM and NPS estimates increased, whereas the FWS and FS estimates decreased. By contrast, in constant dollars, the total deferred maintenance estimate for the four agencies decreased from FY2009 to FY2018 by $3.61 billion, from $22.99 billion to $19.38 billion, or 16%. The BLM estimate increased, whereas estimates for the other three agencies decreased. In each fiscal year, NPS had the largest portion of the total deferred maintenance, considerably more than any of the other three agencies. FS consistently had the second-largest share, followed by FWS and then BLM. Throughout the past decade, the asset class that included roads comprised the largest portion of the four-agency combined deferred maintenance. Congressional debate has focused on varied issues, including the level and sources of funds needed to reduce deferred maintenance, whether agencies are using existing funding efficiently, how to balance the maintenance of existing infrastructure with the acquisition of new assets, whether disposal of assets is desirable given limited funding, and the priority of maintaining infrastructure relative to other government functions. Some question why deferred maintenance estimates have fluctuated over time. These fluctuations are likely the result of many factors, among them the following: Agencies have refined methods of defining and quantifying the maintenance needs of their assets. Levels of funding for maintenance, including funding to address the maintenance backlog, vary from year to year. Economic conditions, including costs of services and products, also fluctuate. The asset portfolios of the agencies change, with acquisitions and disposals affecting the number, type, size, age, and location of agency assets. The extent to which these and other factors affected changes in each agency's maintenance backlog over the past decade is not entirely clear. In some cases, comprehensive information is not readily available or has not been examined.", "document_type": "crs"}
{"report": "A complicated body of rules, precedents, and practices governs the legislative process on the floor of the House of Representatives. The official manual of House rules is more than 1,000 pages long and is supplemented by 30 volumes of precedents, with more volumes to be published in coming years. Yet there are two reasons why gaining a fundamental understanding of the House's legislative procedures is not as difficult as the sheer number and size of these documents might suggest. First, the ways in which the House applies its rules are largely predictable, at least in comparison with the Senate. Some rules are certainly more complex and more difficult to interpret than others, but the House tends to follow similar procedures under similar circumstances. Even the ways in which the House frequently waives, supplants, or supplements its standing rules with special, temporary procedures generally fall into a limited number of recognizable patterns. Second, underlying most of the rules that Representatives may invoke and the procedures the House may follow is a fundamentally important premise—that a majority of Members should ultimately be able to work their will on the floor. Although House rules generally recognize the importance of permitting any minority—partisan or bipartisan—to present its views and sometimes propose its alternatives, the rules do not enable that minority to filibuster or use other parliamentary devices to prevent the majority from prevailing without undue delay. This principle provides an underlying coherence to the various specific procedures discussed in this report. Article I of the Constitution imposes a few restrictions on House (and Senate) procedures—for example, requirements affecting quorums and roll-call votes—but otherwise the Constitution authorizes each house of Congress to determine for itself the \"Rules of its Proceedings\" (Article 1, Section 5). This liberal grant of authority has several important implications. First, the House can amend its rules unilaterally; it need not consult with either the Senate or the President. Second, the House is free to suspend, waive, or ignore its rules whenever it chooses to do so. By and large, the Speaker or whatever Representative is presiding usually does not enforce the rules at his or her own initiative. Instead, Members must protect their own rights by affirmatively making points of order whenever they believe the rules are about to be violated. In addition, House rules include several formal procedures for waiving or suspending certain other rules, and almost any rule can be waived by unanimous consent. Thus, the requirements and restrictions discussed in this report generally apply only if the House chooses to enforce them. If for no other reason than the size of its membership, the House has found it necessary to limit the opportunities for each Representative to participate in floor deliberations. Whenever a Member is recognized to speak on the floor, there is always a time limit on his or her right to debate. The rules of the House never permit a Representative to hold the floor for more than one hour. Under some parliamentary circumstances, there are more stringent limits, with Members being allowed to speak for no more than 5 minutes, 20 minutes, or 30 minutes. Furthermore, House rules sometimes impose a limit on how long the entire membership of the House may debate a motion or measure. Most bills and resolutions, for instance, are considered under a set of procedures called \"suspension of the rules\" (discussed later in this report) that limits all debate on a measure to a maximum of 40 minutes. Under other conditions, when there is no such time limit imposed by the rules, the House (and to some extent, the Committee of the Whole as well) can impose one by simple majority vote. These debate limitations and debate-limiting devices generally prevent a minority of the House from thwarting the will of the majority. House rules also limit debate in other important respects. First, all debate on the floor must be germane to whatever legislative business the House is conducting. Representatives may speak on other subjects only in one-minute speeches most often made at the beginning of each day's session, special order speeches occurring after the House has completed its legislative business for the day, and during morning hour debates that are scheduled on certain days of the week. Second, all debate on the floor must be consistent with certain rules of courtesy and decorum. For example, a Member should not question or criticize the motives of a colleague. When a House committee reports a public bill or resolution that had been referred to it, the measure is placed on the House Calendar or the Union Calendar. In general, tax, authorization, and appropriations bills are placed on the Union Calendar; all others go to the House Calendar. In effect, the calendars are catalogues of measures that have been approved, with or without proposed amendments, by one or more House committees and are now available for consideration on the floor. Placement on a calendar does not guarantee that a measure will receive floor consideration at a specified time or at all. Because it would be impractical or undesirable for the House to take up measures in the chronological order in which they are reported and placed on one of the calendars, there must be some procedures for deciding the order in which measures are to be brought from the calendars to the House floor—in other words, procedures for determining the order of business. Clause 1 of Rule XIV lists the daily order of business on the floor, beginning with the opening prayer, the approval of the Journal (the official record of House proceedings required by the Constitution), and the Pledge of Allegiance. Apart from these routine matters, however, the House never follows the order of business laid out in this rule. Instead, certain measures and actions are privileged, meaning they may interrupt the regular order of business. In practice, all the legislative business that the House conducts comes to the floor by interrupting the order of business under Rule XIV, either by unanimous consent or under the provisions of another House rule. Every bill and resolution that cannot be considered by unanimous consent must become privileged business if it is going to reach the floor at all. There is no one single set of procedures that the House always follows when it considers a public bill or resolution on the floor. Instead, there are several modes of consideration, or different sets of procedural rules, that the House uses. In some cases, House rules require that certain kinds of bills be considered in certain ways. By various means, however, the House chooses to use whichever mode of consideration is most appropriate for a given bill. Which of these modes the House uses depends on such factors as the importance and potential cost of the bill and the amount of controversy the bill has generated among Members. The differences among these sets of procedures rest largely on the balance that each strikes between the opportunities for Members to debate and propose amendments, on the one hand, and the ability of the House to act promptly, on the other. Regardless of which procedure the House uses to consider legislation, the House majority party leadership generally tries to post the text of measures coming to the chamber floor in advance on an internet website created for that purpose. The House most frequently resorts to a set of procedures that enables it to act quickly on bills that enjoy overwhelming but not unanimous support. Although this set is called \"suspension of the rules,\" clause 1 of Rule XV provides for these procedures as an alternative to the other modes of consideration. The essential components of suspension of the rules are (1) a 40-minute limit on debate, (2) a prohibition against floor amendments, and (3) a two-thirds vote of those present and voting for passage. On every Monday, Tuesday, and Wednesday—and at other times by special arrangement—the Speaker may recognize Members to move to suspend the rules and pass a particular bill (or take some other action, such as agreeing to the Senate's amendments to a House bill). Once such a motion is made, the motion and the bill itself together are debatable for a maximum of 40 minutes. Half of the time is controlled by the Representative making the motion, often the chair of the committee with jurisdiction over the bill; the other half is usually controlled by the ranking minority member of the committee (or sometimes the subcommittee) of jurisdiction, especially when he or she opposes the motion. The suspension motion itself may propose to pass the bill with certain amendments, but no Member may propose an amendment from the floor. During the debate, the two Members who control the time yield parts of it to other Members who wish to speak. Once the 40 minutes is either used or yielded back, a single vote occurs on suspending the rules and simultaneously passing the bill. If two-thirds of the Members present vote \"Aye,\" the motion is agreed to and the bill is passed. If the motion fails, the House may debate the bill again at another time, perhaps under another mode of consideration that permits floor amendments and more debate and requires only a simple majority vote for passage. The House frequently considers several suspension motions on the same day, which could result in a series of electronically recorded votes taking place at 40-minute intervals if such votes are requested. For the convenience of the House, therefore, clause 8 of Rule XX permits the Speaker to postpone electronic votes that Members have demanded on motions to suspend the rules until a later time on the same day or the following day. When the votes do take place, they are clustered together, occurring one after the other without intervening debate. One of the ironies of the legislative process on the House floor is that the House does relatively little business under the basic rules of the House. Instead, most of the debate and votes on amendments to major bills occur in Committee of the Whole (discussed below). This is largely because of the rule that generally governs debate in the House itself. The rule controlling debate during meetings of the House (as opposed to meetings of the Committee of the Whole) is clause 2 of Rule XVII, which states in part that a \"Member, Delegate, or Resident Commissioner may not occupy more than one hour in debate on a question in the House.\" In theory, this rule permits each Representative to speak for as much as an hour on each bill, on each amendment to each bill, and on each of the countless debatable motions that Members could offer. Thus, there could be more than four hundred hours of debate on each such question, a situation that would make it virtually impossible for the House to function effectively. In practice, however, this \"hour rule\" usually means that each measure considered \"in the House\" is debated by all Members for no more than a total of only one hour before the House votes on passing it. The reason for this dramatic difference between the rule in theory and the rule in practice lies in the consequences of a parliamentary motion to order what is called the \"previous question.\" When a bill or resolution is called up for consideration in the House—and, therefore, under the hour rule—the Speaker recognizes the majority floor manager to control the first hour of debate. The majority floor manager is usually the chair of the committee or subcommittee with jurisdiction over the measure and most often supports its passage without amendment. This Member will yield part of his or her time to other Members and may allocate control of half of the hour to the minority floor manager (usually the ranking minority member of the committee or subcommittee). However, the majority floor manager almost always yields to other Representatives \"for purposes of debate only.\" Thus, no other Member may propose an amendment or make any motion during that hour. During the first hour of debate, or at its conclusion, the majority floor manager invariably \"moves the previous question.\" This nondebatable motion asks the House if it is ready to vote on passing the bill. If a majority votes for the motion, no more debate on the bill is in order, nor can any amendments to it be offered; after disposing of the motion, the House usually votes immediately on whether to pass the bill. If the House defeats the previous question, however, opponents of the bill would then be recognized to control the second hour of debate, and might use that time to try to amend the measure. Because of this, it is unusual for the House not to vote for the previous question—the House disposes of most measures considered in the House, under the hour rule, after no more than one hour of debate and with no opportunity for amendment from the floor. These are not very flexible and accommodating procedural ground rules for the House to follow in considering most legislation. Debate on a bill is usually limited to one hour, and only one or two Members control this time. Before an amendment to the bill can even be considered, the House must first vote against a motion to order the previous question. For these reasons, most major bills are not considered in the House under the hour rule. In current practice, the most common type of legislation considered under the hour rule in the House are procedural resolutions reported by the House Committee on Rules that are commonly referred to as \"special rules\" (discussed below). Much of the legislative process on the floor occurs not \"in the House\" but in a committee of the House known as the Committee of the Whole (formally, the Committee of the Whole House on the State of the Union). Every Representative is a member of the Committee of the Whole, and it is in this committee, meeting in the House chamber, that many major bills are debated and amended before being passed or defeated by the House itself. Most bills are first referred to, considered in, and reported by a standing legislative committee of the House before coming to the floor. In much the same way, once bills do reach the floor, many of them then are referred to a second committee, the Committee of the Whole, for further debate and for the consideration of amendments. The Speaker presides over meetings of the House but not over meetings of the Committee of the Whole. Instead, the Speaker appoints another Member of the majority party to serve as the chair of the Committee of the Whole during the time the committee is considering a particular bill or resolution. In addition, the rules that apply in Committee of the Whole are somewhat different from those that govern meetings of the House itself. The major differences are discussed in the following sections of this report. In general, the combined effect of these differences is to make the procedures in Committee of the Whole—especially the procedures for offering and debating amendments—considerably more flexible than those of the House. Clause 3 of Rule XVIII requires that most bills affecting federal taxes and spending be considered in Committee of the Whole before the House votes on passing them. Most other major bills are also considered in this way. Most commonly, the House adopts a resolution, reported by the Rules Committee, that authorizes the Speaker to declare the House \"resolved\" into Committee of the Whole to consider a particular bill. There are two distinct stages to consideration in Committee of the Whole. First, there is a period for general debate, which is routinely limited to an hour. Each of the floor managers usually controls half the time, yielding parts of it to other Members who want to participate in the debate. During general debate, the two floor managers and other Members discuss the bill, the conditions prompting the committee to recommend it, and the merits of its provisions. Members may describe and explain the reasons for the amendments that they intend to offer, but no amendments can actually be proposed at this time. During or after general debate, the majority floor manager may move that the committee \"rise\"—in other words, that the committee transform itself back into the House. When the House agrees to this motion, it may resolve into Committee of the Whole again at another time to resume consideration of the bill. Alternatively, the Committee of the Whole may proceed immediately from general debate to the next stage of consideration: the amending process. The Committee of the Whole may consider a bill for amendment section by section or, in the case of appropriations measures, paragraph by paragraph. Amendments to each section or of the bill are in order after the part they would amend has been read or designated and before the next section is read or designated. Alternatively, the bill may be open to amendment at any point, usually by unanimous consent. The first amendments considered to each part of the bill are those (if any) recommended by the committee that reported it. Thereafter, members of the committee are usually recognized before other Representatives to offer their own amendments. All amendments must be germane to the text they would amend. Germaneness is a subject matter standard more stringent than one of relevancy and reflects a complex set of criteria that have developed by precedent over the years. The Committee of the Whole votes only on amendments; it does not vote directly on the bill as a whole. And like the standing committees of the House, the Committee of the Whole does not actually amend the bill; it only votes to recommend amendments to the House. The motion to order the previous question may not be made in Committee of the Whole, so, under a purely open amendment process, Members may offer whatever germane amendments they wish. After voting on the last amendment to the last portion of the bill, the committee rises and reports the bill back to the House with whatever amendments it has agreed to. Purely open amendment processes have been rare in recent Congresses; the amendment process is far more frequently structured by the terms of a special rule reported by the Rules Committee and adopted by the House. This process is discussed in the next section of this report. An amendment to a bill is a first-degree amendment. After such an amendment is offered, but before the committee votes on it, another Member may offer a perfecting amendment to make some change in the first degree amendment. In current floor practice, this is rare. A perfecting amendment to a first-degree amendment is a second-degree amendment. After debate, the committee first votes on the second-degree perfecting amendment and then on the first-degree amendment as it may have been amended. Clause 6 of Rule XVI also provides that a Member may offer a substitute for the first-degree amendment before or after a perfecting amendment is offered, and this substitute may also be amended. Although a full discussion of these possibilities is beyond the scope of this report, it is important to note that the amending process can become complicated, with Members proposing several competing policy choices before the Committee of the Whole votes on any of them. Debate on amendments in Committee of the Whole is governed by the five-minute rule, not the hour rule that regulates debate in the House. The Member offering each amendment (or the majority floor manager, in the case of a committee amendment) is first recognized to speak for five minutes. Then a Member opposed to the amendment may claim five minutes for debate. Other Members may also speak for five minutes each by offering a motion \"to strike the last word.\" Technically, this motion is an amendment that proposes to strike out the last word of the amendment being debated. But it is a \"pro forma amendment\" that is offered merely to secure time for debate and so is not voted on when the five minutes expire. In this way, each Representative may speak for five minutes on each amendment. However, a majority of the Members can vote (or agree by unanimous consent) to end the debate on an amendment immediately or at some specified time. Also, as mentioned, if the amendment process is governed by a special rule reported by the Rules Committee and adopted by the House, that resolution will limit the number, order, and form of amendments that can be considered. When the committee finally rises and reports the bill back to the House, the House proceeds to vote on the amendments the committee has adopted. It usually approves all these amendments by one voice vote, though Members can demand separate votes on any or all of them as a matter of right. After a formal and routine stage called \"third reading and engrossment\" (when only the title of the bill is read), there is then an opportunity for a Member, virtually always from the minority party, to offer a motion to recommit the bill to committee. If the House agrees to a \"simple\" or \"straight\" motion to recommit, which only proposes to return the bill to committee, the bill is taken from the floor and returned to committee. Although the committee technically has the power to re-report the bill, in practice, the adoption of a straight motion to recommit is often characterized as effectively \"killing\" the measure. \"Straight\" motions to recommit are rare. Alternatively, motions to recommit far more frequently include instructions that the committee report the bill back to the House \"forthwith\" with an amendment that is stated in the motion. If the House agrees to such a motion, which is debatable for 10 minutes, evenly divided, it then immediately votes on the amendment itself, so a motion to recommit with instructions is really a final opportunity for the minority party to amend the bill before the House votes on whether to pass it. Thus, this complicated mode of consideration, which the House uses to consider most major bills, begins in the House with a decision to resolve into Committee of the Whole to consider a particular bill. General debate and the amending process take place in Committee of the Whole, but ultimately it is the House that formally amends and then passes or rejects the bill. Clause 1(m) of Rule X authorizes the Rules Committee to report resolutions affecting the order of business. Such a resolution—called a \"rule\" or \"special rule\"—usually proposes to make a bill in order for floor consideration so that it can be debated, amended, and passed or defeated by a simple majority vote. In effect, each special rule recommends to the House that it take from the Union or House Calendar a measure that is not otherwise privileged business and bring it to the floor out of its order on that calendar. Typically, such a resolution begins by providing that, at any time after its adoption, the Speaker may declare the House resolved into Committee of the Whole for the consideration of that bill. Because the special rule is itself privileged, under clause 5(a) of Rule XIII, the House can debate and vote on it promptly. If the House accepts the Rules Committee's recommendation, it proceeds to consider the bill itself. One fundamental purpose of most special rules, therefore, is to make another bill or resolution privileged so that it may interrupt the regular order of business. Their other fundamental purpose is to set special procedural ground rules for considering that measure; these ground rules may either supplement or supplant the standing rules of the House. For example, the special rule typically sets the length of time for general debate in Committee of the Whole and specifies which Members are to control that time. In addition, the special rule normally includes provisions that expedite final House action on the bill after the amending process in Committee of the Whole has been completed. Special rules may also waive points of order that Members could otherwise make against consideration of the bill, against one of its provisions, or against an amendment to be offered to it. The most controversial provisions of special rules affect the amendments that Members can offer to the bill that the resolution makes in order. As noted above, an \"open rule\" permits Representatives to propose any amendment that meets the normal requirements of House rules and precedents—for example, the requirement that each amendment must be germane. A \"modified open rule\" permits amendments to be offered that otherwise comply with House rules but imposes a time limit on the consideration of amendments or requires them to be preprinted in the Congressional Record . At the other extreme, a \"closed rule\" prohibits all amendments except perhaps for committee amendments and pro forma amendments (\"to strike the last word\") offered only for purposes of debate. A \"structured\" rule, which is the most common type of rule, permits only certain specific amendments to be considered on the floor. These provisions are very important because they can prevent Representatives from offering amendments as alternatives to provisions of the bill, thereby limiting the policy choices that the House can make. Open rules have been rare in recent Congresses. However, like other committees, the Rules Committee only makes recommendations to the House. As noted above, Members debate each of its procedural resolutions in the House under the hour rule and then vote to adopt or reject it. If the House votes against ordering the previous question on a special rule, a Member could offer an amendment to it, proposing to change the conditions under which the bill itself is to be considered. Because the adoption of a special rule is often viewed as a \"party loyalty\" vote, however, such a development is exceedingly rare. All the same, it is important to remember that while the Rules Committee is instrumental in helping the majority party leadership formulate its order of business and in setting appropriate ground rules for considering each bill, the House retains ultimate control over what it does, when, and how. Legislation is sometimes brought before the House of Representatives for consideration by the unanimous consent of its Members. Long-standing policies announced by the Speaker regulate unanimous consent requests for this purpose. Among other things, the Speaker will recognize a Member to propound a unanimous consent request to call up an unreported bill or resolution only if that request has been cleared in advance with both party floor leaders and with the bipartisan leadership of the committee of jurisdiction. Before any bill can become law, both the House and the Senate must pass it, and the two houses must agree on each and every one of its provisions. This basic constitutional requirement means that the House must have procedures to respond when the House and Senate pass different versions of the same bill. For example, the House may pass a Senate bill with House amendments, or the Senate may pass a House bill with Senate amendments and then send its amendments to the House. In either case, the two houses must resolve their differences over these amendments before the legislative process is completed. There are essentially two ways to approach this stage of the process: (1) by dealing with the amendments individually through a process of exchanging amendments between the chambers, with the bill being sent back and forth between the House and Senate, or (2) by dealing with the amendments collectively through a conference committee of Representatives and Senators who negotiate a series of compromises and concessions that are compiled in a conference report that the two houses can vote to accept. Because the process of resolving differences between the houses can be quite complicated, only some of its basic elements are summarized here. The House normally considers Senate amendments to a House bill by unanimous consent or by suspension of the rules; the House may accept the amendments (concur in them) or amend them (concur in them with House amendments). Alternatively, the committee with jurisdiction over the bill may authorize its chair to move that the House disagree to the Senate's amendments and send them to a conference committee. When the House amends and passes a Senate bill, it may request a conference with the Senate immediately, or it may simply send its amendments to the Senate in the hope that the Senate will accept them. If the Senate refuses to do so, it may request a conference with the House instead. On the other hand, if the House and Senate can reach agreement by proposing amendments to each other's positions, the bill can be sent to the President for his signature or veto without the need to create a conference committee. This method of resolving differences is sometimes colloquially called \"ping-pong,\" because each chamber acts in turn, shuttling the legislation back and forth as each proposes amendments to the position of the other. If the House and Senate agree to send their versions of the bill to a conference committee, the Speaker appoints the House conferees. These conferees are usually drawn from the standing committee (or committees) with jurisdiction over the bill, although the Speaker may appoint some other Representatives as well. When the House and Senate conferees meet, they are to deal only with provisions of the bill on which the two houses disagree. They should not insert new provisions or change provisions that both houses have already approved. Furthermore, as the conferees resolve each provision or amendment in disagreement, they accept the House position, the Senate position, or a compromise between them. Like almost all other House rules, the rules limiting the authority of conferees are enforced only if Members make points of order at the appropriate time. The House may also adopt a special rule, reported by the Rules Committee, waiving points of order against a conference report. To complete their work successfully, a majority of the House conferees and a majority of the Senate conferees must sign a report that recommends all the agreements they have reached. The conferees also sign a \"joint explanatory statement\" that describes the original House and Senate positions and the conferees' recommendations and is the functional equivalent of a legislative committee report. After Representatives have had three days to examine a conference report, it is privileged for floor consideration; it may be called up at any time that the House is not already considering something else. The report may be debated in the House under the hour rule, so the vote almost always occurs after no more than one hour of debate. No amendments to the report are in order. In practice, however, the House almost always considers conference reports under the terms of a special rule from the Rules Committee that waives all points of order against the report and its consideration. The conference report is a proposed package settlement of a number of disagreements, so the House and Senate may accept it or reject it, but they may not change it. If the two houses agree to the report by simple majority vote, all their differences have been resolved and the bill is then \"enrolled,\" or reprinted, for formal presentation to the President. In rare instances, conferees cannot reach agreement on one or more of the amendments in conference, or they may reach an agreement that they cannot include in their conference report because their proposal exceeds the scope of the differences between the House and Senate positions (and thus violates the rules governing the content of conference reports). In either case, the conferees may report back to the two houses with an amendment (or amendments) in disagreement. After acting on the conference report and dealing collectively with all the other amendments that were sent to conference, the House acts on each of the amendments in disagreement by considering motions such as a motion to accept the Senate's amendment or a motion to amend it with a new House amendment. The Senate takes similar action until the disagreements on these amendments are resolved or until the two houses agree to create a new conference committee only to address the remaining amendments that are still in disagreement. The bill cannot become law until the two houses resolve all the differences between their positions. Whenever Representatives vote on the floor, there is almost always first a \"voice vote,\" in which the Members in favor of the bill, amendment, or motion vote \"Aye\" in unison, followed by those voting \"No.\" Before the Speaker (or the chair of the Committee of the Whole) announces the result, any Representative can demand a \"division vote,\" in which the Members in favor stand up to be counted, again followed by those opposed. But before the result of either a voice vote or a division vote is announced, a Member may try to require another vote in which everyone's position is recorded publicly. This recorded vote is taken by using the House's electronic voting system. In Committee of the Whole, an electronic vote is ordered when 25 Members request it. In the House, such a vote occurs when demanded by at least one-fifth of the Members present. Alternatively, any Member can demand an electronically recorded vote in the House if a quorum of the membership is not present on the floor when the voice or division vote takes place. The Constitution requires that a quorum must be present on the floor when the House is conducting business. In the House, a quorum is a majority of the Representatives; in Committee of the Whole, it is only 100 Members. However, the House has traditionally assumed that a quorum is always present unless a Member makes a point of order that it is not. The rules restrict when Members can make such points of order, and they occur most often when the House or the Committee of the Whole is voting. In the House, for example, a Representative can object to a voice or division vote on the grounds that a quorum is not present and make that point of order. If a quorum is not present, the Speaker automatically orders an electronically recorded vote during which Members record their presence on the floor by casting their votes. The issue is decided and a quorum is established at the same time. A voice or division vote is valid even if less than a quorum participates in the vote so long as no one makes a point of order that a quorum is not present. For this reason, Members can continue to meet in their committees or fulfill their other responsibilities off the floor when the House is doing business that does not involve publicly recorded votes. On most days, the House will meet two hours prior to scheduled legislative business for Morning Hour Debate, a period in which Members can make speeches of up to five minutes on subjects of their choosing. Later, the House will meet for legislative session. After the opening prayer on each day by the House chaplain (or perhaps by a guest chaplain), the Speaker announces approval of the Journal of the previous day's proceedings. A Member may require a recorded vote on agreeing to the Speaker's approval of the Journal. Following the Pledge of Allegiance, some Members may then ask unanimous consent to address the House for one minute each on whatever subjects they wish, including subjects unrelated to the scheduled legislative business of the day. The ability to set the House's floor schedule is one of the primary powers and responsibilities of the majority party leaders, and in doing so they often consult with minority party leaders. Generally speaking, to the extent possible, majority party leaders and the committee chairmen arrange the legislative schedule for each week in advance. During the last floor session of the week, the majority leader normally announces the expected schedule for the coming week in a traditional \"wrap-up\" colloquy with a minority party leader. Changes in the schedule may be announced as they are made. On a Monday, Tuesday, or Wednesday, the House will commonly consider multiple measures under the \"suspension of the rules\" procedure. Typically, recorded votes on such measures, if requested, are clustered together and taken at the end of the day. On other days of the week, the House will usually consider a major bill pursuant to a special rule reported by the House Committee on Rules. Such a special rule would be debated in the House under the hour rule, at the end of which the majority manager of the special rule would \"move the previous question,\" which, when adopted, brings the resolution to a vote. Once adopted, the House would ordinarily consider a measure in Committee of the Whole pursuant to the terms for general debate and amendment established by the special rule. Following consideration in the Committee of the Whole, the House would take the final votes on the measure after voting on the amendments recommended by the committee and on a minority motion to recommit, which would likely be made with amendatory instructions. As each item of business is completed, the Speaker anticipates which Member should be seeking recognition to call up the next bill or resolution. If another Representative requests to be recognized instead, t he Speaker may ask, \"For what purpose does the gentleman seek recognition?\" The Speaker may decline to recognize that Member if the Speaker wants the House to consider another privileged measure, motion, or report. At the end of legislative business on most days, some Members address the House for as much as an hour each on subjects of their choice. These \"special order\" speeches are arranged in advance and organized by the party leadership. In this way, Representatives can comment at length on current national and international issues and discuss bills that have not yet reached the House floor. The House often adjourns by early evening, although it may remain in session later when the need arises or when the end of the annual session or some other deadline approaches. The House rules for each Congress are published in a volume often called the House manual but officially entitled Constitution, Jefferson's Manual and Rules of the House of Representatives . A new edition of this collection is published each Congress. The precedents of the House established through 1935 have been compiled in the 11-volume set of Hinds' and Cannon's Precedents of the House of Representatives . More recent precedents are published as Deschler's or Deschler-Brown -Johnson Precedents of the U.S. House of Representatives ; 18 volumes of this set now are available. Volume 1 of a fourth series of House precedents, Precedents of the United States House of Representatives , was initiated in 2017, and additional volumes are expected in the future. The House's procedures are summarized in House Practice: A Guide to the Rules, Precedents and Procedures of the House , by Charles W. Johnson, John V. Sullivan, and Thomas J. Wickham Jr., Parliamentarians of the House. The most recent version of House Practice was published in 2017. The Parliamentarian and his assistants welcome inquiries about House procedures and offer expert assistance compatible with their other responsibilities. CRS Report 98-995, The Amending Process in the House of Representatives , by Christopher M. Davis. CRS Report RL32200, Debate, Motions, and Other Actions in the Committee of the Whole , by Bill Heniff Jr. and Elizabeth Rybicki. CRS Report 97-552, The Discharge Rule in the House: Principal Features and Uses , by Richard S. Beth. CRS Report RL30787, Parliamentary Reference Sources: House of Representatives , by Richard S. Beth and Megan S. Lynch. CRS Report 98-696, Resolving Legislative Differences in Congress: Conference Committees and Amendments Between the Houses , by Elizabeth Rybicki. CRS Report 97-780, The Speaker of the House: House Officer, Party Leader, and Representative , by Valerie Heitshusen. CRS Report 98-314, Suspension of the Rules in the House: Principal Features , by Elizabeth Rybicki. CRS Report 98-870, Quorum Requirements in the House: Committee and Chamber , by Christopher M. Davis.", "summary": "The daily order of business on the floor of the House of Representatives is governed by standing rules that make certain matters and actions privileged for consideration. On a day-to-day basis, however, the House can also decide to grant individual bills privileged access to the floor, using one of several parliamentary mechanisms. The standing rules of the House include several different parliamentary mechanisms that the body may use to act on bills and resolutions. Which of these will be employed in a given instance usually depends on the extent to which Members want to debate and amend the legislation. In general, all of the procedures of the House permit a majority of Members to work their will without excessive delay. The House considers most legislation by motions to suspend the rules, with limited debate and no floor amendments, with the support of at least two-thirds of the Members voting. Occasionally, the House will choose to consider a measure on the floor by the unanimous consent of Members. The Rules Committee is instrumental in recommending procedures for considering major bills and may propose restrictions on the floor amendments that Members can offer or bar them altogether. Many major bills are first considered in Committee of the Whole before being passed by a simple majority vote of the House. The Committee of the Whole is governed by more flexible procedures than the basic rules of the House, under which a majority can vote to pass a bill after only one hour of debate and with no floor amendments. Although a quorum is supposed to be present on the floor when the House is conducting business, the House assumes a quorum is present unless a quorum call or electronically recorded vote demonstrates that it is not. However, the standing rules preclude quorum calls at most times other than when the House is voting. Questions are first decided by voice vote, although any Member may then demand a division vote. Before the final result of a voice or division vote is announced, Members can secure an electronically recorded vote instead if enough Members desire it or if a quorum is not present in the House. The constitutional requirements for making law mean that each chamber must pass the same measure with the identical text before transmitting it to the President for his consideration. When the second chamber of Congress amends a measure sent to it by the first chamber, the two chambers must resolve legislative differences to meet this requirement. This can be accomplished by shuttling the bill back and forth between the House and Senate, with each chamber proposing amendments to the position of the other, or by establishing a conference committee to try to negotiate a compromise version of the legislation.", "document_type": "crs"}
{"report": "Congress is currently considering reauthorization of the National Flood Insurance Program (NFIP) for either a shorter or longer term, while the program is still dealing with the financial impact of the 2017 and 2018 hurricane seasons. Total losses (insured and uninsured) for the 2017 hurricane season are estimated at a record $273 billion, with losses for Hurricane Harvey estimated at $128.8 billion, Hurricane Maria at $92.7 billion, and Hurricane Irma at $51.5 billion. Total losses for the 2018 hurricane season are estimated at $49.4 billion, with Hurricane Florence at $24.2 billion and Hurricane Michael at $25.2 billion. NFIP claims for Harvey, Irma, and Maria amounted to more than $10.1 billion as of January 31, 2019, while NFIP claims for Florence and Michael amounted to more than $850 million as of that date. The NFIP is designed to borrow money from the Treasury to cover claims for extreme events; however, the 2017 losses would have pushed the program over its authorized borrowing limit. Rather than increase the borrowing limit, in 2017, Congress canceled $16 billion of NFIP debt to allow the program to pay claims. Expanding the role of private insurers, including reinsurers, has been seen by many as an answer to the variability of the financial position of the NFIP. Increasing participation by private insurers could transfer more flood risk from policyholders to the private insurance sector, as opposed to transferring the risk to the federal government through the NFIP. In addition to the possible advantage to the NFIP, the increased availability of flood insurance as private companies enter the market may benefit households and businesses, as insured flood victims are likely to recover more quickly and more fully after a flood. Private insurer interest in directly providing and underwriting flood risk has increased in recent years. Advances in the analytics and data used to quantify flood risk along with increases in capital market capacities may allow private insurers to take on flood risks that they shunned in the past. However, increasing the private sector role in providing flood insurance coverage directly to consumers may have implications for the operations and fiscal solvency of the NFIP as currently structured. Increased access to private flood insurance could provide individual policyholders with a wider choice of coverage and possibly cheaper premiums, but may also lead to variable consumer protections. The extent to which private insurance companies participate in the U.S. flood insurance market represents an area of congressional concern. Both the 114 th and 115 th Congress addressed the issue with legislation passing the House; however, no legislation was ultimately enacted. The NFIP is currently operating under a short-term reauthorization until May 31, 2019. This report describes the current role of private insurers in U.S. flood insurance, and discusses barriers to private sector involvement. The report considers potential effects of increased private sector involvement in the U.S. flood market, both for the NFIP and for consumers. Finally, the report outlines the provisions relevant to private flood insurance in House and Senate NFIP reauthorization bills from the 115 th Congress. It will be updated to reflect legislative developments in the 116 th Congress, particularly focusing on private flood insurance. The NFIP is the main provider of primary flood insurance coverage for residential properties in the United States, providing nearly $1.42 trillion in coverage for over 5 million residential flood insurance policies. In FY2018, the program collected about $3.5 billion in annual premium revenue, $1.1 billion in assessments, fees, and surcharges and $1.0 billion in payments from private reinsurers. Nationally, over 22,000 communities participate in the NFIP. The role of the federal government in flood insurance is in contrast to the majority of other property and casualty risks, such as damage from fire or accidents, which are covered by a broad array of private insurance companies. Total premiums for private property and casualty insurance in 2018 totaled $611 billion, with the policies backed by over $2 trillion in assets held by private insurers. The NFIP has two main policy goals: (1) to provide access to primary flood insurance, thereby allowing for the transfer of some of the financial risk of property owners to the federal government; and (2) to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. As a public insurance program, the NFIP is designed differently from the way in which private-sector companies provide insurance. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to property owners who otherwise would not be able to obtain it, and to reduce the government's cost after floods. The NFIP also engages in many \"non-insurance\" activities in the public interest: it disseminates flood risk information through flood maps, requires communities to adopt land use and building code standards in order to participate in the program, potentially reduces the need for other post-flood disaster aid, contributes to community resilience by providing a mechanism to fund rebuilding after a flood, and may protect lending institutions against mortgage defaults due to uninsured losses. The benefits of such tasks are not directly measured in the NFIP's financial results from selling flood insurance. From the inception of the NFIP, the program has been expected to achieve multiple objectives, some of which may conflict with one another: To ensure reasonable insurance premiums for all; To have risk-based premiums that would make people aware of and bear the cost of their floodplain location choices; To secure widespread community participation in the NFIP and substantial numbers of insurance policy purchases by property owners; and To earn premium and fee income that, over time, covers claims paid and program expenses. The NFIP offers flood insurance to anyone in a community that chooses to participate in the program. Flood insurance purchase generally is voluntary, except for property owners who are in a Special Flood Hazard Area (SFHA) and whose mortgage is backed by the federal government. Flood insurance policies through the NFIP are sold only in participating communities and are offered to both property owners and renters and to residential and non-residential properties. NFIP policies have relatively low coverage limits, particularly for non-residential properties or properties in high-cost areas. The maximum coverage for single-family dwellings (which also includes single-family residential units within a 2-4 family building) is $100,000 for contents and up to $250,000 for building coverage. The maximum available coverage limit for other residential buildings is $500,000 for building coverage and $100,000 for contents coverage, and the maximum coverage limit for non-residential business buildings is $500,000 for building coverage and $500,000 for contents coverage. By law and regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSEs) must require the property owners in an SFHA to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. In addition to this legal mandatory purchase requirement, lenders may also require borrowers outside of an SFHA to maintain flood insurance as a means of financially securing the property. In order to comply with this mandate, property owners may purchase flood insurance through the NFIP, or through a private company, so long as the private flood insurance \"provides flood insurance coverage which is at least as broad as the coverage\" of the NFIP, among other conditions. The mandatory purchase requirement is enforced by the lender, rather than FEMA, and lenders can be fined up to $2,000 by banking regulators for each failure to require flood insurance or provide notice. Property owners who do not obtain flood insurance when required may find that they are not eligible for certain types of disaster assistance after a flood. Flood insurance rates in the NFIP generally are directed by statute to be \"based on consideration of the risk involved and accepted actuarial principles,\" meaning that the rate is reflective of the true flood risk to the property. However, Congress has directed FEMA not to charge actuarial rates for certain categories of properties and to offer discounts to other classes of properties. FEMA is not, however, provided funds to offset these subsidies and discounts, which has contributed to FEMA's need to borrow from the U.S. Treasury to pay NFIP claims. There are three main categories of properties that pay less than full risk-based rates: Pre-FIRM : properties that were built or substantially improved before December 31, 1974, or before FEMA published the first Flood Insurance Rate Map (FIRM) for their community, whichever was later; Newly mapped : properties that are newly mapped into a SFHA on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date; and Grandfathered : properties that were built in compliance with the FIRM in effect at the time of construction and are allowed to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. The NFIP is currently authorized until May 31, 2019. Since the end of FY2017, 10 short-term NFIP reauthorizations have been enacted. As of the date of this report, in the 116 th Congress, no NFIP legislation has been considered in committee in the Senate. The House Financial Services Committee held a hearing on March 13, 2019, on NFIP reauthorization at which four draft bills were circulated. In the 115 th Congress, a number of bills were introduced to provide a longer-term reauthorization of the NFIP as well as make numerous other changes to the program. The House of Representatives passed H.R. 2874 (The 21 st Century Flood Reform Act) by a vote of 237-189 on November 14, 2017. Among its numerous provisions, H.R. 2874 would have authorized the NFIP until September 30, 2022. Three bills were introduced in the Senate that would have reauthorized the expiring provisions of the NFIP: S. 1313 (Flood Insurance Affordability and Sustainability Act of 2017); S. 1368 (Sustainable, Affordable, Fair, and Efficient [SAFE] National Flood Insurance Program Reauthorization Act of 2017); and S. 1571 (National Flood Insurance Program Reauthorization Act of 2017). None of these bills were considered by the full Senate in the 115 th Congress. Among their other provisions, S. 1313 would have authorized the NFIP until September 30, 2027; S. 1368 would have authorized the NFIP until September 30, 2023; and S. 1571 would have authorized the NFIP until September 30, 2023. The four reauthorization bills differed significantly in the degree to which they would have encouraged private participation in flood insurance, particularly flood insurance sold by private companies in competition with the NFIP. In general, legislation passed by the House was more encouraging of private flood insurance than Senate legislation. The House passed standalone legislation to encourage private insurance in the 114 th Congress ( H.R. 2901 ); however, the Senate did not take up H.R. 2901 in the 114 th Congress. In the 115 th Congress, the House included the same provisions in H.R. 2874 and in an unrelated bill to reauthorize the Federal Aviation Administration ( H.R. 3823 ). The Senate removed the flood insurance language from H.R. 3823 before passing it. Reportedly, the provisions relating to private flood insurance were a particular issue of concern. The Senate ultimately did not take up H.R. 2874 during the 115 th Congress. S. 1313 included some similar provisions to H.R. 2874 , but S. 1368 and S. 1571 did not. Details of the provisions relating to private insurance in the 115 th Congress House and Senate bills are described in the Appendix, and Table A-1 relates the provisions in the bills to the issues discussed in this report. Private insurers can be involved in the flood insurance market in a number of ways, including (1) by helping to administer the NFIP; (2) by sharing risk with the NFIP as a reinsurer; or (3) by taking on risk themselves as a primary insurer, where the insurer contracts directly with a consumer. Since 1983, private insurers have played a major role in administering the NFIP, including selling and servicing policies and adjusting claims, but they largely have not been underwriting flood risk themselves. Instead, the NFIP retains the direct financial risk of paying claims for these policies. Since 2016, the NFIP has purchased a limited amount of reinsurance, thus transferring some of the flood risk to the private sector. While FEMA provides the overarching management and oversight of the NFIP, the majority of the day-to-day operation of the NFIP is handled by private companies. This includes marketing, selling and writing policies, and all aspects of claims management. FEMA has established two different arrangements with private industry. The first is the Direct Servicing Agent, or DSA, which operates as a private contractor, selling NFIP policies on behalf of FEMA for individuals seeking to purchase flood insurance policies directly from the NFIP. The DSA also handles the policies of severe repetitive loss properties. The second arrangement is the Write-Your-Own (WYO) program, where private insurance companies are paid to issue and service NFIP policies. With either the DSA or WYO program, the NFIP retains the actual financial risk of paying claims for the policy, and the policy terms and premiums are the same. Approximately 13% of the total NFIP policy portfolio is managed through the DSA and 87% of NFIP policies are sold by the 60 companies participating in the WYO program. Companies participating in the WYO program are compensated through a variety of methods, but this compensation is not directly based on the costs incurred by the WYOs. In the Biggert-Waters Flood Insurance Reform Act of 2012 (Title II of P.L. 112-141 , hereinafter BW-12), Congress required FEMA to develop and issue a rulemaking on a \"methodology for determining the appropriate amounts that property and casualty insurance companies participating in the WYO program should be reimbursed for selling, writing, and servicing flood insurance policies and adjusting flood insurance claims on behalf of the National Flood Insurance Program.\" This rulemaking was required within a year of enactment of BW-12. As of April 2019, FEMA has yet to publish a rulemaking to revise the compensation structure of the WYO companies. Without this analysis, it is difficult to ascertain how much it actually costs WYO companies to administer the NFIP policies, or the WYO's profit margins (if any). In the 115 th Congress, H.R. 2874 would have capped the allowance paid to the WYOs at 27.9% of premiums, while S. 1368 would have capped the allowance at 22.46%. In the Homeowner Flood Insurance Affordability Act of 2014 ( P.L. 113-89 , HFIAA), Congress revised the authority of FEMA to secure reinsurance for the NFIP from the private reinsurance and capital markets. The purchase of private market reinsurance reduces the likelihood of FEMA needing to borrow from the Treasury to pay claims. In addition, as the U.S. Government Accountability Office (GAO) noted, reinsurance could be beneficial because it allows FEMA to price some of its flood risk up front through the premiums it pays to the reinsurers rather than borrowing from Treasury after a flood. From a risk management perspective, using reinsurance to cover losses in only the more extreme years could help the government to manage and reduce the volatility of its losses over time. Transfer of risk to the private sector through reinsurance, however, is unlikely to lower the overall cost of the NFIP because reinsurers understandably charge FEMA premiums to compensate for the risk they assume. The primary benefit of reinsurance is to transfer and manage risk rather than to reduce the NFIP's long-term fiscal exposure. For example, a reinsurance scenario which would provide the NFIP with $16.8 billion coverage (sufficient for Katrina-level losses) could cost an estimated $2.2 billion per year. Such a reinsurance premium, however, would be a large portion of the total premiums paid into the NFIP, approximately two-thirds of the current premium amounts. Devoting such a large portion of premiums to reinsurance could leave insufficient funds for paying claims outside of large disasters, or for covering the other purposes for NFIP funds, such as flood mitigation, mapping, and improving NFIP rating structures. Reinsurance has been purchased by FEMA through two different mechanisms, \"traditional\" reinsurance and reinsurance backed by catastrophe bonds. The traditional reinsurance has been purchased from a varied group of reinsurance companies with each reinsurer bearing part of the risk. The catastrophe bond reinsurance is facilitated by a single company, with the risk then transferred to capital market investors who purchase the bonds. The specifics of each reinsurance purchase has varied, but in general, the reinsurance has been designed to pay a certain percentage of the losses from a single, large scale event, with a higher percentage if losses are higher. Coverage has typically started after $4 billion in losses, a loss level that has only been reached by the NFIP in three events—Hurricane Katrina, Superstorm Sandy, and Hurricane Harvey. Table 1 outlines the various reinsurance purchases, including the dates in force, type of reinsurance, amount of coverage, premiums paid by FEMA, and claims paid to FEMA. To date, the reinsurance purchases have been a net fiscal positive for the NFIP with a total of $655 million in premiums paid and $1.042 billion received from claims. This is due to the extremely high losses experienced after Hurricane Harvey, which resulted in over $8.6 billion paid by the NFIP to policyholders. Unless another large scale flooding event occurs, the balance of premiums vs. claims is likely to turn negative in the next two to three years if FEMA continues similar reinsurance purchases. In the 115 th Congress, H.R. 2874 , S. 1313 , and S. 1571 all contained provisions that would have required or encouraged the NFIP to transfer a portion of its risk to the private reinsurance market. One of the reasons that Congress created the NFIP in 1968 was the general unavailability of flood insurance from private insurers. Private flood insurance was offered between 1895 and 1927, but losses incurred from the 1927 Mississippi River floods and additional flood losses in 1928 led most insurers to stop offering flood policies. Private flood insurance companies largely concluded that flood peril was uninsurable because of the catastrophic nature of flooding, the difficulty of determining accurate rates, the risk of adverse selection, and the concern that they could not profitably provide risk-based flood coverage at a price that consumers felt they could afford. Currently, the private flood insurance market most commonly provides commercial coverage, secondary coverage above the NFIP maximums, or coverage in the lender-placed market. The 2018 premiums for private flood insurance as reported to the National Association of Insurance Commissioners (NAIC) totaled $644 million, up from $589 million in 2017 and $376 million in 2016, compared to the $3.5 billion total amount of NFIP premiums. In general, the private flood market tends to focus on high-value properties, which command higher premiums and therefore the extra expense of flood underwriting can be more readily justified. Currently few private insurers compete with the NFIP in the primary residential flood insurance market. One illustration of this is that the NAIC only began systematically collecting separate data on private flood insurance in 2016. As discussed in the following sections, private insurers have identified a number of potential barriers to more widespread private sector involvement in providing flood insurance. Increasing private insurance may present a number of issues for the NFIP and for consumers. In BW-12, Congress explicitly provided for private flood insurance to fulfill the mandatory purchase mortgage requirement as long as the private flood insurance \"provides flood insurance coverage which is at least as broad as the coverage\" of the NFIP, among other conditions. Implementation of this requirement has proved challenging. The crux of the implementation issue is in answering the question of who would evaluate whether specific policies met the \"at least as broad as\" standard and what criteria would be used in making this evaluation. Some lending institutions feel that they lack the necessary technical expertise to evaluate whether a flood insurance policy meets the definition of private flood insurance set forth in BW-12. The responsible federal agencies issued two separate Notices of Proposed Rulemaking (NPRM) on the question, the first in October 2013, and the second in November 2016. On February 12, 2019, the agencies announced a final rule implementing this BW-12 requirement. Of particular note, the agencies indicate the rule \"allows institutions to rely on an insurer's written assurances in a private flood insurance policy stating the criteria are met; [and] clarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria.\" This second point may seem unusual, because BW-12 included a specific definition of private flood insurance, while the agencies indicate that the rule allows acceptance of private flood insurance that does not meet this statutory definition. In creating the exception that allows private flood insurance that does not follow the statutory definition of \"private flood insurance,\" the agencies relied on the usage of the more general term \"flood insurance\" in 42 U.S.C. 4012a(b)(1)(A) combined with the perceived congressional intent to promote private insurance in BW-12. The rule takes effect on July 1, 2019. Press reports described it as generally welcomed by the banking industry, but it is unclear to what extent this new rule will encourage private flood insurance or whether additional legislative changes might be needed if Congress seeks to further encourage development of the private flood insurance market. In the 115 th Congress, H.R. 2874 and S. 1313 included provisions that would have revised the definition of private flood insurance, striking existing statutory language requiring private flood insurance to provide coverage \"at least as broad as the coverage\" provided by the NFIP in order to meet the mandatory purchase requirements. Instead, the new definition would have relied on whether the insurance policy and insurance company were in compliance with the laws and regulations in the state where the insurance was purchased. S. 1368 and S. 1571 had no similar provisions. An associated issue is that of continuous coverage, which is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. Under existing law, if an NFIP policyholder allows their policy to lapse, any subsidy that they currently receive would be eliminated immediately. Unless legislation specifically allows private flood insurance to count for continuous coverage, a borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. In the 115 th Congress, H.R. 2874 included a provision that would have specified that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered to have maintained continuous coverage. S. 1313 included a provision to allow private flood insurance to count as continuous coverage. S. 1368 and S. 1571 had no similar provisions. In the 116 th Congress, H.R. 1666 , introduced on March 11, 2019, would consider any period during which a property is covered by a flood insurance policy, either through the NFIP or a private company, to be a period of continuous coverage. Before FY2019, the Write Your Own carriers, private insurers who sell and service NFIP policies, were restricted in their ability to sell flood insurance policies on their own behalf while also participating as a WYO, due to a \"non-compete\" clause contained in the standard NFIP contracts. These contracts governing the WYO companies' participation in the NFIP restricted the WYO carriers from selling their own standalone private flood products. A non-compete clause would require WYO companies to decide whether to offer private flood insurance policies in their own right or to act as WYO carriers, thus potentially limiting the size of the private flood market. In the 115 th Congress, H.R. 2874 would have eliminated the non-compete clause in place at the time, while S. 1313 would have provided temporary authorization for WYOs to sell private flood insurance for certain types of properties, with a follow-up study by FEMA to determine if the authorization should be made permanent. FEMA implemented changes in the standard WYO contracts for FY2019 removing the restrictions on WYO companies offering private flood insurance, while maintaining requirements that such private insurance lines remain entirely separate from a WYO company's NFIP insurance business. This action removes the non-compete clause without legislation, although FEMA in the future would retain the authority to reinstate the non-compete clause. Possible implications of the removal of the non-compete clause are discussed later in this report in the section on \" Adverse Selection .\" FEMA's subsidized rates are often seen as one of the primary barriers to private sector involvement in flood insurance. However, even without the subsidies mandated by law, the NFIP's definition of full-risk rates differs from that of private insurers. Whereas the NFIP's full-risk rates must incorporate expected losses and operating costs, a private insurer's full-risk rates must also incorporate a profitable return on capital. As a result, even those NFIP policies which are considered to be actuarially sound from the perspective of the NFIP may still be underpriced from the perspective of private insurers. In order to make the flood insurance market attractive, private insurers would want to be able to charge premium rates that reflect the full estimated risk of potential flood losses while still allowing the companies to make a profit. A reformed NFIP rate structure could have the effect of encouraging more private insurers to enter the primary flood market because NFIP full-risk based rates would be closer to the rates that private insurers would likely charge; however, this could lead to higher rates for households. In the 115 th Congress, H.R. 2874 would have phased out the pre-FIRM subsidy for primary residences at a rate of 6.5%-15% (compared to the current rate of 5%-18%), in a staged manner. In the first year after enactment, the minimum rate increase would have been 5%; in the second year after enactment, the minimum rate increase would have been 5.5%; and in the third year of enactment, the minimum rate increase would have been 6%. The phaseout of the pre-FIRM subsidy for other categories of properties would have remained at 25%. The Senate bills did not contain any provisions related to premium rate subsidies. FEMA is in the process of developing a redesigned risk rating system for the NFIP, known as Risk Rating 2.0. The new flood insurance rates for single-family properties are to be announced on April 1, 2020, and the new rates planned to go into effect for single-family properties across the country on October 1, 2020. As of January 31, 2019, there were 3.53 million single-family policies in force nationally. Many details are not yet known, but FEMA representatives have indicated the new rating structure will include replacement cost value and the distance between the property and a source of water. Risk Rating 2.0 is to also include new sources of flooding, such as intense rainfall, that are not currently included in the rating structure. As addressed above, the rules on the acceptance of private insurance for the mandatory purchase requirement, and whether or not private flood insurance would count for continuous coverage, have had a significant impact on the market potential for private insurers. Another driver of private sector concern is regulatory uncertainty at the state level. The role of state regulators would increase in a flood insurance market with increased private sector involvement, which could increase the burden of oversight. The involvement of 56 state and territorial insurance regulators is likely to add complexity and additional costs for insurers, lenders, or property owners. For example, some private insurers cited the intervention of state regulators in controlling rates for wind insurance in Florida as a reason for withdrawing from that market. However, this could also lead to the development of state-specific insurance solutions, which might better suit local social and economic conditions. In the 115 th Congress, H.R. 2874 and S. 1313 referenced state laws and regulations in their definition of private flood insurance that could meet the mandatory purchase requirements. Many insurers view the lack of access to NFIP data on flood losses and claims as a barrier to more private companies offering flood insurance. It is argued that increasing access to past NFIP claims data would allow private insurance companies to better estimate future losses and price flood insurance premiums, and ultimately to determine which properties they might be willing to insure. However, FEMA's view is that the agency would need to address privacy concerns in order to provide property level information to insurers, because the Privacy Act of 1974 prohibits FEMA from releasing policy and claims data which contain personally identifiable information. Private insurers have also suggested that better flood risk assessment tools such as improved flood maps and inland and storm surge models are needed in order to price risks at the individual and portfolio level. In the 115 th Congress, H.R. 2874 would have required FEMA to make all NFIP claims data publicly available in a form that does not reveal personally identifiable information, while S. 1313 would have authorized FEMA to sell or license individual claims data while requiring FEMA to make aggregate claims data available. Insurers need sufficient consumer participation to manage and diversify their risk exposure. Many private insurers have expressed the view that broader participation in the flood insurance market would be necessary to address adverse selection and maintain a sufficiently large risk pool. A long-standing objective of the NFIP has been to increase purchases of flood insurance policies, and this objective was the motivation for introducing the mandatory purchase requirement. Despite the mandatory purchase requirement, not all covered mortgages carry the insurance as dictated, and no up-to-date data on national compliance rates with the mandatory purchase requirement are available. A 2006 study commissioned by FEMA found that compliance with this mandatory purchase requirement may be as low as 43% in some areas of the country (the Midwest), and as high as 88% in others (the West). A more recent study of flood insurance in New York City found that compliance with the mandatory purchase requirement by properties in the SFHA with mortgages increased from 61% in 2012 to 73% in 2016. The escrowing of insurance premiums, which began in January 2016, may increase compliance with the mandatory purchase requirement more widely, but no data are yet available. The mandatory purchase requirement could potentially be expanded to more (or all) mortgage loans made by federally regulated lending institutions for properties in communities participating in the NFIP. Another possible option would be to require all properties within the SFHA to have flood insurance, not just those with federally backed mortgages. Consumer participation could also be increased if the federal government were to mandate that homeowners' insurance policies include flood coverage or require all homeowners to purchase flood insurance. All four 115 th Congress bills contained provisions for some form of study to assess the compliance with the mandatory purchase requirement. H.R. 2874 would also have increased civil penalties on lenders for failing to enforce the mandatory purchase requirement. Current NFIP policies offer a relatively limited array of coverages, particularly compared to what is available in private markets for similar insurance against perils other than floods. Private insurance companies could potentially compete with the NFIP by offering coverage not available under the NFIP, such as business interruption insurance, living expenses while a property is being repaired, basement coverage, coverage of other structures on a property, and/or by offering policies with coverage limits higher than the NFIP. The NFIP currently also has a 30-day waiting period in almost all cases before the insurance coverage goes into effect, whereas private insurance companies may have a shorter waiting period. Private companies could also offer flood coverage as an add-on to a standard homeowners' policy, which could eliminate the current problem of distinguishing between flood damage (which is covered by the NFIP) and wind damage (which is often covered by standard homeowners' insurance). Unlike the NFIP, private flood insurance companies may also issue a policy without necessarily requiring elevation certificates, perhaps by using new technology to measure the elevation of individual structures. Since some properties receive lower NFIP rates due to cross subsidies from other NFIP policyholders, it seems likely that some of the non-subsidized NFIP policyholders would be able to obtain less expensive flood insurance from private insurers. Private insurers may also be able to offer premiums more closely tied to individual risks than the NFIP currently does, which would provide lower premiums for some policyholders. Quantifying the potential savings for some policyholders from private insurance is, however, difficult. The amount and extent of cross-subsidization within the NFIP is not currently known, as the NFIP has not historically tracked the number of grandfathered properties. One example of an attempt to provide estimates of NFIP versus private insurance is a modeling exercise carried out by two private companies, Milliman and KatRisk, which looked at premiums for single-family homes in Louisiana, Florida, and Texas. Their modeling suggested that 77% of single-family homes in Florida, 69% in Louisiana, and 92% in Texas would pay less with a private policy than with the NFIP; however, 14% in Florida, 21% in Louisiana, and 5% in Texas would pay over twice as much. Milliman did not provide any details of the coverage offered by these private policies, nor the basis on which their figures were estimated. The consumer protections associated with private policies are likely to be enforced at a state level and will therefore be variable; some states may offer a higher level of protection than others. Because private insurers are free to accept or reject potential policyholders as necessary in order to manage their risk portfolio, private insurers may not necessarily renew a policy. A private flood insurance policy might be less expensive than an NFIP policy, but it might also offer less extensive coverage, which a policyholder may not realize until they make a claim following a flood. Unlike the NFIP, the language in private flood insurance policies is not standardized and has not yet been tested in court in the same way as, for example, homeowners' insurance. Thus there may be greater variability in claims outcomes for consumers in the early years of private flood insurance penetration. Private sector competition might increase the financial exposure and volatility of the NFIP, as private markets will likely seek out policies that offer the greatest likelihood of profit. In the most extreme case, the private market may \"cherry-pick\" (i.e., adversely select against the NFIP) the profitable, lower-risk NFIP policies that are \"overpriced\" either due to cross-subsidization or imprecise flood insurance rate structures, particularly when there is pricing inefficiency in favor of the customer. This could leave the NFIP with a higher density of actuarially unsound policies that are being directly subsidized or benefiting from cross-subsidization. Because the NFIP cannot refuse to write a policy, those properties that are considered \"undesirable\" by private insurers are likely to remain in the NFIP portfolio—private insurers will not compete against the NFIP for policies that are inadequately priced from their perspective. Private insurers, as profit-seeking entities, are unlikely independently to price flood insurance policies in a way that ensures affordable premiums as a purposeful goal, although some private policies could be less expensive than NFIP policies. It is likely that the NFIP would be left with a higher proportion of subsidized policies, which may become less viable in a competitive market. The extent of such \"cherry picking\" is uncertain with some arguing that it would have little effect. However, evidence from the UK flood insurance market suggests that even in an entirely private market \"cherry picking\" can be difficult to avoid. Interviews of private insurers indicate that one of the key drivers for the introduction of Flood Re, the new UK private flood insurance scheme, was the emergence of new entrants in the flood insurance market after 2000. These new entrants had little or no existing high-flood-risk business and no commitment to continue to insure this business under the terms of the informal agreement with the government. This gave them a competitive advantage, as they could choose to select the more profitable lower-risk business. One driver for change therefore was that Flood Re would include these new entrants and force them to contribute by charging their clients for the cross-subsidy for Flood Re, leveling the playing field between the private insurers. A significant increase in private flood insurance policies that \"depopulates\" the NFIP may also undermine the NFIP's ability to generate revenue, reducing the amount of past borrowing that can be repaid or extending the time required to repay the debt. If the number of NFIP policies decreases, it would likely become increasingly difficult for the remaining NFIP policyholders to subsidize policies, raising prices for the non-subsidized policyholders and thus accelerating the move to private insurance. In the long term the program could be left as a \"residual market\" for subsidized or high-risk properties. Residual market mechanisms are used in areas such as auto insurance, where consumers may be required to purchase insurance, but higher risk individuals may be unable to purchase it from regular insurers. The exact form of residual market mechanisms vary in different states and for different types of insurance, but they typically require some form of outside support either from the government or from insurers themselves. In the 115 th Congress, CBO cost estimate of H.R. 2874 considered the impact of eliminating the WYO companies' non-compete agreement. CBO estimated that, over the 2017-2027 period, holders of about 690,000 properties that, under current law, would have been purchased under the NFIP would instead choose to buy private flood insurance to cover those properties if H.R. 2874 were enacted. CBO did not expect any property owners who are subsidized by the NFIP to be among those leaving the program. CBO estimated that eliminating the non-compete clause and making NFIP data publically available would lead to an increase in spending of $39 million for the 2018-2022 period and $393 million for the 2018-2017 period. S. 1313 would have required FEMA, within two years of enactment, to report on the extent to which the properties for which private flood insurance is purchased tend to be at a lower risk than properties for which NFIP policies are purchased (i.e., the extent of adverse selection), by detailing the risk classifications of the private flood insurance policies. S. 1313 would also have provided the FEMA Administrator the power to limit the participation of WYO companies in the broader flood insurance marketplace if the Administrator determined that private insurance adversely impacts the NFIP. If the number of NFIP policyholders were to decrease significantly, it might also be difficult to support the NFIP's functions of reducing flood risk through flood mapping and floodplain management. NFIP flood mapping is currently funded in two ways, through (1) annual discretionary appropriations; and (2) discretionary spending authority from offsetting money collected from the Federal Policy Fee (FPF). The FPF is paid to FEMA and deposited in the National Flood Insurance Fund (NFIF). The income from the FPF is designated to pay for floodplain mapping activities, floodplain management programs, and certain administrative expenses. About 66% of the resources from the FPF are allocated to flood mapping, with floodplain management receiving about 19% of the overall income from the FPF. To the extent that the private flood insurance market grows and policies move from the NFIP to private insurers, FEMA will no longer collect the FPF on those policies and less revenue will be available for floodplain mapping and management. Concerns have been raised about maintaining the activities funded by the FPF, with some stakeholders arguing that a form of FPF equivalency, or some form of user fee, should be applied to private flood insurance. In the 115 th Congress, both S. 1313 and S. 1368 contained mechanisms by which private insurance companies could have contributed to the costs of floodplain mapping in lieu of paying the FPF. Enforcement of floodplain management standards could be more challenging within a private flood insurance system, as the current system makes the availability of NFIP insurance in a community contingent on the implementation of floodplain management standards. For example, the Association of State Floodplain Managers (ASFPM) has expressed concerns that the widespread availability of private flood insurance could lead some communities to drop out of the NFIP and rescind some of the floodplain management standards and codes they had adopted, leading to more at-risk development in flood hazard areas. ASFPM suggested that this issue could be addressed by allowing private policies to meet the mandatory purchase requirement only if they were sold in participating NFIP communities. FEMA suggested that access to federal disaster assistance could be made partially contingent on the adoption of appropriate mitigation policies, but noted that this approach could be politically challenging. However, a positive consequence is that government investment in mitigation could increase private market participation by reducing the flood exposure of high-risk properties and thereby increasing the number of properties that private insurers would be willing to cover. The policy debate surrounding NFIP and private insurance has evolved over the last few years. The discussion in 2012 was framed in the context of privatization of the NFIP and actions that might be taken to create conditions for private sector involvement. One of the primary interests of Congress at the time was to reduce the federal government's role in flood insurance by transferring its exposure to the private sector, with an expectation that a realignment of roles would allow the federal government to focus on flood risk mitigation while private markets focused on providing flood insurance. One argument for increasing private sector participation in the U.S. flood market was that competition should lead to innovation in flood risk analytics and modeling and produce new flood insurance products that would better meet customer needs and lead to greater levels of insurance market penetration. In fact, private sector flood risk analytics and modeling have improved significantly before any sizable entry of private insurers into the market. Another argument was that, in contrast to the NFIP, which cannot diversify its portfolio of flood risk by insuring unrelated risks, the insurance industry can diversify catastrophic risks with uncorrelated or less correlated risks from other perils, other geographic regions, non-catastrophic risks, or risks from unrelated lines of business. FEMA considered a range of concrete steps by which the barriers to private sector involvement could be addressed. One of these has been introduced: the purchase of reinsurance. Two others are in progress: the reduction of premium subsidies for some properties and reporting to make premium subsidies and cross-subsidies more transparent. Although BW-12 directed FEMA to make a recommendation about the best manner in which to accomplish the privatization of the NFIP, FEMA presented the report without a recommendation, arguing that any privatization strategy is complex and involves significant policy decisions that would require input from a variety of stakeholders. They concluded that there is no single, clear solution; it is heavily politicized; and harsh criticism of any change is inevitable. Currently the discussion is more focused on sharing risk, with the recognition that neither the NFIP nor the private sector is likely to be able to write all of the policies needed to cover all of the flood risk in the United States. FEMA has identified the need to increase flood insurance coverage across the nation as a major priority for NFIP reauthorization, and this also forms a key element of their 2018-2022 strategic plan. FEMA has developed a \"moonshot\" with the goal of doubling flood insurance coverage by 2023 through the increased sale of both NFIP and private policies. The 2017 hurricane season highlighted the flood insurance gap in the United States, where many people that are exposed to flood risk are not covered by flood insurance. For example, in Texas and Florida, less than a third of the flooded residential structures in SFHAs were insured, and no more than 10%-12% of flooded residential structures outside the SFHA were insured. Recent floods have also demonstrated that insured flood victims generally receive significantly more from NFIP flood insurance than from FEMA Individual Assistance (IA). For example, in the 2015 South Carolina floods, the average NFIP claim was $35,172, while the average IA payment was about $3,199. In the 2016 Louisiana floods, the average NFIP claim was $91,507, while the average IA payment was about $9,349. For Hurricane Harvey, the average NFIP claim was $116,823, while the average IA payment in Texas was about $4,426. For Hurricane Irma, the average NFIP claim in Florida was $51,773, while the average IA payment was about $1,315. FEMA's view is that both the NFIP and an expanded private market will be needed to increase flood insurance coverage for the nation and reduce uninsured flood losses. However, the private market is unlikely to expand significantly without congressional action. The concerns of private companies related to the mandatory purchase requirement and continuous coverage and the concerns of some Members of Congress about adverse selection are among the most pressing issues likely to be addressed in any long-term NFIP reauthorization. The provisions in the 115 th Congress legislation that related to private flood insurance, and the issues raised as barriers to private sector involvement, are summarized below and compared side-by-side in Table A-1 . All of the bills also included provisions related to administrative reforms of the NFIP, some of which may be relevant to private insurance companies, which are not described in this report. H.R. 2874 , 21 St Century Flood Reform Act H.R. 2874 , Section 102, would have phased out the pre-FIRM subsidy for primary residences at a rate of 6.5%-15% (compared to the current rate of 5%-18%), except that in the first year after enactment, the minimum rate increase would have been 5%; in the second year after enactment, the minimum rate increase would have been 5.5%; and in the third year after enactment, the minimum rate increase would have been 6%. The phaseout of the pre-FIRM subsidy for other categories of properties (non-primary residences, non-residential properties, severe repetitive loss properties, properties with substantial cumulative damage, and properties with substantial damage or improvement after July 6, 2012) would have remained at 25%. This section would have made it possible, but not certain, for FEMA to raise premiums more rapidly than under current law by increasing the minimum rate at which the pre-FIRM subsidy could be removed for primary residences. H.R. 2874 , Section 201, would have revised the definition of private flood insurance previously defined in BW-12. This section would have struck existing statutory language describing how private flood insurance must provide coverage \"as broad as the coverage\" provided by the NFIP. Instead, the new definition would have relied on whether the insurance policy and insurance company were in compliance in the individual state (as defined to include certain territories and the District of Columbia) where the policy applies. Further, \"private flood insurance\" would have been specifically defined as including surplus lines insurance. Though the majority of regulation of private flood insurance would have rested with individual states, federal regulators would have been required to develop and implement requirements relating to the financial strength of private insurance companies from which such entities and agencies accepted private insurance, provided that such requirements not affect or conflict with any state law, regulation, or procedure concerning the regulation of the business of insurance. The dollar amount of coverage would still have had to meet federal statutory requirements and requirements relating to the financial strength of such companies offering flood insurance could still be implemented. This section would also have specified that if a property owner purchased private flood insurance and decided then to return to the NFIP, they would be considered to have maintained continuous coverage. This section would have allowed private insurers to offer policies that provide coverage that might differ significantly from NFIP coverage, either by providing greater coverage or potentially providing reduced coverage that could leave policyholders exposed after a flood. H.R. 2874 , Section 202, would have applied the mandatory purchase requirement only to residential improved real estate, thereby eliminating the requirement for other types of properties (e.g., all commercial properties) to purchase flood insurance from January 1, 2019. This would likely have affected the policy base of the NFIP by reducing the number of commercial properties covered. However, it is uncertain how many would have elected to forgo insurance coverage (public or private) entirely. H.R. 2874 , Section 203, would have eliminated the non-compete requirement in the WYO arrangement with FEMA that restricted WYO companies from selling both NFIP and private flood insurance policies. This would have allowed the WYO companies to offer their own insurance policies while also receiving reimbursement for their participation in the WYO program to administer the NFIP policies. This section was largely pre-empted by FEMA's proposed changes for FY2019 to remove the WYO non-compete clause. H.R. 2874 , Section 204, would have required FEMA to make publicly available all data, models, assessments, analytical tools, and other information that is used to assess flood risk or identify and establish flood elevations and premiums. This section would also have required FEMA to develop an open-source data system by which all information required to be made publicly available may be accessed by the public on an immediate basis by electronic means. Within 12 months after enactment, FEMA would have been required to establish and maintain a publicly searchable database that provides information about each community participating in the NFIP. This section provided that personally identifiable information would not have been made available; the information provided would be based on data that identifies properties at the zip code or census block level. H.R. 2874 , Section 506, would have established that the allowance paid to WYO companies would not be greater than 27.9% of the chargeable premium for such coverage. It would also have required FEMA to reduce the costs to WYO companies participating in the program. H.R. 2874 , Section 507, would have increased the civil penalties from $2,000 to $5,000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement. In addition, the federal entities for lending regulations, in consultation with FEMA, would have been required jointly to update and reissue the guidelines on compliance with mandatory purchase. H.R. 2874 , Section 513, would have required GAO to issue a report, within 18 months of enactment, on the implementation and efficacy of the mandatory purchase requirement. H.R. 2874 , Section 511, would have required that, no later than 18 months after enactment, FEMA begin to annually transfer a portion of the risk of the NFIP to the private reinsurance or capital markets to cover a FEMA-determined probable maximum loss target expected to occur in the fiscal year. S. 1313 , Flood Insurance Affordability and Sustainability Act of 2017 S. 1313 , Section 101, would have required annual transfer of a portion of the risk of the NFIP to the private reinsurance or capital markets in an amount sufficient to maintain the ability of the program to pay claims, and limit the exposure of the NFIP to potential catastrophic losses from extreme events. S. 1313 , Section 102, would have required FEMA to conduct a study in coordination with the National Association of Insurance Commissioners to address how to increase participation in flood insurance coverage through programmatic and regulatory changes, and report to Congress no later than 18 months after enactment. This study would have been required to include but not be limited to options to (1) expand coverage beyond the SFHA to areas of moderate flood risk; (2) automatically enroll customers in flood insurance while providing customers the opportunity to decline enrollment; and (3) create bundled flood insurance coverage that diversifies risk across multiple-peril insurance. S. 1313 , Section 401, would have allowed any state-approved private insurance to satisfy the mandatory purchase requirement, and allowed private flood insurance to count as continuous coverage. This section would also have changed the amount of insurance required for both private flood insurance policies and NFIP policies in order to satisfy the mandatory purchase requirement. S. 1313 , Section 402, would have provided temporary authority during the first two years after enactment for WYO companies to sell private flood insurance for certain properties (e.g., non-residential properties, severe repetitive loss properties, business properties, or any property that has incurred flood-related damage in which the cumulative amount of payments equaled or exceeded the fair market value of the property) with the possibility of expanded participation after two years and further study. S. 1313 , Section 403, would have required FEMA to study the feasibility of selling or licensing the use of historical structure-specific NFIP claims data to non-governmental entities, while reasonably protecting policyholder privacy, and report within a year of enactment. This section would also have authorized FEMA to sell or license claims data as the Administrator determines is appropriate and in the public interest, with the proceeds to be deposited in the National Flood Insurance Fund (NFIF). S. 1313 , Section 404, would have required an insurance company issuing a policy for private flood insurance to impose and collect an annual surcharge equivalent to the Federal Policy Fee (FPF), to be transferred to the FEMA Administrator and deposited in the NFIF. S. 1313 , Section 602, would have required FEMA, not later than one year from enactment, to create and maintain a publicly searchable database that includes the aggregate number of claims filed each month, by state; the aggregate number of claims paid in part or in full; and the aggregate number of claims denials appealed, denials upheld on appeal, and denials overturned on appeal; without making personally identifiable information available. S. 1368 , Sustainable, Affordable, Fair, and Efficient [SAFE] National Flood Insurance Program Reauthorization Act of 2017 S. 1368 , Section 302, would have established that the total amount of FEMA reimbursement paid to WYO companies could not be greater than 22.46% of the chargeable premium for such coverage. S. 1368 , Section 303, would have required FEMA to develop a fee schedule based on recovering the actual costs of providing Flood Insurance Rate Maps (FIRMs) and charge any private entity an appropriate fee for use of such maps. This requirement would have provided a mechanism by which private insurance companies could contribute to the costs of floodplain mapping in lieu of paying the FPF. S. 1368 , Section 304, would have required FEMA, within 12 months of enactment, to develop a schedule to determine the actual costs of WYO companies, including claims adjusters and engineering companies, and reimburse the WYO companies only for the actual costs of the service or products. S. 1368 , Section 410, would have required FEMA to conduct a study and report to Congress within one year of enactment on the percentage of properties with federally backed mortgages located in SFHAs that satisfy the mandatory purchase requirement, and the percentage of properties with federally backed mortgages located in the 500-year floodplain that would satisfy the mandatory purchase requirement if the mandatory purchase requirement applied to such properties. S. 1571 , National Flood Insurance Program Reauthorization Act of 2017 S. 1571 , Section 302, would have specified that FEMA may consider any form of risk transfer, including traditional reinsurance, catastrophe bonds, collateralized reinsurance, resilience bonds, and other insurance-linked securities. S. 1571 , Section 303, would have required the federal banking regulators to conduct an annual study regarding the rate at which persons who are subject to the mandatory purchase requirement are complying with that requirement. Section 303 would also have required FEMA to conduct an annual study of participation rates and financial assistance to individuals who live in areas outside SFHAs. ", "summary": "The National Flood Insurance Program (NFIP) is the main source of primary flood insurance coverage in the United States, collecting approximately $4.75 billion in premiums, fees, and surcharges for over five million flood insurance policies. This is in contrast to the majority of other property and casualty risks, such as damage from fire or accidents, which are covered by a broad array of private insurance companies. One of the primary reasons behind the creation of the NFIP in 1968 was the withdrawal by private insurers from providing flood insurance coverage, leaving flood victims largely reliant on federal disaster assistance to recover after a flood. While private insurers have taken on relatively little flood risk, they have been involved in the administration of the NFIP through sales and servicing of policies and claims. In recent years, private insurers have expressed increased interest in providing flood coverage. Advances in the analytics and data used to quantify flood risk along with increases in capital market capacities may allow private insurers to take on flood risks that they shunned in the past. Private flood insurance may offer some advantages over the NFIP, including more flexible flood polices, integrated coverage with homeowners insurance, or lower-cost coverage for some consumers. Private marketing might also increase the overall amount of flood coverage purchased, reducing the amount of extraordinary disaster assistance necessary to be provided by the federal government. Increased private coverage could reduce the overall financial risk to the NFIP, reducing the amount of NFIP borrowing necessary after major disasters. Increasing private insurance, however, may have some downsides compared to the NFIP. Private coverage would not be guaranteed to be available to all floodplain residents, unlike the NFIP, and consumer protections could vary in different states. The role of the NFIP has historically been broader than just providing insurance. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to property owners who otherwise would not be able to obtain it, and to reduce government's cost after floods. Through flood mapping and mitigation efforts, the NFIP has tried to reduce the future impact of floods, and it is unclear how effectively the NFIP could play this broader role if private insurance became a large part of the flood marketplace. Increased private insurance could also have an impact on the subsidies that are provided for some consumers through the NFIP. The 2012 reauthorization of the NFIP (Title II of P.L. 112-141) included provisions encouraging private flood insurance; however, various barriers have remained. Legislation passed the House in the 114th Congress (H.R. 2901) and 115th Congress (H.R. 2874) which would have attempted to expand the role of private flood insurance; neither bill was taken up by the Senate. In the 116th Congress, no NFIP legislation has advanced past introduction. The NFIP is currently operating under a short-term reauthorization until May 31, 2019; some NFIP legislation may be considered prior to this date.", "document_type": "crs"}
{"report": "Congress has been interested in disaster relief since the earliest days of the republic. On February 19, 1803, the 7 th Congress passed the first known federal disaster assistance legislation, providing debt relief to the residents of Portsmouth, NH, following a December 26, 1802, fire that burned down most of the town (\"A Bill for the Relief of the Sufferers by Fire, in the Town of Portsmouth,\" commonly known as the Congressional Act of 1803). Over the years, Congress has authorized the expansion of federal disaster assistance to individuals, businesses, and places (both for humanitarian reasons and as a means to enhance interstate commerce). For example During the 1930s, Congress passed legislation authorizing the Reconstruction Finance Corporation to make disaster loans for the repair and reconstruction of certain public facilities following an earthquake, and later, other types of disasters; and the Bureau of Public Roads to provide funding for highways and bridges damaged by natural disasters. During the 1950s, Congress passed legislation authorizing the President to respond to major disasters. During the 1960s, Congress passed legislation expanding the U.S. Army Corps of Engineers' authority to implement flood control projects. During the 1970s, Congress passed legislation authorizing federal loans and tax assistance to individuals affected by disasters, as well as federal funding for the repair and replacement of public facilities; and the establishment of the presidential disaster declaration process. During the 1980s, Congress passed legislation authorizing numerous changes to federal disaster assistance programs administered by the Federal Emergency Management Agency (FEMA), which had been created by Executive Order 12127 on March 31, 1979, to, among other activities, coordinate federal disaster relief efforts. Since the 1980s, Congress has focused on the oversight of FEMA's implementation of federal disaster relief efforts and assessing the Robert T. Stafford Disaster Relief and Emergency Assistance Act (of 1988), hereinafter the Stafford Act, as amended (42 U.S.C. 5721 et seq.) to determine if its provisions meet current needs. One such potential need is providing disaster assistance following a terrorist attack. The Stafford Act authorizes the President to issue two types of declarations that could potentially provide federal assistance to states and localities in response to a terrorist attack: a \"major disaster declaration\" or an \"emergency declaration.\" Major disaster declarations authorize a wide-range of federal assistance to states, local governments, tribal nations, individuals and households, and certain nonprofit organizations to aid recovery from a catastrophic event. Major disaster declarations must be requested by the state governor or tribal leader. Emergency declarations authorize a more limited range of federal assistance and are issued by the President to protect property and public health and safety and to lessen or avert the threat of a major disaster. In most cases, the state governor or tribal leader must request an emergency declaration; however, under 501(b) of the Stafford Act, the President has authority to issue an emergency declaration without a gubernatorial or tribal request under specified conditions. Examples of these types of emergency declarations with respect to terrorist incidents include the April 19, 1995, bombing of the Alfred P. Murrah Building in Oklahoma City, and the September 11, 2001, attack on the Pentagon. In each instance, the emergency declaration was followed by a major disaster declaration. While the Stafford Act has been used to provide assistance in response to terrorist attacks in the past, recent incidents such as the mass shootings that occurred in 2015 and 2016 in San Bernardino, CA, and Orlando, FL, respectively, and the 2016 vehicular attacks in Nice, France, and Ohio State University may have brought to light some potential shortcomings in the Stafford Act. That is, certain terror attacks may not meet the criteria of a major disaster for two reasons. First, depending on the mechanism used in the attack, certain terror incidents may not meet the legal definition of a major disaster. Of interest here, the Stafford Act defines a major disaster as \"any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance.\" The list of incidents that qualify for a major disaster declaration is specifically limited, and it is not clear if a terror attack would meet the legal definition of a major disaster if the incident involved something other than a fire or explosion. Meeting the definition of a major disaster is a necessary but insufficient condition for the receipt of major disaster assistance. The incident's cost must also be beyond the capacity of the state and local government. When an incident occurs, FEMA meets with the state to assess damage costs to affected homes and public infrastructure. Damages to public infrastructure are particularly important because this amount is compared to the state's population. This comparison is called the \"per capita threshold.\" FEMA uses the threshold to assess state and local government capacity. In general, FEMA will recommend that the President declare a major disaster if the incident meets or exceeds the per capita threshold. It is conceivable that a terrorist incident could cause substantial loss of life but cause little or no damage to homes and public infrastructure. This lack of damage (to public infrastructure) may disqualify these incidents from receiving the wider range of assistance provided under a major disaster declaration. With respect to terrorism, some may view the Stafford Act's current framework adequate and oppose efforts to alter it. Their reasons are twofold. First, while terrorist incidents such as mass shootings can be devastating in terms of loss of life and impact on national morale, some argue that a major disaster should not be declared for terrorist incidents that do not cause enough damage to public infrastructure to warrant federal assistance. State and local governments, as well as insurance coverage, they say, should be the main sources of assistance if damages are limited. Second, they may argue that terror incidents that do not meet the criteria of a major disaster could be eligible for Stafford Act assistance under an emergency declaration. In contrast to the prescribed definition of incidents that qualify as a major disaster, an emergency is defined more broadly to include \"any occasion or instance for which, in the determination of the President, federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States.\" Some might argue that an emergency declaration would provide adequate assistance to individuals and households after a terrorist incident. For example, as outlined in Section 502 of the Stafford Act, an emergency declaration may include Section 408 assistance. Some examples of Section 408 assistance include FEMA's Individuals and Household Program (IHP), which provides housing and grants to individuals and families; and Other Needs Assistance (ONA) grants, which is part of the IHP program in the form of grants to families and individuals. These grants can cover items including medical and dental expenses caused by the incident as well as funeral expenses. ONA grants may also cover certain necessary expenses such as the replacement of personal property and other expenses. Others may argue that most acts of terrorism warrant the wide range of assistance provided by a major disaster declaration. They would argue that the assistance provided under an emergency declaration is too limited. For example, the Crisis Counseling program is not provided under an emergency declaration. The Crisis Counseling program may seem especially appropriate to a terrorist incident given the assistance it provides for what is likely a wrenching event for those involved. In addition, the type of declaration determines what types of Small Business Administration (SBA) disaster loans are available. In general, homeowners, renters, businesses, and nonprofit organizations become eligible for disaster loans under a major disaster declaration. In contrast, typically only private nonprofit organizations are eligible for disaster loans under an emergency declaration. Finally, beyond the monetary assistance provided by a major disaster declaration, some would argue that major disaster declarations are important symbolic gestures of federal support to states and localities. The Stafford Act requires that all major disaster declaration requests be made by state governors or tribal leaders. Such requests must be made on the basis that the incident is of such severity and magnitude that effective response is beyond the capability of the affected state and local government. The request for a declaration begins with a letter to the President from the governor or tribal leader. Included with the letter are supplemental material and any relevant information about the incident. The letter also describes what types of federal assistance is being requested. In the case of a request for a major disaster declaration, a particularly important piece of information accompanying the letter is the Preliminary Damage Assessment (PDA). PDAs provide public infrastructure damage estimates (as well as estimated damage to households). By regulation, FEMA compares this damage estimate against the state's population. In general, FEMA will make a recommendation to the President that a major disaster be declared if public infrastructure damages exceed $1.42 per capita. This formula is known as the \"per capita threshold.\" A request for an emergency declaration follows the same basic regulatory procedures highlighted above for major disasters with some nuances. Similar to a request for a major disaster declaration, the basis for an emergency declaration is that the incident is of such severity and magnitude that effective response is beyond the capability of the affected state and local government. FEMA, however, does not apply any formulas—including the per capita threshold—in regulations to make emergency declaration recommendations to the President. While there are differences between the two types of declarations, the ultimate decision to declare and grant federal assistance for emergencies and major disasters rests solely with the President. In general, an incident must meet three criteria to be eligible for a major disaster declaration: (1) definition, (2) unmet need, and (3) state action. The Stafford Act defines a major disaster as any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of states, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby. The definition of a major disaster can be applied in several ways. The definition could be applied prescriptively. In this view, the definition would be considered as an itemized list of incidents eligible for federal assistance under the Stafford Act. As a result, certain incidents are not eligible for assistance because the definition is taken as verbatim and all inclusive. Another approach is to consider the definition as open to interpretation. In this view, the list of incidents is seen as providing examples of some of the incidents that could be considered a major disaster. Alternatively, the definition could be seen as a blend of the two approaches. The list of natural disasters might be seen as open-ended whereas human caused incidents are limited to the itemized list of \"fire, flood, or explosion.\" Depending on the interpretation, the definition may limit certain incidents from receiving federal assistance. The discussion regarding whether an incident would be denied assistance due to definitional limitations is hypothetical. There have been incidents denied for definitional reasons (such as the Flint water contamination incident) but thus far a Governor has not requested a major disaster for a terrorist incident and denied assistance based on the definition of a major disaster. It is unclear if the definition would be fatal to a request for a major disaster declaration. Ultimately, the President has the discretion to determine what incidents that meet this definition are eligible for a major disaster declaration. In addition to meeting the definition of a major disaster, the incident must result in damages significant enough to exceed the capabilities and resources of state and local governments. Exceeding state and local capabilities and resources is generally considered as the state's unmet need. Under the Stafford Act: All requests for a declaration by the President that a major disaster exists shall be made by the Governor of the affected state. Such a request shall be based on a finding that the disaster is of such severity and magnitude that effective response is beyond the capabilities of the state and the affected local governments and that federal assistance is necessary. In general, FEMA assesses the degree of damage for an incident to help determine unmet need. FEMA considers six general areas: estimated cost of the assistance; localized impacts; insurance coverage; hazard mitigation; recent multiple disasters; and other federal assistance programs. While all of these factors are considered when assessing an incident's worthiness for federal assistance, the estimated cost of assistance is perhaps the most critical because it contains the per capita threshold mentioned earlier in this report, as well as the unmet needs of families and individuals. Attacks such as the 2016 Pulse nightclub shooting in Florida and the 2015 San Bernardino, CA, shooting had a high number of fatalities with relatively low damages to public infrastructure. Limited public infrastructure damages may make the per capita threshold difficult to reach—particularly for highly populated states. The state or tribal nation must implement its emergency plan, dedicate sufficient resources to respond to the incident, and agree to cost-sharing requirements, as follows: As part of such request, and as a prerequisite to major disaster assistance under this chapter, the Governor shall take appropriate response action under state law and direct execution of the state's emergency plan. The Governor shall furnish information on the nature and amount of State and local resources which have been or will be committed to alleviating the results of the disaster, and shall certify that, for the current disaster, state and local government obligations and expenditures (of which state commitments must be a significant proportion) will comply with all applicable cost-sharing requirements of this chapter. As conceptualized in Figure 1 , an incident is eligible for a disaster declaration if all three criteria intersect. An incident that does not meet the definition of a major disaster, and/or does not have unmet need would not have intersecting criteria and may have more difficulty receiving a major disaster declaration. The assistance provided for a major disaster declaration generally takes three forms: Public Assistance (PA), Individual Assistance (IA), and Hazard Mitigation Assistance (HMA). PA addresses the state or tribe's essential needs but concentrates on repairing damage to infrastructure (public roads, buildings, etc.). IA helps families and individuals. IA can be in the form of temporary housing assistance and grants to address post-disaster needs (such as replacing furniture, clothing and other items). It may also include crisis counseling and disaster unemployment benefit. HMA provides grant funding to the state for mitigation projects. HMA does not necessarily need to mitigate risks from the type of disaster that was declared. Rather, HMA can be used for mitigation projects identified before the declaration was issued. FEMA, however, does not exclusively perform all disaster response and recovery operations for the federal government. The President has the authority to direct any federal agency to use its authorities and resources to support state and local response and recovery efforts, primarily through Sections 402, 403, and 502 of the Stafford Act. In general, when a declaration is declared, FEMA coordinates federal entities and organizations that are involved in the incident by \"assigning\" missions to relevant agencies to address a state's request for federal assistance or support overall federal operations pursuant to, or in anticipation of, a Stafford Act declaration. The activities carried out by other agencies through Mission Assignments are generally reimbursed by FEMA through the Disaster Relief Fund (DRF). For example, FEMA may request the Department of Health and Human Services to establish and operate a shelter co-located with a federal medical station to support non-medical caregivers and family members accompanying patients being treated at the station. Major disaster declarations also put the Small Business Administration (SBA) Disaster Loan Program into effect. The loan program provides three main types of loans for disaster-related losses: (1) Home and Personal Property Disaster Loans, (2) Business Physical Disaster Loans, and (3) Economic Injury Disaster Loans (EIDL). Home Physical Disaster Loans provide up to $200,000 to repair or replace disaster-damaged primary residences. Personal Property Loans provide up to $40,000 to replace personal items such as furniture and clothing. Business Physical Disaster Loans provide up to $2 million to help businesses of all sizes and nonprofit organizations repair or replace disaster-damaged property, including inventory and supplies. EIDLs provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. Loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. Loan amounts for EIDLs are based on actual economic injury and financial needs, regardless of whether the business suffered any property damage. Major disaster declarations that include both IA and PA make all three loan types available. Only private non-profit organizations are eligible for SBA physical disaster loans and EIDL, if the major disaster declaration only provides PA. It is important to note that SBA disaster loans are usually the only type of federal assistance available to businesses after a terror attack because FEMA does not provide assistance to the private sector. The three criteria for an incident to be eligible for an emergency disaster declaration include (1) definition, (2) unmet need, and (3) state action. The Stafford Act defines an emergency as any occasion or instance for which, in the determination of the President, federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States. While the definition of a major disaster includes a list of incidents that could be considered a major disaster, emergencies are defined more broadly. Consequently, a terrorist attack such as a mass shooting or other nontraditional attack (such as using a vehicle as a weapon) under consideration as an \"emergency\" would likely not face the definitional challenge posed by the \"major disaster\" definition. The Stafford Act procedure for an emergency declaration can be particularly useful when a terrorist incident involves federal property or a federal program is Section 501(b) of the act: The President may exercise any authority vested in him by section 502 or section 503 with respect to an emergency when he determines that an emergency exists for which the primary responsibility for response rests with the United States, because the emergency involves a subject area for which, under the Constitution or laws of the United States, the United States exercises exclusive or preeminent responsibility and authority. In determining whether or not such an emergency exists, the President shall consult the Governor of any affected state, if practicable. The President's determination may be made without regard to subsection (a). While Presidents have rarely invoked this authority, it could provide a path for rapid action and certain forms of terrorism might be easily and justly defined as a federal responsibility. And as noted previously, emergency declarations can later be converted to major disaster declarations. The use of Section 501(b) is infrequent and has been invoked on three occasions: (1) the Alfred P. Murrah Federal Building bombing in Oklahoma City in 1995, (2) the 2003 Space Shuttle Columbia explosion, and (3) the terrorist attack on the Pentagon on September 11, 2001. It could be argued that the usefulness of 501(b) would be limited to certain situations that involve areas of federal responsibility (e.g., federal properties or programs). It could be further argued that that the use of Section 501(b) would be inappropriate, if the incident occurred in a business setting or an area of state and local jurisdiction. Others might disagree and argue that all terrorist incidents are a federal responsibility regardless of where they occur in the United States. According to this view, the 501(b) authority could be useful in the initial stages of a terrorist event since it provides the President with the discretion to act quickly without having to wait for a gubernatorial request for assistance. Others might be concerned that Section 501(b) might be invoked too often if applied to any situation that involved terrorism. For example, they may argue that it could lead to an expansion of federal assistance if routinely used in terror-related mass shootings. In general, similar to a major disaster, an incident must result in damages significant enough to exceed the capabilities and resources of state and local governments. Under the Stafford Act All requests for a declaration by the President that an emergency exists shall be made by the Governor of the affected state. Such a request shall be based on a finding that the situation is of such severity and magnitude that effective response is beyond the capabilities of the state and the affected local governments and that federal assistance is necessary. As mentioned previously, the President has the authority to issue an emergency declaration in certain circumstances without a gubernatorial or tribal request. Thus, in certain circumstances, the response does not need to be beyond the capabilities of state and local governments since the response could be considered a uniquely federal responsibility. As with a major disaster, the state or tribal nation must implement its emergency plan, dedicate sufficient resources to respond to the incident, and agree to cost-sharing requirements, as follows: As a part of such request, and as a prerequisite to emergency assistance under this act, the Governor shall take appropriate action under State law and direct execution of the State's emergency plan. The Governor shall furnish information describing the state and local efforts and resources which have been or will be used to alleviate the emergency, and will define the type and extent of federal aid required. Based upon such Governor's request, the President may declare that an emergency exists. As illustrated in Figure 2 , an incident is eligible for an emergency declaration if all three criteria intersect. An incident that does not meet the definition of a major disaster, or does not have unmet need would not have intersecting criteria and may have more difficulty receiving a major disaster declaration. Emergency declarations authorize activities that can help states and communities carry out essential services and activities that might reduce the threat of future damage. Emergency declarations authorize less assistance than a major disaster. Emergency declarations do not provide assistance for repairs and replacement of public infrastructure or nonprofit facilities. However, they do provide emergency services under the Stafford Act and other actions that might lessen the threat of a major disaster. As with major disaster declarations, the President has the authority under an emergency declaration to direct any federal agency to use its authorities and resources in support of state and local response and recovery efforts under 502 of the Stafford Act. Also, the emergency authority includes Section 408 which means that housing assistance and grants for individuals and families could be provided under an emergency declaration. Emergency declarations also trigger the SBA Disaster Loan Program, albeit usually on a limited basis. All three SBA disaster loan types are available when the emergency declaration includes IA. Emergency declarations, however, rarely provide IA. Typically, limited PA is provided. For example, 281 emergences were declared from 1990 to 2015. Of these, 18 included IA. SBA disaster loans are generally only available to private, non-profit organizations for \"PA-only\" declarations. Some may see this as a limitation. For example, if an incident affected a business (e.g., malls, movie theaters, or nightclubs), those businesses would not be eligible for an SBA disaster loan under a PA-only emergency declaration. The following section provides information on past terror attacks that have received federal assistance under the Stafford Act, including a general description of what types of assistance was provided for the incident. It also provides information on the Orlando Pulse nightclub shooting. It is included in this discussion because the governor requested Stafford Act assistance. The San Bernardino and Ohio State attacks are not included because Stafford Act declarations were not requested. Table 1 provides a comparison of each incident. It is notable that in all but one case, the declaration was issued on the same day as the attack. An emergency declaration was issued to Oklahoma for the Alfred P. Murrah Federal Building Bombing on April 19, 1995—the day of the bombing. The emergency declaration permitted FEMA to take vital actions necessary just hours following the tragedy. This principally involved bringing in FEMA's Urban Search and Rescue (USAR) teams. USAR Task Forces began arriving in Oklahoma City the afternoon of April 19, 1995. In addition, the emergency declaration also provided the sources that allowed the debris removal process to begin. Debris removal, however, was a challenging operation since the area to be cleared was also a Federal Bureau of Investigation (FBI) crime scene and new protocols were needed to accomplish response operations in that unique environment. As then-FEMA Director James Lee Witt explained: Here were two earnest, dedicated, well-trained groups working as hard as they could—and yet there was an inherent conflict between them. In clearing out the debris, the search and rescue people needed to proceed slowly, carefully. The FBI wanted to pick up the pace, to get their hands on crime evidence immediately—and they wanted that evidence not to be contaminated. Each group was under tremendous pressure. A major disaster declaration was later issued for the incident on April 26, 1995. This action permitted, at the request of the governor, the activation of the Crisis Counseling program. This program provides funding to state and local mental health authorities to provide service to survivors affected by a disaster incident. Since the great majority of damage was to federal facilities, FEMA's expenditures were limited for this event since FEMA aid under the Stafford Act is directed toward the losses of state, tribal and local governments. Aid to families and individuals (which includes crisis counseling) was the largest program expenditure at $5.5 million. SBA approved 163 disaster loans for $7.3 million. This included 71 approved home disaster loans for $452,700 and 92 business disaster loans for $6.8 million. Following the attacks on the Twin Towers, a major disaster declaration was issued on September 11, 2001 for the state of New York. The following day an emergency was declared for Virginia, site of the Pentagon attack. Later, on September 21, 2001, a major disaster was declared for Virginia with September 11 th identified as the beginning of the incident period. The scope of the New York attacks, along with the President's declaration, resulted in legislation that appropriated $40 billion to address not only recovery for these events but security concerns, including transportation safety and initiating counter measures against terrorism. Half of the appropriated amount ($20 billion) was devoted by law ( P.L. 107-38 ) to recovery and assistance efforts in New York, Virginia, and Pennsylvania. FEMA's work involved urban search and rescue teams, debris removal, crisis counseling, and housing aid for displaced residents. FEMA's DRF expenditures in New York alone surpassed $8.7 billion. In the case of Virginia, the largest expenditures were for aid to families and individuals. More than $14.5 million was provided for these programs (including crisis counseling), while nearly $5 million was provided for emergency work and debris clearance. The two disaster declarations triggered the SBA Disaster Loan Program. For New York, SBA approved 6,384 loans for roughly $551 million. This included 412 approved home loans for roughly $6.0 million, 566 approved business loans for $37 million, and 5,406 approved EIDL loans for $507 million. For Virginia, SBA approved 256 loans for roughly $31 million. This included one approved business loan for $125,500, and 255 approved EIDL loans for approximately $31 million. An emergency declaration was issued to Massachusetts on April 17, 2013, for the Boston Marathon Bombing—two days after the incident. The Boston bombing was a unique situation that resulted in a large man-hunt, the shutdown of a major city, and the eventual capture of one perpetrator and the killing of the other in a shootout with the police. Unlike some other terrorism-related incidents, this event stretched out over several days. In addition to the damage caused at the blast site, it also tested the resources of state and local first responders throughout the area. FEMA's Deputy Administrator explained FEMA's post-incident role: FEMA was authorized to provide Category B emergency protective measures to include items such as police personnel, search and rescue, and removal of health and safety hazards. FEMA also provided Public Assistance to include funding for shelters and emergency care for Norfolk and Suffolk counties, which was primarily used for residents whose homes had been impacted during the blast or could benefit from crisis counseling. Eventually, the incident period was extended, beginning on April 15, 2013, and concluding on April 22, 2013, to capture the eligible costs expended by public safety and other response personnel throughout the region. FEMA's portion of those costs (75% of the eligible amount) totaled just over $6 million. Additionally, FEMA \"authorized state and local agencies in Massachusetts to use existing preparedness grant funding to support law enforcement and first responder overtime costs resulting from investigation support activities or heightened security measures.\" SBA approved four EIDL loans for $214,300 in the aftermath of the Boston Marathon Bombing. Other SBA disaster loan types were not available because the incident was declared an emergency (as opposed to a major disaster). On June 13, 2016, Florida Governor Rick Scott made a request to the President to issue an emergency declaration in response to the mass shooting at Pulse nightclub in Orlando, FL, on June 12, 2016. The governor's request is the first known Stafford Act request in response to a mass shooting incident. The governor requested $5 million for emergency protective measures (Category B) under the Public Assistance program. The assistance was intended to address health and safety measures, and assistance for management, control, and reduction of immediate threats to public health and safety. According to FEMA Administrator Craig Fugate, the President denied the request for assistance partly because the Governor could not satisfactorily demonstrate that the response to the incident was beyond the capacity of the state and local governments. According to the denial letter sent by FEMA Administrator Craig Fugate to Governor Rick Scott: a presidential emergency declaration under the Stafford Act applies when federal assistance is needed to supplement state and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe. Because your request did not demonstrate how the emergency response associated with this situation is beyond the capability of the state and affected local governments or identify any direct federal assistance needed to save lives or protect property, an emergency declaration is not appropriate for this incident. The request was also denied because other forms of federal assistance would be provided for the incident. The letter further states: although the Stafford Act is not the appropriate source of funding for those activities and this situation, several federal agencies, including the Department of Justice, the Federal Bureau of Investigation, and FEMA have resources that may help support the response to this incident absent an emergency declaration under the Stafford Act. We will work closely with you and your staff to identify these additional capabilities. Although the request for an emergency declaration was denied, FEMA approved a request from Florida to reallocate $253,000 in unspent money from the Homeland Security Grant Program to help pay for overtime costs in the wake of the shooting. SBA only provided EIDL for the attack and related investigation. This included five approved loans for $353,400. It is generally agreed that the government should help victims of terrorism in times of need, but the proper scope of that assistance with respect to the Stafford Act is subject to debate. Some might question whether the fiscal responsibility resides primarily with the federal or the state government. The debate may be further complicated if the incident does not clearly meet the definition of a major disaster or does not meet certain thresholds, or both. The selected approach will likely be influenced by how policymakers view the role of the federal government in response to terrorism. Some may argue that Stafford Act assistance is warranted for all or most acts of terrorism. Others might argue that Stafford Act assistance should only be provided in cases where the incident meets the existing framework of definitions and unmet need. As mentioned previously, the definition of a major disaster contains a list of incidents that can be considered a major disaster. One hypothetical concern is, as currently defined, certain acts of terror may not meet the definition of a major disaster. The following discussion demonstrates how Congress designed the definition to address natural disasters and human-caused incidents. The term \"major disaster\" was originally defined in the Federal Disaster Relief Act of 1950 as any flood, drought, fire, hurricane, earthquake, storm, or other catastrophe in any part of the United States which, in the determination of the President, is or threatens to be of sufficient severity and magnitude to warrant disaster assistance by the federal government to supplement the efforts and available resources of states and local governments in alleviating the damage, hardship, or suffering caused thereby, and respecting which the governor of any State (or the Board of Commissioners of the District of Columbia) in which such catastrophe may occur or threaten certifies the need for disaster assistance under this Act, and shall give assurance of expenditure of a reasonable amount of the funds of the government of such state, local governments therein, or other agencies, for the same or similar purposes with respect to such catastrophe. Congress expanded on the list of specific incidents when it amended the definition in the Disaster Relief Act of 1974 which defined a major disaster as any hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, drought, fire, explosion, or other catastrophe in any part of the United States which, in the determination of the President, causes damage of sufficient severity and magnitude to warrant major disaster assistance under this Act, above and beyond emergency services by the federal government, to supplement the efforts and available resources of States, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby. It is notable that the Senate report on the bill indicated that a major disaster is defined as \"any damage caused by these hazard s determined by the President to be of sufficient severity and magnitude to warrant federal assistance\" to supplement state and local efforts. To some, this would support the argument that the definition should be prescriptively viewed as a list of eligible incidents. Congress amended the definition again in 1988—the year the Stafford Act was enacted. Congress designed the new definition with a subtle change in wording to limit human-caused incidents from receiving major disaster declarations. As shown in Figure 3 , Congress removed \"or other catastrophe\" from the definition of a major disaster and inserted \"or, regardless of cause.\" According to the Senate report accompanying the bill, Congress removed \"other catastrophe\" because it had been broadly interpreted to justify federal assistance to humanly caused incidents. According to the Senate report Congress intended the [the Disaster Relief Act of 1974] to alleviate state and local conditions caused by natural catastrophes. Although non-natural catastrophes are not specifically enumerated by Section 102 of the act, the phrase \"other catastrophes\" has been broadly interpreted to justify federal assistance in response to humanly caused traumatic events. The expansion of legislative intent in the administration of the Disaster Relief Act has provoked recent congressional concern. The report further states that Broadening the scope of the act to cover both natural and non-natural catastrophes has strained the capacity of programs designed to respond only to natural catastrophes. Within its intended context the act has functioned relatively well. It is comprehensive and flexible legislation, well-suited to handle the full range of natural disasters for which it was designed. It was not written, however, to respond to the occasionally catastrophic consequences of social, economic, or political activity and establishes no administrative or programmatic mechanisms to do so. As demonstrated above, it appears that Congress sought to prevent the Stafford Act from being used to address an array of social issues and the specificity of the amended definition may have precluded some incidents from being declared a major disaster. For example, Michigan Governor Rick Snyder's request for a major disaster declaration for the Flint water contamination incident was denied based on the grounds that it did not meet the definition of a major disaster. The denial letter sent from the FEMA Administrator to the governor (see Appendix ) stated the incident did not meet the legal definition of a major disaster because it was \"not a result of a natural disaster, nor was it caused by fire, flood, or explosion.\" Another potential issue related to the definition's strict enumeration of human-caused incidents is that it is hypothetically conceivable that two incidents with equal damages and loss of life with different mechanisms of destruction would be treated differently in terms of eligibility. For example, an explosion that kills 50 people could be eligible for a major disaster (if there are sufficient damages to public infrastructure) whereas if a vehicle (similar to the 2016 Nice, France, attack) was used to kill 50 people it could arguably be considered ineligible. A similar argument could be made about a sarin gas attack or a cybersecurity attack that do not involve an explosion or result in fire. Others may argue that the definition's specificity would not preclude terror incidents from being declared major disasters if the consequences merited a major disaster declaration—regardless of the mechanism. They may further argue that an incident could be recast with some ingenuity to make the incident conform to the definition. For instance, they may argue that, broadly interpreted, firing a gun or releasing gas involves a type of explosion. An arguable example of recasting incident was attempted in the unsuccessful appeal of Flint water contamination incident. The appeal letter stated that Respectfully, I appeal the determination that the event \"does not meet the legal definition of a major disaster under 42 U.S.C. §5122.\" This unique disaster poses imminent and long-term threat to the citizens of Flint. Its severity warrants special consideration for all categories of the Individual and Public Assistance Programs, as well as the Hazard Mitigation program in order to facilitate recovery. While the definition under 44 C.F.R. §206.2(17) provides examples of what might constitute a natural disaster, I submit that this disaster is analogous to the flood category, given that the qualities within the water, over a long term, flooded and damaged the city's infrastructure in ways that were not immediately or easily detectable. This disaster is a natural catastrophe in the sense that lead contamination into water is a natural process. One concern that could emerge from broad interpretations of the definition is that it could lead to \"declaration creep\" wherein marginal incidents are increasingly considered major disasters. They may also argue that incidents without fire or explosions would likely not create significant damages and would therefore not warrant a major disaster declaration. An emergency declaration would be more appropriate according to this view. If Congress is concerned that the definition of a major disaster might preclude some incidents from receiving federal assistance, it could consider amending the definition to explicitly include terrorism. Since FEMA is a component agency of the Department of Homeland Security (DHS) it might be assumed that a potential definition would be the one used by DHS. There are, however, multiple definitions used by the federal government and there is no consensus on the definition of terrorism. As demonstrated in Table 2 , several U.S. governmental agencies have different definitions of terrorism. In some definitions, such as the one used by the Department of State, the act must be politically motivated whereas in other definitions it does not need to be a factor (such as the one used by the Federal Bureau of Investigation and DHS). Some might argue that definitions that rely on motivation are problematic if applied to Stafford Act assistance because they are based on the intentionality of the act rather than the act's consequences. For example, a mass shooting that is motivated by hate or brought about by mental illness might not be considered an act of terrorism while a similar incident that is politically motivated might. Perhaps an alternative approach would be expanding the types of assistance available under an emergency declaration rather than amending the definition. For example, Congress could make crisis counseling and SBA disaster loans for businesses and households available under emergency declarations. This would arguably help to address events where there is great loss of life but relatively little damage to public infrastructure. These measures may also provide a boost for public morale in such a situation as well as an assurance to state and local governments that they may receive some supplemental help. Some may be concerned that FEMA might not recommend a major disaster declaration to the President for an act of terrorism because the incident does not meet or exceed the $1.42 per capita threshold. Using this threshold, FEMA may not recommend a declaration for an incident with a high number of casualties but limited damage to public infrastructure. For example, the Orlando Pulse nightclub attack killed 49 people but caused little damage to public property. Almost all of the damage was to the nightclub. In addition, damages to businesses are generally not considered when formulating the per capita threshold which is based on public sector damage. Even if there is substantial damage to public infrastructure, some populous states may have difficulty meeting the per capita threshold. For example, in 2013 Illinois communities were denied federal assistance after a string of tornados devastated rural communities of the state. The storms caused significant damages to the rural communities but, given the state's large population, there was not enough damage to meet the per capita threshold. Some might argue that loss of life should play a larger role when FEMA makes declaration recommendations. Others might question whether terror attacks with limited public infrastructure damage—while devastating in their own right in terms of loss of life and the impact they can have on national morale—cause enough damage to warrant a major disaster declaration. If Congress is concerned that the per capita threshold may prevent state and local governments from receiving a major disaster declaration for a terror attack, Congress could require FEMA to consider factors beyond damages to public infrastructure when formulating its recommendation to the President. One potential assessment tool is the value of statistical life (VSL) which assigns a monetary value to each fatality caused by the given incident. For example, the U.S. Department of Transportation uses $9.1 million as the VSL when evaluating risk reduction. If this VSL amount was applied to the Orlando attack, the 49 fatalities would amount to roughly $446 million in damages. Proponents might argue that evaluating a terror attack with VSL would provide objective criteria for making recommendations as to whether an incident warranted federal assistance. Others might question if altering the per capita threshold is necessary. They may point out that the per capita threshold is used solely by FEMA to make recommendations. Also, FEMA already considers damage to homes and rental properties. As noted previously, the ultimate decision to grant federal assistance for a major disaster rests solely with the President. Furthermore, the per capita threshold is designed to evaluate a state's capacity to respond to an incident. It could be argued that highly populated states should be able to fund their recovery without federal assistance because they have a higher tax base on which to draw. According to this view, adjusting the per capita threshold or applying additional factors would be unnecessary. Whereas Congress sought to limit the President's authority to issue major disaster declarations for human-caused incidents under the Stafford Act, the inverse might be said about emergency declarations. As demonstrated by Figure 4 , the definition of an emergency in the Disaster Relief Act of 1974 included a specific list of incidents eligible for an emergency declaration. The amended definition eliminated the list and defined emergency more broadly. It could be argued that the amended definition provides the President with a great deal of discretion to issue an emergency declaration in response to acts of terrorism. And as mentioned previously, FEMA does not use the per capita threshold formula to make emergency declaration recommendations to the President. To some, the broad definition and lack of a per capita formula make emergency declarations more suitable for certain types of terror attacks such as mass shootings. Consequently, some may argue that there is no need to change the Stafford Act to make it easier for \"soft target\" attacks to receive a major disaster declaration because it is relatively easier to obtain an emergency declaration. Even so, some might see the decision to issue an emergency declaration as arbitrary and question how state capacity is determined. For example, in a news release in response to the denied emergency declaration for the Orlando shooting, Governor Rick Scott stated It is incredibly disappointing that the Obama Administration denied our request for an emergency declaration. Last week, a terrorist killed 49 people, and wounded many others, which was the deadliest shooting in U.S. history. It is unthinkable that President Obama does not define this as an emergency. We are committing every state resource possible to help the victims and the community heal and we expect the same from the federal government. The press release also provided links to other incidents that were approved for emergency declarations, including President Obama's 2009 inauguration, the 2016 Flint Water crisis, the Massachusetts water main break in 2010, and the 2013 Boston Marathon bombing, among others. Some might question why these incidents warranted emergency declarations but the Pulse nightclub shooting did not. Proponents of changing the Stafford Act may also argue that, even if an incident receives an emergency declaration, the scope of the assistance is limited compared to a major disaster. For one, assistance is primarily provided to governmental entities under an emergency declaration. Individuals may receive some temporary housing assistance (which may not be applicable if the incident does not impact people's homes) and other forms of assistance such as Other Needs Assistance, which is a grant to households for necessary items damaged or destroyed by the incident, under Section 408 of the Stafford Act. But assistance to those experiencing mental health problems, generally addressed by FEMA's Crisis Counseling program, is not available under an emergency declaration. Further, as mentioned previously, SBA disaster loans are generally only available to private non-profit organizations under an emergency declaration. If Congress is concerned that emergency declarations would not provide enough assistance in response to certain types of terror attacks, it could consider expanding the types of assistance potentially available for these incidents. The expanded assistance could be tied to all emergency declarations, or designed exclusively for acts of terror. In addition, Congress could require the SBA to provide the full range of disaster loans if an emergency were declared for an act of terror. This section examines how the SBA Disaster Loan programs might be used to assist businesses, individuals, and households following a terrorist attack. The section also examines a potential alternative source of federal funding that has been used to assist businesses negatively impacted by a terror attack. As previously mentioned, SBA disaster loans are usually the only type of federal assistance available to businesses affected by a terror attack. There are potentially four scenarios where the SBA Disaster Loan Program could be used to support business recovery activities following a terror attack. These include two types of presidential declarations as authorized by the Stafford Act, and two types of SBA declarations authorized by the Small Business Act. In addition to providing disaster loans for businesses, some of these declarations also make disaster loans available to individuals and households. As demonstrated below, the type of declaration determines what loans types are made available: Major Disaster or Emergency Declaration Authorizing PA and IA. The President issues a major disaster declaration, or an emergency declaration, and authorizes both IA and PA under the authority of the Stafford Act. When the President issues such declarations, Home and Personal Property Disaster Loans, and Business Physical Disaster Loans become available to homeowners, renters, businesses of all sizes, and nonprofit organizations located within the disaster area. Home and Personal Property Disaster Loans, and Business Physical Disaster Loans can be used to repair and replace items and structures damaged by an attack. EIDL may also be made available under this declaration to provide loans to businesses that suffered substantial economic injury as a result of the incident. Major Disaster or Emergency Declaration Authorizing PA O nly . The President makes a major disaster declaration or emergency declaration that only provides the state with PA. In such a case, a private nonprofit entity located within the disaster area that provides noncritical services may be eligible for a SBA physical disaster loan and EIDL. Disaster loans would not available to renters and homeowners under this type of declaration. In addition, Business Physical Disaster Loans, and EIDLs are generally not made available to businesses (unless they are a private nonprofit entity) when the declaration only provides PA. As mentioned previously, there are two scenarios under which SBA disaster loans could be provided in response to a terror attack without the issuance of presidential disaster declaration: Gubernatorial Request for Assistance . Under this scenario, the SBA Administrator issues a physical disaster declaration in response to a gubernatorial request for assistance. Under this type of declaration, SBA disaster loans would be available to eligible homeowners, renters, businesses of all sizes, and nonprofit organizations within the disaster area or contiguous counties and other political subdivisions. EIDL would also be available under this type of declaration. Gubernatorial Certification of Substantial Economic Injury . The SBA Administrator may issue an EIDL declaration when SBA receives a certification from a governor that at least five small businesses have suffered substantial economic injury as a result of a disaster. This declaration may be offered only when other viable forms of financial assistance are unavailable. Small agricultural cooperatives and most private nonprofit organizations located within the disaster area or contiguous counties and other political subdivisions are eligible for SBA disaster loans when the SBA Administrator issues an EIDL declaration. These types of loans, however, may not be used to repair damages resulting from a terror attack. Rather, loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. For example, a business may suffer a dramatic decline in its business operations and revenue stream or have difficulty obtaining materials as a result of a terror attack. As illustrated above, the type of loans that are made available to individuals, homeowners, and businesses largely depends on declaration type. Some observers might be concerned that certain disaster loans may not be available following a terrorist attack. In the view of those observers, Congress could consider amending existing programs by making all SBA disaster loan types available following a terror attack for certain declarations. For example, Congress might make EIDL, home and business disaster loans available for major disaster and emergencies that only provide PA. Another source of potential assistance to businesses is Department of Housing and Urban Development's (HUD's) Community Development Block Grant (CDBG) program. The CDBG program provides grants to states and localities to assist their recovery efforts following a presidentially declared disaster. Generally, grantees must use at least half of these funds for activities that principally benefit low- and moderate-income persons or areas. The program is designed to help communities and neighborhoods that otherwise might not recover due to limited resources. While the SBA Disaster Loan Program is automatically triggered by a presidential disaster declaration, CDBG is not. Instead, Congress has occasionally addressed unmet disaster needs by providing supplemental disaster-related appropriations for the CDBG program. Consequently, CDBG is not provided for all major disasters, but only at the discretion of Congress. Congress has authorized supplemental appropriations of funds in response to terror attacks through CDBG. For example In 1995, following the Alfred P. Murrah Federal Building attack in Oklahoma City, OK, Congress appropriated $12 million in supplemental CDBG funding to the City of Oklahoma City. Funds were to be used to establish a revolving loan fund only for the purposes of making loans to carry out economic development activities that would primarily benefit a designated area in the city impacted by the bombing. On November 26, 2001, two months following the terror attacks of September 11, 2001, Congress appropriated $700 million in CDBG supplemental funding to the state of New York for assistance to properties and businesses damaged by, and for economic revitalization related to the terror attack. On January 10, 2002, Congress followed that initial appropriation with a second appropriation of $2 billion in CDBG assistance to the Lower Manhattan Development Corporation (LMDC) to be used to, among other things, reimburse businesses and persons for economic losses, including funds to reimburse tourism areas adversely impacted by the attacks. On August 2, 2002, Congress appropriated an additional $783 million to the state of New York through the LMDC in cooperation with the City of New York in support of the city's economic recovery efforts. Funds were used to provide financial assistance to properties and businesses, including the redevelopment of infrastructure, and for economic revitalization activities. Most federal disaster assistance programs are funded through annual appropriations. This generally ensures that the programs have funds available when an incident occurs. As a result, these programs can provide assistance in a relatively short period of time. For example, a July 2015 SBA Office of Inspector General (OIG) study found that SBA's processing time for home disaster loans averaged 18.7 days and application processing times for business disaster loans averaged 43.3 days. CDBG disaster assistance, on the other hand, is funded through supplemental funding. In general, Congress only provides supplemental funding when disaster needs exceed the amount available through annual appropriations. This typically only occurs when a large incident takes place, such as Hurricanes Katrina and Sandy. This is because Congress must debate and pass supplemental funding. Additionally, funding for CDBG disaster assistance is not available for all incidents. Some might argue the necessity for supplemental funding would preclude smaller terror incidents from receiving CDBG disaster assistance. Others might be concerned that assistance is not timely. For example, an appropriation for CDBG disaster assistance was enacted on June 3, 2008. The allocation date for the CDBG disaster assistance was September 11, 2008—three months after the enacted appropriation. One potential option would be to fund CDBG disaster assistance through annual appropriations. Doing so would create an account with funds that could be made immediately available to help expedite CDBG disaster assistance. Congress could examine strategies to make CDBG disaster assistance available to businesses that suffered damage as a result of a terrorist incident. The assistance could be triggered by a major disaster declaration, an emergency declaration, or both. Critics of the above policy option might argue that if this approach were used, it would be necessary to determine under what situations CDBG disaster assistance would be released. Critics may also argue that determinations for CDBG disaster assistance are made by Congress. Changing the process to one based on annual appropriation might shift the determination to a (relevant) federal agency. Similarly, as mentioned previously, CDBG disaster assistance is typically only available for large-scale incidents. Creating a permanent CDBG program for disaster assistance might provide a gateway for smaller incidents to receive CDBG disaster assistance. This, in turn, might lead to increased federal expenditures for disaster assistance. Some may question whether the Stafford Act is the appropriate authority for providing assistance to terror incidents with high number of casualties and limited damage. The assistance provided under the Stafford Act is primarily for recovery purposes (i.e., repairing and replacing damaged buildings and infrastructure). Under the existing Stafford Act authorities the assistance FEMA might provide would be the Other Needs Assistance (ONA) grant program that can be used to pay funeral expenses. And even in those cases, there may be private insurance already meeting those needs. Arguably, ONA could be expanded to begin to cover other costs following a death in the family and an expansion of FEMA coverage of related emergency health care costs might be helpful to the uninsured affected by a terrorist event. Similarly, a terrorist event could also be the trigger for expanded Disaster Unemployment Assistance benefits. But beyond those areas, little of the FEMA catalogue of assistance would apply beyond the programs already being employed. This report has outlined several different approaches, both definitional and administrative, that could fill in perceived gaps that have been forecast based on possible events juxtaposed against current policy parameters. One view argues that the Stafford Act should be amended to assure that terrorist attacks are eligible for major disaster assistance. Another view is that the Stafford Act is a flexible instrument that has assisted states and families and individuals through a myriad of unanticipated situations. According to this view, the Stafford Act's existing structure is sufficient to meet the potential terrorism challenges that may lie ahead. The selected approach will likely be influenced by two factors: (1) impact on federal costs, and (2) personal views concerning the appropriate nature of the federal government's role in addressing terrorism. Some might be concerned that amending the Stafford Act to assure that soft target and nonconventional terror attacks are eligible for major disaster assistance might, in their view, inappropriately shift the primary financial burden for addressing terrorism costs from the states to the federal government. Others might see these costs as minimal, particularly compared to the costs of natural disasters, such as those from major hurricanes. With respect to the appropriate role for the federal government in addressing terrorism costs, some might argue that the federal government should provide assistance for all instances of terrorism, even if those costs could be adequately handled by the state. Others might argue that federal assistance should be provided only in those cases where state and local government financial capacity is lacking. ", "summary": "The Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) authorizes the President to issue two types of declarations that could potentially provide federal assistance to states and localities in response to a terrorist attack: a \"major disaster declaration\" or an \"emergency declaration.\" Major disaster declarations authorize a wide range of federal assistance to states, local governments, tribal nations, individuals and households, and certain nonprofit organizations to recover from a catastrophic event. Major disaster declarations also make Small Business Administration (SBA) disaster loans available to eligible businesses and households. Emergency declarations authorize a more limited range of federal assistance to protect property and public health and safety, and to lessen or avert the threat of a major disaster. Only private nonprofit organizations are eligible for disaster loans under an emergency declaration. The Stafford Act has been used to provide assistance in response to terrorist attacks in the past including the 1995 bombing of the Alfred P. Murrah Building in Oklahoma City, the September 11, 2001, attacks, and the 2013 Boston Marathon attack. Nevertheless, the tactics used in recent incidents such as the 2015 San Bernardino, CA, and the 2016 Orlando, FL, mass shootings, and the 2016 Ohio State University vehicular and knife attack, have brought to light two main challenges that might prevent certain types of terrorist incidents from receiving the wider assistance provided under a major disaster declaration: the major disaster definition lists specific incident types that are eligible for federal assistance. Past terrorist incidents were considered major disasters, in part, because they resulted in fires and explosions. Incidents without a fire or an explosion may not meet the definition of a major disaster; and the Federal Emergency Management Agency's (FEMA) recommendation to the President to issue a major disaster declaration is mainly based on damage amounts to public infrastructure compared to the state's population. Terrorist incidents with a large loss of life but limited damage to public infrastructure may not meet this criterion. Some may argue that terrorist incidents warrant the wider range of assistance provided by a major disaster declaration, and advocate for changes to the Stafford Act and FEMA policies to make all acts of terrorism eligible for major disaster assistance. Others may disagree and argue that Stafford Act should not be altered for the following reasons: regardless of cause, state and local governments should be the main source of assistance if damages are limited; if the incident does not qualify for major disaster assistance, it could still be eligible for limited assistance under an emergency declaration. Advocates of changing the Stafford Act may argue that emergency declaration assistance is too limited. For example, parts of FEMA's Individual Assistance (IA) program, which provides various forms of help for families and individuals, are not available without a major disaster declaration. Another concern is the limited availability of SBA disaster loans under an emergency declaration. Advocates might therefore argue that changes to the Stafford Act are needed to make it easier for certain terror attacks to qualify for major disaster assistance. These include expanding the major disaster definition to include terror incidents that do not involve fires and explosions; requiring FEMA to use additional metrics when making major disaster recommendations; and/or extending the availability of certain IA programs and SBA disaster loans under an emergency declaration. This report provides an overview of emergency and major disaster declarations and explains how they might be used in the aftermath of a terrorist incident that does not involve a fire or an explosion, such as high casualty mass shootings or chemical gas attacks. This report also provides an overview of Stafford Act assistance provided for past terrorist incidents. This report will be updated as events warrant.", "document_type": "crs"}
{"report": "This report provides background information and potential oversight issues for Congress on the Columbia-class program, a program to design and build a class of 12 new ballistic missile submarines (SSBNs) to replace the Navy's current force of 14 aging Ohio-class SSBNs. The Navy has identified the Columbia-class program as the Navy's top priority program. The Navy wants to procure the first Columbia-class boat in FY2021. The Navy's proposed FY2020 budget requests $1,698.9 million in advance procurement (AP) funding and $533.1 million in research and development funding for the program. The program poses a number of funding and oversight issues for Congress. Decisions that Congress makes on the Columbia-class program could substantially affect U.S. military capabilities and funding requirements, and the U.S. shipbuilding industrial base. For an overview of the strategic and budgetary context in which the Columbia-class program and other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. This report focuses on the Columbia-class program as a Navy shipbuilding program. Another CRS report—CRS Report RL33640, U.S. Strategic Nuclear Forces: Background, Developments, and Issues , by Amy F. Woolf—discusses the Columbia class as an element of future U.S. strategic nuclear forces in the context of strategic nuclear arms control agreements. The U.S. Navy operates three kinds of submarines—nuclear-powered attack submarines (SSNs), nuclear-powered cruise missile submarines (SSGNs), and nuclear-powered ballistic missile submarines (SSBNs). The SSNs and SSGNs are multi-mission ships that perform a variety of peacetime and wartime missions. They do not carry nuclear weapons. The SSBNs, in contrast, perform a specialized mission of strategic nuclear deterrence. To perform this mission, SSBNs are armed with submarine-launched ballistic missiles (SLBMs), which are large, long-range missiles armed with multiple nuclear warheads. SSBNs launch their SLBMs from large-diameter vertical launch tubes located in the middle section of the boat. The SSBNs' basic mission is to remain hidden at sea with their SLBMs, so as to deter a nuclear attack on the United States by another country by demonstrating to other countries that the United States has an assured second-strike capability, meaning a survivable system for carrying out a retaliatory nuclear attack. Navy SSBNs, which are sometimes referred to informally as \"boomers,\" form one leg of the U.S. strategic nuclear deterrent force, or \"triad,\" which also includes land-based intercontinental ballistic missiles (ICBMs) and land-based long-range bombers. At any given moment, some of the Navy's SSBNs are conducting nuclear deterrent patrols. The Department of Defense's (DOD's) report on the 2018 Nuclear Posture Review (NPR), released on February 2, 2018, states the following: Ballistic missile submarines are the most survivable leg of the triad. When on patrol, SSBNs are, at present, virtually undetectable, and there are no known, near-term credible threats to the survivability of the SSBN force. Nevertheless, we will continue to hedge against the possibility that advances in anti-submarine warfare could make the SSBN force less survivable in the future. The Navy currently operates 14 Ohio (SSBN-726) class SSBNs (see Figure 1 ). The boats are commonly called Trident SSBNs or simply Tridents because they carry Trident D-5 SLBMs. They were procured in FY1977-FY1991 and entered service in 1984-1997. They were designed and built by General Dynamics' Electric Boat Division (GD/EB) of Groton, CT, and Quonset Point, RI. They were originally designed for 30-year service lives but were later certified for 42-year service lives, consisting of two approximately 19-year periods of operation separated by an approximately 4-year midlife nuclear refueling overhaul, called an engineered refueling overhaul (ERO). The nuclear refueling overhaul includes both a nuclear refueling and overhaul work on the ship that is not related to the nuclear refueling. The boats were originally designed to each carry 24 SLBMs. As part of DOD's plan for complying with U.S.-Russia strategic nuclear arms control limits, four SLBM launch tubes on each boat have been deactivated, reducing to 20 the number of SLBMs they can each carry. Eight of the 14 Ohio-class SSBNs are homeported at Bangor, WA, in Puget Sound; the other six are homeported at Kings Bay, GA, close to the Florida border. Unlike most Navy ships, which are operated by single crews, Navy SSBNs are operated by alternating crews (called the Blue and Gold crews) so as to maximize the percentage of time that they spend at sea in deployed status. The first of the 14 Ohio-class SSBNs (SSBN-730) will reach the end of its 42-year service life in 2027. The remaining 13 will reach the ends of their service lives at a rate of roughly one ship per year thereafter, with the 14 th reaching the end of its service life in 2040. The Navy has initiated a program to refurbish and extend the service lives of D-5 SLBMs to about 2040. As Columbia-class SSBNs begin to replace Ohio-class boats in 2031, refurbished D-5s carried by retiring Ohio-class boats will be transferred to new Columbia-class boats. Columbia-class boats will continue to be armed with these refurbished D-5s until about 2040, at which time the D-5s are to be replaced by a successor SLBM. Including the Ohio class, the Navy has operated four classes of SSBNs since 1959. For a table summarizing these four classes, see Appendix A . As one expression of U.S.-UK cooperation on nuclear weapon matters that dates back to World War II, the UK's four Vanguard-class SSBNs, which entered service in 1993-1999, each carry 16 Trident II D-5 SLBMs, and previous classes of UK SSBNs similarly carried earlier-generation U.S. SLBMs. The UK plans to replace the four Vanguard-class boats with three or four Dreadnought-class next-generation SSBNs. Dreadnought-class boats are to be equipped with 12 missile launch tubes, but current UK plans call for each boat to carry eight D-5 SLBMs, with the other four tubes not being used for SLBMs. The United States is providing technical assistance to the United Kingdom for the Dreadnought-class program, as it has over the years for some other UK submarine programs; for additional discussion, see Appendix B . U.S. Navy submarines are built at two shipyards—General Dynamics' Electric Boat Division (GD/EB) of Groton, CT, and Quonset Point, RI, and Huntington Ingalls Industries' Newport News Shipbuilding (HII/NNS), of Newport News, VA. GD/EB and HII/NNS are the only two shipyards in the country capable of building nuclear-powered ships. GD/EB builds submarines only, while HII/NNS also builds nuclear-powered aircraft carriers and is capable of building other types of surface ships. The two yards currently are jointly building Virginia-class attack submarines. In addition to GD/EB and HII/NNS, the submarine construction industrial base includes hundreds of supplier firms, as well as laboratories and research facilities, in numerous states. Much of the total material procured from supplier firms for the construction of submarines comes from sole-source suppliers. For nuclear-propulsion component suppliers, an additional source of stabilizing work is the Navy's nuclear-powered aircraft carrier construction program. Much of the design and engineering portion of the submarine construction industrial base is resident at GD/EB. Smaller portions are resident at HII/NNS and some of the component makers. Navy officials have stated consistently since September 2013 that the Columbia-class program is the Navy's top priority program, and that this means, among other things, that from the Navy's perspective, the Columbia-class program will be funded, even if that comes at the expense of funding for other Navy programs. Until 2016, the Columbia-class program was known as the Ohio replacement program (ORP) or SSBN(X) program, and boats in the class were referred to as Ohio replacement boats or SSBNXs. For information on the Columbia-class program's origin and milestones, see Appendix C . Navy plans call for procuring 12 Columbia-class boats to replace the current force of 14 Ohio-class SSBNs. In explaining the planned procurement quantity of 12 boats, the Navy states the following: Ten operational SSBNs—meaning boats not encumbered by lengthy maintenance actions—are needed to meet strategic nuclear deterrence requirements for having a certain number of SSBNs at sea at any given moment. A total of 14 Ohio-class boats was needed to meet the requirement for 10 operational boats because, during the middle years of the Ohio class life cycle, three and sometimes four of the boats were nonoperational at any given moment on account of being in the midst of lengthy midlife nuclear refueling overhauls or other extended maintenance actions. A total of 12 (rather than 14) Columbia-class boats will be needed to meet the requirement for 10 operational boats because the midlife overhauls of Columbia-class boats, which will not include a nuclear refueling, will require less time (about two years) than the midlife refueling overhauls of Ohio-class boats (which require about four years from contract award to delivery), the result being that only two Columbia-class boats (rather than three or sometimes four) will be in the midst of midlife overhauls or other extended maintenance actions at any given moment during the middle years of the Columbia-class life cycle. The Trump Administration's Nuclear Posture Review (NPR), released in February 2018, states the following: \"The COLUMBIA-class program will deliver a minimum of 12 SSBNs to replace the current OHIO fleet and is designed to provide required capabilities for decades.\" The use of the word \"minimum\" in that sentence can be viewed as signaling a possibility that the required number of Columbia-class boats might at some point be increased to something more than 12 boats. The Navy wants to procure the first Columbia-class boat in FY2021, the second in FY2024, and the remaining 10 at a rate of one per year from FY2026 through FY2035. Under this schedule, the Navy projects that the lead boat (i.e., first boat) would be delivered in FY2028, the second in FY2031, and the remaining 10 at a rate of one per year from FY2033 through FY2042. After being delivered in FY2028, the lead boat would undergo substantial testing, with the aim of having it be ready for its first deterrent patrol in 2031. Under this schedule, and given planned retirement dates for Ohio-class boats, the Navy projects that the SSBN force would decline to 13 boats in FY2027-FY2028, 12 boats in FY2029, 11 boats in FY2030-FY2036 and 10 boats in FY2037-FY2040, and then increase back to 11 boats in FY2041 and 12 boats in FY2042. The Navy states that the reduction to 11 or 10 boats during the period FY2030-FY2041 is acceptable in terms of meeting strategic nuclear deterrence requirements, because during these years, all 11 or 10 of the SSBNs in service will be operational (i.e., none of them will be in the midst of a lengthy midlife overhaul). The Navy acknowledges that there is some risk in having the SSBN force drop to 11 or 10 boats, because it provides little margin for absorbing an unforeseen event that might force an SSBN into an unscheduled and lengthy maintenance action. The projected minimum level of 11 or 10 boats can be increased to 12 or 11 boats (providing some additional margin for absorbing an unforeseen event that might force an SSBN into an unscheduled and lengthy maintenance action) by accelerating by about one year the planned procurement dates of boats 2 through 12 in the program. Under this option, the second boat in the program would be procured in FY2023 rather than FY2024, the third boat in the program would be procured in FY2025 rather than FY2026, and so on. Implementing this option could affect the Navy's plan for funding the procurement of other Navy shipbuilding programs during the period FY2022-FY2025. The Columbia-class design (see Figure 2 ) includes 16 SLBM tubes, as opposed to 24 SLBM tubes (of which 20 are now used for SLBMs) on Ohio-class SSBNs. Although the Columbia-class design has fewer SLBM tubes than the Ohio-class design, it is larger than the Ohio-class design in terms of submerged displacement. The Columbia-class design, like the Ohio-class design before it, will be the largest submarine ever built by the United States. For additional background information on the Columbia-class design, see Appendix D . Current U.S. and UK plans call for the Columbia class and the UK's Dreadnought-class SSBN to use a missile compartment—the middle section of the boat with the SLBM launch tubes—of the same general design. As mentioned earlier, Dreadnought-class SSBNs are to each be armed with eight D-5 SLBMs, or half the number to be carried by the Columbia class. The modular design of the CMC will accommodate this difference. The UK provided some of the funding for the design of the CMC, including a large portion of the initial funding. Estimates of the procurement cost or acquisition cost (i.e., the research and development cost plus procurement cost) of the Columbia-class program include the following: The Navy's FY2020 budget submission estimates the total procurement cost of the 12-ship class at $109.0 billion in then-year dollars. The Navy in August 2017 estimated the total procurement cost of the Columbia-class program at $109.2 billion in then-year dollars and the program's research and development cost at $13.0 billion in then-year dollars, for a total acquisition (research and development plus procurement) cost of $122.3 billion in then-year dollars. The Navy as of January 2017 estimated the procurement cost of the lead ship in the Columbia class at $8.2 billion in constant 2017 dollars, not including several billion dollars in additional cost for plans for the class, and the average unit procurement cost of ships 2 through 12 in the program at $6.5 billion each in constant FY2017 dollars. A May 2019 Government Accountability Office (GAO) report assessing selected major DOD weapon acquisition programs stated that the estimated total acquisition (development plus procurement) cost of the Columbia-class program as of June 2018 was $103,035.2 million (about $103.0 billion) in constant FY2019 dollars, including $13,103.0 million (about $13.1 billion) in research and development costs and $89,932.2 million (about $89.9 billion) in procurement costs. The above estimates do not include estimated costs for refurbishing D-5 SLBMs so as to extend their service lives to about 2040. The Navy as of January 2017 estimated the average annual operation and support (O&S) cost of each Columbia class boat at $119 million per year. The National Sea-Based Deterrence Fund (NSBDF) is a fund in DOD's budget separate from the Navy's shipbuilding account for holding and executing procurement funding for the construction of new SSBNs. It was created by Congress in 2014 originally with the aim of helping to financially insulate other Navy shipbuilding programs from the potential cost impact of the Columbia-class program, and to encourage U.S. policymakers to finance the procurement of Columbia-class boats from across DOD's budget rather than solely from the Navy's budget. In more recent years, the statute establishing and governing the fund (10 U.SC. 2218a) has been amended to give the NSBDF an additional function of acting as a vehicle or repository for certain special acquisition authorities that have the potential for reducing at the margin the cost of Columbia-class boats and other Navy nuclear-powered ships (i.e., aircraft carriers and attack submarines). For additional background information on the NSBDF, see Appendix E . The Navy, under a plan it calls the Submarine Unified Build Strategy (SUBS), plans to build Columbia-class boats jointly at GD/EB and HII/NNS, with most of the work going to GD/EB. As part of this plan, the Navy is also proposing to adjust the division of work on the Virginia-class attack submarine program (in which boats are jointly built at GD/EB and HII/NNS), so that HII/NNS would receive a larger share of the work for that program than it has received in the past. Table 1 shows FY2020-FY2024 funding for the Columbia-class program under the Navy's FY2020 budget submission. One issue for Congress is whether to approve, reject, or modify the Navy's FY2020 funding request for the program. In assessing this question, Congress may consider whether the Navy has accurately priced the work that is proposed to be done with FY2020 funding, as well as broader issues, including those discussed in some of the sections below. Another oversight issue for Congress is the risk of cost growth in the program. As detailed by CBO and GAO, lead ships in Navy shipbuilding programs in many cases have turned out to be more expensive to build than the Navy had estimated. As discussed in further detail below, CBO and GAO have concluded that there is a significant risk of cost growth in the Columbia-class program. Navy officials, as discussed earlier, have stated consistently since 2013 that the Columbia-class program is the Navy's top priority program, and that this means, among other things, that from the Navy's perspective, the Columbia-class program will be funded, even if that comes at the expense of funding for other Navy programs. Given this, the impact of cost growth in the Columbia-class program in a situation of finite DOD funding might be not so much on the execution of the Columbia-class program itself as on the consequent affordability of other DOD programs, perhaps particularly other Navy shipbuilding programs. The issue of the potential impact of the Columbia-class program on the affordability of other DOD programs is discussed in a subsequent section of this report. A January 24, 2017, Navy information paper provided to CRS and CBO in March 2017 stated that, at the time of Milestone B for the Columbia-class program, the Navy had assigned a confidence level of 43% to its estimated procurement cost for the lead ship in the Columbia class and a confidence level of 46% to its estimated average procurement cost for ships 2 through 12 in program. What this meant was that the Navy at the time of Milestone B had calculated that there was more than a 50% chance that the procurement costs of Columbia-class boats would turn out to be greater than what the Navy estimates. The January 24, 2017, Navy information paper stated the following: The confidence levels associated with the Milestone B Lead Ship End Cost (Less Plans) and Average Follow Ship End Cost estimate are approximately 43 percent and 46 percent respectively. The risk analysis was performed on 54 parameters influencing shipbuilder labor and material, changes, plans, and government furnished equipment costs. Reflecting confidence levels that had been calculated at the time of Milestone B, a December 1, 2017, Navy information paper provided the confidence levels and corresponding estimated unit procurement costs shown in Table 2 . Navy officials stated in May 2019 that during the time that has transpired since Milestone B, certain risk elements affecting the calculation of confidence levels have been retired, and that as a result, the Navy's confidence level for its costs estimates had increased to 50%, meaning that the Navy as of May 2019 calculated that there is a 50% chance that the procurement costs of Columbia-class boats will turn out to be greater than what the Navy estimates, and a 50% chance that it will turn out to be less than what the Navy estimates. Navy officials also stated in May 2019 that a confidence level of 50% is where they want the Navy's estimate to be. An October 2018 CBO report on the cost of the Navy's shipbuilding programs stated the following (emphasis added): The cost of the 12 Columbia class submarines included in the 2019 shipbuilding plan is one of the most significant uncertainties in the Navy's and CBO's analyses of future shipbuilding costs…. The Navy currently estimates that the first Columbia would cost $13.2 billion in 2018 dollars and that subsequent ships would have an average cost of $6.6 billion. The implied total cost for the 12 submarines is $85 billion, or an average of $7.1 billion for each ship…. The Navy estimates that research and development costs would amount to $13 billion, bringing the total acquisition cost to $98 billion. The Navy's current estimate of costs for the Columbia class is greater than its estimate for the 2017 [shipbuilding] plan because it is the only shipbuilding program in the 2019 [shipbuilding] plan that includes real cost growth in the naval shipbuilding industry. That adjustment was required as part of the Department of Defense's approval of the Columbia class to Milestone B status, an important marker in the evolution of a major defense procurement program. According to the Navy's estimate, the cost per thousand tons for the first Columbia would be 14 percent less than that of the first Virginia class attack submarine—an improvement that would affect costs for the entire new class of ballistic missile submarines. The Navy anticipates lower costs per thousand tons for the Columbia because it plans to recycle, to the extent possible, the design, technology, and components used for the Virginia class. Furthermore, because ballistic missile submarines (such as the Columbia class) tend to be larger and less densely built than attack submarines (like the Virginia class), the Navy maintains that they will be easier to build and thus less expensive per thousand tons. The Navy has stated, however, that there is a greater than 50 percent probability that the cost of the first Columbia and subsequent ships of the class would exceed its estimates, and CBO estimates costs that are about 9 percent greater than the Navy projects. The costs of lead ships of new classes of submarines built in the 1970s and 1980s provide little evidence that ballistic missile submarines are cheaper by weight to build than attack submarines…. The first Ohio class submarine was more expensive to build than the lead ships of the two classes of attack submarines built during the same period—the Los Angeles and the Improved Los Angeles. (The design of the Improved Los Angeles included the addition of 12 vertical-launch system cells.) In addition, the average cost-to-weight ratio of the first 12 or 13 ships of the class was virtually identical for the Ohio, Los Angeles, and Improved Los Angeles classes. Although the cost by weight of lead ships for submarines had grown substantially by the 1990s, there was still little evidence that submarine size affected the cost per thousand tons. The first Virginia class submarine, which was ordered in 1998, cost about the same by weight as the first Seawolf submarine even though the Seawolf is 20 percent larger and was built nine years earlier. The difference between the Navy's and CBO's estimates is smaller than in earlier years, mostly because of the change in the way the service calculated its estimate. CBO estimates that purchasing the first Columbia class submarine would cost $13.6 billion in 2018 dollars, $0.4 billion more than the Navy estimates. Estimating the cost of the lead ship of a class with a new design is particularly difficult because of uncertainty about how much the Navy will spend on nonrecurring engineering and detailed design. CBO estimates that, all told, 12 Columbia class submarines would cost $93 billion, or an average of $7.7 billion each—a half billion more per submarine than the Navy estimates. That average is based on the $13.6 billion estimated cost of the lead submarine and an average cost of $7.1 billion estimated for the 2 nd through 12 th submarines. Research and development would cost between $13 billion and $17 billion, CBO estimates. Overall, the Navy expects a 14 percent improvement in the cost-to-weight ratio of the Columbia class compared with the first 12 submarines in the Virginia class. Given the history of submarine construction, however, CBO is less optimistic than the Navy. CBO estimates that the Navy will realize a 6 percent improvement, stemming in part from the projected savings attributable to the concurrent production of the Columbia and Virginia class submarines. The costs for the Columbia class submarines could be lower than the Navy and CBO project, depending on the acquisition strategy. The Navy is purchasing the submarines through the National Sea-Based Deterrence Fund, which was established in the Carl Levin and Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015 ( P.L. 113-291 ). The Congress appropriates money for the program in the Navy's main shipbuilding account, and then DoD transfers money into the fund. The Navy could realize savings from special procurement authorities associated with that fund, such as the ability to purchase components and materials for several submarines, and possibly for other ships, at the same time. Further savings could be considerable if, for example, lawmakers authorized the Navy to use a block-buy strategy—an approach it has used with other types of ships. A block-buy strategy allows the Navy to purchase a group of submarines over a specified period (effectively lowering the price of the ships by promising a steady stream of work for the shipyards) and to buy components and materials for the submarines in optimal amounts that minimize costs (known as economic order quantities). One disadvantage of the strategy is that if lawmakers later decided not to build all the submarines, materials that were purchased for the unbuilt ships might go unused. A block-buy strategy might also leave the Congress with less flexibility to change procurement plans or to purchase fewer submarines if lawmakers did not approve of how the program was progressing. Costs for the Columbia class submarines could, however, exceed both the Navy's and CBO's estimates. The new SSBN would be the largest submarine that the United States has ever built. It is expected to reuse some technology and components from the Virginia class submarine, but it would also include many new elements, such as an all-electric drive system, an X-stern ship control system, a new missile compartment, and a nuclear reactor that is designed to last the entire 42-year service life of the submarine. An April 2019 GAO report on the Columbia-class program stated the following: The Navy's $115 billion procurement cost estimate is not reliable partly because it is based on overly optimistic assumptions about the labor hours needed to construct the submarines. While the Navy analyzed cost risks, it did not include margin in its estimate for likely cost overruns. The Navy told us it will continue to update its lead submarine cost estimate, but an independent assessment of the estimate may not be complete in time to inform the Navy's 2021 budget request to Congress to purchase the lead submarine. Without these reviews, the cost estimate—and, consequently, the budget—may be unrealistic. A reliable cost estimate is especially important for a program of this size and complexity to help ensure that its budget is sufficient to execute the program as planned. The Navy is using the congressionally-authorized National Sea-Based Deterrence Fund to construct the Columbia class. The Fund allows the Navy to purchase material and start construction early on multiple submarines prior to receiving congressional authorization and funding for submarine construction. The Navy anticipates achieving savings through use of the Fund, such as buying certain components early and in bulk, but did not include the savings in its cost estimate. The Navy may have overestimated its savings as higher than those historically achieved by other such programs. Without an updated cost estimate and cost risk analysis, including a realistic estimate of savings, the fiscal year 2021 budget request may not reflect funding needed to construct the submarine. Another oversight issue for Congress is the risk of technical challenges or funding-related issues (such as lapses in appropriations or restrictions on spending during periods when DOD is funded under continuing resolutions) that could lead to delays in designing and building the lead Columbia-class boat and having it ready for its scheduled initial deterrent patrol in 2031, when it is to deploy in the place of the first retiring Ohio-class SSBN. The schedule for designing and building the lead boat and having it ready for its scheduled first deterrent patrol in 2031 has little slack for absorbing unforeseen delays due to technical challenges or funding-related issues. To help mitigate the risk of technical challenges causing delays that threaten the lead boat's 2031 first-patrol date, the Navy has been working to generate additional margin inside the schedule for designing and building the lead boat, so as to provide more ability for absorbing delays and thereby make the schedule less brittle and more resilient. At a March 27, 2019, hearing before the Seapower subcommittee of the Senate Armed Services Committee on Navy shipbuilding programs, Navy officials testified that for the Columbia-class program, the Navy is implementing Continuous Production on selected shipyard-manufactured items to reduce cost and schedule risk and help strengthen the industrial base with a focus on critical vendors. Advance Construction activities are set to start in June 2019 at General Dynamics Electric Boat and Huntington Ingalls Industries-Newport News to proactively manage schedule margin and reduce controlling path risks for COLUMBIA. At least two technical challenges have already occurred in the Columbia-class program, one first reported in 2017 involving an electric motor, and another first reported in 2018 involving faulty welds in the first missile tube sections being built for the lead boat. Navy officials have stated that neither of these challenges jeopardized the lead's boat's schedule for being ready for its first patrol in 2031, in part because the Navy—recognizing that it had not built SSBN missile tube sections in many years—had built 23 months of margin into the schedule for manufacturing the missile tube sections. (This is in part why manufacturing of missile tube sections began well ahead of fabrication work on other parts of the submarine.) The problem with the welds reportedly absorbed up to 15 months of that margin, but even after absorbing that delay, 8 or more months of margin remained. Technical challenges could arise in various parts of the ship. One area that may bear close watching is the ship's electric-drive propulsion system, which is quite different than the mechanical-drive system used in other Navy nuclear-powered submarines. The Navy has been working for years to mitigate the risks associated with the Columbia-class design's electric-drive system through a technology-development process that includes testing and validation with land-based component prototypes. An April 2019 GAO report states the following: We found that the Navy continues to experience problems with the electric drive of the integrated power system that could potentially affect construction of the lead submarine. A manufacturing defect that affected the system's first production-representative propulsion motor required extensive repair that consumed 9 months of schedule margin at the land-based test facility. The Navy now plans to test the motor at the same time it had originally scheduled to make any final design changes before starting production. This could constrain opportunities to implement timely, corrective actions if problems are discovered during testing. More generally, regarding the risk of delays in designing and building the lead boat, the April 2019 GAO report stated the following: The Navy's goal is to complete a significant amount of the Columbia class submarine's design—83 percent—before lead submarine construction begins in October 2020. The Navy established this goal based on lessons learned from another submarine program in an effort to help mitigate its aggressive construction schedule. Achieving this goal may prove to be challenging as the shipbuilder has to use a new design tool to complete an increasingly higher volume of complex design products…. The shipbuilder has hired additional designers to improve its design progress. The Navy also plans to start advance construction of components in each major section of the submarine, beginning in fiscal year 2019, when less of the design will be complete…. The Navy is attempting to mitigate an aggressive schedule for lead submarine construction by (1) setting a goal to mature a significant amount of the submarine's design prior to the start of construction and (2) beginning advance construction of submarine modules prior to October 2020. The shipbuilder is working to improve design performance and would have to maintain this increased pace to achieve its design goal, which is necessary to mitigate schedule risk associated with constructing the lead submarine. This may prove challenging as it must complete an increasingly higher volume and complexity of design products. At the same time, the Navy is continuing to develop several critical technologies and recent manufacturing defects with the integrated power system and missile tubes are among the challenges that the Navy is facing in ensuring timely delivery of critical components to the shipyard. A May 2019 GAO report assessing selected major DOD weapon acquisition programs additionally stated the following regarding the Columbia-class program: Technology Maturity The Columbia class program identified two critical technologies—a carbon dioxide removal system and the stern area system, the details of which are classified. The program expects the carbon dioxide removal system to reach full maturity in late 2019, while the stern area system is still immature. In December 2017, we reported that several Columbia class technologies that met GAO's definition of a critical technology element were not identified by the Navy as critical technologies. Specifically, the Navy did not follow best practices for assessing critical technologies. When we applied these best practices, we identified four additional critical technologies that the Navy excluded. These include the integrated power system, the propulsor/coordinated stern, the common missile compartment (CMC), and the nuclear reactor. Of these, only the nuclear reactor is fully mature as of late 2018. The Navy expects the CMC to reach full maturity in 2019. However, officials reported that in July 2018 the shipbuilder identified significant weld defects in CMC missile tubes from one of three suppliers after the supplier had already delivered seven tubes to the shipyard and installation work had begun, resulting in rework. Officials further report that the shipbuilder found defects affected five additional tubes. Program officials attributed these defects to inexperienced welders and weld inspectors. The Navy estimates that, as of January 2019, the CMC consumed 52 percent of its schedule margin. Should the Navy discover additional CMC deficiencies, the planned construction sequence for the lead submarine will be jeopardized. Further, manufacturing defects have delayed delivery of the integrated power system's (IPS) first production-representative motor. The Navy plans to recover the motor's schedule margin by testing it while the supplier updates the motor's production design. Consequently, any new deficiencies discovered in testing may require the supplier to modify its design, which could delay the lead ship's IPS motor production schedule. Design Stability The program office plans to complete the basic and functional design prior to the lead submarine's scheduled construction start, in October 2020. However, Navy officials report the shipbuilder has already begun building sections of the submarine, with 95 percent of the basic and functional design complete—a level slightly below best practices. Further, the Navy has determined that the shipbuilder needs to complete 83 percent of the detail design—the most complex design phases down to the lowest level of the submarine—by October 2020 to meet its cost and schedule goals. Currently, the shipbuilder is behind schedule because it has yet not achieved planned efficiencies with new design software. The shipbuilder increased its design staff by 18 percent in an effort to reach the design goal on schedule. However, the program's plan for achieving design stability is premised on assumptions about the final form, fit, and function of critical technologies—and how those technologies will perform in a realistic environment—that the program has yet to demonstrate. Production Readiness By beginning to build sections of the submarine starting in December 2018, the Navy believes that the builder can achieve an aggressive 84-month construction schedule. However, this is 2 years prior to the planned request for fiscal year 2021 authorization to start construction of the lead ship. Other Program Issues In a April 2019 report, we made several recommendations to improve the program's cost estimate. Specifically, we found that the program's $115 billion procurement cost estimate is not reliable because its estimate is based on overly optimistic assumptions about the labor hours needed to construct Columbia class submarines and did not include any cost margin in case these assumptions are not met. While the Navy analyzed program cost risks, it did not include enough margin in its estimate for likely cost growth. The Navy plans to update the cost estimate for the lead ship, but it may not complete this update in time for its fiscal year 2021 budget request, which will seek authorization and funding for lead submarine construction. Program Office Comments We provided a draft of this assessment to the program office for review and comment. The program office provided technical comments, which we incorporated where appropriate. The program office stated that it intends to provide needed capabilities on schedule and at an affordable price by committing to stable requirements, achieving high design maturity at the start of construction for the lead submarine, improving manufacturing and construction readiness, and aggressively working to reduce costs. It also said it plans to complete 83 percent of the design by construction start—more than other recent submarine programs. The program also stated that it plans to update its cost estimate in 2019 to inform lead submarine funding. The program noted that the Navy recognizes its supplier base remains a high risk to construction readiness and continues to devote increased oversight on manufacturing issues and readiness assessments. The program said it continues to comply with all Navy, Department of Defense, and statutory requirements for managing critical technologies. Until such time that the Navy can find ways to generate additional margin inside the program's schedule, the program appears to be in a situation where many things need to go right, and few things can go wrong, between now and 2031 for the lead boat to be ready for its first patrol in 2031. In assessing this situation, it can be noted on the one hand that the Columbia-class program's status as the Navy's top priority program means that the program can be a high claimant for funding and personnel (including engineers, supervisors, and managers) that can be used to reduce the risk of occurrence of technical challenges that could threaten the lead boat's 2031 first-patrol date. On the other hand, it can be noted that the lead ship in the Columbia-class program, like the lead ships in most Navy shipbuilding programs, is serving as the program's prototype, creating an inherent risk of technical challenges. Another issue for Congress—one that observers have focused on for several years—concerns the potential impact of the Columbia-class program on funding that will be available for other Navy programs, including other shipbuilding programs, particularly during the 10-year period FY2026-FY2035, when the Navy plans to procure one Columbia-class boat per year. Other things held equal, cost growth in the Columbia-class program (see the earlier discussion of the risk of cost growth in the program) could reinforce concerns about the potential impact of the Columbia-class program on funding that will be available for other Navy programs, including other shipbuilding programs. Even without such cost growth, however, this issue would remain as a matter of concern. Starting in FY2026, when the Navy plans to procure one Columbia-class boat per year for a period of 10 years, the Navy estimates that the Columbia-class program will require, in constant FY2019 dollars, roughly $7 billion per year in procurement funding. Several years ago, when the Navy's shipbuilding budget was being funded at a level of roughly $14 billion per year, observers were concerned that the Columbia-class program during the period FY2026-FY2035 could absorb as much as half of the Navy's shipbuilding budget, leaving relatively little funding available for all other Navy shipbuilding programs. Over the last several years, the Navy's shipbuilding budget has been increased to an annual funding level of roughly $24 billion per year. In a context of a shipbuilding budget of roughly $24 billion per year, a Columbia-class requirement for roughly $7 billion per year does not loom as large proportionately as it once did. Concerns remain, however, about funding that will be available for the procurement of other kinds of ships. The Navy's report on its FY2020 30-year shipbuilding plan states the following: The fiscal impact of the new SSBN begins in FY2023 with advanced procurement [funding], and then increases in FY2026 with full annual procurements. This represents Navy's largest fiscal challenge for near-term budgets and could impact the pace of procuring other ship types – potentially causing a drop below the steady profiles [shown elsewhere in this report]. At a March 27, 2019, hearing before the Seapower subcommittee of the Senate Armed Services Committee on Navy shipbuilding programs, Navy officials testified that the COLUMBIA Class program remains the Navy's number one acquisition priority program and is on track to start construction in October 2020 and deliver to pace the retirement of our current ballistic missile submarines, deploying for its first patrol in FY 2031. To better align focus and resources and ensure successful delivery of this program to the Fleet, DON has established Program Executive Office COLUMBIA. Additional resources above the Navy's [budget] topline will be required for the Navy to fund serial production of the COLUMBIA Class SSBN and maintain its planned shipbuilding profile. The creation of the National Sea-Based Deterrence Fund (NSBDF) and the amending of the statute governing the fund to include special acquisition authorities can be viewed as one response to concerns about the potential impact of the Columbia-class program on funding that will be available for other Navy programs, including other shipbuilding programs. For additional information about the NSBDF, see Appendix E . Another potential option for reducing the potential impact of the Columbia-class program on funding that will be available for other Navy programs, including other shipbuilding programs, would be to reduce the Columbia-class program to something fewer than 12 boats. Over the years, for various reasons, some observers have advocated or presented options for an SSBN force of fewer than 12 SSBNs. A November 2013 CBO report on options for reducing the federal budget deficit, for example, presented an option for reducing the SSBN force to 8 boats as a cost-reduction measure. Earlier CBO reports have presented options for reducing the SSBN force to 10 boats as a cost-reduction measure. CBO reports that present such options also provide notional arguments for and against the options. A June 2010 report by a group known as the Sustainable Defense Task Force recommended reducing the SSBN force to 7 boats, a September 2010 report from the Cato Institute recommended reducing the SSBN force to 6 boats, and a September 2013 report from a group organized by the Stimson Center recommended reducing the force to 10 boats. Views on whether a force of fewer than 12 Columbia-class boats would be appropriate could depend on, among other things, assessments of strategic nuclear threats to the United States and the role of SSBNs in deterring such threats as a part of overall U.S. strategic nuclear forces, as influenced by the terms of strategic nuclear arms control agreements. Reducing the number of SSBNs below 12 could also raise a question as to whether the force should continue to be homeported at both Bangor, WA, and Kings Bay, GA, or consolidated at a single location. The Navy's position is that the current requirement for having a certain number of SSBNs on patrol translates into a need for a force of 14 Ohio-class boats, and that this requirement can be met in the future by a force of 12 Columbia-class boats. Another oversight issue for Congress concerns potential industrial-base challenges of building both Columbia-class boats and Virginia-class attack submarines (SSNs) at the same time, particularly as procurement of Virginia-class submarines shifts to production of a new and larger version of the Virginia-class design that incorporates an additional mid-ship section called the Virginia Payload Module (VPM). Concerns about the ability of the submarine construction industrial base to execute an eventual procurement rate of two VPM-equipped Virginia-class boats and one Columbia-class boat per year, as currently planned under the Navy's FY2020 30-year shipbuilding plan, have been heightened by recent reports of challenges faced by the two submarine-construction shipyards (GD/EB and HII/NNS) as well as submarine component supplier firms in meeting scheduled delivery times for Virginia-class boats as the Virginia-class program transitions over time from production of two \"regular\" Virginia-class boats per year to two VPM-equipped boats per year. Concerns about the industrial-base issue can be viewed as an additional element of the previously discussed issue of the risk of schedule delay in designing and building the lead Columbia-class boat. Table 3 below summarizes congressional action on the Navy's FY2020 funding request for the Columbia-class program. Appendix A. Summary of Past U.S. SSBN Designs This appendix provides background information on the four SSBN classes that the United States has operated since 1959. The four classes are summarized in Table A-1 . As shown in the table, the size of U.S. SSBNs has grown over time, reflecting in part a growth in the size and number of SLBMs carried on each boat. The Ohio class carries an SLBM (the D-5) that is much larger than the SLBMs carried by earlier U.S. SSBNs, and it carries 24 SLBMs, compared to the 16 on earlier U.S. SSBNs. In part for these reasons, the Ohio-class design, with a submerged displacement of 18,750 tons, is more than twice the size of earlier U.S. SSBNs. Appendix B. U.S.-UK Cooperation on SLBMs and the New UK SSBN This appendix provides background information on U.S.-UK cooperation on SLBMs and the UK's next-generation SSBN, previously called the Successor-class SSBN and now called the Dreadnought-class SSBN. The UK's four Vanguard-class SSBNs, which entered service in 1993-1999, each carry 16 Trident II D-5 SLBMs. Previous classes of UK SSBNs similarly carried earlier-generation U.S. SLBMs. The UK's use of U.S.-made SLBMs on its SSBNs is one element of a long-standing close cooperation between the two countries on nuclear-related issues that is carried out under the 1958 Agreement for Cooperation on the Uses of Atomic Energy for Mutual Defense Purposes (also known as the Mutual Defense Agreement). Within the framework established by the 1958 agreement, cooperation on SLBMs in particular is carried out under the 1963 Polaris Sales Agreement and a 1982 Exchange of Letters between the two governments. The Navy testified in March 2010 that \"the United States and the United Kingdom have maintained a shared commitment to nuclear deterrence through the Polaris Sales Agreement since April 1963. The U.S. will continue to maintain its strong strategic relationship with the UK for our respective follow-on platforms, based upon the Polaris Sales Agreement.\" The first Vanguard-class SSBN was originally projected to reach the end of its service life in 2024, but an October 2010 UK defense and security review report states that the lives of the Vanguard class ships will now be extended by a few years, so that the four boats will remain in service into the late 2020s and early 2030s. The UK plans to replace the four Vanguard-class boats with three or four next-generation Dreadnought-class boats are to be equipped with 12 missile launch tubes, but current UK plans call for each boat to carry eight D-5 SLBMs, with the other four tubes not being used for SLBMs. The report states that \"'Main Gate'—the decision to start building the submarines—is required around 2016.\" The first new boat is to be delivered by 2028, or about four years later than previously planned. The United States is assisting the UK with certain aspects of the Dreadnought SSBN program. In addition to the modular Common Missile Compartment (CMC), the United States is assisting the UK with the new PWR-3 reactor plant to be used by the Dreadnought SSBN. A December 2011 press report states that \"there has been strong [UK] collaboration with the US [on the Dreadnought program], particularly with regard to the CMC, the PWR, and other propulsion technology,\" and that the design concept selected for the Dreadnought class employs \"a new propulsion plant based on a US design, but using next-generation UK reactor technology (PWR-3) and modern secondary propulsion systems.\" The U.S. Navy states that Naval Reactors, a joint Department of Energy/Department of Navy organization responsible for all aspects of naval nuclear propulsion, has an ongoing technical exchange with the UK Ministry of Defence under the US/UK 1958 Mutual Defence Agreement. The US/UK 1958 Mutual Defence Agreement is a Government to Government Atomic Energy Act agreement that allows the exchange of naval nuclear propulsion technology between the US and UK. Under this agreement, Naval Reactors is providing the UK Ministry of Defence with US naval nuclear propulsion technology to facilitate development of the naval nuclear propulsion plant for the UK's next generation SUCCESSOR ballistic missile submarine. The technology exchange is managed and led by the US and UK Governments, with participation from Naval Reactors prime contractors, private nuclear capable shipbuilders, and several suppliers. A UK based office comprised of about 40 US personnel provide full-time engineering support for the exchange, with additional support from key US suppliers and other US based program personnel as needed. The relationship between the US and UK under the 1958 mutual defence agreement is an ongoing relationship and the level of support varies depending on the nature of the support being provided. Naval Reactors work supporting the SUCCESSOR submarine is reimbursed by the UK Ministry of Defence. U.S. assistance to the UK on naval nuclear propulsion technology first occurred many years ago: To help jumpstart the UK's nuclear-powered submarine program, the United States transferred to the UK a complete nuclear propulsion plant (plus technical data, spares, and training) of the kind installed on the U.S. Navy's six Skipjack (SSN-585) class nuclear-powered attack submarines (SSNs), which entered service between 1959 and 1961. The plant was installed on the UK Navy's first nuclear-powered ship, the attack submarine Dreadnought , which entered service in 1963. The December 2011 press report states that \"the UK is also looking at other areas of cooperation between Dreadnought and the Ohio Replacement Programme. For example, a collaboration agreement has been signed off regarding the platform integration of sonar arrays with the respective combat systems.\" A June 24, 2016, press report states the following: The [U.S. Navy] admiral responsible for the nuclear weapons component of ballistic missile submarines today praised the \"truly unique\" relationship with the British naval officers who have similar responsibilities, and said that historic cooperation would not be affected by Thursday's vote to have the United Kingdom leave the European Union. Vice Adm. Terry Benedict, director of the Navy's Strategic Systems Programs, said that based on a telephone exchange Thursday morning with his Royal Navy counterpart, \"I have no concern.\" The so-called Brexit vote—for British exit—\"was a decision based on its relationship with Europe, not with us. I see yesterday's vote having no effect.\" Appendix C. Columbia-Class Program Origin and Milestones This appendix provides background information on the Columbia-class program's origin and milestones. Program Origin and Early Milestones Although the eventual need to replace the Ohio-class SSBNs has been known for many years, the Columbia-class program can be traced more specifically to an exchange of letters in December 2006 between President George W. Bush and UK Prime Minister Tony Blair concerning the UK's desire to participate in a program to extend the service life of the Trident II D-5 SLBM into the 2040s, and to have its next-generation SSBNs carry D-5s. Following this exchange of letters, and with an awareness of the projected retirement dates of the Ohio-class SSBNs and the time that would likely be needed to develop and field a replacement for them, DOD in 2007 began studies on a next-generation sea-based strategic deterrent (SBSD). The studies used the term sea-based strategic deterrent (SBSD) to signal the possibility that the new system would not necessarily be a submarine. An Initial Capabilities Document (ICD) for a new SBSD was developed in early 2008 and approved by DOD's Joint Requirements Oversight Committee (JROC) on June 20, 2008. In July 2008, DOD issued a Concept Decision providing guidance for an analysis of alternatives (AOA) for the program; an acquisition decision memorandum from John Young, DOD's acquisition executive, stated the new system would, barring some discovery, be a submarine. The Navy established an Columbia-class program office at about this same time. The AOA reportedly began in the summer or fall of 2008. The AOA was completed, with final brief to the Office of the Secretary of Defense (OSD), on May 20, 2009. The final AOA report was completed in September 2009. An AOA Sufficiency Review Letter was signed by OSD's Director, Cost Assessment & Program Evaluation (CAPE) on December 8, 2009. The AOA concluded that a new-design SSBN was the best option for replacing the Ohio-class SSBNs. (For a June 26, 2013, Navy blog post discussing options that were examined for replacing the Ohio-class SSBNs, see Appendix D .) The program's Milestone A review meeting was held on December 9, 2010. On February 3, 2011, the Navy provided the following statement to CRS concerning the outcome of the December 9 meeting: The OHIO Replacement Program achieved Milestone A and has been approved to enter the Technology Development Phase of the Dept. of Defense Life Cycle Management System as of Jan. 10, 2011. This milestone comes following the endorsement of the Defense Acquisition Board (DAB), chaired by Dr. Carter (USD for Acquisition, Technology, and Logistics) who has signed the program's Milestone A Acquisition Decision Memorandum (ADM). The DAB endorsed replacing the current 14 Ohio-class Ballistic Missile Submarines (SSBNs) as they reach the end of their service life with 12 Ohio Replacement Submarines, each comprising 16, 87-inch diameter missile tubes utilizing TRIDENT II D5 Life Extended missiles (initial loadout). The decision came after the program was presented to the Defense Acquisition Board (DAB) on Dec. 9, 2010. The ADM validates the program's Technology Development Strategy and allows entry into the Technology Development Phase during which warfighting requirements will be refined to meet operational and affordability goals. Design, prototyping, and technology development efforts will continue to ensure sufficient technological maturity for lead ship procurement in 2019. January 2017 Milestone B Approval On January 4, 2017, DOD gave Milestone B approval to the Columbia-class program. Milestone B approval, which permits a program to enter the engineering and manufacturing development (EMD) phase, is generally considered a major milestone for a defense acquisition program, permitting the program to transition, in effect, from a research and development effort into a procurement program of record. A January 6, 2017, Navy notification to Congress on the Milestone B approval for the Columbia-class program states the following: On 4 November 2016, Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall chaired the Milestone B Defense Acquisition Board, and on 4 January, 2017 signed the acquisition decision memorandum approving COLUMBIA Class program's Milestone B and designating the program as an Acquisition Category ID major defense acquisition program. Milestone B also establishes the Acquisition Program Baseline against which the program's performance will be assessed. Additionally, this decision formally authorizes entry into the Engineering and Manufacturing Development Phase of an acquisition program, permitting the transition from preliminary design to detail design, using Shipbuilding and Conversion, Navy (SCN) funds. Cost estimates for this program have been rebaselined from CY2010 dollars to CY2017 dollars in accordance with DoDI 5000.02, Rev p, dated 7 January 2015. The MS B Navy Cost Estimate for Average Follow Ship End Cost (hulls 2-12) in 2010$ using specific shipbuilding indices is $5.0 billion, a $600 million reduction from the MS A estimate, which nearly achieves the affordability target of $4.9 billion set at MS A. To continue cost control, the Navy will focus on: • Stable operational and technical requirements • High design maturity at construction start • Detailed plans to ensure manufacturing readiness including robust prototyping efforts and synergies with other nuclear shipbuilding programs • Aggressive cost reduction actions Affordability caps have been assigned that are consistent with current cost estimates and reasonable margins for cost growth. Relative to Milestone A, these estimates have been updated to adjust Base Year from 2010 to 2017, a standard practice to match Base Year with the year of Milestone B approval. The MS A unit cost affordability target ($4.9 billion in CY2010$ using Navy indices) used a unique metric, \"Average Follow-on Ship End Cost,\" which accounted for hulls 2-12. From Milestone B forward, the affordability cap for the unit cost will be measured by using the Average Procurement Unit Cost (APUC), which includes all 12 hulls. The Affordability Cap of $8.0 billion in CY2017$ is based upon the approved APUC estimate of $7.3 billion plus 10%.... The Navy and industry are currently negotiating the detail design and construction (DD&C) contract, which is expected to award in early 2017. With negotiations continuing on the DD&C contract, the Navy has ensured the COLUMBIA Program design effort will continue without interruption. The Navy issued a contract modification to allow execution of SCN for detail design on the existing R&D contract. With this modification in place, detail design efforts that had initially planned to transition to the DD&C contract, will continue on the current R&D contract to ensure continued design progress. With the Milestone B approval and the appropriation of $773M in FY17 SCN under the second Continuing Resolution, funding is now available to execute detail design. In accordance with 10 U.S.C. §2218a and the FY17 National Defense Authorization Act, the Navy deposited the FY17 SCN into the National Sea-Based Deterrence Fund (NSBDF). The first installment of funding will be executed on the existing R&D contract, which allows transition into detail design and continued design progress until the award of the DD&C contract. Appendix D. Design of Columbia-Class Boats This appendix provides additional background information on the design for the Columbia-class boats. Some Key Design Features The Columbia-class design will reflect the following: The Columbia class is being designed for a 42-year expected service life. Unlike the Ohio-class design, which requires a midlife nuclear refueling, the Columbia class is to be equipped with a life-of-the-ship nuclear fuel core (a nuclear fuel core that is sufficient to power the ship for its entire expected service life). Although the Columbia class will not need a midlife nuclear refueling, it will still need a midlife nonrefueling overhaul (i.e., an overhaul that does not include a nuclear refueling) to operate over its full 42-year life. The Columbia class is to be equipped with an electric-drive propulsion train, as opposed to the mechanical-drive propulsion train used on other Navy submarines. The electric-drive system is expected to be quieter (i.e., stealthier) than a mechanical-drive system. The Columbia class is to have SLBM launch tubes that are the same size as those on the Ohio class (i.e., tubes with a diameter of 87 inches and a length sufficient to accommodate a D-5 SLBM). The Columbia class will have a beam (i.e., diameter) of 43 feet, compared to 42 feet on the Ohio-class design, and a length of 560 feet, the same as that of the Ohio-class design. Instead of 24 SLBM launch tubes, as on the Ohio-class design, the Columbia class is to have 16 SLBM launch tubes. As noted earlier, although the Columbia-class design has fewer SLBM tubes than the Ohio-class design, it is larger than the Ohio-class design in terms of submerged displacement. The Columbia-class design has a reported submerged displacement of 20,815 tons (as of August 2014), compared to 18,750 tons for the Ohio-class design. The Columbia-class design, like the Ohio-class design before it, will be the largest submarine ever built by the United States. The Navy states that \"owing to the unique demands of strategic relevance, [Columbia-class boats] must be fitted with the most up-to-date capabilities and stealth to ensure they are survivable throughout their full 40-year life span.\" June 2013 Navy Blog Post Regarding Ohio Replacement Options A June 26, 2013, blog post by Rear Admiral Richard Breckenridge, the Navy's Director for Undersea Warfare (N97), discussing options that were examined for replacing the Ohio-class SSBNs, stated the following: Over the last five years, the Navy–working with U.S. Strategic Command, the Joint Staff and the Office of the Secretary of Defense–has formally examined various options to replace the Ohio ballistic missile submarines as they retire beginning in 2027. This analysis included a variety of replacement platform options, including designs based on the highly successful Virginia-class attack submarine program and the current Ohio-class ballistic missile submarine. In the end, the Navy elected to pursue a new design that leverages the lessons from the Ohio, the Virginia advances in shipbuilding and improvements in cost-efficiency. Recently, a variety of writers have speculated that the required survivable deterrence could be achieved more cost effectively with the Virginia-based option or by restarting the Ohio-class SSBN production line. Both of these ideas make sense at face value–which is why they were included among the alternatives assessed–but the devil is in the details. When we examined the particulars, each of these options came up short in both military effectiveness and cost efficiency. Virginia-based SSBN design with a Trident II D5 missile. An SSBN design based on a Virginia-class attack submarine with a large-diameter missile compartment was rejected due to a wide range of shortfalls. It would: • Not meet survivability (stealth) requirements due to poor hull streamlining and lack of a drive train able to quietly propel a much larger ship • Not meet at-sea availability requirements due to longer refit times (since equipment is packed more tightly within the hull, it requires more time to replace, repair and retest) • Not meet availability requirements due to a longer mid-life overhaul (refueling needed) • Require a larger number of submarines to meet the same operational requirement • Reduce the deterrent value needed to protect the country (fewer missiles, warheads at-sea) • Be more expensive than other alternatives due to extensive redesign of Virginia systems to work with the large missile compartment (for example, a taller sail, larger control surfaces and more robust support systems) We would be spending more money (on more ships) to deliver less deterrence (reduced at-sea warhead presence) with less survivability (platforms that are less stealthy). Virginia-based SSBN design with a smaller missile. Some have encouraged the development of a new, smaller missile to go with a Virginia-based SSBN. This would carry forward many of the shortfalls of a Virginia-based SSBN we just discussed, and add to it a long list of new issues. Developing a new nuclear missile from scratch with an industrial base that last produced a new design more than 20 years ago would be challenging, costly and require extensive testing. We deliberately decided to extend the life of the current missile to decouple and de-risk the complex (and costly) missile development program from the new replacement submarine program. Additionally, a smaller missile means a shorter employment range requiring longer SSBN patrol transits. This would compromise survivability, require more submarines at sea and ultimately weaken our deterrence effectiveness. With significant cost, technical and schedule risks, there is little about this option that is attractive. Ohio-based SSBN design. Some have argued that we should re-open the Ohio production line and resume building the Ohio design SSBNs. This simply cannot be done because there is no Ohio production line. It has long since been re-tooled and modernized to build state-of-the-art Virginia-class SSNs using computerized designs and modular, automated construction techniques. Is it desirable to redesign the Ohio so that a ship with its legacy performance could be built using the new production facilities? No, since an Ohio-based SSBN would: • Not provide the required quieting due to Ohio design constraints and use of a propeller instead of a propulsor (which is the standard for virtually all new submarines) • Require 14 instead of 12 SSBNs by reverting to Ohio class operational availability standards (incidentally creating other issues with the New START treaty limits) • Suffer from reduced reliability and costs associated with the obsolescence of legacy Ohio system components Once again, the end result would necessitate procuring more submarines (14) to provide the required at-sea presence and each of them would be less stealthy and less survivable against foreseeable 21 st century threats. The Right Answer: A new design SSBN that improves on Ohio: What has emerged from the Navy's exhaustive analysis is an Ohio replacement submarine that starts with the foundation of the proven performance of the Ohio SSBN, its Trident II D5 strategic weapons system and its operating cycle. To this it adds: • Enhanced stealth as necessary to pace emerging threats expected over its service life • Systems commonality with Virginia (pumps, valves, sonars, etc.) wherever possible, enabling cost savings in design, procurement, maintenance and logistics • Modular construction and use of COTS equipment consistent with those used in today's submarines to reduce the cost of fabrication, maintenance and modernization. Total ownership cost reduction (for example, investing in a life-of-the-ship reactor core enables providing the same at-sea presence with fewer platforms). Although the Ohio replacement is a \"new design,\" it is in effect an SSBN that takes the best lessons from 50 years of undersea deterrence, from the Ohio, from the Virginia, from advances in shipbuilding efficiency and maintenance, and from the stern realities of needing to provide survivable nuclear deterrence. The result is a low-risk, cost-effective platform capable of smoothly transitioning from the Ohio and delivering effective 21 st century undersea strategic deterrence. 16 vs. 20 SLBM Tubes Overview The Navy's decision to design Columbia-class boats with 16 SLBM tubes rather than 20 was one of several decisions the Navy made to reduce the estimated average procurement cost of boats 2 through 12 in the program toward a Navy target cost of $4.9 billion in FY2010 dollars. Some observers were concerned that designing the Columbia class with 16 tubes rather than 20 would create a risk that U.S. strategic nuclear forces might not have enough capability in the 2030s and beyond to fully perform their deterrent role. These observers noted that to comply with the New Start Treaty limiting strategic nuclear weapons, DOD plans to operate in coming years a force of 14 Trident SSBNs, each with 20 operable SLBM tubes (4 of the 24 tubes on each boat are to be rendered inoperable), for a total of 280 tubes, whereas the Navy in the Columbia-class program is planning a force of 12 SSBNs each with 16 tubes, for a total of 192 tubes, or about 31% less than 280. These observers also cited the uncertainties associated with projecting needs for strategic deterrent forces out to the year 2080, when the final Columbia-class boat is scheduled to leave service. These observers asked whether the plan to design the Columbia class with 16 tubes rather than 20 was fully supported within all parts of DOD, including U.S. Strategic Command (STRATCOM). In response, Navy and other DOD officials stated that the decision to design the Columbia class with 16 tubes rather than 20 was carefully considered within DOD, and that they believe a boat with 16 tubes will give U.S. strategic nuclear forces enough capability to fully perform their deterrent role in the 2030s and beyond. Testimony in 2011 At a March 1, 2011, hearing before the House Armed Services Committee, Admiral Gary Roughead, then-Chief of Naval Operations, stated the following: I'm very comfortable with where we're going with SSBN-X. The decision and the recommendation that I made with regard to the number of tubes—launch tubes are consistent with the new START treaty. They're consistent with the missions that I see that ship having to perform. And even though it may be characterized as a cost cutting measure, I believe it sizes the ship for the missions it will perform. At a March 2, 2011, hearing before the Strategic Forces subcommittee of the House Armed Services Committee, the following exchange occurred: REPRESENTATIVE TURNER: General Kehler, thank you so much for your continued thoughts and of course your leadership. One item that we had a discussion on was the triad, of looking to—of the Navy and the tube reductions of 20 to 16, as contained in other hearings on the Hill today. I would like your thoughts on the reduction of the tubes and what you see driving that, how you see it affecting our strategic posture and any other thoughts you have on that? AIR FORCE GENERAL C. ROBERT KEHLER, COMMANDER, U.S. STRATEGIC COMMAND Thank you, Mr. Chairman. Well, first of all, sir, let me say that the—in my mind anyway, the discussion of Trident and Ohio-class replacement is really a discussion in the context of the need to modernize the entire triad. And so, first of all, I think that it's important for us to recognize that that is one piece, an important piece, but a piece of the decision process that we need to go through. Second, the issue of the number of tubes is not a simple black-and-white answer. So let me just comment here for a minute. First of all, the issue in my mind is the overall number of tubes we wind up with at the end, not so much as the number of tubes per submarine. Second, the issue is, of course, we have flexibility and options with how many warheads per missile per tube, so that's another consideration that enters into this mixture. Another consideration that is important to me is the overall number of boats and the operational flexibility that we have with the overall number of boats, given that some number will need to be in maintenance, some number will need to be in training, et cetera. And so those and many other factors—to include a little bit of foresight here, in looking ahead to 20 years from now in antisubmarine warfare environment that the Navy will have to operate in, all of those bear on the ultimate sideways shape configuration of a follow-on to the Ohio. At this point, Mr. Chairman, I am not overly troubled by going to 16 tubes. As I look at this, given that we have that kind of flexibility that I just laid out; given that this is an element of the triad and given that we have some decision space here as we go forward to decide on the ultimate number of submarines, nothing troubles me operationally here to the extent that I would oppose a submarine with 16 tubes. I understand the reasons for wanting to have 20. I understand the arguments that were made ahead of me. But as I sit here today, given the totality of the discussion, I am—as I said, I am not overly troubled by 16. Now, I don't know that the gavel has been pounded on the other side of the river yet with a final decision, but at this point, I am not overly troubled by 16. At an April 5, 2011, hearing before the Strategic Forces subcommittee of the House Armed Services Committee, the following exchange occurred: REPRESENTATIVE LARSEN: General Benedict, we have had this discussion, not you and I, I am sorry. But the subcommittee has had a discussion in the past with regards to the Ohio-class replacement program. The new START, though, when it was negotiated, assumed a reduction from 24 missile tubes per hole to, I think, a maximum a maximum of 20. The current configuration [for the Columbia class], as I understand it, would move from 24 to 16. Can you discuss, for the subcommittee here, the Navy's rationale for that? For moving from 24 to 16 as opposed to the max of 20? NAVY REAR ADMIRAL TERRY BENEDICT, DIRECTOR, STRATEGIC SYSTEMS PROGRAMS (SSP): Sir, as part—excuse me, as part of the work-up for the milestone A [review for the Columbia class program] with Dr. Carter in OSD, SSP supported the extensive analysis at both the OSD level as well as STRATCOM's analysis. Throughout that process, we provided, from the SWS [strategic weapon system] capability, our perspective. Ultimately that was rolled up into both STRATCOM and OSD and senior Navy leadership and in previous testimony, the secretary of the Navy, the CNO, and General Chilton have all expressed their confidence that the mission of the future, given their perspectives, is they see the environment today can be met with 16. And so, as the acquisition and the SWS provider, we are prepared to support that decision by leadership, sir. REPRESENTATIVE LARSEN: Yes. And your analysis supports—did your analysis that fed into this, did you look at specific numbers then? REARD ADMIRAL BENEDICT: Sir, we looked at the ability of the system, again, SSP does not look at specific targets with... REPRESENTATIVE LARSEN: Right. Yes, yes, yes. REAR ADMIRAL BENEDICT: Our input was the capability of the missile, the number of re-entry bodies and the throw weight that we can provide against those targets and based on that analysis, the leadership decision was 16, sir. At an April 6, 2011, hearing before the Strategic Forces subcommittee of the Senate Armed Services Committee, the following exchange occurred: SENATOR SESSIONS: Admiral Benedict, according to recent press reports, the Navy rejected the recommendations of Strategic Command to design the next generation of ballistic missile submarines with 20 missile tubes instead of opting for only 16 per boat. What is the basis for the Navy's decision of 16? And I'm sure cost is a factor. In what ways will that decision impact the overall nuclear force structure associated with the command? NAVY REAR ADMIRAL TERRY BENEDICT, DIRECTOR, STRATEGIC SYSTEMS PROGRAMS (SSP): Yes, sir. SSP supported the Navy analysis, STRATCOM's analysis, as well as the OSD analysis, as we proceeded forward and towards the Milestone A decision [on the Columbia class program] that Dr. Carter conducted. Based on our input, which was the technical input as the—as the director of SSP, other factors were considered, as you stated. Cost was one of them. But as the secretary, as the CNO, and I think as General Kehler submitted in their testimony, that given the threats that we see today, given the mission that we see today, given the upload capability of the D-5, and given the environment as they saw today, all three of those leaders were comfortable with the decision to proceed forward with 16 tubes, sir. SENATOR SESSIONS: And is that represent your judgment? To what extent were you involved—were you involved in that? REAR ADMIRAL BENEDICT: Sir, we were involved from technical aspects in terms of the capability of the missile itself, what we can throw, our range, our capability. And based on what we understand the capability of the D-5 today, which will be the baseline missile for the Ohio Replacement Program, as the director of SSP I'm comfortable with that decision. Section 242 Report Section 242 of the FY2012 National Defense Authorization Act ( H.R. 1540 / P.L. 112-81 of December 31, 2011) required DOD to submit a report on the Columbia-class program that includes, among other things, an assessment of various combinations of boat quantities and numbers of SLBM launch tubes per boat. The text of the section is as follows: SEC. 242. REPORT AND COST ASSESSMENT OF OPTIONS FOR OHIO-CLASS REPLACEMENT BALLISTIC MISSILE SUBMARINE. (a) Report Required- Not later than 180 days after the date of the enactment of this Act, the Secretary of the Navy and the Commander of the United States Strategic Command shall jointly submit to the congressional defense committees a report on each of the options described in subsection (b) to replace the Ohio-class ballistic submarine program. The report shall include the following: (1) An assessment of the procurement cost and total life-cycle costs associated with each option. (2) An assessment of the ability for each option to meet— (A) the at-sea requirements of the Commander that are in place as of the date of the enactment of this Act; and (B) any expected changes in such requirements. (3) An assessment of the ability for each option to meet— (A) the nuclear employment and planning guidance in place as of the date of the enactment of this Act; and (B) any expected changes in such guidance. (4) A description of the postulated threat and strategic environment used to inform the selection of a final option and how each option provides flexibility for responding to changes in the threat and strategic environment. (b) Options Considered- The options described in this subsection to replace the Ohio-class ballistic submarine program are as follows: (1) A fleet of 12 submarines with 16 missile tubes each. (2) A fleet of 10 submarines with 20 missile tubes each. (3) A fleet of 10 submarines with 16 missile tubes each. (4) A fleet of eight submarines with 20 missile tubes each. (5) Any other options the Secretary and the Commander consider appropriate. (c) Form- The report required under subsection (a) shall be submitted in unclassified form, but may include a classified annex. Subsection (c) above states the report \"shall be submitted in unclassified form, but may include a classified annex.\" The report as submitted was primarily the classified annex, with a one-page unclassified summary, the text of which is as follows (underlining as in the original): The National Defense Authorization Act (NDAA) for Fiscal Year 2012 (FY12) directed the Secretary of the Navy and the Commander of U.S. Strategic Command (USSTRATCOM) to jointly submit a report to the congressional defense committees comparing four different options for the OHIO Replacement (OR) fleet ballistic missile submarine (SSBN) program. Our assessment considered the current operational requirements and guidance. The four SSBN options analyzed were: 1.12 SSBNs with 16 missile tubes each 2.10 SSBNs with 20 missile tubes each 3.10 SSBNs with 16 missile tubes each 4.8 SSBNs with 20 missile tubes each The SSBN force continues to be an integral part of our nuclear Triad and contributes to deterrence through an assured second strike capability that is survivable, reliable, and credible. The number of SSBNs and their combined missile tube capacity are important factors in our flexibility to respond to changes in the threat and uncertainty in the strategic environment. We assessed each option against the ability to meet nuclear employment and planning guidance, ability to satisfy at-sea requirements, flexibility to respond to future changes in the postulated threat and strategic environment, and cost. In general, options with more SSBNs can be adjusted downward in response to a diminished threat; however, options with less SSBNs are more difficult to adjust upward in response to a growing threat. Clearly, a smaller SSBN force would be less expensive than a larger force, but for the reduced force options we assessed, they fail to meet current at-sea and nuclear employment requirements, increase risk in force survivability, and limit flexibility in response to an uncertain strategic future. Our assessment is the program of record, 12 SSBNs with 16 missile tubes each, provides the best balance of performance, flexibility, and cost meeting commander's requirements while supporting the Nation's strategic deterrence mission goals and objectives. The classified annex contains detailed analysis that is not releasable to the public. Appendix E. National Sea-Based Deterrence Fund (NSBDF) This appendix provides additional background information on the National Sea-Based Deterrence Fund (NSBDF). Created by P.L. 113-291 Section 1022 of the Carl Levin and Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015 ( H.R. 3979 / P.L. 113-291 of December 19, 2014) created the National Sea-Based Deterrence Fund (NSBDF), a fund in the DOD budget, codified at 10 U.S.C. 2218a, that is separate from the Navy's regular shipbuilding account (which is formally known as the Shipbuilding and Conversion, Navy, or SCN, appropriation account). Amended by P.L. 114-92 , P.L. 114-328 , and P.L. 115-91 Section 1022 of the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015), Section 1023 of the FY2017 National Defense Authorization Act ( S. 2943 / P.L. 114-328 of December 23, 2016), and Section 1022 of the FY2018 National Defense Authorization Act ( H.R. 2810 / P.L. 115-91 of December 12, 2017) amended 10 U.S.C. 2218a to provide additional acquisition authorities for the NSBDF. Text as Amended The text of 10 U.S.C. 2218a, as amended, is as follows: §2218a. National Sea-Based Deterrence Fund (a) Establishment.-There is established in the Treasury of the United States a fund to be known as the \"National Sea-Based Deterrence Fund\". (b) Administration of Fund.-The Secretary of Defense shall administer the Fund consistent with the provisions of this section. (c) Fund Purposes.-(1) Funds in the Fund shall be available for obligation and expenditure only for construction (including design of vessels), purchase, alteration, and conversion of national sea-based deterrence vessels. (2) Funds in the Fund may not be used for a purpose or program unless the purpose or program is authorized by law. (d) Deposits.-There shall be deposited in the Fund all funds appropriated to the Department of Defense for construction (including design of vessels), purchase, alteration, and conversion of national sea-based deterrence vessels. (e) Expiration of Funds After 5 Years.-No part of an appropriation that is deposited in the Fund pursuant to subsection (d) shall remain available for obligation more than five years after the end of fiscal year for which appropriated except to the extent specifically provided by law. (f) Authority to Enter Into Economic Order Quantity Contracts.-(1) The Secretary of the Navy may use funds deposited in the Fund to enter into contracts known as \"economic order quantity contracts\" with private shipyards and other commercial or government entities to achieve economic efficiencies based on production economies for major components or subsystems. The authority under this subsection extends to the procurement of parts, components, and systems (including weapon systems) common with and required for other nuclear powered vessels under joint economic order quantity contracts. (2) A contract entered into under paragraph (1) shall provide that any obligation of the United States to make a payment under the contract is subject to the availability of appropriations for that purpose, and that total liability to the Government for termination of any contract entered into shall be limited to the total amount of funding obligated at time of termination. (g) Authority to Begin Manufacturing and Fabrication Efforts Prior to Ship Authorization.-(1) The Secretary of the Navy may use funds deposited into the Fund to enter into contracts for advance construction of national sea-based deterrence vessels to support achieving cost savings through workload management, manufacturing efficiencies, or workforce stability, or to phase fabrication activities within shipyard and manage sub-tier manufacturer capacity. (2) A contract entered into under paragraph (1) shall provide that any obligation of the United States to make a payment under the contract is subject to the availability of appropriations for that purpose, and that total liability to the Government for termination of any contract entered into shall be limited to the total amount of funding obligated at time of termination. (h) Authority to Use Incremental Funding to Enter Into Contracts for Certain Items.-(1) The Secretary of the Navy may use funds deposited into the Fund to enter into incrementally funded contracts for advance procurement of high value, long lead time items for nuclear powered vessels to better support construction schedules and achieve cost savings through schedule reductions and properly phased installment payments. (2) A contract entered into under paragraph (1) shall provide that any obligation of the United States to make a payment under the contract is subject to the availability of appropriations for that purpose, and that total liability to the Government for termination of any contract entered into shall be limited to the total amount of funding obligated at time of termination. (i) Authority for Multiyear Procurement of Critical Components to Support Continuous Production.-(1) To implement the continuous production of critical components, the Secretary of the Navy may use funds deposited in the Fund, in conjunction with funds appropriated for the procurement of other nuclear-powered vessels, to enter into one or more multiyear contracts (including economic ordering quantity contracts), for the procurement of critical contractor-furnished and Government-furnished components for critical components of national sea-based deterrence vessels. The authority under this subsection extends to the procurement of equivalent critical components common with and required for other nuclear-powered vessels. (2) In each annual budget request submitted to Congress, the Secretary shall clearly identify funds requested for critical components and the individual ships and programs for which such funds are requested. (3) Any contract entered into pursuant to paragraph (1) shall provide that any obligation of the United States to make a payment under the contract is subject to the availability of appropriations for that purpose and that the total liability to the Government for the termination of the contract shall be limited to the total amount of funding obligated for the contract as of the date of the termination. (j) Budget Requests.-Budget requests submitted to Congress for the Fund shall separately identify the amount requested for programs, projects, and activities for construction (including design of vessels), purchase, alteration, and conversion of national sea-based deterrence vessels. (k) Definitions.-In this section: (1) The term \"Fund\" means the National Sea-Based Deterrence Fund established by subsection (a). (2) The term \"national sea-based deterrence vessel\" means any submersible vessel constructed or purchased after fiscal year 2016 that is owned, operated, or controlled by the Department of Defense and that carries operational intercontinental ballistic missiles. (3) The term \"critical component\" means any of the following: (A) A common missile compartment component. (B) A spherical air flask. (C) An air induction diesel exhaust valve. (D) An auxiliary seawater valve. (E) A hovering valve. (F) A missile compensation valve. (G) A main seawater valve. (H) A launch tube. (I) A trash disposal unit. (J) A logistics escape trunk. (K) A torpedo tube. (L) A weapons shipping cradle weldment. (M) A control surface. (N) A launcher component. (O) A propulsor. Precedents for Funding Navy Acquisition Programs Outside Navy Appropriation Accounts Prior to the establishment of the NSBDF, some observers had suggested funding the procurement of Columbia-class boats outside the Navy's shipbuilding budget, so as to preserve Navy shipbuilding funds for other Navy shipbuilding programs. There was some precedent for such an arrangement Construction of certain DOD sealift ships and Navy auxiliary ships was funded in past years in the National Defense Sealift Fund (NDSF), a part of DOD's budget that is outside the Shipbuilding and Conversion, Navy (SCN) appropriation account, and also outside the procurement title of the DOD appropriations act. Most spending for ballistic missile defense (BMD) programs (including procurement-like activities) is funded through the Defense-Wide research and development and procurement accounts rather than through the research and development and procurement accounts of the individual military services. A rationale for funding DOD sealift ships in the NDSF had been that DOD sealift ships perform a transportation mission that primarily benefits services other than the Navy, and therefore should not be forced to compete for funding in a Navy budget account that funds the procurement of ships central to the Navy's own missions. A rationale for funding BMD programs together in the Defense-Wide research and development account is that this makes potential trade-offs in spending among various BMD programs more visible and thereby helps to optimize the use of BMD funding. Potential Implications of NSBDF on Funding Available for Other Programs The NSBDF has at least two potential implications for the impact that the Columbia-class program may have on funding available in coming years for other DOD acquisition programs A principal apparent intent in creating the NSBDF is to help preserve funding in coming years for other Navy programs, and particularly Navy shipbuilding programs other than the Columbia-class program, by placing funding for the Columbia-class program in a location within the DOD budget that is separate from the Navy's shipbuilding account and the Navy's budget in general. Referring to the fund as a national fund and locating it outside the Navy's budget appears intended to encourage a view (consistent with an argument made by supporters of the Columbia-class program that the program is intended to meet a national military need rather than a Navy-specific need) that funding for the Columbia-class program should be resourced from DOD's budget as a whole, rather than from the Navy's budget in particular. The acquisition authorities in subsections (f), (g), (h), and (i) of 10 U.S.C. 2218a, which were added by P.L. 114-92 and P.L. 114-328 , could marginally reduce the procurement costs of not only Columbia-class boats, but also other nuclear-powered ships, such as Virginia-class attack submarines and Gerald R. Ford (CVN-78) class aircraft carriers, by increasing economies of scale in the production of ship components and better optimizing ship construction schedules. The joint explanatory statement for the FY2016 National Defense Authorization Act ( S. 1356 / P.L. 114-92 of November 25, 2015) directed DOD to submit a report on the \"acquisition strategy to build Ohio-class replacement submarines that will leverage the enhanced procurement authorities provided in the [NSBDF] ... .\" Among other things, the report was to identify \"any additional authorities the Secretary [of Defense] may need to make management of the Ohio-class replacement more efficient....\" The Navy submitted the report on April 18, 2016. The report states in part that the high cost for this unique, next generation strategic deterrent requires extraordinary measures to ensure its affordability. Further, procuring the OHO Replacement (OR), the next generation SSBN, within the current shipbuilding plan presents an extreme challenge to the Navy's shipbuilding budget. To minimize this challenge and reduce OR schedule risk, the Navy proposes to leverage those authorities provided by the National Sea-Based Deterrence Fund (NSBDF) in conjunction with the employment of best acquisition practices on this critical program.... ... the Navy is continuing to identify opportunities to further acquisition efficiency, reduce schedule risk, and improve program affordability. Most notably in this regard, the Navy is currently assessing [the concept of] Continuous Production [for producing components of Columbia-class boats more efficiently than currently scheduled] and will keep Congress informed as we quantify the benefits of this and other initiatives that promise substantial savings.... ... the Navy's initial assessment is that the authorities and further initiatives described [in this report] will be essential to achieving the reductions to acquisition cost and schedule risk that are so critical to success on the OR program.... Section 1022 of the FY2016 NDAA authorized the use of funds in the NSBDF to enter into contracts for EOQ [Economic Order Quantity purchases of materials and equipment] and AC [advance construction activities in shipyards], and to incrementally fund contracts for AP [advance procurement] of specific components. These authorities are essential to successfully executing the OR acquisition strategy. The Navy is able to take advantage of these authorities largely due to how its submarine shipbuilding plan is phased.... Economic Order Quantity contracts provide substantial cost savings to the Navy from procuring materials and equipment in bulk quantities. In addition to the cost savings typically associated with EOQ authority, the Navy has identified an opportunity to implement EOQ procurements to achieve OR schedule efficiencies and commonality contract actions with VCS [Virginia-class submarine] Block V [boats] and CVN [nuclear-powered aircraft carriers].... Advance Construction is the authority to begin [shipyard] construction [work] in fiscal years of AP [advance procurement] budget requests prior to the full funding/authorization year of a hull. Early manufacturing activities help retire construction risk for first-of-a-kind efforts, ease transition from design to production, and provide efficiencies in shipyard construction workload. Advance Construction would allow the shipbuilders to begin critical path construction activities earlier, thus reducing risk to the OR delivery schedule.... The FY2016 NDAA allows the Navy and shipbuilders to enter into incrementally funded procurements for long lead components that employ both AP and Full Funding (FF) SCN increments. This funding approach will provide significant schedule improvements and cost savings by maximizing the utilization of limited funding.... Maximum economic advantage can be obtained through Continuous Production. Procuring components and systems necessary for Continuous Production lines [as opposed to production lines that experience periods during which they are without work] would provide opportunities for savings through manufacturing efficiencies, increased [production-line] learning and the retention of critical production skills. In addition to lowering costs, Continuous Production would reduce schedule risk for both the U.S. and UK SSBN construction programs and minimize year-to-year funding spikes. To execute Continuous Production, the Navy requires authority to enter into contracts to procure contractor furnished and government furnished components and systems for OR SSBNs. OR Missile Tube and Missile Tube Module component procurement through Continuous Production lines have been identified as the most efficient and affordable procurement strategy.... Missile Tube Continuous Production could achieve an average reduction of 25 percent in Missile Tube procurement costs across the [Columbia] Class. These savings are compared to [the] single shipset procurement costs [that are] included in the PB17 PoR [the program of record reflected in the President's (proposed) Budget for FY2017].... The Navy estimates that procuring Missile Tube Modules in Continuous Production lines would result in a cumulative one year schedule reduction in Missile Tube Module manufacturing for the OR Class. This schedule reduction, on a potential critical path assembly, would reduce ship delivery risk and increase schedule margin for follow ship deliveries. In addition to improving schedule, Missile Tube Module Continuous Production (including Strategic Weapon System (SWS) Government Furnished Equipment (GFE)) would produce savings as high as 20 percent compared to single shipset procurement costs included in the PB17 PoR. Executing Continuous Production of Missile Tubes or Missile Tube Modules requires re-phasing of funding from outside the PB17 Future Year's Defense Program (FYDP) [to years that are within the FYDP] but results in significant overall program reductions. The Navy is evaluating additional Continuous Production opportunities for nuclear and nonnuclear components with common vendors required for VIRGINIA Class submarines and FORD Class aircraft carriers. Some examples include spherical air flasks, hull valves, pressure hull hemi heads, bow domes, castings, and torpedo tubes. The prerequisite to Continuous Production in each of these cases would be an affirmation of design stability consistent with completion of first article testing, or its equivalent.... The Navy's position on the cost benefits of these authorities is not fully developed. However, the Congressional Budget Office stated in its Analysis of the Navy's FY2016 Shipbuilding Plan , \" ... the Navy could potentially save several hundred million dollars per submarine by purchasing components and materials for several submarines at the same time.\"... The Navy's initial cost analysis aligns with CBO's projections, and the cost reductions from employing these acquisition authorities will be further evaluated to support the Navy's updated OR Milestone B cost estimate in August 2016.... The Under Secretary of Defense for Acquisition, Technology and Logistics (USD AT&L) approved the OR Program Acquisition Strategy on January 4, 2016. This strategy emphasizes using alternative acquisition tools and cross-platform contracting to reduce schedule risk and lower costs in support of the Navy's shipbuilding programs.... To reduce costs and help alleviate fiscal pressures, the Navy will work with Congress to implement granted authorities and explore the additional initiatives identified in this report.... The cost reductions from employing the granted and proposed acquisition authorities will be further evaluated to support the Navy's updated OR Milestone B cost estimate in August 2016.... These authorities are needed with the National Sea-Based Deterrence Fund, RDTEN [research, development, test, and evaluation, Navy], and SCN appropriations accounts. Together, these acquisition tools will allow the Navy, and the shipbuilders, to implement the procurement strategy which will reduce total OR acquisition costs and shorten construction schedules for a program with no margin for delay.", "summary": "The Columbia (SSBN-826) class program is a program to design and build a class of 12 new ballistic missile submarines (SSBNs) to replace the Navy's current force of 14 aging Ohio-class SSBNs. The Navy has identified the Columbia-class program as the Navy's top priority program. The Navy wants to procure the first Columbia-class boat in FY2021. Research and development work on the program has been underway for several years, and advance procurement (AP) funding for the program began in FY2017. The Navy's proposed FY2020 budget requests $1,698.9 million in advance procurement (AP) funding and $533.1 million in research and development funding for the program. The Navy's FY2020 budget submission estimates the total procurement cost of the 12-ship class at $109.0 billion in then-year dollars. An April 2018 Government Accountability Office (GAO) report assessing selected major DOD weapon acquisition programs stated that the estimated total acquisition cost of the Columbia-class program is $102,075.3 million (about $102.1 billion) in constant FY2018 dollars, including $12,901.0 million (about $12.9 billion) in research and development costs and $89,174.3 million (about $89.2 billion) in procurement costs. Issues for Congress for the Columbia-class program include the following: whether to approve, reject, or modify the Navy's FY2020 funding requests for the program; the risk of cost growth in the program; the risk of technical challenges or funding-related issues that could lead to delays in designing and building the lead boat in the program and having it ready for its scheduled initial deterrent patrol in 2031; the potential impact of the Columbia-class program on funding that will be available for other Navy programs, including other shipbuilding programs; and potential industrial-base challenges of building both Columbia-class boats and Virginia-class attack submarines (SSNs) at the same time. This report focuses on the Columbia-class program as a Navy shipbuilding program. CRS Report RL33640, U.S. Strategic Nuclear Forces: Background, Developments, and Issues, by Amy F. Woolf, discusses the Columbia class as an element of future U.S. strategic nuclear forces in the context of strategic nuclear arms control agreements.", "document_type": "crs"}
{"report": "A private bill is one that provides benefits to specified individuals (including corporate bodies). Individuals sometimes request relief through private law when administrative or legal remedies are exhausted, but Congress seems more often to view private legislation as appropriate when no other remedy is available and when enactment would, in a broad sense, afford equity. From 1817 through 1971, most Congresses enacted hundreds of private laws, but since then the number has declined significantly as Congress has expanded administrative discretion to deal with many of the situations that tended to give rise to private bills. Since 2007, four private laws have been enacted. Private provisions are also occasionally included in public legislation. The Senate considers private bills using the same procedures that are used to consider other legislation. No House rule defines what bills qualify as private, but most private bills have official titles stating them to be \"for the relief of\" named individuals. House Rule XII, clause 4, prohibits the introduction or consideration of private bills for granting pensions, constructing certain bridges, correcting military or naval records, or settling claims eligible for action under the Tort Claims Act ( U.S. Code , Title 28). Subjects of contemporary private bills (and House committees receiving referral of those bills) include the following: Immigration (e.g., residency status, visa classification): Judiciary Domestic claims against the government: Judiciary Foreign claims against the government: Foreign Affairs Patents and copyrights: Judiciary Vessel documentation: Transportation and Infrastructure Taxation (e.g., income tax liability, tariff exemptions): Ways and Means Public lands (e.g., sales, claims, exchanges, mineral leases): Natural Resources Veterans' benefits: Veterans' Affairs Civil Service status: Oversight and Reform Medical (e.g., drug approvals, HMO enrollment requirements): Energy and Commerce Military decorations: Armed Services Private bills are introduced and referred in the same way as other measures. They are commonly introduced by the Member who represents the individual to be benefitted. Seldom are companion bills introduced in both chambers. Although House Rule XII, clause 7, permits no cosponsors on private bills, cosponsors have occasionally appeared on private bills that attract broad interest. Immigration and claims matters have long been the most common subjects of private bills. The Committee on the Judiciary refers these to its Subcommittee on Immigration and Citizenship, which handles them routinely under established committee rules. It generally takes no action on a private bill unless its sponsor submits specified documentation and requests a hearing. The sponsor is generally the only witness at such a hearing. The subcommittee makes available to Member offices information on what documentation it requires and the kinds of bills on which it is likely to take favorable action. It usually declines to report a bill if its records show few precedents for favorable House action in similar cases. Panels that handle other kinds of private legislation have no similarly institutionalized procedures. House Rule XV, clause 5, establishes special procedures for the consideration of private bills. When reported, private bills go on a dedicated calendar, the Private Calendar (House Rule XIII, clause 1). On the first Tuesday of each month, the Speaker is to direct the Clerk to call the bills and resolutions that are pending on the Private Calendar. Each bill is called up automatically in the order in which it was reported and placed on the Calendar. The bills are considered under a hybrid set of procedures known as \"the House as in Committee of the Whole,\" meaning that there is no period of general debate, but debate and amendment may occur under the five-minute rule. Usually, however, no debate occurs, and private measures are disposed of by voice vote. At his or her discretion, the Speaker may also, on any other day of the month, call up for consideration a bill or resolution that has been pending on the Private Calendar for at least seven days, providing he or she has given two legislative days' notice of his or her intention to do so. During the call of the Private Calendar, if two Members object to the consideration of any bill, it is automatically recommitted. During a Congress, each party is to appoint official \"objectors\" who are responsible for examining bills on the Private Calendar and objecting to those they deem inappropriate. Sometimes, a member of a subcommittee dealing with immigration or claims has served simultaneously as an official objector. In practice, instead of objecting, objectors may ask that a bill be passed \"over, without prejudice,\" which gives sponsors an opportunity to discuss concerns with them informally before the next calendar call. If a private bill is recommitted, the committee may re-report it as a paragraph of an omnibus private bill, which has priority for consideration under Rule XV. At this stage, the substance of each original private bill may be defeated by majority vote by means of a motion to strike the paragraph out of the omnibus bill. Otherwise, each paragraph may be amended only by reducing amounts of money or providing limitations. After an omnibus private bill is passed, it is broken up again into separate bills for further action. In recent practice, committees seldom re-report private measures once they are recommitted, and the House does not appear to have considered an omnibus private bill in decades. The House has sometimes considered private bills using other parliamentary mechanisms, such as the Suspension of the Rules procedure or by unanimous consent. Further proceedings on private bills follow the general lawmaking process. Presidents have vetoed private bills, sometimes by pocket veto. Otherwise, Congress may override the veto in the same way as with public measures. Either house of Congress may also, by resolution, refer a private claims bill to the Court of Claims for a recommendation from a trial commissioner. These recommendations are requested occasionally and are strictly advisory, but they are often followed when requested.", "summary": "A private bill is one that provides benefits to specified individuals (including corporate bodies). Individuals sometimes request relief through private law when administrative or legal remedies are exhausted, but Congress seems more often to view private legislation as appropriate when no other remedy is available and when enactment would, in a broad sense, afford equity. From 1817 through 1971, most Congresses enacted hundreds of private laws, but since then, the number has declined significantly as Congress has expanded administrative discretion to deal with many of the situations that tended to give rise to private bills. Since 2007, four private laws have been enacted. Private provisions are also occasionally included in public legislation. The Senate considers private bills using the same procedures that are used to consider other legislation.", "document_type": "crs"}
{"report": "According to the Office of Personnel Management (OPM), the federal workforce is composed of an estimated 2.1 million civilian workers, and several federal agencies collect, compile, and publish statistics about this workforce. Source s may vary in their totals due to differences in how federal workforce statistics are compiled. Some sources rely on \"head counts\" of employees (OPM), some on total hours worked (such as the Office of Management and Budget [OMB]), some on surveys of employing agencies, and others on self-identification by workers surveyed in their homes. In addition, federal civilian employee databases may exclude particular departments, agencies, or branches of government. Some may also account for temporary or seasonal employees (such as those employed by the U.S. Census) depending on the time of year the statistics are generated. This report focuses on differences in methodologies, including exclusions, and the frequency of data collection employed by OMB and OPM to determine the size and scope of the federal workforce. These differences will facilitate the selection of appropriate data for specific purposes. One example of a key methodological distinction is the difference between \"full-time equivalents\" (FTEs) and on-board personnel. The following two examples illustrate how the FTE and on-board methods can be used to derive different federal workforce totals. Full-time equivalent employment is defined as the total number of regular straight-time hours (not including overtime or holiday hours) worked by employees divided by the number of compensable hours applicable to each fiscal year. Work years, or FTEs, are not employee \"head counts.\" One work year, or one FTE, is equivalent to 2,080 hours of work. Table 1 offers examples in which there is a difference between the actual number of people and the number of FTEs working the same number of total hours. It also illustrates how measuring employment by hours can substantially change the perception of the number of employees it takes to accomplish the work. FTE employment numbers are used by OMB to manage employment in departments and agencies. The requirements for reporting FTE employment in the President's Budget are prescribed in Section 85 of OMB Circular No. A-11 on \"Estimating Employment Levels and the Employment Summary (Schedule Q).\" FTE data are published annually in OMB's the Budget of the United States Government under the individual department and agency accounts in the Appendix as well as in the Analytical Perspectives and Historical Tables volumes. OPM defines on-board employment as the number of employees in pay status at the end of the quarter. Data for on-board employment provide employee \"head count\" in most departments and agencies as of a particular date, including full-time, part-time, and seasonal employees. OPM's Employment and Trends report and OPM's FedScope database provide on-board employment headcounts. When calculating on-board personnel, the number of full-time, part-time, and seasonal workers at an agency is relevant. For example, an agency reporting 10 FTEs could conceivably report 20 \"on-board\" employees, depending on employees' work schedules. In addition, the \"on-board\" headcount may result in wide variances in employment numbers, depending on the specific date the employees are counted. For example, the Census Bureau hires 7,000 Census enumerators every 10 years. The federal on-board employees count is likely to be larger during the duration of their employment. OPM is an independent agency that functions as the central human resources department of the executive branch. In fulfilling its mission, OPM collects, maintains, and publishes data on a large portion of the federal civilian workforce. In FY2010, OPM established a system called the Enterprise Human Resources Integration-Statistical Data Mart (EHRI-SDM). This automated system provides access to personnel data for 96% of nonpostal federal civilian executive branch employees. The database does have exclusions; for example, not all executive branch agencies submit their personnel data to OPM. These exclusions include some national security and intelligence agencies, and the Postal Service. Even with these exclusions, the EHRI-SDM is widely regarded as the most comprehensive resource available on the size and scope of the federal workforce. More than 100 data elements are collected for each federal employee within the EHRI-SDM. These data are aggregated by OPM and published in the resources described below. FedScope is a website that provides public access to the EHRI-SDM, covering the most recent five years of employment, accession, and separation data provided by approximately 120 federal agencies. It is available at http://www.fedscope.opm.gov/ . FedScope data are presented in five subject categories, called \"cubes,\" each covering a different subject and time span. The following are descriptions of the data cubes available through FedScope: Employment . This set of cubes contains the total number of federal employees of the included agencies, as well as other information such as age, gender, length of service, occupation, occupation category, pay grade, salary level, type of appointment, work schedule, agency, and location. Data are published quarterly (March, June, September, and December) for the most recent eight fiscal years. September data, which align with the end of the fiscal year, are available from 1998 to the present. Accession . This set of cubes contains the number of people added to the federal civilian workforce each fiscal year. It includes data elements on employees hired from outside the government and those who transferred from one type of federal service category to another. The most recent 14 fiscal years of data are available. Separation . This set of cubes contains the number of people who leave the federal civilian workforce each fiscal year. It captures data elements on employees who transferred to other agencies, voluntarily resigned, retired, experienced a reduction-in-force (RIF), were terminated, or died while employed. The most recent 14 years of data are available. Employment Trends . This set of cubes displays the most recent five years of employment cube data together in one interface, facilitating workforce data comparisons and trend recognition. Diversity . This set of cubes sorts data by an Ethnicity and Race Indicator. Data elements for 13 categories of racial and ethnic groups are available for the most recent eight years. September data, which align with the end of the fiscal year, are available from 2006 to the present. Table 2 provides some of the most commonly requested data available from FedScope. Employment and Trends is an occasional publication from OPM based on on-board employee data. It provides data on executive departments and independent agencies, including the Department of Defense (DOD) civilian employees, Executive Office of the President, legislative branch, and judicial branch. It presents selected data in detailed statistical tables and includes information by government branch, agency, and location. Introductory material in Employment and Trends explains the data presented, time lags in data releases, and caveats to consider when calculating workforce totals. The most recently released version of this resource is available at http://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/#url=Employment-Trends . Common Characteristics of Government is an annual publication that includes a brief outline of OPM's federal employee databases and it includes frequently requested data. The latest edition (FY2017) is available at https://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/common-characteristics-of-the-government/ccog2017.pdf . Sizing Up the Executive Branch of the Federal Workforce is an OPM report that provides access to frequently requested data related to the executive branch. This report includes some information related to the size of the executive branch by month and year, types of employment, and other frequently requested data. The most recent report (FY2017) is available at https://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/reports-publications/sizing-up-the-executive-branch-2016.pdf . OMB is the largest component of the Executive Office of the President. OMB reports directly to the President, and it assists executive departments and agencies in implementing priorities and commitments of the President. OMB produces the Budget of the United States , which includes federal employee statistics created using the FTE counting method. The Budget of the United States , sometimes referred to as the President's Budget, is a four-volume set of documents that includes detailed financial information on individual programs and appropriations accounts. Three volumes of the budget include information on direct civilian FTEs. Tables in the President's Budget typically include actual FTE levels for prior fiscal years and estimates for the two most current fiscal years. The U.S. Government Publishing Office website posts budget volumes dating back to FY1996 at https://www.govinfo.gov/app/collection/BUDGET/ . Table 3 illustrates an example of some commonly requested federal employment data found within the President's Budget. The following volumes of the President's Budget include information on federal employees. The current volumes can be accessed at https://www.whitehouse.gov/omb/budget . The Analytical Perspectives volume typically includes information on the federal workforce, sometimes including information on occupations, trends, education level, age distribution, and other factors. The most current Analytical Perspectives volume of the President's Budget is available at http://www.whitehouse.gov/omb/analytical-perspectives/ . The Appendix volume typically includes an estimate of individual agency FTEs based on the President's proposal along with an estimate and actual FTE count for the prior two years. The most recent Appendix volume of the President's Budget is available at http://www.whitehouse.gov/omb/appendix . The Historical Tables volume of the President's Budget includes historical data on topics such as budget, receipts, outlays, and deficits. This volume also typically includes historical employment counts. The most recent Historical Tables volume of the President's Budget is available at http://www.whitehouse.gov/omb/historical-tables . The resources described in this report contain data often requested by Members or congressional staff. The sources covered differ in the methodology, including exclusions, and the frequency of data collection. Users should be aware of these differences when using federal workforce statistics from these sources.", "summary": "This report describes online tools, reports, and data compilations created by the Office of Management and Budget (OMB) and the Office of Personnel Management (OPM) that contain statistics about federal employees and the federal workforce. The report also describes key characteristics of each resource and briefly discusses selected methodological differences, with the intention of facilitating the selection of appropriate data for specific purposes. This report is not intended to be a definitive list of all information on the federal workforce. It describes significant and recurring products that contain specific data often requested by Members or congressional staff.", "document_type": "crs"}
{"report": "The federal government is vested with the exclusive power to create rules governing alien entry and removal. However, the impact of alien migration—whether lawful or unlawful—is arguably felt most directly in the communities where aliens reside . State and local responses to unlawfully present aliens within their jurisdictions have varied considerably, particularly in determining the role th at state or local police should play in enforcing federal immigration law. At one end of the spectrum, some states and localities actively assist federal immigration authorities in identifying and apprehending aliens for removal. For example, jurisdictions sometimes enter into \"287(g) Agreements\" with the federal government, in which state or local law enforcement are deputized to perform certain immigration enforcement activities. Some states and localities have attempted to play an even greater role in immigration enforcement, in many cases because of perceptions that federal efforts have been inadequate. In the past, some have adopted measures that criminally sanction conduct believed to facilitate the presence of unlawfully present aliens and have also instructed police to actively work to detect such aliens as part of their regular duties. The adoption of these kinds of measures has waned considerably, though, after the Supreme Court's 2012 ruling in Arizona v. United States held that several provisions of one such enactment, Arizona's S.B. 1070, were preempted by federal immigration law. Subsequent lower court decisions struck down many other state and local measures that imposed criminal or civil sanctions on immigration-related activity. At the other end of the spectrum, some states and localities have been less willing to assist the federal government with its immigration enforcement responsibilities. Often dubbed \"sanctuary jurisdictions,\" some states and localities have adopted measures that limit their participation in enforcing federal immigration laws, including, for example, prohibiting police officers from assisting with federal efforts to identify and apprehend unlawfully present aliens within the state or locality's jurisdiction. That said, there is debate over both the meaning and application of the term \"sanctuary jurisdiction.\" Additionally, state and local jurisdictions have varied reasons for choosing not to cooperate with federal immigration enforcement efforts, including reasons not necessarily motivated by disagreement with federal immigration enforcement policies, such as concern about potential civil liability or the availability of state or local resources to assist federal immigration enforcement efforts. During President Donald Trump's first month in office, he issued an executive order, \"Enhancing Public Safety in the Interior of the United States,\" which, in part, seeks to encourage state and local cooperation with federal immigration enforcement and disincentivize state and local adoption of sanctuary policies. This report discusses legal issues related to state and local measures limiting law enforcement cooperation with federal immigration authorities, as well as the federal government's efforts to counter those measures. It begins by providing a general explanation of the term \"sanctuary jurisdiction\" for the purpose of this report. Next, it provides an overview of constitutional principles underlying the relationship between federal immigration laws and related state and local measures, namely, preemption and the anti-commandeering doctrine. Then, it discusses various types of laws and policies adopted by states and localities to limit their participation with federal immigration enforcement efforts, which may give rise to a label of \"sanctuary jurisdiction,\" and federal efforts to counter those measures. Finally, the report concludes with a discussion of the lawsuits challenging the executive order targeting sanctuary jurisdictions and certain executive branch actions to implement the executive order. State or local measures limiting police participation in immigration enforcement are not a recent phenomenon . Indeed, many of the recent \"sanctuary\"-type initiatives can be traced back to church activities designed to provide refuge—or \"sanctuary\"—to unauthorized Central American aliens fleeing civil unrest in the 1980s. A number of states and municipalities issued declarations in support of these churches' actions. Others went further and enacted more substantive measures intended to limit police involvement in federal immigration enforcement activities. These measures have included, among other things, restricting state and local police from arresting persons for immigration violations, limiting the sharing of immigration-related information with federal authorities, and barring police from questioning a person about his or her immigration status. Still, there is no official definition of a \"sanctuary\" jurisdiction in federal statute or regulation. Broadly speaking, sanctuary jurisdictions are commonly understood to be those that have laws or policies designed to substantially limit involvement in federal immigration enforcement activities, though there is not necessarily a consensus as to the meaning of this term. Some jurisdictions have self-identified as a sanctuary (or some other similar term). For other jurisdictions, there might be disagreement regarding the accuracy of such a designation, particularly if state or local law enforcement cooperates with federal immigration authorities in some areas but not others. Any reference by this report to a policy of a particular jurisdiction is intended only to provide an example of the type of measure occasionally referenced in discussions of \"sanctuary\" policies. These references should not be taken to indicate CRS is of the view that a particular jurisdiction is a \"sanctuary\" for unlawfully present aliens. The heart of the debate surrounding the permissible scope of sanctuary jurisdictions centers on the extent to which states, as sovereign entities, may decline to assist in federal efforts to enforce federal immigration law, and the degree to which the federal government can stop state action that undercuts federal objectives in a manner that is consistent with the Supremacy Clause and constitutional principles of federalism. . The federal government's power to regulate immigration is both substantial and exclusive. This authority derives from multiple sources, including Congress's Article I powers to \"establish a uniform Rule of Naturalization\" and to \"regulate commerce with foreign nations, and among the several states,\" as well as the federal government's \"inherent power as sovereign to conduct relations with foreign nations.\" Rules governing the admission and removal of aliens, along with conditions for aliens' continued presence within the United States, are primarily contained in the Immigration and Nationality Act of 1952, as amended (INA). The INA further provides a comprehensive immigration enforcement regime that contains civil and criminal elements. Arizona v. United States reinforced the federal government's pervasive role in creating and enforcing the nation's immigration laws. The ruling invalidated several Arizona laws designed \"to discourage and deter the unlawful entry and presence of aliens and economic activity by persons unlawfully present in the United States\" as preempted by federal law. In doing so, the Court declared that \"[t]he Government of the United States has broad, undoubted power over the subject of immigration and the status of aliens.\" As Arizona highlights, the doctrine of preemption is relevant in assessing state policies related to immigration. The preemption doctrine derives from the Constitution's Supremacy Clause, which states that the \"Constitution, and the laws of the United States ... shall be the supreme law of the land.\" Therefore, Congress, through legislation, can preempt (i.e., invalidate) state law. Preemption can be express or implied. Express preemption occurs when Congress enacts a law that explicitly expresses the legislature's intent to preempt state law. Preemption may be implied in two ways: (1) when Congress intends the federal government to govern exclusively, inferred from a federal interest that is \"so dominant\" and federal regulation that is \"so pervasive\" in a particular area (called \"field preemption\"); or (2) when state law conflicts with federal law so that it is impossible to comply with both sovereigns' regulations, or when the state law prevents the \"accomplishment and execution\" of Congress's objectives (called \"conflict preemption\"). Accordingly, any preemption analysis of the relationship between a federal statute and a state measure must be viewed through the lens of congressional intent. The Supremacy Clause establishes that lawful assertions of federal authority may preempt state and local laws, even in areas that are traditionally reserved to the states via the Tenth Amendment. One notable power reserved to the states is the \"police power\" to promote and regulate public health and safety, the general welfare, and economic activity within a state's jurisdiction. Using their police powers, states and municipalities have frequently enacted measures that, directly or indirectly, address aliens residing in their communities. Yet despite the federal government's sweeping authority over immigration, the Supreme Court has cautioned that not \"every state enactment which in any way deals with aliens is a regulation of immigration and thus per se preempted\" by the federal government's exclusive power over immigration. Accordingly, in Arizona the Supreme Court reiterated that, \"[i]n preemption analysis, courts should assume that the historic police powers of the States are not superseded unless that was the clear and manifest purpose of Congress.\" For example, in Chamber of Commerce of the United States v. Whiting, the Supreme Court upheld an Arizona law—related to the states' \"broad authority under their police powers to regulate the employment relationship to protect workers within the State\" —that authorized the revocation of licenses held by state employers that knowingly or intentionally employ unauthorized aliens. Even though the Immigration Reform and Control Act of 1986 (IRCA) expressly preempted \"any State or local law imposing civil or criminal sanctions ... upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens,\" the Supreme Court concluded that Arizona's law fit within IRCA's savings clause for state licensing regimes and thus was not preempted. Although the federal government's power to preempt state or local activity touching on immigration matters is extensive, this power is not absolute. The U.S. Constitution establishes a system of dual sovereignty between the federal government and the states, including by creating a national legislature with enumerated powers and reserving most other legislative powers to the states by way of the Tenth Amendment. The anti-commandeering doctrine derives from this structural allocation of power, which \"withholds from Congress the power to issue orders directly to the [s]tates\" and prevents Congress from directly compelling states \"to enact and enforce a federal regulatory program.\" Thus, the federal government cannot \"issue directives requiring the [s]tates to address particular problems, nor command the [s]tates' officers, or those of their political subdivisions, to administer or enforce a federal regulatory program.\" Several Supreme Court rulings inform the boundaries of the anti-commandeering doctrine. First, in New York v. United States , the Court reviewed a constitutional challenge to provisions of a federal law that created a series of incentives for states to dispose of radioactive waste. The statute provided states the option of (1) regulating according to Congress's direction, or (2) taking title to, and possession of, the low-level radioactive waste generated within their borders and becoming liable for all damages suffered by waste generators resulting from the state's failure to timely do so. The law, in the Court's view, gave states a \"choice\" between two options concerning their maintenance of radioactive waste disposal, neither of which the Constitution authorized Congress, on its own, to impose on the states. By offering this \"choice,\" Congress had, in the Court's view, \"crossed the line distinguishing encouragement from coercion,\" and in doing so acted \"inconsistent[ly] with the federal structure of our Government established by the Constitution.\" In so holding, the Court declared that \"[t]he Federal Government may not compel the States to enact or administer a federal regulatory program.\" Then, in Printz v. United States, the Supreme Court reviewed whether certain interim provisions of the Brady Handgun Violence Prevention Act (Brady Act) violated the anti-commandeering doctrine. The relevant provisions required state and local law enforcement officers to conduct background checks (and other related tasks) on prospective handgun purchasers. The Court rejected the government's position that the challenged Brady provisions—which directed states to implement federal law—were distinguishable from the law at issue in New York —which directed states to create a policy—and thus was constitutionally permissible. Rather, the Court concluded that a federal mandate requiring state and local law enforcement to perform background checks on prospective handgun purchasers violated the anti-commandeering doctrine. Accordingly, the Court announced that \"Congress cannot circumvent\" the Constitution's prohibition against compelling states to enact or enforce a federal regulatory scheme \"by conscripting the State's officers directly.\" But not every federal requirement imposed on the states necessarily violates the anti-commandeering principles identified in Printz and New York . A number of federal statutes provide that certain information collected by state entities must be reported to federal agencies. And the Court in Printz expressly declined to consider whether these kinds of requirements were constitutionally impermissible, distinguishing reporting requirements from the case before it, which involved \"the forced participation of the States ... in the actual administration of a federal program.\" Additionally, in Reno v. Condon , the Supreme Court unanimously rejected an anti-commandeering challenge to the Driver's Privacy Protection Act (DPPA), which barred states from disclosing or sharing a driver's personal information without the driver's consent, subject to specific exceptions. The Court distinguished the DPPA from the federal laws struck down in New York and Printz because, in the Court's view, the DPPA sought to regulate states \"as owners of databases\" and did not \"require the States in their sovereign capacity to regulate their own citizens ... [or] enact any laws or regulations ... [or] require state officials to assist in the enforcement of federal statutes regulating private individuals.\" The Court declined to address the state's argument that Congress may only regulate the states through generally applicable laws that apply to individuals as well as states, given that the Court deemed the DPPA to be a generally applicable law. The Supreme Court recently clarified the scope of the anti-commandeering doctrine in its 2018 ruling, Murphy v. National Collegiate Athletic Association . Murphy involved a challenge under the anti-commandeering doctrine to the Professional and Amateur Sports Protection Act (PASPA), which, as relevant here, prohibited states from \"authorizing\" sports gambling \"by law.\" (This is sometimes referred to as PASPA's \"anti-authorization\" provision. ) In 2012—20 years after PASPA's enactment—New Jersey eliminated its constitutional ban on sports gambling and then, two years later, repealed state laws that prohibited certain sports gambling. Invoking PASPA's civil-suit provision, several sports leagues sued to enjoin New Jersey from enforcing its new law, arguing that it violated PASPA. The Third Circuit Court of Appeals, sitting en banc, agreed. Further, the Third Circuit rejected New Jersey's counterargument that PASPA unlawfully commandeered state legislatures. The Supreme Court concluded otherwise, holding that PASPA's anti-authorization provision violated the anti-commandeering doctrine. The sports leagues (and the United States, which appeared as amicus curiae ) had argued that under the anti-commandeering doctrine, Congress cannot compel states to enact certain measures, but it can prohibit states from enacting new laws, as PASPA does. The Court described this distinction as \"empty,\" emphasizing that \"[t]he basic principle—that Congress cannot issue direct orders to state legislatures—applies in either event.\" Further, the Court elucidated two situations in which the anti-commandeering doctrine is not implicated. First, the doctrine does not apply \"when Congress evenhandedly regulates an activity in which both States and private actors engage\" (as the Court characterized the situation in Reno ). Second, the federal government does not commandeer states when it enacts a scheme involving \"cooperative federalism,\" in which a state is given a choice either to implement, on its own, a federal program, or opt-out and yield to the federal government's administration of that program. Finally, the Court rejected the sports leagues and the government's contention that PASPA validly preempts state and local gambling laws. The Court announced that \"regardless of the language sometimes used by Congress and this Court, every form of preemption is based on a federal law that regulates the conduct of private actors, not the States .\" But PASPA neither imposes federal restrictions, nor confers federal rights, on private actors, and so, the Court concluded, PASPA can be construed only as a law that regulates state actors and not as a valid preemption provision. Congress does not violate the Tenth Amendment or anti-commandeering principles more generally when it uses its broad authority to enact legislation for the \"general welfare\" through its spending power, including by placing conditions on funds distributed to the states that require those accepting the funds to take certain actions that Congress otherwise could not directly compel the states to perform. However, Congress cannot impose a financial condition that is \"so coercive as to pass the point at which 'pressure turns into compulsion.'\" For example, in National Federation of Independent Business v. Sebelius , the Supreme Court struck down a provision of the Patient Protection and Affordable Care Act of 2010 (ACA) that purported to withhold Medicaid funding to states that did not expand their Medicaid programs. The Court found that the financial conditions placed on the states in the ACA (withholding all federal Medicaid funding, which, according to the Court, typically totals about 20% of a state's entire budget) were akin to \"a gun to the head\" and thus unlawfully coercive. Several states and municipalities have adopted measures intended to limit their participation in federal immigration enforcement efforts. These limitations take several forms. For example, some states and localities have sought to restrict police cooperation with federal immigration authorities' efforts to apprehend removable aliens, sometimes called \"don't enforce\" policies. Other measures may restrict certain state officials from inquiring about a person's immigration status, sometimes referred to as \"don't ask\" policies. Still others restrict information sharing between local law enforcement and federal immigration authorities, sometimes described as \"don't tell\" policies. The following sections discuss some state and local restrictions on law enforcement activity in the field of immigration enforcement along those lines, including the relationship between these restrictions and federal law. Violations of federal immigration law may be criminal or civil in nature. Removal proceedings are civil, although some conduct that makes an alien removable may also warrant criminal prosecution. For example, an alien who knowingly enters the United States without authorization is not only potentially removable, but could also be charged with the criminal offense of unlawful entry. Other violations of the INA are exclusively criminal or civil in nature. Notably, an alien's unauthorized immigration status makes him or her removable but, absent additional factors (e.g., having reentered the United States after being formally removed), unlawful presence on its own is not a criminal offense. Some jurisdictions have adopted measures that restrict its police officers from making arrests for violations of federal immigration law. In some jurisdictions restrictions prohibit police from detaining or arresting aliens for civil violations of federal immigration law, like unlawful presence . Other jurisdictions prohibit police from making arrests for some criminal violations of federal immigration law, like unlawful entry. Still others prohibit law enforcement from assisting federal immigration authorities with investigating or arresting persons for civil or criminal violations of U.S. immigration laws. And some other jurisdictions have prohibitions that are broader in scope, such as a general statement that immigration enforcement is the province of federal immigration authorities, rather than that of local law enforcement. State or local restrictions on police authority to arrest persons for federal immigration law violations do not appear to raise significant legal issues. Even though the INA expressly allows state and local law enforcement to engage in specified immigration enforcement activities, nothing in the INA compels such participation. Indeed, any such requirement likely would raise anti-commandeering issues. Moreover, after Arizona , it appears that states and localities are generally preempted from making arrests for civil violations of the INA in the absence of a specific federal statutory authorization or the \"request, approval, or other instruction from the Federal Government.\" Many sanctuary-type policies place restrictions on police inquiries or investigations into a person's immigration status. Some policies provide that police may not question a person about his or her immigration status except as part of a criminal investigation. Others bar law enforcement from initiating police activity with an individual for the sole purpose of discovering immigration status. And other policies prohibit law enforcement from questioning crime victims and witnesses about their immigration status. Still other policies more broadly limit officials from gathering information about persons' immigration status, except as required by law. Restricting the authority of police to question a person about his or her immigration status helps ensure that law enforcement lacks any information that could be shared with federal immigration authorities. As explained in the \" PRWORA and IIRIRA \" section below, two federal laws prevent state or local restrictions on sharing information about a person's immigration status with federal immigration authorities, but the provisions do not require state or local police to actually collect such information. Murphy has raised questions, though, about the continuing constitutional viability of these statutes. Some states and localities have restricted government agencies or employees from sharing information with federal immigration authorities. For instance, some jurisdictions prohibit law enforcement from notifying federal immigration authorities about the release status of incarcerated aliens, unless the alien has been convicted of certain felonies. Similarly, other jurisdictions prohibit their employees from disclosing information about an individual's immigration status unless the alien is suspected of engaging in illegal activity that is separate from unlawful immigration status. Some jurisdictions restrict disclosing information except as required by federal law —sometimes referred to as a \"savings clause\"—although it appears that the Department of Justice has interpreted those provisions as conflicting with federal information-sharing provisions. Over the years the federal government has enacted measures designed to counter certain sanctuary policies. Notably, in 1996 Congress enacted Section 434 of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), and Section 642 of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA), to curb state and local restrictions on information sharing. Most recently, the President issued Executive Order 13768, \"Enhancing Public Safety in the Interior of the United States,\" which, as relevant here, seeks to encourage state and local cooperation with federal immigration enforcement and disincentivize state and local adoption of sanctuary policies that hinder federal immigration enforcement. These federal initiatives—and related legal issues—are described below. In 1996 Congress sought to end state and local restrictions on information sharing through provisions in PRWORA and IIRIRA. Neither PRWORA nor IIRIRA require s state or local government entities to share immigration-related information with federal authorities. Instead, these provisions bar restrictions that prevent state or local government entities or officials from voluntarily communicating with federal immigration authorities regarding a person's immigration status. IIRIRA § 642, codified at 8 U.S.C. § 1373, bars any restriction on a federal, state, or local governmental entity or official's ability to send or receive information regarding \"citizenship or immigration status\" to or from federal immigration authorities. It further provides that no person or agency may prohibit a federal, state, or local government entity from (1) sending information regarding immigration status to, or requesting information from, federal immigration authorities; (2) maintaining information regarding immigration status; or (3) exchanging such information with any other federal, state, or local government entity. PRWORA § 434, codified at 8 U.S.C. § 1644, similarly bars state and local governments from prohibiting or restricting state or local government entities from sending or receiving information, to or from federal immigration authorities, regarding the \"immigration status\" of an individual. Shortly after Congress enacted these information-sharing restrictions, New York City, which had a policy limiting information sharing with federal immigration authorities, brought suit challenging the constitutionality of Sections 1373 and 1644. Among other things, New York City alleged that the provisions facially violated the Tenth Amendment by barring states and localities from controlling the degree to which their officials may cooperate with federal immigration authorities. A federal district court dismissed this claim in City of New York v. United States , and the U.S. Court of Appeals for the Second Circuit affirmed the judgment. The Second Circuit observed that, unlike the statutes struck down on anti-commandeering grounds in New York and Printz , the information-sharing provisions in PRWORA and IIRIRA did not directly compel state authorities to administer and enforce a federal regulatory program. Instead, the court reasoned, these provisions prohibited state and local governments from restricting \"the voluntary exchange\" of immigration information between federal and state authorities. Further, the court added, \"informed, extensive, and cooperative interaction of a voluntary nature\" between states and federal authorities is an integral feature of the American system of dual sovereignty, and, in any event, the Supremacy Clause \"bars states from taking actions that frustrate federal laws and regulatory schemes.\" Accordingly, the Second Circuit concluded that the Tenth Amendment does not provide states and municipalities with the \"untrammeled right to forbid all voluntary cooperation by state or local officials with particular federal programs.\" The court therefore rejected New York City's constitutional challenge to the information-sharing provisions of PRWORA and IIRIRA, holding that that they did not violate the Tenth Amendment or principles of federalism. New York City sought to appeal the decision to the Supreme Court, but its petition for certiorari was denied. A few months later, though, the Court handed down Reno , which, as explained earlier, held that the DPPA (a federal statute regulating the dissemination of certain personal information collected by state authorities) did not violate federalism principles embodied in the Tenth Amendment. Since the Second Circuit's ruling, questions about Section 1373's constitutionality remained relatively quiet until President Trump issued the executive order targeting jurisdictions that do not comply with Section 1373. This sparked new litigation challenging Section 1373, some of which invoked Murphy after the ruling came down. Shortly after taking office, President Trump issued Executive Order (EO) 13768, \"Enhancing Public Safety in the Interior of the United States,\" which, in Section 9, addresses sanctuary jurisdictions. Specifically, Section 9(a) of the EO seeks to encourage state and local cooperation with federal immigration enforcement and disincentivize—by threatening to withhold federal grant money—state and local adoption of sanctuary policies. Although EO 13768 did not explicitly define \"sanctuary jurisdiction,\" later interpretive guidance from the Department of Justice (DOJ or Justice Department) defined the term, as it is used in the executive order, as a jurisdiction that willfully refuses to comply with 8 U.S.C. § 1373 (IIRIRA § 642). This section discusses recent litigation concerning efforts by the Trump Administration to deter the implementation of state or local \"sanctuary\" policies. It begins by providing a brief description of Section 9(a) of EO 13768 and the DOJ's implementation of its requirements. Next, it discusses ongoing litigation involving challenges to Section 9(a). Several of these cases involve direct challenges to the executive order. Other lawsuits involve challenges to the Justice Department's decision, in implementing the executive order, to attach new conditions for grant eligibility under the Edward Byrne Memorial Justice Assistance Grant (Byrne JAG) program and Community Oriented Policing Services (COPS) program, all of which are designed to encourage state and local law enforcement cooperation with federal immigration enforcement. Finally, this section discusses a lawsuit filed by the United States against California, claiming that three new state laws obstruct the federal government's immigration enforcement efforts and, as a result, violate the Constitution's Supremacy Clause. On January 25, 2017, the President signed EO 13768, \"Enhancing Public Safety in the Interior of the United States.\" Section 9 of the executive order seeks to encourage state and local cooperation with federal immigration enforcement and disincentivize state and local adoption of sanctuary policies. In particular, Section 9 declares that \"[i]t is the policy of the executive branch to ensure, to the fullest extent of the law, that a State, or political subdivision of a State, shall comply with 8 U.S.C. 1373.\" To implement the policy set forth in the executive order, the President instructs the Attorney General and the Secretary of the Department of Homeland Security (DHS) under Section 9(a) to ensure that jurisdictions that \"willfully refuse to comply with 8 U.S.C. 1373 (sanctuary jurisdictions) are not eligible to receive Federal grants,\" subject to limited exception. The executive order authorizes the DHS Secretary to designate a jurisdiction she determines to be a \"sanctuary,\" and directs the Attorney General to take \"appropriate enforcement actions\" against \"any entity\" that violates Section 1373 or that \"has in effect a statute, policy, or practice that prevents or hinders the enforcement of Federal law.\" Under Section 9(b), the President directs the DHS Secretary to publish, weekly, a list of jurisdictions that ignore or fail to honor detainer requests for incarcerated aliens, \"[t]o better inform the public regarding the public safety threats associated with sanctuary jurisdictions.\" A few months later, on May 22, 2017, Attorney General Sessions issued a memorandum interpreting EO 13768. First, he announced that \"sanctuary jurisdictions,\" for the purposes of enforcing the executive order, are \"jurisdictions that 'willfully refuse to comply with 8 U.S.C. 1373.'\" Further, the Attorney General stated that the executive order applies only to grants that the DOJ or DHS administer. As a result, the Attorney General announced that the DOJ would \"require jurisdictions applying for certain Department grants to certify their compliance with federal law, including 8 U.S.C. § 1373, as a condition for receiving an award.\" In addition, the certification requirement would apply to all existing grants administered by the DOJ's Office of Justice Programs and Office of Community Oriented Policing Services (COPS) that expressly contain the certification condition, and to future grants for which the DOJ has statutory authority to impose such conditions. Further, the Attorney General added that \"[s]eparate and apart from the Executive Order, statutes may authorize the Department to tailor grants or to impose additional conditions on grantees to advance the Department's law enforcement priorities.\" Accordingly, \"[g]oing forward,\" the Attorney General announced, \"the Department, where authorized, may seek to tailor grants to promote a lawful system of immigration.\" As a follow up to that interpretive memorandum, two months later on July 25, 2017, the DOJ issued a press release and accompanying background document announcing new conditions for recipients of the Byrne JAG program. The Byrne JAG program provides federal funds to the states, District of Columbia, Puerto Rico, and other territories for various nonfederal criminal justice initiatives. The press release announced three new conditions: 1. Compliance Condition . Byrne JAG program grant recipients must certify compliance with Section 1373, which would notify the federal government that the jurisdiction does not restrict its offices and personnel from sending or receiving citizenship or immigration status to or from federal immigration authorities . 2. Access Condition . Grant recipients that have detention facilities housing aliens (e.g., local jails or state prisons where aliens may be confined) must permit DHS immigration enforcement personnel (i.e., enforcement officers with DHS's U.S. Immigration and Customs Enforcement [ICE]) to access those facilities to meet with housed aliens and inquire into their eligibility to remain in the country. 3. Notice Condition . When DHS believes that an alien in state or local custody is removable from the United States for a violation of federal immigration law, ICE officers may issue a \"detainer\" requesting that the state or local entity give notice of the alien's pending release from custody so that ICE may take control of the alien for possible removal proceedings. To be eligible for grants under the Byrne JAG program, DOJ announced that recipients generally must give DHS 48 hours' advance notice before releasing from custody an alien wanted for removal. These requirements were made applicable to Byrne JAG applications that were due six weeks later, on September 5, 2017, meaning that applying jurisdictions would need to be in compliance with all three conditions within six weeks. Additionally, the Justice Department announced a requirement for applicants seeking grants administered by the COPS Office to certify compliance with Section 1373. COPS grants are used to advance community policing, for example, through training, technical assistance, and developing \"innovative policing strategies\" in a number of \"topic areas\" selected by the DOJ. For FY2018, in the topic area for \"Field Initiated Law Enforcement,\" priority consideration could be given to applicants that cooperate with federal immigration authorities \"to address illegal immigration.\" Further, the COPS Office notified potential applicants that additional consideration would be given to applicants that partner with federal law enforcement to combat illegal immigration. To obtain that special consideration, applicants could sign a form certifying that they follow practices mirroring those of the notice and access conditions of Byrne JAG program: (1) allowing federal immigration authorities to access detention facilities where they may question known or suspected aliens about their immigration status; and (2) providing at least 48 hours' notice of those persons' expected custodial release. The lawsuits challenging Section 9(a) of EO 13768 and its implementation came in two waves. The first wave came shortly after President Trump signed the executive order, when several jurisdictions sued for injunctive relief. The second, larger wave of litigation came after the DOJ announced the new Byrne JAG and COPS conditions. In the litigation challenging the EO's implementation, the various challengers have brought arguments raising similar statutory and constitutional concerns, chiefly: the DOJ lacked statutory authority to impose the new conditions; the DOJ imposed the conditions arbitrarily and capriciously in violation of the Administrative Procedure Act; the executive branch violated principles of separation of powers by usurping the legislature's spending power; and the government violated the anti-commandeering doctrine by unconstitutionally conscripting the states into federal immigration enforcement. The County and City of San Francisco and the County of Santa Clara (collectively, the \"Counties\"), for example, filed suit within days of each other, and those lawsuits were considered jointly by a district judge in the Northern District of California. The district court presiding over the Counties' challenges ultimately issued an injunction blocking nationwide enforcement of Section 9(a). The Ninth Circuit agreed with the lower court that Section 9(a) violates the Constitution's principles of separation of powers. However, while agreeing that the injunction was appropriate to prevent Section 9(a) from having effect in California, the appellate court concluded that the current factual record was insufficient to support a nationwide injunction and remanded the case to the district court for further factfinding. As for the litigation challenging new Byrne JAG and COPS conditions, in one case, the U.S. District Court of the Northern District of Illinois enjoined the Byrne JAG conditions as applied to Chicago. The court held that, in imposing those conditions, the DOJ exceeded the statutory authority Congress delegated to implement the Byrne JAG program. In another case, the U.S. District Court for the Eastern District of Pennsylvania enjoined the federal government from enforcing the three Byrne JAG conditions against Philadelphia. The district court concluded, among other things, that the conditions were imposed arbitrarily and capriciously in violation of the Administrative Procedure Act (APA) because the government had failed to adequately justify imposing the new conditions. For reasons similar to the federal district courts in Chicago and Pennsylvania, a district court in New York enjoined the government from enforcing the new conditions against the City of New York and the States of New York, Connecticut, New Jersey, Rhode Island, Washington, Massachusetts, and Virginia (the collective plaintiffs in that case). Notably, all of the district judges held, post- Murphy , that Section 1373 violates the anti-commandeering doctrine. Finally, in another lawsuit brought by the City of Los Angeles, California, a district judge permanently enjoined the new considerations for COPS grant selections, concluding that they were imposed without statutory authority, violated the Spending Clause, and were arbitrarily and capriciously imposed in violation of the APA. Shortly after President Trump issued EO 13768, the City and County of San Francisco and the County of Santa Clara, California, filed suit, asking a federal court to enjoin Section 9(a) of the order. The Counties principally argued that Section 9(a) is unconstitutional in three ways. First, the Counties contended that the funding restrictions, by purporting to withhold, or impose new eligibility conditions on, congressional appropriations, violated the separation of powers by usurping the legislature's spending power granted in Article I, Section 8 of the Constitution. Alternatively, even assuming that the President had lawful authority to withhold, or impose conditions on, congressionally appropriated funds, the Counties argued that Section 9(a) would still violate the Spending Clause because it surpasses the constitutional limits of the Spending Clause set forth by the Supreme Court. Finally, the Counties argued that Section 9(a) violates the anti-commandeering doctrine, contending, for instance, that Section 9(a) coerces jurisdictions into complying with ICE-issued immigration detainers by threatening to withhold federal funding and take unspecified enforcement action against jurisdictions that \"'hinder the enforcement of federal law.'\" The district judge ultimately agreed with all three arguments and permanently enjoined—nationwide—Section 9(a) of the executive order. The Ninth Circuit, in a 2-1 ruling, affirmed the district court's judgment on the ground that Section 9(a) violates the separation of powers by usurping Congress's spending power. The Ninth Circuit vacated the injunction's nationwide application, however, and remanded for further factfinding on whether the injunction ought to be nationwide in scope. In holding that EO Section 9(a) violates the separation of powers, the Ninth Circuit recounted that \"when it comes to spending, the President has none of his own constitutional powers to rely upon.\" That power, the court explained, is exclusively Congress's domain, subject to delegation. Yet, the court opined, Congress had not authorized the executive branch \"to withdraw federal grant moneys from jurisdictions that do not agree with the current Administration's immigration strategies.\" Further, the court pointed to nearly a dozen failed congressional proposals to do just that during the 114th Congress. Thus, the Ninth Circuit concluded, \"[n]ot only has the Administration claimed for itself Congress's exclusive spending power, it also attempted to coopt Congress's power to legislate.\" Another California city unsuccessfully tried to challenge EO 13768 as it relates to sanctuary jurisdictions. Richmond, California, like Santa Clara and San Francisco, argued that (1) the President exceeded his constitutional authority by purporting to appropriate federal funds; (2) even assuming that the President has such spending authority, the conditions set forth in the executive order violate the Spending Clause's lawful parameters; and (3) the executive order unlawfully commandeers the states. The district court denied Richmond's request for injunctive relief, however, after concluding that the city could not establish pre-enforcement standing to challenge the executive order. In dismissing Richmond's suit, the district court applied the framework that the Supreme Court set forth in Babbitt v. Farm Workers National Union to determine whether a plaintiff has standing to challenge a statute before it is enforced against the plaintiff. Under Babbitt, the plaintiff must demonstrate \"an intention to engage in a course of conduct arguably affected with a constitutional interest, but proscribed by a statute, and there exists a credible threat of prosecution thereunder.\" The district court assumed without deciding that Richmond had policies proscribed by the executive order, could lose federal funding if the order was enforced against it, and put forward claims that implicated constitutional interests. So the ruling on whether Richmond had pre-enforcement standing ultimately hinged on whether Richmond had demonstrated a \"well-founded fear\" that the executive order would be enforced against it, and the court concluded the city had not. The court opined that \"[t]he likely targets of enforcement under the [Executive] Order are jurisdictions that have actually refused to cooperate with ICE and that ICE believes are hindering its immigration enforcement efforts.\" But according to Richmond's own complaint, the court found, the federal government had never asked Richmond to assist in enforcing immigration policy, nor had it been identified as a locality that restricts cooperation with ICE or regularly declines immigration detainers. Thus, the court decided that Richmond had \"no real-world friction with ICE or the defendants over its policies\" and thus was unlikely to be subjected to the executive order's funding restrictions. The Cities of Seattle, Washington, and Portland, Oregon, jointly challenged President Trump's executive order. The cities asked a district court to declare that Section 9(a) of EO 13768 is unconstitutional under the Tenth Amendment, the Spending Clause, and separation-of-power principles, principally for the same reasons as the other jurisdictions challenging the executive order. Soon after the plaintiffs brought suit, though, the district court stayed the case, pending the resolution of the appeal in the Ninth Circuit of the injunction issued in the Santa Clara/San Francisco litigation. After the Ninth Circuit concluded that Section 9(a) was unconstitutional, the district judge in this case also ruled that Section 9(a) unconstitutionally violated the separation of powers. Two cities in Massachusetts, Chelsea and Lawrence, also filed suit shortly after President Trump issued EO 13768, challenging Section 9(a). Chelsea and Lawrence principally argued that that Section 9(a) violates the Tenth Amendment and the Constitution's separation-of-power principles, for reasons substantially similar to those argued by Santa Clara, San Francisco, and Richmond. However, after the district court in the Santa Clara/San Francisco litigation issued a nationwide preliminary injunction blocking the executive order, the parties agreed to stay the proceedings unless and until the injunction is lifted. After the Justice Department announced the new Byrne JAG conditions, the City of Chicago, Illinois, sued, asking a district court to enjoin the Attorney General from imposing them. Chicago's suit challenged each of the three conditions that the Justice Department imposed for grant eligibility (compliance with the information-sharing requirements of Section 1373, DHS access to state and local detention facilities, and providing notice to DHS when an alien wanted for removal is released from custody). First, Chicago argued that the DOJ lacked statutory authority to impose the new conditions because the Byrne JAG statute does not confer agency discretion to add substantive conditions to the receipt of those federal funds. And even though the Byrne JAG statute requires that recipients certify compliance with \"all other applicable Federal laws,\" Chicago contended that conditioning the receipt of the grant on state and local compliance with Section 1373 is a new condition nevertheless. This is so because, Chicago asserted, Section 1373 is not an \"applicable\" law as intended by the JAG statute; rather, Chicago argued that the word \"applicable\" necessarily narrows the phrase from one that includes the entire body of federal law, to one that includes a subset of laws that \"make[s] clear to grant recipients that their receipt of money is conditioned on compliance.\" In Chicago's view, the correct set of \"applicable\" laws is \"the specialized body of statutes that govern federal grantmaking.\" Second, Chicago argued that the notice and access conditions violate the Constitution's separation-of-power principles because the DOJ—an executive branch agency—unlawfully exercised the spending authority exclusively granted to the legislative branch. Third, Chicago asserted that, even if the DOJ had been given the discretion to condition grant eligibility, the notice and access conditions exceeded constitutional spending authority. According to Chicago, the new conditions (1) are not germane to the federal interest in the Byrne JAG funds Chicago receives, and (2) by requiring grant recipients to provide immigration authorities with 48 hours' notice before releasing an alien in custody, would induce Chicago to engage in activities that violate the Fourth Amendment because, in practice, Chicago would have to hold detainees longer than constitutionally permitted. Finally, Chicago alleged that Section 1373, on its face, violates the Tenth Amendment, and thus the DOJ cannot condition the receipt of federal funds on state and local compliance with it. The district court initially granted a nationwide, preliminary injunction concerning the notice and access conditions. The Seventh Circuit upheld this ruling on interlocutory appeal but stayed its nationwide effect, making the injunction applicable to only Chicago. Before the district court made its final ruling, the Supreme Court issued Murphy , prompting the court to reconsider its earlier conclusion that the compliance condition was lawful. Ultimately, the court issued a nationwide, permanent injunction, holding that Section 1373 is unconstitutional on its face and blocking the enforcement of all three Byrne JAG conditions. However, because the en banc Seventh Circuit previously had stayed the nationwide effect of the preliminary injunction, the district court stayed the nationwide effect of the permanent injunction, pending appeal, in deference to the Seventh Circuit's earlier order. Turning to the merits of the district court's order, the court first concluded that Section 1373 violates the anti-commandeering doctrine. The court recounted that in Murphy, the Supreme Court held that, under the anti-commandeering doctrine, \"Congress cannot issue direct orders to state legislatures\" through a federal law that compels state action or that prohibits state action. Thus, because Section 1373 prohibits state policymakers from forbidding its employees to share immigration-status information with immigration authorities, the court concluded that this federal prohibition on state action runs afoul of the anticommandeering doctrine. The court further rejected the government's request to carve out an exception to the anti-commandeering doctrine for laws requiring states to share information with the federal government \"in the face of clear guidance from Murphy \" and without the Supreme Court ever creating such an exception. Next, the district court concluded that the notice, access, and compliance conditions were imposed without statutory authority and thus unlawful. The court's conclusion that Section 1373 is unconstitutional doomed the compliance condition. The Byrne JAG statute requires compliance with \"all other applicable Federal laws.\" But, \"[a]s an unconstitutional law,\" the court explained, \"Section 1373 automatically drops out of the possible pool of 'applicable Federal laws.'\" For the notice and access conditions, the court principally relied on the Seventh Circuit's reasoning in its order affirming the preliminary injunction, adding that \"the Attorney General ha[d] not mustered any other convincing argument in support of greater statutory authority\" and that \"nothing ha[d] shaken this Court from the opinion it expressed at the preliminary injunction stage.\" For instance, the Seventh Circuit had rejected the government's contention that the conditions are authorized by 34 U.S.C. § 10102(a)(6), which sets forth the duties and functions of the Assistant Attorney General (AAG) in running the Office of Justice Programs, which administers the Byrne JAG program. The government had pointed to the statutory text granting the AAG the authority to exercise \"powers and functions as may be vested in the Assistant Attorney General pursuant to this chapter or by delegation of the Attorney General, including placing special conditions on all grants, and determining priority purposes for formula grants . \" But, according to the Seventh Circuit, \"[t]he inescapable problem here is that the Attorney General does not even claim that the power exercised here is authorized anywhere in the chapter, nor that the Attorney General possesses that authority and therefore can delegate it to the Assistant Attorney General.\" The City of Evanston, Illinois (City), and the United States Conference of Mayors (Conference), together, brought a lawsuit that mirrored Chicago's and requested preliminary injunctive relief. The case was assigned to the same district judge who had presided over Chicago's lawsuit. For that reason, when considering whether the plaintiffs were likely to succeed on the merits of their claims, the district court relied on its earlier opinions and those of the Seventh Circuit. The district judge observed that, \"though the plaintiffs at bar have changed, the legislation proscribing which conditions the Attorney General may attach has not.\" Accordingly, because the Seventh Circuit described as \"untenable\" the government's arguments for its statutory authority to impose the Byrne JAG conditions, the district court concluded that the City and Conference were likely to prevail. Consequently, the district court enjoined the government from enforcing the conditions against the plaintiffs. The City of Philadelphia, Pennsylvania, also sued to stop the Attorney General from imposing the new Byrne JAG conditions. Like Chicago, Philadelphia argued that the DOJ lacked statutory authority to impose the new conditions, violated constitutional principles of separation of powers, violated the Spending Clause, and unconstitutionally conscripted the states into federal immigration enforcement. Philadelphia also argued that the conditions were arbitrarily and capriciously imposed in violation of the APA. Initially, the district court found that all three of the conditions were unlawfully imposed and preliminarily blocked their enforcement against Philadelphia. Then, after a bench trial, the court permanently enjoined the DOJ from enforcing against Philadelphia the three new Byrne JAG conditions. The district court concluded that the Byrne JAG Statute contained no explicit authority for the notice and access conditions. The court further held that the Justice Department's decision to impose all three conditions was arbitrary and capricious in violation of the APA. The court reasoned that the DOJ did not adequately justify imposing the new conditions. For instance, the court found that, before imposing the certification condition, the government had not \"assess[ed] the benefits or drawbacks of imposing a condition, but instead merely assessed whether jurisdictions would be compliant were such a condition imposed.\" Finally, the district court in Philadelphia concluded that Murphy mandates holding Section 1373 unconstitutional. The Third Circuit affirmed the district court's ruling but on narrower grounds: The court held that the conditions were imposed without statutory authority and thus are unlawful. The circuit court first concluded that the JAG statute did not authorize any of the challenged conditions. In support of the notice and access conditions, the government pointed to two provisions of the statute requiring the Attorney General to direct grant applicants (1) to report \"data, records, and information (programmatic and financial)\" that he may \"reasonably require,\" and (2) to certify that \"there has been appropriate coordination with affected agencies.\" In the government's view, \"information\" the Attorney General may \"reasonably require\" includes notification of an alien's release from custody from law-enforcement and corrections programs funded by the JAG grant. But the court disagreed, explaining that JAG statute explicitly limits information to programmatic and financial information, meaning \"information regarding the handling of federal funds and the programs to which those funds are directed\" and not \"priorities unrelated to the grant program.\" The court also rejected the government's argument that the coordination provision authorizes access to aliens in Philadelphia's custody because that would amount to \"appropriate coordination\" with immigration authorities affected by those same JAG-funded law-enforcement and corrections programs. Because the statute refers to instances where \"there has been \" coordination, which the court understood to reference past coordination, the court concluded that the statutory language \"does not serve as a basis to impose an ongoing requirement to coordinate.\" As for the lawfulness of the compliance condition, the government invoked another JAG statute provision, this one requiring applicants to certify compliance with \"all other applicable Federal laws.\" The government contended that Section 1373 is an applicable federal law. The court rejected the government's expansive view of the term, however. The court reasoned, for instance, that if the Attorney General could condition funds based on compliance with any law in the U.S. Code , this practice would essentially turn the JAG formula grant—which is awarded to a jurisdiction through a formula that considers only population and violent crime statistics—into a discretionary grant. Next, the court rejected the government's other asserted source of statutory authority for imposing the conditions: the provision establishing the duties and functions of the AAG in 34 U.S.C. § 10102. This statute directs the AAG to \"exercise such other powers and functions as may be vested in the [AAG] pursuant to this chapter or by delegation of the Attorney General, including placing special conditions on all grants.\" The court emphasized, however, that this provision authorizes the AAG to place conditions on grants only if that power has been vested by Title 34 of the U.S. Code or delegated by the Attorney General, and neither of those predicates had occurred. All told, based on the sole ground that the Attorney General lacked statutory authority to impose the notice, access, and compliance conditions, the Third Circuit affirmed the district court's order enjoining those conditions as applied to Philadelphia, and declined to address Philadelphia's additional arguments. In separate lawsuits considered together, the State of California and the City and County of San Francisco sued the Justice Department seeking to block the three new Byrne JAG conditions. The California plaintiffs argued that the notice and access conditions were imposed without statutory authority and, thus, violate the separation of powers, invoking the conclusions reached by the district courts who had enjoined those conditions. The plaintiffs further argued that, post- Murphy , Section 1373 is constitutionally unenforceable against the states. They contended that Section 1373 \"dictates what a state legislature may and may not do,\" and Murphy forecloses Congress's ability to do that. The district court concluded that the Byrne JAG conditions violate the separation of powers and that Section 1373 is unconstitutional, declaring that he is \"[i]n agreement with every court that has looked at these issues.\" And \"follow[ing] the lead of the district court in City of Chicago ,\" the district judge entered a nationwide injunction, staying the nationwide aspect until the Ninth Circuit has an opportunity to review the order on appeal. Like the district courts in Chicago and Philadelphia, the district court here concluded that the Byrne JAG statute does not authorize the Justice Department to impose the notice and access conditions, given the sparse, inapplicable discretion the statute delegates. Without that delegated authority, the court continued, the Justice Department unlawfully exercised Congress's exclusive Spending Power and violated the separation of powers. Next, the court held that Section 1373 violates principles of federalism. The court explained that post- Murphy , \"[t]here is no distinction for anti-commandeering purposes . . . between a federal law that affirmatively commands States to enact new laws and one that prohibits States from doing the same.\" And even if the Supreme Court eventually were to carve out an exception for federally required information-sharing, the district court opined that Section 1373 impacts jurisdictions much more than \"a ministerial information-sharing statute.\" For example, the court found that Section 1373 \"takes control over the State's ability to command its own law enforcement.\" The States of New York, Connecticut, New Jersey, Rhode Island, Washington, Massachusetts, and Virginia and the City of New York (collectively, the \"States and City\") sued the DOJ, challenging the three new Byrne JAG conditions. Like other jurisdictions, these plaintiffs contended that the conditions violate the separation of powers and the APA, and, further, that Section 1373 violates the anti-commandeering doctrine. A district judge in the Southern District of New York enjoined the Justice Department from imposing the notice, access, and compliance conditions on the States and City. The court first concluded that the conditions were imposed without statutory authority and thus, as the APA directs, must be set aside. Agreeing with the other courts, the district judge rejected the government's arguments that the statutory provision authorizing the Assistant Attorney General to exercise powers delegated by the Attorney General to impose grant conditions. Specifically, the government had contended that 34 U.S.C. § 10102(a)(6) authorizes the imposition of the conditions, and Department's compliance condition is authorized by the Byrne JAG statute's requirement, under 34 U.S.C. § 10153(a)(5)(D), to certify compliance with \"all other applicable Federal laws.\" Concerning § 10102(a)(6), the district court concluded that the Assistant Attorney General could not impose the conditions because the Attorney General had no statutory authority to do so, and thus had no authority to delegate. As for § 10153(a)(5)(D), the court concluded that the term \"all other applicable Federal laws\" is ambiguous and thus violates the tenet that \"if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously.\" Accordingly, the court viewed the language \"'from the perspective of a state official who is engaged in the process of deciding whether the State should accept [the] funds and the obligations that go with those funds,' and 'must ask whether such a state official would clearly understand that one of the obligations of the Act is the [purported] obligation.'\" From that perspective, the court concluded that the applicable federal laws are limited to those applicable grant, given that the rest of § 10153 concerns requirements for the application and grant itself. Additionally, the district court concluded that the conditions constitute arbitrary and capricious agency action in violation of the APA. The court reasoned that, notwithstanding the government's evidence in support of the benefits of withholding Byrne JAG funds from jurisdictions that fail to comply with the three conditions, \"[c]onspicuously absent\" from the government's evidence \"is any discussion of the negative impacts that may result from imposing the conditions, and the record is devoid of any analysis that the perceived benefits outweigh these drawbacks.\" Next, the district court concluded that Section 1373 violates the anti-commandeering doctrine and thus is unconstitutional. The court acknowledged that the Second Circuit—whose opinions are binding precedent on the Southern District of New York—held that Section 1373 is constitutional in City of New York v. United States . But the court concluded that the Second Circuit's earlier ruling \"cannot survive the Supreme Court's decision in Murphy .\" City of New York , the court explained, had relied on a distinction between affirmative commands, which were considered unconstitutional, and affirmative prohibitions, which the circuit court had considered permissible. But, the Second Circuit continued, the Supreme Court in Murphy described that distinction as \"empty.\" Because Murphy concluded that the anti-commandeering doctrine forbids the federal government from imposing a direct prohibition on state legislatures, the district court held that Section 1373—by dictating what a state legislature may not do—is unconstitutional. The district court additionally held that the three Byrne JAG conditions violate the separation of powers. Harking back to its earlier analysis of the Byrne JAG statute provisions, the court explained that when Congress delegated spending authority to the executive branch in the statute, it did not delegate the authority to impose the new conditions. The Byrne JAG statute, the court continued, authorizes the distribution of funds \"according to statutorily prescribed criteria\" that the executive branch is powerless to disturb. The City of Los Angeles, California, separately challenged the new conditions attached to the Byrne JAG program and the additional consideration factors for the COPS program. Initially focusing on the COPS program, Los Angeles first asked the U.S. District Court for the Central District of California to enjoin the DOJ from implementing the new COPS considerations in any future grant solicitations, contending, among other things, that they were imposed without statutory authority, violate the Spending Clause, and are invalid under the APA. The district court agreed with Los Angeles and granted a permanent injunction. The court first concluded that the DOJ lacked statutory authority to consider the degree to which applying jurisdictions cooperate with federal immigration enforcement when assessing applications. The court pointed to 34 U.S.C. § 10381(c)—the statute authorizing the COPS program for community-policing grants—which identifies when the DOJ \"may give preferential consideration\" to applicants, and explained that none of the scenarios listed apply to federal immigration enforcement. Next, the court concluded that the challenged COPS considerations violate the Spending Clause. The federal government had contended that the challenged \"considerations\" on grant funding were not subject to the same Spending Clause requirements as grant \"conditions\" because compliance with the considerations was not required to receive the grant. But the court found no meaningful distinction between grant \"conditions\" and the challenged \"considerations,\" declaring that \"compliance is required in order for applicants to compete on a level playing field.\" Further, the court remarked, if the government's assertion were correct, \"it would be simple for federal agencies to avert Spending Clause requirements by labeling all considerations 'plus factors.'\" And because the COPS statute does not identify as a factor for preferential treatment a jurisdiction's cooperation with federal immigration enforcement, the court concluded that Congress did not, as the Spending Clause requires, \"unambiguously condition\" the receipt of funds on the recipients' compliance with federal authorities. \"It is irrelevant\" that the DOJ's COPS Office was forthcoming about the conditions because, the court added, it is Congress—not the agency—that \"must be clear in its directives.\" Additionally, the added considerations violate the Spending Clause because, the court concluded, they are not germane to the goals of the COPS program: \"[C]ommunity policing is about developing partnerships between local authorities and the community,\" and, in the court's view, \"there is no relationship between local police partnerships with federal authorities and community policing.\" Finally, the district court concluded that the added considerations are arbitrary and capricious in violation of the APA because the government put forth no evidence, nor did it argue, that its explanation for adding the considerations—that \"'[c]ities and states that cooperate with federal law enforcement make all of us safer by helping remove dangerous criminals from our communities,' including by ending 'violent crime stemming from illegal immigration'\"—was based on any findings or data. Thus the court concluded that the government had no reasonable basis for adding the new conditions. Concerning the Byrne JAG notice and access conditions, the district court later entered a preliminary injunction blocking the government from enforcing those conditions against Los Angeles. In doing so, the court pointed to the text of the Byrne JAG statute, explaining that \"[t]he authority explicitly granted to the Attorney General . . . is limited.\" That limited authority, the court concluded, does not include requiring states or localities to assist in immigration enforcement. On the other side of the coin, the Justice Department has sued California, seeking to invalidate three laws governing the state's regulation of private and public actors' involvement in immigration enforcement within its border. The government contends that these laws \"reflect a deliberate effort by California to obstruct the United States' enforcement of federal immigration law, to regulate private entities that seek to cooperate with federal authorities consistent with their obligations under federal law, and to impede consultation and communication between federal and state law enforcement officials,\" and, thus, violate the Supremacy Clause. The government is challenging parts of the following three California laws: (1) The Immigrant Worker Protection Act, Assembly Bill 450 (AB 450); (2) Section 12 of Assembly Bill 103 (AB 103); and (3) the California Values Act, Section 3 of Senate Bill 54 (SB 54). In particular, the federal government principally contends that these laws violate the Supremacy Clause in two ways. First, the DOJ argues that the state measures violate the doctrine of intergovernmental immunity—a doctrine that derives from the Supremacy Clause and provides that \"a State may not regulate the United States directly or discriminate against the Federal Government or those with whom it deals.\" Second, the government asserts that the California laws are preempted because they create an obstacle for the federal government's enforcement of certain immigration laws. AB 450 imposes on public and private employers in California several requirements related to federal immigration enforcement actions taking place at the worksite. First, AB 450 prohibits an employer from allowing an immigration enforcement officer to enter any nonpublic areas of a worksite, unless the officer has a judicial warrant or \"as otherwise required by federal law.\" Second, AB 450 bars employers from permitting immigration enforcement officers to access, review, or obtain employee records without a subpoena or judicial warrant, or \"as otherwise required by federal law\" (together, the \"consent\" provisions). Third, \"[e]xcept as otherwise required by federal law,\" AB 450 requires employers to provide employees with written notice of any I-9 employment eligibility inspection (or other employment record inspections) within 72 hours after receiving notice of the inspection (the \"notice\" provision). Fourth, AB 450 prohibits an employer (or a person acting on the employer's behalf) from reverifying the employment eligibility of a current employee unless as required by 8 U.S.C. § 1324a(b) or \"as otherwise required by federal law\" (the \"reverification\" provision). Section 12 of AB 103—part of California's omnibus budget bill—requires, for the next 10 years, the California Attorney General (or a designee) to review and report on county, local, and private detention facilities that house aliens in immigration proceedings, including those housing minors on behalf of, or by contract with, the U.S. Office of Refugee Resettlement or ICE. The review must include the conditions of confinement, standard of care, due process provided, and the circumstances surrounding the aliens' apprehension and transfer to the facility. SB 54 enacts the California Values Act, which regulates to California's participation in federal immigration enforcement. As relevant here, the California Values Act generally prohibits law enforcement agencies from using agency money or personnel to investigate, interrogate, detain, detect, or arrest persons for the purpose of immigration enforcement, including inquiring into immigration status; detaining a person subject to a hold request; providing information about a person's release date; providing personal information such as a person's home or work address, unless it is publicly available; making or participating in arrests based on civil immigration warrants; or performing any functions of an immigration officer. The Act also prohibits California law enforcement agencies from placing their officers under the supervision of federal agencies or employing officers who are deputized as special federal officer for purposes of immigration enforcement. Further, under the Act, California law enforcement agencies may not use immigration authorities as \"interpreters\" for law enforcement matters relating to persons in custody. Nor may California law enforcement agencies transfer a person to immigration authorities unless authorized to do so by judicial warrant, a judicial probable cause determination, or otherwise in accordance with California law. Additionally, subject to limited exception, the agencies may not contract with the federal government to use California law enforcement facilities to house federal detainees. However, the Act specifies that it does not prevent California law enforcement from enforcing violations of 8 U.S.C. § 1326, which makes it a criminal offense to unlawfully enter the United States after being denied admission to, or being removed from, the United States. Nor does the Act prevent California law enforcement from responding to requests for information about a person's criminal history. Further, the Act does not prevent California law enforcement from engaging in certain joint law enforcement task force activities. Additionally, California law enforcement may still give immigration authorities access to interview an individual in custody, in compliance with California law, and to make inquiries related to determining whether a person is a potential crime or trafficking victim and thus eligible for certain visas. On March 6, 2018, the United States sued California, requesting an injunction to preliminarily block the three California laws described above. In particular, the government contends that the contested California laws violate the Supremacy Clause. The government asserts that the California laws \"reflect a deliberate effort by California to obstruct the United States' enforcement of federal immigration law, to regulate private entities that seek to cooperate with federal authorities consistent with their obligations under federal law, and to impede consultation and communication between federal and state law enforcement officials.\" Further, the United States contends that the California laws \"have the purpose and effect of making it more difficult for federal immigration officers to carry out their responsibilities in California,\" and \"[t]he Supremacy Clause does not allow California to obstruct the United States' ability to enforce laws that Congress has enacted or to take actions entrusted to it by the Constitution.\" The district court granted the government's request, in part, concluding only that parts of California's Immigrant Worker Protection Act (AB 450), as applied to private employers, violates the Supremacy Clause. The government appealed, arguing that the other challenged California provisions, too, likely are unconstitutional. But the Ninth Circuit sustained all but one of the district court's rulings, concluding that one subsection within Section 12 of AB 103 violates the doctrine of intergovernmental immunity. The district court concluded that the United States was likely to succeed on its claim challenging AB 450's consent and reverification provisions. The court concluded that consent provision violates the doctrine of intergovernmental immunity because it imposes monetary penalties on employers for voluntarily consenting to immigration officers entering nonpublic areas of the worksite and to access employment records, and thus, the provision \"impermissibly discriminates against those who choose to deal with the Federal Government.\" Concerning the reverification provision, the court reasoned that the government was likely to succeed on the merits of its claim that the provision is preempted by IRCA. The court concluded that the reverification provision likely stands as an obstacle to enforcing IRCA's continuing obligation imposed on employers to avoid knowingly employing an unauthorized alien. But the court concluded that the government was unlikely to succeed on its claim that AB 450's notice provision violates the Supremacy Clause. The court first concluded that this provision does not violate the intergovernmental immunity doctrine because, the court explained, it punishes employers for failing to communicate with its employees and not for choosing to deal with the federal government. The Ninth Circuit agreed, adding that \"intergovernmental immunity attaches only to state laws that discriminate against the federal government and burden it in some way .\" And the Ninth Circuit accepted California's contention that \"[t]he mere fact that those notices\" required by AB 450 \"contain information about federal inspections does not convert them into a burden on those inspections.\" The district court also rejected the government's argument that the notice provision prevents an obstacle to enforcing IRCA's prohibition on employing unauthorized aliens because, the government asserted, if investigation targets are warned, investigations will be less effective. But the court opined that IRCA imposes obligations and penalties on employers , not employees, and so the \"target\" of any investigation is the employer , not the employee. Likewise, the Ninth Circuit concluded that AB 450's notice requirement does not impose \"additional or contrary obligations that undermine or disrupt the activities of federal immigration authorities\" in implementing IRCA. The district court declined to preliminarily enjoin Section 12 of AB 103. The government had argued that California's \"efforts to assess the process afforded to immigrant detainees\" through the review and reporting requirements in AB 103, create an obstacle to administering the federal government's exclusive discretion in deciding whether and how to pursue an alien's removal. The court disagreed, though, opining that the California Attorney General's review would not give the state a role in determining whether an alien should be detained or removed from the United States. Rather, the court characterized the provision as one that harnesses power California's Attorney General lawfully possesses to investigate matters related to state law enforcement. Nor, the court concluded, would the government likely succeed on its claim Section 12 of AB 103 violates the doctrine of intergovernmental immunity. The court recognized that the law imposes inspections only on facilities that contract with the federal government. But the court opined that the burden imposed on the federal contractors is minimal, and the government had not shown that the burden imposed under AB 103 is higher than burdens imposed under independent California laws governing inspections of other detention facilities within the state. On appeal, however, the Ninth Circuit concluded that part of Section 12 of AB 103 (the requirement for the California Attorney General to review the circumstances surrounding detained aliens' apprehension and transfer to each facility) violates the doctrine of intergovernmental immunity. The Ninth Circuit characterized the district court's ruling as creating a \"de minimis exception\" to the doctrine of intergovernmental immunity. But the Ninth Circuit rejected this new exception, opining that \"[ a ] ny economic burden that is discriminatorily imposed on the federal government is unlawful.\" Still, the court decided that only the provision requiring state inspectors to examine the circumstances surrounding the immigration detainees' apprehension and transfer to the facility likely violates the doctrine of intergovernmental immunity. In the Ninth Circuit's view, this \"unique\" requirement appeared distinct from any other inspection imposed under California law, and, thus, the Ninth Circuit concluded that the district court erred in finding that the review appears no more burdensome than other legally mandated inspections. Finally, the district court rejected the government's argument that SB 54 acts as an obstacle to immigration enforcement and, thus, is preempted. The government had asserted that SB 54's limitations on information sharing and transferring to federal custody certain alien inmates \"impede immigration enforcement from fulfilling its responsibilities regarding detention and removal because officers cannot arrest an immigrant upon the immigrant's release from custody and have a more difficult time finding immigrants after the fact without access to address information.\" The court opined, however, that \"refusing to help is not the same as impeding.\" A state's refusal to help with federal immigration enforcement will always make obtaining the federal objective more difficult than if the state voluntarily assists, but, the court explained, \"[s]tanding aside does not equate to standing in the way.\" The Ninth Circuit upheld the district court's ruling. First, the court concluded that SB 54 does not obstruct the government's implementation of the INA. The court reasoned that the INA (with the exception of Section 1373) \"provides state and localities the option , not the requirement , of assisting federal immigration authorities,\" and \"SB 54 simply makes that choice for California law enforcement agencies.\" Further, invoking the Supreme Court's ruling in Murphy , the Ninth Circuit opined that invalidating SB 54 under the principles of conflict preemption \"would, in effect, 'dictate[] what a state legislature may and may not do,' because it would imply that a state's otherwise lawful decision not to assist federal authorities is made unlawful when it is codified as state law.\" Nor does Section 1373 preempt the information-sharing provisions of SB 54 because, the court concluded, the state measure expressly permits the type of information required by Section 1373, specifically, citizenship or information status. Moreover, the Ninth Circuit, again relying on Murphy , concluded that anti-commandeering principles likely precluded a preemption challenge to the information-sharing provisions. The court described the exception to the anti-commandeering doctrine for reporting requirements as existing only when the \"Congress evenhandedly regulates an activity in which both States and private actors engage.\" But here, Section 1373 regulates only state actors, and therefore anti-commandeering principles preclude the government from requiring California to exchange information with it. Ongoing lawsuits concerning sanctuary jurisdictions may offer clarity on some unsettled and cross-cutting issues involving immigration and federalism. The Tenth Amendment reserves for the states the \"police power\" to regulate and protect the health, safety, and welfare of the public, and, in adopting sanctuary policies, jurisdictions have sometimes invoked public safety concerns as a justification for enacting those measures. But the federal government's power to regulate immigration-related matters is substantial and exclusive, and on occasion the exercise of this power has been found to render unenforceable state or local initiatives that conflict with federal immigration enforcement priorities. Additionally, Congress generally may condition the receipt of federal funds on compliance with specific conditions that achieve federal goals. Still, the anti-commandeering doctrine restricts the federal government from compelling the states to administer or enforce a federal regulatory program, like the immigration laws, whether through direct compulsion or prohibition, or indirectly, through monetary incentives that are unduly coercive. With that background, the heart of the debate in the lawsuits challenging EO 13768 and its implementation has principally centered on what constitutionally permissible methods are available to the federal government to stop or deter state and local adoption of sanctuary policies, which the government views as hindering federal immigration enforcement objectives, and, on the flip side, whether and when state and local sanctuary policies do, in fact, undercut federal immigration enforcement efforts in a manner that contravenes the Supremacy Clause. In City & County of San Francisco v. Trump and County of Santa Clara v. Trump , for example, the district court's ruling that enjoined Section 9(a) hinged, in part, on its conclusion that the executive branch lacked statutory authority from Congress to withhold and create new conditions for federal grants, and that purporting to withhold all federal grants from what it labeled as sanctuary jurisdictions was unconstitutionally coercive, given the sheer amount of money a sanctuary jurisdiction would stand to lose if it didn't dispense with its policies. Congress could step in to ratify Section 9(a), at least in part, using its spending power to incentivize states to cooperate with immigration enforcement, so long as it doesn't threaten to withhold an amount of money that could be deemed coercive. And in City of Chicago v. Sessions and City of Philadelphia v. Sessions, the district courts and one appellate court concluded that the executive branch lacked statutory authority to impose some of the spending conditions that the DOJ attached to the Byrne JAG program. Likewise, Congress could amend the Byrne JAG statute to give the Attorney General, as it has done for other grant programs, the discretion to impose conditions on the receipt of the federal grant. Moreover, since Murphy, the courts considering the challenges to Section 1373 have concluded that the statute is no longer constitutionally viable, given the Supreme Court's application of the anti-commandeering doctrine to a federal statute that prohibits states from enacting certain kinds of laws. Accordingly, to achieve Section 1373's goals, Congress may consider using its power of the purse to incentivize states and localities to share immigration-related information with federal immigration authorities. ", "summary": "There is no official or agreed-upon definition of what constitutes a \"sanctuary\" jurisdiction, and there has been debate as to whether the term applies to particular states and localities. Moreover, state and local jurisdictions have varied reasons for opting not to cooperate with federal immigration enforcement efforts, including reasons not necessarily motivated by disagreement with federal policies, such as concern about potential civil liability or the costs associated with assisting federal efforts. But traditional sanctuary policies are often described as falling under one of three categories. First, so-called \"don't enforce\" policies generally bar state or local police from assisting federal immigration authorities. Second, \"don't ask\" policies generally bar certain state or local officials from inquiring into a person's immigration status. Third, \"don't tell\" policies typically restrict information sharing between state or local law enforcement and federal immigration authorities. One legal question relevant to sanctuary policies is the extent to which states, as sovereign entities, may decline to assist in federal immigration enforcement, and the degree to which the federal government can stop state measures that undermine federal objectives. The Tenth Amendment preserves the states' broad police powers, and states have frequently enacted measures that, directly or indirectly, address aliens residing in their communities. Under the doctrine of preemption—derived from the Supremacy Clause—Congress may displace many state or local laws pertaining to immigration. But not every state or local law touching on immigration matters is necessarily preempted; the measure must interfere with, or be contrary to, federal law to be rendered unenforceable. Further, the anti-commandeering doctrine, rooted in the Constitution's allocation of powers between the federal government and the states, prohibits Congress from forcing state entities to perform regulatory functions on the federal government's behalf, including in the context of immigration. A series of Supreme Court cases inform the boundaries of preemption and the anti-commandeering doctrine, with the Court most recently opining on the issue in Murphy v. NCAA. These dueling federal and state interests are front and center in numerous lawsuits challenging actions taken by the Trump Administration to curb states and localities from implementing sanctuary-type policies. Notably, Section 9(a) of Executive Order 13768, \"Enhancing Public Safety in the Interior of the United States,\" directs the Secretary of Homeland Security and the Attorney General to withhold federal grants from jurisdictions that willfully refuse to comply with 8 U.S.C. § 1373—a statute that bars states and localities from prohibiting their employees from sharing with federal immigration authorities certain immigration-related information. The executive order further directs the Attorney General to take \"appropriate enforcement action\" against jurisdictions that violate Section 1373 or have policies that \"prevent or hinder the enforcement of federal law.\" To implement the executive order, the Department of Justice added new eligibility conditions to the Edward Byrne Memorial Justice Assistance Grant (Byrne JAG) Program and grants administered by the Justice Department's Office of Community Oriented Policing Services (COPS). These conditions tied eligibility to compliance with Section 1373 and other federal immigration priorities, like granting federal authorities access to state and local detention facilities housing aliens and giving immigration authorities notice before releasing from custody an alien wanted for removal. Several lawsuits were filed challenging the constitutionality of the executive order and new grant conditions. So far the courts that have reviewed these challenges—principally contending that the executive order and grant conditions violate the separation of powers and anti-commandeering principles—generally agree that the Trump Administration acted unconstitutionally. For instance, the Ninth Circuit Court of Appeals upheld a permanent injunction blocking enforcement of Section 9(a) against California. Additionally, two separate district courts permanently enjoined the Byrne JAG conditions as applied to Chicago and Philadelphia. In doing so, these courts concluded that the Supreme Court's most recent formulation of the anti-commandeering doctrine in Murphy requires holding Section 1373 unconstitutional. These lawsuits notwithstanding, the courts still recognize the federal government's pervasive, nearly exclusive role in immigration enforcement. This can be seen in the federal government's lawsuit challenging three California measures governing the state's regulation of private and public actors' involvement in immigration enforcement within its border. Although a district court opined that several measures likely were lawful exercises of the state's police powers, it also concluded that two provisions regulating private employers are likely unlawful under the Supremacy Clause. This ruling was mostly upheld on appeal, in which the Ninth Circuit additionally opined that a provision requiring the California attorney general to review the circumstances surrounding detained aliens' apprehension and transfer to detention facilities within the state also violates the Supremacy Clause.", "document_type": "crs"}
{"report": "The National Flood Insurance Program (NFIP) was created by the National Flood Insurance Act of 1968 (NFIA). The NFIP received a short-term reauthorization through December 8, 2017, a second short-term reauthorization through December 22, 2017, and a third short-term reauthorization through January 19, 2018. The NFIP lapsed between January 20 and January 22, 2018, and received a fourth short-term reauthorization until February 8, 2018. The NFIP lapsed for approximately eight hours during a brief government shutdown in the early morning of February 9, 2018, and was then reauthorized until March 23, 2018. The NFIP received a sixth reauthorization until July 31, 2018, a seventh reauthorization until November 30, 2018, an eighth reauthorization until December 7, 2018, a ninth reauthorization until December 21, 2018, and a tenth reauthorization until May 31, 2019. The last long-term reauthorization of the NFIP was by the Biggert-Waters Flood Insurance Reform Act of 2012 (hereinafter BW-12), from July 6, 2012, to September 30, 2017. Congress amended elements of BW-12, but did not extend the NFIP's authorization further, in the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent the Federal Insurance and Mitigation Administration (FIMA). As of October 2018, the NFIP had more than 5.1 million flood insurance policies providing over $1.3 trillion in coverage. The program collects about $3.6 billion in annual premium revenue. Nationally, as of January 2019, about 22,355 communities in 56 states and jurisdictions participated in the NFIP. According to FEMA, the program saves the nation an estimated $1.87 billion annually in flood losses avoided because of the NFIP's building and floodplain management regulations. This report provides introductory information on key components of the NFIP, ranging from floodplain mapping to the standard flood insurance forms. This report will be updated as significant revisions are made to the NFIP through legislation or administrative action. However, this report does not provide detail on current or future legislative issues for Congress, which are covered in a separate report. CRS also has a separate report on flood insurance and other federal disaster assistance programs. In the original NFIP statute, Congress stipulated that \"a program of flood insurance can promote the public interest by providing appropriate protection against the perils of flood losses and encouraging sound land use by minimizing exposure of property to flood losses.\" Congress had found that postdisaster flood losses, and the subsequent federal disaster relief assistance to help communities recover from those flood losses, had \"placed an increasing burden on the Nation's resources\" and that as a matter of national policy \"a reasonable method of sharing the risk of flood losses is through a program of flood insurance which can complement and encourage preventive and protective measures.\" At the time of establishment of the NFIP, as is generally still the case today, it was found that \"many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions.\" Thus, the NFIP essentially has two interrelated policy purposes that can be summarized as 1. to provide access to primary flood insurance, thereby allowing for the transfer of some of the financial risk of property owners to the federal government, and 2. to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. A core design feature of the NFIP is that communities are not required to participate in the program by any law or other regulation. Rather, communities in the United States voluntarily participate in the NFIP generally as a means of securing access to the primary flood insurance offered by the NFIP. Essentially, the NFIP is structured so that the availability of primary flood insurance through the NFIP (purpose #1 from above) is tied to the adoption and enforcement of floodplain management standards by participating communities (purpose #2). FEMA is only allowed to provide flood insurance to \"those States or areas (or subdivisions thereof)\" where \"adequate land use and control measures\" have been adopted that \"are consistent with the comprehensive criteria for land management and use developed\" by the NFIP. Thus, communities that participate in the NFIP, and therefore whose residents may access the NFIP's primary flood insurance, also adopt through local or state laws minimum floodplain management standards that are described in FEMA regulations. The NFIP accomplishes the goal of reducing comprehensive flood risk primarily by requiring participating communities to Collaborate with FEMA to develop and adopt flood maps called Flood Insurance Rate Maps (FIRMs). Enact minimum floodplain standards based on those flood maps. In addition, premiums collected from the sale of insurance in the NFIP finance a Flood Mitigation Assistance (FMA) grant program that reduces overall flood risk. This section of the report briefly discusses each of these means of reducing comprehensive flood risk. FEMA is responsible for undertaking Flood Insurance Studies (FISs) nationwide to identify areas within the United States having special flood, mudslide, and flood-related erosion hazards; assess the flood risk; and designate insurance zones. FEMA develops, in coordination with participating communities, flood maps called Flood Insurance Rate Maps (FIRMs) using these FISs that depict the community's flood risk and floodplain. In BW-12, Congress revised the authorities of FEMA as it relates to flood hazard mapping to formally establish what FEMA has called the Risk Mapping, Assessment and Planning (Risk MAP) process. Though formally authorized in BW-12, FEMA started the Risk MAP process at the request of Congress in 2009. While FEMA is largely responsible for the creation of the FIRM, the community itself must pass the map into its local or state law in order for the map to be effective. An area of specific focus on the FIRM is the Special Flood Hazard Area (SFHA). The SFHA is intended to distinguish the flood risk zones that have a chance of flooding during a \"1 in 100 year flood\" or greater frequency. This means that properties in the SFHA have a risk of 1% or greater risk of flooding every year. Table 1 shows flood-risk zones that are depicted on the FIRMs. Zones A (A1-30), AE, AH, AO, V, VE, VO, and V1-30 constitute the designated SFHA on the community's FIRM. V zones are distinguished from A zones in that V zones are subject to tidal wave action (i.e., coastal flooding). Two other designations for classifying zones in the SFHA are the Zone AR, which is an area where a levee or similar structure is determined not to provide sufficient flood protection, but is undergoing restoration; and the Zone A99, an area where a federal flood protection structure is under construction to provide the necessary flood protection standard. Flood maps adopted across the country vary considerably in age and in quality. While some FIRMs may have last been developed and adopted by a community in the 1980s, especially in rural areas of the country, most communities will have maps adopted within the past 15 to 20 years. All official FIRMs can be accessed, and are searchable by address and location, on a FEMA website called the Map Service Center, and modern FIRMs can be digitally viewed via the Geographic Information System in the National Flood Hazard Layer. There is no consistent, definitive timetable for when a particular community will have their maps revised and updated. FEMA uses a process called the Coordinated Needs Management Strategy to prioritize, identify, and track the lifecycle of mapping needs of Risk MAP. Generally, flood maps may require updating when there have been significant new building developments in or near the flood zone, changes to flood protection systems (e.g., levees and sand dunes), and environmental changes in the community. Because of the variability in how and when a FIRM is updated, for example, one community may be undergoing the process of updating its map while a neighboring community is not, and one community may have had its map last updated in 2016 while a neighboring community had its last revised in 2005, etc. There are statutory guidelines for how FEMA is allowed to develop new FIRMs for a community. These guidelines require, for example, FEMA to conduct extensive communication and outreach efforts with the community during the mapping process and include various minimum waiting periods after intermediary steps are taken in the process. In addition, during this process, communities are asked to submit pertinent data concerning their flood hazards, flooding experience, mitigation plans to avoid potential flood hazards, and estimates of historical and prospective economic impacts flooding has had on the community. Generally, FEMA seeks to make the Risk MAP process a collaborative process with local communities to encourage a joint sense of \"ownership\" of the maps. There are also legal requirements allowing communities and individuals to appeal during the process of updating FIRMs. This appeal process now includes the option, first authorized in BW-12, for communities to appeal to a Scientific Resolution Panel regarding a proposed FIRM. In BW-12, Congress reestablished and reauthorized a council called the Technical Mapping Advisory Council (TMAC). The TMAC is broadly authorized to review and recommend improvements to how FEMA produces and disseminates flood hazard, flood risk, and flood map information. In particular, the TMAC is authorized to recommend to FEMA \"mapping standards and guidelines for—(A) flood insurance rate maps [FIRMs]; and (B) data accuracy, data quality, data currency, and data eligibility.\" Currently, the TMAC estimates that the production of a new or revised FIRM is designed to take three to five years under the Risk MAP program, but can often take as long as six and a half years or longer. The TMAC has suggested that the ideal Risk MAP project timeline is 25 months. After a map is finalized and adopted by a community, it can still be revised to correct for errors in map accuracy. To correct these inaccuracies, FEMA allows individuals and communities to request letters amending or revising the flood map. In general, two primary circumstances may result in changes to the flood map. First, the natural elevation of property may be incorrectly accounted for on a FIRM, and that natural elevation is such that the property should not be considered part of the SFHA. Generally, in this circumstance, an individual or community may request a Letter of Map Amendment (LOMA). Second, a community may feel that a physical development in the community has resulted in a reduction of the flood risk for areas previously mapped in the floodplain. Generally, in this circumstance, the community may request a Letter of Map Revision (LOMR). In either a LOMA or LOMR, the decision to correct a map must be based on scientific information validating the inaccuracy of the current map. In most circumstances, the cost of requesting the map correction is borne by the community or individual. As authorized in law, FEMA has developed a set of minimum floodplain management standards that are intended to (1) constrict the development of land which is exposed to flood damage where appropriate, (2) guide the development of proposed construction away from locations which are threatened by flood hazards, (3) assist in reducing damage caused by floods, and (4) otherwise improve the long-range land management and use of flood-prone areas. Communities are required to adopt these minimum floodplain management standards in order to participate in the NFIP. FEMA has set forth the minimum standards it requires for participation in the NFIP in federal regulations. Though the standards appear in federal regulations, the standards only have the force of law because they are adopted and enforced by a state or local government. Key conditions of the NFIP minimum standards include, among many other conditions, that communities: require permits for development in the SFHA; require elevation of the lowest floor of all new residential buildings in the SFHA to or above the Base Flood Elevation (BFE); restrict development in the regulatory floodway to prevent increasing the risk of flooding; and require certain construction materials and methods that minimize future flood damage. Legal enforcement of the floodplain management standards is the responsibility of the participating NFIP community. However, FEMA, often in cooperation with state governments, will conduct community assistance visits (CAVs) to monitor how and if a community is adequately enforcing its floodplain ordinances. Two previous reviews commissioned by FEMA on community enforcement of minimum floodplain standards have estimated that the nationwide rate of community compliance with the standards is 70% to 85%, and that between 58% and 70% of buildings are built in full compliance with the standards. A community that has been found failing to enforce the floodplain management standards may be placed on probation and ultimately suspended from the NFIP (as discussed later in this report). As these standards are just minimum requirements, states and communities can elect to adopt higher standards as a means of mitigating flood risk. In addition, FEMA operates a program, called the Community Rating System, to incentivize NFIP communities to adopt more rigorous floodplain management standards (as discussed later in this report). To reduce comprehensive flood risk, FEMA also operates a Flood Mitigation Assistance (FMA) Grant Program that is funded through revenue collected by the NFIP. The FMA Program awards grants for a number of purposes, including state and local mitigation planning; the elevation, relocation, demolition, or flood proofing of structures; the acquisition of properties; and other activities. In FY2019, the FMA Program was authorized to use $175 million of NFIP revenue. The funding is available until it is expended, so in certain years the amount awarded may exceed the amount authorized by Congress in an appropriation act for a specific fiscal year. A database of approved FMA grants that is available from FEMA indicates that over $905 million in projects was approved between July 1997 and November 2017. FEMA has considerable discretion under the law to craft the details of the flood insurance policies it sells through the NFIP. Currently, there are three policies that the NFIP uses to sell primary flood insurance—the Dwelling, the General Property, and the Residential Condominium Building Association policy forms. Collectively, these Standard Flood Insurance Policies (SFIPs) appear in regulations, and coverage qualifications are generally equivalent. Table 2 displays the maximum available coverage limits for SFIPs by occupancy type. These coverage amounts are set by law. Policyholders are able to elect coverage for both their building property and separate coverage for contents. Renters may obtain contents-only coverage. Because SFIP coverage limits are often less than the value of a structure or the value of the property's contents, policyholders can obtain excess flood insurance to cover losses beyond the coverage limit. However, such excess coverage is not sold by the NFIP, and can only be purchased through the private insurance market. Within the SFIPs sold by the NFIP, there are numerous policy exclusions that are often not understood by policyholders. For example, SFIPs do not provide coverage for alternative living expenses (e.g., the cost of staying in a hotel while a house is being repaired) or business interruption expenses, and SFIPs have limited coverage of basements or crawlspaces. In addition, the SFIP does not cover damage caused by earth movement, including landslides. In a community that participates or has participated in the NFIP, owners of properties in the mapped SFHA are required to purchase flood insurance as a condition of receiving a federally backed mortgage. By law and regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises must require these property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Examples of the types of lenders that are mandated to issue regulations requiring the purchase of flood insurance related to mortgages include federal agency lenders, such as the Department of Veterans Affairs, or the government-sponsored enterprises (GSEs), Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), or federally regulated lending institutions, such as banks covered by the Federal Deposit Insurance Corporation (FDIC) or the Office of the Comptroller of the Currency (OCC). Property owners falling under this mandate may purchase flood insurance through the NFIP, or through a private company, so long as the private flood insurance provides \"flood insurance coverage which is at least as broad as the coverage provided under a [SFIP] … including when considering deductibles, exclusions, and conditions offered by the insurer.\" The implementation of this requirement has proved challenging, with the responsible federal regulators (the Federal Reserve, Farm Credit Administration, Federal Deposit Insurance Corporation, National Credit Union Administration, and Comptroller of the Currency) issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016 . The crux of the implementation issue can be seen as answering the question of who would judge whether specific policies met the \"at least as broad as\" standard and what criteria would be used in making this judgment? The uncertainty as to whether particular private policies would meet the standard has been seen as \" at odds with \" greater private participation in the flood insurance marketplace. On February 12, 2019, the regulators announced a final rule implementing the BW-12 \"requirement that regulated lending institutions accept private flood insurance policies\" that takes effect July 1, 2019. Of particular note, the rule \"allows institutions to rely on an insurer's written assurances in a private flood insurance policy stating the criteria are met; [and] clarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria.\" The rule does not apply directly to other federal agencies, nor to the GSEs, which would be subject to separate rulemaking. Not all mortgages in the SFHA are affected by this mandatory purchase requirement. For example, a personal mortgage loan between two private parties (such as between family members), or a mortgage issued by a private mortgage company that is not then sold on the secondary market to a bank or entity like Fannie Mae, may not require flood insurance. Even if they are not technically required to mandate flood insurance by federal law, the issuing party may still require it as a means of financially securing the property. While the exact percentage of total mortgages requiring flood insurance is unknown, one study suggested at least 77% of all mortgages in SFHAs in 2003 would be subject to the requirement. Despite the mandatory purchase requirement, not all covered mortgages carry the insurance as dictated. Though there are no official statistics available from the federal mortgage regulators responsible for implementation of the mandate, a 2006 study commissioned by FEMA found that compliance with this mandatory purchase requirement may be as low as 43% in some areas of the country (the Midwest), and as high as 88% in others (the West). In a 2013 analysis done following Hurricane Sandy, one study found that approximately 65% of properties in New York City required to have insurance through their mortgage had such insurance. A 2017 study of flood insurance in New York City by the same authors reassessed the 2013 data and suggested that the estimate in their earlier study may have slightly overstated the actual take-up rate, which the 2017 study estimated at 61%. The later study found that compliance with the mandatory purchase requirement by properties in the SFHA with mortgages increased from 61% in 2012 to 73% in 2016. The later study also argued that findings for properties without mortgages indicate the effectiveness of the mandatory purchase requirement, as the 37% take-up rate for properties without mortgages in the SFHA was similar to take-up rates outside the SFHA (37% for properties with mortgages and 32% for properties without mortgages). The escrowing of insurance premiums may increase compliance with the mandatory purchase requirement. Federal mortgage regulators have required the escrowing of flood insurance premiums on certain mortgages in compliance with regulations issued after changes to the law made in 1994. Expanding upon existing requirements, Section 100209 of BW-12, as subsequently revised by Section 25 of HFIAA, has required that regulated lenders start escrowing flood insurance for all mortgages, except if the lending institution is under a regulated size or the loan is a subordinate to another loan. This broader implementation of the escrowing provision began in January 2016, per law and regulations. Flood insurance is optional for properties outside the SFHA regardless of whether they have a federally backed mortgage. However, as there is still a risk of flooding outside the SFHA, members of NFIP participating communities with property located in the B, C, or X Zones of a FIRM may voluntarily purchase a lower-cost Preferred Risk Policy. Unlike with properties in the SFHA, an individual may be denied a PRP if there is significant loss history for the property. FEMA encourages the purchase of PRPs both to reduce the financial flood risk of a broader group of individuals, and to expand the policy base of the NFIP writ large, thus improving the fiscal soundness of the NFIP portfolio. A PRP uses the same basic policy forms as properties within the SFHA, but receives discounted rates in accordance with its lower risk profile. The NFIP requires most SFIP and PRP policyholders to purchase what is in effect a separate insurance policy to offset the expense of complying with more rigorous building code standards when local ordinances require them to do so. This increased cost of compliance coverage is authorized in law, and rates for the coverage, as well as how much can be paid out for claims, are set by FEMA. Congress has capped the amount that can be paid for ICC coverage at $75. The ICC policy has a separate rate premium structure, and provides an amount up to $30,000 in payments for certain eligible expenses. For example, when a building is determined by a community to be substantially damaged following a flood, floodplain management standards adopted by local communities can require the building to be rebuilt to current floodplain management requirements, even if the property previously did not need to do so. For instance, the new compliance standard may require the demolition and elevation of the rebuilt building to above the BFE. An ICC claim may then be submitted by the policyholder to offset the cost of complying with the elevation standard. FEMA also makes ICC coverage available if a building has been declared a repetitive loss by a community's floodplain management regulations. However, not all participating NFIP communities have or enforce a \"repetitive loss provision\" that records, declares, and mandates improvements to properties that have experienced repetitive loss. Thus, certain structures that have experienced repetitive loss may not be eligible for ICC payments. FEMA has not implemented ICC coverage for two conditions that they are authorized to do so by law. These two conditions are for properties that have sustained flood damage on multiple occasions, if the Administrator determines that it is cost-effective and in the best interests of the NFIP, and for properties for which an offer of mitigation assistance is made under various federal assistance programs. FEMA's decision not to implement these provisions has provoked criticism from some stakeholders of the NFIP. While FEMA provides the overarching management and oversight of the NFIP, the bulk of the day-to-day operation of the NFIP, including the marketing, sale, writing, and claims management of policies, is handled by private companies. This arrangement between the NFIP and private industry is authorized by statute and guided by regulation. There are two different arrangements that FEMA has established with private industry. The first is the Direct Servicing Agent, or DSA, which operates as a private contractor on behalf of FEMA for individuals seeking to purchase flood insurance policies directly from the NFIP. The second arrangement is called the Write-Your-Own (WYO) Program, where private insurance companies are paid to directly write and service the policies themselves. With either the DSA or WYO Program, the NFIP retains the actual financial risk of paying claims for the policy (i.e., underwrites the policy), and the policy terms and premiums are the same. Currently, approximately 13% of the total NFIP policy portfolio is managed through the DSA, and 87% of NFIP policies are sold by the 59 companies participating in the WYO Program. Over the years, the balance between the number of policies serviced by the WYO Program or the DSA has evolved, with the WYOs covering approximately 50% of policies in 1986, and approximately 97% of policies in 2008. Because most purchasers of the NFIP policies never interface directly with a FEMA representative, and only deal with a WYO company or the DSA, they may not be aware that they are actually purchasing insurance from FEMA. Companies participating in the WYO Program are compensated through a variety of methods, as summarized in Table 3 . The Government Accountability Office (GAO) and Department of Homeland Security, Office of the Inspector General (DHS IG) have produced a number of reports investigating how much the WYOs were compensated for the services they provided in support of the NFIP. In BW-12, Congress required FEMA to develop and issue a rulemaking on a \"methodology for determining the appropriate amounts that property and casualty insurance companies participating in the Write Your Own program should be reimbursed for selling, writing, and servicing flood insurance policies and adjusting flood insurance claims on behalf of the National Flood Insurance Program.\" This rulemaking was required within a year of enactment of BW-12. As of April 2019, FEMA has yet to publish a rulemaking to revise the compensation structure of the WYOs. Following Hurricane Sandy, there were concerns raised regarding the possible systematic underpayment of claims for flood losses through the NFIP. As a result of these issues, FEMA carried out a process by which Hurricane Sandy survivors could resubmit their NFIP claims to be reevaluated by FEMA. FEMA reviewed the resubmitted claims and provided additional claim payments to those deemed warranted in the review, and concluded the Sandy Claims Review Process on March 1, 2018. As of January 29, 2018, approximately 85% of policyholders who requested a review had received additional payments, resulting in approximately $258.6 million in additional claims payments. The remaining 15% of reviewed files received no additional payment. In addition, FEMA settled and litigated lawsuits initiated by claimants following Hurricane Sandy, with 1,631 of the 1,633 court cases settled, resulting in approximately $164 million in settlement payments. Except for certain subsidies, flood insurance rates in the NFIP are directed to be \"based on consideration of the risk involved and accepted actuarial principles,\" meaning that the rate is reflective to the true flood risk to the property. Essentially, FEMA uses several basic characteristics to classify properties based on flood risks. Structures are evaluated by their specific risk zone on a FIRM, the elevation of the structure relative to the Base Flood Elevation (BFE) in each risk zone, and occupancy type (e.g., single family, other residential, nonresidential, and mobile/manufactured homes), along with other specific determinants of risk. In addition, the premium structure includes estimates for the expenses of the NFIP, including servicing of policies. A detailed discussion of the premium rate structure of the NFIP, and how or why it is and is not actuarially sound, is beyond the scope of this report. However, additional resources exist to assist Congress with this issue. While most premium rates in the NFIP are intended to represent the full flood risk of a given structure, Congress has directed FEMA not to charge actuarial rates for properties that were constructed or substantially improved before December 31, 1974, or before the date upon which FEMA has published the first Flood Insurance Rate Map for the community, whichever was later. Therefore, by statute, premium rates charged on structures built before they were first mapped into a flood zone that have not been substantially improved, known as pre-FIRM structures, are allowed to have lower premiums than what would be expected to cover predicted claims. The availability of this pre-FIRM subsidy was intended to allow preexisting floodplain properties to contribute in some measure to prefunding their recovery from a flood disaster instead of relying solely on federal disaster assistance. In essence, the flood insurance could distribute some of the financial burden among those protected by flood insurance and the public. As of September 2016, 817,344 policies received a pre-FIRM subsidy, representing approximately 16.1% of all NFIP policies. Historically, the total number of pre-FIRM policies is relatively stable, but the percentage of those policies by comparison to the total policy base has decreased. The pricing subsidy for pre-FIRM policies is progressively being phased out of the NFIP, as was initially required under Section 100205 of BW-12, as revised by Sections 3 and 5 of HFIAA. Under current law, all premiums for pre-FIRM properties will eventually reach actuarially sound rates (i.e., the rate equivalent structures pay without the subsidy, reflecting true flood risk), but at a different pace of phaseout depending on the property type. Table 4 provides an adaptation of a table from GAO regarding the multifaceted phaseout of the pre-FIRM subsidy following BW-12, as revised by HFIAA. In summary, HFIAA slowed the rate of phaseout of the pre-FIRM subsidy for most primary residences, but retained the pace of the phaseout of the subsidy from BW-12 for business properties and secondary homes. In addition, HFIAA created a minimum and maximum increase in the amount for the phaseout of pre-FIRM subsidies for all primary residences of 5%-15% annually. Unless otherwise noted, the percentage increases are based on the current premium (e.g., a 15% annual increase from the prior year premium), rather than the percentage difference between the current premium and the actuarial rate (i.e., a rate increase of 25% does not mean the pre-FIRM subsidy is eliminated in four years). Congress introduced a new form of subsidy in HFIAA, for owners of properties newly mapped into a SFHA. The newly mapped procedure applies to properties previously in zones B, C, X, D, AR, or A99 (see Table 1 ), which are newly mapped into a SFHA on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date. The newly mapped procedure does not apply to properties mapped into a SFHA by the initial FIRM for a community entering the NFIP, and certain properties may be excluded based on their loss history. The rate for eligible newly mapped properties is equal to the PRP rate, but with a higher Federal Policy Fee, for the first 12 months following the map revision. After the first year, the newly mapped rate will begin its transition to a full-risk rate, with annual increases to newly mapped policy premiums calculated using a multiplier that varies by the year of the map change. Annual increases are restricted to no more than 18% per year. As of September 2016, 3.9% of all policies received a newly mapped subsidy. Using the authority to set rate classes for the NFIP and to offer lower than actuarial premiums, FEMA allows property owners to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. This practice is colloquially referred to as \"grandfathering,\" \"administrative grandfathering,\" or the \"grandfather rule\" and is separate and distinct from the pre-FIRM subsidy. To understand the grandfather rule, consider a hypothetical property X that is currently mapped into one flood zone (e.g., Zone AE), and is built to the proper building code and standards. If property X then is remapped to a new flood zone (e.g., Zone VE) and has maintained continuous insurance coverage under the NFIP, the owner of property X can pay the flood insurance rate and premium based on the prior mapped zone (i.e., pay the AE rate instead of the higher VE rate). A policyholder with a property may also be grandfathered if the elevation of a base flood is changed in a map, but the property itself does not change flood zones. Congress eliminated the practice of offering grandfathering to policyholders after new maps were issued in BW-12, but then subsequently reinstated the practice in HFIAA. FEMA does not have a definitive estimate on the number of properties that have a grandfathered rate in the NFIP, though data are being collected to fulfill a separate mandate of HFIAA. Unofficial estimates suggest that at least 10%-20% of properties are grandfathered, and these figures may increase with time as newer maps are introduced in high population areas. FEMA does not consider the practice of grandfathering to be a subsidy for the NFIP, per se, because the discount provided to an individual policyholder is cross-subsidized by other policyholders in the NFIP. Thus, while grandfathering does intentionally allow grandfathered policyholders to pay premiums that are less than their known actuarial rate, the discount is offset by others in the same rate class as the grandfathered policyholder. Although FEMA does not have an estimate of how many properties are paying grandfathered rates, the program tries to recoup lost revenue by charging higher rates for other policies in the SFHA. It is not clear, however, whether the NFIP is increasing other SFHA policy premiums by an amount equal to the discount from other NFIP risk-based rates that are being paid by the grandfathered properties. Through a program called the Community Rating System (CRS), FEMA encourages communities to improve upon the minimum floodplain management standards that are required to participate in the NFIP. The CRS Program, as authorized by law, is intended to incentivize the reduction of flood and erosion risk, as well as the adoption of more effective measures to protect natural and beneficial floodplain functions. FEMA awards points that increase a community's \"class\" rating in the CRS on a scale of 1 to 10, with 1 being the highest ranking. Points are awarded for an array of improvements for how the community informs its public on flood risk; maps and regulates its floodplain; reduces possible flood damage; and provides immediate warnings and responds to flooding incidents. Starting at Class 9, policyholders in the SFHA within a CRS community receive a 5% discount on their SFIP premiums, with increasing discounts of 5% per class until reaching Class 1, and at that level, policyholders in the SFHA can receive a 45% discount on their SFIP premiums. These discounts are not extended to PRPs. In order to participate in the CRS Program, a community must apply to FEMA and document its creditable improvements through site visits and assessments. As of June 2017, FEMA estimated that only 5% of eligible NFIP communities participate in the CRS program. However, these communities have a large number of flood policies, so more than 69% of all flood policies are written in CRS-participating NFIP communities. One can determine if and how highly rated a community is in the CRS Program through the most recent Flood Insurance Manual. For April 2014 premium rates, the National Research Council estimated that the CRS program provided an average 11.4% discount on SFIP premiums across the NFIP. The CRS discount is cross-subsidized into the NFIP program, such that the discount for one community ends up being offset by increased premium rates in all communities across the NFIP. Therefore, for April 2014 rates, the average 11.4% discount for CRS communities was cross-subsidized and shared across NFIP communities through a cost (or load) increase of 13.4% to overall premiums. Thus in some circumstances, the discount provided to communities participating in the CRS Program may be less than the expense of the overall CRS Program. Congress has expressed concern related to the perceived affordability of flood insurance premiums. In BW-12, Congress required FEMA to commission a study with the National Academy of Sciences (NAS) regarding participation in the NFIP and the affordability of premiums. The Affordability Study was not finished by its original deadline (270 days following enactment of BW-12). Congress amended the authorization for the Study while also extending the deadline in HFIAA. The NAS has since completed the Affordability Study report in two parts. In HFIAA, Congress also required FEMA to develop a Draft Affordability Framework \"that proposes to address, via programmatic and regulatory changes, the issues of affordability of flood insurance sold under the National Flood Insurance Program, including issues identified in the affordability study.\" Due 18 months following the submission of the Affordability Study, the deadline for the Framework, based on FEMA's stated date of submittal of the Affordability Study, was September 10, 2017. FEMA published their Affordability Framework on April 17, 2018. FEMA enforces two regulatory conditions—probation and suspension—for removing a participating community from the NFIP. Whether or not a particular community has either been placed on probation or suspended can be found using the NFIP's Community Status Book. Notably, a community cannot be removed from the NFIP because of increased or excess flood insurance claims and losses. Rather, probation and suspension only occur if the community fails to uphold its obligations related to floodplain management. A community can be placed on probation by FEMA if it is found that it is failing to adequately enforce the floodplain management standards it has adopted. As established by regulations, probation can result in a fee of $50 being charged to all policyholders in the community while the community is given time to rectify FEMA's concerns regarding their implementation of the floodplain management standards. Ultimately, if the community does not correct its cited deficiencies after given time periods described in regulations, the community will be suspended from the NFIP by FEMA. A community can also be involuntarily suspended from the NFIP for either failing to adopt an approved floodplain map and an approved set of floodplain management standards within the time periods required by regulations; or repealing or revising its floodplain management standards to a level below the minimum standards set forth in regulations. A suspended community may be reinstated to the NFIP once the relevant errors or deficiencies provoking the suspension have been resolved to meet FEMA's specification. Communities that have been suspended or those communities that do not participate in the NFIP can face significant consequences. Primarily, members of these communities are not able to purchase primary flood insurance through the NFIP, which may result in significant uninsured property risk in that community. However, communities may elect not to participate in the NFIP because they have very little flood risk to begin with, given their particular geography or climate. In addition, if a community does not participate in, or has been suspended from, the NFIP but has been previously mapped by FEMA for flood hazards, it is difficult for the community and policyholders to access other forms of federal assistance for areas in the floodplain. For example, by law, no federal assistance may be provided for acquisition or construction purposes in an area that has been identified as having special flood hazards unless the property is covered by flood insurance. Likewise, federally backed mortgages still require flood insurance for properties in the SFHA, so these property-owners would be required to obtain such insurance in the private market. A community is allowed to leave the NFIP at its will, but the potential consequences of that decision are similar to those if the community has been suspended. The funding for the NFIP is primarily maintained in an authorized account called the National Flood Insurance Fund (NFIF). Generally, the NFIP has been funded through three methods: receipts from the premiums of flood insurance policies, including fees and surcharges; direct annual appropriations for specific costs of the NFIP; and borrowing from the U.S. Treasury when the balance of the NFIF has been insufficient to pay the NFIP's obligations (e.g., insurance claims). This section of the report briefly discusses each of these three methods of NFIP funding. As of November 2018, the written premium on approximately 5.1 million policies in force was about $3.6 billion. Included within the premiums are several fees and surcharges on flood insurance policies mandated by law. First, the Federal Policy Fee (FPF) was authorized by Congress in 1990 and helps pay for the administrative expenses of the program, including floodplain mapping and some of the insurance operations. The amount of the FPF is set by FEMA and can increase or decrease year to year. Since the April 2016 rating period, the FPF has been set at a flat rate of $50 for SFIPs, and $25 for PRPs. Since October 2017, the FPF is also $25 for contents-only policies. Second, a Reserve Fund assessment was authorized by Congress in BW-12 to establish and maintain a Reserve Fund to cover future claim and debt expenses, especially those from catastrophic disasters. By law, FEMA is ultimately required to maintain a reserve ratio of 1% of the total loss exposure through the Reserve Fund assessment. As of January 2019, the amount required for the Reserve Fund ratio was approximately $13.07 billion. However, FEMA is allowed to phase in the Reserve Fund assessment to obtain the ratio over time, with an intended target of not less than 7.5% of the 1% Reserve Fund ratio in each fiscal year (so, using January 2019 figures, not less than approximately $980 million each year). Since April 2016, using its discretion, FEMA has charged every NFIP policy a Reserve Fund assessment equal to 15% of the premium charged for both SFIPs and PRPs. The Reserve Fund assessment has increased from its original status, in October 2013, of 5% on all SFIPs, and 0% on PRPs. In addition to the Reserve Fund assessment, all NFIP policies are also assessed a surcharge following the passage of HFIAA. The amount of the surcharge is dependent on the type of property being insured. For primary residences, the charge is $25; for all other properties, the charge is $250. Starting on April 1, 2019, FEMA will be introducing a 5% surcharge for severe repetitive loss properties. Revenues from these surcharges are deposited into the Reserve Fund. Table 5 displays how Congress has appropriated and authorized offsetting receipts for the NFIP from FY2015 to FY2018. As provided for in law, all premiums from the sale of NFIP insurance are transferred to FEMA and deposited in the NFIF. Congress then authorizes FEMA to withdraw funds from the NFIF, and use those funds for specified purposes needed to operate the NFIP. In addition to premiums, Congress has also provided annual appropriations to supplement floodplain mapping activities. In addition to the mix of discretionary and mandatory funding levels indicated in Table 5 , which are set in appropriations legislation, fluctuating levels of mandatory spending occur in the NFIP in order to pay and adjust claims on affected NFIP policies. Congress has authorized FEMA to borrow no more than $30.425 billion from the U.S. Treasury in order to operate the NFIP. The authorization for this borrowing would be reduced to $1 billion after May 31, 2019, were the NFIP to be allowed to lapse. In January 2017, the NFIP borrowed $1.6 billion due to losses in 2016 (the August 2016 Louisiana floods and Hurricane Matthew). On September 22, 2017, the NFIP borrowed the remaining $5.825 billion from the Treasury to cover claims from Hurricane Harvey, Hurricane Irma, and Hurricane Maria, reaching the NFIP's authorized borrowing limit of $30.425 billion. On October 26, 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. This represents the first time that NFIP debt has been cancelled, although Congress appropriated funds between 1980 and 1985 to repay NFIP debt. FEMA borrowed another $6.1 billion on November 9, 2017, to fund estimated 2017 losses, including those incurred by Hurricanes Harvey, Irma, and Maria and anticipated programmatic activities, bringing the debt up to $20.525 billion. The NFIP currently has $9.9 billion of remaining borrowing authority. The NFIP's debt to the U.S. Treasury cannot be tied directly to any single incident, as any insurance claim paid by the NFIP is in some way responsible for the existing debt of the NFIP (i.e., a dollar paid in claims, and therefore expended by the NFIP, following a minor flooding incident is no different than a dollar paid following a major hurricane). However, the NFIP was forced to borrow heavily to pay claims in the aftermath of two catastrophic flood seasons, the 2005 hurricane season (particularly Hurricanes Katrina, Rita, and Wilma) and Hurricane Sandy in 2012. For example, following Hurricane Sandy, Congress passed P.L. 113-1 to increase the borrowing limit of the NFIP from $20.775 billion to the current $30.425 billion. Prior to Hurricane Katrina in 2005, the NFIP had generally been able to cover its costs, borrowing relatively small amounts from the U.S. Treasury to pay claims, and then repaying the loans with interest. The NFIP's debt is conceptually owed by current and future participants in the NFIP, as the insurance program itself owes the debt to the Treasury and pays for accruing interest on that debt through the premium revenues of policyholders. For example, from FY2006 to FY2016 (i.e., since the NFIP borrowed funds following Hurricane Katrina), the NFIP has paid $2.82 billion in principal repayments and $3.83 billion in interest to service the debt through the premiums collected on insurance policies. Under its current authorization, the only means the NFIP has to pay off the debt is through the accrual of premium revenues in excess of outgoing claims, and from payments made out of the growing Reserve Fund. As required by law, FEMA submitted a report to Congress in 2013 on how the borrowed amount from the U.S. Treasury could be repaid within a 10-year period. Whether or not FEMA will ultimately be able to pay off the debt is largely dependent on future insurance claims, namely if a catastrophic flooding incident such as Hurricanes Harvey, Sandy, or Katrina occurs again and with what frequency. However, using various predictions for both revenues (i.e., premiums) and losses (i.e., insurance claims), FEMA's report on debt repayment indicated even with the most optimistic scenario of future flooding it would take at least 13 years to repay the debt. In more realistic scenarios, the debt would not be paid off for at least 20 years, or it may increase considerably with future catastrophic incidents. For example, in April 2017, CBO projected that the NFIP would have insufficient receipts to pay the expected claims and expenses over the 2018-2027 period and that FEMA would need to use about $1 billion of its then-current $5.825 billion borrowing authority to pay those expected claims. Also in April 2017, FEMA updated some of the assumptions in the October 2015 NFIP Semi-Annual Debt Repayment Progress Report and estimated that at the end of 20 years, the NFIP's net debt would increase by a further $9.4 billion. No projections of the NFIP debt have yet been made that take account of the cancellation of $16 billion of NFIP debt, or the as yet unknown total claims of the 2017 hurricane season. In HFIAA-14, Congress revised the authority of FEMA to secure reinsurance for the NFIP from the private reinsurance and capital markets. In September 2016, FEMA secured its first placement of reinsurance for the NFIP, contracting for reinsurance cover which ran from September 19, 2016, through March 19, 2017, structured into two coverage layers. Under the first layer, the reinsurers would indemnify FEMA $1 million for flood claims losses that exceed $5 million. Under the second layer, the reinsurers would indemnify FEMA $1,000,000 when the total losses from a single flood event exceed $5.5 billion. In January 2017, FEMA purchased $1.042 billion of insurance, to cover the period from January 1, 2017, to January 1, 2018, for a reinsurance premium of $150 million. Under this agreement, the reinsurance covered 26% of losses between $4 billion and $8 billion arising from a single flooding event. The purchase of private market reinsurance reduces the likelihood of FEMA needing to borrow from the Treasury to pay claims. However, since FEMA is withdrawing funds from the Reserve Fund to pay for this reinsurance, it subsequently increases the cost of insurance to policyholders. FEMA's modeling of the NFIP portfolio before the reinsurance purchase suggested that there was a 17.2% chance of losses from an event exceeding $4 billion in 2017. FEMA has already paid over $8.67 billion in claims for Hurricane Harvey, triggering the full 2017 reinsurance. In January 2018, FEMA purchased $1.46 billion of insurance to cover the period from January 1, 2018, to January 1, 2019, for a reinsurance premium of $235 million. The agreement is structured to cover losses above $4 billion for a single flooding event, covering 18.6% of losses between $4 billion and $6 billion, and 54.3% of losses between $6 billion and $8 billion. In August 2018, FEMA entered into its first transfer of NFIP risk to private risk markets through an insurance-linked securities transfer, in the form of a three-year agreement with Hannover Re, a reinsurance company. Hannover Re is acting as a \"transformer,\" transferring $500 million of the NFIP's financial risk to the capital markets by sponsoring issuance of an indemnity-triggered cat bond. Hannover Re will indemnify FEMA for a portion of claims for a single qualifying flooding event that occurs between August 1, 2018, and July 31, 2021. The agreement is structured into two tranches. The first provides reinsurance coverage for 3.5% of losses between $5 and $10 billion, and the second for 13% of losses between $7.5 and $10 billion. FEMA paid a premium of $62 million for the first year of coverage. Unlike the earlier reinsurance purchases, which covered all NFIP flood losses, the catastrophe bond applies only to flooding resulting directly or indirectly from a named storm and covers only the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Combined with the January 2018 reinsurance placement, FEMA transferred $1.96 billion of the NFIP's flood risk for the 2018 hurricane season to the private sector. FEMA has not claimed on the reinsurance purchased in 2018. In January 2019, FEMA purchased $1.32 billion of insurance to cover the period from January 1, 2019, to January 1, 2020, for a reinsurance premium of $186 million. The agreement is structured to cover losses above $4 billion for a single flooding event, covering 14% of losses between $4 billion and $6 billion, and 25.6% of losses between $6 billion and $8 billion, and 26.6% of losses between $8 billion and $10 billion. The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key componen ts of the program. Unless reauthorized or amended by Congress, the following will occur after May 31, 2019: The authority to provide new flood insurance contracts will expire. Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. Other activities of the program would technically remain authorized following May 31, 2019, such as the issuance of FMA grants. However, the expiration of the key authorities described above would have varied, generally serious effects on these remaining NFIP activities. ", "summary": "The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was most recently reauthorized to May 31, 2019, through a series of short-term reauthorizations. The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. Communities volunteer to participate in the NFIP in order to have access to federal flood insurance, and in return are required to adopt minimum standards. The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent the Federal Insurance and Mitigation Administration (FIMA). FEMA manages a Risk Mapping, Assessment and Planning (Risk MAP) process to produce Flood Insurance Rate Maps (FIRMs). Depicted on FIRMs are Special Flood Hazard Areas (SFHAs), which are areas exposed to a 1% or greater risk of annual flooding. FIRMs vary in age across the country, and are updated on a prioritized basis. The Risk MAP process provides extensive outreach and appeal opportunities for communities. Updating a community's FIRMs can take three to five years or more. Participating communities must adopt a flood map and enact minimum floodplain standards to regulate development in the SFHA. FEMA encourages communities to enhance their floodplain standards by offering reduced premium rates through the Community Rating System (CRS). FEMA also manages a Flood Mitigation Assistance (FMA) grant program using NFIP revenues to further reduce comprehensive flood risk. Participating communities that fail to adopt FIRMs or maintain minimum floodplain standards can be put on probation or suspended from the NFIP. In communities that do not participate in the NFIP, or have been suspended, individuals cannot purchase NFIP insurance. Individuals in these communities also face challenges receiving federal disaster assistance in flood hazard areas, and have difficulties receiving federally backed mortgages. NFIP insurance uses one of three types of Standard Flood Insurance Policies (SFIPs). SFIPs have maximum coverage limits set by law. Any federal entity that makes, guarantees, or purchases mortgages must, by law, require property owners in the SFHA to purchase flood insurance, generally through the NFIP. In moderate risk areas, community members may purchase Preferred Risk Policies (PRPs) that offer less costly insurance. The day-to-day sale, servicing, and claims processing of NFIP policies are conducted by private industry partners. Most policies are serviced by companies that are reimbursed through the Write Your Own (WYO) Program. The premium rate for most NFIP policies is intended to reflect the true flood risk. However, Congress has directed FEMA to subsidize flood insurance for properties built before the community's first FIRM (i.e., the pre-FIRM subsidy). In addition, FEMA \"grandfathers\" properties at their rate from past FIRMs to updated FIRMs through a cross-subsidy. Congress has provided appropriations to the NFIP for some of the cost of Risk MAP. Congress also authorizes the use of premium revenues for other NFIP costs, including administration, salaries, and other expenses. NFIP premiums also include other charges, such as a Federal Policy Fee, a Reserve Fund assessment, and a surcharge to help fund the NFIP. In October 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. The NFIP currently owes $20.525 billion to the U.S. Treasury, leaving $9.9 billion in borrowing authority from a $30.425 billion limit in law. This debt is serviced by the NFIP and interest is paid through premium revenues. After May 31, 2019, key authorities of the NFIP, such as the authority to issue new insurance contracts, will expire if they are not reauthorized by Congress.", "document_type": "crs"}
{"report": "Members of Congress may address numerous ongoing and new policy issues in the 116 th Congress. The changing dynamics and composition of international trade and finance can affect the overall health of the U.S. economy, the success of U.S. businesses and workers, and the U.S. standard of living. They also have implications for U.S. geopolitical interests. Conversely, geopolitical tensions, risks, and opportunities can have major impacts on international trade and finance. These issues are complex and at times controversial, and developments in the global economy often make policymaking more challenging. Congress is in a unique position to address these and other issues given its constitutional authority for legislating and overseeing international commerce. The major focus of the 115 th Congress was overseeing the Trump Administration's evolving trade policy. The Trump Administration's approach to international trade arguably represents a significant shift from the approaches of prior administrations, in that it questions the benefits of U.S. leadership in the rules-based global trading system and expresses concern over the potential limits that this system may place on U.S. sovereignty. As such, the Administration's withdrawal from the proposed Trans-Pacific Partnership (TPP), imposition of unilateral trade restrictions on various U.S. imports, renegotiation of the North American Free Trade Agreement (NAFTA), modification of certain provisions in the U.S.-South Korea (KORUS) free trade agreement (FTA), and launch of an extensive review of U.S. participation in the World Trade Organization (WTO) were among the most notable developments in U.S. trade policy in the past two years. Other issues before Congress included approving legislation to (1) strengthen the process used to review the national security implications of foreign direct investment transactions in the United States; (2) modernize U.S. development finance tools to help advance U.S. national security and economic interests and global influence; and (3) provide temporary tariff suspensions and reductions—through Miscellaneous Tariff Bills—on certain products not available domestically. Continued focus on economic sanctions against Russia, North Korea, Iran, Cuba, and other countries were also of interest to many in Congress. The Trump Administration has displayed a more critical view than past administrations of U.S. trade agreements, made greater use of various U.S. trade laws with the potential to restrict U.S. imports, and focused on bilateral trade balances as a key metric of the health of U.S. trading relationships. As part of this shift in focus, the Administration has placed a greater emphasis on \"fair\" and \"reciprocal\" trade. China has also been a center of attention as the Administration has sought to address longstanding concerns over its policies on intellectual property (IP), forced technology transfer, and innovation. Citing these concerns and others, the President has unilaterally imposed trade restrictions on a number of U.S. imports under U.S. laws and authorities—most of which have been used infrequently since the establishment of the WTO in 1995. During the 115 th Congress' second session, many Members weighed in on the President's actions. While some supported his use of unilateral trade measures, others raised concerns about potential negative economic implications of these actions and the risks they pose to the rules-based international trading system. Several Members introduced bills to amend some of the President's trade authorities—for example, to require congressional consultation or approval before imposing new trade barriers. The implications of changes in the U.S. trade landscape for the 116 th Congress will depend on a number of factors, including the impact of the Administration's trade actions—particularly increased tariffs—on U.S. industries, firms, workers, and supply chains; the reaction of U.S. trading partners; and the extent to which future actions are in line with core U.S. commitments and obligations under the WTO and other trade agreements. The U.S.-China trade and economic relationship is complex and wide-ranging, and it will likely entail continued close examination by Congress. In addition to specific trade practices of concern, Congress scrutinize the economic and geopolitical implications of China's Belt and Road Initiative, which finances and develops infrastructure projects across a number of countries and regions. Congress may also examine the economic implications of China's industrial policies in high technology sectors, which could potentially challenge U.S. firms and disrupt global markets. How these issues play out, combined with the evolving global economic landscape, raise potentially significant legislative and policy questions for Congress. The 116 th Congress may consider (1) legislation to implement the U.S.-Mexico-Canada Agreement; (2) measures to reassert its constitutional authority over tariffs and other trade restrictions or to narrow the scope of how the president can use delegated authorities to impose such restrictions; (3) the extent to which past U.S. FTAs should be modernized or revised and, if so, in what manner; (4) what priority should be given to negotiating new U.S. FTAs with the European Union, the United Kingdom, Japan, and other trading partners, as well as the scope of negotiations; and (5) the impact of FTAs excluding the United States on U.S. economic and broader interests, and the appropriate U.S. response to the proliferation of such agreements. Another major issue is the role of the United States in the multilateral, rules-based trading system underpinned by the WTO. Historically, U.S. leadership in the global trading system has enabled the United States to shape the international trade agenda in ways that both advance and defend U.S. interests. The growing debate over the role and future direction of the WTO may raise important issues for Congress, such as how current and future WTO agreements affect the U.S. economy, the value of U.S. membership and leadership in the WTO, and the need to update or adapt WTO rules to reflect 21 st century realities. Such updates might address the proliferation of global supply chains, advances in technology, new forms of trade barriers, and market-distorting government policies. This report provides a broad overview of select topics in international trade and finance. It is not an exhaustive look at all issues, nor is it a detailed examination of any one issue. Rather, it provides concise background information of certain prominent issues that have been the subject of recent discussion and debate, and that may come before the 116 th Congress. However, it does include references to more in-depth CRS products on the issues. In 2017, the global economy began to display signs of a synchronized recovery from the 2008-2009 global financial crisis and deep economic recession. The International Monetary Fund (IMF) estimates that real global gross domestic product (GDP) rose from 3.3% in 2016 to 3.7% in 2017 ( Figure 1 ). As a group, advanced economies grew 2.3% (up from 1.7% in 2016), while emerging market and developing economies grew 4.7% (up from 4.4% in 2016). The growth performance of major U.S. trading partners diverged widely in 2017, affecting both their bilateral trade and investment relations with the United States and their exchange rates against the U.S. dollar. Canada more than doubled its real GDP growth rate, from 1.4% in 2016 to 3.1% in 2017. China also continued to grow, albeit at a pace of 6.9% in 2017. Among the United States' top trading partners, India and Mexico experienced lower growth in 2017 than in 2016. The IMF forecasts improved performance in the short-term from both advanced economies—2.1% for 2019—and emerging market and developing economies—4.7% in 2019. This growth is projected to slow in the medium term, however, as output gaps close and advanced economies return to their potential output paths. Beyond the short term, growth rates are expected to fall below pre-recession levels, as the aging populations and shrinking labor forces in advanced economies are expected to act as a drag on expansion. Overall fiscal policy is expected to remain expansionary in 2019, but begin to turn contractionary by 2020. Monetary policy may remain supportive in the Eurozone and Japan, but may continue to tighten in the United States—although the speed of U.S. monetary tightening has been thrown into question by recent economic and financial market developments. More broadly, global financial conditions are expected to remain generally accommodative. Emerging markets (EMs) as a group face growing vulnerabilities to their economies due to uncertainties about global trade, depreciating currencies and risks of capital flight, volatile equity markets, large debts denominated in foreign currencies, and, in certain areas, the lack of deeper economic reform. Increased uncertainty over political and policy direction could constrain the rate of growth in Argentina, Brazil, Pakistan, Turkey, and South Africa. Additionally, China is expected to experience slower growth rates in the coming years, as the economy continues to rebalance away from investment toward private consumption, and from industry to services. The rise in China's nonfinancial debt as a share of GDP is likely to contribute to this downward trend. In Venezuela, the economy has collapsed, with the inflation rate forecast by the IMF to have exceeded 1,000,000% in 2018. In addition, declining commodity prices, particularly oil, could increase concerns in commodity-producing economies—many of them EMs—and destabilize national incomes. These and other developments could add to uncertainties in global financial markets, raise risks for U.S. banks of nonperforming loans, complicate the efforts of some banks to rebuild their capital bases, and potentially dampen prospects for long-term gains in productivity and higher rates of economic growth. The United States continues to experience strong economic fundamentals and remains a relatively bright spot within the global economy, which could help it sustain its position as a main driver of global economic growth. With close to 5% of the world's population, it accounted for almost 25% of the world's output in nominal U.S. dollars, more than 10% of its exports (goods and services), and 16% of its growth in 2017. The U.S. economy grew faster in 2017 than in 2016: U.S. real GDP increased 2.2% in 2017, up from 1.5% in 2016. The latest U.S. data show signs of continuing strong performance in 2018, with the IMF forecasting 2.9% growth and the U.S. Federal Reserve estimating growth between 2.9% and 3.2%. Some forecasts indicate that U.S. growth could stop accelerating by 2019 due to higher commodity prices, upward inflationary pressures, monetary policy tightening by the U.S. Federal Reserve, trade policy uncertainties, and global risks. Labor market data indicate that the United States is at—or close to—full employment, as the jobless rate reached 4.1% at the end of 2017 and is projected to have fallen below 4.0% in 2018. The decline in the price of oil is affecting not only the global economy, but also the U.S. economy. While the drop in energy prices may raise U.S. consumers' real incomes and improve the competitive position of some U.S. industries, these positive effects may be offset to some extent by a drop in employment and investment in the energy sector. With the improving global economic outlook, the IMF and the WTO had projected a rebound in trade growth for 2018 and 2019. However, amid several downside risks, including rising trade tensions between major economies like the United States and China, and heightened trade policy uncertainty, the IMF and WTO now expect global trade growth to slow. Restrictive trade policy measures imposed by the United States and some of its major trading partners may be affecting trade flows and prices in targeted sectors. Analysts claim that some recent policy announcements also have harmed business outlooks and investment plans, due to heightened concern over possible disruptions to supply chains and the risks of potential increases in the scope or intensity of trade restrictions. The Organization for Economic Cooperation and Development (OECD) projects that a further rise in trade tensions may have additional adverse effects on global investment and jobs. In addition, exchange rates continue to experience volatility, with a number of currencies depreciating against the U.S. dollar, including the Chinese renminbi, Argentine peso, Turkish lira, and South African rand. Volatile currency and equity markets—combined with uncertainties over global trade and rates of inflation that remain below the target levels of a number of central banks—could further complicate current efforts of the U.S. Federal Reserve to continue tightening monetary policy. Other major economies, such as Eurozone and Japan, may continue to pursue unconventional monetary policies. Uncertainties in global financial markets could put additional upward pressure on the U.S. dollar, as investors may seek \"safe haven\" currencies and dollar-denominated investments. For some economies, volatile currencies and continued low commodity prices could add to debt issues, raising the prospect of defaults and potential economic crises. The U.S. Constitution assigns authority over foreign trade to Congress. Article I, Section 8, of the Constitution gives Congress the power to \"lay and collect Taxes, Duties, Imposts, and Excises\" and to \"regulate Commerce with foreign Nations.\" For the first 150 years of the United States, Congress exercised its power to regulate foreign trade by setting tariff rates on all imported products. Congressional trade debates in the 19 th century often pitted Members from northern manufacturing regions, who benefitted from high tariffs, against those from largely southern raw material exporting regions, who gained from and advocated for low tariffs. A major shift in U.S. trade policy occurred after Congress passed the highly protective \"Smoot-Hawley\" Tariff Act of 1930, which significantly raised U.S. tariff levels and led U.S. trading partners to respond in kind. As a result, world trade declined rapidly, exacerbating the impact of the Great Depression. Since the passage of the Tariff Act of 1930, Congress has delegated certain trade authority to the executive branch. First, Congress enacted the Reciprocal Trade Agreements Act of 1934, which authorized the President to enter into reciprocal agreements to reduce tariffs within congressionally pre-approved levels, and to implement the new tariffs by proclamation without additional legislation. Congress renewed this authority periodically until the 1960s. Subsequently, Congress enacted the Trade Act of 1974, aimed at opening markets and establishing nondiscriminatory international trade norms for nontariff barriers as well. Because changes in nontariff barriers in reciprocal bilateral, regional, and multilateral trade agreements may involve amending U.S. law, the agreements require congressional approval and implementing legislation. Congress has renewed or amended the 1974 Act five times, which includes granting \"fast-track\" trade negotiating authority. Since 2002, \"fast track\" has been known as trade promotion authority (TPA). In 2015, Congress authorized a new TPA through July 1, 2021 (see \" Trade Promotion Authority (TPA) \" below). Congress also exercises trade policy authority through the enactment of laws authorizing trade programs and measures to address unfair and other trade practices. It also conducts oversight of the implementation of trade policies, programs, and agreements. These include such areas as U.S. trade agreement negotiations, tariffs and nontariff barriers, trade remedy laws, import and export policies, economic sanctions, and the trade policy functions of the federal government. Over the years, Congress has authorized a number of trade laws that delegate a range of authorities to the President to investigate and take actions on imported goods for national security purposes (Section 232, Trade Expansion Act of 1962), trade remedies to counter dumping and subsidy practices by other countries, unfair trade practices (Section 301, Trade Act of 1974), or safeguard measures (Section 201, Trade Act of 1974). The Trump Administration is using these acts to impose steel and aluminum tariffs on major trading partners and for possible tariffs on vehicles and auto parts for national security purposes, and on a range of Chinese products for what the Administration deems as unfair trading practices including intellectual property theft and other practices. Some Members of Congress have opposed the use of these tariffs and in the 116 th Congress may seek to revisit or curtail these statutes. Additionally, Congress has an important role in international investment and finance policy. Under its treaty powers, the Senate considers bilateral investment treaties (BITs), and Congress sets the level of U.S. financial commitments to the multilateral development banks (MDBs), including the World Bank and the International Monetary Fund (IMF). It also funds the Office of the U.S. Trade Representative (USTR) and other trade agencies, and authorizes the activities of various agencies, such as the Export-Import Bank (Ex-Im Bank) and the Overseas Private Investment Corporation (OPIC). Congress also has oversight responsibilities over these institutions, as well as the Federal Reserve and the Department of the Treasury, whose activities can affect international capital flows and short-term movements in the international exchange value of the dollar. Congress also closely monitors developments in international financial markets that could affect the U.S. economy. Trade Promotion Authority (TPA) is a primary means by which Congress asserts its constitutional authority over trade policy, particularly U.S. trade agreements. TPA—the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 )—which was signed by President Obama on June 29, 2015, is in place until July 1, 2021. Any agreement signed by that date, such as the United States-Mexico-Canada (USMCA), is eligible for consideration under TPA. TPA allows implementing bills submitted to Congress by the President for specific trade agreements to be considered under expedited legislative procedures—limited debate, no amendments, and an up or down vote—provided the President observes certain statutory obligations in negotiating trade agreements. These obligations include achieving progress in meeting congressionally defined U.S. trade policy negotiating objectives, as well as congressional notification and consultation requirements before, during, and after the completion of the negotiation process. The primary purpose of TPA is to preserve the constitutional role of Congress with respect to the consideration of implementing legislation for trade agreements that require changes in domestic law, which includes tariffs, while also bolstering the negotiating credibility of the executive branch by ensuring that trade agreements will not be changed once concluded. Since the authority was first enacted in the Trade Act of 1974 ( P.L. 93-618 ), Congress has renewed or amended TPA five times (1979, 1984, 1988, 2002, and 2015). In addition, TPA legislative procedures are considered rules of the House and Senate, and, as such, can be changed at any time. Precedent exists for implementing legislation to have its eligibility for expedited treatment under TPA removed by Congress. In 2019, Congress may use TPA to consider the USMCA or other agreements negotiated by the Administration. The United States has been a driving force in breaking down trade and investment barriers across the globe and constructing an open and rules-based global trading system through a wide range of international institutions and agreements. Since 1934, U.S. policymakers across political parties have recognized the importance of pursuing trade policies that promote more open, rules-based, and reciprocal international commerce, while being cognizant of potential costs to specific segments of the population, particularly through greater competition. Although there is a general consensus that, in the aggregate, the overall economic benefits of reducing barriers to trade and investment outweigh the costs, the processes of trade and financial liberalization, and of globalization more broadly, have presented both opportunities and challenges for the United States. Many U.S. consumers, workers, firms, and industries have benefited from increased trade. On the consumption side, U.S. households have enjoyed lower product prices and a broader variety of goods and services—some of which the United States does not produce in large quantities. On the production side, stronger linkages to the global economy force U.S. industries and firms to focus on areas in which they have a comparative advantage, provide them with export and import opportunities, enable them to realize economies of scale, and encourage them to innovate. At the same time, some stakeholders argue that globalization is not inclusive, benefiting some more than others. They point to job losses, stagnant wages, and rising income inequality among some groups—as well as to environmental degradation—as indicators of the negative impact of globalization on the U.S. economy, although the causes of these trends are highly contested. Some policymakers also perceive growing bilateral U.S. trade deficits as evidence that U.S. trade with other nations is \"uneven\" or that foreign countries engage in \"unfair\" trade practices. Others view many of the existing global trade rules as outdated, since they do not reflect the realities of the 21 st century—particularly when it comes to technological advances, new forms of trade (such as digital trade), and threats that international trade may pose to U.S. national security. Finally, some experts argue that the 2008-2009 financial crisis caused painful adjustment and costs for some segments of the population, which have exacerbated concerns related to U.S. trade policy and have led to increased domestic nationalism. A longstanding objective of some Members of Congress and administrations has been to achieve a \"level playing field\" for U.S. industries, firms, and workers, and to preserve the United States' high standard of living—all while remaining innovative, productive, and internationally competitive, as well as safeguarding those stakeholders who otherwise may be left behind in a fast-changing global economy. Given Congress' constitutional authority over U.S. trade policy, Members are in a unique to position to influence, legislate, and oversee responses that support these goals and that reduce or soften the hardships and costs from international trade. A key question in policy debates over international trade is its impact on U.S. jobs. Trade is one among a number of forces that drive changes in employment, wages, the distribution of income, and ultimately the U.S. standard of living. Most economists argue that macroeconomic forces within an economy, including technological and demographic changes, are the dominant factors that shape trade and foreign investment relationships and complicate efforts to disentangle the distinct impact that trade has on the economy. In a dynamic economy like that of the United States, jobs are constantly being created and replaced as some economic activities expand, while others contract. Various measures are used to estimate the role and impact of trade in the economy and of trade on employment. One measure developed by the U.S. Department of Commerce concludes that, as of 2016 (the most recent year for which data is available), exports support, directly and indirectly, 10.7 million jobs in the U.S. economy: 6.3 million in the goods-producing sectors and 4.4 million in the services sector ( Figure 2 ). According to these estimates, jobs associated with international trade, especially jobs in export-intensive manufacturing industries, earn 18% more on a weighted average basis than comparable jobs in other manufacturing industries. Trade and trade liberalization can have a differential effect on workers and firms in the same industry. Some estimates indicate that the short-run costs to workers who attempt to switch occupations or switch industries in search of new employment opportunities may experience substantial effects. One study concluded that workers who switched jobs as a result of trade liberalization generally experienced a reduction in their wages, particularly in occupations where workers performed routine tasks. These negative income effects were especially pronounced in occupations exposed to imports from low-income countries. In contrast, occupations associated with exports experienced a positive relationship between rising incomes and growth in export shares. As a result of the differing impact of trade liberalization on workers and firms, Congress created Trade Adjustment Assistance (TAA) programs to mitigate the potential adverse effects of trade liberalization on workers, firms, and farmers (see text box below). The overall U.S. trade deficit, or more broadly the current account balance, represents an accounting principle that expresses the difference between the country's exports and imports of goods and services. The United States has experienced annual current account deficits since the mid-1970s. Congressional interest in the trade deficit has been heightened by the Trump Administration's approach to international trade. The Administration has used the U.S. trade deficit as a barometer for evaluating the success or failure of the global trading system, U.S. trade policy, and U.S. trade agreements. It has characterized the trade deficit as a major factor in a number of perceived ills afflicting the U.S. economy—including the rate of unemployment and slow gains in wages—and partially as the result of unfair trade practices by foreign competitors. Many economists, however, argue that this characterization misrepresents the nature of the trade deficit and the role of trade in the U.S. economy. In general, traditional economic theory holds that the overall U.S. trade deficit stems from U.S. macroeconomic policies and an imbalance between saving and investment in the U.S. economy. Currently, the demand for capital in the U.S. economy outstrips the amount of gross savings supplied by households, firms, and the government (a savings-investment imbalance). Therefore, many observers argue that attempting to alter the trade deficit without addressing the underlying macroeconomic issues would be counterproductive and create distortions in the economy. A concern expressed by some analysts and policymakers is the debt accumulation associated with sustained trade deficits. They argue that the long-term impact on the U.S. economy of borrowing to finance imports depends on whether those funds are used for greater investments in productive capital with high returns that raise future standards of living, or whether they are used for current consumption. These concerns and the various policy approaches that have been used to alter the savings-investment imbalance in the economy are beyond the scope of this report. U.S. free trade agreements (FTAs) generally are negotiated on the basis of U.S. trade negotiating objectives established by Congress under Trade Promotion Authority (TPA). U.S. FTAs have evolved in the scope and depth of their commitments since the 1980s. Since the first bilateral U.S. FTA with Israel, which is only 14 pages in length and focused primarily on the elimination of tariffs, the United States has pursued increasingly comprehensive and enforceable commitments. The North American Free Trade Agreement (NAFTA), which entered into force in 1994, was the first FTA that incorporated many of the rules in more recent U.S. FTAs. It initiated a new generation of U.S. trade agreements in the Western Hemisphere and other parts of the world, influencing negotiations in areas such as market access, rules of origin, intellectual property rights (IPR), foreign investment, and dispute resolution. It was the first trade agreement to include provisions on IPR protection, labor, and the environment. Although not all FTAs are exactly the same, core provisions incorporated into most U.S. FTAs include the following: Tariffs and Market Access. Elimination of most tariffs and nontariff barriers on goods, services, and agriculture over a period of time, and specific rules of origin requirements. Services. Commitments on national treatment, most-favored nation (MFN) treatment, and prohibition of local presence requirements. IPR Protection. Minimum standards of protection and enforcement for patents, copyrights, trademarks, and other forms of IPR. FTAs after NAFTA have new commitments reflecting standard protection similar to that found in U.S. law. Foreign Investment. Removal of investment barriers, basic protections for investors, with exceptions, and mechanisms for dispute settlement. Labor and Environmental Provisions. Commitments to enforce one's own laws in NAFTA evolved to commitments in later FTAs to adopt, maintain, and not derogate from laws incorporating specific standards, among other provisions. Government Procurement. Commitments to provide certain levels of access to and nondiscriminatory treatment in parties' government procurement markets. Dispute Settlement. Provisions for dispute settlement mechanism to resolve disputes regarding each party's adherence to agreement obligations. Other Provisions. Other core provisions have included those related to competition policy, monopolies, and state enterprises, sanitary and phytosanitary standards, safeguards, technical barriers to trade, transparency, and good governance. Before an FTA can enter into force, it must be ratified by the governments of parties involved. In the United States, Congress must approve an FTA before it can enter into force. Before voting on an agreement, Congress may review whether the objectives it set out in TPA legislation were followed in the negotiation of the agreement, evaluate the overall economic effect on the U.S. economy, including through a mandated report by the U.S. International Trade Commission (ITC), determine whether the agreement would promote U.S. standards such as IPR, labor, and the environment in other countries, or consider the enforceability of the agreement and its rules. During 2018, the Trump Administration turned to quotas and quota-like arrangements to achieve some of its trade objectives. It negotiated potential quotas on autos through side letters to the proposed United States-Mexico-Canada Agreement (USMCA), as well as quota arrangements that allowed South Korea, Brazil, and Argentina to avoid U.S. tariff increases on steel and aluminum imports. Some Members of Congress and analysts have questioned whether these actions represent an undesirable shift in U.S. trade policy—towards one that some analysts have labeled managed trade. Managed trade generally refers to government efforts to achieve measurable results by establishing—through quantitative restrictions on trade and other numerical targeted approaches—specific market shares or targets for certain products. These are met through mutual agreement or under threat of trade action (e.g., increased tariffs). The 116 th Congress may wish to examine the extent to which the Administration is adopting such an approach, including its effectiveness and impact on U.S. and international trade. Advocates of managed trade policies contend that, by negotiating results-oriented agreements and using the size of the U.S. economy as leverage, the United States can ensure that trade with certain trading partners is \"fair,\" \"balanced,\" and \"reciprocal.\" In addition, they argue, it will force countries to change their distortive economic policies, decrease the size of the U.S. trade deficit and, by reducing U.S. imports, help strengthen certain U.S. industries and boost U.S. employment. Other policymakers view these measures as protectionist and harmful to the economy. Many economists question the efficacy of prodding U.S. trading partners into negotiating or accepting quotas or numerical targets, as well as the ability of the state, rather than market forces, to provide the most efficient allocation of scarce resources—even when attempting to respond to trade-distorting measures by trading partners. They also note that policies that restrict U.S. imports and boost U.S. exports may not decrease the overall size of the U.S. trade deficit, as it is primarily the result of macroeconomic forces—namely the low level of U.S. savings relative to total investment. According to some observers, a move away from a market-driven, multilateral rules-based system to one driven by numerical outcomes and targets could lead to increasing trade restrictions, retaliation or replication by other countries, higher prices, lower global economic growth, and the erosion of the international trading system. The rapid growth of digital technologies has created new opportunities for U.S. consumers and businesses but also new challenges in international trade. For example, consumers today access e-commerce, social media, telemedicine, and other offerings not available thirty years ago. Businesses use advanced technology to reach new markets, track global supply chains, analyze big data, and create new products and services. New technologies facilitate economic activity but also create new trade policy questions and concerns. Recent international negotiations have sought to improve and remove barriers to market access for trade in digital goods and services and also address other concerns, such as cybersecurity and privacy protection. Internationally-traded information and communication technologies (ICT) products, whether physical goods (e.g., laptops) or emerging technologies, including algorithms and artificial intelligence, may be subject to traditional trade barriers such as tariffs or export controls. Nontariff barriers impede U.S. firms' market access by limiting what companies can offer or how they can operate in a foreign market, such as requiring local content or partners. Internet sovereignty is a challenge for firms who seek market access in countries where the government strictly controls what digital data is permitted within its borders, such as what information people can access online. Another often-cited digital trade barrier is data localization requirements or cross-border data flows restrictions that policymakers may enact to promote safety, security, privacy or favor domestic firms but that raise costs and risks for foreign firms. Technology transfer requirements and cybersecurity issues include the infringement of intellectual property and theft of trade secrets, economic espionage, and may touch on national security concerns. The 116 th Congress may consider a variety of issues related to technology and trade. These include provisions in the proposed United States-Mexico-Canada Agreement (USMCA), U.S. participation in e-commerce negotiations at the World Trade Organization (WTO), evolving online privacy policies in the United States and other countries, as well as concerns about trade with China, such as those outlined in the Trump Administration's investigation under Section 301 of the Trade Act of 1974 (see section on Tariff Actions by the Trump Administration). U.S. officials have long recognized that U.S. economic interests are vital to national security concerns and have considered the concepts of \"geoeconomics\" and \"economic statecraft\" in relation to national security strategy. Broadly speaking, these terms refer to the political consequences of economic decisions or the economic consequences of political trends and the dynamics of national power. In recent years, a combination of domestic and international forces are challenging the U.S. leadership role in ways that are unprecedented in the post-World War II era. For some observers, these challenges are not just about economic growth and international economic engagement, but directly affect U.S. national security. In their view, China's growing economic competition for leading-edge technologies, in particular, challenges not only U.S. commercial interests, but potentially threatens U.S. national security interests. According to some observers, since taking office, the Trump Administration has promoted a form of national security that mixes trade and economic relationships with national security, defense, and foreign policy objectives in ways that seem more confrontational than cooperative, more unilateral than multilateral, and more central to its overall agenda than in previous administrations. For example, the Trump Administration has used the U.S. trade deficit and import tariffs to support the defense industrial base by placing tariffs on the imports of strategic security partners as a form of national economic security. Despite existing National Security Strategy (NSS) reports and previous executive branch efforts, there is a view that the United States lacks a holistic, whole-of-government approach for thinking about economic challenges and opportunities in relation to U.S. national security. To that end, on April 25, 2018, Senators Young, Merkley, Rubio and Coons introduced S. 2757 , the National Economic Security Strategy Act of 2018 to \"ensure Federal policies, statutes, regulations, procedures, data gathering, and assessment practices are optimally designed and implemented to facilitate the competitiveness, prosperity, and security of the United States.\" This and similar legislation may be introduced in the 116 th Congress. Policy debates during the 116 th Congress may include the use and impact of unilateral tariffs imposed by the Trump Administration under various U.S. trade laws, as well as potential legislation that alters the authority granted by Congress to the President to do so; U.S.-China trade relations; legislation to implement the proposed United States-Mexico-Canada Trade Agreement (USMCA); and the Administration's launch of bilateral trade negotiations with the European Union, Japan, and the United Kingdom, among many others. The following section provides a broad overview of the potentially more prominent issues in international trade and finance that the 116 th Congress may consider. Concerns over trading partner trade practices, the U.S. trade deficit, and potential negative effects of U.S. imports have been a focus of the Trump Administration. Citing these concerns and others, the President has imposed increased tariffs under (1) Section 201 of the Trade Act of 1974 on U.S. imports of washing machines and solar products; (2) Section 232 of the Trade Expansion Act of 1962 on U.S. imports of steel and aluminum, and potentially autos and uranium, and (3) Section 301 of the Trade Act of 1974 on U.S. imports from China. Congress delegated aspects of its constitutional authority to regulate foreign commerce to the President through these trade laws. They allow presidential action, based on agency investigations and other criteria, to impose import restrictions to address specific concerns ( Table 1 ). They have been used infrequently in the past two decades, in part due to the 1995 creation of the World Trade Organization (WTO) and its dispute settlement system. Annual U.S. imports of goods subject to the additional tariffs, which range from 10% to 50%, totaled $282 billion in 2017 ( Figure 3 ). All formally proposed tariffs are now in effect. The President has informally raised the prospect of tariffs on an additional $267 billion of U.S. annual imports from China, and, pending a Section 232 investigation expected to be finalized in early 2019, additional tariffs on approximately $361 billion of U.S. auto and parts imports. While the tariffs benefit import-competing U.S. producers, they also increase costs for downstream users of imported products (e.g., auto producers using steel in cars) and consumers. In response to the U.S. actions, several U.S. trading partners have initiated WTO dispute settlement proceedings and imposed retaliatory tariffs on goods accounting for $126 billion of annual U.S. exports in 2017, causing export declines in targeted industries. Congressional views on the tariffs differ, but many Members have raised concerns over their potential negative economic implications and the process for seeking exclusions to tariffs. Some also question whether the President's actions adhere to the intent of the trade laws used. The 115 th Congress held a number of hearings on the effects and implementation of the tariffs, and several Members introduced legislation that would have altered the President's current authorities. The issue may be the subject of further debate and possible legislative activity in the 116 th Congress. Sections 301 of the Trade Act of 1974, as amended, is one of the principal statutory means by which the United States addresses \"unfair\" foreign barriers to U.S. exports. Concerns over China's policies on intellectual property (IP), technology, and innovation led the Trump Administration to launch a \"Section 301\" investigation in August 2017. In March 2018, President Trump signed a memorandum justifying U.S. action against China under Section 301. In its justification, the Administration focused on: 1) various Chinese policies that force or pressure technology transfers from U.S. companies to a Chinese entity; 2) China's unfair technology licensing practices that prevent U.S. firms from achieving market-based returns for their IP; 3) China's investments and acquisitions which generate large-scale technology and IP transfer to support China's industrial policy goals; and 4) China's cyber intrusions into U.S. computer networks to gain access to valuable business information. On June 15, the U.S. Trade Representative (USTR) announced a two-stage plan to impose 25% ad valorem tariffs on $50 billion worth of Chinese imports. On June 16, China issued its own two-stage retaliation plan against the United States. In response, on June 18, President Trump directed the USTR to propose a new list of products worth $200 billion that would be subject to increased 10% tariffs if China retaliated (stage 3). The first two stages of U.S. 25% tariff hike measures went into effect on July 6 and August 23. China implemented comparable countermeasures on U.S. products. On September 24, the Trump Administration imposed 10% increased tariffs on additional Chinese imports (stage 3), which were to increase to 25% on January 1, 2019 (now on hold). In response, China raised tariffs (by 5% and 10%) on $60 billion worth of imports from the United States ( Figure 4 ). The Trump Administration created a process to enable affected U.S. firms to petition for an exclusion from some of the tariff increases. A bilateral meeting between Presidents Trump and Xi at the conclusion of the December 2018 G-20 summit in Argentina may have laid groundwork for addressing the tariff escalation. The two leaders agreed to begin negotiations on \"structural changes\" on IP and technology issues, along with agriculture services, with the goal of achieving an agreement in 90 days. The White House reported that China agreed to make \"very substantial\" (though unspecified) purchases of U.S. agricultural, energy, and industrial products. President Trump agreed to suspend the tariff rate increases planned for January 1, 2019, unless no agreement is reached in 90 days. On December 13, the U.S. Department of Agriculture reported that China had agreed to purchase 1.13 million metric tons of U.S. soybeans. While some policymakers and many business representatives have expressed support for the Administration's goals of improving China's IP and technology policies, they question whether tariff hikes against China can achieve those goals. Several Members of Congress have raised concerns over the impact the current trade conflict is having on their constituents in terms of higher-priced imports from China and lost U.S. export sales. Section 232 of the Trade Expansion Act of 1962 (as amended) is sometimes called the \"national security clause,\" because it provides the President with the ability to impose restrictions on certain imports that the U.S. Department of Commerce determines threaten to impair the national security. If requested, or upon self-initiation, Commerce investigates the import of specific product(s) and, if it determines in the affirmative, and if the President concurs, he may adjust the subject imports using tariffs, quotas, or other measures to offset the adverse effect. Section 232 sets out timelines and procedures for the investigation and that the President must follow once a decision is made. The executive branch has broad discretion in Section 232 cases to define the scope of the investigation, and the World Trade Organization (WTO) allows members to take measures in order to protect \"essential security interests.\" Based on concerns about ongoing global overcapacity and certain trade practices, in April 2017, the Trump Administration initiated Section 232 investigations on U.S. steel and aluminum imports. Effective March 23, 2018, President Trump applied 25% and 10% tariffs, respectively, on certain steel and aluminum imports. In order to limit potential negative domestic effects of the tariffs on U.S. businesses and consumers, Commerce established a process for product exclusions requests and has received over 49,000 requests (including resubmissions) as of October 28, 2018. While the President negotiated tariff exemptions and quota arrangements with Brazil, South Korea, Argentina, and Australia, the proposed United States-Mexico-Canada Agreement (USMCA) did not resolve or address the Section 232 tariffs on imported steel and aluminum from Canada and Mexico. Multiple U.S. trading partners are challenging the tariffs under WTO dispute settlement rules and have threatened or enacted retaliatory measures, risking potential escalation of retaliatory tariffs. In turn, the United States has argued that trading partners' counter tariffs in response to the U.S. Section 232 measures cannot be justified under WTO rules, and the United States filed its own WTO complaints over the retaliatory tariffs by at least six countries. As Congress continues to debate the Administration's Section 232 actions, it may consider multiple issues including potential amendments to the delegation of constitutional authority that Congress gave to the President through Section 232, examining the investigation and implementation processes, and exploring opportunities to address specific market-distorting practices that are the root causes of steel and aluminum overcapacity through international forums and trade negotiations. Section 201 of the Trade Act of 1974 grants authority to the President to provide temporary import relief (e.g., through additional tariffs or quotas on imports) in order to facilitate positive adjustment of a U.S. industry to import competition. The President may provide this relief if, as a result of an investigation based on industry petitions or self-initiated by the President, the U.S. International Trade Commission (ITC) makes a recommendation for relief based on a finding that increased U.S. imports of these products are a \"substantial cause of serious injury\"—or threat thereof—to U.S. manufacturers. Section 201 investigations are unlike other trade remedy tools, such as antidumping (AD) and countervailing duty (CVD) cases that investigate \"material injury\" (or threat thereof) based on sales of imported products at less than fair value (AD) or that are subsidized by a foreign government or other public entity (CVD). Rather, Section 201 cases investigate import surges of fairly-traded goods. On January 23, 2018, based on affirmative findings of serious injury by the ITC and recommended actions, President Trump announced that he would impose temporary new tariffs on imports of large residential washing machines and solar photovoltaic (PV) cells and modules , effective February 7, 2018. When initiating the actions on January 23, the President said , \"My administration is committed to defending American companies, and they've been very badly hurt from harmful import surges that threaten the livelihood of their workers, of jobs, actually, all over this country.\" While such actions may benefit some U.S. domestic producers, they could also raise prices for U.S. consumers and domestic industries that use these imports to manufacture downstream products. The Section 201 measures could also increase tensions with various U.S. trading partners. Prior to the ITC affirmative findings, several Members wrote to the ITC commissioners to caution that imposing tariffs could have unintended consequences, including by raising prices and potentially costing jobs at foreign-run facilities in the United States. Increasing U.S. tariffs or imposing other import restrictions potentially opens the United States to complaints it is violating its World Trade Organization (WTO) and free trade agreement (FTA) commitments. In response to the recent U.S. tariff actions, several U.S. trading partners, including Canada, China, Mexico, and the European Union (EU), have initiated dispute settlement proceedings, which are now at various stages in the WTO dispute settlement process. Several countries have also imposed retaliatory tariffs and the United States has similarly responded by initiating additional disputes at the WTO, arguing that the retaliatory measures do not adhere to WTO commitments. Some analysts fear this escalating series of unilateral tariff actions, retaliations, and resulting WTO disputes may threaten the stability of the multilateral trading system, given the political sensitivity of a potential WTO panel ruling on issues related to national security (Section 232) and the possibility of countries potentially disregarding WTO rulings not in their favor. Economically, retaliation amplifies the potential negative effects of the U.S. tariff measures. It broadens the scope of U.S. industries potentially harmed by making targeted U.S. exports less competitive in foreign markets. To date, six trading partners have imposed retaliatory tariffs in response to Section 232 actions affecting approximately $25 billion of U.S. annual exports, and China has imposed retaliatory tariffs in response to Section 301 actions affecting approximately $101 billion of U.S. annual exports ( Figure 5 ). The products affected cover a range of industries, but the largest export categories include soybeans, motor vehicles, steel, and aluminum. Lost market access resulting from the retaliatory tariffs may compound concerns that U.S. exporters increasingly face higher tariffs than some competitors in foreign markets, as other countries proceed with trade liberalization agreements, such as the EU-Japan FTA, which do not include the United States. Since China embarked upon economic and trade liberalization in 1979, U.S.-Chinese economic ties have grown extensively (see text box). Total bilateral trade rose from about $2 billion in 1979 to $636 billion in 2017. China was the United States' largest trading partner, largest source of imports ($506 billion), and third largest merchandise export market ($130 billion). From 2008 to 2017, U.S. merchandise exports to China grew faster (at 82.4%) than those to any other major U.S. trading partner. According to the U.S. Department of Commerce's Bureau of Economic Analysis (BEA), sales by U.S.-invested firms in China in 2016 totaled $464 billion. The U.S. merchandise trade deficit with China was $376 billion in 2017, by far the largest U.S. bilateral trade imbalance; projections estimate it may have reached $418 billion in 2018 ( Figure 6 ). Reducing the U.S. trade deficit with China has been a major objective of the Trump Administration and many in Congress. From the U.S. perspective, tensions over various economic and trade issues stem largely from China's incomplete transition to an open-market economy. While China has significantly liberalized its economic and trade regimes over the past three decades—especially since joining the World Trade Organization (WTO) in 2001—it continues to maintain or has recently imposed a number of policies to support and protect domestic firms, especially state-owned enterprises (SOEs). Major Chinese government practices of concern to U.S. stakeholders include subsidies, tax breaks, and low-cost loans given to Chinese firms, foreign trade and investment barriers, discriminatory intellectual property and technology policies, and the lack of the rule of law. An American Chamber of Commerce in China business climate survey in 2018 found that 75% said that foreign businesses in China were \"less welcomed\" there than before, compared to 44% who felt that way in 2014. Several recently issued economic plans, such as the \"Made in China 2025\" (MIC 2025) initiative, which seeks to make China a global leader in advanced manufacturing in 10 designated industries, appear to indicate a sharply expanded government role in the economy. U.S. business representatives have raised concerns over the potentially distortionary and discriminatory aspects of the MIC 2025 plan, and the Trump Administration's Section 301 actions against China appear to be largely aimed at curbing the initiative (see section on Tariffs on U.S. Imports from China). More recently, Presidents Trump and Xi agreed to negotiations to address issues of concern. The 116 th Congress may monitor ongoing 301 actions and any potential bilateral agreement to resolve U.S. trade concerns. U.S. firms cite the lack of effective protection of intellectual property rights (IPR) as one of their biggest impediments in conducting business in China. A study by the Commission on the Theft of American Intellectual Property estimated that global IPR theft costs the U.S. economy $300 billion, of which China accounted for between 50% ($150 billion) and 80% ($240 billion) of those losses. In May 2014, the U.S. Department of Justice indicted five members of the Chinese People's Liberation Army for government-sponsored cyber-espionage against U.S. companies and theft of proprietary information to aid state-owned enterprises. During Chinese President Xi Jinping's state visit to the United States in September 2015, the two sides reached an agreement on cyber security, pledging that neither country's government would conduct or knowingly support cyber-enabled theft of intellectual property for commercial purposes and to establish a joint dialogue on cybercrime and related issues (which has continued under the Trump Administration). However, in October 2018, Crowdstrike, a U.S. cybersecurity technology company, identified China as \"the most prolific nation-state threat actor during the first half of 2018.\" It found that Chinese entities had made targeted intrusion attempts against \"multiple sectors of the economy, including biotech, defense, mining, pharmaceutical, professional services, transportation, and more.\" In November 2018, FBI Director Christopher Wray stated: \"No country presents a broader, more severe threat to our ideas, our innovation, and our economic security than China.\" Then U.S. Attorney General Jeff Sessions proclaimed that \"Chinese economic espionage against the United States has been increasing—and it has been increasing rapidly.\" On December 1, 2018, U.S. Assistant Attorney General John C. Demers stated at a Senate hearing that from 2011 to 2018, China was linked to more than 90% of the Department of Justice's cases involving economic espionage and two-thirds of its trade secrets cases. The 116 th Congress may consider how to address the threats outlined by senior government officials, including through possible legislation. China conceived its Belt and Road Initiative (BRI) in 2013 to promote greater economic connectivity and integration across several regions, through the development of \"economic corridors\" and revitalized land and sea routes for trade and investment. While infrastructure investment is a core component, objectives of policy coordination, trade facilitation, financial integration, and people-to-people ties also drive the initiative. To date, China has released little official aggregate information on BRI, raising questions for the United States and others about its scope. According to Chinese media, China has signed agreements on BRI cooperation with more than 100 countries and international institutions, and collectively, projects could entail capital requirements ranging $1 trillion to $4 trillion. Based on emerging trends, projects appear to largely involve Chinese SOEs, materials, and financing. If BRI achieves Chinese objectives to \"complement the development strategies of countries involved\" and build a \"new model of win-win cooperation\" it could help fill major deficits in infrastructure investment in Asia and other regions and reshape trade patterns. Some observers, including U.S. officials and Members of Congress, have growing concerns about the initiative's motives, perceived lack of transparency in projects, and potential debt sustainability problems for countries receiving Chinese loans (such as Sri Lanka and Pakistan), as well as the use of economic leverage to achieve geopolitical and strategic goals. The United States has commercial interests at stake, and more broadly, economic interests in shaping the rules governing global and regional trade and finance; BRI could potentially reshape these systems to reflect Chinese interests. In response, the Trump Administration has called for modernizing U.S. development finance tools and cooperating with allies on \"high-quality infrastructure.\" Its \"Free and Open Indo-Pacific\" strategy involves $113 million in new U.S. initiatives and investments in the region. China's growing economic influence was cited as a motivation for Congress to pass the Better Utilization of Investments Leading to Development (BUILD) Act ( P.L. 115-254 ), signed into law in October 2018. The 116 th Congress may hold further hearings on Chinese economic practices and BRI, and it may consider new tools to counter Chinese influence and better support U.S. firms involved in economic activities abroad. As part of its oversight and approval of funding for U.S. participation in multilateral development banks and international financial institutions, Congress may also exercise oversight of institutions involved in BRI and implementation of the BUILD Act, as well as consider possible multilateral cooperation on debt transparency issues. In addition to multilateral efforts through the World Trade Organization (WTO), the United States has worked to reduce and eliminate barriers to trade and create nondiscriminatory rules and principles to govern trade through bilateral and regional trade agreements. Over the past two decades, these agreements, referred to as free trade agreements (FTAs) in the U.S. context, have proliferated globally in part due to difficulty in reaching consensus on new agreements at the WTO. In total, the United States has concluded 14 FTAs with 20 countries since 1985, when the first bilateral FTA was concluded with Israel ( Figure 7 ). The Trump Administration has taken a number of actions with regard to FTAs, and the issue may be a focus of the 116 th Congress. In January 2017, the President withdrew the United States from the 12-member Trans-Pacific Partnership (TPP), which had been signed but not ratified during the Obama Administration. The Trump Administration has also made changes to existing U.S. FTAs. Most significantly, the Administration renegotiated the North American Free Trade Agreement (NAFTA), the largest U.S. FTA. The modified agreement—renamed the United States-Mexico-Canada Agreement (USMCA)—requires congressional approval and implementing legislation in order to enter into force, suggesting a possible vote in the 116 th Congress. The President also negotiated changes to the U.S.-South Korea (KORUS) FTA, but the relatively minor adjustments were made by proclamation at the end of 2018 and require no further action by Congress. Looking forward, the Administration has notified Congress under Trade Promotion Authority (TPA) of its intent to negotiate trade agreements with the European Union (EU), Japan, and the United Kingdom (UK), which could begin in early 2019. Congress is expected to weigh in on the scope and objectives for these new agreements throughout the negotiating process, especially through the TPA requirement for the Executive Branch to conduct ongoing consultations before, during, and after the completion of the negotiations. On November 30, 2018, President Trump and the leaders of Canada and Mexico signed the United States-Mexico-Canada Agreement (USMCA), a proposed trilateral free trade agreement (FTA) that, if approved by Congress and ratified by the governments of Canada and Mexico, would revise and modernize the North American Free Trade Agreement (NAFTA). Pursuant to trade promotion authority (TPA), the Administration notified Congress of its intention to sign the agreement on August 31, 2018, in part to allow for the signing of the agreement prior to Mexico's president-elect Andres Manuel Lopez Obrador taking office on December 1, 2018. Members may debate and potentially consider legislation to implement the agreement in the 116 th Congress. Issues for potential examination include whether the USMCA meets TPA's negotiating objectives, whether provisions on labor and environment would have stronger enforcement, and the economic impact of the agreement. Congress may also consider the economic and political ramifications if President Trump gives a six-month notification of an intention to withdraw from NAFTA. Many trade policy experts and economists give credit to FTAs such as NAFTA for expanding trade and economic linkages among countries, creating more efficient production processes, increasing the availability of lower-priced consumer goods, and improving living standards and working conditions. Other proponents contend that NAFTA has political dimensions that create positive ties within North America and improve democratic governance. At the same time, some policymakers, labor groups, and consumer advocacy groups argue that NAFTA has had a negative effect on the U.S. economy. They often refer to labor provisions as being weak and maintain that the proposed USMCA should have stronger, more enforceable labor provisions to address issues such as outsourcing, lower wages, and job dislocation. The proposed USMCA, comprised of 34 chapters and 12 side letters, retains most of NAFTA's chapters, including the elimination of tariff and nontariff trade barriers, while making notable changes to rules of origin (ROO) for motor vehicle and agriculture products and modernizing provisions on intellectual property rights (IPR), digital trade, and services trade. The agreement also allows some greater access to the Canadian dairy market to U.S. dairy producers and adds new obligations on currency misalignment, a new chapter on state-owned enterprises, and a new chapter on anti-corruption. Other provisions new to U.S. FTAs include a sunset clause provision, which would require a joint review and agreement on renewal issues after six years, revised provisions on government procurement and investment, and a provision that allows a party to withdraw from the agreement if another party enters into an FTA with a country it deems to be a nonmarket economy (e.g., China). The Trump Administration's proposals on ROO in motor vehicle products were one of the more controversial issues in the USMCA negotiations. Under NAFTA, the ROO requirement for autos, light trucks, engines, and transmissions is 62.5%; for all other vehicles and automotive parts it is 60%. USMCA would raise these requirements to 75% of a motor vehicle's content and to 70% of its steel and aluminum content. It would also add a wage requirement, for the first time in any FTA, stating that 40%-45% of auto content must be made by workers earning at least $16 per hour. Supporters of the proposed USMCA contend that the agreement would modernize NAFTA by including updated provisions in areas such as digital trade and financial services. Some analysts believe that the updated auto ROO requirements contained in the USMCA could raise compliance and production costs and lead to higher prices, which could possibly negatively affect U.S. vehicle sales. Overall, the full economic effects of the proposed USMCA would not be expected to be significant because nearly all U.S. trade with Canada and Mexico is now conducted duty and barrier free. Many economists and other observers believe that it is not expected to have a measurable effect on United States-Mexico trade and investment, jobs, wages, or overall economic growth, and that it would probably not have a measurable effect on the U.S. trade deficit with Mexico. The U.S.-South Korea (KORUS) free trade agreement (FTA), the second-largest U.S. FTA by trade flows, has been a centerpiece of U.S.-South Korea economic relations since its entry into force in March 2012. Formal negotiations to modify the pact began in January 2018, following months of public criticism of the agreement by President Trump, including threats of potential U.S. withdrawal. In September, the two countries signed a modified agreement. The relevant U.S. tariff changes became effective January 1, 2019, through Presidential proclamation. A major underlying factor in the renegotiation was President Trump's concern over the growth in the bilateral trade deficit since KORUS took effect ( Figure 8 ). Most economists, however, argue that other factors, including a slowdown in South Korea's economic growth during the period, were the key drivers of the deficit. In 2017, the U.S. trade deficit with South Korea shrank by more than $7 billion, in part due to increased U.S. energy (crude oil and natural gas) and services exports. The KORUS FTA is the most recent and arguably most extensive U.S. FTA in effect. The changes made through the modifications were relatively minor and focused mostly on U.S. tariff adjustments and South Korean implementation issues. Specifically, the modifications, among other things, extend the 25% U.S. light truck tariff for twenty years to 2041, double the number of U.S. vehicle exports to South Korea that can be imported with U.S. safety standards (25,000 to 50,000 per manufacturer per year), and confirm South Korea's adherence to KORUS commitments on origin verifications, and its intent to amend a domestic pharmaceutical pricing policy to ensure it is consistent with KORUS commitments. Although South Korea's National Assembly ratified the modifications, the government has expressed concern over potential U.S. Section 232 tariffs on auto and auto parts. Unlike the United States-Mexico-Canada Agreement (USMCA), the KORUS FTA modifications do not explicitly exempt any South Korean autos from future Section 232 actions. On October 16, 2018, the Trump Administration notified Congress, under Trade Promotion Authority (TPA), of its intent to enter trade agreement negotiations with the European Union (EU), its largest overall trade and investment partner. This followed a U.S.-EU announcement in July 2018 on plans to work to eliminate transatlantic tariffs, nontariff barriers, and subsidies on \"non-auto industrial goods,\" as well as to boost trade specifically in services, chemicals, pharmaceuticals, medical products, and U.S. soybeans. Although the European Commission does not have a negotiating mandate from EU member states, U.S.-EU preparatory talks have been ongoing. The proposed negotiations represent a potential de-escalation of the conflict between the two sides over recent new tariff measures (see Tariff Actions by the Trump Administration). Each side agreed not to impose further tariffs on each other while negotiations are active, and to examine current U.S. steel and aluminum tariffs. At the same time, the proposed negotiations are likely to be complex. No agreement exists on their scope. The EU, so far, has rejected the U.S. assertion on including all agriculture in the negotiations. It is an open question if the scope will broaden to include other areas designated under TPA. Depending on which issues are addressed, the challenges that impeded the previous U.S.-EU trade negotiations could resurface. EU FTAs negotiated in recent years emphasize expanded protections for geographical indications, replace investor-state dispute settlement (ISDS) with an investment court system, and lack explicit commitments to remove trade restrictions on data flows; these approaches raised concerns for some Members of Congress in the past. The United Kingdom's expected withdrawal from the EU also could affect the negotiations, as it would remove a traditionally leading voice on trade liberalization from the EU. How the United States approaches some trade issues might evolve in the wake of the proposed United States-Mexico-Canada Agreement (USMCA). Congress has a direct interest in monitoring and shaping trade discussions on these issues. Implementing legislation for any final U.S.-EU trade agreement would be subject to congressional consideration. As negotiations proceed, Congress may debate and hold hearings on such issues as the potential impact of greater transatlantic trade liberalization on the U.S. economy and particular sectors, and the extent to which any U.S.-EU commitments could help develop globally relevant rules on trade. In September 2018, President Trump and Japanese Prime Minister Abe announced plans to launch formal bilateral trade negotiations. Under Trade Promotion Authority (TPA) procedures, on October 16, the Administration officially notified Congress of its intent to enter into the negotiations—which could begin after 90 days—and began consultations with Congress over the scope of such negotiations. As a top U.S. trade and investment partner, Japan is a longstanding U.S. priority for trade negotiations, in particular following U.S. withdrawal from the proposed Trans-Pacific Partnership (TPP) in 2017 ( Figure 10 ). Japan's recent free trade agreements (FTAs) with major markets in the Asia-Pacific and Europe could set new rules and lower tariffs for other countries trading with Japan, disadvantaging U.S. exporters and further incentivizing U.S. interest in new talks. Japan had preferred a regional approach to U.S. trade negotiations, and urged the United States to reconsider its TPP withdrawal. Some suggest Japan's willingness to enter bilateral talks relates to potential U.S. Section 232 tariffs on Japanese autos and auto parts—Japan's top export to the United States and a major source of the U.S. trade deficit with Japan. The initial joint announcement stated that the negotiations will focus on goods and services—specifically areas that \"can produce early achievements\"—and then turn to investment and other issues. Negotiations of commitments on agriculture and autos may be among the most contentious, and both sides have expressed priorities for the new talks. Japan plans to limit new agriculture market access to its offers in existing trade agreements, including TPP, while the United States seeks market access outcomes that will increase U.S. production and employment in the auto industry. An agreement limited in coverage or presented to Congress in stages would represent a shift in approach from recent U.S. FTAs, which typically contain more comprehensive provisions. The Administration provided more certainty in the scope of the new U.S.-Japan talks in releasing its specific negotiating objectives in December 2018, as required by TPA 30 days before talks can commence. It suggests that a broad range of issues may be covered, including trade in goods, services, agriculture, investment, intellectual property, state-owned enterprises, and digital trade. The Office of the U.S. Trade Representative (USTR) specified that it may pursue negotiations with Japan in stages, in consultation with Congress, but that the aim is to \"address both tariff and nontariff barriers and to achieve fairer, more balanced trade in a manner consistent with the objectives that Congress has set out\" in TPA. In light of \"Brexit\"—the expected withdrawal of the United Kingdom (UK) from the European Union (EU)—some Members of Congress and the Trump Administration called for launching U.S.-UK free trade agreement (FTA) negotiations. The UK is a major U.S. trade and economic partner, and foreign direct investment (FDI) and affiliate activity are key aspects of bilateral ties ( Figure 11 ). In January 2017, President Trump and Prime Minister May discussed how the two sides could \"lay the groundwork\" for a future U.S.-UK FTA. The two sides subsequently established a bilateral working group that has met regularly to explore ways to strengthen trade and investment ties, including through a potential future FTA. On October 16, 2018, the Administration formally notified Congress, under Trade Promotion Authority (TPA), of its intent to enter into the negotiations. The 116 th Congress may hold ongoing consultations with the Trump Administration over the scope of the negotiations, and to engage in oversight as the negotiations progress. FTA prospects depend on the terms of the UK's withdrawal from the EU and the future UK-EU trade relationship, including whether the UK will have an independent trade policy. Tremendous uncertainty surrounds the UK-EU Brexit negotiations. Under a draft agreement and political declaration, a transition period could extend through at least 2020, during which time the UK may be able to negotiate, but not enter into, trade agreements with other countries. Aspirations for the future UK-EU relationship include negotiating a comprehensive UK-EU FTA, along with developing an independent UK trade policy. Yet, the \"Irish border\" issue presents challenges; a agreement reached by both sides in late 2018—in which the UK would have remained in a customs union with the EU as a \"backstop\" if they cannot reach an alternative arrangement that avoids a \"hard border\" (customs check, physical border infrastructure) between Northern Ireland and Ireland—was rejected by the UK Parliament in January 2019. How aligned the UK remains with the EU in such areas as regulations could affect dynamics in the U.S.-UK FTA negotiations. Some experts view a U.S. FTA with the UK as more feasible than one with the EU, given similarities in U.S. and UK trade policy approaches historically and the two countries' \"special relationship\"; others caution that domestic interests could complicate trade negotiations. Prospects of bilateral FTA negotiations have already generated concern among some stakeholders, particularly in the UK, about implications, such as for food safety regulations. Other key negotiating issues could include financial services, investment, and e-commerce, which are prominent in U.S.-UK trade. Since 1990, the number of free trade and regional agreements in force globally has grown six-fold from fewer than 20 to nearly 300 ( Figure 12 ). All 164 members of the World Trade Organization (WTO) are now party to at least one FTA and, as of 2014, each member had on average 11 FTA partners. With only 14 U.S. FTAs in effect, the vast majority of these agreements do not involve the United States. The multilateral trading system, meanwhile, has not produced a broad set of new trade liberalization agreements (excluding more limited scope agreements, such as the Trade Facilitation Agreement) since the Uruguay Round, which also established the WTO in 1995. The proliferation of FTAs, particularly in the absence of a major new multilateral agreement, presents certain challenges for the United States. These agreements are inherently discriminatory given their limited membership (i.e., they provide preferential treatment to some countries and not others). U.S. exporters benefit from the preferential aspects of FTAs when they gain better access to FTA partner markets than their foreign competitors, but may be similarly harmed when third parties negotiate agreements that do not involve the United States. During the 116 th Congress, this issue may grow more prominent as agreements among a number of the United States' top trading partners are concluded and take effect. Major recent agreements include the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11), involving among others Canada, Mexico, Japan, and Vietnam, which took effect at the end of 2018, and the European Union-Japan FTA which is expected to come into effect in early 2019. Both the United States and Japan exported more than $10 billion of autos to the European Union (EU) in 2017; the EU-Japan FTA would eventually eliminate the EU's 10% auto tariff, giving Japanese exporters a major competitive advantage in the EU market. As other countries move forward with new FTA negotiations that cover a significant share of world trade, a number of issues arise that may be of interest to Congress, including how these agreements will affect U.S. economic and strategic interests, their impact on U.S. leadership in trade liberalization efforts and establishing new trade rules, and the appropriate U.S. response. The 164-member World Trade Organization (WTO), established in 1995, oversees and administers global trade rules and negotiations, and resolves trade disputes. The WTO succeeded the General Agreement on Tariffs and Trade (GATT) of 1947, which was established to advance a more open, rules-based trading system and to further economic stability, growth, and prosperity. The United States was a key architect of the GATT/WTO and the agreements resulting from multilateral trade negotiations. Successive rounds of trade liberalization, culminating in the Uruguay Round (1986-1994), supported the significant expansion of trade through reductions in trade barriers and the establishment of rules and principles, such as nondiscrimination and transparency. Since the establishment of the WTO, members have lowered their average most-favored nation (MFN) applied tariff on a unilateral basis from 25% in 1994 to less than 10% today ( Figure 13 ). The WTO's dispute settlement system has processed more than 500 disputes, with the aim of enforcing its rules, managing trade tensions, and ensuring a stable system. While the WTO is recognized as the foundation of the global trading system, including by Congress, it faces growing challenges. Many observers believe it must adopt reforms to remain a relevant and effective institution, both in terms of its negotiating and dispute settlement functions. Compared to past administrations, the Trump Administration has taken a more skeptical stance toward the WTO and the value of multilateral trade deals. President Trump has also raised the possibility of U.S. withdrawal from the WTO. As debates over the future of the WTO intensify, a number of issues arise that may be of interest to the 116 th Congress, including how current and future WTO agreements affect the U.S. economy and the value of U.S. membership and leadership in the WTO. While the landscape of global trade and investment has changed dramatically since the World Trade Organization (WTO)'s founding, WTO rules have not been modernized or expanded since 1995, with some exceptions. The most recent round of multilateral negotiations, the Doha Round, began in 2001, but stalled in 2015, with no clear path forward. The deadlock in negotiations is largely due to entrenched differences in priorities among leading emerging market economies, developing countries, and advanced economies, as well as rigidities in the multilateral negotiating process. The most recent 11 th WTO Ministerial Conference in 2017 did not result in major breakthroughs in negotiations. Work to build on current agreements continues, including through plurilateral agreements among subsets of countries. WTO members committed to achieve a multilateral deal on fisheries subsidies by the next ministerial in 2020; the United States has supported these efforts. In other areas, such as agriculture, talks remain stalled. Separate groups of members committed to work programs or plurilateral talks on e-commerce (which the United States joined), investment facilitation, and micro, and small and medium-sized enterprises. The United States viewed the 11 th Ministerial outcome positively—that it signaled \"the impasse at the WTO was broken,\" paving the way for like-minded countries to pursue new work in other areas. Some WTO members, including the United States, point to plurilateral or sectoral settings as the way forward for the institution. The Trump Administration has not specified its position on plurilaterals pursued under the Obama Administration, such as on services and environmental goods. More recently, the European Union (EU), Canada, China, and other countries have put forward WTO reform proposals. These and other issues may be of ongoing interest to Congress. The World Trade Organization (WTO) dispute settlement system is often called the \"crown jewel\" of the organization by its adherents because it provides a means to enforce commitments and resolve disputes peacefully without recourse to unilateral action. Under its procedures, countries first seek to settle their differences through consultation. If consultations prove unsuccessful, a dispute can be launched. The dispute is presented before a dispute settlement panel, and a decision is adopted by the Dispute Settlement Body. Cases can be appealed to the Appellate Body (AB). If a party is found to violate an agreement, it has time to bring its law into conformity with the decision. If the party refuses to bring itself into compliance, or if the compliance panel deems the steps taken to be insufficient, the aggrieved party can retaliate by withdrawing trade concessions (i.e., reimposing tariffs) to a level equivalent to the economic damage of the infringing measure. The U.S. Trade Representative (USTR) is authorized to launch cases on behalf of the United States, after input from other agencies and stakeholders in the private sector or nongovernmental organizations (NGOs). The United States is an active user of the dispute settlement system. Among WTO members, the United States has been a complainant in the most dispute cases since the system was established in 1995, initiating 123 disputes ( Figure 14 ). The two largest targets of complaints initiated by the United States are China and the EU, which, combined, account for more than one-third. Some stakeholders, including the Trump Administration and some Members of Congress, hold a more skeptical view of the WTO's dispute settlement system and have focused on reforming it. The Administration has withheld the appointment of AB panelists, imperiling the ability of the AB to hear cases past December 2019, when it would lack a quorum. USTR Robert Lighthizer has called for systemic changes in the body, but, thus far, the United States has not made specific proposals. U.S. concerns are known to include whether AB panelists have interpreted agreements too expansively and opine on issues not central to the case at hand, whether proceedings are completed in a timely manner, and whether AB jurists should be able to finish cases after their terms have expired. The European Union (EU) and others have proposed reforms to address U.S. concerns on a number of issues, but these were rejected by the United States. The U.S. Ambassador to the WTO claims that the proposals \"instead appear to endorse changing the rules to accommodate and authorize the very approaches that have given rise to Members' concerns.\" The United States has historically served as a leader in the World Trade Organization (WTO) and many U.S. firms rely on WTO rules to open markets for imports and exports, eliminate discriminatory treatment, and defend and advance U.S. economic interests. There are costs and benefits to the United States and other countries to uphold the rules and enforce WTO commitments. As WTO members did not conclude the Doha Round, new questions emerged about the WTO's future direction. Many observers are concerned that recent U.S. tariff actions and counterretaliation by other countries, as well as escalating trade disputes are straining the system. Arguably, the WTO system is only as strong as the members' commitment to abide by its rules, and if those rules are not respected by one or more members engaging in tit-for-tat retaliation, the edifice of the system could be weakened. Another question is whether the WTO is equipped to handle effectively the challenges of emerging markets like China that many experts view as not full-fledged market economies. The Administration has expressed doubt over the value of the WTO and multilateral trade negotiations to the U.S. economy. While some U.S. frustrations with the WTO are not new and are shared by other trading partners, the Administration's overall approach has spurred new questions regarding future U.S. leadership and participation in the WTO. Many observers believe the WTO needs to adopt reforms to salvage its role as the foundation of the global trading system. In addition to ongoing WTO efforts to negotiate new trade liberalization and rules in areas like fisheries or e-commerce and digital trade, negotiations in other areas such as services, competition with state owned enterprises, and other issues could help increase the relevance of the WTO as a negotiating body. Partly in response to perceived protectionist actions by the Trump Administration, other countries have begun to assert themselves as leaders and advocates for the global trading system. Led by the European Union (EU) and Canada, some WTO members have begun to explore aspects of institutional reform that could promote the effectiveness of the WTO. The 116 th Congress may consider whether new U.S. negotiating objectives or oversight hearings are needed to address prospects for WTO reforms and rulemaking. Intellectual property is a creation of the mind that may be embodied in physical and nonphysical (including digital) objects. Intellectual property rights (IPR) are legal, private, enforceable rights that governments grant to inventors and artists that generally provide time-limited monopolies to right holders to use, commercialize, and market their creations and prevent others from doing the same without their permission. Examples of IPR include patents, copyrights, trademarks, trade secrets, and geographical indicators. Debate over IPR includes a number of policy concerns, including the role of intellectual property in the U.S. economy as a source of innovation and comparative advantage; the impact of IPR infringement on U.S. commercial, health, safety, and security interests; and the balance between protecting IPR to stimulate innovation and advancing other public policy goals, such as promoting access to medicines and ensuring the free flow of information. As the global economy changes, protection and enforcement of IPR in the digital environment, including cyber-theft, is of increasing concern. At the same time, lawful limitations to IPR, such as exceptions in copyright law for media, research, and teaching (known as \"fair use\"), also may have benefits. IPR is addressed in trade agreements and U.S. law. Since 1988, Congress has included IPR as a principal U.S. trade negotiating objective in trade promotion authority (TPA). In the TPA passed in 2015, Congress directs the Executive Branch to seek IP commitments that exceed the minimum standards of the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The United States also has other trade policy tools at its disposal under U.S. law to advance IPR goals. The \"Special 301\" provision of the Trade Act of 1974 allows the U.S. Trade Representative (USTR) to identify and report different levels of U.S. concern about foreign countries' IPR practices and policies. The U.S. International Trade Commission (ITC) conducts investigations into allegations that U.S. imports infringe U.S. intellectual property under the \"Section 337\" provision of the Tariff Act of 1930, as amended. Section 337 investigations, depending on their outcome, can lead to orders prohibiting counterfeit and pirated goods from entering U.S. borders. A central part of the IPR debate in the 116 th Congress may be the IPR provisions of the proposed United States-Mexico-Canada Trade Agreement (USMCA), which retain the North American Free Trade Agreement's (NAFTA's) core protections for IPR and specific enforcement requirements. At the same time, the USMCA also includes updated and new provisions, notably ten years of data protection for biologics; extension of copyright terms to 70 years; prohibitions on circumvention of technological protection measures; criminal and civil penalties for trade secret theft, including by state-owned enterprises and cyber-theft; and copyright safe-harbor provisions for Internet Service Provider (ISP) liability. In addition, Congress may continue to monitor closely negotiations with China to address the IPR issues raised by the Trump Administration's Section 301 investigation (see sections on Tariff Actions by the Trump Administration and U.S.-China Trade and Key Issues). These include forced technology transfer from U.S. companies, cyber-intrusion and cyber-theft of U.S. trade secrets, discriminatory licensing restrictions on U.S. firms, and efforts to acquire sensitive U.S. technology. Some Members of Congress and others have sought to improve labor and environmental conditions in other countries through the inclusion of more enforceable provisions in U.S. free trade agreements (FTAs). They have been concerned that lax or lower standards in other countries may make U.S. products less competitive (resulting in lost jobs and production to overseas firms), or cause damage to the environment as trade and investment expand. Other policymakers have tried to limit the scope and enforceability of such provisions, or believe that the competence to address these issues lies elsewhere, such as the International Labor Organization (ILO). They also view trade agreements as enabling greater economic growth that can provide more resources for addressing labor and environmental issues. Congress may consider how the proposed United States-Mexico-Canada Agreement (USMCA) addresses worker rights protection, an issue that is prominent in the negotiation of U.S. FTAs. Since 1988, Congress has included worker rights protection as a principal negotiating objective in trade promotion authority (TPA) legislation, and the United States has been in the forefront of using FTAs to promote core internationally-recognized worker rights consistent with the ILO Declaration on Fundamental Principles and Rights at Work (1998). The North American Free Trade Agreement (NAFTA) was the first U.S. FTA that addressed worker rights by committing the parties to enforce their own labor laws and to resolve disputes. The proposed USMCA has language similar to more recent FTAs, requiring countries to adopt, maintain, and not derogate from laws that incorporate ILO principles, including freedom of association and the effective recognition of the right to collective bargaining, elimination of all forms of compulsory or forced labor, effective abolition of child labor, and elimination of discrimination in respect of employment and occupation. It also has an additional commitment for Mexico to adopt and maintain labor laws and practices for protection of worker representation in collective bargaining. On the environment, the United States has negotiated environmental provisions in FTAs, which have evolved over time. NAFTA was the first agreement to include environmental provisions, committing the parties to enforce their own laws and cooperatively resolve disputes in a special venue, among other goals. The Trade Act of 2002 was the first grant of TPA containing environmental negotiating objectives, calling for countries not to fail to enforce their own environmental laws in a manner affecting trade and investment. Environmental obligations were expanded in later U.S. FTAs and were largely reflected in the 2015 grant of TPA, which obligated parties to adopt and maintain laws consistent with multilateral environmental agreements (MEAs) to which they are a party. Parties also were obligated not to derogate from their laws in order to attract trade and investment. These provisions were subject to the same dispute settlement provisions as other parts of the agreement with the withdrawal of trade concessions as the ultimate penalty for noncompliance. The World Trade Organization (WTO) does not have provisions related to environmental protection, although negotiations are underway to eliminate tariffs for environmental goods, which the United States and other believe will support broader environmental goals. In the proposed USMCA, Congress may examine the extent to which environmental provisions are consistent with TPA and the strength of enforcement mechanisms for environmental commitments. The United States often uses its import policy to accomplish broader foreign and domestic policy goals. For example, Congress created programs that provide duty-free access to the U.S. market to foster economic growth in less developed countries. In addition, to address unfair trade practices and thus provide relief to \"materially injured\" domestic producers and workers, Congress created an investigative process through which an additional duty is placed on imported merchandise to offset the amount at which the merchandise is found to be sold in the U.S. market at less than fair value, or to be subsidized by a foreign government or public entity. Congress also helped to provide a competitive edge to U.S. business by suspending or reducing tariffs on imports used by domestic manufacturers to make downstream goods. As the current Administration's actions shift the trade landscape, Congress may conduct oversight of these policies and their implementation, including Trump Administration decisions to self-initiate anti-dumping investigations, which until these actions, had not occurred since 1985. Since 1974, Congress has created six trade preference programs to assist developing countries. The following trade preference programs are still in effect: Generalized System of Preferences (GSP—expires December 31, 2020), which applies to all designated developing countries; Caribbean Basin Economic Recovery Act (CBERA—permanent), which includes under its umbrella, the Haitian Hemispheric Opportunity through Partnership Encouragement Acts (HOPE I and II—expires September 30, 2025) and the Haitian Economic Lift Program (HELP—expires September 30, 2025); Caribbean Basin Trade Partnership Act (CBTPA—expires September 30, 2020); African Growth and Opportunity Act (AGOA—expires September 30, 2025); and Nepal Preference Program (expires December 31, 2025). These programs give preferential, temporary, nonreciprocal, duty-free access to the U.S. market for select products from developing countries designated by the Administration. The aim of the policy is to encourage eligible countries to develop viable domestic industries. The 115 th Congress extended GSP, one of the largest and oldest of the preferential trade programs. However, since the CBTPA and GSP expire in September and December of 2020, respectively, the 116 th Congress could consider further extending these programs. Given the Administration's discretion over product and country eligibility, Congress may seek to consult closely with the Administration over its enforcement of statutory eligibility criteria to ensure adherence to congressional objectives or examine possible reforms to the programs. In line with its increased focus on reciprocity in U.S. trade relations, the Trump Administration has also expressed increased interest in potentially negotiating reciprocal trade agreements with current preference program beneficiaries. U.S. Trade Representative Robert Lighthizer, for example, emphasized the possibility of new reciprocal free trade agreement (FTA) negotiations with African countries in his remarks at the annual United States-Sub-Saharan Africa Trade and Economic Cooperation Forum (\"AGOA Forum\"). Congress has directed the Administration to seek such agreements in the past. In the 116 th Congress, it may consider influencing the scope and prioritization of any new negotiations through consultations with the Administration, and it would ultimately have to pass implementing legislation to bring new FTAs into force. Trade remedies are quasi-judicial administrative actions taken to mitigate injury (or the threat thereof) to domestic industries and workers caused by certain trade practices. Antidumping (AD) and countervailing duty (CVD) remedies provide relief from injurious imports that either are sold at less than fair value or subsidized by a foreign government. Safeguard (Section 201) actions provide temporary relief from import surges of fairly-traded goods. AD/CVD laws are administered primarily through the International Trade Administration (ITA) of the U.S. Department of Commerce, which addresses the existence and amount of dumping or subsidies, and the U.S. International Trade Commission (ITC), which determines injury to the U.S. industries petitioning for redress. In AD and CVD cases, the remedy is an AD or CVD \"order\" that places an additional duty assessed to offset the calculated amount of dumping or subsidy. World Trade Organization (WTO) rules permit the use of all three of these remedies. Since a series of legislative changes expanded access to AD/CVD remedies in the 1970s, they have increased in use. As of October 22, 2018, there are 462 AD/CVD orders affecting imports from 47 countries ( Figure 15 ). The majority of these orders (51.3%) apply to iron and steel imports. Critics of AD/CVD remedies argue that they are protectionist, opaque, overused by certain industries, based on poor economics, and give too much discretion to the ITA. Advocates argue that AD/CVD remedies are based on sound economics, provide a safety valve necessary for the continuation of trade liberalization, and ensure a fairer trading system. As part of its oversight function, Congress might consider how the current Administration's priorities might affect the U.S. trade remedy regime, including, as noted above, self-initiation of investigations as opposed to industry-led petitions. Additionally, while the quasi-judicial nature of AD/CVD investigations may indicate that Congress intended AD/CVD actions to be conducted apart from political influence, the involvement of constituents can lead to Members being asked to write letters or testify at hearings on either side of a trade remedy action to support a constituent's cause. Many Members of Congress introduce bills to support importer requests for the temporary suspension of tariffs on chemicals, raw materials, or other nondomestically made components used as inputs in the manufacturing process. A rationale for these requests is that such tariff suspensions help domestic producers of manufactured goods reduce costs, making their products more competitive. Due to the large number of bills typically introduced, they are often packaged together in a broader miscellaneous tariff bill (MTB). The American Manufacturing Competitiveness Act of 2016 ( P.L. 114-159 ) revised the process by directing the U.S. International Trade Commission (ITC) to receive importer petitions for reduced or suspended duties and report its findings directly to the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance. Using the new procedure, Congress passed P.L. 115-239 , the Miscellaneous Tariff Bill Act of 2018. P.L. 114-159 also provides for the initiation of a new MTB process in 2019, which could be considered by Members in the 116 th Congress. In 2017, the United States was the world's largest source of foreign direct investment (FDI) ($342 billion) and the largest recipient of FDI ($275 billion). The U.S. dual position as a leading source and destination for FDI means that the United States has important economic, political, and domestic interests at stake in the development of international policies regarding direct investment. Investment is a major driver of trade, and U.S. investment policy is a critical part of the U.S. trade policy debate—intersecting with questions about economic impact, trade restrictions, national security, and regulatory sovereignty. Traditionally, the United States has supported a rules-based open and liberalized investment environment, including by negotiating rules, disciplines, and market access commitments in trade agreements and administering investment promotion programs, while also reviewing certain proposed inbound foreign investment transactions for U.S. national security implications. The U.S. investment policy landscape may be evolving in the wake of the Trump Administration's approach to investment issues in the proposed United States-Mexico-Canada Agreement (USMCA), as well as legislation passed in the 115 th Congress to update and expand the scope of the Committee on Foreign Investment in the United States (CFIUS). Competition over technological leadership and changing dynamics in the global economy with the rise of emerging economies, such as China and state-led firms, has led to renewed debates in Congress over the impact of foreign investment on U.S. economic and national security interests. In general, U.S. policies treat foreign investors no less favorably than U.S. firms, with some exceptions for national security. In 2007, Congress asserted its role in formulating the scope and direction of U.S. foreign investment policy when the Foreign Investment and National Security Act of 2007 ( P.L. 110-49 ) was enacted, formally establishing the Committee on Foreign Investment in the United States (CFIUS), which serves the President in overseeing the national security implications of foreign direct investment. This law broadened Congress's oversight role, and explicitly includes homeland security and critical infrastructure as issues that the President must consider when evaluating the national security implications. The law also grants the President the authority to suspend or block foreign investments that are judged to \"threaten to impair\" U.S. national security and requires review of investments by foreign investors owned or controlled by foreign governments. The law has been used five times to block a foreign acquisition of a U.S. firm, although a number of investments have been withdrawn before reviews were completed. In 2017, growing concerns over the impact of Chinese investment in U.S. high-technology firms resulted in the introduction of bipartisan legislation to \"strengthen and modernize\" CFIUS. On August 13, 2018, President Trump signed into law the Foreign Investment Risk Re view Modernization Act (FIRRMA) of 2018 (Title XVII, P.L. 115-232 ), which amends the current process for CFIUS (under P.L. 110-49 ) to review, on behalf of the President, the effect of investment transactions on U.S. national security. The legislation represents the most comprehensive reform of the CFIUS review process since it was created, and notably expands the scope of transactions that fall under CFIUS' jurisdiction. Certain provisions take effect immediately, while others, including some related to the expanded scope of CFIUS, are subject to further regulations (the U.S. Department of the Treasury issued temporary regulations in October 2018). Some experts have suggested that the broad changes under FIRRMA could potentially lead CFIUS to take a more assertive role that emphasizes both U.S. economic and national security interests, particularly relative to the development of emerging or leading-edge technology. While specific countries are not singled out in the legislation, FIRRMA allows CFIUS to potentially discriminate among foreign investors by country of origin during the review of certain investment transactions. Greater scrutiny could be directed on transactions tied to certain countries, pending specific criteria defined by regulations. The debate over FIRRMA and its forthcoming implementation raises a number of questions for the 116 th Congress, including the extent to which the amended review process will be successful in protecting U.S. national security interests and whether it balances the objectives of maintaining the traditionally open U.S. investment climate while preserving the competitiveness of U.S. firms. The United States negotiates international investment agreements (IIAs), based on a \"model\" Bilateral Investment Treaty (BIT), to reduce restrictions on foreign investment, ensure nondiscriminatory treatment of investors and investment, and advance other U.S. interests. U.S. IIAs typically take two forms: (1) BITs, which require a two-thirds vote of approval in the Senate; or (2) BIT-like chapters in free trade agreements (FTAs), which require simple majority approval of implementing legislation by both houses of Congress. While U.S. IIAs are a small fraction of the more than 3,300 IIA agreements worldwide, they are often viewed as more comprehensive and of a higher standard than those of other countries ( Figure 16 ). A focal point for Congress on investment issues may be implementing legislation for the proposed United States-Mexico-Canada Agreement (USMCA). The investment provisions in USMCA differ significantly from those under the North American Free Trade Agreement (NAFTA) and previous FTAs and BITs entered into by the United States. Differences relate to investor-state dispute settlement (ISDS), the binding arbitration of private claims against host-country governments for violation of investment obligations under IIAs (e.g., obligations to provide nondiscriminatory treatment and a minimum standard of treatment to foreign investors). A longstanding cornerstone of U.S. trade agreements, ISDS has been favored widely in the U.S. business community as an important reciprocal form of protection for foreign investment that is modeled on U.S. law. At the same time, it is contested by some civil society groups based on concerns over its scope and fairness, among other issues. While ISDS is in the current NAFTA, the proposed USMCA would eliminate ISDS with respect to Canada and place specific limits with respect to Mexico. ISDS is available under the proposed USMCA for alleged violations by Mexico of national treatment, most-favored nation treatment, or direct expropriation. However, the proposed USMCA would limit other claims against Mexico, such as those of indirect expropriation, government contracts involving the oil, power generation, telecommunications, transportation, and infrastructure sectors. Claimants would also be required to first exhaust local remedies. Treatment of ISDS and other provisions common to IIAs could be a focus of proposed new U.S. trade agreement negotiations with Japan, the European Union (EU), and the United Kingdom (UK), especially considering the EU's push to include an Investment Court System in place of ISDS in its recent trade agreements and negotiations with other countries. The federal government seeks to expand U.S. exports and investment through finance and insurance programs and other forms of assistance for U.S. businesses in order to support U.S. jobs and economic growth. Trade finance and promotion activities also may support U.S. foreign policy goals. Many of these activities are driven by demand from U.S. commercial interests. A number of U.S. government agencies have distinct roles in carrying out these functions. Two agencies that may be focal points for legislative activity and oversight in the 116 th Congress are the Export-Import Bank (Ex-Im Bank) and Overseas Private Investment Corporation (OPIC), discussed below. Collectively, trade promotion agencies raise issues for Congress in terms of their economic justifications, use of federal resources, and intersection with U.S. policy goals and priorities. They also raise questions about the federal trade organizational structure. Ex-Im Bank, the official U.S. export credit agency (ECA), provides direct loans, loan guarantees, and export credit insurance to help finance U.S. exports of goods and services to contribute to U.S. employment. Driven by private sector demand, it aims to provide such support when alternative financing is not available or to counter government-backed export credit financing extended by other countries. Ex-Im charges interest, premiums, and other fees for its services, which it uses to fund its activities, and is subject to the annual appropriations process. Proponents of the agency contend that it supports U.S. exports and jobs, contributes financially to the U.S. Treasury, and manages its risks. Critics argue that it crowds out private sector activity, provides \"corporate welfare,\" and poses a risk to taxpayers. Ex-Im Bank operates under a renewable general statutory charter, which Congress extended through September 30, 2019 ( P.L. 114-94 ). Despite its reauthorization, Ex-Im Bank is not fully operational. Since July 2015, the Board of Directors has lacked a quorum due to unfilled positions, constraining it from approving medium- and long-term export financing above $10 million. Ex-Im Bank reported a backlog of almost $40 billion in pending transactions at the end of FY2018. In recent years, Ex-Im Bank authorizations for finance and insurance transactions have declined ( Figure 17 ). In the 115 th Congress, four presidential nominees to the Board were approved by the Senate Banking Committee and were pending before the Senate. In the 116 th Congress, potential issues could be consideration of nominations to the Board, as well as whether to reauthorize Ex-Im Bank, and if so, for how long and under what terms. Ex-Im Bank abides by Organization for Economic Cooperation and Development (OECD) guidelines for ECA activity with repayment terms of two years or more, which aim to ensure that price and quality—not financing terms—guide decisions on purchasing exports. Foreign ECAs, of both OECD and non-OECD members, increasingly are providing financing outside of the scope of the OECD Arrangement. ECA financing by China, a non-OECD member, is of particular concern. Within and outside of the reauthorization debate, Congress may consider the effectiveness of current international ECA rules and ongoing international negotiations to enhance existing ECA rules or develop new arrangements, as well as other opportunities to address concerns about \"unfair\" competition from foreign ECAs. Spun out of the U.S. Agency for International Development (USAID) in 1971, OPIC has been the primary U.S. development finance institution (DFI). It aims to promote economic growth in developing and emerging economies by providing project and investment fund financing and insuring against the political risks of investing abroad for U.S.-linked private investors. It operates based on private sector demand. In FY2018, OPIC made $3.3 billion in new commitments for investment projects in infrastructure and other sectors in sub-Saharan Africa, Latin America, the Indo-Pacific, and other regions. OPIC charges fees for its services, which it uses to fund its activities. It is also subject to the appropriations process. In recent years, Congress has renewed OPIC's authority through appropriations legislation. The 116 th Congress will have responsibility for overseeing the Administration's consolidation and expansion of OPIC under the Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), which establishes a new U.S. International Development Finance Corporation (IDFC) as a successor to OPIC (see textbox). The BUILD Act is part of the U.S. policy response to China's growing economic influence in developing countries, exemplified by China's Belt and Road Initiative. Based on the BUILD Act timeline, the IDFC could become operational as early as summer 2019. During a transition period, OPIC is to continue to perform its existing functions. As the IDFC is operationalized, the 116 th Congress may examine implementation issues and whether the current statutory framework allows the IDFC to balance both its mandates to support U.S. businesses in competing for overseas investment opportunities and to support development, as well as whether it enables the IDFC to respond effectively to strategic concerns, especially vis-à-vis China. Congress also may consider whether to press the Administration to pursue international rules on development finance comparable to export credit financing. More broadly, the IDFC's establishment could renew legislative debate over the economic and policy benefits and costs of U.S. government activity to support private investment. National security considerations shape U.S. trade and investment policies. In addition to the national security implications of foreign investment discussed above in the context of the Committee on Foreign Investment in the United States (CFIUS), key programs include controls on exports for foreign policy and other objectives and the use of economic sanctions to achieve specific foreign policy goals. The 116 th Congress may consider the balance of U.S. foreign policy and national security objectives against U.S. commercial and economic interests. Congress has authorized the President to control the export of various items for national security, foreign policy, and economic reasons. Separate programs and statutes for controlling different types of exports exist for nuclear materials and technology, defense articles and services, and dual-use goods and technology. Under each program, licenses of various types are required before export. The U.S. Departments of Commerce, State, Energy, and Defense administer these programs. In 2018, in conjunction with reform of the Committee on Foreign Investment in the United States (CFIUS), Congress passed the Export Control Reform Act (ECRA) (Subtitle B, P.L. 115-232 ), which authorized the dual-use export control system administered by the Department of Commerce and largely codifies current practices. The Obama Administration undertook a comprehensive reform of the U.S. export control system, which adopted a unified control list, created a single integrated information technology system, and established a single enforcement coordination agency. Responsibility for licensing exports is divided among the Departments of Commerce, State, and the Treasury, based on the nature of the product (munitions or dual-use goods) and basis for control. The Department of Defense has an important advisory role in examining license applications. Enforcement is shared among these agencies, as well as the U.S. Departments of Justice and Homeland Security. Exports controls lie between the nexus of trade and security. Congress is increasingly concerned with illicit attempts to obtain U.S. technology by foreign powers (particularly China), in both the dual-use and high technology spheres (such as artificial intelligence, robotics, etc.). In addition to enhanced investment scrutiny through CFIUS, the new export control act provides for the creation of an interagency process to identify foundational and emerging technologies and assess their national security implications, and recommend levels of control. Congress may be interested in the implementation of this process and its role in maintaining U.S. superiority in critical technologies. Economic sanctions may be defined as coercive economic measures taken against a target to bring about a change in policies. They can include such measures as trade embargoes; restrictions on particular exports or imports; denial of foreign assistance, loans, and investments; blocking of foreign assets under U.S. jurisdiction; and prohibition on economic transactions that involve U.S. citizens or businesses. Secondary sanctions, in addition, can impede trade, transactions, and access to U.S.-located assets of foreign persons and entities in third countries that engage with a primary target. The United States maintains an array of economic sanctions against foreign governments, entities, and individuals. Specifically, the United States maintains sanctions regimes against foreign governments it has identified as supporters of acts of international terrorism (Iran, North Korea, Sudan, Syria); nuclear arms proliferators (Iran, North Korea, Syria); egregious violators of international human rights norms, democratic governance, or corruption standards (Belarus, Burundi, Central African Republic, Cuba, Democratic Republic of the Congo, Iran, Libya, Nicaragua, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela, Western Balkans, Yemen, Zimbabwe, and the Hizbollah organization); and those threatening regional stability (Iran, North Korea, Russia, Syria); imposes economic restrictions on individuals and entities found to be active in egregious human rights abuses and corruption within the state system, international terrorism, narcotics trafficking, weapons proliferation, illicit cyber activities, conflict diamond trade, and transnational crime; and targets individuals and entities with economic and diplomatic restrictions to meet the requirements of the United Nations Security Council (Central African Republic, Democratic Republic of Congo, Eritrea, Guinea-Bissau, Iran, Iraq, Lebanon, Libya, North Korea, Somalia, South Sudan, Sudan, Yemen, and individuals affiliated with the Islamic State (Da'esh), al-Qaida, or the Taliban). The 116 th Congress may continue the deliberations of its predecessor to influence decision-making by President Trump's approach to foreign policy and national security. Sanctions are central to the debates over how to deter Iran's missile proliferation activities, normalize relations with North Korea while ensuring an end to its nuclear and missile programs, convince Russia to leave Ukraine, or end the conflict in Syria. The 115 th Congress, in its waning days, showed some interest in reviewing the President's long-standing national emergency authorities to use sanctions; given the frequent use of the authorities, the 116 th Congress may take a close look with an eye toward increasing its role in national security and foreign policy decisions. Since World War II, governments have created and used informal forums, as well as more formal international organizations, to discuss and coordinate economic policies. More informal forums include the Group of 7 (G-7) and the Group of 20 (G-20), and more formal international organizations include the International Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD), the World Bank, and the World Trade Organization (WTO), among others. The United States has traditionally been a leader in these bodies, but the U.S. role is changing under President Trump. Congress plays a key role in shaping U.S. policy at international organizations and forums, including through authorizations and appropriations of U.S. funding, hearings, legislation that directs the Administration's policy and votes at the institutions, and Senate confirmation of high-level political appointees. More broadly, given longstanding economic and foreign policy interests in a stable, thriving global economy, the 116 th Congress may continue monitoring major economic developments overseas and their potential impact on U.S. economic and foreign policy interests. Key issues may include how other countries' exchange rate policies are impacting the U.S. economy, the role of the U.S. dollar in the global economy, trade developments, and ongoing and potential economic crises, particularly in indebted emerging markets and developing countries such as Argentina and Pakistan. Between the 1970s and the 2000s, international economic discussions at the top leadership level took place among a small group of developed industrialized economies: the Group of 7 (G-7). The G-7 includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. In response to the global financial crisis, leaders decided that a broader group of developed and emerging-market economies, the Group of 20 (G-20), would become the premier forum for international economic cooperation and coordination ( Figure 18 ). The G-20 includes the G-7 members, as well as Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, and the European Union (EU). Although the G-20 is considered the \"premier\" forum, the G-7 continues to meet in parallel. G-7 and G-20 leader meetings (\"summits\") are held annually; meetings among lower and senior level officials occur throughout the year. Traditionally, the United States has played a strong leadership role at the G-7 and the G-20. For example, the United States was the leader in convening the G-20 to respond to the global financial crisis of 2008-2009. Under President Trump, however, the U.S. role in these forums has been shifting. The summits have become more contentious, with the United States increasingly isolated on key issues, particularly trade and climate change. At the G-7 summit in Canada in 2018, President Trump unprecedentedly withdrew his initial support for the G-7 joint leaders' statement (communiqué). Agreement was reached on a communiqué at the G-20 summit in Argentina in 2018, but many analysts question the significance of the communiqué's substance. In 2019, France and Japan are scheduled to host the G-7 and G-20 summits, respectively. Although U.S. participation in the G-7 and the G-20 is primarily driven by the Administration, Congress could exercise oversight through hearings and reporting requirements. Additionally, legislative action may be required to implement some commitments made by the Administration in the G-7 and G-20 process. The International Monetary Fund (IMF) is an international organization focused on promoting international macroeconomic stability. Created in 1945, it has grown in membership over the past six decades to 189 countries. Although the IMF's functions have changed as the global economy has evolved, today it is focused on surveillance of member states and the global economy, lending to member states facing economic crises, and technical assistance to strengthen members' capacity to design and implement effective policies. The FY2016 Consolidated Appropriations Act ( P.L. 114-47 ) authorized U.S. participation in an IMF reform package, which doubled the size of IMF core resources (\"quota\") and gave emerging-markets a stronger voice in the governance of the institution. The legislation also sunsets U.S. contributions to a supplemental fund at the IMF, the New Arrangements to Borrow (NAB), in 2022, the first time the United States reduced its financial commitment to the institution since it was created. Members are evaluating IMF rules on providing large loans, which were used controversially during the 2010-2012 Eurozone debt crisis. Legislation introduced in the 115 th Congress, The IMF Reform and Integrity Ac t ( H.R. 1573 ), would have limited the ability of the U.S. Executive Director to the IMF to vote for large IMF programs, especially, where the Fund is co-financing with larger creditors. In 2019, the IMF is to continue work on its review of IMF quota resources. IMF Managing Director Christine Lagarde has been laying the groundwork to seek an increase in country contributions to the Fund. According to David Lipton, the IMF's first deputy managing director, \"As our world becomes increasingly multipolar, but the scope for national policies to respond to crises becomes more constrained, the IMF will be the indispensable institution.\" The Trump Administration, however, does not appear to support a boost in Fund resources. At a December hearing before the House Financial Services Committee, Treasury Undersecretary David Malpass told Members that \"[the Administration is] opposed to changes in quotas given that the IMF has ample resources to achieve its mission.\" Undersecretary Malpass added that the Administration believes that recent reforms have improved the stability of the global monetary system and that countries have alternative resources to the Fund on which they could draw in the event of a crisis. Multilateral development banks (MDBs) provide financing funded from private capital markets to developing countries in order to promote economic and social development. The United States is a member, and major donor, to five major multilateral development banks (MDBs): the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank. These institutions were established after World War II to provide financing for economic development at a time when private sector financing, especially for war-torn, post-conflict, or developing countries, was not available. While the MDBs have thrived and grown over the past decades, the international economy has changed dramatically. Many developing and low-income countries are able to borrow on the international capital markets to finance their development projects. At the same time, emerging-market countries are creating their own MDBs, including the China-led Asian Infrastructure Investment Bank. Congress authorizes and appropriates U.S. funding for the five major MDBs, which may shift under the Trump Administration. The Trump Administration has laid out a comprehensive reform agenda for the MDBs that includes, but is not limited to, creating lending limits to promote more robust financial discipline at the MDBs and graduate borrowers, especially China, and shift lending from higher income developing countries to lower income countries. The Administration is also seeking to better coordinate country programs and best-practices across. Meanwhile, in 2018 the United States and other World Bank members agreed to a $60.1 billion capital increase for the World Bank's main lending facility, the International Bank for Reconstruction and Development (IBRD), which would raise the IBRD's capital from $268.9 billion to $329 billion. World Bank members also endorsed a $5.5 billion capital increase for the International Finance Corporation (IFC), the World Bank's private-sector lending arm, which would more than triple the IFC's capital base from $2.57 billion to $8.2 billion. Congress would need to fully authorize and appropriate funds for any U.S. participation in the proposed capital increase. Exchange rates, the price of currencies relative to each other, are among the most important prices in the global economy. They affect the price of every country's imports and exports, as well as the value of every overseas investment. Some U.S. policymakers have expressed concerns that other governments purposefully undervalue their currency to gain an unfair advantage for their exports, or \"manipulate\" their currencies, hurting U.S. companies and jobs. Countries have committed to refraining from currency manipulation through the International Monetary Fund (IMF), the G-7, and the G-20. Under U.S. law, the U.S. Department of the Treasury is tasked with reporting on and responding to currency manipulation. However, the IMF, the G-7, and the G-20 have never publicly labeled a particular country as a currency manipulator, and Treasury has not done so in more than two decades. Some Members of Congress have called for stronger actions to combat currency manipulation over the past decade. It was also a key issue for then candidate Donald Trump during the 2016 presidential campaign. Other policymakers have preferred a more cautious approach, arguing that U.S. consumers benefit when other countries have weak currencies and actions against currency manipulation risk retaliation that could hurt U.S. interests. The 116 th Congress may grapple with debates about currency manipulation in at least two contexts. First, as Congress considers implementing legislation for the proposed United States-Mexico-Canada Agreement (USMCA), it may examine the treatment of exchange rates in the agreement. The USMCA would include, for the first time in a trade agreement, enforceable provisions to combat currency manipulation among the signatories. U.S. concerns about currency manipulation have not focused on Canada and Mexico per se, but addressing currency manipulation in the USMCA may serve as precedent for future trade agreements. Second, China's currency policies have been a particular source of concern for U.S. policymakers. After appreciating in 2017, China's currency depreciated by almost 10% between April and November 2018 ( Figure 19 ). Some analysts believe that the Chinese government is using currency policies to offset the effects of tariffs imposed on U.S. imports from China under Section 301. Currency policy could become a salient issue for Members in the trade disputes between the United States and China. For at least 70 years, the U.S. dollar has been the world's dominant currency. Central banks around the world hold a large portion of their reserves in U.S. dollars ( Figure 20 ), and private companies use U.S. dollars for international transactions. Dollars make up nearly two-thirds of central bank reserves, countries' dollar imports are on average worth five times what they buy from the United States, and more than half of all global cross-border debt is denominated in U.S. dollars. There are considerable benefits to having a reserve currency, including lower borrowing costs for the U.S. government. This cost advantage occurs because there is generally a willingness of foreign central banks to pay a liquidity premium to hold dollar assets. Questions have been raised about whether the U.S. dollar could lose its status as a reserve currency. Some countries are pursuing or considering policies that challenge the dollar's role. For example, oil market transactions have traditionally been denominated in dollars, but China has begun trading oil futures in renminbi. Some countries have also discussed the creation of alternative payments systems, not centered on the dollar, as a way to circumvent U.S. financial sanctions. Broader concerns about the direction of U.S. economic policy, including rising national debt, as well as the predictability of U.S. policies, including trade conflicts with other countries, are also driving debates about the dollar's supremacy. However, most economists agree that in the short run there are no good alternatives. The Eurozone is still recovering from its crisis, and China does not have a stable banking system or open capital account. However, the 116 th Congress may consider the benefits it derives from dollar as a reserve currency and the long-term impact of various economic policies, such as fiscal policies and financial sanctions, on the role of the dollar in the global economy. Analysts are growing increasingly concerned about debt sustainability in many emerging markets and developing countries. Many emerging markets experienced an influx of capital following the global financial crisis of 2008-2009, as investors sought more profitable investment opportunities than in advanced economies, where interest rates were at historical lows. The influx of capital into emerging markets may have created investment bubbles, which could be vulnerable to changes in the availability or cost of financing, for example if and when the U.S. Federal Reserve raises interest rates. These dynamics started playing out in Argentina and Turkey in 2018, and there are concerns that other emerging markets similarly reliant on external financing may face similar pressures. Additionally, China has increasingly financed projects in developing countries, some of which, such as Pakistan, are starting to experience or exacerbating existing fiscal problems. Some analysts are concerned about whether such countries will be able to meet their financial obligations to China, and the implications if they are unable to do so. The 116 th Congress may monitor economic conditions in emerging markets and developing countries in terms of U.S. interests and implications for the role of the IMF. In terms of U.S. economic interests, U.S. economic exposure through trade, investment, and financial channels to emerging markets that faced the most significant pressures in 2018—Argentina and Turkey—is relatively limited. A broader crisis across emerging and developing markets could have more significant economic ramifications. Economic crises in emerging and developing countries could also have implications for U.S. foreign policy interests, depending on the specific countries in question. In terms of the IMF, Congress may monitor the IMF's role in responding to crises. With the United States as the IMF's largest shareholder, Congress may monitor in particular the size of and reforms attached to any IMF programs and the adequacy of IMF resources. Congress may also focus on the role of Chinese financing in countries approaching the IMF for assistance, including transparency on the size and terms of Chinese financing and burden sharing by China in any financial assistance package. Members of Congress exert significant influence over U.S. economic and trade policy and its implementation through their legislative, appropriations, and oversight roles. Given current debates, fundamental questions about the future direction of trade and international economic issues may be key areas of interest for the 116 th Congress. In engaging on these issues, Congress may evaluate the impact of Section 301, 232, and 201 tariffs on U.S. workers and firms, and consider legislation that alters the authority granted by Congress to the President to impose unilateral tariffs; consider implementing legislation for the USMCA, and conduct oversight of new bilateral trade negotiations with the EU, Japan, and UK; conduct oversight of the Trump Administration's policies at the WTO, including reform efforts; conduct oversight and take possible legislative action concerning a range of other trade issues, including U.S. trade relations with China and other major economies, as well as U.S. export and import policies and programs; consider legislation to reauthorize the U.S. Export-Import Bank, which expires on September 30, 2019; evaluate the implementation of major legislation passed during the 115 th Congress, including CFIUS and export control reforms, as well as the creation of a new U.S. International Development Finance Corporation as a successor to OPIC; examine U.S. leadership in discussions over international economic policy coordination at the G-7 and the G-20; consider legislation to adjust U.S. funding to the World Bank; and monitor major developments in financial markets, including the impact of other countries' exchange rate polices on the U.S. economy, high levels of debt in emerging markets, and the role of the U.S. dollar. U.S. trade and economic policy affects the interest of all Members of Congress and their constituents. Congressional actions on these issues can impact the health of the U.S. economy, the success of U.S. businesses and their workers, the standard of living of Americans, and U.S. geopolitical interests. Some of these issues may be highly contested, as Members of Congress and affected stakeholders have differing views on the benefits, costs, and role of U.S. trade policy. The dynamic nature of the global economy—including the increasingly interconnected nature of the global market, the growing influence of emerging markets, and the growing role of digital trade, among other factors—as well as the Trump Administration's reassessment of U.S. policies provide the backdrop for a potential robust and complex debate in the 116 th Congress over a range of trade and finance issues.", "summary": "The U.S. Constitution grants authority to Congress to lay and collect duties and regulate foreign commerce. Congress exercises this authority in numerous ways, including through oversight of trade policy and consideration of legislation to implement trade agreements and authorize trade programs. Policy issues cover areas such as U.S. trade negotiations, U.S. trade and economic relations with specific regions and countries, international institutions focused on trade, tariff and nontariff barriers, worker dislocation due to trade liberalization, enforcement of trade laws and trade agreement commitments, import and export policies, international investment, economic sanctions, and other trade-related functions of the federal government. Congress also has authority over U.S. financial commitments to international financial institutions and oversight responsibilities for trade- and finance-related agencies of the U.S. government. Issues in the 116th Congress During his first two years in office, President Trump has focused on reevaluating many U.S. international trade and economic policies and relationships. The President's focus on these issues could continue over the next two years. Broad policy debates during the 116th Congress may include the impact of trade and trade agreements on the U.S. economy, including U.S. jobs; the causes and consequences of the U.S. trade deficit; the implications of technological developments for U.S. trade policy; and the intersection of economics and national security. Among many others, the potentially more prominent issues in this area that the 116th Congress may consider are the use and impact of unilateral tariffs imposed by the Trump Administration under various U.S. trade laws, as well as potential legislation that alters the authority granted by Congress to the President to do so; legislation to implement the proposed United States-Mexico-Canada Trade Agreement (USMCA), which would revise and modernize the North American Free Trade Agreement (NAFTA); the Administration's launch of bilateral trade negotiations with the European Union, Japan, and the United Kingdom, as well as key provisions in trade agreements, including on intellectual property rights, labor, the environment, and dispute settlement; U.S. engagement with the World Trade Organization (WTO), proposals for WTO reform, and the future direction of the multilateral trading system; U.S.-China trade relations, including investment issues, intellectual property rights protection, forced technology transfer, currency issues, and market access liberalization; the future of U.S.-Asia trade and economic relations, given President Trump's withdrawal of the United States from the proposed Trans-Pacific Partnership (TPP) and China's expanding Belt and Road Initiative; the Administration's use of quotas to achieve some of its trade objectives, and whether these actions represent a shift in U.S. policy towards \"managed trade\"; monitoring the implementation of legislation passed by the 115th Congress, including changes to the Committee on Foreign Investment in the United States (CIFUS) and export controls, as well as the creation of a new U.S. International Development Finance Corporation; re-authorization of the Export-Import Bank, the U.S. export credit agency that helps finance U.S. exports; oversight of international trade and finance policies to support foreign policy goals, including sanctions on Iran, North Korea, Russia, and other countries; shifts in U.S. leadership of international economic policy coordination at the Group of 7 (G-7) and the Group of 20 (G-20) under the Trump Administration; legislation to fund the Administration's commitment to increase U.S. contributions to the World Bank, as well as potential U.S.-led reforms to the institution; and major developments in financial markets, including the impact of other countries' exchange rate polices on the U.S. economy, high levels of debt in emerging markets, potential economic crises, and the role of the U.S. dollar in the global economy.", "document_type": "crs"}
{"report": "T he term digital economy has fluid meaning in different policy contexts. Broadly speaking, this term can refer to any number of everyday economic activities that are connected over computers, mobile phones, or other internet-connected devices. In the realm of international tax policy, though, certain types of activities and markets have been singled out for selective taxation by some jurisdictions—primarily in Europe. Most of these digital economy business models operate in \"two-sided markets\" in which they provide services to individual users (sometimes at zero charge) and sell other services to businesses (e.g., advertising to users). Proponents of these \"digital services taxes\" (DSTs) justify them on a number of grounds, including the goal of having multinational corporations (MNCs) pay their \"fair share\" of taxes, taxing profits purportedly derived from consumers in their jurisdictions, or adapting traditional rules and systems of international taxation to account for new forms of \"disruptive\" business models that can be conducted virtually over the internet. U.S. opposition to these unilateral taxes has been voiced by several government officials. Robert Stack, while Treasury Deputy Assistant Secretary for International Tax Affairs under President Obama, said that such efforts are primarily political efforts to target U.S. corporations. More recently, Treasury Secretary Steven Mnuchin has issued multiple statements in opposition to unilateral taxation of digital economy businesses. Some Members of the tax-writing committees in Congress have also criticized these efforts. This report analyzes DST proposals from an economic and policy perspective as they have been introduced, discussed, and adapted in European countries. Some commentators and policymakers argue that MNCs in the digital economy are \"undertaxed\" or are not paying a \"fair share\" of taxes in their jurisdictions. Two issues that often underlie these sentiments are (1) the ability of digital economy MNCs to provide services without establishing a physical presence (or \"permanent establishment\") in the country in which their customers reside and (2) the ability of digital economy MNCs to shift their profits away from countries where they conduct real economy activity (e.g., sales, development, production) toward low-tax jurisdictions where the MNCs are conducting little to no real economic activity. Even if a country is able to establish the right to tax an MNC's profits in the digital economy (via permanent establishment rules), the profits subject to tax in that jurisdiction could be reduced via transfer pricing rules. A commonly held principle across international tax law is that there must be a substantial enough connection between a country and a corporation's activities to establish \"nexus\" in that country, enabling the country the first right to tax the corporation's income or profits earned from sales in that country. Specific criteria for what constitutes a permanent establishment are written into bilateral tax treaties, but they often require a fixed, physical presence within the country. Once a right to tax has been created, a country can tax a portion of the MNC's cross-border profits that can be sourced to its jurisdiction. MNCs can earn income from local residents without creating a permanent establishment in that jurisdiction. Rules creating a permanent establishment based on physical nexus might not be triggered by digital activities over the internet because \"the internet\" is not physically located in any one country. The internet is a global network of computers. For example, Google can sell advertising space on its search results to a French business without creating a permanent establishment in France. The physical servers processing the payment and posting the advertisements do not have to be located in France. In response, different countries and intergovernmental organizations have tried or proposed modifying definitions and interpretations of permanent establishment rules to include \"digital presence\" criteria. These criteria include users, \"clicks,\" or other digital activities with origins in the local jurisdiction. The \" Select International Efforts to Tax the Digital Economy \" section of this report discusses these proposals in more detail. Transfer pricing rules dictate how profits from transactions between related entities within the MNC should be divided among multiple countries for tax purposes. From the U.S. perspective, transfer pricing rules are intended to prevent taxpayers from shifting income properly attributable to the United States to a related foreign company (and vice versa) through pricing that does not reflect an arm's-length result. In practice, though, the arm's-length standard can be difficult to administer on intra-company transactions within an MNC in which there is no market where independent parties bargain over price. Sophisticated transfer pricing strategies can result in an MNC's global profits being subject to a low effective tax rate across multiple tax jurisdictions. MNCs in the digital economy, in particular, can use transfer pricing strategies to reduce the effective tax rate imposed on their cross-border income, because their primary sources of income are often derived from intangible assets (e.g., patents, algorithms, trademarks, and marketing licenses). These assets are more challenging for \"arm's-length\" pricing because it is difficult to determine the value of a comparable sale of such unique technologies and services. Additionally, intangible assets can be sold to a corporate entity in a low-tax jurisdiction at relatively low cost as they do not require the relocation of corporate headquarters or physical factories, workforces, etc. The exact tax planning methods used by MNCs can vary, but generally they involve the parent (e.g., located in the United States) selling the income-earning ownership rights to those intangible assets to a subsidiary corporation in a low-tax jurisdiction. Early on, a firm developing a potentially profitable intangible asset in a higher-tax jurisdiction might create a subsidiary in a low-tax jurisdiction and sell or assign the ownership rights to that subsidiary. Creation of this \"shell corporation\" is primarily a paper transaction for the purposes of holding ownership of the profit-generating intangible asset. One way that this could happen is through a cost-sharing agreement in which a U.S. corporate owner of an existing intangible asset agrees to make the rights available to a foreign affiliate in exchange for other resources and funds to be applied toward the joint development of a new marketable product or service. Under a cost-sharing agreement, a foreign affiliate makes an initial buy-in payment for existing technology that, in theory, should reflect an \"arm's-length\" price that would be paid by an unrelated party. It then receives the income accruing to that asset. Subsequently, the foreign affiliate shares in the cost of continuing technological development. The cost-sharing payments made by the foreign affiliate to the U.S. corporation are income to the U.S. parent, and the foreign affiliate gains the right to use the advance in technology in a specified foreign market. This results in two outcomes. First, the MNC can use transfer pricing rules to maximize costs attributable to subsidiaries in higher-tax jurisdictions. Thus, the taxable income earned by the subsidiaries in higher-tax jurisdictions is reduced to as close to zero as possible. And second, taxable income realized by the shell corporation in the lower-tax jurisdiction is increased. For example, a U.S. corporation establishes a subsidiary in Jersey, an island in the English Channel with a standard corporate tax rate of 0%. The subsidiary buys an existing mobile phone technology developed by its parent U.S. corporation. The subsidiary has bought the right to earnings from marketing that technology in phones throughout Europe. The original cost-sharing payment to the parent would be subject to U.S. tax. The agreement allows the Jersey subsidiary to use updated versions of that technology in the European market from research conducted in the United States. Although the intangible assets were originally developed and improved in the United States, earnings from the mobile phone sales in Europe flow to the Jersey subsidiary and are taxed at 0%. Concerns over the ability for MNCs to avoid corporate income taxes have led to much discussion within national governments and among developed countries in international economic settings. As some of these discussions have met impasse, for various reasons, some countries have unilaterally proposed or implemented policies to tax digital economy MNCs on specific grounds. This section of the report provides a brief historical overview of these recent discussions and select unilateral DST proposals in Europe. While efforts to tax the digital economy have not been limited to European countries, efforts to develop policy principles and justifications in support of these specific taxes on digital economy markets have primarily been driven by politicians and commentators in Europe, including the United Kingdom. This report will not provide a comprehensive account of each DST proposal or be updated to track the rapid pace of policy modifications and emerging proposals. In 2013, members of the Organization for Economic Cooperation and Development (OECD) and G-20 initiated the Base Erosion and Profit Shifting (BEPS) Project. The result of this multiyear effort is the 2015 BEPS Action Plan, which represents the consensus of the member countries that participated in the BEPS Project. Article 1 of the BEPS Action Plan analyzes the implications that the digital economy could have for modern tax systems, including taxes on corporate profits (i.e., corporate income taxes), withholding taxes (e.g., on royalties), and value-added taxes (VATs). Article 1 acknowledges that \"it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy for tax purposes\" given the importance of digital platforms and business models in modern economies. In light of this finding, though, Article 1 discusses potential new tax principles to enable countries to tax the profits earned by firms in the digital economy. Specifically, Article 1 discusses expanding on the widely accepted principle that profits should be taxed \"where value is created\" to include the notion that value-creating activities include user interaction. For example, YouTube profits when users post their videos and create content on its channels and generates more revenue in advertisement sales based on increased viewer traffic. Additionally, Article 1 considers using \"significant economic presence\" rather than physical presence as the standard nexus for sourcing which jurisdiction has the right to tax. \"Significant economic presence\" could be measured by a corporation's revenues earned from customers in a country. The various DST proposals in Europe share many of the features of digital taxation options discussed in the OECD BEPS report. Following the release of the 2015 BEPS Action Plan, the OECD has continued work in this area with its Task Force on the Digital Economy. On March 16, 2018, the task force released an interim report reflecting three different perspectives by its members. One perspective is that user-value creation has led to a \"misalignment between the location in which profits are taxed and the location in which value is created\" in some digital economy business models. This user-created value argument, discussed more throughout this report, has been used by many proponents of DSTs. A second perspective is that the challenges of tax policy presented by the digital economy are not exclusive to specific business models and should be addressed within the existing international tax framework for business profits. A third perspective is generally satisfied with recent BEPS recommendations and the existing international tax system and does not see a need for significant reform. Despite divisions reflected in the interim report, the task force aims to create an international consensus on principles for taxing the digital economy with a goal of releasing a final report on conclusions and recommendations by 2020. In March 2018, the European Commission announced a digital tax package containing two proposals. The first proposal would expand the definition of permanent establishment to include cases where a company had significant economic activity through a \"digital presence,\" thereby allowing EU members to tax profits that are generated in their jurisdiction even if a firm does not have a physical presence. Under the proposal, a digital platform would be deemed to have established a \"virtual permanent establishment\" in an EU member state if it (1) exceeds a threshold of €7 million in annual revenues in a member state, (2) has more than 100,000 users in a member state in a taxable year, or (3) has over 3,000 business contracts for digital services business users in a taxable year. Until that more systemic change in permanent establishment rules is adopted, the second proposal would impose an \"interim tax\" on certain revenue from digital activities: selling online advertising, online marketplaces (facilitating the buying and selling of goods and services between users), and sales of data generated from user-provided information. The interim DST would apply only to companies with total annual worldwide revenues of at least €750 million and EU revenues of at least €50 million. The European Commission estimated that a 3% tax rate would raise €5 billion annually for member states. Media reports indicate that the EU-wide proposals have stalled partly due to disagreement among member states with different economic interests and questions as to whether the proposals would be legal under EU law. In support of its digital tax proposals, the European Commission argues that existing tax rules do not account for how value is \"created by users\" in the digital economy: Today's international corporate tax rules are not fit for the realities of the modern global economy and do not capture business models that can make profit from digital services in a country without being physically present. Current tax rules also fail to recognise the new ways in which profits are created in the digital world, in particular the role that users play in generating value for digital companies. As a result, there is a disconnect—or 'mismatch'—between where value is created and where taxes are paid. In discussing \"value creation in the digital economy,\" the European Commission states: In the digital economy, value is often created from a combination of algorithms, user data, sales functions and knowledge. For example, a user contributes to value creation by sharing his/her preferences (e.g., liking a page) on a social media forum. This data will later be used and monetised for targeted advertising. The profits are not necessarily taxed in the country of the user (and viewer of the advert), but rather in the country where the advertising algorithms has been developed, for example. This means that the user contribution to the profits is not taken into account when the company is taxed. Despite the policy pronouncements of the European Commission, member states of the EU disagree on both the long-term (changes to the permanent establishment rules to include digital presence factors) and interim (an EU-wide DST) proposed policies regarding the digital economy. On December 4, 2018, the economics and finance ministers of various EU member states met as part of the EU's Economic and Financial Affairs (Ecofin) Council. As part of its agenda, the Ecofin Council was scheduled to consider a vote on the EU's DST proposal. According to media reports, a vote was not formally considered, as it was apparent that multiple members held out in opposition against the DST. As of the publication date of this report, the issues are still under consideration by the Ecofin Council. Even if opponents to the broad, EU-wide DST proposed by the European Commission successfully block adoption of such a tax, this does not mean that individual members states are also barred from imposing their own national-level DSTs. Policy and political pressure for DSTs still exist within many EU member states. According to one media report, approximately 11 of the 28 EU member states were considering or had adopted DSTs before the Ecofin meeting. In April 2018, Spain announced that it would introduce a DST of 3% to the gross income derived from certain digital services. According to a preliminary text of the proposal, beginning in 2019, the tax will be imposed on certain digital services, including online advertising, online marketplaces, and data transfer service (i.e., revenue from the sales of online user activities) determined from internet protocol (IP) addresses within Spain. The tax would apply only to companies with global revenues for the previous calendar year exceeding €750 million and €3 million in revenues earned in that current year from activities with users in Spain. On October 29, 2018, the Conservative Party introduced a DST as part of its 2018 budget proposal. Specifically, the tax would be levied at 2% on the applicable revenues of \"certain digital businesses which derive value from their UK users.\" Revenue subject to tax include search engines, social media platforms, and online marketplaces derived from the participation of UK users. Users is defined broadly and can include interactions (e.g., payments made or clicks) from UK participants on either side of a two-sided digital market. The tax would apply only to businesses whose revenues from covered business activities exceed £25 million per year and groups that generate global revenues from search engines, social media platforms, and online marketplaces in excess of £500 million annually. There would also be a safe harbor provision that exempts \"loss-makers and reduces the effective rate of tax on businesses with very low profit margins.\" A \"review clause\" would be included in the DST to ensure that it is still required following further international tax reform discussions. The specifics of the DST are to be detailed in legislation to be considered by Parliament that is expected to be introduced in April 2020. The UK Treasury estimates that the DST will raise £400m by 2022-2023 and £440m by 2023-2024. According to the UK Treasury, the DST serves as \"interim action\" to \"ensure that digital businesses pay tax that reflects the value they derive from UK users\" until international corporate tax reform efforts determine a comprehensive method to tax income earned from these types of multinational corporate business models. On December 17, 2018, Bruno Le Maire, Finance Minister of France, announced that the government was going to impose a DST beginning on January 1, 2019. Le Maire said that the tax is estimated to raise around €500 million annually. Details on what activities would be covered and the rate of tax were not provided but may be addressed in legislative sessions. Le Maire's announcement came the week after EU finance ministers did not reach agreement on an EU-wide DST at the December 2018 Ecofin meeting and shortly after President Emmanuel Macron announced billions of euros in tax cuts and spending in response to domestic social unrest. According to media coverage of the announcement, the decision to impose a DST seems to be motivated at least in part by a perceived unfairness in the amount of taxes paid by foreign corporations compared to domestic corporations. This section of the report first identifies the fundamentals of a corporate profits tax before addressing justifications that some have offered for DSTs. DSTs have been characterized as extensions of different types of tax regimes ranging from a tax on corporate profits in the digital economy to something more like a selective or excise tax on specific types of activities that is standalone from income tax regimes. Based policy analysis, though, DSTs resemble a selective tax on revenue (akin to an excise tax) and not as a tax on corporate profits. A tax on corporate profits taxes the return to investment in the corporate sector. Investment is giving up income for consumption today for the promises of higher returns, or earnings, in the future. Investment can be made in tangible assets, such as factories or equipment, or intangible assets, such as patents or trade secrets. The earnings eventually generated by the assets owned by corporations are taxed under the corporate profits tax. As discussed in the \"Permanent Establishment\" section of this report, domestic tax laws and international agreements provide the first right to tax income at its physical source—that is, where the asset is owned. The locations of a corporation's customers do not determine which country has a right to tax its income. For example, if a U.S. firm manufactures goods in the United States and exports those goods to European countries, then those European countries do not have a right to tax the earnings of the U.S. firm just because of its sale to European customers. Under some tax regimes, countries retain the right to impose a residual tax by taxing foreign-source income (i.e., income earned from overseas) and allowing a foreign tax credit. But the right to impose that residual tax on income from foreign incorporated subsidiaries is based on a domestic corporation owning some minimum percentage of the foreign business entity (i.e., a controlled foreign corporation, or CFC). In the United States, income from foreign branches is taxed currently and eligible for a credit. For example, the United States could tax the income that a firm earned from overseas sales if that firm is owned in part or in full by a U.S. parent in the year that the foreign-source income was earned (i.e., \"currently,\" or not subject to deferral). However, most countries do not exercise this residual right to tax foreign-source income outside of income that can be easily shifted to low-tax countries. European Commission authorities appear to be characterizing their DST proposal as an extension of national-level corporate income taxes. In contrast, the UK has framed its DST as a gross receipts tax and specifically says that it is not an income tax. Regardless of these mixed characterizations, a policy analysis of DSTs indicate that they do not resemble a tax on corporate profits. First, as explained above, international tax rules do not provide countries a right to tax an MNC's cross-border income solely because their residents purchase goods or services provided by that firm. Rather, ownership of assets justifies a country to tax that MNC's profits. Second, DSTs, as they have been introduced thus far, are not structured as taxes on corporate profits. Corporate accounting profit is equal to total revenue minus total cost. Many corporate income tax systems tax corporate profits (along some policy spectrum of resident-based or worldwide-based rules). In contrast, DSTs are structured as \"turnover taxes\" that apply to the revenue generated from taxable activities regardless of costs incurred to a firm. The first section of the Appendix provides an algebraic illustration to show that a DST may have different consequences for the after-tax accounting profits of a firm than an income tax levied at the same tax rate. Third, DSTs are economically equivalent to excise taxes on intermediate services in the supply chains of various markets. As explained in the \"Economic Efficiency\" section of this report, the economic incidence of a DST is likely to be borne by purchasers of taxable services (e.g., companies paying digital economy firms for advertising, marketplace listings, or user data) and possibly consumers downstream from those transactions, depending on supply-and-demand conditions in each stage of the supply chain. It could be possible under specific market conditions (i.e., in which firms subject to the statutory incidence of a DST earn supernormal economic profits or have monopoly power) that DSTs could reduce corporate profits of firms in the digital economy. Under this scenario, even though DSTs would not still be structured as a tax on profits (from a plain reading of the implementing law), they could have the economic effect of a tax on profits. For reasons discussed later in this report, though, it would be difficult to demonstrate that digital economy firms generate supernormal economic profits or are monopolies within the larger markets in which they operate. Proponents of DSTs argue that profits earned by MNCs in the digital economy are not adequately taxed on a worldwide basis, as many of these firms have reduced their effective tax rates through international tax planning strategies. As discussed earlier in the \" Tax Issues Highlighted by the Digital Economy \" section of this report, two prongs of these tax planning strategies include avoiding permanent establishments in higher-tax jurisdictions and using transfer pricing to shift profits to lower-tax jurisdictions. Other strategies that help MNCs, both inside the digital economy and outside, avoid income tax include debt and earnings stripping, avoiding withholding taxes, and contract manufacturing. Critics of basing DSTs on this position could make several arguments. First, revenues lost from profit shifting are lost revenues to the country with the right to tax the corporation that owns the asset, not the country that is home to the corporation's customers. Although many developed economies are concerned with ensuring that profits are taxed from their proper source under international tax laws, a country that imposes a DST on foreign MNCs' income (in which they have no right to tax) is not consistent with the rationale of recouping revenue lost from the profit-shifting practices of that country's firms. Second, tax strategies enabling MNCs to pay little to no tax have been used by a broad array of firms that rely on intangible assets for the majority of their profits, and these firms are not limited to industries in the \"digital economy.\" For example, European Commission authorities recently opened investigations into tax benefits conferred by its members on McDonald's (over royalty payments made by franchisees for use of the company's brand) and Starbucks (over royalty payments for coffee roasting \"know-how\" and the price of its unroasted beans). Thus, it can be argued that DSTs arbitrarily target firms within the digital economy for allegedly excessive profit shifting. Third, tax policies in a number of countries have recently changed or are scheduled to change in ways that will reduce incentives for profit shifting. These changes will most likely affect firms with the most aggressive profit-shifting strategies, including some digital economy firms. In the United States, a number of provisions enacted in P.L. 115-97 have reduced or will likely reduce economic incentives for U.S. MNCs to engage in profit shifting and tax avoidance. In addition to reducing the top marginal corporate tax rate from 35% to 21% —and, thus, the potential tax savings from profit shifting— P.L. 115-97 contains several other policy changes discouraging profit shifting, such as \"Thin capitalization\" rules limiting the benefits to earnings and debt stripping, such as reducing the share deductions of interest from 50% to 30% of adjusted taxable income for businesses with gross receipts greater than $25 million and eliminating a safe harbor that exempted firms without high debt-to-equity ratios. A new tax on \"global intangible low-taxed income\" (GILTI), effectively imposing a 10.5% minimum tax rate on the intangible income of CFCs in years 2018-2025 and 13.125% after 2025. In other words, if U.S. corporations are largely the center of concerns about digital economy MNCs not paying a \"fair share\" of their worldwide profits in tax, then GILTI provides a \"floor\" in the amount of tax owed by firms that previously sought out tax homes for their intangible assets in countries that imposed low or zero income tax. A \"deemed repatriation\" tax on accumulated post-1986 earnings at rates of 15.5% (if held in cash) and 8% (other, noncash assets), with applicable foreign tax credits similarly reduced. In other words, retained earnings of U.S. MNCs that were held abroad (often in low-tax jurisdictions) are now subject to tax. U.S. firms that invert are subject to a number of penalties, such as higher tax rates on the stock compensation of the inverting company's executives, a recapture of the deemed repatriation rate on post-1986 earnings (subjecting these earnings instead to 35% instead of 8% or 15.5%), and application of ordinary individual income tax rates instead of lower qualified dividend/long-term capital gains rates on certain dividends issued from the new foreign parent of the inverting U.S. company. Some European countries have taken efforts to change policies that were characterized by some as enabling tax avoidance among digital economy MNCs. For example, Ireland is phasing out tax provisions by 2020 behind the \"double Irish sandwich.\" Some digital economy firms reportedly used this tax planning strategy to reduce the effective rate of tax on their cross-border income (e.g., advertising sales in Europe) and shift their profits to \"tax havens\" that impose no tax on corporate income. Furthermore, the Netherlands is considering imposing a withholding tax on royalty payments to low-tax jurisdictions by 2021. Although tax-minimizing international tax planning still exists, policy changes have reduced the benefits of using past strategies that raised concerns of MNCs routing income through a complicated series of international business entities for the primary purpose of reducing tax owed. Fourth, DST proposals are unlikely to affect profit-shifting behavior. As explained above, a tax on corporate profits, in a very general sense, taxes corporate income minus the costs of production. In contrast, DSTs are imposed on gross revenue derived from certain business activities (or \"turnover\") and do not take into account costs or net profits earned by the taxable firm. Thus, economic incentives for MNCs to shift profits remain unchanged by DSTs as they do not affect profit-maximizing decisions at the margins. As discussed in the \" Select International Efforts to Tax the Digital Economy \" section of this report, statements by the European Commission and United Kingdom claim that tax regimes are not adequately taxing the \"value\" created by user contributions and behavioral data that forms a key part of the business models of firms in the digital economy. The user-based value creation argument says that some digital platforms benefit from \"network effects,\" in which the contributions of one user benefit other users and draw more users to utilize the platform. For example, a UK user creates a video on YouTube that is widely shared or promoted among other UK users. The increased user traffic benefits YouTube because more users are seeing advertisements that it has placed on its site. Thus, the video content creator has created \"value\" to YouTube by generating more advertising revenue to the platform. As another example, Yelp is a website and mobile application that allows users to provide restaurant and business reviews. Yelp generates revenue primarily from targeted advertising placed on its website. As more users provide higher-quality reviews, more users will rely on Yelp. Thus, the quality of user contributions creates \"value\" for Yelp's business model by increasing advertising revenue. Critics of this user-based \"value-creation\" argument could make various rebuttals. First, business models in the digital economy do not raise novel or \"disruptive\" challenges to income tax frameworks. In the digital economy, it is common for firms to operate in two-sided markets, where they sell or provide services to two sets of customers. For example, a social media company could use revenue earned from customers on one side of the market (advertising sales to businesses) to subsidize the free provision of services to customers on the other side of the market (individual platform users). A company providing free health and athletic tracking services can charge lower prices for a wearable device if it can sell aggregated user data to another marketer. This method of earning income across two-sided markets, though, is not new. For example, the advent of radio and television broadcasting in the 1900s operated on the same business model, where individual users consumed free programming in exchange for listening or viewing advertisements from sponsors. Just because French households along the border with Italy listen to Italian advertisements on an Italian radio station does not give France the right to tax the Italian radio station's advertising revenues. By analogy, just because French households are able to view online advertisements placed by a U.S. company on a U.S.-owned social media platform does not give France the right to tax the U.S. social media firm's advertising revenue. Second, the \"value created\" in the digital economy is achieved by the innovations and assets of the companies themselves, not by the actions of a single user. The companies—not the customers—bear the risk associated with investments in innovative technologies and platforms. They hire the workers, conduct the research, and develop the software, algorithms, and patentable innovations. For example, a key capability of many digital economy platforms is the ability to aggregate large amounts of data points across millions (if not billions) of users and repurpose that information for targeted adverting or directly selling goods and services. The technology enabling the aggregation of the user data and identifying patterns in consumer behavior is what adds value for resale to potential advertisers or retailers. Third, user contributions can be viewed as inputs to digital economy business models. It can be argued that the value of a single user's data or input is worth little to no market value in isolation. This is why users are generally willing to let companies track and collect these data without charge. Even if digital business models that allow individual users to monetize and sell their individual data grow, any income earned by individual users would be subject to tax under existing tax systems. For example, property owners on Airbnb are subject to income taxes and other hospitality fees levied by their national and local governments. YouTube \"influencers\" that are sponsored by companies pay personal income tax on those earnings to their home countries. Fourth, user contributions can be viewed as a substitute for money exchanged by consumers for the provision of digital services. \"Direct provision,\" in this context, has the same meaning as \"sale of\" digital services, except there is no money exchanged in the transaction (i.e., bartering). For example, take the market for data generated by user-provided information. Google users agree to have Google track their search queries in exchange for the free use of Google's search engine. Similarly, Facebook users agree to have their likes, posts, and network connections tracked and aggregated for sale to advertisers in exchange for the use of Facebook's social media platform at zero cost. These transactions, it is argued, maximize the economic welfare of both consumers and producers. Consumers benefit because the behavioral data of any one user has little to zero market value (as discussed above), but consumers do value the provision of digital goods and services. Producers of digital services benefit because they are able to generate revenue from repurposing aggregated user data in exchange for operating their digital platforms at little to no cost to users. As another example, Amazon's business model can be viewed like a catalog retail merchant that features the goods of different manufacturers. A catalog retail merchant earns income by selling space to manufacturers for the privilege of featuring their products in the merchant's catalog. The catalog merchant's customers place an order, and the goods—which are typically manufactured from outside of the jurisdiction where the customer is located—are then shipped to the customer. The customers did not \"create value\" in that business-to-business transaction via their subscription and purchases of the catalog. By analogy, just because a final consumer of goods sold via Amazon resides in the UK or France does not give those countries the right to tax Amazon's revenues. Fifth, the distinction that customers in the digital economy create value while customers in other industries do not could be viewed as arbitrary. Consumers engage in a countless array of activities that enhance a company's \"value\" in the course of everyday life. Customer reviews and referrals for services—everything from dog walkers to dry cleaners to dentists—have existed for years and can increase a business's revenues. However, consumers usually do not expect a share of those revenues, nor does the act of providing a review give the country in which that customer resides a right to tax the service provider's profits. Additionally, consumers promote certain brands and companies simply by using their goods or services. This sort of \"free marketing\" improves the reputation of the brand or firm but does not trigger tax liability based on the location of the consumer. The flow of users to one digital economy platform or another are similar in that mass consumer attraction drives revenue. What the digital economy has changed, though, is the speed and scope in which consumer actions can be relayed to others. Excise taxes are typically justified by economic principles or as revenue-raising measures. From an economic perspective, there are four common types of excise taxes: (1) sumptuary (or \"sin\") taxes, (2) regulatory or environmental taxes, (3) benefit-based taxes (or user charges), and (4) luxury taxes. The first two categories of excise taxes attempt to correct for a perceived \"market failure\" in which the actions of individuals in the market have negative spillover effects to society. The third category is typically used to limit the burden of funding a government program that tends to benefit a relatively defined or narrow set of beneficiaries. The fourth category, largely repealed in the United States, uses specific taxes as a means to raise revenue in a more progressive manner. Based on these classifications of excise taxes, it appears that a DST primarily serves as a revenue raising measure. The use of digital platforms does not appear to create negative spillovers to society, creating the economic justification for use of excise taxes to raise the price of individual transactions as a means to reduce the burden on society. DSTs do not appear to be a benefit-based tax, as proponents have not called for dedicating the revenue to specific government programs that benefit digital economy MNCs subject to tax. DSTs also do not appear to be clearly a more progressive method of financing government activities compared to income taxes or broad-based consumption taxes (e.g., value-added taxes) that are common in Europe. As discussed below in the \" Vertical Equity (Progressivity) \" section of this report, DSTs could be a regressive method of financing government spending in the countries that impose them. This section analyzes DST proposals under the standard tax evaluation criteria used by economists. These criteria are used to understand how a tax affects consumer demand and producer supply, whether a tax aligns with common notions of fairness, and administrative issues that could increase tax compliance costs for taxpayers or affect the ability of governments to collect revenue from a tax. Economic efficiency is typically defined as optimal production and distribution of resources in a market. Taxes typically impede, or distort, that optimal allocation of resources by raising the price of the taxed activity. Central to estimating the magnitude of these distortions is determining who bears the economic burden, or incidence, of the tax. The economic incidence of a tax can differ from the statutory incidence (i.e., who is obligated by law to pay the tax) depending on conditions in the affected market. Once the economic incidence of a tax is established, the exact distortions to consumers and producers can be determined as well as any other economic activity that is typically discouraged by a tax. The statutory incidence of the DST is borne by firms that provide covered services. For example, under the Spanish DST, companies that sell online advertising services, provide platforms for online marketplaces and intermediation services, and data transfer services—all to users with IP addresses within Spain's jurisdiction—will be subject to the DST (providing that they meet the threshold requirements). The economic incidence of such a tax could vary depending on the structure and characteristics of those individual markets, as explained in more technical detail in the Appendix . Under one scenario, digital economy firms providing services subject to the DST are perfectly competitive, and the economic burden is borne by the consumers of the digital services in the form of higher prices over the long term. For example, Spain levies its DST on firms that place digital advertisements, based on the revenue earned from showing advertisements on the search results and web pages of users with Spanish IP addresses. In a perfectly competitive market, firms providing digital advertisements earn zero economic profit in that they could not earn a higher rate of return via alternative investments. When faced with the DST, these advertising firms can either (a) exit the industry and pursue higher returns in other industries that are not subject to tax or (b) pass along the tax in the form of higher prices to businesses that purchase the advertising services. The firms purchasing digital advertising could be Spanish companies, but they could also be foreign firms purchasing advertisements that are ultimately targeted to Spanish users. In this case, the imposition of a DST in a competitive market will increase the price of taxable services and lead to a decline in the quantity demanded. The exact magnitude of these changes will depend on the responsiveness, or \"elasticity,\" of the companies purchasing the internet advertising to changes in price. Assuming that companies purchasing the advertising services are also operating in a perfectly competitive market, they are faced with the same options as the firms that sell internet advertising: exit the industry or pass the tax along to consumers of their goods. Higher prices could result in lower consumer demand for the advertised product. The magnitude of this reduced demand depends on the responsiveness of consumer demand to changes in price (i.e., the price elasticity of demand). Thus, a DST imposed on intermediary services can have ripple effects downstream within markets. Under perfect competition, the economic incidence of an upstream DST is ultimately borne by the final consumers of those advertised products. Under an alternative scenario, sellers of digital services (e.g., Google, Facebook, Amazon) could be monopolies, or a small number of firms could have \"market power\" (the ability to influence the price for their services prevailing in the market), and at least part of the tax is borne by these firms in the form of reduced economic profits. Firms can derive market power from a number of factors. For example, lack of competition could enable one firm to have a significant effect on the prevailing rate of digital advertising services. Also, the presence of complements and substitutes could affect market power. In contrast to firms in perfectly competitive markets, firms that have market power are able to earn positive economic profits, also known as \"supernormal profits,\" because they are able to set a price above their marginal cost of production. Some have argued that digital economy firms are more likely to generate supernormal profits because the marginal cost of scaling production of their business model is relatively low, if not costless. For example, the marginal cost for Facebook to display an advertisement to a user is basically zero. Others argue that some firms generate supernormal profits because they are operating in an oligopoly or near-monopoly. For example, most search results are conducted through Google, and Facebook has the most users among social media platforms. These arguments, though, may not provide clear indication of supernormal profits. A variation of the first argument could have been made during the rise of the retail catalog industry, where the marginal cost of producing a single magazine and mailing it to a consumer was relatively small. However, the presence of competing catalog retailers should have driven the prices of firms down close to their marginal costs (which encompass more than just the cost of printing one additional catalog). The second argument could be seen to misidentify the structure of \"two-sided markets\" in which many digital economy firms provide services to individual users as well as businesses. For example, Google provides search engine results to individual users (at no cost) and sells advertising space on those search results to businesses. Even if Google dominates the search engine market, it still competes against other firms, such as Facebook, for digital advertising. Digital economy firms also compete with nondigital economy methods of providing advertising services (e.g., television, print, and radio), which could constrain their ability to set prices well above their marginal cost of production. When faced with the DST, a monopolist or firms with market power bear at least some of the tax in the form of lower profit. This analysis is explained in more detail in the Appendix . How much of the tax is passed along to companies buying the advertising placement (and their customers) depends on the elasticities of supply and demand in those markets. Like the analysis in the competitive market, consumers in the affected industries reduce their demand in response to higher prices. The ultimate implication of the analyses above is that DSTs introduce distortions in various markets by reducing the financial return to capital in digital economy industries or by raising the cost of goods and services intermediated through digital platforms. Investment in affected markets would be expected to decrease. An example of the former would shift investment out of digital economy firms (e.g., as retailers purchase more print, television, or radio advertisement instead of internet advertisement or increased sales via brick-and-mortar or catalog outlets instead of digital), while an example of the latter would involve a reduction in demand of the final goods. The exact magnitude of these changes will vary based on the responsiveness of supply and demand in those various markets. Distortions can also arise in different ways depending on how a particular country's DST is applied to different firms. These issues are described more in the \" Differential Treatment of Firms \" section below. The principle of vertical equity generally implies that taxpayers with a greater ability to pay the tax should generally pay a greater share of their household income in taxes compared to households with a lesser ability. A tax is \"progressive\" if higher income households pay a greater share of their income in tax than lower-income households, whereas the opposite is true in a regressive tax system. If the economic incidence of DSTs resemble that of an excise tax rather than a tax on corporate profits, as discussed in the \" Economic Efficiency \" section, this finding also has an impact on the vertical equity analysis of DSTs. A review of the economic literature shows that the majority of the corporate income tax is borne by capital (i.e., the corporation's shareholders) with the residual being borne by labor, or workers. Capital, here in the form of stock ownership, tends to be disproportionately concentrated in higher-income households. In contrast, excise taxes are commonly borne by consumers in the form of higher prices. Excise taxes are often regressive, as lower-income households bear a higher share of their pre-tax income on consuming goods and services than higher-income households. The exact equity effects of DSTs could vary based on different abilities for intermediate firms to pass the tax along to consumers, the nature of the goods and services that they sell, and the responsiveness of consumers in those relative markets. For example, assume that Facebook charges higher prices for advertising on the social media platform to companies, and companies are able to pass those higher advertising costs in full to their customers in the form of higher prices. If one of those companies sells luxury cars and another sells consumer household goods, the DST has more progressive effects in the former case and more regressive effects in the latter. In the aggregate, though, there is little reason to assume that final consumers of goods and services sold through taxable activities in digitized business models are disproportionately higher-income. Thus, it can be expected that a DST affecting a broad range of goods and services is more likely to be regressive than not, especially when compared to a tax on corporate profits. DSTs create unequal economic treatment between similarly situated firms inside and outside of the digital economy. Firms outside of the digital economy can earn just as much global or local revenue as firms taxed under DSTs without being subject to an additional layer of tax on their revenue. Firms outside or inside the digital economy can also engage in profit shifting and \"aggressive\" transfer pricing to reduce their taxes owed in a country. DSTs, as they have been presented thus far, also create inequalities for firms of similar size based on certain exemptions and thresholds. For example, each of the specific European DST proposals use different or multiple thresholds based on total cross-border profits, revenue generated from covered business activities, \"clicks\" or interaction based from local users, etc. While proponents of these DSTs with minimum thresholds might have other policy goals in mind (e.g., exempting smaller businesses from potentially costly tax compliance burdens), the exact levels at which these thresholds are drawn among larger MNCs are arbitrary from a policy perspective. Critics of DSTs would argue that the thresholds are drawn to exclude domestic MNCs or to target the taxes to a narrow set of foreign MNCs. Regardless of their rationale, these thresholds create concerns of inequitable treatment between different sectors. In the situation where the tax is fully passed along to consumers, digital firms either charge a higher price (reducing demand) or exit the industry. Where the MNCs subject to the statutory incidence of the tax bear at least a portion of the economic incidence of the DST, then they face a lower return to business investment in that country compared to firms not subject to the DST. Additionally, the UK DST's proposed exemption or \"safe harbor\" for \"low profit\" firms could create another layer of equity concerns. If the exemption is based on low profits as calculated by UK tax rules, then firms that are not subject to the UK corporate income tax (because they do not have a permanent establishment in the UK) will not be eligible for the exemption. In other words, if a firm must be subject to the UK corporate income tax to be eligible for exemption then, by definition, the exemption is not available to foreign MNCs. MNCs with similar amounts of global revenue would be subject to different effective tax rates on their worldwide consolidated earnings (across all related entities) based on whether they were subject to UK income taxes or not. An alternative exemption being considered by the UK, based on global consolidated profits, could have some administrative issues, as discussed in the next section of this report. DSTs present several administrative challenges to both the public and private sectors. With regard to the public sector, lawmakers and revenue-collecting agencies will have to clarify exactly what types of activities are subject to tax and which parties bear the statutory burden of paying tax. These decisions affect the costs of administering the tax or the gross revenue collected by the tax. With regard to the private sector, the decisions made by lawmakers and agencies could affect the costs of complying with DST regimes. Technology could present administrative challenges to the implementation of DST proposal. First, some digital economy platforms allow users to opt out of having their data tracked or resold to third parties. Without this information a digital service provider may be able to fulfill a user's desire for privacy, but the absence of the information limits the provider's ability to apply proper taxes based on the customer's jurisdiction. \"Do not track\" or internet browser plugins that make it more difficult for companies to track users' activities could affect the measurement of data collected from local users. Second, users could reroute their internet traffic to servers outside of the country imposing the DST and mask their physical location. Virtual private network services (VPNs) allow users to access websites while making it appear that their IP addresses are from locations other than their actual locations. VPNs connect users to servers located in different parts of the world. Websites will see that a user's web traffic is originating from the VPN server, which could or could not be in the same jurisdiction as the user. Typically, VPNs are used for anonymity reasons or to bypass firewalls and website censors imposed in certain jurisdictions. VPNs are not sufficient to protecting a user's IP address, as other unmasking techniques (some requiring more effort) can be used. Still, users could use VPNs located outside of the taxing jurisdiction to reduce the flow of user activity attributed to IPs within the taxing jurisdiction, thereby reducing revenue collected from \"local\" user activity. Even if this does not completely eliminate the revenue base for a DST, VPN use still results in mismeasurement of the amount of revenue attributed to local users. Overall, lawmakers writing DSTs would likely need to consider specifying what level of enforcement would be sufficient for companies to make good faith efforts to source their revenues to local users. More due diligence required by companies to determine the source of their users or unmask user efforts designed to preserve their privacy will impose higher costs to the companies. A lower standard might require fewer resources from firms and be less intrusive on user privacy but reduce the amount of tax raised from local users. Thus, DSTs could present policy tradeoffs between individual privacy concerns and tax revenue collection. Two features of the UK's proposed DST create additional administrative challenges. An exemption based on low UK-source profits could also have unintended consequences for proponents of the DST in the form of reduced revenue. Some digital economy MNCs do have subsidiaries physically located in Europe. For example, these firms might have the purpose of providing customer service or call centers that speak the local language or market the company's lines of business. Generally, these types of business activities are low profit margin. If a digital economy MNC does have a permanent establishment in the UK that earns close to zero profits, thereby owing little to no income tax in the UK, does the tax situation of this local subsidiary justify an exemption for the entire MNC controlled group? If so, the MNC could still be technically generating millions of British pounds in revenue from sales to UK customers over the internet. In contrast, an MNC that does not have a UK subsidiary but also has millions in revenue from sales to UK customers would not be eligible for the low-profit exemption. The clear tax planning implication of such an interpretation of the low-profit exemption is that MNCs should establish a low-profit subsidiary in the UK as a means to claim the low-profit margin exemption. If allowed, then the UK DST would likely raise little to no revenue. Alternatively, the UK could base its low-profit exemption based on worldwide profits of the MNC. In the United States, corporations are required to report a number of tax-related calculations and information on their annual Securities and Exchange Commission filings for shareholders. Among these tax-related data are their effective tax rate and tax paid across all jurisdictions where the firm is subject to tax. However, the tax data reported under financial accounting rules typically varies from actual tax paid. This phenomenon is described as \"book-tax differences.\" For example, different rules for depreciation are typically used for accounting purposes compared to actual tax policy in a jurisdiction (e.g., if the lawmakers in that country decided to speed up cost recovery with the intent of increasing business investment). Thus, an exemption based on financial disclosure forms may not accurately reflect taxable income. U.S. corporations are allowed to claim a tax credit against U.S. corporate income tax liability for income taxes paid to foreign jurisdictions. The rationale is to prevent double taxation of foreign-source income. DSTs are taxes on revenue earned from specific business activities and should not be eligible for U.S. foreign tax credit treatment for several reasons. First, such taxes are not income taxes under common bilateral tax treaty language. Statements from some countries imposing DSTs, such as the UK, indicate that they do not intend DST payments to be creditable against taxes that an MNC might owe in its home country. Nor are DSTs \"in lieu of income taxes,\" as the countries imposing DSTs do have a corporate income tax system. The Internal Revenue Service (IRS) could clarify that U.S. bilateral income tax treaties do not provide for a foreign tax credit against U.S. tax for U.S. corporations that make DST payments to foreign jurisdictions. If the IRS does not do so, then Congress could enact legislation denying a U.S. foreign tax credit for such payments. Denying a foreign tax credit could increase the total taxes paid by U.S. MNCs in jurisdictions around the world, but allowing DST payments to be creditable would effectively force the U.S. Treasury (and U.S. taxpayers) to subsidize tax rates imposed by foreign jurisdictions. Policymakers who sympathize with the premise that MNCs in the digital economy are unfairly able to shift profits to low-tax jurisdictions could still disagree with the unilateral response of foreign countries to impose DSTs. The tax on GILTI serves as an alternative policy tool intended to impose higher effective tax rates on U.S. firms in the digital economy. For example, in the 115 th Congress, the No Tax Break for Outsourcing Act ( H.R. 5108 ; S. 2459 ) would have increased the GILTI tax rate to 21% and eliminated the deduction for the return on tangible assets derived by domestic corporations from serving foreign markets in computing GILTI tax liability, among other provisions. As discussed, above, DSTs have the same economic effects as an excise tax. It is not controversial for countries to levy excise taxes on imported as well as domestically consumed goods or services. Such taxes are considered to not distort trade. However, some DST proponents have not explicitly labeled them as \"excise taxes,\" making it unclear how these taxes should be viewed in terms of international agreements. Regardless of the label attached to them, some commentators argued that DSTs violate restrictions on tariffs under the rules of the World Trade Organization. For example, some scholars argue that the high-revenue thresholds for taxation and the exclusion of certain revenues earned by European firms effectively discriminate against the digital exports of U.S. firms. Many proponents of DSTs argue that they are \"interim measures\" until the international community adopts broader reforms in international tax rules. As mentioned in the discussion of the European Commission's DST proposal, the commission prefers changes, both inside and outside of the EU, in the permanent establishment rules to incorporate some measure of \"digital presence.\" This goal aligns with the EU's goal of a consolidated tax base among its members and formulary apportionment of corporate tax revenue based on a set of factors (e.g., sales, assets, employment), which would result in a shift away from tax allocation based on assets. The form and rationale of DSTs appear to better comport with a formulary apportionment tax being pursued in the EU than a traditional national corporate income tax. The inability for consensus to impose a DST at the European Commission level could lead more individual member states to unilaterally impose their own DSTs. Even if the United States objects to unilateral DSTs, these sovereign countries are generally able to impose their own tax systems (within the boundaries of any other international agreements, such as EU membership). Congress could consider creating \"carrots\" or \"sticks\" affecting the policy choices of DST proponents. Tax policy and legal scholars have debated the merits of \"potential compromises\" that would not require fundamental rewrites of international tax rules. Some of these options would rely on the executive branch for day-to-day negotiations at a bilateral or multilateral level (e.g., at the OECD). Any modification to existing or new tax treaties, though, would require Senate approval. Congress could also direct the executive branch to impose incentives (and disincentives) that would affect key sectors of the EU economy. An evaluation of these emerging ideas and concepts is, however, beyond the scope of this report. DSTs Are Not Structured as Taxes on Profits Corporate profit is generally defined as: (1) π=TR-TC Where π is profit, TR is total revenue, and TC is total cost. This is before taxes. After tax corporate profit, π t , for a firm after imposition of a percentage tax ( t ) on corporate profit, is defined as: 2 πt=(1-t)(TR-TC) In contrast, a DST ( dst ) is levied as a percent of total, gross revenue yielding an after tax profit, π dst , of: 3 πdst=(1-dst)TR-TC Algebraically, equations (2) and (3) are not equivalent. To further illustrate, the following amounts can be substituted: TR = $1,000, TC = $500, and t = 0.03 (or a 3% tax rate). Using these parameters, πt based on a 3% profit tax would be: 4 πt=(1-0.03)($1,000-$500) 5 πt=$485 Using these parameters, πdst based on a 3% DST revenue tax would be: 6 πdst=(1-0.03)$1,000-$500 7 πdst=$470 As shown above, after-tax profit for a corporation subject to a 3% income tax rate (equation 5) is greater than after-tax profit for a corporation subject to a 3% DST (equation 7) in lieu of an income tax. The two taxes are not the same. Effects of a DST on Supply-Demand Conditions in Digital Markets To analyze the economic effects of a DST, the different markets in which digital economy firms operate must be conceptualized. In a general sense, the consumers or buyers in these markets are those that pay money to the supplier or seller for the provision of a service. Many firms in digital economies operate in \"two-sided markets\" in which they provide services to two different consumers: individual users and businesses. While both sides of these markets could be relevant for calculating DST liability, the markets for the latter group of services are the starting point for analyzing the economic effects of a DST, because these business-to-business transactions are where the statutory incidence of a DST is typically first imposed. For example, in the market for internet advertisements, a clothing company could be the consumer and Google or Facebook could be the seller or supplier. In the market for marketplace sales, a vendor could be the consumer and Amazon could be the seller or supplier. In the market for user data sales, a data transfer firm could be the consumer and Facebook, Google, or Fitbit could the supplier. From an economic perspective, there are two extremes of market structure: perfect competition and monopoly. Most market structures lie somewhere in between. Monopolies rarely exist, and they are typically regulated. For reasons explained below, there are specific reasons why monopolies are likely not to exist in the markets in which DSTs apply. However, firms could have market power if there are barriers to entry. The following analyses examine how a DST would apply, over the long run, in the two extremes of market structure for a digital economy firm facing a downward sloping demand curve. Analysis of a DST in a Competitive Market In perfect competition, firms face a downward-sloping demand curve, and the supply curve is perfectly elastic (horizontal) as increases in output are achieved by new firms entering the industry over the long run. Each firm earns no economic profit, meaning that the opportunity cost of investing in alternative ventures is zero, and each is a price taker in the market (i.e., an individual firm cannot influence the price prevailing in the market). In this scenario, when the government imposes an excise tax, firms must ultimately pass on the cost of the tax to their consumers or exit the market. The market for services provided by firms in the digital economy could be depicted as \"perfectly competitive.\" Under this scenario, many firms are willing to provide a relatively similar service. These markets can be outlined more narrowly to encompass only activities by other digital economy firms (e.g., internet advertising, marketplace sales, data transfer), or they can be outlined more broadly (e.g., consumer advertising, retail outlets, consumer marketing research). In other words, although users typically associate Facebook as primarily a social network and Google as primarily a search engine, both firms may operate and compete in the same market for internet advertising. Additionally, both firms compete in the larger market for consumer advertising alongside television, print, and radio advertisers. If a clothing seller is deciding where to spend his advertising budget, that seller can purchase advertising placements on Facebook, Google, etc. (not to mention television, print, and radio). Similarly, a data transfer company looking to purchase and analyze user data then selling marketing services for another good or service not only has the choice to purchase data from Facebook, Google, etc.; it can also collect data from other companies that collect data and surveys on consumer preferences. Figure A-1 and Figure A-2 illustrate the long-run effects of a DST in a perfect competition scenario with demand curves of different slopes. The demand curves are downward-sloping because consumers demand less of the taxed service as price increases. The different slopes represent scenarios where consumer demand is more responsive, or elastic, to changes in price ( Figure A-1 ) and less responsive, or inelastic ( Figure A-2 ). The supply curves in both figures are flat, or \"infinitely elastic\" because suppliers, in the aggregate, are able to adjust their capacity to meet whatever level of consumer demand prevails in the market. In both figures, the initial equilibrium (E), before the tax, between the prevailing market price (P) and quantity (Q) is denoted by an asterisk superscript (*). After the tax is applied, the change in equilibrium between price and quantity is denoted by a subscript ( t ). In both figures, the tax is also passed forward to consumers in the form of higher prices. Firms reduce output or some firms exit the market because participants earn zero economic profit. If the DST rate is 3%, for example, then suppliers in a competitive market are assumed to increase price by 3% minus any tax savings (i.e., deductions for excise tax payments from any income tax owed to the jurisdiction imposing the DST). In Figure A-1 , imposition of a DST causes prices to rise and quantity demanded to fall in the market. The magnitude of the change in quantity is roughly similar to the change in price in the illustration below, but in a market with relatively elastic demand, the change in quantity can exceed the change in price. One cause for this phenomenon is the availability of near-substitutes. For example, if television advertisement is equally as effective as internet advertising, then a tax increasing prices of the latter will lead to a larger decline in demand as more companies purchase advertisements on television instead of the internet. In Figure A-2 , imposition of a DST also causes prices to rise and quantity demanded to fall in the market. With a relatively inelastic demand curve, though, the magnitude of the change in price exceeds the change in quantity. This could be caused, for example, by a lack of substitutes (e.g., a strong preference for internet advertising or lack of alternative outlets to online marketplaces to sell goods and services). In this case, the change in price is greater than the change in quantity demanded. Many of the services subject to a DST are intermediate inputs to the final sales of other goods and services. This means that the method of analyzing the effects of the DST would be replicated for each stage in the supply chain. For example, if a DST increases the price of advertising a clothing company's products over the internet, then that clothing company will likely increase the cost of the clothing that it charges its customers (the retail consumer in the country levying the tax). The exact magnitude of the effects will vary depending on elasticities of supply and demand in that downstream market for retail clothing sales. In a perfectly competitive retail clothing market, though, it is anticipated that prices will increase and quantity demanded will decrease. In addition to effects on price and quantity prevailing within a market, DSTs can also have \"welfare effects.\" Under this method of analysis, economists consider changes to consumer surplus, producer surplus, and deadweight loss. Consumer surplus is the total benefit of value of a good or service that consumers receive beyond what they actually pay in the market. It is depicted on a supply-demand graph as the area below the demand curve and above the price. Producer surplus is the benefit to producers from selling a good or service at a price higher than their marginal cost of producing one additional unit. It is depicted on a supply-demand graph as the area above the supply curve and below the price. Deadweight loss is an inefficiency in the market that is typically introduced by government intervention, such as a tax, that results in a loss in economic activity and potential losses to consumer or producer surpluses. In a supply-demand graph of a competitive market, like the ones above, deadweight loss is depicted as the center triangle created after the imposition of a tax. Welfare analyses of the DSTs depicted in Figure A-1 and Figure A-2 indicate that they reduce consumer surplus, have no effect on producer surplus, and create deadweight loss inefficiencies. Before the imposition of a DST, consumer welfare is measured as the areas a + b + c in both figures. This area indicates that consumers are receiving benefits from consuming goods or services subject to DSTs in excess of the price they actually pay for them. This could be in part because social media platforms, shopping on online marketplaces, or using search engines are free to consumers. After the imposition of a DST, though, consumer welfare is reduced to the area a . As producers increase the cost of goods and services subject to a DST, consumer welfare decreases due to higher costs. The area b becomes revenue collected by the government and the area c becomes deadweight loss in economic activity discouraged by the DST. There is no effect on producer surplus, because it does not exist in a perfectly competitive market. In a perfectly competitive market, producers are price takers and earn no economic profit. The main differences in Figure A-1 and Figure A-2 are due to the slope of the demand curve. The relatively inelastic demand in Figure A-2 leads to greater reductions in consumer welfare, more tax revenue collected, and smaller deadweight losses. This is because a relatively inelastic demand curve indicates that consumers are less responsive to changes in price. If consumers are unable to substitute away from goods or services subject to DSTs toward nontaxed activities, then they pay higher prices for taxed activities, and the government collects more revenue. Analysis of a DST in a Monopoly Market Some argue that major firms in the digital economy have \"monopoly power.\" Proponents of this assertion could point out that Facebook is the largest social media platform or that Google is the predominant search engine. Others may say that digital economy platforms create network effects that prevent competition. For example, Facebook is able to maintain its status as the most popular social media platform because the value of interacting on a network with billions of users exceeds a new platform with only a few users. Similarly, Amazon might be characterized as a monopoly because many customers shop and provide reviews on its website, so a vendor looking for exposure to the largest customer base will choose to pay for the service of listing its products on that site compared to a smaller internet marketplace. These views may be seen, by others, as misguided because they are viewing the opposite side of the two-sided markets in the digital economy or defining the \"market\" too narrowly. As explained in the perfect competition analysis, above, Google and Facebook can be viewed as competitors in the market for selling digital advertising space or data transfer services even if they have some degree of market power on the other side of the market (e.g., search engines and social networks). Additionally, digital economy firms also compete against \"non-digital\" competitors. For example, in the larger markets for consumer product advertising, internet companies compete with advertising via television, print, and radio. Whether firms have supernormal profits or economic rents in an industry is often difficult to determine. In general, the presence of high accounting profits (total revenue minus total costs) is not indicative of whether a firm has profits in an economic sense. Economic profits take into consideration the opportunity costs of investing in a different income-producing activity. There is typically a risk-free portion of the return to any investment. For example, in the corporate sector this could be the average rate of return of the stock market. However, riskier investments generally require a higher potential return in order to attract capital (also known as the \"risk premium\"). The point of this distinction is that high accounting profits can be an indication of a higher risk premium. For the sake of argument, Figure A-3 illustrates the effects of a DST in a hypothetical monopoly market where there is one producer. An example of this phenomenon in the digital economy could be a single firm that sells internet advertising, marketplace sales, or data transfers to a potential buyer. Figure A-3 illustrates a monopoly market before the imposition of a tax. In a monopoly market, the seller still faces a downward-sloping demand curve. However, the monopolist does not have a supply curve because it does not accept the price prevailing in the market (like individual sellers in a competitive market). Instead, it sets price (P M ) and output (Q M ) at the intersection of marginal revenue (MR) and marginal cost (MC) to arrive at a profit-maximizing equilibrium (E M ) along the demand curve. The upward-sloping MC represents the fact that the monopolist firm faces increasing marginal costs as it increases the quantity supplied in the market. The monopolist also has an upward-sloping average total cost (ATC) curve, which includes the upward-sloping function of the MC curve plus added fixed costs of production. Unlike producers in the competitive markets in Figure A-1 and Figure A-2 , the monopolist in Figure A-3 earns economic profits, or rents. Economic profit per unit sold is the difference between the price charged by the monopolist (P M ) and the ATC curve, or the distance bc . That average profit per unit times the total number of units sold ( dc ) equals the total economic profit earned by the monopolist, as shown in the gray shaded box ( abcd ). The effects of a DST on a monopoly market are illustrated in Figure A-4 . A DST shifts the demand curve in as consumers of taxed services respond to higher after-tax prices. As a result of the reduced demand, the marginal revenue earned by the monopolist declines, and the MR curve shifts from MR M to MR t . The equilibrium in the market shifts from E M to E t . Quantity decreases from Q M to Q t . The price faced by the consumer in the market increases from P M to P t . The price received by the monopolist, though, decreases from P M to P Mt . The economic profit earned by the monopolist under the new post-tax demand and MR t curves is represented by the gray shaded box ( fghi ). The revenue collected by the government is represented by the dashed-line area just above the monopolist's profit. Changes to deadweight loss is not illustrated on Figure A-4 , but they can be explained in qualitative terms. The presence of a monopoly market creates deadweight loss relative to a competitive market because P M is set higher than the price where supply and demand intersect in the competitive market (e.g., in Figure A-1 and Figure A-2 ). When a tax is introduced on top of the distortions caused by the monopolist, the size of the deadweight loss in the market is further increased.", "summary": "Several countries, primarily in Europe, and the European Commission have proposed or adopted taxes on revenue earned by multinational corporations (MNCs) in certain \"digital economy\" sectors from activities linked to the user-based activity of their residents. These proposals have generally been labeled as \"digital services taxes\" (DSTs). For example, beginning in 2019, Spain is imposing a DST of 3% on online advertising, online marketplaces, and data transfer service (i.e., revenue from sales of user activities) within Spain. Only firms with €750 million in worldwide revenue and €3 million in revenues with users in Spain are to be subject to the tax. In 2020, the UK plans to implement a 3% DST that would apply only to businesses whose revenues exceed £25 million per year and groups that generate global revenues from search engines, social media platforms, and online marketplaces in excess of £500 million annually. The UK labels its DST as an \"interim\" solution until international tax rules are modified to allow countries to tax the profits of foreign MNCs if they have a substantial enough \"digital presence\" based on local users. The member states of the European Commission are also actively considering such a rule. These policies are being considered and enacted against a backdrop of ongoing, multilateral negotiations among members and nonmembers of the Organization for Economic Cooperation and Development (OECD). These negotiations, prompted by discussions of the digital economy, could result in significant changes for the international tax system. Proponents of DSTs argue that digital firms are \"undertaxed.\" This sentiment is driven in part by some high-profile tech companies that reduced the taxes they paid by assigning ownership of their income-producing intangible assets (e.g., patents, marketing, and trade secrets) to affiliate corporations in low-tax jurisdictions. Proponents of DSTs also argue that the countries imposing tax should be entitled to a share of profits earned by digital MNCs because of the \"value\" to these business models made by participation of their residents through their content, reviews, purchases, and other contributions. Critics of DSTs argue that the taxes target income or profits that would not otherwise be subject to taxation under generally accepted income tax principles. U.S. critics, in particular, see DSTs as an attempt to target U.S. tech companies, especially as minimum thresholds are high enough that only the largest digital MNCs (such as Google, Facebook, and Amazon) will be subject to these specific taxes. DSTs are structured as a selective tax on revenue (akin to an excise tax) and not as a tax on corporate profits. A tax on corporate profits taxes the return to investment in the corporate sector. Corporate profit is equal to total revenue minus total cost. In contrast, DSTs are \"turnover taxes\" that apply to the revenue generated from taxable activities regardless of costs incurred by a firm. Additionally, international tax rules do not allow countries to tax an MNC's cross-border income solely because their residents purchase goods or services provided by that firm. Rather, ownership of assets justifies a country to be allocated a share of that MNC's profits to tax. Under these rules and their underlying principles, the fact that a country's residents purchase digital services from an MNC is not a justification to tax the MNC's profits. DSTs are likely to have the economic effect of an excise tax on intermediate services. The economic incidence of a DST is likely to be borne by purchasers of taxable services (e.g., companies paying digital economy firms for advertising, marketplace listings, or user data) and possibly consumers downstream from those transactions. As a result, economic theory and the general body of empirical research on excise taxes predict that DSTs are likely to increase prices in affected markets, decrease quantity supplied, and reduce investment in these sectors. Compared to a corporate profits tax—which, on balance, tends to be borne by higher-income shareholders—DSTs are expected to be more regressive forms of raising revenue, as they affect a broad range of consumer goods and services. Certain design features of DSTs could also create inequitable treatment between firms and increase administrative complexity. For example, minimum revenue thresholds could be set such that primarily large, foreign (and primarily U.S.) corporations are subject to tax. Requirements to identify the location of users could also introduce significant costs on businesses. This report traces the emergence of DSTs from multilateral tax negotiations in recent years, addresses various purported policy justifications of DSTs, provides an economic analysis of their effects, and raises several issues for Congress.", "document_type": "crs"}
{"report": "In the past two decades, increasing global trade liberalization, among other factors, has led to a rise in U.S. agricultural imports. The U.S. Department of Agriculture (USDA) reports that U.S. agricultural imports reached nearly $121 billion in the 2017 calendar year ( Figure 1 ), which was twice the level of such imports in 2000. Consequently, the increasing volume of imports has heightened public concern about the potential for introducing pests and diseases. Most imported agricultural products, such as live animal and plants, are inspected by U.S. government officials and have accompanying documentation—animal and plant health import permits—certifying adherence to U.S. requirements. More than ever, the U.S. government depends on the proper use of these import permits to facilitate U.S. agricultural trade. The USDA's Animal and Plant Health Inspection Service (APHIS) regulates the import, transit, and release of regulated animals, animal products, veterinary biologics, plants, plant products, pests, organisms, soil, and genetically engineered organisms. APHIS-issued import health permits verify that the health status and the production practices of an imported product meet U.S. import standards. APHIS works with foreign exporters, U.S. importers, and foreign governments to interpret and enforce APHIS-issued animal and plant health import permits. Animal and plant health import permits include components from U.S. specific regulations and World Trade Organization (WTO) guidelines. Further, these health import permits are a part of broader agreements between the United States and its trading partners in the WTO that establish sanitary and phytosanitary (SPS) standards. SPS measures aim to protect against diseases, pests, toxins, and other contaminants. Since 2000, the United States has entered into a dozen free trade agreements (FTAs), which include an SPS chapter containing specific U.S. import requirements that the partner country has agreed to recognize. Examples include specific product or processing standards, requirements for products to be produced in disease-free areas, quarantine and inspection procedures, sampling and testing requirements, residue limits for pesticides and drugs in foods, and prohibitions on certain food additives. APHIS works with the Department of Homeland Security's (DHS) Customs and Border Protection (CBP), in addition to other federal agencies (e.g., Food Safety and Inspection Service, Food and Drug Administration), to enforce agricultural import regulations. CBP has authority to enforce APHIS regulations at ports of entry. APHIS and CBP personnel inspect shipments of imported agricultural products and certify that the required animal or plant health import permits and SPS documentation accompany each shipment. For much of the 20 th century, animal and plant health bureaus within USDA operated independently of one another. The creation of APHIS consolidated these bureaus in 1972. There are a number of statutes (e.g., Table 1 ) that have established APHIS's authority over health import permits. However, the majority of the directives are found in two key legislative actions: 1. The Animal Health Protection Act (AHPA, 7 U.S.C. § § 8301 et seq .) is the primary federal law governing the protection of animal health. It gives APHIS broad authority to detect, control, or eradicate pests or diseases of livestock or poultry. AHPA consolidated all of the animal quarantine and related laws—some dating back to the late 1800s—and replaced them with one statutory framework. While most of the authorities contained in the consolidated AHPA were taken from existing laws, some new provisions were added to fill in gaps in legal authority. 2. The Plant Protection Act of 2000 (PPA, 7 U.S.C. § § 7701 et seq . ) is the primary federal law governing plant pests in foreign and interstate commerce, covering agricultural commodities, plants, biological control organisms, articles that might be infested, means of transportation, and other pathways for moving pests. It authorizes APHIS to prohibit or restrict the importation, exportation, and interstate movement of plants, plant products, certain biological control organisms, noxious weeds, and plant pests. It also authorizes APHIS to inspect foreign plant imports, quarantine any state or premise infested with a new pest or noxious weed, and cooperate with states in certain control and eradication actions. Both AHPA and PPA give APHIS authority to inspect agricultural imports. However, after the events of September 11, 2001, congressional concern about agroterrorism—the deliberate introduction of an animal or plant disease to infect food, causing economic losses and/or undermining social stability—triggered the strengthening of APHIS and other federal agency agricultural inspection activities. Congress passed the Public Health Security and the Bioterrorism Preparedness and Response Act of 2002 (16 U.S.C. §§3371-3378; commonly referred to as the Bioterrorism Act) to bolster protection of the nation's food and water supplies and prevent unauthorized access to certain animal and plant disease organisms in laboratories. Since the enactment of the Bioterrorism Act, APHIS-issued health permits have been required to accompany APHIS-regulated agricultural imports to facilitate trade. Overall, the House and Senate Agriculture Committees maintain jurisdiction over USDA's meat and poultry inspection programs and also other food-safety-related programs administered by other USDA agencies. These House and Senate committees direct APHIS, other federal agencies, states, industry, and professional groups to facilitate international and domestic agricultural trade. The Subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of the House and Senate Appropriations Committees appropriate funds for APHIS. Between FY2014 and FY2018, APHIS's discretionary appropriation has averaged $877 million annually. APHIS's appropriations cover four broad mission areas: (1) Safeguarding and Emergency Preparedness/Response, (2) Agency-Wide Programs, (3) Safe Trade and International Technical Assistance, and (4) Animal Welfare. The Safeguarding and Emergency Preparedness/Response portion of the APHIS budget is responsible for monitoring animal and plant health in the United States and throughout the world and represents roughly 85% of APHIS's annual budget. Most of the animal and plant health import permit activities are housed in this mission area. In May 2018, both the House and Senate appropriations committees reported bills ( H.R. 5961 , S. 2976 , 115 th Congress) that would have provided roughly $1 billion for the APHIS budget for FY2019. This amount was roughly $260 million more than Administration's FY2019 request and would have amounted to an increase of 7% from the FY2018 appropriation of $981.9 million. In August 2018, the Senate passed H.R. 6147 , which would have provided $1 billion for APHIS for FY2019. When the APHIS administrator considers it necessary to take emergency action to protect U.S. agriculture or prevent pest or disease entry into the United States, the administrator may issue a Federal Order. Such Federal Orders are effective immediately, contain specific regulatory requirements, and remain in effect until they are revised by another Federal Order or until an interim rule on the subject is published. APHIS issues Federal Orders, under the PPA, which authorizes USDA to prohibit or restrict the importation or entry of any plant, plant part, or article that USDA identifies as necessary to prevent the introduction or dissemination of a plant pest into or within the United States. For example, in June 2018, APHIS released a Federal Order prohibiting the importation of pomegranate arils from Peru into the United States due to concerns about the potential importation of the Mediterranean fruit fly ( Ceratitis capitata ). This Federal Order is still in effect as of January 9, 2019. Agricultural imports arrive to the Un ited States through five U.S. Customs Districts ( Figure 2 ). Although APHIS regulations are enforced at the ports of entry, they are typically mediated through health import permits. APHIS's Plant Production Quarantine and Veterinary Services oversee the health import permit process for a \"plant health import permit\" or \"animal health import permit,\" respectively ( Figure 3 ). APHIS works with several federal agencies to issue import permits. U.S. importers obtain APHIS health import permits via the APHIS website (\"ePermit\") or in consultation with APHIS or state Department of Agriculture offices. Many U.S. importers use ePermit for the importation of products from abroad as well as for interstate trade. The ePermit system enables federal regulatory officials to issue, track, and verify the validity of import permits online. There is a cost to the importer associated with each ePermit application. APHIS and the state-level authorities often request health import permit submissions alongside supporting documentation ( Figure 4 ). In many cases, a biosafety facility inspection is a part of the review process—where a facility (e.g., laboratory, greenhouse, growth chamber) must demonstrate they can adequately and safely contain certain organisms. Health import permits are normally processed and issued within 10 business days of receipt of the application. After a health import permit is obtained, APHIS and/or CBP must inspect the APHIS-regulated product. One of the flagship programs that APHIS and CBP collaborate on and administer is the Agricultural Quarantine Inspection (AQI) program. AQI ensures that the required health permits, sanitary certificates (for animal products), and phytosanitary certificates (for plant products) accompany each shipment. APHIS transfers funds to CBP to conduct AQI activities. APHIS collects AQI user fees from international airline passengers, operators of commercial vehicles, cruise ship passengers, and importers of shipments requiring phytosanitary treatments. Congress appropriates funding for AQI each year (e.g., operating expenses such as rent, utilities, travel, and supplies to conduct program activities). The AQI user fees recover costs that APHIS and CBP bear to administer the inspections. USDA estimates that in FY2018, AQI collected $765 million in fees, of which it transferred $539 million to DHS and retained $226 million to augment its discretionary appropriation. In a 2013 report, the Government Accountability Office (GAO) identified a gap between fee revenues and total program costs. In its report, GAO recommended aligning the division of fees between APHIS and CBP with their respective costs and that the two agencies ensure that fees are collected when due. In February 2018, APHIS announced it had implemented all of GAO's recommendations. Importers must obtain APHIS-issued health import permits before beginning the inspection process. In addition to APHIS, Congress has directed other federal agencies and state-level Departments of Agriculture (see Table 2 ) to participate in inspecting APHIS-regulated products: The Food and Drug Administration (FDA) has taken steps to protect the public from terrorist attacks on the U.S. food supply and other food-related emergencies in collaboration with DHS. Since 2003, FDA has advised U.S. importers to submit \"prior notice\" online forms to FDA before food is imported or offered for import into the United States. Unlike APHIS, FDA does not enforce industry guidelines, but FDA does review APHIS-issued import permits to verify the disease or pest status of the agricultural product. The Food Safety Modernization Act (FSMA; P.L. 111-353 ) created new rules governing FDA's food inspection regime of both domestic and imported foods under the agency's jurisdiction. CBP and APHIS inspect agricultural products together through the AQI program. CBP officials require U.S. importers to present an APHIS-issued import permit before conducting inspections. The F ood Safety and Inspection Service (FSIS) has regulatory oversight of meat, poultry, and some egg products. FSIS often requests APHIS-issued health import permits before proceeding with meat inspections. In the case of FSIS-regulated products, FSIS requires APHIS-issued animal health import permits to ensure that the meat and/or poultry ingredients in such food products are prepared under FSIS inspection or in a foreign establishment certified by a foreign inspection system approved by FSIS. S tate-l evel D epartments of A griculture enforce APHIS regulations. States have different animal and plant health import restrictions that apply to interstate trade. Some states have heightened restrictions based on disease and pest detections. Similar to FSIS, state-level regulators typically request APHIS-issued animal or plant health import permits before conducting their inspections. State-level Departments of Agriculture often coordinate with APHIS and CBP directly (e.g., when a state detects a disease outbreak). Congress has long been involved in efforts to prevent the entry of pest and disease threats into the United States from agricultural imports. This oversight has manifest in various congressional actions, including continuing to provide APHIS with appropriations to monitor pests and diseases, introducing legislation to address invasive species (e.g., Areawide Integrated Pest Management, H.R. 5411 , 115 th Congress), and directing CBP to enforce APHIS regulations to deter agricultural smuggling into the United States. APHIS-issued animal and plant health import permits can be a tool to prevent agricultural import threats to the United States. The sections that follow summarize selected issues that Congress has addressed by directing APHIS to undertake a specific role, assigning the agency with specific responsibilities, or authorizing it carry out certain actions. In the event of a U.S. disease outbreak or pest infestation, APHIS is designated to be the lead U.S. agency for informing the international community (such as to the World Organization for Animal Health, also known as \"OIE\"). Typically, APHIS would directly contact the partner country's scientific authority to explain the nature and extent of the outbreak. In most cases, APHIS and officials of the partner country observe the SPS guidelines agreed upon under the WTO framework or, in some cases, the SPS chapters in individual FTAs. Responses to a pest or disease outbreak can include a complete ban on the importation of U.S. products impacted by the pest/disease. Under certain circumstances, a \"regionalization\" protocol may be applied in which a specific exporting region within the United States may be recognized as disease- or pest-free. In the event of a trading partner experiencing a disease outbreak or pest infestation, the notification process is similar to a U.S. outbreak (e.g., informing OIE). APHIS informs U.S. importers of the trading partner outbreak. U.S. importers work with APHIS to verify that the health import permit reflects the disease or pest status of the exporting country. APHIS provides guidance to U.S. importers if their health import permits would be accepted (e.g., following SPS protocol of regionalization) or rejected (e.g., ban products from an infected trading partner). Table 3 provides a selected listing of prominent APHIS-monitored diseases and pests that pose a threat to U.S. agriculture. Among these are disease concerns, including avian influenza and foot-and-mouth disease, and invasive plant pests such as the Asian longhorned beetle and the emerald ash borer. In some instances, agricultural imports (or even interstate shipments) can arrive into AQI with pests and diseases that could impact public health or U.S. agricultural production systems. Congress has sometimes directed APHIS to address certain diseases through the annual appropriations process. For example, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), includes a general provision providing APHIS with an additional $5.5 million—to remain available until the end of FY2019—to fund a multiple-agency response to citrus greening disease. Agroterrorism is the deliberate introduction of an animal or plant disease with the objective of infecting food, causing economic losses and/or undermining social stability. Requiring U.S. importers to obtain APHIS-issued health import permits is one way that APHIS and the CBP protect against agroterrorism. Permits provide APHIS and CBP inspectors an opportunity to conduct random sampling to assist in disease and pest identification or to detect other potential threats. Congress has taken steps to address potential harmful imports (\"select agents\") that could impact public health or animal/plant health through the Bioterrorism Act by directing the Department of Health and Human Services's (HHS) Centers for Disease Control and Prevention (CDC) and APHIS to enforce the Select Agents and Toxins List under the Federal Select Agent Program. The agents and toxins on this list have been determined to pose a threat to human and animal health, plant health, or animal and plant products. Some of these agents and toxins are overseen by HHS, others by USDA, and certain ones by both agencies. An invasive species is a nonnative (also known as an alien ) species that does or is likely to cause economic or environmental harm or harm to human health. Invasive species include plants, animals, and microbes. The introduction of invasive species into the United States—whether deliberate or unintentional—can threaten native animal and plant communities, lead to ecosystem disruptions, and contribute to extinctions of native species. Invasive species can also impact biodiversity and alter habitats and can result in the introduction of new pests and diseases. An estimated 50,000 non-native invasive animal and plant species have been introduced to the United States for over a century, with a 2011 study citing total costs exceeding $100 billion annually—including economic costs related to damages as well as management, mitigation, and recovery activities. APHIS collects information on invasive species and monitors their impacts (e.g., on agricultural production, forest lands). The information is updated and shared with AQI and ports of entries. The health import permits provide the APHIS/CBP officials specific guidelines (e.g., identifying specific pests), depending on the origination of the product, that facilitate detection during inspecting or random sampling of the imported agricultural products. U.S. importers also work with APHIS and other federal agencies (e.g., the Environmental Protection Agency) to obtain regulations on preventing an invasive species infestation (e.g., vessel ballast water discharge). Several statutes provide federal agencies with authorities to address invasive species in the United States. Some in Congress have expressed interest in pursuing legislation to reduce the prevalence of invasive species, such as through the introduction of \"area-wide integrated pest management\" (e.g., H.R. 5411 , 115 th Congress), a pest management strategy that is applied within a geographical area. This bill would have expanded the USDA Integrated Research, Education, and Extension Competitive Grants Program for qualified area-wide integrated pest management projects. Over the past 30 years, there has been a steady increase in the movement of people and agricultural products around the world. The volume of smuggled and improperly imported agricultural products entering the United States has been a congressional concern. Products smuggled into the United States can harbor exotic plant and animal pests, diseases, or invasive species that could damage domestic crops, livestock, and the environment. If APHIS identifies an illegally imported product or a regulatory violation, it may seize the item and pursue civil and criminal penalties, if warranted. APHIS encourages distributors and retailers to purchase products that have been imported through legal channels that are typically accompanied by APHIS health import permits. One way that Congress has attempted to prevent agricultural smuggling is through the Lacey Act. The Lacey Act dates from 1900 and prohibits the importation of any plant—with limited exceptions—that is taken or traded in violation of domestic or international laws. The act requires declarations—in addition to the APHIS-issued plant health import permits—for imported shipments of most plants or plant products. APHIS works with CBP, the U.S. Coast Guard (e.g., for fisheries violations), the National Marine Fisheries Service, the Federal Bureau of Investigation, the U.S. Forest Service, and U.S. Immigration and Customs Enforcement to enforce the Lacey Act through inspection or monitoring activities. APHIS's role in this context is to collect APHIS-issued health import permits, manage the declaration requirement, provide guidance to importers regarding the declaration, perform compliance checks, and provide enforcement agencies with information to assist their investigations. The declaration is to be made by the importer at the time of import. According to USDA, both CBP and APHIS activities have contributed to an increase in the number of declarations, with approximately 1 million declarations in FY2017, up roughly 300,000 from FY2016. This increase has coincided with the introduction of the online system in lieu of paper-based declarations. ", "summary": "The Animal and Plant Health Inspection Service (APHIS) of the U.S. Department of Agriculture (USDA) is the U.S. government authority tasked with regulating the import, transit, and release of regulated animals, animal products, veterinary biologics, plants, plant products, pests, organisms, soil, and genetically engineered organisms. APHIS provides scientific authorities in trade partner countries and U.S. importers with animal and plant health import regulations. APHIS requires U.S. importers to obtain animal or plant health import permits, which verify that the items being imported meet U.S. import standards. Animal and plant health import permits certify that imports follow U.S. regulations, World Trade Organization (WTO) guidelines, and/or trading partner specific requirements. These import permits are a part of broader agreements between the United States and its trading partners within the WTO on established sanitary and phytosanitary (SPS) measures. These measures aim to protect against diseases, pests, toxins, and other contaminants. The House and Senate Agricultural Appropriations Committees appropriate funds that allow APHIS to carry out a range of activities, including those involved in issuing import permits. From FY2014 to FY2018, discretionary appropriations for APHIS have averaged nearly $900 million. About 85% of the APHIS budget is allocated to the \"Safeguarding and Emergency Preparedness/Response\" mission area, which includes the administration of health import permits and other efforts to prevent imports of pests and diseases into the United States. APHIS's authority over agricultural imports is largely provided by the Animal Health Protection Act (7 U.S.C. §§8301 et seq.), the Plant Protection Act (7 U.S.C. §§7701 et seq.), and the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (7 U.S.C. §§8401). These laws authorize APHIS to administer animal and plant health import permits and conduct agricultural import inspections. APHIS works with other federal agencies, such as the Department of Homeland Security's Customs and Border Protection (CBP), to conduct animal and plant health monitoring programs and to determine if new pest or disease management programs are needed. In addition, Congress directs the Food and Drug Administration, the Food Safety and Inspection Service, and state-level Departments of Agriculture to participate in inspecting many products regulated by APHIS. APHIS and CBP personnel inspect shipments of imported agricultural products and certify that the required import health permits and SPS certificates accompany each shipment. One of the major flagship programs that APHIS and CBP administer together is the Agricultural Quarantine Inspection (AQI) program, in which APHIS and CBP technical staff work to ensure that the required animal or plant health permits, sanitary certificates (for animal products), and phytosanitary certificates (for plant products) accompany each shipment. APHIS transfers funds to CBP to conduct AQI activities. The ongoing congressional commitment to preventing plant and animal disease and pests from entering the United States through agricultural imports is evident in annual appropriations Congress provides for APHIS. Congress has directed APHIS to monitor pests and diseases and has assigned APHIS to oversee SPS activities in some free trade agreements. Moreover, legislation introduced in the 115th Congress sought to address invasive species (e.g., Areawide Integrated Pest Management, H.R. 5411) and would have directed CBP to enforce APHIS regulations to deter smuggling of plants and animals into the United States.", "document_type": "crs"}
{"report": "This report provides links to cybersecurity-related bills with some type of committee, floor, or chamber action (i.e., action subsequent to introduction). It also provides links to cybersecurity-related hearings. Table 1 lists House bills in the 116th Congress. Table 2 lists Senate bills in the 116th Congress. Table 3 lists House bills in the 115th Congress. Table 4 lists Senate bills in the 115th Congress. In the 116 th Congress, the House has passed four cybersecurity-related bills and the Senate has given varying levels of consideration to four others, passing one. See Table 1 for a list of House bills and Table 2 for a list of Senate bills in the 116 th Congress . Thirty-one bills received committee consideration or passed one or both chambers in the 115 th Congress. Five bills became public laws: On September 28, 2018, the Department of Energy Research and Innovation Act was signed into law ( P.L. 115-246 ). The law establishes a Department of Energy policy for science and energy research and development programs; reforms National Laboratory management and technology transfer programs; and directs DOE to report to Congress on integrated research programs in cybersecurity and national security, among other issues. On August 13, 2018, the John S. McCain National Defense Authorization Act for Fiscal Year 2019 was signed into law ( P.L. 115-232 ). The bill authorizes appropriations and sets forth policies regarding Department of Defense's military activities, including cybersecurity matters. On December 12, 2017, the President signed the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ), which establishes several cybersecurity efforts and new rules and programs related to information security. These include an official ban on Kaspersky Lab software (Section 1634); definition by the President of \"cyberwar\" (Section 1633); the Pentagon's reexamination of the Defense Department's internal organizational structure surrounding its cybersecurity-related missions (Section 1641, Section 1644, and others); and the National Science Foundation and Office of Personnel Management's launch of a joint pilot scholarship program aimed at educating and recruiting talent directly out of universities (Section 1649). On November 21, 2017, the FITARA Enhancement Act of 2017 became law ( P.L. 115-88 ). Among other things, it requires the chief information officer of each covered agency for information technology to conduct a risk management review of those investments that have received a high-risk rating for four consecutive quarters. On November 2, 2017, Congress passed the Strengthening State and Local Cyber Crime Fighting Act of 2017 ( P.L. 115-76 ), which authorizes a National Computer Forensics Institute within the U.S. Secret Service. The institute is to disseminate information related to the investigation and prevention of cyber and electronic crime and related threats. CRS Report R43831, Cybersecurity Issues and Challenges: In Brief , by Eric A. Fischer CRS In Focus IF10610, Cybersecurity Legislation in the 113th and 114th Congresses , by Eric A. Fischer CRS Report R44069, Cybersecurity and Information Sharing: Comparison of H.R. 1560 (PCNA and NCPAA) and S. 754 (CISA) , by Eric A. Fischer CRS Report R43996, Cybersecurity and Information Sharing: Comparison of H.R. 1560 and H.R. 1731 as Passed by the House , by Eric A. Fischer and Stephanie M. Logan CRS Report R42114, Federal Laws Relating to Cybersecurity: Overview of Major Issues, Current Laws, and Proposed Legislation , by Eric A. Fischer CRS Report R43821, Legislation to Facilitate Cybersecurity Information Sharing: Economic Analysis , by N. Eric Weiss The following tables list c ybersecurity hearings in the 116 th Congress . Table 5 lists House hearings arranged by date in reverse chronological order. Table 6 lists House hearings arranged by committee. Table 7 lists Senate hearings arranged by date in reverse chronological order , and Table 8 lists Senate hearings arranged by committee. CRS identified these hearings as being primarily about cybersecurity or related issues. However, no single, objective selection criterion was available for CRS to use in identifying which hearings to include. The list of hearings should therefore not be considered definitive. Table document titles are active links to the committee's website for that particular hearing . Table 9 lists House hearings arranged by date in reverse chronological order , and Table 10 lists House hearings arranged by committee. Table 11 lists Senate hearings by date. Table 12 lists Senate hearings arranged by committee. CRS identified these hearings as being primarily about cybersecurity or related issues. However, no single, objective selection criterion was available for CRS to use in identifying which hearings to include. The list of hearings should therefore not be considered definitive. In the tables , the document titles are active links to the committee's website for that particular hearing .", "summary": "Most major cybersecurity legislative provisions were enacted prior to 2002, despite many recommendations having been made over the past decade. More recently, in the 115th and 116th Congresses, cybersecurity legislation has received either committee or floor action or final passage, and both chambers have held multiple hearings. In the 116th Congress, a number of House and Senate bills have received consideration, and hearings have been held by committees in each chamber. In the 115th Congress, 31 bills received some type of action (committee consideration or passage by one or both chambers). Five bills became public law. The House held 54 hearings on cybersecurity issues and the Senate held 40 hearings.", "document_type": "crs"}
{"report": "Foreign assistance is one of the tools the United States employs to advance U.S. interests in Latin America and the Caribbean. The focus and funding levels of aid programs change along with broader U.S. policy goals. Current aid programs reflect the diverse needs of the countries in the region (see Figure 1 for a map of Latin America and the Caribbean). Some countries receive the full range of U.S. assistance as they struggle with political, socioeconomic, and security challenges. Others have made major strides in consolidating democratic governance and improving living conditions; these countries no longer receive traditional U.S. development assistance but typically receive some U.S. support to address security challenges, such as transnational crime. Congress authorizes and appropriates foreign assistance to the region and conducts oversight of aid programs and the executive branch agencies charged with managing them. The Trump Administration has proposed significant reductions in foreign assistance expenditures to shift resources to other budget priorities. The Administration also is reassessing the objectives of U.S. foreign assistance efforts, including those in Latin America and the Caribbean. However, Congress would have to approve any shifts in aid funding levels or priorities. This report provides an overview of U.S. assistance to Latin America and the Caribbean. It examines historical and recent trends in aid to the region; the Trump Administration's FY2019 budget request for aid administered by the State Department, the U.S. Agency for International Development (USAID), and the Inter-American Foundation; and FY2019 foreign aid appropriations legislation. It also analyzes how the Administration's efforts to scale back assistance could affect U.S. policy in Latin America and the Caribbean. The United States has long been a major contributor of foreign assistance to countries in Latin America and the Caribbean. Between 1946 and 2017, the United States provided the region with more than $88 billion ($181 billion in constant 2017 dollars) of assistance. U.S. assistance to the region spiked in the early 1960s following the introduction of President John F. Kennedy's Alliance for Progress, an anti-poverty initiative that sought to counter Soviet and Cuban influence in the aftermath of Fidel Castro's 1959 seizure of power in Cuba. After a period of decline, U.S. assistance to the region increased again following the 1979 assumption of power by the leftist Sandinistas in Nicaragua. Throughout the 1980s, the United States provided considerable support to Central American governments battling leftist insurgencies to prevent potential Soviet allies from establishing political or military footholds in the region. U.S. aid flows declined in the mid-1990s, following the dissolution of the Soviet Union and the end of the Central American conflicts (see Figure 2 ). U.S. foreign assistance to Latin America and the Caribbean began to increase once again in the late 1990s and remained on a generally upward trajectory through 2010. The higher levels of assistance were partially the result of increased spending on humanitarian and development assistance. In the aftermath of Hurricane Mitch in 1998, the United States provided extensive humanitarian and reconstruction assistance to several countries in Central America. The establishment of the President's Emergency Plan for AIDS Relief in 2003 and the Millennium Challenge Corporation in 2004 also provided a number of countries in the region with new sources of U.S. assistance. In addition, the United States provided significant assistance to Haiti in the aftermath of a massive earthquake in 2010. Increased funding for counternarcotics and security programs also contributed to the rise in U.S. assistance. Beginning with President Bill Clinton and the 106 th Congress in FY2000, successive Administrations and Congresses provided substantial amounts of foreign aid to Colombia and its Andean neighbors to combat drug trafficking in the region and end Colombia's long-running internal armed conflict. Spending received another boost in FY2008, when President George W. Bush joined with his Mexican counterpart to announce the Mérida Initiative, a package of U.S. counter-drug and anti-crime assistance for Mexico and Central America. In FY2010, Congress and the Obama Administration split the Central American portion of the Mérida Initiative into a separate Central America Regional Security Initiative (CARSI) and created a similar program for the countries of the Caribbean known as the Caribbean Basin Security Initiative (CBSI). U.S. assistance to Latin America and the Caribbean began to decline again in FY2011. Although the decline was partially the result of reductions in the overall U.S. foreign assistance budget in the aftermath of the U.S. recession, it also reflected changes in the region. Due to stronger economic growth and more effective social policies, the percentage of people living in poverty in Latin America fell from 45% in 2002 to 30% in 2017. Some nations, such as Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay, are now in a position to provide technical assistance to other countries in the region. Other nations, such as Bolivia and Ecuador, have expelled U.S. personnel and opposed U.S. assistance projects, leading to the closure of USAID offices. Collectively, these changes have resulted in the U.S. government concentrating foreign assistance resources in fewer countries and sectors. Aid levels have rebounded since FY2014, largely due to a renewed focus on Central America in response to recent migration trends, but appropriations remain below the FY2008-FY2013 average. The Trump Administration requested $1.1 billion for Latin America and the Caribbean through foreign assistance accounts managed by the State Department and USAID in FY2019. That amount would have been $581 million, or 34%, less than the estimated $1.7 billion of assistance Congress appropriated for the region in FY2018 (see Table 1 ). The Administration also proposed eliminating the Inter-American Foundation—a small, independent U.S. foreign assistance agency that promotes grassroots development in Latin America and the Caribbean—and consolidating its programs into USAID. The proposed reductions for the region were slightly greater than the 28% reduction proposed for the global foreign aid budget. Congress ultimately did not adopt many of the Administration's proposed cuts (see \" Legislative Developments ,\" below). About $515.9 million (46%) of the Administration's proposed FY2019 foreign aid budget for Latin America and the Caribbean was requested through a new Economic Support and Development Fund (ESDF). The ESDF foreign assistance account would have consolidated aid that currently is provided through the Development Assistance (DA) and Economic Support Fund (ESF) accounts to support democracy, the rule of law, economic reform, education, agriculture, and natural resource management. Whereas the DA account is often used for long-term projects to foster broad-based economic progress and social stability in developing countries, the ESDF account, like the ESF account, would focus more on countries and programs that are deemed critical to short-term U.S. security and strategic objectives. The FY2019 request included $296.4 million (36%) less funding for the ESDF account than was provided to the region through the DA and ESF accounts combined in FY2018. Another $151.4 million (14%) of the Administration's FY2019 request for the region would have been provided through the two Global Health Programs (GHP) accounts. This amount includes $119.2 million requested through the State Department GHP account for HIV/AIDS programs and $32.2 million requested through the USAID GHP account to support maternal and child health, nutrition, and malaria programs. Under the FY2019 request for the region, funding for the State Department GHP account would have declined by $17.5 million (13%) and funding for the USAID GHP account would have declined by $31.2 million (49%) compared with the FY2018 estimate. The remaining $442.9 million (40%) of the Administration's FY2019 request for Latin America and the Caribbean would have supported security assistance programs, including the following: $390 million requested through the International Narcotics Control and Law Enforcement (INCLE) account for counter-narcotics and civilian law enforcement efforts and projects intended to strengthen judicial institutions. INCLE funding for the region would have declined by $152.2 million (28%) compared with the FY2018 estimate. $21.9 million requested through the Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR) account, which funds efforts to counter global threats, such as terrorism and proliferation of weapons of mass destruction, and humanitarian demining programs. NADR funding would have declined by $1.7 million (7%) compared with the FY2018 estimate. $11.1 million requested through the International Military Education and Training (IMET) account to train Latin American and Caribbean military personnel. IMET funding would have declined by $1.5 million (12%) compared with the FY2018 estimate. $20 million requested through the Foreign Military Financing account to provide U.S.-made defense equipment to Colombia. FMF funding would have declined by $66 million (77%) compared with the FY2018 estimate. The Trump Administration's FY2019 foreign assistance request would have reduced funding for nearly every country and regional program in Latin America and the Caribbean (see Table 2 ). Some of the most notable reductions that the Administration proposed are discussed below. The FY2019 request included $435.5 million to continue the U.S. Strategy for Engagement in Central America, which would have been a $191 million (30%) cut compared with the FY2018 estimate. The strategy is designed to address the underlying conditions driving irregular migration from the Central America to the United States by promoting good governance, economic prosperity, and improved security in the region. The request included $252.8 million for CARSI (-21%), $45.7 million for El Salvador (-21%), $69.4 million for Guatemala (-42%), $65.8 million for Honduras (-18%), and $1.8 million combined for Belize, Costa Rica, and Panama (-82%). It did not include any democracy assistance to support civil society groups in Nicaragua; such assistance totaled $10 million in FY2018. Colombia would have remained the single largest recipient of U.S. assistance in Latin America and the Caribbean under the Administration's FY2019 request; however, aid would have fallen to $265.4 million—a $125.8 million (32%) reduction compared with the FY2018 estimate. Colombia has received significant amounts of U.S. assistance to support counternarcotics and counterterrorism efforts since FY2000. The FY2019 request included funds to support implementation of the Colombian government's peace accord with the Revolutionary Armed Forces of Colombia (FARC); it sought to foster reconciliation within Colombian society, expand state presence to regions historically under FARC control, and support rural economic development in marginalized communities. The request also included funds to support Colombia's drug eradication and interdiction efforts. Haiti, which has received high levels of aid for many years as a result of its significant development challenges, would have remained the second-largest recipient of U.S. assistance in the region in FY2019 under the Administration's request. U.S. assistance increased significantly after a massive earthquake struck Haiti in 2010 but has gradually declined from those elevated levels. The Administration's FY2019 request would have provided $170.5 million to Haiti to improve food security, increase economic opportunity, promote good governance, and address health challenges (particularly HIV/AIDS). This would have been a $13.9 million (8%) cut compared with the FY2018 estimate. Mexico would have received $78.9 million of assistance under the FY2019 request, which would have been a $73.8 million (48%) cut compared with the FY2018 estimate. Mexico traditionally had not been a major U.S. aid recipient due to its middle-income status, but it began receiving larger amounts of counternarcotics and anti-crime assistance through the Mérida Initiative in FY2008. The Administration's FY2019 request for Mexico included funds to strengthen the rule of law; secure borders and ports; and combat transnational organized crime, including opium poppy cultivation and heroin production. The FY2019 request included $36.2 million for the CBSI, which would have been a $21.5 million (37%) cut compared with the FY2018 estimate. The CBSI funds maritime and aerial security cooperation, law enforcement capacity building, border and port security, justice-sector reform, and crime prevention programs in the Caribbean. In addition to the proposed reductions to State Department and USAID-managed assistance for the region, discussed above, the Trump Administration's FY2019 budget request proposed eliminating the Inter-American Foundation (IAF) and consolidating its programs into USAID. The IAF is an independent U.S. foreign assistance agency established through the Foreign Assistance Act of 1969 ( 22 U.S.C. §290f ). Congress created the agency after conducting a comprehensive review of previous assistance efforts and determining that programs at the government-to-government level had largely failed to promote social and civic change in the region despite fostering economic growth. With annual appropriations of $22.5 million in recent years, the IAF provides grants and other targeted assistance directly to the organized poor to foster economic and social development and to encourage civic engagement in their communities. The IAF is active in 20 countries in the region—including eight countries in which USAID no longer has a presence—and has focused particularly on migrant-sending communities in Central America since 2014. The Trump Administration asserted that merging the IAF's small grants programs into USAID would \"better integrate them with USAID's existing global development programs, more cohesively serve U.S. foreign policy objectives, and increase organizational efficiencies through reducing duplication and overhead.\" The FY2019 request included $3.5 million to conduct an orderly IAF closeout and $20 million under USAID's Latin America and Caribbean Regional program to continue providing small grants to poor and remote communities throughout the region (see Table 3 ). Opponents of the merger noted that Congress specifically created the IAF as an alternative to other U.S. agencies. They argued that USAID would not be able to maintain the IAF's distinct model and flexibility, which have allowed it to invest in innovative projects and work with groups that otherwise would be unable or unwilling to partner with the U.S. government. On February 15, 2019, nearly four and a half months into the fiscal year, President Trump signed into law the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). Division F of the act—the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019—includes funding for foreign assistance programs in Latin America and the Caribbean. The measure was preceded by three short-term continuing resolutions ( P.L. 115-245 , P.L. 115-298 , and P.L. 116-5 ), which funded foreign assistance programs at the FY2018 level, and a 35-day lapse in appropriations from December 22, 2018, to January 25, 2019. Although the House and Senate Appropriations Committees had approved their FY2019 foreign assistance appropriations measures ( H.R. 6385 and S. 3108 , respectively) in June 2018, neither bill received floor consideration prior to the end of the 115 th Congress. P.L. 116-6 and the accompanying joint explanatory statement do not specify foreign assistance appropriations levels for every Latin American and Caribbean nation. Nevertheless, the amounts designated for key U.S. initiatives in Central America, Colombia, and Mexico significantly exceed the Administration's request (see Table 4 ). Central America. According to the joint explanatory statement, the act provides $527.6 million to continue implementation of the U.S. Strategy for Engagement in Central America. That amount is $92 million more than the Administration requested but $99 million less than Congress appropriated for the initiative in FY2018. Unlike previous years, the measure provides the Secretary of State with significant flexibility to decide how to allocate the funds among the nations of the region. The joint explanatory statement notes that the Secretary of State should take into account the political will of Central American governments, including their demonstrated commitment to implement reforms \"to reduce illegal migration and reduce corruption and impunity.\" Colombia. The act provides \"not less than\" $418.3 million for Colombia, which is nearly $153 million more than the Administration requested and $27 million more than Congress appropriated in FY2018. The joint explanatory statement notes that the additional funding for FY2019, appropriated through the INCLE account, is intended to \"bolster Colombia's drug eradication and interdiction efforts and enhance rural security.\" Mexico . According to the joint explanatory statement, the act provides $162.7 million for Mexico. That amount is nearly $84 million more than the Administration requested and $10 million more than Congress appropriated for Mexico in FY2018. The additional funding for FY2019 is intended to support security and rule-of-law efforts, such as \"programs to assist the Government of Mexico in securing its borders and reducing poppy cultivation and heroin and synthetic drug production.\" Venezuela. The act provides \"not less than\" $17.5 million for programs to promote democracy and the rule of law in Venezuela. The joint explanatory statement notes that the legislation also includes assistance for Venezuelan refugees and migrants who have been forced to leave the country. Inter-American Foundation. The act provides $22.5 million for the IAF, which is the same amount Congress appropriated for the agency in FY2018. The joint explanatory statement designates an additional $10 million, appropriated through the DA account, as a transfer to the IAF to carry out programs in Central America. The Trump Administration's efforts to scale back U.S. foreign assistance could have significant implications for U.S. policy in Latin America and the Caribbean in the coming years. In particular, they could accelerate U.S. efforts to transition countries in the region away from traditional development assistance and toward other forms of bilateral engagement. They also could result in the Department of Defense (DOD) taking on a larger role in U.S. security cooperation with the region. Moreover, many argue the Administration's proposed foreign assistance cuts, combined with other U.S. policy shifts and the region's growing economic ties with other countries, such as China, could contribute to a relative decline in U.S. influence in Latin America and the Caribbean. Over the past three decades, many Latin American and Caribbean countries have made major strides in consolidating democratic governance and improving living conditions for their citizens. As nations have achieved more advanced levels of development, the U.S. government has reduced the amount of assistance it provides to them while attempting to sustain long-standing relationships through other forms of engagement. Budget cuts often have accelerated this process by forcing U.S. agencies to refocus their assistance efforts on fewer countries. In the mid-1990s, for example, budget constraints compelled USAID to close its field offices in Argentina, Belize, Chile, Costa Rica, and Uruguay. Similarly, budget cuts in the aftermath of the 2007-2009 U.S. recession contributed to USAID's decision to close its field offices in Guyana and Panama. The Trump Administration's desire to reduce foreign assistance funding could contribute to a new round of aid transitions. The FY2019 budget request would have zeroed out traditional development assistance for Brazil, Jamaica, and Nicaragua, and would have reduced it significantly for several other countries in the region. Although it appears as though many of those reductions were not enacted in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), the Administration may push for further cuts in the coming years. The Administration's National Security Strategy, released in December 2017, asserts that the United States \"will shift away from a reliance on assistance based on grants to approaches that attract private capital and catalyze private sector activity.\" Likewise, USAID has begun to reorient all of its country partnerships around the concept of \"self-reliance,\" placing a greater emphasis on supporting countries' abilities to plan, finance, and implement solutions to their own development challenges. Some development experts caution that such transitions should be done in a strategic manner to ensure that partner countries are able to sustain the progress that has been made with past U.S. investments and to prevent ruptures in bilateral relations that could be exploited by competing powers or compromise U.S. interests. These experts argue that successful transitions require careful planning and close coordination across the U.S. government, as well as with partner-country governments, local stakeholders, and other international donors. In their view, a timeline of three to five years, at a minimum, is necessary for the transition process. A decision to no longer appropriate new foreign aid funds for a given country would not necessarily lead to an abrupt end to ongoing U.S. assistance programs. In recent years, Congress has appropriated most aid for Latin America and the Caribbean through foreign assistance accounts that provide the State Department and USAID with up to two fiscal years to obligate the funds and an additional four years to expend them. As a result, U.S. agencies often have a pipeline of previously appropriated funds available to be expended on assistance programs. If aid transitions do occur, the United States could remain engaged with its partners in the region in several ways. As large-scale development programs are closed out, the U.S. government could use smaller, more nimble programs, such as those managed by the IAF, to maintain its presence in remote areas and continue to build relationships with local leaders. As grant assistance is withdrawn, the U.S. government could help partner countries mobilize private capital by entering into trade and investment agreements or by providing loan guarantees and technical assistance through the newly authorized U.S. International Development Finance Corporation (IDFC). As former aid recipients look to share their development expertise with other nations, the U.S. government could enter into trilateral cooperation initiatives to jointly fund and implement programs in third countries that remain priorities for U.S. assistance. Congress has demonstrated an interest in influencing the pace and shape of aid transitions. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) directed the USAID Administrator to submit a report to Congress describing the conditions and benchmarks under which aid transitions may occur, the actions required by USAID to facilitate such transitions, descriptions of the associated costs, and plans for ensuring post-transition development progress. The report, submitted in October 2018, notes that USAID has selected 17 publicly available, third-party metrics to help the agency assess the relative self-reliance of every country. If, after taking into account additional country-specific information, the agency determines a country is ready to transition, USAID is to begin an in-depth, consultative assessment process to consider potential models for continued partnership. The results of that process are to inform an implementation plan that will lay out the activities, resources, and sequencing needed to ensure a successful transition. Jamaica is one of two countries worldwide that USAID is using to test the new strategic transition process. Congress could require USAID to provide additional information as the agency continues to develop its framework for strategic transitions and moves forward with the pilot project in Jamaica. For example, in the 115 th Congress, H.R. 6385 would have required the USAID Administrator to regularly consult with Congress and development stakeholders on \"efforts to transition nations from assistance recipients to enduring diplomatic, economic, and security partners.\" The Trump Administration's approach toward Latin America and the Caribbean has focused heavily on U.S. national security objectives. For example, the Administration described the FY2019 foreign assistance request for the region as an effort to \"break the power of transnational criminal organizations and networks; shut down the illicit pathways used to traffic humans, drugs, money and weapons; and address the underlying causes that contribute to outmigration.\" The Administration's FY2019 budget proposal, however, would have reduced State Department-managed security assistance to the region (INCLE, NADR, IMET, and FMF) by 33% compared with the FY2018 estimate. Some analysts have noted that any cuts to State Department-managed security assistance programs in Latin America and the Caribbean could be offset by increased support from DOD. Congress has authorized DOD to provide a wide range of security assistance to foreign nations (referred to as security cooperation by DOD) including many activities that overlap with those traditionally managed by the State Department. For example, 10 U.S.C. §333 authorizes DOD, with the concurrence of the State Department, to train and equip foreign security forces for counterterrorism operations, counter-weapons of mass destruction operations, counter-illicit drugs operations, counter-transnational organized crime operations, and maritime and border security operations, among other purposes. Given the number of security challenges the United States faces around the globe, however, it is unclear whether DOD would devote increased funding to security cooperation in Latin America and the Caribbean. As a result of a provision (10 U.S.C. §381) enacted as part of the National Defense Authorization Act for FY2017 ( P.L. 114-328 ), DOD is required to submit formal, consolidated budget requests for security cooperation efforts, including the specific countries or regions where they are to take place, \"to the extent practicable.\" For FY2019, DOD requested $55.1 million for security cooperation in the areas of responsibility of U.S. Northern Command and U.S. Southern Command, which encompass the Latin American and Caribbean region. That amount would be slightly less than the estimated $58.6 million DOD obligated for security cooperation in the region in FY2018. Both of those figures exclude funds for drug interdiction and counter-drug activities, which account for the vast majority of DOD security cooperation funding for Latin America and the Caribbean. In FY2017 (the most recent year for which data are available), DOD obligations for drug interdiction and counter-drug activities in the region totaled $210.8 million. The exclusion of drug interdiction and counter-drug activities and the lack of country-by-country data in DOD's FY2019 security cooperation request make it difficult to assess the scope of DOD's planned activities in the region and the extent to which those activities may overlap with State Department security assistance programs. This lack of information may hinder congressional efforts to establish budget priorities and shape the relative balance of U.S. assistance in Latin America and the Caribbean. It also may weaken Congress's ability to incentivize policy changes in recipient nations as State Department-managed assistance withheld to comply with legislative conditions could be replaced with less transparent DOD support. DOD asserts that \"in the long-term\" it intends to include \"some budgeting figures by country.\" Congress could use legislation to clarify the breadth of information it expects to receive from DOD in its annual security cooperation budget requests. Although the relative importance of foreign assistance in U.S. relations with Latin American and Caribbean nations has declined since the end of the Cold War, the U.S. government continues to use assistance to advance key policy initiatives in the region. In recent years, U.S. assistance has supported efforts to reduce illicit drug production and end the long-running internal conflict in Colombia, combat transnational organized crime in Mexico, and address the root causes that drive unauthorized migration to the United States from Central America. This assistance has enabled the U.S. government to influence partner countries' policies, including the extent to which they dedicate resources to activities that they otherwise may not consider top priorities. Some analysts and Latin American officials view the Administration's efforts to cut foreign aid as part of a broader trend of U.S. disengagement from the region. They note that President Trump withdrew from the Trans-Pacific Partnership trade agreement and imposed tariffs on several Latin American nations, has been slow to fill diplomatic posts in the region, and was the first U.S. president in 25 years to skip the triennial Summit of the Americas. They contend that this has created a leadership vacuum in the region that other powers have begun to fill. For example, some analysts warn that China, which has provided more than $140 billion in state-backed finance to Latin American and Caribbean nations since 2005, has begun to leverage its significant commercial ties into other forms of power that could come at the expense of the United States. Others note that it may not be a zero-sum game and that the region's increased ties with China do not necessarily portend a loss of U.S. influence. Research suggests that foreign aid can influence perceptions of U.S. leadership, which have declined significantly in Latin America and the Caribbean over the past two years. In 2018, 31% of the region approved of \"the job performance of the leadership of the United States,\" an 18-point decline compared to 2016. Consistently high disapproval ratings could constrain Latin American and Caribbean leaders' abilities to support Trump Administration initiatives and conclude agreements with the United States. Many in Congress also have expressed concerns that significant foreign assistance cuts could weaken U.S. influence around the world. In H.Rept. 115-829 , for example, the House Appropriations Committee asserted that \"the magnitude of the reductions proposed for United States diplomatic and development operations and programs in the fiscal year 2019 request would be counterproductive to the economic and security interests of the nation and would undermine our relationships with key partners and allies.\" Similarly, in S.Rept. 115-282 , the Senate Appropriations Committee asserted that the \"proposed reduction to the International Affairs budget…reinforces the perception that the United States is retreating from its preeminent role as the world's superpower.\" These concerns may have influenced Congress's decision not to adopt many of the Administration's proposed foreign assistance cuts for FY2019. Appendix A. U.S. Foreign Assistance to Latin America and the Caribbean by Account and Country or Regional Program: FY2017 Appendix B. U.S. Foreign Assistance to Latin America and the Caribbean by Account and Country or Regional Program: FY2018 Estimate Appendix C. U.S. Foreign Assistance to Latin America and the Caribbean by Account and Country or Regional Program: FY2019 Request", "summary": "The United States provides foreign assistance to Latin American and Caribbean nations to support development and other U.S. objectives. U.S. policymakers have emphasized different strategic interests in the region at different times, from combating Soviet influence during the Cold War to promoting democracy and open markets since the 1990s. The Trump Administration has sought to reduce foreign aid significantly and refocus U.S. assistance efforts in the region to address U.S. domestic concerns, such as irregular migration and transnational crime. FY2019 Budget Request For FY2019, the Trump Administration requested $1.1 billion for Latin America and the Caribbean through foreign assistance accounts managed by the State Department and the U.S. Agency for International Development (USAID). That amount would have been $581 million, or 34%, less than the estimated $1.7 billion of U.S. assistance the region received in FY2018. The proposal would have cut funding for every type of assistance and nearly every Latin American and Caribbean nation. The Trump Administration also proposed eliminating the Inter-American Foundation—a small, independent U.S. foreign assistance agency that promotes grassroots development in the region—and consolidating its programs into USAID. The Administration's efforts to scale back U.S. assistance could have significant implications for U.S. policy in Latin America and the Caribbean. Faced with potential cuts, U.S. agencies could accelerate efforts to transition countries in the region away from traditional development assistance toward other forms of bilateral engagement. Reductions in State Department-managed security assistance could lead to the Department of Defense taking on a larger role in U.S. security cooperation. Moreover, many argue that reductions in foreign aid, combined with other policy shifts, could contribute to a relative decline in U.S. influence in the region. Legislative Developments President Trump signed into law the Consolidated Appropriations Act, 2019 (P.L. 116-6), on February 15, 2019. Division F of the act—the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019—includes funding for foreign assistance programs in Latin America and the Caribbean. The measure was preceded by three short-term continuing resolutions (P.L. 115-245, P.L. 115-298, and P.L. 116-5), which funded foreign assistance programs at the FY2018 level, and a 35-day lapse in appropriations from December 22, 2018, to January 25, 2019. Although the House and Senate Appropriations Committees had approved their FY2019 foreign assistance appropriations measures (H.R. 6385 and S. 3108, respectively) in June 2018, neither bill received floor consideration prior to the end of the 115th Congress. P.L. 116-6 and the accompanying joint explanatory statement do not specify appropriations levels for every Latin American and Caribbean nation. Nevertheless, the amounts designated for key U.S. initiatives in Central America, Colombia, and Mexico significantly exceed the Administration's request. The act provides $527.6 million to continue implementation of the U.S. Strategy for Engagement in Central America, which is $92 million more than the Administration requested but $99 million less than Congress appropriated for the initiative in FY2018. at least $418.3 million to support the peace process and security and development efforts in Colombia, which is $153 million more than the Administration requested and $27 million more than Congress appropriated for Colombia in FY2018. $162.7 million to support security and rule-of-law efforts in Mexico, which is $84 million more than the Administration requested and $10 million more than Congress appropriated for Mexico in FY2018.", "document_type": "crs"}
{"report": "Article I, Section 9, of the U.S. Constitution provides, \"No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.\" The Constitution does not, however, prescribe any specific structure or process for making appropriations. The committee structure established by Congress during the 20 th century assigns a prominent role to the Appropriations Committees of the House and Senate for both the development of appropriations legislation and oversight over budget execution. The Appropriations Committees, in turn, have created a system of subcommittees designed to facilitate their ability to carry out these tasks. The number and jurisdictions of appropriations subcommittees have evolved to meet changing needs and circumstances. For example, reorganization was undertaken at the beginning of the 108 th Congress in response to the creation of a new Department of Homeland Security. After the legislation establishing the new department was enacted, the House Appropriations Committee established a new subcommittee. This modification of subcommittee structure affected eight of the existing subcommittees and was one of the most extensive reorganizations of the Appropriations Committees since the 1920s. Shortly thereafter, a similar change was made in the Senate Appropriations Committee. Reorganization can also be undertaken to adapt to changes in congressional priorities. For example, in the reorganization that occurred at the start of the 109 th Congress, both the House and the Senate undertook a major change in subcommittee structure. This resulted in the elimination of three appropriations subcommittees in the House and one in the Senate and ultimately affected the jurisdictions of 10 appropriations subcommittees in the House and 8 in the Senate. Another major reorganization at the beginning of the 110 th Congress again shifted subcommittee jurisdiction to reestablish parallel House and Senate subcommittees. This report details the evolution of the House and Senate Appropriations Committees' subcommittee structure from the 1920s to the present. By the end of the First World War, the idea that the President should play a prominent role in a more centralized budgetary process gained prominence, ultimately resulting in passage of the Budget and Accounting Act of 1921. In anticipation of the more centralized executive budget system provided under the act, the House also changed its rules to require that all appropriations be considered by the Appropriations Committee. During the late 19 th century, congressional rules had assigned jurisdiction over certain general appropriations bills to committees other than the House and Senate Appropriations Committees. Notably, the appropriations bills for the District of Columbia, Indian affairs, Agriculture Department, Army, Navy, Post Office Department, and rivers and harbors (i.e., public works) were all considered by their respective legislative committees. A subsequent, additional change involved the organization of appropriations bills. Prior to the Budget and Accounting Act, appropriations bills (and subcommittees) tended to be organized along topical lines. For example, the military activities of the War Department were considered in appropriations bills reported by the Military Affairs Committee, and the activities of the Corps of Engineers were considered in River and Harbor appropriations bills reported by the Commerce Committee. The salaries and contingent expenses for the civilian administration of the department, however, were carried in the Legislative, Executive, and Judicial bill, which was within the jurisdiction of the Appropriations Committee. A similar division existed for most departments and was true even for agencies whose appropriations were wholly within the jurisdiction of the Appropriations Committee. Funding for the activities of agencies as disparate as the Interstate Commerce Commission, the Coast Guard, and the Bureau of Mines was carried in the Sundry Civil bill, which was frequently the largest of the general appropriations bills. Nevertheless, their salaries and expenses were generally funded in the Legislative, Executive, and Judicial bill. Concurrent with the congressional consolidation of jurisdiction over appropriations, the newly established Bureau of the Budget recommended that appropriations bills be reorganized along administrative lines, where appropriations for salaries and expenses would be carried in the same bill as funding for programs and activities administered by a department. This arrangement had previously existed only for the Department of Agriculture appropriations bill. The House Appropriations Committee adopted the bureau's concept and reorganized the structure of general appropriations bills and its subcommittees so extensively that only the structure of the Agriculture bill remained essentially unchanged. After its reorganization, the House Appropriations Committee comprised the following subcommittees: 1. Agriculture Department; 2. Commerce and Labor Departments; 3. Deficiencies; 4. District of Columbia; 5. Independent Offices (including the Executive Office of the President); 6. Interior Department; 7. Legislative Establishment; 8. Navy Department and the Navy; 9. Post Office Department; 10. State and Justice Departments (including the judiciary); 11. Treasury Department; and 12. War Department and the Army (both military and civil functions). By long-standing custom, the House originates all general appropriations bills. As a consequence, historically, the House has generally determined the initial content of the bills. By originating appropriations bills corresponding to its new administratively based organizational structure, the House created a jurisdictional problem for the Senate, which retained a system based on topical organization of appropriations bills, as well as multiple committees sharing jurisdiction over general appropriations bills. Confronted with the difficulty of considering the reorganized appropriations bills with its now outmoded system, the Senate reorganized its appropriations jurisdiction and subcommittees in 1922. Information available on congressional subcommittees, including those of the Appropriations Committees, is generally sparse and unsystematic prior to enactment of the Legislative Reorganization Act of 1946. From available hearings and other committee documents, however, it appears that during this era the Appropriations Committees continued the practice of each subcommittee (other than the Deficiencies Subcommittee) being responsible for drafting one of the regular appropriations bills. Using data on appropriations bills to identify subcommittee structure during this period, one may conclude that the subcommittee structure of the Appropriations Committees was relatively stable. Other than name changes, the salient changes in appropriations bill structure (and, presumably, subcommittee structure) between 1922 and 1946 seem to have been limited to the following: The combination of the bills for the Treasury and Post Office Departments beginning in the second session of the 68 th Congress (1924); The combination of the Commerce and Labor Departments bill with the State and Justice Departments bill beginning in the second session of the 68 th Congress (1924); The separation of the War Department and Army bill into two bills, one for the Military Establishment and the other for War Department Civil Functions, beginning in the first session of the 75 th Congress (1937); The separation of the Labor Department (and the Federal Security Agency) from the Departments of State, Justice, Commerce, and Labor bill beginning in the first session of the 76 th Congress (1939); and The inclusion of the Judiciary in the Legislative Branch bill during the 78 th Congress (1943-1944). One of the chief aims of the Legislative Reorganization Act of 1946 was to bring about a modernization of Congress's committee system, including its subcommittees. As a result, unlike the earlier period, information on subcommittee structure since 1946 is more readily available. In the 80 th Congress (1947-1948), the Appropriations Committees in both chambers had these 12 subcommittees: 1. Agriculture; 2. Deficiencies; 3. District of Columbia; 4. Government Corporations; 5. Independent Offices; 6. Interior Department; 7. Legislative; 8. State, Justice, and Commerce Departments and the Judiciary; 9. Treasury Department and Post Office; 10. Labor Department and Federal Security Agency; 11. War Department; and 12. Navy Department. The idea of modernizing congressional committee structure and operations embodied in the Legislative Reorganization Act was paralleled by an interest in developing a more modern federal administrative apparatus to supplant the one that had grown in episodic bursts to meet the challenges of the Depression and World War II. Because appropriations bills continued to be organized along administrative lines, these changes in the executive branch had an impact on appropriations subcommittee structure. The four changes in party control of the House between 1947 and 1955 also contributed to an environment conducive to revision of appropriations subcommittee jurisdiction. This evolution saw the number of subcommittees fluctuate between a low of 10 and a high of 15. Despite this fluctuation, it appears that the Appropriations Committees generally continued the practice of each subcommittee being responsible for drafting one of the regular appropriations bills. Appropriations Subcommittees that were created, abolished, or reorganized from the 80 th Congress through the 91 st Congress (1947-1970) are as follows: A subcommittee (and appropriations bill) specifically pertaining to government corporations operated in both the House and Senate during the 80 th Congress (1947-1948). Jurisdiction over Army civil functions was transferred to the Deficiencies Subcommittees in both the House and Senate for the 81 st Congress (1949-1950). The Senate subsequently transferred jurisdiction over deficiencies to the full committee and established a separate subcommittee for Army civil functions in the 82 nd Congress, which lasted through the 83 rd (1951-1954). The House continued to operate a Deficiencies and Army Civil Functions Subcommittee in the 82 nd Congress (1951-1952) but transferred jurisdiction over deficiencies to the full committee and created a subcommittee combining Army civil functions with military construction in the 83 rd Congress (1953-1954). A Public Works Subcommittee (including the Army civil functions as well as the Atomic Energy Commission, Bureau of Reclamation, and power marketing administrations) was established by both the House and Senate Appropriations Committees beginning in the first session of the 84 th Congress (1955). The Senate maintained separate subunits within the Public Works Subcommittee to consider matters related to the Atomic Energy Commission and Tennessee Valley Authority and related to the Bureau of Reclamation and Department of the Interior power marketing associations. These subunits operated beginning in the 84 th Congress (1955-1956), continuing through the 90 th Congress (1967-1968). A single bill was reported from the subcommittee for each fiscal year during this period. A separate subcommittee to consider deficiencies was discontinued in the Senate after the 81 st Congress (1949-1950) and in the House after the 82 nd Congress (1951-1952). Jurisdiction over deficiencies and supplemental was subsequently exercised by the full committee. A Deficiencies Subcommittee was reestablished by the House Appropriations Committee for the 86 th through 88 th Congresses (1959-1964), after which the jurisdiction was again exercised by the full committee. The Senate Subcommittee on Deficiencies was reestablished for the second session of the 87 th Congress and met through the 91 st Congress (1962-1970). The War and Navy Departments were consolidated to create a National Military Establishment (later the Department of Defense) during the first session of the 80 th Congress (1947), and their respective appropriations subcommittees were combined to create an Armed Services Subcommittee at the beginning of the 81 st Congress (1949). Renamed the Department of Defense Subcommittee in the first session of the 84 th Congress (1955), the House Subcommittee maintained three separate subunits for consideration of Army, Navy, and Air Force matters during the 84 th and 85 th Congresses (1955-1958), and the Senate maintained a separate subunit for intelligence activities between the 91 st and 94 th Congresses (1968-1976). During these years, there continued to be a single Department of Defense appropriations bill. Military construction was considered part of the Defense Appropriations bill prior to the 83 rd Congress. Between the 83 rd Congress and the first session of the 85 th Congress (1953-1957), appropriations for military construction were carried primarily in deficiency and supplemental appropriations measures. In the 83 rd Congress (1953-1954), the House operated a Civil Functions and Military Construction Subcommittee, but it is otherwise not clear whether military construction matters were considered by a subcommittee in this period. A separate Military Construction Subcommittee was created by the House Appropriations Committee beginning in the second session of the 85 th Congress (1958), and a separate bill for military construction matters was considered for the first time that same year. The Senate Appropriations Committee established a separate subunit for military construction within the Defense Subcommittee in the 86 th Congress (1959-1960) and then a separate subcommittee beginning in the first session of the 87 th Congress (1961). The House and Senate Appropriations Committees established a subcommittee to consider both legislative and judiciary matters in the 83 rd Congress (1953-1954). The two chambers subsequently returned to the former practice of a separate Legislative Subcommittee, with judiciary matters being considered by the same subcommittee as the Departments of State, Justice, and Commerce beginning in the first session of the 84 th Congress (1955). A separate bill to fund foreign aid programs (then called the Mutual Security bill) was considered beginning in the first session of the 83 rd Congress (1953), with jurisdiction exercised by the full committee in both the House and Senate. A separate subcommittee was established by the House Appropriations Committee beginning in the first session of the 84 th Congress (1955). Foreign operations jurisdiction continued to be exercised at the full committee level by the Senate Appropriations Committee until the first session of the 91 st Congress (1969). Jurisdiction over Commerce Department appropriations was exercised by a separate subcommittee in the 84 th through 86 th Congresses (1955-1960). The subcommittee's jurisdiction was combined with the General Government Subcommittee for the first session of the 87 th Congress (1961). Beginning in the second session of the 87 th Congress (1962), jurisdiction was transferred to a subcommittee with jurisdiction over the State, Justice, and Commerce Departments and the judiciary. In the House, a separate subcommittee was established for general government matters (including the Executive Office of the President) in the 84 th through 86 th Congress (1955-1960). In the Senate, jurisdiction over general government matters was exercised by a Subcommittee on Independent Offices and General Government Matters beginning in the 84 th Congress (1955-1956), although separate appropriations bills for independent offices and general government matters were considered. In both the House and Senate, jurisdiction over general government matters was combined with the Commerce Department Subcommittee in the first session of the 87 th Congress (1961). Jurisdiction over general government matters was subsequently combined with the Treasury Department and Post Office Subcommittee in both chambers beginning in the second session of the 87 th Congress (1962). A separate subcommittee was established to consider appropriations for the newly created Transportation Department by both the House and Senate Appropriations Committees beginning in the 90 th Congress (1967). With the creation of the Transportation Subcommittee by the House Appropriations Committee in 1967, the total number of appropriations subcommittees in the House stabilized at 13. The last subcommittee added in the Senate was the Foreign Operations Subcommittee in 1969, bringing the total in that body to 14. Once the Subcommittee on Deficiencies in the Senate was eliminated at the end of the 91 st Congress (1970), the two chambers' appropriations subcommittee structures both totaled 13 and remained parallel during this period. There were no additions, and few major changes, in the subcommittee structure of either the House or Senate Appropriations Committees between 1971 and 2002. The changes that did occur were primarily changes in subcommittee names to reflect changes in agency and departmental status. For example, the title of the Independent Offices bill evolved with the creation of the Departments of Housing and Urban Development in 1965 and Veterans' Affairs in 1988, the Public Works bill became known as the Energy and Water bill after the creation of the Department of Energy in 1977, and the title of the Departments of Labor and Health Education and Welfare was modified to reflect the creation of a separate Department of Education in 1979. However, these changes did not represent major shifts in appropriations subcommittee jurisdictions. At the beginning of the 107 th Congress, the House and Senate had the following 13 subcommittees: 1. Subcommittee on Agriculture, Rural Development, and Related Agencies; 2. Subcommittee on Commerce, Justice, State, and Judiciary; 3. Subcommittee on Defense; 4. Subcommittee on the District of Columbia; 5. Subcommittee on Energy and Water Development; 6. Subcommittee on Foreign Operations; 7. Subcommittee on Interior and Related Agencies; 8. Subcommittee on Labor, Health and Human Services, Education, and Related Agencies; 9. Subcommittee on Legislative Branch; 10. Subcommittee on Military Construction; 11. Subcommittee on Transportation; 12. Subcommittee on Treasury and General Government; and 13. Subcommittee on Veteran's Affairs, Housing and Urban Development, and Independent Agencies. In response to the establishment of a Department of Homeland Security (DHS), in January 2003, the chairman of the House Appropriations Committee announced that a new appropriations subcommittee would be created. This new subcommittee, consolidating appropriations jurisdiction from eight existing subcommittees over the various entities comprising the DHS, was the first major reorganization of appropriations subcommittee structure in either chamber in over 30 years. The new subcommittee was formally established when the committee organized for the 108 th Congress in February 2003. In order to keep the number of appropriations subcommittees at 13, the committee also merged the subcommittees responsible for Department of Transportation appropriations with that responsible for Treasury, Postal Service, and General Government appropriations. The Senate Appropriations Committee made a similar change when it organized in March 2003. At the beginning of the 109 th Congress (2005), the House Appropriations Committee undertook another substantial reorganization, reducing the number of subcommittees from 13 to 10. This reduction was achieved by eliminating the Subcommittees on the Legislative Branch, District of Columbia, and the Departments of Veterans Affairs, Housing and Urban Development, and Independent Agencies (VA-HUD). The jurisdiction over the Legislative Branch appropriations bill was retained by the full committee, and the following major changes were made in House appropriations subcommittee organization: A new subcommittee on Military Quality of Life and Veterans Affairs was created. This was accomplished by combining the previous jurisdiction of the Military Construction subcommittee with jurisdiction over the Department of Veterans Affairs (formerly exercised by the VA-HUD subcommittee), as well as those portions of the Department of Defense concerning the Defense Health Program and military facilities sustain ment and housing accounts. The former Transportation and Treasury subcommittee gained jurisdiction over three new areas: The Department of Housing and Urban Development was transferred from the eliminated VA-HUD subcommittee; the federal judiciary was transferred from the former Commerce, Justice, State, and the Judiciary subcommittee; and jurisdiction over the District of Columbia was transferred from the eliminated District of Columbia subcommittee. Jurisdiction over NASA, the National Science Foundation, and the Office of Science and Technology Policy was transferred from the eliminated VA-HUD subcommittee to the newly named Subcommittee on Science, State, Justice and Commerce, and Related Agencies. Jurisdiction over other agencies formerly exercised by the VA-HUD Subcommittee was transferred to the Interior Subcommittee (the Environmental Protection Agency) and Labor-HHS Subcommittee (AmeriCorps). Jurisdiction over Weatherization Assistance Grants exercised by the Labor-HHS Subcommittee, and energy-related accounts exercised by the Interior Subcommittee, was transferred to the Energy and Water Development Subcommittee. This reorganization left the House with the following 10 subcommittees: 1. Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; 2. Subcommittee on Defense; 3. Subcommittee on Energy and Water Development, and Related Agencies; 4. Subcommittee on Foreign Operations, Export Financing, and Related Programs; 5. Subcommittee on Homeland Security; 6. Subcommittee on Interior, Environment, and Related Agencies; 7. Subcommittee on Labor, Health and Human Services, Education, and Related Agencies; 8. Subcommittee on Military Quality of Life and Veterans Affairs and Related Agencies; 9. Subcommittee on Science, State, Justice and Commerce, and Related Agencies; and 10. Subcommittee on Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia. The Senate Appropriations Committee subsequently adopted a reorganization plan as well, eliminating the Subcommittee on Veterans Affairs, Housing and Urban Development, and Independent Agencies and making the following major changes: Jurisdiction over Veterans Affairs was transferred to the Subcommittee on Military Construction. Jurisdiction over the Department of Housing and Urban Development and the federal judiciary was transferred to the former Subcommittee on Transportation, Treasury and General Government. Jurisdiction over NASA, the National Science Foundation, and the Office of Science and Technology Policy was transferred to the former Subcommittee on Commerce, Justice, State, and the Judiciary. Jurisdiction over AmeriCorps was transferred to the Subcommittee on Labor, Health and Human Services, Education, and Related Agencies. Jurisdiction over the Environmental Protection Agency was transferred to the Subcommittee on Interior and Related Agencies. Jurisdiction over energy related accounts formerly exercised by the Interior Subcommittee was transferred to the Subcommittee on Energy and Water Development. Jurisdiction over the State Department was transferred to the former Subcommittee on Foreign Operations. This reorganization left the Senate with the following 12 subcommittees: 1. Subcommittee on Agriculture, Rural Development, and Related Agencies; 2. Subcommittee on Commerce, Justice and Science; 3. Subcommittee on Defense; 4. Subcommittee on the District of Columbia; 5. Subcommittee on Energy and Water Development; 6. Subcommittee on Homeland Security; 7. Subcommittee on Interior and Related Agencies; 8. Subcommittee on Labor, Health and Human Services, Education, and Related Agencies; 9. Subcommittee on Legislative Branch; 10. Subcommittee on Military Construction and Veterans Affairs; 11. Subcommittee on State and Foreign Operations, and Related Programs; and 12. Subcommittee on Transportation, Treasury, the Judiciary, and Housing and Urban Development. At the beginning of the 110 th Congress (2007), further major changes were made as follows: Jurisdiction over the Departments of Transportation, Treasury, and Housing and Urban Affairs was divided to create subcommittees in both chambers on Transportation, Housing and Urban Development, and related agencies and on Financial Services and General Government (including the Treasury Department, the Judiciary, the Executive Office of the President, the Office of Personnel Management, the Postal Service, the District of Columbia, and other related agencies, such as the Federal Elections Commission, Federal Trade Commission, Securities and Exchange Commission, and Small Business Administration). Jurisdiction over defense health programs and military facilities sustainment and housing accounts was transferred from the House Military Quality of Life subcommittee to the Defense subcommittee. Jurisdiction over the State Department was transferred from the House Science, State, Justice and Commerce, and Related Agencies subcommittee to the Foreign Operations subcommittee. In addition, the House reestablished a subcommittee with jurisdiction over the legislative branch, and the Senate eliminated a separate subcommittee on the District of Columbia. The reorganization left the two chambers with the following 12 subcommittees: 1. Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; 2. Subcommittee on Commerce, Justice, Science, and Related Agencies; 3. Subcommittee on Defense; 4. Subcommittee on Energy and Water Development, and Related Agencies; 5. Subcommittee on Financial Services and General Government; 6. Subcommittee on the Department of Homeland Security; 7. Subcommittee on Interior, Environment, and Related Agencies; 8. Subcommittee on the Departments of Labor, Health and Human Services, Education, and Related Agencies; 9. Subcommittee on Legislative Branch; 10. Subcommittee on Military Construction, Veterans Affairs, and Related Agencies; 11. Subcommittee on State, Foreign Operations, and Related Programs; 12. Subcommittee on Transportation and Housing and Urban Development, and Related Agencies. These 12 subcommittees have remained in place since 2007. In most respects, the jurisdictions of subcommittees for both the House and Senate Appropriations Committees were made parallel. The one salient exception was jurisdiction over funding for the Commodity Futures Trading Commission (CFTC). In the House, funding for CFTC is included in the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations bill, while the Senate includes it in the Financial Services and General Government Appropriations bill. Since 2007, the two chambers have alternated which of these two measures includes CFTC funding when enacted. During the first session of the 110 th Congress (2007), based on the recommendations of the 9/11 Commission, the House created the Select Intelligence Oversight Panel of the Appropriations Committee to oversee spending on federal intelligence activities. This panel was established for three major purposes: to review and study on a continuing basis budget requests for and execution of intelligence activities, to make recommendations to relevant subcommittees of the Appropriations Committee, and to prepare an annual report to the Defense subcommittee containing budgetary and oversight observations and recommendations for use by such subcommittee in preparation of the classified annex to the bill making appropriations for the Department of Defense. This panel did not have any spending jurisdiction. At the beginning of the 112 th Congress (2011), the Select Intelligence Oversight Panel was eliminated by H.Res. 5 , adopted on January 5, 2011.", "summary": "This report details the evolution of the House and Senate Appropriations Committees' subcommittee structure from the 1920s to the present. In 1920, the House adopted a change in its rules to consolidate jurisdiction over all appropriations in the Appropriations Committee. After the enactment of the Budget and Accounting Act of 1921, the House reorganized its Appropriations Committee by establishing for the first time a set of subcommittees to consider appropriations bills based on the administrative organization of the executive branch. The Senate followed suit in 1922, and the two chambers have continued under that basic organizational approach since that time. It is possible to divide the evolution of the modern Appropriations subcommittee structure into four eras. The first era, stretching roughly from the initial reorganization in the 1920s until the end of the Second World War, was marked by stability. Most of the changes in Appropriations structure resulted from combining bills (e.g., the Treasury Department bill with the Post Office Department bill beginning in 1924), although one new bill (and subcommittee) was created when the appropriations bill for the Department of Labor was split off from the Departments of State, Justice, Commerce, and Labor bill in 1939. The second era, from the end of the Second World War through 1970, saw a number of significant changes. During this period, Congress attempted to keep pace with executive branch reorganizations (e.g., creation of subcommittees to consider appropriations for the new Departments of Defense in 1947 and Transportation in 1967) and changing national priorities (e.g., creation of a separate appropriations bill, and later subcommittee, for foreign operations). The third era, from 1971 through 2003, was marked by a renewed stability. While some appropriations subcommittees were renamed to reflect changes in agency and departmental status, these changes did not represent major shifts in jurisdiction. Following major changes in organization involving nearly every subcommittee in the 108th, 109th, and 110th Congresses, the two chambers have once again settled into an era of stable organization. In 2003, both the House and Senate Appropriations Committees merged their subcommittees on Transportation and Treasury and created new subcommittees to consider appropriations for the newly created Department of Homeland Security. In 2005, both chambers undertook major reorganizations, eliminating three subcommittees in the House and one in the Senate. This reorganization, however, left the two chambers with differing subcommittee jurisdictions. In 2007 the two Appropriations Committees reorganized again to reestablish parallel subcommittees that have remained in place since. During the first session of the 110th Congress (2007), the House created the Select Intelligence Oversight Panel of the appropriations committee to oversee spending on federal intelligence activities. This panel was eliminated in 2011 at the beginning of the 112th Congress. This report will be updated to reflect any changes in Appropriations subcommittee structure.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; venture capital programs, including the now inactive New Markets Venture Capital (NMVC) program, to foster small business expansion; programs to increase small business opportunities in federal contracting; direct loans for businesses, homeowners, and renters to assist their recovery from natural disasters; and access to entrepreneurial education to assist with business formation and expansion. Authorized by P.L. 106-554 , the Consolidated Appropriations Act, 2001 (Appendix H: the New Markets Venture Capital Program Act of 2000), the NMVC program is designed to promote economic development and the creation of wealth and job opportunities in low-income geographic areas and among individuals living in such areas by encouraging developmental venture capital investments in smaller enterprises primarily located in such areas; and address the unmet equity investment needs of small enterprises located in low-income geographic areas. Modeled on the SBA's Small Business Investment Company (SBIC) program, SBA-selected, privately owned and managed NMVC companies provide funding and operational assistance to small businesses. To do so, they use private capital the NMVC company has raised (called regulatory capital ) and up to 150% of that amount (called leverage ) from the sale of SBA-guaranteed 10-year debentures, or loan obligations , to third parties, subject to the availability of funds. Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest rates. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture. At least 80% of the investments must be in small businesses located in a low-income area, as defined in the statute. Specialized Small Business Investment Companies (SSBICs) established under the SBIC program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-to-dollar matching basis. Six NMVC companies participated in the program. The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and up to $30 million for operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. The SBA subsequently provided $72.0 million in leverage to NMVC companies in FY2002 and FY2003 ($12.5 million in FY2002 and $59.5 million in FY2003) and $14.4 million for operational assistance grants ($3.75 million in FY2002 and $10.65 million in FY2003). In 2003, the unobligated balances of $10.5 million for NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining in recent years as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance (which is comprised of the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. No bills have been introduced since the 112 th Congress concerning the NMVC program. However, more than 30 bills were introduced in previous Congresses to either expand or amend the program. Many of these bills would have increased the program's funding (a list and summary of bills introduced by Congress to provide the program additional funding appears in the Appendix ). For example, during the 112 th Congress, H.R. 2872 , the Job Creation and Urban Revitalization Act of 2011, would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $75 million of debentures and $15 million for operational assistance grants for FY2012 through FY2013. The bill was referred to the House Committee on Small Business, but no further action was taken on it. This report examines the NMVC program's legislative origins and describes the program's eligibility and performance requirements for NMVC companies, eligibility requirements for small businesses seeking financing, and definition of low-income areas. It also reviews regulations governing the SBA's financial assistance to NMVC companies and provides program statistics. This report concludes with an examination of (1) efforts to eliminate the program based on concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of the program's unobligated funding in 2003, and (3) congressional efforts to provide the program additional funds. On September 15, 1998, the Senate Committee on Small Business conducted a markup of several bills pending before the committee, including H.R. 3412 , the Small Business Investment Company Technical Corrections Act of 1998, which the House had passed. Senator Christopher Bond, chair of the Senate Committee on Small Business, proposed an amendment in the nature of a substitute to H.R. 3412 incorporating the full texts of S. 2372 , the Year 2000 Readiness Act, and S. 2407 , the Small Business Programs Restructuring and Reform Act of 1998, as well as provisions from S. 2448 , the Small Business Loan Enhancement Act. The committee also debated and approved by unanimous voice votes seven amendments to the substitute amendment. One of the seven approved amendments was a precursor of the NMVC program. The amendment, offered by Senator Paul Wellstone, would have authorized a $20 million, four-year technical assistance program—the Community Development Venture Capital Demonstration Program—to provide grants, on a matching dollar-to-dollar basis, to experienced community development venture capital (CDVC) firms that invest in small businesses located in economically distressed areas, such as inner cities and poor rural counties. The grants would be used to provide technical expertise and operating assistance to new, emerging, less experienced CDVC organizations. The program's stated purpose was \"to develop and expand a new but growing field of organizations that use the tools of venture capital to create good jobs, productive wealth, and entrepreneurial capacity that benefit disadvantaged people and economically distressed communities.\" The program's advocates argued that despite difficulties associated with making investments in economically distressed areas, some successful CDVCs had produced \"a 'double bottom line' of not only financial returns, but also social benefits in the form of good jobs and healthier communities.\" On September 15, 1998, the committee reported H.R. 3412 , as amended, by a vote of 18-0. On September 30, 1998, the Senate passed the bill, with an amendment, by unanimous consent. The House did not act on the bill. On January 19, 1999, President Bill Clinton announced during his State of the Union Address support for what was later called the \"New Markets Investment Initiative.\" The proposed initiative was comprised of several programs, including a New Markets Tax Credit program and a New Markets Venture Capital program, to encourage economic development in economically distressed areas. President Clinton subsequently drew attention to the initiative by taking three separate trips to underserved inner city and rural communities, visiting Phoenix, Arizona, and the Pine Ridge Indian Reservation in South Dakota on July 7, 1999, and Los Angeles, California, and Anaheim, California, on July 8, 1999 (trip 1); Newark, New Jersey, and Hartford, Connecticut, on November 4, 1999 (trip 2); and Hermitage, Arkansas, and Chicago, Illinois, on November 5, 1999 (trip 3). During his remarks in Chicago, President Clinton announced that he had reached an agreement with House Speaker Dennis Hastert (who was present) to develop a bipartisan legislative initiative on developing new market investments as a means to revitalize impoverished communities. In a related development, on February 9, 1999, the SBA proposed several incentives to encourage companies participating in its SBIC program to \"expand their investment activity into economically distressed inner cities and rural areas.\" After receiving public comments on several proposed incentives, the SBA issued a final rule on September 30, 1999, implementing the SBIC low- or moderate-income (LMI) initiative. The ongoing LMI initiative is designed to encourage SBICs to invest in small businesses located in inner cities and rural areas \"that have severe shortages of equity capital\" because investments in those areas \"often are of a type that will not have the potential for yielding returns that are high enough to justify the use of participating securities.\" SBICs that invest in small businesses with at least 50% of their employees or tangible assets located in a low- or moderate-income area (LMI zone) or at least 35% of their full-time employees with their primary residence in an LMI zone are eligible for the incentives. For example, unlike regular SBIC debentures that typically have a 10-year maturity, LMI debentures are available in 2 maturities, 5 years and 10 years, plus the stub period. The stub period is the time between the debenture's issuance date and the next March 1 or September 1. The stub period allows all LMI debentures to have common March 1 or September 1 maturity dates to simplify administration of the program. In addition, LMI debentures are issued at a discount so that the proceeds an SBIC receives for the sale of a debenture are reduced by (1) the debenture's interest costs for the first five years, plus the stub period; (2) the SBA's annual fee for the debenture's first five years, plus the stub period; and (3) the SBA's 2% leverage fee. As a result, these interest costs and fees are effectively deferred, freeing SBICs from the requirement to make interest payments on LMI debentures or to pay the SBA's annual fees on LMI debentures for the first five years of a debenture, plus the stub period. As shown in Table 1 , in FY2018, SBICs made 609 investments in small businesses located in an LMI zone, totaling $1.026 billion — 18.6% of the total amount invested. On September 16, 1999, Senator John Kerry introduced S. 1594 , the Community Development and Venture Capital Act of 2000. The bill included several provisions in President Clinton's New Markets Investment Initiative. The bill had three main parts: a New Markets Venture Capital Program, very similar to the present program, to encourage investment in economically distressed communities; a Community Development Venture Capital Assistance Program to expand the number of community development venture capital firms and professionals devoted to investing in economically distressed communities; and BusinessLINC, a mentoring program to link established, successful businesses with small business owners in economically stagnant or deteriorating communities to facilitate the development of small businesses in those areas. After conducting two hearings and sponsoring a roundtable discussion on the Community Development and Venture Capital Act of 2000, the Senate Committee on Small Business reported the bill, as amended, by a vote of 16-1, on July 26, 2000. In the report accompanying the bill, Senator Christopher Bond, chair of the Senate Committee on Small Business, argued that the SBIC program had \"proven to be an extremely successful public-private sector partnership with the government\" and mentioned the SBA's LMI initiative as a new means to encourage SBICs to make investments in LMI zones. However, he argued that \"as successful as the SBIC program is, it does not sufficiently reach areas of our country that need economic development the most.\" He added that although SBICs invested $771 million in LMI zones in 1999, \"the vast majority of those investments were very large and not at all comparable to the type of investments [NMVC] funds would make.\" Senator Bond argued that the committee was approving the bill because it was necessary to expand the number of smaller investments being made to small businesses in the poorest areas, low-income geographic areas, and to fill another gap in access to capital that small businesses face. Investments for NMVC funds typically will range from $50,000 to $300,000 versus the $300,000 to $5 million range found in the Agency's SBIC program.\" The Senate did not take further action on the bill. On December 14, 2000, Representative (later Senator) Jim Talent, chair of the House Committee on Small Business, introduced H.R. 5663 , the New Markets Venture Capital Program Act of 2000. The bill had two parts: the current New Markets Venture Capital Program and BusinessLINC. The next day, the bill was incorporated by reference in the conference report accompanying H.R. 4577 , the Consolidated Appropriations Act, 2001, which became law ( P.L. 106-554 ) on December 21, 2000. On January 22, 2001, the SBA published an interim final rule in the Federal Registe r indicating its intention to establish the NMVC program. The SBA's final rule, which formally established the NMVC program, was published in the Federal Registe r on May 23, 2001. P.L. 106-554 specified that venture capital companies interested in participating in the program must submit a detailed application to the SBA that includes, among other items, a business plan describing how the company intends to make successful developmental venture capital investments in identified low-income geographic areas, and information regarding the community development finance or relevant venture capital qualifications and general reputation of the company's management. In addition, an NMVC company must be a newly formed for-profit entity or a newly formed for-profit subsidiary of an existing entity; be organized under state law solely for the purpose of performing the functions and conducting the activities contemplated under the act; be organized either as a corporation, a limited partnership, or a limited liability company; show, to the SBA's satisfaction, that its current or proposed management team is qualified and has the knowledge, experience, and capability in community development finance or relevant venture capital finance necessary for investing in the types of businesses contemplated by the act; and have a primary objective of economic development of low-income areas. On January 22, 2001, the SBA solicited applications from venture capital companies and SSBICs to participate in the NMVC program. The SBA had planned to offer another round of applications for the program during the first quarter of 2003. However, the second round of applications was canceled because, as mentioned previously, P.L. 108-7 , the Consolidated Appropriations Resolution, 2003, which became law on February 20, 2003, rescinded the program's unobligated funding. The SBA received 23 applicants from companies interested in participating in the NMVC program, and conditionally approved 7 of them. Final approval is subject to the applicant meeting several conditions. For example, applicants are required to raise, within 18 months of being conditionally approved, at least $5 million in private capital or in binding capital commitments from one or more investors (other than federal agencies or departments) that meet criteria established by the administrator (the private funds are called regulatory capital ). Applicants also must have in place binding commitments from sources other than the SBA that are payable or available over a multiyear period not to exceed 10 years that amount to not less than 30% of the total amount of regulatory capital and commitments raised (30% of $5 million = $1.5 million). This additional funding is necessary to guarantee the applicant's ability to meet the required dollar-to-dollar matching contribution for operational assistance grants. Six of the seven companies granted conditional approval subsequently met all of the program requirements (one in April 2002, three in March 2003, one in April 2003, and one in August 2003) and were accepted into the program after signing a formal participation agreement with the SBA. The six NMVC companies initially raised $48 million in private capital and were subsequently provided $72 million in leverage. The companies are Adena Ventures, L.P., Athens, Ohio, approved on April 24, 2002, with targeted low-income areas in Ohio, West Virginia, and Maryland; New Markets Venture Partners, College Park, Maryland, approved on March 5, 2003, with targeted low-income areas in Maryland, Virginia, and the District of Columbia; CEI Community Ventures Fund, LLC, Portland, Maine, approved on March 21, 2003, with targeted low-income areas in Maine, New Hampshire, and Vermont; Murex Investments I, L.P., Philadelphia, Pennsylvania, approved on March 31, 2003, with targeted low-income areas in Pennsylvania, New Jersey, and Delaware; Penn Venture Partners, LP, Harrisburg, Pennsylvania, approved on April 23, 2003, with targeted low-income areas in Pennsylvania; Southern Appalachian Fund, L.P., London, Kentucky, approved on August 8, 2003, with targeted low-income areas in Kentucky, Tennessee, Georgia, Alabama, and Mississippi. NMVC companies are subject to various reporting requirements. For example, for each fiscal year, NMVC companies must file an annual financial statement with the SBA that has been audited by an independent public accountant acceptable to the SBA. The statement must include an assessment of the social, economic, or community development impact of each financing; the number of full-time equivalent jobs created as a result of the financing; the impact on the revenues and profits of the business being financed; and the impact on the taxes paid by the business being financed and by its employees. The statement must also include a listing of the number and percentage of the business's employees that reside in a low-income area. In addition, NMVC companies are required to submit to the SBA a portfolio financing report for each financing made within 30 days of the closing date. NMVC companies are required to provide financial assistance and operational assistance only to small businesses as defined under the SBA's SBIC program. The business must either meet the SBA's size standard for the industry in which it is primarily engaged or have a maximum net worth of no more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5 million. All of the company's subsidiaries, parent companies, and affiliates are considered in the size standard determination. In addition, at the close of each NMVC company's fiscal year, at least 80% of the company's total financings (in total dollars) and 80% of the total number of concerns in that company's portfolio must be small businesses that, at the time of the financing, had their principal offices located in a low-income area (low-income enterprises). NMVC companies that fail to reach these required percentages at the end of any fiscal year must be in compliance by the end of the following fiscal year. They are not eligible for additional leverage from the SBA until they reach the required percentages. The act defines a low-income area as any census tract, or equivalent county division as defined by the Bureau of the Census, that meets any of the following criteria: a poverty rate of 20% or more; if located in a metropolitan area, at least 50% of its households have an income that is below 60% of the area median gross income; if not located in a metropolitan area, has a median household income that does not exceed 80% of the statewide median household income; is located within a historically underutilized business zone (HUBZone); is located in an urban empowerment zone or urban enterprise community as designated by the Department of Housing and Urban Development; or is located in a rural empowerment zone or rural enterprise community as designated by the Department of Agriculture. NMVC companies invest funds they have raised themselves, their regulatory capital, in small businesses. In addition, they can receive up to 150% of that amount from the SBA, subject to the availability of funds. NMVC companies follow essentially the same process for obtaining SBA funding as prescribed under the SBIC program. The SBA's funding, or leverage, comes from the sale to third parties of 10-year securities (or debentures), which are backed by the full faith and credit of the United States. Because the SBA guarantees the timely payment of the principal and interest due on the securities, the SBA is able to obtain favorable interest rates. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture. NMVC debentures are deferred-interest debentures issued at a discount (less than face value) equal to the first five years' interest to eliminate the need for NMVC companies to make interest payments during that period. As a result, NMVC companies make no payments on the debenture for five years from the date of issuance, plus the stub period, which ensures that all NMVC debentures have common prepayment and maturity dates of either March 1 or September 1. NMVC companies make semiannual interest payments on the face amount of the debenture during years 6 to 10, and they are responsible for paying the debenture's principal amount when the debenture reaches its maturity date. NMVC companies receive leverage from the SBA in a two-step process. First, they submit a request to the SBA for a conditional commitment to reserve a specific amount of leverage for future use. This request authorizes the SBA to sell the requested debenture amount to a third party at an interest rate approved by the SBA or to pool the requested debenture amount with other requests, providing each request with the same maturity date, interest rates, and conditions. The NMVC companies then apply to the SBA to draw against the SBA's leverage commitment. These requests may come at any time during the term of the SBA's leverage commitment. Although authorized to do so, the SBA does not pool NMVC debentures. Through an agreement with the SBA, the Federal Home Loan Bank of Chicago (FHLB) has purchased and held all outstanding NMVC debentures since issuance. The interest rate on each NMVC debenture was determined by FHLB using a spread over FHLB's cost of funds as of the date of each issuance. The SBA does not allow NMVC companies to prepay their draws for a period of 12 months (plus the stub period) after issuance. Prepayments are permitted after that waiting period, but only on March 1 or September 1 of each year. The cost of prepayment is the present value of the NMVC debenture on the semiannual date chosen for prepayment. After receiving funds, NMVC companies make equity investments in small businesses of their choice. Equity investments are typically in the form of common or preferred stock and sometimes in the form of subordinated debt with equity features (as long as the debt is not amortized and provides for interest payments contingent upon and limited to the extent of earnings) or limited partnership interests, options, warrants, and similar equity investment instruments. The SBA is authorized to award grants to NMVC companies and SSBICs to provide free operational assistance to small businesses financed, or expected to be financed, under the program. The grants must be used to provide management, marketing, and other technical assistance to help a small business with its business development. The grants have a dollar-to-dollar matching requirement and cannot be used for general and administrative expenses, including overhead. Matching resources may be in the form of (1) cash; (2) in-kind contributions; (3) binding commitments for cash or in-kind contributions that are payable or available over a multiyear period acceptable to the SBA but not to exceed 10 years; or (4) an annuity, purchased with funds other than regulatory capital, from an insurance company acceptable to the SBA that may be payable over a multiyear period acceptable to the SBA but not to exceed 10 years. NMVC companies and SSBICs are eligible for an operational assistance grant award equal to the amount of matching resources the company has raised, subject to the availability of funds. NMVC companies must use at least 80% of both the grant funds and their matching resources to provide free operational assistance to small businesses located in a low-income area. SSBICs must use both the grant funds awarded by the SBA and their matching resources to provide free operational assistance to small businesses \"in connection with a low-income investment made by the SSBIC with regulatory capital raised after September 21, 2000.\" As shown in Table 2 , NMVC companies received operational assistance grants in FY2002 and FY2003 and started making equity investments in small businesses in FY2002. Since the program's inception, NMVC companies invested more than $81.4 million in 71 different small businesses. The program reached its peak, in terms of the amount of financings, in FY2007, investing nearly $16.3 million in 35 different small businesses that year. Since then, the amount of financings each year generally declined—falling to no new financings in FY2016 as the program's initial investments expired and NMVC companies engaged only in additional follow-on financings with the small businesses in their portfolios. As mentioned previously, the NMVC program's active unpaid principal balance (including both the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. The NMVC program has not received any additional funding since 2001. Opposition to the program within Congress began to gain momentum when President George W. Bush recommended in his FY2002 budget request that the NMVC program be eliminated, arguing that the program is relatively expensive and duplicative of other federal programs: The Administration supports the objectives of the New Markets Venture Capital (NMVC) program but believes those objectives can be achieved more efficiently and at a lower cost through other existing programs. Several vehicles and incentives to direct investment into economically distressed communities already exist. Communities targeted by NMVC have access to a wide range of private for-profit and economic development programs, including the federally supported community development financial institutions administered through the Department of Treasury. In addition, SBA's SBIC program, which has 412 licensed venture capital companies with total capital resources amounting to $17.7 billion, is implementing incentives to encourage investment in economically distressed areas. The NMVC program is also expensive relative to the impact that it is expected to have. The total cost of the program in FY2001 is $52 million, not including administrative cost of running the program. Since the program is expected to generate $150-$200 million of investment activity, it will yield only $3.00-$4.00 of investment for every taxpayer dollar spent. In comparison, under the Small Business Investment Company (SBIC) program, there is no cost associated with the debenture portion of the program. Others argued that the NMVC program's targeted clientele of small businesses located in economically distressed areas is inherently too risky for government involvement. In their view, NMVC companies are \"designed and chartered to operate (as profit-making firms) in a market niche that mainstream venture capital firms will not touch.\" The program's advocates contended that the NMVC program is necessary precisely because mainstream venture capital firms generally avoided investments in small businesses located in economically distressed areas. In their view, the NMVC program is an essential part of a larger federal effort, which includes tax incentives, to fill a market niche in private-sector venture capital investments and, in the process, help to revitalize areas experiencing long-term economic difficulties. They also objected to the Bush Administration's argument that the program is duplicative of other federal programs. In their view, the NMVC program is targeted at a clientele that is not being adequately served by other federal programs. The Bush Administration continued to recommend the program's elimination in each of its subsequent budget requests. As mentioned previously, during congressional consideration of the FY2003 budget the unobligated balances of $10.5 million for NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. Since then, more than 30 bills have been introduced to amend the NMVC program, including bills to reduce the amount of capital NMVC companies must raise to become eligible for operational assistance grants, eliminate the matching requirement for operational assistance grants, create an Office of New Markets Venture Capital within the SBA, require the SBA to provide conditionally approved NMVC companies a full two years to meet all program requirements, provide increased financing to small manufacturers, and amend the program's definition for low-income area to correspond with the definition used by the New Market Tax Credits program (Section 45D(e) of the Internal Revenue Code of 1986) (26 U.S.C. 45D(e)). Many of these bills also included provisions to provide the NMVC program additional funding. As shown in Table A-1 in the Appendix , during the 108 th Congress, two bills were introduced, one in the House and one in the Senate, to provide the NMVC program \"such subsidy budget authority as may be necessary to guarantee $75 million of debentures\" and $15 million for operational assistance grants over FY2004 and FY2005. Neither bill was enacted. During the 109 th Congress, an amendment was offered during the House during floor debate on H.R. 2862 , the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006, to provide \"$30 million in debenture guarantees and $5 million for operational assistance grants to fund the creation of a fresh round of New Market Venture Capital companies … paid for by using funds from the Small Business Administration's salary and expense account.\" The amendment failed by voice vote. A bill introduced in the House would have authorized an expansion of the NMVC program to include the selection of an NMVC company whose primary objective would be the economic development of small businesses located in Hurricane Katrina-affected areas. The bill would have authorized \"such subsidy budget authority as may be necessary to guarantee … $50 million of debentures issued by the Gulf Region New Markets Venture Capital Company … and $10 million for grants to the Gulf Region New Markets Venture Capital Company.\" Another House bill would have provided the NMVC program \"such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $25 million for operational assistance grants for FY2006 through FY2008.\" Neither bill was enacted. During the 110 th Congress, four bills were introduced, two in the House and two in the Senate, to provide the NMVC program additional funding. One of the House bills would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $25 million for operational assistance grants for FY2007 through FY2009. The other House bill would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $30 million of debentures and $5 million for operational assistance grants for FY2008 through FY2010. The two Senate bills would have provided the NMVC program $20 million for operational assistance grants. None of these bills was enacted. During the 111 th Congress, two bills were introduced in the House to provide the NMVC program additional funding. One of the bills would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $25 million for operational assistance grants for FY2009 through FY2011. The other bill would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $100 million of debentures and $20 million for operational assistance grants for FY2010 through FY2011. During the 112 th Congress, one bill was introduced to provide additional funding for the NMVC program. Representative Nydia Velázquez introduced H.R. 2872 , the Job Creation and Urban Revitalization Act of 2011, on September 8, 2011. The bill would have provided the NMVC program such subsidy budget authority as may be necessary to guarantee $75 million of debentures and $15 million for operational assistance grants for FY2012 through FY2013. The bill was referred to the House Committee on Small Business on September 8, 2011. No further action was taken on the bill. As mentioned earlier, no bills have been introduced since the 112 th Congress concerning the NMVC program. P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), included provisions designed to encourage SBIC investments in low-income areas. The act allowed an SBIC licensed on or after October 1, 2009, to elect to have a maximum leverage amount of $175 million instead of $150 million (later increased to $175 million) if that SBIC has invested at least 50% of its financings in low-income geographic areas, as defined under the NMVC program, and certified that at least 50% of its future investments will be in low-income geographic areas. ARRA also increased the maximum amount of leverage available for two or more licenses under common control to $250 million from $225 million if these requirements are met. In addition, on April 7, 2011, the SBA announced a $1 billion impact investment SBIC initiative (providing up to $150 million in leverage in FY2012 and up to $200 million in leverage per fiscal year thereafter until the limit is reached). Under this initiative, SBA-licensed impact investment debenture SBICs are required to invest at least 50% of their financings, \"which target areas of critical national priority including underserved markets and communities facing barriers to access to credit and capital.\" To receive an impact investment, a small business must meet at least one of the following criteria: be located in or, at the time of the initial investment, have at least 35% of its full-time employees residing in an LMI zone as defined in 13 C.F.R. Section 107.50 or be located in an economically distressed area as defined by Section 3011 of the Public Works and Economic Development Act of 1965, as amended (an area with per capita income of 80% or less of the national average or an unemployment rate that is, for the most recent 24-month period for which data are available, at least 1% greater than the national average unemployment rate); or be in an industrial sector that the SBA has identified as a national priority (currently clean energy, education, and advanced manufacturing). Initially, an impact investment SBIC could receive up to $80 million in SBA leverage. On June 6, 2013, the SBA announced that it was increasing the maximum leverage available to impact investment SBICs to $150 million. On September 25, 2014, the SBA announced several changes to the impact investment program designed to \"broaden access to the fund.\" The agency announced that it was continuing the program beyond FY2016. Additionally, effective October 1, 2014, among other changes, the SBA eliminated the program's $200 million collective, per-fiscal-year leverage cap; added advanced manufacturing to the list of eligible sectors; provided eligibility to businesses that receive Small Business Innovation Research or Small Business Technology Transfer grants; and permitted, through December 1, 2014, existing debenture SBICs to apply to opt into the program if they meet the program's requirements. Subject to the SBA's approval, impact investment SBICs may devise a customized definition of an \"impact investment\" during the licensing process. On February 3, 2016, the SBA published a proposed rule in the Federal Register to provide regulations for impact investment SBICs regarding licensing, leverage eligibility, fees, and reporting and compliance requirements. The proposed regulations were an indication of the SBA's intent at that time to continue the impact investment SBIC initiative indefinitely. At the end of FY2018, there were nine licensed, impact investment SBICs (two in 2011, one in 2012, two in 2014, two in 2015, and two in 2016). As of September 30, 2018, they managed more than $905 million in assets and had investments in 81 small businesses. During FY2018, these SBICs invested $106.8 million in 35 small businesses. After reviewing the impact investment SBIC initiative's performance, on September 28, 2017, the SBA's Office of Investment and Innovation (OII) published a letter addressed to SBIC participants, applicants, and all other interested parties indicating that as of November 1, 2017, it would no longer accept new management assessment questionnaires from applicants interested in participating in the impact investment SBIC initiative. The letter indicated that the SBA was also terminating the 2011/2012 Impact Investment Fund Policy letter that the SBA had used to form the initiative's impact investment fund. The OII's letter indicated that the SBA was taking these actions for several reasons, including that \"few qualified funds applied to be licensed as Impact SBICs,\" that \"many of these SBICs would have applied to the SBIC program regardless of the existence of the Impact Policy,\" and \"the results produced were not commensurate with the time and resources expended by SBA to maintain it.\" In addition, on June 11, 2018, the SBA published a notice in the Federal Register withdrawing the proposed rule published on February 3, 2016, that would have created regulations for the impact investment SBIC initiative because the \"SBA has determined that the cost is not commensurate with the benefits.\" The SBA's LMI and impact investment initiatives are designed to encourage SBIC investments in LMI areas. In recent years, the amount of SBIC program investments in LMI zones has generally increased (see Table 1 ). The NMVC program is no longer active (it does not have any active unpaid principal balance) and the amount and number of its financings were lower than anticipated by its original sponsors and below levels desired by its advocates. Some argue that the increased levels of SBIC investments in LMI areas in recent years, coupled with the SBA's efforts to encourage SBIC investments in such areas, may diminish the need for the NMVC program. NMVC advocates disagree. In FY2018, SBICs provided 609 financings totaling $1.026 billion to small businesses located in a LMI income area, an average investment of $1.685 million. NMVC advocates argue, as Senator Bond did when the NMVC program was proposed, that the NMVC program targets small businesses seeking much smaller investments. The debate over the NMVC program's future, particularly whether the program should be provided additional funding, is, in many ways, reflective of broader disagreements about the role of government, and the SBA, in private enterprise. Some believe the federal government and the SBA should take an active role in assisting small businesses to access capital—through the provision of loan guarantees, equity financing, and management training—to further the economic recovery. In their view, the SBA's programs fill a market niche by providing loans to small businesses unable to get credit elsewhere, equity financings to small businesses often overlooked by private investors, and training for new and aspiring entrepreneurs unable to find affordable training elsewhere. They assert that increasing funding for the NMVC program will create jobs by making capital available to entrepreneurs unable to find it in the private marketplace. Others worry about the long-term adverse economic effects of the federal deficit. Instead of supporting increased funding for federal spending programs, they advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses, generate economic growth, and create jobs. They are particularly interested in achieving greater government efficiency by eliminating federal spending programs, such as the NMVC program, that they perceive are duplicative of others.", "summary": "Authorized by P.L. 106-554, the Consolidated Appropriations Act, 2001 (Appendix H: the New Markets Venture Capital Program Act of 2000), the New Markets Venture Capital (NMVC) program, which is no longer active, is designed to promote economic development and the creation of wealth and job opportunities in low-income geographic areas by addressing the unmet equity investments needs of small businesses located in those areas. Modeled on the Small Business Association's (SBA's) Small Business Investment Company (SBIC) program, SBA-selected, privately owned and managed NMVC companies provide funding and operational assistance to small businesses. To do so, they use private capital the NMVC company has raised (called regulatory capital) and up to 150% of that amount (called leverage) from the sale of SBA-guaranteed 10-year debentures, or loan obligations, to third parties, subject to the availability of funds. Because the SBA guarantees the debenture, the SBA is able to obtain favorable interest rates. NMVC companies are responsible for meeting the terms and conditions set forth in the debenture. At least 80% of the investments must be in small businesses located in a low-income area. Specialized Small Business Investment Companies (SSBICs) established under the SBIC program are also eligible for NMVC operational assistance grants, which are awarded on a dollar-to-dollar matching basis. Six companies participated in the NMVC program. The NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining in recent years as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018. This report examines the NMVC program's legislative origins and describes the program's eligibility and performance requirements for NMVC companies, eligibility requirements for small businesses seeking financing, and definition of low-income areas. It also reviews regulations governing the SBA's financial assistance to NMVC companies and provides program statistics. The report concludes with an examination of (1) efforts to eliminate the program based on concerns that it duplicated other SBA programs and is relatively expensive, (2) the rescission of the program's unobligated funding in 2003, and (3) congressional efforts to provide the program additional funds.", "document_type": "crs"}
{"report": "Through its investigative powers, Congress gathers information it considers necessary to oversee the implementation of existing laws or to evaluate whether new laws are necessary. This \"power of inquiry\" is essential to the legislative function and derives directly, though implicitly, from the Constitution's vesting of legislative power in the Congress. The information that Congress seeks, whether to inform itself for lawmaking purposes or to conduct oversight, often lies in the executive branch's possession. And while executive branch officials comply with most congressional requests for information, \"experience has taught that mere requests\" can sometimes be \"unavailing,\" and that \"information which is volunteered is not always accurate or complete . . . .\" The Supreme Court has therefore determined that \"some means of compulsion [is] essential\" for Congress \"to obtain what is needed.\" When Congress finds an inquiry blocked by the withholding of information, or where the traditional process of negotiation and accommodation is considered inappropriate or unavailing, a subpoena—either for testimony or documents—may be used to compel compliance with congressional demands. An individual—whether a member of the public or an executive branch official—has a legal obligation to comply with a duly issued and valid congressional subpoena, unless a valid and overriding privilege or other legal justification permits non-compliance. The subpoena, however, is only as effective as the means by which it is potentially enforced. Without a process by which Congress can coerce compliance or deter non-compliance, the subpoena would be reduced to a formalized request rather than a constitutionally based demand for information. Congress currently employs an ad hoc combination of methods to combat non-compliance with subpoenas. The two predominant methods rely on the authority and participation of another branch of government. First, the criminal contempt statute permits a single house of Congress to certify a contempt citation to the executive branch for the criminal prosecution of an individual who has willfully refused to comply with a committee subpoena. Once the contempt citation is received, any later prosecution lies within the control of the executive branch. Second, Congress may try to enforce a subpoena by seeking a civil judgment declaring that the recipient is legally obligated to comply. This process of civil enforcement relies on the help of the courts to enforce congressional demands. Congress has only rarely resorted to either criminal contempt or civil enforcement to combat non-compliance with subpoenas. In most circumstances involving the executive branch, committees can obtain the information they seek through voluntary requests or after issuing (but not yet seeking enforcement of) a subpoena. Even where the executive branch is initially reluctant to provide information, Congress can use the application of various forms of legislative leverage, along with an informal political process of negotiation and accommodation, to obtain what it needs. Congress exercises substantial power over the executive branch by controlling agency authority, funding, and, in the case of the Senate, confirmation of executive officers. The use or threatened use of these powers in a way that would impose burdens on an agency can encourage compliance with subpoenas (or make it more likely that requested information will be provided without need to issue a subpoena) and solidify Congress's position when trying to negotiate a compromise during an investigative dispute with the executive branch. But legislative leverage and the subpoena enforcement mechanisms do not always ensure congressional access to requested information, particularly from the executive branch. Recent controversies could be interpreted to suggest that the existing mechanisms are at times inadequate—at least in the relatively rare instance that enforcement is necessary to respond to a current or former executive branch official who has refused to comply with a subpoena. Four times since 2008, the House of Representatives has held an executive branch official (or former official) in criminal contempt of Congress for denying a committee information subpoenaed during an ongoing investigation. In each instance the executive branch determined not to bring the matter before a grand jury. In three of the four instances, the House also looked to the federal courts for civil enforcement of the outstanding subpoena. The committees involved eventually obtained much of the information sought through those lawsuits, but only after prolonged litigation, and, in one of the cases, only after a judicial decision that could be viewed as potentially hindering Congress's access to executive branch information in the future. The House's decision to resort to criminal contempt of Congress and civil enforcement in these cases was not without controversy, as in each instance the executive official asserted that a constitutional privilege limited Congress's right to the information sought. This report will not address whether the officials in each case invoked a valid privilege or whether the privilege asserted was adequate to justify withholding information from Congress. Nor will this report address whether, under the circumstances, it was appropriate for Congress to exercise its contempt power. Rather, this report will examine the legal enforcement of congressional subpoenas in a contemporary and historical context and discuss legal issues associated with alternative subpoena-enforcement frameworks that Congress may consider to obtain information from the executive branch. Besides leveraging its general legislative powers, Congress currently relies on two formal legal mechanisms to enforce subpoenas: criminal contempt of Congress and civil enforcement of subpoenas in the federal courts. The criminal contempt of Congress statute, enacted in 1857 and only slightly modified since, makes the failure to comply with a duly issued congressional subpoena a criminal offense. The statute, now codified under 2 U.S.C. § 192, provides that any person who \"willfully\" fails to comply with a properly issued committee subpoena for testimony or documents is guilty of a misdemeanor, punishable by a substantial fine and imprisonment for up to one year. The criminal contempt statute outlines the process by which the House or Senate may refer the non-compliant witness to the Department of Justice (DOJ) for criminal prosecution. Under 2 U.S.C. § 194, once a committee reports the failure to comply with a subpoena to its parent body, the President of the Senate or the Speaker of the House is directed to \"certify[] the statement of facts . . . to the appropriate United States attorney, whose duty it shall be to bring the matter before the grand jury for its action.\" The statute does not expressly require approval of the contempt citation by the committee's parent body, but both congressional practice and judicial decisions suggest that approval may be necessary. Although approval of a criminal contempt citation under § 194 appears to impose a mandatory duty on the U.S. Attorney to submit the violation to a grand jury, the executive branch has repeatedly asserted that it retains the discretion to determine whether to do so. A successful contempt prosecution may lead to criminal punishment of the witness in the form of incarceration, a fine, or both. Because the criminal contempt statute is punitive, its use is mainly as a deterrent. In other words, while the threat of criminal contempt can be used as leverage to encourage compliance with a specific request, a conviction does not necessarily lead to release of the information to Congress. Congress may also choose to enforce a subpoena through a civil suit in the federal courts by a process known as civil enforcement. Under this process, either house of Congress may unilaterally authorize one of its committees or another legislative entity to file a suit in federal district court seeking a court order declaring that the subpoena recipient is legally required to comply with the demand for information. In the past, this authorization has been provided through a simple House or Senate resolution. Federal law provides the jurisdictional basis for the Senate's exercise of its civil enforcement power. Under 28 U.S.C. § 1365, the U.S. District Court for the District of Columbia (D.C. District Court) has jurisdiction \"over any civil action brought by the Senate or committee or subcommittee of the Senate to enforce . . . any subpoena.\" The law, however, makes clear that the grant of jurisdiction \"shall not apply\" to an action to enforce a subpoena issued to an executive branch official acting in his or her official capacity who has asserted a \"governmental privilege.\" Yet at least one district court has suggested that the limitation found within § 1365 does not necessarily bar the courts from exercising jurisdiction over Senate claims to enforce a subpoena against an executive official under other jurisdictional provisions. The House has no corresponding statutory framework for beginning a civil enforcement lawsuit, but still retains the authority to seek assistance from the courts. Recent practice, approved by the D.C. District Court, suggests that the House may authorize a committee or other entity to file a civil claim in federal court to enforce a subpoena on behalf of the body. This process has been used on various occasions to bring civil enforcement lawsuits against an executive branch official. As opposed to criminal contempt, a successful civil enforcement suit generally has the benefit of securing compliance with the congressional subpoena—meaning the committee may obtain the information it seeks. If the court orders compliance with the subpoena and disclosure of the information, generally after finding both that the subpoena is valid and that the individual has not invoked an adequate privilege justifying non-compliance, continued defiance may lead to contempt of court as opposed to contempt of Congress. Modern congressional disputes with the executive branch over access to information provide insight into the functioning of both the criminal contempt of Congress and civil enforcement processes. In 1982, a pair of House committees issued subpoenas to Environmental Protection Agency (EPA) Administrator Anne Burford for litigation documents relating to EPA's enforcement of the federal \"Superfund\" law. At the direction of President Ronald Reagan, Administrator Burford refused to disclose the files on the ground that they were protected by executive privilege. In response, the House approved a criminal contempt citation under 2 U.S.C. § 192 and § 194 for Burford's failure to comply with the committee subpoenas. Shortly after passage of the contempt resolution, and before the Speaker delivered the citation to the U.S. Attorney, the DOJ filed a lawsuit asking a federal court to declare that Administrator Burford had acted appropriately in withholding the litigation documents. The lawsuit was ultimately dismissed, with the court determining that judicial intervention in such executive-legislative disputes \"should be delayed until all possibilities for settlement have been exhausted.\" That point, the court reasoned, would not occur until Administrator Burford was prosecuted for criminal contempt of Congress. The U.S. Attorney subsequently refused to present the criminal contempt to a grand jury, asserting that despite the apparently mandatory language of 2 U.S.C. § 194, the statute left him with discretion to withhold the citation. Two separate compromises were ultimately reached in which both congressional committees were provided access to the subpoenaed documents, at least partly in exchange for proposing a resolution effectively withdrawing the contempt citation. Shortly thereafter, the DOJ Office of Legal Counsel (OLC), which acts as a legal adviser to the President and the executive branch, released an opinion articulating the legal reasoning underlying the Administration's decision not to pursue a contempt prosecution against Administrator Burford. Based on both statutory interpretation and the constitutional separation of powers, the OLC concluded that (1) Congress \"may not direct the Executive to prosecute a particular individual without leaving any discretion to the Executive to determine whether a violation of the law has occurred,\" and (2) \"the contempt of Congress statute was not intended to apply and could not constitutionally be applied to an Executive Branch official who asserts the President's claim of executive privilege . . . .\" Specifically, the opinion asserted that interpreting 2 U.S.C. § 194 as requiring the executive branch to bring a criminal contempt prosecution under these circumstances would \"burden\" and \"nullif[y]\" the President's exercise of executive privilege, and impermissibly interfere with the \"prosecutorial discretion of the Executive by directing the executive branch to prosecute particular individuals.\" In 2007, former White House Counsel Harriet Miers and White House Chief of Staff Joshua Bolten failed to comply with subpoenas issued by the House Judiciary Committee for testimony and documents relating to the dismissal of various United States Attorneys during the George W. Bush Administration. The President asserted executive privilege in each case, asserting that the subpoenaed testimony and documents involved protected White House communications. Both Miers and Bolten relied on the President's determination as justification for non-compliance with the committee subpoenas. After failed negotiations, the House held both individuals in criminal contempt of Congress and—presumably in response to the position taken by the DOJ in the Burford contempt—simultaneously approved a separate resolution authorizing the Judiciary Committee to initiate a civil lawsuit in federal court to enforce the subpoenas. After receiving the criminal contempt citation, the Attorney General informed the Speaker that the DOJ would exercise its discretion and not take any action to prosecute Mr. Bolten or Ms. Miers for criminal contempt of Congress. The DOJ's position, as in the Burford contempt, was that requiring such a prosecution would inhibit the President's ability to assert executive privilege and infringe on the DOJ's prosecutorial discretion. Shortly thereafter, the House Judiciary Committee filed suit, asking the federal court to direct compliance with the subpoenas. In Committee on the Judiciary v Miers , the D.C. District Court rejected the Administration's main argument that a senior presidential adviser asserting executive privilege at the direction of the President is immune from being compelled to testify before Congress. The court described the asserted immunity as \"entirely unsupported by existing case law\" and instead held that Ms. Miers had to appear, but was free to assert executive privilege \"in response to any specific questions posed by the Committee. \" Thus, Ms. Miers could still assert the protections of executive privilege during her testimony depending on the substance of any individual question asked by a Member of the Committee. As for Mr. Bolten, the court directed that the executive branch produce a \"detailed list and description of the nature and scope of the documents it seeks to withhold on the basis of executive privilege\" to allow the court to resolve those claims. The district court decision was appealed. Almost two years after the first subpoena was issued, with the appeal pending before the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit) and a newly elected Congress and President in office, the parties reached a settlement and the case was dismissed. Under that settlement, most of the requested documents were provided to the Committee and Ms. Miers would testify, under oath, in a closed but transcribed hearing. In 2012, Attorney General Eric Holder failed to comply with a House Oversight and Government Reform Committee subpoena seeking documents relating to misleading communications made by the DOJ in response to the committee's ongoing investigation into operation Fast and Furious—a Bureau of Alcohol, Tobacco, Firearms, and Explosives operation in which firearms were permitted to be \"walked,\" or trafficked, to gunrunners and other criminals in Mexico. Like the previous controversies, the President asserted executive privilege over the pertinent documents and directed the Attorney General not to comply with the subpoena. Procedurally, the Holder controversy mirrored that of Miers and Bolten. The House held the Attorney General in criminal contempt of Congress and simultaneously passed a resolution authorizing the committee to enforce the subpoena in federal court. The DOJ shortly thereafter informed the Speaker that it would not take any action on the criminal contempt citation, again citing congressional encroachments on executive privilege and prosecutorial discretion. The committee responded by filing a lawsuit, authorized by House resolution, seeking judicial enforcement of the subpoena. The D.C. District Court held that it had jurisdiction to hear the dispute in 2013 and denied the committee's motion for summary judgment in 2014. But it was not until 2016—in a new Congress and after Attorney General Holder had left his position—that the D.C. District Court issued an opinion in Committee on Oversight and Government Reform v. Lynch instructing the new Attorney General to comply with the subpoena. The court rejected the DOJ's argument that the deliberative process privilege—a prong of executive privilege that protects pre-decisional and deliberative agency communications—justified withholding the subpoenaed documents in the case. In \"balancing the competing interests\" at stake, the court held that the asserted privilege must yield to Congress's \"legitimate need\" for the documents. Despite the committee's victory, two aspects of the court's reasoning may affect Congress's ability to obtain similar documents from the executive branch. First, in denying the committee's earlier motion for summary judgment, the court rejected the argument that the deliberative process privilege can never justify withholding documents in the face of a congressional subpoena. While a previous D.C. Circuit decision had suggested that the deliberative process privilege is a \"common law\" privilege, typically subject to override by legislative action, the district court determined that \"there is an important constitutional dimension to the deliberative process aspect of the executive privilege.\" Although the scope of the deliberative process privilege remains unsettled, by explicitly concluding that it has some degree of constitutional foundation the court's decision might have strengthened the privilege in certain contexts, especially for its use in response to a congressional subpoena. Second, in ordering disclosure of the subpoenaed material, the court emphasized that the substance of the DOJ's internal deliberations had been publicly disclosed as part of a DOJ Inspector General investigation and report. Thus, in considering the DOJ's interests, the court noted that the agency would suffer only \"incremental harm\" from disclosing the documents to the committee. This suggests that in a scenario where deliberative process privilege documents have not been disclosed, a court may give more weight than the Lynch court to the agency's interest in protecting the confidentiality of its communications. Although the committee won the case, it still appealed the decision to the D.C. Circuit out of concern for the reasoning applied. As with Miers , the litigation has spanned different Congresses and different presidential Administrations. The case is being held in abeyance pending a potential settlement between the committee and the Trump Administration. Although the parties reportedly reached a negotiated settlement in March 2018, that settlement was contingent upon the vacation of two specific orders issued by the district court earlier in the case. In October 2018, the district court declined to vacate those decisions, leaving the fate of the negotiated settlement uncertain. Finally, in 2013, former Internal Revenue Service (IRS) official Lois Lerner appeared before the House Oversight and Government Reform Committee for a hearing on allegations that the IRS had given increased scrutiny to conservative political groups applying for tax-exempt status. After Ms. Lerner provided an opening statement denying any wrongdoing, she invoked her Fifth Amendment privilege against self-incrimination, and refused to respond to questions from committee members. After further deliberation, the committee ruled that she had waived her Fifth Amendment privilege by making an opening statement proclaiming her innocence. About 10 months later, the committee recalled her to provide testimony and she again asserted her Fifth Amendment privilege. Ultimately, the House adopted a resolution citing Ms. Lerner for criminal contempt of Congress, but did not choose to approve a resolution authorizing the committee to pursue civil enforcement of the subpoena in federal court, as had been done in 2008 with Ms. Miers and 2012 with Attorney General Holder. The U.S. Attorney for the District of Columbia later informed the Speaker that Ms. Lerner's actions did not warrant a prosecution for criminal contempt, as he had determined that she had not waived her Fifth Amendment rights. This decision was notable in that unlike the Burford, Miers, Bolten, and Holder scenarios, Ms. Lerner was relying on a personal privilege rather than the President's assertion of executive privilege as justification for her non-compliance. A pair of observations may be gleaned from the above events. First, efforts to punish an executive branch official for non-compliance with a committee subpoena through the criminal contempt of Congress statute will likely prove unavailing in certain circumstances. For example, when the President directs or endorses the non-compliance of the official, such as when the official refuses to disclose information pursuant to the President's decision that the information is protected by executive privilege, past practice suggests that the DOJ is unlikely to pursue a prosecution for criminal contempt. As a result, it would appear arguable that there is not currently a credible threat of prosecution for violating 2 U.S.C. § 192 when an executive branch official refuses to comply with a congressional subpoena at the direction of the President. Even when the official is not acting at the clear direction of the President, as in the Lerner controversy, the executive branch has contended that it retains the authority to make an independent assessment of whether the official (or former official) has in fact violated the criminal contempt statute. If the executive branch determines either that the statute has not been violated or that a defense is available that would bar the prosecution, then it may—in an exercise of discretion—leave a congressional citation unenforced. The criminal contempt statute, therefore, may have limited utility as a deterrent to non-compliance with congressional subpoenas by executive branch officials faced with similar circumstances. Second, seeking enforcement of congressional subpoenas in the courts, even when successful, may lead to significant delays in Congress obtaining the sought-after information. This shortcoming was apparent in Miers and the Fast and Furious litigation. Miers , which never reached a decision on the merits by the D.C. Circuit, was dismissed at the request of the parties after about 19 months. Similarly, the Fast and Furious litigation, which remains pending on appeal before the D.C. Circuit, was filed more than six years ago. The passage of time, together with the intervening congressional and presidential elections in each case, could be said to have diminished both the value of the disclosure and the committee's ability to engage in effective, timely oversight. Relying on civil enforcement also involves the risk to Congress that the court will reach a decision that will make it harder for committees to obtain information in the future. For example, while the Miers decision rejected absolute immunity for senior presidential advisers and may have removed a barrier to Congress's access to such testimony in the future, the district court opinions in the Fast and Furious litigation may have more limiting effect on congressional efforts to access testimony by certain executive branch officials, because the court recognized that the deliberative process privilege has constitutional roots and must be balanced against Congress's need for the information. Historically, the House and Senate relied on their own institutional power to not only enforce congressional subpoenas, but also to respond to other actions that either house viewed as obstructing their legislative processes or prerogatives. Indeed, the criminal contempt statute was not enacted until 1857, and the courts do not appear to have entertained a civil action to enforce a congressional subpoena against an executive official until the Watergate era. For much of American history the House and Senate instead used what is known as the inherent contempt power to enforce their investigative powers. The inherent contempt power is a constitutionally based authority given to each house to unilaterally arrest and detain an individual found to be \"obstruct[ing] the performance of the duties of the legislature.\" The power is therefore broader in scope than the criminal contempt statute in that it may be used not only to combat subpoena non-compliance, but also in response to other actions that could be viewed as \"obstructing\" or threatening either house's exercise of its legislative powers. In practice, the inherent contempt power has been exercised using a multi-step process. Upon adopting a House or Senate resolution authorizing the execution of an arrest warrant by that chamber's Sergeant-at-Arms, the individual alleged to have engaged in contemptuous conduct is taken into custody and brought before the House or Senate. A hearing or \"trial\" follows in which allegations are heard and defenses raised. Although generally occurring before the full body, it would appear likely that the contempt hearing could also permissibly take place before a congressional committee who reports its findings to the whole House or Senate. If judged guilty, the House or Senate may then direct that the witness be detained or imprisoned until the obstruction to the exercise of legislative power is removed. Although the purpose of the detention may vary, for subpoena non-compliance the use of the power has generally not been punitive. Rather, the goal is to detain the witness until he or she discloses the information sought, but not beyond the end of the Congress. Despite its title, \"inherent\" contempt is more accurately characterized as an implied constitutional power. The Supreme Court has repeatedly held that although the contempt power is not specifically granted by the Constitution, it is still \"an essential and appropriate auxiliary to the legislative function,\" and thus implied from the general vesting of legislative powers in Congress. The Court has viewed the power as one rooted in self-preservation, concluding that the \"power to legislate\" includes an \"implied right of Congress to preserve itself\" by dealing \"with direct obstructions to its legislative duties\" through contempt. The Court has also suggested that Congress may effectuate this implied power through the Necessary and Proper Clause, which authorizes Congress to \"make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers . . . .\" The 1857 criminal contempt provision, for example, has been viewed as \"an act necessary and proper for carrying into execution the powers vested in . . . each House.\" To that end, it seems understood that the criminal contempt statute was intended to supplement each house's inherent contempt power, rather than to replace it. The Supreme Court has specifically articulated this view and, in fact, gone further to suggest that \"Congress could not divest itself, or either of its Houses, of the essential and inherent power to punish for contempt.\" Historical practice also supports this conclusion, as Congress continued to use the inherent contempt power after enactment of the criminal contempt statute. As applied to subpoena enforcement, the Supreme Court has affirmed the existence of each house's constitutionally based authority to arrest and detain individuals for refusing to comply with congressional demands for information. The 1927 case of McGrain v. Daugherty may be viewed as the high-water mark of the judiciary's recognition of this power. McGrain arose from a Senate investigation into the alleged failure of the Attorney General to prosecute federal antitrust violations associated with the Teapot Dome Scandal. As part of that investigation, a subpoena was issued to Mallie Daugherty, the brother of the Attorney General and president of an Ohio bank, for relevant testimony. When Daugherty refused to comply, the Senate exercised its inherent contempt power and ordered its Sergeant-at-Arms to take Mr. Daugherty into custody. Once arrested, Daugherty filed a writ of habeas corpus with the local district court, which, upon review, held the House's action unlawful and directed that Daugherty be discharged from the Sergeant-at-Arm's custody. The Supreme Court reversed and upheld the House's authority to arrest and detain a witness in order to obtain information for legislative purposes—noting that \"[t]he power of inquiry—with process to enforce it—is an essential and appropriate auxiliary to the legislative function.\" In an oft-quoted passage, the Court declared: A legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change; and where the legislative body does not itself possess the requisite information—which not infrequently is true—recourse must be had to others who do possess it. Experience has taught that mere requests for such information often are unavailing, and also that information which is volunteered is not always accurate or complete; so some means of compulsion are essential to obtain what is needed. Although broadly conceived, the Court has policed the outer confines of the inherent contempt power. In Jurney v MacCracken , the Court clarified that no act is punishable for contempt \"unless it is of a nature to obstruct the performance of the duties of the legislature.\" The Court identified two scenarios to which the power to punish would not extend: (1) where Congress lacks a \"legislative duty to be performed\" or (2) where \"the act complained of is deemed not to be of a character to obstruct the legislative process.\" The first scenario is reflected in Kilbourn v. Thompson, a case in which the Court held that no person may be made subject to the contempt power unless the subject matter of the investigation giving rise to the contempt was within the body's authority. In Kilbourn , the Court ordered the release of a witness held under the contempt power after determining that the House had exceeded its authority when it authorized an investigation into a bankrupt private real-estate pool, of which the United States was a creditor pursuing payment in the bankruptcy court. The Court viewed the investigation—and therefore the contempt—as exceeding the House's constitutional authority because Congress had \"no general power of making inquiry into the private affairs of the citizen.\" Instead, the Court concluded that by interfering in an issue properly resolved in the bankruptcy courts, the House had \"assumed power . . . [that was] in its nature clearly judicial.\" The second scenario set forth in MacCracken is reflected in Marshall v. Gordon . There it was held that a \"manifestly ill-tempered\" letter written to a committee chair was not related enough to obstructing the powers of the House to constitute a contempt. The Marshall opinion began by establishing that the exercise of the contempt power is appropriate only as \"necessary to preserve and carry out the legislative authority given\" to Congress. The power could, for example, be used to remedy physical obstruction of the legislative body in the discharge of its duties, or physical assault upon its members for action taken or words spoken in the body, or obstruction of its officers in the performance of their official duties, or the prevention of members from attending so that their duties might be performed, or finally with contumacy in refusing to obey orders to produce documents or give testimony which there was a right to compel. The Court concluded that because the Marshall contempt was approved in response to the writing of an \"irritating\" letter, and \"not because of any obstruction to the performance of legislative duty,\" it was \"not intrinsic to the right of the House to preserve the means of discharging its legislative duties\" and thus invalid. Despite its potential reach, the inherent contempt power has been described by some observers as cumbersome, inefficient, and \"unseemly.\" Presumably for these reasons, it does not appear that either house has exercised its inherent contempt power to enforce subpoenas or to remove any other obstruction to the exercise of the legislative power since the 1930s. Even so, the mere threat of arrest and detention by the Sergeant-at-Arms can be used to encourage compliance with congressional demands. For example, Senator Sam Ervin, when serving as chairman of the Senate Select Committee on Presidential Campaign Activities, invoked the inherent contempt power several times to encourage compliance with the committee's requests for information during its investigation of the Nixon Administration. Although the power has long lain dormant, it remains a tool that Congress may use to enforce subpoenas. Given the difficulties associated with Congress's current approach to subpoena enforcement, the House or Senate may find it desirable to consider potential alternative frameworks. Before turning to specific alternatives, it is necessary briefly to establish certain foundational separation-of-powers principles that are generally implicated in any discussion of Congress's authority to compel compliance with subpoenas issued to the executive branch. Although the text of the Constitution distributes the legislative, executive, and judicial powers among the three branches of government, the Supreme Court generally has not endorsed an absolute separation. The allocation of powers was never intended, in the words of Justice Oliver Wendell Holmes, to cause the branches to be \"hermetically sealed,\" or divided into \"fields of black and white.\" Instead, observed Justice Robert Jackson, the separation of powers \"enjoins upon [the] branches separateness but interdependence, autonomy but reciprocity.\" It is a doctrine often characterized by ambiguity and overlap rather than bright-line rules. In the subpoena-enforcement context, potential separation-of-powers concerns may arise in three principle areas: congressional exercise of executive or judicial powers; congressional infringement upon executive privilege; and procedural compliance with the constitutional requirements of bicameralism and presentment. The separation of powers could be implicated either when Congress attempts to enforce a subpoena on its own; seeks to limit or control the executive's discretion in conducting that enforcement; or reserves for itself the ultimate right to adjudicate inter-branch disputes. These actions, at least on the surface, might implicate enforcement and adjudication powers generally granted to the executive and judicial branches, respectively. While the Constitution provides Congress with \"[a]ll legislative Powers herein granted,\" it is the executive branch, and the President specifically, that is directed to \"take Care that the Laws be faithfully executed.\" In enforcing these constitutionally articulated roles, the Court has carefully proscribed attempts by Congress to preserve for itself the authority to engage in executive functions, such as the execution or implementation of law. Congress, the Court has held, may neither execute the law itself, nor appoint or control those engaged in the execution. In Bowsher v. Synar , for example, the Court struck down a provision of law that had delegated executive power to the Comptroller General, a legislative branch officer. Under the law, the Comptroller General was to use his own \"independent judgment\" to identify spending reductions to be implemented by the President that were necessary to reduce the deficit to an established target. In rejecting this arrangement, the Court held that the functions delegated to the Comptroller General were executive in nature, as he was required to \"exercise judgment concerning facts that affect the application\" and \"interpretation\" of the law, and had \"ultimate authority to determine the budget cuts to be made.\" Because \"[t]he structure of the Constitution does not permit Congress to execute the laws,\" Congress could not constitutionally delegate that authority to a legislative officer under its control. The Court has also clearly stated that Congress is not \"a law enforcement or trial agency.\" \"Legislative power,\" the Court has established, \"is the authority to make laws, but not to enforce them .\" Thus, \"in order to forestall the danger of encroachment 'beyond the legislative sphere,'\" Congress may not \"invest itself or its Members with . . . executive power.\" These general principles have specific application in the context of congressional investigations and contempt, in which the Court has held that \"the power to investigate must not be confused with any of the powers of law enforcement; those powers are assigned under our Constitution to the Executive and the Judiciary.\" A corollary to the principle that the Constitution has assigned the law enforcement power principally to the executive branch is the notion that when engaging in that enforcement, the executive branch generally retains some degree of \"prosecutorial discretion.\" This doctrine, which derives from a mixture of constitutional principles including the separation of powers, the Take Care Clause, and the duties of a prosecutor as an appointee of the President, forms the foundation of the Court's statement in United States v. Nixon that \"the Executive Branch has exclusive authority and absolute discretion to decide whether to prosecute a case . . . .\" As noted previously, the executive branch has relied partially on prosecutorial discretion in declining to pursue some violations of criminal contempt of Congress. The scope of this discretion is not well established, especially regarding the extent that Congress can require or curtail its exercise. In any event, any attempt by Congress to mandate that the executive branch initiate a specific prosecution, including a prosecution for criminal contempt of Congress, has been opposed by the executive branch and may raise constitutional questions. Just as Congress is not a law enforcer, it is similarly not a court, and may not bestow upon itself the judicial power. The Supreme Court has made clear that \"no judicial power is vested in Congress\" and has generally rebuked congressional attempts to \"try\" an individual for \"any crime or wrongdoing.\" The Constitution does not authorize Congress to exercise even \"commingled\" legislative and judicial powers. In fact, the Court has declared that such an arrangement \"would be absolutely destructive of the distinction between legislative, executive, and judicial authority which is interwoven in the very fabric of the Constitution.\" Relatedly, the Bill of Attainder Clause prohibits Congress from adjudicating specific legal disputes by taking action \"that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial.\" One might assert that these general prohibitions on Congress's exercise of executive or judicial powers would cast doubt upon Congress's historical exercise of its inherent contempt power. It could be argued that when exercising that power, Congress, both as an institution and through officials such as the Sergeant-at-Arms, is exercising executive and judicial power by acting as an arresting officer, prosecutor, and judge. But in affirming the constitutionality of the inherent contempt power, the Court has viewed the power (including the attendant arrest, hearing, and detention of the witness) as an exercise of implied legislative power and thus not in contravention of general separation-of-powers principles. Thus, in considering separation-of-powers questions that arise from the various methods by which Congress can enforce its subpoenas, it is essential to distinguish between Congress exercising its own legislative powers pursuant to the inherent contempt power, and Congress attempting to enforce and judge general statutory prohibitions such as statutory criminal contempt violations under 2 U.S.C. § 192. In short, the former is a permissible exercise of legislative power to remedy an offense against Congress, while the latter may be an impermissible exercise of executive and judicial power to remedy a criminal offense against the United States. The use of some contempt procedures against an executive branch official invoking executive privilege at the direction of the President could be viewed as frustrating the President's ability to protect the confidentiality of his communications—a protection rooted in the separation of powers. In general, executive privilege is an implied legal doctrine that permits the executive branch to \"to resist disclosure of information the confidentiality of which [is] crucial to fulfillment of the unique role and responsibilities of the executive branch of our government.\" Because past subpoena enforcement disputes between Congress and the executive branch have involved such assertions, it is necessary to outline briefly executive privilege's general contours. The Supreme Court has only rarely addressed executive privilege, but its most significant explanation of the doctrine came in the unanimous opinion of United States v. Nixon . Nixon involved the President's assertion of executive privilege in refusing to comply with a criminal trial subpoena—issued upon the request of a special prosecutor—for electronic recordings of conversations he had in the Oval Office with White House advisers. The Court's opinion recognized an implied constitutional privilege protecting presidential communications, holding that the \"privilege of confidentiality of presidential communications\" is \"fundamental to the operation of Government and inextricably rooted in the separation of powers.\" The justification underlying the privilege related to the integrity of presidential decisionmaking, with the Court reasoning that the importance of protecting a President's communications with his advisers was \"too plain to require further discussion,\" as \"[h]uman experience teaches that those who expect public dissemination of their remarks may well temper candor with a concern for appearances and for their own interests to the detriment of the decisionmaking process.\" Even so, the Court determined that when the President asserts only a \"generalized interest\" in the confidentiality of his communications, that interest must be weighed against the need for disclosure in the given case. In conducting that balancing, the Court held that the President's \"generalized\" assertion of privilege \"cannot prevail over the fundamental demands of due process of law in the fair administration of criminal justice,\" and therefore \"must yield to the demonstrated, specific need for evidence in a pending criminal trial.\" The Nixon opinion established three key characteristics of executive privilege, at least as it relates to presidential communications. First, the Court expressly rejected the assertion that the privilege was absolute. Instead, the Court found the privilege to be qualified, requiring that it be assessed in a way that balances \"competing interests\" and \"preserves the essential functions of each branch.\" Second, to protect the \"public interest in candid, objective, and even blunt or harsh opinions in presidential decisionmaking,\" the Court viewed confidential presidential communications as \"presumptively privileged.\" As a result, the Court appeared to suggest that some degree of deference is due to a President's initial determination that certain information is protected by the privilege. Moreover, the burden would appear to be on the party seeking the information to overcome that \"presumption\" through a strong showing of need for the information. Third, the Court viewed the privilege as limited to communications made \"'in performance of [a President's] responsibilities,' 'of his office,' and made 'in the process of shaping policies and making decisions. . . .'\" Thus, the privilege does not appear to apply to all presidential communications. Although presidential claims of a right to protect executive branch confidentiality interests have occurred with relative frequency, the Supreme Court has not addressed executive privilege in any substantial way since the Nixon era, and, in fact, has never addressed the application of executive privilege in the context of a congressional investigation. Indeed, in Nixon , the Court explicitly disclaimed any attempt to assess the application of executive privilege in a congressional investigation, noting that \"we are not here concerned with the balance between the President's generalized interest in confidentiality . . . and congressional demands for information.\" The lower federal courts have generally sought to avoid adjudicating disputes between the executive and legislative branches over executive privilege, instead encouraging the branches to settle their differences through political resolution. Consistent with that approach, lower federal courts have suggested that judicial intervention in such disputes \"should be delayed until all possibilities for settlement have been exhausted,\" and warned that the branches should not take an \"adversarial\" approach to executive privilege disagreements, but should instead \"take cognizance of an implicit constitutional mandate to seek optimal accommodation through a realistic evaluation of the needs of the conflicting branches in the particular fact situation.\" The most significant judicial analysis of executive privilege in the context of a congressional investigation is the D.C. Circuit's decision in Senate Select Committee on Presidential Campaign Activities v. Nixon . Senate Select Committee involved an attempt by the Senate Select Committee on Presidential Campaign Activities to obtain the Nixon White House tapes and other materials as part of the committee's investigation into \"illegal, improper, or unethical\" actions during the 1972 presidential election. The D.C. Circuit decision was issued shortly before the Supreme Court decision in United States v . Nixon , and contemporaneously to an impeachment investigation conducted by the House Judiciary Committee. Although ultimately siding with the President, the D.C. Circuit's opinion affirmed the qualified nature of the privilege by making clear that a President's assertion of the privilege could be overcome by a \"strong showing of need by another institution of government. . . .\" The court elaborated that Congress, in the exercise of its investigative powers, may overcome the President's presumptive privilege when it can show that \"the subpoenaed evidence is demonstrably critical to the responsible fulfillment of the Committee's function.\" Notably, the court suggested that the \"nature of the presidential conduct that the subpoenaed material might reveal,\" including President Nixon's alleged criminal misconduct, is not a significant factor in assessing whether the privilege is overcome. Instead, that analysis depends \"solely\" on the \"nature and appropriateness\" of the function the committee is carrying out. The D.C. Circuit in Senate Select Committee concluded that the Select Committee on Presidential Campaign Activities had failed to make the requisite showing of need. That determination, however, appears to have been based on a pair of unique facts: first, that copies of the tapes had been provided to the House Judiciary Committee under that committee's impeachment investigation; and second, that the President had publicly released partial transcripts of the tapes. Significantly, the Select Committee sought to make the required showing by arguing it had a \"critical\" need for the tapes to carry out two separate and distinct functions. First, pursuant to its oversight function , the committee argued that the tapes were necessary to \"oversee the operations of the executive branch, to investigate instances of possible corruption and malfeasance in office, and to expose the results of its investigations to public view.\" Second, pursuant to its legislative function , the committee argued that \"resolution, on the basis of the subpoenaed tapes, of the conflicts in the testimony before it 'would aid in a determination whether legislative involvement in political campaigns is necessary' and 'could help engender the public support needed for basic reforms in our electoral system.'\" As for the oversight function, the Court held that the Select Committee failed to show the requisite need—mainly because the House Judiciary Committee had already obtained the tapes. Any further investigative need by the Select Committee was therefore \"merely cumulative,\" as the tapes were already in the possession of one committee of Congress. With regard to the Select Committee's legislative functions, the court held that the particular content of the conversations was not essential to future legislation, as \"legislative judgments normally depend more on the predicted consequences of proposed legislative actions . . . than on precise reconstruction of past events.\" Any \"specific legislative decisions\" faced by the Select Committee, the court concluded, could \"responsibly be made\" based on the released transcripts. Given both Nixon and Senate Select Committee , it appears that executive privilege does not establish an absolute bar to Congress obtaining protected information, especially when the assertion of the privilege is based on a \"generalized interest\" in confidentiality rather than one connected to \"military, diplomatic, or sensitive national security secrets.\" Instead, the appropriate inquiry appears to be fact-specific, focusing \"solely\" on whether the investigating committee can show that the information sought is \"demonstrably critical\" to a legitimate legislative function such as oversight or the consideration of legislation. Without more detailed judicial pronouncements the political branches have adopted somewhat divergent views on the scope of executive privilege. This interpretive divide has likely contributed to the frequency and intensity of inter-branch disputes over executive privilege. The executive branch has historically viewed the privilege broadly, providing protections to several different categories of documents and communications that relate to executive branch confidentiality interests. Under the executive branch's interpretation, the privilege covers, among other possible areas, presidential communications; deliberative communications within the executive branch; military, diplomatic, and national security information; and law enforcement files. Congress, however, has generally interpreted the privilege more narrowly, limiting its application to the types of core Article II duties and presidential communications referenced by the Supreme Court in Nixon , while also emphasizing that whatever the privilege's scope, it can be overcome by an adequate showing of need. It appears likely that the executive branch will continue to raise constitutional objections if Congress attempts to use the contempt power to either force the disclosure of information the President considers privileged or to punish an executive branch official for asserting executive privilege. Yet judicial decisions and historical practice have set few clear legal standards for application in such disputes—except to establish that neither side's power is absolute and that Congress and the President have an obligation to attempt to accommodate each other's needs. Thus, any conflict between the power of inquiry and executive privilege, either under the current system or as applied to the alternative approaches discussed in this report, would likely be governed not by bright-line rules, but by a balancing of the specific interests at play in the given dispute, and only after it had become apparent that the legislative and executive branches could not reach an acceptable settlement. How that balancing is implemented, and what legal standard is applied to evaluate an executive privilege claim made in response to a congressional subpoena, will likely depend on the type of information the privilege is asserted to protect. The courts appear to have adopted a hierarchical approach to various privileges within the executive privilege taxonomy. For example, the courts \"have traditionally shown the utmost deference\" to the executive's need to protect \"military or diplomatic secrets.\" Courts have not \"extended this high degree of deference to a President's generalized interest in confidentiality\" of his communications. Other asserted aspects of executive privilege, for example the deliberative process privilege, have been given still less weight, and must be assessed differently in the face of an exercise of Congress's investigative powers. Ultimately, the framework through which Congress chooses to enforce a subpoena for information the President considers protected by executive privilege will impact the process by which executive branch assertions of the privilege are resolved. Under the criminal contempt framework, the Executive becomes the final arbiter of the appropriate scope of executive privilege by deciding whether to go forward with a criminal contempt prosecution of an official relying on the privilege. A decision not to move forward with a prosecution would generally not be subject to judicial review. Under the civil enforcement framework, the initial determination on the application of the privilege is made by the Executive, subject to judicial review if the House or Senate chooses to challenge that determination in federal court. Under inherent contempt, the initial determination on the application of the privilege is made by Congress, subject to review in the courts if the subject of the contempt proceeding challenges his detention. Finally, because the power to seek enforcement of a congressional subpoena is independently vested in each house, rather than in Congress as a whole, constitutional questions may be raised over whether a single house, through approval of a contempt resolution, can trigger legal consequences or impose requirements upon the executive branch without compliance with bicameralism and presentment. The Supreme Court has made clear that Congress must exercise its legislative power in compliance with the \"finely wrought and exhaustively considered[] procedure\" set forth in Article I, Section 7 of the Constitution, which provides that \"every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States.\" This provision establishes the bedrock constitutional principle that before legislation is given the force and effect of statutory law, it must first satisfy the requirements of bicameralism (approval by both houses of Congress) and presentment (submission to the President for his signature or veto). In the seminal case INS v. Chadha , the Court relied on the bicameralism and presentment requirements to invalidate provisions of the Immigration and Nationality Act that authorized either house of Congress, by a one-house resolution, to \"veto\" an exercise of statutory authority delegated to an executive branch officer. In invalidating this \"legislative veto,\" the Court interpreted Article I, Section 7 of the Constitution as establishing that not only all bills, but all \"legislative acts\" are subject to the procedural requirements of bicameralism and presentment. The Court defined a \"legislative act\" as any action \"properly [] regarded as legislative in its character and effect\" or taken with \"the purpose and effect of altering the legal rights, duties and relations of persons. . . outside the legislative branch.\" In other words, congressional actions that have the \"force of law\" generally must comply with the Constitution's \"single, finely wrought\" process—that of passage by both houses and presentment to the President. The Chadha opinion identified specific exceptions to the bicameralism and presentment requirements, noting that \"[c]learly, when the [Constitution's] Draftsmen sought to confer special powers on one House, independent of the other House, or of the President, they did so in explicit, unambiguous terms.\" The Constitution's impeachment provisions and those relating to Senate advice and consent to treaty ratification and the appointment of judges, ambassadors, and public officials are examples of such provisions. The Court also noted that \"[e]ach House has the power to act alone in determining specified internal matters.\" That authority, the Court added, \"only empowers Congress to bind itself and is noteworthy only insofar as it further indicates the Framers' intent that Congress not act in any legally binding manner outside a closely circumscribed legislative arena, except in specific and enumerated instances.\" The contempt power does not fit neatly into the Chadha mold. Indeed, the Court may have neglected the inherent contempt power in articulating its list of exceptions to Chadha 's bicameralism and presentment requirements. Despite Chadha 's language, it does not appear that the Constitution always speaks \"explicit[ly]\" or \"unambiguous[ly]\" when conferring power to each house individually. There is no explicit constitutional language conferring the contempt power or the power of inquiry to each individual house. Rather, as discussed, these powers are implied as essential to the legislative power. Notably, no court has suggested that the exercise of the inherent contempt power by a single house of Congress, which could alter the legal rights or obligations of a detained witness, is inconsistent with the requirements of bicameralism or presentment. As for the criminal contempt statute, the DOJ has asserted that interpreting that statute to require that a contempt citation be brought before the grand jury would be inconsistent with Chadha by allowing one house to place a legal requirement on a U.S. Attorney. To date, no court has had opportunity to consider the validity of the DOJ's position. But it is possible that Chadha -like concerns could be raised by alterations to the contempt framework that would allow the approval of a contempt citation by a single house to create new legal rights or restrictions or otherwise alter the legal authority that may be exercised by executive branch officials. With these general separation-of-powers principles established as background, this report now considers possible subpoena-enforcement frameworks and the key legal issues they raise. As noted previously, most congressional requests for information from the executive branch are complied with, and in those cases when there is a dispute, negotiations between the committee and the executive agency generally lead to a resolution acceptable to both parties. In the instances that Congress has resorted to its subpoena-enforcement mechanisms, the committee involved has generally been able to obtain eventually much of the information it sought. Thus, an argument can be made that the current system acts as an adequate and effective way to obtain information and deter non-compliance with congressional subpoenas in most cases. However, in the rare case that actual prosecution is necessary to compel an executive branch official to comply with a subpoena, criminal contempt (as described above) would not appear to be a wholly reliable means of enforcement. Congress would instead presumably be forced to rely on the traditional process of negotiation, accommodation, and compromise to encourage compliance, or wield its other constitutional powers, such as the power of the purse, the confirmation power, impeachment, and its general legislative control over agency authority to encourage compliance by executive branch officials. When necessary, each house retains the authority to utilize the courts for assistance in enforcing subpoenas. Civil enforcement in the courts, especially when an executive branch official is asserting executive privilege at the direction of the President, conforms to general pronouncements from both the judicial and executive branches. It accords with the judiciary's determination that its established authority to \"say what the law is\" includes the power to \"construe and delineate\" the scope of executive privilege and the executive branch's previous statements that civil enforcement is a permissible way to resolve the competing interests of Congress and the Executive in information access disputes. But reliance on civil enforcement may have certain drawbacks. As discussed above, judicial resolution of oversight disputes can be lengthy and possibly lead to opinions that weaken Congress's oversight authority. Moreover, although a series of district court opinions have recently held civil enforcement cases arising from oversight disputes between the legislative and executive branches to be justiciable, the last appellate opinion to reach the merits of such a dispute was Senate Select Committee v. Nixon in 1977. The executive branch continues to assert the position that inter-branch oversight disputes are non-justiciable. Although such arguments have been rejected by the D.C. District Court, if an appellate court were to adopt the executive's position, that decision could leave both the existing criminal and civil enforcement avenues with only limited effect for use against an executive branch official. There would appear to be several ways in which Congress could alter its approach to enforcing committee subpoenas issued to executive branch officials. But because of the separation-of-powers issues highlighted above, many of these options have potential legal concerns. The extensive ambiguity in this area results from a combination of a lack of applicable judicial precedent; the vast differences in how the executive and legislative branches interpret their own institutional powers; and the importance of practical implementation issues. Congress could try to expedite the civil enforcement process by either statutorily establishing timetables for review or urging speedy judicial consideration of civil subpoena-enforcement cases filed in the federal judiciary by the House or Senate. For example, H.R. 4010 , introduced in the 115th Congress, would have amended 28 U.S.C. § 1365a to provide that \"it shall be the duty\" of the federal courts to \"advance on the docket and to expedite to the greatest possible extent the disposition\" of any civil enforcement lawsuit. The bill would have also provided the House and Senate with the option of having the claim heard by a three-judge panel with a direct appeal to the Supreme Court. Such an approach would appear to be well within Congress's power. Congress has broad authority over the rules of procedure for federal courts, including setting general timetables for judicial consideration of \"cases and controversies.\" Various examples of expedited judicial review procedures exist elsewhere in federal law. Some provisions combine expedited review with the ability to file the lawsuit directly with a federal appellate court rather than a federal district court. Federal law had provided for expedited judicial review of lawsuits filed by the Senate to enforce subpoenas. Under 28 U.S.C. § 1364(c), Senate subpoena-enforcement actions were to be set for hearing at the \"earliest practicable date\" and \"in every way to be expedited.\" Those provisions were repealed in 1984. Establishing expedited judicial review of congressional subpoena-enforcement actions may mitigate some drawbacks of the current civil enforcement process. Yet even if expedited procedures lead to swifter judicial decisions, the risk remains to Congress that a reviewing court could issue a decision adverse to the legislative branch's investigative and oversight interests. Moreover, some commentators have suggested that any attempt to seek assistance from the courts to enforce Congress's own constitutional powers effectively weakens the legislative branch. The House or Senate may also seek to utilize the inherent contempt power to enforce compliance with congressional subpoenas issued to executive branch officials. As noted, the Supreme Court has confirmed the existence of each house's independent and unilateral authority to arrest and detain individuals in order to compel compliance with a subpoena. If either the House or Senate was to revive the inherent contempt power, the chamber may consider establishing specific procedures to be followed in its exercise. Such procedures could govern consideration of an inherent contempt resolution and actions of the Sergeant-at-Arms, as well as the process by which the House or Senate would conduct the \"trial.\" These procedures could be established by a one-house resolution or—if both the House and Senate seek to use uniform procedures—by concurrent resolution or by statute. Although rare, the inherent contempt power has been used to detain executive branch officials, including for non-compliance with a congressional subpoena. During an 1879 investigation into allegations of maladministration by George F. Seward while a consul general in Shanghai, a House committee issued a subpoena to Seward for relevant documents and testimony. When Seward—then an ambassador to China—refused to comply, the House passed a resolution holding him in contempt and directing the Sergeant-at-Arms to take him into custody and bring him before the House. Seward was taken into custody and brought before the House, where he was ultimately released while the House considered impeachment articles. In another example which gave rise to Marshall v. Gordon , the House adopted a contempt resolution directing the Sergeant-at-Arms to arrest U.S. Attorney Snowden Marshall for an insulting letter sent to a committee chair. The arrest was then made and quickly challenged in federal court, where ultimately the Supreme Court ordered Marshall released. In doing so, the Court reaffirmed the contempt power generally, but concluded that in Marshall's case the contempt was invalid as \"not intrinsic to the right of the House to preserve the means of discharging its legislative duties.\" Notably, the Court was silent on whether Marshall's status as an executive branch official had any impact on the House's exercise of the power. Given these examples, and the Supreme Court's general statements on the reach of the inherent contempt power, it would appear to be within Congress's power to use inherent contempt to compel executive branch compliance with congressional subpoenas, at least in certain circumstances. But neither the Seward nor Marshall example involved an assertion of executive privilege, meaning that the Court did not need to consider what, if any, constraints that privilege may impose upon Congress's exercise of its inherent contempt authority. Moreover, an attempt by Congress to arrest or detain an executive official may carry other risks. There would appear to be a possibility that, if the Sergeant-at-Arms attempted to arrest an executive official, a standoff might occur with executive branch law enforcement tasked with protecting that official. This concern is also applicable in the event that a judicial marshal enforces a judicial order of contempt against an executive official, and perhaps will always be \"attendant in high-stakes separation-of-powers controversies.\" Although any subpoena-enforcement mechanism used to override the President's assertion of executive privilege may raise constitutional considerations, use of the inherent contempt power to detain an executive official to obtain documents or testimony the President has found to be privileged would likely raise unique concerns. As discussed, the 1984 OLC opinion issued in the wake of the Burford contempt concluded that the criminal contempt of Congress provision could not constitutionally be applied to an executive official asserting a President's claim of executive privilege. The alternative, the OLC argued, \"would immeasurably burden the President's ability to assert the privilege and to carry out his constitutional functions\" by requiring that subordinates risk a criminal trial and possible conviction to \"vindicate\" the privilege. In a footnote, the opinion extended that same conclusion to Congress's use of inherent contempt to \"arrest\" and \"punish\" an executive branch official invoking a President's claim of executive privilege. The OLC asserted that because the \"reach\" of the criminal contempt statute was \"intended to be coextensive with Congress's inherent civil contempt powers,\" the \"same reasoning that suggests that the criminal contempt statute could not constitutionally be applied against a Presidential assertion of privilege applies to Congress' inherent contempt powers as well.\" This argument has never been tested in court, but was alluded to in Miers . There, the district court stated that the executive branch position was not \"dispositive\" and that the court \"need not decide the issue.\" Nevertheless, the court acknowledged that \"there are strong reasons to doubt the viability of Congress's inherent contempt authority vis-a-vis senior executive officials.\" An argument can be made that the OLC position is based on a conception of inherent contempt not entirely consistent with the power's historical use. For example, the criminal contempt statute does not appear to have been intended to be \"coextensive\" with inherent contempt. While 2 U.S.C. § 192 and its predecessors apply only to non-compliance with congressional subpoenas, the inherent contempt power applies to a much wider range of actions that threaten Congress's ability to discharge the legislative function. The Supreme Court also appears to have viewed the two powers as distinct, noting that they are \"separately exercised\" and \" diverso intuito .\" As opposed to prosecution under the criminal contempt statute, inherent contempt is not necessarily imposed to \"punish\" the contemnor. In the context of subpoena enforcement, inherent contempt has in fact generally been remedial rather than punitive, in that any detention has generally been lifted once the subpoena is complied with. The Supreme Court, for example, noted in 1917 that it could not identify a \"single instance where in the exertion of the power to compel testimony restraint was ever made to extend beyond the time when the witness should signify his willingness to testify . . . .\" Even so, the Court also appears to have recognized that Congress retains the authority to use the inherent contempt power \"solely\" for purposes of punishment. Conflicts between the President's constitutionally implied privilege to protect confidential executive branch communications and Congress's constitutionally implied power to conduct investigative oversight prerogatives are not novel. Indeed, they have consistently arisen throughout American history, beginning as early as the first Congress when President Washington asserted that although the executive branch had a general obligation to comply with congressional requests for information, it still \"ought to refuse those [papers], the disclosure of which would injure the public.\" A full analysis of this long-standing debate is beyond the scope of this report. It is enough to suggest that historical practice and the limited case law both suggest that neither the President's executive privilege nor Congress's inherent contempt power is absolute. In the case of a conflict, judicial decisions relating to both executive privilege and Congress's oversight and contempt powers would suggest that a resolution would most appropriately come through good-faith negotiations between the political branches in which each seeks to accommodate the needs of the other. If those negotiations fail, and Congress chooses to invoke the inherent contempt power against an executive branch official claiming executive privilege, a court would likely be called upon to resolve the dispute, presumably in the posture of a habeas proceeding or a civil suit for wrongful detention. Although the scope of this review is somewhat unclear, it would seem likely that a reviewing court would engage in a fact-based balancing of interests—weighing Congress's legislative or oversight need for the information against the Executive's need to maintain confidentiality in the specific instance. The use of the inherent contempt power to arrest and detain an executive branch official asserting executive privilege at the direction of the President would likely also raise practical concerns relating to historical comity between the branches. The district court in Miers articulated this view, warning that the use of the inherent contempt power to imprison current or even former executive branch officials would \"exacerbate the acrimony between the two branches and would present a grave risk of precipitating a constitutional crisis.\" The court suggested that a \"stand-off\" between the Sergeant-at-Arms and an executive branch official would be an \"unseemly\" and \"provocative clash\" that should be avoided. If Congress agrees with the sentiments expressed in the Miers opinion about the \"unseemly\" nature of directing the Sergeant-at-Arms to arrest and detain an executive branch official, it may consider imposing less onerous penalties on an official deemed guilty of contempt through the inherent contempt process. For example, the imposition of a fine or other monetary penalty, rather than detention and imprisonment, could mitigate some concerns associated with a physical arrest. Neither the House nor the Senate has ever imposed a monetary penalty through the exercise of inherent contempt, yet there may be an argument supporting the existence of that power. Such an argument would likely rely both on dicta from the Supreme Court's opinion in Kilbourn v. Thomps on and an analogy to the judiciary's contempt power . In Kilbourn , the Court made a passing reference to fines during a discussion of the scope of the House's power to \"punish.\" After establishing that the House clearly had authority to punish its own Members for \"disorderly behavior,\" and perhaps the power to punish others as part of either an inquiry into a contested election or an impeachment investigation, the Court then noted that \"[w]hether the power of punishment in either House by fine or imprisonment goes beyond this or not, we are sure that no person can be punished for contumacy as a witness before either House, unless his testimony is required in a matter into which that House has jurisdiction to inquire.\" This may be interpreted to suggest that so long as punishment is appropriate, the form of punishment that may be imposed could include a fine. In Anderson v. Dunn , the Court drew analogies between Congress's power and the judiciary's power to punish for contempt. The courts, the opinion noted, had been delegated authority by statute to punish contemptuous conduct with a fine, imprisonment, or both. The Court suggested, however, that the courts could have exercised the \"power to fine and imprison for contempts . . . without the aid of the statute\" pursuant to a constitutional contempt authority \"incidental to a grant of judicial power.\" The purpose of the judicial contempt statute, the Court reasoned, was to make a \"legislative declaration, that the power of punishing for contempt shall not extend beyond its known and acknowledged limits of fine and imprisonment.\" This statement could be read to suggest that the court viewed the imposition of a fine as a \"known and acknowledged\" form of punishment for inherent contempt, at least in the courts. If such a power inheres to the courts, it might also inhere to Congress as a coordinate branch of government. Yet additional language from Anderson suggests that the power to punish for inherent contempt in the congressional context may be limited to imprisonment. After discussing the judicial contempt power, the Anderson opinion appears to have directly considered the scope of Congress's authority, noting that the \"extent of [Congress's] punishing power\" is \"the least possible power adequate to the end proposed;\" which is the power of imprisonment. It may, at first view, and from the history of the practice of our legislative bodies, be thought to extend to other inflictions. But every other will be found to be mere commutation for confinement; since commitment alone is the alternative where the individual proves contumacious. Despite the Court's statement that \"imprisonment\" was the \"least possible power adequate\" to remedy contemptuous conduct, monetary penalties have generally been viewed as less severe than imprisonment. The Supreme Court, for example, has viewed the imposition of a fine as a \"lesser punishment\" than the \"punishment of imprisonment.\" Still, the Court later reaffirmed the notion that imprisonment was the appropriate penalty for contempt in Marshall by stating that Anderson imposed two limitations on the contempt power: \"the power . . . is limited to imprisonment and such imprisonment may not be extended beyond the session of the body in which the contempt occurred.\" It would appear, therefore, that whether Congress has the authority to impose a fine or other monetary penalty on a witness found to be in contempt by either house is an open question. However, in the case of a legal challenge to a fine, the lack of any precedent for such an assertion of power may inform a court's judgment on the appropriate reach of Congress's power. Moreover, even if Congress retains this authority, it is unclear how such a fine would be implemented and, in the case that the contemnor refuses to remit the sum, collected. Another proposed alternative for subpoena enforcement has been to establish statutorily a procedure for the appointment of an independent official responsible for prosecuting criminal contempt of Congress citations against executive branch officials. Such a law would seek to create an independent prosecutor authorized to make litigation and enforcement decisions, including the decision to initiate and pursue a criminal contempt prosecution pursuant to 2 U.S.C. § 192 and § 194 under reduced influence from the President and the DOJ. The independent prosecutor would retain prosecutorial discretion in enforcement decisions, but would arguably not be subject to the same \"subtle and direct\" political pressure and controls that a traditional U.S. Attorney may face. This office would likely be loosely modeled on the expired Office of Independent Counsel (Independent Counsel) established in the Independent Counsel Act of 1978 (Independent Counsel Act or ICA) and upheld by the Supreme Court in Morrison v Olson . The ICA created a statutory framework by which an Independent Counsel could be appointed to investigate and prosecute high-ranking government officials for a variety of violations of federal law, including criminal contempt of Congress. The actual appointment took place under a three-step process. First, the law required that the Attorney General conduct a preliminary investigation upon receiving \"information sufficient to constitute grounds to investigate whether\" a covered federal criminal violation has occurred. Second, if the Attorney General determined that there were \"reasonable grounds to believe that further investigation is warranted,\" the Attorney General had to \"apply\" to a three-judge panel of the D.C. Circuit for the appointment of an Independent Counsel. Third, upon receipt of an application from the Attorney General, the three-judge panel had to \"appoint an appropriate independent counsel . . . .\" Thus, although the actual appointment was made by the judiciary, the Attorney General's preliminary investigation determined whether the court's appointment authority was triggered. Under the law, Congress could request an appointment of an Independent Counsel, but it could not mandate that the Attorney General initiate the appointment process. Nor was a decision by the Attorney General not to seek appointment of an Independent Counsel subject to judicial review. Once appointed, the Independent Counsel had \"full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice, the Attorney General, and any other officer or employee of the Department of Justice.\" Moreover, he would exercise those powers with a substantial degree of independence established through removal protections and other provisions ensuring the Independent Counsel's authority to make investigatory and prosecutorial decisions without direction from the Attorney General. With regard to removal, the law provided that the Independent Counsel \"may be removed from office . . . only by the personal action of the Attorney General and only for good cause, physical or mental disability . . . or any other condition that substantially impairs the performance of such independent counsel's duties.\" The ICA was upheld against constitutional challenge in the 1988 case of Morrison v. Olson . In a 7-1 decision, the Court held that the law was consistent with both the Appointments Clause and the general separation of powers. With regard to the Appointments Clause, the Court determined that the Independent Counsel was an inferior officer, and was thus not required to be appointed by the President with the advice and consent of the Senate, but could permissibly be appointed by the \"courts of law.\" As for the general separation of powers, the Court held that Congress could provide the Independent Counsel with substantial autonomy and protection from removal despite his law enforcement powers. The majority opinion reasoned that although the Independent Counsel was \"to some degree 'independent' and free from executive supervision to a greater extent than other federal prosecutors,\" the ICA still provided the Attorney General with several adequate means of \"supervising or controlling\" the Independent Counsel's prosecutorial powers, preserving in the executive branch \"sufficient control over the Independent counsel to ensure that the President is able to perform his constitutionally assigned duties.\" Although subject to some external criticism in the decades since its issuance, the Morrison opinion has neither been overturned nor even directly criticized by a majority opinion of the Supreme Court. That said, the composition of the Court has changed, and its more recent decisions have arguably been more protective of executive power, specifically with regard to the President's authority to supervise and control executive branch officials. In any event, if Congress were to seek to establish an independent office for the prosecution of criminal contempt of Congress, it would seem prudent to mirror the Independent Counsel framework approved in Morrison , subject to some potential adjustments. Perhaps the chief criticism of the independent counsel statute, and arguably the reason the statute was permitted to expire, was the breadth of the Independent Counsel's jurisdiction. The ICA authorized the appointment of an independent counsel to investigate and prosecute a wide array of crimes, while also providing the option for the expansion of an appointed counsel's initial jurisdiction with the approval of the three-judge panel. Strictly limiting a new Independent Counsel's jurisdiction to only the investigation and prosecution of the specific criminal contempt of Congress citation approved by either the House or the Senate, with no option for jurisdictional expansion, might sufficiently restrict the authority of the Independent Counsel to alleviate some of those concerns. Congress may also seek to alter the triggering mechanism for the appointment of an independent counsel, for example, by removing the requirement for a preliminary investigation and instead simply requiring appointment by the court upon the approval of a contempt citation by either house of Congress. This alteration would prevent the Attorney General from effectively blocking an appointment at that preliminary stage by concluding that the official's non-compliance with the subpoena had legal merit. It would appear, however, that such a change could raise additional constitutional concerns to an already debated framework. Providing the Attorney General with discretion in triggering the appointment was important to the Court's ultimate approval of independent counsel provisions in Morrison . The Court noted the Attorney General's control in both discussing whether the law authorized an unconstitutional \"usurpation\" of \"executive functions\" and whether the law otherwise undermines \"the powers of the executive branch.\" Specifically, the Court noted that the special division could not appoint an independent counsel \"sua sponte,\" and that because the Attorney General retained authority over the appointment, the law gave \"the executive a degree of control over the power to initiate an investigation by the independent counsel.\" Given these statements, removal of the discretionary authority provided to the Attorney General in triggering the appointment would likely create additional avenues of legal challenge to the law. Congress might also seek to establish a contingent contempt framework in which either house's approval of a contempt citation against an executive branch official automatically results in some other consequence to either the individual official who is the subject of the contempt citation or the official's agency. Like the criminal contempt of Congress provisions, such a statute would arguably be enacted as \"necessary and proper\" to Congress's enforcement of its investigative subpoena power. Any number of consequences may be built into this type of contingent framework, but perhaps the most effective approach would be to utilize Congress's power of the purse to establish some form of conditional limitation or reduction on an agency's funding that is triggered by the approval of a contempt citation against the agency's official. For example, a law might seek to establish that the approval of a contempt resolution against an executive branch official would lead to the temporary withholding of a certain percentage of the official's agency's appropriated funds until the outstanding subpoena is complied with. A law could, for example, place an obligation on the Office of Management and Budget (OMB) to restrict the release of a percentage of the applicable agency's funds at the next quarterly apportionment. Such an arrangement would use Congress's control over agency funding to encourage and incentivize agency cooperation with committee subpoenas. Contingent (or conditional) legislation—typically defined as legislation in which a provision is triggered, activated, or given legal effect only upon the occurrence of some future event or decision—has generally been approved by the courts. That said, the triggering event built into previously approved contingent legislation has generally been an action, finding, or decision of an executive branch official. The Supreme Court has explained the purpose of this type of legislation, writing that due to the uncertainty of \"future conditions,\" Congress \"may feel itself unable conveniently to determine exactly when its exercise of the legislative power should become effective,\" and instead \"may leave the determination of such time to the decision of an Executive.\" A statute that would instead effectively leave that determination to a single house of Congress—through the approval of a contempt resolution—would appear to be a unique and potentially problematic arrangement. Such a statutory arrangement could arguably be viewed as an impermissible exercise of either legislative or executive power by a single house of Congress. The argument that tying a reduction in agency funding to the approval of a contempt resolution may represent an invalid exercise of legislative power by a single house of Congress would be based on the principles of Chadha . As noted, Chadha limited Congress's authority to wield legislative power—which the Court defined as any action with \"the purpose and effect\" of \"altering the legal rights\" of those outside the legislative branch—without complying with the Constitution's \"finely wrought\" process of bicameralism and presentment. Once Congress makes a legislative choice it generally must abide by that choice until \"legislatively altered or revoked.\" Thus, Congress cannot, even by statute, provide one house with the power to override or alter authority delegated to the executive branch. A contingent contempt framework that would allow one house effectively to amend an agency's legal authority to obligate funds by adopting a contempt resolution could be viewed as in tension with this principle. The executive branch, for example, has objected to legislative proposals that would create a \"permanent [contempt] mechanism to be triggered by the vote of one house,\" at least when that mechanism would \"impose. . . an affirmative legal duty\" on the executive branch. Such an arrangement, the executive has argued, would be \"contrary to the clear language and rationale of Chadha .\" The limits that the Chadha decision imposes on contingent contempt legislation are difficult to assess. It is clear, for example, that in the typical legislative scenario a one-house resolution cannot constitutionally have the legal effect of altering statutorily authorized appropriations. If Congress wants to amend an appropriations provision, it generally must do so by enacting a new law. Even so, it would appear that an argument could be made that the restrictions of Chadha are either inapplicable or apply with less force in the investigative and oversight context, perhaps because it is an area in which the Constitution has implicitly authorized a single house to act with legal authority. There are a variety of existing investigative authorities that appear to allow a single house, or a single committee, to alter the legal rights and obligations of those outside the legislative branch. These include issuing a subpoena, which triggers a legal obligation to comply; the inherent contempt power, which allows one house to arrest and detain those outside the legislative branch; the criminal contempt statute, which by its terms and as interpreted by some courts appears to impose an obligation on the U.S. Attorney that flows from the approval of a contempt resolution; and the federal immunity statute, which allows a single committee or single house to obtain a court order granting a witness immunity and requiring their testimony following an assertion of the Fifth Amendment privilege against self-incrimination. Decisions of at least two federal appellate courts have explicitly recognized each house's authority to act unilaterally in the investigatory context, holding that \"[t]here is no doubt that Congress constitutionally can act, without recourse to the full legislative procedure of bicameral passage and presentment, to investigate the conduct of executive officials and others outside the legislative branch.\" Because the \"process to enforce\" investigative demands has been viewed as part of the \"power of inquiry,\" an argument could be made that laws incidental to enforcing congressional subpoenas (like contingent contempt legislation) should not be subject to bicameralism and presentment limitations. The argument that tying a reduction in agency funding to the approval of a contempt resolution may represent an impermissible exercise of executive power by a single house of Congress would likely be based on the principles of Bowsher v. Synar . As discussed, in Bowsher , the Court relied on the separation of powers to invalidate a federal law that had empowered the Comptroller General, a legislative branch officer, to identify and mandate executive branch spending reductions. The Court concluded that by vesting the \"ultimate authority\" to interpret and implement the law in one of its officers, Congress had in effect \"retained control over the execution of the Act\" and unconstitutionally \"intruded into the executive function.\" Congress, the Court concluded, may \"control the execution of its enactment only indirectly . . . by passing new legislation.\" As in Bowsher , it could be argued that the House and Senate would retain impermissible control over the execution of any law that ties budgetary reductions to the approval of a contempt resolution. Arguably, however, the Comptroller General's authority at issue in Bowsher could be distinguished from that exercised by the House or Senate in a contingent contempt framework. In determining that the Comptroller General was exercising executive authority, the Bowsher Court focused on the fact that the Comptroller General used his own \"interpretation\" and \"judgment\" to \"determine precisely what budgetary calculations are required\" and the \"budget cuts to be made.\" Under a contingent contempt framework that established a set percentage funding reduction the House and Senate would exercise no such \"interpretation\" or \"judgment\" in determining the cuts to be made. To the contrary, a house would have discretion in determining whether an official was in contempt (a legislative act) but would exercise no discretion in the resulting execution or implementation (an executive act) of the budget restrictions, which would be implemented in an arguably ministerial manner by the executive branch. A contingent funding restriction in this context may also run into some of the same implementation obstacles as enforcement of subpoenas through criminal contempt of Congress, especially if executive privilege is being asserted. This is because the withholding of already appropriated funds would likely require the assistance of the executive branch—either through OMB withholding or through DOJ enforcement of a violation of the Anti-Deficiency Act. The executive branch has objected to congressional attempts to use the spending power to encourage compliance with investigative demands in a way that \"infringe[s] on the President's constitutional authority.\" For example, in 1960 the Attorney General directed that appropriated funds \"continue to be available\" to the State Department despite the agency withholding information from Congress that triggered a conditional provision terminating certain funds if congressional requests for documents were not complied with. Thus, in a contempt dispute involving executive privilege, if the President views the contingent contempt funding restriction as a \"burden\" on his ability to assert executive privilege, he might direct the OMB not to withhold applicable funding. The uncertainty associated with tying automatic funding reduction to the approval of a contempt resolution in mind, Congress may consider creating a contingent contempt framework that uses the power of the purse to reward agencies for compliance with congressional subpoenas rather than to punish them. This approach may provide the executive branch with a clear budgetary incentive to disclose subpoenaed information to a committee. For example, future appropriations bills could contain provisions that would make additional funding available (at some later point in the fiscal year) to an agency that has not had an official held in contempt of Congress. This carrot, rather than stick, approach has been used to encourage agency compliance with congressional wishes. Even though arguments may still be put forward that this arrangement raises Chadha or Bowsher concerns by giving a single house control over an agency's funding level, it may not be in the Executive's interest to challenge such a provision given that invalidation of the provision would remove agency access to the increased funds. Rather than trying to establish an automatic alteration to agency funds, Congress could avoid any potential constitutional concerns by instead allowing for the introduction of a joint resolution that would provide for the withholding of the agency's funding upon the approval of a contempt citation by either house. That resolution could be given \"fast track procedures\" to encourage speedy consideration by both the House and Senate. Upon passage by the House and Senate, the joint resolution would be presented to the President. This arrangement would satisfy the requirements of bicameralism and presentment and entail no execution of the law by the legislative branch or its competent parts. The joint resolution would, however, be subject to presidential veto. In the alternative, the House or Senate may establish parliamentary procedural consequences that flow from the approval of a contempt citation under each body's constitutional authority to \"determine the Rules of its Proceedings.\" For example, either the House or Senate could limit consideration of any legislative measure that would fully fund either the salary of the official held in contempt or the office in which the official works. Like other rules, such a provision would be enforceable by a point of order, and subject to waiver under the usual processes. Congress's ability to issue and enforce its own subpoenas is essential to the legislative function and an \"indispensable ingredient of lawmaking.\" That said, the prevailing enforcement mechanisms of criminal contempt of Congress and civil enforcement, both of which rely on the assistance and participation of the other branches of government, have certain drawbacks that arguably limit their effectiveness in ensuring timely compliance with congressional subpoenas by executive branch officials. As discussed, alternatives to the current framework are available, but both the constitutional separation of powers and the practical limitations arising from the political nature of congressional executive information access disputes would likely need to be considered in any potential effort at reform.", "summary": "Congress gathers much of the information necessary to oversee the implementation of existing laws or to evaluate whether new laws are necessary from the executive branch. While executive branch officials comply with most congressional requests for information, there are times when the executive branch chooses to resist disclosure. When Congress finds an inquiry blocked by the withholding of information by the executive branch, or where the traditional process of negotiation and accommodation is inappropriate or unavailing, a subpoena—either for testimony or documents—may be used to compel compliance with congressional demands. The recipient of a duly issued and valid congressional subpoena has a legal obligation to comply, absent a valid and overriding privilege or other legal justification. But the subpoena is only as effective as the means by which it may be enforced. Without a process by which Congress can coerce compliance or deter non-compliance, the subpoena would be reduced to a formalized request rather than a constitutionally based demand for information. Congress currently employs an ad hoc combination of methods to combat non-compliance with subpoenas. The two predominant methods rely on the authority and participation of another branch of government. First, the criminal contempt statute permits a single house of Congress to certify a contempt citation to the executive branch for the criminal prosecution of an individual who has willfully refused to comply with a committee subpoena. Once the contempt citation is received, any prosecution lies within the control of the executive branch. Second, Congress may try to enforce a subpoena by seeking a civil judgment declaring that the recipient is legally obligated to comply. This process of civil enforcement relies on the help of the courts to enforce congressional demands. But these mechanisms do not always ensure congressional access to requested information. Recent controversies could be interpreted to suggest that the existing mechanisms are at times inadequate—particularly in the instance that enforcement is necessary to respond to a current or former executive branch official who has refused to comply with a subpoena. There would appear to be several ways in which Congress could alter its approach to enforcing committee subpoenas issued to executive branch officials. These alternatives include the enactment of laws that would expedite judicial consideration of subpoena-enforcement lawsuits filed by either house of Congress; the establishment of an independent office charged with enforcing the criminal contempt of Congress statute; or the creation of an automatic consequence, such as a withholding of appropriated funds, triggered by the approval of a contempt citation. In addition, either the House or Senate could consider acting on internal rules of procedure to revive the long-dormant inherent contempt power as a way to enforce subpoenas issued to executive branch officials. Yet, because of the institutional prerogatives that are often implicated in inter-branch oversight disputes, some of these proposals may raise constitutional concerns.", "document_type": "crs"}
{"report": "The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee that serves the President in overseeing the national security implications of foreign direct investment (FDI) in the economy. Since its inception, CFIUS has operated at the nexus of shifting concepts of national security and major changes in technology, especially relative to various notions of national eco nomic security, and a changing global economic order that is marked in part by emerging economies such as China that are playing a more active role in the global economy. As a basic premise, the U.S. historical approach to international investment has aimed to establish an open and rules-based international economic system that is consistent across countries and in line with U.S. economic and national security interests. This policy also has fundamentally maintained that FDI has positive net benefits for the U.S. and global economy, except in certain cases in which national security concerns outweigh other considerations and for prudential reasons. Recently, some policymakers argued that certain foreign investment transactions, particularly by entities owned or controlled by a foreign government, investments with leading-edge or foundational technologies, or investments that may compromise personally identifiable information, are affecting U.S. national economic security. As a result, they supported greater CFIUS scrutiny of foreign investment transactions, including a mandatory approval process for some transactions. Some policymakers also argued that the CFIUS review process should have a more robust economic component, possibly even to the extent of an industrial policy-type approach that uses the CFIUS national security review process to protect and promote certain industrial sectors in the economy. Others argued, however, that the CFIUS review process should be expanded to include certain transactions that had not previously been reviewed, but that CFIUS' overall focus should remain fairly narrow. In 2018, Congress and the Trump Administration adopted the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), Subtitle A of Title XVII of P.L. 115-232 (Aug. 13, 2018), which became effective on November 11, 2018. The impetus for FIRRMA was based on concerns that ''the national security landscape has shifted in recent years, and so has the nature of the investments that pose the greatest potential risk to national security ....'' As a result, FIRRMA provided for some programs to become effective upon passage, while a pilot program was developed to address immediate concerns relative to other provisions and allow time for additional resources to be directed at developing a more permanent response in these areas. Interim rules for the pilot program developed by the Treasury Department cover an expanded scope of transactions subject to a review by CFIUS to include noncontrolling investments by foreign persons in U.S. firms involved in critical technologies. A second part of the pilot program implements FIRRMA's mandatory declarations provision for all transactions that fall within the specific scope of the pilot program. The pilot program is to end no later than March 5, 2020. Upon enactment, FIRRMA: (1) expanded the scope and jurisdiction of CFIUS by redefining such terms as \"covered transactions\" and \"critical technologies\"; (2) refined CFIUS procedures, including timing for reviews and investigations; and (3) required actions by CFIUS to address national security risks related to mitigation agreements, among other areas. Treasury's interim rules updated and amended existing regulations in order to implement certain provisions immediately. FIRRMA also required CFIUS to take certain actions within prescribed deadlines for various programs, reporting, and other plans. FIRRMA also broadened CFIUS' mandate by explicitly including for review certain real estate transactions in close proximity to a military installation or U.S. government facility or property of national security sensitivities. In addition, FIRRMA: provides for CFIUS to review any noncontrolling investment in U.S. businesses involved in critical technology, critical infrastructure, or collecting sensitive data on U.S. citizens; any change in foreign investor rights; transactions in which a foreign government has a direct or indirect substantial interest; and any transaction or arrangement designed to evade CFIUS. Through a \"sense of Congress\" provision in FIRRMA, CFIUS reviews potentially can discriminate among investors from certain countries that are determined to be a country of \"special concern\" (specified through additional regulations) that has a \"demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect U.S. leadership in areas related to national security.\" Information on international investment and production collected and published by the United Nations indicates that global annual inflows of FDI peaked in 2015, surpassing the previous record set in 2007, but has fallen since, as indicated in Figure 1 . Similarly, from 2012 through 2014, international flows of FDI fell below the levels reached prior to the 2008-2009 financial crisis, but revived in 2015. Between 2015 and 2017, FDI inflows fell by nearly $500 million to $1.4 billion, largely reflecting lower inflows to developed economies as a result of a 22% decline in cross-border merger and acquisition activity (M&As). FDI inflows to developing economies also declined, but at a slower rate than among flows to developed economies, while investment flows to economies in transition continued to increase at a steady pace. Other cross-border capital flows (portfolio investments and bank loans) continued at a strong pace in 2017, contrary to the trend in direct investment. Globally, the foreign affiliates of international firms employed 73 million people in 2017, as indicted in Table 1 . Globally, the stock, or cumulative amount, of FDI in 2017 totaled about $31 trillion. Other measures of international production, sales, assets, value-added production, and exports generally indicate higher nominal values in 2017 than in the previous year, providing some indication that global economic growth was recovering. According to the United Nations, the global FDI position in the United States, or the cumulative amount of inward foreign direct investment, was recorded at around $7.8 trillion in 2017, with the U.S. outward FDI position of about $7.9 trillion. The next closest country in investment position to the United States was Hong Kong with inward and outward investment positions of about one-fourth that of the United States. In comparison, the 28 counties comprising the European Union (EU) had an inward investment position of $9.1 trillion in 2017 and an outward position of $10.6 trillion. Established by an Executive Order of President Ford in 1975, CFIUS initially operated in relative obscurity. According to a Treasury Department memorandum, the Committee was established in order to \"dissuade Congress from enacting new restrictions\" on foreign investment, as a result of growing concerns over the rapid increase in investments by Organization of the Petroleum Exporting Countries (OPEC) countries in American portfolio assets (Treasury securities, corporate stocks and bonds), and to respond to concerns of some that much of the OPEC investments were being driven by political, rather than by economic, motives. Thirty years later in 2006, public and congressional concerns about the proposed purchase of commercial port operations of the British-owned Peninsular and Oriental Steam Navigation Company (P&O) in six U.S. ports by Dubai Ports World (DP World) sparked a firestorm of criticism and congressional activity during the 109 th Congress concerning CFIUS and the manner in which it operated. As a result of the attention by the public and Congress, DP World officials decided to sell off the U.S. port operations to an American owner. On December 11, 2006, DP World officials announced that a unit of AIG Global Investment Group, a New York-based asset management company with large assets, but no experience in port operations, had acquired the U.S. port operations for an undisclosed amount. The DP World transaction revealed that the September 11, 2001, terrorist attacks fundamentally altered the viewpoint of some Members of Congress regarding the role of foreign investment in the economy and the potential impact of such investment on U.S. national security. Some Members argued that this change in perspective required a reassessment of the role of foreign investment in the economy and of the implications of corporate ownership on activities that fall under the rubric of critical infrastructure. The emergence of state-owned enterprises as commercial economic actors has raised additional concerns about whose interests and whose objectives such firms are pursuing in their foreign investment activities. More than 25 bills were introduced in the second session of the 109 th Congress that addressed various aspects of foreign investment following the proposed DP World transaction. In the first session of the 110 th Congress, Congress passed, and President Bush signed, the Foreign Investment and National Security Act of 2007 (FINSA) ( P.L. 110-49 ), which altered the CFIUS process in order to enable greater oversight by Congress and increased transparency and reporting by the Committee on its decisions. In addition, the act broadened the definition of national security and required greater scrutiny by CFIUS of certain types of foreign direct investment. Not all Members were satisfied with the law: some Members argued that the law remained deficient in reviewing investment by foreign governments through sovereign wealth funds (SWFs). Also left unresolved were issues concerning the role of foreign investment in the nation's overall security framework and the methods that are used to assess the impact of foreign investment on the nation's defense industrial base, critical infrastructure, and homeland security. President Ford's 1975 Executive Order established the basic structure of CFIUS, and directed that the \"representative\" of the Secretary of the Treasury be the chairman of the Committee. The Executive Order also stipulated that the Committee would have \"the primary continuing responsibility within the executive branch for monitoring the impact of foreign investment in the United States, both direct and portfolio, and for coordinating the implementation of United States policy on such investment.\" In particular, CFIUS was directed to (1) arrange for the preparation of analyses of trends and significant developments in foreign investment in the United States; (2) provide guidance on arrangements with foreign governments for advance consultations on prospective major foreign governmental investment in the United States; (3) review investment in the United States which, in the judgment of the Committee, might have major implications for U.S. national interests; and (4) consider proposals for new legislation or regulations relating to foreign investment as may appear necessary. President Ford's Executive Order also stipulated that information submitted \"in confidence shall not be publicly disclosed\" and that information submitted to CFIUS be used \"only for the purpose of carrying out the functions and activities\" of the order. In addition, the Secretary of Commerce was directed to perform a number of activities, including (1) Obtaining, consolidating, and analyzing information on foreign investment in the United States; (2) Improving the procedures for the collection and dissemination of information on such foreign investment; (3) Observing foreign investment in the United States; (4) Preparing reports and analyses of trends and of significant developments in appropriate categories of such investment; (5) Compiling data and preparing evaluation of significant transactions; and (6) Submitting to the Committee on Foreign Investment in the United States appropriate reports, analyses, data, and recommendations as to how information on foreign investment can be kept current. The Executive Order, however, raised questions among various observers and government officials who doubted that federal agencies had the legal authority to collect the types of data that were required by the order. As a result, Congress and the President sought to clarify this issue, and in the following year President Ford signed the International Investment Survey Act of 1976. The act gave the President \"clear and unambiguous authority\" to collect information on \"international investment.\" In addition, the act authorized \"the collection and use of information on direct investments owned or controlled directly or indirectly by foreign governments or persons, and to provide analyses of such information to the Congress, the executive agencies, and the general public.\" By 1980, some Members of Congress raised concerns that CFIUS was not fulfilling its mandate. Between 1975 and 1980, for instance, the Committee met only 10 times and seemed unable to decide whether it should respond to the political or the economic aspects of foreign direct investment in the United States. One critic of the Committee argued in a congressional hearing in 1979 that, \"the Committee has been reduced over the last four years to a body that only responds to the political aspects or the political questions that foreign investment in the United States poses and not with what we really want to know about foreign investments in the United States, that is: Is it good for the economy?\" From 1980 to 1987, CFIUS investigated a number of foreign investment transactions, mostly at the request of the Department of Defense. In 1983, for instance, a Japanese firm sought to acquire a U.S. specialty steel producer. The Department of Defense subsequently classified the metals produced by the firm because they were used in the production of military aircraft, which caused the Japanese firm to withdraw its offer. Another Japanese company attempted to acquire a U.S. firm in 1985 that manufactured specialized ball bearings for the military. The acquisition was completed after the Japanese firm agreed that production would be maintained in the United States. In a similar case in 1987, the Defense Department objected to a proposed acquisition of the computer division of a U.S. multinational company by a French firm because of classified work conducted by the computer division. The acquisition proceeded after the classified contracts were reassigned to the U.S. parent company. In 1988, amid concerns over foreign acquisition of certain types of U.S. firms, particularly by Japanese firms, Congress approved the Exon-Florio amendment to the Defense Production Act, which specified the basic review process of foreign investments. The statute granted the President the authority to block proposed or pending foreign \"mergers, acquisitions, or takeovers\" of \"persons engaged in interstate commerce in the United States\" that threatened to impair the national security. Congress directed, however, that the President could invoke this authority only after he had concluded that (1) other U.S. laws were inadequate or inappropriate to protect the national security; and (2) \"credible evidence\" existed that the foreign interest exercising control might take action that threatened to impair U.S. national security. This same standard was maintained in an update to the Exon-Florio provision in 2007, the Foreign Investment and National Security Act of 2007, and in FIRRMA. After three years of often contentious negotiations between Congress and the Reagan Administration, Congress passed and President Reagan signed the Omnibus Trade and Competitiveness Act of 1988. During consideration of the Exon-Florio proposal as an amendment to the omnibus trade bill, debate focused on three controversial issues: (1) what constitutes foreign control of a U.S. firm?; (2) how should national security be defined?; and (3) which types of economic activities should be targeted for a CFIUS review? Of these issues, the most controversial and far-reaching was the lack of a definition of national security. As originally drafted, the provision would have considered investments which affected the \"national security and essential commerce\" of the United States. The term \"essential commerce\" was the focus of intense debate between Congress and the Reagan Administration. The Treasury Department, headed by Secretary James Baker, objected to the Exon-Florio amendment, and the Administration vetoed the first version of the omnibus trade legislation, in part due to its objections to the language in the measure regarding \"national security and essential commerce.\" The Reagan Administration argued that the language would broaden the definition of national security beyond the traditional concept of military/defense to one which included a strong economic component. Administration witnesses argued against this aspect of the proposal and eventually succeeded in prodding Congress to remove the term \"essential commerce\" from the measure and narrow substantially the factors the President must consider in his determination. The final Exon-Florio provision was included as Section 5021 of the Omnibus Trade and Competitiveness Act of 1988. The provision originated in bills reported by the Commerce Committee in the Senate and the Energy and Commerce Committee in the House, but the measure was transferred to the Senate Banking Committee as a result of a dispute over jurisdictional responsibilities. Through Executive Order 12661, President Reagan implemented provisions of the Omnibus Trade Act. In the Executive Order, President Reagan delegated his authority to administer the Exon-Florio provision to CFIUS, particularly to conduct reviews, undertake investigations, and make recommendations, although the statute itself does not specifically mention CFIUS. As a result of President Reagan's action, CFIUS was transformed from an administrative body with limited authority to review and analyze data on foreign investment to an important component of U.S. foreign investment policy with a broad mandate and significant authority to advise the President on foreign investment transactions and to recommend that some transactions be suspended or blocked. In 1990, President Bush directed the China National Aero-Technology Import and Export Corporation (CATIC) to divest its acquisition of MAMCO Manufacturing, a Seattle-based firm producing metal parts and assemblies for aircraft, because of concerns that CATIC might gain access to technology through MAMCO that it would otherwise have to obtain under an export license. Part of Congress's motivation in adopting the Exon-Florio provision apparently arose from concerns that foreign takeovers of U.S. firms could not be stopped unless the President declared a national emergency or regulators invoked federal antitrust, environmental, or securities laws. Through the Exon-Florio provision, Congress attempted to strengthen the President's hand in conducting foreign investment policy, while limiting its own role as a means of emphasizing that, as much as possible, the commercial nature of investment transactions should be free from political considerations. Congress also attempted to balance public concerns about the economic impact of certain types of foreign investment with the nation's long-standing international commitment to maintaining an open and receptive environment for foreign investment. Furthermore, Congress did not intend to have the Exon-Florio provision alter the generally open foreign investment climate of the country or to have it inhibit foreign direct investment in industries that could not be considered to be of national security interest. At the time, some analysts believed the provision could potentially widen the scope of industries that fell under the national security rubric. CFIUS, however, is not free to establish an independent approach to reviewing foreign investment transactions, but operates under the authority of the President and reflects his attitudes and policies. As a result, the discretion CFIUS uses to review and to investigate foreign investment cases reflects policy guidance from the President. Foreign investors also are constrained by legislation that bars foreign direct investment in such industries as maritime, aircraft, banking, resources, and power. Generally, these sectors were closed to foreign investors prior to passage of the Exon-Florio provision in order to prevent public services and public interest activities from falling under foreign control, primarily for national defense purposes. After extensive public comment, the Treasury Department issued its final regulations in November 1991 implementing the Exon-Florio provision. Although these procedures were amended through FINSA, they continued to serve as the basis for the Exon-Florio review and investigation until new regulations were released on November 21, 2008. These regulations created an essentially voluntary system of notification by the parties to an acquisition, and they allowed for notices of acquisitions by agencies that are members of CFIUS. Despite the voluntary nature of the notification, firms largely complied with the provision, because the regulations stipulate that foreign acquisitions that are governed by the Exon-Florio review process that do not notify the Committee remain subject indefinitely to possible divestment or other appropriate actions by the President. Under most circumstances, notice of a proposed acquisition that is given to the Committee by a third party, including shareholders, is not considered by the Committee to constitute an official notification. The regulations also indicated that notifications provided to the Committee would be considered confidential and the information would not be released by the Committee to the press or commented on publicly. In 1992, Congress amended the Exon-Florio statute through Section 837(a) of the National Defense Authorization Act for Fiscal Year 1993 ( P.L. 102-484 ). Known as the \"Byrd\" amendment after the amendment's sponsor, Senator Byrd, the provision requires CFIUS to investigate proposed mergers, acquisitions, or takeovers in cases where two criteria are met: (1) the acquirer is controlled by or acting on behalf of a foreign government; and (2) the acquisition results in control of a person engaged in interstate commerce in the United States that could affect the national security of the United States. This amendment came under scrutiny by the 109 th Congress as a result of the DP World transaction. Many Members of Congress and others believed that this amendment required CFIUS to undertake a full 45-day investigation of the transaction because DP World was \"controlled by or acting on behalf of a foreign government.\" The DP World acquisition, however, exposed a sharp rift between what some Members apparently believed the amendment directed CFIUS to do and how the members of CFIUS interpreted the amendment. In particular, some Members of Congress apparently interpreted the amendment to direct CFIUS to conduct a mandatory 45-day investigation if the foreign firm involved in a transaction is owned or controlled by a foreign government. Representatives of CFIUS argued they interpreted the amendment to mean that a 45-day investigation was discretionary and not mandatory. In the case of the DP World acquisition, CFIUS representatives argued they had concluded as a result of an extensive review of the proposed acquisition prior to the case being formally filed with CFIUS and during the then-existing 30-day review that the DP World case did not warrant a full 45-day investigation. They conceded that the case met the first criterion under the Byrd amendment, because DP World was controlled by a foreign government, but that it did not meet the second part of the requirement, because CFIUS had concluded during the 30-day review that the transaction \"could not affect the national security.\" The intense public and congressional reaction that arose from the proposed Dubai Ports World acquisition spurred the Bush Administration in late 2006 to make an important administrative change in the way CFIUS reviewed foreign investment transactions. CFIUS and President Bush approved the acquisition of Lucent Technologies, Inc. by the French-based Alcatel SA, which was completed on December 1, 2006. Before the transaction was approved by CFIUS, however, Alcatel-Lucent was required to agree to a national security arrangement, known as a Special Security Arrangement, or SSA, that restricts Alcatel's access to sensitive work done by Lucent's research arm, Bell Labs, and the communications infrastructure in the United States. The most controversial feature of this arrangement was that it allowed CFIUS to reopen a review of a transaction and to overturn its approval at any time if CFIUS believed the companies \"materially fail to comply\" with the terms of the arrangement. This marked a significant change in the CFIUS process. Prior to this transaction, CFIUS reviews and investigations were portrayed and considered to be final. As a result, firms were willing to subject themselves voluntarily to a CFIUS review, because they believed that once an investment transaction was scrutinized and approved by the members of CFIUS the firms could be assured that the investment transaction would be exempt from any future reviews or actions. This administrative change, however, meant that a CFIUS determination may no longer be a final decision, and it added a new level of uncertainty to foreign investors seeking to acquire U.S. firms. A broad range of U.S. and international business groups objected to this change in the Bush Administration's policy. In the first session of the 110th Congress, Representative Maloney introduced H.R. 556 , the National Security Foreign Investment Reform and Strengthened Transparency Act of 2007, on January 18, 2007. The House Financial Services Committee approved it on February 13, 2007, with amendments, and the full House amended and approved it on February 28, 2007, by a vote of 423 to 0. On June 13, 2007, Senator Dodd introduced S1610, the Foreign Investment and National Security Act of 2007 (FINSA). On June 29, 2007, the Senate adopted S. 1610 in lieu of H.R. 556 by unanimous consent. On July 11, 2007, the House accepted the Senate's version of H.R. 556 by a vote of 370-45 and sent the measure to President Bush, who signed it on July 26, 2007. On January 23, 2008, President Bush issued Executive Order 13456 implementing the law. FINSA made a number of major changes, including: Codified the Committee on Foreign Investment in the United States (CFIUS), giving it statutory authority. Made CFIUS membership permanent and added the Secretary of Energy, the Director of National Intelligence (DNI), and Secretary of Labor as ex officio members with the DNI providing intelligence analysis; also granted authority to the President to add members on a case-by-case basis. Required the Secretary of the Treasury to designate an agency with lead responsibility for reviewing a covered transaction. Increased the number of factors the President could consider in making his determination. Required that an individual no lower than an Assistant Secretary level for each CFIUS member must certify to Congress that a reviewed transaction has no unresolved national security issues; for investigated transactions, the certification must be at the Secretary or Deputy Secretary level. Provided Congress with confidential briefings upon request on cleared transactions and annual classified and unclassified reports. During the 115 th Congress, many Members expressed concerns over China's growing investment in the United States, particularly in the technology sector. On November 8, 2017, Senators John Cornyn and Dianne Feinstein and Representative Robert Pittenger introduced companion measures in the Senate ( S. 2098 ) and the House ( H.R. 4311 ), respectively, identified as the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) to provide comprehensive revision of the CFIUS process. On May 22, 2018, the Senate Banking and House Financial Services Committees held their respective markup sessions and approved different versions of the legislation. The Senate version of FIRRMA was added as Subtitle A of Title 17 of the Senate version of the National Defense Authorization Act for Fiscal Year 2019 ( S. 2987 , incorporated into the Senate amendments to H.R. 5515 ), which passed the Senate on June 18, 2018. The House version of FIRRMA, H.R. 5841 was passed as a standalone bill under suspension vote on June 26, 2018. On August 13, 2018, President Trump signed FIRRMA, identified as P.L. 115-232 . Similar to previous measures, FIRRMA grants the President the authority to block or suspend proposed or pending foreign \"mergers, acquisitions, or takeovers\" by or with any foreign person that could result in foreign control of any United States business, including such a merger, acquisition, or takeover carried out through a joint venture that threaten to impair the national security. Congress directed, however, that before this authority can be invoked the President must conclude that (1) other U.S. laws are inadequate or inappropriate to protect the national security; and (2) he/she must have \"credible evidence\" that the foreign interest exercising control might take action that threatens to impair the national security. According to CFIUS, it has interpreted this last provision to mean an investment that poses a risk to the national security. In assessing the national security risk, CFIUS looks at (1) the threat, which involves an assessment of the intent and capabilities of the acquirer; (2) the vulnerability, which involves an assessment of the aspects of the U.S. business that could impact national security; and (3) the potential national security consequences if the vulnerabilities were to be exploited. In general, FIRRMA: Broaden s the scope of transactions under CFIUS ' purview by including for review real estate transactions in close proximity to a military installation or U.S. Government facility or property of national security sensitivities; any nonpassive investment in a critical industry or critical technologies; any change in foreign investor rights regarding a U.S. business; transactions in which a foreign government has a direct or indirect substantial interest; and any transaction or arrangement designed to evade CFIUS regulations. Mandates various deadlines , including: a report on Chinese investment in the United States, a plan for CFIUS members to recuse themselves in cases that pose a conflict of interest, an assessment of CFIUS resources and plans for additional staff and resources, a feasibility study of assessing a fee on transactions reviewed unofficially prior to submission of a written notification, and a report assessing the national security risks related to investments by state-owned or state-controlled entities in the manufacture or assembly of rolling stock or other assets used in freight rail, public transportation rail systems, or intercity passenger rail system in the United States. Allows CFI US to discriminate among foreign investors by country of origin in reviewing investment transactions by labeling some countries as \"a country of special concern\"—a country that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security. Shift s the filing process for foreign firms from voluntary to mandatory in certain cases and provides for a two-track method for reviewing investment transactions, with some transactions requiring a declaration to CFIUS and receiving an expedited process, while transactions involving investors from countries of special concern would require a written notification of a proposed transaction and would receive greater scrutiny. Provide s for additional factors for consideration that CFIUS and the President may use to determine if a transaction threatens to impair U.S. national security, as well as formalizes CFIUS' use of risk-based analysis to assess the national security risks of a transaction by assessing the threat, vulnerabilities, and consequences to national security related to the transaction. Lengthen s most time periods for CFIUS reviews and investigations and for a national security analysis by the Director of National Intelligence. Provide s for more staff to ha ndle an expected increased work load and provide s for additional funding for CFIUS through a filing fee structure for firms involved in a transaction and a $20 million annual appropriation. Modif ies CFIUS' annual reporting requirements , including its annual classified report to specified Members of Congress and nonclassified reports to the public to provide for more information on foreign investment transactions. Mandate s separate reforms related to export controls , with requirements to establish an interagency process to identify so-called \"emerging and foundational technologies\"—such items are to also fall under CFIUS review of critical technologies—and establish controls on the export or transfer of such technologies. As indicated in Figure 2 below, the CFIUS foreign investment review process is comprised of an informal step and three formal steps: a Declaration or written notice; a National Security Review; and a National Security Investigation. Depending on the outcome of the reviews, CFIUS may forward a transaction to the President for a Presidential Determination. FIRRMA increases the allowable time for reviews and investigations: (1) 30 days to review a declaration or written notification to determine of the transaction involves a foreign person in which a foreign government has a substantial interest; (2) a 45-day national security review (from 30 days), including an expanded time limit for analysis by the Director of National Intelligence (from 20 to 30 days); (3) a 45-day national security investigation, with an option for a 15 day extension for \"extraordinary circumstances;\" and a 15-day Presidential determination (unchanged). Neither Congress nor the Administration has attempted to define the term \"national security.\" Treasury Department officials have indicated, however, that during a review or investigation each CFIUS member is expected to apply that definition of national security that is consistent with the representative agency's specific legislative mandate. The concept of national security was broadened by P.L. 110-49 to include, \"those issues relating to 'homeland security,' including its application to critical infrastructure.\" As presently construed, national security includes \"those issues relating to 'homeland security,' including its application to critical infrastructure,\" and \"critical technologies.\" FIRRMA broadens CFIUS' role by explicitly including for review certain real estate transactions in close proximity to a military installation or U.S. government facility or property of national security sensitivities; any noncontrolling investment in U.S. businesses involved in critical technology, critical infrastructure, or collecting sensitive data on U.S. citizens; any change in foreign investor rights; transactions in which a foreign government has a direct or indirect substantial interest; and any transaction or arrangement designed to evade CFIUS. While specific countries are not singled out, FIRRMA allows CFIUS to potentially discriminate among foreign investors by country of origin in reviewing certain investment transactions. Greater scrutiny could be directed on transactions tied to certain countries, pending specific criteria defined by regulations. FIRRMA provides a \"sense of Congress\" concerning six additional factors that CFIUS and the President may consider to determine if a proposed transaction threatens to impair U.S. national security. These include: 1. Covered transactions that involve a country of \"special concern\" that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect U.S. leadership in areas related to national security; 2. The potential effects of the cumulative control of, or pattern of recent transactions involving, any one type of critical infrastructure, energy asset, critical material, or critical technology by a foreign government or person; 3. Whether any foreign person engaged in a transaction has a history of complying with U.S. laws and regulations; 4. Control of U.S. industries and commercial activity that affect U.S. capability and capacity to meet the requirements of national security, including the availability of human resources, products, technology, materials, and other supplies and services; 5. The extent to which a transaction is likely to expose personally identifiable information, genetic information, or other sensitive data of U.S. citizens to access by a foreign government or person that may exploit that information to threaten national security; and 6. Whether a transaction is likely to exacerbate or create new cybersecurity vulnerabilities or is likely to result in a foreign government gaining a significant new capability to engage in malicious cyber-enabled activities. Over time, the three-step CFIUS process has evolved to include an informal stage of unspecified length of time that consists of an unofficial CFIUS determination prior to the formal filing with CFIUS. This type of informal review likely developed because it serves the interests of both CFIUS and the firms that are involved in an investment transaction. According to Treasury Department officials, this informal contact enabled \"CFIUS staff to identify potential issues before the review process formally begins.\" FIRMMA directed CFIUS to analyze the feasibility and potential impact of charging a fee for conducting such informal reviews. Firms that are party to an investment transaction apparently benefit from this informal review in a number of ways. For one, it allows firms additional time to work out any national security concerns privately with individual CFIUS members. Secondly, and perhaps more importantly, it provides a process for firms to avoid risking potential negative publicity that could arise if a transaction were blocked or otherwise labeled as impairing U.S. national security interests. For some firms, public knowledge of a CFIUS investigation has had a negative effect on the value of the firm's stock price. For CFIUS members, the informal process is beneficial because it gives them as much time as they deem necessary to review a transaction without facing the time constraints that arise under the formal CFIUS review process. This informal review likely also gives CFIUS members added time to negotiate with firms involved in a transaction to restructure the transaction in ways that can address any potential security concerns or to develop other types of conditions that members feel are appropriate in order to remove security concerns. According to anecdotal evidence, some firms believe the CFIUS process is not market neutral, but adds to market uncertainty that can negatively affect a firm's stock price and lead to economic behavior by some firms that is not optimal for the economy as a whole. Such behavior might involve firms expending resources to avoid a CFIUS investigation, or terminating a transaction that potentially could improve the optimal performance of the economy to avoid a CFIUS investigation. While such anecdotal accounts generally are not a basis for developing public policy, they raise concerns about the possible impact a CFIUS review may have on financial markets and the potential costs of redefining the concept of national security relative to foreign investment. FIRRMA shifts the filing requirement for foreign firms from voluntary to mandatory in certain cases and provides a two-track method for reviewing transactions. Some firms are permitted to file a declaration with CFIUS and could receive an expedited review process, while transactions involving a foreign person in which a foreign government has, directly or indirectly, a substantial interest (to be defined by regulations, but not including stakes of less than 10% voting interest) would be required to file a written notification and receive greater scrutiny. Mandatory declarations may be subject to other criteria as defined by regulations. The chief executive officer of any party to a merger, acquisition, or takeover must certify in writing that the information contained in a written notification to CFIUS fully complies with the CFIUS requirements and that the information is accurate and complete. This written notification would also include any mitigation agreement or condition that was part of a CFIUS approval. The mandatory filing and review process (via a declaration) are required for foreign investments in certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies in 27 specified industries. This requirement applies to critical technologies that are used either in connection with the U.S. business's activity in one or more of the industries specified under the pilot program, or designed by the U.S. business specifically for use in one or more of the specified industries. The shift also expands CFIUS reviews of transactions beyond those that give foreign investors a controlling interest to include investments in which foreign investors do not have a controlling interest in a U.S. firm as a result of the foreign investment. Specifically, such noncontrolling investments are covered, or subject to a review, if they would grant the foreign investor access to \"material nonpublic technical information\" in possession of the U.S. business; membership or observer rights on the board of directors; or any involvement in substantive decisionmaking regarding critical technology. Prior to this change, a controlling interest was determined to be at least 10% of the voting shares of a publicly traded company, or at least 10% of the total assets of a nonpublicly traded U.S. company. This shift was precipitated by concerns that investments in which foreign firms have a noncontrolling interest could nevertheless \"affect certain decisions made by, or obtain certain information from, a U.S. business with respect to the use, development, acquisition, or release of critical technology.\" New authorities granted by FIRRMA for CFIUS to review noncontrolling investments were not immediately effective upon passage of the Act, but were included as part of the Treasury Department's pilot program. The Treasury Department's pilot program also includes provisions for declarations and written notices. The program indicates that declarations and written notices are distinguished according to three criteria: the length of the submission, the time for CFIUS' consideration of the submission, and the Committee's options for disposition of the submission. Declarations are described as short notices that do not exceed five pages. The parties to a transaction could voluntarily stipulate that a transaction is a covered transaction, whether the transaction could result in control of a U.S. business by a foreign person, and whether the transaction is a foreign-government controlled transaction. CFIUS would be required to respond within 30 days to the filing of a declaration, whereas CFIUS would have 45 days to respond to a written notification. CFIUS would also be required to respond in one of four ways to a declaration: (1) request that the parties file a written notice; (2) inform the parties that CFIUS cannot complete the review on the basis of the declaration and that they can file a notice to seek a written notification from the Committee that it has completed all the action relevant to the transaction; (3) initiate a unilateral review of the transaction through an agency notice; or (4) notify the parties that CFIUS has completed its action under the statute. At any point during the CFIUS process, parties can withdraw and refile their notice, for instance, to allow additional time to discuss CFIUS's proposed resolution of outstanding issues. Under FINSA and FIRRMA, the President retains his authority as the only officer capable of suspending or prohibiting mergers, acquisitions, and takeovers, and the measures place additional requirements on firms that resubmitted a filing after previously withdrawing a filing before a full review was completed. After a transaction is filed with CFIUS and depending on an initial assessment, the transaction can be subject to a 45-day national security review. During a review, CFIUS members are required to consider the 12 factors mandated by Congress through FINSA and six new factors in FIRRMA that reflect the \"sense of Congress\" in assessing the impact of an investment. If during the 45-day review period all members conclude that the investment does not threaten to impair the national security, the review is terminated. During the 45-day review stage, the Director of National Intelligence (DNI), an ex officio member of CFIUS, is required to carry out a thorough analysis of \"any threat to the national security of the United States\" of any merger, acquisition, or takeover. This analysis is required to be completed \"within 30 days\" (modified by FIRRMA from 20 to 30 days) of the receipt of a notification by CFIUS. This analysis could include a request for information from the Department of the Treasury's Director of the Office of Foreign Assets Control and the Director of the Financial Crimes Enforcement Network. In addition, the Director of National Intelligence is required to seek and to incorporate the views of \"all affected or appropriate\" intelligence agencies. CFIUS also is required to review \"covered\" investment transactions in which the foreign entity is owned or controlled by a foreign government, but the law provides an exception to this requirement. If the Secretary of the Treasury and certain other specified officials determine that the transaction in question will not impair the national security, the investment is not subject to a formal review. If a national security review indicates that at least one of three conditions exists, the President, acting through CFIUS, is required to conduct a National Security Investigation and to take any \"necessary\" actions as part of an additional 45-day investigation, with a possible 15-day extension. The three conditions are: (1) CFIUS determines that the transaction threatens to impair the national security of the United States and that the threat has not been mitigated during or prior to a review of the transaction; (2) the foreign person is controlled by a foreign government; or (3) the transaction would result in the control of any critical infrastructure by a foreign person, the transaction could impair the national security, and such impairment has not been mitigated. At the conclusion of the investigation or 45-day review period, whichever comes first, the Committee can decide to offer no recommendation or it can recommend to the President that he/she suspend or prohibit the investment. During a review or an investigation, CFIUS and a designated lead agency have the authority to negotiate, impose, or enforce any agreement or condition with the parties to a transaction in order to mitigate any threat to U.S. national security. Such agreements are based on a \"risk-based analysis\" of the threat posed by the transaction. Also, if a notification of a transaction is withdrawn before any review or investigation by CFIUS is completed, the amended law grants the Committee the authority to take a number of actions. In particular, the Committee could develop (1) interim protections to address specific concerns about the transaction pending a resubmission of a notice by the parties; (2) specific time frames for resubmitting the notice; and (3) a process for tracking any actions taken by any parties to the transaction. As noted above, CFIUS authorities allow the President to block or suspend proposed or pending foreign \"mergers, acquisitions, or takeovers\" that threaten to impair the national security. The President, however, is under no obligation to follow the recommendation of the Committee to suspend or prohibit an investment. Congress directed that before this authority can be invoked (1) the President must conclude that other U.S. laws are inadequate or inappropriate to protect the national security; and (2) the President must have \"credible evidence\" that the foreign investment will impair the national security. As a result, if CFIUS determines, as was the case in the Dubai Ports transaction, that it does not have credible evidence that an investment will impair the national security, then it may argue that it is not required to undertake a full 45-day investigation, even if the foreign entity is owned or controlled by a foreign government. After considering the two conditions listed above (other laws are inadequate or inappropriate, and he has credible evidence that a foreign transaction will impair national security), the President is granted almost unlimited authority to take \" such action for such time as the President considers appropriate to suspend or prohibit any covered transaction that threatens to impair the national security of the United States .\" In addition, such determinations by the President are not subject to judicial review, although the process by which the disposition of a transaction is determined may be subject to judicial review to ensure that the constitutional rights of the parties involved are upheld, as was emphasized in the ruling by the U.S. District Court for the District of Columbia in the case of Ralls vs. the Committee on Foreign Investment in the United States . President Bush's January 23, 2008, Executive Order 13456 implementing FINSA made various changes to the law. The Committee consists of nine Cabinet members, including the Secretaries of State, the Treasury, Defense, Homeland Security, Commerce, and Energy; the Attorney General; the United States Trade Representative; and the Director of the Office of Science and Technology Policy. The Secretary of Labor and the Director of National Intelligence serve as ex officio members of the Committee. The Executive Order added five executive office members to CFIUS in order to \"observe and, as appropriate, participate in and report to the President:\" the Director of the Office of Management and Budget; the Chairman of the Council of Economic Advisors; the Assistant to the President for National Security Affairs; the Assistant to the President for Economic Policy; and the Assistant to the President for Homeland Security and Counterterrorism. The President can also appoint members on a temporary basis to the Committee as he determines. FIRRMA did not alter the membership of the Committee, but added two new positions within the Treasury Department. Both of the new positions are designated to be at the level of Assistant Secretary, with one of the positions an Assistant Secretary for Investment Security, whose primary responsibilities will be with CFIUS, under the direction of the Treasury Secretary. The statute requires CFIUS to review all \"covered\" foreign investment transactions to determine whether a transaction threatens to impair the national security, or the foreign entity is controlled by a foreign government, or it would result in control of any \"critical infrastructure that could impair the national security.\" A covered foreign investment transaction is defined as any merger, acquisition, or takeover \"that could result in foreign control of any United States business, including such a merger, acquisition, or takeover carried out through a joint venture.\" The term 'national security' is defined to include those issues relating to 'homeland security,' including its application to critical infrastructure and critical technologies. In addition, in reviewing a covered transaction, Congress directed that CFIUS and the President \"may\" consider the following: the control of United States industries and commercial activity by foreign persons as it affects the capability and capacity of the United States to meet the requirements of national security, including the availability of human resources, products, technology, materials, and other supplies and services, and in considering ''the availability of human resources,'' should construe that term to include potential losses of such availability resulting from reductions in the employment of United States persons whose knowledge or skills are critical to national security, including the continued production in the United States of items that are likely to be acquired by the Department of Defense or other Federal departments or agencies for the advancement of the national security of the United States; and the extent to which a covered transaction is likely to expose, either directly or indirectly, personally identifiable information, genetic information, or other sensitive data of United States citizens to access by a foreign government or foreign person that may exploit that information in a manner that threatens national security . FIRRMA also expanded CFIUS reviews to include unaffiliated businesses that may be affected by a foreign investment transaction if the business: (1) owns, operates, manufactures, supplies, or services critical infrastructure; (2) produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies; or (3) maintains or collects sensitive personal data of United States citizens that may be exploited in a manner that threatens national security. FIRRMA also amended the existing CFIUS statute by mandating certain changes be adopted through new regulations. Seven of 15 changes mandated through regulations concern the definition of a covered transaction and broadening the scope of a CFIUS review. No deadlines were specified for these regulatory changes. The regulatory changes mandated by FIRRMA include: Definition of a foreign investment transaction .Real Estate. CFIUS can prescribe criteria for the definition of a covered transaction beyond those specified in the statute that include certain real estate transactions that are located in the United States. In order to qualify under this provision, the real estate must: be located within, or function as part of, an air or maritime port; be in \"close proximity\" to a U.S. military installation or another facility or property of the U.S. government that is sensitive for reasons relating to national security; reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such an installation, facility, or property; or otherwise expose national security activities at such an installation, facility, or property to the risk of foreign surveillance. CFIUS is also directed to develop regulations concerning the definition of \"close proximity\" in describing real estate transactions subject to review. Unaffiliated business . CFIUS can promulgate regulations governing foreign investments in an unaffiliated U.S. business that: owns, operates, manufactures, supplies, or services critical infrastructure; produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies; or maintains or collects sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security. Changes in investor rights and other structures . Covered transactions also entail any change in the rights that a foreign person has with respect to a U.S. business in which the foreign person has an investment if that change could result in foreign control of the U.S. business. It also includes any other transaction, transfer, agreement, or arrangement that is designed or intended to evade or circumvent the application of the statute, subject to regulations prescribed by CFIUS. Real estate exceptions . Changes by FIRRMA that broaden the scope of a CFIUS review of certain real estate transactions do not include reviews of single housing units or real estate in \"urbanized areas,\" subject to regulations by CFIUS in consultation with the Secretary of Defense. Material nonpublic technical information . CFIUS is directed to develop regulations concerning the term \"material nonpublic technical information,\" which is defined as \"information that provides knowledge, know-how, or understanding, not available in the public domain, of the design, location, or operation of critical infrastructure; or is not available in the public domain, and is necessary to design, fabricate, develop, test, produce, or manufacture critical technologies, including processes, techniques, or methods.\" Critical infrastructure . CFIUS is directed to prescribe regulations concerning investments in U.S. businesses that own, manufacture, supply, or service critical infrastructure that limit the designation to critical infrastructure that is likely to be of importance to U.S. national security (i.e., \"systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems or assets would have a debilitating impact on national security\"). Indirect investment . CFIUS is directed to develop regulations concerning an indirect investment by a foreign person in a U.S. business and exceptions for \"extraordinary circumstances.\" CFIUS is also directed to develop regulations concerning waivers for an investment fund that does constitute control of investment decisions of the fund or decisions relating to entities in which the fund is invested. Foreign person . CFIUS is directed to define further the term \"foreign person\" by specifying criteria to limit the application of the term to investments by foreign persons that are in certain categories. The categories can consider how a foreign person is connected to a foreign country or foreign government, and whether the connection may affect U.S. national security. Substantial interest . Regarding covered transactions with foreign government interests, CFIUS is directed to define the term \"substantial interest.\" In defining the term, CFIUS is directed to consider the means by which a foreign government could influence the actions of a foreign person, including through board membership, ownership interest, or shareholder rights. An interest that is excluded under indirect investment or less than 10% is not considered a substantial interest. Other provisions required by regulation .Transfer of assets pursuant to bankruptcy . CFIUS is required to prescribe regulations for covered transactions that include any transaction that arises pursuant to a bankruptcy proceeding or other form of default on debt. Information required for a declaration . CFIUS is required to develop regulations concerning the type and extent of information parties to an investment transaction are required to provide when submitting a declaration that should not exceed five pages. CFIUS also is required to develop regulations specifying the types of transactions that are required to submit a mandatory declaration. Other declarations . CFIUS may develop regulations that require parties with respect to any investment transaction to submit a declaration. Cooperation with allies and partners. The CFIUS chairperson, in consultation with other members of the Committee, is directed to establish a formal process for exchanging information with governments of countries that are allies or partners of the United States to protect U.S. national security and that of the allies and partners. The process is required to be designed to facilitate the \"harmonization\" of trends in investment and technology that could pose risks to the national security of the United States and its allies and partners; provide for sharing information on specific technologies and entities acquiring technologies to ensure national security; and include consultation with representatives of allied and partner governments on a recurring basis. Additional compliance measures . CFIUS is required to develop methods for evaluating compliance with any mitigation agreement or condition entered into or agreed relative to an investment transaction that allows CFIUS to adequately ensure compliance without unnecessarily diverting resources from assessing new transactions. Filing fees . CFIUS is granted the authority to determine in regulations the amounts of fees and to collect fees on each covered foreign investment transaction for which a written notice was submitted to CFIUS; the amount of fees collected are limited to the costs of administering CFIUS's reviews. CFIUIS can also periodically reconsider and adjust the amount of the fees to ensure that the amount of fees does not exceed the costs of administering the program. Since the review process involves numerous federal government agencies with varying missions, CFIUS seeks consensus among the member agencies on every transaction. Any agency that has a different assessment of the national security risks posed by a transaction has the ability to push that assessment to a higher level within CFIUS and, ultimately, to the President. As a matter of practice, before CFIUS clears a transaction to proceed, each member agency confirms to Treasury, at politically accountable levels, that it has no unresolved national security concerns with the transaction. CFIUS is represented through the review process by Treasury and by one or more other agencies that Treasury designates as a lead agency based on the subject matter of the transaction. At the end of a review or investigation, CFIUS provides a written certification to Congress that it has no unresolved national security concerns. This certification is executed by Senate-confirmed officials at these agencies at either the Assistant Secretary or Deputy Secretary level, depending on the stage of the process at which the transaction is cleared. According to Treasury Department regulations, investment transactions that are not considered to be covered transactions and, therefore, not subject to a CFIUS review are those that are undertaken \"solely for the purpose of investment,\" or an investment in which the foreign investor has \"no intention of determining or directing the basic business decisions of the issuer.\" In addition, investments that are solely for investment purposes are defined as those (1) in which the transaction does not involve owning more than 10% of the voting securities of the firm; or (2) those investments that are undertaken directly by a bank, trust company, insurance company, investment company, pension fund, employee benefit plan, mutual fund, finance company, or brokerage company \"in the ordinary course of business for its own account.\" Other transactions not covered include (1) stock splits or a pro rata stock dividend that does not involve a change in control; (2) an acquisition of any part of an entity or of assets that do not constitute a U.S. business; (3) an acquisition of securities by a person acting as a securities underwriter, in the ordinary course of business and in the process of underwriting; and (4) an acquisition pursuant to a condition in a contract of insurance relating to fidelity, surety, or casualty obligations if the contract was made by an insurer in the ordinary course of business. In addition, Treasury regulations stipulate that the extension of a loan or a similar financing arrangement by a foreign person to a U.S. business will not be considered a covered transaction and will not be investigated, unless the loan conveys a right to the profits of the U.S. business or involves a transfer of management decisions. An element of the CFIUS process added by FINSA and reinforced by FIRRMA is the addition of \"critical industries\" and \"homeland security\" as broad categories of economic activity that could be subject to a CFIUS national security review, ostensibly broadening CFIUS's mandate. The precedent for this action was set in the Patriot Act of 2001 and the Homeland Security Act of 2002, which define critical industries and homeland security and assign responsibilities for those industries to various federal government agencies. FINSA references those two acts and borrows language from them on critical industries and homeland security. After the September 11 th terrorist attacks, Congress passed and President Bush signed the USA PATRIOT Act of 2001 (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism). In this act, Congress provided for special support for \"critical industries,\" which it defined as systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters. This broad definition is enhanced to some degree by other provisions of the act, which identify certain sectors of the economy that are likely candidates for consideration as components of the national critical infrastructure. These sectors include telecommunications, energy, financial services, water, transportation sectors, and the \"cyber and physical infrastructure services critical to maintaining the national defense, continuity of government, economic prosperity, and quality of life in the United States.\" The following year, Congress adopted the language in the Patriot Act on critical infrastructure into The Homeland Security Act of 2002. In addition, the Homeland Security Act added key resources to the list of critical infrastructure (CI/KR) and defined those resources as \"publicly or privately controlled resources essential to the minimal operations of the economy and government.\" Through a series of directives, the Department of Homeland Security identified 17 sectors of the economy as falling within the definition of critical infrastructure/key resources and assigned primary responsibility for those sectors to various federal departments and agencies, which are designated as Sector-Specific Agencies (SSAs). On March 3, 2008, Homeland Security Secretary Chertoff signed an internal DHS memo designating Critical Manufacturing as the 18 th sector on the CI/KR list. In 2013, the list of critical industries was altered through a Presidential Policy Directive (PPD-21). The directive listed three \"strategic imperatives\" as drivers of the Federal approach to strengthening \"critical infrastructure security and resilience:\" 1. Refine and clarify functional relationships across the Federal Government to advance the national unity of effort to strengthen critical infrastructure security and resilience; 2. Enable effective information exchange by identifying baseline data and systems requirements for the Federal Government; and 3. Implement an integration and analysis function to inform planning and operations decisions regarding critical infrastructure. The directive assigns the main responsibility to the Department of Homeland Security for identifying critical industries and coordinating efforts among the various government agencies, among a number of responsibilities. The directive also assigns roles to other agencies and designated 16 sectors as critical to the U.S. infrastructure. The sectors are (1) chemical; (2) commercial facilities; (3) communications; (4) critical manufacturing; (5) dams; (6) defense industrial base; (7) emergency services; (8) energy; (9) financial services; (10) food and agriculture; (11) government facilities; (12) health care and public health; (13) information technology; (14) nuclear reactors, materials, and waste; (15) transportation systems; and (16) water and wastewater systems. FIRRMA added language on critical technologies, which are defined as: Defense articles or defense services included on the United States Munitions List set forth in the International Traffic in Arms Regulations under subchapter M of chapter I of title 22, Code of Federal Regulations. Items included on the Commerce Control List set forth in Supplement No. 1 to part 774 of the Export Administration Regulations under subchapter C of chapter VII of title 15, Code of Federal Regulations, and controlled— pursuant to multilateral regimes, including for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology; for reasons relating to regional stability or surreptitious listening. Specially designed and prepared nuclear equipment, parts and components, materials, software, and technology covered by part 810 of title 10, Code of Federal Regulations (relating to assistance to foreign atomic energy activities). Nuclear facilities, equipment, and material covered by part 110 of title 10, Code of Federal Regulations (relating to export and import of nuclear equipment and material). Select agents and toxins covered by part 331 of title 7, Code of Federal Regulations, part 121 of title 9 of such Code, or part 73 of title 42 of such Code. Emerging and foundational technologies controlled pursuant to section 1758 of the Export Control Reform Act of 2018. The CFIUS statute itself does not provide a definition of the term \"control,\" but such a definition is included in the Treasury Department's regulations and enhanced through FIRRMA to include reviews of transactions that do not involve a controlling interest. According to those regulations, control is not defined as a numerical benchmark, but instead focuses on a functional definition of control, or a definition that is governed by the influence the level of ownership permits the foreign entity to affect certain decisions by the firm. According to the Treasury Department's regulations: The term control means the power, direct or indirect, whether or not exercised, and whether or not exercised or exercisable through the ownership of a majority or a dominant minority of the total outstanding voting securities of an issuer, or by proxy voting, contractual arrangements or other means, to determine, direct or decide matters affecting an entity; in particular, but without limitation, to determine, direct, take, reach or cause decisions regarding: (1) The sale, lease, mortgage, pledge or other transfer of any or all of the principal assets of the entity, whether or not in the ordinary course of business; (2) The reorganization, merger, or dissolution of the entity; (3) The closing, relocation, or substantial alternation of the production operational, or research and development facilities of the entity; (4) Major expenditures or investments, issuances of equity or debt, or dividend payments by this entity, or approval of the operating budget of the entity; (5) The selection of new business lines or ventures that the entity will pursue; (6) The entry into termination or nonfulfillment by the entity of significant contracts; (7) The policies or procedures of the entity governing the treatment of nonpublic technical, financial, or other proprietary information of the entity; (8) The appointment or dismissal of officers or senior managers; (9) The appointment or dismissal of employees with access to sensitive technology or classified U.S. Government information; or (10) The amendment of the Articles of Incorporation, constituent agreement, or other organizational documents of the entity with respect to the matters described at paragraph (a) (1) through (9) of this section. Treasury Department regulations also provide some guidance to firms that are deciding whether they should notify CFIUS of a proposed or pending merger, acquisition, or takeover. The guidance states that proposed acquisitions that need to notify CFIUS are those that involve \"products or key technologies essential to the U.S. defense industrial base.\" This notice is not intended for firms that produce goods or services with no special relation to national security, especially toys and games, food products (separate from food production), hotels and restaurants, or legal services. CFIUS has indicated that in order to ensure an unimpeded inflow of foreign investment it would implement the statute \"only insofar as necessary to protect the national security,\" and \"in a manner fully consistent with the international obligations of the United States.\" FIRRMA defines the term control to mean: \"the power, direct or indirect, whether exercised or not exercised, to determine, direct, or decide important matters affecting an entity, subject to regulations prescribed by the Committee.\" Also, Congress added six additional factors through FIRRMA that CFIUS and the President \"may\" consider in reviewing investment transactions, including the fourth factor, as indicated in the section below on factors for consideration. The CFIUS statute includes a list of 12 factors the President must consider in deciding to block a foreign acquisition, although the President is not required to block a transaction based on these factors. Additionally, CFIUS members can consider the factors as part of their own review process to determine if a particular transaction threatens to impair the national security. This list includes the following elements: (1) domestic production needed for projected national defense requirements; (2) capability and capacity of domestic industries to meet national defense requirements, including the availability of human resources, products, technology, materials, and other supplies and services; (3) control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the U.S. to meet the requirements of national security; (4) potential effects of the transactions on the sales of military goods, equipment, or technology to a country that supports terrorism or proliferates missile technology or chemical and biological weapons; and transactions identified by the Secretary of Defense as \"posing a regional military threat\" to the interests of the United States; (5) potential effects of the transaction on U.S. technological leadership in areas affecting U.S. national security; (6) whether the transaction has a security-related impact on critical infrastructure in the United States; (7) potential effects on United States critical infrastructure, including major energy assets; (8) potential effects on United States critical technologies; (9) whether the transaction is a foreign government-controlled transaction; (10) in cases involving a government-controlled transaction, a review of (A) the adherence of the foreign country to nonproliferation control regimes, (B) the foreign country's record on cooperating in counter-terrorism efforts, (C) the potential for transshipment or diversion of technologies with military applications; (11) long-term projection of the United States requirements for sources of energy and other critical resources and materials; and (12) such other factors as the President or the Committee determine to be appropriate. Factors 6-12 were added through the FINSA Act potentially broadening the scope of CFIUS's reviews and investigations. As previously indicated, instead of adding new factors to this section of the statute, FIRRMA offered six new elements CFIUS and the President \"may\" consider as part of their deliberations through a sense of Congress provision. Previously, CFIUS had been directed by Treasury Department regulations to focus its activities primarily on investments that had an impact on U.S. national defense security. The additional factors, however, incorporate economic considerations into the CFIUS review process in a way that was specifically rejected when the original Exon-Florio amendment was adopted and refocuses CFIUS's reviews and investigations on considering the broader rubric of economic security, although the term is not specifically mentioned. In particular, CFIUS is required to consider the impact of an investment on critical infrastructure and critical technologies as factors for considering a recommendation to the President that a transaction be blocked or postponed. As previously indicated, critical infrastructure is defined in broad terms as \"any systems and assets, whether physical or cyber-based, so vital to the United States that the degradation or destruction of such systems or assets would have a debilitating impact on national security, including national economic security and national public health or safety.\" The six factors added by FIRRMA through a sense of Congress that CFIUS and the President may consider in evaluating the national security implications of an investment are: 1. a transaction involves a country of special concern that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security; 2. the potential national security-related effects of the cumulative control of, or pattern of recent transactions involving, any one type of critical infrastructure, energy asset, critical material, or critical technology by a foreign government or foreign person; 3. whether any foreign person engaging in a covered transaction with a United States business has a history of complying with United States laws and regulations; 4. control of United States industries and commercial activity by foreign persons as it affects the capability and capacity of the United States to meet the requirements of national security, including the availability of human resources, products, technology, materials, and other supplies and services, and in considering ''the availability of human resources'', should construe that term to include potential losses of such availability resulting from reductions in the employment of United States persons whose knowledge or skills are critical to national security, including the continued production in the United States of items that are likely to be acquired by the Department of Defense or other Federal departments or agencies for the advancement of the national security of the United States ; 5. the extent to which a covered transaction is likely to expose, either directly or indirectly, personally identifiable information, genetic information, or other sensitive data of United States citizens to access by a foreign government or foreign person that may exploit that information in a manner that threatens national security; and 6. a transaction that is likely to have the effect of exacerbating or creating new cybersecurity vulnerabilities in the United States or is likely to result in a foreign government gaining a significant new capability to engage in malicious cyber-enabled activities against the United States, including such activities designed to affect the outcome of any election for Federal office. 52 As originally drafted, the Exon-Florio provision also would have applied to joint ventures and licensing agreements in addition to mergers, acquisitions, and takeovers. Joint ventures and licensing agreements subsequently were dropped from the proposal because the Reagan Administration and various industry groups argued at the time that such business practices were deemed to be beneficial arrangements for U.S. companies. In addition, they argued that any potential threat to national security could be addressed by the Export Administration Act and the Arms Control Export Act. FIRRMA added joint ventures as a matter for consideration during a CFIUS review or investigation. FINSA codified, and FIRRMA maintains, confidentiality requirements that are similar to those that appeared in the Exon-Florio amendment and Executive Order 11858 by stating that any information or documentary material filed under the provision may not be made public \"except as may be relevant to any administrative or judicial action or proceeding.\" The provision does state, however, that this confidentiality provision \"shall not be construed to prevent disclosure to either House of Congress or to any duly authorized committee or subcommittee of the Congress.\" The provision provides for the release of proprietary information \"which can be associated with a particular party\" to committees only with assurances that the information will remain confidential. Members of Congress and their staff members are accountable under current provisions of law governing the release of certain types of information. Current statute requires the President to provide a written report to the Secretary of the Senate and the Clerk of the House detailing his decision and his actions relevant to any transaction that was subject to a 45-day investigation. Since the implementation of the Exon-Florio provision in the 1980s, CFIUS had developed several informal practices that likely were not envisioned when the statute was drafted. In particular, members of CFIUS on occasion negotiated conditions with firms to mitigate or to remove business arrangements that raised national security concerns among the CFIUS members. Such agreements often were informal arrangements that had an uncertain basis in statute and had not been tested in court. These arrangements often were negotiated during the formal review period, or even during an informal process prior to the formal filing of a notice of an investment transaction. FINSA required CFIUS to designate a lead agency to negotiate, modify, monitor, and enforce agreements in order to mitigate any threat to national security. Such agreements are required to be based on a \"risk-based analysis\" of the threat posed by the transaction. CFIUS is also required to develop a method for evaluating the compliance of firms that have entered into a mitigation agreement or condition that was imposed as a requirement for approval of the investment transaction. Such measures, however, are required to be developed in such a way that they allow CFIUS to determine that compliance is taking place without also (1) \"unnecessarily diverting\" CFIUS resources from assessing any new covered transaction for which a written notice had been filed; and (2) placing \"unnecessary\" burdens on a party to an investment transaction. If a notification of a transaction is withdrawn before any review or investigation by CFIUS is completed, CFIUS can take a number of actions, including (1) interim protections to address specific concerns about the transaction pending a resubmission of a notice by the parties; (2) specific time frames for resubmitting the notice; and (3) a process for tracking any actions taken by any party to the transaction. Also, any federal entity or entities that are involved in any mitigation agreement are to report to CFIUS if there is any modification that is made to any agreement or condition that had been imposed and to ensure that \"any significant\" modification is reported to the Director of National Intelligence and to any other federal department or agency that \"may have a material interest in such modification.\" Such reports are required to be filed with the Attorney General. FIRRMA further authorizes CFIUS to: conduct periodic reviews of mitigation agreements to determine if the agreements should be phased out or modified if a threat no longer requires mitigation; negotiate, enter into or impose, and enforce any agreement or condition with any party to an investment transaction during and after consideration of a transaction to mitigate any risk to the national security of the United States as a result of the transaction; and review periodically the appropriateness of an agreement or condition and terminate, phase out, or otherwise amend the agreement or condition if a threat no longer requires mitigation through the agreement or condition. In agreeing to a mitigation agreement, CFIUS must determine that the agreement will resolve the national security concerns posed by the transaction, taking into consideration whether the agreement or condition is reasonably calculated to: be effective, verifiable, monitored, and enforceable. FIRRMA established a fund within Treasury and appropriates $20 million to CFIUS for each of fiscal years 2019 through 2023. FIRRMA also authorizes CFIUS to develop a fee schedule, determined through regulation, for each transaction, in addition to an expedited process for hiring additional staff. The fee is restricted to be 1% of the value of the transaction, or three hundred thousand dollars. In developing regulations, CFIUS is also required to consider the impact on small businesses, the expenses to CFIUS associated with conducting reviews, and the impact on foreign investment. Also, the total amount of fees collected are limited to not exceed the costs of administering the fees. FIRRMA also directs CFIUS to study the feasibility of establishing a fee or a fee structure to prioritize a response to informal notices prior to the submission of a formal written notice of an impending or proposed transaction. FIRRMA also requires the President to determine whether and to what extent the expansion of CFIUS' responsibilities as a result of the additional duties designated by FIRRMA requires additional resources. If additional resources are necessary, the President is required to make such a request in the Administration's annual budget. Both FINSA and FIRRMA increased the types and number of reports that CFIUS is required to send to certain specified Members of Congress. In particular, CFIUS is required to brief certain congressional leaders if they request such a briefing and to report annually to Congress on any reviews or investigations it has conducted during the prior year. CFIUS provides a classified report to Congress each year and a less extensive report for public release. Each report is required to include a list of all concluded reviews and investigations, information on the nature of the business activities of the parties involved in an investment transaction, information about the status of the review or investigation, and information on any transactions that were withdrawn from the process, any roll call votes by the Committee, any extension of time for any investigation, and any presidential decision or action. In the classified report, FIRRMA imposed new reporting requirements on CFIUS concerning: the outcome of each review or investigation, including whether a mitigation agreement or condition was entered into and any action by the President; basic information concerning the parties involved; the nature of the business activities or products; statistics on compliance plans and cumulative and trend information on declarations and actions taken; methods used by the Committee to identify nonnotified and nondeclared transactions; a summary of the hiring practices and policies of the Committee; in cases where the Committee has recommended that the President suspend or prohibit a transaction because it threatens to impair the national security, CFIUS is required to notify Congress of the recommendation and, upon request, provide a classified briefing on the recommendation; not later than two years after enactment of FIRRMA, and every two years thereafter through 2026, the Secretary of Commerce is required to submit to Congress and CFIUS a report on foreign direct investment transactions made by entities of the People's Republic of China in the United States. In addition, CFIUS is required to report on trend information on the numbers of filings, investigations, withdrawals, and presidential decisions or actions that were taken. The report must include cumulative information on the business sectors involved in filings and the countries from which the investments originated; information on the status of the investments of companies that withdrew notices and the types of security arrangements and conditions CFIUS used to mitigate national security concerns; the methods the Committee used to determine that firms were complying with mitigation agreements or conditions; and a detailed discussion of all perceived adverse effects of investment transactions on the national security or critical infrastructure of the United States. The Secretary of the Treasury, in consultation with the Secretaries of State and Commerce, is directed by FINSA to conduct a study on investment in the United States, particularly in critical infrastructure and industries affecting national security, by (1) foreign governments, entities controlled by or acting on behalf of a foreign government, or persons of foreign countries which comply with any boycott of Israel; or (2) foreign governments, entities controlled by or acting on behalf of a foreign government, or persons of foreign countries which do not ban organizations designated by the Secretary of State as foreign terrorist organizations. In addition, CFIUS is required to provide an annual evaluation of any credible evidence of a coordinated strategy by one or more countries or companies to acquire U.S. companies involved in research, development, or production of critical technologies in which the United States is a leading producer. The report must include an evaluation of possible industrial espionage activities directed or directly assisted by foreign governments against private U.S. companies aimed at obtaining commercial secrets related to critical technologies. According to the annual report filed by CFIUS, CFIUS activity dropped sharply in 2009 as a result of tight credit markets and hesitation by banks to fund acquisitions and takeovers during the global financial crisis, but rebounded in 2010, as indicated in Table 2 . During the eight-year period 2008-2015 (the latest years for which such data are available), foreign investors sent 925 notices to CFIUS of plans to acquire, take over, or merge with a U.S. firm. In comparison, the Commerce Department reports there were over 1,800 foreign investment transactions in 2015, slightly less than half of which were acquisitions of existing U.S. firms. Acquisitions, however, accounted for 96% of the total annual value of foreign direct investments. Of the investment transactions notified during the 2008-2015 period, about 4% were withdrawn during the initial 30-day review; about 36% of the total notified transactions required a 45-day investigation. Also, of the transactions investigated, about 6% were withdrawn before a final determination was reached. As a result, of the 925 proposed investment transactions notified to CFIUS during this period, 822 transactions, or 89% of the transactions, were completed. As noted earlier in this report, but not in the 2017 CFIUS report, a presidential decision was made in six cases to date. The CFIUS report indicates that 43% of foreign investment transactions notified to CFIUS from 2008 to 2015 were in the manufacturing sector. Investments in the finance, information, and services sectors accounted for another 31% of the total notified transactions, as indicated in Table 3 . Within the manufacturing sector, 43% of all investment transactions notified to CFIUS between 2013 and 2015 were in the computer and electronic products sectors, a share that rose to 49% in 2015. The next three sectors with the highest number of transactions were the transportation equipment sector, which was recorded at 12% in the 2013-2015 period and in 2015, the machinery sector, which fell from 13% in the 2013-2015 period to 12% in 2015, and the electrical equipment and computer sector, which fell from 11% of manufacturing transactions in 2013-2015 to 3% in 2015. Within the finance, information, and services sector, professional services accounted for 20% of transactions 2015, down from 37% recorded in the 2013-2015 period. Notified transactions in publishing (21%), telecommunications (17%), and real estate (10%) comprised the next most active sectors. Table 4 shows foreign investment transactions by the home country of the foreign investor and the industry composition of the investment transactions. According to data based on notices provided to CFIUS by foreign investors, Chinese investors were the most active in acquisitions, takeovers, or mergers during the 2013-2015 period, accounting for 19% of the total number of transactions. The United Kingdom and Canada join China as the top three countries of origin for investors providing notifications to CFIUS. For China and the UK, investment notifications were concentrated in the manufacturing, finance, information, and services sectors, although nearly one-fifth of Chinese transactions were in the mining, construction, and utilities sectors. The ranking of countries in Table 4 differs in a number of important ways from data published by the Bureau of Economic Analysis on the cumulative amount, or the total book value, of foreign direct investment in the United States, which places the United Kingdom, Japan, the Netherlands, Germany, Canada, and Switzerland as the most active countries of origin for foreign investment in the United States. Table 5 provides information on notified foreign investment transactions by in critical technology classified by types of foreign investment. According to CFIUS, the Committee reviewed 130 transactions in 2015 (126 transactions were reported by CFIUS for the data in Table 5 ) involving acquirers from 32 countries to determine if it could detect a coordinated strategy. Solo acquisitions accounted for 86% of the total number of transactions. According to CFIUS, the largest number of transactions in critical technology occurred in the Information Technology and the Aerospace & Defense sectors. The CFIUS annual report also provides some general information on the total number of cases in which it applied legally binding mitigation measures. The report did not list any specific cases or measures, but it did indicate that CFIUS applied mitigation measures to 40 cases in the 2013-2015 period. According to the CFIUS report, in 2015 CFIUS agencies negotiated, and parties adopted, mitigation measures for 11 covered transactions. These mitigation measures have included a number of different approaches, including Ensuring that only authorized persons have access to certain technologies and information. Establishing a Corporate Security Committee and other mechanisms to ensure compliance with all required actions, including the appointment of a U.S. government-approved security officer or member of the board of directors and requirements for security policies, annual reports, and independent audits. Establishing guidelines and terms for handling existing or future U.S. government contracts, U.S. government customer information, and other sensitive information. Ensuring only U.S. citizens handle certain products and services, and ensuring that certain activities and products are located only in the United States. Notifying security officers or relevant U.S. government parties in advance of foreign national visits to the U.S. business for approval. Security protocols to ensure the integrity of goods or software sold to the U.S. Government. Notifying customers regarding the change of ownership. Assurances of continuity of supply for defined periods, and notification and consultation prior to taking certain business decisions, with certain rights in the event that the company decides to exit a business line. Established meetings to discuss business plans that might affect U.S. Government or national security considerations. Exclusion of certain sensitive assets from the transaction. Providing the U.S. Government with the right to review certain business decisions and object if they raise national security concerns. CFIUS also implemented procedures to evaluate and ensure that parties to an investment transaction remain in compliance with any risk mitigation measures that were adopted to gain approval of the investment. These procedures include the following: Periodic reporting to U.S. Government agencies by the companies. On-site compliance reviews by U.S. Government agencies. Third party audits when provided for by the terms of the mitigation measures. Investigations and remedial actions if anomalies or breaches are discovered or suspected. Assigning staff responsibilities to monitor compliance. Designating tracking systems to monitor required reports. Instituting internal instructions and procedures to ensure that in-house expertise is drawn upon to analyze compliance with measures. The U.S. policy approach to international investment generally aimed to establish an open and rules-based system that is consistent across countries and in line with U.S. interests as the largest global foreign direct investor and largest recipient of foreign direct investment. In addition, U.S. foreign direct investment policy has been founded on the concept that the net benefits of such investment are positive and benefit both the United States and the foreign investor, except in certain circumstances concerning risks to national security and for prudential reasons. Even in these cases, however, the U.S. approach generally has been to limit any market distorting impact of the national security review process. Under the CFIUS statute, Congress set a legal standard for the President to meet before he could block or suspend investment transactions: no other laws apply, and he determines that there is \"credible evidence\" that the action does not simply affect national security, but that it \"threatens to impair the national security,\" or that it poses a risk to national security In 2018, Congress and the Trump Administration amended the CFIUS statute through the Foreign Investment Risk Review Modernization Act (FIRRMA) to address a broader range of issues concerning foreign direct investment in the U.S. economy. In part, the motivation for the change in the CFIS statute reflects differing views of the role CFIUS should play in overseeing foreign investment transactions and the concept of national security, particularly as it relates to national economic interests. In some ways, current discussions regarding the role of CFIUS mirror previous debates over a working set of parameters that establish a functional definition of the national economic security implications of foreign direct investment and expose differing assessments of the economic impact of foreign investment on the U.S. economy and differing political and philosophical convictions. Previous congressional efforts to amend the CFIUS statute were driven in large part by national security concerns related to a particular foreign investment transaction, such as the Dubai Ports transaction. More recently, concerns have arisen from a combination of issues, including (1) an increase in foreign investment activity by Chinese state-owned firms; (2) the perception that such investment is part of a government-coordinated approach that serves official strategic purposes, rather than purely commercial interests; and (3) that investments by Chinese firms are receiving government support through subsidized financing or other types of government support that give Chinese firms an \"unfair\" competitive advantage over other private investors. While Members of Congress and others have expressed concerns over investments by Chinese entities, the broader issue of the role of foreign investment in the economy and the interaction between foreign investment and national security predate the creation of CFIUS. Such concerns arguably are heightened by a changing global economic order that is marked by rising emerging economies such as China and India that are more active internationally and changing notions of national economic interests. Changes to CFIUIS through FIRRMA broaden CFIUS' mandate beyond the original narrow focus on the national security implications of individual investment transactions to a more comprehensive assessment of the impact of a combination of transactions. In addition, CFIUS is now required to analyze the impact of certain types of real estate transactions and the potential impact of foreign investment in start-up companies with potentially foundational technologies. These issues and others raise questions for Congress to consider, including: Through FIRRMA, Congress expanded the role of CFIUS in protecting U.S. national security interests. What rubric should CFIUS use to weigh national security interests against economic interests, particularly at the state and local levels that seek foreign investment to support local jobs and tax revenues? The United States is the single largest recipient of foreign investment and the largest overseas direct investor in the world. How should Congress assess the role of CFIUS in protecting U.S. national security interests while supporting the stated policy of the United States to support international efforts to maintain policies that accommodate foreign direct investment? In any year, the level of foreign investment activity is driven in large part by broad economic fundamentals, including merger and acquisition (M&A) activity. As a result, CFIUS' activities could vary substantially from year to year, depending on forces outside its control. How should Congress evaluate CFIUS' activities given these circumstances? Congress has expressed its concerns through FIRRMA about foreign access to critical technologies through investments and acquisitions developed by U.S. firms. How can CFIUS satisfy congressional concerns about the potential loss of leading-edge technologies while avoiding potential conflicts that inhibit the development of new technologies by start-up firms? In response to FIRRMA, Treasury Department regulations identify 27 industries as critical industries for consideration by CFIUS and the President in deciding to block or suspend a foreign investment transaction. How should CFIUS weigh concerns over foreign investments concentrated in certain industries relative to capital needs and requirements in fast-growing industries that may rely on foreign funds in order to expand? What rubric is CFIUS using to determine how much foreign investment in an industry is considered too concentrated? Without providing a definition of national security, Congress has directed CFIUS to protect the United States against investments that threaten to impair the national security. What rubric should CFIUS use to evaluate the national security implications of such items as personally identifiable information?", "summary": "The Committee on Foreign Investment in the United States (CFIUS) is an interagency body comprised of nine Cabinet members, two ex officio members, and other members as appointed by the President, that assists the President in reviewing the national security aspects of foreign direct investment in the U.S. economy. While the group often operated in relative obscurity, the perceived change in the nation's national security and economic concerns following the September 11, 2001, terrorist attacks and the proposed acquisition of commercial operations at six U.S. ports by Dubai Ports World in 2006 placed CFIUS's review procedures under intense scrutiny by Members of Congress and the public. In 2018, prompted by concerns over Chinese and other foreign investment in U.S. companies with advanced technology, Members of Congress and the Trump Administration enacted the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which became effective on November 11, 2018. This measure marked the most comprehensive revision of the foreign investment review process under CFIUS since the previous revision in 2007, the Foreign Investment and National Security Act (FINSA). Generally, efforts to amend CFIUS have been spurred by a specific foreign investment transaction that raised national security concerns. Despite various changes to the CFIUS statute, some Members and others question the nature and scope of CFIUS reviews. The CFIUS process is governed by statute that sets a legal standard for the President to suspend or block a transaction if no other laws apply and if there is \"credible evidence\" that the transaction threatens to impair the national security, which is interpreted as transactions that pose a national security risk. The U.S. policy approach to international investment traditionally established and supported an open and rules-based trading system that is in line with U.S. economic and national security interests. Recent debate over CFIUS reflects long-standing concerns about the impact of foreign investment on the economy and the role of economics as a component of national security. Some Members question CFIUS's performance and the way the Committee reviews cases involving foreign governments, particularly with the emergence of state-owned enterprises, and acquisitions involving leading-edge or foundational technologies. Recent changes expand CFIUS's purview to include a broader focus on the economic implications of individual foreign investment transactions and the cumulative effect of foreign investment on certain sectors of the economy or by investors from individual countries. Changes in U.S. foreign investment policy have potentially large economy-wide implications, since the United States is the largest recipient and the largest overseas investor of foreign direct investment. To date, six investments have been blocked, although proposed transactions may have been withdrawn by the firms involved in lieu of having a transaction blocked. President Obama used the FINSA authority in 2012 to block an American firm, Ralls Corporation, owned by Chinese nationals, from acquiring a U.S. wind farm energy firm located near a Department of Defense (DOD) facility and to block a Chinese investment firm in 2016 from acquiring Aixtron, a Germany-based firm with assets in the United States. In 2017, President Trump blocked the acquisition of Lattice Semiconductor Corp. by the Chinese investment firm Canyon Bridge Capital Partners; in 2018, he blocked the acquisition of Qualcomm by Broadcom; and in 2019, he directed Beijing Kunlun Co. to divest itself of Grindr LLC, an online dating site, over concerns of foreign access to personally identifiable information of U.S. citizens. Given the number of regulatory changes mandated by FIRRMA, Congress may well conduct oversight hearings to determine the status of the changes and their implications.", "document_type": "crs"}
{"report": "Since 2002, Canada has been the United States' top agricultural export market. Mexico was the second-largest export market until 2010, when China displaced Mexico as the second-leading market with Mexico becoming the third-largest U.S. agricultural export market. In FY2018, U.S. agricultural exports t otaled $143 billion, of which Canada and Mexico jointly accounted for about 27%. USDA's Economic Research Service estimates that in 2017 each dollar of U.S. agricultural exports stimulated an additional $1.30 in business activity in the United States. That same year, U.S. agricultural exports generated an estimated 1,161,000 full-time civilian jobs, including 795,000 jobs outside the farm sector. U.S. agricultural exports to Canada and Mexico are an important part of the U.S. economy, and the growth of these markets is partly the result of the North American market liberalization under the North American Free Trade Agreement (NAFTA). On September 30, 2018, the Trump Administration announced an agreement with Canada and Mexico for a U.S.-Mexico-Canada Agreement (USMCA) that would possibly replace NAFTA. NAFTA entered into force on January 1, 1994, following the passage of the implementing legislation by Congress ( P.L. 103-182 ). NAFTA was structured as three separate bilateral agreements: one between Canada and the United States, a second between Mexico and the United States, and a third between Canada and Mexico. Provisions of the Canada-U.S. Trade Agreement (CUSTA), which went into effect on January 1, 1989, continued to apply under NAFTA (see Table 1 ). CUSTA opened up a 10-year period for tariff elimination and agricultural market integration between the two countries. The agricultural provisions agreed upon for CUSTA remained in force as provisions of the new NAFTA agreement. While tariffs were phased out for almost all agricultural products, NAFTA (in accordance with the original CUSTA provisions) exempted certain products from market liberalization. These exemptions included U.S. imports from Canada of dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products and Canadian imports from the United States of dairy products, poultry, eggs, and margarine. Canada liberalized its agricultural sector under NAFTA, but liberalization did not include its dairy, poultry, and egg product sectors, which continued to be governed by domestic supply management policies and are protected from imports by high over-quota tariffs. Quotas that once governed bilateral trade in these commodities were redefined, under NAFTA, as tariff-rate quotas (TRQs) to comply with the Uruguay Round Agreement on Agriculture (URAA), which took effect on January 1, 1995. A TRQ is a quota for a volume of imports at a favorable tariff rate, which was set at zero under NAFTA. Imports beyond the quota volume face higher over-quota tariff rates. The United States and Mexico agreement under NAFTA did not exclude any agricultural products from trade liberalization. Numerous restrictions on bilateral agricultural trade were eliminated immediately upon NAFTA's implementation, while others were phased out over a 14-year period. Remaining trade restrictions on the last handful of agricultural commodities (such as U.S. exports to Mexico of corn, dry edible beans, and nonfat dry milk and Mexican exports to the United States of sugar, cucumbers, orange juice, and sprouting broccoli) were removed upon the completion of the transition period in 2008. Under NAFTA, Mexico eliminated all the tariffs and quotas that formerly governed agricultural imports from the United States. In addition to directly improving market access, NAFTA set guidance and standards on other policies and regulations that facilitated the integration of the North American agricultural market. For example, NAFTA included provisions for rules of origin, intellectual property rights, foreign investment, and dispute resolution. NAFTA's sanitary and phytosanitary (SPS) provisions made a significant contribution toward the expansion of agricultural trade by harmonizing regulations and facilitating trade. Because NAFTA entered into force before URAA, NAFTA's SPS agreement is considered to have provided the blueprint for URAA's SPS agreement. Regarding trade in agricultural products, the Office of the U.S. Trade Representative (USITC) asserts that USMCA would build upon NAFTA to make \"important improvements in the agreement to enable food and agriculture to trade more fairly, and to expand exports of American agricultural products.\" For USMCA to enter into force, Congress would need to ratify the agreement. It must also be ratified by Canada and Mexico. The timeline for congressional approval of USMCA would likely occur under the Trade Promotion Authority (TPA) timeline established under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 ). At various times, President Trump has stated that he intends to withdraw from NAFTA. Some observers have suggested that delays in congressional action on USMCA could make it harder for Canada to consider USMCA approval this year because of upcoming parliamentary elections in October 2019. USMCA seeks to expand upon the agricultural provisions of NAFTA by further reducing market access barriers and strengthening provisions to facilitate trade in North America. An important change in USMCA compared to NAFTA is that the United States agreement with Canada would expand TRQs for imports of U.S. agricultural products into Canada. Other important changes from NAFTA include the agreement between the three countries—Canada, Mexico, and the United States—to further harmonize trade in products of agricultural biotechnology and apply the same health, safety, and marketing standards to agricultural and food imports from USMCA partners as for domestic products. As agreed upon by the leaders of the United States, Canada, and Mexico, all food and agricultural products that have zero tariffs under NAFTA would remain at zero under USMCA. Under USMCA, agricultural products exempted from tariff elimination under the agreement signed between the United States and Canada would be phased out for further market liberalization. Canada currently employs a supply management regime that includes TRQs on imports of dairy and poultry under its NAFTA and World Trade Organization (WTO) market access commitments. Under NAFTA, U.S. dairy has access into the Canadian market under Canada's WTO commitment provisions. For poultry, NAFTA TRQs were established in accordance with the original CUSTA provisions as a percentage of Canada's domestic production. When Canada joined the WTO in 1995, it committed to provide poultry market access at the level that is the greater of its commitment under the WTO or under NAFTA. For chicken meat, the NAFTA TRQ, set at 7.5% of the previous year's domestic production, is higher than the WTO TRQ set at 39,844 metric tons. Canada's chicken meat NAFTA TRQ was 90,100 metric tons in 2018, and the estimate is 95,000 metric tons for 2019. Both the poultry and dairy TRQs under NAFTA are global rather than specific to U.S. imports. The WTO dairy TRQs often have specific allocations for individual countries. For example, the bulk of Canada's WTO cheese quota is allocated to the European Union (EU), and the entire WTO powdered buttermilk TRQ is allocated to New Zealand. Overall, Canada's TRQs appear to have restricted imports of dairy, poultry, and egg products, as the imported volumes for these products have regularly equaled or exceeded their set quota limits. Under USMCA, Canada agreed to increase market access specifically to U.S. exporters of dairy products via new TRQs that are separate from Canada's existing WTO commitments. These additional TRQs apply only to the United States. For chicken meat and eggs, the USMCA replaces the NAFTA commitment with U.S.-specific TRQs. For turkey and broiler hatching eggs and chicks, Canada's NAFTA commitment would be replaced with a minimum access commitment under USMCA, which is not specific to U.S. imports but applies to imports from all origins. While USMCA would expand TRQs for U.S. exports, U.S. over-quota exports would still face the steep tariffs that currently exist under Canada's WTO commitment. The United States, in turn, agreed to improve access to Canadian dairy products, sugar, peanuts, and cotton. The United States would increase TRQs for Canadian dairy, sugar, and sweetened products. Tariffs on cotton and peanut imports into the United States from Canada would be phased out and eliminated five years after the agreement would take effect. As for U.S.-Mexico trade in agricultural products, under NAFTA, Mexico eliminated all the tariffs and quotas that formerly governed agricultural imports from the United States, and the proposed USMCA provides for no further market access changes for imports by Mexico of U.S. agricultural products. The proposed changes in the market access regime for U.S. agricultural exports to Canada under USMCA are summarized in Table 2 . Canada's import restrictions on U.S. dairy products was a high-profile issue for the United States in the USMCA negotiations, so it is noteworthy that under USMCA, Canada agreed to reduce certain barriers to U.S. dairy exports, a key demand of U.S. dairy groups. For one, Canada would make changes to its milk pricing system that sets low prices for Canadian skim milk solids, which is believed to have undercut U.S. exports. Six months after USMCA goes into effect, Canada would eliminate its Class 7 milk price (which includes skim milk solids and is designated as Class 6 in Ontario) and would set its price for skim milk solids based on a formula that takes into account the U.S. nonfat dry milk price. In the future, the United States and Canada would notify each other if either introduces a new milk class price or changes an existing price for a class of milk products. Under USMCA, Canada would maintain its dairy supply management system, but the TRQs would be increased each year for U.S. exports of milk, cheese, cream, skim milk powder, condensed milk, yogurt, and several other dairy categories. While existing in-quota tariffs for U.S. dairy exports to Canada are mostly zero, the over-quota rates can be as high as 200%-300%. USMCA includes provisions on transparency for the implementation of TRQs, such as providing advance notice of changes to the quotas and making public the details of quota utilization rates so that exporters could monitor the extent to which the quotas are filled. While WTO TRQs are available to U.S. dairy product exporters under the current NAFTA provisions, the new TRQs proposed by Canada under USMCA would expand the access that U.S. dairy products would have into Canada. Large portions of Canada's WTO TRQs are allocated to other countries, such as cheese to the EU and powdered buttermilk to New Zealand. Thus, USMCA TRQs would open additional market opportunities for U.S. dairy exports to Canada. For example, the 64,500 metric ton fluid milk TRQ currently provided under NAFTA is available only for cross-border shoppers, but USMCA would allow up to 85% of the proposed new fluid milk TRQ, which would reach 50,000 metric tons by year 6, to U.S. commercial dairy processors. In response to another concern raised by the U.S. dairy industry, Canada agreed to cap its global exports of skim milk powder and milk protein concentrates and to provide information regarding these volumes to the United States. USMCA includes a requirement that the United States and Canada meet five years after the implementation of the agreement—and every two years after that—to determine whether to modify the dairy provisions of the agreement. Under USMCA, Canada has proposed to replace its NAFTA commitments for poultry and eggs with new TRQs. Under USMCA, the duty-free quota for chicken meat would start at 47,000 metric tons on the agreement's entry into force and would expand to 57,000 metric tons in year six. It would then continue to increase by 1% per year for the next 10 years ( Table 2 ). The United States would also have access to Canada's WTO chicken quota available to imports from all origins of 39,844 metric tons. Under USMCA, Canada's TRQ for imports of U.S. eggs would be phased in over six equal installments, reaching 10 million dozen by year six and then increasing by 1% per year for the next 10 years. The annual TRQ for turkey and broiler hatching eggs and chicks would be set by formulas based on Canadian production (see Table 2 ). The TRQs for turkey and broiler-hatching eggs and chicks are USMCA minimum global access commitments based on the greater of Canada's anticipated current year production or its WTO commitment volume. Under USMCA, several key provisions would further expand the Canadian and Mexican market access to U.S. agricultural producers. With the exception of the wheat grading provision between Canada and Mexico, the following provisions, which aim to improve the trading regime, apply to all three countries: Wheat . Canada and the United States have agreed that they shall accord \"treatment no less favorable than it accords to like wheat of domestic origin with respect to the assignment of quality grades.\" Currently, U.S. wheat exports to Canada are graded as feed wheat, which generally commands a lower price. Under USMCA, U.S. wheat exports to Canada would receive the same treatment and price as equivalent Canadian wheat if there is a predetermination that the U.S. wheat variety is similar to a Canadian variety. Canada maintains a list of registered wheat varieties, but the United States does not have a similar list. U.S. wheat exporters would first need to have U.S. varieties approved and registered in Canada before they would be able to benefit from this equivalency provision. According to some stakeholders, this process can be onerous and take several years. Cotton . The addition of a specific textile and apparel chapter to the proposed USMCA may support U.S. cotton production. The chapter promotes greater use of North American–origin textile products such as sewing thread, pocketing, narrow elastics, and coated fabrics for certain end items. Spirits, wine, beer, and other alcoholic beverages . Each country must treat the distribution of another USMCA country's spirits, wine, beer, and other alcoholic beverages as it would its own products. The agreement also establishes new rules governing the listing requirements for a product to be sold in a given country with specific limits on cost markups of alcoholic beverages imported from USMCA countries. SPS provisions . USMCA's SPS chapter calls for greater transparency in SPS rules and regulatory alignment among the three countries. It would establish a new mechanism for technical consultations to resolve SPS issues. SPS provisions provide for increasing transparency in the development and implementation of SPS measures; advancing science-based decisionmaking; improving processes for certification, regionalization and equivalency determinations; conducting systems-based audits; improving transparency for import checks; and promoting greater cooperation to enhance compatibility of regulatory measures. Geographical indicatio ns (GIs) . The United States, Canada, and Mexico agreed to provide procedural safeguards for recognition of new GIs, which are place names used to identify products that come from certain regions or locations. USMCA would protect the GIs for food products that Canada and Mexico have already agreed to in trade negotiations with the EU and would lay out transparency and notification requirements for any new GIs that a country proposes to recognize. The agreement also details a process for determining whether a food name is common or is eligible to be protected as a GI. In a side letter accompanying the agreement, Mexico confirmed a list of 33 terms for cheese that would remain available as common names for U.S. cheese producers to use in exporting cheeses to Mexico. The list includes some terms that are protected as GIs by the EU, such as Edam, Gouda, and Brie. USMCA provisions would protect certain U.S., Canadian, and Mexican spirits as distinctive products. Under the proposed agreement, products labeled as Bourbon Whiskey and Tennessee Whiskey must originate in the United States. Similar protections would exist for Canadian Whiskey, while Tequila and Mezcal would have to be produced in Mexico. In a side letter accompanying the agreement, the United States and Mexico further agree to protect American Rye Whiskey, Charanda, Sotol, and Bacanora. Protections for proprietary food formulas . USMCA signatories agree to protect the confidentiality of proprietary formula information in the same manner for domestic and imported products. The agreement would also limit such information requirements to what is necessary to achieve legitimate objectives. Biotechnology . The agricultural chapter of USMCA lays out provisions for trade in products created using agricultural biotechnology, an issue that was not covered under NAFTA. USMCA provisions for biotechnology cover crops produced with all biotechnology methods, including recombinant DNA and gene editing. USMCA would establish a Working Group for Cooperation on Agricultural Biotechnology to facilitate information exchange on policy and trade-related matters associated with the products of agricultural biotechnology. The agreement also outlines procedures to improve transparency in approving and bringing to market agricultural biotech products. It further outlines procedures for handling shipments containing a low-level presence of unapproved products. While USMCA addresses a number of issues that restrict U.S. agricultural exports to Mexico and Canada, it does not include all of the changes sought by U.S. agricultural groups. For instance, the agreement does not include changes to trade remedy laws to address imports of seasonal produce as requested by Southeastern U.S. produce growers. It also does not address nontariff barriers to market access for U.S. fresh potatoes in Mexico and Canada. Canada's Standard Container Law (part of the Fresh Fruits and Vegetable Regulations of the Canadian Agricultural Products Act) prohibits the importation of U.S. fresh potatoes to Canada in bulk quantities (over 50 kilograms). Finally, the agreement does not address the removal of retaliatory tariffs on U.S. agricultural exports imposed by Canada and Mexico in response to U.S. Section 232 tariffs on steel and aluminum. Some U.S. agriculture stakeholders have expressed concern that the potential benefits of implementing USMCA would be outweighed by the retaliatory tariffs imposed on U.S. agricultural exports by Canada and Mexico. Since 2002, Canada and Mexico have been two of the top three export markets for U.S. agricultural products (competing with Japan until 2009, when China moved into the top three). In recent years, the two countries have jointly accounted for about 40% of the total value of U.S. agricultural exports. Intraregional trade in North America has increased substantially since the implementation of CUSTA and NAFTA and in the wake of Mexico's market-oriented agricultural reforms, which started in the 1980s ( Figure 1 ). The value of total U.S. agricultural product exports to Canada and Mexico rose from under $7 billion at the start of CUSTA in FY1990 to almost $10 billion at the start of NAFTA in FY1994 and peaked at $41 billion in FY2014. The lower level of exports since FY2014 is partly due to a drought-related decline in livestock production in parts of the United States; increased Canadian production of corn, rapeseed, and soybeans; increased use of U.S. corn as ethanol feedstock; growth in U.S. export markets outside of NAFTA; and increased competition from outside of NAFTA. Since mid-2018, U.S. exports of certain products have been adversely affected by the imposition of retaliatory tariffs by Canada and Mexico in response to the Trump Administration's application of a 25% tariff on all U.S. steel imports and a 10% tariff on all U.S. aluminum imports under Section 232 of the Trade Expansion Act of 1962. Similar to the growth in U.S. agricultural exports, U.S. imports of agriculture and related products from Canada and Mexico grew from about $6 billion in FY1990 to $8 billion in FY1994, and U.S. agricultural exports continued to increase after NAFTA came into force on January 1, 1994, reaching $48 billion in FY2018. For FY2019, USDA projects that total U.S. agricultural exports to Canada and Mexico will to decline to $41.2 billion, while U.S. imports from those countries are projected at $49.6 billion. Table 3 presents U.S. agricultural exports to Canada for selected years since 1990, the year after the implementation of CUSTA. The other years in the table include 1995 (the year following the start of NAFTA), 2009 (the year following the full implementation of NAFTA), and the last three years with complete fiscal year data: 2016, 2017, and 2018. U.S. agricultural exports to Canada averaged over $20 billion between FY2016 and FY2018 period ( Table 3 ) and accounted for 14% of the total value of U.S. agriculture exports in FY2018. While the overall value of U.S. agricultural exports to Canada has increased under NAFTA, U.S. exports of consumer-ready food products registered the greatest increase, accounting for almost 80% of the value of all U.S. agricultural exports to Canada in FY2018. Canada accounted for 24% of the value of total U.S. consumer-ready food product exports to all destinations in FY2018. In FY2018, Canada accounted for 72% of the total value of U.S. fresh vegetable exports to all destinations, 54% of nonalcoholic beverage exports to all destinations, 51% of snack food exports to all destinations, 33% of total exports of fresh fruit, 33% of live animal exports, and 26% of total U.S. wine and beer exports to all destinations. Canada is also an important market for bulk agricultural commodities, and Canadian imports of U.S. corn, soybeans, rice, pulses, and wheat have increased since the implementation of NAFTA. Table 4 provides a summary of key U.S. agricultural exports to Mexico for selected years since FY1990. Total U.S. agricultural exports to Mexico grew from $2.7 billion in FY1990 to $3.7 billion in FY1995 after NAFTA came into force, reaching $18.8 billion in FY2018. Grains and meats account for the largest share of exports, but growth has been strong among most products including dairy, prepared food, fruit, tree nuts, sugars and sweeteners, wine and beer, and distillers dry grains. Between FY2016 and FY2018, U.S. agricultural exports to Mexico averaged over $18 billion, accounting for 13% of the total value of U.S. agricultural exports to all destinations in FY2018 ( Table 4 ). Consumer-ready products as a group account for a significant share of U.S. exports to Mexico at 13% of the total value of U.S. agricultural exports in FY2018. Mexico is also a major U.S. export market for a number of bulk agricultural commodities, meat, and dairy products. In FY2018, Mexico accounted for 25% of the total value of U.S. corn exports to all destinations, 24% of the total value of U.S. dairy exports, 22% each of the total value of U.S. pork and poultry exports, 12% of the total value of U.S. wheat exports, and 8% of the total value of U.S. soybeans exports to all destinations. U.S. agricultural imports from Canada and Mexico have increased in value from $26 billion in FY2009—the first full year since the complete market liberalization under NAFTA in 2008—to over $48 billion in FY2018 ( Table 5 ). Major U.S. imports from Canada include snack foods, meats, and processed fruit and vegetable products. U.S. purchases of hogs and cattle from Canada had increased since NAFTA began, but these imports have declined since FY2016. North American market dynamics and the prevailing hog cycle dynamics in the NAFTA countries have affected live animal trade patterns in recent years. Similarly, U.S. coarse grain imports from Canada have also declined in recent years, likely the result of larger U.S. feed grain supplies. U.S. imports from Mexico mostly consist of fresh fruit and vegetables, alcoholic beverages, snack foods, and processed fruit and vegetable products. Many studies have assessed the effects of NAFTA on agriculture and the possible effects if NAFTA were to be terminated. It is difficult to isolate the effects of NAFTA from the market liberalization begun under CUSTA and from Mexico's unilateral trade liberalization measures in the 1980s and early 1990s, which included joining the General Agreement on Tariffs and Trade in 1986. Nevertheless, NAFTA is credited with facilitating trade in North America by reducing tariffs and other market access barriers and by providing a stable and improved trading environment in the region. Studies conducted by USDA indicate that U.S. agricultural exports to Canada and Mexico have been higher than they would have been in the absence of NAFTA. One such study concluded that NAFTA particularly expanded trade in those commodities that underwent the most significant reductions in tariff and nontariff barriers, including U.S. exports to Canada of wheat products, beef and veal, and cotton and U.S. exports to Mexico of rice, cattle and calves, nonfat dry milk, cotton, processed potatoes, apples, and pears. An October 2018 study commissioned by the Farm Foundation examines the potential economic benefits associated with (1) USMCA compared with the provisions provided under NAFTA, (2) USMCA in an environment with prevailing retaliatory tariffs on U.S. agricultural products in response to U.S. tariff increases on imports of steel and aluminum, and (3) the effect of a complete U.S. withdrawal from USMCA/NAFTA. The methodology used by the study assumes that each of the three trade policy scenarios would need to remain in place for at least three to five years or until the market equilibrium stabilizes following the initial policy shock. Thus, the estimated effects from the study can be considered as the long-run impacts. The study considers only proposed changes under USMCA to market access for U.S. agricultural exports to Canada, such as changes in TRQs and tariff rates. It does not consider other changes proposed for agriculture or for other sectors such as manufacturing and automobiles. The study's conclusions under these three scenarios follow. 1. Comparing USMCA to NAFTA, the study estimates that USMCA would generate a net increase in annual U.S. agricultural exports to Canada of $450 million—about 1% of current U.S. exports under NAFTA. This estimated increase would reflect increases in exports of dairy products (+$280 million) and meat (+$210 million), which would be partially offset by a decline in exports of other agricultural products (-$40 million). 2. Under the scenario where USMCA would enter into force but the retaliatory tariffs imposed by Canada and Mexico on U.S. agricultural exports would remain in place, the study projects U.S. agricultural export losses from the retaliatory tariffs of $1.8 billion annually, which would more than offset the projected gains of $450 million from USMCA ratification. 3. Under the scenario of a U.S. withdrawal from NAFTA without USMCA ratification, tariffs on U.S. exports to Canada and Mexico would be expected to return to the higher WTO most-favored-nation (MFN) rates, the highest level of applied tariffs rates under WTO commitments. In this circumstance, the study finds that U.S. agricultural and food exports to Canada and Mexico would decline by about $12 billion, or 30% of the value of U.S. agricultural exports to these markets in FY2018. This loss is expected to be partially offset by an increase of $2.6 billion in U.S. exports to other countries for a net loss in export revenues of $9.4 billion. A loss of this order would represent a decline of 24% compared with the total value of U.S. agricultural exports to these countries in FY2018. To date, similar studies assessing the effect of USMCA on U.S. agriculture as a whole are not available. Individual commodity groups have stated that they expect to benefit from market access gains. For example, the National Turkey Federation stated that USMCA would expand market access resulting in a 29% increase in U.S. turkey exports to Canada. A broad coalition of U.S. agricultural stakeholders is advocating for USMCA's approval, contending that the proposed agreement would further expand market access for U.S. agriculture. Most leading agriculture commodity groups have expressed their support for USMCA. The U.S. wheat industry states that although challenges remain in further opening commerce for U.S. wheat farmers near the border with Canada, USMCA retains tariff-free access to imported U.S. wheat for long-time flour milling customers in Mexico. The American Farm Bureau Federation expressed satisfaction that the USMCA not only locks in market opportunities previously developed but also builds on those trade relationships in several key areas. On the other hand, other farm sector stakeholders, such as the National Farmers Union and the Institute for Agriculture and Trade Policy , have expressed concern that the proposed agreement does not go far enough to institute a fair trade framework that benefits family farmers and ranchers . Some agricultural market observers question whether the benefits to U.S. agriculture of USMCA over NAFTA will be more than incremental. Critics also point out that most U.S. agricultural exports currently enjoy zero tariffs under NAFTA and that the main market access gain under USMCA is through limited quota increases. A researcher for the International Food Policy Research Institute recently concluded that farm production costs would be expected to increase because of domestic content provisions in the agreement in tandem with the new U.S. tariffs on steel and aluminum imports. Upon signing of the USMCA on November 30, 2018, President Trump stated, \"This new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed.\" Regarding agriculture, Secretary Perdue echoed the sentiments expressed by most of the agricultural commodity groups: \"The new USMCA makes important specific changes that are beneficial to our agricultural producers. We have secured greater access to the Mexican and Canadian markets and lowered barriers for many of our products. The deal eliminates Canada's unfair Class 6 and Class 7 milk pricing schemes, opens additional access to U.S. dairy into Canada, and imposes new disciplines on Canada's supply management system. The agreement also preserves and expands critical access for U.S. poultry and egg producers and addresses Canada's discriminatory wheat grading process to help U.S. wheat growers along the border become more competitive.\" The proposed USMCA would have to be approved by Congress and ratified by Mexico and Canada before entering into force. On August 31, 2018, pursuant to TPA, President Trump provided Congress a 90-day notification of his intent to sign a free trade agreement with Canada and Mexico. On January 29, 2019—60 days after an agreement was signed, and as required by TPA—U.S. Trade Representative Robert Lighthizer submitted to Congress changes to existing U.S. laws that would be needed to bring the United States into compliance with the proposed USMCA. A report by the USITC on the possible economic impact of TPA is not expected to be completed until April 20, 2019, due to the 35-day government shutdown. The report has been cited by some Members of Congress as key to their decisions on whether to support the agreement. Some policymakers have stated that the path to ratifying USMCA by Congress is uncertain partially because the three countries have yet to resolve disputes over tariffs on U.S. imports of steel and aluminum, as well as retaliatory tariffs that Canada and Mexico have imposed on U.S. agricultural products. The conclusion of the proposed USMCA did not resolve these tariff disputes. On January 30, 2019, Senator Chuck Grassley called on the Trump Administration to lift tariffs on steel and aluminum imports from Canada and Mexico before Congress begins considering legislation to implement the USMCA. Representatives of the U.S. business community, agriculture interest groups, other congressional leaders, and Canadian and Mexican government officials have also stated that these tariff issues must be resolved before the USMCA enters into force. Other Members of Congress have raised issues regarding labor and environmental provisions of USMCA. Speaker Pelosi has stated that she wants \"stronger enforcement language\" and that the USMCA talks should be reopened to tighten enforcement provisions for labor and environmental protections. Some trade observers believe that delays in congressional action on USMCA could make it harder for Canada to consider USMCA approval this year because of upcoming parliamentary elections in October 2019.", "summary": "On September 30, 2018, the Trump Administration announced the conclusion of the renegotiations of the North America Free Trade Agreement (NAFTA) and the proposed United States-Mexico-Canada Agreement (USMCA). If approved by Congress and ratified by Canada and Mexico, USMCA would modify and possibly replace NAFTA, which entered into force January 1, 1994. NAFTA provisions are structured as three separate bilateral agreements: one between Canada and the United States, a second between Mexico and the United States, and a third between Canada and Mexico. Under NAFTA, bilateral agricultural trade between the United States and Mexico was liberalized over a transition period of 14 years beginning in 1994. NAFTA provisions on agricultural trade between Canada and the United States are based on commitments under the Canada-U.S. Trade Agreement (CUSTA), which granted full market access for most agricultural products with the exception of certain products. The agricultural exceptions under NAFTA include Canadian imports from the United States of dairy products, poultry, eggs, and margarine and U.S. imports from Canada of dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products. The proposed USMCA would expand market access for U.S. exports of dairy, poultry, and eggs to Canada and enhance NAFTA's Sanitary and Phytosanitary (SPS) provisions. It would also include new provisions for trade in agricultural biotechnology products, add provisions governing Geographical Indications (GIs), add protection for proprietary food formulas, and require USMCA countries to apply the same regulatory treatment to imported alcoholic beverages and wheat as those that govern their domestic products. Since 2002, Canada has been the United States' top agricultural export market, and Mexico was the second-largest export market until 2010, when it became the third-largest market as China became the second-largest agricultural export market for the United States. U.S. agricultural exporters are thus keen to keep and grow the existing export market in North America. If the United States were to potentially withdraw from NAFTA, as mentioned several times by President Trump, U.S. agricultural exporters could potentially lose at least a portion of their market share in Canada and Mexico if the proposed USMCA does not enter into force. If the United States withdraws from NAFTA, U.S. agricultural exports to Canada and Mexico would likely face World Trade Organization (WTO) most-favored-nation tariffs—the highest rate a country applies to WTO member countries. These tariffs are much higher than the zero tariffs that U.S. exporters currently enjoy under NAFTA for most agricultural exports to Canada and Mexico. The proposed USMCA would need to be approved by the U.S. Congress and ratified by Canada and Mexico before it could enter into force. Some Members of Congress have voiced concerns about issues such as labor provisions and intellectual property rights protection of pharmaceuticals. Other Members have indicated that an anticipated assessment by the U.S. International Trade Commission (USITC) will be key to their decisions on whether to support the agreement. Canada, Mexico, and some Members of Congress have expressed concern about other ongoing trade issues with Canada and Mexico, such as antidumping issues related to seasonal produce imports and the recent U.S. imposition of a 25% duty on all steel imports and a 10% duty on all aluminum imports. Both the Canadian and the Mexican governments have stated that USMCA ratification hinges in large part upon the Trump Administration lifting the Section 232 tariffs on imported steel and aluminum. Similarly, some Members of Congress have stated that the Administration should lift tariffs on steel and aluminum imports in order to secure the elimination of retaliatory tariffs on agricultural products before Congress would consider legislation to implement USMCA.", "document_type": "crs"}
{"report": "On February 2, 2019, the United States suspended its participation in the Intermediate-Range Nuclear Forces (INF) Treaty and notified Russia of its intent to withdraw from the treaty. Under Article XV of the treaty, the withdrawal will take effect in six months. Russian President Vladimir Putin also announced, on February 2, 2019, that Russia would suspend its participation in the treaty. U.S. and Russian officials had met in Geneva on January 15, 2019, in one last attempt to reach an agreement. According to press reports, Russian diplomats proposed that Russia display the 9M729 missile and demonstrate that it could not fly to INF range, while the United States, in exchange, could demonstrate that the MK-41 launchers in Romania could not be converted to launch INF-range cruise missiles. The United States rejected this proposal and indicated that the only acceptable solution would be for Russia to destroy the missile, its launchers, and its supporting infrastructure. Nevertheless, on January 23, 2019, Russia displayed the canister for the 9M729 cruise missile for an audience of foreign military attachés and the press. Russia noted that, although the missile was a little longer than the similar 9M728 cruise missile, the added length did not increase the range of the missile. It was needed to house a larger warhead and guidance system. No officials from the United States or NATO nations attended the display, arguing that it was a public relations event. U.S. officials also argued that a static display of the missile's canister would not address questions about the missile's range in flight. Over the past few years, NATO, as a whole, has echoed U.S. concerns about Russia's new missile, but some Members have expressed doubt about whether the United States had enough evidence to conclude that the missile violated the INF Treaty. This doubt has ebbed recently, as the allies have offered strong support for the U.S. decision to withdraw from the treaty. In the joint statement released after their December 4 meeting, NATO Foreign Ministers stated that they \"strongly support the finding … that Russia is in material breach of its obligations under the INF Treaty.\" In a statement released on February 1, 2019, the North Atlantic Council noted that Russia had \"taken no demonstrable steps toward returning to full and verifiable compliance\" and that \"Russia will bear sole responsibility for the end of the Treaty.\" At the same time, the statement noted that the \"allies are firmly committed to the preservation of effective international arms control, disarmament and non-proliferation\" and \"will continue to uphold, support, and further strengthen arms control, disarmament and non-proliferation, as a key element of Euro-Atlantic security.\" In July 2014, the State Department released the 2014 edition of its report Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments . This report stated that the United States had determined that \"the Russian Federation is in violation of its obligations under the [1987 Intermediate-range Nuclear Forces] INF Treaty not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles.\" The report did not offer any details about the offending missile or cite the evidence that the United States used to make this determination, but it did note that the United States \"raised these concerns with the Russian Federation\" several times during 2013 and \"will continue to pursue resolution\" of the issue. The 2015, 2016, 2017, and 2018 State Department reports on Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments repeated the claim that Russia had violated the INF Treaty and added a few details to the assertion. These reports state that \"the United States determined the cruise missile developed by the Russian Federation meets the INF Treaty definition of a ground-launched cruise missile with a range capability of 500 km to 5,500 km, and as such, all missiles of that type, and all launchers of the type used to launch such a missile, are prohibited under the provisions of the INF Treaty.\" The Obama Administration also noted that, as in past years, \"the United States again raised concerns with Russia on repeated occasions in an effort to resolve U.S. concerns. The United States will continue to pursue resolution of U.S. concerns with Russia.\" The 2016 report did not, however, repeat the assessment mentioned in 2015 that \"it is in the mutual security interests of all the Parties to the INF Treaty that Russia and the other 11 successor states to the Soviet Union remain Parties to the Treaty and comply with their obligations.\" The 2017 and 2018 reports include details on the types of information the United States has shared with Russia to bolster its claim of Russian noncompliance. The 2018 version of the State Department report confirmed that Russia continues to be in violation of its obligation \"not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 kilometers to 5,500 kilometers, or to possess or produce launchers of such missiles.\" As in past reports, it did not contain details about the capabilities of the offending missile or confirm press reports about the missile's deployment. However, the report indicated that the United States has provided Russia with \"information pertaining to the missile and the launcher, including Russia's internal designator for the mobile launcher chassis and the names of the companies involved in developing and producing the missile and launcher\" and \"information on the violating GLCM's test history, including coordinates of the tests and Russia's attempts to obfuscate the nature of the program.\" The report also indicated that the GLCM has a range capability of between 500 and 5,500 kilometers and that it is \"distinct from the R-500/SSC-7 GLCM or the RS-26 ICBM.\" It stated that \"the United States assesses the Russian designator for the system in question is 9M729.\" U.S. officials have since offered added details about U.S. assessment of Russian noncompliance with INF. In December 2018, Secretary of State Pompeo noted that Russia has deployed several battalions of the 9M729 missile. In addition, in late November 2018, the U.S. Director of National Intelligence, Daniel Coats, offered a more detailed explanation of the U.S. assessment of Russia's noncompliance He noted that Russia \"began the covert development of an intermediate-range, ground-launched cruise missile designated 9M729 probably by the mid-2000s\" and that it had \"had completed a comprehensive flight test program\" with launches from both fixed and mobile launchers by 2015. He also noted that \"Russia conducted the flight test program in a way that appeared purposefully designed to disguise the true nature of their testing activity as well as the capability of the 9M729 missile.\" He noted that Russia first tested the missile to a range \"well over\" 500 kilometers from a fixed launcher, which would be permitted by the treaty if the missile were to be deployed as a sea-based or air-delivered cruise missile. But he noted that \"Russia then tested the same missile at ranges below 500 kilometers from a mobile launcher.\" He then noted that \"by putting the two types of tests together\" Russia developed an INF-range missile that could be launched from a \"ground-mobile platform.\" The DNI's timeline confirmed press reports that had indicated that the United States identified Russian activities that raised INF compliance concerns as early as 2008 and that the Obama Administration began to mention these concerns to Members of Congress in late 2011. Reports from October 2016 indicated that the Administration had concluded that Russia might be preparing to deploy the missile, as it is producing more missiles than it would need to support a test program. This deployment evidently occurred in December 2016, with one brigade remaining at the test site at Kapustin Yar and another moving to a different base within Russia. Reports indicate that some U.S. officials also believe Russia may be taking steps toward pulling out of the treaty. As noted below, Russia repeatedly denied that it had developed a cruise missile with a range that would violate the INF Treaty. After the United States released the designator for the missile, Russia acknowledged the existence of the 9M729 cruise missile but continued to deny that the missile has been tested to, or is capable of flying to, INF range. In a press briefing on November 26, 2018, Deputy Foreign Minister Sergey Ryabkov stated that the U.S. claims are \"fabrications\" and are \"inconsistent with reality and is an obvious attempt by the United States to distort reality.\" He claimed that Russia had engaged in detailed technical discussions with the United States about the capabilities of the missile and that Russia had told the United States that the missile is an \"an upgraded version of the Iskander-M system missile\" that was launched at its maximum range at the Kapustin Yar testing ground on September 18, 2017,\" and covered \"less than 480 km.\" This would place the missile within the range permitted by the INF Treaty. In a statement to the press on December 5, 2018, Russian President Vladimir Putin noted that Russia did not \"agree with the destruction of this deal. But if this happens, we will react accordingly.\" He further noted that if the United States developed INF-range missiles, Russia would do so as well. General Valery Gerasimov, the chief of staff of the Russian military, also told foreign military attaches that Russia would respond if the United States \"were to destroy\" the treaty. He indicated that U.S. missile sites on allied territory could become \"the targets of subsequent military exchanges.\" Obama Administration officials often stated that the INF Treaty remained in the security interest of the United States and its allies, and that the U.S. goal is to \"to work to bring Russia back in to full compliance.\" However, because Russia was unwilling to address U.S. concerns or even acknowledge the existence of the offending cruise missile, the United States reviewed a broad range of economic and military options that might both provide an incentive for Russia to return to compliance with the treaty and provide the United States with the capability to counter Russian actions if it does not return to compliance. Secretary of Defense Mattis addressed the INF Treaty when responding to questions submitted prior to his nomination hearing in early 2017. He stated that Russia's violation of the treaty \"increases the risk to our allies and poses a threat to U.S. forces and interests.\" He also noted that Russia's violation, if allowed to stand, \"could erode the foundations of all current and future arms control agreements and initiatives.\" At the same time, he stated that the violation would not provide Russia with a \"significant military advantage,\" although, if Russia chooses to \"act as an adversary, we must respond appropriately and in league with our allies.\" Further, he echoed the Obama Administration's view that \"returning to compliance is in Russia's best interest.\" Secretary Mattis reaffirmed this goal in November 2017, after a meeting with NATO defense ministers. Secretary Mattis offered a more blunt assessment prior to the NATO meeting of defense ministers in October 2018, when he stated that \"the current situation, with Russia in blatant violation of this treaty, is untenable.\" He also said that \"Russia must return to compliance with the INF Treaty or the U.S. will need to match its capabilities to protect U.S. and NATO interests.\" Press reports indicated that the Trump Administration was moving forward with efforts to begin research and development into a new U.S. ground-launched cruise missile of INF range. The Trump Administration conducted a review of the INF Treaty during its first year in office, and announced the results on December 8, 2017—the 30 th anniversary of the date the treaty was signed. The Administration identified an \"integrated strategy\" that it would implement to seek to resolve questions about Russia's compliance, to press Russia to return to compliance, and to prepare the United States to defend itself and its allies if Russia continued to violate the treaty and the treaty collapsed. Specifically, it noted that the United States will continue \"to seek a diplomatic resolution through all viable channels, including the INF Treaty's Special Verification Commission (SVC).\" Second, it stated that DOD \"is commencing INF Treaty-compliant research and development (R&D) by reviewing military concepts and options for conventional, ground-launched, intermediate-range missile systems.\" It noted that this effort would not violate the INF Treaty, but would \"prepare the United States to defend itself and its allies\" if the treaty collapsed as a result of Russia's violation. Finally, the United States will take economic measures \"tied to entities involved in the development and manufacture of Russia's prohibited cruise missile system.\" It noted that both the military steps and economic measures would cease if Russia returned to compliance with the treaty. When the Administration released its integrated strategy, it reaffirmed U.S. support for the INF Treaty and its interest in convincing Russia to return to compliance. In an interview with the Russian newspaper Kommersant , Thomas Shannon, who was the Under Secretary of State for Political Affairs, stated that \"the Trump Administration values the INF Treaty as a pillar of international security and stability.\" He also noted that \"in this time of increased tensions between the United States and Russia, INF and other arms control agreements are essential for ensuring transparency and predictability in our relationship.\" However, he also stated that while the United States is \"making every effort to preserve the INF Treaty in the face of Russian violations,\" a \"continuation of a situation in which the United States remains in compliance while Russia violates the agreement is unacceptable to us.\" Hence, he emphasized that \"Russia needs to return to compliance with its obligations by completely and verifiably eliminating the prohibited missile system.\" In support of this objective, the United States called for a meeting of the Special Verification Commission; this meeting was held in Geneva from December 12 to 14, 2017. As the State Department noted, the participants agreed that \"the INF Treaty continues to play an important role in the existing system of international security, nuclear disarmament and non-proliferation, and that they will work to preserve and strengthen it.\" But, according to some reports, Russia continued to deny that the 9M729 ground-based cruise missile had ever been tested to INF range or that telemetry from the tests supported a conclusion that it violated the INF Treaty. The United States has not disputed, publicly, Russia's assertion that it did not test the missile to INF range, but it did note, in the State Department's Annual Report, that Russia has attempted to \"obfuscate the nature of the program.\" Although these statements from Trump Administration seemed to indicate that it would continue to press Russia to comply with the INF Treaty and that it continued to believe the treaty served U.S. national security interests, the President reversed course in October 2018. On October 20, he announced that the United States would withdraw from the treaty, citing both Russia's violation and China's nonparticipation. He noted that both nations were expanding their forces of intermediate-range missiles and that the United States was going to have to develop these weapons. His national security advisor, John Bolton, conveyed the U.S. intentions to Moscow on October 23. On December 4, 2018, after a meeting of the NATO foreign ministers, Secretary of State Pompeo declared that the United States \"has found Russia in material breach of the treaty and will suspend our obligations as a remedy effective in 60 days unless Russia returns to full and verifiable compliance.\" He indicated that the United States would not \"test or produce or deploy any systems\" banned by the treaty during the 60-day period, but would provide its official notice of the intent to withdraw, and begin the six-month withdrawal period allowed by the treaty, at the end of the 60 days if Russia did not return to compliance. U.S. and Russian officials met in Geneva on January 15, 2019, but were unable to reach an agreement. According to press reports, Russian diplomats proposed that Russia display the 9M729 missile and demonstrate that it could not fly to INF range, while the United States, in exchange, could demonstrate that the MK-41 launchers in Romania could not be converted to launch INF-range cruise missiles. The United States rejected this proposal and indicated that the only acceptable solution would be for Russia to destroy the missile, its launchers, and its supporting infrastructure. Andrea Thompson, the Undersecretary of State for Arms Control and International Security, noted that an inspection of the missile would not allow the United States to \"confirm the distance that missile can travel,\" and that the \"verifiable destruction of the non-compliant system\" was the only way for Russia \"to return to compliance in a manner that we can confirm.\" While Russian officials indicated they were willing to continue the talks, Thompson also noted that there were no plans for additional meetings, and, if Russia did not agree to eliminate the missile, the United States would suspend its participation in the treaty and submit a formal notice of withdrawal on February 2, 2019. After the Obama Administration declared that Russia was in violation of the INF Treaty, Congress sought additional information in briefings by Administration officials. It also called on the Obama Administration, in both letters and legislation, to press U.S. compliance concerns with Russia, to hold Russia accountable for its actions, and to forgo additional reductions in U.S. nuclear weapons, either unilaterally or through a treaty, until Russia returns to compliance with the INF Treaty. In a letter sent after the October 2016 allegations, Representative Thornberry and Representative Nunes called on the Administration to not only forswear any further changes to U.S. nuclear doctrine and force structure but also to implement economic sanctions and military responses to \"ensure Russia understood the cost of its illegal activity.\" Members also highlighted their concerns with Russia's compliance with the INF Treaty in legislation. The House version of the FY2015 National Defense Authorization Act ( H.R. 4435 , §1225) stated that Congress believes Russia is in \"material breach of its obligations\" under the INF Treaty and that \"such behavior poses a threat to the United States, its deployed forces, and its allies.\" The legislation also called on the President to consider, after consulting with U.S. allies, whether remaining a party to the INF Treaty was still in their national security interests if Russia was in \"material breach\" of the treaty. The final version of this legislation ( H.R. 3979 , §1244) did not include these provisions, but did recognize that Russian violations of the INF Treaty are a serious challenge to the security of the United States and its allies. The final version also stated that it is in the national security interest of the United States and its allies for the INF Treaty to remain in effect and for Russia to return to full compliance with the treaty. At the same time, the legislation mandated that the President submit a report to Congress that includes an assessment of the effect of Russian noncompliance on the national security interests of the United States and its allies, and a description of the President's plan to resolve the compliance issues. The legislation also calls for periodic briefings to Congress on the status of efforts to resolve the U.S. compliance concerns. The FY2016 NDAA ( H.R. 1735 , §1243) also contained provisions addressing congressional concerns with Russia's actions under the INF Treaty. As is discussed in more detail below, it not only mandated that the President notify Congress about the status of the Russian cruise missile program, it also mandated that the Secretary of Defense submit a plan for the development of military capabilities that the United States might pursue to respond to or offset Russia's cruise missile program. In early 2017, following press reports that Russia had begun to deploy the missile, Senator Tom Cotton introduced legislation ( S. 430 )—titled the Intermediate-Range Nuclear Forces (INF) Treaty Preservation Act of 2017—that would authorize the appropriation of $500 million for the Pentagon to develop active defenses to counter ground-launched missile systems of INF range; to develop counterforce capabilities to prevent attacks from these missiles; and to facilitate \"the transfer to allied countries\" of missile systems of INF range. The legislation also stated that the United States should \"establish a program of record\" to develop its own INF-range ground-launched cruise missile system. The House and Senate both included provisions in their versions of the National Defense Authorization Act for 2018 that call for the development of a new U.S. land-based cruise missile. The House bill ( H.R. 2810 , §1244) mandated that the Secretary of Defense both \"establish a program of record to develop a conventional road-mobile ground-launched cruise missile system with a range of between 500 to 5,500 kilometers\" and submit \"a report on the cost, schedule, and feasibility to modify existing and planned missile systems ... for ground launch with a range of between 500 and 5,500 kilometers.\" The bill (§1245) also mandated that the President submit a report to Congress that contains a determination of whether Russia has flight-tested, produced, or \"continues to possess\" a ground-launched cruise missile of INF range. If the President makes this determination, the bill states that the INF Treaty's ban on intermediate-range missiles will \"no longer be binding on the United States as a matter of United States law.\" The Senate bill (§1635) did not use the phrase \"program of record\" in its response to Russia's INF violation, but stated that DOD should establish \"a research and development program for a dual-capable road-mobile ground-launched missile system with a maximum range of 5,500 kilometers.\" The Senate also required a report on the feasibility of modifying other missile systems and mandates that the costs and feasibility of these modifications be compared to the costs and feasibility of a new ground-launched cruise missile. The conference report on the 2018 NDAA ( H.Rept. 115-404 ) retains the House language that mandates that the Secretary of Defense \"establish a program of record to develop a conventional road-mobile ground-launched cruise missile system with a range of between 500 to 5,500 kilometers\" and authorizes $58 million in funding for the development of active defenses to counter INF-range ground-launched missile systems; counterforce capabilities to prevent attacks from these missiles; and countervailing strike capabilities to enhance the capabilities of the United States. It does not include the House version's requirement that the President submit a report to Congress, but it does direct the Director of National Intelligence to notify Congress \"of any development, deployment, or test of a system by the Russian Federation that the Director determines is inconsistent with the INF Treaty.\" Further, the conference report does not contain the House language stating that this determination would mean that the treaty is no longer binding on the United States. Instead, it requires a report outlining possible sanctions against individuals in Russia who are determined to be \"responsible for ordering or facilitating non-compliance by the Russian Federation.\" Congress also addressed the INF Treaty in the National Defense Authorization act for FY2019 ( P.L. 115-232 , §1243). This legislation states that the President must submit a determination to Congress stating whether Russia \"is in material breach of its obligations under the INF Treaty\" and whether \"the prohibitions set forth in Article VI of the INF Treaty remain binding on the United States as a matter of United States law.\" These are the prohibitions on the testing and deployment of land-based ballistic and cruise missiles with a range between 500 and 5,500 kilometers. The legislation also expressed the sense of Congress that Russia's testing and deployment of an INF-range cruise missile had \"defeated the object and purpose of the INF Treaty\" and, therefore, constituted a \"material breach\" of the treaty. As a result, it stated that it was the sense of Congress that the United States \"is legally entitled to suspend the operation of the INF Treaty.\" The House version of the FY2019 NDAA ( H.R. 5515 ) had included this language as a \"statement of policy\" rather than a \"sense of Congress.\" The change in language in the final version of the bill indicates that the President, not Congress, would make the determination of a \"material breach.\" The legislation also stated that the United States should \"take actions to encourage the Russian Federation to return to compliance\" by providing additional funds for the development of military capabilities needed to counter Russia's new cruise missile and by \"seeking additional missile defense assets … to protect United States and NATO forces\" from Russia's noncompliant ground-launched missile systems. Some in Congress have also crafted legislation to constrain or delay U.S. withdrawal from the INF Treaty. In late November 2018, several Senators—led by Senators Merkley, Warren, Gillibrand, and Markey—introduced a bill that would prohibit funding for a new INF-range cruise missile or ballistic missile until the Trump Administration submitted a report that, among other things, identified a U.S. ally formally willing to host such a system on its territory; detailed recent diplomatic efforts to bring Russia back into compliance with the treaty; and assessed the risk to U.S. and allied security of if Russia deployed greater numbers of intermediate range missiles. This report describes the current status of the INF Treaty and highlights issues that Congress may address as the United States pursues its compliance concerns with Russia. It begins with a historical overview that describes the role of intermediate-range nuclear weapons in NATO's security construct in the late 1970s and the political and security considerations that affected the negotiation of the INF Treaty. In addition, the report summarizes the provisions of the INF Treaty, highlighting those central to the discussion about Russia's current activities. It then reviews the publicly available information about the potential Russian violation and Russia's possible motivations for pursuing the development of a noncompliant missile. Next, the report summarizes Russia's concerns with U.S. compliance with the treaty. The report concludes with a discussion of options that the United States might pursue to address its concerns with Russia's activities and options that it might pursue if Russia deploys new INF-range missiles. During the Cold War, nuclear weapons were central to the U.S. strategy of deterring Soviet aggression against the United States and U.S. allies. Toward this end, the United States deployed a wide variety of nuclear-capable delivery systems. These included mines, artillery, short-, medium-, and long-range ballistic missiles, cruise missiles, and gravity bombs. These weapons were deployed with U.S. troops in the field, aboard aircraft, on surface ships, on submarines, and in fixed, land-based launchers. The United States also articulated a complex strategy and developed detailed operational plans that would guide the use of these weapons in the event of a conflict with the Soviet Union and its allies. The United States maintained its central \"strategic\" weapons—long-range land-based missiles, submarine-based missiles, and long-range bombers—at bases in the United States. At the same time, it deployed thousands of shorter-range, or nonstrategic, nuclear weapons with U.S. forces based in Europe, Japan, and South Korea and on surface ships and submarines around the world. It maintained these overseas deployments to extend deterrence and to defend its allies in Europe and Asia. Not only did the presence of these weapons (and the presence of U.S. forces, in general) serve as a reminder of the U.S. commitment to defend its allies if they were attacked, the weapons also could have been used on the battlefield to slow or stop the advance of an adversary's conventional forces. In Europe, these weapons were part of the North Atlantic Treaty Organization's (NATO's) strategy of \"flexible response.\" The United States and its NATO allies recognized that the Soviet Union and Warsaw Pact had numerical superiority in conventional forces and that, without the possibility of resort to nuclear weapons, the United States and NATO might be defeated in a conventional conflict. As a result, the flexible response strategy was designed to allow NATO to respond, if necessary, with nuclear weapons and to control escalation if nuclear weapons were used. Controlling escalation meant that the United States and NATO might be the first to use nuclear weapons in a conflict, with the intent of slowing or stopping the Soviet and Warsaw Pact forces if they overran NATO's conventional defenses and advanced into Western Europe. If the conflict continued, and the Soviet Union responded with its own nuclear weapons in an effort to disrupt the NATO response, then NATO could have escalated beyond the battlefield and employed weapons with greater ranges or greater yields in attacks reaching deeper into Warsaw Pact territory. Ultimately, if the conflict continued and Western Europe remained under attack, the United States could have launched its longer-range strategic missiles and bombers against targets inside the Soviet Union. This nuclear posture was designed to couple U.S. and allied security and, therefore, complicate Soviet efforts \"to pursue a divide and conquer strategy toward NATO.\" It had three overlapping objectives. First, the weapons and operational plans were designed to provide NATO with military capabilities that could have affected outcomes on the battlefield; in other words, NATO hoped it might at least disrupt the Soviet attack if not defeat Soviet and Warsaw Pact forces. Second, the ability of the United States and NATO to escalate the conflict, and hold at risk targets in the Soviet Union, was intended to deter an attack on Western Europe by convincing the Soviet Union and Warsaw Pact that any conflict, even one that began with conventional weapons, could result in nuclear retaliation. Third, this approach was designed to assure U.S. allies in Europe that the United States would come to their defense, as mandated by Article V of the 1949 North Atlantic Treaty, if any of the allies were attacked by Soviet or Warsaw Pact forces. As is often noted in discussions of extended deterrence today, the U.S. ability both to assure its allies of its commitment to their defense and to deter adversaries from attacking those allies rests on the credibility of the U.S. threat to resort to the use of nuclear weapons. While some argue that the existence of nuclear weapons may be enough to underscore the threat, most analysts agree that a credible threat requires plausible plans for nuclear use and weapons that can be used in executing those plans. During the Cold War, the United States often altered the numbers and types of nuclear weapons it deployed in Europe to bolster the credibility of its extended deterrent. Although many of these changes occurred in response to ongoing modernization programs and new assessments of Soviet capabilities, some were designed to respond to emerging concerns among U.S. allies about the credibility of the U.S. promise to fight in Europe in their defense. This was the case with the intermediate-range missiles that the United States deployed in Europe in 1983 and removed, under the terms of the INF Treaty, between 1988 and 1991. One concern about the credibility of the U.S. extended deterrent derived from the short range of many of the U.S. nuclear weapons deployed in Europe. As noted above, many of these weapons were designed for use on the battlefield to disrupt a conventional attack by Soviet and Warsaw Pact forces. To make the threat of the possible use of nuclear weapons credible to the Soviet Union and its allies, the United States based significant numbers of these weapons near the potential front lines of a conflict in West Germany. This placement increased the likelihood that NATO would use the weapons early in a conflict and was intended to convince the Soviet Union of the potential for their use, because, if they were not used early, they would likely be overrun by Warsaw Pact forces. At the same time, though, the early use of these weapons would have caused extensive damage on the territory of West Germany, leading some to question whether NATO would actually employ the weapons early in conflict. If the Soviet Union did not believe that NATO would use these weapons, it might believe that it could defeat at least some of the NATO allies (West Germany, in particular) without risking a response from the entire alliance or the escalation to nuclear war. Moreover, if some NATO allies did not believe that NATO would use the weapons to stop a Soviet attack, such allies might be vulnerable to coercion or intimidation from the Soviet Union prior to the start of a conflict. In this type of scenario, the Soviet Union might believe it could divide NATO by threatening some, but not all, of its members. As a result, many analysts argued that longer-range systems that could be deployed farther from the front lines and reach targets deeper inside enemy territory would provide a more credible deterrent. A second concern about the credibility of U.S. assurances to its allies derived from the Soviet ability to attack the continental United States in response to a U.S. attack on the Soviet Union. Leaders in some of the allied countries questioned whether they could rely on the United States to attack targets in the Soviet Union, as a part of an escalation following an attack in Europe, if the Soviet Union could respond with attacks on targets inside the United States with \"potentially suicidal consequences\" for the United States. Some of the allies feared that if U.S. vulnerability deterred the United States from attacking the Soviet Union in defense of Europe, then a war in Europe, even if it escalated to nuclear use, might remain confined to Europe, with the security of the NATO allies decoupled from the security of the United States. If the allies lacked confidence in the U.S. promise to escalate to strategic strikes on their behalf, then they might, again, be vulnerable to Soviet efforts to coerce or intimidate them before the war began. In addition, if the Soviet Union did not believe that the United States would escalate to strategic nuclear attacks, knowing that it was vulnerable to retaliation, then the Soviet Union might believe it could divide NATO with threats of war. Concerns about the decoupling of U.S. and allied security, or, as it was often phrased, the question of whether the United States would actually \"trade New York for Bonn,\" grew during the latter half of the 1970s, after the Soviet Union began to deploy SS-20 intermediate-range ballistic missiles. These three-warhead missiles, which nominally replaced older SS-4 and SS-5 missiles, had a range of 4,000 kilometers and could, therefore, strike targets in most NATO nations (although not in the United States or Canada) from bases inside the Soviet Union. NATO had no similar capability; it could not strike Moscow or other key Soviet cities with missiles or aircraft based in Western Europe. If the NATO allies or the Soviet Union believed that the United States would not attack the Soviet Union out of fear of a Soviet attack on the United States, then these missiles, and the threat they posed to all of Europe, might be sufficient to induce capitulation, or at least cooperation, from NATO's European allies. In December 1979, NATO responded to this gap in intermediate-range forces, and concerns about its effect on alliance security, by adopting a \"dual-track\" decision that sought to link the modernization of U.S. nuclear weapons in Europe with an effort to spur the Soviets to negotiate reductions in INF systems. In the first track, the United States and its NATO partners agreed to replace aging medium-range Pershing I ballistic missiles with a more accurate and longer-range Pershing II (P-II) while adding new ground-launched cruise missiles. They agreed to deploy 108 Pershing II ballistic missiles and 464 ground-launched cruise missiles, all with single nuclear warheads, between 1983 and 1986. The new weapons would be owned and controlled by the United States, but they would be deployed on the territories of five European allies. West Germany would house deployments of both Pershing II ballistic missiles and cruise missiles, while the United Kingdom, Italy, the Netherlands, and Belgium would each house deployments of cruise missiles. The deployment decision was linked, technically and politically, to a second track where NATO agreed that the United States should attempt to negotiate limits with the Soviet Union on intermediate-range nuclear systems. While most of the allies agreed that NATO's security would be best served by eliminating the Soviet Union's ability to target all of Europe with SS-20 missiles, they recognized that the Soviet Union was unlikely to negotiate away those missiles unless it faced a similar threat from intermediate-range systems based in Western Europe. Few expected the Soviet Union to agree to the complete elimination of its SS-20 missiles, but all agreed that the negotiations were necessary, not just as a means to limit the Soviet threat, but also as a means to appeal to public opinion in Europe, where opposition to the new nuclear weapons was strong. Although NATO adopted the dual-track decision by consensus, with all members of the alliance offering public support for both the deployment and negotiating plans, the governments of each of the five designated host nations still had to approve the deployments. Several had reservations and attached conditions to that approval. For example, West Germany did not want the Soviet Union to be able to single it out as the target for its political campaign against the new systems. Therefore, its leaders required that the NATO decision be unanimous and that at least one other nation on the European continent accept stationing of new nuclear systems. The planned deployments spurred massive public protests across Europe and the United States. These began in 1980, shortly after NATO reached the dual-track decision, and escalated through the first half of the decade. For example, in late 1981, protests occurred in Italy, Germany, Great Britain, and Belgium. Nearly 1 million people marched in Central Park in New York City in June 1982. Additional protests took place across the United States during October 1983. In addition, in October 1983, nearly 3 million people protested across Europe, with nearly 1 million marching in the Netherlands and around 400,000 marching in Great Britain. In one of the more well-known efforts, a Welsh group known as \"Women for Life on Earth\" established a peace camp at Greenham Common, the base where the United Kingdom would house 96 cruise missiles. The women camped outside the base for years, protesting the eventual deployment of the missiles. The governments in some of the nations that had accepted deployment of the missiles also faced political opposition to the weapons. In the Netherlands, the center-right coalition government supported the deployments but recognized that the weapons could become an issue in the 1986 elections, as the opposition Labor Party had threatened to block the deployment if it won. As a result, the government sought to link the deployments to progress in U.S.-Soviet negotiations on both strategic and theater nuclear weapons. In a compromise approved by Dutch parliament in 1984, the government delayed their deployment from 1986 until 1988, specifying that deployment could occur only if the Soviet Union increased the number of SS-20s above the number already deployed on June 1, 1984. The government in Belgium supported the deployments but also faced firm opposition from the Belgian Socialist Party. As a result, the government also supported efforts to move the arms control track forward, even though it did not link the deployment of cruise missiles on its territory to the completion of a treaty. In spite of the opposition, and after extensive debate, each of the five nations agreed to deploy the new missiles. When the deployments began in late 1983, the Soviet Union suspended the arms control negotiations and did not return to the negotiating table until March 1995. The United States and Soviet Union opened their first negotiating session in the fall of 1980, at the end of the Carter Administration. The United States did not present the Soviet Union with a specific proposal for limits or reductions on intermediate-range missiles; instead, it outlined a set of guidelines for the negotiations. Specifically, the United States sought an agreement that would impose equal limits on both sides' intermediate-range missiles—the SS-4, SS-5, and SS-20 missiles for the Soviet Union and the Pershing II and ground-launched cruise missiles for the United States. The Soviet Union, in its proposal, suggested that the two sides simply freeze the numbers of medium-range systems in Europe. This meant that it would stop deploying, but would not reduce, its SS-20 missiles in exchange for the cancellation of all Pershing II and GLCM deployments. Neither proposal was acceptable to the other side. The Reagan Administration, which took office in January 1981, spent most of its first year evaluating and reconsidering the U.S. approach to arms control with the Soviet Union. In November 1981, President Reagan announced that the United States would seek the total elimination of Soviet SS-20, SS-4, and SS-5 missiles in return for the cancellation of NATO's deployment plans—a concept known as the \"zero-option.\" The ban would be global, applying to Soviet missiles in both Europe and Asia. The Soviet Union, for its part, proposed that the two sides agree to a phased reduction of all medium-range nuclear weapons (which it defined as those with a range of 1,000 kilometers) deployed on the territory of Europe, in waters adjacent to Europe, or intended for use in Europe. This proposal would have not only avoided limits on Soviet missiles in Asia, it also would have captured some U.S. dual-capable aircraft based in Europe and U.S. sea-launched cruise missiles. Subsequently, in March 1982, the Soviet Union offered to freeze its deployments of SS-20 missiles unilaterally, and to maintain the moratorium until the two sides reached an agreement or the United States began to deploy the Pershing IIs and GLCMs. Although the two sides discussed possible compromise positions during 1982 and 1983, they made little progress. When the United States began to deploy its INF systems in Europe in late 1983, the Soviet Union withdrew from the negotiations. The negotiations resumed in March 1985 and began to gain traction in 1986. At the Reykjavik summit, in October 1986, Soviet President Gorbachev proposed that all intermediate-range missiles—the SS-20s, GLCMs, and Pershing IIs—be removed from Europe within five years of signing a treaty. He also indicated that the Soviet Union would reduce its SS-20s in Asia to 33 missiles, which would carry 99 warheads. In return, the United States could store a mix of 100 GLCMs and Pershing IIs within the United States, but it could not deploy them within range of the Soviet Union. Further, in April 1987, President Gorbachev indicated that the Soviet Union was prepared to eliminate all of its shorter-range missiles (those with ranges between 300 and 600 miles) in Europe and Asia as a part of an INF agreement. Then, in June, he proposed a global ban on shorter-range and longer-range INF systems, essentially accepting the U.S. zero-option proposal from 1982. The United States and the Soviet Union signed the Treaty on Intermediate Range Nuclear Forces (INF) on December 8, 1987. They exchanged the instruments of ratification, and the treaty entered into force June 1, 1988. The two nations had to eliminate their INF systems within three years of the treaty's entry into force, but the treaty, and its ban on the deployment of intermediate-range land-based ballistic missiles and cruise missiles, is of unlimited duration. The INF Treaty contained several features that were new to the U.S.-Soviet arms control process. Although it was not the first treaty to ban an entire category of weapons (a treaty signed in 1975 had banned biological weapons and earlier treaties had banned the emplacement of nuclear weapons on a seabed or stationing them on celestial bodies), it was the first to ban a category that each nation had already deployed and considered vital for its national security needs. Moreover, where prior treaties imposed equal burdens on each side, the INF Treaty called for asymmetrical reductions. The Soviet Union destroyed 1,846 missiles, including 654 SS-20s, whereas the United States destroyed 846 missiles. Moreover, each of the Soviet SS-20 missiles carried three warheads, while all the U.S. missiles carried only a single warhead. The INF Treaty was also the first U.S.-Soviet treaty to employ intrusive monitoring mechanisms in its verification regime. Under prior treaties, the United States and Soviet Union had relied almost exclusively on their own satellites and remote sensing capabilities—known as national technical means (NTM) of verification—to monitor forces and verify compliance with the treaty. These systems served as the foundation of the monitoring regime under INF, but the treaty also permitted on-site inspections of selected missile assembly facilities and all storage centers, deployment zones, and repair, test, and elimination facilities. Although it did not permit the parties to conduct inspections at any location within the other's territory, it did allow up to 20 short-notice inspections at sites designated in the treaty. The two sides also agreed to participate in an extensive data exchange, which allowed them to account for all systems covered by the agreement. Further, it allowed each side to operate a continuous portal monitoring system outside one assembly facility in the other country, to confirm the absence of new INF missile production. These inspections continued for 10 years after the eliminations were complete, ending in May 2001. The INF Treaty also established the Special Verification Commission (SVC) \"to promote the objectives and implementation of the provisions of this Treaty.\" The United States and Soviet Union agreed that, if either party requested, they would meet in the SVC to \"resolve questions relating to compliance\" with their treaty obligations and to agree on any new measures needed \"to improve the viability and effectiveness\" of the treaty. Under the INF Treaty, the United States and Soviet Union agreed to destroy all intermediate-range and shorter-range ground-launched ballistic missiles and ground-launched cruise missiles. These are missiles with a range between 500 and 5,500 kilometers (300 and 3,400 miles). The launchers associated with the controlled missiles were also to be destroyed, although the warheads and guidance systems of the missiles did not have to be destroyed. They could be used or reconfigured for other systems not controlled by the treaty. Further, the treaty stated that neither party could produce or flight-test any new ground-launched intermediate-range missiles or produce any stages of such missiles or any launchers of such missiles in the future. Article III of the INF Treaty listed the U.S. and Soviet intermediate-range and shorter-range missiles that existed at the time of treaty signing. For the Soviet Union, this list included the SS-20 intermediate-range missile, and the SS-4 and the SS-5 shorter-range missiles. The Soviet Union also agreed to destroy a range of older nuclear missiles, as well as the mobile, short-range SS-23, a system developed and deployed in the early 1980s. For the United States, the list of banned missiles included the new Pershing II ballistic missiles and ground-launched cruise missiles, along with several hundred older Pershing I missiles that were in storage in Europe. The INF Treaty made it clear that each of these types of missiles and their launchers would count as INF missiles and launchers, even if they were altered to fly to different ranges or perform different missions. For example, the treaty stated that if a type of ground-launched ballistic missile or ground-launched cruise missile \"is an intermediate-range missile\" then all missiles of that type \"shall be considered to be intermediate-range missiles.\" The INF Treaty also stated that, \"if a ballistic missile or a cruise missile has been flight-tested or deployed for weapon delivery, all missiles of that type shall be considered to be weapon-delivery vehicles.\" Further, it stated that \"if a launcher has been tested for launching\" a treaty-defined intermediate-range ground-launched ballistic or cruise missile, then \"all launchers of that type shall be considered to have been tested for launching\" missiles banned by the treaty. In other words, even if a nation sought to use a type of launcher for a different purpose or to launch a different type of missile, it would count as a treaty-limited launcher as long as even one launcher of that type had been tested or deployed with an INF-range missile. The INF Treaty's ban on intermediate-range ballistic and cruise missiles applied only to land-based missiles. The treaty did not ban the possession, testing, or production of sea-based or air-delivered intermediate-range ballistic or cruise missiles, even if they had a range of between 500 and 5,500 kilometers. Moreover, it permitted the parties to test sea-based or air-delivered weapons at land-based test ranges, as long as they were \"test-launched at a test site from a fixed land-based launcher which is used solely for test purposes\" and that is distinguishable from an operational launcher of ground-launched ballistic or cruise missiles. Testing such weapons at other locations, or from operational ground-based launchers, would constitute a violation of the treaty. Because the INF Treaty defined treaty-limited ballistic missiles and cruise missiles as \"weapons delivery vehicles,\" rockets that were not designed or tested as weapons-delivery vehicles were not banned by the treaty, even if they were based on land and could fly to ranges between 500 and 5,500 kilometers. The INF Treaty also did not ban the possession or testing and production of missile defense interceptors, even if they flew to ranges between 500 and 5,500 kilometers. Specifically, Article VII stated that ground-launched ballistic missiles \"of a type developed and tested solely to intercept and counter objects not located on the surface of the earth, it shall not be considered to be a missile to which the limitations of this Treaty apply.\" Article III of the INF Treaty lists the intermediate-range ballistic and cruise missiles in existence at the time the treaty was signed; these missiles were banned by the treaty and would remain banned, regardless of the range flown in tests conducted prior to, or possibly after, the signing of the treaty. Article VII describes how the parties will measure the range of new types of missiles to determine whether these missiles are covered by the limits in the treaty. Article VII states that the range of a ground-launched cruise missile is \"the maximum distance which can be covered by the missile in its standard design mode flying until fuel exhaustion, determined by projecting its flight path onto the earth's sphere from the point of launch to the point of impact.\" Like airplanes, cruise missiles do not necessarily fly on a predictable trajectory—they can change direction in flight and can fly to less than their maximum distance. Moreover, the maximum range to fuel exhaustion can depend on the altitude and path of the flight. As a result, flight tests using the same type of missile can demonstrate significant variations for the range of the missile. Observations from a single flight of the missile would be unlikely to provide enough data to estimate the maximum range. Although the range demonstrated in the flight could provide a baseline, other data, including estimates of the maximum amount of fuel and the weight of the missile, could also affect the calculation. Article VII states that the \"the range capability\" of a new type of ground-launched ballistic missile \"shall be considered to be the maximum range to which it has been tested.\" If the range capability of a new missile, as identified by the maximum range demonstrated during flight tests, falls between 1,000 kilometers and 5,500 kilometers, then the missile is considered to be an intermediate-range missile. If the maximum range is greater than 5,500 kilometers, the missile is considered to be a strategic ballistic missile that will count under the limits in the New Strategic Offensive Arms Control Treaty (New START). Because ballistic missiles fly on a predictable trajectory, it is much easier to measure their range than the range of cruise missiles. However, ballistic missiles can also fly to less than their maximum range if they fly along a depressed trajectory or a lofted trajectory, if they carry a heavier payload, or if they consume only part of their fuel. Nevertheless, the INF Treaty does not ban, or even address, ballistic missile flight tests that fall within the 1,000 kilometer to 5,500 kilometer range if the missile in question demonstrated a maximum range greater than 5,500 kilometers in another flight test. In 1988, when the Senate was debating the ratification of the INF Treaty, members of the Armed Services Committee and Foreign Relations Committee expressed concerns about whether this provided a path for the Soviet Union to circumvent the treaty's ban on INF-range missiles. Some questioned whether the Soviet Union might be able to develop a new missile similar to the INF-range SS-20 and test it to a range greater than 5,500 kilometers, before testing it to INF ranges. Officials representing the Reagan Administration acknowledged that both these scenarios were possible and that neither was prohibited by the INF Treaty. In testimony before the Senate Armed Services Committee, Ambassador Maynard Glitman, the lead negotiator for the INF Treaty, stated that a missile tested even once to a range greater than 5,500 kilometers would be considered to be a strategic ground-launched ballistic missile and would not be covered by the INF Treaty, even if it flew to less than 5,500 kilometers in numerous subsequent tests. The State Department amended this answer in a letter to the Foreign Relations Committee after the hearings; it stated that the missile could be considered a new type of missile covered by the INF Treaty if it was tested at strategic range \"with a configuration (booster stages, post-boost vehicle, RV's) that is unlike that used for remaining tests of the system at INF ranges.\" In other words, if the Soviet Union had tested a missile with only a single warhead, which would have allowed it to fly to a longer range, but then tested it at a reduced range with more warheads, it could be considered to be an intermediate-range missile in the multiple warhead configuration. The letter did not indicate, however, whether the Soviet Union agreed with this interpretation. Moreover, the letter reiterated that a ground-launched ballistic missile tested to ICBM ranges and then tested to INF ranges in the same configuration clearly would not be limited by the treaty. Others questioned whether the Soviet Union would be able to use longer-range strategic land-based and sea-based ballistic missiles to attack targets in Europe after it eliminated its INF systems. Secretary of Defense Frank Carlucci responded to these concerns in his testimony before the Senate Foreign Relations Committee. He agreed when Senator Sarbanes asked if \"the Soviets could use other weapons to hit Europe\" after they eliminated their INF missiles. He replied that \"they could, with some disruption to their programming, retarget their strategic systems on Europe.\" He also indicated that the United States could do the same thing because there was \"nothing in the treaty that prevents retargeting.\" Former Secretary of State Henry Kissinger made a similar point in his testimony, noting that Soviet \"ICBMs, SLBMs, and airplanes can carry out the missions assigned to the SS-20s.\" The United States officially charged Russia with violating the INF Treaty in late July 2014, when the State Department released the 2014 edition of its report Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments (the Compliance Report). At the same time, President Obama sent a letter to President Putin notifying him of the finding in the Compliance Report and suggesting that the two countries meet to discuss steps that Russia could take to come back into compliance with the treaty. According to press reports, Administration officials had first raised U.S. concerns with Russia during discussions held in May 2013, and had addressed the issue in subsequent meetings. The two sides met again, in September 2014, after the release of the Compliance Report. The State Department reported that the two sides had a \"useful exchange of views\" during that meeting, but that Russia had failed to \"assuage\" U.S. concerns. Russia, for its part, complained that the United States did not offer any details to back up its accusations and, as it had in previous meetings, denied that it had violated the INF Treaty. The Obama Administration repeated its accusation of Russian noncompliance in the 2015 edition of the State Department Compliance Report. This report added a little detail to the 2014 version, noting the \"United States determined the cruise missile developed by the Russian Federation meets the INF Treaty definition of a ground-launched cruise missile with a range capability of 500 km to 5,500 km, and as such, all missiles of that type, and all launchers of the type used to launch such a missile, are prohibited under the provisions of the INF Treaty.\" While Administration officials continue to withhold details about either the missile or the data used to determine that it is a violation, they have said specifically that the United States is \"talking about a missile that has been flight-tested as a ground-launched cruise-missile system to these ranges that are banned under this treaty.\" The Administration repeated its accusation of testing of a ground-launched cruise missile in the 2016 and 2017 versions of the State Department Compliance Report. Both reports, again, declined to provide details about the offending missile. However, the 2017 report, in response to Russian assertions that the United States lacked proof of such a violation, states that the United States has provided \"more than enough information for the Russian side to identify the missile in question.\" This includes \"information pertaining to the missile and the launcher, including Russia's internal designator for the mobile launcher chassis and the names of the companies involved in developing and producing the missile and launcher and; information on the violating GLCM's test history, including coordinates of the tests and Russia's attempts to obfuscate the nature of the program.\" The United States has also provided Russia with information showing that the \"violating GLCM has a range capability between 500 and 5,500 kilometers\" and that, contrary to much public speculation, it is \"distinct from the R-500/SSC-7 GLCM or the RS-26 ICBM.\" In October 2016, press reports for October 2016 indicated that the Obama Administration believed Russia was moving toward deployment of the new missile, because it had begun to produce the missile in numbers greater than what is needed for a test program. This was followed, in February 2017, by reports in the New York Times stating that Russia had begun to deploy a new ground-launched cruise missile, in violation of the 1987 Intermediate Range Nuclear Forces Treaty. General Paul Selva, the vice chairman of the Joint Chiefs of Staff, confirmed this deployment during testimony before the House Armed Services Committee on March 8, 2017. General Selva noted that Russia had violated the \"spirit and intent\" of the treaty, that it had deliberately deployed the missile to pose a threat to NATO facilities, and that it showed no inclination to return to compliance with the treaty. As noted above, the 2014 Compliance Report determined that Russia is in \"violation of its obligation not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles.\" The State Department repeated this finding in the 2015 and 2016 Compliance Reports. The reports did not provide any details about the missile or cite the evidence that the United States used to make its determination. However, according to press reports, the intelligence community has \"high confidence\" in its assessment that the cruise missile and flight tests in question constitute a \"serious violation.\" Press reports have noted that the missile tests, which took place at the Kapustin Yar test site in western Russia, began in 2008, during the George W. Bush Administration. The Obama Administration concluded that the tests constituted a violation of the INF Treaty and mentioned its concerns to Congress during briefings in late 2011. According to press reports, the Administration briefed U.S. allies in NATO about its concerns at a meeting of NATO's Arms Control, Disarmament and Non-Proliferation Committee in January 2014. The reports also states that the Administration does not believe that Russia has deployed the missile yet. Some in Congress have questioned why, if the tests began in 2008, the United States waited until 2011 to inform Congress, until 2013 to raise the issue with Russia, and until 2014 to inform U.S. allies of its concerns. They speculate that the Obama Administration may have hoped to conceal the issue so that it would not undermine its arms control agenda with Russia. For example, in February 2014, Senators Wicker and Ayotte asked whether the Administration delayed notifying Congress so that the issue would not interfere with the Senate debate on the ratification of the New START Treaty. On the other hand, it is possible that the Obama Administration held off on mentioning its concerns to Congress and U.S. allies until it had more information about the potential violation and more time to analyze that information. According to press reports, \"it took years for American intelligence to gather information on Russia's new missile system.\" Therefore, it seems likely that the United States could not make its determination, with high confidence, using data gathered during only one, or even a few, test launches. Under Secretary of State Rose Goetemoeller underscored this dynamic in testimony before the House Armed Services Committee in late 2015. She noted that the United States knew that Russia had begun to test a cruise missile in 2008, but that \"it was only over time did we accumulate the information that it was a ground launch cruise missile.\" The United States did not immediately assume Russia was testing a prohibited missile because \"under the INF Treaty, sea launched cruise missiles and air launch cruise missiles are permitted, and there is no reason why the Russians could not have been developing during that period a new sea launched or air launched cruise missile.\" She repeated that \"we didn't—simply did not know until later in the test series that it was a ground launch system.\" Daniel Coats, the Director of National Intelligence, confirmed this scenario in his statement to the press on November 30, 2018. He noted that Russia had conducted two types of tests—one to a range of greater than 500 kilometers from a static launcher and one to a shorter range from a mobile launcher. The United States has concluded that the same missile was involved in both types of tests. Experts outside government sought to determine which Russian missile constitutes the INF violation. Initial analyses focused on the Iskander system, a Russian missile launcher that can fire both ballistic missiles and cruise missiles. The ballistic missiles for the system have been tested to a maximum range of less than 500 kilometers and, therefore, do not raise treaty compliance issues. The R-500 cruise missile, which is also launched from an Iskander launcher, has been tested to a range of 360 kilometers but, according to some analyses, could have a maximum range \"several times longer.\" Contrary to much of the speculation, however, Obama Administration officials stated that the R-500 cruise missile was not the missile in question. In addition, the 2017 version of the State Department Compliance Report indicated that the United States had provided Russia with information that demonstrates that the noncompliant cruise missile is distinct from the R-500 system. Some have also suggested that the violation may have occurred if Russia tested an intermediate-range sea-launched cruise missile (SLCM), such as the SS-N-21 SLCM, from a land-based launcher. The INF Treaty allows land-based tests of SLCMs, as long as they are launched from a \"fixed land-based launcher which is used solely for test purposes and which is distinguishable from GLCM launchers.\" If Russia had launched a SLCM with a range greater than 500 kilometers from any other type of launcher, the test would constitute a violation of the treaty. Members of Congress raised this possibility during a joint hearing of the House Foreign Affairs Subcommittee on Europe, Eurasia and Emerging Threats and Subcommittee on Terrorism, Nonproliferation, and Trade in April 2014. For example, Representative Brad Sherman said that Russia may have tested a missile for \"sea-based purposes\" on \"what appears to be an operational, useable ground-based launcher.\" Press reports from Russia have also speculated about this. An October 2014 article mentioned that Russia had conducted a 2,600-kilometer test of a cruise missile in 2013, and quoted a source in Russia's Defense Ministry as saying the missile was a \"naval cruise missile\" tested from a \"ground-based platform\" rather than a ship to save money and simplify the collection of data on the test. This explanation resurfaced in early October 2015, after Russia used its new Kalibr-NK sea-launched cruise missiles in its attacks against targets in Syria. These cruise missiles, which were launched from ships deployed in the Caspian Sea, traveled to ranges of more than 1,500 km, which clearly exceeds the range permitted by the INF Treaty. So, according to one analyst, \"if this missile was ever test-launched from a mobile land-based launcher, it would be considered GLCM for the purposes of the INF Treaty and this test would be a treaty violation.\" This explanation, was also imperfect. It presumed that the violation occurred during a single test, while the timeline discussed above indicated that the United States collected data across several tests. Moreover, there is no evidence in the public press that Russian officials have offered this type of explanation in the several meetings where the United States has raised its concerns. In addition, U.S. officials have repeatedly referred to the violation as a test of a ground-launched cruise missile, lending less credence to the view that the United States might have misidentified tests of a sea-launched missile. Moreover, Rose Goetmeoller stated, specifically, in an article published in September 2015, that this is not a technical violation, as is assumed by the theory that the missile is a SLCM tested from a GLCM launcher. Beginning in 2015, press reports identified another possible candidate for the suspect missile. An article published in late September 2015 noted that Russia had conducted another test of its new GLCM in on September 2. According to this article, the missile, which it identified as the SSC-X-8 cruise missile, did not fly to a range beyond the INF limit. However, it cited officials familiar with the test who claimed that the missile had an \"assessed range\" of \"between 300 miles and 3,400 miles,\" giving it the capability to fly to ranges in excess of those allowed under the INF Treaty. The article also claimed that \"an earlier flight test of the missile prompted the administration, backed by U.S. intelligence agencies, to declare the system a breach of the INF treaty.\" The Obama Administration did not comment on the allegations in 2015, but press reports from February 2017 have identified the SSC-X-8 cruise missile as the system that Russia deployed in December 2016; the designation is now the SSC-8, with the X dropped because the missile is no longer experimental. In late November 2017, the Trump Administration identified the Russian designator for the missile as the 9M729. Little is known about the missile's specific characteristics or the observed tests that led the United States to conclude the missile violated the INF Treaty, although some speculate that it may be a ground-based version of the Kalibr sea-launched cruise missile. Some analysts outside government also contend that Russia has violated the INF Treaty with the development of a new land-based ballistic missile, known as the RS-26, because Russia has tested this missile to ranges below 5,500 kilometers. Other analysts dispute this conclusion, noting that Russia has also tested the missile to more than 5,500 kilometers, which would place it outside INF range and characterize it as a long-range, intercontinental ballistic missile (ICBM). The Obama Administration did not mention this missile in the 2014 Compliance Report, possibly indicating that it either does not consider the missile to be an INF violation or does not have sufficient information to draw a conclusion. The Trump Administration, in the 2018 Compliance Report, specifically noted that the Russian GLCM tested in violation of the INF Treaty \"is distinct from the ... RS-26 ICBM.\" Nevertheless, this missile remains in issue in discussions about the INF Treaty. According to unclassified reports, Russia conducted four flight tests of the RS-26 missile. Two of these flight tests—one that failed in September 2011 and one that succeeded in May 2012—flew from Plesetsk to Kura, a distance of approximately 5,800 kilometers (3,600 miles). The second two tests—in October 2012 and June 2013—were both successful. In both cases the missile flew from Kapustin Yar to Sary-Shagan, a distance of 2,050 kilometers (1,270 miles). Reports indicate that all four tests were conducted with \"solid-propellant missiles launched from a mobile launcher.\" The missiles in the first three tests reportedly carried a single warhead, while the last test carried a \"new combat payload\" that may have consisted of multiple warheads. Russian officials have claimed that the RS-26 missile is an ICBM. At the time of the first test, in September 2011, an official Russian statement indicated that the failed missile was a part of a development program for a new \"fifth generation ICBM.\" Russian officials continued to refer to the new missile as an ICBM after the two tests from Kapustin Yar to Sary-Shagan. According to General-Colonel Zarudnitskiy, the head of the Main Operational Directorate of Russia's General Staff, all four launches were part of the series of tests with \"a new intercontinental-range ballistic missile with improved accuracy.\" Although Russian statements describing the RS-26 as a long-range ICBM cannot serve as definitive proof of the missile's intended range and targets, the existence of a test to more than 5,500 kilometers does seem to place it outside the range of missiles banned by the INF Treaty. Nevertheless, several observers have concluded that, even if it is not a technical violation, the missile's intermediate-range tests could still provide evidence of Russia's intent to circumvent the treaty limits by deploying a new missile optimized for attacks on targets in the INF-range. Ultimately, the question of whether the missile should raise compliance concerns, and, more specifically, whether it represents an actual violation of the INF Treaty, may rest on a more detailed, and possibly classified, analysis of the nature of the missile's payload and the rationale for the shorter-range tests. For example, several analysts have speculated that Russia tested the RS-26 on flights from Kapustin Yar to Sary-Shagan because the missile may have carried a payload that would help it evade ballistic missile defenses. Russia's Deputy Prime Minister, Dmitry Rogozin, reportedly called the missile a \"killer of air defense\" after the June 2013 test flight. Several press reports also indicated that it was designed to be able to evade and penetrate ballistic missile defense systems. For example, in May 2012, an official from Russia's missile industry stated that the missile uses \"a new fuel making it possible to reduce the time of the missile engines' operation during the boost phase. This makes such a missile more capable of overpowering a missile defense system.\" Sary-Shagan serves as the test site for Russia's ballistic missile defense radars, so if Russia wanted to determine whether these radars could identify and track the new missile, it would need to fire the missile toward Sary-Shagan. Russia has also launched its older SS-25 ICBMs from Kapustin Yar to Sary-Shagan in recent years, according to the Russian Ministry of Defense, to gather information that could be used to develop \"effective means for overcoming missile defense.\" If this rationale is consistent with data evident during the missile's flight test, then it might not be considered a violation of the INF Treaty. However, other explanations for the shorter-range tests are possible. As noted above, all long-range missiles can fly to targets at less than their maximum range. If a missile were initially tested with a single, light warhead, but then flew with a heavier payload, or with a greater number of warheads, or if it were flown on a flatter, depressed trajectory or higher, lofted trajectory, it would fly to a shorter range. Some have speculated that the RS-26 may have flown with a single warhead in its initial tests then carried multiple warheads in later tests. Russian press reports indicated that this was a possibility. For example, after the May 2012 test, the Russian press reported that the missile was \"a further development on the Topol-M and Yars strategic missiles and is supposed to be armed with a multiple independently targetable reentry vehicle warhead.\" The Topol-M is a single warhead missile, while the Yars is a variation of the Topol that carries multiple warheads. But both fly to much longer ranges than the 5,800 kilometers demonstrated by the RS-26 in its second flight test. As a result, it is possible that the payload for the RS-26, particularly during its shorter-range tests, contained a substantially different payload than the missile tested to the longer range. If a change in the payload is evident in the data generated during the flight tests, then it may yet be determined to be a violation. Moreover, even if the missile does not violate the terms of the INF Treaty, it could allow Russia to circumvent the limits in the agreement. The United States has not, at this time, concluded that this ballistic missile violates the INF Treaty. In addition, the 2017 and 2018 Compliance Reports indicate that the noncompliant cruise missile at issue in the U.S. allegations is not the RS-26 ICBM. Many analysts agree that Russia has been uncomfortable with the limits in the INF Treaty for nearly a decade. Some speculate that the Russian military has been interested in replacing its lost capabilities since shortly after the treaty was signed so that it could maintain a full complement of missile capabilities, regardless of the threat environment. According to some analysts, Russia has been pursuing a number of programs, including some focused on long-range cruise missiles that seem to seem to \"pay no attention to the treaty limits.\" Others highlight comments from Russian officials that point to emerging threats to Russian security from countries along Russia's periphery that possess their own intermediate-range missiles. Former Secretary of Defense Robert Gates notes in his recent memoir that Sergei Ivanov, a former Russian Minister of Defense, raised this issue with him in 2007. Ivanov, and others in subsequent comments, have noted that the United States and Russia are the only two countries in the world that cannot deploy intermediate-range missiles. Ivanov told Gates that Russia wanted to withdraw from the treaty so that it could deploy these missiles \"to counter Iran, Pakistan, and China.\" Others have echoed this concern in recent years. Anatoly Antonov, Russia's current Deputy Minister of Defense, said in an interview in August 2014, \"Nowadays almost 30 countries have such [intermediate-range] missiles in their arsenals. The majority of them are in close proximity to Russia.\" Others have been more specific, noting that countries from around the periphery of Russia, including North Korea, China, India, and Pakistan, all possess intermediate-range missiles. In 2007, Russia sought to address this concern by submitting a proposal to the United Nations that would convert the INF Treaty into a multilateral treaty that could be signed by all states with intermediate-range and shorter-range missiles. The United States issued a joint statement with Russia supporting this effort. But the proposal did not win any further adherents. Russia may have then focused its attention on the development of its own INF missiles. Recent reports that Russia will deploy the RS-26 missile at Irkutsk, which places it out of range of Europe but within range of China and other nations to its south and east, support the view that Russia may be developing INF-range missiles to address threats outside of Europe. Russian officials have also pointed to threats from NATO as the source of Russia's interest in escaping from the limits of the INF Treaty. Often, these threats have been linked to U.S. and NATO plans to deploy missile defense assets in Europe. For example, in 2007, when the Bush Administration was pursuing plans to deploy missile defense interceptors in Poland and radar in the Czech Republic, President Putin threatened to withdraw from the INF Treaty so that he could deploy missiles with the range needed to attack these sites. Although the Obama Administration cancelled the Bush Administration's planned deployments, it still plans to deploy missile defense interceptors in Poland and Romania as a part of its missile defense architecture known as the European Phased Adaptive Approach (EPAA). The United States insists that these interceptors will pose no threat to Russia's strategic nuclear forces, but Russia has continued to threaten to deploy intermediate-range missiles to target these sites. Missiles in the range of 700-1,000 kilometers would be able to reach deployment sites in Poland and Romania, particularly if Russia moved launchers into its newly annexed Crimean territory. The United States has completed the installation of the Aegis Ashore site in Romania; it was certified as operational in May 2016. Russia continues to argue that this site can threaten Russian strategic forces and to insist that the launchers violate the INF Treaty because they could launch offensive cruise missiles. While it has not made a direct connection recently, it is possible that Russia may have used the operational status of the Aegis Ashore site as an excuse to prepare for the deployment of its treaty-noncompliant cruise missile. Russia may also view new intermediate-range missiles as a response to challenges it faces from NATO's advanced conventional capabilities, especially as NATO has enlarged eastward into nations close to Russia's western border. Russian defense and security documents have not only emphasized that Russia views NATO enlargement as a key threat to its security, they have also highlighted the need for Russia to be able to deter NATO's use of precision conventional weapons, such as the U.S. Navy's Tomahawk sea-launched cruise missiles. Russia already has a wide range of conventional and nuclear capabilities that can threaten U.S. allies in NATO. For example, its shorter-range systems, like the Iskander missiles, which can carry either conventional or nuclear warheads, can reach into Poland and the Baltic states, particularly if they are deployed in Belarus or Kaliningrad. But they cannot reach across Eastern Europe, particularly if they are deployed further east in Russia. As a result, Russia may believe that land-based intermediate-range cruise missiles could fill a gap in Russia's conventional capabilities. Missiles at the lower end of INF range could reach into eastern NATO allies, covering areas that some have noted could serve as staging grounds for NATO strikes against Russia. Systems in the 2,000 kilometer range could reach Germany, and those of 3,000 kilometer range could reach most other NATO states. As Yuriy Baluyevskiy, the former head of the Russian General Staff, said in a September 2014 interview, INF-range missiles would allow Russia \"to erect a system of national security assurance\" with missiles that could target cities in Poland, Romania, and the Baltic and, as a result, \"cool the heads of these states' leaders.\" Some have suggested that Russia might use intermediate-range ballistic missiles to threaten NATO capitals at a greater distance from Russia, in part, to threaten the cohesion of the alliance. Although these capitals are still within range of Russian bombers and longer-range missiles, the nuclear threat to these cities eased considerably after the Soviet Union eliminated its SS-20 missiles. With these missiles eliminated, there was little risk the capitals would face nuclear retaliation if they invoked their Article V commitment to defend the allies closer to Russia. But, with a new threat to these more distant allies, some may question the strength of that commitment. In such a circumstance, the allies located closer to Russia might be more inclined to give in to coercion or intimidation from Russia. Although NATO can take steps to offset this impression and strengthen alliance cohesion, Russia's new intermediate-range missiles could introduce a dynamic similar to the one NATO faced during the Cold War, when some questioned whether the United States would come to the defense of its European allies, knowing that its own territory could be threatened by Soviet long-range missiles. Russian officials claim that three current and planned U.S. military programs violate the INF Treaty. They have raised at least one of these issues in diplomatic exchanges for the past several years, but have become more insistent on addressing these issues in recent months, following the State Department's publication of the 2014 Compliance Report. The three programs identified by Russia include (1) the use of intermediate-range missiles as targets during tests of U.S. missile defense systems; (2) the use of drones as weapons delivery vehicles; and (3) the planned deployment of missile defense interceptors on land in the Navy's MK-41 missile launchers. DOD reviews U.S. weapons programs to ensure that they are consistent with all U.S. arms control, nonproliferation, and disarmament commitments. These reviews have found that none of these programs constitute a violation and that the United States is in full compliance with its INF obligations. The United States addressed Russia's concerns during the meeting on INF compliance in September 2014, providing Russia with treaty-based explanations to demonstrate how the programs are compliant with U.S. obligations under the INF Treaty. However, Russian officials continue to insist that the United States has violated the INF Treaty. The United States has designed and produced numerous target missiles for use during its tests of missile defense interceptors. Several of these targets use modified engines from existing types of ballistic missiles, including retired Minuteman II long-range missiles. One such missile, known as the Hera, flew to ranges of around 1,000 kilometers. Russia claims that target missiles using Minuteman II motors violate the INF Treaty because they \"have similar characteristics to intermediate-range missiles\" and can fly to ranges covered by the INF Treaty. Russian officials have also claimed that the United States may have used guidance components from Pershing missiles in some target missiles. The United States reportedly disputed the Russian assertion in 2001, noting that the Hera missile was a \"booster system\" meant for research, not a weapons delivery system. In December 2014, the Principal Deputy Under Secretary of Defense, Brian McKeon, raised the same point in testimony before subcommittees of the House Foreign Affairs and Armed Services Committees. He noted that the INF Treaty \"explicitly permits the use of older booster stages for research and development purposes, subject to specific Treaty rules. This includes their use as targets for missile defense tests.\" The treaty bans land-based intermediate-range missiles that have been \"flight-tested or deployed for weapons delivery.\" The target missiles have never been equipped with warheads and, therefore, have never been flight tested or deployed for weapons delivery. In addition, the use of guidance systems from an eliminated missile does not violate the INF Treaty, as the text allows the parties to remove guidance sets prior to missile elimination and to reuse them in systems not limited by the treaty. The United States operates several types of unmanned aerial vehicles—drones—to perform intelligence, surveillance, and reconnaissance missions. Some drones have been equipped to carry precision-guided weapons to attack ground targets. While the sizes and ranges of U.S. drones vary greatly, some, including those that can deliver weapons, can fly to ranges between 500 and 5,500 kilometers. Russia claims that U.S. armed drones violate the INF Treaty because they are consistent with the treaty's definition of a ground-launched cruise missile. The treaty defines a cruise missile as \"an unmanned, self-propelled vehicle that sustains flight through the use of aerodynamic lift over most of its flight path.\" It further specifies that a ground-launched cruise missile banned by the treaty means \"a ground-launched cruise missile that is a weapon-delivery vehicle.\" While it is true that drones sustain flight through the use of aerodynamic lift, they do not necessarily meet the treaty's definition of unmanned and self-propelled. Although drones do not have pilots on board, they are piloted remotely, with pilots based at facilities on the ground. Moreover, although armed drones can deliver weapons to targets, they are platforms that carry weapons, not weapons themselves. Unlike a cruise missile with a separate launcher that remains behind after releasing the missile, a drone is self-contained, and takes off and lands like an aircraft. Further, although cruise missiles are destroyed when delivering their payload, drones release their payload then return to base, like an aircraft. Principal Deputy Under Secretary of Defense Brian McKeon summed this up during recent congressional testimony when he noted that drones are not missiles, they are \"two-way, reusable systems. The INF Treaty imposes no restrictions on the testing, production, or possession of two-way, reusable, armed UAVs.\" As a part of its European Phased Adaptive Approach (EPAA) for missile defense, the United States plans to deploy ballistic missile interceptors on land in Romania and Poland, in a construct known as Aegis Ashore. The site in Romania became operational in May 2016, as a part of phase 2 of the EPAA, while the site in Poland is scheduled for 2018, as a part of phase 3. According to the Missile Defense Agency, the United States will deploy SM-3 interceptor missiles at these sites in the same type of vertical launch system—the MK-41—used aboard Aegis ships. According to the U.S. Navy, the MK-41 vertical launch system (VLS) is a \"multi-missile, multi-mission launcher\" that can launch SM-2 interceptors and Tomahawk cruise missiles, along with a number of other systems. Russia claims that the MK-41 VLS will \"be a flagrant violation\" of the INF Treaty when it is based on land because it \"can be used to launch intermediate-range cruise missiles.\" This complaint seems to assume that the launchers will meet the treaty's definition of a ground-launched cruise missile (GLCM) launcher because they can launch Tomahawk sea-launched cruise missiles (SLCMs), even though they have never been tested or deployed with GLCMs. Mikhail Ulyanov, the director of the nonproliferation and arms control department of the Russian Foreign Ministry, repeated this concern on October 12, 2015, when he stated that the deployment of the MK-41 launchers in Romania would be \"a massive breach of the INF Treaty.\" The INF Treaty defines a GLCM launcher as \"a fixed launcher or a mobile land-based transporter-erector-launcher mechanism for launching a GLCM.\" A GLCM is defined \"as a ground-launched cruise missile that is a weapon-delivery vehicle.\" These definitions are somewhat circular: if a missile has been launched from a ground-based launcher, it is a ground-launched missile, and if a launcher has launched a ground-launched missile, it is a GLCM launcher. One could argue that a sea-based missile, such as the Tomahawk, could be launched from land if its launcher were deployed on land. In that case, the launcher could be considered a ground-based launcher, even if it had never been tested with a ground-launched missile. This seems to be the source of Russia's complaint. However, even if it seems somewhat logical, it is not consistent with the INF Treaty's definition. The treaty specifies that the launcher must launch an intermediate-range GLCM, not any intermediate-range cruise missile, to qualify as a system banned by the treaty. Moreover, U.S. officials have asserted that the version of the MK-41 system to be based in Romania and Poland will not be the same as the shipboard version that has been used to launch Tomahawk cruise missiles, even though it will use \"some of the same structural components as the sea-based system.\" According to some reports, the \"electronics and software of the Aegis Ashore Mk-41 launcher are different than the ship-borne variant.\" The Trump Administration reiterated this point in a fact sheet released by the State Department in December 2017. It noted that the Aegis Ashore system \"is only capable of launching defensive interceptor missiles.\" The system uses \"some of the same structural components as the sea-based Mk-41 Vertical Launch System\" but it \"is not the same launcher as the sea-based MK-41 Vertical Launch System.\" The system \"lacks the software, fire control hardware, support equipment, and other infrastructure needed to launch offensive ballistic or cruise missiles such as the Tomahawk.\" This distinction would seem to undercut the Russian view that the launcher used in Aegis Ashore \"can be used to launch intermediate-range cruise missiles.\" However, convincing Russia of this difference may be difficult. In past arms control agreements, the parties have mandated that similar systems with different purposes possess functionally related, observable differences. This is not required under the INF Treaty, and it is not clear at this time whether this will be the case for the land-based MK-41 launchers. As a result, even though the treaty definitions may not capture the system unless it actually launches a cruise missile from land, the United States may find it helpful, for political reasons, to take additional steps to address Russia's concerns and convince Russia that the system does not violate the INF Treaty. The INF treaty is of unlimited duration, but it contains a withdrawal clause that states that each party shall \"have the right to withdraw from this Treaty if it decides that extraordinary events related to the subject matter of this Treaty have jeopardized its supreme interests.\" Russia could have withdrawn from the INF Treaty to address emerging threats from intermediate-range missiles deployed in China or in other nations on its periphery, or if it believed it needed intermediate-range missiles to address perceived threats from NATO. Yet, Russia has remained a party to the treaty while, according to U.S. allegations, developing new intermediate-range missile capabilities. It is possible that it has done so in the hope of delaying a U.S. response while reserving the option to withdraw later, after completing the development and testing of its new systems. The United States, for its part, has considered a number of options to address its compliance concerns, to encourage Russia to remain a party to the treaty, and to respond to security concerns emerging as a result of Russia's development and deployment of new intermediate-range ballistic or cruise missiles. It has now decided to withdraw from the treaty, both to demonstrate that Russia's violation will not go unanswered and to free itself to pursue the development of new intermediate-range missiles. As a result, Russia may now be able to continue its current course free from the limits in the INF Treaty. According to press reports, the United States began to raise concerns about INF compliance with Russia during diplomatic meetings in 2013. Although not specified in the reports, it seems likely that the INF Treaty was only one of several issues discussed in these fora. The press reports note that Russia dismissed the U.S. concerns, stating that Russia had \"investigated the matter and consider[s] the case to be closed.\" U.S. officials stated that Russia's answer \"was not satisfactory to us\" and indicated that it would continue to press the case in future meetings. With Russia unwilling to even acknowledge that it has conducted tests that could raise INF concerns, it seems unlikely that this level of engagement will succeed in resolving the issue. The United States raised the profile of the issue in July 2014 when the State Department released the 2014 Compliance Report. According to press reports, President Obama sent a letter to President Putin that \"underscored his interest in a high-level dialogue with Moscow with the aim of preserving the 1987 treaty and discussing steps the Kremlin might take to come back into compliance.\" At the same time, Secretary of State John Kerry called the Russian Foreign Minister, Sergey Lavrov, to emphasize the same point. The two nations then held a meeting on September 11, 2014, focused exclusively on the two nations' concerns with INF compliance. As noted above, the State Department reported that Russia had failed to \"assuage\" U.S. concerns during the September 2014 meeting. The Russian participants denied that Russia had violated the treaty, complained about the lack of evidence provided by the United States, and accused the United States itself of violating the treaty. The State Department indicated, in its 2016 Annual Report on Compliance with Arms Control Agreements, that \"the United States again raised concerns with Russia on repeated occasions\" in 2015 and it will \"continue to pursue resolution of U.S. concerns with Russia\" in the future. But Russia continued to refuse to address the issue and continued to deny that it has violated the treaty. In testimony before the Senate Foreign Relations Committee, Under Secretary of State Rose Gotemoeller stated that it has been \"extraordinarily difficult\" to address this issue \"because the Russians simply have not wanted to engage in a way that would resolve this problem.\" She repeated that the United States is \"committed to bringing them back into compliance with the INF Treaty and essentially recommitting to that treaty for the future.\" At the same time, Under Secretary Gotemoeller indicated that the diplomatic engagement had some value. In testimony before the House Armed Services Committee in December 2015, she noted that Russia realizes that its \"program has been exposed\" and that it \"is not free to pursue this effort unconstrained, as this would confirm for the world that Russia has been violating an agreement that has been a key instrument of stability and security for nearly three decades.\" As a result Russia still has not begun to deploy the new missile. The Trump Administration initially continued to pursue a diplomatic solution to the INF problem. In the State Department's 2018 Compliance Report, the Administration noted that \"the United States remains open to discussing any and all ways to facilitate the Russian Federation's return to full and verifiable compliance.\" It also highlighted, in a fact sheet released in December 2017, that \"the United States continues to seek a diplomatic resolution through all viable channels.\" While Russia continued to deny that it violated the INF Treaty, some hoped the ongoing diplomatic exchanges could help move the process forward by emphasizing the magnitude of the U.S. concerns and opening channels for future discussions that focus exclusively on the INF Treaty. Public discussions of compliance concerns—in the State Department Compliance Report, press reports, and congressional hearings—could reinforce the U.S. position and complicate Russia's efforts to simply dismiss the U.S. accusations. With more attention focused on its programs, Russia could decide that it needed to explain why it seemed to be testing INF-range missiles and whether it planned to deploy the cruise missile in question on land or at sea. However, even as Russia began to discuss the status of its missile programs, it did not acknowledge that it had violated the treaty. Instead, it disputed U.S. assertions and denied that it had tested a missile to INF range. On the other hand, because Russia has at acknowledged U.S. concerns and offered its own version of events, there might be some room for further discussions during the 60-day period, announced by Secretary of State Pompeo in early December 2018, before the U.S. formally announces its withdrawal. Analysts outside government also suggested that the United States might provide Russia with a greater incentive to acknowledge, address, and possibly resolve this issue by bringing its allies into the discussion so that they could understand the implications of Russia's actions and raise their concerns with Russia directly. This would allow the violation to become \"an issue between the Russian government and its neighbors\" and not just an issue between Russia and the United States. The United States has pursued this process with its NATO allies by providing briefings and holding discussions during NATO meetings. For example, in the statement released after the summit in Wales in September 2014, the allies called on Russia \"to preserve the viability of the INF Treaty through ensuring full and verifiable compliance.\" The United States has taken additional steps to brief its NATO allies on the Russian violation and to encourage the allies to address this issue with Russia. The State Department's 2018 Compliance Report notes that NATO issued a public statement in December 2017 \"affirming U.S. compliance with the Treaty\" and urging Russia to address the serious concerns raised by its missile system \"in a substantial and transparent way, and actively engage in a technical dialogue with the United States.\" The issue has also been on the agenda during meetings of the NATO defense ministers. NATO's Secretary General Jens Stoltenberg highlighted this during his press conference prior to the meeting in October 2018. He stated that the NATO allies \"remain concerned about Russia's lack of respect for its international commitments, including the Intermediate-Range Nuclear Forces Treaty.\" He stated that the INF Treaty is a \"crucial element\" of NATO security and is \"in danger because of Russia's actions.\" He also noted that, although Russia has \"acknowledged the existence of a new missile system, called 9M729,\" it has not \"provided any credible answers on this new missile.\" He concluded by noting that the \"allies agree that the most plausible assessment would be that Russia is in violation of the Treaty.\" This last statement indicated that, in spite of ongoing U.S. efforts to provide the allies with information about Russia's noncompliant missile, the allies' assessment of Russian activities still lacked some of the certainty evident in the U.S. determination that Russia is in violation of the INF Treaty. This difference seemed to disappear after the NATO Foreign Ministers meeting on December 4, 2018, when the Foreign Ministers released a statement accepting the U.S. claim of Russian noncompliance. They noted that the \"allies have concluded that Russia has developed and fielded a missile system, the 9M729, which violates the INF Treaty\" and that they \"strongly support the finding of the United States that Russia is in material breach of its obligations under the INF Treaty.\" At the same time, they noted that the \"allies are firmly committed to the preservation of effective international arms control, disarmament and non-proliferation\" and therefore, \"will continue to uphold, support, and further strengthen arms control, disarmament and non-proliferation, as a key element of Euro-Atlantic security, taking into account the prevailing security environment.\" They also called on Russia \"to return urgently to full and verifiable compliance\" with the INF Treaty. The German Foreign Minister, Heiko Maas, reiterated his nation's support for the INF Treaty following a meeting with Russia's Foreign Minister, Sergei Lavrov, in January 2019. He noted that the treaty remained important for Germany's security, but also stated that Germany believes \"that there is a missile violating this treaty and it should be destroyed in a verifiable manner to get back to the implementation of this agreement.\" The ongoing consultations among and statements by NATO allies likely signal to Russia that NATO remains united in its concerns about Russia's activities and would likely remain united in its response if Russia attempts to use its new missiles to divide the alliance. On the other hand, this coordinated NATO response could backfire if Russia reacted by claiming that the NATO cohesion on this issue provided further evidence of the threat that NATO poses to Russia and further evidence that Russia needs a full scope of military capabilities in response. Article XIII of the INF Treaty established the Special Verification Commission (SVC) as a forum where the parties could meet to discuss and resolve implementation and compliance issues. This body had not met since 2000, but according to the terms of the treaty, the parties agreed that a meeting could occur \"if either Party so requests\"; there is no mandate for consensus or mutual agreement on the need for a meeting. Press reports from October 2016 indicated that United States \"has summoned Moscow to a mandatory meeting\" of the SVC \"to answer accusations that Moscow has violated the INF Treaty.\" This meeting occurred on November 15-16, 2016. The State Department released a statement that noted the meeting had occurred in Geneva, Switzerland, and that the United States, Belarusian, Kazakh, Russian, and Ukrainian Delegations \"met to discuss questions relating to compliance with the obligations assumed under the Treaty.\" The statement did not provide any information about the substance of the discussions or about the possibility of future meetings. While some public press outlets reported that the meeting had occurred, the reports also did not provide any details about the substance of the meeting. Both the United States and Russia probably outlined all their compliance concerns, as that was the reason for calling the meeting, but, absent any reporting to the contrary, it is possible that they did not resolve their concerns or reach any new understandings. The United States called a second meeting of the SVC in late 2017. This meeting occurred in Geneva from December 12 to 14, 2017. Because the United States identified the noncompliant GLCM as the 9M729, Russia could no longer deny the existence of the missile. However, according to some reports, Russia continued to deny that this missile had been tested to INF range or that telemetry from the tests supported a conclusion that it violated the INF Treaty. The United States has not disputed, publicly, Russia's assertion that it did not test the missile to INF range, but it did note, in the State Department's Annual Report, that Russia has attempted to \"obfuscate the nature of the program.\" Analysts outside government have suggested that, by meeting in the SVC, the parties could return to the more routine compliance process established by the treaty and remove the issue from the public debate. They expected this step to ease efforts to initiate a substantive discussion free of political posturing, while clearing the agenda of unrelated issues. Meetings in this forum would also provide Russia with the opportunity to raise its concerns about U.S. programs and U.S. compliance with the INF Treaty. Others questioned whether Russia would be willing to participate in an SVC meeting if it was required to at least acknowledge that it had conducted tests of a questionable missile. However, once the United States called for the meetings, Russia was obligated to attend under the terms of the treaty. While it is not clear what transpired, the meetings should have provided the two nations with an opportunity to share data and information outside the public spotlight. If the meetings had been successful, and Russia had been willing to acknowledge that it had conducted tests that appear inconsistent with the INF Treaty, then the United States and Russia could have used the SVC as a forum to discuss steps they might take to resolve and, if possible, reverse the violation. For example, the United States could provide Russia with a list of missile tests that raised concerns about compliance, and Russia could share data generated during those flight tests so that they could review the data together and try to reach an agreed conclusion on the parameters of the tests. Moreover, even if they could not reach agreed conclusions about past tests, they could seek to negotiate new definitions or procedures that might reduce the chances of future ambiguities or uncertainties. And if they did agree that past tests had violated the terms of the INF Treaty, they might seek to work out procedures to eliminate the offending missiles and restore the parties to compliance with the treaty. Even if Russia acknowledged that its missile violated the INF Treaty, the SVC meetings might not lead to a prompt resolution of the INF debate. The process could still take years to reach a conclusion. For example, in 1983, the United States detected Soviet construction of an early-warning radar that appeared to violate the 1972 Anti-ballistic Missile (ABM) Treaty. That treaty permitted the construction of early-warning radars on the periphery of a country facing out; the Soviet Union had constructed the radar in the country's interior, with the radar facing northeast over Soviet territory. The United States first declared this radar to be a violation of the ABM Treaty in January 1984, and it raised its concerns about the radar in numerous compliance meetings and reviews of the ABM Treaty. The Soviet Union dismissed the U.S. accusations and claimed that the facility was a space-track radar, not an early-warning radar, in spite of the fact that it looked exactly like other Soviet early-warning radars. Finally, in 1987, the Soviet Union suspended construction of the radar and, in 1989, agreed that the radar was a technical violation of the treaty. In 1990, seven years after the United States identified the violation, the Soviet Union began to dismantle the radar. Some analysts have suggested that the United States initiate studies that would explore whether the United States should eventually deploy new intermediate-range ballistic or cruise missiles to meet emerging military requirements. These studies would allow the United States to \"negotiate from a position of strength\" when addressing questions of Russian compliance and might provide the United States with \"military breakout options\" if the negotiations failed. According to Brian McKeon, the Principal Deputy Under Secretary of Defense for Policy, the Pentagon has already pursued this approach. In congressional testimony in December 2014, he noted that the Joint Staff had conducted a military assessment of the threat that new Russian INF-range missiles might create for U.S. allies in Europe and Asia and that \"this assessment has led us to review a broad range of military response options.\" According to Under Secretary McKeon, these options could include the deployment of new defenses against cruise missiles, the development and possible deployment of new U.S. intermediate-range missiles, and the deployment of other military capabilities that could counter the new Russian capabilities. Reports indicate that DOD forwarded its results to the White House in early 2015. The Administration has not, however, released this report to either Congress or the public, noting that its contents remain classified. Under Secretary McKeon provided Congress with an update on the Pentagon's pursuit of options to respond to Russia's INF violation in testimony before the House Armed Services Committee in December 2015. At that time, he noted that the Pentagon remained \"focused on ensuring that Russia gains no significant military advantage from its violation.\" But he also noted that the United States should \"consider Russian actions with regard to the INF Treaty in the context of its overall aggressive and bellicose behavior that flouts international legal norms and destabilizes the European security order.\" As a result, instead of seeking a military response that specifically offset the threat introduced by the new ground-launched cruise missile, the Pentagon is \"factoring Russia's increased cruise missile capabilities, including its INF violation into our planning.\" According to Under Secretary McKeon, the Pentagon is focusing on \"developing a comprehensive response to Russian military actions\" and is \"committing to investments now that we will make irrespective of Russia's decisions to return to compliance with the INF Treaty.\" Congress first offered support for the development of a military response to Russia's INF violation in legislation proposed in both the House and the Senate in July 2014 ( H.R. 5293 and S. 2725 ). These bills called on the President to \"carry out a program to research and develop ground-launched cruise missile and ground-launched ballistic missile capabilities, including by modification of existing United States military capabilities, with a range between 500 and 5,500 kilometers.\" The legislation also called on the President to study potential sites for the deployment of these new systems and to \"consider selecting sites on United States overseas military bases and sites offered by United States allies.\" The FY2015 National Defense Authorization Act ( H.R. 3979 , §1651) also called on the Pentagon to submit a report to Congress that described steps that it plans to take in response to Russia's violation of the INF Treaty. These plans could include research, development, and testing or deployment of future military capabilities or plans to modify and deploy existing military systems, to deter or defend against the threat posed by new Russian INF systems. The FY2016 National Defense Authorization Act ( H.R. 1735 , §1243) expanded on this provision, calling not only for a study on possible options, but also for a plan for the development of the counterforce capabilities to prevent intermediate-range ground-launched ballistic missile and cruise missile attacks, countervailing strike capabilities to enhance the forces of the United States or allies of the United States, and active defenses to defend against intermediate-range ground-launched cruise missile attacks. As noted above, the National Defense Authorization Act for 2018 ( H.R. 2810 ) has taken this approach further, both by providing funding for research into defenses, counterforce capabilities, and countervailing capabilities, and by mandating that DOD begin a program of record to develop a new U.S. ground-launched cruise missile. Press reports indicate that the Pentagon has already begun research into a new ground-launched cruise missile. They note that the United States has told Russia about the new research program and has said it would \"abandon the research program if Russia returns to compliance with the INF Treaty.\" Studies exploring possible U.S. military responses would not necessarily lead to the design of new land-based INF-range systems; the studies might conclude that the United States could meet its security challenges with sea-based or air-delivered weapons. However, if the studies did find that U.S. security could benefit from such systems, the United States could initiate research, development, and design work without violating the INF Treaty's ban on the testing or deployment of intermediate-range land-based missiles. Then, if Russia persisted in developing and deploying INF-range missiles, the United States would be able to move more quickly to respond and offset new threats to its security and the security of its allies. At the same time, these studies might boost the diplomatic dialogue by creating incentives for Russia to address U.S. concerns and preserve the INF Treaty. During the early 1980s, the Soviet Union was unwilling to ban INF-range systems, and was willing to limit its deployment only if the United States did not introduce any new missiles into Europe. It was only after the United States began to deploy its missiles in Europe that the Soviet Union became willing to reduce, and then eliminate, its systems. Some contend that this occurred because Soviet leaders recognized that U.S. INF systems could have struck targets in Moscow in minutes, and might have \"decapitated\" Soviet command and control systems early in a conflict. The only way to mitigate this threat was to agree to a ban on INF missiles. New U.S. research into INF systems might lead to similar, new Russian worries about its vulnerability to missile strikes from Europe, and therefore, new interests in limiting or banning intermediate-range missiles. There is some evidence that the potential for new U.S. INF deployments may have a similar effect on Russia. In June 2015, press reports focused on U.S. statements about the potential development of new military capabilities in response to Russia's INF violation. These articles, which highlighted the possibility that the United States might deploy new land-based missiles to Europe, caught the attention of Russian officials. An official speaking for the Kremlin noted that Moscow \"placed much attention\" on this report. A member of the Defense Committee of Russia's Federal Assembly stated that if the United States pursued such a deployment, Russia \"would face the necessity of retaliating.\" While it is not yet clear whether Russia will conclude that its security is better served by pressing forward with its own deployments or by returning to compliance with the INF Treaty and forestalling a new U.S. cruise missile, it seems likely that Russia now knows that the United States might pursue a military response that affects Russia's security. On the other hand, if, as Secretary McKeon testified in December 2015, the United States is considering the challenge posed by Russia's INF violation to be a part of the broader challenge of Russian activities in Europe, these programs may do little to encourage Russia to return to INF compliance. Part of the incentive for that return would rest with the promise that the United States would refrain from deploying new capabilities in Europe if Russia returned to compliance. But, if the United States responds with investments \"that we will make irrespective of Russia's decisions to return to compliance with the INF Treaty,\" the incentive could be lost. Some analysts have suggested that the United States suspend its participation in arms control agreements with Russia, both to demonstrate the magnitude of its concerns with Russia's missile developments and to preserve U.S. options for responding to military threats that might emerge if Russia deploys new INF missiles. Moreover, by suspending its participation in these agreements, the United States could make it clear that Russia would benefit from treaty-mandated limits on U.S. military capabilities only if its military capabilities were similarly limited. As with the studies on new U.S. military capabilities, this might boost the diplomatic process by providing Russia with an incentive to acknowledge and suspend its noncompliant missile tests. Even before President Trump announced that the United States would withdraw from the INF Treaty, analysts and observers outside government suggested that the United States withdraw both to protest Russia's noncompliance and to allow the United States to pursue the development and deployment of its own land-based INF-range missiles. Some also note that the United States has sought to convince Russia to return to compliance for several years, and that it no longer makes sense for the United States to be bound by INF if Russia is violating it. Many have also noted that, by withdrawing from the treaty, the United States will be free to deploy intermediate-range land-based missiles, not only as a response to emerging challenges from Russia, but also in response to China's growing missile capabilities in Asia. They note that land-based missiles would likely provide the United States with added flexibility in countering Chinese efforts to restrict U.S. operations in the region. While they acknowledge that the United States could deploy air-delivered and sea-based missiles without violating the INF Treaty, they argue that air bases in the region are vulnerable to attack and sea-based assets are already stretched thin with weapons deployed for other missions. Consequently, by deploying missiles on the territory of allies, like Japan, the Philippines, and possibly northern Australia, the United States could expand its reach and grow its capabilities without further stretching its naval forces. However, some argue that U.S. withdrawal could do more harm than good to U.S. and allied security interests because the United States has not yet determined whether it would want to deploy land-based INF missiles itself, and has not yet funded a program to develop such missiles. As a result, U.S. withdrawal would leave Russia as the only party able to benefit from the elimination of the treaty limits and might allow Russia to move quickly from testing to deployment. Moreover, as Stephen Rademaker noted during testimony before the House Armed Services Committee, Russia might \"welcome a U.S. decision to terminate the treaty,\" and it would \"be a mistake to react in ways that will be seen by them as a reward rather than as a punishment.\" He added that \"since Russia so clearly wants out, we should make sure that they alone pay the political and diplomatic price of terminating the treaty.\" Others have argued that U.S. withdrawal from INF could also damage NATO cohesion. Although NATO foreign ministers have accepted the U.S. assessment of a Russian violation, many of the individual nations in NATO continue to support the treaty and believe it continues to serve Europe's security interests. Moreover, even if the United States develops a new land-based missile, U.S. allies in Europe might be unwilling to host the missile on their soil; disputes over deployment of INF-range missiles disrupted NATO in the 1980s and could undermine alliance cohesion again. Consequently, some have suggested that the United States remain in the INF Treaty, continue to seek a resolution with Russia, and deploy air-delivered or sea-based systems around Russia to apply pressure that might bring Russia back into compliance, essentially implementing the strategy outlined by the Trump Administration in late 2017. Some have also questioned whether the United States needs a land-based missile to respond to challenges from China; they note that the United States can cover targets in Asia with sea-based and air-delivered missiles without violating INF. They note that there are far greater ocean areas than land areas within INF range of critical targets in China. Moreover, they question whether U.S. allies in Asia would be any more willing than those in Europe to host new U.S. missiles, particularly if the presence of the missiles might raise concerns among the civilian populations or increase the likelihood of attack early in a conflict. Regardless, some note that even if the United States and its allies could benefit from the deployment of land-based missiles in Asia, those benefits should be weighed against the risks of upsetting U.S. allies and undermining the current security structure in Europe, and possibly returning to the Cold War instabilities that gave rise to the INF Treaty in the first place. As one analyst noted, the United States \"will only stoke anxiety if it looks as though it's willing to increase risk to allies in Europe in order to reduce risk to allies in Asia.\" Several analysts have called on the United States to suspend its participation in the 2010 New Strategic Arms Reduction Treaty (New START). This treaty, which entered into force in February 2011, limits the United States and Russia to 1,550 deployed warheads on 700 deployed delivery vehicles for long-range, strategic nuclear warheads. Both parties have reduced their forces, meeting the mandated limits in February 2018. During implementation, some analysts argued that the United States could suspend its participation, without withdrawing from the treaty, then resume reductions prior to the deadline if Russia returned to compliance with the INF Treaty. This step would \"underscore to Moscow that the advantageous deal they achieved in the New START Treaty ... is being put in jeopardy.\" Others argued that this approach could have undermined U.S. national security interests, noting that Russia could have also suspended its reductions and, possibly, increased its nuclear forces above the limits. Russia could also have responded by suspending the data exchanges and on-site inspections mandated by New START, denying the United States access to data and information that is important not only to the treaty verification process, but also to the U.S. intelligence community. This option is no longer viable, as the United States and Russia have completed their New START reductions. However, the linkage between New START and INF compliance remains an issue, as the United States has begun to assess whether it should support the extension of New START for five years, as permitted by the treaty, when it expires in 2021. Reports indicate that the Trump Administration is currently conducting a review that will inform the U.S. approach to the treaty's extension. Administration officials addressed this review during testimony before the Senate Foreign Relations Committee on September 18, 2018. Both Under Secretary of State Andrea Thompson and Deputy Under Secretary of Defense David Trachtenberg emphasized how Russia's violation of the INF Treaty and its more general approach to arms control undermined U.S. confidence in the arms control process. Under Secretary Thompson noted that Russia's noncompliance \"has created a trust deficit that leads the United States to question Russia's commitment to arms control as a way to manage and stabilize our strategic relationship and promote greater transparency and predictability.\" Deputy Under Secretary Trachtenberg also emphasized that \"arms control with Russia is troubled because the Russian Federation apparently believes it need only abide by the agreements that suit it. As a result, the credibility of all international agreements with Russia is at risk.\" Nevertheless, before deciding whether to extend New START, the Administration is likely to weigh its concerns about Russia's compliance with INF against assessments of whether the limits in the treaty continue to serve U.S. national security interests, and whether the insights and data that the monitoring regime provides about Russian nuclear forces remain of value for U.S. national security. In an interview published in November 2014, Under Secretary of State Rose Gottemoeller, who led the U.S. discussions with Russia on the INF Treaty, stated that she believed there was a debate in Moscow about whether the INF Treaty continued to serve Russia's national security interests. She believed the issue was not settled and that \"recent comments by Russian officials and by the Russian government overall about the viability and importance of the treaty for the time being give us time and space to negotiate.\" It is also possible, however, that the debate in Russia is less about whether to stay within the treaty and more about when and how to move beyond its limits. Some would argue that Russia's willingness to participate in discussions with the United States provided Russia with time and space to pursue its missile programs, before openly withdrawing from the treaty and prompting a U.S. response. Others have argued that Russia may be unwilling to withdraw from the treaty now, with the hope that the United States might eventually agree to a joint withdrawal or that the United States might withdraw itself and free Russia from its obligations. With the future of the treaty uncertain, the United States could consider a range of options for how it might address U.S. and allied security concerns now that Russia has begun to deploy the new INF-range cruise missile. These options include military responses—such as the development and deployment of new nuclear-armed cruise missiles or new conventional military capabilities—along with diplomatic and consultative steps taken with U.S. allies. As noted above, legislation proposed in July 2014 called on the President to conduct a study both on the need for new missiles and on locations overseas where the United States might deploy such systems. Others have been more direct in their support of new U.S. INF-range systems. Former Under Secretary of State John Bolton has argued that the INF Treaty interferes with the United States' ability \"to preserve global security\" and that other countries, like China, North Korea, and Iran, face no limits on their intermediate-range missiles. He believes the United States \"should see Moscow's breach as an opportunity to withdraw\" from the treaty so that it can \"have access to the full spectrum of conventional and nuclear options.\" As noted above, Congress has mandated that the Pentagon begin a program of record on a new ground-launched intermediate-range cruise missile, and the Pentagon has begun to conduct research into such a system. Those who support programs to develop and deploy new U.S. INF-range missiles do not say, specifically, that these missiles should carry nuclear warheads or be based in Europe, although they also do not rule this out. Other analysts, however, argue that such an approach is unnecessary and would possibly do more to disrupt than support U.S. alliances overseas. They note that the United States should not need to deploy new nuclear weapons because U.S. conventional weapons are more than capable of responding to emerging threats and ensuring U.S. and allied security. They note that Russia also views U.S. conventional capabilities as a threat to Russian security, pointing out that Russian officials have repeatedly raised concerns about U.S. advanced conventional weapons and have suggested that Russia would be unwilling to reduce its nuclear forces any further unless the United States were willing to limit these capabilities in an arms control treaty. Moreover, even if the United States decided that it needed to counter Russia's new capabilities with nuclear-armed missiles, it could be very difficult to find an allied country in Europe or Asia that was willing to house those missiles. As noted above, even after NATO reached consensus on the need to deploy INF missiles in 1979, several allied governments nearly refused to accept the missiles on their territories and many faced widespread public protests against the deployment of new nuclear weapons. There would likely be even less support for new nuclear weapons among many of the U.S. allies in Europe now, with several recently calling for the removal of the nearly 200 U.S. nuclear weapons that remain in Europe. As a result, it is possible that U.S. efforts to deploy new nuclear-armed INF-range missiles in Europe could \"exacerbate political divisions in Europe\" and undermine the unity NATO would need to respond to Russian attempts at coercion. There is also likely to be little support for new U.S. land-based nuclear weapons in Asia, as the United States removed these weapons in the early 1990s and maintains long-range bombers with the capability to support extended deterrence in Asia. If Russia deploys new intermediate-range ballistic missiles and cruise missiles and seeks to use those capabilities to coerce or intimidate the United States or its allies, then the United States might deploy other military capabilities in response. These could include new air-delivered or sea-based cruise missiles that would be consistent with the terms of the INF Treaty and would not require basing on allied territories. The United States could also seek to expand the range of existing shorter-range systems, so that it could meet potential new military requirements without bearing the cost of developing new intermediate-range missile systems. For example, in testimony before the House Armed Services Committee, Jim Thomas, the Vice President of the Center for Strategic and Budgetary Assessments, suggested that the Department of Defense (DOD) assess the feasibility and cost to extend the range of the Army's tactical missile system (MGM-164 ATACMS), which currently has a range of about 80 miles. He also suggested that DOD consider developing a \"road-mobile, land-based variant\" of the Navy's MK-41 vertical launch system so that it could launch offensive missiles from land, if needed. Frank Rose and Robert Scher, former officials from the Obama Administration, made similar suggestions in a joint HASC/HFAC hearing in late March 2017. They both identified air-delivered and sea-based military capabilities as a means to not only offset threats to NATO nations but also remind Russia of the threats it could face if the INF Treaty were to collapse. The United States could also expand its missile defense capabilities in Europe and Asia in response to the deployment of new Russian missiles. At the present time, the United States and NATO are pursuing the European Phased Adaptive Approach, with missile defense interceptors deployed at sea and, eventually, on land in Poland and Romania. The interceptors and radars in this system are designed to defend against shorter- and intermediate-range missiles launched from Iran, with, eventually, some capability against longer-range Iranian missiles. The United States is deploying similar sea-based capabilities in Asia, in cooperation with allies there, in response to North Korea's missile program. The United States has insisted, repeatedly, that this system will have no capability against the larger numbers of far more capable Russian long-range missiles. However, several analysts in both the United States and Europe have suggested that NATO might reorient this system to defend against Russian intermediate-range missiles, if necessary. Others have argued that the United States and NATO should focus specifically on the development and deployment of cruise missile defenses \"to protect key alliance assets in the event of a conflict with Russia.\" New intermediate-range missiles deployed in or near Russia would not have the range needed to reach targets in the continental United States. They would, however, be able to threaten U.S. allies in Europe, Asia, and the Middle East. As a result, the United States would likely engage with its allies when determining how to respond if Russia deploys new INF-range missiles. U.S. allies' views on the nature of the threat from the missiles could inform the U.S. approach to responding to that threat. Some may favor continuing efforts to engage Russia through diplomatic channels, while others may prefer that the United States develop and deploy new capabilities to defend against any emerging Russian threat. However, there is little evidence that the United States consulted with its allies in Europe before deciding to withdraw from the treaty. Moreover, press reports indicate that the U.S. decision to delay its formal withdrawal from the treaty by 60 days occurred after \"German Chancellor Angela Merkel and other European leaders persuaded Trump to delay the move to allow for additional consultations.\" The United States could also consider several steps to reassure its allies of its commitment to their defense. Some analysts believe that this has become increasingly important in recent months, following Russia's annexation of Crimea and aggression against Ukraine. For example, NATO could develop new plans and procedures for engaging with Russia in a crisis in which these missiles might come into play. NATO might also expand its ongoing joint training missions and exercises, both to reassure the allies of the U.S. commitment and to strengthen its ability to provide reinforcements if a conflict were to occur. Beyond NATO, the United States could also meet with allies in Asia and the Middle East to discuss possible military or diplomatic responses if they felt threatened by Russia's missiles, either generally or in response to specific scenarios. Although some analysts have suggested that the United States focus its response to Russia's noncompliance with the INF Treaty on military measures, and the development of new missile capabilities, others have argued for a more nuanced approach. They note that the United States may be able to defend its allies and respond to Russian aggression with conventional weapons and existing capabilities. But they also note that the full range of U.S. capabilities will do little to assuage the concerns of U.S. allies unless they are confident that the United States will come to their defense if they are threatened. In the absence of that confidence, some allies may feel more exposed than others and may be more vulnerable to Russian efforts at coercion. As a result, although the current crisis over the INF Treaty began with concerns about the development of new Russian missiles, the United States may need to respond with measures directed more at the political concerns of its allies than at the military capabilities of Russia. For example, some European allies, particularly in Central and Eastern Europe, have expressed concern about the United States' reduced conventional force posture in Europe, and particularly the withdrawal over the past two years of two of the Army's four brigade combat teams in Europe. Although the United States has augmented its military presence in Central and Eastern Europe in the wake of Russia's annexation of Crimea, many allies have asked for a more robust U.S. response. NATO addressed these concerns during the September 2014 summit in Wales and announced a number of collective defense measures that were designed to deter further Russian aggression. Although not directly connected to Russia's noncompliance with the INF Treaty, these measures may also serve to assuage security concerns that arise if Russia continues to develop new intermediate-range ballistic and cruise missiles. Both the House and Senate pressed the Obama Administration for information about Russia's arms control compliance record and options for the U.S. response during the 114 th Congress. The House Armed Services and Foreign Affairs Committees have held three hearings on this issue, to date, and both the House and Senate Armed Services Committees have raised the issues during other, related hearings. The National Defense Authorization Act for FY2015 ( H.R. 3979 ) mandates that the President submit a report to Congress that includes an assessment of the effect of Russian noncompliance on the national security interests of the United States and its allies, and a description of the President's plan to resolve the compliance issues. The legislation also calls for periodic briefings to Congress on the status of efforts to resolve the U.S. compliance concerns. The FY2016 NDAA ( H.R. 1735 , §1243) also addressed Russia's compliance with the INF Treaty and possible U.S. military responses. This legislation stated the sense of Congress that the development and deployment of a nuclear ground-launched cruise missile by Russia is a violation of the INF Treaty, that Russia should return to compliance with the INF Treaty, that efforts to compel Russia to return to compliance \"cannot be open-ended,\" and that there are several U.S. military requirements that would be addressed by the development and deployment of systems currently prohibited by the INF Treaty. The legislation went on to require that the President notify Congress both about the status of Russia's compliance with the INF Treaty and the status and content of updates that the United States provides to its allies in NATO and East Asia about Russia's testing, operating capability, and deployment of INF-range ground-launched ballistic missiles or ground-launched cruise missiles. As was noted above, the legislation also mandated that the Secretary of Defense submit a plan to Congress for the development of counterforce capabilities to prevent intermediate-range ground-launched ballistic missile and cruise missile attacks, countervailing strike capabilities to enhance the forces of the United States or allies of the United States, and active defenses to defend against intermediate-range ground-launched cruise missile attacks. The FY2017 NDAA ( P.L. 114-328 §1231 and §1238) also addressed congressional concerns with Russia's compliance with the INF Treaty. In Section 1231, Congress withheld $10 million in funding for the Executive Office of the President until the Secretary of Defense completed \"meaningful development\" of military capabilities that would allow the United States to respond to risks created by Russia's deployment of a new ground-based cruise missile. Section 1238 mandated that the Chairman of the Joint Chiefs of Staff submit a report containing, among other things, an assessment \"of whether and why the Treaty remains in the national security interest of the United States, including how any ongoing violations bear on the assessment if such a violation is not resolved in the near-term.\" As is noted above, both the House and Senate versions of the FY2018 NDAA ( H.R. 2810 ) also mandate that the United States take steps to develop a military response to Russia's INF-range missile. The conference report ( H.Rept. 115-404 ) mandates that the Secretary of Defense \"establish a program of record to develop a conventional road-mobile ground-launched cruise missile system with a range of between 500 to 5,500 kilometers\" and authorizes $58 million in funding for the development of active defenses to counter INF-range ground-launched missile systems; counterforce capabilities to prevent attacks from these missiles; and countervailing strike capabilities to enhance the capabilities of the United States. The legislation also mandates that the President impose additional sanctions on Russia if it remains in noncompliance with the INF Treaty. Congress also addressed the INF Treaty in the National Defense Authorization act for FY2019 ( P.L. 115-232 , §1243). The conference report legislation states that the President must submit a determination to Congress stating whether Russia \"is in material breach of its obligations under the INF Treaty\" and whether \"the prohibitions set forth in Article VI of the INF Treaty remain binding on the United States as a matter of United States law.\" These are the prohibitions on the testing and deployment of land-based ballistic and cruise missiles with a range between 500 and 5,500 kilometers. The legislation also stated that the United States should \"take actions to encourage the Russian Federation to return to compliance\" by providing additional funds for the development of military capabilities needed to counter Russia's new cruise missile and by \"seeking additional missile defense assets … to protect United States and NATO forces\" from Russia's noncompliant ground-launched missile systems. The FY2015 NDAA had stated that it was in the national security interest of the United States and its allies for the INF Treaty to remain in effect and for Russia to return to full compliance with the treaty. However, this assessment could change now that Russia appears to have deployed its new INF-range land-based cruise missile. Both Congress and the Trump Administration could now conclude that the United States may need to move beyond the diplomatic process to address emerging security concerns. While a decision to withdraw from the INF Treaty would have to come from the executive branch, Congress can express its views on that outcome both during hearings and through legislation. It cannot, however, mandate that outcome.", "summary": "The United States and Soviet Union signed the Intermediate-Range Nuclear Forces (INF) Treaty in December 1987. Negotiations on this treaty were the result of a \"dual-track\" decision taken by NATO in 1979 in response to concerns about the Soviet Union's deployment of new intermediate-range nuclear missiles. NATO agreed both to accept deployment of new U.S. intermediate-range ballistic and cruise missiles and to support U.S. efforts to negotiate with the Soviet Union to limit these missiles. In the INF Treaty, the United States and Soviet Union agreed that they would ban all land-based ballistic and cruise missiles with ranges between 500 and 5,500 kilometers. The ban would apply to missiles with nuclear or conventional warheads, but would not apply to sea-based or air-delivered missiles. The U.S. State Department, in the 2014, 2015, 2016, 2017, and 2018 editions of its report Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments, stated that the United States has determined that \"the Russian Federation is in violation of its obligations under the [1987 Intermediate-range Nuclear Forces] INF Treaty not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles.\" In the 2016 report, it noted that \"the cruise missile developed by Russia meets the INF Treaty definition of a ground-launched cruise missile with a range capability of 500 km to 5,500 km.\" In late 2017, the United States released the Russian designator for the missile—9M729. The United States has also noted that Russia has deployed several battalions with the missile. In late 2018, the Office of the Director for National Intelligence provided further details on the violation. The Obama Administration raised its concerns about Russian compliance with the INF Treaty in a number of meetings since 2013. Russia repeatedly denied that it had violated the treaty. In October 2016, the United States called a meeting of the Special Verification Commission, which was established by the INF Treaty to address compliance concerns. During this meeting, in mid-November, both sides raised their concerns, but they failed to make any progress in resolving them. A second SVC meeting was held in December 2017. The United States has also begun to consider a number of military responses, which might include new land-based INF-range systems or new sea-launched cruise missiles, both to provide Russia with an incentive to reach a resolution and to provide the United States with options for future programs if Russia eventually deploys new missiles and the treaty regime collapses. It might also suspend or withdraw from arms control agreements, although several analysts have noted that this might harm U.S. security interests, as it would remove all constraints on Russia's nuclear forces. The Trump Administration conducted an extensive review of the INF Treaty during 2017 to assess the potential security implications of Russia's violation and to determine how the United States would respond going forward. On December 8, 2017—the 30th anniversary of the date when the treaty was signed—the Administration announced that the United States would implement an integrated response that included diplomatic, military, and economic measures. On October 20, 2018, President Trump announced that the United States would withdraw from INF, citing Russia's noncompliance as a key factor in that decision. The United States suspended its participation in the treaty and submitted its official notice of withdrawal February 2, 2019. Russia responded by suspending its participation on February 2, 2019, as well. Congress is likely to continue to conduct oversight hearings on this issue, and to receive briefings on the status of Russia's cruise missile program. It may also consider legislation authorizing U.S. military responses and supporting alternative diplomatic approaches. This report will be updated as needed.", "document_type": "crs"}
{"report": "Congressional interest in small business access to capital has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to start, continue, or expand operations and create jobs. Small businesses have played an important role in net job growth during previous economic recoveries, particularly in the construction, housing, and retail sectors. For example, after the eight-month recession that began in July 1990 and ended in March 1991, small businesses (defined for this purpose as having fewer than 500 employees) increased their net employment in the first year after the recession, whereas larger businesses continued to experience declines in employment. During the most recent recession (December 2007-June 2009), small businesses accounted for almost 60% of net job losses. From the end of the recession through the end of FY2012, small businesses accounted for about 63% of net new jobs, close to their historical average share of net new job creation. Since then, small businesses have added about 65% of net new jobs. Some have argued that the federal government should provide additional resources to assist small businesses. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses and create jobs. Several laws were enacted during the 111 th Congress to enhance small business access to capital. For example, P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided the Small Business Administration (SBA) an additional $730 million, including $375 million to temporarily subsidize SBA fees and increase the 7(a) loan guaranty program's maximum loan guaranty percentage from 85% on loans of $150,000 or less and 75% on loans exceeding $150,000 to 90% for all regular 7(a) loans. P.L. 111-240 , the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) ($4.0 billion was issued) to encourage community banks with less than $10 billion in assets to increase their lending to small businesses. It also authorized a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, numerous changes to the SBA's loan guaranty and contracting programs, funding to continue the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. According to the SBA, the temporary fee subsidies and 90% maximum loan guaranty for the 7(a) program \"engineered a significant turnaround in SBA lending.... The end result is that the agency helped put more than $42 billion in the hands of small businesses through the Recovery Act and Jobs Act combined.\" This report focuses on the SBLF. It begins with a discussion of the supply and demand for small business loans. The SBLF's advocates argued that the fund was an important part of a larger effort to enhance the supply of small business loans. After describing the program's structure, the report then examines other arguments that were presented both for and against the program's enactment. Advocates claimed the SBLF would increase lending to small businesses and, in turn, create jobs. Opponents contended that the SBLF could lose money, lacked sufficient oversight provisions, did not require lenders to increase their lending to small businesses, could serve as a vehicle for the Troubled Asset Relief Program (TARP) recipients to effectively refinance their TARP loans on more favorable terms with little or no resulting benefit for small businesses, and could encourage a failing lender to make even riskier loans to avoid higher dividend payments. The report concludes with an examination of the SBLF's implementation by the Department of the Treasury and a discussion of bills introduced during recent Congresses to amend the SBLF. For example, during the 112 th Congress, S. 681 , the Greater Accountability in the Lending Fund Act of 2011, would have, among other provisions, limited the program's authority to 15 years from enactment and prohibited TARP recipients from participating in the program. H.R. 2807 , the Small Business Leg-Up Act of 2011, would have transferred any unobligated and repaid funds from the SBLF when its investment authority expired on September 27, 2011, to the Community Development Financial Institutions Fund \"to continue the program of making capital investments in eligible community development financial institutions in order to increase the availability of credit for small businesses.\" H.R. 3147 , the Small Business Lending Extension Act, would have, among other provisions, extended the Department of the Treasury's investment authority from one year following the date of enactment to two years. During the 113 th Congress, H.R. 2474 , the Community Lending and Small Business Jobs Act of 2013, would have transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund. Each quarter, the Federal Reserve Board surveys senior loan officers concerning their bank's lending practices. The survey includes questions about both the supply and demand for small business loans. For example, the survey includes a question concerning their bank's credit standards for small business loans: \"Over the past three months, how have your bank's credit standards for approving applications for C&I [commercial and industrial] loans or credit lines—other than those to be used to finance mergers and acquisitions—for small firms (defined as having annual sales of less than $50 million) changed?\" The senior loan officers are asked to indicate if their bank's credit standards have \"Tightened considerably,\" \"Tightened somewhat,\" \"Remained basically unchanged,\" \"Eased somewhat,\" or \"Eased considerably.\" Subtracting the percentage of respondents reporting \"Eased somewhat\" and \"Eased considerably\" from the percentage of respondents reporting \"Tightened considerably\" and \"Tightened somewhat\" provides an indication of the market's supply of small business loans. As shown in Figure 1 , senior loan officers reported that they generally tightened small business loan credit standards from 2007 through late 2009. Since 2009, small business credit markets have generally improved, with some tightening in 2016 and the end of 2018. The survey also includes a question concerning the demand for small business loans: \"Apart from normal seasonal variation, how has demand for C&I loans changed over the past three months for small firms (annual sales of less than $50 million)?\" Senior loan officers are asked to indicate if demand was \"Substantially stronger,\" \"Moderately stronger,\" \"About the same,\" \"Moderately weaker,\" or \"Substantially weaker.\" Subtracting the percentage of respondents reporting \"Moderately weaker\" and \"Substantially weaker\" from the percentage of respondents reporting \"Substantially stronger\" and \"Moderately stronger\" provides an indication of the market's demand for small business loans. As shown in Figure 1 , senior loan officers reported that the demand for small business loans declined somewhat in 2007 and 2008, and declined significantly in 2009. Demand then leveled off (at a relatively reduced level) during 2010, increased somewhat during the first half of 2011, declined during the latter half of 2011, generally increased from 2012 through 2015, and has varied somewhat, increasing in some quarters and declining in others, since then. The Federal Deposit Insurance Corporation (FDIC) has maintained comparable small business lending data for the second quarter (June 30) of each year since 2002. Figure 2 shows the amount of outstanding small business loans (defined by the FDIC as commercial and industrial loans of $1 million or less) for nonagricultural purposes as of June 30 of each year from 2006 to 2018. As shown in Figure 2 , the amount of outstanding small business loans for nonagricultural purposes increased at a relatively steady pace from June 30, 2006, to June 30, 2008, declined over the next several years, and has increased each year since June 30, 2013. Although changes in small business outstanding debt are not necessarily a result of changes in the supply of small business loans, many, including the SBA, view a decline in small business outstanding debt as a signal that small businesses might be experiencing difficulty accessing sufficient capital to enable them to lead job growth. According to an SBA-sponsored study of small business lending, several factors contributed to the decline in small business lending from 2007 to 2010. The report's authors noted that the 30% decline in home prices from their peak in 2006 to 2010 diminished the value of collateral for many small business borrowers, some of whom had relied on home equity loans to finance their small businesses during the real estate boom. The authors concluded that the absence of this additional source of collateral may have contributed to a decline in lending to small businesses. They also argued that many small businesses found it increasingly difficult to renew existing lines of credit as lenders became more cautious as a result of slow economic growth and an increasing risk of loan defaults, especially among small business start-ups, which are generally considered among the most risky investments. The authors argued that in this newly regulated market, smaller lenders are likely to be less profitable because they have fewer sales of products and services to spread out over the higher auditing and FDIC costs. Hence, they have less money to lend to small businesses and others; and the relative difficulty in assessing creditworthiness due to the lack of information about potential financial performance is very high in small business lending, especially in financial markets driven by factor—rather than relationship—lending. Therefore, one would expect the small business loan market to recover more slowly than other financial markets. The authors also noted that FDIC data indicated that small business lending had not only declined in absolute terms (the total amount of dollars borrowed and the total number of small business loans issued), but in relative terms as well (the market share of business loans): Over the eight years from 2003 through 2010, small business loans as a share of total business loans declined by more than 12 percentage points, from 81.7% in 2003 to 68.9% in 2010. Perhaps of most concern is the further decline in the ratios of small business loans to total assets and small business loans to total business loans. Small business loans constituted about 16.8% of total assets in 2005, but only 15.3% in 2010; hence, small business lending is becoming less significant for these lenders. Small business lending is also losing market share in the business loan market. In the eight-year period from 2003 to 2010, small business loans as a share of total business loans declined more than 10 percentage points from 81.7% in 2003 to 68.9% in 2010. According to the previously mentioned SBA-sponsored study of small business lending, the demand for small business loans fell during the recession primarily because many small businesses experienced a decline in sales and many small business owners had a heightened level of uncertainty concerning future sales. The study's authors argued that given small business owners' lack of confidence in the demand for their goods and services, many small business owners decided to save capital instead of hiring additional employees and borrowing capital to invest in business expansions and inventory. The responses of small business owners to a monthly survey by the National Federation of Independent Business Research Foundation (NFIB) concerning small business owners' views of the economy support the argument that declining sales contributed to the reduced demand for small business loans. From 2008 through 2011, small business owners responding to the NFIB surveys identified poor sales as their number-one problem. Prior to 2008, taxes had been reported as their number-one problem in nearly every survey since the monthly surveys began in 1986. Also, employment data suggest that small businesses were particularly hard hit by the recession. As mentioned previously, small businesses accounted for almost 60% of the net job losses during the December 2007-June 2009 recession. According to testimony by the Secretary of the Treasury before the House Small Business Committee on June 22, 2011, small businesses were especially hard hit by the recession because [s]mall businesses are concentrated in sectors that were especially hard hit by the recession and the bursting of the housing bubble: construction and real estate. More than one-third of all construction workers are employed by firms with less than 20 workers, and an additional third are employed by businesses with fewer than 100 employees. Just over half of those employed in the real estate, rental, and leasing sectors work for businesses with less than 100 workers on their payrolls. More broadly, the rate of job losses was almost twice as high in small businesses as it was in larger firms during the depths of the crisis. During the 111 th Congress, legislation designed to increase both the supply and demand for small business loans was adopted. For example, Congress provided more than $1.1 billion to temporarily subsidize fees for the SBA's 7(a) and 504/Certified Development Company (504/CDC) loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage from 85% on loans of $150,000 or less and 75% on loans exceeding $150,000 to 90% for all regular 7(a) loans (funding was exhausted on January 3, 2011). The fee subsidies were designed to increase the demand for small business loans by reducing the cost of borrowing. The 90% loan guarantee was designed to increase the supply of small business loans by reducing the risk of lending. Congress also provided the SBA additional resources to expand its lending to small businesses. For example, ARRA included a $255 million temporary, two-year small business stabilization program to guarantee loans of $35,000 or less to small businesses for qualified debt consolidation, later named the America's Recovery Capital (ARC) Loan program (the program ceased issuing new loan guarantees on September 30, 2010); an additional $15 million for the SBA's surety bond program and a temporary increase in that program's maximum bond amount from $2 million to $5 million and up to $10 million under certain conditions (the higher maximum bond amounts ended on September 30, 2010); an additional $6 million for the SBA's Microloan program's lending program and an additional $24 million for the Microloan program's technical assistance program; and increased the funds ( leverage ) available to SBA-licensed Small Business Investment Companies (SBICs) to no more than 300% of the company's private capital or $150 million, whichever is less. Several other programs were also enacted during the 111 th Congress to increase the supply of small business loans. For example, ARRA authorized the SBA to establish a temporary secondary market guarantee authority to provide a federal guarantee for pools of first lien 504/CDC program loans that are to be sold to third-party investors. ARRA also authorized the SBA to make below-market interest rate direct loans to SBA-designated \"Systemically Important Secondary Market (SISM) Broker-Dealers\" that would use the loan funds to purchase SBA-guaranteed loans from commercial lenders, assemble them into pools, and sell them to investors in the secondary loan market. P.L. 111-240 extended the SBA's secondary market guarantee authority from two years after the date of ARRA's enactment to two years after the date of the program's first sale of a pool of first lien position 504/CDC loans to a third-party investor (which took place on September 24, 2010). The act also increased the loan guarantee limits for the SBA's 7(a) program from $2 million to $5 million, and for the 504/CDC program from $1.5 million to $5 million for \"regular\" borrowers, from $2 million to $5 million if the loan proceeds are directed toward one or more specified public policy goals, and from $4 million to $5.5 million for manufacturers. It also increased the SBA's Microloan program's loan limit for borrowers from $35,000 to $50,000 and for microlender intermediaries after their first year in the program from $3.5 million to $5 million. In addition, it temporarily increased for one year (through September 26, 2011) the SBA 7(a) Express Program's loan limit from $350,000 to $1 million. The act also authorized the Secretary of the Treasury to establish the $30 billion SBLF and a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs. The SBLF was designed \"to address the ongoing effects of the financial crisis on small businesses by providing temporary authority to the Secretary of the Treasury to make capital investments in eligible institutions in order to increase the availability of credit for small businesses.\" The SBLF's legislative history, including differences in the House- and Senate-passed versions of the program, appears in the Appendix . P.L. 111-240 authorized the Secretary of the Treasury to make up to $30 billion in capital investments in eligible institutions with total assets equal to or less than $1 billion or $10 billion (as of the end of the fourth quarter of calendar year 2009). The authority to make capital investments in eligible institutions was limited to one year after enactment. Eligible financial institutions with total assets equal to or less than $1 billion as of the end of the fourth quarter of calendar year 2009 could apply to receive a capital investment from the SBLF in an amount not exceeding 5% of risk-weighted assets, as reported in the FDIC call report immediately preceding the date of application. During the fourth quarter of 2009, 7,340 FDIC-insured lending institutions reported having assets amounting to less than $1 billion. Eligible financial institutions with total assets of $10 billion or less as of the end of the fourth quarter of calendar year 2009 could apply to receive a capital investment from the fund in an amount not exceeding 3% of risk-weighted assets, as reported in the FDIC call report immediately preceding the date of application. During the fourth quarter of 2009, 565 FDIC-insured lending institutions reported having assets of $1 billion to $10 billion. Risk-weighted assets are assets such as cash, loans, investments, and other financial institution assets that have different risks associated with them. FDIC regulations (12 C.F.R. §567.6) establish that cash and government bonds have a 0% risk-weighting; residential mortgage loans have a 50% risk-weighting; and other types of assets (such as small business loans) have a higher risk-weighting. Lending institutions on the FDIC problem bank list or institutions that have been removed from the FDIC problem bank list for less than 90 days are ineligible to participate in the program. A lending institution can refinance securities issued through the Treasury Capital Purchase Program (CPP) and the Community Development Capital Incentive (CDCI) program under TARP, but only if that institution had not missed more than one dividend payment due under those programs. Participating banks (C corporations and savings associations) are charged a dividend rate of no more than 5% per annum initially, with reduced rates available if the bank increases its small business lending by specified amounts. For example, during any calendar quarter in the initial two years of the capital investments under the program, the bank's dividend rate is lowered if it increases its small business lending, as reported in its FDIC call reports, compared with the average small business lending it made in the four previous quarters immediately preceding the law's enactment, minus some allowable adjustments. Table 1 shows the dividend rates associated with small business lending increases by C corporation banks and savings associations. Table 2 shows the dividend rates associated with small business lending increases by participating S corporation banks and mutual lending institutions. These rates are slightly higher than those for C corporation banks and savings associations \"to reflect after-tax effective rates equivalent to the dividend rate paid by other classes of institutions participating in the Fund through the issuance of preferred stock.\" As will be discussed later, an S corporation does not pay federal taxes at the corporate level. Any business income or loss is \"passed through\" to shareholders who report it on their personal income tax returns. Community Development Financial Institutions (CFDIs) are provided funding for an initial eight years with an automatic rollover for two additional years at the issuer's option. On the 10 th anniversary of the investment date the issuer repays the principal amount, together with all accrued and unpaid interest. Additionally, the dividend rate is 2% per annum for the first eight years from the investment date (payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year) and 9% thereafter. SBLF applicants are required to submit a small business lending plan to the appropriate federal banking agency and, for applicants that are state-chartered banks, to the appropriate state banking regulator. The plan must describe how the applicant's business strategy and operating goals will allow it to address the needs of small businesses in the areas it serves, as well as a plan to provide linguistically and culturally appropriate outreach, where appropriate. The plan is treated as confidential supervisory information. The Secretary of the Treasury is required to consult with the appropriate federal banking agency or, in the case of an eligible institution that is a nondepository community development financial institution, the Community Development Financial Institution Fund, before determining if the eligible institution may participate in the program. The act directed that all funds received by the Secretary of the Treasury in connection with purchases made by the SBLF, \"including interest payments, dividend payments, and proceeds from the sale of any financial instrument, shall be paid into the general fund of the Treasury for reduction of the public debt.\" The SBLF's advocates argued that it would create jobs by encouraging lenders, especially those experiencing liquidity problems (access to cash and easily tradable assets), to increase their lending to small businesses. For example, the House report accompanying H.R. 5297 , the Small Business Lending Fund Act of 2010, argued that the SBLF was needed to enhance small business's access to capital, which, in turn, was necessary to enable those businesses to create jobs and assist in the economic recovery: There has been a dramatic decrease in the amount of bank lending in the past several quarters. On May 20, 2010, the Federal Deposit Insurance Corporation (FDIC) released its Quarterly Banking Profile for the first quarter of 2010. The report shows that commercial and industrial loans declined for the seventh straight quarter, down more than 17% from the year before. Many companies, particularly small businesses, claim that it is becoming harder to get new loans to keep their business operating and that banks are tightening requirements or cutting off existing lines of credit even when the businesses are up to date on their loan repayments. Treasury Secretary Timothy F. Geithner recently acknowledged the problem encountered by some banks, both healthy and troubled, which have been told to maintain capital levels in excess of those required to be considered well capitalized. Some banks say they have little choice but to scale back lending, even to creditworthy borrowers, and the most recent Federal Reserve data shows banks are continuing to tighten lending terms for small businesses. A dissenting view, endorsed by the House Committee on Financial Services' minority members, was included in the report. This view argued that the SBLF does not properly deal with the lack of financing for small businesses: Instead of addressing the problem by stimulating demand for credit by small businesses, H.R. 5297 injects capital into banks with no guarantees that they will actually lend. The bill allows a qualifying bank to obtain a capital infusion from the government without even requiring the bank to make a loan for two years. In fact, if a bank reduces or fails to increase lending to small business during those first two years, it would not face any penalty. It defies logic that the Majority would support a bill to increase lending that does not actually require increased lending. A more effective response to the challenges facing America's small businesses was offered by Representatives Biggert, Paulsen, Castle, Gerlach, and King, whose amendment would have extended a series of small business tax credits before implementing the Small Business Lending Fund. Advocates also argued that even if the SBLF were authorized \"the program probably would not be fully operational for months; banks could shun the program for fear of being stigmatized by its association with TARP; and many banks would avoid taking on new liabilities when their existing assets are troubled.\" They contended that the bill did not provide sufficient oversight for effectively monitoring the program because the Inspector General of the Department of the Treasury, who was given that oversight responsibility under the bill, \"might not be able to direct sufficient attention to this task given its other responsibilities.\" They argued that the Special Inspector General of TARP would be in a better position to provide effective oversight of the program. These, and other, arguments were presented during House floor debate on the bill. For example, Representative Melissa Bean advocated the bill's passage, arguing that the SBLF builds on the effective financial stabilization measures Congress has previously taken by establishing a new $30 billion small business loan fund to provide additional capital to community banks that increase lending to small businesses. This $30 billion investment on which the government will be collecting dividends and earning a profit per the CBO [Congressional Budget Office] estimates can be leveraged by banks into over $300 billion in new small business loans. This is an important investment by the Federal Government in our small business that brings tremendous returns. The terms of the capital provided to banks are performance based; the more a bank increases its small business lending, the lower the dividend rate is for the SBLF capital. If a bank decreases its small business lending, it will be penalized with higher dividend rates. This legislation includes strong safeguards to ensure that banks adequately utilize available funds to increase lending to small businesses, not for other lending or to improve their balance sheet. There will be oversight consistently throughout the program, plus it requires that the capital be invested only in strong financial institutions at little risk of default and the best positioned to increase small business lending. It's important for Americans to understand that although this fund has a maximum value of $30 billion, it is estimated to make a profit for taxpayers in the long run. And the money will ultimately go not to banks, but to the small businesses and their communities that they lend to. As our financial system stabilizes and our community banks recapitalize, these funds will be repaid to Treasury with full repayment required over the next 10 years. Representative Nydia Velázquez, then-chair of the House Committee on Small Business, added that the legislation had sufficient safeguards in place to ensure that the funds were targeted at small businesses: First, banks must apply to the Treasury to receive funds, with a detailed plan on how to increase small business lending at their institution. This language was included at my insistence that we need to make sure that small businesses will get the benefit of this legislation. Second, this capital, repayment of the government loans will be at a dividend rate starting at 5% per year. This rate will be lowered by 1% for every 2.5% increase in small business lending over 2009 levels. It can go as low as a total dividend rate of just 1% if the bank increases its business lending by 10% or more, incentivizing banks to do the right thing. To ensure that banks actually use the funding they receive, the rate will increase—and there are penalties—to 7% if the bank fails to increase its small business lending at their institution within 2 years. To ensure that all federal funds are paid back within 5 years, the dividend rate will increase to 9% for all banks, irrespective of their small business lending, after 4 1/2 years. Representative Velázquez added \"let me just make it clear … CBO estimates that [the SBLF] will save taxpayers $1 billion over 10 years, as banks are expected to pay back this loan over 10 years, with interest.\" Representative Randy Neugebauer opposed the bill's adoption, arguing that the majority is repeating the same failed initiatives that have helped our national debt grow to $13 trillion in the past 2 years. This bill follows the model of the TARP program, minus [TARP's] stronger oversight, and it puts another $30 billion into banks in the hopes that lending to small businesses will increase. In the words of Neil Barofsky, the Special Inspector General who oversees the TARP, \"In terms of its basic design,\" he says, \"its participants, its application process, from an oversight perspective, the Small Business Lending Fund would essentially be an extension of the TARP's Capital Purchase Program.\" From the Congressional Oversight Panel for TARP, chaired by Elizabeth Warren, she says, \"The SBLF's prospects are far from certain. The SBLF also raises questions about whether, in light of the Capital Purchase Program's poor performance in improving credit access, any capital infusion program can successfully jump-start small business lending.\" This bill allows for another $33 billion in spending that will be added to the government's credit card. The CBO tells us that the bank lending portion will ultimately cost taxpayers $3.4 billion when market risk is taken into account. The House passed H.R. 5297 by a vote of 241-182, on June 17, 2010. The arguments presented during House floor debate on H.R. 5297 were also presented during Senate consideration of the bill. Advocates argued that the SBLF would encourage higher levels of small business lending and jobs. For example, Senator Mary Landrieu argued on July 21, 2010, that the SBLF should be adopted because it \"is not a government program for banks. It is a public-private partnership lending strategy for small business.\" She added that as chair of the Senate Committee on Small Business and Entrepreneurship, she talked with her colleagues, including the SBLF's opponents, and revised the program to address their concerns. She also argued that the SBLF has hundreds of endorsements from independent banks, the community banks and almost every small business association in America … makes $1 billion [according to the CBO score] … is not direct lending from the federal government. It is not creating a new bureaucracy … [It is] voluntary … there are no onerous restrictions.… The small business gets the loans. We create jobs. People are employed. The recession starts ending…. It has nothing to do with TARP money. It is not a TARP program. It is not a bank program. It doesn't have anything to do with banks except that we are working in partnership with banks to lend money to small businesses which are desperate for money. Opponents argued that the SBLF could lose money, lacked sufficient oversight provisions, did not require lenders to increase their lending to small businesses, could serve as a vehicle for TARP recipients to effectively refinance their TARP loans on more favorable terms with little or no resulting benefit for small businesses, and could encourage a failing lender to make even riskier loans to avoid higher dividend payments. In addition, there were disagreements over the number of amendments that could be offered by the minority, which led several Senators to oppose further consideration of the bill until that issue was resolved to their satisfaction. For example, on July 22, 2010, Senator Olympia Snowe argued that although \"under a cash-based estimate, CBO listed the official score for the lending fund as raising $1.1 billion over 10 years,\" SBLF proponents \"fail to mention\" that when CBO scored the SBLF using an alternative methodology that adjusts for market risk, it estimated that the SBLF could cost $6.2 billion. Senator Snowe also argued that the bipartisan Congressional Oversight Panel for TARP stated in its May 2010 oversight report that the proposed SBLF \"substantially resembles\" the TARP and \"is a bank-focused capital infusion program that is being contemplated despite little, if any, evidence that such programs increase lending.\" Senator Snowe noted that she regretted \"that we are in a position where we have not been able to reach agreement allowing the minority to offer amendments, which is confounding and perplexing as well as disappointing.\" Senator Snowe later added that the SBLF's incentives to encourage lending to small businesses also \"could encourage unnecessarily risky behavior by banks … to avoid paying higher interest rates.\" Opponents also questioned the SBLF's use of quarterly call report data as submitted by lenders to their appropriate banking regulator to determine what counts as a small business loan. Call report data denotes loans of $1 million or less as small business loans, regardless of the size of the business receiving the loan. As a result, the SBLF's opponents argued that \"the data used to measure small business lending in the SBLF covers an entirely different set of small businesses than those that fall within the definition set out in the Small Business Act or used by the SBA.\" The Senate's version of H.R. 5297 was agreed to on September 16, 2010, by a vote of 68-38. The House agreed to the Senate-passed version of H.R. 5297 on September 23, 2010, by a vote of 237-187, and the bill, retitled the Small Business Jobs Act of 2010, was signed into law by President Obama on September 27, 2010. On February 14, 2011, the Obama Administration issued its budget recommendation for FY2012. The budget anticipated that the SBLF would provide $17.399 billion in financings, well below its authorized amount of $30 billion. This was the first indication that the SBLF's implementation may not proceed as expected. The second indication that the program's implementation may not proceed as expected was an unanticipated delay in the writing of the program's regulations. The U.S. Treasury was criticized by some for not implementing the program quickly enough. The first financing took place on June 21, 2011, about nine months after the program's enactment. The delay was largely due to the Treasury's need to finalize the SBLF's investment decision process with federal banking agencies and the need to create separate SBLF regulations for financial institutions established as C corporations, Subchapter S corporations, mutual lending institutions, and Community Development Financial Institutions (CDFIs). A C corporation is a legal entity established under state law and includes shareholders, directors, and officers. The profit of a C corporation is taxed to the corporation when earned and then is taxed to the shareholders when distributed as dividends. The majority of insured depository institutions, bank holding companies, and savings and loan holding companies are C corporations. A Subchapter S c orporation refers to a section of the Internal Revenue Code (IRC) that allows a corporation to pass corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. Mutual lending institutions , which include many thrifts, are owned by their depositors or policyholders. They have no stockholders. CDFIs are financial entities certified by the CDFI Fund in the U.S. Department of the Treasury and provide capital and financial services to underserved communities. The establishment of separate regulations for each of these different types of financial institutions was largely related to issues involving whether the SBLF's financings would be counted by banking regulatory agencies as Tier 1 capital (core capital that is relatively liquid, such as common shareholders' equity, disclosed reserves, most retained earnings, and perpetual noncumulative preferred stocks) or as Tier 2 capital (supplementary capital that consists mainly of undisclosed reserves, revaluation reserves, general provisions, hybrid instruments, and subordinated term debt). The treatment of the SBLF's financings was important given that banks must maintain a minimum total risk-based capital ratio of 8% (the ratio measures bank capital against assets, with asset values risk-weighted, or adjusted on a scale of riskiness) to be considered adequately capitalized by federal banking regulators. In addition, banks must maintain a minimum Tier 1 risk-based ratio to assets, typically 3% for banking institutions with the highest financial ratings and 4% for others. According to Treasury officials, under Internal Revenue Service (IRS) rules, S corporations can have only a single class of stock (common shares). Consequently, these institutions cannot issue preferred stock to Treasury. As a result, Treasury had to consider purchasing subordinated debt from these institutions, which the banking regulatory agencies would likely designate as Tier 2 capital. Treasury officials believed that providing Tier 2 capital would probably result in fewer S corporation participants. Additionally, because mutual lending institutions do not issue stock, Treasury officials were unable to receive preferred stock as consideration for an investment in this type of institution. Therefore, Treasury had to consider purchasing subordinated debt from these institutions as well. Treasury completed its regulations for C corporation banks first. For C corporations, SBLF funds are treated as Tier I capital and the Treasury purchases senior perpetual noncumulative preferred stock (or an equivalent). The stock pays a quarterly dividend on the first day of each quarter after closing of the SBLF capital program funding. Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. It is composed of core capital, which consists primarily of common stock and disclosed reserves (or retained earnings) but may also include nonredeemable, noncumulative preferred stock. In contrast, S corporations and mutual lending institutions receive unsecured subordinated debentures from the Treasury, which are considered Tier 2 capital for regulatory capital requirements. The application deadline for C corporation banks was May 16, 2011. The application deadline for Subchapter S corporations and mutual lending institutions was June 6, 2011, and the application deadline for CDFIs was June 22, 2011. A total of 926 institutions applied for $11.8 billion in SBLF funding. Treasury approved more than $4.0 billion in SBLF financing to 332 lending institutions ($3.9 billion to 281 community banks and $104 million to 51 CDFIs). SBLF recipients have offices located in 47 states and the District of Columbia. The average financing was $12.1 million, ranging from $42,000 to $141.0 million. Of the 332 lending institutions which received financing, 137 institutions had participated in TARP's Community Development Capital Initiative or its Capital Purchase Program. These institutions received nearly $2.7 billion in SBLF financing (66.8% of the total). Treasury is required to publish monthly reports describing all transactions made under the SBLF program during the reporting period. It is also required to publish a semiannual report (each March and September) providing all projected costs and liabilities, operating expenses, and transactions made by the SBLF, including a list of all participating institutions and the amounts each institution has received under the program. Treasury must also publish a quarterly report describing how participating institutions have used the funds they have received. SBLF participants must submit an initial supplemental report to Treasury no later than five business days before closing. The report provides information from the institution's FDIC call reports or, for holding companies, from their subsidiaries' FDIC call reports, that Treasury uses to establish an initial baseline for measuring the SBLF participants' progress in making loans to small businesses. The initial baseline is the average amount of qualified small business lending that was outstanding for the four full quarters ending on June 30, 2010. It is derived by first adding the outstanding amount of lending reported for all commercial and industrial loans, owner-occupied nonfarm, nonresidential real estate loans, loans to finance agricultural production and other loans to farmers, and loans secured by farmland. Then, the outstanding amount of lending for large loans (defined as any loan or group of loans greater than $10 million), loans to large businesses (defined as businesses with annual revenues greater than $50 million), and the portion of any loans guaranteed by the U.S. government or for which the risk is assumed by a third party is subtracted from that amount. The lending institution then adds back any cumulative charge-offs with respect to such loans since July 1, 2010. This last adjustment is done to prevent lending institutions from being penalized for appropriately charging off loans. Each SBLF participant's small business lending baseline is also adjusted to take into account any gains in qualified small business lending during the four baseline quarters resulting from mergers, acquisitions, and loan purchases. This adjustment is designed to ensure that dividend rate reductions provided to any SBLF participant correspond to additional lending to small businesses and not to the acquisition of existing loans. In addition, the cumulative baseline for all SBLF participants will decrease over time as SBLF participants repay their SBLF loans and exit the program. For example, the initial small business lending baseline for the 332 SBLF participants as of March 31, 2011, was $35.52 billion ($34.75 billion for 281 banks and $770.48 million for 51 CDFIs). The small business lending baseline for the 50 institutions that continued to participate in the SBLF as of December 31, 2018, was $1.5 billion ($808.8 million for 7 banks and $714.5 million for 43 CDFIs). Table 3 provides the number and type of SBLF participating institutions, the small business lending baseline, the amount of small business lending by participants, the change in small business lending by participants, and the change in small business lending by both current and former participants from 2011 to 2018. The number of SBLF participating institutions is declining as institutions repay their loans and exit the program. As Treasury anticipated, this decline has accelerated following the first quarter of 2016 because the dividend rates for C corporation banks and savings associations and for S corporation banks and mutual lending institutions were increased at that time (to 9% and 13.8%, respectively). SBLF institutions are also required to submit quarterly supplemental reports, due in the calendar quarter following submission of the initial supplemental report and in each of the next nine quarters, to determine their dividend rate for the next quarter. Using information contained in the quarterly supplemental reports, Treasury announced in its April 2019 quarterly report on SBLF Participants' Small Business Lending Growth that, as of December 31, 2018 The 50 current SBLF participants (7 banks and 43 CDFIs) increased their small business lending by $1.347 billion over a $1.523 billion baseline. Since inception, the total increase in small business lending reported by both current and former SBLF participants is more than $19.1 billion over the baseline. All seven of the currently participating community banks and 39 of the 43 currently participating CDLFs increased their small business lending over baseline levels. Most current participants report that their small business lending increases have been substantial, with 43 of 50 current SBLF participants (86.0%) increasing small business lending by 10% or more. Treasury officials have praised the SBLF's performance. For example, on October 9, 2012, then-Deputy Secretary of the Treasury Neal Wolin announced that the SBLF quarterly use of funds report released that day \"is further indication that the Administration's Small Business Lending Fund is continuing to help create an environment in which entrepreneurial small businesses can succeed and excel.\" He added that \"banks in the SBLF program continue to show large increases in the lending available for small businesses to grow, create jobs, and support families in communities across the country.\" Some financial commentators have expressed a somewhat less sanguine view of the program's performance. For example, one commentator noted, after the release of the quarterly use of funds report in January 2012, that although the report of increased small business lending was positive news \"it is difficult to isolate the proportion of new lending that would have occurred anyway\" due to improvements in the economy. Another commentator noted that the data may have been skewed by SBLF participants who were entering the small business lending market for the first time, making the increases appear larger and more significant than they actually are; yet another noted that the reported growth in small business lending occurred over six quarters (since June 30, 2010) and that the results, although positive, are \"not as impressive as it may seem.\" A commentator argued in September 2012 that \"if the SBLF ends up being a success story, it will have been on a far smaller scale than either Obama or Congress had originally expected. What's more, it's become clear that even boatloads of financing won't change the fact that demand for the loans themselves has also fallen off, as small businesses themselves are reluctant to expand in a stagnant economy.\" In addition, on August 29, 2013, Treasury's Office of Inspector General (OIG) released an audit of Treasury's reporting of small business lending gains relative to small business lending levels prior to the lenders' participation in the program. The OIG found that \"small business lending gains reported by Treasury are significantly overstated and cannot be linked directly to SBLF funding.\" Specifically, the OIG noted that \"substantial amounts [$3.4 billion of the then reported $8.9 billion] of the reported gains occurred prior to participants receiving SBLF funding.\" As the OIG explained, the lending gains reported [by Treasury] were measured against the same baseline period that the Small Business Jobs Act of 2010 (the Act) instructs Treasury to use for setting dividend rates for repayment of the SBLF capital, which is the four calendar quarters [which] ended [on] June 30, 2010. However, measuring program performance against a baseline with a midpoint seven quarters prior to when most participants received funding inflates program accomplishments and is not responsive to provisions in the Act that direct Treasury to report on participant use of the SBLF funds received. The OIG also argued that the reported lending gains cannot be directly linked to the SBLF capital that Treasury invested in the financial institutions because the lending gains reported \"represent all small business lending gains that institutions participating in the SBLF achieved, regardless of how the loans were funded.\" In addition, the OIG noted, among other findings, that \"a relatively small number (35 or 11%) of SBLF participants accounted for half of small business lending increases between the baseline figure and December 31, 2012.\" During the 112 th Congress, several bills were introduced to change the SBLF. None of the bills were enacted. For example, then-Senator Snowe introduced S. 681 , the Greater Accountability in the Lending Fund Act of 2011, on March 30, 2011. Senator Snowe argued that While I would prefer to terminate this fund altogether, it is unlikely based on the current political environment, which is why we must work to protect taxpayers from some of its most egregious provisions. My goal with this legislation is to ensure that only healthy banks have access to taxpayer money, that they are required to repay loans within a reasonable period of time, and that small businesses find the affordable credit they need. The bill would have, among other things, required recipients to repay SBLF distributions within 10 years of the receipt of the investment; terminated the program no later than 15 years after the date of the bill's enactment; prohibited the Secretary of the Treasury from making capital investments under the program if the FDIC is appointed receiver of 5% or more of the institutions receiving an investment under the program; prohibited participation by any institution that received an investment under TARP (effective on the date of the bill's enactment); removed provisions allowing the Secretary of Treasury to make a capital investment in institutions that would otherwise not be recommended to receive the investment based on the institution's financial condition, but are able to provide a matching investment from private, nongovernmental investors; required the approval of appropriate financial regulators when determining whether an institution should receive a capital investment; and revised the benchmark against which changes in the amount of small business lending is measured from the four full quarters immediately preceding the date of enactment to calendar year 2007. In addition, H.R. 1387 , the Small Business Lending Fund Accountability Act of 2011, would have provided the Special Inspector General for TARP responsibility for providing oversight over the SBLF. S.Amdt. 279 to S. 493 , the Small Business Innovation Research, Small Business Technology Transfer Reauthorization Act of 2011, would have prevented TARP recipients from using funds received in any form under any other federal assistance program, including the SBLF program. H.R. 2807 , the Small Business Leg-Up Act of 2011, would have transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund beginning on the date when the Secretary of the Treasury's authority to make capital investments in eligible institutions expired (on September 27, 2011). The bill's stated intent was \"to increase the availability of credit for small businesses.\" H.R. 3147 , the Small Business Lending Extension Act, would have extended the Department of the Treasury's investment authority from one year following enactment to two years and required the Treasury Secretary to provide any institution not selected for participation in the program the reason for the rejection, ensure that the rejection reason remains confidential, and establish an appeal process that provides the institution an opportunity to contest the reason provided for the rejection of its application. During the 113 th Congress, H.R. 2474 , the Community Lending and Small Business Jobs Act of 2013, would have, among other provisions, transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund. The SBLF was enacted as part of a larger effort to enhance the supply of capital to small businesses. Advocates argued that the SBLF would help to address the decline in small business lending and create jobs. Opponents were not convinced that it would enhance small business lending and worried about the program's potential cost to the federal treasury and its similarities to TARP. Participating institutions are reporting they have increased their small business lending. However, as has been discussed, questions have been raised concerning the validity of these reported amounts. Specifically, as Treasury's OIG argued in its August 2013 audit, more than one-third of the reported lending gains at that time occurred prior to September 30, 2011, the quarter in which most SBLF participants received their SBLF funds; the reported small business lending gains reflect all of the small business lending gains that the participants achieved, regardless of how the loans were funded; and previous OIG audits \"have shown that a large number of participants misreport their small business lending activity.\" In those previous audits, \"50% or more of the institutions reviewed submitted erroneous lending data to Treasury, either overstating or understating their small business lending gains.\" In addition to questions related to the validity of the reported small business lending gains, any analysis of the program's influence on small business lending is likely to be more suggestive than definitive because differentiating the SBLF's effect on small business lending from other factors, such as changes in the lender's local economy, is methodologically challenging, especially given the relatively small amount of financing involved relative to the national market for small business loans. The SBLF's $4.0 billion in financing represents less than 0.7% of outstanding small business loans (as defined by the FDIC). In terms of the concerns expressed about the program's potential cost, Treasury initially estimated in December 2010 that the SBLF could cost taxpayers up to $1.26 billion (excluding administrative costs that were initially estimated at about $26 million annually but actual outlays were $4.54 million in FY2014, $9.05 million in FY2015, $5.01 million in FY2016, and $3.4 million in FY2017). Treasury based that estimate on an expectation that about $17 billion in SBLF financings would be disbursed. In October 2011, Treasury estimated the program's costs based on actual participant data. It estimated that the SBLF would generate a savings of $80 million (excluding administrative costs), with the savings coming primarily from a lower-than-expected financing level and, to a lesser extent, improvements in projected default rates \"due to higher participant quality than expected\" and lower market interest rates. Treasury issues a semiannual report on SBLF costs. In its latest semiannual cost report, released on August 16, 2018, Treasury estimated that the SBLF will \"generate a lifetime positive return of $31 million [excluding administrative costs] for the Treasury General Fund.\" One issue that arose relative to the program's projected cost is the noncumulative treatment of dividends. Treasury's OIG reported in May 2011 that Under the terms set by legislation, dividend payments are non-cumulative, meaning that institutions are under no obligation to make dividend payments as scheduled or to pay off previously missed payments before exiting the program. This dividend treatment differs from the TARP programs, in which many dividend payments were cumulative. This change in dividend treatment was driven by changes in capital requirements mandated by the Collins Amendment to the Dodd-Frank Act. The amendment equalizes the consolidated capital requirements for Tier 1 capital of bank holding companies by requiring that, at a minimum, regulators apply the same capital and risk standards for FDIC-insured banks to bank holding companies. Under TARP, the FRB [Federal Reserve Board] and FDIC treated capital differently at the holding company and depository institution levels. The FRB treated cumulative securities issued by holding companies as Tier 1 capital, while FDIC treated non-cumulative securities issued by depository institutions as Tier 1 capital. In order to comply with the Dodd-Frank Act requirement that securities purchased from holding companies receive the same capital treatment as those purchased from depository institutions, Treasury made the dividends under SBLF non-cumulative. Additionally, given that Tier 1 capital must be perpetual and cannot have a mandatory redemption date, the 10-year repayment period in the Small Business Jobs Act cannot be enforced. Treasury addressed this issue by placing the following additional requirements and restrictions on participants who miss dividend payments: the participant's CEO [Chief Executive Office] and CFO [Chief Financial Officer] must provide written notice regarding the rationale of the board of directors (BOD) for not declaring a dividend; no repurchases may be affected and no dividends may be declared on any securities for the applicable quarter and the following three quarters; after four missed payments (consecutive or not), the issuer's BOD must certify in writing that the issuer used best efforts to declare and pay dividends appropriately; after five missed payments (consecutive or not), Treasury may appoint a representative to serve as an observer on the issuer's BOD; and after six missed payments (consecutive or not), Treasury may elect two directors to the issuer's BOD if the liquidation preference is $25 million or more. Treasury's OIG agreed that Treasury's equity investment policy is consistent with the legislation and that \"it has reasonably structured the program to incentivize payment of dividends.\" However, it recommended that \"Congress consider whether an amendment to the Small Business Jobs Act and/or waiver from the Collins Amendment to the Dodd-Frank Act is needed to make the repayment of dividends a requirement for exiting the program.\" In conclusion, congressional oversight of the SBLF is currently focused on the program's potential long-term costs and effects on small business lending. Underlying those concerns are fundamental disagreements regarding the best way to assist small businesses. Some advocate the provision of additional federal resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses and create jobs. The SBLF's Legislative Origin On March 16, 2009, President Obama announced the first SBLF-like proposal. Under that proposal, the Department of the Treasury would have used TARP funds to purchase up to $15 billion of SBA-guaranteed loans. The purchases were intended to \"immediately unfreeze the secondary market for SBA loans and increase the liquidity of community banks.\" The plan was dropped after it met resistance from lenders. Some lenders objected to TARP's requirement that participating lenders comply with executive compensation limits and issue warrants to the federal government. Smaller, community banks objected to the program's paperwork requirements, such as the provision of a small-business lending plan and quarterly reports. In his January 2010 State of the Union address, President Obama proposed the creation of a $30 billion SBLF to enhance access to credit for small businesses: When you talk to small business owners in places like Allentown, Pennsylvania, or Elyria, Ohio, you find out that even though banks on Wall Street are lending again, they're mostly lending to bigger companies. Financing remains difficult for small business owners across the country, even those that are making a profit. Tonight, I'm proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. In response to the opposition community lenders had expressed concerning TARP's restrictions in 2009, the Obama Administration proposed that Congress approve legislation authorizing the transfer of up to $30 billion in TARP spending authority to the SBLF and statutorily establish the new program as distinct and independent from TARP and its restrictions. The Administration's legislative proposal was finalized and sent to Congress on May 7, 2010. Representative Barney Frank, then-chair of the House Committee on Financial Services, introduced H.R. 5297 , the Small Business Lending Fund Act of 2010, on May 13, 2010. The House Committee on Financial Services held a hearing on H.R. 5297 on May 18, 2010, and passed the bill, as amended to include a State Small Business Credit Initiative, the following day. The House passed the bill, as amended to include a Small Business Early-Stage Investment Program, a Small Business Borrower Assistance Program, and some small business tax reduction provisions, on June 17, 2010. The House-Passed Version of the SBLF Title I of the House-passed version of H.R. 5297 authorized the Secretary of the Treasury to establish a $30 billion SBLF \"to address the ongoing effects of the financial crisis on small businesses by providing temporary authority to the Secretary of the Treasury to make capital investments in eligible institutions\" with total assets equal to or less than $1 billion or $10 billion (as of the end of the fourth quarter of calendar year 2009) \"in order to increase the availability of credit for small businesses.\" The authority to make capital investments in eligible institutions was limited to one year after enactment. Eligible financial institutions having total assets equal to or less than $1 billion as of the end of the fourth quarter of calendar year 2009 could apply to receive a capital investment from the SBLF in an amount not exceeding 5% of risk-weighted assets, as reported in the FDIC call report immediately preceding the date of application. During the fourth quarter of 2009, 7,340 FDIC-insured lending institutions reported having assets amounting to less than $1 billion. Eligible financial institutions having total assets equal to or less than $10 billion as of the end of the fourth quarter of calendar year 2009 could apply to receive a capital investment from the fund in an amount not exceeding 3% of risk-weighted assets, as reported in the FDIC call report immediately preceding the date of application. During the fourth quarter of 2009, 565 FDIC-insured lending institutions reported having assets of $1 billion to $10 billion. Risk-weighted assets are assets such as cash, loans, investments, and other financial institution assets that have different risks associated with them. FDIC regulations (12 C.F.R. §567.6) establish that cash and government bonds have a 0% risk-weighting; residential mortgage loans have a 50% risk-weighting; and other types of assets (such as small business loans) have a higher risk-weighting. Lending institutions on the FDIC problem bank list or institutions that have been removed from the FDIC problem bank list for less than 90 days were ineligible to participate in the program. Lending institutions could refinance securities issued through the Treasury Capital Purchase Program (CPP) and the Community Development Capital Incentive (CDCI) program under TARP, but only if the institution had not missed more than one dividend payment due under those programs. Participating banks would be charged a dividend rate of no more than 5% per annum initially, with reduced rates available if the bank increased its small business lending. For example, during any calendar quarter in the initial two years of the capital investments under the program, the bank's rate would be lowered if it had increased its small business lending compared to the average small business lending it made in the four previous quarters immediately preceding the enactment of the bill, minus some allowable adjustments. A 2.5% to less than 5% increase in small business lending would have lowered the rate to 4%, a 5% to less than 7.5% increase would have lowered the rate to 3%, a 7.5% to less than 10% increase would have lowered the rate to 2%, and an increase of 10% or greater would have lowered the rate to 1%. Table A-1 shows the dividend rates associated with small business lending increases for C corporation banks and savings institutions under H.R. 5297 . These rates were subsequently included in the final law. The bill also authorized the Secretary of the Treasury to adjust these dividend rates for S corporations \"to take into account any differential tax treatment of securities issued by such eligible institution.\" Also, Community Development Financial Institutions were to be charged a dividend rate of 2% per annum for eight years, and 9% thereafter. SBLF applicants were also required to submit a small business lending plan to the appropriate federal banking agency and, for applicants that are state-chartered banks, to the appropriate state banking regulator. The plan was to describe how the applicant's business strategy and operating goals will allow it to address the needs of small businesses in the areas it serves, as well as a plan to provide linguistically and culturally appropriate outreach, where appropriate. The plan was to be treated as confidential supervisory information. The Secretary of the Treasury was required to consult with the appropriate federal banking agency or, in the case of an eligible institution that is a nondepository community development financial institution, the Community Development Financial Institution Fund, before determining if the eligible institution was to participate in the program. The bill specified that the SBLF would be \"established as separate and distinct from the Troubled Asset Relief Program established by the Emergency Economic Stabilization Act of 2008. An institution shall not, by virtue of a capital investment under the Small Business Lending Fund Program, be considered a recipient of the Troubled Asset Relief Program.\" The bill also directed that all funds received by the Secretary of the Treasury in connection with purchases made by the SBLF, \"including interest payments, dividend payments, and proceeds from the sale of any financial instrument, shall be paid into the general fund of the Treasury for reduction of the public debt.\" The Senate-Passed Version of the SBLF Title IV of the Senate-passed version of H.R. 5297 , which later became law, authorized the Secretary of the Treasury to establish a $30 billion SBLF to make capital investments in eligible community banks with total assets equal to or less than $1 billion or $10 billion. There were several differences between the Senate-passed version of H.R. 5297 's SBLF provisions and the SBLF provisions in the House-passed version of H.R. 5297 . Specifically, the House-passed version of H.R. 5297 indicated that eligible institutions may be insured depository institutions that are not controlled by a bank holding company or a savings and loan holding company that is also an eligible institution and is not directly or indirectly controlled by any company or other entity that has total consolidated assets of more than $10 billion, bank holding companies, savings and loan holding companies, community development financial institution loan funds, and small business lending companies, all with total assets of $10 billion or less (as of the end of 2009). The Senate-passed version of H.R. 5297 did not provide eligibility to small business lending companies. House-passed version of H.R. 5297 defined small business lending \"as small business lending as defined by and reported in an eligible institution's quarterly call report, where each loan comprising such lending is made to a small business and is one the following types: (1) commercial and industrial loans; (2) owner-occupied nonfarm, nonresidential real estate loans; (3) loans to finance agricultural production and other loans to farmers; (4) loans secured by farmland; (5) nonowner-occupied commercial real estate loans; and (6) construction, land development and other land loans.\" The Senate-passed version of H.R. 5297 's definition of small business lending did not include nonowner-occupied commercial real estate or construction, land development and other land loans. Senate-passed version of H.R. 5297 had an exclusion provision prohibiting recipient lending institutions from using the funds to issue loans that have an original amount greater than $10 million or that would be made to a business with more than $50 million in revenues. The House-passed version of H.R. 5297 did not contain this provision. House-passed version of H.R. 5297 indicated that the incentives received in the form of reduced dividend rates during the first 4.5-year period following the date on which an eligible institution received a capital investment under the program would be contingent on an increase in the number of loans made. If the number of loans made by the institution did not increase by 2.5% for each 2.5% increase of small business lending, then the rate at which dividends and interest would be payable during the following quarter on preferred stock or other financial instruments issued to the Treasury by the eligible institution would be (i) 5%, if this quarter is within the two-year period following the date on which the eligible institution received the capital investment under the program; or (ii) 7%, if the quarter is after the two-year period. The Senate-passed version of H.R. 5297 did not contain this legislative language. House-passed version of H.R. 5297 included an alternative computation provision that would have allowed eligible institutions to compute their small business lending amounts for incentive purposes as if the definition of their small business lending amounts did not require that the loans comprising such lending be made to small business. This alternative computation would have been allowed if the eligible institution certified that all lending included by the institution for purposes of computing the increase in lending was made to small businesses. The Senate-passed version of H.R. 5297 did not contain this provision. House-passed version of H.R. 5297 indicated that an eligible institution that is a community development loan fund may apply to receive a capital investment from the SBLF in an amount not exceeding 10% of total assets, as reported in the audited financial statements for the fiscal year of the eligible institution that ended in calendar year 2009. The Senate-passed version of H.R. 5297 specifies 5%. House-passed version of H.R. 5297 would have required the Secretary of the Treasury, in consultation with the Community Development Financial Institutions Fund, to develop eligibility criteria to determine the financial ability of a Community Development Loan Fund to participate in the program and repay the investment. It provided a list of recommended eligibility criteria that the Secretary of the Treasury could use for this purpose. The Senate-passed version of H.R. 5297 provided a similar, but mandatory, list of eligibility criteria that must be used for this purpose. House-passed version of H.R. 5297 contained a temporary amortization authority provision which would have allowed an eligible institution to amortize any loss or write-down on a quarterly straight-line basis over a period of time, adjusted to reflect the institution's change in the amount of small business lending relative to the baseline. The Senate-passed version of H.R. 5297 did not contain this provision. The Senate's version of H.R. 5297 was agreed to in the Senate on September 16, 2010, after considerable debate and amendment to remove the Small Business Early-Stage Investment Program and Small Business Borrower Assistance Program, revise the SBLF, and add numerous other provisions to assist small businesses, including additional small business tax reduction provisions. The House agreed to the Senate amendments on September 23, 2010, and President Obama signed the bill, retitled the Small Business Jobs Act of 2010 ( P.L. 111-240 ), into law on September 27, 2010.", "summary": "Congressional interest in small business access to capital has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to start, continue, or expand operations and create jobs. Some have argued that the federal government should provide additional resources to assist small businesses. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses and create jobs. Several laws were enacted during the 111th Congress to enhance small business access to capital. For example, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), provided the Small Business Administration (SBA) an additional $730 million, including funding to temporarily subsidize SBA fees and increase the 7(a) loan guaranty program's maximum loan guaranty percentage to 90%. P.L. 111-240, the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF), in which $4.0 billion was issued, to encourage community banks with less than $10 billion in assets to increase their lending to small businesses. It also authorized a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, numerous changes to the SBA's loan guaranty and contracting programs, funding to continue the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. This report focuses on the SBLF. It opens with a discussion of the supply and demand for small business loans. The SBLF's advocates claimed the SBLF was needed to enhance the supply of small business loans. The report then examines other arguments presented both for and against the program. Advocates argued that the SBLF would increase lending to small businesses and, in turn, create jobs. Opponents contended that the SBLF could lose money, lacked sufficient oversight provisions, did not require lenders to increase their lending to small businesses, could serve as a vehicle for Troubled Asset Relief Program (TARP) recipients to effectively refinance their TARP loans on more favorable terms with little or no resulting benefit for small businesses, and could encourage a failing lender to make even riskier loans to avoid higher dividend payments. The report concludes with an examination of the program's implementation and a discussion of bills introduced to amend the SBLF. For example, during the 112th Congress, S. 681, the Greater Accountability in the Lending Fund Act of 2011, would have limited the program's authority to 15 years from enactment and prohibited TARP recipients from participating in the program. H.R. 2807, the Small Business Leg-Up Act of 2011, would have transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund \"to increase the availability of credit for small businesses.\" H.R. 3147, the Small Business Lending Extension Act, would have extended the Department of the Treasury's investment authority from one year to two years. During the 113th Congress, H.R. 2474, the Community Lending and Small Business Jobs Act of 2013, would have transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund.", "document_type": "crs"}
{"report": "The United Nations (U.N.) Human Rights Council (the Council) is the primary intergovernmental body that addresses human rights worldwide. The United States is not currently a Council member; in June 2018, the Trump Administration announced that the United States would withdraw its membership. Administration officials cited concerns with the Council's disproportionate focus on Israel, ineffectiveness in addressing human rights situations, and lack of reform. Members of the 116 th Congress may continue to consider the Council's role and effectiveness, including what impact, if any, the U.S. withdrawal might have on (1) the Council's efforts to combat human rights and (2) the United States' ability to further its human rights objectives in U.N. fora. Policymakers might also consider the following questions: What role, if any, should the Council play in international human rights policy and in addressing specific human rights situations? Is the Council an effective mechanism for addressing human rights worldwide? If not, what reform measures might improve the Council and how can they be achieved? What role, if any, might the United States play in the Council, or in other U.N. human rights mechanisms, moving forward? Should the United States rejoin the Council? If so, under what circumstances? This report provides background on the Council, including the role of the previous U.N. Commission on Human Rights. It discusses the Council's current mandate and structure, as well as Administration policy and congressional actions. Finally, it highlights policy aspects of possible interest to the 116 th Congress, including the debate over U.S. membership, U.S. funding of the Council, alternatives to the Council in U.N. fora, and the Council's focus on Israel. The U.N. Commission on Human Rights was the primary intergovernmental policymaking body for human rights issues before it was replaced by the U.N. Human Rights Council in 2006. Created in 1946 as a subsidiary body of the U.N. Economic and Social Council (ECOSOC), the commission's initial mandate was to establish international human rights standards and develop an international bill of rights. During its existence, the commission played a key role in developing a comprehensive body of human rights treaties and declarations, including the Universal Declaration of Human Rights. Over time, its work evolved to address specific human rights violations and complaints, as well as broader human rights issues. It developed a system of special procedures to monitor, analyze, and report on country-specific human rights violations, as well as thematic cross-cutting human rights abuses such as racial discrimination, religious intolerance, and denial of freedom of expression. In the late 1990s and early 2000s, controversy developed over the human rights records of some commission members that were widely perceived as systematic abusers of human rights. These instances significantly affected the commission's credibility. Critics, including the United States, claimed that countries used their membership to deflect attention from their own human rights violations by questioning the records of others. Some members were accused of bloc voting and excessive procedural manipulation to prevent debate of their human rights abuses. In 2001, the United States was not elected to the commission, whereas widely perceived human rights violators such as Pakistan, Sudan, and Uganda were elected. In 2005, the collective impact of these and other controversies led U.N. Secretary-General Kofi Annan to propose the idea of a new and smaller Human Rights Council to replace the commission. In 2006, as part of broader U.N. reform efforts, the U.N. General Assembly approved resolution 60/251, which dissolved the U.N. Commission on Human Rights and created the Human Rights Council in its place. This section provides an overview of Council structure and selected policy issues and concerns that have emerged over the years. The Council is responsible for \"promoting universal respect for the protection of all human rights and fundamental freedoms for all.\" It aims to prevent and combat human rights violations, including gross and systematic violations, and to make recommendations thereon; it also works to promote and coordinate the mainstreaming of human rights within the U.N. system. As a subsidiary of the General Assembly, it reports directly to the Assembly's 193 members. It receives substantive and technical support from the U.N. Office of the High Commissioner for Human Rights (OHCHR), an office within the U.N. Secretariat currently headed by Michelle Bachelet of Chile. The Council is a political body; each of its members has different human rights standards, domestic considerations, and foreign policy priorities. Its decisions, resolutions, and recommendations are not legally binding. The Council comprises 47 members apportioned by geographic region as follows: 13 from African states; 13 from Asian states; 6 from Eastern European states; 8 from Latin American and Caribbean states; and 7 from Western European and other states ( Table 1 ). Members are elected for a period of three years and may not hold a Council seat for more than two consecutive terms. If a Council member commits \"gross and systematic violations of human rights,\" the General Assembly may suspend membership with a two-thirds vote of members present. All U.N. members are eligible to run for a seat on the Council. Countries are nominated by their regional groups and elected by the General Assembly through secret ballot with an absolute majority required. Since 2006, the Council has held 13 elections, the most recent of which was in October 2018. The next election is scheduled for late 2019. A key concern for some critics has been the lack of competitiveness in Council elections. In some elections, countries have run unopposed after regional groups nominated the exact number of countries required to fill Council vacancies. Most recently, members from all five regional groups ran unopposed in the October 2018 election. Many experts contend that such actions limit the number of choices and guarantee the election of nominated members regardless of their human rights records. On the other hand, supporters contend that the Council's election process is an improvement over that of the commission. They emphasize that countries widely viewed as the most egregious human rights abusers, such as Belarus, Sudan, and Syria, were pressured not to run or were defeated in Council elections because of the new membership criteria and process. Many also highlight the General Assembly's March 2011 decision to suspend Libya's membership as an example of improved membership mechanisms. More broadly, some Council observers have expressed concern that the Council's closed ballot elections in the General Assembly may make it easier for countries with questionable human rights records to be elected to the Council. To address this issue, some experts and policymakers, including the Trump Administration, have proposed requiring open ballots in Council elections to hold countries publicly accountable for their votes. The Council is headquartered in Geneva, Switzerland, and meets for three or more sessions per year for a total of 10 or more weeks. It can hold special sessions on specific human rights situations or issues at the request of any Council member with the support of one-third of the Council membership. Since 2006, the Council has held 39 regular sessions and 28 special sessions. Since the Council was established, eight of its special sessions have focused on Israel or the Occupied Territories. (See Appendix A for a list of special sessions.) The Council president presides over the election of four vice presidents representing other regional groups in the Council. The president and vice presidents form the Council bureau, which is responsible for all procedural and organizational matters related to the Council. Members elect a president from among bureau members for a one-year term. The current president is Coly Seck of Senegal. All Council members and U.N. member states are required to undergo a Universal Periodic Review (UPR) that examines a member's fulfillment of its human rights obligations and commitments. The review is an intergovernmental process that facilitates an interactive dialogue between the country under review and the UPR working group, which is composed of the 47 Council members and chaired by the Council president. Observer states and stakeholders, such as nongovernmental organizations (NGOs), may also attend the meetings and present information. During the first review, the UPR working group makes initial recommendations, with subsequent reviews focusing on the implementation of previous recommendations. The full Council is responsible for addressing any cases of consistent noncooperation with the review. The United States underwent its first UPR in November 2010 and its second in May 2015. Overall, many governments, observers, and policymakers support the Council's UPR process. They maintain that it provides an important forum for governments, NGOs, and others to discuss and bring attention to human rights situations in specific countries that may not otherwise receive international attention. Some countries have reportedly made commitments based on the outcome of the UPR process. Many NGOs and human rights groups operating in various countries also reportedly use UPR recommendations as a political and diplomatic tool for achieving human rights. At the same time, some human rights experts have been critical of UPR. Many are concerned that the UPR submissions and statements of governments perceived to be human rights abusers are taken at face value rather than being challenged by other governments. Some also contend that the UPR process gives these same countries a platform to criticize countries that may have generally positive human rights records. Many experts have also expressed concern regarding member states' response to and participation in the UPR process. The Council maintains a system of special procedures that are created and renewed by members. Country mandates allow for special rapporteurs to examine and advise on human rights situations in specific countries, including Cambodia, North Korea, and Sudan. Under thematic mandates, special rapporteurs analyze major global human rights issues, such as arbitrary detention, the right to food, and the rights of persons with disabilities. The Council also maintains a complaint procedure for individuals or groups to report human rights abuses in a confidential setting. In June 2007, Council members adopted a resolution to address the Council's working methods. In the resolution, Council members included the \"human rights situation in Palestine and other occupied Arab territories\" as a permanent part of the Council's agenda. No other countries are singled out in this manner. At the time the agenda item was adopted, many U.N. member states and Council observers, including the United States, strongly objected to the Council focusing primarily on human rights violations by Israel. A U.N. spokesperson subsequently noted then-U.N. Secretary-General Ban Ki-moon's \"disappointment\" with the Council's decision to \"single out only one specific regional item, given the range and scope of allegations of human rights violations throughout the world.\" The Human Rights Council is funded primarily through the U.N. regular budget, of which the United States is assessed 22%. Estimated Council funding for the 2018-2019 regular budget biennium is $44.43 million (or $22.2 million per year). The Council also receives extrabudgetary (voluntary) funding to help cover the costs of some of its activities, including staff postings and Council trust funds and mechanisms. For the 2018-2019 biennium, such contributions are estimated at $16.27 million (about $8.13 million per year). Most U.S. policymakers have generally supported the Council's overall purpose and mandate; however, many have expressed concern regarding its effectiveness in addressing human rights issues—leading to ongoing disagreements as to whether or not the United States should be a member of or provide funding for the Council. For example, under President George W. Bush, the United States voted against the Assembly resolution creating the Council and did not run for a seat, arguing that the Council lacked mechanisms for maintaining credible membership. (The George W. Bush Administration also withheld Council funding in FY2008 under a provision enacted by Congress in 2007.) On the other hand, the Obama Administration supported U.S. membership and Council funding, maintaining that it was better to work from within to improve the body; the United States was elected as a Council member in 2009, 2012, and 2016. Under President Obama, the United States consistently opposed the Council actions related to Israel and sought to adopt specific reforms during the Council's five-year review in 2011. Congressional perspectives on the issue have been mixed, with some Members advocating continued U.S. participation and others opposing it. A key concern among many Members of Congress is the Council's focus on Israel. On June 18, 2018, then-U.S. Permanent Representative to the United Nations Nikki Haley and Secretary of State Michael Pompeo announced that the United States would withdraw from the Human Rights Council, citing concerns about U.S. sovereignty and the Council's disproportionate focus on Israel. In a September 2018 speech to the U.N. General Assembly, the President further stated that the United States \"will not return [to the Council] until real reform is enacted.\" Although Administration officials stated that the United States would fully withdraw from the Council, the United States has continued to participate in some Council activities, including the Universal Periodic Review process. Administration officials have also continued to comment on Council elections and express support for continued reform of the organization. The United States withheld $7.67 million in Council funding in both FY2017 and FY2018 (for a total of $15.3 million over two years) under legislation enacted by Congress. Prior to withdrawing from the Council, the Trump Administration had expressed strong reservations regarding U.S. membership. It was particularly concerned with the Council's focus on Israel and lack of attention to other human rights abuses. Ambassador Haley called the Council \"corrupt\" and noted that \"bad actors\" are among its members; at the same time, she also stated that the United States wanted to find \"value and success\" in the body. In June 2017, Haley announced that if the Council failed to change, then the United States \"must pursue the advancement of human rights outside of the Council.\" Haley outlined two key U.S. reform priorities: (1) changing the voting process in the General Assembly from a closed to open ballot so that countries can be held publicly accountable for their votes and (2) removing Israel as a permanent agenda item. Congress maintains an ongoing interest in the credibility and effectiveness of the Council in the context of human rights promotion, U.N. reform, and concerns about the Council's focus on Israel. Over the years, Members have proposed or enacted legislation expressing support for or opposition to the Council, prohibiting U.S. Council funding, or supporting Council actions related to specific human rights situations. Most recently, Members of the 116 th Congress enacted the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), which requires that none of the funds appropriated by the act be made available for the Council unless the Secretary of State determines and reports to the committees on appropriations that participation in the Council is in the national interest of the United States, and that the Council is taking significant steps to remove Israel as a permanent agenda item and ensure integrity in the election of Council members. (Similar language was included in previous fiscal years' appropriations laws.) P.L. 116-6 also addresses the Council in the context of the human rights situations in Sri Lanka; specifically, it states that funds may be made available to the Sri Lankan government only if the Secretary of State certifies to Congress that the Sri Lankan government is, among other things, supporting a credible justice mechanism in compliance with Human Rights Council resolution 30/1 (October 2015). In previous Congresses, proposed stand-alone bills have called for U.S. withdrawal from the Council or required that the United States withhold assessed contributions to the Council through the U.N. regular budget and any voluntary contributions. Specifically, some Members of the 115 th Congress introduced legislation addressing a range of issues, including expressing concern with the Council's focus on Israel, seeking to defund or withdraw from the Council, and calling on the Council to take action on specific human rights situations. Congressional debate regarding the U.N. Human Rights Council has generally focused on a recurring set of policy issues. In general, U.S. policymakers have been divided as to whether the United States should serve as a member of the Council. Supporters of U.S. participation contend that the United States should work from within the Council to build coalitions with like-minded countries and steer the Council toward a more balanced approach to addressing human rights situations. Council membership, they argue, places the United States in a position to advocate its human rights policies and priorities. Supporters also maintain that U.S. leadership in the Council has led to several promising Council developments, including increased attention to human rights situations in countries such as Iran, Mali, North Korea, and Sudan, among others. Some have also noted that the number of special sessions addressing Israel has decreased since the United States joined the Council. In addition, some Council supporters are concerned that U.S. withdrawal might lead to a possible leadership gap and countries such as China and Russia could gain increased influence in the Council. Opponents contend that U.S. membership provides the Council with undeserved legitimacy. The United States, they suggest, should not be a part of a body that focuses disproportionately on one country (Israel) while ignoring many human rights situations in countries that are widely believed to violate human rights. Critics further maintain that the United States should not serve on a body that would allow human rights abusers to serve as members. Many also suggest that U.S. membership on the Council provides countries with a forum to criticize the United States, particularly during the UPR process. Over the years, policymakers have debated to what extent, if any, the United States should fund the Council. Some Members have proposed that the United States withhold a proportionate share of its assessed contributions, approximately 22%, from the U.N. regular budget, which is used to fund the Council. Most recently, FY2017 through FY2019 State-Foreign Operations acts have placed conditions on U.S. funding to the Council, and the Trump Administration subsequently withheld $7.67 million from U.S. contributions to the U.N. regular budget in both FY2017 and FY2018. Information on FY2019 Council funding is currently unavailable. Legislating to withhold Council funds in this manner is a largely symbolic policy action because assessed contributions finance the entire U.N. regular budget and not specific parts of it. The United States had previously withheld funding from the Council in 2008, when the George W. Bush Administration withheld a proportionate share of U.S. Council funding from the regular budget under a law that required the Secretary of State to certify to Congress that funding the Council was in the best national interest of the United States. Some observers and policymakers have argued that if the United States were to withdraw from the Council, it could pursue its human rights objectives in other U.N. fora. Specifically, some suggest that the United States focus on the activities of the General Assembly's Third Committee, which addresses social, humanitarian, and cultural issues, including human rights. Some also recommend that the United States could increase its support for the U.N. Office of the High Commissioner for Human Rights, as well as the Council's independent experts who address country-specific and functional human rights issues. Other U.S. policymakers have proposed addressing human rights in the U.N. Security Council. In April 2017, U.S. Permanent Representative Haley held the Security Council's first ever thematic debate on human rights issues, where she stated the following: The traditional view has been that the Security Council is for maintaining international peace and security, not for human rights. I am here today asserting that the protection of human rights is often deeply intertwined with peace and security. The two things often cannot be separated. On the other hand, critics of this approach might argue that some proposed alternatives do not carry the same level of influence as the Human Rights Council, particularly since bodies such as the General Assembly and Security Council do not focus exclusively on human rights issues. Opponents of U.S. withdrawal contend that unlike the proposed alternatives, the Council includes unique mechanisms to address human rights issues, such as the complaint procedure and Universal Periodic Review process. The Council's ongoing focus on Israel has continued to concern some Members of Congress. In addition to singling out Israel as a permanent part of the Council's agenda, other Council actions—including resolutions, reports, and statements by some Council experts—have generated significant congressional interest for what many view as an apparent bias against Israel. For example, some Members of Congress demonstrated considerable concern with a September 2009 Council report (often referred to as the \"Goldstone Report\" after the main author, Richard Goldstone, an independent expert from South Africa), which found \"evidence of serious violations of international human rights and humanitarian law,\" including possible war crimes, by Israel. The report received further attention in April 2011, when Goldstone stated that the report's conclusion that Israel committed possible war crimes may have been incorrect. In addition, the statements and findings of Richard Falk, the Council's previous Special Rapporteur on the Situation of Human Rights on Palestinian Territories Occupied since 1967 , have drawn considerable criticism from many U.S. policymakers for apparent bias against Israel. More recently, some Members of Congress have expressed alarm regarding a March 2016 Council resolution that, among other things, requested OHCHR to produce a database of all business enterprises that have \"directly and indirectly, enabled, facilitated and profited from the construction and growth of the (Israeli) settlements.\" The United States has opposed this resolution. Some experts suggest that the Council's focus on Israel is at least partially the result of its membership composition. After the first elections, members of the Organization of Islamic Cooperation (OIC) held 17 seats on the Council, accounting for about one-third of the votes needed to call a special session (15 OIC members currently serve on the Council). Some experts contend that blocs such as the African Group and Non-Aligned Movement (NAM), who may at times account for the majority of Council seats, tend to view economic and security issues as more important than human rights violations. Appendix A. Special Sessions of the Human Rights Council", "summary": "Over the years, many Members of Congress have demonstrated an ongoing interest in the role and effectiveness of the United Nations (U.N.) Human Rights Council (the Council). The Council is the primary intergovernmental body mandated with addressing human rights on a global level. During the Obama Administration and the first part of the Trump Administration, the United States served three terms as a Council member. In June 2018, Trump Administration officials announced U.S. withdrawal from the Council, noting concerns with the Council's focus on Israel, overall ineffectiveness in addressing human rights issues, and lack of comprehensive reform. Background The U.N. General Assembly established the Human Rights Council in 2006 to replace the Commission on Human Rights, which was criticized for its apparent ineffectiveness in addressing human rights abuses and for the number of widely perceived human rights abusers that served as its members. Since 2006, many governments and observers have expressed serious concerns with the Council's disproportionate attention to Israel and apparent lack of attention to other pressing human rights situations. In particular, some criticize the inclusion of the \"human rights situation in Palestine and other occupied Arab territories\" (Israel) as a permanent item on the Council's agenda. No other country-specific human rights situation is singled out in this manner. Some are also concerned that countries widely perceived as human rights abusers, such as Saudi Arabia, China, and the Democratic Republic of the Congo, serve as Council members. On the other hand, supporters argue that the Council is an improvement over the previous commission. They contend that the Council's Universal Periodic Review (UPR) process, which aims to evaluate each member state's fulfillment of its human rights obligations, is an effective means for addressing human rights issues in various countries. Many proponents of the Council are encouraged by its increased attention to human rights situations in countries such as Iran, North Korea, and Syria. U.S. Policy Over the years, U.S. policymakers have debated U.S. participation in and funding of the Human Rights Council. The George W. Bush Administration voted against the General Assembly resolution creating the Council and did not run for membership; it also decided to withhold U.S. funding to the organization in FY2008 under a provision enacted by Congress. Conversely, the Obama Administration supported the overall purpose of the Council and decided that it was better to work from within as a Council member to improve its effectiveness. The Obama Administration was also critical of the Council's focus on Israel, sometimes boycotting debates on the issue. The United States was elected to the Council in 2009 and in 2012. In October 2016, it was elected for a third term, which began in January 2017. The United States remained a member during the Trump Administration until mid-2018, when it announced its withdrawal. The Administration also withheld Council funding in FY2017 and FY2018. Some Members of Congress maintain an ongoing interest in the credibility and effectiveness of the Council. Members have been particularly critical of both the Council's focus on Israel and lack of competitive Council elections. Some Members have proposed or enacted legislation calling for U.S. withdrawal; at the same time, others have introduced legislation urging the Council to address specific human rights situations. Most recently, the Consolidated Appropriations Act, 2019 (P.L. 116-6 ), prohibits Council funding unless the Secretary of State determines that U.S. participation is important to the national interest of the United States, and that the Council is taking steps to remove Israel as a permanent agenda item and ensure the integrity of Council elections.", "document_type": "crs"}
{"report": "Cross-border data flows underlie today's globally connected world and are essential to conducting international trade and commerce. Data flows enable companies to transmit information for online communication, track global supply chains, share research, and provide cross-border services. One study estimates that digital commerce relying on data flows drives 22% of global economic output, and that global GDP will increase by another $2 trillion by 2020 due to advances in emerging technologies. However, while cross-border data flows increase productivity and enable innovation, they also raise concerns around the security and privacy of the information being transmitted. Cross-border data flows are central to trade and trade negotiations as organizations rely on the transmission of information to use cloud services, and to send nonpersonal corporate data as well as personal data to partners, subsidiaries, and customers. U.S. policymakers are considering various policy options to address online privacy, some of which could affect cross-border data flows. For example, new consumer rights to control their personal data may impact how companies can use such data. To enable international data flows and trade, the United States has aimed to eliminate trade barriers and establish enforceable international rules and best practices that allow policymakers to achieve public policy objectives, including promoting online security and privacy. Building consensus for international rules and norms on data flows and privacy has become increasingly important as recent incidents have heightened the public's awareness of the risk of personal data stored online. For example, the 2018 Cambridge Analytica scandal drew attention because the firm reportedly acquired and used data on more than 87 million Facebook accounts in an effort to influence voters in the 2016 U.S. presidential election and the UK referendum on continued European Union (EU) membership (\"Brexit\"). In addition, security concerns have been raised about data breaches, such as those that exposed the personal data of half a million Google users or 500 million Marriot hotel customers. Organizations value consumers' personal online data for a variety of reasons. For example, companies may seek to facilitate business transactions, analyze marketing information, detect disease patterns from medical histories, discover fraudulent payments, improve proprietary algorithms, or develop competitive innovations. Some analysts compare data to oil or gold, but unlike those valuable substances, data can be reused, analyzed, shared, and combined with other information; it is not a scarce resource. However, personal data is considered personal private property. Individuals often want to control who accesses their data and how it is used. Experts suggest that data may therefore be considered both a benefit and a liability that organizations hold. Data has value, but an organization takes on risk by collecting personal data; they become responsible for protecting users' privacy and not misusing the information. Data privacy concerns may become more urgent as the amount of online information organizations access and collect, and the level of global data flows, continue to expand. Countries vary in their policies and laws on these issues. The United States has traditionally supported open data flows and has regulated privacy at a sectoral level to cover data, such as health records, rather than create a comprehensive policy. U.S. trade policy has sought to balance the goals of consumer privacy, security, and open commerce, including eliminating trade barriers and opening markets. Other countries are developing data privacy policies that affect international trade as some governments or groups seek to limit data flows outside of an organization or across national borders for a number of reasons. Blocking international data flows may impede the ability of a firm to do business or of an individual to conduct a transaction, creating a form of trade protectionism. Research demonstrates not only the economic gains from digital trade and international data flows, but also the real economic costs of restrictions on such flows. For many policymakers, the crux of the issue is: How can governments protect individual privacy in the least trade-restrictive way possible? The question is similar to concerns raised about ensuring cybersecurity while allowing the free flow of data. In recent years, Congress has examined multiple issues related to cross-border data flows and online privacy. In the 115 th Congress, congressional committees held hearings on these topics, introduced multiple bills, and conducted oversight over federal laws on related issues such as data breach notification. Members are introducing new bills and holding hearings in the 116 th Congress. Congress may consider the proposed U.S.-Mexico-Canada Agreement (USMCA) and examine the digital trade chapter as an example of how to address the issues through trade agreements. In most circumstances, a consumer expects both privacy and security when conducting an online transaction. However, users' expectations and values may vary and there is no globally accepted standard or definition of data privacy in the online world. In addressing online privacy, Congress may need to define personal data and differentiate between sensitive and nonsensitive personal data. In general, data privacy can be defined by an individual's ability to prevent access to personally identifiable information (PII). According to the U.S. Office of Management and Budget (OMB) guidance to federal agencies, PII refers to information that can be used to distinguish or trace an individual's identity, either alone or when combined with other information that is linked or linkable to a specific individual. Since electronic data can be readily shared and combined, some data not traditionally considered PII may have become more sensitive. For example, the OMB definition does not specifically mention data on location tracking, purchase history, o r preferences, but these digital data points can be tracked by a device such as a mobile phone or laptop that an individual carries or logs into. The EU definition of PII attempts to capture the breadth of data available in the online world: \"personal data\" means any information relating to an identified or identifiable natural person ('data subject'); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person. Policymakers may consider differentiating between sensitive and nonsensitive personal data. For example, sensitive personal data could include ethnic origin, political or religious affiliation, biometric data, health data, sexual orientation, precise geolocation data, etc. \"Cross-border data flows\" refers to the movement or transfer of information between computer servers across national borders. Cross-border data flows are part of, and integral to, digital trade and facilitate the movement of goods, services, people, and finance. A 2017 analysis estimated that global flows of goods, services, finance, and people increased world gross domestic product (GDP) by at least 10% in the past decade, adding $8 trillion between 2005 and 2015. Effective and sustainable digital trade relies on data flows that permit commerce and communication but that also ensure privacy and security, protect intellectual property, and build trust and confidence. Impeding cross-border data flows, including through some privacy regulations, may decrease efficiency and reduce other benefits of digital trade, resulting in the fracturing, or so-called balkanization, of the internet. In addressing online privacy, some policymakers focus on limiting access to online information by restricting the flow of data beyond a country's borders. Such limits may also act as protectionist measures. Online privacy policies may create barriers to digital trade, or damage trust in the underlying digital economy. For example, measures to limit cross-border data flows could block companies from using cloud computing to aggregate and analyze global data, or from gaining economies of scale, constrain e-commerce by limiting international online payments, hinder global supply chains seeking to use blockchain to track products or manage supply chains, customs documentation, or electronic payments, impede the trading of crypto-currency, or limit the use of advanced technology like artificial intelligence. According to the World Trade Organization (WTO), one of the most significant overall impacts of the growth of digital technologies is in transforming international trade. Technology can lower the costs of trade, change the types of goods and services that are traded, and may even change the factors defining a country's comparative advantage. The extent of the impact of digital technologies on trade, however, depends in large part on open cross-border data flows. One study of U.S. companies found that data localization rules (i.e., requiring organizations to store data on local servers) were the most-cited digital trade barrier. Some governments advocate privacy or security policies that require data localization and limit cross-border data flows. However, many industry stakeholders argue that blocking cross-border data flows and storing data domestically does not make such data more secure or private. Many experts argue that policymakers should limit cross-border data flows in the least trade-restrictive manner possible and also ensure security and privacy. These objectives are not easily reconciled. Moreover, although an overlap exists between data protection and privacy, the two are not equivalent. Cybersecurity measures are essential to protect data (e.g., against intrusions or theft by hackers). However, they may not be sufficient to protect privacy. For example, if an organization shares user data with a third party, it may be doing so securely, but not in a way that protects users' privacy or aligns with consumer expectations. Similarly, breach notification requirements are not the same as proactive privacy protection measures. At the same time, policies that protect a consumer's privacy can align with security policies. Laws can limit law enforcement's access to information except in certain circumstances. Keeping user information anonymous may enable firms to analyze data while protecting individuals' identities. Some see an inherent conflict between online security, privacy, and trade; others believe that policies protecting all three can be coherent and consistent. The U.S. government has traditionally sought to balance these objectives. Some stakeholders note, however, that current U.S. policy has been inadequate in protecting online privacy and that change is needed. In some cases in the past, Congress has acted to address privacy concerns in particular sectors; for example, the Health Insurance Portability and Accountability Act (HIPAA) of 1996 led to health privacy standards regulations. The Trump Administration has begun an effort to devise an overarching data privacy policy (see \" Defining the U.S. Approach \") and many Members of Congress are also considering possible approaches. There are no comprehensive multilateral rules specifically about privacy or cross-border data flows. However, the United States and other countries have begun to address these issues in negotiating new and updated trade agreements, and through international economic forums and organizations such as the Asia-Pacific Economic Cooperation (APEC) forum and the Organisation for Economic Co-operation and Development (OECD). The World Trade Organization (WTO) General Agreement on Trade in Services (GATS) entered into force in January 1995, predating the current reach of the internet and the explosive growth of global data flows. Many digital products and services that did not exist when the agreements were negotiated are not covered. On the other hand, privacy is explicitly addressed within GATS as an exception to allow countries to take measures that do not conform with the agreement in order to protect \"the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts,\" as long as those measures are not arbitrary or a disguised trade restriction. Efforts to update the multilateral agreement and discussions for new digital trade rules under the WTO Electronic Commerce Work Program stalled in 2017. Given the lack of progress on multilateral rules, some have suggested that the WTO should identify best practices or guidelines for digital trade rules that could lay the foundation for a future multilateral WTO agreement. In December 2017, a group of more than 70 WTO members, including the United States, agreed to \"initiate exploratory work together toward future WTO negotiations on trade-related aspects of electronic commerce.\" Overall U.S. objectives include allowing the free flow of information for international trade and cross-border data flows, \"subject to reasonable safeguards like the protection of consumer data when it is exported,\" but do not specifically address privacy. The group formally launched the e-commerce initiative in January 2019. The official joint statement lists the United States and EU as participants, and also several developing countries such as China and Brazil. India stated it will not join, preferring to maintain its flexibility to favor domestic firms, limit foreign market access, and raise revenue in the future. The statement did not define the scope of any potential agreement. After the meeting, the EU noted data localization measures among the potential new rules to be discussed when negotiations officially launch in March 2019. The U.S. Trade Representative's (USTR's) statement emphasized the need for a high-standard agreement that includes enforceable obligations. Although some experts note that harmonization or mutual recognition is unlikely given divergent legal systems, privacy regimes, and norms of the parties, a common system of rules to allow for cross-border data flows while ensuring privacy protection is reportedly under discussion. Personal privacy has received increasing focus with the growth of digital trade encouraging global cooperation. The United States has contributed to developing international guidelines or principles related to privacy and cross-border data flows, although none are legally binding. The OECD 1980 Privacy Guidelines established the first international set of privacy principles emphasizing data protection as a condition for the free flow of personal data across borders. These OECD guidelines were intended to assist countries with drawing up national data privacy policies. The guidelines were updated in 2013, focusing on national level implementation based on a risk management approach and improving interoperability between national privacy strategies. The updated guidelines identify specific principles for countries to take into account in establishing national policies. The guidelines are to be reviewed and updated again in 2019. Building on the OECD principles and prior G-20 work, the 2018 G-20 Digital Economy Ministerial Declaration identified principles to \"facilitate an inclusive and whole-of-government approach to the use of information and communication technology (ICT) and assist governments in reshaping their capacities and strategies, while respecting the applicable frameworks of different countries, including with regards to privacy and data protection.\" Japan is to host the 2019 G-20 and plans to focus on data governance, offering a forum to address potential global standards on privacy and cross-border data flows. APEC is a regional forum for economic cooperation whose initiatives on privacy and cross-border data flows have influenced members' domestic policies. APEC's 21 members, including the United States, agreed to the 2005 APEC Privacy Framework , based on the OECD guidelines. The framework identifies a set of principles and implementation guidelines to provide members with a flexible approach to regulate privacy at a national level. Once the OECD publishes updated guidelines in 2019, APEC members may revise the framework and principles to reflect the updated guidelines. The APEC Cross-Border Privacy Rules (CBPR), endorsed by APEC Leaders in 2011, is a privacy code of conduct, based on the framework. The CBPR system establishes a set of principles for governments and businesses to follow to protect personal data and allow for cross-border data flows between CBPR members. They aim to balance information privacy with business needs and commercial interests, and facilitate digital trade to spur economic growth in the region. Rather than creating a new set of international regulations, the APEC framework and CBPR system identify best practices that each APEC member can tailor to its domestic legal system and allow for interoperability between countries. The scope and implementation mechanisms under CBPR can vary according to each member country's laws and regulations, providing flexibility for governments to design national privacy approaches. To become a member of the CBPR, a government must 1. Be a member of APEC; 2. Establish a regulator with authority to sign the Cross-Border Privacy Enforcement Arrangement (CPEA); 3. Map national laws to the published APEC guidelines, which set baseline standards; and 4. Establish an accountability agent empowered to audit and review a company's practices, and enforce privacy rules and laws. If a government joins the CBPR system, every domestic organization is not required to also join; however, becoming a member of CBPR may benefit an organization engaged in international trade by indicating to customers and partners that the organization values and protects data privacy. With certified enrollment in CBPR, organizations can transfer personal information between participating economies (e.g., Mexico to Singapore) and be assured of compliance with the legal regimes in both places. To become a CBPR member, an individual organization must develop and implement data privacy policies consistent with the APEC Privacy Framework and complete a questionnaire. The third party accountability agent is responsible for assessing an organization's application, ongoing monitoring of compliance, investigating any complaints, and taking enforcement actions as necessary. Domestic enforcement authorities in each member country serve as a backstop for dispute resolution if an accountability agent cannot resolve a particular issue. All CBPR member governments must join the CPEA to ensure cooperation and collaboration between the designated national enforcement authorities. In the United States, the Federal Trade Commission (FTC) is the regulator and enforcement authority. TrustArc is the only accountability agent, but many expect the U.S. Department of Commerce to recognize additional agents soon. As of this writing, TrustArc lists about 20 U.S. firms that are APEC CBPR certified. The CBPR grows in significance as the number of participating economies and organizations increases. The U.S. ambassador to APEC aims to have \"as many APEC economies as possible as soon as possible to join the system.\" Currently, the United States, Japan, Mexico, Canada, South Korea, Singapore, Taiwan, and Australia are CBPR members; the Philippines is in the process of joining. Russia, on the other hand, stated it has no plans to join. Although APEC initiatives are regionally focused, they can provide a basis to scale up to larger global efforts because they reflect economies at different stages of development and include industry participation. Due to its voluntary nature, APEC has served as a testbed for identifying best practices, standards, and principles and for creating frameworks that can lead to binding commitments in plurilateral or larger multilateral agreements (see \" Data Flows and Privacy in U.S. Trade Agreements \"). Expanding CBPR beyond APEC could represent the next step toward consistent international rules and disciplines on data flows and privacy. Countries vary in their privacy policies and laws, reflecting differing priorities, cultures, and legal structures. According to one index, China is the most restrictive digital trade country among 64 countries surveyed, followed by Russia, India, Indonesia, and Vietnam (see Figure 1 ). The United States ranks 22 in the index, less restrictive than Brazil or France but more restrictive than Canada or Australia. The relatively high U.S. score largely reflects financial sector restrictions. The \"restrictions on data\" category covers data policies such as privacy and security measures; this category is included in the composite index. Looking specifically at the 64 countries' data policies, Russia is the most restrictive country, followed by Turkey and China. Russia's policies include data localization, retention, and transfer requirements, among others. Turkey's comprehensive Data Protection Law also establishes requirements in these areas. In contrast, the United States ranks 50 for data policy restrictions. Two of the top U.S. trading partners (the EU and China) have established their data policies from different perspectives. The EU's policies are driven by privacy concerns; China's policies are based on security justifications. Both are setting examples that other countries, especially those with (or seeking) closer trading ties to China or the EU, are emulating; thus, these policies have affected U.S. firms seeking to do business in those other countries as well. The EU considers the privacy of communications and the protection of personal data to be fundamental human rights, which are codified in EU law. Differences between the United States and EU in their approaches to data protection and data privacy laws have long been sticking points in U.S.-EU economic and security relations. The EU and United States negotiated the U.S.-EU Privacy Shield to allow for the transatlantic transfer of personal data by certified organizations. The bilateral agreement established a voluntary program with commitments and obligations for companies, limitations on law enforcement access, and transparency requirements. U.S. companies that participate in the program must still comply with all of the obligations under EU law (see below) if they process personal data of EU persons. The Privacy Shield is overseen and enforced by EU federal and U.S. agencies, including the Department of Commerce and the FTC, and is reviewed by both parties annually. The EU's General Data Protection Regulation (GDPR), effective May 2018, establishes rules for EU members, with extraterritorial implications. The GDPR is a comprehensive privacy regime that builds on previous EU data protection rules. It grants new rights to individuals to control personal data and creates specific new data protection requirements. The GDPR applies to (1) all businesses and organizations with an EU establishment that process (i.e., perform operations on) personal data of individuals in the EU, regardless of where the actual processing of the data takes place; and (2) entities outside the EU that offer goods or services (for payment or for free) to individuals in the EU or monitor the behavior of individuals in the EU. While the GDPR is directly applicable at the EU member state level, individual countries are responsible for establishing some national-level rules and policies as well as enforcement authorities, and some are still in the process of doing so. As a result, some U.S. stakeholders have voiced concerns about a lack of clarity and inadequate country compliance guidelines. Many U.S. firms doing business in the EU have made and are making changes to comply with the GDPR, such as revising and clarifying user terms of agreement and asking for explicit consent. For some U.S. companies, it may be easier and cheaper to apply GDPR protections to all users worldwide rather than to maintain different policies for different users. Large firms may have the resources to hire consultants and lawyers to guide implementation and compliance; it may be harder and costlier for small and mid-sized enterprises to comply, possibly deterring them from entering the EU market and creating a de facto trade barrier. Since the GDPR went into effect on May 25, 2018, some U.S. businesses, including some newspaper websites and digital advertising firms, have opted to exit the EU market given the complexities of complying with the GDPR and the threat of potential enforcement actions. European Data Protection Authorities (DPAs) have received a range of GDPR complaints and initiated several GDPR enforcement actions in the fall of 2018. In January 2019, the French DPA issued the largest penalty to date for a data privacy breach. The agency imposed a €50 million (approximately $57 million) fine on Google for the \"lack of transparency\" regarding how the search engine processes user data. Analysts contend that the high fine may set a benchmark and signal for future enforcement, raising concerns among some firms doing business in the EU. Under the GDPR, a few options exist to transfer personal data in or out of the EU and ensure that privacy is maintained. 1. An organization may use specific Binding Corporate Rules (BCRs) or Model Contracts approved by the EU; 2. An organization may comply with domestic privacy regimes of a country that has obtained a mutual adequacy decision from the EU, which means that the EU has deemed that a country's laws and regulations provide an adequate level of data protection; currently, fewer than 15 jurisdictions are deemed adequate by the EU; or 3. A U.S.-based organization may enroll in the bilateral U.S.-EU Privacy Shield program for transatlantic transfer of personal data. The GDPR legal text seems to envision a fourth way, such as a certification scheme to transfer data, that the EU has yet to elaborate. A certification option(s) could create a less burdensome means of compliance for U.S. and other non-EU organizations to transfer personal data to or from the EU in the future. This could be an opportunity for the United States to work with the EU on creating a common system, perhaps even setting a global standard. Some experts contend that the GDPR may effectively set new global data privacy standards, since many companies and organizations are striving for GDPR compliance to avoid being shut out of the EU market, fined, or otherwise penalized, or in case other countries introduce rules that imitate the GDPR. The EU is actively promoting the GDPR and some countries, such as Argentina, are imitating all or parts of the GDPR in their own privacy regulatory and legislative efforts or as part of broader trade negotiations with the EU. In general, the EU does not include cross-border data flows or privacy in free trade agreements. However, alongside trade negotiations with Japan, the EU and Japan agreed to recognize each other's data protection systems as \"equivalent,\" allowing for the free flow of data between the EU and Japan and serving as a first step in adopting an adequacy decision. Under the agreement, Japan committed to implementing additional measures to address the handling of the personal data of EU persons on top of Japan's own privacy regime. China's trade and internet policies reflect state direction and industrial policy, limiting the free flow of information and individual privacy. For example, the requirement for all internet traffic to pass through a national firewall can impede the cross-border transmission of data. China's 2015 counterterrorism law requires telecommunications operators and internet service providers to provide assistance to the government, which could include sharing individuals' data. Citing national security concerns, China's Internet Sovereignty policies, Cybersecurity Law, and Personal Information Security Specification impose strict requirements on companies, such as storing data domestically; limiting the ability to access, use, or transfer data internationally; and mandating security assessments that provide Chinese authorities access to proprietary information. In 2014, China announced a new social credit system, a centralized big-data-enabled system for monitoring and shaping businesses' and citizens' behavior that serves as a self-enforcing regulatory mechanism. According to the government, China aims to make individuals more \"sincere\" and \"trustworthy,\" while obtaining reliable data on the creditworthiness of businesses and individuals. An individual's score would determine the level of government services and opportunities he or she could receive. China seeks to have all its citizens subject to the social credit system by 2020, forcing some U.S. businesses who do business in China, such as airlines, to participate. As of 2018, multiple government agencies and financial institutions contribute data to the platform. Pilot projects are underway in some provinces to apply various rewards and punishments in response to data collected. The lack of control an individual may have and the exposure of what some consider private data is controversial among observers in and out of China. Some countries, such as Vietnam, are following China's approach in creating cybersecurity policies that limit data flows and require local data storage and possible access by government authorities. Some U.S. firms and other multinational companies are considering exiting the Vietnamese market rather than complying, while some analysts suggest that Vietnam's law may not be in compliance with its recent commitments in trade agreements (see below). India has also cited security as the rationale for its draft Personal Data Protection Bill, which would establish broad data localization requirements and limit cross-border transfer of some data. Unlike the EU, these countries do not specify mechanisms to allow for cross-border data flows. U.S. officials have raised concerns with both Vietnam's and India's localization requirements. The EU's emphasis on privacy protection and China's focus on national security (and the countries that emulate their policies) have led these countries to create data-focused policies that restrict international trade and commerce. The United States has traditionally sought a balanced approach between trade, privacy, and security. U.S. data flow policy priorities are articulated in USTR's Digital 2 Dozen report, first developed under the Obama Administration, and the White House's 2017 National Security Strategy. Both Administrations emphasize the need for protection of privacy, the free flow of data across borders, and an interoperable internet. These documents establish the U.S. position that the free flow of data is not inconsistent with privacy protection. Recent free trade agreements translate the U.S. position into binding international commitments. The United States has taken a data-specific approach to regulating data privacy, with laws protecting specific information, such as healthcare or financial data. The FTC enforces consumer protection laws and requires that consumers be notified of and consent to how their data will be used, but the FTC does not have the mandate or resources to enforce broad online privacy protections. There is growing interest among some Members of Congress and in the Administration for a more holistic U.S. data privacy policy. The United States has played an important role in international discussions on privacy and data flows, such as in the OECD, G-20, and APEC, and has included provisions on these subjects in recent free trade agreements. Congress noted the importance of digital trade and the internet as a trading platform in setting the current U.S. trade negotiating objectives in the June 2015 Trade Promotion Authority (TPA) legislation ( P.L. 114-26 ). TPA includes a specific principal U.S. trade negotiating objective on \"digital trade in goods and services and cross-border data flows.\" According to TPA, a trade agreement should ensure that governments \"refrain from implementing trade-related measures that impede digital trade in goods and services, restrict cross-border data flows, or require local storage or processing of data.\" However, TPA also recognizes that sometimes measures are necessary to achieve legitimate policy objectives and aims for such regulations to be the least trade restrictive, nondiscriminatory, and transparent. Comprehensive and Progressive Agreement for Trans‐Pacific Partnership (CPTPP /TPP-11 ) . The CPTPP is a recently concluded trade agreement among 11 Asia-Pacific countries. The CPTPP is based on the proposed Trans-Pacific Partnership (TPP) agreement negotiated by the Obama Administration and from which President Trump withdrew the United States in January 2017. The electronic commerce chapter in TPP, left unchanged in CPTPP, contains the strongest binding trade agreement commitments on digital trade in force globally. CPTPP includes provisions on cross-border data flows and personal information protection. The text specifically states that the parties \"shall allow the cross-border transfer of information.\" The agreement allows restrictive measures for legitimate public policy purposes if they are not discriminatory or disguised trade barriers. The agreement also prohibits localization requirements for computing facilities, with similar exceptions. On privacy, the CPTPP requires parties to have a legal framework in place to protect personal information and to have consumer protection laws that cover online commerce. It encourages interoperability between data privacy regimes and encourages cooperation between consumer protection authorities. United States-Mexico-Canada Agreement (USMCA). The released text for the proposed USMCA aims to revise and update the trilateral North American Free Trade Agreement (NAFTA), and illustrates the Trump Administration's approach. The USMCA chapter 19 on digital trade includes articles on consumer protection, personal information protection, cross-border transfer of information by electronic means, and cybersecurity, among other topics. Building on the TPP, the agreement seeks to balance the legitimate objectives by requiring parties to have a legal framework to protect personal information, have consumer protection laws for online commercial activities, and not prohibit or restrict cross-border transfer of information. While the agreement does not prescribe specific rules or measures that a party must take to protect privacy, it goes further than the TPP (or CPTPP) provisions and provides guidance to inform a country's privacy regime. In particular, the USMCA explicitly refers to the APEC Privacy Framework and OECD Guidelines as relevant and identifies key principles. In general, the proposed USMCA requires that parties not restrict cross-border data flows. Governments are allowed to do so to achieve a legitimate public policy objective (e.g., privacy, national security), provided the measure is not arbitrary, discriminatory, a disguised trade barrier, or greater than necessary to achieve the particular objective. In this way, the parties seek to balance the free flow of data for commerce and communication with protecting privacy and security. The agreement specifically states that the parties may take different legal approaches to protect personal data and also recognizes APEC CBPR as a \"valid mechanism to facilitate cross-border information transfer while protecting personal information.\" The agreement aims to increase cooperation between the United States, Mexico, and Canada on a number of digital trade issues, including exchanging information on personal information protection and enforcement experiences; strengthening collaboration on cybersecurity issues; and promoting the APEC CBPR and global interoperability of national privacy regimes. The governments also commit to encourage private-sector self-regulation models and promote cooperation to enforce privacy laws. While the agreement is only between three parties, the provisions are written broadly to encompass global efforts. Some stakeholders look at USMCA as the basis for potential future trade agreements (such as with the UK). Cross-border data flows will likely be a key issue in future U.S.-EU trade negotiations. The United States has articulated a clear position on data privacy in trade agreements; however, there is no single U.S. data privacy policy. Nevertheless, the Trump Administration is seeking to define an overarching U.S. policy on data privacy. The Trump Administration's ongoing three-track process is being managed by the Department of Commerce (Commerce) in consultation with the White House. Different bureaus in Commerce are tasked with different aspects of the process, as follows. 1. The National Institutes of Standards and Technology (NIST) is developing a privacy framework. Similar to its cybersecurity framework, NIST aims to create a voluntary framework as a tool for organizations to adopt to identify, assess, manage, and communicate about privacy risks. By classifying specific privacy outcomes and potential approaches, the framework is intended to enable organizations to create and adapt privacy strategies, innovate, and manage privacy risks within diverse environments. As part of its transparent approach, NIST is currently consulting with public- and private-sector stakeholders through various forms of outreach to collect feedback and aims to have a draft framework before the end of 2019. 2. The National Telecommunications and Information Administration (NTIA) is developing a set of privacy principles to guide a domestic legal and policy approach. The NITA sought public comment on a proposed set of \"user-centric privacy outcomes\" and a set of high-level goals. 3. The International Trade Administration (ITA) engages with foreign governments and international organizations such as APEC. ITA is focusing on the international interoperability aspects of potential U.S. privacy policy. ITA's role is to ensure that the NIST and NTIA approaches are consistent with U.S. international policy objectives, including TPA, and principles, such as the OECD framework and APEC CBPRs. Like the EU and China, Commerce is seeking input through a public- and private-sector consultation process. However, unlike the EU or China, Commerce is expecting to create a voluntary privacy framework. Some observers question whether the Commerce approach is sufficient to result in strong privacy protections if it is not backed up by congressional action and federal legislation. Some suggest that Congress could lead a whole-of-government approach through new federal legislation. In the 115 th Congress, then-House Committee on Energy and Commerce Ranking Member Frank Pallone, Jr. requested that the Government Accountability Office (GAO) examine issues related to federal oversight of internet privacy. The January 2019 GAO report concluded that now is \"an appropriate time for Congress to consider comprehensive Internet privacy.\" GAO stated that \"Congress should consider developing comprehensive legislation on Internet privacy that would enhance consumer protections and provide flexibility to address a rapidly evolving Internet environment. Issues that should be considered include what authorities agencies should have in order to oversee Internet privacy, including appropriate rulemaking authority.\" Recognizing the importance of protecting open data flows amid growing concerns about online privacy, some stakeholders seek to influence U.S. policies on these issues. In addition to submitting comments in response to NTIA and NIST requests and participating in their forums, multiple organizations issued their own sets of principles or guidelines, some referencing the EU GDPR. The U.S. Chamber of Commerce has also published model privacy legislation for Congress to consider. Though they vary in emphasis, these proposals share common themes: transparency on what data is being collected and how it is being used; user control, including the ability to opt out of sharing at least some information and to access and correct personal data collected; data security measures, like data breach notification requirements; and enforcement by the FTC; FTC commissioners also voiced support for the agency as the appropriate federal enforcer for consumer privacy. But these groups also differ in some areas, such as whether, or to what extent, to include certain aspects included in the GDPR, such as the right to deletion (so-called \"right to be forgotten\"), requirements for data minimization, or extraterritorial reach. There is not consensus on whether the FTC should be given rule-making authority or additional resources, the enforcement role of states, or if an independent data protection commission is needed similar to EU DPAs. Consistent with U.S. trade policy, industry groups generally point out the need to be flexible, encourage private-sector innovation, establish sector- and technology-neutral rules, create international interoperability between privacy regimes, and facilitate cross-border data flows. Private-sector stakeholders generally want to avoid what they regard as overregulation or high compliance burdens. These groups emphasize risk management and a harm-based approach, which they state keeps an organization's costs proportional to the consumer harm prevented. On the other hand, some consumer advocates point to a need for baseline obligations to protect against discrimination, disinformation, or other harm. In general, consumer advocates believe that any comprehensive federal privacy policy should complement, and not supplant, sector-specific privacy legislation or state-level legislation. Finding a global consensus on how to balance open data flows and privacy protection may be key to maintaining trust in the digital environment and advancing international trade. One study found that over 120 countries have laws related to personal data protection. Divergent national privacy approaches raise the costs of doing business and make it harder for governments to collaborate and share data, whether for scientific research, defense, or law enforcement. A system for global interoperability in a least trade-restrictive and nondiscriminatory way between different national systems could help minimize costs and allow entities in different jurisdictions with varying online privacy regimes to share data via cross-border data flows. Such a system could help avoid fragmentation of the internet between European, Chinese, and American spheres, a danger that some analysts have warned against. For example, Figure 2 suggests the potential of an interoperability system that allows data to flow freely between GDPR- and CBPR-certified economies. The OECD guidelines, G-20 principles, APEC CBPR, CPTPP, and USMCA provisions demonstrate an evolving understanding on how to balance cross-border data flows, security, and privacy, to create interoperable policies that can be tailored by countries and avoid fragmentation or the potential exclusion of other countries or regulatory systems. The various trade agreements and initiatives with differing sets of parties may ultimately pave the way for a broader multilateral understanding and eventually lead to more enforceable binding commitments founded on the key WTO principles of nondiscrimination, least trade restrictiveness, and transparency. Congress may consider the trade-related aspects of data flows in trade agreements, including through close examination of these provisions during the congressional debate and consideration of legislation to implement the proposed USMCA. Issues include whether the agreements make progress in meeting TPA's related trade negotiating objectives and if the provisions strike the appropriate balance among public policy objectives. In addition, USTR's specific trade negotiating objectives for future agreements with the EU and Japan include establishing rules to protect cross-border data flows. These future trade negotiations present challenges and provide opportunities for Congress to further engage USTR on the issues and to conduct oversight. Congress may further consider how best to achieve broader consensus on data flows and privacy at the global level. Congress could, for example, conduct additional oversight of current best practice approaches (e.g., OECD, APEC) or ongoing negotiations in the WTO on e-commerce to create rules through plurilateral or multilateral agreements. Congress may consider endorsing certain of these efforts to influence international discussions and the engagement of other countries. Congress may want to examine the potential challenges and implications of building a system of interoperability between APEC, CBPR, and the EU GDPR. Related issues are the extent to which the EU is establishing its system as a potential de facto global approach through its trade agreements and other mechanisms, and how U.S. and other trade agreements may ultimately provide approaches that could be adopted more globally. Congress may seek to better understand the economic impact of data flows and privacy regimes in other countries related to U.S. access to other markets and the extent to which barriers are being put in place that may discriminate against U.S. exporters. Congress may examine the lack of reciprocal treatment and limits on U.S. firms' access to some foreign markets. Congress may consider the implications of not having a comprehensive national data privacy policy. Will the EU GDPR and China cybersecurity policies become the global norms that other countries follow in the absence of a clear U.S. alternative? Congress may enact comprehensive privacy legislation. In considering such action, Congress could investigate and conduct oversight of the Administration's ongoing privacy efforts, including requesting briefings and updates on the NTIA, NIST, and ITA initiatives to provide congressional feedback and direction and ensure they are aligned with U.S. trade objectives. Congress may also seek input from other federal agencies. In deliberating a comprehensive U.S. policy on personal data privacy, Congress may review the GAO report's findings and conclusions. Congress may also weigh several factors, including: How can U.S. trade and domestic policy achieve the appropriate balance to encourage cross-border commerce, economic growth, and innovation, while safeguarding individual privacy and national security? How would a new privacy regime affect U.S. consumers and businesses, including large multinationals who must comply with different national privacy regimes and small- and medium-sized enterprises with limited resources and technology expertise? Do U.S. agencies have the needed tools to accurately assess the size and scope of cross-border data flows to help analyze the economic impact of different privacy policies, or measure the costs of trade barriers? How should an evolving U.S. privacy regime align with U.S. trade policy objectives and evolving international standards, such as the OECD Guidelines for privacy and cybersecurity, and should U.S. policymakers prioritize interoperability with other international privacy frameworks to avoid further fragmentation of global markets and so-called balkanization of the internet? In addition, there are a host of other policy considerations not directly related to trade.", "summary": "\"Cross-border data flows\" refers to the movement or transfer of information between computer servers across national borders. Such data flows enable people to transmit information for online communication, track global supply chains, share research, provide cross-border services, and support technological innovation. Ensuring open cross-border data flows has been an objective of Congress in recent trade agreements and in broader U.S. international trade policy. The free flow of personal data, however, has raised security and privacy concerns. U.S. trade policy has traditionally sought to balance the need for cross-border data flows, which often include personal data, with online privacy and security. Some stakeholders, including some Members of Congress, believe that U.S. policy should better protect personal data privacy and security, and have introduced legislation to set a national policy. Other policymakers and analysts are concerned about increasing foreign barriers to U.S. digital trade, including data flows. Recent incidents of private information being shared or exposed have heightened public awareness of the risks posed to personal data stored online. Consumers' personal online data is valued by organizations for a variety of reasons, such as analyzing marketing information and easing the efficiency of transactions. Concerns are likely to grow as the amount of online data organizations collect and the level of global data flows expand. As Congress assesses policy options, it may further explore the link between cross-border data flows, online privacy, and trade policy; the trade implications of a comprehensive data privacy policy; and the U.S. role in establishing best practices and binding trade rules that seek to balance public policy priorities. There is no globally accepted standard or definition of data privacy in the online world, and there are no comprehensive binding multilateral rules specifically about cross-border data flows and privacy. Several international organizations, including the Organisation for Economic Co-operation and Development (OECD), G-20, and Asia-Pacific Economic Cooperation (APEC) forum, have sought to develop best practice guidelines or principles related to privacy and cross-border data flows, although none are legally binding. U.S. and other recent trade agreements are establishing new enforceable trade rules and disciplines. Countries vary in their data policies and laws; some focus on limiting access to online information by restricting the flow of data beyond a country's borders, aiming to protect domestic interests (e.g., constituents' privacy). However, these policies can also act as protectionist measures. The EU and China, two top U.S. trading partners, have established prescriptive rules on cross-border data flows and personal data from different perspectives. The EU General Data Protection Regulation (GDPR) is driven by privacy concerns; China is focused on security. Their policies affect U.S. firms seeking to do business in those regions, as well as in other markets that emulate the EU and Chinese approaches. Unlike the EU or China, the United States does not broadly restrict cross-border data flows and has traditionally regulated privacy at a sectoral level to cover data, such as health records. U.S. trade policy has sought to balance the goals of consumer privacy, security, and open commerce. The proposed United States-Mexico-Canada Agreement (USMCA) represents the Trump Administration's first attempt to include negotiated trade rules and disciplines on privacy, cross-border data flows, and security in a trade agreement. While the United States and other countries work to define their respective national privacy strategies, many stakeholders seek a more global approach that would allow interoperability between differing national regimes to facilitate and remove discriminatory trade barriers to cross-border data flows; this could offer an opportunity for the United States to lead the global conversation. Although Congress has examined issues surrounding online privacy and has considered multiple bills, there is not yet consensus on a comprehensive U.S. online data privacy policy. Congress may weigh in as the Administration seeks to define U.S. policy on data privacy and engages in international negotiations on cross-border data flows.", "document_type": "crs"}
{"report": "Title IV of the Higher Education Act (HEA; P.L. 89-329), as amended, authorizes programs that provide financial assistance to students to attend certain institutions of higher education (IHEs). In academic year (AY) 2016-2017, 6,760 institutions were classified as Title IV eligible IHEs. Of these IHEs eligible to participate in Title IV programs, approximately 29.4% were public institutions, 27.8% were private nonprofit institutions, and 42.9% were proprietary (or private, for-profit) institutions. It is estimated that $122.5 billion was made available to students through Title IV federal student aid in FY2017. To be able to receive Title IV assistance, students must attend an institution that is eligible to participate in the Title IV programs. IHEs must meet a variety of requirements to participate in the Title IV programs. First, an IHE must meet basic eligibility criteria, including offering at least one eligible program of education. In addition, an IHE must satisfy the program integrity triad, under which it must be legally authorized to provide a postsecondary education in the state in which it is located; accredited or preaccredited by an agency recognized by the Department of Education (ED) for such purposes, and certified by ED as eligible to participate in Title IV programs. The state authorization and accreditation components of the triad were developed independently to address the issues of quality assurance and consumer protection, and the federal government (ED specifically) generally relies on states and accrediting agencies to determine standards of educational program quality. The federal government's only direct role in determining Title IV eligibility is through the process of certification of eligibility and ensuring IHEs meet some additional Title IV requirements. Certification, as a component of the program integrity triad, focuses on an institution's fiscal responsibility and administrative capacity to administer Title IV funds. An IHE must fulfill a variety of other related requirements, including those that relate to institutional recruiting practices, student policies and procedures, and Title IV program administration. Finally, additional criteria may apply to an institution depending on its control or the type of educational programs it offers. For instance, proprietary institutions must derive at least 10% of their revenues from non-Title IV funds (also known as the 90/10 rule). Failure to fulfill some of these requirements does not necessarily end an IHE's participation in the Title IV programs, but may lead to additional oversight from ED and/or restrictions placed an IHE's Title IV participation. This report provides a general overview of HEA provisions that affect a postsecondary institution's eligibility for participation in Title IV student aid programs. It first describes general eligibility criteria at both the institutional and programmatic level and then, in more detail, the program integrity triad. Next, it discusses several issues that are closely related to institutional eligibility: Program Participation Agreements, campus safety policies and crime reporting required under the Clery Act, the return of Title IV funds, and distance education. To be eligible to participate in HEA Title IV student aid programs, institutions must meet several criteria. These criteria include requirements related to programs offered by the institutions, student enrollment, institutional operations, and the length of academic programs. This section discusses the definition of an eligible IHE for the purposes of Title IV participation and program eligibility requirements. The HEA contains two definitions of institutions of higher education. Section 101 provides a general definition of IHE that applies to institutional eligibility for participation in HEA programs other than Title IV programs. The Section 102 definition of IHE is used only to determine institutional eligibility to participate in HEA Title IV programs. Section 101 of the HEA provides a general definition of IHE. This definition applies to institutional participation in non-Title IV HEA programs. Section 101 IHEs can be public or private nonprofit educational institutions. Section 101 specifies criteria both public and private nonprofit educational institutions must meet to be considered IHEs. Neither the HEA nor regulations specifically define a public institution of higher education. However, in general, public institutions can be described as those whose educational programs are operated by states or other government entities and are primarily supported by public funds. Regulations define a nonprofit IHE as one that (1) is owned and operated by a nonprofit corporation or association, with no part of the corporation's or association's net earnings benefiting a private shareholder or individual, (2) is determined by the Internal Revenue Service to be a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code (IRC), and (3) is legally authorized to operate as a nonprofit organization by each state in which it is physically located. To be considered a Section 101 IHE, public and private nonprofit educational institutions must admit as regular students only individuals with a high school diploma or its equivalent, individuals beyond the age of compulsory school attendance, or individuals who are dually or concurrently enrolled in both the institution and in a secondary school; be legally authorized to provide a postsecondary education within the state in which they are located; offer a bachelor's degree, provide a program of at least two-years that is acceptable for full credit toward a bachelor's degree, award a degree that is accepted for admission to a graduate or professional program, or provide a training program of at least a one-year that prepares students for gainful employment in a recognized occupation; and be accredited or preaccredited by an accrediting agency recognized by ED to grant accreditation or preaccreditation status Section 102 of the HEA defines IHE only for the purposes of Title IV participation. The Section 102 definition includes all institutions included in the Section 101 definition (i.e., public and private nonprofit IHEs) and also includes proprietary institutions, postsecondary vocational institutions, and foreign institutions that have been approved by ED. Section 102 specifies that proprietary and postsecondary vocational institutions must meet many of the same Section 101 requirements that are applicable to public and private nonprofit institutions. In addition, Section 102 specifies other criteria that all types of educational institutions must meet to be considered Title IV eligible IHEs. HEA Section 102 specifies that a proprietary IHEs is an institution that is neither a public nor a private nonprofit institution. In addition to the basic Title IV eligibility criteria that all IHEs must meet (e.g., state authorization, accreditation by an ED-recognized accrediting agency), proprietary IHEs must meet additional criteria to be considered Title IV eligible. Specifically, a proprietary IHE must (1) provide an eligible program of training \"to prepare students for gainful employment in a recognized occupation\" or (2) provide a program leading to a baccalaureate degree in liberal arts that has been continuously accredited by a regional accrediting agency since October 1, 2007, and have provided the program continuously since January 1, 2009. Additionally, it must have been legally authorized to provide (and have continuously been providing) the same or a substantially similar educational program for at least two consecutive years. HEA Section 102 defines a postsecondary vocational institution as a public or private nonprofit institution that provides an eligible program of training \"to prepare students for gainful employment in a recognized occupation,\" and has been legally authorized to provide (and has continuously been providing) the same or a substantially similar educational program for at least two consecutive years. It is possible for a public or private nonprofit IHE that offers a degree program (e.g., an associate's or bachelor's degree) to also qualify as a postsecondary vocational institution by offering programs that are less than one academic year and that lead to a nondegree recognized credential such as a certificate. Institutional participation in Title IV student aid programs allows students from the United States to borrow through the federal Direct Loan program to attend postsecondary institutions located outside of the United States. In general, a foreign institution is eligible to participate in the Direct Loan program if it is comparable to an eligible IHE (as defined in HEA Section 101) within the United States, is a public or private nonprofit institution, and has been approved by ED. Foreign graduate medical schools, veterinary schools, and nursing schools are also eligible to participate in Title IV student aid programs, but must meet additional requirements. Freestanding foreign graduate medical schools, veterinary schools, and nursing schools may be proprietary institutions. Additional requirements for foreign institutions to participate in Title IV student aid programs are beyond the scope of this report and, generally, will not be discussed hereinafter. The definitions of proprietary institutions and postsecondary vocational institutions contained in Section 102 have several overlapping components with the Section 101 definition of IHE. For instance, both proprietary and postsecondary vocational institutions must (1) admit as regular students only those individuals with a high school diploma or its equivalent, individuals beyond the age of compulsory school attendance, or individuals who are dually or concurrently enrolled in both the institution and in a secondary school; (2) be legally authorized to provide a postsecondary education by the state in which they are located; and (3) be accredited or preaccredited by an accrediting agency recognized by ED to grant such statuses. In addition, all types of institutions (including public and private nonprofit institutions) must meet requirements related to the course of study offered at the institution and student enrollment to be considered Title IV eligible under Section 102. In general, any type of institution is considered ineligible to participate in Title IV programs if more than 25% of its enrolled students are incarcerated, or if more than 50% of the its enrolled students do not have a secondary school diploma or equivalent and the institution does not provide a two-year associate's degree or a four-year bachelor's degree. Also, in general, an institution is ineligible if more than 50% of the courses offered are correspondence courses or if 50% or more of its students are enrolled in correspondence courses. These \"50% rules\" are discussed in more detail in the distance education section of this report. Finally, an institution is considered ineligible to participate in Title IV programs if the institution has filed for bankruptcy or the institution (or its owner or chief executive officer) has been convicted of or pled no contest or guilty to a crime involving the use of Title IV funds. While the above-described criteria generally apply to most types of Section 102 institutions, specific criteria apply to individual types of Section 102 institutions. The following sections provide information on Title IV eligibility criteria that apply to those additional types of IHEs not specified in Section 101, but specified in Section 102: proprietary IHEs, postsecondary vocational institutions, and foreign institutions. Hereinafter, unless otherwise noted, the term \"institution of high education (IHE)\" only refers to Section 102 institutions. To qualify as an eligible institution for Title IV participation, an institution must offer at least one eligible program, but overall institutional eligibility does not necessarily extend to all programs offered by the institution. Not all of an institution's programs must meet program eligibility requirements for an IHE to participate in Title IV, but, in general, students enrolled solely in ineligible programs cannot receive Title IV student aid. To be Title IV eligible, a program must lead to a degree (e.g., an associate's or bachelor's degree) or certificate or prepare students for gainful employment in a recognized occupation. Before awarding Title IV aid to students, an IHE must determine that the program in which a student is participating is Title IV eligible, ensure that the program is included in its accreditation notice, and ensure that the the IHE is authorized by the appropriate state to offer the program. In addition to the general criteria for all types of institutions, a program must meet specific eligibility requirements depending on whether the institution at which it is offered is a public or private nonprofit IHE, a proprietary IHE, or a postsecondary vocational IHE. At a public or private nonprofit IHE, the following types of programs are Title IV eligible: (1) programs that lead to an associate's, bachelor's, professional, or graduate degree; (2) transfer programs that are at least two academic years in length and for which the institution does not award a credential but that are acceptable for full credit toward a bachelor's degree; (3) programs that lead to a certificate or other recognized nondegree credential, that prepare students for gainful employment in a recognized occupation, and that are at least one academic year in length; (4) certificate or diploma training programs that are less than one year in length, if the institution also meets the definition of a postsecondary vocational institution; and (5) programs consisting of courses required for elementary or secondary teacher certification in the state in which the student intends to teach. For all of these, an academic year must also require an undergraduate course of study to contain an amount of instructional time in which a full-time student is expected to complete at least 24 semester or trimester credit hours, 36 quarter credit hours, or 900 clock hours. In general, eligible programs at proprietary and postsecondary vocational institutions must meet a specified number of weeks of instruction and must provide training that prepares students for gainful employment in a recognized occupation (described below). At proprietary and postsecondary vocational institutions, the following types of programs are Title IV eligible: undergraduate programs that provide at least 600 clock hours, 16 semester or trimester hours, or 24 quarter hours of instruction offered over a minimum of at least 15 weeks ; such programs may admit, as regular students, individuals who have not completed the equivalent of an associate's degree; programs that provide at least 300 clock hours, 8 semester hours, or 12 quarter hours of instruction offered over a minimum of 10 weeks; such programs must be graduate or professional programs or must admit as regular students only individuals who have completed the equivalent of an associate's degree; short-term programs that provide between 300 and 600 clock hours of instruction over a minimum of 10 weeks ; such programs must have been in existence for at least one year, have verified completion and placement rates of at least 70%, may not last more than 50% longer than the minimum training period required by the state or federal agency for the occupation for which the program is being offered, and must admit as regular students some individuals who have not completed the equivalent of an associate's degree; and programs offered by accredited proprietary IHEs that lead to a bachelor's degree in liberal arts; the school must have been continuously accredited by an ED-recognized accrediting agency since at least October 1, 2007 and must have provided the program continuously since January 1, 2009. Most nondegree programs offered by public and private nonprofit IHEs must prepare students for \"gainful employment in a recognized occupation.\" Gainful employment requirements also apply to almost all programs offered by proprietary and postsecondary vocational institutions, regardless of whether they lead to a degree. In response to concerns about the quality of programs that prepare students for gainful employment and the level of student debt assumed by individuals who attend these programs, ED issued final rules on gainful employment on October 31, 2014. The regulations require that educational programs subject to gainful employment requirements offered by IHEs meet minimum performance standards to be considered offering education that prepares students for gainful employment in a recognized occupation. They also require IHEs to disclose specified information about each of its gainful employment programs to enrolled or prospective students. Finally, the gainful employment rules require IHEs to report information to ED necessary to calculate the debt-to-earnings ratios. Although the gainful employment regulations became effective July 1, 2015, various aspects of them have not yet been fully implemented or have been delayed in implementation. For example, ED delayed until July 1, 2019, some portions of the rule relating to certain disclosure requirements. Additionally, to enable ED to calculate whether an IHE's programs meet the minimum performance standards (discussed below), regulations specify that ED obtains data from the Social Security Administration (SSA). However, a memorandum of understanding relating to data sharing between ED and SSA lapsed in 2018. In August 2018, ED issued a Notice of Proposed Rulemaking that proposes to rescind the gainful employment rules in their entirety. Based on HEA requirements relating to the implementation date for Title IV regulations, the earliest possible date the proposed rules could go into effect is July 1, 2020. The gainful employment regulations establish a framework within which educational programs offered by IHEs must meet minimum performance standards to be considered offering education that prepares students for gainful employment in a recognized occupation. Under the framework, ED annually calculates two debt-to-earnings (D/E) rates for each gainful employment program offered by an IHE, the discretionary income rate and the annual earnings rate. These rates measure a gainful employment program's completers' debt (their annual loan payments) as a percentage of their post-completion earnings. Using these measures, institutions will be determined to be \"passing,\" \"in the zone,\" or \"failing.\" Thresholds for each category are as follows: Passing : Programs whose completers have annual loan payments less than or equal to 8% of annual earnings (the annual earnings rate) or less than or equal to 20% of discretionary income (the discretionary income rate). In the zone: Programs whose completers have annual loan payments greater than 8% but less than or equal to 12% of annual earnings or greater than 20% but less than or equal to 30% of discretionary income. Failing : Programs whose completers have annual loan payments greater than 12% of annual earnings and greater than 30% of discretionary income. Programs that are failing in two out of any three consecutive years or that are in the zone for four consecutive years will be ineligible for Title IV participation for three years. The gainful employment rules also contain several disclosure requirements. For any year in which ED notifies an IHE that a gainful employment program could become ineligible in the next year based on its debt-to-earnings ratios (i.e., one year of failure or three years in the zone), the IHE must provide a warning to current and prospective students that the program does not meet the gainful employment standards and that if the program does not meet the gainful employment standards in the future, students would not be able to receive Title IV aid. In addition, an IHE must disclose specified information about each of its gainful employment programs to enrolled and prospective students. Information to be disclosed includes the following: the primary occupation that the program prepares students to enter; whether the program satisfies applicable educational prerequisites for professional licensure or certification in each state within the institution's metropolitan statistical area (MSA); program length and number of clock or credit hours, or equivalent, in the program; the program's completion rates for full-time and less-than-full-time students and the program's withdrawal rates; Federal Family Education Loan (FFEL) and Direct Loan program loan repayment rates for all students who entered repayment on Title IV loans and who enrolled in the program, for those who withdrew from the program, and for those who completed the program; the program tuition, fees, and additional costs incurred by a student who completes the program within the program's published length; the job placement rate for the program, if otherwise required by the institution's accrediting agency or state; the percentage of enrolled students who received Title IV or private loans for enrollment in the program; the median loan debt and mean or median earnings of students who completed the program, of students who withdrew from the program, and of both groups combined; the program cohort default rate; and the annual earnings rate for the program. Institutions must also certify that each of their gainful employment programs is included in the IHE's accreditation, meets any state or federal entity accreditation requirements, and meets any state licensing and certification requirements for the state in which the IHE is located. Title IV of the HEA sets forth three requirements to ensure program integrity in postsecondary education, known as the program integrity triad. The three requirements are state authorization, accreditation by an accrediting agency recognized by ED, and eligibility and certification by ED. This triad is intended to provide a balance in the Title IV eligibility requirements. The states' role is to provide consumer protection, the accrediting agencies' role is to provide quality assurance, and the federal government's role is to provide oversight of compliance to ensure administrative and fiscal integrity of Title IV programs at IHEs. The state role in the program integrity triad is to provide legal authority for an institution to operate a postsecondary educational program in the state in which it is physically located. There are two basic requirements for an IHE to be considered legally authorized by a state: 1. the state must authorize the IHE by name to operate postsecondary educational programs, and 2. the state must have in place a process to review and address complaints concerning IHEs, including enforcing applicable state law. An IHE can be authorized by name through a state charter, statute, constitutional provision, or other action by an appropriate state agency (e.g., authorization to conduct business or operate as a nonprofit organization). Additionally, an institution must also comply with any applicable state approval or licensure requirements. The state agency responsible for the authorization of postsecondary institutions must also perform three additional functions: upon request, provide the Secretary with information about the process it uses to authorize institutions to operate within its borders; notify the Secretary if it has evidence to believe that an institution within its borders has committed fraud in the administration of Title IV programs; and notify the Secretary if it revokes an institution's authorization to operate. On December 19, 2016, ED issued final regulations related to state authorization for IHEs offering postsecondary distance or correspondence education (discussed later in this report). The regulations would require an IHE offering postsecondary distance or correspondence education to students residing in a state in which the IHE is not physically located to meet any requirements within the student's state of residence. Under the rules, an IHE may meet this requirement if it participates in a state authorization reciprocity agreement. These regulations were scheduled to become effective July 1, 2018. However, on July 3, 2018 (and effective June 29, 2018), the Secretary of Education (Secretary) issued a final rule delaying the implementation of these requirements until July 1, 2020. The second component of the program integrity triad is accreditation by an ED-recognized accrediting agency or association. In higher education, accreditation is intended to help ensure an acceptable level of quality within IHEs. For Title IV purposes, an institution must be accredited or preaccredited by an ED-recognized accrediting agency. Each accrediting agency must meet HEA-specified standards to be recognized by ED. From its inception, accreditation has been a voluntary process. It developed with the formation of associations that distinguished between IHEs that merited the designation of college or university from those that did not. Since then, accreditation has been used as a form of \"external quality review ... to scrutinize colleges, universities and programs for quality assurance and quality improvement.\" In 1952, shortly after the passage of the Veterans' Readjustment Act of 1952 (the Korean GI Bill; P.L. 82-550), the federal government began formally recognizing accrediting agencies. This was done as one means to assess higher education quality and link it to determining which institutions would qualify to receive federal aid under the Korean GI Bill. Rather than creating a centralized authority to assess quality, the federal government chose to rely in part on the existing expertise of accrediting agencies. Today, ED's formal recognition of accrediting agencies is important, because an IHE's Title IV eligibility is conditioned upon accreditation from an ED-recognized accreditation organization. As part of the accreditation system's development, three types of accrediting agencies have emerged: Regional accrediting agencies. These operate in six regions of the United States, with each agency concentrating on a specific region. Generally, these accredit entire public and private nonprofit degree-granting IHEs. National accrediting agencies. These operate across the United States and also accredit entire institutions. There are two types of national accrediting agencies: faith-based agencies that accredit religiously affiliated or doctrinally based institutions, which are typically private nonprofit degree-granting institutions, and career-related agencies that typically accredit proprietary, career-based, degree- and nondegree-granting institutions. Specialized or programmatic accrediting agencies. These operate throughout the United States and accredit individual educational programs (e.g., law) and single-purpose institutions (e.g., freestanding medical schools). Specific educational programs are often accredited by a specialized accrediting agency, and the institution at which the program is offered is accredited by a regional or national accrediting organization. Generally, an institution must be accredited by an ED-recognized accrediting agency that has the authority to cover all of the institution's programs. Alternatively, a public or private nonprofit IHE may be preaccredited by an agency recognized by ED to grant such preaccreditation, and a public postsecondary vocational institution may be accredited by a state agency that ED determines is a reliable authority. Proprietary institutions must be accredited by an ED-recognized accrediting agency. The accreditation process begins with an institution or program requesting accreditation. Institutional accreditation is cyclical, with a cycle ranging from every few years up to 10 years. Initial accreditation does not guarantee subsequent renewal of the accredited status. Typically, an institution seeking accreditation will first perform a self-assessment to determine whether its operations and performance meet the basic standards required by the relevant accrediting agency. Next, an outside group of higher education peers (e.g., faculty and administrators) and members of the public conduct an on-site visit at the institution during which the team determines whether the accrediting organization's standards are being met. Based on the results of the self-assessment and site visit, the accrediting organization determines whether accreditation will be awarded, renewed, denied, or provisionally awarded to an institution. Educational programs within institutions can be accredited by programmatic accrediting agencies; however, a program is not required to be accredited by a programmatic accrediting agency for Title IV purposes. Rather, it only needs to be covered by the IHE's primary accrediting agency. Frequently, programmatic accrediting agencies review a specific program within an IHE that is accredited by a regional or national accrediting agency. An institution that has had its accreditation revoked or terminated for cause cannot be recertified as an IHE eligible to participate in Title IV programs for 24 months following the loss of accreditation, unless the accrediting agency rescinds the loss. The same rules apply if an institution voluntarily withdraws its accreditation. The Secretary can, however, continue the eligibility of a religious institution whose loss of accreditation, whether voluntary or not, is related to its religious mission and not to the HEA accreditation standards. If an institution's accrediting agency loses its recognition from ED, it has up to 18 months to obtain accreditation from another ED-recognized agency. Although the federal government does not set specific standards for institutional or programmatic accreditation, generally, it does require that institutions be accredited or preaccredited by a recognized accrediting organization to be eligible for Title IV participation. ED's primary role in accreditation is to recognize an accrediting agency as a \"reliable authority regarding the quality of education or training offered\" at IHEs through the processes and conditions set forth in the HEA and federal regulations. For ED recognition, Section 496 of the HEA specifically requires that an accrediting agency be a state, regional, or national agency that demonstrates the ability to operate as an accrediting agency within the relevant state or region or nationally. Additionally, agencies must meet one of the following criteria: IHE membership with the agency must be voluntary, and one of the primary purposes of the agency must be accreditation of the IHEs. The agency must be a state agency approved by the Secretary as an accrediting agency on or before October 1, 1991. The agency must either conduct accreditation through a voluntary membership of individuals in a profession, or it must have as its primary purpose the accreditation of programs within institutions that have already been accredited by another ED-recognized agency. Agencies that meet the first or third criterion listed above must also be administratively and financially separate and independent of any related trade association or membership organization. For an agency that meets the third criterion and that was ED-recognized on or before October 1, 1991, the Secretary may waive the requirement that the agency be administratively and financially independent of any related organization, but only if the agency can show that the existing relationship with the related organization has not compromised its independence in the accreditation process. All types of accrediting agencies must show that they consistently apply and enforce standards that ensure that the education programs, training, or courses of study offered by an IHE are of sufficient quality to meet the stated objectives for which the programs, training, or courses are offered. The standards used by the accrediting agencies must assess student achievement in relation to the institution's mission; this may include course completion, job placement rates, and passage rates of state licensing exams. Agencies must also consider curricula, faculty, facilities, fiscal and administrative capacity, student support services, and admissions practices. Accrediting agencies must also meet requirements that focus on the review of an institution's operating procedures, including reviewing an institution's policies and procedures for determining credit hours, the application of those policies and procedures to programs and coursework, and reviewing any newly established branch campuses. They must also perform regular on-site visits that focus on the quality of education and program effectiveness. The final component of the program integrity triad is eligibility and certification by ED. Here, ED is responsible for verifying an institution's legal authority to operate within a state and its accreditation status. ED also evaluates an institution's financial responsibility and administrative capability to administer Title IV student aid programs. An institution can be certified to participate in Title IV for up to six years before applying for recertification. ED determines an IHE's financial responsibility based on its ability to provide the services described in its official publications, to administer the Title IV programs in which it participates, and to meet all of its financial obligations. A public IHE is deemed financially responsible if its debts and liabilities are backed by the full faith and credit of the state or another government entity. A proprietary or private nonprofit IHE is financially responsible if it meets specific financial ratios (e.g., equity ratio) established by ED, has sufficient cash reserves to make any required refunds (including the return of Title IV funds), is meeting all of its financial obligations, and is current on its debt payments. Even if an institution meets the above requirements, ED does not consider it financially responsible if the IHE does not meet third-party financial audit requirements or if the IHE violated past performance requirements, such as failing to satisfactorily resolve any compliance issues identified in program reviews or audits. Alternatively, if an institution does not meet the above standards of financial responsibility, ED may still consider it financially responsible or give it provisional certification, under which it may operate for a time, if it qualifies under an alternative standard. These alternative standards include submitting an irrevocable letter of credit to ED that is equal to at least 50% of the Federal Student Aid (FSA) program funds that the IHE received during its most recently completed fiscal year, meeting specific monitoring requirements, or participating in the Title IV programs under provisional certification. Along with demonstrating financial responsibility, an institution must demonstrate its ability to properly administer the Title IV programs in which it participates and to provide the education it describes in public documents (e.g., marketing brochures). Administrative capability focuses on the processes, procedures, and personnel used in administering Title IV funds and indicators of student success. Administrative capability standards address numerous aspects of Title IV administration. For example, to administer Title IV programs an institution must use ED's electronic processes and develop a system to identify and resolve discrepancies in Title IV information received by various institutional offices. The IHE must also refer cases of Title IV student fraud or criminal misconduct to ED's Office of Inspector General for resolution, and it must provide all enrolled and prospective students financial aid counseling. Finally, the IHE must have an adequate internal system of checks and balances that includes dividing the functions of authorizing payments and disbursing funds between two separate offices. Institutions are required to have a capable staff member to administer Title IV programs and coordinate those programs with other aid received by students. This person must also have an adequate number of qualified staff to assist with aid administration. Before receiving Title IV funds, an IHE must certify that neither it nor its employees have been debarred or suspended by a federal agency; similar limitations apply to lenders, loan servicers, and third-party servicers. Relating to indicators of student success, an institution must have satisfactory academic progress (SAP) standards for students receiving Title IV funds. In general, IHEs must develop SAP standards that establish a minimum grade point average (or its equivalent) for students and a maximum time frame in which students must complete their educational programs. A student who fails to meet the SAP requirements becomes ineligible to receive Title IV funds. Also related to student success indicators, an institution that seeks to participate in Title IV programs for the first time may not have an undergraduate withdrawal rate for regular students that is greater than 33% during its most recently completed award year. An institution may be deemed administratively incapable if it has a high cohort default rate (CDR). In general, the CDR is the number of an IHE's federal loan recipients who enter repayment in a given fiscal year (the cohort fiscal year) and who default within a certain period of time after entering repayment (cohort default period; CDP), divided by the total number of borrowers who entered repayment in the cohort fiscal year. Since 2014, ED has used a three-year CDP in calculating an institution's CDR. An IHE will be found administratively incapable if one of the following conditions is met: 1. an institution's CDR is greater than 40% in one year for loans made under the FFEL and Direct Loans programs; 2. an institution's CDR is 30% or greater for each of the three most recent fiscal years for loans made under the FFEL and Direct Loans programs; or 3. an institution's CDR is 15% or greater in any single year for loans made under the Federal Perkins Loan Program. When an IHE is determined to be administratively incapable due to a high CDR, it may become ineligible to participate in the Direct Loan, Pell Grant, and/or Perkins Loan programs (but not other Title IV programs). ED may grant provisional certification for up to three years to an institution that would be deemed administratively capable except for its high cohort default rates. If an institution is seeking initial certification, ED can grant it up to one year of provisional certification. ED can also grant an institution provisional certification for up to three years if ED is determining the IHE's administrative capacity and financial responsibility for the first time, if the IHE has experienced a partial or total change in ownership, or if ED determines that the administrative or financial condition of the IHE may hinder its ability to meet its financial responsibilities. Additionally, if an accrediting agency loses its ED recognition, any institution that was accredited by that agency may continue to participate in Title IV programs for up to 18 months after ED's withdrawal of recognition. To ensure that an institution is conforming to eligibility requirements, ED can conduct program reviews. During a program review, ED evaluates an institution's compliance with Title IV requirements and identifies actions the IHE must take to correct any problem(s). Review priority is given to those institutions with high cohort default rates; IHEs with significant fluctuations in Pell Grant awards or Direct Loan volume that are not accounted for by changes in programs offered; IHEs that are reported to have deficiencies or financial aid problems by their state or accrediting agency; IHEs with high annual dropout rates; and IHEs determined by ED to pose a significant risk of failing to comply with the administrative capability or financial responsibility requirements. If, during a review, ED determines that an institution is not administratively capable or financially responsible or is violating Title IV program rules, ED may grant it provisional certification, take corrective actions, or impose sanctions. ED has the authority to impose a variety of sanctions and corrective actions on an institution that violates Title IV program rules, a Program Participation Agreement (discussed later in this report) or any other agreement made under the laws or regulations, or if it substantially misrepresents the nature of its educational programs, financial charges, or graduates' employability. Sanctions include fines, limitations, suspensions, emergency actions, and terminations. ED can also sanction third-party servicers performing tasks related to the institution's Title IV programs. ED may impose several types of sanctions on institutions for statutory and regulatory violations, including fines, limitations, and suspensions. ED can fine an institution up to $55,907 for each statutory or regulatory violation it commits, depending on the size of the IHE and the seriousness of the violation. Under a limitation, ED imposes specific conditions or restrictions on an institution related to its administration of Title IV funds. A limitation lasts for at least 12 months, and if an institution fails to abide by the limitation, ED may initiate a termination proceeding. Finally, under a suspension, an institution is not allowed to participate in Title IV programs for up to 60 days. Each of these sanctions may require an institution to take corrective actions as well, which may include repaying illegally used funds or making payments to eligible students from the IHE's own funds. ED can take emergency action to withhold Title IV funds from an institution if it receives reliable information that an IHE is violating applicable laws or regulations, agreements, or limitations. ED must determine that the institution is misusing federal funds, that immediate action is necessary to stop misuses, and that the potential losses outweigh the importance of using established procedures for limitation, suspension, or termination. An emergency action suspends an institution's participation in Title IV programs and prohibits it from disbursing such funds. Typically, the emergency action may not last more than 30 days. The final action ED can take is the termination of an institution's participation in Title IV programs. Generally, an institution that has had its participation terminated cannot reapply to be reinstated for at least 18 months. To request reinstatement, an institution must submit a fully completed application to ED and demonstrate that it has corrected the violation(s) for which its participation was terminated. ED may then approve, approve subject to limitations, or deny the institution's request. Several other requirements affect institutional eligibility for Title IV programs. Some of these requirements include institution Program Participation Agreements, which include provisions related to incentive compensation and campus crime reporting requirements; return of Title IV funds; and distance education. The failure to meet the requirements for any of these may result in the loss of Title IV eligibility or other sanctions. HEA Section 487 specifies that each institution wanting to participate in Title IV student aid programs is required to have a current Program Participation Agreement (PPA). A PPA is a document in which the institution agrees to comply with the laws, regulations, and policies applicable to the Title IV programs; it applies to an IHE's branch campuses and locations that meet Title IV requirements, as well as its main campus. It also lists all of the Title IV programs in which the IHE is eligible to participate, the date on which the PPA expires, and the date on which the IHE must reapply for participation. By signing a PPA, an institution agrees that it will act as a fiduciary responsible for properly administering Title IV funds, will not charge students a processing fee to determine a student's eligibility for such funds, and will establish and maintain administrative and fiscal procedures to ensure the proper administration of Title IV programs. The PPA reiterates many provisions required for institutional eligibility and ED certification discussed earlier in this report and contains several additional notable requirements that may affect an IHE's Title IV eligibility, which are described below. Along with the general participation requirements with which an institution must comply, a PPA may also contain institution-specific requirements. As part of their PPAs, domestic and foreign proprietary IHEs must agree to derive at least 10% of their revenue from non-Title IV funds (i.e., no more than 90% of their revenue can come from Title IV funds). This is known as the 90/10 rule. Examples of non-Title IV funds include private education loans and some military and veterans' benefits, such as benefits provided under the Post-9/11 GI Bill program. If an IHE violates the 90/10 rule in one year, it does not immediately lose its Title IV eligibility. Rather, it is placed on a provisional eligibility status for two years. If the IHE violates the 90/10 rule for two consecutive years, it loses its eligibility for at least two years. In a PPA, an IHE must agree it will not provide any commission or incentive compensation to individuals based directly or indirectly on their success in enrolling students or the enrolled students' obtaining financial aid; however, some exceptions apply to this general rule. For instance, IHEs can provide incentive compensation to individuals for the recruitment of foreign students who are ineligible to receive Title IV funds or they can provide incentive compensation through a profit-sharing plan. The ban on incentive compensation only applies to the activities of securing enrollment (recruitment) and securing financial aid. Other activities are not banned, and ED draws a distinction between activities that involve directly working with individual students and policy-level determinations that affect recruitment and financial aid awards. For instance, an individual who is responsible for contacting potential student applicants or assisting students in filling out an enrollment application cannot receive incentive compensation, but an individual who conducts marketing activities, such as the broad dissemination of informational brochures or the collection of contact information, can receive incentive compensation. HEA Section 485(f), referred to as the Clery Act, requires domestic Title IV participating IHEs (1) to report to ED campus crime statistics and (2) establish and disseminate campus safety and security policies. Both the campus crime statistics and campus safety and security policies must be compiled and disseminated to current and prospective students and employees in an IHE's annual security report (ASR). Campus crime statistics required to be reported to ED and included in an ASR include data on the occurrence on campus of a range of offenses specified in statute, including murder, burglary, robbery, domestic violence, rape, and other forms of sexual violence. In addition to campus crime statistics, ASRs must include statements of campus safety and security policies regarding, for example, procedures and facilities for students and others to report criminal actions or other emergencies occurring on campus and an IHE's response to such reports; security and access to campus facilities; campus law enforcement, including the law enforcement authority of campus security personnel, and the working relationship between campus security personnel and state and local law enforcement; programs designed to inform students and employees about the prevention of crimes; and the possession, use, and sale of alcoholic beverages and illegal drugs; enforcement of state underage drinking laws; enforcement of federal and state drug laws; and any drug or alcohol abuse education programs required under the HEA. An ASR must also include statements of policies specifically relating to incidence of domestic and sexual violence. For example, an ASR must include statements of policy regarding programs to prevent such incidents; procedures a victim should follow if such an incident as occurred; procedures an IHE will follow once such an incident has been reported and procedures for institutional disciplinary actions in cases of alleged incidents (including a statement of the standard of evidence that will be used in any school proceeding arising from the incident report); and possible sanctions and protective measures that an IHE may impose following a final determination in an institutional proceeding regarding such incidences. The Clery Act prohibits the Secretary of Education from requiring IHEs to adopt particular policies, procedures, or practices; and prohibits retaliation against anyone exercising his or her rights or responsibilities under the act. HEA Section 484B specifies that when a Title IV aid recipient withdraws from an IHE before the end of the payment or enrollment period for which funds were disbursed, Title IV funds must be returned to ED according to a statutorily prescribed schedule. In general, when a student withdraws from an IHE, an IHE first determines the portion of Title IV aid considered to be \"earned\" by the student while enrolled and the portion considered to be \"unearned.\" Unearned aid must be returned to ED. Up to the 60% point of a payment or enrollment period, unearned funds must be returned on a pro rata schedule. After the 60% point of a payment or enrollment period, the total amount of funds awarded is considered to have been earned by the student and no funds are required to be returned. Whether an IHE and/or the student is required to return the funds to ED depends on a variety of circumstances, including whether Title IV funds have been applied directly to a student's institutional charges. Unearned funds must be returned to their respective programs in a specified order, with loans being returned first, followed by Pell Grants, and then other Title IV aid. In some instances, a student may have earned more aid than has been disbursed, and the difference is disbursed to the student after the student withdraws. Generally, distance education and correspondence education refers to educational instruction with a separation in time, place, or both between the student and instructor. It is a way in which institutions can increase student access to postsecondary education by offering alternatives to traditional on-campus instruction. Recently, due to the greater availability of new technologies, there has been substantial growth in the amount and types of courses institutions offer. Section 103(7)(A) and (B) of the HEA and the accompanying regulations define distance education as instruction that uses \"(1) the internet; (2) one-way and two-way transmissions through open broadcast, closed circuit, cable, microwave, broadband lines, fiber optics, satellite, or wireless communications devices; [or] ... (3) audio conferencing\" to deliver instruction to students separated from the instructor. A course taught through a video cassette, DVD, or CD-ROM is considered a distance education course if one of the above-mentioned technologies is used to support student-instructor interaction. Regardless of the technology used, \"regular and substantive interaction between the students and the instructor\" must be ensured. Correspondence courses are expressly excluded from the definition of distance education. A correspondence course is one for which an institution provides instructional materials and exams for students who do not physically attend classes at the IHE, but does not include those courses that are delivered with \"regular and substantive interaction between the students and the instructor\" via one of the above-described technologies. In 1992, partially in response to cases of some correspondence institutions' fraudulent and abusive practices used to attract unqualified students to enroll in programs of poor or questionable quality, Congress incorporated provisions referred to as the \"50% rules\" into the HEA. The rules affected both the eligibility of institutions offering correspondence courses and their students' eligibility for Title IV aid. In general, under the rules, an institution is ineligible for Title IV aid if more than 50% of its courses are offered by correspondence, or if 50% or more of its students are enrolled in correspondence courses. As discussed earlier in this report, rules promulgated in 2016 would have required an IHE offering postsecondary distance or correspondence education in a state in which it is not physically located to meet any state authorization requirements within that state. Under the regulations, an IHE could meet this requirement if it participates in a state authorization reciprocity agreement. These regulations were scheduled to become effective July 1, 2018. However, on July 3, 2018 (and effective June 29, 2018), the Secretary of Education issued a final rule delaying the implementation of these requirements until July 1, 2020. The distinction between distance education and traditional instruction is also important for the purposes of Title IV program eligibility. Distance education programs provided by domestic IHEs are eligible for Title IV participation if they have been accredited by an accrediting agency recognized by ED to evaluate distance education programs. A program offered by a foreign IHE, in whole or in part, through distance education (including telecommunications) or correspondence is ineligible for Title IV participation.", "summary": "Title IV of the Higher Education Act (HEA) authorizes programs that provide financial assistance to students to assist them in obtaining a postsecondary education at certain institutions of higher education (IHEs). These IHEs include public, private nonprofit, and proprietary institutions. For students attending such institutions to be able to receive Title IV assistance, an institution must meet basic criteria, including offering at least one eligible program of education (e.g., programs leading to a degree or preparing a student for gainful employment in a recognized occupation). In addition, an IHE must satisfy the program integrity triad, under which it must be licensed or otherwise legally authorized to operate in the state in which it is physically located, accredited or preaccredited by an agency recognized for that purpose by the Department of Education (ED), and certified by ED as eligible to participate in Title IV programs. These requirements are intended to provide a balance between consumer protection, quality assurance, and oversight and compliance in postsecondary education providers participating in Title IV student aid programs. An IHE must also fulfill a variety of other related requirements, including those that relate to institutional recruiting practices, student policies and procedures, and the administration of the Title IV student aid programs. Finally, additional criteria may apply to an institution depending on its control or the type of educational programs it offers. For example, proprietary institutions must meet HEA requirements that are otherwise inapplicable to public and private nonprofit institutions, including deriving at least 10% of their revenues from non-Title IV funds (also known as the 90/10 rule). While an institution is ineligible to participate in Title IV programs if more than 50% of its courses are offered by correspondence or if 50% or more of its students are enrolled in correspondence courses. This report first describes the types of institutions eligible to participate in Title IV programs and discusses the program integrity triad. It then discusses additional issues related to institutional eligibility, including program participations agreements, required campus safety policies and crime reporting, and distance and correspondence education.", "document_type": "crs"}
{"report": "S ince the 1970s, policymakers have increasingly used the tax code to promote energy policy goals. Long-term energy policy goals include providing a secure supply of energy, providing energy at a low cost, and ensuring that energy production and consumption is consistent with environmental objectives. A range of federal policies, including various research and development programs, mandates, and direct financial support such as tax incentives or loan guarantees, promotes various energy policy objectives. This report focuses on tax incentives that support the production of or investment in various energy resources. Through the mid-2000s, the majority of revenue losses associated with energy tax incentives were from provisions benefiting fossil fuels. At present, the balance has shifted, such that the bulk of federal revenue losses associated with energy tax provisions are from incentives for renewable energy production and investment. While there has been growth in the amount of energy from renewable resources, the majority of domestic energy produced continues to be from fossil energy resources. This has raised questions regarding the value of energy tax incentives relative to production and the relative subsidization of various energy resources. Although the numbers in this report may be useful for policymakers evaluating the current status of energy tax policy, it is important to understand the limitations of this analysis. This report evaluates energy production relative to the value of current energy tax expenditures. It does not, however, seek to analyze whether the current system of energy tax incentives is economically efficient, effective, or otherwise consistent with broader energy policy objectives. Further, analysis in this report does not include information on federal spending on energy that is not linked to the tax code. The following sections estimate the value of tax incentives relative to the level of energy produced using fossil and renewable energy resources. Before proceeding with the analysis, some limitations are outlined. The analysis itself requires quantification of energy production and energy tax incentives. Once data on energy production and energy tax incentives have been presented, the value of energy tax incentives can be evaluated relative to current levels of energy production. The analysis below provides a broad comparison of the relative tax support for fossil fuels as compared with the relative support for renewables. Various data limitations prevent a precise analysis of the amount of subsidy per unit of production across different energy resources. Limitations associated with this type of analysis include the following: Current-year tax incentives may not directly support current-year production . Many of the tax incentives available for energy resources are designed to encourage investment, rather than production. For example, the expensing of intangible drilling costs (IDCs) for oil and gas provides an incentive to invest in capital equipment and exploration. Although the ability to expense IDCs does not directly support current production of crude oil and natural gas, such subsidies are expected to increase long-run supply. Differing levels of federal financial support may or may not reflect underlying policy rationales . Various policy rationales may exist for federal interventions in energy markets. Interventions may be designed to achieve various economic, social, or other policy objectives. Although analysis of federal financial support per unit of energy production may help inform the policy debate, it does not directly consider why various energy sources may receive different levels of federal financial support. Tax expenditures are estimates . The tax expenditure data provided by the Joint Committee on Taxation (JCT) are estimates of federal revenue losses associated with specific provisions. These estimates do not provide information on actual federal revenue losses, nor do these estimates reflect the amount of revenue that would be raised should the provision be eliminated. Additionally, the JCT advises that tax expenditures across provisions not be summed, due to interaction effects. Tax expenditure data are not specific to energy source . Many tax incentives are available to a variety of energy resources. For example, the tax expenditure associated with the expensing of IDCs does not distinguish between revenue losses associated with natural gas versus those associated with oil. The tax expenditure for five-year accelerated depreciation also does not specify how much of the benefit accrues to various eligible technologies, such as wind and solar. A number of tax provisions that support energy are not energy specific . The U.S. energy sector benefits from a number of tax provisions that are not targeted at energy. For example, the production activities deduction (Section 199), before being repealed in the 2017 tax act ( P.L. 115-97 ), benefited all domestic manufacturers. For the purposes of the Section 199 deduction, oil and gas extraction was considered a domestic manufacturing activity. Certain energy-related activities may also benefit from other tax incentives that are available to non-energy industries, such as the ability to issue tax-exempt debt, the ability to structure as a master limited partnership, or tax incentives designed to promote other activities, such as research and development. The Energy Information Administration (EIA) provides annual data on U.S. primary energy production. EIA defines primary energy as energy that exists in a naturally occurring form, before being converted into an end-use product. For example, coal is considered primary energy, which is typically combusted to create steam and then electricity. This report relies on 2017 data on U.S. primary energy production (see Table 1 ). In 2017, most primary energy was produced using fossil fuels. Natural gas was the largest source of primary energy production, accounting for 32.0% of primary energy produced. Crude oil accounted for 22.1% of U.S. primary energy production in 2017, and coal accounted for 17.7%. Taken together, fossil energy sources were used for 77.7% of 2017 primary energy production. The remaining U.S. primary energy production is attributable to nuclear electric and renewable energy resources. Overall, 9.5% of 2017 U.S. primary energy was produced as nuclear electric energy. Renewables (including hydroelectric power) constituted 12.8% of 2017 U.S. primary energy production. Biomass was the largest source of primary production among the renewables in 2017, accounting for 5.9% of overall primary energy production and 46.1% of renewable energy production. This was followed by hydroelectric power at 3.1% and wind energy at 2.7% of primary energy production. Solar energy and geothermal energy were responsible for 0.9% and 0.2%, respectively, of 2017 primary energy production (see Table 1 ). Primary energy produced using biomass can be further categorized as biomass being used to produce biofuels (e.g., ethanol) and biomass being used to generate biopower. Of the 5.2 quadrillion Btu of energy produced using biomass, about 2.3 quadrillion Btu was used in the production of biofuels. The tax code supports the energy sector by providing a number of targeted tax incentives, or tax incentives only available for the energy industry. In addition to targeted tax incentives, the energy sector may also benefit from a number of broader tax provisions that are available for energy- and non-energy-related taxpayers. These broader tax incentives are not included in the analysis, since tax expenditure estimates do not indicate how much of the revenue loss associated with these generally available provisions is associated with energy-related activities. Joint Committee on Taxation (JCT) tax expenditure estimates are used to tabulate federal revenue losses associated with energy tax provisions. The tax expenditure estimates provided by the JCT are forecasted revenue losses. These revenue losses are not reestimated on the basis of actual economic conditions. Thus, revenue losses presented below are projected, as opposed to actual revenue losses. The JCT advises that individual tax expenditures cannot be simply summed to estimate the aggregate revenue loss from multiple tax provisions. This is because of interaction effects. When the revenue loss associated with a specific tax provision is estimated, the estimate is made assuming that there are no changes in other provisions or in taxpayer behavior. When individual tax expenditures are summed, the interaction effects may lead to different revenue loss estimates. Consequently, aggregate tax expenditure estimates, derived from summing the estimated revenue effects of individual tax expenditure provisions, are unlikely to reflect the actual change in federal receipts associated with removing various tax provisions. Thus, total tax expenditure figures presented below are an estimate of federal revenue losses associated with energy tax provisions, and should not be interpreted as actual federal revenue losses. Table 2 provides information on revenue losses and outlays associated with energy-related tax provisions in FY2017 and FY2018. The FY2017 figures are included to facilitate comparison with the primary energy production using different energy resources. Since the tax code was substantially changed beginning in 2018, FY2018 tax expenditures are also included. In 2017, the tax code provided an estimated $17.8 billion in support for the energy sector. More than one-third of the 2017 total, $6.4 billion, was due to the renewable energy production tax credit (PTC) and investment tax credit (ITC). Nine different provisions supporting fossil fuels had an estimated cost of $4.6 billion, collectively, in 2017. This declined to $3.2 billion for 2018. While the tax legislation enacted late in 2017 ( P.L. 115-97 ) did not directly change fossil-fuel-related tax provisions, other changes, including the reduced corporate tax rate, lowered the tax savings associated with various tax incentives for fossil fuels. While the majority of federal tax-related support for energy in 2017 can be attributed to either fossil fuels or renewables, provisions supporting energy efficiency, alternative technology vehicles, and nuclear energy also resulted in forgone revenue in 2017 and 2018. Table 3 provides a side-by-side comparison of fossil fuel and renewable production, along with the cost of tax incentives supporting fossil fuel and renewable energy resources. During 2017, 77.7% of U.S. primary energy production could be attributed to fossil fuel sources. Of the federal tax support targeted to energy in 2017, an estimated 25.8% of the value went toward supporting fossil fuels. During 2017, an estimated 12.8% of U.S. primary source energy was produced using renewable resources. Of the federal tax support targeted to energy in 2017, an estimated 65.2% went toward supporting renewables. Table 3 also contains information on subcategories of renewables, specifically (1) renewables excluding hydro and (2) renewables excluding biofuels. Excluding hydro might be instructive since current energy production is the result of past investment decisions, some of which may not have benefited from targeted tax incentives. Thus, it may not always be appropriate to compare the current value of tax incentives to current levels of energy production. For example, energy generated using hydroelectric power technologies might be excluded from the renewables category, as most existing hydro-generating capacity was installed before the early 1990s. Thus, there is no current federal tax benefit for most electricity currently generated using hydropower. Further, with many of the best hydro sites already developed, there is limited potential for growth in conventional hydropower capacity. There is, however, potential for development of additional electricity-generating capacity through smaller hydro projects that could substantially increase U.S. hydroelectric generation capacity. Excluding hydro from the renewables category, or removing an energy resource where the development was not likely supported by current renewables-related tax incentives, nonhydro renewables accounted for 9.7% of 2017 primary energy production (see Table 3 ). During 2017, certain tax expenditures for renewable energy did, however, benefit taxpayers developing and operating hydroelectric power facilities. Certain hydroelectric installations, including efficiency improvements or capacity additions at existing facilities, may be eligible for the renewable energy production tax credit (PTC). Given that hydro is supported by 2017 tax expenditures, one could also argue that for the purposes of the comparison being made in this report, hydro should be included in the renewables category. It may also be instructive to consider incentives that generally support renewable electricity separately from those that support biofuels. Of the estimated $17.8 billion in energy tax provisions in 2017, an estimated $2.1 billion, or 11.8%, went toward supporting biofuels. Excluding tax incentives for biofuels, 53.4% of energy-related tax incentives in 2017 were attributable to renewables. In other words, excluding biofuels from the analysis reduces the share of tax incentives attributable to renewables from 65.2% to 53.4% (see Table 3 ). Excluding biofuels from the analysis also reduces renewables' share of primary energy production. When biofuels are excluded, the share of primary energy produced in 2017 attributable to renewables falls by 2.7 percentage points, from 12.8% to 10.1% ( Table 3 ). In 2017, 9.5% of primary energy produced was from nuclear resources. The one tax benefit for nuclear with a positive tax expenditure in 2017 was the special tax rate for nuclear decommissioning reserve funds. At $0.2 billion in 2017, this was 1.7% of the value of all tax expenditures for energy included in the analysis. Like many other energy-related tax expenditures, the special tax rate for nuclear decommissioning reserve funds is not directly related to current energy production. Instead, this provision reduces the cost of investing in nuclear energy by taxing income from nuclear decommissioning reserve funds at a preferred rate (a flat rate of 20%). Over time, there have been substantial shifts in the proportion of energy-related tax expenditures benefiting different types of energy resources. Figure 1 illustrates the projected value of energy-related tax incentives since 1978. Energy tax provisions are categorized as primarily benefiting fossil fuels, renewables, renewable fuels, efficiency, vehicles, or some other energy purpose. Until the mid-2000s, most of the value of energy-related tax incentives supported fossil fuels. Starting in the mid-2000s, the cost of energy-related tax preferences supporting renewables increased. Some of this increase was attributable to provisions supporting renewable fuels, which have since expired. From the 1980s through 2011, most of the tax-related federal financial support for renewable energy was for renewable fuels, mainly alcohol fuels (i.e., ethanol). The tax credits for alcohol fuels (including ethanol) expired at the end of 2011. Starting in 2008, the federal government incurred outlays associated with excise tax credits for biodiesel and renewable diesel. Under current law, the tax credits for biodiesel and renewable diesel expired at the end of 2017. Thus, after FY2018 (which includes the end of calendar year 2017), there are no projected costs associated with tax incentives for renewable fuels. Expired tax incentives may be extended, however, as part of the \"tax extenders.\" Beginning in the mid-2000s, the cost of energy tax incentives for renewables began to increase. Beginning in 2009, the Section 1603 grants in lieu of tax credits contributed to increased costs associated with tax-related benefits for renewable energy. Through 2014, Section 1603 grants in lieu of tax credits exceeded tax expenditures associated with the production tax credit (PTC) and investment tax credit (ITC) combined. The Section 1603 grant option is not available for projects that began construction after December 31, 2011. However, since grants are paid out when construction is completed and eligible property is placed in service, outlays under the Section 1603 program continued through 2017. Tax expenditures for the ITC and PTC have increased substantially in recent years. As a result of the extensions for wind and solar enacted in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), ITC and PTC tax expenditures are projected to remain stable for several years. Under current law, the PTC will not be available to projects that begin construction after December 31, 2019. However, since the PTC is available for the first 10 years of renewable electricity production, and the expiration date is a start-of-construction deadline as opposed to a placed-in-service deadline, PTC tax expenditures will continue after the provision expires. The ITC for solar, currently 30%, is scheduled to decline to 26% for property beginning construction in 2020, and 22% for property beginning construction in 2021, before returning to the permanent rate of 10% after 2021. Thus, absent additional policy changes, the higher tax expenditures associated with the PTC and ITC are expected to be temporary. Tax expenditures for tax incentives supporting energy efficiency increased in the late 2000s, but subsequently declined. Most of the increase in revenue losses for efficiency-related provisions was associated with tax incentives for homeowners investing in certain energy-efficient property. The primary tax incentive for energy efficiency improvements to existing homes expired at the end of 2017. Extension of expired tax incentives for energy efficiency would increase the cost of energy efficiency-related tax incentives. As was noted above, many energy-related tax provisions, particularly those that support renewables, are temporary. Over time as these incentives phase out, tax expenditures associated with these provisions will decline. This process may take some time. For the PTC, for example, the credit is claimed during the first 10 years of qualifying production. It is possible that qualifying production begins after the December 31, 2019, start-of-construction expiration date, meaning that tax expenditures for the PTC are expected to continue for at least the next decade. U.S. Department of the Treasury tax expenditure estimates can be used to illustrate how expiring provisions affect the distribution of energy-related tax expenditures over time (see Figure 2 ). Treasury and JCT tax expenditure estimates differ in a number of ways. The Treasury provides tax expenditures over an 11-year budget window. The JCT uses a shorter 5-year window. The JCT and Treasury also use different methodologies when preparing tax expenditure estimates, and have different classifications as to what provisions constitute tax expenditures. Thus, the tax expenditure estimates prepared by each entity are not directly comparable. However, looking at Treasury tax expenditure estimates over time can illustrate broader trends regarding which types of energy are receiving tax-related benefits. In 2018, according to Treasury's tax expenditure estimates, tax expenditures supporting renewables totaled an estimated $8.4 billion. By 2028, that number is expected to decline to $3.5 billion. The decline can be explained by the reduced tax expenditures for the PTC and ITC as these provisions phase down or expire. Treasury estimates that tax expenditures supporting fossil fuels will total $2.2 billion in 2018. The Treasury anticipates this number increasing over time, reaching an estimated $3.8 billion by 2028. The Treasury estimates that the revenue losses associated with most permanent oil-and-gas tax incentives will increase over the next decade. The energy sector is supported by an array of tax incentives reflecting diverse policy objectives. As a result, the amount of tax-related federal financial support for energy differs across energy sectors, and is not necessarily proportional to the amount of energy production from various energy sectors. The total amount of energy-related tax incentives is projected to decline under current law, although extensions of expired energy tax provisions, or other modifications to energy tax provisions, could change these figures. Over the longer term, the amount of tax-related support for the energy sector could decline if provisions are allowed to expire as scheduled under current law. ", "summary": "The U.S. tax code supports the energy sector by providing a number of targeted tax incentives, or tax incentives available only for the energy industry. Some policymakers have expressed interest in understanding how energy tax benefits are distributed across different domestic energy resources. For example, what percentage of energy-related tax benefits support fossil fuels (or support renewables)? How much domestic energy is produced using fossil fuels (or produced using renewables)? And how do these figures compare? In 2017, the value of federal tax-related support for the energy sector was estimated to be $17.8 billion. Of this, $4.6 billion (25.8%) can be attributed to tax incentives supporting fossil fuels. Tax-related support for renewables was an estimated $11.6 billion in 2017 (or 65.2% of total tax-related support for energy). The remaining tax-related support went toward nuclear energy, efficiency measures, and alternative technology vehicles. While the cost of tax incentives for renewables has exceeded the cost of incentives for fossil fuels in recent years, the majority of energy produced in the United States continues to be derived from fossil fuels. In 2017, fossil fuels accounted for 77.7% of U.S. primary energy production. The remaining primary energy production is attributable to renewable energy and nuclear electric resources, with shares of 12.8% and 9.5%, respectively. The balance of energy-related tax incentives has changed over time, and it is projected to continue to change, under current law, in coming years. Factors that have contributed to recent changes in the balance of energy-related tax incentives include the following: Increased tax expenditures for solar and wind. Tax expenditures associated with the energy credit for solar and the production tax credit for wind have increased substantially in recent years. Following the long-term extensions of these temporary tax benefits provided in the Consolidated Appropriations Act, 2016 (P.L. 114-113), tax expenditures for the solar energy credit are projected to remain stable for several years, before decreasing in the longer term. The expiration of tax-related support for renewable fuels. Tax-related support for renewable fuels declined substantially after the tax credits for alcohol fuels were allowed to expire at the end of 2011. Other fuels-related incentives also expired at the end of 2017 (although these may be extended as part of the \"tax extenders\"). Decline then increase in tax expenditures for fossil fuels. Tax expenditures for fossil fuels declined between 2017 and 2018, an indirect effect of the 2017 tax act (P.L. 115-97). Over time, however, the tax expenditures associated with permanent fossil fuels tax incentives are estimated to increase. One starting point for evaluating energy tax policy may be a calculation of subsidy relative to production level. However, a complete policy analysis might consider why the level of federal financial support differs across various energy technologies. Tax incentives for energy may support various environmental or economic objectives. For example, tax incentives designed to reduce reliance on imported petroleum may be consistent with energy security goals. Tax incentives that promote renewable energy resources may be consistent with certain environmental objectives.", "document_type": "crs"}
{"report": "The U.S.-Mexico bilateral economic relationship is of key interest to the United States because of Mexico's proximity, the extensive cultural and economic ties between the two countries, and the strong economic relationship with Mexico under the North American Free Trade Agreement (NAFTA). The United States and Mexico share many common economic interests related to trade, investment, and regulatory cooperation. The two countries share a 2,000-mile border and have extensive interconnections through the Gulf of Mexico. There are also links through migration, tourism, environmental issues, health concerns, and family and cultural relationships. Congress has maintained an active interest on issues related to NAFTA renegotiations and the recently signed U.S.-Mexico-Canada trade agreement (USMCA); U.S.-Mexico trade and investment relations; Mexico's economic reform measures, especially in the energy sector; the Mexican 2018 presidential elections; U.S.-Mexico border management; and other related issues. Congress has also maintained an interest in the ramifications of possible withdrawal from NAFTA. Congress may also take an interest in the economic policies of Mexico's new President Andrés Manuel López Obrador, the populist leader of the National Regeneration Movement (MORENA) party, who won the July 2018 election with 53% of the vote. MORENA's coalition also won majorities in both chambers of the legislature that convened on September 1, 2018. Former President Enrique Peña Nieto successfully drove numerous economic and political reforms that included, among other measures, opening up the energy sector to private investment, countering monopolistic practices, passing fiscal reform, making farmers more productive, and increasing infrastructure investment. This report provides an overview and background information regarding U.S.-Mexico economic relations, trade trends, the Mexican economy, NAFTA, the proposed USMCA, and trade issues between the United States and Mexico. It will be updated as events warrant. Mexico is one of the United States' most important trading partners, ranking second among U.S. export markets and third in total U.S. trade (imports plus exports). Under NAFTA, the United States and Mexico have developed significant economic ties. Trade between the two countries has more than tripled since the agreement entered into force in 1994. Through NAFTA, the United States, Mexico, and Canada form one of the world's largest free trade areas, with about one-third of the world's total gross domestic product (GDP). Mexico has the second-largest economy in Latin America after Brazil. It has a population of 129 million people, making it the most populous Spanish-speaking country in the world and the third-most populous country in the Western Hemisphere (after the United States and Brazil). Mexico's gross domestic product (GDP) was an estimated $1.15 trillion in 2017, about 6% of U.S. GDP of $19.39 trillion. Measured in terms of purchasing power parity (PPP), Mexican GDP was considerably higher, $2.35 trillion, or about 12% of U.S. GDP. Per capita income in Mexico is significantly lower than in the United States. In 2017, Mexico's per capita GDP in purchasing power parity was $17,743, or 30% of U.S. per capita GDP of $59,381 (see Table 1 ). Ten years earlier, in 2007, Mexico's per capita GDP in purchasing power parity was $13,995, or 29% of the U.S. amount of $48,006. Although there is a notable income disparity with the United States, Mexico's per capita GDP is relatively high by global standards, and falls within the World Bank's upper-middle income category. Mexico's economy relies heavily on the United States as an export market. The value of exports equaled 37% of Mexico's GDP in 2017, as shown in Table 1 , and approximately 80% of Mexico's exports were headed to the United States. The United States is, by far, Mexico's leading partner in merchandise trade, while Mexico is the United States' third-largest trade partner after China and Canada. Mexico ranks second among U.S. export markets after Canada, and is the third-leading supplier of U.S. imports. U.S. merchandise trade with Mexico increased rapidly since NAFTA entered into force in January 1994. U.S. exports to Mexico increased from $41.6 billion in 1993 (the year prior to NAFTA's entry into force) to $265.0 billion in 2018. U.S. imports from Mexico increased from $39.9 billion in 1993 to $346.5 billion in 2018. The merchandise trade balance with Mexico went from a surplus of $1.7 billion in 1993 to a widening deficit that reached $74.3 billion in 2007 and then increased to an all-time high of $81.5 billion in 2018. The United States had a surplus in services trade with Mexico of $7.4 billion in 2017 (latest available data), as shown in Figure 1 . U.S. services exports to Mexico totaled $32.8 billion in 2017, up from $14.2 billion in 1999, while imports were valued at $25.5 billion in 2017, up from $9.7 billion in 1999. Leading U.S. merchandise imports from Mexico in 2018 included motor vehicles ($64.5 billion or 19% of imports from Mexico), motor vehicle parts ($49.8 billion or 14% of imports), computer equipment ($26.6 billion or 8% of imports), oil and gas ($14.5 billion or 4% of imports), and electrical equipment ($11.9 billion or 3% of imports), as shown in Table 2 . U.S. imports from Mexico increased from $295.7 billion in 2014 to $346.5 billion in 2018. Oil and gas imports from Mexico have decreased sharply, dropping from $39.6 billion in 2011 to $7.6 billion in 2016, partially due to a decrease in oil production but also because of the drop in the price of oil around the world. In 2017, U.S. oil and gas imports from Mexico increased to $14.5 billion. Leading U.S. exports to Mexico in 2018 consisted of petroleum and coal products ($28.8 billion or 11% of exports to Mexico), motor vehicle parts ($20.2 billion or 8% of exports), computer equipment ($17.4 billion or 7% of exports), semiconductors and other electronic components ($13.1 billion or 5% of exports), and basic chemicals ($10.3 billion or 4% of exports), as shown in Table 3 . Foreign direct investment (FDI) has been an integral part of the economic relationship between the United States and Mexico since NAFTA implementation. The United States is the largest source of FDI in Mexico. The stock of U.S. FDI increased from $17.0 billion in 1994 to a high of $109.7 billion in 2017. While the stock Mexican FDI in the United States is much lower, it has increased significantly since NAFTA, from $2.1 billion in 1994 to $18.0 billion in 2017 (see Figure 2 ). The liberalization of Mexico's restrictions on foreign investment in the late 1980s and the early 1990s played an important role in attracting U.S. investment to Mexico. Up until the mid-1980s, Mexico had a very protective policy that restricted foreign investment and controlled the exchange rate to encourage domestic growth, affecting the entire industrial sector. A sharp shift in policy in the late 1980s that included market opening measures and economic reforms helped bring in a steady increase of FDI flows. These reforms were locked in through NAFTA provisions on foreign investment and resulted in increased investor confidence. NAFTA investment provisions give North American investors from the United States, Mexico, or Canada nondiscriminatory treatment of their investments as well as investor protection. NAFTA may have encouraged U.S. FDI in Mexico by increasing investor confidence, but much of the growth may have occurred anyway because Mexico likely would have continued to liberalize its foreign investment laws with or without the agreement. Many economists and other observers have credited NAFTA with helping U.S. manufacturing industries, especially the U.S. auto industry, become more globally competitive through the development of supply chains. Much of the increase in U.S.-Mexico trade, for example, can be attributed to specialization as manufacturing and assembly plants have reoriented to take advantage of economies of scale. As a result, supply chains have been increasingly crossing national boundaries as manufacturing work is performed wherever it is most efficient. A reduction in tariffs in a given sector not only affects prices in that sector but also in industries that purchase intermediate inputs from that sector. Some analysts believe that the importance of these direct and indirect effects is often overlooked. They suggest that these linkages offer important trade and welfare gains from free trade agreements and that ignoring these input-output linkages could underestimate potential trade gains. A significant portion of merchandise trade between the United States and Mexico occurs in the context of production sharing as manufacturers in each country work together to create goods. Trade expansion has resulted in the creation of vertical supply relationships, especially along the U.S.-Mexico border. The flow of intermediate inputs produced in the United States and exported to Mexico and the return flow of finished products greatly increased the importance of the U.S.-Mexico border region as a production site. U.S. manufacturing industries, including automotive, electronics, appliances, and machinery, all rely on the assistance of Mexican manufacturers. In the auto sector, for example, trade expansion has resulted in the creation of vertical supply relationships throughout North America. The flow of auto merchandise trade between the United States and Mexico greatly increased the importance of North America as a production site for automobiles. According to industry experts, the North American auto industry has \"multilayered connections\" between U.S. and Mexican suppliers and assembly points. A Wall Street Journal article describes how an automobile produced in the United States has tens of thousands of parts that come from multiple producers in different countries and travel back and forth across borders several times. A company producing seats for automobiles, for example, incorporates components from four different U.S. states and four Mexican locations into products produced in the Midwest. These products are then sold to major car makers. The place where final assembly of a product is assembled may have little bearing on where its components are made. The integration of the North American auto industry is reflected in the percentage of U.S. auto imports that enter the United States duty-free under NAFTA. In 2017, 99% of U.S. motor vehicle imports from Mexico entered the United States duty-free under NAFTA, compared to 76% of motor vehicle parts. Only 56% of total U.S. imports from Mexico received duty-free treatment under NAFTA; the remainder entered the United States under other programs. Mexico's export-oriented assembly plants, a majority of which have U.S. parent companies, are closely linked to U.S.-Mexico trade in various labor-intensive industries such as auto parts and electronic goods. Foreign-owned assembly plants, which originated under Mexico's maquiladora program in the 1960s, account for a substantial share of Mexico's trade with the United States. These export processing plants use extensive amounts of imported content to produce final goods and export the majority of their production to the U.S. market. NAFTA, along with a combination of other factors, contributed to a significant increase in Mexican export-oriented assembly plants, such as maquiladoras, after its entry into force. Other factors that contributed to manufacturing growth and integration include trade liberalization, wages, and economic conditions, both in the United States and Mexico. Although some provisions in NAFTA may have encouraged growth in certain sectors, manufacturing activity likely has been more influenced by the strength of the U.S. economy and relative wages in Mexico. Private industry groups state that these operations help U.S. companies remain competitive in the world marketplace by producing goods at competitive prices. In addition, the proximity of Mexico to the United States allows production to have a higher degree of U.S. content in the final product, which could help sustain jobs in the United States. Critics of these types of operations argue that they have a negative effect on the economy because they take jobs from the United States and help depress the wages of low-skilled U.S. workers. Changes in Mexican regulations on export-oriented industries after NAFTA merged the maquiladora industry and Mexican domestic assembly-for-export plants into one program called the Maquiladora Manufacturing Industry and Export Services (IMMEX). NAFTA rules for the maquiladora industry were implemented in two phases, with the first phase covering the period 1994-2000, and the second phase starting in 2001. During the initial phase, NAFTA regulations continued to allow the maquiladora industry to import products duty-free into Mexico, regardless of the country of origin of the products. This phase also allowed maquiladora operations to increase maquiladora sales into the Mexican domestic market. Phase II made a significant change to the industry in that the new North American rules of origin determined duty-free status for U.S. and Canadian products exported to Mexico for maquiladoras. In 2001, the North American rules of origin determined the duty-free status for a given import and replaced the previous special tariff provisions that applied only to maquiladora operations. The initial maquiladora program ceased to exist and the same trade rules applied to all assembly operations in Mexico. The elimination of duty-free imports by maquiladoras from non-NAFTA countries under NAFTA caused some initial uncertainty for the companies with maquiladora operations. Maquiladoras that were importing from third countries, such as Japan or China, would have to pay applicable tariffs on those goods under the new rules. Remittances are one of the three highest sources of foreign currency for Mexico, along with foreign direct investment and tourism. Most remittances to Mexico come from workers in the United States who send money back to their relatives. Mexico receives the largest amount of remittances in Latin America. Remittances are often a stable financial flow for some regions as workers in the United States make efforts to send money to family members. Most go to southern states where poverty levels are high. Women tend to be the primary recipients of the money, and usually use it for basic needs such as rent, food, medicine, and/or utilities. The year 2017 was a record-breaking one for remittances to Mexico, with a total of $28.8 billion, which represents an increase of 7.5% over the 2016 level. In 2016, annual remittances to Mexico increased by 8.7% to a record high at the time of $27.0 billion (see Figure 3 ). Some analysts contend that the increase is partially due to the sharp devaluation of the Mexican peso after the election of President Donald Trump, while others state that it is a shock reaction to President Trump's threat to block money transfers to Mexico to pay for a border wall. The weaker value of the peso has negatively affected its purchasing power in Mexico, especially among the poor, and many families have had to rely more on money sent from their relatives in the United States. Since the late 1990s, remittances have been an important source of income for many Mexicans. Between 1996 and 2007, remittances increased from $4.2 billion to $26.1 billion, an increase of over 500%, and then declined by 15.2%, in 2009, likely due to the global financial crisis. The growth rate in remittances has been related to the frequency of sending, exchange rate fluctuations, migration, and employment in the United States. Electronic transfers and money orders are the most popular methods to send money to Mexico. Worker remittance flows to Mexico have an important impact on the Mexican economy, in some regions more than others. Some studies report that in southern Mexican states, remittances mostly or completely cover general consumption and/or housing. A significant portion of the money received by households goes for food, clothing, health care, and other household expenses. Money also may be used for capital invested in microenterprises throughout urban Mexico. The economic impact of remittance flows is concentrated in the poorer states of Mexico. The United States has engaged in bilateral efforts with Mexico, and also with Canada, to address issues related to border security, trade facilitation, economic competitiveness, regulatory cooperation, and energy integration. The United States and Mexico launched the High Level Economic Dialogue (HLED) on September 20, 2013, to help advance U.S.-Mexico economic and commercial priorities that are central to promoting mutual economic growth, job creation, and global competitiveness. The initiative is led at the Cabinet level and is co-chaired by the U.S. Department of State, Department of Commerce, the Office of the United States Trade Representative, and their Mexican counterparts. Major goals of the HLED are meant to build on, but not duplicate, a range of existing bilateral dialogues and working groups. The United States and Mexico aim to promote competitiveness in specific sectors such as transportation, telecommunications, and energy, as well as to promote greater two-way investment. The HLED is organized around three broad pillars, including 1. Promoting competitiveness and connectivity; 2. Fostering economic growth, productivity, and innovation; and 3. Partnering for regional and global leadership. The HLED is also meant to explore ways to promote entrepreneurship, stimulate innovation, and encourage the development of human capital to meet the needs of the 21 st century economy, as well as examine initiatives to strengthen economic development along the U.S.-Mexico border region. Another bilateral effort is the U.S.-Mexico High-Level Regulatory Cooperation Council (HLRCC), launched in May 2010. The official work plan was released by the two governments on February 28, 2012, and focuses on regulatory cooperation in numerous sectoral issues including food safety, e-certification for plants and plant products, commercial motor vehicle safety standards and procedures, nanotechnology, e-health, and offshore oil and gas development standards. U.S. agencies involved in regulatory cooperation include the U.S. Food and Drug Administration, Department of Agriculture, Department of Transportation, Office of Management and Budget, Department of the Interior, and Occupational Safety and Health Administration. The United States and Mexico are engaged in a bilateral border management initiative under the Declaration Concerning 21 st Century Border Management that was announced in 2010. This initiative is a bilateral effort to manage the 2,000-mile U.S.-Mexico border through the following cooperative efforts: expediting legitimate trade and travel; enhancing public safety; managing security risks; engaging border communities; and setting policies to address possible statutory, regulatory, and/or infrastructure changes that would enable the two countries to improve collaboration. With respect to port infrastructure, the initiative specifies expediting legitimate commerce and travel through investments in personnel, technology, and infrastructure. The two countries established a Bilateral Executive Steering Committee (ESC) composed of representatives from the appropriate federal government departments and offices from both the United States and Mexico. For the United States, this includes representatives from the Departments of State, Homeland Security, Justice, Transportation, Agriculture, Commerce, Interior, and Defense, and the Office of the United States Trade Representative. For Mexico, it includes representatives from the Secretariats of Foreign Relations, Interior, Finance and Public Credit, Economy, Public Security, Communications and Transportation, Agriculture, and the Office of the Attorney General of the Republic. Since 2005, the United States, Canada, and Mexico have made efforts to increase cooperation on economic and security issues through various endeavors. President George W. Bush and President Barack Obama, with the leaders of Mexico and Canada, participated in trilateral summits known as the North American Leaders' Summits (NALS). The first NALS took place in March 2005, in Waco, Texas, and was followed by numerous trilateral summits in Mexico, Canada, and the United States. President Obama participated in the last summit on June 29, 2016, in Ottawa, Canada, with an agenda focused on economic competitiveness, climate change, clean energy, the environment, regional and global cooperation, security, and defense. President Donald Trump has not indicated whether his Administration plans to continue NALS efforts. The United States has pursued other efforts with Canada and Mexico, many of which have built upon the accomplishments of the working groups formed under the NALS. These efforts include the North American Competitiveness Work Plan (NACW) and the North American Competitiveness and Innovation Conference (NACIC). Proponents of North American competitiveness and security cooperation view the initiatives as constructive to addressing issues of mutual interest and benefit for all three countries, especially in the areas of North American regionalism; inclusive and shared prosperity; innovation and education; energy and climate change; citizen security; and regional, global, and stakeholder outreach to Central America and other countries in the Western Hemisphere. Some critics believe that the summits and other trilateral efforts are not substantive enough and that North American leaders should make their meetings more consequential with follow-up mechanisms that are more action oriented. Others contend that the efforts do not go far enough in including human rights issues or discussions on drug-related violence in Mexico. Mexico's economy is closely linked to the U.S. economy due to the strong trade and investment ties between the two countries. Economic growth has been slow in recent years. The forecast over the next few years projects economic growth of above 2%, a positive outlook, according to some economists, given external constraints but falling short of what the country needs to make a significant cut in poverty and to create jobs. Over the past 30 years, Mexico has had a low economic growth record with an average growth rate of 2.6%. Mexico's GDP grew by 2.4% in 2017 and 2.1% in 2016. The country benefitted from important structural reforms initiated in the early 1990s, but events such as the U.S. recession of 2001 and the global economic downturn of 2009 adversely affected the economy and offset the government's efforts to improve macroeconomic management. The OECD outlook for Mexico for 2018 states that there are some encouraging signs for potential economic growth, including improvements in fiscal performance, responsible and reliable monetary policy to curb inflation, growth in manufacturing exports and inflows of foreign direct investment, and positive developments due to government reforms in telecommunications, energy, labor, education, and other structural reforms. According to the OECD, full implementation of Mexico's structural reforms could add as much as 1% to the annual growth rate of the Mexican economy. While these achievements may be positive, Mexico continues to face significant challenges in regard to alleviating poverty, decreasing informality, strengthening judicial institutions, addressing corruption, and increasing labor productivity. Trends in Mexico's GDP growth generally follow U.S. economic trends, as shown in Figure 4 , but with higher fluctuations. Mexico's economy is highly dependent on manufacturing exports to the United States, as approximately 80% of Mexico's exports are destined for the United States. The country's outlook will likely remain closely tied to that of the United States, despite Mexico's efforts to diversify trade. Part of the government's reform efforts are aimed at making economic growth more inclusive, reducing income inequality, improving the quality of education, and reducing informality and poverty. Mexico has a large informal sector that is estimated to account for a considerable portion of total employment. Estimates on the size of the informal labor sector vary widely, with some sources estimating that the informal sector accounts for about one-third of total employment and others estimating it to be as high as two-thirds of the workforce. Under Mexico's legal framework, workers in the formal sector are defined as salaried workers employed by a firm that registers them with the government and are covered by Mexico's social security programs. Informal sector workers are defined as nonsalaried workers who are usually self-employed. These workers have various degrees of entitlement to other social protection programs. Salaried workers can be employed by industry, such as construction, agriculture, or services. Nonsalaried employees are defined by social marginalization or exclusion and can be defined by various categories. These workers may include agricultural producers; seamstresses and tailors; artisans; street vendors; individuals who wash cars on the street; and other professions. Many workers in the informal sector suffer from poverty, which has been one of Mexico's more serious and pressing economic problems for many years. Although the government has made progress in poverty reduction efforts, poverty continues to be a basic challenge for the country's development. The Mexican government's efforts to alleviate poverty have focused on conditional cash transfer programs. The Prospera (previously called Oportunidades ) program seeks to not only alleviate the immediate effects of poverty through cash and in-kind transfers, but to break the cycle of poverty by improving nutrition and health standards among poor families and increasing educational attainment. Prospera has provided cash transfers to the poorest 6.9 million Mexican households located in localities from all 32 Mexican states. It has been replicated in about two dozen countries throughout the world. The program provides cash transfers to families in poverty who demonstrate that they regularly attend medical appointments and can certify that children are attending school. The government also provides educational cash transfers to participating families. Programs also provide nutrition support to pregnant and nursing women and malnourished children. Some economists cite the informal sector as a hindrance to the country's economic development. Other experts contend that Mexico's social programs benefitting the informal sector have led to increases in informal employment. For years, numerous political analysts and economists have agreed that Mexico needs significant political and economic structural reforms to improve its potential for long-term economic growth. President Peña Nieto was successful in breaking the gridlock in the Mexican government and passing reform measures meant to stimulate economic growth. The OECD stated that the main challenge for the government is to ensure full implementation of the reforms and that it needed to progress further in other key areas. According to the OECD, Mexico must improve administrative capacity at all levels of government and reform its judicial institutions. Such actions would have a strong potential to boost living standards substantially, stimulate economic growth, and reduce income inequality. The OECD stated that issues regarding human rights conditions, rule of law, and corruption were also challenges that needed to be addressed by the government, as they too affect economic conditions and living standards. According to a 2014 study by the McKinsey Global Institute, Mexico had successfully created globally competitive industries in some sectors, but not in others. The study described a \"dualistic\" nature of the Mexican economy in which there was a modern Mexico with sophisticated automotive and aerospace factories, multinationals that could compete in global markets, and universities that graduated high numbers of engineers. In contrast, the other part of Mexico, consisting of smaller, more traditional firms, was technologically backward, unproductive, and operated outside the formal economy. The study stated that three decades of economic reforms had failed to raise the overall GDP growth. Government measures to privatize industries, liberalize trade, and welcome foreign investment created a side to the economy that was highly productive in which numerous industries had flourished, but the reforms had not yet been successful in touching other sectors of the economy where traditional enterprises had not modernized, informality was rising, and productivity was plunging. Mexico's long-term economic outlook depends largely on the energy sector. The country is one of the largest oil producers in the world, but its oil production has steadily decreased since 2005 as a result of natural production declines. According to industry experts, Mexico has the potential resources to support a long-term recovery in total production, primarily in the Gulf of Mexico. However, the country does not have the technical capability or financial means to develop potential deepwater projects or shale oil deposits in the north. Reversing these trends is a goal of the 2013 historic constitutional energy reforms sought by President Peña Nieto and enacted by the Mexican Congress. The reforms opened Mexico's energy sector to production-sharing contracts with private and foreign investors while keeping the ownership of Mexico's hydrocarbons under state control. They will likely expand U.S.-Mexico energy trade and provide opportunities for U.S. companies involved in the hydrocarbons sector, as well as infrastructure and other oil field services. The North American Free Trade Agreement (NAFTA) excluded foreign investment in Mexico's energy sector. Under NAFTA's energy chapter, parties confirmed respect for their constitutions, which was of particular importance for Mexico and its 1917 Constitution establishing Mexican national ownership of all hydrocarbons resources and restrictions of private or foreign participation in its energy sector. Under NAFTA, Mexico also reserved the right to provide electricity as a domestic public service. In the NAFTA renegotiations (see section below on \" NAFTA Renegotiation and the U.S.-Mexico-Canada Agreement (USMCA) \"), the United States sought to preserve and strengthen investment, market access, and state-owned enterprise disciplines benefitting energy production and transmission. In addition, the negotiating objectives stated that the United States supports North American energy security and independence, and promotes the continuation of energy market-opening reforms. Mexico specifically called for a modernization of NAFTA's energy provisions. The USMCA retains recognition of Mexico's national ownership of all hydrocarbons. Some observers contend that much is at stake for the North American oil and gas industry in the bilateral economic relationship, especially in regard to Mexico as an energy market for the United States. Although Mexico was traditionally a net exporter of hydrocarbons to the United States, the United States had a trade surplus in 2016 of almost $10 billion in energy trade as a result of declining Mexican oil production, lower oil prices, and rising U.S. natural gas and refined oil exports to Mexico. The growth in U.S. exports is largely due to Mexico's reforms, which have driven investment in new natural gas-powered electricity generation and the retail gasoline market. Some observers contend that dispute settlement mechanisms in NAFTA and the proposed USMCA will defend the interests of the U.S. government and U.S. companies doing business in Mexico. They argue that the dispute settlement provisions and the investment chapter of the agreement will help protect U.S. multibillion-dollar investments in Mexico. They argue that a weakening of NAFTA's dispute settlement provisions would result in less protection of U.S. investors in Mexico and less investor confidence. Mexico has had a growing commitment to trade integration and liberalization through the formation of FTAs since the 1990s, and its trade policy is among the most open in the world. Mexico's pursuit of FTAs with other countries not only provides domestic economic benefits, but could also potentially reduce its economic dependence on the United States. Mexico signed the Trans-Pacific Partnership (TPP), a negotiated regional free trade agreement (FTA), but which has not entered into force, among the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. In January 2017, the United States gave notice to the other TPP signatories that it does not intend to ratify the agreement. On March 8, 2018, Mexico and the 10 remaining signatories of the TPP signed the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). The CPTPP parties announced the outlines of the agreement in November 2017 and concluded the negotiations in January 2018. The CPTPP, which will enact much of the proposed TPP without the participation of the United States, is set to take effect on December 30, 2018. It requires ratification by 6 of the 11 signatories to become effective. As of October 31, 2018, Mexico, Canada, Australia, Japan, New Zealand, and Singapore had ratified the agreement. Upon entry into force, it will reduce and eliminate tariff and nontariff barriers on goods, services, and agriculture. It could enhance the links Mexico already has through its FTAs with other signatories—Canada, Chile, Japan, and Peru—and expand its trade relationship with other countries, including Australia, Brunei, Malaysia, New Zealand, Singapore, and Vietnam. Mexico has a total of 11 free trade agreements involving 46 countries. These include agreements with most countries in the Western Hemisphere, including the United States and Canada under NAFTA, Chile, Colombia, Costa Rica, Nicaragua, Peru, Guatemala, El Salvador, and Honduras. In addition, Mexico has negotiated FTAs outside of the Western Hemisphere and entered into agreements with Israel, Japan, and the European Union. Given the perception of a rising protectionist sentiment in the United States, some regional experts have suggested that Mexico is seeking to negotiate new FTAs more aggressively and deepen existing ones. In addition to being a party to the CPTPP, Mexico and the EU renegotiated their FTA and modernized it with updated provisions. Discussions included government procurement, energy trade, IPR protection, rules of origin, and small- and medium-sized businesses. The new agreement is expected to replace a previous agreement between Mexico and the EU from 2000. The agreement is expected to allow almost all goods, including agricultural products, to move between Europe and Mexico duty-free. Mexico is also a party to the Pacific Alliance, a regional integration initiative formed by Chile, Colombia, Mexico, and Peru in 2011. Its main purpose is to form a regional trading bloc and stronger ties with the Asia-Pacific region. The Alliance has a larger scope than free trade agreements, including the free movement of people and measures to integrate the stock markets of member countries. NAFTA has been in effect since January 1994. Prior to NAFTA, Mexico was already liberalizing its protectionist trade and investment policies that had been in place for decades. The restrictive trade regime began after Mexico's revolutionary period, and remained until the early to mid-1980s, when it began to shift to a more open, export-oriented economy. For Mexico, an FTA with the United States represented a way to lock in trade liberalization reforms, attract greater flows of foreign investment, and spur economic growth. For the United States, NAFTA represented an opportunity to expand the growing export market to the south, but it also represented a political opportunity to improve the relationship with Mexico. On November 30, 2018, the United States, Canada, and Mexico signed the proposed USMCA. Concluded on September 30, 2018, USMCA would revise and modernize NAFTA. The proposed USMCA would have to be approved by Congress and ratified by Mexico and Canada before entering into force. Pursuant to trade promotion authority (TPA), the preliminary agreement with Mexico was notified to Congress on August 31, 2018, in part to allow for the signing of the agreement prior to Mexico's president-elect Andreas Manuel Lopez Obrador taking office on December 1, 2018. TPA contains certain notification and reporting requirements that likely will push any consideration of implementing legislation into the 116 th Congress. USMCA, comprised of 34 chapters and 12 side letters, retains most of NAFTA's chapters, making notable changes to market access provisions for autos and agriculture products, and to rules such as investment, government procurement, and intellectual property rights (IPR). New issues, such as digital trade, state-owned enterprises, anticorruption, and currency misalignment, are also addressed. NAFTA renegotiation provided opportunities to modernize the 1994 agreement by addressing issues not covered in the original text and updating others. Many U.S. manufacturers, services providers, and agricultural producers opposed efforts to withdraw from NAFTA and asked the Trump Administration to \"do no harm\" in the negotiations because they have much to lose if the United States pulls out of the agreement. Contentious issues in the negotiations reportedly included auto rules of origin, a \"sunset clause\" related to the trade deficit, dispute settlement provisions, and agriculture provisions on seasonal produce. President Trump stated on December 1, 2018, that he intends to notify Mexico and Canada that he intends to withdraw from NAFTA with a notice of six months. A NAFTA withdrawal by the United States prior to congressional approval of the proposed USMCA would have significant implications going forward for U.S. trade policy and U.S.-Mexico economic relations. Numerous think tanks and economists have written about the possible economic consequences of U.S. withdrawal from NAFTA: An analysis by the Peterson Institute for International Economics (PIIE) finds that a withdrawal from NAFTA would cost the United States 187,000 jobs that rely on exports to Mexico and Canada. These job losses would occur over a period of one to three years. By comparison, according to the study, between 2013 and 2015, 7.4 million U.S. workers were displaced or lost their jobs involuntarily due to companies shutting down or moving elsewhere globally. The study notes that the most affected states would be Arkansas, Kentucky, Mississippi, and Indiana. The most affected sectors would be autos, agriculture, and nonauto manufacturing. A 2017 study by ImpactEcon, an economic analysis consulting company, estimates that if NAFTA were to terminate, real GDP, trade, investment, and employment in all three NAFTA countries would decline. The study estimates U.S. job losses of between 256,000 and 1.2 million in three to five years, with about 95,000 forced to relocate to other sectors. Canadian and Mexican employment of low-skilled workers would decline by 125,000 and 951,000 respectively. The authors of the study estimate a decline in U.S. GDP of 0.64% (over $100 billion). The Coalition of Services Industries (CSI) argues that NAFTA continues to be a remarkable success for U.S. services providers, creating a vast market for U.S. services providers, such as telecommunications and financial services. CSI estimates that if NAFTA is terminated, the United States risks losing $88 billion in annual U.S. services exports to Canada and Mexico, which support 587,000 high-paying U.S. jobs. Opponents of NAFTA argue that it has resulted in thousands of lost jobs to Mexico and has put downward pressure on U.S. wages. A study by the Economic Policy Institute estimates that, as of 2010, U.S. trade deficits with Mexico had displaced 682,900 U.S. jobs. Others contend that workers need more effective protections in trade agreements, with stronger enforcement mechanisms. For example, the AFL-CIO states that current U.S. FTAs have no deadlines or criteria for pursuing sanctions against a trade partner that is not enforcing its FTA commitments. The AFL-CIO contends that the language tabled by the United States in the renegotiations does nothing to improve long-standing shortcomings in NAFTA. Canada and Mexico likely would maintain NAFTA between themselves if the United States were to withdraw. U.S.-Canada trade could be governed either by the Canada-U.S. free trade agreement (CUSFTA), which entered into force in 1989 (suspended since the advent of NAFTA), or by the baseline commitments common to both countries as members of the World Trade Organization. If CUSFTA remains in effect, the United States and Canada would continue to exchange goods duty free and would continue to adhere to many provisions of the agreement common to both CUSFTA and NAFTA. Some commitments not included in the CUSFTA, such as intellectual property rights, would continue as baseline obligations in the WTO. It is unclear whether CUSFTA would remain in effect as its continuance would require the assent of both parties. The United States and Mexico have had a number of trade disputes over the years, many of which have been resolved. These issues have involved trade in sugar, country of origin labeling, tomato imports from Mexico, dolphin-safe tuna labeling, and NAFTA trucking provisions. The United States and Mexico are currently in a trade dispute over U.S. actions to impose tariffs on imports of steel and aluminum. The United States claims its actions are due to national security concerns; however, Mexico contends that U.S. tariffs are meant to protect domestic industries from import competition and are inconsistent with the World Trade Organization (WTO) Safeguard Agreement. On March 8, 2018, President Trump issued two proclamations imposing tariffs on U.S. imports of certain steel and aluminum products, respectively, using presidential powers granted under Section 232 of the Trade Expansion Act of 1962. Section 232 authorizes the President to impose restrictions on certain imports based on an affirmative determination by the Department of Commerce that the targeted import products threaten to impair national security. The proclamations outlined the President's decisions to impose tariffs of 25% on steel and 10% on aluminum imports, with some flexibility on the application of tariffs by country. On March 22, the President issued proclamations temporarily excluding Mexico, Canada, and numerous other countries, giving a deadline of May 1, by which time each trading partner had to negotiate an alternative means to remove the \"threatened impairment to the national security by import\" for steel and aluminum in order to maintain the exemption. After the temporary exception expired on May 31, 2018, the United States began imposing a 25% duty on steel imports and a 10% duty on aluminum imports from Mexico and Canada. The conclusion of the proposed USMCA did not resolve or address the Section 232 tariffs on imported steel and aluminum from Canada and Mexico. The three parties continue to discuss the tariffs, which some analysts believe could result in quotas on imports of Mexican and Canadian steel and aluminum. In response to the U.S. action, Mexico and several other major partners initiated dispute settlement proceedings and announced their intention to retaliate against U.S. exports. Mexico announced it would impose retaliatory tariffs on 71 U.S. products, covering an estimated $3.7 billion worth of trade, as shown in Table 4 . Mexico is a major U.S. partner for both steel and aluminum trade. In 2017, Mexico ranked second, after Canada, among U.S. trading partners for both steel and aluminum. U.S.-Mexico trade in steel and aluminum totaled $10.3 billion in 2017, as shown in Table 5 . The United States and Mexico are currently involved in a trade dispute under the WTO regarding U.S. dolphin-safe labeling provisions and tuna imports from Mexico. Mexico has long argued that U.S. labeling rules for dolphin-safe tuna negatively affect its tuna exports to the United States. The United States contends that Mexico's use of nets and chasing dolphins to find large schools of tuna is harmful to dolphins. The most recent development in the long trade battle took place on April 25, 2017, when a WTO arbitrator determined that Mexico is entitled to levy trade restrictions on imports from the United States worth $163.2 million per year. The arbitrator made the decision based on a U.S. action from 2013 (see section below on \" WTO Tuna Dispute Proceedings \"), but did not make a compliance judgment on the U.S. 2016 dolphin-safe tuna labeling rule that the United States has said brings it into compliance with the WTO's previous rulings. The issue relates to U.S. labeling provisions that establish conditions under which tuna products may voluntarily be labeled as \"dolphin-safe.\" Products may not be labeled as dolphin-safe if the tuna is caught by means that include intentionally encircling dolphins with nets. According to the Office of the United States Trade Representative (USTR), some Mexican fishing vessels use this method when fishing for tuna. Mexico asserts that U.S. tuna labeling provisions deny Mexican tuna effective access to the U.S. market. The government of Mexico requested the United States to broaden its dolphin-safe rules to include Mexico's long-standing tuna fishing technique. It cites statistics showing that modern equipment has greatly reduced dolphin mortality from its height in the 1960s and that its ships carry independent observers who can verify dolphin safety. However, some environmental groups that monitor the tuna industry dispute these claims, stating that even if no dolphins are killed during the chasing and netting, some are wounded and later die. In other cases, they argue, young dolphin calves may not be able to keep pace and are separated from their mothers and later die. These groups contend that if the United States changes its labeling requirements, cans of Mexican tuna could be labeled as \"dolphin-safe\" when it is not. However, an industry spokesperson representing three major tuna processors in the United States, including StarKist, Bumblebee, and Chicken of the Sea, contends that U.S. companies would probably not buy Mexican tuna even if it is labeled as dolphin-safe because these companies \"would not be in the market for tuna that is not caught in the dolphin-safe manner.\" The tuna labeling dispute began over 10 years ago. In April 2000, the Clinton Administration lifted an embargo on Mexican tuna under relaxed standards for a dolphin-safe label. This was in accordance with internationally agreed procedures and U.S. legislation passed in 1997 that encouraged the unharmed release of dolphins from nets. However, a federal judge in San Francisco ruled that the standards of the law had not been met, and the Federal Appeals Court in San Francisco sustained the ruling in July 2001. Under the Bush Administration, the Commerce Department ruled on December 31, 2002, that the dolphin-safe label may be applied if qualified observers certify that no dolphins were killed or seriously injured in the netting process. Environmental groups, however, filed a suit to block the modification. On April 10, 2003, the U.S. District Court for the Northern District of California enjoined the Commerce Department from modifying the standards for the dolphin-safe label. On August 9, 2004, the federal district court ruled against the Bush Administration's modification of the dolphin-safe standards and reinstated the original standards in the 1990 Dolphin Protection Consumer Information Act. That decision was appealed to the U.S. Ninth Circuit Court of Appeals, which ruled against the Administration in April 2007, finding that the Department of Commerce did not base its determination on scientific studies of the effects of Mexican tuna fishing on dolphins. In late October 2008, Mexico initiated WTO dispute proceedings against the United States, maintaining that U.S. requirements for Mexican tuna exporters prevent them from using the U.S. \"dolphin-safe\" label for its products. The United States requested that Mexico refrain from proceeding in the WTO and that the case be moved to the NAFTA dispute resolution mechanism. According to the USTR, however, Mexico \"blocked that process for settling this dispute.\" In September 2011, a WTO panel determined that the objectives of U.S. voluntary tuna labeling provisions were legitimate and that any adverse effects felt by Mexican tuna producers were the result of choices made by Mexico's own fishing fleet and canners. However, the panel also found U.S. labeling provisions to be \"more restrictive than necessary to achieve the objectives of the measures.\" The Obama Administration appealed the WTO ruling. On May 16, 2012, the WTO's Appellate Body overturned two key findings from the September 2011 WTO dispute panel. The Appellate Body found that U.S. tuna labeling requirements violate global trade rules because they treat imported tuna from Mexico less favorably than U.S. tuna. The Appellate Body also rejected Mexico's claim that U.S. tuna labeling requirements were more trade-restrictive than necessary to meet the U.S. objective of minimizing dolphin deaths. The United States had a deadline of July 13, 2013, to comply with the WTO dispute ruling. In July 2013, the United States issued a final rule amending certain dolphin-safe labelling requirements to bring it into compliance with the WTO labeling requirements. On November 14, 2013, Mexico requested the establishment of a WTO compliance panel. On April 16, 2014, the chair of the compliance panel announced that it expected to issue its final report to the parties by December 2014. In April 2015, the panel ruled against the United States when it issued its finding that the U.S. labeling modifications unfairly discriminated against Mexico's fishing industry. On November 2015, a WTO appellate body found for a fourth time that U.S. labeling rules aimed at preventing dolphin bycatch violate international trade obligations. The United States expressed concerns with this ruling and stated that the panel exceeded its authority by ruling on acts and measures that Mexico did not dispute or were never applied. On March 16, 2016, Mexico announced that it would ask the WTO to sanction $472.3 million in annual retaliatory tariffs against the United States for its failure to comply with the WTO ruling. The United States counterargued that Mexico could seek authorization to suspend concessions of $21.9 million. On March 22, 2016, the United States announced that it would revise its dolphin-safe label requirements on tuna products to comply with the WTO decision. The revised regulations sought to increase labeling rules for tuna caught by fishing vessels in all regions of the world, and not just those operating in the region where Mexican vessels operate. The new rules did not modify existing requirements that establish the method by which tuna is caught in order for it to be labeled \"dolphin-safe.\" The Humane Society International announced that it was pleased with U.S. actions to increase global dolphin protections. On December 19, 2014, the U.S. Department of Commerce (DOC) signed an agreement with the Government of Mexico suspending the U.S. countervailing duty (CVD) investigation of sugar imports from Mexico. The DOC signed a second agreement with Mexican sugar producers and exporters suspending an antidumping (AD) duty investigation on imports of Mexican sugar. The agreements suspending the investigations alter the nature of trade in sugar between Mexico and the United States by (1) imposing volume limits on U.S. sugar imports from Mexico and (2) setting minimum price levels on Mexican sugar. After the suspension agreement was announced, two U.S. sugar companies, Imperial Sugar Company and AmCane Sugar LLC, requested that the DOC continue the CVD and AD investigations on sugar imports from Mexico. The two companies filed separate submissions on January 16, 2015, claiming \"interested party\" status. The companies claimed they met the statutory standards to seek continuation of the probes. The submissions to the DOC followed requests to the ITC, by the same two companies, to review the two December 2014 suspension agreements. The ITC reviewed the sugar suspension agreements to determine whether they eliminate the injurious effect of sugar imports from Mexico. On March 19, 2015, the ITC upheld the agreement between the United States and Mexico that suspended the sugar investigations. Mexican Economy Minister Ildefonso Guajardo Villarreal praised the ITC decision, stating that it supported the Mexican government position. The dispute began on March 28, 2014, when the American Sugar Coalition and its members filed a petition requesting that the U.S. ITC and the DOC conduct an investigation, alleging that Mexico was dumping and subsidizing its sugar exports to the United States. The petitioners claimed that dumped and subsidized sugar exports from Mexico were harming U.S. sugar producers and workers. They claimed that Mexico's actions would cost the industry $1 billion in 2014. On April 18, 2014, the DOC announced the initiation of AD and CVD investigations of sugar imports from Mexico. On May 9, 2014, the ITC issued a preliminary report stating that there was a reasonable indication a U.S. industry was materially injured by imports of sugar from Mexico that were allegedly sold in the United States at less than fair value and allegedly subsidized by the Government of Mexico. In August 2014, the DOC announced in its preliminary ruling that Mexican sugar exported to the United States was being unfairly subsidized. Following the preliminary subsidy determination, the DOC stated that it would direct the U.S. Customs and Border Protection to collect cash deposits on imports of Mexican sugar. Based on the preliminary findings, the DOC imposed cumulative duties on U.S. imports of Mexican sugar, ranging from 2.99% to 17.01% under the CVD order. Additional duties of between 39.54% and 47.26% were imposed provisionally following the preliminary AD findings. The final determination in the two investigations was expected in 2015 and had not been issued when the suspension agreements were signed. The Sweetener Users Association (SUA), which represents beverage makers, confectioners, and other food companies, argues that the case is \"a diversionary tactic to distract from the real cause of distortion in the U.S. sugar market—the U.S. government's sugar program.\" It contends that between 2009 and 2012, U.S. sugar prices soared well above the world price because of the U.S. program, providing an incentive for sugar growers to increase production. According to the sugar users association, this resulted in a surplus of sugar and a return to lower sugar prices. The SUA has been a long-standing critic of the U.S. sugar program. In 2006, the United States and Mexico resolved a trade dispute involving sugar and high fructose corn syrup. The dispute involved a sugar side letter negotiated under NAFTA. Mexico argued that the side letter entitled it to ship net sugar surplus to the United States duty-free under NAFTA, while the United States argued that the sugar side letter limited Mexican shipments of sugar. In addition, Mexico complained that imports of high fructose corn syrup (HFCS) sweeteners from the United States constituted dumping. It imposed antidumping duties for some time, until NAFTA and WTO dispute resolution panels upheld U.S. claims that the Mexican government colluded with the Mexican sugar and sweetener industries to restrict HFCS imports from the United States. In late 2001, the Mexican Congress imposed a 20% tax on soft drinks made with corn syrup sweeteners to aid the ailing domestic cane sugar industry, and subsequently extended the tax annually despite U.S. objections. In 2004, the United States Trade Representative (USTR) initiated WTO dispute settlement proceedings against Mexico's HFCS tax, and following interim decisions, the WTO panel issued a final decision on October 7, 2005, essentially supporting the U.S. position. Mexico appealed this decision, and in March 2006, the WTO Appellate Body upheld its October 2005 ruling. In July 2006, the United States and Mexico agreed that Mexico would eliminate its tax on soft drinks made with corn sweeteners no later than January 31, 2007. The tax was repealed, effective January 1, 2007. The United States and Mexico reached a sweetener agreement in August 2006. Under the agreement, Mexico can export 500,000 metric tons of sugar duty-free to the United States from October 1, 2006, to December 31, 2007. The United States can export the same amount of HFCS duty-free to Mexico during that time. NAFTA provides for the free trade of sweeteners beginning January 1, 2008. The House and Senate sugar caucuses expressed objections to the agreement, questioning the Bush Administration's determination that Mexico is a net-surplus sugar producer to allow Mexican sugar duty-free access to the U.S. market. The United States was involved in a country-of-origin labeling (COOL) trade dispute under the World Trade Organization (WTO) with Canada and Mexico for several years, which has now been resolved. Mexican and Canadian meat producers claimed that U.S. mandatory COOL requirements for animal products discriminated against their products. They contended that the labeling requirements created an incentive for U.S. meat processors to use exclusively domestic animals because they forced processors to segregate animals born in Mexico or Canada from U.S.-born animals, which was very costly. They argued that the COOL requirement was an unfair barrier to trade. A WTO appellate panel in June 2013 ruled against the United States. The United States appealed the decision. On May 18, 2015, the WTO appellate body issued findings rejecting the U.S. arguments against the previous panel's findings. Mexico and Canada were considering imposing retaliatory tariffs on a wide variety of U.S. exports to Mexico, including fruits and vegetables, juices, meat products, dairy products, machinery, furniture and appliances, and others. The issue was resolved when the Consolidated Appropriations Act of 2016 ( P.L. 114-113 ) repealed mandatory COOL requirements for muscle cut beef and pork and ground beef and ground pork. USDA issued a final rule removing country-of-origin labeling requirements for these products. The rule took effect on March 2, 2016. The estimated economic benefits associated with the final rule are likely to be significant, according to the U.S. Department of Agriculture (USDA). According to USDA, the estimated benefits for producers, processors, wholesalers, and retailers of previously covered beef and pork products are as much as $1.8 billion in cost avoidance, though the incremental cost savings are likely to be less as affected firms had adjusted their operations. The dispute began on December 1, 2008, when Canada requested WTO consultations with the United States concerning certain mandatory labeling provisions required by the 2002 farm bill ( P.L. 107-171 ) as amended by the 2008 farm bill ( P.L. 110-246 ). On December 12, 2008, Mexico requested to join the consultations. U.S. labeling provisions include the obligation to inform consumers at the retail level of the country of origin in certain commodities, including beef and pork. USDA labeling rules for meat and meat products had been controversial. A number of livestock and food industry groups opposed COOL as costly and unnecessary. Canada and Mexico, the main livestock exporters to the United States, argued that COOL had a discriminatory trade-distorting impact by reducing the value and number of cattle and hogs shipped to the U.S. market, thus violating WTO trade commitments. Others, including some cattle and consumer groups, maintained that Americans want and deserve to know the origin of their foods. In November 2011, the WTO dispute settlement panel found that (1) COOL treated imported livestock less favorably than U.S. livestock and (2) it did not meet its objective to provide complete information to consumers on the origin of meat products. In March 2012, the United States appealed the WTO ruling. In June 2012, the WTO's Appellate Body upheld the finding that COOL treats imported livestock less favorably than domestic livestock and reversed the finding that it does not meet its objective to provide complete information to consumers. It could not determine if COOL was more trade restrictive than necessary. In order to meet a compliance deadline by the WTO, USDA issued a revised COOL rule on May 23, 2013, that required meat producers to specify on retail packaging where each animal was born, raised, and slaughtered, which prohibited the mixing of muscle cuts from different countries. Canada and Mexico challenged the 2013 labeling rules before a WTO compliance panel. The compliance panel sided with Canada and Mexico; the United States appealed the decision. The implementation of NAFTA trucking provisions was a major trade issue between the United States and Mexico for many years because the United States delayed its trucking commitments under NAFTA. NAFTA provided Mexican commercial trucks full access to four U.S.-border states in 1995 and full access throughout the United States in 2000. Mexican commercial trucks have authority under the agreement to operate in the United States, but they cannot operate between two points within the country. This means that they can haul cross-border loads but cannot haul loads that originate and end in the United States. The proposed USMCA would cap the number of Mexican-domiciled carriers that can receive U.S. operating authority and would continue the prohibition on Mexican-based carriers hauling freight between two points within the United States. Mexican carriers that already have authority under NAFTA to operate in the United States would continue to be allowed to operate in the United States. The United States delayed the implementation of NAFTA provisions because of safety concerns. The Mexican government objected to the delay and claimed that U.S. actions were a violation of U.S. commitments. A dispute resolution panel supported Mexico's position in February 2001. President Bush indicated a willingness to implement the provision, but the U.S. Congress required additional safety provisions in the FY2002 Department of Transportation Appropriations Act ( P.L. 107-87 ). The United States and Mexico cooperated to resolve the issue over the years and engaged in numerous talks regarding safety and operational issues. The United States had two pilot programs on cross-border trucking to help resolve the issue: the Bush Administration's pilot program of 2007 and the Obama Administration's program of 2011. A significant milestone in implementation of U.S. NAFTA commitments occurred on January 9, 2015, when the Department of Transportation's Federal Motor Carrier Safety Administration (FMCSA) announced that Mexican motor carriers would be allowed to conduct long-haul, cross-border trucking services in the United States. The International Brotherhood of Teamsters filed a lawsuit on March 20, 2015, in the Ninth Circuit U.S. Court of Appeals, seeking to halt FMCSA's move. On March 15, 2017, a three-judge panel heard the oral arguments of the legal challenge by the Teamsters, the Owner-Operator Independent Drivers Association, and two other organizations. These organizations argued that the FMCSA did not generate enough inspection data during the pilot program to properly make a determination about expanding the program. The Ninth Circuit Court of Appeals dismissed the lawsuit on June 29, 2017, stating that FMCSA has the law-given discretion to grant operating authority to Mexican carriers. On November 27, 2002, with safety inspectors and procedures in place, the Bush Administration began the process to open U.S. highways to Mexican truckers and buses. Environmental and labor groups went to court in early December to block the action. On January 16, 2003, the U.S. Court of Appeals for the Ninth Circuit ruled that full environmental impact statements were required for Mexican trucks to be allowed to operate on U.S. highways. The U.S. Supreme Court reversed that decision on June 7, 2004. In February 2007, the Bush Administration announced a pilot project to grant Mexican trucks from 100 transportation companies full access to U.S. highways. In September 2007, the Department of Transportation (DOT) launched a one-year pilot program to allow approved Mexican carriers beyond the 25-mile commercial zone in the border region, with a similar program allowing U.S. trucks to travel beyond Mexico's border and commercial zone. Over the 18 months that the program existed, 29 motor carriers from Mexico were granted operating authority in the United States. Two of these carriers dropped out of the program shortly after being accepted, while two others never sent trucks across the border. In total, 103 Mexican trucks were used by the carriers as part of the program. In the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ), signed into law in December 2007, Congress included a provision prohibiting the use of FY2008 funding for the establishment of the pilot program. However, the DOT determined that it could continue with the pilot program because it had already been established. In March 2008, the DOT issued an interim report on the cross-border trucking demonstration project to the Senate Committee on Commerce, Science, and Transportation. The report made three key observations: (1) the Federal Motor Carrier Safety Administration (FMCSA) planned to check every participating truck each time it crossed the border to ensure that it met safety standards; (2) there was less participation in the project than was expected; and (3) the FMCSA implemented methods to assess possible adverse safety impacts of the project and to enforce and monitor safety guidelines. In early August 2008, DOT announced that it would extend the pilot program for an additional two years. In opposition to this action, the House approved on September 9, 2008 (by a vote of 396 to 128), H.R. 6630 , a bill that would have prohibited DOT from granting Mexican trucks access to U.S. highways beyond the border and commercial zone. The bill also would have prohibited DOT from renewing such a program unless expressly authorized by Congress. No action was taken by the Senate on the measure. On March 11, 2009, the FY2009 Omnibus Appropriations Act ( P.L. 111-8 ) terminated the pilot program. The FY2010 Consolidated Appropriations Act, passed in December 2009 ( P.L. 111-117 ), did not preclude funds from being spent on a long-haul Mexican truck pilot program, provided that certain terms and conditions were satisfied. Numerous Members of Congress urged President Obama to find a resolution to the dispute in light of the effects that Mexico's retaliatory tariffs were having on U.S. producers (see section below on \" Obama Administration's 2011 Pilot Program \"). In response to the abrupt end of the pilot program, the Mexican government retaliated in 2009 by increasing duties on 90 U.S. products with a value of $2.4 billion in exports to Mexico. Mexico began imposing tariffs in March 2009 and, after reaching an understanding with the United States, eliminated them in two stages in 2011. The retaliatory tariffs ranged from 10% to 45% and covered a range of products that included fruit, vegetables, home appliances, consumer products, and paper. Subsequently, a group of 56 Members of the House of Representatives wrote to the then-United States Trade Representative, Ron Kirk, and DOT Secretary Ray LaHood requesting the Administration to resolve the trucking issue. The bipartisan group of Members stated that they wanted the issue to be resolved because the higher Mexican tariffs were having a \"devastating\" impact on local industries, especially in agriculture, and area economies in some states. One reported estimate stated that U.S. potato exports to Mexico had fallen 50% by value since the tariffs were imposed and that U.S. exporters were losing market share to Canada. A year after the initial 2009 list of retaliatory tariffs, the Mexican government revised the list of retaliatory tariffs to put more pressure on the United States to seek a settlement for the trucking dispute. The revised 2010 list added 26 products to and removed 16 products from the original list of 89, bringing the new total to 99 products from 43 states with a total export value of $2.6 billion. Products added to the list included several types of pork products, several types of cheeses, sweet corn, pistachios, oranges, grapefruits, apples, oats and grains, chewing gum, ketchup, and other products. The largest in terms of value were two categories of pork products, which had an estimated export value of $438 million in 2009. Products removed from the list included peanuts, dental floss, locks, and other products. The revised retaliatory tariffs were lower than the original tariffs and ranged from 5% to 25%. U.S. producers of fruits, pork, cheese, and other products that were bearing the cost of the retaliatory tariffs reacted strongly at the lack of progress in resolving the trucking issue and argued, both to the Obama Administration and to numerous Members of Congress, that they were potentially losing millions of dollars in sales as a result of this dispute. In March 2011, President Obama and Mexican President Calderón announced an agreement to resolve the dispute. By October 2011, Mexico had suspended all retaliatory tariffs on U.S. exports to Mexico. In January 2011, the Obama Administration presented an \"initial concept document\" to Congress and the Mexican government for a new long-haul trucking pilot program with numerous safety inspection requirements for Mexican carriers. It would put in place a new inspection and monitoring regime in which Mexican carriers would have to apply for long-haul operating authority. The project involved several thousand trucks and would eventually bring as many vehicles as are needed into the United States. The concept document outlined three sets of elements: 1. Pre-Operations Elements included an application process for Mexican carriers interested in applying for long-haul operations in the United States; a vetting process by the U.S. Department of Homeland Security and the Department of Justice; a safety audit of Mexican carriers applying for the program; documentation of Mexican commercial driver's license process to demonstrate comparability to the U.S. process; and evidence of financial responsibility (insurance) of the applicant. 2. Operations Elements included monitoring procedures with regular inspections and electronic monitoring of long-haul vehicles and drivers; follow-up review (first review) to ensure continued safe operation; compliance review (second review) upon which a participating carrier would be eligible for full operation authority; and FMCSA review that included insurance monitoring and drug and alcohol collection and testing facilities. 3. Transparency Elements included required Federal Register notices by the FMCSA; publically accessible website that provides information on participating carriers; establishment of a Federal Advisory Committee with representation from a diverse group of stakeholders; periodic reports to Congress; and requirements for DOT Office of the Inspector General reports to Congress. On July 6, 2011, the two countries signed a Memorandum of Understanding (MOU) to resolve the dispute over long-haul cross-border trucking. Within 10 days after signing of the MOU, Mexico suspended 50% of the retaliatory tariffs it had imposed on U.S. exports (see section below on Mexico's retaliatory tariffs). Mexico agreed to suspend the remainder of the tariffs within five days of the first Mexican trucking company receiving its U.S. operating authority. On October 21, 2011, Mexico suspended the remaining retaliatory tariffs. In February 2013, the United States and Mexico reached an agreement on cross-border trade in tomatoes, averting a potential trade war between the two countries. On March 4, 2013, the Department of Commerce (DOC) and the government of Mexico officially signed the agreement suspending the antidumping investigation on fresh tomatoes from Mexico. The dispute began on June 22, 2012, when a group of Florida tomato growers, who were backed by growers in other states, asked the DOC and the U.S. International Trade Commission to terminate an antidumping duty suspension pact on tomatoes from Mexico. The termination of the pact, which set a minimum reference price for Mexican tomatoes in the United States, would have effectively led to an antidumping investigation on Mexican tomatoes. Mexico's Ambassador to the United States at the time, Arturo Sarukhan, warned that such an action would damage the U.S.-Mexico trade agenda and bilateral trade relationship as a whole. He also stated that Mexico would use all resources at its disposal, including the possibility of retaliatory tariffs, to defend the interests of the Mexican tomato industry. The suspension pact dates back to 1996, when the DOC, under pressure from Florida tomato growers, filed an antidumping petition against Mexican tomato growers and began an investigation into whether they were dumping Mexican tomatoes on the U.S. market at below-market prices. NAFTA had eliminated U.S. tariffs on Mexican tomatoes, causing an inflow of fresh tomatoes from Mexico. Florida tomato growers complained that Mexican tomato growers were selling tomatoes at below-market prices. After the 1996 filing of the petition, the DOC and Mexican producers and exporters of tomatoes reached an agreement under which Mexican tomato growers agreed to revise their prices by setting a minimum reference price in order to eliminate the injurious effects of fresh tomato exports to the United States. The so-called \"suspension agreement\" remained in place for years and was renewed in 2002 and 2008. The 2013 suspension agreement covers all fresh and chilled tomatoes, excluding those intended for use in processing. It increases the number of tomato categories with established reference prices from one to four. It also raises reference prices at which tomatoes can be sold in the U.S. market to better reflect the changes in the marketplace since the last agreement was signed. It continues to account for winter and summer seasons. When they filed the 2012 petition asking for the termination of the suspension agreement, U.S. tomato producers argued that the pacts had not worked. The petitioners stated that it was necessary to end the agreement with Mexico in order to \"restore fair competition to the market and eliminate the predatory actions of producers in Mexico.\" However, business groups urged the DOC to proceed cautiously in the tomato dispute since termination could result in higher tomato prices in the United States and lead Mexico to implement retaliatory measures. Some businesses urged a continuation of the agreement, arguing that it helped stabilize the market and provide U.S. consumers with consistent and predictable pricing. According to a New York Times article, Mexican tomato producers enlisted roughly 370 U.S. businesses, including Wal-Mart Stores and meat and vegetable producers, to argue their cause. U.S. policymakers may follow trade issues regarding the proposed USMCA and the possibility of a NAFTA withdrawal by President Trump. Policymakers may consider numerous issues as they begin to debate the proposed USMCA and consider its approval. Some issues could include the timetable for consideration under TPA, whether the proposed USMCA meets TPA's negotiating objectives and other requirements, and the impact of the agreement on U.S.-Mexico trade relations. The full effects of the proposed USMCA on U.S.-Mexico trade relations would not be expected to be significant because nearly all U.S. trade with Mexico is now conducted duty and barrier free. A USMCA would maintain NAFTA's tariff and nontariff barrier eliminations. If the agreement is approved by Congress, ratified by Mexico and Canada, and enters into force, some economists and other observers believe that it is not expected to have a measurable effect on overall U.S.-Mexico trade and investment, jobs, wages, or overall economic growth, and that it would probably not have a measurable effect on the U.S. trade deficit with Mexico. The U.S. International Trade Commission (ITC) is conducting an investigation into the likely economic impacts of a USMCA, a required element of the TPA process. TPA 2015 states that the ITC must issue its report within 105 days of the President's signing of a trade deal. With President Trump's signing of the USMCA on November 30, 2018, the ITC report would be due by mid-March 2019. One exception to this overall economic evaluation may be the motor vehicle industry, which may experience more significant effects than other industries because of the changes in rules of origin in the USMCA and because of the high percentage of motor vehicle goods that enter duty-free under NAFTA. The highest share of U.S. trade with Mexico is in the motor vehicle industry, and it is also the industry with the highest percentage of duty-free treatment under NAFTA because of high North American content. In 2017, leading U.S. merchandise imports from Mexico were motor vehicles ($57.4 billion or 26% of imports) and motor vehicle parts ($45.5 billion or 20% of imports). About 99.4% of U.S. motor vehicle imports and about 75.6% of motor vehicle parts imports from Mexico entered the United States duty-free under NAFTA. In comparison, only 55.6% of total U.S. imports from Mexico in 2017 received duty-free benefits under NAFTA. Some analysts believe that the updated auto rules of origin requirements contained in the USMCA could raise compliance and production costs and could lead to higher prices, which could possibly negatively affect U.S. vehicle sales. The net impact, however, may be more limited depending on the capacity of U.S. automakers and parts manufacturers to shift suppliers and production locations and the ability to absorb higher costs, according to some observers. Some observers contend that manufacturers with a stronger presence in Mexico, such as General Motors and Fiat Chrysler Automobiles, may be more impacted. Other observers and stakeholders are continuing to review the provisions in the new agreement and what effect, if any, these changes would have on U.S. economic relations with Canada and Mexico. To some analysts, provisions in areas such as customs regulation, digital trade, sanitary and phytosanitary measures, and enforcement on labor and the environment are considered an improvement over similar provisions in NAFTA. Other proposed changes in the agreement, such as largely heightened IPR protections and generally less extensive investment provisions, have both supporters and detractors. For example, there is some concern that the ISDS provisions in the USMCA effectively may only apply to certain U.S. contracts in Mexico's energy sector and possibly leave out other sectors such as services. Under USMCA, investors would be limited to filing ISDS claims for breaches of national treatment, most-favored nation treatment, or expropriation, but not indirect expropriation President Donald Trump stated to reporters on December 1, 2018, that he intended to notify Canada and Mexico of his intention to withdraw from NAFTA in six months. Article 2205 of NAFTA states that a party may withdraw from the agreement six months after it provides written notice of withdrawal to the other parties. If a party withdraws, the agreement shall remain in force for the remaining parties. Private sector groups are urging the President to remain within NAFTA until the proposed USMCA enters into force. They claim that withdrawing from NAFTA would have \"devastating\" negative consequences. Congress may consider the ramifications of withdrawing from NAFTA and how it may affect the U.S. economy and foreign relations with Mexico. It may monitor and consider the congressional role in a possible withdrawal. If the United States withdraws from NAFTA, it could return to WTO most-favored-nation tariffs, the rate it applies to all countries with which the United State does not have an FTA. The United States and Canada maintain relatively low simple average MFN rates, at 3.5%. Mexico has a higher 7.0% simple average rate. However, both countries have higher \"peak\" tariffs on labor intensive goods, such as apparel and footwear, and some agriculture products. Of the three NAFTA parties, the United States has the lowest MFN tariffs in most categories. Applied tariffs are considerably higher in Mexico than the United States. Mexico's bound tariff rates are very high and far exceed U.S. bound rates. Without NAFTA, there is a risk that tariffs on U.S. exports to Mexico could reach up to 36.2% (see Table 6 ). In agriculture, U.S. farmers would face double-digit applied and trade-weighted rates in both Mexico and Canada. Mexico and Canada likely would maintain duty-free treatment between themselves through maintenance of a bilateral NAFTA, or through commitments made in conjunction with the CPTPP. If the United States withdrew from NAFTA without the proposed USMCA entering into force, certain commitments would be affected, such as the following: Services Access. The three NAFTA countries committed themselves to allowing market access and nondiscriminatory treatment in certain service sectors. If the United States withdrew from NAFTA, it would still be obligated to adhere to the commitments it made for the WTO's General Agreement on Trade in Services. While these commitments were made contemporaneously with NAFTA, given that the NAFTA schedule operated under a negative list basis—all sectors included unless specifically excluded—and GATS on a positive list—specific sectors are listed for inclusion—NAFTA is likely more extensive. Government Procurement. The NAFTA government procurement chapter sets standards and parameters for government purchases of goods and services. The schedule annexes set forth opportunities for firms of each party to bid on certain contracts for specified government agencies. The WTO Government Procurement Agreement (GPA) also imposes disciplines and obligations on government procurement. Unlike most other WTO agreements, membership in the GPA is optional. Mexico is not a member of the GPA, and U.S. withdrawal from NAFTA would allow Mexico to adopt any domestic content or buy local provisions. (Since U.S. firms are more competitive in obtaining Mexican contracts than Mexican firms in the United States, this may adversely affect some U.S. domestic firms.) Investment. Unlike many chapters in NAFTA that have analogous counterparts in the WTO Agreements, the investment chapter in the WTO does not provide the same level of protection for investors as do NAFTA, subsequent U.S. trade agreements, or bilateral investment treaties. If the United States withdrew from NAFTA, U.S. investors would lose protections in Mexico. Countries would have more leeway to block individual investments. U.S. investors would not have recourse to the investor-state dispute settlement (ISDS) mechanism, but would need to deal with claims of expropriation through domestic courts, recourse to government-to-government consultation, or dispute settlement. Canada and Mexico likely would maintain investor protection between them through the prospective CPTPP or through maintenance of NAFTA provisions. Policymakers may consider issues on how the United States can improve cooperation with Mexico in the areas of border trade, transportation, competitiveness, economic growth, and security enhancement through the HLED, HLRCC, and the 21 st Century Border Management programs mentioned earlier in this report. Some policy experts emphasize the importance of U.S.-Mexico trade in intermediate goods and supply chains and argue that the two governments can improve cooperation in cross-border trade and can invest more in improving border infrastructure. The increased security measures along the U.S.-Mexico border, they argue, have resulted in a costly disruption in production chains due to extended and unpredictable wait times along the border.", "summary": "The economic and trade relationship with Mexico is of interest to U.S. policymakers because of Mexico's proximity to the United States, the extensive trade and investment relationship under the North American Free Trade Agreement (NAFTA), the conclusion of the NAFTA renegotiations and the proposed U.S.-Mexico-Canada Agreement (USMCA), and the strong cultural and economic ties that connect the two countries. Also, it is of national interest for the United States to have a prosperous and democratic Mexico as a neighboring country. Mexico is the United States' third-largest trading partner, while the United States is, by far, Mexico's largest trading partner. Mexico ranks third as a source of U.S. imports, after China and Canada, and second, after Canada, as an export market for U.S. goods and services. The United States is the largest source of foreign direct investment (FDI) in Mexico. Most studies show that the net economic effects of NAFTA, which entered into force in 1994, on both the United States and Mexico have been small but positive, though there have been adjustment costs to some sectors within both countries. Much of the bilateral trade between the United States and Mexico occurs in the context of supply chains as manufacturers in each country work together to create goods. The expansion of trade since NAFTA has resulted in the creation of vertical supply relationships, especially along the U.S.-Mexico border. The flow of intermediate inputs produced in the United States and exported to Mexico and the return flow of finished products greatly increased the importance of the U.S.-Mexico border region as a production site. U.S. manufacturing industries, including automotive, electronics, appliances, and machinery, all rely on the assistance of Mexican manufacturers. Congress faces numerous issues related to U.S.-Mexico trade and investment relations. The United States, Mexico, and Canada signed the proposed USMCA on November 30, 2018, which would have to be approved by Congress and ratified by Mexico and Canada before entering into force. A few days after signing the agreement, President Donald J. Trump stated to reporters that he intends to notify Mexico and Canada of his intention to withdraw from NAFTA with a six-month notice. Congress may consider policy issues and economic effects of the proposed USMCA, economic and political ramifications of possibly withdrawing from NAFTA, and the potential strategic implications of Mexico's new President Andrés Manuel López Obrador, who entered into office on December 1, 2018. Congress may also examine the congressional role in a possible withdrawal from NAFTA; evaluate the effects of U.S. tariffs on aluminum and steel imports from Mexico and Mexico's retaliatory tariffs on certain U.S. exports; and address issues related to the U.S. withdrawal from the proposed Trans-Pacific Partnership (TPP) free trade agreement among the United States, Canada, Mexico, and nine other countries, and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which will enact much of the proposed TPP without the participation of the United States. The CPTPP is set to take effect for Mexico and five other countries on December 30, 2018. Some observers contend that the withdrawal from TPP could damage U.S. competitiveness and economic leadership in the region, while others see the withdrawal as a way to prevent lower-cost imports and potential job losses. Congress also may maintain an active interest in ongoing bilateral efforts to promote economic competitiveness, increase regulatory cooperation, and pursue energy integration. Under the U.S.-Mexico High Level Economic Dialogue (HLED), which was first launched in September 2013, the United States and Mexico are striving to advance economic and commercial priorities through annual meetings at the Cabinet level that also include leaders from the public and private sectors. Two other initiatives that may be of interest to policymakers are the High-Level Regulatory Cooperation Council (HLRCC) and the bilateral border management initiative under the Declaration Concerning 21st Center Border Management.", "document_type": "crs"}
{"report": "This report provides background information and issues for Congress regarding China's actions in the South China Sea (SCS) and East China Sea (ECS), with a focus on implications for U.S. strategic and policy interests. Other CRS reports focus on other aspects of maritime territorial disputes involving China. The issue for Congress is how the United States should respond to China's actions in the SCS and ECS—particularly China's island-building and base-construction activities in the Spratly Islands in the SCS—and to China's strengthening position in the SCS. A key oversight question for Congress is whether the Trump Administration has an appropriate strategy—and an appropriate amount of resources for implementing that strategy—for countering China's \"salami-slicing\" strategy or gray zone operations for gradually strengthening its position in the SCS, for imposing costs on China for its actions in the SCS and ECS, and for defending and promoting U.S. interests in the region. Decisions that Congress makes on these issues could substantially affect U.S. strategic, political, and economic interests in the Indo-Pacific region and elsewhere. In this report, the term China's near-seas region refers to the SCS, ECS, and Yellow Sea. The term first island chain refers to a string of islands, including Japan and the Philippines, that encloses China's near-seas region. The term second island chain , which reaches out to Guam, refers to a line that can be drawn that encloses both China's near-seas region and the Philippine Sea between the Philippines and Guam. The term exclusive economic zone ( EEZ ) dispute is used in this report to refer to a dispute principally between China and the United States over whether coastal states have a right under international law to regulate the activities of foreign military forces operating in their EEZs. Although maritime territorial disputes in the SCS and ECS involving China and its neighbors may appear at first glance to be disputes between faraway countries over a few rocks and reefs in the ocean that are of seemingly little importance to the United States, the situation in the SCS and ECS can engage U.S. interests for a variety of strategic, political, and economic reasons, including but not necessarily limited to those discussed in the sections below. The SCS, ECS, and Yellow Sea border three U.S. treaty allies—Japan, South Korea, and the Philippines. In addition, the SCS and ECS (including the Taiwan Strait) surround Taiwan, regarding which the United States has certain security-related policies under the Taiwan Relations Act ( H.R. 2479 / P.L. 96-8 of April 10, 1979), and the SCS borders Southeast Asian nations that are current, emerging, or potential U.S. partner countries, such as Singapore, Vietnam, and Indonesia. In a conflict with the United States, Chinese bases in the SCS and forces operating from them would add to a regional network of Chinese anti-access/area-denial (A2/AD) forces intended to keep U.S. military forces outside the first island chain (and thus away from China's mainland). Among other things, Chinese bases in the SCS and forces operating from them could help create a bastion (i.e., a defended operating sanctuary) in the SCS for China's emerging sea-based strategic deterrent force of nuclear-powered ballistic missile submarines (SSBNs). In a conflict with the United States, Chinese bases in the SCS and forces operating from them would be vulnerable to U.S. attack. Attacking the bases and the forces operating from them, however, would tie down the attacking U.S. forces for a time at least, delaying the use of those U.S. forces elsewhere in a larger conflict, and potentially delay the advance of U.S. forces into the SCS. Short of a conflict with the United States, Chinese bases in the SCS, and more generally, Chinese domination over or control of its near-seas region could help China to do one or more of the following on a day-to-day basis: control fishing operations and oil and gas exploration activities in the SCS; coerce, intimidate, or put political pressure on other countries bordering on the SCS; announce and enforce an air defense identification zone (ADIZ) over the SCS; announce and enforce a maritime exclusion zone (i.e., a blockade) around Taiwan; facilitate the projection of Chinese military presence and political influence further into the Western Pacific; and help achieve a broader goal of becoming a regional hegemon in its part of Eurasia. In light of some of the preceding points, Chinese bases in the SCS, and more generally, Chinese domination over or control of its near-seas region could complicate the ability of the United States to intervene militarily in a crisis or conflict between China and Taiwan; fulfill U.S. obligations under U.S defense treaties with Japan and the Philippines and South Korea; operate U.S. forces in the Western Pacific for various purposes, including maintaining regional stability, conducting engagement and partnership-building operations, responding to crises, and executing war plans; and prevent the emergence of China as a regional hegemon in its part of Eurasia. A reduced U.S. ability to do one or more of the above could encourage countries in the region to reexamine their own defense programs and foreign policies, potentially leading to a further change in the region's security architecture. Some observers believe that China is trying to use disputes in the SCS and ECS to raise doubts among U.S. allies and partners in the region about the dependability of the United States as an ally or partner, or to otherwise drive a wedge between the United States and its regional allies and partners, so as to weaken the U.S.-led regional security architecture and thereby facilitate greater Chinese influence over the region. Some observers remain concerned that maritime territorial disputes in the ECS and SCS could lead to a crisis or conflict between China and a neighboring country such as Japan or the Philippines, and that the United States could be drawn into such a crisis or conflict as a result of obligations the United States has under bilateral security treaties with Japan and the Philippines. Most recently, those concerns have focused more on the possibility of a crisis or conflict between China and Japan over the Senkaku Islands. A key element of the U.S.-led international order that has operated since World War II is the principle that force or coercion should not be used as a means of settling disputes between countries, and certainly not as a routine or first-resort method. Some observers are concerned that China's actions in SCS and ECS challenge this principle and—along with Russia's actions in Crimea and eastern Ukraine—could help reestablish the very different principle of \"might makes right\" (i.e., the law of the jungle) as a routine or defining characteristic of international relations. Another key element of the U.S.-led international order that has operated since World War II is the treatment of the world's seas under international law as international waters (i.e., as a global commons), and the principle of freedom of operations in international waters. The principle of freedom of operations in international waters is often referred to in shorthand as freedom of the seas. It is also sometimes referred to as freedom of navigation, although this term can be defined—particularly by parties who might not support freedom of the seas—in a narrow fashion, to include merely the freedom for commercial ships to navigate (i.e., pass through) sea areas, as opposed to the freedom for both commercial and naval ships to conduct various activities at sea. A more complete way to refer to the principle of freedom of the seas, as stated in the Department of Defense's (DOD's) annual Freedom of Navigation (FON) report, is \"all of the rights, freedoms, and lawful uses of the sea and airspace, including for military ships and aircraft, guaranteed to all nations under international law.\" The principle of freedom of the seas dates back hundreds of years. Some observers are concerned that China's actions in the SCS appear to challenge the principle that the world's seas are to be treated under international law as international waters. If such a challenge were to gain acceptance in the SCS region, it would have broad implications for the United States and other countries not only in the SCS, but around the world, because international law is universal in application, and a challenge to a principle of international law in one part of the world, if accepted, could serve as a precedent for challenging it in other parts of the world. Overturning the principle of freedom of the seas, so that significant portions of the seas could be appropriated as national territory, would overthrow hundreds of years of international legal tradition relating to the legal status of the world's oceans and significantly change the international legal regime governing sovereignty over much of the surface of the world. Some observers are concerned that if China's position that coastal states have a right under international law to regulate the activities of foreign military forces in their EEZs were to gain greater international acceptance under international law, it could substantially affect U.S. naval operations not only in the SCS and ECS, but around the world, which in turn could substantially affect the ability of the United States to use its military forces to defend various U.S. interests overseas. Significant portions of the world's oceans are claimable as EEZs, including high-priority U.S. Navy operating areas in the Western Pacific, the Persian Gulf, and the Mediterranean Sea. The legal right of U.S. naval forces to operate freely in EEZ waters—an application of the principle of freedom of the seas—is important to their ability to perform many of their missions around the world, because many of those missions are aimed at influencing events ashore, and having to conduct operations from more than 200 miles offshore would reduce the inland reach and responsiveness of ship-based sensors, aircraft, and missiles, and make it more difficult to transport Marines and their equipment from ship to shore. Restrictions on the ability of U.S. naval forces to operate in EEZ waters could potentially require changes (possibly very significant ones) in U.S. military strategy or U.S. foreign policy goals. Major commercial shipping routes pass through the SCS, which links the Western Pacific to the Indian Ocean and the Persian Gulf. An estimated $3.4 trillion worth of international shipping trade passes through the SCS each year. DOD states that \"the South China Sea plays an important role in security considerations across East Asia because Northeast Asia relies heavily on the flow of oil and commerce through South China Sea shipping lanes, including more than 80 percent of the crude oil [flowing] to Japan, South Korea, and Taiwan.\" In addition, the ECS and SCS contain potentially significant oil and gas exploration areas. Exploration activities there could potentially involve U.S. firms. The results of exploration activities there could eventually affect world oil prices. As China continues to emerge as a major world power, observers are assessing what kind of international actor China will ultimately be. China's actions in the SCS and ECS could influence assessments that observers might make on issues such as China's approach to settling disputes between states (including whether China views force and coercion as acceptable means for settling such disputes, and consequently whether China believes that \"might makes right\"), China's views toward the meaning and application of international law, and whether China views itself more as a stakeholder and defender of the current international order, or alternatively, more as a revisionist power that will seek to change elements of that order that it does not like. Developments in the SCS and ECS could affect U.S.-China relations in general, which could have implications for other issues in U.S.-China relations. China is a party to multiple maritime territorial disputes in the SCS and ECS, including in particular the following (see Figure 1 for locations of the island groups listed below): a dispute over the Paracel Islands in the SCS, which are claimed by China and Vietnam, and occupied by China; a dispute over the Spratly Islands in the SCS, which are claimed entirely by China, Taiwan, and Vietnam, and in part by the Philippines, Malaysia, and Brunei, and which are occupied in part by all these countries except Brunei; a dispute over Scarborough Shoal in the SCS, which is claimed by China, Taiwan, and the Philippines, and controlled since 2012 by China; and a dispute over the Senkaku Islands in the ECS, which are claimed by China, Taiwan, and Japan, and administered by Japan. The island and shoal names used above are the ones commonly used in the United States; in other countries, these islands are known by various other names. These island groups are not the only land features in the SCS and ECS—the two seas feature other islands, rocks, and shoals, as well as some near-surface submerged features. The territorial status of some of these other features is also in dispute. There are additional maritime territorial disputes in the Western Pacific that do not involve China. Maritime territorial disputes in the SCS and ECS date back many years, and have periodically led to diplomatic tensions as well as confrontations and incidents at sea involving fishing vessels, oil exploration vessels and oil rigs, coast guard ships, naval ships, and military aircraft. In addition to maritime territorial disputes in the SCS and ECS, China is involved in a dispute, principally with the United States, over whether China has a right under international law to regulate the activities of foreign military forces operating within China's EEZ. The position of the United States and most other countries is that while the United Nations Convention on the Law of the Sea (UNCLOS), which established EEZs as a feature of international law, gives coastal states the right to regulate economic activities (such as fishing and oil exploration) within their EEZs, it does not give coastal states the right to regulate foreign military activities in the parts of their EEZs beyond their 12-nautical-mile territorial waters. The position of China and some other countries (i.e., a minority group among the world's nations) is that UNCLOS gives coastal states the right to regulate not only economic activities, but also foreign military activities, in their EEZs. In response to a request from CRS to identify the countries taking this latter position, the U.S. Navy states that countries with restrictions inconsistent with the Law of the Sea Convention [i.e., UNCLOS] that would limit the exercise of high seas freedoms by foreign navies beyond 12 nautical miles from the coast are [the following 27]: Bangladesh, Brazil, Burma, Cambodia, Cape Verde, China, Egypt, Haiti, India, Iran, Kenya, Malaysia, Maldives, Mauritius, North Korea, Pakistan, Portugal, Saudi Arabia, Somalia, Sri Lanka, Sudan, Syria, Thailand, United Arab Emirates, Uruguay, Venezuela, and Vietnam. Other observers provide different counts of the number of countries that take the position that UNCLOS gives coastal states the right to regulate not only economic activities but also foreign military activities in their EEZs. For example, one set of observers, in an August 2013 briefing, stated that 18 countries seek to regulate foreign military activities in their EEZs, and that 3 of these countries—China, North Korea, and Peru—have directly interfered with foreign military activities in their EEZs. The dispute over whether China has a right under UNCLOS to regulate the activities of foreign military forces operating within its EEZ appears to be at the heart of incidents between Chinese and U.S. ships and aircraft in international waters and airspace, including incidents in March 2001, September 2002, March 2009, and May 2009, in which Chinese ships and aircraft confronted and harassed the U.S. naval ships Bowditch , Impeccable , and Victorious as they were conducting survey and ocean surveillance operations in China's EEZ; an incident on April 1, 2001, in which a Chinese fighter collided with a U.S. Navy EP-3 electronic surveillance aircraft flying in international airspace about 65 miles southeast of China's Hainan Island in the South China Sea, forcing the EP-3 to make an emergency landing on Hainan Island; an incident on December 5, 2013, in which a Chinese navy ship put itself in the path of the U.S. Navy cruiser Cowpens as it was operating 30 or more miles from China's aircraft carrier Liaoning , forcing the Cowpens to change course to avoid a collision; an incident on August 19, 2014, in which a Chinese fighter conducted an aggressive and risky intercept of a U.S. Navy P-8 maritime patrol aircraft that was flying in international airspace about 135 miles east of Hainan Island —DOD characterized the intercept as \"very, very close, very dangerous\"; and an incident on May 17, 2016, in which Chinese fighters flew within 50 feet of a Navy EP-3 electronic surveillance aircraft in international airspace in the South China Sea—a maneuver that DOD characterized as \"unsafe.\" Figure 2 shows the locations of the 2001, 2002, and 2009 incidents listed in the first two bullets above. The incidents shown in Figure 2 are the ones most commonly cited prior to the December 2013 involving the Cowpens , but some observers list additional incidents as well. DOD stated in 2015 that The growing efforts of claimant States to assert their claims has led to an increase in air and maritime incidents in recent years, including an unprecedented rise in unsafe activity by China's maritime agencies in the East and South China Seas. U.S. military aircraft and vessels often have been targets of this unsafe and unprofessional behavior, which threatens the U.S. objectives of safeguarding the freedom of the seas and promoting adherence to international law and standards. China's expansive interpretation of jurisdictional authority beyond territorial seas and airspace causes friction with U.S. forces and treaty allies operating in international waters and airspace in the region and raises the risk of inadvertent crisis. There have been a number of troubling incidents in recent years. For example, in August 2014, a Chinese J-11 fighter crossed directly under a U.S. P-8A Poseidon operating in the South China Sea approximately 117 nautical miles east of Hainan Island. The fighter also performed a barrel roll over the aircraft and passed the nose of the P-8A to show its weapons load-out, further increasing the potential for a collision. However, since August 2014, U.S.-China military diplomacy has yielded positive results, including a reduction in unsafe intercepts. We also have seen the PLAN implement agreed-upon international standards for encounters at sea, such as the Code for Unplanned Encounters at Sea (CUES), which was signed in April 2014. A recent incident in the SCS occurred on September 30, 2018, between the U.S. Navy destroyer Decatur (DDG-73) and a Chinese destroyer, as the Decatur was conducting a freedom of navigation (FON) operation near Gaven Reef in the Spratly Islands. In the incident, the Chinese destroyer overtook the U.S. destroyer close by on the U.S. destroyer's port (i.e., left) side, requiring the U.S. destroyer to turn starboard (i.e., to the right) to avoid the Chinese ship. U.S. officials stated that at the point of closest approach between the two ships, the stern (i.e., back end) of the Chinese ship came within 45 yards (135 feet) of the bow (i.e., front end) of the Decatur . As the encounter was in progress, the Chinese ship issued a warning by radio stating, \"If you don't change course your [sic] will suffer consequences.\" One observer, commenting on the incident, stated, \"To my knowledge, this is the first time we've had a direct threat to an American warship with that kind of language.\" U.S. officials characterized the actions of the Chinese ship in the incident as \"unsafe and unprofessional.\" A November 3, 2018, press report states the following: The US Navy has had 18 unsafe or unprofessional encounters with Chinese military forces in the Pacific since 2016, according to US military statistics obtained by CNN. \"We have found records of 19 unsafe and/or unprofessional interactions with China and Russia since 2016 (18 with China and one with Russia),\" Cmdr. Nate Christensen, a spokesman for the US Pacific Fleet, told CNN. A US official familiar with the statistics told CNN that 2017, the first year of the Trump administration, saw the most unsafe and or unprofessional encounters with Chinese forces during the period. At least three of those incidents took place in February, May and July of that year and involved Chinese fighter jets making what the US considered to be \"unsafe\" intercepts of Navy surveillance planes. While the 18 recorded incidents only involved US naval forces, the Air Force has also had at least one such encounter during this period…. The US Navy told CNN that, in comparison, there were 50 unsafe or unprofessional encounters with Iranian military forces since 2016, with 36 that year, 14 last year and none in 2018. US and Iranian naval forces tend to operate in relatively narrow stretches of water, such as the Strait of Hormuz, increasing their frequency of close contact. DOD states that Although China has long challenged foreign military activities in its maritime zones in a manner that is inconsistent with the rules of customary international law as reflected in the LOSC, the PLA has recently started conducting the very same types of military activities inside and outside the first island chain in the maritime zones of other countries. This contradiction highlights China's continued lack of commitment to the rules of customary international law. Even though China is a state party to the LOSC [i.e., UNCLOS], China's domestic laws restrict military activities in its exclusive economic zone (EEZ), including intelligence collection and military surveys, contrary to LOSC. At the same time, the PLA is increasingly undertaking military operations in other countries' EEZs. The map on the following page [not reproduced here] depicts new PLA operating areas in foreign EEZs since 2014. In 2017, the PLAN conducted air and naval operations in Japan's EEZ; employed an AGI [intelligence-gathering ship] ship, likely to monitor testing of a THAAD system in the U.S. EEZ near the Aleutian Islands; and employed an AGI ship to monitor a multi-national naval exercise in Australia's EEZ. PLA operations in foreign EEZs have taken place in Northeast and Southeast Asia, and a growing number of operations are also occurring farther from Chinese shores. The issue of whether China has the right under UNCLOS to regulate foreign military activities in its EEZ is related to, but ultimately separate from, the issue of territorial disputes in the SCS and ECS: The two issues are related because China can claim EEZs from inhabitable islands over which it has sovereignty, so accepting China's claims to sovereignty over inhabitable islands in the SCS or ECS could permit China to expand the EEZ zone within which China claims a right to regulate foreign military activities. The two issues are ultimately separate from one another because even if all the territorial disputes in the SCS and ECS were resolved, and none of China's claims in the SCS and ECS were accepted, China could continue to apply its concept of its EEZ rights to the EEZ that it unequivocally derives from its mainland coast—and it is in this unequivocal Chinese EEZ that several of the past U.S.-Chinese incidents at sea have occurred. Press reports of maritime disputes in the SCS and ECS sometimes focus on territorial disputes while devoting little or no attention to the EEZ dispute, or do relatively little to distinguish the EEZ dispute from the territorial disputes. From the U.S. perspective, the EEZ dispute is arguably as significant as the maritime territorial disputes because of the EEZ dispute's proven history of leading to U.S.-Chinese incidents at sea and because of its potential for affecting U.S. military operations not only in the SCS and ECS, but around the world. For background information on treaties and international agreements related to the disputes, see Appendix C . For background information on the July 2016 tribunal award in the SCS arbitration case involving the Philippines and China concerning maritime territorial issues in the SCS, see Appendix D . In general, China's approach to the maritime disputes in the SCS and ECS, and to strengthening its position over time in the SCS, can be characterized as follows: China appears to have identified the assertion and defense of its maritime territorial claims in the SCS and ECS, and the strengthening of its position in the SCS, as important national goals. To achieve these goals, China appears to be employing an integrated, whole-of-society strategy that includes diplomatic, informational, economic, military, paramilitary/law enforcement, and civilian elements. In implementing this integrated strategy, China appears to be persistent, patient, tactically flexible, willing to expend significant resources, and willing to absorb at least some amount of reputational and other costs that other countries might seek to impose on China in response to China's actions. Observers frequently characterize China's approach to the SCS and ECS as a \"salami-slicing\" strategy that employs a series of incremental actions, none of which by itself is a casus belli , to gradually change the status quo in China's favor. At least one Chinese official has used the term \"cabbage strategy\" to refer to a strategy of consolidating control over disputed islands by wrapping those islands, like the concentric leaves of a cabbage, in successive layers of occupation and protection formed by fishing boats, Chinese Coast Guard ships, and then finally Chinese naval ships. Other observers have referred to China's approach as a strategy of gray zone operations (i.e., operations that reside in a gray zone between peace and war), of creeping annexation or creeping invasion, or as a \"talk and take\" strategy, meaning a strategy in which China engages in (or draws out) negotiations while taking actions to gain control of contested areas. Perhaps more than any other set of actions, China's island-building (aka land-reclamation) and base-construction activities at sites that it occupies in the Paracel Islands and Spratly Islands in the SCS have heightened concerns among U.S. observers that China is rapidly gaining effective control of the SCS. China's island-building and base-construction activities in the SCS appear to have begun around December 2013, and were publicly reported starting in May 2014. Awareness of, and concern about, the activities appears to have increased substantially following the posting of a February 2015 article showing a series of \"before and after\" satellite photographs of islands and reefs being changed by the work. China occupies seven sites in the Spratly Islands. It has engaged in island-building and facilities-construction activities at most or all of these sites, and particularly at three of them—Fiery Cross Reef, Subi Reef, and Mischief Reef, all of which now feature lengthy airfields as well as substantial numbers of buildings. Although other countries, such as Vietnam, have engaged in their own island-building and facilities-construction activities at sites that they occupy in the SCS, these efforts are dwarfed in size by China's island-building and base-construction activities in the SCS. DOD stated in 2017 that In 2016, China focused its main effort on infrastructure construction at its outposts on the Spratly Islands. Although its land reclamation and artificial islands do not strengthen China's territorial claims as a legal matter or create any new territorial sea entitlements, China will be able to use its reclaimed features as persistent civil-military bases to enhance its presence in the South China Sea and improve China's ability to control the features and nearby maritime space. China reached milestones of landing civilian aircraft on its airfields on Fiery Cross Reef, Subi Reef, and Mischief Reef for the first time in 2016, as well as landing a military transport aircraft on Fiery Cross Reef to evacuate injured personnel.... China's Spratly Islands outpost expansion effort is currently focused on building out the land-based capabilities of its three largest outposts—Fiery Cross, Subi, and Mischief Reefs—after completion of its four smaller outposts early in 2016. No substantial land has been reclaimed at any of the outposts since China ended its artificial island creation in the Spratly Islands in late 2015 after adding over 3,200 acres of land to the seven features it occupies in the Spratlys. Major construction features at the largest outposts include new airfields—all with runways at least 8,800 feet in length—large port facilities, and water and fuel storage. As of late 2016, China was constructing 24 fighter-sized hangars, fixed-weapons positions, barracks, administration buildings, and communication facilities at each of the three outposts. Once all these facilities are complete, China will have the capacity to house up to three regiments of fighters in the Spratly Islands. China has completed shore-based infrastructure on its four smallest outposts in the Spratly Islands: Johnson, Gaven, Hughes, and Cuarteron Reefs. Since early 2016, China has installed fixed, land-based naval guns on each outpost and improved communications infrastructure. The Chinese Government has stated that these projects are mainly for improving the living and working conditions of those stationed on the outposts, safety of navigation, and research; however, most analysts outside China believe that the Chinese Government is attempting to bolster its de facto control by improving its military and civilian infrastructure in the South China Sea. The airfields, berthing areas, and resupply facilities on its Spratly outposts will allow China to maintain a more flexible and persistent coast guard and military presence in the area. This would improve China's ability to detect and challenge activities by rival claimants or third parties, widen the range of capabilities available to China, and reduce the time required to deploy them.... China's construction in the Spratly Islands demonstrates China's capacity—and a newfound willingness to exercise that capacity—to strengthen China's control over disputed areas, enhance China's presence, and challenge other claimants.... In 2016, China built reinforced hangars on several of its Spratly Island outposts in the South China Sea. These hangars could support up to 24 fighters or any other type of PLA aircraft participating in force projection operations. In April, May, and June 2018, it was reported that China has landed aircraft and moved electronic jamming equipment, surface-to-air missiles, and anti-ship missile systems to its newly built facilities in the SCS. In July 2018, it was reported that \"China is quietly testing electronic warfare assets recently installed at fortified outposts in the South China Sea….\" Also in July 2018, Chinese state media announced that a Chinese search and rescue ship had been stationed at Subi Reef—the first time that such a ship had been permanently stationed by China at one of its occupied sites in the Spratly Islands. For additional discussion of China's island-building and facility-construction activities, see CRS Report R44072, Chinese Land Reclamation in the South China Sea: Implications and Policy Options , by Ben Dolven et al. In addition to the island-building and base-construction activities discussed above, additional Chinese actions in the SCS and ECS have heightened concerns among U.S. observers. Following a confrontation in 2012 between Chinese and Philippine ships at Scarborough Shoal, China gained de facto control over access to the shoal and its fishing grounds. Subsequent Chinese actions that have heightened concerns among U.S. observers, particularly since late 2013, include the following, among others: China's announcement on November 23, 2013, of an air defense identification zone (ADIZ) over the ECS that includes airspace over the Senkaku Islands; frequent patrols by Chinese Coast Guard ships—some observers refer to them as harassment operations—at the Senkaku Islands; Chinese pressure against the small Philippine military presence at Second Thomas Shoal in the Spratly Islands, where a handful of Philippine military personnel occupy a beached (and now derelict) Philippine navy amphibious ship; the implementation on January 1, 2014, of fishing regulations administered by China's Hainan province applicable to waters constituting more than half of the SCS, and the reported enforcement of those regulations with actions that have included the apprehension of non-Chinese fishing boats; and a growing civilian Chinese presence on some of the sites in the SCS occupied by China in the SCS, including both Chinese vacationers and (in the Paracels) permanent settlements. China asserts and defends its maritime claims not only with navy ships, but also with coast guard cutters and maritime militia vessels. Indeed, China employs its coast guard and maritime militia more regularly and extensively than its navy in its maritime sovereignty-assertion operations. DOD states that China's navy, coast guard, and maritime militia together \"form the largest maritime force in the Indo-Pacific.\" DOD states that the China Coast Guard (CCG) is the world's largest coast guard. It is much larger than the coast guard of any country in the region, and it has increased substantially in size in recent years through the addition of many newly built ships. China makes regular use of CCG ships to assert and defend its maritime claims, particularly in the ECS, with Chinese navy ships sometimes available over the horizon as backup forces. The Defense Intelligence Agency (DIA) states the following: Under Chinese law, maritime sovereignty is a domestic law enforcement issue under the purview of the CCG. Beijing also prefers to use CCG ships for assertive actions in disputed waters to reduce the risk of escalation and to portray itself more benignly to an international audience. For situations that Beijing perceives carry a heightened risk of escalation, it often deploys PLAN combatants in close proximity for rapid intervention if necessary. China also relies on the PAFMM—a paramilitary force of fishing boats—for sovereignty enforcement actions…. China primarily uses civilian maritime law enforcement agencies in maritime disputes, employing the PLAN [i.e., China's navy] in a protective capacity in case of escalation. The CCG has rapidly increased and modernized its forces, improving China's ability to enforce its maritime claims. Since 2010, the CCG's large patrol ship fleet (more than 1,000 tons) has more than doubled in size from about 60 to more than 130 ships, making it by far the largest coast guard force in the world and increasing its capacity to conduct extended offshore operations in a number of disputed areas simultaneously. Furthermore, the newer ships are substantially larger and more capable than the older ships, and the majority are equipped with helicopter facilities, high-capacity water cannons, and guns ranging from 30-mm to 76-mm. Among these ships, a number are capable of long-distance, long-endurance out-of-area operations. In addition, the CCG operates more than 70 fast patrol combatants ([each displacing] more than 500 tons), which can be used for limited offshore operations, and more than 400 coastal patrol craft (as well as about 1,000 inshore and riverine patrol boats). By the end of the decade, the CCG is expected to add up to 30 patrol ships and patrol combatants before the construction program levels off. In March 2018, China announced that control of the CCG would be transferred from the civilian State Oceanic Administration to the Central Military Commission. The transfer occurred on July 1, 2018. On May 22, 2018, it was reported that China's navy and the CCG had conducted their first joint patrols in disputed waters off the Paracel Islands in the SCS, and had expelled at least 10 foreign fishing vessels from those waters. China also uses the People's Armed Forces Maritime Militia (PAFMM)—a force that essentially consists of fishing ships with armed crew members—to defend its maritime claims. In the view of some observers, the PAFMM—even more than China's navy or coast guard—is the leading component of China's maritime forces for asserting its maritime claims, particularly in the SCS. U.S. analysts in recent years have paid increasing attention to the role of the PAFMM as a key tool for implementing China's salami-slicing strategy, and have urged U.S. policymakers to focus on the capabilities and actions of the PAFMM. DOD states that \"the PAFMM is the only government-sanctioned maritime militia in the world,\" and that it \"has organizational ties to, and is sometimes directed by, China's armed forces.\" DIA states that The PAFMM is a subset of China's national militia, an armed reserve force of civilians available for mobilization to perform basic support duties. Militia units organize around towns, villages, urban subdistricts, and enterprises, and they vary widely from one location to another. The composition and mission of each unit reflects local conditions and personnel skills. In the South China Sea, the PAFMM plays a major role in coercive activities to achieve China's political goals without fighting, part of broader Chinese military doctrine that states that confrontational operations short of war can be an effective means of accomplishing political objectives. A large number of PAFMM vessels train with and support the PLA and CCG in tasks such as safeguarding maritime claims, protecting fisheries, and providing logistic support, search and rescue (SAR), and surveillance and reconnaissance. The Chinese government subsidizes local and provincial commercial organizations to operate militia ships to perform \"official\" missions on an ad hoc basis outside their regular commercial roles. The PAFMM has played a noteworthy role in a number of military campaigns and coercive incidents over the years, including the harassment of Vietnamese survey ships in 2011, a standoff with the Philippines at Scarborough Reef in 2012, and a standoff involving a Chinese oil rig in 2014. In the past, the PAFMM rented fishing boats from companies or individual fisherman, but it appears that China is building a state-owned fishing fleet for its maritime militia force in the South China Sea. Hainan Province, adjacent to the South China Sea, ordered the construction of 84 large militia fishing boats with reinforced hulls and ammunition storage for Sansha City, and the militia took delivery by the end of 2016. China regularly states that it supports freedom of navigation and has not interfered with freedom of navigation. China, however, appears to hold a narrow definition of freedom of navigation that is centered on the ability of commercial cargo ships to pass through international waters. In contrast to the broader U.S./Western definition of freedom of navigation (aka freedom of the seas), the Chinese definition does not appear to include operations conducted by military ships and aircraft. It can also be noted that China has frequently interfered with commercial fishing operations by non-Chinese fishing vessels—something that some observers would regard as a form of interfering with freedom of navigation for commercial ships. An August 12, 2015, press report states the following (emphasis added): China respects freedom of navigation in the disputed South China Sea but will not allow any foreign government to invoke that right so its military ships and planes can intrude in Beijing's territory, the Chinese ambassador [to the Philippines] said. Ambassador Zhao Jianhua said late Tuesday [August 11] that Chinese forces warned a U.S. Navy P-8A [maritime patrol aircraft] not to intrude when the warplane approached a Chinese-occupied area in the South China Sea's disputed Spratly Islands in May.... \"We just gave them warnings, be careful, not to intrude,\" Zhao told reporters on the sidelines of a diplomatic event in Manila.... When asked why China shooed away the U.S. Navy plane when it has pledged to respect freedom of navigation in the South China Sea, Zhao outlined the limits in China's view. \"Freedom of navigation does not mean to allow other countries to intrude into the airspace or the sea which is sovereign. No country will allow that,\" Zhao said. \"We say freedom of navigation must be observed in accordance with international law. No freedom of navigation for warships and airplanes .\" A July 19, 2016, press report states the following: A senior Chinese admiral has rejected freedom of navigation for military ships, despite views held by the United States and most other nations that such access is codified by international law. The comments by Adm. Sun Jianguo, deputy chief of China's joint staff, come at a time when the U.S. Navy is particularly busy operating in the South China Sea, amid tensions over sea and territorial rights between China and many of its neighbors in the Asia-Pacific region. \"When has freedom of navigation in the South China Sea ever been affected? It has not, whether in the past or now, and in the future there won't be a problem as long as nobody plays tricks,\" Sun said at a closed forum in Beijing on Saturday, according to a transcript obtained by Reuters. \"But China consistently opposes so-called military freedom of navigation, which brings with it a military threat and which challenges and disrespects the international law of the sea,\" Sun said. A March 4, 2017, press report states the following: Wang Wenfeng, a US affairs expert at the China Institute of Contemporary International Relations, said Beijing and Washington obviously had different definitions of what constituted freedom of navigation. \"While the US insists they have the right to send warships to the disputed waters in the South China Sea, Beijing has always insisted that freedom of navigation should not cover military ships,\" he said. A February 22, 2018, press report states the following: Hundreds of government officials, experts and scholars from all over the world conducted in-depth discussions of various security threats under the new international security situation at the 54 th Munich Security Conference (MSC) from Feb. 16 to 18, 2018. Experts from the Chinese delegation at the three-day event were interviewed by reporters on hot topics such as the South China Sea issue and they refuted some countries' misinterpretation of the relevant international law. The conference included a panel discussion on the South China Sea issue, which China and the Association of Southeast Asian Nations (ASEAN) countries have been committed to properly solving since the signing of the draft South China Sea code of conduct. Senior Colonel Zhou Bo, director of the Security Cooperation Center of the International Military Cooperation Office of the Chinese Ministry of National Defense, explained how some countries' have misinterpreted the international law. \"First of all, we must abide by the United Nations Convention on the Law of the Sea (UNCLOS),\" Zhou said. \"But the problem now is that some countries unilaterally and wrongly interpreted the 'freedom of navigation' of the UNCLOS as the 'freedom of military operations', which is not the principle set by the UNCLOS,\" Zhou noted. A June 27, 2018, opinion piece in a British newspaper by China's ambassador to the UK stated that freedom of navigation is not an absolute freedom to sail at will. The US Freedom of Navigation Program should not be confused with freedom of navigation that is universally recognised under international law. The former is an excuse to throw America's weight about wherever it wants. It is a distortion and a downright abuse of international law into the \"freedom to run amok\". Second, is there any problem with freedom of navigation in the South China Sea? The reality is that more than 100,000 merchant ships pass through these waters every year and none has ever run into any difficulty with freedom of navigation.... The South China Sea is calm and the region is in harmony. The so-called \"safeguarding freedom of navigation\" issue is a bogus argument. The reason for hyping it up could be either an excuse to get gunboats into the region to make trouble, or a premeditated intervention in the affairs of the South China Sea, instigation of discord among the parties involved and impairment of regional stability…. China respects and supports freedom of navigation in the South China Sea according to international law. But freedom of navigation is not the freedom to run amok. For those from outside the region who are flexing their muscles in the South China Sea, the advice is this: if you really care about freedom of navigation, respect the efforts of China and Asean countries to safeguard peace and stability, stop showing off your naval ships and aircraft to \"militarise\" the region, and let the South China Sea be a sea of peace. A September 20, 2018, press report stated the following: Chinese Ambassador to Britain Liu Xiaoming on Wednesday [September 19] said that the freedom of navigation in the South China Sea has never been a problem, warning that no one should underestimate China's determination to uphold peace and stability in the region…. Liu stressed that countries in the region have the confidence, capability and wisdom to deal with the South China Sea issue properly and achieve enduring stability, development and prosperity. \"Yet to everyone's confusion, some big countries outside the region did not seem to appreciate the peace and tranquility in the South China Sea,\" he said. \"They sent warships and aircraft all the way to the South China Sea to create trouble.\" The senior diplomat said that under the excuse of so-called \"freedom of navigation,\" these countries ignored the vast sea lane and chose to sail into the adjacent waters of China's islands and reefs to show off their military might. \"This was a serious infringement\" of China's sovereignty, he said. \"It threatened China's security and put regional peace and stability in jeopardy.\" Liu stressed that China has all along respected and upheld the freedom of navigation and over-flight in the South China Sea in accordance with international law, including the United Nations Convention on the Law of the Sea. \"Freedom of navigation is not a license to do whatever one wishes,\" he said, noting that freedom of navigation is not freedom to invade other countries' territorial waters and infringe upon other countries' sovereignty. \"Such 'freedom' must be stopped,\" Liu noted. \"Otherwise the South China Sea will never be tranquil.\" In contrast to China's narrow definition, the U.S./Western definition of freedom of navigation is much broader, encompassing operations of various types by both commercial and military ships and aircraft in international waters and airspace. As discussed earlier in this report, an alternative term for referring to the U.S./Western definition of freedom of navigation is freedom of the seas, meaning \"all of the rights, freedoms, and lawful uses of the sea and airspace, including for military ships and aircraft, guaranteed to all nations under international law.\" When Chinese officials state that China supports freedom of navigation, China is referring to its own narrow definition of the term, and is likely not expressing agreement with or support for the U.S./Western definition of the term. China prefers to discuss maritime territorial disputes with other regional parties to the disputes on a bilateral rather than multilateral basis. Some observers believe China prefers bilateral talks because China is much larger than any other country in the region, giving China a potential upper hand in any bilateral meeting. China generally has resisted multilateral approaches to resolving maritime territorial disputes, stating that such approaches would internationalize the disputes, although the disputes are by definition international even when addressed on a bilateral basis. (China's participation with the ASEAN states in the 2002 declaration of conduct DOC and in negotiations with the ASEAN states on the follow-on binding code of conduct (COC) [see Appendix C ] represents a departure from this general preference.) Some observers believe China is pursuing a policy of putting off a negotiated resolution of maritime territorial disputes so as to give itself time to implement the salami-slicing strategy. Along with its above-discussed preference for treating territorial disputes on a bilateral rather than multilateral basis, China resists and objects to U.S. involvement in maritime disputes in the SCS and ECS. Statements in China's state-controlled media sometimes depict the United States as an outsider or interloper whose actions (including freedom of navigation operations) are seeking to \"stir up trouble\" in an otherwise peaceful regional situation. Potential or actual Japanese involvement in the SCS is sometimes depicted in China's state-controlled media in similar terms. Depicting the United States in this manner can be viewed as consistent with goals of attempting to drive a wedge between the United States and its allies and partners in the region and of ensuring maximum leverage in bilateral (rather than multilateral) discussions with other countries in the region over maritime territorial disputes. A July 31, 2018, press report stated the following: The Philippines has expressed concern to China over an increasing number of Chinese radio messages warning Philippine aircraft and ships to stay away from newly fortified islands and other territories in the South China Sea claimed by both countries, officials said Monday. A Philippine government report showed that in the second half of last year alone, Philippine military aircraft received such Chinese radio warnings at least 46 times while patrolling near artificial islands built by China in the South China Sea's Spratly archipelago. The Chinese radio messages were \"meant to step up their tactics to our pilots conducting maritime air surveillance in the West Philippine Sea\", the report said, using the Philippine name for the South China Sea. A Philippine air force plane on patrol near the Chinese-held islands received a particularly offensive radio message in late January according to the Philippine government report. It was warned by Chinese forces that it was \"endangering the security of the Chinese reef. Leave immediately and keep off to avoid misunderstanding,\" the report said. Shortly afterwards, the plane received a veiled threat: \"Philippine military aircraft, I am warning you again, leave immediately or you will pay the possible consequences.\" The Filipino pilot later \"sighted two flare warning signals from the reef\", said the report, which identified the Chinese-occupied island as Gaven Reef. Philippine officials have raised their concern twice over the radio transmissions, including in a meeting with Chinese counterparts in Manila earlier this year that focused on the Asian countries' long-unresolved territorial disputes, according to two officials who spoke on condition of anonymity because they were not authorised to discuss the issue publicly. It is a new problem that emerged after China transformed seven disputed reefs into islands using dredged sand in the Spratlys… The messages used to originate from Chinese coastguard ships in past years but US military officials suspect transmissions now are also being sent from the Beijing-held artificial islands, where far more powerful communications and surveillance equipment has been installed along with weapons such as surface-to-air missiles. \"Our ships and aircraft have observed an increase in radio queries that appear to originate from new land-based facilities in the South China Sea,\" Commander Clay Doss, public affairs officer of the US 7th Fleet, said by email in response to questions about the Chinese messages. \"These communications do not affect our operations,\" Doss said…. US Navy ships and aircraft communicate routinely with regional navies, including the Chinese navy. \"The vast majority of these communications are professional, and when that is not the case, those issues are addressed by appropriate diplomatic and military channels,\" Doss said. For discussion of some additional elements of China's approach to maritime disputes in the SCS and ECS, including China's nine-dash line in the SCS, see Appendix E . The U.S. position on territorial and EEZ disputes in the Western Pacific (including those involving China) includes the following elements, among others: The United States supports the principle that disputes between countries should be resolved peacefully, without coercion, intimidation, threats, or the use of force, and in a manner consistent with international law. The United States supports the principle of freedom of seas, meaning the rights, freedoms, and uses of the sea and airspace guaranteed to all nations in international law. The United States opposes claims that impinge on the rights, freedoms, and lawful uses of the sea that belong to all nations. The United States takes no position on competing claims to sovereignty over disputed land features in the ECS and SCS. Although the United States takes no position on competing claims to sovereignty over disputed land features in the ECS and SCS, the United States does have a position on how competing claims should be resolved: Territorial disputes should be resolved peacefully, without coercion, intimidation, threats, or the use of force, and in a manner consistent with international law. Claims of territorial waters and EEZs should be consistent with customary international law of the sea and must therefore, among other things, derive from land features. Claims in the SCS that are not derived from land features are fundamentally flawed. Parties should avoid taking provocative or unilateral actions that disrupt the status quo or jeopardize peace and security. The United States does not believe that large-scale land reclamation with the intent to militarize outposts on disputed land features is consistent with the region's desire for peace and stability. The United States, like most other countries, believes that coastal states under UNCLOS have the right to regulate economic activities in their EEZs, but do not have the right to regulate foreign military activities in their EEZs. U.S. military surveillance flights in international airspace above another country's EEZ are lawful under international law, and the United States plans to continue conducting these flights as it has in the past. The Senkaku Islands are under the administration of Japan and unilateral attempts to change the status quo raise tensions and do nothing under international law to strengthen territorial claims. For additional information regarding the U.S. position on the issue of operational rights of military ships in the EEZs of other countries, see Appendix F . U.S. Navy ships challenge what the United States views as excessive maritime claims and carry out assertions of operational rights as part of the U.S. Freedom of Navigation (FON) program for challenging maritime claims that the United States believes to be inconsistent with international law. The FON program began in 1979, involves diplomatic activities as well as operational assertions by U.S. Navy ships, and is global in scope, encompassing activities and operations directed not only at China, but at numerous other countries around the world, including U.S. allies and partner states. DOD's record of \"excessive maritime claims that were challenged by DoD operational assertions and activities during the period of October 1, 2016, to September 30, 2017, in order to preserve the rights, freedoms, and uses of the sea and airspace guaranteed to all nations by international law\" includes a listing for multiple challenges that were conducted to challenge Chinese claims relating to \"excessive straight baselines; jurisdiction over airspace above the exclusive economic zone (EEZ); restriction on foreign aircraft flying through an Air Defense Identification Zone (ADIZ) without the intent to enter national airspace; domestic law criminalizing survey activity by foreign entities in the EEZ; prior permission required for innocent passage of foreign military ships through the TTS; and actions/statements that indicate a claim to a TTS [territorial sea] around features not so entitled.\" Some observers now assess that China's actions in the SCS have achieved for China a more dominant or more commanding position in the SCS. One observer, for example, writes in a March 28, 2018, commentary piece that as Beijing's regional clout continues to grow, it can be hard for weaker nations to resist it, even with these allies' support. Barely three weeks after the [the U.S. aircraft carrier Carl] Vinson's visit [to Vietnam], the Vietnamese government bowed to Chinese pressure and canceled a major oil drilling project in disputed South China waters. It was yet another sign of the region's rapidly shifting dynamics. For the last decade, the United States and its Asian allies have been significantly bolstering their military activities in the region with the explicit aim of pushing back against China. But Beijing's strength and dominance, along with its diplomatic, economic and military reach, continues to grow dramatically.... Western military strategists worry that China will, in time, be able to block any activity in the region by the United States and its allies. Already, satellite photos show China installing sophisticated weapons on a range of newly-reclaimed islands where international law says they simply should not be present. In any war, these and other new weapons that China is acquiring could make it all but impossible for the U.S. Navy and other potential enemies of China to operate in the area at all.... China's increasing confidence in asserting control over the South China Sea has clearly alarmed its neighbors, particularly the Philippines, Vietnam, Malaysia, Indonesia and Brunei, all of whom have competing territorial claims over waters that China claims for itself. But it also represents a major and quite deliberate challenge to the United States which, as an ally to all these nations, has essentially staked its own credibility on the issue. Over the last several years, it has become common practice for U.S. warships to sail through nearby waters, pointedly refusing to acknowledge Chinese demands that they register with its unilaterally-declared air and maritime \"identification zones\" (which the United States and its allies do not recognize).... None of this, however, addresses the seismic regional change produced by China's island-building strategy.... ... China sees this confrontation as a test case for its ability to impose its will on the wider region—and so far it is winning.... The United States remains the world's preeminent military superpower, and there is little doubt it could win a fight with China almost anywhere else in the world. In its own backyard, however, Beijing is making it increasingly clear that it calls the shots. And for now, there is little sign anyone in Washington—or anywhere else—has the appetite to seriously challenge that assumption. An April 9, 2018, article from a Chinese media outlet states the following: The situation in the South China Sea has been developing in favor of China, said Chinese observers after media reported that China is conducting naval drills in the region, at the same time as \"three US carrier battle groups passed by\" the area. \"The regional strategic situation is tipping to China's side in the South China Sea, especially after China's construction of islands and reefs,\" Chen Xiangmiao, a research fellow at the National Institute for the South China Sea, told the Global Times on Sunday. China has strengthened its facilities in the region and conducted negotiations and cooperation on the South China Sea, which have narrowed China's gap in power with the US, while gaining advantages over Japan and India, according to Chen. U.S. Navy Admiral Philip Davidson, in responses to advance policy questions from the Senate Armed Services Committee for an April 17, 2018, hearing before the committee to consider nominations, including Davidson's nomination to become Commander, U.S. Pacific Command (PACOM), stated the following in part (emphasis added): With respect to their actions in the South China Sea and more broadly through the Belt and Road Initiative, the Chinese are clearly executing deliberate and thoughtful force posture initiatives. China claims that these reclaimed features and the Belt and Road Initiative [BRI] will not be used for military means, but their words do not match their actions.... While Chinese air forces are not as advanced as those of the United States, they are rapidly closing the gap through the development of new fourth and fifth generation fighters (including carrier-based fighters), long range bombers, advanced UAVs, advanced anti-air missiles, and long-distance strategic airlift. In line with the Chinese military's broader reforms, Chinese air forces are emphasizing joint operations and expanding their operations, such as through more frequent long range bomber flights into the Western Pacific and South China Sea. As a result of these technological and operational advances, the Chinese air forces will pose an increasing risk not only to our air forces but also to our naval forces, air bases and ground forces.... In the South China Sea, the PLA has constructed a variety of radar, electronic attack, and defense capabilities on the disputed Spratly Islands, to include: Cuarteron Reef, Fiery Cross Reef, Gaven Reef, Hughes Reef, Johnson Reef, Mischief Reef and Subi Reef. These facilities significantly expand the real-time domain awareness, ISR, and jamming capabilities of the PLA over a large portion of the South China Sea, presenting a substantial challenge to U.S. military operations in this region.... China's development of forward military bases in the South China Sea began in December 2013 when the first dredger arrived at Johnson Reef. Through 2015, China used dredging efforts to build up these reefs and create manmade islands, destroying the reefs in the process. Since then, China has constructed clear military facilities on the islands, with several bases including hangars, barracks, underground fuel and water storage facilities, and bunkers to house offense and defensive kinetic and non-kinetic systems. These actions stand in direct contrast to the assertion that President Xi made in 2015 in the Rose Garden when he commented that Beijing had no intent to militarize the South China Sea. Today these forward operating bases appear complete. The only thing lacking are the deployed forces. Once occupied, China will be able to extend its influence thousands of miles to the south and project power deep into Oceania. The PLA will be able to use these bases to challenge U.S. presence in the region, and any forces deployed to the islands would easily overwhelm the military forces of any other South China Sea-claimants. In short, China is now capable of controlling the South China Sea in all scenarios short of war with the United States .... Ultimately, BRI provides opportunities for China's military to expand its global reach by gaining access to foreign air and maritime port facilities. This reach will allow China's military to extend its striking and surveillance operations from the South China Sea to the Gulf of Aden. Moreover, Beijing could leverage BRI projects to pressure nations to deny U.S. forces basing, transit, or operational and logistical support, thereby making it more challenging for the United States to preserve international orders and norms.... With respect to the Indo-Pacific region, specifically, I am concerned that some nations, including China, assert their interests in ways that threaten the foundational standards for the world's oceans as reflected in the Law of the Sea Convention. This trend is most evident off the coast of China and in the South China Sea where China's policies and activities are challenging the free and open international order in the air and maritime domains. China's attempts to restrict the rights, freedoms, and lawful uses of the sea available to naval and air forces is inconsistent with customary international law and as President Reagan said in the 1983 Statement on United States Oceans Policy, \"the United States will not, however, acquiesce in unilateral acts of other states designed to restrict the rights and freedoms of the international community in navigation and overflight.\" A May 8, 2018, press report states the following: China's neighbors and rivals fear that the Asian powerhouse is slowly but surely establishing the foundation of an Air Defense Identification Zone (ADIZ) in one of the world's most important and busy waterways…. Boosting China's missile defense system in the area would allow it to progressively restrict the movement as well as squeeze the supply lines of smaller claimant states, all of which maintain comparatively modest military capabilities to fortify their sea claims.\" Another observer writes in a May 10, 2018, commentary piece that All these developments [in the SCS], coupled with the lack of any concerted or robust response from the United States and its allies and partners in the region, point to the inevitable conclusion that the sovereignty dispute in the SCS has – irreversibly – become a foregone conclusion. Three compelling reasons justify this assertion…. First, China sees the SCS issue as a security matter of paramount importance, according it the status of a \"core interest\" – on par with resolution of the Taiwan question…. Second, the sovereignty of SCS waters is a foregone conclusion partly because of U.S. ambivalence toward Chinese military encroachment…. Third, the implicit acquiescence of ASEAN [Association of Southeast Asian Nations] states toward China's moves in the SCS has strengthened its position that all features and waters within the \"nine-dashed line\" belongs to Beijing…. The above three factors – Beijing's sharpened focus on national security, lack of American resolve to balance China in the SCS, and ASEAN's prioritization of peace and stability over sovereignty considerations – have contributed to the bleak state of affairs today…. From the realist perspective, as Beijing accrues naval dominance in the SCS, the rules meant to regulate its behavior are likely to matter less and less—underscoring the geopolitical truism that 'might is right.' While China foreswears the use of coercive force on its Southeast Asian neighbors and may indeed have no offensive intentions today, it has now placed itself in a position to do so in future. In other words, while it had no capacity nor intent to threaten Southeast Asian states previously, it has developed the requisite capabilities today. Another observer writes in a separate May 10, 2018, commentary piece that the South China Sea is being increasingly dominated militarily by China at both its eastern and western ends. This is what researchers at the US Naval War College meant when they told the author that Chinese militarization activities in the region are an attempt to create the equivalent of a \"strategic strait\" in the South China Sea. In other words, through the more or less permanent deployment of Chinese military power at both extreme ends of the South China Sea – Hainan and Woody Island in the west, and the new (and newly militarized) artificial islands in the east – Beijing is seeking to transform the South China Sea from an international SLOC into a Chinese-controlled waterway and a strategic chokepoint for other countries…. This amalgamation of force means that China's decades-long \"creeping assertiveness\" in this particular body of water has become a full-blown offensive. What all this means is that China is well on its way toward turning the South China Sea in a zone of anti-access/area denial (A2/AD). This means keeping military competitors (particularly the US Navy) out of the region, or seriously impeding their freedom of action inside it. A June 1, 2018, press report states the following: Through its navy, coast guard, a loose collection of armed fishing vessels, and a network of military bases built on artificial islands, Beijing has gained de facto control of the South China Sea, a panel of Indo-Pacific security experts said Friday. And the implications of that control—militarily, economically, diplomatically—are far-reaching for the United States and its partners and allies in the region. \"Every vessel [sent on a freedom of navigation transit] is shadowed\" by a Chinese vessel, showing Beijing's ability to respond quickly events in areas it considers its own, retired Marine Lt. Gen. Wallace \"Chip\" Gregson said during an American Enterprise Institute forum. Another observer writes in a June 5, 2018, commentary piece that It's over in the South China Sea. The United States just hasn't figured it out yet…. It is past time for the United States to figure out what matters in its relationship with China, and to make difficult choices about which values have to be defended, and which can be compromised. A June 21, 2018, editorial states the following: America's defence secretary, James Mattis, promised \"larger consequences\" if China does not change track [in the SCS]. Yet for now [Chinese President Xi Jinping], while blaming America's own \"militarisation\" as the source of tension, must feel he has accomplished much. He has a chokehold on one of the world's busiest shipping routes and is in a position to make good on China's claims to the sea's oil, gas and fish. He has gained strategic depth in any conflict over Taiwan. And, through the sheer fact of possession, he has underpinned China's fatuous historical claims to the South China Sea. To his people, Mr Xi can paint it all as a return to the rightful order. Right now, it is not clear what the larger consequences of that might be. Another observer writes in a July 17, 2018, commentary piece that Two years after an international tribunal rejected expansive Chinese claims to the South China Sea, Beijing is consolidating control over the area and its resources. While the U.S. defends the right to freedom of navigation, it has failed to support the rights of neighboring countries under the tribunal's ruling. As a result, Southeast Asian countries are bowing to Beijing's demands…. In late July 2017, Beijing threatened Vietnam with military action if it did not stop oil and gas exploration in Vietnam's exclusive economic zone, according to a report by the BBC's Bill Hayton. Hanoi stopped drilling. Earlier this year, Vietnam again attempted to drill, and Beijing issued similar warnings…. Other countries, including the U.S., failed to express support for Vietnam or condemn China's threats. Beijing has also pressured Brunei, Malaysia and the Philippines to agree to \"joint development\" in their exclusive economic zones—a term that suggests legitimate overlapping claims. Meanwhile China is accelerating its militarization of the South China Sea. In April, it deployed antiship cruise missiles, surface-to-air missiles and electronic jammers to artificial islands constructed on Fiery Cross Reef, Subi Reef and Mischief Reef. In May, it landed long-range bombers on Woody Island. The Trump administration's failure to press Beijing to abide by the tribunal's ruling is a serious mistake. It undermines international law and upsets the balance of power in the region. Countries have taken note that the tide in the South China Sea is in China's favor, and they are making their strategic calculations accordingly. This hurts U.S. interests in the region. Up through 2014, U.S. concern over maritime territorial and EEZ disputes involving China centered more on their potential for causing tension, incidents, and a risk of conflict between China and its neighbors in the region, including U.S. allies Japan and the Philippines and emerging partner states such as Vietnam. While that concern remains, particularly regarding the potential for a conflict between China and Japan involving the Senkaku Islands, U.S. concern since 2014 (i.e., since China's island-building activities in the Spratly Islands were first publicly reported) has shifted increasingly to how China's strengthening position in the SCS may be affecting the risk of a U.S.-China crisis or conflict in the SCS and the broader U.S.-Chinese strategic competition. A key issue for Congress is how the United States should respond to China's actions in the SCS and ECS—particularly its island-building and base-construction activities in the Spratly Islands—and to China's strengthening position in the SCS. A key oversight question for Congress is whether the Trump Administration has an appropriate strategy for countering China's \"salami-slicing\" strategy or gray zone operations for gradually strengthening its position in the SCS, for imposing costs on China for its actions in the SCS and ECS, and for defending and promoting U.S. interests in the region. In considering how to respond to China's actions in the SCS and ECS, an initial step can be to review China's approach to the region. As stated earlier, in general, China's approach to the maritime disputes in the SCS and ECS, and to strengthening its position over time in the SCS, can be characterized as follows: China appears to have identified the assertion and defense of its maritime territorial claims in the SCS and ECS, and the strengthening of its position in the SCS, as important national goals. To achieve these goals, China appears to be employing an integrated, whole-of-society strategy that includes diplomatic, informational, economic, military, paramilitary/law enforcement, and civilian elements. In implementing this integrated strategy, China appears to be persistent, patient, tactically flexible, willing to expend significant resources, and willing to absorb at least some amount of reputational and other costs that other countries might seek to impose on China in response to China's actions. The above points raise a possible question as to how likely a U.S. response might be to achieve U.S. goals if it were one-dimensional rather than multidimensional or whole-of-government; halting or intermittent rather than persistent; insufficiently resourced; reliant on imposed costs that are not commensurate with the importance that China appears to have assigned to achieving its goals in the region, or some combination of these things. Potential general U.S. goals in responding to China's actions in the SCS and ECS include but are not necessarily limited to the following, which are not mutually exclusive: fulfilling U.S. security commitments in the Western Pacific, including treaty commitments to Japan and the Philippines; maintaining and enhancing the U.S.-led security architecture in the Western Pacific, including U.S. security relationships with treaty allies and partner states; maintaining a regional balance of power that is favorable to the United States and its allies and partners; de fending the principle of peaceful resolution of disputes , under which disputes between countries should be resolved peacefully, without coercion, intimidation, threats, or the use of force, and in a manner consistent with international law, and resisting the emergence of an alternative \"might-makes-right\" approach to international affairs; defending the principle of freedom of the seas , meaning the rights, freedoms, and uses of the sea and airspace guaranteed to all nations in international law, including the interpretation held by the United States and many other countries concerning operational freedoms for military forces in EEZs; and preventing China from becoming a regional hegemon in East Asia, and potentially as part of that, preventing China from controlling or dominating the ECS or SCS. Potential specific U.S. goals in responding to China's actions in the SCS and ECS include but are not necessarily limited to the following, which are not mutually exclusive: dissuading China from carrying out any additional base-construction activities that it might be planning for sites that it occupies in the SCS; dissuading China from moving any additional military personnel, equipment, and supplies to bases at sites that it occupies in the SCS, and persuading China to remove military personnel, equipment, and supplies that have already been moved to those bases; dissuading China from initiating island-building or base-construction activities at Scarborough Shoal; dissuading China from declaring an ADIZ over the SCS; encouraging China to reduce or end Chinese Coast Guard ships at the Senkaku Islands in the ECS; encouraging China to halt actions intended to put pressure against the small Philippine military presence at Second Thomas Shoal in the Spratly Islands (or against any other Philippine-occupied sites in the Spratly Islands); encouraging China to provide greater access by Philippine fisherman to waters surrounding Scarborough Shoal or in the Spratly Islands; encouraging China to adopt the U.S./Western definition regarding freedom of the seas, including the freedom of U.S. and other non-Chinese military vessels to operate freely in China's EEZ; and encouraging China to accept and abide by the July 2016 tribunal award in the SCS arbitration case involving the Philippines and China (see Appendix D ). In terms of identifying specific actions that are intended to support U.S. policy goals, a key element would be to have a clear understanding of which actions are intended to support which goals, and to maintain an alignment of actions with policy goals. For example, U.S. freedom of navigation (FON) operations, which often feature prominently in discussions of actual or potential U.S. actions, can directly support a general goal of defending principle of freedom of the seas, but might support other goals only indirectly, marginally, or not at all. In assessing how the United States should respond to China's actions in the SCS, another factor that policymakers may consider is the potential contribution that could be made by allies such as Japan, the Philippines, Australia, the UK, and France, as well as potential or emerging partner countries such as Vietnam, Indonesia, and India. Most or all of the countries just mentioned have taken steps of one kind or another in response to China's actions in the SCS and ECS. For U.S. policymakers, one key question is how effective those steps by allies and partner countries have been, whether those steps could be strengthened, and whether they should be undertaken independent of or in coordination with the United States. A second key question concerns the kinds of actions that Philippine president Rodrigo Duterte might be willing to take, given his largely nonconfrontational policy toward China regarding the SCS, and what implications Philippine reluctance to take certain actions may have for limiting or reducing the potential effectiveness of U.S. options for responding to China's actions in the SCS. In apparent response to China's actions in the SCS and ECS, the United States during the Obama Administration took a number of actions, including the following: reiterating the U.S. position on maritime territorial claims in the area in various public fora; expressing strong concerns about China's island-building and base-construction activities, and calling for a halt on such activities by China and other countries in the region; taking steps to improve the ability of the Philippines, Vietnam, Malaysia, and Indonesia to maintain maritime domain awareness (MDA) and patrol their EEZs, including the Southeast Asia Maritime Security Initiative (MSI), an initiative (since renamed the Indo-Pacific MSI) announced by the Obama Administration in May 2015 and subsequently legislated by Congress to provide $425 million in maritime security assistance to those four countries over a five-year period; taking steps to strengthen U.S. security cooperation with Japan, the Philippines, Vietnam, and Singapore, including signing an agreement with the Philippines that provides U.S. forces with increased access to Philippine bases, increasing the scale of joint military exercises involving U.S. and Philippine forces, relaxing limits on sales of certain U.S. arms to Vietnam, and operating U.S. Navy P-8 maritime patrol aircraft from Singapore; expressing support for the idea of Japanese patrols in the SCS; and stating that the United States would support a multinational maritime patrol of the SCS by members of ASEAN. Some observers, both during and after the Obama Administration, have criticized the Obama Administration for not doing enough to counter China's actions in the SCS and ECS. In particular, they have argued that the Obama Administration did not react strongly enough to China's occupation of Scarborough Shoal in 2012; react strongly enough to China's island-building and base-construction activities in the Spratly Islands starting around December 2013; do enough in terms of conducting and offering sufficiently clear and strong legal rationales for U.S. freedom of navigation (FON) operations in the SCS; do enough to publicize, rhetorically support, and enforce the July 2016 tribunal award in the SCS arbitration case involving the Philippines and China; and impose sufficiently strong costs on China's for its actions in the SCS and ECS. As a result of the above, these critics have argued, the Obama Administration in effect sent a message to China that the United States would not strongly oppose China's actions in the SCS and ECS—a message, these critics have argued, that may have encouraged and accelerated China's actions. Supporters of the Obama Administration's actions in response to China's actions in the SCS and ECS have argued that those actions were substantial and proportionate to China's actions and successful in deterring China from initiating island-building and base-construction activities at Scarborough Shoal; having U.S. military aircraft disregard the ADIZ that China declared over the ECS, and in deterring China from declaring an ADIZ over the SCS; imposing political and reputational costs on China for its actions in the ECS and SCS during this time; and working with regional allies and partners to impose costs on China and strengthen the U.S.-led security architecture for the region. In addition to continuing to implement the above-mentioned Indo-Pacific MSI and conducting recurring freedom of navigation (FON) operations in the SCS (see next section), the Trump Administration reportedly has taken other actions to promote U.S. interests in that area. These steps include actions to increase U.S. defense and intelligence cooperation with Vietnam and Indonesia, and U.S. assistance to improve the maritime security capabilities of the two countries. A January 9, 2018, press report states the following: The United States has accused China of \"provocative militarisation\" of disputed areas in the South China Sea and will continue sending vessels to the region to carry out freedom-of-navigation patrols, according to a top US adviser on Asia policy. Brian Hook, a senior adviser to US Secretary of State Rex Tillerson, said on Tuesday [January 9] that the issue of the South China Sea was raised at all diplomatic and security dialogues between China and the US... \"China's provocative militarisation of the South China Sea is one area where China is contesting international law. They are pushing around smaller states in ways that put a strain on the global system,\" Hook said during a media telephone conference. \"We are going to back up freedom-of-navigation operations and let them know we will fly, sail and operate wherever international law allows.\"... \"We strongly believe China's rise cannot come at the expense of the values and rule-based order. That order is the foundation of peace and stability in the Indo-Pacific and also around the world,\" Hook said. \"When China's behaviour is out of step with these values and these rules we will stand up and defend the rule of law.\" A May 3, 2018, press report stated the following: The United States has raised concerns with China about its latest militarization of the South China Sea and there will be near-term and long-term consequences, the White House said on Thursday [May 3]. U.S. news network CNBC reported on Wednesday that China had installed anti-ship cruise missiles and surface-to-air missile systems on three manmade outposts in the South China Sea. It cited sources with direct knowledge of U.S. intelligence. Asked about the report, White House spokeswoman Sarah Sanders told a regular news briefing: \"We're well aware of China's militarization of the South China Sea. We've raised concerns directly with the Chinese about this and there will be near-term and long-term consequences.\" Sanders did not say what the consequences might be. On May 23, 2018, DOD announced that it was disinviting China from the 2018 RIMPAC (Rim of the Pacific) exercise. RIMPAC is a U.S.-led, multilateral naval exercise in the Pacific involving naval forces from more than two dozen countries that is held every two years. At DOD's invitation, China participated in the 2014 and 2016 RIMPAC exercises. DOD had invited China to participate in the 2018 RIMPAC exercise, and China had accepted that invitation. Observers who have argued for the United States to take stronger actions in response to China's actions in the ECS and SCS have argued that the United States should, among other things, not invite China to participate in the 2018 RIMPAC exercise, on the grounds that doing so would in effect reward China for its recent actions in the ECS and SCS. They have also argued that the value to the United States and its allies of information gained from observing Chinese naval forces operate during the exercise would be outweighed by the value to China of information that China would gain from observing U.S. and other allied and partner navies operate during the exercise. After DOD had issued the invitation to China to participate in the 2018 RIMPAC exercise, these observers argued that the invitation should be withdrawn. Supporters of having China participate in RIMPAC exercises have argued that they are valuable for maintaining a constructive working relationship with China's navy—something, they argue, that could be of particular value if there were a U.S.-Chinese incident at sea or a U.S.-China crisis over some issue. They have also argued that China's participation in RIMPAC exercises provides opportunities to encourage China's navy to adopt U.S. and Western norms relating to issues such as freedom of the seas and avoidance of incidents at sea, and that the value to the United States and its allies of information gained from observing China's naval forces operate during the exercise is not outweighed by value to China of the information gained by China from observing U.S., allied, and partner navies operate during the exercises, particularly since China could observe the exercise using intelligence-gathering ships or perhaps other means, even without participating in the exercise. A statement from DOD about the withdrawal of the invitation for China to participate in the 2018 RIMPAC exercise states the following: The United States is committed to a free and open Indo-Pacific. China's continued militarization of disputed features in the South China Sea only serve to raise tensions and destabilize the region. As an initial response to China's continued militarization of the South China Sea we have disinvited the PLA Navy from the 2018 Rim of the Pacific (RIMPAC) Exercise. China's behavior is inconsistent with the principles and purposes of the RIMPAC exercise. We have strong evidence that China has deployed anti-ship missiles, surface-to-air missile (SAM) systems, and electronic jammers to contested features in the Spratly Islands region of the South China Sea. China's landing of bomber aircraft at Woody Island has also raised tensions. While China has maintained that the construction of the islands is to ensure safety at sea, navigation assistance, search and rescue, fisheries protection, and other non-military functions the placement of these weapon systems is only for military use. We have called on China to remove the military systems immediately and to reverse course on the militarization of disputed South China Sea features. We believe these recent deployments and the continued militarization of these features is a violation of the promise that President Xi made to the United States and the World not to militarize the Spratly Islands. A May 23, 2018, press report states the following: The Pentagon rescinded an invitation to China to participate in an international military exercise in the Pacific Ocean next month, signaling disapproval to Beijing for what U.S. officials say is its refusal to stop militarizing South China Sea islands. Defense Secretary Jim Mattis, after weeks of internal debate within the Pentagon, concluded that China shouldn't be allowed to participate in the American-led biennial Rim of the Pacific exercise, slated to begin in June, according to U.S. officials. The invitation's withdrawal hasn't been previously disclosed. Chinese officials in Washington were notified of the decision Wednesday morning, said the U.S. officials. China's top diplomat, State Councilor Wang Yi, criticized the Pentagon's decision in comments while visiting the State Department Wednesday. \"We find that a very unconstructive move, nonconstructive move,\" Mr. Wang told reporters. \"We hope the U.S. will change such a negative mindset.\"... After The Wall Street Journal published [an initial version of] this article on Wednesday [May 23], Pentagon officials called their move \"an initial response\" to China's militarization of the islands. \"We have strong evidence that China has deployed anti-ship missiles, surface-to-air missile (SAM) systems, and electronic jammers to contested features in the Spratly Islands region of the South China Sea,\" Lt. Col. Chris Logan, a Pentagon spokesman, said in a statement. \"China's landing of a bomber aircraft at Woody Island has also raised tensions.\" Eric Sayers, of the Center for Strategic and International Studies, a think tank in Washington, and a former adviser to U.S. Pacific Command, said the Pentagon move \"will be a minor blow to the PLA Navy's prestige.\" He said, \"It will also send the signal to Beijing that China cannot expect to continue to militarize the South China Sea and still be treated as a welcomed member of the international maritime community.\" But, Mr. Sayers added, the Trump administration must still develop an overall strategy in the Indo- Pacific region if it hopes to influence the maritime domain there. \"Thus far, there is little evidence or new initiatives one can point to that distinguishes this administration's regional policy from the previous one,\" he said. The decision to rescind the invitation came after more than a month of internal Trump administration debate about China, including the timing of any rescission, the officials said, especially given the trade talks. Top State Department officials initially advised against rescinding the invitation, hoping that diplomatic interventions would convince China to at least remove missiles from those islands, said the U.S. officials. State Department officials didn't immediately respond to a request for comment. But Pentagon officials held the view that it was time to impose a cost on the Chinese for their behavior in the South China Sea, the officials said. A June 3, 2018, press report states the following: The United States is considering intensified naval patrols in the South China Sea in a bid to challenge China's growing militarization of the waterway, actions that could further raise the stakes in one of the world's most volatile areas. The Pentagon is weighing a more assertive program of so-called freedom-of-navigation operations close to Chinese installations on disputed reefs, two U.S. officials and Western and Asian diplomats close to discussions said. The officials declined to say how close they were to finalizing a decision. Such moves could involve longer patrols, ones involving larger numbers of ships or operations involving closer surveillance of Chinese facilities in the area, which now include electronic jamming equipment and advanced military radars. U.S. officials are also pushing international allies and partners to increase their own naval deployments through the vital trade route as China strengthens its military capabilities on both the Paracel and Spratly islands, the diplomats said, even if they stopped short of directly challenging Chinese holdings. \"What we have seen in the last few weeks is just the start, significantly more is being planned,\" said one Western diplomat, referring to a freedom of navigation patrol late last month that used two U.S. ships for the first time. \"There is a real sense more needs to be done.\"… Critics have said the patrols have little impact on Chinese behavior and mask the lack of a broader strategy to deal with China's growing dominance of the area…. U.S. Defence Secretary Jim Mattis warned in Singapore on Saturday [June 2] that China's militarization of the South China Sea was now a \"reality\" but that Beijing would face unspecified consequences. A November 13, 2018, press report states the following: National security adviser John Bolton said [on November 13] the U.S. would oppose any agreements between China and other claimants to the South China Sea that limit free passage to international shipping, and that American naval vessels would continue to sail through those waters. Mr. Bolton's remarks served as a warning to Southeast Asian leaders, who are preparing for a regional summit in Singapore this week, and particularly for the Philippines, which is now in talks with Beijing about jointly exploring natural resources in the contested area. In meetings to develop a code of conduct this year for the South China Sea, China has tried to secure a veto over Southeast Asian nations hosting military exercises with other countries in the disputed waters…. Mr. Bolton said the U.S. welcomes the negotiations in principle. In a media briefing in Singapore, he described them as a plus. But he stressed that \"the outcome has to be mutually acceptable, and also has to be acceptable to all the countries that have legitimate maritime and naval rights to transit and other associate rights that we don't want to see infringed.\" Some observers have expressed concern that the Trump Administration's focus from time to time on North Korea has sometimes distracted the Administration from the situation in the SCS, permitting China to more easily increase or consolidate its gains in the area. Other observers have expressed concern that the Trump Administration's focus on reducing the U.S. trade deficit with China could distract the Administration from other issues relating to China, including China's actions in the SCS. At a September 17, 2015, hearing before the Senate Armed Services Committee on DOD's maritime security strategy in the Asia-Pacific region, DOD witnesses stated, in response to questioning, that the United States had not conducted a freedom of navigation (FON) operation within 12 miles of a Chinese-occupied land feature in the Spratly Islands since 2012. This led to a public debate in the United States (that was watched by observers in the Western Pacific) over whether the United States should soon conduct such an operation, particularly given China's occupation of Scarborough Shoal in 2012 and China's island-building activities at sites that its occupies in the SCS. Opponents argued that conducting a FON operation could antagonize China and give China an excuse to militarize its occupied sites in the SCS. Supporters argued that not conducting such an operation was inconsistent with the underlying premise of the U.S. FON program that navigational rights which are not regularly exercised are at risk of atrophy; that it was inconsistent with the U.S. position of taking no position on competing claims to sovereignty over disputed land features in the SCS (because it tacitly accepts Chinese sovereignty over those features); that it effectively rewarded (rather than imposed costs on) China for its assertive actions in the SCS, potentially encouraging further such actions; and that China intends to militarize its occupied sites in the Spratly Islands, regardless of whether the United States conducts FON operations there. The Obama Administration reportedly considered, for a period of weeks, whether to conduct such an operation in the near future. Some observers argued that the Obama Administration's extended consideration of the question, and the press reporting on that deliberation, unnecessarily raised the political stakes involved in whether to conduct what, in the view of these observers, should have been a routine FON operation. The Obama Administration decided in favor of conducting the operation, and the operation reportedly was conducted near the Chinese-occupied site of Subi Reef on October 27, 2015 (which was October 26, 2015, in Washington, DC), using the U.S. Navy destroyer Lassen in conjunction with a U.S. Navy P-8 maritime patrol aircraft flying overhead. Statements from executive branch sources about the operation that were reported in the press created some confusion among observers regarding how the operation was conducted and what rationale the Obama Administration was citing as the legal basis for the operation. In particular, there was confusion among observers as to whether the United States was defending the operation as an expression of the right of innocent passage —a rationale, critics argued, that would muddle the legal message sent by the operation, possibly implying U.S. acceptance of Chinese sovereignty over Subi Reef, which would inadvertently turn the operation into something very different and perhaps even self-defeating from a U.S. perspective. A second FON operation in the SCS was conducted on January 29, 2016, near Triton Island in the Paracel Islands, by the U.S. Navy destroyer C urtis Wilber . A third FON operation in the SCS was conducted on May 10, 2016, in which the destroyer William P. Lawrence conducted an innocent passage within 12 nautical miles of Fiery Cross Reef, a Chinese-occupied feature in the Spratly Islands that is also claimed by Taiwan, Vietnam, and the Philippines. A fourth FON operation in the SCS occurred on October 21, 2016, involving the destroyer Decatur operating near the Paracel Islands. This was the final announced FON operation in the South China Sea during the Obama Administration. As of early May 2017, the Trump Administration had not conducted any announced FON operations in the SCS, and DOD reportedly had turned down proposals from the Navy to conduct such operations, prompting some observers to argue that the Trump Administration, in its first few months in office, appeared to be more hesitant about conducting FON operations in the SCS than the Obama Administration was during its final 15 months in office (i.e., since October 2015). DOD officials stated that in spite of the absence of announced FON operations in the SCS, U.S. policy on such operations had not changed, and that the United States intended to conduct FON operations in the SCS in the near future. As shown in Table 1 , the Trump Administration conducted an FON operation in the SCS on May 25, 2017, and has conducted multiple additional FON operations in the SCS since then. In general, China has objected to each of these operations and has stated that it sent Chinese Navy ships in each case to warn the U.S. Navy ships to leave the areas in question. The FON operation conducted on September 30, 2018, led to an intense encounter, discussed elsewhere in this report, between the U.S. Navy ship that conducted the operation (the USS Decatur [DDG-73]) and the Chinese Navy ship that was sent to warn it off. In addition to conducting FON operations in the Spratly and Paracel islands, U.S. Navy ships have steamed through the Taiwan Strait on multiple occasions, and Air Force long-range bombers have periodically conducted flyovers above the ECS and SCS. A September 1, 2017, press report states that The Pentagon for the first time has set a schedule of naval patrols in the South China Sea in an attempt to create a more consistent posture to counter China's maritime claims there, injecting a new complication into increasingly uneasy relations between the two powers. The U.S. Pacific Command has developed a plan to conduct so-called freedom-of-navigation operations two to three times over the next few months, according to several U.S. officials, reinforcing the U.S. challenge to what it sees as excessive Chinese maritime claims in the disputed South China Sea. Beijing claims sovereignty over all South China Sea islands and their adjacent waters. The plan marks a significant departure from such military operations in the region during the Obama administration, when officials sometimes struggled with when, how and where to conduct those patrols. They were canceled or postponed based on other political factors after what some U.S. officials said were contentious internal debates. The idea behind setting a schedule contrasts with the more ad hoc approach to conducting freedom-of-navigation operations, known as \"fonops\" in military parlance, and establish more regularity in the patrols. Doing so may help blunt Beijing's argument that the patrols amount to a destabilizing provocation each time they occur, U.S. officials said.... Officials described the new plan as a more predetermined way of conducting such patrols than in the past, though not immutable. The plan is in keeping with the Trump administration's approach to military operations, which relies on giving commanders leeway to determine the U.S. posture. In keeping with policies against announcing military operations before they occur, officials declined to disclose where and when they would occur.... In a new facet, some freedom-of-navigation patrols may be \"multi-domain\" patrols, using not only U.S. Navy warships but U.S. military aircraft as well. Thus far, there have been three publicly disclosed freedom-of-navigation operations under the Trump administration. The last one was conducted on Aug. 10 by the navy destroyer, the USS John S. McCain, which days later collided with a cargo ship, killing 10 sailors. That patrol around Mischief Reef—one of seven fortified artificial islands that Beijing has built in the past three years in the disputed Spratlys archipelago—also included an air component. According to U.S. officials, two P-8 Poseidon reconnaissance aircraft flew above the McCain in a part of the operation that hadn't been previously disclosed. More navigation patrols using warships likely now will include aircraft overhead, they said.\" An October 12, 2017, blog post states the following: The [reported October 10, 2017,] FONOP is the fourth in just five months and demonstrates that the Trump administration is accepting a higher frequency for these operations. After the Obama administration initiated South China Sea operations in October 2015, beginning with challenges to Chinese and other South China Sea claimant state possessions in the Spratly group, it only carried out three additional operations in 2016. Critics of the Obama administration's approach to the U.S. Navy's freedom of navigation operations in the South China Sea suggested that the relative infrequency and perception that the operations were subject of the overall ebbs and flows of the U.S.-China bilateral relationship undermined their stated utility as legal signaling tools. Even with stepped up FONOPs this year, the Trump administration hasn't changed the fundamentals of U.S. South China Sea policy, which continues to remain agnostic about sovereignty claims and focuses exclusively on freedom of navigation, overflight, and the preservation of international law and order in the region. With the exception of USS Dewey's May 2017 FONOP around Mischief Reef—notable for being the first FONOP this year—successive Trump administration FONOPs have attracted comparatively less attention in the press. Proponents of these operations in the United States have argued that they should not be seen as noteworthy events, but more as a fact of life in the South China Sea—a reminder of the U.S. Navy's forward presence in the area and its commitment to freedom of navigation. A corollary of the increased pace of operations this year is that a slowdown in U.S. FONOPs could appear to be motivated by broader diplomatic concerns in the bilateral U.S.-China relationship. In assessing U.S. FON operations that take place within 12 nautical miles of Chinese-occupied sites in the SCS, one question relates to whether to conduct such operations, exactly where, and how often. A second question relates to the rationale that is cited as the legal basis for conducting them. Regarding this second question, one U.S. specialist on international law of the sea states the following regarding three key legal points in question (emphasis added): Regarding features in the water whose sovereignty is in dispute, \"Every feature occupied by China is challenged by another claimant state, often with clearer line of title from Spanish, British or French colonial rule. The nation, not the land, is sovereign, which is why there is no territorial sea around Antarctica—it is not under the sovereignty of any state, despite being a continent. As the United States has not recognized Chinese title to the features, it is not obligated to observe requirements of a theoretical territorial sea. Since the territorial sea is a function of state sovereignty of each rock or island, and not a function of simple geography, if the United States does not recognize any state having title to the feature, then it is not obligated to observe a theoretical territorial sea and may treat the feature as terra nullius . Not only do U.S. warships have a right to transit within 12 nm [nautical miles] of Chinese features, they are free to do so as an exercise of high seas freedom under article 87 of the Law of the Sea Convention, rather than the more limited regime of innocent passage. Furthermore, whereas innocent passage does not permit overflight, high seas freedoms do, and U.S. naval aircraft lawfully may overfly such features.... More importantly, even assuming that one or another state may have lawful title to a feature, other states are not obligated to confer upon that nation the right to unilaterally adopt and enforce measures that interfere with navigation, until lawful title is resolved. Indeed, observing any nation's rules pertaining to features under dispute legitimizes that country's claim and takes sides.\" Regarding features in the water whose sovereignty has been resolved, \"It is unclear whether features like Fiery Cross Reef are rocks or merely low-tide elevations [LTEs] that are submerged at high tide, and after China has so radically transformed them, it may now be impossible to determine their natural state. Under the terms of the law of the sea, states with ownership over naturally formed rocks are entitled to claim a 12 nm territorial sea. On the other hand, low-tide elevations in the mid-ocean do not qualify for any maritime zone whatsoever. Likewise, artificial islands and installations also generate no maritime zones of sovereignty or sovereign rights in international law, although the owner of features may maintain a 500-meter vessel traffic management zone to ensure navigational safety.\" Regarding features in the water whose sovereignty has been resolved and which do qualify for a 12-nautical-mile territorial sea, \" Warships and commercial vessels of all nations are entitled to conduct transit in innocent passage in the territorial sea of a rock or island of a coastal state, although aircraft do not enjoy such a right.\" These three legal points appear to create at least four options for the rationale to cite as the legal basis for conducting an FON operation within 12 miles of Chinese-occupied sites in the SCS: One option would be to state that since there is a dispute as to the sovereignty of the site or sites in question, that site or those sites are terra nullius , that the United States consequently is not obligated to observe requirements of a theoretical territorial sea, and that U.S. warships thus have a right to transit within 12 nautical miles of the site or sites as an exercise of high seas freedom under article 87 of the Law of the Sea Convention. A second option, if the site or sites were LTEs prior to undergoing land reclamation, would be to state that the site or sites are not entitled to a 12-nautical-mile territorial sea, and that U.S. warships consequently have a right to transit within 12 nautical miles as an exercise of high seas freedom. A third option would be to state that the operation was being conducted under the right of innocent passage within a 12-nautical-mile territorial sea. A fourth option would be to not provide a public rationale for the operation, so as to create uncertainty for China (and perhaps other observers) as to exact U.S. legal rationale. If the fourth option is not taken, and consideration is given to selecting from among the first three options, then it might be argued that choosing the second option might inadvertently send a signal to observers that the legal point associated with the first option was not being defended, and that choosing the third option might inadvertently send a signal to observers that the legal points associated with the first and second options were not being defended. Regarding the FON operation conducted on May 24, 2017, near Mischief Reef, the U.S. specialist on international law of the sea quoted above states the following: This was the first public notice of a freedom of navigation (FON) operation in the Trump administration, and may prove the most significant yet for the United States because it challenges not only China's apparent claim of a territorial sea around Mischief Reef, but in doing so questions China's sovereignty over the land feature altogether.... The Pentagon said the U.S. warship did a simple military exercise while close to the artificial island—executing a \"man overboard\" rescue drill. Such drills may not be conducted in innocent passage, and therefore indicate the Dewey exercised high seas freedoms near Mischief Reef. The U.S. exercise of high seas freedoms around Mischief Reef broadly repudiates China's claims of sovereignty over the feature and its surrounding waters. The operation stands in contrast to the flubbed transit by the USS Lassen near Subi Reef on October 27, 2015, when it appeared the warship conducted transit in innocent passage and inadvertently suggested that the feature generated a territorial sea (by China or some other claimant). That operation was roundly criticized for playing into China's hands, with the muddy legal rationale diluting the strategic message. In the case of the Dewey, the Pentagon made clear that it did not accept a territorial sea around Mischief Reef—by China or any other state. The United States has shoehorned a rejection of China's sovereignty over Mischief Reef into a routine FON operation. Mischief Reef is not entitled to a territorial sea for several reasons. First, the feature is not under the sovereignty of any state. Mid-ocean low-tide elevations are incapable of appropriation, so China's vast port and airfield complex on the feature are without legal effect. The feature lies 135 nautical miles from Palawan Island, and therefore is part of the Philippine continental shelf. The Philippines enjoys sovereign rights and jurisdiction over the feature, including all of its living and non-living resources.... Second, even if Mischief Reef were a naturally formed island, it still would not be entitled to a territorial sea until such time as title to the feature was determined. Title may be negotiated, arbitrated or adjudicated through litigation. But mere assertion of a claim by China is insufficient to generate lawful title. (If suddenly a new state steps forward to claim the feature—Britain, perhaps, based on colonial presence—would it be entitled to the presumption of a territorial sea?) Even Antarctica, an entire continent, does not automatically generate a territorial sea. A territorial sea is a function of state sovereignty, and until sovereignty is lawfully obtained, no territorial sea inures. Third, no state, including China, has established baselines around Mischief Reef in accordance with article 3 of UNCLOS. A territorial sea is measured from baselines; without baselines, there can be no territorial sea. What is the policy rationale for this construction? Baselines place the international community on notice that the coastal state has a reasonable and lawful departure from which to measure the breadth of the territorial sea. Unlike the USS Lassen operation, which appeared to be a challenge to some theoretical or \"phantom\" territorial sea, the Dewey transit properly reflects the high seas nature of the waters immediately surrounding Mischief Reef as high seas. As a feature on the Philippine continental shelf, Mischief Reef is not only incapable of ever generating a territorial sea but also devoid of national airspace. Aircraft of all nations may freely overfly Mischief Reef, just as warships and commercial ships may transit as close to the shoreline as is safe and practical. The Dewey transit makes good on President Obama's declaration in 2016 that the Annex VII tribunal for the Philippines and China issued a \"final and binding\" decision.... The United States will include the Dewey transit on its annual list of FON operations for fiscal year 2017, which will be released in the fourth quarter or early next year. How will the Pentagon account for the operation—what was challenged? The Dewey challenged China's claim of \"indisputable sovereignty\" to Mischief Reef as one of the features in the South China Sea, and China's claim of \"adjacent\" waters surrounding it. This transit cuts through the diplomatic dissembling that obfuscates the legal seascape and is the most tangible expression of the U.S. view that the arbitration ruling is \"final and binding.\" Regarding this same FON operation, two other observers stated the following: The Dewey's action evidently challenged China's right to control maritime zones adjacent to the reef—which was declared by the South China Sea arbitration to be nothing more than a low tide elevation on the Philippine continental shelf. The operation was hailed as a long-awaited \"freedom of navigation operation\" (FONOP) and \"a challenge to Beijing's moves in the South China Sea,\" a sign that the United States will not accept \"China's contested claims\" and militarization of the Spratlys, and a statement that Washington \"will not remain passive as Beijing seeks to expand its maritime reach.\" Others went further and welcomed this more muscular U.S. response to China's assertiveness around the Spratly Islands to challenge China's \"apparent claim of a territorial sea around Mischief Reef…[as well as] China's sovereignty over the land feature\" itself. But did the Dewey actually conduct a FONOP? Probably—but maybe not. Nothing in the official description of the operation or in open source reporting explicitly states that a FONOP was in fact conducted. Despite the fanfare, the messaging continues to be muddled. And that is both unnecessary and unhelpful. In this post, we identify the source of ambiguity and provide an overview of FONOPs and what distinguishes them from the routine practice of freedom of navigation. We then explain why confusing the two is problematic—and particularly problematic in the Spratlys, where the practice of free navigation is vastly preferable to the reactive FONOP. FONOPs should continue in routine, low-key fashion wherever there are specific legal claims to be challenged (as in the Paracel Islands, the other disputed territories in the SCS); they should not be conducted—much less hyped up beyond proportion—in the Spratlys. Instead, the routine exercise of freedom of navigation is the most appropriate way to use the fleet in support of U.S. and allied interests.... ... was the Dewey's passage a FONOP designed to be a narrow legal challenge between the US and Chinese governments? Or was it a rightful and routine exercise of navigational freedoms intended to signal reassurance to the region and show U.S. resolve to defend the rule sets that govern the world's oceans? Regrettably, the DOD spokesman's answer was not clear. The distinction is not trivial.... The U.S. should have undertaken, and made clear that it was undertaking, routine operations to exercise navigational freedoms around Mischief Reef—rather than (maybe) conducting a FONOP. The first problem with conducting FONOP operations at Mischief Reef or creating confusion on the point is that China has made no actual legal claim that the U.S. can effectively challenge. In fact, in the Spratlys, no state has made a specific legal claim about its maritime entitlements around the features it occupies. In other words, not only are there no \"excessive claims,\" there are no clear claims to jurisdiction over water space at all. Jurisdictional claims by a coastal state begin with an official announcement of baselines—often accompanied by detailed geographic coordinates—to put other states on notice of the water space the coastal state claims as its own. China has made several ambiguous claims over water space in the South China Sea. It issued the notorious 9-dashed line map, for instance, and has made cryptic references that eventually it might claim that the entire Spratly Island area generates maritime zones as if it were one physical feature. China has a territorial sea law that requires Chinese maritime agencies only to employ straight baselines (contrary to international law). And it formally claimed straight baselines all along its continental coastline, in the Paracels, and for the Senkaku/Diaoyu Islands, which China claims and Japan administers. All of these actions are contrary to international law and infringe on international navigational rights. These have all been subject to American FONOPs in the past—and rightly so. They are excessive claims. But China has never specified baselines in the Spratlys. Accordingly, no one knows for sure where China will claim a territorial sea there. So for now, since there is no specific legal claim to push against, a formal FONOP is the wrong tool for the job. The U.S. Navy can and should simply exercise the full, lawful measure of high seas freedoms in and around the Spratly Islands. Those are the right tools for the job where no actual coastal state claim is being challenged. Second, the conflation of routine naval operations with the narrow function of a formal FONOP needlessly politicizes this important program, blurs the message to China and other states in the region, blunts its impact on China's conduct, and makes the program less effective in other areas of the globe. This conflation first became problematic with the confused and confusing signaling that followed the FONOP undertaken by the USS Lassen in the fall of 2015. Afterward, the presence or absence of a FONOP dominated beltway discussion about China's problematic conduct in the South China Sea and became the barometer of American commitment and resolve in the region. Because of this discussion, FONOPs became reimagined in the public mind as the only meaningful symbol of U.S. opposition to Chinese policy and activity in the SCS. In 2015 and 2016 especially, FONOPs were often treated as if they were the sole available operational means to push back against rising Chinese assertiveness. This was despite a steady U.S. presence in the region for more than 700 ship days a year and a full schedule of international exercises, ample intelligence gathering operations, and other important naval demonstrations of U.S. regional interests. In consequence, we should welcome the apparent decision not to conduct a FONOP around Scarborough Shoal—where China also never made any clear baseline or territorial sea claim. If U.S. policy makers intend to send a signal to China that construction on or around Scarborough would cross a red line, there are many better ways than a formal FONOP to send that message.... The routine operations of the fleet in the Pacific theater illustrate the crucial—and often misunderstood—difference between a formal FONOP and operations that exercise freedoms of navigation. FONOPs are not the sole remedy to various unlawful restrictions on navigational rights across the globe, but are instead a small part of a comprehensive effort to uphold navigational freedoms by practicing them routinely. That consistent practice of free navigation, not the reactive FONOP, is the policy best suited to respond to Chinese assertiveness in the SCS. This is especially true in areas such as the Spratly Islands where China has made no actual legal claims to challenge. As mentioned earlier, in terms of identifying specific actions that are intended to support U.S. policy goals, a key element would be to have a clear understanding of which actions are intended to support which goals, and to maintain an alignment of actions with policy goals. U.S. freedom of navigation (FON) operations can directly support a general goal of defending principle of freedom of the seas, but might support other goals only indirectly, marginally, or not at all. Some of the actions taken to date by the United States, as well as some of those suggested by observers who argue in favor of stronger U.S. actions, are intended to impose costs on China for conducting certain activities in the ECS and SCS, with the aim of persuading China to stop or reverse those activities. Cost-imposing actions can come in various forms (e.g., reputational/political, institutional, or economic). Although the potential additional or strengthened actions often relate to the Western Pacific, potential cost-imposing actions do not necessarily need to be limited to that region. As a hypothetical example for purposes of illustrating the point, one potential cost-imposing action might be for the United States to respond to unwanted Chinese activities in the ECS or SCS by moving to suspend China's observer status on the Arctic Council. Expanding the potential scope of cost-imposing actions to regions beyond the Western Pacific can make it possible to employ elements of U.S. power that cannot be fully exercised if the examination of potential cost-imposing strategies is confined to the Western Pacific. It may also, however, expand, geographically or otherwise, areas of tension or dispute between the United States and China. Actions to impose costs on China can also impose costs, or lead to China imposing costs, on the United States and its allies and partners. Whether to implement cost-imposing actions thus involves weighing the potential benefits and costs to the United States and its allies and partners of implementing those actions, as well as the potential consequences to the United States and its allies and partners of not implementing those actions. Some observers argue that the current response to China's actions in the SCS is inadequate, and have proposed taking stronger actions. Appendix G presents a bibliography of some recent writings by these observers. In general, actions proposed by these observers include (but are not limited to) the following: making a statement (analogous to the one that U.S. leaders have made concerning the Senkaku islands and the U.S.-Japan treaty on mutual cooperation and security) that clarifies what the United States would do under the U.S.-Philippines mutual defense treaty in the event of certain Chinese actions at Scarborough Shoal, Second Thomas Shoal, or elsewhere in the SCS; further increasing and/or accelerating actions to strengthen the capacity of allied and partner countries in the region to maintain maritime domain awareness (MDA) and defend their maritime claims by conducting coast guard and/or navy patrols of claimed areas; further increasing U.S. Navy operations in the region, including sending U.S. Navy ships more frequently to waters within 12 nautical miles of Chinese-occupied sites in the SCS, and conducting FON operations in the SCS jointly with navy ships of U.S. allies; further strengthening U.S. security cooperation with allied and partner countries in the region, and with India, to the point of creating a coalition for balancing China's assertiveness; and taking additional actions to impose costs on China for its actions in its near-seas region, such as inviting Taiwan to participate in the 2018 RIMPAC exercise. As mentioned earlier, some observers remain concerned that maritime territorial disputes in the ECS and SCS could lead to a crisis or conflict between China and a neighboring country such as Japan or the Philippines, and that the United States could be drawn into such a crisis or conflict as a result of obligations the United States has under bilateral security treaties with Japan and the Philippines. Regarding this issue, potential oversight questions for Congress include the following: Have U.S. officials taken appropriate and sufficient steps to help reduce the risk of maritime territorial disputes in the SCS and ECS escalating into conflicts? Do the United States and Japan have a common understanding of potential U.S. actions under Article IV of the U.S.-Japan Treaty on Mutual Cooperation and Security (see Appendix B ) in the event of a crisis or conflict over the Senkaku Islands? What steps has the United States taken to ensure that the two countries share a common understanding? Do the United States and the Philippines have a common understanding of how the 1951 U.S.-Philippines mutual defense treaty applies to maritime territories in the SCS that are claimed by both China and the Philippines, and of potential U.S. actions under Article IV of the treaty (see Appendix B ) in the event of a crisis or conflict over the territories? What steps has the United States taken to ensure that the two countries share a common understanding? Aside from public statements, what has the United States communicated to China regarding potential U.S. actions under the two treaties in connection with maritime territorial disputes in the SCS and ECS? Has the United States correctly balanced ambiguity and explicitness in its communications to various parties regarding potential U.S. actions under the two defense treaties? How do the two treaties affect the behavior of Japan, the Philippines, and China in managing their territorial disputes? To what extent, for example, would they help Japan or the Philippines resist potential Chinese attempts to resolve the disputes through intimidation, or, alternatively, encourage risk-taking or brinksmanship behavior by Japan or the Philippines in their dealings with China on the disputes? To what extent do they deter or limit Chinese assertiveness or aggressiveness in their dealings with Japan the Philippines on the disputes? Has the DOD adequately incorporated into its planning crisis and conflict scenarios arising from maritime territorial disputes in the SCS and ECS that fall under the terms of the two treaties? Another issue for Congress—particularly the Senate—is the potential impact of China's actions in the SCS and ECS on the question of whether the United States should become a party to the United Nations Convention on the Law of the Sea (UNCLOS). UNCLOS and an associated 1994 agreement relating to implementation of Part XI of the treaty (on deep seabed mining) were transmitted to the Senate on October 6, 1994. In the absence of Senate advice and consent to adherence, the United States is not a party to UNCLOS or the associated 1994 agreement. During the 112 th Congress, the Senate Foreign Relations Committee held four hearings on the question of whether the United States should become a party to the treaty on May 23, June 14 (two hearings), and June 28, 2012. Supporters of the United States becoming a party to UNCLOS argue or might argue one or more of the following: The treaty's provisions relating to navigational rights, including those in EEZs, reflect the U.S. position on the issue; becoming a party to the treaty would help lock the U.S. perspective into permanent international law. Becoming a party to the treaty would give the United States greater standing for participating in discussions relating to the treaty—a \"seat at the table\"—and thereby improve the U.S. ability to call on China to act in accordance with the treaty's provisions, including those relating to navigational rights, and to defend U.S. interpretations of the treaty's provisions, including those relating to whether coastal states have a right under UNCLOS to regulate foreign military activities in their EEZs. At least some of the ASEAN member states want the United States to become a member of UNCLOS, because they view it as the principal framework for resolving maritime territorial disputes. Relying on customary international law to defend U.S. interests in these issues is not sufficient, because it is not universally accepted and is subject to change over time based on state practice. Opponents of the United States becoming a party to UNCLOS argue or might argue one or more of the following: China's ability to cite international law (including UNCLOS) in defending its position on whether coastal states have a right to regulate foreign military activities in their EEZs shows that UNCLOS does not adequately protect U.S. interests relating to navigational rights in EEZs; the United States should not help lock this inadequate description of navigational rights into permanent international law by becoming a party to the treaty. The United States becoming a party to the treaty would do little to help resolve maritime territorial disputes in the SCS and ECS, in part because China's maritime territorial claims, such as those depicted in the map of the nine-dash line, predate and go well beyond what is allowed under the treaty and appear rooted in arguments that are outside the treaty. The United States can adequately support the ASEAN countries and Japan in matters relating to maritime territorial disputes in the SCS and ECS in other ways, without becoming a party to the treaty. The United States can continue to defend its positions on navigational rights on the high seas by citing customary international law, by demonstrating those rights with U.S. naval deployments (including those conducted under the FON program), and by having allies and partners defend the U.S. position on the EEZ issue at meetings of UNCLOS parties. In H.R. 5515 as reported by the House Armed Services Committee ( H.Rept. 115-676 of May 15, 2018), Section 1254 states the following: SEC. 1254. Modification, redesignation, and extension of Southeast Asia Maritime Security Initiative. (a) Modification and redesignation.— (1) IN GENERAL.—Subsection (a) of section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92; 129 Stat. 1073; 10 U.S.C. 2282 note), as amended by section 1289 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328; 130 Stat. 2555), is further amended— (A) in paragraph (1), by striking \"South China Sea\" and inserting \"South China Sea and Indian Ocean\"; and (B) in paragraph (2), by striking \"the 'Southeast Asia Maritime Security Initiative'\" and inserting \"the 'Indo-Pacific Maritime Security Initiative'\". (2) CONFORMING AMENDMENT.—The heading of such section is amended to read as follows: \"Sec. 1263. Indo-Pacific Maritime Security Initiative.\". (b) Covered countries.—Subsection (e)(2) of such section is amended by adding at the end the following: \"(D) India.\". (c) Designation of additional countries.—Such section is further amended— (1) in subsection (e)(1), by striking \"subsection (f)\" and inserting \"subsection (g)\"; (2) by redesignating subsections (f), (g), and (h) as subsections (g), (h), and (i), respectively; and (3) by inserting after subsection (e) the following: \"(f) Inclusion of additional countries.—The Secretary of Defense, with the concurrence of the Secretary of State, is authorized to include additional foreign countries under subsection (b) for purposes of providing assistance and training under subsection (a) and additional foreign countries under subsection (e)(2) for purposes of providing payment of incremental expenses in connection with training described in subsection (a)(1)(B) if, with respect to each such additional foreign country, the Secretary determines and certifies to the appropriate committees of Congress that it is important for increasing maritime security and maritime domain awareness in the Indo-Pacific region.\". (d) Extension.—Subsection (i) of such section, as redesignated, is amended by striking \"September 30, 2020\" and inserting \"September 30, 2023\". On May 22, 2018, as part of its consideration of H.R. 5515 , the House agreed to by voice vote H.Amdt. 644 , an en bloc amendment including, inter alia, amendment number 91 as printed in H.Rept. 115-698 of May 21, 2018, providing for consideration of H.R. 5515 . Amendment 91 added Section 1298, which states the following: SEC. 1298. Modification to annual report on military and security developments involving the People's Republic of China. Paragraph (22) of section 1202(b) of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106–65; 10 U.S.C. 113 note), as most recently amended by section 1261 of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91; 131 Stat. 1688), is further amended by striking \"activities in the South China Sea\" and inserting the following: \"\"activities— \"(A) in the South China Sea; \"(B) in the East China Sea, including in the vicinity of the Senkaku islands; and \"(C) in the Indian Ocean region.\". In S. 2987 as reported by the Senate Armed Services Committee ( S.Rept. 115-262 of June 5, 2018), Section 1064 states the following: SEC. 1064. United States policy with respect to freedom of navigation and overflight. (a) Declaration of policy.—It is the policy of the United States to fly, sail, and operate throughout the oceans, seas, and airspace of the world wherever international law allows. (b) Implementation of policy.—In furtherance of the policy set forth in subsection (a), the Secretary of Defense should— (1) plan and execute a robust series of routine and regular air and naval presence missions throughout the world and throughout the year, including for critical transportation corridors and key routes for global commerce; (2) in addition to the missions executed pursuant to paragraph (1), execute routine and regular air and maritime freedom of navigation operations throughout the year, in accordance with international law, including the use of expanded military options and maneuvers beyond innocent passage; and (3) to the maximum extent practicable, execute the missions pursuant to paragraphs (1) and (2) with regional partner countries and allies of the United States. Section 1241 of S. 2987 as reported states the following: SEC. 1241. Redesignation, expansion, and extension of Southeast Asia Maritime Security Initiative. (a) Redesignation as Indo-Pacific Maritime Security Initiative.— (1) IN GENERAL.—Subsection (a)(2) of section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (10 U.S.C. 333 note) is amended by striking \"the 'Southeast Asia Maritime Security Initiative'\" and inserting \"the 'Indo-Pacific Maritime Security Initiative'\". (2) CONFORMING AMENDMENT.—The heading of such section is amended to read as follows: \"SEC. 1263. Indo-Pacific Maritime Security Initiative\". (b) Expansion.— (1) EXPANSION OF REGION TO RECEIVE ASSISTANCE AND TRAINING.—Subsection (a)(1) of such section is amended by inserting \"and the Indian Ocean\" after \"South China Sea\" in the matter preceding subparagraph (A). (2) RECIPIENT COUNTRIES OF ASSISTANCE AND TRAINING GENERALLY.—Subsection (b) of such section is amended— (A) in paragraph (2), by striking the comma at the end and inserting a period; and (B) by adding at the end the following new paragraphs: \"(6) Bangladesh. \"(7) Sri Lanka.\". (3) COUNTRIES ELIGIBLE FOR PAYMENT OF CERTAIN INCREMENTAL EXPENSES.—Subsection (e)(2) of such section is amended by adding at the end the following new subparagraph: \"(D) India.\". (c) Extension.—Subsection (h) of such section is amended by striking \"September 30, 2020\" and inserting \"December 31, 2025\". Regarding Section 1241, S.Rept. 115-262 states the following: Redesignation, expansion, and extension of Southeast AsiaMaritime Security Initiative (sec. 1241) The committee recommends a provision that would amend section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92) to: redesignate the Southeast Asia Maritime Security Initiative as the Indo-Pacific Maritime Security Initiative; add Bangladesh and Sri Lanka as recipient countries of assistance and training; add India as a covered country eligible for payment of certain incremental expenses; and extend the authority under the section through December 31, 2025. The committee continues to strongly support efforts under the Southeast Asia Maritime Security Initiative aimed at enhancing the capabilities of regional partners to more effectively exercise control over their maritime territory and to deter adversaries. The committee is encouraged by the progress that has been made under the initiative, and notes that to date, the Department of Defense has utilized the authority under section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92), as amended, to support specified partner capacity-building efforts in the region, to include the provision of training, sustainment support, and participation in multilateral engagements. The committee recognizes that the initiative was designed to support a long-term capacity building effort, which will require increased resources in future years as requirements are established and refined, as programs mature, and as the regional security environment continues to evolve. The committee believes the Department's efforts to improve maritime domain awareness and maritime security should be fully integrated into a U.S. strategy for a free and open Indo-Pacific. Therefore, the committee supports redesignating the authority under section 1263 as the Indo-Pacific Maritime Security Initiative, the inclusion of Bangladesh and Sri Lanka as recipient countries, and the addition of India as a covered country to encourage its participation in regional security initiatives of this kind. Furthermore, as a demonstration of the United States' commitment to allies and partners in the region, the committee supports the extension of the Indo-Pacific Maritime Security Initiative through the end of 2025. Beyond the Indo-Pacific Maritime Security Initiative, the committee encourages the Department to make use of the full complement of security cooperation authorities available to the Department, particularly those under section 1241 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328), to enhance the capabilities of foreign security partners in South and Southeast Asia to protect mutual security interests. (Pages 296-297) Section 1245 of S. 2987 as reported states the following: SEC. 1245. Prohibition on participation of the People's Republic of China in Rim of the Pacific (RIMPAC) naval exercises. (a) Sense of Congress.—It is the sense of Congress that— (1) the pace and militarization by the Government of the People's Republic of China of land reclamation activities in the South China Sea is destabilizing the security of United States allies and partners and threatening United States core interests; (2) these activities of the Government of the People's Republic of China adversarially threaten the maritime security of the United States and our allies and partners; (3) no country that acts adversarially should be invited to multilateral exercises; and (4) the involvement of the Government of the People's Republic of China in multilateral exercises should undergo reevaluation until such behavior changes. (b) Conditions for future participation in RIMPAC.—The Secretary of Defense shall not enable or facilitate the participation of the People's Republic of China in any Rim of the Pacific (RIMPAC) naval exercise unless the Secretary certifies to the congressional defense committees that China has— (1) ceased all land reclamation activities in the South China Sea; (2) removed all weapons from its land reclamation sites; and (3) established a consistent four-year track record of taking actions toward stabilizing the region. A June 26, 2018, statement of Administration policy regarding S. 2987 stated the following: Prohibition on Participation of the People's Republic of China in Rim of the Pacific (RIMPAC) Naval Exercises. The Administration objects to section 1245 because China's participation in RIMPAC and other military-to-military events may be appropriate or inappropriate in any given year, depending on numerous other factors. Section 1245 would place restrictions on the Secretary of Defense's ability to manage a strategic relationship in the context of competition, limiting DOD's options on China and ability to act in the national security interest of the United States. Section 1251 of S. 2987 as reported states the following: SEC. 1251. Report on military and coercive activities of the People's Republic of China in South China Sea. (a) In general.—Except as provided in subsection (d), immediately after the commencement of any significant reclamation or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction, the Secretary of Defense, in coordination with the Secretary of State, shall submit to the congressional defense committees, and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity. (b) Elements of report to public.—Each report on a significant reclamation or militarization activity under subsection (a) shall include a short narrative on, and one or more corresponding images of, such significant reclamation or militarization activity. (c) Form.— (1) SUBMITTAL TO CONGRESS.—Any report under subsection (a) that is submitted to the congressional defense committees shall be submitted in unclassified form, but may include a classified annex. (2) RELEASE TO PUBLIC.—If a report under subsection (a) is released to the public, such report shall be so released in unclassified form. (d) Waiver.— (1) RELEASE OF REPORT TO PUBLIC.—The Secretary of Defense may waive the requirement in subsection (a) for the release to the public of a report on a significant reclamation or militarization activity if the Secretary determines that the release to the public of a report on such activity under that subsection in the form required by subsection (c)(2) would have an adverse effect on the national security interests of the United States. (2) NOTICE TO CONGRESS.—If the Secretary issues a waiver under paragraph (1) with respect to a report on an activity, not later than 48 hours after the Secretary issues such waiver, the Secretary shall submit to the congressional defense committees written notice of, and justification for, such waiver. Regarding Section 1251, S.Rept. 115-262 states the following: Report on military and coercive activities of the People's Republic of China in the South China Sea (sec. 1251) The committee recommends a provision that would require the Secretary of Defense, in coordination with the Secretary of State, to submit to the congressional defense committees and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity immediately after the commencement of any significant reclamation or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction. The committee is concerned that sufficient information has not been made publicly available in a timely fashion regarding China's reclamation and militarization activities of China in the South China Sea. Therefore, the committee urges the Secretary of Defense to determine that the public interest in selective declassification of China's activities in the South China Sea outweighs the potential damage from disclosure. The Secretary should consider mandating that the directors of National Geospatial-Intelligence Agency and the Defense Intelligence Agency provide the Bureau of Intelligence and Research (INR) at the State Department with declassified aircraft-generated imagery and supporting analysis describing Chinese activities of concern. The committee also urges that the State Department brief and distribute the reports to the media and throughout Southeast Asia. (Page 300) In the conference report ( H.Rept. 115-874 of July 25, 2018) on H.R. 5515 / P.L. 115-232 of August 13, 2018, Section 1086 states the following: SEC. 1086. UNITED STATES POLICY WITH RESPECT TO FREEDOM OF NAVIGATION AND OVERFLIGHT. (a) DECLARATION OF POLICY.—It is the policy of the United States to fly, sail, and operate throughout the oceans, seas, and airspace of the world wherever international law allows. (b) IMPLEMENTATION OF POLICY.—In furtherance of the policy set forth in subsection (a), the Secretary of Defense should— (1) plan and execute a robust series of routine and regular air and naval presence missions throughout the world and throughout the year, including for critical transportation corridors and key routes for global commerce; (2) in addition to the missions executed pursuant to paragraph (1), execute routine and regular air and maritime freedom of navigation operations throughout the year, in accordance with international law, including, but not limited to, maneuvers beyond innocent passage; and (3) to the maximum extent practicable, execute the missions pursuant to paragraphs (1) and (2) with regional partner countries and allies of the United States. Section 1252 of H.R. 5515 states the following: SEC. 1252. REDESIGNATION, EXPANSION, AND EXTENSION OF SOUTHEAST ASIA MARITIME SECURITY INITIATIVE. (a) REDESIGNATION AS INDO-PACIFIC MARITIME SECURITY INITIATIVE.— (1) IN GENERAL.—Subsection (a)(2) of section 1263 of the National Defense Authorization Act for Fiscal Year 2016 (10 U.S.C. 333 note) is amended by striking ''the 'Southeast Asia Maritime Security Initiative' '' and inserting ''the 'Indo-Pacific Maritime Security Initiative' ''. (2) CONFORMING AMENDMENT.—The heading of such section is amended to read as follows: ''SEC. 1263. INDO-PACIFIC MARITIME SECURITY INITIATIVE.''. (b) EXPANSION.— (1) EXPANSION OF REGION TO RECEIVE ASSISTANCE AND TRAINING.—Subsection (a)(1) of such section is amended by inserting ''and the Indian Ocean'' after ''South China Sea'' in the matter preceding subparagraph (A). (2) RECIPIENT COUNTRIES OF ASSISTANCE AND TRAINING GENERALLY.—Subsection (b) of such section is amended— (A) in paragraph (2), by striking the comma at the end and inserting a period; and (B) by adding at the end the following new paragraphs: ''(6) Bangladesh. ''(7) Sri Lanka.''. (3) COUNTRIES ELIGIBLE FOR PAYMENT OF CERTAIN INCREMENTAL EXPENSES.—Subsection (e)(2) of such section is amended by adding at the end the following new subparagraph: ''(D) India.''. (c) EXTENSION.—Subsection (h) of such section is amended by striking ''September 30, 2020'' and inserting ''December 31, 2025''. Section 1259 of H.R. 5515 states the following: SEC. 1259. PROHIBITION ON PARTICIPATION OF THE PEOPLE'S REPUBLIC OF CHINA IN RIM OF THE PACIFIC (RIMPAC) NAVAL EXERCISES. (a) CONDITIONS FOR FUTURE PARTICIPATION IN RIMPAC.— (1) IN GENERAL.—The Secretary of Defense shall not enable or facilitate the participation of the People's Republic of China in any Rim of the Pacific (RIMPAC) naval exercise unless the Secretary certifies to the congressional defense committees that China has— (A) ceased all land reclamation activities in the South China Sea; (B) removed all weapons from its land reclamation sites; and (C) established a consistent four-year track record of taking actions toward stabilizing the region. (2) FORM.—The certification under paragraph (1) shall be in unclassified form but may contain a classified annex as necessary. (b) NATIONAL SECURITY WAIVER.— (1) IN GENERAL.—The Secretary of Defense may waive the certification requirement under subsection (a) if the Secretary determines the waiver is in the national security interest of the United States and submits to the congressional defense committees a detailed justification for the waiver. (2) FORM.—The justification required under paragraph (1) shall be in unclassified form but may contain a classified annex as necessary. Section 1262 of H.R. 5515 states the following: SEC. 1262. REPORT ON MILITARY AND COERCIVE ACTIVITIES OF THE PEOPLE'S REPUBLIC OF CHINA IN SOUTH CHINA SEA. (a) IN GENERAL.—Except as provided in subsection (d), immediately after the commencement of any significant reclamation, assertion of an excessive territorial claim, or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction, the Secretary of Defense, in coordination with the Secretary of State, shall submit to the appropriate congressional committees, and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity. (b) ELEMENTS OF REPORT TO PUBLIC.—Each report on the commencement of a significant reclamation, an assertion of an excessive territorial claim, or a militarization activity under subsection (a) shall include a short narrative on, and one or more corresponding images of, such commencement of a significant reclamation, assertion of an excessive territorial claim, or militarization activity. (c) FORM.— (1) SUBMISSION TO CONGRESS.—Any report under subsection (a) that is submitted to the appropriate congressional committees shall be submitted in unclassified form, but may include a classified annex. (2) RELEASE TO PUBLIC.—If a report under subsection (a) is released to the public, such report shall be so released in unclassified form. (d) WAIVER.— (1) RELEASE OF REPORT TO PUBLIC.—The Secretary of Defense may waive the requirement in subsection (a) for the release to the public of a report on the commencement of any significant reclamation, an assertion of an excessive territorial claim, or a militarization activity by the People's Republic of China in the South China Sea if the Secretary determines that the release to the public of a report on such activity under that subsection in the form required by subsection (c)(2) would have an adverse effect on the national security interests of the United States. (2) NOTICE TO CONGRESS.—If the Secretary issues a waiver under paragraph (1) with respect to a report on an activity, not later than 48 hours after the Secretary issues such waiver, the Secretary shall submit to the appropriate congressional committees written notice of, and justification for, such waiver. (e) APPROPRIATE CONGRESSIONAL COMMITTEES DEFINED.—In this section, the term ''appropriate congressional committees'' means— (1) the congressional defense committees; and (2) the Committee on Foreign Relations of the Senate and the Committee on Foreign Affairs of the House of Representatives. Regarding Section 1262, H.Rept. 115-874 states the following: Report on military and coercive activities of the People's Republic of China in South China Sea (sec. 1262) The House bill contained a provision (sec. 1261) that would require Secretary of Defense, in consultation with the Director of National Intelligence and the Secretary of State, to submit a report to appropriate congressional committees on a quarterly basis describing China's activities in the Indo-Pacific region, and to disseminate the report to regional allies and partners and provide public notification, as appropriate. The provision would require that the dissemination and availability of the report and public notification be made in a manner consistent with national security and the protection of classified national security information. The Senate amendment contained a similar provision (sec. 1251) that would require the Secretary of Defense, in coordination with the Secretary of State, to submit to the congressional defense committees and release to the public, a report on the military and coercive activities of China in the South China Sea in connection with such activity immediately after the commencement of any significant reclamation or militarization activity by the People's Republic of China in the South China Sea, including any significant military deployment or operation or infrastructure construction. The House recedes with an amendment that would clarify that the required report shall be submitted to the congressional defense committees immediately after the commencement of any significant reclamation, assertion of an excessive territorial claim, or military activity by the People's Republic of China in the South China Sea. The conferees are concerned that sufficient information has not been made publicly available in a timely fashion regarding China's reclamation and militarization activities in the South China Sea. Moreover, the conferees recognize that China has engaged in provocative military activities elsewhere throughout the Indo-Pacific Region, including the East China Sea, the Taiwan Strait, and the Indian Ocean. The conferees urge the Secretary of Defense to give full consideration to the strategic and public interest in selective declassification of China's activities in the South China Sea and elsewhere in the Indo-Pacific region. (Pages 993-994) Section 1288 of H.R. 5515 states the following: SEC. 1288. MODIFICATION OF FREEDOM OF NAVIGATION REPORTING REQUIREMENTS. Subsection (a) of section 1275 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114–328; 130 Stat. 2540), as amended by section 1262(a)(1) of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115–91; 131 Stat. 1689), is further amended by striking ''the Committees on Armed Services of the Senate and the House of Representatives'' and inserting ''the Committee on Armed Services and the Committee on Foreign Relations of the Senate and the Committee on Armed Services and the Committee on Foreign Affairs of the House of Representatives''. Appendix A. Strategic Context from U.S. Perspective This appendix presents a brief discussion of some elements of the strategic context from a U.S. perspective in which the issues discussed in this report may be considered. There is also a broader context of U.S.-China relations and U.S. foreign policy toward the Indo-Pacific that is covered in other CRS reports. Shift in International Security Environment World events have led some observers, starting in late 2013, to conclude that the international security environment has undergone a shift from the familiar post-Cold War era of the past 20 to 25 years, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different situation that features, among other things, renewed great power competition with China and Russia and challenges by these two countries and others to elements of the U.S.-led international order that has operated since World War II. China's actions in the SCS and ECS can be viewed as one reflection of that shift. Uncertainty Regarding Future U.S. Role in World The overall U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs. A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II. In addition to promoting and defending the open international order, the overall U.S. role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world. Certain statements and actions from the Trump Administration have led to uncertainty about the Administration's intentions regarding the future U.S. role in the world. Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U.S. role in one or more ways. A change in the overall U.S. role could have profound implications for U.S. foreign policy, including U.S. policy regarding maritime territorial and EEZ disputes involving China. U.S. Grand Strategy Discussion of the above-mentioned shift in the international security environment has led to a renewed emphasis in discussions of U.S. security and foreign policy on grand strategy and geopolitics. From a U.S. perspective, grand strategy can be understood as strategy considered at a global or interregional level, as opposed to strategies for specific countries, regions, or issues. Geopolitics refers to the influence on international relations and strategy of basic world geographic features such as the size and location of continents, oceans, and individual countries. From a U.S. perspective on grand strategy and geopolitics, it can be noted that most of the world's people, resources, and economic activity are located not in the Western Hemisphere, but in the other hemisphere, particularly Eurasia. In response to this basic feature of world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. grand strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, on the grounds that such a hegemon could represent a concentration of power strong enough to threaten core U.S. interests by, for example, denying the United States access to some of the other hemisphere's resources and economic activity. Although U.S. policymakers have not often stated this key national strategic goal explicitly in public, U.S. military (and diplomatic) operations in recent decades—both wartime operations and day-to-day operations—can be viewed as having been carried out in no small part in support of this key goal. Focus on Great Power Competition with China and Russia The Trump Administration's December 2017 National Security Strategy (NSS) and the 11-page unclassified summary of its January 2018 National Defense Strategy (NDS) reorient U.S. national security strategy and, within that, U.S. defense strategy, toward an explicit primary focus on great power competition with China and Russia and on countering Chinese and Russian military capabilities. The new U.S. strategy orientation set forth in the 2017 NSS and 2018 NDS is sometimes referred to a \"2+3\" strategy, meaning a strategy for countering two primary challenges (China and Russia) and three additional challenges (North Korea, Iran, and terrorist groups). Concept of a Free and Open Indo-Pacific (FOIP) In addition to the 2017 NSS and 2018 NDS, the Trump Administration has highlighted the concept of a free and open Indo-Pacific (FOIP), with the term Indo-Pacific referring to the Indian Ocean, the Pacific Ocean, and the countries (particularly those in Eurasia) bordering on those two oceans. The concept, which is still being fleshed out by the Trump Administration, appears to be a general U.S foreign policy and national security construct for the region, but observers view it as one that includes a military component. Challenge to U.S. Sea Control and U.S. Position in Western Pacific Observers of Chinese and U.S. military forces view China's improving naval capabilities as posing a potential challenge in the Western Pacific to the U.S. Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U.S. Navy has faced since the end of the Cold War. More broadly, these observers view China's naval capabilities as a key element of an emerging broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific. Regional U.S. Allies and Partners The United States has certain security-related policies pertaining to Taiwan under the Taiwan Relations Act ( H.R. 2479 / P.L. 96-8 of April 10, 1979). The United States has bilateral security treaties with Japan, South Korea, and the Philippines, and an additional security treaty with Australia and New Zealand. In addition to U.S. treaty allies, certain other countries in the Western Pacific can be viewed as current or emerging U.S. security partners. Appendix B. U.S. Treaties with Japan and Philippines This appendix presents brief background information on the U.S. security treaties with Japan and the Philippines. U.S.-Japan Treaty on Mutual Cooperation and Security The 1960 U.S.-Japan treaty on mutual cooperation and security states in Article V that Each Party recognizes that an armed attack against either Party in the territories under the administration of Japan would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional provisions and processes. The United States has reaffirmed on a number of occasions over the years that since the Senkaku Islands are under the administration of Japan, they are included in the territories referred to in Article V of the treaty, and that the United States \"will honor all of our treaty commitments to our treaty partners.\" (At the same time, the United States, noting the difference between administration and sovereignty, has noted that such affirmations do not prejudice the U.S. approach of taking no position regarding the outcome of the dispute between China, Taiwan, and Japan regarding who has sovereignty over the islands.) Some observers, while acknowledging the U.S. affirmations, have raised questions regarding the potential scope of actions that the United States might take under Article V. U.S.-Philippines Mutual Defense Treaty The 1951 U.S.-Philippines mutual defense treaty states in Article IV that Each Party recognizes that an armed attack in the Pacific Area on either of the Parties would be dangerous to its own peace and safety and declares that it would act to meet the common dangers in accordance with its constitutional processes. Article V states that For the purpose of Article IV, an armed attack on either of the Parties is deemed to include an armed attack on the metropolitan territory of either of the Parties, or on the island territories under its jurisdiction in the Pacific or on its armed forces, public vessels or aircraft in the Pacific. The United States has reaffirmed on a number of occasions over the years its obligations under the U.S.-Philippines mutual defense treaty. On May 9, 2012, Filipino Foreign Affairs Secretary Albert F. del Rosario issued a statement providing the Philippine perspective regarding the treaty's application to territorial disputes in the SCS. U.S. officials have made their own statements regarding the treaty's application to territorial disputes in the SCS. Appendix C. Treaties and Agreements Related to the Maritime Disputes This appendix briefly reviews some international treaties and agreements that bear on the issues discussed in this report. UN Convention on Law of the Sea (UNCLOS) The United Nations Convention on the Law of the Sea (UNCLOS) establishes a treaty regime to govern activities on, over, and under the world's oceans. UNCLOS was adopted by Third United Nations Conference on the Law of the Sea in December 1982, and entered into force in November 1994. The treaty established EEZs as a feature of international law, and contains multiple provisions relating to territorial waters and EEZs. As of May 10, 2018, 168 nations were party to the treaty, including China and most other countries bordering on the SCS and ECS (the exceptions being North Korea and Taiwan). The treaty and an associated 1994 agreement relating to implementation of Part XI of the treaty (on deep seabed mining) were transmitted to the Senate on October 6, 1994. In the absence of Senate advice and consent to adherence, the United States is not a party to the convention and the associated 1994 agreement. A March 10, 1983, statement on U.S. ocean policy by President Ronald Reagan states that UNCLOS contains provisions with respect to traditional uses of the oceans which generally confirm existing maritime law and practice and fairly balance the interests of all states. Today I am announcing three decisions to promote and protect the oceans interests of the United States in a manner consistent with those fair and balanced results in the Convention and international law. First, the United States is prepared to accept and act in accordance with the balance of interests relating to traditional uses of the oceans—such as navigation and overflight. In this respect, the United States will recognize the rights of other states in the waters off their coasts, as reflected in the Convention, so long as the rights and freedoms of the United States and others under international law are recognized by such coastal states. Second, the United States will exercise and assert its navigation and overflight rights and freedoms on a worldwide basis in a manner that is consistent with the balance of interests reflected in the convention. The United States will not, however, acquiesce in unilateral acts of other states designed to restrict the rights and freedoms of the international community in navigation and overflight and other related high seas uses. Third, I am proclaiming today an Exclusive Economic Zone in which the United States will exercise sovereign rights in living and nonliving resources within 200 nautical miles of its coast. This will provide United States jurisdiction for mineral resources out to 200 nautical miles that are not on the continental shelf. UNCLOS builds on four 1958 law of the sea conventions to which the United States is a party: the Convention on the Territorial Sea and the Contiguous Zone, the Convention on the High Seas, the Convention on the Continental Shelf, and the Convention on Fishing and Conservation of the Living Resources of the High Seas. 1972 Convention on Preventing Collisions at Sea (COLREGs) China and the United States, as well as more than 150 other countries (including all those bordering on the South East and South China Seas, but not Taiwan), are parties to an October 1972 multilateral convention on international regulations for preventing collisions at sea, commonly known as the collision regulations (COLREGs) or the \"rules of the road.\" Although commonly referred to as a set of rules or regulations, this multilateral convention is a binding treaty. The convention applies \"to all vessels upon the high seas and in all waters connected therewith navigable by seagoing vessels.\" It thus applies to military vessels, paramilitary and law enforcement (i.e., coast guard) vessels, maritime militia vessels, and fishing boats, among other vessels. In a February 18, 2014, letter to Senator Marco Rubio concerning the December 5, 2013, incident involving the Cowpens , the State Department stated the following: In order to minimize the potential for an accident or incident at sea, it is important that the United States and China share a common understanding of the rules for operational air or maritime interactions. From the U.S. perspective, an existing body of international rules and guidelines—including the 1972 International Regulations for Preventing Collisions at Sea (COLREGs)—are sufficient to ensure the safety of navigation between U.S. forces and the force of other countries, including China. We will continue to make clear to the Chinese that these existing rules, including the COLREGs, should form the basis for our common understanding of air and maritime behavior, and we will encourage China to incorporate these rules into its incident-management tools. Likewise, we will continue to urge China to agree to adopt bilateral crisis management tools with Japan and to rapidly conclude negotiations with ASEAN on a robust and meaningful Code of Conduct in the South China in order to avoid incidents and to manage them when they arise. We will continue to stress the importance of these issues in our regular interactions with Chinese officials. In the 2014 edition of its annual report on military and security developments involving China, the DOD states the following: On December 5, 2013, a PLA Navy vessel and a U.S. Navy vessel operating in the South China Sea came into close proximity. At the time of the incident, USS COWPENS (CG 63) was operating approximately 32 nautical miles southeast of Hainan Island. In that location, the U.S. Navy vessel was conducting lawful military activities beyond the territorial sea of any coastal State, consistent with customary international law as reflected in the Law of the Sea Convention. Two PLA Navy vessels approached USS COWPENS. During this interaction, one of the PLA Navy vessels altered course and crossed directly in front of the bow of USS COWPENS. This maneuver by the PLA Navy vessel forced USS COWPENS to come to full stop to avoid collision, while the PLA Navy vessel passed less than 100 yards ahead. The PLA Navy vessel's action was inconsistent with internationally recognized rules concerning professional maritime behavior (i.e., the Convention of International Regulations for Preventing Collisions at Sea), to which China is a party. 2014 Code for Unplanned Encounters at Sea (CUES) On April 22, 2014, representatives of 21 Pacific-region navies (including China, Japan, and the United States), meeting in Qingdao, China, at the 14 th Western Pacific Naval Symposium (WPNS), unanimously agreed to a Code for Unplanned Encounters at Sea (CUES). CUES, a nonbinding agreement, establishes a standardized protocol of safety procedures, basic communications, and basic maneuvering instructions for naval ships and aircraft during unplanned encounters at sea, with the aim of reducing the risk of incidents arising from such encounters. The CUES agreement in effect supplements the 1972 COLREGs Convention (see previous section); it does not cancel or lessen commitments that countries have as parties to the COLREGS Convention. Two observers stated that \"the [CUES] resolution is non-binding; only regulates communication in 'unplanned encounters,' not behavior; fails to address incidents in territorial waters; and does not apply to fishing and maritime constabulary vessels [i.e., coast guard ships and other maritime law enforcement ships], which are responsible for the majority of Chinese harassment operations.\" DOD stated in 2015 that Going forward, the Department is also exploring options to expand the use of CUES to include regional law enforcement vessels and Coast Guards. Given the growing use of maritime law enforcement vessels to enforce disputed maritime claims, expansion of CUES to MLE [maritime law enforcement] vessels would be an important step in reducing the risk of unintentional conflict. U.S. Navy officials have stated that the CUES agreement is generally working well, and that the United States (as noted in the passage above) is interested in expanding the agreement to cover coast guard ships. Officials from Singapore and Malaysia reportedly have expressed support for the idea. An Obama Administration fact sheet about Chinese President Xi Jinping's state visit to the United States on September 24-25, 2015, stated the following: The U.S. Coast Guard and the China Coast Guard have committed to pursue an arrangement whose intended purpose is equivalent to the Rules of Behavior Confidence Building Measure annex on surface-to-surface encounters in the November 2014 Memorandum of Understanding between the United States Department of Defense and the People's Republic of China Ministry of National Defense. A November 3, 2018, press report published following an incident in the SCS between a U.S. Navy destroyer and a Chinese destroyer stated the following: The U.S. Navy's chief of naval operations has called on China to return to a previously agreed-upon code of conduct for at-sea encounters between the ships of their respective navies, stressing the need to avoid miscalculations. During a Nov. 1 teleconference with reporters based in the Asia-Pacific region, Adm. John Richardson said he wants the People's Liberation Army Navy to \"return to a consistent adherence to the agreed-to code that would again minimize the chance for a miscalculation that could possibly lead to a local incident and potential escalation.\" The CNO cited a case in early October when the U.S. Navy's guided-missile destroyer Decatur reported that a Chinese Type 052C destroyer came within 45 yards of the Decatur as it conducted a freedom-of-navigation operation in the South China Sea. However, he added that the \"vast majority\" of encounters with Chinese warships in the South China Sea \"are conducted in accordance with the Code of Unplanned Encounters at Sea and done in a safe and professional manner.\" The code is an agreement reached by 21 Pacific nations in 2014 to reduce the chance of an incident at sea between the agreement's signatories. 2014 U.S.-China MOU on Air and Maritime Encounters In November 2014, the U.S. DOD and China's Ministry of National Defense signed a Memorandum of Understanding (MOU) regarding rules of behavior for safety of air and maritime encounters. The MOU makes reference to UNCLOS, the 1972 COLREGs convention, the Conventional on International Civil Aviation (commonly known as the Chicago Convention), the Agreement on Establishing a Consultation Mechanism to Strengthen Military Maritime Safety (MMCA), and CUES. The MOU as signed in November 2014 included an annex on rules of behavior for safety of surface-to-surface encounters. An additional annex on rules of behavior for safety of air-to-air encounters was signed on September 15 and 18, 2015. An October 20, 2018, press report states the following: Eighteen nations including the U.S. and China agreed in principle Saturday [October 20] to sign up to guidelines governing potentially dangerous encounters by military aircraft, a step toward stabilizing flashpoints but one that leaves enough wiggle room to ignore the new standards when a country wants. The guidelines essentially broaden a similar agreement reached by the U.S. and China three years ago and are an attempt to mitigate against incidents and collisions in some of the world's most tense areas…. The in-principle agreement, which will be put forward for formal adoption by the group of 18 nations next year, took place at an annual meeting of defense ministers under the aegis of the 10-country Association of Southeast Asian Nations, hosted by Singapore. Asean nations formally adopted the new guidelines themselves Friday. \"The guidelines are very useful in setting norms,\" Singapore's defense minister Ng Eng Hen told reporters after the meeting. \"All the 18 countries agreed strong in-principle support for the guidelines.\"… The aerial-encounters framework agreed to Saturday includes language that prohibits fast or aggressive approaches in the air and lays out guidelines on clear communications including suggestions to \"refrain from the use of uncivil language or unfriendly physical gestures.\" Signatories to the agreement, which is voluntary and not legally binding, would agree to avoid unprofessional encounters and reckless maneuvers…. The guidelines fall short on enforcement and geographic specifics, but they are \"better than nothing at all,\" said Evan Laksmana, senior researcher with the Center for Strategic and International Studies in Jakarta. \"Confidence-building surrounding military crises or encounters can hardly move forward without some broadly agreed-upon rules of the game,\" he said. Negotiations on SCS Code of Conduct (COC) In 2002, China and the 10 member states of ASEAN signed a nonbinding Declaration on the Conduct (DOC) of Parties in the South China Sea in which the parties, among other things, ... reaffirm their respect for and commitment to the freedom of navigation in and overflight above the South China Sea as provided for by the universally recognized principles of international law, including the 1982 UN Convention on the Law of the Sea.... ... undertake to resolve their territorial and jurisdictional disputes by peaceful means, without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned, in accordance with universally recognized principles of international law, including the 1982 UN Convention on the Law of the Sea.... ... undertake to exercise self-restraint in the conduct of activities that would complicate or escalate disputes and affect peace and stability including, among others, refraining from action of inhabiting on the presently uninhabited islands, reefs, shoals, cays, and other features and to handle their differences in a constructive manner.... ...reaffirm that the adoption of a [follow-on] code of conduct in the South China Sea would further promote peace and stability in the region and agree to work, on the basis of consensus, towards the eventual attainment of this objective.... In July 2011, China and ASEAN adopted a preliminary set of principles for implementing the DOC. U.S. officials since 2010 have encouraged ASEAN and China to develop the follow-on binding Code of Conduct (COC) mentioned in the final quoted paragraph above. China and ASEAN have conducted negotiations on the follow-on COC, but China has not yet agreed with the ASEAN member states on a final text. On March 8, 2017, China announced that the first draft of a framework for the COC had been completed, and that \"China and ASEAN countries feel satisfied with this.\" On May 18 and 19, 2017, it was reported that the China and the ASEAN countries had agreed on the framework. An article from a Chinese news outlet stated the following: All countries involved have agreed not to release the framework document, but to maintain it as an internal document at this time since the consultation will continue and they do not want any external interference, [Vice-Foreign Minister] Liu [Zhenmin] said. \"Against the backdrop of economic globalization, China and ASEAN countries should continue making our regional rules to guide our own actions and protect our common interests,\" Liu said. A May 18, 2017, press report stated that Liu Zhemin \"called on others to stay out [of the negotiations], apparently a coded message to the United States. 'We hope that our consultations on the code are not subject to any outside interference,' Liu said.\" An August 3, 2017, press report stated the following: Southeast Asian ministers meeting this week are set to avoid tackling the subject of Beijing's arming and building of manmade South China Sea islands, preparing to endorse a framework for a code of conduct that is neither binding nor enforceable. The Association of South East Asian Nations (ASEAN) has omitted references to China's most controversial activities in its joint communique, a draft reviewed by Reuters shows. In addition, a leaked blueprint for establishing an ASEAN-China code of maritime conduct does not call for it to be legally binding, or seek adherence to the United Nations Convention on the Law of the Sea (UNCLOS).... Analysts and some ASEAN diplomats worry that China's sudden support for negotiating a code of conduct is a ploy to buy time to further boost its military capability.... The agreed two-page framework is broad and leaves wide scope for disagreement, urging a commitment to the \"purposes and principles\" of UNCLOS, for example, rather than adherence. The framework papers over the big differences between ASEAN nations and China, said Patrick Cronin of the Center for a New American Security. \"Optimists will see this non-binding agreement as a small step forward, allowing habits of cooperation to develop, despite differences,\" he said. \"Pessimists will see this as a gambit favorable to a China determined to make the majority of the South China Sea its domestic lake.\" An August 6, 2017, press report stated the following: Southeast Asian nations agreed with China on Sunday [August 6] to endorse a framework for a maritime code of conduct that would govern behavior in disputed waters of the South China Sea, a small step forward in a negotiation that has lasted well over a decade. Though not the long-discussed code itself, the framework sets out parameters for discussion of an agreement intended to bring predictability to a potential flashpoint as China increasingly asserts its military presence over the area in the face of rival claims. The 10 countries of the Association of Southeast Asian Nations will meet with China at the end of August to discuss legalities for negotiations on the code of conduct, with formal talks beginning soon after, Philippines department of foreign affairs spokesman Robespierre Bolivar said Sunday. The endorsement of the framework, which was tentatively agreed to in May, came during a bilateral meeting between China and Asean on the sidelines of a series of security-oriented meetings that will conclude Tuesday. The unsticking of the framework after years of obstruction is widely seen as a concession by China, which has opposed any legally binding code on maritime engagement, stepped up naval patrols and built artificial islands to enforce its claims, equipping them with military weapons. Beijing's move to allow discussion on the code of conduct follows a resetting of ties with the Philippines under President Rodrigo Duterte, who in October—just four months after taking office—visited Beijing and declared a new friendship between the two countries. An August 8, 2017, blog post about the framework states the following: In Manila on 6 August 2017, the foreign ministers of ASEAN and China endorsed the framework for the Code of Conduct for the South China Sea (COC). While the framework is a step forward in the conflict management process for the South China Sea, it is short on details and contains many of the same principles and provisions contained in the 2002 ASEAN-China Declaration on the Conduct of Parties in the South China Sea (DOC) which has yet to be even partially implemented. The text includes a new reference to the prevention and management of incidents, as well as a seemingly stronger commitment to maritime security and freedom of navigation. However, the phrase \"legally binding\" is absent, as are the geographical scope of the agreement and enforcement and arbitration mechanisms. The framework will form the basis for further negotiations on the COC. Those discussions are likely to be lengthy and frustrating for those ASEAN members who had hoped to see a legally binding, comprehensive and effective COC. Some observers have argued that China has been dragging out the negotiations on the COC for years as part of a \"talk and take strategy,\" meaning a strategy in which China engages in (or draws out) negotiations while taking actions to gain control of contested areas. A May 25, 2017, news report states the following: To call negotiations between China and the ten-country Association of South-East Asian Nations (ASEAN) over rival claims in the South China Sea \"drawn out\" would be a gross understatement. At the centre of the matter is an unsquareable circle: the competing claims of China and several South-East Asian countries. Nobody wants to go to war; nobody wants to be accused of backing down. Still, at a meeting of senior Chinese and ASEAN officials on May 18 th , something happened: the two sides agreed on a \"framework\" for a code of conduct. An official from Singapore (which currently co-ordinates ASEAN-China relations) called the agreement a sign of \"steady progress\".... ASEAN members called for a legally binding code of conduct as far back as 1996.... Since then, code-of-conduct negotiations have proceeded glacially.... Last July, after China received an unfavourable ruling on its maritime claims in a case brought by the Philippines to a tribunal in The Hague, China agreed to expedite the talks.... The draft framework will be presented to ASEAN and Chinese foreign ministers at a conference in August. This will then form the basis for the thorny negotiations to follow. The text has not (yet) been leaked. But its most salient feature may be what it appears to lack: any hint of enforcement mechanisms or consequences for violations. China has long rejected a legally binding agreement—or indeed any arrangement that could limit its actions in the South China Sea. The result, explains Ian Storey, of the ISEAS-Yusof Ishak Institute, a think-tank in Singapore, is a framework \"that makes China look co-operative…without having to do anything that might constrain its freedom of action\". ASEAN, meanwhile, gets the appearance of progress. \"The ASEAN secretariat is a bureaucracy, and bureaucrats like process,\" explains Mr Storey. A July 13, 2018, blog post states the following: The COC has become a \"holy grail,\" highly desired but unattainable. A major concern should be that this holy grail could turn into a tool for China to legitimize its actions in the South China Sea by engaging in the process while subverting its spirit. To this end, the challenges to the COC process are likely to be: China will use the COC talks to delay, exploit, and divert focus from any ASEAN consensus on the South China Sea; China will seek to include unhelpful and imprecise language in the COC which it could then use to justify its actions; China will nonetheless claim the COC as a diplomatic success and will use it as cover to avoid criticism while still pursuing its unilateral strategy to control the South China Sea…. If the COC process continues on its current trajectory, and China succeeds in filling the document with vague articles that would have little impact on its behavior, it would effectively be abusing the rules-based order to its own benefit. Instead of protecting against unilateral actions in the South China Sea, the rules-based order in the form of the COC could assist and justify China's expansion and ultimately its sole control of the South China Sea. Other regional actors need to recognize these traps of concluding a counter-productive COC, and resist the urge to reach an agreement just to be able to say they made progress. Instead, they should insist on negotiating the terms and conditions of a real COC, one that would establish effective rules-based dispute management mechanisms, not one that would by-pass them for the sake of an easy \"win.\" An August 2, 2018, press report states the following: After more than a decade of talks, a bloc of Southeast Asian nations and China have agreed on a draft code of conduct that will lay the foundation for negotiations over the disputed South China Sea. Observers said the agreement showed that China and the Association of Southeast Asian Nations (Asean) could make progress through talks despite rising regional tensions, but they also warned that there was still a long way to go until a final deal. The agreement on the \"Single Draft COC Negotiating Text\" was announced at a meeting of Asean foreign ministers in Singapore on Thursday [August 2], after being nailed down at a China-Asean meeting in the central Chinese city of Changsha in June. An August 9, 2018, press report stated the following: Talks on completing a code of conduct for the disputed South China Sea will be long and complex and it would be unrealistic to set a timetable, state media on Thursday [August 9] cited a senior Chinese diplomat as saying…. In an interview with China Newsweek magazine, Yi Xianliang, Director General of the Chinese Foreign Ministry's Department of Boundary and Ocean Affairs, said the talks were continuing. Many of the topics were complex and sensitive and there were many different points of view, he said. \"If these issues are to be resolved, and the code finally comes together, all sides need to keep looking for the greatest common denominator,\" Yi added. \"There are voices from the outside, who are trying to set a timetable for the talks on the code. I think this is unrealistic,\" he said. Any multilateral talks take time, especially on such a complex issue as the South China Sea, Yi added. \"It is impossible to define a timetable. Instead of setting the timetable unrealistically, and binding one's hands, it's better to step forward one foot at a time.\"… \"Certain countries outside the region have been agitating that the code must be legally binding. This issue is quite complicated, including the domestic legal procedures involved in the countries concerned,\" he added, without elaborating. An October 22, 2018, press report stated the following: As China moves to complete the creation of military outposts in the South China Sea, Beijing's negotiation with southeastern Asian nations over a binding code of conduct is gaining momentum. But U.S. officials and experts warn China's insertions in the draft South China Sea code of conduct may put Washington and Beijing on a collision course. The text of the draft also shows that deep divisions remain among claimants. One of the Chinese provisions in the text states, \"The Parties shall not hold joint military exercises with countries from outside the region, unless the parties concerned are notified beforehand and express no objection.\" China also proposed cooperation on the marine economy \"shall not be conducted in cooperation with companies from countries outside the region.\" A State Department spokesperson told VOA the United States is concerned by reports China has been pressing members of the Association of Southeast Asian Nations \"in the closed-door talks, to accept restrictions on their ability to conduct exercises with security partners, and to agree not to conduct oil and gas exploration in their claimed waters with energy firms based in countries which are not part of the ongoing negotiations.\" \"These proposals, if accepted, would limit the ability of ASEAN nations to conduct sovereign, independent foreign and economic policies and would directly harm the interests of the broader international community,\" added the State Department spokesperson…. \"In other words, China would like a veto over all the military exercises held by ASEAN countries with other nations. I think this really provides some evidence that China indeed is trying to limit American influence in the region, one might go so far as to say to push American military presence out of the region eventually, but certainly in the area of the South China Sea,\" said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies in Washington…. The United States is also calling for ongoing discussions on the South China Sea code of conduct to be transparent and consultative with the rest of the international community. U.S. officials said the international community has direct stakes in the outcome. A September 6, 2018, blog post stated the following: After two decades of talks, scepticism about the development of a South China Sea Code of Conduct (COC) is well-deserved, but it is also important to acknowledge progress when it happens. The agreement on a single draft negotiating text, revealed ahead of the ASEAN–China Post Ministerial Meeting on 2 August 2018, is an important step in the process that deserves recognition. The COC will not resolve the South China Sea disputes, nor was it ever meant to. Instead the COC is intended to manage disputes to avoid conflict pending their eventual resolution by direct negotiation or arbitration among the claimants. But any system to effectively manage the South China Sea disputes would require three things, none of which are achieved yet in the draft text. First, an effective COC would need to be geographically defined…. Second, an effective COC would need a dispute settlement mechanism…. Third, any effective regime to manage the South China Sea disputes would need detailed provisions on fisheries management and oil and gas development…. The solution to this problem could be a COC signed by all 10 ASEAN members and China that establishes general rules of behaviour within a clear geographic area, sets up an effective dispute settlement mechanism and endorses the immediate start of follow-on negotiations involving only the relevant claimants on fisheries management and oil and gas cooperation. Such a document would be a major step towards peacefully managing the South China Sea disputes and there are hints that at least some sections of the negotiating text might be on the right track. But the differences between parties remain considerable and final agreement on an effective COC still seems some way off. An October 29, 2018, press report states the following: The Philippines on Monday said a set of rules intended to prevent conflict in the South China Sea need not legally compel countries to follow it—an issue of importance for the Chinese government. Philippine Foreign Affairs Secretary Teodoro Locsin Jr. raised this possibility during a joint news conference with Wang Yi, his Chinese counterpart, in Davao City where they held bilateral talks to firm up preparations for President Xi Jinping's visit to Manila next month. The Association of Southeast Asian Nations and China are negotiating a code of conduct in the South China Sea. The 10-member bloc wants it to be legally binding, but Beijing prefers just \"binding,\" ASEAN diplomats have said. \"Perhaps, we will not be able to arrive at a legally binding COC, but it will be a standard on how people of ASEAN and governments of ASEAN will behave with each other -- always with honor, never with aggression, and always for mutual progress,\" Locsin said…. Wang said China will abide by the code whether it is legally binding or not. He said China hopes to finish the negotiations before Manila's term as ASEAN-China coordinator ends. \"We welcome constructive opinions within the framework... that has been agreed,\" Wang said, referring to the general outline agreed last year, which dropped a reference to a legally binding code. The framework essentially repeats the spirit of a 2002 declaration on the South China Sea that called on parties to exercise restraint to avoid escalating tensions, and respect international law, among other things. Critics and ASEAN officials said the declaration failed to manage tensions in the disputed area because it was not legally binding. A November 14, 2018, press report stated the following: A rulebook to settle disputes in the hotly contested South China Sea should be finished in three years, Chinese Premier Li Keqiang said on Tuesday, insisting his nation does not seek \"hegemony or expansion.\" Li's comments appeared to be the first clear timeframe for finishing the code of conduct. Talks have dragged on for years, with China accused of delaying progress as it prefers to deal with less powerful countries on a one-to-one basis. Appendix D. July 2016 Tribunal Award in SCS Arbitration Case Involving Philippines and China This appendix provides background information on the July 2016 tribunal award in the SCS arbitration case involving the Philippines and China. Overview In 2013, the Philippines sought arbitration under UNCLOS over the role of historic rights and the source of maritime entitlements in the South China Sea, the status of certain maritime features and the maritime entitlements they are capable of generating, and the lawfulness of certain actions by China that were alleged by the Philippines to violate UNCLOS. A tribunal was constituted under UNCLOS to hear the case. China stated repeatedly that it would not accept or participate in the arbitration and that, in its view, the tribunal lacked jurisdiction in this matter. China's nonparticipation did not prevent the case from moving forward, and the tribunal decided that it had jurisdiction over various matters covered under the case. On July 12, 2016, the tribunal issued its award (i.e., ruling) in the case. The award was strongly in favor of the Philippines—more so than even some observers had anticipated. The tribunal ruled, among other things, that China's nine-dash line claim had no legal basis; that none of the land features in the Spratlys is entitled to any more than a 12-nm territorial sea; that three of the Spratlys features that China occupies generate no entitlement to maritime zones; and that China violated the Philippines' sovereign rights by interfering with Philippine vessels and by damaging the maritime environment and engaging in reclamation work on a feature in the Philippines' EEZ. Under UNCLOS, the award is binding on both the Philippines and China (China's nonparticipation in the arbitration does not change this). There is, however, no mechanism for enforcing the tribunal's award. The United States has urged China and the Philippines to abide by the award. China, however, has declared the ruling null and void. Philippine President Rodrigo Duterte, who took office just before the tribunal's ruling, has not sought to enforce it. The tribunal's press release summarizing its award states the following in part: The Award is final and binding, as set out in Article 296 of the Convention [i.e., UNCLOS] and Article 11 of Annex VII [of UNCLOS]. Historic Rights and the 'Nine-Dash Line': ... On the merits, the Tribunal concluded that the Convention comprehensively allocates rights to maritime areas and that protections for pre-existing rights to resources were considered, but not adopted in the Convention. Accordingly, the Tribunal concluded that, to the extent China had historic rights to resources in the waters of the South China Sea, such rights were extinguished to the extent they were incompatible with the exclusive economic zones provided for in the Convention. The Tribunal also noted that, although Chinese navigators and fishermen, as well as those of other States, had historically made use of the islands in the South China Sea, there was no evidence that China had historically exercised exclusive control over the waters or their resources. The Tribunal concluded that there was no legal basis for China to claim historic rights to resources within the sea areas falling within the 'nine-dash line'. Status of Features: ... Features that are above water at high tide generate an entitlement to at least a 12 nautical mile territorial sea, whereas features that are submerged at high tide do not. The Tribunal noted that the reefs have been heavily modified by land reclamation and construction, recalled that the Convention classifies features on their natural condition, and relied on historical materials in evaluating the features. The Tribunal then considered whether any of the features claimed by China could generate maritime zones beyond 12 nautical miles. Under the Convention, islands generate an exclusive economic zone of 200 nautical miles and a continental shelf, but \"[r]ocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf.\" ... the Tribunal concluded that none of the Spratly Islands is capable of generating extended maritime zones. The Tribunal also held that the Spratly Islands cannot generate maritime zones collectively as a unit. Having found that none of the features claimed by China was capable of generating an exclusive economic zone, the Tribunal found that it could—without delimiting a boundary—declare that certain sea areas are within the exclusive economic zone of the Philippines, because those areas are not overlapped by any possible entitlement of China. Lawfulness of Chinese Actions: ... Having found that certain areas are within the exclusive economic zone of the Philippines, the Tribunal found that China had violated the Philippines' sovereign rights in its exclusive economic zone by (a) interfering with Philippine fishing and petroleum exploration, (b) constructing artificial islands and (c) failing to prevent Chinese fishermen from fishing in the zone. The Tribunal also held that fishermen from the Philippines (like those from China) had traditional fishing rights at Scarborough Shoal and that China had interfered with these rights in restricting access. The Tribunal further held that Chinese law enforcement vessels had unlawfully created a serious risk of collision when they physically obstructed Philippine vessels. Harm to Marine Environment: The Tribunal considered the effect on the marine environment of China's recent large-scale land reclamation and construction of artificial islands at seven features in the Spratly Islands and found that China had caused severe harm to the coral reef environment and violated its obligation to preserve and protect fragile ecosystems and the habitat of depleted, threatened, or endangered species. The Tribunal also found that Chinese authorities were aware that Chinese fishermen have harvested endangered sea turtles, coral, and giant clams on a substantial scale in the South China Sea (using methods that inflict severe damage on the coral reef environment) and had not fulfilled their obligations to stop such activities. Aggravation of Dispute: Finally, the Tribunal considered whether China's actions since the commencement of the arbitration had aggravated the dispute between the Parties. The Tribunal found that it lacked jurisdiction to consider the implications of a stand-off between Philippine marines and Chinese naval and law enforcement vessels at Second Thomas Shoal, holding that this dispute involved military activities and was therefore excluded from compulsory settlement. The Tribunal found, however, that China's recent large-scale land reclamation and construction of artificial islands was incompatible with the obligations on a State during dispute resolution proceedings, insofar as China has inflicted irreparable harm to the marine environment, built a large artificial island in the Philippines' exclusive economic zone, and destroyed evidence of the natural condition of features in the South China Sea that formed part of the Parties' dispute. Assessments of Impact of Arbitral Award One Year Later In July 2017, a year after the arbitral panel's award, some observers assessed the impact to date of the award. For example, one observer stated the following: One year ago, China suffered a massive legal defeat when an international tribunal based in The Hague ruled that the vast majority of Beijing's extensive claims to maritime rights and resources in the South China Sea were not compatible with international law. Beijing was furious. At an official briefing immediately after the ruling, Vice Foreign Minister Liu Zhenmin twice called it \"nothing more than a piece of waste paper,\" and one that \"will not be enforced by anyone.\" And yet, one year on, China is, in many ways, abiding by it.... China is not fully complying with the ruling—far from it. On May 1, China imposed a three-and-a-half-month ban on fishing across the northern part of the South China Sea, as it has done each year since 1995. While the ban may help conserve fish stocks, its unilateral imposition in wide areas of the sea violates the ruling. Further south, China's occupation of Mischief Reef, a feature that is submerged at high tide and the tribunal ruled was part of the Philippines' continental shelf, endures. Having built a vast naval base and runway here, China looks like it will remain in violation of that part of the ruling for the foreseeable future. But there is evidence that the Chinese authorities, despite their rhetoric, have already changed their behavior. In October 2016, three months after the ruling, Beijing allowed Philippine and Vietnamese boats to resume fishing at Scarborough Shoal, west of the Philippines. A China Coast Guard ship still blocks the entrance to the lagoon, but boats can still fish the rich waters around it. The situation is not perfect but neither is China flaunting its defiance.... Much more significantly, China has avoided drilling for oil and gas on the wrong side of the invisible lines prescribed by the United Nations Convention on the Law of the Sea (UNCLOS).... ... the ruling means China has no claim to the fish, oil or gas more than 12 nautical miles from any of the Spratlys or Scarborough Shoal. The Chinese authorities appear not to accept this.... There are clear signs from both China's words and deeds that Beijing has quietly modified its overall legal position in the South China Sea. Australian researcher Andrew Chubb noted a significant article in the Chinese press in July last year outlining the new view.... ... China's new position seems to represent a major step towards compliance with UNCLOS and, therefore, the ruling. Most significantly, it removes the grounds for Chinese objections to other countries fishing and drilling in wide areas of the South China Sea.... Overall, the picture is of a China attempting to bring its vision of the rightful regional order (as the legitimate owner of every rock and reef inside the U-shaped line) within commonly understood international rules. Far from being \"waste paper,\" China is taking the tribunal ruling very seriously. It is still some way from total compliance but it is clearly not deliberately flouting the ruling. Another observer stated the following: A year ago today, an arbitral tribunal formed pursuant to the United Nations Convention for the Law of the Sea issued a blockbuster award finding much of China's conduct in the South China Sea in violation of international law. As I detailed that day on this blog and elsewhere, the Philippines won about as big a legal victory as it could have expected. But as many of us also warned that day, a legal victory is not the same as an actual victory. In fact, over the past year China has succeeded in transforming its legal defeat into a policy victory by maintaining its aggressive South China Sea policies while escaping sanction for its non-compliance. While the election of a new pro-China Philippines government is a key factor, much of the blame for China's victory must also be placed on the Obama Administration.... International law seldom enforces itself, and even the reputational costs of violating international law do not arise unless other states impose those costs on the law-breaker. Both the Philippines and the U.S. had policy options that would have raised the costs of China's non-compliance with the award. But neither country's government chose to press China on the arbitral award.... Looking back after one year, we cannot say (yet) that U.S. policy in the South China Sea is a failure. But we can say that the U.S. under President Obama missed a huge opportunity to change the dynamics in the region in its favor, and it is hard to know whether or when another such opportunity will arise in the future. Reported Chinese Characterization of Arbitral Award as \"Waste Paper\" When the arbitral panel's award was announced, China stated that \"China does not accept or recognize it,\" and that the award \"is invalid and has no binding force.\" The first of the two passages quoted above states that \"at an official briefing immediately after the ruling, Vice Foreign Minister Liu Zhenmin twice called it 'nothing more than a piece of waste paper,' and one that 'will not be enforced by anyone.'\" A November 22, 2017, press report states the following: An eight-page essay pumped through social media and Chinese state newspapers in recent days extolled the virtues of president Xi Jinping. Among his achievements, in the Chinese language version, was that he had turned the South China Sea Arbitration at The Hague—which found against China—into \"waste paper\". It was an achievement that state news agency Xinhua's lengthy hymn, entitled \"Xi and His Era\", did not include in the English version for foreign consumption. Assessments and Events Two Years Later Another observer writes in a May 10, 2018, commentary piece that Two years after an international tribunal rejected expansive Chinese claims to the South China Sea, Beijing is consolidating control over the area and its resources. While the U.S. defends the right to freedom of navigation, it has failed to support the rights of neighboring countries under the tribunal's ruling. As a result, Southeast Asian countries are bowing to Beijing's demands…. While Beijing's dramatic military buildup in the South China Sea has received much attention, its attempts at \"lawfare\" are largely overlooked. In May, the Chinese Society of International Law published a \"critical study\" on the South China Sea arbitration case. It rehashed old arguments but also developed a newer one, namely that China is entitled to claim maritime zones based on groups of features rather than from individual features. Even if China is not entitled to historic rights within the area it claims, this argument goes, it is entitled to resources in a wide expanse of sea on the basis of an exclusive economic zone generated from outlying archipelagoes. But the Convention on the Law of the Sea makes clear that only archipelagic states such as the Philippines and Indonesia may draw straight archipelagic baselines from which maritime zones may be claimed. The tribunal also explicitly found that there was \"no evidence\" that any deviations from this rule have amounted to the formation of a new rule of customary international law. China's arguments are unlikely to sway lawyers, but that is not their intended audience. Rather Beijing is offering a legal fig leaf to political and business elites in Southeast Asia who are already predisposed to accept Beijing's claims in the South China Sea. They fear China's threat of coercive economic measures and eye promises of development through offerings such as the Belt and Road Initiative. Why did Washington go quiet on the 2016 tribunal decision? One reason is Philippine President Rodrigo Duterte's turn toward China and offer to set aside the ruling. The U.S. is also worried about the decision's implications for its own claims to exclusive economic zones from small, uninhabited land features in the Pacific. The Trump administration's failure to press Beijing to abide by the tribunal's ruling is a serious mistake. It undermines international law and upsets the balance of power in the region. Countries have taken note that the tide in the South China Sea is in China's favor, and they are making their strategic calculations accordingly. This hurts U.S. interests in the region. A July 12, 2018, press report stated the following: The Philippines is celebrating today the second anniversary of its landmark arbitration award against China's territorial claims in the South China Sea handed down by an arbitral tribunal in The Hague…. Until now, the Philippines remains sharply divided on how to leverage its arbitration award. Filipino President Rodrigo Duterte has repeatedly downplayed the relevance of the ruling by questioning its enforceability amid China's vociferous opposition. Soon after taking office in mid-2016, Duterte declared that he would \"set aside\" the arbitration award in order to pursue a \"soft landing\" in bilateral relations with China. In exchange, he has hoped for large-scale Chinese investments as well as resource-sharing in the South China Sea…. Other major leaders in the Philippines, however, have taken a tougher stance and continue to try to leverage the award to resist China's expanding footprint in the area. The Stratbase-Albert Del Rosario Institute, an influential think tank co-founded by former Philippine Secretary of Foreign Affairs Albert del Rosario, hosted today a high-level forum on the topic at the prestigious Manila Polo Club. Del Rosario oversaw the arbitration proceedings against China under Duterte's predecessor, Benigno Aquino. He opened the event attended by dignitaries from major Western and Asian countries with a strident speech which accused China of trying to \"dominate the South China Sea through force and coercion.\" He defended the arbitration award as an \"overwhelming victory\" to resist \"China's unlawful expansion agenda.\" The ex-top diplomat also accused the Duterte administration of acquiescence to China by acting as an \"abettor\" and \"willing victim\" by soft-pedaling the Philippines' claims in the South China Sea and refusing to raise the arbitration award in multilateral fora. The keynote speaker of the event was Vice President Leni Robredo, who has recently emerged as the de facto leader of the opposition against Duterte. Though falling short of directly naming Duterte, her spirited speech served as a comprehensive indictment of the administration's policy in the South China Sea…. Her keynote address, widely covered by the local media, was followed by an even more spirited speech by interim Supreme Court Chief Justice Antonio Carpio, another leading critic of Duterte's foreign policy. The chief magistrate, who also oversaw the Philippines' arbitration proceedings against China, lashed out at Duterte for placing the landmark award in a \"deep freeze.\" He called on the Duterte administration to leverage the award by negotiating maritime delimitation agreements with other Southeast Asian claimant states such as Malaysia and Vietnam which welcomed the arbitral tribunal's nullification of China's nine-dashed-line map. He also called on the Philippines to expand its maritime entitlement claims in the area, in accordance to the arbitration award, by applying for an extended continental shelf in the South China Sea at the UN. Another July 12, 2018, press report stated the following: Tarpaulins bearing the words \"Welcome to the Philippines, province of China\" were seen hanging from several footbridges in Metro Manila Thursday, two years after the country won its arbitration case against China. The red banners bore the Chinese flag and Chinese characters. It is unclear who installed the tarpaulins, which are possible reference to a \"joke\" by President Rodrigo Duterte that the country can be a province of the Asian giant. \"He (Xi Jinping) is a man of honor. They can even make us 'Philippines, province of China,' we will even avail of services for free,\" Duterte said in apparent jest before an audience of Chinese-Filipino business leaders earlier in 2018. \"If China were a woman, I'd woo her.\"… In a Palace briefing, presidential spokesperson Harry Roque said enemies of the government are behind the tarpaulins. A report on ANC said that the Metro Manila Development Authority already took the banners down. The tarpaulins sparked outrage among social media users. A July 17, 2018, press report stated the following: Protesters held a rally in front of the Chinese Consulate [in San Francisco] before proceeding to the Philippine Consulate downtown, demanding that China \"get out of Philippine territory in the West Philippine Sea.\" The protest was timed with others in Los Angeles and Vancouver on the second anniversary of the UN's Permanent Court of Arbitration ruling that China had no right to the territory it was claiming. Filipino American Human Rights Advocates (FAHRA) in a statement celebrated the court's finding that \"China's historical claim of the \"nine-dash line\" [is] illegal and without basis.\" \"China continues to violate the UN's decision with the backing of its puppet Philippine government headed by President Duterte, who is deceived by the 'build, build, build' economic push while China establishes a 'steal, steal, steal' approach to islands and territories belonging to the Exclusive Economic Zone (EEZ) of the Philippines as determined by UN,\" the statement lamented. FAHRA also found it unacceptable that Filipino fishermen must now ask permission to fish in the Philippine waters from \"a Chinese master.\" \"Duterte is beholden to the $15-billion loan with monstrous interest rate and China's investments in Boracay and Marawi, at the expense of Philippine sovereignty,\" FAHRA claimed. \"This is not to mention that China remains to be the premier supplier of illegal drugs to the country through traders that include the son, Paolo Duterte, with his P6 billion shabu shipment to Davao,\" it further charged. The group demanded that \"China abide by the UN International Tribunal Court's decision two years ago, to honor the full sovereignty of the Philippines over all territories at the Exclusive Economic Zone (EEZ) including the West Philippine Sea and the dismantling of the nuclear missiles and all military facilities installed by the Chinese government at the Spratly islands meant to coerce the Filipinos and all peace-loving people of Southeast Asia who clamor for equal respect and equal sovereignty in the area\" among others. Appendix E. Additional Elements of China's Approach to Maritime Disputes This appendix presents background information on additional elements of China's approach to the maritime disputes in the SCS and ECS. Map of Nine-Dash Line China depicts its claims in the SCS using the so-called map of the nine-dash line—a Chinese map of the SCS showing nine line segments that, if connected, would enclose an area covering roughly 90% (earlier estimates said about 80%) of the SCS ( Figure E-1 ). The area inside the nine line segments far exceeds what is claimable as territorial waters under customary international law of the sea as reflected in UNCLOS, and, as shown in Figure E-2 , includes waters that are within the claimable EEZs (and in some places are quite near the coasts) of the Philippines, Malaysia, Brunei, and Vietnam. The map of the nine-dash line, also called the U-shaped line or the cow tongue, predates the establishment of the People's Republic of China (PRC) in 1949. The map has been maintained by the PRC government, and maps published in Taiwan also show the nine line segments. In a document submitted to the United Nations on May 7, 2009, which included the map shown in Figure E-1 as an attachment, China stated the following: China has indisputable sovereignty over the islands in the South China Sea and the adjacent waters, and enjoys sovereign rights and jurisdiction over the relevant waters as well as the seabed and subsoil thereof (see attached map [of the nine-dash line]). The above position is consistently held by the Chinese Government, and is widely known by the international community. The map does not always have exactly nine dashes. Early versions of the map had as many as 11 dashes, and a map of China published by the Chinese government in June 2014 includes 10 dashes. The exact positions of the dashes have also varied a bit over time. China has maintained ambiguity over whether it is using the map of the nine-dash line to claim full sovereignty over the entire sea area enclosed by the nine-dash line, or something less than that. Maintaining this ambiguity can be viewed as an approach that preserves flexibility for China in pursuing its maritime claims in the SCS while making it more difficult for other parties to define specific objections or pursue legal challenges to those claims. It does appear clear, however, that China at a minimum claims sovereignty over the island groups inside the nine line segments—China's domestic Law on the Territorial Sea and Contiguous Zone, enacted in 1992, specifies that China claims sovereignty over all the island groups inside the nine line segments. China's implementation on January 1, 2014, of a series of fishing regulations covering much of the SCS suggests that China claims at least some degree of administrative control over much of the SCS. An April 30, 2018, blog post states the following: In what is likely a new bid to reinforce and even expand China's sweeping territorial claims in the South China Sea, a group of Chinese scholars recently published a \"New Map of the People's Republic of China.\" The alleged political national map, reportedly first published in April 1951 but only \"discovered\" through a recent national archival investigation, could give new clarity to the precise extent of China's official claims in the disputed waters. Instead of dotted lines, as reflected in China's U-shaped Nine-Dash Line claim to nearly all of the South China Sea, the newly discovered map provides a solid \"continuous national boundary line and administrative region line.\" The Chinese researchers claim that through analysis of historical maps, the 1951 solid-line map \"proves\" beyond dispute that the \"U-boundary line is the border of China's territorial sea\" in the South China Sea. They also claim that the solid administrative line overlaying the U-boundary \"definitely indicated that the sovereignty of the sea\" enclosed within the U-boundary \"belonged to China.\" The study, edited by the Guanghua and Geosciences Club and published by SDX Joint Publishing Company, has not been formally endorsed by the Chinese government. April 2018 Press Report of Proposal for Continuous Boundary Line in SCS An April 22, 2018, press report states the following: Researchers are proposing a new boundary in the South China Sea that they say will help the study of natural science while potentially adding weight to China's claims over the disputed waters, according to a senior scientist involved in the government-funded project. The new boundary will help to define more clearly China's claims in the contested region, but it is not clear whether or when it will be officially adopted by Beijing, the scientist said. A precise continuous line will split the Gulf of Tonkin between China and Vietnam, go south into waters claimed by Malaysia, take a U-turn to the north along the west coast of the Philippines and finish at the southeast of Taiwan. For decades, China's sovereign claim in the South China Sea has been murky, in large part because of the use of a segmented, vaguely located borderline known as the 'nine-dash line'. A United Nations tribunal ruled in July 2016 that China had no legal basis to claim the area within the dash lines. One reason for China losing the case was that it could not define the territory precisely. However, analysts said Beijing was unlikely to officially change the nine-dash line any time soon, in the face of potential international opposition.... The vast area of blue outlined by the new boundary, hanging on a map like a Christmas stocking under South China, overlaps the dashes and fills in the gaps. It includes all contested waters, such as the Paracel Islands, the Spratly Islands, James Shoal and Scarborough Shoal. The boundary would determine for the first time the exact area that China claimed to own with historic rights in the South China Sea, according to the researcher. Its purpose was partly the study of natural science and partly driven by a political motivation \"to strengthen China's claims\" over the waters to prepare for possible changes in its South China Sea policy in the future, the researcher said. Within the boundary, China would claim the right to activities ranging from fishing, prospecting and mining for energy or mineral resources to the construction of military bases with deep water ports or airports. Other countries' access to these rights would, however, be open for discussion, as is the case at Scarborough Shoal, which China controls but allows Philippine fishing boats to access. While Beijing would consider the area within the boundary its territory, other countries would still have freedom of navigation, the researcher said.... \"Soon we will have a clear idea of what belongs to us in the South China Sea and what does not,\" said the researcher. \"This will allow us to better plan and coordinate the efforts to protect our national interest in the region while reducing the risk of conflict with other countries caused by the absence of a border over the ocean.\"... \"More often, when we are sending vessels out to the sea or looking down at an area via satellite, we are not sure whether it was our water,\" said the researcher in the boundary-drawing project. \"The nine-dash line can no longer meet the demands of increasing Chinese activities in the South China Sea.\"... The continuous boundary was generated not only by curve-extending, gap-filling algorithms on computer. It was also based on a solid piece of historic evidence, according to the project team. In 1951, an official map approved by the central government of China marked the China-claimed area in the South China Sea with a pair of non-stopping lines. There was an inner black line indicating the sovereign boundary and an outer red line representing where China could exercise administrative power. \"We were thrilled when we found the map,\" the researcher said. \"It is something we can show the world.\" A detailed description of the map was published by the project team in a paper in domestic academic journal China Science Bulletin in March this year. Its authors recommended using the continuous U-shape boundary line as a replacement for the nine-dash line. The \"U-boundary is the border of China's sea in the South China Sea, and its sovereignty belongs to China\", the authors wrote in the paper. It \"can further express the certainty of the integrity, continuity and border of China's seas in the South China Sea\", they wrote, adding that it was \"more vivid, accurate, complete and scientific\". Professor Yu Minyou, director of the China Institute of Boundary and Ocean Studies at Wuhan University, said that if the old map was published with government approval, which was usually the case in China, \"it surely will add legal weight to China's claim\" in the region.... But other countries should bear in mind that it did not represent the Chinese government's position as long as the dash lines stayed on official maps, Yu said, adding that China's strategy for the South China Sea was \"open and clear\". \"China wants to achieve peace, stability, harmony and prosperity in the region,\" he said. \"We are willing to share natural resources with other countries and leave the disputes to be solved in the future. \"What we are doing now is creating a suitable environment for the final settlement of the issue.\" A government expert at the National Institute for South China Sea Studies in Haikou, Hainan, said the continuous boundary would serve as a useful tool for some studies of natural science. But it was highly unlikely to be printed on an official map, said the expert, who requested not to be named because he was not allowed to speak to overseas media about sensitive issues. \"To my knowledge, the Chinese government currently has no plan to change the dash lines,\" he said. \"Most diplomats and ocean law experts will oppose joining the dashes.\" The tension in the South China Sea has eased significantly in recent times, with neighbouring countries such as the Philippines and Vietnam no longer seeking direct confrontation with China over disputed areas. \"Things are moving towards the right direction,\" the government expert said. \"It is not the best time to cut a boundary.\" September 2017 Press Report of Potential New \"Four-Sha\" Legal Claim A September 21, 2017, press report states the following: The Chinese government recently unveiled a new legal tactic to promote Beijing's aggressive claim to own most of the strategic South China Sea. The new narrative that critics are calling \"lawfare,\" or legal warfare, involves a shift from China's so-called \"9-Dash Line\" ownership covering most of the sea. The new lawfare narrative is called the \"Four Sha\"—Chinese for sand—and was revealed by Ma Xinmin, deputy director general in the Foreign Ministry's department of treaty and law, during a closed-door meeting with State Department officials last month. China has claimed three of the island chains in the past and recently added a fourth zone in the northern part of the sea called the Pratas Islands near Hong Kong. The other locations are the disputed Paracels in the northwestern part and the Spratlys in the southern sea. The fourth island group is located in the central zone and includes Macclesfield Bank, a series of underwater reefs and shoals. China calls the island groups Dongsha, Xisha, Nansha, and Zhongsha, respectively. Ma, the Foreign Ministry official, announced during the meetings in Boston on Aug. 28 and 29 that China is asserting sovereignty over the Four Sha through several legal claims. He stated the area is China's historical territorial waters and also part of China's 200-mile Exclusive Economic Zone that defines adjacent zones as sovereign territory. Beijing also claims ownership by asserting the Four Sha are part of China's extended continental shelf. U.S. officials attending the session expressed surprise at the new Chinese ploy to seek control over the sea as something not discussed before.... A State Department notice at the end of what was billed as an annual U.S.-China Dialogue on the Law of the Sea and Polar Issues made no mention of the new Chinese lawfare tactic. The statement said only that officials from foreign affairs and maritime agencies \"exchanged views on a wide range of issues related to oceans, the law of the sea, and the polar regions.\" A September 25, 2017, blog post about the claim states the following: While dropping or even de-emphasizing China's Nine-Dash Line claim in favor of the Four Shas has important diplomatic and political implications, the legal significance of such a shift is harder to assess. The constituent parts of China's Four Sha claims have long been set forth publicly in Chinese domestic law and official statements. Based on what we know so far, these new Chinese legal justifications are no more lawful than China's Nine-Dash Line claim. The challenge for critics of Chinese claims in the South China Sea, however, will be effectively explaining and articulating why this shift does not actually strengthen China's legal claims in the South China Sea. The Four Sha claim has a long pedigree in Chinese law and practice. China's 1992 law on the territorial sea and contiguous zone, for example, declared that China's land territory included the \"Dongsha island group, Xisha island group, Zhongsha island group, [and] Nansha island group.\" A 2016 white paper disputing the Philippines' claims in the South China Sea arbitral process similarly claimed that: China's Nanhai Zhudao (the South China Sea Islands) consist of Dongsha Qundao (the Dongsha Islands), Xisha Qundao (the Xisha Islands), Zhongsha Qundao (the Zhongsha Islands) and Nansha Qundao (the Nansha Islands). These Islands include, among others, islands, reefs, shoals and cays of various numbers and sizes.... In a 2016 white paper, Beijing stated that, \"China has, based on Nanhai Zhudao [the \"Four Sha\"], internal waters, territorial sea, contiguous zone, exclusive economic zone and continental shelf.\" Neither the white paper nor the Beacon's report explain how China derives these maritime zones from the four island groups.... Because China is not constituted \"wholly by one or more archipelagos\" (think Indonesia or the Philippines), the U.S. and most countries would view straight baselines around an island group as contrary to the UN Convention on the Law of the Sea (UNCLOS).... For this reason, this new Chinese legal strategy is even weaker than the Nine-Dash Line given that it clearly violates UNCLOS (e.g., Articles 46 and 47). Most Chinese defenses of the Nine Dash Line argued that the claim predated China's accession to UNCLOS and therefore not governed by it. Despite the legal weaknesses of its possible new strategy, China may still reap some benefits from trading the Nine-Dash Line for the Four Shas. First, the Chinese leadership may have realized that the Nine Dash Line has become too much of a diplomatic liability. The Nine-Dash Line is completely sui generis and no other state has made a historic maritime claim anything like it. For this reason, the Nine-Dash Line makes China an easy target for foreign criticism in a way that straight baselines around island groups probably will not. Second, by adopting language more similar to that found in UNCLOS, China may be betting that it can tamp down criticism, and win potential partners in the region.... Third, and most intriguingly, China may have concluded that it can better shape (or undermine, depending on your point of view) the law of the sea by adopting UNCLOS terminology.... So while we might be encouraged to see the Nine-Dash Line pass into the (legal) dustbins of history, we should be skeptical about whether the Four Shas herald a new more modest Chinese role in the South China Sea. China's legal justification for the Four Shas is just as weak, if not weaker, than its Nine-Dash Line claim. But explaining why the Four Shas is weak and lawless will require sophisticated legal analysis married with effective public messaging. Comparison with U.S. Actions Toward Caribbean and Gulf of Mexico Some observers have compared China's approach toward its near-seas region with the U.S. approach toward the Caribbean and the Gulf of Mexico in the age of the Monroe Doctrine. It can be noted, however, that there are significant differences between China's approach to its near-seas region and the U.S. approach—both in the 19 th and 20 th centuries and today—to the Caribbean and the Gulf of Mexico. Unlike China in its approach to its near-seas region, the United States has not asserted any form of sovereignty or historical rights over the broad waters of the Caribbean or Gulf of Mexico (or other sea areas beyond the 12-mile limit of U.S. territorial waters), has not published anything akin to the nine-dash line for these waters (or other sea areas beyond the 12-mile limit), and does not contest the right of foreign naval forces to operate and engage in various activities in waters beyond the 12-mile limit. Appendix F. U.S. Position on Operational Rights in EEZs This appendix presents additional background information on the U.S. position on the issue of operational rights of military ships in the EEZs of other countries. Operational Rights in EEZs Regarding a coastal state's rights within its EEZ, Scot Marciel, then-Deputy Assistant Secretary, Bureau of East Asian and Pacific Affairs, stated the following as part of his prepared statement for a July 15, 2009, hearing before the East Asian and Pacific Affairs Subcommittee of the Senate Foreign Relations Committee: I would now like to discuss recent incidents involving China and the activities of U.S. vessels in international waters within that country's Exclusive Economic Zone (EEZ). In March 2009, the survey ship USNS Impeccable was conducting routine operations, consistent with international law, in international waters in the South China Sea. Actions taken by Chinese fishing vessels to harass the Impeccable put ships of both sides at risk, interfered with freedom of navigation, and were inconsistent with the obligation for ships at sea to show due regard for the safety of other ships. We immediately protested those actions to the Chinese government, and urged that our differences be resolved through established mechanisms for dialogue—not through ship-to-ship confrontations that put sailors and vessels at risk. Our concern over that incident centered on China's conception of its legal authority over other countries' vessels operating in its Exclusive Economic Zone (EEZ) and the unsafe way China sought to assert what it considers its maritime rights. China's view of its rights on this specific point is not supported by international law. We have made that point clearly in discussions with the Chinese and underscored that U.S. vessels will continue to operate lawfully in international waters as they have done in the past. As part of his prepared statement for the same hearing, Robert Scher, then-Deputy Assistant Secretary of Defense, Asian and Pacific Security Affairs, Office of the Secretary of Defense, stated that we reject any nation's attempt to place limits on the exercise of high seas freedoms within an exclusive economic zones [sic] (EEZ). Customary international law, as reflected in articles 58 and 87 of the 1982 United Nations Convention on the Law of the Sea, guarantees to all nations the right to exercise within the EEZ, high seas freedoms of navigation and overflight, as well as the traditional uses of the ocean related to those freedoms. It has been the position of the United States since 1982 when the Convention was established, that the navigational rights and freedoms applicable within the EEZ are qualitatively and quantitatively the same as those rights and freedoms applicable on the high seas. We note that almost 40% of the world's oceans lie within the 200 nautical miles EEZs, and it is essential to the global economy and international peace and security that navigational rights and freedoms within the EEZ be vigorously asserted and preserved. As previously noted, our military activity in this region is routine and in accordance with customary international law as reflected in the 1982 Law of the Sea Convention. As mentioned earlier in the report, if China's position on whether coastal states have a right under UNCLOS to regulate the activities of foreign military forces in their EEZs were to gain greater international acceptance under international law, it could substantially affect U.S. naval operations not only in the SCS and ECS (see Figure F-1 for EEZs in the SCS and ECS), but around the world, which in turn could substantially affect the ability of the United States to use its military forces to defend various U.S. interests overseas. As shown in Figure F-2 , significant portions of the world's oceans are claimable as EEZs, including high-priority U.S. Navy operating areas in the Western Pacific, the Persian Gulf, and the Mediterranean Sea. Some observers, in commenting on China's resistance to U.S. military survey and surveillance operations in China's EEZ, have argued that the United States would similarly dislike it if China or some other country were to conduct military survey or surveillance operations within the U.S. EEZ. Skeptics of this view argue that U.S. policy accepts the right of other countries to operate their military forces freely in waters outside the 12-mile U.S. territorial waters limit, and that the United States during the Cold War acted in accordance with this position by not interfering with either Soviet ships (including intelligence-gathering vessels known as AGIs) that operated close to the United States or with Soviet bombers and surveillance aircraft that periodically flew close to U.S. airspace. The U.S. Navy states that When the commonly recognized outer limit of the territorial sea under international law was three nautical miles, the United States recognized the right of other states, including the Soviet Union, to exercise high seas freedoms, including surveillance and other military operations, beyond that limit. The 1982 Law of the Sea Convention moved the outer limit of the territorial sea to twelve nautical miles. In 1983, President Reagan declared that the United States would accept the balance of the interests relating to the traditional uses of the oceans reflected in the 1982 Convention and would act in accordance with those provisions in exercising its navigational and overflight rights as long as other states did likewise. He further proclaimed that all nations will continue to enjoy the high seas rights and freedoms that are not resource related, including the freedoms of navigation and overflight, in the Exclusive Economic Zone he established for the United States consistent with the 1982 Convention. DOD states that the PLA Navy has begun to conduct military activities within the Exclusive Economic Zones (EEZs) of other nations, without the permission of those coastal states. Of note, the United States has observed over the past year several instances of Chinese naval activities in the EEZ around Guam and Hawaii. One of those instances was during the execution of the annual Rim of the Pacific (RIMPAC) exercise in July/August 2012. While the United States considers the PLA Navy activities in its EEZ to be lawful, the activity undercuts China's decades-old position that similar foreign military activities in China's EEZ are unlawful. In July 2014, China participated, for the first time, in the biennial U.S.-led Rim of the Pacific (RIMPAC) naval exercise, the world's largest multilateral naval exercise. In addition to the four ships that China sent to participate in RIMPAC, China sent an uninvited intelligence-gathering ship to observe the exercise without participating in it. The ship conducted operations inside U.S. EEZ off Hawaii, where the exercise was located. A July 29, 2014, press report stated that The high profile story of a Chinese surveillance ship off the cost of Hawaii could have a positive aspect for U.S. operations in the Pacific, the head of U.S. Pacific Command (PACOM) said in a Tuesday [July 29] afternoon briefing with reporters at the Pentagon. \"The good news about this is that it's a recognition, I think, or acceptance by the Chinese for what we've been saying to them for sometime,\" PACOM commander Adm. Samuel Locklear told reporters. \"Military operations and survey operations in another country's [Exclusive Economic Zone]—where you have your own national security interest—are within international law and are acceptable. This is a fundamental right nations have.\" One observer stated the following: The unprecedented decision [by China] to send a surveillance vessel while also participating in the RIMPAC exercises calls China's proclaimed stance on international navigation rights [in EEZ waters] into question... During the Cold War, the U.S. and Soviets were known for spying on each other's exercises. More recently, Beijing sent what U.S. Pacific Fleet spokesman Captain Darryn James called \"a similar AGI ship\" to Hawaii to monitor RIMPAC 2012—though that year, China was not an official participant in the exercises.... ... the spy ship's presence appears inconsistent with China's stance on military activities in Exclusive Economic Zones (EEZs).... That Beijing's AGI [intelligence-gathering ship] is currently stationed off the coast of Hawaii suggests either a double standard that could complicate military relations between the United States and China, or that some such surveillance activities are indeed legitimate—and that China should clarify its position on them to avoid perceptions that it is trying to have things both ways.... In its response to the Chinese vessel's presence, the USN has shown characteristic restraint. Official American policy permits surveillance operations within a nation's EEZ, provided they remain outside of that nation's 12-nautical mile territorial sea (an EEZ extends from 12 to 200 nautical miles unless this would overlap with another nations' EEZ). U.S. military statements reflect that position unambiguously.... That consistent policy stance and accompanying restraint have characterized the U.S. attitude toward foreign surveillance activity since the Cold War. Then, the Soviets were known for sending converted fishing ships equipped with surveillance equipment to the U.S. coast, as well as foreign bases, maritime choke points, and testing sites. The U.S. was similarly restrained in 2012, when China first sent an AGI to observe RIMPAC.... China has, then, sent a surveillance ship to observe RIMPAC in what appears to be a decidedly intentional, coordinated move—and in a gesture that appears to contradict previous Chinese policy regarding surveillance and research operations (SROs). The U.S. supports universal freedom of navigation and the right to conduct SROs in international waters, including EEZs, hence its restraint when responding to the current presence of the Chinese AGI. But the PRC opposes such activities, particularly on the part of the U.S., in its own EEZ.... How then to reconcile the RIMPAC AGI with China's stand on surveillance activities? China maintains that its current actions are fully legal, and that there is a distinct difference between its operations off Hawaii and those of foreign powers in its EEZ. The PLAN's designated point of contact declined to provide information and directed inquiries to China's Defense Ministry. In a faxed statement to Reuters, the Defense Ministry stated that Chinese vessels had the right to operate \"in waters outside of other country's territorial waters,\" and that \"China respects the rights granted under international law to relevant littoral states, and hopes that relevant countries can respect the legal rights Chinese ships have.\" It did not elaborate. As a recent Global Times article hinted—China's position on military activities in EEZs is based on a legal reading that stresses the importance of domestic laws. According to China maritime legal specialist Isaac Kardon, China interprets the EEZ articles in the United Nations Convention on the Law of the Sea (UNCLOS) as granting a coastal state jurisdiction to enforce its domestic laws prohibiting certain military activities—e.g., those that it interprets to threaten national security, economic rights, or environmental protection—in its EEZ. China's domestic laws include such provisions, while those of the United States do not. Those rules would allow China to justify its seemingly contradictory approach to AGI operations—or, as Kardon put it, \"to have their cake and eat it too.\" Therefore, under the Chinese interpretation of UNCLOS, its actions are neither hypocritical nor illegal—yet do not justify similar surveillance against China. Here, noted legal scholar Jerome Cohen emphasizes, the U.S. position remains the globally dominant view—\"since most nations believe the coastal state has no right to forbid surveillance in its EEZ, they do not have domestic laws that do so.\" This renders China's attempted constraints legally problematic, since \"international law is based on reciprocity.\" To explain his interpretation of Beijing's likely approach, Cohen invokes the observation that a French commentator made several decades ago in the context of discussing China's international law policy regarding domestic legal issues: \"I demand freedom from you in the name of your principles. I deny it to you in the name of mine.\" Based on his personal experience interacting with Chinese officials and legal experts, Kardon adds, \"China is increasingly confident that its interpretation of some key rules and—most critically—its practices reinforcing that interpretation can over time shape the Law of the Sea regime to suit its preferences.\" But China is not putting all its eggs in that basket. There are increasing indications that it is attempting to promote its EEZ approach vis-à-vis the U.S. not legally but politically. \"Beijing is shifting from rules- to relations-based objections,\" Naval War College China Maritime Studies Institute Director Peter Dutton observes. \"In this context, its surveillance operations in undisputed U.S. EEZs portend an important shift, but that does not mean that China will be more flexible in the East or South China Seas.\" The quasi-authoritative Chinese commentary that has emerged thus far supports this interpretation.... [A recent statement from a Chinese official] suggests that Beijing will increasingly oppose U.S. SROs on the grounds that they are incompatible with the stable, cooperative Sino-American relationship that Beijing and Washington have committed to cultivating. The Obama Administration must ensure that the \"new-type Navy-to-Navy relations\" that Chinese Chief of Naval Operations Admiral Wu Shengli has advocated to his U.S. counterpart does not contain expectations that U.S. SROs will be reduced in nature, scope, or frequency.... China's conducting military activities in a foreign EEZ implies that, under its interpretation, some such operations are indeed legal. It therefore falls to China now to clarify its stance—to explain why its operations are consistent with international law, and what sets them apart from apparently similar American activities. If China does not explain away the apparent contradiction in a convincing fashion, it risks stirring up increased international resentment—and undermining its relationship with the U.S. Beijing is currently engaging in activities very much like those it has vociferously opposed. That suggests the promotion of a double standard untenable in the international system, and very much at odds with the relationships based on reciprocity, respect, and cooperation that China purports to promote.... If, however, China chooses to remain silent, it will likely have to accept—at least tacitly, without harassing—U.S. surveillance missions in its claimed EEZ. So, as we watch for clarification on Beijing's legal interpretation, it will also be important to watch for indications regarding the next SROs in China's EEZ. In September 2014, a Chinese surveillance ship operated in U.S. EEZ waters near Guam as it observed a joint-service U.S. military exercise called Valiant Shield. A U.S. spokesperson for the exercise stated the following: \"We'd like to reinforce that military operations in international commons and outside of territorial waters and airspace is a fundamental right that all nations have.... The Chinese were following international norms, which is completely acceptable.\" Appendix G. Options Suggested by Observers for Strengthening U.S. Actions This appendix presents a bibliography of some recent writings by observers who have suggested options (or are reporting on options suggested by others) for strengthening U.S. actions for responding to China's actions in the SCS and ECS, organized by date, beginning with the most-recent item. Andrew S. Erickson, \"Maritime Numbers Game, Understanding and Responding to China's Three Sea Forces,\" Indo-Pacific Defense Forum , January 28, 2019. James R. Holmes, \"Use It or Lose It: Seagoing Nations Must Defend Embattled Waterways,\" The Hill , January 27, 2019. Gregory Poling and Eric Sayers, \"Time to Make Good on the U.S.-Philippine Alliance,\" War on the Rocks , January 21, 2019. Gregory Poling and Bonnie S. Glaser, \"How the U.S. Can Step Up in the South China Sea,\" Foreign Affairs , January 16, 2019. Zack Cooper and Gregory Poling, \"America's Freedom of Navigation Operations Are Lost at Sea, Far Wider Measures Are Needed to Challenge Beijing's Maritime Aggression,\" Foreign Policy , January 8, 2019. Andrew S. Erickson, \"Shining a Spotlight: Revealing China's Maritime Militia to Deter its Use,\" National Interest , November 25, 2018. Eric Sayers, \"Assessing America's Indo-Pacific Budget Shortfall,\" War on the Rocks , November 15, 2018. Patrick N. Cronin and Richard Javad Heydarian, \"This Is How America and the Philippines Can Upgrade Their Alliance,\" National Interest , November 12, 2018. John Lee, Freedom of Navigation and East Asian Stability: Countering Beijing's Campaign of Historical Revisionism ,\" Hudson Institute, November 2018, 8 pp. Ryan Martinson and Peter Dutton, \"Chinese Scientists Want to Conduct Research in U.S. Waters—Should Washington Let Them?\" National Interest , November 4, 2018. Hunter Stires, \"Understanding and Defeating China's Maritime Insurgency in the South china Sea,\" National Interest , November 1, 2018. Robert D. Kaplan, \"How President Trump Is Helping Beijing Win in the South China Sea,\" Washington Post , October 9, 2018. Tuan Pham, \"China's Worth Nightmare: RIMPAC 2020 in the South China Sea?\" National Interest , September 29, 2018. Patrick M. Cronin, \"China is Waging a Maritime Insurgency in the South China Sea. It's Time for the Unitd States to Counter It.\" National Interest , August 6, 2018. Shigeki Sakamoto, \"China's South China Sea Project Must Not Succeed; The International Community Shouldn't Quietly Let China Ignore the 2016 [Arbitral Tribunal] Decision.\" Diplomat , August 6, 2018. James Amedeo, \"America Needs a Clear Strategy to Counter China's Expansion in the South China Sea,\" National Interest , August 1, 2018. Lynn Kuok, \"Countering China's Actions in the South China Sea,\" Lawfare , August 1, 2018. Timothy Perry, \"Use Maritime-Law Trends to Offset Beijing's Gains in the South China Sea,\" Defense One , July 24, 2018. J. Michael Cole, \"It's Time to Stop China's Seaward Expansion,\" National Interest , July 21, 2018. Lindsey W. Ford, \"Was China's RIMPAC Exclusion An Opening or a Wasted Shot?\" East Asia Forum , July 20, 2018. Lynn Kuok, \"China Is Winning in the South China Sea,\" Wall Street Journal , July 17, 2018. \"Washington and Its Allies Need to Contain Beijing,\" Financial Times , July 1, 2018. Patrick M. Cronin and Melodiw Ha, \"Toward a New maritime Strategy in the South China Sea,\" The Diplomat , June 22, 2018. (A similar version was posted as: Patrick M. Cronin and Melodie Ha, \"Toward a New Maritime Strategy in the South China Sea,\" CSIS, June 21, 2018 (PacNet #42). Paul J. Leaf, \"Taiwan and the South China Sea Must Be Taken Off the Back Burner,\" National Interest , June 18, 2018. Robert E. McCoy, \"A Better Way to Repel China in the South China Sea,\" Asia Times , June 8, 2018. Robert Farley, \"The South China Sea Conundrum for the United States,\" The Diplomat , June 5 2018. Joel Gehrke, \"Marco Rubio: US Must Develop Plan to 'Destroy' Chinese Assets in South China Sea,\" Washington Examiner , June 4, 2018. Duncan DeAeth, \"Taiwan Should Invite US to Open Military Base on Taiping Island, Says DPP Think-Tank,\" Taiwan News , June 4, 2018. Julian Ku, \"It's Time for South China Sea Economic Sanctions,\" Lawfare , June 1, 2018. Eric Sayers, \"Time to Launch a Combined Maritime Task Force for the Pacific,\" War on the Rocks , June 1, 2018. Matthew Krull, \"America's Annual Naval Patrol Report and How to Fix It,\" National Interest , May 29, 2018. Tuan N. Pham, \"A Sign of the Times: China's Recent Actions and the Undermining of Global Rules, Pt. 3,\" CIMSEC (Center for International Maritime Security), May 24, 2018. Ryan D. Martinson and Andrew Erickson, \"Re-Orienting American Seapower for the China Challenge,\" War on the Rocks , May 10, 2018. Ben Cipperley, \"In the Era of Great Power Competition, the US Needs to Step Up Its Game,\" The Diplomat , May 8, 2018. Stephen Bryen, \"How to Counter China's Fortified Islands in South China Sea,\" Asia Times , May 5, 2018. Ely Ratner, \"Exposing China's Actions in the South China Sea,\" Council on Foreign Relations, April 6, 2018. Shawn Lansing, \"A White Hull Approach to Taming the Dragon: Using the Coast Guard to Counter China,\" War on the Rocks , February 22, 2018. Dean Cheng, \"Wanted: A Strategy to Limit China's Grand Plans for the South China Sea,\" National Interest , January 30, 2018. Hal Brands, \"China Hasn't Won the Pacific (Unless You Think It Has),\" Bloomberg , January 5, 2018.", "summary": "China's actions in recent years in the South China Sea (SCS)—particularly its island-building and base-construction activities at sites that it occupies in the Spratly Islands—have heightened concerns among U.S. observers that China is rapidly gaining effective control of the SCS, an area of strategic, political, and economic importance to the United States and its allies and partners, particularly those in the Indo-Pacific region. U.S. Navy Admiral Philip Davidson, in his responses to advance policy questions from the Senate Armed Services Committee for an April 17, 2018, hearing to consider his nomination to become Commander, U.S. Pacific Command (PACOM), stated that \"China is now capable of controlling the South China Sea in all scenarios short of war with the United States.\" Chinese control of the SCS—and, more generally, Chinese domination of China's near-seas region, meaning the SCS, the East China Sea (ECS), and the Yellow Sea—could substantially affect U.S. strategic, political, and economic interests in the Indo-Pacific region and elsewhere. China is a party to multiple territorial disputes in the SCS and ECS, including, in particular, disputes with multiple neighboring countries over the Paracel Islands, Spratly Islands, and Scarborough Shoal in the SCS, and with Japan over the Senkaku Islands in the ECS. Up through 2014, U.S. concern over these disputes centered more on their potential for causing tension, incidents, and a risk of conflict between China and its neighbors in the region, including U.S. allies Japan and the Philippines and emerging partner states such as Vietnam. While that concern remains, particularly regarding the potential for a conflict between China and Japan involving the Senkaku Islands, U.S. concern since 2014 (i.e., since China's island-building activities in the Spratly Islands were first publicly reported) has shifted increasingly to how China's strengthening position in the SCS may be affecting the risk of a U.S.-China crisis or conflict in the SCS and the broader U.S.-Chinese strategic competition. In addition to territorial disputes in the SCS and ECS, China is involved in a dispute, particularly with the United States, over whether China has a right under international law to regulate the activities of foreign military forces operating within China's exclusive economic zone (EEZ). The position of the United States and most other countries is that while international law gives coastal states the right to regulate economic activities (such as fishing and oil exploration) within their EEZs, it does not give coastal states the right to regulate foreign military activities in the parts of their EEZs beyond their 12-nautical-mile territorial waters. The position of China and some other countries (i.e., a minority group among the world's nations) is that UNCLOS gives coastal states the right to regulate not only economic activities, but also foreign military activities, in their EEZs. The dispute appears to be at the heart of multiple incidents between Chinese and U.S. ships and aircraft in international waters and airspace since 2001, and has potential implications not only for China's EEZs, but for U.S. naval operations in EEZs globally, and for international law of the sea. A key issue for Congress is how the United States should respond to China's actions in the SCS and ECS—particularly its island-building and base-construction activities in the Spratly Islands—and to China's strengthening position in the SCS. A key oversight question for Congress is whether the Trump Administration has an appropriate strategy—and an appropriate amount of resources for implementing that strategy—for countering China's \"salami-slicing\" strategy or gray zone operations for gradually strengthening its position in the SCS, for imposing costs on China for its actions in the SCS and ECS, and for defending and promoting U.S. interests in the region.", "document_type": "crs"}
{"report": "The Army's Optionally Manned Fighting Vehicle (OMFV) is expected to be the third attempt to replace the M-2 Bradley Infantry Fighting Vehicle (IFV) which has been in service since the early 1980s. Despite numerous upgrades since its introduction, the Army contends the M-2 is near the end of its useful life and can no longer accommodate the types of upgrades needed for it to be effective on the modern battlefield. Because the OMFV would be an important weapon system in the Army's Armored Brigade Combat Teams (ABCTs), Congress may be concerned with how the OMFV would impact the effectiveness of ground forces over the full spectrum of military operations. Moreover, Congress might also be concerned with how much more capable the OMFV is projected to be over the M-2 to ensure that it is not a costly marginal improvement over the current system. A number of past unsuccessful Army acquisition programs have served to heighten congressional oversight of Army programs, and the OMFV will likely be subject to a high degree of congressional interest. In addition to these primary concerns, how the Army plans to use the new congressionally-granted Section 804 Middle Tier Acquisition Authority as well as overall program affordability could be potential oversight issues for Congress. In June 2018, the Army established the Next Generation Combat Vehicle (NGCV) program to replace the M-2 Bradley Infantry Fighting Vehicle (IFV), which has been in service since the early 1980s. In October 2018, Army leadership reportedly decided to redesignate the NGCV as the Optionally Manned Fighting Vehicle (OMFV) and add additional vehicle programs to what would be called the NGCV Program. Under the new NGCV Program, the following systems are planned for development: The Optionally Manned Fighting Vehicle (OMFV) : the M-2 Bradley IFV replacement. The Armored Multi-Purpose Vehicle (AMPV) : the M-113 vehicle replacement. Mobile Protected Firepower (MPF) : a light tank for Infantry Brigade Combat Teams (IBCTs). Robotic Combat Vehicles (RCVs) : three versions, Light, Medium, and Heavy. The Decisive Lethality Platform (DLP) : the M-1 Abrams tank replacement. Two programs—AMPV and MPF—are in Low Rate Initial Production (LRIP) and Prototype Development, respectively. Reportedly, the AMPV and MPF programs, which were overseen by Program Executive Office (PEO) Ground Combat Systems, will continue to be overseen by PEO Ground Combat Systems, but the NGCV Cross Functional Team (CFT) will determine their respective operational requirements and acquisition schedule. Because AMPV and MPF are discussed in earlier CRS reports and the OMFV is in the early stages of development, the remainder of this report focuses on the OMFV and associated RCVs. Because the DLP is intended to replace the Army's second major ground combat system—the M-1 Abrams Tank—it will be addressed in a separate CRS report in the future. The Army's preliminary basic operational requirements for the OMFV include the following: Optionally manned . It must have the ability to conduct remotely controlled operations while the crew is off-platform. Capacity. It should eventually operate with no more than two crewmen and possess sufficient volume under armor to carry at least six soldiers. Transportability . Two OMFVs should be transportable by one C-17 and be ready for combat within 15 minutes. Dense urban terrain operations and mobility . Platforms should include the ability to super elevate weapons and simultaneously engage threats using main gun and an independent weapons system. Protection. It must possess requisite protection to survive on the contemporary and future battlefield. Growth. It should possess sufficient size, weight, architecture, power, and cooling for automotive and electrical purposes to meet all platform needs and allow for preplanned product improvements. Lethality. It should apply immediate, precise, and decisively lethal extended range medium-caliber, directed energy, and missile fires in day/night/all-weather conditions, while moving and/or stationary against moving and/or stationary targets. The platform should allow for mounted, dismount, and unmanned system target handover. Embedded p latform t raining . It should have embedded training systems that have interoperability with the Synthetic Training Environment. Sustainability. Industry should demonstrate innovations that achieve breakthroughs in power generation and management to obtain increased operational range and fuel efficiency, increased silent watch, part and component reliability, and significantly reduced sustainment burden. Additional requirements include the capacity to accommodate reactive armor, an Active Protection System (APS), artificial intelligence, and Directed-energy weapons and advanced target sensors. The M-2 Bradley is an Infantry Fighting Vehicle (IFV) used to transport infantry on the battlefield and provide fire support to dismounted troops and suppress or destroy enemy fighting vehicles. The M-2 has a crew of three—commander, gunner, and driver—and carries seven fully equipped infantry soldiers. M-2 Bradley IFVs are primarily found in the Army's Armored Brigade Combat Teams (ABCT). The first M-2 prototypes were delivered to the Army in December 1978, and the first delivery of M-2s to units started in May 1981. The M-2 Bradley has been upgraded often since 1981, and the Army reportedly announced in January 2018 that it plans to undertake an upgrade to the M-2A5 version planned for the mid-2020s. Despite numerous upgrades over its lifetime, the M-2 Bradley has what some consider a notable limitation. Although the M-2 Bradley can accommodate seven fully equipped infantry soldiers, infantry squads consist of nine soldiers. As a result, \"each mechanized [ABCT] infantry platoon has to divide three squads between four Bradleys, meaning that all the members of a squad are not able to ride in the same vehicle.\" This limitation raises both command and control and employment challenges for Bradley-mounted infantry squads and platoons. The M-2 Bradley first saw combat in 1991 in Operation Desert Storm, where its crews were generally satisfied with its performance. The M-2's service in 2003's Operation Iraqi Freedom (OIF) was also considered satisfactory. However, reports of vehicle and crew losses attributed to mines, improvised explosive devices (IEDs), and anti-tank rockets—despite the addition of reactive armor to the M-2—raised concerns about the survivability of the Bradley. Furthermore, the M-2 Bradley is reportedly reaching the technological limits of its capacity to accommodate new electronics, armor, and defense systems. By some accounts, M-2 Bradleys during OIF routinely had to turn off certain electronic systems to gain enough power for anti-roadside-bomb jammers. Moreover, current efforts to mount active protection systems (APS) on M-2 Bradleys to destroy incoming anti-tank rockets and missiles are proving difficult. Given its almost four decades of service, operational limitations, demonstrated combat vulnerabilities, and difficulties in upgrading current models, the M-2 Bradley is arguably a candidate for replacement. The Army has twice attempted to replace the M-2 Bradley IFV—first as part of the Future Combat System (FCS) Program, which was cancelled by the Secretary of Defense in 2009, and second with the Ground Combat Vehicle (GCV) Program, cancelled by the Secretary of Defense in 2014. These cancellations, along with a series of high-profile studies, such as the 2011 Decker-Wagner Army Acquisition Review, have led many to call into question the Army's ability to develop and field ground combat systems. Introduced in 1999 by Army Chief of Staff General Eric Shinseki, FCS was envisioned as a family of networked, manned and unmanned vehicles, and aircraft for the future battlefield. The Army believed that advanced sensor technology would result in total battlefield awareness, permitting the development of lesser-armored combat vehicles and the ability to engage and destroy targets beyond the line-of-sight. However, a variety of factors led to the program's cancellation, including a complicated, industry-led management approach; the failure of a number of critical technologies to perform as envisioned; and frequently changing requirements from Army leadership—all of which resulted in program costs increasing by 25%. After $21.4 billion already spent and the program only in the preproduction phase, then Secretary Gates restructured the program in 2009, effectively cancelling it. Recognizing the need to replace the M-2 Bradley, as part of the FCS \"restructuring,\" the Army was directed by the Secretary of Defense in 2009 to develop a ground combat vehicle (GCV) that would be relevant across the entire spectrum of Army operations, incorporating combat lessons learned in Iraq and Afghanistan. In 2010, the Army, in conjunction with the Pentagon's acquisition office, conducted a review of the GCV program to \"review GCV core elements including acquisition strategy, vehicle capabilities, operational needs, program schedule, cost performance, and technological specifications.\" This review found that the GCV relied on too many immature technologies, had too many performance requirements, and was required by Army leadership to have too many capabilities to make it affordable. In February 2014, the Army recommended terminating the GCV program and redirecting the funds toward developing a next-generation platform. The cost of GCV cancellation was estimated at $1.5 billion. In the aftermath of the GCV program, the Army embarked on a Future Fighting Vehicle (FFV) effort in 2015. Army officials—described as \"cautious\" and \"in no hurry to initiate an infantry fighting vehicle program\"—instead initiated industry studies to \"understand the trade space before leaping into a new program.\" In general, Army combat vehicle modernization efforts post-FCS have been characterized as upgrading existing platforms as opposed to developing new systems. This was due in part to reluctance of senior Army leadership, but also to significant budgetary restrictions imposed on the Army during this period. Some in Congress, however, were not pleased with the slow pace of Army modernization, reportedly noting the Army was \"woefully behind on modernization\" and was \"essentially organized and equipped as it was in the 1980s.\" In June 2018, in part due to congressional concerns, the Army announced a new modernization strategy and designated NGCVs as the second of its six modernization priorities. Originally, the NGCV was considered the program to replace the M-2 Bradley. Development of the NGCV would be managed by the Program Executive Officer (PEO) Ground Combat Systems, under the Assistant Secretary of the Army (ASA), Acquisition, Logistics, and Technology (ALT). In November 2017, the Army established a Modernization Task Force to examine the options for establishing an Army Futures Command (AFC) that would establish unity of command and effort as the Army consolidated its modernization process under one roof. Formerly, Army modernization activities were primarily spread among Forces Command (FORSCOM), Training and Doctrine Command (TRADOC), Army Materiel Command (AMC), Army Test and Evaluation Command (ATEC), and the Army Deputy Chief of Staff G-8. Intended to be a 4-star headquarters largely drawn from existing Army commands, AFC was planned to be established in an urban environment with ready access to academic, technological, and industrial expertise. On July 13, 2018, the Army announced that AFC would be headquartered in Austin, TX, and that it had achieved initial operating capability on July 1, 2018. According to the Army, when AFC reaches full operating capacity in summer 2019, the headquarters will comprise approximately 500 personnel (about 100 uniformed and 400 Army civilians). Sub-organizations, many of which currently reside within FORSCOM, TRADOC, and AMC, are to transition to AFC, but there are no plans to physically move units or personnel from these commands at the present time. Army Futures Command intends to use what it calls Cross-Functional Teams (CFT) as part of its mission, which includes the development of NGCV. As a means to \"increase the efficiency of its requirements and technology development efforts, the Army established cross-functional team pilots for modernization\" in October 2017. These CFTs are intended to leverage expertise from industry and academia; identify ways to use experimentation, prototyping, and demonstrations; and Identify opportunities to improve the efficiency of requirements development and the overall defense systems acquisition process. The eight CFTs are Long Range Precision Fires at Ft. Sill, OK; Next Generation Combat Vehicle at Detroit Arsenal, MI; Future Vertical Lift at Redstone Arsenal, AL; Network Command, Control, Communication, and Intelligence at Aberdeen Proving Ground, MD; Assured Positioning, Navigation and Timing at Redstone Arsenal, AL; Air and Missile Defense at Ft. Sill, OK; Soldier Lethality at Ft. Benning, GA; and Synthetic Training Environment in Orlando, FL. CFTs are to be a part of AFC. Regarding the NGCV, program acquisition authority is derived from Assistant Secretary of the Army (ASA) for Acquisition, Logistics, and Technology (ALT), who is also the senior Army Acquisition Executive (AAE), to whom the Program Executive Officers (PEOs) report. AFC is to be responsible for requirements and to support PEOs. The NGCV Program Manager (PM), who is subordinate to PEO Ground Combat Systems, is to remain under the control of ASA (ALT) but are to be teamed with CFTs under control of the AFC. The Government Accountability Office (GAO) notes, however Army Futures Command has not yet established policies and procedures detailing how it will execute its assigned mission, roles, and responsibilities. For example, we found that it is not yet clear how Army Futures Command will coordinate its responsibilities with existing acquisition organizations within the Army that do not directly report to it. One such organization is the Office of the Assistant Secretary of the Army for Acquisition, Logistics and Technology [ASA (ALT)]—the civilian authority responsible for the overall supervision of acquisition matters for the Army—and the acquisition offices it oversees. The Army's explanation of how the NGCV program is to be administered and managed, along with GAO's findings regarding AFC not yet having established policies and procedures, suggests a current degree of uncertainty as to how the NGCV program will be managed. Figure 1 depicts the Department of Defense (DOD) Systems Acquisition Framework, which illustrates the various phases of systems development and acquisitions and is applicable to the procurement of Army ground combat systems. Reportedly, the original OMFV plan called for five years of Technology Development, starting in FY2019, and leading up to a FY2024 Milestone B decision to move the program into the Engineering and Manufacturing Development phase. If the Engineering and Manufacturing Development phase proved successful, the Army planned for a Milestone C decision to move the program into the Production and Deployment phase in FY2028, with the intent of equipping the first unit by FY2032. In April 2018, Secretary of the Army Mark Esper, noting that industry could deliver OMFV prototypes by FY2021, reportedly stated he wanted to accelerate the OMFV timeline. After examining a number of possible courses of action, the Army reportedly settled on a timeline that would result in an FY2026 fielding of the OMFV. This being the case, the Army reportedly will pursue a \"heavily modified off-the-shelf model meaning a mature chassis and turret integrated with new sensors.\" Unofficially, some Army officials suggested they would like to see a 50 mm cannon on industry-proposed vehicles. Under this new acquisition approach, the Army plans to award up to two vendors three-year Engineering and Manufacturing Development (EMD) contracts in the first quarter of FY2020; if EMD is successful, make a Milestone C decision to move the program into the Production and Development phase in the third quarter of FY2023; and Equip first units in the first quarter of FY2026. Reportedly, the Army plans eventually to award a production contract for up to 3,590 OMFVs to a single vendor. Although the Army reportedly expects five to seven vendors to compete for the OMFV EMD contract, three vendors have already showcased prospective platforms. BAE Systems is proposing its fifth-generation CV-90. The CV-90 was first fielded in Europe in the 1990s. The latest version mounts a 35 mm cannon provided by Northrop Grumman that can accommodate 50 mm munitions. The CV-90 also features the Israeli IMI Systems Iron Fist active protection system (APS), which is currently being tested on the M-2 Bradley. The CV-90 can accommodate a three-person crew and five infantry soldiers. GDLS is proposing its Griffin III technology demonstrator, which uses the British Ajax scout vehicle chassis. The Griffin III mounts a 50 mm cannon and can accommodate an APS and host unmanned aerial vehicles (UAVs). The Griffin II can accommodate a two-person crew and six infantry soldiers. Raytheon/Rheinmetall is proposing its Lynx vehicle. It can mount a 50 mm cannon and thermal sights, and can accommodate both APS and UAVs. Raytheon states that the Lynx can accommodate an entire nine-soldier infantry squad. As part of the revised NGCV Program, the Army plans to develop three RCV variants: Light, Medium, and Heavy. The Army reportedly envisions employing RCVs as \"scouts\" and \"escorts\" for manned OMFVs. RCVs could precede OMFVs into battle to deter ambushes and could be used to guard the flanks of OMFV formations. Initially, RCVs would be controlled by operators riding in NGCVs, but the Army hopes that improved ground navigation technology and artificial intelligence will permit a single operator to control multiple RCVs. The following sections provide a brief overview of each variant. The RCV–L is to be less than 10 tons, with a single vehicle capable of being transported by rotary wing assets. It should be able to accommodate an anti-tank guided missile (ATGM) or a recoilless weapon. It is also expected to have a robust sensor package and be capable of integration with UAVs. The RCV–L is considered to be \"expendable.\" The RCV–M is to be between 10 to 20 tons, with a single vehicle capable of being transported by a C-130 aircraft. It should be able to accommodate multiple ATGMs, a medium cannon, or a large recoilless cannon. It is also expected to have a robust sensor package and be capable of integration with UAVs. The RCV–M is considered to be a \"durable\" system and more survivable than the RCV–L. The RC–H is to be between 20 to 30 tons, with two vehicles capable of being transported by a C-17 aircraft. It is also expected to be able to accommodate an onboard weapon system capable of destroying enemy IFVs and tanks. It should also have a robust sensor package and be capable of integration with UAVs. The RCV–H is considered to be a \"nonexpendable\" system and more survivable than the other RCVs. Reportedly, the Army does not have a formal acquisition approach for the RCV, but it plans to experiment from FY2020 to FY2023 with human interface devices and reconnaissance and lethality technologies. Reportedly, the Army plans to issue prototype contracts in November 2019. Depending on the outcome of experimentation with prototypes, the Army expects a procurement decision in FY2023. Section 804 of the National Defense Authorization Act for FY2016 ( P.L. 114-92 ) provides authority to the Department of Defense (DOD) to rapidly prototype and/or rapidly field capabilities outside the traditional acquisition system. Referred to as \"804 Authority,\" it is intended to deliver a prototype capability in two to five years under two distinct pathways: Rapid Prototyping or Rapid Fielding. One of the benefits of using 804 Authority is that the services can bypass the Joint Requirements Oversight Council (JROC) and the Joint Capabilities Integration Development Systems (JCIDS), two oversight bodies that, according to some critics, slow the acquisition process. Under Rapid Prototyping, the objectives are to field a prototype that can be demonstrated in an operational environment, and Provide for residual operational capability within five years of an approved requirement. Under Rapid Fielding, the objectives are to begin production within six months, and Complete fielding within five years of an approved requirement. For the OMFV program, the Army reportedly plans to use Rapid Prototyping under Section 804 to permit the program to enter at the EMD Phase, thereby avoiding a two- to three-year Technical Maturation Phase. Regarding the RCV program, the Army's Robotic Campaign Plan indicates that Section 804 authority is an \"option\" for RCV development. While many in DOD have embraced the use of Section 804 authority, some have expressed concerns. Supporters of Section 804 authority contend that provides \"an alternative path for systems that can be fielded within five years or use proven technologies to upgrade existing systems while bypassing typical oversight bodies that are said to slow the acquisition process.\" Critics, however, argue that \"new rapid prototyping authorities won't eliminate the complexities of technology development.\" One former Under Secretary of Defense for Acquisition, Technology, and Logistics, Frank Kendall, reportedly warns What determines how long a development program takes is the product. Complexity and technical difficulty drive schedule. That can't be wished away. Requirements set by operators drive both complexity and technical difficulty. You have to begin there. It is possible to build some kinds of prototypes quickly if requirements are reduced and designs are simplified. Whether an operator will want that product is another question. It's also possible to set totally unrealistic schedules and get industry to bid on them. There is a great deal of history that teaches us that this is a really bad idea. Others contend that for this authority to work as intended, \"maintaining visibility of 804 prototyping would be vital to ensure the authority is properly used\" and that \"developing a data collection and analytical process will enable DOD to have insight into how these projects are being managed and executed.\" In this regard, congressional oversight of programs employing Section 804 authority could prove essential to ensuring a proper and prudent use of this congressionally authorized authority. The Army requested $378 million in Research, Development, Test, and Evaluation (RDT&E) funding for the OMFV program and $109 million in RDT&E funding for the RCV in its FY2020 budget request. In terms of the OMFV, funding is planned to be used for, among other things, maturing technological upgrades for integration into the vehicle, including nondevelopmental active protection systems (APS), the XM 913 50 mm cannon, and the 3 rd Generation Forward Looking Infrared Radar (FLIR). FY2020 funding for RCVs is planned for finishing building prototypes of surrogate platforms and conducting manned-unmanned teaming evaluations. The OMFV is expected to be the Army's third attempt to replace the M-2 Bradley IFV after two costly previous attempts were cancelled, perhaps casting doubt on the Army's ability to design and field major ground combat systems. While many factors contributed to the cancelled FCS and GCV programs, two common problems were (1) overreliance on too many immature technologies, as well as the failure of some critical technologies, and (2) frequently changing performance requirements from Army leadership, resulting in increased program costs. Although the Army suggests that an emphasis on prototyping and the creation of the Army Futures Command (AFC) may remedy such problems, it can be argued these remedies are, at best, too general and lack specific measures necessary to ensure that past problems do not recur. To enhance program oversight and avoid potential problems in the OMFV program, Congress might consider requiring the Army to articulate the specific measures it will employ to mitigate technological challenges and leadership-generated \"requirements creep.\" In terms of requirements, it may be beneficial to have answers to the following questions: Who in the Army will have input into OMFV performance requirements? Who in the Army adjudicates the inputs for OMFV performance requirements? Who in the Army will be responsible for the final decision on OMFV performance requirements? Understanding these standards could help policymakers conduct oversight in terms of overall OMFV program accountability, especially if requirements change over the lifecycle of the program. One of the reasons cited for the failure of the FCS program was a \"complicated program management approach.\" Program management of major defense systems typically involves a number of organizations and multiple authorities and processes. Even by those standards, however, program management of the OMFV and RCV programs is arguably overly complicated and somewhat ill-defined (see pages 6-7). Determining AFC's role in OMFV and RCV program management, and how it will relate to the ASA (ALT) and PEO Ground Combat Systems and other organizations, may be a work in progress; however, at some point, having a clearly established management structure with agreed authorities and responsibilities is likely to be essential for ultimate program success. Toward this end, Congress might consider examining, in detail, the Army's proposed program management structure and authorities and processes for OMFV and RCV to help ensure that program management will be efficient and effective, and not a programmatic detriment (as it was in the case of the FCS). As previously noted, the Army envisions employing RCVs as \"scouts\" and \"escorts\" for manned OMFVs. In addition to enhancing OMFV survivability, RCVs could potentially increase the overall lethality of ABCTs. Army leadership has stated that the Army's first priority is replacing the Bradley with the OMFV, that the RCV will mature on a longer timeline than the OMFV, and that the OMFV will later be joined by the RCV. Given technological challenges, particularly autonomous ground navigation and artificial intelligence improvement, the Army's vision for RCV may not be achievable by the planned FY2026 fielding date or for many years thereafter. The Army describes the OMFV and RCV as \"complementary\" systems, but a more nuanced description of both the systematic and operational relationship between the two could be beneficial. While the OMFV appears to offer a significant improvement over the M-2 Bradley—given weapon systems technological advances by potential adversaries—operating alone without accompanying RCVs, the OMFV may offer little or marginal operational improvement over the M-2 Bradley. Recognizing the risks associated with a scenario where RCV fielding is significantly delayed or postponed due to technological challenges—along with a better understanding of the systematic and operational relationship between the OMFV and the RCV—could prove useful for policymakers. Another potential oversight question for Congress could be what is the role of Army Futures Command (AFC) in integrating requirements between OMFV and RCVs? To some, the use of Section 804 authority offers great promise in developing and fielding qualifying weapon systems quickly and cost-effectively. Others note that rapid prototyping authorities under Section 804 will not eliminate the complexities of technology development and that operational requirements also drive the complexity and technical difficulty of a project. In acknowledging the potential benefits that Section 804 authority could bring to the Army's third attempt to replace the M-2 Bradley, as well as the risks associated with its use over a more traditional acquisition approach, policymakers might decide to examine the potential costs, benefits, and risks associated with using Section 804 authority for the OMFV program. ", "summary": "In June 2018, in part due to congressional concerns, the Army announced a new modernization strategy and designated the Next Generation Combat Vehicle (NGCV) as the program to replace the M-2 Bradley. In October 2018, Army leadership decided to redesignate the NGCV as the Optionally Manned Fighting Vehicle (OMFV) and to add additional vehicle programs to what would be called the NGCV Program. The M-2 Bradley, which has been in service since 1981, is an Infantry Fighting Vehicle (IFV) used to transport infantry on the battlefield and provide fire support to dismounted troops and suppress or destroy enemy fighting vehicles. Updated numerous times since its introduction, the M-2 Bradley is widely considered to have reached the technological limits of its capacity to accommodate new electronics, armor, and defense systems. Two past efforts to replace the M-2 Bradley—the Future Combat System (FCS) Program and the Ground Combat Vehicle (GCV) Program—were cancelled for programmatic and cost-associated reasons. In late 2018, the Army established Army Futures Command (AFC), intended to establish unity of command and effort while consolidating the Army's modernization process under one roof. AFC is intended to play a significant role in OMFV development and acquisition. Hoping to field the OMFV in FY2026, the Army plans to employ Section 804 Middle Tier Acquisition Authority for rapid prototyping. The Army plans to develop, in parallel, three complementary classes of Robotic Combat Vehicles (RCVs) intended to accompany the OMFV into combat both to protect the OMFV and provide additional fire support. For RCVs to be successfully developed, problems with autonomous ground navigation will need to be resolved and artificial intelligence must evolve to permit the RCVs to function as intended. The Army has stated that a new congressionally-granted acquisition authority—referred to as Section 804 authority—might also be used in RCV development. The Army requested $378 million in Research, Development, Test, and Evaluation (RDT&E) funding for the OMFV program and $109 million in RDT&E funding for the RCV in its FY2020 budget request. Potential issues for Congress include the following: How will the OMFV program avoid the same fate as the cancelled FCS and GCV programs? What is the Army Futures Command's (AFC's) role in program management? What is the relationship between the OMFV and RCVs? What are some of the benefits and concerns regarding Section 804 authority and the OMFV?", "document_type": "crs"}
{"report": "Federal agencies provide a range of assistance to individual survivors; state, territorial, and local governments; and nongovernmental entities after major disasters, including natural disasters and terrorist attacks. Types of aid can include, but are not limited to, operational, logistical, and technical support; financial assistance through grants, loans, and loan guarantees; and the provision of federally owned equipment and facilities. Many, but not all, programs are available after the President issues a major disaster declaration pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) authority. More limited aid is available under a Stafford Act emergency declaration, a declaration issued by a department or agency head, or on an as needed basis. This report only identifies programs frequently used to provide financial assistance in the disaster response and recovery process. It provides brief descriptive information to help congressional offices determine which programs merit further consideration in the planning, organization, or execution of the disaster response and recovery process. Most of the programs listed here are authorized as assistance programs and are listed at the General Services Administration (GSA) website beta.SAM.gov. The list does not include operational or technical assistance that some agencies provide in emergency or disaster situations. It is also not inclusive of all forms of financial disaster assistance that may be available to every jurisdiction in every circumstance, as unique factors often trigger unique forms of assistance. Congress may, and frequently has, authorized specific forms of financial assistance on a limited basis following particular disasters. Programs discussed in this report satisfy one or more of the following criteria: Congress expressly designated the program to provide financial assistance for disaster relief or recovery. The program is applicable to most disaster situations, even if not specifically authorized for that purpose. The Federal Emergency Management Agency (FEMA) and other federal agencies have frequently used the program to provide financial assistance. The program is potentially useful for addressing short-term and long-term recovery needs (e.g., assistance with processing survivor benefits or repair of public facilities). Most of the programs listed in this report are specifically authorized for use during situations occurring because of a disaster. General assistance programs that may apply to disaster situations are described at the end of the report (see \" General Assistance Programs \"). As Congress and the Administration respond to domestic needs arising from major disasters, some conditions of these programs may be changed. For the most up-to-date information on a particular program, please contact the CRS analyst or department or agency program officers listed in the report. The Individuals and Households Program (IHP) is the primary vehicle for FEMA assistance to individuals and households after the President issues an emergency or major disaster declaration, when authorized. It is intended to meet basic needs and support recovery efforts, but it cannot compensate disaster survivors for all losses. Congress appropriates money for the IHP (and most other aid authorized by the Stafford Act) to the Disaster Relief Fund. IHP assistance is available in the form of financial and direct assistance to eligible individuals and households who, as a result of a disaster, have uninsured or under-insured necessary expenses and serious needs that cannot be met through other means or forms of assistance. Program funds have a wide range of eligible uses, including different forms of temporary housing assistance; housing repairs; housing replacement; and permanent housing construction. IHP funds may also be used for other needs assistance (ONA), including funeral, medical, dental, childcare, personal property, transportation, and other expenses. FEMA provides 100% of the housing assistance costs, but ONA is subject to a 75% federal and 25% state cost share. In addition, there is a limitation on the amount of financial assistance an individual or household may receive, with financial assistance including assistance to reimburse temporary lodging expenses; rent for alternate housing accommodations; home repairs and replacement; as well as ONA. Financial assistance for repairs and replacement may not exceed $34,900 (FY2019). Separately, financial assistance for ONA may not exceed $34,900 (FY2019). Financial assistance to rent alternate housing accommodations under Section 408 (c)(1)(A)(i) of the Stafford Act, however, is excluded from the cap. The maximum amount of financial assistance is adjusted annually to reflect changes in the Consumer Price Index. IHP assistance is intended to be temporary and is generally limited to a period of 18 months from the date of the declaration, but may be extended by FEMA. (Also see \" Physical Disaster Loans—Residential SBA Disaster Loans Available to Homeowners and Renters \" below for additional assistance for homeowners and renters.) Agency : Federal Emergency Management Agency Authority : 42 U.S.C. §5174 Regulation : 44 C.F.R. §§206.110–206.120 Phone : Office of Congressional Affairs, 202-646-4500 Website : https://www.fema.gov/media-library/assets/documents/24945 CFDA Program Numbers : 97.048 and 97.050 CRS Contact : Elizabeth Webster, 202-707-9197 Disaster Unemployment Assistance (DUA) provides benefits to previously employed or self-employed individuals rendered jobless as a direct result of a major disaster and who are not eligible for regular federal or state unemployment compensation (UC). In certain cases, individuals who have no work history or are unable to work may also be eligible for DUA benefits. DUA is federally funded through FEMA, but is administered by the Department of Labor and state UC agencies. In general, individuals must apply for benefits within 30 days after the date the state announces availability of DUA benefits. When applicants have good cause, they may file claims after the 30-day deadline. This deadline may be extended; however, initial applications filed after the 26 th week following the declaration date will not be considered. When a reasonable comparative earnings history can be constructed, DUA benefits are determined in a similar manner to regular state UC benefit rules. The minimum weekly DUA benefit is required to be half of the average weekly UC benefit for the state where the disaster occurred. DUA assistance is available to eligible individuals as long as the major disaster continues, but no longer than 26 weeks after the disaster declaration. For more information, see CRS Report RS22022, Disaster Unemployment Assistance (DUA) , by Julie M. Whittaker. Agency: Department of Labor, Employment and Training Administration Authority: 42 U.S.C. §5177 Regulation: 20 C.F.R. §625; 44 C.F.R. §206.141 Contact: See listings of resources by state , https://www.careeronestop.org/localhelp/unemploymentbenefits/unemployment-benefits.aspx Website: http://ows.doleta.gov/unemploy/disaster.asp CFDA Program Number : 97.034 CRS Contact: Julie Whittaker, 202-707-2587 The dislocated worker program helps fund training and related assistance to persons who have lost their jobs and are unlikely to return to their current jobs or industries. Of the funds appropriated, 80% are allotted by formula grants to states and local entities and 20% are reserved by the Secretary of Labor to fund a national reserve that supports national dislocated worker grants to states or local ent ities. One type of national emergency grant is Disaster Relief Employment Assistance, under which funds can be made available to states to employ dislocated workers in temporary jobs involving recovery after a national emergency. An individual may be employed for up to 12 months. There are no matching requirements for Workforce Innovation and Opportunity Act (WIOA) programs. Agency: Department of Labor, Employment and Training Administration Authority: 29 U.S.C. §3225 Regulation: 20 C.F.R. §671 Contact: See listings of state Dislocated Worker/Rapid Response Coordinators at http://www.doleta.gov/layoff/rapid_coord.cfm Website: https://www.doleta.gov/DWGs/eta_default.cfm CFDA Program Number : 17.278 CRS Contact: David H. Bradley, 202-707-7352 The majority of disaster loans provided by the Small Business Administration (SBA), approximately 80%, are made available to individuals and households. SBA disaster assistance is provided in the form of loans, not grants, and therefore must be repaid to the federal government. Homeowners, renters, and personal property owners located in a declared disaster area (and in contiguous counties) may apply to the SBA for loans to help recover losses from the disaster. SBA's Home Disaster Loan Program falls into two categories: personal property loans and real property loans. These loans cover only uninsured or underinsured property and primary residences. Loan maturities may be up to 30 years. A personal property loan provides a creditworthy homeowner or renter with up to $40,000 to repair or replace personal property items, such as furniture, clothing, or automobiles, damaged or lost in a disaster. These loans cover only uninsured or underinsured property and primary residences and cannot be used to replace extraordinarily expensive or irreplaceable items, such as antiques, recreational vehicles, or furs. A creditworthy homeowner may apply for a \"real property loan\" of up to $200,000 to repair or restore the homeowner's primary residence to its predisaster condition. The loans may not be used to upgrade homes or build additions, unless upgrades or changes are required by city or county building codes. A real property loan may be increased by 20% for repairs to protect the damaged property from a similar disaster in the future. Agency: Small Business Administration Authority: 15 U.S.C. §636(b) Regulation: 13 C.F.R. §§123.200–123.204 Contact : Office of Congressional and Legislative Affairs, 202-205-6700 Website : https://disasterloan.sba.gov/ela/Information/TypesOfLoans CFDA Program Number : 59.008 CRS Contact : Bruce R. Lindsay, 202-707-3752 This unique fund directs payments to individuals and groups for disaster-related needs that have not been or will not be met by government agencies or other organizations. A disaster survivor will normally receive no more than $2,000 from this fund in any one declared disaster unless the Assistant Administrator for the Disaster Assistance Directorate determines that a larger amount is in the best interest of the disaster victim and the federal government. There is no matching requirement for this program and no limitation on the time period in which assistance is available. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5121 et seq. Regulation: 44 C.F.R. §206.181 Contact : Office of Congressional Affairs, 202-646-4500 Website : http://www.fema.gov/library/viewRecord.do?id=5037 CRS Contact: Bruce R. Lindsay, 202-707-3752 This program provides grants that enable states to offer crisis counseling services, when required, to victims of a federally declared major disaster for the purpose of relieving mental health problems caused or aggravated by the disaster or its aftermath. Assistance is short-term and community-oriented. Cost-share requirements are not imposed on this assistance. The regulations specify that program funding generally ends after nine months, but time extensions may be approved if requested by the state and approved by federal officials. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5183 Regulation: 44 C.F.R. §206.171 Contact : Office of Congressional Affairs, 202-646-4500 Website: https://www.fema.gov/recovery-directorate/crisis-counseling-assistance-training-program CFDA Pr ogram Number : 97.032 CRS Contact: Sarah A. Lister, 202-707-7320 Disaster Legal Services (DLS) are provided for free to low-income individuals who require them as a result of a major disaster, and the provision of services is \"confined to the securing of benefits under the [Stafford] Act and claims arising out of a major disaster.\" Assistance may include help with insurance claims, drawing up new wills and other legal documents lost in the disaster, help with home repair contracts and contractors, and appeals of FEMA decisions. Neither the statute nor the regulations establish cost-share requirements or time limitations for DLS. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5182 Regulation: 44 C.F.R. §206.164 Contact : Office of Congressional Affairs, 202-646-4500 Website: https://www.fema.gov/media-library/assets/documents/24413 CFDA Program Number : 97.033 CRS Contact: Elizabeth Webster, 202-707-9197 The Disaster Case Management (DCM) program partners case managers and disaster survivors to develop and implement Disaster Recovery Plans to address unmet needs. The DCM program is authorized under the Stafford Act. Following a presidentially declared major disaster that includes Individual Assistance (IA), the governor or tribal executive may request a grant to use DCM providers to supply services to survivors with long-term, disaster-caused unmet needs. The program is time-limited, and it shall not exceed 24 months from the date of the presidential major disaster declaration. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5189d Contact: Office of Congressional Affairs, 202-646-4500 Website: https://www.fema.gov/media-library/assets/documents/101292 CFDA Program Number : 97.088 CRS Contact: Elizabeth Webster, 202-707-9197 The Internal Revenue Code (IRC) includes tax relief provisions that apply to individuals and businesses affected by federally declared disasters, and the following are some examples. Individuals located in affected areas are allowed extra time (four years instead of the general two) to replace homes due to involuntary conversion (e.g., destruction from wind or floods, theft, or property ordered to be demolished) and still defer any gain. Taxpayers may also be able to deduct personal casualty losses attributable to federally declared disasters, subject to certain limitations. Qualifying disaster relief payments received by affected individuals are not subject to tax. The Internal Revenue Service also has the authority to provide some relief, including the extension of tax filing deadlines. In addition to these and other permanent tax relief provisions, special temporary provisions have been enacted for certain disasters. The 2017 tax revision ( P.L. 115-97 ) provided tax relief related to 2016 and 2017 disasters. These measures were expanded to cover the California wildfires in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ). Agency : Internal Revenue Service Authority : Various provisions throughout the Internal Revenue Code, Title 26 U.S.C., including §§123, 139, 165, 402, 408, 1033, 6654, 7508A Regulation : No specific regulation Contact : Congressional Liaison, 202-317-6985 Website : http://www.irs.gov/uac/Tax-Relief-in-Disaster-Situations CRS Contact s : Molly Sherlock, 202-707-7797 Authorized by multiple sections of the Stafford Act, the Public Assistance (PA) Grant Program is FEMA's primary form of financial assistance for state and local governments. The PA Program provides grant assistance for many eligible purposes, including the following: Emergency work, as authorized by Sections 403, 407, and 502 of the Stafford Act, which provide for the removal of debris and emergency protective measures, such as the establishment of temporary shelters and emergency power generation. Permanent work, as authorized by Section 406, which provides for the repair, replacement, or restoration of disaster-damaged, publicly owned facilities and the facilities of certain private nonprofit organizations (PNPs). At its discretion, FEMA may provide assistance for hazard mitigation measures that are not required by applicable codes and standards. As a condition of PA assistance, applicants must obtain and maintain insurance on their facilities for similar future disasters. Management costs, as authorized by Section 324, which reimburses some of the applicant's administrative expenses incurred managing the totality of the PA Program's projects and grants. PNPs are generally eligible for permanent work assistance if they provide a governmental type of service, though PNPs not providing a \"critical\" service must first apply to the SBA for loan assistance for facility projects. The federal government provides a minimum of 75% of the cost of eligible assistance, and this cost share can rise if certain criteria are met. Funding for the PA Program comes through discretionary appropriations to the Disaster Relief Fund. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §§5170b, 5172, 5173, 5189f, 5192 Regulation: 44 C.F.R. §206, subparts G, H, I Contact : Office of Congressional Affairs, 202-646-4500 Website: http://www.fema.gov/public-assistance-local-state-tribal-and-non-profit CFDA Program Number : 97.036 CRS Contact: Natalie Keegan, 202-707-9569 The Hazard Mitigation Grant Program (HMGP) provides grants to states for implementing mitigation measures after a disaster and to provide funding for previously identified mitigation measures to lessen future damage and loss of life. The federal government provides up to 75% of the cost share of eligible projects. Historically, the amount available for HMGP awards is established by a scale that authorizes three tiers of awards: 15% of the total of other Stafford Act assistance in a state for a major disaster in which no more than $2 billion is provided; 10% for assistance that ranges from more than $2 billion to $10 billion; and 7.5% for a major disaster that involves Stafford Act assistance from more than $10 billion to $35.3 billion. Funding for HMGP comes through discretionary appropriations to the Disaster Relief Fund. The amount of funding provided can be increased if the state has an approved enhanced mitigation plan. HMGP funding is only awarded with a major disaster declaration, not an emergency declaration. However, during FY2015, FY2017, and FY2018, Congress directed that HMGP grants be made available with fire management assistance grants. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5170c Regulation: 44 C.F.R. §§206.430–206.440 Contact : Office of Congressional Affairs , 202-646-4500 Website : http://www.fema.gov/hazard-mitigation-grant-program CFDA Program Number : 97.039 CRS Contact: Diane P. Horn, 202-707-3472 The Pre-Disaster Mitigation (PDM) Grant Program provides grants and technical assistance to states, territories, and local communities for cost-effective hazard mitigation activities that complement a comprehensive hazard mitigation program and reduce injuries, loss of life, and damage and destruction of property. Through FY2018, a minimum of the lesser of $575,000 or 1.0% of appropriated funds was provided to a state or local government, with assistance capped at 15% of appropriated funds. Federal funds generally comprise 75% of the cost of approved mitigation projects, except for small impoverished communities that may receive up to 90% of the cost. Funding for the PDM Program changed significantly with the passage of the Disaster Recovery Reform Act of 2018 (DRRA). DRRA authorizes the National Public Infrastructure Pre-Disaster Mitigation Fund, for which the President may set aside from the DRF, with respect to each major disaster, an amount equal to 6% of the estimated aggregate amount of the grants to be made pursuant to the following sections of the Stafford Act: 403 (essential assistance), 406 (repair, restoration, and replacement of damaged facilities), 407 (debris removal), 408 (federal assistance to individuals and households), 410 (unemployment assistance), 416 (crisis counseling assistance and training), and 428 (public assistance program alternative program procedures). These changes may increase the focus on funding public infrastructure projects that improve community resilience before a disaster occurs, although FEMA has the discretion to shape the program in many ways. There is potential for significantly increased funding post-DRRA through the new transfer from the DRF, but it is not yet clear how FEMA will implement this new program. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5133 Regulation: 44 C.F.R. §201 Contact : Office of Congressional Affairs, 202-646-4500 Website: http://www.fema.gov/pre-disaster-mitigation-grant-program CFDA Program Number : 97.047 CRS Contact: Diane P. Horn, 202-707-3472 The Community Disaster Loan (CDL) program provides loans to local governments that have suffered substantial loss of tax and other revenue in areas included in a major disaster declaration. Typically, the loan may not exceed 25% of the local government's annual operating budget for the fiscal year of the disaster. The limit is 50% if the local government lost 75% or more of its annual operating budget. A loan may not exceed $5 million, and there is no matching requirement. The statute does not impose time limitations on the assistance, but the normal term of a loan is five years. The statute provides that the repayment requirement is cancelled if local government revenues are not sufficient to meet operations expenses during a three-fiscal-year period after a disaster. The governor's authorized representative must officially approve the application and funds must be available in the Disaster Assistance Direct Loan Program (DADLP) account. In P.L. 115-72 , Congress provided up to $4.9 billion for the CDL program to assist local governments in providing essential services as a result of Hurricanes Harvey, Irma, or Maria. However, this legislation departed from the traditional CDL program framework by giving the Secretary of Homeland Security (in consultation with the Secretary of the Treasury) broad authority over lending terms, eligible uses, and criteria for loan cancelation, among other program elements. As a result, this CDL-type program operates differently from the traditional program. For more information, see CRS Insight IN11106, Community Disaster Loans: Homeland Security Issues in the 116th Congress , by Michael H. Cecire. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5184 Regulation: 44 C.F.R. §§206.360–206.378 Contact : Office of Congressional Affairs, 202-646-4500 CFDA Program Number : 97.030 CRS Contact: Michael H. Cecire, 202-707-7109 This program provides grants to state and local governments to aid states and their communities with the mitigation, management, and control of fires burning on publicly or privately owned forests or grasslands. The federal government provides 75% of the costs associated with fire management projects, but funding is limited to calculations of the \"fire cost threshold\" for each state. No time limitation is applied to the program. For more information, see CRS Report R43738, Fire Management Assistance Grants: Frequently Asked Questions , by Bruce R. Lindsay and Katie Hoover. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §5187 Regulation: 44 C.F.R. §§204.1–204.64 Contact : Office of Congressional Affairs, 202-646-4500 Website: https://www.fema.gov/fire-management-assistance-grant-program CFDA Program Number : 97.046 CRS Contact: Bruce R. Lindsay, 202-707-3752 Congress created the Oil Spill Liability Trust Fund (OSLTF) in 1986. Subsequent laws authorized the OSLTF taxing authority, appropriations from the fund, and eligible uses for the fund. The OSLTF complements the Oil Pollution Act of 1990 (OPA; P.L. 101-380 ), which established a new federal oil spill liability framework, replaced existing federal liability frameworks, and amended the existing Clean Water Act oil spill response authorities. In addition, OPA transferred monies into the OSLTF from existing liability funds. The OSLTF may be used, among other purposes, to fund oil spill response activities and to compensate individuals, businesses, and governments for applicable economic damages resulting from an oil spill. Potential damages include injury or loss of property and loss of profits or earning capacity. OPA established a claims process for compensating parties affected by an oil spill. In general, claims must be presented first to the party responsible for the spill, but specific circumstances (e.g., the responsible party is unknown) allow persons to present a claim directly to the OSLTF. Agency : National Pollution Funds Center (part of the U.S. Coast Guard) Authority : 26 U.S.C. §9509 and 33 U.S.C. §2712 Regulation : 33 C.F.R. §136 Contact : Office of Legislative Affairs, 202-245-0520 Website : http://www.uscg.mil/npfc/ CRS Contact : Jonathan L. Ramseur, 202-707-7919 This program assists small businesses and nonprofits suffering economic injury as a result of disasters by offering loans and loan guarantees. Businesses must be located in disaster areas declared by the President, the Small Business Administration, or the Secretary of Agriculture. There is no matching requirement in this program. The maximum loan amount is $2 million. Loan terms may extend for up to 30 years. The application period is announced at the time of the disaster declaration. For more information, see CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible Issues for Congress , by Bruce R. Lindsay. Agency: Small Business Administration Authority: 15 U.S.C. §636(b) Regulation: 13 C.F.R. §§123.300–123.303 Contact : Office of Congressional Affairs, 202-205-6700 Website : https://disasterloan.sba.gov/ela/Information/EIDLLoans CFDA Program Number : 59.008 CRS Contact: Bruce R. Lindsay, 202-707-3752 This program provides loans to businesses and nonprofits in declared disaster areas for uninsured physical damage and losses. The maximum loan amount is $2 million. Loan terms may extend for up to 30 years. There is no matching requirement in this program. For more information, see CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible Issues for Congress , by Bruce R. Lindsay. Agency: Small Business Administration Authority: 15 U.S.C. §636(b) Regulation: 13 C.F.R. §§123.200–123.204 Contact : Office of Congressional Affairs, 202-205-6700 Website: https://disasterloan.sba.gov/ela/Information/BusinessPhysicalLoans CFDA Program Number : 59.008 CRS Contact: Bruce R. Lindsay, 202-707-3752 When a county has been declared a disaster area by either the President or the Secretary of Agriculture, agricultural producers in that county may become eligible for low-interest emergency disaster (EM) loans available through the U.S. Department of Agriculture's Farm Service Agency. Producers in counties that are contiguous to a county with a disaster designation also become eligible for an EM loan. EM loan funds may be used to help eligible farmers, ranchers, and aquaculture producers recover from production losses (e.g., when the producer suffers a significant loss of an annual crop) or from physical losses (e.g., repairing or replacing damaged or destroyed structures or equipment, or replanting permanent crops, such as orchards). A qualified applicant can then borrow up to 100% of actual production or physical losses (not to exceed $500,000) at a below-market interest rate. For more information see CRS Report RS21212, Agricultural Disaster Assistance , by Megan Stubbs. Agency: Department of Agriculture, Farm Service Agency Authority: 7 U.S.C. §1961 Regulation: 7 C.F.R. §764 Contact : Legislative Liaison Staff, 202-720-7095 Website: https://www.fsa.usda.gov/programs-and-services/farm-loan-programs/emergency-farm-loans/index CFDA Program Number : 10.404 CRS Contact: Megan Stubbs, 202-707-8707 Since 1968, the federal government has pursued a comprehensive flood risk management strategy designed to (1) identify and map flood-prone communities across the country (flood hazard mapping); (2) encourage property owners in NFIP participating communities to purchase insurance as a protection against flood losses (flood insurance); and (3) require communities in designated flood risk zones to adopt and enforce approved floodplain management ordinances to reduce future flood risk to new construction in regulated floodplains (floodplain management). The Federal Insurance and Mitigation Administration (FIMA), a part of FEMA, manages the NFIP. For more information, see CRS Report R44593, Introduction to the National Flood Insurance Program (NFIP) , by Diane P. Horn and Baird Webel, and CRS In Focus IF11023, Selected Issues for National Flood Insurance Program (NFIP) Reauthorization and Reform , by Diane P. Horn. Agency: Federal Emergency Management Agency Authority: 42 U.S.C. §4001 et seq. Regulation: 44 C.F.R. §59.1–§82.21 Contact : Office of Congressional Affairs, 202-646-4500 Website: http://www.fema.gov/national-flood-insurance-program CFDA Program Number : 97.022 CRS Contact : Diane Horn, 202-707-3472 In addition to programs described above that provide targeted assistance to individuals, states, territories, local governments, and businesses specifically affected by disasters, other general assistance programs may be useful to communities in disaster situations. For example, individuals who lose income, employment, or health insurance may become eligible for programs that are not specifically intended as disaster relief, such as cash assistance under the Temporary Assistance for Needy Families (TANF) program, job training under the Workforce Investment Act, Medicaid, or the State Children's Health Insurance Program (S-CHIP). Likewise, state or local officials have the discretion to use funds under programs such as the Social Services Block Grant or Community Development Block Grant to meet disaster-related needs, even though these programs were not established specifically for such purposes. Other agencies may offer assistance to state and local governments, including the Economic Development Administration and the Army Corps of Engineers. For businesses, however, only the disaster programs administered by the Small Business Administration are generally applicable. Numerous other federal programs could offer disaster relief, but specific eligibility criteria or other program rules might make it less likely that they would actually be used. Moreover, available funds might already be obligated for ongoing program activities. To the extent that federal agencies have discretion in the administration of programs, some agencies may choose to adapt these non-targeted programs for use in disaster situations. Also, Congress may choose to provide additional funds through emergency supplemental appropriations for certain general assistance programs, specifically for use after a disaster. CRS analysts and program specialists can help provide information regarding general assistance programs that might be relevant to a given disaster situation. CRS appropriations reports may have information on disaster assistance within particular federal agencies. These reports also list CRS's key policy staff by their program area and agency expertise. CRS Report R41981, Congressional Primer on Responding to Major Disasters and Emergencies , by Bruce R. Lindsay and Elizabeth M. Webster CRS Report R41101, FEMA Disaster Cost-Shares: Evolution and Analysis , by Natalie Keegan and Elizabeth M. Webster CRS Report RL33330, Community Development Block Grant Funds in Disaster Relief and Recovery , by Eugene Boyd CRS Report RL33579, The Public Health and Medical Response to Disasters: Federal Authority and Funding , by Sarah A. Lister CRS Report R44593, Introduction to the National Flood Insurance Program (NFIP) , by Diane P. Horn and Baird Webel CRS Insight IN10450, Private Flood Insurance and the National Flood Insurance Program (NFIP) , by Baird Webel and Diane P. Horn CRS Report R45099, National Flood Insurance Program: Selected Issues and Legislation in the 115th Congress , by Diane P. Horn CRS In Focus IF10730, Tax Policy and Disaster Recovery , by Molly F. Sherlock CRS Report R41884, Considerations for a Catastrophic Declaration: Issues and Analysis , by Bruce R. Lindsay CRS Report R43784, FEMA's Disaster Declaration Process: A Primer , by Bruce R. Lindsay CRS Report R43738, Fire Management Assistance Grants: Frequently Asked Questions , by Bruce R. Lindsay and Katie Hoover CRS Report R45085, FEMA Individual Assistance Programs: In Brief , by Shawn Reese CRS Report R45238, FEMA and SBA Disaster Assistance for Individuals and Households: Application Process, Determinations, and Appeals , by Bruce R. Lindsay and Shawn Reese CRS Report RS22022, Disaster Unemployment Assistance (DUA) , by Julie M. Whittaker CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible Issues for Congress , by Bruce R. Lindsay CRS Report RS21212, Agricultural Disaster Assistance , by Megan Stubbs CRS Report R42854, Emergency Assistance for Agricultural Land Rehabilitation , by Megan Stubbs CRS In Focus IF10565, Federal Disaster Assistance for Agriculture , by Megan Stubbs CRS In Focus IF10730, Tax Policy and Disaster Recovery , by Molly F. Sherlock CRS Report R44808, Federal Disaster Assistance: The National Flood Insurance Program and Other Federal Disaster Assistance Programs Available to Individuals and Households After a Flood , by Diane P. Horn CRS Insight IN11094, The Evolving Use of Disaster Housing Assistance and the Roles of the Disaster Housing Assistance Program (DHAP) and the Individuals and Households Program (IHP) , by Elizabeth M. Webster CRS Insight IN11054, Disaster Housing Assistance: Homeland Security Issues in the 116th Congress , by Elizabeth M. Webster CRS Insight IN11106, Community Disaster Loans: Homeland Security Issues in the 116th Congress , by Michael H. Cecire Note: Because not all agencies have complete, up-to-date information available on the internet, in particular during and immediately after a disaster, congressional users are encouraged to contact the appropriate CRS program analysts or department or agency program officers for more complete, timely information. USA.gov http://www.USA.gov/ Many federal agencies have established websites specifically for responding to disasters. Some agencies maintain websites with comprehensive information about their disaster assistance programs, whereas others supply only limited information; most list contact phone numbers. An A-Z index of U.S. government departments and agencies is available at the website above. FEMA Website http://www.fema.gov From its website, FEMA offers regular updates on recovery efforts in areas under a major disaster declaration. Information on a specific disaster may include a listing of declared counties and contact information for local residents. Disaster Assistance.gov http://www.disasterassistance.gov/ DisasterAssitance.gov provides information on how help might be obtained from the U.S. government before, during, and after a disaster. The website includes tools to find, apply for, and check the status of assistance by category or agency. The website also includes disaster-related news feeds and information on community resources. Assistance Listings at beta.SAM.gov https://beta.SAM.gov/ Official descriptions of more than 2,200 federal assistance programs, including disaster and recovery grants and loans, can be found on beta.SAM.gov. The website is currently in beta, and it houses federal assistance listings previously found on the now-retired Catalog of Federal Domestic Assistance (CFDA). For programs summarized in this report, CFDA program numbers are given (which are searchable at the \"Assistance Listings\" domain at beta.SAM.gov). Full assistance listing descriptions, updated by departments and agencies, cover authorizing legislation, objectives, and eligibility and compliance requirements. For current appropriations and additional information, users can contact CRS analysts, or departments and agencies.", "summary": "This report is designed to assist Members of Congress and their staff as they address the needs of their states, communities, and constituents after a disaster. It includes a summary of federal programs that provide federal disaster assistance to individual survivors, states, territories, local governments, and nongovernmental entities following a natural or man-made disaster. A number of federal agencies provide financial assistance through grants, loans, and loan guarantees to assist in the provision of critical services, such as temporary housing, counseling, and infrastructure repair. The programs summarized in this report fall into two broad categories. First, there are programs specifically authorized for use during situations occurring because of a disaster. Most of these programs are administered by the Federal Emergency Management Agency (FEMA). Second are general assistance programs that in some instances may be used either in disaster situations or to meet other needs unrelated to a disaster. Many federal agencies, including the Departments of Health and Human Services (HHS) and Housing and Urban Development (HUD), administer programs that may be included in the second category. The programs in the report are primarily organized by recipient: individuals, state and local governments, nongovernmental entities, or businesses. These programs address a variety of short-term needs, such as food and shelter, and long-term needs, such as the repair of public utilities and public infrastructure. The report also includes a list of Congressional Research Service (CRS) reports on disaster assistance as well as relevant federal agency websites that provide information on disaster responses, updates on recovery efforts, and resources on federal assistance programs. This report will be updated as significant legislative or administrative changes occur.", "document_type": "crs"}
{"report": "The Longshore and Harbor Workers' Compensation Act (LHWCA) requires that private-sector firms provide workers' compensation coverage for their employees engaged in longshore, harbor, or other maritime occupations on or adjacent to the navigable waters of the United States. Although the LHWCA program is administered by the Department of Labor (DOL), most benefits are paid either through private insurers or self-insured firms. The LHWCA is a workers' compensation system and not a federal benefits program. Like other workers' compensation systems in the United States, the LHWCA ensures that all covered workers are provided medical and disability benefits in the event they are injured or become ill in the course of their employment, and it provides benefits to the survivors of covered workers who die on the job. In 2016, the LHWCA paid approximately $1.41 billion in cash and medical benefits to injured workers and the families of deceased workers. Nearly all private- and public-sector workers in the United States are covered by some form of workers' compensation. The federal government has a limited role in workers' compensation and administers workers' compensation programs only for federal employees and several classes of private-sector workers, including longshore and harbor workers. For most occupations, workers' compensation is mandated by state laws and administered by state agencies. There is no federal mandate that states provide workers' compensation. However, every state and the District of Columbia has a workers' compensation system. There are no federal standards for state workers' compensation systems. However, all U.S. workers' compensation systems provide for limited wage replacement and full medical benefits for workers who are injured or become ill as a result of their work and survivors benefits to the families of workers who die on the job. Workers' compensation in the United States is a no-fault system that pays workers for employment-related injuries or illnesses without considering the culpability of any one party. In exchange for this no-fault protection and the guarantee of benefits in the event of an employment-related injury, illness, or death, workers give up their rights to bring actions against employers in the civil court system and give up their rights to seek damages for injuries and illnesses, including pain and suffering, outside of those provided by the workers' compensation laws. Workers' compensation is mandatory in all states and the District of Columbia, with the exception of Texas. In Texas, employers may, under certain conditions, opt out of the workers' compensation system, but in doing so subject themselves to civil actions brought by injured employees. Prior to the enactment of the LHWCA in 1927, longshore and harbor workers were not covered by any workers' compensation system. Although persons who worked entirely on land were covered by workers' compensation laws in those states that enacted such laws, pursuant to the Supreme Court's 1917 decision in Southern Pacific Co. v. Jensen , state workers' compensation systems did not have jurisdiction over persons working on the \"navigable waters\" of the United States because the Constitution granted the authority over \"matters of admiralty and maritime jurisdiction\" to the federal government. The LHWCA created a federal workers' compensation program to cover these workers. In 1972, the LHWCA zone of coverage was extended to include areas adjacent to navigable waters that are used for loading, unloading, repairing, or building vessels. The LHWCA provisions apply to any private firm with any covered employees who work, full- or part-time, on the navigable waters of the United States, including in any of the following adjoining areas: piers; wharves; dry docks; terminals; building ways; marine railways; or other areas customarily used in the loading, unloading, repairing, or building of vessels. With the exception of workers excluded by statute (listed below), the LHWCA covers any maritime employee of a covered firm, including longshore workers (those who load and unload ships) and harbor workers (i.e., ship repairmen, ship builders, and ship breakers). Sections 2(3) and 3(b) of the LHWCA exclude the following workers from coverage: Workers covered by a state workers' compensation law, including employees exclusively engaged in clerical, secretarial, security, or data processing work; persons employed by a club, camp, recreational operation, museum, or retail outlet; marina employees not engaged in the construction, replacement, or expansion of the marina; suppliers, transporters, and vendors doing business temporarily at the site of a covered employer; aquaculture workers; and employees who build any recreational vessel under 65 feet in length, or repair any recreational vessel, or dismantle any part of a recreational vessel in connection with the repair of the vessel. Workers, whether covered or not covered by a state workers' compensation law, including masters and crew members of vessels; persons engaged by the master of a vessel to unload any vessel under 18 tons net; and employees of the federal government, or any state, local, or foreign government or any subdivision of such a government. Section 803 of the American Recovery and Reinvestment Act of 2009 (ARRA) modified one of the excluded classes of workers under the LHWCA by adding additional exclusions for persons who work on recreational vessels over 65 feet in length. Prior to the amendment, Section 2(3)(F) of the LHWCA read as follows: (3) The term \"employee\" means…but such term does not include… (F) individuals employed to build, repair, or dismantle any recreational vessel under sixty-five feet in length. This section, as amended, reads as follows (with additions in italics): (3) The term \"employee\" means…but such term does not include… (F) individuals employed to build any recreational vessel under sixty-five feet in length, or individuals employed to repair any recreational vessel, or to dismantle any part of a recreational vessel in connection with the repair of such vessel. By granting an exemption from the LHWCA to persons engaged in the repair of any recreation vessel, regardless of its size, this amendment limits the scope of the LHWCA and increases the types of workers excluded from coverage. In 2011, the DOL promulgated implementing regulations for the new recreational vessel provision provided by Section 803 of ARRA. These regulations provided definitions of recreational vessel for the purposes of the determination of LHWCA coverage. These definitions are based on the classification of vessels used by the U.S. Coast Guard (USCG) and provided in statute and regulation. Specifically, under these current DOL regulations, a vessel is considered a recreational vessel if the vessel is being manufactured or operated mainly for pleasure or leased, rented, or chartered to another person for his or her pleasure. In addition, for a vessel being built or repaired under warranty by its manufacturer or builder, the vessel is considered a recreational vessel if it appears based on its design and construction to be intended for recreational uses. The manufacturer or builder bears the burden under this regulation to establish that the vessel is a recreational vessel. For a vessel being repaired, dismantled for repair, or dismantled at the end of its life (ship breaking), the vessel is not considered a recreational vessel if it was operating, more than infrequently, in one of the following categories provided in the U.S. Code : \"passenger vessel\" (46 U.S.C. §2101(22)); \"small passenger vessel\" (46 U.S.C. §2101(35)); \"uninspected passenger vessel\" (46 U.S.C. §2101(42)); vessel routinely engaged in \"commercial service\" (46 U.S.C. §2101(5)); or vessel that routinely carries \"passengers for hire\" (46 U.S.C. §2101(21a)). A vessel being repaired, dismantled for repair, or dismantled at the end of its life is considered a recreational vessel if the vessel is a public vessel owned, or bareboat chartered, by the federal government or a state or local government and shares elements of design and construction with traditional recreational vessels and is not used for military or commercial purposes. Since the promulgation of the DOL's 2011 rules providing regulatory definitions of recreational vessels for the purposes of the LHWCA, numerous bills have been introduced that would, if enacted, remove the existing regulatory definitions for a vessel being repaired, dismantled for repair, or dismantled at the end of its life so that the USCG categories of vessels provided in Section 2101 of Title 46 of the United States Code would no longer be used in the classification of such a vessel under the LHWCA. This legislation would expand the types of recreational vessels. Because persons who work on recreational vessels are not covered by the LHWCA, the legislation would allow employers to purchase workers' compensation for these workers under state laws rather than the LHWCA, which, due to the more generous benefits frequently offered by the LHWCA and the limited number of providers, may be more expensive. In the 115 th Congress, Section 3509 of H.R. 2810 , the National Defense Authorization Act for 2018 (NDAA), as initially passed by the House of Representatives on July 14, 2017, contained this legislative provision. This provision was not included in the Senate version of the bill nor in the final NDAA enacted into law. The LHWCA has been amended four times to extend coverage to occupations outside the original scope of the law. In 1928, coverage was extended to employees of the District of Columbia . The provision was repealed, effective for all injuries occurring on or after July 26, 1982, with the enactment by the District of Columbia government of the District of Columbia Workers' Compensation Act of 1982. Benefits for injuries that occurred prior to July 26, 1982, continue to be paid under the LHWCA. Coverage was extended to overse a s military and public works contractors in 1941 with the enactment of the Defense Base Act. In 1952, coverage was extended to civilian employees of nonappropriated fund instrumentalities of the armed forces , such as service clubs and post exchanges. Coverage was extended in 1953 to employees working on the Outer Continental Shelf in the exploration and the development of natural resources , such as workers on offshore oil platforms. Employers required by the LHWCA to provide workers' compensation coverage to their employees may either purchase private insurance or self-insure. The DOL is responsible for authorizing insurance carriers to provide coverage under the LHWCA program and for authorizing companies to self-insure. However, the DOL does not set or regulate insurance premiums. These insurance arrangements are the primary means of providing LHWCA benefits to injured, sick, and deceased workers and their families. General revenue is not used to pay any LHWCA benefits. The DOL operates the Special Fund to provide LHWCA benefits in cases in which the responsible employer or insurance carrier cannot pay or in which benefits must be paid for a second injury under Section 8(f) of the LHWCA. The Special Fund is financed through an annual assessment charged to employers and insurance carriers based on the previous year's claims, payments required when an employee dies without any survivors, disability payments due to an employee without survivors after his or her death, and penalties and fines assessed for noncompliance with LHWCA program rules. The administrative costs associated with the LHWCA are largely provided by general revenue. General revenue is used to pay for most oversight functions associated with the LHWCA and the processing of LHWCA claims. General revenue is also used to pay legal and investigative costs associated with the DOL Office of the Solicitor and Office of the Inspector General. Revenue from the Special Fund is used to finance oversight activities related to the Special Fund and the program's vocational rehabilitation activities. In 2016, total administrative costs associated with the LHWCA were approximately $15.8 million, of which $13.6 million, or 86%, was paid by general revenue and $2.2 million, or 14%, was paid by the Special Fund. The LHWCA provides medical benefits for covered injuries and illnesses and disability benefits to partially cover wages lost due to covered injuries or illnesses, and it provides survivors benefits to the families of workers who die on the job. The LHWCA provides medical benefits to fully cover the cost of any medical treatment associated with a covered injury or illness. These medical benefits are provided without any deductibles, copayments, or costs paid by the injured worker. Prescription drugs and medical procedures are fully covered, as are costs associated with travelling to and from medical appointments. A covered worker may select his or her own treating physician, provided the physician has not been debarred from the LHWCA program for violating program rules. Covered workers are entitled to vocational rehabilitation services provided under the LHWCA. Vocational rehabilitation services are designed to assist the covered worker in returning to employment. There is no cost to the covered worker for vocational rehabilitation and workers actively participating in a rehabilitation program are entitled to an additional benefit of $25 per week. All costs associated with vocational rehabilitation under the LHWCA are paid out of the Special Fund. Vocational rehabilitation services may be provided by public or private rehabilitation agencies. The LHWCA provides disability benefits to covered workers to partially cover wages lost due to the inability to work because of a covered injury or illness. The amount of disability benefits is based on the worker's pre-disability wage, subject to maximum and minimum benefits based on the National Average Weekly Wage (NAWW) as determined by the DOL. The NAWW is updated October 1 of each year and is based on average wages across the United States for the three calendar quarters ending on June 30 of that year. The minimum weekly benefit that can be paid to a covered employee is equal to 50% of the NAWW and the maximum weekly benefit that can be paid is equal to 200% of the NAWW. Disability benefits under the LHWCA, like all workers' compensation benefits, are not subject to federal income taxes. Unlike most state workers' compensation benefits, however, LHWCA benefits are adjusted based on wage inflation rather than price inflation. Benefits are adjusted annually each October 1 to reflect the change in the NAWW from the previous year, up to a maximum increase of 5%. The LHWCA provides benefits in cases of total disability. Under the LHWCA, a worker is considered totally disabled if he or she is unable to earn his or her pre-injury wage because of a covered injury or illness. In addition, a worker is also considered totally disabled if he or she loses both hands, arms, feet, legs, or eyes, or any two of these body systems, such as the loss of one arm and one leg. Total disability benefits under the LHWCA are equal to two-thirds of the covered worker's wage at the time of the injury or illness. Total disability benefits continue until the worker is no longer totally disabled or dies. If a covered worker is able to partially return to work or return to work at a wage level less than his or her wage at the time of injury, then he or she is considered partially disabled. In cases of temporary partial disability, the LHWCA benefit is equal to two-thirds of the difference between the workers' pre-injury wage and his or her current earning capacity or actual earnings. Section 8(c) of the LHWCA provides a schedule of benefits to be paid in cases of permanent partial disability (PPD), such as the loss of a limb. The benefit schedule provides the number of weeks of compensation, at two-thirds of the pre-injury wage, for each type of PPD. For example, the LHWCA schedule provides that a worker who loses an arm is entitled to 312 weeks of compensation. Benefits in cases not listed on the schedule are paid at two-thirds of the difference between the pre-injury wage and current earning capacity for the duration of the disability. Schedule benefits for PPD are paid regardless of the current work status or earnings capacity of the employee. Thus, an employee with a PPD can fully return to work and earn his or her wage in addition to the PPD compensation. A copy of the LHWCA PPD schedule can be found in the Appendix to this report. If a worker has an illness that was caused by his or her covered employment but did not manifest itself until after his or her retirement, then he or she is entitled to disability benefits equal to two-thirds of the NAWW multiplied by the percentage of his or her impairment. The percentage of impairment is determined using the current edition of the American Medical Association's Guides to the Evaluation of Permanent Impairment (AMA Guides ), or another professionally recognized source if the condition is not listed in the AMA Guides. The LHWCA provides cash benefits to the surviving spouses and minor children of workers killed on the job. Benefits for a surviving spouse end when the spouse remarries or dies and benefits for surviving children continue until the children reach the age of 18, age 23 if a full-time student, or for the life a child with a disability. A surviving spouse with no eligible children is entitled to one-half of the deceased worker's wage at the time of death under the LHWCA. A surviving spouse with one or more eligible children is entitled to two-thirds of the deceased worker's wage at the time of death. Once all children become ineligible for benefits because of their ages, the surviving spouse's benefit is reduced to the level of a spouse without any eligible children. If an eligible spouse becomes ineligible for benefits because of death or remarriage, or if there is no surviving spouse, benefits are still paid to any surviving children. Under the LHWCA, a single surviving eligible child is entitled to one-half of the deceased worker's wage at the time of death, and two or more surviving children are eligible for a combined two-thirds of the wage at the time of death. The survivors of a covered worker killed on the job are entitled under the LHWCA to a cash payment to provide for the burial and funeral of the deceased. The burial and funeral allowance is capped by Section 9(a) of the LHWCA at $3,000, and this cap not adjusted to reflect changes in prices or wages. If a covered worker who is receiving scheduled PPD benefits dies of a cause unrelated to his or her illness or injury, then the balance of any remaining PPD benefits is paid to his or her survivors. If a covered worker who dies on the job leaves no survivors, his or her employer or the employer's insurance carrier is required to pay $5,000 into the Special Fund. Although the responsibility for the payment of benefits under the LHWCA rests with the employer or the employer's insurance company, decisions on benefit eligibility and the amount of benefits are made by the DOL. Upon the report of an injury, illness, or death, the LHWCA claims process begins. If the employer or insurance carrier does not controvert the claim, then arrangements are made by the DOL for the claim to be paid. If, however, the employer controverts any part of the claim, then the DOL sets up an informal conference, either in person or by phone, between the employer or insurance carrier and worker with the goal of resolving any disputes over the claim. If this informal conference fails to resolve all outstanding disputes, then a formal hearing before a DOL administrative law judge (ALJ) is scheduled. If the employer or insurance carrier or the worker is dissatisfied with the decision of the ALJ, then this decision may be appealed to the Benefits Review Board (BRB). The BRB is made up of five members appointed by the Secretary of Labor. Either party dissatisfied with the decision of the BRB may file a petition with the U.S. Court of Appeals for the circuit in which the injury occurred praying that the BRB's decision be set aside or modified. If an employer or insurance carrier fails to pay compensation in accordance with a final decision on a claim, the covered worker or the DOL may request that the U.S. District Court order that payment be made.", "summary": "The Longshore and Harbor Workers' Compensation Act (LHWCA) is a federal workers' compensation program that covers certain private-sector maritime workers. Firms that employ these workers are required to purchase workers' compensation or self-insure and are responsible for providing medical and disability benefits to covered workers who are injured or become ill on the job and survivors benefits to the families of covered workers who die on the job. The LHWCA is administered by the Department of Labor (DOL), and all benefit costs are paid by employers and their insurance carriers. In 2016, more than $1.4 billion in LHWCA benefits were paid to beneficiaries. Congress has extended the LHWCA provisions to cover workers outside of the maritime industry, such as overseas government contractors and civilian employees of military post exchanges. As part of the American Recovery and Reinvestment Act of 2009 (ARRA), persons who repair recreational vessels of any size were added to the LHWCA exemption list. In 2011, the DOL implemented this provision; since then, those regulations have proven controversial and numerous bills have been introduced to modify the regulatory definition to increase the number of workers exempted from the LHWCA. The LHWCA pays for all medical care associated with a covered injury or illness. Disability benefits are based on a worker's pre-injury wage, and, unlike comparable state workers' compensation benefits, are adjusted annually to reflect national wage growth.", "document_type": "crs"}
{"report": "In recent years, Central American migrant families have been arriving at the U.S.-Mexico border in relatively large numbers, many seeking asylum. While some request asylum at U.S. ports of entry, others do so after attempting to enter the United States illegally between U.S. ports of entry. On May 7, 2018, then-Attorney General Jeff Sessions announced that the Department of Justice (DOJ) implemented a \"zero tolerance\" policy toward illegal border crossing, both to discourage illegal migration into the United States and to reduce the burden of processing asylum claims that Administration officials contend are often fraudulent. Under the zero tolerance policy, DOJ prosecuted 100% of adult aliens apprehended crossing the border illegally, making no exceptions for whether they were asylum seekers or accompanied by minor children. Illegal border crossing is a misdemeanor for a first time offender and a felony for anyone who has previously been \"denied admission, excluded, deported, or removed, or has departed the United States while an order of exclusion, deportation or removal is outstanding and thereafter enters, attempts to enter or is found in the U.S.\" Both such criminal offenses can be prosecuted by DOJ in federal criminal courts. DOJ's \"100% prosecution\" policy represented a change in the level of enforcement of an existing statute rather than a change in statute or regulation. The recent Bush and Obama Administrations prosecuted illegal border crossings relatively infrequently, in part to avoid having DOJ resources committed to prosecuting sizeable numbers of misdemeanors. At different times during those Administrations, illegal entrants would be criminally prosecuted in an attempt to reduce illegal migration, but exceptions were generally made for families and asylum seekers. Illegal border crossers who are prosecuted by DOJ are detained in federal criminal facilities. Because children are not permitted in criminal detention facilities with adults, detaining adults who crossed illegally requires that any minor children under age 18 accompanying them be treated as unaccompanied alien children (UAC) and transferred to the care and custody of the Department of Health and Human Services' (HHS's) Office of Refugee Resettlement (ORR). The widely publicized family separations were therefore a consequence of the Administration's policy of 100% prosecution of illegal border crossing, and not the result of a direct policy or law mandating family separation. Since the policy was implemented, \"under 3,000\" children may have been separated from their parents, including at least 100 under age 5. The family separations have garnered extensive public attention. The Trump Administration and immigration enforcement advocates maintain that the zero tolerance policy was necessary to dis-incentivize migrants from coming to the United States and clogging immigration courts with fraudulent requests for asylum. Immigrant advocates contend that migrant families are fleeing legitimate threats of violence and that family separations resulting from the zero tolerance policy were cruel and violated fundamental human rights. This report briefly reviews the statutory authority for prosecuting persons who enter the United States illegally between U.S. ports of entry, and the policies and procedures for processing apprehended illegal border entrants and any accompanying children. It explains enforcement policies under past Administrations and then discusses the Trump Administration's zero tolerance policy on illegal border crossers and the attendant family separations. The report concludes by presenting varied policy perspectives on the zero tolerance policy and briefly reviews recent related congressional activity. An Appendix examines recent trends in the apprehension of family units at the U.S. Southwest border. This report describes policies and circumstances that continue to change. Information presented in it is current as of the publication date but may become outdated quickly. Aliens who wish to enter the United States may request admission legally at a U.S. port of entry or may attempt to enter illegally by crossing the border surreptitiously between U.S. ports of entry. Aliens who wish to request asylum may do so at a U.S. port of entry before an officer with the Department of Homeland Security (DHS) Customs and Border Protection (CBP) Office of Field Operations or upon apprehension between U.S. ports of entry before an agent with CBP's U.S. Border Patrol. DHS has broad statutory authority both to detain aliens not legally admitted, including asylum seekers, and to remove aliens who are found to be either inadmissible at ports of entry or removable once in the United States. Aliens requesting asylum at the border are entitled to an interview assessing the credibility of their asylum claims. Aliens who enter the United States illegally between ports of entry face two types of penalties. They face civil penalties for illegal presence in the United States, and they face criminal penalties for having entered the country illegally. Both types of penalties are explained below. The Immigration and Nationality Act (INA) establishes civil penalties for persons who are in the United States unlawfully (i.e., without legal status). These penalties apply to foreign nationals who entered the United States illegally as well as those who entered legally but subsequently violated the terms of their admission, typically by \"overstaying\" their visa duration. Foreign nationals who are apprehended for such civil immigration violations are generally subject to removal (deportation) and are placed in formal or streamlined removal proceedings (described below in \" Removal \") The INA also establishes criminal penalties for (1) persons who enter or attempt to enter the United States illegally between ports of entry, (2) persons who elude examination or inspection by immigration officers, or (3) persons who attempt to enter or obtain entry to the United States through fraud or willful misrepresentation. In addition, the INA provides criminal penalties for persons who unlawfully reenter the United States after they were previously removed from the country. Foreign nationals apprehended for criminal immigration violations are subject to prosecution by DOJ in federal criminal courts. This report only addresses criminal penalties for illegal entry and reentry between ports of entry. Foreign nationals who attempt to enter the United States without authorization often do so between U.S. ports of entry on the U.S. border. If apprehended, they are processed by CBP. They are typically housed briefly in CBP detention facilities before being transferred to the custody of another federal agency or returned to their home country through streamlined removal procedures (discussed below). All apprehended aliens, including children, are placed into removal proceedings that occur procedurally after any criminal prosecution for illegal entry. Removal proceedings generally involve formal hearings in an immigration court before an immigration judge, or expedited removal without such hearings (see \" Removal \" below). In general, CBP refers apprehended aliens for criminal prosecution if they meet criminal enforcement priorities (e.g., child trafficking, prior felony convictions, multiple illegal entries). Such individuals are placed in the custody of the U.S. Marshals Service (DOJ's enforcement arm) and transported to DOJ criminal detention facilities for pretrial detention. After individuals have been tried—and if convicted, have served any applicable criminal sentence—they are transferred to DHS Immigration and Customs Enforcement (ICE) custody and placed in immigration detention. ICE, which represents the government in removal hearings, commences removal proceedings. If CBP does not refer apprehended aliens to DOJ for criminal prosecution, CBP may either return them to their home countries using streamlined removal processes or transfer them to ICE custody for immigration detention while they are in formal removal proceedings. Many aliens at the U.S.-Mexico border seek asylum in the United States. Asylum is not numerically limited and is granted on a case-by-case basis. Asylum can be requested by foreign nationals who have already entered the United States and are not in removal proceedings (\"affirmative\" asylum) or those who are in removal proceedings and claim asylum as a defense to being removed (\"defensive\" asylum). The process in each case is different. Arriving aliens who are inadmissible, either because they lack proper entry documents or because they attempt U.S. entry through misrepresentation or false claims to U.S. citizenship, are put into a streamlined removal process known as expedited removal (described below in \" Removal \"). Aliens in expedited removal who express a fear of persecution are detained by ICE and given a \"credible fear\" interview with an asylum officer from DHS's U.S. Citizenship and Immigration Services (USCIS). The purpose of the interview is to determine if the asylum claim has sufficient validity to merit an asylum hearing before an immigration judge. Those who receive a favorable credible fear determination are taken out of expedited removal, placed into formal removal proceedings, and given a hearing before an immigration judge, thereby placing the asylum seeker on the defensive path to asylum. Those who receive an unfavorable determination may request that an immigration judge review the case. Aliens in expedited removal who cannot demonstrate a credible fear are promptly deported. The INA provides DHS with broad authority to detain adult aliens who are in removal proceedings . However, child detention operates under different policies than that of adults. All children are detained according to broad guidelines established through a court settlement agreement (applicable to all alien children) and two statutes (applicable only to unaccompanied alien children). The 1997 Flores Settlement Agreement (FSA) established a nationwide policy for the detention, treatment, and release of all alien children, both accompanied and unaccompanied. The Homeland Security Act of 2002 charged ORR with providing temporary care and ensuring custodial placement of UAC with suitable and vetted sponsors. Finally, the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (TVPRA) directed DHS to ensure that all UAC be screened by DHS for possible human trafficking. The TVPRA mandated that UAC from countries other than Mexico or Canada—along with all UAC apprehended in the U.S. interior—be transferred to the care and custody of ORR, and then be \"promptly placed in the least restrictive setting that is in the best interest of the child.\" In the course of being referred to ORR, UAC are also put into formal removal proceedings, ensuring they can request asylum or other types of immigration relief before an immigration judge. As a result of a 2015 judicial interpretation of the Flores Settlement Agreement, children accompanying apprehended adults cannot be held in family immigration detention with their parents for more than 20 days, on average. If the parents cannot be released with them, such children are typically treated as UAC and referred to ORR. Under the formal removal process, an immigration judge from DOJ's Executive Office for Immigration Review (EOIR) determines whether an alien is removable. The immigration judge may grant certain forms of relief (e.g., asylum, cancellation of removal), and removal decisions are subject to administrative and judicial review. Under streamlined removal procedures, which include expedited removal and reinstatement of removal (i.e., when DHS reinstates a removal order for a previously removed alien), opportunities for relief and review are generally limited. Under expedited removal (INA §235(b)), an alien who lacks proper documentation or has committed fraud or willful misrepresentation to gain admission into the United States may be removed without any further hearings or review, unless he or she indicates a fear of persecution in their home country or an intention to apply for asylum. If apprehended foreign nationals are found to be removable, ICE and CBP share the responsibility for repatriating them.  CBP handles removals at the border for unauthorized aliens from the contiguous countries of Mexico and Canada, and ICE handles all removals from the U.S. interior and removals for all unauthorized aliens from noncontiguous countries. Prior to the Trump Administration, aliens apprehended between ports of entry who were not considered enforcement priorities (e.g., a public safety threat, repeat illegal border crosser, convicted felon, or suspected child trafficker) were typically not criminally prosecuted for illegal entry but would be placed directly into civil removal proceedings for unauthorized U.S. presence. In addition, aliens apprehended at and between ports of entry who sought asylum and were found to have credible fear generally were not held in immigration detention if DHS did not assess them as public safety risks. Rather, they were administratively placed into removal proceedings, instructed by DHS to appear at their immigration hearings, and then released into the U.S. interior. This policy became more prevalent after 2015 when a federal judge ruled that children could not be kept in immigration detention for more than 20 days. DHS officials justified the \"catch and release\" approach in the past because of the lack of detention bed space and the considerable cost of detaining large numbers of unauthorized aliens and family units for the lengthy periods, often stretching to years, between apprehension by CBP and removal hearings before an EOIR judge. Immigration enforcement advocates criticized the catch and release policy because of the failure of many apprehended individuals to appear subsequently for their immigration hearings. According to some observers, prior Administrations made more use of alternatives to detention that permitted DHS to monitor families who were released into the U.S. interior. Such practices are needed to monitor the roughly 2 million aliens in removal proceedings given that ICE's current budget funds less than 50,000 beds, which are prioritized for aliens who pose public safety or absconder risks. Data are not available on the rate and/or absolute number of family separations resulting from illegal border crossing prosecutions under prior Administrations, limiting the degree to which comparisons can be made with the Trump Administration's zero tolerance policy. DHS states that the agency referred an average of 21% of all illegal border crossing \"amenable adults\" for prosecution from FY2010 through FY2016. DHS maintains that it has an established policy of separating children from adults when it cannot determine the family relationship or otherwise verify identity, determines that the child is being smuggled or trafficked or is otherwise at risk with the parent or legal guardian, or determines that the parent or legal guardian may have engaged in criminal conduct and refers them for criminal prosecution. On April 6, 2018, then-Attorney General Jeff Sessions announced a \"zero tolerance\" policy under which all illegal border crossers apprehended between U.S. ports of entry would be criminally prosecuted for illegal entry or illegal reentry. This policy made no exceptions for asylum seekers and/or family units. To facilitate this policy, the Attorney General announced that he would send 35 additional prosecutors to U.S. Attorney's Offices along the Southwest border and 18 additional immigration judges to adjudicate cases in immigration courts near the Southwest border. Consequently, if a family unit was apprehended crossing illegally between ports of entry, the zero tolerance policy mandated that CBP refer all illegal adult entrants to DOJ for criminal prosecution. Accompanying children, who are not permitted to be housed in adult criminal detention settings with their parents, were to be processed as unaccompanied alien children in accordance with the TVPRA. They were transferred to the custody of ORR, which houses them in agency-supervised, state-licensed shelters. If feasible given the circumstances, ORR attempted to place them with relatives or legal guardian sponsors or place them in temporary foster care. ORR has over 100 shelters in 17 states, and during the implementation of the zero tolerance policy they were reportedly at close to full capacity. Consequently, at one point, the agency was evaluating options for housing children on Department of Defense (DOD) installations to handle the surge of separated children resulting from increased prosecution of parents crossing between ports of entry. As noted earlier, after adults have been tried in federal courts for illegal entry—and if convicted, have served their criminal sentences—they are transferred to ICE custody and placed in immigration detention. Typically, parents are then reunited in ICE family detention facilities with their children who have either remained in ORR custody or have been placed with a sponsor. Requests for asylum can also be pursued at this point. In FY2017, CBP apprehended 75,622 alien family units and separated 1,065 (1.4%) of them. Of those separations, 46 were due to fraud and 1,019 were due to medical and/or security concerns. In the first five months of FY2018, prior to enactment of the zero tolerance policy, CBP apprehended 31,102 alien family units and separated 703 (2.2%), of which 191 resulted from fraud and 512 from medical and/or security concerns. Prior to Attorney General Sessions's announcement of the zero tolerance policy, the American Civil Liberties Union (ACLU) filed a lawsuit against ICE (referred to as \"Ms. L. v. ICE\") on behalf of two families separated at the Southwest border: a woman from the Democratic Republic of the Congo who was separated from her 6-year-old daughter at a port of entry for five months; and a woman from Brazil who had crossed into the United States illegally between ports of entry and was separated from her 14-year-old son for eight months. The lawsuit, filed in February, was subsequently expanded in March 2018 to a class-action lawsuit filed by the ACLU against ICE on behalf of all parents who were separated from their children by DHS. In the early months of the policy, the Administration repeatedly revised the number of families that had been separated. According to CBP testimony in May 2018, 658 children were separated from 638 adults who were referred for prosecution between May 7 and May 21. DHS subsequently reported that 1,995 children had been separated from their parents between April 19 and May 31. DHS updated these figures in June 2018, reporting that 2,342 children were separated from their parents between May 5 and June 9. DHS then reported that CBP had since reunited with their parents 538 children who were never sent to ORR shelters. HHS Secretary Alex Azar then reported that \"under 3,000\" minor children (under age 18) had been separated from their families in total, including roughly 100 under age 5. As of July 13, 2018, HHS reported that 2,551 children ages 5 to 17 remained separated. On June 20, 2018, following considerable and largely negative public attention to family separations stemming from the zero tolerance policy, President Trump issued an executive order (EO) mandating that DHS maintain custody of alien families \"during the pendency of any criminal improper entry or immigration proceedings involving their member,\" to the extent permitted by law and appropriations. The EO instructs DOD to provide and/or construct additional shelter facilities, upon request by ORR, and it instructs other executive branch agencies to assist with housing as appropriate to implement the EO. The EO mandates that the Attorney General prioritize the adjudication of detained family cases, and it requires the Attorney General to ask the U.S. District Court for the Central District of California, which oversees the Flores Settlement Agreement, to modify the agreement to permit detained families to remain together. On June 25, 2018, CBP announced that, because of ICE's lack of family detention bed space, it had temporarily halted the policy of referring adults who cross the border illegally with children to DOJ for criminal prosecution. According to a White House announcement, the zero tolerance policy may be reinstituted once additional family detention bed space becomes available. Also on June 25, 2018, DOD announced plans to permit four of its military bases to be used by other federal agencies to shelter up to 20,000 UAC and family units. DOD subsequently announced that 12,000 persons would be housed on its facilities, before another report appeared suggesting the number was 32,000 UAC and family units. Since these announcements, no efforts have been made to house apprehended UAC or family units on military installations. On June 26, 2018, in response to the ACLU class action lawsuit, Judge Dana Sabraw of the U.S. District Court for the Southern District of California issued an injunction against the Administration's practice of separating families and ordered that all separated families be reunited within 30 days. The judge ruled that children under age 5 must be reunited with their parents within 14 days, all children must have phone contact with their parents within 10 days, children could be separated at the border only if accompanying adults presented an immediate danger to them, and parents were not to be removed unless they had been reunited with their separated children. In response to the June 26 injunction, the Trump Administration reportedly instructed DHS to provide all parents with final orders of removal and whose children were separated from them with two options. The first was to return to their countries of origin with their children. This option fulfilled the mandate from the June 26 court order to reunite families but also forced parents and children to abandon any claims for asylum. The second option was for parents to return alone to their country of origin. This option would leave the children in the United States to apply for asylum on their own. Parental decisions were to be recorded on a new ICE form. On July 9, 2018, Judge Dolly Gee of the U.S. District Court for the Central District of California, which oversees the Flores Settlement Agreement, ruled against a DOJ request to modify the agreement to permit children to remain with their parents in family detention. Judge Gee held that no basis existed for amending the court's original decision requiring the federal government to release alien minors in immigration detention after 20 days, regardless of any unlawful entry prosecution of the parents. On July 10, ICE officials reportedly indicated that parents reunited with their children would be enrolled in an alternative detention program, such as the use of ankle bracelets that permit electronic monitoring, and then released into the U.S. interior, essentially reverting to the prior policy that has been labeled by some as \"catch and release.\" DOJ continued to maintain that its zero tolerance policy was in effect. On July 11, 2018, in response to the requirements of the ACLU lawsuit, ORR certified a list of 2,654 children that the agency stated were in its custody at the time of the June 26 injunction that it believed had been separated from their parents and whose parents met the lawsuit's class definition. According to a subsequent HHS Office of Inspector General (OIG) report, one or more data sources showed that an additional 946 children may have been separated from family members at the time of apprehension, but their family members did not meet the criteria needed for inclusion in the lawsuit. On July 16, 2018, in response to concerns expressed by the ACLU about potential abrupt deportations following family reunification, Judge Sabraw temporarily halted, for one week, the deportations of parents who had been reunited with their children. The judge issued the stay of deportations to provide parents slated for removal with a week's time to better understand their legal rights regarding asylum or other forms of immigration relief for themselves and their children. On July 16, 2018, Jonathan White, Deputy Director for Children's Programs at the Office of Refugee Resettlement, testified before Judge Sabraw that ORR had identified 2,551 separated children in its custody ages 5 to 17 and had matched 2,480 to their parents, while 71 children's parents remained unidentified. ORR was undertaking intensive background checks to ensure that separated children were reunited with their actual parents and did not face personal security risks such as child abuse. According to White, 1,609 parents of separated children remained in ICE custody. White noted that ICE was also conducting its own security checks and at that point had cleared 918 parents, failed 51 parents, and had 348 parents with pending clearances. As of July 16, 2018, ICE had approved about 300 children for release to be reunited with their parents. On July 18, 2018, HHS submitted a \"Tri-Department Plan\" in coordination with DHS and DOJ explaining actions the agencies were taking to reunify Ms. L v. ICE class members with their children. These steps include conducting and reviewing background checks of parents, confirming parentage, assessing child safety, interviewing parents, and reuniting families. As of July 19, 2018, the Administration had reportedly reunified 364 of the 2,551 children ages 5 to 17. Apart from the parents of those children, 1,607 parents were eligible to be reunited with their children, 719 of whom had final orders of deportation. Another 908 parents were not expected to be eligible for reunification because they possessed criminal backgrounds or required \"further evaluation.\" On September 6, 2018, DHS and HHS proposed new regulations that would effectively terminate the Flores Settlement Agreement and replace it with formal regulations governing the \"apprehension, processing, care, custody, and release\" of minor children. The primary provision in these proposed regulations would be the authority to hold migrant children and their parents until their cases have been adjudicated. Whether federal courts will impose injunctions on or rule against the regulations based on their inconsistency with the Flores Settlement Agreement is not yet known. In October 2018, it was widely reported that the Administration was considering alternative immigration enforcement policies involving family separation to reduce the persistent and relatively high level of unauthorized migrants seeking asylum at the Southwest border. One of these approaches, a \"binary choice\" policy, would give detained parents the option of keeping their children with them in immigration detention during the pendency of their immigration cases or being separated from their children, who would be referred to ORR shelters, including possible foster care. This option gained traction as a large and expanding migrant group originating from Honduras, referred to as the migrant \"caravan,\" garnered extensive media attention as it made its way through Central America and Mexico. As of this writing, DHS has not taken any action with regard to this proposed policy. Apart from the number of separated children who have been included in the Ms. L. v. ICE lawsuit, other figures emerged on the total number of family separations that have occurred more generally. For example, on October 12, 2018, Amnesty International (AI) published a report citing statistics provided to the organization by CBP indicating that 6,022 \"family units\" had been separated between April 19, 2018, and August 15, 2018. These cases, combined with the 1,768 family separations reported by DHS between October 1, 2016, and February 28, 2018 (the 1,065 in FY2017 plus the 703 in the first five months of FY2018 noted separately above) indicate that CBP has reported a total of 7,790 family separations to either CRS or AI. This total excludes an unknown number of family separations occurring between March 1 and April 18, 2018. According to AI, it also may exclude an unknown number of families that were separated after requesting asylum at U.S. ports of entry. In January 2019, HHS's OIG issued a report on ORR's challenges identifying all separated children, ultimately concluding that \"the total number of children separated from a parent or guardian by immigration authorities is unknown.\" The report cited limitations with both its information technology system for tracking such children as well as the complexity of determining which children should be classified as separated. According to this report, ORR's review of new information acquired between July and December 2018 indicated that an additional 162 children had met the criteria to be included in the Ms. L. v. ICE lawsuit, and that 79 previously included children had not actually been separated from a parent, changing the total from 2,654 to 2,737 children in the lawsuit. On February 7, 2019, a representative from HHS's OIG testified before Congress that DHS was continuing to separate children from their parents, although at a lower rate than during the zero tolerance policy of May-June 2018. The testimony noted that while DHS routinely separates families if parents have a criminal history, DHS had not provided HHS with sufficient information to facilitate appropriate placement within the ORR shelter system. The testimony also noted that \"thousands more\" children were likely separated prior to June 26, 2018, but, lacking any formal system for tracking such separations, the witness could not provide more precise figures. On February 21, 2019, the Joint Status Report filed on the status of a revised total of 2,816 children (2,709 ages 5 and above and 107 under age 5) included in the Ms. L. v. ICE lawsuit indicated that 2,735 had been reunited with their parents. The statuses of the remaining children are described in the report largely as follows: being determined upon further review to have not been separated from their parents; not reunited because of potential safety issues with the parent; and not being reunited because deported parents confirmed they wanted to allow the child to remain in the United States. In addition, the report also indicated that up to 249 additional children not part of the Ms. L. v. ICE lawsuit had been separated between June 27, 2018 (the day after the lawsuit was filed), and January 31, 2019. According to ICE, the basis for separation was largely \"parent criminality, prosecution, gang affiliation, or other law enforcement purpose.\" On February 21, 2019, Texas Civil Rights Project released a report describing the findings from interviews with 272 adults who had experienced family separation subsequent to the President's executive order. The interviewees, a subset of almost 10,000 screened immigrants who were prosecuted for immigration violations at the Southwest border, had indicated to screeners that they had been separated from their children. The data, the first on family separation collected on a large scale by an organization outside the federal government, indicated that since the zero tolerance policy was terminated, a considerable number of family separations had occurred between minor children and relatives other than parents and legal guardians. As noted above, the INA defines an unaccompanied child as an unauthorized minor under age 18 who is not in the care and custody of a parent or legal guardian. According to DHS, minor children apprehended at the border who are accompanied by older siblings, cousins, aunts, uncles, grandparents, and other relatives who are not parents or legal guardians must be treated as unaccompanied alien children, separated from their accompanying relatives, and turned over to the custody of ORR. DHS reportedly does not count such related pairs of individuals as family units in its statistics, raising concerns among advocates that current CBP statistics may not fully capture the extent of family separation among apprehended migrants. Perspectives on the zero tolerance policy generally divide into two groups. Those who support greater immigration enforcement point to recent surges in family unit migration and a substantial backlog of asylum cases that are straining DHS and DOJ resources, potentially compromising the agencies' abilities to meet their outlined missions. Those who advocate on behalf of immigrants decry the Administration's treatment of migrants as unnecessarily harsh and counterproductive. DHS and DOJ contend that the policy enforces existing law and is needed to reduce illegal immigration. DHS notes that foreign nationals attempting to enter the United States between ports of entry or \"without inspection\" are committing a crime punishable under the INA as a misdemeanor on the first occasion and a felony for every attempt thereafter. DHS maintains that it has a long-standing policy of separating children from adults when children are at risk because of threats from human trafficking or because the familial relationship is suspect. DHS also maintains that it does not have a formal policy of separating parents from children for deterrence purposes, and it follows a standard policy of keeping families together \"as long as operationally possible.\" According to DHS, the agency has \"a legal obligation to protect the best interests of the child whether that is from human smugglings, drug traffickers, or nefarious actors who knowingly break [U.S.] immigration laws and put minor children at risk.\" Accordingly, DHS considers it appropriate to treat children of apprehended parents as UAC. DHS posits that while family separation is an unfortunate outcome of stricter enforcement of immigration laws and criminal prosecution of illegal entry and reentry, it is no different than the family separation that occurs in the U.S. criminal justice system when parents of minor children commit a crime and are taken into criminal custody. Attorney General Sessions has stated that parents who do not want to be separated from their children should simply not attempt to cross the U.S. border illegally. DHS Secretary Nielsen justified the zero tolerance policy with statistics showing a 223% increase in illegal border crossings and inadmissible cases along the Southwest border between April 2017 and April 2018. Similar increases in monthly apprehensions between years were cited for family units and unaccompanied alien children. Secretary Nielsen also stated that while the apprehension figures \"are at times higher or lower than in years past, it makes little difference,\" characterizing them as unacceptable either way. DHS officials cite results of policies imposed at the Border Patrol's El Paso sector (covering West Texas and New Mexico) for part of 2017, where a similar family separation policy reduced the number of illegal family border crossings by 64%. DHS notes that its policy reflects President Trump's January 2017 Executive Order 13767 on border security directing executive branch departments and agencies to \"deploy all lawful means to secure the Nation's Southwest border, to prevent further illegal immigration into the United States, and to repatriate illegal aliens swiftly, consistently, and humanely.\" DHS further contends that parents who attempt to cross illegally into the United States with their children not only put their children at grave risk but also enrich transnational criminal organizations to whom they pay smuggling fees. DHS argues that some parents, aware of the limited amount of family detention space, intentionally use their children as shields from detention and anticipate that they will be viewed, as they had been in prior years, as low security risks. DHS points to unpublished intelligence reports describing cases where unrelated adults have used or trafficked children in order to avoid immigration detention. DHS and other observers also note that asylum requests have increased considerably, a trend that raises concerns about possible fraudulent asylum claims and the misuse of asylum claims to enter and remain in the United States. DHS notes that ICE and ORR both play a role in family reunification and characterizes the process as \"well-coordinated.\" DHS maintains that it has procedures in place to connect separated family members and ensure that parents know the location of minors and can regularly communicate with them. Mechanisms to facilitate such communication include posted information notices in ICE detention facilities, an HHS Adult Hotline and email inquiry address, and an ICE call center and email inquiry address. DHS and ORR are using DNA testing to confirm familial ties between parents and children. Immigrant advocacy organizations argue that migrant families are fleeing a well-documented epidemic of gang violence from the Northern Triangle countries of El Salvador, Guatemala, and Honduras. They have criticized the practice of family separation because it seemingly punishes people for fleeing dangerous circumstances and seeking asylum in the United States. They posit that requesting asylum is not an illegal act, Congress created laws that require DHS to process and evaluate claims for humanitarian protection, DHS must honor congressional intent by humanely processing and evaluating such claims, and many who request asylum have valid claims and compelling circumstances that merit consideration. Immigrant advocates have also criticized the Administration for creating what they consider to be a debacle of its own making, characterized by frequently changing policies and justifications, what some describe as an uncoordinated implementation process, and the absence of an effective plan to reunify separated families. In some cases, records linking parents to children reportedly may have disappeared or been destroyed, hampering efforts to establish relationships between family members. Media reports have described obstacles to reuniting families after separation, including a lack of communication between federal agencies, the absence of information about accompanying children collected by CBP at the time of apprehension, the inability of ICE detainees to receive phone calls without special arrangements, and a cumbersome vetting process to ensure children's safe placement with parents. Similar observations have since been made by government agencies. In addition, while DOJ typically detains and prosecutes parents for illegal entry at federal detention centers and courthouses near the U.S.-Mexico border, ORR houses their children at shelters geographically dispersed in 17 states, in some cases thousands of miles away from the parents. Child welfare professionals assert that family separation has the potential to cause lasting psychological harm for adults and especially for children. Some point to the findings of a DHS advisory panel as well as those of other organizations that discourage family detention as neither appropriate nor necessary for families and as not being in children's best interests. Some immigration observers question the Administration's ability to marshal resources required to prosecute all illegal border crossers given that Congress has not appropriated additional funding to support the zero tolerance policy. One news report, for example, noted that 3,769 foreign nationals were convicted of illegal entry in criminal courts during March 2018, a month in which 37,383 foreign nationals were apprehended for illegal entry. Given the relative size of the task they face, observers question how DOJ and DHS can channel fiscal resources to meet this objective without compromising their other missions. They contend that the policy is counterproductive because it prevents CBP from using risk-based strategies to pursue the most egregious crimes, thereby making the Southwest border region less safe and more prone to criminal activity. Some have suggested that the zero tolerance policy is diverting resources from, and thereby hindering, other DHS operations. Some in Congress have criticized the family separation policy because of its cost in light of alternative options, such as community-based detention programs. They cite, for example, the Family Case Management Program (FCMP), which monitored families seeking asylum and demonstrated reportedly high compliance rate with immigration requirements such as court hearings and immigration appointments. The FCMP, which began in January 2016, was terminated by the Trump Administration in April 2017. According to DHS, the FCMP average daily cost of $36 reportedly exceeded that of \"intensive supervision\" programs ($5-$7 daily), although both programs are considerably lower than the average daily cost of family detention ($319). More broadly, immigration advocates contend that the Administration is engaged in a concerted effort to restrict access to asylum and reduce the number of asylum claims. They caution that prosecuting persons who cross into the United States in order to present themselves before a CBP officer and request asylum raises concerns about whether the United States is abiding by human rights and refugee-related international protocols. They note a considerable current backlog of pending defensive asylum cases, which numbered almost 325,000 (45%) of the roughly 720,000 total pending immigration cases in EOIR's docket as of June 11, 2018. They also cite Attorney General Sessions's recent decision to substantially limit the extent to which immigration judges can consider gang or domestic violence as sufficient grounds for asylum. Such efforts could have the unintended effect of sustaining illegal immigration flows of desperate foreign nationals fleeing violent circumstances, particularly from Northern Triangle countries. Given that this topic is developing rapidly, bills discussed below do not reflect all legislation or amendments introduced to date, or more recent developments. Instead, the bills presented here are intended to illustrate the range of legislative proposals to address family separation in the current context. Bills introduced during the 116 th Congress that are related to family separation are intended to prevent or limit the practice. These include H.R. 883 / S. 271 , the Families Belong Together Act, which would grant humanitarian parole and/or LPR status to separated parents and children upon request. Likewise, H.R. 541 / S. 292 , the Keep Families Together Act (similar to H.R. 6135 / S. 3036 introduced in the 115 th Congress) contains provisions to keep families together during all stages of processing following apprehension at a U.S. border, plus protections against the prosecution for illegal border crossing of asylum seekers and grantees. H.R. 1012 , the REUNITE Act, includes provisions that would facilitate the expeditious reunification of separated families. H.J.Res. 31 , the Consolidated Appropriations Act, 2019, included additional funding to increase the number of participants in Alternatives to Detention (ATD) programs; additional ICE staffing dedicated to the management of ATD immigration cases, particularly those of asylum applicants; and the Family Case Management Program (FCMP), an alternative to family detention. The legislation directs ICE to prioritize both the use of ATD programs for families and the adjudication timeline for cases of individuals enrolled in ATD, particularly those of families and asylum seekers. A number of bills were introduced in the 115 th Congress in response to family separation resulting from the Administration's zero tolerance policy regarding the prosecution of illegal border crossing. With the exception of H.R. 6136 , which failed to pass in the House by a vote of 121-301, none of the bills introduced saw congressional action. Bills that emphasized immigration enforcement included H.R. 6182 , the Codifying President Trump's Affording Congress an Opportunity to Address Family Separation Executive Order Act, which would have provided statutory authority for President Trump's executive order within the INA; H.R. 6173 , which would have clarified standards for family detention; and Section 3102 of H.R. 6136 , the Border Security and Immigration Reform Act of 2018, which would have permitted children accompanied by parents to remain in DHS custody during the pendency of a parent's criminal prosecution, rather than being referred to ORR and treated as UAC. On July 11, 2018, similar amendment language was included in an appropriations bill to fund the Departments of Labor, Health and Human Services, and Education, that was approved by the House Appropriations Committee. H.R. 6204 , the Families First Act of 2018, included similar provisions, asylum reforms, and provided increased funding for family unit facilities, personnel, and judges, among other provisions. Bills that intended to prevent or limit family separation included H.R. 6135 / S. 3036 , the Keep Families Together Act, and H.R. 6236 , the Family Unity Rights and Protection Act, both of which contained provisions to keep families together during all stages of processing following apprehension at a U.S. border; H.R. 6232 , the Preventing Family Separation for Immigrants with Disabilities Act, which would have prohibited family separation for individuals with developmental disabilities; and H.R. 6172 , the Reunite Children with Their Parents Act, which would have required DHS and DOJ to reunite minor children already separated from their parents. Other bills, such as H.R. 6181 / H.R. 6190 / S. 3093 , the Keep Families Together and Enforce the Law Act, would have maintained family unity by making the Flores Settlement Agreement and related laws and regulations inapplicable to children who are accompanied by adults when they are apprehended at a U.S. border. H.R. 6195 / S. 3091 , the Protect Kids and Parents Act, would have limited the separation of families seeking asylum by mandating that they be housed together, and facilitated asylum processing (e.g., by adding additional immigration judges and DHS personnel and establishing asylum processing deadlines), among other provisions. Increasing numbers of apprehensions of Central American families and children are occurring within the context of relatively low historical levels of total alien apprehensions ( Figure A-1 ). Apprehensions at the Southwest border had peaked at 1.62 million in 1986, the year Congress enacted the Immigration Reform and Control Act (IRCA), which gave legal status to roughly 2.7 million unauthorized aliens residing in the United States. After dropping for multiple years, apprehensions increased again, climbing from 0.85 million in FY1989 to an all-time high of 1.64 million in FY2000. Apprehensions generally fell after that (with the exception of FY2004-FY2006), reaching a 40-year low of 327,577 in FY2011. They have fluctuated since that point, declining even further in some years. For the first four months of FY2019, apprehensions at the Southwest border reached 201,497. The national origins of apprehended aliens have shifted considerably during the past two decades ( Figure A-2 ). In FY2000, for example, almost all aliens apprehended at the Southwest border (98%) were Mexican nationals. As recently as FY2011, Mexican nationals made up 84% of all apprehensions. However, beginning in FY2012, foreign nationals from countries other than Mexico made up a growing percentage of total apprehensions and for most years after FY2013, they made up the majority. In the first four months of FY2019, \"other-than-Mexicans\" comprised most (78%) of total alien apprehensions on the Southwest border. Among demographic categories, persons in family units and unaccompanied children currently make up the largest share of total alien apprehensions at the Southwest border ( Figure A-3 ). According to CBP Commissioner Kevin McAleenan, single adult males made up over 90% of arriving aliens in the past. However, in the first four months of FY2019, family units and unaccompanied children comprised roughly 60% of all apprehended aliens. CBP data on family unit apprehensions at the Southwest border are publicly available starting in FY2012, when they numbered just over 11,000. Since then, family unit apprehensions have increased considerably, reaching a peak of 107,212 in FY2018. In the first four months of FY2019, CBP apprehended 99,901 family units, which, if extrapolated to the remainder of FY2019, yields a projected estimate of almost 300,000 family unit apprehensions, exceeding the annual levels of all prior fiscal years. CBP data on apprehensions of unaccompanied alien children at the Southwest border from FY2012 onward indicate a peak of 68,541 apprehensions in FY2014 and 20,123 apprehensions in the first four months of FY2019. Since FY2012, the composition of family unit apprehensions by origin country has shifted from mostly Mexican (80%) to mostly El Salvadoran, Guatemalan, and Honduran (96%) ( Figure A-4 ). Among these three Northern Triangle countries, the percentage of apprehensions from El Salvador, after increasing for several years, has recently declined, from 35% of all family unit apprehensions in FY2016 to 9% in the first four months of FY2019, while the percentage from Guatemala has increased steadily from 3% in FY2012 to 51% in FY2019. Among unaccompanied alien children apprehended at the Southwest border, a similar country-of-origin compositional shift has also occurred. The percentage of apprehended unaccompanied children originating from Mexico declined from 57% in FY2012 to 15% in the first four months of FY2019, while the percentage of apprehended unaccompanied children from the Northern Triangle countries increased from 42% to 82% over the same period.", "summary": "For the last several years, Central American migrant families have arrived at the U.S.-Mexico border in relatively large numbers, many seeking asylum. While some request asylum at U.S. ports of entry, others do so after entering the United States \"without inspection\" (i.e., illegally) between U.S. ports of entry. On May 7, 2018, the Department of Justice (DOJ) implemented a \"zero tolerance\" policy toward illegal border crossing both to discourage illegal migration into the United States and to reduce the burden of processing asylum claims that Administration officials contend are often fraudulent. Under the zero tolerance policy, DOJ prosecuted all adult aliens apprehended crossing the border illegally, with no exception for asylum seekers or those with minor children. DOJ's policy represented a change in the level of enforcement of an existing statute rather than a change in statute or regulation. Prior Administrations prosecuted illegal border crossings relatively infrequently. Criminally prosecuting adults for illegal border crossing requires detaining them in federal criminal facilities where children are not permitted. While DOJ and the Department of Homeland Security (DHS) have broad statutory authority to detain adult aliens, children must be detained according to guidelines established in the Flores Settlement Agreement (FSA), the Homeland Security Act of 2002, and the Trafficking Victims Protection Reauthorization Act of 2008. A 2015 judicial ruling held that children remain in family immigration detention for no more than 20 days. If parents cannot be released with them, children are treated as unaccompanied alien children and transferred to the Department of Health and Human Services' (HHS's) Office of Refugee Resettlement (ORR) for care and custody. The widely publicized family separations were a consequence of the Trump Administration's zero tolerance policy, not the result of an explicit family separation policy. Since the zero tolerance policy was implemented, up to 3,000 children may have been separated from their parents. In addition, thousands more were separated prior to the public announcement of the policy change. Following mostly critical public reaction, President Trump issued an executive order on June 20, 2018, mandating that DHS maintain custody of alien families during the pendency of any criminal trial or immigration proceedings. DHS Customs and Border Protection (CBP) subsequently stopped referring most illegal border crossers to DOJ for criminal prosecution. A federal judge then mandated that all separated children be promptly reunited with their families. Another rejected DOJ's request to modify the FSA to extend the 20-day child detention guideline. DHS has since reverted to some prior immigration enforcement policies, and family separations continue to occur based upon DHS enforcement protocols in place prior to the 2018 zero tolerance policy. Administration officials and immigration enforcement advocates argue that measures like the zero tolerance policy are necessary to discourage migrants from coming to the United States and submitting fraudulent asylum requests. They maintain that alien family separation resulting from the prosecution of illegal border crossers mirrors that which occurs regularly under the U.S. criminal justice system policy where adults with custody of minor children are charged with a crime and may be held in jail, effectively separating them from their children. Immigrant advocates contend that migrant families are fleeing legitimate threats from countries with exceptionally high rates of gang violence, and that family separations resulting from the zero tolerance policy are cruel and violate fundamental human rights—such as the ability to request asylum. They maintain that the zero tolerance policy was hastily implemented and lacked planning for family reunification following criminal prosecutions. Some observers question the Trump Administration's capacity to marshal sufficient resources to prosecute all illegal border crossers without additional resources. Others criticize the family separation policy in light of less expensive alternatives to detention. In prior years, most individuals apprehended were single adult males. Family unit apprehensions, which increased from just over 11,000 in FY2012 to 99,901 in the first four months of FY2019, and apprehensions of unaccompanied alien children are occurring within the context of otherwise relatively low historical levels of total alien apprehensions. In addition, the national origin of recently apprehended family units and unaccompanied children has shifted to mostly Central American from long-term trends of mostly Mexican.", "document_type": "crs"}
{"report": "Telecommunication providers and technology companies around the world have been working together to research and develop new technology solutions to meet growing demands for mobile data from consumers and industrial users. Fifth-generation (5G) mobile technologies represent the next iteration of mobile communications technologies that were designed to improve current (e.g., 3G, 4G) mobile networks. 5G networks are expected to provide faster speeds, greater capacity, and the potential to support new features and services. 5G technologies were developed to accommodate the increasing demands for mobile data (i.e., more people using more data on more devices). 5G technologies are expected to serve current consumer demands and future applications (e.g., industrial Internet of Things, autonomous vehicles). 5G technologies are expected to yield significant consumer benefits (e.g., assisting the disabled, enabling telemedicine), industrial benefits (e.g., automated processes, increased operational efficiencies, data analytics), and economic benefits (e.g., new revenues, new jobs). Past experience has shown that companies first to market with new technologies capture the bulk of the revenues. Hence, companies around the world are racing to develop and deploy 5G technologies, and many countries (e.g., central governments), seeing potential for economic gain, are taking action to support 5G deployment. This competition between companies and countries to lead 5G technologies and capture the bulk of the revenues is often called the \"race to 5G.\" In the United States, Congress has monitored the progress of 5G deployment, and the U.S. position in the race to 5G. Congress has made spectrum available for 5G use, and directed the federal government to identify additional spectrum for future 5G use. Congress has also streamlined processes for deploying 5G equipment (also known as small cells ) on federal land; additionally, in 2018, legislation was introduced in the Senate which would have streamlined processes for deploying 5G small cells. To protect national security interests and to ensure the security of 5G networks, Congress restricted federal agencies from purchasing certain foreign-made telecommunications equipment. This report provides a background on mobile technologies, and addresses the race to 5G, focusing on three leading countries—the United States, China, and South Korea. This report discusses factors affecting 5G deployment, and U.S. actions to support 5G deployment, such as actions related to small cells and national security. Finally, this report discusses near-term policy considerations for Congress related to the deployment of 5G networks, and future policy considerations, including the privacy and security of 5G networks and devices. The first mobile phones appeared in the 1980s. Since then, mobile phone use has increased exponentially. The number of smartphone users in the United States has grown from nearly 63 million in 2010 to an estimated 238 million in 2018. Worldwide, there are an estimated 4.5 billion mobile phone users, 2.5 billion of which are smartphone users. More people are using more data on more mobile devices; as a result, demand for mobile data is rapidly increasing. Telecommunication companies continually invest in their networks to provide faster, more reliable service, expand the capacity of networks to meet growing demands for data, and support new technology uses. Approximately every 10 years, a new technology solution emerges from industry studies and research that offers vastly improved speeds, supports new features and functions, and creates new markets and new revenue for providers. These technologies offer such significant improvements to networks and devices that they change the way people use mobile communications, and thus represent the next generation of mobile technology. In mobile communications, there have been five generations of technology. Figure 1 provides an overview of the technologies. First-generation (1G) technologies brought consumers the first mobile phone. The phone and the service were expensive, and the basic analog networks offered voice-only services, and limited coverage and capacity. Second-generation (2G) technologies used digital networks, which supported voice and texting. Networks were expanded and phones were made more affordable, increasing adoption. Third-generation (3G) technologies supported voice, data, and mobile access to the internet (e.g., email, videos). Smartphones were introduced, and people began using mobile phones as computers for business and entertainment, greatly increasing demand for data. Fourth-generation (4G) technologies offered increased speeds, and true mobile broadband that could support music and video streaming, mobile applications, and online gaming. Providers offered unlimited data plans and mobile devices that could be used as hotspots to connect other devices to the network, further increasing demand for mobile data. Each generation was built to achieve certain levels of performance (e.g., certain levels of speed, higher capacity, added features). To be called a \"3G network\" implied a specific network architecture and specific technologies were used, certain levels of speeds were offered, and new features were supported. In earlier generations, companies and countries adopted different technical standards to achieve performance requirements. In 3G and 4G, companies and countries began building networks to the same standards. This enabled equipment to be used in many countries, enabled manufacturers to achieve economies of scale, and enabled carriers to speed deployment. For example, for 4G, companies and countries adopted Long-Term Evolution (LTE) standards, which redefined the network architecture to offer greater speeds and capacity. Fifth-generation (5G) networks utilize 5G standards, which use new technologies and deployment methods to provide faster speeds, greater capacity, and enhanced services. 5G networks are expected to meet the increasing demand for data from consumers, and to support new services. 5G was also designed to meet growing demands for data from industrial users, and to support the growing use of mobile communications technologies across multiple industries (e.g., crop management systems, public safety applications, new medical technologies). Three factors are driving the need for improved wireless networks. First, there are more people using more data on more devices. Since 2016, more people worldwide have been using more data on mobile devices such as smartphones than on desktops. Globally, mobile data traffic is expected to increase sevenfold from 2016 to 2021, and mobile video is driving that increase. The spectrum used for mobile communications is becoming crowded and congested. Current networks (e.g., 3G, 4G) cannot always meet consumer demands for data, especially during periods of heavy use (e.g., emergencies). During periods of heavy use, consumers may experience slow speeds, unstable connections, delays, or loss of service. Second, the total number of internet-connected devices, both consumer devices (e.g., smart watches, smart meters) and industrial devices (e.g., sensors that assist with predictive maintenance), has increased. Market research indicates that in 2018 there were 17.8 billion connected devices globally; 7 billion of which were not smartphones, tablets, or laptops, but other connected devices (e.g., sensors, smart locks) that allow users to monitor and manage activities through a mobile device, such as a smartphone, further increasing demand on networks. Third, industries are relying on internet-connected devices in everyday business operations. Companies use devices to track assets, collect performance data, and inform business decisions. These devices, when connected, form the Internet of Things (IoT)—the collection of physical objects (e.g., health monitors, industrial sensors) that interconnect to form networks of devices and systems that can collect and compute data from many sources. More advanced IoT devices (e.g., autonomous cars, emergency medical systems) need networks that can provide persistent (\"always-on\") connections, low latency services (i.e., minimal lag time on commands), greater capacity (e.g., bandwidth) to access and share more data, and the ability to quickly compile and compute data. These are features that current mobile networks cannot consistently support. Since 2012, telecommunications standards development organizations (SDO), with the help of their industry partners, have been researching ways to improve mobile communication networks; link people, devices, and data through a smart network; and enable a \"seamlessly connected society.\" Companies are developing new technologies that are expected to improve networks, meet the growing demand for data, support IoT applications, and enable a seamlessly connected society. Telecommunication and technology companies experimented with new, higher-band spectrum (i.e., millimeter waves) that could provide greater bandwidth and speed. However, these waves cannot travel long distances or penetrate obstacles (e.g., trees, buildings); companies worked together to develop technologies that capitalize on the strengths of this spectrum (e.g., bandwidth and speed) and address its shortfalls through innovative technology solutions (e.g., placing smaller cell sites close together to relay signals around obstacles and over longer distances). The research identified several solutions that offer vastly improved speeds (from 10 times to 100 times faster than 4G networks), greater bandwidth, and ultra-low latency service (i.e., 1-2 milliseconds (ms) of lag time as opposed to 50 ms for 4G). These solutions address many of the perceived shortcomings of existing networks and offer new features that could support and expand the use of more advanced technologies for consumers and businesses. 5G networks offer the increased bandwidth, constant connectivity, and low latency services which can enhance and expand the use of mobile technologies for consumers and businesses. Consumers are to be able to download a full-length, high-definition movie on their mobile device in seconds; engage in video streaming without interruption; and participate in online gaming anywhere. 5G technologies are expected to create new revenue streams for technology companies and telecommunications providers. 5G technologies are also expected to support interconnected devices (e.g., smart homes, medical devices), and advanced IoT systems, such as autonomous vehicles, precision agriculture systems, industrial machinery, and advanced robotics. IoT technologies are expected to be integrated into industrial systems to automate processes and to optimize operational efficiencies. 5G networks are expected to support the growing IoT industry, enabling device makers to develop and deploy new IoT devices and systems across multiple industries, and sell IoT products globally, yielding significant economic gains for technology companies and for the countries where those companies are located. Figure 1 shows an interconnected tractor system, and the progression of a single product to a connected product to an IoT system that can process data from many sources to inform decisions. During the deployment of 4G networks, U.S. companies took the lead in developing new technologies. U.S. companies drove industry standards, brought products to market, gained first-mover advantage, and achieved significant economic gains for themselves and the United States. Analysts conclude that \"U.S. leadership on 4G added nearly $100 billion to [the U.S.] economy and brought significant economic and consumer benefits.\" Industry analysts predict 5G will generate new revenue for technology companies and for the countries where those companies are located. For example, in a study commissioned by the Cellular Telecommunications and Internet Association (CTIA), IHS Markit estimated that 5G could produce up to $12.3 trillion in global sales across multiple industries by 2035. In another analysis, Accenture reports that U.S. telecommunication providers are expected to invest approximately $275 billion in 5G infrastructure, which could create up to 3 million new jobs in the United States and add up to $500 billion to the nation's GDP. Past experience has shown that companies that are first to market capture the bulk of the economic benefits from new technologies. Hence, companies around the world are racing to bring 5G products to markets. Technology companies (e.g., network equipment manufacturers, chip makers, smartphone manufacturers, and software companies) are producing 5G equipment and devices for providers. Telecommunications providers are deploying 5G infrastructure and marketing new 5G products to gain domestic market share and increase revenues. Countries around the world (i.e., central governments) are supporting 5G efforts to ensure their companies are first to deploy 5G products and services, and positioned to capture the bulk of the economic benefits from the new technology—to \"win the race to 5G.\" There have been several industry reports on countries leading in 5G. In a 2018 report, Deloitte notes that \"The United States, Japan, and South Korea have all made significant strides toward 5G readiness, but none to the same extent as China.\" A 2017 study by IHS Markit, a data analytics and information services firm, examined the economic activity for seven countries: the United States, China, South Korea, Japan, Germany, United Kingdom, and France. The 2017 IHS Markit study concluded, that based on projected research and development (R&D) and capital expenditure (Capex) investments in 5G from 2020 to 2035, the United States and China are expected to drive and dominate 5G technologies over the next 16 years. More recent reports paint a different picture of 5G leadership. An April 2018 report by Analysys Mason, commissioned by CTIA, concluded that with the first 5G standards approved in December 2017, there was a shift in readiness between nations. In the report, the United States ranked third in readiness behind China and South Korea. According to the report, China is showing greater signs of readiness due to government planning and coordination with industry. The government's \"Made in China 2025\" initiative (released in 2015) and its more recent five-year economic plan (China's 13 th Five-Year Plan for Economic and Social Development Plan for the People's Republic of China, 2016) established a path to gain leadership of 5G. China financed R&D projects, supported Chinese industry efforts to participate in standards development, and collaborated with international partners to test new equipment and technology solutions. China also provided $400 billion in 5G investments, coordinated with companies manufacturing 5G technologies, and worked with Chinese providers to deploy 5G infrastructure to achieve its goal to launch 5G by 2020. Analysts report that China's technology companies and telecommunications providers are committed to the national plan and 2020 timeline. Industry analysts have pointed to other actions by China that indicate China is positioning itself to dominate in 5G technologies. Analysts note that China has set targets to increase the use of Chinese equipment and components in its 5G networks. China wants locally-made chips to be used in 40% of smartphones sold domestically by 2025, and domestic firms to have 60% of the market in industrial sensors. China plans to deploy domestically; capture the revenues from its massive domestic market (e.g., consumers and industrial users); upgrade industrial systems to increase the efficiency, productivity, and competitiveness of Chinese technology companies; build its capacity to develop technology equipment and components; and become a leading supplier of 5G technologies to the world (e.g., network equipment and IoT devices). In the Analysys Mason report, South Korea was positioned ahead of the United States \"based on a strong push for early 5G launch combined with government commitment to achieving 5G success.\" South Korea advanced in 5G readiness due to early investments in R&D and trial deployments at the 2018 Olympics. The early investment in 5G allowed South Korea to claim credit for the first large-scale pilot of 5G technologies. Some analysts rank China above the United States in 5G readiness, while other analysts assert that the competitive market in the United States spurs innovation, which could give the United States an edge in the global 5G market. Still others note that given the focus on 5G deployment by several Asian nations (e.g., China, South Korea, and Japan); the large Asian market; and the rapid rate of migration to new technologies in Asia, Asia may emerge as a 5G leader. The Chinese government has advanced on its plan: investing in R&D, participating and leading in 5G standards development to benefit Chinese firms, engaging in international 5G projects to build knowledge, building capacity to provide 5G equipment, and reserving spectrum for 5G use. A 2018 study found that since 2015, China has outspent the United States by $24 billion in 5G infrastructure, having built 350,000 new cell sites, while U.S. companies have built 30,000 in the same timeframe. Recent reports indicate that after first 5G technical specifications were released in December 2017, Chinese providers began deploying 5G cell sites at a rapid pace, and announced plans to launch 5G in 2019, ahead of the 2020 timeline. Industry observers called this the \"China Surge,\" and concluded that China was positioning to win the race to 5G. South Korea is also moving forward on spectrum. In June 2018, South Korea auctioned both mid-band and high-band spectrum for 5G use. And in July 2018, government officials announced its telecommunications providers would work together to build out a nationwide 5G network. Officials argued that a coordinated approach would reduce duplication, save costs, speed deployment, and enable South Korea to be the first to launch a nationwide 5G network. Telecommunication providers committed to the plan and to launching 5G on the same day—a day the government is calling \"Korea 5G Day.\" According to articles from December 2018, South Korea's providers launched fixed 5G to business users on December 1, 2018, and announced plans to launch mobile 5G for consumers in March 2019 when 5G phones become available. In the United States, private telecommunication providers are driving deployment. For example, Verizon launched fixed 5G services in four cities on October 1, 2018. AT&T launched mobile 5G services in 12 cities on December 21, 2018, with at least 19 more cities targeted in 2019. T-Mobile is building out 5G networks in 30 cities and plans to launch 5G services after 5G cell phones are released in 2019. Sprint is moving ahead with its plans to deploy 5G in 9 cities in the first half of 2019. Analysts assert that the United States ranks near the top in readiness due to industry investment in 5G trial deployments and aggressive timelines for commercial deployment. In the United States, Congress has supported 5G deployment by identifying spectrum for 5G use and easing regulations related to the placement of 5G equipment. The FCC has developed a comprehensive strategy to free spectrum for 5G use and accelerate deployment. In the race to 5G, countries are leading in different ways and in different aspects. China assumed a top-down approach, and is leading on infrastructure deployment; however, China faces the same challenges as other countries in terms of spectrum (e.g., managing incumbent users, avoiding interference)—activities that take time. South Korea has auctioned 5G spectrum and is committed to being the first to deploy 5G nationwide; however, its cooperative approach to deployment may thwart competition and innovation needed to develop new 5G products and compete in the global 5G market. In the United States, industry is leading 5G efforts. The government has supported private deployment efforts by identifying and allocating spectrum for 5G use and reducing regulatory barriers for siting of 5G equipment. However, the lengthy spectrum allocation process, competing demands for spectrum, and local resistance to 5G cell siting regulations may slow 5G deployment in the United States; further, a purely market-based approach to deployment may not ensure that all areas and all industries will have access to 5G. Some industry analysts contend that the race to 5G has just started and is more of a marathon than a sprint, noting \"Europe was quicker to roll out 2G, and Japan was the first with 3G, but that hardly deterred Apple and Google from dominating the smartphone market.\" 5G technologies have many areas of growth, and opportunities to achieve revenues from both the sale of the technology at initial deployment and the sale of products and services after deployment (e.g., innovative applications, subscription services, IoT devices). Industry analysts note that in the race to dominate the global 5G market, months may not matter; but if the United States falls years behind in deploying 5G networks and developing new 5G technologies, devices, and services, that may affect its ability to compete in the global technology market for many years to come. There are factors affecting 5G deployment in all countries, including international decisions on standards and spectrum, and factors affecting deployment in the United States such as resistance to the placement of 5G infrastructure and trade restrictions. There are several factors affecting all 5G deployments, including international decisions on standards and spectrum; the management of spectrum (e.g., auctioning spectrum, reconfiguring users to accommodate 5G, establishing agreements to share spectrum); the availability of 5G equipment and devices; and the installation of small cells needed to provide 5G services. In earlier cellular networks, countries and companies built networks, equipment, and devices to different standards; as a result, not all equipment worked on all networks or in all countries. Technology companies and telecommunication providers saw value in developing standards, to enable technology companies to build to one standard, bring products to market faster, sell equipment globally, achieve economies of scale, and reduce the cost of equipment. Two organizations central to this effort for 5G are the 3 rd Generation Partnership Project (3GPP) and the United Nations International Telecommunications Union (ITU). 3GPP is a collaboration of seven telecommunication SDOs from Japan, China, Europe, India, Korea, and the United States. 3GPP has more than 370 members from leading companies from many nations. Members include leading telecommunication providers (e.g., AT&T, China Mobile, SK Telecom), technology companies (e.g., Intel, Qualcomm, Samsung, Ericsson, Huawei, ZTE), and government agencies. 3GPP is one of many organizations working to build consensus on technical specifications for mobile communications (3G, 4G, and 5G). 3GPP members have worked together to develop, test, and build specifications for 5G technologies. In 2018, 3GPP approved two 5G technical specifications: In December 2017, 3GPP approved the \"Non-Standalone version of the New Radio standard,\" which supports enhanced mobile broadband (eMBB). These specifications allow carriers to supplement existing 4G networks with 5G technologies to improve speed and reduce latency. In June 2018, 3GPP completed the \"Stand-Alone version of the New Radio standard.\" This specification supports the independent deployment of 5G, using core networks that are designed to support advanced IoT devices and functions. These specifications are important because they define how 5G networks will be designed and deployed, because they set technical specifications for 5G equipment, and because they have support from a wide array of stakeholders. 3GPP plans to submit these 5G specifications to the ITU in June 2019 as part of the global standards development process. If the ITU ratifies the specifications, those specifications would be recognized as the global standard for the technology. Other SDOs submit specifications to ITU as well; however, 3GPP is recognized as the major standards contributor. Thus, many companies and countries are moving forward on 5G plans based on approved 3GPP specifications. 3GPP is now focused on technical specifications and performance requirements for advanced functions (e.g., 5G for vehicle-to-vehicle communication, industrial IoT). These specifications are expected to be finalized by 3GPP in 2019; thus, networks, equipment, and devices that can support advanced 5G functions are not expected to arrive until 2020 or later. During the development of 3G technologies, China adopted its own standard to avoid dependence on western technology. While equipment built to those standards was successful in China, the standards were not accepted globally, and equipment could not be successfully exported. Other countries participated in international projects, contributed to international standards, and implemented standards-based networks. By participating in SDOs, a company can shape standards, and ensure that the final standards and requirements for equipment align to its preferred specifications for the product. Companies that are able to gain acceptance of their preferred standards through the standards development process have a head start in bringing products to market and gaining first-mover advantage. This approach is \"much more economical than trying to retrofit a product (and its manufacturing process) after a standard is approved.\" Many countries support industry efforts to participate in standards development. FCC Commissioner O'Rielly noted, \"If standards properly reflect and include our industries' amazing efforts, they promote U.S. technologies and companies abroad, bringing investment, revenues, and jobs to this country.\" For 5G, China played a more cooperative role in standards development, participating in SDOs, leading technical committees, conducting 5G R&D, contributing to 5G specifications, and participating in international projects. Some experts assert that through its participation in SDOs, China is advancing its preferred standards and positioning itself to dominate the global 5G market. As an example, analysts note that many network operators are adopting the 5G Non-Stand Alone standard to leverage their legacy 4G networks as a first step to building out 5G. China is supporting the 5G Stand-Alone standard which would require operators to rebuild core networks and buy new base stations and equipment, and move all countries toward more advanced IoT devices (which China is focused on providing). However, in the development of standards for 5G, SDO members supported both Non-Stand-Alone and Stand-Alone specifications, which enabled them to leverage 4G networks, improve 4G services with 5G technologies, and provide better services as companies plan out 5G deployments. Even before specifications were finalized, some companies and countries advanced 5G plans and launched 5G services. For example, China began deploying 5G infrastructure before 5G specifications were approved, and Verizon launched fixed 5G services using proprietary standards. While these efforts provide some advantages in future deployments, in that companies can prepare for and learn from these deployments, there are also risks. For example, last-minute revisions to the specifications may require China to upgrade those pre-standard 5G sites. To offer mobile 5G technologies, companies need 5G phones, which were under development. So while companies began deploying 5G networks once specifications were approved, they would have to wait for 5G phones to offer mobile 5G services. Since 5G phones were slated for release around the same time (spring 2019), most major carriers in the leading countries announced launch dates that were within months of each other. South Korea is expected to launch mobile 5G services in March 2019. T-Mobile announced it would launch mobile 5G services in early 2019, as did Verizon. AT&T announced plans to offer a 5G smartphone in the first half of 2019. Sprint is expected to launch nationwide 5G in the first half of 2019. China Mobile announced plans to introduce 5G service by the end of 2019—ahead of its 2020 target date. Approval of technical specifications is an important milestone in the race to 5G. With approved specifications, technology companies can begin to manufacture equipment and devices. Once equipment become available, telecommunication companies can begin to build out networks and plan their launch of 5G services. Another factor driving 5G deployment is spectrum. All wireless technologies use the electromagnetic spectrum to communicate. Spectrum refers to the radio frequencies used to communicate over the airwaves. Most countries have spectrum management agencies. In the United States, the FCC manages spectrum allocation for nonfederal users while the National Telecommunications and Information Administration (NTIA) manages spectrum for federal users. Agencies may assign the rights to use specific frequencies to certain users (e.g., public safety users), or sell the rights to use specific frequencies (e.g., telecommunication companies, broadcasters). Companies deploy infrastructure (e.g., towers, equipment) that will enable communications on their assigned frequencies. Error! Reference source not found. provides an overview of U.S. spectrum allocations in 2008 as an example of how the U.S. spectrum is allocated for various communications (e.g., mobile communications) and for other wireless uses (e.g., garage door openers, satellite radio, GPS). Most mobile devices (e.g., cell phones) use frequencies under 6 gigahertz (GHz) because the frequencies in this segment of the spectrum are conducive to wireless communications. For example, frequencies in this segment of the spectrum can travel long distances enabling coverage across wider areas, and can penetrate buildings and walls easily. However, as more people are using more mobile devices for more purposes, this segment of the spectrum (below 6 GHz) is becoming crowded, which can result in slower speeds, slower connections, and dropped calls. In 2015, companies began looking at new spectrum bands that could support mobile communications. Industry researchers identified waves between 30 GHz and 300 GHz (also known as millimeter waves or MMW) that offered greater bandwidth (e.g., higher capacity to handle more traffic) and increased speeds. Telecommunication providers had not considered MMW for mobile communications because the waves are shorter, cannot travel far, cannot travel well through buildings, and tend to be absorbed by trees and rain. Researchers proposed the use of small cells, placed close together, to relay shorter waves across longer distances, and to interconnect them to provide a high-speed network to specific areas, such as a city or a stadium. Typically, telecommunications equipment is designed to function on certain frequencies. Equipment and device manufacturers consider the characteristics of the assigned frequency bands and engineer equipment to take advantage of frequency strengths and mitigate weaknesses. 5G relies on multiple spectrum bands. 5G leverages low-band spectrum (below 1 GHz), mid-band spectrum (1 GHz-6 GHz), and high-band (MMW) spectrum. 5G calls for deployment of 5G technologies in high band spectrum (MMW) spectrum to offer ultra-fast services to high-density areas. 5G technologies deployed in mid-band spectrum offer improved capacity and coverage, faster service, and new features to existing customers. 5G technologies deployed in low-band spectrum can provide the widespread coverage needed for many IoT applications. Studies have shown that delays in spectrum allocation can delay deployments, and put countries at a disadvantage in technology markets. Hence, countries are working to identify spectrum in all three bands for 5G. They are also working together, and with industry, to harmonize spectrum (i.e., ensure all countries are using similar frequency bands) to create economies of scale, reduce costs for manufacturers and providers, and promote compatibility (e.g., roaming) across systems. Companies around the world are interested in identifying common spectrum for 5G deployment. This would help ensure all companies deploy in the same bands, so that equipment works in all regions. According to one expert, \"Harmonized global spectrum is important because with a commonality of spectrum the 5G ecosystem can optimize resources to achieve economies of scale, [reduce the cost of equipment and devices, and] spur rapid proliferation and adoption.\" Exact harmonization is not necessary; similar ranges of frequencies can support global harmonization. This provides countries (i.e., government agencies responsible for allocating spectrum) with flexibility to accommodate existing users who may be operating in certain bands, and cannot be easily relocated (e.g., military agencies). The ITU works with countries and industries to set standards and harmonize regulations and spectrum use worldwide. In 2019, the ITU is expected to discuss 5G spectrum at its World Radiocommunication Conference (WRC-19). Stakeholders involved in the development of 5G technologies agree that 5G needs spectrum in three key frequency ranges to operate effectively: sub-1 GHz to support widespread coverage across urban, suburban, and rural areas, provide in-building coverage, and support IoT devices and services; 1-6 GHz to provide additional capacity and coverage, including the 3.3-3.8 band, which is expected to form the basis of many initial 5G services; and above 6 GHz, including MMW, to provide ultra-high broadband speeds. Figure 3 shows 5G spectrum targets worldwide, and commonalities in spectrum that may help to inform global harmonization of spectrum for 5G. The FCC has auctioned spectrum previously; hence telecommunication providers have substantial spectrum holdings in different bands, including frequency bands targeted for 5G. For example, T-Mobile is deploying 5G using its 600 MHz spectrum, and Verizon was able to launch 5G services using its 28 GHz spectrum. In 2018, Congress took action to identify additional spectrum for 5G use. In the Consolidated Appropriations Act, 2018, signed into law on March 23, 2018, Congress enacted two provisions related to spectrum. The Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (RAY BAUM'S Act of 2018), encourages the repurposing of federal spectrum to support 5G. The Making Opportunities for Broadband Investment and Limiting Excessive and Needless Obstacles to Wireless (MOBILE NOW) Act, directs the NTIA to study the impact of deploying in MMW band on federal users. The FCC initiated an auction of the 28 GHz band on November 14, 2018. The auction of the 24 GHz band is to follow. The FCC is preparing additional high-band spectrum for auction. With these auctions, the FCC will have released almost 5 GHz of high-band spectrum for 5G. The FCC stated it has \"assigned more high-band spectrum for 5G than any country in the world,\" noting the United States is 4 GHz ahead of China in high-band spectrum for 5G. The FCC has also initiated proceedings to identify mid-band spectrum (e.g., 2.5 GHz, 3.5 GHz, and 3.7-4.2 GHz) for 5G use. The FCC has identified under-utilized mid-band spectrum that could support 5G, and is examining ways in which mid-band spectrum can be shared between users (e.g., educational, satellite, federal). The FCC is working with the NTIA to identify federal mid-band spectrum that can be repurposed for or shared to support commercial 5G use. The FCC has also granted applications to deploy in the low band (600 MHz), and has targeted changes for the 800 MHz and 900 MHz bands to support 5G use. Further, the FCC has identified additional spectrum for unlicensed (e.g., Wi-Fi) use that will be needed to support 5G networks. Although the FCC is striving to free up spectrum for 5G use, the United States has a complex spectrum allocation process that requires a lengthy rulemaking process, auction process, and relocation process, which takes time. Industry advocates have urged policymakers to plan, collaborate, and set timelines to expedite the availability of spectrum, and coordinate spectrum auctions so providers can plan spectrum acquisitions and deployments. The Trump Administration has focused on 5G planning. On September 28, 2018, the White House held a \"5G Summit\" with industry and government officials to discuss policies that would help ensure faster deployment of 5G technologies. On October 25, 2018, President Trump signed a Presidential Memorandum calling for a National Spectrum Strategy to assess current and future spectrum needs and support the deployment of 5G through incentives and reduced regulations. Even as the FCC is moving forward on multiple proceedings, U.S. telecommunications executives are arguing that more mid-band spectrum is needed to support 5G deployment. Some policymakers have called for additional spectrum and reduced regulations to spur 5G deployment. Others have stressed the need to ensure 5G benefits are available to all people. In comparison, South Korea simultaneously completed auctions of high-band (28 GHz) and mid-band (3.5 GHz) spectrum in June 2018. South Korea's Ministry of Science and Information and Communications Technology (ICT) allowed operators to start using the 5G frequencies in December 2018, in preparation of the country's launch of mobile 5G planned for March 2019. China reserved spectrum for 5G use in 2017, and sought public comment on the planned use of the mid-band spectrum (3.4-3.6 GHz), and millimeter wave spectrum (24.75-27.5 GHz and 37-42.5 GHz) for 5G. During its public comment process, China noted the potential for disruption to existing users, which is a common issue in spectrum allocation. Experts assert that China has an advantage over the United States in freeing spectrum for 5G, in that it can \"exert much stronger control over existing spectrum users.\" Industry experts have noted that China has eliminated \"regulatory red tape to expedite deployment and make it easier for industry to access large blocks of higher frequency spectrum bands.\" In December 2018, China reportedly allocated large swathes of mid-band spectrum to its three state-owned mobile operators, \"preparing the way for large-scale networks testing in 2019, and the launch of commercial 5G services by 2020.\" Just as telecommunications providers are racing to deploy 5G, technology companies and device makers are racing to be the first to deploy 5G equipment and phones, to achieve the economic benefits expected from 5G technologies. U.S. equipment manufacturers are developing 5G equipment and devices. In a July 2018 Senate hearing, Qualcomm announced that it is \"on track to deliver chips that support 5G in both sub-6 GHz and millimeter wave spectrum in time to enable 5G data-only devices to launch before the end of 2018 and for the first 5G smartphones … to launch in the first half of 2019.\" U.S. equipment manufacturers are benefitting from the race to 5G, supplying other countries with 5G technologies, including China. For example, the American chip-maker, Intel, is working with Chinese telecommunications providers. Similarly, technology suppliers from other countries are supporting U.S. deployments. For example, T-Mobile signed a $3.5 billion agreement with the Swedish telecommunications equipment maker Ericsson to support T-Mobile's 5G plans. Most device makers have announced that 5G phones will be available in 2019. While both Verizon and AT&T launched 5G networks in select areas and offered some 5G services, neither offered access to 5G on a smartphone because 5G smartphones were not yet available. With the adoption of 5G specifications, 5G devices are in production and expected to be available in 2019. As a result, most providers have announced plans to launch 5G services in 2019, after devices are released. For example, both Verizon and AT&T have announced a launch of new Samsung 5G devices in the first half of 2019. South Korean device-maker LG announced that its 5G smartphone is expected to be available in the first half of 2019, as a Sprint exclusive. Technology experts have cautioned that since providers are using different spectrum bands to deploy 5G, the first 5G phones may be carrier exclusive (i.e., may only contain one carrier's frequencies). Experts note that \"nobody has figured out how to cram the 28 GHz [spectrum] that Verizon and T-Mobile are using, and AT&T's 39 GHz into one box yet. And while T-Mobile and Verizon are using similar 28 GHz bands, T-Mobile is also putting 5G on the 600 MHz band, which Verizon is not.\" The telecommunications industry is global and co-dependent. Providers partner with technology companies and device makers from around the world to move forward on 5G deployment. The availability of 5G devices will drive adoption and revenues for all telecommunications providers. Hence, the availability of equipment and devices is an important factor in the race to 5G. As stated, deployment of 5G systems will rely on a range of technologies and different bands of spectrum. 5G systems using low- to mid-band spectrum can install new 5G equipment on existing cell sites (4G cell sites). This will increase the speed and functionality of existing 4G networks, but will likely not achieve the ultra-fast speeds provided by millimeter wave bands. For deployments that leverage higher bands, particularly above 6 GHz, a much higher density of cell sites is needed as the signals cannot travel as far or through obstacles. To overcome these challenges, providers will place many smaller cell sites (also called small cells ) close together to relay signals further distances and around obstacles. Small cells are low-powered radio access nodes with ranges of between 10 meters to two kilometers (in comparison, macro cell towers can cover up to 20 miles or around 32 kilometers). The lower end of small cell nodes is similar to today's Wi-Fi access points. Often compared in size to a pizza box or backpack, small cells can be installed on existing structures, such as buildings, poles, or streetlights. When attaching small cells to existing infrastructure, installation and operation requires connection to a power source, backhaul (e.g., fiber optic cable connection or wireless connection to a core network), and a permit for use of the space. Installations on existing structures can expand to include multiple small cells for use by different wireless carriers, wires, and adjacent boxes housing batteries or cooling fans. Small cells can also be placed in locations without such existing infrastructure, in which case construction of a pole with a power source and backhaul (i.e., wired connections) is required. In the United States, constructing new wireless towers or attaching equipment to pre-existing structures generally requires providers to obtain approval from federal, state, or local governmental bodies, depending on the location and current owner of the land or structure. The FCC has promulgated rules to ensure all people have access to communications services and to guide approval processes. Past FCC rules require localities to act on cell siting applications in a reasonable period of time; grant the FCC authority to regulate terms and rates of pole attachments unless states elect to regulate poles themselves; restrict state or local entities from prohibiting telecommunications services; grant state and local entities authorities to manage rights-of-way and charge reasonable fees for access to rights-of-way; and require state and local entities to approve eligible facilities requests. 5G small cell installation have sparked debate over the balance between streamlining siting regulations to facilitate 5G deployment nationwide and maintaining local authorities to review placement of cell sites in communities. U.S. industry executives claim that current regulations and local approvals required for placement of telecommunications equipment adds time and cost to deployment, which puts U.S. carriers at a disadvantage in 5G deployment. Local governments and residents have cited concerns about management of rights-of-way, fees charged to providers for access, and the impact of small cells on property values and health and safety. At the September 26, 2018, Commission meeting, the FCC approved new rules aimed at facilitating the deployment of wireless infrastructure for 5G networks. In its ruling, the FCC clarified when a state or local regulation of wireless infrastructure deployment effectively prohibits service; the FCC declared that a state or local government that restricts the entry of a new provider into a service area or inhibits a new service (e.g., 5G) materially inhibits service (which is not permitted under FCC rules); concluded that state and local governments should be able to charge fees that are no greater than a reasonable approximation of objectively reasonable costs for processing applications and for managing deployments in the rights-of-way for 5G deployments; identified acceptable fee levels for small wireless facility deployments; and provided guidance defining criteria for determining whether certain state and local non-fee requirements—such as aesthetic and undergrounding requirements—constitute an effective prohibition of service (which is not permitted under FCC rules). Further, the FCC established two new shot clocks for small wireless facilities which require localities to make decisions on cell siting applications within 60 days for collocation of equipment on preexisting structures and 90 days for new builds; codified the existing 90- and 150-day shot clocks for wireless facility deployments that do not qualify as small cells that were established in 2009; stated that all state and local government authorizations necessary for the deployment of personal wireless service infrastructure are subject to those shot clocks; and adopted a new remedy for missed shot clocks by finding that a failure to act within the new small wireless facility shot clock constitutes a prohibition on the provision of telecommunication services to an area, which is not allowed under FCC rules. The FCC noted that easing cell siting regulations will help to speed 5G deployment, encourage private sector investment in 5G networks, and give the United States an advantage in the global race to dominate the 5G market. Prior to the FCC vote on the small cell siting rules in September 2018, nine Members of Congress wrote a letter to the FCC urging the FCC to remove the item from its September meeting agenda. The letter urged the FCC to \"hit pause\" on the issue to consider the perspectives of cities and municipalities, and to seek a solution that balances the interests of localities and industry. FCC Commissioner Carr, who led the effort to streamline the small cell placement process, invoked the race to 5G in his support of the rules, noting, \"We're not the only country that wants to be first to 5G. One of our biggest competitors is China. They view 5G as a chance to flip the script. They want to lead the tech sector for the next decade. And they are moving aggressively to deploy the infrastructure needed for 5G.\" Industry officials praised the FCC's rules on the day of the vote, noting, \"The FCC's action today addresses key obstacles to deploying 5G across the country by reducing unnecessary government red tape.\" Industry representatives noted that high fee rates and long approval processes cost providers money, delayed the deployment of telecommunications infrastructure, and resulted in fewer sites proposed, and less investment in and services to communities. FCC Commissioner Rosenworcel, who dissented in part, asserted the rules amounted to federal overreach and an override of state and local authorities and worried that \"litigation that follows will only slow our 5G future.\" According to Rosenworcel, the FCC's decision \"irresponsibly interferes with existing agreements and ongoing deployments across the country.\" She cited a recently approved partnership in San Jose, CA, that led to 4,000 small cells on city-owned light poles and $500 million of private investment to support broadband deployment. Many local governments opposed the ruling, saying the rules exceed the FCC's authorities, and preempt local authorities to manage public property, protect public health and safety, and manage small cell installments. Several localities have stated they would experience a loss in revenue due to the FCC's rules. The National Association of Counties and the National League of Cities, in a joint statement, noted, \"The FCC's impractical actions will significantly impede local governments' ability to serve as trustees of public property, safety and well-being. The decision will transfer significant local public resources to private companies, without securing any guarantee of public benefit in return.\" On January 14, 2019, the FCC rules related to small cells went into effect. Various parties are challenging the rules in federal court. Small cell siting is a key issue in U.S. 5G deployment. FCC rules designed to advance national interests (e.g., accelerate 5G deployment, achieve the full benefits from 5G technologies) are conflicting with authorities and regulations designed to protect other interests (e.g., public safety, health, ensuring equal access to advanced technologies). Policies that enable U.S. companies to deploy 5G infrastructure and allow state and local entities to manage the placement of 5G small cells in communities could speed deployment of 5G technologies in the United States and enable the United States to achieve the broader consumer and economic benefits from 5G . On December 18, 2017, the Trump Administration released its first National Security Strategy (NSS). In the context of the NSS's broader discussion of \"rejuvenating\" domestic economic competitiveness as one pillar of U.S. national security, the Administration identified the enhancement of American infrastructure as a priority action, to include \"[improving] America's digital infrastructure by deploying a secure 5G capability nationwide.\" Concern over the rollout of 5G technology from a U.S. national security and intelligence standpoint has been directed at (1) a perceived lack of market diversity that some have argued would result in increased risk to the global telecommunications supply chain; and (2) concern over the potential vulnerability of 5G networks to targeting by foreign intelligence services. In a February 13, 2018, statement for the record prepared for a Senate Select Committee on Intelligence (SSCI) open hearing, Director of National Intelligence Daniel Coats stated The global shift to advanced information and communications technologies (ICT) will increasingly test U.S. competitiveness because aspiring suppliers around the world will play a larger role in developing new technologies and products. These technologies include next-generation, or 5G, wireless technology; the internet of things; new financial technologies; and enabling [artificial intelligence] and big data for predictive analysis. Differences in regulatory and policy approaches to ICT-related issues could impede growth and innovation globally and for U.S. companies. Some analysts and experts have highlighted the substantial investment in 5G technologies made by Chinese companies such as ZTE Corporation and Huawei Technologies Co., Ltd.—and the ties of such companies to the government of China—in raising concerns regarding China's relative position vis-à-vis the U.S. in 5G network development. Those who share this view believe China's ambition is 5G dominance using several methods, including continued investment in networks, products, and standards that support critical infrastructure and services that will rely on 5G technology; shaping industry standards, regulations, and policies; and \"extracting concessions from large multinationals in exchange for market access.\" FBI Director Christopher Wray has also highlighted the potential threat associated with any increase in the integration of Chinese-made or designed devices and 5G cellular network equipment into the United States telecommunications network, stating that We're deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don't share our values to gain positions of power inside our telecommunications networks. That provides the capacity to exert pressure or control over our telecommunications infrastructure. It provides the capacity to maliciously modify or steal information. And it provides the capacity to conduct undetected espionage. Others have pointed to the legal leverage the Chinese intelligence services have over companies like Huawei and ZTE to underscore concern over the potential threat Chinese firms could bring to 5G networks: If Huawei or ZTE were to win a contract to supply 5G equipment under market terms, the political and legal environment in China would prevent either company from refusing a subsequent entreaty from either the Chinese intelligence services or military for access to the technology or services…. The [Chinese] government treats Chinese companies operating abroad as subject to [Chinese] law, and multiple new Chinese laws dictate that telecoms operators must provide the Chinese intelligence services with unfettered access to networks for intercept, which raises concerns about Huawei or ZTE 5G support facilities being used for intelligence operations. During the 112 th Congress, the House Permanent Select Committee on Intelligence (HPSCI) conducted an investigation into the U.S. national security issues posed by Huawei and ZTE, with the committee's report on the results of the investigation highlighting \"the potential security threat posed by Chinese telecommunications companies with potential ties to the Chinese government or military.\" It found, \"in particular, to the extent these companies are influenced by the state, or provide Chinese intelligence services access to telecommunication networks, the opportunity exists for further economic and foreign espionage by a foreign nation-state already known to be a major perpetrator of cyber espionage\" and other forms of state-sponsored and corporate espionage. The HPSCI report concludes with a number of recommendations. Among them: (1) The intelligence community should remain focused on the threat of penetration of the U.S. telecommunications market by Chinese companies; and (2) the Committee on Foreign Investment in the United States (CFIUS) should block acquisitions, takeovers, and mergers that involve Chinese companies Huawei and ZTE. In March 2018, CFIUS blocked the takeover of Qualcomm Inc. of the United States—a leader in 5G research and development funding—by Broadcom of Singapore. A U.S. Treasury Department letter of March 5 explaining this decision noted that a takeover of Qualcomm by Broadcom \"could pose a risk to the national security of the United States.\" Although details of the national security concerns are classified, they relate to Broadcom's relationships with third party foreign entities and the national security effects of Broadcom's business intentions with respect to Qualcomm. [Because of] well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States. Additionally, Section 889 of the John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 ( P.L. 115-232 ) prohibits the heads of federal agencies from procuring telecommunications equipment or services from Huawei, ZTE Corporation, and other telecommunications companies linked to the government of China that could pose a counterintelligence and national security threat to the United States. On January 28, 2019, the U.S. Department of Justice announced criminal charges against Huawei, its Chief Financial Officer, and two affiliates. Many observers are concerned about the vulnerabilities of 5G networks to exploitation by foreign intelligence services. An individual's ability to use 5G-enabled networks and systems for positive purposes also suggests this same technology can be exploited by foreign intelligence to manipulate perceptions and behavior. That manipulation is likely to take various forms, including efforts to deceive and confuse people in various ways about what is happening and what the truth is … overloading people's senses with useless or irrelevant information so that we cannot accurately discern what adversaries are doing or what is important; and putting misinformation before us to erroneously confirm pre-existing biases and cause us to misperceive reality and to choose the wrong courses of action. They will also try to stoke long-standing animosities and fears so that Americans fight with each other and look foolish to the world we are supposed to be leading. The amount of personal information available for exploitation will expand exponentially with 5G technology, along with doubts as to the security of the networks. This raises concerns among privacy advocates and national security professionals. National security professionals foresee significant challenges for the U.S. intelligence, military, and diplomatic communities in terms of their ability to interact freely and discreetly with foreign nationals who may be deterred by the threat of an aggressive counterintelligence posture. Some analysts argue that policies directed at discouraging Chinese investment in the United States not only contradict longstanding U.S. policy of encouraging China to participate in international standards processes, but also may be counterproductive. They suggest that to regard China's influence in 5G technology and standards development as a potential threat to national security may effectively encourage China to create national standards that may act as technical barriers to trade that, in and of themselves, threaten U.S. national security. Technological innovation in the private sector, to include 5G, relies on cooperation between the United States and China, they maintain. These critics also note that the Trump Administration's trade policy, which includes tariffs on Chinese telecommunications equipment, threatens to significantly increase the costs and slow the deployment of 5G infrastructure. Fencing off the U.S. technology sector from one-sixth of the world's population, they suggest, will only cede ground to Chinese competitors, drive up costs for U.S. consumers, and reduce the competitiveness of leading U.S. technology companies, all while isolating the United States from the places where innovation is happening. Congress and other U.S. policymakers are faced with deciding how to address both interest in promoting U.S. competitiveness in the global race to 5G, and an efficient domestic 5G deployment. Congress may consider the role of the federal government in industrial policy and promotion, and the role of the federal government in domestic deployment of 5G technologies. In the rollout of previous technologies, U.S. telecommunications companies invested in research and development, participated in international projects to test the technologies, contributed to standards, and planned business strategies. This market-based approach sparked competition and innovation that gave the United States an edge in previous technologies. For 5G, other countries (i.e., central governments) have engaged in centralized planning and coordination with industry to gain a lead in the race to 5G. Congress may monitor U.S. progress on 5G deployment and technologies, consider whether there is a need for more planning and coordination with industry, and assess whether additional government involvement would help or hinder the efforts of U.S. companies in the global race to 5G. In terms of domestic deployment, Congress may be asked to consider the benefits and risks of 5G deployment. Nationally, 5G technologies are expected to create new revenues and new jobs. 5G technologies have also raised national security concerns, individual privacy concerns, and questions about how to assess the security of foreign-made equipment. Congress may consider policies that protect U.S. telecommunications networks, including policies that impose trade restrictions or economic sanctions on foreign technology providers, or policies limiting foreign participation in 5G build-outs. Congress may weigh how various policy approaches address threats to national security (e.g., threats to telecommunications networks, industrial systems, critical infrastructure, and government networks; cybersecurity threats; threats to privacy). Congress may also consider how trade policies may alter the ability of U.S. companies to deploy networks domestically, and to purchase and sell equipment abroad. 5G technologies are also expected to offer new services for consumers (e.g., telehealth to rural areas, new services for the disabled). However, localities have raised concerns regarding the siting of 5G small cells (e.g., authorities to make decisions about public rights-of-way, fees, ensuring rural access, health and safety). While some stakeholders are seeking U.S. government support to speed 5G deployment, others are calling on the U.S. government to assess 5G risks and concerns before deploying. Congress may consider how to weigh these competing interests and concerns. Congress may consider policies to allocate additional spectrum for future 5G use. Congress may weigh the spectrum needs of 5G and the spectrum needs of other users (e.g., other commercial, federal, and educational users) to ensure essential users will have adequate access to the nation's spectrum. Congress may also consider future spectrum needs—spectrum needed for advanced 5G technologies, and industrial IoT systems—when developing spectrum policies. Congress may consider policies related to the future use of 5G and IoT devices. As 5G and IoT technologies are integrated into various industries and applied to everyday life, Congress may consider new policies related to the privacy and security of data being transmitted across millions of IoT devices and through 5G networks. Congress may consider policies implementing security measurements (i.e., best practices) in devices, systems, and networks to ensure security of data. To retain U.S. leadership in telecommunications technologies, Congress may consider supporting or encouraging investment in research and development of new telecommunications technologies (e.g., IoT applications, 6G technologies). The challenge with new technologies is that while the free and open exchange of information (e.g., in the international standards process) promotes innovation, it also presents risks (e.g., sharing intellectual capital). As global standards emerge, and equipment is built to a common standard, companies around the world may use equipment and component parts from other countries. Policies and processes that assess and address security risks with 5G supply chains may enhance the security of U.S. telecommunications networks. The deployment of 5G technologies is just beginning. Countries around the world are striving to be first to market with 5G technologies and services to capture the bulk of the economic benefits from this new technology. In the United States, private industry is leading deployment efforts. The U.S. government is supporting 5G deployment by identifying and allocating spectrum for 5G use and streamlining rules related to siting of 5G small cell. However, there are factors that may hinder 5G deployment in the United States, including the complex spectrum allocation process, local resistance to small cell rules, and limitations on trade that may affect the availability of 5G equipment and devices. Development and deployment of 5G technologies are expected to extend through 2035. The 116 th Congress may be asked to consider both issues related to the immediate deployment of 5G networks, and issues related to future use of 5G devices (including IoT devices). Policy decisions made now, at the start of the deployment, could affect the U.S. position in the race to 5G and the future use of 5G in the United States. The 115 th Congress considered several policies related to 5G technologies. Congress enacted two pieces of legislation related to 5G spectrum: The Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (RAY BAUM'S Act of 2018) ( P.L. 115-141 , Division P), was incorporated into the Consolidated Appropriations Act, 2018, which was enacted on March 23, 2018. This act includes provisions that improve and accelerate the spectrum auction process. The Making Opportunities for Broadband Investment and Limiting Excessive and Needless Obstacles to Wireless (MOBILE NOW) Act ( P.L. 115-141 , Division P, Title VI), which was also incorporated into the Consolidated Appropriations Act, 2018 (enacted on March 23, 2018), requires federal agencies to make decisions on applications and permit requests for placing wireless infrastructure on federal property in a timely and reasonable manner; this act also directs the federal government to conduct assessments of spectrum in the 3 GHz band and in the millimeter wave frequencies to determine whether authorizing licensed or unlicensed wireless broadband services in those bands is feasible, and, if so, which frequencies are best suited for such operations. The 115 th Congress considered legislation to allocate additional spectrum for mobile communications, and to expand wireless services in rural areas: The Advancing Innovation and Reinvigorating Widespread Access to Viable Electromagnetic Spectrum (AIRWAVES) Act ( S. 1682 ) was introduced in the Senate on August 1, 2017, and would have created a national pipeline of spectrum for commercial use, to incentivize industry to expand wireless services. If passed, the bill would have required the federal government to identify additional spectrum for commercial licensed and unlicensed use (including 5G), and to allocate 10% of the proceeds from the designated spectrums to expand wireless infrastructure in rural areas. The bill was referred to the Committee on Commerce, Science, and Transportation, where there was no further action on the bill. A related bill ( H.R. 4953 ) was introduced in the House on February 6, 2018, and referred to the Committee on Energy and Commerce, Subcommittee on Communications and Technology, where there was no further action on the bill. Some Members introduced resolutions in support of 5G technologies and services: S.Res. 242 and H.Res. 521 introduced in August and September 2017, respectively. The resolutions would have expressed the sense that the United States should commit to modernizing infrastructure policies to meet demand for wireless broadband services, to increase access, quality, and affordability of broadband services, and to promote economic development and digital innovation throughout the United States. If passed, the resolutions would have shown congressional support for the deployment of 5G technologies in the United States. Legislation was introduced to address the challenges of small site deployment: The Streamlining the Rapid Evolution and Modernization of Leading-edge Infrastructure Necessary to Enhance (STREAMLINE) Small Cell Deployment Act ( S. 3157 ), introduced on June 28, 2018, would have set criteria for state and local review of cell siting applications, deadlines for approvals of applications, and restrictions on fees that state and local governments may charge. The bill was referred to the Committee on Commerce, Science, and Transportation, where there was no further action on the bill. Four bills were introduced that addressed cybersecurity issues: The Securing the Internet of Things Act of 2017 or Securing IoT Act of 2017 ( H.R. 1324 ), introduced on March 2, 2017, would have required equipment using certain frequencies to meet new cybersecurity standards defined by the FCC and the National Institute of Standards and Technology. The State of Modern Application, Research, and Trends of IoT Act or SMART IoT Act ( H.R. 6032 ) was introduced on June 7, 2018. The bill would have directed the Department of Commerce to conduct a study on Internet-connected devices industry in the United States. This bill passed in the House on November 28, 2018; the bill was received in the Senate on November 29, 2018, where it was referred to the Committee on Commerce, Science, and Transportation; there was no further action on the bill. The Interagency Cybersecurity Cooperation Act ( H.R. 1340 ) introduced on March 2, 2017, would have required the FCC to create a new interagency committee to examine security reports related to telecommunications and produce recommendations for preventing and mitigating against attacks. It would have also defined communications networks as \"critical infrastructure,\" subject to national security requirements. The bill was referred to the Committee on Energy and Commerce, Subcommittee on Communications and Technology and the Committee on Oversight and Government Reform where there was no further action on this bill. The Cyber Security Responsibility Act ( H.R. 1335 ) would have required the FCC to issue rules for securing communications networks and define communications networks as \"critical infrastructure.\" The bill was referred to the Committee on Energy and Commerce, Subcommittee on Communications and Technology; there was no further action on this bill. Congress also addressed national security concerns related to telecommunications: The John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 ( P.L. 115-232 ), enacted on August 13, 2018, prohibited the heads of federal agencies from procuring telecommunications equipment or services from Huawei, ZTE Corporation, and other companies linked to the government of China that could pose a counterintelligence and national security threat to the United States. Hearings held during the 115 th Congress that have discussed 5G and related topics have included \"Race to 5G: Exploring Spectrum Needs to Maintain U.S. Global Leadership,\" Senate Committee on Commerce, Science, and Transportation, July 25, 2018. \"Realizing the Benefits of Rural Broadband: Challenges and Solutions,\" House Committee on Energy and Commerce, Subcommittee on Communications and Technology, July 17, 2018. \"Oversight of the Federal Communications Commission,\" House Committee on Energy and Commerce, Subcommittee on Communications and Technology, July 18, 2018. \"Race to 5G and Its Potential to Revolutionize American Competitiveness,\" House Committee on Energy and Commerce, Subcommittee on Communications and Technology, November 16, 2017. \"Cybersecurity of the Internet of Things,\" House Committee on Oversight and Government Reform, Subcommittee on Information Technology, October 3, 2017. ", "summary": "Since the first mobile phones were made available in the 1980s, telecommunication providers have been investing in mobile networks to expand coverage, improve services, and attract more users. First-generation networks supported mobile voice calls but were limited in coverage and capacity. To address those limitations, providers developed and deployed second-generation (2G) mobile networks, then third-generation (3G), and fourth-generation (4G) networks. Each generation offered improved speeds, greater capacity, and new features and services. In 2018, telecommunication providers began deploying fifth-generation (5G) networks to meet growing demands for data from consumer and industrial users. 5G networks are expected to enable providers to expand consumer services (e.g., video streaming, virtual reality applications), support the growing number of connected devices (e.g., medical devices, smart homes, Internet of Things), support new industrial uses (e.g., industrial sensors, industrial monitoring systems), perform advanced data analytics, and enable the use of advanced technologies (e.g., smart city applications, autonomous vehicles). 5G is expected to yield significant economic benefits. Market analysts estimate that in the United States, 5G could create up to 3 million new jobs and add $500 billion to the nation's gross domestic product (GDP). Globally, analysts estimate that 5G technologies could generate $12.3 trillion in sales activity across multiple industries and support 22 million jobs by 2035. Experience has shown that companies first to market with new products can capture the bulk of the revenues, yielding long-term benefits for those companies and significant economic gains for the countries where those companies are located. Hence, technology companies around the world are racing to develop 5G products, and some countries (i.e., central governments) are acting in support of 5G deployment. This competition to develop 5G products and capture the global 5G market is often called the \"race to 5G.\" In the race to 5G, the United States is one of the leaders, along with China and South Korea. Each country has adopted a different strategy to lead in 5G technology development and deployment. China's central government is supporting the deployment of 5G infrastructure in China. China has a national plan to deploy 5G domestically, capture the revenues from its domestic market, improve its industrial systems, and become a leading supplier of telecommunications equipment to the world. In South Korea, the central government is working with telecommunications providers to deploy 5G. South Korea plans to be the first country to deploy 5G nationwide, and to use the technology to improve its industrial systems. In the United States, private industry is leading 5G deployment. U.S. providers, competing against each other, have conducted 5G trials in several cities and were the first in the world to offer 5G services commercially. The U.S. government has supported 5G deployment, making spectrum available for 5G use and streamlining processes related to the siting of 5G equipment (e.g., small cells). While each country has taken a different approach to capturing the 5G market, there are factors that drive the timeline for all deployments, including international decisions on standards and spectrum. In the United States, 5G deployment may also be affected by the lengthy spectrum allocation process, resistance from local governments to federal small cell siting rules, and limitations on trade that may affect availability of equipment. The 116th Congress may monitor the progress of 5G deployment in the United States and the U.S. position in the race to 5G. Congress may consider policies that may affect 5G deployment, including policies related to spectrum allocation, trade restrictions, and local concerns with 5G deployment. Policies that support 5G deployment while also protecting national and local interests could provide significant consumer benefits, help to modernize industries, give U.S. companies an advantage in the global economy, and yield long-term economic gains for the United States. In developing policies, Members may consider the economic and consumer benefits of 5G technologies, as well as other interests, such as the need to preserve spectrum for other users and uses, the protection of national security and intellectual property when trading, the privacy and security of 5G devices and systems, and the respect of local authorities and concerns during 5G deployment.", "document_type": "crs"}
{"report": "Human activities, particularly fossil fuel combustion and industrial operations, have raised the atmospheric concentration of carbon dioxide (CO 2 ) and other greenhouse gases (GHG) by about 40% over the past 150 years. Almost all climate scientists agree that these GHG increases have contributed to a warmer climate today and that, if they continue, will contribute to future climate change. Although a range of actions that seek to reduce GHG emissions are currently underway or being developed on the international and sub-national level (e.g., individual state actions or regional partnerships) , federal policymakers and stakeholders have different viewpoints over what to do, if anything, about future climate change and related impacts. Congressional interest in GHG emission control legislation has fluctuated over the last 15 years. Proposals to limit GHG emissions have often focused on market-based approaches, such as a GHG emission cap-and-trade program or a GHG emissions tax (often referred to as a carbon tax) or fee. In general, a market-based approach would place a price on GHG emissions (e.g., through an emissions cap or emission tax or fee), allowing covered entities to determine their pathway of compliance. This report provides a comparison of the legislative proposals from the 108 th through the 116 th Congresses that were and are designed primarily to reduce GHG emissions using market-based approaches such as cap-and-trade or carbon tax/fee programs. During this time frame, Members introduced multiple energy-related proposals that would have likely resulted in reductions in GHG emissions—legislation that promotes renewable energy or encourages carbon capture and sequestration —but these bills are not discussed in this report. In addition, starting in the 112 th Congress, some Members have introduced resolutions in the House and Senate expressing the view that a carbon tax is not in the economic interests of the United States. In September 2018, the House passed a resolution \"expressing the sense of Congress that a carbon tax would be detrimental to the United States economy\" ( H.Con.Res. 119 ). An analogous resolution was not introduced in the Senate in the 115 th Congress. As Figure 2 illustrates, between the 108 th and 111 th Congresses, most of the introduced bills would have established cap-and-trade systems. Between the 112 th and 115 th Congresses, most of the introduced bills would have established carbon tax or emissions fee programs. In the 111 th Congress, Members offered multiple and varied proposals, ultimately resulting in the House passage of H.R. 2454 , an economy-wide cap-and-trade bill. A companion bill in the Senate ( S. 1733 ) was ordered reported from the Committee on Environment and Public Works, but the bill was never brought to the Senate floor for consideration. In subsequent Congresses, some Members continued to offer GHG emission control legislation, but these proposals saw minimal legislative activity. During that time frame, the U.S. Environmental Protection Agency (EPA) used existing Clean Air Act authorities to promulgate GHG emission standards for key sectors, including the electric power and transportation sectors. EPA rulemakings in this area—particularly the 2015 Clean Power Plan final rule and the 2018 Affordable Clean Energy proposed rule —generated considerable interest and debate in Congress. The proposals from the 116 th Congress range in their scope of emissions covered from CO 2 emissions from fossil fuel combustion to multiple GHG emissions from a broader array of sources. In addition, the proposals differ by how, to whom, and for what purpose the fee revenues or allowance value would be applied. Some economic analyses indicate that policy choices to distribute the tax, fee, or emission allowance revenue would yield greater economic impacts than the direct impacts of the carbon price. The first section of this report provides background information on cap-and-trade and carbon tax or emission fee programs. The second section compares the GHG emission reduction legislation in each Congress (108 th -116 th ). Over the last 15 years, broad GHG emission reduction legislation has generally involved market-based approaches—such as cap-and-trade systems or carbon tax programs—that rely on private sector choices and market forces to minimize the costs of emission reductions and spur innovation. Both carbon tax and emissions cap-and-trade programs would place a price—directly or indirectly—on GHG emissions or their inputs (e.g., fossil fuels), both would increase the price of fossil fuels for the consumer, and both would reduce GHG emissions to some degree. Preference between the two approaches ultimately depends on which variable policymakers prefer to precisely control: emission levels or emission prices. As a practical matter, these market-based policies may include complementary or hybrid designs, incorporating elements to increase certainty in price or emissions quantity. For example, legislation could provide mechanisms for adjusting a carbon tax/fee if a targeted range of emissions reductions were not achieved in a given period. Alternatively, legislation could include mechanisms that would bound the range of market prices for a cap-and-trade system's emissions allowances to improve price certainty. A GHG cap-and-trade system creates an overall limit, or cap, on GHG emissions from certain sources. Cap-and-trade programs can vary by the sources covered, which often include major emitting sectors (e.g., power plants and carbon-intensive industries), fuel producers and/or processors (e.g., coal mines or petroleum refineries), or some combination of both. The emissions cap is partitioned into emission allowances . Typically, in a GHG cap-and-trade system, one emission allowance represents the authority to emit one metric ton of carbon dioxide-equivalent (mtCO 2 e). The emissions cap creates a new commodity—the emission allowance. Policymakers may decide to distribute the emission allowances to covered entities at no cost (based on, for example, previous years' emissions), sell the allowances (e.g., through an auction), or use some combination of these strategies. The distribution of emission allowances is typically a source of significant debate during a cap-and-trade program's development, because the allowances have monetary value. At the end of each established compliance period (e.g., a calendar year or multiple years), covered sources submit emission allowances to an implementing agency to cover the number of tons emitted. If a source did not provide enough allowances to cover its emissions, the source would be subject to penalties. Covered sources would have a financial incentive to make reductions beyond what is required, because they could (1) sell or trade unused emission allowances to entities that face higher costs to reduce their facility emissions, (2) reduce the number of emission allowance they need to purchase, or (3) bank them, if allowed, to use in a future year. The use of emission offsets as a compliance option received attention during debate over cap-and-trade programs. An offset is a measurable reduction, avoidance, or sequestration of GHG emissions from a source not covered by an emission reduction program. Economic analyses of cap-and-trade proposals concluded that offset treatment (i.e., whether or not to allow their use and, if so, to what degree) would have a substantial impact on overall program cost. This is because some emissions and sources often not covered in cap-and-trade programs can reduce emissions at a lower cost per ton than many typically covered sources. However, the use of offsets generates considerable controversy, primarily over the concern that difficult-to-assess or fraudulent offsets could create uncertainty about the quantity of emission reductions. In addition, other mechanisms—such as allowance banking or borrowing—may be included to increase the flexibility of the program and, generally, reduce the costs. In a carbon tax or emissions fee program, policymakers attach a price to GHG emissions or the inputs that create them. A carbon tax/fee on emissions or emissions inputs—namely fossil fuels—would increase the relative price of the more carbon-intensive energy sources. This result is expected to spur innovation in less carbon-intensive technologies and stimulate other behavior that may decrease emissions. Economic modeling indicates that a carbon tax/fee approach could achieve emission reductions, the level of which would depend on the scope and stringency (i.e., tax or fee level) of the program. For example, to address emissions from fossil fuel combustion—76% of total U.S. GHG emissions —policymakers could apply a tax/fee to fossil fuels at approximately 3,000 entities, including coal mines, petroleum refineries, and entities required to report natural gas deliveries. A carbon tax/fee would generate a new revenue stream. The magnitude of the revenues would depend on the scope and rate of the tax or fee, the responsiveness of covered entities in reducing their potential emissions, and multiple other market factors. A 2016 Congressional Budget Office study estimated that a $25/ton carbon tax would yield approximately $100 billion in the first year of the program. When designing a carbon tax/fee system, one of the more controversial and challenging questions for policymakers is how, to whom, and for what purpose the new tax or fee revenues could be applied. Congress would face the same issues that would be encountered during a debate over emission allowance value distribution in a cap-and-trade system. When deciding how to allocate the revenues, policymakers would encounter trade-offs among objectives. The central trade-offs involve minimizing economy-wide costs, lessening the costs borne by specific groups—particularly low-income households and displaced workers or communities—and supporting a range of specific policy objectives. A primary argument against a carbon tax/fee system (and a cap-and-trade program) is the concern about the economy-wide costs that a carbon price could impose. The potential costs would depend on a number of factors, including the magnitude, design, and use of revenues of the carbon tax or fee. Others who may oppose a carbon tax system express opposition to federal taxes in general or the possibility that the revenues would enable greater federal spending. Owners of coal resources, in particular, would likely lose asset values under a carbon tax system—as under a cap-and-trade system—to the degree that coal becomes less competitive under the costs of emission reductions. This section compares GHG emission reduction legislation from the 108 th Congress to the 116 th Congress by including a separate legislative table for each Congress. The tables compare the bills by their overall framework, scope, stringency, and selected design elements. Categories of comparison include General framework: the proposed program structure—emissions cap, emissions tax or fee, or some combination of both—and scope in terms of emissions covered (multiple GHG emissions or just CO 2 emissions). Covered entities/materials: the industries, sectors, or materials that would be subject to the program. Emissions limit or target: the GHG or CO 2 emissions target or cap for a particular year. Some targets/caps would apply only to covered sources; others apply to total U.S. GHG emissions. Distribution of allowance value or tax revenue: how emission allowance value or carbon tax or fee revenue would be distributed (if applicable). Offset and international allowance treatment: the degree to which offsets and international allowances could be used for compliance purposes and the types of offset activities that would qualify. Some proposals limit offsets by percentage of required reductions; others limit offsets as a percentage of allowance submissions. Mechanism to address carbon-intensive imports: a central concern with a U.S. GHG reduction program is that it could raise U.S. prices more than goods manufactured abroad, potentially creating a competitive disadvantage for some domestic businesses, particularly carbon-intensive, trade-exposed industries. Policymakers could address these potential impacts in several ways—for example, through border adjustments, tax rebates, or emission allowances provided at no cost to selected industrial sectors. Additional GHG reduction measures: other mechanisms that are designed to further reduce GHG emissions that are not covered in the central program. ", "summary": "Congressional interest in market-based greenhouse gas (GHG) emission control legislation has fluctuated over the past 15 years. During that time, legislation has often involved market-based approaches, such as a cap-and-trade system or a carbon tax or fee program. Both approaches would place a price—directly or indirectly—on GHG emissions or their inputs (e.g., fossil fuels), both would increase the price of fossil fuels, and both would reduce GHG emissions to some degree. Both would allow emission sources to choose the best way to meet their emission requirements or reduce costs, potentially by using market forces to minimize national costs of emission reductions. Preference between the two approaches ultimately depends on which variable policymakers prefer to precisely control—emission levels or emission prices. A primary policy concern with either approach is the economic impacts that may result from the program. Expected energy price increases could have both economy-wide impacts (e.g., on the U.S. gross domestic product) and disproportionate effects on specific industries and particular demographic groups. The degree of these potential effects would depend on a number of factors, including the magnitude, design, and scope of the program and the use of tax or fee revenues or emission allowance values. This report includes a separate table for each Congress, comparing GHG emission reduction legislation by the following characteristics: General framework: the proposed program structure and scope in terms of emissions covered, multiple GHG emissions, or just carbon dioxide (CO2) emissions. Covered entities/materials: a list of the industries, sectors, or materials that would be subject to the program. Emissions limit or target: the GHG or CO2 emissions target or cap for a specified year. Distribution of allowance value or tax revenue: how emission allowance value or carbon tax or fee revenue would be distributed. Offset and international allowance treatment: the degree to which offsets and international allowances could be used for compliance purposes and the types of offset activities that would qualify. Mechanism to address carbon-intensive imports: a U.S. GHG reduction program may create a competitive disadvantage for some domestic businesses, particularly carbon-intensive, trade-exposed industries. Additional GHG reduction measures: other mechanisms designed to further reduce GHG emissions that are not covered in the central program. As the figure below illustrates, between the 108th and 111th Congresses, most of the introduced bills would have established cap-and-trade systems. Between the 112th and 115th Congresses, most of the introduced bills would have established carbon tax or emissions fee programs. The proposals from the 116th Congress range in their scope of emissions covered from CO2 emissions from fossil fuel combustion to multiple GHG emissions from a broader array of sources. In addition, the proposals differ by how, to whom, and for what purpose the fee revenues or allowance value would be applied. Some economic analyses indicate that policy choices to distribute the tax, fee, or emission allowance revenue would yield greater economic impacts than the direct impacts of the carbon price.", "document_type": "crs"}
{"report": "The federal government supports the development of airport infrastructure in three different ways. First, the Airport Improvement Program (AIP) provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations such as runways and taxiways. Second, Congress has authorized airports to assess a local passenger facility charge (PFC) on each boarding passenger, subject to specific federal approval. PFC revenues can be used for a broader range of projects than AIP funds, including \"landside\" projects such as passenger terminals and ground access improvements. Third, federal law grants investors preferential income tax treatment on interest income from bonds issued by state and local governments for airport improvements (subject to compliance with federal rules). Airports may also draw on state and local funds and on operating revenues, such as lease payments and landing fees. A federal role in airport infrastructure first developed during World War II. Prior to the war, airports were a local or private responsibility, with federal support limited to the tax exclusion of municipal bond interest. National defense needs led to the first major federal support for airport construction. After the war, the Federal Airport Act of 1946 (P.L. 79-377) continued federal a id, although at lower levels than during the war years. Initially, much of this spending supported conversion of military airports to civilian use. In the 1960s, substantial funding also was used to upgrade and extend runways for use by commercial jets. In 1970, Congress responded to increasing congestion, both in the air and on the ground at U.S. airports, by passing two laws. The first, the Airport and Airway Development Act, established the forerunner programs of AIP: the Airport Development Aid Program and the Planning Grant Program. The second, the Airport and Airway Revenue Act of 1970, dealt with the revenue side of airport development, establishing the Airport and Airway Trust Fund (AATF, also referred to as the Aviation Trust Fund, and in this report, the trust fund). The Airport and Airway Improvement Act of 1982 ( P.L. 97-248 ; the 1982 Act) created the current AIP and reactivated the trust fund. For a more detailed legislative history of AIP, see Appendix A of this report. Eight years later, amid concerns that the existing sources of funds for airport development would be insufficient to meet national airport needs, the Aviation Safety and Capacity Expansion Act of 1990 (Title IX of the Omnibus Budget Reconciliation Act of 1990, P.L. 101-508 ) allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a passenger facility charge on each paying passenger boarding an aircraft at their airports. Different airports use different combinations of AIP funding, PFCs, tax-exempt bonds, state and local grants, and airport revenues to finance particular projects. Small airports are more likely to be dependent on AIP grants than large or medium-sized airports. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs. Each of these funding sources places various legislative, regulatory, or contractual constraints on airports that use it. The availability and conditions of one source of funding may also influence the availability and terms of other funding sources. In a 2015 study, the U.S. Government Accountability Office (GAO) found that airport-generated net income financed about 38% of airports' capital spending, AIP 33%, PFCs 18%, capital contributions by airport sponsor (often a state or municipality) or by other sources such as an airline or tenant 6%, and state grants nearly 5%. AIP provides federal grants to airports for airport development and planning. Participants range from very large publicly owned commercial airports to small general aviation airports that may be privately owned but are available for public use. AIP funding is usually limited to construction of improvements related to aircraft operations, such as runways and taxiways. Commercial revenue-producing facilities are generally not eligible for AIP funding, nor are operating costs. The structure of AIP funds distribution reflects congressional priorities and the objectives of assuring airport safety and security, increasing airport capacity, reducing congestion, helping fund noise and environmental mitigation costs, and financing small state and community airports. The main financial advantage of AIP to airports is that, as a grant program, it can provide funds for capital projects without the financial burden of debt financing, although airports are required to provide a modest local match to the federal funds. Limitations on the use of AIP grants include the range of projects that AIP can fund and the requirement that recipients adhere to all program regulations and grant assurances. Federal law requires the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States. This appears as a biannual Federal Aviation Administration (FAA) publication called the National Plan of Integrated Airport System s (NPIAS) . For an airport to receive AIP funds, it must be listed in the NPIAS. AIP program structure and authorizations are set in FAA authorization acts. Modifications have been made to AIP through the years, but the basic program structure remains the same. The most recent act, the FAA Reauthorization Act of 2018 ( P.L. 115-254 ), authorized AIP funding through FY2023. The trust fund was designed to assure an adequate and consistent source of funds for federal airport and airway programs. It is the primary funding source for most FAA activities in addition to federal grants to airports. These include facilities and equipment (F&E); research, engineering, and development (R, E&D); and FAA operations and maintenance (O&M). Congress determines how much the trust fund will be allowed to expend for various purposes, including the AIP. The money flowing into the Airport and Airway Trust Fund comes from a variety of aviation-related taxes. These taxes were authorized by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) and reauthorized by the 2018 FAA reauthorization act. Revenue sources include the following: 7.5% ticket tax, $4.20 flight segment tax, 6.25% tax on cargo waybills, 4.4 cents per gallon on commercial aviation fuel, 19.4 cents per gallon on general aviation gasoline, 21.9 cents per gallon on general aviation jet fuel, 14.1 cents per gallon fractional ownership surtax on general aviation jet fuel, $18.60 international arrival tax, $18.60 international departure tax, and 7.5% \"frequent flyer\" award tax. In most years since the trust fund was established, the revenues plus interest on the unexpended balances brought in more money than was being paid out. This led to the growth in the end-of-year unexpended balances in the trust fund. At times these unexpended balances are inaccurately referred to as a surplus. In practice, FAA may have committed unexpended balances to fund particular airport projects, so those balances may not be available for other purposes. Most air carriers have altered their pricing structures in ways that have implications for the trust fund. Ancillary fees are now commonly charged for services such as checked baggage that in the past were included in the ticket price. Such fees are not subject to the 7.5% ticket tax. Had the $4.57 billion in baggage fees collected in 2017 been subject to the ticket tax, the trust fund might have received more than $343 million in additional revenue. AIP spending authorized and the amounts actually made available for grants from the aviation trust fund since FY2000 are illustrated in Table 1 . After trending upward from FY1982 to FY1992, grant funding approved in annual appropriations declined through the mid-1990s as part of federal deficit reduction efforts, leaving large gaps between authorized AIP spending levels and the amounts the program was actually allowed to expend. This occurred despite provisions in place since 1976 designed to ensure that federal capital spending for airports is fully funded at the authorized level (see Text B ox ). The Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century (AIR21; P.L. 106-181 ), enacted in 2000, provided major increases in AIP's authorization, starting in FY2001. During FY2001-FY2006 AIP was funded near its fully authorized levels. The amount available for grants peaked at $3.47 billion in FY2008. From FY2008 through FY2011, when AIP was authorized by a series of authorization extension acts, appropriators set the program's annual obligation limitation at $3.515 billion. The 2012 FAA Modernization and Reform Act authorized funding through FY2015 at an annual level of $3.35 billion. In July 2016, the FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) was passed to further extend the authorization of AIP at the annual level of $3.35 billion through September 30, 2017. The 115 th Congress passed a six-month extension ( P.L. 115-63 ) of aviation funding and programs through the end of March 2018. Subsequently, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), provided a further extension through the end of FY2018. In addition to the annual funding of $3.35 billion, the 2018 appropriations act provided a $1.0 billion appropriation from the general fund to the AIP discretionary grants program. The Secretary of Transportation was directed to keep this supplemental funding available through September 30, 2020, and to give priority to nonprimary, nonhub, and small hub airports. These supplemental funds are not included in the AIP funding summary or discussion in this report, as FAA is in the process of evaluating applications and distributing funds. The FAA Reauthorization Act of 2018 ( P.L. 115-254 ) funded AIP from FY2019 through FY2023 at an annual level of $3.35 billion. It also authorized supplemental annual funding from the general fund to the AIP discretionary grants program ($1.02 billion in FY2019, $1.04 billion in FY2020, $1.06 billion in FY2021, $1.09 billion in FY2022, and $1.11 billion in FY2023), and required at least 50% of these additional funds to be available to nonhub and small hub airports. In February 2019, Congress passed the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). The act provided a $500 million supplemental appropriation from the general fund to the AIP discretionary grants program and required that this money remain available through September 30, 2021. The distribution system for AIP grants is complex. It is based on a combination of formula grants (also referred to as apportionments or entitlements) and discretionary funds. Each year the entitlements are first apportioned by formula to specific airports or types of airports. Once the entitlements are satisfied, the remaining funds are defined as discretionary funds. Airports apply for discretionary funds for projects in their airport master plans. Formula grants and discretionary funds are not mutually exclusive, in the sense that airports receiving formula funds may also apply for and receive discretionary funds. Grants are generally awarded directly to airports. Legislation sets forth definitions of airports that are relevant both in discussions of the airport system in general and of AIP funding distribution in particular (see Appendix B ). The statutory provisions for the allocation of both formula and discretionary funds are based on these definitions. Entitlements are funds that are apportioned by formula to airports and may generally be used for any eligible airport improvement or planning project. These funds are divided into four categories: primary airports, cargo service airports, general aviation airports, and Alaska supplemental funds (see Appendix B for a full list of airport definitions). Each category distributes AIP funds by a different formula (49 U.S.C. §47114). Most airports have up to three years to use their apportionments. Nonhub commercial service airports have up to four years. The formula distributions are contingent on an annual AIP obligation limitation of $3.2 billion or more. If this threshold is not met in a particular fiscal year, most formulas revert to prior authorized funding formulas. Primary Airports. The apportionment for airports that board more than 10,000 passengers each year is based on the number of boardings (also referred to as enplanements) during the prior calendar year. The amount apportioned for each fiscal year is equal to double the amount that would be received according to the following formulas: $7.80 for each of the first 50,000 passenger boardings; $5.20 for each of the next 50,000 passenger boardings; $2.60 for each of the next 400,000 passenger boardings; $0.65 for each of the next 500,000 passenger boardings; and $0.50 for each passenger boarding in excess of 1 million. The minimum allocation to any primary airport is $1 million. The maximum is $26 million. Cargo Service Airports. Some 3.5% of AIP funds subject to apportionment are apportioned to airports served by all-cargo aircraft with a total annual landed weight of more than 100 million pounds. The allocation formula is the proportion of the individual airport's landed weight to the total landed weight at all cargo service airports. General Aviation Airports. General aviation, reliever, and nonprimary commercial service airports are apportioned 20% of AIP funds subject to apportionment. From this share, all airports, excluding all nonreliever primary airports, receive the lesser of the following: $150,000; or one-fifth of the estimated five-year costs for airport development for each of these airports as listed in the most recent NPIAS. Any remaining funds are distributed according to a state-based population and area formula. FAA makes the project decisions on the use of these funds in consultation with the states. Although FAA has ultimate control, some states view these funds as an opportunity to address general aviation needs from a statewide, rather than a local or national, perspective. Alaska Supplemental Funds. Funds are apportioned to airports in Alaska to assure that Alaskan airports receive at least twice as much funding as they did under the Airport Development Aid Program in 1980. Foregone Apportionments. Large and medium hub airports that collect a passenger facility charge of $3 or less have their AIP formula entitlements reduced by an amount equal to 50% of their projected PFC revenue for the fiscal year until they forgo or give back 50% of their AIP formula grants. In the case of PFC above the $3 level the percentage forgone is 75%. A special small airport fund, which provides grants on a discretionary basis to airports smaller than medium hub, gets 87.5% of these foregone funds. The discretionary fund gets the remaining 12.5%. The discretionary funds (49 U.S.C. §§47115-47116) include the money not distributed under the apportioned entitlements, as well as the forgone PFC revenues that were not deposited into the small airport fund. AIP discretionary funding for FY2018 was about 9.4% of the total AIP funding. Discretionary grants are approved by FAA based on project priority and other selection criteria. Figure 1 illustrates the composition of both apportioned and discretionary grants, based on FY2018 data. Despite its name, the discretionary fund is not allocated solely at FAA's discretion. Allocations are subject to the following three set-asides and certain other spending criteria: Airport Noise Set-Asides . At least 35% of discretionary funds are set aside for noise compatibility planning and for carrying out noise abatement and compatibility programs. Military Airport Program . At least 4% of discretionary funds are set aside for conversion and dual use of up to 15 current and former military airports. The program allows funding of some projects not normally eligible under AIP. Grants for Reliever Airports . There is a set-aside of two-thirds of 1% of discretionary funds for reliever airports in metropolitan areas suffering from flight delays. The Secretary of Transportation is also directed to see that 75% of the grants made from the discretionary fund are used to preserve and enhance capacity, safety, and security at primary and reliever airports, and also to carry out airport noise compatibility planning and programs at these airports. From the remaining 25%, FAA is required to set aside $5 million for the testing and evaluation of innovative aviation security systems. Subject to these limitations and the three set-asides, the Secretary of Transportation, through FAA, has discretion in distribution of grants from the remainder of the discretionary fund. Under this program, FAA provides funds directly to participating states for projects at airports classified as other than primary airports. Each participating state receives a block grant made up of the state's apportionment (formula) funds and available discretionary funds. A block grant program state is responsible for selecting and funding AIP projects at the small airports in the state. In making the selections, the participating states are required to comply with federal priorities. Each block grant state is responsible for project administration as well as most of the inspection and oversight roles normally assumed by FAA. The states that currently participate in the state block grant program are Georgia, Illinois, Michigan, Missouri, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin. For AIP projects, the federal government share differs depending on the type of airport. The federal share, whether funded by formula or discretionary grants, is as follows: 75% for large and medium hub airports (80% for noise compatibility projects); 90% for other airports; \"not more than\" 90% for airport projects in states participating in the state block grant program; 70% for projects funded from the discretionary fund at airports receiving exemptions under 49 U.S.C. §47134, the pilot program for private ownership of airports; airports reclassified as medium hubs due to increased passenger volumes may retain eligibility for up to a 90% federal share for a two-year transition period; certain economically distressed communities receiving subsidized air service may be eligible for up to a 95% federal share of project costs. This cost-share structure means that smaller airports pay a lower share of AIP-funded project costs than larger airports. The airports themselves must raise the remaining share from other sources. Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, such as general aviation and reliever airports, which received over 25% of AIP grants distributed in FY2018. Air carriers have objected to this allocation, pointing out that their passengers and freight shippers pay the vast majority of revenue flowing into the trust fund. General aviation interests, however, defend AIP grants to noncommercial airports. Figure 2 shows the share of AIP grants awarded in FY2018, by value, broken out by airport type. Figure 3 displays AIP grants awarded by type of project for FY2018. For the most part, AIP development grants support \"airside\" development projects such as runways, taxiways, aprons, navigation aids, lighting, and airside safety projects. Substantial AIP funds also go for state block grants and noise planning and abatement. AIP spending on roads is generally restricted to roads on or entering airport property. In cases in which a primary or reliever airport may want to begin an AIP-eligible project without waiting for the funds to become available, FAA is authorized to issue a letter of intent (LOI). If it does so, the LOI states that eligible project costs, up to the allowable federal share, will be reimbursed according to a schedule set forth in the letter. Although the LOI technically does not obligate the federal government, it is an indication of FAA's approval of the scope and timing of the project, as well as the federal intent to fund the project in future years. Because most primary airports fund their major development projects with tax-exempt revenue bonds, the evidence of federal support that the LOI provides is likely to lead to favorable bond interest rates. The airport may proceed with the project with assurance that all AIP-allowable costs specified in the LOI will remain eligible for reimbursement over the life of the LOI. Both entitlement and discretionary funds are used to fulfill LOIs. FAA limits the total of discretionary funds in all LOIs subject to future obligation to roughly 50% of forecast available discretionary funds. LOIs have certain eligibility restrictions. They can only be issued to cover projects at primary and reliever airports. The proposed airport development project or action must \"enhance airfield capacity in terms of increased aircraft operations, increased aircraft seating or cargo capacity, or reduced airfield operational delays.\" For large and medium hub airports, the project must enhance \"system-wide airport capacity significantly.\" Airports' grant applications are conditioned on assurances regarding future airport operations. Examples of such assurances include making the airport available for public use on reasonable conditions and without unjust economic discrimination (against all types, kinds, and classes of aeronautical activities); charging air carriers making similar use of the airport substantially comparable amounts; maintaining a current airport layout plan; making financial reports to FAA; and expending airport revenue only on capital or operating costs at the airport. Within the AIP context, assurances are a means of guaranteeing the implementation of federal policy. Obligations derived from airports' assurances extend beyond the formal closure of AIP grant-supported projects. Obligations related to the use, operation, and maintenance of an airport remain in effect for the expected life of the improvement, up to 20 years. In the case of the purchase of land with AIP funds, the federal obligations do not expire. Airports may request that FAA release them from their AIP contractual obligations. Typically, as a condition of the release, the airport sponsor must either reimburse the federal government for the AIP grants (in the case of land grants, the federal share of the fair market value of the land) or reinvest the amount in an approved AIP project (see Text B ox ). When airport managers or interest groups express concerns about the \"strings attached\" to AIP funding, they are usually referring to AIP grant assurances. In 1990, federal deficits and expected tight budgets led to concerns that the Airport and Airway Trust Fund and other existing sources of funds for airport development would be insufficient to meet national airport needs. This led to authorization of a new user charge, the Passenger Facility Charge (PFC). The PFC was seen as a complementary funding source to AIP. The Aviation Safety and Capacity Expansion Act of 1990 allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a fee on each paying passenger boarding an aircraft at their airports. Initially, there was a $3 cap on each airport's PFC and a $12 limit on the total PFCs that a passenger could be charged per round trip. The PFC is a state, local, or port authority fee, not a federally imposed tax deposited into the Treasury. Because of the complementary relationship between AIP and PFCs, PFC provisions are generally folded into the sections of FAA reauthorization legislation dealing with AIP. The money raised from PFCs must be used to finance eligible airport-related projects. Unlike AIP funds, PFC funds may be used to service debt incurred to carry out projects. Legislation in 2000 raised the PFC ceiling to $4.50, with an $18 limit on the total PFCs that a passenger can be charged per round trip. To impose a PFC above $3 an airport has to show that the funded projects will make significant improvements in air safety, increase competition, or reduce congestion or noise impacts on communities, and that these projects could not be fully funded by using the airport's AIP formula funds or AIP discretionary grants. Large and medium hub airports imposing PFCs above the $3 level forgo 75% of their AIP formula funds. PFCs at large and medium hub airports may not be approved unless the airport has submitted a written competition plan to FAA, which includes information about the availability of gates, leasing arrangements, gate-use requirements, controls over airside and ground-side capacity, and intentions to build gates that could be used as common facilities. The FAA Modernization and Reform Act of 2012 included minor changes to the PFC program. The act made permanent the trial program that authorized nonhub small airports to impose PFCs. The act also required GAO to study alternative means of collecting PFCs without including the PFC in the ticket price. The FAA Reauthorization Act of 2018 did not include significant changes to the PFC program and maintained the $4.50 PFC cap, with a maximum charge of $18 per round-trip flight. It did include a provision, however, that required a qualified organization to conduct a study assessing the infrastructure needs of airports and existing financial resources for commercial service airports and to make recommendations on the actions needed to upgrade the national aviation infrastructure system. Unlike AIP grants, of which over 67% in FY2018 went to airside projects (runways, taxiways, aprons, and safety-related projects), PFC revenues are heavily used for landside projects, such as terminals and transit systems on airport property, and for interest payments. Table 2 shows the AIP grant awards and PFC approvals by project type in FY2018. Annual system-wide PFC collections grew from $85.4 million in 1992 to over $3.4 billion in 2018. The PFC statutory language lends itself to a broader interpretation of \"capacity enhancing\" projects, and the implementing regulations are less constraining than those for AIP funds. Air carriers, which historically have preferred funding to be dedicated to airside projects, must be notified and provided with an opportunity for consultation about airports' proposals to fund projects with PFC revenues. They are generally less involved in the PFC project planning and decisionmaking process than is the case with AIP projects. The difference in the pattern of project types may also be influenced by the fact that larger airports, which collect most of the PFC revenue, tend to have substantial landside infrastructure, whereas smaller airports that are much more dependent on AIP funding have comparatively limited landside facilities. Bonds have long been a major source of funding for capital projects at primary airports. According to Bond Buyer, a trade publication, airports raised approximately $17.4 billion in 84 bond issues in 2018, a substantial increase over the $14.7 billion raised in 116 issues in 2017. Most airport-related bonds are classified as tax-exempt private activity bonds (PABs). These bonds, issued by a local government or public authority, allow the use of landing fees, charges on airport users, and property taxes on privately controlled on-airport buildings, such as cargo facilities, to service debt without obligating tax revenue. Their tax-exempt status enables airports to raise funds more cheaply than would otherwise be the case because investors enjoy a federal income tax exclusion on interest paid on the bonds. In some cases, revenue from PFCs may be used to service the bonds. PABs may be used to build facilities that are directly related and essential to servicing aircraft, enabling aircraft to take off and land, and transferring passengers or cargo to or from aircraft. Normally, airport bonds might be classified as taxable PABs because they are used to finance facilities where more than 90% of the activity is private and more than 90% of the repayment is from revenue generated by the facility. Issuers of taxable PABs must pay higher interest rates than required on tax-exempt bonds, to compensate investors for the taxes due on interest income. Congress therefore created an exception allowing airports that are owned by governmental entities to issue \"qualified\" PABs that are tax-exempt.  The majority of airport bonds are considered by the Internal Revenue Service to be \"qualified\" PABs. Some recent proposals would allow privately owned airports to receive the same tax-preferred treatment of their bonds as airports owned by public authorities. A possible precedent for this is the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ( P.L. 109-59 , §1143; SAFETEA-LU), which allowed for up to $15 billion in tax-exempt bond financing for highways or freight transfer facilities that would otherwise not qualify for tax-exempt financing. Many of the supporters of the SAFETEA-LU provisions envisioned expanded eligibility for PABs as a means of facilitating public-private partnerships between a public authority and an outside investor. In the airport context, this would be analogous to an airport authority agreeing to a long-term lease with a private investor who would have the ability to enter the market for tax-exempt bonds to finance improvements at the airport and, perhaps, also to finance the purchasing costs of the lease itself. By statute, the safe operation of airports is the highest aviation priority. Other priorities established by Congress include increasing capacity to the maximum feasible extent, minimizing noise impacts, and encouraging efficient service to state and local communities (i.e., support for general aviation airports). But there are significant disagreements about the appropriate degree of federal participation in airport development and finance and about the specific types of expenditure that should be given priority within AIP. Airline and airport operators tend to view the fully authorized funding of the program as a good thing. An alternative view, however, is that too much has been spent on AIP, particularly at smaller airports that do not play a significant role in commercial aviation. The assessment of airport capital needs is fundamental to determining the appropriate federal support needed to foster a safe and efficient national airport system. The federal government's interest goes beyond capacity issues to include implementation of federal safety and noise policies. Both FAA and the Airports Council International-North America (ACI-NA) have issued projections of airports' long-term financial needs. In its most recent NPIAS report, FAA estimated that the national system's capital needs for FY2019-FY2023 will total $35.1 billion (an annual average of approximately $7 billion). The ACI-NA infrastructure needs survey resulted in an estimate of $128.1 billion over the same years (an annual average of approximately $25.6 billion). The main reason for the widely differing estimates was disparate views on what kinds of airport projects to include. The NPIAS report was based on information taken from airport master plans and state system plans, but FAA planners screened out planned projects not justified by aviation activity forecasts or not eligible for AIP grants. Only designated NPIAS airports were included in the FAA study. Implicit in this methodology is that the planning has been carried through to the point where financing is identified. Not all projects used to develop the NPIAS estimates are actually completed, or in some cases even begun, within the range of years covered in the NPIAS estimates. ACI-NA argues that the NPIAS underestimates AIP eligible needs because not all such needs will be in the current airport plans. The ACI-NA study reflects the broader business view of major airport operators and casts a substantially wider net. It includes projects funded by PFCs, bonds, or state or local funding; airport-funded air traffic control facilities; airport- or TSA-funded security projects; \"necessary\" AIP-ineligible projects such as parking facilities, hangars, revenue portions of terminals, and off-airport roads/transit facilities; and AIP-eligible projects not reported to FAA in the belief that there would be a low probability of receiving additional AIP funding. Its 2019-2023 infrastructure needs survey, for example, included major airport terminal projects that are ineligible for AIP grants. The ACI-NA study also includes projects without identified funding sources. The ACI-NA estimate is higher than the FAA estimate because of the wider net it casts and because it is adjusted for projected inflation. The estimates are important because the primary AIP reauthorization issue is the program's appropriate level of funding. Because the ACI-NA airport needs projection includes much that is not eligible for AIP grants, its accuracy may not be as critical in evaluating appropriate AIP funding levels as that of the NPIAS projections. On the other hand, the broader ACI-NA estimate may be more significant for policy choices related to bond issuance and PFCs, since these sources fund a broader range of projects than AIP. In 2004, then-FAA Administrator Marion C. Blakey stated that the agency's goal was to increase total capacity at the top 35 U.S. airports by 30% over a 10-year period. FAA's Operational Evolution Plan (OEP) is intended to increase the capacity and efficiency of the National Airspace System (NAS) over a 10-year period to keep up with the expected growth in demand for air travel and air cargo. In support of that goal, FAA released a study focused on the 35 busiest airports, Capacity Needs in the National Airspace System: An Analysis of Airport and Metropolitan Area Demand and Operational Capacity in the Future (also referred to as FACT1). The study projected 18 airports would need additional capacity by 2020. In 2007, FACT1 was updated by a second study, FACT2. FACT2 expanded the study to include 21 non-OEP airports that were identified as having the potential to be capacity constrained or were in capacity-constrained metropolitan areas. The study examined airports that would need capacity increases and also projected which airports would need capacity increases in 2015 and 2025. It identified four airports plus the New York metropolitan area that needed additional capacity in 2007. It further identified 14 hub airports as likely to be capacity-constrained in 2025. FACT2 found that, in comparison to FACT1, many non-OEP airports \"... have higher capacities than originally presumed and thus less need for additional capacity.\" A further update, FACT3, was released in January 2015. FACT3 forecasted that the 2007-2009 recession, volatile fuel costs, airline consolidation, and replacement of many 50-seat regional jets with larger aircraft would result in 32% fewer operations and about 23% fewer enplanements in 2025 at the 30 core airports than forecast in FACT2. It projected that airport delays would remain concentrated at a few major hub airports, notably the three New York City-area airports, Philadelphia International Airport, and Hartsfield-Jackson Atlanta International Airport. This study may have implications for the reauthorization of AIP. The large runway projects that are the focus of the OEP can require long lead times—10 or more years from concept to initial construction is not unusual. At large and medium hub airports, runway projects are usually paid for, in part, by AIP funds. Therefore, some projects needed by 2025 may require AIP funding in earlier years. Because large and medium airports that levy PFCs must forgo either 50% or 75% of their AIP formula entitlement funds, most federal funding for their runway projects would probably need to take the form of AIP discretionary funds. The pool of discretionary funds is primarily the remainder of annual funding after the entitlement formula requirements are satisfied. Of the forgone PFC funds, 87.5% are reserved for the small airport fund and are also not available for OEP airports. If the AIP budget is constrained in the future, either under a reauthorization bill or during the annual appropriations process, and the entitlement formulas remain as they are, the discretionary portion of the AIP budget may be squeezed, limiting large airports' ability to draw on AIP funds for major capacity expansion projects. Many of the attributes of AIP's programmatic structure are similar to those of the 1982 act that created the program. Over the years these attributes have been modified based on perceived needs and on the practical politics of passing the periodic FAA reauthorization bills that contain the AIP provisions. These considerations make a major overhaul of the AIP structure unlikely, but may leave room for programmatic adjustments in the distribution of apportionments. One such adjustment might shift AIP funds to enhancing capacity at large and medium hub airports. There are several ways Congress might accomplish this. One would be to eliminate the requirement that large and medium hub airports that impose the maximum PFCs forgo 75% of their entitlements. This change would give larger airports a greater share of entitlement funding, but at the cost of reducing AIP grants to small airports. Alternatively, changes in the statutory set-asides of discretionary funds could give FAA more flexibility to use that money for capacity enhancement, but might reduce funding for noise mitigation and other purposes. Changes in the last several FAA authorization acts increased entitlements and broadened the range of landside projects eligible for AIP grants. These changes generally benefitted airports smaller than medium hub size. In particular, the increased amount of apportioned funds has limited the availability of funds for discretionary grants at major airports. Further changes giving airports increased flexibility in the use of their entitlements might benefit smaller airports not served by commercial aviation, in line with the national goal of having an \"extensive\" national airport system, but this use of funds might conflict with the goal of reducing congestion at major commercial airports. The current apportionment system relies on a $3.2 billion funding level trigger mechanism to lift most of the apportionments to twice their formula level. This has been in place for two reauthorization cycles. Should that trigger be breached, entitlements for all airports would be reduced drastically. The entitlement formulas may not be sustainable, without depleting discretionary funds, in the absence of additional funding for AIP. One way to reduce the amount of trust fund revenue needed for AIP would be to allow large and medium hub airports to opt out of AIP and rely exclusively on PFCs to finance capital projects. This would require raising or eliminating the federal cap on PFCs. These \"defederalized\" airports could then be released from some or all of the AIP grant assurances under which they now operate, such as land use requirements and airport revenue use restrictions. If airports exit the program, AIP spending could be reduced or could be redirected to other NPIAS airports. Airport privatization denotes a change in ownership from a public entity (such as a local government or an airport authority established by a state government) to a private one. In a number of countries, such as Great Britain, government-owned airports have been privatized by sale to private owners. In the United States, some airports have allowed private ownership of certain on-airport facilities or management functions, but the ownership of all major airports remains in the hands of government entities. The Airport Privatization Pilot Program (49 U.S.C. §47134; Section 149 of the Federal Aviation Reauthorization Act of 1996, P.L. 104-264 , as amended) authorizes FAA to exempt up to 10 airports from certain federal restrictions on the use of airport revenue off-airport. Participating airports may be also exempted from certain requirements on the repayment of federal grants. Privatized airports may still participate in the AIP, but at a lower federal share (70%). The pilot program was renamed the Airport Investment Partnership Program (AIPP) in the 2018 FAA reauthorization act and expanded to admit more than 10 airports. The AIPP provides that at primary airports, the airport sponsor may only recover from the sale or lease an amount approved by at least 65% of the scheduled air carriers serving the airport, as well as by both scheduled and unscheduled air carriers that together account for 65% of the total landed weight at the airport for the year. The requirement that air carriers approve the use of airport revenue for nonairport purposes, such as profit distribution, may have served to limit interest in the program. To date, only two airports have completed the privatization process established under the provisions of the AIPP. One of those, Stewart International Airport in New York State, subsequently reverted to public ownership when it was purchased by the Port Authority of New York and New Jersey. Luis Muñoz Marín International Airport in San Juan, PR, is now the only commercial service airport operating under private management after privatization under the APPP. As of 2018, there are three applicants under active FAA consideration: Hendry County Airglades Airport in Clewiston, FL; Westchester Airport in White Plains, NY; and St. Louis Lambert International Airport in St. Louis, MO. There is no certainty that any AIP cost savings from privatization would be retained for use by the other AIP-eligible airports. AIP spending is determined by the authorization and appropriations process, and Congress could choose to use any savings to reduce the program size, to marginally assist in deficit reduction, to reduce general fund portions of FAA operations funding, or to make money available for spending elsewhere. Debate over FAA reauthorization generally brings forth proposals to alter the AIP grant assurances, such as ensuring that workers on airport construction projects receive prevailing wages set under the Davis-Bacon Act and pledging to use airport revenue solely for spending on airport operations and capital costs. If AIP spending remains constrained, critics are likely to argue that the grant assurances raise the cost of projects to increase airport capacity and complicate the closure and reuse of underutilized airports or airports that are locally unpopular due to noise or safety concerns. Historically, a basic funding issue is whether to change the existing discretionary fund set-aside for noise mitigation and abatement. The noise set-aside, however, has been increased in previous reauthorization acts and is now 35% of discretionary funding. Demand to use AIP funds for noise mitigation could increase if Congress grants FAA the flexibility to fund noise mitigation projects that are outside the DNL 65 decibel (dB) noise impact area, but this could divert resources from capacity and safety projects. A related issue is whether to make the planning for noise-mitigating air traffic control procedures at individual airports eligible for AIP funding. The central issue related to PFCs is whether to raise the $4.50 per enplaned passenger ceiling or to eliminate the ceiling altogether. In general, airports argue for increasing or eliminating the ceiling, whereas most air carriers and some passenger advocates oppose higher limits on the PFCs. A 2015 GAO study analyzed the effects by raising the PFC cap under three scenarios: setting the cap at $6.47, $8.00, or $8.50. The study found raising PFC would significantly increase airport funding, but could also marginally slow passenger growth and therefore the growth in revenues to the trust fund. PFC supporters feel that the PFC is more reliable than AIP funding, which is subject to the authorization and appropriations process. They also argue that PFCs are procompetitive, helping airports build gates and facilities that both encourage new entrant carriers and allow incumbent carriers to expand. Advocates of an increase in the cap also argue that over time, the value of the PFC has been eroded by inflation and an adjustment is therefore necessary. The permissible uses of revenues are an ongoing point of contention. Airport operators, in particular, would like more freedom to use PFC funds for off-airport projects, such as transportation access projects, and want the process of obtaining FAA approval to be streamlined. Carriers, on the other hand, often complain that airports use PFC funds to finance proposals of dubious value, especially outside airport boundaries, instead of high-priority projects that offer meaningful safety or capacity enhancements. The major air carriers are also unhappy with their limited influence over project decisions, as airports are required only to consult with resident air carriers instead of having to get their agreement on PFC-funded projects. Unlike interest income from governmental bonds, which is not subject to the alternative minimum tax (AMT), interest from private activity bonds is still subject to the AMT. ACI-NA has proposed broadening the definition of governmental airport bonds to, in effect, include either all airport bonds or at least those bonds issued for public-use projects that meet AIP or PFC eligibility requirements. Opponents of such changes express concerns that these changes would reduce U.S. Treasury revenues. Some also argue it would make more sense to change the AMT as part of a tax bill rather than including a specific exemption for income on airport bonds in an FAA reauthorization bill. In either case, such a change would not be under the jurisdiction of the congressional committees that will have jurisdiction over most reauthorization provisions. Changes to the AMT would be under the jurisdiction of the congressional tax-writing committees, the House Committee on Ways and Means and the Senate Committee on Finance. Appendix A. Legislative History of Federal Grants-in-Aid to Airports Prior to World War II the federal government viewed airports as a local responsibility. During the 1930s, it spent about $150 million a year on airports through work relief agencies such as the Works Progress Administration (WPA). The first federal support for airport construction was granted during World War II. After the war, the Federal Airport Act of 1946 (P.L. 79-377) created the Federal Aid to Airports Program, using funds appropriated annually from the general fund. Initially much of this spending supported conversion of military airports to civilian use. In the 1960s substantial funding went to upgrade and extend runways for use by commercial jets. By the end of the 1960s, congestion, both in the air and on the ground at U.S. airports, was seen as evidence that airport capacity was inadequate. Airport and Airway Development and Revenue Acts of 1970 (P.L. 91-258) In 1970, Congress responded to the capacity concerns by passing two acts. The first, the Airport and Airway Development Act (Title I of P.L. 91-258), established the Airport Development Aid Program (ADAP) and the Planning Grant Program (PGP), and set forth the programs' grant criteria, distribution guidelines, and authorization of grant-in-aid funding for the first five years of the program. The second, the Airport and Airway Revenue Act of 1970 (Title II of P.L. 91-258), established the Airport and Airway Trust Fund. Revenues from levies on aviation users and fuel were dedicated to the fund. Under the 1970 acts the trust fund could pay capital costs and, when excess funds existed, could also help cover FAA's administrative and operations costs. Airport and Airway Development and Revenue Acts Amendments of 1971 (P.L. 92-174) The Nixon Administration's FAA budget requests for FY1971 and FY1972 under the new trust fund system brought it into immediate conflict with Congress over the budgetary treatment of trust fund revenues. The Administration treated the new financing system as a user-pay system, whereas many Members of Congress viewed the trust fund as primarily a capital fund. The 1971 Amendments Act made the trust fund a capital-only account (although only through FY1976), disallowing the use of trust fund revenues for FAA operations. Airport and Airway Development Amendments Act of 1976 ( P.L. 94-353 ) The 1976 act made a number of adjustments to the ADAP and reauthorized the Airport and Airway Trust Fund through FY1980. The act again allowed the use of trust fund resources for the costs of air navigation services (a part of operations and maintenance). However, in an attempt to assure adequate funding of airport grants, the act included \"cap and penalty\" provisions which placed an annual cap on spending for costs of air navigation systems and a penalty that reduced these caps if airport grants were not funded each year at the airport program's authorized levels. This cap was altered multiple times in reauthorization acts in the following decades. ADAP grants totaled about $4.1 billion from 1971 through 1980. Congress did not pass authorizing legislation for ADAP during FY1981 and FY1982, during which the aviation trust fund lapsed, although spending for airport grants continued. Airport and Airway Improvement Act of 1982 ( P.L. 97-248 ) The 1982 act created the current AIP and reactivated the Airport and Airway Trust Fund. It altered the funding distribution among the newly defined categories of airports, extending aid eligibility to privately owned general aviation airports, increasing the federal share of eligible project costs, and earmarking 8% of total funding for noise abatement and compatibility planning. The act also required the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States. This biannual publication, the National Plan of Integrated Airport Systems (NPIAS) , identifies airports that are considered important to the national aviation system. For an airport to receive AIP funds it must be listed in the NPIAS. Although the 1982 act was amended often in the 1980s and early 1990s, the general structure of AIP remained the same. The Airport and Airway Safety and Capacity Expansion Act of 1987 ( P.L. 100-223 ; 1987 act) authorized significant spending increases for AIP and added a cargo service apportionment. It also included provisions to encourage full funding of AIP at the authorized level. Title IX of P.L. 101-508 , the Omnibus Budget Reconciliation Act of 1990 (OBRA1990), included the Aviation and Airway Safety and Capacity Act of 1990, which allowed airports, under certain conditions, to levy a Passenger Facility Charge (PFC) to raise revenue and also established the Military Airport Program (MAP), which provided AIP funding for capacity and/or conversion-related projects at joint-use or former military airports. The Airport Noise and Capacity Act of 1990 (OBRA 1990, Title IX, Subtitle D) set a national aviation noise policy. OBRA1990 included the Revenue Reconciliation Act of 1990, which reauthorized the Aviation Trust Fund and adjusted some of the aviation taxes. The Federal Aviation Reauthorization Act of 1994 ( P.L. 103-305 ) reauthorized AIP for two more years and again made modifications in the cap and penalty provisions. Federal Aviation Reauthorization Act of 1996 ( P.L. 104-264 ) The 1996 reauthorization of the AIP made a number of adjustments to entitlement funding and discretionary set-aside provisions. It also included directives concerning intermodal planning, cost reimbursement rules, letters of intent, and the small airport fund. A demonstration airport privatization program and a demonstration program for innovative financing techniques were established. The demonstration status of the state block grant program was removed. The act did not reauthorize the taxes that supported the Airport and Airway Trust Fund. This was done by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), which extended, subject to a number of modifications, the existing aviation trust fund taxes through September 30, 2007. The Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century of 2000 (AIR21; P.L. 106-181 ) The enactment of AIR21 was the culmination of two years of legislative effort to pass a multiyear FAA reauthorization bill. The initial debate focused on provisions to take the aviation trust fund off-budget or erect budgetary \"firewalls\" to assure that all trust fund revenues and interest would be spent each year for aviation purposes. These proposals, however, never emerged from the conference committee. Instead, the enacted legislation included a so-called \"guarantee\" that all of each year's receipts and interest credited to the trust fund would be made available annually for aviation purposes. AIR21 did not make major changes in the structure or functioning of AIP. It did, however, greatly increase the amount available for airport development projects. The AIP funding authorization rose from $1.9 billion in FY2000 to $3.4 billion in FY2003. The formula funding and minimums for primary airports were doubled starting in FY2001. The state apportionment for general aviation airports was increased from 18.5% to 20%. The noise set-aside was increased from 31% to 34% of discretionary funding and a reliever airport discretionary set-aside of 0.66% was established. AIR21 also increased the PFC maximum to $4.50 per boarding passenger. In return for imposing a PFC above the $3 level, large and medium hub airports would forgo 75% of their AIP formula funds. This had the effect of making a greater share of AIP funding available to smaller airports. Vision 100: Century of Aviation Reauthorization Act of 2003 ( P.L. 108-176 ; H.Rept. 108-334 ) Vision 100, signed by President George W. Bush on December 12, 2003, included significant changes to AIP. The law codified the AIR21 spending \"guarantees\" through FY2007. It increased the discretionary set-aside for noise compatibility projects from 34% to 35%. It increased the amount that an airport participating in the Military Airport Program (MAP) could receive to $10 million for FY2004 and FY2005, but in FY2006 and FY2007 it returned the maximum funding level to $7 million. The act allowed nonprimary airports to use their entitlements for revenue-generating aeronautical support facilities, including fuel farms and hangars, if the Secretary of Transportation determines that the sponsor has made adequate provisions for the airside needs of the airport. The law permitted AIP grants at small airports to be used to pay interest on bonds issued to finance airport projects. The act included a trial program to test procedures for authorizing small airports to impose PFCs. Vision 100 repealed the authority to use AIP or PFC funds for most airport security purposes. FAA Modernization and Reform Act of 2012 ( P.L. 112-95 ) The 2012 FAA reauthorization act funded AIP for four years from FY2012 to FY2015 at an annual level of $3.35 billion. A new provision, Section 138, permitted small airports reclassified as medium hubs due to increased passenger volumes to retain eligibility for up to a 90% federal share for a two-year transition period. This provision also allows certain economically distressed communities receiving subsidized air service to be eligible for up to a 95% federal share of project costs. The 2012 act maintained the $4.50 PFC cap, with a maximum charge of $18 per round-trip flight. It included a provision that instructed GAO to study alternative means for collecting PFCs. The act also expanded the number of airports that could participate in the airport privatization pilot program from 5 to 10. This law was extended through July 15, 2016. The FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) The 2016 FAA extension act funded AIP through FY2017 at an annual level of $3.35 billion. A new provision, Section 2303, provided temporary relief to small airports that had 10,000 or more passenger boardings in 2012 but had fewer than 10,000 during the calendar year used to calculate the AIP apportionment for FY2017. This provision allowed such airports to receive apportionment for FY2017 an amount based on the number of passenger boardings at the airport during calendar year 2012. The FAA Reauthorization Act of 2018 ( P.L. 115-254 ) The 2018 FAA reauthorization act funded AIP for five years from FY2019 through FY2023 at an annual level of $3.35 billion. It also authorized supplemental annual funding from the general fund to the AIP discretionary funds—$1.02 billion in FY2019, $1.04 billion in FY2020, $1.06 billion in FY2021, $1.09 billion in FY2022, and $1.11 billion in FY2023—and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011. The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports. The law included a provision that forbids states or local governments from levying or collecting taxes on a business on an airport that \"is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes.\" Appendix B. Definitions of Airports Included in the NPIAS Commercial Service Airports Publicly owned airports that receive scheduled passenger service and board at least 2,500 passengers each year (506 airports). Primary Airports . Airports that board more than 10,000 passengers each year. There are four subcategories: Large Hub Airports . Board 1% or more of system -wide boardings ( 30 airports, 72 % of all enplanements)Medium Hub Airports . Board 0.25% but less than 1% (31 airports, 16% of all enplanements) Small Hub Airports . Board 0.05% but less than 0.25% (72 airports, 8% of all enplanements) Non hub Primary Airports . Board more than 10,000 but less than 0.05% (247 airports, 3% of all enplanements) Non primary Commercial Service Airports . Board at least 2,500 but no more than 10,000 passengers each year (126 airports, 0.1% of all enplanements). Other Airports General Aviation Airports . General aviation airports do not receive scheduled commercial or military service but typically do support business, personal, and instructional flying; agricultural spraying; air ambulances; on-demand air-taxies; and/or charter aircraft service (2,554 airports). Reliever Airports . Airports designated by FAA to relieve congestion at commercial airports and provide improved general aviation access (261 airports). Cargo Service Airports . Airports served by aircraft that transport cargo only and have a total annual landed weight of over 100 million pounds. An airport may be both a commercial service and a cargo service airport. New Airports Seven airports are anticipated to be built between 2019 and 2023. They include two primary airports, two nonprimary commercial service airports, and three general aviation airports.", "summary": "There are five major sources of airport capital development funding: the federal Airport Improvement Program (AIP); local passenger facility charges (PFCs) imposed pursuant to federal law; tax-exempt bonds; state and local grants; and airport operating revenue from tenant lease and other revenue-generating activities such as landing fees. Federal involvement is most consequential in AIP, PFCs, and tax-exempt financing. The AIP has been providing federal grants for airport development and planning since the passage of the Airport and Airway Improvement Act of 1982 (P.L. 97-248). AIP funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. The funds obligated for AIP are drawn from the airport and airway trust fund, which is supported by a variety of user fees and fuel taxes. Different airports use different combinations of these sources depending on the individual airport's financial situation and the type of project being considered. Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, which received over 25% of AIP grants distributed in FY2018. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs. The FAA Reauthorization Act of 2018 (P.L. 115-254) provided annual AIP funding of $3.35 billion from the airport and airway trust fund for five years from FY2019 to FY2023. The act left the basic structure of AIP unchanged, but authorized supplemental annual funding of over $1 billion from the general fund to the AIP discretionary funds, starting with $1.02 billion in FY2019, and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive a 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011. The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports. The law included a provision that forbids states or local governments from levying or collecting taxes on a business at an airport that \"is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes.\" The airport improvement issues Congress generally faces in the context of FAA reauthorization include the following: Should airport development funding be increased or decreased? Should the $4.50 ceiling on PFCs be eliminated, raised, or kept as it is? Could AIP be restructured to address congestion at the busiest U.S. airports, or should a large share of AIP resources continue to go to noncommercial airports that lack other sources of funding? Should Congress set tighter limits on the purposes for which AIP and PFC funds may be spent? This report provides an overview of airport improvement financing, with emphasis on AIP and the related passenger facility charges. It also discusses some ongoing airport issues that are likely to be included in a future FAA reauthorization debate.", "document_type": "crs"}
{"report": "As online attacks grow in volume and sophistication, the United States is expanding its cybersecurity efforts. Cybercriminals continue to develop new ways to ensnare victims, whereas nation-state hackers compromise companies, government agencies, and businesses to create espionage networks and steal information. Threats come from both criminals and hostile countries, especially China, Russia, Iran, and North Korea. Much is written on this topic, and this CRS report directs the reader to authoritative sources that address many of the most prominent issues. The annotated descriptions of these sources are listed in reverse chronological order, with an emphasis on material published in the past several years. This report includes resources and studies from government agencies (federal, state, local, and international), think tanks, academic institutions, news organizations, and other sources: Table 1 —cybercrime, data breaches and security, including hacking, real-time attack maps, and statistics (such as economic estimates) Table 2 —national security, cyber espionage, and cyberwar, including Stuxnet, China, and the Dark Web Table 3 — the Internet of Things (IoT), smart cities, cloud computing, and FedRAMP", "summary": "As online attacks grow in volume and sophistication, the United States is expanding its cybersecurity efforts. Cybercriminals continue to develop new ways to ensnare victims, whereas nation-state hackers compromise companies, government agencies, and businesses to create espionage networks and steal information. Threats come from both criminals and hostile countries, especially China, Russia, Iran, and North Korea. Much is written on this topic, and this CRS report directs the reader to authoritative sources that address many of the most prominent issues. The annotated descriptions of these sources are listed in reverse chronological order, with an emphasis on material published in the past several years. This report includes resources and studies from government agencies (federal, state, local, and international), think tanks, academic institutions, news organizations, and other sources: Table 1—cybercrime, data breaches and security, including hacking, real-time attack maps, and statistics (such as economic estimates) Table 2—national security, cyber espionage, and cyberwar, including Stuxnet, China, and the Dark Web Table 3—, The Internet of Things (IoT), smart cites, cloud computing, and FedRAMP The following reports comprise a series of authoritative reports and resources on these additional cybersecurity topics: CRS Report R44405, Cybersecurity: Overview Reports and Links to Government, News, and Related Resources, by Rita Tehan. CRS Report R44406, Cybersecurity: Education, Training, and R&D Authoritative Reports and Resources, by Rita Tehan. CRS Report R44408, Cybersecurity: Cybercrime and National Security Authoritative Reports and Resources, by Rita Tehan. CRS Report R44410, Cybersecurity: Critical Infrastructure Authoritative Reports and Resources, by Rita Tehan. CRS Report R44417, Cybersecurity: State, Local, and International Authoritative Reports and Resources, by Rita Tehan. CRS Report R44427, Cybersecurity: Federal Government Authoritative Reports and Resources, by Rita Tehan. CRS Report R43317, Cybersecurity: Legislation, Hearings, and Executive Branch Documents, by Rita Tehan. CRS Report R43310, Cybersecurity: Data, Statistics, and Glossaries, by Rita Tehan.", "document_type": "crs"}
{"report": "Several hundred informal Member organizations exist within the House of Representatives, Senate, or between both the chambers; these organizations typically reflect Members' shared legislative objectives or representational interests. These groups may commonly be described as congressional caucuses, working groups, or task forces, but in this report, will be identified, collectively, as informal Member organizations , to avoid confusion with official party caucuses. An additional distinction between informal Member organizations may be drawn. In the House of Representatives, some groups may register with the Committee on House Administration to form a Congressional Member Organization (CMO). CMOs registered with the Committee on House Administration can include groups exclusively for House Members or bicameral groups that include House Members and Senators. Informal Member organizations that are not registered with the Committee on House Administration are called informal Member groups ; these include groups exclusive to the Senate, which does not have any formal registration process for informal Member organizations. These distinctions are described in greater detail in the sections below. The Appendix provides some considerations for House Members seeking to form a CMO. Some of these considerations that are not exclusive to the House process, such as determining a group's objective and possible membership, may also be of interest to Senators or House Members seeking to form an informal Member group. There are two types of informal Member organizations: Congressional Member Organizations (CMOs) and informal Member groups. The term C ongressional Member O rganization refers to a group of Members that is registered with the Committee on House Administration to support a common legislative objective. CMOs may be composed of House Members exclusively, or they may include House Members and Senators. The requirements to register a group as a CMO, as well as guidelines governing how official resources under the control of the Member may be available to use for CMO activities, are provided on the website of the Committee on House Administration. To become a CMO, the Committee on House Administration requires that at least one of the officers associated with the group must be a Member of the House. A group seeking identification as a CMO must also register electronically with the Committee on House Administration by submitting a letter on official letterhead containing the name of the CMO, its statement of purpose, names of its officers, and contact information for staff designated to work on issues related to the CMO. If a group's application complies with the Committee on House Administration's guidelines for CMOs and is approved by the committee, the group will be included in the online list of registered CMOs for the current Congress. A registered CMO may request use of internal House mail, House intranet site, and a postbox at House Postal Operations. A CMO must reregister with the Committee on House Administration in every Congress to maintain its status as such. House Members may have personal office staff (including shared employees) assist a CMO with its legislative objectives. CMOs are not employing authorities, nor do they have separate corporate or legal identities. House Members may also utilize some official resources for CMO activities, subject to limitations established by the Committee on House Administration. CMOs cannot be assigned office space, host a separate website, send franked mail, or use official funds to print or pay for stationery. The Members' Representational Allowance (MRA) may not be used to directly support a CMO as an independent entity, nor can individual Members use their franking privilege on behalf of a CMO. Members may use official resources for communications related to a CMO, to prepare materials related to CMO issues for dissemination, or to publicize CMO issues on a section of their official House website. Neither CMOs nor individual Members may accept funds, goods, or services from private individuals or organizations to support the CMO. Members may, however, use personal funds to support a CMO. House Members who join CMOs must conduct their activities in accordance with applicable provisions in law, the House Ethics Manual , Members' Congressional Handbook , and Rules of the House (including House Rule XXIII, the House Code of Official Conduct). Some additional guidance addressing CMO and informal Member group funding is available on the House Committee on Ethics website. In general, unless otherwise specified, the same regulations applicable to House Members as individuals also apply to their participation in CMOs. Members can contact the Committee on House Administration; the Commission on Congressional Mailing Standards (also known as the Franking Commission); and the Office of Advice and Education of the House Committee on Ethics for information and guidance. Additional regulations may apply to shared employees. Beginning in the 114 th Congress, the House amended its rules to allow certain CMOs to be designated as E ligible Congressional Member Organizations (ECMOs). Members may assign personal office staff to work on behalf of an ECMO and transfer associated MRA funds for salaries and expenses for those employees to a dedicated House account administered by the ECMO. H.Res. 6 directs the Committee on House Administration to promulgate relevant regulations regarding the use of MRA funds, shared employees, and access of House services. To qualify for ECMO status, a group must have been a registered CMO in the preceding Congress, with shared employees from at least 15 House Member offices; register as a CMO in the 116 th Congress; designate a single House Member as administrator of the group; and have at least three House employees assigned to perform work on its behalf. The Committee on House Administration provides further information about the eligibility and disclosure requirements, registration process, and other regulations for ECMOs. In addition to registered CMOs, informal Member groups exist in the House, Senate, and across the chambers. Some informal groups with House Members may be loosely organized associations of like-minded Members; others may be more structured and operate similarly to CMOs but are not registered with the Committee on House Administration. In general, the rules and regulations that apply to House Members as individuals apply to their participation in informal Member groups, including applicable provisions in law, the House Ethics Manual , Members' Congressional Handbook , and Rules of the House (including House Rule XXIII, the House Code of Official Conduct). The Committee on House Administration and House Committee on Ethics can provide further guidance for Members. The Senate does not have a registration process for informal Member groups. Historically, Senate informal groups have drawn upon resources available to Senators for materials and services, without dedicating any additional funding to the organization. Because of their traditional, nonofficial status and informal nature, specific regulation of such groups in the Senate has not been deemed necessary. As in the House, informal groups of Senators are collectively subject to the same regulations applicable to Senators as individuals as indicated in the Senate Ethics Manual , Rules of the Senate, and the Senate Code of Official Conduct. Further guidance may be available to Senators from the Senate Committee on Ethics and Committee on Rules and Administration. Separate regulations expressly recognizing them and prescribing their operations have never been implemented in the Senate. The number of identified informal Member organizations since the 92 nd Congress (1971-1972) is provided in Table 1 , which shows how an increase began in the 1970s and has increased more markedly since the 1990s. The Committee on House Administration lists 518 registered CMOs for the 115 th Congress, which includes House-only organizations and some bicameral organizations. It is more challenging to tally the number of informal Member groups because they are not officially tracked by the House or Senate. Self-reported information from House Members' offices in the Congressional Yellow Book identifies an additional 158 groups, some of which may be House-only and some of which may be bicameral groups. Self-reported information from Senators' offices in the Congressional Yellow Book identifies 178 groups, some of which may be Senate-only and some of which may be bicameral groups. Informal Member organizations typically exist as forums to discuss ideas and potential activities related to public policy or representational considerations. Groups may engage in direct legislative advocacy for a particular issue or concern, provide opportunities to educate Members and staff on policy matters, or generate broader public awareness on these topics. Groups often hold regular Member or staff meetings to exchange information and develop legislative strategy. Many informal Member organizations also invite outside speakers and groups to make presentations to their Members. Some informal Member organizations may have a relatively narrow legislative interest or objective. Other groups may have a broader focus and address multiple issues of concern for a particular geographic region, economic sector, or generalized policy area. Many Members view their participation in informal group or CMO activities as a means to realize both electoral and policy objectives. An informal Member organization can be readily established as circumstances and issues warrant without first enacting legislation or changing House, Senate, or party rules; open or limit its membership as it deems necessary to accomplish its goals; expand Members' opportunities to specialize on issues because there is no limit on the number of groups that can exist or on the number of groups that a Member can join; serve as a vehicle for the resolution of issue and policy differences between committees, parties, or the two houses; provide an opportunity for a comprehensive and coordinated approach to issues over which committee jurisdiction is unclear or fragmented; conduct briefings and use other means to provide Members information and analysis on issues of interest; attract attention to issues that the group members believe need to be addressed; and enhance Members' relations and standing with particular constituencies. In addition to the benefits that informal Member organizations may provide, some observers have noted certain limitations or disadvantages to these groups. Specifically, they have argued that informal Member organizations have become so numerous that their significance has been diminished, as nearly every cause or issue has a Member organization; compete with the formal leadership and committee structure and functions; undermine or even impede the legislative process by further fragmenting the congressional policymaking process; may facilitate certain special interests in attaining undue attention in the legislative process; create a perception of conflict of interest for Members who may have formal legislative responsibilities within the same subject areas covered by the informal Member organization (i.e., by appearing to be an advocate and adjudicator of an issue at the same time); and present the possibility of Congress being viewed negatively by the public as overly influenced by special interests. Ethical considerations have arisen related to the nature and extent of Member participation on governing bodies of outside, nonprofit, tax-exempt organizations with informal ties to CMOs, particularly with regard to Members' participation in fundraising for these outside foundations. Under the current House ethics rules, House Members are permitted to serve on the boards of certain outside groups, including nonprofit foundations and institutes, so long as they do not serve for compensation and their service does not conflict with a Member's general obligation to the public. House Members are also permitted to raise funds for certain nonprofit organizations, but they are prohibited from raising money for any organization that is \"established or controlled by Members (or staff)\" without receiving permission from the House Committee on Ethics. Questions as to whether a nonprofit organization's activities are related to a Member's official duties can be directed to the House Committee on Ethics. In addition to the distinction between CMOs and informal Member groups, informal Member organizations may be broadly categorized by the purpose of the group. In general, six categories can serve as a classification system for informal Member organizations, although some informal Member organizations may be difficult to fit into any category or may fit into multiple categories. The six categories of informal Member organizations are 1. intraparty (promoting the policy views of like-minded Members within a political party); 2. personal interest (typically focused on a broad, single concern, such as the environment or children, that is often under the jurisdiction of more than one committee); 3. industry (advocating the interests of a particular industry); 4. regional (championing the interests of a particular region); 5. state/district (advocating the interests of a particular state or district); and 6. national constituency (advocating the interests of particular groups of constituents, such as women, minorities, and veterans). Members who join intraparty Member organizations, such as the Blue Dog Coalition and the Republican Study Committee, tend to use their membership as a forum to exchange information and develop legislative strategy with party colleagues who share their political ideology. They tend to work on a wide range of issues and \"have been important factors in agenda setting\" by attracting attention to issues. Personal interest Member organizations, such as the Congressional Diabetes Caucus and the Congressional Sportsmen's Caucus, tend to focus on increasing public and congressional awareness of issues, offer new solutions for addressing them, and attempt to influence the congressional agenda. CMOs that focus on issues of interest to particular industries, such as the Congressional Automotive Caucus, Congressional Shipbuilding Caucus, and Congressional Steel Caucus, tend to attract Members who are strongly committed to promoting that industry's interests. Members often view their membership as a means to increase congressional awareness of the industry's concerns, develop legislative strategy, and signal to constituents that they are actively promoting their interests. Regional CMOs, such as the Northeast-Midwest Congressional Coalition and Congressional Western Caucus, and state/district CMOs, such as the California Democratic Congressional Delegation, tend to focus on promoting legislative provisions that they believe will assist their region or state/district. National constituency CMOs, such as the Congressional Black Caucus, Congressional Hispanic Caucus, and Congressional Hispanic Conference, tend to have broad concerns that often fall under the jurisdiction of more than one committee. In addition to engaging in a wide range of agenda-setting activities, such as testifying before congressional committees and drafting bills and amendments, national constituency CMOs are more likely than other CMOs to attempt to place issues on the legislative agenda. Members tend to join national constituency CMOs to raise public and congressional awareness of their issues, exchange information, and develop legislative strategy. Since the earliest Congresses, Members have gathered to promote their mutual interests in ad hoc, informal settings, outside of the formal committee and political party systems. This section provides examples of some of these early groups, followed by the developments that shaped the modern system of informal Member organizations. Two key changes for informal Member organizations in the House are also discussed: the development of Legislative Service Organizations (LSOs), which operated from 1979 to 1994, and the creation of congressional Member organizations in 1995. When Congress first convened in Washington, DC, many Members resided in local boardinghouses and spent considerable time discussing legislation and building coalitions after-hours with their colleagues who also resided in their house. Historians have noted that there was a close correlation in the voting records among those Members who boarded together, often forming boardinghouse voting blocs. In 1812, the efforts of two informal congressional groups, the War Hawks and the Invisibles, were instrumental in the declaration of war against Great Britain in the War of 1812. In 1833, several Members of Congress formed the Congressional Temperance Society to advocate abstinence from intoxicating beverages, and the group remained active until 1899. In the 1840s, the Abolitionist Group, an informal congressional group, worked in opposition to slavery. One prominent Member group from the mid-20 th century was the Chowder and Marching Society, which was founded in 1949 by 15 Republican House Members, including future Presidents Richard M. Nixon and Gerald R. Ford. It was initially formed to oppose legislation providing monthly bonuses for war veterans, which the Members considered too costly. As its membership increased over time, it served as a somewhat exclusive social forum for leading Republican Members of Congress to discuss pending legislation and legislative strategy. In 1957, several freshman House Republicans formed the Acorns, which served both as a social group and as a forum to discuss legislative issues. The Democratic Study Group (DSG), established in 1959, is considered by many observers to be the first modern informal Member organization. It was formed by moderate and liberal House Democrats to counter the influence of southern conservative Democrats who chaired many of the House's committees at the time. Forty Members attended its organizational meeting in 1959. Over time, the dues-paying membership of the DSG increased, ranging from 115 to 170 Members during the early 1970s, to around 225 during the mid-1970s, and 250 in 1980. Membership then fell to around 200 dues-paying Members during the remainder of the 1980s. Initially, DSG meetings focused on providing legislative briefings for Members and developing strategy concerning pending floor legislation. Later, the DSG gained influence in the House by establishing a whip system and using paid staff to create research and policy analyses. DSG staff briefing papers and information on scheduled floor votes became essential reading material for many Members, especially for those who were not serving on the committee of jurisdiction. A leading congressional scholar described the DSG's influence on the legislative process as follows: Operating out of an office on the top floor of the Longworth House Office Building, DSG staff briefing papers and information on scheduled floor legislation filled an information gap left open by party leaders. Even Republicans subscribed to the DSG Legislative Report for its detailed, balanced descriptions of bills and proposed amendments scheduled for floor action and for information on the rules setting the terms of floor debate. By 1977, 37 percent of House Members and 66 percent of legislative assistants surveyed by the House Commission on Administrative Review reported relying heavily on DSG material for information on legislation scheduled for floor action. Even a higher proportion of legislative assistants used DSG information for committee work and to keep up-to-date on public issues. In 1963, 14 moderate and liberal House Republican freshmen, led by Representative F. Bradford Morse (R-MA), formed the Wednesday Group to serve as a forum for the exchange of information on pending legislation. Its membership later grew to about 30 Members. In 1966, Senators Jacob Javits (R-NY), Joseph Clark (D-PA), and George McGovern (D-SD), and Representative Robert Kastenmeier (D-WI) formed the nonpartisan Members of Congress for Peace Through Law (MCPL) to advocate their views on foreign affairs and defense policy and concerns about the escalating Vietnam conflict. One of its Members, Representative Paul McCloskey (R-CA), declared [t]he beauty of the MCPL, the great function that it performs, is that it gives us a source of knowledge and an opportunity for self-information outside the formal committee work.... Essentially, it's a rebel organization. We're rebelling against the close ties between the Administration and committee chairmen who have a monopoly on information. For several years, the DSG, Wednesday Group, and MCPL were the only informal Member groups within Congress that achieved a visible and enduring status within the institution. As shown in Table 1 , the number of informal Member groups increased during the 1970s. The establishment of the Conference of Great Lakes Congressmen in 1970 and the Congressional Black Caucus (CBC) in 1971 increased the number of informal Member organizations to five. By 1980, the number of informal Member organizations had grown to 59, not counting class clubs. During the 1970s, scholars note that Members were largely expected to follow and respect the norms of seniority, apprenticeship, and legislative specialization within the committee system. For Members who felt that these institutional arrangements inhibited their personal or policy objectives, informal Member organizations may have provided an alternative system for policy work that provided greater opportunities for individual policy specialization, representation of constituent interests, and working with like-minded colleagues. As the number of informal Member organizations grew throughout the 1970s, several Members and political organizations called for regulation of these groups, arguing that they operated largely beyond the reach of congressional ethics rules and were not subject to any direct congressional oversight. In September 1977, the Commission on Administrative Review of the House of Representatives recommended that informal Member groups \"should be held accountable for the spending of public monies.\" To accomplish this goal, the commission made recommendations for informal Member organizations, generally, and created recommended criteria for groups seeking recognition by the House as Legislative Service Organizations. The commission's recommendations were never considered by the full House, however, because the rule providing for their consideration, H.Res. 766 , was defeated in the House, 160-252, on October 12, 1977. A report from the House Select Committee on Ethics from January 3, 1979, found that informal Member groups were exempt from language in House Rule XLV, which prohibited the establishment of unofficial office accounts. On April 4, 1979, the Committee on Standards of Official Conduct issued an advisory opinion that determined that informal Member groups were exempt from House Rule XLIII, clause 11, which prohibited Members of the House from authorizing or allowing a non-House individual, group, or organization from using the words \"Congress of the United States,\" \"House of Representatives,\" \"Official Business,\" or any combination thereof on any letterhead or envelope. Given continuing concerns that, without congressional oversight, informal Member groups might be used to circumvent House ethics rules, on July 18, 1979, the Committee on House Administration issued the first regulations governing their activities. It required informal Member groups receiving disbursements from a Member's clerk-hire allowance or allowance for official expenses, office space controlled by the House Office Building Commission, or furniture, supplies, or equipment to register with the Clerk of the House as an LSO; provide the Clerk a summary of their finances semi-annually, including, among other information, a listing of their officers and staff, a summary of funds received and disbursed, and an itemization of all receipts and disbursements if $1,000 or more in the aggregate; have its chair, or senior House Member certify the amount of employee salaries, the physical location of each employee, and the regular performance of official duties; and make a monthly certification of the amount of clerk-hire fees disbursed and identify the LSO employees receiving the funds, with the salary amounts issued directly by the Clerk. Because LSOs were not subject to House rules concerning how House Members and committees could spend public funds, however, several organizations argued that LSOs could bring the House into public disrepute if they were used to circumvent House spending rules. One outside organization told the Committee on House Administration that what legislators and their staffs were prohibited from doing as individuals, they can now do by acting as a group. Specifically, informal House groups can receive an unlimited amount of funds from special interest lobbying groups; they have not reported the proceeds from fundraising events as campaign contributions; one caucus has received contributions from foreign governments; and caucus related institutes have accepted hundreds of thousands of dollars in non-bid grants from federal agencies. All of these activities, if conducted by a Member acting individually, would clearly be prohibited by House rules or federal law. On September 22, 1981, the Committee on House Administration formed the Ad hoc Subcommittee on Legislative Service Organizations. In October 1981, the subcommittee held a hearing and adopted several recommendations regarding the regulation of LSOs. The full committee adopted these recommendations on October 21, 1981, which included the following regulations: LSOs could not receive income or contributions, either in cash or in-kind, from any source other than Congress or its Members from their personal accounts, except that they may take advantage of educational intern, fellowship, or volunteer programs when the programs are primarily of educational benefit to the participating interns, fellows, or volunteers and they may distribute any report, analysis, or other research material prepared by others so long as the identity of the person or organization authoring the work is fully disclosed. Any informal Member group receiving contributions or any form of income from any source other than Congress or its Members (except as noted above) could not be located in space under control of the House and could not receive other support from the House or from Members of the House via their allowances. The Clerk of the House would disburse salary payments to an employee authorized by a Member to work for an LSO, dependent upon receiving a monthly certification by the employing Member and by the chair or ranking Member of the LSO. Each LSO would submit a quarterly report to the Clerk of the House no later than 30 days after the end of the reporting period, which would be publicly available and contain (1) the name, business address, officers, and number of Members of the organization; (2) total receipts for the quarter with a summary of receipts by category (e.g., clerk-hire, or dues); (3) total disbursements for the quarter plus a listing of the recipient, purpose, and amount of all disbursements in excess of $200 in the aggregate during the quarter; (4) a listing of the name, business address, and job title of all persons employed by the organization, their total compensation during the quarter, and the dates of their employment; (5) name and sponsor of all interns, fellows, or volunteers associated with the LSO; (6) a general description of the legislative services or other assistance associated with the LSO provided to its Members during the quarter; (7) a listing of all reports, analyses, or other material provided to Members during the quarter provided by the LSO; and (8) a copy of the sponsorship statement required to be filed with the Committee on House Administration at establishment and May 1 of each even-numbered year thereafter. The Committee on House Administration's requirement to submit quarterly financial reports was effective January 1, 1982, and the other regulations were effective January 1, 1983. During the 1980s and into the early 1990s, the number of informal House Member organizations generally continued to increase, although the number of LSOs remained fairly stable. In 1990 (101 st Congress), for example, there were 30 registered LSOs and 63 informal House Member groups. In these years, some Members and political organizations questioned the financial integrity of certain LSOs, arguing that the quarterly financial reports they submitted were incomplete, misleading, or habitually late, and that these groups did not face any sanctions for violating House LSO regulations. At a hearing on May 6, 1993, for example, a member of the Committee on House Administration delivered the following critique of LSO accounting procedures: The big picture is the House LSOs with millions of dollars in Federal tax dollars missing and unaccounted for. These are an embarrassment to the Congress. I think it could be a national disgrace. It could rival last year's bank, restaurant, and post office scandals. My independent 10 year review involves surprising and alarming figures. It shows that Members of Congress have funneled more than $34 million in tax funds on LSO operations. Those LSOs in turn report spending of $26.8 million.... $7.7 million are absent. They have simply disappeared. One out of every $5 is missing, unreported, and unaccounted for. Some Members and political organizations also objected to certain LSOs' links with external groups and affiliated foundations, arguing that those relationships raised suspicions of impropriety. In addition, media reports suggested that some LSO spending and staffing decisions raised ethical questions concerning possible nepotism and cronyism, and accused some LSOs of using taxpayer funds for expenses that normally were prohibited or required preapproval for Members and committees. Also, some congressional scholars raised concerns about LSOs' decentralizing effect on the congressional policymaking process. In response to concerns about lax filing of LSO financial reports, on August 5, 1993, the Committee on House Administration issued new LSO financial accounting requirements, effective January 1, 1994. The new regulations placed financial management of LSOs under the House Finance Office (eliminating individual LSO bank accounts outside Congress), including payroll and expense vouchers; required LSOs to file proposed budgets starting in January, including a statement of purpose and a list of all employees and Members; subjected LSO employees to House ethics rules; and required LSOs to file annual, year-end statements disclosing cash-on-hand, expenses, and receipts. The change in House leadership and party control following the 1994 elections ushered in further changes for House Member organizations through the elimination of LSOs and the creation of CMOs. At that time, there were 28 LSOs, and 16 of them had House office space, primarily in the Ford House Office Building. On December 6, 1994, incoming House Speaker-elect Newt Gingrich announced that the House Republican Conference had adopted a resolution to prohibit LSOs. House Members could still form groups for similar purposes, but institutional funding would no longer be available. Some congressional scholars have suggested that the elimination of LSOs, in part, helped Speaker Gingrich centralize control in the House. One scholar, for example, argues eliminating LSOs removed one institutional impediment to achieving a more hierarchical congressional structure in which party leaders and conferences assume an enhanced political importance.... The removal of autonomous and entrepreneurial actors such as LSOs was fully consonant with achieving a more centralized and rationalized House. Members from the new minority party and Members of established LSOs, including the Democratic Study Group, Congressional Black Caucus, Congressional Hispanic Caucus, and Congressional Caucus for Women's Issues, opposed the dissolution of LSOs. More than 150 members of the Democratic Study Group, which had 18 full-time employees and a $1.6 million budget in 1993, signed a letter in December 1994 to the incoming Speaker, alleging that the prohibition on LSOs was \"an effort to censor opposing views, and to deny the primary source of information to the minority party as we embark upon a furious legislative schedule.\" LSOs were eliminated through the adoption of the House Rules for the 104 th Congress on January 4, 1995. The Committee on House Oversight (now the Committee on House Administration) subsequently revoked previous certifications of all LSOs, effective January 11, 1995. LSOs were instructed to stop spending money and vacate their offices by January 31, 1995. They were given until March 30, 1995, to pay all outstanding bills; any balances in LSO accounts after April 3, 1995, were to be returned to the U.S. Treasury to reduce the national debt. On February 8, 1995, the committee issued regulations defining CMOs and governing their activities: A CMO is an informal organization of Members who share official resources to jointly carry out activities.... [It has] no separate corporate or legal identity apart from the Members who comprise it.... [It] is not an employing authority, and no staff may be appointed by, or in the name of a CMO. A CMO may not be assigned separate office space. CMO organizers were required to provide the CMO's name, a statement of purpose, the names and titles of officers, and the name of any personal staff member (including shared employees) designated to work on the CMO's issues when they registered with the committee, and as changes in information warranted. Members could not use funds from their official allowances to support CMO activities or lend their frank to a CMO. CMOs could not accept funds or resources from outside groups or individuals to support their operations. However, Members could use their own personal funds for that purpose. Most (23) of the 28 LSOs reorganized and continued operating either as an informal Member group (8) or as a CMO (15). Four LSOs disbanded, including one that became a private, nonprofit organization and another that transferred its research responsibilities to the House Republican Conference. Another LSO was absorbed by the House Democratic Caucus. Some contemporary political observers believed that the demise of LSOs in 1995 might have signaled the end, or at least a significant reduction, of the number, role, and influence of informal Member organizations in Congress. Instead, the number of CMOs and informal Member groups continued to increase in the late 1990s, suggesting that, despite the limitations imposed on the options available to House Members to support these organizations, they have retained an important role in the congressional policymaking process. Since the 2000s, the number of informal member organizations has continued to grow. Informal Member organizations have become an enduring part of modern Congresses, and they have grown in number markedly since the 1970s. House or Senate regulations broadly pertaining to individual Members' activities generally apply to their participation with informal Member organizations, and certain additional House regulations from the Committee on House Administration affect a subset of informal Member organizations known as CMOs. The independence of these groups from more formal institutions within the House and Senate can provide certain advantages, such as facilitating collaboration among Members and providing leadership opportunities outside of one's party or committee assignments. At times, this relative independence has also led to concerns about oversight for informal Member organizations, as well as concerns over the fractionalization of the legislative process and competition with formal leadership and committee functions. Some groups may share legislative or representational interests with the House or Senate at large, certain party leaders, or particular committees; yet Member organizations can also create forums for differing viewpoints, new policy ideas, or more particularized constituent concerns. Informal Member organizations can facilitate deliberation and policy development in Congress by providing opportunities for Members to exchange information and can contribute to public awareness on a variety of topics. This appendix covers some considerations that may be of interest to House Members seeking to form a CMO. Current requirements from the Committee on House Administration are noted, where applicable. Define the Objective First, clearly state the group's objective(s). What is its purpose? Determine the Level of Interest The founding Member(s) determines whether there is sufficient interest to warrant organizing the group. A number of methods may be used in making this determination. These include informal discussions with colleagues; communications with constituents (individuals and organizations); and the Member's personal judgment and interest. The extent to which an issue or interest is fragmented within the committee system may also be a factor. In an effort to bring the various aspects of an issue under one entity, a number of groups have been organized around issues that were widely dispersed among several committees and subcommittees. Consult Prospective \"Core\" Members Sometimes, the organizing Member(s) selects a few colleagues with an interest in the issue, consults with them about the group, and enlists their support in organizing it. In many instances, these Members serve as the group's executive officers, coordinators, or sponsors, and are the activists who lay the group's foundation and shape its policy. This informal gathering of \"core\" Members may occur before the group is actually established or shortly thereafter. Consider Internal Institutional Concerns In an effort to avoid the appearance of rivalry or duplication with party or committee positions and policy, group organizers may wish to consult with party and committee leadership, or inform them of the intent to form the organization. Similar consideration may also be given to any existing groups that handle relevant aspects of the issue(s) or policy. Organizers will likely want to give careful consideration to the group's name in order to avoid confusion with other existing entities (whether formal or informal). Identify Likely Membership CMO membership is voluntary. Eligibility criteria for membership are determined by the group itself. Membership may be open to all Members who are willing to join, or it may be limited to invitees only. Membership may be open to one party only or both parties; the House only or both the House and the Senate; regions that share specific economic concerns; districts or states; Members who share personal characteristics; Members whose constituents share personal or occupational characteristics; or Members who share issue interests. Membership may also be based upon committee and subcommittee assignments. Similarly, the membership lists of the committees and subcommittees with primary jurisdiction over the relevant issue(s) can be used to identify prospective CMO members. This procedure can provide an indication of whether, how, and by whom the issue is handled. It may also identify some Members who would either support or oppose the group. Seek Necessary Guidance and Information The Committee on House Administration has issued specific regulations governing groups that register as CMOs. The regulations appear in the Members' Congressional Handbook, which is available online at http://cha.house.gov/handbooks/members-congressional-handbook#Members-Handbook-Organizations . After reviewing these regulations, House Members may wish to contact the Committee on House Administration, the House Commission on Congressional Mailing Standards (also known as the Franking Commission), the Committee on Standards of Official Conduct's Office of Advice and Education, and any other authorities, as appropriate, for guidance. Notify or Announce the CMO's Formation There are instances where formation of a CMO has been announced on the House floor, in the Congressional Record , by the media (through press releases, news articles, newsletters, television interviews, etc.), and internally, through circulation of \"Dear Colleague\" letters to Members. The \"Dear Colleague\" letter and announcement usually invite Members to join the group and explain its goals, anticipated activities, and reason(s) for being formed. Sometimes, notification of a group's formation also includes language aimed at assuring that the group is not being established to supplant the structure or operations of any committee or party organizations. Register with the Committee on House Administration As mentioned previously, any informal group of House Members that wishes to use personal staff to work on behalf of an informal Member group, discuss their membership in the group in official communications, or mention their membership on their official House website must register the group with the Committee on House Administration as a CMO. The registration form is available at https://cha.house.gov/member-services/congressional-memberstaff-organizations/cmocso-registration-form#cmo . CMO Organizational Structure Each CMO determines its own organizational structure. All CMOs are required to have at least one identifiable leader who is designated as the group's sponsor when it is registered with the Committee on House Administration. That Member, or Members if there is more than one sponsor, is listed as the CMO's chair, or co-chairs, on the committee's web page. Beyond that, many CMOs have little or no formal organizational structure. Often, the founding Member or Members serve as the group's officers or coordinators, without formal election or designation. Leadership responsibilities (e.g., coordinating the group's activities, scheduling meetings, distributing information on group issues and actions, etc.) are undertaken by Members who volunteer, and group business usually is handled by staff in an individual Member's office as part of their regular office duties. Several groups have a structure that includes any combination of the following elements: officers (e.g., chair, co-chair, vice chair, secretary); an executive committee (alternatively called an executive board, steering committee, or advisory panel); and subunits (usually called task forces or working groups). The chair usually is a Member who is highly interested in the issue(s) surrounding the group's organization. More often than not, he or she \"steps forth\" to serve in that role or agrees to accept the position when recruited. Usually, he or she also designates staff to serve as (the) key contact person(s) for the group and to provide assistance on group business. Most bipartisan or bicameral CMOs have had more than one chair (i.e., co-chairmen) to emphasize the bipartisan or bicameral aspect of the organization. For example, a CMO might have two co-chairs, one from each party. Or, the CMO might have a chair, who may be a Member of either party in either house, as well as a Senate co-chair and a House co-chair, while prescribing that all three officers cannot be members of the same party. Several CMOs have a chair, vice chair, and secretary. A few have opted for an even more stratified structure, one that might include whips and an executive committee. Class groups (i.e., freshmen in a particular Congress) usually have a structure that includes a president, vice president, and secretary. Most of the bicameral groups are also bipartisan, and their organizational structure usually reflects these characteristics. Thus, many bicameral CMOs require that the group's leadership be composed of Members from both parties and both houses. Current CMO regulations provide that \"Members of both the House and Senate may participate in CMO, but at least one of the Officers of the CMO must be a Member of the House.\" Executive Committee/Steering Committee/Advisory Board For most CMOs, the officers or executive committee administer the group's activities and set its agenda. Often, the executive committee also serves as the CMO's source of expertise, and it advises the group on certain issues. An executive committee serving in this advisory capacity sometimes comprises Members who serve on the committees and subcommittees with primary jurisdiction over the issue(s) of concern to the group. Other bases for advisory or executive committee membership might be the Member's state or region, common characteristic(s) of Members' constituents or congressional districts, or shared characteristics among the Members themselves, including their \"class\" group, knowledge, or interest. Some CMOs have separated the administrative and advisory roles of the executive committee by creating an advisory committee, apart from the executive committee. How Are the Chairs and Other Officers Selected? Like other internal operational matters, the manner by which the CMO's chair(s) is selected is left to the discretion of each CMO. A CMO may use an informal method of selection, whereby Members volunteer to serve as chair. If more than one Member expresses such interest, a co-chair arrangement may be used. Or, the interested Members themselves may work out an agreement as to who will serve, perhaps so that some Members serve during the first session and others during the second session. Alternatively, a group may choose a more formal process whereby interested Members must be nominated and then stand for election by the total membership or the executive committee. In many instances, the initial chair(s) is the CMO's founder. Often, he or she continues to serve until no longer a Member or until he or she relinquishes the position. However, in some instances, tenure as CMO chair is limited, either by custom or by rule (in the CMO's bylaws). Staff Currently, CMOs cannot employ staff. It is the individual Members and not the CMO who are the employing entities. Thus, CMO business is handled by staff of individual Members (often the group's chair(s)) as part of their regular duties. Frequently, the staff member works in an area related to the group's issue(s). Beginning in the 114 th Congress, the House amended its rules to allow certain CMOs (Eligible Congressional Member Organizations, or ECMOs) to enter into agreements with individual Members to contribute employment slots and a portion of the Members' Representational Allowance to a dedicated account of the ECMO. Members interested in registering a CMO as an ECMO can consult with the Committee on House Administration regarding the eligibility requirements and registration process.", "summary": "This report examines the historical development and contemporary role of Congressional Member Organizations (CMOs) in the House, as well as informal Member groups in the House, Senate, and across the chambers. Commonly, these groups are referred to as caucuses, but they will be referred to collectively as informal Member organizations in this report to avoid confusion with official party caucuses. Some examples of groups that modern observers would consider informal Member organizations date back as far as the early 1800s, but the number of groups has grown substantially since the 1990s. Members of the House and Senate may form these groups and participate in their activities for a variety of reasons. Often the objectives of these groups coincide with Members' policy objectives or representational considerations. These groups enable Members to exchange information and ideas with colleagues, and can facilitate interactions among Members who might not otherwise have opportunities to work with one another. Some groups may be eligible to register with the Committee on House Administration as a Congressional Member Organization (CMO), which enables House Members to utilize some personal office resources in support of CMO legislative activities. CMOs may include Senators among their members, but the Senate has no registration process for Member groups. Informal Member organizations that are not registered with the Committee on House Administration (including those in the Senate) are called informal Member groups. The term informal Member organization is used when referring to both CMOs and informal Member groups. Since the 1970s, the House has issued various regulations governing informal Member organizations. This history provides some additional background on existing CMO regulations and can provide further insights about some of the perceived benefits and shortcomings of these groups. To increase accountability and transparency in an era when Member groups had greater access to institutional resources, the House created its first regulations in 1979 for Member groups registered with the Committee on House Administration as Legislative Service Organizations (LSOs). In 1995, LSOs were abolished and CMOs were created, with limited abilities to use official resources in support of Member groups. Beginning in 2015, the Committee on House Administration created a designation of Eligible Congressional Member Organizations (ECMOs) for certain CMOs, which enables Members to assign personal office staff to work on behalf of an ECMO; four CMOs in the 115th Congress were designated as ECMOs. In recent years, the number of CMOs and informal Member groups has increased, more than doubling from the 108th Congress (350) to the 115th Congress (854). This increase has taken place even though (with limited exceptions in certain specific circumstances) House Members can no longer use their Members' Representational Allowance (MRA) to directly support a CMO or informal Member group as an independent entity; provide congressional office space for these organizations; use the congressional frank to support their activities; or accept goods, funds, or services from private organizations or individuals to support their activities. Despite these limits imposed on the options available to House Members to support informal Member organizations, CMOs and other informal Member organizations have retained an ongoing role in the congressional policymaking process. Their influence has endured largely because many Members continue to consider their participation in informal Member groups and CMOs as advantageous in achieving their legislative and representational goals.", "document_type": "crs"}
{"report": "The leaders of the eight legislative branch agencies and entities—the Government Accountability Office, the Library of Congress, the Government Publishing Office (formerly Government Printing Office), the Office of the Architect of the Capitol, the U.S. Capitol Police, the Congressional Budget Office, the Congressional Research Service, and the Office of Compliance—are appointed in a variety of manners. The first four agencies are led by a person appointed by the President, with the advice and consent of the Senate. The next two are appointed by Congress, the next by the Librarian of Congress, and the last by a board of directors. Congress has periodically examined the procedures used to appoint legislative branch officers with the aim of protecting the prerogatives of, and ensuring accountability to, Congress within the framework of the advice and consent appointment process established in Article II, Section 2 of the Constitution. Legislation to alter the appointment process for legislative branch agencies and entities has periodically been introduced for many years. Questions remain about various reform proposals, including the ability of Congress to remove the President from the appointment process for some of these positions. These may depend upon the implication or interpretation of the Appointments Clause of the Constitution, the definition of an \"officer of the United States,\" the specific office or agency in question, and whether or not a change in appointing authority would require any revision in the powers and duties of legislative branch agency leaders. Some previous reforms and proposals have also attempted to find a role for the House of Representatives, which does not play a formal role in the confirmation of presidential nominees, in the search for legislative branch officials. The report also briefly addresses legislation considered, but not enacted, in the 115 th Congress to change the appointment process for the Register of Copyrights. The following sections contain information on the legislative branch agency heads' appointment processes, length of tenures (if terms are set), reappointment or removal provisions (if any), salaries and benefi ts, and most recent appointments. Information is provided on each agency and summarized in Table 1 . Pursuant to the Legislative Branch Appropriations Act, 1990, the Architect is \"appointed by the President by and with the advice and consent of the Senate for a term of 10 years.\" The act also established a congressional commission responsible for recommending individuals to the President for the position of Architect of the Capitol. The commission, originally consisting of the Speaker of the House of Representatives, the President pro tempore of the Senate, the majority and minority leaders of the House of Representatives and the Senate, and the chairs and the ranking minority Members of the Committee on House Administration and the Senate Committee on Rules and Administration, was expanded in 1995 to include the chairs and ranking minority Members of the House and Senate Appropriations Committees. Prior to 1989, the Architect was selected by the President for an unlimited term without any formal involvement of Congress. The FY1990 act, however, followed numerous attempts dating at least to the 1950s to alter the appointment procedure to provide a role for Congress. The proposals included requiring the advice and consent of the Senate, establishing a commission to recommend names to the President, and removing the appointment process from the President and instead making the Architect appointed solely by Congress. In the 111 th Congress, two measures ( H.R. 2185 and H.R. 2843 ) were introduced to remove the President from the Architect appointment process and shift it to congressional leaders and chairs and ranking Members of specific congressional committees. Under both measures, the Architect would still serve a 10-year term. Under H.R. 2843 , as reported, the Architect would have been appointed jointly by the same 14-member panel, equally divided between the House and Senate, that currently is responsible for recommending candidates to the President. This bill was reported by the Committee on House Administration ( H.Rept. 111-372 ) on December 10, 2009. The Committee on Transportation and Infrastructure was discharged from further consideration the same day. The House agreed to the bill, as amended to include an 18-member panel, also equally divided between the House and Senate, by voice vote on February 3, 2010. H.R. 2843 was received in the Senate and referred to the Committee on Rules and Administration, although no further action was taken. Under the earlier bill ( H.R. 2185 , 111 th Congress), which was introduced on April 30, 2009, the Architect would have been appointed jointly by the Speaker of the House, the Senate majority leader, the minority leaders in the House and Senate, the chairs and ranking minority Members of the House and Senate Committees on Appropriations, and the chairs and ranking minority Members of the Committee on House Administration and Senate Committee on Rules and Administration. This bill followed similar legislation ( H.R. 6656 , 110 th Congress), with the same 12-member appointing panel, introduced on July 30, 2008. Both bills were referred to two committees, but no further action was taken. The Architect of the Capitol is compensated at an \"annual rate which is equal to the lesser of the annual salary for the Sergeant at Arms of the House of Representatives or the annual salary for the Sergeant at Arms and Doorkeeper of the Senate.\" Stephen T. Ayers was nominated by President Obama for a 10-year term on February 24, 2010. He was the second Architect nominated pursuant to the new commission procedure. The nomination was referred to the Senate Committee on Rules and Administration. The committee held a hearing on April 15, 2010, and Ayers was confirmed by unanimous consent in the Senate on May 12, 2010. Ayers was previously the Deputy Architect/Chief Operating Officer and had served as Acting Architect of the Capitol following the February 4, 2007, retirement of former Architect of the Capitol Alan Hantman. Upon the retirement of Ayers on November 23, 2018, Christine Merdon, the Deputy Architect of the Capitol/Chief Operating Officer, became the Acting Architect of the Capitol. Pursuant to 31 U.S.C. 703(a)(1), the Comptroller General shall be \"appointed by the President, by and with the advice and consent of the Senate.\" This procedure dates to the establishment of the agency in 1921. Additionally, a commission procedure established in 1980 recommends individuals to the President in the event of a vacancy. The commission consists of the Speaker of the House, the President pro tempore of the Senate, the majority and minority leaders of the House and Senate, the chairs and ranking minority Members of the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Oversight and Government Reform. The commission is to recommend at least three individuals for this position to the President, although the President may request additional names. The Comptroller General is appointed to a 15-year term and may not be reappointed. The Comptroller General may be removed by \"(A) impeachment; or (B) joint resolution of Congress, after notice and an opportunity for a hearing\" and only by reason of permanent disability; inefficiency; neglect of duty; malfeasance; or a felony or conduct involving moral turpitude. The salary of the Comptroller General is equal to Level II of the Executive Schedule. Additionally, a law enacted in 1953 established a separate retirement system for the Comptroller General. Gene L. Dodaro, then-Chief Operating Officer at GAO, became the acting Comptroller General on March 13, 2008, upon the resignation of David M. Walker, who had previously been confirmed on October 21, 1998. The White House announced Dodaro's nomination to a 15-year term as Comptroller General on September 22, 2010. The Senate Committee on Homeland Security and Governmental Affairs held a hearing on the nomination on November 18, 2010, and Dodaro was confirmed by the Senate by unanimous consent on December 22, 2010. The Government Publishing Office (formerly Government Printing Office) was established in 1861. The U.S. Code , at 44 U.S.C. 301, states that the President \"shall nominate and, by and with the advice and consent of the Senate, appoint a suitable person to take charge of and manage the Government Publishing Office. The title shall be Director of the Government Publishing Office.\" The current appointment language was enacted in 2014, although the use of the advice and consent procedure for this position can be traced back much further. There is no set term of office for the Director. The Director's pay is equivalent to Level II of the Executive Schedule. Robert C. Tapella was nominated to be Director of the Government Publishing on June 18, 2018. The nomination was referred to the Committee on Rules and Administration. No further action was taken prior to the end of the 115 th Congress, and the nomination was returned to the President pursuant to Senate Rule XXXI. President Trump renominated Tapella on January 16, 2019. The nomination was referred to the Committee on Rules and Administration. Previously, Tapella served in this role from October 4, 2007 (confirmed by the Senate by voice vote) until December 28, 2010. GPO's Chief Administrative Officer, Herbert H. Jackson Jr., has served as Acting Deputy Director since July 1, 2018, following the retirement of Andrew M. Sherman. Sherman, formerly GPO's Chief of Staff, had been serving as Acting Deputy Director since the retirement of Acting GPO Director Jim Bradley on March 6, 2018. Bradley, previously the GPO Deputy Director, had assumed this role following the departure of the previous Director, Davita Vance-Cooks, in November 2017. Vance-Cooks had been nominated by President Obama on May 9, 2013, to be Public Printer, as the head of the GPO was then known, and confirmed by the Senate by voice vote on August 1, 2013. The Library of Congress was established in 1800. The U.S. Code , at 2 U.S.C. 136, states: \"The Librarian of Congress shall make rules and regulations for the government of the Library.\" Until an act of February 19, 1897, which made the appointment subject to the advice and consent of the Senate, the Librarian was appointed solely by the President. Recent changes to the appointment statute, at 2 U.S.C. 136-1, amended the tenure of the Librarian. The Librarian of Congress Succession Modernization Act of 2015, S. 2162 , was introduced in the Senate on October 7, 2015, and agreed to the same day by unanimous consent. It was agreed to in the House without objection on October 20 and signed by President Obama on November 5, 2015 ( P.L. 114-86 ). The act establishes a term limit of 10 years, with the possibility of reappointment by the President, by and with the advice and consent of the Senate. Previously, there was no set term of office for the Librarian. The U.S. Code , at 2 U.S.C. 136a-2, states: \"the Librarian of Congress shall be compensated at an annual rate of pay which is equal to the annual rate of basic pay payable for positions at Level II of the Executive Schedule under section 5313 of title 5.\" Carla D. Hayden was nominated to a 10-year term as Librarian of Congress by President Obama on February 24, 2016. The Senate Committee on Rules and Administration held a hearing on the nomination on April 20, 2016, and ordered the nomination favorably reported on June 9. Hayden was confirmed as the 14 th Librarian of Congress on July 13, 2016 (74-18, record vote number 128). Hayden succeeded James H. Billington who retired effective September 30, 2015. Billington had been confirmed as Librarian of Congress by the Senate on July 24, 1987. The Legislative Reorganization Act of 1970 provides that the Librarian of Congress appoint the Director of the Congressional Research Service (CRS) \"after consultation with the Joint Committee on the Library.\" The basic rate of pay for the director is equivalent to Level III of the Executive Schedule. There is no set term of office. Mary B. Mazanec, who served as Acting Director of CRS following the retirement of former Director Daniel P. Mulhollan on April 2, 2011, was appointed Director by the Librarian of Congress on December 5, 2011. 2 U.S.C. 1901 states: \"There shall be a captain of the Capitol police and such other members with such rates of compensation, respectively, as may be appropriated for by Congress from year to year. The Capitol Police shall be headed by a Chief who shall be appointed by the Capitol Police Board and shall serve at the pleasure of the Board.\" The last sentence was inserted in 1979, struck by the FY2003 Consolidated Appropriations Resolution, and restored in 2010 by the U.S. Capitol Police Administrative Technical Corrections Act. Pursuant to the FY2003 act, the chief of the Capitol Police receives compensation \"equal to $1,000 less than the lower of the annual rate of pay in effect for the Sergeant-at-Arms of the House of Representatives or the annual rate of pay in effect for the Sergeant-at-Arms and Doorkeeper of the Senate.\" Pay for the chief has been adjusted multiple times in recent years: it formerly was (1) equal to Level IV of the Executive Schedule under 1979 legislation, (2) linked to the Senior Executive Service under an act from 2000, and (3) equal to $2,500 less than these officers pursuant to a 2002 law. On February 24, 2016, the Capitol Police Board announced the appointment of Matthew R. Verderosa as the new Chief of the U.S. Capitol Police, effective March 20, 2016. Previously, Chief Kim Dine was sworn in on December 17, 2012. The director of the Congressional Budget Office (CBO) has been appointed wholly by Congress since the creation of the post with the passage of the Congressional Budget Act in 1974. The act stipulates that the director is appointed for a four-year term \"by the Speaker of the House of Representatives and the President pro tempore of the Senate after considering recommendations received from the Committees on the Budget of the House and the Senate, without regard to political affiliation and solely on the basis of his fitness to perform his duties.\" The director may be reappointed, and either chamber can remove the director by simple resolution. Additionally, a director appointed \"to fill a vacancy prior to the expiration of a term shall serve only for the unexpired portion of that term\" and an \"individual serving as Director at the expiration of a term may continue to serve until his successor is appointed.\" The director of CBO receives compensation at an annual rate that is equal to the lower of the highest annual rate of compensation of any officer of the House or any officer of the Senate. Keith Hall, the current director of CBO, began his service on April 1, 2015. He follows Douglas W. Elmendorf, who began his term on January 22, 2009. 2 U.S.C. 1382 states that the chair of the board of directors of the Office of Compliance, \"subject to the approval of the Board, shall appoint and may remove an Executive Director. Selection and appointment of the Executive Director shall be without regard to political affiliation and solely on the basis of fitness to perform the duties of the Office.\" The executive director must be \"an individual with training or expertise in the application of laws referred to in section 1302(a)\" of Title II of the U.S. Code . The FY2008 Consolidated Appropriations Act altered the compensation for the Office's statutorily established positions, including that of the executive director. The chair of the board may fix the annual rate of pay for the executive director, although the level may not exceed the lesser of House or Senate officers. Prior to the FY2008 act, the maximum pay for this position had been Level V of the Executive Schedule. Separate legislation, P.L. 110-164 , amended the Congressional Accountability Act and altered eligibility and tenure restrictions for the executive director by allowing current or former Office of Compliance employees to serve in this capacity. The legislation also permits the executive director, deputy executive directors, and general counsel, who formerly were limited to one five-year term in their positions, to serve up to two terms. Susan Tsui Grundmann was appointed to a five-year term as executive director commencing January 2017. She succeeded Barbara J. Sapin, who was appointed in 2013. During the 115 th Congress, the House and Senate considered legislation that would alter the appointment of one position within one of these agencies—the Register of Copyrights. Under current law pertaining to the copyright office (17 U.S.C. 701): All administrative functions and duties ... are the responsibility of the Register of Copyrights as director of the Copyright Office of the Library of Congress. The Register of Copyrights, together with the subordinate officers and employees of the Copyright Office, shall be appointed by the Librarian of Congress, and shall act under the Librarian's general direction and supervision. H.R. 1695 and S. 1010 , the Register of Copyrights Selection and Accountability Act, would have made the Register of Copyrights a presidential appointment, subject to the advice and consent of the Senate. The legislation would have established a seven-person panel to recommend at least three candidates for this position to the President. The panel would consist of the Speaker of the House, President pro tempore of the Senate, majority and minority leaders in the House and Senate, and Librarian of Congress. The bills would have established a 10-year term of office for the Register. H.R. 1695 was reported by the House Judiciary Committee on April 20, 2017 ( H.R. 1695 , H.Rept. 115-91 ), and passed in the House, as amended, on April 26 (378–48, Roll no. 227). The Senate Committee on Rules and Administration held a hearing on September 26, 2018. A Senate committee markup of S. 1010 initially scheduled for December 12, 2018, was postponed. No further action was taken during the 115 th Congress. The office is currently led by Acting Register of Copyrights Karyn A. Temple, who was named to the position by Librarian of Congress Carla Hayden on October 21, 2016.", "summary": "The leaders of the legislative branch agencies and entities—the Government Accountability Office (GAO), the Library of Congress (LOC), the Congressional Research Service (CRS), the Government Publishing Office (GPO, formerly Government Printing Office), the Office of the Architect of the Capitol (AOC), the U.S. Capitol Police (USCP), the Congressional Budget Office (CBO), and the Office of Compliance—are appointed in a variety of manners. Four agencies are led by a person appointed by the President, with the advice and consent of the Senate; two are appointed by Congress; one is appointed by the Librarian of Congress; and one is appointed by a board of directors. Congress has periodically examined the procedures used to appoint these officers with the aim of protecting the prerogatives of, and ensuring accountability to, Congress within the framework of the advice and consent appointment process established in Article II, Section 2 of the Constitution. This report contains information on the legislative branch agency heads' appointment processes, length of tenures (if terms are set), reappointment or removal provisions (if any), salaries and benefits, and most recent appointments. This report also briefly addresses legislation considered, but not enacted, in the 115th Congress to change the appointment process for the Register of Copyrights.", "document_type": "crs"}
{"report": "Many Members of Congress became actively engaged in foreign policy debates over U.S. intervention in the 1992-1995 war in Bosnia and Herzegovina (hereafter, \"Bosnia\"). Congress monitored and at times challenged the Bush and Clinton Administrations' response to the conflict through numerous hearings, resolutions, and legislative initiatives. Many observers contend that the United States is a stakeholder in Bosnia's future because of the strong impact of U.S. intervention on the postwar Bosnian state. Nearly 25 years after warring parties in Bosnia reached the Dayton Agreement (see below), Bosnia faces numerous internal and external challenges, and the country retains geopolitical importance to U.S. interests in the Western Balkans. As Congress assesses ongoing and emerging security issues in the region, including resilience against malign external influence, renewed conflict, and radicalization, Bosnia's internal politics and its role in Balkan stability may merit further examination. Bosnia has existed in various forms throughout its history: a medieval kingdom, territory held by two major empires, a federal unit, and, since 1992, an independent state. Bosnia's present international borders are largely consistent with its administrative boundaries under later periods of Ottoman Turkish rule. After World War I, Bosnia became part of the newly created Kingdom of Serbs, Croats, and Slovenes. It was one of the six constituent republics of the Socialist Federal Republic of Yugoslavia from 1945 until 1992. Bosnia's constitution stems from the U.S.-brokered Dayton Peace Agreement that ended the country's 1992-1995 war. It recognizes three \"constituent peoples\": Bosniaks, Croats, and Serbs. All three groups are Slavic. Religious tradition is considered a marker of difference among the three ethnic identities: Bosniaks are predominantly Muslim, Serbs are largely Orthodox Christian, and Croats are mostly Catholic. Although Bosnian, Croatian, and Serbian are recognized in Bosnia as distinct official languages, they are mutually intelligible. Bosniaks comprise approximately 50.1% of the population, Bosnian Serbs 30.8%, and Bosnian Croats 15.4%. In this report, Bosnian is used as a non-ethnic term for a person or institution from Bosnia. A Bosnian Serb is an ethnic Serb from Bosnia and a Bosnian Croat is an ethnic Croat from Bosnia. Bosniak refers to Slavic Muslims. Bosnia's religious and cultural diversity is one of its distinctive characteristics. Islam was introduced to part of Bosnia's population during the Ottoman period, although there were also large Catholic, Orthodox Christian, and Jewish communities. Bosnia was the most heterogeneous Yugoslav republic and the only one where no ethnic group formed an absolute majority. During the 1990s, some popular accounts of Bosnia (and the former Yugoslavia) depicted its ethnic relations as \"ancient hatreds,\" implying that the country's ethnic groups cannot peacefully coexist and that the 1992-1995 war was unavoidable. However, many experts on the region reject this thesis. Although Bosnia has experienced episodes of communal violence and bloodshed, most recently during World War II and the 1992-1995 war, its heterogeneous population also has lived in mixed communities for periods of peace. Many experts contend that ethnic conflict often was stoked by domestic leaders who manipulated historical memory and grievances to further their own agendas, or by external powers seeking to rule Bosnia or annex its territory. In the 1980s, Yugoslavia's escalating political and economic crises fueled nationalist movements. Nationalist leaders in Serbia and Croatia appealed to Bosnian Serbs and Croats as ethnic \"kin.\" The party that ruled Croatia for most of the 1990s, the Croatian Democratic Union (HDZ), established a sister party with the same name to mobilize Bosnian Croats and compete in Bosnia's elections. This gave Croatia an avenue of influence in Bosnian politics. Serbia, led by strongman Slobodan Milošević, likewise had influence over Bosnian Serb leaders. In Bosnia's November 1990 elections—the first competitive elections in decades—voters cast aside the ruling League of Communists party and elected ethnic parties that largely continue to dominate today. Bosnian voters backed independence in a 1992 referendum, following in the footsteps of Slovenia, Croatia, and Macedonia. Bosnian Serbs, who did not want to separate from Yugoslavia, boycotted the referendum. Bosnian Serb forces seized more than two-thirds of Bosnia's territory, and a three-year conflict followed that pitted Serb, Croat, and Bosniak forces against one another. Bosnian Serb leaders declared a \"Serb Republic\" ( Republika Srpska) in March 1992, while Bosnian Croat leaders proclaimed the Croat Community of Herceg-Bosnia in July. Some Bosnian Croat and Bosnian Serb leaders advocated unification with Croatia and Serbia, respectively, where government factions—including their strongman leaders—likewise wanted to carve a Greater Croatia and Greater Serbia out of Bosnia's territory. Bosniak leaders opposed dismemberment of the state. Bosnia's war was one of the most lethal conflicts in Europe since World War II. Bosnian Serb forces besieged Sarajevo for 44 months. More than 10,000 people, mostly civilians, died due to shelling, sniping, and blockade-related deprivation. Paramilitary factions from neighboring Croatia and Serbia—some of which reportedly had ties to the Croatian and Serbian government—fought alongside Bosnian Croats and Serbs. The Serb-dominated Yugoslav National Army also aided Bosnian Serb forces, giving them a military advantage. In many areas, combatants from the three groups killed or expelled members of other ethnic groups to \"purify\" territory that they wanted to claim as their own. This \"ethnic cleansing\" changed Bosnia's demographic landscape. An estimated 100,000 or more Bosnians were killed in the conflict, and roughly half of its population displaced. In addition, an estimated 20,000 or more women and girls were victims of sexual violence. Hundreds of Bosnians have been prosecuted for war crimes at the International Criminal Tribunal for the former Yugoslavia (ICTY) and in Bosnian courts. In 2016, the ICTY convicted wartime Bosnian Serb leader Radovan Karadžić of genocide and war crimes. In 2019, the tribunal rejected his appeal and increased his sentence from 40 years to life. Citizens of Croatia and Serbia have also been indicted for crimes committed in the Bosnian war. Highly publicized incidents in 1994 and 1995 underscored the war's human toll. Bosnian Serb forces bombarded a Sarajevo market in 1994 and 1995, resulting in over 100 civilian deaths. In July 1995, Serb forces commanded by Ratko Mladić seized and executed more than 8,000 Bosniak men and boys in a U.N.-designated safe area around the city of Srebrenica, an incident subsequently seen by some as a consequence of the international community's muddled, ineffectual response to the conflict. The International Court of Justice and ICTY subsequently ruled that the Srebrenica massacres constituted an act of genocide. Mladić was convicted of genocide and other crimes in 2017. These incidents increased pressure on U.S. policymakers to take a stronger role in resolving a conflict that had largely been left to the EU and the United Nations. Under U.S. command, NATO intervened in August and September 1995 with air strikes against Bosnian Serb targets, while allied Bosniak and Croat forces launched a simultaneous offensive in western Bosnia. The United States played a key role in brokering several agreements. The 1994 Washington Agreement ended the \"war within a war\" between Bosniaks and Croats. In November 1995, leaders from Croatia, Bosnia, and Serbia met at the Wright-Patterson Air Force base in Dayton, OH, to negotiate a peace agreement. U.S. diplomat Richard Holbrooke played a crucial role in brokering the General Framework Agreement for Peace in Bosnia and Herzegovina, more commonly known as the Dayton Peace Agreement. Bosnia's complex political system is a product of the Dayton Agreement; one of its annexes serves as Bosnia's constitution (Annex 4). Its provisions partly reflect the situation on the ground in 1995, including the subdivision of Bosnia into two ethnoterritorial entities ( Figure 1 ): Republika Srpska (\"RS\"), which Bosnian Serb leaders had proclaimed in 1992, and the Federation of Bosnia and Herzegovina (\"FBiH,\" predominantly populated by Bosniaks and Croats), which was created by the 1994 Washington Agreement. Entity borders were largely drawn to form ethnic majorities, even though they also reflected territorial seizure and ethnic cleansing. Many Bosniaks view the division of Bosnia into these roughly equal entities as awarding the spoils of war to Bosnian Serbs, whom they regard as the aggressors. Many Bosnian Serbs, however, view the Serb-majority entity as a protection against marginalization. The designation of Bosniaks, Croats, and Serbs as Bosnia's three \"constituent peoples\" is a cornerstone of the Dayton system. Numerous government bodies have ethnic quotas requiring equal representation of the three groups. In these power-sharing institutions, delegates from each constituent group may veto measures that go against vital ethnic interests. While these arrangements make Bosnia's political system prone to gridlock, Dayton's negotiators viewed them as necessary to prevent any group from feeling marginalized in a context of low trust. Bosnia is a parliamentary republic with a high degree of decentralization. Its complex, tiered structure includes a central (\"state-level\") government, the two entities, the autonomous Brčko district, and cantonal and municipal governments. The central (\"state-level\") government covers the entirety of Bosnia. A three-member presidency is the head of state, and includes one Serb member who is elected by RS voters, and one Bosniak and one Croat member elected by FBiH voters. The Council of Ministers, led by a Chairperson, is roughly equivalent to a cabinet government and prime minister in other parliamentary systems. The Parliamentary Assembly is a state-level legislature with two chambers: a directly elected House of Representatives (42 members) and an indirectly elected House of Peoples (5 Serbs, 5 Croats, and 5 Bosniaks). The state-level government is considered to be weak, despite some expansion of its functions in the 2000s. Its major responsibilities include foreign relations; trade, customs, and monetary policy; migration and asylum policy; defense; and intelligence. Bosnia is further subdivided into two ethnoterritorial entities: Republika Srpska (RS), where Serbs are the largest ethnic group (82%), and the Federation entity (FBiH), where Bosniaks (70%) and Croats (22%) are the largest groups. The two entities have broader policy jurisdiction than the state-level government. Governing functions that are not assigned to the state-level government fall to the entities. These include civilian policing, economic policy, fiscal policy, energy policy, and health and social policy, as well as other issues. Each entity has its own constitution, as well as a president, vice presidents, legislature, and cabinet government with a prime minister. Each entity may establish \"special parallel relationships\" with neighboring states (i.e., Croatia and Serbia). Numerous entity bodies also incorporate ethnic quotas. Brčko district, a border region in northeastern Bosnia, was initially administered by the international community to allay concerns about RS secession. Brčko's location interrupts RS's contiguity, and both entities initially claimed it. Brčko was later awarded to both entities, but remains a self-governing district whose population is a mix of all three constituent peoples. Some analysts believe it has been relatively more successful than the entities in passing reforms and reintegrating its divided population (e.g., ethnically mixed schools with a common curriculum). FBiH entity is further divided into ten cantons, many of which were drawn to form ethnic Bosniak or Croat majorities. The cantons have jurisdiction in many policy areas, including policing, housing, culture, and education. They also have their own constitutions—based on the FBiH constitution—as well as legislatures and cabinet-style governments. FBiH and RS are further divided into 79 and 64 municipalities, respectively. The Dayton Agreement established a strong oversight role for the international community. The Office of the High Representative (OHR) was created to monitor the implementation of civilian aspects of Dayton. The High Representative is supported by the Peace Implementation Council (PIC), a group of 55 countries and agencies. A 1997 PIC conference empowered the High Representative to impose binding decisions and sanction politicians who obstruct Dayton. Until the mid-2000s, the High Representative used these powers to remove officials deemed to be obstructive to peace and to promote what are considered among the most constructive reforms since Dayton, including merging the entities' armed forces and intelligence services and putting them under new state-level ministries. However, the High Representative's proactive role has since decreased. This is partly due to criticism that the OHR lacks democratic legitimacy and accountability. Bosnian Serb politicians have claimed that the OHR's interventions support Bosniak leaders' preference for a more centralized state. At the same time, some U.S. and EU policymakers believed that the attraction of EU membership could incentivize reforms in place of the OHR's more top-down approach. The international community also plays an ongoing security role. NATO led the Implementation Force (IFOR) and the smaller Stabilization Force (SFOR) that monitored security aspects of the Dayton Peace Agreement. The initial deployment of NATO ground forces to Bosnia numbered nearly 60,000, of which the largest share (approximately one-third) was from the United States. The number of troops subsequently decreased. In 2004, NATO's peacekeeping role was transferred to the EU with the understanding that NATO would assist if necessary. The size of the EU operation (EUFOR Althea) decreased from 7,000 troops in 2004 to roughly 600 troops today. Many analysts contend that the Dayton Agreement helped hold Bosnia together after the war; they point to the absence of widespread violence since 1995 as an indicator of its success. However, observers also question whether Bosnia can function much longer under the Dayton system. They identify several key challenges: Critics claim that Bosnia's political system reinforces the country's ethnic divisions and makes ethnicity a core basis of political identity. The ethnic parties that have dominated politics since the war generally appeal to voters from their respective ethnic communities rather than all Bosnians. Critics accuse ethnic party leaders of inflaming nationalist tensions and manipulating historical memory to distract from corruption and win elections, thus aggravating rather than bridging the deep wounds that remain from the war. In some parts of Bosnia, divisions are further reproduced at the societal level through institutions like segregated schools, which separate schoolchildren from different ethnic groups and teach them different curriculum. Some analysts also contend that the system is too gridlock-prone to pass major political and economic reforms to be passed, even with the incentive of potential EU membership. Bosnia's fractured, overlapping institutions sometimes muddle policymaking jurisdiction and impede coordinated response. Furthermore, power-sharing arrangements create numerous veto points in the legislative process. Government coalitions are typically ideologically broad and unwieldy, creating a further source of potential dysfunction. One of the consequences of these barriers is that it is difficult to pass legislation. The previous state-level Parliament, for example, adopted twelve new laws over the course of its 2014-2018 term. Corruption in Bosnia has roots in the country's wartime economy. A 2000 Government Accountability Office (GAO) report stated that \"organized crime and corruption pervade Bosnia's national political parties, civil service, law enforcement and judicial systems. [Ethnic] parties control all aspects of the government, the judiciary, and the economy, and in so doing maintain the personal and financial power of their members.\" Many observers claim that the situation has improved little since then. In 2018, the High Representative warned that the rule of law has deteriorated, while the U.S. State Department describes the rule of law as \"an existential issue.\" Bosnia's major parties allegedly siphon from the state apparatus and public enterprises in their strongholds to amass wealth and power. Furthermore, parties in power reportedly politicize hiring in Bosnia's public sector, which employs an estimated third or more of the working population. For many Bosnians, satisfactory employment depends on having the right political connections, which creates a dependence that reportedly is exploited during elections. In 2018, the outgoing U.S. ambassador to Bosnia decried the \"[Bosnian] politicians who seek to destabilize the country in order to remain in power at all costs for personal profit and protection.\" Many analysts believe that Bosnia's entrenched ethnic parties benefit tremendously from the status quo and have little incentive to reform the system. Bosnia's MPs are among the best-paid in Europe relative to local incomes, commanding six to eight times the average Bosnian salary. Parties and politicians who gain office in the government or administration often find \"a remarkably efficient path to personal enrichment.\" Politicians are skilled at using veto points to block legislation that threatens their position in Bosnia's patronage system. According to one analyst, Bosnia's patronage system is \"the raison d'etre of the political elites and is the main cause of the state's dysfunctionality and resistance to reform.\" Bosnia's entrenched political class may also fear penalty if serious reforms are enacted and shine the spotlight on malfeasance. Criminal indictments against leaders in neighborhood countries like Romania, Croatia, and North Macedonia highlight this risk. Analysts believe these disincentives make entrenched politicians resistant to external pressure for reform. Several major rounds of U.S.- and EU-brokered constitutional reform efforts, including in 2006, 2008, and 2009, ultimately failed. Germany and the United Kingdom launched a major initiative in 2014 to shift the focus from difficult constitutional reforms to seemingly more feasible socioeconomic reforms that they hoped would improve Bosnia's economy and dismantle patronage networks. The 2015 \"Reform Agenda\" identified economic, administrative, and legal measures to be adopted by entity- and state-level governments. The process, which required the major parties to commit in writing to the reform framework, was supported by the EU, the International Monetary Fund, the World Bank Group, and the United States. As an incentive for politicians to agree to the Agenda, the EU offered the entry into force of Bosnia's long-stalled Stabilization and Association Agreement, which marked the first step toward EU membership. However, most observers view the Reform Agenda as largely unsuccessful; many of its provisions failed when entrenched parties objected to measures that would undercut their dominance. While many officials recognize that Bosnia's political system needs reform, there is little consensus on how to change it or to generate the political will to find common ground so long as the dominant parties remain entrenched. Bosnian Serb leaders have expressed a desire to return to the \"original\" Dayton system, when the entities had greater competencies in security and justice. Milorad Dodik, who has dominated politics in Republika Srpska since the 2000s, has gone further by repeatedly threatening RS secession. Bosnian Croat leaders from the largest Croat party, the Croatian Democratic Union of Bosnia (HDZ-BiH), call for more autonomy for Croats, and have raised the prospect of splitting FBiH to create a third Croat-majority entity. By contrast, Bosniak leaders generally prefer more centralization and the removal of some of the institutional arrangements that they believe contribute to dysfunction and gridlock. Some Bosniak officials also have proposed dismantling the entities or eliminating FBiH's cantons. Survey research documents Bosnian citizens' anger toward the political class and their distrust of political institutions. In a 2018 International Republican Institute survey, 86% of respondents expressed belief that Bosnia is heading in the wrong direction. An estimated 170,000 individuals—disproportionately young and skilled—have emigrated since 2013. Dissatisfaction with education and healthcare, insecurity, and nepotism are cited as key motives to emigrate. Nevertheless, some analysts believe that periods of social discontent in 2014 and 2018, which challenged the system but appeared to transcend ethnic divides, suggest that strengthening Bosnian civil society could increase pressure for reform, and perhaps cultivate a new generation of party leaders. Other observers have put their hopes for reform in Bosnia's so-called \"civic parties,\" which do not have nationalist platforms and typically mobilize voters on the basis of socioeconomic interests rather than ethnicity. While these parties have not matched the results of the ethnic parties, their electoral performance has improved in recent years. Bosnia's challenges came to the forefront during its most recent general election on October 7, 2018 (see Table 1 ). The Central Election Commission (CEC) registered 60 parties and over 3,500 candidates for state-level, entity, and cantonal offices. Observers noted that the campaign climate was more divisive and nationalist in tone than usual. Despite broad voter dissatisfaction, entrenched ethnic parties won the largest vote shares. Almost six months after the election, the parties are still negotiating over government formation at the state level and in FBiH; however, it appears that entrenched ethnic parties will continue to dominate. In March 2019, the leaders of the largest Bosniak, Croat, and Serb parties stated that they had agreed to a set of principles to guide forming the state-level government (the Council of Ministers). Some observers viewed the improved result of civic parties (one-third of the vote in FBiH) as a positive development. Some of the most controversial outcomes concern the elections to the state-level presidency, composed of three members (one Bosniak, one Croat, and one Serb). In a closely fought race, Šefik Džaferović, candidate of the ethnic Bosniak SDA party, narrowly defeated the candidate of the civic SDP party (36.6% and 33.5%, respectively), retaining the lock that the SDA has had on the Bosniak seat in most elections since 1996, but perhaps auguring a future victory by a civic party candidate. Prior to the election, some analysts expressed concern at the prospect of two of the three seats on the presidency being held by the nationalist Bosnian Serb leader Milorad Dodik and his ally, the nationalist Bosnian Croat politician Dragan Čović. Both politicians have explicitly or implicitly challenged the legitimacy of Bosnian statehood and called for greater ethnoterritorial autonomy. However, to the surprise of some observers, Željko Komšić of the civic Democratic Front defeated incumbent Čović for the Croat seat with 53% of the vote. Komšić was previously elected as the Croat member of the presidency in 2006 and 2010, and is considered to be a moderate political figure who generally supports centralizing reforms. In contrast to HDZ-BiH leader Čović, he does not have strong ties to the Croatian government. Komšić's election as the Croat member of the presidency in 2006 and 2010 was mired in controversy amid complaints that he only won with the support of Bosniaks who voted in the election for the Croat member on the presidency rather than the Bosniak member. Komšić identifies as Croat but has been leader of several civic parties. He comes from central Bosnia, and not from the Croat-majority western regions that are the stronghold of the HDZ. Although it is not illegal for Bosniaks to vote for the Croat seat on the presidency rather than the Bosniak seat, some Croat leaders (especially HDZ-BiH and HDZ-1990) claim that it violates the spirit of Dayton and results in illegitimate representation of Croats. Similar accusations of ethnic cross-voting surfaced after Komšić's victory in 2018. Some analysts expect Komšić's victory to harden the HDZ-BiH position on electoral reform (see \"Legal Challenges,\" above) and possibly embolden politicians who seek a separate entity. As most pre-election polls anticipated, RS strongman Milorad Dodik defeated the more moderate incumbent Serb member of the presidency with 54% of the vote. Dodik has dominated entity politics in RS since the mid-2000s as entity prime minister and president. Analysts note that RS's political environment grew more closed as Dodik consolidated power. Dodik has run afoul of the United States and the EU by frequently threatening to hold a referendum on RS secession, questioning the legitimacy of Bosnian statehood, and cultivating close ties to Russia (see below). The U.S. Treasury Department sanctioned him in 2017 for actively obstructing Dayton. Many analysts have expressed concern that Dodik will use his new position to obstruct the workings of the central government while continuing to dictate politics in RS through loyal allies. Shortly after the election he vowed to \"work above all and only for the interests of Serbs.\" One of his first acts as head of state was to call for Bosnia to recognize Ukraine's Crimea region as Russian territory. In December 2018, the National Assembly of RS approved the creation of several new ministries, an act that some view as an attempt to wrest competencies from the state-level government. In early 2019, the RS parliament courted controversy when it passed legislation to create a new commission to reinvestigate the events of Srebrenica, which many view as an attempt to deny or downplay the massacres. Since the election, the formation of governments has proceeded piecemeal, and legal challenges to election law in FBiH (see above, \"Legal Challenges\") initially cast doubt over the formation of that entity's government. The RS National Assembly approved the new entity government in December 2018. Party leaders continue to negotiate over forming governments in FBiH and the state-level Council of Ministers. Because the FBiH government did not fix electoral legislation before the election, the Electoral Commission adopted a decision to assign delegates to the House of Peoples based on the 2013 census. (The Electoral Commission's actions reportedly came amid strong pressure from U.S. and EU officials). Several Bosniak parties challenged the decision before the Constitutional Court; however, the Court declined to take on the case. Bosnia is one of Europe's poorest countries. The 1992-1995 war caused an estimated $110 billion in damage, and Bosnia's economy contracted to one-eighth of its prewar level. Despite significant reconstruction and recovery since 1995, GDP per capita was $5,148 in 2017, well below the EU average ($33,715) and that of Bulgaria ($8,031), its lowest-ranking member. Nearly one in five Bosnians lives below the poverty level. Bosnia's unemployment rate was 18% in 2018, down from 28% in 2015. Youth unemployment also declined in recent years from 60% to 46%. Nevertheless, these rates are still high by European standards. Since 2015, annual GDP growth has averaged around 3%, but it is largely driven by consumption (much of which in turn is fueled by migrant remittances). The IMF has urged Bosnia to privatize or restructure the nearly 550 state-owned enterprises that comprise roughly 20% of its economy; many of them are unprofitable but allegedly are used by politicians as \"cash cows and workplaces for loyal cadres.\" Bosnia participates in several free trade schemes. In 2006, it joined the Central European Free Trade Agreement (CEFTA) alongside other non-EU countries in the region, including other ex-Yugoslav neighbors. Bosnia's Stabilization and Association Agreement (SAA) with the European Union, which entered into force in 2015, provides for almost fully free trade. A free trade agreement with the European Free Trade Association (EFTA) also entered into force in 2015. The EU is Bosnia's primary trade partner. Germany, Italy, Croatia, Slovenia, and Austria are Bosnia's key EU export markets, accounting for more than half of its exports in 2017. Serbia, another CEFTA signatory, is also an important export market. Bosnia's major exports include vehicle seats, raw materials, leather products, textiles, energy, and wood products. The EU is also Bosnia's primary source of foreign direct investment (FDI). In 2016, 63% of Bosnia's FDI came from EU countries, with Austria, Croatia, and Slovenia the top sources. Serbia is also a significant source of FDI (16.3%). However, Bosnia's fragmented legal and administrative structure create a challenging investment climate. Many relevant laws differ between the two entities. Corruption, entrenched economic interests, and political instability also deter investment. As a result, FDI amounts to just 2% of Bosnia's GDP, well below the Western Balkan average of 5%. Bosnia was the region's lowest-rated country in the World Bank's 2019 Ease of Doing Business Index. U.S. and EU policymakers view the NATO and EU accession processes as a positive force for democratization and reform in the Western Balkans, including Bosnia. According to analysts, this assessment informed the United States' partial retreat from the region in the 2000s and 2010s. EU membership is one of the few policy issues for which there is relatively broad consensus among Bosnia's politicians and population. The EU's \"fundamentals first\" approach to enlargement in the Western Balkans frontloads the accession process with meeting the core requirements of having a democratic political system and functioning market economy; in Bosnia, the EU is currently focused on issues relating to the rule of law, public administration reform, and economic development. In 2016, Bosnia submitted its application to join the EU. Its current status is potential candidate , which entitles it to receive financial assistance from the EU's Instrument for Pre-Accession Assistance II (IPA II). Between 2014 and 2020, Bosnia is expected to receive €552 million in IPA II allocations, making the EU Bosnia's largest source of foreign assistance. Many EU member states provide additional aid to Bosnia through domestic foreign assistance programs. Bosnia's EU membership prospects are uncertain. In a 2018 progress report, the European Commission (the EU's executive) flagged Bosnia's slow implementation of reforms, including the 2015 Reform Agenda (a flagship EU initiative in Bosnia) and numerous domestic and international court rulings (see \"Legal Challenges,\" above). Some analysts question whether Bosnia, under its current political system, would be capable of meeting the membership requirement of harmonizing domestic legislation with the many thousands of provisions in the acquis communautaire, the cumulative body of EU legislation, case law, and regulations. In comparison to EU membership, Bosnian leaders are more divided over the issue of joining NATO. These divisions largely fall along Bosnian Serb and Bosnian Croat/Bosniak lines. Bosnian Serb opposition is rooted in resentment over NATO's role in the Bosnian war, and may also reflect a desire to remain in lockstep with neighboring Serbia, which also does not seek NATO membership. Bosnia joined NATO's Partnership for Peace in 2006 and secured an Individual Partnership Action Plan in 2008. In 2010, NATO indicated that it would launch a Membership Action Plan (MAP)—a program to help aspiring members meet membership requirements—once Bosnia meets several conditions, the most challenging of which is the reregistration of permanent defense installations from entity to state-level government. RS officials have resisted ceding control over defense installations on entity territory. Although Bosnia does not yet meet these requirements, in December 2018 NATO foreign ministers invited Bosnia to activate its MAP by submitting its first Annual National Program. Some analysts interpreted this invitation as a gesture to generate reform momentum in Bosnia's fragile post-election period. The Bosniak and Croat members of the presidency responded positively, but Bosnian Serb leaders (and most Bosnian Serbs) do not want Bosnia to join NATO. In October 2017, the RS National Assembly passed a resolution supporting military neutrality. RS President Željka Cvijanović reiterated this stance after NATO's invitation, and Dodik—now a member of the state-level presidency—also has vowed to pursue military neutrality. Bosnia's relations with Croatia and Serbia are seen as an important component of regional stability. However, bilateral relations have often been fraught as a legacy of the Bosnian war, as well as sensitivities over Croatia and Serbia's relations with Bosnian Croats and Serbs. While democratic gains in Croatia and Serbia after 2000 contributed to improved relations with Bosnia, they remain reluctant to examine or acknowledge their role in the Bosnian war. At times, Bosnian leaders have objected to what they describe as Croatian and Serbian meddling in Bosnia's affairs. Ex-Bosnian Croat member of the presidency Dragan Čović and current Bosnian Serb member of the presidency Milorad Dodik draw support from leaders in Croatia and Serbia and reportedly hold Croatian and Serbian citizenship, respectively, alongside their Bosnian citizenship. The Croatian government financially and politically backed Čović in Bosnia's 2018 elections, and Croatian politicians have raised the issue of Bosnian Croats' constitutional challenges (see above, \"Legal Challenges\") in forums like the European Parliament, NATO, and the United Nations. These moves prompted three former High Representatives to Bosnia to issue a joint letter expressing alarm over Croatia's \"meddling\" in Bosnia's internal affairs. The Croatian government also challenged the legitimacy of Željko Komšić as the Croat member of the Bosnian presidency (see above, \"2018 General Election\"). Some parties in Croatia hold Croatian election campaign events on Bosnian territory to mobilize Bosnian Croat voters with dual citizenship to vote in Croatia's elections. The Serbian government likewise supports Dodik, who is a frequent visitor to Belgrade. Some Serbian politicians have made statements supporting convicted Bosnian Serb war criminals, inflaming an issue that remains highly sensitive in Bosnia. Bosnia and Serbia have an unresolved demarcation dispute over approximately 40 square kilometers of border area, including a railway segment and hydroelectric power stations. Bosnia has dual citizenship treaties with Croatia and Serbia, resulting in hundreds of thousands of Bosnian Croats and Bosnian Serbs acquiring dual citizenship. This has raised jurisdictional issues in cases in which indicted war criminals hold dual citizenship. Despite occasional tensions in their relations, Croatia and Serbia are important economic partners for Bosnia. Both countries are among Bosnia's top export markets and top sources of FDI. As part of its enlargement strategy in the Western Balkans, the EU has embraced a connectivity agenda to improve regional transportation, energy, and infrastructural linkages, reserving up to €1 billion in grants for projects for the period 2015-2020. Officials believe that improved connectivity could benefit bilateral relations and contribute to regional stability. Given its strategic location and relatively small, weak states, the Balkan region has long drawn in more powerful states. Many analysts maintain that as the United States and the European Union have both scaled back their presence in the Balkans to address other issues since the late 2000s, Russia, Turkey, and China partly filled the vacuum. U.S. and EU officials have expressed concern over Russian influence in the Western Balkans, particularly after Russia occupied Ukraine's Crimea region in 2014. Many analysts maintain that Russia does not have a grand strategy in the Western Balkans, but rather aims to prevent Euro-Atlantic integration and shore up its claims to great power status by asserting itself in the EU's \"inner courtyard.\" Analysts have identified several Russian tools in the region, including playing a \"spoiler\" role, projecting soft power, and leveraging energy dominance. Observers contend that Russia plays a \"spoiler\" role in Bosnia by exacerbating ethnic divisions, backing illiberal or anti-Western political factions, and helping to militarize RS. They claim that these actions help sustain the dysfunction and gridlock that undermine Bosnia's Euro-Atlantic reform efforts. Russia has supported Bosnian Serb and Bosnian Croat nationalist leaders Milorad Dodik and Dragan Čović. Dodik's meeting with Russian President Vladimir Putin just before Bosnia's October 7, 2018 general election was one of nearly ten meetings between the two over the past three years, signaling high-level Russian support. Many experts assert that Russia has been a key ally to Dodik in resisting Western pressure to cooperate on reforms. Moscow has also supported divisive RS policies. When Dodik violated a Bosnian Constitutional Court ruling in 2016 by holding a referendum to establish a controversial \"Statehood Day,\" Russia stood apart from the High Representative and Western diplomats by supporting the initiative. More recently, Russia stated its support for RS's controversial Srebrenica commission (see above). Analysts have also expressed concern at Russia's apparent support for Čović, who has advocated greater autonomy for Croats and the creation of a third Croat entity. Some analysts have expressed concern at Russia's role in RS's security sector. Russian forces have trained RS police special forces on counterterrorism and intelligence. Some observers believe that these exercises contribute to militarization in RS, potentially pushing the police force beyond its civilian law enforcement mandate. Analysts caution that militarization could increase the scale of violence in any confrontation between RS and the Bosnian government. Some Bosnian Serb ultranationalist and veterans groups have fought alongside pro-Russia combatants in Ukraine, and analysts believe they could be mobilized to support RS leaders as well. Russian soft power draws upon religious and cultural kinship with Bosnian Serbs, as well as Russia's history of support during the wars of Yugoslav disintegration. Kremlin-linked media, like Sputnik and RT , amplify existing anti-Western narratives and positively shape public opinion toward Russia. Some local media further propagate Sputnik and RT articles. A 2018 National Democratic Institute media study found that RS media stories about Russia were overwhelmingly positive, while the tone of most stories about the United States and NATO was negative. Pro-Russian media glorifies the Russian military, highlights cultural and religious links between Serbs and Russians, and documents high-level meetings between RS and Russian officials. Economic relations between Russia and RS have deepened in recent years. Russia is the largest source of FDI in RS, and it is largely concentrated in the energy sector. In 2007, Russian state-owned oil company Zarubezhneft bought RS's Bosanski Brod oil refinery, motor oil processing facilities in nearby Modrica, and retailer Banjaluka Petrol. Some analysts believe that these assets—which were purchased without an open tender—give Zarubezhneft influence in RS. In addition to being an important employer, Zarubezhneft is RS's biggest taxpayer; its value-added tax and excise duty contributions reportedly account for 25% of RS budget revenue. Bosnia depends upon Russian natural gas imports via Ukraine. Energy policy is vested in the entities, and Russian natural gas provider Gazprom reportedly has used its market dominance to pit the two entities against one another and undermine projects that would diversify supplies. Many analysts believe that Turkey's influence in Bosnia has increased over the last two decades due to Ankara's close relationship with Bosniak leaders. Some Turkish officials reportedly view Bosnia as a natural sphere of influence given geographic and historical connections. Observers note that Turkish President Recep Tayyip Erdogan has at times invoked Ottoman-era ties to Bosnia and religious kinship with Bosniaks as soft power tools. Turkish influence in Bosnia has expanded since Yugoslavia's collapse. During the 1992-1995 war, Turkey gained prestige among Bosniaks by condemning the international arms embargo against Bosnia, arguing that it prevented Bosniaks from defending themselves. Turkey, as well as other predominantly Muslim countries like Iran and Saudi Arabia, reportedly supplied Bosniak forces with arms. Turkish influence has continued since the war's end. Bosnia is one of the top recipients of Turkish Cooperation and Coordination Agency assistance; much of this support is earmarked for projects to restore Ottoman-era buildings and monuments. A Turkish Cultural Center was established in Bosnia in 2003, and in 2009 the Yunus Emre Foundation, an NGO founded by the Turkish government, opened an office in Sarajevo to promote Turkish language and culture. Turkey has popular support among Bosniaks. In a 2018 International Republican Institute survey, 76% of Bosniak respondents had positive views of Turkey—the strongest support among Bosniaks for any foreign state. Many Bosnian Croats and Bosnian Serbs look to Croatia and Serbia as external protectors, and some analysts believe that Turkey has attempted to establish a similar role for itself vis-à-vis Bosniaks. Observers contend that Erdogan's ruling party has particularly strong ties to the largest Bosniak ethnic party, the SDA. Erdogan and Turkish state-owned media openly supported SDA candidate Bakir Izetbegović in his bid for the Bosniak seat on the presidency in 2014. Some observers believe that Izetbegović's clout within the SDA rests in part on his support from Erdogan. Economic relations between Bosnia and Turkey have deepened in recent years. Turkish FDI in Bosnia accounted for 5.6% of FDI flows in 2016. One notable project is a highway to connect Sarajevo to Belgrade, Serbia. After years of disagreement, Bosnian officials approved the route in February 2019. Turkey is expected to provide funding for some of the expected €3 billion in costs, although the terms of the contract are not yet resolved. Some officials, including French President Emmanuel Macron, have expressed concern over Turkey's alleged ambitions as part of broader EU concern over external influence in the Balkans. However, analysts caution that Turkey's ambitions and capabilities in the Balkans may be overstated. They note that the scope of Turkish investment is sometimes exaggerated in the media, and that proposed projects do not always come to fruition. While Russian and Turkish influence in Bosnia relies in part on soft power, China's presence in Bosnia is primarily economic. Between 2011 and 2019, Chinese investments in Bosnia amounted to an estimated $3.6 billion, primarily in the form of direct lending for energy and transportation projects. Chinese firms have contracts to construct or expand energy plants, including a €350 million loan to construct a coal-fired plant in Stanari, RS. A €1.4 billion deal was signed to construct a highway between Banja Luka and Mlinište. In March 2019, the EU Energy Community criticized the FBiH entity government's decision to guarantee a €600 million loan from China's Exim Bank to build a coal-fired power plant in Tuzla. However, some analysts caution that China's economic influence in Bosnia may be overstated at present. While China's pledged investments in high-visibility projects garner media attention, the actual amount of Chinese FDI is far less than that of the EU. Moreover, many pledged projects do not come to fruition. Nevertheless, EU and U.S. officials have voiced concern over the scope of China's investments in the Balkans, as well as Chinese lending practices. Chinese loans often require recipient state governments to assume the loan burden, potentially leading to high external debt. The EU has also raised concerns that Chinese lending practices violate EU rules in public procurement because they frequently require use of Chinese contractors, laborers, or supplies. In contrast to EU funds, which are partly designed to spur reform, Chinese loans have few conditions and rules linked to transparency or reform. Finally, EU officials have expressed concern that China's economic might could be a source of leverage over recipient states that are candidates or potential candidates for EU membership and thus impede the EU's ability to speak with one voice on relations with China if they do become members. Bosnia was not a core transit country in the \"Balkan Route\" that hundreds of thousands of migrants and refugees followed in an attempt to reach the EU during heightened flows in 2015 and early 2016. However, recent route shifts have brought more migrant and refugee traffic through Bosnia. Since early 2018, an estimated 23,000 migrants and refugees have entered Bosnia; approximately 25% of them remain in the country. Most of them hope to enter EU territory via Bosnia's neighbor, Croatia, and from there move on and enter the EU's visa- and passport-free Schengen Area. However, the Croatian government has expanded border policing, and apprehended individuals are sent back to Bosnia. The EU provided €2 million in 2018 to help Bosnia respond to the crisis and provide shelter to migrants and refugees who are effectively stranded in Bosnia. The migration crisis has triggered a backlash from some Bosnians, particularly in Una-Sana Canton, which borders Croatia and has the highest concentration of migrants and refugees. Some residents of Bihać, Una-Sana's administrative center, protested against camps situated in their municipality in October 2018, while local authorities in Velika Kladuša, another city in the canton, reportedly obstructed the Ministry of Security's plans to house migrants in a local building. The incident illustrates local backlash as well as the state-level government's difficulty enforcing its decisions, even when it has jurisdiction. Islam was introduced to part of Bosnia's population during Ottoman rule. In socialist Yugoslavia, the semi-official Islamic Religious Community played a key role in religious affairs, including legal rulings and religious education. It was renamed the Islamic Community of Bosnia and Herzegovina in 1992, and remains an important religious institution. Islamic tradition in the Balkans, including Bosnia, is generally moderate and secular. The majority of Bosnia's practicing Muslims follow the Hanafi school of Sunni Islam. However, some analysts have expressed concern over the emergence of groups influenced or funded by state and non-state entities in the Arab Gulf states, where more conservative Hanbali Sunni practices are common. Aid workers, missionaries, and \"mujahedeen\" fighters from the Gulf States promoted transnational Islamist militancy and Salafist Hanbali religious doctrine during Bosnia's 1992-1995 war; Iran's government also supported Bosniak leaders and forces. After the war, Saudi Arabia provided an estimated $600 million in aid to repair and build hundreds of mosques and establish schools and cultural centers that promote socially conservative Sunni views. Iran has also maintained active cultural outreach and other ties to some Bosnian Muslims. Many analysts contend that Salafi groups have limited support in Bosnia because of the traditionally high level of secularism among Bosnian Muslims. They also note that few Bosnian Muslims who subscribe to Salafist ideas and practices have violent intentions, and many of them live in remote rural communities. While most of these groups were not originally affiliated with official religious organizations in Bosnia, the Grand Mufti of Bosnia's Islamic Community exerted pressure on them to acknowledge his authority and his right to monitor religious content. As a result, an estimated 90% of Salafi groups were brought under official structures. Nevertheless, some experts caution that radicalized groups and individuals may pose a terrorist threat despite their small numbers. Radicalized Muslims were implicated in the bombing of a police station in Bugojno in 2010 and a lone-gunman attack on the U.S. Embassy in Sarajevo in 2011. The Islamic State (IS) and Nusra Front's gains in Syria and Iraq in the 2010s altered the dynamic of the terrorism threat in Bosnia and broadened the use of social media in recruitment. Between 2012 and 2017, an estimated 350 Bosnian citizens traveled from Bosnia or Bosnian diaspora communities to fight with armed groups in Iraq and Syria. More recently, returned foreign fighters are seen as a potential threat as the position of the IS and other armed groups has weakened. Bosnia's stock of illegal weapons, mines, and explosives may exacerbate the risk posed by returnees. As of December 2017, officials believed that just over 100 Bosnians remained in Syria (including women and children), roughly 50 had returned to Bosnia, and 70 had been killed in the conflict. In 2014, the Bosnian government introduced new criminal offenses to prosecute foreign terrorist fighters and recruiters. Several dozen returned fighters and domestic recruiters have been convicted of these offenses. While the U.S. State Department describes Bosnia as a \"cooperative counterterrorism partner,\" it warns that Bosnia's political fragmentation and dysfunction could undermine counterterrorism efforts. For example, in 2017 several ministries proposed new measures to tighten counterterrorism efforts; however, they were not enacted due to political gridlock in state-level and FBiH governments. Initially viewed as a \"European problem,\" the Bosnian conflict eventually helped shape the post-Cold War role of the United States and NATO in European security. When the United States assumed greater responsibilities in resolving the conflict, its role was considerable: leading NATO airstrikes, garnering diplomatic support from Russia and European allies, persuading warring parties to agree to a ceasefire, brokering the Dayton Peace Agreement, and deploying 20,000 troops to Bosnia. According to Richard Holbrooke, the U.S. official who brokered the talks, the Bosnian war was a pivotal period in U.S. foreign policy in Europe: \"The three main pillars of [policy]—U.S.-Russian relations, NATO enlargement into Central Europe, and Bosnia—had often worked against each other. Now they reinforced each other: NATO sent its forces out of area for the first time in its history, and Russian troops, under an American commander, were deployed alongside them.\" Some analysts and policymakers believe that the United States' strong hand in resolving the conflict and in shaping Bosnia's political system have made it a stakeholder in Bosnia's future. U.S. officials, often in cooperation with the EU, have intervened to defuse crises and broker reform talks. The United States also has imposed sanctions against Bosnian officials: in addition to Dodik (see above), the U.S. State Department publicly designated Bosnian Serb politician Nikola Špirić (Dodik's associate) for \"significant corruption or gross violation of human rights.\" U.S. policymakers attach strategic importance to Bosnia's stability; many analysts believe turbulence in Bosnia could reverberate in the Balkans and potentially draw in Croatia and Serbia, while instability in other parts of the region could spill over into Bosnia. When the Trump Administration indicated in 2018 that it would consider supporting a potential Serbia-Kosovo agreement to \"adjust borders\" between the two—a major break with the long-standing EU and U.S. policy to oppose redrawing borders in the Balkans along ethnic lines—some analysts expressed concern that the Administration could reshape long-standing U.S. policy toward Bosnia. However, the new U.S. Ambassador to Bosnia stated in February 2019 that the U.S. will continue to be \"guarantor of Bosnia and Herzegovina's sovereignty and territorial integrity.\" On the other hand, many observers also note that U.S. engagement in Bosnia (and the Western Balkans) decreased under the administrations of President George W. Bush and President Barack Obama. During this time U.S. policymakers turned their focus to geopolitical crises and challenges in other parts of the globe while ceding the regional lead to the EU. Indeed, some analysts have urged the United States to assume a greater role in Bosnia, arguing that Bosnia's current crises warrant it, and that the EU and the United States are more effective in the region when they work together. Congressional interest in Bosnia dates back to the 1992-1995 war. Many Members featured prominently in foreign policy debates over U.S. intervention in the conflict. In 2015, the House passed a resolution describing the Srebrenica massacres as a genocide and urging the United States to continue to support Bosnia's territorial integrity ( H.Res. 310 , 114 th Congress). In the 114 th and 115 th Congresses, a bill was introduced in the Senate to establish an enterprise fund to promote economic development and the private sector in Bosnia ( S. 2307 and S. 864 ). In April 2018, the House Foreign Affairs Committee's Subcommittee on Europe, Eurasia, and Emerging Threats held a hearing on Bosnia's prospects ahead of its October 2018 elections. Congress's engagement with Bosnia also continues within the broader context of policy concern over the external influence of China, Turkey, and Russia in the Western Balkans and energy security. As a potential candidate for EU membership and NATO partner, Bosnia is eligible for assistance through the Countering Russian Influence Funds under the Countering America's Adversaries Through Sanctions Act (CAATSA) enacted in 2017 ( P.L. 115-44 ). Through congressionally approved (and sometimes expanded) foreign assistance appropriations, Bosnia has received more than $2 billion in aid since 1995. Between 1996 and 1999, the United States pledged $1 billion of the $4 billion international commitment to implementing Dayton's civilian provisions and helping to rebuild Bosnia. The cost of U.S. military operations in Bosnia since 1992 is estimated at more than $10 billion ( Appendix I ). Bosnia continues to receive U.S. foreign assistance, although the amount has decreased in recent years. Assistance to Bosnia in FY2015 and FY2016 was approximately $33 million each year. In FY2017, it was $53.5 million, and $41.5 million in FY2018. The Administration requested $21 million for FY2019 and $16.9 million for FY2020. Nearly 25 years after the Dayton Peace Agreement, Bosnia faces many challenges. In considering U.S. relations with Bosnia, Members of Congress may consider the following questions: How can the United States encourage Bosnia's government to incorporate the legal rulings of the Bosnian Constitutional Court and the European Court of Human Rights into election legislation and the constitution? How can U.S. foreign assistance be used to counter Russian influence in Republika Srpska, in particular Russia's close ties to Bosnian Serb politicians and its use of local media and Sputnik to amplify anti-U.S. narratives and project pro-Russia soft power? What are the implications of potential militarization in Republika Srpska? How can the United States effectively address this alleged trend? How can the United States support a successful reform initiative that secures transparency and accountability, and facilitates a political community in which politicians and voters are committed to the Bosnian state and socioeconomic challenges that transcend all three ethnic groups? Can the Germany-U.K. initiative from 2015 be revived, or is it better to start from scratch? Are the approximately 600 troops in the European Union Force mission in Bosnia sufficient to stabilize Bosnia if violence breaks out? If Serbia and Kosovo agree to normalize relations by redrawing their borders, how can U.S. policymakers prevent this development from destabilizing Bosnia, particularly given Milorad Dodik's threats to seek RS secession if Kosovo is \"partitioned\"? How can the United States encourage Croatia and Serbia to engage in Bosnia in a manner that helps bridge ethnic divisions and contributes to Bosnia's territorial integrity and sovereignty? Given the pervasiveness of corruption in Bosnia, how can U.S. assistance most effectively be used to counter it? Does foreign assistance contribute to civic groups and independent media that could serve as a check against corruption? ", "summary": "Bosnia and Herzegovina (hereafter, \"Bosnia\") drew heavily on U.S. support after gaining independence from Yugoslavia in 1992. The United States helped end the Bosnian war (1992-1995), one of the most lethal conflicts in Europe since the Second World War, by leading NATO airstrikes against Bosnian Serb forces, brokering the Dayton Peace Agreement in 1995, and deploying 20,000 U.S. troops. Some Members of Congress became involved in policy debates over these measures, and Congress monitored and at times challenged the Bush and Clinton Administrations' response through numerous hearings, resolutions, and legislative proposals. Since 1995, the United States has been a major source of aid to Bosnia and firmly supports its territorial integrity. The United States also supports Bosnia's aspirations for NATO and European Union (EU) membership. Today, Bosnia faces serious challenges. Nearly 25 years after the Dayton Agreement, Bosnia continues to use part of the Agreement as its constitution, which divides the country into two ethnoterritorial entities. Critics charge that Bosnia's political system is too decentralized to enact the reforms required for NATO and EU membership. They also contend that the ethnic power-sharing arrangements and veto points embedded in numerous government bodies are sources of gridlock. Domestic and international courts have ruled against several aspects of Bosnia's constitution, yet the Bosnian government thus far has failed to implement these rulings. Since Bosnia's independence, its politics has been dominated by ethnic parties representing the country's three main groups: Bosniaks (Slavic Muslims), Croats, and Serbs. These parties have prospered under a system that critics charge lacks transparency and accountability. Critics also maintain that ethnic party leaders use divisive nationalist rhetoric to distract from serious issues affecting the country as a whole, including poverty, unemployment, and stalled political reforms. The Bosnian population exhibits low trust in political parties and the government, and disaffection toward the country's elite. U.S. and EU officials brokered several ultimately unsuccessful rounds of constitutional reform negotiations, and continue to call on Bosnia's leaders to implement reforms to make governance more efficient and effective, dismantle patronage networks, and bring Bosnia closer to EU and NATO membership. However, there is little consensus among the country's leaders on how the country should be reformed. Bosnian Serb leaders from the Serb-majority entity (Republika Srpska) have called for greater autonomy and even secession from Bosnia. Some Bosnian Croat leaders have called for partitioning Bosnia's other entity, the Federation of Bosnia and Herzegovina, to create a separate Croat-majority entity. Bosniak leaders, by contrast, generally prefer a more centralized state. Many analysts caution that any move to partition the country could lead to renewed violence, while greater decentralization could make Bosnia's government less functional. U.S. policy has long been oriented toward preserving Bosnia's statehood. Bosnia's 2018 general elections largely returned to power the same entrenched ethnic parties. Of particular concern is the election of Bosnian Serb leader Milorad Dodik to Bosnia's collective presidency. Dodik, a sharp critic of the United States and NATO, has periodically called for a referendum on Republika Srpska's secession. He is under U.S. sanctions for obstructing the Dayton Agreement. In addition to these internal challenges, U.S. and EU officials have expressed concern over external influence in the region. Russia reportedly relies on soft power, energy leverage, and \"spoiler\" tactics to influence Bosnia, particularly in the Serb-majority entity. Turkish soft power draws on Bosnia's Ottoman-era heritage and Turkey's shared religious tradition with Bosniaks. China is a more recent presence in the region, but its heavy investments and lending have prompted concern on both sides of the Atlantic. Policymakers have also expressed concern at the challenges posed by the return of Bosnians who fought with the Islamic State and Nusra Front in Syria and Iraq. Many observers contend that the United States remains a stakeholder in Bosnia's future because of its central role in resolving the conflict and shaping the postwar Bosnian state. Given the history of U.S. involvement in Bosnia, Bosnia's importance to regional stability in the Balkans, and concerns over Russian and Chinese influence in Bosnia, Members of Congress may be interested in monitoring how the country navigates its internal and external challenges. Congress may also consider future U.S. aid levels to Bosnia and the degree to which such assistance supports the long-standing U.S. policy objectives for Bosnia of territorial integrity, NATO and EU integration, energy security, and resilience against malign influence.", "document_type": "crs"}
{"report": "Economic growth and expanded global trade have led to substantial increases in goods movement over the past few decades. The growth in freight transportation demand, along with growing passenger demand, has caused congestion in parts of the transportation system, making freight movements slower and less reliable. Because the condition and performance of freight infrastructure play a considerable role in the efficiency of the freight system, federal support of freight infrastructure investment is likely to be of significant congressional concern in the reauthorization of the surface transportation program. The program is currently authorized by the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94 ), which is scheduled to expire on September 30, 2020. Congress has begun to place greater emphasis on freight over the course of recent reauthorizations, but national policy is still vague or silent on a number of issues. There are ongoing disagreements about the best way to accomplish improvements in freight system infrastructure—notably, how to raise new funds for investment, the magnitude of the amounts required, which projects to prioritize, and the role of the federal government in the planning process. Meanwhile, technological advances in mobility have prompted new questions about how best to accomplish the efficient movement of people and goods in a multimodal transportation system. Autonomous vehicle technology could have potential applications in the trucking industry, as could greater deployment of automation in the rail and port industries. While the FAST Act concerns many aspects of surface transportation funding and safety policy, the focus of this report is on truck freight and that portion of the rail and port industries that transports truck trailers and containers (intermodal freight). This report does not address operational issues that also may be of interest during reauthorization, such as hours of service and hazardous material transport safety. Moreover, this report does not contain in-depth discussion of environmental issues associated with freight movements, such as carbon emissions and climate change, or air and noise pollution, though these issues may be germane to the topics of funding and project selection. The freight transportation system is a complex network of different types of transportation, known as modes, that carries everything from coal to small packages. It handles domestic shipments of a few miles as well as international shipments of thousands of miles. Often, a shipment of cargo will move across multiple modes before reaching its destination, using road, rail, air, pipeline, and/or maritime infrastructure in the process; when freight changes modes in this way, it is referred to as multimodal . Freight moved in stackable containers is easier to move among ships, trains, and trucks; this is referred to as intermodal freight. Rail alone carries the second-largest share of domestic freight measured in ton-miles, but only a small proportion by value ( Table 1 ), reflecting the fact that major rail cargos such as coal and grain have low ratios of value to weight. Trucks carry by far the most freight by value but a smaller proportion of ton-miles, as the average truck shipment travels a much shorter distance than the average rail shipment. Air transportation is a relatively minor mode for domestic shipments because it is expensive to ship goods by air. The proportions for international shipments to and from the United States are quite different from those for domestic shipments, with about three-quarters of goods, measured by weight, arriving or departing by ship. Measured by value, nearly one-fourth of U.S. international freight moves by air. Trucks operate over a four-million-mile system of public access highways and streets. Of this, approximately 209,000 miles has been designated by the Federal Highway Administration (FHWA) as the \"National Truck Network,\" a network of highways able to accommodate large trucks. This network includes the Interstate Highway system, which extends approximately 47,000 miles, plus principal arterial highways designated by the states. Trucks account for about 9% of vehicle miles traveled on the entire U.S. road system, but 15% of vehicle miles on Interstates and 24% on rural Interstates. The railroad sector is dominated by seven large railroads, or Class I carriers, that generally focus on long-distance moves. The Class I railroads are complemented by more than 500 short line and regional railroads (Class II and Class III, respectively) that tend to haul freight shorter distances, provide connections between the Class I networks, or connect the Class I networks and ports. For the most part, railroad infrastructure, including track and associated structures and the land they occupy, is owned by the carriers themselves. The U.S. railroad network consists of approximately 140,000 miles of railroad, of which approximately 94,000 miles could be considered transcontinental or mainline railroad and 46,000 miles could be considered regional or local railroad. In some places, freight trains share space with intercity and commuter passenger trains. Overall, freight traffic has recovered to the level prior to the 2007-2009 recession, but the modal composition of freight traffic is now quite different ( Figure 1 ). While truck tonnage has risen steadily and is now 33% higher than a decade ago, rail tonnage dropped sharply in 2008-2009 and has recovered more slowly. Increased intermodal traffic has offset declining volumes of coal and crude oil shipped by rail. Barge traffic on inland waterways recovered from recession lows in 2010, but since then has grown only slightly. The steady growth in truck traffic, which includes smaller delivery trucks in addition to tractor-trailer \"combination\" trucks, has been linked to the growth of e-commerce establishments and just-in-time delivery services. As companies push to offer quicker delivery, they are opening new distribution centers in urban areas. These centers depend on large trucks to replenish inventory, and on small trucks to quickly deliver products to consumers. Coal has been the most significant revenue source for the rail industry aside from intermodal traffic, and the decline in rail traffic reflects a general decline in demand for coal. Since 2011, the volume of coal carried by railroads has declined significantly despite rebounding slightly in 2017. This decline has been mitigated somewhat by an increase in intermodal traffic, and by more short-lived booms in other commodity groups. A spike in oil production and a shortage of pipeline capacity contributed to a bump in rail shipments from 2012 to 2016, but the quantity of oil moved by rail has since receded. Crude industrial sand, which includes sand used in hydraulic fracturing of oil and gas wells, saw a similar rise and fall in that period before spiking again in 2017. Tonnage carried by trucks as a single mode has increased a modest 2% over the past decade. Meanwhile, tonnage moving only by rail has decreased 16%, due largely to a significant decline in coal shipments. Most of the growth in surface freight has occurred in intermodal tonnage (mainly involving combined truck/rail shipment), which has increased by 188% in 10 years. The U.S. Department of Transportation (DOT) forecasts that domestic freight tonnage will increase by an average of about 1.4% per year from 2015 to 2045. In that span, truck tonnage is projected to increase by 38%, rail tonnage by 20%, and multimodal tonnage (of which intermodal is a subset) by 120%. Overall, this would represent an acceleration compared to recent trends. Freight tonnage in the United States grew at an average annual rate of 1.1% from 1993 to 2017, with truck tonnage growing slightly faster (1.4%) in that period. By contrast, DOT forecasts truck tonnage to grow more slowly than total tonnage over the coming decades. River and coastal ports are hubs for considerable truck and rail activity, making the road and rail links to these facilities an important component of surface transportation infrastructure. Over the last two decades, barge traffic on inland rivers has been flat or declining. Meanwhile, the volume of containerized cargo grew rapidly from 17.9 million twenty-foot equivalent units (TEUs) in 2000 to 32.0 million TEUs in 2015. Container traffic declined during the 2007-2009 recession but has since recovered. In 2018 it was approximately 40% above its 2009 low. The Ports of Los Angeles and Long Beach together handled 29.9% of all container traffic at ocean ports in the United States in 2017. Container trade at these two ports increased by 64% between 2000 and 2017, but was outpaced by the growth in container trade for the entire United States, which grew by 106%. Congress has requested studies on the condition of road and rail links to ports (also known as intermodal connectors ) in past surface transportation reauthorization legislation. The most recent study by DOT indicates that of the approximately 1,484 miles of freight intermodal connectors in the National Highway System, roughly half are two lanes wide. Certain port projects are eligible for funding from surface transportation programs, including the BUILD and INFRA competitive grant programs discussed later in this report, but eligibility reflects a primary concern with the intermodal connections to these facilities. Most capital programs to benefit marine transportation, such as harbor dredging and lock repair, are undertaken by other federal agencies, notably the U.S. Army Corps of Engineers, rather than by DOT. Historically, these programs have not been included in surface transportation legislation. Until recently, there was no separate federal freight transportation program, but instead a relatively loose collection of freight-related programs that were embedded in a larger surface transportation program aimed at supporting both passenger and freight mobility. Historically, most highway funding has been distributed to the states via several large \"core\" formula programs, leaving states to decide how to use their allocated funds. Other, smaller programs provide grant awards for more targeted projects. The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA; P.L. 109-59 ), which was enacted in 2005 and expired in 2012 after a series of extensions, funded over 70 highway programs. Almost all of these have now been combined into a handful of formula programs with broader objectives. Core surface transportation program funds are distributed to states by formula, but freight transportation is often interstate in nature. The funds received by a single state may not be sufficient to construct the infrastructure necessary to relieve congestion at freight bottlenecks whose effects are felt several states away. Recognizing this, Congress created the Projects of National and Regional Significance program within SAFETEA as a way of directing federal funds to large projects with wide-ranging benefits. All funds made available through the program were earmarked in the legislation and were not available for other projects. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) created a discretionary grant program for transportation infrastructure investments, originally known as the Transportation Investment Generating Economic Recovery (TIGER) program and now called the Better Utilizing Investments to Leverage Development (BUILD) program. BUILD grants are distributed at the discretion of the Secretary of Transportation, subject to a set-aside for rural areas and limits on maximum and minimum grant size. The program is not authorized in law, but has received funding in appropriations bills every year since its introduction in FY2009 through FY2018. Since its inception, roughly one-quarter of grants have gone to freight-specific projects, and almost half to road projects that could benefit freight as well as passengers (see Table 2 ). The successor to SAFETEA, the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) of 2012, contained the first articulation of a national freight policy. Whether the federal government should make a more focused effort toward funding projects that benefit freight movement was a major policy question in the reauthorization debate. The Senate version of MAP-21 ( S. 1813 , 112 th Congress) would have created a separate program for funding freight-related projects, but this was not enacted. Instead, MAP-21 allowed a larger share of project costs to come from federal sources if a project could be demonstrated to improve the efficient movement of freight: the state cost share for freight-specific projects on Interstate Highways was reduced from 10% to 5% and on other highways from 20% to 10%. MAP-21 enacted planning provisions related to identifying infrastructure components critical to freight transport. It directed DOT to designate a \"Primary Freight Network\" (PFN) consisting of 27,000 centerline miles of existing roadways (independent of the number of lanes), based primarily on freight volume and in consultation with shippers and carriers. The Secretary of Transportation could designate up to an additional 3,000 centerline miles of existing or planned roads as part of the PFN based on their future importance to freight movement. States could designate \"critical rural freight corridors\" based on the density of truck traffic if they connect the PFN or Interstate System with sufficiently busy freight terminals. The act designated a larger National Freight Network to include the critical rural freight corridors, portions of the Interstate System not designated as parts of the PFN, and roads in the PFN. DOT, in consultation with partners and stakeholders, was directed to develop a National Freight Strategic Plan that identifies highway bottlenecks and to report every two years on the condition and performance of the National Freight Network. Each state was encouraged, but not required, to create a state freight advisory committee comprising representatives of freight interests and a state freight plan \"that provides a comprehensive plan for the immediate and long-range planning activities and investments of the State with respect to freight.\" Among other things, a state's freight plan was to describe how it will improve the ability of the state to meet the national freight goals established by DOT. National freight policy was updated significantly by the FAST Act. The act repealed the Primary Freight Network and National Freight Networks established by MAP-21. It instead directed DOT to create a National Freight Strategic Plan and identify the components of a National Highway Freight Network, consisting only of highways, and a National Multimodal Freight Network, which must include railroads, marine highways, and the infrastructure necessary to connect these networks to one another in order to facilitate the movement of containerized freight. The multimodal network was to be officially designated within a year of enactment. However, while DOT sought public comment on an interim network and released a draft strategic plan, it has not taken final action. No public comment was sought on the National Highway Freight Network, as the FAST Act defined it by expanding upon the Primary Freight Network already defined by MAP-21. The FAST Act also directed a portion of federal funds toward highway segments and other projects deemed most critical to freight movement. It did this by creating a new discretionary grant program and a new formula program for distributing federal funds to states. The stated goals of these two programs are very similar: to increase U.S. global economic competitiveness, reduce congestion and bottlenecks, increase the efficiency and reliability of the highway network, and reduce the environmental impact of freight movement. The National Highway Freight Program created in the FAST Act is a formula program with funding of $1.1 billion in FY2016 rising to $1.5 billion in FY2020. Funds are administered by state departments of transportation and must be directed toward highway components designated as especially important to freight movement. These components include a Primary Highway Freight Network (PHFN) designated by the Federal Highway Administration, \"critical rural freight corridors\" designated by the states, and \"critical urban freight corridors\" designated by either states or metropolitan planning organizations, depending on the population size of an urban area. These components, along with other Interstate Highway segments, comprise the National Highway Freight Network. States containing 2% or more of the total mileage of the PHFN are required to spend their program funds on the PHFN, critical rural, or critical urban freight corridors. Other states may spend their program funds on any part of the larger National Highway Freight Network. Up to 10% of a state's apportionment can be directed toward projects within rail or port terminals \"that provide surface transportation infrastructure necessary to facilitate direct intermodal interchange, transfer, and access into or out of the facility.\" The Nationally Significant Freight and Highway Projects Program is a discretionary grant program with funding of $800 million in FY2016 rising to $1 billion in FY2020. It was initially known as the Fostering Advancements in Shipping and Transportation for the Long-Term Achievement of National Efficiencies (FASTLANE) program, but is now called Infrastructure for Rebuilding America (INFRA). Public entities are eligible to apply, including states and groups of states, metropolitan planning organizations, local governments or groups of local governments, political subdivisions of states or local governments, transportation-related authorities such as port authorities, and tribal governments. Eligible uses of funds include highway projects, railway-highway grade crossing projects, connections to ports and intermodal freight facilities, and elements of private freight rail projects that provide public benefits. However, grants for freight intermodal or freight rail projects are capped at $500 million over the life of the program. A grant is to provide not more than 60% of the cost of a project, but other federal assistance can be used to provide up to a total federal share of 80% (i.e., the local cost share required must be at least 20%). This grant program is designed primarily for relatively high-cost projects; each grant awarded must be at least $25 million, and the project must have eligible costs amounting to at least $100 million or a significant share of a state's highway funding apportionment the previous fiscal year (e.g., 30% in the case of a project within a single state). However, 10% of grant funds are reserved for smaller projects with minimum grants of $5 million. DOT is to consider the dispersion of projects geographically, including between rural and urban communities. Congress has 60 days to disapprove a DOT grant approval. While not an explicit focus of federal freight programs, it can be argued that projects that do not serve freight directly can reduce traffic in areas where infrastructure is shared between passengers and freight, freeing up roadway capacity and alleviating some impacts of congestion. For example, reconstruction of the Memorial Bridge in Washington, DC, was partially funded by a $90 million FASTLANE grant in 2016. This bridge is not currently open to trucks, but supporters of the project argued that returning the infrastructure to a state of good repair for use by passenger vehicles would relieve congestion on other crossings of the Potomac River used by freight carriers. In October 2015, DOT published a draft National Freight Strategic Plan, fulfilling one of the requirements of MAP-21 (three months after the deadline initially set by law). A comment period would have required a final version of that plan to be released by December 2016, but the passage of the FAST Act in the interim updated the requirements of the National Freight Strategic Plan with a new deadline of December 2017; DOT opted to complete the document required by the FAST Act rather than continue updating the MAP-21 strategic plan, now superseded. As of year-end 2018, this requirement of the FAST Act had not been met. The Federal Highway Administration Conditions and Performance Report released in May 2018 was the first to fulfill the requirement of Section 1116 of the FAST Act to report specifically on the conditions of the National Highway Freight Network. This report found that in 2014, 77% of network mileage had \"good\" pavement, while 19% of miles were graded \"fair\" and the remaining 4% \"poor.\" The report also found that there are approximately 57,600 bridges on the network, of which 4.3% are structurally deficient. The report contains measures of congestion at the 25 most congested points in the freight network, and for key freight corridors, generally dealing with speed and trip times. Since this is the first report to contain these figures, it can be used as a baseline to assess whether the condition and functioning of the network are improving over time. The FAST Act also required DOT to report on the conditions and performance of the National Multimodal Freight Network, but as this network has not yet been defined, no report has been issued. The federal government supports surface transportation projects mostly through funds distributed to the states. Financing initiatives, on the other hand, are arrangements that rely primarily on borrowing. The federal government supports freight infrastructure financing arrangements mainly through direct loans, loan guarantees, and tax preferences for certain types of bonds. The FAST Act created a new Surface Transportation Infrastructure Finance Bureau to consolidate some of the support functions for several of these programs. The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides loans for highway projects, public or private freight rail facilities providing intermodal transfer, infrastructure providing access to intermodal freight facilities, and surface transportation improvements facilitating intermodal transfers or improved access at port terminals. Since FY1999, according to DOT, TIFIA financing for all types of projects amounted to $30.1 billion. This assistance was provided to 77 projects that have a total cost of $108.4 billion. Highway and freight projects account for approximately 60% of TIFIA assistance. The largest project specifically related to freight, receiving a $341 million TIFIA loan, is the Port of Miami Tunnel, which opened August 3, 2014, to improve truck access to and from the port. The FAST Act provided a total of $1.435 billion for TIFIA loans, including $300 million in each of FY2019 and FY2020. Because the government expects most of the loans to be repaid, the program's funding need only cover the subsidy cost of credit assistance and administrative costs. According to the Federal Credit Reform Act of 1990, Title XIII, Subtitle B of the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ), the subsidy cost is \"the estimated long-term cost to the government of a direct loan or a loan guarantee, calculated on a net present value basis, excluding administrative costs.\" Consequently, the loan capacity of the TIFIA program is much larger than the budget authority available. DOT estimates that since each dollar of funding has historically allowed TIFIA to provide $14 in credit assistance, FAST Act funding levels could allow for up to $20 billion in total credit assistance over the life of the law. The Railroad Rehabilitation and Improvement Financing (RRIF) program provides loans and loan guarantees for rail infrastructure and equipment through the Federal Railroad Administration up to a total of $35 billion of unpaid principal, with $7 billion reserved for Class II and III railroads. Direct loans can be up to 100% of a project's cost and for a maximum term of 35 years. Interest is charged at the rate paid by the U.S. Treasury to issue bonds of a similar maturity. Eligible borrowers are state and local governments, government-sponsored authorities and corporations, railroads, joint ventures that include at least one railroad, freight rail shippers served by one railroad wanting to connect a facility to a second railroad, and interstate compacts. The RRIF program does not receive an appropriation from Congress, but allows project sponsors to pay the subsidy cost (termed the credit risk premium ). FRA evaluates applications for RRIF loans in terms of each applicant's creditworthiness and the value of collateral offered to secure the loan. These factors determine the credit risk premium. Since 2002, there have been 40 loan agreements totaling $6.3 billion. Loans for freight railroads have ranged in size from $234 million, made to the Dakota Minnesota and Eastern Railroad in 2004, to $56,000, made in 2011 to C&J Railroad. Loans are typically relatively small; while the mean size of a loan is $142 million, the median is $21 million. While Class II and Class III freight operators have received most of the loans, the largest loans by value have gone to Amtrak or commuter railroads. A 2018 loan for $6 million to the Port of Everett, WA, the first extended to a port authority, is to be used to increase rail freight capacity. Similar to the TIGER/BUILD program, many projects financed by TIFIA or RRIF loans may benefit passengers as well as freight. In reauthorizing federal surface transportation programs, the primary freight-related issues before Congress are likely to be setting funding levels and, if necessary, raising revenue. Key questions include whether there should be a dedicated revenue stream for freight-related purposes and whether additional federal funding should be dedicated to freight projects selected by DOT rather than distributed by formula for spending at the discretion of the states. One idea that has come before Congress is the creation of a new dedicated revenue stream for freight infrastructure, funded not by the motor fuels taxes that fund most federal surface transportation spending, but by a charge on goods movement. Under one such proposal, which was introduced in the 113 th , 114 th , and 115 th Congresses but not passed, a 1% tax would be assessed on the cost of freight shipments, with the revenue deposited in a new trust fund. A National Freight Program would then distribute these funds to states by formula for exclusive use for freight projects. A similar proposal would reserve 5% of the import duties collected by Customs and Border Patrol for freight purposes, directing the money into a Freight Trust Fund. Proposals for taxes and fees on freight traffic have been raised before, including taxes based on trucking charges, a combined weight-distance or ton-mile tax such as those assessed already by certain states, and a tax on every maritime container imported and exported. Some proponents have advocated such fees specifically to raise money for freight-related projects, while others see them as a means of raising additional sums for general surface transportation use. Existing law generally permits tolling of existing federal-aid highways only when they are rebuilt or replaced. In the case of Interstate Highways, the existing non-tolled lane count must be maintained, even if the facility is reconstructed (with exceptions for some toll roads that predate the Interstate System). In 1998, Congress created the Interstate System Reconstruction and Rehabilitation Pilot Program, allowing up to three states to toll Interstate segments in order to repair or rehabilitate them. One of the states accepted into the pilot program, Missouri, considered reconstructing 200 miles of Interstate 70 to include two truck-only lanes in each direction, with the entire project to be funded by tolls. The proposal encountered strong resistance in the state and is no longer being pursued. The other states participating in the pilot program, Virginia and North Carolina, also did not undertake proposed projects. The only other way an existing toll-free federal-aid highway (including non-tolled existing Interstate Highway lanes) may be converted is under the Value Pricing Pilot Program, a separate program established in 1991 that is designed primarily to mitigate congestion. Congress has no direct control over the decision to impose highway tolls, which is up to the state or local entity that owns the infrastructure. It could, however, widen the circumstances under which states are permitted to toll Interstate Highways. Tolls could provide a source of funding for freight-related projects. Trucking interests generally oppose additional tolling, especially truck-only tolling, largely out of concern that political considerations will make it easier to raise tolls on trucks than on cars, and prefer higher motor fuels taxes to fund highway improvements. Studies have concluded that funding highways with motor fuels taxes provides trucks a cross-subsidy from automobile users' gas tax payments, due to the fact that the wear and tear caused by a heavy truck is much greater than that caused by a light vehicle. Growth in freight and passenger transportation demand has brought an increase in truck and rail congestion. This congestion is particularly pronounced in major urban areas that contain important freight hubs such as ports, airports, border crossings, and rail yards. Many of the trucks delayed may be simply passing through the region rather than serving local shippers. As identified by DOT, the 25 most congested segments for trucks are generally urban Interstate Highway interchanges. The most recent rankings published by DOT are based on 2014 data, so the impact of FAST Act programs on alleviating freight bottlenecks has not yet been assessed. However, a number of metropolitan areas have been at or near the top of the congestion list for several consecutive years. Five of the 25 most congested segments are in Houston and two are in each of Chicago, Atlanta, Los Angeles, Seattle, and Cincinnati. While the rankings of individual cities can fluctuate, 13 interchanges have been listed among the top 20 most congested for at least the last five years. The interchange of I-290 and I-90/94 in Chicago has ranked no better than second-worst since 2010, and the interchange of I-95 and SR 4 in Fort Lee, NJ, just outside New York City, has ranked no better than fourth-worst. A trucking industry study estimates that 86% of the total costs of congestion for trucks are concentrated on 17% of Interstate Highway mileage. Similarly, the projected increase in highway freight traffic over the coming decades is not likely to be uniformly distributed across the nation's highways. Segments of the Interstate Highway system that are projected to see an increase of more than 10,000 trucks per day are spread out over parts of 15 states (see Figure 2 ). This is roughly equivalent to an additional truck traveling on a segment every 8.6 seconds. At the same time, many Interstate Highway segments are projected to have only small increases in truck traffic through 2045. The formula used to distribute most federal surface transportation funds to the states, including formula grants under the National Highway Freight Program, does not incorporate anticipated increases in truck traffic volume, meaning that the states expected to face the largest increases in truck traffic are not entitled to greater federal funding to address capacity constraints. As Figure 2 indicates, the largest increases in truck traffic are expected to occur where Interstates intersect, but also along stretches of highway that connect busy nodes to each other. For example, a stretch of I-40 in Arkansas, connecting Little Rock to Memphis, TN, is one such segment. The nature of interstate commerce means that much of the truck traffic using this highway may simply be crossing Arkansas rather than moving freight to or from businesses in Arkansas. Although only Arkansas can use its federal highway funds to increase the capacity of the road, much of the benefit from such a project would likely accrue to other states, potentially limiting Arkansas's incentive to undertake the work. One way for Congress to address this situation would be to adjust the methodology for calculating each state's apportionment of funds distributed under the National Highway Freight Program to consider freight-related metrics. The NHFP currently takes into account each state's share of National Highway Freight Network miles. The dedicated freight funding proposals introduced in the 113 th , 114 th , and 115 th Congresses, discussed above, would have incorporated several other measures intended to reflect a state's importance to the national freight system into the distribution formula. These would have included each state's share of the nation's ports, miles of freight rail track, cargo-handling airports, freight tonnage, and freight value relative to the national total. Instead of adjusting formula programs to reflect freight-related needs, Congress has provided DOT with discretionary funds it can distribute for freight and other purposes through the INFRA and BUILD grant programs. These programs have proven to be popular and routinely receive applications for more funding than they can make available, but they have also been criticized for lacking transparent processes for project selection and for funding projects that may not have the highest estimated benefit/cost ratios. A 2017 Government Accountability Office report concluded that the INFRA (then known as FASTLANE) application review process allowed for broad discretion during certain team reviews, and that certain large projects were forwarded to the Secretary of Transportation for approval even if they did not initially meet certain statutory requirements. A third approach would be to direct spending congressionally. From the start of the 112 th Congress in 2011 until the end of the 115 th Congress in January 2019, the House and Senate observed a ban on congressionally directed spending, also known as earmarking. The earmark ban effectively blocked Members of Congress from inserting language in authorization or appropriations bills to designate funds for specific freight-related projects, as frequently occurred prior to 2011. The ban was established through rules adopted by the House Republican Conference, the Senate Republican Conference, and the Senate Appropriations Committee. The Democratic Party majority that has controlled the House since January 2019 has not adopted similar language, and it is unclear whether earmarks are permitted in proposed legislation in that chamber. Because freight infrastructure decisions are often made at the state or local level, it would be helpful for transportation planners to know the characteristics of the trucks traveling particular highway segments. Information about the industries served, the origin and destination of the shipments, and daily or seasonal variations in volume could help planners identify freight users that share an economic interest in mitigating a bottleneck or determine the feasibility of moving some of the traffic to off-peak hours or to other modes. DOT's Bureau of Transportation Statistics and the Census Bureau conduct a survey of shippers every five years (the Commodity Flow Survey cited in Table 1 ) that provides information on outbound shipments. However, the sample size is not sufficient to provide reliable data for any specific urban area. The survey does not record through traffic, does not distinguish between imports and domestic freight, and occurs too infrequently to identify trends in freight patterns. The survey was designed more to provide a national picture of freight transport than to meet local or regional needs. In the FAST Act, Congress requested DOT to \"... consider any improvements to existing freight flow data collection efforts that could reduce identified freight data gaps and deficiencies....\" A policy decision for Congress is whether the federal government should be responsible for providing adequate freight data for state and local transportation planners. Autonomous vehicle technology has potential applications in the freight sector. Autonomous trucks potentially offer significant freight transportation savings, as driver compensation represents either the largest or second-largest cost component for truck carriers, depending on the price of fuel. Fuel and driver compensation typically each account for about one-third of total operating costs. A truck driver may not drive for more than 11 hours per day under federal regulations, so it is difficult for carriers to improve labor productivity except by using larger trucks. Because driver error is the overwhelming cause of vehicle accidents, automation that reduces accident rates could improve public safety. Also, long-distance truck carriers experience exceptionally high driver turnover, and automation may reduce the need for drivers. Despite the economic motivation, many in the trucking industry doubt whether driverless trucks are feasible in the foreseeable future given the current horizon of autonomous technology. An alternative scenario, at least for the next decade or two, is that truck driver jobs may come to resemble those of airline pilots in that drivers would spend part of their time monitoring an autonomous driving system rather than directly controlling the vehicle at all times. The skills of truck drivers when backing up an 18-wheeler to a warehouse or driving on local roads may be irreplaceable. In addition, some carriers may not be eager to forgo personal contact between drivers and customers, which may create sales opportunities. The 115 th Congress debated federal policy regarding autonomous vehicle technology at length. H.R. 3388 , passed by the House, sought to establish new rules for testing and adoption of autonomous technology for cars and light trucks, but had no provisions pertaining to commercial vehicles. In the Senate, S. 1885 would have subjected commercial vehicles to the same safety evaluation requirements as private vehicles. Neither measure was enacted, but in debating these bills, Congress evaluated to what extent federal policy should assist autonomous vehicle technology by granting exemptions to certain federal requirements that otherwise would impede testing and demonstrations of these vehicles. Congress also considered preempting states from issuing certain regulations that are contrary to federal regulations or contrary to other states' regulations in order to avoid differing state requirements. These provisions were relevant to a technology being tested in the trucking industry known as \"platooning.\" In a platoon, trucks follow each other closely enough to save fuel by reducing drag at high speeds (around 10% for a following truck and 5% for the lead truck). All the trucks in a platoon have drivers, but only the driver of the lead truck is in full control of the vehicles. The drivers in the following trucks steer their vehicles, but their feet are off the accelerator and brake because truck speed is controlled by wireless communication from the lead truck. This communication reduces the braking response times of the following trucks and therefore allows trucks to follow closely enough to significantly reduce wind resistance. Absent federal legislation, it is possible that states would enact conflicting limits on platooning, reducing its utility in interstate commerce. Congress may also be asked to support a technology known as Hyperloop, which proposes the use of pods or sleds to transport containers in vacuum-sealed tubes at high speed. While this technology has gone through some testing, it has not yet been commercially deployed. Hyperloop projects are not currently eligible for funding under surface transportation formula grant programs or any of DOT's discretionary grant programs, which are limited to road, rail, and some port projects. There is no federal program dedicated solely to research and development of freight-specific technology. The federal government supports research and development of some surface transportation technologies through the Highway Research and Development Program (23 U.S.C. §503(b)) and the Technology and Innovation Deployment Program (23 U.S.C. §503(c)). The FAST Act currently authorizes $250 million and $135 million, respectively, for these programs through FY2020. ", "summary": "Economic growth and expanded global trade have led to substantial increases in goods movement over the past few decades. The growth in freight transportation demand, along with growing passenger demand, has caused congestion in many parts of the transportation system, making freight movements slower and less reliable. Because the condition and performance of freight infrastructure play a considerable role in the efficiency of the freight system, federal support of freight infrastructure investment is likely to be of significant congressional concern in the reauthorization of the surface transportation program. The program is currently authorized by the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94), which is scheduled to expire on September 30, 2020. Until recently, the federal surface transportation program did not pay specific attention to freight movement. However, the two most recent surface transportation acts, the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), approved in 2012, and the FAST Act, passed in 2015, encouraged federal and state planning for freight transportation from a multimodal perspective. The FAST Act also directed a portion of federal funds toward highway segments and other projects deemed most critical to freight movement. It did this by creating two new programs: a discretionary grant program administered by the Secretary of Transportation and a formula program for distributing federal funds to states. Trucks continue to move the bulk of freight in the United States. Freight tonnage is projected to increase by an average of 1.4% per year through 2045, according to the Department of Transportation (DOT), and trucks are projected to carry the largest share of the additional freight traffic. Much of the growth in truck traffic has occurred in urban areas, and this trend is expected to continue. Consequently, most truck congestion occurs in urban areas, and comparatively few highway miles are responsible for a disproportionately large share of congestion costs. Highway infrastructure decisions are mainly made by the states, but federal fuel tax revenue is an important source of funds for the projects states pursue. With fuel taxes no longer able to fully cover the cost of existing highway infrastructure programs, Congress has considered strategies to raise new revenue and to make more effective use of federal dollars to facilitate the movement of freight. The trucking industry has favored raising additional revenue by increasing fuel taxes and has generally opposed greater use of highway tolls out of concern that these may disproportionately affect truckers. DOT studies have shown that the structure of motor fuel taxes provides a subsidy to heavily loaded trucks at the expense of passenger vehicles. One significant question is whether additional funding for freight-related infrastructure should be distributed to the states by formula or on a discretionary basis. Federal projections indicate that a relatively small number of Interstate Highway segments and interchanges are likely to face large increases in truck traffic by 2045. However, individual states may have limited incentives to use their federal formula funds to alleviate increasing congestion in those locations, as many of the trucks affected may be passing through rather than serving local businesses. Discretionary grants may be more effective in providing large amounts of federal funding for very costly freight-related projects, particularly those requiring interstate cooperation, but could also lead to fewer projects receiving federal funds. Besides appropriating funds for freight infrastructure, Congress has created programs to support research and development of new transportation technologies. Autonomous and connected vehicle technologies have potential applications in the freight sector, but many federal regulations are written assuming that a single person is in full control of a vehicle at all times. Congress has considered, but not advanced, proposals to update such regulations. Industry is eager to explore the cost-saving potential of new technology, so it will likely remain an issue for Congress.", "document_type": "crs"}
{"report": "Charging fees for grazing private livestock on federal lands is statutorily authorized and has been the policy of the Forest Service (FS, Department of Agriculture) since 1906, and of the Bureau of Land Management (BLM, Department of the Interior) since 1936. Today, fees are charged for grazing on BLM and FS land basically under a fee formula established in the Public Rangelands Improvement Act of 1978 (PRIA) and continued administratively. BLM manages a total of 245.7 million acres, primarily in the West. Of total BLM land, 154.1 million acres were available for livestock grazing in FY2017. The acreage used for grazing during 2017 was 138.7 million acres. FS manages a total of 192.9 million acres. Although this land is predominantly in the West, FS manages more than half of all federal lands in the East. Of total FS land, more than 93 million acres were available for grazing in FY2017, with 74 million used for livestock grazing. For both agencies, the acreage available for livestock grazing reflects lands within grazing allotments. However, the acreage in those allotments that is capable of forage production is substantially less, according to the FS, because some lands lack forage (e.g., are forested or contain rockfalls). In addition, for both agencies, acreage used for grazing is less than the acreage available due to voluntary nonuse for economic reasons, resource protection needs, and forage depletion caused by drought or fire, among other reasons. Because BLM and FS are multiple-use agencies, lands available for livestock grazing generally are also available for other purposes. On BLM rangelands, in FY2017, there were 16,357 operators authorized to graze livestock, and they held 17,886 grazing permits and leases. Under these permits and leases, a maximum of 12,333,568 animal unit months (AUMs) of grazing potentially could have been authorized for use. Instead, 8,820,617 AUMs were authorized for use. BLM defines an AUM, for fee purposes, as a month's use and occupancy of the range by one animal unit, which includes one yearling, one cow and her calf, one horse, or five sheep or goats. On FS rangelands, in FY2017, there were 5,725 permit holders permitted (i.e., allowed) to graze commercial livestock, with a total of 6,146 active permits. A maximum of 8,238,429 head-months (HD-MOs) of grazing were under permit and thus potentially could have been authorized for use. Instead, 6,803,425 HD-MOs were authorized for use. FS uses HD-MO as its unit of measurement for use and occupancy of FS lands. This measurement is nearly identical to AUM as used by BLM for fee purposes. Hereinafter, AUM is used to cover both HD-MO and AUM. BLM and FS are charging a 2019 grazing fee of $1.35 per AUM. This annual fee is in effect from March 1, 2019, through February 29, 2020. This is the minimum fee allowed. (See \" The Fee Formula \" section, below.) BLM and FS typically spend more managing their grazing programs than they collect in grazing fees. For example, $79.0 million was appropriated to BLM for rangeland management in FY2017. Of that amount, $32.4 million was used for administration of livestock grazing, according to the agency. The remainder was used for other range activities, i ncluding weed management, habitat improvement, and water development. For the same fiscal year, BLM collected $18.3 million in grazing fees. The FY2017 appropriation for FS for grazing management was $56.9 million. The funds are used primarily for grazing permit administration and planning. FS collected $7.6 million in grazing fees during FY2017. Grazing fees have been contentious since their introduction. Generally, livestock producers who use federal lands want to keep fees low. They assert that federal fees are not comparable to fees for leasing private rangelands because public lands often are less productive; must be shared with other public users; and often lack water, fencing, or other amenities, thereby increasing operating costs. They fear that fee increases may force many small and medium-sized ranchers out of business. Conservation groups generally assert that low fees contribute to overgrazing and deteriorated range conditions. Critics assert that low fees subsidize ranchers and contribute to budget shortfalls because federal fees are lower than private grazing land lease rates and do not cover the costs of range management. They further contend that, because some of the collected fees are used for range improvements, higher fees could enhance the productive potential and environmental quality of federal rangelands. The fee charged by BLM and FS is based on the grazing on federal rangelands of a specified number of animals for one month. PRIA establishes a policy of charging a grazing fee that is \"equitable\" and prevents economic disruption and harm to the western livestock industry. The law requires the Secretaries of Agriculture and the Interior to set a fee annually that is the estimated economic value of grazing to the livestock owner. The fee is to represent the fair market value of grazing, beginning with a 1966 base value of $1.23 per AUM. This value is adjusted for three factors based on costs in western states of (1) the rental charge for pasturing cattle on private rangelands, (2) the sales price of beef cattle, and (3) the cost of livestock production. Congress also established that the annual fee adjustment could not exceed 25% of the previous year's fee. PRIA required a seven-year trial (1979-1985) of the formula while BLM and FS undertook a study to help Congress determine a permanent fee or fee formula. President Reagan issued Executive Order 12548 (February 14, 1986) to continue indefinitely the PRIA fee formula, and established the minimum fee of $1.35 per AUM. The 2019 grazing fee of $1.35 per AUM represents a 4% decrease from the 2018 fee. Since 1981, BLM and FS have been charging the same fee, as shown in Table 1 . The fee has ranged from $1.35 per AUM (for about half of the years during the 39-year period) to $2.31 per AUM (for 1981). The fee averaged $1.55 per AUM over the period. Fifty percent of grazing fees collected by each agency, or $10.0 million—whichever is greater—go to a range betterment fund in the Treasury. BLM and FS grazing receipts are deposited separately. Monies in the fund are subject to appropriations. BLM typically has requested and received an annual appropriation of $10.0 million for the fund. FS generally requests and receives an appropriation that is less than the $10.0 million minimum authorized in law. For instance, for FY2017, the agency received an appropriation of $4.2 million, roughly half the fees collected. The agencies use the range betterment fund for range rehabilitation, protection, and improvement, including grass seeding and reseeding, fence construction, weed control, water development, and fish and wildlife habitat. Under law, one-half of the fund is to be used as directed by the Secretary of the Interior or of Agriculture, and the other half is authorized to be spent in the district, region, or forest that generated the fees, as the Secretary determines after consultation with user representatives. Agency regulations contain additional detail. For example, BLM regulations provide that half of the fund is to be allocated by the Secretary on a priority basis, and the rest is to be spent in the state and district where derived. Forest Service regulations provide that half of the monies are to be used in the national forest where derived, and the rest in the FS region where the forest is located. In general, FS returns all range betterment funds to the forest that generated them. The agencies allocate the remaining 50% of the collections differently. For FS, 25% of the funds are deposited in the Treasury and 25% are subject to revenue-sharing requirements. The revenue-sharing payments are made to states, but the states do not retain any of the funds. The states pass the funds to specified local governmental entities for use at the county level (16 U.S.C. §500; see Figure 1 ). For BLM, states receive 12.5% of monies collected from lands defined in Section 3 of the Taylor Grazing Act and 37.5% is deposited in the Treasury. Section 3 lands are those within grazing districts for which BLM issues grazing permits. (See Figure 2 .) By contrast, states receive 50% of fees collected from BLM lands defined in Section 15 of the Taylor Grazing Act. Section 15 lands are those outside grazing districts for which BLM leases grazing allotments. (See Figure 3 .) For both agencies, any state share is to be used to benefit the counties that generated the receipts. PRIA directed the Interior and Agriculture Secretaries to report to Congress, by December 31, 1985, on the results of their evaluation of the fee formula and other grazing fee options and their recommendations for implementing a permanent grazing fee. The Secretaries' report included (1) a discussion of livestock production in the western United States; (2) an estimate of each agency's cost for implementing its grazing programs; (3) estimates of the market value for public rangeland grazing; (4) potential modifications to the PRIA formula; (5) alternative fee systems; and (6) economic effects of the fee system options on permittees. A 1992 revision of the report updated the appraised fair market value of grazing on federal rangelands, determined the costs of range management programs, and recalculated the PRIA base value through the application of economic indexes. The study results, criticized by some as using faulty evaluation methods, were not adopted. In the 1990s, grazing fee reform was considered by Congress but no change was enacted. In particular, in the 104 th Congress (1995-1996), the Senate passed a bill to establish a new grazing fee formula and alter rangeland regulations. The formula was to be derived from the three-year average of the total gross value of production for beef and no longer indexed to operating costs and private land lease rates, as under PRIA. By one estimate, the measure would have resulted in an increase of about $0.50 per AUM. In the 105 th Congress (1997-1998), the House passed a bill with a fee formula based on a 12-year average of beef cattle production costs and revenues. The formula would have resulted in a 1997 fee of about $1.84 per AUM. Since the 1990s, it appears that no major bills to alter the grazing fee have passed the chambers. Also in the 1990s—and in subsequent years—certain Presidents proposed changes to grazing fees and related policies. However, these changes were not adopted. As one example, in 1993, the Clinton Administration proposed an administrative increase in the fee and revisions of other grazing policies. The proposed fee formula started with a base value of $3.96 per AUM and was to be adjusted to reflect annual changes in private land lease rates in the West (called the Forage Value Index). The current PRIA formula is adjusted using multiple indexes. As a second example, for some fiscal years (e.g., FY2008), President George W. Bush proposed terminating the deposit of 50% of BLM's grazing fees into the range betterment fund. The fee collections would have gone instead to the General Fund of the U.S. Treasury. As a third example, for some fiscal years, President Obama proposed a grazing administrative fee for BLM and FS (e.g., of $1.00 per AUM in FY2015 and $2.50 per AUM in FY2017). These administrative fees would have been additional to the annual grazing fee, and the agencies would have used them to offset the cost of administering the livestock grazing programs. There is ongoing debate about the appropriate grazing fee, with several key areas of contention. First, there are differences over which criteria should prevail in setting fees: fair market value; cost recovery (whereby the monies collected would cover the government's cost of running the program); sustaining ranching, or resource-based rural economies generally; or diversification of local economies. Second, there is disagreement over the validity of fair market value estimates for federal grazing because federal and private lands for leasing are not always directly comparable. Third, whether to have a uniform fee, or varied fees based on biological and economic conditions, is an area of debate. Fourth, there are diverse views on the environmental costs and benefits of grazing on federal lands and on the environmental impact of changes in grazing levels. Fifth, it is uncertain whether fee increases would reduce the number of cattle grazing on sensitive lands, such as riparian areas. Sixth, some environmentalists assert that the fee is not the main issue, but that all livestock grazing should be barred to protect federal lands. As noted, there have been proposals to alter the grazing fee in recent years, but these proposals have not been adopted. For example, the Obama Administration's proposed grazing administration fee of $2.50 per AUM in 2017 would have been in addition to the annual fee of $2.11 per AUM. The monies would have been used for administering grazing to shift a portion of the costs to permit holders. Use of the fees would have been subject to appropriations. BLM estimated that the proposed administrative fee would have generated $16.5 million in FY2017, and FS estimated revenues of $15.0 million in FY2017. Livestock organizations, among others, opposed the proposal as an unnecessary and burdensome cost for the livestock industry. The Administration had included similar proposals in earlier budget requests; none of these proposals were enacted. As another example, in 2005, several groups petitioned BLM and FS to raise the grazing fees, asserting that the fees did not reflect the fair market value of federal forage. When the agencies did not respond to the petition, the groups sued. In addition to asserting that BLM and FS unreasonably delayed response to their petition, the petitioners argued that the agencies were required to conduct a study under the National Environmental Policy Act (NEPA) to determine the environmental impacts of the current grazing fee rate. In January 2011, BLM and FS responded to the petition, denying the request for a fee increase, and the lawsuit was settled. The BLM and FS grazing fee has generally been lower than fees charged for grazing on other federal lands as well as on state and private lands, as shown in studies over the past 15 years. For instance, a 2005 Government Accountability Office (GAO) study found that other federal agencies charged $0.29 to $112.50 per AUM in 2004, when the BLM and FS fee was $1.43 per AUM. While BLM and FS use a formula to set the grazing fee, most agencies charge a fee based on competitive methods or a market price for forage. Some seek to recover the costs of their grazing programs. GAO also reported that in 2004, state fees ranged from $1.35 to $80 per AUM and private fees ranged from $8 to $23 per AUM. In 2010, when the BLM and FS fee was $1.35 per AUM, state grazing fees continued to show wide variation. They ranged from $2.28 per AUM for Arizona to $65-$150 per AUM for Texas. Moreover, some states did not base fees on AUMs, but rather had fees that were variable, were set by auction, were based on acreage of grazing, or were tied to the rate for grazing on private lands. Further, a 2018 study of state grazing fees in 11 western states continued to show widely differing fees, ranging from $3.50 per AUM for New Mexico to $65-$100 per AUM for Texas. Fees for these states were higher than the 2018 BLM and FS fee ($1.41 per AUM). For grazing on private lands in 2017, the average monthly lease rate for lands in 16 western states was $23.40 per head. Fees ranged from $11.50 in Oklahoma to $39.00 in Nebraska. For comparison, in 2017, the BLM and FS grazing fee was $1.87 per AUM. Comparing the BLM and FS grazing fee with state and private fees is complicated due to a number of factors. One factor is the varying purposes for which the fees are charged. Many states and private landowners seek market value for grazing. As noted above, PRIA established the BLM and FS fee in accordance with multiple purposes. They included preventing economic disruption and harm to the western livestock industry as well as being \"equitable\" and representing the fair market value of grazing. While the base fee originally reflected what was considered to be fair market value, the adjustments included in the formula have not resulted in fees comparable to state and private fees. According to GAO's 2005 study, \"it is generally recognized that while the federal government does not receive a market price for its permits and leases, ranchers have paid a market price for their federal permits or leases—by paying (1) grazing fees; (2) nonfee grazing costs, including the costs of operating on federal lands, such as protecting threatened and endangered species (i.e., limiting grazing area or time); and (3) the capitalized permit value.\" Regarding the latter, the capitalized value of grazing permits typically is reflected in higher purchase prices that federal permit holders pay for their ranches. A second factor is the quality of resources on the lands being grazed and the number and types of services provided by the landowners. For example, in its 2005 study, GAO noted advantages of grazing on private lands over federal lands. They included generally better forage and sources of water; services provided by private landowners, such as watering, fencing, feeding, veterinary care, and maintenance; the ability of lessees to sublease, thus generating revenue; and limited public access. With regard to state lands, the study indicated that states also typically limit public access to their lands, while the quality of forage and the availability of water are more comparable to federal lands. A third factor is whether the federal grazing fee alone or other nonfee costs of operating on federal lands are considered in comparing federal and nonfederal costs. Some research suggests that ranchers might spend more to graze on federal lands than private lands when both fee and nonfee costs are considered. Nonfee costs relate to maintenance, herding, moving livestock, and lost animals, among other factors. Unauthorized grazing occurs on BLM and FS lands in a variety of ways, including when cattle graze outside the allowed areas or seasons or in larger numbers than allowed under permit. According to GAO, the frequency and extent of unauthorized grazing is not known, because many cases are handled informally by agency staff. However, during the five-year period spanning 2010 to 2014, BLM and FS documented nearly 1,500 instances of unauthorized grazing, some of which involved the livestock owners having to pay penalties and, less frequently, livestock impoundment. In many cases the unauthorized grazing is unintentional, but in other cases livestock owners have intentionally grazed cattle on federal land without getting a permit or paying the required fee. The livestock owners have claimed that they do not need to have permits or pay grazing fees for various reasons, such as that the land is owned by the public; that the land belongs to a tribe under a treaty; or that other rights, such as state water rights, extend to the accompanying forage. A particularly long-standing controversy involves cattle grazed by Cliven Bundy in Nevada. After about two decades of pursuing administrative and judicial resolutions, in April 2014, BLM and the National Park Service began impounding Mr. Bundy's cattle on the grounds that he did not have authority to graze on certain federal lands and had not been paying grazing fees for more than 20 years. BLM estimated at that time that Mr. Bundy owed more than $1 million to the federal government (including grazing fees and trespassing fees) as a result of unauthorized grazing. However, the agencies ceased the impoundment of the cattle due to fears of confrontation between private citizens opposed to the roundup and federal law enforcement officials present during the impoundment. Mr. Bundy had not been paying grazing fees to the federal government primarily on the assertion that the lands do not belong to the United States but rather to the state of Nevada, and that his ancestors used the land before the federal government claimed ownership. However, courts determined that the United States owns the lands, enjoined Mr. Bundy from grazing livestock in these areas, and authorized the United States to impound cattle remaining in the trespass areas. BLM continues to seek to resolve the issue through the judicial process. BLM estimated that during the two decades prior to the 2014 intended impoundment of Mr. Bundy's cattle, the agency had impounded cattle about 50 times. The operation to remove Mr. Bundy's cattle from federal lands in Nevada was the biggest removal effort, in terms of the number of cattle and the area involved, according to BLM.  It was also one of the most controversial, in part because of the number and role of law enforcement officials and the temporary closures of land to conduct the impoundment. There have been efforts to end livestock grazing on certain federal lands through voluntary retirement of permits and leases and subsequent closure of the allotments to grazing. This practice is supported by those who view grazing as damaging to the environment, more costly than beneficial, and difficult to reconcile with other land uses. This practice is opposed by those who support ranching on the affected lands, fear a widespread effort to eliminate ranching as a way of life, or question the legality of the process. In some cases, supporters seek to have ranchers relinquish their permits to the government in exchange for compensation by third parties, particularly environmental groups. The third parties seek to acquire the permits through transfer, and advocate agency amendments to land use plans to permanently devote the grazing lands to other purposes, such as watershed conservation. Legislation to authorize an end to grazing in particular areas through voluntary donations of the permits by the permit holders has been introduced in recent Congresses. These measures generally provide for the Secretary of the Interior and/or the Secretary of Agriculture to accept the donation of a permit, terminate the permit, and end grazing on the associated land (or reduce grazing where the donation involves a portion of the authorized grazing). Provisions authorizing such voluntary permit donations in specific areas have sometimes been enacted. Other bills have sought to establish pilot programs for livestock operators to voluntarily relinquish permits and leases in particular states. Still other measures have proposed allowing the Secretary of the Interior and the Secretary of Agriculture to accept a certain number of waived permits, such as a maximum of 100 each year. Under both types of measures, when the Secretaries accept waived permits, they would permanently retire such permits and leases and end grazing on the affected allotments (or reduce grazing where the relinquishment involves a portion of the authorized grazing). Provisions authorizing such pilot programs for particular states or authorizing acceptance of a certain number of waived permits have not been enacted. In earlier Congresses, legislation was introduced to buy out grazing permittees (or lessees) on federal lands generally or on particular allotments. Such legislation provided that permittees who voluntarily relinquished their permits would be compensated at a certain dollar value per AUM, generally significantly higher than the market rate. The allotments would have been permanently closed to grazing. Such legislation, which had been backed by the National Public Lands Grazing Campaign, was advocated to enhance resource protection, resolve conflicts between grazing and other land uses, provide economic options to permittees, and save money. According to proponents, while a buyout program would be costly if all permits were relinquished, it would save more than the cost over time. Opponents of buyout legislation include those who support grazing, others who fear the creation of a compensable property right in grazing permits, some who contend that it would be too costly, or still others who support different types of grazing reform. The extension, renewal, transfer, and reissuance of grazing permits have been issues for Congress. Both BLM and FS have a backlog of permits needing evaluation for renewal. For instance, BLM's backlog has been increasing for more than a decade, with a backlog of more than 7,000 permit renewals as of September 30, 2017. To allow for continuity in grazing operations, Congress had enacted a series of temporary provisions of law allowing the terms and conditions of grazing permits to continue in effect until the agencies complete processing of a renewal. The most recent provision, P.L. 113-291 (Section 3023), made permanent the automatic renewal (until the renewal evaluation process is complete) of grazing permits and leases that expire or are transferred. Agency decisions regarding permit issuance are subject to environmental review under the National Environmental Policy Act (NEPA). That environmental review would include the identification of any additional state, tribal, or federal environmental compliance requirements, such as the Endangered Species Act (ESA), that would apply to a permitted grazing operation. P.L. 113-291 provided that the issuance of a grazing permit \"may\" be categorically excluded from this NEPA requirement under certain conditions. Provisions regarding categorical exclusions have been controversial. Supporters assert that they will expedite the renewal process, foster certainty of grazing operations, and reduce agency workload and expenses. Opponents have expressed concern that categorical exclusions could result in insufficient environmental review and public comment to determine range conditions. ", "summary": "Charging fees for grazing private livestock on federal lands is a long-standing but contentious practice. Generally, livestock producers who use federal lands want to keep fees low, whereas conservation groups believe fees should be increased. The current formula for determining the grazing fee for lands managed by the Bureau of Land Management (BLM) and the Forest Service (FS) was established in the Public Rangelands Improvement Act of 1978 (PRIA) and continued by a 1986 executive order issued by President Reagan. The fee is based on grazing of a specified number of animals for one month, known as an animal unit month (AUM). The fee is set annually under a formula that uses a base value per AUM. The base value is adjusted by three factors—the lease rates for grazing on private lands, beef cattle prices, and the cost of livestock production. For 2019, BLM and FS are charging a grazing fee of $1.35 per AUM. This fee is in effect from March 1, 2019, through February 29, 2020, and is the minimum allowed. Since 1981, when BLM and FS began charging the same grazing fee, the fee has ranged from $1.35 per AUM (for about half the years) to $2.31 per AUM (for 1981). The average fee during the period was $1.55 per AUM. In recent decades, grazing fee reform has occasionally been considered by Congress or proposed by the President, but no fee changes have been adopted. The grazing fees collected by each agency essentially are divided between the agency, Treasury, and states/localities. The agency portion is deposited in a range betterment fund in the Treasury and is subject to appropriation by Congress. The agencies use these funds for on-the-ground activities, such as range rehabilitation and fence construction. Under law, BLM and FS allocate the remaining collections differently between the Treasury and states/localities. Issues for Congress include whether to retain the current grazing fee or alter the charges for grazing on federal lands. The current BLM and FS grazing fee is generally lower than fees charged for grazing on state and private lands. Comparing the BLM and FS fee with state and private fees is complicated, due to factors including the purposes for which fees are charged, the quality of the resources on the lands being grazed, and whether the federal grazing fee alone or other nonfee costs are considered. Unauthorized grazing occurs on BLM and FS lands in a variety of ways, including when cattle graze outside the allowed areas or seasons or in larger numbers than allowed under permit. In some cases, livestock owners have intentionally grazed cattle on federal land without getting a permit or paying the required fee. The agencies have responded at times by fining the owners, as well as by impounding and selling the trespassing cattle. BLM continues to seek a judicial resolution to a long-standing controversy involving cattle grazed by Cliven Bundy on lands in Nevada. There have been efforts to end livestock grazing in specific areas through voluntary retirement of permits and leases and subsequent closure of the allotments to grazing. Congress has enacted some such proposals. Congress also has considered measures to reduce or end grazing in specified states or to allow a maximum number of permits to be waived yearly. Among other reasons, such measures have been supported to protect range resources but opposed as diminishing ranching operations. Another issue involves expiring grazing permits. Both BLM and FS have a backlog of permits needing evaluation for renewal. To allow for continuity in grazing operations, P.L. 113-291 made permanent the automatic renewal (until the evaluation process is complete) of permits and leases that expire or are transferred. The law provided that the issuance of a grazing permit \"may\" be categorically excluded from environmental review under the National Environmental Policy Act (NEPA) under certain conditions. NEPA categorical exclusions have been controversial.", "document_type": "crs"}
{"report": "Running away from home is not a recent phenomenon. Folkloric heroes Huckleberry Finn and Davy Crockett fled their abusive fathers to find adventure and employment. Although some youth today also leave home due to abuse and neglect, they often endure far more negative outcomes than their romanticized counterparts from an earlier era. Without adequate and safe shelter, runaway and homeless youth are vulnerable to engaging in high-risk behaviors and further victimization. Youth who live away from home for extended periods may become removed from school and systems of support. Runaway and homeless youth are vulnerable to multiple problems while they are away from a permanent home, including untreated mental health disorders, drug use, and sexual exploitation. They also report other challenges including poor health and the lack of basic provisions. Congress began to hear concerns about the vulnerabilities of the runaway population in the 1970s due to increased awareness about these youth and the establishment of runaway shelters to assist them in returning home. Congress and the President went on to enact the Runaway Youth Act of 1974 as Title III of the Juvenile Justice and Delinquency Prevention Act ( P.L. 93-415 ) to assist runaways through services specifically for this population. Since that time, the law has been updated to authorize services to provide support for runaway and homeless youth outside of the juvenile justice, mental health, and child welfare systems. The Runaway Youth Act—now known as the Runaway and Homeless Youth Act—authorized federal funding to be provided through annual appropriations for three programs that assist runaway and homeless youth: the Basic Center Program (BCP), Transitional Living Program (TLP), and Street Outreach Program (SOP). Together, the programs make up the Runaway and Homeless Youth Program (RHYP), administered by the Family and Youth Services Bureau (FYSB) in the U.S. Department of Health and Human Services' (HHS) Administration for Children and Families (ACF). Basic Center Program: Provides funding to community-based organizations for crisis intervention, temporary shelter, counseling, family unification, and after care services to runaway and homeless youth under age 18 and their families. In some cases, BCP-funded programs may serve older youth. Over 31,000 youth participated in FY2016, the most recent year for which data are available. Transitional Living Program: Supports community-based organizations that provide homeless youth ages 16 through 22 with stable, safe, longer-term residential services up to 18 months (or longer under certain circumstances), including counseling in basic life skills, building interpersonal skills, educational advancement, job attainment skills, and physical and mental health care. Over 6,000 youth participated in FY2016. Street Outreach Program: Provides funding to community-based organizations for street-based outreach and education, including treatment, counseling, provision of information, and referrals for runaway, homeless, and street youth who have been subjected to, or are at risk of being subjected to, sexual abuse, sexual exploitation, prostitution, and trafficking. SOP grantees made contact with more than 36,000 youth in FY2016. This report begins with an overview of the runaway and homeless youth population. It then describes the challenges in defining and counting this population, as well as the factors that influence homelessness and leaving home. The report also provides background on federal efforts to support runaway and homeless youth, including the evolution of federal policies to respond to these youth, with a focus on the period from the Runaway Youth Act of 1974 to the present time. The report then describes the administration and funding of the Basic Center, Transitional Living, and Street Outreach programs that were created from authorizations in the act. The appendixes include funding information for the BCP program and discuss other federal programs that may be used to assist runaway and homeless youth. There is no single federal definition of the terms \"homeless youth\" or \"runaway youth.\" However, HHS relies on definitions from the Runaway and Homeless Youth Act in administering the Runaway and Homeless Youth program: The act includes the following definitions: \"Homeless youth,\" for purposes of the BCP, includes individuals under age 18 (or some older age if permitted by state or local law) for whom it is not possible to live in a safe environment with a relative and who lack safe alternative living arrangements. \"Homeless youth,\" for purposes of the TLP, includes individuals ages 16 through 22 for whom it is not possible to live in a safe environment with a relative and who lack safe alternative living arrangements. Youth older than age 22 may participate if they entered the program before age 22 and meet other requirements. \"Runaway youth\" includes individuals under age 18 who absent themselves from their home or legal residence at least overnight without the permission of their parents or legal guardians. Separately, the McKinney-Vento Act authorizes several federal programs for homeless individuals that are administered by the U.S. Department of Housing and Urban Development (HUD). The definition of \"homeless individual\" in McKinney-Vento refers to \"unaccompanied youth,\" which applies to selected homelessness programs. HUD's related regulation defines an \"unaccompanied youth\" as someone under age 25 who meets the definition of \"homeless\" in the Runaway and Homeless Youth Act or other specified federal laws. The regulation also provides additional criteria, including that they have lived independently without permanent housing for at least 60 days. The research literature discusses definitions of runaway and homeless youth. While studies have often categorized young people based on their status as runaways , homeless, or street youth , a 2011 report suggests that overlap exists between these categories. The authors of the study note that these \"typologies,\" or classifications, are too narrowly defined by the youth's housing status and reasons for homelessness, among other factors. The authors explain that typologies based on mental health status or age cohort are promising, but they suggest further research in this area to ensure that the typologies are accurate. The precise number of homeless and runaway youth is unknown due to their residential mobility. These youth often eschew the shelter system for locations or areas that are not easily accessible to shelter workers and others who count the homeless and runaways. Youth who come into contact with census takers may also be reluctant to report that they have left home or are homeless. Determining the number of homeless and runaway youth is further complicated by the lack of a standardized methodology for counting the population and inconsistent definitions of what it means to be homeless or a runaway. Differences in methodology for collecting data on homeless populations may also influence how the characteristics of the runaway and homeless youth population are reported. Some studies have relied on point prevalence estimates that report whether youth have experienced homelessness at a given point in time, such as on a particular day. According to researchers that study the characteristics of runaway and homeless youth, these studies appear to be biased toward describing individuals who experience longer periods of homelessness. HUD requires communities receiving certain HUD funding to conduct annual point-in-time (PIT) counts of people experiencing homelessness, including homeless youth. The PIT counts include people living in emergency shelter, transitional housing, and on the street or other places not meant for human habitation. It does not include people who are temporarily living with family or friends. In the 2018 PIT count, communities identified 36,361 unaccompanied youth under age 25 (versus 40,799 in 2017) and another 8,724 under age 25 who were homeless parents (versus 9,434 in 2017). While PIT counts do not provide a confident estimate of youth experiencing homelessness across the country, they provide some information to communities about the potential scope of youth homelessness. The Reconnecting Homeless Youth Act ( P.L. 110-378 ), which renewed authorization of appropriations for the Runaway and Homeless Youth Program through FY2013, also authorized funding for HHS to conduct periodic studies of the incidence and prevalence of youth who have run away or are homeless. Separately, the accompanying conference report to the FY2016 appropriations law ( P.L. 114-113 ) directed HUD to use $2 million to conduct a national incidence and prevalence study of homeless youth as authorized under the Runaway and Homeless Youth program. HUD provided these funds to Chapin Hall at the University of Chicago to carry out the study. The study, known as Voices of Youth Count , used a nationally representative phone survey to derive national estimates and conducted brief surveys of youth and in-depth interviews of youth who had experiences of homelessness. The phone survey involved interviews with adults whose households had youth and young adults ages 13 to 25 and with adults ages 18 to 25. Voices of Youth Count estimated that approximately 700,000 youth ages 13 to 17 and 3.5 million young adults ages 18 to 25 had experienced homelessness within a one-year period, meaning they were sleeping in places not meant for human habitation, staying in shelters, or temporarily staying with others while lacking a safe and stable alternative living arrangement. This differs from the PIT counts because it includes individuals who are staying with others. The study also found that youth homelessness affected youth in rural and urban areas at similar levels. A 2010 study on the lifetime prevalence of running away used longitudinal survey data of young people who were 12 to 18 years old when they were first interviewed about whether they had run away—defined as staying away at least one night without their parents' prior knowledge or permission—along with other behaviors. In subsequent years, youth who were under age 17 at their previous interview were asked if they had run away since their last interview. Youth who had ever run away were asked how many times they had done so and the age at which they first did. The study found that 19% of those who ran away did so before turning 18; females were more likely than males to run away; and among white, black, and Hispanic youth, black youth have the highest rate of ever running away. Youth who ran away reported that they did so about three times on average; however, about half of runaways had only run away once. Approximately half of the youth had run away before age 14. A subset of runaway youth is those in foster care. In FY2017, over 500 children in the United States had run away from their foster care home or other placement. While this represents less than 1% of all children in foster care, running away is more prevalent among older youth in care. A study of over 50,000 youth ages 13 through 17 in 21 states indicated that 17% ran away at least once during their first time in foster care. The study found that female, black, and Hispanic youth were more likely to run away than male and white youth in care. The study further found that youth were more likely to run away from congregate care (i.e., group care) settings compared to other settings, such as living with a relative or in a foster family home. Youth were also more likely to run away from care if they lived in the most socioeconomically disadvantaged counties or lived in a state that lacked a process to screen youth on the risk of running away. States report on the characteristics and experiences of certain current and former foster youth through the National Youth in Transition Database (NYTD). Among other information, states must report data on cohorts of foster youth beginning when they are age 17, and later at ages 19 and 21. Among youth surveyed in FY2015 at age 21, about 43% reported having experienced homelessness. Youth most often cite family conflict as the major reason for their homelessness or episodes of running away. According to the research literature, a youth's poor family dynamics, sexual activity, sexual orientation, pregnancy, school problems, and alcohol and drug use are strong predictors of family discord. One-third of callers who used the National Runaway Safeline in 2017—a crisis call center funded under the Runaway and Homeless Youth Program for youth and their relatives involved in runaway incidents—gave family dynamics (not defined) as the reason for their call. Further, a longitudinal survey of middle school and high school youth examined the effects of family instability (e.g., child maltreatment, lack of parental warmth, and parent rejection) and other factors on the likelihood of running away from home approximately two to six years after youth were initially surveyed. Researchers found that youth with family instability were more likely to run away. Family instability also influenced problem behaviors, such as illicit drug use, which, in turn, were associated with running away. Researchers further determined that certain other effects (e.g., school engagement, neighborhood cohesiveness, physical victimization, and friends' support) were not strong predicators of whether youth in the sample ran away. In a study of youth who ran away from foster care between 1993 and 2003, the youth cited three primary reasons why they ran from foster care: to connect with their biological families, express their autonomy and find normalcy, and maintain relationships with nonfamily members. The Voices of Youth Count study found that certain youth ages 18 to 25 were at heightened risk of experiencing homelessness. This included youth with less than a high school diploma or GED; who were Hispanic or black; who were parenting and unmarried; or identified as lesbian, gay, bisexual, transgender, or questioning (LGBTQ). Gay and lesbian youth appear to be at greater risk for homelessness and are overrepresented in the homeless population, due often to experiencing negative reactions from their parents when they come out about their sexuality. The Voices of Youth Count study found that LGBTQ young adults ages 18 to 25 had more than twice the risk of being homeless than their heterosexual peers. LGBTQ youth made up about 20% of young adults who reported homelessness. In addition, a study involving LGBTQ young adults in seven cities found that the most common reason youth became homeless was due to being kicked out or asked to leave the home of a parent, relative, foster home, or group home. Under an HHS grant, Youth with Child Welfare Involvement at Risk of Homelessness , the 18 grantees (state, local, and tribal child welfare agencies or community-based organizations) evaluated multiple risk factors for homelessness among child welfare-involved populations: which include those who have had numerous foster care placements, run away from foster care, been placed in a group home, had a history of mental health or behavioral health diagnoses, had juvenile justice involvement, had a history of substance abuse, been emancipated from foster care, and been parenting or fathered a child. Runaway and homeless youth are vulnerable to multiple problems while they are away from a permanent home, including untreated mental health disorders, drug use, and sexual exploitation. Studies of homeless youth indicate that they are more likely to experience mental health and substance abuse disorders than their counterparts in the general population. A literature review of studies on psychiatric disorders among homeless youth found high prevalence of conduct disorders, major depression, psychosis, and other disorders. A study of participants in the Street Outreach Program found that about 6 out of 10 reported symptoms associated with depression and almost three-fourths reported that they had experienced major trauma, such as physical or sexual abuse or witnessing or being a victim of violence. Substance abuse is more prevalent among youth who live on the street, compared to homeless youth who are in shelters. Still, both groups of youth use alcohol or drugs at higher rates than their peers who live in family households, even after researchers control for demographic differences. While away from a permanent home, runaway and homeless youth are also vulnerable to sexual exploitation; sex and labor trafficking; and other victimization such as being beaten up, robbed, or otherwise assaulted. Some youth resort to illegal activity including stealing, exchanging sex for food or a place to stay, and selling drugs for survival. Runaway and homeless youth report other challenges including poor health and a lack of basic provisions. Prior to the enactment of the Runaway Youth Act of 1974 (Title III, Juvenile Justice and Delinquency Prevention Act of 1974, P.L. 93-415 ), federal policy provided limited services to runaway and homeless youth. If they received any services, most of these youth were served through the local child welfare agency, juvenile justice court system, or both. The 1970s marked a shift to a more rehabilitative model for assisting youth who had run afoul of the law, including those who committed status offenses such as running away. During this period, Congress focused increasing attention on runaways and other vulnerable youth due, in part, to emerging sociological models to explain why youth engaged in deviant behavior. The first runaway shelters were created in the late 1960s and 1970s to assist them in returning home. The landmark Runaway Youth Act of 1974 decriminalized runaway youth and authorized funding for programs to provide shelter, counseling, and other services. Since the law's enactment, Congress and the President have expanded the services available to both runaway youth and homeless youth under what is now referred to as the Runaway and Homeless Youth Program. In more recent years, other federal entities have been involved in responding to the challenges facing runaway and homeless youth. These efforts are coordinated through the U.S. Interagency Council on Homelessness (USICH). Figure 1 traces the evolution of federal policy in this area. The Runaway and Homeless Youth Program is a major part of recent federal efforts to end youth homelessness through the U.S. Interagency Council on Homelessness. The USICH, established under the 1987 Stewart B. McKinney Homeless Assistance Act, is made up of several federal agencies, including HHS and HUD. The HEARTH Act, enacted in 2009 as part of the Helping Families Save Their Homes Act ( P.L. 111-22 ), charged USICH with developing a National Strategic Plan to End Homelessness. In June 2010, USICH released this plan, entitled Opening Doors . The plan set out goals for ending homelessness, including (1) ending chronic homelessness by 2015; (2) preventing and ending homelessness among veterans by 2015; (3) preventing and ending homelessness for families, youth, and children by 2020; and (4) setting a path to ending all types of homelessness. In 2012, USICH amended Opening Doors to specifically address strategies for improving the educational outcomes for children and youth and assisting unaccompanied homeless youth. USICH outlined its intention to improve outcomes for youth in four areas: stable housing, permanent connections, education or employment options, and socio-emotional well-being. In 2013, a USICH working group developed a guiding document for ending youth homelessness by 2020. Known as the Framework to End Youth Homelessness , the document outlines a data strategy to collect better data on the number and characteristics of youth experiencing homelessness. This data strategy includes coordinating the former data collection system for the Runaway and Homeless Youth program—referred to as RHYMIS—with HUD's Homeless Management Information Systems (HMIS). RHYMIS was a data system administered by HHS for previous RHYP grantees to upload demographic and other data for the youth they served. HMIS is a locally administered data system used to record and analyze client, service, and housing data for individuals and families who are homeless or at risk of homelessness in a given community. As of FY2015, RHYP grantees stopped reporting to RHYMIS and instead report to HMIS. Grantees reported to RHYMIS on the basic demographics of the youth, the services they received, and the status of the youth upon exiting the programs. RHY grantees are now required to report this same (and new information) to HMIS. According to HHS, some grantees have had have encountered inaccurate software programming for their data standards or have had issues with successfully extracting their data to submit to HHS. The data strategy outlined in the framework also involves, if funding is available, designing and implementing a national study to estimate the number, needs, and characteristics of youth experiencing homelessness. This is consistent with the Runaway and Homeless Youth Act's directive for HHS to conduct a study of youth homelessness. As noted, this study— Voices of Youth Count —received funding from FY2016 HUD appropriations. In addition, HHS has supported other research on homeless youth, including factors associated with prolonged homelessness and risk factors for homelessness among children and youth with involvement in child welfare. In 2018, the USICH issued a brief that outlines continued gaps in data on the homeless youth population, citing the need for greater understanding about the causes of youth homelessness and how youth enter and exit homelessness. Separately, the framework also outlined a strategy to strengthen and coordinate the capacity of federal, state, and local systems to work toward ending youth homelessness. USICH has provided guidance to communities, including by establishing community-level criteria for ending homelessness and accompanying benchmarks to assess whether they have achieved an end to youth homelessness. Still, the 2018 USICH brief called for greater evidence regarding the impact of housing and service interventions in helping youth exit homelessness. As mentioned, the Runaway and Homeless Youth Program is administered by the Family and Youth Services Bureau (FYSB) within HHS's Administration for Children and Families (ACF). The Runaway and Homeless Youth Act includes three authorizations of appropriations. The authorization of appropriations for the Basic Center Program and Transitional Living program is $127.4 million for each of FY2019 and FY2020. Under the law, 90% of the federal funds appropriated under the two programs must be used for the BCP and TLP (together, the programs and their related activities are known as the Consolidated Runaway and Homeless Youth program). Of this amount, 45% is reserved for the BCP and no more than 55% is reserved for the TLP. The remaining share of consolidated funding is allocated for (1) a national communication system to facilitate communication between service providers, runaway youth, and their families (National Safeline); (2) training and technical support for grantees; (3) evaluations of the programs; (4) federal coordination efforts on matters relating to the health, education, employment, and housing of these youth; and (5) studies of runaway and homeless youth. The authorization of appropriations for the Street Outreach program is $25 million for each of FY2019 and FY2020. Although the SOP is a separately funded component, SOP services are coordinated with those provided under the BCP and TLP. The authorization of appropriations for the periodic estimate of incidence and prevalence of youth homelessness is such sums as may be necessary for FY2019 and FY2020. Funding has not been provided by HHS under this authority, and as noted, funds appropriated to HUD for this purpose have been used to support Voices of Youth Count. Table 1 shows funding levels for the Runaway and Homeless Youth Program from FY2006 through FY2019. Over this period, funding has increased notably for the program three times, most recently from FY2017 to FY2018. Congress has provided some guidance on how the additional funds are to be spent. In the conference report to accompany the FY2019 consolidated appropriations act, Congress stated that the increase should be provided to current TLP grantees whose awards end on March 31, 2019. The funding is to be used to continue services until new awards are made to those grantees, or for those grantees that did not receive a new grant, to provide services until the end of FY2019. Funding may then be used for additional new awards. The Basic Center Program is intended to provide short-term shelter and services for youth and their families at centers operated by BCP grantees, which are public and private community-based organizations. Youth eligible to receive BCP services include those youth who are at risk of running away or becoming homeless (and may live at home with their parents), or have already left home, either voluntarily or involuntarily. To stay at the shelter, youth must be under age 18, or an older age if the BCP center is located in a state or locality that permits this higher age. Some centers may serve homeless youth through street-based services, home-based services, and drug abuse education and prevention services. Grantees seek to connect youth with their families, whenever possible, or to locate appropriate alternative placements. They also provide individual or group and family counseling, health care, education, and employment assistance. As specified in the law, BCP grantees or centers are intended to provide services as an alternative to involving runaway and homeless youth in the law enforcement, juvenile justice, child welfare, and mental health systems. Youth may stay in a center continuously up to 21 days. In FY2017, the program served 23,288 youth, and in FY2018 it funded 280 BCP shelters (most recent figures available). These centers, which can shelter as many as 20 youth, are generally supposed to be located in areas that are frequented or easily reached by runaway and homeless youth. BCP grantees must make efforts to contact the parents and relatives of runaway and homeless youth. Grantees are also required to establish relationships with law enforcement, health and mental health care, social service, welfare, and school district systems to coordinate services. Grantees maintain confidential statistical records of youth, including youth who are not referred to out-of-home shelter services. Further, grantees are required to submit an annual report to HHS detailing the program activities and the number of youth participating in such activities, as well as information about the operation of the centers. BCP grants are allocated directly to grantees for a three-year period. Funding is generally distributed to entities based on the proportion of the nation's youth under age 18 in the jurisdiction where the entities are located. The 50 states, the District of Columbia, and Puerto Rico each receive a minimum allotment of $200,000. Separately, the territories (currently, this includes American Samoa and Guam) each receive a minimum of $70,000. The amount of funding for each state or territory can further depend on whether grant applicants in that jurisdiction applied for funding, and if so, whether the applicant fulfilled the requirements in the authorizing law and grant application. For example, the authorizing law directs HHS to give priority to applicants who have demonstrated experience in providing services to runaway and homeless youth. HHS is to re-allot any funds designated for grantees in one state to grantees in other states that will not be obligated before the end of a fiscal year. See Table A-1 for the amount of funding allocated for each state in FY2017 and FY2018. The costs of the BCP are shared by the federal government (90%) and grantees (10%). In FY2008, HHS began funding a three-year Rural Host Homes Demonstration Project , which was initiated to expand BCP shelter and support services to runaway and homeless youth who live in rural areas not served by shelter facilities. The project supported grantees that provided youth with shelter (via host home families who were recruited, screened, and trained) and preventive services, including transportation, counseling, educational assistance, and aftercare planning, among others. Over the course of the three years, the project served 781 youth, 411 of whom received shelter and 370 of whom received preventive services without shelter. Recognizing the difficulty that youth face in becoming self-sufficient adults, the Transitional Living Program provides longer-term shelter and assistance for youth ages 16 through 22 (or older if the youth entered the TLP prior to reaching age 22) who may leave their biological homes due to family conflict, or have left and are not expected to return home. Pregnant and/or parenting youth are eligible for TLP services. In FY2017, the TLP provided services to 3,517 youth. In FY2018, the program funded 229 organizations. Each TLP grantee may shelter up to 20 youth at various sites, such as host family homes, supervised apartments owned by a social service agency, scattered-site apartments, or single-occupancy apartments rented directly with the assistance of the grantee. Youth may remain at TLP sites for up to 540 days (18 months), or longer for youth under age 18. Youth ages 16 through 22 may remain in the program for a continuous period of 635 days (approximately 21 months) under \"exceptional circumstances.\" This term means circumstances in which a youth would benefit to an unusual extent from additional time in the program. A youth in a TLP who has not reached age 18 on the last day of the 635-day period may, in exceptional circumstances and if otherwise qualified for the program, remain in the program until his or her 18 th birthday. Youth receive several types of services at TLP-funded programs: basic life-skills training, including consumer education and instruction in budgeting and the use of credit; parenting support and child care (as appropriate); building interpersonal skills; educational opportunities, such as GED courses and postsecondary training; assistance in job preparation and attainment; and mental and physical health care services. TLP grantees are required to develop a written plan designed to help youth transition to living independently or another appropriate living arrangement, and they are to refer youth to other systems that can help to meet their educational, health care, and social service needs. The grantees must also submit an annual report to HHS that includes information regarding the activities carried out with funds and the number and characteristics of the homeless youth. As part of the FY2002 budget request, the George W. Bush Administration proposed a $33 million initiative to fund maternity group homes—or centers that provide shelter to pregnant and parenting teens who are vulnerable to abuse and neglect—as a component of the TLP. Although the TLP authorized services for pregnant and parenting teens prior to FY2002, the Bush Administration sought funds specifically to serve this population. Increased funds were ultimately provided to enable these youth to access TLP services. The 2003 amendments to the Runaway and Homeless Youth Act ( P.L. 108-96 ) provided explicit authority to use TLP funds for this purpose. Since FY2004, funding for adult-supervised transitional living arrangements that serve pregnant or parenting women ages 16 to 21 and their children has been awarded to organizations that receive TLP grants. These organizations provide youth with parenting skills, including child development education, family budgeting, health and nutrition, and other skills to promote family well-being. TLP grants are distributed competitively by HHS to community-based public and private organizations throughout the country for a five-year period. Grantees must provide at least 10% of the total cost of the program. HHS is carrying out a study to learn more about the long-term outcomes of 1,250 youth who have used TLP services. The study seeks to describe the outcomes and to isolate and describe promising practices and other factors that may contribute to their successes or challenges. Of particular interest for the study is how services are delivered, the demographics of youth, and their socio-emotional wellness and life experiences. It involves both a process evaluation and impact evaluation, with youth randomly assigned to the treatment (i.e., participation in the TLP) and control groups. The study seeks to address the following questions: (1) How do TLP programs operate, what types of program models are used to deliver services, and what services are delivered to homeless youth? (2) What are the long-term housing outcomes and protective factors for youth who participate in the TLP program immediately, six months, 12 months, and 18 months after exiting the program? (3) What interventions can be attributed to any positive outcomes experienced by youth who participate in the TLP? According to HHS, the pilot study revealed challenges \"in collecting data from a large enough sample size of youth to detect any effects so that conclusions could be drawn about the impact of homeless youth served by TLPs.\" HHS is not certain how it will move forward with the study. In FY2016, HHS began the Transitional Living Program Special Population Demonstration project. The project funded nine grantees over a two-year period that tested approaches for serving populations that need additional support: LGBTQ runaway and homeless youth ages 16 to 21; and young adults who have left foster care because of emancipation. Grantees were expected to provide strategies that help youth build protective factors, such as connections with schools, employment, and appropriate family members and other caring adults. According to HHS, a process evaluation will assess how grantees are implementing the demonstration project. HHS separately funded a project from FY2012 through FY2014 to build the capacity of TLPs in serving LGBTQ youth. Known as the 3/40 Blueprint: Creating the Blueprint to Reduce LGBTQ Youth Homelessness , the purpose of the grant was develop information about serving the LGBTQ youth population experiencing homelessness, such as through efforts to identify innovative intervention strategies, determine culturally appropriate screening and assessment tools, and better understand the needs of LGBTQ youth served by RHY providers. The website developed by the grantee, the University of Illinois at Chicago, identifies promising practices that serve LGBTQ youth who are experiencing homelessness and publishes information about their challenges. In FY2009, HHS began the Support Systems for Rural Homeless Youth Demonstration Project . Six states received grants to support TLPs in rural communities in serving young adults who have few or no connections to a supportive family structure or community resources. The five-year project sought to provide services across three main areas: survival support, which includes housing, health care (including mental health), and substance abuse treatment and prevention; community, which includes community service, youth and adult partnerships, mentoring, and peer support groups; and education and employment, which includes high school or GED completion, postsecondary education, and job training and employment. The six states—Colorado, Iowa, Minnesota, Nebraska, Oklahoma, and Vermont—each received annual grants of $200,000. According to HHS, all of the sites engaged youth in positive youth development activities that included safe places for youth to go. In addition, they raised awareness about homelessness in rural areas and addressed some of the unique needs around employment, housing, and transportation. However, the sites also confirmed that there is a general lack of available housing for homeless youth and that transportation was the most critical impediment to serving these youth. The Street Outreach Program provides runaway and homeless youth living on the streets or in areas that increase their risk of using drugs or being subjected to sexual abuse, prostitution, sexual exploitation, and trafficking are eligible to receive services. The program's goal is to assist youth in transitioning to safe and appropriate living arrangements. SOP services include the following: treatment and counseling; crisis intervention; drug abuse and exploitation prevention and education activities; survival aid; street-based education and outreach; information and referrals; and follow-up support. Grants are awarded for a three-year period, and grantees must provide 10% of the funds to cover the cost of the program. In FY2018, 96 grantees were funded. In FY2017 grantees made contact with 24,366 youth. The Family and Youth Services Bureau initiated the Street Outreach Program Data Collection Project in 2012 to learn more about the lives and needs of homeless and runaway youth served by SOP grantees. The purpose of the project was to design services to better meet the needs of these youth. FYSB collected information through focus groups and computer-assisted personal interviews with 656 youth (ages 14 to 21 years) served by grantees in 11 cities. The project found that participants were homeless on average for nearly two years and had challenges with substance abuse, mental health, and exposure to trauma. Youth most identified that they were in need of job training or help finding a job, transportation assistance, and clothing. The top barriers to obtaining shelter were shelters being full, not knowing where to go for shelter, and lacking transportation to get to a shelter. The study researchers concluded that more emergency shelters could help prevent youth from sleeping on the street. Further, they noted that youth on the streets need more intensive case management (e.g., careful assessment and treatment planning, linkages to community resources, etc.) and more intensive interventions. HHS funds the Runaway and Homeless Youth Training and Technical Assistance Center (RHYTTAC) to provide technical assistance to RHYP grantees. HHS awarded a five-year cooperative agreement, from September 30, 2017, through September 29, 2020, to National Safe Place to operate RHYTTAC. National Safe Place is a national youth outreach program that aims to educate young people about the dangers of running away or trying to resolve difficult, threatening situations on their own. RHYTTAC is designed to provide training and conference services to RHYP grantees that enhance and promote continuous quality improvement to services provided by RHYP grantees. Further, RHYTTAC offers resources and information through its website, tip sheets, a quarterly newsletter, toolkits, sample policies and procedures, and other resources. RHYTTAC also provides assistance to individual grantees in response to their questions or concerns, as well as concerns raised by HHS as part of the Runaway and Homeless Youth Program Monitoring System (see subsequent section). A portion of the funds for the BCP, TLP, and related activities are allocated for a national communications system known as the National Runaway Safeline (\"Safeline\"). The Safeline is intended to help homeless and runaway youth (or youth who are contemplating running away) through counseling, referrals, and communicating with their families. Beginning with FY1974 and every year after, the Safeline, which until 2013 was called the National Runaway Switchboard, has been funded through the Basic Center Program grant or the Consolidated Runaway and Homeless Youth Program grant. The Safeline is located in Chicago and operates each day to provide services to youth and their families across the country. Services include (1) a channel through which runaway and homeless youth or their parents may leave messages; (2) 24-hour referrals to community resources, including shelter, community food banks, legal assistance, and social services agencies; and (3) crisis intervention counseling to youth. In calendar year 2017, the Safeline handled nearly 30,000 contacts with youth (via phone, computer, emails, and postings), of which nearly three-quarters were from youth and 9% were from parents; the other callers were relatives, friends, and others. Other services are also provided through the Safeline. Since 1995, the \"Home Free\" family reunification program has provided bus tickets for youth ages 12 to 21 to return home or to an alternative placement near their home through Home Free. HHS evaluates each RHYP grantee through the Runaway and Homeless Youth Monitoring System. Staff from regional ACF offices and other grant recipients (known as peer reviewers) inspect the program site, conduct interviews, review case files and other agency documents, and conduct entry and exit conferences. The monitoring team then prepares a written report that identifies the strengths of the program and areas that require corrective action. The Reconnecting Homeless Youth Act of 2008 required that within one year of its enactment (October 8, 2009), HHS was to issue rules that specified performance standards for public and nonprofit entities that receive BCP, TLP, and SOP grants. On April 14, 2014, HHS issued a notice of proposed rulemaking (NPRM) for the new performance standards and other requirements for the Runaway and Homeless youth program grantees. On December 20, 2016, HHS implemented a final rule that was similar to the provisions in the NPRM. These standards are used to monitor individual grantee performance. The Senate Committee on Health, Education, Labor, and Pensions (HELP) and the House Committee on Education and Labor have exercised jurisdiction over the Runaway and Homeless Youth Program. HHS must submit reports biennially to the committees on the status, activities, and accomplishments of program grant recipients and evaluations of the programs performed by HHS. The most recent report was submitted in January 2018, and covered FY2014 and FY2015. The 2003 reauthorization law ( P.L. 108-96 ) of the Runaway and Homeless Youth Act required that HHS, in consultation with the U.S. Interagency Council on Homelessness, submit a report to Congress on the promising strategies to end youth homelessness within two years of the reauthorization, in October 2005. The report was submitted to Congress in June 2007. As mentioned above, the 2008 reauthorization law ( P.L. 110-378 ) required HHS, as of FY2010, to periodically submit to Congress an incidence and prevalence study of runaway and homeless youth ages 13 to 26, as well as the characteristics of a representative sample of these youth. As discussed, Congress appropriated funding to HUD for this purpose and the study, known as Voices of Youth Count , includes multiple publications about its findings. The 2008 law also directed the Government Accountability Office (GAO) to evaluate the process by which organizations apply for BCP, TLP, and SOP, including HHS's response to these applicants. GAO submitted a report to Congress in May 2010 on its findings. GAO found weaknesses in several of the procedures for reviewing grants, such as that peer reviewers for the grant did not always have expertise in runaway and homeless youth issues and feedback on grants was not provided in a permanent record. In addition, GAO found that HHS delayed telling successful grantees that the grant had been awarded to them. HHS has implemented the recommendations made in the report. Appendix A. Basic Center Program (BCP) Funding Appendix B. Additional Federal Support for Runaway and Homeless Youth Since the creation of the Runaway and Homeless Youth Program, other federal initiatives have also established services for such youth. Youth Homelessness Demonstration Program (YHDP): The omnibus appropriations laws for FY2016 through FY2018 enabled HUD to set aside up to $33 million (FY2016), $43 million (FY2017), and $80 million (FY2018) from the Homeless Assistance Grants account to implement projects that demonstrate how a \"comprehensive approach\" can \"dramatically reduce\" homelessness for youth through age 24. The appropriations laws each fiscal year direct this funding to up to 10 communities with the FY2016 funding; up to 11 communities with the FY2017 funding, including at least five rural communities; and up to 25 communities with the FY2018 funding, including at least eight rural communities. HUD has allocated $33 million to 10 communities for FY2016 and $43 million for FY2017. In addition, HUD is taking steps to evaluate the YHDP grantee communities in developing and carrying out a coordinated community approach to preventing and ending youth homelessness. 100-Day Challenges to End Youth Homelessness : Since 2016, cities have partnered with public and private entities to accelerate efforts to prevent and end youth homelessness. A Way Home America and Rapid Results Institute, organizations that focus on pressing social problems, have provided support to the organizations. HHS provided training and technical assistance through RHYTTAC to the first three cities involved in the challenge: Los Angeles, CA; Cleveland, OH; and Austin, TX. In general, participating communities have housed homeless youth and have identified new housing options for this population. Youth with Child Welfare Involvement At-Risk of Homelessness (YAHR): HHS has funded grants to build evidence on what works to prevent homelessness among youth and young adults who have child welfare involvement. HHS awarded funds to 18 grantees for a two-year planning period (2013-2015). Six of the grantees received additional funding to refine and test their service models during a second phase (2015-2018). A subset of those grantees will then be selected to conduct a rigorous evaluation of their impact on homelessness. In school year 2016-2017, more than 1.3 million children and youth were homeless. Of these students, over 118,000 were homeless youth unaccompanied by their families. The Department of Education administers the Education for Homeless Children and Youth program, which was established under the McKinney-Vento Homeless Assistance Act of 1987 ( P.L. 100-77 ), as amended. This program assists state education agencies (SEAs) to ensure that all homeless children and youth have equal access to the same, appropriate education, including public preschool education, that is provided to other children and youth. Grants made by SEAs to local education agencies (LEAs) under this program must be used to facilitate the enrollment, attendance, and success in school of homeless children and youth. Program funds may be appropriated for activities such as tutoring, supplemental instruction, and referral services for homeless children and youth, as well as providing them with medical, dental, mental, and other health services. McKinney-Vento liaisons for homeless children and youth in each LEA is responsible for coordinating activities for these youth with other entities and agencies, including local Basic Center and Transitional Living Program grantees. States that receive McKinney-Vento funds are prohibited from segregating homeless students from non-homeless students, except for short periods of time for health and safety emergencies or to provide temporary, special, supplemental services. FY2019 funding for the program is $93.5 million. According to a 2017 survey of 43,000 college students at selected colleges and universities, 9% of those attending four-year universities and 12% of those attending community college had been homeless in the last year. In addition, 37% of university students and 46% of community college students were housing insecure in the past year, meaning that they had difficulty paying rent or lived with others beyond the expected capacity of the housing, among other scenarios. The Higher Education Act (HEA) authorizes financial aid and support programs that target homeless students and other vulnerable populations. For purposes of applying for federal financial aid, a student's expected family contribution (EFC) is the amount that can be expected to be contributed by a student and the student's family toward his or her cost of education. Certain groups of students are considered \"independent,\" meaning that only the income and assets of the student (and not their parents or guardians) are counted. Individuals under age 24 who have been verified during the school year as either (1) unaccompanied and homeless or (2) unaccompanied, self-supporting, and risk of homelessness. This verification can come from a McKinney-Vento liaison for homeless children and youth in the local education agency; the director (or designee) of a program funded under the Runaway and Homeless Youth program; the director (or designee) of an emergency shelter or transitional housing program funded by HUD; or a financial aid administrator. Separately, HEA provides that homeless children and youth are eligible for what are collectively called the federal TRIO programs. This includes the following TRIO programs: Talent Search, Upward Bound, Student Support Services, and Educational Opportunity Centers. The TRIO programs are designed to identify potential postsecondary students from disadvantaged backgrounds, prepare these students for higher education, provide certain support services to them while they are in college, and train individuals who provide these services. HEA directs the Department of Education (ED), which administers the programs, to (as appropriate) require applicants seeking TRIO funds to identify and make services available, including mentoring, tutoring, and other services, to these youth. TRIO funds are awarded by ED on a competitive basis. In addition, HEA authorizes services for homeless youth through TRIO Student Support Services—a program intended to improve the retention and graduation rates of disadvantaged college students—that include temporary housing during breaks in the academic year. In FY2019, TRIO appropriations are $1.1 billion. Separately, HEA allows additional uses of funds through the Fund for the Improvement of Postsecondary Education (FIPSE) to establish demonstration projects that provide comprehensive support services for students who are or were homeless at age 13 or older. FIPSE is a grant program that seeks to support the implementation of innovative educational reform ideas and evaluate how well they work. As specified in the law, the projects can provide housing to the youth when housing at an educational institution is closed or unavailable to other students. FY2019 appropriations for FIPSE are $5 million. Recently emancipated foster youth are vulnerable to becoming homeless. In FY2017, nearly 20,000 youth \"aged out\" of foster care. The Chafee Foster Care Independence Program (CFCIP), created under the Chafee Foster Care Independence Act of 1999 ( P.L. 106-169 ), provides states with funding to support children and youth ages 14 to 21 who are in foster care and former foster youth ages 18 to 21 (and up to age 23 in states that extend foster care to age 21). States are authorized to receive funds based on their share of the total number of children in foster care nationwide. However, the law's \"hold harmless\" clause precludes any state from receiving less than the amount of funds it received in FY1998 or $500,000, whichever is greater. The program specifies funding for transitional living services, and as much as 30% of the funds may be dedicated to room and board. The program is funded through mandatory spending, and as such $140 million ($143 million as of FY2020) is provided for the program each year through the annual appropriations process. The Family Violence Prevention and Services Act (FVPSA), Title III of the Child Abuse Amendments of 1984 ( P.L. 98-457 ), authorized funds for Family Violence Prevention and Service grants that work to prevent family violence, improve service delivery to address family violence, and increase knowledge and understanding of family violence. From FY2007 to FY2009, one of these projects focused on runaway and homeless youth in dating violence situations through HHS's Domestic Violence/Runaway and Homeless Youth Collaboration on the Prevention of Adolescent Dating Violence initiative. The initiative was created because many runaway and homeless youth come from homes where domestic violence occurs and may be at risk of abusing their partners or becoming victims of abuse. The initiative funded eight states and community-based organizations to address the issue of teen dating violence among runaway and homeless youth. The grants funded activities such as curriculum on dating violence, small groups for teens, and a sexual assault/dating violence reduction program. The initiative resulted in an online toolkit for advocates in the runaway and homeless youth and domestic and sexual assault fields to help programs better address relationship violence with runaway and homeless youth.", "summary": "This report discusses runaway and homeless youth, and the federal response to support this population. There is no single definition of the terms \"runaway youth\" or \"homeless youth.\" However, both groups of youth share the risk of not having adequate shelter and other provisions, and may engage in harmful behaviors while away from a permanent home. Youth most often cite family conflict as the major reason for their homelessness or episodes of running away. A youth's sexual orientation, sexual activity, school problems, and substance abuse are associated with family discord. The precise number of homeless and runaway youth is unknown due to their residential mobility and overlap among the populations. The U.S. Department of Housing and Urban Development (HUD) is supporting data collection efforts, known as Voices of Youth Count, to better determine the number of homeless youth. The 2017 study found that approximately 700,000 youth ages 13 to 17 and 3.5 million young adults ages 18 to 25 experienced homelessness within a 12-month period because they were sleeping in places not meant for habitation, in shelters, or with others while lacking alternative living arrangements. From the early 20th century through the 1960s, the needs of runaway and homeless youth were handled locally through the child welfare agency, juvenile justice courts, or both. The 1970s marked a shift toward federal oversight of programs that help youth who had run afoul of the law, including those who committed status offenses (i.e., a noncriminal act that is considered a violation of the law because of the youth's age). The Runaway Youth Act of 1974 was enacted as Title III of the Juvenile Justice and Delinquency Prevention Act (P.L. 93-415) to assist runaways through services specifically for this population. The act was amended over time to include homeless youth. It authorizes funding for services carried out under the Runaway and Homeless Youth Program (RHYP), which is administered by the U.S. Department of Health and Human Services (HHS). The program was most recently authorized through FY2020 by the Juvenile Justice Reform Act of 2018 (P.L. 115-385). This law did not make other changes to the RHYP statute. Funding is discretionary, meaning provided through the appropriations process. FY2019 appropriations are $127.4 million. The RHYP program is made up of three components: the Basic Center Program (BCP), Transitional Living Program (TLP), and Street Outreach Program (SOP). The BCP provides temporary shelter, counseling, and after care services to runaway and homeless youth under age 18 and their families. In FY2017, the program served 23,288 youth, and in FY2018 it funded 280 BCP shelters (most recent figures available). The TLP is targeted to older youth ages 16 through 22 (and sometimes an older age). In FY2017, the TLP program served 3,517 youth, and in FY2018 it funded 299 grantees (most recent figures available). Youth who use the TLP receive longer-term housing with supportive services. The SOP provides education, treatment, counseling, and referrals for runaway, homeless, and street youth who have been subjected to, or are at risk of being subjected to, sexual abuse, sex exploitation, and trafficking. In FY2017, the SOP grantees made contact with 24,366 youth. The RHYP is a part of larger federal efforts to end youth homelessness through the U.S. Interagency Council on Homelessness (USICH). The USICH is a coordinating body made up of multiple federal agencies committed to addressing homelessness. The USICH's Opening Doors plan to end homelessness includes strategies for ending youth homelessness by 2020, including through collecting better data and supporting evidence-based practices to improve youth outcomes. Voices of Youth Count is continuing to report on characteristics of homeless youth. In addition to the RHYP, there are other federal supports to address youth homelessness. HUD's Youth Homelessness Demonstration Program is funding a range of housing options for youth, in selected urban and rural communities. Other federal programs have enabled homeless youth to access services, including those related to education and family violence.", "document_type": "crs"}
{"report": "The issue of executive discretion has been at the center of constitutional debates in liberal democracies throughout the twentieth century. How to balance a commitment to the rule of law with the exigencies of modern political and economic crises has engaged legislators and scholars in the United States and around the world. The United States Constitution is silent on questions of emergency power. As such, over the past two centuries, Congress and the President have answered those questions in varied and often ad hoc ways. In the eighteenth and nineteenth centuries, the answer was often for the President to act without congressional approval in a time of crisis, knowingly risking impeachment and personal civil liability. Congress claimed primacy over emergency action and would decide subsequently to either ratify the President's actions or indemnify the President for any civil liability. By the twentieth century, a new pattern had begun to emerge. Instead of retroactively judging an executive's extraordinary actions in a time of emergency, Congress created statutory bases permitting the President to declare a state of emergency and make use of extraordinary delegated powers. The expanding delegation of emergency powers to the executive and the increase of governing via emergency power by the executive has been a common trajectory among twentieth-century liberal democracies. As innovation has quickened the pace of social change and global crises, some legislatures have felt compelled to delegate to the executive, who traditional political theorists assumed could operate with greater \"dispatch\" than deliberate, future-oriented legislatures. Whether such actions subvert the rule of law or are a standard feature of healthy modern constitutional orders has been a subject of extensive debate. The International Emergency Economic Powers Act (IEEPA) is one such example of a twentieth-century delegation of emergency authority. One of 123 emergency statutes under the umbrella of the National Emergencies Act (NEA), IEEPA grants the President extensive power to regulate a variety of economic transactions during a state of emergency. Congress enacted IEEPA in 1977 to rein in the expansive emergency economic powers that it had been delegated to the President under the Trading with the Enemy Act (TWEA). Nevertheless, some scholars argue that judicial and legislative actions subsequent to IEEPA's enactment have made it, like TWEA, a source of expansive and unchecked executive authority in the economic realm. Others, however, argue that Presidents often use IEEPA to implement the will of Congress either as directed by law or as encouraged by congressional activity. Until recently, there has been little congressional discussion of modifying either IEEPA or its umbrella statute, the NEA. Recent presidential actions, however, have drawn attention to presidential emergency powers under the NEA of which IEEPA is the most frequently used. Should Congress consider changing IEEPA, there are two issues that Congress may wish to address. The first pertains to how Congress has delegated its authority under IEEPA and its umbrella statute, the NEA. The second pertains to choices made in the Export Control Reform Act of 2018. The First World War (1914-1918) saw an unprecedented degree of economic mobilization. The executive departments of European governments began to regulate their economies with or without the support of their legislatures. The United States, in contrast, was in a privileged position relative to its allies in Europe. Separated by an ocean from Germany and Austria-Hungary, the United States was never under substantial threat of invasion. Rather than relying on the inherent powers of the presidency, or acting unconstitutionally and waiting for congressional ratification, President Wilson sought explicit pre-authorization for expansive new powers to meet the global crisis. Between 1916 and the end of 1917, Congress passed 22 statutes empowering the President to take control of private property for public use during the war. These statutes gave the President broad authority to control railroads, shipyards, cars, telegraph and telephone systems, water systems, and many other sectors of the American economy. TWEA was one of those 22 statutes. It granted to the executive an extraordinary degree of control over international trade, investment, migration, and communications between the United States and its enemies. TWEA defined \"enemy\" broadly and included \"any individual, partnership, or other body of individuals [including corporations], of any nationality, resident within the territory ... of any nation with which the United States is at war, or resident outside of the United States and doing business within such a territory ....\" The first four sections of the act granted the President extensive powers to limit trading or communication with, or transporting enemies (or their allies) of the United States. These sections also empowered the President to censor foreign communications and place extensive restrictions on enemy insurance or reinsurance companies. It was Section 5(b) of TWEA, however, that would form one of the central bases of presidential emergency economic power in the twentieth century. Section 5(b), as originally enacted, states: That the President may investigate, regulate, or prohibit, under such rules and regulations as he may prescribe, by means of licenses or otherwise, any transactions in foreign exchange, export or earmarkings of gold or silver coin or bullion or currency, transfers of credit in any form (other than credits relating solely to transactions to be executed wholly within the United States), and transfers of evidences of indebtedness or of the ownership of property between the United States and any foreign country, whether enemy, ally of enemy or otherwise, or between residents of one or more foreign countries, by any person within the United States; and he may require any such person engaged in any such transaction to furnish, under oath, complete information relative thereto, including the production of any books of account, contracts, letters or other papers, in connection therewith in the custody or control of such person, either before or after such transaction is completed. The statute gave the President exceptional control over private international economic transactions in times of war. While Congress terminated many of the war powers in 1921, TWEA was specifically exempted because the U.S. Government had yet to dispose of a large amount of alien property in its custody. The Great Depression, a massive global economic downturn that began in 1929, presented a challenge to liberal democracies in Europe and the Americas. To deal with the complexities presented by the crisis, nearly all such democracies began delegating discretionary authority to their executives to a degree that had only previously been done in times of war. The U.S. Congress responded, in part, by dramatically expanding the scope of TWEA, delegating to the President the power to declare states of emergency in peacetime and assume expansive domestic economic powers. Such a delegation was made possible by analogizing economic crises to war. In public speeches about the crisis, President Franklin D. Roosevelt asserted that the Depression was to be \"attacked,\" \"fought against,\" \"mobilized for,\" and \"combatted\" by \"great arm[ies] of people.\" The economic mobilization of the First World War had blurred the lines between the executive's military and economic powers. As the Depression was likened to \"armed strife\" and declared to be \"an emergency more serious than war\" by a Justice of the Supreme Court, it became routine to use emergency economic legislation enacted in wartime as the basis for extraordinary economic authority in peacetime. As the Depression entered its third year, the newly-elected President Roosevelt sought from Congress \"broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.\" In his first act as President, Roosevelt proclaimed a bank holiday, suspending all transactions at all banking institutions located in the United States and its territories for four days. In his proclamation, Roosevelt claimed to have authority to declare the holiday under Section 5(b) of TWEA. However, because the United States was not in a state of war and the suspended transactions were primarily domestic, the President's authority to issue such an order was dubious. Despite the tenuous legality, Congress ratified Roosevelt's actions by passing the Emergency Banking Relief Act three days after his proclamation. The act amended Section 5(b) of TWEA to read: During time of war or during any other period of national emergency declared by the President , the President may, through any agency that he may designate, or otherwise, investigate, regulate, or prohibit.... This amendment gave the President the authority to declare that a national emergency existed and assume extensive controls over the national economy previously only available in times of war. By 1934, Roosevelt had used these extensive new powers to regulate \"Every transaction in foreign exchange, transfer of credit between any banking institution within the United States and any banking institution outside of the United States.\" With America's entry into the Second World War in 1941, Congress again amended TWEA to grant the President extensive powers over the disposition of private property, adding the so-called \"vesting\" power, which authorized the permanent seizure of property. Now in its most expansive form, TWEA authorized the President to declare a national emergency and, in so doing, to regulate foreign exchange, domestic banking, possession of precious metals, and property in which any foreign country or foreign national had an interest. The Second World War ended in 1945. Following the conflict, the allied powers constructed institutions and signed agreements designed to keep the peace and to liberalize world trade. However, the United States did not immediately resume a peacetime posture with respect to emergency powers. Instead, the onset of the Cold War rationalized the continued use of TWEA and other emergency powers outside the context of a declared war. Over the next several decades, Presidents declared four national emergencies under Section 5(b) of TWEA and assumed expansive authority over economic transactions in the postwar period. During the Cold War, economic sanctions became an increasingly popular foreign policy and national security tool, and TWEA was a prominent source of presidential authority to use the tool. In 1950, President Harry S. Truman declared a national emergency, citing TWEA, to impose economic sanctions on North Korea and China. Subsequent Presidents referenced that national emergency as authority for imposing sanctions on Vietnam, Cuba, and Cambodia. Truman likewise used Section 5(b) of TWEA to maintain regulations on foreign exchange, transfers of credit, and the export of coin and currency that had been in place since the early 1930s. Presidents Richard M. Nixon and Gerald R. Ford invoked TWEA to continue export controls established under the Export Administration Act when the act expired. TWEA was also a prominent instrument of postwar presidential monetary policy. Presidents Dwight D. Eisenhower and John F. Kennedy used TWEA and the national emergency declared by President Roosevelt in 1933 to maintain and modify regulations controlling the hoarding and export of gold. In 1968, President Lyndon B. Johnson explicitly used Truman's 1950 declaration of emergency under Section 5(b) of TWEA to limit direct foreign investment by U.S. companies in an effort to strengthen the balance of payments position of the United States after the devaluation of the pound sterling by the United Kingdom. In 1971, after President Nixon ended the convertibility of the U.S. dollar to gold, effectively ending the postwar monetary order, he made use of Section 5(b) of TWEA to declare a state of emergency and place a 10% ad valorem supplemental duty on all dutiable goods entering the United States. The reliance by the executive on the powers granted by Section 5(b) of TWEA meant that postwar sanctions regimes and significant parts of U.S. international monetary policy relied on continued states of emergency for their operation. By the mid-1970s, in the wake of U.S. military involvement in Vietnam, revelations of domestic spying, assassinations of foreign political leaders, the Watergate break-in, and other related abuses of power, Congress increasingly focused on checking the executive branch. The Senate formed a bipartisan special committee chaired by Senators Frank Church and Charles Mathias to reevaluate the expansive delegations of emergency authority to the President. The special committee issued a report surveying the President's emergency powers in which it asserted that the United States had technically \"been in a state of national emergency since March 9, 1933\" and that there were four distinct declarations of national emergency in effect. The report also noted that the United States had \"on the books at least 470 significant emergency statutes without time limitations delegating to the Executive extensive discretionary powers, ordinarily exercised by the Legislature, which affect the lives of American citizens in a host of all-encompassing ways.\" In the course of its investigations, Senator Mathias, committee co-chair, noted, \"A majority of the people of the United States have lived all of their lives under emergency government.\" Senator Church, the other co-chair, said the central question before the committee was \"whether it [was] possible for a democratic government such as ours to exist under its present Constitution and system of three separate branches equal in power under a continued state of emergency.\" Among the more controversial statutes highlighted by the committee was TWEA. In 1977, during the House markup of a bill revising TWEA, Representative Jonathan Bingham, Chairperson of the House International Relations Committee's Subcommittee on Economic Policy, described TWEA as conferring \"on the President what could have been dictatorial powers that he could have used without any restraint by Congress.\" According to the Department of Justice, TWEA granted the President four major groups of powers in a time of war or other national emergency: (a) Regulatory powers with respect to foreign exchange, banking transfers, coin, bullion, currency, and securities; (b) Regulatory powers with respect to \"any property in which any foreign country or a national thereof has any interest\"; (c) The power to vest \"any property or interest of any foreign country or national thereof\"; and (d) The powers to hold, use, administer, liquidate, sell, or otherwise deal with \"such interest or property\" in the interest of and for the benefit of the United States. The House report on the reform legislation called TWEA \"essentially an unlimited grant of authority for the President to exercise, at his discretion, broad powers in both the domestic and international economic arena, without congressional review.\" The criticisms of TWEA centered on the following: (a) It required no consultation or reports to Congress with regard to the use of powers or the declaration of a national emergency. (b) It set no time limits on a state of emergency, no mechanism for congressional review, and no way for Congress to terminate it. (c) It stated no limits on the scope of TWEA's economic powers and the circumstances under which such authority could be used. (d) The actions taken under the authority of TWEA were rarely related to the circumstances in which the national emergency was declared. In testimony before the House Committee on International Relations, Professor Harold G. Maier summed up the development and the main criticisms of TWEA: Section 5(b)'s effect is no longer confined to \"emergency situations\" in the sense of existing imminent danger. The continuing retroactive approval, either explicit or implicit, by Congress of broad executive interpretations of the scope of powers which it confers has converted the section into a general grant of legislative authority to the President…\" Congress's reforms to emergency powers under TWEA came in two acts. First, Congress enacted the National Emergencies Act (NEA) in 1976. The NEA provided for the termination of all existing emergencies in 1978, except those making use of Section 5(b) of TWEA, and placed new restrictions on the manner of declaring and the duration of new states of emergency, including: Requiring the President to immediately transmit to Congress of the declaration of national emergency. Requiring a biannual review whereby \"each House of Congress shall meet to consider a vote on a concurrent [now joint, see below] resolution to determine whether that emergency shall be terminated.\" Authorizing Congress to terminate the national emergency through a privileged concurrent [now joint] resolution. Second, Congress tackled the thornier question of TWEA. Because the authorities granted by TWEA were heavily entwined with postwar international monetary policy and the use of sanctions in U.S. foreign policy, unwinding it was a difficult undertaking. The exclusion of Section 5(b) reflected congressional interest in preserving existing regulations regarding foreign assets, foreign funds, and exports of strategic goods. Similarly, establishing a means to continue existing uses of TWEA reflected congressional interest in \"improving future use rather than remedying past abuses.\" The subcommittee charged with reforming TWEA spent more than a year preparing reports, including the first complete legislative history of TWEA, a tome that ran nearly 700 pages. In the resulting legislation, Congress did three things. First, Congress amended TWEA so that it was, as originally intended, only applicable \"during a time of war.\" Second, Congress expanded the Export Administration Act to include powers that previously were authorized by reference to Section 5(b) of TWEA. Finally, Congress wrote the International Emergency Economic Powers Act (IEEPA) to confer \"upon the President a new set of authorities for use in time of national emergency which are both more limited in scope than those of section 5(b) and subject to procedural limitations, including those of the [NEA].\" The Report of the House Committee on International Relations summed up the nature of an \"emergency\" in their \"new approach\" to international emergency economic powers: [G]iven the breadth of the authorities, and their availability at the President's discretion upon a declaration of a national emergency, their exercise should be subject to various substantive restrictions. The main one stems from a recognition that emergencies are by their nature rare and brief, and are not to be equated with normal ongoing problems. A national emergency should be declared and emergency authorities employed only with respect to a specific set of circumstances which constitute a real emergency, and for no other purpose. The emergency should be terminated in a timely manner when the factual state of emergency is over and not continued in effect for use in other circumstances. A state of national emergency should not be a normal state of affairs. IEEPA, as currently amended, empowers the president to: (A) investigate, regulate, or prohibit: (i) any transactions in foreign exchange, (ii) transfers of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or national thereof, (iii) the importing or exporting of currencies or securities; and (B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States. (C) when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals, confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that he determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest, when, as, and upon the terms directed by the President, in such agency or person as the President may designate from time to time, and upon such terms and conditions as the President may prescribe, such interest or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes. These powers may be exercised \"to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.\" Presidents may invoke IEEPA under the procedures set forth in the NEA. When declaring a national emergency, the NEA requires that the President \"immediately\" transmit the proclamation declaring the emergency to Congress and publish it in the Federal Register . The President must also specify the provisions of law that he or she intends to use. In addition to the requirements of the NEA, IEEPA provides several further restrictions. Preliminarily, IEEPA requires that the President consult with Congress \"in every possible instance\" before exercising any of the authorities granted under IEEPA. Once the President declares a national emergency invoking IEEPA, he or she must immediately transmit a report to Congress specifying: (1) the circumstances which necessitate such exercise of authority; (2) why the President believes those circumstances constitute an unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States; (3) the authorities to be exercised and the actions to be taken in the exercise of those authorities to deal with those circumstances; (4) why the President believes such actions are necessary to deal with those circumstances; and (5) any foreign countries with respect to which such actions are to be taken and why such actions are to be taken with respect to those countries. The President subsequently is to report on the actions taken under the IEEPA at least once in every succeeding six-month interval that the authorities are exercised. As per the NEA, the emergency may be terminated by the President, by a privileged joint resolution of Congress, or automatically if the President does not publish in the Federal Register and transmit to Congress a notice stating that such emergency is to continue in effect after such anniversary. Congress has amended IEEPA eight times ( Table 1 ). Five of the eight amendments have altered civil and criminal penalties for violations of orders issued under the statute. Other amendments excluded certain informational materials and expanded IEEPA's scope following the terrorist attacks of September 11, 2001. Congress also amended the NEA in response to a ruling by the Supreme Court to require a joint rather than a concurrent resolution to terminate a national emergency. As originally enacted, IEEPA protected the rights of U.S. persons to participate in the exchange of \"any postal, telegraphic, telephonic, or other personal communication, which does not involve a transfer of anything of value\" with a foreign person otherwise subject to sanctions. Amendments in 1988 and 1994 updated this list of protected rights to include the exchange of published information in a variety of formats. The act currently protects the exchange of \"information or informational materials, including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds,\" provided such exchange is not otherwise controlled for national security or foreign policy reasons related to weapons proliferation or international terrorism. Unlike the Trading with the Enemy Act (TWEA), IEEPA did not allow the President to vest assets as originally acted. In 2001, at the request of George W. Bush Administration, Congress amended IEEPA as part of the USA PATRIOT Act to return to the President the authority to vest frozen assets, but only under certain circumstances: ... the President may ... when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals, confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that [the President] determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest, when, as, and upon the terms directed by the President, in such agency or person as the President may designate from time to time, and upon such terms and conditions as the President may prescribe, such interest or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes. Speaking about the efforts of intelligence and law enforcement agencies to identify and disrupt the flow of terrorist finances, Attorney General John Ashcroft told Congress: At present the President's powers are limited to freezing assets and blocking transactions with terrorist organizations. We need the capacity for more than a freeze. We must be able to seize. Doing business with terrorist organization must be a losing proposition. Terrorist financiers must pay a price for their support of terrorism, which kills innocent Americans. Consistent with the President's [issuance of E.O. 13224 ] and his statements [of September 24, 2001], our proposal gives law enforcement the ability to seize the terrorists' assets. Further, criminal liability is imposed on those who knowingly engage in financial transactions, money-laundering involving the proceeds of terrorist acts. The House Judiciary Committee report explaining the amendments described its purpose as follows: Section 203 of the International Emergency Economic Powers Act (50 U.S.C. § 1702) grants to the President the power to exercise certain authorities relating to commerce with foreign nations upon his determination that there exists an unusual and extraordinary threat to the United States. Under this authority, the President may, among other things, freeze certain foreign assets within the jurisdiction of the United States. A separate law, the Trading With the Enemy Act, authorizes the President to take title to enemy assets when Congress has declared war. Section 159 of this bill amends section 203 of the International Emergency Economic Powers Act to provide the President with authority similar to what he currently has under the Trading With the Enemy Act in circumstances where there has been an armed attack on the United States, or where Congress has enacted a law authorizing the President to use armed force against a foreign country, foreign organization, or foreign national. The proceeds of any foreign assets to which the President takes title under this authority must be placed in a segregated account can only be used in accordance with a statute authorizing the expenditure of such proceeds. Section 159 also makes a number of clarifying and technical changes to section 203 of the International Emergency Economic Powers Act, most of which will not change the way that provision currently is implemented. The government has apparently never employed the vesting power to seize Al Qaeda assets within the United States. Instead, the government has sought to confiscate them through forfeiture procedures. The first, and to date, apparently only, use of this power under IEEPA occurred on March 20, 2003. On that date, in Executive Order 13290, President George W. Bush ordered the blocked \"property of the Government of Iraq and its agencies, instrumentalities, or controlled entities\" to be vested \"in the Department of the Treasury.... [to] be used to assist the Iraqi people and to assist in the reconstruction of Iraq.\" However, the President's order excluded from confiscation Iraq's diplomatic and consular property, as well as assets that had, prior to March 20, 2003, been ordered attached in satisfaction of judgments against Iraq rendered pursuant to the terrorist suit provision of the Foreign Sovereign Immunities Act and § 201 of the Terrorism Risk Insurance Act (which reportedly totaled about $300 million) . A subsequent executive order blocked the property of former Iraqi officials and their families, vesting title of such blocked funds in the Department of the Treasury for transfer to the Development Fund for Iraq (DFI) to be \"used to meet the humanitarian needs of the Iraqi people, for the economic reconstruction and repair of Iraq's infrastructure, for the continued disarmament of Iraq, for the cost of Iraqi civilian administration, and for other purposes benefitting of the Iraqi people.\" The DFI was established by UN Security Council Resolution 1483, which required member states to freeze all assets of the former Iraqi government and of Saddam Hussein, senior officials of his regime and their family members, and transfer such assets to the DFI, which was then administered by the United States. Most of the vested assets were used by the Coalition Provision Authority (CPA) for reconstruction projects and ministry operations. The USA PATRIOT Act made three other amendments to Section 203 of IEEPA. After the power to investigate, it added the power to block assets during the pendency of an investigation. It clarified that the type of interest in property subject to IEEPA is an \"interest by any person, or with respect to any property, subject to the jurisdiction of the United States.\" It also added subsection (c), which provides: In any judicial review of a determination made under this section, if the determination was based on classified information (as defined in section 1(a) of the Classified Information Procedures Act) such information may be submitted to the reviewing court ex parte and in camera. This subsection does not confer or imply any right to judicial review. As described in the House Judiciary Committee report, these provisions were meant to clarify and codify existing practices. Like TWEA prior to its amendment in 1977, the President and Congress together have often turned to IEEPA to impose economic sanctions in furtherance of U.S. foreign policy and national security objectives. While initially enacted to rein in presidential emergency authority, presidential emergency use of IEEPA has expanded in scale, scope, and frequency since the statute's enactment. The House report on IEEPA stated, \"emergencies are by their nature rare and brief, and are not to be equated with normal, ongoing problems.\" National emergencies invoking IEEPA, however, have increased in frequency and length since its enactment. Since 1977, Presidents have invoked IEEPA in 54 declarations of national emergency. On average, these emergencies last nearly a decade. Most emergencies have been geographically specific, targeting a specific country or government. However, since 1990, Presidents have declared non-geographically-specific emergencies in response to issues like weapons proliferation, global terrorism, and malicious cyber-enabled activities. The erosion of geographic limitations has been accompanied by an expansion in the nature of the targets of sanctions issued under IEEPA authority. Originally, IEEPA was used to target foreign governments; however, Presidents have increasingly targeted groups and individuals. While Presidents usually make use of IEEPA as an emergency power, Congress has also directed the use of IEEPA or expressed its approval of presidential emergency use in several statutes. IEEPA is the most frequently cited emergency authority when the President invokes NEA authorities to declare a national emergency. ( Figure 1 ). Rather than referencing the same set of emergencies, as had been the case with TWEA, IEEPA has required the President to declare a national emergency for each independent use. As a result, the number of national emergencies declared under the terms of the NEA has proliferated over the past four decades. Presidents declared only four national emergencies under the auspices of TWEA in the four decades prior to IEEPA's enactment. In contrast, Presidents have invoked IEEPA in 54 of the 61 declarations of national emergency issued under the National Emergen cies Act. As of March 1, 2019, there were 32 ongoing national emergencies; all but three involved IEEPA. Each year since 1990, Presidents have issued roughly 4.5 executive orders citing IEEPA and declared 1.5 new national emergencies citing IEEPA. ( Figure 2 ). On average, emergencies invoking IEEPA last nearly a decade. The longest emergency was also the first. President Jimmy Carter, in response to the Iranian hostage crisis of 1979, declared the first national emergency under the provisions of the National Emergencies Act and invoked IEEPA. Six successive Presidents have renewed that emergency annually for nearly forty years. As of March 1, 2019, that emergency is still in effect, largely to provide a legal basis for resolving matters of ownership of the Shah's disputed assets. That initial emergency aside, the length of emergencies invoking IEEPA has increased each decade. The average length of an emergency invoking IEEPA declared in the 1980s was four years. That average extended to 10 years for emergencies declared in the 1990s and 11 years for emergencies declared in the 2000s ( Figure 3 ). As such, the number of ongoing national emergencies has grown nearly continuously since the enactment of IEEPA and the NEA ( Figure 4 ). Between January 1, 1979, and January 1, 2019, there were on average 14 ongoing national emergencies each year, 13 of which invoked IEEPA. In most cases, the declared emergencies citing IEEPA have been geographically specific ( Figure 5 ). For example, in the first use of IEEPA, President Jimmy Carter issued an executive order that both declared a national emergency with respect to the \"situation in Iran\" and \"blocked all property and interests in property of the Government of Iran [...].\" Five months later, President Carter issued a second order dramatically expanding the scope of the first EO and effectively blocked the transfer of all goods, money, or credit destined for Iran by anyone subject to the jurisdiction of the United States. A further order expanded the coverage to block imports to the United States from Iran. Together, these orders touched upon virtually all economic contacts between any place or legal person subject to the jurisdiction of the United States and the territory and government of Iran. Many of the executive orders invoking IEEPA have followed this pattern of limiting the scope to a specific territory, government, or its nationals. Executive Order 12513, for example, prohibited \"imports into the United States of goods and services of Nicaraguan origin\" and \"exports from the United States of goods to or destined for Nicaragua.\" The order likewise prohibited Nicaraguan air carriers and vessels of Nicaraguan registry from entering U.S. ports. Executive Order 12532 prohibited various transactions with the \"Government of South Africa or to entities owned or controlled by that Government.\" While the majority (38) of national emergencies invoking IEEPA have been geographically specific, ten have lacked explicit geographic limitations. President George H.W. Bush declared the first geographically nonspecific emergency in response to the threat posed by the proliferation of chemical and biological weapons. Similarly, President George W. Bush declared a national emergency in response to the threat posed by \"persons who commit, threaten to commit, or support terrorism.\" President Barack Obama declared emergencies to respond to the threats of \"transnational criminal organizations\" and \"persons engaging in malicious cyber-enabled activities.\" Without explicit geographic limitations, these orders have included provisions that are global in scope. These geographically nonspecific emergencies have increased in frequency over the past 40 years—three of the ten have been declared since 2015. In addition to the erosion of geographic limitations, the stated motivations for declaring national emergencies have expanded in scope as well. Initially, stated rationales for declarations of national emergency citing IEEPA were short and often referenced either a specific geography or the specific actions of a government. Presidents found that circumstances like \"the situation in Iran,\" or the \"policies and actions of the Government of Nicaragua,\" constituted \"unusual and extraordinary threat[s] to the national security and foreign policy of the United States\" and would therefore declare a national emergency. The stated rationales have, however, expanded over time in both the length and subject matter. Presidents have increasingly declared national emergencies, in part, to respond to human and civil rights abuses, slavery, denial of religious freedom, political repression, public corruption, and the undermining of democratic processes. While the first reference to human rights violations as a rationale for a declaration of national emergency came in 1985, most of such references have come in the past twenty years. Table A-2 . Presidents have also expanded the nature of the targets of IEEPA sanctions. Originally, the targets of sanctions issued under IEEPA were foreign governments. The first use of IEEPA targeted \"Iranian Government Property.\" Use of IEEPA quickly expanded to target geographically defined regions. Nevertheless, Presidents have also increasingly targeted groups, such as political parties or terrorist organizations, and individuals, such as supporters of terrorism or suspected narcotics traffickers. The first instances of orders directed at groups or persons were limited to foreign groups or persons. For example, in Executive Order 12978, President Bill Clinton targeted specific \"foreign persons\" and \"persons determined [...] to be owned or controlled by, or to act for or on behalf of\" such foreign persons. An excerpt is included below: Except to the extent provided in section 203(b) of IEEPA (50 U.S.C. 1702(b)) and in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date, I hereby order blocked all property and interests in property that are or hereafter come within the United States, or that are or hereafter come within the possession or control of United States persons, of: (a) the foreign persons listed in the Annex to this order; (b)  foreign persons determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State: (i) to play a significant role in international narcotics trafficking centered in Colombia; or (ii) materially to assist in, or provide financial or technological support for or goods or services in support of, the narcotics trafficking activities of persons designated in or pursuant to this order; and (c) persons determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, to be owned or controlled by, or to act for or on behalf of, persons designated in or pursuant to this order. However, in 2001, President George W. Bush issued Executive Order 13219 to target \"persons who threaten international stabilization efforts in the Western Balkans.\" While the order was similar to that of Executive Order 12978, it removed the qualifier \"foreign.\" As such, persons in the United States, including U.S. citizens, could be targets of the order. The following is an excerpt of the order: Except to the extent provided in section 203(b)(1), (3), and (4) of IEEPA (50 U.S.C. 1702(b)(1), (3), and (4)), the Trade Sanctions Reform and Export Enhancement Act of 2000 (title IX, P.L. 106-387 ), and in regulations, orders, directives, or licenses that may hereafter be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date, all property and interests in property of: (i)  the persons listed in the Annex to this order; and (ii)  persons designated by the Secretary of the Treasury, in consultation with the Secretary of State, because they are found: (A) to have committed, or to pose a significant risk of committing, acts of violence... Several subsequent invocations of IEEPA have similarly not been limited to foreign targets. In sum, presidential emergency use of IEEPA was directed at foreign states initially, with targets that were delimited by geography or nationality. Since the 1990s, however, Presidents have expanded the scope of their declarations to include individual persons, regardless of nationality or geographic location, who are engaged in specific activities. While IEEPA is often categorized as an emergency statute, Congress has used IEEPA outside of the context of national emergencies. When Congress legislates sanctions, it often authorizes or directs the President to use IEEPA authorities to impose those sanctions. In the Nicaragua Human Rights and Anticorruption Act of 2018, the most recent example, Congress directed the President to exercise \"all powers granted to the President [by IEEPA] to the extent necessary to block and prohibit [certain transactions].\" Penalties for violations by a person of a measure imposed by the President under the Act would be, likewise, determined by reference to IEEPA. The trend has been long-term. Congress first directed the President to make use of IEEPA authorities in 1986 as part of an effort to assist Haiti in the recovery of assets illegally diverted by its former government. That statute provided: The President shall exercise the authorities granted by section 203 of the International Emergency Economic Powers Act [50 USC 1702] to assist the Government of Haiti in its efforts to recover, through legal proceedings, assets which the Government of Haiti alleges were stolen by former president-for-life Jean Claude Duvalier and other individuals associated with the Duvalier regime. This subsection shall be deemed to satisfy the requirements of section 202 of that Act. [50 USC 1701] In directing the President to use IEEPA, Congress waived the requirement that he declare a national emergency (and none was declared). Subsequent legislation has followed this general pattern, with slight variations in language and specificity. The following is an example of current legislative language that has appeared in several recent statutes: (a) IN GENERAL.—The President shall impose the sanctions described in subsection (b) with respect to— ... (b) SANCTIONS DESCRIBED.— (1) IN GENERAL.—The sanctions described in this subsection are the following: (A) ASSET BLOCKING.—The exercise of all powers granted to the President by the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) to the extent necessary to block and prohibit all transactions in all property and interests in property of a person determined by the President to be subject to subsection (a) if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person. ... (2) PENALTIES.—A person that violates, attempts to violate, conspires to violate, or causes a violation of paragraph (1)(A) or any regulation, license, or order issued to carry out paragraph (1)(A) shall be subject to the penalties set forth in subsections (b) and (c) of section 206 of the International Emergency Economic Powers Act (50 U.S.C. 1705) to the same extent as a person that commits an unlawful act described in subsection (a) of that section. Congress has also expressed, retroactively, its approval of unilateral presidential invocations of IEEPA in the context of a national emergency. In the Countering Iran's Destabilizing Activities Act of 2017, for example, Congress declared, \"It is the sense of Congress that the Secretary of the Treasury and the Secretary of State should continue to implement Executive Order No. 13382.\" Presidents, however, have also used IEEPA to preempt or modify parallel congressional activity. On September 9, 1985, President Reagan, finding \"that the policies and actions of the Government of South Africa constitute an unusual and extraordinary threat to the foreign policy and economy of the United States,\" declared a national emergency and limited transactions with South Africa. The President declared the emergency despite the fact that legislation limiting transactions with South Africa was quickly making its way through Congress. In remarks about the declaration, President Reagan stated that he had been opposed to the bill contemplated by Congress because unspecified provisions \"would have harmed the very people [the U.S. was] trying to help.\" Nevertheless, members of the press at the time (and at least one scholar since) noted that the limitations imposed by the Executive Order and the provisions in legislation then winding its way through Congress were \"substantially similar.\" In general, IEEPA has served as an integral part of the postwar international sanctions regime. The President, either through a declaration of emergency or via statutory direction, has used IEEPA to limit economic transactions in support of administrative and congressional national security and foreign policy goals. Much of the action taken pursuant to IEEPA has involved blocking transactions and freezing assets. Once the President declares that a national emergency exists, he may use the authority in Section 203 of IEEPA (Grants of Authorities; 50 U.S.C. § 1702) to investigate, regulate, or prohibit foreign exchange transactions, transfers of credit, transfers of securities, payments, and may take specified actions relating to property in which a foreign country or person has interest—freezing assets, blocking property and interests in property, prohibiting U.S. persons from entering into transactions related to frozen assets and blocked property, and in some instances denying entry into the United States. Pursuant to Section 203, Presidents have prohibited transactions with and blocked property of those designated as engaging in malicious cyber-enabled activities, including \"interfering with or undermining election processes or institutions\" [Executive Order 13694 of April 1, 2015, as amended; 50 U.S.C. § 1701 note. See also Executive Order 13848 of September 12, 2018; 83 F.R. 46843.]; prohibited transactions with and blocked property of those designated as illicit narcotics traffickers including foreign drug kingpins; prohibited transactions with and blocked property of those designated as engaging in human rights abuses or significant corruption; prohibited transactions related to illicit trade in rough diamonds; prohibited transactions with and blocked property of those designated as Transnational Criminal Organizations; prohibited transactions with \"those who disrupt the Middle East peace process;\" prohibited transactions related to overflights with certain nations; instituted and maintained maritime restrictions; prohibited transactions related to weapons of mass destruction, in coordination with export controls authorized by the Arms Export Control Act and the Export Administration Act of 1979, and in furtherance of efforts to deter the weapons programs of specific countries (i.e., Iran, North Korea); prohibited transactions those designated as \"persons who commit, threaten to commit, or support terrorism;\" maintained the dual-use export control system at times when its then-underlying authority, the Export Administration Act authority had lapsed; blocked property of and transactions with those designated as engaged in cyber activities that compromise critical infrastructures including election processes or the private sector's trade secrets; blocked property of and prohibited transactions with those designated as responsible for serious human rights abuse or engaged in corruption; blocked certain property of and transactions with foreign nationals of specific countries those designated as engaged in activities that constitute an extraordinary threat. No President has used IEEPA to place tariffs on imported products from a specific country or on products imported to the United States in general. However, IEEPA's similarity to TWEA, coupled with its relatively frequent use to ban imports and exports, suggests that such an action could happen. In addition, no President has used IEEPA to enact a policy that was primarily domestic in effect. Some scholars argue, however, that the interconnectedness of the global economy means it would probably be permissible to use IEEPA to take an action that was primarily domestic in effect. The ultimate disposition of assets frozen under IEEPA may serve as an important part of the leverage economic sanctions provide to influence the behavior of foreign actors. The President and Congress have each at times determined the fate of blocked assets to further foreign policy goals. Presidents have used frozen assets as a bargaining tool during foreign policy crises and to bring a resolution to such crises, at times by unfreezing the assets, returning them to the sanctioned entity or channeling them to a follow-on government. The following are some examples of how Presidents have made use of blocked assets to resolve foreign policy issues. President Carter invoked authority under IEEPA to impose trade sanctions against Iran, freezing Iranian assets in the United States, in response to the hostage crisis in 1979. On January 19, 1981, the United States and Iran entered into a series of executive agreements brokered by Algeria under which the hostages were freed, a portion of the blocked assets ($5.1 billion) was used to repay outstanding U.S. bank loans to Iran, another part ($2.8 billion) was returned directly to Iran, another $1 billion was transferred into a security account in the Hague to pay other U.S. claims against Iran as arbitrated by the Iran-U.S. Claims Tribunal (IUSCT), and an additional $2 billion remained blocked pending further agreement with Iran or decision of the Tribunal. The United States also undertook to freeze the assets of the former Shah's estate along with those of the Shah's close relatives pending litigation in U.S. courts to ascertain Iran's right to their return. Iran's litigation was unsuccessful, and none of the contested assets were returned to Iran. Presidents have also been able to channel frozen assets to opposition governments in cases where the United States continued to recognize a previous government that had been removed by coup d'état or otherwise replaced as the legitimate government of a country. For example, after Panamanian President Eric Arturo Delvalle tried to dismiss de facto military ruler General Manuel Noriega from his post as head of the Panamanian Defense Forces, which resulted in Delvalle's own dismissal by the Panamanian Legislative Assembly, President Reagan recognized Delvalle as the legitimate head of government and instituted economic sanctions against the Noriega regime. The Department of State advised U.S. banks not to disburse funds to the Noriega regime, and Delvalle was able to obtain court orders permitting him access to the funds. President Reagan issued Executive Order 12635, which blocked all property and interests in payments of the government of Panama, and the Department of the Treasury issued regulations requiring companies who owed money to Panama to pay those funds into an escrow account established at the Federal Reserve Bank of New York, which also held payments owed by the United States for the operation of the Panama Canal Commission. Some of the funds in the escrow account were used to pay the operating expenses of the Delvalle government. After the U.S. invasion of Panama, President George H.W. Bush lifted economic sanctions and used some of the frozen funds to repay debts owed by Panama to foreign creditors, with remaining funds returned to the successor government. In a similar more recent case, the Trump Administration's recognition of Venezuelan opposition leader Juan Guaidó as Venezuela's interim president permitted Guaidó access to Venezuelan government assets held at the United States Federal Reserve and other insured United States financial institutions. President Barrack Obama initially froze Venezuelan government assets in 2015, pursuant to IEEPA and the Venezuela Defense of Human Rights and Civil Society Act of 2014. After official recognition of Guaidó, the Trump Administration imposed new sanctions under IEEPA to freeze the assets of the main Venezuelan state-owned oil company, Petróleos de Venezuela (Pdvsa), which could both significantly reduce funds available to the regime of Nicolas Maduro and channel them to Guaidó. There is also precedent for using frozen foreign assets for purposes authorized by the U.N. Security Council. After the first war with Iraq, President George H.W. Bush ordered the transfer of frozen Iraqi assets derived from the sale of Iraqi petroleum held by U.S. banks to be transferred to a holding account in the Federal Reserve Bank of New York to fulfill \"the rights and obligations of the United States under U.N. Security Council Resolution No. 778.\" The President cited a section of the United Nations Participation Act (UNPA), as well as IEEPA, as authority to take the action. The transferred funds were used to provide humanitarian relief and to finance the United Nations Compensation Commission, which was established to adjudicate claims against Iraq arising from the invasion. Other Iraqi assets remained frozen and accumulated interest until they were vested in 2003 (see below). In some cases, the United States has ended sanctions and returned frozen assets to successor governments. In the case of the former Yugoslavia, for example, in 2003, $237.6 million in frozen funds belonging to the Central Bank of the Socialist Federal Republic of Yugoslavia were transferred to the central banks of the successor states. In the case of Afghanistan, $217 million in frozen funds belonging to the Taliban were released to the Afghan Interim Authority in January 2002. The executive branch has traditionally resisted congressional efforts to vest foreign assets to pay U.S. claimants without first obtaining a settlement agreement with the country in question. Congress has overcome such resistance in the case of foreign governments that have been designated as \"State Supporters of Terrorism.\" U.S. nationals who are victims of state-supported terrorism involving designated states have been able to sue those countries for damages under an exception to the Foreign Sovereign Immunities Act (FSIA) since 1996. To facilitate the payment of judgments under the exception, Congress passed Section 117 of the Treasury and General Government Appropriations Act, 1999, which further amended the FSIA by allowing attachment and execution against state property with respect to which financial transactions are prohibited or regulated under Section 5(b) TWEA, Section 620(a) of the Foreign Assistance Act (authorizing the trade embargo against Cuba), or Sections 202 and 203 of IEEPA, or any orders, licenses or other authority issued under these statutes. Because of the Clinton Administration's continuing objections, however, Section 117 also gave the President authority to \"waive the requirements of this section in the interest of national security,\" an authority President Clinton promptly exercised in signing the statute into law. The Section 117 waiver authority protecting blocked foreign government assets from attachment to satisfy terrorism judgments has continued in effect ever since, prompting Congress to take other actions to make frozen assets available to judgment holders. Congress enacted §2002 of the Victims of Trafficking and Violence Protection Act of 2000 (VTVPA) to mandate the payment from frozen Cuban assets of compensatory damages awarded against Cuba under the FSIA terrorism exception on or prior to July 20, 2000. The Department of the Treasury subsequently vested $96.7 million in funds generated from long-distance telephone services between the United States and Cuba in order to compensate claimants in Alejandre v. Republic of Cuba , the lawsuit based on the1996 downing of two unarmed U.S. civilian airplanes by the Cuban air force. Another payment of more than $7 million was made using vested Cuban assets to a Florida woman who had won a lawsuit against Cuba based on her marriage to a Cuban spy. As unpaid judgments against designated state sponsors of terrorism continued to mount, Congress enacted the Terrorism Risk Insurance Act (TRIA). Section 201 of TRIA overrode long-standing objections by the executive branch to make the frozen assets of terrorist states available to satisfy judgments for compensatory damages against such states (and organizations and persons) as follows: Notwithstanding any other provision of law, and except as provided in subsection (b), in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist party is not immune under section 1605(a)(7) of title 28, United States Code, the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable. Subsection (b) of Section 201 provided waiver authority \"in the national security interest,\" but only with respect to frozen foreign government \"property subject to the Vienna Convention on Diplomatic Relations or the Vienna Convention on Consular Relations.\" When Congress amended the FSIA in 2008 to revamp the terrorism exception, it provided that judgments entered under the new exception could be satisfied out of the property of a foreign state notwithstanding the fact that the property in question is regulated by the United States government pursuant to TWEA or IEEPA. Congress has also directed that the proceeds from certain sanctions violations be paid into a fund for providing compensation to the former hostages of Iran and terrorist state judgment creditors. To fund the program, Congress designated that certain real property and bank accounts owned by Iran and forfeited to the United States could go into the United States Victims of State Sponsored Terrorism Fund, along with the sum of $1,025,000,000, representing the amount paid to the United States pursuant to the June 27, 2014, plea agreement and settlement between the United States and BNP Paribas for sanctions violations. The fund is replenished through criminal penalties and forfeitures for violations of IEEPA or TWEA-based regulations, or any related civil or criminal conspiracy, scheme, or other federal offense related to doing business or acting on behalf of a state sponsor of terrorism. Half of all civil penalties and forfeitures relating to the same offenses are also deposited into the fund. A number of lawsuits seeking to overturn actions taken pursuant to IEEPA have made their way through the judicial system, including challenges to the breadth of congressionally delegated authority and assertions of violations of constitutional rights. As demonstrated below, most of these challenges have failed. The few challenges that succeeded did not seriously undermine the overarching statutory scheme for sanctions. The breadth of presidential power under IEEPA is illustrated by the Supreme Court's 1981 opinion in Dames & Moore v. Regan . In Dames & Moore , petitioners had challenged President Carter's executive order establishing regulations to further compliance with the terms of the Algiers Accords, which the President had entered into to end the hostage crisis with Iran. Under these agreements, the United States was obligated (1) to terminate all legal proceedings in U.S. courts involving claims of U.S. nationals against Iran, (2) to nullify all attachments and judgments, and (3) to resolve outstanding claims exclusively through binding arbitration in the Iran-U.S. Claims Tribunal (IUSCT). The President, through executive orders, revoked all licenses that permitted the exercise of \"any right, power, or privilege\" with regard to Iranian funds, nullified all non-Iranian interests in assets acquired after a previous blocking order, and required banks holding Iranian assets to transfer them to the Federal Reserve Bank of New York to be held or transferred as directed by the Secretary of the Treasury. Dames and Moore had sued Iran for breach of contract to recover compensation for work performed. The district court had entered summary judgment in favor of Dames and Moore and issued an order attaching certain Iranian assets for satisfaction of any judgment that might result, but stayed the case pending appeal. The executive orders and regulations implementing the Algiers Accords resulted in the nullification of this prejudgment attachment and the dismissal of the case against Iran, directing that it be filed at the IUSCT. In response, Dames and Moore sued the government. The plaintiffs claimed that the President and the Secretary of the Treasury exceeded their statutory and constitutional powers to the extent they adversely affected Dames and Moore's judgment against Iran, the execution of that judgment, the prejudgment attachments, and the plaintiff's ability to continue to litigate against the Iranian banks. The government defended its actions, relying largely on IEEPA, which provided explicit support for most of the measures taken—nullification of the prejudgment attachment and transfer of the property to Iran—but could not be read to authorize actions affecting the suspension of claims in U.S. courts. Justice Rehnquist wrote for the majority: Although we have declined to conclude that the IEEPA…directly authorizes the President's suspension of claims for the reasons noted, we cannot ignore the general tenor of Congress' legislation in this area in trying to determine whether the President is acting alone or at least with the acceptance of Congress. As we have noted, Congress cannot anticipate and legislate with regard to every possible action the President may find it necessary to take or every possible situation in which he might act. Such failure of Congress specifically to delegate authority does not, \"especially . . . in the areas of foreign policy and national security,\" imply \"congressional disapproval\" of action taken by the Executive. On the contrary, the enactment of legislation closely related to the question of the President's authority in a particular case which evinces legislative intent to accord the President broad discretion may be considered to \"invite\" \"measures on independent presidential responsibility.\" At least this is so where there is no contrary indication of legislative intent and when, as here, there is a history of congressional acquiescence in conduct of the sort engaged in by the President. The Court remarked that Congress's implicit approval of the long-standing presidential practice of settling international claims by executive agreement was critical to its holding that the challenged actions were not in conflict with acts of Congress. For support, the Court cited to Justice Frankfurter's concurrence in Youngstown Sheet and Tube Co. v. Sawyer stating that \"a systematic, unbroken, executive practice, long pursued to the knowledge of the Congress and never before questioned … may be treated as a gloss on 'Executive Power' vested in the President by § 1 of Art. II.\" Consequently, it may be argued that Congress's exclusion of certain express powers in IEEPA do not necessarily preclude the President from exercising them, at least where a court finds sufficient precedent exists. Lower courts have examined IEEPA under a number of other constitutional doctrines. Courts have reviewed whether Congress violated the non-delegation principle of separation of powers by delegating too much power to the President to legislate, in particular by creating new crimes. These challenges have generally failed. As the U.S. Court of Appeals for the Second Circuit explained while evaluating IEEPA, delegations of congressional authority are constitutional so long as Congress provides through a legislative act an \"intelligible principle\" governing the exercise of the delegated authority. Even if the standards are higher for delegations of authority to define criminal offenses, the court held, IEEPA provides sufficient guidance. The court stated: The IEEPA \"meaningfully constrains the [President's] discretion,\" by requiring that \"[t]he authorities granted to the President ... may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.\" And the authorities delegated are defined and limited. The Second Circuit found it significant that \"IEEPA relates to foreign affairs—an area in which the President has greater discretion,\" bolstering its view that IEEPA does not violate the non-delegation doctrine. The U.S. Court of Appeals for the Eleventh Circuit considered whether Section 207(b) of IEEPA is an unconstitutional legislative veto. That provision states: The authorities described in subsection (a)(1) may not continue to be exercised under this section if the national emergency is terminated by the Congress by concurrent resolution pursuant to section 202 of the National Emergencies Act [50 U.S.C. § 1622] and if the Congress specifies in such concurrent resolution that such authorities may not continue to be exercised under this section. In U.S. v. Romero-Fernandez , two defendants convicted of violating the terms of an executive order issued under IEEPA argued on appeal that IEEPA was unconstitutional, in part, because of the above provision. The Eleventh Circuit accepted that the provision was an unconstitutional legislative veto (as conceded by the government) based on INS v. Chadha , in which the Supreme Court held that Congress cannot void the exercise of power by the executive branch through concurrent resolution, but can act only through bicameral passage followed by presentment of the law to the President. The Eleventh Circuit nevertheless upheld the defendants' convictions for violations of IEEPA regulations, holding that the legislative veto provision was severable from the rest of the statute. Courts have also addressed whether certain actions taken pursuant to IEEPA have effected an uncompensated taking of property rights in violation of the Fifth Amendment. The Fifth Amendment's Takings Clause prohibits \"private property [from being] taken for public use, without just compensation.\" The Fifth Amendment's prohibitions apply as well to regulatory takings, in which the government does not physically take property but instead imposes restrictions on the right of enjoyment that decreases the value of the property or right therein. The Supreme Court has held that the nullification of prejudgment attachments pursuant to regulations issued under IEEPA was not an uncompensated taking, suggesting that the reason for this position was the contingent nature of the licenses that had authorized the attachments. The Court also suggested that the broader purpose of the statute supported the view that there was no uncompensated taking: This Court has previously recognized that the congressional purpose in authorizing blocking orders is \"to put control of foreign assets in the hands of the President....\" Such orders permit the President to maintain the foreign assets at his disposal for use in negotiating the resolution of a declared national emergency. The frozen assets serve as a \"bargaining chip\" to be used by the President when dealing with a hostile country. Accordingly, it is difficult to accept petitioner's argument because the practical effect of it is to allow individual claimants throughout the country to minimize or wholly eliminate this \"bargaining chip\" through attachments, garnishments, or similar encumbrances on property. Neither the purpose the statute was enacted to serve nor its plain language supports such a result. Similarly, a lower court held that the extinguishment of contractual rights due to sanctions enacted pursuant to IEEPA does not amount to a regulatory taking requiring compensation under the Fifth Amendment. Even though the plaintiff suffered \"obvious economic loss\" due to the sanctions regulations, that factor alone was not enough to sustain plaintiff's claim of a compensable taking. The court quoted long-standing Supreme Court precedent to support its finding: A new tariff, an embargo, a draft, or a war may inevitably bring upon individuals great losses; may, indeed, render valuable property almost valueless. They may destroy the worth of contracts. But whoever supposed that, because of this, a tariff could not be changed, or a non-intercourse act, or an embargo be enacted, or a war be declared? .... [W]as it ever imagined this was taking private property without compensation or without due process of law? Accordingly, it seems unlikely that entities whose business interests are harmed by the imposition of sanctions pursuant to IEEPA will be entitled to compensation from the government for their losses. Persons whose assets have been directly blocked by the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) pursuant to IEEPA have likewise found little success challenging the loss of the use of their assets as uncompensated takings. Many courts have recognized that a temporary blocking of assets does not constitute a taking because it is a temporary action that does not vest title in the United States. This conclusion is apparently so even if the blocking of assets necessitates the closing altogether of a business enterprise. In some circumstances, however, a court may analyze at least the initial blocking of assets under a Fourth Amendment standard for seizure. One court found a blocking to be unreasonable under a Fourth Amendment standard where there was no reason that OFAC could not have first obtained a judicial warrant. Some persons whose assets have been blocked have asserted that their right to due process has been violated. The Due Process Clause of the Fifth Amendment provides that no person shall be deprived of life, liberty, or property, without due process of law. Where one company protested that the blocking of its assets without a pre-deprivation hearing violated its right to due process, a district court found that a temporary deprivation of property does not necessarily give rise to a right to notice and an opportunity to be heard. A second district court stated that the exigencies of national security and foreign policy considerations that are implicated in IEEPA cases have meant that OFAC historically has not provided pre-deprivation notice in sanctions programs. A third district court stated that OFAC's failure to provide a charitable foundation with notice or a hearing prior to its designation as a terrorist organization and blocking of its assets did not violate its right to procedural due process, because the OFAC designation and blocking order serve the important governmental interest of combating terrorism by curtailing the flow of terrorist financing. That same court also held that prompt action by the government was necessary to protect against the transfer of assets subject to the blocking order. In Al Haramain Islamic Foundation v. U.S. Department of Treasury , the U.S. Court of Appeals for the Ninth Circuit considered whether OFAC's use of classified information without any disclosure of its content in its decision to freeze the assets of a charitable organization, and its failure to provide adequate notice and a meaningful opportunity to respond, violated the organization's right to procedural due process. The court applied the balancing test set forth by the Supreme Court in its landmark administrative law case Mathews v. Eldridge to resolve these questions. Under the Eldridge test, to determine if an individual has received constitutional due process, courts must weigh: (1) [the person's or entity's] private property interest, (2) the risk of an erroneous deprivation of such interest through the procedures used, as well as the value of additional safeguards, and (3) the Government's interest in maintaining its procedures, including the burdens of additional procedural requirements.\" While weighing the interests and risks at issue in Al Haramain , the Ninth Circuit found the organization's property interest to be significant: By design, a designation by OFAC completely shutters all domestic operations of an entity. All assets are frozen. No person or organization may conduct any business whatsoever with the entity, other than a very narrow category of actions such as legal defense. Civil penalties attach even for unwitting violations. Criminal penalties, including up to 20 years' imprisonment, attach for willful violations. For domestic organizations such as AHIF–Oregon, a designation means that it conducts no business at all. The designation is indefinite. Although an entity can seek administrative reconsideration and limited judicial relief, those remedies take considerable time, as evidenced by OFAC's long administrative delay in this case and the ordinary delays inherent in our judicial system. In sum, designation is not a mere inconvenience or burden on certain property interests; designation indefinitely renders a domestic organization financially defunct. Nevertheless, the court found \"the government's interest in national security [could not] be understated.\" In evaluating the government's interest in maintaining its procedures, the Ninth Circuit explained that the Constitution requires that the government \"take reasonable measures to ensure basic fairness to the private party and that the government follow procedures reasonably designed to protect against erroneous deprivation of the private party's interests.\" While the Ninth Circuit had previously held that the use of undisclosed information in a case involving the exclusion of certain longtime resident aliens should be considered presumptively unconstitutional, the court found that the presumption had been overcome in this case. The Ninth Circuit noted that all federal courts that have considered the argument that OFAC may not use undisclosed classified information in making its determinations have rejected it. Although the court found that OFAC's failure to provide even an unclassified summary of the information at issue was a violation of the organization's due process rights, the court deemed the error harmless because it would not likely have affected the outcome of the case. In the same case, the Ninth Circuit also considered the organization's argument that it had been denied adequate notice and an opportunity to be heard. Specifically, the organization asserted that OFAC had refused to disclose its reasons for investigating and designating the organization, leaving it unable to respond adequately to OFAC's unknown suspicions. Because OFAC had provided the organization with only one document to support its designation over the four-year period between the freezing of its assets and the redesignation of the organization as a specially designated global terrorist (SDGT), the court agreed that the organization had been deprived of due process rights. However, the court found that this error too was harmless. Some courts have considered whether asset blocking or penalties imposed pursuant to regulations promulgated under IEEPA have violated the subjects' First Amendment rights to free association, free speech, or religion. Challenges on these grounds have typically failed. Courts have held that there is no First Amendment right to support terrorists. The U.S. Court of Appeals for the District of Columbia Circuit distinguished advocacy from financial support and held that the blocking of assets affected only the ability to provide financial support, but did not implicate the organization's freedom of association. Similarly, a district court interpreted relevant case law to hold that government actions prohibiting charitable contributions are subject to intermediate scrutiny rather than strict scrutiny, a higher standard that applies to political contributions. With respect to a free speech challenge brought by a charitable organization whose assets were temporarily blocked during the pendency of an investigation, a district court explained that \"when 'speech' and 'nonspeech' elements are combined in the same course of conduct, a sufficiently important government interest in regulating the nonspeech element can justify incidental limitations on First Amendment freedoms.\" Accordingly, the district court applied the following test to determine whether the designations and blocking actions were lawful. Citing the Supreme Court's opinion in United States v. O'Brien , the court stated that a government regulation is sufficiently justified if: it is within the constitutional power of the government; it furthers an important or substantial governmental interest; the governmental interest is unrelated to the suppression of free expression; and the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest. The court found the government's actions to fall within the bounds of this test: First, the President clearly had the power to issue the Executive Order. Second, the Executive Order promotes an important and substantial government interest—that of preventing terrorist attacks. Third, the government's action is unrelated to the suppression of free expression; it prohibits the provision of financial and other support to terrorists. Fourth, the incidental restrictions on First Amendment freedoms are no greater than necessary. However, with respect to an organization that was not itself designated as an SDGT but wished to conduct coordinated advocacy with another organization that was so designated, one appellate court found that an OFAC regulation barring such coordinated advocacy based on its content was subject to strict scrutiny. Accordingly, the court rejected the government's reliance on the Supreme Court's decision in Holder v. Humanitarian Law Project to find that the regulation impermissibly implicated the organization's right to free speech. Accordingly, there may be some circumstances where the First Amendment protects speech coordinated with (but not on behalf of) an organization designated as an SDGT. Until the recent enactment of the Export Control Reform Act of 2018, export of dual use goods and services was regulated pursuant to the authority of the Export Administration Act (EAA), which was subject to periodic expiry and reauthorization. President Reagan was the first President to use IEEPA as a vehicle for continuing the enforcement of the EAA's export controls. After Congress did not extend the expired EAA, President Reagan issued Executive Order 12444 in 1983, finding that \"unrestricted access of foreign parties to United States commercial goods, technology, and technical data and the existence of certain boycott practices of foreign nations constitute, in light of the expiration of the Export Administration Act of 1979, an unusual and extraordinary threat to the national security.\" Although the EAA had been reauthorized for short periods since its initial expiration in 1983, every subsequent President utilized the authorities granted under IEEPA to maintain the existing system of export controls during periods of lapse. Figure 1 . In the latest iteration, President George W. Bush issued Executive Order 13222 in 2001, finding the existence of a national emergency with respect to the expiration of the EAA and directing—pursuant to the authorities allocated under IEEPA—that \"the provisions for administration of the [EAA] shall be carried out under this order so as to continue in full force and effect…the export control system heretofore maintained.\" Presidents Obama and Trump annually extended the 2001 executive order. Courts have generally treated this arrangement as authorized by Congress, although certain provisions of the EAA in effect under IEEPA have led to challenges. The determining factor appears to be whether IEEPA itself provides the President the authority to carry out the challenged action. In one case, the U.S. Court of Appeals for the Fifth Circuit upheld a conviction for an attempt to violate the regulations even though the EAA had expired and did not expressly criminalize such attempts. The circuit court rejected the defendants' argument that the President had exceeded his delegated authority under the EEA by \"enlarging\" the crimes punishable under the regulations. Nevertheless, a district court held that the conspiracy provisions of the EAA regulations were rendered inoperative by the lapse of the EAA and \"could not be repromulgated by executive order under the general powers that IEEPA vests in the President.\" The district court found that, even if Congress intended to preserve the operation of the EAA through IEEPA, that intent was limited by the scope of the statutes' substantive coverage at the time of IEEPA's enactment, when no conspiracy provision existed in either statute. The U.S. Court of Appeals for the D.C. Circuit upheld the application of the EAA as a statute permitting the government to withhold information under exemption 3 of the Freedom of Information Act (FOIA), which exempts from disclosure information exempted from disclosure by statute, even though the EAA had expired. Referring to legislative history it interpreted as congressional approval of the use of IEEPA to continue the EAA provisions during periods of lapse, the court stated: Although the legislative history does not refer to the EAA's confidentiality provision, it does evince Congress's intent to authorize the President to preserve the operation of the export regulations promulgated under the EAA. Moreover, it is significant for purposes of determining legislative intent that Congress acted with the knowledge that the EAA's export regulations had long provided for confidentiality and that the President's ongoing practice of extending the EAA by executive order had always included these confidentiality protections. The D.C. Circuit distinguished this holding in a later case involving appellate jurisdiction over a decision by the Department of Commerce to apply sanctions for a company's violation of the EAA regulations. Pursuant to the regulations and under the direction of the Commerce Department, the company sought judicial review directly in the D.C. Circuit. The D.C. Circuit, however, concluded that it lacked jurisdiction: This court would have jurisdiction pursuant to the President's order only if the President has the authority to confer jurisdiction—an authority that, if it exists, must derive from either the Executive's inherent power under the Constitution or a permissible delegation of power from Congress. The former is unavailing, as the Constitution vests the power to confer jurisdiction in Congress alone. Whether the executive order can provide the basis of our jurisdiction, then, turns on whether the President can confer jurisdiction on this court under the auspices of IEEPA…..We conclude that the President lacks that power. Nothing in the text of IEEPA delegates to the President the authority to grant jurisdiction to any federal court. Consequently, the appeal of the agency decision was determined to belong in the district court according to the default rule under the Administrative Procedure Act (APA). Congress may wish to address a number of issues with respect to IEEPA; two are addressed here. The first pertains to how Congress has delegated its authority under IEEPA and its umbrella statute, the NEA. The second pertains to choices made in the Export Control Reform Act of 2018. Although the stated aim of the drafters of the NEA and IEEPA was to restrain the use of emergency powers, the use of such powers has expanded by several measures. Presidents declare national emergencies and renew them for years or even decades. The limitation of IEEPA to transactions involving some foreign interest was intended to limit IEEPA's domestic application. However, globalization has eroded that limit, as few transactions today do not involve some foreign interest. Many of the other criticisms of TWEA that IEEPA was supposed to address—consultation, time limits, congressional review, scope of power, and logical relationship to the emergency declared—are criticisms that scholars levy against IEEPA today. In general, three common criticisms are levied by scholars with respect to the structure of the NEA and IEEPA that may be of interest to Congress. First, the NEA and IEEPA do not define the phrases \"national emergency\" and \"unusual and extraordinary threat\" and Presidents have interpreted these terms broadly. Second, the scope of presidential authority under IEEPA has become less constrained in a highly globalized era. Third, owing to rulings by the Supreme Court and amendments to the NEA, Congress would likely have to have a two-thirds majority rather than a simple majority to terminate a national emergency. Despite these criticisms, Congress has not acted to terminate or otherwise express displeasure with an emergency declaration invoking IEEPA. This absence of any explicit statement of disapproval, coupled with explicit statements of approval in some instances, may indicate congressional approval of presidential use of IEEPA thus far. Arguably, then, IEEPA could be seen as an effective tool for carrying out the will of Congress. Neither the NEA nor IEEPA define what constitutes a \"national emergency.\" IEEPA conditions its invocation in a declaration on its necessity for dealing with an \"unusual and extraordinary threat … to the national security, foreign policy, or economy of the United States.\" In the markup of IEEPA in the House, Fred Bergsten, then-Assistant Secretary for International Affairs in the Department of the Treasury, praised the requirement that a national emergency for the purposes of IEEPA be \"based on an unusual and extraordinary threat\" because such language \"emphasizes that such powers should be available only in true emergencies.\" Because \"unusual\" and \"extraordinary\" are also undefined, the usual and ordinary invocation of the statute seems to conflict with those statutory conditions. If Congress wanted to refine the meaning of \"national emergency\" or \"unusual and extraordinary threat,\" it could do so through statute. Additionally, Congress could consider requiring some sort of factual finding by a court prior to, or shortly after, the exercise of any authority, such as under the First Militia Act of 1792 or the Foreign Intelligence Surveillance Act. However, Congress may consider that the ambiguity in the existing statute provides the executive with the flexibility necessary to address national emergencies with the requisite dispatch. While IEEPA nominally applies only to foreign transactions, the breadth of the phrase, \"any interest of any foreign country or a national thereof\" has left a great deal of room for executive discretion. The interconnectedness of the modern global economy has left few major transactions in which a foreign interest is not involved. As a result, at least one scholar has concluded, \"the exemption of purely domestic transactions from the President's transaction controls seems to be a limitation without substance.\" Presidents have used IEEPA since the 1980s to control exports by maintaining the dual-use export control system, enshrined in the Export Administration Regulations (EAR) in times when its underlying authorization, the Export Administration Act (EAA), periodically expired. During those times when Congress did not reauthorize the EAA, Presidents have declared emergencies to maintain the dual-use export control system. The current emergency has been ongoing since 2001. While Presidents have used IEEPA to implement trade restrictions against adversaries, it has not been used as a general way to impose tariffs. However, as noted above, President Nixon used TWEA to impose a 10% ad valorem tariff on goods entering the United States to avoid a balance of payments crisis after he ended the convertibility of the U.S. dollar to gold. Although the use of TWEA in this instance was criticized at the time, it does not appear that the subsequent reforms resulting in the enactment of IEEPA would prevent the President from imposing tariffs or other restrictions on trade. However, the availability of diverse other authorities for addressing trade, including for national security purposes, makes the use of IEEPA for this purpose unlikely. The scope of powers over individual targets is also extensive. Under IEEPA, the President has the power to prohibit all financial transactions with individuals designated by Executive Order. Such power allows the President to block all the assets of a U.S. citizen or permanent resident. Such uses of IEEPA may reflect the will of Congress or they may represent a grant of authority that may have gone beyond what Congress originally intended. The heart of the curtailment of presidential power by the NEA and IEEPA was the provision that Congress could terminate a state of emergency declared pursuant to the NEA with a concurrent resolution. When the \"legislative veto\" was struck down by the Supreme Court (see above), it left Congress with a steeper climb—presumably requiring passage of a veto-proof joint resolution—to terminate a national emergency declared under the NEA. Two such resolutions have ever been introduced and neither declarations of emergency involved IEEPA. The lack of congressional action here could be the result of the necessity of obtaining a veto-proof majority or it could be that the use of IEEPA has so far reflected the will of Congress. If Congress wanted to assert more authority over the use of IEEPA, it could amend the NEA or IEEPA to include a \"sunset provision,\" terminating any national emergency after a certain number of days. At least one scholar has recommended such an amendment. Alternatively, Congress could amend IEEPA to provide for a review mechanism that would give Congress an active role. In the Senate during the 115 th Congress, for example, Senator Mike Lee introduced the Global Trade Accountability Act of 2017 required the President to report to Congress on any proposed trade action (including the use of IEEPA), including a description of the proposal together with a list of items to be affected, an economic impact study of the proposal including potential retaliation. Congress, using expedited procedures, would need to approve the President's action through a joint resolution within a 60-day period. The legislation would have provided for a temporary one-time unilateral trade action for a 90-day period. Similarly, in the 116 th Congress, Senator Lee introduced S. 764 , a bill to provide for congressional approval of national emergency declarations, and for other purposes, which would amend the NEA to require an act of Congress within 30 days to allow a national emergency to continue. Another approach would establish a means for Congress to pass a resolution of disapproval if IEEPA authorities are invoked. An example of this approach is the Trade Authority Protection Act (H.R. 5760). After the submission of similar reporting requirement to S. 177 (above), Congress could, under Congressional Review Act (CRA)-style procedures, pass a joint resolution of disapproval. Congress does have the authority to pass a joint resolution under IEEPA, as noted above, but the use of CRA procedures would allow for certain expedited consideration. Alternatively, Congress could use any of these mechanisms to amend the current disapproval resolution process in IEEPA or the NEA itself. In testimony before the House Committee on International Relations in 1977, Professor Harold G. Maier summed up the main criticisms of TWEA: Section 5(b)'s effect is no longer confined to \"emergency situations\" in the sense of existing imminent danger. The continuing retroactive approval, either explicit or implicit, by Congress of broad executive interpretations of the scope of powers which it confers has converted the section into a general grant of legislative authority to the President…\" Like TWEA before it, IEEPA sits at the center of the modern U.S. sanction regime. Like TWEA before it, Congress has often approved explicitly of the President's use of IEEPA. In several circumstances, Congress has directed the President to impose a variety of sanctions under IEEPA and waived the requirement of an emergency declaration. Even when Congress has not given explicit approval, no Member of Congress has ever introduced a resolution to terminate a national emergency citing IEEPA. The NEA requires that both houses of Congress meet every six months to consider a vote on a joint resolution on terminating an emergency. Neither house has ever met to do so. In response to concerns over the scale and scope of the emergency economic powers granted by IEEPA, supporters of the status quo would argue that Congress has implicitly and explicitly expressed approval of the statute and its use. In 2018, Congress passed the Export Control Reform Act (ECRA). The legislation repealed the expired Export Administration Act of 1979, the regulations of which had been continued by reference to IEEPA since 2001. The ECRA became the new statutory authority for Export Administration Regulations. Nevertheless, several export controls addressed in the Export Administration Act of 1979 were not updated in the Export Control Reform Act of 2018; instead, Congress chose to require the President to continue to use IEEPA to continue to implement the three sections of the Export Administration Act of 1979 that were not repealed. Going forward, Congress may wish to revisit these provisions, which all relate to deterring the proliferation of weapons of mass destruction. Appendix A. NEA and IEEPA Use", "summary": "The International Emergency Economic Powers Act (IEEPA) provides the President broad authority to regulate a variety of economic transactions following a declaration of national emergency. IEEPA, like the Trading with the Enemy Act (TWEA) from which it branched, sits at the center of the modern U.S. sanctions regime. Changes in the use of IEEPA powers since the act's enactment in 1977 have caused some to question whether the statute's oversight provisions are robust enough given the sweeping economic powers it confers upon the President upon declaration of a state of emergency. Over the course of the twentieth century, Congress delegated increasing amounts of emergency power to the President by statute. The Trading with the Enemy Act was one such statute. Congress passed TWEA in 1917 to regulate international transactions with enemy powers following the U.S. entry into the First World War. Congress expanded the act during the 1930s to allow the President to declare a national emergency in times of peace and assume sweeping powers over both domestic and international transactions. Between 1945 and the early 1970s, TWEA became a critically important means to impose sanctions as part of U.S. Cold War strategy. Presidents used TWEA to block international financial transactions, seize U.S.-based assets held by foreign nationals, restrict exports, modify regulations to deter the hoarding of gold, limit foreign direct investment in U.S. companies, and impose tariffs on all imports into the United States. Following committee investigations that discovered that the United States had been in a state of emergency for more than 40 years, Congress passed the National Emergencies Act (NEA) in 1976 and IEEPA in 1977. The pair of statutes placed new limits on presidential emergency powers. Both included reporting requirements to increase transparency and track costs, and the NEA required the President to annually assess and extend, if appropriate, the emergency. However, some experts argue that the renewal process has become pro forma. The NEA also afforded Congress the means to terminate a national emergency by adopting a concurrent resolution in each chamber. A decision by the Supreme Court, in a landmark immigration case, however, found the use of concurrent resolutions to terminate an executive action unconstitutional. Congress amended the statute to require a joint resolution, significantly increasing the difficulty of terminating an emergency. Like TWEA, IEEPA has become an important means to impose economic-based sanctions since its enactment; like TWEA, Presidents have frequently used IEEPA to restrict a variety of international transactions; and like TWEA, the subjects of the restrictions, the frequency of use, and the duration of emergencies have expanded over time. Initially, Presidents targeted foreign states or their governments. Over the years, however, presidential administrations have increasingly used IEEPA to target individuals, groups, and non-state actors such as terrorists and persons who engage in malicious cyber-enabled activities. As of March 1, 2019, Presidents had declared 54 national emergencies invoking IEEPA, 29 of which are still ongoing. Typically, national emergencies invoking IEEPA last nearly a decade, although some have lasted significantly longer--the first state of emergency declared under the NEA and IEEPA, which was declared in response to the taking of U.S. embassy staff as hostages by Iran in 1979, may soon enter its fifth decade. IEEPA grants sweeping powers to the President to control economic transactions. Despite these broad powers, Congress has never attempted to terminate a national emergency invoking IEEPA. Instead, Congress has directed the President on numerous occasions to use IEEPA authorities to impose sanctions. Congress may want to consider whether IEEPA appropriately balances the need for swift action in a time of crisis with Congress' duty to oversee executive action. Congress may also want to consider IEEPA's role in implementing its influence in U.S. foreign policy and national security decision-making.", "document_type": "crs"}
{"report": "The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the U.S. Small Business Administration (SBA) and justified the agency's existence on the grounds that small businesses are essential to the maintenance of the free enterprise system. In economic terms, the congressional intent was to assist small businesses as a means to deter monopoly and oligarchy formation within all industries and the market failures caused by the elimination or reduction of competition in the marketplace. Congress decided to allow the SBA to establish size standards to ensure that only small businesses were provided SBA assistance. Specifically, the Small Business Act of 1953 defines a small business as one that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis. The business may be a sole proprietorship, partnership, corporation, or any other legal form. The SBA conducts an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, to determine its size standards. The analysis is designed to ensure that only small businesses receive SBA assistance and that these small businesses are not dominant in their field on a national basis. The SBA currently uses two types of size standards to determine SBA program eligibility: (1) industry-specific size standards and (2) alternative size standards based on the applicant's maximum tangible net worth and average net income after federal taxes. The SBA's industry-specific size standards are also used to determine eligibility for federal small business contracting purposes. The SBA's industry-specific size standards determine program eligibility for firms in 1,036 industrial classifications (hereinafter industries) in 23 sub-industry activities described in the 2017 North American Industry Classification System (NAICS). Given its mandate to promote competition in the marketplace, the SBA includes an economic analysis of each industry's overall competitiveness and the competitiveness of firms within the industry in its size standards methodology. The size standards are based on four measures: (1) number of employees (505 industries), (2) average annual receipts in the previous three (may soon be the previous five) years (526 industries), (3) average asset size as reported in the firm's four quarterly financial statements for the preceding year (5 industries), or (4) a combination of number of employees and barrel per day refining capacity (1 industry). Overall, about 97% of all employer firms qualify as small. These firms represent about 30% of industry receipts. In the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance. The size standards have also been challenged by Members of Congress concerned that the size standards may not adequately target federal assistance to firms that they consider to be truly small. This report provides a historical examination of the SBA's size standards and assesses competing views concerning how to define a small business. It also discusses P.L. 111-240 , the Small Business Jobs Act of 2010, which authorized the SBA to establish an alternative size standard using maximum tangible net worth and average net income after federal taxes for both the 7(a) and 504/CDC loan guaranty programs; established, until the SBA acted, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application; and required the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards every 18 months beginning on the new law's date of enactment (September 27, 2010) and ensure that each size standard is reviewed at least once every five years. P.L. 112-239 , the National Defense Authorization Act for Fiscal Year 2013, which directs the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification. This provision addressed the SBA's practice of limiting the number of size standards it used and combining size standards within industrial groups as a means to reduce the complexity of its size standards and to provide greater consistency for industrial classifications that have similar economic characteristics. P.L. 114-328 , the National Defense Authorization Act for Fiscal Year 2017, which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes. Previously, the small business size standard for agricultural enterprises was set in statute as having annual receipts not in excess of $750,000. P.L. 115-324 , the Small Business Runway Extension Act of 2018, which directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts. Legislation introduced during the 112 th Congress ( H.R. 585 , the Small Business Size Standard Flexibility Act of 2011), 113 th Congress ( H.R. 2542 , the Regulatory Flexibility Improvements Act of 2013, and included in H.R. 4 , the Jobs for America Act), 114 th Congress ( H.R. 527 , the Small Business Regulatory Flexibility Improvements Act of 2015, and its Senate companion bill, S. 1536 ), and 115 th Congress ( H.R. 33 , the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S. 584 , and included in H.R. 5 , the Regulatory Accountability Act of 2017) to authorize the SBA's Office of Chief Counsel for Advocacy to approve or disapprove a size standard requested by a federal agency for purposes other than the Small Business Act or the Small Business Investment Act of 1958. The SBA's Administrator currently has that authority. In 2016 (the most recent available data), there were over 5.95 million employer firms and over 24.8 million nonemployer (self-employed) firms. As Table 1 indicates, there were 5,954,684 employer firms in the United States employing 126,752,238 people and providing total payroll of $6.43 trillion in 2016. Most employer firms (61.6%) had 4 or fewer employees, 78.6% had fewer than 10 employees, 89.1% had fewer than 20 employees, 98.1% had fewer than 100 employees, and 99.7% had fewer than 500 employees in 2016. The table also provides data concerning other economic factors that might be used to define a small business: an employer firm's number of employees as a share (cumulative percentage) of the total number of employer firms, as a share of employer firm total employment, and as a share of employer firm total annual payroll. As will be discussed, the SBA has traditionally applied economic factors to specific industries, not to cumulative statistics for all employer firms, to determine which firms are small businesses. Nonetheless, the data in Table 1 illustrate how the selection of economic factors used to define small business affects the definition's outcome. For example, for illustrative purposes only, if the mid-point (50%) for these three economic factors was used to define what is a small business, three different employee firm sizes would be used to designate firms as small: Businesses would be required to have no more than 4 employees to be defined as small if the definition for small used the mid-point (50%) share of the total number of employer firms (employer firms with no more than four employees accounted for 61.6% of the total number of employer firms in 2016). Businesses would be required to have no more than 999 employees to be defined as small if the definition for small used the mid-point (50%) share of employer firm total employment (employer firms with no more than 999 employees accounted for 52.6% of employer firm total employment in 2016). Businesses would be required to have no more than 1,999 employees to be defined as small if the definition for small used the mid-point (50%) share of employer firm total annual payroll (employer firms with no more than 1,999 employees accounted for 51.8% of employer firm total annual payroll in 2016). Other economic factors that might be used to define a small business include the value of the employer firm's assets or its market share, expressed as a firm's sales revenue from that market divided by the total sales revenue available in that market or as a firm's unit sales volume in that market divided by the total volume of units sold in that market. The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA to establish size standards for determining eligibility for SBA assistance. More than sixty years have passed since the SBA established its initial small business size standards on January 1, 1957. Yet, decisions made then concerning the rationale and criteria used to define small businesses established precedents that continue to shape current policy. Moreover, as mentioned previously, the SBA relies on an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, in its size standards methodology to ensure that businesses receiving SBA assistance are not dominant in their field on a national basis. However, in the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance and by Members of Congress concerned that the size standards do not adequately target the SBA's assistance to firms that they consider to be truly small. Over the years, the SBA typically reviewed its size standards piecemeal, reviewing specific industries when the SBA determined that an industry's market conditions had changed or the SBA was asked to undertake a review by an industry claiming that its market conditions had changed. On five occasions, in 1980, 1982, 1992, 2004, and 2008, the SBA proposed a comprehensive revision of its size standards. The SBA did not fully implement any of these proposals, but the arguments presented, both for and against the proposals, provide a context for understanding the SBA's current size standards, and the rationale and criteria that have been presented to retain and replace them. As mentioned previously, P.L. 111-240 requires the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards during the 18-month period beginning on the date of enactment (September 27, 2010) and during every 18-month period thereafter. The act also requires the SBA to review each size standard at least once every five years. The SBA completed its first five-year review of all SBA industry size standards in 2016. As a result of its five-year review, the SBA estimates that more than 72,000 small businesses gained SBA eligibility. There is no uniform or accepted definition for a small business. Instead, several criteria are used to determine eligibility for small business spending and tax programs. This was also the case when Congress considered establishing the SBA during the early 1950s. For example, in 1952, the House Select Committee on Small Business reviewed federal statutes, executive branch directives, and the academic literature to serve as a guide for determining how to define small businesses. The Select Committee began its review by asserting that the need to define the concept of small business was based on a general consensus that assisting small business was necessary to enhance economic competition, combat monopoly formation, inhibit the concentration of economic power, and maintain \"the integrity of independent enterprise.\" It noted that the definition of small businesses in federal statutes reflected this consensus by taking into consideration the firm's size relative to other firms in its field and \"matters of independence and nondominance.\" For example, the War Mobilization and Reconversion Act of 1944 defined a small business as either \"employing 250 wage earners or less\" or having \"sales volumes, quantities of materials consumed, capital investments, or any other criteria which are reasonably attributable to small plants rather than medium- or large-sized plants.\" The Selective Service Act of 1948 classified a business as small for military procurement purposes if \"(1) its position in the trade or industry of which it is a part is not dominant, (2) the number of its employees does not exceed 500, and (3) it is independently owned and operated.\" The Select Committee also found that, for data-gathering purposes, the executive branch defined small businesses in relative, as opposed to absolute, terms within specific industries. For example, the Bureau of Labor Statistics \"defined small business in terms of an average for each industry based on the volume of employment or sales. All firms which fall below this average are deemed to be small.\" The U.S. Census Bureau also used different criteria for different industries. For example, manufacturing firms were classified as small if they had fewer than 100 employees, wholesalers were considered small if they had annual sales below $200,000, and retailers were considered small if they had annual sales below $50,000. According the Census Bureau, in 1952, small businesses accounted for \"roughly 92 percent of all business establishments, 45 percent of all employees, and 34 percent of all dollar value of all sales.\" The Select Committee also noted that in 1951, the National Production Authority's Office of Small Business proposed defining all manufacturing firms with fewer than 50 employees as small and any with more than 2,500 employees as large. Manufacturers employing between these numbers of employees would be considered large or small depending on the general structure of the industry to which they belonged. The larger the percentage of total output produced by large firms, the larger the number of employees a firm could have to be considered small. Using this definition, most manufacturing firms with fewer than 50 employees would be classified as small, but others, such as an aircraft manufacturer, could have as many as 2,500 employees and still be considered small. For procurement purposes, the Select Committee found that executive branch agencies defined small businesses in absolute, as opposed to relative, terms, using 500 employees as the dividing line between large and small firms. Federal agencies defended the so-called 500 employee rule on the grounds that it \"had the advantage of easy administration\" across federal agencies. In reviewing the academic literature, the Select Committee reported that Abraham Kaplan's Small Business: Its Place and Problems defined small businesses as those with no more than $1 million in annual sales, $100,000 in total assets, and no more than 250 employees. Applying this definition would have classified about 95% of all business concerns as small, and would have accounted for about half of all nonagricultural employees. Based on its review of federal statutes, executive branch directives, and the academic literature, the Select Committee decided that it would not attempt \"to formulate a rigid definition of small business\" because \"the concept of small business must remain flexible and adaptable to the peculiar needs of each instance in which a definition may be required.\" However, it concluded that the definition of small should be a relative one, as opposed to an absolute one, that took into consideration variations among economic sectors: This committee is also convinced that whatever limits may be established to the category of small business, they must vary from industry to industry according to the general industrial pattern of each. Public policy may demand similar treatment for a firm of 2,500 employees in one industry as it does for a firm of 50 employees in another industry. Each may be faced with the same basic problems of economic survival. Reflecting the view that formulating a rigid definition of small business was impractical, the Small Business Act of 1953 provided leeway in defining small businesses. It defined a small firm as \"one that is independently owned and operated and which is not dominant in its field of operation.\" The SBA was authorized to establish and subsequently alter size standards for determining eligibility for federal programs to assist small business, some of which are administered by the SBA. The act specifies that the size standards \"may utilize number of employees, dollar volume of business, net worth, net income, a combination thereof, or other appropriate factors.\" It also notes that the concept of small is to be defined in a relative sense, varying from industry to industry to the extent necessary to reflect \"differing characteristics\" among industries. The House Committee on Banking and Currency's report accompanying H.R. 5141, the Small Business Act of 1953, issued on May 28, 1953, provided the committee's rationale for not providing a detailed definition of small: It would be impractical to include in the act a detailed definition of small business because of the variation between business groups. It is for this reason that the act authorizes the Administration to determine within any industry the concerns which are to be designated small-business concerns for the purposes of the act. The report did not provide specific guidance concerning what the committee might consider to be small, but it did indicate that data on industry employment, as of March 31, 1948, \"reveals that on the basis of employment, small business truly is small in size. Of the approximately 4 million business concerns, 87.4% had fewer than 8 employees and 95.2% of the total number of concerns, employed fewer than 20 people.\" Initially, the SBA created two sets of size standards, one for federal procurement preferences and another for the SBA's loan and management training services. At the request of federal agencies, the SBA adopted the then-prevailing small business size standard used by federal agencies for procurement, which was no more than 500 employees. The SBA retained the right to make exceptions to the no more than 500 employee procurement size standard if the SBA determined that a firm having more than 500 employees was not dominant in its industry. For the SBA's loan and management training services, the SBA's staff reviewed economic data provided by the Census Bureau to arrive at what Wendell Barnes, SBA's Administrator, described at a congressional hearing in 1956 as \"a fairly accurate conclusion as to what comprises small business in each industry.\" Jules Abels, SBA's economic advisor to the Administrator, explained at that congressional hearing how the SBA's staff determined what constituted a small business: There are various techniques for the demarcation lines, but in a study of almost any industry, you will find a large cluster of small concerns around a certain figure.... On the other hand, above a certain dividing line you will find relatively few and as you map out a picture of an industry it appears that a dividing line at a certain point is fair. On January 5, 1956, the SBA published a notice of proposed rulemaking in the Federal Register announcing its first proposed small business size standards. During the public comment period, representatives of several industries argued that the proposed standards were too restrictive and excluded too many firms. In response, Mr. Abels testified that the SBA decided to adjust its figures to make them \"a little bit more liberal because there was some feeling on the part of certain industries that they were too tight and that they excluded too many firms.\" The SBA published its final rule concerning its small business size standards on December 7, 1956, and they became effective on January 1, 1957. The SBA decided to use number of employees as the sole criterion for determining if manufacturing firms were small and annual sales or annual receipts as the sole criterion for all other industries. Mr. Abels explained at the congressional hearing the SBA's rationale for using number of employees for classifying manufacturing firms as small and annual sales or annual receipts for all other firms: in the absence of automation which would give one firm in an industry a great advantage over another, roughly speaking if the firms were mechanized to the same extent, a firm with 400 employees would have an output which would be twice as large as the output of a firm with 200 employees.... However when you depart from the manufacturing field and go into, say, a distributive field or trade, it then becomes necessary to discard the number of employees, because it is a matter of judicial notice, that one man for example in the distributive trades can sell as much as 100 men can sell. One small construction firm possibly can do a lot more business than one with a lot more employees. A service trade again has its volume geared to something other than the number of employees. So I think that one can say with reasonable certainty that it is only within the manufacturing field that the employee standard is the uniform yardstick, but that other than manufacturing the dollar volume is the appropriate yardstick. The SBA's initial size standards defined most manufacturing firms employing no more than 250 employees as small. In addition, the SBA considered manufacturing firms in some industries (e.g., metalworking and small arms) as small if they employed no more than 500 employees, and in some others (e.g., sugar refining and tractors) as small if they employed no more than 1,000 employees. To be considered small, wholesalers were required to have annual sales volume of $5 million or less; construction firms had to have average annual receipts of $5 million or less over the preceding three years; trucking and warehousing firms had to have annual receipts of $2 million or less; taxicab companies and most firms in the service trades had to have annual receipts of $1 million or less; and most retail firms had to have annual sales of $1 million or less. Mr. Abels testified that the SBA experienced \"continual\" protests of its size standards by firms denied financial or support assistance because they were not considered small. He also testified that in each case, the SBA denied the protest and determined, in his words, that the standard was \"valid and accurate.\" In 1977, the U.S. General Accounting Office (GAO, now the U.S. Government Accountability Office) was asked by the Senate Select Committee on Small Business to review the SBA's size standards. At that time, most of the SBA's size standards remained at their original 1957 levels, other than a one-time upward adjustment for inflation in 1975 for industries using annual sales and receipts to restore eligibility to firms that may have lost small-business status due solely to the effect of inflation. GAO's report, issued in 1978, found that the SBA's size standards \"are often high and often are not justified by economic rationale.\" Specifically, GAO reported that many size standards may not direct assistance to the target group described in SBA regulations as businesses \"struggling to become or remain competitive\" because the loan and procurement size standards for most industries were established 15 or more years ago and have not been periodically reviewed; SBA records do not indicate how most standards were developed; and the standards often define as small a very high percentage of the firms in the industries to which they apply. GAO recommended that the SBA reexamine its size standards \"by collecting data on the size of bidders on set-aside and unrestricted contracts, determining the size of businesses which need set-aside protection because they cannot otherwise obtain Federal contracts\" and then consider reducing its size standards or \"establishing a two-tiered system for set-aside contracts, under which certain procurements would be available for bidding only to the smaller firms and others would be opened for bidding to all businesses considered small under present standards.\" Citing the GAO report, several Members objected to the SBA's size standards at a House Committee on Small Business oversight hearing conducted on July 10, 1979. Representative John J. LaFalce, chair of the House Committee on Small Business Subcommittee on General Oversight and Minority Enterprise, stated that \"what we have faced from 1953 to the present is virtually nothing other than acquiescence to the demands of the special interest groups. That is how the size standards have been set.\" Representative Tim Lee Carter, the subcommittee's ranking minority member, stated that \"it seems to me that we may be fast growing into just a regular bank forum not just to small business but to all business.\" At that time, approximately 99% of all firms with employees were classified by the SBA as a small business. Roger Rosenberger, SBA's associate administrator for policy, planning and budgeting, testified at the hearing that the SBA would undertake a comprehensive economic analysis of industry data to determine if its size standards should be changed. However, he also defended the validity of the SBA's size standards, arguing that the task of setting size standards was a complicated and difficult one because of \"how market structure and size distribution of firms vary from industry to industry.\" He testified that some industries are dominated by a few large firms, some are comprised almost entirely of small businesses, and others \"can be referred to as a mixed industry.\" He argued that each market structure presents unique challenges for defining small businesses within that industry group. For example, he argued that it was debatable whether the SBA should provide any assistance to any of the businesses within industries where \"smaller firms are flourishing.\" On March 10, 1980, the SBA issued a notice of proposed rulemaking designed to \"reduce administrative complexity\" by replacing its two sets of size standards, one for procurement preferences and another for its loan and consultative support services, with a single set of size standards for both purposes. The SBA also proposed to use a single factor, the firm's number of employees, for definitional purposes for nearly all industries instead of using the firm's number of employees for some industries, the firm's assets for others, and the firm's annual gross receipts for still others. The SBA argued that when size standards are denominated in dollars, i.e., annual revenues, its ability to help the small business sector is undermined by inflation. Using employment, as opposed to dollar sales, will provide greater stability for SBA and its clients; will remove inter-industry distortions generated by differential inflation rates; and reduce the need for SBA to make frequent revisions in the size standards merely to reflect price increases. In setting its proposed new size standards for each industry (ranging from no more than 15 to no more than 2,500 employees), the SBA first placed each industry into one of three groups: concentrated (characterized by a highly unequal distribution of sales among the firms in the industry), competitive (characterized by a more equal distribution of sales in the industry), or mixed (industries that do not meet the criteria of competitive or concentrated industries). The SBA determined that there were 160 concentrated industries, 317 competitive industries, and 249 mixed industries. The SBA argued that establishing a size standard for the 160 concentrated industries was a \"straight-forward task—simply identify and exclude those few firms which account for a disproportionately large share of the industry's sales.\" For competitive industries, the SBA argued that the size standard should be set \"relatively low, so as to support entry and moderate growth.\" The SBA argued that mixed industries require \"relatively high size standards ... to reinforce competition and offset the pressures to increase the degree of concentration in these industries.\" The proposed new SBA size standards would have had the net effect of reducing the number of firms classified as small by about 225,000. In percentage terms, the number of firms classified as small would have been reduced from about 99% of all employer firms to 96%. Over 86% of the more than 1,500 public comments received by the SBA concerning its proposed new size standards criticized it. Most of the criticism was from firms that would no longer be considered small under the new size standards. In addition, several federal agencies indicated that the proposed size standards in the services and construction industries were set too low, reducing the number of small firms eligible to compete for procurement contracts below levels they deemed necessary to ensure adequate competition to prevent agency costs from rising. On October 21, 1980, Congress required the SBA to take additional time to consider the consequences of the proposed changes to the size standards by adopting the Small Business Export Expansion Act of 1980 ( P.L. 96-481 ). It prohibited \"the SBA from promulgating any final rule or regulation relating to small business size standards until March 31, 1981.\" In the meantime, the Reagan Administration entered office, and, as is customary when there is a change in Administration, replaced the SBA's senior leadership. The SBA's new Administrator, Michael Cardenas, was sympathetic to the concerns of federal agencies that the proposed size standards in the services and construction industries were set too low to meet those agencies' procurement needs. As a result, he indicated that the SBA would modify its size standards proposal by (1) increasing the proposed size standards for 51 industries, mostly in the services and construction industries; (2) lowering the proposed size standards in 157 manufacturing industries (typically from no more than 2,500 employees to no more than 500 employees) to prevent one or more of the largest producers in those industries from being classified as small; and (3) increasing the SBA's proposed lowest size standard from no more than 15 employees to no more than 25 employees (affecting 93 service and trade industries). The net effect of these changes would have restored eligibility for approximately 60,000 of the 225,000 firms expected to lose eligibility under the previous Administration's proposal. The SBA subsequently met with various trade organizations and federal agency procurement officials to discuss the proposal. As these consultations took place, the SBA experienced another turnover in its senior leadership. The SBA, headed by the new appointee, James C. Sanders, issued a notice of proposed rulemaking concerning its size standards on May 3, 1982. The proposal differed from its March 10, 1980, predecessor in three ways: First, the range of size standards was narrowed to a range of 25 employees to 500 employees. This reflected a widespread view that 15 employees was too low a cutoff while 2,500 employees was too high. Second, SBA proposed a 500-employee ceiling, focusing on smaller firms. Third, SBA responded to sentiments within many procurement-sensitive industries that the proposed size standards in some cases were too low to accommodate the average procurement currently being performed by small business. Therefore, SBA proposed higher size standards in a number of procurement-sensitive industries, while maintaining the 500-employee cap. The SBA received over 500 comments on the proposed rule, with about 72% of those comments opposing the rule. Taking those comments into consideration, the SBA reexamined its size standards once again, and, after a year of further consultation with various trade organizations and federal agency procurement officials, issued another notice of proposed rulemaking on May 6, 1983. The 1983 proposal (1) replaced the use of two sets of size standards, one for procurement and another for the SBA's loan and consultative support services, with a single set for all programs; (2) retained most of the size standards that were expressed in terms of average annual sales or receipts; (3) adjusted those size standards for inflation (an upward adjustment of 81%); (4) retained most of the size standards for manufacturing; and (5) made relatively minor changes to the size standards in other industries, with a continued emphasis on a 500-employee ceiling for most industries. The SBA received 630 comments on the proposed rule, with almost 70% supporting it. SBA Administrator Sanders characterized the SBA's revised size standard proposal as \"a fine-tuning of current standards which has the basic support of both the private sector and the Federal agencies that use the basic size standards to achieve their set-aside procurement goals.\" He also added that \"since almost no size standard is proposed to decrease, and most will in fact increase, very few firms will lose their small business status. We estimate that about 39,000 firms will gain small business status.\" He testified that in percentage terms, in 1983, 97.9% of the nation's 5.2 million firms with employees were classified by the SBA as small. Under the SBA's proposal, 98.6% of all firms with employees would be classified as small. The final rule was published in the Federal Register on February 9, 1984. Representative Parren J. Mitchell, chair of the House Committee on Small Business, expressed disappointment in the SBA's final rule, stating at a congressional oversight hearing on July 30, 1985, that \"the government and the business community are still victimized by that same ad hoc, sporadic system that the SBA promised to fix some six years ago.\" He introduced legislation ( H.R. 1178 , a bill to amend the Small Business Act) that would have required the SBA to adjust its size standard for an industrial classification downward by at least 20% if small business' share of that market equaled or exceeded 60%, and at least 40% of the market share was achieved through the receipt of federal procurement contracts. The bill also mandated a minimum 10% increase in the SBA's size standard for an industrial classification if small business' share of that market was less than 20% and less than 10% of the market share was achieved through the receipt of federal procurement contracts. The bill was opposed by various trade associations, the SBA, and federal agency procurement officials, and was not reported out of committee. On December 31, 1992, the SBA issued a notice of proposed rulemaking \"to streamline its size standards\" by reducing the number of fixed size standard levels from 30 to 9. The nine proposed size standards were no more than 100, 500, 750, 1,000, or 1,500 employees; and no more than $5 million, $10 million, $18 million, or $24 million in annual receipts. The annual receipts levels reflected an upward adjustment of 43% for inflation. The SBA argued that the proposed changes would make the size standards more user-friendly for small business owners and restore eligibility to nearly 20,000 firms that were no longer considered small solely because of the effects of inflation. The proposed rule was later withdrawn as a courtesy to allow the incoming Clinton Administration time to review it. The SBA ultimately decided not to pursue this approach because it felt that converting \"receipts based size standards in effect at that time to one of four proposed receipts levels created a number of unacceptable anomalies.\" Over the subsequent decade, the SBA reviewed the size standards for some industries on a piecemeal basis and, in 1994, adjusted for inflation its size standards based on firm's annual sales or receipts (an upward adjustment of 48.2%). The SBA estimated that the adjustment would restore eligibility to approximately 20,000 firms that lost small-business status due solely to the effects of inflation. In 2002, the SBA adjusted for inflation its annual sales and receipts based size standards for the fourth time (an upward adjustment of 15.8%). The SBA estimated that the adjustment would restore eligibility to approximately 8,760 firms that lost small-business status due solely to the effects of inflation. The rule also included a provision that the SBA would assess the impact of inflation on its annual sales and receipts based size standards at least once every five years. Then, on March 19, 2004, the SBA, once again, issued a notice of proposed rulemaking to streamline its size standards. The proposed rule would have established size standards based on the firm's number of employees for all industries, avoiding the need to adjust for inflation size standards based on sales or receipts. At that time, the SBA size standards consisted of 37 different size levels: 30 based on annual sales or receipts, 5 on the number of employees (both full- and part-time), 1 on financial assets, and 1 on generating capacity. Under the proposed rule, the SBA would use 10 size standards, 5 new employee size standards (adding no more than 50, 150, 200, 300, and 400 employees), and the existing 5 employee size standards (no more than 100, 500, 750, 1,000, and 1,500 employees). The proposed rule would not have changed any existing size standards based on number of employees. The SBA argued that the use of a single size standard would \"help to simplify size standards\" and \"tends to be a more stable measure of business size\" than other measures. It added that the proposed rule would change 514 size standards and that, after the proposed conversion to the use of number of employees, of the \"approximately 4.4 million businesses in the industries with revised size standards, 35,200 businesses could gain and 34,100 could lose small business eligibility, with the net effect of 1,100 additional businesses defined as small.\" A majority (51%) of the more than 4,500 comments on the proposed rule supported it, but with \"a large number of comments opposing various aspects of SBA's approach to simplifying size standards.\" In addition, the chairs of the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship opposed the proposed rule, largely because they were concerned about potential job losses resulting from more than 34,000 small businesses losing program eligibility. The SBA withdrew the proposed rule on July 1, 2004. In 2005, the SBA adjusted for inflation size standards based on firms' annual sales or receipts (an upward adjustment of 8.7%). The SBA estimated that the adjustment restored eligibility to approximately 12,000 firms that lost small-business status due solely to inflation. In 2008, the SBA made another adjustment for inflation to its annual sales and receipts based standards (another upward adjustment of 8.7%). The SBA estimated that the adjustment restored eligibility for approximately 10,400 firms that lost small-business status due solely to inflation. In June 2008, the SBA announced that it would undertake a comprehensive, two-year review of its size standards, proceeding one industrial sector at a time, starting with Retail Trade (NAICS Sector 44-45), Accommodations and Food Services (NAICS Sector 72), and Other Services (NAICS Sector 81). The SBA argued that it was concerned that \"not all of its size standards may now adequately define small businesses in the U.S. economy, which has seen industry consolidations, technological advances, emerging new industries, shifting societal preferences, and other significant industrial changes.\" It added that its reliance on an ad hoc approach \"scrutinizing the limited number of specific industries during a year, while worthwhile, leaves unexamined many deserving industries for updating and may create over time a set of illogical size standards.\" The SBA announced that it would begin its analysis of its size standards by assuming that \"$6.5 million [later increased to $7.5 million] is an appropriate size standard for those industries with receipts size standards and 500 employees for those industries with employee size standards.\" It would then analyze the following industry characteristics: \"average firm size; average asset size (a proxy for startup costs); competition, as measured by the market share of the four largest firms in the industry; and, the distribution of market share by firm size—that is, are firms in the industry generally very small firms, or dominated by very large firms.\" Then, before making its final determination on the size standard, it would \"examine the participation of small businesses in federal contracting and SBA's guaranteed loan program at the current size standard level. Depending on the level of small business participation, additional consideration may be given to the level of the current size standard and the analysis of industry factors.\" In April 2009, the SBA announced that was simplifying the administration and use of its size standards by reducing the number of receipts based size standards from 31 to 8 when establishing a new size standard or reviewing an existing size standard: For many years, SBA has been concerned about the complexity of determining small business status caused by a large number of varying receipts based size standards (see 69 FR 13130 (March 4, 2004) and 57 FR 62515 (December 31, 1992)). At the start of current comprehensive size standards review, there were 31 different levels of receipts based size standards. They ranged from $0.75 million to $35.5 million, and many of them applied to one or only a few industries. The SBA believes that to have so many different size standards with small variations among them is unnecessary and difficult to justify analytically. To simplify managing and using size standards, SBA proposes that there be fewer size standard levels. This will produce more common size standards for businesses operating in related industries. This will also result in greater consistency among the size standards for industries that have similar economic characteristics. Under the current comprehensive size standards review, SBA is proposing to establish eight \"fixed-level\" receipts based size standards: $5.0 million, $7.0 million, $10.0 million, $14.0 million, $19.0 million, $25.5 million, $30.0 million, and $35.5 million. These levels are established by taking into consideration the minimum, maximum and the most commonly used current receipts based size standards. These eight receipts based size standards were increased to $5.5 million, $7.5 million, $11.0 million, $15.0 million, $20.5 million, $27.5 million, $32.5 million, and $38.5 million in 2014 to account for inflation. The SBA also announced that it would use eight employee based size standards when establishing a new size standard or reviewing an existing size standard (no more than 50, 100, 150, 200, 250, 500, 750, and 1,000 employees) instead of seven (no more than 50, 100, 150, 500, 750, 1,000, and 1,500 employees); and continue to use one asset based size standard, one megawatt hours size standard (based on electrical output over the preceding fiscal year), and one size standard based on a combination of the number of employees and barrel per day refining capacity. The SBA also announced that \"to simplify size standards further\" it \"may propose a common size standard for closely related industries.\" The SBA argued although the size standard analysis may support a separate size standard for each industry, SBA believes that establishing different size standards for closely related industries may not always be appropriate. For example, in cases where many of the same businesses operate in the same multiple industries, a common size standard for those industries might better reflect the Federal marketplace. This might also make size standards among related industries more consistent than separate size standards for each of those industries. Because SBA size standards remain in force until after they are reviewed, the number of size standards did not immediately drop from 41 to 19 in 2009. Instead, the number of size standards began to decline gradually as new size standard final rules were issued. In addition, from 2010 through 2016, the SBA decided, in most instances, not to lower size standards (which would have made it more difficult for businesses to qualify) even if the data supported lowering them because unemployment at that time was relatively high and doing so would \"run counter to numerous Congressional and Administration's initiatives and programs to create jobs and boost economic growth.\" As a result of this policy decision, several size standards that would have otherwise been eliminated remained in place. Also, in 2016, the SBA added a new employee based size standard (no more than 1,250 employees) and reinstated the use of another (no more than 1,500 employees) when establishing a new, or revising an existing, size standard. The SBA's decisions in 2009 to reduce the number of receipts based size standards and to propose a common size standard for closely related industries were opposed by some industry groups. They argued that these policies could lead to the SBA to classify an industry \"for the sake of convenience\" into a size standard that the agency's own economic analysis indicates should be in a different (easier to qualify) size standard. Congress adopted legislation in 2013 ( P.L. 112-239 , National Defense Authorization Act for Fiscal Year 2013) that included provisions directing the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification. The SBA currently has 27 SBA industry size standards in effect (16 receipts based size standards, 9 employee based sized standards, 1 asset based size standard, and 1 size standard based on a combination of the number of employees and barrel per day refining capacity). That number is expected to increase given the SBA's directive not to limit the number of size standards. As mentioned previously, P.L. 111-240 requires the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards during the 18-month period beginning on the date of enactment (September 27, 2010) and during every 18-month period thereafter. The act directs the SBA to \"make appropriate adjustments to the size standards\" to reflect market conditions, and to report to the House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship and make publicly available \"not later than 30 days\" after the completion of each review information regarding the factors evaluated as part of each review, the criteria used for any revised size standard, and why the SBA did, or did not, adjust each size standard that was reviewed. The act also requires the SBA to ensure that each industry size standard is reviewed at least once every five years. On July 7, 2011, the SBA announced that its \"comprehensive review of all small business size standards\" would begin with the following six industries: Educational Services (final rule was issued on September 24, 2012); Health Care and Social Assistance Services (final rule was issued on September 24, 2012); Real Estate Rental and Leasing (final rule was issued on September 24, 2012); Administrative and Support, Waste Management and Remediation Services (final rule was issued on December 6, 2012); Information (final rule was issued on December 6, 2012); and Utilities (final rule was issued on December 23, 2013). The SBA subsequently completed size standard reviews for all industries in January 2016 (listed by when the final rule was issued): Professional, Scientific and Technical Services (final rule was issued on February 24, 2012); Transportation and Warehousing (final rule was issued on February 24, 2012); Agriculture, Forestry, Fishing and Hunting (final rule was issued on June 20, 2013); Arts, Entertainment, and Recreation (final rule was issued on June 20, 2013); Finance and Insurance (final rule was issued on June 20, 2013); Management of Companies (final rule was issued on June 20, 2013); Support Activities for Mining (final rule was issued on June 20, 2013); Construction (final rule was issued on December 23, 2013); Wholesale Trade (final rule was issued on January 25, 2016); Industries with Employee Based Size Standards not Part of Manufacturing, Wholesale Trade, or Retail Trade (final rule was issued on January 26, 2016); and Manufacturing (final rule was issued on January 26, 2016). A summary of the final rules issued for each industry is provided in Table A-1 . During the first five-year review cycle, the SBA increased 621 size standards, decreased 3 (to exclude potentially dominant firms from being considered small), and retained 388 at their pre-existing levels. Of the 388 retained size standards, 214 were retained based on the results of the SBA's economic analysis and 174 were retained based on the SBA's policy of generally not lowering any size standard, even though the results of the economic analysis supported lowering them, due to national economic conditions. The SBA has started its second five-year review of its size standards and anticipates issuing its first final rules in the second five-year review cycle in 2019, using new size standard methodology announced in April 2018 (discussed in the next section). The SBA also announced in April 2018 that its policy of generally not lowering size standards when the analysis indicates that a lower standard is justified would no longer be in force, at least initially, during the second five-year review cycle: the decision to raise, lower, or retain a size standard will primarily be driven by analytical results, with due considerations of public comments, impacts of changes on the affected businesses, and other factors SBA considers important. All of these decisions will be detailed in individual rulemakings. It will take several years to complete the five-year review of all size standards … during which the state of the economy may change. It is, therefore, not possible to state now … what impact, if any, the future economic environment would have on the SBA's policy decision regarding size standards. As mentioned earlier, the SBA, relying on statutory language, defines a small business as a concern that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis. The business may be a sole proprietorship, partnership, corporation, or any other legal form. The SBA uses two measures to determine if a business is small: industry specific size standards or a combination of the business's net worth and net income. For example, the SBA's Small Business Investment Company (SBIC) program allows businesses to qualify as small if they meet the SBA's size standard for the industry in which the applicant is primarily engaged, or an alternative net worth and net income based size standard which has been established for the SBIC program. The SBIC's alternative size standard is currently set as a maximum net worth of not more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5 million. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. The SBA decided to apply the net worth and net income measures to the SBIC program \"because investment companies evaluate businesses using these measures to decide whether or not to make an investment in them.\" Businesses participating in the SBA's 504/Certified Development Company (504/CDC) loan guaranty program are to be deemed small if they did not have a tangible net worth in excess of $8.5 million and did not have an average net income in excess of $3 million after taxes for the preceding two years. As discussed below, P.L. 111-240 increased these threshold amounts on an interim basis to not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes for the two full fiscal years before the date of the application. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. Also, before May 5, 2009, businesses participating in the SBA's 7(a) loan guaranty program, including its express programs, were deemed small if they met the SBA's size standards for firms in the industries described in NAICS. Using authority provided under P.L. 111-5 , the American Recovery and Reinvestment Act of 2009, the SBA temporarily applied the 504/CDC program's size standards as an alternative for 7(a) loans approved from May 5, 2009, through September 30, 2010. Firms applying for a 7(a) loan during that time period qualified as small using either the SBA's industry size standards or the 504/CDC program's size standard. The provision's intent was to enhance the ability of small businesses to access the capital necessary to create and retain jobs during the economic recovery. P.L. 111-240 made the use of alternative size standards for the 7(a) program permanent. The act directs the SBA to establish an alternative size standard for both the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards. The act also establishes, until the date on which the alternative size standard is established, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application. The SBA Administrator has the authority to establish and modify size standards for particular industries. Overall, about 97% of all employer firms qualify as small under the SBA's size standards. These firms account for about 30% of industry receipts. The SBA generally \"prefers to use average annual receipts as a size measure because it measures the value of output of a business and can be easily verified by business tax returns and financial records.\" However, historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small. Before a proposed change to the size standards can take effect, the SBA's Office of Size Standards (OSS) undertakes an analysis of the change's likely impact on the affected industry, focusing on the industry's overall degree of competition and the competitiveness of the firms within the industry. The analysis includes an assessment of the following four economic factors: \"average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms.\" The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors \"as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses.\" The specifics of SBA's size standards methodology have evolved over the years with the availability of new industry and federal procurement data and staff research. For example, the SBA previously presumed less than $7.0 million (increased to less than $7.5 million in 2014 to account for inflation) as an appropriate \"anchor\" size standard for the services, retail trade, construction, and other industries with receipts based size standards; 500 or fewer employees as an appropriate anchor size standard for the manufacturing, mining and other industries with employee based size standards; and 100 or fewer employees as an appropriate anchor size standard for the wholesale trade industries. These three anchor size standards were used as benchmarks or starting points for the SBA's economic analysis. To the extent an industry displayed \"differing industry characteristics,\" a size standard higher, or in some cases lower, than an anchor size standard was used. In April 2018, the SBA replaced the \"anchor\" approach with a \"percentile\" approach, primarily because the anchors were no longer representative of the size standards being used (just 24% of industries with receipt-based size standards and 22% of those with employee based size standards have the anchor size standards) and the anchor approach entails \"grouping industries from different NAICS sectors thereby making it inconsistent with section 3(a)(7) of the [Small Business] Act,\" which limits the SBA's ability to create common size standards by grouping industries below the 4-digit NAICS level. Specifically, when assessing the appropriateness of the current size standards, the SBA now evaluates the structure of each industry in terms of four economic characteristics or factors, namely average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms using the Gini coefficient. For each size standard type ... SBA ranks industries both in terms each of the four industry factors and in terms of the existing size standard and computes the 20 th percentile and 80 th percentile values for both. SBA then evaluates each industry by comparing its value for each industry factor to the 20 th percentile and 80 th percentile values for the corresponding factor for industries under a particular type of size standard. If the characteristics of an industry under review within a particular size standard type are similar to the average characteristics of industries within the same size standard type in the 20 th percentile, SBA will consider adopting as an appropriate size standard for that industry the 20 th percentile value of size standards for those industries. For each size standard type, if the industry's characteristics are similar to the average characteristics of industries in the 80 th percentile, SBA will assign a size standard that corresponds to the 80 th percentile in the size standard rankings of industries. A separate size standard is established for each factor based on the amount of differences between the factor value for an industry under a particular size standard type and 20 th percentile and 80 th percentile values for the corresponding factor for all industries in the same type. Specifically, the actual level of the new size standard for each industry factor is derived by a linear interpolation using the 20 th percentile and 80 th percentile values of that factor and corresponding percentiles of size standards. Each calculated size standard will be bounded between the minimum and maximum size standards levels [see Table 2 ] ... the calculated value for a receipts based size standard for each industry factor is rounded to the nearest $500,000 and the calculated value for an employee based size standard is rounded to the nearest 50 employees for Manufacturing and industries in other sectors (except Wholesale and Retail Trade) and to the nearest 25 employees for employee based size standards for Wholesale Trade and Retail Trade. The SBA anticipates that its shift from using the anchor approach to the percentile approach will have minimal impact, both in terms of the direction and magnitude of changes, to its industry size standards. Any changes to size standards must follow the rulemaking procedures of the Administrative Procedure Act. A proposed rule changing a size standard is first published in the Federal Register , allowing for public comment. It must include documentation establishing that a significant problem exists that requires a revision of the size standard, plus an economic analysis of the change. Comments from the public, plus any other new information, are reviewed and evaluated before a final rule is promulgated establishing a new size standard. The SBA currently uses employment size to determine eligibility for 505 of 1,036 industries (48.6%), including all 360 manufacturing industries, 24 mining industries, and 71 wholesale trade industries. As of October 1, 2017, 98 manufacturing industries have an upper limit of 500 employees (27.2%); 91 have an upper limit of 750 employees (25.2%); 89 have an upper limit of 1,000 employees (24.7%); 56 have an upper limit of 1,250 employees (15.6%); and 26 have an upper limit of 1,500 employees (7.2%). 3 of the 24 mining industries have an upper limit of 250 employees (12.5%), 7 have an upper limit of 500 employees (29.2%), 7 have an upper limit of 750 employees (29.2%), 2 have an upper limit of 1,000 employees (8.3%), 3 have an upper limit of 1,250 employees (12.5%), and 2 have an upper limit of 1,500 employees (8.3%). 25 of the 71 wholesale trades industries have an upper limit of 100 employees (35.2%), 16 have an upper limit of 150 employees (22.5%), 21 have an upper limit of 200 employees (29.6%), and 9 have an upper limit of 250 employees (12.7%). The SBA currently has nine employee based industry size standards in effect (no more than 100, 150, 200, 250, 500, 750, 1,000, 1,250, and 1,500 employees). The SBA uses average annual receipts over the three (soon to be five) most recently completed fiscal years to determine program eligibility for most other industries (526 of 1,036 industries, or 50.8%). The SBA also uses average asset size as reported in the firm's four quarterly financial statements for the preceding year to determine eligibility for five finance industries, and a combination of number of employees and barrel per day refining capacity for petroleum refineries. The SBA currently has 16 receipts based industry size standards in effect. In some instances, there is considerable variation in the size standards used within each industrial sector. For example, the SBA uses 11 different size standards to determine eligibility for 66 industries in the retail trade sector. In general, most administrative and support service industries have an upper limit of either $15.0 million or $20.5 million in average annual sales or receipts; most agricultural industries have an upper limit of $0.75 million in average annual sales or receipts; most construction of buildings and civil engineering construction industries have an upper limit of $36.5 million in average annual sales or receipts, and most construction specialty trade contractors have an upper limit of $15.0 million in average annual sales or receipts; most educational services industries have an upper limit of either $7.5 million or $11.0 million in average annual sales or receipts; most health care industries have an upper limit of either $7.5 million or $15.0 million in average annual sales or receipts; most social assistance industries have an upper limit of $11.0 million in average annual sales or receipts; there is considerable variation within the professional, scientific, and technical service industries, ranging from an upper limit of $7.5 million in average annual sales or receipts to $38.5 million; there is considerable variation within the transportation and warehousing industrial sector, ranging from an upper limit of $7.5 million in average annual sales or receipts to $38.5 million for 43 industries and from an upper limit of 500 employees to 1,500 employees for 15 industries); and most finance and insurance industries have an upper limit of $38.5 million in average annual sales or receipts. The SBA also applies a $550 million average asset limit (as reported in the firm's four quarterly financial statements for the preceding year) to determine eligibility in five finance industries: commercial banks, saving institutions, credit unions, other depository credit intermediation, and credit card issuing. Many federal statutes provide special considerations for small businesses. For example, small businesses are provided preferences through set-asides and sole source awards in federal contracting and pay lower fees to apply for patents and trademarks. In most instances, businesses are required to meet the SBA's size standards to be considered a small business. However, in some cases, the underlying statute defines the eligibility criteria for defining a small business. In other cases, the statute authorizes the implementing agency to make those determinations. Under current law, a federal agency that decides that it would like to exercise its authority to establish its own size standard through the federal rulemaking process is required to, among other things, (1) undertake an initial regulatory flexibility analysis to determine the potential impact of the proposed rule on small businesses, (2) transmit a copy of the initial regulatory flexibility analysis to the SBA's Chief Counsel for Advocacy for comment, and (3) publish the agency's response to any comments filed by the SBA's Chief Counsel for Advocacy in response to the proposed rule and a detailed statement of any change made to the proposed rule in the final rule as a result of those comments. In addition, the federal agency must provide public notice of the proposed rule and an opportunity for the public to comment on the proposed rule, typically through the publication of an advanced notice of proposed rulemaking in the Federal Register and notification of interested small businesses and related organizations. Also, prior to issuing the final rule, the federal agency must have the approval of the SBA's Administrator. Under current practice, the SBA's Administrator, through the SBA's Office of Size Standards, consults with the SBA's Office of Advocacy prior to making a final decision concerning such requests. The Office of Advocacy is an independent office within the SBA. During the 112 th Congress, H.R. 585 , the Small Business Size Standard Flexibility Act of 2011, was reported by the House Committee on Small Business on November 16, 2011, by a vote of 13 to 8. The bill would have retained the SBA's Administrator's authority to approve or disapprove size standards for programs under the Small Business Act of 1953 (as amended) and the Small Business Investment Act of 1958 (as amended). The Office of Chief Counsel for Advocacy would have assumed the SBA Administrator's authority to approve or disapprove size standards for purposes of any other act. Similar legislative provisions have been introduced during the 113 th Congress ( H.R. 2542 , the Regulatory Flexibility Improvements Act of 2013, and included in H.R. 4 , the Jobs for America Act), 114 th Congress ( H.R. 527 , the Small Business Regulatory Flexibility Improvements Act of 2015, and its Senate companion bill, S. 1536 ), and 115 th Congress ( H.R. 33 , the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S. 584 , and included in H.R. 5 , the Regulatory Accountability Act of 2017). Advocates of splitting the SBA Administrator's small business size standards' authority between the Office of Chief Counsel for Advocacy and the SBA's Administrator have argued that Should an agency wish to draft a regulation that adopts a size standard different from the one already adopted by the Administrator in regulations implementing the Small Business Act, the agency must obtain approval of the Administrator. However, that requires the Administrator to have a complete understanding of the regulatory regime of that other act—knowledge usually outside the expertise of the SBA. However, the Office of the Chief Counsel for Advocacy, an independent office within the SBA, represents the interests of small businesses in rulemaking proceedings (as part of its responsibility to monitor agency compliance with the Regulatory Flexibility Act, 5 U.S.C. 601-12, (RFA)) does have such expertise. Therefore, it is logical to transfer the limited function on determining size standards of small businesses for purposes other than the Small Business Act and Small Business Investment Act of 1958 to the Office of the Chief Counsel for Advocacy…. the Administrator is not the proper official to determine size standards for purposes of other agencies' regulatory activities. The Administrator is not fluent with the vast array of federal regulatory programs, is not in constant communication with small entities that might be affected by another federal agency's regulatory regime, and does not have the analytical expertise to assess the regulatory impact of a particular size standard on small entities. Furthermore, the Administrator's standards are: very inclusive, not developed to comport with other agencies' regulatory regimes, and lack sufficient granularity to examine the impact of a proposed rule on a spectrum of small businesses. Opponents have argued that When an agency is seeking to use a size standard other than those approved by the SBA, the agency may consult with the Office of Advocacy. Such consultation is sensible, as the Office of Advocacy has significant knowledge of the regulatory environment outside of the canon of SBA law. However, the SBA's Office of Size Standards, with its historical involvement, expertise, and staff resources in this area, remains the appropriate entity to approve such size standards…. While the legislation permits the SBA to continue to approve size standards for its enabling statutes, it removes SBA's authority to do so for other statutes. The result would be to create a duplicate size standard authority in both the SBA and the Office of Advocacy. Both the SBA and the Office of Advocacy would have personnel who would analyze and evaluate size standards. Through the bifurcation of these responsibilities, taxpayers would effectively be forgoing the economies of scale that are currently enjoyed by the operation of a single Office of Size Standards in the SBA…. Having two such entities that have the same mission is not a transfer of function, but an inefficient and duplicative reorganization.… Instead of having one central office, there will now be two—further muddling small businesses' relationship with the federal government. Two bills were introduced during the 114 th Congress ( H.R. 3714 , the Small Agriculture Producer Size Standards Improvements Act of 2015, and H.R. 4341 , the Defending America's Small Contractors Act of 2016) to authorize the SBA to establish size standards for agricultural enterprises not later than 18 months after the date of enactment. The size standard for agricultural enterprises was, at that time, set in statute as having annual receipts not in excess of $750,000. H.R. 4341 , among other provisions, would have also limited an industry category to a greater extent than provided under the North American Industry Classification codes for small business procurement purposes if further segmentation of the industry category is warranted. H.R. 4341 was introduced on January 7, 2016, and ordered to be reported with amendment by the House Committee on Small Business on January 13, 2016. H.R. 3714 was introduced on October 8, 2015, considered by the House under suspension of the rules on April 19, 2016, and agreed to by voice vote. P.L. 114-328 , the National Defense Authorization Act for Fiscal Year 2017, includes a provision which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes. Also, as mentioned previously, P.L. 115-324 , the Small Business Runway Extension Act of 2018, directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts. The SBA has not announced if it will continue to use the average annual gross receipts over three years to determine receipts-based size standards or if it will use the average annual gross receipts from the previous five years. Historically, the SBA has relied on economic analysis of market conditions within each industry to define eligibility for small business assistance. On several occasions in its history, the SBA attempted to revise its small business size standards in a comprehensive manner. However, because (1) the Small Business Act provides leeway in how the SBA is to define small business; (2) there is no consensus on the economic factors that should be used in defining small business; (3) federal agencies have generally opposed size standards that might adversely affect their pool of available small business contractors; and (4) the SBA's initial size standards provided program eligibility to nearly all businesses, the SBA's efforts to undertake a comprehensive reassessment of its size standards met with resistance. Firms that might lose eligibility objected. Federal agencies also objected. As a result, in each instance, the SBA's comprehensive revisions were not fully implemented. The SBA's congressionally mandated requirement to conduct a detailed review of at least one-third of the SBA's industry size standards every 18 months was imposed by P.L. 111-240 , the Small Business Jobs Act of 2010, to prevent small business size standards from becoming outdated. More frequent reviews of the size standards were expected to increase their accuracy and, generally speaking, result in (1) increased numbers of small businesses found to be eligible for SBA assistance and (2) an increase in the number and amount of federal contracts awarded to small businesses (primarily by preventing large businesses from being misclassified as small and by increasing the number of small businesses eligible to compete for federal contracts). As expected, the SBA's economic analyses during the recent five-year review cycle often supported an increase in the size standards for many industries. However, the SBA's economic analyses also occasionally supported a decrease in the size standards for some industries. Despite the SBA's decision to, in most circumstances, make no changes when their economic analyses indicated that a decrease was warranted, it could be argued that the increased frequency of the reviews has generally prevented the SBA's size standards from becoming outdated. This, in turn, has, at least to a certain extent, improved the accuracy of the size standards (as measured by the extent to which the size standard is in alignment with the SBA's economic analyses). In a related matter, the SBA continues to adjust its receipts based size standards for inflation at least once every five years, or more frequently if inflationary circumstances warrant, to prevent firms from losing their small business eligibility solely due to the effects of inflation. The most recent adjustment for inflation took place on July 14, 2014. Prior to that, the last adjustment for inflation took place in 2008. The SBA also continues to review size standards within specific industries whenever it determines that market conditions within that industry have changed. Congress has several options related to the SBA's ongoing review of its size standards. For example, as part of its oversight of the SBA, Congress can wait for the agency to issue its proposed rule before providing input or establish a dialogue with the agency, either at the staff level or with Members involved directly, prior to the issuance of its proposed rule. Historically, Congress has tended to wait for the SBA to issue proposed rules concerning its size standards before providing input, essentially deferring to the agency's expertise in the technical and methodological issues involved in determining where to draw the line between small and large firms. Congress has then tended to respond to the SBA's proposed rules concerning its size standards after taking into consideration current economic conditions and input received from the SBA and affected industries. Waiting for the SBA to issue its proposed rule concerning its size standards before providing congressional input has both advantages and disadvantages. It provides the advantage of insulating the proposed rule from charges that it is influenced by political factors. It also has the advantage of respecting the separation of powers and responsibilities of the executive and legislative branches. However, it has the disadvantage of heightening the prospects for miscommunication, false expectations, and wasted effort, as evidenced by past proposed rules concerning the SBA's size standards that were either rejected outright, or withdrawn, after facing congressional opposition. Another policy option that has not received much congressional attention in recent years, but which Congress may choose to address, is the targeting of the SBA's resources. When the SBA reviews its size standards, it focuses on the competitive nature of the industry under review, with the goal of removing eligibility of firms that are considered large, or dominant, in that industry. There has been relatively little discussion of the costs and benefits of undertaking those reviews with the goal of targeting SBA resources to small businesses in industries that are struggling to remain competitive. GAO recommended this approach in 1978 and Roger Rosenberger, then SBA's associate administrator for policy, planning, and budgeting, testified at a congressional hearing in 1979 that it was debatable whether the SBA should provide any assistance to any of the businesses within industries where \"smaller firms are flourishing.\" Revising the SBA's size standards using this more targeted approach would likely reduce the number of firms eligible for assistance. It would also present the possibility of increasing available benefits to eligible small firms in those industries deemed \"mixed\" or \"concentrated\" by the SBA without necessarily increasing overall program costs. Perhaps because previous proposals that would result in a reduction in the number of firms eligible for assistance have met with resistance, this alternative approach to determining program eligibility has not received serious consideration in recent years. Nonetheless, it remains an option available to Congress should it decide to change current policy.", "summary": "Small business size standards are of congressional interest because they have a pivotal role in determining eligibility for Small Business Administration (SBA) assistance as well as federal contracting and, in some instances, tax preferences. Although there is bipartisan agreement that the nation's small businesses play an important role in the American economy, there are differences of opinion concerning how to define them. The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA to establish size standards to ensure that only small businesses receive SBA assistance. The SBA currently uses two types of size standards to determine SBA program eligibility: industry-specific size standards and alternative size standards based on the applicant's maximum tangible net worth and average net income after federal taxes. The SBA's industry-specific size standards determine program eligibility for firms in 1,036 industrial classifications in 23 sub-industry activities described in the 2017 North American Industry Classification System (NAICS). The size standards are based on one of four measures: (1) number of employees, (2) average annual receipts in the previous three (may soon be the previous five) years, (3) average asset size as reported in the firm's four quarterly financial statements for the preceding year, or (4) a combination of number of employees and barrel per day refining capacity. Overall, about 97% of all employer firms qualify as small under the SBA's size standards. These firms represent about 30% of industry receipts. The SBA conducts an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, to determine its size standards. However, in the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance and by Members concerned that the size standards may not adequately target assistance to firms that they consider to be truly small. This report provides a historical examination of the SBA's size standards and assesses competing views concerning how to define a small business. It also discusses P.L. 111-240, the Small Business Jobs Act of 2010, which authorized the SBA to establish an alternative size standard using maximum tangible net worth and average net income after federal taxes for both the 7(a) and 504/CDC loan guaranty programs; established, until the SBA acted, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application; and required the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards every 18 months beginning on the new law's date of enactment (September 27, 2010) and ensure that each size standard is reviewed at least once every five years. P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, which directed the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification. This provision addressed the SBA's practice of limiting the number of size standards it used and combining size standards within industrial groups as a means to reduce the complexity of its size standards and to provide greater consistency for industrial classifications that have similar economic characteristics. P.L. 114-328, the National Defense Authorization Act for Fiscal Year 2017, which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes. Previously, the small business size standard for agricultural enterprises was set in statute as having annual receipts not in excess of $750,000. P.L. 115-324, the Small Business Runway Extension Act of 2018, which directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts. Legislation introduced during recent Congresses (including H.R. 33, the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S. 584, during the 115th Congress) to authorize the SBA's Office of Chief Counsel for Advocacy to approve or disapprove a size standard requested by a federal agency for purposes other than the Small Business Act or the Small Business Investment Act of 1958. The SBA's Administrator currently has that authority.", "document_type": "crs"}
{"report": "On November 9, 1916, Jeannette Rankin (R-MT) was elected to the House of Representatives as Montana's Representative-at-Large to the 65 th Congress (1917-1919). This election win gave Representative Rankin the dist inction of being the first woman elected to serve in Congress. The first woman to serve in the Senate was Rebecca Latimer Felton (D-GA). She was appointed in 1922 and served for one day. Three hundred sixty five women have been elected or appointed to Congress. These figures include six nonvoting Delegates, one each from Guam, Hawaii, the District of Columbia, and American Samoa, and two from the U.S. Virgin Islands, as well as one Resident Commissioner from Puerto Rico. Of these 365 women, there have been 247 Democrats and 118 Republicans; 309 (211 Democrats, 98 Republicans) women elected only in the House of Representatives, including 7 (4 Democrats, 3 Republicans) women who have served as Delegates or Resident Commissioners in the House; 40 (25 Democrats, 15 Republicans) women elected or appointed only in the Senate; and 16 (11 Democrats, 5 Republicans) women elected or appointed in both houses. A record 131 women currently serve in the 116 th Congress. This is higher than the previous record from the 115 th Congress (109 women initially sworn in, 5 House Members subsequently elected, and 2 Senators subsequently appointed). Of these 131 women, there are 25 in the Senate (17 Democrats and 8 Republicans); 106 in the House (91 Democrats and 15 Republicans); 4 of the women in the House who serve as Delegates or Resident Commissioner (2 Democrats and 2 Republicans), representing the District of Columbia, American Samoa, the U.S. Virgin Islands, and Puerto Rico; 25 African American women, 10 Asian Pacific American women, 15 Hispanic women, and 2 Native American women; and 5 women who chair House committees, 1 woman who chairs a Senate standing committee, 1 woman who chairs a House select committee, and 1 woman who chairs a Senate select committee. One of the House committee chairs also chairs a Joint Committee. Other notable facts about women in the 116 th Congress include the following: Not including Delegates and the Resident Commissioner, women currently hold 102 (23.4%) seats in the House of Representatives and 25 (25%) seats in the Senate, totaling 127 (23.7%) of the 535 voting seats in the 116 th Congress. Including Delegates and the Resident Commissioner, women currently hold 106 seats in the House of Representatives, increasing the total to 131 seats (24.2%) in the entire Congress. This report includes brief biographical information, committee assignments, dates of service, listings by Congress and state, and (for Representatives) congressional districts of the 365 women who have been elected or appointed to Congress. It will be updated when there are relevant changes in the makeup of Congress. For additional information, including a discussion of the impact of women in Congress as well as historical information, including the number and percentage of women in Congress over time, data on entry to Congress, comparisons to international and state legislatures, tenure, firsts for women in Congress, women in leadership, and African American, Asian Pacific American, Hispanic, and Native American women in Congress, see CRS Report R43244, Women in Congress: Statistics and Brief Overview , by Jennifer E. Manning and Ida A. Brudnick. The lists and tables that follow provide information on women Members of Congress, including the dates they were first elected or appointed, the Congresses in which they served, the committees on which they served, and, where relevant, the committees they chaired or served on as ranking Member. Table 1 lists all the women who have served in each Congress, by Congress. Table 2 lists the women Members of Congress, by state. Table 3 provides the total number of women in each Congress. Most of the data presented are from the Biographical Directory of the United States Congress, 1774-present , available at http://bioguide.congress.gov ; various editions of the Congressional Directory ; Congressional Quarterly and Leadership Directories Inc. publications; and Women in Congress website, at http://womenincongress.house.gov , maintained by the House of Representatives' Office of the Historian and the Office of Art and Archives, Office of the Clerk. The 116 th Congress committee assignments sources are the House, Official Alphabetical List of the Members with Committee Assignments in the 11 6 th Congress , available from the Clerk of the House's website at http://clerk.house.gov/committee_info/oal.aspx ; and Senate, Committee Assignments of the 11 6 th Congress , available at the Senate website at http://www.senate.gov/general/committee_assignments/assignments.htm . The names and jurisdiction of House and Senate committees have changed many times over the years. In the interest of brevity, this report does not identify all historical name changes. The committee names listed are for the most part those in effect at the time a Member served on the panel. ABEL, HAZEL HEMPEL. Republican; Nebraska, Senator. Elected to the 83 rd Congress to fill the vacancy caused by the death of Dwight P. Griswold and filled in the interim by Eva Bowring. (served Nov. 8, 1954, until her resignation Dec. 31, 1954) Committee assignments: S. Finance (83 rd Congress) S. Interstate and Foreign Commerce (83 rd Congress) ABZUG, BELLA S. Democrat; New York, 19 th District (92 nd Congress) and 20 th District (93 rd -94 th Congresses). Elected to the 92 nd -94 th Congresses. (served Jan. 3, 1971-Jan. 3, 1977) Committee assignments: H. Government Operations (92 nd -94 th Congresses) H. Public Works (92 nd -94 th Congresses) ADAMS, ALMA S. Democrat; North Carolina, 12 th District. Elected to the 113 th Congress to fill the vacancy caused by the resignation of Melvin L. Watt, and also elected to the 114 th -116 th Congresses. (served Nov. 4, 2014-present) Committee assignments: H. Agriculture (114 th -116 th Congresses) H. Education and the Workforce/Education and Labor (114 th -116 th Congresses) H. Small Business (114 th -115 th Congresses) H. Financial Services (116 th Congress) ADAMS, SANDY. Republican; Florida, 24 th District. Elected to the 112 th Congress. (served Jan. 3, 2011-Jan. 3, 2013) Committee assignments: H. Judiciary (112 th Congress) H. Science, Space and Technology (112 th Congress) ALLEN, MARYON PITTMAN. Democrat; Alabama, Senator. Appointed to the 95 th Congress June 8, 1978, to fill vacancy caused by the death of husband James B. Allen. (served June 12, 1978-Jan. 3, 1979) Committee assignments: S. Agriculture, Nutrition, and Forestry (95 th Congress) S. Judiciary (95 th Congress) ANDREWS, ELIZABETH B. Democrat; Alabama, 3 rd District. Elected to the 92 nd Congress in an April 4, 1972, special election to fill vacancy caused by the death of husband George W. Andrews. (served April 10, 1972-Jan. 3, 1973) Committee assignment: H. Post Office and Civil Service (92 nd Congress) ASHBROOK, JEAN. Republican; Ohio, 17 th District. Elected to the 97 th Congress in a June 29, 1982, special election to fill vacancy caused by the death of husband John M. Ashbrook. (served July 12, 1982-Jan. 3, 1983) Committee assignment: H. Merchant Marine and Fisheries (97 th Congress) AMATA, AUMUA. See RADEWAGEN, AUMUA AMATA COLEMAN. AXNE, CYNTHIA. Democrat; Iowa, 3 rd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Financial Services (116 th Congress) H. Agriculture (116 th Congress) AYOTTE, KELLY. Republican; New Hampshire, Senator. Elected in 2010. (served Jan. 3, 2011-Jan. 3, 2017) Committee assignments: S. Armed Services (112 th -114 th Congresses) S. Budget (112 th -114 th Congresses) S. Commerce, Science and Transportation (112 th -114 th Congresses) S. Small Business and Entrepreneurship (112 th -114 th Congresses) S. Special Aging (112 th -113 th Congresses) S. Homeland Security and Governmental Affairs (113 th -114 th Congresses) BACHMANN, MICHELE. Republican; Minnesota, 6 th District. Elected to the 110 th -113 th Congresses. (served Jan. 3, 2007-Jan. 3, 2015) Committee assignments: H. Financial Services (110 th -113 th Congresses) H. Intelligence (112 th -113 th Congresses) BAKER, IRENE BAILEY. Republican; Tennessee, 2 nd District. Elected to the 88 th Congress in a March 10, 1964, special election, to fill vacancy caused by the death of husband Howard H. Baker, Sr. (served March 10, 1964-Jan. 3, 1965) Committee assignment: H. Government Operations (88 th Congress) BAKER, NANCY KASSEBAUM. See KASSEBAUM, NANCY LANDON. BALDWIN, TAMMY. Democrat; Wisconsin, 2 nd District. Elected to the 106 th -112 th Congresses (served in House Jan. 3, 1999-Jan. 3, 2013). Subsequently elected to the Senate in 2012 and reelected in 2018. (served in Senate Jan. 3, 2013-present) Committee assignments: H. Budget (106 th -108 th Congresses) H. Judiciary (106 th -111 th Congresses) H. Energy and Commerce (109 th -112 th Congresses) S. Budget (113 th -114 th Congresses) S. Energy (113 th Congresses) S. Homeland Security and Governmental Affairs (113 th -114 th Congresses) S. Health, Education, Labor, and Pensions (113 th -116 th Congresses) S. Special Aging (113 th Congress) S. Appropriations (114 th -116 th Congresses) S. Commerce, Science and Transportation (115 th -116 th Congresses) BARRÁGAN, NANETTE DIAZ. Democrat; California, 44 th District. Elected to the 115 th -116 th Congresses. (served Jan. 3, 2017-present) Committee assignments: H. Homeland Security (115 th -116 th Congresses) H. Natural Resources (115 th Congress) H. Energy and Commerce (116 th Congress) BASS, KAREN. Democrat; California, 33 rd (112 th Congress) and 37 th District (113 th Congress-present). Elected to the 112 th -116 th Congresses. (served Jan. 3, 2011-present). Chair of the Congressional Black Caucus, 116 th Congress. Committee assignments: H. Budget (112 th Congress) H. Foreign Affairs (112 th -116 th Congresses) H. Judiciary (113 th -116 th Congresses) BEAN, MELISSA L. Democrat; Illinois, 8 th District. Elected to the 109 th -111 th Congresses. (served Jan. 3, 2005-Jan. 3, 2011) Committee assignments: H. Financial Services (109 th -111 th Congresses) H. Small Business (109 th -111 th Congresses) BEATTY, JOYCE. Democrat; Ohio, 3 rd District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Financial Services (113 th -116 th Congresses) Jt. Economic (116 th Congress) BENTLEY, HELEN DELICH. Republican; Maryland, 2 nd District. Elected to the 99 th -103 rd Congresses. (served Jan. 3, 1985-Jan. 3, 1995) Committee assignments: H. Merchant Marine and Fisheries (99 th -103 rd Congresses) H. Public Works and Transportation (99 th , 100 th , and 102 nd Congresses) H. Select Aging (99 th -102 nd Congresses) H. Budget (101 st -102 nd Congresses) H. Appropriations (103 rd Congress) BERKLEY, SHELLEY. Democrat; Nevada, 1 st District. Elected to the 106 th -112 th Congresses. (served Jan. 3, 1999-Jan. 3, 2013) Committee assignments: H. Small Business (106 th Congress) H. Transportation and Infrastructure (106 th -109 th Congresses) H. Veterans' Affairs (106 th -110 th Congresses) H. International Relations (107 th -109 th Congresses) H. Foreign Affairs (111 th Congress) H. Ways and Means (110 th -112 th Congresses) BIGGERT, JUDY. Republican; Illinois, 13 th District. Elected to the 106 th -112 th Congresses. (served Jan. 3, 1999-Jan. 3, 2013) Committee assignments: H. Banking and Financial Services (106 th Congress) H. Government Reform (106 th Congress) H. Financial Services (107 th -112 th Congresses) H. Science/Science and Technology/Science, Space and Technology (106 th -112 th Congresses) H. Education and the Workforce/and Labor (107 th -112 th Congresses) H. Standards of Official Conduct (107 th -109 th Congresses) BLACK, DIANE. Republican; Tennessee, 6 th District. Elected to the 112 th -115 th Congresses. (served Jan. 3, 2011-Jan. 3, 2019) Committee assignments: H. Budget (112 th -115 th Congresses; chair, 115 th Congress, 1 st session) H. Ways and Means (112 th -115 th Congresses) BLACKBURN, MARSHA. Republican; Tennessee, 7 th District, and Senator. Elected to the 108 th -115 th Congresses. (served in House Jan. 3, 2003-Jan. 3, 2019). Subsequently elected to the Senate in 2018. (served in Senate Jan. 3, 2019-present) Committee assignments: H. Education and the Workforce (108 th Congress) H. Government Reform (108 th Congress) H. Judiciary (108 th Congress) H. Energy and Commerce (109 th -115 th Congresses) H. Select Energy Independence and Global Warming (111 th Congress) H. Budget (113 th -114 th Congresses) S. Armed Services (116 th Congress) S. Commerce, Science and Transportation (116 th Congress) S. Judiciary (116 th Congress) S. Veterans' Affairs (116 th Congress) BLITCH, IRIS FAIRCLOTH. Democrat; Georgia, 8 th District. Elected to the 84 th -87 th Congresses. (served Jan. 3, 1955-Jan. 3, 1963) Committee assignment: H. Public Works (84 th -87 th Congresses) BLUNT ROCHESTER, LISA. Democrat; Delaware, At Large. Elected to the 115 th -116 th Congresses. (served Jan. 3, 2017-present) Committee assignments: H. Agriculture (115 th Congress) H. Education and the Workforce (115 th Congress) H. Energy and Commerce (116 th Congress) BOGGS, CORINNE C. (LINDY). Democrat; Louisiana, 2 nd District. Elected to the 93 rd Congress in a March 20, 1973, special election to fill vacancy caused by the death of husband Thomas Hale Boggs, Sr.; reelected to the 94 th -101 st Congresses. (served March 27, 1973-Jan. 3, 1991) Committee assignments: H. Banking and Currency/Banking, Currency, and Housing (93 rd -94 th Congresses) H. House Administration (94 th Congress) H. Appropriations (95 th -101 st Congresses) H. Select Children, Youth, and Families (99 th -101 st Congresses) Jt. Bicentennial Arrangements (94 th Congress; chair) Commission of the Bicentenary of the U.S. House (chair, 99 th -100 th Congresses) BOLAND, VERONICA GRACE. Democrat; Pennsylvania, 11 th District. Elected to the 77 th Congress, to fill vacancy caused by the death of husband Patrick J. Boland. (served Nov. 19, 1942-Jan. 3, 1943) No committee assignments listed. BOLTON, FRANCES PAYNE. Republican; Ohio, 22 nd District. Elected to the 76 th Congress in a Feb. 27, 1940, special election to fill vacancy caused by death of husband Chester C. Bolton; reelected to the 77 th -90 th Congresses. (served March 5, 1940-Jan. 3, 1969) Committee assignments: H. Election of President, Vice President, and Representatives in Congress (76 th Congress) H. Expenditures in Executive Departments (76 th Congress) H. Foreign Affairs (77 th -90 th Congresses; ranking member, 88 th -90 th Congresses) BONAMICI, SUZANNE. Democrat; Oregon, 1 st District. Elected to the 112 th Congress in a Jan. 31, 2012, special election to fill vacancy caused by resignation of David Wu; reelected to the 113 th -116 th Congresses. (served Feb. 7, 2012-present) Committee assignments: H. Budget (112 th Congress) H. Science, Space and Technology (112 th -116 th Congresses) H. Education and the Workforce/Education and Labor (113 th -116 th Congresses) H. Select Committee on the Climate Crisis (116 th Congress) BONO MACK, MARY. Republican; California, 44 th District (105 th -107 th Congresses) and 45 th District (108 th -112 th Congresses). Elected to the 105 th Congress in an April 7, 1998, special election to fill vacancy caused by the death of husband Sonny Bono; reelected to the 106 th -112 th Congresses. (served April 20, 1998-Jan. 3, 2013) Committee assignments: H. National Security (105 th Congress) H. Judiciary (105 th -106 th Congresses) H. Armed Services (106 th Congress) H. Small Business (106 th Congress) H. Energy and Commerce (107 th -112 th Congresses) BORDALLO, MADELEINE Z. Democrat; Delegate from Guam. Elected to the 108 th -115 th Congresses. (served Jan. 3, 2003-Jan. 3, 2019) Committee assignments: H. Armed Services (108 th -115 th Congresses) H. Resources/Natural Resources (108 th -115 th Congresses) H. Small Business (108 th -109 th Congresses) BOSONE, REVA ZILPHA BECK. Democrat; Utah, 2 nd District. Elected to the 81 st and 82 nd Congresses. (served Jan. 3, 1949-Jan. 3, 1953) Committee assignments: H. Public Lands (81 st Congress) H. Administration (82 nd Congress) H. Interior and Insular Affairs (82 nd Congress) BOWRING, EVA KELLY. Republican; Nebraska, Senator. Appointed to the Senate April 16, 1954, to fill vacancy caused by death of Dwight Griswold. (served April 16-Nov. 8, 1954) Committee assignments: S. Interstate and Foreign Commerce (83 rd Congress) S. Labor and Public Welfare (83 rd Congress) S. Post Office and Civil Service (83 rd Congress) BOYDA, NANCY. Democrat; Kansas, 2 nd District. Elected to the 110 th Congress. (served Jan. 3, 2007-Jan. 3, 2009) Committee assignments: H. Agriculture (110 th Congress) H. Armed Services (110 th Congress) BOXER, BARBARA. Democrat; California, 6 th District. Elected to the 98 th -102 nd Congresses (served in House Jan. 3, 1983-Jan. 3, 1993). Subsequently elected to the Senate in 1992 and reelected in 1998, 2004, and 2010. (served in Senate Jan. 5, 1993-Jan. 3, 2017) Committee assignments: H. Merchant Marine and Fisheries (98 th Congress) H. Government Operations (98 th -102 nd Congresses) H. Budget (99 th -101 st Congresses) H. Select Children, Youth, and Families (99 th -102 nd Congresses) H. Armed Services (102 nd Congress) S. Banking, Housing, and Urban Affairs (103 rd -105 th Congresses) S. Budget (103 rd -106 th Congresses) S. Environment and Public Works (103 rd -114 th Congresses; chair, 110 th -113 th Congresses; ranking member, 114 th Congress) S. Appropriations (105 th Congress) S. Foreign Relations (106 th -114 th Congresses) S. Commerce, Science, and Transportation (107 th -113 th Congresses) S. Select Ethics (110 th -114 th Congresses; chair, 110 th -113 th Congresses; vice chair, 114 th Congress) BROOKS, SUSAN. Republican; Indiana, 5 th District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Education and the Workforce (113 th Congress) H. Ethics (113 th -115 th Congresses; chair, 115 th Congress) H. Homeland Security (113 th Congress) H. Select Terrorist Attack in Benghazi (113 th -114 th Congresses) H. Energy and Commerce (114 th -116 th Congresses) H. Select Modernization of Congress (116 th Congress) BROWN, CORRINE. Democrat; Florida, 3 rd District (103 rd -112 th Congresses), 5 th District (113 th -114 th Congress). Elected to the 103 rd -114 th Congresses. (served Jan. 3, 1993-Jan. 3, 2017) Committee assignments: H. Government Operations (103 rd Congress) H. Public Works and Transportation (103 rd Congress) H. Transportation and Infrastructure (104 th -114 th Congresses) H. Veterans' Affairs (103 rd -114 th Congresses; ranking member, 114 th Congress) BROWN-WAITE, GINNY. Republican; Florida, 5 th District. Elected to the 108 th -111 th Congresses. (served Jan. 3, 2003-Jan. 3, 2011) Committee assignments: H. Budget (108 th -109 th Congresses) H. Financial Services (108 th -110 th Congresses) H. Veterans Affairs (108 th -110 th Congresses) H. Homeland Security (109 th -110 th Congresses) H. Ways and Means (111 th Congress) BROWNLEY, JULIA. Democrat; California, 26 th District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Education and the Workforce (113 th Congress) H. Science and Technology (113 th Congress) H. Transportation and Infrastructure (114 th -116 th Congresses) H. Veterans' Affairs (114 th -116 th Congresses) H. Select Committee on the Climate Crisis (116 th Congress) BUCHANAN, VERA DAERR. Democrat; Pennsylvania, 30 th District. Elected to the 82 nd Congress in a July 24, 1951, special election to fill vacancy caused by death of husband Frank Buchanan; reelected to the 83 rd -84 th Congresses. (served August 1, 1951, until her death Nov. 26, 1955) Committee assignments: H. Merchant Marine and Fisheries (82 nd Congress, 1 st session) H. Veterans' Affairs (82 nd Congress, 1 st session) H. Public Works (82 nd Congress, 2 nd session-83 rd Congress) H. Banking and Currency (84 th Congress) BUERKLE, ANN MARIE. Republican; New York, 25 th District. Elected to the 112 th Congress. (served Jan. 3, 2011-Jan. 3, 2013) Committee assignments: H. Foreign Affairs (112 th Congress) H. Oversight and Government Reform (112 th Congress) H. Veterans' Affairs (112 th Congress) BURDICK, JOCELYN BIRCH. Democrat; North Dakota, Senator. Appointed to Senate Sept. 12, 1992, to fill vacancy caused by death of husband Quentin Burdick. (served Sept. 16, 1992-Dec. 4, 1992) Committee assignment: S. Environment and Public Works (102 nd Congress) BURKE, YVONNE BRATHWAITE. Democrat; California, 37 th District. Elected to the 93 rd -95 th Congresses. (served Jan. 3, 1973-Jan. 3, 1979). First female Chair of the Congressional Black Caucus, 94 th Congress. Committee assignments: H. Public Works (93 rd Congress) H. Interior and Insular Affairs (93 rd Congress) H. Appropriations (94 th -95 th Congresses) H. Select Committee on the House Beauty Shop (chair, 94 th -95 th Congresses) BURTON, SALA. Democrat; California, 5 th District. Elected to the 98 th Congress in a June 21, 1983, special election, to fill vacancy caused by death of husband Phillip Burton; reelected to the 99 th -100 th Congresses. (served June 28, 1983, until her death Feb. 1, 1987) Committee assignments: H. Education and Labor (98 th Congress) H. Interior and Insular Affairs (98 th Congress) H. Select Committee on Hunger (98 th -99 th Congresses) H. Rules (99 th -100 th Congresses) BUSHFIELD, VERA CAHALAN. Republican; South Dakota, Senator. Appointed to the Senate Oct. 6, 1948, to fill vacancy caused by death of husband Harlan J. Bushfield; resigned Dec. 26, 1948. No committee assignments listed. BUSTOS, CHERI. Democrat; Illinois, 17 th District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Agriculture (113 th -116 th Congresses) H. Transportation and Infrastructure (113 th -115 th Congresses) H. Appropriations (116 th Congress) BYRNE, LESLIE. Democrat; Virginia, 11 th District. Elected to the 103 rd Congress. (served Jan. 3, 1993-Jan. 3, 1995) Committee assignments: H. Post Office and Civil Service (103 rd Congress) H. Public Works and Transportation (103 rd Congress) BYRON, BEVERLY BARTON BUTCHER. Democrat; Maryland, 6 th District. Elected to the 96 th Congress to fill vacancy caused by death of husband Goodloe E. Byron; reelected to the 97 th -102 nd Congresses. (served Jan. 3, 1979-Jan. 3, 1993) Committee assignments: H. Armed Services (96 th -102 nd Congresses) H. Select Committee on Aging (96 th -102 nd Congresses) H. Interior and Insular Affairs (97 th -102 nd Congresses) BYRON, KATHARINE EDGAR. Democrat; Maryland, 6 th District. Elected to the 77 th Congress in a May 27, 1941, special election to fill vacancy caused by death of husband William Devereux Byron. (served June 11, 1941-Jan. 3, 1943) Committee assignments: H. Civil Service (77 th Congress) H. War Claims (77 th Congress) CANTWELL, MARIA. Democrat; Washington, 1 st District. Elected to the 103 rd Congress (served in House Jan. 3, 1993-Jan. 3, 1995). Subsequently elected to the Senate in 2000 and reelected in 2006, 2012, and 2018. (served in Senate Jan. 3, 2001-present) Committee assignments: H. Foreign Affairs (103 rd Congress) H. Merchant Marine and Fisheries (103 rd Congress) H. Public Works and Transportation (103 rd Congress) S. Judiciary (107 th Congress) S. Energy and Natural Resources (107 th -116 th Congresses; ranking member, 114 th -115 th Congresses) S. Small Business and Entrepreneurship (107 th -116 th Congresses; chair, 113 th Congress, 2 nd session) S. Indian Affairs (107 th -116 th Congresses; chair, 113 th Congress, 1 st session) S. Commerce, Science, and Transportation (108 th -116 th Congresses; ranking member, 116 th Congress) S. Finance (110 th -116 th Congresses) CAPITO, SHELLEY MOORE. Republican; West Virginia, 2 nd District; Senator. Elected to the 107 th -113 th Congresses. (served in House Jan. 3, 2001-Jan. 3, 2015). Subsequently elected to the Senate in 2014. (served in Senate Jan. 3, 2015-present) Committee assignments: H. Financial Services (107 th -113 th Congresses) H. Small Business (107 th -108 th Congresses) H. Transportation and Infrastructure (107 th -113 th Congresses) H. Rules (109 th Congress) H. Select Committee on Energy and Global Warming (111 th Congress) S. Appropriations (114 th -116 th Congresses) S. Energy and Natural Resources (114 th -115 th Congresses) S. Environment and Public Works (114 th -116 th Congresses) S. Rules and Administration (114 th -116 th Congresses) Jt. Committee on the Library (114 th -115 th Congresses) S. Commerce, Science, and Transportation (115 th -116 th Congresses) CAPPS, LOIS. Democrat; California, 22 nd District (105 th -107 th Congresses), 23 rd District (108 th -112 th Congresses) and 24 th District (113 th -114 th Congress). Elected to the 105 th Congress in a March 9, 1998, special election to fill vacancy caused by death of husband Walter Capps; reelected to the 106 th -114 th Congresses. (served March 17, 1998-Jan. 3. 2017) Committee assignments: H. International Relations (105 th Congress) H. Science (105 th Congress) H. Commerce (106 th Congress) H. Energy and Commerce (107 th -114 th Congresses) H. Budget (109 th Congress) H. Natural Resources (110 th -111 th Congresses; 114 th Congress) H. Ethics (114 th Congress) CARAWAY, HATTIE WYATT. Democrat; Arkansas, Senator. Appointed to the Senate Nov. 13, 1931, and elected Jan. 12, 1932, to fill the vacancy caused by death of husband Thaddeus H. Caraway; reelected to two full Senate terms. (served Dec. 8, 1931-Jan. 3, 1945) Committee assignments: S. Agriculture and Forestry (72 nd -78 th Congresses) S. Commerce (72 nd -78 th Congresses) S. Enrolled Bills (72 nd -78 th Congresses; chair, 73 rd -78 th Congresses) S. Library (72 nd -78 th Congresses) CARNAHAN, JEAN. Democrat; Missouri, Senator. Appointed to the Senate Dec. 4, 2000, to fill vacancy caused by her husband's (Governor Mel Carnahan's) posthumous election to the Senate. (served Jan. 3, 2001-Nov. 25, 2003) Committee assignments: S. Armed Services (107 th Congress) S. Commerce, Science and Transportation (107 th Congress) S. Governmental Affairs (107 th Congress) S. Small Business and Entrepreneurship (107 th Congress) S. Special Committee on Aging (107 th Congress) CARSON, JULIA. Democrat; Indiana, 10 th District (105 th -107 th Congresses) and 7 th District (108 th -110 th Congresses). Elected to the 105 th -110 th Congresses. (served Jan. 3, 1997, until her death Dec. 15, 2007) Committee assignments: H. Banking and Financial Services/Financial Services (105 th -110 th Congresses) H. Veterans' Affairs (105 th -107 th Congresses) H. Transportation and Infrastructure (108 th -110 th Congresses) CASTOR, KATHY. Democrat; Florida, 11 th District (110 th -112 th Congresses) and 14 th District (113 th Congress-present). Elected to the 110 th -116 th Congresses. (served Jan. 3, 2007-present) Committee assignments: H. Armed Services (110 th , 112 th Congresses) H. Rules (110 th Congress) H. Energy and Commerce (111 th -116 th Congresses) H. Standards of Official Conduct (111 th Congress) H. Budget (112 th -114 th Congresses) H. Select Committee on the Climate Crisis (116 th Congress; chair) CHENEY, LIZ. Republican; Wyoming, At Large. Elected to the 115 th -116 th Congresses. (served Jan. 3, 2017-present) Committee assignments: H. Armed Services (115 th -116 th Congresses) H. Natural Resources (115 th -116 th Congresses) H. Rules (115 th Congress) CHENOWETH, HELEN. Republican; Idaho, 1 st District. Elected to the 104 th -106 th Congresses. (served Jan. 3, 1995-Jan. 3, 2001) Committee assignments: H. Agriculture (104 th -106 th Congresses) H. Resources (104 th -106 th Congresses) H. Veterans' Affairs (105 th -106 th Congresses) H. Government Reform (106 th Congress) CHISHOLM, SHIRLEY ANITA. Democrat; New York, 12 th District. Elected to the 91 st -97 th Congresses. (served Jan. 3, 1969-Jan. 3, 1983) Committee assignments: H. Veterans' Affairs (91 st -92 nd Congresses) H. Education and Labor (92 nd -94 th Congresses) H. Rules (95 th -97 th Congresses) CHRISTENSEN, DONNA. Democrat; Delegate from the Virgin Islands. Elected to the 105 th -113 th Congresses. (served Jan. 3, 1997-Jan. 3, 2015) Committee assignments: H. Resources/Natural Resources (105 th -112 th Congresses) H. Small Business (105 th -109 th Congresses) H. Homeland Security (108 th -110 th Congresses; 112 th Congress) H. Energy and Commerce (111 th -113 th Congresses) CHRISTIAN-GREEN, DONNA and CHRISTIAN-CHRISTENSEN, DONNA . See CHRISTENSEN, DONNA . CHU, JUDY. Democrat; California, 32 nd District (111 th -112 th Congresses) and 27 th District (113 th Congress-present). Elected to the 111 th Congress in a July 14, 2009, special election to fill vacancy caused by resignation of Hilda Solis; reelected to 112 th -116 th Congresses. Chair of the Congressional Asian Pacific American Caucus, 112 th -116 th Congresses. (served July 16, 2009-present) Committee assignments: H. Education and Labor (111 th Congress) H. Judiciary (111 th -115 th Congresses) H. Oversight and Government Reform (111 th Congress) H. Small Business (112 th -116 th Congresses) H. Ways and Means (115 th -116 th Congresses) CHURCH, MARGUERITE STITT. Republican; Illinois, 13 th District. Elected to the 82 nd -87 th Congresses (served Jan. 3, 1951-Jan. 3, 1963). Representative Church succeeded her husband, Ralph E. Church, who died in office. Committee assignments: H. Expenditures in Executive Departments (82 nd Congress) H. Government Operations (83 rd Congress) H. Foreign Affairs (83 rd -87 th Congresses) CLARK, KATHERINE M. Democrat; Massachusetts, 5 th District. Elected to the 113 th Congress in a Dec. 10, 2013, special election to fill vacancy caused by the resignation of Edward Markey. Subsequently reelected to the 114 th -116 th Congresses. (served Dec. 12, 2013-present) Committee assignments: H. Natural Resources (113 th Congress) H. Science and Technology (113 th -114 th Congresses) H. Education and the Workforce (114 th Congress) H. Appropriations (115 th -116 th Congresses) CLARKE, MARIAN WILLIAMS. Republican; New York, 34 th District. Elected to the 73 rd Congress in a Dec. 28, 1933, special election to fill vacancy caused by death of husband John Davenport Clarke. (served Jan. 3, 1934-Jan. 3, 1935) Committee assignments: H. Civil Service (73 rd Congress) H. Claims (73 rd Congress) H. Invalid Pensions (73 rd Congress) CLARKE, YVETTE. Democrat; New York, 11 th District (110 th -112 th Congresses) and 9 th District (113 th Congress-present). Elected to the 110 th -116 th Congresses. (served Jan. 3, 2007-present) Committee assignments: H. Education and Labor (110 th -111 th Congresses) H. Homeland Security (110 th -113 th , 116 th Congresses) H. Small Business (110 th -114 th Congresses) H. Ethics (113 th -115 th Congresses) H. Energy and Commerce (114 th -116 th Congresses) CLAYTON, EVA. Democrat; North Carolina, 1 st District. Elected to the 102 nd Congress Nov. 3, 1992, to fill vacancy caused by death of Walter Jones; simultaneously elected to the 103 rd Congress; reelected to the 104 th -107 th Congresses. (served Nov. 5, 1992-Jan. 3, 2003) Committee assignments: H. Agriculture (103 rd -107 th Congresses) H. Small Business (103 rd -104 th Congresses) H. Budget (105 th -107 th Congresses) CLINTON, HILLARY RODHAM. Democrat; New York, Senator. Elected to the Senate in 2000 and reelected in 2006. (served Jan. 3, 2001, until her resignation Jan. 21, 2009, to become Secretary of State). First Lady of the United States, 1993-2001. Committee assignments: S. Budget (107 th Congress) S. Environment and Public Works (107 th -110 th Congresses) S. Health, Education, Labor, and Pensions (107 th -110 th Congresses) S. Armed Services (108 th -110 th Congresses) S. Special Aging (109 th -110 th Congresses) COLLINS, BARBARA-ROSE. Democrat; Michigan, 13 th District (102 nd Congress) and 15 th District (103 rd -104 th Congresses). Elected to the 102 nd -104 th Congresses. (served Jan. 3, 1991-Jan. 3, 1997) Committee assignments: H. Public Works and Transportation (102 nd -103 rd Congresses) H. Science, Space and Technology (102 nd Congress) H. Government Operations (103 rd Congress) H. Post Office and Civil Service (103 rd Congress) H. Government Reform and Oversight (104 th Congress) H. Transportation and Infrastructure (104 th Congress) H. Select Children, Youth, and Families (102 nd Congress) COLLINS, CARDISS. Democrat; Illinois, 7 th District. Elected to the 93 rd Congress in a June 5, 1973, special election to fill vacancy caused by death of husband George W. Collins; reelected to the 94 th -104 th Congresses (served June 7, 1973-Jan. 3, 1997). Chair of the Congressional Black Caucus, 96 th Congress. Committee assignments: H. Government Operations/Government Reform and Oversight (93 rd -104 th Congresses) H. International Relations/Foreign Affairs (94 th -96 th Congresses) H. District of Columbia (95 th Congress) H. Select Committee on Narcotics Abuse and Control (96 th -102 nd Congresses) H. Energy and Commerce (97 th -103 rd Congresses) H. Commerce (104 th Congress) COLLINS, SUSAN M. Republican; Maine, Senator. Elected to the Senate in 1996; reelected in 2002, 2008, and 2014. (served Jan. 3, 1997-present) Committee assignments: S. Labor and Human Resources (105 th Congress) S. Governmental Affairs (105 th -108 th Congresses; chair, 108 th Congress) S. Homeland Security and Governmental Affairs (109 th -112 th Congresses; chair, 109 th Congress; ranking member, 110 th -112 th Congresses) S. Special Aging (105 th -116 th Congresses; ranking member, 113 th Congress; chair, 114 th -116 th Congresses) S. Special Committee on the Year 2000 Technology Problems (106 th Congress) S. Health, Education, Labor, and Pensions (106 th -107 th Congresses; 115 th -116 th Congresses) S. Armed Services (107 th -112 th Congresses) Jt. Economic (108 th Congress) S. Appropriations (111 th -116 th Congresses) S. Select Intelligence (113 th -116 th Congresses) COMSTOCK, BARBARA J. Republican; Virginia, 10 th District. Elected to the 114 th -115 th Congresses (served Jan. 3, 2015-Jan. 3, 2019). Committee assignments: H. House Administration (114 th -115 th Congresses) H. Science and Technology (114 th -115 th Congresses) H. Transportation and Infrastructure (114 th -115 th Congresses) CORTEZ MASTO, CATHERINE . Democrat; Nevada, Senator. Elected in 2016. (served Jan. 3, 2017-present) Committee assignments: S. Banking, Housing, and Urban Affairs (115 th -116 th Congresses) S. Commerce, Science, and Transportation (115 th Congress) S. Energy and Natural Resources (115 th -116 th Congresses) S. Indian Affairs (115 th -116 th Congresses) S. Rules (115 th -116 th Congresses) S. Finance (116 th Congress) CRAIG, ANGELA. Democrat; Minnesota, 2 nd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Agriculture (116 th Congress) H. Small Business (116 th Congress) H. Transportation and Infrastructure (116 th Congress) CUBIN, BARBARA. Republican; Wyoming, At Large. Elected to the 104 th -110 th Congresses. (served Jan. 3, 1995-Jan. 3, 2009) Committee assignments: H. Resources (104 th -109 th Congresses) H. Science (104 th Congress) H. Commerce (105 th -106 th Congresses) H. Energy and Commerce (107 th -110 th Congresses) DAHLKEMPER, KATHLEEN A. Democrat; Pennsylvania, 3 rd District. Elected to the 111 th Congress. (served Jan. 3, 2009-Jan. 3, 2011) Committee assignments: H. Agriculture (111 th Congress) H. Science and Technology (111 th Congress) H. Small Business (111 th Congress) DANNER, PAT. Democrat; Missouri, 6 th District. Elected to the 103 rd -106 th Congresses. (served Jan. 3, 1993-Jan. 3, 2001) Committee assignments: H. Public Works and Transportation/Transportation and Infrastructure (103 rd -106 th Congresses) H. Small Business (103 rd Congress) H. International Relations (105 th -106 th Congresses) DAVIDS, SHARICE. Democrat; Kansas, 3 rd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Small Business (116 th Congress) H. Transportation and Infrastructure (116 th Congress) DAVIS, JO ANN. Republican; Virginia, 1 st District. Elected to the 107 th -110 th Congresses. (served Jan. 3, 2001, until her death Oct. 6, 2007) Committee assignments: H. Armed Services (107 th -110 th Congresses) H. Government Reform (107 th -108 th Congresses) H. International Relations (107 th -109 th Congresses) H. Foreign Affairs (110 th Congress) H. Select Intelligence (108 th -109 th Congresses) DAVIS, SUSAN. Democrat; California, 49 th District (107 th Congress) and 53 rd District (108 th Congress-present). Elected to the 107 th -116 th Congresses. (served Jan. 3, 2001-present) Committee assignments: H. Armed Services (107 th -116 th Congresses) H. Education and the Workforce/Education and Labor (107 th -116 th Congresses) H. Veterans' Affairs (108 th Congress) H. House Administration (110 th -111 th , 116 th Congresses) Jt. Printing (110 th , 116 th Congresses) DEAN, MADELEINE. Democrat; Pennsylvania, 4 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Financial Services (116 th Congress) H. Judiciary (116 th Congress) DEGETTE, DIANA. Democrat; Colorado, 1 st District. Elected to the 105 th -116 th Congresses. (served Jan. 3, 1997-present) Committee assignments: H. Commerce/Energy and Commerce (105 th -116 th Congresses) H. Natural Resources (111 th , 116 th Congresses) DELAURO, ROSA. Democrat; Connecticut, 3 rd District. Elected to the 102 nd -116 th Congresses. (served Jan. 3, 1991-present) Committee assignments: H. Government Operations (102 nd Congress) H. Public Works and Transportation (102 nd Congress) H. Select Committee on Aging (102 nd Congress) H. Appropriations (103 rd Congress; 105 th -116 th Congresses) H. National Security (104 th Congress) H. Budget (108 th -111 th , 116 th Congresses) DELBENE, SUZAN. Democrat; Washington, 1 st District. Elected to the 112 th Congress in a Nov. 6, 2012, special election to fill vacancy caused by resignation of Jay Inslee; reelected to the 113 th -116 th Congresses. (served Nov. 13, 2012-present) Committee assignments: H. Agriculture (113 th -114 th Congresses) H. Judiciary (113 th -114 th Congresses) H. Budget (115 th Congress) H. Ways and Means (115 th - 116 th Congresses) H. Select Modernization of Congress (116 th Congress) DEMINGS, VAL BUTLER . Democrat; Florida, 10 th District. Elected to the 115 th -116 th Congresses. (served Jan. 3, 2017-present) Committee assignments: H. Homeland Security (115 th -116 th Congresses) H. Government Reform (115 th Congress) H. Judiciary (115 th -116 th Congresses) H. Intelligence (116 th Congress) DINGELL, DEBBIE. Democrat; Michigan, 12 th District. Elected to the 114 th -116 th Congress. (served Jan. 3, 2015-present) Committee assignments: H. Budget (114 th Congress) H. Natural Resources (114 th , 116 th Congresses) H. Energy and Commerce (115 th -116 th Congresses) Jt. Select Solvency Multiemployer Pension Plans (115 th Congress) DOLE, ELIZABETH H. Republican; North Carolina, Senate. Elected to the Senate in 2002. (served Jan. 3, 2003-Jan. 3, 2009) Committee assignments: S. Agriculture, Nutrition, and Forestry (108 th Congress) S. Armed Services (108 th -110 th Congresses) S. Banking, Housing, and Urban Affairs (108 th -110 th Congresses) S. Special Aging (108 th -110 th Congresses) S. Small Business and Entrepreneurship (110 th Congress) DOUGLAS, EMILY TAFT. Democrat; Illinois, At Large. Elected to the 79 th Congress. (served Jan. 3, 1945-Jan. 3, 1947) Committee assignment: H. Foreign Affairs (79 th Congress) DOUGLAS, HELEN GAHAGAN. Democrat; California, 14 th District. Elected to the 79 th -81 st Congresses. (served Jan. 3, 1945-Jan. 3, 1951) Committee assignment: H. Foreign Affairs (79 th -81 st Congresses) DRAKE, THELMA. Republican; Virginia, 2 nd District. Elected to the 109 th -110 th Congresses. (served Jan. 3, 2005-Jan. 3, 2009) Committee assignments: H. Armed Services (109 th -110 th Congresses) H. Education and the Workforce (109 th Congress) H. Resources (109 th Congress) H. Transportation and Infrastructure (110 th Congress) DUCKWORTH, TAMMY. Democrat; Illinois, 8 th District. Elected to the 113 th -114 th Congresses. (served in House Jan. 3, 2013-Jan. 3, 2017). Subsequently elected to the Senate in 2016. (served in Senate Jan. 3, 2017-present) Committee assignments: H. Armed Services (113 th -114 th Congresses) H. Oversight and Government Reform (113 th -114 th Congresses) H. Select Terrorist Attack in Benghazi (113 th -114 th Congresses) S. Commerce, Science, and Transportation (115 th -116 th Congresses) S. Energy and Natural Resources (115 th Congress) S. Environment and Public Works (115 th -116 th Congresses) S. Small Business and Entrepreneurship (115 th -116 th Congresses) S. Armed Services (116 th Congress) DUNN, JENNIFER. Republican; Washington, 8 th District. Elected to the 103 rd -108 th Congresses. (served Jan. 3, 1993-Jan. 3, 2005) Committee assignments: H. Administration (103 rd Congress) H. Public Works and Transportation (103 rd Congress) H. Science, Space, and Technology (103 rd Congress) Jt. Committee on Congressional Operations (103 rd Congress) H. Oversight (104 th Congress) H. Ways and Means (104 th -108 th Congresses) Jt. Economic (107 th -108 th Congresses) H. Homeland Security (108 th Congress) DWYER, FLORENCE PRICE. Republican; New Jersey, 6 th District (85 th -89 th Congresses) and 12 th District (90 th -92 nd Congresses). Elected to the 85 th -92 nd Congresses. (served Jan. 3, 1957-Jan. 3, 1973) Committee assignments: H. Government Operations (85 th -92 nd Congresses; ranking member, 90 th -92 nd Congresses) H. Veterans' Affairs (85 th Congress) H. Banking and Currency (86 th -92 nd Congresses) EDWARDS, DONNA. Democrat; Maryland, 4 th District. Elected to the 110 th Congress in a June 17, 2008, special election to fill vacancy caused by the resignation of Albert Wynn; reelected to the 111 th -114 th Congresses. (served June 19, 2008-Jan. 3, 2017) Committee assignments: H. Science and Technology/Science, Space and Technology (110 th -114 th Congresses) H. Transportation and Infrastructure (110 th -114 th Congresses) H. Ethics (112 th Congress) EDWARDS, ELAINE. Democrat; Louisiana, Senator. Appointed to the Senate August 1, 1972, by her husband, Governor Edwin L. Edwards, to fill vacancy caused by death of Allen J. Ellender. (served August 7, 1972-Nov. 13, 1972) Committee assignments: S. Agriculture and Forestry (92 nd Congress) S. Public Works (92 nd Congress) ELLMERS, RENEE. Republican; North Carolina, 2 nd District. Elected to the 112 th -114 th Congresses. (served Jan. 3, 2011-Jan. 3, 2017) Committee assignments: H. Agriculture (112 th Congress) H. Foreign Affairs (112 th Congress) H. Small Business (112 th Congress) H. Energy and Commerce (113 th -114 th Congresses) EMERSON, JO ANN. Republican; Missouri, 8 th District. Elected to the 104 th Congress in a Nov. 5, 1996, special election to fill vacancy caused by death of husband, Bill Emerson, and simultaneously to the 105 th Congress; reelected to the 106 th -113 th Congresses. (served Nov. 5, 1996, until her resignation Jan. 22, 2013) Committee assignments: H. Agriculture (105 th Congress) H. Small Business (105 th Congress) H. Transportation and Infrastructure (105 th Congress) H. Appropriations (106 th -112 th Congresses) ENGLISH, KARAN. Democrat; Arizona, 6 th District. Elected to the 103 rd Congress. (served Jan. 3, 1993-Jan. 3, 1995) Committee assignments: H. Education and Labor (103 rd Congress) H. Natural Resources (103 rd Congress) ERNST, JONI. Republican; Iowa, Senator. Elected in 2014. (served Jan. 3, 2015-present) Committee assignments: S. Agriculture, Nutrition, and Forestry (114 th -116 th Congresses) S. Armed Services (114 th -116 th Congresses) S. Homeland Security and Governmental Affairs (114 th Congress) S. Small Business and Entrepreneurship (114 th -116 th Congresses) S. Environment and Public Works (115 th -116 th Congresses) Jt. Select Budget and Appropriations Process Reform (115 th Congress) S. Judiciary (116 th Congress) ESCOBAR, VERONICA. Democrat; Texas, 16 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Judiciary (116 th Congress) H. Armed Services (116 th Congress) ESHOO, ANNA G. Democrat; California, 14 th District (103 rd -112 th Congresses) and 18 th District (113 th Congress-present). Elected to the 103 rd -116 th Congresses. (served Jan. 3, 1993-present) Committee assignments: H. Merchant Marine and Fisheries (103 rd Congress) H. Science, Space, and Technology (103 rd Congress) H. Commerce (104 th -106 th Congresses) H. Energy and Commerce (107 th -116 th Congresses) H. Intelligence (108 th -111 th Congresses) ESLICK, WILLA McCORD BLAKE. Democrat; Tennessee, 7 th District. Elected to the 72 nd Congress in an August 4, 1932, special election to fill vacancy caused by death of husband Edward Eslick. (served Dec. 5, 1932-March 3, 1933) Committee assignments: H. Public Buildings and Grounds (72 nd Congress) H. World War Veterans' Legislation (72 nd Congress) ESTY, ELIZABETH. Democrat; Connecticut, 5 th District. Elected to the 113 th -115 th Congresses. (served Jan. 3, 2013-Jan. 3, 2019) Committee assignments: H. Science, Space and Technology (113 th -115 th Congresses) H. Transportation and Infrastructure (113 th -115 th Congresses) FALLIN, MARY. Republican; Oklahoma, 5 th District. Elected to the 110 th -111 th Congresses. (served Jan. 3, 2007-Jan. 3, 2011) Committee assignments: H. Small Business (110 th -111 th Congresses) H. Transportation and Infrastructure (110 th -111 th Congresses) H. Natural Resources (110 th Congress) H. Armed Services (111 th Congress) FARRINGTON, MARY ELIZABETH PRUETT. Republican; Delegate from Hawaii. Elected to the 83 rd Congress in a July 31, 1954, special election to fill vacancy caused by death of husband, Joseph R. Farrington; reelected to the 84 th Congress. (served August 4, 1954-Jan. 3, 1957) Committee assignments: H. Agriculture (83 rd -84 th Congresses) H. Armed Services (83 rd -84 th Congresses) H. Interior and Insular Affairs (83 rd -84 th Congresses) FEINSTEIN, DIANNE. Democrat; California, Senator. Elected to the Senate Nov. 3, 1992, to fill the vacancy caused by the resignation of Pete Wilson. Subsequently elected to a full term on Nov. 8, 1994, and reelected in 2000, 2006, 2012, and 2018. (served Nov. 10, 1992-present) Committee assignments: S. Appropriations (103 rd Congress, 107 th -116 th Congresses) S. Judiciary (103 rd -116 th Congresses; ranking member, 115 th -116 th Congresses) S. Rules and Administration (103 rd -116 th Congresses; chair, 110 th Congress) S. Foreign Relations (104 th -105 th Congresses) Jt. Committee on the Library (105 th and 111 th Congresses; chair, 110 th Congress) S. Energy and Natural Resources (107 th -109 th Congresses) Jt. Committee on Inaugural Ceremonies (110 th -111 th Congresses) S. Select Intelligence (107 th -116 th Congresses; chair, 111 th -113 th Congresses; vice chair, 114 th Congress) Jt. Committee on Printing (106 th -107 th Congresses; vice chair, 110 th Congress) FELTON, REBECCA LATIMER. Democrat; Georgia, Senator. Appointed to the Senate on Oct. 3, 1922, to fill vacancy caused by death of Thomas E. Watson; sworn in Nov. 21, 1922; term expired Nov. 22 with the election of Walter George to the vacancy she filled. No committee assignments listed. FENWICK, MILLICENT. Republican; New Jersey, 5 th District. Elected to the 94 th -97 th Congresses. (served Jan. 3, 1975-Jan. 3, 1983) Committee assignments: H. Banking, Currency, and Housing/Banking, Finance and Urban Affairs (94 th -95 th Congresses) H. Small Business (94 th -95 th Congresses) H. Standards of Official Conduct (95 th Congress) H. District of Columbia (96 th Congress) H. International Relations/Foreign Affairs (96 th -97 th Congresses) H. Education and Labor (97 th Congress) H. Select Committee on Aging (97 th Congress) FERRARO, GERALDINE ANN. Democrat; New York, 9 th District. Elected to the 96 th -98 th Congresses. (served Jan. 3, 1979-Jan. 3, 1985) Committee assignments: H. Post Office and Civil Service (96 th -97 th Congresses) H. Public Works and Transportation (96 th -98 th Congresses) H. Select Committee on Aging (96 th -97 th Congresses) H. Budget (98 th Congress) FIEDLER, BOBBI. Republican; California, 21 st District. Elected to the 97 th -99 th Congresses. (served Jan. 3, 1981-Jan. 3, 1987) Committee assignments: H. Budget (97 th -99 th Congresses) Jt. Economics (99 th Congress) FINKENAUER, ABBY. Democrat; Iowa, 1 st District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Small Business (116 th Congress) H. Transportation and Infrastructure (116 th Congress) FISCHER, DEBRA (DEB). Republican; Nebraska, Senator. Elected to the Senate in 2012 and reelected in 2018. (served Jan. 3, 2013-present) Committee assignments: S. Agriculture, Nutrition and Forestry (115 th -116 th Congresses) S. Armed Services (113 th -116 th Congresses) S. Commerce, Science and Transportation (113 th -116 th Congresses) S. Environment and Public Works (113 th -115 th Congresses) S. Indian Affairs (113 th Congress) S. Small Business and Entrepreneurship (113 th -114 th Congresses) S. Special Aging (115 th Congress) S. Rules and Administration (115 th -116 th Congresses) FLETCHER, ELIZABETH (LIZZY) . Democrat; Texas, 7 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Science, Space and Technology (116 th Congress) H. Transportation and Infrastructure (116 th Congress) FOWLER, TILLIE. Republican; Florida, 4 th District. Elected to the 103 rd -106 th Congresses. (served Jan. 3, 1993-Jan. 3, 2001) Committee assignments: H. Armed Services (103 rd , 106 th Congresses) H. National Security (104 th -105 th Congresses) H. Merchant Marine and Fisheries (103 rd Congress) H. Transportation and Infrastructure (104 th -106 th Congresses) FOXX, VIRGINIA. Republican; North Carolina, 5 th District. Elected to the 109 th -116 th Congresses. (served Jan. 3, 2005-present) Committee assignments: H. Agriculture (109 th -110 th Congresses) H. Education and the Workforce/Education and Labor (109 th -110 th Congresses, 113 th -116 th Congresses; chair, 115 th Congress, ranking member, 116 th Congress) H. Government Reform/Oversight and Government Reform/Oversight and Reform (109 th -110 th , 115 th -116 th Congresses) H. Rules (111 th -114 th Congresses) Jt. Select Solvency Multiemployer Pension Plans (115 th Congress) FRAHM, SHEILA. Republican; Kansas, Senator. Appointed to the Senate May 24, 1996, to fill vacancy caused by resignation of Robert Dole. (served June 11, 1996-Nov. 5, 1996) Committee assignments: S. Armed Services (104 th Congress) S. Banking, Housing, and Urban Affairs (104 th Congress) FRANKEL, LOIS. Democrat; Florida, 22 nd District (113 th -114 th Congresses) and 21 st District (115 th Congress-present). Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Foreign Affairs (113 th -115 th Congresses) H. Transportation and Infrastructure (113 th -115 th Congresses) H. Appropriations (116 th Congress) Jt. Economic (116 th Congress) FUDGE, MARCIA F. Democrat; Ohio, 11 th District. Elected to the 110 th Congress in a Nov. 4, 2008, special election to fill vacancy caused by death of Stephanie Tubbs Jones; reelected to the 111 th -116 th Congresses. (served Nov. 19, 2008-present) Chair of the Congressional Black Caucus, 113 th Congress. Committee assignments: H. Education and Labor/Education and the Workforce (111 th Congress; 113 th -116 th Congresses) H. Science and Technology/Science, Space and Technology (111 th -112 th Congresses) H. Agriculture (112 th -116 th Congresses) H. Administration (116 th Congress) FULMER, WILLA LYBRAND. Democrat; South Carolina, 2 nd District. Elected to the 78 th Congress Nov. 7, 1944, to fill vacancy caused by death of husband, Hampton P. Fulmer. (served Nov. 6, 1944-Jan. 3, 1945) No committee assignments listed. FURSE, ELIZABETH. Democrat; Oregon, 1 st District. Elected to the 103 rd -105 th Congresses. (served Jan. 3, 1993-Jan. 3, 1999) Committee assignments: H. Armed Services (103 rd Congress) H. Banking, Finance, and Urban Affairs (103 rd Congress) H. Merchant Marine and Fisheries (103 rd Congress) H. Commerce (104 th -105 th Congresses) GABBARD, TULSI. Democrat; Hawaii, 2 nd District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Armed Services (113 th -116 th Congresses) H. Foreign Affairs (113 th -115 th Congresses) H. Homeland Security (113 th Congress) H. Financial Services (116 th Congress) GARCIA, SYLVIA. Democrat; Texas, 29 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Financial Services (116 th Congress) H. Judiciary (116 th Congress) GASQUE, ELIZABETH HAWLEY. Democrat; South Carolina, 6 th District. Elected to the 75 th Congress in a Sept. 13, 1938, special election to fill vacancy caused by death of her husband, Allard H. Gasque; never sworn in or seated, because Congress was not in session between the time of her election and the expiration of her term. No committee assignments listed; never sworn in. GIBBS, FLORENCE REVILLE. Democrat; Georgia, 8 th District. Elected to the 76 th Congress in an Oct. 1, 1940, special election to fill vacancy caused by death of husband, Benjamin Gibbs. (served Oct. 3, 1940-Jan. 3, 1941) No committee assignments listed. GIFFORDS, GABRIELLE. Democrat; Arizona, 8 th District. Elected to the 110 th -112 th Congresses (served Jan. 3, 2007, until her resignation on Jan. 25, 2012). Giffords was seriously wounded in an assassination attempt on Jan. 8, 2011. Committee assignments: H. Armed Services (110 th -112 th Congresses) H. Foreign Affairs (110 th -111 th Congresses) H. Science and Technology/Science, Space and Technology (110 th -112 th Congresses) GILLIBRAND, KIRSTEN. Democrat; New York, 20 th District. Elected to the 110 th -111 th Congresses (served in House Jan. 3, 2007, until resignation on Jan. 26, 2009). Appointed to the Senate to fill vacancy caused by resignation of Hillary Clinton; elected to remainder of term in 2010 and reelected in 2012 and 2018. (served in Senate Jan. 27, 2009-present) Committee assignments: H. Agriculture (110 th Congress) H. Armed Services (110 th Congress) S. Foreign Relations (111 th Congress) S. Environment and Public Works (111 th -116 th Congresses) S. Special Aging (111 th -116 th Congresses) S. Agriculture, Nutrition and Forestry (111 th -116 th Congresses) S. Armed Services (112 th -116 th Congresses) GONZÁLEZ - COLÓN, JENNIFFER. Republican; Resident Commissioner from Puerto Rico. Elected to the 115 th -116 th Congresses. (served Jan. 3, 2017-present) Committee assignments: H. Natural Resources (115 th -116 th Congresses) H. Small Business (115 th Congress) H. Veterans' Affairs (115 th Congress) H. Transportation and Infrastructure (116 th Congress) H. Science, Space and Technology (116 th Congress) GRAHAM, GWEN. Democrat; Florida, 2 nd District. Elected to the 114 th Congress. (served Jan. 3, 2015-Jan. 3, 2017) Committee assignments: H. Agriculture (114 th Congress) H. Armed Services (114 th Congress) GRANAHAN, KATHRYN ELIZABETH. Democrat; Pennsylvania, 2 nd District. Elected to the 84 th Congress in a Nov. 6, 1956, special election to fill the vacancy caused by the death of her husband, William T. Granahan, and to the 85 th Congress; reelected to the 86 th -87 th Congresses. (served Jan. 3, 1957-Jan. 3, 1963) Committee assignments: H. District of Columbia (85 th Congress) H. Post Office and Civil Service (85 th -87 th Congresses) H. Government Operations (85 th Congress, 2 nd session-87 th Congress) GRANGER, KAY. Republican; Texas, 12 th District. Elected to the 105 th -116 th Congresses. (served Jan. 3, 1997-present) Committee assignments: H. Budget (105 th , 107 th Congresses) H. Oversight (105 th Congress) H. Transportation and Infrastructure (105 th Congress) Jt. Printing (105 th Congress) H. National Security (105 th Congress) H. Appropriations (106 th -116 th Congresses; ranking member, 116 th Congress) H. Homeland Security (108 th Congress) GRASSO, ELLA T. Democrat; Connecticut, 6 th District. Elected to the 92 nd -93 rd Congresses. (served Jan. 3, 1971-Jan. 3, 1975) Committee assignments: H. Education and Labor (92 nd -93 rd Congresses) H. Veterans' Affairs (92 nd -93 rd Congresses) GRAVES, DIXIE BIBB. Democrat; Alabama, Senator. Appointed by her husband, Governor David Bibb Graves, to the Senate August 18, 1937, to fill the vacancy caused by the resignation of Hugo L. Black. (served August 20, 1937, until her resignation Jan. 10, 1938) Committee assignments: S. Claims (75 th Congress) S. Education and Labor (75 th Congress) S. Mines and Mining (75 th Congress) GREEN, EDITH. Democrat; Oregon, 3 rd District. Elected to the 84 th -93 rd Congresses. (served Jan. 3, 1955, until her resignation Dec. 31, 1974) Committee assignments: H. Education and Labor (84 th -92 nd Congresses) H. Interior and Insular Affairs (84 th -85 th Congresses) Jt. Committee on Disposition of Executive Papers (85 th Congress) H. House Administration (86 th -87 th Congresses) H. Merchant Marine and Fisheries (88 th -90 th Congresses) H. Select Committee on the House Beauty Shop (90 th -93 rd Congresses) H. District of Columbia (92 nd Congress) H. Appropriations (93 rd Congress) GREENE, ENID. See WALDHOLTZ, ENID GREENE. GREENWAY, ISABELLA SELMES. Democrat; Arizona, At Large. Elected to the 73 rd Congress in a Oct. 3, 1933, special election to fill vacancy caused by resignation of Lewis W. Douglas; reelected to the 74 th Congress. (served Jan. 3, 1934-Jan. 3, 1937) Committee assignments: None listed (73 rd Congress) H. Indian Affairs (74 th Congress) H. Irrigation and Reclamation (74 th Congress) H. Public Lands (74 th Congress) GRIFFITHS, MARTHA WRIGHT. Democrat; Michigan, 17 th District. Elected to the 84 th -93 rd Congresses. (served Jan. 3, 1955-Jan. 3, 1975) Committee assignments: H. Banking and Currency (84 th -87 th Congresses) H. Government Operations (84 th -87 th Congresses) Jt. Economic (87 th -92 nd Congresses) H. Ways and Means (88 th -92 nd Congresses) H. Select Committee on the House Beauty Shop (chair, 90 th -93 rd Congresses) H. Select Committee on Crime (91 st Congress) HAALAND, DEBRA. Democrat; New Mexico, 1 st District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Natural Resources (116 th Congress; vice chair) H. Armed Services (116 th Congress) HAGAN, KAY. Democrat; North Carolina; Senator. Elected in 2008. (served Jan. 3, 2009-Jan. 3, 2015) Committee assignments: S. Armed Services (111 th -113 th Congresses) S. Health, Education, Labor, and Pensions (111 th -113 th Congresses) S. Small Business and Entrepreneurship (111 th -113 th Congresses) S. Banking, Housing and Urban Affairs (112 th -113 th Congresses) HAHN, JANICE. Democrat; California, 36 th District. Elected to the 112 th Congress in a July 12, 2011, special election to fill vacancy created by the resignation of Jane Harman; reelected to the 113 th -114 th Congresses. (served July 19, 2011, until her resignation Dec. 4, 2016) Committee assignments: H. Homeland Security (112 th Congress) H. Transportation and Infrastructure (113 th -114 th Congresses) H. Small Business (114 th Congress) HALL, KATIE. Democrat; Indiana, 1 st District. Elected to the 97 th Congress in a Nov. 2, 1982, special election to fill vacancy caused by death of Adam Benjamin Jr.; reelected to the 98 th Congress. (served Nov. 29, 1982-Jan. 3, 1985) Committee assignments: H. Post Office and Civil Service (98 th Congress) H. Public Works and Transportation (98 th Congress) HALVORSON, DEBBIE . Democrat; Illinois, 11 th District. Elected to the 111 th Congress. (served Jan. 3, 2009-Jan. 3, 2011) Committee assignments: H. Agriculture (111 th Congress) H. Small Business (111 th Congress) H. Veterans Affairs (111 th Congress) HANABUSA, COLLEEN. Democrat; Hawaii, 1 st District. Elected to the 112 th -113 th Congresses; to the 114 th Congress to fill vacancy caused by the death of Mark Takai, and to the 115 th Congress. (served Jan. 3, 2011-Jan. 3, 2015; Nov. 8, 2016-Jan. 3, 2019) Committee assignments: H. Armed Services (112 th , 113 th , 115 th Congresses) H. Natural Resources (112 th , 113 th , 115 th Congresses) HANDEL, KAREN. Republican; Georgia, 6 th District. Elected to the 115 th Congress to fill vacancy caused by the resignation of Tom Price. (served June 26, 2017-Jan. 3, 2019) Committee assignments: H. Education and the Workforce (115 th Congress) H. Judiciary (115 th Congress) HANSEN, JULIA BUTLER. Democrat; Washington, 3 rd District. Elected to the 86 th Congress Nov. 8, 1960, to fill vacancy caused by death of Russell V. Mack, and to the 87 th Congress; reelected to the 88 th -93 rd Congresses. (served Jan. 3, 1961-Jan. 3, 1975) Committee assignments: H. Veterans' Affairs (87 th Congress, 1 st session) H. Education and Labor (87 th Congress) H. Interior and Insular Affairs (87 th Congress) H. Appropriations (88 th -93 rd Congresses) HARDEN, CECIL MURRAY. Republican; Indiana, 6 th District. Elected to the 81 st -95 th Congresses. (served Jan. 3, 1949-Jan. 3, 1959) Committee assignments: H. Veterans' Affairs (81 st Congress) H. Expenditures in Executive Departments (82 nd Congress) H. Government Operations (83 rd -85 th Congresses) H. Post Office and Civil Service (83 rd -85 th Congresses) HARMAN, JANE. Democrat; California, 36 th District. Elected to the 103 rd -105 th Congresses and the 107 th -112 th Congresses. (served Jan. 3, 1993-Jan. 3, 1999; Jan. 3, 2001, until her resignation Feb. 28, 2011) Committee assignments: H. Armed Services (103 rd Congress) H. Science, Space, and Technology/Science (103 rd -104 th Congresses) H. National Security (104 th -105 th Congresses) H. Energy and Commerce (107 th , 111 th , 112 th Congresses) H. Intelligence (104 th -105 th Congresses; 107 th -109 th Congresses) H. Homeland Security (108 th -112 th Congresses) HARRIS, KAMALA DEVI. Democrat; California, Senator. Elected in 2016. (served Jan. 3, 2017-present) Committee assignments: S. Budget (115 th -116 th Congresses) S. Environment and Public Works (115 th Congress) S. Homeland Security (115 th -116 th Congresses) S. Judiciary (115 th -116 th Congresses) S. Select Intelligence (115 th -116 th Congresses) HARRIS, KATHERINE. Republican; Florida, 13 th District. Elected to the 108 th - 109 th Congresses. (served Jan. 3, 2003-Jan. 3, 2007) Committee assignments: H. Financial Services (108 th -109 th Congresses) H. International Relations (108 th -109 th Congresses) H. Homeland Security (109 th Congress) HART, MELISSA. Republican; Pennsylvania, 4 th District. Elected to the 107 th -109 th Congresses. (served Jan. 3, 2001-Jan. 3, 2007) Committee assignments: H. Financial Services (107 th -108 th Congresses) H. Judiciary (107 th -108 th Congresses) H. Science (107 th -108 th Congresses) H. Standards of Official Conduct (109 th Congress) H. Ways and Means (109 th Congress) HARTZLER, VICKY. Republican; Missouri, 4 th District. Elected to the 112 th -116 th Congresses. (served Jan. 3, 2011-present) Committee assignments: H. Agriculture (112 th -116 th Congresses) H. Armed Services (112 th -116 th Congresses) H. Budget (113 th -114 th Congresses) HASSAN, MAGGIE. Democrat; New Hampshire, Senator. Elected in 2016. (served Jan. 3, 2017-present) Committee assignments: S. Commerce, Science, and Transportation (115 th Congress) S. Health, Education, Labor, and Pensions (115 th -116 th Congresses) S. Homeland Security and Governmental Affairs (115 th -116 th Congresses) Jt. Economic (115 th -116 th Congresses) S. Finance (116 th Congress) HAWKINS, PAULA. Republican; Florida, Senator. Elected in 1980. (served Jan. 1, 1981-Jan. 3, 1987) Committee assignments: S. Agriculture, Nutrition, and Forestry (97 th -99 th Congress) S. Labor and Human Resources (97 th -99 th Congress) Jt. Economic (97 th Congress) S. Banking, Housing, and Urban Affairs (98 th Congress) S. Foreign Relations (98 th Congress) S. Special Aging (99 th Congress) HAYES, JAHANA. Democrat; Connecticut, 5 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Agriculture (116 th Congress) H. Education and Labor (116 th Congress) HAYWORTH, NAN. Republican; New York, 19 th District. Elected to the 112 th Congress. (served Jan. 3, 2011-Jan. 3, 2013) Committee assignment: H. Financial Services (112 th Congress) HECKLER, MARGARET M. Republican; Massachusetts, 19 th District. Elected to the 90 th -97 th Congresses. (served Jan. 3, 1967-Jan. 3, 1983) Committee assignments: H. Government Operations (90 th Congress) H. Veterans' Affairs (90 th -97 th Congresses) H. Banking and Currency (91 st -93 rd Congresses) H. Select Committee on the House Beauty Shop (92 nd -93 rd Congresses) H. Agriculture (94 th -96 th Congresses) Jt. Economic (94 th , 96 th , 97 th Congresses) H. Select Committee on Ethics (96 th Congress) H. Science and Technology (97 th Congress) HEITKAMP, MARY KATHRYN (HEIDI). Democrat; North Dakota, Senator. Elected in 2012. (served Jan. 3, 2013-Jan. 3, 2019) Committee assignments: S. Agriculture, Nutrition, and Forestry (113 th -115 th Congresses) S. Banking, Housing and Urban Affairs (113 th -115 th Congresses) S. Homeland Security and Governmental Affairs (113 th -115 th Congresses) S. Indian Affairs (113 th -115 th Congresses) S. Small Business and Entrepreneurship (113 th -115 th Congresses) Jt. Select Solvency Multiemployer Pension Plans (115 th Congress) HERRERA BEUTLER, JAIME. Republican; Washington, 3 rd District. Elected to the 112 th -116 th Congresses. (served Jan. 3, 2011-present) Committee assignments: H. Small Business (112 th -113 th Congresses) H. Transportation and Infrastructure (112 th Congress) H. Small Business (113 th Congress) H. Appropriations (114 th -116 th Congresses) H. Science, Space and Technology (116 th Congress) HERSETH SANDLIN, STEPHANIE. Democrat; South Dakota, At-Large. Elected to the 108 th Congress in a June 1, 2004, special election, to fill vacancy caused by resignation of William Janklow; reelected to the 109 th -111 th Congresses. (served June 3, 2004-Jan. 3, 2011) Committee assignments: H. Agriculture (108 th -111 th Congresses) H. Resources (108 th -109 th Congresses) H. Natural Resources (111 th Congress) H. Veterans' Affairs (108 th -111 th Congresses) H. Select Energy, Independence, and Global Warming (110 th -111 th Congresses) HICKS, LOUISE DAY. Democrat; Massachusetts, 9 th District. Elected to the 92 nd Congress. (served Jan. 3, 1971-Jan. 3, 1973) Committee assignments: H. Education and Labor (92 nd Congress) H. Veterans' Affairs (92 nd Congress) HILL, KATIE. Democrat; California, 25 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Oversight and Reform (116 th Congress) H. Science, Space and Technology (116 th Congress) H. Armed Services (116 th Congress) HIRONO, MAZIE. Democrat; Hawaii, 2 nd District. Elected to the 110 th -112 th Congresses; elected to the Senate in 2012 and reelected in 2018. (served in the House Jan. 3, 2007-Jan. 3, 2013; served in the Senate Jan. 3, 2013-present) Committee assignments: H. Education and Labor/Education and the Workforce (110 th -112 th Congresses) H. Transportation and Infrastructure (110 th -112 th Congresses) H. Small Business (110 th Congress) H. Ethics (112 th Congress, partial) S. Armed Services (113 th -116 th Congresses) S. Environment and Public Works (113 th Congress) S. Judiciary (113 th , 115 th -116 th Congresses) S. Veterans' Affairs (113 th -116 th Congresses) S. Select Intelligence (114 th Congress) S. Small Business and Entrepreneurship (114 th -116 th Congresses) S. Energy and Natural Resources (115 th -116 th Congresses) Jt. Select Budget and Appropriations Process Reform (115 th Congress) HOCHUL, KATHY. Democrat; New York, 26 th District. Elected to the 112 th Congress in a May 24, 2011, special election to fill vacancy caused by resignation of Christopher Lee. (served June 1, 2011-Jan. 3, 2013) Committee assignments: H. Armed Services (112 th Congress) H. Homeland Security (112 th Congress) HOLT, MARJORIE S. Republican; Maryland, 4 th District. Elected to the 93 rd -99 th Congresses. (served Jan. 3, 1973-Jan. 3, 1987) Committee assignments: H. Armed Services (93 rd -99 th Congresses) H. Administration (94 th Congress) H. Budget (95 th -96 th Congresses) Jt. Economic (98 th Congress) H. District of Columbia (98 th Congress) HOLTZMAN, ELIZABETH. Democrat; New York, 16 th District. Elected to the 93 rd -96 th Congresses. (served Jan. 3, 1973-Jan. 3, 1981) Committee assignments: H. Judiciary (93 rd -96 th Congresses) H. Budget (94 th -96 th Congresses) H. Select Committee on Aging (96 th Congress) HONEYMAN, NAN WOOD. Democrat; Oregon, 3 rd District. Elected to the 75 th Congress. (served Jan. 3, 1937-Jan. 3, 1939) Committee assignments: H. Indian Affairs (75 th Congress) H. Irrigation and Reclamation (75 th Congress) H. Rivers and Harbors (75 th Congress) HOOLEY, DARLENE. Democrat; Oregon, 5 th District. Elected to the 105 th -110 th Congresses. (served Jan. 3, 1997-Jan. 3, 2009) Committee assignments: H. Banking and Financial Services/Financial Services (105 th -109 th Congresses) H. Science/Science and Technology (105 th , 109 th , 110 th Congresses) H. Budget (106 th -108 th Congresses; 110 th Congress) H. Veterans' Affairs (108 th -109 th Congresses) H. Energy and Commerce (110 th Congress) HORN, JOAN KELLY. Democrat; Missouri, 2 nd District. Elected to the 102 nd Congress. (served Jan. 3, 1991-Jan. 3, 1993) Committee assignments: H. Public Works and Transportation (102 nd Congress) H. Science, Space, and Technology (102 nd Congress) H. Select Children, Youth, and Family (102 nd Congress) HORN, KENDRA. Democrat; Oklahoma, 5 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Science, Space and Technology (116 th Congress) H. Armed Services (116 th Congress) HOULAHAN, CHRISTINA . Democrat; Pennsylvania, 6 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Small Business (116 th Congress) H. Foreign Affairs (116 th Congress) H. Armed Services (116 th Congress) HUCK, WINNIFRED SPRAGUE MAS ON. Republican; Illinois, At Large. Elected to the 67 th Congress in a Nov. 7, 1922, special election to fill vacancy caused by death of her father, William E. Mason. (served Nov. 20, 1922-March 3, 1923) Committee assignments: H. Expenditures in the Department of Commerce (67 th Congress) H. Reform in the Civil Service (67 th Congress) H. Woman Suffrage (67 th Congress) HUMPHREY, MURIEL BUCK. Democrat; Minnesota, Senator. Appointed to the Senate Jan. 25, 1978, to fill vacancy caused by death of husband, Hubert H. Humphrey. (served Feb. 6, 1978-Jan. 3, 1979) Committee assignments: S. Foreign Relations (95 th Congress) S. Governmental Affairs (95 th Congress) HUTCHISON, KAY BAILEY. Republican; Texas, Senator. Elected on June 5, 1993, to fill vacancy caused by resignation of Lloyd Bentsen. Subsequently elected to a full term in 1994, and reelected in 2000 and 2006. (served June 14, 1993-Jan. 3, 2013) Committee assignments: S. Armed Service (103 rd -104 th Congresses) S. Commerce, Science, and Transportation (103 rd -112 th Congresses; ranking member, 111 th -112 th Congresses) S. Small Business (103 rd -104 th Congresses) S. Select Intelligence (104 th Congress) S. Appropriations (105 th -112 th Congresses) S. Rules and Administration (105 th -112 th Congresses) S. Environment and Public Works (106 th Congress) S. Veterans' Affairs (107 th -110 th Congresses) S. Banking, Housing, and Urban Affairs (111 th Congress) HYDE-SMITH, CINDY. Republican; Mississippi, Senator. Appointed to the Senate March 21, 2018, to fill vacancy caused by resignation of Thad Cochran. Elected in Nov. 2018. (served April 9, 2018-present) Committee assignments: S. Agriculture, Nutrition and Forestry (115 th -116 th Congresses) S. Appropriations (115 th -116 th Congresses) S. Rules and Administration (115 th -116 th Congresses) S. Energy and Natural Resources (116 th Congress) JACKSON LEE, SHEILA. Democrat; Texas, 18 th District. Elected to the 104 th -116 th Congresses. (served Jan. 3, 1995-present) Committee assignments: H. Judiciary (104 th -116 th Congresses) H. Science (104 th -109 th Congresses) H. Homeland Security (108 th -116 th Congresses) H. Foreign Affairs (110 th -111 th Congresses) H. Budget (116 th Congress) JAYAPAL, PRAMILA. Democrat; Washington, 7 th District. Elected to the 115 th -116 th Congresses. (served Jan. 3, 2017-present) Committee assignments: H. Budget (115 th -116 th Congresses) H. Judiciary (115 th -116 th Congresses) H. Education and Labor (116 th Congress) JENCKES, VIRGINIA ELLIS. Democrat; Indiana, 6 th District. Elected to the 73 rd -75 th Congresses. (served March 9, 1933-Jan. 3, 1939) Committee assignments: H. Civil Service (73 rd -75 th Congresses) H. District of Columbia (73 rd -75 th Congresses) H. Mines and Mining (73 rd -74 th Congresses) JENKINS, LYNN. Republican; Kansas, 2 nd District. Elected to the 111 th -115 th Congresses. (served Jan. 3, 2009-Jan. 3, 2019) Committee assignments: H. Financial Services (111 th Congress) H. Ways and Means (112 th -115 th Congresses) JOHNSON, EDDIE BERNICE. Democrat; Texas, 30 th District. Elected to the 103 rd -116 th Congresses (served Jan. 3, 1993-present). Chair of the Congressional Black Caucus, 107 th Congress. Committee assignments: H. Public Works and Transportation (103 rd Congress) H. Science, Space, and Technology/Science/Science and Technology (103 rd -116 th Congresses; ranking member, 112 th -115 th Congresses; chair, 116 th Congress) H. Transportation and Infrastructure (104 th -116 th Congresses) JOHNSON, NANCY L. Republican; Connecticut, 6 th District (98 th -107 th Congresses) and 5 th District (108 th -109 th Congresses). Elected to the 98 th -109 th Congresses. (served Jan. 3, 1983-Jan. 3, 2007) Committee assignments: H. Public Works and Transportation (98 th -100 th Congresses) H. Veterans' Affairs (98 th -99 th Congresses) H. Select Children, Youth, and Families (98 th -100 th Congresses) H. Budget (100 th Congress) H. Ways and Means (101 st -109 th Congresses) H. Standards of Official Conduct (102 nd -104 th Congresses; chair, 104 th Congress) Jt. Taxation (109 th Congress) JONES, BRENDA. Democrat; Michigan, 13 th District. Elected to the 115 th Congress in a Nov. 6, 2018 special election to fill vacancy caused by resignation of John Conyers. (served Nov. 29, 2018-Jan. 3, 2019) No committee assignments. JONES, STEPHANIE TUBBS. Democrat; Ohio, 11 th District. Elected to the 106 th -110 th Congresses. (served Jan. 3, 1999, until her death on August 20, 2008) Committee assignments: H. Banking and Financial Services (106 th Congress) H. Financial Services (107 th Congress) H. Small Business (106 th -107 th Congresses) H. Standards of Official Conduct (107 th -110 th Congresses; chair, 110 th Congress) H. Ways and Means (108 th -110 th Congresses) JORDAN, BARBARA C. Democrat; Texas, 18 th District. Elected to the 93 rd -95 th Congresses. (served Jan. 3, 1973-Jan. 3, 1979) Committee assignments: H. Judiciary (93 rd -95 th Congresses) H. Government Operations (94 th -95 th Congresses) KAHN, FLORENCE PRAG. Republican; California, 4 th District. Elected to the 69 th Congress in a Feb. 17, 1925, special election to fill vacancy caused by death of husband, Julius Kahn; reelected to the 70 th -74 th Congresses. (served Dec. 7, 1925-Jan. 3, 1937) Committee assignments: H. Census (69 th Congress) H. Coinage, Weights, and Measures (69 th Congress) H. Education (69 th Congress) H. Expenditures in the War Department (69 th Congress) H. War Claims (70 th Congress) H. Military Affairs (71 st -72 nd Congresses) H. Appropriations (73 rd -74 th Congresses) KAPTUR, MARCY. Democrat; Ohio, 9 th District. Elected to the 98 th -116 th Congresses. (served Jan. 3, 1983-present) Committee assignments: H. Banking, Finance, and Urban Affairs (98 th -101 st Congresses) H. Veterans' Affairs (98 th -100 th Congresses) H. Budget (101 st , 112 th Congresses) H. Appropriations (101 st -116 th Congresses) KASSEBAUM, NANCY LANDON. Republican; Kansas, Senator. Elected to the Senate in 1978. Reelected to the Senate in 1984 and 1990. (served Dec. 23, 1978-Jan. 3, 1997) Committee assignments: S. Banking, Housing, and Urban Affairs (96 th , 101 st , 102 nd Congresses) S. Special Committee on Aging (96 th -98 th Congresses; 101 st -102 nd Congresses) S. Budget (96 th -100 th Congresses) S. Commerce, Science, and Transportation (96 th -100 th Congresses) S. Select Committee on Ethics (99 th -100 th Congresses) S. Foreign Relations (97 th -104 th Congresses) S. Labor and Human Resources (101 st -104 th Congresses; ranking member, 103 rd Congress; chair, 104 th Congress) S. Indian Affairs (102 nd -104 th Congresses) Jt. Committee on the Organization of Congress (103 rd Congress) KEE, MAUDE ELIZABETH. Democrat; West Virginia, 5 th District. Elected to the 82 nd Congress in a July 16, 1951, special election to fill vacancy caused by death of husband, John Kee; reelected to the 83 rd -88 th Congresses. (served July 26, 1951-Jan. 3, 1965) Committee assignments: H. Veterans' Affairs (82 nd -88 th Congresses) H. Government Operations (85 th -87 th Congresses) H. Interior and Insular Affairs (88 th Congress) KELLY, EDNA FLANNERY. Democrat; New York, 12 th District. Elected to the 81 st Congress Nov. 8, 1949, to fill vacancy caused by death of Andrew L. Somers; reelected to the 82 nd -90 th Congresses. (served Jan. 3, 1950-Jan. 3, 1969) Committee assignments: H. Foreign Affairs (81 st -90 th Congresses) H. Standards of Official Conduct (90 th Congress) KELLY, ROBIN. Democrat; Illinois, 2 nd District. Elected to the 113 th Congress in a April 9, 2013, special election to vacancy caused by resignation of Jesse Jackson Jr.; reelected to the 114 th -116 th Congresses. (served April 11, 2013-present) Committee assignments: H. Oversight and Government Reform/Oversight and Reform (113 th -116 th Congresses) H. Science, Space, and Technology (113 th Congress) H. Foreign Affairs (114 th -115 th Congresses) H. Energy and Commerce (116 th Congress) KELLY, SUE. Republican; New York, 19 th District. Elected to the 104 th -109 th Congresses. (served Jan. 3, 1995-Jan. 3, 2007) Committee assignments: H. Banking and Financial Services/Financial Services (104 th -109 th Congresses) H. Small Business (104 th -109 th Congresses) H. Transportation and Infrastructure (104 th -109 th Congresses) KENNELLY, BARBARA BAILEY. Democrat; Connecticut, 1 st District. Elected to the 97 th Congress in a Jan. 12, 1982, special election to fill vacancy caused by death of William R. Cotter; reelected to the 98 th -105 th Congresses. (served Jan. 12, 1982-Jan. 3, 1999) Committee assignments: H. Government Operations (97 th Congress) H. Public Works and Transportation (97 th Congress) H. Select Intelligence (100 th -102 nd Congresses) H. Budget (103 rd Congress) H. Administration (103 rd Congress) H. Ways and Means (98 th -105 th Congresses) KEYS, MARTHA ELIZABETH. Democrat; Kansas, 2 nd District. Elected to the 94 th -95 th Congresses. (served Jan. 3, 1975-Jan. 3, 1979) Committee assignment: H. Ways and Means (94 th -95 th Congresses) KILPATRICK, CAROLYN CHEEKS. Democrat; Michigan, 15 th District (105 th -107 th Congresses) and 13 th District (108 th -111 th Congresses). Elected to the 105 th -111 th Congresses. (served Jan. 3, 1997-Jan. 3, 2011). Chair of the Congressional Black Caucus, 110 th Congress. Committee assignments: H. Banking and Financial Services (105 th Congress) H. House Oversight (105 th Congress) Jt. Library (105 th Congress) H. Appropriations (106 th -111 th Congresses) KILROY, MARY JO. Democrat; Ohio, 15 th District. Elected to the 111 th Congress. (served Jan. 3, 2009-Jan. 3, 2011) Committee assignments: H. Financial Services (111 th Congress) H. Homeland Security (111 th Congress) KIRKPATRICK, ANN. Democrat; Arizona, 1 st District (111 th , 113 th , and 114 th Congresses) and 2 nd District (116 th Congress-present). Elected to the 111 th , 113 th , 114 th , and 116 th Congresses. (served Jan. 3, 2009-Jan. 3, 2011; Jan. 3, 2013-Jan. 3, 2017; Jan. 3, 2019-present) Committee assignments: H. Homeland Security (111 th Congress) H. Small Business (111 th Congress) H. Veterans Affairs (111 th , 113 th Congresses) H. Transportation and Infrastructure (113 th -114 th Congresses) H. Agriculture (114 th , 116 th Congresses) H. Appropriations (116 th Congress) KLOBUCHAR, AMY. Democrat; Minnesota, Senator. Elected to Senate in 2006 and reelected in 2012 and 2018. (served Jan. 3, 2007-present) Committee assignments: S. Agriculture, Nutrition and Forestry (110 th -116 th Congresses) S. Commerce, Science, and Transportation (110 th -116 th Congresses) S. Environment and Public Works (110 th -111 th Congresses) Jt. Economic (110 th -116 th Congresses; Vice Chair, 113 th Congress) S. Judiciary (111 th -116 th Congresses) S. Rules (114 th -116 th Congresses; ranking member, 115 th -116 th Congresses) Jt. Printing (116 th Congress) Jt. Library (116 th Congress) KNUTSON, COYA GJESDAL. Democrat; Minnesota, 9 th District. Elected to the 84 th -85 th Congresses. (served Jan. 3, 1955-Jan. 3, 1959) Committee assignment: H. Agriculture (84 th -85 th Congresses) KOSMAS, SUZANNE. Democrat; Florida, 24 th District. Elected to the 111 th Congress. (served Jan. 6, 2009-Jan. 3, 2011) Committee assignments: H. Finance Services (111 th Congress) H. Science and Technology (111 th Congress) KUSTER, ANN McLANE. Democrat; New Hampshire, 2 nd District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Agriculture (113 th -115 th Congresses) H. Small Business (113 th Congress) H. Veterans' Affairs (113 th -115 th Congresses) H. Energy and Commerce (116 th Congress) LANDRIEU, MARY. Democrat; Louisiana, Senator. Elected to the Senate in 1996; reelected in 2002 and 2008. (served Jan. 3, 1997-Jan. 3, 2015) Committee assignments: S. Agriculture, Nutrition, and Forestry (105 th Congress) S. Energy and Natural Resources (105 th -113 th Congresses; chair, 113 th Congress, 2 nd session) S. Small Business and Entrepreneurship (105 th -113 th Congresses; chair, 111 th Congress-113 th Congress, 1 st session) S. Armed Services (106 th -107 th Congresses) S. Appropriations (107 th -113 th Congresses) S. Homeland Security and Governmental Affairs (110 th -113 th Congresses) LANGLEY, KATHERINE GUDGER. Republican; Kentucky, 10 th District. Elected to the 70 th -71 st Congresses. (served Dec. 5, 1927-March 3, 1931) Committee assignments: H. Claims (70 th -71 st Congresses) H. Immigration and Naturalization (70 th -71 st Congresses) H. Invalid Pensions (70 th -71 st Congresses) H. Education (71 st Congress) LAWRENCE, BRENDA L. Democrat; Michigan, 14 th District. Elected to the 114 th -116 th Congress. (served Jan. 3, 2015-present) Committee assignments: H. Oversight and Government Reform/Oversight and Reform (114 th -116 th Congresses) H. Small Business (114 th Congress) H. Transportation and Infrastructure (115 th Congress) H. Appropriations (116 th Congress) LEE, BARBARA. Democrat; California, 9 th District (105 th -112 th Congresses); 13 th District (113 th -116 th Congresses). Elected to the 105 th Congress in an April 7, 1998, special election to fill vacancy caused by resignation of Ronald Dellums; reelected to the 106 th -116 th Congresses. (served April 20, 1998-present) Chair of the Congressional Black Caucus, 111 th Congress. Committee assignments: H. Banking and Financial Services/Financial Services (105 th -109 th Congresses) H. Science (105 th Congress) H. International Relations/Foreign Affairs (107 th -111 th Congresses) H. Appropriations (110 th -116 th Congresses) H. Budget (113 th -116 th Congresses) LEE, SUSIE. Democrat; Nevada, 3 rd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignment: H. Veterans' Affairs (116 th Congress) H. Education and Labor (116 th Congress) LESKO, DEBBIE. Republican; Arizona, 8 th District. Elected to the 115 th Congress in an April 24, 2018, special election to fill vacancy caused by resignation of Trent Franks; reelected to the 116 th Congress. (served May 7, 2018-present) Committee assignments: H. Homeland Security (115 th -116 th Congresses) H. Judiciary (116 th Congress) H. Rules (116 th Congress) LINCOLN, BLANCHE LAMBERT. Democrat; Arkansas, 1 st District. Elected to the 103 rd -104 th Congresses (served in House Jan. 3, 1993-Jan. 3, 1997). Subsequently elected to the Senate in 1998 and reelected in 2004. (served in Senate Jan. 3, 1999-Jan. 3, 2011) Committee assignments: H. Agriculture (103 rd Congress) H. Energy and Commerce (103 rd Congress) H. Merchant Marine and Fisheries (103 rd Congress) H. Commerce (104 th Congress) S. Agriculture, Nutrition, and Forestry (106 th -111 th Congresses; chair, 111 th Congress) S. Energy and Natural Resources (106 th , 111 th Congresses) S. Special Committee on Aging (106 th -111 th Congresses) S. Finance (107 th -111 th Congresses) S. Select Committee on Ethics (107 th -108 th Congresses) LLOYD, MARILYN. Democrat; Tennessee, 3 rd District. Elected to the 94 th -103 rd Congresses. (served Jan. 3, 1975-Jan. 3, 1995) Committee assignments: H. Science, Space, and Technology (94 th -103 rd Congresses) H. Public Works and Transportation (94 th -99 th Congresses) H. Select Committee on Aging (96 th -102 nd Congresses) H. Armed Services (98 th -103 rd Congresses) LOFGREN, ZOE. Democrat; California, 16 th District (104 th -112 th Congresses); 19 th District (113 th Congress-present). Elected to the 104 th -116 th Congresses. (served Jan. 3, 1995-present) Committee assignments: H. Judiciary (104 th -116 th Congresses) H. Science/Science, Space and Technology (104 th -108 th Congresses; 113 th -116 th Congresses) H. Standards of Official Conduct (105 th -107 th Congresses; chair, 111 th Congress) H. Homeland Security (108 th -111 th Congresses) H. Administration (109 th -116 th Congresses; chair, 116 th Congress) Jt. Library (109 th -110 th Congresses; 113 th -116 th Congresses) H. Select Modernization of Congress (116 th Congress) Jt. Printing (chair, 116 th Congress) LONG, CATHERINE S. Democrat; Louisiana, 8 th District. Elected to the 99 th Congress in a March 30, 1985, special election to fill vacancy caused by death of husband, Gillis Long. (served April 4, 1985-Jan. 3, 1987) Committee assignments: H. Public Works (99 th Congress) H. Small Business (99 th Congress) LONG, JILL. Democrat; Indiana, 4 th District. Elected to the 101 st Congress in a March 28, 1989, special election to fill vacancy caused by resignation of Dan Coats; reelected to the 102 nd -103 rd Congresses. (served April 5, 1989-Jan. 3, 1995) Committee assignments: H. Agriculture (101 st -103 rd Congresses) H. Veterans' Affairs (101 st -103 rd Congresses) H. Select Committee on Hunger (101 st -102 nd Congresses) LONG, ROSE McCONNELL. Democrat; Louisiana, Senator. Appointed to the Senate Jan. 31, 1936, to fill vacancy caused by death of her husband, Huey Pierce Long; subsequently elected April 21, 1936, in a special election to fill the remaining months of his term. (served Feb. 10, 1936-Jan. 3, 1937) Committee assignments: S. Claims (74 th Congress) S. Immigration (74 th Congress) S. Interoceanic Canals (74 th Congress) S. Post Office and Post Roads (74 th Congress) S. Public Lands and Surveys (74 th Congress) LOVE, MIA B. Republican; Utah, 4 th District. Elected to the 114 th -115 th Congress. (served Jan. 3, 2015-Jan. 3, 2019) Committee assignment: H. Financial Services (114 th -115 th Congresses) LOWEY, NITA M. Democrat; New York, 20 th District (101 st -102 nd Congresses); 18 th District (103 rd -112 th Congresses); 17 th District (113 th Congress-present). Elected to the 101 st -116 th Congresses. (served Jan. 3, 1989-present) Committee assignments: H. Education and Labor (101 st -102 nd Congresses) H. Merchant Marine and Fisheries (101 st -102 nd Congresses) H. Select Narcotics Abuse and Control (101 st -102 nd Congresses) H. Appropriations (103 rd -116 th Congresses; ranking member, 113 th -115 th Congresses; chair, 116 th Congress) H. Homeland Security (108 th -110 th Congresses) Jt. Select Budget and Appropriations Process Reform (115 th Congress; co-chair) LUCE, CLARE BOOTHE. Republican; Connecticut, 4 th District. Elected to the 78 th -79 th Congresses. (served Jan. 3, 1943-Jan. 3, 1947) Committee assignment: H. Military Affairs (78 th -79 th Congresses) LUJAN GRISHAM, MICHELLE. Democrat; New Mexico, 1 st District. Elected to the 113 th -115 th Congresses. Chair, Congressional Hispanic Caucus, 115 th Congress. (served Jan. 3, 2013-until her resignation Dec. 31, 2018) Committee assignments: H. Agriculture (113 th -115 th Congresses) H. Budget (113 th -115 th Congresses) H. Oversight and Government Reform (113 th -114 th Congresses) LUMMIS, CYNTHIA. Republican; Wyoming, At Large. Elected to the 111 th -114 th Congresses. (served Jan. 3, 2009-Jan. 3, 2017) Committee assignments: H. Agriculture (111 th Congress) H. Budget (111 th Congress) H. Natural Resources (111 th Congress; 113 th -114 th Congresses) H. Appropriations (112 th Congress) H. Oversight and Government Reform (113 th -114 th Congresses) H. Science, Space and Technology (113 th Congress) LURIA, ELAINE. Democrat; Virginia, 2 nd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignment: H. Veterans' Affairs (116 th Congress) H. Armed Services (116 th Congress) LUSK, GEORGIA LEE. Democrat; New Mexico, At Large. Elected to the 80 th Congress. (served Jan. 3, 1947-Jan. 3, 1949) Committee assignment: H. Veterans' Affairs (80 th Congress) MAJETTE, DENISE L. Democrat; Georgia, 4 th District. Elected to the 108 th Congress. (served Jan. 3, 2003-Jan. 3, 2005) Committee assignments: H. Budget (108 th Congress) H. Education and the Workforce (108 th Congress) H. Small Business (108 th Congress) MALONEY, CAROLYN. Democrat; New York, 14 th District (103 rd -112 th Congresses); 12 th District (113 th Congress-present). Elected to the 103 rd -116 th Congresses. (served Jan. 3, 1993-present) Committee assignments: H. Government Operations/Government Reform/Oversight and Government Reform/Oversight and Reform (103 th -116 th Congresses) H. Banking and Financial Services/Financial Services (103 rd -116 th Congresses) Jt. Economic (105 th -116 th Congresses; vice chair, 110 th Congress and 116 th Congresses; chair, 111 th Congress; ranking member, 114 th Congress) MANKIN, HELEN DOUGLAS. Democrat; Georgia, 5 th District. Elected to the 79 th Congress in a Feb. 12, 1946, special election to fill vacancy caused by resignation of Robert Ramspeck. (served Feb. 25, 1946-Jan. 3, 1947) Committee assignments: H. Civil Service (79 th Congress) H. Claims (79 th Congress) H. Elections (79 th Congress) H. Revision of Laws (79 th Congress) MARGOLIES-MEZVINSKY, MARJORIE. Democrat; Pennsylvania, 13 th District. Elected to the 103 rd Congress. (served Jan. 3, 1993-Jan. 3, 1995) Committee assignments: H. Energy and Commerce (103 rd Congress) H. Government Operations (103 rd Congress) H. Small Business (103 rd Congress) MARKEY, BETSY. Democrat; Colorado, 4 th District. Elected to the 111 th Congress. (served Jan. 3, 2009-Jan. 3, 2011) Committee assignments: H. Agriculture (111 th Congress) H. Transportation and Infrastructure (111 th Congress) MARTIN, LYNN M. Republican; Illinois, 16 th District. Elected to the 97 th -101 st Congresses. (served Jan. 3, 1981-Jan. 3, 1991) Committee assignments: H. Administration (97 th -98 th Congresses) H. Budget (97 th -99 th Congresses) H. Armed Services (99 th -100 th Congresses) Jt. Printing (98 th Congress) H. Rules (101 st Congress) H. Bipartisan Task Force on Ethics (vice chair, 101 st Congress) MATSUI, DORIS O. Democrat; California, 5 th District (109 th -112 th Congresses); 6 th District (113 th Congress-present). Elected to the 109 th Congress in a March 8, 2005, special election to fill vacancy caused by death of husband, Robert Matsui; reelected to the 110 th -116 th Congresses. (served March 10, 2005-present) Committee assignments: H. Rules (109 th -111 th , 116 th Congresses) H. Science (109 th Congress) H. Transportation and Infrastructure (110 th Congress) H. Energy and Commerce (110 th -116 th Congresses) MAY, CATHERINE DEAN. Republican; Washington, 4 th District. Elected to the 86 th -91 st Congresses. (served Jan. 3, 1959-Jan. 3, 1971) Committee assignments: H. Agriculture (86 th -91 st Congresses) H. District of Columbia (91 st Congress, 1 st session) H. Select Committee on the House Beauty Shop (90 th -91 st Congresses) Jt. Atomic Energy (91 st Congress) MCBATH, LUCY. Democrat; Georgia, 6 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Judiciary (116 th Congress) H. Education and Labor (116 th Congress) MCCARTHY, CAROLYN. Democrat; New York, 4 th District. Elected to the 105 th -113 th Congresses. (served Jan. 7, 1997-Jan. 3, 2015) Committee assignments: H. Education and the Workforce/Education and Labor (105 th -113 th Congresses) H. Small Business (105 th -106 th Congresses) H. Financial Services (108 th -113 th Congresses) MCCARTHY, KAREN. Democrat; Missouri, 5 th District. Elected to the 104 th -108 th Congresses. (served Jan. 3, 1995-Jan. 3, 2005) Committee assignments: H. Science (104 th Congress) H. Small Business (104 th Congress) H. Transportation and Infrastructure (104 th Congress) H. Commerce/Energy and Commerce (105 th -108 th Congresses) H. Homeland Security (108 th Congress) MCCARTHY, KATHYRN O'LOUGHLIN. Democrat; Kansas, 6 th District. Elected to the 73 rd Congress. (served March 9, 1933-Jan. 3, 1935) Committee assignments: H. Education (73 rd Congress) H. Public Buildings and Grounds (73 rd Congress) H. World War Veterans' Legislation (73 rd Congress) MCCASKILL, CLAIRE. Democrat; Missouri, Senator. Elected to the Senate in 2006; reelected in 2012. (served Jan. 3, 2007-Jan. 3, 2019) Committee assignments: S. Armed Services (110 th -115 th Congresses) S. Homeland Security and Governmental Affairs (110 th -115 th Congresses; ranking member, 115 th Congress) S. Indian Affairs (110 th Congress) S. Special Aging (110 th -114 th Congresses; ranking member, 114 th Congress) S. Commerce, Science, and Transportation (111 th -114 th Congresses) S. Finance (115 th Congress) MCCOLLUM, BETTY. Democrat; Minnesota, 4 th District. Elected to the 107 th -116 th Congresses. (served Jan. 3, 2001-present) Committee assignments: H. Education and the Workforce (107 th -109 th Congresses) H. Resources (107 th -108 th Congresses) H. International Relations (108 th -109 th Congresses) H. Appropriations (110 th -116 th Congresses) H. Oversight and Government Reform (110 th Congress) H. Budget (111 th -112 th Congresses) MCCORMICK, RUTH HANNA. Republican; Illinois, At Large. Elected to the 71 st Congress. (served April 15, 1929-March 3, 1931) Committee assignment: H. Naval Affairs (71 st Congress) MCKINNEY, CYNTHIA. Democrat; Georgia, 11 th District (103 rd -104 th Congresses) and 4 th District (105 th -107 th Congress and 109 th Congress). Elected to the 103 rd -107 th Congresses and to the 109 th Congress. (served Jan. 3, 1993-Jan. 3, 2003; Jan. 3, 2005-Jan. 3, 2007) Committee assignments: H. Agriculture (103 rd -104 th Congresses) H. Banking and Finance (104 th -105 th Congresses) H. Foreign Affairs/International Relations (103 rd -107 th Congresses) H. National Security (105 th Congress) H. Armed Services (106 th -107 th Congresses; 109 th Congress) H. Budget (109 th Congress) MCMILLAN, CLARA GOODING. Democrat; South Carolina, 1 st District. Elected to the 76 th Congress in a Nov. 7, 1939, special election to fill vacancy caused by death of husband, Thomas S. McMillan. (served Jan. 3, 1940-Jan. 3, 1941) Committee assignments: H. Election of President, Vice President, and Representatives in Congress (76 th Congress) H. Insular Affairs (76 th Congress) H. Patents (76 th Congress) H. Public Buildings and Grounds (76 th Congress) MCMORRIS RO D GERS, CATHY. Republican; Washington, 5 th District. Elected to the 109 th -116 th Congresses. (served Jan. 3, 2005-present) Committee assignments: H. Armed Services (109 th -111 th Congresses) H. Education and the Workforce/Education and Labor (109 th -111 th Congresses) H. Resources/Natural Resources (109 th -111 th Congresses) H. Energy and Commerce (112 th -116 th Congresses) MCSALLY, MARTHA. Republican; Arizona, 2 nd District. Elected to the 114 th -115 th Congresses. (served in House Jan. 3, 2015-Jan. 3, 2019) Appointed to the Senate Jan. 3, 2019, to fill vacancy caused by death of John McCain. (served in Senate Jan. 3, 2019-present) Committee assignments: H. Armed Services (114 th -115 th Congresses) H. Homeland Security (114 th -115 th Congresses) S. Armed Services (116 th Congress) S. Banking (116 th Congress) S. Energy and Natural Resources (116 th Congress) S. Special Committee on Aging (116 th Congress) S. Indian Affairs (116 th Congress) MEEK, CARRIE. Democrat; Florida, 17 th District. Elected to the 103 rd -107 th Congresses. (served Jan. 3, 1993-Jan. 3, 2003) Committee assignments: H. Appropriations (103 rd Congress; 105 th -107 th Congresses) H. Budget (104 th Congress) H. Government Reform and Oversight (104 th Congress) MENG, GRACE. Democrat; New York, 6 th District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Foreign Affairs (113 th -114 th Congresses) H. Small Business (113 th -114 th Congresses) H. Appropriations (115 th -116 th Congresses) H. Ethics (116 th Congress) MEYERS, JAN. Republican; Kansas, 3 rd District. Elected to the 99 th -104 th Congresses. (served Jan. 3, 1985-Jan. 3, 1997) Committee assignments: H. Science and Technology (99 th Congress) H. Select Aging (99 th -102 nd Congresses) H. Foreign Affairs/ International Relations (99 th -104 th Congresses) H. Economic and Educational Opportunities (104 th Congress) H. Small Business (99 th -104 th Congresses; ranking member, 103 rd Congress; chair, 104 th Congress) MEYNER, HELEN STEVENSON. Democrat; New Jersey, 13 th District. Elected to the 94 th -95 th Congresses. (served Jan. 3, 1975-Jan. 3, 1979) Committee assignments: H. District of Columbia (94 th -95 th Congresses) H. Foreign Affairs (94 th Congress) H. International Relations (95 th Congress) MIKULSKI, BARBARA ANN. Democrat; Maryland, 3 rd District. Elected to the 95 th -99 th Congresses (served in House Jan. 3, 1977-Jan. 3, 1987). Subsequently elected to the Senate in 1986 and reelected in 1992, 1996, 2004, and 2010. (served in Senate Jan. 6, 1987-Jan. 3, 2017) Committee assignments: H. Interstate and Foreign Commerce (95 th -97 th Congresses) H. Merchant Marine and Fisheries (95 th -99 th Congresses) H. Energy and Commerce (97 th -99 th Congresses) S. Environmental and Public Works (100 th Congress) S. Appropriations (100 th -114 th Congresses; chair, 113 th Congress; ranking member, 114 th Congress) S. Labor and Human Resources (100 th -105 th Congresses) S. Small Business (100 th -102 nd Congresses) S. Select Ethics (103 rd -104 th Congresses; 109 th Congress) S. Health, Education, Labor, and Pensions (106 th -114 th Congresses) S. Select Intelligence (107 th -114 th Congresses) MILLENDER-McDONALD, JUANITA. Democrat; California, 37 th District. Elected to the 104 th Congress in a March 26, 1996, special election to fill vacancy caused by resignation of Walter Tucker; reelected to the 105 th -110 th Congresses. (served April 16, 1996, until her death April 22, 2007) Committee assignments: H. Small Business (104 th -110 th Congresses) H. Transportation and Infrastructure (104 th -110 th Congresses) H. Administration (108 th -110 th Congresses; ranking member, 109 th Congress; chair, 110 th Congress) Jt. Library (108 th -110 th Congresses) Jt. Printing (109 th -110 th Congresses) MILLER, CANDICE S. Republican; Michigan, 10 th District. Elected to the 108 th -114 th Congresses. (served Jan. 3, 2003, until her resignation Dec. 31, 2016) Committee assignments: H. Armed Services (108 th -110 th Congresses) H. Government Reform (108 th -109 th Congresses) H. House Administration (109 th Congress; chair, 113 th - 114 th Congresses) H. Transportation and Infrastructure (110 th -114 th Congresses) H. Select Energy Independence and Global Warming (110 th -111 th Congresses) H. Homeland Security (110 th -114 th Congresses) Jt. Library (109 th Congress; 113 th -114 th Congresses) Jt. Printing (109 th Congress; 113 th -114 th Congresses) MILLER, CAROL. Republican; West Virginia, 3 rd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Oversight and Reform (116 th Congress) H. Transportation and Infrastructure (116 th Congress) H. Select Committee on the Climate Crisis (116 th Congress) MINK, PATSY TAKEMOTO. Democrat; Hawaii, 2 nd District. Elected to the 89 th -94 th Congresses; elected to the 101 st Congress in a Sept. 22, 1990, special election to fill vacancy caused by resignation of Daniel Akaka; reelected to the 102 nd -107 th Congresses; posthumously reelected to the 108 th Congress. (served Jan. 3, 1965-Jan. 3, 1977; Sept. 27, 1990, until her death Sept. 28, 2002) Committee assignments: H. Education and Labor (89 th -94 th Congresses; 101 st -103 rd Congresses) H. Interior and Insular Affairs (90 th -94 th Congresses) H. Budget (94 th Congress; 103 rd -105 th Congresses) H. Government Operations (101 st -102 nd Congresses) H. Natural Resources (103 rd Congress) H. Economic and Educational Opportunities/Education and the Workforce (104 th -107 th Congresses) H. Government Reform (106 th -107 th Congresses) MOLINARI, SUSAN. Republican; New York, 14 th District (101 st -102 nd Congresses) and 13 th District (103 rd -105 th Congresses). Elected to the 101 st Congress in a March 20, 1990, special election to fill vacancy caused by resignation of father, Guy Molinari; reelected to the 102 nd -105 th Congresses. (served March 27, 1990, until her resignation August 1, 1997) Committee assignments: H. Small Business (101 st Congress) H. Public Works and Transportation (101 st -103 rd Congresses) H. Transportation and Infrastructure (104 th -105 th Congresses) H. Education and Labor (102 nd -103 rd Congresses) H. Budget (104 th -105 th Congresses) MOORE, GWENDOLYNNE (GWEN). Democrat; Wisconsin, 4 th District. Elected to the 109 th -116 th Congresses. (served Jan. 3, 2005-present) Committee assignments: H. Financial Services (109 th -115 th Congresses) H. Small Business (109 th -111 th Congresses) H. Budget (110 th -114 th Congresses) H. Ways and Means (116 th Congress) MORELLA, CONSTANCE A. Republican; Maryland, 8 th District. Elected to the 100 th -107 th Congresses. (served Jan. 6, 1987-Jan. 3, 2003) Committee assignments: H. Post Office and Civil Service (100 th -103 rd Congresses) H. Science, Space, and Technology/Science (100 th -107 th Congresses) H. Select Aging (100 th -102 nd Congresses) H. Government Reform and Oversight (104 th -107 th Congresses) MOSELEY-BRAUN, CAROL. Democrat; Illinois, Senator. Elected to the Senate in 1992. (served Jan. 3, 1993-Jan. 3, 1999) Committee assignments: S. Banking, Housing, and Urban Affairs (103 rd -105 th Congresses) S. Judiciary (103 rd Congress) S. Small Business (103 rd Congress) S. Finance (104 th -105 th Congresses) S. Special Aging (104 th -105 th Congresses) MUCARSEL-POWELL, DEBBIE. Democrat; Florida, 26 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Transportation and Infrastructure (116 th Congress) H. Judiciary (116 th Congress) MURKOWSKI, LISA. Republican; Alaska, Senator. Appointed to the Senate Dec. 20, 2002, by her father, Frank Murkowski, to the seat he had held before he was elected governor of Alaska. Reelected to a six-year term in 2004, as well as in 2010 and 2016. (served Jan. 3, 2003-present) Committee assignments: S. Energy and Natural Resources (108 th -116 th Congresses; ranking member, 111 th -113 th Congresses; chair, 114 th -116 th Congresses) S. Environment and Public Works (108 th -109 th Congress) S. Veterans' Affairs (108 th Congress) S. Indian Affairs (108 th -116 th Congresses; ranking member, part of 110 th Congress) S. Foreign Relations (109 th -110 th Congresses) S. Health, Education, Labor, and Pensions (110 th -116 th Congresses) S. Appropriations (111 th -116 th Congresses) MURPHY, STEPHANIE. Democrat; Florida, 7 th District. Elected to the 115 th -116 th Congresses. (served Jan. 3, 2017-present) Committee assignments: H. Armed Services (115 th Congress) H. Small Business (115 th Congress) H. Ways and Means (116 th Congress) MURRAY, PATTY. Democrat; Washington, Senator. Elected to the Senate in 1992 and reelected in 1998, 2004, 2010, and 2016. (served Jan. 5, 1993-present) Committee assignments: S. Appropriations (103 rd -111 th Congresses; 113 th -116 th Congresses) S. Banking, Housing, and Urban Affairs (103 rd -104 th Congresses) S. Budget (103 rd -116 th Congresses; chair, 113 th Congress) S. Labor and Human Resources (105 th Congress) S. Veterans Affairs (105 th -116 th Congresses; chair, 112 th Congress) S. Select Ethics (105 th Congress) S. Health, Education, Labor, and Pensions (106 th -116 th Congresses; ranking member, 114 th -116 th Congresses) S. Foreign Relations (110 th Congress) S. Indian Affairs (110 th Congress) Jt. Printing (111 th -112 th Congresses) S. Rules and Administration (111 th -113 th Congresses) Jt. Select Committee on Deficit Control (112 th Congress) MUSGRAVE, MARILYN. Republican; Colorado, 4 th District. Elected to the 108 th -110 th Congresses. (served Jan. 3, 2003-Jan. 3, 2009) Committee assignments: H. Agriculture (108 th -110 th Congresses) H. Education and the Workforce (108 th -109 th Congresses) H. Small Business (108 th -110 th Congresses) H. Resources (109 th Congress) MYRICK, SUE. Republican; North Carolina, 9 th District. Elected to the 104 th -112 th Congresses. (served Jan. 3, 1995, to Jan. 3, 2013) Committee assignments: H. Budget (104 th Congress) H. Science (104 th Congress) H. Small Business (104 th Congress) H. Rules (105 th -108 th Congresses) H. Energy and Commerce (109 th -112 th Congresses) H. Intelligence (112 th Congress) NAPOLITANO, GRACE FLORES. Democrat; California, 34 th District (106 th -107 th Congresses), 38 th District (108 th -112 th Congresses) and 32 nd District (113 th Congress-present). Elected to the 106 th -116 th Congresses (served Jan. 3, 1999-present). Chair of the Congressional Hispanic Caucus, 109 th Congress. Committee assignments: H. Resources/Natural Resources (106 th -116 th Congresses) H. Small Business (106 th -108 th Congresses) H. International Relations (107 th -109 th Congresses) H. Transportation and Infrastructure (110 th -116 th Congresses) NEGRETE McLEOD, GLORIA. Democrat; California, 35 th District. Elected to the 113 th Congress. (served Jan. 3, 2013-Jan. 3, 2015) Committee assignments: H. Agriculture (113 th Congress) H. Veterans' Affairs (113 th Congress) NEUBERGER, MAURINE BROWN. Democrat; Oregon, Senator. Elected to the Senate in a Nov. 8, 1960, special election to fill vacancy caused by death of husband, Richard L. Neuberger, and for the ensuing six-year term. (served Nov. 9, 1960-Jan. 3, 1967) Committee assignments: S. Agriculture and Forestry (87 th -88 th Congresses) S. Banking and Currency (87 th -89 th Congresses) S. Special Committee on Aging (87 th Congress) S. Committee on Parliamentary Conference with Canada (87 th Congress, 2 nd session) S. Commerce (89 th Congress) NOEM, KRISTI. Republican; South Dakota, At Large. Elected to the 112 th -115 th Congresses. (served Jan. 3, 2011-Jan.3, 2019) Committee assignments: H. Education and the Workforce (112 th Congress) H. Natural Resources (112 th Congress) H. Agriculture (113 th Congress) H. Ways and Means (114 th -115 th Congresses) NOLAN, MAE ELLA. Republican; California, 5 th District. Elected to the 67 th Congress in a Jan. 23, 1923, special election to fill vacancy caused by death of husband, John Nolan, and also to the 68 th Congress. (served Feb. 2, 1923-March 3, 1925). First woman to chair a congressional committee. Committee assignments: H. Expenditures in the Post Office Department (67 th -68 th Congresses; chair, 68 th Congress) H. Labor (67 th -68 th Congresses) NORRELL, CATHERINE DORRIS. Democrat; Arkansas, 6 th District. Elected to the 87 th Congress in an April 18, 1961, special election to fill vacancy caused by death of husband, William Frank Norrell. (served April 25, 1961-Jan. 3, 1963) Committee assignment: H. Post Office and Civil Service (87 th Congress) NORTHUP, ANNE M. Republican; Kentucky 3 rd District. Elected to the 105 th -109 th Congresses. (served Jan. 3, 1997-Jan. 3, 2007) Committee assignment: H. Appropriations (105 th -109 th Congresses) NORTON, ELEANOR HOLMES. Democrat; Delegate from the District of Columbia. Elected to the 102 nd -116 th Congresses. (served Jan. 3, 1991-present) Committee assignments: H. District of Columbia (102 nd -103 rd Congresses) H. Post Office and Civil Service (102 nd -103 rd Congresses) H. Public Works and Transportation (102 nd -103 rd Congresses) Jt. Committee on the Organization of Congress (103 rd Congress) H. Small Business (104 th Congress) H. Oversight and Government Reform/ Government Reform/Oversight and Reform (104 th -116 th Congresses) H. Transportation and Infrastructure (104 th -116 th Congresses) H. Homeland Security (108 th -111 th Congresses) NORTON, MARY TERESA. Democrat; New Jersey, 13 th District. Elected to the 69 th -81 st Congresses. (served Dec. 7, 1925-Jan. 3, 1951) Committee assignments: H. District of Columbia (69 th -74 th Congresses; chair, 72 nd - 74 th Congresses) H. Labor (69 th -79 th Congresses; chair, 75 th -79 th Congresses) H. World War Veterans Legislation (69 th -72 nd Congresses) H. Memorials (71 st -79 th Congresses) H. Education (78 th -79 th Congresses) H. Enrolled Bills (78 th -79 th Congresses) H. Administration (ranking member, 80 th Congress; chair, 81 st Congress) Jt. Printing (81 st Congress) Jt. Library (80 th Congress) OAKAR, MARY ROSE. Democrat; Ohio, 20 th District. Elected to the 95 th -102 nd Congresses. (served Jan. 3, 1977-Jan. 3, 1993) Committee assignments: H. Banking, Finance, and Urban Affairs (95 th -102 nd Congresses) H. Select Committee on Aging (96 th -102 nd Congresses) H. Post Office and Civil Service (97 th -102 nd Congresses) H. Administration (98 th -102 nd Congresses) OCASIO-CORTEZ, ALEXANDRIA. Democrat; New York, 14 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Oversight and Reform (116 th Congress) H. Financial Services (116 th Congress) O'DAY, CAROLINE LOVE GOODWIN. Democrat; New York, At Large. Elected to the 74 th -77 th Congresses. (served Jan. 3, 1935-Jan. 3, 1943) Committee assignments: H. Election of President, Vice President, and Representatives (74 th -77 th Congresses; chair, 75 th -77 th Congresses) H. Immigration and Naturalization (75 th -77 th Congresses) H. Insular Affairs (75 th -77 th Congresses) OLDFIELD, PEARL PEDEN. Democrat; Arkansas, 2 nd District. Elected to the 70 th Congress in a Jan. 9, 1929, special election to fill vacancy caused by death of husband, William A. Oldfield, and also to the 71 st Congress. (served Jan. 11, 1929-March 3, 1931) Committee assignments: H. Coinage, Weights, and Measures (71 st Congress) H. Expenditures in the Executive Departments (71 st Congress) H. Public Buildings and Grounds (71 st Congress) OMAR, ILHAN. Democrat; Minnesota, 5 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignment: H. Budget (116 th Congress) H. Foreign Affairs (116 th Congress) H. Education and Labor (116 th Congress) OWEN, RUTH BRYAN. Democrat; Florida, 4 th District. Elected to the 71 st -72 nd Congresses. (served April 15, 1929-March 3, 1933) Committee assignment: H. Foreign Affairs (71 st -72 nd Congresses) PATTERSON, ELIZABETH J. Democrat; South Carolina, 4 th District. Elected to the 100 th -102 nd Congresses. (served Jan. 3, 1987-Jan. 3, 1993) Committee assignments: H. Banking, Finance, and Urban Affairs (100 th -102 nd Congresses) H. Veterans' Affairs (100 th -102 nd Congresses) H. Select Hunger (100 th -102 nd Congresses) PELOSI, NANCY. Democrat; California, 5 th District (100 th -102 nd Congresses), 8 th District (103 rd -112 th Congresses); 12 th District (113 th Congress-present). Elected to the 100 th Congress in a June 2, 1987, special election to fill vacancy caused by death of Sala Burton; reelected to the 101 st -116 th Congresses. (served June 9, 1987-present) First female Speaker of the House, 110 th , 111 th , and 116 th Congresses. Committee assignments: H. Banking, Finance, and Urban Affairs (100 th -101 st Congresses) H. Government Operations (100 th -101 st Congresses) H. Appropriations (102 nd -107 th Congresses) H. Standards of Official Conduct (102 nd -104 th Congresses) H. Intelligence (104 th -107 th Congresses; Ex Officio, 108 th -113 th , 116 th Congresses) PETTIS, SHIRLEY N. Republican; California, 37 th District. Elected to the 94 th Congress in a April 29, 1975, special election to fill vacancy caused by death of husband, Jerry L. Pettis; reelected to the 95 th Congress. (served May 6, 1975-Jan. 3, 1979) Committee assignments: H. Interior and Insular Affairs (94 th Congress) H. Education and Labor (95 th Congress) H. International Relations (95 th Congress) PFOST, GRACIE BOWERS. Democrat; Idaho, 1 st District. Elected to the 83 rd -87 th Congresses. (served Jan. 3, 1953-Jan. 3, 1963) Committee assignments: H. Interior and Insular Affairs (83 rd -87 th Congresses) H. Post Office and Civil Service (84 th -85 th Congresses) H. Public Works (86 th -87 th Congresses) PINGREE, CHELLIE. Democrat; Maine, 1 st District. Elected to the 111 th -116 th Congresses. (served Jan. 3, 2009-present) Committee assignments: H. Armed Services (111 th -112 th Congresses) H. Rules (111 th -112 th Congresses) H. Agriculture (112 th -116 th Congresses) H. Appropriations (113 th -116 th Congresses) PLASKETT, STACEY E. Democrat; Delegate from the U.S. Virgin Islands. Elected to the 114 th -116 th Congresses. (served Jan. 3, 2015-present) Committee assignments: H. Agriculture (114 th -116 th Congresses) H. Oversight and Government Reform/Oversight and Reform (114 th -116 th Congresses) H. Transportation and Infrastructure (116 th Congress) PORTER, KATIE . Democrat; California, 45 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Financial Services (116 th Congress) PRATT, ELIZA JANE. Democrat; North Carolina, 8 th District. Elected to the 79 th Congress in a May 25, 1946, special election to fill vacancy caused by death of William O. Burgin. (served June 3, 1946-Jan. 3, 1947) Committee assignments: H. Flood Control (79 th Congress) H. Pensions (79 th Congress) H. Territories (79 th Congress) PRATT, RUTH SEARS BAKER. Republican; New York, 17 th District. Elected to the 71 st -72 nd Congresses. (served April 15, 1929-March 3, 1933) Committee assignments: H. Banking and Currency (71 st Congress) H. Library (71 st -72 nd Congresses) H. Education (72 nd Congress) PRESSLEY, AYANNA. Democrat; Massachusetts, 7 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Oversight and Reform (116 th Congress) H. Financial Services (116 th Congress) PRYCE, DEBORAH. Republican; Ohio, 15 th District. Elected to the 103 rd -110 th Congresses. (served Jan. 3, 1993-Jan. 3, 2009) Committee assignments: H. Banking, Finance, and Urban Affairs (103 rd Congress) H. Government Operations (103 rd Congress) H. Rules (104 th -108 th Congresses) H. Financial Services (109 th -110 th Congresses) PYLE, GLADYS. Republican; South Dakota, Senator. Elected to the Senate Nov. 8, 1938, to fill vacancy caused by death of Peter Norbeck; never sworn in and seated, because Congress was not in session between her election and the expiration of the term on Jan. 3, 1939. No committee assignments listed. RADEWAGEN, AUMUA AMATA COLEMAN. Republican; Delegate from American Samoa. Elected to the 114 th -116 th Congress. (served Jan. 3, 2015-present) Committee assignments: H. Natural Resources (114 th -116 th Congresses) H. Small Business (114 th -116 th Congresses) H. Veterans' Affairs (114 th -116 th Congresses) RANKIN, JEANNETTE. Republican; Montana, At Large (65 th Congress) and 1 st District (77 th Congress). Elected to the 65 th Congress and the 77 th Congress. (served April 2, 1917-March 4, 1919; Jan. 3, 1941-Jan. 3, 1943) First woman elected to Congress. Committee assignments: H. Public Lands (65 th Congress; 77 th Congress) H. Woman Suffrage (65 th Congress) H. Insular Affairs (77 th Congress) REECE, LOUISE GOFF. Republican; Tennessee, 1 st District. Elected to the 87 th Congress in a May 16, 1961, special election to fill vacancy caused by death of her husband, B. Carroll Reece. (served May 23, 1961-Jan. 3, 1963) Committee assignment: H. Public Works (87 th Congress) REID, CHARLOTTE THOMPSON. Republican; Illinois, 15 th District. Elected to the 88 th -92 nd Congresses. (served Jan. 3, 1963, until her resignation on Oct. 7, 1971) Committee assignments: H. Interior and Insular Affairs (88 th -89 th Congresses) H. Public Works (89 th Congress) H. Appropriations (90 th -92 nd Congresses) H. Standards of Official Conduct (91 st -92 nd Congresses) RICE, KATHLEEN M. Democrat; New York; 4 th District. Elected to the 114 th -116 th Congresses. (served Jan. 3, 2015-present) Committee assignments: H. Homeland Security (114 th -116 th Congresses) H. Veterans' Affairs (114 th -116 th Congresses) RICHARDSON, LAURA. Democrat, California, 37 th District. Elected to the 110 th Congress in an August 21, 2007, special election to fill vacancy caused by death of Juanita Millender-McDonald; reelected to the 111 th -112 th Congresses. (served Sept. 4, 2007, to Jan. 3, 2013) Committee assignments: H. Science and Technology (110 th Congress) H. Transportation and Infrastructure (110 th -112 th Congresses) H. Homeland Security (111 th -112 th Congresses) RILEY, CORINNE BOYD. Democrat; South Carolina, 2 nd District. Elected to the 87 th Congress in an April 10, 1962, special election to fill vacancy caused by death of husband, John J. Riley. (served April 12, 1962-Jan. 3, 1963) Committee assignment: H. Science and Transportation (87 th Congress) RIVERS, LYNN. Democrat; Michigan, 13 th District. Elected to the 104 th -107 th Congresses. (served Jan. 3, 1995-Jan. 3, 2003) Committee assignments: H. Budget (104 th -106 th Congresses) H. Science (104 th -107 th Congresses) H. Education and the Workforce (107 th Congress) ROBERTSON, ALICE MARY. Republican; Oklahoma, 2 nd District. Elected to the 67 th Congress. (served April 11, 1921-March 3, 1923) Committee assignments: H. Expenditures in the Interior Department (67 th Congress) H. Indian Affairs (67 th Congress) H. Woman Suffrage (67 th Congress) ROBY, MARTHA. Republican; Alabama, 2 nd District. Elected to the 112 th -116 th Congresses. (served Jan. 3, 2011-present) Committee assignments: H. Agriculture (112 th -113 th Congresses) H. Armed Services (112 th -113 th Congresses) H. Education and the Workforce (112 th -113 th Congresses) H. Appropriations (113 th -116 th Congresses) H. Select Terrorist Attack in Benghazi (113 th -114 th Congresses) H. Judiciary (115 th -116 th Congresses) ROGERS, EDITH NOURSE. Republican; Massachusetts, 5 th District. Elected to the 69 th Congress in a June 30, 1925, special election to fill vacancy caused by death of husband, John J. Rogers; reelected to the 70 th -86 th Congresses. (served Dec. 7, 1925, until her death Sept. 10, 1960) Committee assignments: H. Expenditures in the Navy Department (69 th Congress) H. Industrial Arts and Expositions (69 th Congress) H. Woman Suffrage (69 th Congress) H. World War Veterans' Legislation (69 th -79 th Congresses) H. Civil Service (70 th -77 th Congresses) H. Indian Affairs (70 th Congress) H. Foreign Affairs (73 rd -79 th Congresses) H. Veterans' Affairs (80 th -86 th Congresses; ranking member, 81 st -82 nd and 84 th -86 th Congresses; chair, 80 th and 83 rd Congresses) ROSEN, JACKY. Democrat; Nevada, 3 rd District, and Senator. Elected to the 115 th Congress. (served in House Jan. 3, 2017-Jan. 3. 2019) Subsequently elected to the Senate in 2018. (served in the Senate Jan. 3, 2019-present) Committee assignments: H. Armed Services (115 th Congress) H. Science, Space and Technology (115 th Congress) S. Commerce, Science and Transportation (116 th Congress) S. Health, Education, Labor and Pensions (116 th Congress) S. Homeland Security and Governmental Affairs (116 th Congress) S. Small Business (116 th Congress) S. Special Aging (116 th Congress) ROS-LEHTINEN, ILEANA. Republican; Florida, 18 th District (102 nd -112 th Congresses); 27 th District (113 th Congress-present). Elected to the 101 st Congress in an August 29, 1989, special election to fill vacancy caused by death of Claude Pepper; reelected to the 102 nd -115 th Congresses. Chair of the Congressional Hispanic Conference in the 109 th Congress. (served Sept. 6, 1989-Jan. 3, 2019) Committee assignments: H. Foreign Affairs/International Relations (101 st -115 th Congresses; ranking member, 110 th -111 th Congresses; chair, 112 th Congress) H. Government Operations/Government Reform (101 st -109 th Congresses) H. Budget (109 th Congress) H. Rules (113 th Congress) H. Intelligence (114 th -115 th Congresses) ROUKEMA, MARGARET (MARGE) SCAFATI. Republican; New Jersey, 7 th District. Elected to the 97 th -107 th Congresses. (served Jan. 3, 1981-Jan. 3, 2003) Committee assignments: H. Education and Labor/Economic and Educational Opportunities/Education and the Workforce (97 th -107 th Congresses) H. Select Hunger (98 th -102 nd Congresses; vice chair, 100 th Congress) H. Banking, Finance and Urban Affairs/Banking and Financial Services/Financial Services (97 th -107 th Congresses) ROYBAL-ALLARD, LUCILLE. Democrat; California, 33 rd District (103 rd -107 th Congresses); 34 th District (108 th -112 th Congresses); 40 th District (113 th Congress-present). Elected to the 103 rd -116 th Congresses. (served Jan. 3, 1993-present) Committee assignments: H. Banking, Finance, and Urban Affairs/Banking and Financial Services (103 rd -105 th Congresses) H. Small Business (103 rd Congress) H. Budget (104 th -105 th Congresses) H. Select U.S. National Security and Military/Commercial Concerns with … China (105 th -106 th Congresses) H. Appropriations (106 th -116 th Congresses) H. Standards of Official Conduct (108 th -110 th Congresses) Jt. Select Budget and Appropriations Process Reform (115 th Congress) SAIKI, PATRICIA F. Republican; Hawaii, 1 st District. Elected to the 100 th -101 st Congresses. (served Jan. 3, 1987-Jan. 3, 1991) Committee assignments: H. Banking, Finance and Urban Affairs (100 th -101 st Congresses) H. Merchant Marine and Fisheries (100 th -101 st Congresses) H. Select Aging (100 th -101 st Congresses) ST. GEORGE, KATHARINE PRICE COLLIER. Republican; New York, 28 th District. Elected to the 80 th -88 th Congresses. (served Jan. 3, 1947-Jan. 3, 1965) Committee assignments: H. Post Office and Civil Service (80 th -84 th Congresses; 86 th -88 th Congresses) H. Government Operations (83 rd Congress) H. Armed Services (85 th -86 th Congresses) H. Rules (87 th -88 th Congresses) SÁNCHEZ, LINDA. Democrat; California, 39 th District (108 th -113 th Congresses); 38 th District (113 th Congress-present). Elected to the 108 th -115 th Congresses (served Jan. 3, 2003-present). Sister of Loretta Sanchez. Chair of the Congressional Hispanic Caucus, 114 th Congress. Committee assignments: H. Government Reform (108 th -109 th Congresses) H. Judiciary (108 th -112 th Congresses) H. Small Business (108 th -109 th Congresses) H. Education and Labor (110 th Congress) H. Foreign Affairs (110 th Congress) H. Ways and Means (111 th Congress; 113 th -116 th Congresses) H. Veterans' Affairs (112 th Congress) H. Ethics (112 th -114 th Congresses; ranking member, 114 th Congress) H. Select Terrorist Attack in Benghazi (113 th -114 th Congresses) SANCHEZ, LORETTA. Democrat; California, 46 th District (105 th -107 th and 113 th -114 th Congresses) and 47 th District (108 th -110 th Congresses). Elected to the 105 th -114 th Congresses (served Jan. 3, 1997-Jan. 3, 2017). Sister of Linda Sánchez. Committee assignments: H. Education and the Workforce (105 th -107 th Congresses) H. National Security (105 th Congress) H. Armed Services (106 th -114 th Congresses) H. Homeland Security (108 th -114 th Congresses) Jt. Economic (109 th Congress; 111 th -114 th Congresses) SCANLON, MARY GAY. Democrat, Pennsylvania, 7 th District (115 th Congress); 5 th District (116 th Congress). Elected to the 115 th Congress in a Nov. 6, 2018 special election to fill vacancy caused by the resignation of Patrick Meehan, also elected to the 116 th Congress. (served Nov. 13, 2018-present) Committee assignments: 115 th Congress: no assignments H. Judiciary (116 th Congress) H. Rules (116 th Congress) H. Select Modernization of Congress (116 th Congress) SCHAKOWSKY, JANICE. Democrat; Illinois, 9 th District. Elected to the 106 th -116 th Congresses. (served Jan. 3, 1999-present) Committee assignments: H. Banking and Financial Services/Financial Services (106 th -107 th Congresses) H. Government Reform (106 th -107 th Congresses) H. Small Business (106 th Congress) H. Energy and Commerce (108 th -116 th Congresses) H. Intelligence (110 th -113 th Congresses) H. Appropriations (114 th Congress) H. Budget (116 th Congress) SCHENK, LYNN. Democrat; California, 49 th District. Elected to the 103 rd Congress. (served Jan. 3, 1993-Jan. 3, 1995) Committee assignments: H. Energy and Commerce (103 rd Congress) H. Merchant Marine and Fisheries (103 rd Congress) SCHMIDT, JEAN. Republican, Ohio, 2 nd District. Elected to the 109 th Congress in an August 2, 2005, special election to fill vacancy caused by resignation of Rob Portman; reelected to the 110 th -112 th Congresses. (served Sept. 6, 2005, to Jan. 3, 2013) Committee assignments: H. Agriculture (109 th -112 th Congresses) H. Government Reform (109 th Congress) H. Transportation and Infrastructure (109 th -112 th Congresses) H. Foreign Affairs (112 th Congress) SCHNEIDER, CLAUDINE CMARADA. Republican; Rhode Island, 2 nd District. Elected to the 97 th -101 st Congresses. (served Jan. 3, 1981-Jan. 3, 1991) Committee assignments: H. Merchant Marine and Fisheries (97 th -101 st Congresses) H. Science and Technology (97 th -101 st Congresses) H. Special Committee on Aging (98 th -101 st Congresses) SCHRIER, KIM. Democrat; Washington, 8 th District. Elected to the 116 th Congress (served Jan. 3, 2019 to present) Committee assignments: H. Agriculture (116 th Congress) H. Education and Labor (116 th Congress) SCHROEDER, PATRICIA S. Democrat; Colorado, 1 st District. Elected to the 93 rd -104 th Congresses. (served Jan. 3, 1973-Jan. 3, 1997) Committee assignments: H. Armed Services (93 rd -103 rd Congresses) H. Post Office and Civil Service (93 rd -103 rd Congresses) H. Judiciary (97 th -104 th Congresses) H. Select Children, Youth, and Families (100 th -102 nd Congresses; chair, 102 nd Congress) H. National Security (104 th Congress) SCHWARTZ, ALLYSON Y. Democrat; Pennsylvania, 13 th District. Elected to the 109 th -113 th Congresses. (served Jan. 3, 2005-Jan. 3, 2015) Committee assignments: H. Budget (109 th -113 th Congresses) H. Transportation and Infrastructure (109 th Congress) H. Ways and Means (110 th , 111 th , 113 th Congresses) H. Foreign Affairs (112 th Congress) SEASTRAND, ANDREA . Republican; California, 22 nd District. Elected to the 104 th Congress. (served Jan. 3, 1995-Jan. 3, 1997) Committee assignments: H. Science (104 th Congress) H. Transportation and Infrastructure (104 th Congress) SEKULA GIBBS, SHELLEY . Republican; Texas, 22 nd District. Elected to the 109 th Congress in a Nov. 7, 2006, special election to fill vacancy caused by resignation of Tom Delay. (served Nov. 13, 2006-Jan. 3, 2007) Committee assignments: H. Education and the Workforce (109 th Congress) H. Transportation and Infrastructure (109 th Congress) SEWELL, T ERRYCINA ( \"TERRI\" ). Democrat; Alabama, 7 th District. Elected to the 112 th -116 th Congresses. (served Jan. 3, 2011-present) Committee assignments: H. Agriculture (112 th Congress) H. Science, Space and Technology (112 th Congress) H. Financial Services (113 th -114 th Congresses) H. Intelligence (113 th -116 th Congresses) H. Ways and Means (115 th -116 th Congresses) SHAHEEN, JEANNE D. Democrat; New Hampshire; Senator. Elected to Senate in 2008 and reelected in 2014. (served Jan. 3, 2009-present) Committee assignments: S. Energy and Natural Resources (111 th -112 th Congresses) S. Foreign Relations (111 th -116 th Congresses) S. Small Business and Entrepreneurship (111 th -116 th Congresses; ranking member, 114 th -115 th Congresses) S. Armed Services (112 th -116 th Congresses) S. Appropriations (113 th -116 th Congresses) S. Ethics (115 th -116 th Congress) SHALALA, DONNA. Democrat; Florida, 27 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Education and Labor (116 th Congress) H. Rules (116 th Congress) SHEA-PORTER, CAROL, Democrat; New Hampshire, 1 st District. Elected to the 110 th , 111 th , 113 th , and 115 th Congresses. (served Jan. 3, 2007-Jan. 3, 2011; Jan. 3, 2013-Jan. 3, 2015; Jan. 3, 2017-Jan. 3, 2019) Committee assignments: H. Armed Services (110 th , 111 th , 113 th , 115 th Congresses) H. Education and Labor/ Education and the Workforce (110 th , 111 th , 115 th Congresses) H. Natural Resources (111 th , 113 th Congresses) SHEPHERD, KAREN. Democrat; Utah, 2 nd District. Elected to the 103 rd Congress. (served Jan. 3, 1993-Jan. 3, 1995) Committee assignments: H. Natural Resources (103 rd Congress) H. Public Works and Transportation (103 rd Congress) SHERRILL, MIKIE. Democrat; New Jersey, 11 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Science, Space and Technology (116 th Congress) H. Armed Services (116 th Congress) SIMPSON, EDNA OAKES. Republican; Ohio, 28 th District. Elected to the 86 th Congress (served Jan. 3, 1959-Jan. 3, 1961). She succeeded her husband, Sidney Simpson, who died on Oct. 26, 1958. Committee assignments: H. Administration (86 th Congress) H. Interior and Insular Affairs (86 th Congress) SINEMA, KYRSTEN. Democrat; Arizona, 9 th District, and Senator. Elected to the 113 th -115 th Congresses. (served in House Jan. 3, 2013-Jan. 3, 2019) Subsequently elected to the Senate in 2018. (served in Senate Jan. 3, 2019-present) Committee assignment: H. Financial Services (113 th -115 th Congresses) S. Banking, Housing and Urban Affairs (116 th Congress) S. Commerce, Science and Transportation (116 th Congress) S. Homeland Security and Governmental Affairs (116 th Congress) S. Veterans' Affairs (116 th Congress) S. Special Aging (116 th Congress) SLAUGHTER, LOUISE MCINTOSH. Democrat; New York; 30 th District (100 th -102 nd Congresses); 28 th District (103 rd -112 th Congresses); 25 th District (113 th Congress-present). Elected to the 100 th -115 th Congresses. (served Jan. 3, 1987, until her death March 16, 2018) Committee assignments: H. Government Operations (100 th -101 st Congresses) H. Public Works and Transportation (100 th -101 st Congresses) H. Select Aging (100 th -102 nd Congresses) H. Budget (102 nd -104 th Congresses) H. Government Reform and Oversight (104 th Congress) H. Rules (102 nd -115 th Congresses; chair, 110 th -111 th Congresses; ranking member, 109 th , 112 th -115 th Congresses) H. Homeland Security (108 th Congress) SLOTKIN, ELISSA. Democrat; Michigan, 8 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Homeland Security (116 th Congress) H. Armed Services (116 th Congress) SMITH, LINDA. Republican; Washington, 3 rd District. Elected to the 104 th -105 th Congresses. (served Jan. 3, 1995-Jan. 3, 1999) Committee assignments: H. Resources (104 th -105 th Congresses) H. Small Business (104 th -105 th Congresses) SMITH, MARGARET CHASE. Republican; Maine, 2 nd District, and Senator. Elected to the 76 th Congress in a June 3, 1940, special election to fill vacancy caused by death of husband, Clyde H. Smith; reelected to the 77 th -80 th Congresses (served in House June 10, 1940-Jan. 3, 1949). Subsequently elected to the Senate in 1948 and reelected in 1954, 1960, and 1966 (served in Senate Jan. 3, 1949-Jan. 3, 1973). Chair of the Senate Republican Conference, 1967-1972 (the highest Senate leadership post held by a woman). Committee assignments: H. Election of the President, Vice President, Representatives in Congress (76 th Congress) H. War Claims (76 th Congress) H. Revision of the Laws (76 th Congress) H. Invalid Pensions (76 th -77 th Congresses) H. Education (77 th Congress) H. Post Office and Post Roads (77 th Congress) H. Naval Affairs (78 th -79 th Congresses) H. Armed Services (80 th Congress) S. District of Columbia (81 st Congress) S. Expenditures in Executive Departments (81 st -82 nd Congresses) S. Rules and Administration (82 nd Congress) S. Select Senate Employees Compensation Rates (chair, 83 rd Congress) S. Appropriations (83 rd -92 nd Congresses) S. Armed Services (83 rd -92 nd Congresses; ranking member, 90 th -92 nd Congresses) S. Government Operations (83 rd -85 th Congresses) S. Aeronautical and Space Sciences (86 th -92 nd Congresses; ranking member, 88 th -91 st Congresses) SMITH, TINA. Democrat; Minnesota; Senator. Appointed to the Senate Dec. 13, 2017, to fill vacancy caused by resignation of Al Franken, reelected in 2018. (served Jan. 3, 2018-present) Committee assignments: S. Agriculture, Nutrition and Forestry (115 th -116 th Congresses) S. Energy and Natural Resources (115 th Congress) S. Indian Affairs (115 th -116 th Congresses) Jt. Select Solvency Multiemployer Pension Plans (115 th Congress) S. Banking, Housing and Urban Affairs (116 th Congress) S. Health, Education, Labor and Pensions (116 th Congress) SMITH, VIRGINIA. Republican; Nebraska, 3 rd District. Elected to the 94 th -101 st Congresses. (served Jan. 3, 1975-Jan. 3, 1991) Committee assignments: H. Education and Labor (94 th Congress) H. Interior and Insular Affairs (94 th Congress) H. Appropriations (95 th -101 st Congresses) SNOWE, OLYMPIA J. Republican; Maine, 2 nd District, and Senator. Elected to the 96 th -103 rd Congresses (served in House Jan. 3, 1979-Jan. 3, 1995). Subsequently elected to the Senate in 1994 and reelected in 2000 and 2006. (served in Senate Jan. 3, 1995, to Jan. 3, 2013) Committee assignments: H. Government Operations (96 th Congress) H. Small Business (96 th -97 th Congresses) H. Select Committee on Aging (96 th -102 nd Congresses) H. Foreign Affairs (97 th -103 rd Congresses) Jt. Economic (98 th -102 nd Congresses) H. Budget (103 rd Congress) S. Budget (104 th -107 th Congresses) S. Commerce, Science, and Transportation (104 th -112 th Congresses) S. Foreign Relations (104 th Congress) S. Small Business and Entrepreneurship (104 th -112 th Congresses; chair, 108 th -109 th Congresses; ranking member, 110 th -112 th Congresses) S. Armed Services (105 th -106 th Congresses) S. Finance (107 th -112 th Congresses) S. Select Intelligence (108 th -112 th Congresses) SOLIS, HILDA. Democrat; California, 31 st District (107 th Congress) and 32 nd District (108 th -111 th Congresses). Elected to the 107 th -111 th Congresses. (served Jan. 3, 2001, until her resignation on Feb. 23, 2009, to become Secretary of Labor) Committee assignments: H. Education and the Workforce (107 th Congress) H. Resources/Natural Resources (107 th , 110 th Congresses) H. Energy and Commerce (108 th -110 th Congresses) H. Select Energy Independence and Global Warming (110 th Congress) SPANBERGER, ABIGAIL. Democrat; Virginia, 7 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Agriculture (116 th Congress) H. Foreign Affairs (116 th Congress) SPEIER, JACKIE. Democrat; California, 12 th District (110 th -112 th Congresses); 14 th District (113 th Congress-present). Elected to the 110 th Congress in an April 8, 2008, special election to fill vacancy caused by death of Tom Lantos; reelected to the 111 th -116 th Congresses. (served April 10, 2008-present) Committee assignments: H. Financial Services (110 th -111 th Congresses) H. Oversight and Government Reform/Oversight and Reform (110 th -113 th , 116 th Congresses) H. Select Committee on Energy Independence and Global Warming (111 th Congress) H. Homeland Security (112 th Congress) H. Armed Services (112 th -116 th Congresses) H. Intelligence (114 th -116 th Congresses) SPELLMAN, GLADYS NOON. Democrat; Maryland, 5 th District. Elected to the 94 th -97 th Congresses. Began service Jan. 14, 1975. Unable to be sworn in to the 97 th Congress due to disability; seat declared vacant Feb. 24, 1981. Committee assignments: H. Banking, Currency, and Housing/Banking, Finance, and Urban Affairs (94 th -96 th Congresses) H. Post Office and Civil Service (94 th -95 th Congresses) H. Democratic Steering and Policy (96 th Congress) STABENOW, DEBBIE. Democrat; Michigan, 8 th District, and Senator. Elected to the 105 th -106 th Congresses (served in House Jan. 3, 1997-Jan. 3, 2001). Subsequently elected to the Senate in 2000 and reelected in 2006, 2012, and 2018. (served in Senate Jan. 3, 2001-present) Committee assignments: H. Agriculture (105 th -106 th Congresses) H. Science (105 th -106 th Congresses) S. Agriculture, Nutrition, and Forestry (107 th -116 th Congresses; chair, 112 th -113 th Congresses, ranking member, 114 th -116 th Congresses) S. Banking, Housing, and Urban Affairs (107 th -109 th Congresses) S. Budget (107 th -116 th Congresses) S. Special Committee on Aging (107 th -108 th Congresses) S. Finance (110 th -116 th Congresses) S. Energy and Natural Resources (111 th -116 th Congresses) Jt. Taxation (114 th -116 th Congresses) STANLEY, WINIFRED CLAIRE. Republican; New York, At Large. Elected to the 78 th Congress. (served Jan. 3, 1943-Jan. 3, 1945) Committee assignments: H. Civil Service (78 th Congress) H. Patents (78 th Congress) STEFANIK, ELISE M. Republican; New York, 21 st District. Elected to the 114 th -116 th Congresses. (served Jan. 3, 2015-present) Committee assignments: H. Armed Services (114 th -116 th Congresses) H. Education and the Workforce /Education and Labor (114 th -116 th Congresses) H. Intelligence (115 th -116 th Congresses) STEVENS, HALEY. Democrat; Michigan, 11 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Science, Space and Technology (116 th Congress) H. Education and Labor (116 th Congress) SULLIVAN, LEONOR KRETZER. Democrat; Missouri, 3 rd District. Elected to the 83 rd -94 th Congresses. (served Jan. 3, 1953-Jan. 3, 1977) Committee assignments: H. Merchant Marine and Fisheries (83 rd Congress; 89 th -94 th Congresses; chair, 93 rd - 94 th Congresses) H. Banking and Currency (84 th -94 th Congresses) Jt. Committee on Defense Production (91 st -94 th Congresses) SUMNER, JESSIE. Republican; Illinois, 18 th District. Elected to the 76 th -79 th Congresses. (served Jan. 3, 1939-Jan. 3, 1947) Committee assignment: H. Banking and Currency (76 th -79 th Congresses) SUTTON, BETTY. Democrat; Ohio, 13 th District. Elected to the 110 th -112 th Congresses. (served Jan. 3, 2007, to Jan. 3, 2013) Committee assignments: H. Budget (110 th Congress) H. Rules (110 th Congress) H. Energy and Commerce (111 th Congress) H. Armed Services (112 th Congress) H. Natural Resources (112 th Congress) TAUSCHER, ELLEN. Democrat; California, 10 th District. Elected to the 105 th -111 th Congresses. (served Jan. 3, 1997, until her resignation on June 26, 2009) Committee assignments: H. National Security (105 th Congress) H. Science (105 th Congress) H. Armed Services (106 th -111 th Congresses) H. Transportation and Infrastructure (105 th -111 th Congresses) TENNEY, CLAUDIA. Republican; New York, 22 nd District. Elected to the 115 th Congress. (served Jan. 3, 2017-Jan. 3, 2019) Committee assignment: H. Financial Services (115 th Congress) THOMAS, LERA MILLARD. Democrat; Texas, 8 th District. Elected to the 89 th Congress in a March 26, 1966, special election to fill vacancy caused by death of husband, Albert Thomas. (served March 30, 1966-Jan. 3, 1967) Committee assignment: H. Merchant Marine and Fisheries (89 th Congress) THOMPSON, RUTH. Republican; Michigan, 9 th District. Elected to the 82 nd -84 th Congresses. (served Jan. 3, 1951-Jan. 3, 1957) Committee assignments: H. Judiciary (82 nd -84 th Congresses) Jt. Committee on Immigration and Nationality Policy (84 th Congress) THURMAN, KAREN L. Democrat; Florida, 5 th District. Elected to the 103 rd -107 th Congresses. (served Jan. 3, 1993-Jan. 3, 2003) Committee assignments: H. Agriculture (103 rd -104 th Congresses) H. Government Operations/Government Reform and Oversight (103 rd -104 th Congresses) H. Ways and Means (105 th -107 th Congresses) TITUS, DINA. Democrat; Nevada, 3 rd District (111 th Congress); 1 st District (113 th Congress-present). Elected to the 111 th and 113 th -116 th Congresses. (served Jan. 3, 2009-Jan. 3, 2011; Jan. 3, 2013-present) Committee assignments: H. Education and Labor (111 th Congress) H. Homeland Security (111 th , 116 th Congresses) H. Transportation and Infrastructure (111 th -116 th Congresses) H. Veterans' Affairs (113 th -114 th Congresses) H. Foreign Affairs (115 th -116 th Congresses) TLAIB, RASHIDA. Democrat; Michigan, 13 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Oversight and Reform (116 th Congress) H. Financial Services (116 th Congress) TORRES, NORMA J. Democrat; California, 35 th District. Elected to the 114 th -116 th Congresses. (served Jan. 3, 2015-present) Committee assignments: H. Homeland Security (114 th Congress) H. Natural Resources (114 th -115 th Congresses) H. Foreign Affairs (115 th Congress) H. Rules (115 th -116 th Congresses) H. Appropriations (116 th Congress) TORRES SMALL, XOCHITL. Democrat; New Mexico, 2 nd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Homeland Security (116 th Congress) H. Armed Services (116 th Congress) TRAHAN, LORI. Democrat; Massachusetts, 3 rd District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: Education and Labor (116 th Congress) H. Armed Services (116 th Congress) TSONGAS, NIKI. Democrat; Massachusetts; 5 th District (110 th -112 th Congresses); 3 rd District (113 th Congress-present). Elected to the 110 th Congress in an Oct. 16, 2007, special election to fill vacancy caused by resignation of Martin Meehan; reelected to the 111 th -115 th Congresses. (served Oct. 18, 2007-Jan. 3, 2019) Committee assignments: H. Armed Services (110 th -115 th Congresses) H. Budget (110 th -111 th Congresses) H. Natural Resources (111 th -115 th Congresses) UNDERWOOD, LAUREN. Democrat; Illinois, 14 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Homeland Security (116 th Congress) H. Veterans' Affairs (116 th Congress) H. Education and Labor (116 th Congress) UNSOELD, JOLENE. Democrat; Washington, 3 rd District. Elected to the 101 st -103 rd Congresses. (served Jan. 3, 1989-Jan. 3, 1995) Committee assignments: H. Education and Labor (101 st -103 rd Congresses) H. Merchant Marine and Fisheries (101 st -103 rd Congresses) H. Select Aging (101 st -102 nd Congresses) VELÁZQUEZ, NYDIA M. Democrat; New York, 12 th District (103 rd -112 th Congresses); 7 th District (113 th District-present). Elected to the 103 rd -116 th Congresses. (served Jan. 3, 1993-present) Chair of the Congressional Hispanic Caucus, 111 th Congress. Committee assignments: H. Banking, Finance, and Urban Affairs/Banking and Financial Services/Financial Services (103 rd -116 th Congresses) H. Small Business (103 rd -115 th Congresses; chair, 110 th -111 th , 116 th Congresses; ranking member, 105 th -109 th , 112 th -115 th Congresses) H. Natural Resources (115 th -116 th Congresses) VUCANOVICH, BARBARA. Republican; Nevada, 2 nd District. Elected to the 98 th -104 th Congresses. (served Jan. 3, 1983-Jan. 3, 1997) Committee assignments: H. Administration (98 th -101 st Congresses) H. Select Children, Youth, and Families (98 th -101 st Congresses) H. Interior and Insular Affairs (98 th -102 nd Congresses) H. Appropriations (102 nd -104 th Congresses) H. Natural Resources (103 rd Congress) WAGNER, ANN. Republican; Missouri, 2 nd District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Financial Services (113 th -116 th Congresses) H. Foreign Affairs (115 th -116 th Congress) WALDHOLTZ, ENID GREENE. Republican; Utah, 2 nd District. Elected to the 104 th Congress. (served Jan. 3, 1995-Jan. 3, 1997) Committee assignment: H. Rules (104 th Congress) WALORSKI, JACKIE. Republican; Indiana, 2 nd District. Elected to the 113 th -116 th Congresses. (served Jan. 3, 2013-present) Committee assignments: H. Armed Services (113 th -114 th Congresses) H. Budget (113 th Congress) H. Veterans' Affairs (113 th -114 th Congresses) H. Agriculture (114 th Congress) H. Ways and Means (115 th -116 th Congresses) WALTERS, MIMI. Republican; California, 45 th District. Elected to the 114 th -115 th Congresses. (served Jan. 3, 2015-Jan. 3, 2019) Committee assignments: H. Judiciary (114 th Congress) H. Transportation and Infrastructure (114 th Congress) H. Energy and Commerce (115 th Congress) H. Ethics (115 th Congress) WARREN, ELIZABETH. Democrat; Massachusetts; Senator. Elected in 2012 and reelected in 2018. (served Jan. 3, 2013-present) Committee assignments: S. Banking, Housing and Urban Affairs (113 th -116 th Congresses) S. Health, Education, Labor, and Pensions (113 th -116 th Congresses) S. Special Aging (113 th -116 th Congresses) S. Energy and Natural Resources (114 th Congress) S. Armed Services (115 th -116 th Congresses) WASSERMAN SCHULTZ, DEBBIE. Democrat, Florida, 20 th District (109 th -112 th Congresses); 23 rd District (113 th Congress-present). Elected to the 109 th -116 th Congresses. (served Jan. 3, 2005-present) Committee assignments: H. Financial Services (109 th Congress) Jt. Library (110 th -111 th Congresses) H. Appropriations (110 th -111 th Congresses; 113 th -116 th Congresses) H. Judiciary (110 th -112 th Congress, first session) H. Budget (112 th , 115 th Congresses) H. Oversight and Reform (116 th Congress) WATERS, MAXINE. Democrat; California, 29 th District (102 nd Congress), 35 th District (103 rd -112 th Congresses) and 43 rd District (113 th Congress-present). Elected to the 102 nd -116 th Congresses. (served Jan. 3, 1991-present) Chair, Congressional Black Caucus, 105 th Congress. Committee assignments: H. Banking, Finance, and Urban Affairs/Banking and Financial Services/ Financial Services (102 nd -116 th Congresses; ranking member, 113 th -115 th Congresses; chair, 116 th Congress) H. Veterans' Affairs (102 nd -104 th Congresses) H. Small Business (103 rd -104 th Congresses) H. Judiciary (105 th -112 th Congresses) WATSON, DIANE. Democrat; California, 32 nd District (107 th Congress) and 33 rd District (108 th -111 th Congresses). Elected to the 107 th Congress in a June 5, 2001, special election to fill vacancy caused by death of Julian Dixon; reelected to the 108 th -111 th Congresses. (served June 7, 2001-Jan. 3, 2011) Committee assignments: H. Government Reform/Oversight and Government Reform (107 th -111 th Congresses) H. International Relations/Foreign Affairs (107 th -111 th Congresses) WATSON COLEMAN, BONNIE. Democrat; New Jersey, 12 th District. Elected to the 114 th -116 th Congresses. (served Jan. 3, 2015-present) Committee assignments: H. Homeland Security (114 th -116 th Congresses) H. Oversight and Government Reform (114 th -115 th Congresses) H. Appropriations (116 th Congress) WEIS, JESSICA McCULLOUGH. Republican; New York, 38 th District. Elected to the 86 th -87 th Congresses. (served Jan. 3, 1959-Jan. 3, 1963) Committee assignments: H. District of Columbia (86 th -87 th Congresses) H. Government Operations (86 th Congress) H. Science and Astronautics (87 th Congress) WEXTON, JENNIFER. Democrat, Virginia, 10 th District. Elected to the 116 th Congress. (served Jan. 3, 2019-present) Committee assignments: H. Science, Space and Technology (116 th Congress) H. Financial Services (116 th Congress) WILD, SUSAN. Democrat, Pennsylvania, 15 th District (115 th Congress); 7 th District (116 th Congress). Elected to the 115 th Congress in a Nov. 6, 2018 special election to fill vacancy caused by resignation of Charlie Dent; subsequently elected to the 116 th Congress. (served Nov. 27, 2018-present) Committee assignments: None in 115 th Congress H. Foreign Affairs (116 th Congress) H. Education and Labor (116 th Congress) H. Ethics (116 th Congress) WILSON, FREDERICA. Democrat; Florida; 17 th District (112 th Congress), 24 th District (113 th Congress-present). Elected to the 112 th -116 th Congresses. (served Jan. 3, 2011-present) Committee assignments: H. Foreign Affairs (112 th Congress) H. Science, Space and Technology (112 th -113 th Congresses) H. Education and the Workforce (114 th -116 th Congresses) H. Transportation and Infrastructure (115 th -116 th Congresses) WILSON, HEATHER. Republican; New Mexico, 1 st District. Elected to the 105 th Congress in a June 23, 1998, special election to fill vacancy caused by death of Steven Schiff; reelected to the 106 th -110 th Congresses. (served June 25, 1998-Jan. 3, 2009) Committee assignments: H. Commerce (105 th -106 th Congresses) H. Intelligence (106 th Congress; 109 th -110 th Congresses) H. Armed Services (107 th -108 th Congresses) H. Energy and Commerce (107 th -110 th Congresses) WINGO, EFFIGENE LOCKE. Democrat; Arkansas, 4 th District. Elected to the 71 st Congress Nov. 4, 1930, to fill vacancy caused by death of husband, Otis Wingo, and to the 72 nd Congress. (served Dec. 1, 1930-March 3, 1933) Committee assignments: H. Accounts (71 st Congress) H. Insular Affairs (71 st Congress) H. Foreign Affairs (72 nd Congress) WOODHOUSE, CHASE GOING. Democrat; Connecticut, 2 nd District. Elected to the 79 th and 81 st Congresses. (served Jan. 3, 1945-Jan. 3, 1947, and Jan. 3, 1949-Jan. 3, 1951) Committee assignments: H. Banking and Currency (79 th , 81 st Congresses) H. Administration (81 st Congress) WOOLSEY, LYNN. Democrat; California, 6 th District. Elected to the 103 rd -112 th Congresses. (served Jan. 3, 1993-Jan. 3, 2013) Committee assignments: H. Budget (103 rd -105 th Congresses) H. Education and Labor/Economic and Educational Opportunities/Education and the Workforce (103 rd -112 th Congresses) H. Government Operations (103 rd Congress) H. Science/Science and Technology/Science, Space and Technology (106 th -112 th Congresses) H. Foreign Affairs (110 th Congress)", "summary": "In total 365 women have been elected or appointed to Congress, 247 Democrats and 118 Republicans. These figures include six nonvoting Delegates, one each from Guam, Hawaii, the District of Columbia, and American Samoa, and two from the U.S. Virgin Islands, as well as one Resident Commissioner from Puerto Rico. Of these 365 women, there have been 309 (211 Democrats, 98 Republicans) women elected only to the House of Representatives; 40 (25 Democrats, 15 Republicans) women elected or appointed only to the Senate; and 16 (11 Democrats, 5 Republicans) women who have served in both houses. A record 131 women currently serve in the 116th Congress. Of these 131 women, there are 25 in the Senate (17 Democrats and 8 Republicans); 102 Representatives in the House (89 Democrats and 13 Republicans); and 4 women in the House (2 Democrats and 2 Republicans) who serve as Delegates or Resident Commissioner, representing the District of Columbia, American Samoa, the U.S. Virgin Islands, and Puerto Rico. This report includes brief biographical information, committee assignments, dates of service, district information, and listings by Congress and state, and (for Representatives) congressional districts of the 365 women who have been elected or appointed to Congress. It will be updated when there are relevant changes in the makeup of Congress. For additional information, including a discussion of the impact of women in Congress as well as historical information, including the number and percentage of women in Congress over time, data on entry to Congress, comparisons to international and state legislatures, tenure, firsts for women in Congress, women in leadership, and African American, Asian Pacific American, and Hispanic women in Congress, see CRS Report R43244, Women in Congress: Statistics and Brief Overview, by Jennifer E. Manning and Ida A. Brudnick.", "document_type": "crs"}
{"report": "Firefighting and the provision of fire protection services to the public is traditionally a local responsibility, funded primarily by state, county, and municipal governments. During the 1990s, however, shortfalls in state and local budgets—coupled with increased responsibilities (i.e., counterterrorism) of local fire departments—led many in the fire community to call for additional financial support from the federal government. Since enactment of the FIRE Act in the 106 th Congress, the Assistance to Firefighters Grants (AFG) program (also known as \"fire grants\" and \"FIRE Act grants\") has provided funding for equipment and training directly from the federal government to local fire departments. Since the fire grant program commenced in FY2001, funding has been used by fire departments to purchase firefighting equipment, personal protective equipment, and firefighting vehicles. Many in the fire-service community argued that notwithstanding the fire grant program, there remained a pressing need for an additional federal grant program to assist fire departments in the hiring of firefighters and the recruitment and retention of volunteer firefighters. They asserted that without federal assistance, many local fire departments would continue to be unable to meet national consensus standards for minimum staffing levels, which specify at least four firefighters per responding fire vehicle (or five or six firefighters in hazardous or high-risk areas). Fire-service advocates also pointed to the Community Oriented Policing Services (COPS) program as a compelling precedent of federal assistance for the hiring of local public safety personnel. In support of SAFER, fire-service advocates cited studies performed by the U.S. Fire Administration and the National Fire Protection Association, the Boston Globe , and the National Institute for Occupational Safety and Health (NIOSH) which concluded that many fire departments fall below minimum standards for personnel levels. According to these studies, the result of this shortfall can lead to inadequate response to different types of emergency incidents, substandard response times, and an increased risk of firefighter fatalities. On the other hand, those opposed to SAFER grants have contended that funding for basic local government functions—such as paying for firefighter salaries—should not be assumed by the federal government, particularly at a time of high budget deficits. Also, some SAFER opponents disagree that below-standard levels in firefighting personnel are necessarily problematic, and point to statistics indicating that the number of structural fires in the United States has continued to decline over the past 20 years. In response to concerns over the adequacy of firefighter staffing, the Staffing for Adequate Fire and Emergency Response Act—popularly called the \"SAFER Act\"—was introduced into the 107 th and 108 th Congresses. The 108 th Congress enacted the SAFER Act as Section 1057 of the FY2004 National Defense Authorization Act ( P.L. 108-136 ; signed into law November 24, 2003). The SAFER provision was added as an amendment to S. 1050 on the Senate floor ( S.Amdt. 785 , sponsored by Senator Dodd) and modified in the FY2004 Defense Authorization conference report ( H.Rept. 108-354 ). The SAFER grant program is codified as Section 34 of the Federal Fire Prevention and Control Act of 1974 (15 U.S.C. 2229a). The SAFER Act authorizes grants to career, volunteer, and combination fire departments for the purpose of increasing the number of firefighters to help communities meet industry-minimum standards and attain 24-hour staffing to provide adequate protection from fire and fire-related hazards. Also authorized are grants to volunteer fire departments for activities related to the recruitment and retention of volunteers. On January 2, 2013, the President signed P.L. 112-239 , the FY2013 National Defense Authorization Act. Title XVIII, Subtitle A is the Fire Grants Reauthorization Act of 2012, which significantly amended the SAFER statute (15 U.S.C. 2229a) and authorized the SAFER program through FY2017. Table 1 provides a summary of key SAFER provisions in the 2012 reauthorization, and provides a comparison with the previous version of the SAFER statute. Two types of grants are authorized by the SAFER Act: hiring grants and recruitment and retention grants. Hiring grants cover a three-year term and are cost shared with the local jurisdiction. According to the amended statute, the federal share shall not exceed 75% in the first year of the grant, 75% in the second year, and 35% in the third year. While the majority of hiring grants will be awarded to career and combination fire departments, the SAFER Act specifies that 10% of the total SAFER appropriation be awarded to volunteer or majority-volunteer departments for the hiring of personnel. Additionally, at least 10% of the total SAFER appropriation is set aside for recruitment and retention grants , which are available to volunteer and combination fire departments for activities related to the recruitment and retention of volunteer firefighters. Also eligible for recruitment and retention grants are local and statewide organizations that represent the interests of volunteer firefighters. No local cost sharing is required for recruitment and retention grants. With the authorizations of both the AFG and SAFER programs expiring on September 30, 2017, and with sunset dates for both programs of January 2, 2018, the 115 th Congress considered reauthorization legislation. On April 5, 2017, S. 829 , the AFG and SAFER Program Reauthorization Act of 2017, was introduced by Senator McCain and referred to the Committee on Homeland Security and Governmental Affairs. On May 17, 2017, the committee ordered S. 829 to be reported ( S.Rept. 115-128 ) with an amendment in the nature of a substitute. On August 2, 2017, the Senate passed S. 829 by unanimous consent. On July 12, 2017, the House Subcommittee on Research and Technology, Committee on Science, Space and Technology, held a hearing entitled U.S. Fire Administration and Fire Grant Programs Reauthorization: Examining Effectiveness and Priorities . Testimony was heard from the USFA acting administrator and from fire service organizations. On December 15, 2017, H.R. 4661 , the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017, was introduced by Representative Comstock. H.R. 4661 was identical to the Senate-passed S. 829 , except that while S. 829 repealed the sunset provisions for AFG and SAFER, H.R. 4661 extended the sunset dates to September 30, 2024. Additionally, H.R. 4661 reauthorized the USFA through FY2023. On December 18, 2017, the House passed H.R. 4661 by voice vote under suspension of the rules. On December 21, 2017, the Senate passed H.R. 4661 without amendment by unanimous consent. Other legislation related to SAFER reauthorization included H.R. 3881 , the AFG and SAFER Program Reauthorization Act of 2017, introduced by Representative Pascrell, which was identical to S. 829 as passed by the Senate. On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 ( P.L. 115-98 ). P.L. 115-98 extends the SAFER and AFG authorizations through FY2023; extends the sunset provisions for SAFER and AFG through September 30, 2024; extends the USFA authorization through FY2023; provides that the U.S. Fire Administration in FEMA may develop and make widely available an online training course on SAFER and AFG grant administration; expands SAFER hiring grant eligibility to cover the conversion of part-time or paid-on-call firefighters to full-time firefighters; directs FEMA, acting through the Administrator of USFA, to develop and implement a grant monitoring and oversight framework to mitigate and minimize risks of fraud, waste, abuse, and mismanagement related to the SAFER and AFG grant programs; and makes various technical corrections to the SAFER and AFG statute. The SAFER grant program receives its annual appropriation through the House and Senate Appropriations Subcommittees on Homeland Security. Within the appropriations bills, SAFER is listed under the line item, \"Firefighter Assistance Grants,\" which is located in Title III—Protection, Preparedness, Response, and Recovery. \"Firefighter Assistance Grants\" also includes the Assistance to Firefighters Grant Program. Although authorized for FY2004, SAFER did not receive an appropriation in FY2004. Table 2 shows the appropriations history for firefighter assistance, including SAFER, AFG, and the Fire Station Construction Grants (SCG) grants provided in the American Recovery and Reinvestment Act (ARRA). Table 3 shows recent and proposed appropriated funding for the SAFER and AFG grant programs. For FY2017, the Administration requested $335 million for SAFER and $335 million for AFG, a reduction of $10 million for each program from the FY2016 enacted level. According to the budget request, the proposed reduction in SAFER and AFG \"reflects FEMA's successful investments in prior year grants awarded.\" The Administration's FY2017 budget did not request SAFER waiver authority for FY2017. Under the proposed budget, the SAFER and AFG grant accounts would be transferred to the Preparedness and Protection activity under FEMA's broader \"Federal Assistance\" account. According to the budget request, Federal Assistance programs will \"assist Federal agencies, States, Local, Tribal, and Territorial jurisdictions to mitigate, prepare for and recover from terrorism and natural disasters.\" On May 26, 2016, the Senate Appropriations Committee approved S. 3001 , the Department of Homeland Security Act, 2017. The Senate bill would provide $680 million for firefighter assistance, including $340 million for SAFER and $340 million for AFG. The committee maintained a separate budget account for Firefighter Assistance and did not transfer that budget account to the Federal Assistance account as proposed in the Administration budget request. In the accompanying report ( S.Rept. 114-68 ), the committee directed DHS to continue the present practice of funding applications according to local priorities and those established by the USFA, and to continue direct funding to fire departments and the peer review process. The committee stated its expectation that funding for rural fire departments remain consistent with their previous five-year history, and encouraged FEMA to consider the need for resources for staffing grants to rural departments that meet both local and regional needs. On June 22, 2016, the House Appropriations Committee approved its version of the Department of Homeland Security Appropriations Act, 2017. Unlike the Senate, the House committee did transfer the Firefighter Assistance budget account into a broader Federal Assistance account in FEMA. The bill provided $690 million for firefighter assistance, including $345 million for SAFER and $345 million for AFG. In the committee report, the committee directed FEMA to continue administering the fire grants programs as directed in prior year committee reports. The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provided $690 million for firefighter assistance in FY2017, including $345 million for SAFER and $345 million for AFG. The firefighter assistance account is transferred to FEMA's broader Federal Assistance account. For FY2018, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG, slightly below the FY2017 level. SAFER and AFG are under Grants in the Federal Assistance budget account. On July 18, 2017, the House Appropriations Committee approved the Department of Homeland Security Appropriations Act, 2018 ( H.R. 3355 ; H.Rept. 115-239 ). The bill provided $690 million for firefighter assistance under the Federal Assistance budget account, including $345 million for SAFER and $345 million for AFG. In the bill report, the committee encouraged FEMA to give high-priority consideration to grants providing for planning, training, and equipment to firefighters for crude oil-by-rail and ethanol-by-rail derailment and incident response. On September 14, 2017, the House passed H.R. 3354 , a FY2018 omnibus appropriations bill that includes funding for SAFER and AFG. During floor consideration, the House adopted an amendment offered by Representative Kildee that added $20 million to SAFER; thus H.R. 3354 would provide $365 million for SAFER and $345 million for AFG. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided $700 million for firefighter assistance in FY2018, including $350 million for SAFER and $350 million for AFG. Money is to remain available through September 30, 2019. For FY2019, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG. On June 21, 2018, the Senate Appropriations Committee approved S. 3109 , the Department of Homeland Security Appropriations Act, 2019 ( S.Rept. 115-283 ). The Senate bill would provide $700 million for firefighter assistance, including $350 million for SAFER and $350 million for AFG. On July 25, 2018, the House Appropriations Committee approved its version of the FY2019 Homeland Security appropriations bill ( H.R. 6776 ; H.Rept. 115-676 ). The House bill would also provide $700 million for firefighter assistance, including $350 million for SAFER and $350 million for AFG. Unlike the Senate bill, the House bill would continue SAFER waiver authority. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $700 million for firefighter assistance in FY2019, including $350 million for SAFER and $350 million for AFG, with funds to remain available through September 30, 2020. Division A, Title III, Section 307 of P.L. 116-6 includes SAFER waiver authority which FEMA would be able to implement (if it so chose) for the FY2019 round of SAFER awards. For FY2020, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG. This is the same amount the Administration requested in its FY2019 budget proposal and a 1.6% reduction from the FY2019 appropriation. The Administration's FY2020 budget proposal does not request SAFER waiver authority. In 2009, with the economic turndown adversely affecting budgets of local governments, concerns arose that modifications to the SAFER statute may be necessary to enable fire departments to more effectively participate in the program. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included a provision (§603) that waived the matching requirements for SAFER grants awarded in FY2009 and FY2010. Subsequently, the FY2009 Supplemental Appropriations Act ( P.L. 111-32 ) included a provision (§605) giving the Secretary of Homeland Security authority to waive certain limitations and restrictions in the SAFER statute. For grants awarded in FY2009 and FY2010, waivers permitted grantees to use SAFER funds to rehire laid-off firefighters and fill positions eliminated through attrition, allow grants to extend longer than the five-year duration, and permit the amount of funding per position at levels exceeding the limit of $100,000. The Department of Defense and Continuing Appropriations Act, 2011 ( P.L. 112-10 ) contained language that removed cost-share requirements and allowed SAFER grants to be used to rehire laid-off firefighters and fill positions eliminated through attrition. However, the law did not remove the requirement that SAFER grants fund a firefighter position for four years, with the fifth year funded wholly by the grant recipient. P.L. 112-10 also did not waive the cap of $100,000 per firefighter hired by a SAFER grant. According to fire service advocates, these unwaived SAFER requirements (the mandatory five-year position duration, the $100,000 cap) would be a disincentive for many communities to apply for SAFER grants, because localities would be reluctant to apply for grants that would require future expenditure of local funds. P.L. 112-74 , the Consolidated Appropriations Act, FY2012, included language (§561) prohibiting using any funds to enforce all of the SAFER restrictions that have been lifted since FY2009. Additionally, Section 562 of P.L. 112-74 reinstated DHS waiver authority for the restrictions that were not lifted in the FY2011 appropriations bill ( P.L. 112-10 ). Meanwhile, the SAFER reauthorization language in the Fire Grants Reauthorization Act of 2012 ( P.L. 112-239 ) removed the $100,000 cap per firefighter hired, shortened the grant period from four to three years, removed the requirement to retain SAFER-hired firefighters for one year past the termination of federal grant support, and provided economic hardship waivers that will give DHS the authority to waive matching requirements and prohibitions on using SAFER funds for rehiring laid-off firefighters and filling positions eliminated through attrition. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) and the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) continued to grant DHS waiver authority from SAFER requirements. Specifically, DHS was allowed to waive cost sharing requirements, the three-year grant term, cost limits per firefighter hired, and the prohibition on using SAFER funds for rehiring laid-off firefighters and filling positions eliminated through attrition. The same SAFER waiver authority was included in the Administration's FY2015 budget proposal and in the FY2015 House and Senate Department of Homeland Security Appropriations bills. In the bill report accompanying H.R. 4903 ( H.Rept. 113-481 ), the House Appropriations Committee noted that this annual waiver authority has been available since FY2009, and that the reauthorization of the SAFER program by the 112 th Congress ( P.L. 112-239 ) provided FEMA with permanent authority to waive certain matching and nonsupplantation requirements for grantees based on a determination that a grantee meets economic hardship criteria. Given that FEMA had been working with stakeholders to develop these criteria and that the agency hoped to soon be able to implement its new waiver authority, the committee expected that FY2015 would be the last instance in which annual waiver authority would be provided, and that any waivers in future fiscal years would be limited to the authorization provided in P.L. 112-239 . The Department of Homeland Security Appropriations Act, 2015 ( P.L. 114-4 ) was signed by the President on March 4, 2015. Section 557 of P.L. 114-4 provided SAFER waiver authority for FY2015. The Administration's FY2016 budget would have maintained SAFER waiver authority for FY2016. S. 1619 , the Department of Homeland Security Act, 2016, would also have continued waiver authority. The accompanying bill report ( S.Rept. 114-68 ) directed FEMA to work with stakeholders and present a recommendation to the Senate Appropriations Committee on the feasibility of removing these waivers in future appropriations. However, neither the House bill ( H.R. 3128 ), nor the final Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) contained the SAFER waiver provision for FY2016. The Administration's FY2017, FY2018, and FY2019 budgets did not request SAFER waiver authority, and neither the House nor Senate Appropriations Committee bills contained SAFER waiver provisions. However, Section 307 of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) again contained the previous waiver authority provision, stating that FEMA \"may\" grant SAFER waiver authority to allow SAFER funds for retaining and rehiring firefighters. However, for the 2018 round of SAFER awards, FEMA chose not to exercise that authority, and thus will not provide SAFER hiring grants for retaining or rehiring firefighters. The House FY2019 Homeland Security appropriations bill would have continued the waiver authority in FY2019, while the Senate FY2019 Homeland security appropriations bill did not include the SAFER waiver authority provision. Ultimately, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) included SAFER waiver authority for the FY2019 round of SAFER awards. The Administration's FY2020 budget proposal does not request SAFER waiver authority. For the latest information and updates on the application for and awarding of SAFER grants, see the official SAFER grant program website at https://www.fema.gov/staffing-adequate-fire-emergency-response-grants . Table 4 shows the state-by-state distribution of SAFER grant funds, from FY2005 through FY2017. Table 5 shows the percentage distribution of SAFER grant funds by type of department (career, combination, volunteer) for FY2009 through FY2014, while Table 6 shows the percentage distribution of SAFER grant funds by community service area (urban, suburban, rural) for FY2009 through FY2014. Of the FY2014 SAFER awards, grants for hiring accounted for 90% of the total federal share of dollars awarded, while recruitment and retention accounted for 10%. During 2014 and 2015, the DHS Office of the Inspector General (OIG) conducted an audit of SAFER grants for fiscal years 2010 through 2012. On June 8, 2016, the DHS OIG released its report finding that 63% of SAFER grant recipients over that period did not comply with grant guidance and requirements to prevent waste, fraud, and abuse of grant funds. The report recommended that FEMA's Grant Programs Directorate develop and implement an organizational framework to manage the risk of fraud, waste, abuse, and mismanagement. According to the report, FEMA has concurred with the OIG findings and has taken corrective actions to resolve the recommendations. Meanwhile, the Fire Grants Reauthorization Act of 2012 ( P.L. 112-239 ) directed GAO to prepare a report to Congress that includes an assessment of the effect of the changes made by P.L. 112-239 on the effectiveness, relative allocation, accountability, and administration of the fire grants. GAO was also directed to evaluate the extent to which those changes have enabled grant recipients to mitigate fire and fire-related and other hazards more effectively. In September 2016, GAO released its report, entitled Fire Grants: FEMA Could Enhance Program Administration and Performance Assessment. The report concluded that FEMA's fire grant policies and the awards made in FY2013 and FY2014 generally reflected the changes to the fire grant statute made by P.L. 112-239 , and that FEMA enhanced its assessment of program performance by establishing and reporting on measures of effectiveness of the grants. However, GAO also concluded that those performance measures do not include measurable performance targets linked to SAFER and AFG program goals, and that \"aligning the fire grants programs' use of data on, and definitions of, critical infrastructure to award fire grants and assess program performance with the more objective, quantitative approach used by DHS and GPD [the Grants Program Directorate] for other programs and non-fire preparedness grants could enhance GPD's efforts to integrate the fire grants program into larger national preparedness efforts and more objectively assess the impact of fire grants.\" Firefighter assistance grants were impacted by the partial government shutdown. FEMA personnel who administer the grants were furloughed. For all three grant programs (AFG, SAFER, and FP&S) the application and awards process was delayed. For the 2018 awards round, the application windows for AFG and FP&S closed in October and December 2018, respectively, but the processing of those applications could not move forward. The opening of the 2018 round application window for SAFER grants was also delayed. For grants already awarded (in the 2017 and previous rounds), grant recipients periodically draw down funds, either to reimburse expenditures already incurred, or in immediate advance of those expenditures. Grant recipients were unable to draw down funds during the shutdown, which may have disrupted the ability of the grantees to continue grant-funded activities, including personnel costs covered by SAFER grant awards, which extend for three years. This disruption may continue after the government shutdown has resolved due to a backlog of payment requests that need to be processed once furloughed FEMA grant personnel return to work. SAFER grants are distributed to career, volunteer, combination, and paid-on-call fire departments serving urban, suburban, and rural areas. A continuing issue is how equitably and effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. Another continuing issue is budget appropriations for SAFER and AFG. As is the case with many federal programs, concerns over the federal budget deficit could impact budget levels for SAFER and AFG. At the same time, firefighter assistance budgets will likely receive heightened scrutiny from the fire service community, given the local budgetary shortfalls that many fire departments may face. ", "summary": "In response to concerns over the adequacy of firefighter staffing, the Staffing for Adequate Fire and Emergency Response Act, known as the SAFER Act, was enacted by the 108th Congress as Section 1057 of the FY2004 National Defense Authorization Act (P.L. 108-136). The SAFER Act authorizes grants to career, volunteer, and combination local fire departments for the purpose of increasing the number of firefighters to help communities meet industry-minimum standards and attain 24-hour staffing to provide adequate protection from fire and fire-related hazards. Also authorized are grants to volunteer fire departments for recruitment and retention of volunteers. SAFER is administered by the Federal Emergency Management Agency (FEMA) of the Department of Homeland Security (DHS). On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 (P.L. 115-98). P.L. 115-98 extends the SAFER and AFG authorizations through FY2023; extends the sunset provisions for SAFER and AFG through September 30, 2024; provides that the U.S. Fire Administration (USFA) may develop and make widely available an online training course on SAFER and AFG grant administration; expands SAFER hiring grant eligibility to cover the conversion of part-time or paid-on-call firefighters to full-time firefighters; directs FEMA, acting through the Administrator of USFA, to develop and implement a grant monitoring and oversight framework to mitigate and minimize risks of fraud, waste, abuse, and mismanagement related to the AFG and SAFER grant programs; and makes various technical corrections to the SAFER and AFG statute. The Consolidated Appropriations Act, 2019 (P.L. 116-6) provided $700 million for firefighter assistance in FY2019, including $350 million for SAFER and $350 million for AFG. For FY2020, the Administration requested $688.688 million for firefighter assistance, including $344.344 million for SAFER and $344.344 million for AFG. This is the same amount the Administration requested in its FY2019 budget proposal and a 1.6% reduction from the FY2019 appropriation. An overall issue for the 116th Congress is how equitably and effectively grants are being distributed and used to protect the health and safety of the public and firefighting personnel against fire and fire-related hazards. Another continuing issue is budget appropriations for SAFER and AFG. As is the case with many federal programs, concerns over the federal budget deficit could impact budget levels for SAFER and AFG. At the same time, firefighter assistance budgets will likely receive heightened scrutiny from the fire service community, given the local budgetary shortfalls that many fire departments may face. Additionally, a continuing issue related to SAFER hiring grants has been whether SAFER statutory restrictions should be waived to permit grantees to use SAFER funds for retention and rehiring. Division F, Title III, Section 307 of the Consolidated Appropriations Act, 2018 stated that FEMA \"may\" grant SAFER waiver authority. However, for the 2018 round of SAFER awards, FEMA has chosen not to exercise that authority, and thus will not provide SAFER hiring grants for retaining or rehiring firefighters. The Consolidated Appropriations Act, 2019 (P.L. 116-6) also includes SAFER waiver authority for the FY2019 round of SAFER awards. The Administration's FY2020 budget proposal does not request SAFER waiver authority.", "document_type": "crs"}
{"report": "The Low Income Home Energy Assistance Program (LIHEAP) is a block grant program administered by the Department of Health and Human Services (HHS) under which the federal government gives annual grants to states, the District of Columbia, U.S. territories and commonwealths, and Indian tribal organizations to operate multi-component home energy assistance programs for needy households. Established in 1981 by Title XXVI of P.L. 97-35 , the Omnibus Budget Reconciliation Act, LIHEAP has been reauthorized and amended a number of times, most recently in 2005, when P.L. 109-58 , the Energy Policy Act, authorized annual regular LIHEAP funds at $5.1 billion per year from FY2005 through FY2007. The federal LIHEAP statute has very broad guidelines, with many decisions regarding the program's operation made by the states. Recipients may be helped with their heating and cooling costs, receive crisis assistance, have weatherizing expenses paid, or receive other aid designed to reduce their home energy needs. Households with incomes up to 150% of the federal poverty income guidelines or, if greater, 60% of the state median income, are federally eligible for LIHEAP benefits. States may adopt lower income limits, but no household with income below 110% of the poverty guidelines may be considered ineligible. The LIHEAP statute provides for two types of program funding: regular funds—sometimes referred to as block grant funds—and emergency contingency funds. Regular funds are allotted to states on the basis of the LIHEAP statutory formula, which was enacted as part of the Human Services Reauthorization Act of 1984 ( P.L. 98-558 ). The way in which regular funds are allocated to states depends on the amount of funds appropriated by Congress. The second type of LIHEAP funds, emergency contingency funds, last appropriated in FY2011, may be released and allotted to one or more states at the discretion of the President and the Secretary of HHS. The funds may be released at any point in the fiscal year to meet additional home energy assistance needs created by a natural disaster or other emergency. For more information on LIHEAP more generally, see CRS Report RL31865, LIHEAP: Program and Funding , by Libby Perl. The remainder of this report discusses only the history and methods of distributing regular LIHEAP funds to the states. Funds for tribes are included in each state's formula allocations and are distributed at the state level based on eligible tribal members. Territories receive funds separately as a percentage set aside of regular funds, so neither tribes nor territories are included in the formula discussion. The current statutory LIHEAP formula was enacted in 1984 as part of P.L. 98-558 , the Human Services Reauthorization Act. The statutory formula replaced a formula from a predecessor program to LIHEAP, the Low Income Energy Assistance Program (LIEAP), which was active for one year (FY1981) prior to enactment of LIHEAP. The LIEAP formula emphasized the heating needs of cold-weather states. When Congress changed the LIHEAP formula in 1984, there were two primary differences from the previous formula: home heating needs were not emphasized to the same degree, and the law provided that HHS use the most recent data available to calculate allotments (the LIEAP formula used static data to distribute funds to the states). For more information about both the history of energy assistance formulas from the 1970s through enactment of LIHEAP as well as the enactment of the statutory formula, see Appendix D . The term \"old\" LIHEAP formula refers to the way in which regular funds were distributed using the formula under LIEAP, which was then adopted by LIHEAP when it was enacted. Congress directed that LIEAP state allocations be determined using a complex combination of alternate formulas and factors that included residential energy expenditures, a measure of \"coldness\" called heating degree days, and household income. Further, as specified in law, the data for each factor were either from a particular year or measured a change over a particular period of time, so the data inputs did not change. See Table D-2 for LIEAP formula data. The result of the LIEAP combination of formulas was that each state was assigned a static percentage of funds that did not change from one year to the next. For example, Minnesota received approximately 4.0% of total LIHEAP funds under this formula, and Florida received not-quite 1.4% of the total. See column (a) of Table 1 for each state's share of funds under the \"old\" LIHEAP formula. The term \"new\" LIHEAP formula refers to the way in which funds are to be distributed via the statutory formula enacted as part of P.L. 98-558 . The statute provides that each state's share of funds is to be based on low-income household expenditures on home energy in the state. See the statutory language in the text box, below. Based on the statutory language, HHS calculates heating and cooling consumption and expenditures by low-income households in each state, with the numbers updated each year. (See \" Calculating the New Formula Percentages ,\" later in this report, for more details about how the formula rates are calculated.) Each state's share is then based on the ratio of low-income household expenditures on home energy for the state to all expenditures of low-income households in the country. For example, when formula data were updated in FY2019, Minnesota's share of funds under the \"new\" formula was approximately 1.9% of the total and Florida's was about 4.4%. See column (b) of Table 1 for FY2019 formula shares. However, unlike under the \"old\" formula, states do not necessarily receive their \"new\" formula percentage share of funds. As can be seen from the Minnesota and Florida examples, the implementation of the \"new\" LIHEAP formula meant that some states saw their share of funding reduced, while others saw their share increased. As a result, Congress included in the statutory formula two \"hold harmless\" provisions to make sure that states that saw their shares of total funds decrease were prevented from dramatic drops in funding. The hold harmless provisions operate so that states that gain the most funding have their share reduced to compensate states that lose funding. See \" Using the \"New\" Formula Percentages to Allocate Funds to the States ,\" later in this report, for a more detailed description about how the hold-harmless provisions operate. In the 25 years after the enactment of the \"new\" LIHEAP formula, Congress, with few exceptions, did not appropriate sufficient regular funds to require use of \"new\" formula data. Because of the hold-harmless provisions in the statutory formula, appropriations must exceed approximately $2 billion before the \"new\" formula percentages are used. During these years, the \"old\" formula percentages (found in column (a) of Table 1 ) were used to distribute LIHEAP funds to the states. Starting in FY2009, appropriations for LIHEAP regular funds have exceeded $2 billion, ranging from $3.3 billion to $4.5 billion over the last 10 years. However, the \"new\" formula has not operated as is provided for in the statute. Instead, Congress has directed, in appropriations language, that a portion of funds be distributed using the \"new\" formula, and the remainder using the \"old\" formula. For example, in FY2019 P.L. 115-245 provided that $716 million be distributed according to the \"new\" formula, and the remainder, about $2.96 billion (after deducting funds for the territories and training and technical assistance), distributed using the \"old\" formula percentages. For allocations to the states from FY2009-FY2019, see Appendix C . The next section of this report (\" Determining State LIHEAP Allotments Using the \"New\" Formula \") goes into additional detail about how the \"new\" formula operates, while Appendix D explains more about the history of the \"old\" LIHEAP formula. The LIHEAP statutory formula provides for three different methods to calculate each state's allotment of regular LIHEAP funds. The calculation method used to determine state allotments depends upon the size of the appropriation in a particular year. If the annual appropriation level is at or below the equivalent of a hypothetical FY1984 appropriation of $1.975 billion, then the \"old \"LIHEAP formula percentages apply. If appropriations exceed a hypothetical FY1984 appropriation of $1.975 billion, then \"new\" formula percentages apply and are used to calculate state allotments. To calculate the new formula percentages, HHS determines the heating and cooling costs of low-income households in each state. If the appropriation is less than $2.25 billion, the new formula percentages are used together with a hold-harmless level that prevents states from falling below the amount they would have received at the hypothetical FY1984 appropriations level. Finally, if appropriations equal or exceed $2.25 billion, the \"new\" percentages apply, as does the hold-harmless level, and, in addition, a hold-harmless rate increases the \"new\" formula percentage for certain states. This section describes the steps involved in allocating LIHEAP funds to the states under each of the appropriations triggers. The LIHEAP formula uses the home energy expenditures of low-income households in each state as a first step in determining the amount of total regular funds that each state will receive. Specifically, this means estimating the amount of money that all low-income households (as defined by the LIHEAP statute) in each state spend on heating and cooling from all energy sources. This method accounts for variations in heating and cooling needs of the states, the types of energy used, energy prices, and the low-income population and their heating and cooling methods. Further, as mentioned in the previous section, the \"new\" formula requires HHS to determine allocations \"on the basis of the most recent satisfactory data available to the Secretary.\" HHS updates these data annually. The most recent data were provided to CRS in 2019. The process for capturing the expenditures of low-income households involves the following steps: Total Residential Energy Consumption. The first step in calculating new formula rates is determining total residential energy consumption for each heating and cooling source in every state. Residential energy consumption is usually measured in terms of the total amount of British Thermal Units (Btus) used in private households and generally captures energy used for space and water heating, cooling, lighting, refrigeration, cooking, and the energy needed to operate appliances. The most recent data used in calculating LIHEAP formula rates come from the 2016 Energy Information Administration (EIA) State Energy Data System consumption estimates. Temperature Variation. The next step in determining the formula rates involves adjusting the amount of energy consumed for each fuel source by temperature variation in each state. This is done by using a ratio consisting of the 30-year average heating and cooling degree day data to each state's share of the most recent year's average heating and cooling degree days. A heating degree day measures the extent to which a day's average temperature falls below 65°F and a cooling degree day measures the extent to which a day's average temperature rises above 65°F. For example, a day with an average temperature of 50°F results in a measure of 15 heating degree days; a day with an average temperature of 80°F results in a measure of 15 cooling degree days. The purpose of the adjustment to fuel consumption is to account for abnormally warm or cool years, where energy usage might attain extreme values. This information is collected by the National Oceanic and Atmospheric Administration. The most recent year's average heating and cooling degree day data are from 2016, and the 30-year average was computed from 1971 to 2000. Heating and Cooling Consumption. As mentioned above, total residential energy consumption encompasses other uses in addition to heating and cooling (e.g., operation of appliances). So the next step in calculating LIHEAP formula rates is to derive the portion of fuel consumed specifically to heat and cool homes as opposed to other uses. The EIA, as part of the Residential Energy Consumption Survey (RECS), uses an \"end use estimation methodology\" to estimate the amount of fuel used for heating and cooling (among other uses). The most recent information on heating and cooling consumption comes from the 2009 RECS. HHS adjusts the EIA heating and cooling consumption estimates using heating degree day and cooling degree day data. Low-Income Household Heating and Cooling Consumption. After estimating heating and cooling consumption for all households, the next step is to calculate heating and cooling consumption in Btus for low-income households. HHS uses Census data to determine fuel sources used by low-income households. The most recent information on low-income households and the fuel sources they use comes from the American Community Survey five-year estimates for 2012-2016. In addition, low-income consumption data are adjusted to account for the fact that low-income households might use more or less of a fuel source than is used by households on average. This is done using consumption data from the 2009 RECS. Total Spending on Heating and Cooling. To arrive at the amount of money that low-income households spend on heating and cooling, the number of Btus used by low-income households that were estimated in the previous step are multiplied by the average fuel price for each fuel source. The total amount spent on heating and cooling by low-income households for each fuel source is then added together to arrive at total spending for each state. Regional energy price variation can be significant, and the formula takes expected expenditure differences into account. This information is collected by the EIA and published in the State Energy Data System Consumption, Price, and Expenditure Estimates. The most recent price data used to calculate formula rates are from 2016. New Formula Percentage. Finally, these expenditure data are used to estimate the amount spent by low-income households on heating and cooling in each state relative to the amount spent by low-income households on heating and cooling in all states. The calculated proportion becomes the new formula percentage for each state. Table 1 at the end of this section shows both the percentages under the \"old\" formula (column (a)) and the most recent \"new\" formula percentages (column (b)), received by CRS from HHS in 2019. To see how the formula rates for each state have changed in recent years, see Table 2 . These new formula percentages are used to allocate LIHEAP funds to the states if the annual appropriation exceeds the equivalent of a hypothetical FY1984 appropriation of $1.975 billion. However, they do not represent the exact percentage of funds that all states will receive under the new formula. The ultimate allotments are determined after application of both the hold-harmless level and hold-harmless rate, described in the next section. The new percentages are the starting point for determining how funds will be allocated to the states. The LIHEAP \"new\" formula percentages that HHS calculates using the most recent satisfactory data available do not necessarily represent the percentage of funds that states will receive. State allotments depend upon the application of the two hold-harmless provisions in the LIHEAP statute. Some states must have their share of funds ratably reduced in order to hold harmless those states that would, but for the hold-harmless provisions, lose funds. Other states see a gain in their share of funds because they benefit from the hold-harmless provisions. The application of the hold-harmless provisions depends upon the size of the appropriation for a given fiscal year. These appropriation level triggers are described below. The LIHEAP statute does not contain an explicit trigger for the \"new\" formula rates to be used. However, the statute specifies that states must receive no less than \"the amount of funds the State would have received in fiscal year 1984 if the appropriations for this subchapter for fiscal year 1984 had been $1,975,000,000.\" As a result, up to this appropriation level, states receive the same percentage of funds that they would have received at a given appropriation level under the \"old\" LIHEAP formula. The FY1984 appropriation of $1.975 billion referred to in the LIHEAP statute is hypothetical because this was not the amount actually appropriated in FY1984. The actual FY1984 appropriation was $2.075 billion. In addition, the current year appropriation that is \"equivalent to\" a hypothetical FY1984 appropriation of $1.975 billion is not exactly $1.975 billion. In FY1984, with the exception of funds provided to the territories, all LIHEAP regular funds were distributed to the states. Since then, two other funds have become part of the regular fund distribution. These are funds for training and technical assistance (TTA) and for the leveraging incentive (LI) grants (which includes REACH grants) to the states. This means that an appropriation that is equivalent to a hypothetical FY1984 appropriation of $1.975 billion must account for these new funds. For example, in FY2019, Congress appropriated $2.988 million for TTA and no funding for LI /REACH, so the equivalent of an FY1984 appropriation of $1.975 billion is approximately $1.978 billion. The LIHEAP formula in FY1984 distributed funds by giving states the same percentage of funds that they received in FY1981 under the predecessor program, the Low Income Energy Assistance Program (LIEAP). Table 1 shows rates under the old formula in column (a). For example, at an appropriation at or below the equivalent of a hypothetical FY1984 appropriation of $1.975 billion, Alabama would receive 0.86% of total funds, Alaska would receive 0.55% of total funds, and so on. Table A-1 , column (a), reports the dollar amount of funds that each state would have received in FY1984 had the regular fund appropriation been $1.975 billion. For comparison purposes, the dollar amounts also assume that funds for the territories would be 0.5% of the total, a change made by HHS beginning with the FY2014 appropriation. If the regular LIHEAP appropriation exceeds the equivalent of a hypothetical FY1984 appropriation of $1.975 billion for the fiscal year, all funds are to be distributed under a different methodology, using the new set of percentages described earlier. In addition, a hold-harmless level applies to ensure that certain states do not fall below the amount of funds they would have received at the equivalent of a hypothetical FY1984 appropriation of $1.975 billion. Table 1 shows whether a state benefits from the hold-harmless level. This is indicated by a \"Y\" in column (c), while the dollar amount of funds those states receive by being held harmless appears in column (d). For example, Alabama is not held harmless, while Colorado is held harmless. The dollar amount of funds that Colorado receives pursuant to the hold-harmless level is $31.613 million. But for the hold-harmless level, Colorado would receive less than this dollar amount at its new formula percentage at certain appropriation levels. Eventually, when appropriations increase sufficiently, the percentage of funds under the new formula for hold-harmless states will exceed their hold harmless amounts and they will begin to receive their new percentage of funds. This appropriation level varies for each state. For example, at lower appropriation levels, the $31.613 million hold-harmless level for Colorado exceeds the state's new percentage share of 1.438% of total funds. However, by the time appropriations reach $2.25 billion, Colorado's new percentage share exceeds $31.613 million and the state begins to receive funds at the new percentage. Eventually, many states will receive the percentage of funds at their new percentage. The hold-harmless level is achieved by reducing the allocation of funds to states with the greatest proportional gains under the new formula percentages. For example, under the most recent LIHEAP formula percentages, states with the greatest proportional gains were Nevada, Arizona, and Texas. Depending on the appropriation level, these states (and others with the greatest gains) may then have their allotments reduced to hold harmless the states that would otherwise see reduced benefits. So although these states with the greatest proportional gains will see their LIHEAP allotments increase under the new formula, their allotments may not increase to reach their new formula rates (column (b) of Table 1 ). Columns (b) and (c) of Table A-1 show estimated allotments to the states at hypothetical appropriations levels between $1.975 billion and $2.25 billion. Column (b) shows the estimated allotment of funds that each state would receive when the regular fund appropriation is at $2.14 billion and column (c) shows the estimated allotment of funds when the regular fund appropriation is just under $2.25 billion ($2,249,999,999). The LIHEAP statute stipulates additional requirements in the method for distributing funds when the appropriation is at or above $2.25 billion. At this level, the hold-harmless level still applies, but, in addition, a new hold-harmless rate is applied. Specifically, for all appropriation levels at or above $2.25 billion, states that would have received less than 1% of a total $2.25 billion appropriation must be allocated the percentage they would have received at a $2.14 billion appropriation level. (This assumes the percentage at $2.14 billion is greater than the percentage originally calculated at the hypothetical $2.25 billion appropriation; this is not true for all states that receive less than 1% of the $2.25 billion appropriation.) Then that state will receive the percentage share of funds it would have received at $2.14 billion for all appropriation levels at or above $2.25 billion. This hold-harmless rate ensures a state specific share of the total available funds. As with the hold-harmless level, the allocations to the states with the greatest proportional gains are then ratably reduced again until there is no funding shortfall. Column (e) of Table 1 shows which states benefit from the hold-harmless rate, indicated by a \"Y,\" while column (f) shows the proportion of funds that those states receive. For example, Idaho benefits from the hold-harmless rate and receives 0.580% of the total appropriation when appropriations are at or above $2.25 billion. The application of the hold-harmless rate creates another layer of discontinuity in the allocation rates. States that are ratably reduced see their allocations at $2.25 billion fall below the amount they would receive at $2.249 billion, while states that benefit from the hold-harmless rate see their funding jump up slightly. Columns (d) through (i) of Table A-1 in Appendix A show estimated allotments to states at various hypothetical appropriations levels at or above $2.25 billion. Until FY2006, appropriations for regular LIHEAP funds had only exceeded the equivalent of a hypothetical FY1984 appropriation of $1.975 billion in 1985 and 1986; thereafter, from FY1987 through FY2005, and again in FY2007, states continued to receive the same percentage of LIHEAP funds that they received under the program's predecessor, LIEAP (see column (a) of Table 1 for these percentages). In FY2006, funds were distributed under the \"new\" LIHEAP formula when Congress appropriated $2.48 billion in regular funds for the program. In FY2008, perhaps due to an oversight, the new formula was again used to distribute funds. The FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) failed to authorize a set-aside called leveraging incentive grants. As a result, the funds for those grants were added to the LIHEAP regular funds, triggering use of new formula data. In FY2009, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act ( P.L. 110-329 ) appropriated $4.51 billion in regular funds. However, the law further specified that $840 million be distributed according to the \"new\" LIHEAP formula, with the remaining $3.67 billion distributed according to the percentages of the \"old\" formula established by LIEAP. From FY2010 through the present, Congress has continued to appropriate funds using a version of a split between the \"old\" and \"new\" formulas. See Table C-1 in Appendix C of this report for the distribution of funds to the states from FY2009 through FY2019. Appendix A. Estimated Allotments to the States Under Various Hypothetical Appropriations Levels Table A-1 , below, shows estimated allocations to the states at various hypothetical appropriations levels. In column (a) are allotments at the equivalent of a hypothetical FY1984 appropriation of $1.975 billion—under recent LIHEAP practice where funds are set aside for training and technical assistance, the equivalent appropriation level is approximately $1.978 billion. The remaining columns show estimated allotments at appropriations of $2.14 billion, just under $2.25 billion, $2.25 billion, $3.0 billion, $3.69 billion (the amount appropriated in FY2019), $4.0 billion, and $5.1 billion, the amount at which the LIHEAP program was last authorized in P.L. 109-58 . In each case, the estimates assume that 0.5% would be set aside for the territories, the amount set aside by HHS starting in FY2014. Appendix B. Further Depiction of How State Allotments Depend Upon Appropriation Levels Figure B-1 graphically illustrates the interplay of the hold harmless provisions in state allotments for three types of states over a range of appropriations from $0 to $5.1 billion. Represented are (1) a hold-harmless level state, (2) a state whose increased allocations are ratably reduced in order to maintain allocations for the hold-harmless level and rate states, and (3) a hold-harmless level and rate state. These three states are not representative of all states in the three categories; see Table A-1 for the range of individual state allocations. In the figure, there are three vertical areas. These areas separate the three levels of appropriations that are triggers under current law and were explained previously in this report. The figure also graphs the three types of states. These three types of states are as follows. Hold-Harmless Level Only State . This state is depicted with a blue line running from $0 to point G. States with \"new\" formula percentages that start out lower than their \"old\" formula percentages are subject to only the hold-harmless level provision. They do not qualify for the hold-harmless rate because each state's share of the regular funds at $2.25 billion is greater than 1%. The hold-harmless level is evident from point A to point F. Here, despite increases in the appropriations level, the state allotment remains fixed. In Table 1 , these are the states that have a \"Y\" in column (c) and an \"N\" in column (e).Ratable Reduction State. This state is depicted with a purple line running from $0 to point H. States with \"new\" formula percentages that are higher than their \"old\" formula percentages are subject to a ratable reduction. Their new formula percentage is greater than their old (FY1984) percentage. There is a small decrease in state allotments at point D that is attributable to the increased shortfall on the distribution of funds that the hold-harmless rate imposes. In Table 1 , these are the states that have an \"N\" in both column (c) and column (e).Hold-Harmless Level and Rate State. This state is depicted with a red line running from $0 to point I. States have lower new formula percentages and are subject to both the hold-harmless level and the hold harmless rate provisions. The hold-harmless level is evident by the fixed state allotment from point C to point E. However, the (subtle) jump at exactly $2.25 billion (point E) signals that this state is subject to the hold-harmless rate provision. After the allotment jump at $2.25 billion, the state's allotment continues to increase (at a rate lower than the old rate, but higher than the new rate). In Table 1 , these are the states that have a \"Y\" in column (c) and a \"Y\" in the column (e). Appendix C. LIHEAP Formula Fund Allocations to the States, FY2010-FY2019 Since FY2009, Congress, through appropriations language, has directed that a portion of the regular funds appropriated be distributed to the states via the \"new\" LIHEAP formula, and the remainder using the \"old\" formula percentages. The portion of funds distributed via the new formula has ranged from 14% to nearly 20% of regular funds appropriated, depending on the year. Table C-1 , below, shows actual LIHEAP regular fund allocations to the states from FY2009 through FY2019. In each year, funds for the territories, training and technical assistance (TTA), and leveraging incentive grants (if appropriated) are first subtracted from the total appropriation. The remainder of funding is distributed to the states via formula as directed in appropriations language. For example, in FY2019 Congress directed that $716 million be distributed via the \"new\" LIHEAP formula, and the remainder via the \"old\" LIHEAP formula percentages. The column header in Table C-1 for each year shows the total regular funds appropriated for LIHEAP (including funds that were not distributed via the formula such as rescissions and transfers). Total funding distributed to the states via formula is in the final row of the table for each year. The table notes describe the division between \"new\" and \"old\" formulas, and any other relevant information. Appendix D. History of the LIHEAP Formula Predecessor Programs to LIHEAP The mid- to late-1970s, a time marked by rapidly rising fuel prices, also marked the beginning of federal energy assistance funding for low-income households. The first national program to help low-income households was created in early 1975 to assist families with energy conservation primarily through home weatherization. This assistance was provided through a new Emergency Energy Conservation Program (EECP), enacted as part of the Headstart, Economic Opportunity, and Community Partnership Act of 1974 ( P.L. 93-644 ). The funds were administered by the Community Services Administration (CSA), the successor agency to the Office of Economic Opportunity, which was responsible for many of the programs created as part of the 1964 war on poverty. Beginning in 1977, funds were also made available through the CSA to help families directly pay for fuel (as opposed to weatherization expenses) via a variety of programs. Each of these programs had in common a focus on the need for heating assistance (versus cooling assistance). Congress continued to appropriate funds for energy assistance programs through FY1980, at which point a new program, the Low Income Energy Assistance Program (LIEAP), was enacted as part of the Crude Oil Windfall Profits Tax Act of 1980 ( P.L. 96-223 ). LIEAP, which was administered by the Department of Health and Human Services (HHS), was funded for one year, FY1981, before the creation of LIHEAP. Like the CSA programs, LIEAP emphasized heating over cooling needs. This preference was reflected in both the CSA program formulas and the LIEAP set of formulas, which used variables that benefitted cold-weather states to determine how funds would be distributed. The LIEAP set of formulas continues to have relevance for the way in which LIHEAP funds are distributed. This section of the report describes these predecessor programs to LIHEAP and their distribution formulas. Community Services Administration Energy Assistance Programs On January 4, 1975, President Ford signed into law the Headstart, Economic Opportunity, and Community Partnership Act of 1974 ( P.L. 93-644 ), which contained funds for a new program, called the Emergency Energy Conservation Program (EECP). The program was to be administered by the Community Services Administration (CSA), and its purpose was to enable low-income individuals and families, including the elderly and the near poor, to participate in energy conservation programs designed to lessen the impact of the high cost of energy ... and to reduce ... energy consumption. The law governing EECP listed a number of eligible activities in which states could participate, including energy conservation and education programs; weatherization assistance; loans and grants for the purchase of energy conservation technologies; alternative fuel supplies; and fuel voucher and stamp programs. Despite the variety of activities that could be funded through the program, the first CSA funding notice regarding the program limited eligible activities to \"winterizing\" homes and to giving emergency assistance \"to prevent hardship or danger to health due to utility shutoff or lack of fuel.\" During the four years the EECP was funded, the majority of funds were used for weatherization expenses. EECP funds were distributed to states via a formula that benefitted those states with high heating costs. One formula variable in particular, a measure of \"coldness\" called heating degree days, benefitted cold-weather states. Heating degree days measure the extent to which a day's average temperature falls below 65° Fahrenheit. For example, a day with an average temperature of 50° results in a measure of 15 heating degree days. Because heating degree days are higher in cold-weather states, including the heating degree day variable in a formula favors states with greater heating needs. Squaring the heating degree days magnifies this effect. The EECP formula took the number of population-weighted heating degree days in each state, squared them, and multiplied the result by the number of households in poverty that owned their homes to determine how funds would be allocated. The CSA acknowledged the emphasis on heating needs in its formula, stating that the FY1975 allocation \"was heavily weighted to the coldest areas.\" In the three fiscal years that followed the first appropriation for the EECP, from FY1976 through FY1978, the CSA changed somewhat the way in which it allocated funds to the states; however, the factors continued to favor cold-weather states through use of either heating degree days or heating degree days squared. The first year that Congress specifically appropriated funds for direct assistance to help low-income households (those at or below 125% of poverty) pay their energy costs (instead of funds that went primarily for weatherization and conservation activities) was FY1977. The FY1977 Supplemental Appropriations Act ( P.L. 95-26 ) provided $200 million for a Special Crisis Intervention Program to be administered by CSA. States could use funds to make direct payments to fuel providers on behalf of low-income families lacking the financial resources to pay their energy bills. The CSA directed states to target households where utilities had been shut off (or were threatened with shut off) or who could prove \"dire financial need\" as the result of paying large energy bills. Although the law did not reserve funds exclusively for heating costs, the way in which funds were allocated to the states emphasized heating need. Funds were distributed to the states based on a formula that used (1) heating degree days squared, (2) the number of households in poverty, (3) the number of persons above age 65 with incomes below 125% of poverty, and (4) the relative cost of fuel in the region. Congress again appropriated $200 million for crisis intervention in both FY1978 and FY1979. In FY1978, funds were available to households with the need for assistance as the result of an energy-related emergency such as lack of fuel, a natural disaster, fuel shortages, and widespread unemployment. In FY1979, funds were made available to assist families facing \"substantially increased energy costs and/or life- or health-threatening situations caused by winter-related energy emergencies.\" In FY1980, Congress appropriated a total of $1.6 billion for energy assistance. Of this amount, $400 million was appropriated for the Energy Crisis Assistance Program (ECAP, a CSA program similar to the Special Crisis Intervention Program) through two separate appropriations. The remainder, $1.2 billion, was appropriated as part of the FY1980 Department of the Interior Appropriations Act ( P.L. 96-126 ) to the Department of Health, Education, and Welfare (HEW, the predecessor to HHS) for cash assistance and crisis intervention due to high energy costs. This appropriation to HEW is sometimes referred to as Low Income Supplemental Energy Allowances. Of this $1.2 billion, $400 million was to be distributed specifically to recipients of Supplemental Security Income (SSI). The rest of the funds appropriated to HEW, approximately $800 million, as well as the ECAP funds, were distributed to states on the basis of three factors: heating degree days squared, the number of households below 125% of poverty, and the difference in home heating energy expenditures between 1978 and 1979. The formula used to distribute the $400 million for SSI recipients used these same factors but also included the number of SSI recipients in each state relative to the national total. The Low Income Energy Assistance Program (LIEAP) Formula In April 1980, Congress replaced the patchwork energy assistance programs of the late 1970s with one program, the Low Income Energy Assistance Program (LIEAP). LIEAP, the direct predecessor program to LIHEAP, was established as part of the Crude Oil Windfall Profits Tax Act of 1980 ( P.L. 96-223 ). The program was introduced in the Senate as the Home Energy Assistance Act ( S. 1724 ) and was incorporated into H.R. 3919 , the bill that would become the Crude Oil Windfall Profits Tax Act, on the Senate floor. Like the energy assistance programs of the late 1970s such as the Special Crisis Intervention Program and the Low Income Supplemental Energy Allowances, LIEAP allocated funds to states in order to help low-income households pay their home energy costs. Also like these predecessor programs, LIEAP allocated funds to states using a method that put more emphasis on the heating needs of cold-weather states than it did on cooling needs. The formula developed under LIEAP continues to be relevant in several ways: (1) it has been used to distribute LIHEAP funds as recently as FY2007, (2) the percentage shares of funds that states received continue to be the benchmark for the way in which states are held harmless under the current LIHEAP formula, and (3) from FY2009 through the present, Congress has distributed the bulk of LIHEAP funds using the LIEAP formula percentages (for more information, see Appendix C ). As a result, the variables used are important in understanding the current formula and the way in which it is used to distribute funds. Ultimately, Congress developed the LIEAP formula through two different laws: P.L. 96-223 , the law that authorized LIEAP, and P.L. 96-369 , a continuing resolution enacted six months later. The following two subsections describe the elements of the formula developed through each. Formula Under P.L. 96-223 The formula developed as part of S. 1724 , and subsequently incorporated into P.L. 96-223 , reflected, in part, the concern that the problem of rising energy costs were \"most critical in areas with high home heating costs.\" The formula for LIEAP arose from a Senate compromise over three different proposals. The debate centered around the degree to which heating should be emphasized over energy expenditures generally. Some Members wanted a formula that accounted for all energy uses and was not based solely on geographic location, while others saw the program's purpose as solely to provide heating assistance. The debate on the Senate floor was, at times, contentious, with Senator Edmund Muskie (Maine) resolved to filibuster in order to support the heating needs of northern states. Primarily at issue was the measure of heating degree days, particularly the extent to which they would be weighted and whether they would be squared. Under the final compromise LIEAP formula in P.L. 96-223 , states received funds under one of four different alternatives used to measure home energy need, depending on which one benefitted a state the most. Three of the four options contained different combinations of several formula factors: residential energy expenditures; heating degree days or heating degree days squared; and the number of low-income households in the state. Under the first formula alternative, 50% of the allocation was based on residential energy expenditures and 50% on heating degree days squared multiplied by the number of households at or below the Bureau of Labor Statistics (BLS) lower living standard. Under the second formula alternative, 25% of the allocation was based on residential energy expenditures and 75% based on heating degree days squared multiplied by the number of households at or below the BLS lower living standard. Under the third formula alternative, 50% of the allocation was based on residential energy expenditures and 50% based on heating degree days (not squared) multiplied by the number of households with incomes at or below the BLS lower living standard. The fourth option guaranteed states a minimum benefit of $120 for each household that received Aid to Families with Dependent Children (AFDC), SSI, or Food Stamp benefits. The option was added to S. 1724 at the Finance Committee level in recognition of the fact that (in general) funds were not being provided for cooling costs. (See Table D-2 for a breakdown of these formulas.) While the focus of the formula was on heating assistance, the LIEAP law did allow states to provide for cooling when households could demonstrate medical necessity. Congress authorized LIEAP for one year, FY1981, at $3 billion, but funds were not appropriated as part of P.L. 96-223 . Formula Under P.L. 96-369 Before the formula in P.L. 96-223 could be used to allocate funds, Congress introduced an alternative method for computing the state distribution rates. It did so when it appropriated $1.85 billion in LIEAP funds for FY1981 in a continuing resolution ( P.L. 96-369 ), in October of 1980, six months after enactment of the Crude Oil Windfall Profits Tax Act. The new allocation method was not described in P.L. 96-369 , however. Instead, the continuing resolution referred to a House Appropriations Committee report (H. Rept. 96-1244) accompanying another bill—the FY1981 Departments of Labor, Health and Human Services and Education Appropriations Act. It was in this committee report that the additional formula components for LIEAP were laid out. The additional formula components appeared to be intended to act as a counter to the formula developed in P.L. 96-223 , which some argued benefitted warmer weather states more than was necessary. The first step in the new set of formulas was to determine each state's share of funds using two calculations set out in H. Rept. 96-1244 and assign states the greater of the two amounts. Under the first formula alternative, 50% of the allocation was based on the increase in home heating expenditures, and 50% was based on the number of heating degree days squared times the population with income less than or equal to 125% of poverty. This was the same formula used for the Low-Income Supplemental Energy Allowances Program. Under the second formula alternative, 25% of the allocation was based on total residential energy expenditures, and 75% was based on heating degree days squared multiplied by the number of low-income households in the state. The greater of the two percentages calculated using the formula in H. Rept. 96-1244 was then assigned to each state. After adjusting state allotments proportionately so that the total allocation reached 100% of funds available, the second step in the amended formula was to compare these state allotments to 75% of the amount each state would receive under the formula in P.L. 96-223 . States would then receive the greater of these two amounts. To see the percentage of funds that each state received under the LIEAP formula, see Table 1 , column (a). Although the alternative formulas under H.Rept. 96-1244 used factors similar to those in P.L. 96-223 , the original set of formulas was somewhat more favorable to warm-weather states. For example, the BLS lower living standard, used in all of the P.L. 96-223 formulas but only one of those in H.Rept. 96-1244, was higher than 125% of poverty for most household sizes, which benefitted the South, where the low-income population was higher. The original set of formulas in P.L. 96-223 also provided for a minimum benefit to states on the basis of the number of AFDC, SSI, and Food Stamp recipient households, unconditioned on their household heating expenditures. In addition, the inclusion of the increase in home heating expenditures in H. Rept. 96-1244 benefitted Northeastern states, where heating oil prices had increased substantially. Enactment of LIHEAP In August 1981, the Omnibus Budget Reconciliation Act, P.L. 97-35 , created LIHEAP, replacing its predecessor, LIEAP. The new program was not substantially different from the previous program. Some of the changes to the program included less restrictive federal rules and more state flexibility in determining how to operate their LIHEAP programs. The program was authorized at $1.85 billion for FY1982-FY1984. In FY1982, Congress appropriated $1.875 billion for LIHEAP; in FY1983, it appropriated $1.975 billion; and in FY1984, $2.075 billion. Continued Use of the LIEAP Formula When the formula for LIEAP was initially created in 1980 under the Crude Oil Windfall Profits Tax Act ( P.L. 96-223 ), it brought about a good deal of debate on the floor of the Senate, where the formula provisions were added to the legislation. Discussion over the formula also occurred leading up to the enactment of P.L. 96-369 , the FY1981 continuing resolution that funded LIEAP and amended the formula. Despite these earlier disagreements over formula allocations, the process to enact LIHEAP in 1981 did not engender the same level of debate or result in a different formula. Instead, the law creating LIHEAP provided that the allotment percentages for each state would remain the same as they had been in FY1981 under the LIEAP formula as amended by P.L. 96-369 . From FY1982 through FY1984, then, states continued to receive the same percentage of funds that they received under the LIEAP formula. The 1984 LIHEAP Reauthorization: A New Formula Formula Discussions When Congress began to consider reauthorizing LIHEAP in 1983, two aspects of the formula were debated. First, some legislators recognized that the multi-step LIEAP formula benefitted cold-weather states relative to warm-weather states. The second debated aspect of the formula centered on the appropriateness and timeliness of the data used in formula calculations. In 1983, the energy information used to calculate state allotments was not the most current data available. For example, the most recent data the formula used were the change in the cost of energy between 1978 and 1980, or the cost of energy in 1980, depending on the sub-formula one chose to apply. No aspect of the formula took account of increased costs after 1980. Legislative sentiment in favor of changing the formula was evident, when, in September 1983, the House adopted an amendment to the Emergency Immigration Education Act ( H.R. 3520 ) that would have adjusted the LIHEAP formula and resulted in a change in allocations to the states. The amendment's formula took into account the energy expenditures of poor families, which, according to the amendment's sponsor, Representative Carlos Moorhead (California), would result in lower percentage allocations for 23 states, mostly in the Northeast and Midwest, gains for 27, primarily in the South, and the same allocation for one state. The amendment was eventually dropped from H.R. 3520 in conference with the Senate. Introduction of a Hold-Harmless Level Efforts to reauthorize LIHEAP began in April 1983 with the introduction of the Low-Income Home Energy Assistance Amendments of 1984 ( H.R. 2439 ). The bill was referred to two committees: Education and Labor and Energy and Commerce. Within the Energy and Commerce committee, two subcommittees held markups: Fossil and Synthetic Fuels and Energy Conservation and Power. As introduced, H.R. 2439 did not contain changes to the LIHEAP formula. The Subcommittees on Fossil and Synthetic Fuels and Energy Conservation and Power worked together to arrive at a formula change, which had the effect of shifting funds from states in the Northeast to the South and West. Unlike the previous set of formulas developed under LIEAP, the new formula directed the Department of Health and Human Services to determine states' allotments \"using data relating to the most recent year for which data is available.\" Because the cost of heating oil remained steady between 1981 and 1983, and the price of natural gas rose 33%, this meant that states in the Northeast—where heating oil was the primary source of energy—would lose LIHEAP dollars, while states in the South and the Midwest would gain under this provision. In addition, population growth in the South (as well as its higher poverty rates) meant that southern states would benefit from the use of more recent population data. To offset the losses to certain states resulting from the use of current data, H.R. 2439 also included a hold-harmless provision, or hold-harmless level; this provision ensured that if appropriations were less than or equal to $1.875 billion, states would receive no less than their allotment would have been under the old formula at this appropriations level. The bill additionally increased the LIHEAP authorization level to $2.075 billion for FY1984, $2.26 billion for FY1985, $2.5 billion in FY1986, $2.625 billion for FY1987, and $2.8 billion for FY1988. Introduction of a Hold-Harmless Rate After the House Energy and Commerce Committee reported H.R. 2439 to the House floor—but before the full House could act on the bill—the Senate passed its version of LIHEAP reauthorization as part of the Human Services Reauthorization Act ( S. 2565 ) on October 4, 1984. The Senate bill contained language very similar to H.R. 2439 , but made several changes and additions to the formula. S. 2565 specified that states' shares of LIHEAP funds would be based on the home energy expenditures of low-income households, not on expenditures of all households. The hold-harmless level was altered. S. 2565 directed that no state in FY1985 would receive less funding than it received in FY1984, and for FY1986 and thereafter, no state would receive less than the amount they would have received in FY1984 if the appropriations level had been $1.975 billion. A second hold-harmless provision, or hold-harmless rate, was created. The provision maintained the percentage allocated rather than a total funding level allocated to each affected state. The hold-harmless rate provision guaranteed that certain states would receive increased allotments when appropriations reached $2.25 billion. States would qualify for this increase if their total allotment percentage at an appropriation of $2.25 billion were less than 1%. These states would instead receive the allotment rate they would have received at an appropriation of $2.14 billion if that allotment rate were higher than the rate at $2.25 billion. In their debate about S. 2565 , Senators referred to the hold-harmless rate as the \"small States hold harmless,\" as the intent was to protect the small (population) states' shares of LIHEAP funds. Otherwise, the concern was that appropriations might have to increase significantly before small state allotments would increase above their hold-harmless levels, with the states' percentage shares of funds declining even as total appropriations increased. The Senate bill also included different authorization amounts for LIHEAP, $2.14 billion for FY1985 and $2.275 billion for FY1986. After S. 2565 passed the Senate, the House debated and passed the bill on October 9, 1984, retaining all the provisions included in the Senate version. The bill became P.L. 98-558 , the Human Services Reauthorization Act, on October 30, 1984.", "summary": "The Low Income Home Energy Assistance Program (LIHEAP) provides funds to states, the District of Columbia, U.S. territories and commonwealths, and Indian tribal organizations (collectively referred to as grantees) primarily to help low-income households pay home energy expenses. The LIHEAP statute provides for two types of funding: regular funds (sometimes referred to as block grant funds) and emergency contingency funds. Regular funds are allocated to grantees based on a formula, while emergency contingency funds may be released to one or more grantees at the discretion of the Secretary of the Department of Health and Human Services (HHS) based on emergency need. This report focuses on the way in which regular funds are distributed. Regular LIHEAP funds are allocated to the states according to a formula that has a long and complicated history. (Tribes receive a share of state funding, while a percentage of regular funds is set aside for territories.) Prior to enactment of LIHEAP, in 1981, a series of predecessor energy assistance programs focused on the heating needs of cold weather states. This focus was in part the result of high heating oil prices throughout the 1970s. When LIHEAP was enacted, it adopted the formula of its immediate predecessor program, the Low Income Energy Assistance Program (LIEAP). Funds under LIEAP were distributed according to a multi-step formula that was more favorable to colder-weather states. The LIHEAP statute specified that states would continue to receive the same percentage of regular funds that they did under the LIEAP formula. This is sometimes referred to as the \"old\" LIHEAP formula. After several years, when Congress reauthorized LIHEAP in 1984 it changed the program's formula by requiring the use of more recent population and energy data (data were not updated under the \"old\" formula) and reducing the emphasis on heating needs. The effect of these changes meant that, in general, some funding would be shifted from colder-weather states to warmer-weather states. (Using FY2019 formula data, the figure below shows which states receive a greater share of funds under the \"new\" and \"old\" formulas.) To prevent a dramatic shift of funds, Congress added two \"hold-harmless\" provisions to the formula. The percentage of funds that states receive under the formula enacted in 1984 is sometimes referred to as the \"new\" formula. New formula data is used to calculate state allotments when appropriations for LIHEAP regular funds exceed approximately $2 billion. In the years following the enactment of the \"new\" LIHEAP formula, appropriations did not reach this level, so until the mid-2000s funds were largely distributed according to the \"old\" formula percentages. However, in FY2006, and in FY2009 through FY2019, regular fund appropriations have ranged from $2.5 billion to $4.5 billion, and the \"new\" formula has been incorporated into the way in which funds are distributed to the states. Notably, however, since FY2009 Congress has limited the operation of the \"new\" formula by requiring that the majority of regular funds be distributed using \"old\" formula percentages. For distributions to the states from FY2009-FY2019, see Table C-1.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers several programs to support small businesses, including the Historically Underutilized Business Zone Empowerment Contracting (HUBZone) program. The HUBZone program is \"a place-based contracting assistance program whose primary objective is job creation and increasing capital investment in distressed communities.\" It was authorized in 1997 ( P.L. 105-135 , the HUBZone Act of 1997; Title VI of the Small Business Reauthorization Act of 1997), and the SBA began accepting applications from interested small businesses on March 22, 1999. The HUBZone program provides participating small businesses located in areas with low income, high poverty, or high levels of unemployment with contracting opportunities in the form of set-asides , sole-source awards , and price-evaluation preferences . The Competition in Contracting Act of 1984 generally requires \"full and open competition\" for government procurement contracts. However, procurement set-asides are permissible competitive procedures. A set-aside restricts competition for a federal contract to specified contractors. Set-asides can be exclusive or partial, depending upon whether the entire procurement or just part of it is so restricted. In this case, the competition may be restricted to SBA-certified HUBZone businesses if there is a reasonable expectation of at least two SBA-certified HUBZone bidders and a fair market price. It is the most commonly used mechanism in the HUBZone program, accounting for about 78.4% of HUBZone program contract dollars ($1.49 billion of $1.90 billion) in FY2017. A sole-source award is a federal contract awarded, or proposed for award, without competition. Sole-source awards accounted for about 3.4% of HUBZone program contract dollars ($65.3 million of $1.90 billion) in FY2017. In addition, in any full and open competition for a federal contract \"the price offered by a qualified HUBZone business shall be deemed as being lower than the price of another offeror if the HUBZone business price offer is not more than 10% higher than the other offer.\" Price-evaluation preferences accounted for about 18.2% of HUBZone program contract dollars ($346.9 million of $1.90 billion) in FY2017. In FY2017, the federal government awarded 81,082 contracts valued at $7.53 billion to HUBZone-certified businesses. About $1.90 billion of that amount was awarded with a HUBZone preference ($1.49 billion through a HUBZone set-aside, $65.3 million through a HUBZone sole-source award, and $346.9 million through a HUBZone price-evaluation preference). About $1.53 billion of that amount was awarded to HUBZone-certified businesses in open competition with other firms. The remaining $4.10 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses). The program's administrative cost is about $9.8 million annually. It received an appropriation of $3 million for FY2019, with the additional cost of administering the program provided by the SBA's appropriation for salaries and general administrative expenses. Congressional interest in the HUBZone program has increased in recent years, primarily due to U.S. Government Accountability Office (GAO) reports of fraud in the program and efforts by small businesses to ease HUBZone eligibility requirements. This report examines arguments presented both for and against targeting assistance to geographic areas with specified characteristics as opposed to providing assistance to people or businesses with specified characteristics; assesses arguments presented both for and against the creation and continuation of the HUBZone program, starting with the arguments presented during consideration of P.L. 105-135 , which authorized the program; discusses the HUBZone program's structure and operation, focusing on the definitions of HUBZone areas and HUBZone small businesses and the program's performance relative to federal contracting goals; and provides an analysis of the SBA's administration of the HUBZone program and the SBA's performance measures. This report also examines HUBZone-related legislation, including P.L. 114-92 , the National Defense Authorization Act for Fiscal Year 2016, which expanded the definition of a Base Realignment and Closure Act (BRAC) military base closure area to make it easier for businesses located in those areas to meet the HUBZone program's requirement that at least 35% of its employees reside in a HUBZone area. It also extended BRAC base closure area HUBZone eligibility from five years to not less than eight years, provided HUBZone eligibility to qualified disaster areas, and added Native Hawaiian Organizations to the list of HUBZone eligible small business concerns. P.L. 115-91 , the National Defense Authorization Act for Fiscal Year 2018, which included provisions from several bills introduced during the 115 th Congress, including S. 929 , the Invest in Rural Small Business Act of 2017, and H.R. 3294 , the HUBZone Unification and Business Stability Act of 2017. Specifically, the act, among other provisions, allows small businesses that have HUBZone status on or before December 31, 2019, to retain that status from January 1, 2020, until the SBA prepares an updated online tool depicting HUBZone qualified areas (anticipated by the SBA to take place in December 2021). Once the new online tool (currently called the HUBZone map) is operational, the SBA must update it every five years for qualified census tracts and nonmetropolitan counties and when a change in status takes place for other HUBZone types (e.g., when an area becomes, or ceases to be, a redesignated area). The act also allows governors, starting on January 1, 2020, to petition the SBA each year to designate areas located in nonurban areas, with a population of 50,000 or fewer, and an average unemployment rate at least 120% of the national or state average, whichever is lower, as HUBZones; requires the SBA to process HUBZone certification applications with sufficient and complete documentation within 60 days of receipt; ensures that HUBZone-eligible BRAC areas receive HUBZone eligibility for a full eight years, beginning on the date they are designated a BRAC; and requires the SBA, not later than one year after enactment, to publish performance metrics measuring the HUBZone program's success in promoting economic development in economically distressed areas. In addition, P.L. 114-187 , the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), includes a provision exempting Puerto Rico from the 20% population cap on qualified census tracts (QCTs) located in metropolitan statistical areas (MSAs) for 10 years, or until the date on which the Financial Oversight and Management Board for Puerto Rico, created by PROMESA, ceases to exist, whichever comes first. The act also requires the SBA to implement a risk-based approach to requesting and verifying information from firms applying to be designated or recertified as a qualified HUBZone small business. Several bills are also discussed that would increase the federal government's small business contracting goals. For example, during the 113 th Congress, S. 259 , the Assuring Contracting Equity Act of 2013, would have increased the federal government's 23% contracting goal for small businesses generally to 25%, the 5% contracting goals for small disadvantaged businesses and women-owned small businesses to 10%, and the 3% contracting goals for HUBZone-certified small businesses and service-disabled veteran-owned small businesses to 6%. The bill's provisions were reintroduced in both the House and Senate during the 114 th Congress ( H.R. 3175 and S. 1859 ) and the 115 th Congress ( H.R. 2362 and S. 1061 ). Also, H.R. 273 , the Minority Small Business Enhancement Act of 2015, would have increased the federal government's 23% contracting goal for small businesses generally to 25% and the 5% contracting goals for small disadvantaged businesses and women-owned small businesses to 10%. The HUBZone program was authorized by P.L. 105-135 . Senator Christopher S. \"Kit\" Bond, the legislation's sponsor, described it as a \"jobs bill and a welfare-to-work bill\" designed to \"create realistic opportunities for moving people off of welfare and into meaningful jobs\" in \"inner cities and rural counties that have low household incomes, high unemployment, and whose communities have suffered from a lack of investment.\" Its enactment was part of a broader debate that had been under way since the late 1970s concerning whether the federal government should target assistance to geographic areas with specified characteristics as opposed to providing assistance to people or businesses with specified characteristics. The idea that targeting government assistance to geographic areas with specified characteristics, as opposed to targeting government assistance to people or businesses with specified characteristics, would result in more effective outcomes had its origins in a British experiment in urban revitalization started during the late 1970s. In 1978, Sir Geoffrey Howe, a Conservative Member of Parliament, argued for the establishment of market-based enterprise zones that would provide government regulatory and tax relief in economically distressed areas as a means to encourage entrepreneurs \"to pursue profit with minimum governmental restrictions.\" With the support of Prime Minister Margaret Thatcher's Conservative government (1979-1990), by the mid-1980s, more than two dozen enterprise zones were operating in England. Evaluations of the British enterprise zones' potential for having a positive effect on the long-term economic growth of economically distressed areas suggested that providing tax incentives and implementing regulatory relief in those areas were \"useful but not decisive economic development tools for distressed communities.\" In the United States, the idea of targeting regulatory and tax relief to economically distressed places appealed to some liberals who had become frustrated by the lack of progress some economically distressed communities had experienced under conventional government assistance programs, such as federal grant-in-aid programs. They tended to view the idea as a supplement to existing government assistance programs. Some conservatives also supported the idea of providing additional regulatory and tax relief to geographic areas because it generally aligned with their views on reducing government regulation and taxes. They tended to view this approach as a replacement, as opposed to a supplement, for existing government assistance programs. As a result, support for targeting federal assistance to economically distressed places came from a diverse group of individuals and organizations that were often on opposing sides in other issue areas. Some of its leading proponents were the Congressional Black Caucus; the National Urban League; the National League of Cities; the National Association for the Advancement of Colored People; President Ronald Reagan; Republican Representative Jack Kemp, who introduced the first enterprise zone bill in Congress in May 1980 ( H.R. 7240 , the Urban Jobs and Enterprise Zone Act of 1980); and Democratic Representative Robert Garcia, who cosponsored with Representative Kemp H.R. 3824 , the Urban Jobs and Enterprise Zone Act of 1981. Opponents noted that targeting government assistance, in this case regulatory and tax relief, to economically distressed places would \"provide incentives in designated areas, regardless of the nature of the industry which would benefit from the incentives.\" They argued that it would be more efficient and cost effective to target federal assistance to businesses that offer primarily high-wage, full-time jobs with benefits and have relatively high multiplier effects on job creation than to offer the same benefits to all businesses, including those that offer primarily low-wage, part-time jobs with few or no benefits and have relatively low multiplier effects on job creation. Others opposed the idea because they viewed it as a partisan extension of supply-side economics. Still others, including the National Federation of Independent Businesses, an organization representing the interests of the nation's small businesses, were not convinced that providing \"marginal rate reductions or marginal reductions in taxes\" would \"stimulate the entry of new businesses into depressed areas.\" Further, some economists argued that it would be more efficient to let the private market determine where businesses locate rather than to have the government enact policies that encourage businesses to locate, or relocate, in areas they would otherwise avoid. In this view, \"the locational diversion of economic activity reduces or may outweigh gains from the creation of economic activity.\" These disagreements may have had a role in delaying the enactment of the first fully functional federal enterprise zone program until 1993 ( P.L. 103-66 , the Omnibus Budget Reconciliation Act of 1993). In the meantime, 37 states and the District of Columbia had initiated their own enterprise zone programs. Evaluations of their effect on job creation and the economic status of the targeted distressed areas \"provided conflicting conclusions, with some finding little or no program-related impacts, and others finding gains in the zones associated with the enterprise zone incentives.\" Evaluations of federal enterprise zones would later report similarly mixed findings. The federal enterprise zone program's enactment in 1993 established a precedent for the enactment of other programs, such as the HUBZone program, that target federal assistance, in this case government contracts, to places with specified characteristics. For example, the Senate Committee on Small Business's report accompanying the HUBZone program's authorizing legislation in 1997 presented many of the same arguments for adopting the HUBZone program that had been put forth for adopting the federal enterprise zone program: Creating new jobs in economically distressed areas has been the greatest challenge for many of our nation's governors, mayors, and community leaders. The trend is for business to locate in areas where there are customers and a skilled workforce. Asking a business to locate in a distressed area often seems counter to its potential to be successful. But without businesses in these communities, we don't create jobs, and without sources of new jobs, we are unlikely to have a successful revitalization effort. The HUBZone program attempts to utilize a valuable government resource, a government contract, and make it available to small businesses who agree in return to locate in an economically distressed area and employ people from these areas…. Contracts to small businesses in HUBZones can translate into thousands of job opportunities for persons who are unemployed or underemployed. HUBZone opponents expressed many of the same arguments that were raised in opposition to federal enterprise zones. For example, some Members opposed contract set-asides because they \"unfairly discriminate against more efficient producers\" and argued that \"lower taxes, fewer mandates and freer markets are what stimulate the growth of small business.\" Others contended that the experiences under enterprise zones suggested that HUBZones would have, at best, a limited impact on the targeted area's economic prospects: the record of enterprise zones demonstrates that businesses that locate in an area because of tax breaks or other artificial inducements (such as HUBZone contract preferences), instead of genuine competitive advantages, generally prove not to be sustainable…. Thus, the incentives generally go to businesses that would have located in and hired from the target area anyway…. Therefore, we should be realistic about the impact the HUBZone legislation will have on business relocation decisions. HUBZone critics also argued that the program would compete with, and potentially diminish the effectiveness of, the SBA's Minority Small Business and Capital Ownership Development 8(a) program. The 8(a) program provides participating small businesses with training, technical assistance, and contracting opportunities in the form of set-asides and sole-source awards. Eligibility for the 8(a) program is generally limited to small businesses \"unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States\" that demonstrate \"potential for success.\" Small businesses owned by Indian tribes, Alaska native corporations, native Hawaiian organizations, and community development corporations are also eligible for the 8(a) program under somewhat different terms. In FY2017, about 5,100 firms participated in the 8(a) program and the federal government provided more than $22.3 billion in contracts to 8(a) firms. Others argued that the HUBZone self-certification process \"while laudable in its effort to reduce certification costs and delays, invites inadvertent or deliberate abuses.\" As will be discussed in greater detail, the SBA's administration of the HUBZone program and the program's effectiveness in assisting economically distressed areas has been criticized. For example, GAO has argued that the program is subject to fraud and abuse and has recommended that the SBA \"take additional actions to certify and monitor HUBZone firms as well as to assess the results of the HUBZone program.\" Several Members of Congress have also questioned the program's effectiveness. For example, in 2009, Representative Nydia M. Velázquez argued that When first introduced, the HUBZone program promised to create opportunities for small businesses in low-income communities. It was designed to do this by helping entrepreneurs access the Federal marketplace. In theory, the benefits will be twofold; HUBZones will not only bolster the small business community, but will also breathe new life into struggling neighborhoods. However, the program has been undermined by chronic underfunding, inherent program flaws and sloppy management. Instead of being incubators for growth and development, HUBZones have become breeding grounds for fraud and abuse. Five HUBZone types (or classes) currently exist: qualified census tracts (QCTs), qualified nonmetropolitan counties, qualified Indian reservations/Indian Country, military bases closed under the BRAC, and qualified disaster areas. In addition, QCTs and qualified nonmetropolitan counties that lose their eligibility may temporarily retain their eligibility by becoming redesignated areas. Also, P.L. 115-91 , the National Defense Authorization Act for Fiscal Year 2018, authorizes governors, starting on January 1, 2020, to petition the SBA annually to grant HUBZone eligibility to designated covered areas in their state (or territory) which are located outside of an urbanized area, have a population of 50,000 or fewer, and have an unemployment rate at least 120% of the unemployment rate for the nation or state in which it is located, whichever is less. The term qualified census tract (QCT) has the meaning given that term in Section 42(d)(5)(B)(ii) of the Internal Revenue Code of 1986. That section of the Internal Revenue code refers to QCTs as determined by the Department of Housing and Urban Development (HUD) for its low-income housing tax credit program and has three subparts: (I) In general The term \"qualified census tract\" means any census tract which is designated by the Secretary of Housing and Urban Development and, for the most recent year for which census data are available on household income in such tract, either in which 50 percent or more of the households have an income which is less than 60 percent of the area median gross income for such year or which has a poverty rate of at least 25 percent. If the Secretary of Housing and Urban Development determines that sufficient data for any period are not available to apply this clause on the basis of census tracts, such Secretary shall apply this clause for such period on the basis of enumeration districts. (II) Limit on MSA's designated The portion of a metropolitan statistical area which may be designated for purposes of this subparagraph shall not exceed an area having 20 percent of the population of such metropolitan statistical area. (III) Determination of areas For purposes of this clause, each metropolitan statistical area shall be treated as a separate area and all nonmetropolitan areas in a State shall be treated as 1 area. In MSAs in which more than 20% of the population qualifies, HUD orders the census tracts in that MSA from the highest percentage of eligible households to the lowest. HUD then designates the census tracts with the highest percentage of eligible households as qualified until the 20% population limit is exceeded. If a census tract is excluded because it raises the percentage above 20%, then subsequent census tracts are considered to determine if a census tract with a smaller population could be included without exceeding the 20% limit. As mentioned earlier, P.L. 114-187 , the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) exempts Puerto Rico from the 20% population cap for 10 years, or until the date on which the Financial Oversight and Management Board for Puerto Rico ceases to exist, whichever comes first. The HUBZone map indicates that, as of June 1, 2018, 20.2% of all census tracts (14,980 of 74,002) had QCT status. The SBA's most recent update of QCT eligibility was released in January 2018. The SBA has announced that the next update of QCT status will not take place until December 2021. Those designations will then be updated every five years thereafter, as required by P.L. 115-91 , the National Defense Authorization Act for Fiscal Year 2018. A qualified nonmetropolitan county is any county that is not located in a metropolitan statistical area as defined in Section 143(k)(2)(B) of the Internal Revenue Code of 1986 and in which the median household income is less than 80% of the nonmetropolitan state median household income, based on the most recent data available from the Bureau of the Census of the Department of Commerce; the unemployment rate is not less than 140% of the average unemployment rate for the United States or for the state in which such county is located, whichever is less, based on the most recent data available from the Secretary of Labor; or the county has been designated by the Secretary of HUD as a difficult development area (DDA). As of June 1, 2018, about 18.9% (613) of the nation's 3,242 counties had qualified nonmetropolitan county status (30.6% of the nation's 2,006 nonmetropolitan counties). This count includes 21 counties qualified as eligible solely due to their status as a DDA. The SBA's most recent update of nonmetropolitan county eligibility was released in January 2018. The SBA has announced that the next update of nonmetropolitan county eligibility will not take place until December 2021. Those designations will then be updated every five years thereafter, as required by P.L. 115-91 . As will be discussed, Congress created redesignated areas to delay the loss of HUBZone status for census tracts and nonmetropolitan counties that lose HUBZone eligibility. P.L. 105-135 , the HUBZone Act of 1997, provided HUBZone eligibility to \"lands within the external boundaries of an Indian reservation.\" Since then, the term Indian reservation has been clarified and expanded to include Indian trust lands and other lands covered under the term Indian Country as used by the Bureau of Indian Affairs, portions of the state of Oklahoma designated as former Indian reservations by the Internal Revenue Service (Oklahoma tribal statistical areas), and Alaska native village statistical areas. As of June 1, 2018, there were 619 HUBZone-qualified Indian lands. A private firm's analysis of Indian reservations' economic characteristics conducted on behalf of the SBA indicated that for the most part—and particularly in states where reservations are numerous and extensive—mean income of reservations is far below state levels, and unemployment rates and poverty rates are far above state levels. There are some interesting exceptions, however, where reservations are basically on a par with the states they are in. Examples include Osage reservation in Oklahoma and reservations in Connecticut, Rhode Island, and Michigan. The factors at work here may be casinos and oil. In accordance with P.L. 115-91 , all HUBZone-qualified Indian lands designated on or before December 31, 2019, retain that status from January 1, 2020, until the SBA prepares an updated online tool depicting HUBZone qualified areas (anticipated by the SBA to take place in December 2021). The act does not address when the SBA is required to update its new online tool to reflect changes in the status of HUBZone-qualified Indian lands. Presumably, the online tool would be updated immediately to reflect any change in that status. P.L. 108-447 , the Consolidated Appropriations Act, 2005, provided HUBZone eligibility for five years to \"lands within the external boundaries of a military installation closed through a privatization process\" under the authority of P.L. 101-510 , the Defense Base Closure and Realignment Act of 1990 (BRAC—Title XXIX of the National Defense Authorization Act for Fiscal Year 1991); title II of P.L. 100-526 , the Defense Authorization Amendments and Base Closure and Realignment Act; and any other provision of law authorizing military base closures or redevelopment. The military base's HUBZone eligibility commences on the effective date of the initial law (December 8, 2004) if the military base was already closed at that time or on the date of formal closure if the military base was still operational at that time. During the 113 th and 114 th Congresses, several bills were introduced to make it easier for businesses located in a BRAC military base closure area to meet the HUBZone requirement of having at least 35% of their employees reside within a HUBZone. As mentioned earlier, P.L. 114-92 contains such a provision. The act expands BRAC HUBZone eligibility to census tracts and nonmetropolitan counties that (1) contain a BRAC base closure area, (2) intersect with a BRAC base closure area, (3) are contiguous with a BRAC base closure area, or (4) are contiguous to any census tract or nonmetropolitan county described in (1) through (3). The act also extended HUBZone eligibility for BRAC base closure areas from five years to at least eight years. As of June 1, 2018, there were 125 HUBZone-qualified base closure areas. In accordance with P.L. 115-91 , all HUBZone-qualified base closure areas designated on or before December 31, 2019, retain that status from January 1, 2020, until the SBA prepares an updated online tool depicting HUBZone qualified areas (anticipated by the SBA to take place in December 2021). The act also requires the SBA to update its new online tool immediately after an area is designated as a HUBZone-qualified base closure area to reflect its change in status. P.L. 114-92 provided HUBZone eligibility for qualified disaster areas, defined as \"any census tract or nonmetropolitan county for which the President has declared a major disaster under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170) or located in an area in which a catastrophic incident has occurred (on or after the date of enactment) if such census tract or nonmetropolitan county ceased to be qualified [as a HUBZone] ... during the period beginning 5 years before the date on which the President declared the major disaster or the catastrophic incident occurred and ending 2 years after such date.\" However, the following exceptions apply: (1) in the case of a major presidentially-declared disaster, such census tract or nonmetropolitan county may be designated a qualified disaster area only during the 5-year period beginning on the date on which the President declared the major disaster for the area in which the census tract or nonmetropolitan county is located; and (2) in the case of a catastrophic incident, such census tract or nonmetropolitan county may be designated a qualified disaster area only during the 10-year period beginning on the date on which the catastrophic incident occurred in the area in which the census tract or nonmetropolitan area is located. As of June 1, 2018, there were eight designated qualified disaster areas. In accordance with P.L. 115-91 , all qualified disaster areas designated on or before December 31, 2019, retain that status from January 1, 2020, until the SBA prepares an updated online tool depicting HUBZone qualified areas (anticipated by the SBA to take place in December 2021). The act also requires the SBA to update its new online tool immediately after an area is designated as a qualified disaster area to reflect its change in status. One of the implicit goals of the HUBZone program is to improve the economic standing of the geographic areas receiving assistance so they are no longer economically distressed areas. As a result, it could be argued that it is a program success when a QCT or a qualified nonmetropolitan county loses its HUBZone status when new economic data are published. However, because small businesses \"that locate to a HUBZone may lose their eligibility in only one year due to changes in such data\" and concerned that some HUBZone areas could \"shift in and out of eligibility year after year,\" Congress included a provision in P.L. 106-554 , the HUBZones in Native America Act of 2000 (Title VI, the Consolidated Appropriations Act, 2001), to address this issue. The provision provided census tracts and nonmetropolitan counties that lose HUBZone eligibility an automatic extension \"for the 3-year period following the date on which the census tract or nonmetropolitan county ceased to be so qualified.\" The act labeled these census tracts and nonmetropolitan counties as redesignated areas . As of June 1, 2018, there were 221 redesignated nonmetropolitan counties and 5,174 redesignated census tracts. In accordance with P.L. 115-91 , all redesignated areas on or before December 31, 2019, retain that status from January 1, 2020, until the SBA prepares an updated online tool depicting HUBZone qualified areas (anticipated by the SBA to take place in December 2021). The act also requires the SBA to update its new online tool immediately after an area becomes, or ceases to be, a redesignated area to reflect its change in status. Overall, as of June 1, 2018, 834 of the nation's 3,242 counties (about 25.7%) had HUBZone status, either as a qualified nonmetropolitan county, a DDA, or a redesignated nonmetropolitan county and 20,154 of the nation's 74,002 census tracts (about 27.2%) had HUBZone status, either as a QCT or as a redesignated QCT. During the 114 th Congress H.R. 5250 , the Growing and Reviving Rural Economies Through Transitioning HUBZone Redesignation Act of 2016, and S. 2838 , the Small Business Transforming America's Regions Act of 2016, would have extended the eligibility of redesignated HUBZones to seven years from three years. During the 115 th Congress, H.R. 2013 , the Growing and Reviving Rural Economies Through Transitioning HUBZone Redesignation Act of 2017, and S. 690 , the HUBZone Investment Protection Act, would extend the eligibility of redesignated HUBZones to seven years from three years. The Senate Committee on Small Business and Entrepreneurship reported S. 690 favorably, without amendment, on August 2, 2017. In addition, H.R. 2592 , the Expanding the Impact of the HUBZone Program Act of 2017, would extend HUBZone eligibility to not more than 10 years and H.R. 3294 , the HUBZone Unification and Business Stability Act of 2017, would provide HUBZone eligibility for at least five years beginning on January 1, 2020. Firms must be certified by the SBA to participate in the HUBZone program. Table 1 indicates the number of HUBZone-certified small businesses listed in the SBA's Dynamic Small Business Search database for selected dates from 2010 to 2018. The SBA's database contains information provided by small businesses interested in obtaining federal contracts when they registered in the federal System for Award Management (SAM). The data indicate that the number of HUBZone firms increased from May 2010 to May 2011 and then generally declined until mid-2015, with much of the reduction due to the previously mentioned expiration of grandfathered redesignated areas on October 1, 2011. Since then, the number of HUBZone firms has increased somewhat. As of April 3, 2019, the SBA's Dynamic Small Business Search database included 6,769 firms with active HUBZone certifications. To become certified, firms complete and submit specified SBA HUBZone application forms to the SBA, either online or by mail. Firms must meet SBA size standards for the firm's primary industry classification; be at least 51% owned and controlled by U.S. citizens, a community development corporation, an agricultural cooperative, or an Indian tribe (including Alaska native corporations); maintain a principal office located in a HUBZone; ensure that at least 35% of its employees reside in a HUBZone; represent, as provided in the application, that it will \"attempt to maintain\" having at least 35% of its employees reside in a HUBZone during the performance of any HUBZone contract it receives; represent, as provided in the application, that it will ensure that it will comply with certain contract performance requirements in connection with contracts awarded to it as a qualified HUBZone small business concern (such as spending at least 50% of the cost of the contract incurred for personnel on its own employees or employees of other qualified HUBZone small business concerns and meeting specified subcontracting limitations to nonqualified HUBZone small business concerns); provide an active, up-to-date Dun and Bradstreet profile and Data Universal Numbering System (DUNS) number that represents the business; and provide an active Central Contractor Registration profile for the business. Prior to 2010, the SBA's goal was to make its determination within 30 calendar days after receipt of a complete application package, subject to the need for additional information or clarification of information contained in the application. In response to reports of applicant fraud, in FY2009 the SBA began a two-year effort to reengineer its applicant review process (requiring applicants to submit documentation such as lease or rental agreements, three years of tax returns, citizenship documentation, and payroll records to prove they meet program requirements). Initially, depending on the complexity of the application and the need for additional information, the SBA took from 5 months to 12 months to make its determination. The SBA has since decreased the average time to process HUBZone applications, with about 61% of applications processed in three months or less. P.L. 115-91 requires the SBA, effective January 1, 2020, to process HUBZone certification applications with sufficient and complete documentation within 60 days of receipt. If the SBA approves an application, it sends a written notice to the business and adds the business to its list of certified HUBZone businesses. A decision to deny eligibility must be in writing and state the specific reasons for denial. In the past, the SBA's staff conducted random program examinations \"to verify the accuracy of any certification made or information provided as part of the HUBZone application process, or in connection with a HUBZone contract.\" Examiners typically verified that the business met the program's eligibility requirements and that it met such requirements at the time of its application for certification, its most recent recertification, or its certification in connection with a HUBZone contract. In response to reports of fraud, the SBA, in addition to reengineering its applicant review process, now conducts program examinations of all firms that received a HUBZone contract in the previous fiscal year. SBA district field offices also conduct site visits to validate the geographic requirement for principal offices. In FY2018, SBA district field offices completed 529 on-site compliance reviews of HUBZone-certified firms, about 10% of the HUBZone-certified firms in the SBA's portfolio. Certified HUBZone small business concerns must recertify every three years to the SBA that they meet the requirements for being a HUBZone business. They must also immediately notify the SBA of any material change that could affect their eligibility, such as a change in the ownership, business structure, or principal office of the concern or a failure to meet the 35% HUBZone residency requirement. Since 1978, federal agency heads have been required to establish federal procurement contracting goals, in consultation with the SBA, \"that realistically reflect the potential of small business concerns and small businesses concerns owned and controlled by socially and economically disadvantaged individuals\" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting the goals to the SBA. In 1988, Congress authorized the President to annually establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. Congress required the government-wide minimum participation goal for small businesses to be \"not less than 20% of the total value of all prime contract awards for each fiscal year\" and \"not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year\" for small businesses owned and controlled by socially and economically disadvantaged individuals. Each federal agency was also directed to \"have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency.\" The SBA was also required to report to the President annually on the attainment of the goals and to include the information in an annual report to Congress. The SBA negotiates the goals with each federal agency and establishes a small business eligible baseline for evaluating the agency's performance. The agency head is required to \"make consistent efforts to annually expand participation by small business concerns from each industry category.\" If the SBA and the agency cannot agree on the goals, the agency may submit the case to the Office of Management and Budget (OMB) Office of Federal Procurement Policy (OFPP) for resolution. The small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., nonappropriated funds), contracts not covered by Federal Acquisition Regulations, acquisitions on behalf of foreign governments, and contracts not reported in the Federal Procurement Data System (such as contracts or government procurement card purchases valued less than $10,000). These exclusions typically account for 18% to 20% of all federal prime contracts each year. The SBA then evaluates the agencies' performance against their negotiated goals annually, using data from the Federal Procurement Data System—Next Generation, managed by the U.S. General Services Administration, to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually. Each agency that fails to achieve any proposed prime or subcontract goal is required to submit a justification to the SBA on why they failed to achieve a proposed or negotiated goal with a proposed plan of corrective action. Agencies can take credit in every category that is applicable to the recipient of the contract. For example, \"when counting goaling achievements, a contract awarded to a service-disabled Veteran-Owned Woman-Owned Small Business would be counted toward the Small Business (SB) goal, the Service-Disabled Veteran-Owned Small Business (SDVOSB) goal and the Women-Owned Small Business (WOSB) goal. However, these category counts are not summed to triple the total count. The Sum of Parts Does Not Equal the Whole (italics in original).\" Over the years, federal government-wide procurement contracting goals have been established for small businesses generally ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, and P.L. 105-135 , the HUBZone Act of 1997—Title VI of the Small Business Reauthorization Act of 1997), small businesses owned and controlled by socially and economically disadvantaged individuals ( P.L. 100-656 ), women ( P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994), small businesses located within a HUBZone ( P.L. 105-135 ), and small businesses owned and controlled by a service-disabled veteran ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999). The current federal small business contracting goals are at least 23% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses, 3% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses, and 3% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses. There are no punitive consequences for not meeting these goals. However, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings. As shown in Table 2 , the FY201 7 Small Business Goaling Report , using data in the Federal Procurement Data System, indicates that federal agencies met the federal contracting goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017. Federal agencies awarded 23.88% of the value of their small business eligible contracts ($442.5 billion) to small businesses ($105.7 billion), 9.10% to small disadvantaged businesses ($40.2 billion), 4.71% to women-owned small businesses ($20.8 billion), 1.65% to HUBZone small businesses ($7.3 billion), and 4.05% to service-disabled veteran-owned small businesses ($17.9 billion). The percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017 is also provided in the table for comparative purposes. Congressional interest in the HUBZone program has increased in recent years, primarily due to GAO reports of fraud in the program and efforts by small businesses to ease HUBZone eligibility requirements. GAO and the SBA's Office of Inspector General (OIG) have audited the SBA's administration of the HUBZone program on many occasions over the years and have made a number of recommendations to improve the SBA's internal control and oversight practices in an effort to deter fraud in the program. In most instances, the SBA has endeavored to implement these recommendations, but both GAO and the OIG have argued that despite these efforts administrative challenges remain. In 2006, the OIG reported that there was a two-year backlog in HUBZone program examinations. It noted that it was concerned \"that workload resources had not been adequately devoted to eliminating this two-year backlog\" and that firms that should be decertified from the program remained on the list of certified HUBZone businesses and potentially were \"inappropriately receiving HUBZone contracts between the time they are initially certified and subsequently examined/recertified.\" In 2008, GAO reported that the map used by the SBA to publicize qualified HUBZone areas was inaccurate, resulting in ineligible small businesses participating in the program and excluding eligible businesses; the mechanisms used by the SBA to certify and monitor HUBZone firms provided limited assurance that only eligible firms participated in the program; the SBA had not complied with its own policy of recertifying HUBZone firms every three years (about 40% of those firms had not been recertified); and the SBA lacked formal guidance that would specify a time frame for processing HUBZone firm decertifications (1,400 of 3,600 firms proposed for decertification had not been processed within the SBA's self-imposed goal of 60 days). In 2008, GAO released another report that \"identified substantial vulnerabilities in SBA's application and monitoring process, clearly demonstrating that the HUBZone program is vulnerable to fraud and abuse.\" Using fictitious employee information and fabricated documentation, GAO obtained HUBZone certification for four bogus firms. In one of its applications, GAO claimed that its principal office was the same address as a coffee store that happened to be located in a HUBZone. GAO argued that if the SBA \"had performed a simple Internet search on the address, it would have been alerted to this fact.\" Two of GAO's applications used leased mailboxes from retail postal services centers. GAO argued that \"a post office box clearly does not meet SBA's principal office requirement.\" In addition, it identified \"10 firms from the Washington, D.C. metro area that were participating in the HUBZone program even though they clearly did not meet eligibility requirements.\" GAO subsequently selected four geographical areas for analysis to determine whether cases of fraud and abuse exist for HUBZone businesses located outside of the Washington, DC, metropolitan area: Dallas, TX; Huntsville, AL; San Antonio, TX; and San Diego, CA. GAO reported in March 2009 that it found \"fraud and abuse\" in all four metropolitan areas, including 19 firms that \"clearly are not eligible,\" and highlighted 10 firms that it \"found to be egregiously out of compliance with HUBZone program requirements.\" In 2010, GAO submitted applications for HUBZone certification for \"four new bogus firms … using false information and fabricated documents ... fictitious employee information and bogus principal office addresses\" including \"the addresses of the Alamo in Texas, a public storage facility in Florida, and a city hall in Texas as principal office locations.\" The SBA certified three of the four bogus firms and lost GAO's documentation for its fourth application \"on multiple occasions,\" forcing GAO to abandon that application. GAO reported that \"the SBA continues to struggle with reducing fraud risks in its HUBZone certification process despite reportedly taking steps to bolster its controls.\" The SBA responded to these audits and congressional criticism of its administration of the HUBZone program by \"reengineering business processes to reduce fraud and abuse within the program.\" In 2006, the SBA committed to reviewing 5% of all certifications \"through a full-scale program of examinations.\" In 2009, it \"moved from verifying a sample of HUBZone firms to verifications of 100% of HUBZone firms receiving contracts in the previous fiscal year.\" In 2010, the SBA reported that its standard HUBZone business process now requires all firms to submit supporting documentation verifying the information and statements made in their application. Previous practice required firms only to submit an electronic application. In addition, the Program Office implemented a new business process for recertifying HUBZone firms which requires all firms that are due for recertification to certify via wet signature that they still conform to the eligibility requirements. Previous practice required firms to submit an electronic verification. On April 21, 2010, Karen Mills, the SBA's Administrator at that time, testified before the House Committee on Small Business that the SBA is \"working to ensure that only legitimate and eligible firms are benefiting from HUBZone\" and has \"made dramatic increases in the number of site visits to HUBZone firms.\" The SBA conducted 680 HUBZone site visits in FY2008, 911 in FY2009, 1,070 in FY2010, 988 in FY2011, 788 in FY2012, 511 in FY2013, 569 in FY2014, 518 in FY2015, 515 in FY2016, 505 in FY2017, and 529 in FY2018. The SBA's new, more labor-intensive certification process, coupled with an increase in applications for HUBZone certifications, resulted in what the SBA described as \"significant delays in the processing of new applications for certification.\" Noting that individual applications \"can vary greatly depending on the complexity of the case and the applicant's responsiveness to any requests for supporting information,\" the SBA reported in 2010 that the final HUBZone determination time frames \"vary from 5 months to 12 months, with an average of 8 to 10 months.\" The SBA has since decreased the average time to process HUBZone applications, with about 61% of applications processed in three months or less. As mentioned previously, P.L. 115-91 requires the SBA, effective January 1, 2020, to process HUBZone certification applications with sufficient and complete documentation within 60 days of receipt. On November 19, 2013, the OIG released the results of an audit of 12 of the 357 firms that received HUBZone certification between July 2012 and December 2012. The 12 firms accounted for 94% of the federal contract dollars awarded to those 357 firms during that time period. The OIG found that 3 of the 12 firms \"received certification without meeting the requirements of the program.\" Specifically, the OIG found \"one firm [that] did not meet the principal office requirement, one firm [that] did not meet the 35% residency requirement, and one instance where a possibly fraudulent application was missed.\" The OIG also noted that the HUBZone program's standard operating procedures (SOP) manual was last updated in November 2007, when firms self-certified their HUBZone eligibility, and does not account for the SBA's new certification process; the SBA did not make its eligibility determination within 30 calendar days of the receipt of a complete application for all 12 of the nonfraudulent applications reviewed as required under the SBA's existing regulations; and the SBA did not make its eligibility determination within its proposed 90 calendars days of the receipt of a complete application, a change to the existing regulations that the SBA is seeking due to the shift from self-certification to full document review, for 5 of the 12 firms. The SBA responded to the OIG's audit on November 12, 2013, indicating that it planned to update and publish a new HUBZone program SOP by the end of 2014, issue decertification notices for the three firms cited in the OIG's audit, and amend the certification process \"so that actions are completed within an average of 90 days from the date the application is electronically verified.\" The new HUBZone SOP has not been published. The delay may be related to the SBA's ongoing review of the program's regulations. The SBA has announced that \"several of the regulations governing the program should be amended in order to resolve certain issues that have arisen\" and is working on a proposed rule that \"would constitute a comprehensive revision of part 126 of SBA's regulations to clarify current HUBZone Program regulations and implement various new procedures.\" On March 28, 2019, the OIG released the results of an audit of 15 of 39 firms that received HUBZone certification and a HUBZone contract between April 1, 2017, and March 31, 2018. The 15 firms obtained approximately $29.4 million in HUBZone contract dollars during that time period. Of these selected firms, five received more than $1 million in HUBZone contracts, five received HUBZone contacts amounting to $100,000 to $999,999, and five received HUBZone contacts amounting to less than $100,000. The OIG found that the SBA \"did not detect indicators of fraud and certified 2 of the 15 firms … that did not meet principal office location requirements\" and \"certified a third firm … based on incomplete analysis of supporting documentation\" related to the 35% residency requirement. The OIG questioned $598,000 in contract obligations for these firms and concluded that \"these deficiencies occurred because the Program Office did not have a standardized review process of the analysis of oversight of HUBZone certifications\" and \"did not update its written policies despite a prior OIG audit recommendation to update its HUBZone guidance.\" The OIG also found that the SBA did not make its eligibility determinations for 4 of the 15 firms with the 90-day regulatory requirement and \"did not timely assign applications to analysts for certified and pending firms.\" The OIG concluded that these delays were due to \"a lack of formalized guidance, IT issues, and staff turnover.\" The OIG issued five recommendations for the SBA's consideration, including reexamine the three cited firm's eligibility, update and implement HUBZone written guidance, and implement a plan to mitigate information technology issues affecting the HUBZone certification process. The SBA responded to a draft of the OIG's audit on March 14, 2019, indicating that it agreed with all five recommendations and had already reexamined the eligibility of one of the three firms cited in the audit. During the 112 th Congress, S. 633 , the Small Business Contracting Fraud Prevention Act of 2011, which was introduced on March 17, 2011, and agreed to by the Senate, with amendment, by unanimous consent on September 21, 2011, would have required the SBA to implement GAO's recommendations to maintain a correct, accurate, and updated map to identify HUBZone areas; implement policies that ensure only eligible firms participate in the program; employ appropriate technology to control costs and maximize efficiency; notify the Small Business Committees of any backlogs in applications or recertifications with plans and timetables for eliminating the backlog; ensure small businesses meet the 35% HUBZone residency requirement at the time of bid as well as at the time of the contract award; and extend the redesignated status of HUBZone areas that lose that status due to the release of economic data from the 2010 decennial census for three years after the first date on which the SBA publishes a HUBZone map that is based on the results from that census. In addition, S. 3572 , the Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012, was introduced on September 19, 2012, and referred to the Senate Committee on Finance. It included, among other provisions, the HUBZone provisions contained in S. 633 . The SBA did not formally respond to the legislation. It has argued at congressional hearings and in its congressional budget justification documents that it has taken steps to implement GAO's recommendations. During the 114 th Congress, P.L. 114-187 , the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), includes a provision requiring the SBA to implement, within 270 days following PROMESA's enactment (which took place on June 30, 2016), a risk-based approach to requesting and verifying information from firms applying to be designated or recertified as a qualified HUBZone small business. GAO is required to begin an assessment of the SBA's risk-based approach within a year of the approach's implementation and complete the assessment, along with any recommendations for improvement, within the following six months. During the 115 th Congress, P.L. 115-91 , the National Defense Authorization Act for Fiscal Year 2018, among other provisions, requires the SBA, starting on January 1, 2020, to \"conduct program examinations of qualified HUBZone small business concerns, using a risk-based analysis to select which concerns are examined, to ensure that any concern examined meets the [program's] requirements.\" The act also specifies that any small business that misrepresented its status as a qualified HUBZone small business concern shall be subject to liability for fraud. As part of its 2008 audit of the HUBZone program, GAO reported that the SBA had taken \"limited steps\" to assess the effectiveness of the HUBZone program. It noted that the SBA's performance measures—the number of applications approved and recertifications processed, the annual value of federal contracts awarded to HUBZone firms, and the number of program examinations completed—provide data on program activity but \"do not directly measure the program's effect on firms (such as growth in employment or changes in capital investment) or directly measure the program's effect on the communities in which the firms are located (for instance, changes in median household income or poverty levels).\" GAO recommended that the SBA \"further develop measures and implement plans to assess the effectiveness of the HUBZone program that take into account factors such as the economic characteristics of the HUBZone area.\" The SBA responded to GAO's findings by announcing that it \"would develop an assessment tool to measure the economic benefits that accrue to areas in the HUBZone program\" and that it \"would then issue periodic reports accompanied by the underlying data.\" On March 25, 2009, GAO reported that, as of that date, the SBA had not developed measures or implemented plans to assess the program's effectiveness. GAO noted that the SBA did commission an independent review of the HUBZone program's economic impact. That study was released in May 2008. It concluded that the HUBZone program has not generated enough HUBZone contract dollars to have an impact on a national scale. When spread over an eight-year period across 2,450 metropolitan areas and counties with qualified census tracts, qualified counties, and Indian reservations, $6 billion has a limited impact…. About two-thirds of HUBZone areas have HUBZone businesses; just under one-third have HUBZone vendors that have won HUBZone contracts; and about 4 percent of HUBZone areas have received annual-equivalent HUBZone contract revenues greater than $100 per capita, based on HUBZone population…. The program has a substantial impact in only a very small percentage of HUBZones. Where the impact is largest, there generally is at least one very successful vender in the HUBZone. Thus, the program can be effective. At present, however, the impact in two-thirds of all HUBZones is nil. GAO also noted that the SBA had issued a notice in the Federal Register on August 11, 2008, seeking public comment on a proposed methodology for measuring the economic impact of the HUBZone program. The notice presented a two-step economic model that the SBA had developed to estimate the impact on HUBZone areas directly attributable to the HUBZone program, the SBA's non-HUBZone programs, and other related federal procurement programs. The notice indicated that economic impact \"will be measured by the estimated growth in median household income and employment (or a reduction in unemployment) in a specific HUBZone area.\" GAO criticized the SBA for relying on public comments to refine the proposed methodology \"rather than conducting a comprehensive effort\" that considered relevant literature and input from experts in economics and performance measurement. GAO concluded that \"based on our review, we do not believe this effort was a sound process for developing measures to assess the effectiveness of the program\" and reported that the SBA had abandoned that proposal and \"had initiated a new effort to address this issue.\" The SBA indicated in its FY2011 budget justification report to Congress that it had developed \"a methodology for measuring the economic impact of the HUBZone program\" to \"provide for the continuous study and monitoring of the program's effectiveness in terms of its economic goals.\" However, it did not provide any details concerning the methodology and has continued to use its previous performance measures—the number of small businesses assisted (applications approved and recertifications processed), the annual value of federal contracts awarded to HUBZone firms, and the number of program examinations completed—to assess the program's performance. During the 112 th Congress, S. 633 would have required the SBA to implement GAO's recommendation to \"develop measures and implement plans to assess the effectiveness of the HUBZone program.\" It also would have required the SBA to identify \"a baseline point in time to allow the assessment of economic development under the HUBZone program, including creating additional jobs\" and take into account \"the economic characteristics of the HUBZone and contracts being counted under multiple socioeconomic subcategories.\" The SBA did not formally respond to the legislation. It has argued at congressional hearings and in its congressional budget justification documents that it is taking steps to implement GAO's recommendation. During the 115 th Congress, P.L. 115-91 requires the SBA, starting on January 1, 2020, to publish performance metrics measuring the HUBZone program's success in meeting the program's objective of promoting economic development in economically distressed areas and to submit, not later than 90 days after the last date of each fiscal year, a report to the House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship \"analyzing the data from the performance metrics.\" Similar provisions were included in H.R. 2592 , the Expanding the Impact of the HUBZone Program Act of 2017, and H.R. 3294 , the HUBZone Unification and Business Stability Act of 2017. As mentioned previously, the federal government has established procurement contracting goals for small businesses generally (at least 23% of the total value of all small business eligible prime contract awards for each fiscal year), small disadvantaged businesses (5% of the total value of all small business eligible prime contract awards and subcontract awards for each fiscal year), women-owned small businesses (5% of the total value of all small business eligible prime contract awards and subcontract awards for each fiscal year), HUBZone small businesses (3% of the total value of all small business eligible prime contract awards and subcontract awards for each fiscal year), and service-disabled veteran-owned small businesses (3% of the total value of all small business eligible prime contract awards and subcontract awards for each fiscal year). A number of bills have been introduced over the past several Congresses to increase the small business procurement contracting goals. Generally speaking, the executive branch, during both Democratic and Republican Administrations, has not advocated increasing these goals. Although no official reason has been provided for not advocating an increase in these goals, it is generally recognized that the sitting Administration is often blamed when small business contracting goals are not achieved. Since 2005, the 5% contracting goal for small disadvantaged businesses has been achieved each fiscal year through FY2016, the 23% contracting goal for small businesses generally was achieved five times (23.41% in FY2005, 23.39% in FY2013, 24.99% in FY2014, 25.75% in FY2015, and 24.3% in FY2016), the 3% contracting goal for service-disabled veteran-owned small businesses was achieved four times (3.38% in FY2013, 3.68% in FY2014, 3.28% in FY2015, and 3.98% in FY2016), and the 5% contracting goal for women-owned small businesses was achieved once (5.05% in FY2015). The federal government did not achieve the 3% contracting goal for HUBZone small businesses in any of these fiscal years. Because the federal government has frequently not been able to meet most of its small business contracting goals, sitting Administrations have generally been reluctant to advocate an increase in these goals. From the executive branch's perspective, increasing the goals could subject the sitting Administration to a greater risk of being labeled as antibusiness or anti-small business even if the executive branch increases its contracting with small businesses from the previous fiscal year. As a result, proposals to increase the small business contracting goals have originated in the legislative, as opposed to the executive, branch. Several bills were introduced during the 112 th Congress to increase the federal government's small business contracting goals, including H.R. 2424 , the Expanding Opportunities for Main Street Act of 2011, and its companion bill in the Senate ( S. 1334 ); H.R. 2921 , the Expanding Opportunities for Small Businesses Act of 2011; H.R. 2949 , the Small Business Opportunity Expansion Act of 2011; H.R. 3850 , the Government Efficiency through Small Business Contracting Act of 2012; H.R. 6078 , the Small Business Contracting Opportunities Expansion Act of 2012; and S. 3213 , the Small Business Goaling Act of 2012. In addition, as passed by the House on May 18, 2012, H.R. 4310 , the National Defense Authorization Act for Fiscal Year 2013, included a provision that would have increased the 23% contracting goal for small businesses generally to 25%. The bill would have also established a 40% goal for small businesses generally of the total value of all subcontract awards for each fiscal year. These provisions were subsequently dropped from the bill. During the 113 th Congress, S. 259 , the Assuring Contracting Equity Act of 2013, would have increased the federal government's 23% contracting goal for small businesses generally to 25%, raised the 5% contracting goals for small disadvantaged businesses and women-owned small businesses to 10%, and increased the 3% contracting goals for HUBZone small businesses and service-disabled veteran-owned small businesses to 6%. The bill's provisions were reintroduced in both the House and Senate during the 114 th Congress ( H.R. 3175 and S. 1859 ) and the 115 th Congress ( H.R. 2362 and S. 1061 ). In addition, H.R. 4093 , the Greater Opportunities for Small Business Act of 2014, which was reported by the House Committee on Small Business on April 9, 2014, would have increased the federal government's 23% contracting goal for small businesses generally to 25% and established a 40% subcontracting goal for small businesses generally. H.R. 4435 , the Howard P. \"Buck\" McKeon National Defense Authorization Act for Fiscal Year 2015, which was passed by the House on May 22, 2014, also contained these two provisions. The Senate's national defense reauthorization bill ( S. 2410 ) did not include this language. Also, H.R. 273 , the Minority Small Business Enhancement Act of 2015, would have increased the federal government's 23% contracting goal for small businesses generally to 25% and the 5% contracting goals for small disadvantaged businesses and women-owned small businesses to 10%. Advocates of increasing the federal government's small business contracting goals argue that higher goals are necessary to ensure that small businesses receive \"a fair proportion of the total purchases and contracts for property and services for the government in each industry category.\" They also contend that higher goals will \"increase prime contracting and subcontracting opportunities for small businesses\" and that \"each time the goal has previously been increased, small business contracting, with its inherent benefits, has increased.\" During consideration of H.R. 4310 , the National Defense Authorization Act for Fiscal Year 2013, the Obama Administration opposed the House's provisions that would have increased the 23% contracting goal for small businesses generally and established a 40% subcontracting goal for small businesses generally: The Administration strongly supports efforts to increase Federal contracting with small businesses, but opposes section 1631, which would establish a laudable but overly ambitious government-wide small business procurement goal and unrealistic individual agency goals that could undermine the goals process and take away the Government's ability to focus its efforts where opportunities for small business contractors are greatest. Congressional interest in the SBA's HUBZone program has increased in recent years. Debates over the program's effect on economically distressed communities, as reflected in GAO's recommendation for new SBA performance measures; the federal government's difficulty in meeting the 3% contracting goal; the reduction in the number of HUBZone firms; and small business anxiety concerning the increased frequency of HUBZone eligibility determinations have all served to elevate congressional interest in the program. But perhaps the most influential reason for the increased level of congressional interest has been GAO's finding of fraud in the program. The SBA has overhauled the program. It reported in its FY2011 congressional budget justification that it had \"met its primary goal during FY2009\" to reengineer its \"business processes to reduce fraud and abuse with the program.\" On April 21, 2010, then-SBA Administrator Karen Mills testified before the House Committee on Small Business that progress has been made but \"we know there's more work to do.\" She testified that \"At the front-end, it means more upfront certification and eligibility. For small businesses already in the program, it means more efforts with compliance and site visits. And if they're found to be out of compliance, it means pursuing and removing bad actors.\" Also, in its FY2013 congressional budget justification, the SBA indicated that To further reduce fraud, waste, and abuse, the HUBZone program began the systematic Legacy Portfolio Review of firms that were certified as a HUBZone prior to the FY2009 policy of full document review for initial certification. During FY2011, 2,040 firms completed the Legacy Portfolio Review. The SBA also conducted and received 987 site visit reports from its field staff conveying whether or not the firm appeared to be operating from the HUBZone principal office. This amount is in sharp contrast with the seven site visits that had been conducted in FY2008. In FY2012, the SBA will be rolling out a HUBZone recruitment initiative to target firms that may be HUBZone eligible and educate them on the benefits of the program. One of the immediate by-products of the SBA's new business processes was an increase in the processing time for new HUBZone certifications. In the past, the SBA had a self-imposed goal of making those certifications within 30 calendar days after receipt of a complete application package, subject to the need for additional information or clarification of information contained in the application. Now, depending on the complexity of the application and the need for additional information, the SBA reports that it takes, on average, about three months to make those certifications. Concerns about the processing times were reflected in P.L. 115-91 's provision requiring the SBA, effective January 1, 2020, to process HUBZone certification applications with sufficient and complete documentation within 60 days of receipt. It remains to be determined if the SBA's new processes will reduce the incidence of fraud within the program. The resolution of that question could determine the future of the HUBZone program.", "summary": "The Historically Underutilized Business Zone Empowerment Contracting (HUBZone) program provides participating small businesses located in areas with low income, high poverty, or high unemployment with contracting opportunities in the form of set-asides, sole-source awards, and price-evaluation preferences. Its primary objectives are job creation and increased capital investment in distressed communities. Firms must be certified by the SBA to participate in the program. As of April 3, 2019, the SBA's Dynamic Small Business Search database included 6,769 firms with active HUBZone certifications. In FY2017, the federal government awarded 81,082 contracts valued at $7.53 billion to HUBZone-certified businesses. About $1.90 billion of that amount was awarded with a HUBZone preference ($1.49 billion through a HUBZone set-aside, $65.3 million through a HUBZone sole-source award, and $346.9 million through a HUBZone price-evaluation preference). About $1.53 billion of that amount was awarded to HUBZone-certified businesses in open competition with other firms. The remaining $4.10 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses). The HUBZone program's administrative cost is about $8.4 million annually. It received an appropriation of $3.0 million for FY2019, with the additional cost of administering the program provided by the SBA's appropriation for salaries and general administrative expenses. Congressional interest in the HUBZone program has increased in recent years, primarily due to GAO reports of fraud in the program and efforts by small businesses to ease HUBZone eligibility requirements. This report examines arguments both for and against targeting assistance to geographic areas with specified characteristics as opposed to providing assistance to people or businesses with specified characteristics. It then assesses the arguments both for and against the continuation of the HUBZone program. The report also discusses the HUBZone program's structure and operation, focusing on the definition of HUBZone areas and HUBZone small businesses and the program's performance relative to federal contracting goals. It includes an analysis of the SBA's administration of the program and the SBA's performance measures. This report also examines HUBZone-related legislation, including P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, which, among other provisions, expanded the definition of a Base Realignment and Closure Act (BRAC) military base closure area to make it easier for businesses located in those areas to meet the HUBZone program's requirement that at least 35% of its employees reside in a HUBZone area. It also extended BRAC base closure area HUBZone eligibility from five years to not less than eight years, provided HUBZone eligibility to qualified disaster areas, and added Native Hawaiian Organizations to the list of HUBZone eligible small business concerns. P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018, which, among other provisions, allows small businesses that have HUBZone status on or before December 31, 2019, to retain that status from January 1, 2020, until the SBA prepares an updated online tool depicting HUBZone qualified areas (anticipated by the SBA to take place in December 2021). Once the new online tool (currently called the HUBZone map) is operational, the SBA must update it every five years for qualified census tracts and nonmetropolitan counties and when a change in status takes place for other HUBZone types (e.g., when an area becomes or ceases to be a redesignated area). The act also allows governors, starting on January 1, 2020, to petition the SBA each year to designate areas located in nonurban areas, with a population of 50,000 or fewer, and an average unemployment rate at least 120% of the national or state average, whichever is lower, as HUBZones; requires the SBA to process HUBZone certification applications with sufficient and complete documentation within 60 days of receipt; ensures that HUBZone-eligible BRAC areas receive HUBZone eligibility for a full eight years, beginning on the date they are designated a BRAC; and requires the SBA, not later than one year after enactment, to publish performance metrics measuring the HUBZone program's success in promoting economic development in economically distressed areas.", "document_type": "crs"}
{"report": "The United States Fire Administration (USFA) is currently an entity within the Federal Emergency Management Agency (FEMA) of the Department of Homeland Security (DHS). Its mission is to provide leadership, coordination, and support for the nation's fire prevention and control, fire training and education, and emergency medical services activities, and to prepare first responders and health care leaders to react to hazard and terrorism emergencies of all kinds. One of USFA's key objectives is to significantly reduce the nation's loss of life from fire, while also achieving a reduction in property loss and nonfatal injury due to fire. Although fire loss has improved significantly over the past 25 years, the fire problem in the United States remains serious. The United States still has one of the highest fire death rates in the industrialized world. According to the National Fire Protection Association (NFPA), in 2015 there were 1,345,500 total fires reported, 3,280 civilian fire deaths, 15,700 civilian fire injuries, and an estimated $14.3 billion in direct property loss. There were 69 on-duty firefighter deaths in 2016. The genesis of USFA and FEMA's fire prevention and control activities can be found in the landmark 1973 report of the National Commission on Fire Prevention and Control, entitled America Burning . The commission recommended the creation of a federal fire agency which would provide support to state and local governments and private fire organizations in their efforts to reduce fire deaths, injuries, and property loss. The commission recommended that this new agency be placed within the Department of Housing and Urban Development. Congress instead opted to place the agency in the Department of Commerce, and with the passage of the Federal Fire Prevention and Control Act of 1974 ( P.L. 93-498 ), the National Fire Prevention and Control Administration (NFPCA) was established. In 1978, Congress changed the name of NFPCA to USFA ( P.L. 95-422 ), and in 1979, President Carter's Reorganization Plan No. 3 placed the USFA within the newly created FEMA. Also in 1979, the National Fire Academy (NFA) in Emmitsburg, MD, was opened, offering courses and training to fire service personnel and other persons engaged in fire prevention and control. During the early 1980s, the Reagan Administration proposed the elimination of the USFA (while preserving the Fire Academy). Although Congress did not allow the termination of the USFA, the agency suffered severe staff reductions and the Fire Academy was separated from the USFA and housed organizationally with other FEMA emergency training programs. In 1991, the NFA was subsequently reorganized back into the USFA, where it remains today. Currently, the USFA is located on the grounds of the National Emergency Training Center in Emmitsburg, MD. USFA programs include the following: Data Collection —USFA's National Fire Data Center (NFDC) administers a national system (the National Fire Incident Reporting System or NFIRS) used for collecting, analyzing, and disseminating data and information on fire and other emergency incidents to state and local governments and the fire community. The NFDC provides a national analysis of the fire problem, identifying problem areas for which prevention and mitigation strategies are needed. Public Education and Awareness —Through partnerships and special initiatives, USFA involves the fire service, the media, other federal agencies, and safety interest groups in the development and delivery of fire safety awareness and education programs. These programs are targeted at those groups most vulnerable to the hazards of fire, including the young, elderly, and disabled. Training —USFA's National Fire Academy (NFA) offers educational opportunities for the advanced professional development of the mid-level and senior fire/EMS officers and allied professionals involved in fire prevention and life safety activities. The academy develops and delivers educational and training programs with a national focus that supplement and support state and local fire service training. The NFA also offers training to support the National Incident Management System Integration Center (NIC) and nationwide implementation of the National Incident Management System (NIMS). Research and Technology —Through research, testing, and evaluation, USFA works with public and private entities to promote and improve fire and life safety. Research and special studies are conducted on fire detection, suppression, and notification systems, as well as issues related to firefighter and emergency responder health and safety. Research results are published and made available to the public free of charge through the USFA Publications Center. In fulfilling its mission, the USFA uses the assets of the National Fire Academy, the National Emergency Training Center (NETC) Facilities and Support Services, and the National Fire Programs Division. On May 18, 2017, President Trump announced his intention to appoint Chief G. Keith Bryant as the USFA Administrator. G. Keith Bryant was sworn in as the U.S. Fire Administrator on August 4, 2017. The USFA receives its annual appropriation through the House and Senate Appropriations Subcommittees on Homeland Security. Table 1 shows recent and proposed appropriated funding for USFA. Beginning in FY2004, the USFA was funded through the Preparedness, Mitigation, Response, and Recovery (PMRR) account within the Emergency Preparedness and Response Directorate of the Department of Homeland Security. On July 13, 2005, then-DHS Secretary Michael Chertoff announced a restructuring of DHS, effective October 1, 2005. USFA was removed from the PMRR account and received a separate appropriation (its own line item) under the new DHS Directorate for Preparedness. The FY2007 Department of Homeland Security appropriations bill ( P.L. 109-295 ) transferred the USFA back to the Federal Emergency Management Agency within DHS. The Administration's FY2017 budget proposed $42.3 million for USFA, a 3.8% decrease from the FY2016 level. The request included $1.5 million for facilities improvement under the Procurement, Construction, and Improvements account. The budget proposal included $500,000 for distance learning capability and reductions of $1 million each for NFIRS and state fire training grants. The budget request would also transfer the stand-alone USFA budget account into the Preparedness and Protection activity under FEMA's broader Federal Assistance account. On May 26, 2016, the Senate Appropriations Committee approved S. 3001 , the Department of Homeland Security Act, 2017. The Senate bill would provide $44 million for USFA, which matches the FY2016 level and is $1.688 million above the request. In the accompanying report ( S.Rept. 114-68 ), the committee stated that the increase over the Administration request should allow for the continued development of NFIRS and support for the National Fallen Firefighters Memorial. The committee maintained a separate budget account for USFA and did not transfer the USFA budget account to the Federal Assistance account as proposed in the Administration budget request. On June 22, 2016, the House Appropriations Committee approved its version of the Department of Homeland Security Appropriations Act, 2017. Unlike the Senate, the House committee transferred the USFA budget account into a broader \"Federal Assistance\" account in FEMA. The bill provided $42.5 million for USFA under the Federal Assistance account and $1.5 million under Procurement, Construction, and Improvements for National Fire Academy facility costs. The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) funded USFA at a total level of $44 million in FY2017. This consisted of $42.5 million under Education, Training, and Exercises in the Federal Assistance account, and $1.5 million under the Procurement, Construction, and Improvements account. For FY2018, the Administration requested $43.41 million for USFA, slightly below the FY2017 level of $44 million. The FY2018 level consists of $41.913 million under Education, Training, and Exercises in the Federal Assistance account, and $1.497 million under the Procurement, Construction, and Improvements account. According to the FY2018 budget proposal, the request reflects a $1 million reduction to the State Fire Training Assistance grants. On July 18, 2017, the House Appropriations Committee approved the Department of Homeland Security Appropriations Act, 2018 ( H.R. 3355 ; H.Rept. 115-239 ). The bill provided the same level as the Administration request: $41.913 million under Education, Training, and Exercises in the Federal Assistance account, and $1.497 million under the Procurement, Construction, and Improvements account. On September 14, 2017, the House passed H.R. 3354 , a FY2018 omnibus appropriations bill that includes funding for USFA. During floor consideration, the House adopted an amendment offered by Representative Pascrell that added $1 million for USFA's State Fire Training Assistance grants, thereby restoring the Administration's proposed reduction. H.R. 3354 would provide a total of $44.41 million for USFA. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided $44.397 million for USFA. This total included $1.497 million in the FEMA Procurement, Construction, and Improvements account for the National Emergency Training Center. State Fire Training Assistance grants continued to be funded by USFA. For FY2019, the Administration requested $44.993 million for USFA. The FY2019 level consisted of $43.493 million under Education, Training, and Exercises in the Federal Assistance account, and $1.5 million for annual capital improvement of the National Emergency Training Center under the Procurement, Construction, and Improvements account. On June 21, 2018, the Senate Appropriations Committee approved S. 3109 , the Department of Homeland Security Act, 2019 ( S.Rept. 115-283 ). The Senate bill would provide $44 million to USFA in the Federal Assistance account, $507,000 above the budget request, to ensure the National Fire Academy can fulfill its mission of providing training and professional development without reducing its ability to carry out other important responsibilities. The bill report directed FEMA to continue its traditional funding for the congressionally mandated National Fallen Firefighters Memorial. S. 3109 would also provide $1.5 million for annual capital improvement of the National Emergency Training Center under the Procurement, Construction, and Improvements account. On July 25, 2018, the House Appropriations Committee approved its version of the FY2019 Homeland Security bill. Identical to the Administration's budget request, the House bill would provide $43.493 million under Education, Training, and Exercises in the Federal Assistance account, and $1.5 million under the Procurement, Construction, and Improvements account. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $45.679 million for USFA, including $1.5 million in the FEMA Procurement, Construction, and Improvements account for the National Emergency Training Center. For FY2020, the Administration requested $46.605 million for USFA, which includes $1.5 million transferred from the Procurement, Construction, and Improvements account for NETC campus renovations. The budget proposal would be a $1 million increase over the FY2019 level; the increase would fund further improvements to NETC facilities. The budget proposal does not include funding for State Fire Training Assistance. The U.S. Fire Administration Reauthorization Act of 2003 ( P.L. 108-169 ) was signed into law on December 6, 2003. The act reauthorized the USFA through FY2008 at the following levels: $63 million for FY2005, $64.85 million for FY2006, $66.796 million for FY2007, and $68.8 million for FY2008. P.L. 108-169 also reestablished the presidentially appointed position of the U.S. Fire Administrator, which had been statutorily abolished by the Homeland Security Act of 2002. Additionally, the legislation directed the USFA to develop new firefighting technologies and standards in coordination with private sector standards groups and federal, state, and local agencies. P.L. 108-169 required that equipment purchased with fire grant money meet or exceed voluntary consensus standards when feasible. The U.S. Fire Administration Reauthorization Act of 2008 was signed into law on October 8, 2008 ( P.L. 110-376 ). P.L. 110-376 authorized the USFA at $70 million for FY2009, $72.1 million for FY2010, $74.263 million for FY2011, and $76.491 million for FY2012. Provisions included authorizing National Fire Academy training program modifications and reports; directing the National Fire Academy to provide training on incidents occurring in the wildfire-urban interface, multijurisdictional fires, hazardous materials incidents, and advanced emergency medical services; authorizing USFA to enter into contracts with one or more nationally recognized third-party organizations to deliver training; a report on the feasibility of providing incident command training for fires at ports and in marine environments; national fire incident reporting system upgrades; sponsoring and disseminating research on fire prevention and control at the wildland-urban interface; encouraging adoption of national voluntary consensus standards for firefighter health and safety; establishing a state and local fire service position at the National Operations Center within DHS; providing coordination regarding fire prevention and control and emergency medical services; and expressing congressional support for USFA recommendations for adoption and education regarding sprinklers in commercial and residential buildings. On January 2, 2013, the President signed P.L. 112-239 , the FY2013 National Defense Authorization Act. Title XVIII, Subtitle B was the U.S. Fire Administration Reauthorization Act of 2012, which authorized USFA through FY2017. P.L. 112-239 included the following provisions: reauthorized USFA at an annual level of $76,490,890 for FY2013 through FY2017, and for each fiscal year sets aside $2,753,672 to be used to carry out Section 8(f) of the Fire Prevention and Control Act (15 U.S.C. 2207) related to evaluation of technology and development of standards; authorized the USFA Administrator to appoint a Deputy Administrator; authorized the Administrator to take such steps as the Administrator considers appropriate to educate the public and overcome public indifference as to fire, fire prevention, and individual preparedness; and removed the limitation on funding levels for updating the National Fire Incident Reporting System. In the 115 th Congress, on July 12, 2017, the House Subcommittee on Research and Technology, Committee on Science, Space and Technology, held a hearing entitled U.S. Fire Administration and Fire Grant Programs Reauthorization: Examining Effectiveness and Priorities . Testimony was heard from the USFA acting administrator and from fire service organizations. On December 15, 2017, H.R. 4661 , the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017, was introduced by Representative Comstock, which sought to reauthorize the USFA through FY2023. On December 18, 2017, the House passed H.R. 4661 by voice vote under suspension of the rules. On December 21, 2017, the Senate passed H.R. 4661 without amendment by unanimous consent. On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 ( P.L. 115-98 ). P.L. 115-98 extends the USFA authorization through FY2023. The authorization levels are the same as in the previous authorization: $76,490,890 each year for FY2017 through FY2023, of which $2,753,672 each fiscal year is to be used to carry out Section 8(f) of the Fire Prevention and Control Act (15 U.S.C. 2207) related to evaluation of technology and development of standards. The Assistance to Firefighters Grant (AFG) Program, also known as the FIRE Act grant program, was established by Title XVII of the FY2001 Floyd D. Spence National Defense Authorization Act ( P.L. 106-398 ). The program provides federal grants directly to local fire departments and unaffiliated Emergency Medical Services (EMS) organizations to help address a variety of equipment, training, and other firefighter-related and EMS needs. A related program is the Staffing for Adequate Fire and Emergency Response Firefighters (SAFER) program, which provides grants for hiring, recruiting, and retaining firefighters. Since its inception, the fire grant program has been administered by FEMA/USFA (FY2001-FY2003), the Office for Domestic Preparedness (FY2004), the Office of State and Local Government Coordination Preparedness (FY2005), and the Office of Grants and Training in the DHS Directorate for Preparedness (FY2006). The FY2007 DHS Appropriations Act ( P.L. 109-295 ) transferred USFA to FEMA and the fire and SAFER grants to the Grants Programs Directorate in FEMA. Congressional appropriations reports have consistently instructed DHS to maintain USFA involvement in the grant administration process for AFG and SAFER grants. In September 2016, the Government Accountability Office (GAO) released a report entitled Fire Grants: FEMA Could Enhance Program Administration and Performance Assessment. Among its findings, GAO concluded that FEMA has not defined and documented USFA's specific role or responsibilities with the fire grants program, and that there is no formalized relationship or policy regarding how the two organizations' programs could work together. According to GAO Although a level of informal coordination exists between GPD [Grant Programs Directorate] and USFA, enhancing these efforts by using collaborative mechanisms that our work across the federal government has identified as key features and issues to consider during implementation—such as clearly defining and agreeing upon USFA's role and responsibilities and documenting agreement regarding how they will be collaborating—could help GPD further leverage USFA expertise and resources in support of the fire grants programs, which could also help GPD manage the integration of fire grants into broader national preparedness efforts. In December 2016, the USFA signed an agreement with FEMA's Grant Programs Directorate to provide a framework for each entity's roles and responsibilities for improving the management of the fire grants. Concerns over the federal budget deficit could impact future funding levels for the USFA. Debate over the USFA budget has focused on whether the USFA is receiving an appropriate level of funding to accomplish its mission, given that appropriations for USFA have consistently been well below the agency's authorized level, and given that USFA's budget has remained flat over recent years. The 116 th Congress may also consider whether the role of USFA might be expanded. For example, H.R. 1646 , the Helping Emergency Responders Overcome Act of 2019 (the HERO Act), introduced by Representative Bera on March 8, 2019, would direct USFA, in coordination with the Secretary of Health and Human Services, to develop and make publicly available resources that may be used by the federal government and other entities to educate mental health professionals about the mental health issues and challenges faced by firefighters and emergency medical services personnel. Finally, an ongoing issue is the viability and status of the USFA and National Fire Academy within the Department of Homeland Security. While supportive of the reorganization of FEMA into DHS, many in the fire service community have cautioned that USFA and NFA programs—which address the day-to-day challenges faced by fire departments—should not be overshadowed in an organization which focuses on homeland security and counterterrorism. Since the establishment of DHS in March 2003, fire service groups have opposed a number of actions DHS has taken with respect to the USFA and NFA. These included the abolishment of the presidentially appointed position of U.S. Fire Administrator (subsequently reestablished by enactment of the USFA Reauthorization Act of 2003); proposed cancellations of some NFA courses in 2003 due to an across-the-board FEMA budget cut (those NFA courses were subsequently restored after fire service protests); and the transfer of the fire grant program from the USFA to the DHS Office for Domestic Preparedness. ", "summary": "The United States Fire Administration (USFA)—which includes the National Fire Academy (NFA)—is currently housed within the Federal Emergency Management Agency (FEMA) of the Department of Homeland Security (DHS). The objective of the USFA is to significantly reduce the nation's loss of life from fire, while also achieving a reduction in property loss and nonfatal injury due to fire. The Consolidated Appropriations Act, 2019 (P.L. 116-6) provided $45.679 million for USFA, including $1.5 million in the FEMA Procurement, Construction, and Improvements account for the National Emergency Training Center. For FY2020, the Administration requested $46.605 million, which includes $1.5 million transferred from the Procurement, Construction, and Improvements account for NETC campus renovations. The budget proposal would be a $1 million increase over the FY2019 level; the increase would fund further improvements to NETC facilities. The budget proposal does not include funding for State Fire Training Assistance. On January 3, 2018, the President signed the United States Fire Administration, AFG, and SAFER Program Reauthorization Act of 2017 (P.L. 115-98). P.L. 115-98 extends the USFA authorization through FY2023. The authorization levels are the same as in the previous authorization: $76,490,890 each year for FY2017 through FY2023. Meanwhile, concerns over the federal budget deficit could impact future funding levels for the USFA. Debate over the USFA budget has focused on whether the USFA is receiving an appropriate level of funding to accomplish its mission, given that appropriations for USFA have consistently been well below the agency's authorized level. Additionally, an ongoing issue is the viability and status of the USFA and the National Fire Academy within the Department of Homeland Security.", "document_type": "crs"}
{"report": "The Disaster Relief Fund (DRF) is one of the most-tracked single accounts funded by Congress each year. Managed by the Federal Emergency Management Agency (FEMA), it is the primary source of funding for the federal government's domestic general disaster relief programs. These programs, authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended (42 U.S.C. 5121 et seq.), outline the federal role in supporting state, local, tribal, and territorial governments as they respond to and recover from a variety of incidents. They take effect in the event that nonfederal levels of government find their own capacity to deal with an incident is overwhelmed. The current emergency management policy environment assumes this federal role in domestic disaster relief as the default position and the availability of resources through the DRF a necessary requirement. However, this was not always the case. The concept of general disaster relief from the federal government predates both FEMA and the Stafford Act, but federal involvement in relief after natural and man-made disasters was very rare before the Civil War, and was at times considered unconstitutional. Domestic disaster relief efforts became more common after the Civil War, but were not seen as a necessary obligation of the federal government. Standing federal domestic disaster relief programs and a pool of resources to fund them only emerged after the Second World War. Prior to the development of these programs, domestic disaster relief and recovery was a matter for private nongovernmental organizations and state and local governments. Once established, the federal role in domestic disaster response and recovery grew, proving politically popular and resilient despite periodic concerns about management, execution, and budgetary impacts. As the DRF is the source of funding for most general disaster relief programs, it is an indicator of the scope of those programs and the volume of taxpayer-funded aid they provide. Understanding the trends in the growth of the federal government's role in general disaster relief and recovery, and the associated costs of that role, may be useful as Congress considers changes in both emergency management and budgetary policies. This report introduces the DRF and outlines how its resources are made available through a series of simple questions, presents a brief history of the federal government's involvement in domestic disaster relief, describes how the request for general disaster relief funding has been formulated over time, and examines the congressional response to those requests. It also provides the funding history for the DRF, and discusses several issues before Congress connected to the fund and the general disaster relief programs it supports. The DRF is the primary source of funding for the federal government's general disaster relief program—response and recovery efforts pursuant to a range of domestic emergencies and disasters in existing law—as opposed to specific relief and recovery initiatives that may be enacted for individual incidents. Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , as amended; hereinafter \"the Stafford Act\"), the President can declare that an emergency exists or a major disaster is occurring. These declarations make state, tribal, territorial, and local governments eligible for a variety of assistance programs, many of which are funded from the DRF. Usually declarations are made at the request of a state, tribal, or territorial government. While the DRF funds Stafford Act disaster relief and recovery programs, several other federal departments and agencies have significant roles in disaster preparedness, relief, recovery, and mitigation. They include the Department of Housing and Urban Development, the Small Business Administration, U.S. Department of Agriculture, U.S. Army Corps of Engineers, and the Department of Health and Human Services. While FEMA may fund some of their activities from the DRF through mission assignments, their larger programs are funded through separate appropriations. The role of the federal government has evolved over the years, but emergency response and disaster relief has historically been a federalized \"bottom-up\" operation, starting from the local or tribal governments affected, backed up by the state or territorial government, and then turning to the federal government if their capacity is overwhelmed. The broadening of the federal role has been a factor in which activities are funded under the DRF. Currently, the Federal Emergency Management Agency (FEMA) coordinates federal disaster response and recovery efforts, and manages the DRF, which funds activities in five categories: 1. Activity pursuant to a major disaster declaration— This activity represents the vast majority of spending from the DRF. FEMA's primary \"Direct Disaster Programs\" are the Individual Assistance (IA), Public Assistance (PA), and the Hazard Mitigation Grant Program (HMGP) programs. Federal assistance provided by other federal agencies at FEMA's direction through \"mission assignments\" is also paid for from the DRF. 2. Pre declaration surge activities —These are activities undertaken prior to an emergency or major disaster declaration to prepare for response and recovery, such as deploying response teams or prepositioning equipment. 3. Activit y pursuant to an emergency declaration —This is federal assistance to supplement state and local efforts in providing emergency services in any part of the United States. 4. Fire Management Assistance Grants (FMAGs) for large wildfires —This is assistance for the mitigation, management, and control of any fires on public or private lands that could, if unchecked, worsen and result in a major disaster declaration. 5. Disaster Readiness and Support (DRS) activities —These are ongoing, non-incident specific activities that allow FEMA to provide timely disaster response, operate its programs responsively and effectively, and provide oversight of its emergency and disaster programs. The DRF is not separately authorized as a distinct entity, but the activities it funds are authorized under the Stafford Act (42 U.S.C. 5121 et seq.). Since FY1980—FEMA's first annual appropriation—the DRF has been funded through its own appropriation within FEMA's budget, first under the heading \"Disaster Relief,\" and then \"Disaster Relief Fund\" starting in FY2012. FEMA's annual appropriations were first provided through the VA, HUD, and Independent Agencies Appropriations Act, but have been included in the Department of Homeland Security Appropriations act since FY2004. Since the first \"Disaster Relief\" appropriation for FY1948, most of the DRF's appropriations have been provided through supplemental appropriations. DRF appropriations have historically been provided for general disaster relief, rather than specific presidentially declared disasters or emergencies. The most recent iterations of the accompanying language indicate the funds are provided for the \"necessary expenses in carrying out the Robert T. Stafford Disaster Relief and Emergency Assistance Act,\" thus covering all past and future disaster and emergency declarations. Previous versions of the appropriations language going back to 1950 also referenced the legislation authorizing general disaster relief rather than targeting specific disasters. On a number of occasions, specific disasters have been mentioned in the appropriation, but funding was not specifically directed to one disaster over others. While many disaster supplemental appropriations bills are associated with a specific incident or incidents—such as P.L. 113-2 , \"the Sandy Supplemental\"—the language in that act does not limit the use of the disaster relief appropriation to that specific incident. Since the enactment of P.L. 112-74 , Congress has received regular reporting on spending from the DRF. Monthly reports on such spending since March 2013 are available on FEMA's website. Currently, the reports include information on DRF balances, actual and projected obligations from the DRF for large-scale disasters broken down by disaster declaration, and obligations and expenditures aggregated by incident. These reports also include estimates of the DRF balance through the end of the current fiscal year. Disaster relief has not always been a part of the mission of the federal government. For nearly 80 years, federal domestic disaster relief was minimal, extremely narrow in scope, and largely ignored the humanitarian side of the relief equation, leaving that to private organizations and local levels of government. Even as the country emerged from the Civil War with more of a national identity and a sense that the federal government could act to provide relief in some circumstances, disaster aid remained limited, responding only after the fact on a case-by-case basis. Only after World War II did the concept emerge of a federal role in responding to disasters broadly defined, led by the President and funded in advance, as opposed to case-by-case responses to needs in the wake of the most severe events led by ad hoc congressional action. Over the ensuing years, the general disaster relief program and its funding grew, adopting concepts of assistance that had been reserved for catastrophic events. In the 1970s, the Federal Emergency Management Agency (FEMA) was established, institutionalizing the federal role in disaster response, recovery, mitigation, and preparedness—the role we recognize today. At the heart of that role is the set of relief programs that have evolved since the 1940s, known collectively as the Stafford Act, which are funded by the Disaster Relief Fund appropriation. The Constitution provides little specific direction on the question of how the United States should confront disasters. While allusions to the intent of the Constitution speak to promoting domestic tranquility and promoting the general welfare, limitations on the federal role in state affairs combined with practical politics of the day to limit federal involvement in disaster relief and recovery in the early years of the country. The federal government did provide disaster relief on some occasions. Some observers note at least 128 instances from 1803 to 1947 when natural disasters prompted the federal government to provide some type of ad hoc relief on a case-by-case basis for specific incidents after they occurred. Prior to the Civil War, these measures largely consisted of refunds of duties paid on goods destroyed in customs house fires, allowance for delayed payments of bonds, and land grants for resettlement. Proponents of disaster relief argued that the \"general welfare\" clause of the Constitution warranted the federal role in disaster relief. Opponents did not find this justification convincing, as it was nonspecific, and argued that certain natural disasters (such as flooding of the Mississippi River) were foreseeable, and therefore state and local governments had an obligation to be prepared; that it was improper for the government to provide relief for specific places with money it collected for the common good; and that the federal government could not afford to provide universal relief. As the U.S. economy became more robust, federal revenues grew, weakening the position of those in Congress who opposed a federal role in disaster assistance on the basis of the lack of such resources. Congressional willingness to provide assistance was not always sufficient to ensure its provision, however. In 1887, President Grover Cleveland vetoed a bill that would have provided $10,000 to pay for seeds for farmers in Texas after a drought, arguing as follows: I can find no warrant for such an appropriation in the Constitution; and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that though the people support the Government, the Government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood. Much of the disaster relief provided in this period was nongovernmental in nature. In 1881, Clara Barton founded the American National Red Cross (ANRC), which provided disaster aid from funds it raised from private sources. One year before a catastrophic earthquake struck San Francisco in 1906, revised incorporating legislation for the ANRC tasked the organization with \"mitigating the sufferings caused by pestilence, famine, fire, floods, and other great national calamities, and to devise and carry on measures for preventing the same.\" In the days after the earthquake, President Theodore Roosevelt issued an appeal for assistance from the public to be channeled through the ANRC: In the face of so horrible and appalling a national calamity as that which has befallen San Francisco, the outpouring of the nation's aid should, as far as possible, be entrusted to the American Red Cross, the national organization best fitted to undertake such relief work.... In order that this work may be well systematized and in order that the contributions, which I am sure will flow in with lavish generosity, may be wisely administered, I appeal to the people of the United States, to all cities, chambers of commerce, boards of trade, relief committees and individuals to express their sympathy and render their aid by contributions to the American Red Cross. While the federal government provided assistance in response and recovery in the San Francisco case on an ad hoc basis, the majority of the assistance provided was through private means. Congress appropriated $2.5 million in the days after the quake for the Secretary of War to provide \"subsistence and quartermaster's supplies ... to such destitute persons as have been rendered homeless or are in needy circumstances as a result of the earthquake and commissary stores to such injured and destitute persons as may require assistance,\" but nonfederal cash contributions to the ANRC and the local relief organizations exceeded $9 million in the two years following the disaster. The ANRC served as the major institutional source of relief for disaster victims in the United States, serving communities and individuals in cooperation with state and local governments with relatively little direct contributions from the federal government for many years. The Red Cross continued to play a leading role in nongovernmental disaster relief as the federal government's role in disaster aid evolved and expanded through the 20 th century and into the 21 st . After the Second World War, the federal government started becoming more involved in disaster relief beyond specific incident-by-incident relief efforts. In 1947, P.L. 80-233 authorized the federal government to provide surplus property to state and local governments for disaster relief under the Disaster Surplus Property Program. Less than eight months later, the Administrator of the Federal Works Agency noted in a letter to President Harry S. Truman that the program would not provide adequate relief to communities over the longer term. The next year, Congress made its first appropriation for general disaster relief. The Second Deficiency Appropriation Act, 1948, which was enacted on June 25, 1948, provided funding directly to the President as follows: DISASTER RELIEF Disaster Relief: To enable the President, through such agency or agencies as he may designate, and in such manner as he shall determine, to supplement the efforts and available resources of State and local governments or other agencies, whenever he finds that any flood, fire, hurricane, earthquake, or other catastrophe in any part of the United States is of sufficient severity and magnitude to warrant emergency assistance by the Federal Government in alleviating hardship, or suffering caused thereby, and if the governor of any State in which such catastrophe shall occur shall certify that such assistance is required, $500,000, to remain available until June 30, 1949, and to be expended without regard to such provisions regulating the expenditure of Government funds or the employment of persons in the Government service as he shall specify: Provided, That no expenditures shall be made with respect to any such catastrophe in any State until the governor of such State shall have entered into an agreement with such agency of the Government as the President may designate giving assurance of expenditure of a reasonable amount of the funds of the government of such State, local governments therein, or other agencies, for the same or similar purposes with respect to such catastrophe: Provided further, That no part of this appropriation shall be expended for departmental personal services: Provided further, That no part of this appropriation shall be expended for permanent construction: Provided further, That within any affected area Federal agencies are authorized to participate in any such emergency assistance. Although this legislation comes with broad latitude for the President in expending these funds, this appropriation contained several hallmarks that continue in today's disaster relief structure: the President makes the determination that a disaster has occurred, and that federal aid is required; the state has a role in certifying the need and committing state resources to be eligible for federal support; aid is to \"supplement the efforts and available resources of State and local governments or other agencies,\" rather than to fund the entire relief effort; and the President may direct federal agencies to participate in emergency assistance. The conditions laid out in this appropriation were echoed in the next two appropriations, provided in 1949, which totaled $1 million. The Disaster Relief Act of 1950 formalized the structure outlined in the initial appropriations legislation, and indicated for the first time that it is the intent of Congress to provide an orderly and continuing means of assistance by the Federal Government to States and local governments in carrying out their responsibilities to alleviate suffering and damage resulting from major disasters, to repair essential public facilities in major disasters, and to foster the development of such State and local organizations and plans to cope with major disasters as may be necessary. Section 8 of the act limited the authorized disaster relief funding to $5 million in total. This restriction did not effectively constrain funding, however. The first supplemental appropriation for general disaster relief authorized under the Disaster Relief Act for 1950 provided $25 million, and a waiver of the Section 8 limitation. The first authorized annual appropriation for general disaster relief was for $800,000, enacted August 31, 1951, less than two months later. Annual appropriations were \"to be available until expended,\" rather than expiring as previous general disaster relief appropriations had, and their use for administrative expenses was statutorily capped at 2% per year. Under the Kennedy and Johnson Administrations, the federal government's role in disaster relief expanded further. Federal general disaster relief programs broadened in 1962, with the inclusion of several American territories, and grants for repair of state facilities. However, Congress still passed specific legislation authorizing relief programs pursuant to other major disasters. In 1964 and 1965, post-disaster legislation provided specific relief for victims of an earthquake in Alaska, flooding in western states, and victims of Hurricane Betsy in Florida, Louisiana, and Mississippi. In a history of disaster relief legislation, one observer described the situation thus: In 1962, 1964, and 1965, Congress had sought to preserve P.L. 81-875 [the Disaster Relief Act of 1950] and yet provide disaster assistance in the case of the very big disasters by special legislation only for the states named. Although no one at the time appeared aware that the new types of assistance would become precedents for general legislation, it was in the nature of the system that ultimately they would be reenacted for general use. This would change the following year. The Disaster Relief Act of 1966 abolished the Disaster Relief Act of 1950, and revised the general disaster assistance program by providing more assistance to public colleges and universities, as well as authorizing assistance to repair local public facilities. According to some observers, the agencies charged with carrying out most of the disaster relief activity felt the 1966 legislation was unnecessary and the work could be carried out under existing authorities. The Disaster Relief Act of 1969 was enacted in response to Hurricane Camille, although the expansion of the federal role in disaster assistance it represented had been included in legislation since 1965. It included broader public and individual assistance, including temporary housing, food assistance, unemployment assistance, and the federal government funding up to half the cost of repair and restoration of public facilities, and providing matching funds to help states develop preparedness plans. Not all of these costs would be borne by the funding provided to the President, and the programs were only authorized through calendar 1970, but they represented a significant broadening of federal government involvement. The Disaster Relief Act of 1970 consolidated the previous disaster relief legislation into a single act, and made many of the Camille-driven programs permanent, including a permanent program to provide temporary housing assistance, and programs for debris removal and permanent repair and replacement of state and local public facilities. The Disaster Relief Act of 1974 provided for a more robust preparedness program, and introduced the concept of \"emergency\" declarations to accommodate assistance in cases where an incident did not rise to the \"major disaster\" threshold. The Disaster Relief and Emergency Assistance Amendments of 1988 ( P.L. 100-707 , hereinafter DREAA) was enacted 14 years later; it renamed the Disaster Relief Act of 1974 as the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the aforementioned Stafford Act). It made the following programmatic changes: Authorized the President to declare an emergency under the Stafford Act in \"any occasion or instance\" in which federal aid is needed—allowing for assistance without a major disaster declaration; Defined a \"major disaster\" as \"any natural catastrophe ... or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance....\" Established a 75% minimum level of assistance for the immediate response, debris removal, and repair of public facilities; and Provided for a 50/50 cost share for hazard mitigation grants. Over the course of the 40 years after the original $500,000 appropriation for general disaster relief with associated programmatic language, the now-renamed Stafford Act and the DREAA are the pieces of legislation that structure the current relationship between the federal and state government in emergency management and disaster relief. These laws, which appear at 42 U.S.C. 5121 et seq., continue to be amended through such vehicles as the Sandy Recovery Improvement Act ( P.L. 113-2 , Division B) and the Disaster Recovery Reform Act of 2018 ( P.L. 115-254 , Division D). Other CRS analyses will address such amendments to the general disaster relief program in detail. General disaster relief activities by the federal government under the Stafford Act are funded through the appropriations process. Three types of appropriations support these activities: Supplemental Appropriations are requested by the Administration on an ad hoc basis, generally to address a need not sufficiently covered in the annual appropriations process. These move on a short timetable and generally do not go through the complete committee process. More than 85% of net appropriations for the DRF have been provided through supplemental appropriations. Annual Appropriations: Requested by the Administration in February as a part of the annual budget process, these are expected to be passed by Congress and enacted into law prior to the start of the fiscal year in October. Annual appropriations measures fund the core activities of the government and are developed through the committee process. Continuing Appropriations: Provided when annual appropriations work remains unresolved at the beginning of the new fiscal year, these appropriations are temporary budget authority provided at a rate for operations based on the prior fiscal year to allow the government to continue functioning. The measure that provides them is termed a \"continuing resolution,\" or \"CR.\" These continuing appropriations may expire (in the case of an interim CR), or extend to the end of the fiscal year (in the case of a \"long-term\" CR). The current Disaster Relief Fund concept can trace its birth back to an appropriations bill in the 1940s—the Second Deficiency Appropriations Act, 1948. Deficiency appropriations bills, which provided funding to meet unanticipated needs during the fiscal year, were a forerunner of modern supplemental appropriations bills. As the severity, frequency, and resultant costs to the federal government of the array of disasters that will strike the United States in a given year have always been unpredictable in an annual budgetary context, disaster relief funding frequently has been provided through deficiency, and later supplemental, appropriations. When Congress and the Administration began to express concerns about the budget deficit in the 1980s, efforts were made to restrain supplemental spending by limiting it to cases of \"dire emergency.\" With the implementation of budget control in the 1990s, a special designation for emergency spending was created. If both Congress and the Administration agreed certain spending was an emergency requirement, budget limits would be adjusted to accommodate that spending. Congress used the emergency designation on a disaster relief appropriation for the first time in an FY1992 supplemental appropriations act. Congress continues to use emergency designations in supplemental appropriations legislation to provide budgetary flexibility. At one point, Congress was statutorily required to use the designation for disaster relief appropriations. Under the terms of the aforementioned FY1992 supplemental appropriations act, beginning in FY1993, Congress required \"all amounts appropriated for disaster assistance payments [under the Stafford Act] that are in excess of either the historical annual average obligation of $320,000,000, or the amount submitted in the President's initial budget request, whichever is lower\" to be designated as emergency requirements under a specific provision of the Balanced Budget and Emergency Deficit Control Act of 1985. This practice of emergency designation above a particular threshold was followed until FY2000, when a clause appeared in the appropriation noting that discretionary appropriations were being provided notwithstanding the restrictions of this section of the U.S. Code. With the passage of the Budget Control Act in 2011, which provided additional budgetary flexibility for the costs for major disasters, supplemental disaster relief appropriations declined in frequency, but remained a primary contributor to balances in the DRF. See the \" DRF Funding History: FY1964-FY2018 \" section below for details. As was noted above, the first general disaster relief funding was provided in an appropriations act in 1948, and carried its own authorizing provisions. Stand-alone authorization for general disaster relief first came in 1950. Once the initial separate authorization was put in place for general disaster relief, appropriations were provided for FY1952, FY1956-FY1958, and FY1962. With the broadening of the relief program to cover more types of damages and the authorization of aid on general terms that had only been made on a case-by-case basis before the mid-1960s, appropriations for general disaster relief became more common—and larger. Annual appropriations for general disaster relief have been provided each year since FY1964, with only two exceptions. Each time this occurred, the DRF was deemed to have an adequate unobligated balance to meet anticipated needs. As will be discussed later in this report, the adoption of a special designation for the costs of major disasters under the Stafford Act as a part of the Budget Control Act of 2011 ( P.L. 112-25 ) made it easier to provide budget authority to the DRF in the annual appropriations process. In the seven appropriations cycles since the implementation of this designation in FY2012, more budget authority was provided for the DRF in annual appropriations measures than in the 63 prior cycles combined, accounting for inflation. Since the FY2013 budget request, FEMA has bifurcated its annual appropriations request between the costs of major disasters—the \"Disaster Relief Category\"—and everything else funded by the DRF—\"Base Disaster Relief,\" which includes funding for emergency designations, fire management assistance, pre-disaster declaration surge activities, and Disaster Readiness and Support Programs. The former category is eligible for the designation as \"disaster relief,\" a designation that triggers an upward adjustment of statutory discretionary spending limits to accommodate it without triggering sequestration. The latter category is not, and scores as discretionary spending. Even though the DRF is a \"no-year\" fund, and its appropriations are available until expended, it does get temporary replenishment from continuing resolutions (CRs) at times, until its annual appropriations are finalized. In FY1982, for the first time, interim general disaster relief funding was provided in a CR through an \"anomaly,\" a provision providing funds at an operating rate different from that base rate of operations provided in the resolution. These \"anomaly\" provisions may also provide flexibility that can help avoid some of the complications that can arise under the constraints of operating under continuing appropriations. For example, CRs generally provide funding at a constant rate of operations, with certain restrictions. This can complicate disaster response and recovery, when calls for funding vary in scale and timing from year to year. When FEMA responds to major disasters of significant size while operating under a CR, either FEMA requests special flexibility from the Office of Management and Budget (OMB)—which apportions funding to agencies—or CRs direct flexibility to be provided to ensure adequate resources are available for disaster response and recovery. An example of this can be found in the initial FY2019 CR. Section 124 of Division C of P.L. 115-245 provides that the funds provided under the CR \"may be apportioned up to the rate for operations necessary to carry out response and recovery activities.\" The following figures show appropriations for the DRF from FY1964 through FY2018. Each fiscal year shows a gross total of annual appropriations and discretionary appropriations (represented by a two-part bar) and a net total (represented by a black mark on each bar), which takes into account rescissions and transfers from the DRF. An inset graphic provides the scale to include funding levels for several outlier years, while showing the detail of appropriations for the more typical years. The first figure shows data in nominal dollars, and the second shows constant FY2018 dollars. The figures show an increase in appropriations for the DRF starting in the 1990s, largely due to increases in supplemental appropriations. Annual appropriations rose significantly in the early 2000s and again starting in FY2013. Even with the surge in appropriations for the 2017 catastrophic series of disasters, which included Hurricane Harvey, Hurricane Maria, and the California wildfires, FY2005 remains the single highest year for appropriations for the DRF, when a series of hurricanes, including Katrina, Rita, and Wilma hit the southeastern United States. A table showing the underlying data for each figure appears in the Appendix . FEMA's budget justifications have noted for years, in one form or another, that \"[t]he primary cost driver associated with Major Disasters is disaster activity.\" Although year-to-year disaster relief appropriations are largely driven by disaster activity and ongoing recovery needs, when analyzing historical data over an extended time frame, other factors such as programmatic changes in general disaster relief and certain changes in the budget process may also warrant consideration. The two largest factors affecting year-to-year disaster relief appropriations are disaster activity, which varies in frequency and severity, and the ongoing recovery costs from previous disasters. Federal involvement in disaster response and recovery occurs when lower levels of government find their capabilities are overwhelmed and turn to the federal government for help. Reduced (or increased) numbers of calls for relief mean reduced (or increased) need for disaster relief appropriations. The incidents that lead to expenditures from the DRF vary in scale. Equally powerful storms may strike a community a glancing blow or a direct hit. An earthquake may hit a rural area, or a major city with complex infrastructure. Stricken communities, states, territories, and tribes have varying levels of preparedness for particular types of disaster. Some observers have noted that as the U.S. population grows and develops property in disaster-prone areas, and as patterns of severe weather shift, the costs of disasters are likely to continue to rise. According to the National Centers for Environmental Information of the National Oceanic and Atmospheric Administration, from 1980 through October 2018, the United States has averaged six weather-related disaster events that each cost $1 billion or more each year. 2016 had 15 such events, 2017 had 16, and 2018, as of October 9, had 11. Spending to help large, complex communities rebuild disaster-damaged facilities and infrastructure and mitigate against future disasters is a significant multiyear cost largely paid for from the Disaster Relief Fund. Using Figure 2 , one can contrast this period of high-frequency, high-impact events of the 2010s to the relatively calm period of the 1980s. Without the driver of large disasters, DRF appropriations remained modest. Over the period from FY1981 to FY1991, abnormally low levels of disaster activity led to no supplemental appropriations for 7 of those 11 fiscal years, and no annual appropriations in either FY1984 or FY1991—the only two fiscal years that has occurred since FY1964. By contrast, over the last six years, the DRF has required sustained high levels of appropriations, including three of its five highest total appropriations by fiscal year, even adjusting for inflation. Over the long term, alterations to the scope of federal disaster relief programs affect the type and level of federal spending when disasters occur. The Disaster Relief Act of 1950 authorized funding to repair local public facilities at the President's discretion. As the brief history above relates, the federal program for general disaster relief has evolved into a much broader program, of which local public facilities is only one facet. This evolution has occurred gradually. Some of this evolution was the result of incorporating assistance offered in response to specific disasters in the 1960s and 1970s into the general relief programs under the Stafford Act. Another facet of this evolution was the broadening of the federal role in helping respond to smaller-scale incidents, including proactive declarations prior to potential disasters to reduce their impact. In addition, disaster relief programs funded through the DRF now include disaster mitigation programs that are not limited to mitigating the disaster that triggered them, but are also intended to reduce the impact (and by extension, the cost) of disasters over the long term. The impacts of programmatic expansions are reflected in Figure 2 , with the trend of increased general disaster relief appropriations on a small scale associated with expansions under the Disaster Relief Act of 1969 and the Disaster Relief Act of 1970, and on a larger scale with the expansion of programs under the Disaster Relief and Emergency Assistance Amendments of 1988. While the decrease in disaster activities in the 1980s reduced the annual demand for disaster relief appropriations, once the number of declared disasters rose again, and emergencies and mitigation also drew on DRF resources, demand for those resources grew rapidly. This evolution continues, with reform legislation frequently following on the heels of exceptionally large disasters, or complexes of disasters. This was the case when the federal response to a series of hurricanes and wildfires in 2017 helped drive interest in the Disaster Recovery Reform Act of 2018. Changes in congressional budget processes have at times been discussed as a means of limiting the budgetary impact of disaster relief spending. However, the budget controls that have been approved and implemented have more often been provided with provisions to ensure disaster relief budget authority remains available if needed. Prior to 1985, Congress provided appropriations to fund the federal government without specific statutory limitations on overall spending. The 1985 Balanced Budget and Emergency Deficit Control Act put limits on deficit spending in place. The Budget Enforcement Act of 1990 placed express limits on discretionary spending for the first time. The 1990 act also provided an exception to those limits, allowing Congress, together with the President, to declare certain spending to be an emergency requirement, and therefore not subject to those limits. This was used to provide additional appropriations for disaster relief. Although the original set of discretionary limits expired, the emergency spending designation has continued as part of the appropriations process. In 2011, the Budget Control Act ( P.L. 112-25 ) not only reestablished statutory spending limits, but also provided a special designation for the costs of major disasters, in addition to the emergency designation. The amount of funding that can be designated as disaster relief—defined as spending pursuant to a major disaster declaration—is limited by a formula based on past spending on disaster relief. It is not a restriction on how much can be spent on disasters, however—funding in excess of the allowable adjustment for disaster relief is still eligible for an emergency designation. This formula was adjusted by the Bipartisan Budget Act of 2018 to account for emergency-designated spending on disasters. The special designation for disaster spending will expire along with the discretionary spending limits in 2021. The impact of these changes in the budget process on disaster relief appropriations appears to be limited to the structure of the total appropriations, rather than the amount. The Congressional Budget Office (CBO) noted that in the 1970s, \"about 5%\" of supplemental funding was for disasters. In a report reviewing supplemental appropriations enacted during the 1980s, CBO indicated that number fell to less than 1%. This can be attributed to the drop in disaster activity discussed above. In a similar report on the 1990s, CBO observed an increase in the use of supplemental appropriations to provide disaster relief, noting the following: [I]n the 1990s, Presidents Bush and Clinton tended to request—and the Congress tended to provide in regular appropriations—less than what would eventually be spent in those disaster-related accounts. (Some observers say the underfunding was an effort to keep total appropriations under the [budget enforcement] caps.) When a disaster or emergency arose, the Congress enacted supplemental appropriations during the fiscal year, usually at the request of the President. That supplemental funding was designated emergency spending and was therefore not counted under the discretionary spending caps. Figure 1 and Figure 2 do not show a distinct impact of budget controls on the overall level of disaster spending. However, they do show an increase in the amount of funding provided in annual appropriations versus supplemental appropriations starting in FY2012. The addition of the disaster relief designation under the Budget Control Act enabled higher funding levels for disasters in the annual appropriations bills, as disaster relief-designated appropriations did not compete with other appropriations for limited discretionary resources, within the allocations provided to the subcommittee funding FEMA, or within the overall discretionary spending limit. In the early years of the disaster relief designation, this increased annual funding also reduced the frequency and urgency of supplemental appropriations for the DRF. However, Congress has provided emergency-designated relief for catastrophic disasters in supplemental appropriations, whether statutory budget controls were in place or not. The responsibility for managing DRF appropriations has shifted among agencies as the general disaster relief function grew. In March 1951, President Truman initially delegated the authority for directing federal agencies in a disaster to the Housing and Home Finance Administrator at the Department of Housing and Urban Development (HUD); then in January 1953 the responsibility was shifted to the Federal Civil Defense Administration in the Department of Defense (DOD). In 1961, the authority was moved within the department to the Office of Civil Defense Mobilization, which had its name changed in 1961 to the Office of Emergency Planning, and changed again in 1968 to the Office of Emergency Preparedness. It remained with that office until its abolishment in 1973, when disaster relief powers were transferred from DOD back to HUD, where those powers were exercised by the Federal Disaster Assistance Administration (FDAA). Although management responsibilities were vested in various parts of the federal bureaucracy, appropriations for general disaster relief were provided directly to the Executive Office of the President from FY1948 through FY1973. For FY1974, funds were still described as \"Funds Appropriated to the President,\" but they were provided within HUD's appropriations. In 1978, responding to support for a more cohesive emergency management structure at the federal level, President Jimmy Carter issued Reorganization Plan #3, which created the Federal Emergency Management Agency (FEMA). At the time, disaster relief functions were vested in three agencies: the FDAA (at HUD, managing general federal disaster relief), the Federal Preparedness Agency (FPA—part of the General Services Administration); and the Defense Civil Preparedness Agency (DCPA—part of the Department of Defense). This was the first time that emergency management functions at the national level were expressly centralized into a single federal agency. FEMA had a three-part role: Mobilizing federal resources, Coordinating federal efforts with state and local governments, and Managing the efforts of the public and private sectors in disaster responses. FY1980 was the first year appropriations for \"Disaster Relief\" were provided to FEMA. A review of selected FEMA budget justifications shows how the executive branch has discussed its decision on how much to request for disaster relief. In the early 1980s (1983-1985), FEMA provided justifications for the Disaster Relief appropriation that included management and coordination, individual assistance, and public assistance activities. These activities were also supported under the Emergency Management Planning and Assistance appropriation and the Salaries and Expenses appropriation for FEMA. These justifications noted that actual disaster relief requirements were based on unpredictable external factors. The FY1984 justification noted, \"The budget requests mentioned are based on average projection of disaster occurrence. Any significant change from the projected totals, through either more or larger size incidents, could generate an increased request.\" However, despite that uncertainty, a request for a specific budget number leads to questions about the basis for that particular number. In the FY1986 process, FEMA explicitly noted it was projecting its anticipated need \"on the basis of past experience with disasters.\" Between September 1984, when FEMA submitted its budget request to the Office of Management and Budget for review, and February 1985, when the budget justification was provided to Congress, additional \"experience\" was apparently accumulated that reduced the projected demand for disaster relief from $350 million to $275 million. By the FY1989 appropriations cycle, the language justifying the request had evolved into \"an assessment of historical averages,\" and included specific data on the average annual disaster relief obligations for a seven-year period, as well as the disaster relief obligations for the most recently concluded fiscal year. The budget justification then included a request, noting the request and the projected obligation data that justified it included $30 million in savings through unspecified \"legislative and administrative reforms.\" By the late 1980s and into the 1990s, concerns about deficit spending led to the discussion of budget controls, and ultimately their implementation. The FY1992 request highlighted the difficulty in simply using averages of past obligations. According to the justification, the average annual obligation from 1981 to 1989 of $270 million was exceeded by the FY1990 obligation of over $2 billion for costs related to Hurricane Hugo and the Lomo Prieta earthquake. The FY1994 request included a great deal of information on prior-year activities, discussing these elements in the context of average levels of obligations, and noting the impact of larger disasters in prior years, but did little to specifically justify the request level of $292 million. For FY1995, the budget discussion evolved, as FEMA justified the request on the basis of the first five years of activities under the Stafford Act, and the series of major disasters that had struck. The use of the five-year average continued through the 1990s and early 2000s, with disaster support costs—the costs of maintaining disaster response capabilities that are not attributable to a specific disaster—included as well. Certain very large disasters were not included in the average. For example, for FY1999, FEMA explicitly excluded the costs of the Northridge earthquake, plus disaster support costs. For FY2003, not only was Northridge excluded from the average, but so were the impacts of the 9/11 terrorist attacks. By FY2009, the justification had again evolved: \"Coupled with funding from recoveries of prior year obligations and unobligated funds carried forward, the appropriation request will fund the five-year average obligation level for direct disaster activity (excluding extraordinary events, such as the terrorist attack of September 11, 2001, the 2004 hurricanes in Florida and other states, and Hurricanes Katrina, Rita, and Wilma in 2005 and 2006 and excluding disaster readiness and support functions).\" In FY2011, the Administration simplified the request language by referring to disasters that cost less than $500 million as \"non-catastrophic disaster activity.\" That year, in addition to the request for the DRF based on the five-year average of \"non-catastrophic\" disaster relief obligations, the Administration made a concurrent request for $3.6 billion for the costs of prior catastrophic storms and wildfires. The 2010s saw continued debate on deficit spending, coupled with a continuing desire to fund disaster relief programs. When Congress passed the Budget Control Act of 2011 ( P.L. 112-25 ), it created statutory caps on spending as well as a special mechanism to exempt some of the costs of major disasters from those caps. (See \" Changes in the Budget Process \" for details.) A $500 million reserve fund was included in the Administration's budget request for FY2012. This was intended to help ensure resources were available on short notice in hurricane season. This rose to $1 billion in FY2015. For FY2019, the reserve request increased to $2 billion \"due to the uncertainty around the availability of additional supplemental funding to continue addressing the 2017 hurricanes.\" In FY2013, FEMA shifted from using a 5-year average to using a 10-year average of non-catastrophic obligations, plus the estimated requirements for past catastrophic disasters, plus the reserve, as the basis for their overall DRF request. At times, the Administration and Congress have examined methods of speeding up or broadening the availability of funds to address emergencies and disasters by changing how they were appropriated. Examples of this include the use of contingent appropriations and the proposal to establish a reserve fund for disaster relief. In some of its first exercises of the emergency designation, Congress chose to provide a portion of the appropriation for the DRF as emergency-designated budget authority contingent on the Administration specifically requesting the additional funds and designating them as an emergency requirement. An example of this structure can be found in P.L. 103-75 , a supplemental appropriations bill for FY1993: For an additional amount for ''Disaster relief\", $1,735,000,000, and in addition, $265,000,000, which shall be available only to the extent an official budget request for a specific dollar amount, that includes designation of the entire amount of the request as an emergency requirement as defined in the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, is transmitted by the President to Congress, to remain available until September 30, 1997, for the Midwest floods and other disasters: Provided , That the entire amount is designated by Congress as an emergency requirement pursuant to section 251(b)(2)(D)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and title I, chapter II, of Public Law 102-229. The FY2002 annual disaster relief appropriation was the last annual appropriation that included this type of contingent appropriation. While current appropriations requests for the DRF include a special appropriated reserve within the DRF for unanticipated catastrophic disasters, the concept of a budgetary reserve fund outside the DRF has also been proposed in the past, which would enable appropriations for broader non-Stafford disaster relief initiatives. In FY2002, alongside a request for the DRF that included disaster support costs and funding for prior-year disasters, the Administration proposed the creation a of $5.6 billion National Emergency Reserve allowance to support the costs of \"significant new disasters.\" The DRF, the Small Business Administration (SBA) Disaster Loan Program, and wildfire programs at the Department of Agriculture and Department of the Interior would have been the primary recipients of this funding. The annual reserve would have been established in the budget resolution, and based on the average annual spending on \"extraordinarily large events.\" It would have been allocated to the appropriations subcommittees to fund presidential requests for emergency requirements if two criteria were met: \"the events were sudden, urgent, unforeseen, and not permanent; and adequate funding for a normal year has been provided for the applicable program by the Appropriations Committees.\" Unused reserve amounts could be rolled over into the next year. The proposal was not ultimately adopted. The federal government has defined a role for itself in emergency management and disaster recovery, as a backstop for state, local, territorial, and tribal governments, with roles in providing limited relief for individuals and support for mitigation efforts. FEMA's DRF appropriation funds a great deal of the federal effort. As the DRF appropriation is simply an amount of budget authority provided to support a role in disasters that is defined through separately crafted laws and policies, many of the issues related to the DRF are less about the appropriation than they are about that separately defined federal role. Despite the magnitude of funding provided through the DRF for a range of activities and programs, other appropriations support disaster-related activities in other departments and agencies. As noted earlier, HUD, USDA, DOT, DOD, and SBA all fund various disaster relief and recovery programs. At various times in the past, efforts have been made to fund activities through the DRF that are not part of the current portfolio of Stafford Act programs. The Stafford Act already encompasses a wide range of emergency management, disaster relief, and disaster response activities. Making non-Stafford programs eligible for DRF funding is something Congress could choose to do, but it would not provide any obvious policy or budgetary advantage. Existing non-Stafford programs have their own funding streams, management, and oversight. Providing their resources through a new appropriation could complicate their funding stream and congressional oversight. While making the programs eligible for funding from the DRF could make additional budget authority available, it would be more transparent and direct for Congress to simply fund the program through its existing appropriation. There is no special budgetary treatment for appropriations for the DRF—only for appropriations which are designated for the costs of major disasters under the BCA. Shifting discretionary spending out of one appropriations subcommittee's jurisdiction into another provides no overall budgetary benefit—the total amount of spending remains the same. Subcommittee allocations are set and reset every year (sometimes multiple times each year) at the discretion of the House and Senate appropriations committees, so such a move could well result in no net impact on available resources. The concept of a broader funding stream providing discretionary resources for DRF, SBA, and USDA disaster relief programs has also been considered before. Such an idea, floated by a previous Administration but rejected by Congress, might have made more resources available in the immediate aftermath of a disaster, but it is not clear that reorganizing funding would make the programs subject to more thorough oversight or make them more effective. It could limit the ability of Congress to provide specific oversight or direction through appropriations to the separate programs. Congress could also break up the DRF into appropriations for the individual Stafford Act programs or groups of programs. This might allow for additional specific congressional oversight and direction, but it could reduce the flexibility that exists within the DRF to shift its resources to meet unanticipated disaster needs by segmenting the available resources. Appropriations are frequently provided on the basis of what can be spent on a project in a given fiscal year. This thinking informs part of the funding request, as it includes a basis of spending on open disasters, where recovery is ongoing. A 10-year average informs the portion of the DRF budget request that pays for response and recovery from disasters that cost less than $500 million. Previous and current Administrations have sought additional reserve funds over and above those projected needs to pay for potential \"no notice\" events. On the other hand, from FY2014 to FY2017, almost $2.5 billion in funding was rescinded from unobligated balances in the DRF. In the present constrained budget environment, Congress continues to weigh the proper level of reserves for FEMA to keep on hand in the DRF. While disaster relief is a relatively small part of the discretionary budget, and an even smaller part of the overall federal budget, disaster relief spending is anticipated to continue growing in the coming years. In modern history, Congress has been generally willing to provide resources for major disasters on an as-needed basis. However, discussions of deficit and debt continue in Congress, and may increase in frequency and volume as the Budget Control Act nears expiration in FY2021. The central question is this: Does disaster relief represent enough of a priority for the federal government to maintain the status quo notwithstanding potential increasing costs? When budget controls were put in place in the 1980s, 1990s, and 2010s, exceptions were provided to help ensure relief and recovery efforts would continue to be funded. With the expiration of the Budget Control Act statutory caps on discretionary spending, one limitation on disaster relief spending—albeit one with a limited practical effect, as noted above—will go away. The allowable adjustment for disaster relief will expire as well, which may have more of an impact, as Congress has used it to move disaster relief spending more fully into the annual appropriations process. The adjustment has effectively allowed most of the annual DRF appropriation to be provided without competing against other homeland security priorities for the discretionary funding provided under the Homeland Security appropriations subcommittee's allocation. Congress may consider whether they want that process to continue. Congress may also debate whether to try to limit disaster relief spending. The most direct means of doing this would not be to change the DRF appropriation, but by changing the underlying laws that authorize the programs it funds. Implementing relief limits or deductibles for states or smaller jurisdictions, larger nonfederal cost shares, or changes in the declaration process may prove unpopular, and having to vote for them once in more durable authorizing legislation may be more practical than doing so annually in appropriations legislation, which expires. ", "summary": "The Disaster Relief Fund (DRF) is one of the most-tracked single accounts funded by Congress each year. Managed by the Federal Emergency Management Agency (FEMA), it is the primary source of funding for the federal government's domestic general disaster relief programs. These programs, authorized under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended (42 U.S.C. 5121 et seq.), outline the federal role in supporting state, local, tribal, and territorial governments as they respond to and recover from a variety of incidents. They take effect in the event that nonfederal levels of government find their own capacity to deal with an incident is overwhelmed. The appropriation which feeds the DRF predates current disaster relief programs and FEMA itself. It dates back to a half-million dollar deficiency appropriation to the President in 1948 that was drafted to allow him to use these resources to provide temporary emergency assistance to communities in the wake of unspecified potential natural disasters. Although the appropriation was provided with one particular Upper Midwest flooding incident in mind, the legislative language allowed the funding to be used more broadly, if the President wished to do so. This policy of providing general disaster relief was a shift from previous policy, which largely left emergency management, disaster relief, and disaster recovery in the hands of other levels of government and private relief organizations. Prior to the development of the general relief program, when the federal government got involved in disaster response and recovery, it was on an ad hoc, case-by-case basis. By comparison, the annual appropriation for the DRF in FY2018—70 years after the initial appropriation for general disaster relief—was $7.9 billion. The evolving federal role in disaster relief is partially illuminated in the funding stream provided for it through the DRF. What is a fixture of federal policy today was not a given a century ago. Examining the history of the program and its funding through the DRF may help Congress consider future approaches to disaster relief. This report introduces the DRF and provides a brief history of federal disaster relief programs. It goes on to discuss the appropriations that fund the DRF, and provides a funding history from FY1964 to the present day, discussing factors that contributed to those changing appropriations levels. It concludes with discussion of how the budget request for the DRF has been developed and structured, given the unpredictability of the annual budgetary impact of disasters, and raises some potential issues for congressional consideration. This report is updated on an annual basis.", "document_type": "crs"}
{"report": "In early 2018, the Trump Administration—citing concerns over national security and unfair trade practices—imposed increased tariffs on certain imported products in general and on U.S. imports from China in particular. Several of the affected foreign trading partners responded to the U.S. tariffs with their own retaliatory tariffs targeting various U.S. products, especially agricultural commodities. On July 24, 2018, Secretary of Agriculture Sonny Perdue announced that the U.S. Department of Agriculture (USDA) would be taking several temporary actions to assist farmers in response to trade damage from what the Administration has characterized as \"unjustified retaliation.\" Specifically, USDA would authorize up to $12 billion in financial assistance—referred to as the \"trade aid\" package—for certain agricultural commodities under Section 5 of the Commodity Credit Corporation (CCC) Charter Act (15 U.S.C. 714c). The Secretary said that most of the funding would go to agricultural commodities most directly affected by the trade retaliation—corn, cotton, soybeans, sorghum, wheat, hogs, and dairy (sweet cherries and almonds were added to this list in September)—but that some funding would also be used for the purchase, distribution, and trade promotion of a variety of affected commodities. The trade-aid package includes a Market Facilitation Program (MFP) of direct payments to affected producers, a Food Purchase and Distribution Program, and an Agricultural Trade Promotion (ATP) program. Payments under the MFP program would be made in two rounds: a first round announced on August 27, 2018, initially valued at $4.7 billion; and an equivalent-valued second round announced on December 17, 2018. Secretary Perdue stated that there would not be further trade-related financial assistance beyond this $12 billion package as producers would be able to adjust their production activities in 2019 to reflect market conditions related to the trade dispute. This report provides background on the trade dispute that triggered the trade-aid package as well as the authority used by USDA to respond to the trade dispute with financial assistance. Then the report describes the three components of the trade-aid package with details on their implementation. In March 2018, the Trump Administration began applying a 25% tariff to U.S. steel imports and 10% tariff to U.S. aluminum imports from certain countries, citing national security concerns. In April, in response to alleged unfair trade practices by the Chinese government, the Administration placed additional tariffs on a number of Chinese products that are exported to the United States. China, Canada, Mexico, the European Union, and Turkey subsequently enacted retaliatory tariffs on U.S. food and agricultural products, in addition to other goods, in response to the U.S. actions. The retaliatory tariffs from those countries now apply to more than 800 U.S. food and agricultural products across meats, grains, dairy products, specialty and horticultural crops, seafood, and alcoholic beverages. The export value for the targeted products to the retaliating countries totaled about $26.9 billion in 2017—about 18% of total U.S. agricultural exports. China, which is subject to the largest set of U.S. tariff increases—including both the U.S. steel and aluminum tariffs and the U.S. tariffs in response to unfair trade practices—also has the most expansive list of retaliatory tariffs. All told, China, which was the second-leading export market by value for U.S. food and agriculture products in 2017, has levied retaliatory tariffs on about 800 U.S. food and agricultural products that were worth about $20.6 billion in exports to that country in 2017. Among China's retaliatory tariffs is a 25% tariff on soybeans, its top agricultural product import by value from the United States. China imported about $12 billion worth of U.S. soybeans in 2017, accounting for 57% of the value of all U.S. soybean exports that year. With the higher tariffs in place, China is now purchasing more soybeans from Brazil and elsewhere to meet its demand. China has also targeted other key U.S. products, including sorghum, wheat, pork and pork offal, dairy products, fruits and nuts, seafood, and whiskey. Among other countries, Canada—the leading export market for U.S. agriculture and food products in 2017—has imposed retaliatory tariffs of 10% on about 20 food and agricultural products, mostly processed foods. U.S. exports of those products to Canada in 2017 were valued at $2.6 billion. Mexico, the third-leading export market for U.S. agriculture and food products by value in 2017, has imposed tariffs ranging from 15% to 25% on cheese, pork, and some prepared foods. U.S. exports of those products to Mexico were valued at about $2.5 billion in 2017. The European Union has levied tariffs on a small number of U.S. prepared foods, corn, and rice, which were worth about $1 billion in 2017. Turkey has imposed retaliatory tariffs on U.S. nuts, rice, and some prepared foods, imports of which amounted to some $250 million in 2017. U.S. agriculture and food products have been targeted with increased tariffs by foreign nations for several reasons. First, the United States exports a large amount of agriculture and food products, so many countries have the choice of retaliating against those goods. Second, agricultural commodities are easily substituted from among potential suppliers, so curbing imports from one country would not necessarily limit an importing country's access to the commodity. For example, China has turned primarily to Brazil for more of its soybean imports. Third, given the geographic nature of the production of some agriculture and food products, countries can target certain goods in order to negatively and disproportionately affect the constituents of specific U.S. lawmakers. For example, all of the retaliating countries have imposed retaliatory tariffs on whiskey, some specifically on Bourbon whiskey, which is largely produced in Kentucky, rather than on all distilled beverages or alcohol more generally. The primary authority for the trade aid package is the Secretary of Agriculture's discretion to use the general powers of the CCC. The CCC is a wholly government-owned entity that exists solely to finance authorized programs that support U.S. agriculture. It is federally chartered by the CCC Charter Act of 1948 (P.L. 80-806; 15 U.S.C. 714 et seq. ), as amended. Most CCC-funded programs are classified as mandatory spending programs and therefore do not require annual discretionary appropriations in order to operate. The CCC instead borrows from the U.S. Treasury to finance its programs consistent with its permanent, indefinite authority to borrow up to $30 billion. Congress replenishes the CCC borrowing authority by appropriating funding to cover the CCC's net realized losses. Typically, Congress passes laws, such as omnibus farm bills, that specifically direct USDA on how to administer CCC activities and in what amounts to fund them. The underlying authorization for the CCC, however, also provides the Secretary with general powers to take certain actions in support of U.S. agriculture at the discretion of the Secretary. This discretionary use has historically been somewhat intermittent and limited in its scale, but it is the basis of the MFP and ATP announced by the Administration. USDA also has discretionary authority to purchase U.S. agricultural commodities under a provision known as Section 32. The name refers to its authorization in Section 32 of the act of August 24, 1935 (P.L. 74-320; 7 U.S.C. 612c), as amended. Most of Section 32's mandatory funding is transferred to the USDA's child nutrition account, but the Secretary has broad discretion in how to spend the remaining unallocated funding—some of which is used to purchase agricultural commodities. The premise is that removing products from normal marketing channels helps to reduce supply and thereby increase prices and farm income. Purchased commodities are diverted to domestic food assistance programs as discussed below (see \" Food Purchase and Distribution Program \"). The Administration's trade aid announcement does not specify whether the CCC or Section 32 authority is being used to make the purchases under the announced Food Purchase and Distribution Program. However, the scale of the $1.2 billion program indicates that the CCC is most likely the source since the typical annual amount of funding available in Section 32 for purchases is rarely more than half of this amount. Whether from the CCC or Section 32, the Administration's purchases appear to use distribution channels similar to those under Section 32. On August 27, 2018, Secretary Perdue announced the first round of trade assistance. As part of the August 27 announcement, Secretary Perdue provided details on each of the three trade aid package components, including an initial tranche of $6.1 billion in designated outlays out of a potential $12 billion in total program spending. The MFP was to provide initial estimated direct payments of $4.7 billion to qualifying agricultural producers. A Food Purchase and Distribution Program is to undertake $1.2 billion in government purchases of excess food supplies. The ATP program, funded with an additional $200 million, is to help finance foreign market development for affected agricultural products. On December 17, 2018, Secretary Perdue revised the first round of MFP outlays upward slightly to $4.8 billion, and announced an equivalent $4.8 billion in potential second-round outlays. The MFP provides direct financial assistance to producers of commodities that are significantly impacted by actions of foreign governments resulting in the loss of traditional exports. USDA initially determined that qualifying commodities include corn, upland cotton, extra-long-staple cotton, sorghum, soybeans, wheat, dairy, and hogs. On September 21, 2018, USDA announced that fresh sweet cherries and shelled almonds are also eligible for MFP payments. USDA's Farm Service Agency (FSA) is to administer the MFP by providing payments in two potential tranches. However, producers need only sign up once for the MFP to be eligible for first and second payments. Under the sign-up period, producers can submit MFP applications beginning on the following dates: September 4, 2018, for producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs; and September 24, 2018, for producers of shelled almonds and fresh sweet cherries. Eligible producers should apply after their harvest is complete. Initially, producers were given a deadline of January 15, 2019, to complete an application. However, USDA extended the deadline to February 14 due to a partial shutdown of the federal government. The current deadline for producers to certify their 2018 production is May 1, 2019. USDA used 2017 production data to estimate that approximately $9.6 billion would be distributed in MFP payments for corn, cotton, sorghum, soybeans, wheat, dairy, hogs, fresh sweet cherries, and shelled almonds, with over three-fourths ($7.3 billion) of MFP payments provided to soybean producers ( Table 1 ). U.S. producers of corn, cotton, sorghum, soybeans, wheat, dairy, hogs, fresh sweet cherries, and shelled almonds are eligible for MFP payments at this time. Eligible applicants must have an ownership interest in the commodity and be actively engaged; have an average adjusted gross income for tax years 2014, 2015, and 2016 of less than $900,000 per year; comply with the provisions of the \"Highly Erodible Land and Wetland Conservation\" regulations, often called the conservation compliance provisions. USDA determined MFP payments based on its estimated \"direct trade damage\"—that is, the difference in expected trade value for each affected commodity with and without the retaliatory tariffs ( Table A-3 ). The estimated \"trade damage\" for each affected commodity was then divided by the crop's production in 2017 to derive a per-unit payment rate. Indirect effects—such as any decline in market prices and resultant \"lost value\" for many of the affected commodities—are not included in the payment calculation (see Appendix B ). USDA's trade-aid package is thus linking MFP commodity payments only to the trade loss associated with each identified MFP commodity. Neither final trade effect, with or without retaliatory tariffs, is observable because much of the affected agricultural production had yet to be harvested and sold at the time the payment rates were calculated, and markets had yet to fully adjust to whatever new trade patterns would emerge from the trade dispute. As a result, USDA estimated both export values (with and without retaliatory tariffs) using a global trade model that took into account the availability of substitute supplies from export competitors, and the availability of demand for U.S. agricultural exports from alternate importers. MFP payments are tied directly to a producer's actual level of production of eligible commodities in 2018. A producer's total potential MFP payment for an eligible commodity equals the announced payment rate per unit (see column two of Table 1 ) times the harvested (and certified) production during 2018 or in the case of hogs, the inventory during the period of July 15 to August 15, 2018. During the first payment period (announced by USDA on September 27), MFP payments were set equal to the announced MFP payment rate times 50% of a producer's harvested (and certified) production. The second payment rate (announced on December 17) applied to the remaining 50% of the producer's production. The MFP is separate from and in addition to the current safety net support provided by the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) support programs or crop insurance coverage where revenue insurance protects against low prices, low yields, or a combination of both. Furthermore, by coupling the payments directly to production, those regions of the country where drought or other yield-reducing factors have negatively impacted production during 2018 may receive less aid through MFP than other regions. According to USDA, as of February 7, 2019, $6.4 billion in payments have been made to farmers. FSA offices closed on December 28, 2018, due to a lack of funding under the government shutdown. Producers who have not yet applied for payments or certified their 2018 production must wait for FSA offices to reopen before receiving MFP payments. However, USDA has said that producers that have already applied and certified their 2018 production will continue to receive MFP payments during the government shutdown. USDA announced that MFP payments are capped on a per-person or per-legal-entity basis under three separate payment limits: a combined $125,000 for eligible crops (corn, cotton, sorghum, soybeans, and wheat), a combined $125,000 for livestock (dairy production and hogs), and a combined $125,000 for eligible specialty crops (fresh sweet cherries and shelled almonds). Furthermore, MFP payments do not count against other 2014 farm bill payment limitations. There are no criteria in place to calculate whether losses covered under revenue support programs (e.g., ARC and PLC) of the 2014 farm bill might be duplicated by MFP. As a result, the same program acres that are eligible for ARC or PLC payments may be eligible for MFP payments. Due to its potential price tag ($12 billion) and the coupled nature of the MFP payments, there is considerable interest from policymakers and market observers about whether these payments will be fully compliant with World Trade Organization (WTO) commitments. It would appear that, if the United States restricts MFP payments to $12 billion or less, and its other amber box payments adhere to the recent annual average of $4.9 billion since 2010, then total U.S. amber box payments would be below its $19.1 billion limit on trade-distorting farm subsidies at the WTO. However, several economists have suggested there is considerable uncertainty in how much the eventual MFP payments will be. For example, Darci Vetter, former chief U.S. agricultural negotiator at the Office of the U.S. Trade Representative, said that current low agricultural commodity prices cause her to worry that billions of dollars in \"additional payments will put us over our [amber box] $19 billion cap,\" exposing the United States to a potential legal challenge. Joe Glauber, a former USDA chief economist, stated, \"I would be very hesitant to say categorically, 'No, we're not going to hit our $19.1 [billion ceiling].'\" While soybean growers and most farm-advocacy groups have generally been supportive of the payments, some commodity groups—most notably associations representing corn, wheat, and milk—contend that the MFP payments are insufficient to fully compensate their industries (see Table A-4 and Appendix B for a comparison of \"trade loss\" and \"market loss\"). The National Corn Growers Association claims that recent trade disputes have lowered corn prices by $0.44/bu. for a loss of $6.3 billion on the projected 2018 harvest. Similarly, the National Association of Wheat Growers estimates that a $0.75/bu. price decrease will result in nearly $2.5 billion in lost value, while the National Milk Producers Federation calculates that milk prices are now estimated to be $1.10/cwt. lower than just prior to the trade retaliation, causing over $1.2 billion in losses based on milk futures prices. Many specialty crop groups similarly contend that their interests are not being fully compensated for tariff-related export losses by the USDA trade aid programs. For example, a recent study suggests that, in California alone, specialty crops may suffer trade-related losses of over $3.3 billion this year. The Administration is allocating about $1.2 billion of its trade aid package to purchasing various agricultural commodities and distributing them through domestic nutrition assistance programs. USDA typically purchases agricultural commodities for domestic distribution in two ways: (1) \"entitlement purchases\" for the mandated, preplanned needs of a feeding program; and (2) \"contingency purchases\" (also called \"bonus buys\") that are usually triggered as a surplus removal mechanism to raise market prices of a commodity without displacing normal demand. The new $1.2 billion of purchases is under the second category of contingency purchases. Contingency purchases are statutorily authorized under the Secretary's discretion to support agriculture by making purchases under the CCC or Section 32 as discussed above. These are mandatory funds and do not need to be appropriated. When USDA purchases commodities, especially for distribution to nutrition assistance programs, the Agricultural Marketing Service (AMS) announces its purchasing intentions with product specifications. Vendors who are approved to sell to USDA may submit offers. The purchased products would be distributed through regular USDA nutrition assistance channels that provide in-kind assistance, such as food banks participating in the Emergency Food Assistance Program, the Commodity Supplemental Food Program, child nutrition programs such as the National School Lunch Program, and the Food Distribution Program on Indian Reservations. However, not all of these programs have the authority to accept contingency/bonus purchases. The Administration's August 27 announcement listed 29 commodities targeted for purchases totaling $1.2 billion ( Table A-1 ). It also mentions two additional commodities (sweet cherries and almonds) that total $175 million, with program details to be determined ( Table A-2 ). The announced purchase values were set for each affected commodity using the same gross trade damage formula that was used to calculate the MFP per-unit payment rate described earlier. The largest purchases that were announced include pork ($559 million), apples ($93 million), dairy ($85 million), and pistachios ($85 million). USDA said that the breadth of commodities and scale of purchases was based on economic analyses of the effect of tariffs. Purchasing orders and distribution activities are to be adjusted based on the demand by the recipient food assistance programs geographically. As of December 17, 2018, USDA had procured some portion of 16 of the 29 commodities included in the program, totaling more than 4,500 truckloads of food. USDA's AMS will continue purchasing commodities for delivery throughout 2019. In FY2017, the AMS purchased $2.2 billion of commodities for distribution for domestic nutrition assistance. Of this total, $735 million was from Section 32 ($270 million in contingency purchases that are most similar to those under the trade aid package and $465 million in entitlement purchases), and $1.5 billion was entitlement purchases from the USDA's Food and Nutrition Service budget. No purchases were made with CCC funds. Thus, the new program of contingency purchases is several times larger than a typical annual amount and a relatively large increase in the amount distributed through nutrition programs. The third and smallest element of the trade aid package is the ATP program. The Administration is allocating $200 million of the trade aid package to boost trade promotion efforts of USDA's Foreign Agricultural Service (FAS). The program is to operate in a manner similar to FAS's Market Access Program (MAP) and Foreign Market Development Program (FMDP). These funds are to provide cost-share assistance to eligible U.S. agricultural organizations to promote U.S. food and agricultural goods overseas and develop new markets to help offset the adverse effects of the retaliatory tariffs. The money—which would nearly double the amounts made available annually for the MAP and FMDP trade promotion programs for one year—can be used for such activities as consumer advertising, public relations, point-of-sale demonstrations, participation in trade fairs and exhibits, market research, and technical assistance. Further, ATP money is not limited to certain commodities and is to be available to all sectors of agriculture. While the $200 million for ATP is considerably less than the other programs in the trade aid package, it is a notable increase for USDA's trade promotion programs, which are authorized at $234 million annually. Though all sectors of agriculture can apply for ATP funding through eligible U.S. organizations, it is unclear whether USDA intends to give preference to certain commodities—such as those that are not eligible for other programs under the trade aid package or those most impacted by the tariffs. The application period for ATP closed in November 2018 with more than $600 million in requested activities from more than 70 organizations. On January 31, 2019, USDA's FAS announced the full $200 million in ATP funding awards. The broad discretionary authority granted to the Secretary under the CCC Charter Act to implement the trade aid package also allows the Secretary to determine how the aid is to be calculated and distributed. Using this authority is not without precedent, but the scope and scale of its use for the trade aid package has increased congressional and public interest. USDA has declared this trade aid package to be a temporary, one-time response to foreign tariffs imposed on selected U.S. commodities. Most farm commodity and advocacy groups have been supportive of the trade aid package even as they have called for solutions that restore export activity. However, some stakeholders have begun to question the equity of the distribution of MFP payments due to difficulties in isolating specific market effects and the initial lack of transparency around the formulas for determining MFP payment rates. Now that the formulas are public, several commodity groups question the rationale for determining MFP payments based on \"trade damage\" rather than the broader \"market loss\" measure. Some trade economists and market watchers have suggested that the potential effects of the trade aid package and the imposition of tariffs and retaliatory tariffs could be longer lasting because they have created uncertainty about U.S. trade policy behavior and have called into question U.S. reliability as a trading partner. Further, the use of CCC authority to mitigate tariff-related losses may establish a precedent for future situations. Appendix A. Food Purchases in the Trade Aid Package Appendix B. Trade Loss versus Opportunity Cost USDA has elected to base MFP payments strictly on estimated trade loss. In contrast, several commodity groups have calculated the \"lost market value\" and view it as a better measure of the economic damage from the retaliatory tariffs (see \" Industry Response to MFP Payment Allocation \"). These two \"loss\" measures are described here. Trade Loss Trade loss is the value of lost export sales due to a change in foreign demand ( Table A-3 ). With respect to retaliatory tariffs, it is the difference in U.S. agricultural exports with and without the tariffs. It also appears in USDA export forecasts. For example, in May 2018, USDA forecast U.S. agricultural export sales to China for FY2018 of $21.6 billion; by August 2018, USDA had revised its forecast down to $19 billion and initially projected agricultural export sales to China in FY2019 of only $12 billion. Thus, from May to August the U.S. agricultural export outlook to China had declined by $2 billion, while the FY2019 forecast had fallen by as much as $9 billion. Lost Market Value (or the Opportunity Cost of Missed Sales) Lost market value describes the opportunity cost of missed sales associated with a drop in market prices. For example, if soybean prices were $10.00 per bushel in March and $8.00 per bushel in October, the opportunity cost of not selling in March (whether from on-farm stocks or by forward contracting the crop in the field) but instead waiting to sell after harvest in October would be $2.00 per bushel. All physical quantities of a commodity available on the farm—including commodities in storage as well as in the field—are potentially subject to a missed sales opportunity. Furthermore, until the producer actually sells the commodity, the realized market value and true opportunity cost remain unknown. What Is the Correct Cost? If a trade dispute contributes to a drop in the market price of a commodity, then the associated \"lost market value\" would affect all quantities of the affected commodity, whether exported or used domestically. This appears to be the type of \"loss\" being measured by most U.S. commodity groups. However, the retaliatory tariffs are only one of a number of factors that influence market prices. In particular, the outlook for record U.S. soybean and near-record corn harvests in 2018 has likely had an important effect on pressuring market prices lower during the May to September period. This production effect should be excluded from any estimate of trade-based market loss. Changes in USDA's monthly price forecasts from May to September may provide an upper-bound estimate of the trade impacts ( Table A-4 ), since this period coincides with the escalating trade conflicts when the retaliatory tariffs were applied. However, they include the production effect and thus likely overstate any trade impact. According to USDA, during the May-September period, farm prices for MFP commodities declined 18% for soybeans, 8% for sorghum, and 8% for corn but rose 2% for wheat and 15% for cotton. At first glance, these price changes seem out of sync with the MFP payment rates. Sorghum could receive a payment rate that is nearly three times as large as its estimated price decline from May to September. In contrast, corn—which has experienced a price decline identical to sorghum—could receive a payment rate that amounts to 3% of the price decline that corn prices experienced over this same period. However, given the number of factors influencing market prices over this period, it may not be possible to establish with confidence what market prices would have been in the absence of the retaliatory tariffs. Any viable estimate would have to be generated from a global economic model featuring all major agricultural commodities that compete for land and other inputs in production; may substitute for each other in alternative uses; and captures the interactions of all relevant market factors such as policy, technology, and expected prices, production, and demand. For example, wheat and cotton are to receive per-unit MFP payment rates while experiencing an increase in farm prices during the May-September period. However, 2018 has been a year of poor international wheat harvests, and it could be that wheat prices might have moved to much higher levels in the absence of retaliatory tariffs.", "summary": "In early 2018, the Trump Administration—citing concerns over national security and unfair trade practices—imposed increased tariffs on certain imported products in general and on U.S. imports from China in particular. Several of the affected foreign trading partners (including China) responded to the U.S. tariffs with their own retaliatory tariffs targeting various U.S. products, especially agricultural commodities. On July 24, 2018, Secretary of Agriculture Sonny Perdue announced that the U.S. Department of Agriculture (USDA) would be taking several temporary actions to assist farmers in response to trade damage from what the Administration has characterized as \"unjustified retaliation.\" Specifically, the Secretary said that USDA would authorize up to $12 billion in financial assistance—referred to as a trade aid package—for certain agricultural commodities using Section 5 of the Commodity Credit Corporation (CCC) Charter Act (15 U.S.C. 714c). USDA intends for the trade aid package to provide short-term assistance in response to the ongoing trade disputes. However, the Secretary stated that there would not be further trade-related financial assistance beyond this $12 billion package. The aid package includes (1) a Market Facilitation Program (MFP) of direct payments (valued at up to $10 billion) to producers of soybeans, corn, cotton, sorghum, wheat, hogs, and dairy who are most affected by the trade retaliation (sweet cherries and almonds were added to this list in September); (2) a Food Purchase and Distribution Program to partially offset lost export sales of affected commodities ($1.2 billion); and (3) an Agricultural Trade Promotion (ATP) Program to expand foreign markets ($200 million). USDA's Farm Service Agency will administer the MFP by providing payments in two potential tranches: a first round announced on August 27, 2018, initially valued at $4.7 billion; and an equivalent-valued second round announced on December 17, 2018. However, producers need only sign up once for the MFP to be eligible for first and second payments. The sign-up period for soybeans, corn, cotton, sorghum, wheat, hogs, and dairy started September 4, 2018. The sign-up period for fresh sweet cherries and shelled almonds started on September 24. To be eligible, a producer must have an ownership share in the commodity, be actively engaged in farming, and be in compliance with adjusted gross income restrictions and conservation provisions. Eligible producers should apply after their harvest is complete. Initially, producers were given a deadline of January 15, 2019, to complete an application. However, USDA extended the deadline until February 14, 2018, due to the government shutdown. USDA used 2017 production data to estimate that approximately $9.6 billion would be distributed in MFP payments for corn, cotton, sorghum, soybeans, wheat, dairy, hogs, fresh sweet cherries, and shelled almonds, with over three-fourths ($7.3 billion) of MFP payments provided to soybean producers. MFP payments are capped on a per-person or per-legal-entity basis at a combined $125,000 for eligible crop commodities, a combined $125,000 for dairy production and hogs, and, separately, a combined $125,000 for fresh sweet cherries and shelled almonds. In addition to the MFP payments, the Administration announced a Food Purchase and Distribution Program that is to undertake $1.2 billion in government purchases of excess food supplies. USDA has targeted an initial 29 commodities for purchases and distribution through domestic nutrition assistance programs. Purchasing orders and distribution activities are to be adjusted based on the demand by the recipient food assistance programs geographically. The smallest piece of the trade aid package is an allocation of $200 million to the ATP to boost the trade promotion efforts at USDA's Foreign Agricultural Service, including foreign market development for affected agricultural products. On January 31, 2019, USDA awarded $200 million to 57 organizations through ATP. USDA's use of its discretionary authority under the CCC Charter Act to make direct payments without further congressional action has historically been somewhat intermittent and limited in its scale. While the use of this authority is not without precedent, the scope and scale of this trade aid package has increased congressional and public interest. Furthermore, the significant variation in the announced MFP payment rates for affected commodities has elicited questions about equitable treatment among affected commodities. On September 13, USDA released a description of its MFP payment methodology, which is based strictly on the estimated direct trade \"damage\"—that is, export losses resulting from retaliatory tariffs. Indirect effects—such as the decline in market prices and resultant \"lost value\" for many of the affected commodities—were not included in the payment calculation.", "document_type": "crs"}
{"report": "The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; programs to increase small business opportunities in federal contracting; direct loans for businesses, homeowners, and renters to assist their recovery from natural disasters; and access to entrepreneurial education to assist with business formation and expansion. It also administers the Small Business Investment Company (SBIC) program. Authorized by P.L. 85-699, the Small Business Investment Act of 1958, as amended, the SBIC program is designed to \"improve and stimulate the national economy in general and the small-business segment thereof in particular\" by stimulating and supplementing \"the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply.\" The SBIC program was created to address concerns raised in a Federal Reserve Board report to Congress that identified a gap in the capital markets for long-term funding for growth-oriented small businesses. The report noted that the SBA's loan programs were \"limited to providing short-term and intermediate-term credit when such loans are unavailable from private institutions\" and that the SBA \"did not provide equity financing.\" Equity financing (or equity capital) is money raised by a company in exchange for a share of ownership in the business. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time. The Federal Reserve Board's report concluded there was a need for a federal government program to \"stimulate the availability of capital funds to small business\" to assist these businesses in gaining access to long-term financing and equity financing. Facilitating the flow of capital to small businesses to stimulate the national economy was, and remains, the SBIC program's primary objective. The SBA does not make direct investments in small businesses. It partners with privately owned and managed SBICs licensed by the SBA to provide financing to small businesses with private capital the SBIC has raised (called regulatory capital) and with funds (called leverage) the SBIC borrows at favorable rates because the SBA guarantees the debenture (loan obligation). As of December 31, 2018, there were 305 licensed SBICs participating in the SBIC program. In FY2018, the SBA provided $2.52 billion in leverage to SBICs. In recent years, some Members of Congress have argued that the program should be expanded as a means to stimulate economic activity and create jobs. For example, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased the annual amount of leverage the SBA is authorized to provide to SBICs to $4 billion from $3 billion and P.L. 114-113 , the Consolidated Appropriations Act, 2016, increased the amount of outstanding leverage allowed for two or more SBIC licenses under common control (the multiple licenses/family of funds limit) to $350 million from $225 million. In addition, P.L. 115-187 , the Small Business Investment Opportunity Act of 2017, increased the amount of outstanding leverage allowed for individual SBICs to $175 million from $150 million. Others worry that an expanded SBIC program could result in losses and increase the federal deficit. In their view, the best means to assist small business, promote economic growth, and create jobs is to reduce business taxes and exercise federal fiscal restraint. Some Members and small business advocates have also proposed that the program target additional assistance to startup and early stage small businesses, which are generally viewed as relatively risky investments but also as having a relatively high potential for job creation. For example, during the 113 th Congress, S. 1285 and H.R. 30 , the Small Business Investment Enhancement and Tax Relief Act, would have authorized the Administration to establish a separate SBIC program for early stage small businesses. In addition, as part of the Obama Administration's Startup America Initiative, the SBA established a five-year, $1 billion early stage SBIC initiative in 2012. Early stage SBICs are required to allocate at least 50% of their investments in early stage small businesses, defined as small businesses that have never achieved positive cash flow from operations in any fiscal year. The SBA stopped accepting new applicants for the early stage SBIC initiative in 2017. In addition, on June 11, 2018, the SBA withdrew a proposed rule published on September 19, 2016, to amend the initiative to make it \"more attractive and ... a permanent part of the SBIC program.\" The SBA indicated that it withdrew the proposed rule \"because very few qualified funds applied to the Early Stage SBIC initiative, the costs were not commensurate with the results, and the comments to the proposed rule did not demonstrate broad support for a permanent Early Stage SBIC program.\" This report examines the SBIC program's structure and operations, focusing on SBIC eligibility requirements, investment activity, and program statistics. It includes information concerning the SBA's debenture SBIC program, participating securities SBIC program, impact investment SBIC program (targeting underserved markets and communities facing barriers to access to credit and capital), and early stage SBIC initiative. This report also discusses legislative efforts that led to an increase in (1) the maximum annual leverage the SBA is authorized to provide to SBICs and (2) the maximum amount of outstanding leverage allowed for two or more SBIC licenses under common control. There are two types of SBICs. Investment companies licensed under Section 301(c) of the Small Business Investment Act of 1958, as amended, are referred to as original , or regular, SBICs. Investment companies licensed under Section 301(d) of the act, called Specialized Small Business Investment Companies (SSBICs), focus on providing financing to small business entrepreneurs \"whose participation in the free enterprise system is hampered because of social or economic disadvantage.\" Section 301(d) was repealed by P.L. 104-208 , the Omnibus Consolidated Appropriations Act, 1997 (Title II of Division D, the Small Business Programs Improvement Act of 1996). As a result, no new SSBIC licenses have been issued since October 1, 1996. However, existing SSBICs were \"grandfathered\" and allowed to remain in the program. With few exceptions, SBICs and SSBICs are subject to the same eligibility requirements and operating rules and regulations. Therefore, the term SBIC is usually used to refer to both SBICs and SSBICs. Five types of regular SBICs exist. Debenture SBICs, impact investment SBICs, and early stage SBICs receive leverage through the issuance of debentures. Debentures are debt obligations issued by SBICs and held or guaranteed by the SBA. P articipating securities SBICs receive leverage through the issuance of participating securities. Participating securities are redeemable, preferred, equity-type securities, often in the form of limited partnership interests, preferred stock, or debentures with interest payable only to the extent of earnings. Bank-owned , non-leveraged SBICs do not receive leverage. This report focuses on the four types of regular SBICs that receive leverage from the SBA. A SBIC can be organized in any state as either a corporation, a limited partnership (LP), or a limited liability company (LLCs must be organized under Delaware law). Most SBICs are owned by relatively small groups of local investors, although many are partially owned, and some (47 of 305) are wholly owned, by commercial banks. A few SBICs are corporations with publicly traded stock. One of the primary criteria for licensure as a SBIC is having qualified management. The SBA reviews and approves a prospective SBIC's management team based upon its professional capabilities and character. Specifically, the SBA examines the SBIC's management team and looks for at least two principals with substantive and analogous principal investment experience; realized track record of superior returns, based on an overall evaluation of appropriate quantitative performance measures; evidence of a strong rate of business proposals and investment offers (deal flow) in the investment area proposed for the new fund; a cohesive management team, with complementary skills and a history of working together; managerial, operational, or technical experience that can add value at the portfolio company level; and a demonstrated ability to manage cash flows so as to provide assurance the SBA will be repaid on a timely basis. Applying for a SBIC debenture license is a multi-step process, beginning with the submission of the SBA Management Assessment Questionnaire (MAQ) and an initial, nonrefundable licensing fee of $10,000. The questionnaire includes, among others, questions concerning the fund's legal name and the name and addresses of its principals and control persons; the fund's investment strategy (including geographic focus, industry focus, diversification strategy, primary types of securities to be used, whether it plans to be primarily an equity or debt investor, etc.); the management team's history and professional experience; the fund's investment decisionmaking process, from deal origination to portfolio monitoring; the fund's economics (including a description of the fund's carried interest, the formula used to calculate management fees and the fund's policy on the allocation of fees between the fund and any management or other affiliated entities, details concerning compensation the principals earn outside of this partnership, etc.); the fund's capitalization (including investment strategy, whether a placement agent has been or will be hired, information concerning any third-party borrowing arrangements, etc.); the fund's governance structure (including an organizational chart); and a 10-year financial forecast for the fund. After receiving the firm's application, a member of the SBA's Program Development Office reviews the MAQ; assesses the investment company's proposal in light of the program's minimum requirements and management qualifications; performs initial due diligence, including making reference telephone calls; and prepares a written recommendation to the SBA's Investment Division's Investment Committee (composed of senior members of the division). If, after reviewing the MAQ and the SBA's Program Development Office's evaluation, the Investment Committee concludes, by majority vote at a regularly scheduled meeting, that the investment company's management team may be qualified for a license, that management team is invited to the SBA's headquarters in Washington, DC, for an in-person interview. If, following the interview, the Investment Committee votes to proceed, the investment company is provided a \"Green Light\" letter formally inviting it to proceed to the final licensing phase of the application process. Once an applicant receives a Green Light letter, the applicant typically has up to 18 months to raise the requisite private capital. During this time frame, the SBA \"keeps in touch with the applicant, conducts SBIC training classes, and provides guidance as needed.\" Final licensing occurs when the SBA accepts an applicant's complete licensing application (consisting of an updated SBA Form 2181 and complete SBA Forms 2182 and 2183), which is submitted after raising sufficient private capital, and receives a final licensing fee, currently $20,000. Obtaining a SBIC license for the first time usually takes six to eight months from the initial MAQ submission to the license issuance. As discussed below, new applications for the participating securities program, impact investment program, and early stage SBIC initiative are no longer being accepted. The eligibility requirements and application process for small businesses requesting financial assistance from a SBIC is provided in the Appendix . P.L. 85-699 authorized the SBA to select companies to participate in the SBIC program and to purchase debentures from those companies to provide additional funds to invest in small businesses. Initially, debenture SBICs were required to have a private capital investment of at least $300,000 to participate in the SBIC program. Debenture SBICs are now required to have a private capital investment of at least $5 million (called regulatory capital). The SBA has discretion to license an applicant with regulatory capital of $3 million if the applicant has satisfied all licensing standards and requirements, has a viable business plan reasonably projecting profitable operations, and has a reasonable timetable for achieving regulatory capital of at least $5 million. At least 30% of a debenture SBIC's regulatory and leverageable capital must come from three people unaffiliated with the fund's management and unaffiliated with each other. Also, no more than 33% of a SBIC's regulatory capital may come from state or local government entities. P.L. 102-366 , the Small Business Credit and Business Opportunity Enhancement Act of 1992 (Title IV, the Small Business Equity Enhancement Act of 1992), authorized the SBA to guarantee participating securities. Participating securities are redeemable, preferred, equity-type securities issued by SBICs in the form of limited partnership interests, preferred stock, or debentures with interest payable only to the extent of earnings. In 1994, the SBA established the SBIC Participating Securities Program (SBIC PSP) to encourage the formation of participating securities SBICs that would make equity investments in startup and early stage small businesses. The SBA created the program to fill a perceived investment gap created by the SBIC debenture program's focus on mid- and later-stage small businesses. The SBA stopped issuing new commitments for participation securities on October 1, 2004, beginning a process to end the program, which continues. The SBA stopped issuing new commitments for participating securities primarily because the program experienced a projected loss of $2.7 billion during the early 2000s as investments in technology startup and early stage small businesses lost much of their stock value at that time. The SBA found that \"the fees payable by SBICs for participating securities leverage are not sufficient to cover the projected net losses in the participating securities program.\" The SBA continued to honor its existing commitments to participating securities SBICs, which were allowed to continue operations. However, these securities SBICs were required to comply with special rules concerning minimum capital, liquidity, non-SBA borrowing, and equity investing. In recent years, some Members have expressed interest in either revising the program or starting a new program modeled on certain aspects of the SBIC PSP to assist startup and early stage small businesses. The SBA is no longer issuing new commitments for participating securities, and each year several participating securities SBICs leave the program because their leverage commitments are retired. As of December 31, 2018, there were 25 participating securities SBICs in the SBIC program, with $18.0 million in outstanding capital at risk. Participating securities SBIC are required to have regulatory capital of at least $10 million. The SBA has discretion to require less than $10 million in regulatory capital if the licensee can demonstrate that it can be financially viable over the long term with a lower amount. In this circumstance, the regulatory amount required may not be lower than $5 million. At least 30% of a participating securities SBIC's regulatory and leverageable capital must come from three people unaffiliated with the fund's management and unaffiliated with each other. Also, no more than 33% of a SBIC's regulatory capital can come from state or local government entities. On April 7, 2011, the SBA announced it was establishing a $1 billion impact investment SBIC initiative (up to $150 million in leverage in FY2012 and up to $200 million in leverage per fiscal year thereafter until the limit is reached). SBA-licensed impact investment SBICs are required to invest at least 50% of their financings, \"which target areas of critical national priority including underserved markets and communities facing barriers to access to credit and capital.\" These areas initially included businesses located in underserved communities (as defined by the SBA), the education sector, and the clean energy sector. Impact investment SBICs are required to have a minimum private capital investment of at least $5 million and are subject to the same conditions as debenture SBICs concerning the source of the funds. Initially, an impact investment SBIC could receive up to $80 million in SBA leverage. On June 6, 2013, the SBA announced that it was increasing the maximum leverage available to impact investment SBICs to $150 million. Nine impact investment SBICs were licensed (two in 2011, one in 2012, two in 2014, two in 2015, and two in 2016). As of September 30, 2018, they managed more than $905 million in assets and had investments in 81 small businesses. In FY2018, impact investment SBICs invested $106.8 million in 35 small businesses. On September 28, 2017, the SBA provided notice to program stakeholders that it would no longer accept new applications to be a licensed impact investment SBIC on or after November 1, 2017. The SBA also announced that it was withdrawing a proposed rule, published on February 3, 2016, that would have provided impact investment SBICs additional benefits \"to encourage qualified private equity fund managers with a focus on social impact to apply to the SBIC program.\" The SBA indicated that the cost of the proposed additional benefits was \"not commensurate\" with the benefits. The SBA also indicated that few qualified SBICs had applied to participate in the program, and that many of the program's participants would have applied to the SBIC program \"regardless of the existence of the [impact investment program].\" On April 27, 2012, the SBA published a final rule in the Federal Register establishing a $1 billion early stage SBIC initiative (up to $150 million in leverage in FY2012 and up to $200 million in leverage per fiscal year thereafter until the limit is reached). As mentioned previously, the SBA is no longer seeking new applicants for the early stage SBIC initiative. Early stage SBICs are required to invest at least 50% of their financings in early stage small businesses, defined as small businesses that have never achieved positive cash flow from operations in any fiscal year. In recognition of the higher risk associated with investments in early stage small businesses, the initiative included \"several new regulatory provisions intended to reduce the risk that an early stage SBIC would default on its leverage and to improve SBA's recovery prospects should a default occur.\" For example, early stage SBICs are required to raise more regulatory capital (at least $20 million) than debenture SBICs, impact investment SBICs (at least $5 million), and participating securities SBICs (at least $10 million). They are also subject to special distribution rules to require pro rata repayment of SBA leverage when making distributions of profits to their investors. In addition, early stage SBICs are provided less leverage (up to 100% of regulatory capital, $50 million maximum) than debenture SBICs and participating securities SBICs (up to 200% of regulatory capital, $175 million maximum per SBIC and $350 million for two or more SBICs under common control) and impact investment SBICs (up to 200% of regulatory capital, $175 million maximum). On May 1, 2012, the SBA published a notice in the Federal Register announcing its first annual call for venture capital fund managers to submit an application to become a licensed early stage SBIC. Thirty-three venture capital funds submitted preliminary application materials. After these materials were examined and interviews held, the SBA announced on October 23, 2012, that it had issued Green Light letters to six funds, formally inviting them to file license applications. The SBA's second, third, fourth, and fifth annual calls for venture capital fund managers to submit an application to become a licensed early stage SBIC took place on December 18, 2012, February 4, 2014, January 12, 2015, and February 2, 2016, respectively. Five of the 63 investment funds that applied to participate in the program were granted an early stage SBIC license. As of September 30, 2018, the five early stage SBICs had raised $251.3 million in private capital, received $138.4 million in SBA-guaranteed leverage, had $43.7 million in outstanding commitments, and invested $267.5 million in 82 small businesses. In FY2018, early stage SBICs invested $47.1 million in 36 small businesses. On September 19, 2016, the SBA published a notice of proposed rulemaking in the Federal Register , which included proposed changes to the early stage SBIC initiative to \"make material improvements to the program\" and \"attract more qualified early stage fund managers.\" The SBA, at that time, indicated its intention to continue the initiative beyond its initial five-year term. As mentioned previously, the SBA stopped accepting new applications for the early stage SBIC initiative in 2017. In addition, on June 11, 2018, the SBA withdrew the September 19, 2016 proposed rule that included provisions designed to encourage qualified SBICs to participate in the initiative. Table 1 provides five key features distinguishing the SBA's debenture SBICs, participating securities SBICs, impact investment SBICs, and early stage SBICs the minimum amount of capital required to obtain a license; the amount of SBA leverage that can be received; the nature of the investments provided; a description of the requirements for repaying the SBA's leverage; and any profit participation requirements. SBICs provide equity capital to small businesses in various ways, including by purchasing small business equity securities (e.g., stock, stock options, warrants, limited partnership interests, membership interests in a limited liability company, or joint venture interests); making loans to small businesses, either independently or in cooperation with other private or public lenders, that have a maturity of no more than 20 years; purchasing debt securities from small businesses, which may be convertible into, or have rights to purchase, equity in the small business; and providing small businesses, subject to limitations, a guarantee of their monetary obligations to creditors not associated with the SBIC. SBICs are subject to statutory and regulatory restrictions concerning the nature of their approved investments. For example, SBICs are not allowed to directly or indirectly provide financing to any of their associates (e.g., officers, directors, and employees); control, either directly or indirectly, any small business on a permanent basis; invest, without SBA approval, more than specified percentages of their private (regulatory) capital in securities, commitments, or guarantees in any one small business (e.g., SBICs are not allowed to invest more than 30% of their private capital in any one small business if their investment plan includes two or more tiers of SBA leverage); invest in farmland, unimproved land, or any small business classified under Major Group 65 (Real Estate) of the Standard Industrial Classification (SIC) Manual, with the exception of title abstract companies, real estate agents, brokers, and managers; provide funds for small businesses whose primary business activity involves directly or indirectly providing funds to others, purchasing debt obligations, factoring, or leasing equipment on a long-term basis with no provision for maintenance or repair; or provide funds to a small business if the funds will be used substantially for a foreign operation. The SBA also regulates the interest rates and fees SBICs are allowed to charge small businesses on loans, debt securities, and equity financing. In 1999, the SBA introduced the low and moderate income investments (LMI) initiative to encourage SBICs to invest in small businesses located in inner cities and rural areas \"that have severe shortages of equity capital\" because investments in those areas \"often are of a type that will not have the potential for yielding returns that are high enough to justify the use of participating securities.\" This ongoing initiative provides incentives to SBICs that invest in small businesses that have at least 50% of their employees or tangible assets located in a low-to-moderate income area (LMI Zone) or have at least 35% of their full-time employees with their primary residence in an LMI Zone. For example, unlike regular SBIC debentures that typically have a 10-year maturity, LMI debentures are available in two maturities, for 5 years and 10 years, plus the stub period. The stub period is the time between the debenture's issuance date and the next March 1 or September 1. The stub period allows all LMI debentures to have common March 1 or September 1 maturity dates to simplify administration of the program. In addition, LMI debentures are issued at a discount so that the proceeds that a SBIC receives for the sale of a debenture is reduced by (1) the debenture's interest costs for the first five years, plus the stub period; (2) the SBA's annual fee for the debenture's first five years, plus the stub period; and (3) the SBA's 2% leverage fee. As a result, these interest costs and fees are effectively deferred, freeing SBICs from the requirement to make interest payments on LMI debentures or pay the SBA's annual fees on LMI debentures for the first five years of a debenture, plus the stub period. In FY2018, SBICs made 609 investments in small businesses located in a LMI Zone, totaling nearly $1.03 billion—about 18.6% of the total amount invested. In 2007, P.L. 110-140 , the Energy Independence and Security Act of 2007, authorized the SBA to issue Energy Saving Debentures for the purpose of making \"Energy Saving Qualified Investments,\" defined in the act as an investment \"in a small business concern that is primarily engaged in researching, manufacturing, developing, or providing products, goods, or services that reduce the use or consumption of non-renewable energy resources.\" Energy Saving Debentures are structured as a discount debenture similar to LMI debentures. For example, there are no interest payments or SBA annual charge for the first five years of the Energy Saving Debenture, plus the stub period between the debenture's issuance date and the next March 1 or September 1 payment date. A SBIC applies to the SBA for financial assistance (leverage) to secure the \"SBA's conditional commitment to reserve a specific amount of leverage\" for the SBIC's future use. If the application is approved, a SBIC draws down the leverage as it makes financial commitments. The SBA accepts draw applications from SBICs twice a month. When the SBA approves the draw, it issues a payment voucher to a SBIC (called an approval notice). The payment voucher has a term of approximately 60 days and provides a SBIC with the ability to draw funds on a daily basis. A debenture is executed in conjunction with each draw and held by an agent of a bank selected by the SBA (Federal Home Loan Bank of Chicago), which provides interim funding to the SBIC until a \"SBIC's debenture(s) can be pooled with others and sold to the public, a process that occurs every six months [each March and September].\" During the interim period, the bank charges a SBIC the London Interbank Offered Rate (LIBOR), plus a 30 basis point premium. The SBA determines the size of the debenture pool two weeks prior to each scheduled pooling date. All of \"the debentures scheduled to be pooled are purchased and pooled together by an entity called the Investment Trust which is managed by the Bank of New York Mellon,\" and, as the pooling occurs, \"the SBA signs an agreement with the Trust to guarantee all the interest and principal payments due on each of the debentures in the pool.\" The trust then securitizes the pool of debentures and issues new securities called trust certificates. Underwriters are hired to sell the trust certificates to investors in the public market. An offering circular is issued to notify investors of the trust certificates' availability, the terms of the securities, and information concerning how they can be purchased. The SBA operates the SBIC program on a zero-subsidy basis. To recoup its expenses should defaults occur, the SBA is authorized to charge SBICs a 3% origination fee for each debenture and for each participating security issued (1% at commitment and 2% at draw), an annual fee (not to exceed 1.38% for debentures and 1.46% for participating securities) on the leverage drawn, which is fixed at the time of the leverage commitment, and other administrative and underwriting fees that are adjusted annually. A licensed debenture SBIC in good standing with a demonstrated need for funds may apply to the SBA for financial assistance (leverage) of up to 300% of its private capital. However, the SBA has traditionally approved debenture SBICs for a maximum of 200% of their private capital, and no fund management team may exceed the allowable maximum amount of leverage of $175 million per SBIC and $350 million for two or more licenses under common control. Debenture SBICs obtain leverage from the sale of SBA-guaranteed debenture participation trust certificates. SBA-guaranteed debenture participation trust certificates may have a term of up to 15 years, although only one outstanding SBA-guaranteed debenture participation trust certificate has a term exceeding 10 years and all recent public offerings have specified a term of 10 years. Debenture SBICs are required to make semiannual payments on the interest due on the debenture, semiannual payments on the SBA's annual charge, and a lump sum principal payment to investors at maturity. SBICs are allowed to prepay SBA-guaranteed debentures without penalty. However, a SBA-guaranteed debenture must be prepaid in whole and not in part and can only be prepaid on a semiannual payment date. The debenture's coupon (interest) rate is determined by market conditions and the interest rate of 10-year Treasury securities at the time of the sale. Also, as mentioned previously, LMI debentures are available in two maturities, for 5 years and 10 years (plus the stub period). Because the SBA guarantees the debenture, investors are more likely to purchase a debenture participation trust certificate as opposed to others available on the market. They are also more likely to accept a lower coupon (interest) rate than what would be expected without the SBA's guarantee. As a result, the SBIC program enhances a SBIC's access to venture capital and reduces its cost of raising additional financial resources. Because debenture SBICs are required to make semiannual interest payments on the debenture and semiannual payments on the SBA's annual charge, they tend to focus their investments on mid- and later-stage small businesses that have a positive cash flow. Businesses with a positive cash flow have resources available to make payments to the debenture SBIC, either in the form of interest payments or dividends. In many instances, small businesses with positive cash flow are seeking capital for expansion. Although the SBA is no longer issuing new commitments for participating securities, the SBA is authorized to accept an application from licensed participating securities SBICs for leverage of up to 200% of their private capital. Also, no fund management team may exceed the allowable maximum amount of leverage of $175 million per SBIC and $350 million for two or more licenses under common control. Participating securities SBICs obtained leverage by issuing SBA-guaranteed participating securities. The SBA pooled these participating securities and sold SBA-guaranteed participating securities certificates, representing an undivided interest in the pool, to investors through periodic public offerings. SBA participating securities may have a term of up to 15 years, but all recent public offerings had a specified a term of 10 years. There were 35 public offerings of SBA-guaranteed participating securities certificates since the start of the participating securities program, amounting to just under $10.3 billion. The final SBA-guaranteed participating securities certificate, for $332 million, had a term of 10 years and was offered to investors on February 19, 2009, with delivery of the certificates on February 25, 2009. SBIC participating securities certificates provide for quarterly payments to investors from dividends on preferred stock, interest on an income bond, or a priority return on a preferred limited partnership equal to a specified interest rate on the principal amount and a lump sum principal payment at maturity. A participating securities SBIC is obligated to make these quarterly payments \"only to the extent it has sufficient profits available to make such payments.\" If a participating securities SBIC is unable to make any required payment, the SBA will make the payment on its behalf. Because startup and early stage small businesses often are not initially profitable, the SBA included language in its participating securities' offering circulars that it \"anticipates that it will be called upon routinely to make such … payments for the SBICs in the early years of the lives of such SBICs\" and that it \"expects to be reimbursed [by the SBIC] any amounts paid … under its guarantee over the life of a participating security.\" Because the SBA guaranteed the certificate, investors were more likely to purchase a SBIC participating securities certificate as opposed to others available on the market. They were also more likely to accept a lower payment rate than what would be expected without the SBA's guarantee. In addition, participating securities SBICs are more likely than debenture SBICs to invest in startup and early stage small businesses because the SBA is willing to make a participating securities SBIC's required quarterly payments to investors, at least during the early years of the investment. Because participating securities SBICs are not required to make these quarterly payments, they are encouraged to focus on a small business's long-term prospects for growth and profitability rather than on its prospects for having immediate, positive cash flow. As of December 31, 2018, the SBA had a guarantee on an outstanding unpaid principal balance of $11.3 billion in SBIC debentures, $18.0 million in SBIC participating securities, and $56.7 million in other, primarily SSBIC, financings. The SBA also had an outstanding commitment on $3.4 billion in SBIC debentures and $2.6 million in other, primarily SSBIC, financings. The SBA established the Impact Investment SBIC Initiative in 2011 to \"target areas of critical national priority including underserved markets and communities facing barriers to access to credit and capital.\" On July 26, 2011, the SBA announced that the first impact investment SBIC license had been awarded to InvestMichigan! Mezzanine Fund. Licensed impact investment SBICs may apply to the SBA for leverage of up to 300% of their private capital, limited to $175 million. In addition, they may receive leverage amounting to no more than 100% of their private capital during any fiscal year (subject to the $175 million limit). The SBA generally limits impact investment SBICs to a maximum of 200% of their private capital, up to $175 million. Impact investment SBICs obtain leverage in the same way debenture SBICs obtain leverage—through the issuance of SBA-guaranteed debentures with a term of up to 10 years. They are also subject to the same terms and conditions as debenture SBICs, except they were provided an expedited application review process when new applications to the impact investment program were being accepted. The SBA established the Early Stage Innovation SBIC Initiative in 2012 to \"expand access to capital for early stage small businesses throughout the United States.\" A licensed early stage SBIC may apply to the SBA for leverage of up to 100% of its private capital, limited to $50 million. The SBA does not consider applications for leverage from an early stage SBIC applicant that is under common control with another early stage SBIC applicant or an existing early stage SBIC (unless the existing early stage SBIC has no outstanding leverage or leverage commitments and will not seek additional leverage in the future). Early stage SBICs obtain leverage in the same way that debenture SBICs obtain leverage—through the issuance of SBA-guaranteed debentures with a term of up to 10 years. However, early stage debentures come in two forms: early stage standard debentures and early stage discounted debentures. Early stage standard SBIC debentures are similar to standard SBIC debentures, but, instead of requiring semiannual payments on the debenture's interest and on the SBA's annual charge, they require quarterly payments on the debenture's interest and on the SBA's annual charge. In addition, early stage SBICs must maintain a reserve sufficient to pay the interest on the debenture and on the SBA's annual charges for the first 21 payment dates following the date of issuance (five years plus the length of time between the issue date and the next March 1, June 1, September 1, or December 1). Because early stage standard debentures require early stage SBICs to make quarterly payments, they are most appropriate for investments in small businesses that have established a positive cash flow enabling them to pay interest or dividends to the early stage SBIC. Early stage discounted debentures are issued at a discount (less than face value) equal to the first five years of interest on the debenture and the first five years of annual SBA charges. The discount eliminates the need for early stage SBICs to make interest payments on the debenture and to make payments on the SBA's annual charge for five years from the date of issuance, plus the stub period.  Early stage SBICs make quarterly payments on the debenture's interest and on the SBA's annual charge during years 6 through 10. They are also responsible for paying the debenture's principal amount when the debenture reaches its maturity date. Because early stage discounted debentures do not require interest payments or payments on the SBA's annual charge for five years, they are most appropriate for investments in small businesses that have not established a positive cash flow to pay interest or dividends to the early stage SBIC. As a result, early stage discounted debentures are designed to encourage investments in early stage small businesses, which by definition have not established a positive cash flow. Once licensed, each SBIC is required to file with the SBA an annual financial report that includes an audit by a SBA-approved independent public accountant. SBICs are also subject to annual on-site regulatory compliance examinations and required to provide the SBA a portfolio financing report within 30 days of the closing date for each financing of a small business; the value of their loans and investments within 90 days of the end of the fiscal year in the case of annual valuations and within 30 days following the close of other reporting periods; any material adverse changes in valuations at least quarterly (within 30 days following the close of the quarter); and copies of reports provided to investors, documents filed with the Securities and Exchange Commission, and documents pertaining to litigation or other legal proceedings, including criminal charges against any person required by the SBA complete a personal history statement in connection with the SBIC's license. As of December 31, 2018, there were 305 licensed SBICs in operation (227 debenture SBICs, 25 participating securities SBICs, 47 bank-owned, non-leveraged SBICs, and 6 SSBICs). As shown in Table 2 , the number of debenture SBICs has generally increased in recent years. However, the total number of licensed SBICs has stayed relatively the same in recent years, primarily due to the planned reduction in the number of participating securities SBICs and SSBICs. The SBA has made it a goal to increase the number of new SBIC licenses issued each year, with an emphasis on new debenture SBICs licenses, \"to position the program for continued growth.\" Overall, SBICs pursue investments in a broad range of industries, geographic areas, and stages of investment. Some individual SBICs specialize in a particular field or industry and others invest more generally. Most SBICs concentrate on a particular stage of investment (i.e., startup, expansion, or turnaround) and identify a geographic area in which to focus. From the inception of the SBIC program to December 31, 2018, SBICs have invested approximately $97.6 billion in approximately 181,185 financings to small businesses. As mentioned previously, as of December 31, 2018, the SBA had a guarantee on an outstanding unpaid principal balance of $11.3 billion in SBIC debentures, $18.0 million in SBIC participating securities, and $56.7 million in other, primarily SSBIC, financings. The SBA also had an outstanding commitment on $3.2 billion in SBIC debentures and $2.6 million in other, primarily SSBIC, financings. Including private investment, as of December 30, 2018, the SBIC program had invested or committed about $30.3 billion in small businesses, with the SBA's share of capital at risk about $14.5 billion. In FY2018, SBICs made 2,711 financings. The average financing amount was $2,029,730. In FY2018, SBIC funds were used primarily for acquiring an existing business (57.9%) and also for operating capital (18.0%), refinancing or refunding debt (13.0%), a new building or plant construction (0.9%), research and development (0.8%), purchasing machinery or equipment (0.6%), marketing activities (0.6%), plant modernization (0.4%) and other uses (7.8%). As shown in Table 3 , the total amount of SBIC financing declined during the recession (December 2007-June 2009), reached prerecession levels in FY2011, and has generally increased since then. In FY2018, the SBA committed to guarantee $2.52 billion in SBIC small business investments. SBICs invested another $2.98 billion from private capital for a total of $5.50 billion in financing for 1,151 small businesses. In addition, the amount of SBA leverage as a share of total financing provided has generally increased in recent years. For example, the SBA's leverage commitments accounted for 26.7% of total financing in FY2007, compared with 46.6% in FY2014, 40.6% in FY2015, 42.0% during FY2016, 34.2% in FY2017, and 45.8% in FY2018. The SBA was authorized to issue up to $3.0 billion in SBIC leverage from FY2006 through FY2013. As mentioned previously, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased that annual SBIC-leverage amount to $4 billion. For comparative purposes, private venture capital firms invested $26.0 billion in 3,417 deals in 2010, $36.3 billion in 4,234 deals in 2011, $33.1 billion in 4,680 deals in 2012, $36.4 billion in 5,176 deals in 2013, $60.0 billion in 5,998 deals in 2014, $78.1 billion in 6,098 deals in 2015, $63.8 billion in 5,679 deals in 2016, $76.4 billion in 5,824 deals in 2017, and $99.5 billion in 5,536 deals in 2018. In 2008, the Urban Institute released an analysis comparing debenture SBIC investments made from 1997 to 2005 to private-sector venture capital investments made during that time period in second stage business loans, third stage business loans, and bridge loans \"because these investments are likely to be of the same character (debt with equity features) as those made by debenture SBICs.\" The Urban Institute found that debenture SBIC investments accounted for more than 62% of all venture capital financings in second stage business loans, third stage business loans, and bridge loans in the United States during that time period. However, because the average amount of a SBIC debenture investment was much smaller than the industry average, SBIC debenture investments accounted for \"only 8% of total dollars invested.\" As shown in Table 4 , in FY2018, SBICs made 130 financings (4.8% of all financings) amounting to $132.4 million (2.4% of the total amount of financings) to minority-owned and -controlled small businesses. In addition, in FY2018, SBICs made 59 financings (2.2% of all financings) totaling $96.0 million (1.7% of the total amount financed) to women-owned small businesses and 25 financings (0.9% of all financings) totaling nearly $16.1 million (0.3% of the total amount financed) to veteran-owned small businesses. Research concerning private venture capital investment in minority-owned or women-owned small businesses is limited. As a result, it is difficult to find the data necessary to compare the SBIC program's investment in minority-owned or women-owned small businesses to the private sector's investment in these firms. In 2007, the SBA acknowledged at a congressional hearing on its investment programs that \"women and minority representation in [the SBIC program] is low\" and has been for many years. The SBA reported at that time that it did not control the investments made by SBICs, but it has tried to increase women and minority representation in the SBIC program by reaching out to venture capital firms, trade organizations, and others to better understand why women and minority representation in the SBIC program is low and by \"finding debenture firms with minority representation on their investment committees and in senior management.\" However, despite these efforts, in 2009, the Small Business Investor Alliance (then called the National Association of Small Business Investment Companies) asserted at a congressional hearing on the SBA's capital access programs that the SBA's SBIC licensing process \"has done an abysmal job at attracting and licensing funds led by women and minorities.\" During the 111 th Congress, S. 1831 , the Small Business Venture Capital Act of 2009, was introduced on October 21, 2009, and referred to the Senate Committee on Small Business and Entrepreneurship. No further action was taken on the bill. It would have encouraged SBIC investments in women-owned small businesses and socially and economically disadvantaged small business concerns by increasing the amount of leverage available to SBICs that invest at least 50% of their financings in small business concerns owned and controlled by women or socially and economically disadvantaged small business concerns. As shown in Table 5 , in FY2018, SBICs provided financing to small businesses located in 48 states, the District of Columbia and Puerto Rico, with the most financing taking place in California (392 financings totaling over $1.0 billion), Texas (276 financings totaling $427.6 million), and New York (233 financings totaling $482.6 million). The previously mentioned 2008 Urban Institute comparative analysis of debenture SBIC financing from 1997 to 2005 found that the dollar volume of investments from debenture SBICs was more evenly distributed across the nation than from comparable private venture capital funds. For example, the Urban Institute found that California (45.8%) and Massachusetts (12.9%) received the largest share of the total dollar volume invested by private venture capital funds from 1997 to 2005. The two states accounted for more than half (58.7%) of the total dollar volume invested by private venture capital funds. In contrast, New York (18.7%) and California (11.1%) received the largest share of the total dollar volume invested by debenture SBICs from 1997 to 2005. The two states accounted for less than one-third (29.8%) of the total dollar volume invested by debenture SBICs. In addition, the top 10 states in terms of their share of the total dollar volume invested accounted for nearly 84% of the total invested by private venture capital funds, compared with 64% for debenture SBICs. A comparison of the state-by-state distribution of private-sector venture capital fund investments in 2018 and SBIC financings in FY2018 (see Table 5 ) suggests the Urban Institute's finding that SBICs investments were more evenly distributed across the nation than private-sector venture capital fund investments from 1997 to 2005 continues to be the case today. For example, during 2018, California (55.3%), New York (13.2%), Massachusetts (9.4%), and Texas (2.2%) received the largest shares of the total dollar volume invested by private venture capital funds. The four states accounted for more than four-fifths (80.1%) of the total dollar volume invested by private venture capital funds during that time period. In contrast, the four states with the largest share of the total volume invested by SBICs in FY2018 (California at 19.1%, New York, New York at 8.8%, Texas at 7.8%, and Illinois at 6.2%) accounted for 41.9% of the total dollar volume invested by SBICs. P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), included provisions designed to increase the amount of leverage issued under the SBIC program by increasing the maximum amount of leverage available to an individual SBIC to 300% of its private capital or $150 million, whichever is less, and by increasing the maximum amount of leverage available for two or more licenses under common control to $225 million. It also encouraged SBIC investment in smaller enterprises by requiring SBICs licensed after the date of its enactment (February 17, 2009) to certify that at least 25% of all future financing dollars are invested in smaller enterprises. ARRA defined smaller enterprises as firms having either a net worth of no more than $6 million and average after-tax net income for the preceding two years of no more than $2 million or meeting the SBA's size standard for its industry classification. ARRA also encouraged SBIC investments in low-income areas by allowing a SBIC licensed on or after October 1, 2009, to elect to have a maximum leverage amount of $175 million, and $250 million for two or more licenses under common control, if the SBIC has invested at least 50% of its financings in low-income geographic areas and certified that at least 50% of its future investments will be in low-income geographic areas. As part of its Startup America Initiative, on January 31, 2012, the Obama Administration recommended that the SBIC program's annual authorization be increased to $4 billion from $3 billion and that the amount of SBA leverage available to licensees under common control (the multiple licenses/family of funds limit) be increased to $350 million from $225 million. On April 27, 2012, the SBA also published a final rule in the Federal Register establishing the $1 billion Early Stage Innovation SBIC Initiative (up to $150 million in SBA leverage in FY2012 and up to $200 million in SBA leverage per fiscal year thereafter until the limit is reached) to encourage SBIC program investments in early stage small businesses. As will be discussed, several bills have been introduced during recent Congresses to expand the SBIC program by increasing its annual authorization to $4 billion (enacted), increasing the multiple licenses/family of funds limit to $350 million (enacted), increasing the individual SBIC fund limit to $175 million (enacted), or authorizing a SBIC program specifically designed to encourage SBIC investments in business startups and other early stage small businesses (introduced). Some Members and small business advocates have proposed legislation to establish a \"permanent\" congressionally authorized SBIC program to target additional assistance to startup and early stage small businesses, which are generally viewed as relatively risky investments but also as having a relatively high potential for job creation. Advocates of targeting additional assistance to startup and early stage small businesses argue that the SBA's participating securities program was created to fill a perceived investment gap resulting from the SBA's debenture program's focus on mid- and later-stage small businesses. Because the SBA is no longer providing new licenses or leverage for participating securities SBICs, several Members have introduced legislation to create a new SBA program that would focus on the investment needs of startup and early stage small businesses. For example, during the 111 th Congress, the House passed, by a vote of 241-182, H.R. 5297 , the Small Business Jobs and Credit Act of 2010. Among its provisions, as passed by the House, H.R. 5297 would have authorized a $1 billion Small Business Early Stage Investment Program. The proposed program would have provided equity investment financing of up to $100 million in matching funds to each participating investment company. It would have required participating investment companies to invest in small businesses, with at least 50% of the financing in early stage small businesses, defined as those small businesses not having \"gross annual sales revenues exceeding $15 million in any of the previous three years.\" The proposed program emphasized venture capital investments in startup companies operating in nine targeted industries. H.R. 5297 , as subsequently approved by Congress and signed into law by President Obama on September 27, 2010 ( P.L. 111-240 , the Small Business Jobs Act of 2010), did not include legislative language authorizing a Small Business Early Stage Investment Program. However, it authorized a three-year Intermediary Lending Pilot Program to provide direct loans to not more than 20 eligible nonprofit lending intermediaries each year, totaling not more than $20 million and $1 million per intermediary at an interest rate of 1%. The intermediaries, in turn, may make loans to new or growing small businesses, not to exceed $200,000 per business. The Intermediary Lending Pilot Program was funded for two years. Thirty-six lenders currently participate in the program. As mentioned previously, in 2012, the SBA established the early stage SBIC initiative to encourage SBIC investments in early stage small businesses. Also, during the 113 th Congress, H.R. 30 , the Small Business Investment Enhancement and Tax Relief Act, and S. 1285 , the Small Business Innovation Act of 2013, would have authorized the Administration to establish a separate SBIC program for early stage small businesses. The Small Business Innovation Act (of 2016) was reintroduced ( S. 3375 ) during the 114 th Congress. Advocates of efforts to encourage capital investment in startup and early stage small businesses, including Members of Congress who have served on the House or Senate Small Business Committees, have argued that the SBA's elimination of the SBIC participating securities program has created a gap \"in the SBA's existing array of capital access programs, particularly in the provision of capital to early stage small businesses in capital-intensive industries.\" As Representative Nydia Velázquez argued on the House floor during congressional consideration of H.R. 5297 : This legislation, Mr. Chairman, also recognizes that capital markets are changing dramatically. Credit standards are stricter, and small businesses are now looking not only to loans and to credit cards to finance their operations, but they are also looking to equity investment to turn their ideas into reality. This has become even more pronounced as asset values have declined, leaving entrepreneurs with less collateral to borrow against. Unfortunately, small firms' access to venture capital and to equity investment has declined. Last year, such investments plummeted from $28 billion in 2008 to only $17 billion last year. This is due, in part, to the previous administration's decision to terminate the SBA's largest pure equity financing program—the Small Business Investment Company Participating Securities program. This has left many entrepreneurs who need equity investment to fulfill their business plans without a source of such financing. Opponents of efforts to encourage capital investment in startup and early stage small businesses have argued that such efforts could \"pile unnecessary risk or costs onto taxpayers at a time when we're dealing with record debt and unsustainable deficit spending.\" During consideration of the proposed Small Business Early Stage Investment Program, opponents argued that it was untested, that it would likely encourage risky investments, and that the legislation required \"only 50% of the funding … to be invested\" in early stage small businesses. In 2009, the Small Business Investor Alliance characterized the SBIC program as \"dramatically underused.\" It argued that the program's financing levels would increase if (1) the SBA further improved its licensing processing procedures to make them more timely and objective, (2) the percentage of SBIC regulatory capital allowed from state or local government entities was increased from its present maximum of 33%, and (3) the SBIC program's multiple licenses/family of funds limit (at that time $225 million for two or more licenses under common control) was increased to allow SBICs to have a series of investment funds in place, in which, for example, \"one fund could be winding down, another could be at peak, and another could just be ramping up.\" During the 111 th Congress, H.R. 3854 , the Small Business Financing and Investment Act of 2009, which was passed by the House on October 29, 2009, and H.R. 5554 , the Small Business Assistance and Relief Act of 2010, which was not reported after being referred to five committees for consideration, proposed to encourage greater use of the SBIC program by increasing the maximum percentage of SBIC regulatory capital allowed from state or local government entities to 45% from 33%. Both measures would have also increased the SBIC program's multiple licenses/family of funds limit to $350 million from $225 million; increased the SBIC program's limit of $250 million to $400 million for multiple funds under common control that were licensed after September 30, 2009, and invested 50% of their dollars in low-income geographic areas; and increased the SBIC program's authorization level from to $5.5 billion from $3.0 billion in FY2011. The Obama Administration also recommended, as part of its Startup America Initiative (which included the SBA's $1 billion early stage SBIC initiative and $1 billion impact investment SBIC initiative), that the 112 th Congress adopt legislation to increase the SBIC program's annual authorization to $4 billion from $3 billion. The Administration recommended as well that the 112 th Congress adopt legislation to increase the amount of SBA leverage available to licensees under common control to $350 million from $225 million. During the 112 th Congress, H.R. 3219 , the Small Business Investment Company Modernization Act of 2011, would have encouraged greater utilization of the SBIC program by increasing the maximum amount of outstanding SBA leverage available to any single licensed SBIC from the lesser of 300% of its private capital or $150 million to the lesser of 300% of its private capital or $200 million if a majority of the managers of the company are experienced in managing one or more SBIC licensed companies. It would also have increased the maximum amount of outstanding SBA leverage available to two or more licenses under common control to $350 million from $225 million. S. 2136 , a bill to increase the maximum amount of leverage permitted under title III of the Small Business Investment Act of 1958, would have encouraged greater use of the SBIC program by increasing the maximum amount of outstanding SBA leverage available to two or more licenses under common control to $350 million from $225 million. It also would have increased the SBIC program's authorization level to $4 billion from $3 billion. On March 15, 2012, S.Amdt. 1833 , the INVEST in America Act of 2012, was offered on the Senate floor as an amendment in the nature of a substitute to H.R. 3606 , the Jumpstart Our Business Startups Act, which had previously passed the House. Two of the provisions in the amendment proposed to encourage greater use of the SBIC program by (1) increasing the maximum amount of outstanding SBA leverage available to two or more licenses under common control to $350 million from $225 million and (2) increasing the SBIC program's authorization level to $4 billion from $3 billion. The Senate later passed H.R. 3606 with amendments, which did not address the SBIC program. The House accepted the Senate amendments and passed the bill, which President Obama signed into law ( P.L. 112-106 ). S. 3442 , the SUCCESS Act of 2012, and S. 3572 , the Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012, would have, among other provisions, increased the SBIC program's authorization amount to $4 billion from $3 billion, increased the multiple licenses/family of funds limit to $350 million from $225 million, and annually adjusted the maximum outstanding leverage amount available to both individual SBICs and SBICs under common control to account for inflation. In addition, H.R. 6504 , the Small Business Investment Company Modernization Act of 2012, which was passed by the House on December 18, 2012, would have increased the SBIC program's multiple licenses/family of funds limit to $350 million from $225 million. During the 113 th Congress, as mentioned previously, P.L. 113-76 increased the annual leverage amount the SBA is authorized to provide to SBICs to $4 billion from $3 billion. In addition to increasing the program's authorization amount to $4 billion, S. 511 , the Expanding Access to Capital for Entrepreneurial Leaders Act (EXCEL Act) would have increased the program's multiple licenses/family of funds limit to $350 million from $225 million. S. 1285 , would have, among other provisions, also increased the program's multiple licenses/family of funds limit to $350 million. During the 114 th Congress, P.L. 114-113 , the Consolidated Appropriations Act, 2016, increased the SBIC program's multiple licenses/family of funds limit to $350 million. In addition, H.R. 5968 , the Small Business Investment Opportunity Act of 2016, introduced on September 8, 2016, and referred to the House Committee on Small Business, would have increased the maximum amount of leverage available to SBICs to 300% of the SBIC's private capital (200% in practice) or $170 million, whichever is less, from the current maximum of 300% of the SBIC's private capital (200% in practice) or $150 million, whichever is less. During the 115 th Congress, P.L. 115-187 , the Small Business Investment Opportunity Act of 2017, increased the maximum amount of leverage for individual SBICs to $175 million from $150 million. In 2010, the SBA announced that one of its goals for the SBIC program was to increase its \"acceptance in the marketplace and increase the number of funds licensed and the amount of leverage issued so as to improve capital access for small businesses.\" The SBA asserted that ARRA's changes to the SBIC program would help it to achieve this goal. ARRA increased the maximum leverage available to SBICs to up \"to three times the private capital raised by the SBIC, or $150 million, whichever is less, and $225 million for multiple licensees under common control\" and increased \"the maximum leverage amounts to $175 million for single funds and $250 million for multiple funds under common control who are licensed after September 30, 2009, and invest 50% of their dollars in low income geographic areas.\" As mentioned previously, P.L. 113-76 increased the annual leverage amount the SBA is authorized to provide to SBICs to $4 billion from $3 billion, P.L. 114-113 , the Consolidated Appropriations Act, 2016, increased the SBIC program's multiple licenses/family of funds limit to $350 million, and P.L. 115-187 , the Small Business Investment Opportunity Act of 2017, increased the maximum amount of leverage for individual SBICs to $175 million. Advocates of increasing the SBIC program's leverage limits have argued that these actions are necessary to help fill a perceived gap in the SBA's \"array of capital access programs.\" In addition, they argue that the demise of the SBIC participating securities program and the current \"underutilization\" of the SBIC debentures program is preventing many small firms from accessing the capital necessary to fully realize their economic potential and assist in the national economic recovery. On the other hand, others worry about the potential risk that an expanded SBIC program has for the taxpayer, especially if investments are targeted at startup and early stage small businesses which, by definition, have a more limited credit history and a higher risk for default than businesses that have established positive cash flow. Some Members of Congress have argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. In their view, encouraging greater utilization of the SBIC program will increase small business access to capital, result in higher levels of job creation and retention, and promote economic growth. For example, on March 19, 2012, during Senate consideration of the INVEST in America Act of 2012, then-Senator Olympia Snowe argued The amendment [ S.Amdt. 1833 ] I and Senator Landrieu introduced would also help small companies access capital by modifying the Small Business Investment Company, SBIC, Program to raise the amount of SBIC debt the Small Business Administration, SBA, can guarantee from $3 billion to $4 billion. It would also increase the amount of SBA guaranteed debt a team of SBIC fund managers who operate multiple funds can borrow. The SBIC provisions in this amendment have bipartisan support, are noncontroversial, come at no cost to taxpayers and will create jobs. We do not get many bills of this kind in the Senate anymore. One of the most difficult challenges facing new small businesses today is access to capital. The SBIC Program has helped companies like Apple, FedEx, Callaway Golf, and Outback Steakhouse become household names. As entrepreneurs and other aspiring small business owners well know, it takes money to make money. This legislation ensures that our entrepreneurs and high-growth companies have access to the resources they need so they can continue to drive America's economic growth and job creation in these challenging times. There is no reason why Congress should not approve this amendment to ensure capital is getting into the hands of America's job creators. This amendment will spur investment in capital-starved startup small businesses, which will play a critical role in leading the Nation of the devastating economic downturn from which we have yet to emerge. For those who may be unfamiliar, despite significant entrepreneurial demand for small amounts of capital, because of their substantial size, most private investment funds cannot dedicate resources to transactions below $5 million. The Nation's SBICs are working to fill that gap, especially even during these challenging times. Others worry about the potential risk an expanded SBIC program may have for increasing the federal deficit. In their view, the best means to assist small business, promote economic growth, and create jobs is to reduce business taxes and exercise federal fiscal restraint. For example, Representative Sam Graves, then-chair of the House Committee on Small Business, indicated in the Small Business Committee's FY2013 \"views and estimates\" letter to the House Budget Committee that the House Small Business Committee supported an increase in the SBIC program's authorization to $4 billion from $3 billion. However, he indicated that the committee opposed funding for the SBA's early stage SBIC initiative and impact investment SBIC initiative because of their potential to generate losses that could lead to higher SBIC fees or to the need to provide federal funds to subsidize the SBIC program. Representative Graves wrote in the FY2013 views and estimates letter that The debenture SBIC program is designed to provide equity injections to small businesses that have been operational and have a track record of cash-flow and profits. … The program is financially sound because the structure of repayments ensures that the government will not suffer significant losses. Thus, no changes are needed to the program and it operates on a zero subsidy basis without an appropriation. The SBA budget is fully supportive of this program and we concur in that recommendation, including raising the program level from $3 billion to $4 billion. Presumably, some of the additional program level (which will cost the federal government no money) will be used to support two new variations in the Debenture SBIC Program [the early stage SBIC initiative and the impact investment SBIC initiative] … Neither initiative has received authority from Congress nor had its operational principles assessed by the Committee prior to implementation. The Committee reiterates its recommendation from last year's views and estimates – no funds should be allocated from the additional debenture program levels for these two programs. The Committee on the Budget also should provide further protection to the existing debenture SBIC program by requiring any modifications to the program, whether a pilot program or not, be based on a new subsidy calculation that ensures the current debenture program will operate at zero subsidy without any increase in fees due to losses stemming from the Impact and Early Stage Innovation programs. The House Committee on Small Business's FY2016 views and estimates letter reiterated the committee's opposition to the funding of these two initiatives and recommended that any modifications to the SBIC program \"whether a pilot program or not, be based on a new subsidy calculation that ensures the current debenture program will operate at zero subsidy without any increase in fees.\" As these quotations attest, congressional debate concerning the SBIC program has primarily involved assessments of the ability of small businesses to access capital from the private sector and evaluations of the program's risk, the effect of proposed changes on the program's risk, and the potential impact of the program's risk on the federal deficit. Empirical analysis of economic data can help inform debate concerning the ability of small businesses to access capital from the private sector and the extent of the program's risk, the effect of proposed changes on the program's risk, and the potential impact of the program's risk on the federal deficit. Additional data concerning SBIC investment impact on recipient job creation and firm survival might also prove useful. Small Business Eligibility Requirements Only businesses that meet the SBA's definition of \"small\" may participate in the SBIC program. Businesses must meet either the SBA's size standard for the industry in which they are primarily engaged or the SBA's alternative size standard for the SBIC program. SBICs use the size standard that is most likely to qualify the company, typically the alternative size standard for the SBIC program. The current SBIC alternative size standard, which became effective on July 14, 2014, is tangible net worth not in excess of $19.5 million and average net income after federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $6.5 million. All of a company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. In addition, since 1997, the SBA has required SBICs to set aside a specified percentage of their financing for \"businesses at the lower end of the permitted size range,\" primarily because \"the financial size standards applicable to the SBIC program are considerably higher than those used in other SBA programs.\" P.L. 111-5 requires SBICs licensed after the date of its enactment (February 17, 2009) to certify that at least 25% of their future financing is invested in smaller enterprises. A smaller enterprise is a company that, together with any affiliates, either has net worth of no more than $6 million and average after-tax net income for the preceding two years of no more than $2 million or meets the SBA's size standard in the industry in which the applicant is primarily engaged. A SBIC licensed on or before February 17, 2009, that has not received any SBA leverage commitments after February 17, 2009, must have at least 20% of its aggregate financing dollars (plus 100% for leverage commitments over $90 million) invested in smaller enterprises. A SBIC licensed on or before February 17, 2009, that has received a SBA leverage commitment after February 17, 2009, must meet the 20% threshold (plus 100% for leverage commitments over $90 million) for financing provided before the date of the first leverage commitment issued after February 17, 2009, and the 25% threshold for financing made after such date. SBICs are not allowed to invest in the following: other SBICs, finance and investment companies or finance-type leasing companies, unimproved real estate, companies with less than 51% of their assets and employees in the United States, passive or casual businesses (those not engaged in a regular and continuous business operation), or companies that will use the proceeds to acquire farmland. In addition, SBICs may not provide funds for a small business whose primary business activity is deemed contrary to the public interest or if the funds will be used substantially for a foreign operation. Small Business Application Process Small business owners interested in receiving SBIC financing can search for active SBICs using the SBA's SBIC directory. The directory provides contact information for all licensed SBICs, sorted by state. It also includes the SBIC's preferred minimum and maximum financing size range, the type of capital provided (e.g., equity, mezzanine, subordinated debt, 1 st and 2 nd lien secured term, or preferred stock), funding stage preference (e.g., early stage, growing and expansion stage, or later stage), industry preference (e.g., business services, manufacturing, environmental services, or distribution), geographic preference (e.g., national, regional, or specific state or states), and a description of the firm's focus (e.g., equity capital to later stage companies for expansion and acquisition or targeting companies with revenues of at least $5 million and profitability at the time of financing). After locating a suitable SBIC, the small business owner presents the SBIC a business plan that addresses the business's operations, management, financial condition, and funding requirements. The typical business plan includes the following information: the name of the business as it appears on the official records of the state or community in which it operates; the city, county, and state of the principal location and any branch offices or facilities; the form of business organization and, if a corporation, the date and state of incorporation; a description of the business, including the principal products sold or services rendered; a history of the general development of the products or services during the past five years (or since inception); information about the relative importance of each principal product or service to the volume of the business and its profits; a description of the business's real and physical property and adaptability to other business ventures; a description of technical attributes of its products and facilities; detailed information about the business's customer base, including potential customers; a marketing survey or economic feasibility study; a description of the distribution system for the business's products or services; a descriptive summary of the competitive conditions in the industry in which the business is engaged, including its competitive position relative to its largest and smallest competitors; a full explanation and summary of the business's pricing policies; brief resumes of the business's management personnel and principal owners, including their ages, education, and business experience; banking, business, and personal references for each member of management and for the principal owners; balance sheets and profit and loss statements for the last three fiscal years (or from inception); detailed projections of revenues, expenses, and net earnings for the coming year; a statement of the amount of funding requested and the time requirements for the funds; the reasons for the request for funds and a description of the proposed uses; and a description of the benefits the business expects to gain from the financing (e.g., expansion, improvement in financial position, expense reduction, or increase in efficiency). Because SBICs typically receive hundreds of business plans per year, the SBA recommends that small business owners seek a personal referral or introduction to the particular SBIC fund manager being targeted to increase \"the likelihood that the business plan will be carefully considered.\" According to the Small Business Investor Alliance, \"a thorough study an SBIC must undertake before it can make a final decision could take several weeks or longer.\"", "summary": "The Small Business Administration's (SBA's) Small Business Investment Company (SBIC) program is designed to enhance small business access to venture capital by stimulating and supplementing \"the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply.\" Facilitating the flow of capital to small businesses to stimulate the national economy was, and remains, the SBIC program's primary objective. As of December 31, 2018, there were 305 privately owned and managed SBA-licensed SBICs providing small businesses private capital the SBIC has raised (called regulatory capital) and funds the SBIC borrows at favorable rates (called leverage) because the SBA guarantees the debenture (loan obligation). SBICs pursue investments in a broad range of industries, geographic areas, and stages of investment. Some SBICs specialize in a particular field or industry, and others invest more generally. Most SBICs concentrate on a particular stage of investment (i.e., startup, expansion, or turnaround) and geographic area. The SBIC program currently has invested or committed about $30.3 billion in small businesses, with the SBA's share of capital at risk about $14.5 billion. In FY2018, the SBA committed to guarantee $2.52 billion in SBIC small business investments. SBICs invested another $2.98 billion from private capital for a total of $5.50 billion in financing for 1,151 small businesses. In recent years, some Members of Congress have argued that the program should be expanded as a means to stimulate economic activity and create jobs. For example, P.L. 113-76, the Consolidated Appropriations Act, 2014, increased the annual amount of leverage the SBA is authorized to provide to SBICs to $4 billion from $3 billion. P.L. 114-113, the Consolidated Appropriations Act, 2016, increased the amount of outstanding leverage allowed for two or more SBIC licenses under common control (the multiple licenses/family of funds limit) to $350 million from $225 million. P.L. 115-187, the Small Business Investment Opportunity Act of 2017, increased the amount of outstanding leverage allowed for individual SBICs to $175 million from $150 million. Others worry that an expanded SBIC program could result in losses and increase the federal deficit. In their view, the best means to assist small business, promote economic growth, and create jobs is to reduce business taxes and exercise federal fiscal restraint. Some Members have also proposed that the program target additional assistance to startup and early stage small businesses, which are generally viewed as relatively risky investments but also as having a relatively high potential for job creation. During the Obama Administration, the SBA established a five-year, early stage SBIC initiative. Early stage SBICs are required to invest at least 50% of their investments in early stage small businesses, defined as small businesses that have never achieved positive cash flow from operations in any fiscal year. The SBA stopped accepting new applicants for the early stage SBIC initiative in 2017. This report describes the SBIC program's structure and operations, focusing on SBIC eligibility requirements, investment activity, and program statistics. It also includes information concerning the SBIC program's debenture SBIC program, participating securities SBIC program, impact investment SBIC program (targeting underserved markets and communities facing barriers to access to credit and capital), and early stage SBIC initiative.", "document_type": "crs"}
{"report": "The Congressional Budget Act of 1974 (hereinafter referred to as the Budget Act) created the budget resolution and specifies that it be adopted annually. The budget resolution reflects an agreement between the House and Senate on spending and revenue levels. The budget resolution does not become law; therefore no money is spent or collected as a result of its adoption. Instead, it is meant to assist Congress in considering an overall budget plan. Once agreed to by both chambers in the exact same form, the budget resolution creates parameters that may be enforced in two primary ways: (1) by points of order, and (2) by using the budget reconciliation process. Once the budget resolution has been agreed to by both chambers, certain levels contained in it are enforceable through points of order. This means that if legislation is being considered on the House or Senate floor that would violate certain levels contained in the budget resolution, a Member may raise a point of order against the consideration of that legislation. Points of order can be raised against bills, resolutions, amendments, or conference reports. If such a point of order is raised against legislation for violating levels in the budget resolution, the presiding officer makes a ruling on the point of order based on estimates provided by the relevant Budget Committee. Points of order are not self-enforcing, meaning that if no Member raises a point of order, a chamber may consider and pass legislation that would violate levels established in the budget resolution. In addition, either chamber may waive the point of order. The process for waiving points of order, and the number of Members required to waive points of order, varies by chamber. Generally, such points of order can be waived in the House by a simple majority of Members and in the Senate by three-fifths of all Senators. The Budget Act requires that the budget resolution include the following budgetary levels for the upcoming fiscal year and at least four out years: total spending, total revenues, the surplus/deficit, new spending for each major functional category, the public debt, and (in the Senate only) Social Security spending and revenue levels. The Budget Act also requires that the aggregate amounts of spending recommended in the budget resolution be allocated among committees. The Budget Act provides that the House and Senate Appropriations Committees receive an allocation for only the upcoming fiscal year (referred to as the budget year), but the remaining House and Senate committees receive allocations for the entire period covered by the budget resolution. The Budget Act requires that the House and Senate Appropriations Committees subdivide their allocations by subcommittee and report these sub-allocations to their respective chambers. While the Budget Act requires that the budget resolutions include the levels described above, it does not require that all of these levels be enforceable by points of order. (Some levels in the budget resolution are, therefore, included only for informational purposes.) Budgetary levels that are enforceable include spending and revenue aggregates and committee spending allocations. The Budget Act prohibits the consideration of (1) any measure that would cause spending to exceed levels in the budget resolution, or (2) any measure that would cause total revenue levels to fall below the levels in the budget resolution. Likewise, the Budget Act prohibits the consideration of legislation that would violate the committee spending allocations. (Similarly, once the Appropriations Committees report their sub-allocations to their respective chambers, the Budget Act bars the consideration of any spending measures that would cause those sub-allocations to be violated.) While points of order can be effective in enforcing the budgetary goals outlined in the budget resolution, they can be raised against legislation only when it is pending on the House or Senate floor. This can be effective for legislation such as appropriations measures, which typically provide funding for one year and are therefore considered on the House and Senate floor annually. Points of order cannot, however, limit direct spending or revenue levels resulting from current law. Often, for the budgetary levels in the budget resolution to be achieved, Congress must pass legislation to alter the levels of revenue and/or direct spending resulting from existing law. In this situation, Congress seeks to reconcile the levels of direct spending and revenue resulting from existing law with those budgetary levels expressed in the budget resolution. To assist in this process, the budget reconciliation process allows special consideration of legislation that would accomplish those budgetary levels expressed in the budget resolution. If Congress intends to use the reconciliation process, reconciliation directives (also referred to as reconciliation instructions) must be included in the annual budget resolution. These directives instruct individual committees to develop and report legislation that would change laws within their respective jurisdictions related to direct spending, revenue, or the debt limit. Once a specified committee develops legislation, the reconciliation directive may direct it to report the legislation for consideration in its chamber or submit it to the Budget Committee to be included in an omnibus reconciliation measure. Such reconciliation legislation is then eligible to be considered under special expedited procedures in both the House and Senate. The budget resolution reflects an agreement between the House and Senate on a budgetary plan for the upcoming fiscal year. When the House and Senate do not reach final agreement on this plan, the budget process for the upcoming fiscal year may become complicated. Without an agreement on budgetary parameters, it may be more difficult for Congress to reach agreement on subsequent budgetary legislation, both within each chamber and between the chambers. If Congress agreed upon a budget resolution for the prior fiscal year, that resolution remains in effect and may provide some operative parameters, since a resolution includes multi-year enforceable levels. The usefulness of such levels may be limited, however, due to altered economic conditions and technical factors, not to mention any changes in congressional budgetary goals. Since a committee allocation to the Appropriations Committee is made for only the upcoming fiscal year, the House and Senate cannot rely on a prior year's budget resolution. This means that there is no allocation of spending made to the Appropriations Committees and no formal basis for them to make the required spending sub-allocations. Without such enforceable budgetary levels, the development and consideration of individual appropriations measures may encounter difficulties. Without agreement on a budget resolution, Congress also may not use the budget reconciliation process. This means that any budgetary changes to revenue or mandatory spending may not be considered under the special expedited procedures provided by the budget reconciliation process. The Budget Act sought to require adoption of a budget resolution before Congress could consider budgetary legislation for the upcoming year. Under Section 303(a) of the Budget Act, the House and Senate generally may not consider spending, revenue, or debt limit legislation for a fiscal year until the budget resolution for that fiscal year has been adopted. The Budget Act provides for exceptions, however, and in addition allows the point of order to be waived in both chambers by a simple majority. In the absence of a budget resolution, other budget enforcement mechanisms are available to Congress comprising two general categories. First, there are types of budget enforcement that are entirely separate from the budget resolution, such as chamber rules and statutory spending caps. These mechanisms remain in effect in the absence of a budget resolution and place restrictions on certain types of budgetary legislation. Such enforcement is briefly described below in the section titled \" What Types of Budgetary Enforcement Exist Outside of the Budget Resolution? \" Second, in the absence of agreement on a budget resolution, Congress may employ alternative legislative tools to serve as a substitute for a budget resolution. When Congress has been late in reaching final agreement on a budget resolution, or has not reached agreement at all, it has relied on such substitutes. These substitutes are typically referred to as \"deeming resolutions,\" because they are deemed to serve in place of an agreement between the two chambers on an annual budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year (or multiple fiscal years). Employing a deeming resolution, however, does not preclude Congress from subsequently agreeing to a budget resolution. While referred to as deeming resolutions, such mechanisms are not formally defined and have no specifically prescribed content. Instead, they denote the House and Senate, often separately, engaging legislative procedures to deal with enforcement issues on an ad hoc basis. As described below, the mechanisms vary in form and function, but they always (1) include or reference certain budgetary levels (e.g., aggregate spending limits and committee spending allocations) and (2) contain language stipulating that such levels are to be enforceable by points of order as if they had been included in a budget resolution. As shown in Table 1 , since the creation of the budget resolution, dates of adoption have varied, and there have been 10 years in which Congress did not come to agreement on a budget resolution. As shown in Table 2 , in each of those years, one or both chambers employed at least one deeming resolution to serve as a substitute for a budget resolution. It should be noted that Table 2 includes only the deeming resolutions that pertain to the fiscal years for which Congress did not agree on a budget resolution. For example, for FY2017, the House and Senate ultimately agreed to a budget resolution, and so data pertaining to FY2017 is not included in this report even though the Senate utilized a deeming resolution before agreement on a budget resolution was reached. As described below, deeming resolutions have varied in several ways. Congress initially used simple resolutions as the legislative vehicle for deeming resolutions (which is why they are referred to as resolutions). As shown in Table 2 , however, deeming resolutions have also been included as provisions in lawmaking vehicles, such as appropriations bills. Questions sometimes arise regarding whether the use of an alternative legislative vehicle has any impact on the enforceability of the budgetary levels. Article I of the Constitution, however, gives each house of Congress broad authority to determine its rules of procedure. The House and the Senate may include rulemaking provisions, such as enforceable budgetary levels, in any type of legislative vehicle. In each case, the rulemaking provisions have equal standing and effect. Under this constitutional rulemaking principle, each house has the authority to take parliamentary action that waives its own rules in certain circumstances if it sees fit. This power is not compromised by the fact that the rulemaking provision may be established in statute. As shown in Figure 1 , timing of congressional action on deeming resolutions has varied, since deeming resolutions may be initiated any time Congress regards it as necessary. Chambers have often agreed to deeming resolutions several months after they have separately agreed to a budget resolution but have not come to agreement with each other. Also, chambers have agreed to a deeming resolution on the same day as agreeing to a budget resolution in situations when one chamber foresees difficulty resolving differences with the other chamber. For example, the Senate agreed to a budget resolution for FY1999 on April 2, 1998, and, anticipating an impasse with the House, agreed to a deeming resolution the same day. Similarly, the House passed a budget resolution for FY2007 on May 18, 2006, and agreed to a deeming resolution the same day. Further, deeming resolutions have been provided for far in advance of potential action on a budget resolution. For example, the Bipartisan Budget Act of 2015 ( P.L. 114-74 , enacted in November of 2015) included a provision directing the Senate Budget Committee chair to file in the Congressional Record levels that would then become enforceable in the Senate as if they had been included in a budget resolution for FY2017. Often, a chamber initiates action on a deeming resolution so that it can subsequently begin consideration of appropriations measures. In the House deeming resolutions are often included in the same resolution providing for consideration of the first appropriations measure for the upcoming fiscal year. Just as employing a deeming resolution does not preclude Congress from subsequently agreeing to a budget resolution, it also does not preclude Congress from acting on another deeming resolution that either expands or replaces the first deeming resolution. For example, in FY1999 the Senate agreed to a deeming resolution in April, and in October it agreed to a further deeming resolution that amended the previous deeming resolution. Likewise, the House agreed to a deeming resolution for FY2014 in June but in December passed the Bipartisan Budget Act, which included a deeming resolution that superseded parts of the initial deeming resolution. Deeming resolutions always include at least two things: (1) language setting forth or referencing specific budgetary levels (e.g., aggregate spending limits and/or committee spending allocations), and (2) language stipulating that such levels are to be enforceable as if they had been included in a budget resolution. Even so, significant variations exist in their content, as shown in Table 3 . Budget resolutions include budgetary levels in the form of explicit dollar amounts, and in some instances deeming resolutions have done the same. For example: Pending the adoption by the Congress of a concurrent resolution on the budget for FY1999, the following allocations contemplated by section 302(a) of the Congressional Budget Act of 1974 shall be considered as made to the Committee on Appropriations: (1) New discretionary budget authority: $531,961,000,000. (2) Discretionary outlays: $562,277,000,000. Some deeming resolutions, however, have not included the budgetary levels themselves but have incorporated them by reference, particularly in situations when that chamber has already passed a budget resolution but has not come to agreement with the other chamber. For example: Pending the adoption of a concurrent resolution on the budget for fiscal year 2003, the provisions of House Concurrent Resolution 353, as adopted by the House, shall have force and effect in the House as though Congress has adopted such concurrent resolution. In some cases, the deeming resolution has stated that the chairs of the House and Senate Budget Committees shall subsequently file in the Congressional Record levels that will then become enforceable as if they had been included in a budget resolution. The committee chairs are typically directed to file particular levels, such as those consistent with discretionary spending caps or those consistent with the baseline projections of the Congressional Budget Office. Such provisions have been used recently in both the Budget Control Act of 2011 and the Bipartisan Budget Act of 2013. For example: For the purpose of enforcing the Congressional Budget Act of 1974 for fiscal year 2014... the ... levels provided for in subsection (b) shall apply in the same manner as for a concurrent resolution on the budget for fiscal year 2014.... The Chairmen of the Committee on the Budget of the House of Representatives and the Senate shall each submit a statement for publication in the Congressional Record as soon as practicable after the date of enactment of this Act that includes ... committee allocations for fiscal year 2014 consistent with the discretionary spending limits set forth in this Act. As stated above, deeming resolutions will sometimes reference a budget resolution that has been previously adopted by that chamber and will deem that budget resolution to be enforceable. Alternatively, mechanisms may include or reference only certain levels normally included in a budget resolution. For example, in some cases deeming resolutions have included only committee allocations to the Appropriations Committee, while in other cases they have included allocations for all committees, as well as aggregate spending and revenue levels. While content has varied, deeming resolutions that have not referenced a previously passed budget resolution have typically included only levels to be enforced by points of order, such as aggregate spending and revenue levels as well as spending allocations for each committee. Deeming resolutions generally do not include all of the levels required to be in a budget resolution by the Budget Act. For example, the Budget Act requires that the budget resolution include the corresponding deficit level and public debt level under the enforceable budgetary framework. These have not typically been included in deeming resolutions. In addition, deeming resolutions have often included other matter, such as points of order. In addition to the budget resolution, Congress employs other types of budget enforcement. Some of these enforcement mechanisms are procedural (which are enforced through points of order), and some are statutory (which are enforced through sequestration). In the absence of a budget resolution, these additional budget enforcement mechanisms remain intact. This means that even without a budget resolution, there are still prohibitions and restrictions on different types of budgetary legislation. For example, a limit on defense and nondefense discretionary spending currently exists in the form of annual discretionary spending caps and in addition can act as a guide to appropriators in crafting appropriations measures. In addition, limits on new direct spending and revenue legislation exist through points of order and statutory enforcement such as Senate PAYGO, House CUTGO, and Statutory PAYGO. The House and Senate have many budget-related points of order that seek to restrict or prohibit consideration of different types of budgetary legislation. These points of order are found in various places such as the Budget Act, House and Senate standing rules, and past budget resolutions. For example, for FY2017, Congress moved forward with appropriations in the absence of a budget resolution or deeming resolution. The House Appropriations Committee adopted \"interim 302(b) sub-allocations\" for some individual appropriations bills. Such levels did not act as an enforceable cap on appropriations measures when they were considered on the floor. A separate order adopted by the House as a part of H.Res. 5 (114 th Congress), however, prohibited floor amendments that would increase spending in a general appropriations bill, effectively creating a cap on individual appropriations bills when they were considered on the floor. In addition, in the Senate there exists a pay-as-you-go (PAYGO) rule that prohibits the consideration of direct spending or revenue legislation that is projected to increase the deficit. Another example is the House cut-as-you-go (CUTGO) rule that prohibits the consideration of direct spending legislation that is projected to increase the deficit. Numerous other points of order exist. A summary of many of these can be found in CRS Report 97-865, Points of Order in the Congressional Budget Process , by James V. Saturno. In addition to points of order, there are other types of budget enforcement mechanisms that employ statutory enforcement known as a sequester. A sequester provides for the automatic cancellation of previously enacted spending, making largely across-the-board reductions to nonexempt programs, activities, and accounts. A sequester is implemented through a sequestration order issued by the President as required by law. The purpose of a sequester is to enforce certain statutory budget requirements, such as enforcing statutory limits on discretionary spending or ensuring that new revenue and direct spending laws do not have the net effect of increasing the deficit. Generally, sequesters have been used as an enforcement mechanism that would either discourage Congress from enacting legislation violating a specific budgetary goal or encourage Congress to enact legislation that would fulfill a specific budgetary goal. Sequestration is currently employed as the enforcement mechanism for three budgetary policies: 1. The Budget Control Act of 2011 (BCA; P.L. 112-25 ) established annual statutory limits on each defense discretionary and non-defense discretionary spending that are in effect through 2021. If legislation is enacted breaching either the defense or non-defense discretionary spending cap, then a sequester will occur, making cuts to non-exempt programs within the corresponding category to make up for the breach. In this situation, the sequester will either deter enactment of legislation violating the spending limits or—in the event that legislation is enacted violating these limits—automatically reduce discretionary spending to the limit specified in law. 2. The BCA also created a Joint Select Committee on Deficit Reduction instructed to develop legislation to reduce the budget deficit by at least $1.5 trillion over the 10-year period FY2012-FY2021. The BCA stipulated that if a measure meeting specific requirements was not enacted by January 15, 2012, then a sequester would be triggered to enforce the budgetary goal established for the committee. In this situation the sequester was meant to either encourage agreement on deficit reduction legislation or, in the event that such agreement was not reached, automatically reduce spending so that an equivalent budgetary goal would be achieved. Because the agreement was not reached, this sequester is now in effect through 2024. 3. Another enforcement mechanism was created by the Statutory Pay-As-You-Go Act of 2010 ( P.L. 111-139 ). The budgetary goal of Statutory PAYGO is to ensure that new revenue and direct spending legislation enacted during a session of Congress does not have the net effect of increasing the deficit (or reducing a surplus) over either a 6- or 11-year period. The sequester enforces this requirement by either deterring enactment of such legislation or, in the event that legislation has such an effect, automatically reducing spending to achieve the required deficit neutrality.", "summary": "The budget resolution reflects an agreement between the House and Senate on a budgetary plan for the upcoming fiscal year. Once agreed to by both chambers in the exact same form, the budget resolution creates parameters that may be enforced by (1) points of order and (2) using the budget reconciliation process. When the House and Senate do not reach final agreement on this plan, it may be more difficult for Congress to reach agreement on subsequent budgetary legislation, both within each chamber and between the chambers. In the absence of agreement on a budget resolution, Congress may employ alternative legislative tools to serve as a substitute for a budget resolution. These substitutes are typically referred to as \"deeming resolutions,\" because they are deemed to serve in place of an annual budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year. Since the creation of the budget resolution, there have been 10 years in which Congress did not come to agreement on a budget resolution. In each of those years, one or both chambers employed at least one deeming resolution to serve as a substitute for a budget resolution. While referred to as deeming resolutions, such mechanisms are not formally defined and have no specifically prescribed content. Instead, they represent the House and Senate, often separately, engaging legislative procedures to deal with enforcement issues on an ad hoc basis. As described below, the mechanisms can vary significantly in content and timing. This report covers the use of deeming resolutions pertaining to fiscal years for which the House and Senate did not agree on a budget resolution. While neither the House nor Senate have yet adopted a budget resolution for FY2020, they may still do so. In the meantime, on April 9, 2019, the House passed a deeming resolution for FY2020, H.Res. 293.", "document_type": "crs"}
{"report": "Successive Administrations have identified Iran as a key national security challenge. The Trump Administration encapsulated its assessment of the threat posed by Iran in a late September 2018 State Department report entitled \"Outlaw Regime: A Chronicle of Iran's Destructive Activities.\" It outlines Iran's malign activities as well as a litany of other activities the Administration terms \"the Iranian regime's destructive behavior at home and abroad.\" The U.S. intelligence community testified in January 2019 that \"Iran's regional ambitions and improved military capabilities almost certainly will threaten U.S. interests in the coming year, driven by Tehran's perception of increasing U.S., Saudi, and Israeli hostility, as well as continuing border insecurity, and the influence of hardliners.\" An annual Defense Department report on Iran's military power required by successive National Defense Authorization Acts (NDAAs), generally contain assessments similar to those presented publicly by the intelligence community. Iran's foreign and defense policies are products of overlapping, and sometimes contradictory, motivations. One expert asserts that Iran has not decided whether it is a \"nation, or a cause.\" Iran's leaders are apparently motivated, at least to some extent, by the perception of threats to their regime and their national interests posed by the United States and its allies. Supreme Leader Grand Ayatollah Ali Khamene'i, Iran's paramount decisionmaker since 1989, has repeatedly stated that the United States seeks to overturn Iran's regime through support for anti-regime activists, economic sanctions, and alliances with Iran's regional adversaries. Iran's leaders assert that the U.S. military presence in and around the Persian Gulf region reflects intent to intimidate Iran or attack it if Iran pursues policies the United States finds inimical. Iran's leaders assert that the United States' support for Sunni Arab regimes that oppose Iran has led to the empowerment of radical Sunni Islamist groups and spawned Sunni-dominated terrorist groups such as the Islamic State. The ideology of Iran's 1979 Islamic revolution infuses Iran's foreign policy. The revolution overthrew a secular, authoritarian leader, the Shah, who the leaders of the revolution asserted had suppressed Islam and its clergy. A clerical regime was established in which ultimate power is invested in a \"Supreme Leader\" who melds political and religious authority. In the early years after the revolution, Iran attempted to \"export\" its revolution to nearby Muslim states. In the late 1990s, Iran appeared to abandon that goal because its promotion produced resistance to Iran in the region. However, the various conflicts in the region that arose from the 2011 \"Arab Spring\" uprisings have appeared to give Iran opportunities to revive that goal to some extent. Iran's leaders assert that the political and economic structures of the Middle East are heavily weighted in favor of the United States and its regional allies and against who Iranian leaders describe as \"oppressed peoples\": the Palestinians, who do not have an independent state, and Shia Muslims, who are politically underrepresented and economically disadvantaged minorities in many countries of the region. Iran claims that the region's politics and economics have been distorted by Western intervention and economic domination. Iranian leaders also assert that the creation of Israel is a manifestation of Western intervention that deprived the Palestinians of legitimate rights. Iranian leaders frequently assert that the Islamic revolution made Iran independent of U.S. influence and that the country's foreign policy is intended, at least in part, to ensure that the United States cannot interfere in Iran's domestic affairs. They cite as evidence of past U.S. interference the 1953 U.S.-backed overthrow of elected Prime Minister Mohammad Mossadeq and U.S. backing for Saddam Hussein's regime in the 1980-1988 Iran-Iraq war. Iran claims its ideology is pan-Islamic and nonsectarian. It cites its support for Sunni groups such as Hamas and for secular Palestinian groups as evidence that it works with non-Islamist and non-Shia groups to promote Palestinian rights. Iran's national interests usually dovetail with, but sometimes conflict with, Iran's ideology. Iran's leaders, stressing Iran's well-developed civilization and historic independence, claim a right to be recognized as a major power in the region. They contrast Iran's history with that of the six Persian Gulf monarchy states (Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain, and Oman of the Gulf Cooperation Council, GCC), most of which gained independence only in the 1960s and 1970s. To this extent, many of Iran's foreign policy actions are similar to those undertaken by the Shah of Iran and prior Iranian dynasties. Iran has generally refrained from backing Islamist movements in the Central Asian countries, which are mainly Sunni inhabited and whose Islamist movements are largely hostile toward Iran. Iran has sometimes tempered its commitment to aid other Shias to promote its geopolitical interests. For example, it has supported mostly Christian-inhabited Armenia, rather than Shia-inhabited Azerbaijan, in part to thwart cross-border Azeri nationalism among Iran's large Azeri minority. Even though Iranian leaders accuse U.S. allies of contributing to U.S. efforts to structure the Middle East to its advantage, Iranian officials have sought to engage with historic U.S. allies, such as Turkey, to try to thwart international sanctions and consolidate Iran's position in Syria. Iran's foreign policy often appears to reflect differing approaches and outlooks among key players and interest groups. Supreme Leader Khamene'i sits as the apex of Iran's hardline leaders and factions. His consistent refrain, and the title of his book widely available in Iran, is \"I am a revolutionary, not a diplomat.\" He and leaders of Iran's Islamic Revolutionary Guard Corps (IRGC), the military and internal security force created after the Islamic revolution, consistently support regional interventions, even when doing so earns international criticism. More moderate Iranian leaders, including President Hassan Rouhani and Foreign Minister Mohammad Javad Zarif, argue that Iran should not have any \"permanent enemies.\" They maintain that a pragmatic foreign policy has resulted in easing of international sanctions under the JCPOA, increased worldwide attention to Iran's views, and the positioning of Iran as a trade and transportation hub. They argue for continuing to adhere to the JCPOA as a means of dividing the United States from Europe and other U.S. partners—virtually all of which opposed the U.S. withdrawal from the JCPOA. Criticism from hardliners contributed to Zarif's resignation in February 2019, but Rouhani did not accept the resignation and Zarif remains in position. The moderate factions draw support from Iran's youth and intellectuals who want integration with the West. The degree to which public opinion shapes Iranian foreign policy decisions is not clear. During protests in Iran in December 2017-January 2018, some protesters expressed opposition to the use of Iran's financial resources for regional interventions rather than to improve the living standards of the population. And, the 2011-2016 period of comprehensive international sanctions weakened Iran's economy and living standards to the point where the government accepted a compromise to limit its nuclear program. Yet, the regime has not at any time shifted its regional policies in response to domestic public opinion. Iran employs a number of different methods and mechanisms to implement its foreign policy. Iran uses support for terrorist groups and armed factions as an instrument of policy. In some cases, such as Lebanese Hezbollah and some Iraqi Shia factions, Iran has established Shia militia groups as armed factions and, through funding and advice, has helped build them into political movements that acquire political legitimacy and seats in national parliaments and cabinets. The State Department report on international terrorism for 2017 stated that Iran remained the foremost state sponsor of terrorism in 2017, and continued to provide arms, training, and military advisers in support of allied governments and movements, such as the regime of President Bashar Al Asad of Syria, Lebanese Hezbollah, Hamas and other Palestinian militant groups, Houthi rebels in Yemen, Shia militias in Iraq, and underground violent groups in Bahrain. Other Administration reports, testimony, and statements, including DNI worldwide threat assessment testimony in recent years, make similar assertions. Many of the groups Iran supports are named as Foreign Terrorist Organizations (FTOs) by the United States, and because of that support, Iran was placed on the U.S. list of state sponsors of terrorism (\"terrorism list\") in January 1984. Some armed factions that Iran supports have not been named as FTOs. Such groups include the Houthi (\"Ansar Allah\") movement in Yemen (composed of Zaidi Shia Muslims), the Taliban, and underground Shia opposition factions in Bahrain. Iran generally opposes Sunni terrorist groups that work against Iran's core interests, such as Al Qaeda and the Islamic State. Iran actively combatted the Islamic State in Syria and Iraq. Iran has expelled some Al Qaeda activists who it allowed to take refuge there after the September 11, 2001, attacks, but some reportedly remain, perhaps in an effort by Iran to exert leverage against the United States or Saudi Arabia. Iran's operations in support of its allies are carried out by the Qods (Jerusalem) Force of the IRGC (IRGC-QF). That force, estimated to have about 20,000 personnel, is headed by IRGC Major General Qasem Soleimani, who is said to report directly to Khamene'i. IRGC and IRGC-QF leaders generally publicly acknowledge operations in support of regional allies, although often characterizing Iran's support as humanitarian aid or protection for Shia religious shrines or sites. Much of the weaponry Iran supplies to its allies includes specialized anti-tank systems (\"explosively forced projectiles\" EFPs), artillery rockets, mortars, short-range ballistic missiles, and cruise missiles. The table below lists major terrorist attacks sponsored by Iran and/or Hezbollah, and does not include plots that were foiled. In recent months, authorities in Europe have arrested Iranian diplomats and operatives, including IRGC-QF agents, suspected of organizing terrorist plots against Iranian dissidents and other targets. In January 2018, Germany arrested 10 IRGC-QF operatives. In March 2018, Albania arrested two Iranian operatives for terrorist plotting. In mid-2018, authorities in Germany, Belgium, and France arrested Iranian operatives, including one based at Iran's embassy in Austria, for a suspected plot to bomb a rally by Iranian dissidents in Paris. In October 2018, an Iranian operative was arrested for planning assassinations in Denmark. Iran seemingly prefers indirect action through proxies and armed factions it supports, but does sometimes undertake direct military action. Iran conducts, although less frequently in 2017-2018, \"high speed intercepts\" of U.S. ships in the Persian Gulf as an apparent show of strength. Iran has, on some occasions, diverted or detained international shipping transiting the Gulf. In 2018, Iran has conducted missile strikes on regional opponents. In September, Iran fired missiles at a Kurdish opposition group based in northern Iraq. In early October, Iran fired, from Iranian territory, missiles at Islamic State positions in Syria. Iran's national security is not limited to militarily supporting allies and armed factions. A wide range of observers report that Iran has provided funding to political candidates in neighboring Iraq and Afghanistan to cultivate allies there. Iran has provided direct payments to leaders of neighboring states to gain and maintain their support. In 2010, then-President of Afghanistan Hamid Karzai publicly acknowledged that his office had received cash payments from Iran. Iran has established some training and education programs that bring young Muslims to study in Iran. One such program runs in Latin America, despite the small percentage of Muslims there. Since 2012, Iran has dedicated significant resources toward cyberespionage and has conducted cyberattacks against the United States and U.S. allies in the Persian Gulf. Government-supported Iranian hackers have conducted a series of cyberattacks against oil and gas companies in the Persian Gulf. Iran also uses traditional diplomatic tools. Iran has an active Foreign Ministry and maintains embassies or representation in all countries with which it has diplomatic relations. Khamene'i has rarely traveled outside Iran as Supreme Leader—and not at all in recent years—but Iranian presidents travel outside Iran regularly, including to Europe and U.N. meetings in New York. Khamene'i frequently hosts foreign leaders in Tehran. From August 2012 until August 2015, Iran held the presidency of the Non-Aligned Movement (NAM), which has about 120 member states and 17 observer countries and generally shares Iran's criticisms of big power influence over global affairs. In August 2012, Iran hosted the NAM annual summit. Iran is a party to all major nonproliferation conventions, including the Nuclear Non-Proliferation Treaty (NPT) and the Chemical Weapons Convention (CWC). Iran insists that it has adhered to all its commitments under these conventions, but the international community asserted that it did not meet all its obligations under these pacts. Nuclear negotiations between Iran and international powers began in 2003 and culminated with the July 2015 JCPOA. Iran is actively seeking to expand its participation in multilateral organizations. It has sought to join the World Trade Organization (WTO) since the mid-1990s. Iran also seeks full membership in regional organizations including the South Asian Association of Regional Cooperation (SAARC) and the Shanghai Cooperation Organization (SCO). Officials from some SCO countries have said that the JCPOA removed obstacles to Iran's obtaining full membership, but opposition from some members has blocked Iran's accession to date. Iran has participated in multilateral negotiations to try to resolve the civil conflict in Syria, even though Iran's main goal is to ensure Asad's continuation in power. Iran has pursued a wide range of defense programs, as well as a nuclear program that the international community perceived could be intended to eventually produce a nuclear weapon. These programs are discussed in the following sections. Iran's nuclear program has been a paramount U.S. concern, in part because Iran's acquisition of an operational nuclear weapon could cause Iran to perceive that it is immune from military pressure and produce a regional nuclear arms race. Israeli leaders have characterized an Iranian nuclear weapon as a threat to Israel's existence. Some Iranian leaders argue that a nuclear weapon could end Iran's historic vulnerability to great power invasion, domination, or regime change attempts. Iran's nuclear program became a major issue in 2002, when U.S. officials confirmed that Iran was building a uranium enrichment facility at Natanz and a heavy water production plant at Arak. The threat escalated in 2010, when Iran began enriching uranium to 20% purity, which requires most of the effort needed to produce weapons-grade uranium (90%+ purity). A nuclear weapon also requires a detonation mechanism. The International Atomic Energy Agency (IAEA) concluded that Iran researched such a mechanism until 2009. The United States insists that Iran must not possess a nuclear-capable missile. The U.S. intelligence community has stated in recent years that it \"does not know whether Iran will eventually decide to build nuclear weapons.\" Iranian leaders cite Supreme Leader Khamene'i's 2003 proclamation ( fatwa ) that nuclear weapons are un-Islamic as evidence that a nuclear weapon is inconsistent with Iran's ideology. Iranian leaders assert that Iran's nuclear program was always intended for civilian uses, including medicine and electricity generation. Iran argued that uranium enrichment is its \"right\" as a party to the 1968 Nuclear Non-Proliferation Treaty and that it wants to make its own nuclear fuel to avoid potential supply disruptions. U.S. officials have said that Iran's use of nuclear energy is acceptable. IAEA findings that Iran researched a nuclear explosive device—detailed in a December 2, 2015, International Atomic Energy Agency (IAEA) report—cast doubt on Iran's assertions of purely peaceful intent. There were no assertions that Iran, at any time, diverted nuclear material for a weapons program. In April 2015, then-Vice President Biden stated that Iran could likely have enough fissile material for a nuclear weapon within two to three months of a decision to manufacture that material. U.S. officials said that the JCPOA increased the \"breakout time\"—an all-out effort by Iran to develop a nuclear weapon using declared facilities or undeclared covert facilities—to at least 12 months. When the JCPOA was agreed, Iran had about 19,000 total installed centrifuges to enrich uranium, of which about 10,000 were operating. Prior to the interim nuclear agreement (Joint Plan of Action, JPA), Iran had a stockpile of 400 pounds of 20% enriched uranium (short of the 550 pounds that would be needed to produce one nuclear weapon). Weapons grade uranium is uranium that is enriched to 90%. Under the JCPOA, Iran is allowed to operate only about 5,000 centrifuges and was required to reduce its stockpile of 3.67% enriched uranium to 300 kilograms (660 pounds). These restrictions start to expire in October 2025—10 years from Adoption Day (October 2015). Another means of acquiring fissile material for a nuclear weapon is to reprocess plutonium, a material that could be produced by Iran's heavy water plant at Arak. In accordance with the JCPOA, Iran rendered inactive the core of the reactor and it has limited its stockpile of heavy water. The JCPOA does not prohibit civilian nuclear plants such as the one Russia built at Bushehr. Under a 1995 bilateral agreement, Russia supplies nuclear fuel for that plant and takes back the spent nuclear material for reprocessing. It became operational in 2012. The JCPOA was the product of a long international effort to persuade Iran to negotiate limits on its nuclear program. In 2003, France, Britain, and Germany (the \"EU-3\") opened a diplomatic track to negotiate curbs on Iran's program, and in October 2003 they obtained an Iranian pledge, in return for receiving peaceful nuclear technology, to suspend uranium enrichment activities and sign and ratify the \"Additional Protocol\" to the NPT (allowing for enhanced inspections). Iran signed the Additional Protocol on December 18, 2003, although the Majles did not ratify it. Iran ended the suspension after several months, but the EU-3 and Iran subsequently reached a November 14, 2004, \"Paris Agreement,\" under which Iran suspended uranium enrichment in exchange for trade talks and other non-U.S. aid. The Bush Administration supported the agreement with a March 11, 2005, announcement by dropping the U.S. objection to Iran's applying to join the World Trade Organization (WTO). That agreement broke down in 2005 when Iran rejected an EU-3 proposal for a permanent nuclear accord as offering insufficient benefits. In August 2005, Iran began uranium \"conversion\" (one step before enrichment) at its Esfahan facility and, on February 4, 2006, the IAEA board voted 27-3 to refer the case to the Security Council. The Council set an April 29, 2006, deadline to cease enrichment. \"P5+1\" Formed . In May 2006, the Bush Administration join the talks, triggering an expanded negotiating group called the \"Permanent Five Plus 1\" (P5+1: United States, Russia, China, France, Britain, and Germany). A month after it formed, the P5+1 offered Iran guaranteed Iran nuclear fuel for its civilian reactor (Annex I to Resolution 1747) and threatened sanctions if Iran did not agree (sanctions were imposed in subsequent years). The U.N. Security Council subsequently imposed sanctions on Iran in an effort to shift Iran's calculations toward compromise, as outlined in the text box below. The P5+1 met in February 2009 to incorporate the Obama Administration's stated commitment to direct U.S. engagement with Iran and, in April 2009, U.S. officials announced that a U.S. diplomat would attend P5+1 meetings with Iran. In July 2009, the United States and its allies demanded that Iran offer constructive proposals by late September 2009 or face \"crippling sanctions.\" A September 9, 2009, Iranian proposal led to an October 1, 2009, P5+1-Iran meeting in Geneva that produced a tentative agreement for Iran to allow Russia and France to reprocess 75% of Iran's low-enriched uranium stockpile for medical use. A draft agreement was approved by the P5+1 countries following technical talks in Vienna on October 19-21, 2009, but the Supreme Leader decided that Iran's concessions were excessive and no accord was finalized. In April 2010, Brazil and Turkey negotiated with Iran to revive the October arrangement. On May 17, 2010, the three countries signed a \"Tehran Declaration\" for Iran to send 2,600 pounds of low enriched uranium to Turkey in exchange for medically useful uranium. Iran submitted to the IAEA an acceptance letter, but the Administration rejected the plan for failing to address enrichment to the 20% level. Immediately after the Brazil-Turkey mediation failed, then-Secretary of State Clinton announced that the P5+1 had reached agreement on a new U.N. Security Council Resolution that would give U.S. allies authority to take substantial new economic measures against Iran. Adopted on June 9, 2010, Resolution 1929 was pivotal by linking Iran's economy to its nuclear capabilities and thereby authorizing U.N. member states to sanction key Iranian economic sectors. An annex to the Resolution presented a modified offer of incentives to Iran. Negotiations subsequent to the adoption of Resolution 1929—in December 2010, in Geneva and January 2011, in Istanbul—floundered over Iran's demand for immediate lifting of international sanctions. Additional rounds of P5+1-Iran talks in 2012 and 2013 (2012: April in Istanbul; May in Baghdad; and June in Moscow; 2013: Almaty, Kazakhstan, in February and in April) did not reach agreement on a P5+1 proposals that Iran halt enrichment to the 20% level; close the Fordow facility; and remove its stockpile of 20% enriched uranium. The June 2013 election of Rouhani as Iran's president improved the prospects for a nuclear settlement and, in advance of his visit to the U.N. General Assembly in New York during September 23-27, 2013, Rouhani stated that the Supreme Leader had given him authority to negotiate a nuclear deal. The Supreme Leader affirmed that authority in a speech on September 17, 2013, stating that he believes in the concept of \"heroic flexibility\"—adopting \"proper and logical diplomatic moves....\" An interim nuclear agreement, the Joint Plan of Action (JPA), was announced on November 24, 2013, providing modest sanctions relief in exchange for Iran (1) eliminating its stockpile of 20% enriched uranium, (2) ceasing to enrich to that level, and (3) not increasing its stockpile of 3.5% enriched uranium. P5+1-Iran negotiations on a comprehensive settlement began in February 2014 but missed several self-imposed deadlines. On April 2, 2015, the parties reached a framework for a JCPOA, and the JCPOA was finalized on July 14, 2015. U.N. Security Council Resolution 2231 of July 20, 2015, endorsed the JCPOA and contains restrictions (less stringent than in Resolution 1929) on Iran's importation or exportation of conventional arms (for up to five years), and on development and testing of ballistic missiles capable of delivering a nuclear weapon (for up to eight years). On January 16, 2016, the IAEA certified that Iran completed the work required for sanctions relief and \"Implementation Day\" was declared. The Trump Administration criticized the JCPOA for not addressing key U.S. concerns about Iran's continuing \"malign activities\" in the region or its ballistic missile program, and the expiration of key nuclear restrictions. In October 2017, the Administration withheld certification of Iranian compliance under the Iran Nuclear Agreement Review Act (INARA, P.L. 114-17 ) on the grounds that sanctions relief was not proportional to the limitations on Iran's nuclear program. The noncertification enabled Congress to use expedited rules to reimpose U.S. sanctions, but Congress did not take any action. On October 13, 2017, and January 12, 2018, the President threatened to withdraw the United States from the JCPOA unless Congress and the European countries acted to (1) extend the JCPOA's nuclear restrictions beyond current deadlines to ensure that Iran never comes close to developing a nuclear weapon; (2) impose strict sanctions on Iran's development of ballistic missiles; and (3) ensure that Iran allows \"immediate\" access to any site that the IAEA wants to visit. The Administration insisted that U.S. allies address Iran's \"malign activities\" in the region. The European countries negotiated with the United States but ultimately did not meet all of his stipulated conditions. On May 8, 2018, President Trump withdrew the United States from the JCPOA and announced that all U.S. sanctions would be reimposed by November 4, 2018. On August 29, 2018, the Administration provided Congress with a report mandated by the Countering America's Adversaries through Sanctions Act ( P.L. 115-44 ) on its strategy to counter \"Iran's conventional and asymmetric threats.\" The elements of the strategy are discussed throughout this report. In May 2019, the Trump Administration revoked some of the waivers under U.S. law that enable European and other countries to provide technical assistance to Iran's JCPOA-permitted nuclear sites. On May 8, 2019, after that announcement as well as a series of U.S. sanctions announcements against Iran, President Rouhani announced that Iran would begin exceeding some of the allowed limits to Iran's program – particularly the amount of low-enriched uranium and heavy water that Iran could stockpile. He announced that Iran would take further nuclear steps in violation of the JCPOA if its demands for the economic benefits of the JCPOA were not met within 60 days. Iran has an active missile development program, as well as other WMD programs at varying stages of activity and capability, as discussed further below. Iran signed the Chemical Weapons Convention (CWC) on January 13, 1993, and ratified it on June 8, 1997. The U.S. statement to the November 22, 2018, CWC review conference said that \"the United States has had longstanding concerns that Iran maintains a chemical weapons program that it failed to declare to the OPCW (Organization for the Prohibition of Chemical Weapons).\" The statement specified that Iran failed to submit a complete chemical weapons production facility declaration; that Iran did not declare all of its riot control agents; and that Iran failed to declare its transfer of chemical weapons to Libya in the 1980s. The statement added that the United States could not certify that Iran does not maintain an undeclared CW stockpile. Iran also has ratified the Biological and Toxin Weapons Convention (BTWC), but it engages in dual-use activities with possible biological weapons applications that could potentially be inconsistent with the convention. Iran is widely believed to be unlikely to use chemical or biological weapons or to transfer them to its regional proxies or allies because of the potential for international powers to discover their origin and retaliate against Iran for any use. According to the September 2018 Administration report \"Outlaw Regime: A Chronicle of Iran's Destructive Activities,\" Iran has \"the largest ballistic missile force in the Middle East, with more than ten ballistic missile systems either in its inventory or in development, and a stockpile of hundreds of missiles that threaten its neighbors in the region.\" The intelligence community has said publicly that Iran \"can strike targets up to 2,000 kilometers from Iran's borders.\" Iran is not known to possess an intercontinental ballistic missile (ICBM) capability (missiles of ranges over 2,900 miles), but the DNI threat assessment testimony of February 13, 2018, stated that \"Iran's work on a space launch vehicle (SLV)—including on its Simorgh—shortens the timeline to an ICBM because SLVs and ICBMs use similar technologies.\" However, then-IRGC Commander-in-Chief Ali Jafari said in October 2017 that the existing ranges of Iran's missiles are \"sufficient for now,\" suggesting that Iran has no plans to develop an ICBM. If there is a decision to do so, progress on Iran's space program could shorten the pathway to an ICBM because space launch vehicles use similar technology. Iran's missile programs are run by the IRGC Aerospace Force, particularly the Al Ghadir Missile Command—an entity sanctioned under Executive Order 13382. There are persistent reports that Iran-North Korea missile cooperation is extensive, but it is not known whether North Korea and Iran have recently exchanged missile hardware. At the more tactical level, Iran is acquiring, developing, and exporting short-range ballistic and cruise missiles that Iran's forces can use and/or transfer to regional allies and proxies to protect them and to enhance Iran's ability to project power. The U.S. intelligence community has said in recent years that Iran \"continues to develop and improve a range of new military capabilities to target U.S. and allied military assets in the region, including armed UAVs, ballistic missiles, advanced naval mines, unmanned explosive boats, submarines and advanced torpedoes, and anti-ship and land-attack cruise missiles.\" Resolution 2231 (the operative Security Council resolution on Iran) \"calls on\" Iran not to develop or test ballistic missiles \"designed to be capable of\" delivering a nuclear weapon, for up to eight years from Adoption Day of the JCPOA (October 18, 2015). The wording is far less restrictive than that of Resolution 1929, which clearly prohibited Iran's development of ballistic missiles. The JCPOA itself does not specifically contain ballistic missile restraints. Iran has continued developing and testing missiles, despite Resolution 2231, which took effect on January 16, 2016, \"Implementation Day.\" On October 11, 2015, and reportedly again on November 21, 2015, Iran tested a 1,200-mile-range ballistic missile, which U.S. intelligence officials called \"more accurate\" than previous Iranian missiles of similar range. Iran conducted ballistic missile tests on March 8-9, 2016—the first such tests after Implementation Day. Iran reportedly conducted a missile test in May 2016, although Iranian media had varying accounts of the range of the missile tested. A July 11-21, 2016, test of a missile of a range of 2,500 miles, akin to North Korea's Musudan missile, reportedly failed. It is not clear whether North Korea provided any technology or had any involvement in the test. On January 29, 2017, Iran tested what Trump Administration officials called a version of the Shahab missile and what outside experts called a Khorramshahr missile (see Table 2 ). Press reports say the test failed when the missile exploded after traveling about 600 miles. On July 27, 2017, Iran's Simorgh rocket launched a satellite into space. On January 15, 2019, a Simorgh vehicle failed to put a communications satellite into orbit. On December 1, 2018, Secretary of State Pompeo stated that Iran had test fired a medium-range ballistic missile \"capable of carrying multiple warheads.\" Iran continues to periodically test short-range ballistic missiles. The Obama Administration termed Iran's post-Implementation Day ballistic missile tests as \"provocative and destabilizing\" and \"inconsistent with\" Resolution 2231. The Trump Administration termed Iran's July 27, 2017, space launch and its December 1, 2018, missile launch \"violations\" of the Resolution because of the inherent capability of the vehicle and the missile to carry a nuclear warhead. The U.N. Security Council has not imposed any additional sanctions on Iran for these tests to date. Several successive Administrations have designated Iranian missile-related entities for sanctions under Executive Order 13382 and the Iran, North Korea, and Syria Nonproliferation Act. The Trump Administration has demanded, as a condition of any revised JCPOA, a binding ban on Iran's development of nuclear-capable ballistic missiles. Section 1226 of the FY2017 National Defense Authorization Act ( S. 2943 , P.L. 114-328 ) requires the DNI, as well as the Secretary of State and the Secretary of the Treasury, to submit quarterly reports to Congress on Iranian missile launches in the preceding year, and on efforts to impose sanctions on entities assisting those launches. The provision sunsets on December 31, 2019. Iran asserts that conventionally armed missiles are an integral part of its defense strategy and they will not accept any new curbs on Iran's missile program. Iran argues that it is not developing a nuclear weapon and therefore is not designing its missile to carry a nuclear weapon. Successive U.S. Administrations have sought to build up regional missile defense systems. The United States and Israel have a broad program of cooperation on missile defense as well as on defenses against shorter-range rockets and missiles such as those Iran supplies to Lebanese Hezbollah. Through sales of the Patriot system (PAC-3) and more advanced \"THAAD\" (Theater High Altitude Area Defense) to the Gulf states, the United States has sought to construct a coordinated GCC missile defense system. The United States has sought a defense against an eventual long-range Iranian missile system by emplacing missile defense systems in various Eastern European countries and on ship-based systems. The United States has helped Israel develop the Arrow missile defense system that is intended to intercept Iranian (or other) ballistic missiles launched at Israel. Other Israeli systems developed with U.S. help, including Iron Dome and David's Sling, are intended to intercept rockets launched by Iranian allies Hezbollah and Hamas. The FY2013 national defense authorization act ( P.L. 112-239 ) contained provisions urging the Administration to undertake more extensive efforts, in cooperation with U.S. partners and others, to defend against the missile programs of Iran (and North Korea). Iran appears to be able to defend against any conceivable aggression from Iran's neighbors, while lacking the ability to project conventional military power outside the region or across waterways. Iran's forces are widely assessed as incapable of defeating the United States in a classic military confrontation, but they could potentially inflict significant damage or casualties on the U.S. military. Then-CENTCOM Commander General Joseph Votel testified on February 27, 2018, that Iran's ground forces are \"improving their ability to quickly mobilize and deploy in response to internal and external threats.\" Organizationally, Iran's armed forces are divided to perform functions appropriate to their roles. The Islamic Revolutionary Guard Corps (IRGC, known in Persian as the Sepah-e-Pasdaran Enghelab Islami ) controls the Basij (Mobilization of the Oppressed) volunteer militia that has been the main instrument to repress domestic dissent. The IRGC also has a national defense role. The IRGC and the regular military ( Artesh )—the national army that existed under the former Shah—report to a joint headquarters. In June 2016, Supreme Leader Khamene'i replaced the longtime Chief of Staff (head) of the Joint Headquarters with IRGC Major General Mohammad Hossein Bagheri, an early IRGC recruit who fought against Kurdish insurgents and in the Iran-Iraq War. The appointment of an IRGC officer to head the joint headquarters again demonstrates the IRGC's dominance within Iran's military and security structure. In April 2019, Khamene'i appointed a new IRGC Commander-in-Chief, IRGC Maj. Gen. Hossein Salami, to replace IRGC Maj. Gen. Mohammad Ali Jafari. Both are hardliners and IRGC operations and its political orientation are not expected to change. The IRGC Navy (IRGCN) and regular Navy (Islamic Republic of Iran Navy, IRIN) are distinct forces. As of 2007, the IRIN has responsibility for the Gulf of Oman, whereas the IRGC Navy has responsibility for the closer-in Persian Gulf and Strait of Hormuz more well-suited to its generally smaller ships. The IRGC Navy operates Iran's large inventory of small boats, including China-supplied patrol boats. In August 2018, the hardline IRGC General Alireza Tangsiri was appointed commander of the IRGC Navy. Rouhani's August 2017 appointment of a senior Artesh figure, Brigadier General Amir Hatami, as Defense Minister suggests that the Artesh remains an integral part of the defense establishment. The Artesh is deployed mainly at bases outside cities and has no internal security role. The regular air force (Islamic Republic of Iran Air Force, IRIAF) operates most of Iran's traditional combat aircraft, whereas the IRGC Aerospace Force operates Iran's missile force and does not generally operate combat aircraft. The IRIN controls Iran's larger ships as well as its three Kilo-class submarines bought from Russia and the 14 North Korea-designed \"Yona\" (Ghadir, Iranian variant) midget subs, according to DOD reports. Iran is also developing increasingly lethal systems such as more advanced naval mines. Iran has a small number of warships on its Caspian Sea coast and, since 2014, Iran has periodically sent warships into the Atlantic Ocean to demonstrate growing naval capability. Iran compensates for its conventional military deficiencies by focusing on \"asymmetric warfare.\" As an example, the IRGC Navy has developed forces and tactics to control the approaches to Iran, including the Strait of Hormuz, centering on an ability to \"swarm\" U.S. naval assets with its fleet of small boats and to launch large numbers of anti-ship cruise missiles and coastal defense cruise missiles. Iran has added naval bases along its coast in recent years, enhancing its ability to threaten shipping in the strait. As discussed further later in this report, IRGC Navy vessels sometimes conduct \"high-speed intercepts\"—close-approaches of U.S. naval vessels in the Gulf. Iran's arming of regional allies and proxies represents another aspect of Iran's development of asymmetric warfare capabilities. Iran's allies and proxies control territory within which Iran can emplace missiles, rockets, and factories to build military equipment. These allies help Iran expand its influence and project power with little direct risk, giving Tehran a measure of deniability. For example, Iran's provision of anti-ship missiles to the Houthi rebels in Yemen could represent an effort by Tehran to project military power into the key Bab el-Mandeb Strait chokepoint. Iran could also try to retaliate through terrorist attacks inside the United States or against U.S. embassies and facilities in Europe or the Persian Gulf. Iran could also try to direct Iran-supported forces in Afghanistan or Iraq to attack U.S. personnel in those countries. Iran's support for regional terrorist groups was a justification for Iran's addition to the U.S. list of state sponsors of terrorism (\"terrorism list\") in January 1984. Iran's armed forces have few formal relationships with foreign militaries outside the region. Iran's most significant military-to-military relationships have focused on Iranian arms purchases or upgrades. According to the August 2018 report to Congress mandated by the Countering America's Adversaries through Sanctions Act, Iran has bought weaponry from Russia, China, North Korea, Belarus, and Ukraine, and \"has obtained missile and aircraft technology from foreign suppliers, including China and North Korea.\" Iran and Russia have cooperated closely to assist the Asad regime in Syria. In August 2016, Iran allowed Russia's bomber aircraft, for a brief time, to use Iran's western airbase at Hamadan to launch strikes in Syria—the first time the Islamic Republic gave a foreign military use of Iran's military facilities. Iran and India have a \"strategic dialogue\" and some Iranian naval officers reportedly underwent some training in India in the 1990s – a timeframe during which Iran's military also conducted joint exercises with the Pakistani armed forces. Iran has signed at least basic—and in some cases more extensive—military cooperation agreements with Syria, Afghanistan, Sudan, Oman, Venezuela, Belarus, Russia, China, and South Africa. The IRIN (regular navy) appears to be trying to expand Iran's relationships through naval port visits, including to China in 2013 and South Africa in 2016. The IRIN has also, in recent years, made port visits to Sri Lanka, Tanzania, Azerbaijan, Indonesia, and South Africa, and held joint naval exercises with Oman, Bangladesh, India, Pakistan, Kazakhstan, Russia, China, Djibouti, and Italy. In September 2014, two Chinese warships docked at Iran's port of Bandar Abbas, for the first time in history, to conduct four days of naval exercises, and in October 2015, the leader of Iran's regular (not IRGC) Navy made the first visit ever to China by an Iranian Navy commander. In August 2017, the chief of Iran's joint military headquarters made the first top-level military visit to Turkey since Iran's 1979 revolution. Sales to Iran of most conventional arms (arms on a U.N. Register of Conventional Arms) were banned by U.N. Resolution 1929. Resolution 2231, which supersedes Resolution 1929, requires Security Council approval for any transfer of weapons or military technology, or related training or financial assistance, to Iran. The requirement extends for a maximum of five years from Adoption Day (until October 17, 2020). The Resolution named the systems subject to restriction: Battle tanks; armored combat vehicles; large caliber artillery systems; combat aircraft; attack helicopters; warships; missiles or missile systems, as defined by the U.N. Register of Conventional Arms, or related material, including spare parts ... and the provision to Iran ... of technical training, financial resources or services, advice, other services or assistance related to the supply, sale, transfer, manufacture, maintenance, or use of arms and related materiel.... Defense Minister Hossein Dehgan visited Moscow in February 2016, reportedly to discuss possible purchases of $8 billion worth of new conventional arms, including T-90 tanks, Su-30 aircraft, attack helicopters, anti-ship missiles, frigates, and submarines. Such purchases would require Security Council approval under Resolution 2231, and U.S. officials have said the United States would use its veto power to deny approval for the sale. Resolution 2231 also requires Security Council approval for Iranian transfers of any weaponry outside Iran until October 17, 2020. Separate U.N. Security Council resolutions ban arms shipments to such conflict areas as Yemen (Resolution 2216) and Lebanon (Resolution 1701). Iran appears to have violated this restriction on numerous occasions, but the U.N. Security Council has not, to date, agreed on any punishments for these apparent violations. Iran's defense budget generally runs about 4% of GDP, but was higher (6%) in 2018. Iran's national budget is about $300 billion and, in dollar terms, Iran's 2018-2019 defense budget was about $25 billion, up from about $23 billion in 2017. These observations appear to support President Trump's statement in his May 8, 2018, announcement of the U.S. withdrawal from the JCPOA that Iran's defense budget had increased 40% since the JCPOA has been implemented. Of the defense budget, about two-thirds funds the IRGC and its subordinate units, and about one-third funds the regular military ( Artesh ) and its units. By contrast, GCC combined defense spending is expected by defense industry experts to reach $100 billion in 2019. The Trump Administration has articulated a multilayered strategy to try to counter Iran's malign activities and \"roll back\" Iranian influence in the region. The centerpiece of the strategy is to utilize economic sanctions to change Iran's behavior and deny Iran the resources it needs to continue its regional operations. The State Department's 2018 report \"Outlaw Regime: A Chronicle of Iran's Destructive Activities\" asserts that Iran has spent over $16 billion since 2012 \"propping up the Assad regime and supporting [Iran's] other partners and proxies in Syria, Iraq, and Yemen.\" The Administration has also articulated 12 specific demands for Iran to change its behavior in exchange for a new JCPOA and normalized relations with the United States and the international community. The demands pertaining to Iran's regional activities, as stipulated in the May 21, 2018, speech by Secretary of State Pompeo at the Heritage Foundation are that Iran: End support to Middle East terrorist groups, including Lebanese Hizballah, Hamas, and the Palestinian Islamic Jihad. Respect the sovereignty of the Iraqi government and permit the disarming, demobilization, and reintegration of Shia militias. End military support to the Houthi militia and work toward a peaceful political settlement in Yemen. Withdraw all forces under Iranian command throughout the entirety of Syria. End support for the Taliban and other terrorists in Afghanistan and the region, and cease harboring senior al-Qaeda leaders. End the IRGC-QF's support for terrorists and militant partners around the world. End its threatening behavior against its neighbors, including threats to destroy Israel, firing of missiles into Saudi Arabia and the UAE, threats to international shipping, and destructive cyberattacks. Coalition Building. Moreover, the Administration has sought to build alliances to counter Iran strategically. Some initiatives, such as the formation of a \"Middle East Strategic Alliance,\" are discussed below. Building a coalition to counter Iran was a key component of Secretary of State Pompeo's trip to the GCC states, Iraq, Jordan, and Egypt in January 2019, as well as a ministerial meeting in Poland during February 13-14, 2019. Threatening Military Action. The Administration also has threatened military retaliation for Iranian direct action. On September 21, 2018, Secretary of State Pompeo threatened action against Iran also for activities undertaken by Iran's proxies. According to the Secretary, \"We have told the Islamic Republic of Iran that using a proxy force to attack an American interest will not prevent us from responding against the prime actor.\" In early May 2019, the United States sent accelerated the deployment of an aircraft carrier group and sent a bomber group to the Persian Gulf region in response to what the Administration said were \"troubling; and escalatory indications and warnings\" related to Iran. The United States also works with local leaders and factions that seek to counter Iranian influence. The applications of Administration strategy are discussed in the sections below. The focus of Iranian security policy is the Near East, where Iran employs all instruments of its national power. Successive Administrations have described many of Iran's regional operations as \"malign activities.\" Director of National Intelligence Dan Coats, in the February 13, 2018, delivery of the annual worldwide threat assessment testimony before Congress, assessed that \"Iran will seek to expand its influence in Iraq, Syria, and Yemen, where it sees conflicts generally trending in Tehran's favor.\" Secretary of State Pompeo described a litany of Iranian malign activities in his speech to the Heritage Foundation on May 21, 2018, referenced above. A question that often proves difficult is that of the dollar value of material support that the IRGC-QF provides to Iran's allies and proxies. Published estimates vary widely and are difficult to corroborate. Information from official U.S. government sources sometimes provides broad dollar figures without breakdowns or clear information on how those figures were derived. Iran has a 1,100-mile coastline on the Persian Gulf and Gulf of Oman, and exerting dominance of the Gulf has always been a key focus of Iran's foreign policy—even during the reign of the Shah of Iran. In 1981, perceiving a threat from revolutionary Iran and spillover from the Iran-Iraq War that began in September 1980, the six Gulf states formed the Gulf Cooperation Council alliance (GCC: Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, and the United Arab Emirates). U.S.-GCC security cooperation expanded during the 1980-1988 Iran-Iraq War and became more institutionalized after the 1990 Iraqi invasion of Kuwait. Prior to 2003, the extensive U.S. presence in the Gulf was in large part to contain Saddam Hussein's Iraq but, with Iraq militarily weak since Saddam's ouster, the U.S. military presence in the Gulf focuses primarily on containing Iran and conducting operations against regional terrorist groups. Several of the GCC leaders have accused Iran of fomenting unrest among Shia communities in the GCC states. Yet, the GCC states maintain relatively normal trading relations with Iran. In 2017, Iran sought to ease tensions with the GCC countries in an exchange of letters and a February 2017 visit by President Hassan Rouhani to Kuwait and Oman, but the long-standing issues that divide Iran and the GCC countries thwarted the initiative. The willingness of Qatar, Kuwait, and Oman to engage Iran contributed to a rift within the GCC in which Saudi Arabia, UAE, and Bahrain—joined by a few other Muslim countries—announced on June 5, 2017, an air, land, and sea boycott of Qatar. The rift has given Iran an opportunity to accomplish a long-standing goal of weakening the GCC alliance. The GCC rift came two weeks after President Donald Trump visited Saudi Arabia and expressed strong support for its policies. Iranian and Saudi leaders accuse each other of seeking regional hegemony and the two countries consistently have sought to weaken each other, including by supporting each other's oppositionists. The mutual animosity has aggravated regional sectarian tensions and caused escalations of the region's various conflicts. In 2015, Saudi Arabia led a coalition that intervened in Yemen's internal conflict in an effort to roll back Iranian influence by reducing the territory under the control of Houthi rebels there. Saudi Arabia, with corroboration from U.S. officials and a U.N. \"panel of experts\" on the Yemen conflict, has blamed Iran directly for supplying the Houthis with ballistic missiles that have been fired on the Kingdom. In 2017, Saudi leaders unsuccessfully sought to undermine Lebanese Hezbollah by pressuring Saudi ally and Lebanon Prime Minister Sa'd Hariri to expose Hezbollah's political influence in Lebanon. Saudi leaders have sought since 2017 to more extensively engage Iraqi leaders to draw the country closer to the Arab world and away from Iran. Iran blamed Saudi Arabia and the Islamic State organization, for the September 22, 2018, attack on a military parade in Ahwaz, in mostly Arab southwestern Iran, which killed 25 persons. Iran did not retaliate against Saudi Arabia, instead launching missiles against Islamic State positions in Syria on October 1, 2018. In January 2016, Saudi Arabia severed diplomatic relations with Iran in the wake of violent attacks and vandalism against its embassy in Tehran and consulate in Mashhad, Iran. The attacks were a reaction to Saudi Arabia's January 2, 2016, execution of an outspoken Shia cleric, Nimr Baqr al Nimr, alongside dozens of Al Qaeda members; all had been convicted of treason and/or terrorism charges. Subsequently, Saudi Arabia and Bahrain broke diplomatic relations with Iran, and Qatar, Kuwait, and UAE recalled their ambassadors from Iran. In December 2016, Saudi Arabia executed 15 Saudi Shias sentenced to death for \"spying\" for Iran. Strong backers of a hard line U.S. policy toward Iran, Saudi leaders publicly applauded the Trump Administration's May 2018 exit from the JCPOA. Saudi Crown Prince Mohammad bin Salman Al Saudi, on the eve of a March 20, 2018, meeting with President Trump, stated that Saudi Arabia would acquire a nuclear weapon if Iran does. Saudi officials repeatedly cite past Iran-inspired actions as a reason for distrusting Iran. These actions include Iran's encouragement of violent demonstrations at some Hajj pilgrimages in Mecca in the 1980s and 1990s, which caused a break in relations from 1987 to 1991. The two countries increased mutual criticism of each other's actions in the context of the 2016 Hajj. Saudi Arabia asserts that Iran instigated the June 1996 Khobar Towers bombing and accused it of sheltering the alleged mastermind of the bombing, Ahmad Mughassil. The UAE is aligned with Saudi Arabia on the Iran issues. It likewise applauded the U.S. pullout from the JCPOA and has been, aside from Saudi Arabia, the lead force combatting the Houthis in Yemen. UAE leaders blamed Iran for arming the Houthis with anti-ship missiles that damaged a UAE naval vessel in the Bab el-Mandeb Strait in late 2016. Despite their political and territorial differences, the UAE and Iran maintain extensive trade and commercial ties. Iranian-origin residents of Dubai emirate number about 300,000, and many Iranian-owned businesses are located there, including branch offices of large trading companies based in Iran. The UAE is alone in the GCC in having a long-standing territorial dispute with Iran, concerning the Persian Gulf islands of Abu Musa and the Greater and Lesser Tunb islands. The Tunbs were seized by the Shah of Iran in 1971, and the Islamic Republic took full control of Abu Musa in 1992, violating a 1971 agreement to share control of that island. The UAE has sought to refer the dispute to the International Court of Justice (ICJ), but Iran insists on resolving the issue bilaterally. (ICJ referral requires concurrence from both parties to a dispute.) In 2013-2014, the two countries held direct apparently productive discussions on the issue and Iran reportedly removed some military equipment from the islands. However, no resolution has been announced. The GCC has consistently backed the UAE position. Since 1995, Qatar has occupied a \"middle ground\" between anti-Iran animosity and sustained engagement with Iran. The speaker of Iran's Majles (parliament) visited Qatar in March 2015 and the Qatari government allowed him to meet with Hamas leaders in exile there. Qatar also pursues policies that are opposed to Iran's interests, for example by providing arms and funds to factions in Syria opposed to Syrian President Bashar Al Asad and—until the 2017 rift with Saudi Arabia and the UAE—by joining Saudi-led military intervention in Yemen. Qatar has sometimes used its engagement with Iran to obtain the release of prisoners held by Iran or its allies, and strongly refutes Saudi-led assertions that it is aligned with or politically close to Iran. Qatar withdrew its Ambassador from Iran in connection with the Nimr execution discussed above, but restored relations in August 2017 to reciprocate Iran's support for Qatar in the intra-GCC rift. Iran has increased its food exports to Qatar as an alternative to supplies from Saudi Arabia. Qatar does not have territorial disputes with Iran, but Qatari officials reportedly remain wary that Iran could try to encroach on the large natural gas field Qatar shares with Iran (called North Field by Qatar and South Pars by Iran). In April 2004, the Iran's then-deputy oil minister said that Qatar is probably producing more gas than \"her right share\" from the field. Bahrain, ruled by the Sunni Al Khalifa family and still unsettled by 2011 unrest among its majority Shia population, consistently alleges that Iran is agitating Bahrain's Shia community, some of which is of Persian origin, to try to overturn Bahrain's power structure. Bahrain has consistently accused Iran of supporting violent Shia factions that reportedly operate separately from an opposition dominated by peaceful political societies. On several occasions, Bahrain has withdrawn its Ambassador from Iran following Iranian criticism of Bahrain's treatment of its Shia population or alleged Iranian antigovernment plots. Bahrain broke ties with Iran in concert with Saudi Arabia in January 2016. In 1981 and again in 1996, Bahrain publicly claimed to have thwarted Iran-backed efforts by Bahraini Shia dissidents to violently overthrow the ruling family. As did Saudi Arabia and the UAE, Bahrain supported the Trump Administration's withdrawal from JCPOA. Bahraini and U.S. officials assert that Iran provides weapons, explosives, and weapons-making equipment efforts to violent underground factions in Bahrain. In 2016, Bahraini authorities uncovered a large warehouse containing equipment, apparently supplied by Iran that is tailored for constructing \"explosively forced projectiles\" (EFPs) such as those Iran-backed Shia militias used against U.S. armor in Iraq during 2004-2011. No EFPs have actually been used in Bahrain, to date. On January 1, 2017, 10 detainees who had been convicted of militant activities such as those discussed above broke out of Bahrain's Jaw prison with the help of attackers outside the jail. In March 2017, security forces arrested a group of persons that authorities claimed were plotting to assassinate senior government officials, asserting that the cell received military training by IRGC-QF. Six Bahraini Shias were sentenced to death for this alleged plot on December 25, 2017. In October 2017, 29 Bahrainis were convicted for having links to Iran and conducting espionage in Bahrain. On March 17, 2017, the State Department named two members of a Bahrain militant group, the Al Ashtar Brigades, as Specially Designated Global Terrorists (SDGTs), asserting the group is funded and supported by Iran. In July 2018, the State Department named the Al Ashtar Brigades as a Foreign Terrorist Organization (FTO), based on State Department assertions that Iran has provided weapons, funding, and training to Bahraini militant Shia groups that have conducted attacks on the Bahraini security forces. On January 6, 2016, Bahraini security officials dismantled a terrorist cell, linked to IRGC-QF, planning to carry out a series of bombings throughout the country. Tensions also have flared occasionally over Iranian attempts to question the legitimacy of a 1970 U.N.-run referendum in which Bahrainis chose independence rather than affiliation with Iran. In March 2016, a former IRGC senior commander and adviser to Supreme Leader Khamene'i reignited the issue by saying that Bahrain is an Iranian province and should be annexed. Kuwait is differentiated from some of the other GCC states by its integration of Shias into the political process and the economy. About 25% of Kuwaitis are Shia Muslims, but Shias have not been restive there and Iran was not able to mobilize Kuwaiti Shias to end Kuwait's support for the Iraqi war effort in the Iran-Iraq War (1980-1988). Kuwait cooperates with U.S.-led efforts to contain Iranian power and is participating in Saudi-led military action against Iran-backed Houthi rebels in Yemen. However, it also has tried to mediate a settlement of the Yemen conflict and broker GCC-Iran rapprochement, and Kuwait's government did not fund or arm any Syrian opposition groups. Kuwait exchanges leadership-level visits with Iran; Kuwait's Amir Sabah al-Ahmad Al Sabah visited Iran in June 2014, Kuwait's Foreign Minister visited Iran in late January 2017 to advance Iran-GCC reconciliation, and Rouhani visited Kuwait (and Oman) in February 2017 as part of that abortive effort. However, on numerous occasions, Kuwaiti courts have convicted Kuwaitis with spying for the IRGC-QF or Iranian intelligence. Kuwait recalled its Ambassador from Iran in connection with the Saudi-Iran dispute over the execution of Al Nimr. Omani officials assert that engagement with Iran is a more effective means to moderate Iran's foreign policy than to threaten or pressure it, and Oman's leadership has the most consistent engagement with Iran's leadership of any of the Gulf states. Omani leaders express gratitude for the Shah's sending of troops to help the Sultan suppress rebellion in the Dhofar region in the 1970s, even though Iran's regime changed since then. President Rouhani visited Oman in 2014 and in 2017. Sultan Qaboos visited Iran in August 2013, reportedly to explore with the newly elected Rouhani U.S.-Iran nuclear negotiations that ultimately led to the JCPOA. After the JCPOA was finalized, Iran and Oman accelerated their joint development of the Omani port of Al Duqm, which is emerging as a significant trading and transportation outlet. Since late 2016, Oman also has been a repository of Iranian heavy water to help Iran comply with the JCPOA, but the May 2, 2019 U.S. ending of waivers for storing Iranian heavy water could curtail Oman's future storage of that Iranian product. Oman was the only GCC country to not downgrade its relations with Iran in connection with the January 2016 Nimr dispute. And, Oman drew closer to Iran in 2017 because of Iran's support for Qatar in the intra-GCC rift, which Omani leaders assert was the result of misguided action by Saudi Arabia and the UAE. Oman has not supported any factions fighting the Asad regime in Syria and has not joined the Saudi-led Arab intervention in Yemen, enabling Oman to undertake the role of mediator in both of those conflicts. Omani officials say that, in the past two years, they have succeeded in blocking Iran from smuggling weaponry to the Houthis via Oman. Successive U.S. Administrations have considered the Gulf countries as lynchpins in U.S. strategy to contain Iranian power, and to preserve the free flow of oil and freedom of navigation in the Persian Gulf, which is only about 20 miles wide at its narrowest point. Each day, about 17 million barrels of oil flow through the Strait, which is 35% of all seaborne traded oil and 20% of all worldwide traded oil. U.S. and GCC officials view Iran as posing a possible threat to the Strait and the Gulf, potentially using the naval, missile, mine, and other assets and tactics discussed above. In mid-2015, Iran stopped several commercial ships transiting the strait as part of an effort to resolve commercial disputes with the shipping companies involved. In July 2018, Iran's President Rouhani indirectly threatened the free flow of oil in the Gulf should the Trump Administration succeed in compelling Iran's oil customers to cease buying Iranian oil entirely. In late August 2018 and again in late April 2019, after the United States ended sanctions exceptions for the purchase of Iranian oil, IRGC Navy commander Alireza Tangsiri reiterated those threats. Iran has sometimes challenged U.S. forces in the Gulf, perhaps in part to demonstrate that it is not intimidated by U.S. power. During 2016-2017, according to DNI Coats, about 10% of U.S. Navy interactions with the IRGC-Navy were \"unsafe, abnormal, or unprofessional.\" IRGC-Navy elements conducted numerous \"high speed intercepts\" of U.S. naval vessels in the Gulf and, in some cases, fired rockets near U.S. warships. During some of these incidents, U.S. vessels have fired warning shots at approaching Iranian naval craft. U.S. Navy and other military commanders say that, since August 2017, Iran has largely, although not completely, ceased the naval challenges. The shift in Iranian behavior might have been prompted by concerns that that the Trump Administration might respond militarily. President Trump has stated an intent to counter Iranian actions in the Gulf or more broadly, including potentially with military action. On July 22, 2018, President Trump issued the tweet below: To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS! As noted, in early May 2019, the United States accelerated a carrier deployment to the Gulf and sent additional bombers in response to reported Iranian planning for attacks on U.S. forces in and around the Gulf and possible further afield in the region. Some reports indicated that the U.S. deployments were triggered primarily by observed Iranian shipments of short-range ballistic missiles in regional waterways, presumably bound for the Houthis. In a statement, National Security Adviser John Bolton warned that the deployment was intended to send a \"clear and unmistakable message that any attack on U.S. interests or those of our allies\" would be met with \"unrelenting force.\" The Obama Administration sought to add structure to the U.S.-GCC strategic partnership by instituting a \"U.S.-GCC Strategic Dialogue\" in March 2012. Earlier, in February 2010, then-Secretary Clinton also raised the issue of a possible U.S. extension of a \"security umbrella\" or guarantee to regional states against Iran. However, no such formal U.S. security pledge was issued. The JCPOA prompted GCC concerns that the United States might reduce its commitment to Gulf security and President Obama and the GCC leaders held two summit meetings—in May 2015 and April 2016—to reassure the GCC of U.S. support against Iran. The summit meetings produced announcements of a U.S.-GCC strategic partnership and specific commitments to (1) facilitate U.S. arms transfers to the GCC states; (2) increase U.S.-GCC cooperation on maritime security, cybersecurity, and counterterrorism; (3) organize additional large-scale joint military exercises and U.S. training; and (4) implement a Gulf-wide coordinated ballistic missile defense capability, which the United States has sought to promote in recent years. Perhaps indicating reassurance, the GCC states expressed support for the JCPOA. Despite that public support, the GCC states have strongly backed the Trump Administration's characterization of Iran as a major regional threat, and the related relaxation of restrictions on arms sales to the GCC states and downplaying of concerns about GCC human rights practices. Saudi Arabia, the UAE, and Bahrain all publicly supported the Trump Administration exit from the JCPOA, whereas—reflecting divisions within the GCC—Qatar, Kuwait, and Oman expressed \"understanding\" for the exit. U.S. officials have stated that the intra-GCC rift centered on Qatar is harming the U.S.-led effort to forge a united strategy against Iran, and, since April 2018, President Trump reportedly has been insisting that Gulf leaders resolve the rift, although without evident success to date. Middle East Strategic Alliance (MESA). The Trump Administration reportedly is attempting to build a new coalition to counter Iran, composed of the GCC states plus Egypt, Jordan, and possibly also Morocco. The Administration reportedly sought to unveil this \"Middle East Strategic Alliance\" (MESA) in advance of a planned U.S.-GCC summit but, because of the ongoing intra-GCC dispute and other factors, the meeting has been repeatedly postponed and no date has been announced. The Saudi killing of U.S.-based Saudi journalist Jamal Kashoggi, which has brought widespread international and congressional criticism of the Kingdom and Crown Prince Mohammad bin Salman Al Saud, further clouds prospects for another U.S.-GCC summit. The establishment of a MESA was a significant element of Secretary of State Pompeo's trip to the GCC states in January 2019, but the concept suffered a setback in April 2019 when Egypt announced it would not participate in the MESA grouping. The GCC states are pivotal to U.S. efforts to counter Iran militarily. There are about 35,000 U.S. forces stationed at GCC military facilities, in accordance with formal defense cooperation agreements (DCAs) with Kuwait, Bahrain, Qatar, and the UAE; a facilities access agreement with Oman; and memoranda of understanding with Saudi Arabia. The DCAs and other defense agreements reportedly provide for the United States to pre-position substantial military equipment, to train the GCC countries' forces; to sell arms to those states; and, in some cases, for consultations in the event of a major threat to the state in question. Some U.S. forces in the Gulf are aboard a U.S. aircraft carrier task force that is in the Gulf region nearly constantly, although a U.S. carrier was absent from the Gulf for much of 2018 before returning there in December 2018. The Defense Department also uses authority in Section 2282 of U.S.C. Title 10 to program Counterterrorism Partnerships Funds (CTPF) for U.S. special operations forces training to enhance GCC counterterrorism capabilities, including to prevent infiltration by the IRGC-QF. Arms Sales . U.S. arms sales to the GCC countries have improved GCC air and naval capabilities and their interoperability with U.S. forces. In past years, the United States has tended to approve virtually all arms purchase requests by the GCC states, including such equipment as combat aircraft, precision-guided munitions, combat ships, radar systems, and communications gear. However, the Bahrain government crackdown on the 2011 uprising there, the intra-GCC rift, and the Saudi/UAE-led war in Yemen have slowed or halted some U.S. arms sales to the GCC states. The following sections discuss specific U.S.-Gulf defense relationships. Saudi Arabia . The United States and Saudi Arabia have signed successive memoranda of understanding (MoUs) under which a few hundred U.S. military personnel to train the military, National Guard (SANG), and Ministry of Interior forces in Saudi Arabia. The Saudi force has about 225,000 active duty personnel, with about 600 tanks, of which 200 are U.S.-made M1A2 \"Abrams\" tanks. The Saudi Air Force flies the F-15. In late 2018, Saudi Arabia announced it would buy the sophisticated missile defense system Theater High Altitude Air Defense system (THAAD) at an estimated cost of about $14 billion. The sale was approved by the State Department in October 2017. Kuwait . The United States has had a DCA with Kuwait since 1991, and over 13,000 mostly U.S. Army personnel are stationed there, including ground combat troops. Kuwait has hosted the U.S.-led headquarters for Operation Inherent Resolve (OIR), the military component of the campaign against the Islamic State. U.S. forces operate from such facilities as Camp Arifjan, south of Kuwait City, where the United States pre-positions ground armor including Mine Resistant Ambush Protected (MRAP) vehicles, as well as from several Kuwaiti air bases. U.S. forces train at Camp Buehring, about 50 miles west of the capital. Kuwait has a small force (about 15,000 active military personnel) that relies on U.S. arms, including Abrams tanks and F/A-18 combat aircraft. The Trump Administration stated during the September 2017 visit to Washington, DC, of Kuwait's Amir that it would proceed with selling Kuwait 32 additional F/A-18s. Qatar . The United States has had a DCA with Qatar since 1992, which was revised in December 2013. Over 11,000 U.S. military personnel, mostly Air Force, are in Qatar, stationed at the forward headquarters of U.S. Central Command (CENTCOM), which has responsibility for the Middle East and Central Asia; a Combined Air Operations Center (CAOC) that oversees U.S. combat aircraft missions in the region; the large Al Udeid Air Base; and the As Saliyah army pre-positioning site where U.S. armor is pre-positioned. Qatar's armed force is small with about 12,000 active military personnel. Qatar has historically relied on French military equipment, including Mirage combat aircraft, but in late 2016, the Obama Administration approved selling up to 72 F-15s to Qatar. The F-15 deal, with an estimated value of $21 billion, was formally signed between Qatar and the Trump Administration on June 14, 2017. Qatar and the United States signed an agreement in early 2019 under which Qatar commits to expand Al Udeid air base and build fixed housing and other facilities there to be able to accommodate up to 13,000 U.S. personnel. UAE. The United States has had a DCA with UAE nearly continuously since 1994. About 5,000 U.S. forces, mostly Air Force and Navy, are stationed in UAE, operating surveillance and refueling aircraft from Al Dhafra Air Base, and servicing U.S. Navy and contract ships at the large commercial port of Jebel Ali. The UAE armed forces include about 63,000 active duty personnel, using primarily French-made tanks purchased in the 1990s. Its air force is equipped with U.S.-made F-16s the country has bought in recent years. The UAE has stated that it wants to buy the F-35 Joint Strike Fighter, but U.S. officials have indicated that the potential sale would be evaluated in accordance with U.S. policy to maintain Israel's Qualitative Military Edge (QME). The Trump Administration has reportedly agreed to brief the UAE on the aircraft—possibly signaling a willingness to sell it to the UAE at some point. The UAE has taken delivery of the THAAD anti-missile system. Bahrain . The United States has had a DCA with Bahrain since 1991. Over 6,000 U.S. personnel, mostly Navy, operate out of the large Naval Support Activity facility that houses the U.S. command structure for U.S. naval operations in the Gulf. U.S. Air Force personnel also access Shaykh Isa Air Base. Bahrain has only about 6,000 active military personnel, and another 11,000 internal security forces under the Ministry of Interior. The United States has given Bahrain older model U.S. M60A3 tanks and a frigate ship as grant \"excess defense articles,\" and the country has bought U.S.-made F-16s with national funds and U.S. Foreign Military Financing (FMF) credit. The Obama Administration told Congress in 2016 that it would not finalize a sale of additional F-16s unless the government demonstrates progress on human rights issues, but in March 2017, the Trump Administration dropped that condition. The Trump Administration has maintained a general ban on arms sales to Bahrain's internal security forces. Oman . The United States has had a \"facilities access agreement\" with Oman since April 1980, under which a few hundred U.S. forces (mostly Air Force) are deployed at and have access to Omani air bases such as those at Seeb, Masirah Island, Thumrait, and Musnanah. Oman has a 25,000-person force that has historically relied on British-made military equipment. The United States has provided some M60A3 tanks as excess defense articles, and Oman has bought F-16s using national funds, partly offset by U.S. FMF. Assistance Issues . The GCC states are considered wealthy states and most receive little or virtually no U.S. assistance. The more wealthy GCC states (Saudi Arabia, Kuwait, Qatar, and UAE) sometimes receive nominal amounts of U.S. funding for the purpose or enabling them to obtain discounted prices to enroll personnel in military education courses in the United States. Bahrain and Oman receive a few million dollars per year in Foreign Military Financing (FMF) and International Military Education and Training Funds (IMET). Small amounts of State Department funds are provided to all the Gulf states for counterterrorism/border security programs (nonproliferation, antiterrorism, de-mining and related, NADR, funds) Iran's policy has been to support the Shia-led governments in Iraq and Syria against armed insurgencies or other domestic strife that might threaten those governments. That policy faced a significant challenge and uprising in Syria that began in 2011 and the Islamic State organization's capture of significant territory in Iraq in 2014. These challenges have been beaten back substantially not only by Iranian intervention but also by U.S. intervention in Iraq and Russian intervention in Syria, and Iran is perceived to be strongly positioned in both Syria and Iraq. The U.S. military ousting of Saddam Hussein in 2003 removed Iran's main regional adversary and produced governments led by Shia Islamists with long-standing ties to Iran. Iran is able to wield substantial influence on Iraq not only through these relationships but because the IRGC-QF arms, trains, and advises several Shia militias. Some of them were formed during Saddam Hussein's rule and others formed to fight U.S. forces in Iraq during 2003-2011. The June 2014 offensive led by the Islamic State organization at one point brought Islamic State forces to within 50 miles of the Iranian border, triggering Iran to supply the Baghdad government as well as the peshmerga forces of the autonomous Kurdistan Regional Government (KRG) with IRGC-QF advisers, intelligence drone surveillance, weapons shipments, and other direct military assistance. In part to counter the Islamic State challenge, Iranian leaders acquiesced to U.S. insistence that Iran's longtime ally, Prime Minister Nuri al-Maliki be replaced by a different Shia Islamist, Haider al-Abadi, who pledged to be more inclusive of Sunni leaders. Iran supplies Shia militias in Iraq with rocket-propelled munitions, such as Improvised Rocket Assisted Munitions (IRAMs), contributed to the deaths of about 500 U.S. military personnel during those years. Iran has typically appointed members of or associates of the IRGC-QF as its Ambassador to Iraq. Current estimates of the total Shia militiamen in Iraq number about 110,000-120,000, of which about two-thirds are members of Iran-backed militias. Collectively, all of the Shia militias are known as Popular Mobilization Forces or Units (PMFs or PMUs). Iran also exercises a degree of soft power in Iraq. It is the main supplier of natural gas that Iraq needs to operate its electricity plants. Then-Secretary of Defense Mattis warned in early 2018 that Iran was funding some Iraqi candidates as part of an effort to increase its influence over the Iraqi government elected in the May 2018 vote. In October 2018, coalition negotiations named relatively pro-American figures as president and prime minister, but Iran is said to be pushing for the appointment of a pro-Iranian figure to be interior minister, a post crucial to Iran's ability to continue to work with its proxies inside Iraq. To demonstrate Iran's interest in the Iraq relationship, President Rouhani conducted an official visit to Iraq in March 2019, during which agreements were signed for a new rail link and other new economic linkages. Rouhani was received in Najaf by the revered Iraqi Shia leader Ayatollah Ali al-Sistani—the only Iranian president the reclusive figure has received. Sistani reportedly urged Iran to respect Iraq's sovereignty—a veiled criticism of the IRGC-QF's emphasis on supporting Iraqi militias. At the same time, Iran reportedly has been seeking to increase its sway over the Shia religious leadership in Iraq. The commanders of the most powerful Iran-backed militias, including Asa'ib Ahl Al Haq (AAH) leader Qais Khazali, the Badr Organization's Hadi al-Amiri (see above), and Kata'ib Hezbollah's Abu Mahdi al-Muhandis, have come to wield significant political influence. They have close ties to Iran dating from their underground struggle against Saddam Hussein in the 1980s and 1990s, and the commanders have publicly pressured the government to reduce reliance on the United States and ally more closely with Iran. Some of these commanders advocate a U.S. withdrawal from Iraq now that the Islamic State has been mostly defeated in Iraq. These figures have largely resisted incorporating their forces into the formal security structure. In late August 2018, there were unconfirmed reports that Iran had transferred short-range ballistic missiles to some of its Shia militia allies in Iraq, possibly for the purpose or projecting force further into the region. Secretary of State Michael Pompeo reacted to the reports by stating in a tweet that he is Deeply concerned about reports of #Iran transferring ballistic missiles into Iraq. If true, this would be a gross violation of Iraqi sovereignty and of UNSCR 2231. Baghdad should determine what happens in Iraq, not Tehran. Despite good relations with the Iraqi Kurdish political leadership, Iran, as does the United States, supports the territorial integrity of Iraq and opposed the September 25, 2017, KRG referendum on independence. At the same time, Iran is wary of the ability of some anti-Iran government Kurdish movements to operate in northern Iraq. In September 2018, Iran fired seven Fateh-110 short-range ballistic missiles at a base in northern Iraq operated by the Kurdistan Democratic Party of Iran—an Iranian Kurdish opposition group. The KDP-I's Secretary General and other figures of the group were reportedly among those wounded. However, Iran's influence in Iraq was cast into some doubt with the strong May 12, 2018, election showing of Iraqi nationalist Moqtada al-Sadr's faction. The number of IRGC-QF personnel in Iraq advising Iran-backed militias or the Iraqi government is not known from published sources. It is likely that there are far fewer such Iranian personnel in Iraq than there were at the height of the Islamic State challenge to Iraq in 2014. In 2014, a senior Iranian cleric estimated the dollar value of Iran's assistance to Iraq at about $1 billion—a large increase over an estimated baseline level of about $150 million per year. Some Iran-backed militias are offshoots of the \"Mahdi Army\" militia that Shia cleric Moqtada Al Sadr formed in 2004 to combat the U.S. military presence in Iraq. As the U.S. intervention in Iraq ended in 2011, the Mahdi Army evolved into a social services network but, in response to the Islamic State offensive in 2014, it reorganized as the \"Salaam (Peace) Brigade,\" with about 15,000 fighters. Kata'ib Hezbollah . One Mahdi Army offshoot, Kata'ib Hezbollah (KAH), was designated by the State Department as a Foreign Terrorist Organization (FTO) in June 2009. KAH has an estimated 20,000 fighters. In July 2009, the Department of the Treasury designated it and its commander, Abu Mahdi al-Muhandis, as threats to Iraqi stability under Executive Order 13438. Muhandis was a Da'wa party operative during Saddam's rule, and was convicted in absentia by Kuwaiti courts for the Da'wa assassination attempt on the ruler of Kuwait in May 1985 and the 1983 Da'wa bombings of the U.S. and French embassies there. After these attacks, he served as leader of the Badr Corps of the IRGC-backed Supreme Council for the Islamic Revolution in Iraq (SCIRI), but he broke with the group in 2003 because of its support for the U.S. invasion of Iraq. He joined the Mahdi Army during 2003-2006 but then broke to form KAH. Asa'ib Ahl Al Haq . Asa'ib Ahl Al Haq (AAH) leader Qais al-Khazali headed the Mahdi Army \"Special Groups\" breakaway faction during 2006-2007, until his capture and incarceration by U.S. forces for his alleged role in a 2005 raid that killed five American soldiers. During his imprisonment, his followers formed AAH. After his release in 2010, Khazali took refuge in Iran, returning in 2011 to take resume command of AAH while also converting it into a political movement. AAH resumed military activities after the 2014 Islamic State offensive, and has about 15,000 fighters. Khazali is now an elected member of Iraq's national assembly. Badr Organization . The Badr Organization, the armed wing of the Islamic Supreme Council of Iraq (ISCI, formerly SCIRI), the mainstream Shia party headed now by Ammar al-Hakim. Did not oppose the 2003-2011 U.S. intervention in Iraq. The Badr forces (then known as the Badr Brigades or Badr Corps) received training and support from the IRGC-QF in its failed efforts to overthrow Saddam during the 1980s and 1990s. The Badr Organization largely disarmed after Saddam's fall, integrated into the political process, and supported the United States as a facilitator of Iraq's transition to Shia rule. Its leader is Hadi al-Amiri, an elected member of the National Assembly who advocates for government reliance on the Shia militias. Amiri's faction, called \"Conquest,\" won the second-highest number of seats in the May 12, 2018, Iraqi election, positioning Amiri to wield significant influence. Badr has an estimated 20,000 militia fighters. Harakat Hezbollah al-Nujaba. Some Iran-backed Shia militias formed after the U.S. withdrawal. Harakat Hezbollah al-Nujaba or \"Nujaba Movement,\" led by Shaykh Akram al-Ka'bi, formed in 2013 to assist the Asad regime in Syria. The group increased its presence on the Aleppo front in 2016 to help the Asad regime recapture the whole city. Ka'bi was designated as a threat to Iraq's stability under E.O. 13438 in 2008, when he was then a leader of a Mahdi Army offshoot termed the \"Special Groups.\" In March 2019, the Trump Administration designated the Nujaba militia as a terrorist entity under E.O. 13224. Another Shia militia, the Mukhtar Army, claimed responsibility for a late October 2015 attack on Iranian dissidents inhabiting the \"Camp Liberty\" facility, discussed below. These militias might total 10,000 personnel. U.S. policy to limit Iranian influence in Iraq has focused on engaging with Iraqi leaders who are well-disposed to the United States and relatively nonsectarian. The United States supported Abadi's reelection bid in Iraq as contributing to efforts to counter Iran's influence there, and the current president and prime minister, Barham Salih and Adel Abdul Mahdi, respectively, are well known to U.S. officials and favor continued U.S. involvement in Iraq. In 2014, U.S. officials initially refused to support Iraqi Shia militias in the anti-Islamic State effort, but U.S. policy after 2015 supported those PMFs identified by U.S. officials as not backed by Iran. October 2017, then-Secretary of State Rex Tillerson called on Iran-backed militias to disarm and for their Iranian advisors to \"go home.\" The Trump Administration reportedly has worked with the Iraqi government, with mixed success to date, to integrate the militias into the official security forces or demobilize and merge into the political process. Even though the approximately 5,000 U.S. forces in Iraq have directed their operations against Islamic State remnants and on improving the capabilities of Iraqi forces, and have not conducted any combat against IRGC-QF personnel or Iran-backed militias in Iraq, Iran-backed Shia militias pose a potential threat to U.S. personnel in Iraq. On September 11, 2018, following rocket attacks near U.S. diplomatic facilities in Iraq, the Administration blamed Iran for not \"act[ing] to stop these attacks,\" and threatened potential U.S. military action against Iran if Iran-backed militias in Iraq attacked U.S. interests. Some reports indicate that the additional U.S. force deployments to the Persian Gulf were prompted in part by U.S. indications of Iranian planning for its allies in Iraq to attack U.S. forces. The potential for such Iranian attacks was assessed by experts as increasing following the April 15, 2019 U.S. designation of the IRGC as an FTO. U.S. indications of possible attacks on U.S. forces prompted Secretary of State Pompeo to suddenly rearrange his travel in Europe to make an unscheduled visit to Iraq on May 7, 2019 to \"assure [Iraq's leaders] that we stood ready to continue to ensure that Iraq was a sovereign, independent nation, and that the United States would continue to help build out partners in the region.\" With respect to sanctions, the United States has pressed Iraq to comply with reimposed U.S. sanctions on Iran by ceasing oil swaps with Iran and ceasing dollar transactions with Iran's Central Bank. The United States has provided successive 90-day waivers of the Iran Freedom and Counterproliferation Act ( P.L. 112-239 ) to permit Iraq to continue buying Iranian natural gas that feeds its power plants until it can line up alternative gas sources. Executive Order 12438 blocks property and prevents U.S. visas for persons determined to threaten stabilization efforts in Iraq. The FY2019 National Defense Authorization Act (NDAA, P.L. 115-232 ), bans any U.S. assistance from being used to assist any group affiliated with the IRGC-QF. In the 116 th Congress, legislation such as H.R. 361 and H.R. 571 requires sanctions on Iran-backed militias or other entities determined to be destabilizing Iraq. On the other hand, these organizations are believed to have virtually no U.S.-based assets or financial interests that would be susceptible to U.S. sanctions. Iranian leaders characterize Syrian President Bashar al Asad as a key ally, despite Asad's secular ideology, and Iran has undertaken major efforts to keep him in power. The reasons for Iran's consistent and extensive support for Asad include the following: (1) Syria's cooperation is key to Iran's arming and protection of Hezbollah; (2) the Asad regime has been Iran's closest Arab ally in a region where most governments oppose Iran; (3) a Sunni opposition government hostile to Iran might come to power if Asad fell; and (4) the Asad regime can help block Sunni extremist groups from attacking Hezbollah in Lebanon from across the Syria border. Most observers conclude that Iran's strategic interest in the Asad regime's survival is sufficiently compelling that Iran will resist withdrawing Iranian forces from Syria as long as any threat to Asad's grip on power persists. In 2018, Iran and Syria signed updated military cooperation agreements, perhaps suggesting Iranian intent to remain militarily in Syria indefinitely. On the Syria battlefield, Iran-backed militias advanced east to the point where they can potentially help Iran form a secure supply corridor from Iran to Lebanon. On several occasions, Iran-backed forces approached U.S. training locations for Syrian forces in southeast Syria combatting the Islamic State and were subjected to U.S.-led fire to halt their advances. On October 1, 2018, Iran fired six ballistic missiles from western Iran on suspected Islamic State positions near Hanjin, Syria. Iran claimed the strikes were retaliation for the September 2018 attack on Iran's military parade in Ahwaz (see above), but the strikes, which were near areas in which U.S. and U.S.-backed forces in Syria operate, could be interpreted as signaling Iran's ability to project power in Syria from Iran's homeland itself. Iran-backed forces are likely to play a role in any Syrian government offensive to recapture Idlib province, the last major bastion of opposition forces. Iran's extensive involvement in Syria has alarmed Israeli leaders who now apparently perceive Iran as using Syrian territory to exert greater leverage against Israel—adding to the threat posed by Hezbollah on Israel's northern border. Israel accuses Iran of constructing bases in Syria, including rocket and missile factories that can safely supply Hezbollah. For additional information on the threat to Israel posed by Iran's presence in Syria, see: CRS In Focus IF10858, Iran and Israel: Tension Over Syria , by Carla E. Humud, Kenneth Katzman, and Jim Zanotti Iran has not hidden its involvement or its losses in Syria. Deaths of high-ranking IRGC commanders in battles in Syria have been widely publicized in state-run media. Their deaths have been portrayed by the regime as heroic sacrifices on behalf of the Iranian revolution and Iran's national interests. At least 700 Iranian military personnel have died in Syria, including several high-level IRGC-QF commanders. Prior to the Russian intervention, Iran participated in multilateral diplomacy on a political solution in Syria and put forward proposals for a peaceful transition in Syria. In 2015, Iran attended meetings of and did not publicly dissent from joint statements issued by an international contact group on Syria, which included the United States. Iran was invited to participate in this \"Vienna process\" after the United States dropped its objections on the grounds that, in the wake of the July 2015 Iran nuclear agreement, Iran could potentially contribute to a Syria solution. However, Russia's intervention in Syria created the potential for Iran to achieve its maximum goals in Syria, and in 2016-2018, Iran has apparently continued to pursue those goals in negotiations brokered by Russia and Turkey (\"Astana Process\"). However, an August 2018 Administration report on Iran mandated by the Countering America's Adversaries through Sanctions Act said that Iran \"is not playing a constructive role in Syria ... despite Iran's status as a 'guarantor' of the Astana ceasefire zones ostensibly in place.\" Iranian support to Asad against the rebellion is extensive, including the provision of substantial funds, weapons, and IRGC-QF advisors to the Syrian regime. However, exact numbers of Iranian and Iran-backed forces are available in ranges, because of the wide disparity in open reporting: Iranian Military Personnel. After 2012, Iran expanded its intervention to the point where regional security sources estimated that, by late 2015, it was deploying nearly 2,000 military personnel in Syria, including IRGC-QF, IRGC ground force, and even some regular army special forces personnel. The deployment of Iranian regular army forces in Syria was significant because Iran's regular military has historically not deployed beyond Iran's borders since the 1980-1988 Iran-Iraq War. Hezbollah Fighters . Sources tend to center on a figure of about 7,000 Lebanese Hezbollah fighters deployed to Syria to assist Syrian government forces. Militia Recruits . The IRGC-QF recruited a reported 24,000-80,000 Shia fighters to operating under Iranian command in Syria at the height of the conflict during 2013-2017. These include not only Lebanese Hezbollah fighters but also Iraqi militias such as Harakat Hezbollah al-Nujaba, and brigades composed of Afghan and Pakistani Shias. These numbers might have declined somewhat as the Syrian government regained much of its territory; on November 29, 2018, the State Department's policy official on Iran, Brian Hook, stated that Iran \"manages as many as 10,000 Shia fighters in Syria, some of whom are children as young as 12 years old.\" Financial Support. Estimates of Iran's spending to support Asad's effort against the rebellion vary widely. In June 2015, the office of the U.N. Special Envoy to Syria Staffan de Mistura estimated Iran's aid to Syria, including military and economic aid, to total about $6 billion per year. Iranian aid to Syria is difficult to gauge with precision, in part because it includes a combination of economic aid (for which some figures, such as lines of credit, are publicly available in official statements), subsidized oil and commodity transfers, and military aid (for which numbers are difficult to obtain). The State Department's \"Outlaw Regime\" report (graphic, page 11), referenced above, indicates that Iran has extended \"at least $4.6 billion in credit to the Assad regime\" since 2012. U.S. officials have stated that reducing Iran's presence in Syria is critical to protecting Israel and to the larger U.S. strategy of rolling back Iran's regional influence. Then-Secretary of State Rex Tillerson devoted much of a January 17, 2018, speech on U.S. policy toward Syria to explaining that the 2,000 U.S. troops in Syria were there in part to diminish Iranian influence in Syria and denying Iran's \"dreams of a northern arch\" (from Iran to the Mediterranean). He explained that a U.S.-Russia de-escalation agreement for southwest Syria \"addresses Israel's security by requiring Iranian-backed militias, most notably Hezbollah, to move away from Israel's border.\" National Security Adviser John Bolton reiterated that position in a speech on September 10, 2018. Secretary of State Pompeo said in his May 21, 2018, speech at the Heritage Foundation, that \"Iran must withdraw all forces under Iranian command throughout the entirety of Syria.\" In December 2018, President Trump announced that U.S. forces would withdraw, leading some experts to assert that the United States would lose at least some of its leverage against Iran in Syria. Others argued that the U.S. forces that are in Syria do not pressure Iran much because the U.S. forces have not been ordered to preemptively attack Iranian or pro-Iranian forces in Syria and the U.S. force is not large enough to influence political outcomes in Syria. The Administration has supported Israeli strikes on Iranian positions in Syria that are part of Israel's effort to deny Iran the opportunity to conduct an extensive military infrastructure there. Still, at least in part due to these arguments and others, President Trump ultimately decided to leave at least 400 U.S. forces in Syria indefinitely. Executive Order 13572 blocks U.S.-based property and prevents U.S. visas for persons determined to be responsible for human rights abuses and repression of the Syrian people. Several IRGC-QF commanders have been designated for sanctions under the order. In the 115 th Congress, H.R. 4012 would direct the Director of National Intelligence to produce a National Intelligence Estimate on Iranian support to proxy forces in Syria (and Lebanon). A significant component of Iran's policy is to use its allies to pressure Israel strategically. Iran's leaders assert that Israel is an illegitimate creation of the West and an oppressor of the Palestinians—a position that differs from that of the Shah of Iran, whose government maintained relatively normal relations with Israel. Supreme Leader Khamene'i has repeatedly described Israel as a \"cancerous tumor\" that should be removed from the region. In a September 2015 speech, Khamene'i stated that Israel will likely not exist in 25 years—the time frame for the last of the JCPOA nuclear restriction to expire. These statements underpin Israeli assertions that a nuclear-armed Iran would be an \"existential threat\" to Israel. Iran's leaders routinely state that Israel presents a strategic threat to Iran. They add that the international community applies a \"double standard\" to Iran in that Israel has faced no sanctions even though it is the only Middle Eastern country to possess nuclear weapons and not to become a party to the Nuclear Non-Proliferation Treaty (NPT). Iran's leaders assert that Israel's purported nuclear arsenal is a main obstacle to establishing a weapons-of-mass-destruction (WMD) free zone in the Middle East. Iran materially supports nonstate actors such as Hamas and Hezbollah that have undertaken armed action against Israel, possibly as an attempt to apply pressure to Israel to compel it to make concessions. Alternately, Iran might be attempting to disrupt prosperity, morale, and perceptions of security among Israel's population. For more than two decades, the annual State Department report on international terrorism has asserted that Iran provides funding, weapons (including advanced rockets), and training to a variety of U.S.-designated FTOs, including Hezbollah, Hamas, Palestinian Islamic Jihad—Shiqaqi Faction (PIJ), the Al Aqsa Martyrs Brigades (a militant offshoot of the dominant Palestinian faction Fatah), and the Popular Front for the Liberation of Palestine-General Command (PFLP-GC). Israel and the Obama Administration disagreed over the JCPOA—Prime Minister Benjamin Netanyahu called it a \"historic mistake,\" and, in September 2017 and in March 2018, he reportedly urged President Trump to seek to renegotiate it or to terminate U.S. participation in it. Netanyahu's policy preference was adopted when the Trump Administration exited the JCPOA on May 8, 2018. Israel retains the option of a military strike on Iran's nuclear facilities should Iran responds to the U.S. exit by resuming the nuclear activities prohibited or limited by the JCPOA. U.S. officials assert that Iran gives Hamas funds, weapons, and training. Hamas seized control of the Gaza Strip in 2007 and has since administered that territory, but it ceded formal authority over Gaza in June 2014 to a consensus Palestinian Authority (PA) government and turned over further authority to the PA as part of an October 2017 reconciliation agreement. Hamas terrorist attacks within Israel have decreased since 2005, but Hamas has used Iran-supplied rockets and other weaponry during three conflicts with Israel since 2008, the latest of which was in 2014. Smaller scale trading of rocket attacks and air strikes have taken place in the summer of 2018. The Iran-Hamas relationship was forged in the 1990s as part of an apparent attempt to disrupt the Israeli-Palestinian peace process through Hamas attacks on buses, restaurants, and other civilian targets inside Israel. However, in 2012, their differing positions on the ongoing Syria conflict caused a rift. Largely out of sectarian sympathy with Sunni rebels in Syria, Hamas opposed the efforts by Asad to defeat the rebellion militarily. Iran reduced its support to Hamas in its brief 2014 conflict with Israel as compared to previous Hamas-Israel conflicts in which Iran backed Hamas extensively. Since then, Iran has apparently sought to rebuild the relationship by providing missile technology that Hamas used to construct its own rockets and by helping it rebuild tunnels destroyed in the conflict with Israel. Hamas and Iran restored their relations in October 2017. Iran's support to Hamas has been estimated to be as high as $300 million per year (funds and in-kind support, including weapons) during periods of substantial Iran-Hamas collaboration, but is widely assessed at a baseline amount in the tens of millions per year. The State Department's September 2018 \"Outlaw Regime\" report states that Iran \"provides up to $100 million annually in combined support to Palestinian terrorist groups,\" including Hamas, PIJ, and the PFLP-GC. Lebanese Hezbollah, which Iranian leaders portray as successful \"exportation\" of Iran's Islamic revolution, is Iran's most significant nonstate ally. Hezbollah's actions to support its own as well as Iranian interests take many forms, including acts of terrorism and training and combat in countries in the region. Recent State Department reports on international terrorism state that \"the group generally follows the religious guidance of the Iranian Supreme Leader, which [is] [Grand Ayatollah] Ali Khamenei.\" Iran's close relationship to the group began when Lebanese Shia clerics of the pro-Iranian Lebanese Da'wa (Islamic Call) Party—many of whom had studied under the leader of Iran's revolution, Grand Ayatollah Ruhollah Khomeini—began to organize in 1982 into what later was unveiled in 1985 as Hezbollah. IRGC forces were sent to Lebanon to help develop a military wing, and these IRGC forces subsequently evolved into the IRGC-QF. Iranian leaders have long worked with Hezbollah as an instrument to pressure Israel. Hezbollah's attacks on Israeli forces in Israel's self-declared \"security zone\" in southern Lebanon contributed to an Israeli withdrawal from that territory in May 2000. Hezbollah fired Iranian-supplied rockets on Israel's northern towns and cities during the July-August 2006 war with Israel, and in July 2006 Hezbollah damaged an Israeli warship with a C-802 anti-ship missile of the type that Iran reportedly bought in significant quantity from China in the 1990s. Hezbollah's leadership asserted that it was victorious in that war for holding out against Israel. Illustrating the degree to which Iranian assistance has helped Hezbollah become a potential global terrorism threat, the State Department Coordinator for Counterterrorism said on November 13, 2018, that \"Hezbollah's ambitions and global reach rival those of Al Qaeda and ISIS.\" Iran has assisted Hezbollah in several of the terrorist attacks that are depicted in the table above. Hezbollah has become a major force in Lebanon's politics, in part due to the arms and funding it gets from Iran. Hezbollah now plays a major role in decisionmaking and leadership selections in Lebanon. Hezbollah's militia rivals the Lebanese Armed Forces (LAF). However, there has been vocal criticism of Hezbollah in and outside Lebanon for its support for Asad, which has diluted Hezbollah's image as a steadfast opponent of Israel and has embroiled it in war against other Muslims. In November 2017, the resignation of Prime Minister Sa'd Hariri appeared intended to expose and undermine Hezbollah's influence in Lebanon—a move he undertook immediately after close consultations with Riyadh. The resignation was rescinded by popular pressure in Lebanon and did not diminish Hezbollah's position. Hezbollah's allies increased their number of seats as a result of April 2018 parliamentary elections in Lebanon, although the number of seats held by Hezbollah itself stayed at the 13 it held previously. Iranian support for Hezbollah fluctuates according to the scope and intensity of their joint activity. Iran provided high levels of aid to the group in the course of its combat intervention in Syria and after the 2006 Hezbollah war with Israel. Among specific assistance: Training . The State Department report for 2016 asserted that Iran \"has trained thousands of [Hezbollah] fighters at camps in Iran.\" In the early 1980s, Iran was widely reported to have a few thousand IRGC personnel helping to establish what became Hezbollah. More recently, Hezbollah has become more self-sufficient and able to assist IRGC-QF operations elsewhere, such as in Syria, Iraq, and Yemen. In Syria, the IRGC-QF has facilitated Hezbollah's extensive involvement on behalf of the Asad regime, whose continuation in power is in the interests of both Iran and Hezbollah. Syria is the key conduit through which the IRGC-QF has historically armed and assisted Hezbollah. Financial Support . The State Department report for 2015 contained a specific figure, stating that Iran has provided Hezbollah with \"hundreds of millions of dollars.\" However, on June 5, 2018, Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker cited a figure of $700 million in Iranian support to Hezbollah per year —far higher than specific figures previously cited in any U.S. official reports. The higher figure could represent a U.S. reassessment of its previous estimates, or perhaps reflect a large increase due to Hezbollah's extensive combat on various battlefronts in Syria. The State Department's September 2018 \"Outlaw Regime\" report repeats the $700 million figure. Weapons Transfers . State Department reports and officials say that, according to the Israeli government, since that conflict, Hezbollah has stockpiled more than 130,000 rockets and missiles, presumably supplied mostly by Iran. Some are said to be capable of reaching Tel Aviv and other population centers in central Israel from south Lebanon. The State Department report adds that Israeli experts assert that Iran also has transferred to Hezbollah anti-ship and anti-aircraft capabilities. These specific rockets and missiles are discussed in the table above. Iran has historically transferred weaponry to Hezbollah via Syria, offloading the material at Damascus airport and then trucking it over the border. However, possibly due to expanded Israeli strike operations against Iran in Syria, some reports indicate that in 2018 Iran has also sought to transfer weaponry directly to Hezbollah via Beirut. The Trump Administration has followed its predecessors in trying to disrupt the Iran-Hezbollah relationship, although without appreciably more success than its predecessors had. The United States has not acted against Hezbollah militarily, but it has supported Israeli air strikes in Syria that are intended, at least in part, to disrupt Iranian weapons supplies to Hezbollah. Successive Administrations have also sought to provide U.S. military gear and other assistance to the Lebanese army, to build it up as a counterweight to Hezbollah. It is not clear that such efforts have accomplished the stated objectives, however. The United States has imposed sanctions on Iranian entities involved in supplying Hezbollah as well as on Hezbollah and its related entities, although without apparent effect in light of the fact that such entities do not generally operate in the international financial or commercial system. The 115 th Congress enacted legislation ( P.L. 115-272 ) that expanded the authority to sanction foreign banks that transaction business with Hezbollah, its affiliates, and partners. Sanctions on Hezbollah and on Iran might have contributed to the early 2019 call by Hezbollah's Secretary General Hassan Nasrallah for additional donations, but there has been no evident change in Hezbollah's operational behavior in 2019. Iranian leaders have not historically identified Yemen as a core Iranian security interest, but they seized on 2014 territorial gains by Zaidi Shia Houthi rebels there as an opportunity to acquire significant leverage against Saudi Arabia. A 2011 \"Arab Spring\"-related uprising in Yemen forced longtime President Ali Abdullah Saleh to resign in January 2012. In March 2015, Saudi Arabia assembled an Arab coalition that, with logistical help from U.S. forces, has helped the ousted government recapture some territory but has caused drastic humanitarian consequences without yet compelling the Houthis to accept a political solution. The increasingly sophisticated nature of Iran's support for the Houthis could suggest that Iran perceives the Houthis as a potential proxy to project power on the southwestern coast of the Arabian Peninsula. Iranian weapons shipments to the Houthis are banned by Resolution 2231 on Iran and also by Resolution 2216 on Yemen, discussed above. A July 2016 report on Iran by the U.N. Secretary-General reiterated the assertion made previously by U.N. experts, that Iran has shipped arms to the Houthis. Among the systems Iran is providing are anti-ship cruise missiles that are of increasing concern to U.S. commanders. The Houthis fired anti-ship missiles at UAE and U.S. ships in the Red Sea in October 2016, which prompted U.S. strikes on Houthi-controlled radar installations. Iran subsequently deployed several warships to the Yemen seacoast as an apparent sign of support for the Houthis. In January 2017, the Houthis damaged a Saudi ship in the Red Sea—an action that contributed to the February 1, 2017, Trump Administration statement putting Iran \"on notice\" for its regional malign activities. The degree of U.S. concern about Iran's supplies of missiles to the Houthis was reflected in then-CENTCOM commander General Joseph Votel's March 29, 2017, testimony before the House Armed Services Committee, referring to the Bab el-Mandeb Strait: It is a choke point, it is a major transit area for commerce, not only ours but for international ships. About 60 to 70 ships go through there a day. What we have seen, I believe, that the—with the support of Iran, we have seen the migration of capabilities that we previously observed in the Straits of Hormuz, a layered defense, consists of coastal defense missiles and radar systems, mines, explosive boats that have been migrated from the Straits of Hormuz to this particular area right here, threatening commerce and ships and our security operations in that particular area. Saudi Arabia, with U.S. and some U.N. backing, accuses Iran of providing the ballistic missiles that the Houthis have fired on Riyadh on several occasions. A December 8, 2017, report by the U.N. Secretary-General on implementation of Resolution 2231 generally supports those allegations as well as allegations that Iran had shipped other weapons to the Houthis. U.S. Ambassador to the U.N. Nikki Haley cited that report in a December 14, 2017, presentation to the Security Council that asserted definitively that Iran had given the Houthis the missiles fired on Riyadh. A report by a U.N. panel of experts in January 2018 reportedly found that two missiles fired on Saudi Arabia by the Houthis, on July 22 and November 4, 2017, were consistent with the design of Iranian missiles, but the panel did not state definitively who supplied the missiles or how they were transported to Yemen. On November 29, 2018, the head of the State Department's \"Iran Action Group,\" Brian Hook, displayed missiles, rockets, and other equipment that he asserted were supplied by Iran to the Houthis and captured by Saud-led coalition forces. Some of these systems are discussed in the \"Iran missile arsenal\" table above. In late February 2018, Russia blocked a U.N. Security Council resolution from identifying Iran directly as a violator of the U.N. ban on weapons shipments to Yemen (Resolution 2216). Iran has denied providing the Houthis with missiles and assert that they are from a government arsenal assembled before the 2011 civil strife. Many observers assess that Iran's support for the Houthis has been modest. The State Department's \"Outlaw Regime\" report states that since 2012, Iran \"has spent hundreds of millions of dollars\" aiding the Houthis. Secretary Pompeo mentioned the same figure in the transcript of his briefing for Senators on November 28, 2018. In that same transcript, Secretary Pompeo stated that a 20-person IRGC-QF unit called \"Unit 190\" is responsible for funneling Iranian weaponry to the Houthis. Pompeo added that the head of the unit also arranges for the travel of IRGC-QF and Hezbollah advisers to go to Yemen to advise the Houthis. The State Department's \"Outlaw Regime\" report cites press reports that Iran might have sent some militia forces from Syria to fight alongside the Houthis in Yemen. U.S. officials have cited Iran's support for the Houthis to argue for the main policy line of effort, which is providing logistical support to the Saudi-led Arab coalition battling the Houthis in Yemen. In his May 21, 2018, speech, Secretary Pompeo stipulated as one U.S. demand on Iran that the country \"must also end its military support for the Houthi militia and work towards a peaceful political settlement in Yemen.\" In the transcript of his remarks to Senators on November 28, 2018, Pompeo stated that \"Iran wants to establish a version of Lebanese Hezbollah on the Arabian Peninsula so the mullahs in Tehran can control seaborne trade through strategic waterways like the Bab el-Mandeb Strait.... we must also prevent Iran from entrenching itself in Yemen.\" However, even though many Members of Congress express concerns with Iran's backing for the Houthis, several bills have passed the House and the Senate requiring a decrease, or even an end, to the U.S. support for the Arab coalition fighting in Yemen. These votes have been widely viewed as opposition to the civilian casualties caused by the Saudi-led effort as well as sentiment against Saudi Crown Prince Mohammad bin Salman over the October 2018 Kashoggi killing. The United States has also sought to prevent Iran from delivering weapons to the Houthis by conducting joint naval patrols with members of the Saudi-led coalition. Some weapons shipments have been intercepted. Some reports indicate that, to evade the naval scrutiny, Iran has been transferring its weapons deliveries to a variety of small boats in the northern Persian Gulf, from where they sail to Yemen. The United States also has increased its assistance to Oman to train its personnel to prevent smuggling through its territory, presumably including the smuggling of Iranian weaponry to the Houthis. U.S. forces have not engaged in any bombing of the Houthis or Iranian advisers in Yemen, although U.S. forces continue to operate on the ground in Yemen against the Al Qaeda in the Arabian Peninsula (AQAP) terrorist group that operates in southeastern Yemen. Iran and Turkey, which share a short border, have extensive economic relations but sometimes tense political relations. Turkey is a member of NATO, and Iran has sought to limit Turkey's cooperation with any NATO plan to emplace military technology near Iran's borders. Iran and Turkey's disputes on some regional issues might be caused, at least in part, by the sectarian differences between Sunni-inhabited Turkey and Shia Iran. Turkey has advocated Asad's ouster as part of a solution for conflict-torn Syria whereas Iran is a key supporter of Asad. However, following a failed Turkish military coup in July 2016, and mutual concerns over the empowerment of Syrian Kurdish forces, Turkey-Iran differences narrowed. Turkey's President Recep Tayip Erdogan has come to publicly accept that Asad might remain in power in Syria and both countries are integral part of Russia-led talks on an overall political solution for Syria. Iran and Turkey cooperate to try to halt cross border attacks by Kurdish groups that oppose the governments of Turkey (Kurdistan Workers' Party, PKK) and of Iran (Free Life Party, PJAK), and which enjoy safe have in northern Iraq. In August 2017, the first high-level Iranian military visit to Turkey since the Iranian revolution took place when the chief of staff of Iran's joint military headquarters, Hamid Baqeri, who rose through IRGC ranks, visited Ankara. Turkey supported the JCPOA, and sanctions relief on Iran has enabled Iran-Turkey trade to expand. Iran supplies as much as 50% of Turkey's oil and over 5% of its natural gas, the latter flowing through a joint pipeline that began operations in the late 1990s and has since been supplemented by an additional line. President Erdogan has indicated that Turkey will not cooperate with the reimposition of sanctions on Iran related to the U.S. exit from the JCPOA. In the 1990s and early 2000s, Iran and Turkey were at odds over the strategic engagement of Turkey's then leaders with Israel. The Iran-Turkey dissonance on the issue faded after Erdogan's Islamist-rooted Justice and Development Party (AKP) came to power in Turkey. Turkey has since been a significant supporter of Hamas and other Islamist movements. Two countries in North Africa, Egypt and Morocco, have been mentioned as potential members of the planned \"Middle East Strategic Alliance\" (MESA) to counter Iran Iran's relations with Egypt have been strained for decades, spanning various Egyptian regimes. Egypt is a Sunni-dominated state that is aligned politically and strategically with other Sunni governments that are critical of Iran. Iran broke relations with Egypt shortly after the 1979 peace treaty Egypt signed with Israel. The two countries reportedly have been close to reestablishing full relations numerous times, including after the election of a Muslim Brotherhood leader, Mohammad Morsi, as Egypt's president. Morsi visited Iran in August 2012. However, relations worsened again after the military's overthrow of the Morsi government. Egypt, particularly under the government of President Abd al Fattah Sisi, views Hamas as an Islamist threat and has sought to choke off Iranian and other weapons supplies to that movement. On the other hand, Egypt and Iran have found some common ground on Syria insofar as Sisi has not sought Asad's ouster. Egypt said in April 2019 that it would not join the U.S.-backed MESA alliance. In May 2018, Morocco announced t hat it would sever diplomatic ties with Iran because of alleged Iranian support (via its ally Lebanese Hezbollah) for the Polisario Front, which seeks independence for the Western Sahara. Morocc o's foreign minister claimed that Hezbollah had provided surface-to-air missiles to the Polisario; that evidence was reportedly presented to Iran but has not been made public. No other publicly available evidence appears to support of those specific allegations, and both Iran and Hezbollah denied the accusations. Morocco previously cut ties with Iran in March 2009 due to alleged Iranian efforts to spread Shiism in largely Sunni Morocco; diplomatic relations were reestablished in January 2017. Morocco has close relations with Saudi Arabia, which supported Morocco's severing ties with Iran. An intent to be part of the MESA coalition could give Morocco incentive to be as hardline on Iran as possible, and potential to accuse Iran of activities for which there might not be a lot of independently corroborated evidence. There has been little, if any, evidence that influencing politics or political outcomes in Morocco has been a significant feature of Iran's regional policies or its intent. Iranian leaders rarely, if ever, mention Morocco when they outline Iranian policy in the Middle East region. There are few easily identifiable factions in Morocco that are pro-Iranian or with which the IRGC-QF can work. Iran's relations with countries in the Caucasus, Central Asia, and South Asia vary significantly, but most countries in these regions conduct relatively normal trade and diplomacy with Iran. Some of them face significant domestic threats from radical Sunni Islamist extremist movements similar to those that Iran characterizes as a threat. Most of the Central Asia states that were part of the Soviet Union are governed by authoritarian leaders. Afghanistan remains politically weak, and Iran is able to exert influence there. Some countries in the region, particularly India, seek greater integration with the United States and other world powers and tend to downplay cooperation with Iran. The following sections address countries that have significant economic and political relationships with Iran. Azerbaijan is, like Iran, mostly Shia Muslim-inhabited. However, Azerbaijan is ethnically Turkic and its leadership is secular. Iran and Azerbaijan also have territorial differences over boundaries in the Caspian Sea. Iran asserts that Azeri nationalism might stoke separatism among Iran's large Azeri Turkic population, which has sometimes been restive. Iran has generally tilted toward Armenia, which is Christian, in Armenia's conflict with Azerbaijan over the Nagorno-Karabakh enclave. The relationship is expanding among Iran, Armenia, and Georgia now that Iran is not under international economic sanctions. On December 21, 2016, President Rouhani visited Armenia to discuss a Persian Gulf-Black Sea transit and transport corridor. For more than two decades, Azerbaijan has engaged in strategic cooperation with the United States against Iran (and Russia), including Azerbaijan's deployments of troops to and facilitation of supply routes to Afghanistan, and counterterrorism cooperation. In the 1990s, the United States successfully backed construction of the Baku-Tblisi-Ceyhan oil pipeline, intended in part to provide non-Iranian and non-Russian export routes. On the other hand, the United States has accepted Azerbaijan's need to deal with Iran on some major regional energy projects. Several U.S. sanctions laws exempted from sanctions long-standing joint natural gas projects that involve some Iranian firms—particularly the Shah Deniz natural gas field and pipeline in the Caspian Sea. The project is run by a consortium in which Iran's Naftiran Intertrade Company (NICO) holds a passive 10% share. (Other major partners are BP, Azerbaijan's national energy firm SOCAR, and Russia's Lukoil.) The lifting of sanctions on Iran has caused Azerbaijan to alter its policy toward Iran somewhat. In August 2016, Azerbaijan's President Ilham Aliyev hosted Rouhani and Russia's President Vladimir Putin to a \"Baku Summit,\" in which a major topic was a long-discussed \"North-South Transport Corridor\" involving rail, road, and shipping infrastructure from Russia to Iran, through Azerbaijan. The project is estimated to cost $400 million. And, some press reports indicate that Iranian investors previously or still linked to Iranian governing institutions have engaged in real estate and other projects in Azerbaijan. Iran has generally sought positive relations with the leaderships of the Central Asian states, even though most of these leaderships are secular and all of the Central Asian states are mostly Sunni inhabited. Almost all of the Central Asian states share a common language and culture with Turkey; Tajikistan is alone among them in sharing a language with Iran. Several have active Sunni Islamist opposition movements, such as the Islamic Movement of Uzbekistan (IMU), giving the Central Asian countries common cause with Iran to prevent Sunni jihadist terrorist actions. The IMU, which is active in Afghanistan, in mid-2015, declared its loyalty to the Islamic State organization. Iran and the Central Asian states are expanding economic relations, perhaps in part to fit into China's \"Belt and Road Initiative\" (BRI) to build up infrastructure in countries west of China—akin to reviving the old \"Silk Road. In December 2014, a new railway was inaugurated through Iran, Kazakhstan, and Turkmenistan, providing a link from the Persian Gulf to Central Asia. Iran was hoping that the 2016 lifting of sanctions would position Iran as central to energy and transportation routes linking East Asia with Europe—a vision that was discussed with Iranian leaders during the January 2016 visit to Iran of China's President Xi Jinping. However, the reimposition of U.S. sanctions in 2018 is likely to slow or halt that ambition. Along with India and Pakistan, Iran has been given observer status in a Central Asian security grouping called the Shanghai Cooperation Organization (SCO—Russia, China, Kazakhstan, Kyrgyzstan, Uzbekistan, and Tajikistan). In April 2008, Iran applied for full membership in the organization. Apparently in an effort to cooperate with international efforts to pressure Iran, in June 2010, the SCO barred admission to Iran on the grounds that it is under U.N. Security Council sanctions. Some officials from SCO member countries have stated that the JCPOA removed that formal obstacle to Iran's obtaining full membership, but opposition to Iran's full membership among some SCO countries has denied Iran from full membership. Rouhani attended the late May 2018 SCO meeting in China which discussed how to react to the U.S. exit from the JCPOA. Turkmenistan and Iran have a land border in Iran's northeast. Supreme Leader Khamene'i is of Turkic origin; his family has close ties to the Iranian city of Mashhad, capital of Khorasan Province, which borders Turkmenistan. The two countries are also both rich in natural gas reserves. A natural gas pipeline from Iran to Turkey, fed with Turkmenistan's gas, began operations in 1997, and a second pipeline was completed in 2010. China has since become Turkmenistan's largest natural gas customer. Another potential project favored by Turkmenistan and the United States would likely reduce interest in pipelines that transit Iran. President Berdymukhamedov has revived his predecessor's 1996 proposal to build a gas pipeline through Afghanistan to Pakistan and India (termed the Turkmenistan-Afghanistan-Pakistan-India, or \"TAPI\" pipeline). In August 2015, Turkmenistan's state-owned gas company was named head of the pipeline consortium and Turkmenistan officials said the project was formally inaugurated in December 2015, with completion expected in 2019. U.S. officials have expressed strong support for the project as \"a very positive step forward and sort of a key example of what we're seeking with our New Silk Road Initiative, which aims at regional integration to lift all boats and create prosperity across the region.\" Iran and Tajikistan share a common Persian language, as well as literary and cultural ties, but the two do not share a border and most Tajikistan citizens are Sunni Muslims. President Imamali Rakhmonov has asserted that Iran and Tajikistan face common threats from arms races, international terrorism, political extremism, fundamentalism, separatism, drug trafficking, transnational organized crime, and the proliferation of weapons of mass destruction, and that close ties with neighboring states such as Iran would be based on noninterference in each other's internal affairs and the peaceful settlement of disputes, such as over border, water, and energy issues. Some Sunni Islamist extremist groups that pose a threat to Tajikistan are allied with Al Qaeda or the Islamic State. Tajikistan's leaders appear particularly concerned about Islamist movements in part because the Islamist-led United Tajik Opposition posed a serious threat to the newly independent government in the early 1990s, and a settlement of the insurgency in the late 1990s did not fully resolve government-Islamist opposition tensions. The Tajikistan government has detained members of Jundallah (Warriors of Allah)—a Pakistan-based Islamic extremist group that has conducted bombings and attacks against Iranian security personnel and mosques in Sunni areas of eastern Iran. In part because the group attacked some civilian targets in Iran, in November 2010, the State Department named the group an FTO. Kazakhstan is a significant power by virtue of its geographic location, large territory, and ample natural resources. It hosted P5+1-Iran nuclear negotiations in 2013 and, in September 2014, Kazakhstan's President Nursultan Nazarbayev met with President Rouhani and expressed the hope that a JCPOA would be achieved in order to better integrate Iran economically into the Central Asian region. Kazakhstan played a role in the commercial arrangements that produced the December 2015 shipment out to Russia of almost all of Iran's stockpile of low-enriched uranium, fulfilling a key JCPOA requirement. Kazakhstan's National Atomic Company Kazatomprom supplied Iran with 60 metric tons of natural uranium on commercial terms as compensation for the removal of the material, which Norway paid for. With sanctions eased, Iran is open to additional opportunities to cooperate with Kazakhstan on energy and infrastructure projects. Kazakhstan possesses 30 billion barrels of proven oil reserves (about 2% of world reserves) and 45.7 trillion cubic feet of proven gas reserves (less than 1% of world reserves). Two major offshore oil fields in Kazakhstan's sector of the Caspian Sea—Kashagan and Kurmangazy—are estimated to contain at least 14 billion barrels of recoverable reserves. Iran and Kazakhstan do not have any joint energy ventures in the Caspian or elsewhere, but after the finalization of the JCPOA in July 2015, the two countries resumed Caspian oil swap arrangements that were discontinued in 2011. The two countries are not at odds over specific sections of the Caspian Sea, and some aspects, but not all, of the territorial questions regarding the Caspian were settled in 2018. During the 1990s, Uzbekistan, which has the largest military of the Central Asian states, identified Iran as a potential regional rival and as a supporter of Islamist movements in the region. However, since 1999, Uzbekistan and Iran—which do not share a common border or significant language or cultural links—have moved somewhat closer over shared stated concerns about Sunni Islamist extremist movements, particularly the Islamic Movement of Uzbekistan (IMU) extremist group. In February 1999, six bomb blasts in Tashkent's governmental area nearly killed then President Islam Karimov, who was expected to attend a high-level meeting there. The government alleged that the plot was orchestrated by the IMU with assistance from Afghanistan's Taliban, which was in power in Afghanistan and hosting Osama bin Laden. In September 2000, the State Department designated the IMU as an FTO. The IMU itself has not claimed responsibility for any terrorist attacks in Iran and appears focused primarily on activities against the governments of Afghanistan and Uzbekistan. Iran-Uzbekistan relations have not changed significantly since the August 2016 death of Uzbekistan's longtime President Islam Karimov and his replacement by Shavkat Mirziyoyev, who was at the time the Prime Minister. Uzbekistan has substantial natural gas resources but it and Iran do not have joint energy-related ventures. Most of Uzbekistan's natural gas production is for domestic consumption. Still, Mirziyoyev has sought to expand regional and international cooperation and his foreign policy departure from the Karimov era is likely to benefit Uzbekistan-Iran relations. The countries in South Asia face perhaps a greater degree of threat from Sunni Islamic extremist groups than do the countries of Central Asia. They also share significant common interests with Iran, which Iran used to foster cooperation against U.S. sanctions. This section focuses on several countries in South Asia that have substantial interaction with Iran. In Afghanistan, Iran is pursuing a multitrack strategy by helping develop Afghanistan economically, engaging the central government, supporting pro-Iranian groups and, at times, arming Taliban fighters. An Iranian goal appears to be to restore some of its traditional sway in eastern, central, and northern Afghanistan, where \"Dari\"-speaking (Dari is akin to Persian) supporters of the \"Northern Alliance\" grouping of non-Pashtun Afghan minorities predominate. Iran shares with the Afghan government concern about the growth of Islamic State affiliates in Afghanistan, such as Islamic State—Khorasan Province, ISKP, an affiliate of the Islamic State organization that Iran is trying to thwart on numerous fronts in the region. The two countries are said to be cooperating effectively in their shared struggle against narcotics trafficking. President Ghani and Iranian leaders meet periodically. Iran has sought influence in Afghanistan in part by supporting the Afghan government, which is dominated by Sunni Muslims and ethnic Pashtuns. In October 2010, then-President Hamid Karzai admitted that Iran was providing cash payments (about $2 million per year) to his government. It is not known whether such payments continue. Iran's ally, Dr. Abdullah Abdullah, who is half-Tajik and speaks Dari, is \"Chief Executive Officer\" of the Afghan government under a power-sharing arrangement with President Ashraf Ghani that followed the 2014 presidential election. Even though it engages the Afghan government, Tehran has in the recent past sought leverage against U.S. forces in Afghanistan and in any Taliban-Afghan government peace settlement. Past State Department reports on international terrorism have accused Iran of providing materiel support, including 107mm rockets, to select Taliban and other militants in Afghanistan, and of training Taliban fighters in small unit tactics, small arms use, explosives, and indirect weapons fire. In July 2012, Iran allowed the Taliban to open an office in Zahedan (eastern Iran). In December 2016, Iran invited several Taliban figures to an \"Islamic Unity\" conference in Tehran. Reflecting apparent concern about the U.S. military presence in Afghanistan, Iran reportedly tried to derail the U.S.-Afghanistan Bilateral Security Agreement (BSA), signed in September 2014, that allowed the United States to maintain troops in Afghanistan after 2014. It prohibits the United States from launching military action against other countries from Afghanistan. In his May 21, 2018, speech, Secretary Pompeo demanded that \"Iran, too, must end support for the Taliban and other terrorists in Afghanistan and the region, and cease harboring senior Al Qaeda leaders.\" Purported Iranian support to Taliban factions comes despite the fact that Iran saw the Taliban regime in Afghanistan of 1996-2001 as an adversary. The Taliban allegedly committed atrocities against Shia Afghans (Hazara tribes) while seizing control of Persian-speaking areas of western and northern Afghanistan. Taliban fighters killed nine Iranian diplomats at Iran's consulate in Mazar-e-Sharif in August 1998, prompting Iran to mobilize ground forces to the Afghan border. Relations between Iran and Pakistan have been uneven. Pakistan supported Iran in the 1980-1988 Iran-Iraq War, and Iran and Pakistan engaged in substantial military cooperation in the early 1990s, and the two still conduct some military cooperation, such as joint naval exercises in April 2014. The founder of Pakistan's nuclear weapons program, A.Q. Khan, sold nuclear technology and designs to Iran. However, a rift emerge between the two countries in the 1990s because Pakistan's support for the Afghan Taliban ran counter to Iran's support for the Persian-speaking and Shia Muslim minorities who opposed Taliban rule. Iran reportedly is concerned that Pakistan might harbor ambitions of returning the Taliban movement to power in Afghanistan. Two Iranian Sunni Muslim militant groups that attack Iranian regime targets— Jundullah (named by the United States as an FTO, as discussed above) and Jaysh al-Adl—operate from western Pakistan. A significant factor dividing them is Pakistan's relationship with Saudi Arabia. Pakistan declined a Saudi request that Pakistan participation in the Saudi-led coalition against the Houthis in Yemen, but Pakistan joined Saudi Arabia's 34-nation \"antiterrorism coalition\" in December 2015. The coalition was announced as a response to the Islamic State, but Iran asserts it is directed at reducing Iran's regional influence. The two nations' bilateral agenda has increasingly focused on a joint major gas pipeline project that would ease Pakistan's energy shortages while providing Iran an additional customer for its large natural gas reserves. As originally conceived, the line would continue on to India, but India withdrew from the project at its early stages. Then-President of Iran Ahmadinejad and Pakistan's then-President Asif Ali Zardari formally inaugurated the project in March 2013. Iran has completed the line on its side of the border, but Pakistan was unable to finance the project on its side of the border until China agreed in April 2015 to build the pipeline at a cost of about $2 billion. U.S. officials stated that the project could be subject to U.S. sanctions under the Iran Sanctions Act, which went into effect again on November 5, 2018, and there is little evident movement on the project. India and Iran have overlapping histories and civilizations, and they are aligned on several strategic issues. Tens of millions of India's citizens are Shia Muslims. Both countries have historically supported minority factions in Afghanistan that are generally at odds with Afghanistan's dominant Pashtun community. India has generally cooperated with U.S. sanctions policy on Iran, even though India has obtained Iranian oil on concessionary terms and even though India's position has generally been that it will only enforce sanctions authorized by U.N. Security Council resolutions. Some projects India has pursued in Iran involve not only economic issues but national strategy. India has long sought to develop Iran's Chabahar port, which would give India direct access to Afghanistan and Central Asia without relying on transit routes through Pakistan. India had hesitated to move forward on that project because of U.S. opposition to projects that benefit Iran. India, Iran, and Afghanistan held a ceremony in May 2016 to herald the start of work. In December 2017, Iran inaugurated the $1 billion expansion of Chabahar—a project that U.S. officials have excepted from U.S. sanctions on Iran because of its pivotal contribution to Afghanistan's development. During Rouhani's visit to India in February 2018, he and India's Prime Minister Narendra Modi signed memoranda outlining future expanded energy cooperation. During the late 1990s, U.S. officials expressed concern about India-Iran military-to-military ties. The relationship included visits to India by Iranian naval personnel, although India said these exchanges involved junior personnel and focused mainly on promoting interpersonal relations and not on India's provision to Iran of military expertise. The military relationship between the countries has withered in recent years. Iran attaches significant weight to its relations with Russia—a permanent member of the U.N. Security Council, a supplier of arms to Iran, a party to the JCPOA, and a key supporter of the Asad regime. Russia appears to view Iran as a de facto ally in combating Sunni Islamist extremist movements, which have conducted attacks in Russia. Russian President Vladimir Putin visited Iran on November 23, 2015, to attend a conference of major international natural gas producers, and also held talks with Supreme Leader Khamene'i and President Rouhani, resulting in an announcement of a $5 billion line of credit to Iran for possible joint projects, including additional natural gas pipelines, railroads, and power plants. Rouhani visited Moscow on March 28, 2017, to discuss with President Putin the issues discussed below. During Putin's visit to Tehran on November 1, 2017, the two countries agreed to collaborate on \"strategic energy deals\" valued at about $30 billion. Russia opposed the U.S. exit from the JCPOA and has said it would not cooperate with reimposed U.S. secondary sanctions on Iran. U.S. officials express concern primarily with Iran-Russia military cooperation, particularly in Syria. Russia-Iran cooperation has been pivotal to the Asad regime's recapture of much of rebel-held territory since 2015. Yet, the two countries' interests do not align precisely in Syria because Iranian leaders express far greater concern about protecting Hezbollah in any post-Asad regime than do leaders of Russia, whose interests appear to center on preserving the Asad regime and on Russia's overall presence in the Middle East. In August 2016, Iran allowed Russia to stage bombing runs in Syria from a base in western Iran, near the city of Hamadan. The Russian use of the base ran counter to Iran's constitution, which bans foreign use of Iran's military facilities, and Iran subsequently ended the arrangement after Russia publicized it. Russia has been Iran's main supplier of conventional weaponry and a significant supplier of missile-related technology. In February 2016, Iran's then-Defense Minister Hosein Dehgan visited Moscow reportedly to discuss purchasing Su-30 combat aircraft, T-90 tanks, helicopters, and other defense equipment. Under Resolution 2231, selling such gear would require Security Council approval - until the provision sunsets in October 2020 - and U.S. officials have said publicly they would not support such a sale. Russia previously has abided by all U.N. sanctions to the point of initially cancelling a contract to sell Iran the advanced S-300 air defense system—even though Resolution 1929, which banned most arms sales to Iran, did not specifically ban the sale of the S-300. After the April 2, 2015, framework nuclear accord was announced, Russia lifted its ban on the S-300 sale, and the system became operational in Iran in 2016. In January 2015, Iran and Russia signed a memorandum of understanding on defense cooperation, including military drills. Russia built and still supplies fuel for Iran's only operating civilian nuclear power reactor at Bushehr, a project from which Russia earns significant revenues. Since December 2015, Russia has shipped out of Iran of almost all of Iran's stockpile of low-enriched uranium—helping Iran meet a key requirement of the JCPOA. The U.S. ending of sanctions waivers that allowed for the shipments could complicate this technical assistance provided by Russia. Iran's foreign policy is focused on urging the European countries to continue providing Iran with the economic benefits of the JCPOA in the wake of the May 2018 Trump Administration pullout from that accord. The EU is struggling with that effort, insofar as European countries have substantial engagement in the U.S. economy and are reluctant to risk that business to maintain economic ties to Iran. Still, Rouhani and his subordinates regularly visit European capitals and engage European leaders, daily flights from several European countries to Iran continue, and many Iranian students attend European universities. While the European countries oppose the U.S. withdrawal from the JCPOA, they are critical of Iran for recent alleged Iranian plots to assassinate dissidents in Europe (discussed above). In January 2019, in response to a Dutch letter linking Iran to assassinations of Dutch nationals of Iranian origin in 2015 and 2017, the EU sanctioned the internal security unit of Iran's Intelligence ministry and two Iranian operatives for sponsoring acts of terrorism. It is the terrorism issue that has, in the past, disrupted Iran-Europe relations. During the 1990s, the United States had no dialogue with Iran at all, whereas the EU countries maintained a policy of \"critical dialogue\" and refused to join the 1995 U.S. trade and investment ban on Iran. But, that dialogue was suspended in April 1997 in response to the German terrorism trial (\"Mykonos trial\") that found high-level Iranian involvement in killing Iranian dissidents in Germany. East Asia includes three of Iran's five largest buyers of crude oil and one country, North Korea, that is widely accused of supplying Iran with missile and other military-related technology. The countries in Asia have not extensively intervened militarily or politically in the Middle East, and Iran rarely criticizes countries in Asia. China, a permanent member of the U.N. Security Council and a P5+1 party to the JCPOA, is Iran's largest oil customer. During U.N. Security Council deliberations on Iran during 2006-2013, China tended to argue for less stringent sanctions than did the United States, but China's compliance with U.S. sanctions was pivotal to U.S. efforts to reduce Iran's revenue from oil sales during 2012-2016. China opposed the U.S. withdrawal from the JCPOA and the government has continued to buy substantial quantities of Iran oil, even while earning a U.S. exception from sanctions requiring Iran's oil customers to reduce buys from Iran. China faces a potential threat from Sunni Muslim extremists in western China and appears to see Shia Iran as a potential ally against Sunni radicals. China also appears to agree with Iran's view that the Asad regime is preferable to the Islamic State and other Islamist rebel organizations. Shortly after Implementation Day of the JCPOA in January 2016, China's President Xi Jinping included Tehran on a visit to the Middle East region. His trip to Iran generally focused on China's vision of an energy and transportation corridor extending throughout Eurasia (Belt and Road Initiative, BRI), and including Iran, and the two countries agreed to expand trade to $600 billion over the next decade. Iran's burgeoning economic and diplomatic relationships with the Central Asian states appear intended, at least in part, to enable Iran to take advantage of the substantial Chinese investment in the region that is required to implement its BRI vision. As an example, in February 2016, the first rail cargo from China arrived in Iran via the Kazakhstan-Turkmenistan-Iran link discussed above. China in the past supplied Iran with advanced conventional arms, including cruise missile-armed fast patrol boats that the IRGC Navy operates in the Persian Gulf; anti-ship missiles; ballistic missile guidance systems; and other WMD-related technology. A number of China-based entities have been sanctioned by the United States, including in 2017, for allegedly aiding Iran's missile, nuclear, and conventional weapons programs. Iran's primary interest in Japan and South Korea has been to expand commercial relations after sanctions were eased. Neither Japan nor South Korea has been heavily involved in security and strategic issues in the Middle East, but both countries are close allies of the United States. Both countries are wary of Iran's reported military and technology relations with North Korea. During the period when the United States was implementing the JCPOA, South Korea's then-President Geun-hye Park visited Tehran in May 2016 for the first tour of Iran by a South Korean president to Iran since 1962, accompanied by representatives of 236 South Korean companies and organizations. The two sides signed a number of agreements in the fields of oil and gas, railroads, tourism, and technology, and agreed to reestablish direct flights between Tehran and Seoul. Japan's Prime Minister Shinzo Abe reportedly had planned to visit Iran in late August 2016, but postponed the visit. During the U.N. General Assembly meetings in New York (September 18-21, 2017), Abe accepted an invitation from President Rouhani to visit Iran, according to Abe's spokesperson., but no date for the visit was announced. The visit, which would have been the first by a leader of Japan to the Islamic Republic, is unlikely now that the United States has exited the JCPOA. Japanese and South Korean firms are consistently unwilling to risk their positions in the U.S. market by violating any U.S. sanctions on Iran, and these companies are starting to leave the Iran market now that U.S. secondary sanctions are being reimposed. Iran and North Korea have been aligned as \"rogue states\" subjected to wide-ranging international sanctions. North Korea is one of the few countries with which Iran has formal military-to-military relations, and the two countries have cooperated on a wide range of military and WMD-related ventures, particularly the development of ballistic missile technology. In the past, Iran reportedly funded and assisted in the retransfer of missile and possibly nuclear technology from North Korea to Syria. North Korea also reportedly supplied Iran with small submarines. It is widely suspected that the two continue to cooperate on missile development, and possibly nuclear issues as well, but the extent of the cooperation, if any, is not known from published sources. North Korea has not at any time pledged to abide by international sanctions against Iran, but its economy is too small to significantly help Iran. According to some observers, a portion of China's purchases of oil from Iran and other suppliers is reexported to North Korea. After international sanctions on Iran's crude oil exports were removed, additional quantities of Iranian oil likely began reaching North Korea, most likely via China. However, the expansion of such retransfers are likely limited by the adoption in September 2017 of additional U.N. sanctions limiting the supply of oil to North Korea. Some U.S. officials and some in Congress have expressed concerns about Iran's relations with leaders in Latin America that share Iran's distrust of the United States. Some experts and U.S. officials have asserted that Iran has sought to position IRGC-QF operatives and Hezbollah members in Latin America to potentially carry out terrorist attacks against Israeli targets in the region or even in the United States itself. Some U.S. officials have asserted that Iran and Hezbollah's activities in Latin America include money laundering and trafficking in drugs and counterfeit goods. These concerns were heightened during the presidency of Mahmoud Ahmadinejad (2005-2013), who made repeated, high-profile visits to the region in an effort to circumvent U.S. sanctions and gain support for his criticisms of U.S. policies. However, few of the economic agreements that Ahmadinejad announced with Latin American countries were implemented, by all accounts. President Rouhani has expressed only modest interest in expanding ties in Latin America, perhaps in part because Latin America is not pivotal to Iran's economy. He made his first visit to the region in September 2016 in the course of traveling to the annual U.N. General Assembly meetings in New York. He went to several of the countries that Foreign Minister Zarif did in August 2016: Cuba, Chile, Bolivia, Ecuador, Nicaragua, and Venezuela—countries in that region that Ahmadinejad visited during his presidency as well. Iran's officials have stated that the purpose of the visits were to expand economic relations with Latin American countries. In the 112 th Congress, the Countering Iran in the Western Hemisphere Act, requiring the Administration to develop a strategy to counter Iran's influence in Latin America, was enacted ( H.R. 3783 , P.L. 112-220 ). The required report was provided to Congress in June 2013, asserting that \"Iranian influence in Latin America and the Caribbean is waning\" in part because of U.S. efforts to cause Latin American countries to assess the costs and benefits of closer relations with Iran. Observers have directed particular attention to Iran's relationship with Venezuela (an OPEC member, as is Iran) because of its avowed anti-U.S. posture, and Argentina, because of the Iran-backed attacks on Israeli and Jewish targets there. Iran's relations with Cuba have been analyzed by experts in the past, but the U.S. opening to Cuba that began in late 2014 have eased concerns about Cuba-Iran relations. U.S. counterterrorism officials also have stated that the tri-border area of Argentina, Brazil, and Paraguay is a \"nexus\" of arms, narcotics and human trafficking, counterfeiting, and other potential funding sources for terrorist organizations, including Hezbollah. Assertions in 2009 by some U.S. officials that Iran was significantly expanding its presence in Nicaragua were disputed by subsequent accounts. During Ahmadinejad's presidency, Iran had particularly close relations with Venezuela and its president, Hugo Chavez, who died in office in March 2013. Neither Rouhani nor Chavez's successor, Nicolas Maduro, have expressed the enthusiasm for the relationship that Chavez and Ahmadinejad did, but Iran has expressed support for Maduro in 2019 in the face of the serious political challenge from the opposition led by Juan Guaido. In the context of stepped up unrest in Venezuela in April-May 2019, U.S. officials have accused Iran and Hezbollah of helping Maduro retain support within the Venezuelan military. Iranian leaders have publicly supported Maduro as the legitimate leader of Venezuela and, in April 2019, Iran resumed a long-dormant direct air route from Tehran to Venezuela. Still, the extent of any Iranian or Hezbollah involvement in current events in Venezuela remains unclear. Even during the presidencies of Chavez and Ahmadinejad, the United States did not necessarily perceive a threat from the Iran-Venezuela relationship. In July 2012, President Obama stated that Iran-Venezuela ties have not had \"a serious national security impact on the United States.\" Very few of the economic agreements announced were implemented. A direct air link was reportedly restarted by President Maduro in January 2015 in order to try to promote tourism between the two countries. Petroleos de Venezuela (PDVSA)—which operates the Citgo gasoline stations in the United States—has been supplying Iran with gasoline since 2009, in contravention of U.S. sanctions, and PDVSA was sanctioned under the Iran Sanctions Act in May 2011. The United States \"de-listed\" PDVSA as stipulated in the JCPOA, but it was \"re-listed\" in concert with the reimposition of U.S. sanctions on Iran in 2018. In Argentina, Iran and Hezbollah carried out acts of terrorism against Israeli and Jewish targets in Buenos Aires that continue to affect Iran-Argentina relations. The major attacks were the 1992 bombing of the Israeli embassy and the 1994 bombing of a Jewish community center (Argentine-Israeli Mutual Association, AMIA). Based on indictments and the investigative information that has been revealed, there is a broad consensus that these attacks were carried out by Hezbollah operatives, assisted by Iranian diplomats and their diplomatic privileges. The Buenos Aires attacks took place more than 20 years ago and there have not been any recent public indications that Iran and/or Hezbollah are planning attacks in Argentina or elsewhere in Latin America. However, in February 2015, Uruguay stated that an Iranian diplomat posted there had left the country before Uruguay issued a formal complaint that the diplomat had tested the security measures of Israel's embassy in the capital, Montevideo. Many in Argentina's Jewish community opposed a January 2013 agreement between Iran and the government of then-President Cristina Fernandez de Kirchner to form a \"truth commission\" rather than to aggressively prosecute the Iranians involved. In May 2013, the Argentine prosecutor in the AMIA bombing case, Alberto Nisman, issued a 500-page report alleging that Iran has been working for decades in Latin America, setting up intelligence stations in the region by utilizing embassies, cultural organizations, and even mosques as a source of recruitment. In January 2015, Nisman was found dead of a gunshot wound, amid reports that he was to request indictment of Argentina's president for allegedly conspiring with Iran to downplay the AMIA bombing issue. President Kirchner was succeeded in December 2015 by Mauricio Macri, who has not sought to broaden relations with Iran. Sub-Saharan Africa has not generally been a focus of Iranian foreign policy, perhaps because of the relatively small size of most African economies and the limited ability of African countries to influence the actions of Iran's main regional rivals. Former President Ahmadinejad sought to deepen diplomatic and commercial ties to some African countries, focusing on those that have had historically tense relations with Western powers (such as Sudan, Zimbabwe, and South Africa). Many African countries, however, apparently did not want to risk their relationships with the United States or blowback from domestic Sunni constituencies by broadening relations with Iran. The overwhelming majority of Muslims in Africa are Sunni, and Muslim-majority African countries have tended to be responsive to financial and diplomatic overtures from Iran's rival, Saudi Arabia. Amid the Saudi-Iran dispute in January 2016 over the Nimr execution, several African countries that Iran had cultivated as potential allies broke relations with Iran outright, including Djibouti, Comoros, and Somalia, as well as Sudan. Senegal, at one time seen as a primary focus of Ahmadinejad's Africa outreach, and Sudan have supported the Saudi-led military effort against the Iran-backed Houthis in Yemen—in Sudan's case with some forces. The UAE, in particular, has actively sought allies in the Horn of Africa to reduce Iranian influence, including by facilitating UAE operations against the Iran-backed Houthi rebels in Yemen. West Africa's large Lebanese diaspora communities may also be a target of Iranian influence operations and a conduit for Hezbollah financial and criminal activities. Rouhani has made few statements on relations with countries in Africa and has apparently not made the continent a priority. Tehran appears, however, to retain an interest in cultivating African countries as trading partners—an interest that might increase now that the Trump Administration has decided to exit the JCPOA and reimpose all U.S. sanctions. Iran's leaders also apparently see Africa as a market for its arms exports and as sources of diplomatic support in U.N. forums. African populations may also be seen as potential targets for Iranian \"soft power\" and religious influence. Iran's Al Mustafa University, which promotes Iran's message and Shia religious orientation with branches worldwide, has numerous branches in various African countries. The IRGC-QF has reportedly operated in some countries in Africa, in part to secure arms-supply routes for pro-Iranian movements in the Middle East but also to be positioned to act against U.S. or allied interests, to support friendly governments or factions, and act against Sunni extremist movements. Several African countries have claimed to disrupt purportedly IRGC-QF-backed arms trafficking or terrorism plots. In May 2013, a court in Kenya found two Iranian men guilty of planning to carry out bombings in Kenya, apparently against Israeli targets. In December 2016, two Iranians and a Kenyan who worked for Iran's embassy in Nairobi were charged with collecting information for a terrorist act after filming the Israeli embassy in that city. Senegal cut diplomatic ties with Iran between 2011 and 2013 after claiming that Iran had trafficked weapons to its domestic separatist insurgency. Iran's relations with the government of Sudan, which were extensive since the early 1990s, have diminished substantially since 2014 as Sudan has moved closer to Iran's rivals, Saudi Arabia and the UAE. Sudan, like Iran, is still named by the United States as a state sponsor of terrorism, although U.S. officials have praised the country's counterterrorism cooperation in recent years, possibly to the point where the Administration might decide to remove Sudan from the terrorism list. Iran's relations with Sudan provided Iran with a channel to supply weapons to Hamas and other pro-Iranian groups in the Gaza Strip. The relationship began in the 1990s when Islamist leaders in Sudan, who came to power in 1989, welcomed international Islamist movements to train and organize there. Iran began supplying Sudan with weapons it used on its various fronts, such as in its internal conflicts with rebels in what is now South Sudan as well as in the Darfur region, and the IRGC-QF reportedly armed and trained Sudanese forces, including the Popular Defense Force militia. Iranian pilots reportedly assisted Sudan's air force, and Iran's naval forces periodically visited Port Sudan. Iran also reportedly played a key role in helping Sudan build its own military industry. Israel repeatedly accused Iran of shipping weapons bound for Gaza through Sudan and, at times, took military action against sites in Sudan that Israel asserted were being used by Iran to arm Hamas. However, because Sudan is inhabited by Sunni Arabs, it has always been considered susceptible to overtures from Saudi Arabia and other GCC countries to distance itself from Iran. Since 2014, Saudi and UAE economic assistance to and investment in Sudan have caused Sudan to realign. In September 2014, the Sudan government closed all Iranian cultural centers in Sudan and expelled the cultural attaché and other Iranian diplomats on the grounds that Iran was using its facilities and personnel in Sudan to promote Shia Islam. In March 2015, Sudan joined the Saudi-led Arab coalition against the Houthis in Yemen, appearing to confirm that Sudan has significantly downgraded its strategic relations with Iran. In December 2015, Sudan joined the Saudi-led antiterrorism coalition discussed earlier. In January 2016, Sudan severed ties with Iran in connection with the Saudi execution of Nimr. Key questions include whether, and if so, how, U.S. actions might alter Iran's behavior, and whether the United States and Iran are on a collision course toward armed conflict. To date, no U.S. strategy, by any Administration, has reduced Iran's inclination to intervene in the region or otherwise try to enhance its regional influence. Trump Administration officials asserted that the sanctions relief of the JCPOA enabled Iran to increase its regional malign activities, and that pulling out of the accord and reimposing sanctions were required. However, it can be argued that the level of Iran's regional influence is linked more to opportunities provided by the region's conflicts than to the level of Iran's financial resources. Whereas deployments of additional U.S. military force to the region might deter some Iranian actions, U.S. buildups arguably have never caused Iran to alter its fundamental regional strategies. As noted throughout, Administration efforts against Iran included imposition of sanctions on various Iranian activities; provision of advice, training, and counterterrorism assistance to regional leaders and groups who seek to limit Iranian influence; and deployment of U.S. forces to intercept Iranian weapons shipments and deter Iranian ground action. Additional U.S. pressure on Iran—particularly if such pressure involves military action—could embroil the United States more deeply in regional conflicts. Those who argue that Iran is an increasingly challenging regional actor maintain the following: Iran is likely to continue to supply its regional allies and proxies with larger quantities of and more accurate weaponry, including short-range missiles. Iran might, through its allies and proxies in Syria and Iraq, succeed in establishing a secure land corridor extending from Iran to Lebanon and in pressuring Israel from the Syrian border as well as the Lebanese border. The potential for major Iran-Israel conflict in Syria is significant. A further prolongation of the intra-GCC rift could complicate U.S. efforts to contain Iran militarily and hinder U.S. military operations in the region. The lifting of the U.N. ban on arms sales to Iran in October 2020 will enable Iran to modernize its armed forces, possibly to the point where it can move ground forces across waterways such as the Strait of Hormuz. Iran could further increase its assistance to hardline opposition factions in Bahrain, which has apparently been limited to date to only small, militant underground groups. Iran might succeed in emerging as a major regional energy and trading hub, both within and outside its participation in China's BRI initiative, potentially expanding Iran's political influence to an even greater extent. Various regional powers might establish or expand military cooperation with Iran, a development that could strengthen Iran's conventional capabilities. On the other hand, in order to preserve at least some multilateral sanctions relief and avoid the potential for confrontation, Iran might be induced to accept regional settlements that benefit U.S. and allied interests. Those who take this view argue the following: Iran might be induced to cooperate in identifying an alternative to Asad in Syria that attenuates the civil conflict and permits Iran to draw down its forces. Iran might be persuaded to curtail its delivery of additional long-range rockets or other military equipment to Hezbollah and Hamas, although Iran is unlikely under any circumstances to reduce its political support for Hezbollah. Iran might support a political solution in Yemen that gives the Houthis less influence in a new government than they are demanding. Iran and the UAE might resolve their territorial dispute. Iran might gain admission to the SCO and cooperate more systematically with its members against the Islamic State or other terrorist organizations. Iran might seek to finalize regional economic projects, including development of oil and gas fields in the Caspian Sea; gas pipeline linkages between Iran and Kuwait, Bahrain, Oman, and Pakistan; and transportation routes to China. Domestic Iranian factors could cause Iran's foreign policy to shift. For example: Protests that have taken place since late 2017 could escalate and cause the regime to reduce the scope of its interventions, cut its defense budget, or limit its missile development program. If unrest escalates dramatically and the regime loses power, Iran's foreign policy could shift dramatically, likely becoming far more favorable to U.S. interests. The departure from the scene of the Supreme Leader could change Iran's foreign policy sharply, depending on the views of his successor.", "summary": "Iran's national security policy is the product of many overlapping and sometimes competing factors such as the ideology of Iran's Islamic revolution, perception of threats to the regime and to the country, long-standing national interests, and the interaction of the Iranian regime's factions and constituencies. Iran's leadership: Seeks to deter or thwart U.S. or other efforts to invade or intimidate Iran or to bring about a change of regime. Has sought to take advantage of opportunities of regional conflicts to overturn a power structure in the Middle East that it asserts favors the United States, Israel, Saudi Arabia, and other Sunni Muslim Arab regimes. Seeks to enhance its international prestige and restore a sense of \"greatness\" reminiscent of ancient Persian empires. Advances its foreign policy goals, in part by providing material support to regional allied governments and armed factions. Iranian officials characterize the support as helping the region's \"oppressed\" and assert that Saudi Arabia, in particular, is instigating sectarian tensions and trying to exclude Iran from regional affairs. Sometimes disagrees on tactics and strategies. Supreme Leader Ali Khamene'i and key hardline institutions, such as the Islamic Revolutionary Guard Corps (IRGC), oppose any compromises of Iran's national security core goals. Iran's elected president, Hassan Rouhani, and Foreign Minister Mohammad Javad Zarif support Iran's integration into regional and international diplomacy. Supports acts of international terrorism, as the \"leading\" or \"most active\" state sponsor of terrorism, according to each annual State Department report on international terrorism since the early 1990s. The Administration insists that an end to Iran's malign activities is a requirement of any revised JCPOA and normalization of relations with the United States. The Trump Administration has articulated a strategy to counter Iran's \"malign activities\" based on: Applying \"maximum pressure\" on Iran's economy and regime through sanctions. President Trump withdrew the United States from the JCPOA on May 8, 2018, and reimposed all U.S. sanctions as of November 5, 2018. Attempting to diplomatically, politically, and economically isolate Iran. Training, arming, and providing counterterrorism assistance to partner governments and some allied substate actors in the region. Deploying U.S. forces to deter Iran and interdict its arms shipments to its allies and proxies. Indirectly threatening military action against Iranian actions that pose an immediate threat to U.S. regional interests or allies.", "document_type": "crs"}
{"report": "Names for Navy ships traditionally have been chosen and announced by the Secretary of the Navy, under the direction of the President and in accordance with rules prescribed by Congress. For most of the 19 th century, U.S. law included language explicitly assigning the Secretary of the Navy the task of naming new Navy ships. The reference to the Secretary of the Navy disappeared from the U.S. Code in 1925. The code today (10 U.S.C. §8662) is silent on the issue of who has the authority to name new Navy ships, but the Secretary of the Navy arguably retains implicit authority, given the location of Section 8662 in subtitle C of Title 10, which covers the Navy and Marine Corps. In discussing its name-selection process, the Naval History and Heritage Command—the Navy's in-house office of professional historians—cites the above-mentioned laws and states the following: As with many other things, the procedures and practices involved in Navy ship naming are as much, if not more, products of evolution and tradition than of legislation. As we have seen, the names for new ships are personally decided by the Secretary of the Navy. The Secretary can rely on many sources to help him reach his decisions. Each year, the Navy History and Heritage Command (NHHC) compiles primary and alternate ship name recommendations and forwards these to the Chief of Naval Operations by way of the chain of command. These recommendations are the result of research into the history of the Navy and by suggestions submitted by service members, Navy veterans, and the public. Ship name source records at NHHC reflect the wide variety of name sources that have been used in the past, particularly since World War I. Ship name recommendations are conditioned by such factors as the name categories for ship types now being built, as approved by the Secretary of the Navy; the distribution of geographic names of ships of the fleet; names borne by previous ships that distinguished themselves in service; names recommended by individuals and groups; and names of naval leaders, national figures, and deceased members of the Navy and Marine Corps who have been honored for heroism in war or for extraordinary achievement in peace. In its final form, after consideration at the various levels of command, the Chief of Naval Operations signs the memorandum recommending names for the current year's building program and sends it to the Secretary of the Navy. The Secretary considers these nominations, along with others he receives, as well as his own thoughts in this matter. At appropriate times, he selects names for specific ships and announces them. While there is no set time for assigning a name, it is customarily done before the ship is christened. The ship's sponsor─the person who will christen the ship─is also selected and invited by the Secretary. In the case of ships named for individuals, an effort is made to identify the eldest living direct female descendant of that individual to perform the role of ship's sponsor. For ships with other name sources, it is customary to honor the wives of senior naval officers or public officials. A July 2012 Navy report to Congress on the Navy's policies and practices for naming ships (see next section) states the following: Once a type/class naming convention [i.e., a general rule or guideline for how ships of a certain type or class are to be named] is established, Secretaries can rely on many sources to help in the final selection of a ship name. For example, sitting Secretaries can solicit ideas and recommendations from either the Chief of Naval Operations (CNO) or the Commandant of the Marine Corps (CMC), or both. They can also task the Naval Heritage and History Command to compile primary and alternate ship name recommendations that are the result of research into the history of the Navy's battle force or particular ship names. Secretaries also routinely receive formal suggestions for ship names from concerned citizens, active and retired service members, or members of Congress. Finally, Congress can enact provisions in Public Law that express the sense of the entire body about new ship naming conventions or specific ship names. Regardless of the origin of the recommendations, however, the final selection of a ship's name is the Secretary's to make, informed and guided by his own thoughts, counsel, and preferences. At the appropriate time—normally sometime after the ship has been either authorized or appropriated by Congress and before its keel laying or christening—the Secretary records his decision with a formal naming announcement. On July 13, 2012, the Navy submitted to Congress a 73-page report on the Navy's policies and practices for naming ships. The report was submitted in response to Section 1014 of the FY2012 National Defense Authorization Act ( H.R. 1540 / P.L. 112-81 of December 31, 2011). The executive summary of the Navy's report is reprinted here as Appendix A . Rules for giving certain types of names to certain types of Navy ships have evolved over time. Attack submarines, for example, were once named for fish, then later for cities, and most recently for states, while cruisers were once named for cities, then later for states, and most recently for battles. State names, to cite another example, were given to battleships, then later to nuclear-powered cruisers and ballistic missile submarines, and are now being given to attack submarines. The Naval History and Heritage Command states the following: \"How will the Navy name its ships in the future? It seems safe to say that the evolutionary process of the past will continue; as the fleet itself changes, so will the names given to its ships. It seems equally safe, however, to say that future decisions in this area will continue to demonstrate regard for the rich history and valued traditions of the United States Navy.\" The July 2012 Navy report to Congress states that \"US Navy ship-naming policies, practices, and 'traditions' are not fixed; they evolve constantly over time.\" The report also states that \"Just as [ship] type naming conventions change over time to accommodate technological change as well as choices made by Secretaries, they also change over time as every Secretary makes their own interpretation of the original naming convention.\" There have been numerous exceptions to the Navy's ship-naming rules, particularly for the purpose of naming a ship for a person when the rule for that type of ship would have called for it to be named for something else. The July 2012 report to Congress cites exceptions to ship naming rules dating back to the earliest days of the republic, and states that \"a Secretary's discretion to make exceptions to ship-naming conventions is one of the Navy's oldest ship-naming traditions.\" The report argues that exceptions made for the purpose of naming ships for Presidents or Members of Congress have occurred frequently enough that, rather than being exceptions, they constitute a \"special cross-type naming convention\" for Presidents and Members of Congress. This CRS report continues to note, as exceptions to basic class naming rules, instances where ships other than aircraft carriers have been named for Presidents or Members of Congress. Some observers have perceived a breakdown in, or corruption of, the rules for naming Navy ships. Such observers might cite, for example, the three-ship Seawolf (SSN-21) class of attack submarines— Seawolf (SSN-21), Connecticut (SSN-22), and Jimmy Carter (SSN-23)—which were named for a fish, a state, and a President, respectively, reflecting no apparent class naming rule. The July 2012 Navy report to Congress states the following: \"Current ship naming policies and practices fall well within the historic spectrum of policies and practices for naming vessels of the Navy, and are altogether consistent with ship naming customs and traditions.\" For ship types now being procured for the Navy, or recently procured for the Navy, naming rules (and exceptions thereto) are summarized below. The July 2012 Navy report to Congress discusses current naming rules (and exceptions thereto) at length. On December 14, 2016, the Navy named the first of its 12 planned next-generation ballistic missile submarines Columbia (SSBN-826), in honor of the District of Columbia. The 12 planned boats are consequently now referred to as Columbia -class or SSBN-826 class boats. The Navy has not stated what the naming rule for these ships will be. Given the selection of Columbia as the name of the lead ship, possibilities for the naming rule include (but are not necessarily limited to) cities, capital cities, or states and federal districts and territories. It is also possible that the name Columbia will turn out to be an exception to the naming rule for the class. The current USS Columbia (SSN-771)—a Los Angeles (SSN-688) class attack submarine that was named for Columbia, SC; Columbia, IL; and Columbia, MO —entered service in 1995 and will reach the end of its 33-year expected service life in 2028, at about the time that construction of SSBN-826 is scheduled to be completed. If the service life of SSN-771 is extended for several years, it would remain in service after the commissioning of SSBN-826. This would create an issue to be resolved, since 10 U.S.C. §8662(a) states, \"Not more than one vessel of the Navy may have the same name.\" One possible step for resolving such an issue would be to change the name of SSBN-826 to something else, such as District of Columbia —a step that could be viewed as somewhat similar to the below-discussed instance in which the name of the Los Angles-class submarine SSN-705 was changed from Corpus Christi to City of Corpus Christi (see \" Congressional Responses to Announced Navy Ship-Naming Decisions \" below). Virginia (SSN-774) class attack submarines are being named for states. An exception occurred on January 8, 2009, when then-Secretary of the Navy Donald Winter announced that SSN-785 would be named for former Senator John Warner. Another exception occurred on January 9, 2014, when then-Secretary of the Navy Ray Mabus announced that SSN-795, the second of the two Virginia-class boats procured in FY2015, would be named for Admiral Hyman G. Rickover, who served for many years as director of the Navy's nuclear propulsion program. As of May 6, 2019, the Navy has announced names for all Virginia-class boats through SSN-801, the second of two Virginia-class boats procured in FY2018. A total of 30 Virginia-class boats have been procured through FY2019, of which 26 have been named for states. (Two were named for people and the two procured in FY2019 have not yet been named.) The Navy's shipbuilding plan calls for procuring three additional Virginia-class boats in FY2020 and two per year FY2021 and subsequent years. The 26 state-named Virginia-class boats procured through FY2018, together with the additional Virginia-class boats planned for procurement in FY2020 and subsequent years and the 17 existing state-named Ohio (SSBN-726) class SSBNs and cruise missile submarine (SSGNs), could make for a total of more than 50 boats starting around FY2022. Thus, starting around FY2022, the Navy might run out of state names for Virginia-class boats, and consequently might need to either amend the Virginia-class naming rule or begin making a series of exceptions to the rule. The July 2012 Navy report to Congress states that \"while carrier names are still 'individually considered,' they are now generally named in honor of past US Presidents.\" Of the 14 most recently named aircraft carriers (those with hull numbers 67 through 80), 10 have been named for U.S. Presidents and 2 for Members of Congress. The Navy is currently procuring Gerald R. Ford (CVN-78) class carriers. On January 16, 2007, the Navy announced that CVN-78, the lead ship in the CVN-78 class, would be named for President Gerald R. Ford. On May 29, 2011, the Navy announced that CVN-79, the second ship in the class, would be named for President John F. Kennedy. On December 1, 2012, the Navy announced that CVN-80, the third ship in the class, would be named Enterprise . The Navy made the announcement on the same day that it deactivated the 51-year-old aircraft carrier CVN-65, also named Enterprise . CVN-80 is the ninth Navy ship named Enterprise . CVN-80 was procured in the FY2018 budget, which Congress considered in 2017. If CVN-80, like most Navy ships, had been named at about the time of procurement, or later, rather than in 2012, it would have been named by the current Secretary of the Navy, Richard Spencer. The July 2012 Navy report to Congress, which was produced when Ray Mabus was the Secretary of the Navy, states that Secretary [of the Navy Ray] Mabus values the ability to consider [aircraft] carrier names on an individual, case‐by‐case basis, for two reasons. First, it will allow a future Secretary to name a future fleet aircraft carrier for someone or something other than a former President. Indeed, Secretary Mabus has a particular name in mind. With the scheduled decommissioning of USS Enterprise (CVN 65), perhaps the most famous ship name in US Navy history besides USS Constitution will be removed from the Naval Vessel Register. Secretary Mabus believes this circumstance could be remedied by bestowing the Enterprise's storied name on a future carrier. Prior to the naming of CVN-80, the most recent carrier that was not named for a President or Member of Congress was the second of the 14 most recently named carriers, Nimitz (CVN-68), which was procured in FY1967. Destroyers traditionally have been named for famous U.S. naval leaders and distinguished heroes. The July 2012 Navy report to Congress discusses this tradition and states more specifically that destroyers are being named for deceased members of the Navy, Marine Corps, and Coast Guard, including Secretaries of the Navy. Exceptions since 2012 (all of which involve Arleigh Burke [DDG-51] class destroyers) include the following: On May 7, 2012, the Navy announced that it was naming DDG-116 for a living person, Thomas Hudner. On May 23, 2013, the Navy announced that it was naming DDG-117 for a living person, Paul Ignatius, and that it was naming DDG-118 for the late Senator Daniel Inouye, who served in the U.S. Army during World War II. On March 31 and April 5, 2016, it was reported that the Navy was naming DDG-120 for a living person, former Senator Carl Levin. On July 28, 2016, the Navy announced that it was naming DDG-124 for a living person, Harvey C. Barnum Jr. On July 11, 2018, Secretary of the Navy Richard Spencer announced that the Navy was expanding the name of the destroyer John. S. McCain (DDG-56) to include a living person, Senator John S. McCain III (for additional discussion, see the next section below). On May 6, 2019, the Navy announced that it was naming DDG-133 for a living person, former Senator Sam Nunn, who had served in the Coast Guard from 1959 to 1960, and in the Coast Guard Reserve from 1960 until 1968 (for additional discussion, see the section following the next section). As of May 6, 2019, the Navy had announced names for all DDG-51 class destroyers procured through DDG-131, the second of three DDG-51s procured in FY2019, and DDG-133, one of three DDG-51s requested for procurement in FY2020. On July 11, 2018, Secretary of the Navy Richard Spencer announced that the Navy was expanding the name of the destroyer John. S. McCain (DDG-56), originally named for Admiral John S. \"Slew\" McCain (1884-1945) and his son, Admiral John S. \"Jack\" McCain, Jr. (1911-1981), to also include Senator John S. McCain III, the grandson of Admiral John S. McCain and the son of Admiral John S. McCain, Jr. DDG-56 was procured in FY1989 and was commissioned into service on July 2, 1994. John S. McCain III served as a Member of the House of Representatives from 1983 to 1987, and as a Senator from 1987 to 2018. Among his committee chairmanships, he was the chairman of the Senate Armed Services Committee from January 3, 2015, until his death on August 25, 2018. He was the Republican Party candidate for President in 2008. On May 6, 2019, the Navy announced that it was naming DDG-133 for former Senator Sam Nunn. Nunn served in the Coast Guard from 1959 to 1960, and in the Coast Guard Reserve from 1960 until 1968. He was a Senator from 1972 to 1997. During his time in the Senate, he was, among other things, the Chairman of the Senate Armed Services Committee from January 1987 to January 1995. The Navy in 2017 initiated a new program, called the FFG(X) program, to build a class of 20 guided-missile frigates (FFGs). The Navy wants to procure the first FFG(X) in FY2020, the second in FY2021, and the remaining 18 at a rate of two per year in FY2022-FY2030. As of May 6, 2019, the Navy had not announced a naming rule for this planned new class of ships. Previous classes of U.S. Navy frigates, like Navy destroyers, were generally named for naval leaders and heroes. Littoral Combat Ships (LCSs) were at first named for U.S. mid-tier cities, small towns, and other U.S. communities. The naming rule was later adjusted to regionally important U.S. cities and communities. An exception occurred on February 10, 2012, when the Navy announced that it was naming LCS-10 for former Representative Gabrielle Giffords. Another exception occurred on February 23, 2018, when President Trump, in a press conference with Australian Prime Minister Malcolm Turnbull, announced that an LCS would be named Canberra , in honor of HMAS Canberra (D33), an Australian cruiser named for the capital city of Australia that fought alongside U.S. Navy forces World War II and was scuttled after being damaged by Japanese attack in the Battle of Savo Island on August 9, 1942. The Navy has identified the LCS to be named Canberra as LCS-30. A previous U.S. Navy ship, the gun cruiser Canberra (CA-70), which served from 1943 to 1947 and again from 1956 to 1970, was similarly named in honor of HMAS Canberra . There is also a current HMAS Canberra (L02), an amphibious assault ship (i.e., helicopter carrier) that entered service in 2014 and now serves as the flagship of the Australian navy. The situation of LCS-30 and L02 sharing the same name will presumably not violate 10 U.S.C. §8662(a)—which states that \"not more than one vessel of the Navy may have the same name\"—because 10 U.S.C. §8662 is a statute governing the naming of U.S. Navy ships and L02 is not a U.S. Navy ship. As of May 6, 2019, the Navy had posted or announced names for all LCSs up through LCS-30, plus LCS-32, LCS-34, LCS-36, and LCS-38. The Navy also announced on October 9, 2018, that one additional LCS would be named for Cleveland, OH, but the Navy did not specify which LCS would receive this name. A total of 35 LCSs have been procured through FY2019. In addition to LCSs 1-30, 32, 34, 36, and 38, the Navy has identified the 35 th LCS as LCS-31. As of May 6, 2019, this ship was listed by the Navy as having no name. The Navy does not want to procure any more LCSs beyond the 35 that have been procured. If no additional LCSs are procured beyond the 35 that have been procured, LCS-31 will be the last LCS to be named. Given the Navy's October 9, 2018, announcement that one additional LCS would be named for Cleveland, OH, it is possible the Navy will name LCS-31 for Cleveland. Amphibious assault ships (LHAs), which look like medium-sized aircraft carriers, are being named for important battles in which U.S. Marines played a prominent part, and for famous earlier U.S. Navy ships that were not named for battles. The Navy announced on June 27, 2008, that the first LHA-6 class amphibious assault ship, LHA-6, would be named America , a name previously used for an aircraft carrier (CV-66) that served in the Navy from 1965 to 1996. The Navy announced on May 4, 2012, that LHA-7, the second ship in the class, LHA-7, would be named Tripoli , the location of famous Marine battles in the First Barbary War. The Navy reaffirmed this name selection with a more formal announcement on May 30, 2014. On November 9, 2016, the Navy announced that the third ship in the class, LHA-8, will be named Bougainville , the location of a famous World War II campaign in the Pacific. San Antonio (LPD-17) class amphibious ships are being named for major U.S. cities and communities (with major being defined as being one of the top three population centers in a state), and cities and communities attacked on September 11, 2001. An exception occurred on April 23, 2010, when the Navy announced that it was naming LPD-26, the 10 th ship in the class, for the late Representative John P. Murtha. Another exception occurred on May 2, 2018, when the Navy announced that it was naming LPD-29, the 13 th ship in the class, for Navy Captain Richard M. McCool, Jr., who received the Medal of Honor for his actions in World War II and later served in the Korean and Vietnam wars. As of May 6, 2019, the Navy had not announced a name for LPD-30, which was funded in FY2018, and which is to be the first of a new version, or flight, of the LPD-17 class design called the LPD-17 Flight II design. On January 6, 2016, then-Secretary of the Navy Ray Mabus announced that the Navy's new oilers will be named for \"people who fought for civil rights and human rights,\" and that the first ship in the class, TAO-205, which was procured in FY2016, will be named for Representative John Lewis. The ships in this class consequently are now referred to as John Lewis (TAO-205) class ships. The Navy wants to procure a total of 20 John Lewis-class ships. On July 28, 2016, it was reported that the Navy would name the second through sixth ships in the class (i.e., TAOs 206 through 210) for Harvey Milk, Earl Warren, Robert F. Kennedy, Lucy Stone, and Sojourner Truth, respectively. All these names were later posted by the Navy for these ships. The Navy's 14 Lewis and Clark (TAKE-1) class cargo and ammunition ships were named for famous American explorers, trailblazers, and pioneers. The Navy announced on October 9, 2009, that the 13 th ship in the class was being named for the civil rights activist Medgar Evers. The Navy announced on May 18, 2011, that the 14 th ship in the class would be named for civil rights activist Cesar Chavez. Expeditionary Fast Transports (EPFs), which until May 2011 were being procured by the Army as well as by the Navy, were at first named for American traits and values. In December 2009, the naming rule for EPFs was changed to small U.S. cities. At some point between December 2010 and October 2011, it was adjusted to small U.S. cities and counties. As of May 6, 2019, the Navy had posted names for all EPFs through EPF-12, which was procured in FY2016. A 13 th EPF was funded by Congress in FY2018, and a 14 th was funded by Congress in FY2019. The Navy's two Expeditionary Transport Docks (ESDs 1 and 2) and its Expeditionary Sea Bases (ESB 3 and higher) are being named for famous names or places of historical significance to U.S. Marines. Two of these ships have been named for living persons—ESD-2, which was named John Glenn , and ESB-4, which was named for Hershel \"Woody\" Williams. On November 4, 2017, Secretary of the Navy Richard Spencer announced that the third ESB (ESB-5), which was procured in FY2016, would be named for Marine Corps Vietnam veteran and Medal of Honor recipient Lance Corporal Miguel Keith. This was Spencer's first announced naming of a Navy ship. A fourth ESB (ESB-6) was procured in FY2018, and a fifth (ESB-7) was procured in FY2019. Navy plans calls for procuring a total of six ESBs. On March 12, 2019, the Navy announced that that TATS-6, the first ship in a new class of towing, salvage, and rescue ships (TATSs), would be named Navajo, \"in honor of the major contributions that the Navajo people have made to the armed forces,\" and that ships in this class will be named for prominent Native Americans or Native American tribes. It has been a long time since ships named for certain states were last in commissioned service with the Navy as combat assets. While there is no rule requiring the Navy, in selecting state names for ships, to choose states for which the most time has passed since a ship named for the state has been in commissioned service with the Navy as a combat asset, advocates of naming a ship for a certain state may choose to point out, among other things, the length of time that has transpired since a ship named for the state has been in commissioned service with the Navy as a combat asset. In its announcement of April 13, 2012, that the Navy was naming the Virginia class attack submarines SSNs 786 through 790 for Illinois, Washington, Colorado, Indiana, and South Dakota, respectively, the Department of Defense stated, \"None of the five states has had a ship named for it for more than 49 years. The most recent to serve was the battleship Indiana, which was decommissioned in October 1963.\" The July 2012 Navy report to Congress states the following: \"Before deciding on which names to select [for the five submarines], [then-]Secretary [of the Navy Ray] Mabus asked for a list of State names that had been absent the longest from the US Naval Register....\" In its announcement of November 19, 2012, that the Navy was naming the Virginia class attack submarine SSN-791 for Delaware, the Department of Defense quoted then-Secretary Mabus as saying, \"It has been too long since there has been a USS Delaware in the fleet....\" A Navy News Service article about the Navy's September 18, 2014, announcement that the Virginia class attack submarine SSN-792 was being named for Vermont stated that \"This is the first ship named for Vermont since 1920[,] when the second USS Vermont was decommissioned.\" A Navy News Service article about the Navy's October 10, 2014, announcement that the Virginia class attack submarine SSN-793 was being named for Oregon stated that the previous USS Oregon \"was a battleship best known for its roles in the Spanish American War when it helped destroy Admiral Cervera's fleet and in the Philippine-American War; it performed blockade duty in Manila Bay and off Lingayen Gulf, served as a station ship, and aided in the capture of Vigan.\" A Navy News Service article about the Navy's January 19, 2016, announcement that the Virginia-class attack submarine SSN-801 was being named for Utah stated, \"The future USS Utah will be the second naval vessel to bear the name; the first, a battleship designated BB-31, was commissioned in 1911 and had a long, honorable time in service.... While conducting anti-gunnery exercises in Pearl Harbor, BB-31 was struck by a torpedo and capsized during the initial stages of the Japanese attack [on December 7, 1941]. She was struck from the Navy record Nov. 13, 1944 and received a battle star for her service in World War I.\" The Navy's naming announcements for Virginia-class submarines have reduced the group of states for which several decades had passed since a ship named for the state had been in commissioned service with the Navy as a combat asset, and for which no ship by that name is currently under construction. This group used to include Illinois, Delaware, Vermont, Oregon, and Montana, but Virginia-class attack submarines have now been named for these states. (See the Virginia-class attack submarine naming announcements of April 13, 2012; November 19, 2012; September 18, 2014; October 10, 2014; and September 2, 2015, respectively.) As shown in Table 1 , the three states for which the most time now appears to have passed since a ship named for the state has been in commissioned service with the Navy as a combat asset, and for which no ship by that name is currently under construction, are Kansas, Arizona, and Oklahoma. As of May 6, 2019, it has been more than 97 years since the decommissioning on December 16, 1921, of the battleship Kansas (BB-21), the most recent ship named for the state of Kansas that was in commissioned service with the Navy as a combat asset. As discussed earlier in the section on rules for naming SSNs, starting around FY2022, the Navy might run out of state names for Virginia-class boats, and consequently might need to either amend the Virginia-class naming rule or begin making a series of exceptions to the rule. The Navy historically has only rarely named ships for living persons, meaning (throughout this CRS report) persons who were living at the time the name was announced. The Navy stated in February 2012 that The Navy named several ships for living people (ex. George Washington, Ben Franklin, etc.) in the early years of our Republic. The Naval History and Heritage Command (NHHC) believes that the last ship to be named by the Navy in honor of a living person prior to [the aircraft carrier] CARL VINSON (CVN-70) was the brig JEFFERSON (launched in April 1814). Between 1814 and November 18, 1973, when President Nixon announced the naming of CARL VINSON, NHHC does not believe that any ships had been named for a living person by the Navy as NHHC does not have records that would indicate such. The July 2012 Navy report to Congress, noting a case from 1900 that was not included in the above passage, states that the practice of naming ships in honor of deserving Americans or naval leaders while they are still alive can be traced all the way back to the Revolutionary War. At the time, with little established history or tradition, the young Continental Navy looked to honor those who were fighting so hard to earn America's freedom. Consequently, George Washington had no less than five ships named for him before his death; John Adams and James Madison, three apiece; John Hancock, two; and Benjamin Franklin, one. The practice of naming ships after living persons was relatively commonplace up through 1814, when a US Navy brig was named in honor of Thomas Jefferson. However, after the War of 1812, with the US Navy older and more established, and with the list of famous Americans and notable naval heroes growing ever longer, the practice of naming ships after living persons fell into disuse. Indeed, the only exception over the next 150 years came in 1900, when the Navy purchased its first submarine from its still living inventor, John Philip Holland, and Secretary of the Navy John D. Long named her USS Holland (SS 1) in his honor.... [In the early 1970s], however, Department of the Navy leaders were considering the name for CVN 70. Secretary of the Navy John Warner knew the 93 rd Congress had introduced no less than three bills or amendments (none enacted) urging that CVN 70 be named for in honor of Carl Vinson, who served in the House for 50 years and was known as the \"Father of the Two-Ocean Navy.\" Although Secretary Warner felt Congressman Vinson was more than worthy of a ship name, the former Congressman was still alive. Naming a ship for this giant of naval affairs would therefore violate a 160-year old tradition. After considering the pros and cons of doing so, Secretary Warner asked President Richard Nixon's approval to name CVN 70 for the 90-year old statesman. President Nixon readily agreed. Indeed, he personally announced the decision on January 18, 1974.... In hindsight, rather than this decision being a rare exception, it signaled a return to the Continental Navy tradition of occasionally honoring famous living persons with a ship name. Since then, and before the appointment of current Secretary [now then-Secretary] of the Navy Ray Mabus, Secretaries of the Navy have occasionally chosen to follow this new, \"old tradition,\" naming ships in honor of still living former Presidents Jimmy Carter, Ronald Reagan, George H.W. Bush, and Gerald R. Ford; Secretary of the Navy Paul Nitze; Navy Admirals Hyman G. Rickover, Arleigh Burke, and Wayne E. Meyer; Senators John C. Stennis and John Warner; and famous entertainer Bob Hope. Moreover, it is important to note that three of these well-known Americans—Gerald R. Ford, John C. Stennis, and Bob Hope—were so honored after Congress enacted provisions in Public Laws urging the Navy to do so. By its own actions, then, Congress has acknowledged the practice of occasionally naming ships for living persons, if not outright approved of it. In other words, while naming ships after living persons remains a relatively rare occurrence—about three per decade since 1970—it is now an accepted but sparingly used practice for Pragmatic Secretaries [of the Navy] of both parties. For them, occasionally honoring an especially deserving member of Congress, US naval leader, or famous American with a ship name so that they might end their days on earth knowing that their life's work is both recognized and honored by America's Navy-Marine Corps Team, and that their spirit will accompany and inspire the Team in battle, is sometimes exactly the right thing to do. As shown in Table 2 , since the naming of CVN-70 for Carl Vinson in 1974, at least 21 U.S. military ships have been named for persons who were living at the time the name was announced. Eight of the 21 were announced between January 2012 and March 2016, including three announced in 2012 and four announced in 2016. In four of the six most-recent instances, the ships were named for current or former Members of Congress. The most recent instance occurred on May 6, 2019, when the Navy announced that it was naming the destroyer DDG-51 for former Senator Sam Nunn. (For further discussion of that naming action, see the earlier section on names for destroyers.) A June 15, 2017, blog post states the following: Four [past U.S. Navy] ships have been named for Confederate officers: the [ballistic missile submarine/attack submarine] USS Robert E. Lee (SSBN-601[/SSN-601]) [commissioned 1960; decommissioned 1983], the [ballistic missile submarine] USS Stonewall Jackson (SSBN-634) [commissioned 1964; decommissioned 1995], the [submarine tender] USS Hunley (AS-31) [commissioned 1962; decommissioned 1994], and the [submarine tender] USS Dixon (AS-37) [commissioned 1971; decommissioned 1995]. H. L. Hunley built the Confederate submarine that sank with him on board before it engaged in combat. A subsequent Confederate submarine was built and named for him. Commanded by George Dixon, the CSS Hunley carried out the world's first submarine attack when it struck the [sloop-of-war] USS Housatonic in February1864. Currently in the fleet is the [Ticonderoga (CG-47) class Aegis cruiser] USS Chancellorsville (CG-62) [commissioned 1989], named for Lee's greatest victory over the U.S. Army. Chancellorsville also was the battle in which Gen. Thomas \"Stonewall\" Jackson was mortally wounded by friendly fire. The purpose of erecting monuments and naming U.S. ships after Confederates—enemies of the United States—seems to be to recognize their perceived status as noble warriors rather than to remember the cause for which they waged war: the dissolution of the United States to preserve the \"peculiar institution\" of human slavery. This view of history is not shared by millions of Americans who see the monuments to Confederates as glorifying, even justifying the \"lost cause\" and the enslavement of humans. Other ships have been named for enemies [of the United States], probably because they were considered \"noble warriors\" too. [The ballistic missile submarine] USS Tecumseh (SSBN-628) [commissioned 1964; decommissioned 1993] and [the harbor tug] USS Osceola (YTB-129) [commissioned 1938; sold for scrapping 1973] were named after American Indian leaders who fought wars against the United States. Regarding the Chancellorsville , the Navy states that the cruiser is The first U.S. Navy ship named for a Civil War battle fought just south of the Rappahannock and Rapidan Rivers in Virginia (1–5 May 1863). Gen. Robert E. Lee, CSA, who led the Confederate Army of Northern Virginia, held Gen. Joseph Hooker, USA, who commanded the Union Army and Department of the Potomac, in position while Lt. Gen. Thomas J. Jackson, CSA, enveloped the Union right flank, surprising and rolling up the Federal's right. Lee's victory, combined with the urgent need to relieve pressure on Vicksburg, Miss., prompted the South's thrust into Pennsylvania that summer, resulting in the pivotal Battle of Gettysburg. An August 16, 2017, press report states the following: As America churns through a bloody debate over the place Confederate monuments occupy in the modern day United States, a Navy cruiser named in honor of a Confederate Civil War victory is unlikely to see its named changed, a service official said Wednesday [August 16]. The guided-missile cruiser Chancellorsville [CG-62] was commissioned in 1989 and derives its name from an 1863 battle considered to be the greatest victory of Confederate Gen. Robert E. Lee.... But a Navy official speaking on the condition of anonymity Wednesday said that even though the Chancellorsville is named after a Confederate victory, the name comes from a battle, not an individual, and soldiers on both sides died. The week-long battle resulted in major casualties for both sides—13,000 Confederates and 17,000 Union troops, according to the National Parks [sic: Park] Service. The Navy official did say, however, that there remains a chance the ship's crest could be altered. The predominance of gray in the ship's crest speaks to \"General Robert E. Lee's spectacular military strategies and his dominance in this battle,\" according to the ship's website. An inverted wreath also memorializes the Confederacy's second-best known general, Stonewall Jackson, who was mortally wounded in the battle. While the rupture of the country during the Civil War is reflected in the crest, it also features Jackson's order to \"press on.\" \"Maybe that is worth re-looking at or redoing,\" the official said. \"There's a fine line.\" In recent years, the Navy on a few occasions has announced names for ships years before those ships were procured. Although announcing a name for a ship years before it is procured is not prohibited, doing so could deprive a future Secretary of the Navy (or, more broadly, a future Administration) of the opportunity to select a name for the ship. It could also deprive Congress of an opportunity to express its sense regarding potential names for a ship, and create a risk of assigning a name to a ship that eventually is not procured for some reason, a situation that could be viewed as potentially embarrassing to the Navy. As noted earlier, the July 2012 Navy report to Congress states the following: At the appropriate time—normally sometime after the ship has been either authorized or appropriated by Congress and before its keel laying or christening—the Secretary records his decision with a formal naming announcement. At the end of the above passage, there is a footnote (number 3) in the Navy report that states the following: Although there is no hard and fast rule, Secretaries most often name a ship after Congress has appropriated funds for its construction or approved its future construction in some way—such as authorization of either block buys or multi-year procurements of a specific number of ships. There are special cases, however, when Secretaries use their discretion to name ships before formal Congressional approval, such as when Secretary John Lehman announced the namesake for a new class of Aegis guided missile destroyers would be Admiral Arleigh Burke, several years before the ship was either authorized or appropriated. In connection with the quoted footnote passage immediately above, it can be noted that the lead ship of the DDG-51 class of destroyers was named for Arleigh Burke on November 5, 1982, about two years before the ship was authorized and fully funded. Recent examples of Navy ships whose names were announced more than two years before they were procured include the following: The destroyer Zumwalt (DDG-1000). On July 4, 2000, President Bill Clinton announced that DDG-1000, the lead ship in a new class of destroyers, would be named Zumwalt in honor of Admiral Elmo Zumwalt Jr., the Chief of Naval Operations from 1970 to 1974, who had died on January 2, 2000. At the time of the naming announcement, Congress was considering the Navy's proposed FY2001 budget, under which DDG-1000 was scheduled for authorization in FY2005, a budget that Congress would consider in 2004, which was then about four years in the future. The aircraft carrier Enterprise (CVN-80). As noted earlier, on December 1, 2012, the Navy announced that CVN-80, the third Gerald R. Ford (CVN-78) class aircraft carrier, would be named Enterprise . At the time of the announcement, CVN-80 was scheduled for procurement in FY2018, the budget for which Congress was to consider in 2017, which was then more than four years in the future. (CVN-80 was in fact procured in FY2018.) The ballistic missile submarine ( SSBN-826 ) Columbia . As noted earlier, on July 28, 2016, it was reported that the first Ohio replacement ballistic missile submarine (SSBN-826) will be named Columbia in honor of the District of Columbia. This ship is scheduled for procurement in FY2021, the budget for which Congress is to consider in 2020, which in July 2016 was about four years in the future. Three John Lewis (TAO- 205) class oilers. As noted earlier, on July 28, 2016, it was reported that the Navy would name the second through sixth John Lewis (TAO-205) class oilers (i.e., TAOs 206 through 210) for Harvey Milk, Earl Warren, Robert F. Kennedy, Lucy Stone, and Sojourner Truth, respectively. In 2016, these five ships were scheduled for procurement in FY2018, FY2019, FY2020, FY2021, and FY2022, respectively, the budgets for which Congress has considered or will consider in 2017, 2018, 2019, 2020, and 2021, respectively. Thus, using the procurement dates that were scheduled in 2016, the name for TAO-208 ( Robert F. Kennedy ) was announced about three years before it was to be procured, the name for TAO-209 ( Lucy Stone ) was announced about four years it was to be procured, and the name for TAO-210 ( Sojourner Truth ) was announced about five years before it was to be procured. As discussed in the CRS report on the TAO-205 class program, the first six ships in the TAO-205 class are being procured under a block buy contract that Congress authorized as part of its action on the FY2016 defense budget. The procurement of each ship under this contract remains subject to the availability of appropriations for that purpose. Members of the public are sometimes interested in having Navy ships named for their own states or cities, for earlier U.S. Navy ships (particularly those on which they or their relatives served), for battles in which they or their relatives participated, or for people they admire. Citizens with such an interest sometimes contact the Navy, the Department of Defense, or Congress seeking support for their proposals. An October 2008 news report, for example, suggested that a letter-writing campaign by New Hampshire elementary school students that began in January 2004 was instrumental in the Navy's decision in August 2004 to name a Virginia-class submarine after the state. The July 2012 Navy report to Congress states the following: In addition to receiving input and recommendations from the President and Congress, every Secretary of the Navy receives numerous requests from service members, citizens, interest groups, or individual members of Congress who want to name a ship in honor of a particular hometown, or State, or place, or hero, or famous ship. This means the \"nomination\" process is often fiercely contested as differing groups make the case that \"their\" ship name is the most fitting choice for a Secretary to make. Members of the public may also express their opposition to an announced naming decision. The July 2012 Navy report to Congress cites and discusses five recent examples of ship-naming decisions that were criticized by some observers: the destroyer DDG-1002 (named for President Lyndon Johnson), the Littoral Combat Ship LCS-10 (named for former Representative Gabrielle Giffords), the amphibious ship LPD-26 (named for late Representative John P. Murtha), the auxiliary ship TAKE-13 (named for Medgar Evers), and the auxiliary ship TAKE-14 (named for Cesar Chavez). Congress has long maintained an interest in how Navy ships are named, and has influenced or may have influenced pending Navy decisions on the naming of certain ships, including but not limited to the following: One source states that \"[the aircraft carriers] CVN 72 and CVN 73 were named prior to their start [of construction], in part to preempt potential congressional pressure to name one of those ships for Admiral H.G. Rickover ([instead,] the [attack submarine] SSN 709 was named for the admiral).\" There was a friendly rivalry of sorts in Congress between those who supported naming the aircraft carrier CVN-76 for President Truman and those who supported naming it for President Reagan; the issue was effectively resolved by a decision announced by President Clinton in February 1995 to name one carrier (CVN-75) for Truman and another (CVN-76) for Reagan. One press report suggests that the decision to name CVN-77 for President George H. W. Bush may have been influenced by a congressional suggestion. Section 1012 of the FY2007 John Warner National Defense Authorization Act ( H.R. 5122 / P.L. 109-364 of October 17, 2006), expressed the sense of the Congress that the aircraft carrier CVN-78 should be named for President Gerald R. Ford. The Navy announced on January 16, 2007, that CVN-78 would be named Gerald R. Ford . In the 111 th Congress, H.Res. 1505 , introduced on July 1, 2010, expressed the sense of the House of Representatives that the Secretary of the Navy should name the next appropriate naval ship in honor of John William Finn. The measure was not acted on after being referred to the House Armed Services Committee. On February 15, 2012, the Navy announced that DDG-113, an Arleigh Burke (DDG-51) class destroyer, would be named John Finn . Section 1012 of the FY2012 National Defense Authorization Act ( H.R. 1540 / P.L. 112-81 of December 31, 2011) expressed the sense of Congress that the Secretary of the Navy is encouraged to name the next available naval vessel after Rafael Peralta. On February 15, 2012, the Navy announced that DDG-113, an Arleigh Burke (DDG-51) class destroyer, would be named Rafael Peralta . The July 2012 Navy report to Congress states that every Secretary of the Navy, regardless of point of view [on how to name ships], is subject to a variety of outside influences when considering the best names to choose. The first among these comes from the President of the United States, under whose direction any Secretary works... Secretaries of the Navy must also consider the input of Congress.... Given the vital role Congress plays in maintaining the Navy-Marine Corps Team, any Secretary is sure to respect and consider its input when considering ships names. Sometimes, the Secretary must also balance or contend with differences of opinion between the President and Congress. The Navy suggests that congressional offices wishing to express support for proposals to name a Navy ship for a specific person, place, or thing contact the office of the Secretary of the Navy to make their support known. Congress may also pass legislation relating to ship names (see below). Congress can pass legislation regarding a ship-naming decision that has been announced by the Navy. Such legislation can express Congress's views regarding the Navy's announced decision, and if Congress so desires, can also suggest or direct the Navy to take some action. The following are three examples of such legislation: S.Res. 332 of the 115 th Congress is an example of a measure that appears to reflect support for an announced Navy ship-naming decision. This measure, introduced in the Senate on November 15, 2017, and considered and agreed to without amendment and with a preamble by unanimous consent the same day, summarizes the military career of Hershel \"Woody\" Williams and commemorates the christening of ESB-4, an expeditionary sea base ship named for Williams (see \" Legislative Activity in 115th and 116th Congress .\") H.Res. 1022 of the 111 th Congress is an example of a measure reflecting support for an announced Navy ship-naming decision. This measure, introduced on January 20, 2010, and passed by the House on February 4, 2010, congratulates the Navy on its decision to name a naval ship for Medgar Evers. H.Con.Res. 312 of the 97 th Congress is an example of a measure that appears to reflect disagreement with an announced Navy ship-naming decision. This measure expressed the sense of Congress that the Los Angeles (SSN-688) class attack submarine Corpus Christi (SSN-705) should be renamed, and that a nonlethal naval vessel should instead be named Corpus Christi . (Los Angeles-class attack submarines were named for cities, and SSN-705 had been named for Corpus Christi, TX.) H.Con.Res. 312 was introduced on April 21, 1982, and was referred to the Seapower and Strategic and Critical Materials subcommittee of the House Armed Services Committee on April 28, 1982. On May 10, 1982, the Navy modified the name of SSN-705 to City of Corpus Christi . On April 12, 2013, then-Secretary of the Navy Ray Mabus announced that LPD-27, a San Antonio (LPD-17) class amphibious ship, would be named for Portland, OR. LPD-27 is to be the third Navy ship to bear the name Portland. The first, a cruiser (CA-33), was named for Portland, ME. It was commissioned into service in February 1933, decommissioned in July 1946, and maintained in reserve status until struck from the Navy list in March 1959. The second, an amphibious ship (LSD-37), was named for both Portland, ME, and Portland, OR. It was commissioned into service in October 1970, decommissioned in October 2003, and stricken from the Naval Vessel Register in March 2004. An April 18, 2013, press release from Senator Angus King stated that \"U.S. Senators Susan Collins and Angus King today sent a letter to Ray Mabus, the Secretary of the Navy, asking that the USS Portland [LPD-27], a new San Antonio-class amphibious transport dock ship named after the city of Portland, Oregon, also be named in honor of Portland, Maine, consistent with the long history and tradition of U.S. Navy ships bestowed with the name USS Portland.\" In reply, the Navy sent letters dated April 24, 2013, to Senators Collins and King that stated the following in part: In addition to [the ballistic missile submarine] USS MAINE (SSBN 743), Secretary [of the Navy Ray] Mabus recently honored the state of Marine through his naming of [the expeditionary fast transport ship] USNS MILLINOCKET (JHSV 3) [now called T-EPF 3] which was christened last weekend and will proudly represent our Nation as part of the fleet for decades to come. The Secretary of the Navy has tremendous appreciation for the state of Maine, its citizens and the incredible support provided by them to our Navy and our Nation. However, Oregon is the only state in our Nation that does not currently have a ship in the fleet named for the state, its cities or communities. Secretary Mabus named LPD 27 after Portland, Oregon, to correct that oversight and acknowledge the support and contributions made by the men and women of Portland and Oregon. As noted elsewhere in this report, on October 10, 2014, the Navy announced that it was naming the Virginia-class attack submarine SSN-793 for Oregon. A May 21, 2016, Navy blog post about the ship's christening states that \"LPD-27 will be the third Navy ship named Portland, honoring both the Oregon seaport and Maine's largest city.\" That statement is not correct, as the Navy confirms that LPD-27 is named solely for Portland, OR. A July 5, 2017, Navy News Service report states correctly that \"LPD 27 is named for the city of Portland, Oregon, and follows the World War II heavy cruiser CA 33 and the amphibious ship LSD 37 as the third U.S. Navy ship to bear the name Portland.\" LPD-27 is scheduled to be commissioned in Portland, OR, on April 21, 2018. Table 3 shows past enacted provisions going back to the 100 th Congress regarding future ship-naming decisions. All of these measures expressed the sense of the Congress (or of the Senate or House) about how a future Navy ship should be named. Table 4 shows past examples of proposed bills and amendments regarding future ship-naming decisions going back to the 93 rd Congress. Some of these measures expressed the sense of the Congress about how a Navy ship should be named, while others would mandate a certain name for a ship. Although few of these measures were acted on after being referred to committee, they all signaled congressional interest in how certain ships should be named, and thus may have influenced Navy decisions on these matters. S.Con.Res. 10 of the 115 th Congress was introduced in the Senate on March 21, 2017; no further actions for the measure are listed at Congress.gov. The text of S.Con.Res. 10 as introduced was as follows: CONCURRENT RESOLUTION Expressing the sense of Congress that the Secretary of the Navy should name the next nuclear powered submarine of the United States Navy the \"USS Los Alamos\". Whereas the people of Los Alamos and the Navy have a 74-year relationship that continues from the Manhattan Project through the creation of a nuclear Navy and into the current ocean-borne leg of the strategic nuclear triad of the United States; Whereas the contributions of the people of Los Alamos and surrounding communities allowed the Navy to keep its offensive edge from World War II, through the Cold War, continuing to the emerging conflicts as of the date of adoption of this resolution; Whereas Captain \"Deke\" Parsons was one of the first residents of Los Alamos and, along with Laureate Ramsey, oversaw the safe delivery, assembly and loading of the nuclear bomb that led to the surrender of Japan in World War II; Whereas the people of Los Alamos and surrounding communities played a critical role in designing the nuclear portion of the first nuclear weapon to enter the arsenal of the Navy, known as the Regulus, along with atomic depth bombs, torpedoes, rockets, and even next generation weapon systems like the B61–12 precision-guided nuclear bomb; Whereas the people of Los Alamos designed the warheads that armed the first generation Trident submarine-launched ballistic missiles of the Navy and the follow-on Trident II missile warheads used by the Navy; Whereas the research into nuclear energy conducted by Los Alamos during World War II advanced the technical basis for the development of the nuclear propulsion systems of the Navy used aboard Los Angeles, Seawolf, Ohio, and Virginia Class submarines along with multiple naval aircraft carriers today; Whereas the people of Los Alamos and Los Alamos National Laboratory host United States Naval Academy midshipmen every year to provide hands-on scientific and engineering experience working to solve real world challenges in national security, thereby directly contributing to the development of future Navy leadership; Whereas the people of Los Alamos carry the solemn responsibility to assess the sea-based nuclear deterrent carried aboard Navy fleet ballistic missile submarines; Whereas naming a submarine Los Alamos will recognize and continue to forge the longstanding relationship between the Navy and Los Alamos; Whereas the year 2018 will mark the 75th anniversary of Los Alamos National Laboratory; and Whereas the distinctive service and contributions from the people of Los Alamos to the Navy merits naming a vessel that embodies the heritage, service, fidelity, and achievements of the residents of Los Alamos and surrounding communities in partnership with the United States Navy: Now, therefore, be it Resolved by the Senate (the House of Representatives concurring), That it is the sense of the Congress that the Secretary of the Navy should name the next nuclear powered submarine of the United States Navy as the \"USS Los Alamos\". Appendix A. Executive Summary of July 2012 Navy Report to Congress This appendix reprints the executive summary of the July 2012 Navy report to Congress on the Navy's policies and practices for naming its ships. The text of the executive summary is as follows: Executive Summary This report is submitted in accordance with Section 1014 of P.L. 112-81 , National Defense Authorization Act (NDAA) for Fiscal Year 2012, dated 31 December 2011, which directs the Secretary of Defense to submit a report on \"policies and practices of the Navy for naming vessels of the Navy.\" As required by the NDAA, this report: Includes a description of the current policies and practices of the Navy for naming vessels of the Navy, and a description of the extent to which theses policies and practices vary from historical policies and practices of the Navy for naming vessels of the Navy, and an explanation for such variances; Assesses the feasibility and advisability of establishing fixed policies for the naming of one or more classes of vessels of the Navy, and a statement of the policies recommended to apply to each class of vessels recommended to be covered by such fixed policies if the establishment of such fixed policies is considered feasible and advisable; and Identifies any other matter relating to the policies and practices of the Navy for naming vessels of the Navy that the Secretary of Defense considers appropriate. After examining the historical record in great detail, this report concludes: Current ship naming policies and practices fall well within the historic spectrum of policies and practices for naming vessels of the Navy, and are altogether consistent with ship naming customs and traditions. The establishment of fixed policies for the naming of one or more classes of vessels of the Navy would be highly inadvisable. There is no objective evidence to suggest that fixed policies would improve Navy ship naming policies and practices, which have worked well for over two centuries. In addition, the Department of the Navy used to routinely publish lists of current type naming rules for battle force ships, and update it as changes were made to them. At some point, this practice fell into disuse, leading to a general lack of knowledge about naming rules. To remedy this problem, the Naval History and Heritage Command will once again develop and publish a list of current type naming rules to help all Americans better understand why Secretaries of the Navy choose the ship names they do. This list will be updated as required.", "summary": "Names for Navy ships traditionally have been chosen and announced by the Secretary of the Navy, under the direction of the President and in accordance with rules prescribed by Congress. Rules for giving certain types of names to certain types of Navy ships have evolved over time. There have been exceptions to the Navy's ship-naming rules, particularly for the purpose of naming a ship for a person when the rule for that type of ship would have called for it to be named for something else. Some observers have perceived a breakdown in, or corruption of, the rules for naming Navy ships. On July 13, 2012, the Navy submitted to Congress a 73-page report on the Navy's policies and practices for naming ships. For ship types now being procured for the Navy, or recently procured for the Navy, naming rules can be summarized as follows: The first Ohio replacement ballistic missile submarine (SSBN-826) has been named Columbia in honor of the District of Columbia, but the Navy has not stated what the naming rule for these ships will be. Virginia (SSN-774) class attack submarines are being named for states. Aircraft carriers are generally named for past U.S. Presidents. Of the past 14, 10 were named for past U.S. Presidents, and 2 for Members of Congress. Destroyers are being named for deceased members of the Navy, Marine Corps, and Coast Guard, including Secretaries of the Navy. The Navy has not yet announced a naming rule for its planned new class of FFG(X) frigates, the first of which the Navy wants to procure in FY2021. Previous classes of U.S. Navy frigates, like Navy destroyers, were generally named for naval leaders and heroes. Littoral Combat Ships (LCSs) are being named for regionally important U.S. cities and communities. Amphibious assault ships are being named for important battles in which U.S. Marines played a prominent part, and for famous earlier U.S. Navy ships that were not named for battles. San Antonio (LPD-17) class amphibious ships are being named for major U.S. cities and communities, and cities and communities attacked on September 11, 2001. John Lewis (TAO-205) class oilers are being named for people who fought for civil rights and human rights. Expeditionary Fast Transports (EPFs) are being named for small U.S. cities. Expeditionary Transport Docks (ESDs) and Expeditionary Sea Bases (ESBs) are being named for famous names or places of historical significance to U.S. Marines. Navajo (TATS-6) class towing, salvage, and rescue ships are being named for prominent Native Americans or Native American tribes. Since 1974, at least 21 U.S. military ships have been named for persons who were living at the time the name was announced. The most recent instance occurred on May 6, 2019, when the Navy announced that it was naming the destroyer DDG-51 for former Senator Sam Nunn. Members of the public are sometimes interested in having Navy ships named for their own states or cities, for older U.S. Navy ships (particularly those on which they or their relatives served), for battles in which they or their relatives participated, or for people they admire. Congress has long maintained an interest in how Navy ships are named, and has influenced the naming of certain Navy ships. The Navy suggests that congressional offices wishing to express support for proposals to name a Navy ship for a specific person, place, or thing contact the office of the Secretary of the Navy to make their support known. Congress may also pass legislation relating to ship names. Measures passed by Congress in recent years regarding Navy ship names have all been sense-of-the-Congress provisions.", "document_type": "crs"}
{"report": "The program activities of most federal agencies are generally funded on an annual basis through the enactment of 12 regular appropriations acts . When those annual appropriations acts are not enacted by the beginning of the fiscal year (i.e., by October 1), one or more continuing appropriations acts may be enacted to provide temporary funding to continue certain programs and activities until action on regular appropriations acts is completed. Such funding is provided for a specified period of time, which may be extended through the enactment of subsequent CRs. A continuing appropriations act is commonly referred to as a continuing resolution or CR because it has typically been in the form of a joint resolution rather than a bill. But there is no procedural requirement as to its form. Continuing appropriations are also occasionally provided through a bill. If appropriations are not enacted for a fiscal year through a regular appropriations act or a CR, a \"funding gap\" occurs until such appropriations are provided. When a funding gap occurs, federal agencies may be directed to begin a \"shutdown\" of the affected programs and activities. Agencies are generally prohibited from obligating or expending federal funds in the absence of appropriations. Congress has enacted one or more CRs in all but three of the 43 fiscal years since FY1977. Further information is available in Table 2 of this report. In total, 186 CRs were enacted into law during the period covering FY1977-FY2019, ranging from zero to 21 in any single fiscal year. On average, about four CRs were enacted each fiscal year during this interval. Table 3 and Figure 1 of this report provide more information on this aspect of CRs. This report provides an overview of the components of CRs and information about congressional practices related to their use. The first section of this report explains six of the typical main components of CRs: coverage, duration, funding rate, restrictions on new activities, anomalies, and legislative provisions. The second section discusses the enactment of regular appropriations acts prior to the start of the fiscal year and the number of CRs enacted, beginning with FY1977, which was the first fiscal year that began on October 1. The third section provides information on the variation in the number and duration of CRs enacted each fiscal year after FY1997—the most recent fiscal year in which all regular appropriations were enacted before the start of the new fiscal year. Finally, the fourth section of this report discusses the features of the 15 \"full-year CRs\" that provided funding through the remainder of the fiscal year. For further information, see Table 4 in this report. A list of all CRs enacted between FY1977 and FY2019 is provided at the end of this report in Table 5 . This report has been updated from the previous January 2016 version to include information on FY2017, FY2018, and FY2019. Congress has included six main components in CRs. First, CRs provide funding for certain activities ( coverage ), which are typically specified with reference to the prior or current fiscal year's appropriations acts. Second, CRs provide budget authority for a specified duration of time. This duration may be as short as a single day or as long as the remainder of the fiscal year. Third, CRs typically provide funds based on an overall funding rate . Fourth, the use of budget authority provided in the CR is typically prohibited for new activities not funded in the previous fiscal year. Fifth, the duration and amount of funds in the CR, and purposes for which they may be used for specified activities, may be adjusted through anomalies . Sixth, legislative provisions —which create, amend, or extend other laws—have been included in some instances. Although this section discusses the above components as they have been enacted in CRs under recent practice, it does not discuss their potential effects on budget execution or agency operations. For analysis of these issues, see CRS Report RL34700, Interim Continuing Resolutions (CRs): Potential Impacts on Agency Operations . A CR provides funds for certain activities, which are typically specified with reference to other pieces of appropriations legislation or the appropriations acts for a previous fiscal year. Most often, the coverage of a CR is defined with reference to the activities funded in prior fiscal years' appropriations acts for which the current fiscal year's regular appropriations have yet to be enacted. For example, in Section 101 of P.L. 111-68 (the first CR for FY2010), the coverage included activities funded in selected regular and supplemental appropriations acts for FY2008 and FY2009: Sec. 101. Such amounts as may be necessary… under the authority and conditions provided in such Acts, for continuing projects or activities (including the costs of direct loans and loan guarantees) that are not otherwise specifically provided for in this joint resolution, that were conducted in fiscal year 2009, and for which appropriations, funds, or other authority were made available in the following appropriations Acts: (1) Chapter 2 of title IX of the Supplemental Appropriations Act, 2008 ( P.L. 110-252 ). (2) Section 155 of division A of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 ), except that subsections (c), (d), and (e) of such section shall not apply to funds made available under this joint resolution. (3) Divisions C through E of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 ). (4) Divisions A through I of the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ), as amended by section 2 of P.L. 111-46 . (5) Titles III and VI (under the heading `Coast Guard ' ) of the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ). [emphasis added] Less frequently, CRs specify coverage with reference to regular appropriations bills for the current fiscal year that have yet to be enacted. In these instances, it is possible that an activity covered in the corresponding previous fiscal year's appropriations bill might not be covered in the CR. Alternatively, a CR might stipulate that activities funded in the previous fiscal year are covered only if they are included in a regular appropriations bill for the current fiscal year. For example, Section 101 of P.L. 105-240 , the first CR for FY1999, provided that funding would continue only under such circumstances. SEC. 101. (a) Such amounts as may be necessary under the authority and conditions provided in the applicable appropriations Act for the fiscal year 1998 for continuing projects or activities including the costs of direct loans and loan guarantees (not otherwise specifically provided for in this joint resolution) which were conducted in the fiscal year 1998 and for which appropriations, funds, or other authority would be available in the following appropriations Acts : (1) the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1999…. (8) the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 1999, the House and Senate reported versions of which shall be deemed to have passed the House and Senate respectively as of October 1, 1998, for the purposes of this joint resolution, unless a reported version is passed as of October 1, 1998, in which case the passed version shall be used in place of the reported version for purposes of this joint resolution; (9) the Legislative Branch Appropriations Act, 1999…. [emphasis added] CRs may be enacted as stand-alone legislative vehicles or as provisions attached to a regular appropriations bill or an omnibus bill. In instances in which one or more regular appropriations bills are near completion, Congress may find it expeditious to include a CR in that same legislative vehicle to cover activities in the remaining regular bills that are not yet enacted. In such instances, some activities may be covered by reference while funding for others is provided through the text of the measure. For example, Division C of P.L. 115-245 —the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019—provided continuing appropriations through December 7, 2018, by referencing the FY2018 regular appropriations acts, while the other divisions of P.L. 115-245 provided full-year regular appropriations for the FY2019 Defense and Labor-HHS-ED bills. The duration of a CR refers to the period for which budget authority is provided for covered activities. The period ends either upon the enactment of the applicable regular appropriations act or on an expiration date specified in the CR, whichever occurs first. When a CR expires prior to the completion of all regular appropriations bills for a fiscal year, one or more additional CRs may be enacted to prevent funding gaps and secure additional increments of time to complete the remaining regular appropriations bills. The duration of any further CRs may be brief, sometimes a single day, to encourage the process to conclude swiftly, or it may be for weeks or months to accommodate further negotiations or congressional recesses. In some cases, CRs have carried over into the next session of Congress. In most of the fiscal years in which CRs have been used, a series of two or more have been enacted into law. Such CRs may be designated by their order (e.g., \"first\" CR, \"second\" CR) or, after the initial CR has been enacted, designated as a \"further\" CR. When action on the regular appropriations bills is not complete by the time when the first CR expires, subsequent CRs will often simply replace the expiration date in the preceding CR with a new expiration date. For example, Section 1 of the third CR for FY2016, P.L. 114-100 , stated that \"Public Law 114-53 is amended by striking the date specified in Section 106(3) and inserting 'December 22, 2015.'\" This action extended the duration of the preceding CR by six days. Funds provided by a CR will not necessarily be used by all covered activities through the date the CR expires. In practice, the budget authority provided by a CR may be superseded by the enactment of subsequent appropriations measures or the occurrence of other specified conditions. In an instance in which a regular appropriations bill was enacted prior to the expiration of a CR, the budget authority provided by the regular bill for covered activities would replace the funding provided by the CR. All other activities in the CR, however, would continue to be funded by the CR unless they were likewise superseded or the CR expired. The duration of funds for certain activities could also be shortened if other conditions that are specified in the CR occur. For example, Section 107 of P.L. 108-84 , the first CR for FY2004, provided funds for 31 days or fewer: Sec. 107. Unless otherwise provided for in this joint resolution or in the applicable appropriations Act, appropriations and funds made available and authority granted pursuant to this joint resolution shall be available until (a) enactment into law of an appropriation for any project or activity provided for in this joint resolution, or (b) the enactment into law of the applicable appropriations Act by both Houses without any provision for such project or activity, or (c) October 31, 2003, whichever first occurs . [emphasis added] In this instance, funding for all other activities not subject to these conditions would continue under the CR until it expired or was otherwise superseded. When a CR is attached to a regular appropriations bill, the activities covered by regular appropriations are funded through the remainder of the fiscal year, whereas the activities covered by the CR are funded through a specified date. Congress may also single out specific activities in a CR to receive funding for a specified duration that differs from the vast majority of other accounts and activities. This type of variation in duration is discussed in the \" Exceptions to Duration, Amount, and Purposes: Anomalies \" section. As an alternative to the separate enactment of one or more of the regular appropriations bills for a fiscal year, a CR may provide funds for the activities covered in such bills through the remainder of the fiscal year. This type of CR is referred to as a full-year CR. Full-year CRs may provide funding for all bills that have yet to be enacted or include the full text of one or more regular appropriations bills. For example, Division A of P.L. 112-10 contained the text of the FY2011 Defense Appropriations Act, whereas the programs and activities covered by the 11 remaining regular appropriations bills were funded by the full-year CR in Division B. CRs often fund activities under a formula-type approach that provides budget authority at a restricted level but not a specified amount. This method of providing budget authority is commonly referred to as the \"funding rate.\" Under a funding rate, the amount of budget authority for an account is calculated as the total amount of budget authority annually available based on a reference level (usually a dollar amount or calculation), multiplied by the fraction of the fiscal year for which the funds are made available in the CR. This is in contrast to regular and supplemental appropriations acts, which generally provide specific amounts for each account. In previous years, many CRs have provided funding across accounts by reference to the amount of budget authority available in specified appropriations acts from the previous fiscal year. For example, Section 101 of P.L. 110-329 , the first CR for FY2010, provided the following funding rate: Such amounts as may be necessary, at a rate for operations as provided in the applicable appropriations Acts for fiscal year 2008 and under the authority and conditions provided in such Acts, for continuing projects or activities (including the costs of direct loans and loan guarantees) that are not otherwise specifically provided for in this joint resolution, that were conducted in fiscal year 2008, and for which appropriations, funds, or other authority were made available in the following appropriations Acts: divisions A, B, C, D, F, G, H, J, and K of the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) . [emphasis added] Other CRs have provided funding by reference to the levels available in the previous fiscal year, with either an increase or decrease from the previous fiscal year's level. For example, Section 101(a) and (b) of P.L. 112-33 , the first CR for FY2012, provided the following funding rate: (a) Such amounts as may be necessary, at a rate for operations as provided in the applicable appropriations Acts for fiscal year 2011 and under the authority and conditions provided in such Acts, for continuing projects or activities (including the costs of direct loans and loan guarantees) that are not otherwise specifically provided for in this Act, that were conducted in fiscal year 2011, and for which appropriations, funds, or other authority were made available in the following appropriations Acts…. (b) The rate for operations provided by subsection (a) is hereby reduced by 1.503 percent . [emphasis added] Although these examples illustrate the most typical types of funding rates, other types of funding rates have sometimes been used when providing continuing appropriations. For example, P.L. 105-240 , the first CR for FY1999, provided a variable funding rate for covered activities. Specifically, the CR provided funds derived from three possible reference sources: the House- and Senate-passed FY1999 regular appropriations bills, the amount of the President's budget request, or \"current operations\" (the total amount of budget authority available for obligation for an activity during the previous fiscal year), whichever was lower. In instances where no funding was provided under the House-and Senate-passed FY1999 appropriations bills, the funding rate would be based on the lower of the President's budget request or current operations. In addition, while the first CR for a fiscal year may provide a certain funding rate, subsequent CRs sometimes may provide a different rate. CRs have sometimes provided budget authority for some or all covered activities by incorporating the actual text of one or more regular appropriations bills for that fiscal year rather than providing funding according to the rate formula. For example, P.L. 112-10 provided funding for the Department of Defense through the incorporation of a regular appropriations bill in Division A, whereas Division B provided formulaic funding for all other activities for the remainder of the fiscal year. In this type of instance, the formula in the CR applies only to activities not covered in the text of the incorporated regular appropriations bill or bills. CRs that provide a funding rate for activities often stipulate that funds may be used for the purposes and in the manner provided in specified appropriations acts for the previous fiscal year. CRs may also provide that the funds provided may be used only for activities funded in the previous fiscal year. In practice, this is often characterized as a prohibition on \"new starts.\" In addition, conditions and limitations on program activity from the previous year's appropriations acts may be retained by language contained within the resolution's text. An example of such language, from P.L. 112-33 , is below: Sec. 103. Appropriations made by section 101 shall be available to the extent and in the manner that would be provided by the pertinent appropriations Act. [emphasis added] Sec. 104. Except as otherwise provided in section 102, no appropriation or funds made available or authority granted pursuant to section 101 shall be used to initiate or resume any project or activity for which appropriations, funds, or other authority were not available during fiscal year 2011. [emphasis added] This language prevents the initiation of new activities with the funds provided in the CR. Agencies may use appropriated funds from prior fiscal years that remain available, however, to initiate new activities in some circumstances. Even though CRs typically provide funds at a rate, they may also include provisions that enumerate exceptions to the duration , amount , or purposes for which those funds may be used for certain appropriations accounts or activities. Such provisions are commonly referred to as \"anomalies.\" The purpose of anomalies is to preserve Congress's constitutional prerogative to provide appropriations in the manner it sees fit, even in instances when only short-term funding is provided. A CR may contain anomalies that designate a duration of funding for certain activities that is different from the overall duration provided. For example, Section 112 of P.L. 108-84 provided an exception to the expiration date of October 31, 2003, specified in Section 107(c) of the CR: For entitlements and other mandatory payments whose budget authority was provided in appropriations Acts for fiscal year 2003, and for activities under the Food Stamp Act of 1977, activities shall be continued at the rate to maintain program levels under current law, under the authority and conditions provided in the applicable appropriations Act for fiscal year 2003, to be continued through the date specified in section 107(c): Provided , That notwithstanding section 107, funds shall be available and obligations for mandatory payments due on or about November 1 and December 1, 2003, may continue to be made . [emphasis added] Anomalies may also designate a specific amount or rate of budget authority for certain accounts or activities that is different than the funding rate provided for the remainder of activities in the CR. Typically, such funding is specified as an annualized rate based upon a lump sum. For example, Section 120 of P.L. 112-33 provided the following anomaly for a specific account, which was an exception to the generally applicable rate in Section 101: Notwithstanding section 101, amounts are provided for \"Defense Nuclear Facilities Safety Board—Salaries and Expenses\" at a rate for operations of $29,130,000. [emphasis added] Funding adjustments can also be provided in anomalies for groups of accounts in the bill. For example, Section 121 of P.L. 112-33 provided a different rate for certain funds in a group of accounts: Notwithstanding any other provision of this Act, except section 106, the District of Columbia may expend local funds under the heading \"District of Columbia Funds\" for such programs and activities under title IV of H.R. 2434 (112 th Congress), as reported by the Committee on Appropriations of the House of Representatives, at the rate set forth under ''District of Columbia Funds—Summary of Expenses'' as included in the Fiscal Year 2012 Budget Request Act of 2011 (D.C. Act 19–92), as modified as of the date of the enactment of this Act. [emphasis added] Further, anomalies may provide exceptions to amounts specified in other laws. For example, Section 121 of P.L. 110-329 provided that funds may be expended in excess of statutory limits up to an alternative rate. Notwithstanding the limitations on administrative expenses in subsections (c)(2) and (c)(3)(A) of section 3005 of the Digital Television Transition and Public Safety Act of 2005 ( P.L. 109-171 ; 120 Stat. 21), the Assistant Secretary (as such term is defined in section 3001(b) of such Act) may expend funds made available under sections 3006, 3008, and 3009 of such Act for additional administrative expenses of the digital-to-analog converter box program established by such section 3005 at a rate not to exceed $180,000,000 through the date specified in section 106(3) of this joint resolution. [emphasis added] CRs may also use anomalies to alter the purposes for which the funds may be expended. Such anomalies may allow funds to be spent for activities that would otherwise be prohibited or prohibit funds for activities that might otherwise be allowed. For example, Section 114 of P.L. 108-309 , the first CR for FY2005, prohibited funds from being available to a particular department for a certain activity: Notwithstanding any other provision of this joint resolution, except sections 107 and 108, amounts are made available for the Strategic National Stockpile (\"SNS\") at a rate for operations not exceeding the lower of the amount which would be made available under H.R. 5006, as passed by the House of Representatives on September 9, 2004, or S. 2810, as reported by the Committee on Appropriations of the Senate on September 15, 2004: Provided, That no funds shall be made available for the SNS to the Department of Homeland Security under this joint resolution …. [emphasis added] Substantive legislative provisions, which have the effect of creating new law or changing existing law, have also been included in some CRs. One reason why CRs have been attractive vehicles for such provisions is that they are often widely considered to be must-pass measures to prevent funding gaps. Legislative provisions previously included in CRs have varied considerably in length, from a short paragraph to more than 200 pages. House and Senate rules restrict the inclusion of legislative provisions in appropriations bills, but such restrictions are applicable in different contexts. Although House rules prohibit legislative provisions from being included in general appropriations measures (including amendments or any conference report to such measures), these restrictions do not apply to CRs. Senate rules prohibit non-germane amendments that include legislative provisions either on the Senate floor or as an amendment between the houses. While these Senate restrictions do apply in the case of CRs, there is considerable leeway on when such provisions may be included, such as when the Senate amends a legislative provision included by the House. The rules of the House and Senate are not self-enforcing. A point of order must be raised and sustained to prevent any legislative language from being considered and enacted. Substantive provisions in CRs have included language that established major new policies, such as an FY1985 CR, which contained the Comprehensive Crime Control Act of 1984. More frequently, CRs have been used to amend or renew provisions of law. For example, Section 140 of P.L. 112-33 retroactively renewed import restrictions under the Burmese Freedom and Democracy Act of 2003 ( P.L. 108-61 ): (a) Renewal of Import Restrictions Under Burmese Freedom and Democracy Act of 2003.— (1) In general.—Congress approves the renewal of the import restrictions contained in section 3(a)(1) and section 3A (b)(1) and (c)(1) of the Burmese Freedom and Democracy Act of 2003. (2) Rule of construction.—This section shall be deemed to be a \"renewal resolution\" for purposes of section 9 of the Burmese Freedom and Democracy Act of 2003. (b) Effective Date.—This section shall take effect on July 26, 2011. CRs have also contained legislative provisions that temporarily extended expiring laws. For example, Section 136 of P.L. 115-298 extended the National Flood Insurance Program: Sec. 136. Sections 1309(a) and 1319 of the National Flood Insurance Act of 1968 ( 42 U.S.C. 4016(a) and 4026) shall be applied by substituting the date specified in section 105(3) of this Act for 'December 7, 2018.' Legislative provisions that temporarily extend expiring laws are effective through the date the CR expires, unless otherwise specified. As mentioned previously, regular appropriations were enacted after October 1 in all but four fiscal years between FY1977 and FY2019. Consequently, CRs have been needed in almost all of these years to prevent one or more funding gaps from occurring. Table 2 provides an overview of the enactment of regular appropriations bills and the use of CRs between FY1977 and FY2019. All appropriations were enacted before the start of the new fiscal year four times during this period: FY1977, FY1989, FY1995, and FY1997. Over half of the regular appropriations bills for a fiscal year were enacted before the start of the new fiscal year in only one instance (FY1978). In all other fiscal years, fewer than six regular appropriations acts were enacted on or before October 1. In addition, in 15 out of the 43 years during this period, no regular appropriations bills were enacted prior to the start of the fiscal year. Ten of these fiscal years have occurred in the interval since FY2001. CRs were enacted in all but three of these fiscal years (FY1989, FY1995, and FY1997). In FY1977, although all 13 regular appropriations bills became law on or before the start of the fiscal year, two CRs were enacted to provide funding for certain activities that had not been included in the regular appropriations acts. CRs have been a significant element of the recent annual appropriations process. As shown in Table 3 , a total of 117 CRs were enacted into law from FY1998 to FY2019. While the average number of such measures enacted per year was about five, the number enacted ranged from two measures (for FY2009, FY2010, and FY2013) to 21 (for FY2001). During the past 22 fiscal years, Congress provided funding by means of a CR for an average of almost five months (143 days) each fiscal year. Taking into account the total duration of all CRs for each fiscal year, the period for which continuing appropriations were provided ranged from 21 days to 365 days. On average, each of the 117 CRs lasted for about 39 days; 53 of these were for seven days or fewer. Three full-year CRs were used during this period, for FY2007, FY2011, and FY2013. In the first four instances (FY1998-FY2001), the expiration date of the final CR was set in the first quarter of the fiscal year on a date occurring between October 21 and December 21. The expiration date in the final CR for the next three fiscal years (FY2002-FY2004) and FY2019, however, was set in the following session of Congress on a date occurring between January 10 and February 20. In six of the next 12 fiscal years (FY2005, FY2006, FY2008, FY2010, FY2012, and FY2016), the expiration dates were in the first quarter of the fiscal year on a date occurring between December 8 and December 31. For the remaining fiscal years, the final CRs were enacted during the next session of Congress. In one instance, the final CR for the fiscal year expired during the month of January (FY2014). In three instances, the final CR expired in March (FY2009, FY2015, and FY2018). Three other final CRs—for FY2007, FY2011, and FY2013—provided funding through the end of the fiscal year. Figure 1 presents a representation of the duration of CRs for FY1998-FY2019. As the figure shows, there is no significant correlation between these two variables. For example, six CRs were enacted for both FY1998 and FY1999, but the same number of measures lasted for a period of 57 days for FY1998 and only 21 days for FY1999. The largest number of CRs enacted for a single fiscal year during this period—21 for FY2001—covered a period lasting 82 days at an average duration of about four days per act. The smallest number enacted—two each for FY2009, FY2010, and FY2013—covered 162 days, 79 days, and 365 days, respectively. Figure 1 also shows considerable mix in the use of shorter-term and longer-term CRs for a single fiscal year. For example, for FY2001, 21 CRs covered the first 82 days of the fiscal year. The first 25 days were covered by a series of four CRs lasting between five and eight days each. The next 10 days, a period of intense legislative negotiations leading up to the national elections on November 7, 2000, were covered by a series of 10 one-day CRs. The next 31 days were covered by two CRs, the first lasting 10 days and the second lasting 21 days. The first of these two CRs was enacted into law on November 4, the Saturday before the election, and extended through November 14, the second day of a lame-duck session. The second CR was enacted into law on November 15 and expired on December 5, which was 10 days before the lame-duck session ended. The remaining five CRs, which ranged in duration from one to six days, covered the remainder of the lame-duck session and several days beyond (as the final appropriations measures passed by Congress were being processed for the President's approval). Table 5 provides more detailed information on the number, length, and duration of CRs enacted for FY1977-FY2019. As indicated previously, this represents the period after the start of the federal fiscal year was moved from July 1 to October 1 by the Congressional Budget Act. Full-year CRs have been used to provide annual discretionary spending on a number of occasions. Prior to the full implementation of the Congressional Budget Act in FY1977, full-year CRs were used occasionally, particularly in the 1970s. Full-year CRs were enacted into law for four of the six preceding fiscal years (FY1971, FY1973, FY1975, and FY1976). Following the successful completion of all 13 regular appropriations acts prior to the start of FY1977, full-year CRs were used in each of the 11 succeeding fiscal years (FY1978-FY1988) to cover at least one regular appropriations act. Three years later, another full-year CR was enacted for FY1992. Most recently, full-year CRs were enacted for FY2007, FY2011, and FY2013. Table 4 identifies the 15 full-year CRs enacted for the period since FY1977. Nine of the 15 full-year CRs during this period were enacted in the first quarter of the fiscal year—three in October, two in November, and four in December. The six remaining measures, however, were enacted during the following session between February 15 and June 5. The full-year CRs enacted during this period also varied in terms of length and the form of funding provided. Full-year CRs prior to FY1983 were relatively short measures, ranging in length from one to four pages in the Statutes-at-Large . Beginning with FY1983 and extending through FY1988, however, the measures became much lengthier, ranging from 19 to 451 pages. The greater page length of full-year CRs enacted for the period covering FY1983-FY1988 may be explained by two factors. First, full-year CRs enacted prior to FY1983 generally established funding levels by formulaic reference. Beginning with FY1983, however, Congress began to incorporate the full text of some or all of the covered regular appropriations acts, thereby increasing its length considerably. None of the full-year CRs enacted between 1985 and 1988 used formulaic funding provisions. Secondly, the number of regular appropriations acts covered by full-year CRs increased significantly during the FY1983-FY1988 period. For the period covering FY1978-FY1982, the number of regular appropriations acts covered by CRs for the full fiscal year ranged from one to six (averaging about three). Beginning with FY1983 and extending through FY1988, the number of covered acts ranged from five to 13, averaging about 10. The next two full-year CRs, for FY1992 and FY2007, returned to the earlier practice of using formulaic references and anomalies to establish funding levels. Both CRs provided funding only through this means. As a consequence, the length of these measures was considerably shorter than the FY1983 through FY1988 full-year CRs. The two most recent full-year CRs, for FY2011 and FY2013, in some respects were a hybrid of the earlier and recent approaches. The FY2011 full-year CR provided funding for 11 bills through formulaic provisions and anomalies. It also carried the full text of one regular appropriations bill in a separate division of the act (the FY2011 Department of Defense Appropriations Act). Similarly, the FY2013 CR contained the texts of five regular appropriations bills in Divisions A through E of the act—the FY2013 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act; the Commerce, Justice, Science, and Related Agencies Appropriations Act; the Department of Defense Appropriations Act; the Department of Homeland Security Appropriations Act; and the Military Construction and Veterans Affairs and Related Agencies Appropriations Act. In addition, Division F was characterized as providing continuing appropriations for the remaining seven regular appropriations bills through formulaic provisions and anomalies. Unlike previous years, the formula for providing continuing appropriations was based on the amount provided in FY2012 rather than a rate.", "summary": "The program activities of most federal agencies are generally funded on an annual basis through the enactment of regular appropriations acts. When those annual appropriations acts are not enacted by the beginning of the fiscal year (i.e., by October 1), one or more continuing appropriations acts (commonly known as continuing resolutions or CRs) may be enacted to provide temporary funding to continue certain programs and activities until action on the regular appropriations acts is completed. Congress has included six main components in CRs. First, CRs have provided funding for certain activities (coverage), which are typically specified with reference to the prior fiscal year's appropriations acts. Second, CRs have provided budget authority for a specified duration of time. This duration may be as short as a single day or as long as the remainder of the fiscal year. Third, CRs have provided funds based on an overall funding rate. Fourth, the use of budget authority provided in the CR has been prohibited for new activities not funded in the previous fiscal year. Fifth, the duration and amount of funds in the CR, and purposes for which they may be used for specified activities, may be adjusted through anomalies. Sixth, legislative provisions—which create, amend, or extend other laws—have been included in some instances. This report provides detailed information on CRs beginning with FY1977, which was the first fiscal year that began on October 1. Congress has enacted one or more CRs in all but three of the last 43 fiscal years (FY1977-FY2019). In addition, in 10 of the last 18 fiscal years, the initial CR—and in some years subsequent CRs—provided continuing appropriations for all the regular appropriations acts. After FY1997—the most recent fiscal year that all regular appropriations bills were enacted before the start of the new fiscal year—an average of at least five CRs were signed into law for each fiscal year before the appropriations process was completed for that year. During this period, CRs provided funding for an average of almost five months each fiscal year. For some fiscal years, a CR has provided continuing appropriations (i.e., at a rate of operations) through the end of that year (often referred to as a full-year CR). Most recently, a full-year CR was enacted for most of the regular appropriations acts for FY2007, FY2011, and FY2013. In the 1980s, in contrast, some \"full-year CRs\" actually included the full text of certain regular appropriations acts (i.e., in the form of an omnibus appropriations act rather than a typical CR).", "document_type": "crs"}
{"report": "T he federal government has two major tools for affecting the macroeconomy: fiscal policy and monetary policy. These policy interventions are generally used to either increase or decrease economic activity to counter the business cycle's impact on unemployment, income, and inflation. This report focuses on fiscal policy; for more information related to monetary policy, refer to CRS Report RL30354, Monetary Policy and the Federal Reserve: Current Policy and Conditions , by Marc Labonte. Fiscal policy is the means by which the government adjusts its budget balance through spending and revenue changes to influence broader economic conditions. According to mainstream economics, the government can impact the level of economic activity, generally measured by gross domestic product (GDP), in the short term by changing its level of spending and tax revenue. Expansionary fiscal policy—an increase in government spending, a decrease in tax revenue, or a combination of the two—is expected to spur economic activity, whereas contractionary fiscal policy—a decrease in government spending, an increase in tax revenue, or a combination of the two—is expected to slow economic activity. When the government's budget is running a deficit, fiscal policy is said to be expansionary: when it is running a surplus, fiscal policy is said to be contractionary. From a policymaker's perspective, expansionary fiscal policy is generally used to boost GDP growth and the economic indicators that tend to move with GDP, such as employment and individual incomes. However, expansionary fiscal policy also tends to affect interest rates and investment, exchange rates and the trade balance, and the inflation rate in undesirable ways, limiting the long-term effectiveness of persistent fiscal stimulus. Contractionary fiscal policy can be used to slow economic activity if policymakers are concerned that the economy may be overheating, which can cause a recession. The magnitude of fiscal policy's effect on GDP will also differ based on where the economy is within the business cycle—whether it is in a recession or an expansion. During a recession, aggregate demand (overall spending) in the economy falls, which generally results in slower wage growth, decreased employment, lower business revenue, and lower business investment. Recessions occur for a number of reasons, but as seen during the most recent recession from 2007 to 2009, they can result in serious negative consequences for both individuals and businesses. However, the government can replace some of the lost aggregate demand and limit the negative impacts of a recession on individuals and businesses with the use of fiscal stimulus by increasing government spending, decreasing tax revenue, or a combination of the two. Government spending takes the form of both purchases of goods and services by the government, which directly increase economic activity, and transfers to individuals, which indirectly increase economic activity as individuals spend those funds. Decreased tax revenue via tax cuts indirectly increases aggregate demand in the economy. For example, an individual income tax cut increases the amount of disposable income available to individuals, enabling them to purchase more goods and services. Standard economic theory suggests that in the short term, fiscal stimulus can lessen the negative impacts of a recession or hasten a recovery. However, the ability of fiscal stimulus to boost aggregate demand may be limited due to its interaction with other economic processes, including interest rates and investment, exchange rates and the trade balance, and the rate of inflation. To engage in fiscal stimulus by either increasing spending or decreasing tax revenue, the government must increase the size of its deficit and borrow money to finance that stimulus. This can lead to an increase in interest rates and subsequent decreases in investment and some consumer spending. This rise in interest rates may therefore offset some portion of the increase in economic activity spurred by fiscal stimulus. At any given time, there is a limited supply of loanable funds available for the government and private parties to borrow from—a global pool of savings. If the government begins to borrow a larger portion of this pool of savings, it increases the demand for these funds. As demand for loanable funds increases, without any corresponding increase in the supply of these funds, the price to borrow these funds, also known as interest rates, increases. Rising interest rates generally depress economic activity, as they make it more expensive for businesses to borrow money and invest in their firms. Similarly, individuals tend to decrease so-called interest-sensitive spending—spending on goods and services that require a loan, such as cars, homes, and large appliances—when interest rates are relatively higher. The process through which rising interest rates diminish private-sector spending is often referred to as crowding out . However, the degree to which crowding out occurs is partially dependent on where the economy is within the business cycle, either in a recession or in a healthy expansion. During a recession, crowding out tends to be smaller than during a healthy economic expansion due to already depressed demand for investment and interest-sensitive spending. Because demand for loanable funds is already depressed during a recession, the additional demand created by government borrowing does not increase interest rates as much, and therefore does not crowd out as much private spending as it would during an economic expansion. In addition to fiscal policy, the government can influence the business cycle through the use of monetary policy, which is implemented by the Federal Reserve. The Federal Reserve is an independent government agency charged with maintaining stable prices and maximum employment through its monetary policy. The Federal Reserve can influence interest rates throughout the economy by adjusting the federal funds rate, a very short-term interest rate faced by banks. Decreasing interest rates reduces the cost to businesses and individuals of borrowing funds to make new investments and purchases. Conversely, increasing interest rates raises the cost to businesses and individuals of borrowing funds to make new investments and purchases. The Federal Reserve can conduct monetary policy in a complementary nature to fiscal policy, offsetting the rise in interest rates by decreasing the federal funds rate. Alternatively, the Federal Reserve can pursue a policy that offsets stimulus, pushing interest rates up by increasing the federal funds rate. Another potential consequence of government fiscal stimulus is an increase in the value of the U.S. dollar and a subsequent increase in the trade deficit, which mitigates some portion of the rise in economic activity resulting from the fiscal stimulus. As discussed above, fiscal stimulus can cause interest rates to rise. In a global context where interest rates are rising in the United States relative to the rest of the world, demand for investment inside the United States is likely to increase among investors around the world as they seek out higher rates of return. The greater demand for investment in the United States is likely to temper the increase in interest rates resulting from fiscal stimulus. However, foreign investors must first exchange their own currency for U.S. dollars to invest in the United States. The increased demand for U.S. dollars increases the value of a U.S. dollar relative to other foreign currencies. As the U.S. dollar appreciates in value, domestic demand for imported goods increases because a U.S. dollar can now buy more goods and services abroad, but foreign demand for U.S. goods and services decreases because they are now relatively more expensive for foreigners. The end result is generally an increase in the U.S. trade deficit, as exports decrease and imports from abroad increase in the United States. An increasing trade deficit, all else equal, means that consumption and production of domestic goods and services are falling, partly offsetting the increase in aggregate demand caused by the stimulus. As discussed above, however, during a recession interest rates are less likely to rise, or are likely to increase to a lesser degree, due to an already depressed demand for investment and spending within the economy. Without rising interest rates, or if they increase to a lesser degree, the associated increase in the trade deficit is also likely to be smaller. In addition, if the Federal Reserve engages in similarly stimulative monetary policy, it may be able to mitigate some of the anticipated increase in the trade deficit by further preventing an increase in interest rates. As discussed above, the goal of fiscal stimulus is to increase aggregate demand within the economy. However, if fiscal stimulus is applied too aggressively, or is implemented when the economy is already operating near full capacity, it can result in an unsustainably large demand for goods and services that the economy is unable to supply. When the demand for goods and services is greater than the available supply, prices tend to rise, a scenario known as inflation. A rising inflation rate can introduce distortions into the economy and impose unnecessary costs on individuals and businesses, although economists generally view low and stable inflation as a sign of a well-managed economy. As such, rising inflation rates can hinder the effectiveness of fiscal stimulus on economic activity by imposing additional costs on individuals and interfering with the efficient allocation of resources in the economy. The Federal Reserve has some ability to limit inflation by implementing contractionary monetary policy. If the Federal Reserve observes accelerating inflation as a result of additional fiscal stimulus, it can counteract this by increasing interest rates. The rise in interest rates results in a slowing of economic activity, neutralizing the fiscal stimulus, and may help to slow inflation as well. Economists attempt to evaluate the overall impact of fiscal stimulus on the economy by estimating fiscal multipliers , which measure the ratio of a change in economic output to the change in government spending or revenue that causes the change in output. A fiscal multiplier greater than one suggests that for each dollar the government spends, the economy grows by more than one dollar. A multiplier may be larger than one if the initial government stimulus results in further spending by private actors. For example, if the government increases spending on infrastructure projects as part of its stimulus, directly increasing aggregate demand, numerous contractors and construction workers will likely receive additional income as a consequence. If those workers then spend a portion of their new income within the economy, it further increases aggregate demand. Alternatively, a fiscal multiplier of less than one suggests that for each dollar the government spends, the economy grows by less than one dollar, suggesting the expansionary power of the fiscal stimulus is being offset by the contractionary pressures discussed above. Estimates of fiscal multipliers vary depending on the form of the fiscal stimulus and on which economic model the economist uses to measure the multiplier. For example, a 2012 academic research article estimated fiscal multipliers for various forms of stimulus utilizing several different prominent economic models from the Federal Reserve Board, the European Central Bank, the International Monetary Fund (IMF), the European Commission, the Organisation for Economic Co-operation and Development (OECD), the Bank of Canada, and two models developed by academic economists. The authors found varying estimates (see Table 1 ) for different forms of fiscal stimulus ranging from 1.59 for cash transfers to low-income individuals to 0.23 for reduced labor income taxes. Based on these estimates, increasing government spending on consumption by 1% of GDP would result in a 1.55% increase in GDP, and decreasing labor income taxes by 1% of GDP would result in a 0.23% increase in GDP. The magnitude of fiscal multipliers likely depends on where the economy is in the business cycle. As discussed above, during a recession fiscal stimulus is less likely to result in offsetting contractionary effects—such as rising interest rates, trade deficits, and inflation—resulting in a larger increase in economic activity from fiscal stimulus. Accordingly, another academic research article attempted to estimate fiscal multipliers depending on whether the economy was in an expansion or a recession, and found that the multiplier for government spending was between 0 and 0.5 during expansions and between 1.0 and 1.5 during recessions. Persistently applying fiscal stimulus can negatively affect the economy through three main avenues. First, persistent large budget deficits can result in a rising debt-to-GDP ratio and lead to an unsustainable level of debt. Second, persistent fiscal stimulus—particularly during economic expansions—can limit long-term economic growth by crowding out private investment. Third, rising public debt will require a growing portion of the federal budget to be directed toward interest payments on the debt, potentially crowding out other, more worthwhile sources of government spending. Some economic research has suggested that relatively high public debt negatively impacts economic growth. For example, one academic research paper suggested that for developed countries, a 10-percentage-point increase in the debt-to-GDP ratio is associated with a 0.15- to 0.20-percentage-point decrease in per capita real GDP growth. As noted, persistent fiscal stimulus can result in a rising debt-to-GDP ratio and lead to an unsustainable level of public debt. A rising debt-to-GDP ratio can be problematic if the perceived or real risk of the government defaulting on that debt begins to rise. As the perceived risk of default begins to increase, investors will demand higher interest rates to compensate themselves. The tipping point at which public debt becomes unsustainable is difficult to predict. A continually rising debt-to-GDP ratio is likely to lead to an unsustainable level of debt over time. The threshold at which a nation's debt becomes unsustainable depends on a number of factors, such as the denomination of the debt, political circumstances, and, potentially most importantly, underlying economic conditions. A change in these circumstances may shift a nation's debt to unsustainable without the underlying amount of debt changing at all. To date, it does not appear that the United States has an immediate concern with respect to unsustainability; however, the U.S. debt-to-GDP ratio is projected to continually rise under current policy. Persistent fiscal stimulus, and the associated budget deficits, can decrease the size of the economy in the long term as a result of decreased investment in physical capital. As discussed previously, the government's deficit spending can result in higher interest rates, which generally lead to lower levels of business investment. Business investment—spending on physical capital such as factories, computers, software, and machines—is an important determinant of the long-term size of the economy. Physical capital investment allows businesses to produce more goods and services with the same amount of labor and raw materials. As such, government deficits that lead to lower levels of business investment can result in lower quantities of physical capital, and therefore may reduce the productive capacity of the economy in the long term. As discussed earlier, some of the increase in interest rates and decline in domestic investment resulting from fiscal stimulus will likely be offset by additional investment in the United States from abroad. The inflow of capital from abroad is beneficial, as it allows for additional investment in the United States economy. However, in exchange for these investment flows, the United States is now sending a portion of its national income to foreigners in the form of interest payments. With a larger portion of investment flows coming from abroad, rather than from within the United States, a larger portion of the U.S. national income will be sent abroad. Rising public debt may also be of concern due to its associated interest payments. All else equal, an increase in the level of public debt will result in an increase in interest payments that the government must make each year. Rising interest payments may displace government spending on more worthwhile programs. In 2019, interest payments on the debt are projected to be about 1.8% of GDP, or about $382 billion. By 2029 interest payments on the debt are expected to increase significantly, rising to about 3.0% of GDP or about $921 billion. As the economy shifts from a recession and into an expansion, broader economic conditions will generally improve, whereby unemployment falls and wages and private spending increase. With improving economic conditions, policymakers may choose to begin withdrawing fiscal stimulus by decreasing the size of the deficit or potentially by applying contractionary fiscal policy and running a budget surplus. As discussed in the previous section, policymakers may choose to withdraw fiscal stimulus for a number of reasons. First, persistent fiscal stimulus when the economy is near full capacity can exacerbate the negative consequences of fiscal stimulus, such as decreasing investment, rising trade deficits, and accelerating inflation. Second, decreasing the size of the budget deficit slows the accumulation of public debt. The government can withdraw fiscal stimulus by increasing taxes, decreasing spending, or a combination of the two. When the government raises individual income taxes, for example, individuals have less disposable income and decrease their spending on goods and services in response. The decrease in spending reduces aggregate demand for goods and services, slowing economic growth temporarily. Alternatively, when the government reduces spending, it reduces aggregate demand in the economy, which again temporarily slows economic growth. As such, when the government reduces the deficit, regardless of the mix of fiscal policy choices used to do so, aggregate demand is expected to decrease in the near term. However, withdrawing fiscal stimulus is expected to result in lower interest rates and more investment; a depreciation of the U.S. dollar and a shrinking trade deficit; and a slowing inflation rate. These effects tend to spur additional economic activity, partly offsetting the decline resulting from withdrawing fiscal stimulus. Whether the decrease in aggregate demand is problematic for overall economic performance depends on the state of the overall economy at that time. Withdrawing fiscal stimulus is likely to put downward pressure on domestic interest rates, which encourages additional spending and investment, increasing economic activity. When the government decreases its budget deficit, the demand for loanable funds decreases because the government reduces the amount of those funds it is borrowing. The decrease in demand for loanable funds decreases the price to borrow those funds (i.e., interest rates decline). Declining interest rates encourage increased business investment into new capital projects and consumer spending into durable goods by reducing the cost of borrowing. Withdrawing fiscal stimulus is also expected to result in a depreciation of the U.S. dollar and an improved trade balance with the rest of the world. Assuming the shrinking deficit causes a decline in U.S. interest rates relative to interest rates abroad, individuals in the United States and abroad would rather make investments outside of the United States to benefit from those higher interest rates. Individuals shifting their investments outside the United States must first exchange their U.S. dollars for foreign currency, which decreases the value of the U.S. dollar relative to foreign currencies. As the U.S. dollar depreciates, foreign goods and services become relatively more expensive for U.S. residents and U.S. goods and services become relatively less expensive for foreign individuals. This generally results in an improved trade balance as foreign demand for U.S. goods and services (exports) increases and domestic demand for foreign goods and services (imports) decreases. When fiscal stimulus is withdrawn, aggregate demand for goods and services in the economy also tends to shrink, which is expected to slow inflation. Economists generally view relatively low and stable inflation as beneficial for economic growth, because businesses and consumers are relatively certain about the future price of goods and can make efficient decisions with respect to investment and consumption over time. The ultimate impact on the economy of withdrawing fiscal stimulus depends on the relative magnitude of its effects on aggregate demand, interest rates and investment, exchange rates and the trade deficit, and inflation. The same fiscal multipliers discussed earlier in the \" Fiscal Expansion Multiplier \" section can be used to estimate the impact of withdrawing fiscal stimulus by simply reversing the sign for each multiplier. As shown in Table 1 , decreasing government spending on consumption by 1% of GDP is expected to reduce real GDP by 1.55% after the first year, compared to no change in fiscal policy. Alternatively, increasing labor income taxes by 1% of GDP is expected to reduce real GDP by 0.23% after the first year. Again, monetary policy can be used alongside fiscal policy to affect the overall impact on the economy. For example, the Federal Reserve could lower interest rates to spur aggregate demand as the federal government withdraws fiscal stimulus in an effort to offset the decline in aggregate demand resulting from the shrinking deficit. This could allow the government to withdraw fiscal stimulus without decreasing aggregate demand or economic activity. As shown in Figure 1 , the federal government has generally been running a budget deficit for much of the past 30 years—save for two short periods in the 1960s and 1990s. This suggests that the federal government has been applying some level of fiscal stimulus to the economy for much of the past three decades, although the level of stimulus has increased and decreased over time. However, simply examining the overall budget deficit to judge the level of fiscal stimulus can be misleading, as the levels of federal spending and revenue differ over time automatically due to changes in the state of the economy, rather than deliberate choices made each year by Congress. During economic expansions, tax revenue tends to increase and spending tends to decrease automatically, as rising incomes and employment result in higher average incomes and therefore greater individual and corporate income tax revenues. Federal spending on income support programs, such as food stamps and unemployment insurance, tends to fall as fewer people need financial assistance and unemployment claims fall during economic expansions. The combination of rising tax revenue and falling federal spending tends to improve the government's budget deficit. The opposite is true during recessions, when federal spending rises and revenue shrinks. These cyclical fluctuations in revenue and spending are often referred to as automatic stabilizers. Therefore, when examining fiscal policy, it is often beneficial to estimate the budget deficit excluding these automatic stabilizers, referred to as the structural deficit , to get a sense of the affirmative fiscal policy decisions made each year by Congress. As shown in Figure 1 , budget deficits tend to increase during and shortly after recessions (denoted by grey bars) as policymakers attempt to buoy the economy by applying fiscal stimulus. This can be seen explicitly by viewing the structural deficit/surplus, as this only shows affirmative changes in fiscal policy made by Congress. The budget deficit then tends to shrink as the economy enters into recovery and fiscal stimulus is less necessary to support economic growth. However, in recent years, the federal budget has bucked this trend. After the structural deficit peaked in 2009 at roughly 7.5% of GDP, it began to decline through 2014, falling to about 2.0% of GDP. Beginning in 2016, in spite of relatively strong economic conditions, the structural deficit has started to rise again, nearing 4.0% of GDP in 2018. Given that the economy is arguably at or exceeding full employment currently, the increase in fiscal stimulus since 2016 is notable. As discussed earlier, expanding fiscal stimulus when the economy is not depressed can result in rising interest rates, a growing trade deficit, and higher inflation. As of publication of this report, interest rates and inflation do not appear to have been affected by the additional fiscal stimulus; interest rates are at historic lows and inflation shows no signs of acceleration. The trade deficit has been growing in recent years; however, it is not clear that this growth in the trade deficit is a result of increased fiscal stimulus. ", "summary": "Fiscal policy is the means by which the government adjusts its spending and revenue to influence the broader economy. By adjusting its level of spending and tax revenue, the government can affect the economy by either increasing or decreasing economic activity in the short term. For example, when the government runs a budget deficit, it is said to be engaging in fiscal stimulus, spurring economic activity, and when the government runs a budget surplus, it is said to be engaging in a fiscal contraction, slowing economic activity. The government can use fiscal stimulus to spur economic activity by increasing government spending, decreasing tax revenue, or a combination of the two. Increasing government spending tends to encourage economic activity either directly through purchasing additional goods and services from the private sector or indirectly by transferring funds to individuals who may then spend that money. Decreasing tax revenue tends to encourage economic activity indirectly by increasing individuals' disposable income, which tends to lead to those individuals consuming more goods and services. This sort of expansionary fiscal policy can be beneficial when the economy is in recession, as it lessens the negative impacts of a recession, such as elevated unemployment and stagnant wages. However, expansionary fiscal policy can result in rising interest rates, growing trade deficits, and accelerating inflation, particularly if applied during healthy economic expansions. These side effects from expansionary fiscal policy tend to partly offset its stimulative effects. The government can use contractionary fiscal policy to slow economic activity by decreasing government spending, increasing tax revenue, or a combination of the two. Decreasing government spending tends to slow economic activity as the government purchases fewer goods and services from the private sector. Increasing tax revenue tends to slow economic activity by decreasing individuals' disposable income, likely causing them to decrease spending on goods and services. As the economy exits a recession and begins to grow at a healthy pace, policymakers may choose to reduce fiscal stimulus to avoid some of the negative consequences of expansionary fiscal policy, such as rising interest rates, growing trade deficits, and accelerating inflation, or to manage the level of public debt. In recent history, the federal government has generally followed a pattern of increasing fiscal stimulus during a recession, then decreasing fiscal stimulus during the economic recovery. Prior to the \"Great Recession\" of 2007-2009 the federal budget deficit was about 1% of gross domestic product (GDP) in 2007. During the recession, the budget deficit grew to nearly 10% of GDP in part due to additional fiscal stimulus applied to the economy. The budget deficit began shrinking in 2010, falling to about 2% of GDP by 2015. In contrast to the typical pattern of fiscal policy, the budget deficit began growing again in 2016, rising to nearly 4% of GDP in 2018 despite relatively strong economic conditions. This change in fiscal policy is notable, as expanding fiscal stimulus when the economy is not depressed can result in rising interest rates, a growing trade deficit, and accelerating inflation. As of publication of this report, interest rates have not risen discernibly and are still near historic lows, and inflation rates show no sign of acceleration. The trade deficit has been growing in recent years; however, it is not clear that this growth in the trade deficit is a result of increased fiscal stimulus.", "document_type": "crs"}
{"report": "The existence and treatment of political prisoners in Burma (Myanmar) has been a central issue in the formulation of U.S. policy toward Burma for more than 25 years. The arrest, detention, prosecution, and imprisonment of Burmese political prisoners—including Aung San Suu Kyi —frequently were cited as reasons for imposing political and economic sanctions on Burma and the leaders of its ruling military junta. The release of political prisoners was often listed as a necessary condition for the repeal of those sanctions. When announcing waivers of existing sanctions, the Obama Administration often cited progress on the release of political prisoners as evidence for why the waiver was warranted. During a discussion of the human rights situation in Burma during the 34 th session of the U.N. Human Rights Council in March 2017, William J. Mozdzierz, Director of the Office of Human Rights and Humanitarian Affairs within the State Department's Bureau of International Organization Affairs, stated that the U.S. government was \"concerned by new political arrests under the current [Burmese] government,\" and urged \"the [Burmese] government to immediately and unconditionally release all political prisoners, and to drop charges against individuals for taking part in protected political activities.\" What actions, if any, the 116 th Congress or the Trump Administration may take with respect to U.S. policy toward Burma may hinge, in part, on the issue of political prisoners in Burma. Eight years have passed since Burma's ruling military junta, the State Peace and Development Council (SPDC), transferred power over to a newly reconstituted Union Parliament and President Thein Sein, a retired general and the SPDC's last Prime Minister. In 2016, Aung San Suu Kyi and the National League for Democracy (NLD) assumed control over the Union Parliament after NLD's landslide victory in the 2015 parliamentary elections. Although both the Thein Sein and NLD-led governments periodically pardoned political prisoners, authorities continue to arrest, detain, prosecute, and imprison people for peacefully expressing their political opinions. One reason that controversy over political imprisonment persists in Burma is the lack of agreement on the definition of \"political prisoner.\" Some in Burma would restrict the definition to \"prisoners of conscience\"; others prefer a broader definition that would include persons who took up arms against the SPDC and the Burmese military. Efforts to forge an official definition for political prisoners during the Thein Sein government were unsuccessful. So far, the NLD-led government has made little progress on the definition issue. A second reason the issue of political imprisonment persists in Burma is the existence of many laws—some dating back to the time of British colonial rule—that restrict freedom of speech, freedom of assembly, and freedom of the press. Various human rights organizations have identified Burmese laws that violate international standards on these freedoms. Because these laws remain in force, Burmese security personnel can arrest, detain, and prosecute people for their political views. Burma's courts have also shown a willingness to convict people for their political views. During the Thein Sein government, the Union Parliament made some progress on legal reform, but also passed new laws that some observers maintain restrict political expression. Since the NLD took control of the Union Parliament, little progress has been made on repealing or revising Burma's questionable laws. A third reason the issue of political imprisonment persists in Burma has to do with who holds administrative authority over Burma's criminal cases. All security forces in Burma—including the military (or Tatmadaw), the Myanmar Police Force (MPF), the Border Guard Police, and local militias—directly or indirectly report to the Tatmadaw's Commander-in-Chief Senior General Min Aung Hlaing, and not to President Win Myint or the Union Parliament. As a result, people will continue to be arrested for political expression, in accordance with existing Burmese laws, so long as Min Aung Hlaing supports such a policy. President Win Myint does have authority over the prosecution of criminal offenses and the power to grant amnesty to convicted criminals. If addressing political imprisonment remains a priority in U.S. policy toward Burma, then the 116 th Congress and the Administration could consider several options, such as reimposing sanctions and restrictions previously waived, or providing assistance in repealing or revising problematic laws or the provisions in the 2008 constitution. However, it may be useful for such options to be evaluated in the context of and with consideration of the possible impact on other priorities in U.S. relations with Burma, including: the creation of a democratically elected civilian government in Burma; the protection of the human rights of the people of Burma; progress toward greater economic prosperity for the people of Burma; and the establishment of direct civilian control over the Tatmadaw and the rest of Burma's security forces. The number of political prisoners in Burma fluctuates over time, depending on the termination of prison sentences, the status of pending trials, and the arrest and detention of new alleged political prisoners by Burma's security forces. The number also varies depending on which definition of \"political prisoner\" is used when categorizing cases. The figures released by the Assistance Association of Political Prisoners (Burma), or AAPP(B), in its monthly report on political prisoners are widely used by the Burmese media, the international press, and the State Department, as a comparatively reliable estimate of the number of political prisoners in Burma. The AAPP(B) is a nonprofit human rights organization formed in 2000 by former Burmese political prisoners. For over a decade, the AAPP(B) has released a monthly report on the number of political prisoners in Burma, based on its definition of political prisoner (see \" Definition of Political Prisoners \" below) and its network of researchers who monitor Burma's security system for information on alleged political prisoner arrests, detentions, trials, and incarceration. The monthly reports include a description of related events of the past month and a detailed list containing the names, alleged violation, prison (where applicable), sentence (where applicable), and political affiliation (if any) of each political prisoner. According to the AAPP(B), there were 331 political prisoners in Burma as of the end of April 2019. Of those, 48 were serving prison sentences, 90 were being held in detention awaiting trial, and 193 were awaiting trial outside of prison (see Figure 1 ). The number of political prisoners in Burma declined sharply after the NLD-led government took power in April 2016, but has been gradually increasing since June 2017, setting aside the anticipated downturn following the Myanmar New Year's presidential pardons. In addition, the number of political prisoners serving sentences or being detained while awaiting trial has slowly risen over the last year. The success of Aung San Suu Kyi and the National League for Democracy (NLD) in Burma's 2015 parliamentary elections raised the hopes of many in Burma that the arrest and detention of political prisoners would soon come to an end. During his term in office (2011-2016), former President Thein Sein promised to release all \"prisoners of conscience\" and at one point pledged that there would be no more \"prisoners of conscience\" in Burmese prisons by the end of 2014. According to most observers, he failed to fulfill his pledge. In January 2016, an NLD spokesperson told the press that the new government once in power would adopt an official definition of \"political prisoner\" and \"would not arrest anyone as political prisoners.\" The spokesperson also stated that the NLD-led government \"can control the arresting of political prisoners in accordance with existing laws,\" but did not elaborate on how that would be accomplished. Soon after assuming office in April 2016, former President Htin Kyaw and State Counsellor Aung San Suu Kyi took steps to secure the release of nearly 235 political prisoners. On April 7, 2016, the Office of the State Counsellor announced that \"releasing prisoners of conscience who are behind bars for their involvement in peaceful political activities is one of the priorities of the new government.\" The following day, Aung San Suu Kyi ordered that charges be dropped for 114 people facing charges for their participation in a peaceful protest against a proposed National Education Bill. On April 16, 2016—Burma's traditional New Year—President Htin Kyaw issued Order 33/2016 granting amnesty to 83 political prisoners. The amnesty was reportedly granted to \"make people feel happy and peaceful, and (promote) national reconciliation during the New Year.\" According to the Ministry of Home Affairs, between April and mid-August 2016, the NLD-led government released 457 people facing trial for political activity, and 274 political cases were closed. On May 23, 2017, President Htin Kyaw granted amnesty to 259 prisoners in recognition of the second 21 st Century Panglong Peace Conference, held on May 24-29, 2017. On April 17, 2018, current President Win Myint pardoned 8,541 prisoners, including 36 political prisoners. In its comments on the April pardons, AAPP(B) stated the following: In light of the Presidential pardons, persecuting journalists for seeking the truth and others for speaking leaves a bitter taste in the mouth, particularly considering NLD's broken promise, made in 2016, that it would release all political prisoners when it came to power. President Win Myint has issued three separate prisoner pardons in 2019. On April 17, 2019, he granted amnesty to 9,551 prisoners, of which 2 were considered political prisoners according to AAPP(B). On April 26, 2019, 6,948 additional prisoners received a presidential pardon. On May 7, 2019, President Win Myint pardoned 6,520 prisoners, bringing the total for the year to 23,019. According to AAPP(B), the three releases in 2019 included 20 political prisoners. The most prominent among them were the journalists Kyaw Soe Oo and Wa Lone. The released political prisoners also included 6 individuals imprisoned under the Unlawful Associations Act for their alleged association with one of Burma's ethnic armed organizations (EAOs), 5 people sentenced for violations of the Telecommunications Law, and 4 persons convicted of violating Penal Code 505(b). These three laws are among a number of Burmese laws that have been identified as unduly restricting human rights and civil liberties (see \" Problematic Laws \"). According to a spokesperson from the State Counsellor's Office, 27 people with affiliations with three EAOs—the All Burma Students' Democratic Front (ABSDF), the Restoration Council of Shan State (RCSS) and the Shan State Progressive Party (SSPP)—were released as part of peace and national reconciliation efforts. In between the episodic presidential pardons, the NLD-led government has continued to arrest, detain, try, and convict individuals for political reasons using various laws, some of which date back to British colonial rule (see \" Problematic Laws \"). According to the AAPP(B), 25 of the 48 political prisoners serving sentences as of the end of April 2019 were convicted under the Unlawful Association Act of 1908 for their alleged association with a prohibited EAO. Another 4 people were imprisoned under Section 505(b) of the Penal Code, which makes it illegal to \"cause fear or alarm to the public.\" In addition, 5 of those in prison were convicted for violating Section 66(d) of the Telecommunications Act of 2013 for allegedly \"using a telecommunication network to extort, threaten, obstruct, defame, disturb, inappropriately influence or intimidate.\" Three cases in particular have garnered strong international responses. The first case involves a former \"child soldier,\" Aung Ko Htwe, who was arrested and convicted in March 2018 for violation of Section 505(b) of the Penal Code. The second concerns the arrest and conviction on September 3, 2018, of two Reuters reporters, Kyaw Soe Oo and Wa Lone, for violating the Official Secrets Act of 1923. Kyaw Soe Oo and Wa Lone were granted presidential pardons on May 7 2019; Aung Ko Ktwe remains in prison. The third case pertains to the December 2, 2018, convictions of Lum Zawng, Nang Pu, and Zau Jet, for their alleged defamation of the Burmese military during peaceful protests in Mytkyina, the capital of Kachin State, in April 2018. Aung Ko Htwe claims he was kidnapped and enlisted in the Burmese Army in 2005 at the age of 10. In 2008, he deserted, but was soon arrested and charged with murder; he was convicted and sentenced to death, but his sentence was commuted to 10 years by Commander-in-Chief Senior General Min Aung Hlaing. Following an August 10, 2017, interview with Radio Free Asia (RFA) in which he recounted his alleged kidnapping and enlistment, he was arrested and charged with violating Section 505(b) of the Penal Code that makes it illegal to \"cause fear or alarm to the public.\" On March 28, 2018, Aung Ko Htwe was convicted and sentenced to two years imprisonment with hard labor. In addition, he was sentenced to six months in prison in February 2018 for criticizing the judge presiding over his trial. On October 30, 2018, he was acquitted of subsequent charges arising from his trial. He remains in prison, serving out the rest of his term. Kyaw Soe Oo and Wa Lone are reporters for Reuters who broke the story in February 2018 about the murder of 10 Rohingya by Tatmadaw soldiers in Inn Din village during the \"clearance operations\" in Rakhine State (see text box). On December 17, 2017—two months before their story was published—they were arrested for allegedly violating the Official Secrets Act of 1923. The next day, Acting President Myint Swe granted Lieutenant Colonel Yu Naing the authority to press charges under the Official Secrets Act and Burma's Information Ministry announced their arrest and detention for \"possessing important and secret government documents related to Rakhine State and security forces (with the intent) to send them to a foreign news agency.\" The trial of Kyaw Soe Oo and Wa Lone lasted over eight months and was full of conflicting and unusual testimony. On February 6, 2018, a police lieutenant informed the court that he burned all his notes pertaining to the case. On April 20, 2018, prosecution witness Captain Moe Yan Naing testified that police Brigadier General Tin Ko Ko ordered him and other police officers to entrap the two reporters by giving them \"secret documents\" as part of a sting operation. After his testimony, Captain Moe Yan Naing was arrested and sentenced to one year in prison for violating the Police Disciplinary Act. On September 3, 2018, Kyaw Soe Oo and Wa Lone were convicted of violating the Official Secrets Act and sentenced to seven years in prison. The U.S. Embassy in Burma released the following statement: Today's conviction of journalists Wa Lone and Kyaw Soe Oo under the Official Secrets Act is deeply troubling for all who support press freedom and the transition toward democracy in Myanmar. The American people have long stood with the people of Myanmar in support of democracy, and we continue to support civilian rule and those advocating for freedom, reform, and human rights in Myanmar. The clear flaws in this case raise serious concerns about rule of law and judicial independence in Myanmar, and the reporters' conviction is a major setback to the Government of Myanmar's stated goal of expanding democratic freedoms. We urge the Government of Myanmar to release Wa Lone and Kyaw Soe Oo immediately, and to end the arbitrary prosecution of journalists doing their jobs. Then-U.S. Ambassador to the United Nations Nikki Haley also released a statement about the convictions, stating the following: It is clear to all that the Burmese military has committed vast atrocities. In a free country, it is the duty of a responsible press to keep people informed and hold leaders accountable. The conviction of two journalists for doing their job is another terrible stain on the Burmese government. We will continue to call for their immediate and unconditional release. Other governments, including the European Union and the United Kingdom, as well as many human rights organizations, also issued statements calling for the immediate release of Kyaw Soe Oo and Wa Lone. On April 23, 2019, Burma's Supreme Court upheld the convictions and sentences imposed on Kyaw Soe Oo and Wa Lone. The following day, the State Department issued a press statement, indicating that the Court's decision \"sends a profoundly negative signal about freedom of expression and the protection of journalists in Burma.\" The statement also urged Burma \"to protect hard-earned freedoms, prevent further backsliding on recent democratic gains, and reunite these journalists with their families.\" Kyaw Soe Oo and Wa Lone were among the 6,520 prisoners granted a pardon on May 7, 2019. On April 30, 2018, peaceful protests were held in Myitkyina, the capital of Kachin State to demand that the Tatmadaw and the NLD-led government take steps to provide assistance to an estimated 2,000 people displaced by fighting between the Tatmadaw and the Kachin Independence Army (KIA). On September 3, 2018, Lum Zawng, Nang Pu, and Zau Jet were arrested for alleged violations of Section 500 of the Penal Code, defamation of the Burmese military. The three activists supposedly made inaccurate and derogatory statements about the Burmese military during the protests in Myitkyina and in a press conference the following day. On December 7, 2018, Lum Zawng, Nang Pu, and Zau Jet were convicted and sentenced to six months in jail. A number of embassies, including the U.S. Embassy in Rangoon, as well as several human rights organizations criticized the convictions and called for the immediate release of the three activists. Nang Pu was released from prison on March 29, 2019, for health reasons. Lum Zawng and Zau Jet were granted pardons on April 26, 2019. One factor complicating the end of political prisoners in Burma is a lack of agreement on the definition of a political prisoner. While the concept of political prisoner has a long history, there is no single international standard for defining political prisoners. Prisoners detained for political reasons are afforded some protection by international agreements, such as the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights. The State Department's Bureau of Democracy, Human Rights, and Labor considers someone a political prisoner if 1. the person is incarcerated in accordance with a law that is, on its face, illegitimate; the law may be illegitimate if the defined offense either impermissibly restricts the exercise of a human right; or is based on race, religion, nationality, political opinion, or membership in a particular group; 2. the person is incarcerated pursuant to a law that is on its face legitimate, where the incarceration is based on false charges where the underlying motivation is based on race, religion, nationality, political opinion, or membership in a particular group; or 3. the person is incarcerated for politically motivated acts, pursuant to a law that is on its face legitimate, but who receives unduly harsh and disproportionate treatment or punishment because of race, religion, nationality, political opinion, or membership in a particular group; this definition generally does not include those who, regardless of their motivation, have gone beyond advocacy and dissent to commit acts of violence. In applying this definition, the State Department recognizes that being accused of violent acts and committing violent acts are two different matters, and considers the circumstances pertaining to a particular person when determining whether she or he is to be considered a political prisoner. Following a human rights dialogue with the Thein Sein government in January 2015, the State Department issued a press release that included the statement, \"The United States [government] expressed the need to adopt consensus definitions of 'prisoner of conscience' and 'political prisoner' as a basis to review cases.\" In Burma, one of the more critical issues in defining political prisoners is whether or not to include individuals who have been detained for their alleged association with Burma's ethnic-based militias or their associated political parties. Because these militias periodically have been involved in armed conflict with the Burmese military, some analysts exclude detainees allegedly associated with the militias from their estimates of Burma's political prisoners. Ex-President Thein Sein consistently confined his definition to include only \"prisoners of conscience,\" and generally used that phrase when discussing the issue. He repeatedly stated that individuals who have committed criminal acts are not considered \"prisoners of conscience,\" and are expected to serve out their prison sentences. Similarly, Aung San Suu Kyi and Burma's military leaders prefer to restrict the definition of political prisoner to only include \"prisoners of conscience.\" Some international groups, such as Amnesty International (AI), also use a narrower definition that emphasizes so-called \"prisoners of conscience.\" The AAPP(B) and Human Rights Watch (HRW) use a broader definition of political prisoner. The AAPP(B) defines a political prisoner as \"anyone who is arrested because of his or her perceived or real involvement in or supporting role in opposition movements with peaceful or resistance means.\" The AAPP(B) rejects the limitation of political prisoners to \"prisoners of conscience\" for several reasons. First, the AAPP(B) maintains that Burmese security forces frequently detain political dissidents with false allegations that they committed violent or nonpolitical crimes. Restricting the definition to \"prisoners of conscience\" would exclude many political prisoners. Second, the AAPP(B) maintains that the decision to participate in armed resistance against the government in Naypyidaw should be \"viewed with the backdrop of violent crimes committed by the state, particularly against ethnic minorities.\" In short, the AAPP(B) views armed struggle as a reasonable form of political opposition given the severity of the violence perpetrated by the Burmese military and police. The Political Prisoners Review Committee (PPRC, also known as the Political Prisoner Scrutiny Committee), set up by former Burmese President Thein Sein, reportedly attempted to develop a consensus definition of political prisoners. Bo Kyi, the committee's AAPP(B) representative, told the press in May 2013 that the 19 members had agreed to a definition, but that the Thein Sein government did not formally adopt the definition. On August 17 and 18, 2014, AAPP(B) and the FPPS held a workshop in Rangoon to discuss a common definition of political prisoners and to open a discussion with the Thein Sein government and Burma's Union Parliament on the topic. Representatives of various Burmese organizations and political parties, as well as the International Committee of the Red Cross, attended the workshop. The attendees at the conference agreed to the following definition of political prisoner: Anyone who is arrested, detained, or imprisoned for political reasons under political charges or wrongfully under criminal and civil charges because of his or her perceived or known active role, perceived or known supporting role, or in association with activities promoting freedom, justice, equality, human rights, and civil and political rights, including ethnic rights, is defined as a political prisoner. The adopted statement of the conferees further explained: The above definition relates to anyone who is arrested, detained, or imprisoned because of his or her perceived or known active role, perceived or known supporting role, or in association with political activities (including armed resistance but excluding terrorist activities), in forming organizations, both individually and collectively, making public speeches, expressing beliefs, organizing or initiating movements through writing, publishing, or distributing documents, or participating in peaceful demonstrations to express dissent and denunciation against the stature and activities of both the Union and state level executive, legislative, judicial, or other administrative bodies established under the constitution or under any previously existing law. Following the workshop, a Member of Parliament from Aung San Suu Kyi's National League for Democracy (NLD) reportedly said that the NLD would submit a proposed definition of political prisoner to the Union Parliament. Since the NLD has assumed power, different voices have called for establishing a legal definition of political prisoners. In their May 2016 report cited above, the AAPP(B) and FPPS recommended that the NLD-led government adopt an internationally recognized definition of political prisoners. On June 2, 2016, Pe Than, an Arakan National Party (ANP) member of the Union Parliament's lower house, spoke on the chamber's floor in support of adopting legal definitions of \"political prisoners\" and \"political offenses\" to protect political activists. Deputy Minister of Home Affairs General Aung Soe voiced his ministry's opposition to Pe Than's proposal, stating that providing special treatment to political prisoners would discriminate against other people arrested for alleged violations of the law. In addition, human rights abuses by the government against two segments of Burmese society also have been raised in association with the issue of political prisoners. First, allegations of corruption among local Burmese officials are fairly common, with officials reportedly frequently using their official power to detain people on falsified charges in order to confiscate property (particularly land) or otherwise exact revenge on their opponents. In addition, officials have reportedly used provisions in old and new laws to arrest and detain people protesting alleged violations of their legal rights by those very same officials. These reported abuses of power by officials have been portrayed as creating a special group of \"political prisoners.\" Second, past governments in Burma singled out the Rohingya, a predominately Muslim ethnic minority residing in northern Rakhine State along the border with Bangladesh, and allegedly subjected them to more extensive and invasive political repression, including restrictions on movement, employment, education, and marriage. The NLD-led government has done little to reverse the previous practice of discrimination against the Rohinyga. Burma's 2008 Constitution provides for the continued authority of any laws promulgated prior to the adoption of the Constitution, unless they contravene provisions in the Constitution or are superseded by laws passed by the Union Parliament. As a result, many comparatively repressive laws, including some dating back to British colonial rule, remain in force in Burma. Over the last six years, the Union Parliament has repealed or amended some of the more problematic laws, but has also passed new laws that some observers view as being similarly repressive of human rights. Burma's security forces, and in particular, the Myanmar Police Force, have used these laws to suppress the voices of political opposition in Burma. In its monthly report on political prisoners, the AAPP(B) includes information on which laws were allegedly violated. The following laws are those most frequently cited in the AAPP(B) monthly reports: The Unlawful Associations Act of 1908 —Section 17(1) states that association with any organization that the President declares illegal is punishable by two to three years' imprisonment, along with a possible fine. Under Section 17(2), managing an unlawful association or promoting its meetings is subject to three to five years of imprisonment, and a possible fine. This law has been frequently used to declare ethnic armed organizations and their militias \"unlawful associations.\" As of December 2016, at least 72 people were serving sentences for alleged violations of this act. The Telecommunications Law of 2013 —Section 66(d) subjects anyone found \"[e]xtorting, coercing, restraining wrongfully, defaming, disturbing, causing undue influence or threatening to any person by using any Telecommunications Network\" to up to three years in prison and/or a fine. This law is being used to arrest and try political commentators and journalists who criticize government policy, government officials, or the Tatmadaw on social media. The AAPP(B) has compiled a list of 37 Section 66(d) cases since October 2015, including 10 convictions. The Right to Peaceful Assembly and Peaceful Procession Act of 2011 (as amended in 2016) —The law places restrictions on the freedom of assembly and expression inconsistent international human rights laws and standards. Violators of the law are subject to up to two years in prison and/or a fine. This law has reportedly been used to arrest and try people protesting against alleged illegal land confiscations by local officials and the Tatmadaw, as well as individuals rallying in opposition to other actions by the Burmese government and the military. On July 15, 2015, the U.S. Embassy in Rangoon issued a statement indicating, \"The United States is concerned over continued reports or arrests and excessive prison terms handed down to peaceful protesters under Article 18 of the Peace Assembly and Processions Act.\" Section s 505(a) and 505(b) of the Penal Code —These sections make it illegal to publish or circulate statements that either cause or is likely to cause \"any officer, soldier, sailor, or airman, in the Army, Navy or Airforce to mutiny or otherwise disregard or fail in his duty\" [Section 505(a)] or \"fear or alarm to the public or to any section of the public whereby any person may be induced to commit an offence against the State or against the public tranquility\" [Section 505(b)]. This law is frequently used against journalists who publish stories that contradict or question official accounts of events in Burma, particularly those associated with the nation's ongoing low-grade civil war. In April 2016, Burma's Legal Affairs and Special Cases Assessment Commission, a governmental body established by Burma's Union Parliament, recommended that 142 laws be repealed or amended, including some that have been used to suppress political opposition and expression. The commission recommended abolishing the Emergency Provisions Act of 1950 (which made it illegal to engage in activities that hindered the ability of the government or the military to perform their duties) and Section 505(b) of the Penal Code (which makes it illegal to circulate, make, or publish any statement, rumor, or report \"with intent to cause, or which is likely to cause, fear or alarm to the public or to any section of the public whereby any person may be induced to commit an offence against the State or against the public tranquility\"), as well as amend Article 18 of the Peace Assembly and Processions Act. In January 2016, the International Federation for Human Rights (FIDH), a federation of over 180 international human rights organizations, called on the incoming Union Parliament to repeal or amend several laws enacted by the outgoing Union Parliament. The laws identified by FIDH included the Right to Peaceful Assembly and Peaceful Procession Act of 2011; the Telecommunications Act of 2013; the Printing and Publications Act of 2014; the Media Act of 2014; and the four so-called \"Race and Religion Protection Laws\" of 2015 (the Interfaith Marriage Law, the Monogamy Law, the Population Control Law, and the Religious Conversion Law), which are seen as discriminating against Burma's Muslim population. Human Rights Watch issued a report in 2016, entitled \"They Can Arrest You at Any Time: The Criminalization of Peaceful Expression in Burma,\" that also cited these laws as tools of political oppression, as well as several others, including the Electronic Transactions Act of 2004; the Official Secrets Act of 1923; and various sections of the Penal Code (Sections 124A, 130B, 141-147, 153A, 295A, 298, 503, 405, 505(b), 505(c), and 509). Since taking office in January 2016, the NLD-led Union Parliament has made some efforts to repeal or amend a few of the problematic laws. In May 2016, the Union Parliament revoked the State Protection Act of 1975, which allowed the government to declare a State of Emergency and to suspend citizens' basic rights. In October 2016, it repealed the Emergency Provisions Act of 1950, which effectively prohibited criticism of the Tatmadaw or the government. In December 2016, proposals were submitted to amend Section 66(d) of the Telecommunications Act of 2013, but they have not been approved. Under Burma's 2008 constitution, the President has limited authority over the arrest and detention of people for alleged criminal activity; the Commander-in-Chief of Defence Services controls the security forces that make arrests. In part as a result, people in Burma continue to be arrested and convicted for their political activities. The President, however, can direct that pending cases be dropped, as well as grant pardons and amnesties once people have been convicted. Burma's 2008 constitution stipulates \"All the armed forces in the Union shall be under the command of the Defence Services\" (Article 338) and \"The Defence Services shall lead in safeguarding the Union against all internal and external dangers\" (Article 339). The Commander-in-Chief is to be appointed by the President, \"with the proposal and approval of the National Defence and Security Council\" (Article 342). Article 20(c) states, \"The Commander-in-Chief of the Defence Services is the Supreme Commander of all armed forces.\" Burma's Defence Services includes the Myanmar Armed Forces (or Tatmadaw), the Border Guard Forces, and the Myanmar Police Force. The Myanmar Armed Forces and the Border Guard Forces are part of the Ministry for Defence; the Myanmar Police Force are part of the Ministry for Home Affairs. Article 232(b)(ii) of the 2008 constitution requires the President \"obtain a list of suitable Defence Services personnel nominated by the Commander-in-Chief of the Defence Services for Ministries of Defence, Home Affairs and Border Affairs,\" thereby requiring that those Ministers be active military personnel and giving the Commander-in-Chief authority over who is selected as Minister of Defence, Home Affairs, and Border Affairs. As a result, the Commander-in-Chief of Defence Services has authority over Burma's security forces and, by extension, over the arrest and detention of persons who allegedly have violated the law. Once arrests have been made, the cases are directed to Burma's attorney general, who is appointed by the president (subject to the approval of the Union Parliament) and reports directly to the president. Public prosecutors, appointed at the local level and under the attorney general's authority, are responsible for prosecuting criminal cases. As such, the president does have the authority to direct the attorney general and the public prosecutors to drop charges considered political in nature. In April 2016, State Counsellor Aung San Suu Kyi exercised such authority to secure the release of over 100 people being detained for participation in peaceful protests. Article 204 of the constitution gives the president the power to grant pardons and amnesties (in accord with the recommendation of the National Defence and Security Council). In addition, Section 401(1) of Burma's Code of Criminal Procedures states the following: When any person has been sentenced to punishment for an offence, the President of the Union may at any time, without conditions or upon any conditions which the person sentenced accepts, suspend the execution of his sentence or remit the whole or any part of the punishment to which he has been sentenced. The authority to grant pardons and amnesties was used several times by former Presidents Thein Sein and Htin Kyaw, and has been used by current President Win Myint. The Burma Political Prisoners Assistance Act (BPPAA, H.R. 2327 ) was introduced on April 15, 2019, by Representatives Andy Levin and Ann Wagner. It would call for immediate release of Kyaw Soe Oo, Lum Zawng, Nang Pu,Wa Lone, and Zau Jet (all five have been released or granted pardons since the bill's introduction). The legislation would also state that it is U.S. policy that (1) all prisoners of conscience and political prisoners in Burma be \"unconditionally and immediately released\"; (2) the Administration and the Department of State \"should use all their diplomatic tools\" to ensure such a release occurs; and (3) the NLD-led government should \"repeal or amend all laws that violate the rights to freedom of expression, peaceful assembly, or association.\" In addition, the BPPAA would require that the Secretary of State provide assistance to civil society organizations in Burma that \"work to secure the release of prisoners of conscience and political prisoners in Burma,\" as well as assistance to current and former prisoners of conscience and political prisoners in Burma. That assistance shall include: Support for documentation of human rights violations with respect to prisoners of conscience and political prisoners; Support for awareness and advocacy in Burma on the issue of political prisoners; Support for efforts to repeal or amend laws that \"are used to imprison individuals as either prisoners of conscience or political prisoners\"; travel costs and legal fees for families of prisoners of conscience or political prisoners; post-incarceration assistance—including mental health and other health care, access to education and employment assistance, and other forms of reparation—for former prisoners of conscience or political prisoners; and the creation of an independent prisoner review mechanism in Burma. The BPPAA would also include definitions for prisoners of conscience and political prisoners. The legislation's definition of prisoners of conscience is similar to that used by Amnesty International. It would define political prisoners as any person: who is arrested, detained, or imprisoned for political reasons under political charges or wrongfully under criminal and civil charges because of his or her perceived or known active role in, perceived or known supporting role in, or perceived or known association with activities promoting freedom, justice, equality, human rights, or civil and political rights, including ethnic rights. Some of the options that Congress may consider to address issues of political imprisonment in Burma include the following: Providing technical and other forms of assistance to the Union Parliament and the Ministry of Justice in identifying and revising those laws that have been or could be used to arrest and prosecute people for political reasons; Pressuring the NLD-led government to reevaluate and consider repealing laws or regulations that declare any of the ethnic armed organizations (EAOs) illegal under the Unlawful Associations Act of 1908; Supporting the reestablishment of a Political Prisoners Review Committee or a similar body to identify alleged political prisoners and develop an official definition of political prisoners; Imposing suitable restrictions on relations with Burma until all political prisoners have been unconditionally released; Conditioning the provision of certain types of assistance to the NLD-led government and/or the Tatmadaw contingent on the adoption of an official definition of political prisoner, and on the release of political prisoners; Imposing suitable restrictions on relations with Burma until sufficient reforms of Burma's security forces, including the Myanmar Police Force, have been undertaken to preclude or reduce the likelihood people will be arrested or prosecuted as political prisoners; and Including the absence of political prisoners in Burma as a criteria for determining that a democratic civilian government that respects human rights and civil liberties has been established in Burma, and that certain restrictions on bilateral relations can be removed. The presence of political prisoners in Burma is only one of several possible issues that Congress may consider when examining U.S. policy toward Burma. Other key issues may be as follows: The Low- G rade Civil War : Burma has endured a low-grade civil war between the Tatmadaw and up to 20 ethnic armed organizations for over 50 years. Aung San Suu Kyi has made the peace process a high priority for the NLD-led government, but the three \"21 st Century Panglong Peace Conferences\" (held on August 31-September 3, 2016, May 24-29, 2017, and July 11-16, 2018, respectively) have made little progress toward ending the long-standing conflict. Tatmadaw Commander-in-Chief Min Aung Hlaing announced a unilateral ceasefire in eastern Burma for the first half of 2019, but periodic fighting between the Tatmadaw and several EAOs continues to be reported. Violence in Rakhine State and the Rohingya Refugee Crisis : On August 25, 2017, the Arakan Rohingya Salvation Army (ARSA) attacked 30 security outposts along Burma's border with Bangladesh. The Tatmadaw responded with a \"clearance operation\" that resulted in the flight of over 700,000 Rohingya into Bangladesh. A United Nations Fact Finding Mission on Myanmar has recommended that the United Nations Security Council refer six Tatmadaw senior officers to the International Criminal Court for investigation and possible prosecution for genocide, crimes against humanity, and war crimes for serious human rights abuses committed during the clearance operations. In December 2018, the Arakan Army began a campaign to establish bases in northern Rakhine State. The Tatmadaw responded by deploying heavily-armed troops into the region. Frequent fighting between the Arakan Army and the Tatmadaw continues to occur, complicating any plans of the safe and voluntary return of the Rohingya. Relations between the two major ethnic minorities residing in Rakhine State—the Rakhine (also known as Arakan) and the Rohingya—have been problematic for decades. In 1982, Burma's military junta stripped the Rohingya of their citizenship, and began portraying the vast majority of them as illegal immigrants from Bangladesh and India. Violent unrest broke out in Rakhine State in 2012, resulting in the deaths of at least 57 Rohingya and 31 Rakhine, and the displacement of an estimated 90,000 people, mostly Rohingya. In October 2016, after a group of assailants attacked three police outposts, the Tatmadaw began a \"clearance operation\" in northern Rakhine State that, according to the U.N. Office of High Commissioner of Human Rights (OHCHR), resulted in the murder, enforced disappearance, torture, rape, arbitrary detention, and forced deportation of hundreds of Rohingya. Constitutional and Legal Reform : During the parliamentary campaign, the NLD stated that it would seek to implement both constitutional and legal reforms aimed at establishing a more democratic government and protecting the human rights of the people of Burma. Some analysts note that, since taking office in April 2016, the NLD has made little progress on either campaign pledge.", "summary": "Despite a campaign pledge that they \"would not arrest anyone as political prisoners,\" Aung San Suu Kyi and the National League for Democracy (NLD) have failed to fulfil this promise since they took control of Burma's Union Parliament and the government's executive branch in April 2016. While presidential pardons have been granted for some political prisoners, people continue to be arrested, detained, tried, and imprisoned for alleged violations of Burmese laws. According to the Assistance Association of Political Prisoners (Burma), or AAPP(B), a Thailand-based, nonprofit human rights organization formed in 2000 by former Burmese political prisoners, there were 331 political prisoners in Burma as of the end of April 2019. During its three years in power, the NLD government has provided pardons for Burma's political prisoners on six occasions. Soon after assuming office in April 2016, former President Htin Kyaw and State Counsellor Aung San Suu Kyi took steps to secure the release of nearly 235 political prisoners. On May 23, 2017, former President Htin Kyaw granted pardons to 259 prisoners, including 89 political prisoners. On April 17, 2018, current President Win Myint pardoned 8,541 prisoners, including 36 political prisoners. In April and May 2019, he pardoned more than 23,000 prisoners, of which the AAPP(B) considered 20 as political prisoners. Aung San Suu Kyi and her government, as well as the Burmese military, however, also have demonstrated a willingness to use Burma's laws to suppress the opinions of its political opponents and restrict press freedoms. The NLD-led government arrested two Reuters reporters who had reported on alleged murders of Rohingya by Tatmadaw soldiers, Kyaw Soe Oo and Wa Lone, in December 2017 and charged them with violating the Official Secrets Act of 1923. On September 3, 2018, the two reporters were sentenced to seven years in prison. Kyaw Soe Oo and Wa Lone were granted a presidential pardon on May 7, 2019, after serving 511 days in prison. In addition, Aung Ko Htwe was sentenced to two years in prison with hard labor on March 28, 2018, following his August 2017 interview with Radio Free Asia about his allegations that he was forced by the Tatmadaw to become a \"child soldier.\" The Union Parliament has repealed or amended a few of the numerous laws that authorities use to arrest and prosecute people for political reasons, and further has passed new laws that some observers see as limiting political expression and protection of human rights. In addition, the Tatmadaw, which directly or indirectly control the nation's security forces (including the Myanmar Police Force), has not demonstrated an interest in ending Burma's history of political imprisonment. Tatmadaw leaders have brought multiple defamation cases against journalists who publish stories critical of Burma's military. The Burma Political Prisoners Assistance Act (H.R. 2327) would make it U.S. policy to support the immediate and unconditional release of \"all prisoners of conscience and political prisoners in Burma,\" and require the Secretary of State to \"provide assistance to civil society organizations in Burma that work to secure the release of prisoners of conscience and political prisoners in Burma.\" Congress may consider if and how to integrate concerns regarding political imprisonment into overall U.S. policy in Burma. Congress may also choose to assess how other important issues in Burma should influence U.S. policy, including efforts to end the nation's ongoing low-grade civil war, the forced deportation of more than 700,000 Rohingya from Rakhine State, and prospects for constitutional and legal reform designed to establish a democratically elected civilian government that respects the human rights and civil liberties of all Burmese people.", "document_type": "crs"}
